Hello everyone and welcome to the Ratos interim report, January to June 2020. Today I'm pleased to present Jonas Wiström, CEO, Helene Gustafsson, Head of IR and Press, and CFO Jonas Ågrup. For the first part of this call, all participants will be in a listen-only mode, and afterwards there will be a question-and-answer session. I will now hand the call over to the speakers. Please begin.
Good morning everyone and welcome to today's telephone conference where Ratos' CEO Jonas Wiström and Interim CFO Jonas Ågrup will present Ratos' report for the second quarter. After the presentation, a Q&A session will follow. The recorded version of the telephone conference will also be published on our website after the call. With that said, we will start the presentation turning to slide two and the agenda of today. The presentation will focus on the result development for the second quarter, as well as important events in the quarter, the impact of COVID-19, the performance in the companies, and finally a summary of the quarter. With that said, I leave the word over to you, Jonas, to present the results.
Thank you, Helene, and good morning everyone. Let's turn over to page three then. We are actually rather happy here today at Ratos, not just because of the weather situation in Stockholm, which is excellent, but we're happy of the fact that our positive earnings trend continues and that our company group actually is becoming quite stable. I remember joining my first quarter 2018, we had three companies out of 13 making a better result. Corresponding Q2 2018 was five of 13. Now we have 10 out of 12 doing better results for the quarter and 11 of 12 doing better for the half year, and that all since the start of Corona. If we start with net sales, we saw that increase by 2%, ending up on SEK 7.2 billion.
The organic growth, however, is 9%, adjusted for currency effects of 5%-6%, and divestments and acquisitions are about 1%-2%. Seven of our companies grew their revenue in the second quarter. EBITDA increased 49%, or SEK 344 million. Again, 10 of 12 showed EBITDA improvement. Plantasjen increased their EBITDA with SEK 182 million during the quarter. So they are, of course, a big contributor but not the only one. I'm really happy to see that our focus on people and operational excellence in our companies continues to generate stronger and stronger results and better EBITDA margins in spite of the pandemic. If we look at the margin development in Q2 year- to- date, rolling last 12 months, it's increasing. If we look at the EBITDA for the last 12 months, it's nearly SEK 1.6 billion.
Also happy to see, especially in Corona times, that the cash flow is improved further due to our earnings, of course, but also an increased focus on working capital. The profit before tax is up to SEK 953 million compared to SEK 514 million last year, and our earnings per share is 2.18 versus 1.28 the previous year. So with that, let's move to slide four. The activity has been quite high also in the second quarter. Of course, the transaction market is weaker during a Corona quarter, but our strategy remains from what we told you at our capital markets day in November. I'm very happy that we have announced the CEO change in both Plantasjen and HL Display, not just because we have two strong CEOs recruited. They both come from the Ratos family.
Nina Jönsson came to Plantasjen from HL Display, where she's been very successful, and Björn Borgman took over the helm in HL Display, and he has a number of years of experience at the position leading all sales in all markets. We are building a talent pool in the Ratos group through different processes, including our own Academy for Businessmanship and Leadership, BELT. I'm very happy to see these internal recruitments. Diab is a company that has developed very well. I come back to that later on. During the quarter, Diab continued to make investments. Worth to mention is that all are coupled to customer contracts. The China investment is the fifth in the series of investments for production of PET core foam, and the total capacity of PET core will make Diab a global leader in that area.
HENT, that disturbed the second quarter last year with downturns, signed a contract quite some time ago for University Hospital in Narvik, which is a big project, value NOK 1.2 billion, and it's a public project, and that is now starting up. I think it's good that the public sector accounts now for 71% of the backlog of orders at the end of the second quarter. Aibel, again, affected by the COVID-19 pandemic, has been awarded a contract for Sleipner, Gina Krog fields in the North Sea, and the total value of that is NOK 600 million. After the end of the period, Aibel has been awarded a portfolio agreement with Equinor for modification tasks, which will stabilize Aibel. I will come back to Aibel later also when I go through the companies.
We have also received a large order for airteam, I think the largest ever, in connection with Ferring's new head office in Denmark. That was actually in July. If we now turn to page five, we try to give an overview here on how COVID-19 has affected us. It's very different between the companies. The most severe impact has been in Aibel, TFS, LEDiL, and HL Display. We have a moderate negative impact in Diab, in Bisnode, and in HENT, and minor effects in airteam, Speed Group, KVD, and Oase Outdoors, although Oase Outdoors were very heavily impacted in the beginning of Q2. We're certain that we have had a positive impact in Plantasjen. I'm impressed by the companies how they have continued to implement actions to mitigate effects in the second quarter.
We have had no real significant disruption in supply chains or in-house production, but measures are implemented in all companies. The total amount of government support in Sweden and other countries around the world amounts to a small number, just CHF 30 million. I think that's some 0.4% of our revenue or something. Our priorities, of course, continue to be health and safety, liquidity, and EBITDA in that order. It's clear that our governance model has helped us, our new governance model, I should say, has helped us to act very fast in our companies with quick decisions around restructuring measures and other measures taken. Now, the financial situation is very important in all times, and especially in these times. So when we now turn to slide six, I will hand over the word to Jonas Ågrup, who will go through our leverage and financial situation. Please, Jonas.
Thank you, Jonas. So let's look at the leverage, and the leverage here is including the IFRS 16 leasing, which is important to know. So if we look at the leverage, we have seen a positive trend within the group since the end of 2018. And if we look at Q2 this year, we are at 2.6x , as you can see, which is down 28% if we compare to the fourth quarter 2019. And we see good development in basically all the companies. We have improved EBITDA in 11 out of 12 companies, and we see lower net debt in 10 out of 12 companies. For Aibel, the leverage, as you can see, went up a little bit. Aibel was impacted by lower EBITDA in the quarter. We injected new capital into Plantasjen, NOK 300 million in the quarter, and that was used for amortizing interest-bearing liabilities.
We improved cash position in Plantasjen. I would like to mention that Plantasjen has, as you know, 140 stores in Norway, Sweden, and Finland, and the leasing liability is quite high for Plantasjen. The net debt is like NOK 4.3 billion , but the leasing liabilities are at NOK 3.6 billion . That's a big part of the net debt, the leasing liabilities. Net cash position within Ratos AB is around SEK 1.2 billion , and that facility is, as of now, unutilized. Now we will continue to focus on the development of the business areas and our group companies. We turn to slide seven, and I hand the word back to you, Jonas.
Thank you, Jonas. This now sounds like the Muppets show. Right. So let's start with construction and services. The business area had a decline in sales of 5%, mainly due to Aibel. However, the EBITDA increased by SEK 79 million. So let me take you through my view of the companies here. Aibel had a net sales growth despite the decrease in activity from COVID-19, but EBITDA was actually lower. And this is of two reasons, or one reason, you should say, the COVID-19 uncertainty and Aibel's habit to be very well provisioned in their projects. And that is something for you that have followed Aibel during the years that they have never sort of come with negative surprises by the end of the projects, rather the opposite.
All in all, the outlook for Aibel looks more positive than three months ago, given the COVID-19 situation, but also the orders taken in Q2 and July. There was also a crisis package from the Norwegian government, which will have an indirect positive impact on Aibel. So we see a little bit better future for Aibel coming forward, but when comparing next half year with the next half or the last six months of previous year, one should remember that in 2019, they were finalizing a lot of large projects. airteam, developing very well, actually, grew by 29% on a strong order book, which was actually further strengthened in July to a record order book after the Ferring order for the new headquarters. This makes airteam's Denmark market position even stronger, but EBITDA and the profitability have improved in both Danish and the Swedish operations.
HENT net sales were more or less maintained. Projects are affected with lower activity level and increased costs due to COVID-19. I think HENT has a more stable order book today, with, again, 71% of the backlog related to public sector. Comparing the results here with last year, we should remember that last year's EBITDA was negatively impacted by write-downs of -SEK 133 million . Speed Group is a company that has really developed well over the last 12 months. This is a result of the restructuring measures we or they took in Q2 last year. We have today a new management team with a very experienced CEO from the sector, and further measures have been taken to increase the efficiency, and we also have a more healthy project portfolio. So stable and positive development for Speed Group, which I'm happy to see. So then let's move over to consumer and technology.
Here we could see a net sales growth of 9%. The organic sales growth is 17%. The currency has been against us here. EBITDA increased to 827 from 607 last year. The Q2 is a very strong quarter for consumer and technology, driven by all companies, but of course, Plantasjen as the largest contributor. Starting with Bisnode, their sales decreased by 3%, mainly due to their marketing solution segment that is clearly negatively impacted by COVID-19. Also, smaller SME companies were buying less credit solutions. Despite this, EBITDA improved, and of course, the margin, due to the long-term transformation into a more efficient and scalable Bisnode, and Bisnode has also implemented a robust action program for COVID-19.
KVD, dealing with cars, their sales increased 7%, tough start of the Q2, but markets became better during the quarter, and they have a strong focus on private cars and gained market shares in this sector. So EBITDA increased due to the high volumes, but also to more efficient processes, which I think if some of you have been a client with KVD, you notice that as a customer, that's at least what I hear. Oase Outdoors, they had a very tough start again of the quarter with a majority of stores closed out in Europe and also the camping sites. As shops and the camping sites gradually opened in the quarter, sales came along and got very strong by the end of the quarter. So net sales increased over the quarter with 9%.
The important U.K. market, which is very big for Oase Outdoors, was partially closed even in June and will open up gradually in July. So that has also affected the quarter. A cost savings program, very well implemented, has also contributed to the improved EBITDA and the fact that last year we had quality problems in our newly released series of inflatable tents. Last but not least, Plantasjen. Well, their organic sales increased by 25%, not due to the weather. We deal with weather statistics here at Ratos, and in Sweden, it has been the coldest May for five years. In Norway, a little bit less sure on this number, but I read a report in 15 years that it has not been as cold in May as this year.
Now, the reason for Plantasjen growing is that we have more customers coming to our stores, and each customer buys more than before. We believe this is a result of the COVID-19 effect, of course, but also a focus on customer experience and product offering that will continue with Nina Jönsson having the helm in Plantasjen and will continue to strengthen the brand. Then I suggest that we move over to business area industry on page nine. So industry had a net sales increase and an organic growth of just 1% in the quarter, companies with quite some effects from COVID-19. EBITDA, however, increased from 104 to 141 during the quarter. If we start with Diab again, which I've also been impressed on how well they've handled the corona pandemic, given the fact that they have factories in China, Italy, and the U.S., China and Italy have stabilized.
The U.S. is still affected by the COVID-19 when it comes to production. They grow their organic net sales still by 21%. They have invested in new production, as I said earlier in this call, coupled to the long-term contracts, and they are mainly coupled to the wind sector. The aerospace and marine has a severe impact from COVID-19, but all in all, EBITDA improved with impressive 53%. HL Display demand decreased quickly and sharply from the COVID-19, most severe effects in the French market. This was partially offset by the quick development, the change of production in their factories, and offering to be able to offer protective equipment for shops, and that mitigated the sales decrease, which still is significant. I'm impressed that EBITDA improved despite the lower sales as a result of very good cost control, increased production efficiency, and a favorable product mix.
LEDiL, again, hit by corona. Net sales decreased by 6%. Order intake low. So COVID-19 impacted all markets negatively, especially the indoor lighting market. EBITDA still increased. Even after we had a one-off last year of EUR 0.5 million, but even including that, EBITDA increased again thanks to good cost control. And last but not least, TFS, quite impacted by COVID-19, of course, because they want to perform clinical trials in hospitals. As everyone understands, it's been very difficult to do that during the quarter. The EBITDA decrease and the fact that they made black numbers in spite of this is very much due to the restructuring program performed in December. We have a new CEO, and that significantly lowered the company's cost structure and to that we had special COVID-19 measures. So all in all, in summary, continued strong EBITDA trend development in a seasonally strong quarter for Ratos.
Aibel showed EBITDA improvements, 11 or 12 in the first half, 19, small contributions from government grants, and very good measures taken, and as Jonas Ågrup told us, our financial position is improved. Although it's too early to say COVID-19 is over, there are uncertainties for the future, but I feel that we're very well equipped financially and in basically most things. We feel very well equipped to handle the challenges that will come also in the second half. Thank you very much.
Thank you, Jonas. And operator, I think we can open up for the Q&A session.
Thank you, and ladies and gentlemen, if you do wish to ask a question, please press zero and then one on your telephone keypad now. If you wish to withdraw your question, you may do so by pressing zero to cancel, so the first question is from the line of Derek Laliberté from ABG Sundal Collier. Please go ahead. Your line is open.
Thank you and good morning. I was wondering if you could share some color on the capital injection in Plantasjen, why this came at this particular point in time, and also if we expect this to be sufficient in the long term, etc. Thank you.
Good morning, Derek. Good to hear from you.
Good morning.
Well, and I think I've said during all these calls that we want to have our leverage down in our portfolio companies. We have a lot of money from EBITDA disappearing in our financial net, making our EPS lower. So this is a step in line to lower the leverage in Plantasjen, and our ambition is to continue to lower the leverage in Plantasjen. I don't know if you have any further comments to that. You asked if this is sufficient. Yes, we believe it's sufficient, but again, we will follow the development, and you shouldn't be surprised if we lower the leverage even further in the future.
Sounds great. Thanks. And also, it was quite small, but regarding the government aid, just to be clear, which companies does this refer to?
I actually have a list in front of me. I think all companies have, we have a reduced labor tax, is it called?
Payroll tax.
Sorry, payroll tax. We have this sick leave thing. So I think more or less all companies, but it's a very, very small amount. So I think these furloughs, there we have had most of it in Sweden and Diab, some also in HL Display, but it's just four companies who have used that.
Gotcha. And finally, I know you talked about this before, but if you could elaborate a bit on what Nina Jönsson brings to the table in Plantasjen, what you expect from her to do differently in the company going forward and sort of the whole situation with the CEO changes that are going on? Thank you.
Yeah. I think you should give Nina a call, actually. She's on holiday now, I think, but I got to learn Nina quite well since I'm the chairman of HL Display. And so she's a natural, strong leader with a great experience from both sides of the retail market. As you know, she spent many years in senior positions in Procter & Gamble, including country manager positions in Sweden and over Europe in Switzerland. She's been in Moscow. And then she had had very senior positions in ICA. So I think she's very, very well suited for this mission. And I know that she's had a good start. She has a new management team in place. She has a new recruit, actually, from HL Display, Peder Clason, with long experience from Procter & Gamble and Absolut.
But again, I don't want, I mean, take a call to Nina and hear from her, but I think it will mean a lot for Plantasjen.
Okay.
Yeah. Okay.
Sounds great. I will certainly do that. Thank you. That's all from me.
Thank you, Derek.
Just as a reminder, if you do wish to ask a question, please press zero and then one on your telephone keypad now. Next question is from Mikael Laséen from Carnegie. Please go ahead. Your line is open.
Yes, good morning. So first of all, when you look at the numbers, and especially the sales numbers and organic growth numbers, and put that in relation to your comment on only Plantasjen being positively impacted by COVID-19, it seems almost that there should be a few more companies that have had actually a positive impact, but correct me if I'm wrong. And secondly, on that topic, when it comes to, again, when you look at sales, and many of the companies have actually grown in the quarter, and you still have used the government grants and the subsidies available, is it possible to quantify that a bit more, how much earnings actually have been positively impacted? And thirdly, on that, when it comes to, for instance, the payroll taxes in the U.S., I guess that is one of the companies that you do have with U.S. employees.
I guess in the U.S., at least, it's more of a loan that you pay back in 2021 and 2022. So all of these government grants that you have received, how much is it, and how much is more in terms of loans rather than just a one-off?
Good morning, Mikael. Very interesting question. You're absolutely right. We have a dual-loan Paycheck Protection Program. It's SEK 1.1 million out of the SEK 30 million. Reduced labor tax is SEK 5 million. Pension and disability contribution SEK 1 million. Sick leave. No, I'm now taking the four-month period here. So you should take because we started to get these programs in March. So I'm sorry when I say SEK 1 million, it's from the period from March to June. And then it's SEK 10 million per month, you could say. So it's SEK 30 million in total for the quarter. So if you don't get the numbers together, it's because it's four months. Okay with you, Mikael?
That's okay. But SEK 30 million is the total that you have received.
Maybe I should hand over to my CFO, who is better equipped to continue to answer the question.
No, hi, Mikael. We have also, in addition to what Jonas talked about, we have actually a government loan in the U.S., which I think is about SEK 10 million . But we have not decided, or it has not been decided, if it should be paid back or not. In some cases, I think it could be we don't have to pay back the loans, but it's not affecting the results this quarter, so it's SEK 10 million in loans, if I remember correctly, and then if we have any companies that have had any positive effects of COVID-19, I think we saw a positive effect maybe on the Oase Outdoors in June now, but they were also heavily negatively impacted earlier.
Oh, yeah. Yeah. In June, for sure, positive impact in Plantasjen in a way. But if you say that all these SEK 30 million goes into the EBITDA, yeah, the EBITDA increased from 703 to 1,047. So it's not a material effect. I think it's fair to say we would have had 1,017 instead of 1,047. And I hope you agree.
Yeah, that's very helpful. But on the organic growth, I mean, when it comes to Speed Group, for instance, shouldn't they have had a net positive impact from COVID-19? Of course, it's difficult to assess what is what here, but.
No, no. The negative effect in Speed Group is we have a business for book distribution, and I don't know if that's a COVID-19 effect or not, but I think less people go and buy a book physical, maybe even before COVID, but certainly less during this pandemic. I would say if it wasn't for the book distribution, I would agree that there was no negative impact in Speed Group, but they have this business.
Okay. Thanks. And a final question from me. You mentioned obviously Aibel, for instance, when it comes to, and HENT also when it comes to order intake. But what about the other companies? Are you seeing any—I mean, now obviously Q2 was a messy quarter for many companies. So when trying to assess the future here, what are you seeing in terms of order intake and the sort of current trading situation here? Is there going to be sort of a backlash? I mean, companies which enter the COVID-19 crisis with solid order books, I guess, first the economy closes down, and then you start to work off those order books, and then you need to replace these orders with something else. Is there anything like that that you're seeing, or are things more coming back to normal?
Also a very insightful question, I think. Because as you say, sales is harder to perform. And so you're right in the sense that if you have a large order book, you're not so affected. Initially, it takes longer time. Fortunately, that hasn't happened to Aibel or HENT, as you mentioned. I think if I should point out companies here, I think LEDiL, I think I did that, had a weak order intake in Q2. Worried for them in Q3. I'm not going to start to do forecasts here, but I think it's a very good question. Bisnode, also sales performed by physical salesmen in many countries. We should not believe that the growth will come back in Q3 or anything like that. They are affected, really, on the order situation of COVID. Help me out here, Jonas Ågrup. I think those are the companies I would mention, actually.
For TFS, it's very much about the hospitals opening up more, which we see signs of. Oase Outdoors, you could say, well, positive effect in June. But on the other hand, people don't buy so much tents in July and August because the summer is more or less past, if you understand what I mean. But apart from that, looking through the companies here, I see no sort of warning signs. Aibel had a very strong Q3 and Q4 last year since they were finishing up their mega projects. They will finish up these projects we have now in 2021, 2022. So that's not the corona effect, but it's a kind of view for going forward. I hope you're happy with my answer, Mikael.
Yes. Thanks a lot. I guess that's all from me. Thank you.
Thank you.
And there are currently no further questions registered, so I'll hand the call back to the speakers. Please go ahead.
Thank you very much for participating this very, very active, intensive report morning. I thank you for listening, and I hope you will have some vacation during the summer and a great summer. Thank you very much.
This now concludes the conference call. Thank you all for attending. You may now disconnect your lines.