Market

Macroeconomic uncertainty increased globally in 2018. The challenging relationships between international superpowers, as well as trade restrictions and Brexit, contributed to greater political uncertainty. At the same time, interest rates are rising internationally, and the levels of pricing seen in stock markets and for corporate transactions have been at historically high levels. The underlying macroeconomic fundamentals weakened over 2018, although Norway continued to enjoy good economic growth. With a couple of exceptions, our portfolio companies delivered stronger earnings in 2018 than in 2017, and the exceptions relate to companies that are undergoing a transformation process.

In 2018 Ferd Capital continued to focus on investment opportunities that make use of Ferd’s competitive advantages, such as our ability to be flexible and to take a long-term approach. In the market for more traditional transactions we again experienced a high level of competition for new investment opportunities in 2018, and we expect this to continue.

Portfolio companies

2018 was an eventful year for many of our portfolio companies:

• Aibel delivered the Johan Sverdrup drilling platform in 2018 and. Based on this successful delivery and a strong offering, Aibel was awarded the process platform for phase 2 of the Johan Sverdrup field. The company also won other important contracts, such as the refurbishment and life-time extension of Njord Bravo FSU and hook-up at Johan Sverdrup. In 2018, Aibel’s total order intake was in excess of NOK 13 billion, as compared to NOK 5 billion in 2017.
• Brav has in 2018 continued its journey towards becoming a professional house of brands. The company got a good start in 2018 thanks to a strong winter season, but sales were negatively affected by the unusually hot summer in Scandinavia. Brav realized strong growth in its core markets and has strengthened its position in Europe, especially with its outdoor brands, and has become less season-dependent. The company has throughout the year invested significant resources in developing its digital infrastructure, and while this impacted 2018 earnings, it will equip the company for profitable growth in the coming years.
• Fürst Medisinsk Laboratorium maintained its market share in 2018 and continued to deliver strong earnings thanks to the focus on secure operations, high quality of each aspect of the production, good, user-friendly IT systems and excellent level of service to both existing and new customers. In 2018 Fürst’s development of WebMed, a new electronic patient record system for primary healthcare, took a big step forwards, and the system is now being tested by pilot customers.
• Elopak continued to increase its volumes through its three growth initiatives in the roll fed aseptic carton, aseptic gable top carton and gable top carton areas in North America. It also focused on increasing its operational efficiency. A new ERP system was rolled out at its factory in the Netherlands, and the entire organisation was involved in delivering on the improvement plan that it initiated in 2017. Elopak’s growth and efficiency initiatives will continue at full strength in 2019.
• Fjord Line delivered revenue growth of nearly 15% in 2018. This growth was driven by an increase in passengers and freight units, higher ticket revenue and on-board sales. The company carried all time high volume with 1.4 million passengers and over 66,000 freight units. The company has in 2018 focused on developing its platform for future growth and improving the customer experience, including the launch of a new shopping experience on MS Oslofjord, 64 new cabins on both MS Stavangerfjord and MS Bergensfjord, and investment in its digital infrastructure.
• Interwell continued its positive trend from 2017 and achieved strong growth in both revenue and earnings. The company grew across all its geographic areas, with particularly strong growth seen in the Middle East and the Americas. At the same time, it allocated substantial resources to its research and development activities in order to improve and expand its product portfolio. Its work to develop and commercialise a permanent plugging solution for the closure of oil wells (P&A) progressed positively.
• Mestergruppen’s focus in 2018 was on integrating the companies it acquired in 2016 and 2017. In addition, a number of new retailers joined its building materials and house builder chains, which led to growth in distribution revenue for the Group. As part of its focus on industrialising the process for house building, the company completed the acquisition of Pretre at the start of the year, and made a bolt-on acquisition in Jæren Treteknikk in August. Mestergruppen is continuing its work on strengthening its position in the building materials distribution and retail market and in the market for and house and cabin development and construction.
• Servi saw market conditions improve in 2018 as a result of higher levels of activity in the marine and renewables segments. The market has now stabilised and there are signs of an upturn in some segments, which can also be seen in Servi’s higher order intake. In 2018 Servi continued to work on adapting its cost base and it implemented a number of improvement measures to increase its competitiveness, including investing further in after-sales and servicing and reorganising its sales organisation.
• Mnemonic became part of Ferd Capital’s portfolio through Ferd’s acquisition of 63% of the company’s share capital from former employees and external shareholders. As part of the transaction, Ferd sold approximately 20% of the company’s share capital back to employees, who now own around 50% of the company. Since its incorporation in 2001, Mnemonic has grown to become one of the biggest suppliers of cyber security in Europe, and it is a preferred security partner to large public sector organisations and private companies.

Transactions

In 2018 Ferd Capital increased its shareholdings in the listed companies Nilfisk and Benchmark Holding. Ferd Capital wishes to actively contribute to the development of these companies. In 2018 we also sold a significant proportion of our holding in PGS.

In the private mandate, we acquired approximately 43% of Mnemonic.

The Special Investments mandate made two investments in 2018, namely in FriskUtvikling, which is a co-investment with Credo Partners, and in NP Innovation through Broodstock Capital Partners. We also sold our investment in JSB Group, which was part of the Winds portfolio that is owned through Verdane.

Organisation

Ferd Capital invests through three investment mandates: Private companies, Stock Exchange Listed companies and Special Investments. At the end of the year, the Ferd Capital business area consisted of 12 employees who have a broad range of experience from both Ferd and other companies.

Future prospects

Ferd Capital has a portfolio of strong companies that are well placed to continue to create value in 2019. Ferd also has sizeable unused investment capacity, and it will emphasise working proactively on new investment opportunities. Our three investment mandates give us a significant degree of flexibility in terms of the types of investment we can make, and we will focus again in 2019 on opportunities where we can make good use of Ferd’s competitive advantages, both in the form of add-on investments to existing portfolio companies and potential new portfolio companies.