Market

2022 proved to be a historically weak year for the global financial markets. Covid-19 continued to impact society and the global economy in the first quarter, and the rest of the year was impacted by Russia`s invasion of Ukraine, escalating energy prices, rising inflation and market turbulence in equity markets around the world. Global financial markets were strongly affected by a sizeable shift in interest rates. With a decrease of 18% in global share prices and a decrease of almost 30% for growth shares (in USD terms), 2022 was the weakest year since the financial crisis. Global markets saw 10 out of 11 sectors decrease in value, and only the energy sector achieved a positive return (up by 48%). Nordic stock exchanges fell by 13% in Norwegian krone terms, although the Oslo Stock Exchange fell by only 1% (a decrease of 16% if the energy sector is excluded). Robust asset and risk management made it possible to protect values, sit through the volatility and take advantage of opportunities.

Portfolio companies

Private company investments

• Aibel continued to perform well in 2022, with a high level activity and good performance on projects in all business areas. Through the course of the year its order book increased by NOK 20 billion, giving an order backlog of NOK 30 million at the end of the year, which is equivalent to 2.5 times the revenue for the previous 12 months. Revenue for 2022 of just over NOK 12.2 billion reflected in particular the high level of activity over the first half of year right across the project portfolio, with a particular contribution from Hammerfest LNG Cold Recovery, as well as a high level of activity at the Haugesund yard as a result of the Haewene Brim and Johan Sverdrup P2 projects.
• Aidian has since it was acquired by Ferd in April 2022 focused on re-establishing a foothold in the company’s core areas that are not related to Covid-19. With a geographic spread that extends throughout Europe and into China, Aidan experienced some regional differences in the progress of the reopening of society after Covid-19, but saw a clear trend for increasing activity towards the end of the year. As a result of increased focus on antimicrobial resistance (AMR) Aidian also saw a positive trend in demand for CRP tests, for example in Poland which introduced payments for CRP tests for children.
• Brav reported strong top line growth in the first half of 2022 as a result of advance orders received in 2021, but saw a slowdown in its market over the rest of the year, driven in particular by a drop in repeat orders and a low level of sales through its own distribution channels. The year was also affected by a reorganisation of the company’s activities in Germany and the sale of its business in Russia to the local management following the invasion of Ukraine. Market conditions over the course of 2022 were characterised by lower demand for sporting and outdoor goods, which meant that retail outlets were left with higher than usual stock levels. In common with the sporting goods sector in general, Brav expects 2023 to be a challenging year. The company intends to focus on cost control and cash flow, but will also continue its focus on further growth through its own distribution channels and the development of digital platforms in 2023.
• Broodstock Capital experienced an eventful year in 2022. Its shares in Billund Aquaculture in Denmark were sold back to the company’s founder, while at the same time it acquired the full share capital of the Norwegian subsidiary company VAQ in Norway. The proposal to introduce a 40% resource rent tax in the fish farming sector created considerable uncertainty over the outlook for the industry’s operating framework. The companies owned by Broodstock Capital are currently well positioned with the agreements and contracts in place, but the impact over the longer term will be closely linked to how the tax is structured. Broodstock Capital’s companies are focused on some of the most exciting trends in aquaculture, including fish health, digitalisation, water recycling and healthy proteins.
• Fjord Line has been heavily affected by the Covid-19 pandemic, which has prevented normal operations for over two years, and by the inflated fuel prices caused by inter alia Russia´s invasion of Ukraine. Even though the underlying market showed clear signs of a return to more normal conditions in the 2022 high season, with record-high revenue, profitability was sharply reduced by the high fuel prices. The company has started work on converting two of its vessels to ‘dual fuel’ during the spring of 2023 in order to be able to use the most cost efficient type of fuel at any time. During the course of 2022 the company also carried out a refinancing and raised additional capital in order to secure its future operations.
• Fürst reported both earnings and profitability ahead of budget for 2022 despite the unstable market conditions caused by Covid-19. The company also delivered further improvements in capacity utilisation despite upward pressure on costs, with an increase in the number of tests carried out both in total and as measured by tests per full-time employee. Fürst also experienced an increase in 2022 in the number of doctors that use the company as their principal testing laboratory, and this resulted in a beneficial increase in market share on a countrywide basis. Fürst’s subsidiary WebMed gained a sound foothold in the Norwegian market for electronic patient journal solutions in 2022, and is now one of the fastest-growing suppliers of this product and is attracting good feedback from customers. The company Helseapps saw a repositioning in 2022 from making a significant contribution from its pandemic-related activities to establishing a position as a broadly-based supplier of interaction services in the healthcare sector. Patogen reported very strong growth in both turnover and profitability in 2022, and has now become an integrated part of Fürst.
• Interwell reported strong organic growth in 2022, and all the regions in which it operates have seen their level of activity recover following the Covid-19 pandemic. The global energy crisis has also had a positive effect on the company’s level of activity and profitability. The company carried out a major strategic acquisition of the Norwegian company Petroleum Technology Company (PTC) in 2022. PTC is a company that complements Interwell’s product portfolio and is growing very strongly, and the acquisition opens up significant commercial synergies. Interwell continues to focus on developing new solutions both for existing segments and for new markets that are involved in the shift towards more sustainable energy sources. P&A, which is an important development area, experienced a sharp increase in interest from a number of major oil companies over the course of 2022. The company’s growth outlook continues to be very strong.
• Mestergruppen reported good results for 2022 in a volatile and ever more challenging market. In overall terms, 2022 was affected by a sharp decrease in the volume of sales in both the retail and professional segments of the building materials market. This was accompanied by sharp price increases, which helped to maintain revenue of 2022 in line with 2021 (pro forma). Market conditions in Norway were in general more significantly affected than in Sweden. Mestergruppen also used 2022 to implement new strategic positions, including the acquisitions of VVS Norge and Dale Malo. The integration of Malorama has been successful, and EBITDA performance has so far been ahead of expectations. Mestergruppen closed 2022 with a strong balance sheet, but expects 2023 to be a challenging year in terms of both prices and sales volumes.
• Mnemonic reported another good year in 2022 in a continuously growing market. Work related to major cyber security incidents and a number of major projects demonstrated the company’s leading market position in Norway. In addition, Mnemonic is seeing good growth in Sweden and Holland. The company continues to invest heavily in research and development and in international growth. This is reflected in short-term profitability being relatively low in relation to the company’s underlying potential. Mnemonic won the ‘Great Place to Work’ award in Norway and was among the top 10 finalists in Europe. The company experienced low employee turnover and was able to recruit numerous talented new employees in 2022.
• Norkart reported sound and profitable organic growth in 2022 across all its product and services areas. 2022 was the first year for the company’s new CEO, who worked with the board of directors to implement a number of important measures to elevate Norkart’s operations and improve underlying profitability. These measures included strategic decisions to further develop the company’s main product area GISLINE, moving to new headquarters at Skøyen in Oslo, optimising prices and cost of goods, refreshing the company’s strategy, establishing a new IT security team and introducing a new organisational structure which was implemented from 1 January 2023.
• Simployer continued to deliver growth and sound profitability in 2022. Profit margin was somewhat lower in 2022 than in 2021 due to higher development costs and lower than budgeted revenue in Sweden. With its new CEO in place, the company has revitalised its strategy with a commitment to realise the full potential of its people. As part of this, the company has updated its project strategy and reorganised its product and technology organisation. The company has continued to invest in product development, and launched a new initiative for e-learning at the end of 2022. On the commercial side, the company has focused in particular on a new solution for employee engagement in Norway and an HR system for Sweden. Simployer also opened an office in Denmark. The market for HR technology and expertise is growing strongly, which supports the outlook for long-term growth in demand for Simployer’s services.
• Try delivered good operational performance and increased its top line in 2022, driven in particular by Try Dig. The company saw high demand in most of its business areas in the first half of 2022, which led to growth in recruitment. However profitability was adversely affected by changes in market conditions in the second half of 2022. Try was also active in M&A during 2022, including investments in Netlife Bergen and Try Dig Latvia in addition to organic investments in growth and competence development. The units that make up the group won many prizes in 2022, both nationally and internationally, which demonstrate the high quality of Try’s product deliveries. In addition Try won the Byråprofi in Norway, which underlines the company’s strong position in the Norwegian market. Try is well-positioned for further growth at the intersection of creativity, strategy and technology, but expects market conditions be weaker in 2023 than in 2022 and has made the appropriate adjustments in response to this.

Listed company investments

• Benchmark Holdings was admitted to listing on Euronext Growth (Oslo) in December 2022, and plans to move to a full listing on the Oslo Stock Exchange. The company reported an overall increase in turnover of 27% in 2022, with a positive trend in a number of the company’s segments. This improvement was driven by two of the three business areas, Genetics and Nutrition, which delivered strong financial results. Both business areas deliver critically important solutions for growth industries. The third business area, Health, reported that its new key products Cleantreat and Ectosan were taking longer than anticipated to achieve sales momentum. The company’s focus continues to be on profitable growth, cost savings and generating positive cash flow.
• BHG Group experienced tougher competition and weaker demand in 2022 as a result of customers switching their spending away from home improvements as the Covid-19 pandemic gradually faded away. In addition, cost inflation and downward pressure on prices had a negative effect on margins. Despite this the company was successful in increasing its market share during 2022, although profitability was challenging. Stock levels were high, and the company made a write-down of SEK 400 million in October and implemented cost savings with an effect of SEK 150-200 million. BHG Group carried out two rounds of equity raising in 2022 totalling SEK 1.8 billion to strengthen the company’s balance sheet. In addition the company changed its CEO in August 2022, with Adam Schatz leaving the company to be replaced by the chair of the board of directors Gustaf Örn, and the company has implemented a cost saving program and other measures to improve its financial condition.
• Boozt delivered sound growth and profitability in 2022 despite challenging market conditions. This was driven by an increase in order values thanks to new product categories (men’s wear, children’s wear and home) combined with stable rates of product returns and higher customer satisfaction. The company continued to increase its market share over the course of 2022 despite challenging market conditions for both off-line and online retailers. Boozt reduced employee numbers by 5% before summer 2022, and implemented a cost saving program in response to deteriorating market conditions. At the end of the fourth quarter Boozt had a sound balance sheet and cash holdings of SEK 1,8 billion.
• Elopak successfully navigated a challenging year in 2022 following its record year in 2021 thanks to achieving its strategic priorities and offsetting inflation in raw material prices (PE and aluminium) by price increases in Europe. Important milestones included investment in India (GLS) and the completion of the Naturepak acquisition. Elopak also disposed of its Russian production unit in 2022 (awaiting completion). At the close of 2022 the company’s guiding indicated revenue in excess of EUR 1 billion driven primarily by growth in aseptic volumes, price increases in Europe and generally strong growth in the ‘Americas’ segment. Elopak continued to strengthen its product portfolio in 2022 and launched the Pure-Pak® eSense carton, which is a more environmentally friendly aseptic carton produced without aluminium film that has a carbon footprint up to 50% lower than the standard Pure-Pak® aseptic carton. In addition, Elopak has become one of the three first companies in the world to have its Net Zero targets approved following the official launch of the Net Zero standard by the Science Based Targets initiative.
• Lerøy Seafood reported strong financial results for 2022 as a result of record high prices for seafood continued with improved cost control. The company developed new markets during the Covid 19 pandemic, and a recovery in demand from the hotel/restaurant/catering sector (HORECA) combined with slow growth in supply has led to very marked increase in raw material prices. However the announcement in September of a proposal for a new resource rent tax for the fish farming sector had a significant adverse effect on the company’s share price. The structure of the new tax has not yet been decided, and this is creating uncertainty over the operating framework for the Norwegian aquaculture industry. Lerøy Seafood has responded to the current uncertainty by putting a stop to all investment and laying off staff in its processing activities. The situation is also causing uncertainty over contracts. Lerøy Seafood’s focus in 2023 will continue to be on operational improvements, building market presence and seeking to optimise its operations in response to the proposed resource rent tax.
• Nilfisk continued to deliver robust growth in 2022 following its sizeable growth in 2021 (over 20% organic growth), driven by positive momentum in the American market. Net margins were lower in 2022 as a result of downward pressure on prices and higher overhead costs driven by strategic investments. The company’s share price fell during the year as a result of the slowdown in profitability growth and recession concerns. Nilfisk presented its business plan for 2023 at its capital markets day in April 2022. The company has ambitious targets for delivering profitable and sustainable growth by developing its service offer, expanding in major markets and developing sustainable products. Nilfisk has continued to deliver on its sustainability focus, and has been rated ‘Gold’ by Ecovadis.

Transactions

2022 was a relatively active year for Ferd Capital. In its listed investments portfolio, Ferd Capital increased its shareholding in several companies, of which the largest investments were in BHG Group, Lerøy Seafood and Boozt, reduced or sold its shareholding in a few companies (including Grieg Seafood) and participated in several share issues in order to retain its ownership share. In its private investments portfolio, Ferd Capital’s largest investment in the period was the acquisition of the Finnish company Aidian in partnership with Nordstjernan, and it also made a number of attractive add-on investments (including PTC and VVS Norge).

Organisation

Ferd Capital invests through tho investment mandates: Private companies and Listed companies (the former Special Investments mandate was discontinued with effect from 1 January 2023). Ferd discontinued the Ferd Invest business area in the first half of 2022, and the group’s direct investments in listed companies are now brought together in the Ferd Capital business area.

Ferd Capital has revitalised its organisation by creating industry specialist groups, and has also established ‘Team Sweden’ to place additional focus on increasing its foothold in Sweden. At the end of the year, the Ferd Capital business area consisted of 16 employees who have a broad range of experience from both Ferd and other companies, and it has recruited four additional employees who will join Ferd during 2023.

Future prospects

There is currently considerable uncertainty over the outlook for economic growth and corporate earnings. The market is looking for signals that inflation will fall. Relatively marginal changes in the inflation picture have had a disproportionate impact on interest rates and therefore on the pricing of shares. Ferd Capital has a portfolio of companies in a range of sectors that we believe are well-positioned to create value going forward. In addition, we will work proactively on new investment opportunities and take advantage of the long-term opportunities that can arise in turbulent market conditions, both through M&A activity for our portfolio companies and by establishing new strategic positions. Ferd Capital also has an ambition to strengthen its position in Sweden and in the Nordic region in general. In addition, we will prioritise the implementation of our sustainability strategy.