Volati Annual Report 2020

202020201,800 Volati is a Swedish industrial group that acquires and develops well-managed companies with a focus on long-term value creation. Through an active acquisition strategy and its vision to be regarded as Sweden’s best owner of medium-sized companies, Volati has delivered strong and sustainable growth in proﬁtability since the start in 2003. Volati primarily owns Nordic companies, predominantly in Sweden. The Company has been listed on Nasdaq Stockholm since 2016. 1610 1) Formerly Trading. Volati in brief salix group 1) industry akademibokhandeln employeescountriesbusiness units three business areasAdministration Report ��53 Sustainability Report �� 57 Risks and uncertainties ��71 Corporate Governance Report �� 74 Financial Statements – Group ��90 Notes – Group �� 94 Financial Statements – Parent Company �� 137 Notes – Parent Company ��141 Auditor’s Report �� 146 About the Annual Report: The Consumer business area was closed down during Q4 2020 after the operations of the business area were divested. This means that the income statements for 2019 and 2020 have been restated, in accordance with applicable ﬁnancial reporting standards, and exclude the Consumer business area. The descriptions of operations and companies in this annual report focus on continuing operations unless otherwise stated. The formal annual report, which Volati’s auditors have examined, is found on pages 53–56, 71–73 and 90–145. The statutory sustainability report can be found on pages 57–69. This report is a translation of the Swedish original. In the event of discrepancies, the Swedish version shall prevail. Volati in 2020 �� 2 Comments from the CEO ��4 Volati’s vision, business concept and targets �� 8 Acquisitions ��12 Reasons to invest in Volati �� 15 Comments from the Chairman �� 16 Case: Besikta Bilprovning ��20 Business model for long-term value creation �� 22 Volati’s business areas ��36 Share information �� 48 c ontents 1 Volati in 2020 2020 was an eventful and successful year for Volati, with continued strong earnings growth EBITA increased by 26 percent. Volati continued its high acquisition rate in 2020. Four add-on acquisitions were made – Heco, Beneli, Pisla and Märkas. • Net sales increased by 13 percent to SEK 6,696 (5,938) million. • EBITA for continuing operations increased by 26 percent to SEK 488 (388) million. • Operating cash ﬂow amounted to SEK 623 (403) million. • Volati completed four acquisitions in 2020, all of which were value-creating add-on acquisitions for existing operations. • The Consumer business area was discontinued as a result of the divestment of its operations. • An EGM held on 2 February 2021 adopted an extra dividend of SEK 10.00 per share and SEK 30.80 per preference share. • The Board proposes an ordinary dividend of SEK 1.20 per share to ordinary shareholders and a preference share dividend to be paid in accordance with the Company’s articles of association. and also distribute shares in the subsidiary Bokusgruppen AB (publ). 1) • Andreas Stenbäck has been appointed the new CEO with eﬀect from 1 May 2021. 1) Renamed from Volati Bok AB. 2020 in brief 2Key ﬁgures * Full year 2020 Full year 2019 Full year 2018 Full year 2017 Full year 2016 Net sales6,6965,9386,0844,3563,206 EBITA488388433377318 EBIT437345366345301 Proﬁt for the year977–2274241200 Proﬁt for the year from continuing operations263245––– Operating cash ﬂow623403475513343 Net debt/adjusted EBITDA, x –0.81.51.71.2–0.6 Earnings per ordinary share, SEK 11.370.132.582.192.07 Earnings per ordinary share, continuing operations, SEK2.372.17––– Return on adjusted equity, %51–4131225 * The years 2019–2020 do not include discontinued operations. See also Note 5. EBITA by business areaNet sales by business area 47%42% 12% 40%34% 27% The distribution by business area is not calculated proforma for the year’s acquisitions. Acquired companies are therefore only included in the above calculation from the acquisition closing date. The business areas’ shares are calculated excluding central costs. Divested operations are included in the relevant business area up to the divestment date. Distribution by business area Salix Group, SEK 2,665 million Akademibokhandeln, SEK 1,775 million Industry, SEK 2,258 million Salix Group, SEK 265 million Akademibokhandeln, SEK 67 million Industry, SEK 236 million 3 2020 in briefA successful year in a challenging world 42020 was an intensive, challenging and successful year for Volati. The year was dominated by the global corona- virus pandemic and our main priority was the health and safety of our employees, while also ensuring continuity and proﬁtability for the business. This meant that we were able to maintain a high acquisition rate and deliver strong earnings growth during the year. I have repeatedly had reason to be impressed by employees in the Volati Group during the year. There has been evidence of magniﬁcent leader- ship in every part of the business, which meant that we were able to act quickly and decisively when the coronavirus spread during spring. We took immediate measures to adapt the organisation to stricter health and safety guidelines, protect liquidity and ensure continu- ity and proﬁtability for our companies. Among other things, we were affected by the fact that the Group had store operations, regulated inspection operations, manufacturing in Italy and important supply chains in China and India. I am proud of the strength with which we have responded to these challenges, while also successfully meeting increased demand in many parts of the business. All in all, this therefore enabled us to deliver another strong year in terms of earnings, with EBITA growth of 26 percent. We achieved all ﬁnancial targets during the year. High acquisition rate continues Acquisition-driven growth is a key component of Volati’s strategy. I am very pleased that we have maintained a high acquisition rate, with four excellent add-on acquisitions during the year. We actually added more EBITA through acquisitions than in 2019. The acquisitions of Heco and the Finnish company Pisla enable the Salix Group business area (formerly Trading) to strengthen its position as a leading Nordic supplier of ﬁttings for the hardware and building materials retail sector. In turn, the acquisitions of Beneli and Märkas make the Ettiketto business unit Sweden’s largest label supplier. In January 2021, we made a further acquisition – the Finnish company JPT-Industria. This is an add-on acquisition for the Tornum business unit whose Nordic market position is strengthened as a result. Business area development The Salix Group business area reported another year of very strong growth in both sales and earnings. They have been particularly efﬁcient in ensuring delivery capacity during this corona-dominated year. This has enabled the business area, with its strong brands, to beneﬁt from high demand, notably in the consumer- driven area of building materials, hardware retail and garden centres. Akademibokhandeln is the business areas that has been most affected by the coronavirus pandemic and they have done a fantastic job in a challenging external environment. Despite the pandemic having affected retail trade for most of the year, Akademibokhandeln was heading for growth in both sales and earnings. Unfortunately, the important Christmas shopping period was negatively affected by 5 Comments from the CEOstronger government recommendations not to visit stores in the weeks before Christmas. Sales and earnings were therefore just below the previous year. One of the great joys of the year was the strong growth in Akademi- bokhandeln’s digital channels, which helped to compensate for much of the lost store sales in the wake of the coronavirus pandemic. Sales in the digital channels increased by 25 percent compared with 2019 and accounted for a total of 44 percent of Akademibokhandeln’s sales during the year. The Industry business area also delivered another year of strong growth in sales and earnings. We have four excellent, proﬁtable and successful business units in the business area. All have the potential for further develop- ment, including through add-on acquisitions, in order to eventually become independent business areas with clear industrial logic. Within the business area, we also see good opportunities to broaden operations to attrac- tive new areas through acquisitions. Closure of Consumer business area In 2020, we sold both Besikta Bilprovning and NaturaMed Pharma, which also resulted in our decision to close down the Consumer busi- ness area. Sales of companies are not normally part of our strategy. However, in both cases there were compelling reasons to sell. We have had a highly successful journey with Besikta, with management and employees joining to build one of the best and most proﬁtable vehicle inspection companies in Sweden. These qualities were reﬂected in the offer we received from the Spanish company Applus+, resulting in a good transaction for Volati, with a capital gain of SEK 750 million. At the same time, Besikta gained an industrial owner with a global presence and the best conditions to develop the company further in the future. NaturaMed Pharma has shown weak growth since its acquisition in 2014 and we have not been able to modernise its business model at a satisfactory pace. In that situation, we consid- Comments from the CEO 6ered that it was right to sell the company to an industrial owner that knows the industry and has good conditions to develop the company. The Consumer business area has generated a very good overall return with a total capital gain of approximately SEK 335 million and a total cash ﬂow, including acquisition and divestment consideration, of SEK 760 million. We have strengthened our balance sheet, which means that we can continue to develop Volati and at the same time pay an extra dividend to our shareholders, as decided by an EGM at the beginning of 2021. More decentralised control of Salix Group Volati’s main strengths are in acquiring, owning and developing medium-sized companies. The result of successful development work is that the companies are growing strongly. The Salix Group business area is an example of this, having shown tremendous growth in recent years. The business area currently operates largely as a group, with clear industrial logic and common structures for logistics and administra- tion. At the beginning of 2021, we established a more decentralised governance structure to give the operations even better conditions for continuing growth, including decision-making closer to the business. We have appointed a separate board for the business area, which has received an ownership directive from the Volati Board. Through this, the business area’s board is given increased powers to decide on matters such as acquisitions, investments and strategy. To clarify the change, we changed the name of the business area – from Trading to Salix Group. Evaluating whether Akademibokhandeln is better placed for growth as an independent company In February, it was announced that the Volati Board had asked management to evaluate a possible distribution and separate listing of the Akademibokhandeln business area. Akademi- bokhandeln has developed positively since its acquisition in 2017. The business is character- ised by good proﬁtability and, as I mentioned earlier, strong growth in the digital channels. With fantastic brands in Akademibokhandeln and Bokus, 44 million online visitors annually, 18 million in-store visitors and 2 million mem- bers of the customer club, the business area is in a unique position to increase the pace of the digital transition and drive growth over the next 3–5 years. The company also has a clear ambition to continue this journey and increase the growth rate for the digital channels through continued investments in business develop- ment. To provide the Akademibokhandeln business area with the best opportunities for future development, we are therefore evaluat- ing whether the business area is better placed to accelerate its growth-oriented work as an independent company. Strong position for the future Volati leaves a successful 2020 in very good shape. We achieved high earnings growth and have a strong balance sheet. Our good results during this challenging year are really the result of teamwork, with our employees going the extra mile. After the end of the year, we signed up to the UN Global Compact. This means that we are intensifying our sustainability work and that we back the Global Compact’s ten principles in the areas of human rights, labour, the environment and anti-corruption. I would like to thank you very sincerely for your professionalism and commitment during the year. Our ambition is to continue to develop Volati at a fast pace. The evaluations and changes I have described are made with the aim of taking maximum advantage of growth opportunities in all business areas – thereby enabling signiﬁcant value creation for share- holders also in the future. Mårten Andersson, CEO Volati Stockholm, March 2021 7 Comments from the CEONext >