Storskogen Group Ab Class B · OMXSTO:STOR_B
Storskogen Group Ab Class B — Investor Day (September 2022)
71 slides from Storskogen Group Ab Class B's investor day presentation, Sep 27, 2022
Slide 1: Storskogen Capital Markets Day
Storskogen Capital Markets Day 27 September 2022 09.30 Registration 10.00 – 12.30 Daniel Kaplan, CEO and Co-founder Strategy Alexander Bjärgård, Co-founder and Head of M&A and Corporate Development M&A Strategy Lena Glader, CFO Financial overview Q&A 12.30 – 13.30 Lunch 13.30 – 15.00 Christer Hansso
Slide 2: Daniel Kaplan, CEO and Co-founder
Daniel Kaplan CEO and Co-founder Capital Markets Day 27 September 2022 2
Slide 3: Storskogen in brief
Storskogen in brief Storskogen is an international group of businesses with operations in 27 countries SEK 36.0bn Investment teams in annual Operational presence RTM net sales1 ~12,200 employees, an operational presence in 27 countries and SEK 3.7bn management teams in 4 market in annual areas adj.
Slide 4: Storskogen in brief
Storskogen in brief Highly diversified business split across three business areas and 14 verticals Services Trade Industry Peter Ahlgren Christer Hansson Fredrik Bergegård NO. OF BUSINESS UNITS NO. OF BUSINESS UNITS NO. OF BUSINESS UNITS 61 34 38 NO. OF EMPLOYEES NO. OF EMPLOYEES NO. OF EMPLOYEES >5
Slide 5: Diversified portfolio reduces risks
Diversified portfolio reduces risks Storskogen presents an opportunity for investors to access a unique asset class. The diverse portfolio provides a strategic platform for further growth and resilience in challenging times. Diversification across many sectors Geographical diversification Verticals’
Slide 6: Introduction to Storskogen
Introduction to Storskogen We are uniquely positioned Our mission is to empower Our vision is to be the leading to identify, acquire and businesses to realise their full international owner of small develop market leaders potential to medium-sized businesses with sustainable business models over an
Slide 7: Why small to medium-sized companies?
Why small to medium-sized companies? Many well-run profitable businesses reach a point in their journey when they would benefit from a new long-term owner to secure their future competitiveness and to realise their full potential 1 Large addressable market of companies given that many entrepreneurs
Slide 8: Unique market position
Unique market position With a diversified portfolio leveraging on numerous macro trends and local positioning in a number of countries, Storskogen has a unique knowledge base and position to effectively allocate capital Broad investment criteria and Extraordinary deal-flow local presence Selective a
Slide 9: Organisation
Organisation Storskogens decentralised governance and active ownership model emphasise industrial expertise and local presence. This enables us to generate long-term positive results as a group. Accounting Legal Board of Directors Business Control ESG Corporate Financial Control Development Finance
Slide 10: Core values
Core values Storskogen’s core values are deeply embedded in the organisation. The values are the backbone of the decentralised and active ownership model, enabling robust relations within the group. Entrepreneurial Respectful Long-term approach Professional 10
Slide 11: Active ownership model
Active ownership model What sets us apart is our proven decentralised operational model, active governance and extensive network, allowing for autonomous operational decision-making while holding our businesses accountable through dialogue and metrics Promoting entrepreneurship and decentralisation
Slide 12: Storskogen supports its companies in navigating through the ESG transition
SCIP EPD ESG UNGC GRI CSR SDGs TCFD Storskogen supports its EU companies in navigating GHG Taxo- nomy through the ESG transition CSDD LCA towards a sustainable society SBTi D&I EMS UNGPs CSRD HRDD ESRS SASB 12
Slide 13: Driving sustainability
Driving sustainability With an infinite ownership horizon, sustainability is at the heart of decision-making. By providing ESG tools and support we increase the long-term competitiveness of our companies. Decision on Targets and acquisition action plan Hands-on Evaluation Onboarding Strategy support
Slide 14: Empowering businesses
Empowering businesses Storskogen's value contribution to the business units is all about decreasing risk and increasing upside, illustrated by the 1% organic EBITA growth in 2020 and 36% in 2021 Increase upside Industry expertise +36% organic EBITA • Financing and stability growth in 2021 in a stron
Slide 15: The power of pooling expertise from 12,200 people
The power of pooling expertise from 12,200 people Storskogen Knowledge Exchange, KX, is an initiative to facilitate and promote knowledge sharing within the Group. KX currently consists of six domains headed by a domain lead from HQ. Example of ongoing initiatives within the domain Pricing procureme
Slide 16: Financial development
Financial development Storskogen has experienced strong sales growth over the past years, both organically and through acquisitions. Organic EBITA growth is a key financial target, aiming at real GDP growth + 1-2 pp. 30,000 12% 25,000 10% Organic Organic 20,000 8% revenue EBITA growth (%) growth (%)
Slide 17: Financial targets and outcome
Financial targets and outcome Storskogen is performing in line with a majority of the financial targets set at the IPO. Adjusted cash conversion and organic EBITA growth are currently performing below target. OUTCOME Financial targets (mid term) 3Y average 19-21 Q4 2021 / H1 2022 Maintain growth in
Slide 18: Next generation ownership
Next generation ownership Storskogen is planning for a recession by calibrating costs, acquisition pace and retaining a strong balance sheet – while setting the stage for fulfilling our long-term vision and mission Short-term focus Long-term realisation of strategy • Continued focus on cash flow and
Slide 19: Alexander Bjärgård
Alexander Bjärgård Co-founder and Head of M&A and Corporate Development Capital Markets Day 27 September 2022 19
Slide 20: Diversified portfolio of qualitative businesses
Diversified portfolio of qualitative businesses Storskogen’s strategy has been intact since the start with the aim to build a diversified portfolio of quality companies The building blocks of our portfolio Quality Diversified Acquisition criteria & Strategic M&A considerations Prudent and selective
Slide 21: Storskogen’s acquisition criteria
Storskogen’s acquisition criteria Storskogen identifies, acquires and develop companies with the fundamental and financial foundation to secure success for the next 100-years Fundamental criteria Financial criteria SWEET SPOT EV/EBITA 5x-8x ESG >90.1% ownership Sustainable & resilient EBITA SEK 15-7
Slide 22: Strategic considerations from an M&A perspective
Strategic considerations from an M&A perspective We evaluate potential acquisitions from an M&A perspective where >50% of our1 portfolio companies have an M&A agenda and/or are part of a structure with the aim to realise potential synergies COST SHARE OF GROUP STRUCTURE REVENUE SYNERGIES SYNERGIES R
Slide 23: Capital allocation
Capital allocation Storskogen allocates capital based on fundamental and financial criteria as well as strategic considerations Add-ons EV/EBITA 5x-8x ESG >90.1% ownership Cluster Platform Roll-up Sustainable & resilient EBITA SEK 15-70m Proven macro Leading business trends position in model & respe
Slide 24: Unrivalled deal flow enables selective acquisitions
Unrivalled deal flow enables selective acquisitions Storskogen’s acquisition criteria and positioning generates an unrivalled and unique deal flow of available targets. This allows a selective and systematic process. Capital allocation ~1 100 Evaluated cases1 Large number of actionable SMEs with bus
Slide 25: Storskogen’s evaluation process to ensure we acquire quality
Storskogen’s evaluation process to ensure we acquire quality Guiding definition of overall attractiveness used to support assessing an opportunity and its relevance over a long-term horizon Areas of due diligence The Case Assessment Tool (CAT) • Market growth and profitability levels Macro & • Compe
Slide 26: Tailored deal teams
Tailored deal teams Carefully selected teams to ensure we always leverage relevant competencies and experiences in each and every specific situation Team & partner resources Example of actual deal team • Hans Löfqvist Engineering AB (founded in 1977) M&A Legal • Automation company with revenue FY 20
Slide 27: Leveraging on sustainable macro trends
Leveraging on sustainable macro trends Diversified portfolio by end-markets provides a strategic platform for further growth and resilience in challenging times Leveraging macro trends Verticals’ share of group net sales1 • Installation Services, 9% • Green energy transition • Infrastructure, 6% • U
Slide 28: Portfolio composition by business unit and regional exposure
Portfolio composition by business unit and regional exposure Storskogen’s portfolio is not dependent on a single business unit and is becoming more international with less exposure to Sweden Share of group net sales by business unit1 Share of group net sales by country1 RTM Jun-22 RTM Jun-21 RTM Jun
Slide 29: Long term sustainable competitive advantage
Long term sustainable competitive advantage Storskogen’s 20 largest business units are market leaders in various niche markets across different regions Company Founded Market leadership Company Founded Market leadership #1 Bar feeders globally; #1 Chip conveyors in 1 1973 1993 #1 steel piling suppli
Slide 30: Decades of solid performance
Decades of solid performance Storskogen is built by companies and entrepreneurs which have proven themselves over a long period of time by delivering sustainable and resilient growth 9,000 8,000 7,000 6,000 5,000 SEKm 4,000 3,000 2,000 1,000 0 FY 2002 FY 2003 FY 2004 FY 2005 FY 2006 FY 2007 FY 2008
Slide 31: Unique position to allocate capital effectively
Unique position to allocate capital effectively Storskogen has the ability to allocate capital in an agile and selective way throughout different end-markets and market areas. We are investing in our current portfolio companies and calibrate the acquisition pace short term. Portfolio companies Macro
Slide 32: Lena Glader
Lena Glader CFO Capital Markets Day 27 September 2022 32
Slide 33: Top line and EBITA margin
Top line and EBITA margin A strong net sales growth coupled with solid EBITA margins over the past 14 quarters, organic and acquired Net sales and margin development 40,000 12% 35,000 10% 30,000 8% 25,000 SEKm 20,000 6% 15,000 4% 10,000 2% 5,000 0 0% Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q2 2020 Q
Slide 34: Diversification brings resilience
Diversification brings resilience Diverse portfolio reinforces resilience in economic downturns Historical performance of +100 BUs1 14% 12% 10% Covid-19 crisis 8% 6% IT crisis Global financial crisis 4% 2% 0% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2
Slide 35: EBITA margin concentration
EBITA margin concentration Above 60% of the portfolio has an average EBITA margin of 7.5-12.5%. In total, the portfolio is weighted towards an EBITA margin above 10%. Margin allocation in portfolio 12,000 Adj. EBITA margin intervals 10,000 33% 8,000 29% <0% 0.1-4.9% 5%-9.9% LTM Q2 net sales 6,000 10
Slide 36: Positive earnings growth during our ownership
Positive earnings growth during our ownership Trend of improved EBITA earnings in later acquired cohorts of companies, which stand for the vast majority of the current portfolio Acquisition Share of total net Avg acquisition year/s sales H1 20221 multiple2 Organic EBITA development in absolute numbe
Slide 37: Robust financial steering and control processes
Robust financial steering and control processes A well-structured process from M&A and onboarding to implementation of a common financial framework. Actionable steering tools for monitoring, follow up and support for portfolio companies. Cash management, internal financing, focus projects at group l
Slide 38: KPI follow-up from Business Units to Storskogen
KPI follow-up from Business Units to Storskogen Decentralised management with selected KPIs providing an efficient early warnings system allowing group management to allocate resources and support KPI follow-up Trade • EBITA (abs compared with budget) • Gross profit • Gross margin % (II) • Inventory
Slide 39: Storskogen's confidence indicator
Storskogen's confidence indicator A tool to gather collective knowledge about current and expected market trends from portfolio CEOs. The result is used as an indication of market development on Group as well as company level. 200 12% 150 10% 100 8% 50 Net 0 6% -50 4% -100 2% -150 -200 0% Confidence
Slide 40: Cash conversion at target the past five years
Cash conversion at target the past five years Storskogen’s model delivers good as well as stable returns and cash flow Cash conversion1 As of Q2 2022, LTM 100% 94% Financial ROE2 target of 80% 71% 70% 73% >70% 9.2% P/WC3 67% 72.7% 60% ROCE4 40% 32% 9.6% ROCE net of 20% cash5 11.9% 0% 2017 2018 2019
Slide 41: Consistent returns but diluted by growth
Consistent returns but diluted by growth Significant dilution effects on return metrics due to issuance of debt and share capital Return metrics (12m) Return on Equity Return on Capital Employed Return on Capital Employed excl Goodwill 25% 20% 15% 10% 5% SEKm 0% 2018 2019 2020 2021 H1 2022 2018 2019
Slide 42: Cash flow analysis
Cash flow analysis The free cash flow has grown to a significant amount, however with several extraordinary parameters negatively impacting the development during H1 2022 Cash generation1 1,800 10% 8.6% 1,634 1,600 7.2% 8% 1,400 6.0% 5.9% 1,200 6% 4.8% 1,026 1,000 815 SEKm 800 646 4% 597 600 494 372
Slide 43: Inventories and prices have driven WC
Inventories and prices have driven WC The increase of Cash conversion Cycle Days is driven by a strategic inventory build-up to mitigate the supply chain disruptions and material shortages, as well as by inflation Average Cash Conversion Cycle Days for the Group 90 80 84 82 70 75 70 71 60 67 50 55 5
Slide 44: Working capital dynamics by Business Area
Working capital dynamics by Business Area Trade has increased the Inventory Days, while Industry had a flat development last quarter. AR and AP Days are at similar levels in both business areas as of June. Services has naturally lower levels of CCC days. Trade Industry Services 160 160 160 140 140 1
Slide 45: Debt structure
Debt structure S&P Moody’s A well-balanced capital structure, further proven in satisfactory BB+ Ba1 credit ratings during H1 2022 Debt structure Interest-bearing gross debt Interest rate Book 18,000 SEKm Maturity Type % value 16,000 RCF 2024-2026 Floating 1.35-2.15 7,500 14,000 3,765 Bond 1 2024 St
Slide 46: Non interest-bearing liabilities
Non interest-bearing liabilities The majority of earn-outs and minority options has a long-term maturity. The amount paid is based on actual performance. Minority options and Earn-outs Non interest-bearing liabilities 4,000 Maturity Share of total 3,500 3,000 1,425 Within 12m 41% 2,500 Earn-outs SEK
Slide 47: Net debt and leverage
Net debt and leverage Leverage is currently at 2.5, within target of 2-3x Leverage ratio 14,000 4 12,000 3 10,000 SEKm 2.5 8,000 2.2 2.0 2 1.8 6,000 1.7 4,000 1.1 1.1 1 2,000 0.5 0 0 Q3 20 Q4 20 Q1 21 Q2 21 Q3 21 Q4 21 Q1 22 Q2 22 Interest-bearing net debt, SEKm Interest-bearing net debt / Adj. RTM
Slide 48: Cost split of operating expenses
Cost split of operating expenses Limited exposure to fuel and energy, while personnel is one of the main driver of operating expenses Income statement SEKm Jan-Jun 2022 % of total sales Purchasing of material Total sales 15,997 and components: 88% • Services: 21% Raw materials and • Industry: 41% -8
Slide 49: Q&A
Daniel Kaplan Alexander Bjärgård BILD Co-founder and Head of M&A and Q&A CEO and Corporate Co-founder Development Lena Glader CFO 49
Slide 50: Storskogen Capital Markets Day
Storskogen Capital Markets Day 27 September 2022 09.30 Registration 10.00 – 12.30 Daniel Kaplan, CEO and Co-founder Strategy Alexander Bjärgård, Co-founder and Head of M&A and Corporate Development M&A Strategy Lena Glader, CFO Financial overview Q&A 12.30 – 13.30 Lunch 13.30 – 15.00 Christer Hansso
Slide 51: Christer Hansson
Christer Hansson EVP and Head of Business Area Trade Capital Markets Day 27 September 2022 51
Slide 52: BA Trade overview
BA in brief Financial performance BA Trade HQ presence Operational presence No of business units1 overview 8,000 20% 35 6,000 15% No of employees >2,000 4,000 A diversified portfolio 2,000 10% of European Yearly net sales run rate2 companies with ~SEK 10bn 0 5% strong brands in their 2018 2019 2020
Slide 53: BA Trade team
Way-of-working BA Trade team A dedicated team of investment professionals who work continuously with recurring and specific initiatives to secure development and growth in all business units Head of BA Trade Investment Directors Jacob Sandström Erika Butterworth Åsa Murphy Anders Molander Roger Koll
Slide 54: Portfolio strategy
Way-of-working Portfolio strategy Business units are managed differently depending on managements’ capabilities and market preconditions Portfolio strategy Grow and scale-up Support and nurture Course correction Organic Add-ons and roll-ups Sales performers Scale performers Reliable performers Low p
Slide 55: The Freight Initiative
Operational Excellence Shanghai Container Index (SCFI) The Freight Initiative Leveraging our strength as a group to create an advantage for all business units $5,500 Jan ’22 Shipping is a significant cost for the Trade businesses Combined container volume of ~ 5,000 TEU per year Main concerns: • Del
Slide 56: Deep dive into the Health and Beauty vertical
Case study Deep dive into the Health and Beauty vertical The Health and Beauty vertical has developed from our first acquisition in 2019 to an approximately SEK 2.3bn business in four markets – where “HAIR CO” shows how strong synergies can be realised 2019 2020 2021 2022 2023 HAIR CO • Consolidatio
Slide 57: Peter Ahlgren
Peter Ahlgren EVP and Head of Business Area Services Capital Markets Day 27 September 2022 57
Slide 58: BA Services overview
BA in brief Financial performance BA Services HQ presence Operational presence No of business units1 10,000 15% overview 62 8,000 No of employees 6,000 10% >5,000 4,000 A large diversified 2,000 portfolio with strong India China Yearly net sales run rate2 cash flow companies ~SEK 12bn 0 5% spread bo
Slide 59: BA Services team
Way-of-working BA Services team A strong team of Investment Directors, with various backgrounds, deep expertise and relevant experience within each functional segment Head of BA Service Investment Directors Oskar Bjursten Katarina Hedberg Thomas Pilo Thomas Larsson Lina Falk Jimenez Niclas Rundlöf T
Slide 60: Best practices in the Group
Operational Excellence Best practices in the Group Synergies and common initiatives to drive long-term profitability 16 companies within electrical- and security installations across Sweden, Procurement managed to reduce material cost by approx. 8% by jointly pooling their Direct supplies purchasing
Slide 61: The Sovent Way
Case study The Sovent Way The SoVent Way – the key to the success SoVent - successfully consolidating a Philosophy Reality fragmented market by turning philosophy into reality A clear value foundation Each employee does the SoVent way training A systemized way of working Snapshot of SoVent Each empl
Slide 62: Fredrik Bergegård
Fredrik Bergegård EVP and Head of Business Area Industry Capital Markets Day 27 September 2022 62
Slide 63: BA Industry overview
BA in brief Financial performance BA Industry HQ presence Operational presence No of business units1 overview 10,000 14% 38 8,000 12% 10% No of employees 6,000 8% A diversified portfolio >4,900 4,000 6% 4% 2,000 of high-quality USA China, Japan, Taiwan Yearly net sales run rate2 2% industrial compan
Slide 64: A strong central Industry team
Way-of-working A strong central Industry team A strong team with long industrial experience, supporting and coaching the business units Head of BA Industry Investment Directors Patrik Klerck Monika Gutén Mikael Jonsson Jost Bendel Mike Dakin Seasoned CEO Experienced CEO Senior Executive Experienced
Slide 65: Close cooperation with the Business Unit CEOs
Way-of-working Close cooperation with the Business Unit CEOs Structured way of working with business units – recurring and specific initiatives in combination with daily interaction and an entrepreneurial ad-hoc approach with fast decisions when needed Way of working QUARTERLY BU SPECIFIC FOCUSES TR
Slide 66: Investing in automising production
Operational Excellence Investing in automising production Productivity investments to ensure increased efficiency, sustainability and competitiveness China Sweden Reshoring Redesigned from manual assembly to automated assembly Increased productivity Moved manufacturing from China to Sweden Lowered c
Slide 67: Brenderup’s acquisition of Tysse
Case study Brenderup’s acquisition of Tysse Acquisition of Tysse to yield high degree of back-end synergies as well as go-to-market synergies Brenderup Group in short • Scandinavia’s #1 trailer manufacturer Phase 1 • Established in 1936 Lower purchasing cost • HQ in Malmö • Facilities in Wielen (PL)
Slide 68: Q&A
Christer Peter Hansson Ahlgren BILD BILD EVP and Head of Q&A EVP and Head of Business Area Business Area Trade Services Fredrik Bergegård BILD EVP and Head of Business Area Industry 68
Slide 69: Summary
Summary Storskogen has established itself as a leading international group of businesses with an infinite ownership horizon A well diversified portfolio of qualitative businesses Unrivalled deal flow enables selective acquisitions and efficient capital allocation Good consistent returns despite grow
Slide 70: Appendix
Appendix 70
Slide 71: Definitions
Definitions Cash conversion Adjusted EBITDA – change in NWC – CAPEX/Adjusted EBITDA Return on Equity (ROE) LTM Profit/avg R12 Equity, (incl NCI) Return on Working Capital (P/WC) Adjusted EBITA/avg LTM Working Capital Return on Capital Employed (ROCE) LTM Operating Profit + Financial income/avg LTM C