Volati : Year-end report January–December 2017

Q4 October-December 2017.

• Net sales increased 94.6% to SEK 1,517.2m (779.5)
• EBITA rose 94.6% to SEK 141.7m (72.8)
• Net profit after tax increased 103.4% to SEK 92.5m (45.5)
• Earnings per common share after deduction of preference share dividends amounted to SEK 0.95 (0.43).
• On 10 November, T-Emballage was acquired with sales of SEK 584m and an EBITA of SEK 40m for 2016. Following the acquisition, T-Emballage became a business unit within the Trading Business Area
• In December, Volati issued a five-year SEK 600m bond that carries an interest rate of +3.5 percentage points over 3M STIBOR. In parallel, Akademi­bokhandeln repurchased SEK 192m of bonds outstanding. After the repurchase, Akademibokhandeln had SEK 308m in bonds outstanding

Full-year January-December 2017.

• Net sales increased 35.9% to SEK 4,356.1m (3,206.5)
• EBITA rose 18.3% to SEK 376.5m (318.4)
• Net profit after tax increased 20.4% to SEK 241.4m (200.5)
• Earnings per common share after deduction of preference share dividends amounted to SEK 2.19 (2.07)

Events after the reporting period.

• The Board proposes distribution of a dividend to holders of common shares of SEK 40.2m, corresponding to SEK 0.50 (0.50) per common share and a dividend of SEK 64.2m to holders of preference shares, corresponding to SEK 40 per preference share. The preference share dividend is payable at SEK 10.00 per preference share each quarter until the 2019 Annual General Meeting

Comments from the CEO

We increased EBITA by 18% but are disappointed by 2017.

As a long-term owner of operating companies, we know that profitability varies over time and there can be large fluctuations between quarters and years. As an owner of 14 businesses, it is also likely that challenges will arise in one or even a few of them. However, in 2017, a number of our companies did not deliver in line with expectations. That this should occur in our first year as a listed company with a large number of new owners in Volati was particularly disappointing. Despite this, for the full year we can report EBITA growth of slightly more than 18% together with a strong cash flow and low net debt.

Weak performance at a number of our business units

The trend for organic EBITA growth was down 18% for the year, primarily due to weak performances from Corroventa, Tornum, NaturaMed Pharma and Me&i. The underlying reasons for the poor performances differed. Corroventa stands strong and continues to perform very well, but with no major floods in the year, earnings were significantly down on 2016. Tornum posted healthy sales but had weak project profitability, which was highly disappointing. Me&i and NaturaMed Pharma are facing structural challenges due to changed consumer behaviour. In view of the negative organic growth trend in 2017, it is important to take note that average organic EBITA growth over the last five years was slightly more than 8%. To reach our long-term target of 5% organic EBITA growth, we have decided to take a number of actions to improve corporate governance and to lower our costs.

Reinforced business area organisation with expanded mandate

We have strengthened our business area organisation by appointing Nicklas Margård, Johan Ekström and Håkan Karlström as business area managers. Business area managers are responsible for business development, monitoring operations and add-on acquisitions among other duties. In parallel, we have reorganised and eliminated three roles at head office to achieve a clearer allocation of responsibility and to nurture local entrepreneurial expertise. The objectives of these changes include increasing focus on business development and business follow-up. This is of particular importance for those companies that have faced difficulties in 2017. Among other things, this change means that the central position of Investment Director is being eliminated and allocated to the Group management and business area managers. Together, these changes will enable us to take good, quick decisions close to operations and, thereby provide our management teams with favourable preconditions for building up their operations and delivering results.

Akademibokhandeln stands solid

The fourth quarter is by far Akademibokhandeln's strongest earnings period and our new business area, which joined the Group in July 2017, has contributed EBITA of SEK 105m and an very healthy cash flow since its acquisition. During the year, Akademibokhandeln's investments in continued business development included the development of a new streaming service for audio books. We are pleased that Akademibokhandeln is part of the Group and support the management in their efforts to continue delivering good stories and literature in all channels and formats to Akademibokhandeln's more than 4 million customers, of which 1.7 million are members of their customer club.

Low leverage and high capacity for acquisitions

During the fourth quarter, we completed the third acquisition of the year, T-Emballage, which with its high profitability and strong offering in building materials and packaging fits well into the Trading Business Area. Together, this means that over the year we acquired businesses at reasonable valuations that contributed annual EBITA of SEK 139m, which is in line with our long-term objectives. We have low leverage, unutilised credit facilities and SEK 438m in cash, which means we have considerable financial scope for making continued acquisitions.

2017 was a disappointment. But I am confident that with our business model and our capacity to address challenges as they appear, we will continue to deliver long-term value, just as we have since our start in 2003. I look forward to continuing to build Volati.

Mårten Andersson, CEO

About Volati

Volati is a Swedish industrial group formed in 2003, which comprises some 50 operating companies divided into 14 business units organised in four business areas: Trading, Consumer, Industry and Akademibokhandeln. Volati acquires mainly companies with proven business models, leading market positions and strong cashflow at reasonable valuations and develops these with an emphasis on long-term value creation. Volati's strategy is to build on the identity and entrepreneurial spirit of the companies, adding, leadership, expertise, processes and financial resources. Volati has operations in 16 countries, with a total of about 1,900 employees and annual sales of approximately SEK 5.5bn. Volati's ordinary shares and preference shares are listed on Nasdaq Stockholm. Further information is available atwww.volati.se.