Alimak : Interim report for January-September 2021 - Report

Alimak Group AB

ALIG, SE0007158910

Interim Report	Q3
JANUARY-SEPTEMBER 2021

Continued profit improvements

• Continued strong order intake in Construction and Industrial
• Strong service growth, up 26% in the quarter
• New Heights Programme delivering margin improvements in line with plan
• Still challenges in Wind and BMU (Building Maintenance Units)

THIRD QUARTER

• Order intake decreased by 2% to MSEK 872 (888) with an organic decrease of 3%
• Strong organic order intake growth in Construction, up 14%, and in Industrial, up 19%
• Revenue decreased by 1% to MSEK 902 (916) with an organic decrease of 5%
• EBITA increased to MSEK 119 (67), margin 13.2% (7.3)
• Result for the period increased to MSEK 74 (41)
• Earnings per share, basic and diluted, increased to SEK 1.37 (0.75)
• Cash flow from operations increased to MSEK 244 (206)

JANUARY-SEPTEMBER

• Order intake decreased by 2% to MSEK 2,860 (2,917) with an organic increase of 2%
• Strong organic order intake growth in Construction, up 10%, and in Industrial, up 15%
• Revenue decreased by 4% to MSEK 2,699 (2,807) with an organic growth in line with last year
• EBITA increased to MSEK 339 (233), margin 12.6% (8.3)
• Result for the period increased to MSEK 215 (133)
• Earnings per share, basic and diluted, increased to SEK 3.97 (2.45)
• Cash flow from operations was MSEK 507 (341)
• Leverage (Net Debt/EBITDA) at September 30, 2021 was 0.82 (1.50 as of December 31, 2020)

KEY FIGURES, GROUP	Q3 2021	Q3 2020	∆	Jan-Sep 2021	Jan-Sep 2020	∆
Order intake, MSEK	872	888	-1.8%	2,860	2,917	-2.0%
Revenue, MSEK	902	916	-1.4%	2,699	2,807	-3.8%
EBITA, MSEK	119	67	76.8%	339	233	45.6%
EBITA margin, %	13.2%	7.3%		12.6%	8.3%
EBIT, MSEK	110	59	87.9%	313	200	56.5%
EBIT margin, %	12.2%	6.4%		11.6%	7.1%
Result for the period, MSEK	74	41	82.1%	215	133	62.0%
Earnings per share, basic and dilluted, SEK	1.37	0.75	82.7%	3.97	2.45	62.0%
Cash flow from operations, MSEK	244	206	18.8%	507	341	48.6%
Net debt/EBITDA, ratio	0.82	1.68	-51.2%	0.82	1.68	-51.2%

Alimak Group AB	2
Interim Report Q3 JANUARY-SEPTEMBER 2021

Comments by the CEO

Our Construction and Industrial divisions continued to have positive development with solid order intake development in both new equipment and services in the quarter. I am pleased to see, according to plan, continued strong service order intake development for the Group and margin improvements in all divisions during the quarter. In BMU (Building Maintenance Units) and Wind, we continue to face challenges that we are working diligently to mitigate.

Construction delivered another strong quarter with order intake up 14%, with solid contribution from both new equipment and Services and with continued good development in Rental.

Industrial also delivered strong organic order intake growth of 19% in the quarter where new equipment sales is continuing to develop very strong. The new industrial elevator for the emerging markets, launched at the beginning of the year, has contributed positively.

BMU had weak equipment sales in the quarter due to continued low investment activity level in high complexity BMU-projects for new high-rise buildings. However, the division continued to show a strong service order intake. We continue to drive the profitability improvement program which includes both growth enhancing initiatives as well as improving cost efficiency.

As expected, order intake in Wind was lower year-over- year due to our decision to exit tower internals. We also still face a weak development in China, impacted by increased competition from local suppliers and low level of government support incentives.

It is pleasing to see that service order intake for the Group continues to show solid growth, up 26% in the quarter, in line with our efforts to increase the share of Service revenue.

Organic revenue growth in the quarter was at the same level as last year, excluding the effects of our exit from tower internals. We are facing supply chain challenges which we to a large extent have been able to manage.

Margin improvements in all divisions

Our number one priority for the year is to deliver the second phase of the New Heights Programme, securing margin improvements and continuing to implement our

MSEK	Orderintake and revenues by Quarters
1,400
			1,073
1,200	888	845	915	872
1,000
800
600
400
200
916	933	846	951	902
0
Q3-20	Q4-20	Q1-21	Q2-21	Q3-21
			Revenue			Order intake

divisional strategies to drive profitable growth. Despite lower reported revenue in the quarter, EBITA was up by 77%, corresponding to a margin increase of 5.9 percentage points year-over-year. In Q3 last year, 35 MSEK was booked related to the New Heights Programme. Margins improved in all divisions, in line with plan, supported by improved gross margins and lower SG&A expenses. I am pleased to see that the organization to a large extent has managed to offset the cost increases for freight and raw material through active price management and other mitigating activities, and all divisions are delivering improved gross margins.

Cash flow was strong in the quarter, and we have a strong financial position that allow us to invest in future growth.

Set for growth, expanding our product portfolio and value proposition

Our decentralised and customer focused divisions are now working diligently with developing our value propositions and further service penetration. Digitalisation is a key enabler for us, and it is exciting to see the high customer interest in our Alimak Group BIM-gallery (Building Information Modelling) with over 2,000 downloads to date. Increasing the pace in product development is also a key initiative for future growth. In October, we are launching a new product, in close cooperation with a customer in Construction, providing scaffolders greater efficiency and increased workplace safety.

We are well set for growth and further margin improvements, supported by increased M&A efforts, in a continued uncertain macro environment.

Ole Kristian Jødahl, President and CEO

MSEK	EBITA % & EBITA by Quarters	%
200									20
				13.2		13.2
150				11.1				15
7.3		9.2
100									10
50									5
67		86	95	126		119
0				0
Q3-20	Q4-20	Q1-21	Q2-21	Q3-21
			EBITA			EBITA. %

Alimak Group AB	3
Interim Report Q3 JANUARY-SEPTEMBER 2021

Group Performance

Share of EBITA

Share of revenue

BMU		Construction		BMU		Construction
Industrial		Wind		Industrial		Wind

THIRD QUARTER

Order intake in the quarter decreased by 2% to MSEK 872 (888) with an organic decrease of 3%. Excluding the Tower Internals business in Wind that we are exiting, organic growth decreased 1%. Service orders showed strong performance in the quarter, up 26%.

Revenue decreased by 1% to MSEK 902 (916) with an organic decrease of 5%. Excluding the Tower Internals business in Wind, organic growth was flat. Revenue growth was solid in Construction, Industrial and service revenue in all divisions. Wind decreased due to exiting tower internals and a challenging business climate in China.

EBITA for the quarter was MSEK 119 (67), corresponding to a margin of 13.2% (7.3). EBITA-margins improved in all divisions in line with plan.

Amortisation in the quarter amounted to MSEK 9 (9), largely related to the acquired businesses.

EBIT in the quarter was MSEK 110 (59).

The financial net amounted to MSEK -9(-6). The interest net was MSEK -3(-6), leases MSEK -1(-2) and the remaining largely related to currency fluctuations.

Tax expense for the quarter was MSEK 26 (11), corresponding to a tax rate of 26.2% (21.8).

Result for the period amounted to MSEK 74 (41) where the increase came from the higher operating result in 2021 and restructuring related cost of 35 MSEK in 2020. EPS thereby increased to SEK 1.37 (0.75) for the quarter.

Cash flow from operations in the quarter was MSEK 244 (206). The improvement comes from a higher operating result and further reduction in working capital of MSEK 120 (104).

Net investments in fixed assets in the quarter totalled MSEK 25 (23), of which MSEK 18 (19) was related to additions to the rental fleet.

Capitalised investments in intangibles amounted to MSEK 0 (0).

Net reduction of borrowings amounted to MSEK 141 (134).

JANUARY-SEPTEMBER

Order intake during the period decreased by 2% to MSEK 2,860 (2,917) with an organic increase of 2%. Excluding the tower internals business in Wind that we are exiting, organic growth increased by 4%.

Revenue decreased by 4% to MSEK 2,699 (2,807) with an organic increase of 2%, excluding tower internals. The increase was driven by growth in Construction, BMU and service revenue in all divisions. Revenue decreased in Industrial due to lower backlog at the beginning of the year and Wind decreased due to exiting tower internals.

EBITA for the period was MSEK 339 (233), corresponding to a margin of 12.6% (8.3). Compared to last year, all divisions have improved result and margin. Amortisation in the period amounted to MSEK 26 (33), largely related to the acquired businesses. The decrease in amortisation relates to customer relations from acquired businesses being fully amortized.

EBIT for the period was MSEK 313 (200).

The financial net amounted to MSEK -24(-30) whereas interest net was MSEK -10(-16), the impact from IFRS 16 was MSEK -4(-6) and the remaining largely derived from currency impact.

Tax expense for the period was MSEK 74 (37) and the tax rate was 25.6% (21.9%).

Result for the period amounted to MSEK 215 (133) where the increase relates to the higher operating result. EPS increased to SEK 3.97 (2.45).

Cash flow from operations in the period was MSEK 507

1. driven by high EBITDA and continued decrease in working capital of MSEK 148 (167).

Net investments in tangible fixed assets in the period totalled MSEK 52 (57). The majority of investments relate to additions in the rental fleet of MSEK 35 (38).

The capitalised investments in intangibles for ERP and other IT systems amounted to MSEK 2 (12).

Net reduction of borrowings amounted to MSEK 130 (198).

Dividend of MSEK 162 (94) was paid out in May.

Alimak Group AB	4
Interim Report Q3 JANUARY-SEPTEMBER 2021

ORDER INTAKE		Q3		Jan-Sep
	2021		2020	2021	2020
Orders, MSEK		872		888	2,860	2,917
Change, MSEK		-16		-152	-57	-373
Change, %		-1.8%		-14.6%	-2.0%	-11.3%
Whereof:
Volume & price, %		-3.3%		-8.6%	1.8%	-9.8%
Exchange rate, %		0.4%		-6.0%	-4.4%	-1.5%
Acquisition & divestment, %		1.1%			0.7%
REVENUE		Q3		Jan-Sep
	2021		2020	2021	2020
Revenue, MSEK		902		916	2,699	2,807
Change, MSEK		-13		-169	-108	-637
Change, %		-1.4%		-15.5%	-3.8%	-18.5%
Whereof:
Volume & price, %		-4.7%		-9.2%	-0.7%	-16.8%
Exchange rate, %		0.0%		-6.3%	-4.5%	-1.7%
Acquisition & divestment, %		3.3%			1.4%
EBITA		Q3		Jan-Sep
	2021		2020	2021	2020
EBITA, MSEK		119		67	339	233
Change, MSEK		52		-85	106	-241
Change, %		76.8%		-55.8%	45.6%	-50.9%
Whereof:
Volume & price, %		63.0%		-57.1%	42.2%	-51.3%
Exchange rate, %		6.4%		1.3%	-0.4%	0.5%
Acquisition & divestment, %		7.5%			3.8%
Share of order intake		Share of revenue

43%			39%
57%	61%
Equipment		Service		Equipment		Service

FINANCIAL POSITION

As of September 30, 2021, net debt totalled MSEK 453 (680 as of December 31, 2020).

The equity ratio was 65.1% (62.8 as of December 31, 2020) and the leverage (net debt/EBITDA) was 0.82 (1.50 as of December 31, 2020).

EMPLOYEES

As of September 30, 2021, there were 2,052 (2,087) FTEs in the Group.

SIGNIFICANT EVENTS DURING THE REPORTING PERIOD JANUARY-SEPTEMBER 2021

Next step in the New Heights Programme

In October 2020, Alimak Group launched the New Heights programme, consisting of three steps 1. Establish the base, 2. Secure margin improvements and 3. Profitable growth. The first step of the programme is completed, and the Group has now entered the second step; Securing margin improvements.

As of January 1, 2021 a new organisation and subsequent reporting structure came into effect with four, customer centric divisions: BMU, Construction, Industrial, and Wind. As a consequence of this the reporting segments are changed compared to the Annual report 2020. A detailed description of the New Heights programme and the new organisation is found in the Annual Report 2020. The reorganisation in combination with restructuring will result in targeted annual savings of around MSEK 60, with full effect as of H2 2021.

Management changes

On February 9, 2021, Alimak Group appointed Thomas Hendel as CFO, effective as of May 17, 2021.Thomas Hendel joins Alimak Group from the role as Deputy Chief Financial Officer of Saab Group, a position he has held since 2016. He has 30 years of experience from different financial and general management roles within Saab and ABB, including as Interim Chief Financial Officer at Saab between May and September 2020.

On March 12, 2021, Alimak Group appointed Salomeh Tafazoli as EVP Industrial division, effective as of June 1, 2021. Salomeh Tafazoli was previously Vice President Sales and Marketing EMEA at Snap-on Equipment, an American based company listed on NYSE. She has extensive experience from the automotive industry, working with both products and services, and has previously held various strategic and commercial roles within Volvo Group and Car-O-Liner Group.

Updated financial targets

On June 17, 2021, The Board of Directors of Alimak Group decided to update the financial targets and dividend policy to reflect the value creation potential identified as part of the New Heights Programme launched in October 2020. In addition, the Group has decided on a new sustainability target.The updated mid- term financial targets and dividend policy are:

Revenue growth target: 5-7%

The Group's mid-term target is to have an average annual revenue growth of 5-7% (previous target: achieve

Alimak Group AB	5
Interim Report Q3 JANUARY-SEPTEMBER 2021

an average annual organic revenue growth of at least 6%).

EBITA-margin target: 14-16%

The Group's mid-term target is to reach an operating EBITA margin of 14-16% (previous target: achieve an operating EBITA margin of at least 15%).

Net Debt/EBITDA target: ~2.0x

The company will maintain an effective capital structure with a net debt of around 2.0x EBITDA over a cycle. The capital structure will be flexible and allow for strategic initiatives (unchanged).

Dividend policy: 40-60%

The Group has a target of paying a dividend of 40-60% of its net profit to its shareholders (previous target: The Company aims to pay its shareholders approximately 50% of its net profit for the applicable period in dividends).

Sustainability target:

Aim to reduce CO2-footprint with 30% cross our value chain by 2025.

Dividend for 2020

The Board of Directors proposed a dividend of SEK 2.00 (1.75) per share based on existing number of shares. In addition, the Board proposed an extra dividend of SEK

1.00. The proposed dividend was approved by the AGM and paid out in May.

FINANCIAL TARGETS AND POLICIES

Please refer to alimakgroup.com

Acquisition of Cento Engineering Group

Alimak Group entered an agreement on July 1, 2021, to acquire the shares of Cento Engineering Group, a UK BMU engineering and service provider with a large share of the service portfolio consisting of Manntech units. Cento Engineering Group's revenue in 2020 amounted to MGBP 5.1 (approximately MSEK 60) and the company will become a part of Alimak Group's BMU division. The

purchase price was not material relative to Alimak Group's market capitalisation.

Alimak Group's EVP for Division BMU Mark Casey leaves the company

On July 26, Mark Casey announced that has decided to leave his role as EVP of the BMU Division. Cameron Reid, BMU Manager Europe assumed the role of Interim EVP. The recruitment process to find a permanent EVP for BMU Division was initiated immediately.

Nomination Committee appointed

On September 28, the Nomination Committee for the 2022 AGM was appointed according to the instructions adopted in 2016 and comprises the following members:

• Johan Menckel, Investment AB Latour, Chair of the Nomination Committee
• Francisco de Juan, Alantra EQMC Asset Management
• Johan Ståhl, Lannebo Fonder
• Erik Malmberg, representing the shareholding of Peder Pråhl
• Johan Hjertonsson, Alimak Group's Chair of the Board

The Nomination Committee shall prepare proposals for the 2022 annual general meeting regarding the Chair of the annual general meeting, number of Directors of the Board, fees to be paid to each of the Directors of the Board, election of Directors of the Board and Chair of the Board, remuneration to the auditor and election of auditor and, if necessary, proposal for changes in the instruction for the Nomination Committee.

Shareholders who wish to present proposals to the Nomination Committee for the 2022 annual general meeting can submit them by post: Alimak Group AB, att: Nomination Committee, Blekholmstorget 30, SE-111 64 Stockholm, Sweden or via e-mail: [e-mail]