Investing in growth in high-voltage cables and cleaning equipment

The Danish companies NKT and Nilfisk, market leaders in high-voltage cables and cleaning equipment respectively, are the latest additions to Ferd Capital’s portfolio of stock exchange listed companies, with both companies having the potential for major value creation in different areas going forward.

In the first half of 2017 Ferd built up a 5.8% in stake in NKT Holding A/S, giving the business area’s portfolio of listed companies its first investment in a Danish company.

“At that time NKT Holding comprised NKT, one of Europe’s leading manufacturers of high-voltage cables, and Nilfisk, a name familiar to many, although only 10% of its revenue comes from vacuum cleaners and other household products. The remainder of Nilfisk’s revenue comes from cleaning equipment for industrial customers”, explains Are Dragesund, Investment Director and Co-Head of Ferd Capital, in an interview with Ferd Magazine. The team responsible for making and then monitoring the investment comprised Are Dragesund, Investment Manager Maria Syse-Nybraaten, and Associate Gustav Martinsen.

Share split
In other words, NKT Holding was made up of very different companies, and the three people from Ferd Capital’s team responsible for the investment emphasise that a planned share split was one of the factors that made the company interesting. The synergies benefitting the two companies were modest, and it was recognised that separate management teams for each of the companies would be more able to operate in an efficient and focused manner. Furthermore, such different businesses appealed to different types of investor with entirely different strategies, which in itself was having a negative impact on how the company was valued on the stock market. The share split took place on 12 October 2017, with shareholders being given the same stake in both NKT AS and Nilfisk Holding AS as they previously held in NKT Holding.

Infrastructure for renewable energy
Maria Syse-Nybraaten emphasises that both companies have significant potential. The potential of NKT A/S is primarily in the transition from fossil energy to electricity from renewable energy sources. This transition requires significant expansion of the electricity transmission network, particularly in the EU. Renewable energy sources such as wind, solar and wave energy are affected by unpredictable weather conditions. This makes it all the more important to have a more extensive and international power network: strong winds in one location can compensate for the sun not shining in another, and NKT is one of the companies with the strongest capabilities in terms of delivering infrastructure that can link regions and countries together.

Always a need for cleaning
At Nilfisk Holding AS, growth is expected to increase steadily. The company provides floor-washing machines, pressure washers and vacuum cleaners for industrial applications, in addition to a wide range of cleaning equipment for process industries, building sites, hospitals, and schools.

“There will always be the need for cleaning, but cleaning is transitioning from manual work to work that involves increasingly advanced machines, and also autonomous equipment. Nilfisk is ahead of its rivals and is also strong on innovation, and it will therefore be able to increase both its revenue and market share going forward”, comments Gustav Martinsen.

The complete article is available in the Ferd Magazine (only available in Norwegian)

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