Annual Report 2010 2 Traction Annual Report 2010 Shareholder Information
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ANNUAL REPORT 2010 2 TRACTION ANNUAL REPORT 2010 SHAREHOLDER INFORMATION Ankarsrum Assistent AB SHAREHOLDER INFORMATION 2011 May 9 Interim Report for the period January – March May 9 Annual General Meeting 2011 July 21 Interim Report for the period January – June October 27 Interim Report for the period January – September Subscription to financial information via e-mail may be made at traction.se, or by e-mail to [email protected]. All reports during the year will be available at the Company’s website. Traction’s official annual accounts are available for downloading at the website well before the Annual General Meeting. TRACTION ANNUAL REPORT 2010 3 CONTENTS CONTENTS 4 2010 SUMMARY 6 PRESIDENT’S STATEMENT 8 TRACTION’S BUSINESS 1 5 BUSINESS ORGANISATION 16 LISTED ACTIVE HOLDINGS 19 UNLISTED ACTIVE HOLDINGS 23 SUBSIDIARIES 26 OWNERSHIP POLICY 28 TRACTION FROM AN INVESTOR PERSPECTIVE 32 A SMALL SELECTION OF TRANSACTIONS OVER THE PAST TEN YEARS 36 THE TRACTION SHARE 38 BOARD OF DIRECTORS 3 9 ADDRESSES Nilörngruppen AB 4 TRACTION ANNUAL REPORT 2010 TRACTION IN BRIEF 2010 SUMMARY • Profit after taxes amounted to MSEK 206 (SEK 12.11 per share). • The change in value of securities was MSEK 110 (267). • Operating profit in the operative subsidiaries amounted to MSEK 67 (–13). • Underwriting of new issues in Switchcore, Rörvik Timber, PA Resources and Alm Brand, which generated revenue of MSEK 15.5 (7.8). • The return on equity was 15 (25) %. • Equity per share amounted to SEK 95 (85). • Sharp increases in profit of Nilörngruppen and Ankarsrum Motors. • Traction’s liquid capacity for new, active engagements amounts to MSEK 800. KEY FINANCIAL INDICATORS 2010 2009 2008 2007 2006 Result for the year, MSEK* 193 273 –171 81 175 Earnings per share, SEK 12 17 –10 5 11 Shareholders’ equity, MSEK 1,495 1,350 1,147 1,348 1,297 Equity per share, SEK 95 85 70 82 78 Market price at end of period, SEK 73 68 54 68 76 Market price/equity per share, % 77 80 76 83 97 Return on equity, % 15 25 –13 6 15 Equity ratio, % 93 92 92 90 90 Dividend per share, SEK* 1.85 1.85 2.50 1.85 1.10 Dividend yield, % 2.5 2.7 4.6 2.7 1.4 *) Attributable to the Parent Company’s equity holders. **) Dividend for 2010 as proposed by the Board of Directors. DISTRIBUTION OF EQUITY ATTRIBUTABLE TO THE PARENT COMPANY’S EQUITY HOLDERS Aktiva noterade innehav 20% Unlisted holdings, 9%, including, i.a. Other listed holdings 29% Bricad Övriga noterade innehav 29% Recco Other financial assets 10% Banking Automation Dotterföretag 7% Cash and cash equivalents, 25% Active listed holdings, 20%, including Onoterade innehav 9% OEM International Subsidiaries, 7%, including, i.a. Övriga nansiella instrument 10% Softronic Nilörngruppen PartnerTech Ankarsrum Motors Likvida medel 25% Hifab Duroc TRACTION ANNUAL REPORT 2010 5 TRACTION IN BRIEF Development and enhancement of companies Traction is a publicly traded investment company with ownership interests in listed and unlisted companies. Our operations are based on our own methodology for developing and refining the companies in which Traction is an owner. The primary focus of the methodology is customer relationships, capital flows and risk management. This methodology has evolved over Traction’s more than 35-year history. Traction does not focus on specific industries, because our method is based on business acumen, which is applicable regardless of industry affilia- tion. Traction’s role as owner is based on an active and long-term engagement, together with an entrepreneur or corporate management. In addition hereto, Traction conducts investment operations aimed at achieving a good return on the Company’s capital. BUSINESS CONCEPT STRATEGY To apply Traction’s business development method in To achieve Traction’s goals, the following are wholly and partially owned companies, thereby gene- required: rating high returns and value growth. • The ability to choose the right projects, in reality, the right partner – corporate managers. BUSINESS PHILOSOPHY • We have a long-term approach. • Project Managers who can provide corporate managers with the support and complementary • We are not seeking to build up a corporate group. expertise they require to carry out the business We work instead with a number of independent project. companies – our clients − whose increase in value will be realised in the longer term. • Project Managers with varying expertise and back- ground to cover the varying needs of each • Our sphere of activity lies within the general trans- company. formation of companies. The requisite technical and industry expertise must be present in the • Project Managers with the ability to step in as company. corporate managers during transitional periods, until a new manager has been appointed. • Our primary objective is to sell management; financing is a secondary priority. It is the • Co-operation partners who can act as project combination that is interesting. manager, director, chief executive and/or joint owner. GOALS • Sufficient financial resources to take on interesting • To achieve average annual growth of shareholders’ projects. equity of at least 25 percent. • Consistent application of our methodology to • To create profitable growth in our wholly owned minimize risk and raise the return on investment. and partially owned companies. • To minimise the risk and increase the return on EXIT STRATEGY our projects. It is important to Traction that our companies display long-term growth and earning power. Our basic tenet is that we regard our ownership as “perpetual”, but our shares are, in principle, always for sale at the right price and to a better owner. We define a better owner as an owner that is able to do more for the company than Traction can. 6 TRACTION ANNUAL REPORT 2010 PRESIDENT’S STATEMENT During 2010 Traction’s subsidiaries delivered a robust earnings improvement Dear shareholders, For 2010 Traction recorded a profit of MSEK 193 attri- Without passing judgement on what today’s market butable to the Parent Company’s equity holders, equi- value of Traction’s subsidiaries is, it is quite obvious valent to a return on equity of 15 percent. If one were that the value exceeds equity by a considerable mar- to exclude the funds that Traction has invested in gin. This means that the discount assigned to Traction, interest-bearing investments with a low rate of return as well as most other listed investment companies, is (and low risk) and deposits with banks, the return ex- clearly greater than what is indicated when estima- ceeded 20 percent. However, the reported result does tes are based on the reported key financial indicators. not provide a totally fair picture of the increase in va- Regardless of whether a discount or a premium is re- lue that occurred during the past year, primarily as a asonable or not, I draw the conclusion that 2010 was consequence of the sharply higher earnings in subsi- a year when Traction’s return significantly exceeded diaries Ankarsrum Motors and Nilörngruppen. Since the return on most other investment alternatives with Traction’s subsidiaries are not valued to market as a similar risk profile. other holdings, but are rather carried at book value, Traction’s capital is currently to a significant de- only subsidiary earnings are included in the repor- gree invested in large, liquid, listed companies and in ted consolidated result. In all, earnings of Traction’s other investments where we are not actively involved. operating subsidiaries increased by a highly gratify- In principle, I don’t see any problems with Traction at ing MSEK 80, from MSEK –13 to +67 compared to the an overarching level having a broad distribution of ac- preceding year. TRACTION ANNUAL REPORT 2010 7 PRESIDENT’S STATEMENT tive as well as passive engagements, as well as functioning management with broad compe- large and small investments. What’s important tence, and are therefore not as dependent on is that we over time manage to generate a good Traction’s day-to-day support in the form of return on the Company’s capital, which actual- business or legal advice, which is normally in ly will require that a larger portion than today demand by smaller, entrepreneurially opera- is invested in assets with a potential to be re- ted companies depending on a single indivi- valued. Also, today’s total lack of indebtedness dual. in Traction makes it difficult to generate a high Engagement in smaller companies assumes rate of return on equity. In a situation where that we are able to see a substantial develop- Traction should be fully invested, there may be ment potential in the business and, above all, reason to consider certain indebtedness in or- that we have a hard driving entrepreneur, who der to get better leverage on our investments. we believe possesses the right qualities. Even In phase one we will be looking over the ba- if the qualities of the entrepreneur are crucial, lance sheets of the companies in which we are we must be able to see good expansion oppor- engaged in order to increase the indebtedness tunities in the business per se. We are thus not where appropriate, at the same time paying interested in engagements in small companies out any surplus liquidity to the shareholders. that will continue to be small! This also means In the beginning of 2011 Traction’s organi- that we should avoid to engage in smaller com- sation was strengthened, primarily to identify panies in established lines of business that do new investment opportunities among medi- not add some kind of new thinking to the mar- um-sized companies. As I have communicated ket. All companies in which Traction gets in- on previous occasions, the ambition is to in- volved must also be “self-propelled” and have crease the number of active holdings, but also a principal owner, entrepreneur or manager to identify other investment alternatives that filled with fervour for the business and who can provide some leverage on our capital.