Year-end report 2018
NET ASSET VALUE AND THE LATOUR SHARE
The net asset value rose to SEK 100 per share, compared with SEK 95 per share at the start of the year. This is an increase of 8.3 per cent, adjusted for dividends. By comparison, the Stockholm Stock Exchange's Total Return Index (SIXRX) decreased by 4.4 per cent. The net asset value at year-end was negatively affected by the weak stock market in December. However, it has recovered after the end of the year and increased to SEK 109 per share on 13 February 2019. (1)
The total return on the Latour share was 13.7 per cent during the year measured against the SIXRX, which fell 4.4 per cent.
The Board of Directors proposes that the dividend be increased to SEK 2.50 (2.25) per share.
The industrial operations' order intake rose 23 per cent to SEK 3,116 m (2,528 m), which represents a 13 per cent increase for comparable entities adjusted for foreign exchange effects.
The industrial operations' net sales rose 22 per cent to SEK 3,216 m (2,645 m), which represents a 12 per cent increase for comparable entities adjusted for foreign exchange effects.
The operating profit increased by 25 per cent to SEK 401 m (321 m), which equates to an operating margin of 12.5 per cent (12.1) for continuing operations.
Swegon completed the acquisition of the German company Zent-Frenger GmbH in October.
The industrial operations' order intake rose 20 per cent to SEK 11,846 m (9,843 m), which represents an 11 per cent increase for comparable entities adjusted for foreign exchange effects.
The industrial operations' net sales rose 20 per cent to SEK 11,608 m (9,705 m), which represents a 10 per cent increase for comparable entities adjusted for foreign exchange effects.
The operating profit increased by 25 per cent to SEK 1,477 m (1,179 m), which equates to an operating margin of 12.7 per cent (12.1) for continuing operations.
Consolidated net sales totalled SEK 11,785 m (9,930 m) and profit after financial items was SEK 2,646 m (3,069 m). Assa Abloy's goodwill write-down and reserves during the year negatively impacted the income statement by SEK 685 m. Additionally, a revaluation of the holdings negatively impacted the income statement by SEK 479 m. Excluding these items, profit increased by 24 per cent to SEK 3,810 m (3,069 m).
Consolidated profit after tax was SEK 2,324 m (2,788 m), which is equivalent to SEK 3.66 (4.37) per share.
Net debt at the end of December was SEK 4,812 m (4,084 m) and is equivalent to 7 per cent of the market value of total assets.
During the year, the value of the investment portfolio increased by 1.9 per cent adjusted for dividends and net investments. The benchmark index (SIXRX) decreased by 4.4 per cent.
In the first and third quarters, the acquisition of 1,345,000 shares increased the ownership stake in Alimak Group to 29.2 per cent of the capital.
EVENTS AFTER THE REPORTING PERIOD
An agreement was signed on 11 January for the acquisition of the Norwegian company TKS Heis. Otherwise, there were no material events subsequent to the end of the reporting period.
(1) The calculation of the net asset value on 13 February was based on the value of the investment portfolio at 1 p.m. on 13 February and the same values as at 31 December were used for the unlisted portfolio.
Comments from the CEO
“The record year of 2018 closed with yet another record-breaking quarter. During the quarter, order intake grew by 23 per cent and invoiced sales by 22 per cent. Excluding acquisitions and foreign exchange effects, order intake grew by 13 per cent and invoiced sales by 12 per cent. This excellent performance meant that net sales in 2018 reached a new record level of SEK 11.6 billion (9.7 billion). In 2018, the total growth in both order intake and invoiced sales was 20 per cent. At the end of the year, the order backlog stood at a record level of SEK 1,864 m (1,148 m) and was thus up an impressive 62 per cent on the previous year's value. Our long-term strategy and methodical investment in product development, sales and marketing in the companies continue to pay dividends.
Thanks to the industrial operations' strong growth, we are also able to report another quarter of record profit in absolute terms. The operating profit increased by 25 per cent to SEK 401 m (321 m) with an operating margin of 12.5 per cent. The full-year profit was also the best to date at SEK 1,477 m (1,179 m) with a higher operating margin of 12.7 per cent (12.1). We have exceeded all our financial targets in 2018. Growth was 20 per cent, the operating margin was 12.7 per cent and the return on operating capital was 16.1 per cent.
We see the industrial operations' record-high order backlog at the close of the year as confirmation that the business climate has remained favourable. The economic situation in the markets where we mainly operate has been strong in the fourth quarter. However, there are still concerns that an economic downturn could be on the way and, as in previous quarters during the year, economic activity has slowed down in some markets. This applies particularly to the UK, Germany, the Middle East and China. There are signs of reduced activity in North America too. Although this uncertainty has not had any major impact on our operations in 2018, we are continuing to prepare for a possible downturn in the economy.
We made one acquisition for the industrial operations in the fourth quarter. Swegon acquired the German company Zent-Frenger, a leading provider of radiant ceilings in Germany. We are continuing to look for suitable companies to add to the Group, both acquisitions that will complement our existing operations and companies that can form new business entities or business areas. During the year, we have made five acquisitions to the wholly-owned industrial operations. Combined, they add just over SEK 700 m in annual sales. Read more about our acquisitions on page 4.
The growth in value on the stock exchange has generally been weak throughout the fourth quarter. This also impacted the value of our investment portfolio which increased by just 1.9 per cent adjusted for dividends and net investments. By comparison, the benchmark index SIXRX was down 4.4 per cent. In the same period, the net asset value in Latour increased by 8.3 per cent to SEK 100 per share, adjusted for dividends.
Some of our listed holdings have now submitted reports. On the whole these reports are good, which again corroborates the high quality of the companies in our portfolio. The volatile stock market with its short-term upward and downward price movements does not affect our attitude towards the companies nor our long-term approach of helping to build strong, healthy and profitable companies that generate long-term value for shareholders. This approach is underscored by the continuation of acquisition activities in the investment portfolio. Bodil Sonesson was able to announce the acquisition of iGuzzini during her first quarter as the newly appointed CEO of Fagerhult. When the acquisition is completed in 2019, Fagerhult will become one of the largest leading lighting companies in Europe, generating annual sales in excess of SEK 8 billion. Latour is supporting the acquisition financially too as guarantor in the forthcoming new share issue in Fagerhult. In addition, Loomis recently acquired the German company Ziemann. This adds annual sales of approximately SEK 1.8 billion and will give Loomis a very strong position in the important German cash management market. Assa Abloy made a total of nineteen acquisitions which together add SEK 3.8 billion in sales. Nederman also made a significant acquisition in 2018.
We are delighted to say that 2018 was another record year and our operations are going from strength to strength. The operating profit continues to grow despite, and perhaps thanks to, the heavy investments being made in product development and sales that are recognised in the income statement. The Board of Directors proposes that the dividend be increased by 11 per cent to SEK 2.50 (2.25) per share.”
President and CEO
For further information please contact:
Jan Svensson, President and CEO, Tel. +46 705-77 16 40 or
Anders Mörck, CFO, Tel. +46 706-46 52 110
President and CEO Jan Svensson and CFO Anders Mörck present the report and answers to questions by telephone today at 10.00 AM (CET). The conference call will be held in English.
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