Interim Report January-September 2017

Oct 26 2017

Interim Report January-September 2017

INTERIM REPORT JANUARY – SEPTEMBER 2017

Reporting period January – September

  • Net sales increased by 10.5 per cent to SEK 7,241 (6,552) million. Organically, net sales grew by 0.7 per cent
  • EBITA* increased by 22.6 per cent to SEK 1,222 (997) million
  • The EBITA margin* increased to 16.9 (15.2) per cent
  • Earnings before tax grew by 16.0 per cent to SEK 1,031 (889) million
  • Net profit for the period grew by 16.8 per cent to SEK 778 (667) million
  • Earnings per share increased by 17.0 per cent to SEK 8.40 (7.18)
  • Cash flow from operating activities increased by 12.5 per cent to SEK 737 (655) million
  • During the period Lifco acquired nine businesses with combined annual sales of around SEK 699 million

Reporting period July – September

  • Net sales increased by 11.1 per cent to SEK 2,365 (2,128) million. Organically, net sales grew by 1.2 per cent
  • EBITA* increased by 28.0 per cent to SEK 404 (316) million
  • The EBITA margin* increased to 17.1 (14.8) per cent
  • Earnings before tax grew by 19.9 per cent to SEK 332 (277) million
  • Net profit for the period grew by 22.4 per cent to SEK 254 (208) million
  • Cash flow from operating activities increased by 29.3 per cent to SEK 299 (230) million

Summary of financial performance

NINE MONTHS THIRD QUARTER Rolling 12 months FULL YEAR
SEK million 2017 2016 change 2017 2016 change change 2016
Net sales 7,241 6,552 10.5% 2,365 2,128 11.1% 9,676 7.7% 8,987
EBITA* 1,222 997 22.6% 404 316 28.0% 1,602 16.4% 1,377
EBITA margin* 16.9% 15.2% 1.7 17.1% 14.8% 2.3 16.6% 1.3 15.3%
Profit before tax 1,031 889 16.0% 332 277 19.9% 1,361 11.7% 1,219
Net profit for the period 778 667 16.8% 254 208 22.4% 1,039 12.1% 927
Earnings per share 8.40 7.18 17.0% 2.73 2.22 23.0% 11.20 12.1% 9.99
Return on capital employed 18.9% 19.1% -0.2 18.9% 19.1% -0.2 18.9% 0.2 18.7%
Return on capital employed excl. goodwill 157% 136% 21 157% 136% 21 157% 16 141%

   * Before acquisition costs.

COMMENTS FROM THE CEO

Net sales increased by 10.5 per cent to SEK 7,241 (6,552) million in the first nine months of year, mainly through acquisitions. All three business areas reported robust sales and earnings growth for the interim period. All divisions in all business areas except Forest saw stable growth during the nine-month period. The market environment in the three business areas remained generally favourable.

EBITA before acquisition costs increased by 22.6 per cent to SEK 1,222 (997) million in the nine-month period while the EBITA margin expanded by 1.7 percentage points to 16.9 (15.2) per cent. The improvement in profitability was mainly due to acquisitions and organic growth. Earnings per share for the nine-month period increased by 17.0 per cent to SEK 8.40 (7.18).

Cash flow from operating activities for the nine-month period increased by 12.5 per cent to SEK 737 (655) million.

During the interim period Lifco consolidated nine new businesses with combined annual sales of around SEK 699 million. In the third quarter we announced the acquisition of majority stakes in Hydal of Norway, Scandinavia’s leading manufacturer of aluminium cabinets, and Fiberworks of Norway, an equipment provider for the European fibre optic market. We have also acquired Elit of Norway, a wholesale supplier of machinery and equipment for electrical installations and electricity production. The nine consolidated acquisitions will have a positive impact on Lifco’s results and financial position in the current year. After the end of the reporting period we have presented the acquisition of two German dental laboratories.

Even after the acquisitions made in 2017 we still have significant financial scope for further acquisitions, as net debt is 2.3 times EBITDA before acquisition costs, well below our target of a net debt of less than three times EBITDA.

Fredrik Karlsson

CEO

 

GROUP PERFORMANCE IN JANUARY – SEPTEMBER

Net sales increased by 10.5 per cent to SEK 7,241 (6,552) million, driven by acquisitions, foreign exchange gains and organic growth. Acquisitions contributed 8.2 per cent, foreign exchange gains 1.5 per cent and organic growth 0.7 per cent to the increase in net sales. Nine new businesses were consolidated over the nine-month period: Elit, Fiberworks, Haglöf Sweden, Hultdins, Hydal, Perfect Ceramic Dental, Pro Optix, Silvent and Solesbee’s.

EBITA* increased by 22.6 per cent to SEK 1,222 (997) million and the EBITA margin* expanded by
1.7 percentage points to 16.9 (15.2) per cent. EBITA* improved on the back of organic growth, acquisitions and changes in exchange rates. Exchange rate changes added 1.5 percentage points to EBITA*. In the first nine months 33 per cent of EBITA* was generated in EUR, 30 per cent in SEK, 14 per cent in NOK, 7 per cent in DKK, 7 per cent in USD, 3 per cent in GBP and 6 per cent in other currencies.

Net financial items were SEK -32 (-21) million.

Earnings before tax increased by 16.0 per cent to SEK 1,031 (889) million. Net profit grew by 16.8 per cent to SEK 778 (667) million.

Average capital employed excluding goodwill increased by SEK 46 million over the nine-month period, to SEK 1,020 million at 30 September 2017, compared with SEK 974 million at 31 December 2016. EBITA* relative to average capital employed excluding goodwill increased by 16 percentage points in the interim period, to 157 per cent. At 30 September 2016 EBITA* relative to average capital employed excluding goodwill was 136 per cent. The improvement was due chiefly to stronger earnings and good control of capital employed.

The Group’s net interest-bearing debt increased by SEK 870 million from 31 December 2016 to SEK 3,888 million at 30 September 2017. Dividend payments during the nine-month period totalled SEK 336 (283) million. The net debt/equity ratio at 30 September 2017 was 0.8 (0.7) and net debt to EBITDA* was 2.3 (2.3) times. At the end of the period 30 per cent of the Group’s interest-bearing liabilities were denominated in EUR.

Cash flow from operating activities for the interim period increased by 12.5 per cent to SEK 737 (655) million. Cash flow from investing activities was SEK -1,333 (-1,600) million, which was mainly attributable to acquisitions.

GROUP PERFORMANCE IN THE THIRD QUARTER

Net sales increased by 11.1 per cent to SEK 2,365 (2,128) million, driven mainly by acquisitions. Acquisitions added 10.2 per cent while foreign exchange rate changes had a negative impact of 0.3 per cent. The organic growth rate was 1.2 per cent.

EBITA* increased by 28.0 per cent to SEK 404 (316) million and the EBITA margin* improved by 2.3 percentage points to 17.1 (14.8) per cent. EBITA* improved on the back of acquisitions and organic growth. Changes in exchange rates had a negative impact on EBITA* of 0.5 percentage points. In the third quarter 34 per cent of EBITA* was generated in EUR, 30 per cent in SEK, 15 per cent in NOK, 8 per cent in USD, 6 per cent in DKK, 3 per cent in GBP and 4 per cent in other currencies.

Net financial items were SEK -11 (-3) million.

Earnings before tax increased by 19.9 per cent to SEK 332 (277) million. Net profit increased by 22.4 per cent to SEK 254 (208) million.

Average capital employed excluding goodwill decreased by SEK 13 million to SEK 1,020 million at 30 September 2017, compared with SEK 1,033 million at 30 June 2017. EBITA relative to average capital employed excluding goodwill increased by 11 percentage points compared with 30 June 2017, to 157 per cent.

The Group’s net interest-bearing debt increased by SEK 59 million to SEK 3,888 million over the three-month period. The net debt/equity ratio was 0.8 at 30 June 2017 as well as 30 September 2017.

Cash flow from operating activities improved by 29.3 per cent in the third quarter, to SEK 299 (230) million. Cash flow from investing activities was SEK -390 (-594) million, which was mainly attributable to acquisitions.

FINANCIAL PERFORMANCE – BUSINESS AREAS

Dental

NINE MONTHS THIRD QUARTER Rolling 12 months FULL YEAR
SEK million 2017 2016 change 2017 2016 change change 2016
Net sales 2,809 2,576 9.0% 848 804 5.5% 3,823 6.5% 3,590
EBITA* 517 472 9.5% 155 144 7.1% 700 6.8% 655
EBITA margin* 18.4% 18.3% 0.1 18.2% 17.9% 0.3 18.3% 0.1 18.2%

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 operates in the US. Lifco sells dental technology to dentists in the Nordic countries and Germany, and develops and sells medical record systems in Denmark and Sweden. The business area also includes a number of manufacturers which produce disinfectants, saliva ejectors, bite registration and dental impression materials, bonding agents and other consumables that are sold to dentists through distributors around the world.

Net sales in Dental increased by 9.0 per cent to SEK 2,809 (2,576) in the first nine months of the year. EBITA* improved by 9.5 per cent to SEK 517 (472) million during the period and the EBITA margin* was 18.4 (18.3) per cent.

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. In the first nine months of the year there were no individual events having a substantial impact on the earnings of the dental group as a whole.

In late June Lifco announced that it had acquired the Chinese dental company Perfect Ceramic Dental (PCD). The company was consolidated in September 2017. PCD is a dental laboratory which generates around 80 per cent of net sales from Lifco’s German dental company MDH. After the end of the reporting period Lifco has announced the acquisition of two German dental laboratories. Net sales in 2016 were EUR 1.3 million and there are around 20 employees.

Demolition & Tools

NINE MONTHS THIRD QUARTER Rolling 12 months FULL YEAR
SEK million 2017 2016 change 2017 2016 change change 2016
Net sales 1,627 1,284 26.7% 569 431 32.2% 2,069 19.9% 1,726
EBITA* 409 297 37.8% 148 104 42.4% 510 28.2% 398
EBITA margin* 25.1% 23.1% 2.0 26.0% 24.1% 1.9 24.6% 1.6 23.0%

DDemolition & 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 operations are divided into two divisions, Demolition Robots and Crane & Excavator Attachments, which are roughly equal in terms of sales. As of March 2017, the business area includes Sweden-based Hultdins, a leading manufacturer of tools and attachments for forestry and construction machinery. As of May 2017, Demolition & Tools also includes US-based Solesbee’s, a leading provider of attachments for excavators and wheel loaders in the North American market.

Net sales increased by 26.7 per cent in the first nine months of the year, to SEK 1,627 (1,284) million. The market situation was generally good. Among the larger markets, the US, Australia and Germany saw the fastest growth.

EBITA* increased by 37.8 per cent over the interim period to SEK 409 (297) million and the EBITA margin* expanded by 2.0 percentage points to 25.1 (23.1) per cent.

Systems Solutions

NINE MONTHS THIRD QUARTER Rolling 12 months FULL YEAR
SEK million 2017 2016 change 2017 2016 change change 2016
Net sales 2,805 2,692 4.2% 948 893 6.0% 3,784 3.1% 3,671
EBITA* 369 296 24.7% 123 88 40.9% 494 17.4% 421
EBITA margin* 13.2% 11.0% 2.2 13.1% 9.8% 3.3 13.1% 1.6 11.5%

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

Net sales in Systems Solutions increased by 4.2 per cent to SEK 2,805 (2,692) million in the first nine months of 2016. All divisions increased their sales for the nine-period with the exception of Interiors for Service Vehicles, which generated sales in line with last year, and Forest, where sales dropped significantly.

EBITA* increased by 24.7 per cent for the interim period, to SEK 369 (296) million. The Construction Materials, Contract Manufacturing and Environmental Technology divisions improved their earnings for the nine-month period. The EBITA margin* expanded by 2.2 percentage points to 13.2 (11.0) per cent.

Construction Materials reported good sales and earnings growth during the nine-month period thanks to robust organic growth and improved profitability in all areas of operation. In June Lifco announced that it had acquired Sweden-based Pro Optix, which provides fibre optic transceivers and cables, wavelength multiplexers, test and measurement instruments, and communication equipment for the European fibre optic market. Pro Optix was consolidated in July 2017. In July Lifco announced that it had acquired a majority stake in Hydal of Norway, Scandinavia’s leading manufacturer of aluminium cabinets for outdoor and indoor use. Hydal generated net sales of around NOK 50 million in 2016 and has 25 employees. Hydal was consolidated in July 2017. In July Lifco announced the acquisition of Fiberworks of Norway, which also provides fibre optic transceivers and cables, wavelength multiplexers, test and measurement instruments, and communication equipment for the European fibre optic market. Fiberworks generated net sales of around NOK 93 million in 2016 and has 14 employees. The company was consolidated in July 2017 and will be working with Lifco’s other fibre-optic company, Pro Optix. In July Lifco also announced that it had acquired Elit AS, a Norwegian wholesale supplier of machinery and equipment for electrical installations and electricity production. Elit generated net sales of around NOK 38 million in 2016 and has ten employees. Elit was consolidated in September 2017.

Net sales in the Interiors for Service Vehicles division in the first nine months of the year were slightly lower and profitability declined slightly due to a weaker UK market and increased product development costs.

Contract Manufacturing reported higher net sales and earnings for the nine-month period. The division’s customers include world-leading manufacturers of equipment for the pharmaceutical industry as well as manufacturers of railway equipment, which have high quality requirements for delivery flexibility as well as documentation.

Environmental Technology performed well over the nine-month period as sales and profitability both improved. As of June 2017, the division includes Sweden-based Silvent, which specialises in energy optimisation and occupational health and safety, and has unique expertise in the area of compressed air dynamics.

In Forest, sales and earnings fell over the nine-month period, despite the consolidation from February 2017 of Haglöf Sweden, a world-leading supplier of instruments for professional forestry surveyors, which added to both sales and earnings. The decline in the division is due to continued problems in certain projects and lower sales.

ACQUISITIONS

In the first nine months of 2017 Lifco made the following acquisitions:

Consolidated from month Acquisition Business area Net sales Employees
February Haglöf Sweden Systems Solutions SEK 60m 43
March Hultdin System Demolition & Tools SEK 152m 66
May Solesbee’s Demolition & Tools USD 11m 35
June Silvent Systems Solutions SEK 120m 70
July Pro Optix Systems Solutions SEK 62m 14
July Hydal Systems Solutions NOK 50m 25
July Fiberworks Systems Solutions NOK 93m 14
September Elit Systems Solutions NOK 38m 10
September Perfect Ceramic Dental Dental HKD 24m* 850

Further information on acquisitions is provided on page 16 of the interim report. The figures for net sales and number of employees refer to the 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.

*HKD 24 million refers to external sales, which amounts for approximately 20 per cent of total sales.

 

OTHER FINANCIAL INFORMATION

Employees

The average number of employees in the first nine quarters of the year was 3,886 (3,662) and the number of employees at the end of the period was 4,632 (3,663). Acquisitions added 1,127 employees.

Events after the end of the reporting period

After the end of the reporting period Lifco has announced the acquisition of two German dental laboratories, which will be consolidated in the fourth quarter.

Related party transactions

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

Risks and uncertainties  

The risk factors which have the biggest impact for Lifco are 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.

The Parent Company is affected by the above risks and uncertainties through its function as owner of the subsidiaries.

For further information on Lifco’s risks and risk management, see the annual report for 2016.

Accounting principles

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 principles have been applied in accordance with those which are presented in the annual report for 2016 and should be read in conjunction with these.

The Group is currently evaluating the effects of those new accounting standards which become effective on 1 January 2018 (IFRS 9 and IFRS 15). Senior management’s current assessment is that the standards will not result in any significant differences for the Group.

 

DECLARATION OF THE Board of Directors

The Board of Directors and Chief Executive Officer warrant and declare that this nine-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, 26 October 2017

Carl Bennet Chairman of the Board Gabriel Danielsson Director Ulrika Dellby Director
Erik Gabrielson
Director
Ulf Grunander Director Anna Hallberg Director
Annika Espander Jansson  Director Fredrik Karlsson President and CEO, Director Annika Norlund Director, employee representative

Johan Stern Vice Chairman
Axel Wachtmeister Director Hans-Eric Wallin Director,employee representative

Auditor’s report

Lifco AB (publ) reg. no. 556465-3185

Introduction
We have reviewed the condensed interim financial information (interim report) of Lifco AB (publ) as of 30 September 2017 and the nine-month period then ended. The board of directors and the CEO are responsible for the preparation and presentation of the interim financial information in accordance with IAS 34 and the Swedish Annual Accounts Act. Our responsibility is to express a conclusion on this interim report based on our review.

Scope of review
We conducted our review in accordance with the International Standard on Review Engagements ISRE 2410, Review of Interim Report Performed by the Independent Auditor of the Entity.  A review consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing, ISA, and other generally accepted auditing standards in Sweden. The procedures performed in a review do not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit.  Accordingly, we do not express an audit opinion.

Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the interim report is not prepared, in all material respects, in accordance with IAS 34 and the Swedish Annual Accounts Act, regarding the Group, and with the Swedish Annual Accounts Act, regarding the Parent Company.

Enköping, 26 October 2017

PricewaterhouseCoopers

Eric Salander                                                                            Tomas Hilmarsson

Authorized Public Accountant                                                   Authorized Public Accountant

Auditor in Charge

FINANCIAL CALENDAR

The report for the fourth quarter and year-end report 2017 will be published on 15 February 2018

The annual report for 2017 will be published in week 14 of 2018

The report for the first quarter will be published on 3 May

The report for the second quarter will be published on 18 July

The report for the third quarter will be published on 25 October

ANNUAL GENERAL MEETING 2018

The Annual General Meeting of Lifco AB will be held on Thursday 3 May 2018, at 3 p.m. CET, at Bonnierhuset, Torsgatan 21, Stockholm. Shareholders wishing to raise an issue for discussion at the AGM on 3 May 2018 may do so by submitting their proposal to the Chairman of Lifco by e-mail: ir@lifco.se or by post to: Lifco AB, Attn: Bolagsstämmoärenden, Verkmästaregatan 1, SE-745 85 Enköping. To ensure their inclusion in the notice and thus on the agenda for the AGM, proposals must be received by the Company no later than 1 March 2018.

THE NOMINATION COMMITTEE

Prior to the Annual General Meeting 2018 the Nomination Committee consists of Carl Bennet, Carl Bennet AB, Anna-Karin Celsing, representative of small shareholders, Per Colleen, the Fourth Swedish National Pension Fund (AP4), Hans Hedström, Carnegie Fonder, Marianne Nilsson, Swedbank Robur Fonder and Adam Nyström, Didner & Gerge Fonder. Carl Bennet is chairman of the Nomination Committee.

Shareholders wishing to submit proposals to the Nomination Committee for the 2018 AGM may do so by send an e-mail to ir@lifco.se or writing to: Lifco, Attn: Valberedningen, Verkmästaregatan 1, SE-745 85 Enköping, Sweden.

FURTHER INFORMATION

Media and investor relations: Åse Lindskog, ir@lifco.se, telephone +46 (0)730 24 48 72

TELECONFERENCE

Media and analysts are welcome to call in to a teleconference, where CEO Fredrik Karlsson, CFO Therése Hoffman and Head of Business Area Dental Per Waldemarson will present the interim report. The presentation is expected to take around 20 minutes, after which participants will be invited to ask questions.

Time: Thursday 26 October, 2 p.m. CET

Link to the presentation:

https://tv.streamfabriken.com/lifco-q3-2017

Call-in numbers:

Sweden: +46 8 566 426 92
UK: +44 203 008 98 03
US +1 855 831 59 45

LIFCO IN BRIEF

Lifco acquires and develops market-leading niche businesses with the potential to deliver sustainable earnings growth and robust cash flows. The Group has three business areas: Dental, Demolition & Tools and Systems Solutions. Lifco is guided by a clear philosophy centred on long-term growth, a focus on profitability and a strongly decentralised organisation. At year-end the Lifco Group consisted of 132 companies in 26 countries. In 2016 Lifco reported EBITA of SEK 1,377 million on net sales of SEK 9.0 billion. The EBITA margin was 15.3 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.The information was submitted for publication through the aforementioned contact person on 26 October 2017, at 11:30 a.m. CET.

CONDENSED CONSOLIDATED INCOME STATEMENT 

NINE MONTHS THIRD QUARTER FULL YEAR
SEK million 2017 2016 change 2017 2016 change 2016
Net sales 7,241 6,552 10.5% 2,365 2,128 11.1% 8,987
Cost of goods sold -4,215 -3,975 6.0% -1,368 -1,301 5.1% -5,405
Gross profit 3,026 2,577 17.4% 997 827 20.6% 3,582
Selling expenses -770 -592 30.2% -255 -197 29.7% -831
Administrative expenses -1,093 -1,007 8.5% -360 -323 11.9% -1,412
Development costs -74 -65 13.3% -24 -20 16.7% -88
Other income and expenses -26 -3 767% -15 -7 114% 1
Operating profit 1,063 910 16.9% 343 280 22.3% 1,252
Net financial items -32 -21 52.5% -11 -3 212% -33
Profit before tax 1,031 889 16.0% 332 277 19.9% 1,219
Tax -253 -222 13.7% -78 -69 12.5% -292
Net profit for the period 778 667 16.8% 254 208 22.4% 927
Profit attributable to:
Parent Company shareholders 763 653 17.0% 248 202 23.2% 908
Non-controlling interests 15 14 6.3% 6 6 19
Earnings per share before and after dilution for the period, attributable to Parent Company shareholders 8.40 7.18 17.0% 2.73 2.22 23.0% 9.99
EBITA* 1,222 997 22.6% 404 316 28.0% 1,377
Depreciation of tangible assets 83 69 20.5% 30 24 21.3% 94
Amortisation of intangible assets 7 7 4.4% 2 2 1.2% 10
Amortisation of intangible assets arising from acquisitions 140 83 69.3% 52 31 69.9% 121

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

NINE MONTHS THIRD QUARTER FULL YEAR
SEK million 2017 2016 change 2017 2016 change 2016
Net profit for the period 778 667 16.8% 254 208 22.4% 927
Other comprehensive income
Items which can later be reclassified to profit or loss:Hedge of net investment 50 -5 -1 -21 -23
Transla­tion differ­encesTax related to other comprehensive income -90-11 1600 -260 974 1594
Total comprehensive income for the period 727 822 -11.5% 227 288 -21.0% 1,067
Comprehensive income attributable to:
Parent Company shareholders 713 804 -11.3% 221 279 -20.7% 1,046
Non-controlling interests 14 18 -20.6% 6 9 -30.6% 21
727 822 -11.5% 227 288 -21.0% 1,067

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, Interiors for Service Vehicles, Contract Manufacturing, Environmental Technology and Forest.

NET SALES TO EXTERNAL CUSTOMERS

No sales are made between the segments.

NINE MONTHS THIRD QUARTER Rolling 12 months FULL YEAR
SEK million 2017 2016 change 2017 2016 change change 2016
Dental 2,809 2,576 9.0% 848 804 5.5% 3,823 6.5% 3,590
Demolition & Tools 1,627 1,284 26.7% 569 431 32.2% 2,069 19.9% 1,726
Systems Solutions 2,805 2,692 4.2% 948 893 6.0% 3,784 3.1% 3,671
Group 7,241 6,552 10.5% 2,365 2,128 11.1% 9,676 7.7% 8,987

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:

NINE MONTHS THIRD QUARTER Rolling 12 months FULL YEAR
SEK million 2017 2016 change 2017 2016 change change 2016
Dental 517 472 9.5% 155 144 7.1% 700 6.8% 655
Demolition & Tools 409 297 37.8% 148 104 42.4% 510 28.2% 398
Systems Solutions 369 296 24.7% 123 88 40.9% 494 17.4% 421
Central Group functions -73 -68 7.2% -22 -20 9.8% -102 5.1% -97
EBITA before acquisition costs 1,222 997 22.6% 404 316 28.0% 1,602 16.4% 1,377
Acquisition costs -19 -4 344% -9 -5 99.2% -19 410% -4
EBITA 1,203 993 21.2% 395 311 27.0% 1,583 15.4% 1,373
Amortisation of intangible assets arising from acquisitions -140 -83 69.3%  -52 -31 69.9%  -178 47.3%  -121 
Net financial items -32 -21 52.5%  -11 -3 212% -44 33.2%  -33
Profit before tax 1,031 889 16.0% 332 277 19.9% 1,361 11.7% 1,219

CONDENSED CONSOLIDATED BALANCE SHEET

SEK million 30 Sep 2017 30 Sep 2016 31 Dec 2016
ASSETS
Intangible assets 8,017 6,756 6,824
Tangible fixed assets 530 459 464
Financial assets 113 105 109
Inventories 1,353 1,163 1,155
Accounts receivable – trade 1,276 1,119 1,046
Current receivablesCash and cash equivalents 317237 354410 236293
Assets held for sale 26
TOTAL ASSETS 11,843 10,392 10,127
EQUITY AND LIABILITIES
Equity 5,150 4,516 4,758
Non-current interest-bearing liabilities incl. pension provisions 38 1,121 1,120
Other non-current liabilities and provisions 917 518 597
Current interest-bearing liabilities 4,087 2,600 2,191
Accounts payable – trade 539 528 507
Other current liabilities 1,112 1,109 954
TOTAL EQUITY AND LIABILITIES 11,843 10,392 10,127

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

Attributable to Parent Company shareholders
SEK million 30 Sep 2017 30 Sep 2016 31 Dec 2016
Opening equity 4,712 3,939 3,939
Comprehensive income for the period 713 804 1,046
Dividend -318 -273 -273
Closing equity 5,107 4,470 4,712
Equity attributable to:
Parent Company shareholders 5,107 4,470 4,712
Non-controlling interests 43 46 46
5,150 4,516 4,758

CONDENSED CONSOLIDATED CASH FLOW STATEMENT 

NINE MONTHS THIRD QUARTER FULL YEAR
SEK million 2017 2016 2017 2016 2016
Operating activities
Operating profit 1,063 910 343 280 1,252
Non-cash items 235 132 89 44 211
Interest and financial items, net -32 -21 -11 -3 -33
Tax paid -297 -232 -81 -67 -295
Cash flow before changes in working capital 969 789 340 254 1,135
Changes in working capital
Inventories -119 -60 -34 1 -57
Current receivables -132 -118 -26 -13 11
Current liabilities 19 44 19 -12 -5
Cash flow from operating activities 737 655 299 230 1,084
Business acquisitions and sales, net -1,221 -1,517 -363 -569 -1,608
Net investment in tangible fixed assets -105 -80 -25 -24 -104
Net investment in intangible assets -7 -3 -2 -1 -9
Cash flow from investing activities -1,333 -1,600 -390 -594 -1,721
Borrowings/repayment of borrowings, net 907 1,174 108 356 710
Dividends paid -336 -283 -1 -3 -285
Cash flow from financing activities 571 891 107 353 425
Cash flow for the period -25 -54 16 -11 -212
Cash and cash equivalents at beginning of periodCash and cash equivalents in businesses held for sale 293 464-24 227 429-24 464
Transla­tion differ­ences -31 24 -6 16 41
Cash and cash equivalents at end of period 237 410 237 410 293

ACQUISITIONS IN 2017

Nine new businesses were consolidated in the first nine months of the year. The acquisitions comprised all shares of Elit, Haglöf Sweden, Hultdin System and Perfect Ceramic Dental as well as majority stakes in Fiberworks, Hydal, Pro Optix, Silvent and Solesbee’s.

The purchase price allocation includes the above nine acquisitions. Purchase price allocations are preliminary until one year after the acquisition date.

Expenses of SEK 14 million related to the nine acquisitions are included in administrative expenses in the consolidated income statement for the first nine months of 2017. If the businesses had been consolidated from 1 January 2017 consolidated net sales would have increased by around SEK 257 million. The nine acquisitions would have had a positive impact on earnings if the companies had been consolidated from 1 January 2017.

Acquired net assets
Net assets, SEK million Carrying amount Value adjustment Fair value
Trademarks, customer relationships, licences 3 827 830
Tangible assets 49 49
Inventories, trade and other receivables 246 -27 219
Trade and other payables -154 -165 -319
Cash and cash equivalents 130 130
Net assets 274 635 909
Goodwill 610 610
Total net assets 274 1,245 1,519
Effect on cash flow, SEK million
Consideration 1,519
Consideration not paid -174 
Cash and cash equivalents in acquired companies -130
Consideration paid relating to acquisitions from previous years 6
Total cash flow effect 1,221

FINANCIAL INSTRUMENTS 

CARRYING AMOUNT FAIR VALUE
SEK million 30 Sep 2017 30 Sep 2016 30 Sep 2017 30 Sep 2016
Loans and receivables
Accounts receivable – trade 1,276 1,119 1,276 1,119
Other non-current financial receivables 5 3 5 3
Cash and cash equivalents 237 410 237 410
Total 1,518 1,532 1,518 1,532
Liabilities at fair value through profit or loss
Other liabilities 225 16 225 16
Other financial liabilities
Interest-bearing borrowings 4,089 3,672 4,089 3,672
Accounts payable – trade 539 528 539 528
Total 4,853 4,216 4,853 4,216

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. Other liabilities classified as financial instruments refer to mandatory put/call options related to non-controlling interests.

KEY PERFORMANCE INDICATORS

ROLLING TWELVE MONTHS TO 201730 SEP 201631 DEC 201630 SEP Net sales, SEK million 9,676 8,987 8,673 Change in net sales, % 7.7 13.7 9.8 EBITA*, SEK million 1,602 1,377 1,319 EBITA margin*, % 16.6 15.3 15.2 EBITDA*, SEK million 1,721 1,481 1,420 EBITDA margin, % 17.8 16.5 16.4 Capital employed, SEK million 8,460 7,381 6,922 Capital employed excl. goodwill and other intangible assets, SEK million 1,020 974 969 Return on capital employed, % 18.9 18.7 19.1 Return on capital employed excl. goodwill, % 157 141 136 Return on equity, % 21.0 21.0 21.4 Net interest-bearing debt, SEK million 3,888 3,018 3,295 Net debt/equity ratio 0.8 0.6 0.7 Net debt/EBITDA* 2.3 2.0 2.3 Equity/assets ratio, % 43.5 47.0 43.5 Number of shares, thousand 90,843 90,843 90,843 Average number of employees 3,886 3,524 3,662

CONDENSED PARENT COMPANY INCOME STATEMENT

NINE MONTHS THIRD QUARTER FULL YEAR
SEK million 2017 2016 2017 2016 2016
Administrative expenses -91 -79 -28 -24 -113
Other operating income* 40 90
Operating profit -91 -39 -28 -24 -23
Net financial items** 635 376 237 -18 544
Profit after financial items 544 337 209 -42 521
Appropriations -10
Tax 1 28 3 17 9
Net profit for the period 545 365 212 -25 520

* Preliminary invoicing of Group-wide services.

**Net financial items include received dividends of SEK 548 (407) million in the nine-month period.

CONDENSED PARENT COMPANY BALANCE SHEET

SEK million 30 Sep 2017 30 Sep 2016
ASSETS
Tangible fixed assets 0 0
Financial assets 4,034 4,243
Current receivables 4,128 2,819
Cash and cash equivalents 32 210
TOTAL ASSETS 8,194 7,272
EQUITY AND LIABILITIES
Equity 2,660 2,278
Untaxed reserves 41 32
Non-current interest-bearing liabilities 1,088
Current interest-bearing liabilities 4,089 2,573
Current non-interest-bearing liabilities                          1,404 1,301
TOTAL EQUITY AND LIABILITIES 8,194 7,272
Pledged assets
Contingent liabilities 23 42

OBJECTIVE AND DEFINITIONS

Return on equity Net profit for the period divided by average equity.
Return on capital employed EBITA before acquisition costs divided by capital employed.
Return on capital employed excluding goodwill and other intangible assets EBITA acquisition costs 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. 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 fixed 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. This is indicated by an asterisk.
EBITDA margin EBITDA divided by net sales.
Net debt/equity ratio Net interest-bearing debt divided by equity.
Earnings per share Profit after tax attributable to Parent Company shareholders divided by average number of outstanding shares.
Net interest-bearing debt Lifco uses the alternative KPI net interest-bearing 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, bond loans and interest-bearing pension provisions less estimated contingent consideration for acquisitions, and 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, calculated as the average of the last four quarters.
Capital employed excluding goodwill and other intangible assets Capital employed excluding goodwill and 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, 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 1920.

EBITA compared with financial statements in accordance with IFRS

SEK million NINE MONTHS2017 NINE MONTHS2016 FULL YEAR2016
Operating profit 1,063 910 1,252
Amortisation of intangible assets arising from acquisitions 140 83 121
EBITA 1,203 993 1,373
Acquisition costs 19 4 4
EBITA* before acquisition costs 1,222 997 1,377

EBITDA compared with financial statements in accordance with IFRS

SEK million NINE MONTHS2017 NINE MONTHS2016 FULL YEAR2016
Operating profit 1,063 910 1,252
Depreciation of tangible assets 83 69 94
Amortisation of intangible assets 7 7 10
Amortisation of intangible assets arising from acquisitions 140 83 121
EBITDA 1,293 1,069 1,477
Acquisition costs 19 4 4
EBITDA* before acquisition costs 1,312 1,073 1,481

Net interest-bearing debt compared with financial statements in accordance with IFRS

SEK million 30 Sep 2017 30 Sep 2016 31 Dec 2016
Non-current interest-bearing liabilities including pension provisions 38 1,121 1,120
Current interest-bearing liabilities 4,087 2,600 2,191
Calculated contingent consideration for acquisitions -16
Cash and cash equivalents -237 -410 -293
Net interest-bearing debt 3,888 3,295 3,018

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

SEK million 30 Sep 2017 30 Jun 2017 31 Mar 2017 31 Dec 2016
Total assets 11,843 11,308 10,872 10,127
Cash and cash equivalents -237 -227 -255 -293
Interest-bearing pension provisions -36 -35 -34 -37
Non-interest-bearing liabilities -2,568 -2,329 -2,200 -2,057
Capital employed 9,002 8,717 8,383 7,740
Goodwill and other intangible assets -8,017 -7,656 -7,265 -6,824
Capital employed excluding goodwill and other intangible assets 985 1,061 1,118 916

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 Q3 2017 Q2 2017 Q1 2017 Q4 2016
Capital employed 8,460 9,002 8,717 8,383 7,740
Capital employed excluding goodwill and other intangible assets 1,020 985 1,061 1,118 916
Total
EBITA* 1,602 404 433 385 380
Return on capital employed 18.9%
Return on capital employed excl. goodwill and other intangible assets 157%