Welcome to the Storskogen Press Conference. During the Q&A session, participants are able to ask questions by dialing five on their telephone keypad. Now I will hand the conference over to the Interim CEO, Christer Hansson, and CFO Lena Glader. Please begin your meeting.
Good morning, everyone. Thank you for joining today's call. I'm Christer Hansson, the interim CEO, and I'm here with Lena Glader, our CFO. We have some important updates to share regarding our strategic direction and the recent divestment. Last night, we announced the divestment of nine business units to M Industrial Invest. Additionally, we are reporting a non-cash impairment of approximately SEK 920 million in the second quarter. These steps are part of our ongoing efforts to enhance the profitability and focus of the Storskogen Group. Since our start in 2012, Storskogen has experienced significant growth, achieving SEK 35 billion in net sales over the last 12 months. With our IPO in 2021, we set a number of financial targets to guide our development. Regular assessments are aimed to ensure that our strategic aligns with these targets, enabling us to make informed decisions that benefit the Group as a whole.
If we move to the next slide, please. A few words on the strategic rationale on this move. Our goal is to support our business units and prioritize those that align with our strategic objectives. By divesting these nine business units, we can better focus on the areas with the highest potential for growth, profitability, and return. These decisions reflect our commitment to driving potential for growth, organic growth, improving cash flows, reducing debt, and delivering on our financial targets. The effect of divesting these long-term underperformances is notably positive, which we will come back to on the next slide. First, a few words on the impairment, Lena.
Sure. A few words on the P&L effect from these write-downs and impairments. In conjunction with the divestment, we've taken a conservative approach, which means that we will report a goodwill impairment of approximately SEK 600 million and write-downs of tangible and intangible assets amounting to around SEK 320 million. This means that the total amount of impairment and write-down will be approximately SEK 920 million in the second quarter. In addition, there will be another -SEK 30 million booked as a capital loss related to these divestments. This will all be booked in the second quarter results and will be adjusted for as items affecting comparability.
Thanks, Lena. Turning our attention to the process of this divestment, we started this process, was initiated in the spring, late February, beginning of March, and we have received substantial interest in the units being sold. We have evaluated several options and had a productive discussion with multiple stakeholders. I'm pleased that we have reached an agreement with M Industrial Invest, a firm with extensive experience in supporting and developing companies facing various challenges. To conclude, let's switch to the next slide. As seen on this slide, by divesting these long-term underperformances, we see a significant 0.7% positive impact on the Group's profitability level. But I also want to stress the importance this will have in the long run as we will be able to focus on the remaining Group with strong potential for growth and even further improvement in profitability.
We will continue to actively manage and support our business units to ensure that they align with our strategic vision and financial targets. To conclude, we are confident that we will build a better Storskogen, where we will be able to better focus on our strategic agenda and improve organic growth to drive long-term profitability. Thank you for your attention, and Lena and I are now happy to take all your questions.
If you wish to ask a question, please dial pound key five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key six on your telephone keypad. The next question comes from Andreas Koski from BNP Paribas. Please go ahead.
Good morning. Can you hear me?
Yes.
Yeah, good morning.
Hi. Yeah, it's Andreas Koski from BNP Paribas, not from Koski. On the impact on EBIT margin, I guess it's pretty straightforward. But what impact will this have on cash flows? What cash flows did these businesses have over the last 12 months or in 2023? Thank you.
Hi, Andreas. Good morning, Andreas from BNP. The impact on EBIT margin, as we say, is according to what we say in the press release. Also, the EBITDA was actually negative for the rolling last 12 months, around SEK 10 million negative on EBITDA level. If you then assume that these companies have also tied up some working capital, even on a normal level, that would mean that they would have had, all in all, a negative operating cash flow as well. All else equal. What we also say in the press release is that there will be a slight marginal positive effect to the net debt to EBITDA ratio, which comes partly, of course, from the fact that these companies have been running on a negative EBITDA, but also from the fact that they've had some debt items also that now will be removed.
Okay, understood. Then how will the profit sharing work? As soon as these businesses, on an aggregate basis, are in black numbers, you will start to get dividends, or how will this be structured? Thank you.
Thanks for the question on that. We will have a small portion of proceeds now, and then dividends as the company starts turning profitable; we will have dividends to pay down the debt that these companies had to us first. Then we will have a significant part of the future proceeds when and if these companies are sold.
Okay, so the dividends will only be used to pay down debt. When the debt is paid down, you will not receive dividends anymore. Then it's only the proceeds when businesses are sold. Is that correct?
I'm sorry. The way it's structured is that all these holdings are held by the company in which we own, the new company in which we own one share. Whenever an asset in that company is divested, we will receive our share of that divestment proceeds, but that can be paid either as a dividend or in another way after the loan to us is repaid in full. In a normal company, that would be distributed through dividend, but it can, of course, also be structured in another way. If that makes sense.
Okay, thank you very much.
Thank you.
I would also like to stress that with these impairments and write-downs, there will be, in practice, no other assets on our balance sheet related to these former or these holdings, apart from the receivable that we have on the new company in terms of that loan that will also bear interest. That will be a financial asset. Anything else on top of that would be a gain, so to speak, in the future.
Thank you.
As a reminder, if you wish to ask a question, please dial pound key five on your telephone keypad. The next question comes from Johan Dahl from Danske Bank. Please go ahead.
Good morning. Johan Dahl here from Danske. Just two questions. Firstly, on the new owner, is there any sort of commitment with regards to equity injection or other things into these companies? Just to understand the business logic here. Secondly, the write-downs, is it possible to sort of distinguish and say that those are exclusively related to the divested companies? You're talking about the vertical here, or are you doing write-downs for other assets as well?
I can start. Hi, Johan, with the first question, then Lena can take the second. Yes, there is. The owner or the buyer is acquiring and paying proceeds upfront. There is a part of that, of course, is commitment and then a long-term commitment in working with these companies and, of course, hopefully turning them around and selling them. And you said in the second question was, Lena?
Yeah, related to the write-down. There are actually three parts of the write-down that we mentioned in the press release. First is a removal, so to speak, of the tangible assets. Now, that's a complete write-down related directly to these companies. Then there is the write-down of intangible assets such as customer relations, any trademarks we would have, or anything like that, other intangible other than goodwill. Those would also be belonging to the companies divested. Then the third part is the goodwill impairment, which is, of course, allocated on a vertical level. If you also look at our annual report, you would see that the goodwill is allocated not to business units, but to the vertical. That's why we say that the goodwill impairment is made in the vertical because there is, in technical terms, no goodwill related to the actual business units. It's all in the vertical.
That's why. But one could say that the amount relates to the divested companies, and there would be no other need for impairment after that.
Thank you so much. Chris, I didn't get you exactly there. What was the financial commitment by the buyer? Is there a commitment to stake this company further either by equity or debt from the new owner? And what is any sort of payments from the new owner to Storskogen when you complete this deal?
Well, there's a small proceeds, as I said, and it's SEK 10 million that we get paid from the beginning. Then, of course, we are converting our internal loans to these new companies, the loans that we already have to the subsidiaries converted to these companies. But after that, of course, M Industrial Invest needs to invest and take working capital and all the commitment in running these companies. There's a commitment from that company in handling this portfolio and this holding in this new company. We are converting this loan, and that's what we are doing. After that, working capital needs to be invested from this new owner.
Got you. Thanks.
Thanks.
There are no more questions at this time, so I hand the conference back to the speakers for any closing comments.
Thank you for that, and thank you for listening. I hope that you all have a great summer. Thanks from Lena and myself.
Thank you. Have a good day.
Have a good day.