Economy and market trends

Demand for Addtech’s services is greatly influenced by macroeconomic factors beyond its control, such as trends in the production industry, the state of the economy in general and conditions in the global capital market.

With a focus on different niche markets and upselling of technical service, support and consumables, the Company is less sensitive to economic fluctuations in individual sectors, industries and geographical areas. Addtech also continuously strives to develop operations that are less dependent on one specific market.

Structural changes

Globalisation, digitalisation and rapid technological development drive structural change in customers’ operations. The trend can increase demand for Addtech’s advanced services, but it can also result in Addtech’s customers disappearing through mergers, closures and relocations to low-cost countries.

Addtech’s clear and unique added value services with high technological content, specialisation in advanced technical advisory services, outstanding service and strong presence on niche markets offset price competition, while increasing competitiveness and generating opportunities to deliver beyond the immediate geographic area. The Group is exposed to a large number of industries with no single customer accounting for more than two percent of sales, constitute protection adverse impact on profit.

Competitive situation

Change and consolidation among companies in the technology trading industry affect competition. There is a risk that suppliers will switch from cooperating with Addtech to establishing their own sales, or that large customers will bypass the middleman. Economies of scale could lead to pricing pressure and rapid technological development could erode our offering.

Addtech strives to offer products and services for which price is not the sole determining factor. By working closely with both suppliers and customers, we continually develop our know-how and our competitiveness. Our extensive technical knowledge, delivery reliability, service and availability add value, which limits the risk that the customer will choose to bypass the middleman. To reduce the risk of competition from suppliers, Addtech continually strives to ensure that cooperation with the Group is the most profitable sales strategy.    

Environment

Changed environmental legislation could affect product sales, goods transports and the way in which our customers use the products. There is also a risk that one of the Group’s subsidiaries, through its corporate ID number, could be linked to a historical responsibility under the Swedish Environmental Code.

Addtech’s subsidiaries are primarily engaged in commerce and business that has a limited direct environmental impact. The Group conducts in limited production. The Group monitors operations and environmental risks with its sustainability report and all companies comply with the Group’s Code of Conduct. In conjunction with acquisitions, Addtech conducts an analysis of the prospective object’s corporate ID number to counter the risk of being liable for historical environmental issues.

Ability to reccruit and retain staff

Addtech is highly dependent on its employees. The ability to recruit and retain qualified managers and employees is of utmost importance to ensure the level of expertise in the Company. Acquisitions are also associated with the risk that expertise could be lost.

Addtech prioritises internal recruitment and creates conditions to promote personnel development among the subsidiaries and to encourage their employees to pursue careers within the Group. The acquisition strategy includes providing good motivation for key employees in the companies to independently continue running the company as part of the Group. Addtech’s Business School, which is aimed at both new employees and senior management, increases internal knowledge transfer, provides skills development for employees and refines the corporate culture. The Group conducts regular employee surveys to find out how employees view their employers and working situation, as well as areas for improvement and development.

Acquisitions and goodwill

Costs attributable to acquisitions may be higher than expected, and positive impacts on profits may take longer time to realise than expected. Goodwill risk arises when a business unit under-performs in relation to the assumptions that applied at the time of the valuation and impairment, if any, could have a negative impact on the Group’s financial performance. Additional risks associated with acquisitions are integration risks and exposure to unknown liabilities.

Addtech has many years of solid experience in acquiring and pricing companies. All potential acquisitions and their operations are carefully examined before completing the acquisition. There are well-established procedures and structures for pricing and implementing the acquisition, as well as for integrating the acquired companies. An effort is made in the agreements to obtain the necessary guarantees to limit the risk of unknown liabilities. The large number of companies acquired entails a significant distribution of risk.

Financial

The business operations are associated with various financial risks such as transaction exposure and translation exposure of foreign currency, as well as credit risks relating to customers. In addition the Group as a whole faces other financial risks, such as financing risk, interest rate risk and credit and counterparty risk.

Addtech strives for structured and efficient management of the financial risks that arise in operations, in accordance with the financial policy adopted by the Board of Directors. The financial policy expresses the goal of identifying, minimising and controlling financial risks, as well as how the responsibility for managing these risks is divided within the organisation.

Suppliers

As the link between supplier and customer, AddLife depends on external suppliers who must meet the terms of agreements regarding matters such as volume, quality and delivery date in order for Addtech to deliver to customers as promised. There is a risk that problems with the supplier could affect Addtech’s deliveries to customers and, ultimately, both its reputation and future sales.

Addtech’s long-term close relationships with reliable suppliers reduce the risk of not being able to deliver as promised. Addtech always signs agreements with its suppliers and is not dependent on any single supplier in the long term.

Organisation

Addtech’s decentralised organisation is based on subsidiaries having a large responsibility for their own operations, which sets high standards for financial reporting and monitoring; shortcomings in this area could lead to inadequate control of the operations.

Addtech controls its subsidiaries through board work, a Group-wide framework for overarching policies and financial reporting. By continuously monitoring the development of its subsidiaries and being active owners, risks at the subsidiary level and potential deficiencies in operations or reporting can quickly be identified and addressed in accordance with the Group’s internal guidelines.

Seasonal effects

There is a risk that Addtech’s operations, earnings and cash flow could be affected by strong seasonal effects driven by
customer demand.

No significant seasonal effects are associated with Addtech’s sales of high-tech products and solutions to companies in the manufacturing and infrastructure sectors. However, the number of production days, customer demand and the will to invest may vary from one quarter to another.