Volati AR 2018

2018This annual report has been prepared in Swedish and translated into English. In the event of any discrepancies between the Swedish original and the translation, the Swedish shall have precedence.8 –15Volati’s business model and ﬁnancial targets 16 – 19Comments from the Chairman32 – 41Volati’s business areas42 – 46Share informationAdministration Report ��48 Sustainability Report ��52Risks and uncertainties ��59Corporate Governance Report ��62Financial Statements – Group ��80Notes – Group ��84Financial Statements – Parent Company ��137Notes – Parent Company ��141Audit Report ��147Volati’s process for creating value20 –312–3Volati 20184 –7Comments from the CEOcontents annual report1 Volati 2018Key ﬁgures20182017201620152014Net sales, SEK million6,0844,3563,2062,1881,656EBITDA, SEK million552459385275249EBITA, SEK million433377318227215Organic EBITA growth, %0–1828–2015EBIT, SEK million366345301214155Adjusted EBITDA949619–264756762Net debt, SEK million573511421333273Net debt/adjusted EBITDA, x 1.71.2–0.62.32.8Cash conversion, %86112899462Earnings per ordinary share, SEK2.582.192.071.370.35Equity per ordinary share, SEK 21.6319.1117.785.514.94Return on adjusted equity, %1312254328Ordinary shares outstanding80,406,57180,406,57180,406,57140,400,00040,400,000Preference shares outstanding1,603,7741,603,7741,603,7741,603,774–Average number of employees2,1571,7501,122908860Dividend per ordinary share, SEK1.001)0.500.50––Dividend per preference share, SEK40.0040.0040.0020.00–• Net sales increased by 40 percent to SEK 6,084 (4,356) million. • Operating proﬁt (EBITA) increased by 15 percent to SEK 433 (377) million. • Operating cash ﬂow amounted to SEK 475 (513) million. • S:t Eriks, Sweden’s leading manufacturer of concrete and natural stone products, was acquired in August.• The Board of Directors proposes a dividend of SEK 1.00 per ordinary share and a dividend for preference shares of SEK 40.00 per share.152,20016CountriesBusiness unitsEmployees1) According to the Board's proposalVolati 20182EBITA Net sales Trading, SEK 2,107 million Consumer, SEK 923 million Akademibokhandeln, SEK 1,784 million Industry, SEK 1,271 million Trading, SEK 158 million Consumer, SEK 104 million Akademibokhandeln, SEK 72 million Industry, SEK 144 millionAs the distribution by business area is not calculated proforma for the year’s acquisitions, acquired companies are only included in the above calculation from the acquisition closing date. The business areas’ shares are calculated excluding central costs.Volati is a Swedish industrial group that acquires and develops well-managed companies with a focus on long-term value creation. We primarily own Nordic companies, predominantly in Sweden.four business areasTrading, Consumer, Akademibokhandeln and Industry3In 2018, we continued our eﬀorts to build an even stronger Volati. Both sales and earnings showed a strong increase. We have also successfully developed our business area organisation and corporate governance. Volati enters 2019 in very good shape – both organisationally and ﬁnancially. An even stronger Volati4s an owner, one of our most important tasks is to create the best development environment for our companies and this is also something we have excelled at historically. We are devoting substantial resources to improving this even more, as we continue growing through acquisitions. An important part of the work is the strengthened business area organisation that was introduced at the end of the year and that we developed in 2018. I am very pleased with the outcome, as it is of key importance for us to continue growing within the framework of our business model. Organisation for continued growthThe business area organisation is headed by competent business area managers who assume overall responsibility for developing and monitoring operations within their business areas. This means that we can continue our success in setting the right strategic direction together with the board and company management, ensuring that we have the right expertise in the manage-ment groups and continuously monitoring the progress towards agreed goals. The business area managers also have responsi-bility for driving Volati’s acquisition agenda together with Group management. This has meant that we both generated and evaluated more acquisition opportunities than before during the year. In other words, we are well-equipped to successfully complete acquisitions and receive and integrate acquired operations, and we also have the strength to address the challenges that arise in the business units. Our eﬃcient management of the challenges we had in the Industry business area in Q4 2017 was behind the business area’s strong results in 2018. I am also very pleased that the measures taken to streamline operations and reduce costs in Akademi-bokhandeln in the second half of the year have produced clear results. Akademi-bokhandeln now enters 2019 with a strong customer oﬀering and lower ﬁxed costs. I believe that this shows the strength of our organisation, as we work together to create long-term value.Developing skills supplyDecentralised business unit governance is a cornerstone of our business model. This in turn requires that we have the right exper-tise in the business units’ boards and management groups. For this reason, we devote a great deal of energy and resources to skills supply throughout the Group. In 2018, these eﬀorts were focused on ensuring access to board expertise in our business units. We have introduced Styrelse-akademin, an initiative in which we work with an international recruitment company to establish a pool of potential candidates for board assignments. This has enabled us to strengthen many of the subsidiary boards during the year. We also gather all board members together a few times a year to exchange knowledge and ideas about board work and listen to external speakers. This has been a great success, which in a short period has further raised the level of board work throughout the Group.I am also proud of our program for future managers – Volati Management Program. All A5Comments from the CEOof the participants who have completed the program are currently doing a fantastic job at management level in one or other of our business units. Our ability to supply the business units with talented leaders will, I believe, be an important competitive advantage for us in a few years’ time.Sales and earnings growth Sales and earnings for 2018 showed a marked increase as a result of both acquisi-tions and eﬃciency improvements. Net sales increased by 40 percent to SEK 6,084 million and operating proﬁt (EBITA) rose by 15 percent to SEK 433 million. Earnings per ordinary share increased by 18 percent to SEK 2.58 per share. During the year, we have been working to reduce the cost level throughout the Group. One reason is that we want to be well prepared for any weaker economic trend in the future. At the same time, it is important to note that we have not seen any change in market conditions and demand during the year.Turning to our business areas, I am pleased with how operations have developed during the year. We faced challenges in the form of a cold winter and a record hot summer, which aﬀected most of our busi-ness areas. The weakened krona aﬀected the Trading business area, which imports a large proportion of its products. The changed vehicle inspection rules introduced during the year aﬀected the vehicle inspec-tion sector and also our operations within the Consumer business area. As a result of hard work in the business units, we were able to compensate for many of the challenges and delivered an organic EBITA that was unchanged from the previous year. Comments from the CEO6mårten andersson, president and ceo Stockholm, March 2019Strong ﬁnancial position and increased dividendVolati’s ﬁnancial position at the end of 2018 was very good. The basis of our entire business model is that we generate strong cash ﬂows every year. Operating cash ﬂow during 2018 was SEK 475 million. We use the cash ﬂow to acquire new companies, invest in our existing business units and distribute dividends to our shareholders. The strong cash ﬂow also contributes to reducing debt. The net debt to EBITDA ratio is 1.7x, which is signiﬁcantly below our long-term ﬁnancial target of a maximum of 3.0x. In other words, we have considerable scope for acquisitions. The strong cash ﬂow and low debt also mean that the Board is able to propose an increase in the dividend per ordinary share to SEK 1.00 (0.50) for 2018.Creating long-term value growthAs I mentioned earlier, we have a high level of acquisition activity in the Group even though we only completed one transaction during 2018, namely S:t Eriks. A large proportion of S:t Eriks' sales comes from infrastructure projects and our hypothesis is that this is an area with relatively good market conditions in the period ahead. We also see that, with our industrial know-how, we can contribute to streamlining the operations together with the company’s management. We are satisﬁed with the integration process for S:t Eriks and have a new management group in place. We note that there are still plenty of acquisition opportunities in the market. We have a good inﬂow of potential acquisi-tion candidates from professional players and also generate many acquisition oppor-tunities internally in our business area organisation. However, we ﬁnd that the price expectations of sellers and buyers increasingly diﬀer. This means that the number of closed deals is lower and that it takes longer to close the deals.Our ambition is to remain active in the acquisition market in 2019. We have both the ﬁnancial and organisational capacity to act quickly when we ﬁnd the right acquisition candidate. At the same time, we will drive eﬃciency and proﬁtability in our existing operations in line with our goal of creating long-term value growth.“Volati’s ﬁnancial position at the end of 2018 was very good.”7Comments from the CEONext >