Welcome everyone to this press conference and webcast teleconference. My name is Stefan Stern. I'm Head of Corporate Relations and Communications at Investor. This conference is about presenting our Q4 report. The presentation is available afterwards on our website. That can also be viewed now in real time online. We're going to hear two presentations, one by CEO Johan Forssell and one by CFO Helena Saxon. We also have our Investor Relations Manager, Magnus Dalhammar here with us. After the two presentations, we're going to take a Q&A. Once again, we're welcome. With that, I'm leaving over to Mr. Forssell.
Thank you, Stefan. Welcome to this presentation. Let me start by giving a summary of 2016. That was an active year for Investor. In the beginning of this year, one major event was announced, and that is that we decided, or the board has recommended to split Atlas Copco into one mining and civil engineering company and one industrial business. I will come back to that. We invested SEK 1.5 billion in our core listed portfolio in Ericsson, Wärtsilä, and Atlas Copco. Of that, we invested about SEK 1 billion in Ericsson in the fourth quarter. That was actually the first time in quite some time since we invested in Ericsson. We also bought a new company in North America, Laborie, a sizable investment, an investment of roughly SEK 5 billion for us.
If you look on the bottom line or the performance, you see that the net asset value was up 13%. Our total share of the return was also up 13% compared to the stock market + 10%. Actually the 13% total share of the return compared to the market of 10% is a copycat of last year. Finally the board proposes a dividend of SEK 11 per share, which is up 10% compared to last year. You know our dividend policy is to give out a large share of the dividends we receive from the core investments, plus a market yield on our net other operating assets, that is the unlisted part. That we should pay a steadily rising dividend over time. You have all seen the announcement by Ericsson lately that the dividend is proposed to be cut from SEK 3.30 to SEK 1 per share.
For Investor, that means that the dividend that we receive will be cut, if you look on Ericsson alone, by roughly half a billion. Having said that, our dividend policy remains firm. Despite that you can expect to see an increase in the dividend also next year. You should not take the current growth rate in the dividend for granted. I just wanted to make that clarification since I would guess that Ericsson and the dividend cut could be a question. Our dividend policy stays firm and we are, as you know, a long-term shareholder. Turning over to the listed core investment, strong performance. Total shareholder return was up 14% during the year. As I mentioned, we invested in these three companies and I'm pleased with that. We invested in Atlas Copco during the first quarter at very attractive level.
During the second and third quarters, we invested in Wärtsilä. Now in the fourth quarter, we acquired Ericsson shares. You can see here that we received a very strong dividend last year, SEK 8.3 billion being up 8% compared to the year before. Moving over to the announcements from Atlas Copco to split the company. I think this is a very logical and natural next step. It creates two companies that have strong positions, market leading positions, and with good opportunities to grow also in the future. We are strongly behind this and believe this will be value creative for the shareholders. If this then is approved by the AGM in 2018, we will get two strong core investments instead of one. EQT, high activity during the year. You have seen a lot of exits, lots of investments.
The net of that was a value increase of 15%. Out of the 15%, 5% was held from the currency and 10% was increase in constant currencies. Finally, you see the net cash flow that was SEK 1 billion this year, which is a strong performance. You know that that can fluctuate between the years. Last year was exceptionally strong with SEK 4,500,000 ,000 but we have said that SEK 1,500,000,000 might be a reasonable level to guide you over the long term. Of course it will depend on exit and investments. I will say a few words about Mölnlycke. Helena will come back to all subsidiaries later on.
If we look on the performance of Mölnlycke, you can see that for the full year, the growth on the top line was about 6%. The profit growth was 16%, and the cash flow actually grew by 11%. I think this is a strong performance. If you look on the fourth quarter alone, the organic growth was 4%, but the profit growth was actually 17%. Going forward with the company with this strong profitability and cash flow, as I said many times, the key focus will remain to be to grab the opportunities to grow this company, invest in R&D, try to find new customers and application for the existing products, but also, of course, to grow in emerging markets. I should say in the fourth quarter, the company really had good traction when it comes to growth in emerging markets.
Mölnlycke is, of course, the biggest part is still in Europe and the U.S., but the growth rate in emerging markets was very strong in a couple of countries during the quarter. Of course, for all companies, even successful ones like Mölnlycke, you always need to have a continuous focus on operational excellence. It's improving every day. I will just make a summary. Helena will go through the details, but you can see here the organic growth for our unlisted companies during 2016. You can see that even though it was a turbulent year, you can see that we have a portfolio that shows a very good underlying organic growth throughout the year. Not only a good growth, but also strong cash flow.
During 2016, Patricia could take out roughly SEK 4 billion from the companies due to the strong cash generation in Mölnlycke, 3 Scandinavia, and Permobil. This picture is unfortunately a little bit wrong, but let me guide you. What I'm trying to show here is that the main sources, this is not going into all the details, the main sources where we receive the inflow of capital and then the main uses of the capital. During the year, we received SEK 8 billion, as I said, from dividends from the core investments. The green part of the chart shows that we got the SEK 4 billion from Mölnlycke, 3, and Permobil. Finally, the orange part shows the SEK 1 billion we received from EQT. That's the SEK 13.2 billion that we received from these three entities. How did we use them?
SEK 7.6 billion was the dividend to our shareholders, the SEK 4.7 billion was the acquisition of Laborie, we did the investments of SEK 1.5 billion in the existing portfolio, with Ericsson being the largest one. This shows, I think, a strong underlying cash flow that makes it possible to give a dividend, but also to reinvest. I would also like to stress that if, for example, Mölnlycke would find a good acquisition opportunity, of course, that part of the cash flow in would be reduced. I would be a very happy camper anyway if they would find opportunities to invest, because that means that they will do part of the investment for us. To summarize, our strategy remains firm, grow net asset value, operate efficiently, pay a steadily rising dividend. With that, I will hand over to Helena.
Thank you, Johan. I will start with the financial highlights for the quarter. Net asset value increased by SEK 9.4 billion to SEK 300 billion, an increase of 3%. Total shareholder return increased 9% compared to SIXRX 3%. If we look at the contribution from the different business areas, we can see that they all contributed to this growth, mainly listed core investments, of course. If we look at listed core investments in particular, we can see that the strongest contributors were Atlas Copco, SEB, and Saab. The strongest performers in the quarter were Ericsson and AstraZeneca had a tougher quarter. As Johan mentioned, we invested over SEK 1 billion in Ericsson shares in Q4. If you look at EQT, our investments in EQT increased by 4% in the quarter, reaching almost SEK 14 billion.
Our net investment in the quarter was just over SEK 100 million, we increased our commitment to EQT to SEK 13.7 billion. Patricia Industries increased or contributed to the increase of net asset value by SEK 1.7 billion. This is also an old slide, I can see that, but never mind. The biggest contributors, again, was Mölnlycke, we also saw a positive contribution from Vectura and Laborie in the quarter. One important thing to mention about Patricia Industries in the quarter is, of course, the strong distribution that Patricia received Johan already mentioned that, but it was a very strong quarter from that perspective. If we look at Mölnlycke in particular, organic growth was 4% in constant currency, both wound care and the surgical division contributed to this growth. We saw growth in the U.S., Europe, with strong growth in emerging markets.
The EBITDA margin increased due to a favorable mix effect and operational leverage. We had some significant CapEx in the quarter in the Czech Republic as we are building a new assembly plant there for the procedure packs. Again, we announced this already in the Q3, we want to mention that the company distributed as much as EUR 300 million to Patricia Industries. Laborie, our new subsidiary, grew 6% in constant currency in the quarter and saw continued strong growth in the urodynamics business. The EBITDA margin was impacted by significant transaction costs, the underlying EBITDA margin, both for the quarter and for the year, is around 25%. The refinancing of the transaction was completed $100 million was distributed to Patricia Industries. Aleris grew 3% in the quarter, mainly driven by the care business in Norway and Denmark.
We had some struggles with healthcare demand both in Denmark and Sweden. In Denmark, we see both private and public demand a little bit weaker, the EBITDA margin increased in the fourth quarter, and that is mainly due to the Curato acquisition. On a positive note, we'd like to mention that Aleris, two Swedish hospitals, Motala and Bollnäs, were mentioned in a ranking made by Dagens Medicin as one of the best in Sweden. Permobil grew 1% in the quarter. U.S. sales were somewhat lower than last year, European growth is still good. EBITDA margin was largely unchanged, Permobil for the first time distributed cash to Patricia Industries, SEK 194 million in the quarter. BraunAbility saw organic growth of 13%, with strong demand for commercial wheelchair-accessible vans and domestic lifts, the EBITDA margin was slightly higher despite significant investments in production quality and efficiency.
Vectura and Grand both grew nicely in the quarter, 3 Scandinavia saw a sequential decrease in the number of subscribers in the quarter. There is strong demand for Hallon and its Danish equivalent, OiSTER. Both still attract new subscribers, we saw service revenue growing by 7%, operational leverage in that business is shown by the EBITDA going 9% in the quarter. Again, 3 distributed cash to its owners, SEK 249 million to Patricia in the quarter. If we look at the portfolio of financial investments, there is a continued focus on divestitures, the net proceeds in Patricia Industries amounted to SEK 292 million in the quarter. I will finish on a slide showing our balance sheet development, our leverage was 5.3x at the end of the quarter at the very low end of our target range.
Net debt amounted to SEK 16.8 billion, our cash and readily available placements amounted to SEK 16.7 billion. The average maturity of our debt portfolio is long, as much as 10 years. Just a final point, after the end of the quarter, we successfully refinanced our SEK 10 billion revolving credit facility.
Thank you, Helena. With that, I'm leaving over for any questions that might come from the audience. First question, microphone.
Thank you. Johan Nevius, Swedbank. First question is on Mölnlycke perhaps, your group leverage and Mölnlycke's leverage. You're approaching 5% on group level and Mölnlycke net debt to EBITDA is approaching two. Theoretically, you could make acquisition in Mölnlycke up to beyond SEK 20 billion without still be popping out of bounds. What's your thinking?
No, I think you're right in the sense that at both Investor level and the balance sheet in Mölnlycke are very strong and both leave ample opportunities to conduct investments. To what extent we will do investments whether it's Investor AB or Mölnlycke, the size of them will be where we see that we can do things that create value. We are looking at investment opportunities at Investor, and Mölnlycke is for sure looking at investment opportunities. It's as always, it takes two to tango, we will see where we end up. You're absolutely right. There is an ample financial opportunity if we find the right opportunity that we believe can create good value.
Okay, how should we look at Laborie and Mölnlycke? Different businesses, still both med tech and.
Yeah, I think they are different businesses. They are, of course, having some similarities, as you say, in terms of the overall market, but there are also differences. It's different customer segments, different product categories, and some different dynamics in the business. You know that in Mölnlycke, it is mainly consumables, while the business model in Laborie is a little bit different. You sell the equipment, but then it's more of a, call it a razor and a razor blade model. After that, you get a lot of consumables around that, which is very nice because then you get stability and good profitability on that.
Is it easier to find complementary synergies to, and do the math on Laborie than Mölnlycke?
I will not say that. For most of our companies, we are looking for add-on acquisitions. There can be exceptions. If you have certain segments or certain business areas within some of our companies that we need to fix, basically improve efficiency and profitability, there we might hold back acquisitions because you need to get in shape. Classical stability, profitability before growth. Overall, most of our companies, especially the ones that are in good shape, they will look for opportunities to grow.
Finally, on BraunAbility, the growth is spectacular. I think there has been some new vehicles that you fit. The company is fitting, including more vehicles that clearly are in demand. What should we expect going forward? 13% is exceptional.
I think you have heard me say that before. I would not try to extrapolate that. I think BraunAbility has had a strong year. Of course, 13% is a very high gross figure. For sure, the company are working intensively to grab all opportunities. We have seen a very strong demand on the commercial side during the year. I think 13% is a very high figure. I would more say that we will work hard to grow it, but 13% is probably on the high side, of course, if you look on the underlying demand in the industry.
Thank you. Any more questions? Please.
Thank you. Derek Laliberte, ABG. Could you please specify where you're seeing this strong growth in the emerging markets for Mölnlycke Health Care? Is it China mainly, or any other strong countries?
I would say that we are actually seeing a good growth rate in Brazil, and that is one of the few companies where you see good growth rate in Brazil at the moment. Brazil is a small market for Mölnlycke. We are seeing, and maybe more importantly in terms of the overall performance, we are seeing good growth in China and the Middle East, and that is very nice and good to see the traction in those two regions.
Also on Mölnlycke's book value, I think it was increased by 4% roughly in the quarter. Is that solely a contribution from the net income, or is it also FX effect?
As we talked about last quarter, this is not an adjustment that we make. This is the value of the equity increases when net income is strong. Last quarter, you asked about the currency effect. This time, actually currency was negative for us, there was a strong underlying effect of just being more profitable, contributing to net asset value or equity through that.
Of course. Thank you.
Michael Hartman, HSBC. A question on Atlas Copco. You were obviously arguing that it creates value. One could actually argue that if you split the company, one part would have a higher cost of capital, it would be rate. There needs to be a compensating factor in order to create value. I was wondering if you could elaborate a little bit on your thinking behind the value creation. Thanks.
Thank you. I think you that follow us closely know how we think, of course, we have debated this intensely in the board in Atlas Copco. I would say like this. For us, this is an action that we take because we truly believe it will create a stronger possibility to develop these companies, basically create a combined better profit in the long term for the two companies by getting an increased focus on these units. That is the key message. We are not looking at peer multiples, et cetera. That has not been the analysis. It has been a true industrial analysis, how we believe we can create most value for the long term. That's why the board of Atlas Copco proposed this, we, as an owner, fully support it.
Just a follow-up. Is the increase in profit versus what you would achieve in the status quo, is that more driven by margin expansion or more by additional growth opportunities?
I will not go into that, you know that. The reason, of course, there are so many moving parts. From the long term, you know Atlas Copco, both business units, you saw the quarterly results. If you look on the industrial units, those are running at very high profit margins, above 20%. You could also see that the mining business was generating 20% margin in the fourth quarter. For the long-term value creation for Atlas Copco's both units, for sure, with those strong profit margins and the strong cash generation that you see, growth is a key priority for both units.
Okay, let's move over for any questions that might come by telephone.
Ladies and gentlemen, if you have a question, please press zero one on your telephone keypad and you will enter a queue. We have a question registered from the line of Elias Porse from Nordea. Please go ahead. Your line is open.
Thank you. Elias Porse from Nordea. Do you agree that your reported values for the unlisted holdings do not reflect the underlying values, for example, in Mölnlycke? If so, are there any good reasons not to report fair values, especially as you have said many times that you do not intend to sell it? Thank you.
Thank you for that question. No, I do not believe that the reported values of Mölnlycke at all reflects the value of the company. As you all know, we report the book value. Of course, you can see the profitability of the company, and you can see the cash generation. Of course, if you would use a normal market multiple, it would have a value that is much, much higher than we have in the books. We have decided to report the listed portfolio and equity at market or estimated market values while we report our subsidiaries to book values. This is the way we do it, and we try to be transparent with the financial figures. You can put, Elias, your estimated value on, for example, Mölnlycke.
Sure. Currently the market is only pricing your unlisted assets at roughly SEK 28 billion in total versus your very conservatively booked values of SEK 68 billion. You obviously must be disappointed by this. Should you not view this as a signal that the market cannot fully price these assets, even as you disclose EBITDA and so on, and that you perhaps should start to help the market via reporting fair values in line with your main peers? Thank you.
I hear you. I will not debate. We can all have different view, I honestly believe disregarding how you report it, that the key way to create value is to develop the companies. I showed you Mölnlycke's growth of 6%, strong profit, double-digit both profit and cash flow growth. That is how you create true intrinsic value, the rest is just booking. If you have that view, Elias, I would just run and buy the shares before there are no one left.
Yeah, I agree. I must allow to buy the shares personally. Coming back to this, obviously you have created a great deal of value in Mölnlycke, but the market hasn't been able to see through it. That could, to some degree, be explained by how you report the values. Do you not see a need to change how you report this, and why would you not want to do fair values in line with the other companies in the sector? Thank you.
Our view is that we honestly, and both Helena and I, we are continuously looking into how we can be transparent, how we can give you good information regarding our subsidiaries, and that is a discussion we always have. To what extent we will add some more information or not, I cannot say now, that is something that we will work continuously on over the coming years. You know we have added more information, for example, related to capital efficiency, and EBITDA margins, et cetera, over the last couple of years.
Thank you.
Our next question comes from the line of Andreas Stiga from Nordea Credit Research. Please go ahead. Your line is open.
Yes, good morning. Thank you. Three questions on Mölnlycke. First of all, the new gearing target, how firm should we view that in line of your comments about growth opportunities? Along those lines, the new financial policy definitely open up for a significantly higher debt leverage. How do you envisage the split between dividends and acquisitions in light of recent years' fairly low acquisition activity? The final question is on the financing activities. It seems like the bond issue process, the new bond issue has stalled. Will Mölnlycke pursue the bond route or will they go to the bank loan market instead? Thanks.
Thank you for those questions. I will leave the questions related to the bonds, et cetera, to Helena, and I can start by taking the first question myself when it comes to how we plan to use our strong balance sheet at Investor. I have said, and I think that is the way we should run it, that I will not guide where we will find it, how much will be unlisted, how much will be listed, because we are here to create value. I don't know in 2017 where the best opportunities will arise. If we see good opportunities, whether it's on the unlisted or listed side, we will try to grab them, and we have the balance sheet that makes it possible to do that.
Having said that, I also say that if you would have, which you will never have, a normal scenario with a steady GDP and a steady development in the world, I think you can expect from a strategy point of view that we'll invest more on the unlisted side, trying to find a couple of new good subsidiaries to add to our portfolio.
Okay, regarding Mölnlycke's updated financial policy, we remain committed to it as we have communicated also through Mölnlycke management. Regarding the bond process, I think that's something we won't comment here. You will hear more about that from Mölnlycke management in time.
Thanks a lot.
I remind you that if you would like to ask a question, you will have to press zero one on your telephone keypad now. Our next question comes from the line of Oskar Lindström from Danske Bank. Please go ahead. Your line is open.
Yes, good morning. I also have a question around the Mölnlycke valuation. Do you believe that the listing of ConvaTec and the acquisition of BSN medical in any way should be seen as peers to Mölnlycke in terms of valuation?
Thank you for the question. For sure, there are certain segments within both those companies that are competing with businesses within Mölnlycke. Of course, are they the perfect peers or are they peers? That I would hand over to you to make the judgment because you can see gross profitability, cash flow, and so forth in all these companies. From our perspective, of course, we have our view of what the true value is, what we believe is the true value of Mölnlycke. In our internal efforts, we have a very strong focus in trying to grow that, what we call internally intrinsic value. That is basically developing the company, so we maximize the true underlying value of the company. When it comes to exactly in terms of the peer multiples, I think you can do that judgment.
Indeed. A follow-up question on this, in terms of you say you're looking for acquisition targets or rather that Mölnlycke is looking for acquisition targets. If I may ask you, are those acquisition targets, would you say that they are mainly within the narrow scope of what Mölnlycke is doing today, i.e. advanced wound care? Is there a wider scope for those acquisitions, especially if you're looking outside of the European market?
I think it's an excellent question, how and where, to what extent it is in the core and to what extent you can create value from growing in what I would call adjacent areas. Going totally out of what your own knowledge and so forth, that I don't believe in, whether it's Mölnlycke or other companies, you need to stick to your core. Of course, there can be a nice number of different adjacencies where you can use the knowledge you have in an organization to grow the business. That is a question for the board in Mölnlycke together with the management team to figure out where they can find those opportunities.
All right. Thank you very much. Those were my questions.
Thank you.
As a last reminder, if you are connected through the phone line and you would like to ask a question, please press zero one on your telephone keypad now. As there are no further questions registered, I will hand back the conference to the speakers.
Okay, thank you for that. I am now going to move over to questions through the web. Can you please tell us, Mr. Dalhammar, who the first question is from and what it relates to?
I can, and it is a question from Mr. Eric Olin, and the question is: Is it possible that Patricia Industries can acquire any industrial company, or is the focus only on med tech?
It's a very good question, the answer is for sure yes on that one. Industrial companies or industrial segment is an area where we have a good and deep knowledge internally in the organization. For sure that is an opportunity.
Thank you. Any more questions through the web? With that, I'm leaving over for any more questions from the audience. First question here. Microphone, please.
Johan, Swedbank. Just follow up. I think it's fair to say with book value on Mölnlycke, we have to do some work ourselves as well. Then you would be open for criticism, whatever value you would show. Anyway, I think given the size of Mölnlycke, I think it would be sensible to show more details, to show surgical and wound care and also perhaps regions which would be the most obvious. There are other things as well, but more details given the size and importance of Mölnlycke would be sensible, I think.
We bring that with us, I understand that there is a good interest, as I said, we'll of course try to be transparent. I can certainly invite you to our Capital Markets Day, where there will be a strong focus on our subsidiaries during the day.
Also on EQT, given the performance over the last year and a bit longer, what can we expect going forward?
I think you can expect that you will have a chance at the Capital Markets Day to get more flavor on EQT, too.
Thank you.
Thank you.
The Capital Markets Day will be in March. Any more questions? Thank you for participating, and thank you for listening in. Thank you.