Svolder : Interim Report #1 21/22

Interim Report 1 2021/2022

Positive net worth trend on a volatile stock market

The Managing Director's comments, page 2

Current reporting period

3 months: 1st September-30th November 2021

• The company posted a result for the period of SEK 291 million (441 m), corresponding to SEK 11.40 (17.20) per share
• The net worth increased by 4.1%, including reinvested dividend, to SEK 286.80 per share
• The listed price of the Class B share increased by 19.8%, including reinvested dividend, to SEK 357.00 per share
• The Carnegie Small Cap Return Index increased by 0.8%
• A dividend of SEK 64 million, corresponding to SEK 2.50 per share, was paid during the period.

Major contributors to net worth

• Positive: Troax, New Wave Group, Beijer Electronics Group
  - Negative: XANO Industri, ITAB Shop Concept

Major changes in the equities portfolio

• Bought: Nordic Waterproofing, Arla Plast, Elanders
  - Sold: GARO

Latest published figures

3rd December 2021

Share price	Net worth
351.60	276

SEKSEK/share

Dear

Shareholder,

		Volatile times			a good degree of caution and without making any formal
The 2021/2022 financial year began on 1st September. Fol-	promises for the future, it is clear that the goals to date have
been well met.
lowing a very strong 2020/2021 for the Swedish stock mar-
The AGM on 18th November decided on a share divi-
ket in general and Svolder in particular, the beginning of the
dend in line with the Board's proposal, i.e. SEK 2.50 per
new financial year has been charac-
					share. This was another raise, and
terised by increased volatility. Mean-
»	It is also worth emphasising	average annual dividend growth is
while Svolder's growth in net worth,
around 12 per cent since the policy
adjusted for dividends, of just over 4		that in every financial year
	became more cash-flow oriented
per cent for the three-month period		since its inception in 1993,	nine years ago. It is also worth em-
continues to outperform our com-
	Svolder has paid out a share-	phasising that in every financial year
parison index, and the growth in the
	since its inception in 1993, Svolder
share price for the quarter is an excel-		holder dividend, totalling the
	has paid out a shareholder dividend,
lent 20 per cent. Among the portfo-		equivalent of SEK 50 per share	totalling the equivalent of SEK 50 per
lio companies, Troax and New Wave
	or SEK 1.3 billion in all.  »	share or SEK 1.3 billion in all. So pay-
Group in particular made a contri-
	ing a dividend is very much part of
bution, a continuation of their strong
					Svolder's DNA, something that was
growth in value from the previous financial year.
	truly highlighted in 2020, when many of our portfolio com-
Svolder's goal is, based on a fully invested equities port-
panies decided against a dividend in the early days of the
folio, to create a positive long-term net worth trend that
pandemic as a precaution.
considerably exceeds the Swedish small cap market, meas-
ured as Carnegie Small Cap Return Index (CSRX). With
			Total return1) 10 years in % on 30th November 2021
1800											1800
1600	Svolder	1 year	3 years	5 years 10 years				1600
1400		Net worth	82		191	255	1113				1400
	Share price (Class B) 102		301	317	1727
1200	Stock market index									1200
1000		CSRX	40		121	163	610				1000
800		SIXRX	34		93	121	354				800
600											600
400											400
200											200
0											0
2011	2012	2013	2014		2015	2016	2017	2018	2019	2020	2021

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.

Infront and Svolder Morningstar, Source:

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Accumulated dividend per share, SEK

50

40

30

20

10

0

1995/1996

1996/1997

1997/1998

2000/2001

2001/2002

2002/2003

2003/2004

2004/2005

2005/2006

2006/2007

2007/2008

2008/2009

2009/2010

2010/2011

2011/2012

2012/2013

2013/2014

2014/2015

1993/1994

1994/1995

1998/1999

1999/2000

2015/2016

2016/2017

2017/2018

2018/2019

2019/2020

2020/2021

Decided/proposed annual dividend

Accumulated dividend

Higher profits and

interest rates?

The COVID-19 pandemic continues to affect everyday life and to challenge the way we socialise, do business and access medical assistance. With variants of the coronavirus constantly emerging, the scientifically founded hope is that a high vaccination rate, testing, and track-

ing/tracing will be able to mitigate the severely adverse effects of the pandemic. Companies' ability to adapt is high, even though shortcomings in supply chains, goods offerings and logistics are having a palpable impact in the form of dramatic price rises for input goods and transpor- tation. The rate of inflation is therefore high at present. Several central banks are reporting an above-normal rate, and believe that it will normalise at a lower level moving forward. Other economic analysts are not so sure. To date, investors on the government bond markets have not responded with alarm, even though interest rates have generally been trending upwards.

As we wrote in our recently published annual report, the interest rate trend is pivotal to stock market develop-

ments over the next few years. Along with profit development it will be one of the most telling parameters of which companies and sectors are best placed to successfully attract investor capital. For Svolder's part, we agree with the forecast as regards positive trends for profit and net sales, but have a more negative view of interest rate development. Further outbreaks of COVID-19, with negative economic and human impacts, could change that outlook. Personally, I feel that the American President expressed himself well regarding the new omicron variant, when addressing the nation after Thanksgiving: "First, this variant is a cause for concern, not a cause for panic. We have the best vaccine in

the world, the best medicines, the best scientists." (White House, 29th November 2021).

Sweden needs

its industry

In Sweden we now have a new government, with a new Prime minister and new ministers for the environment, enterprise and energy. Let us hope that this brings about a change to the negative, bureaucratic approach that has blighted recent years' Swedish investments in nuclear energy, electricity distribution, mining, forestry and infrastructure. Swed- ish and international companies are ready to develop the culture that has long characterised Swedish industry, and which is necessary for future environmental improvement and prosperity that will be reflected in most parts of the country. We need good access to cement, forest raw materi- als, and reliable, reasonably priced electricity across the na- tion. The latest causes for concern are upcoming licensing processes for existing hydro power plants, which already at the start are scheduled to reduce electricity production that can be regulated by 1.5 TWh - equivalent to unplannable power from about five wind farms the size of Lillgrund in Öresund Sound, the biggest in the Nordics. Sweden needs

more hydro power that can be regulated, not less, if the ambitious goals for fossil- free transport systems and carbon-neutral cement, mining and steel production are to be met.

Investment

opportunities despite many highly valued equities

Svolder's portfolio focus remains un- changed. We believe that the company's primary investment focus - listed companies with market values under SEK 20 billion - include many interesting investment opportunities, despite a generally high stock market valuation. This

applies both to existing portfolio holdings, and to new additions from IPOs. Svolder has signed an agreement to be an anchor investor in the IPO of Viva Wine Group, and has also subscribed for shares in the primarily Småland-based real estate and construction company Nivika Fastigheter. These investments will go ahead after the closing day of 30th November and will total SEK 298 million.

Yours faithfully

ulf hedlundh

Managing Director

3

the equities portfolio

30th November 2021

					% of the	% of the
		Share price	Market cap.	% of	company's	company's
Share	Number	(SEK)1)	(SEK m)	net worth	capital 2)	votes2)
Troax Group	2,522,350	422.50	1,066	14.5	4.2	4.2
GARO	4,364,553	222.50	971	13.2	8.7	8.7
Nordic Waterproofing	3,742,952	217.00	812	11.1	15.5	15.5
New Wave Group	4,692,000	169.20	794	10.8	7.1	1.9
XANO Industri	1,730,500	308.00	533	7.3	5.9	1.8
FM Mattsson Mora Group	1,980,568	249.00	493	6.7	14.0	6.1
Elanders	2,270,935	164.40	373	5.1	6.4	4.4
Beijer Electronics Group	4,381,875	77.10	338	4.6	15.1	15.2
Nolato	2,455,760	106.00	260	3.5	1.0	0.9
Wästbygg Gruppen	2,583,916	99.60	257	3.5	8.0	6.8
Profoto Holding	1,515,151	119.20	181	2.5	3.8	3.8
ITAB Shop Concept	12,172,550	13.20	161	2.2	5.6	5.6
Lime Technologies	422,665	354.00	150	2.0	3.2	3.2
Arla Plast	2,639,527	49.10	130	1.8	13.2	13.2
MilDef Group	2,808,182	46.00	129	1.8	7.7	7.7
Boule Diagnostics	2,414,194	53.10	128	1.7	12.4	12.4
Serneke Group	2,077,608	49.60	103	1.4	7.2	2.8
Saab	379,696	236.00	90	1.2	0.3	0.2
AGES Industri	584,000	57.00	33	0.5	8.3	2.5
Equities portfolio			7,002	95.4
Net receivable (+)/net debt (-)			340	4.6
Total/net worth			7,342	100.0
			286.80	SEK per Svolder share

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

1. In calculating the market capitalisation (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.

The following information, for example, can be obtained from the table. Svolder's largest holding is Troax, which has a market value of SEK 1,066 million, corresponding to 14.5 per cent of net worth. A one-per-cent change in Troax's share price would affect Svolder's net worth by SEK 11 million, which equates to SEK 0.40 per Svolder share.

Interim Report 1

Current reporting period:

1st September - 30th November 2021

Market commentary

The interim reporting period, 1st September-30th Novem- ber, was characterised by volatile stock markets around the world. Following a weak September, the markets increased up to the end of November, at which point the discovery of a new coronavirus variant (omicron) caused a negative reaction on the capital markets. All in all, however, the changes in value on the stock exchanges are relatively small, with a minor downturn in Europe (-2.8 per cent) and among Swedish OMXS30 companies (-3.7 per cent). The Amer- ican stock market showed positive figures (1.1 per cent), bolstered by a considerably strengthened US dollar (4.6 per cent). The World Index, measured in SEK, rose just over 2 per cent during the three-month period.

The Swedish small cap market, measured as CSRX, showed a marginally positive development in value (0.8 per cent). In addition to mounting concerns over the pandemic, it is likely that many investors have also chosen to take home profits from previously strong markets during the second half of 2020 and 2021.

Currency movements for the Swedish krona were vola- tile. Following a strong start to the current reporting pe- riod, the SEK weakened in November. Minor currencies, such as Sweden's, tend to suffer in times of financial unease. Moreover, expectations that the Riksbank would adopt a less expansive monetary policy did not materialise. The strength of the US dollar was also palpable towards the end of the current reporting period. Overall, the change for the SEK was limited against the euro (-0.4 per cent), while it was larger, as mentioned, compared to the US dollar.

American government bond interest rates particularly rose during the reporting period, although this process did slow towards the end of the period. Minor increases were observed in Europe. The economy continues to grow stronger in most countries of the world, which has led to disruptions in supply chains and higher prices for input goods. Rates of inflation have been clearly rising, at least in the short term.

Commodity prices developed rather weakly during the three-month period, and generally speaking prices for most industrial commodities have risen more slowly during autumn 2021. Since commodity prices are generally listed in USD, this did mean that prices continued to increase measured in SEK. Oil prices were volatile, and were strong at the beginning of the period and weak at the end.

Index performance (12 months)

155

140

125

110

95

dec	jan feb	mar apr may jun jul aug sep oct nov
2020	2021
	CSRX		SIXRX

Share price trends

The closing price for Svolder's Class B share on the balance sheet date was SEK 357.00. This equates to an increase during the current reporting period of 19.8 per cent, including reinvested dividend. The Class B share's value on the closing day represented a premium of 24.4 per cent on its net worth. The Class B share was traded on all trading days during the period, with an average of just over 67,000 shares traded each day of trading on Nasdaq Stockholm.

Svolder's Class A share is only traded through three auctions (known as Auction Only Market Segments) during the trading day: one on opening, one at about 13.30 and one when the market closes. The closing price for Svolder's Class A share on the balance sheet date was SEK 400.00, which means that the Class A share was valued at a premium of 39.4 per cent in relation to net worth.

Under the terms of Svolder's Articles of Association, Class A shareholders wishing to convert Class A shares into Class B shares may do so by application to Svolder's Board of Directors.

Infront Source:

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