Welcome, everyone, to this press conference and webcast teleconference. My name is Stefan Stein, Head of Corporate Relations and Communications at Investo. This conference is about presenting our Q4 report, and the presentation is available afterwards on our website that can also be viewed now in real time online. We're going to hear 2 presentations, 1 by CEO, Johan Verschel and one by CFO, Irina Saxon. And we also have our Investor Relations Manager, Magnus Dahlana, here with us.
After the two presentations, we're going to take Q and A. Once again, very welcome. And with that, I'm leaving over to Mr. Foschall.
Thank you, Stefan. Welcome to this presentation. Let me start by giving a summary of 2016. That was an active year for Investo. Actually, 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 1 Mining and Civil Engineering Company and 1 Industrial Business.
I will come back to that. We invested SEK 1,500,000,000 in our core listed portfolio in Ericsson, Wartssere and Atlas Copco. And of that, we invested about SEK 1,000,000,000 in Ericsson in the 4th quarter, and that was actually the first time in quite some time since we invested in Ericsson. We also bought a new company in North America, Laboree, a sizable investment in investment of roughly SEK 5,000,000,000 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 plus 10%. And actually, the 13% total shareholder return compared to the market of 10 is a copycat of last year. And 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 received from the core investments, plus the market yield on our net other operating assets, that is the unlisted part, and 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 Investo, that means that the dividend that we receive will be cut, if you look on Ericsson alone, by roughly SEK 500,000,000. Having said that, our dividend policy remains firm. And despite that, you can expect to see an increase in the dividend also next year. But 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.
But our dividend policy stays firm, and we are, as you know, a long term shareholder. Turning then over to the listed core investments. Strong performance. Total shareholder return was up 14% during the year. And as I mentioned, we invested in these 3 companies, and I'm pleased with that.
We invested in Atlas Copco during the Q1 at very attractive level. During the second and third quarters, we invested in Wartsila. And then now in the Q4, we acquired Ericsson shares. And then you can see here that we received a very strong dividend last year, SEK 8,300,000,000 being up 8% compared to the year before. Then 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 2 companies that have strong positions, market leading positions and with good opportunities to grow also in the future. So we are strongly behind this and believe this will be value creative for the shareholders. And if this then is approved by the AGM in 2018, we will get 2 strong core investments instead of 1. EKG, high activity during the year.
You have seen a lot of exits, a lot 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 increased in constant currencies. And then finally, you see the net cash flow that was SEK 1,000,000,000 this year and which is a strong performance. You know that, that can fluctuate between the years.
And the 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. But of course, it will depend on exit and investments. I will say a few words about Mennelikke, and then Helena will come back to all subsidiaries later on. But if we look on the performance of Menelik, you can see that for the full year, the growth on the top line was about 6%. And the profit growth was 16%, and the cash flow actually grew by 11%.
I think this is a strong performance. And if you look on the Q4 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 and D, try to find new customers and application for the existing products, but also, of course, to grow in emerging markets. And I should say, in the Q4, the company really had good traction when it comes to growth in Emerging Markets. And you know Menelik 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 capital countries during the quarter. And of course, for all companies, even successful ones like Nenrik, you always need to have a a continuous focus on operational excellence. It's improving, improving, improving every day. I will just make a summary, and then Helena will go through the details.
But you can see here the organic growth for our unlisted companies during 2016. And 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. And not only a good growth, but also strong cash flow. During 2016, Patricia could take out roughly SEK 4,000,000,000 from the company due to the strong cash generation in Mainlyk, 3 Scandinavia and Permobil. And 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. And during the year, we received SEK 8,000,000,000, as I said, from dividends from the core investments. The green part of the chart shows that we got the SEK 4,000,000,000 from Nenliquet 3 and PermaVie. And finally, the orange part shows the SEK 1,000,000,000 we received from EKT.
So that's the SEK 13,200,000,000 that we received from these three entities. How did we use them? Well, SEK 7,600,000,000 was the dividend to our shareholders. And then the euros 4,700,000,000 was the acquisition and library. And then we did the investments of CHF 1,500,000,000 in the existing portfolio, with Ericsson being the largest one.
So this shows, I think, a strong underlying cash flow that makes it possible to give a dividend but also to reinvest. But I would also like to stress that if, for example, Nern Ligke would find a good acquisition opportunity, of course, that part of the cash flow in would be reduced. But 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. So to summarize, our strategy remains firm. Grow net asset value, operate efficiently and pay a steadily rising dividend.
And with that, I will hand over to Helena.
Thank you, Johan. So I will start with the financial highlights for the quarter. Net asset value increased by SEK 9,400,000,000 to SEK 300,000,000,000, an increase of 3%. But total shareholder return increased 9% compared to SEK 6, 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.
So if
we look at listed core investments in particular, we can see that the strongest contributors were Atlas Copco, SVB and Saab, also the strongest performers in the quarter, where Ericsson and AstraZeneca had a tougher quarter. And as Johan mentioned, we invested over EUR 1,000,000,000 in Ericsson shares in Q4. If you look at EQT, our investments in EQT increased by 4% in the quarter, reaching almost SEK 14,000,000,000. Our net investment in the quarter was just over SEK 100,000,000, and we increased our commitment to EQT to SEK 13 700,000,000. Patricia Industries increased or contributed to the increase of net asset value by 1 point this is also an old slide, I can see that, but never mind, increased by SEK 1,700,000,000 and the biggest contributors again was Mannliche.
And we also saw a positive contribution from Victua and Labrie in the quarter. Of course, 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 Maliki 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. 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 And again, we announced this already in the Q3. We want to mention that the company distributed as much as EUR 300,000,000 to Patricia Industries.
Laboree, our new subsidiary, grew 6% in constant currency in the quarter and saw continued strong growth in the EuroDynamics business. The EBITDA margin was impacted by significant transaction costs, but the underlying EBITDA margin, both for the quarter and for the year, is around 25%. The refinancing of the transaction was completed and $100,000,000 was distributed to Patricia Industries. Alirius grew 3% in the quarter, mainly driven by the Care business in Norway and Denmark. We have some struggles with health care demand, both in Denmark and Sweden.
In Denmark, we see both private and public demand a little bit weaker. But the EBITDA margin increased in the 4th quarter, and that is mainly due to the Corrado acquisition. On a positive note, we'd like to mention that Alaris to Swedish hospitals, Motol and Volnes, were mentioned in the ranking made by Dongers Medicine as one of the best in Sweden. Permobil grew 1% in the quarter. U.
S. Sales was somewhat lower than last year, but European growth is still good. EBITDA margin was largely unchanged. And Permobil, for the first time, distributed cash to Patricia Industries, SEK 194,000,000 in the quarter. BraunAbility saw organic growth of 13% with strong demand for commercial wheelchair accessible vans and domestic lifts, and the EBITDA margin was slightly higher despite significant investments in production, quality and efficiency.
Vectura and Gran both grow nicely in the quarter, and Swiss Scandinavia saw a sequential decrease in the number of subscribers in the quarter. But there is strong demand for Hallon and its Danish equivalent Oyster. It's both still attract new subscribers, and we saw service revenue growing by 7%. And operational leverage in that business is shown by the EBITDA growing EBITDA growing 9% in the quarter. And again, 3 distributed cash to its owners, SEK 249,000,000 to Patricia in the quarter.
If we look at the portfolio of financial investments, there is a continued focus on divestitures, and the net proceeds in Patricia Industries amounted to SEK 292,000,000 in the quarter. I will finish on a slide showing our balance sheet development, and our leverage was EUR 5.3 billion at the end of the quarter at the very low end of our target range. Net debt amounted to SEK 16,800,000,000 and our cash and readily available placements amounted to SEK 16,700,000,000 The average maturity of our debt portfolio is long as much as 10 years. And just a final point, after the end of the quarter, we successfully refinanced our SEK 10,000,000,000 revolving credit facility.
Thank you, Elena. And with that, I'm leaving over for any questions that might come from the audience. First question, microphone. Thank you. Johan O'Neill, Swedbank.
Yes, first question is on, well, MOLVIPI perhaps. And your group leverage and non Zwicky's leverage. I mean, you're approaching 5% on group level and non Zwicky net debt EBITDA is approaching 2. I mean theoretically, you could make decision in Malvika beyond EUR 20,000,000,000 without still be not being out of bounds. What's your thinking?
No, you're right that I think you're right in the sense that at both investor level and the balance sheet in Nielrik are very strong and both lead ample opportunities to conduct investments. To what extent we will do investments, whether it's Investor AD or Nenrik, 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 Henrik is for sure looking at investment opportunities. But this, as always, it takes 2 to tango, so we will see where we end up. But you're absolutely right.
There is an ample financial opportunity if we find the right opportunity that we believe can create good value.
And how should we look at La Bora and Malbec? I mean, different businesses, but still both metric and
Yes. 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 different it's different customer segments, different product categories and some different dynamics in the business. You know that in Vellic, it is mainly consumables, while the business model in Glabari is a little bit different. You sell the equipment, but then you have it's more of a, call it, a razor and a razorblade 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 laborious than WIKEN?
I will not say that. We are looking 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 the efficiency and profitability, that we might hold back acquisitions because you need to get in shape, classical stability, profitability before growth. But overall, most of our companies, especially the ones that are in good shape, they will look for opportunities to grow.
And finally, on brown, I think the growth is spectacular. I think there has been some new vehicles and well, that you fit the company is fitting, including more vehicles that clearly are in demand. What should we expect going forward? 30% is exceptional.
Yes. And I think you have heard me say that before. I would not try to extrapolate that. I think vulnerability has had a strong year. But of course, 13% is very high growth figures.
For sure, the company are working intensively to grab all opportunities. But we are seeing we have seen a very strong demand on the commercial side during the year. But I think 13% is a very high figure. But 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.
Any more questions? Please.
Thank you. Derek Klallerba, B. G. Could you please specify where you're seeing this strong growth in emerging markets for Malek Healthcare? Is it China mainly or any other strong countries?
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. But Brazil is a small market for Velleca. 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 it's very nice and good to see the traction in those two regions.
And also on Malte's book value, I think it was increased by 4% roughly in the quarter. Is that solely a sort of 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. And last quarter, you asked about the currency effect. This time, actually, currency was negative for us.
So there was a strong underlying effect of just being more profitable, so contributing to net asset value or equities through that.
Michael Harkmann, 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 derate. So there need to be a compensating factor in order to create value.
So I was wondering if you could elaborate a little bit on your thinking behind the value creation.
Thank you. I think you that follow us closely know how we think. And of course, we have debated this intensely in the board in Atlas Copco. But 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 2 companies by getting an increased focus on these units.
That is the key message. We are not looking at peer multiples, etcetera. 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. And that's why we the Board of Atlas Copco proposed this, and 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. And you know that and the reason, of course, there's so moving so many moving parts. But from the long term, 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, about 20%. But you could also see that the mining business was generating 20% margin in the 4th quarter.
So for the long term value creation for Atlas Copcos, 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.
We have a question registered from the line of Elias Poce from Nordea. Please go ahead. Your line is open.
Thank you. Elias Porsche from Nordea. Do you agree that your reported values for the unlisted holdings did not reflect the underlying values, for example, in Malmoelika? And if so, are there any good reasons not to report fair values, especially as you've 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 Menelik at all reflects the value of the company. And as you all know, we reported the book value. And of course, you can see the profitability of the company and you can see the cash generation.
And 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 EKT at market or estimated market values while we report our subsidiaries to book values. And this is the way we do it, and we try to be transparent with the financial figures. So you can put, Elias, your estimated value on, for example, Mannlica.
Sure. But currently, the market is only pricing your unlisted assets at roughly SEK 28,000,000,000 in total versus your very conservatively booked of €68,000,000,000 And you obviously must be disappointed by this. But 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.
Yes.
I mean, I hear you, and I will not debate. We can all have different view. But I honestly believe, disregarding how you report it, that the key way to create value is to develop the companies. And I showed you Mernlicka'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. So if you have that view, Elias, I would just run and buy the shares before they are taking there no one left.
Yes. I agree. I'm not allowed to buy the shares personally. But coming back to this, obviously, the market I mean, obviously, you have created a great deal of value in Wallerike, but the market hasn't been able to see through it. And 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?
Yes. I mean, 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, but that is something that we will work continuously on over the coming years. And you know we have added more information, for example, related to capital efficiency and EBITDA margins, etcetera, over the last couple of years.
Thank you.
Our next question comes from the line of Andreas Chigga from Nordea Credit Research. Please go ahead. Your line is open.
Yes, good morning. Thank you. Three questions on Lundike. First of all, the new gearing target, how firm should we view that in line of your comments about growth opportunities? And along those lines, the new financial policy definitely opened 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? And the final question is on the financing activities. It seems like the bond issue process, the new bond issue has stalled. So will the new will Mannlic pursue the bond route or will they go to the bank loan market instead? Thanks.
I will thank you for those questions. I will leave the questions related to the bonds, etcetera, 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. We I have said, and I think that is the way we should run it, that we should I will not guide where we will unlisted, how much will be listed because we are here to create value. And 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 size, 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,
then 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. And regarding Melike's updated financial policy, we remain committed to it as we have communicated also through Maliki management. And regarding the bond process, I think that's something we won't comment here. You will hear more about that from Malikke Management in time.
Our next question comes from the line of Oskar Lindstrom from Danske Bank. Please go ahead. Your line is open.
Yes. Good morning. I also have a question around the Menelik evaluation. And do you believe that the listing of Konvatek and the acquisition of BSN Medical in any way sort of are should be seen as peers to Menelik 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 VENYLIKA. Then, 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 Nelnikja.
And in our internal efforts, our focus is very, very 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. But 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 Menelik is looking for acquisition targets. But if I may ask you, I mean, are those acquisition targets, would you say that they are mainly within the sort of the narrow scope of what Menelik is doing today, I. E, Advanced Wound Care?
Or is there a wider scope for those acquisitions, especially if you're looking outside of the European markets?
I think it's an excellent question. How and where to what extent it is in the core core and to what extent you can create value from growing in what I will call adjacent areas. Going totally out of what your own knowledge and so forth that I don't believe in, whether it's Manvic or other companies, you need to stick to your core. But 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. And that is a question for the board in Mennelik, 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 there are no further questions registered, I'll hand back the conference to the speakers.
Okay. Thank you for that. I'm now going to move over to questions through the web. Can you please tell us, Mr. Dahlhammer, who the first question is from and what it relates to?
I can. And it's a question from Mr. Erik Olin. And the question is, is it possible that Patricia Industries can acquire any industrial company? Or is the focus only on medtech?
It's a very good question, and the answer is for sure, yes, on that one. Industrial companies or segment is an area where we have a good and deep knowledge internally in the organization. So for sure, that is an opportunity.
Thank you. Any more questions to the web? Okay. With that, I'm leaving over for any more questions from the audience. First question here.
Microphone, please. Johan Sverdank. Yes, a follow-up. I think it's fair to say with book value on Lekki, we have to do some work as well. And then I mean, you will be open for criticism, whatever value you would show.
But at Enray, I think given the size of Lundbeck, 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. I mean, there are other things as well, but more details given the size and importance of non liquid would be sensible, I think.
We bring that with us. And I would I understand that there is a good interest. And we 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.
And also on Equity, I mean, given the performance over the last year and a bit longer, what can we expect going forward? It's
been I think you can expect that you will have a chance at the Capital Markets Day to get more flavor on IK2.
And the Capital Markets Day will be in March. Any more questions?
Thank you for participating, and thank you
for listening in. Thank you.