Administration Report

1 april 2016 - 31 march 2017

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 2016/2017 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. Comparisons in parentheses refer to the corresponding period of the previous year, unless stated otherwise.

The operations

Addtech is a Swedish listed technology trading group that provides technological and economic value added in the link between manufacturers and customers. Addtech operates in selected niches in the market for advanced technology products and solutions. Its customers primarily operate in the manufacturing industry and infrastructure. Addtech has around 120 independent subsidiaries that operate under their own brands and about 2,200 employees. The Group's sales amount to over SEK 7 billion and half consist of sales of standard products and half consist of sales of customised products and solutions. Addtech creates optimal conditions for the profitability and growth of subsidiaries. The Addtech share is listed on Nasdaq Stockholm since 2001.

Market trend during the year

The business situation improved during 2016/2017, and we consolidated our positions in the majority of our markets. As before, sales of production components to manufacturing companies and sales of products and solutions to end customers each accounted for roughly half of the Group’s sales. The latter grew more rapidly during the year, driven by the increase in infrastructure investments among Nordic power network companies. In the customer segment Energy, which includes the wind power industry, demand rose during the year. Investments in oil & gas remained low, but in our view the lowest point has been passed. Demand for production components increased overall, and the business situation was favourable in most customer segments, including the mechanical industry, electronics and medical technology. The biggest increase in demand came from manufacturers of special vehicles, in segments such as forklift trucks, mining, forestry and contracting. The business situation among customers in telecom remained weak. Sales of products to the industrial aftermarket, for example, the mechanical, forest and process industries, developed strongly in both the Nordic region and Europe. Demand from the ship supply market was very buoyant. The business situation remained positive for electricity-related products in building and installation.

The year in brief

The 2016/2017 financial year was highly eventful, and we delivered in line with our financial targets for growth combined with profitability. The Group increased sales by 17 percent, EBITA rose by 34 percent and we posted an EBITA margin of 10 percent. Return on working capital was 53 percent and return on equity 28 percent. The Group’s strong profit growth and its improved operating margin arose through higher sales of our products and solutions, combined with a successful efficiency drive. The focus was on further developing the Group’s various operations and making acquisitions in selected segments and niches. We maintained a high rate of acquisitions and ten were made during the year, which will add annual sales of around SEK 500 million. 

Performance by quarter

• First quarter. The Group performed well during the first quarter. Sales and earnings rose, both organically and via acquisitions. The selective cost adjustments implemented had a positive impact on earnings. Demand showed firm growth in the majority of niche markets, although there were wide variations between various customer segments. Demand rose strongly from customers in infrastructure sectors such as power transmission and building & installation in the Swedish market, while other geographical markets were relatively stable. In the energy sector, the market situation was particularly favourable in wind power. Demand in oil & gas in Norway remained at the same low level as in the preceding quarter. Sales of production components to manufacturers rose slightly in all the Nordic markets. This was evident in the majority of customer segments, including machinery manufacture, medical technology, ship supply and electronics. Demand for products in telecom weakened, while demand for products for special vehicles was relatively stable. Overall, the business situation in our markets outside the Nordic regions was favourable. Four acquisitions were carried out during the quarter.
• Second quarter. The Group turned in a very strong performance in the second quarter, and despite a challenging economic situation, we continued to expand. Our operating margin strengthened and the increase in earnings was, in equal measure, acquisition-related and an effect of organic growth with good control of costs. The selective cost savings implemented had a positive impact on earnings. Overall, the underlying demand was stable during the quarter, but the market situation varied according to geographical region and customer segment. Demand for production components from Nordic manufacturing companies remained stable at a high level in the majority of customer segments, including machinery manufacturers, the engineering industry and medical technology. The business situation with customers in special vehicles, transport and wind power improved. Demand for products in telecom fell away considerably and investments in oil & gas in Norway remained at a low level. On the Norwegian market, rising demand was recorded in areas such as infrastructure and the food industry. Demand from industrial aftermarket customers was generally unchanged. Investments by customers in power transmission increased, but demand from customers in power distribution remained stable at a high level. The market for electricity-related products in building and installation grew strongly. One acquisition was carried out during the quarter.
• Third quarter. During the third quarter, the Group recorded strong demand and the economic situation in our markets stabilised. In all four business areas, the Group continued to expand, both through firm organic growth and contributions from acquisitions made. Higher sales of our products and solutions combined with a successful efficiency drive led to further strong growth in profits and the operating margin improved. Demand for production components from Nordic manufacturing companies rose overall, but the business situation continued to vary from one customer segment to another. Demand from machinery manufacturers, the engineering industry and medical technology was relatively stable, but increased in customer segments such as special vehicles, electronics and transport. The market situation remained weak in oil & gas and declined somewhat in telecom and wind power. Overall, the business situation for production components in our markets outside the Nordic regions was favourable. Sales of products to industrial aftermarket customers in the Nordic region were generally stable. Demand from customers in infrastructure sectors such as power transmission and power distribution remained on the same level as in the preceding year. The business situation remained positive for electricity-related products in building and installation. Two acquisitions were made during the quarter.
• Fourth quarter. The fourth quarter brought a strong finish to a year of profit growth in all of our four business areas. Infrastructure investments in national and regional grids in the Nordic region continued to increase. The wind power industry, which is serviced via the customer segment Energy, experienced higher demand. Investments in oil & gas remained low, but in our view the lowest point has been passed. Demand for production components increased overall, and the business situation was favourable in most customer segments, including the mechanical industry, electronics and medical technology. The biggest increase in demand came from manufacturers of special vehicles, in segments such as forklift trucks, mining, forestry and contracting. The business situation among customers in telecom remained weak. Sales of products to the industrial aftermarket, for example, the mechanical, forest and process industries, developed strongly in both the Nordic region and Europe. Demand from the ship supply market was very buoyant. The business situation remained positive for electricity-related products in building and installation. Three acquisitions were made during the quarter.