Welcome to Investor’s Q1 presentation. You can follow this presentation both over the web or over the phone. After the presentation, you will also be able to raise questions to our CEO, Johan Forssell, and our CFO, Helena Saxon. By that, I would again want to say welcome to all of you, and I hand over to Johan Forssell.
Thank you, Viveka, and welcome everybody to this quarterly conference. Unfortunately, the first quarter will always be remembered by the unprovoked invasion by Russia into Ukraine and, of course, all the human tragedy that that has led to. It has also, of course, affected business environment, and we all know that before the war we did see inflation coming up quite quickly and we saw significant supply chain challenges related to the pandemic.
We can now see after the war that these increases or challenges have actually increased in many cases. In this environment, we are working very close with our companies to navigate, to handle the challenges, but also of course trying to grab the opportunities out there.
If I say a few words about the overall macro outlook, we can see that right now we have still supply chain challenges, but we can also see that the demand situation still is quite good. We saw, for example, in our portfolio, ABB came this morning with a very strong order intake.
Of course, when we move forward into the year, there is of course a risk that the supply chain challenges will turn into more of a demand challenge given all the increases that is being put right now on the consumer with higher energy bill, higher gasoline prices, higher mortgage rates, and higher food prices, et cetera. I don't have a crystal ball.
My message is irregardless of how the business cycle and the stock market will develop. I truly believe that Investor stands strong with a strong financial position and companies that are well-positioned to good trends out there, including automation, med tech, and so forth.
Before moving into the first quarter, I would like to say a few words about our work about sustainability. As you know, we have three prioritized areas, business ethics and governance, climate, and then diversity and inclusion. There is a high focus in all our companies when it comes to business ethics and governance, not the least really make sure now to follow all the sanctions related to the war.
When it comes to the climate part, I think it's pleasing to see that compared to 2016, which is the base year, we can see that for the whole of our portfolio of companies up until 2021 now, we can see that the CO2 emissions for Scope 1 and 2 are down 49%. So we have a good trajectory compared to our target, which is to reduce the emissions by 70% up until 2030. Then when it comes to diversity and inclusion, I think it's great to see that it's moving in the right direction. 92% of our portfolio companies now, for example, measure inclusion in the portfolio. There is more to do, but it's a lot of work going on.
Moving over to the first quarter, Investor was affected by the stock market's development, but we held up better than the Swedish stock market with our net asset value being down 10% to total shareholder return minus 9% compared to the Swedish stock market being down 14% in the quarter.
If I then go over to the three business areas and start with the listed companies, we saw that in the quarter, the total return was - 10%, and here we see a big spread between the companies and Helena Saxon will come back to that later on in her presentation. I think one highlight in the quarter was that Atlas Copco announced two acquisitions within the industrial pumps area. These two German acquisitions, they really have differentiated strong technologies and also very good aftermarket business.
I think that in combination with the small business they already had within industrial pumps now creates a strong foundation to build from. I also want to take the opportunity to stress that we have full support for Ericsson's strategy, as well as the board's and management's continued and necessary work to strengthen the culture and work with internal processes related to compliance.
Before moving into the figures for the first quarter regarding Patricia Industries, I think I should say a few words. I guess there is an interest from you to see what kind of exposure we have within Patricia Industries in Russia. As you know, the sales level for the subsidiaries is roughly SEK 45 billion.
Here you can see that the total exposure is very limited with less than SEK 50 million in sales or 0.1% of total sales. That is of course related to the fact that we have a lot of med tech companies in the portfolio. We also have no production in Russia and very limited presence on the ground, basically a handful of employees.
The direct exposure for our Patricia companies is much smaller than many of the companies we have on the listed side. On the other hand, of course, there is an indirect exposure mainly related to the supply chain and the cost for raw materials. Moving down to the quarter, the total return was down 5% in the quarter. Importantly, a number of strategic add-on acquisitions were closed or announced, and then we come back to that.
The organic sales growth was 5% in constant currency, and the adjusted profit was -3%. Excluding Mölnlycke, which still was affected in the first quarter by the PPE sales last year, the organic sales growth was very strong, up 16% for the remaining eight subsidiaries, and the profit was up 30%.
If I then move over to Mölnlycke in the quarter, the organic sales growth was -7% in constant currency. That was, of course, explained by the significant contribution by COVID-19 related sales of PPE last year. If we exclude PPE, the organic growth for the whole group was 6% in the quarter, and that was mainly driven by a strong performance of Wound Care being up 11% organically in the quarter.
The profit margin declined compared to last year, and that is primarily explained by increased raw material and logistic cost, and also increased investments in sales and marketing, mainly within the Wound Care area. I think it is great to see, though, that despite the first quarter normally being a slightly weaker quarter compared to the fourth quarter from a seasonal point of view, we did actually see a sequential improvement in the first quarter.
Also to remember that next quarter or the second quarter this year will be the last one that will be impacted by the PPE comparison, and the negative effect will be significantly smaller than we saw now in the first quarter.
In the first quarter, as you can see from the figures, with organic sales being -7%, adjusted for PPE being +6%, we had an effect of about 12%-13% - from this PPE comparison. In the second quarter, that will be the last affected, the comparison will be only -4%, or roughly 1/3 what we had in this quarter.
The comparison challenges, if you call it like that, will now fade away. Moving down to Wound Care, organic growth was 11%, as I said before, and they had strong growth in most key regions. Before continuing here, I should actually have started to say that before we have reported Mölnlycke with Wound Care and Surgical.
As you might remember, in the middle of last year, we, the company took a decision to form four dedicated business areas with their own P&L responsibility. Starting this quarter, we will also report in the same way to the market. As you can see in the top pie here, Wound Care, based on last 12 months sales, represents about 57% of sales.
Operating Room Solutions, which include surgical clothes, drapes, and so forth, and here, of course, have been included before the PPE business, represents 27% of sales. Then you have Gloves, 13%, and antiseptics being a small part of the business. This is the situation for the last 12 months as of now.
If we would have had the same pie one year ago, of course, the Operating Room Solutions would have been a larger share of the mix. After that summary, let me then move into the remaining three business areas. Operating Room Solutions was down about a third in the quarter.
Adjusted for the PPE contract, sales was more or less flat. Gloves grew 1% in the quarter. Actually, there was another glitch or COVID-19 related manufacturing lockdown in the beginning of the first quarter, but production is now up and running again. And that's of course great to see that, but I should stress that there are still long lead times in freight that is affecting the Gloves business. The underlying demand for gloves is extremely strong.
The small business, our antiseptic, was down 70%, and that is mainly related to supply disruptions. Moving over to the remaining subsidiaries, you can see here that there was a strong organic growth in the portfolio. Let me take them one by one. The BraunAbility grew organically by 43%, and that is due to strong demand and also less supply chain challenges compared to last year.
Profitability improved sharply, and that is, of course, related to operating leverage, but also positive product mix in the quarter. Atlas Antibodies continued to grow strongly at 20% organically, and profitability is high. Profitability is down compared to last year, but here we are really investing in growing this business. We are investing in R&D, we are investing in building the organization, sales and marketing.
This is absolutely our plan to continue to invest to grow this business fast going forward. The same message with Advanced Instruments that grew organically 20% in the quarter. Also here, we are investing heavily to grow this business. In addition, of course, the margin is affected by product mix since the Solentim products that was acquired have a lower margin than the legacy Advanced Instruments.
Piab had a strong development in the quarter being up 70% organically. All regions and all key business areas had good growth, and profitability was at a good level. Permobil grew 6% organically in the quarter, and here profitability is still affected by supply challenges and also input costs going up. In the quarter, though, there was also some non-recurring cost taking place.
Laborie, the organic growth was, call it, only 4%. The end customer demand is very strong. This is a business that has been affected by supply chain challenges. In the quarter, we did see that gastrointestinal and obstetrics, which is formerly the Clinical Innovations acquisition, grew nicely.
On the other hand, the urology capital equipment fell. The reason is they have chips in them, and here there was a significant supply challenge affecting the sales, but the end customer demand is very strong. Profitability was down in Laborie, of course, affected by the supply chain challenges and higher input cost.
Here it should also be mentioned that the company is investing heavily, not only in building the organization and R&D, but also putting a lot of money behind launching new products like the Optilume that was acquired recently. This is a product that is basically now they have FDA approval, and they are launching it, so they are putting money behind that. Sarnova, organic growth of 3%. Here, the main area holding back the growth is the AED business or HeartStart business, which also contain chips that was down in the quarter.
I think one of the strengths is that the companies have been able to handle all the challenges, develop strong organic growth, and also working hard to mitigate the challenges on the supply chain, but also work to find strategic add-on acquisitions. Laborie and Permobil closed two acquisitions during the first quarter.
Laborie, I mentioned the Optilume product. It's a breakthrough treatment for urethral strictures. FDA approval has been received, and now we are launching this product. The total consideration was $150 million, and we will inject $100 million in equity for this acquisition. Permobil closed the acquisition of Panthera, which is a leading player in manual wheelchairs. This in combination with the Italian acquisition recently done, Progeo, will put them in a strong position in this area.
Sales SEK 150 million, good profitability, slightly below the Permobil Group, but a good profitability. Total consideration about SEK 300 million, and we will inject a little bit more than SEK 340 million here, to cover for this acquisition and also previous, the Progeo acquisition.
Yesterday, Piab announced the acquisition of the French company Joulin, which has a very strong position within vacuum grippers and gantry robots for the automated wood handling market segment. This is a perfect fit for Piab. Sales of about SEK 150 million. Sorry. The company has a strong profitability that is in line with the Piab Group. The price here was SEK 560 million, and this will partly be financed with equity from us.
I think if you look on these companies, you can see that the companies are really looking for acquisitions that fit with the companies close to home, where you can work not only on developing R&D better, but also use the commercial sales force to drive sales in a more efficient way.
This is important for us. It should be attractive companies with high profitability, well-run companies, but also that one plus one becomes more than two. We have recently received or over time received questions about what is actually the return on capital employed, excluding the goodwill related to the acquisition of our companies. Here is a summary for eight out of nine subsidiaries. We have excluded Vectura since that is a real estate company. In 2021, you can see the profit margin was 19%.
The capital turnover is very good at three, which gives a return on capital employed of 55% for the whole portfolio. Of course, with these strong figures with both high margins and capital efficiency, our focus remains to really make sure that we grow these strong platforms as fast as we can.
Of course, we also need to make sure we are efficient, but key value creation will be continue to grow these businesses and many of our companies have very high gross margins. Moving over to EQT. Total return was -15% in the quarter. The negative figure is mainly driven by the listed company EQT AB which was down 25% in the quarter. The value growth in the EQT funds was up 12%.
Here we report it with one quarter lag as you know. The cash flow, net cash flow to Investor was more or less zero. Most importantly, in the quarter, EQT announced the acquisition of Baring Private Equity Asia. It's a EUR 6.8 billion acquisition, and this will significantly expand the asset under management.
We're talking about an additional EUR 18 billion of assets under management. With this acquisition, EQT will take a step change in Asia and become one of the really global players within their segment a nd maybe most importantly is that if you look on EQT and Baring, there is a very, very strong culture fit between these two companies. We're very excited about this acquisition.
To summarize then, I don't have a crystal ball, but it might be the case that we are entering more challenging time later on during the year. Let's see how it plays out. Interest rates are for sure on the way up. But irregardless how the market around us develops and irregardless how the stock market develops, I think that Investor actually stands very strong.
We have companies that are well-positioned to growth trends with med tech automation. We see good underlying organic growth. As I showed, they have good profitability and really good capital turnover. In addition to that, we have an excellent financial position that should enable us to act on all opportunities popping up. In addition, our strategy remains firm.
We've continued to focus on our strategic direction, and we focus on technology shift, sustainability, talent management and sustainability, agility are really top priorities. Of course, we need to continuously work to adapt to the situation at hand with sanctions, raw material price increases, to mention a few.
I can tell most companies now are of course working hard to really raise prices. You will also see that in the figures they are also building stock of components to make sure that they can deliver. There is also a lot of tactical work going on and with companies with extremely high gross margin, of course, it. We believe it's many times valuable now in this situation to build some extra stock to be able to deliver. With that, I hand over to Helena.
Thank you, Johan. Yes, I will start with this graph showing the adjusted net asset value development since 2016, and this is the year when we started evaluating our private investments with the estimated market value approach that we use.
You can see at the end of this graph that the quarter ended at an adjusted net asset value of SEK 684 billion, and the annual average growth with dividend added back for the last five years has been 15%. Looking at the total return by business area, we can see that listed companies being two-thirds of the portfolio was down 10%, while Patricia was down 5% and our investments in EQT was down 15%.
Looking a little bit closer at the listed companies, which ended the quarter at SEK 456 billion, we can see, as Johan already mentioned, that there was a mixed performance in the portfolio and some of the larger companies were down significantly, like for example, ABB down, Atlas Copco down 20%.
On the other hand, we saw companies like Saab, Sobi, and AstraZeneca actually outperforming in this turbulent market. Overall, as we mentioned before, listed companies was down 10% compared to SIXRX - 14%. Going over to Patricia Industries, 20% of our portfolio, we can see in this graph showing the sequential change in the estimated market values that several of the companies' values were actually up in the quarter while the overall performance was impacted by Permobil and Mölnlycke being down.
You can see here also that Patricia Industries cash was impacted by an internal transfer and also the provision of acquisition financing of 1.3%, SEK 1.3 billion in the quarter. Johan mentioned some of these acquisitions earlier. Looking at the major drivers of estimated market value in the first quarter, we can see that Mölnlycke estimated market value was down SEK 7.4 billion, and this was driven by lower multiples and lower earnings, which impacted the value negatively.
Permobil was down SEK 1.5 billion. Here, we also saw lower multiples, and there was a capital injection from Patricia Industries of SEK 344 million in the quarter. BraunAbility was actually up almost SEK 400 million due to higher earnings, which impacted positively, but this was somewhat mitigated also here by lower multiples. Sarnova and Three were both up roughly SEK 1 billion because of higher multiples in these cases. Our financial position remains strong, and our leverage at the end of the quarter was 1.8%.
Here, my final slide showing that our average annual TSR is holding up and is well above our internal return requirement and also outperforming SIXRX over all these periods. With that, I hand over to Vivica for Q&A.
Thank you, Johan, and thank you, Helena. By that, we will open up for our Q&A session. We will start with questions over the phone, and I will hand over to our facilitator.
Our first question comes from the line of Maura Tygesen of DNB Markets. Please go ahead.
Thank you so much. I just have one question, which is: when you think about the long-term trends of what's going on with supply chains across your portfolio holdings, do you think it's fair to see higher working capital to sales ratios? What are your thoughts on reshoring of production?
I think, as I said, that right now many companies are building up safety stock basically of components to be able to ship to their customers. What we see right now, the supply chain challenges will remain for quite some time during this year.
During that period, I think many companies will also need to think about resilience handling their customers. In the more long term, of course, the ambition will be for many companies to make the working capital efficient again. We are seeing that some are of course looking through the value chain and call it regionalization.
It differs a lot between different segments, different companies, but in some cases it might be optimum to do that, to increase the resilience, but also, in some cases to reduce the climate footprint. It's an ongoing work to make sure you have efficient supply chains and efficient working capital, but also make sure you are resilient versus your customers.
Thank you. That's clear.
May I remind telephone participants that if you wish to ask a question, please press zero one on your telephone keypads. There are no questions at this time on the telephones. Please go ahead speakers.
Thank you. I will see if we have any questions over the web. We have a question here. How come you didn't buy any stocks in the stock market in Q1 or increase? I gather this is a question about increase our ownership in listed companies.
No, I will not talk about Q1 specifically, because there can be different reasons for it. Of course, we will try to invest in the companies that we want to do it from a strategic point of view and at the time we believe it's attractive to do it. There are also other things affecting our ability as an engaged owner with inside positions in board. Sometimes we can also be restricted to give one example. There are a number of things that can affect that, and I cannot go into those details.
Okay. Thank you. We don't have any more questions over the web, and I gather we don't have any more questions over the phone. By that, we would like to thank you all for joining us today for this Q1 presentation and we'll be back for our Q2 presentation this summer. Thank you all.
Thank you.