Investor AB (publ) (INVEA) Earnings Call Transcript & Summary

Hello, everyone. I'm Magnus Dalhammar and I'm Head of Investor Relations here at Investor. A warm welcome to you all to our Capital Markets update this afternoon. I'm standing here with Johan Forssell, and Christian Cederholm, Head of Patricia Industries. Johan, you actually announced in October that you will step down as CEO at our AGM in May. And Christian, this Monday, it was announced that you will take over. So before we start with today's agenda, I thought it would be interesting to hear a little bit more about this transition. So Christian, I can't miss this chance to ask you the classic sports question. How does this feel? What are your first reflections?

Thank you for the question, Magnus.

You're welcome.

I'm, first of all, super grateful for the trust shown here. And I'm very humble for the task at hand. And I am super excited. I've been with this company for 22 years, and I've come to really appreciate the people, the culture, value and not the least, the great portfolio of companies that we have. So it was an opportunity that was hard to say no to.

I understand. In your words, how would you describe your leadership style?

It's always risky to assess yourself in that dimension. But I think for me, there are a couple of key ingredients, and it's really about delegating and giving people freedom, a clear target, and it's built on trust, right? So a clear target and then empowering people and teams to run with it.

Okay. Sounds good. One question that I'm sure is on many people's minds right now is about our strategy. What are your view on our strategy? Are there any big shifts ahead? Or should we expect more of the same that you will stay the course?

Sorry if I disappoint you here, but the answer is no. I think it's clear that we are on a journey now with a strategy that is working fine and serving as well. And well, in fact, I've been part of shaping this as well in my role in the executive leadership team. So the answer is no.

Okay. Thank you for that, Christian. Now Johan, you are going to remain CEO until the AGM on May 7. And how will you increase the work during this period to ensure a smooth transition?

First of all, after having worked more than 20 years with Christian, I'm very confident that Christian will be a great CEO of Investor. But if we look forward now, of course, I have my responsibility up until the AGM in May. So I will focus 100% on that. At the same time, Christian has his responsibility as Head of Patricia. So that will be 100% focused up until the AGM. Having said that, of course, during this period, I will do my best to support Christian in this transition phase. And it goes without saying that if we do or contemplate doing significant investments, for example, I will, of course, consult Christian regarding these opportunities.

Well, great. Thanks to both of you. Now let's start with Capital Markets update. We will start with strategy presentations by our CEO, Johan Forssell; and our CFO, Helena Saxon, then Christian Cederholm will present Patricia Industries. After that, we'll have a Q&A session with both Johan, Helena and Christian. And you can ask your questions online, and we'll answer as many of them as possible. And if you have a question that doesn't get answered, we will get back to you regarding that one afterwards. Following the Q&A session, there will be a short break. And after that, we'll move on with the CEO presentations to get to listen to interesting presentations by Mölnlycke, Piab, Laborie and Advanced Instruments. There will, of course, be Q&A sessions for each company, so you get to ask the questions directly to them as well. And once we're through with those, we will ask Johan back to join me for some key takeaways from the day. So our first speaker today is Johan Forssell, who will talk about strategy and engaged ownership. So over to you, Johan.

Thank you, Magnus. Our purpose is to create value for people and society by building strong and sustainable businesses. It's important to stress that for us, sustainability has 2 meanings. First, what we normally discuss, for example, related to climate change and so forth. But for us, it's also important that the profit and cash flow development is sustainable over time. We are not interested at all in cutting, for example, R&D to boost profitability short term, our focus in developing strong company for the long term. When we invest in new companies, one of the first things we really try to understand is what is really the DNA of the company that we look into. So what is the DNA of Investor? We are a long-term engaged owner of great companies. We have a buy-to-build strategy. And that means that if we look into an investment opportunity, we actually think is this a company we believe we would like to own in 50-plus years. Our ambition is that our company should be best-in-class. And with that, we mean they should outperform competition in terms of gross profitability, quality and sustainability. We always focus on what we believe is best for each individual company. They are in different phases, different industries. So for example, of course, the situation has differed between companies like ABB, AstraZeneca and SEB. We are truly a long-term owner of our companies, but we also need to make sure that we and our company always everyday focus on improving the efficiency. And perhaps this is one of our most important messages to our companies that on the one hand, they need to invest in -- behind important trends, like, for example, automation, electrification, demographics, climate change and so forth. On the other hand, they need to work extremely hard on improving the efficiency. There is no contradiction between the two. Finally, our model builds on clear roles of responsibilities between us as an owner, the boards in our companies and the management teams. This means that we do not take operational decisions in our companies. That's up for the management to take. And this is, I think, one important part behind our historical good development. Even more important is to make sure we have great people at Investor and running our companies. And I'm not exaggerating if I say that I probably spend about 1/3 of my time on people-related questions, making sure we always have the best people running our companies. This is our life. These are the 24 companies where we are an engaged long-term owner. As of the third quarter, our total assets amounted to a little bit more than SEK 770 billion. As you can see, listed company represents about 2/3 of our assets. And here, the biggest companies are Atlas Copco, ABB and AstraZeneca. Patricia Industry slightly below 1/4 of our total assets. And here, the biggest company is Mölnlycke Healthcare. And finally, we have just below 10% of our investments in EQT. Roughly 50% of that is our ownership in EQT AB, where we have close to 15% of ownership in the company, and about half of this is related to our investment in the funds. We have a great option, and that is that we, at the Investor can invest in EQT funds up to 3% in the new funds without paying carry. So normally, we try to take advantage of that. EQT has a very strong track record, have given us a good financial return. And of course, this -- having this carry fee is a big advantage. Over time, have also received a good net cash flow from EQT. We have a clear strategy and a well-defined -- clear and well-defined strategy. Our ultimate target is to generate an attractive total share of the return to our shareholders. Then we have 3 strategic priorities: grow net asset value, pay steadily rising dividend and deliver on our ESG targets. Then we have our 4 operating priorities. That is the how. How should we reach our target and achieve our strategic priorities. And the most important one, of course, is that we are a good engaged owner in our companies. Secondly, make sure we have an attractive portfolio. Thirdly, that we operate efficiently. We demand that our companies are efficient and then we also need to be efficient at Investor. And finally, make sure we have a strong financial flexibility. Let me now quickly run through the development of our 3 strategic priorities. Over the last 5 years, we have grown the net asset value by 15% per year on average. And that is almost 2x the development of the stock market that has been up about 8% per year during this period. We have delivered an annual growth in dividends per share of 10%, and we have delivered a steadily rising dividend in line with our strategy with 1 exception, as you can see. And that is related to 2019. I should say that this is the dividend for the year 2019, that was paid out in 2020. And the reason here, of course, was the outbreak of the pandemic, where many companies cut down on the dividends. But let me be clear, our ambition and target going forward is to continue to deliver a steadily rising dividend to our shareholders. We have 3 prioritized areas when it comes to ESG. Business ethics and governance, which, of course, is very close to us as an engaged owner. Secondly, climate and resource efficiency and finally, diversity and inclusion. I would not have time here and now to go through all this, but let me say a few words about the climate-related part. All our companies today have targets that are aligned with the Paris Agreement, when it comes to CO2 emissions from their own operation, what's normally called Scope 1 and Scope 2, we have a target that from 2016 to 2030 that all our companies absolute amounts of tonnes of CO2 should be reduced by 70%. As you can see, we are already down by 57%, which is a good achievement. And here, I can tell you that there are many activities going on in our companies, putting solar panels on the manufacturing plants, et cetera. But we also know that Scope 3 is even more important. And here, we have a target that all our companies should have a specific target for Scope 3. And as you can see today, a little bit less than 2/3 of our company have a target related to Scope 3. I should stress that we do not say what the target should be. And the reason for that is that our companies operate in very different industries, different situations. So it's up to each board and management team to come up with the right targets. But to give you an example, in Barsele, for example, the target is to make sure that in 2030, the company has a portfolio of engines with green fuels. If we succeed in growing the net asset value, developing the companies in a good way, pay a steadily rising dividend and do all this in a sustainable way. Of course, we should generate an attractive return to our shareholders. And this is the historical performance. We have a return requirement of 8% to 9% per year. You can see the -- and that's the red dotted line. Our Investor's total return per year is seen in the blue bars, and then we also compare with the Swedish stock market, which is the gray bar on the slide. As you can see, if we look on 1-year, 5-year, 10-year or 20-year periods, we have exceeded not only our return requirement but also the development on the Swedish stock market. So I think we have a clear strategy. We have been able to deliver on our strategic priorities and also delivered a good return to our shareholders. Our ambition, of course, is to continue this journey. And to succeed with that, we will focus heavily on our operating priorities. In my presentation, I will cover the 2 at the top. Our role as an engaged owner and also that -- how we should make sure that we have an attractive portfolio. Before I move into and go through a couple of things on engaged ownership. Once again, I want to stress that the companies are different. They operate in different industries. So each value creation plan, of course, looks different. But there are a couple of topics that are important for most of our companies. One is to make sure we maximize the business opportunity within sustainability. Sustainability is for sure, changing the world and the competitive landscape. And we in our companies, they are making good progress in this area and really incorporating -- working, incorporating sustainability into their businesses because that's the most important part. Let me here give you an example in one of our companies in our portfolio, Atlas Copco. What I think they have done successfully is identifying a couple of mega trends out in the world for which they have a strong product offering and can supply both products and services. To give a few examples, wastewater, there will be a lot of cleaning of water, and they have low pressure compressor for that segment. We have solar power, which we all know will grow. And if you make solar panels, you need to have both compressor, you need to have vacuum equipment and so forth. On the slide, you see wind turbines. Atlas Copco is a leading player in tools that assemble these turbines. And then you have other examples such as batteries, electric vehicles, for that segment, Atlas has a very broad offering from adhesives, riveting, tools, compressors to machine vision. And finally, digitalization will also have -- represents a huge opportunity for Atlas Copco, not the least within the vacuum business to the semi side. This is one example. And the reason why I bring it up is the way we look at it is that we want all our companies to identify the trends that can benefit them. It could be demographics, it can be geographic expansion and so forth. And then try to find the product services to reach that potential because it's not only about growing, you need to grow and be a leading player in that segment to do it in a profitable way. Another big opportunity, of course, is related to capturing the -- all the opportunities related to the rapid technology around the world and not the least when it comes to AI. We see many opportunities in this area, both when it comes to improving the operating efficiency in the companies, but also when it comes to bringing forward new customer solutions and take a lead compared to competition. So what are we doing as an owner? Well, we are making sure that this topic is a priority in the Boards of our companies. And we are also spending significant amount of time on reskilling. Reskilling, of course, at Investor, but also boards and management in our companies. So let me give you a few examples of what we have done during the year. We have something we call share circles. We invite all the shares in our companies on that meet -- the latest meeting, this was a key topic. Recently, we had our network conference, which is a conference where we bring together some 150 top executives in our companies and also that technology was a key topic. And finally, technology has been a key priority in all our value creation plans during the year. Looking forward, there are many activities going on not the least within Generative AI, trying to find new use cases, use cases where you can hopefully get a rather quick payback, so you can get a good buying in the organization. What will be important is that you have a very clear data strategy and a clear data infrastructure, data will be key going forward. A third priority for us is to make sure we have the right corporate structures in our companies. And we are a strong believer in decentralized organization, we clear focus and clear responsibility. And we have had a number of companies that have done split -- splits for the biggest one being Epiroc out of Atlas. Another good example in this respect is the decentralization that has been very successful within ABB. And they have also divested a number of noncore operations. And final example could be Mölnlycke that today have 4 dedicated business units with their own P&Ls. We are, for sure, living in a challenging geopolitical landscape. We know the tough situations or other situations we have in Ukraine and the Middle East and so forth. And from a business perspective, of course, there is an intense pressure between the U.S. and China. So for the companies, China is probably one of the questions that are debated the most at the moment. For the companies that are having a significant presence in China, I would summarize the strategy as engage and derisk. Engage because it's a huge market, more than 1.3 billion people. And also, one should not forget that they are the technology leader in many important areas such as solar, batteries, EVs and so forth. On the other hand, the companies must also derisk to make sure that the supply chain is more regionalized. To be honest, this is not a quick fix. There are many things you need to consider. Do we have a strong supply base in another region? Of course, manufacturing, the economics around it and so forth. So it's more a gradual process. In some companies, it might go a little bit faster, in some a little bit slower. But the important part is top on the agenda. Moving down to the other operating priority, which is to make sure we have an attractive portfolio. We are a long-term owner. But of course, from time to time, we might come to the conclusion that either we are not the right owner of a company or we don't see the long-term potential. And in that case, we should, of course, try to find a better room for the company. Over the last couple of years, we have divested, for example, Aleris. Aleris is a company that runs hospitals and elderly care facilities. We came to the conclusion that while we are very strong in Medtech and Pharmaceuticals, we are not the best owner in running hospitals and elderly care. Another example is that we divested Grand Hotel. Grand Hotel is a fantastic hotel, but we are not the best at running hotel operations. Instead, we have used the proceeds from a number of divestments and the cash flow generated to invest in high-quality companies within our prioritized areas. And the 2 latest subsidiaries we have bought are Advanced Instruments and Piab. Advanced Instruments, a world-leading player within measurement instruments for the clinical and biopharma segments; and then Piab, being a leader in suction caps for automation. Gladly, both of these companies will present during this capital markets update. We are fortunate we have a portfolio with very strong companies, companies that have attractive long-term trends behind them so they can grow. But also our companies -- most of our companies have good profitability or very high profitability and are also capital light, so they generate a strong cash flow. As you can see on the picture, the 2 largest segments is Industrial Technology and Medtech and Pharmaceuticals. Each comprising about 1/3 of our total assets. Within Industrial Technology, Atlas Copco and ABB are the 2 largest and within Medtech Pharmaceutical, Mölnlycke Healthcare and AstraZeneca are the 2 largest. So we have a great portfolio of companies, but the word is complex, fast-moving. In this situation, our focus is, number one, handle here and now, make sure we have the flexibility and the agility and we are prepared for whatever happens. And secondly, invest -- make sure that our companies invest for the future behind the mega trends. That is our focus. Over to you, Magnus.

Thank you, Johan. Very interesting. So our strategy is intact. It's clear and well defined, and we will continue to work hard to future-proof our companies. Our next speaker is our CFO, Helena Saxon, she will go through the financial parts of our strategy. So welcome, Helena and the floor is yours.

Thank you, Magnus, and thank you for the opportunity to present the 2 remaining operating priorities. The first one being operate efficiently. It is, of course, super important for a company like Investor to operate efficiently, not the least because we need to be disciplined with our costs because that's what we demand from our companies. But from time to time, this is a difficult balancing act because we also need to invest in the organization to build resources to be a better engaged owner, but sometimes also into systems to automate and make financial processes more scalable. I think we have been quite good at this balance, and our track record is pretty good because as assets have grown, and we have added several new subsidiaries that we consolidate every quarter. We still haven't grown costs as much. We've had a moderate growth of our cost base. And comparing it to net asset value. You can see here on this slide that our management cost of roughly SEK 600 million is only 10 basis points compared to the net asset value, which is of course, very competitive. Moving over to the next operating priority, which is to maintain financial flexibility, you might ask what do we mean by financial flexibility. Well, for us, it means that we ensure that we have the financial flexibility to both support our companies if and when they need capital, but also capture attractive investment opportunities as well as serving our dividend policy. And our ambition is that our balance sheet shall never be a constraint from this perspective. Looking at our leverage, it is as low as 2%, i.e., the lower end of the target range of 0% to 10%. And we have worked very proactively with our balance sheet, not the least during the period now when the interest rates have been very low. We've managed to refinance up to SEK 23 billion of maturities at very long tenure. The average tenure of those eurobonds was 14 years at a fixed interest rate of 2%. And we are now at a very fortunate position of actually being able to generate more interest on our gross cash position than we pay on our debt. And this proactive management that I just mentioned has resulted in this maturity profile, where you can see that the maturities are well spread out over time. The average tenure is more than 11 years and our next maturity is not until 2029. In addition to our strong balance sheet, we also have very strong cash generating capacity. Looking at these 2 pie charts, you can see on the left-hand side, the sources of our cash flow. And you can see that all business areas actually contribute to the cash flow generation. Most of it, of course, in the form of distribution from our listed companies, Patricia has also contributed a lot here, mainly Mölnlycke, and the net proceeds from EQT has been positive. On the right-hand side, you can see, so what have we used this cash flow for? Well, more than half has been distributed to our shareholders. A significant part has been used to acquire 6 new subsidiaries within Patricia Industries. And we've also invested in selected listed names. During this period, since 2015, we have actually generated as much as SEK 158 billion. And during the period, we have also reduced our net debt or our leverage to 2% from 7% in the beginning of the period. And of course, cash flow will be lumpy from time to time, we will have a weaker year, but I think this picture really illustrates that we have managed to build a platform with multiple sources of cash flow, which will contribute to our financial flexibility, which is so strategic to value creation. So the takeaway from these 2 operating priorities and my presentation today is that investor is in a very strong financial position, and that -- this allows us not only to take advantage of interesting investment opportunities, but also to serve our dividend policy i.e., to distribute steadily rising dividends to shareholders. So that's it from me. Over to you, Magnus.

Thank you, Helena. It's good to know that financial strength and flexibility is in place in this fast-changing environment. So we'll be able to support our companies and make great investments at the same time. Our next speaker is Christian Cederholm, who is still the Head of Patricia Industries for a few more months, and he will continue to update us on the strategy and the priorities of Patricia. So Christian, please go ahead.

Thanks a lot, Magnus. Hi, everyone, and thank you for the opportunity to talk about Patricia, who we are and what we do. Let me start with who we are. We strive -- there you go. We strive to be a great home for great companies. If we do that well, we will contribute to Investor's mission of creating value for people and society by building strong and sustainable businesses. We are long term in what we do, meaning that we buy to build, not to sell, you can think about it as private equity but without exit as part of our strategy. Given that long-term horizon, we want to make sure we engage in companies with strong market positions in industries and niches where we see good opportunities for long-term structural growth. We operate in a highly decentralized way, where each company has high degrees of freedom. As owners, we engage primarily through the Board, but of course, we also engaged with each respective company outside the boardroom on matters such as M&A, capital structure, strategic assessment, et cetera. So they should look upon us as a resource that can be leveraged. In addition to bringing capital and the clear governance model that I just mentioned, we also want to make sure that we add the strength of our network and that goes well beyond Patricia, but rather the broader ecosystem of the sphere. And we have in place an incentive program, equity-based incentive program to make sure that we get as good alignment as possible between us as main shareholders, the management teams who runs the companies and the boards. This is the great team. We have about 30 people split roughly equally between New York and Stockholm under Yuriy's and Thomas' leadership, respectively. It's a diverse team with both investment and operational experience. And in addition, of course, work with our broader network as well, including Board members, but also industrial advisers outside that. These are the great companies then. As you can see, 10 companies focused in 3 verticals. Taken together, it's relatively -- it's grown a lot. It's about 18,000 employees and sales of more than SEK 60 billion with strong profitability and good cash conversion. However, we think about it mostly as 10 companies. 6 of these have been added since Patricia was founded. And across these platforms, there have been about 100 add-on acquisitions, and I'll get back to that a little bit later. We've also, as Johan mentioned, divested 2 companies, Grand Hotel and Aleris. And with the ambition of being a great offer, great companies also comes a responsibility so that if there is a greater home for a company, it is upon us to act. And in fact, we do see that active portfolio management is a key part in many successful companies. If we look at what we're trying to do then, it is basically about building around what we have in the 3 verticals. We're having Medtech and health care, and we, for sure, continue to invest here. We're also committed building the 2 other verticals, real estate and infrastructure and industrial technology. In terms of our strategic priorities then, they have actually looked rather similar over the years. And that is something we're proud of. Our top priority has always been and must always be to build and develop our existing companies. This is for at least 2 reasons. One is mathematical, right? We have 90% plus of our assets in the existing companies. That means that there is no smart investment that can save us if we don't perform in the portfolio companies. But the other reason goes back to our ambition of being a great home for great companies. And today, we start focusing more on the next platform to add, for example, there may be greater homes for these great companies. We continue to invest in what we have, both organically and by way of add-on acquisitions. In addition, we remain open for new business and adding new platforms as well. Looking at the first priority then to develop our existing companies. In short, this is about performing here and now and future-proofing the businesses. As long-term owners, our job is to build for the future to create platforms that can continue to deliver sustainable profitable growth in the future. Performance here and now is also needed, however, it gives us the license to operate as well as the means to reinvest in the business, again, to future-proof them. So we need both. Looking at the profit growth here. The earnings have almost tripled since 2015 with a strong growth in earnings post-COVID. As you understand, this is slightly flattered by the fact that the Swedish krona is weak. But importantly, the underlying earnings growth is also very healthy here. Turning to the future proofing part then. Of course, purchase differ between the companies, and there is no one size fits all here. That said, there are a number of themes that we think are relevant for most companies seeing in the portfolio. And let me say a few words on each of them. If we start with geographic expansion, this is simply about selling our great products and solutions in new countries, getting it out to more people, more customers because we think that the world deserves that. And if I move to -- and importantly, this is not just developing market, but we also have a lot to do in developed markets and markets where we're already in. Moving to talent then. We think we have the potential to do even better in terms of developing and retaining talent from within the group. It makes for good career opportunities for good people, and it also makes us less dependent on external recruitment over time. We, of course, try to do our part. We measure, make sure we have targets for internal recruitment, et cetera. and getting people together is an important part of it, both in terms of forums, for example, around M&A, CFO Forum, digital, et cetera. And now recently, also an executive development program exclusively for talent within Patricia Industries companies. On innovation then, including digital and data. For all our companies in the portfolio, innovation has been a key part and a key reason for them to come to the position they're in. And as market leaders, we also have responsibility to lead in innovation. Several companies have increased their ambitions in terms of investments in R&D and there are explicit plans to increase even further. We are clearly prepared and willing to invest here. I'll get back to the digital and the data opportunity in just 1 or 2 slides. Finally, then on sustainability, we see a lot of opportunity here, not the least to reduce our own CO2 footprint and that of our customers, and I'll mention this in a separate slide. So on digital and data, we have a lot of untapped potential here. We really think it's across the board from internal efficiency to how you go to market to even new revenue streams and potentially new business models for some companies. We think this can be done with limited technology risk. And this is the silver lining here. That means the hardware and the software is here. Instead, we think it's going to be about data to have relevant structured, actionable data. That is where the battery will be. Encouragingly, there is a lot of good initiatives ongoing in all of the companies. Here, we're doing our part here primarily by encouraging and maybe pushing a little bit, trying to facilitate sharing of experiences between the companies. And so to that end, earlier this week, we had our third digital forum this year, this time focused on very concrete use of Generative AI as a productivity tool. Moving to sustainability then. This is -- this obviously entails several dimensions. One very important is, again, the reduction of CO2 and other greenhouse gases. If I take health care as an example, Global Health care represents about 4% to 5% of global CO2 emissions. That's twice as much as airlines and had it been in country would have been the fifth largest country in the world. Our own footprint, including purchased electricity is roughly 100,000 metric tonnes, down about 1/3 since 2021, and this is despite growing the business a lot. Basically, all our companies have targets to reduce between 50% and 70%. We've come some way, but a lot of further investment is needed. And to be clear, some of the low-hanging fruit has been picked and so it will require hard work and further investment to get all the way to the target. Now that's on Scope 1 on 2. As in any business that makes and sell stuff, you would expect to find the vast majority of CO2 footprint in Scope 3, and this is the case also for us. This is basically the Scope 1 and 2 of our suppliers and our customers. And in that lies the great business opportunity. By innovating, we can provide products and solutions that can help our customers reduce their CO2 footprint. And increasingly, we see this as a real and very substantial business opportunity. And I know that, for example, Zlatko, CEO, Mölnlycke, will talk about this in his presentation as well. Add-on acquisitions then. This is a tool to help in building our companies and complement organic growth. We could do everything organic and that is great, but it also takes a lot of time and it creates a lot of growing pains. So we think that once we know the direction of travel, if we can find and execute well on add-ons, it's a great way to accelerate the journey by bringing on good people, good technologies, products and/or market access. We've done almost 1 per month, so close to 100 in total and deployed about SEK 35 billion in enterprise value equivalent over the years. And that remains an important growth lever for us. So that's on developing existing companies. As I said, we also remain open for new business and adding new platforms. So in terms of what we look for them, we focus on the existing verticals. And given our long-term horizon, we are truly picky in what we look for. Both in terms of the industry and the industry niche as well as the company and the strength of the company. We think this is the right approach. It takes longer. But over time, I do think we've proven that we are capable of finding good investment opportunities. Finally then, if we look at the returns since acquisition per investment. So far, returns in 8 out of 10 companies have been above our return requirement. And only 1 has antibodies, which is early on in its journey has negative returns. So by way of concluding then, we think that while we've come some way in developing this group of great companies, everywhere we look in each company there is a lot of opportunities. So our view is that we're really early on in a great journey here. Thank you very much.

Thanks, all 3 of you for great presentations. Now it's time for Q&A. So please send in your questions via the web. And before we have any questions there, I have a few ones to start with, and we actually have a few from the web already, from Karan Pathak, for example. Could you talk a bit about how we view leverage in our companies? And if you start, perhaps, Johan, we can move on from there.

Yes. Overall, I think coming back to -- we have a number of companies in different industries, different situation. And of course, in general, the higher the operational risk you have, the lower the leverage must be. The second part is that the leverage, of course, can be somewhat higher in the unlisted environment compared to a listed company because it's much easier if you own 100% to adjust the balance sheet. If we then look on our companies, I would say, overall, we have very strong balance sheets. The listed companies are strong. If you take the biggest companies in the listed portfolio, Atlas Copco, AstraZeneca, SCD all have very strong balance sheets. And in Patricia, we also have strong balance sheets. But Christian, maybe you can add a little bit more color on that?

Thanks. I think that what Johan said is the same basic principle we apply right, that have operating leverage and risk and then you have financial leverage and risk and the two needs to be balanced. And over the recent year or so, we have actually deleveraged quite a lot in the Patricia companies overall. And we continue to strive for a moderate leverage and then being prepared to go a little bit higher in connection to good add-on acquisitions. And then we make sure that we -- after that, we track and make sure to deleverage.

I think it's fair to say if you take it on an aggregate picture that the leverage we have within our subsidiaries in Patricia is higher than the listed but clearly lower than what you see in private equity.

Good. Thanks. We have a question from Samarth Agrawal as well, and he's wondering about our return requirement. Is that going to change? Or is there a chance to be changing if the portfolio mix changes perhaps towards more private holdings? Please see about that. I know we've had the same return requirements for quite some time on?

No. I think that a return requirement of 8% to 9% makes good sense. We can, of course, have a long debate about it. But on the one hand, you can say an interest rate of say 4%, 5% and then you add a risk premium to that. The other way to look at is that I truly believe that the underlying profit growth should be something like 5% in the portfolio. And if you then add the cash flow in relation to the value should add another, let's say 4%. And that can, of course, be used for dividends and acquiring -- doing add-on acquisitions. So I think it's a reasonable long-term ambition to have that. We have succeeded clearly better historically, but that's the way we think about it.

Okay. Also I have a question about which industries do we find the most attractive?

Yes. I think that attractive for me has 2 dimensions. There are a number of industry segments, a number of opportunities out there in the world. But for us, it needs number one, to be attractive. But secondly, we also need to have a deep knowledge, a broad network for us to engage in them. Because otherwise, of course, you become a 50-50 player. So we are very, very focused. We focus on a couple of industry segments like we have heard Medtech Health Care, Industrial Technologies to mention a few. And we leave a lot of opportunities to others out there. But of course, in our business, Industrial Technology and Healthcare Medtech are 2 very important sectors for us that we focus on.

Thank you. Christian, we often get a very few -- or many questions as you say, about both add-on acquisitions in Patricia Industries and also the new platforms we're looking for. So if you start with the pipeline, is there anything more you can give in terms of details? How many companies are we looking at? How many companies are landing then and so on?

If we start with the add-on acquisitions, that's really a very continuous and ongoing work. And I think that almost at any point in time, you will find that across the 10 companies, there is a healthy pipeline of good opportunities, varying in size, geography, whether it's, call it, early or more mature businesses we have, et cetera. And I think that is also a little bit what you see in the numbers over the years. That said, between years, it varies a lot, but over time, that continues to be an important growth lever, as I mentioned. And then in terms of new platforms, that is a more -- that happens in more discrete steps, and it's clearly fewer of them. As I said, we are really picky. And I think that is the right approach because, again, back to our long-term horizon, we need to be able to live with and leave in harmony with these companies for a very long time. And I put a lot of trust in the process here. I think we've shown over the years that when we do the right things and the team go look for the right opportunities, we don't know when they come, but over time, they seem to come.

I know you presented the split of the companies in Patricia Industries, and you sometimes refer to it as a 3-legged stool. If we fast forward a bit, how would you like that split to look, if you could choose, I mean, back to this question that you already talked about.

It's a good question, but I will say that is not something by which we steer and sort of dimension the way we work with the portfolio. We want to continue to invest in all of the verticals really.

And coming back to that again, there's another question here about, could you describe the process behind sourcing new investments, where do we find this?

Yes. It's a broad -- it's really a broad sourcing work and broaden deep sourcing work and it ranges from, call it, relatively open sources with investment banks and looking around in known portfolios, et cetera. But I'm happy to see that in a lot of the situations, we managed to find the team managers to find some kind of angle to it so that we're somehow unique in our approach.

Thanks. Helena, over to you now, we've provided what we call the estimated market values for the unlisted companies for quite some time now. But I think it would still be good to update us on how do we arrive at them, what's the process behind that?

Yes. Thank you, Magnus. That's a question that we get quite frequently. And it's true that in 2017, we started providing what we call estimated market values as additional service to shareholders and institutional investors as we had realized that it wasn't that easy from the outside to put a market value on our unlisted holdings. And we have said several times that this is maybe not the intrinsic value that we attribute to these companies, but how these companies could be valued where they are listed on the stock exchange. And as you referred to, we use multiples to value them, public multiples, it's often a mix of peers -- listed peers and a broader index. And these multiples are then applied on the reported last 12-month EBITDA and that gives us the enterprise price value from which we subtract the net debt, which is also reported. So it's not that difficult now, I think, for someone from the outside to look at this and say, maybe I think another multiple is more relevant, then I put that in, and then you might arrive at another value and that's fine. This is what we do just to support that process and help someone from the external perspective to understand the value of these companies.

Great. Thank you. Johan, and Christian, anything to add to that?

No. I think that, of course, when we talk about peers, you can normally for most companies might have 2 or 3 key competitors. But of course, if you use a peer group of 2 or 3 players and the multiple for whatever reason, a big earnings drop or whatever changes a lot, could have huge fluctuations. So for that reason, we have a rather -- for most companies, we use broader peer groups to get some stability. So maybe that is the only addition.

Okay. Another question, when one of our companies is not best in class, what do you do? Can you describe that process and share any examples?

I mean I think we are -- when we work and when we take an engaged ownership and we work through the Board, of course, if the company is not performing, then the focus needs to be to create stability and profitability before you take the next step. So stability, profitability before growth, I think, is one key area. Another, of course, is to continue to make sure that you have the right people that can do the turnaround necessary if that is necessary.

Good. Capital allocation, that's another topic that we often get in meetings with investors. And what's your view there?

If you look from a broad perspective, I would say that the flexibility we have, the flexibility to be able to invest both in the listed market and in the unlisted market, I see as a big strength because to be honest, sometimes you find great opportunities in the listed market and sometimes you find them on the unlisted part. I see a big advantage of having that flexibility and that we intend to keep. Having said that, if you look historically over the last 5, 10 years, of course, we have had a very strong focus in growing the unlisted part and that has been very successful.

Good. Thank you for that. We also get some questions about our portfolio composition sometimes, the number of companies, the relative sizes, mix between listed and unlisted, basically, anyone can start here about how we view that?

And maybe I can start to take the overall picture and Christian can get some time to think about Patricia. But I think that today, we have 24 companies. We do not have any plans to move to, call it, 34 companies. I think it's a reasonable size today. But of course, as Christian said before, if we would find a great opportunity within one of our priority segments, a top quality company with good tailwinds, strong market position and the financial metrics we look for and especially the strong culture we look for, then we would try to hit it. So it's a reasonable size. When it comes to the size of the companies per se, we always do what's right for each individual companies. So sometimes it might be that you do a split and then we get the smaller company. For example, Electrolux Professional is quite small, to be honest, in our portfolio, but we believe the decision was the correct one for the company, and that's where we always start. If we look for a new company within Patricia, I would say that we would ideally try to find a big one, so it moves the needle. But maybe you want to add something.

Yes. No, I agree. It's -- it's designed by what is best for the company in each case. And I think that, as Johan said, if I look at Patricia, similarly, we could clearly add maybe one or 2 companies, but we're not looking to do 6 new platforms as we did in the previous 9 years. And in terms of sizing, I think it's really nice to see how the companies have grown quite a lot. So if you look in Patricia now, I think we have at least 5 companies with an EBITDA of above SEK 1 billion. So they're getting to a certain size. And that also goes to show that the companies have proven their ability to actually grow from being relatively small to bigger.

Great. Thank you. One question on the listed side, is there anything preventing us from investing in a new listed company?

No, there is nothing preventing us from investing in the listed companies. However, the opportunities are less than in the unlisted part. And there are a couple of reasons for it, but one reason is that within Patricia Industries, we are looking both in the Nordic region and in the U.S. market, while for the listed part, we focus solely on the Nordic companies. And of course, if you do the metrics for a company to be sizable, let's say, it must be SEK 10 billion, SEK 5 billion at least, then, of course, you need to have a market cap, if we would invest 20%, you need to have a market cap of 5x that, and then it needs to be within our priority sectors and it needs to be available. So there are clearly fewer opportunities on that side than we see on the unlisted part.

All right. I think it's time to conclude the Q&A for now. I think it's fair to say that we are ready and willing to invest when we find the right assets. And Helena, you've made sure that we have the money to use to do that.

Of course.

Great. So thanks for all the good questions and the good answers for that matter. So now we'll have a short break, and we'll be back and then we will start with the company presentations. Thank you. [Break]

Hello. We're back. And now it's time for the company presentations, and the first one now to present is our world-leading company in the Medtech sector, Molnlycke. We first invested in Molnlycke in 2007, and we became the sole owners in 2010. Since then, the company has performed very strongly. Today, it's Patricia Industries largest holding and at the end of Q3 this year, it was actually Investors' fourth largest holding overall. Zlatko Rihter joined Molnlycke as CEO in 2020, and we will now hear him present the company. So welcome, Zlatko.

So thank you so much, Magnus, and a pleasure to be here. My name is Zlatko Rihter, and I've been CEO here at Molnlycke for 3 years basically. And what I would like to do today is give a little bit of insights into Molnlycke, who we are and also our kind of key strategies. So we ended last year north of EUR 1.8 billion of sales. We are today present in more than 100 countries. Just some other kind of facts. We have factories -- 14 factories in 8 countries, soon to be 16 in 10 countries, so we are expanding, and we are close to 9,000 employees. If you look from a business perspective, and I think both you and Christian mentioned this, we are now since 2.5 years basically, organized into 4 separate business areas that have kind of [indiscernible] possibility to really drive the business. The largest one is wound care, close to 60% of our sales today, very much focusing on innovative, intuitive wound care products for prevention and wound management. And of course, here is also an area where we can move into wound healing and increased focus on diagnosis -- wound diagnosis over time. So there are plenty of opportunities to further grow that business. The second largest area is representing 25% of sales is operating room solutions, where we talk about sustainable services that focus on enhancing, improving the workflow in an operating room. And I'll also come back with a few more concrete examples of that. The third largest area, gloves -- surgical gloves, representing 14% of our sales with 2 focus areas really around hand health for the surgeons, but also to make sure that we have optimized the performance. And that has also included safety to make sure that the hands are not contaminated by blood and other things during surgery. And the third -- fourth and smallest -- at this stage, at least, business area is antiseptic representing 3% of the sales, focusing on infection prevention across the patient journey, especially connected to surgeries pre and post. 3% doesn't sound that much, but in U.S., it's a big business for us. If you look a little bit about the kind of the business areas a little bit more in depth, I think what we see today, and I'll come back to that also a bit later is that we do gain market share across the segments today. And we are typically -- what is common for all 4 areas is that we are a premium brand. That basically means that if you just look at the price point, we are more expensive than any competitor. But if you look at the total value or the holistic performance of the products and solutions we offer, we're usually very, very competitive from a cost perspective. And that is, of course, our role to always make sure that we show to our customers that if you take the holistic perspective, we are the first choice for you. So that's kind of our red thread throughout the whole business. If you look at presence, Wound Care is our global business, but also having strongholds in U.S., France, Germany, U.K. and Nordics, but we are present all over the world. ORS to this date is very much still focused on Western Europe and Middle East. We have expanded into Middle East the last 2 years and been quite successful in that and that is part of ORS growth today. Gloves focus very much in U.S., half of the business or more is there, but we have ambitions to expand outside and have active programs in other countries. And then antiseptics, as I said before, very strong in U.S. and opportunities outside that we have not yet captured. So that is a little bit about that part of the business. If we then a little bit deep-dive on our ambitions right now is that you can see that we are very much an EMEA-based business deal, 56% of the sales is in EMEA, 35% in Americas and 9% in APAC. And of course, if you look at the demographics, 60% of the world population lives in APAC, so of course, we have very big areas of focus to drive organic and other type of sales there. But we have good growth in mature markets. And we have ambitious expansion plans and activities in China, Latin America and Japan right now to really strengthen our position there. And we have a strong and evident growth in Middle East since a few years back. That's part of the EMEA numbers, but still very much of a kind of an emerging market. I think we have a good mix today and to further be successful. If you look a little bit about our growth ambitions and I think what we have spent a lot of time on the last 2 to 3 years to figure out how can we accelerate organic growth? Because at the end of the day, that's the most healthy part. And you see, if you look at Molnlycke in the past 10 years, it's been 5-ish type of organic growth in average and also somewhat challenges the years before the pandemic. We had one special onetime deal around PP or mostly face masks during the pandemic that is grayish here. But if you look at the underlying growth, it's been somewhere around 5. What we have managed the last 2 years now is to accelerate that, and we're around 8% right now with this type of activities, as I explained before in the previous slide. So that is, of course, a key focus for us to continue on that journey. If we look a little bit more per business area, we have a continuous strong performance in Wound Care, around 10%. If you look at year-to-date, first 3 quarters. Also, ORS has picked up quite a lot, more than 10% growth. Where we have struggled a little bit this year is around surgical gloves. As you see, it's minus 6%. And the explanation for that is quite simple. We had quite big challenges on elective surgery during the COVID pandemic. It was a big backlog. Then when that was kind of a little bit over, what happened was that we had a lockdown due to COVID in our manufacturing sites in Malaysia, and that hits us and all the competitors. And then last year or this year into this year, we try to kind of catch up. So we and our distributors that we are dependent on in most markets like U.S., also built up stock and that ended up with destocking. So a really good growth last year, destocking this year. I think now finally, the last few months, we are back to a more normal situation where we can drive business again. But it's been a tough year for us there, but it's improving. And then antiseptics also came out of a very weak performance and now have more and more growth. So year-to-date, September ended up 4%. But all in all, as a company, Molnlycke grew 7.4% in the first 9 months this year. And of course, our ambition is to continue on that path. If you look then at profitability and margin development in the last 10 years, you see we've been a company that's been around 28%, 29-ish -- we had a peak during COVID. And here also the onetime business is included. So you see it was a little bit higher, and then we had a big challenge just last year. And what happened there was that we had the challenge of, as you all know, around sea freights and raw material increases. So at hike, we had around EUR 130 million added cost to our cost base basically that we had to handle. And that hit us last year. A big part of that has been gone away now. So we're back to normal, not fully, but to a large degree. And also, I think we spent a lot of time during the last 2 years to really keep the ship tight and I think that is now paying off. And you see the first 9 months this year, we're back to 28.6%, which is, I would say, back to pre-pandemic levels, but with a higher growth than in the pre-pandemic levels. And if we look a little bit about the profitability [indiscernible] fantastic business. As you see, it's around 40% EBITDA. We have 10% growth, and we, of course, will continue to fuel our plans to make sure that, that continues to happen. We have turned around ORS business. If you would look at that 2.5 years ago, it was minus 10%. Now it's approaching, I would say, 10% EBITDA. And I think that's been -- they've been mostly hit by all these cost increases, but they've also done a great job in that business area to turn around that business, and it's becoming quite healthy now. Gloves is stable around 15% to 20% despite all the challenges we have and then also antiseptics has gone from being a negative profit business into profitability this year, and we're around 5% in the first 9 months. So we have 4 different challenges. But I think what is positive now is that all 4 are kind of moving into the right direction. If we then look a little bit shortly at the capital structure, and of course, here, we work very close with our owners, Investor. We have a target when it comes to net debt versus EBITDA around 3% to 3.5%. And I think we've been in that [indiscernible] the last few years, you can see that being illustrated. And of course, with all the challenges that we did have in our supply chain with cost increases and all the problems we had during COVID, one area that has been hit negatively is cash conversion. You can see that's been reduced pretty dramatically, especially last year, and of course, our way to mitigate all the challenges on top of all the cost has been really to, in some cases [indiscernible] inventory to be on the safe side because we have products that when the customer orders, they need to get them. If you don't get the gloves, for example, you cannot perform an operation or surgery, and that cannot happen. So we took that hit, but you can also see now end of Q3 that cash conversion is rising again and going back to, if I may say, more normal levels, 74%. So I think we're doing a quite good job to do that. So let's move a little bit more into our world and where we kind of find opportunities and challenges. And if it's something that kind of bothers me, both as a professional but also as a private person, is that I spend a lot of time out in hospitals. I've been around the last year, at least in hospitals in 10 countries. And I get the same kind of message when I talk to nurses, physicians and health care professionals is that they struggle a lot. I mean they lack people basically. And the normal situation when you come to a ward or a function in a hospital is that they have vacancies of up to 50%. So basically, what they do, they ask their nurses and doctors to do the job for 2 persons at the end of the day. And they don't fully get compensated for that, neither with more vacation or pay. So we will continue to have a staff shortage. We will have less skill and experience caregivers. That's kind of a challenge we have. And what's happening then, of course, is that there is a huge pressure in acute care, which is normally the hospital care and patients are pushed out right now to post acute, ambulatory care or even home care and even relatives so many times asked to do more of the caring of the patients. And of course, the need for intuitive and products and solutions will increase. And I think one way for the health care systems to address that to kind of handle this super tough situation that is chronic, it's nothing that will disappear and it's been even more chronic, I would say, post COVID because we see that -- is that, of course, one way to do that is to increase efficiencies, introduce digital tools and connected health but we haven't fully found that solution. So we are in a situation that is quite tough. And of course, we, at Molnlycke, see this as one of our opportunities and challenges to really truly address that for our solutions to make sure that we can help out. But I think we are not the only ones that have to help out here. It's a big challenge. I think we are well positioned though, to meet these post-COVID customer demands, as I just talked about the staff shortages and low skill staff, I mean we offer improved workflow efficiencies with our products and solutions. One positive thing is that the elective surgeries are now back on pre-pandemic levels. So that means that there are still [indiscernible], but at least patients get the needed surgeries in most countries. I think another downside of COVID, which is that we see more and more patients with chronic and severe wounds. They have been mistreated during the COVID and if you're not treated, a pressure ulcer, for example, can emerge very fast. So we see more and more patients that need help in that area. And of course, that is addressed for our Wound Care business. And then we see, of course, as a result of the COVID situation, we see that infection prevention is very high on the agenda in more or less all countries. So that's, of course, a very central theme partly as a consequence of the COVID pandemic. If we then move a little bit into what we try to do and our operating model and strategic focus, as I said, we have organized ourselves into 4 business areas [indiscernible] responsibilities. They have slightly different call points, and we really try to work on customer segmentation, go-to-market strategies and understand. I think if you understand health care, it can still have a global offering. But each country's health care system is differently set up. So there is no kind of unisex approach of how to go to market. You have to act differently in the U.S., you have to act differently in China, differently in Sweden, differently in Germany, if you want to be successful and truly understand that market. So that is something that we have to have with us. And that goes for all [indiscernible] company. But there are certain macro trends. And there are 3 areas where we strive to be a leader, to be the best in our industry. One is customer centricity. What we did different than many other companies there is that we based our whole strategy on [indiscernible] studies. So we basically ask a bunch of anthropologists to come and visit the different hospitals and tell us what is the #1 pain point for our customers and patients in the different areas. So we ran 4 separate projects on that. And that is the base for our innovation but also go-to-market strategy. Two other macro trends that we really try to deal with is sustainability and digitalization. And I think Christian talked but I'll show a little bit more around sustainability. We could give different examples, but I will highlight sustainability here today. And I will do that by movie. And basically, what we'll show in this movie that we will share with you in a few seconds, it's very short, but interesting is that if you go into an OR traditionally, the operating room or the hospital, they acquired what we call [indiscernible] so you need a drape, you need the staff clothing, all the components were brought in individually. What Molnlycke offers and what we focus on and really try to convert the market into is to what we call tray or procedure-pack business. So if you have a hip surgery, we prepare all the single-use components that goes into the operating room, package them, sterilize them and make sure that they are ready to use. And by that, you can save around 90% of waste when it comes to packaging and you can also save around 40% of preparation time in the hospital. So we help with the workflow and as you all know, time is money. So let's show the movie. [Presentation]

So here you see an example of how we try to operate and kind of add value to the health care society basically by offering procedure packs. We configure them in our production facilities to the need of the customer and thereby, for example, you can save up to 90% of waste when it comes to packaging, but also a lot on preparation time. I think other areas where sustainability plays a role directly in our product offering is that if you look at our Advanced Wound Care products, the intended use normally is that they stay on the patient for 7 days, traditional conventional type of products stays maybe half the time, so that means that you spend half the material over time if you use them the right way. And we also performed life cycle -- full life cycle assessment on our gloves, for example, to really understand why we have our weak spots. And then of course, we have -- we are on a journey to what we call net zero by 2050 at later, so following the paris agreement and really to drive sustainability. So I think this is three examples that are more towards the scope-free type of emission area. So we're really, really trying now to drive that. So a little bit key takeaways and to summarize where Molnlycke stands today. I think first of all, we have a strong growth right now. It's also profitable. We see us bouncing back towards pre-pandemic type of profitability levels with a higher growth and also coming back on the cash conversion to a more solid level. We see ourselves as being a market leader in key segments where we participate, we are always top 1 to 3. We have a healthy innovation pipeline based on [indiscernible] studies where we truly try to figure out what is the #1 or 2 pain points for our patients and customers. And that is not always the easiest to solve because we do not always have a history there, but we really try to take that challenge. And then I think, as you saw also that there is a very strong focus from us on sustainability going forward. That will be one of our key focus areas for a long time. So by that, thank you, and I hope that you will continue to follow us on our journey.

Thank you, Zlatko, for a very interesting presentation. And again, don't forget to send in your questions to Zlatko.

And we have a few questions for you, surprise, surprise. The first one is why are you gaining market share? And how come you have pricing above competition?

I think, as I said before, I mean, we are a premium brand, and this is something that we don't know how to sell cheap products. We really know how to sell premium products because we back that with clinical evidence, health economics, training, professional education and whatever is needed. So we are closer to the customer in that sense. So they get -- once you get used to that as a customer, changing us to somebody else, and you lose that part, it's tough. So we see customers that tried something else and then come back to us. I think we know how to do that. And I think that is why we are seen as a strong player.

You talked a lot about different growth opportunities, but maybe not so much about any inorganic opportunities. Could you shed some light on it?

Absolutely. And I see that as a portfolio. For me, growth can be done in many different ways. I mean our focus is, of course, to create profitable organic growth. But then you have strategic collaboration, we do a lot of those. You have joint ventures, which are more kind of formalized and of course, eventually, when it comes to a situation where we do full acquisitions, of course. And we operate in all 4 and we try to use the whole toolbox dependent on where we need them. And we are doing several already now, I mean, bolt-on acquisitions, small technologies could be that we invest into certain segments somewhere, but we also do a lot of the other stuff. So I think we try to have a balanced approach in that and a high ambition level.

We have a question about the potential in different geographies. And of course, Asia, our impact is still a limited part of the operations. What's sort of the keys to success there or to grow there?

Yes. I think here, we also have to kind of bring in the geopolitical situation that is emerging right now. You have to be in one or another way, if you take the big markets where you want to make -- try to move the needle, you have EU, you have U.S. that were quite well presented. And then you have China, -- you have, I would say, Middle East where Saudi is a very strong market. You have India and Japan and maybe Brazil in the future. So that's kind of where stuff is happening right now. You have to have specific strategies to be successful in all those. And I think I can give one concrete example now. If you take China, we are present in 2 segments. It's acute care, which is the normal where patients go to hospitals. But we also, in China, scar management is a big thing because they have a lot of surgeries who are young females. So there we're going digital. But on the acute care side, if you want to be successful and be part of the tenders in the future, you have to have local manufacturing. So the way to solve that is that we decided this summer to invest into capacity. So we will build a factory here basically to support that. And you have to understand each market because they're all different. And that's the way to be successful. So you have to take an end-to-end perspective. Many times, you have to bring in capacity or local production and then you get access to the market or you find partners, et cetera, et cetera. So you have to really understand the health care system in those markets to be successful.

Okay. At the end of the presentation, you talked a little bit about your innovation pipeline, and I know that you sometimes talk about radical innovation and innovation. But could you please distinguish between the 2?

So what we try to do in [indiscernible] is that we define what we call radical innovation. That is basically something that is new to Molnlycke and something that is new to the world. So you cannot copy what others have done. And it's not incremental innovation. So we try to dedicate roughly 30% of R&D budget, if I may say so [indiscernible] radical innovation which is a little bit out of our comfort zone, it's new stuff. And then still 70% is sustaining engineering or more traditional product development because we would really like to put some new things in the market that moves the needle or disruptive at the end of the day. The radical innovation is based on these ethnographic studies I talk about that we studied the kind of the pain points that customers have by observation and we have started around 10 new projects in the last 2 years to really drive that radical innovation path. And what is interesting now is that all 10 or 9 out of 10 had a high digital component. That's I mean, the way you solve customers' problems. You combine traditional technology, which is [indiscernible] comfort zone, and then you have to go out of your comfort zone and introduce digital components to combine those 2. An example of that could be that you're looking to sensor technology in the wound care dressing to help the customer to understand when they have to replace them and also assess the wound, for example, could be one area that we look into.

Very interesting. So digitalization and new technology is certainly a highly important thing in Medtech as well, of course.

Yes, you cannot hide away from that these days.

Okay. Thank you very much. And we have a question that maybe is more for me, I think, and that question I really like. How do I buy shares in Molnlycke and I'm very happy to be able to answer that. You need to invest in Investor. So thank you for that question. I think with that, thank you very much, Zlatko, and great.

Thank you.

Our next presenting company is Piab, a world leader within vacuum-based material handling. We acquired Piab back in 2018, and the company has certainly made an impressive progress since then. And here to tell us more about that is Peter Laurin. He will talk about the exciting journey ahead for Piab, and Peter joined as CEO in 2022. So welcome, the floor is yours.

Thank you, Magnus. And my name is Peter Laurin, I'm the CEO of Piab Group. Piab, we are an industrial tech company focused on vacuum-based material handling in the automation industry. To give you a little bit of feeling of what we do on our product and solutions in actions, I would like to show this quick video, please. [Presentation]

So Piab was founded in 1951 in the Stockholm area. And our headquarters are still based in Stockholm. We are 1,200 staff in 27 countries worldwide. We are also a company of SEK 3 billion in size and with a 26% EBITDA margin. The company is primarily in Europe, but North America as well as sizable in Asia. We are serving 100 countries on a day-to-day basis. In 2020, we also decentralized and divisionalized. So we've had a successful strategy of having 3 divisions since that time. The largest division then vacuum automation. Here, we have our products and solutions, enabling robots and machines to grip and lift items in manufacturing and packaging lines. Segments, large variety of segments, but the largest ones being packaging, automotive as well as food and beverage. The second division we have is lifting automation. Here's where we assist individuals, humans to lift items in an ergonomic way, normally payloads or weights of, say, 10 kilos to 300 kilos. Here, we serve a wide variety of segments, but the largest one being warehousing and logistics. Thirdly then, the third division. Here, we move powder, so dry material. It could be in pharmaceuticals, could be in food and beverage, could be an additive manufacturing where we move metal powders, primarily in 3D printing. So that is Piab in short. How about our financial performance? So this is a little bit of a historic view on the growth of Piab. And during the Patricia Industries' ownership, we actually accelerated the growth. So now we are at 19% CAGR. And this is, of course, both organic and inorganic. But focusing on the organic growth, we had both product extensions as well as geographical extensions, and we've also taken market share. Profitability, healthy levels of 26% to 28% during that time frame on EBITDA level and our cash conversion is around 80% to 90%. All right. How about the inorganic part then? We supplement and we complement our inorganic growth or our organic growth with inorganic growth. And this has been a really exciting journey. And we are still in a very fragmented landscape. So there are opportunities here continuing. But we've had 13 acquisitions to date. And these 13 acquisitions also bring in both a lot of assets and competence, of course, but also brands. And we've kept around 7 of the 13 brands to date and we do that based on market value and performance. We integrate them lightly sometimes, and we also then have more deeper integration depending on. We see a continued opportunity in the acquisition space. If we then look at the larger market, and this is interesting because the industrial automation market is huge, actually, SEK 5 trillion of industrial automation out there and with a healthy growth. So this whole industry has a tailwind of 7% to 9% growth. But it's really driven by 5 macro trends. And these macro trends are then what we call robot economics. And what is that then? Robot economics is that the prices of the robots are coming down. At the same time, as the performance goes up and the application areas are expanding, so there's more things that you can do with robots now than just a few years back. Then secondly, as Zlatko also mentioned, the labor shortage. We see labor shortages also in the industrial space. And this could, of course, be for repetitive task or mundane task. But also for more advanced tasks across the globe actually. But there are, of course, even more so in North America and the more Western markets. Then we talk about nearshoring and onshoring. This is really linked to the disrupting of the supply chains where we see more factories are being built nearshore and onshore. Then fourthly, and this is a hugely interesting space from a technology aspect that with the technology advancements like [indiscernible], AI, 5G and connectivity, Industry 4.0, we see huge opportunities for automation, and this is further fueling this industry. Last but not least, health and safety. Health and safety, this is a great opportunity to automate away paths that are dangerous. And of course, this is also regulatory-driven. But even so, this is a big trend globally that drives the industry for industrial automation. All right. But what about the addressable market for Piab? So if we zoom in on our niches, so here, we have a market of around SEK 25 billion, growing 7% to 10% per year. And interesting is that if we slice this market up on our divisions, each division have a sizable addressable market with great growth of around 7% to 10%. What we see though, which is interesting is that there are pockets of growth substantially better than that. And that is in areas, for example, like warehousing market, battery as well as additive. And if I take warehouse as an example, here we are working with a lot of the -- for example, Amazon and other large players that are key customers of ours, where we see a lot of the focus and investments; battery naturally and here, our products come well into play and additive manufacturing, this is really around 3D printing in industrial environments. So then if we would zoom in on the segments or the divisions. This is a historical performance of our 3 divisions. So from 2020 to 2023, we've had good growth in all 3 divisions. And you see, first, the total growth, and then you see the organic growth. And I'm happy to share that we then have outgrown or we have better growth than the market itself. So we are taking market share. However then, our customers, our customer base is large. And this is the asset of Piab. Since we have been in business for 70 years, we have a large installed base. So we have more than 70,000 customers actually, and we serve them in 2 ways. One is through distributors, and we have a large distributor network of 900 distributors, and we have direct sales channels as well, a little bit depending on market and size of customer. This -- the large installed base here, which I come back to, it's a huge asset, it also gives us a great recurring revenue. So these customers, when we define them as active customers, that means that they have purchased from Piab within the last 3 years. And we can -- we have a very strong stickiness with our customers. So the recurring business is around 50% in our largest division, which is vacuum automation, 20% in lifting automation and 25% in vacuum conveying. The customer base also drives our R&D. And this is an important part because really the DNA of Piab is around innovation. And if I would just double-click on a few of our innovations ongoing, which we are extremely excited about. If I start in the top-left corner here, which is around our core technology, which is then vacuum. Here, we use compressed air, and we convert it with our COAX technology to vacuum. This is a main technology, and we are now making it next -- or in the next generation, making it significantly more energy-efficient for our customers. So we are driving down the energy consumption with 50% in the next generation, which is quite substantial. Then going to the bottom of the left side here, this is very exciting. This is where robots and AGVs and other machinery is not linked to compressed air anymore. So compressed air will, for the long run, be present in most factories, but there are environments when there are limited amounts of compressed air or none, for example, warehousing or robots that are moving -- and here, electrical pumps will be much more important going forward. So this is an area we are investing in. We have platforms, we have products, but we're going to continue to invest in this space. All right. Then to the middle part, and this is very exciting from a lifting automation division with a completely new product line using our ergonomic handling tools in a new application when you go into containers, unload containers with unstructured goods in an ergonomic way and you do that using our traditional tube lifter but in a new context, a new -- this is a quite long R&D project that just came to fruition and we launched it mid-2023 where you can unload containers in an ergonomic way with less staff and to have the time. So very, very interesting, and we're going to focus on that in 2024. Then around sustainability. This is a red thread in our strategy. And to just take one example is that we have a lot of material science within Piab Group. And what we now have is recycled material for all our advanced grippers, which is a very strong part of our offering. To the right side of this chart, we now move into the more digital space, and this is a digitalization that started a few years ago and will continue. And this is to put connectivity and digital into our products. And this is one example from our vacuum conveying division where the pumps that pulls the material, for example, in a 3D printing environment, pull metal powder, but it's able to take all the data around that, including the filters and so on and knowing when to change, when to update. And it's both from a performance and capacity and energy point of view, but also from a preventive maintenance point of view. Bottom-right corner here. This is from our lifting automation division. And this is where we see that digitalization has a lot of different values for our customers. And it's not only about knowing how many lifts you've done, knowing if your staff is using it or not using it in an ergonomic handling environment but it's also around energy savings. And in our next generation, we're able to reduce the energy consumption with 90% in our vacuum lifters. So hugely exciting. So what does this mean for our future then? Looking ahead then, these are the next 5 years or 4 years on to 2027. And as we see here, we feel confident that we can continue to have a double-digit organic growth and it's really centered around 5 pillars in our strategy, a strategy that we launched in 2023 that we call actually the 2027 strategy. And it's firstly then building on the core installed base that we have. And we will not sort of shift away from any segments we're in, but we will put extra focus on 3 segments where we see extra growth or additional growth in our industry. And that is within warehouse, battery and additive manufacturing. Then we also will put extra focus on geographies. And here, we see the largest manufacturing market in the world in the years ahead will be North America and China, and we're going to continue to have a focus on those markets. Then we talk about R&D. Here, we have long-term R&D plans, and we will extend and invest further in our R&D to keep and extend our technology leadership in our core technologies. Then sustainability. Here, we see a huge opportunity for Piab as we are addressing the energy consumption in the industrial automation space. And this will be a focus as we go forward. And last but not least, channels, we will go much more digital. This is quite traditional industry selling engineer to engineer, and we will now build on that and extend that with digital channels, both in lead generation, but also in the long-term relationship with our customers. And on that note, I would like to take the opportunity to show 2 examples of what we do on that topic. And why we believe this is important to share is that we believe that this will be building blocks in our future when it comes to our relationship with our customers. So let me start on the first -- on the left side here. On the OVM Pro [indiscernible], this is optimization vacuum management. This is platform to digitalize and simulate the environment. So in this engineer-to-engineer sales engagement that we've had in the past, it's very much when you design, you configure and you optimize your solution, it could take days. In this digitalized environment that we now created, this goes down to minutes. And interestingly enough, then is that actually the performance that you normally measure in cycles where you can lift an item, how many can you lift in a minute. That goes down with 25% on average from what we did engineer to engineer when we used the digitalization and simulation tool because we used much more parameters when we defined it in the simulation tool versus more advanced engineers doing the work. So this is a complement to the human interface, but we believe that this could add a lot of value as we scale the business. Then when we go to the Pixie part, the AI system that we launched. This is around enabling all our staff as well as our distributors to have access to advanced platforms and tools, in these cases, as an AI-based tool based on ChatGPT-4 that has our product and database and this comes back to, of course, a lot of rigor around our data strategy. But we see a large opportunity there to enhance our staff with the latest and greatest tools. So with that, I would like to summarize that we are optimistic for the Piab group future and we have a strong culture based on innovation. That's our DNA. And then we have a technology leadership in our niches, and we have a very attractive installed base that we stand on. We also have a proven platform of growth, both organically and inorganically. And all of this in the market that we have, the industrial automation market, which is sort of built in a -- how should I say it, a growth and a tailwind that we are benefiting from. So with that, I would like to end, and thank you for listening. I hope you're going to follow our journey in the future. Thank you. And over to you, Magnus.

Thank you, Peter. See if I have some questions. I would just like to start on the R&D side of things. How do you work there? How much do you collaborate with customers and others to be able to do all the things you're supposed to be doing in the next few years? It's a big task, it seems.

It's a great opportunity, I would say. And I think the closeness with our customers is really what drives it. So we have a few -- or a lot of customers, but a few main ones that we work with in our product development that guides our work. Amazon being one in the packaging space, for example.

Great. Thank you. And another question is, now Piab and yourself, you've been part of the Patricia Industries investor family for a few years. What are your reflections so far on being part of this portfolio, the family, the network? And how does it help you grow and evolve Piab?

There is a lot of strength in that. And I don't say that, Magnus, just because we are at the Investor Capital Market Day. But there are a couple of things that makes it a good base to grow faster than the market. And it's primarily around the network and the governance that we have asset when it comes to a really good Board, an active Board, good network when we have questions in the industry. And it's also linked to the practical hands-on support that we get, specifically in our M&A work, but also in the strategy work and then, of course, access to capital.

Thank you very much for that. At this point, there seems to be no further questions. I think it was a very clear presentation. So I think that's the explanation to that. So thank you again very much, Peter.

Thank you, Magnus. Thanks.

And with that, we'll move on to our next break. [Break]

In 2016, we acquired the Medtech company, Laborie, which became our second subsidiary in the North American part of Patricia Industries. Since then, Laborie has grown both organically and through some very exciting acquisitions. We will now hear CEO, Mike Frazzette talk about Laborie and its attractive prospects. So welcome, Mike.

Great. Thank you, Magnus, and good afternoon, everybody. As you just heard, my name is Mike Frazzette. I'm the CEO of Laborie Medical Technologies. I joined the company back in September of 2017, about a year after Patricia Industries acquired Laborie. And for the next few minutes, if you go to the next slide, you'll see what I'm going to talk about. I'll provide a business overview. I want to talk a little bit about the market dynamics in our competitive spaces, discuss our strategic imperatives for how we intend to win in these spaces and then provide you my outlook on our business and assuming we'll have a few minutes -- I can take some questions at the end. So starting with the business overview. And if we just go to the fundamental slide here, vision, mission and values. Our vision is to be One Laborie in the way we operate. We build global business units around very unique customers, but in culture, especially the resource and control functions, the way we get things done, we operate lean and efficiently and very much as one company. Our mission to preserve and restore human dignity is essentially what gets us up every morning, every employee up every morning. And we work hard every day striving to be world-class at that. The 5 values that are most important to our employees are aspire to greatness, not mediocrity. We respect all because everyone has a role to play. Own it because it's about -- it's all about accountability. Work together because we have common purposes and persist with passion. I think 2 traits that rarely, if they're missing, does anything good happen. If you look at Laborie by the numbers on the next slide, as I said, we're 1 company made up of 4 distinct global business units. We have about 1,000 employees around the world. We will exit 2023 approaching $400 million in annualized sales and growing above market in each of those. We sell to over 10,000 customers in over 110 countries. We have direct presence in 17 of those countries today, including the Nordics, which we just converted from distributor to direct. And we have 8 manufacturing and distribution operation centers, most of them in the U.S. but around the world. And we continue to scale up our direct presence, as you can see on the bottom right-hand side there, in key markets and geographies. If you look back a year ago, we probably would have had about 70 fewer direct salespeople in our markets. On the next slide, you'll see we've got 4 global business units, and they're represented here. I'm going to click through each one of these and then focus on Interventional Urology, our newest one when we talk about the market dynamics. The first one is Urology or UR. So the next slide. If we start there, this business unit focuses on urologists and urogynecologists who are diagnosing and also treating patients who presented them with lower urinary tract symptoms, or LUTS. This is the legacy Laborie business that Ray Laborie established way back in the mid-1980s. And still today is a key contributor to our value. We have high relative share in this business and we're viewed as the global leader. Most urologists and urogynecologists that have urodynamic diagnostics as part of their practice, do so with Laborie products and services, and we're likely trained on Laborie or legacy Laborie systems. The next business unit is our Interventional Urology business, as I said, is our newest global business unit. And here, we exclusively focus on the interventional urologists, treating patients who are suffering from urological structures and benign prostate hyperplasia or BPH. We have a very novel technology here. It's called Optilume, it's a drug-coated balloon catheter. We currently have 2 indications, 1 for urethral structures, the one on the left, and benign prostate hyperplasia, the one on the right. These are disruptive technologies in very attractive markets, and I'll speak about them a little bit more in just a few minutes. The next business unit is our GI business unit, and it consists of both diagnostics and some interventional technologies used for both upper and lower GI tract symptoms and treatments. Again, we have high relative share in the pediatric GI diagnostics, and we have a growing presence in the adult GI lab as well. We have a couple of leading technologies used in colonoscopy, Spot Ex, for endoscopic tattoos and EverLift submucosal lifting agent. And then finally, we have a niche play in the interventional radiology space with our Renova centesis system. And then last, but certainly not least, our OB business is focused on moms and babies in labor and delivery in the neonatal intensive care unit. Again, high relative share, procedure-based products, that are used worldwide to help provide safe deliveries for moms and babies like our Kiwi vacuum-assisted delivery system and our Koala intrauterine pressure catheters and also some very novel technologies in the NICU, like our LifeBubble securement device that provides a new standard in the securement protection of umbilical cord catheters on neonates. It's just a tremendous product. So if you go to the next slide, those are our business units. I want to spend a little bit of time on our markets and the size of those markets and the growth dynamics as well. So if you take a look at the next slide, again, you can see we have 4 global business units built around specific unique customers. Those business units have varied portfolio and channel scale and therefore, different total addressable markets within each. And you can see on this chart, moving left to right, the UR total addressable market is $31 billion, growing at 4% annually. The GI addressable market is $13 billion, growing at 8% annually. So a very attractive market. OB is $21 billion, growing at 6%, and our Interventional Urology, our newest business, the total addressable market there is $15 billion and growing at about 6%. There's also some shift going on in Interventional Urology. So that's a little more fluid. It's -- I'd say 6% is the minimum growth there. So total Laborie addressable market is an $80 billion market, growing at 6%. The takeaways here are 4 global business units, with channel scale focused on unique customers. We've got global leadership positions with novel portfolios. We are operating in attractive markets. We've got attractive growth rates across the board. So let me spend a little bit of time on our newest business unit, the Interventional Urology business. If you go to the next slide. We closed on Urotronic in October and what we acquired was very much a start-up company with a very novel drug-coated balloon technology called Optilume. And you can see the pictures on the slide here. The product consists of a catheter that is inserted into the urethra and a drug-coated balloon is placed at the stricture junction in the urethra and then inflated where it opens the stricture and also disperses an antiproliferative drug that has a clinical -- a lasting clinical effect on the tissue. And today, we have 2 indications. The one on the left is stricture, the one on the right is benign prostate hyperplasia or BPH. 2 very attractive markets, but 2 very different markets. The stricture market is about $2 billion today. It's growing at about 6%. It's historically been a very underserved market, no new technologies here in the last 20 years. And urethral strictures, they cause bladder distension. Patients have a difficult time urinating. These patients are typically using intermittent catheters or they're going in regularly to the urologist and getting balloon dilation every few months. So they're using other instruments to dilate the urethra and unblock restriction. And in extreme cases, they have what's called urethral reconstruction surgery. And this is a maximally invasive procedure that isn't without its risks and potential side effects. Even so, that's the gold standard in stricture. There are about 11,000 maximally invasive urethral reconstruction surgeries performed every year, okay? And so when Optilume was able to show a durable improvement in flow rates with no adverse events, you can imagine the enthusiasm that we generated in the urology community. Already in this year, this is only the second year since launch, we will exceed 12,000 Optilume stricture cases. So think about that. 11,000 per year is the gold standard and we're already at 12,000 in just our second year. So it's a great product, great results, very low adverse events, and I think a lot of headroom to go with stricture. Likewise, in BPH, there are many options for treatment. From pharmaceuticals to minimally invasive surgical treatments also called MIST, up to the gold standard, which is transurethral prostatectomy. And that's usually referred to as a TURP procedure, TUR. The BPH market is bigger. It's about $13 billion today. It's growing at about 6%. It's very competitive. If you look at the names of the companies there, you would recognize most, if not all. And the treatment options are varied. And it usually depends on patient selection and the clinician experience on what treatment pathway the patient will go down. Again, none of the procedures are perfect. None of the pharmaceuticals are perfect. They all have varying levels of effectiveness and come with varying levels of side effects and risk. The clinical results are typically tracked in post-surveillance study. So we can -- we have a pretty good view of what's available out there and how effective it is. And so again, when the clinical results in the PINNACLE study that was the landmark study for Optilume BPH were published in the September Journal of Urology, we found that the -- that Optilume BPH provided immediate and sustained improvement with virtually no adverse events, that the procedure can be done in the office or in the clinic and again, you can imagine when we looked at results 1 year post procedure, and those results were very durable. The enthusiasm for Optilume BPH now is very high. That product is just being launched today, is being met with tremendous enthusiasm. And I think we've got 2 great technologies that are going to provide us some real growth opportunities here in Interventional Urology for a long, long time. I want to spend a few minutes now on the strategic imperatives and what else are we doing to deliver on our growth opportunities and how do we benefit from new technologies, what are we doing in terms of innovation, sustainability, M&A and also geographic expansion. Go to the next slide. We divide -- at Laborie, we divide up our strategic imperatives by the rooms that they support. For example, any imperatives that are designed to improve the customer experience and deliver revenue growth are in the customer room. And those would be voice of customer, commercial, clinical support service. Any imperatives that support supply chain manufacturing, logistics, deliver, improved or margin expansion, lower costs are in the engine room. The future room is exactly what it sounds like. Those are imperatives that address evolving technologies and techniques, deliver new products and services, so R&D, new product development, PLM, M&A, all resides in the future room. And then finally, imperatives that concern our employees, skills, capabilities, and broader goals that support our company are in the people room. If you look at a couple of examples on the next slide in our customer room, we continue to invest in artificial intelligence and virtual reality to elevate our customer experience. 2 areas where we just launched into and we're meeting really nice success, one of them is in virtual reality training on NXT. NXT Pro, which is our latest generation of urodynamic systems. This system can support training from basic all the way to advanced levels. I think you heard from one of the previous speakers about the turnover rate in health care workers and staff turnover is an ongoing issue. Having technology that allows for modular training or virtual training has been a real godsend for us and for our customers. And so we're very proud of this. We're going to continue to invest in it. Another example is the virtual reality training that we have in place for urologists so they can actually practice the Optilume BPH procedure, perfect their technique before performing it on a live procedure. So 2 real good examples of using technology in the customer room. If you go to the next slide. As our portfolio evolves and matures, we see a continuing need for R&D investments. Only instead of spending heavily like we have in the past on next-generation hardware, we see an increasing focus on software, on consumable procedure-based products and on clinical research to differentiate outcomes, especially and also AI for procedure automation and support that I just spoke on. The other R&D area of investment that we're making is in sustainability. So sustainability in designs, in materials and packaging. We're looking for ways to not only take cost out but also to reduce waste and emissions and we're tracking those. Other sustainability initiatives are on the next slide. So if you flip to there. We track and measure ourselves against 4 meaningful sustainability targets. The first one is 100% code of conduct training and adherence for all employees and agents. There's a zero tolerance to anything less than that. The second one is health and safety goals, which include world-class incident rate targets at all sites. We want to provide a safe environment for our employees, for all stakeholders involved with Laborie. The third one is we strive for a diverse workforce and leadership team from a gender perspective. And the fourth one is we set a 50% reduction goal for Scope 1, 2 and 3 CO2 emissions by 2030. We report out on this on a monthly basis to our Board, and I'm pleased to say that we're on track to deliver on each of these sustainability targets. So let me just take a breath here and wrap up a little bit by providing a little bit of history on the company and maybe a little bit of outlook on where we're going. The next slide. So as I said, Patricia bought Laborie in 2016, and I joined 1 year later. And since then, with a lot of their help, we've aggressively used organic growth but also M&A to help future-proof the business. Starting with the Cogentix acquisition as you're moving left to right on this slide, in 2018. Even during the lockdown years, we integrated clinical innovations, which added our OB global business unit. We added GI Supply in 2022, which gave us scale, both channel scale and portfolio scale and also a basis for more bolt-ons in the GI space. And up until last quarter, when we signed the Urotronic deal, which closed at the end of October, which provides us, again, an innovative technology in the interventional urology space. So you can see we've been very busy both organically, launching new products, iterating on the existing portfolio, but also doing quite a bit of M&A work to help future-proof the business going forward. If we look at the next slide, which is a recreation of that time line across the top. But below the time line, we can look at the Laborie revenue growth from 2017 through 2023, and being that we just closed the third quarter, that's a quarter 3, last 12 months' view, the last box there. But our base Laborie UR business, which isn't on this chart, has grown at 5%, which is about 1% above the competitive Urology market that I showed you earlier, 4%. When you include all of our aggregated acquired businesses, the total revenue CAGR is 17% over the same time horizon. During that same time frame, we've also expanded our recurring EBITDA margin by about 900 basis points, going from 25% of sales to 34% today, which doesn't include some of the onetime costs associated with those acquisitions, but it's a recurring EBITDA. And I would point out, similar dynamic to what you've seen in other companies going through the lockdown years, a slight dip in 2019 and then a return back, dealing with some of the supply chain and cost pressures, some of the inventory issues last year. But as we're sitting here today, the trajectory is pretty powerful and it's pretty optimistic. So again, market-leading growth and margin expansion, which especially given those middle lockdown years, I think is a pretty good trajectory and one we believe will only improve as we continue to see a return to pre-pandemic procedure rates as well as the scale-up of Optilume stricture and the launch of Optilume BPH. We believe clearly our best days are ahead of us. If we slip -- go to the last slide. So let me just conclude by saying that Laborie is well positioned in very attractive markets. We're focused on maintaining our leadership and expanding our leadership. We see complementary acquisitions and talent as differentiators, innovation, agility and continuous improvement, our key store long-term success, and we'll continue to invest in those key initiatives. And with that, I'll pause, and I'm happy to take some questions.

Thank you, Mike, for that very good run-through of Laborie. Very exciting indeed. And seeing if there are any questions. I'd like to start with, as you say, you made quite a few significant acquisitions in the past few years. So what would you say are the key learnings from these when it comes to integration, realizing synergies and so on?

That's a good question. Thank you for that, Magnus. I think I've been in the space now for over 35 years and previous companies I was with were also very active in M&A. And I would say the first learning is that in a dynamic space like medical technology, I believe M&A is critical. It's a critical tool to future-proof the company. So that's kind of above all. And then in terms of doing M&A, what are the learnings, there's a lot of them, but I would start with diligence. I don't think there's any shortcuts. When you do an M&A, [indiscernible] diligence of the company, and it doesn't matter whether it's a large company, with multiple platforms, and we've made a couple of acquisitions of some pretty mature companies. We've also acquired some bolt-on technologies or single SKU companies. They both require complete diligence in all of your resource and control functions. If you don't do that and you don't do it well, you can run into problems. And so that's probably my biggest takeaway. And I guess the only other thing I would add is, it's okay to say no. So we've got an ongoing effort to scan the horizon in terms of what's available out there, what looks like a good fit for our business, what do we think we could buy and be a great owner for but not everything works out. And so it's okay to say no. And if it doesn't meet your requirements, if it doesn't look like it's going to fit, you have to have the ability to just walk away.

Thanks. But I guess, the appetite for additional M&A is still there, but perhaps -- or would you say that more of the growth would be organic in the next few years, given the Optilume opportunities and so on?

Well, I think there's an opportunity to do both. I don't think they're mutually exclusive. We are already investing in indication expansion for Optilume. There are other pathologies like urethral strictures, bladder neck construction, and there are even other potential indication outside of urology that might make sense and that we may be interested in pursuing. And within our own -- and with the rest of the portfolio, we also have opportunities to grow organically. But yes, we also will balance that with M&A. We'll continue to look for opportunities, whether those are single SKU type companies or larger enterprises. And I think we would start in our existing business units because there's plenty of -- as I showed you, there's plenty of opportunities to grow within those 4 global business units.

Well, thanks a lot, Mike. There seems to be no further questions right now, but very helpful and informative presentation, and it's going to be great coming back to you over the next few years to see the development. So big thanks for today.

Thank you, Magnus. Have a great day.

You, too.

We acquired Advanced Instruments, a true leader in very attractive niche just a couple of weeks before we had our Capital Markets Day back in 2020. And given that, we thought we'd better give the management some time to focus on the business and get to know the new owners instead of producing a lot of slides for external use. But now 3 times -- sorry, 3 years have passed since then. And having made great process during this period. It's a great pleasure for me to introduce CEO, Byron Selman. So welcome, Byron.

Thank you, Magnus, and good morning, good afternoon, good evening, depending where you are. It's really great to be here today, and I appreciate the opportunity to present Advanced Instruments, talk a bit about who we are, how we're going to grow. So a little bit of history. I joined Advanced Instruments back in 2017. And I would say it's been an incredibly rewarding journey for myself or my team, bringing a relatively slow-paced single-digit growth company to fast-paced double-digit growth company that we are today. And what's even more exciting is the fact that we've just really scratched the surface with regard to our opportunities. So let's go ahead and begin with a quick overview of who we are. So who is Advanced Instruments. Well, certainly, we are a global leader in the lab-based analytical systems in the applications that we serve. But when you dig down into our DNA, we really are an innovation company, and that's something that started very, very early on in our creation. We were founded back in 1955. We were a distributor. We actually acquired the product we were distributing, transform that technology into an osmometer that was gold standard then, and interestingly, is gold standard today, that core technology still remains today. It's been significantly enhanced, of course, but the core technology remains the same. And through our history, we've gone through a series of growth segments, right? And after the Patricia acquisition, we've seen our largest growth and that was nearly doubling our business, $76 million to $150 million. And we did that through both organic and inorganic. We'll talk about both of those, but it's through a number of new product launches, expansion internationally into 3 very strategic acquisitions. Our Solentim acquisition, our SAL Scientific and most recently, our Artel acquisition. All these drive very profitable growth for us. We've consistently been over 40% in EBITDA margin. We target very attractive markets, clinical biopharma, food and beverage. Clinical is kind of our core, where we've been for decades, represents roughly half. Biopharma, probably our most exciting, to be honest with you. Not only where biopharma is gone, but maybe more exciting about where it's going and a global platform of our products. We've been heavily North America based, and you can kind of see that in our split, 75% in the U.S., 25% international. And that just screams opportunity for us. Our products are global in nature, and it's really about putting the right commercial effort and which exactly what we're doing and our investments to get that moving forward. And we're going to do that all through heightened, I'll say, sustainability. It's something that was always important to us, but it certainly has accelerated with the acquisition with Patricia and Investor AB. So if we can go to the next slide, I just want to take a deeper look at some of the characteristics. If we go to the next slide. If you take the top row of this slide, what you'll see is that innovation kind of screaming out. We've launched 6 new products in the past 2 years, the -- and we expect that to continue incidentally. We've gained quite a bit of market leadership through these core technologies. We have over 12,000 systems installed globally. So basically, every hospital in North America has one of our osmometers, and we can absolutely leverage that as we bring our new products, which go on to the next bullet, which are 3 acquisitions that we've had, which is really complemented and added to our overall strength in terms of technology. And what's exciting about all of the products that we have, we see significant recurring revenues. Over half of our business is based on recurring revenues, and that is everything from the plastics that are used, the reagents that are used. And also one of our biggest growing areas in terms of recurring revenue has been our service that we provide to our customers. We do all this, as I said, in very attractive markets. In fact, if you look at our biopharma market, the top 10 biopharma companies in the world are our customers and that across the globe throughout the international markets. And all of this is being led by a very strong management team with some deep experience and I'm fortunate enough to be able to have that team on board and it's certainly a key critical element of our success. But if we go to the next slide, it is all about our products and our technology. And we have 4 portfolios. The first I want to talk about -- all of these incidentally are highly differentiated, all represent gold standard in terms of what they provide in the space they serve. And that's what we go after, whether it's our organic development or inorganic in terms of acquisitions. But let me talk about the first one. It's in bio drug development. And this is -- the Solentim portfolio is one of our recent acquisitions. This is an automated platform. It's actually an ecosystem of 3 products that work seamlessly together to identify key cells that are used to develop biologic drugs. Think of it as finding the raw material for your bio drug process. It's very untapped. I'll say that, too, with a whole series of new products that are going to be coming out. Next is our osmometer portfolio. It's split into clinical as well as bioprocessing. On the clinical side, used to rapidly diagnose patient illness and setting treatment. It is -- it really is a standard of care used throughout the world. On the bioprocessing side, our osmometers increase yield, better quality, purity of pharmaceuticals. It's -- regulatory requirements are such that every infused product, and I should say FDA, every infused product through the FDA requires an osmolality test. So it's really, again, standard of use, I guess, somehow processing. And finally, Artel product, which is our latest acquisition, and this one is particularly exciting because it doesn't focus necessarily on any single industry. It's any lab anywhere that has a pipette, that has a liquid handling, automated liquid handling is an application -- is a customer of ours. And so it's something that recent acquisition, small company, lots of potential and expansion. We're very excited about that. So if we can go to the next slide and take a look at where we are geographically. And what you'll see here is that we are in very key, very important geographic spots around the world. Our corporate headquarters are in Norwood, Massachusetts. We're at 30 minutes outside of Boston. One of our recent acquisitions, Artel is in Westbrook, Maine. It's about 2 hours away. You'll see we're located in the Northeast. The Northeast represents the largest biotech growth sector in the world today. So we're incredibly well positioned for that. Another acquisition brought us into a much larger location within the U.K. and Wimborne. That's where we house our Solentim products. We have R&D manufacturing to help support also EMEA, which fast -- as in 2023, our fastest growing. [Technical Difficulty]

Okay. We have some difficulties. We'll be back shortly.

Can you hear me now? Can you guys hear me?

Yes.

Okay. Sorry about that. It appears my main system just went down. So hopefully, you can hear me all right and we'll continue this slide. Okay. If we could go to the next slide. Yes. Let's talk a little bit about the markets. We talked about the key markets that we're in, bioclinical and food and beverage. And despite some of the challenges that we faced due to COVID, what we continue to see is the fundamentals have remained strong, and the industry trends all heavily support our long-term growth across all these segments. You take biopharma, as an example, right? Just look at the biologic drug market. It's projected to more than double by 3032 (sic) [ 2032 ] with nearly 9% CAGR. If you look at cell and gene therapy, which is a key segment within bio, one of the fastest-growing segments is a key area of focus for us at 23% growth. And all of this is moving towards a more complex drug modality, advanced therapies. And all of that support or I should say that our strategy supports some of the complexity of these drugs with the systems that we have. One of the key areas that has developed in our industry and certainly, we've been on the leading edge of within our applications is automation. We'll talk a bit more about that. And that feeds not only greater accuracy and speed, but also staff shortages that have plagued the industry in particular, on the clinical side. I mentioned COVID did have an impact. Some overcapacity was built. We see that as abating. And in fact, we're seeing an uptick in 2023. And then some of these geopolitical and macroeconomic factors are having a bit of an impact as well. But again, we see that as relatively temporary and not as impactful. Overall, as I mentioned, innovative platforms, all of these focused on not only where the industry is today, but where we see it going in the future as we support our customers. So if we could go to the next slide. So how are we going to grow? Well, our growth is going to be driven by 3 core areas: our technological innovations, again, something that's driven us since our beginning; our direct customer engagement; and continued evolution of our global expansion with our product lines. So let me just talk a bit about our technology. And there's no doubt that automation has been in the forefront of what we do. And you can split automation into 2 categories, right? It's hardware with robotics and its software with artificial intelligence. All of these are key in driving products that not only serve the demand for rapid analysis of the high data loads and predictive analysis and streamlined workflows but also where regulatory agencies are developing. So our products are designed not only to improve workflows and provide purity and accuracy, but also satisfy the regulatory agencies. And you see 3 examples down below of some of our key products, our OsmoPRO MAX, which provides automation in terms of pipetting and testing in hospitals, our Cell Metric, which is part of our Solentim product line that drives cell analysis and automated plate handling and our STUDIUS software, which enables an AI engine across all of our Solentim products, our ecosystem that drives predictive analysis and brings drug development to a whole new level. We're very excited about all of these technologies that are out there. The next slide, Magnus. In terms of direct customer engagement, it's something that has led to our position in the market in North America, and we're looking to leverage that in other regions. And the complexity of our products and the efficiency of being able to drive these technologies can done best only by direct customer engagement. And as a smaller company, we rely quite a bit on distributors we're evolving away from that in key areas and transitioning in particular areas like Germany, Benelux, China, South Korea, all these markets are moving towards, for us, direct engagement with a direct sales team, and we see that accelerating. And it's not just having that direct engagement, but it's having the right type of engagement. So it's not just a sales rep, for example, it's bringing service, scientific support, customer service, is multifaceted customer engagement that leads to a much better experience for our customers, which will enable us to continue to expand and grow. And finally, if we go to the next slide, Magnus. See, ability to now take a products of ours that are heavily commercialized within North America and expanding globally. Artel, great example of this. We recently acquired Artel, over 90% of their penetration was in North America, and we see that expanding significantly over the next year or 2. And we're investing, as I say, in a team to support that and really excited where that's going. If we go to the next slide, Magnus. All of this is being future proof. It's something that I talked about with regard to sustainability in the first slide. It's something that -- we certainly have always taken seriously but have really accelerated under the guidance of Patricia and Investor, which has been great. And as we think about sustainability, it's certainly minimizing environmental impact and understanding the impact that we do have. But it's also the ability to continuing to deliver innovation, to deliver these products and to support our stakeholders, our customers across the board. Understanding that has really been a key pillar of our business, and we've taken a number of meaningful steps. We now have a dedicated resource that specifically leads our sustainability effort corporate-wide. We've embedded that now in our culture. And so we have a number of initiatives that are underway and certainly embedded it within our code of conduct and other communications internally. So we're making steady progress. We know we have more to do, but it's something that, as I say, is very much embedded within our culture and will continue to help support and drive our growth moving forward. So if we go to the next slide, what does that all mean in terms of numbers? I mentioned we've gone through multiple phases of growth throughout our history. And the early part of the years, though I would say the majority part of the years was about that scientific foundation about innovation. When I came on board, it was a lot about execution where we were able to go from 9% to 13% CAGR and more recently, it's been now accelerating growth and accelerating that platform. We've been able to drive 25% CAGR since acquisition by Patricia. We go to the next slide, my last slide. I just want to summarize and kind of bring it all together, and I hope you see that not only are we in attractive markets, but we're an innovation-based company that has significant opportunities from a global expansion perspective. It's something that is in our DNA and started as soon as we formed as a company and certainly continues. We continue to invest heavily in R&D to support our long-term growth. And I would say that goes parallel to investing heavily on our commercial team as we think about our international expansion, which is absolutely key, plus we are in North America. So it's a platform that, as I mentioned, has growth organically and inorganically. And inorganically is an area that is something we've just accelerated over the last few years under Patricia ownership, and it's an area where we see significant opportunities to bring additional technologies on board. So overall, we're excited about where we're going. We believe we're well positioned for long-term profitable growth, and it is absolutely realistic for us to expect from ourselves, doubling our business within the next 5 years and look forward to leading that charge as does my team. So hopefully -- apologies for the technical glitch, but hopefully, that was a bit informative for you and happy to answer any questions that you have.

Thank you very much for that, Byron. And I can assure you that you've raised the knowledge about Advanced Instruments by 1,000% or so externally through this presentation. And we have a question for you from one of the participants, and that is could you give us the rough split of revenues between the different segments, please. [Technical Difficulty] Okay. We seem to have some technical difficulties. We'll just give it 1 more shot.

Magnus, I can hear you, but can you hear me?

I can hear you.

Is it possible to type a question maybe on the chat box? I can hear you now, Magnus. It just came on.

All right. Great. So I'm just going to repeat the question that was about the revenue split between the different segments to begin with and then if you could provide a little more color on the long-term prospects of the different segments?

So from a revenue split right now, clinical and bio are fairly equal in terms of size. We've seen over the recent years, bio accelerating quite a bit. Food and beverage maintains a relatively small area for us. It's not an area of investment, but it is an area of opportunity for us in the future. With regard to where each segment is going, we see clinical continuing to grow at a strong pace. In fact, we are in the double-digit range, and that's going to be driven quite a bit by international and some of the new product technologies that we're launching as we accelerate our replacement cycle. I should mention that planned obsolescence is really key for us. And when you have a very large installed base like we do in clinical, the key is to continue to innovate and continuing to change out our equipment earlier than the service life because of the value and the features and we see that continue on clinical. On bio, we see significant acceleration, and that's driven not only by the technology that we have, but just where the market is going. I think there's been a bit of a slowdown during COVID, but we are seeing some real signs of that picking up, investments coming back in, and we're very well positioned for that.

Thank you. And I'm also going to ask you the same question that Piab got before. You've now been part of the family for a few years. And what's your reflection so far? How has it been being owned by Patricia Industries and how has that helped you and will hopefully help you to continue to grow the business going forward?

Magnus, I think you just came.

All right. I'll ask the question again. You've been part of the Patricia family for a few years now and I'm curious to hear your reflections on how is it being owned by Patricia Industries and how can we help you continue to grow going forward?

Yes, absolutely. Thanks for the question. And I'll start with more in general. It's been great to be part of the Patricia family and the support that we've received. I would say specifically, I talked a bit about acquisitions, inorganic growth. M&A has been a strong growth area for us, and that's really been through the guidance and the consultation through Patricia, which has been great. We had not acquired a company in the previous ownership. And we're in the right position now to do that, and Patricia helps us to find the companies to side-by-side with us in due diligence and ultimately, help provide some guidance with how we should think about integration, which has been really helpful, and it's been a real partnership. I would also say just some of the expertise across the Patricia and Investor family and our ability to work with some of the portfolio companies has been great and brought significant value for us. So we enjoy the Patricia model, and I speak for my team when I say that and look forward to the continued partnership.

With that, thank you very much, Byron. All right. Johan, you're back with me here at the table. And I must say, I think we've had a great afternoon. And I think and hope that our main messages have come across fairly clearly. But what would you say are the key takeaways today from your side?

Thank you, Magnus. First of all, I hope that you have all enjoyed this afternoon, I certainly have. But there are a couple of things that I would like you to bring with you. First of all, we have a well-proven business model. We have a clear strategic direction and we are an owner of fantastic companies. Companies with strong market-leading positions, profitable companies and with good growth opportunities. We also have a very strong financial position, so we are ready to capture opportunities out there. And finally, we have excellent people, and people really makes the difference. So thank you very much for participating today. And with that, over to you, Magnus.

Thank you, Johan, and thank you, everyone who has listened in and participated today. Thank you all the participating companies as well. So we hope you have gained an increased understanding of the Investor, of our strategy and our portfolio that you said, Johan, is made up of great companies. You will find all the presentations from today on our website, and you can also go back there if you want to rewatch this event. And we hope to see you again on January 19 when we release our Q4 results. So with that, thank you very much, and have a great weekend. Bye.