Comments by the President and CEO
Overall, Addtech continued to show solid growth and high profitability in the 2012/2013 financial year. However, the year featured sustained unease on most of the Group's markets. The Group nevertheless delivered solid earnings, thanks to the fact that Addtech is a stable group with sound risk diversification among customers, suppliers and geographic markets alike.
In my comments last year, I wrote that the market would not do us any favours as we entered the new year. I was right. The general market climate is the same. It is still up to us to do a good job in order to grow and maintain profitability.
About half of the Group's operations contended with a poorer business climate, while the other half operated on stable and, in some cases, growing markets. Sweden and Denmark were generally weaker than the previous year, while the Norwegian, Finnish and non-Nordic markets were more favourable.
The market climate varied for our subsidiaries depending on their customer segments and product niches. For instance, Nordic healthcare, medical technology and energy enjoyed strong demand during the year. Conversely, a number of manufacturing customers, mainly in the vehicle and engineering industry, curbed their production rate in the autumn, which in turn affected the Group's outcome for the financial year.
Overall, Group sales increased, mainly because of the contribution through acquisitions. Our organic volumes declined slightly, but in the final quarter at a lower rate than in previous quarters, which is positive. In order to ensure that our subsidiaries are well prepared to contend with the challenges and benefit from the opportunities that the future will bring, we are continuously taking the measures necessary to maximise the long-term profitability of the operations.
Efficiency gives freedom of action
On an uneasy market, managing working capital efficiently is always challenging. The lesson we learned from the 2008-2009 crisis was that improving capital efficiency takes time. Since a year back, we therefore increased focus on reducing working capital, particularly on keeping inventory levels low at our subsidiaries in order to avoid tying up capital unnecessarily. Thanks to these measures, during the year we continued to enjoy a solid cash flow.
In parallel with this, we have reviewed our costs at the subsidiaries that experienced a tougher business climate. Subsidiaries that demonstrated profitable growth, however, could continue to work according to their targets and strategies. To sum up, our efforts have been successful, providing us with good opportunities to continue to strengthen the Group's positions in the coming years, both organically and through acquisitions.
Acquisitions complement our operational progress
Through acquiring a total of eight companies during the year, with combined annual sales of about SEK 590 million, the Group has strengthened its positions in a number of market segments. One example is the acquisition of Necks Electric Group, which has provided the Energy business area with a better comprehensive approach to the electricity distribution and transmission network market.
There are still plenty of acquisition opportunities and we will continue to acquire companies that fit in with our strategy in attractive market segments. The number of companies we will acquire each year is hard to say, and not very important. Over time, however, we will carry out the acquisitions needed to reach our goals. The acquisitions will be in well-defined niche markets, and always firmly in line with our growth strategies. In some cases, the Group has also stepped into new market niches where we saw substantial opportunities and a complement to our other operations. There will be more opportunities of this kind in the future, providing further long-term profitable growth opportunities for the Group.
Roots dating back 100 years - a solid basis for further growth and profitability
Addtech was listed in 2001, when it consisted of around 50 subsidiaries, 1,100 employees and had sales of around SEK 2.5 billion. Today, we have around 130 operating subsidiaries, 2,000 employees and sales of about SEK 5.5 billion with sustained sound profitability. The positive operational performance has led to a solid shareholder value trend since Addtech was listed.
A reason for our successes is the strong corporate culture created by the founders of Bergman & Beving over 100 years ago, which still flourishes and lives on today. Technical expertise combined with business acumen is key to this corporate culture. We believe in a small-scale approach for maintaining this crucial culture at our subsidiaries, so that each company can independently strive to become a market leader in its niche and offer technological and economic value added to customers and suppliers.
Opportunities whatever the state of the market
Our approach at Addtech is that there are opportunities whatever the state of the market - you just have to take them. With the current state of the market, our subsidiaries are focusing on gaining further market shares which can provide good leverage when the market turns upwards again.
The Group subsidiaries are agile, which is possible thanks to our decentralised organisation. They combine good market knowledge with close relationships with customers and suppliers. This makes them quick in responding to changes and new requirements, based on which they can develop their business and even develop new, durable business concepts which replace part of the lost ground. In times like these, this is naturally extremely valuable.
Finally, I would like to thank all employees for the past year. It is your commitment which enables the subsidiaries, and hence the Group, to continue to develop. I would also like to extend my thanks to our customers and suppliers. Over the coming year, we will continue to provide technological and economic value added in your operations. Together, we can and will face a future that holds many opportunities.
Stockholm, June 2013
President and CEO