Hello, and welcome to the Investor AB Q2 Report 2021. Throughout the call, all participants will be in listen only mode, and afterwards there will be a question and answer session. I'll now hand the call to Vivekha Hardman Ryberg, Head of Corporate Communications. Please go ahead with your meeting.
Hello, and welcome, everyone, to Investors Q2 Conference Call. We are hosting this conference call a bit late in the afternoon as we've had a board meeting today, and then we released our report as the board meeting was finalized. As usual, we will start out with our CEO, Johan Puschel, who will present the results followed by our CFO, Helian Nas Saxon, and then we will open up
Thank you very much, Wiebeke. And once again, we have come to this conference call. If we start on Page number 2, we are clearly seeing an improved economic environment and that in combination with the low rates Has continued to fuel asset prices, but there are uncertainties that remain. We know about supply chain issues, geopolitics And of course, the spread of the delta variant. And it is worrying that the delta variant is now spreading, not the least in Asia, In countries such as Indonesia, Thailand and Malaysia, where there is a low vaccination level among the people.
And this is clearly a risk, and we are already seeing an impact in a few cases. One example being We have a plant in Malaysia where they produce gloves that is currently being affected that they need to handle. So it is Something that needs to be watched, how this is spreading around the world. But overall, as I started with, We are seeing an improvement in the economy. And of course, the Q1 from Agastobus overall very strong.
The net asset value was up 5% in the quarter and our total share return was up 15%, and that can be compared with the stock market in Sweden being up 7%. Moving on to Page number 3. The listed company had a total return of 5% in the quarter. Patricia Industries VADI was up 3%. That was driven by higher earnings, but mitigated by multiple contraction.
There was a strong operational performance in the companies, and the 2 companies made strategic add on acquisitions. And then Grand Group and Grand Hotel property were divested in the quarter. The strong development within EKT continues when it comes Value and also we had a very strong cash flow in the quarter. And actually, the cash flow for the total group was very strong in the quarter, Driven by EKT, distribution from Vanvek, SEK 2,000,000,000 and then also distribution from SEK 3,000,000,000 related to the Divestiture of the passive infrastructure and finally, the divestiture of Gran Group and the related property. So we have a very strong financial position that we will utilize where we see opportunities, and I will come back to that.
If I then move to listed companies, the top priorities in the quarter has been to handle Supply chain issues and, of course, the rapidly changing demand. At the same time, of course, many strategic investments in R and D Technology and not only sustainability is, of course, continuing at high speed. Moving down over to The reported sales growth in the quarter was 16%. The organic growth rate was 25%, and the difference between it is mainly that we have a double digit negative currency The profit growth was very strong, up more than 30%, and the divestment of GRAND The generated SEK 1,500,000,000 of net proceeds. BraunAbility and PermaDill Made important strategic add on acquisitions in the quarter.
Permobil acquired Progio, which is a leading Italian manufacturer manual wheelchairs with annual sales of about SEK 100,000,000. Vulnerability acquired a majority in Q3, which is actually the global leader in wheelchair securement solution, So basically, constraints with the revenue of about USD 60,000,000 and this company has a profitability above the level what we see in vulnerability. It is great to see that when we look through our subsidiaries and look at the pipeline of potential Add on acquisitions, we have a very strong pipeline, and we plan to invest significant capital going forward To grow our subsidiaries through not only organic, but also accelerating when it comes to M and A activity. Moving down to Slide number 6. For sure, the Q2 last year was a weak quarter, as you can see from this graph.
Compared to that weak Q2 last year, the organic growth was 25% and the profit was up 32%. But as mentioned before, we should remember that we also had a currency headwind in the quarter. Most company and this is important, I think, That most companies delivered strong sales and profit also on an absolute level. So basically, disregarding the base levels. And I will come back to that on the next slide.
So here, you have the different companies. And I will Run through a little bit each company and not only comment about the performance versus the Q2 last year, But also to give you an indication when it comes to the organic performance where we skip out currency and add on acquisitions, The organic development versus the Q2 2019, so you can have a little bit of a feeling where are we now compared to pre COVID levels. As you can see from the chart, if we exclude Cernova, which I will come back to, All companies generated very strong growth compared to last year between 18% 81% organic growth. If I start then with BraunAbility, the organic growth was 81% in the quarter, and you can also see that we have a good margin expansion. If we then compare vulnerability compared to the Q2 level 2019, We can see that for vulnerability, we are still clearly below pre COVID-nineteen levels, actually double digits below.
So this is one company, while we saw a sharp recovery in the quarter, we are still below where we were before COVID-nineteen. Lubbock had an excellent performance in the quarter, up 67% organically and very strong profitability. And here, if we compare with pre COVID levels, organically, we are now up mid to high single digits compared to the second 2019. So due to the strong development this quarter, we are now above previous levels. Advanced Instruments, our latest subsidiary, has continued to perform extremely well, And we are very pleased to have bought this company.
It grew 47% organically in the quarter, and the profit margin was 50%. And here it's clearly record levels, whatever you do the comparison with. Also, TEJAP had a very strong quarter, organically up 33% compared to last year with margin expansion. And if we compare Tia's performance compared to the organic situation before COVID-nineteen, they are up mid to high single digits, so also here above previous levels. Niellekke grew 18% organically, sub margin expansion.
And if we do the same comparison here with Q2 19 and exclude the PP contract, it's up just about mid single digit compared to the Q2 2019 with Wound Care being the main driver, while Surgical is up just a little bit. PermaDeal grew 18% in the quarter, and also here, margins improved somewhat. And here we can see that if we compare with pre COVID levels, the situation is relative stable, now almost back to pre COVID level, but actually a few percentage points below. Finally, Delsa Nova. This was the company where we We saw negative organic growth by 3% in the quarter, and there are two main reasons for that.
First, there was a strong COVID-nineteen related sales Last year and secondly, we had an unusually mild flu season this year. The underlying performance is good. And if we look on the pre COVID level, this is up a few percent compared to that level. So that is a run through of the companies. And then let me say a few more words about Melvik on the following page.
As mentioned, organic sales was up 18% in the quarter. The contribution from the customer contract Sales related to PP was limited this quarter and actually slightly lower than during the Q2 last year. COVID-nineteen related customer agreements within PP are not expected to add materially To say during the second half of this year. And please remember that the second half last year Was significantly boosted by CPE contracts, so that needs to be taken in consideration. However, the underlying business is strong.
Wound Care grew organically by 20% in constant currency, and we saw very good development in the U. S. And in France. Surgical grew 17%, and we saw good development in gloves and trays. The profit margin was up 1 percentage points, Driven by both the strong sales but also a good mix, but it was negatively impacted by increased raw materials and also increased logistics costs.
And the strong cash flow continues in this company, so they were able to distribute EUR 200,000,000. With that, moving down over to ETT. The total return for the total franchise was 9%. The listed EKT AB company was up 9% in the quarter, and the increase in the funds were up 10%. But please remember That we do the reporting in the funds with 1 quarter lag.
So this is up until March 31. The cash flow, as mentioned before, was very strong, SEK 3,800,000,000 to investors during the quarter. One of the reasons why it was so exceptionally strong was that the mid market U. S. Fund made some significant exit, And our share in the mid market U.
S. Fund is very high, but overall, a good cash flow. And EKG has very high activity Doing both significant investments and the number of exits. So then to summarize, We have a proven governance model, and we speak to it. And I think we have a portfolio with high exposure to attractive long term trends.
And our focus is to continue to work relentlessly as an engaged owner with these companies, capture opportunities, Both geographical expansion, but of course also through M and A and other initiatives. And then secondly, we also need Continue to make sure that we have an attractive portfolio. So with that, I stop and hand over to Hyliana.
Thank you, Johan. And if we move over to the net asset value development, we can see that the adjusted net asset value to Continued to develop positively and landed at the end of the quarter at close to SEK 660,000,000,000. Johan talked about the development in Patricia Industries, looking more closely at the listed companies, Some SEK 450,000,000,000, we see that the TSR was at 5% in the quarter compared to SEK 6, 7%. Year to date, the relative performance is stronger with 25% CCR versus listed fixed RX, I mean, 22%. The strongest share price performance was in Berstille and Electrolux Professional, While the Ericsson and Husqvarna shares had a tougher quarter.
Moving over to Patricia, the total return was 3% in Q2, excluding cash. And on the next page, The sequential change in estimated market value is described in the following graph. The value here is driven by strong operational performance across the board, and we see significant Distributions related to the divestments of both Rand, the infrastructure part of infrastructure in 3 and also financial investments. And the total value of Patricia Industries, including cash, amounted to Almost SEK 600,000,000 or SEK 162,000,000,000 at the end of Q2. Looking at the next page, I will go through the major drivers of estimated market values in the quarter.
So the library estimated market value increased by JPY 2,100,000,000 And earnings impacted positively, while multiples contracted. For Mannliche, earnings impacted positively, Multiples and currency impacted negatively and SEK 2,200,000,000 was distributed in the quarter. Please be reminded that as before, the PPE related profits are adjusted for in the last 12 month earnings. For 3, the estimated market value change was SEK 500,000,000 Here, we see distribution, as I commented before, related to the divestment of the passive network infrastructure. Permobil was impacted negatively in the quarter by multiples contracting, while earnings impacted resulting in the contraction of the estimated market value of SEK 1,000,000,000.
And before I go to my last slide no, sorry, we have I'm jumping ahead of myself. Please go to Page 17 with the financial position as of June 30. Investors' financial position remains Sean, with AA rating, minus AA and AA, 3 credit ratings from S and P and Moody and the leverage ratio just above 2% at the end of the quarter. And now before I go to my last slide With the average annual total returns, I just want to remind everyone that during the quarter, the Annual General Meeting approved of the Board's Proposal of a 4 to 1 share split. The 1st day of trading post split was May 19.
Then looking at this final graph, you can see that based on the strong portfolio and delivering on our strategy, The CSR of the investor share has outperformed both fixed ERIKs and our own return requirements over most periods, in this case, 2010, 5 1 year as well as year to date. Thank you. And with that, I hand over to Jessica, who can start the Q and A session. Yes. Thank you, Johan and Iliana.
We will now have
Our first question is from Jyrki Ngoel of DNB Markets. Please go ahead.
Thank you very much. So I mean, as highlighted in this quarter, with the strong cash flows providing insulation, to say the least, I mean, Would it be fair to be, I mean, more aggressive with the balance sheet since that, I mean, you don't only have The listed portfolio dividends to rely upon anymore.
Okay. Thank you for the question. And I can only say that we recently had a board meeting In Patricia Industries, we went through the pipeline of the different subsidiaries. And we are really stepping up and And have a number of gate opportunities, I do believe, in our subsidiaries. So my expectation is that we will allocate more capital for Significant add on acquisition, including Upsell, putting in equity to finance the somewhat larger add on acquisitions.
So that is a top priority for us. In addition to that, we are, of course, always looking at other opportunities, both on the listed and unlisted side. But what I really see in the pipe right now is the larger than normal opportunities within the add on acquisition pipeline.
Thank you, Johan. And Liana, can you perhaps elaborate a bit on when it will be relevant to Take away this discount that you attribute to non liquor driven by the PPE pandemic related boost here as I mean, we have seen a broader peer universe, I mean, expand their multiples quite substantially over the past 1 year, yes, call it last year. And I think, Damian, your first valuation multiple is not even up 10% during that time frame.
Thank you, Joakim. It's a very relevant question. I think it's not Up top, beside when CPE sales stocks, it's something that is driven by external factors and in particular Due to the delta variant of the virus, for example, that Johan mentioned before. But as we do not believe that the PPE sales is something that will go on forever, It's likely to be related to this extreme situation. We do not want to value it like the rest of Manluche.
But I would not give you a prognosis of when and how much, but currently, we see that it has impacted, and we will see during the fall What happens?
Maybe I can just add to that, that if you look on the PPE profit, because basically the profit related to the PPE sales, We know it's more of a one off nature. And we used last 12 months earnings when we put the Mount Deppel in. And we also know that during the Q3, as I mentioned, operationally, of course, we all need to think about that in the Q3 and Q4 last year, There was significant sales of TD, so that will make it call it a tougher comparison in terms of earnings. On the other hand, we have already reflected that in the valuation. So when we pass basically moving to 2022, The multiple will more gradually reflect the true higher multiple because then we will gradually sort of get Out of the KTE contracts?
At least that's what we expect currently. So you yes.
That's very comprehensive. Thank you. And just a final one for me. I mean, with the decentralization initiatives here launched in Melnik, Can you provide some more color on what the accelerated long term growth ambitions really mean? I mean, and where that stem from and Perhaps how that relates to the historical, call it, the mid single digit 5% organic growth that Malte has delivered in the past years?
I mean, basically, the company is now putting 4 business areas with clear responsibility down to When it comes to manufacturing customer and R and D Development. And by doing that, we boost concurrent septics, gloves and also the OR Solutions business that our strong belief is that this will create even stronger focus. And of course, Each business area head will get an assignment to really develop that business. I cannot give you a specific figure for it, but I think it will be even clearer than before when it comes to the focus and when it comes to the accountability and the related incentives And that, as you know, is something that we believe as an owner is normally the right way forward. So we are We ask about the strong position the company has, the development of the company and also we think and hope that this will further accelerate The opportunities going forward.
But I don't know to what extent that will boost The future growth. But of course, our ambition is to grow this company as much as possible given the high profitability and cash flow.
Thank you. Our next question is from Derek Laliberte of ABG. Please go ahead.
Good afternoon. So I was wondering how you I think this question has been asked before, but how do you view your current In terms of resource allocation, I mean, you have quite a big number of holdings, and many of them are really quite small in relation to the total And maybe your portfolio value. So does this mean that you're focusing more on bolt on acquisitions in the current Companies rather than new investments and does it also mean that you sort of have a bigger minimum size requirement for completely new investments?
Thank you. It's a good comment. I think that the smaller the companies are, All else equal, we would demand a higher growth opportunity going forward. And secondly, our Clear ambition is, as you say, to grow some of our, what you call, a little bit smaller companies through add on acquisition To use the strong platforms and to boost them by doing add on acquisition. And that is normally the way we want to do it.
Some companies that we have owned for a little bit longer time, we have done Coromavila, done a number of add on acquisition broadening the company. It started out with only electric wheelchairs. We have brought it into manual. We have brought it to shipping and cushioning and so forth. We have also expanded it internationally into, for example, Australia In quite good way.
When we now acquire a company like Advanced Instruments, we try to acquire a company That is a really strong leading player in its niche with high profitability, good cash flow And especially the best products in the market. From that, of course, our plan is now to grow Advanced Instruments And the other subsidiaries through add on acquisitions because then we cannot only grow the size of them, but also create synergies In some cases, and develop the platforms.
Thank you. That's really helpful. And I had a follow-up on Malenukka as well. I think I guess It's quite clear, but just to understand, I mean, is it is new for business areas? That's because is that Primarily what's new here or the decentralization and that focus on Q and L responsibility.
Wasn't that the case before as well? And then I just wonder in general as well if you want to highlight any other important Improvement or focus area that the new CEO, Slabkurituris is focusing on in the company.
I think it's not saying that it has not been a good focus in the company before, but I do believe that This reorganization will further sharpen the focus in the company. So that's why we are very supportive of the changes that the Board And in addition to that, historically, That this company has had a fantastic development growing mainly organically. Of course, it's up now to with Slaflo coming in and see Also, we can find a little bit more of M and A activity in that area. That is something that I know they are looking into and not saying that You know it will accelerate, but of course, we are trying to find all avenues to grow this great company.
Thank you. That's all for me.
Thank We have a question from Andreas Lundberg of SEB. Please go ahead.
Hi, Andrea. Hi, Andrea
Slonberg. I was Sorry, it was me, but operator, so yes, just a short question. You talked about the larger normal pipeline. Why is that the case? So why has it grown a lot now?
And also what do you say about the current price levels in the market? Thank you.
When it comes to the size of the pipeline, I think it's a combination of it's always a combination. It takes 2 to tankers. Of course, there needs to be opportunity. But clearly, we have had a conscious focus now for some time to really work through and build out that type In the companies, the Board and the management team in the company are really focused on that. So I think that is one reason.
Then, of course, if you strike the deal or not, it's always a question if it becomes available and the price level. We try to have an attitude or a, call it, framework in our companies that we really map The target in terms of the potential for and the attractiveness of the statements and also the fit with our companies. And based on that, of course, they are trying to dance with the counterparty. So you take a proactive approach rather than local accounts available. So that's the approach we do when we look into the opportunities.
And the second question was?
Higher level, yes.
Yes. I mean, it differs a lot to be very honest. In some cases, pricing can be so stiff that we have to walk away. But in other cases, we also have a strong starting point, and we also have companies that actually want to be acquired by us. And in those cases, if you get an exclusive discussion, we can actually get opportunities at quite reasonable prices, Especially considering the cost of capital in these markets.
So I would say sometimes, yes, It can be tough, but there are also opportunities where we actually can find it at reasonable levels. Our chief I would not say that we see it as a huge problem, to be very honest. It's more finding the right company that fits with our companies and where we see that we can develop them. If we do that, normally, we will grow into the multiples.
Thank you.
Thank you. There are no further questions at this time, so I'll hand back over to our speakers.
Okay. Thank you. Do we have any questions on the web? No. By that, we conclude this conference call, and we wish you all a great