Storskogen Group (STOR) Investor Update summary

Strategic direction and divestment rationale

• Nine underperforming business units are being divested to M Industrial Invest to enhance profitability and focus on core areas with higher growth potential.

• The divestment aims to improve organic growth, cash flows, reduce debt, and deliver on financial targets.

• Long-term turnaround efforts for these units did not yield desired results, prompting accelerated divestment.

• The process began in late February/early March, with substantial interest and multiple options evaluated.

• The transaction is pending regulatory and bondholder approvals, expected by August 2024.

Financial impact and impairment details

• SEK 920 million in non-cash impairments and write-downs will be booked in Q2, including SEK 600 million goodwill impairment and SEK 320 million in tangible/intangible asset write-downs.

• An additional SEK 30 million capital loss will be recorded, all adjusted as items affecting comparability.

• The divested units had negative EBITDA of SEK 10 million and adjusted EBITA of SEK -98 million over the last 12 months, with negative operating cash flow.

• Excluding divested entities, adjusted EBITA margin improves from 9.0% to 9.7% for full year 2023, and pro forma margin rises by 0.7 percentage points.

• Group's interest-bearing net debt/RTM adjusted EBITDA is expected to improve marginally.

Transaction structure and future proceeds

• Initial proceeds of SEK 10 million received; intra-group loans and cash in divested units converted to loans to the new company totaling SEK 240 million.

• Storskogen will hold a preference share in the new company, entitling it to future profits and sales proceeds, with no dividends until loans are repaid.

• Future proceeds will be received as dividends or other payments after the loan is repaid, with further gains possible if assets are sold.

• The new owner, M Industrial Invest, is committed to investing working capital and managing the portfolio.

• No other assets related to these holdings remain on the balance sheet except for the receivable from the new company.