Administration Report

1 april 2015 - 31 march 2016

The Board of Directors and the CEO of Addtech AB, company ID number 556302-9726, hereby submit the annual accounts and consolidated financial statements for the 2015/2016 financial year.

All data in this report refer to continuing operations, excluding the distribution of AddLife, unless otherwise stated. All figures regarding the income statement refer to continuing operations retroactively from 1 April 2014. All figures regarding the balance sheet refer to continuing operations from 31 March 2016 without retroactivity for earlier periods.

Market trend during the year

Overall, the business situation during the year was relatively stable, though we experienced a large variation between our different markets. The Group was heavily affected by the decline in investments in oil and gas in Norway. The negative impact on profits was significant because these sales had a margin exceeding the Group average. While it is still too early to say when the market for oil and gas in Norway will recover, our companies operating there have experienced stabilising demand in the fourth quarter, albeit at a low level. The business situation in our other customer segments in the Norwegian market was relatively stable and some indications suggest that demand may increase in these segments.

In Sweden, the level of activity from manufacturing customers continued to be solid and demand in electricity infrastructure, building and installation increased. Market conditions were also good in Denmark, where we experienced positive sales growth. In Finland, we successfully maintained sales at a good level despite reduced demand in several market segments. In our markets outside the Nordic region the business situation improved overall towards the end of the year.

Key events during the year

The 2015/2016 financial year has been very eventful for Addtech. The Group continued to actively work on measures that affected the costs and working capital of those operations that experienced a weaker business situation. At the same time we actively invested resources in boosting other operations in the Group. There was a focus on further developing the various operations and carrying out acquisitions in selected segments and niches. Ten acquisitions were implemented in our business areas during the year. A small increase in earnings was reported for the full year as a result of both the many acquisitions and the Company’s focus on costs.

In the fourth quarter Addtech’s shareholdings in AddLife were distributed through an IPO on Nasdaq Stockholm. Both Addtech and AddLife have gained greater visibility as a result of this streamlining initiative, allowing them to focus on their respective core markets and providing better conditions for continued profitable growth.

Performance by quarter

• First quarter. During the first quarter business was relatively stable on the whole, but market variations in terms of geography, customer segments and product segments persisted. Demand for production components from Nordic manufacturing companies increased slightly in Denmark and Sweden, and remained stable in Finland despite some uncertainty in the market. The Norwegian market for production components declined in oil and gas while it was more stable in the marine segment and for land-based industry. Several industrial aftermarket customers had robust demand during the quarter and the business climate was unchanged for products in building and installation. Investments by some customers in the electrical energy sector remained at low levels.
• Second quarter. The Group’s growth in sales and operating earnings is attributable to previously completed acquisitions, while underlying demand overall was stable. As a result of lower investments in the Norwegian oil and gas segment, demand declined considerably in that area. This trend mainly affected the Components and Energy business areas, but also other business areas, albeit to a lesser extent. Demand was good for those Group companies that operate in markets outside the Nordic region. Industrial aftermarket customers in general encountered robust demand and the business climate improved somewhat for products in building and installation. Investment by customers remained at low levels in the electrical energy sector but rose in the special vehicle industry. 
• Third quarter. Overall, the quarter was relatively stable, though with underlying variations such as a more favourable business climate in the Nordic countries compared with operations outside that area. Demand for production components from Nordic manufacturing companies rose in Denmark and remained stable in Finland. Underlying demand in the Swedish market was robust, though several of our customers reduced their purchases prior to the turn of the year. The Norwegian market for production components declined substantially in oil and gas, while it was more stable in the marine segment and for land-based industry. The trend in Norway continues to have a negative impact primarily on the Components and Energy business areas. Investments by certain customers in electrical energy remained at low levels, while the business situation was favourable for products in building and installation, as well as from customers in the special vehicle industry.
• Fourth quarter. Overall, the business situation during the quarter was relatively stable, although there was great variation between different customer segments. The companies in oil and gas in Norway experienced stabilising demand, albeit at a low level. The business situation in our other customer segments in the Norwegian market was relatively stable and some indications suggest that demand may increase in these segments. In Sweden, the level of activity from manufacturing customers continued to be solid and demand in electricity infrastructure, building and installation increased. Market conditions were also good in Denmark, with positive sales growth. In Finland, sales also continued at a good level despite reduced demand in several market segments. In markets outside the Nordic region the business situation improved overall towards the end of the year.