Volati Interim Report January-September 2021

“Continuing high growth rate with a focus on long-term value creation”
Andreas Stenbäck, President and CEO

Quarter July–September 2021

Period January-September 2021

Events after the reporting period

2) Key figure includes discontinued operations.

Comments from the CEO

Volati continues to grow at a rapid pace. EBITA increased by 68 percent, rising from SEK 126 million to SEK 211 million in the third quarter. This strong performance and our focus on long-term value creation has brought significant value for our shareholders. Earnings per ordinary share for our continuing operations increased by 96 percent from SEK 0.76 to SEK 1.48 during the quarter. The return on adjusted equity was approximately 33 percent and if we include the effect of the previous year’s sales and separate listing of Bokusgruppen, the return was a full 74 percent.

Our two business areas continued to develop positively in the third quarter. The Salix Group business area increased its EBITA by 17 percent, despite tough comparative figures from a very strong Q3 in 2020. The Industry business area increased its EBITA by an impressive 101 percent. The growth is the result of a high acquisition rate and margin improvement work, particularly through the exploitation of synergies from completed acquisitions. Corroventa, a company in the Industry business area, reported strong earnings growth as a result of the extreme weather that hit Europe. The company is very well positioned through its product sales and one of Europe’s largest rental machine parks to service its customers in the event of major flooding.

Virtually all companies in the Group faced operational challenges during the quarter as a result of disruptions to their supply chains and increased freight costs. However, our management teams were successful in passing on the price increases to end customers, which meant that the impact on margins was limited.

Value-creating growth
Volati is growing fast but with a focus on long-term value creation. Since 2017, we have increased EBITA per ordinary share for continuing operations by an average of 48 percent. We have been able to maintain this high rate of growth without diluting existing shareholders or compromising our required rate of return. Our goal is sustained earnings growth per share, which means, for example, that we have never paid for acquisitions with our own shares and over the years we have only made one new issue, in connection with our IPO. We believe that growth is only value-creating if the return on equity is sufficiently high. Our high return on adjusted equity for continuing operations, which is approximately 33 percent, is therefore testament to our success in value-creating acquisitions, while delivering stable growth in the underlying business. A high return on adjusted equity is a prerequisite for sustainable self-financed growth.

Platforms for continued growth
In an increasingly competitive acquisition market, effective handling of pure ownership issues, such as securing the right company management, setting a framework for strategic direction and deciding on capital allocation, is not enough. Local entrepreneurship is important, but we also need to add value as owners in order to maintain a good return over time. For a long time, Volati has delivered added value through measures such as strategic leadership supply and development, training initiatives and knowledge sharing between companies. We know how to give our management teams the best conditions to develop their companies.

In recent years, we have concentrated on add-on acquisitions – a way of creating strong units and adding further value through synergies between the companies. This means that we can pay slightly more for acquisitions but still at good returns as we are able to factor in synergies. It also means that we decentralise the acquisition work, which ensures quality of integration and provides scalability for us as a Group.

Our decentralised acquisition model is enabled by the acquisition platforms we have created. Salix Group is the best example of where we have built a business area with a clear industrial logic. In the Industry business area, we have companies with similar development opportunities, such as S:t Eriks and Ettiketto, which through acquisitions have built very interesting platforms for continued acquisition-driven growth.

Part of long-term value creation is the ability to realise that you are not always the best owner of a company. We have demonstrated this ability over the last year and are now investing in the businesses we believe are best placed to generate long-term returns. We have a low net debt/EBITDA ratio of 1.4x and see an acquisition market that suits us well. Overall, this puts us in a good position to maintain our high growth rate with a focus on long-term value creation.

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