Lifco : Interim Report January – September 2020

22 October 2020

INTERIM REPORT JANUARY - SEPTEMBER 2020

Reporting period January - September

• Net sales declined -0.7 per cent to SEK 10,031 (10,104) million. Organically, net sales declined -7.1 per cent.
• EBITA* increased 2.6 per cent to SEK 1,920 (1,872) million.
• The EBITA margin* improved 0.6 percentage points to 19.1 (18.5) per cent.
• Profit before tax grew 6.7 per cent to SEK 1,545 (1,448) million.
• Net profit for the period grew 6.7 per cent to SEK 1,159 (1,086) million.
• Earnings per share increased 7.1 per cent till SEK 12.59 (11.76).
• Cash flow from operating activities increased 69.4 per cent to SEK 1,995 (1,178) million.
• Seven businesses were acquired during the period with total annual sales of about SEK 700 million.

Reporting period July - September

• Net sales increased 3.1 per cent to SEK 3,311 (3,211) million. Organically, net sales declined -0.4 per cent.
• The Dental business area was positively impacted by the continued recovery of the European dental markets which are returning to more normal levels. The Systems Solutions business area has as a whole been relatively unaffected by the pandemic. The market remains uncertain in the Demolition & Tools business area and was weaker than the previous year.
• EBITA* increased 17.3 per cent to SEK 699 (596) million.
• The EBITA margin* expanded 2.5 percentage points to 21.1 (18.6) per cent.
• Profit before tax grew 19.7 per cent to SEK 566 (473) million.
• Net profit for the period grew 19.7 per cent to SEK 425 (355) million.
• Cash flow from operating activities increased 11.2 per cent to SEK 736 (662) million.

Summary of financial performance

	NINE MONTHS	THIRD QUARTER	Rolling 12	FULL
							months	YEAR
SEK million	2020	2019	change	2020	2019	change		change	2019
Net sales	10,031	10,104	-0.7%	3,311	3,211	3.1%	13,772	-0.5%	13,845
EBITA*	1,920	1,872	2.6%	699	596	17.3%	2,571	1.9%	2,523
EBITA margin*	19.1%	18.5%	0.6	21.1%	18.6%	2.5	18.7%	0.5	18.2%
Profit before tax	1,545	1,448	6.7%	566	473	19.7%	2,093	4.9%	1,996
Net profit for the period	1,159	1,086	6.7%	425	355	19.7%	1,601	4.8%	1,528
Earnings per share	12.59	11.76	7.1%	4.61	3.86	19.4%	17.40	5.0%	16.57
Return on capital
employed	18.6%	20.9%	-2.3	18.6%	20.9%	-2.3	18.6%	-0.9	19.5%
Return on capital
employed excl. goodwill	125%	122%	3.0	125%	122%	3.0	125%	17.0	108%

*Before acquisition costs and non-recurring items.

Lifco AB (publ)

Verkmästaregatan 1, SE-745 85 Enköping

Org nr 556465-3185 www.lifco.se

COMMENTS FROM THE CEO

Even during the third quarter, the COVID-19 pandemic has continued to affect Lifco's subsidiaries in different ways. Net sales increased 3.1 per cent during the quarter to SEK 3,311 (3,211) million, driven by acquisitions. The Dental business area was positively impacted by the continued recovery of the European dental markets which are returning to more normal levels. The Systems Solutions business area has as a whole been relatively unaffected by the pandemic. Some operations in the Systems Solutions business area have benefited from the effects of the pandemic, while others have been impacted negatively. This has depended on where the companies operate in the value chain and in which segment their customers belong. The market remains uncertain in the Demolition & Tools business area and was weaker than the previous year, particularly for more capital-intensive products.

EBITA* increased 17.3 per cent to SEK 699 (596) million and the EBITA margin* improved 2.5 percentage points to 21.1 (18.6) per cent due to acquisitions as well as low sales and marketing activities during the quarter since many subsidiaries were unable to conduct normal sales and market activities as a result of the pandemic. Earnings per share increased 19.4 per cent till SEK 4.61 (3.86) in the third quarter and cash flow increased 11.2 per cent to SEK 736 (662) million due to improved earnings and lower inventories.

During the first nine months of the year, Lifco strengthened Dental with five acquisitions: two manufacturing companies in Denmark, one in Sweden, a leading distributor in Croatia and a company developing medical record systems in Germany. For Systems Solutions, two Italian companies were acquired: Cramaro Tarpaulin Systems, a niche manufacturer of tarpaulin systems for trucks and agricultural vehicles as well as Tastitalia, which manufactures customised touch panels, displays and keypads. The acquisitions jointly had a positive impact on Lifco's earnings and financial position during the quarter.

On 27 August, Lifco issued two unsecured bonds totalling SEK 1,200 million and therefore has bonds outstanding totalling SEK 2,200 million in the MTN programme with a loan framework of SEK 3,000 million. In addition to bonds outstanding, Lifco has standard short-term credit facilities. Lifco's financial position remains solid and interest-bearing net debt amounted to 1.3 times EBITDA* at 30 September 2020, which is well in line with our target of interest-bearing net debt of a maximum of three times EBITDA* and means that Lifco possesses the financial scope to make additional acquisitions.

Per Waldemarson

President and CEO

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GROUP PERFORMANCE IN JANUARY - SEPTEMBER

Net sales declined -0.7 per cent to SEK 10,031 (10,104) million, driven by the effects of the pandemic and a weaker market in the Demolition & Tools business area. Acquisitions contributed 7.4 per cent, organic growth was -7.1 per cent, while foreign exchange gains impacted sales by -1.0%. During the first nine months of the year, the German company Consys, the Italian company Cramaro Tarpaulin Systems, the Croatian company Dental Grupa, the Danish company Rönvig Dental Manufacturing, the Italian company Tastitalia, TrollDental's product portfolio and the Workplace Safety division of KiiltoClean A/S were consolidated.

EBITA* increased 2.6 per cent to SEK 1,920 (1,872) million and the EBITA margin* improved 0.6 percentage points to 19.1 (18.5) per cent due to acquisitions as well as unusually low sales and marketing activities as a result of the pandemic. Foreign exchange gains impacted EBITA* with -1.0%. During the period, 34 (34) per cent of EBITA* was generated in EUR, 29 (27) per cent in SEK, 14 (16) per cent in NOK, 8 (3) per cent in GBP, 6 (8) per cent in DKK, 3 (6) per cent in USD and 6 (6) per cent in other currencies.

Net financial items were SEK -44(-47) million.

Profit before tax grew 6.7 per cent to SEK 1,545 (1,448) million and net profit for the period increased 6.7 per cent to SEK 1,159 (1,086) million.

Average capital employed excluding goodwill declined by SEK 288 million during the period to SEK 2,057 million at 30 September 2020, compared with SEK 2,345 million at 31 December 2019. EBITA* relative to average capital employed excluding goodwill was at 108 per cent at year-end and increased to 125 per cent during the first nine months of the year.

The Group's net debt declined SEK 127 million from 31 December 2019 to SEK 5,425 million at 30 September 2020, of which liabilities related to put/call options and additional considerations for acquisitions amounted to SEK 1,018 (861) million. Interest-bearing net debt declined by SEK 178 million since year-end and amounted to SEK 3,862 (4,332) million at 30 September 2020.

On 27 August, Lifco issued two unsecured bonds totalling SEK 1,200 million and therefore has bonds outstanding of SEK 2,200 million in the MTN programme with a loan framework of SEK 3,000 million. In addition to bonds outstanding, Lifco has standard short-term credit facilities.

The net debt/equity ratio at 30 September 2020 was 0.6 (0.7) and net debt/EBITDA* was 1.9 (2.0) times. Interest-bearing net debt/EBITDA* was 1.3 (1.5) times. At period-end, 41 (38) per cent of the Group's interest-bearing liabilities were denominated in EUR.

Cash flow from operating activities increased 69.4 per cent during the period, to SEK 1,995 (1,178) million, mainly on the back of improved earnings and reduced working capital. Cash flow from investing activities was SEK -1,099(-1,555) million, which was mainly attributable to acquisitions.

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GROUP PERFORMANCE IN THE THIRD QUARTER

Sales increased 3.1 per cent to SEK 3,311 (3,211) million in the third quarter as the result of acquisitions. Acquisitions contributed 6.8 per cent, organic growth was -0.4 per cent, while foreign exchange gains had a negative impact of -3.3%.

EBITA* increased 17.3 per cent to SEK 699 (596) million and the EBITA margin* improved 2.5 percentage points to 21.1 (18.6) per cent due to acquisitions as well as unusually low sales and marketing activities as a result of the pandemic. Foreign exchange gains impacted EBITA* by -3.0%. During the third quarter, 35 (32) per cent of EBITA* was generated in EUR, 30 (26) per cent in SEK, 13

1. per cent in NOK, 9 (4) per cent in GBP, 4 (8) per cent in DKK, 4 (6) per cent in USD and 5 (9) per cent in other currencies.

Net financial items were SEK -16(-15) million.

Profit before tax grew by 19.7 per cent to SEK 566 (473) million. Net profit for the period grew 19.7 per cent to SEK 425 (355) million.

Average capital employed excluding goodwill declined by SEK 116 million to SEK 2,057 million at 30 September 2020, compared with SEK 2,173 million at 30 June 2020. EBITA* relative to average capital employed excluding goodwill increased from 114 per cent at 30 June 2020 to 125 per cent at 30 September 2020.

The Group's net debt increased during the quarter by SEK 150 million to SEK 5,425 million. At the Annual General Meeting on 24 June 2020, the dividend for the 2019 financial year was set at SEK

5.25 per share. The total dividend to shareholders for the 2019 financial year was SEK 476.9 million, and was paid on 1 July 2020. The dividend to shareholders for the 2018 financial year was paid during the second quarter of 2019.

Cash flow from operating activities increased 11.2 per cent during the third quarter to SEK 736 (662) million due to improved income and lower inventories. Cash flow from investing activities was SEK -228(-610) million, which was attributable to acquisitions and investments.

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