Welcome everyone to this webcast teleconference. My name is Stefan Stern. I am Head of Corporate Relations and Communications at Investor. This call is about presenting our Q2 report, and the presentation is available afterwards on our website, but can also be viewed now in real-time online. We are going to hear presentations by CEO Johan Forssell and CFO Helena Saxon. We also have our Head of Investor Relations, Magnus Dalhammar, here with us. We are going to take Q&A after the two presentations. With that, I am leaving over to Mr. Forssell.
Thank you, Stefan, and hello, everyone. Thank you for listening in to this conference call. Let me start by highlighting the major events during the second quarter. We had, as we all know, a quite volatile quarter in the stock market, driven by the uncertainty surrounding Greece. We have also seen a sharp correction in the Chinese stock market. Given that we, in some segments in China, already have seen excessive investments and credit, a key question, of course, is to what extent this will start to affect consumption and the business climate. The stock market fell somewhat during the quarter, and our net asset value, including dividends, decreased by about 3%. We invested SEK 2.5 billion in ABB, and that meant that we increased our ownership to 9.5%.
Over the past three years, we have invested almost SEK 7 billion in ABB, and based on a strong market position and the fact that we also see some additional improvement potential in the company, we believe that ABB is an attractive long-term investment. EQT had an excellent quarter. Net proceeds to Investor amounted to SEK 2.5 billion, driven by a number of successful exits. Mölnlycke continued to grow with stable profitability, with growth mainly driven by the U.S. and advanced wound care. Aleris showed good growth and strong profitability improvement, and here profitability was mainly driven by productivity improvements within healthcare Sweden and Norway. Finally, I think it was good to see that Permobil returned to growth after a weak first quarter. That was driven by the new product launches in Europe and the U.S., the F3 and the F5, products that have been well received in the markets.
Let me now go over to the new structure that we have established. We announced it during the first quarter. Now our investments are organized in Listed Core Investments, EQT and Patricia. I think it is a clear structure, both from an operational perspective and also how we present it externally. In the Listed Core Investments, we are the leading shareholder, driving our agenda through the boards. In EQT, the financials are very attractive, but we are not involved in the individual investment decisions. Finally, in Patricia, the largest part today is our operating subsidiaries, and here we have full control as we own more or less 100% in these companies. The overall ambition with this reorganization is to become an even more efficient investor and owner. To achieve this, we believe that it is important to have a fully focused investment organizations.
In other words, we have now dedicated team that only work with core investment, the listed part or Patricia Industries. Let me now go through the key focus going forward for each of these three divisions. Starting with Listed Core investments. With increased focus, we want to continue to become a better active owner. We have a dedicated organization of investment manager and business teams, and also, importantly, an extensive network with senior executives to support in this work. The second priority, or I would say rather that for us going forward, we believe it's highly important that we achieve an accelerated profit growth. If you go to the next slide, you will see the reasoning behind it. Over the past few years, our portfolio, as well as the overall stock market, has developed strongly.
One needs to recognize that that has partly been driven by sharply lower interest rates and multiple expansion, as you can see on this slide. Personally, I struggle to see how interest rates could go much lower and how multiples could expand much higher. Given this, accelerated profit growth in our companies will be needed to ensure an attractive long-term return. Coming back to the priorities in Listed Core Investments. Achieving this, and now I move to the next slide. The good part is that we have an attractive portfolio with strong market position, but we also see many opportunities for more improvements, and we will work very hard to capitalize on this. The key is to make sure we have the right boards and management and good value creation plans. You know that our ambition is that our company should be best in class.
In other words, outperform competition in terms of gross profitability and quality. The first priority is to increase the number of companies outperforming industry peers. The second priority is to strengthen ownership in selected core investments when attractive opportunities arise. I should say that if attractive opportunities on the listed side would pop up, we will of course not exclude them. We will look into it. Moving over to EQT. As you know, we are one of the founders of EQT in the mid-1990s. The strong EQT team has delivered an excellent return since the inception. In addition, Investor has, as you know, favorable financials as we get part of the carry and fees. All in all, this makes EQT an attractive investment for us, and we will continue to invest in EQT funds going forward.
Now over to Patricia Industries, which consists of our wholly owned subsidiaries, 3 Scandinavia, and Financial Investments. As you have seen in the report, Financial Investments consists of all former Investor Growth Capital holdings and other holdings in which our ownership horizon has not yet been defined. The integration of IGC into Patricia means that its cost as well as cash position will be reported in Patricia. Helena will go through this more in detail. Just as for the Listed Core Investments, our focus is to become a better owner of our unlisted companies. Also here, we now have a dedicated organization to achieve that. Near to medium term, we will have a high focus to realize value through divestitures of Financial Investments. In terms of capital allocation, a key priority is to invest through our existing subsidiaries.
This could be highly value creative if we can find attractive acquisition targets that offer true operational synergies, for example, within manufacturing and the distribution networks of our companies. Over time, we will also add new subsidiaries when we find the right opportunities. Also that is, as you know, a key priority in the years ahead. Finally, Patricia will also make a distribution to Investor supporting our current dividend. As you can see at the bottom, we have the financial resources to achieve this ambition. Patricia has a cash position of SEK 11 billion. In addition, parts of the future cash flow, exit proceeds, and also, of course, you can adjust the leverage in the holding can be used to build a portfolio, or will be used to build a portfolio of unlisted companies. It's time for me to conclude.
I think we have a strong position financially, and we have a very solid cash flow generation in our total system. Today, the leverage is 6.7% in Investor. It's important when you look on the financials, for me, I always look on the total system. Investor is one part, but equally important, of course, is the leverage in our underlying companies. The fact is that we have strong balance sheet in our holdings, both when it comes to the listed and you have seen the rapid de-levering we have seen in Mölnlycke over the last couple of years. We also will receive cash from the divestitures of Financial Investments. Finally, we have a strong cash flow generation in our subsidiaries, and we also receive good dividends from the listed portfolio.
In terms of priorities going forward, as I now try to go through, a key priority is to further sharpen our role as an active owner. We have assets of about SEK 300 billion, of course, the key for our long-term performance is that these assets really outperform competition. The second priority is to strengthen ownership in selected Listed Core Investments when we see good, attractive opportunities in the market. The third priority is to invest in EQT funds. The fourth one is to invest through existing wholly owned subsidiaries, and this could, as I mentioned, be a good opportunity to grab synergies in the businesses. The fifth priority is to add wholly owned subsidiaries to build a portfolio of more well-run, high-quality companies. Finally, pay a steadily rising dividend. The dividend policy we have remains firm. Moving to the last slide.
This is how we will continue to work to grow our net asset value. We will maintain a strong cost discipline to do this, our dividend policy, as I mentioned, remains firm. This is our way of generating an attractive return to our shareholders. With that, I leave the word to Mrs. Saxon.
Thank you, Johan. We will jump two slides ahead, I will go through the highlights of the first half of the year. The financial highlights January to June 2015, we saw net asset value increase by almost SEK 19 billion, Our total net asset value amounted to almost SEK 280 billion on June 30th. Net asset value grew by 10% with dividend added back and reached SEK 367 per share. The shareholder return for the Investor share was for the first half of the year, 12% compared to SIXRX. If we move to the next slide, I would like to share with you some consequences of the new reporting structure that we put in place in the second quarter. The first one regards leverage. Leverage amounted to 6.7% as of June 30, was reduced by the inclusion of cash in IGC.
In absolute terms, reported net debt decreased in the first half of the year to SEK 20 billion. Cash and readily available placements amounted to more than SEK 15 billion at the end of the quarter. The average maturity of our debt portfolio is almost 11 years. The second reporting change relates to management costs, which we will find on the next slide. Cost efficiency is, as Johan mentioned, one of our operating priorities important to maximize investment and distribution capacity. With IGC being integrated into Patricia, IGC's management costs amounting to some SEK 120 million in 2014 will now be reported in Patricia Industries. However, Investor's underlying management costs will remain largely unchanged. Management costs of running Listed Core Investments, EQT, Our overhead is expected to reach approximately SEK 225 million per year, approximately 0.1% of net asset value.
While management cost of Patricia Industries, now including IGC, is expected to cost around SEK 275 million per year or half a percent of net asset value, excluding cash. Running a portfolio of unlisted companies requires more resources. We believe the higher costs will be covered by higher long-term intrinsic value growth. Our target for the coming years is to stay around the current management cost level, adjusted for wage inflation and currency changes. If we move to the next page, we can see in the new structure what happened in the first half of the year in terms of net asset value growth. Listed core investment was the biggest contributor by SEK 18.5 billion. EQT and Patricia also had strong quarters, contributing SEK 3.1 billion and SEK 3.6 billion. We also received almost SEK 7 billion in dividend in the first half of this year.
If we go into more details into the divisions, on the next slide, you can see the Listed Core Investments, which represent almost 80% of total assets and consists of 11 companies. SEB, Atlas Copco, ABB are the largest ones, Together they contributed the most to net asset value this first half of the year, together with Sobi. In the first half of 2015, we acquired shares in ABB for SEK 3.5 billion, of which SEK 2.5 billion in the second quarter, received SEK 1.2 billion from Atlas Copco in conjunction with their redemption program. On the next page, we can see EQT, that is now reported separately and represents 4% of total assets. EQT contributed, as I said, more than SEK 3 billion to net asset value in the first half of the year.
Investor received proceeds of SEK 3 billion and 25% value increase was recorded in the first half, of which 16% in the very strong second quarter of 2015. We increased our total outstanding commitment to SEK 8.4 billion. Finally, we move to Patricia on the next slide, which you all know by now consists of our five subsidiaries, 3 Scandinavia, and Financial Investments. Patricia Industries represents 18% of total assets. The largest holding of this portfolio is, of course, Mölnlycke. During the first half of 2015, Patricia Industries contributed SEK 3.6 billion, and Financial Investments was the largest contributor. On the next slide, I will start going through the subsidiaries in detail. As you can see, we have a slightly new reporting format for the divisions. In addition to sales and profitability, capital efficiency is of course important when trying to value a company.
We have added operating profit of amortization to our reporting, which gives a reasonably good indication of the capital intensity of our companies. If we start by Mölnlycke. Mölnlycke grew 4% in the second quarter, mainly driven by the U.S., and EBITDA margin was flat. Wound care continued to show good growth, while surgical, still growing but slightly softer, was driven by gloves and procedure pack. Operating cash flow was negatively impacted by a planned discontinuation of factoring. If we move to Aleris, we can see that Aleris grew 12% in constant currency, largely driven by healthcare in Norway and senior care in Sweden. The EBITDA margin improved to 6% due to productivity improvements within healthcare in Sweden and Norway. The operating cash flow improved due to the higher EBITDA, of course, but also working capital efficiency. On the following slide, Permobil.
We can see that Permobil grew 6% in the quarter due to a rebound as the new series of powered wheelchairs were successfully launched in the U.S. and Europe. The EBITDA margin was 17% and impacted by the investments in sales force, product introductions, and some transaction costs. Operating cash flow was negatively impacted by investments related to the product launches. On the next page, our smaller subsidiaries, Grand Hôtel and Vectura. Grand grew 6%, driven mainly by the lodging business, the hotel business itself, and the EBITDA margin was flat around 10%. Vectura grew as much as 20%, partly driven by the stronger sales of Grand Hôtel and also a couple of new Aleris facilities. The EBITDA margin reached 64%. 3 Scandinavia on the next slide. Service revenue grew 9%, driven by the subscriber-based growth.
Denmark returned to growth, but it's still a very tough market with a lot of competition and price pressure. 3 Scandinavia had a strong cash flow in the quarter and distributed as much as SEK 700 million to its owners, of which SEK 280 million to Patricia Industries. On the next slide, Financial Investments. Financial Investments consist of all our former IGC holdings, as Johan mentioned, and other holdings in which the investment horizon has not yet been decided. It represents a third of Patricia Industries and amounts to almost SEK 15 billion in value. Roughly half of this portfolio is listed, and the five largest investments represent 56% of the portfolio. Investments in the quarter amounted to SEK 224 million, of which almost half in the former IGC investments and SEK 78 million in the rights issue in Tobii, the company that was listed in the quarter on the Nasdaq Stockholm.
Divestiture amounted to SEK 660 million, of which almost two-thirds from the sale of Aerocrine. Contribution to net asset value from this part of the portfolio was SEK 3.2 billion in the first half of 2015. This was mainly driven by one specific holding, NSFOCUS, which is the largest one in the portfolio, as you can see in the table on the right, and it's a listed Chinese internet security company. I'll get back now to the last slide of Johan's presentation, our operating priorities. I'm not going to go through them again. My presentation is finished here.
Thank you, Helena. With that, I'm leaving over for any question that might come from you, from the audience. Today that means by phone or on the web. Let's start with questions by phone.
Ladies and gentlemen, if you have a question for the speakers, please press zero one on your telephone keypad. That's zero one to ask a question. Our first question comes from Mr. Elias Porse from Nordea. Please go ahead, sir.
Thank you. You said that you've only had limited impact from the new initiatives in the U.S. so far in Mölnlycke, i.e. the negative pressure wound care therapy for home care and CVS. What kind of impact long-term do you expect here?
I think that it's always with these kind of initiatives difficult to really judge how large it will be. We believe that both initiatives are very interesting and offer good long-term opportunities. What we can say is that initially, if we talk about this year, you should not expect a sharp ramp-up in sales. It will be a rather low figure initially. If we are successful in these initiatives, it could start to become more material in the years ahead.
Thank you. Keeping at Mölnlycke, looking at the outlook for M&A, what do you see in terms of prices coming down and so on?
You mean M&A in terms of our subsidiaries doing M&A?
In Mölnlycke specifically.
It's always with M&A that the tricky part is that first of all, find the really right target that fits with the organization from a culture perspective and also product-wise and geographically. The second one is that you need two to tango. In other words, to find a seller for that company
If those are right, of course, the third one will be the pricing. The pricing, I must say, is very difficult, because if I see more broadly than talking about Mölnlycke specifically, I see some negotiations that are moving rather high in prices and some which are on the contrary, where we believe that we can get more attractive prices. It's difficult to give you an answer on it. It will more be misleading, I think.
All right. Fair enough. For the financial investment, you say that you are evaluating if some holdings could become long-term investments, you've done this for quite some time now. Can you give us any update on the progress?
These are the companies, as we have said before. For us, if they are financial investments, the ultimate target is for us to maximize the value. If we believe that the maximization of value will be to divest it, that will be the main route for us. On the other hand, if we find one or other companies in this or more companies that we believe could be really attractive long-term investments for us, of course, we will not sell them out. We could then actually keep them and develop them internally. This is the work that will be going on over the next couple of years. It will be a gradual process, and when we decide about it, we will come back to you.
Okay, great. Just a quick follow-up, if I may. The former IGC organization is allocating significant resources to realizing the value of your Financial Investments, according to the report. As these are realized, should we expect headcount and cost to come down in this area?
In this portfolio, first of all, it's a large portfolio, and in a number of them, many of them are unlisted companies. It will be quite an active work for quite a number of years to really work through this portfolio. At the same time as we will gradually move to try to build up an organization to find new opportunities in the U.S. market. What we have said is that over this next couple of years here, we will need to do both, while simultaneously remain cost-conscious within the organization, because we believe it's highly important for us to be cost-efficient. What will happen in three, four, five years out? Of course, that will depend on how many subsidiaries do we find. Will it be a little bit more companies, but they are a little bit smaller?
That will demand a different number of resources than if we find a fewer number of larger companies. That will not be appropriate to go in three, four years out. What I can say is that we will have a very high focus to drive both these strategies while at the same time be cost-conscious.
Great. Thank you very much.
Our next question comes from Mr. Magnus Törnå from Handelsbanken. Please go ahead, sir.
Thank you. If I may come back to Mölnlycke first. Mölnlycke's organic growth has slowed from seven to four% in the past four quarters, and on a previous question here, you talked about the complexity of doing acquisitions. Because Mölnlycke has more ambitious growth targets, should we view it that the most probable is for Mölnlycke to ramp up its organic growth ahead?
When it comes to the priority for Mölnlycke going forward, clearly, if you have a company with very high margins and also a very capital-efficient business model, the key priority to create value is organic growth. We will put in all efforts to make sure that we get good growth organically in the future, and that will go both from the, of course, existing business, bringing forward new products, new application for the existing products, and also geographic expansion. In addition to that, I firmly believe that we will see good opportunities for add-on acquisitions in the years ahead. The history tells us it can go faster, it can take longer time. The key is that you really do your homework and find the right target that really fits into your culture, and also that the synergies are real.
With that, I mean that they should not only work in PowerPoint, they should also work in Excel, and they should also work in real life when you merge two cultures. We will work hard on both these aspects.
Great. Can you hear me still?
Yes.
Great. Should we interpret that as if we don't see an acquisition, say, in the coming year or so in Mölnlycke, we could expect rather slow organic growth, or organic growth around the levels that we've seen in the past quarters?
No, I would not draw that conclusion without making a forecast, because we believe that, as I said, the key priority for us is to drive a high and good organic growth for this company. We will do all we can to drive that growth. In addition to that, of course, we will look into if we can find add-on acquisitions to the company.
Right. Okay. If I may just proceed with another question, maybe for the CFO or for you, when it comes to your change here in reporting cash and reporting Patricia's cash in the mother, your debt to total assets is down through that move to around 6.5%. At the same time you've had for a long time sort of a long-term ceiling for the gearing at 10%. Will that target be unchanged even if you change the way to report cash?
I don't understand. The question is about the 6.7%, it's within the target range that we have set.
Yes. My question is that from this move reporting Patricia's cash under the mother of Investor, you now have a debt to assets of about 6.5%.
Given the room up to your sort of ceiling at 10%, that would mean it opens up for some 10, 11 billion SEK of further debt at the group level.
No.
What we have said, just to be clear on that one, we have said that over a business cycle we believe 5%-10% is a reasonable average in the company. We have also said that we can actually move above that. We have, as you know, historically actually been above 10%, but we have said that if we will move more up to the 20%-25% level, we will of course have a plan to bring it down. It will depend on business opportunities and to what extent we believe we can create value from those opportunities. You should not view it that we cannot pass 10%, we can move higher.
On the other hand, I would also say that we believe from a long-term perspective that we should have a solid balance sheet in the parent company or in Investor, and that is why we have this 5%-10% gearing target.
Thank you. That's clear. If I may, just one final question. You were also talking about the Financial Investments and that there is a plan to divest holdings there. The largest holding and NSFOCUS represents about one-third of the total, and this holding was listed, if I'm not mistaken, about a year ago, and it should be in a long lockup time until 2017. Is that correct?
That is correct.
It would be impossible to divest that holding before that lockup period expires?
Yes.
Okay. Thank you.
There are no further questions on the telephone at this time. Please go ahead, speakers.
Thank you. Let's move over to any question that might come on the website. Are there any questions, Mr. Dalhammar?
No further questions, Mr. Stern.
All right then. Any more questions by telephone? Please go ahead.
I remind you it's 01 to ask a question. 01. We have a question from Mr. Elias Porcher from Nordea. Please go ahead, sir.
Thank you. Just two quick questions. Firstly, on Mölnlycke, the discontinued factoring, should we anticipate any long-term cash flow impact from this?
This is a step change for Mölnlycke. They decided to not continue the factoring in certain countries because of the cost of the factoring. They believe we rather keep that margin to ourselves, and it will not go on like that. This quarter it had this impact. On cash flow, it's just a different level of working capital in one quarter, and then it will continue like that.
Okay, great. Finally, the ABB purchases. Can you tell us anything about the timing inter-quarter or if it was before or after the Cevian purchases? Thank you.
Yeah, I can say that it has been gradually over the quarter. You know we also have some restriction periods, so we bought quite a lot also early, but it has been gradual over the quarter.
Great. Thank you.
Thank you. Any more questions?
Our next question comes from Mr. Magnus Törnå from Handelsbanken. Please go ahead, sir.
Thank you. All right. I might just follow up with a question on Patricia Industries. You were talking about the cash that is generated there and that it's primarily going to be reinvested, but also mentioned that cash might be paid out to Investor. Do you have sort of a target view of the split there? How much would be reinvested and how much might be paid out to the mother?
It's a good question, what I can tell you that we will, you can say like a normal distribution at year-end decide on the amount. We will not go throughout in advance to talk about it. The reason is actually that I think it's important that from a total Investor group perspective, we make the right capital allocation decisions. I can also tell you that we will be transparent about it. When the distribution will be decided after year-end, it will be disclosed so you can see it.
Okay. Thank you.
Thank you. Any more questions?
There are no further questions from the telephone at this time.
Okay. With that, thank you for listening in. We wish you all a great summer.
Thank you very much.
Thank you. Bye