Lifco publ : Interim Report January - June 2020

      Reporting period January - June

· Net sales declined by 2.5 per cent to SEK 6,720 (6,893) million. Organically, net sales declined by 10.3 per cent.
· EBITA* decreased by 4.3 per cent to SEK 1,221 (1,276) million.
· The EBITA margin* declined by 0.3 percentage points to 18.2 (18.5) per cent.
· Profit before tax grew 0.4 per cent to SEK 979 (975) million.
· Net profit for the period grew by 0.4 per cent to SEK 734 (731) million.
· Earnings per share increased by 1.0 per cent to SEK 7.98 (7.90).
· Cash flow from operating activities increased by 144 per cent to SEK 1,259 (516) million.
· In April and May, the effects of the COVID-19 pandemic had a significant impact on demand and profitability for many of the Group's subsidiaries. In June, all European dental markets recovered, and an improvement was also noted in the European markets for the operations in Systems Solutions that were affected by the pandemic.
· Five businesses were acquired during the period with total annual sales of about SEK 555 million.
 

Reporting period April - June

· Net sales declined by 12.9 per cent to SEK 3,079 (3,536) million. Organically, net sales declined by 18.1 per cent.
· EBITA* decreased by 17.4 per cent to SEK 569 (689) million.
· The EBITA margin* declined by 1.0 percentage point to 18.5 (19.5) per cent.
· Profit before tax declined by 19.2 per cent to SEK 439 (543) million.
· Net profit for the period decreased by 18.8 per cent to SEK 329 (405) million.
· Cash flow from operating activities increased by 109 per cent to SEK 784 (375) million.

Summary of financial performance  

SIX SECOND Rolling FULL
MONTHS QUARTER 12 YEAR
months
SEK million 2020 2019 change 2020 2019 change change 2019
Net sales 6,720 6,893 -2.5% 3,079 3,536 -12.9% 13,672 -1.2% 13,845
EBITA* 1,221 1,276 -4.3% 569 689 -17.4% 2,468 -2.2% 2,523
EBITA 18.2% 18.5% -0.3 18.5% 19.5% -1.0 18.1% -0.1 18.2%
margin*
Profit 979 975 0.4% 439 543 -19.2% 2,000 0.2% 1,996
before tax
Net profit 734 731 0.4% 329 405 -18.8% 1,531 0.2% 1,528
for the
period
Earnings 7.98 7.90 1.0% 3.56 4.39 -18.9% 16.65 0.5% 16.57
per share
Return on     21.5% -3.5       21.5% -3.5 18.0% -1.5 19.5%
capital 18.0% 18.0%
employed
Return on 114% 136% -22 114% 136% -22 114% 6 108%
capital
employed
excl.
goodwill

*Before
acquisition
costs and
non
-recurring
items.

COMMENTS FROM THE CEO

In April and May, the effects of the COVID-19 pandemic had a significant impact on demand and profitability for many of the Group's subsidiaries. Lifco's more than 160 subsidiaries operate in a large number of industries that have been affected by the outbreak of the pandemic to varying degrees. The impact has been particularly significant in the Dental business area and several of the operations in Systems Solutions, where the companies do not have any order backlog, but where deliveries normally take place in connection with orders being made. However, many companies in Systems Solutions have been relatively unaffected by the pandemic. In June, all European dental markets recovered, and an improvement was also noted in the European markets for the operations in Systems Solutions that were affected by the pandemic. The Demolition & Tools business area experienced a decline in demand resulting from a generally more uncertain and weakened market as well as particularly high uncertainty in the second quarter as a result of the pandemic.

As Lifco stated in the interim report for the first quarter on 24 April, the pandemic impacted financial earnings for the second quarter significantly. During the second quarter, sales decreased by 12.9 per cent to SEK 3,079 (3,536) million and EBITA* fell by 17.4 per cent to SEK 569 (689) million. The EBITA margin* declined by 1.0 percentage point to 18.5 (19.5) per cent. Earnings per share declined by 18.9 per cent during the second quarter to SEK 3.56 (4.39). Cash flow increased by 109 per cent for the second quarter to SEK 784 (375) million as a result of a decrease in working capital.

During the first half of the year, Lifco strengthened Dental with four acquisitions: two manufacturing companies in Denmark, one in Sweden and a leading distributor in Croatia. The Italian company, Cramaro Tarpaulin Systems, a niche manufacturer of tarpaulin systems for trucks and agricultural vehicles, was acquired in Systems Solutions. The acquisitions jointly had a positive impact on Lifco's earnings and financial position during the quarter.

On 25 March 2020, Lifco decided that, given the then current market conditions in light of the pandemic, to refinance two unsecured bonds through bridge financing with Skandinaviska Enskilda Banken AB (publ). The bonds totalled SEK 1,750 million and fell due on 3 April 2020. In addition to this bridge financing, Lifco has bonds outstanding of SEK 1,000 million and standard short-term credit facilities. Lifco's financial position remains solid and interest-bearing net debt amounted to 1.4 times EBITDA* at 30 June 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

GROUP PERFORMANCE IN JANUARY - JUNE

Net sales declined 2.5 per cent to SEK 6,720 (6,893) million, driven by the effects of the COVID-19 pandemic and a weaker market in the Demolition & Tools business area. Organic growth was -10.3 per cent, acquisitions contributed 7.7 per cent while foreign exchange gains had a positive impact of 0.1 per cent. During the first half of the year, the Danish companies Rönvig Dental Manufacturing A/S and the Workplace Safety division of KiiltoClean A/S, TrollDentals product portfolio as well as the majority of the Croatian company Dental Grupa and the Italian Cramaro Tarpaulin Systems were acquired.

EBITA* declined 4.3 per cent to SEK 1,221 (1,276) million and the EBITA margin* fell by 0.3 of a percentage point to 18.2 (18.5) per cent as a result of lower volumes. Foreign exchange gains impacted EBITA* with -0.1%. During the period, 34 (35) per cent of EBITA* was generated in EUR, 29 (27) per cent in SEK and 14 (16) per cent in NOK, 8 (8) per cent in DKK, 7 (3) per cent in GBP, 3 (6) per cent in USD and 5 (5) per cent in other currencies.

Net financial items were SEK -28 (-32) million.

Profit before tax grew by 0.4 per cent to SEK 979 (975) million and net profit for the period increased by 0.4 per cent to SEK 734 (731) million. Non-recurring items amounted to SEK 0 (56) million for the six-month period.

Average capital employed excluding goodwill declined by SEK 172 million during the period to SEK 2,173 million at 30 June 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 114 per cent during the first half of the year.

The Group's net debt declined by SEK 277 million from 31 December 2019 to SEK 5,275 million at 30 June 2020, of which liabilities related to put/call options and additional considerations for acquisitions amounted to SEK 908 (698) million. Interest-bearing net debt declined by SEK 225 million since year-end and amounted to SEK 3,815 (4,312) million at 30 June 2020.

On 25 March 2020, Lifco announced that, given the then current market conditions in light of the pandemic, the company had chosen to refinance two unsecured bonds through bridge financing with Skandinaviska Enskilda Banken AB (publ). The bonds totalled SEK 1,750 million and fell due on 3 April 2020.

The net debt/equity ratio at 30 June 2020 was 0.7 (0.8) and net debt/EBITDA* was 1.9 (2.0) times. Interest-bearing net debt/EBITDA* was 1.4 (1.6) times. At period-end, 41 (33) per cent of the Group's interest-bearing liabilities were denominated in EUR.

Cash flow from operating activities increased by 144 per cent to SEK 1,259 (516) million for the first half of the year, primarily as a result of increased current operating liabilities. Cash flow from investing activities was SEK -871 (-945) million, which was mainly attributable to acquisitions.

GROUP PERFORMANCE IN THE SECOND QUARTER

Net sales declined in the second quarter by 12.9 per cent to SEK 3,079 (3,536) million, driven by the effects of the COVID-19 pandemic and a weaker market in the Demolition & Tools business area. Organic growth was -18.1 per cent, acquisitions contributed 6.2 per cent while foreign exchange gains had a negative impact of 1.0 per cent.

Due to dividends to minorities in the second quarter, Other income and expenses was impacted by SEK -24 (-46) million for revaluations of put options issued in connection with acquisitions.

EBITA* declined 17.4 per cent to SEK 569 (689) million and the EBITA margin* fell by 1.0 percentage point to 18.5 (19.5) per cent as a result of lower volumes. Foreign exchange gains impacted EBITA* with -1.0%. During the second quarter, 32 (35) per cent of EBITA* was generated in EUR, 30 (28) per cent in SEK and 16 (16) per cent in NOK, 7 (8) per cent in DKK, 8 (4) per cent in GBP, 1 (6) per cent in USD and 6 (3) per cent in other currencies.

Net financial items were SEK -22 (-19) million.

Profit before tax declined by 19.2 per cent to SEK 439 (543) million. Net profit for the period decreased by 18.8 per cent to SEK 329 (405) million.

Average capital employed excluding goodwill declined by SEK 215 million to SEK 2,173 million at 30 June 2020, compared with SEK 2,388 million at 31 March 2020. EBITA* relative to average capital employed excluding goodwill increased from 108 per cent at 31 March 2020 to 114 per cent at 30 June 2020.

The Group's net debt fell during the quarter by SEK 854 million to SEK 5,275 million. Dividends amounted to SEK 33 (418) million for the quarter. 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 by 109 per cent to SEK 784 (375) million during the second quarter as a result of lower accounts receivable and inventory. Cash flow from investing activities was SEK -44 (-365) million, which was attributable to acquisitions and investments.

FINANCIAL PERFORMANCE - BUSINESS AREAS

Dental

SIX SECOND Rolling FULL
MONTHS QUARTER 12 YEAR
months
SEK 2020 2019 change 2020 2019 change change 2019
million
Net 2,012 2,252 -10.7% 841 1,125 -25.2% 4,153 -5.5% 4,393
sales
EBITA* 385 465 -17.2% 144 233 -38.2% 794 -9.2% 874
EBITA 19.1% 20.6% -1.5 17.1% 20.7% -3.6 19.1% -0.8 19.9%
margin*

The companies in Lifco's Dental business area are leading suppliers of consumables, equipment and technical service to dentists across Europe, and the business area also has operations in the US. Lifco sells dental technology to dentists in the Nordic countries and Germany, and develops and sells medical record systems in Denmark, Sweden and Germany. The business area also includes a number of manufacturers which produce fitting products for dentures, disinfectants, saliva ejectors, bite registration and dental impression materials, bonding agents and other consumables that are sold to dentists through distributors around the world. In recent years, Dental has through acquisitions and organic growth increased its earnings in manufacturing, dental technology and software faster than in distribution, which has had a positive impact on margin growth in the business area.

Net sales in Dental declined by 10.7 per cent to SEK 2,012 (2,252) million in the first half of the year as a result of the impact of the COVID-19 pandemic in April and May. EBITA* declined by 17.2 per cent to SEK 385 (465) million for the six-month period and the EBITA margin was 19.1 (20.6) per cent as a consequence of lower volumes during April and May. All European dental markets recovered in June, contributing to improved sales and profit at the end of the second quarter.

The dental market remains generally stable. The results of individual companies in Lifco's Dental business may in any individual quarter be influenced by significant fluctuations in exchange rates, calendar effects such as Easter, gained or lost contracts in procurements of consumables by public-sector or major private-sector customers and fluctuations in the delivery of equipment. The pandemic had a significant negative impact on the dental market during the second quarter of 2020. The effects were different in different markets, but demand in all countries decreased significantly. In June, all European dental markets recovered.

As of January 2020, Lifco consolidated Rönvig Dental Manufacturing A/S of Denmark. The company is a niche manufacturer of dental products. Rönvig had a turnover of around DKK 30 million in 2018 and has 17 employees. As of February 2020, Lifco also consolidated the Workplace Safety division of KiiltoClean A/S. The business is a leading niche manufacturer of eyewashes, plasters and first aid stations. The products are sold under the Plum brand and generated net sales of around DKK 79 million in 2019. The business has ten employees. As of February 2020, Lifco consolidated the majority of the Croatian company Dental Grupa, a leading distributor of equipment and consumables for dentists in Croatia. Dental Grupa had net sales of around HRK 66 million in 2019 and has around 40 employees. As of June 2020, TrollDentals product portfolio was consolidated, which had net sales of about SEK 25 million in 2019. 

Demolition & Tools

SIX SECOND Rolling FULL
MONTHS QUARTER 12 YEAR
months
SEK 2020 2019 change 2020 2019 change change 2019
million
Net 1,637 1,823 -10.2% 775 991 -21.8% 3,424 -5.2% 3,610
sales
EBITA* 355 415 -14.5% 176 243 -27.6% 774 -7.2% 834
EBITA 21.7% 22.8% -1.1 22.7% 24.5% -1.8 22.6% -0.5 23.1%
margin*

Demolition & Tools develops, manufactures and sells equipment for the construction and demolition industries. The Group is the world's leading supplier of demolition robots and crane attachments. The Group is also one of the leading global suppliers of excavator attachments. The business area's EBITA margin might fluctuate between quarters due to single, major special orders and changes to the product mix.

During the first half of the year, sales decreased by 10.2 per cent to SEK 1,637 (1,823) million and EBITA* decreased by 14.5 per cent to SEK 355 (415) million with an EBITA margin of 21.7 per cent (22.8). The decline in demand and profitability was a result of a more uncertain and weakened market in general as well as particularly high uncertainty in the second quarter following the COVID-19 pandemic.

Systems Solutions

SIX SECOND Rolling FULL
MONTHS QUARTER 12 YEAR
months
SEK 2020 2019 change 2020 2019 change change 2019
million
Net 3,071 2,818 9.0% 1,463 1,420 3.0% 6,095 4.3% 5,842
sales
EBITA* 536 445 20.4% 274 236 16.1% 1,000 10.0% 909
EBITA 17.5% 15.8% 1.7 18.7% 16.6% 2.1 16.4% 0.8 15.6%
margin*

Through its operating units, Systems Solutions operates in industries offering systems solutions. Systems Solutions is divided into five divisions: Construction Materials, Contract Manufacturing, Environmental Technology, Service and Distribution (previously Interiors for Service Vehicles) and Forest.

Net sales in Systems Solutions increased by 9.0 per cent to SEK 3,071 (2,818) million for the first half of the year on the back of acquisitions. Several of the operations in Systems Solutions have been negatively impacted by the COVID-19 pandemic during the second quarter, particularly those who do not have any order backlog, but where deliveries normally take place in connection with orders being made. In June, an improvement was noted in the European markets for operations in Systems Solutions that were affected by the pandemic.

During the first quarter, EBITA* increased by 20.4 per cent to SEK 536 (445) million and the EBITA margin* improved by 1.7 percentage points to 17.5 (15.8) per cent.

The Construction Materials division has reported a stable performance for the first half of the year. The division was relatively unaffected by the pandemic given that deliveries of input materials to the construction industry continued during the pandemic.

The Contract Manufacturing division is directed at industries that have not been particularly affected by the pandemic and have reported strong sales growth in both the first half of the year and the second quarter with improved result.

Growth in the Environmental Technology division is primarily the result of acquisitions. In the first half of the year, the results improved while the second quarter was weak as the result of a relatively large impact due to the pandemic.

Growth in the Service and Distribution division is primarily the result of acquisitions. The division improved its results both in the first half of the year and in the second quarter.

The Forest division reported a weak first half of the year and second quarter with decreased sales and weaker result following lower volumes.

The majority of Italian company Cramaro Tarpaulin Systems was consolidated in the Service and Distribution division as of February 2020. The company is a niche manufacturer of tarpaulin systems for trucks and agricultural vehicles. The company had net sales of around EUR 27 million in 2019 and has 90 employees.

ACQUISITIONS

Lifco made the following acquisitions in the period:

Consolidated Acquisitions Business area Net sales Employees
from month
January Rönvig Dental Dental DKK 30m 17
Manufacturing
February Workplace Dental DKK 79m 10
Safety
February Dental Grupa Dental HRK 66m 40
February Cramaro Systems Solutions EUR 27m 90
Tarpaulin
Systems
June TrollDental's Dental SEK 25m -
product
portfolio

Further information on the acquisitions is provided on page 16. The figures for net sales and number of employees refer to estimated annual net sales and the number of employees at the acquisition date.

Taken together, the acquisitions will have a positive impact on Lifco's results and financial position in the current year.

OTHER FINANCIAL INFORMATION

Employees

The average number of employees was 5,446 (5,236) in the first half of the year. At the end of the period, the number of employees was 5,382 (5,328). Acquisitions added around 160 employees.

Events after the end of the reporting period

Lifco continues to monitor the effects of the COVID-19 pandemic. No significant events for the Group occurred after the end of the reporting period

Related party transactions

No significant transactions with related parties took place during the period.

Annual General Meeting 2020

The 2020 Annual General Meeting was held on 24 June in Stockholm. The main resolutions of the Meeting were as follows: · The dividend for the 2019 financial year was set at SEK 5.25 per share. The record date for the rights to dividends was set at 26 June 2020, with a payment date of 1 July 2020. · Carl Bennet, Ulrika Dellby, Erik Gabrielson, Ulf Grunander, Annika Espander Jansson, Johan Stern Axel Wachtmeister and Per Waldemarson were re-elected members of the Board and Dan Frohm and Caroline af Ugglas were elected new members of the Board. Carl Bennet was re-elected Chairman of the Board. · The audit firm PricewaterhouseCoopers AB was re-appointed as the company's auditors for a one-year term of office. · Fees for the Board and auditors were adopted, as were principles for the work of the Nomination Committee and guidelines on remuneration of senior executives. · The Articles of Association were changed in accordance with the Board's proposals.

Risks and uncertainties

The risk factors which have the biggest impact for Lifco are global macroeconomic factors, the competitive situation, structural changes in the market and general level of economic activity. Lifco is also exposed to financial risks, including currency risks, interest rate risks, credit and counterparty risks.

Lifco operates in a large number of industries that have been affected by the outbreak of COVID-19 during April and May of 2020 to varying degrees. In June, all European dental markets recovered, and an improvement was also noted in the European markets for the operations in Systems Solutions that were affected by the pandemic. Lifco continues to monitor the effects of the COVID-19 pandemic.

The Parent Company is affected by the above risks and uncertainties in its capacity as owner of the subsidiary companies. For further information on Lifco's risks and risk management, see the 2019 Annual Report.

Accounting policies

The Group's interim report has been prepared in accordance with IAS 34 Interim Financial Reporting and the Swedish Annual Accounts Act. In respect of the Parent Company, the report has been prepared in accordance with the Annual Accounts Act and Recommendation RFR 2 Financial Reporting for Legal Entities of the Swedish Financial Reporting Board. The accounting policies have been applied in accordance with those which are presented in the 2019 Annual Report and should be read in conjunction with these. In many countries, Lifco's companies have received state aid from short-time work schemes and other aid which has reduced personnel costs for the second quarter.

This report has not been examined by the Company's auditors.

DECLARATION OF THE BOARD OF DIRECTORS

The Board of Directors and Chief Executive Officer warrant and declare that this six-month report gives a true and fair view of the Parent Company's and Group's operations, financial positions and results, and that it describes significant risks and uncertainties faced by the Parent Company and the companies included in the Group.

Enköping, 17 July 2020

 
Carl BennetChairman of Ulrika DellbyDirector Dan FrohmDirector
the Board
Erik Gabrielson Ulf GrunanderDirector Annika Espander Jansson
Director Director
Anders Johan SternVice Caroline af
LorentzsonDirector, Chairman UgglasDirector
employee representative
Axel WachtmeisterDirector Per Peter
WaldemarsonPresident WibergDirector,employee
and CEO, Director representative

FINANCIAL CALENDAR

The report for the third quarter will be published on 22 October.

The 2020 year-end report will be published on 1 February 2021.

FURTHER INFORMATION

Media and investor relations: Åse Lindskog, [e-mail], telephone: [phone].

TELECONFERENCE

Media and analysts are welcome to call in to a teleconference, where CEO Per Waldemarson and CFO Therése Hoffman will present the interim report. After the presentation, there will be an opportunity to ask questions.

Time: Friday, 17 July at 1:00 p.m. CEST

Link to the presentation: https://tv.streamfabriken.com/lifco-q2-2020

Telephone numbers:

Sweden [phone]
UK [phone]
US [phone]

ABOUT LIFCO

Lifco offers a safe haven for small and medium-sized businesses. Lifco's business concept is to acquire and develop market-leading niche businesses with the potential to deliver sustainable earnings growth and robust cash flows. Lifco is guided by a clear philosophy centred on long-term growth, a focus on profitability and a strongly decentralised organisation. The Group has three business areas: Dental, Demolition & Tools and Systems Solutions. At year-end, the Lifco Group consisted of 164 operating companies in 30 countries. In 2019, Lifco reported EBITA of SEK 2,523 million on net sales of SEK 13.9 billion. The EBITA margin was 18.2 per cent. Read more at www.lifco.se.

This information constitutes information that Lifco AB is required to publish
under the EU's Market Abuse Regulation and the Swedish Securities Market
Act. The information was submitted for publication through the aforementioned
contact person on 17 July 2020, at 7.30 a.m. CEST.

CONDENSED CONSOLIDATED INCOME STATEMENT

SIX MONTHS SECOND QUARTER FULL YEAR
SEK million 2020 2019 change 2020 2019 change 2019
Net sales 6,720 6,893 -2.5% 3,079 3,536 -12.9% 13,845
Cost of goods sold -3,940 -3,999 -1.5% -1,823 -2,018 -9.7% -8,033
Gross profit 2,780 2,894 -3.9% 1,256 1,518 -17.3% 5,812
Selling expenses -775 -784 -1.1% -345 -407 -15.2% -1,600
Administrative -953 -968 -1.5% -424 -462 -8.2% -1,928
expenses
Development costs -55 -85 -35.3% -28 -45 -37.8% -171
Other income and 10 -50 -120% 2 -42 -104.8% -54
expenses
Operating profit 1,007 1,007 0.0% 461 562 -18.0% 2,059
Net financial -28 -32 -12.5% -22 -19 -15.8% -63
items
Profit before tax 979 975 0.4% 439 543 -19.2% 1,996
Tax -245 -244 0.4% -110 -138 -20.3% -468
Net profit/loss 734 731 0.4% 329 405 -18.8% 1,528
for the period
Profit
attributable to:
Parent Company 725 718 1.0% 323 399 -19.0% 1,505
shareholders
Non-controlling 9 13 -30.8% 6 6 - 23
interests
Earnings per share 7.98 7.90 1.0% 3.56 4.39 -18.9% 16.57
before and after
dilution for the
period,
attributable to
Parent Company
shareholders
EBITA* 1,221 1,276 -4.3% 569 689 -17.4% 2,523
Depreciation of 178 152 17.1% 89 79 12.7% 311
tangible assets
Amortisation of 5 7 -28.6% 2 4 -50.0% 15
intangible assets
Amortisation of 204 154 32.5% 102 80 27.5% 329
intangible assets
arising from
acquisitions

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

SIX SECOND FULL
MONTHS QUARTER YEAR2019
SEK million 2020 2019 change 2020 2019 change
Net profit for the period 734 731 0.4% 329 405 -18.8% 1,528
Other comprehensive income
Items which can later be
reclassified to profit or
loss:
Hedge of net investment 82 11 646% -28 18 -256% 6
Translation differences -222 218 -202% -353 59 -698% 140
Tax related to other -18 -2 800% 6 -4 -250% -1
comprehensive income
Total comprehensive income 576 958 -39.9% -46 478 -110% 1,673
for the period

Comprehensive income
attributable to:
Parent Company shareholders 569 942 -39.6% -50 471 -111% 1,648
Non-controlling interests 7 16 -56.3% 4 7 -42.9% 25
576 958 -39.9% -46 478 -110% 1,673

SEGMENT OVERVIEW

Lifco's operations are monitored and evaluated by the CEO and resources are allocated based on information from the three operating segments Dental, Demolition & Tools and Systems Solutions. The defined quantitative limits have been exceeded only by Dental and Demolition & Tools. One further operating segment, Systems Solutions, is presented. This operating segment consists of a merger of those divisions which have similar economic characteristics and which do not individually meet the defined quantitative limits. These divisions are Construction Materials, Contract Manufacturing, Environmental Technology, Service and Distribution and Forest.

NET SALES TO EXTERNAL CUSTOMERS

No sales are made between the segments.

SIX SECOND Rolling FULL
MONTHS QUARTER 12 YEAR
months
SEK 2020 2019 change 2020 2019 change change 2019
million
Dental 2,012 2,252 -10.7% 841 1,125 -25.2% 4,153 -5.5% 4,393
Demolition 1,637 1,823 -10.2% 775 991 -21.8% 3,424 -5.2% 3,610
& Tools
Systems 3,071 2,818 9.0% 1,463 1,420 3.0% 6,095 4.3% 5,842
Solutions
Group 6,720 6,893 -2.5% 3,079 3,536 -12.9% 13,672 -1.2% 13,845

Net sales by type of income:

SIX SECOND Rolling FULL
MONTHS QUARTER 12 YEAR
months
SEK million 2020 2019 change 2020 2019 change change 2019
Dental 2,012 2,252 -10.7%  841 1,125 -25.2% 4,153 -5.5% 4,393
products
Machinery and 1,637 1,823 -10.2% 775 991 -21.8% 3,424 5.2% 3,610
tools
Construction 591 601 -1.7% 302 304 -0.7% 1,182 -0.8% 1,192
Materials
Contract 590 500 18.0% 321 262 22.5% 1,145 8.5% 1,055
Manufacturing
Environmental 876 798 9.8% 372 411 -9.5% 1,933 4.2% 1,855
Technology
Service and 651 437 49.0% 321 234 37.2% 1,096 24.3% 882
Distribution
Forest 363 482 -24.7% 147 209 -29.7% 739 -13.9% 858
Group 6,720 6,893 -2.5% 3,079 3,536 -12.9% 13,672 -1.2% 13,845

EBITA

A breakdown of results by segment is made up to and including EBITA. EBITA is reconciled to profit before tax in accordance with the following table:

[][]
SIX SECOND Rolling FULL
MONTHS QUARTER 12 YEAR
months
SEK million 2020 2019 change 2020 2019 change change 2019
Dental 385 465 -17.2% 144 233 -38.2% 794 -9.2% 874
Demolition & 355 415 -14.5% 176 243 -27.6% 774 -7.2% 834
Tools
Systems 536 445 20.4% 274 236 16.1% 1,000 10.0% 909
Solutions
Central Group -55 -49 12.2% -25 -23 8.7% -100 6.4% -94
functions
EBITA before 1,221 1,276 -4.3% 569 689 -17.4% 2,468 -2.2% 2,523
acquisition
costs
Acquisition -10 -59 -83.1% -6 -47 -87.2% -30 -62.0% -79
costs[1]
Non-recurring - -56 -100% - - - - -100% -56
items[2]
EBITA 1,211 1,161 4.3% 563 642 -12.3% 2,438 2.1% 2,388
Amortisation of -204 -154 32.5% -102 -80 27.5% -379 15.2% -329
intangibleassets
arising from
acquisitions
Net financial -28 -32 -12.5% -22 -19 15.8% -59 -6.3% -63
items
Profit before 979 975 0.4% 439 543 -19.2% 2,000 0.2% 1,996
tax

[1] Of which, change in put/call options and additional considerations for the current year, SEK 2 (-48) million.

[2] Pertaining to costs in connection with management change.

CONDENSED CONSOLIDATED BALANCE SHEET

SEK million 30 JUN 2020 30 JUN 2019 31 DEC 2019
ASSETS 11,701
Intangible assets 10,257 11,209
Tangible assets 1,491 1,312 1,503
Financial assets 182 179 182
Inventories 2,014 2,127 1,997
Accounts receivable 1,645 1,751 1,584
Current receivables 477 486 374
Cash and cash equivalents 781 340 729
TOTAL ASSETS 18,291 16,452 17,578

EQUITY AND LIABILITIES
Equity 8,061 7,261 7,972
Non-current interest-bearing 1,459 578 1,674
liabilities incl. pension
provisions
Other non-current liabilities 2,017 1,658 1,986
and provisions
Current interest-bearing 3,689 4,551 3,691
liabilities
Accounts payable 805 815 680
Other current liabilities 2,260 1,589 1,575
TOTAL EQUITY AND LIABILITIES 18,291 16,452 17,578

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

Attributable to Parent Company shareholders

SEK million 30 JUN 2020 30 JUN 2019 31 DEC 2019
Opening equity 7,915 6,685 6,685
Comprehensive income for the period 569 942 1,648
Dividend -477 -418 -418
Closing equity 8,007 7,209 7,915

Equity attributable to:
Parent Company shareholders 8,007 7,209 7,915
Non-controlling interests 54 52 57
8,061 7,261 7,972

CONDENSED CONSOLIDATED CASH FLOW STATEMENT

SIX MONTHS SECOND QUARTER FULL YEAR
SEK million 2020 2019 2020 2019 2019
Operating activities
Operating profit 1,007 1,007 461 562 2,059
Non-cash items 385 361 196 203 705
Interest and financial -28 -32 -22 -19 -63
items, net
Tax paid -337 -293 -169 -134 -571
Cash flow before changes 1,027 1,043 466 612 2,130
in working capital
Changes in working
capital
Inventories 37 -313 159 -130 -94
Current receivables 12 -179 205 -41 137
Current liabilities 183 -35 -46 -66 -183
Cash flow from operating 1,259 516 784 375 1,990
activities
Business acquisitions -778 -815 -21 -300 -1,781
and sales, net
Net investment in -81 -122 -13 -59 -243
tangible assets
Net investment in -12 -8 -10 -6 -32
intangible assets
Cash flow from investing -871 -945 -44 -365 -2,056
activities
Borrowings/repayment of -263 818 -608 458 863
borrowings, net
Dividends paid -38 -487 -34 -478 -490
Cash flow from financing -301 331 -642 -20 373
activities

Cash flow for the period 87 -98 98 -10 307
Cash and cash 729 405 714 348 405
equivalents at beginning
of period
Translation differences -35 33 -31 2 17
Cash and cash 781 340 781 340 729
equivalents at end of
period

ACQUISITIONS IN 2020

Five new businesses were consolidated in the first half of the year. The acquisitions refer to TrollDental's product portfolio, all shares in the Danish companies Rönvig Dental Manufacturing A/S and the Workplace Safety division of KiiltoClean A/S as well as the majority of the Croatian company Dental Grupa and the Italian Cramaro Tarpaulin Systems.

The purchase price allocation includes all acquisitions made during the first half of the year.

Acquisition-related expenses of SEK 12 million are included in administrative expenses in the consolidated income statement for the first half of the year. If consolidation had taken place on 1 January 2020, the Group's net sales would have been positively impacted by about SEK 33 million and earnings by about SEK 9 million.

Acquired net assets

Net assets, SEK million Carrying Value Fair
amount adjustment value
Trademarks, customer relationships, licences 5 499 504
Tangible assets 46 - 46
Inventories, accounts receivable and other receivables 175 -2 173
Accounts payable and other liabilities -175 -98 -273
Cash and cash equivalents 85 - 85
Net assets 136 399 535
Goodwill 364 364
Total net assets 136 763 899

Effect on cash flow, SEK million
Consideration 899
Consideration not paid -78
Cash and cash equivalents in acquired -85
companies                                      
Consideration paid relating to acquisitions from 42
previous years
Total cash flow 778
effect                                                 

FINANCIAL INSTRUMENTS

[]
SEK million 30 JUN 2020 30 JUN 2019 31 DEC 2019
Financial assets at
amortised cost
Accounts receivable 1,645 1,751 1,584
Other non-current 11 18 9
financial receivables
Cash and cash 781 340 729
equivalents
Total 2,437 2,109 2,322
Liabilities at fair
value through profit or
loss
Other liabilities[1] 908 698 916
Financial liabilities at
amortised cost
Interest-bearing 5,107 5,092 5,325
borrowings
Accounts payable 805 815 680
Total 6,820 6,605 6,921

[1] Other liabilities classified as financial instruments refer to mandatory put/call options related to non-controlling interests and additional considerations.

The carrying amount is the same as the fair value. Financial instruments at fair value are classified into different levels depending on how fair value is determined. All financial instruments at fair value in the Lifco Group have been classified as level 3, i.e. non-observable inputs. The fair value of short-term borrowings is equal to the carrying amount, as the discount effect is insignificant.

KEY PERFORMANCE INDICATORS

ROLLING TWELVE MONTHS TO 202030 JUN 201931 DEC 201930 JUN
Net sales, SEK million 13,672 13,845 13,134
Change in net sales, % -1.2 15.8 9.9
EBITA*, SEK million 2,468 2,523 2,466
EBITA margin*, % 18.1 18.2 18.8
EBITDA*, SEK million 2,818 2,849 2,699
EBITDA margin*, % 20.6 20.6 20.5
Capital employed, SEK million 13,706 12,925 11,456
Capital employed excl. goodwill and 2,173 2,345 1,807
other intangible assets, SEK million
Return on capital employed, % 18.0 19.5 21.5
Return on capital employed excl. 114 108 136
goodwill, %
Return on equity, % 18.9 20.3 21.9
Net debt, SEK million 5,275 5,552 5,487
Net debt/equity ratio, times 0.7 0.7 0.8
Net debt/EBITDA* 1.9 1.9 2.0
Interest-bearing net debt, SEK 3,815 4,040 4,312
million
Interest-bearing net debt/EBITDA*, 1.4 1.4 1.6
times
Equity/assets ratio, % 44.1 45.4 44.1
Number of shares, thousand 90,843 90,843 90,843
Average number of employees 5,446 5,255 5,236

CONDENSED PARENT COMPANY INCOME STATEMENT

[][]
SIX MONTHS SECOND QUARTER FULL YEAR
SEK million 2020 2019 2020 2019 2019
Administrative expenses -51 -112 -18 -26 -162
Other operating income[1] - - - - 139
Operating profit -51 -112 -18 -26 -23
Net financial items[2] 887 765 788 730 837
Profit after financial items 836 653 770 704 814
Appropriations 6 - 6 - -30
Tax -9 18 5 2 -6
Net profit for the period 833 671 781 706 778

[1] Invoicing of Group-wide services.

[2] Net financial items include SEK 771 (738) million in dividends received during the six-month period.

CONDENSED PARENT COMPANY BALANCE SHEET

SEK million 30 JUN 2020 30 JUN 2019 31 DEC 2019
ASSETS
Tangible assets - 0 0
Financial assets 4,989 4,468 4,872
Current receivables 6,039 4,828 5,226
Cash and cash equivalents 328 45 379
TOTAL ASSETS 11,356 9,341 10,477

EQUITY AND LIABILITIES
Equity 3,628 3,164 3,271
Untaxed reserves 65 70 72
Provisions 11 -
Non-current interest-bearing liabilities 946 - 1,004
Current interest-bearing liabilities 3,511 4,499 3,670
Current non-interest-bearing liabilities 3,195 1,608 2,460
TOTAL EQUITY AND LIABILITIES 11,356 9,341 10,477
Pledged assets - - -
Contingent liabilities 211 81 46

DEFINITIONS AND OBJECTIVES

Return on equity Net profit for the period divided by
average equity.
Return on capital employed EBITA before acquisition costs and non
-recurring items divided by capital
employed.
Return on capital employed excluding EBITA before acquisition costs and non
goodwill and other intangible assets -recurring items divided by capital
employed excluding goodwill and other
intangible assets.
EBITA EBITA is a measure which Lifco considers
relevant for investors who wish to
understand the earnings generated after
investments in tangible and intangible
assets requiring reinvestment but before
investments in intangible assets
attributable to acquisitions. Lifco
defines earnings before interest, tax
and amortisation (EBITA) as operating
profit before amortisation and
impairment of intangible assets arising
from acquisitions. In its financial
reports, Lifco excludes acquisition
costs and non-recurring items. This is
indicated by an asterisk.
EBITA margin EBITA divided by net sales.
EBITDA EBITDA is a measure which Lifco
considers relevant for investors who
wish to understand the earnings
generated before investments in non
-current assets. Lifco defines earnings
before interest, tax, depreciation and
amortisation (EBITDA) as operating
profit before depreciation, amortisation
and impairment of tangible and
intangible assets. In its financial
reports, Lifco excludes acquisition
costs and non-recurring items. This is
indicated by an asterisk.
EBITDA margin EBITDA divided by net sales.
Net debt/equity ratio Net debt divided by equity.
Net debt Lifco uses the alternative KPI net debt.
Lifco considers that this is a useful
additional KPI which allows users of the
financial reports to assess the Group's
ability to pay dividends, make strategic
investments and meet its financial
obligations. Lifco defines the KPI as
follows: current and non-current
liabilities to credit institutions,
bonds, interest-bearing pension
provisions, liabilities related to
put/call options and additional
considerations relating to acquisitions
as well as lease liabilities less cash
and cash equivalents.

Earnings per share Profit after tax attributable to Parent
Company shareholders, divided by the
average number of shares outstanding.

Interest-bearing net debt Lifco uses the alternative KPI interest
-bearing net debt. Lifco considers that
this is a useful additional KPI which
allows users of the financial reports to
assess the Group's ability to pay
dividends, make strategic investments
and meet its financial obligations.
Lifco defines the KPI as follows:
current and non-current liabilities to
credit institutions, bonds as well as
interest-bearing pension provisions less
cash and cash equivalents.

Equity/assets ratio Equity divided by total assets (balance
sheet total).
Capital employed Capital employed is a measure which
Lifco uses for calculating the return on
capital employed and for measuring how
efficient the Group is. Lifco considers
that capital employed is useful in
helping users of the financial reports
to understand how the Group finances
itself. Lifco defines capital employed
as total assets less cash and cash
equivalents, interest-bearing pension
provisions and non-interest-bearing
liabilities with the exception of
liabilities related to put/call options
and additional considerations relating
to acquisitions, calculated as the
average of the last four quarters.

Capital employed excluding goodwill Capital employed excluding goodwill and
and other intangible assets other intangible assets is a measure
which Lifco uses for calculating the
return on capital employed and for
measuring how efficient the Group is.
Lifco considers that capital employed
excluding goodwill and other intangible
assets is useful in helping users of the
financial reports to understand the
impact of goodwill and other intangible
assets on that capital which requires a
return. Lifco defines capital employed
excluding goodwill and other intangible
assets as total assets less cash and
cash equivalents, interest-bearing
pension provisions, non-interest-bearing
liabilities with the exception of
liabilities related to put/call options
and additional considerations relating
to acquisitions, goodwill and other
intangible assets, calculated as the
average of the last four quarters.

RECONCILIATION OF ALTERNATIVE KEY PERFORMANCE INDICATORS

The interim report presents alternative key performance indicators for assessing the Group's performance. The primary alternative KPIs presented in this interim report are EBITA, EBITDA, net debt and capital employed. Definitions of the alternative KPIs are presented on pages 19-20.

EBITA compared with financial statements in accordance with IFRS

SEK million SIX MONTHS2020 SIX MONTHS2019 FULL YEAR2019
1,007
Operating profit 1,007 2,059
Amortisation of intangible 204 154 329
assets arising from
acquisitions
EBITA 1,211 1,161 2,388
Acquisition costs and non 10 115 135
-recurring items
EBITA before acquisition 1,221 1,276 2,523
costs and non-recurring items

EBITDA compared with financial statements in accordance with IFRS

SEK million SIX MONTHS2020 SIX MONTHS2019 FULL YEAR2019
1,007
Operating profit 1,007 2,059
Depreciation of tangible 178 152 311
assets
Amortisation of intangible 5 7 15
assets
Amortisation of intangible 204 154 329
assets arising from
acquisitions
EBITDA 1,394 1,320 2,714
Acquisition costs and non 10 115 135
-recurring items
EBITDA before acquisition 1,404 1,435 2,849
costs and non-recurring items

Net debt compared with financial statements in accordance with IFRS

SEK million 30 JUN 2020 30 JUN 2019 31 DEC 2019
Non-current interest-bearing 1,051 112 1,093
liabilities including pension
provisions
Current interest-bearing 3,545 4,540 3,676
liabilities
Cash and cash equivalents -781 -340 -729
Interest-bearing net debt 3,815 4,312 4,040
Put/call options, additional 908 698 916
considerations
Lease liability 552 477 596
Net debt 5,275 5,487 5,552

Capital employed and capital employed excluding goodwill and other intangible assets compared with financial statements in accordance with IFRS

SEK million 30 JUN 31 MAR 2020 31 DEC 2019 30 SEP 2019
2020
Total assets 18,291 19,278 17,578 17,400
Cash and cash equivalents -781 -714 -729 -456
Interest-bearing pension -41 -38 -40 -39
provisions
Non-interest-bearing -4,174 -3,841 -3,325 -3,545
liabilities
Capital employed 13,295 14,685 13,484 13,360
Goodwill and other intangible -11,701 -12,255 -11,209 -10,969
assets
Capital employed excluding 1,594 2,430 2,275 2,391
goodwill and other intangible
assets

Capital employed and capital employed excluding goodwill and other intangible assets calculated as the average of the last four quarters compared with financial statements in accordance with IFRS

SEK million Average Q2 Q12020 Q4 Q32019
2020 2019
Capital employed 13,706 13,295 14,685 13,484 13,360
Capital employed excluding goodwill 2,173 1,594 2,430 2,275 2,391
and other intangible assets
Total
EBITA* 2,468 569 652 651 596
Return on capital employed 18.0%
Return on capital employed excluding 114%
goodwill and other intangible assets

https://news.cision.com/lifco-ab/r/interim-report-january--june-2020,c3155785

https://mb.cision.com/Main/5431/3155785/1280478.pdf

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