Svolder : Interim Report #2 22/23

Interim Report 2 2022/2023

Net worth unchanged

The Managing Director's comments, page 2

Result for current reporting period

3 months: 1st December 2022-28th February 2023

• The company posted a result for the period of SEK 5 million (-1,400 m), corresponding to SEK 0.00 (-13.70) per share
• The net worth increased 0.1% to SEK 57.10 per share
• The listed price of the Class B share increased by 7.3% to SEK 66.68 per share
• The Carnegie Small Cap Return Index rose by 7.7%

Major contributors to net worth

• Positive: Troax, engcon, FM Mattsson Group

• Negative: GARO, New Wave, Beijer Electronics Group

Major changes in the equities portfolio

• Bought: Arjo
  - Sold: -

Result for the interim period

6 months: 1st September 2022-28th February 2023

• The company posted a result for the period of SEK 79 million (-1,109 m), corresponding to SEK 0.80 (-10.80) per share
• The net worth increased by 1.4%, including reinvested dividend
• The listed price of the Class B share increased by 25.8%, including reinvested dividend
• The Carnegie Small Cap Return Index rose by 9.0%

Latest published figures

3 March 2023

Share price	Net worth
67.42	57

SEKSEK/share

Dear

Shareholder,

Just over a year ago Ukraine, a country in Europe and thereby close to Sweden, was subjected to a military invasion by its neighbour, Russia. Since then, the people of Ukraine have had to watch large parts of their country be destroyed, people killed or seriously injured, and families split apart. In that context, news of share prices and net worth trends may seem rather unimportant.

The strength of the free market economy

Even so, economic stability is the very thing that can bring security in a human disaster like this. Thanks to the prosperity we enjoy in the West, many Ukrainian refugees have been able to be housed here. That prosperity has also laid the foundation for the many initiatives to defend the country's democracy and nascent free market economy, while also indirectly safeguarding the free world.

Without this foundation, laid especially by various forms of enterprise, none of this would have been possible. It is worth considering, with regard to moving forward,

whether Sweden has the ability to question and phase out bureaucracy and inefficient government practices in favour of future enterprise. Enterprise that must also include mi- ning, electricity production, innovations and military de- fence. I believe that for the past year or more, there have been positive signs in that politicians and civil servants keen to support growth have been given more leeway.

The successful self-regulation advocated and generally practised in industry also places demands on companies, leaders, owners and industry organisations to exercise good conduct. I should add here that not all stakeholders in the private sector are setting a good example. Above all there are problems with players who sell to and challenge public services, such as care and assistance companies. There are also warning signals in other sectors, according to those who know about anti-corruption. The European Commission noted in the summer, for example, that efforts to combat bribery in foreign companies and the rising infiltration of organised crime are areas of concern for Sweden.

Total return1) 10 years in % on 28th February 2023

1400											1400
1200	Svolder	1 year	3 years	5 years	10 years					1200
		Net worth	0	87	130	615
1000		Share price (Class B) 10	123	199	964					1000
800	Stock market index									800
		CSRX	−8	36	82	317
600		SIXRX	1	43	73	213					600
400											400
200											200
0											0
	2013	2014	2015	2016	2017	2018	2019	2020	2021	2022	2023

1. Total return is calculated using comparable methods to reinvestment indices and funds, i.e. assuming that the dividend paid is reinvested at the time of the dividend in underlying types of assets.

Source: Morningstar, Svolder and Infront

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Weak short-term,			Soon time to
strong long-term			step down
The current reporting period (1st December-28th Febru-	Time flies when you're having fun, as the saying goes. This
ary) was a weak time for Svolder from the perspective of	will be my last Managing Director's comments. After ne-
relative net worth. Net worth remained unchanged, while	arly 30 years at the helm, at the end of April I will be handing
the small cap market (CSRX) and the Swedish stock ex-	over ongoing responsibility for Svolder to my successor, To-
change (SIXRX) rose by 7.7 and 6.3 per cent respectively. It	mas Risbecker. It has been a true education following mar-
is important to stress the importance of long-term thinking,	ket and social developments over the years, through what
and not only when short-term performance is weak. We do	are primarily Swedish portfolio companies. Nowhere are
so on these pages, as always, by showing figures over ten	innovation and adaptability to human preferences so evi-
years. And by that time scale, Svolder is still doing very well.	dent as in the business sector. I have witnessed this during
Even so, it has been a quarter with some disappoint-	many of the crises that have come along over these 30 years,
ments in the financial reports, as well as market reactions	and especially during the pandemic.
that I personally find surprising. Firstly we have companies	Svolder has tried-and-tested analysis and management
such as GARO, XANO and Nolato, where economic condi-	models along with knowledgeable personnel and expe-
tions and selective market conditions have been a problem;	rienced Board members, who together have built up a va-
perhaps particularly for New Wave				luable network among small Swedish
Group as regards the latter. And it is	»	Thank you everyone who	listed companies and their various sta-
not only elite Swedish and Norwegian		has made these years so	keholders. There is also an impressive
skiers who are notching up successes in		ownership base, including both major
	special for me.  »
Craft's sportswear; quality-conscious		shareholders and many private indivi-
amateurs and sports clubs are as well.				duals interested in equities as a form of
Together with a continued recovery after the pandemic	investment. Some of them have stuck with us all these years
for products for companies and organisations, as well as	and have often sent valuable messages, especially during
the group's increasingly efficient logistics, marketing and	some of the more challenging global situations. I prefer not
purchasing, the corporate group showed even better pro-	to end with any sweeping clichés about future prospects, as
fitability and results during 2022. The message from the	certain politicians like to do. I'll leave those kinds of jud-
company management is that the good growth on markets	gements to Tomas, and let him and Svolder's Board and
outside of Sweden is set to continue, while profitability at	co-workers take the company into the future. Thank you
least on a par with the group's set goals is realistic. The	everyone who has made these years so special for me.
stock market, meanwhile, has responded negatively to the		Yours faithfully
year-end report and dramatically reduced the share price.
I find this unjustified, and instead choose to keep faith in		ulf hedlundh
the analysis of Svolder and several stock market analysts.		Managing Director

The question I ask myself is whether the share has ever been cheaper relative to the company's growth potential, profitability and financial strength?

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the equities portfolio

28th February 2023

					% of the	% of the
		Share price	Market cap.	% of	company's	company's
Share	Number	(SEK)1)	(SEK m)	net worth	capital 2)	votes2)
New Wave Group	5,209,500	184.00	959	16.4	7.9	2.1
Troax Group	3,050,000	223.50	682	11.6	5.1	5.1
Elanders	3,390,056	157.80	535	9.1	9.6	6.6
Beijer Electronics Group	4,390,000	101.20	444	7.6	15.1	15.2
engcon	5,434,783	79.70	433	7.4	3.6	1.2
FM Mattsson Group	6,208,256	59.50	369	6.3	14.7	6.4
GARO	4,136,479	84.60	350	6.0	8.3	8.3
XANO Industri	3,432,786	101.40	348	5.9	5.9	1.8
MilDef Group	2,868,673	75.90	218	3.7	7.2	7.2
Profoto Holding	2,419,811	87.10	211	3.6	6.1	6.1
Viva Wine Group	4,188,370	45.99	193	3.3	4.7	4.7
Nolato	3,200,000	52.10	167	2.8	1.2	0.6
ITAB Shop Concept	12,332,953	12.34	152	2.6	5.7	5.7
Arjo B	3,166,842	39.70	126	2.1	1.2	0.7
Wästbygg Gruppen3)	3,273,586	37.00	121	2.1	10.1	11.2
Lime Technologies	422,665	265.00	112	1.9	3.2	3.2
Arla Plast	2,639,527	36.60	97	1.7	13.2	13.2
Boule Diagnostics	4,828,388	13.00	63	1.1	12.4	12.4
Nivika Fastigheter	1,352,002	41.75	56	1.0	2.3	0.5
Serneke Group	1,660,000	24.15	40	0.7	5.8	5.8
AGES Industri	584,000	53.00	31	0.5	8.3	2.5
Equities portfolio			5,706	97.5
Net receivable (+)/net debt (−)			146	2.5
Total/net worth			5,852	100.0
			57.10	SEK per Svolder share

All securities holdings come under level 1 of the value hierarchy.

1. In calculating the market value (fair value), the last price paid for the securities on Nasdaq Stockholm on the closing day has been used. 
2. Based on outstanding shares in the portfolio company. 
3. Of the shares in Wästbygg Gruppen, 110,000 are Class A.

The following information, for example, can be obtained from the table. Svolder's largest holding is New Wave Group, which has a market value of SEK 959 million, corresponding to 16.4 per cent of net worth. A one-per-cent change in New Wave's share price would affect Svolder's net worth by SEK 10 million, which equates to SEK 0.10 per Svolder share.

Interim Report 2

Current reporting period:

1st December 2022 - 28th February 2023

Market commentary

The current reporting period of 1st December 2022-28th February 2023 was characterised by strong European stock markets (S&P EUR: +8.0%) and some Asian (e.g. Hong Kong: +10%). Stock market development in the US, howe- ver, was negative (S&P500: −2.7%), as was true of the Japa- nese (Nikkei 225: −1.6%) but to a lesser extent. Altogether, this meant that the world index (DJGI) remained unchan- ged, measured in USD.

Stock exchange movements during the quarter were, however, volatile. December and February were rather weak months, while January saw very strong development. The 2022 calendar year was characterised by dramatically higher inflation, significantly rising interest rates, war in Europe, uncertain supply chains, and lower demand in China due to the strict COVID-19 policies there. So it was something of a surprise when investors began 2023 with a more positive attitude towards the future. On several occasions last year, many very negative scenarios were presented regarding households, businesses and countries, although for most people in the western world the actual scenarios were less severe. Many macro variables do, though, remain problematic, particularly pertaining to expectations on inflation, interest rate scenarios, and ever-declining consumption among households.

The Swedish market indices strengthened to the same extent as others in Europe. The established small cap index CSRX slightly outperformed the overall stock exchange (SIXRX) and the largest companies (OMXS30). All of these indices rose between six and eight per cent during the three- month period.

The interest rates for government bonds rose markedly in Europe during the current reporting period, while in the US they fell. For example, the five-year government bond interest rates in Sweden and Germany increased by almost

80 basis points, while the US equivalents fell by just over 25 points. Short-term interest rates around the world generally rose, however, as central banks increased key interest rates. The US Federal Reserve initiated this trend, and the US currently has higher key interest rates than other industrialised nations. Investors though are looking forward, and the initial strengthening of the USD has now slowed, particularly in relation to the EUR. The previously weak Swedish krona saw minor changes against central currencies during the quarter. The USD declined by 1.2 per cent, while the EUR rose 1.4 per cent.

Prices for industrial raw materials rose during the three- month period, with the exception of oil. The rise was most apparent at the beginning of 2023. Inflationary pressure from raw material prices is, however, expected to soon transition into a calmer phase. Meanwhile, it is unclear how salary inflation will develop in 2023, based on what are to date surprisingly strong labour markets in both the US and Europe.

Index performance (12 months)

110

100

90

80

70

mar apr may jun	jul aug sep oct nov dec jan feb
2022			2023
	CSRX		SIXRX

Source: Infront

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