AB Traction : 2022 Annual Report

A N N U A L R E P O R T 2 0 2 2

TRACTION ANNUAL REPORT 2022 1

Content

1. CEO Statement
2. 2022 in Summary
3. Traction's Business

1. Organisation
2. Ownership Policy
3. Active Listed Holdings
   13 Unlisted Holdings
   16 Financial Investments
   20 Financial Overview
   23 Sustainability
   24 The Traction Share
   26 The Past Ten Years
   29 Traction's History
   31 Addresses

Shareholder

Information

8 May 2023 Interim Report January-March

8 May 2023 Regular AGM

14 July 2023 Interim Report January-June

23 October 2023 Interim Report January-September

9 February 2024 Year-end Report 2023

Subscription to financial information via e-mail can be requested at traction.se, where also financial information is available, or by sending an e-mail to [e-mail].

The following annual report is a translation of the Swedish version. In case of any discrepancy between the Swedish or English translation, the Swedish version shall prevail.

Dear Shareholders,

In 2022, the world's stock markets performed weakly, as did the Stockholm Stock Exchange, which fell by 20 percent, after a particularly strong 2021 with an increase of 37 percent. Traction's development follows a similar pattern, but where the rise summed up to 47 percent and the subsequent­ decline to 9 percent. The comparison is partly misleading since Traction's net asset value consisted of over a third of interest -bearing investments and cash equivalents that show a different risk and return profile, but still relevant because the goal over time is for Traction to significantly generate a return in excess of the Stockholm Stock Exchange as a whole.

Traction's result for 2022 amounted to MSEK -378 (1,344), where the active listed holdings affected earnings by MSEK -357 (+820), unlisted holdings MSEK -27 (+208) and financial investments MSEK +21 (+323). Changes in the value of active holdings worth MSEK >100 consisted of BE Group MSEK -129 (300), OEM International MSEK -76 (234), Soft- ronic MSEK -72 (125), Drillcon MSEK -69 (48) and Nilörn- gruppen MSEK +20 (132). Dividends from active holdings amounted to MSEK 77 (66).

Traction's financial equity investments developed marginally positively (+1 percent / MSEK 4) and, as last year (+47 percent / MSEK 257), significantly better than the market as a whole. Financial equity investments showed a mixed development where, for example, the holdings in Wallenius ­Wilhelmsen, RPS Group, Subsea 7 contributed MSEK 83, while the larger holdings in Duroc, PION Group and Portmei- rion Group charged earnings with MSEK 70. The latter ca- tegory, on the other hand, contributed MSEK 68 to earnings last year.

Traction's interest-bearing investments contributed MSEK 17 (67), of which interest income received amounted to MSEK 42 and changes in value to MSEK -25. Rising market interest rates contributed momentarily to net interest income, as only a limited proportion of interest-bearing investments carry fixed interest rates. Parts of the interest-­ bearing portfolio of just under MSEK 1,200 consist of relatively illiquid bonds where pricing is also affected by the prevailing financial climate. This means that a generally increasing financial uncertainty from time to time results in negative changes in value which, provided that the issuer's ability to meet its commitments at maturity has not chang- ed, is reversed when the uncertainty decreases. More than half of the interest-bearing investments have maturities of less than one year.

Operationally, several of Traction's larger holdings continued to develop strongly, with Nilörngruppen and OEM Inter­ national delivering record earnings and BE Group main­

taining a high profit level. Softronic also delivered stable earnings, which were unfortunately burdened by a larger one-off cost for a data breach at the end of the year. A new

CEO took over at Hifab Group, where a number of activities were initiated to reverse a long-mediocre development. The activities, which aim to fundamentally transform the company to sustainably deliver significant added value to its customers, have also meant in the short term that the company showed a positive result in the second half of 2022. Ankarsrum Kitchen reported sales of MSEK 210, which is a decrease compared to 2021 when sales amounted to MSEK 265, strongly driven by a strong baking trend as a con­ sequence of the pandemic's travel restrictions and working from home. In 2023, they established sales companies in Germany and the US, which means exciting opportunities in a longer perspective, while there is uncertainty in the short term due to prevailing high cost inflation and rising interest rates that erode the customer's consumption space.

The uncertainties in the financial markets are currently greater than they have been for a very long time, and a readjustment of interest rates to more normal levels should inevitably result in several of the financial valuation bubbles that have built up in recent years bursting. So far in 2022, we have seen significant valuation declines for several privately owned high-valued companies that depend on ongoing owner contributions for their operation. Even listed companies with speculative valuations, weak profitability­ and/or high debt, often combined with hollow balance sheets with significant intangible asset values, have seen their valuations fall sharply. It would be highly reasonable if this revaluation trend continues in 2023 and also rubs off on today profitable, well-managed and well-­established companies, but whose valuations pledge long-term profitable growth without room for negative deviations or increased competition,­ often P/E ratios exceeding 40. At the same time as this valuation adjustment is taking place, it can be hoped that other more moderately valued companies will not be dragged down in the share price falls, which to a large extent has happened in 2022. The logical outcome would be for the differences in valuations to narrow down, with the highest valued companies, which today enjoy star status on the stock market, falling, and for other more moderately valued companies that have performed weakly in recent years but still shown stability and profitability, to rather rise in value. Only time will tell.

Petter Stillström, CEO

TRACTION ANNUAL REPORT 2022 3

2022 IN SUMMARY

2022 in Summary

• The result after taxes amounted MSEK -378 (1,344).
• Active listed and unlisted holdings accounted for MSEK -384 (1,028) and financial investments for MSEK 21 (323).
• The net asset value per share decreased by 9 (+47) percent, adjusted for dividend paid.
• Traction's net asset value amounted to MSEK 3,785 (4,235) equivalent to SEK 256 (286) per share.
• The return on active listed holdings amounted to approximately -21 (+76) percent.
• The return on other listed shares was approximately 1 (+47) percent.
• Interest-bearinginvestments and cash amounted to approximately MSEK 1,400 equivalent to 37 percent of net asset value.

Events in the beginning of 2023

• The Board of Directors proposes a dividend of SEK 8.80 (4.85) per share, equivalent to MSEK 130 (72).
• The change in value on listed holdings during 2023, up to and including 9 February, amounted to MSEK 162, of which active listed holdings amounts to MSEK 112.
• Proposed dividends from active listed holdings for the financial year 2022 amount to MSEK 74.
• Ownership in Driver Group increased to 28 percent of the capital after acquisition for MSEK 13.

Key Financial Indicators	2022	2021	2020	2019	2018
Profit for the year, MSEK	-378	1,344	-19	416	-71
Net asset value, MSEK	3,785	4,235	2,920	3,001	2,638
Net asset value per share, SEK	256	286	197	203	178
Earnings per share, SEK	-26	91	-1	28	-5
Market price at end of period, SEK	211	277	187	195	165
Change in net asset value per share, %	-9	47	-1	16	-3
Dividend per share, SEK1	8.80	4.85	2.00	4.20	3.60
Dividend yield, %1	4.2	1.8	1.1	2.2	2.2

1Dividend 2022 as proposed by the Board of Directors

Distribution of Traction's Net Asset Value

Financial Investments

Interest-bearing investments incl. cash MSEK 1,358

36%

35%

Other listed shares MSEK 794

21%

8%

Active listed holdings MSEK 1,329

Unlisted holdings MSEK 304

4 TRACTION ANNUAL REPORT 2022

Traction develops and improves companies

Traction is a listed investment company with active ownership interests in listed and unlisted smaller and medium­-sized companies. Traction also conducts investment activities for the purpose of obtaining a good return on the Company's capital

by making financial investments, mainly in other listed companies and interest-bearing assets.

Traction's role as owner is based on active and long-term engagement in close co-operation with other active owners, entrepreneurs and corporate managements. Traction has no particular focus on specific industries, but conducts development and transformation work that is applicable in all companies intending to give priority to professionalism, long-term thinking, and sound business principles.

TRACTION'S BUSINESS

Business Concept

• To conduct development and transformation work for the purpose of achieving a high return and appreciation through active ownership. In addition, the Company conducts investments operations for the purpose of a good return on the Company's capital.

Business Philosopy

• We have a long-term approach.
• We are not seeking to build a corporate group. We work instead with a number of independent companies, the appreciation of which will be realised in the longer term.
• Our sphere of activity lies within the transformation and development of companies in general. The requisite technical and industry expertise must be present in the company.

Goals

• To sustainably generate an increase in Traction's net asset value per share, including dividends that substantially exceeds the overall performance of the Stockholm Stock Exchange.
• To create profitable growth in our wholly and partially owned companies.

Strategy

To achieve Traction's goals, the following is necessary:

• The ability to identify interesting business projects and situations.
• The ability to choose the right partners; especially executives/ entrepreneurs, but also other active owners.
• Project managers who can provide corporate executives the complementary expertise they need.
• Co-operationpartners who can act as project manager, director, CEO and/or part owner.
• Sufficient financial resources to take on interesting projects and to support the development of existing holdings.

Exit Strategy

• It is important to Traction that our companies display long- term growth and earning power. Traction has no strategic holdings or other motives for its ownership than the strictly commercial ones. As a matter of principle, our holdings are always for sale at the right price and to a suitable owner.
  In companies where we have owner companions, the exit strategy varies depending on which development phase the companies are in, and specific prerequisites, especially the intentions of other owners.

TRACTION ANNUAL REPORT 2022 5