Other Financial information

Profitability, financial position and cash flow

The return on equity at the end of the financial year was 28 percent (20), and return on capital employed was 23 percent (16). Return on working capital P/WC (EBITA in relation to working capital) amounted to 53 percent (44).

At the end of the financial year the equity ratio amounted to 39 percent (40). Equity per share, excluding non-controlling interest, totalled SEK 25.45 (22.10). The Group's net debt at the end of the year amounted to SEK 801 million (623), excluding pension liabilities of SEK 210 million (199). The net debt/equity ratio, calculated on the basis of net debt excluding provisions for pensions, amounted to 0.5 (0.4).

Cash and cash equivalents consisting of cash and bank equivalents and approved but non-utilised credit facilities amounted to SEK 818 million (754) at 31 March 2017.

Cash flow from operating activities amounted to SEK 551 million (474) during the financial year. Company acquisitions and disposals including settlement of contingent consideration regarding acquisitions implemented in previous years amounted to SEK 335 million (623). Investments in non-current assets totalled SEK 68 million (90) and disposal of non-current assets amounted to SEK 5 million (24). Dividend from associated company amounted to SEK 3 million (0). Repurchase of treasury shares amounted to SEK 40 million (45) and repurchase of call options amounted to SEK 6 million (0). Exercised and issued call options totalled SEK 18 million (61). Dividends paid to the shareholders of the Parent Company totalled SEK 218 million (217), corresponding to SEK 3.25 (3.25) per share.

Employees

At the end of the financial year, the number of employees was 2,176, compared to 2,076 at the beginning of the financial year. During the financial year, implemented acquisitions increased the number of employees by 129. The average number of employees in the latest 12-month period was 2,133.

Ownership structure

At the end of the financial year the share capital stood at SEK 51.1 million.

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Addtech has four outstanding call option programmes for a total of 1,374,721 shares. Call options issued on repurchased shares entail a dilution effect of about 0.3 percent during the latest 12-month period. Addtech’s own shareholdings fully meet the needs of the outstanding call option programmes.

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Acquisitions

During the first three quarters of the financial year, 1 April to 31 December 2016, following acquisitions have been completed; Elektro-Tukku Oy and Penlink AB to become part of the Components business area, E.T.S Portsmouth Limited to become part of the Energy business area, Sammet Dampers Oy and Itek AS to become part of the Industrial Process business area and Poryan China Company Ltd and Carmac Inc to become part of the Power Solutions business area.

Acquisitions during the fourth quarter

On 2 January 2017, Sensor Control Nordic AB and Sensor ECS AB, Sweden, were acquired to become part of the Components business area. The Sensor-companies deliver products and solutions in the fields of sensor, control and drives. The companies have sales of around SEK 160 million and 30 employees.

On 2 January 2017, Vallentin Elektronik A/S, Denmark, was acquired to become part of the Components business area. Vallentin is a technology trading company that supplies thermal solutions for OEM/built-in to customers, mainly in the area of electronics. The company has sales of about DKK 15 million and four employees.

On 1 March 2017, Ex-tekniikka Oy, Finland, was acquired to become part of the Components business area. Ex-Tekniikka Oy is a technology trading company that supplies Ex products for OEM installation as well as process industry. The company has sales of about EUR 2 million and three employees.

Total Acquisitions

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If all the acquisitions had been completed on 1 April 2016, their impact would have been an estimated SEK 528 million on Group net sales, about SEK 55 million on operating profit and about SEK 39 million on profit after tax for the period.

The amount of contingent consideration depends on future results achieved in the companies. The estimated outcome for the year's acquisitions amounts to SEK 94 million, which is due for payment within one to four years. The amounts are estimated to be able to reach a maximum total of SEK 105 million. Of the contingent consideration not yet paid for acquisitions during the financial year, the discounted value amounts to SEK 84 million.

For acquisitions that resulted in an ownership transfer during the financial year, transaction costs totalled SEK 7 million (3) and are reported under selling expenses.

During the financial year contingent consideration was net revalued to SEK 12 million (10). The impact on profits is recognised in other operating income and other operating expenses, respectively. 

According to the preliminary acquisitions analyses, the assets and liabilities included in the acquisitions were as follows, during the year:

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Parent Company

Parent Company net sales amounted to SEK 54 million (58) and profit after financial items was SEK 312 million (200). Net investments in non-current assets were SEK 0 million (2). The Parent Company's net financial liabilities was SEK 88 million (+21) at the end of the period. 

Other Disclosures

Accounting policies

This interim report was prepared as per International Financial Reporting Standards (IFRS) and IAS 34 Interim Financial Reporting. The accounting policies and basis for calculations applied in the latest annual report were also used here. The interim report for the parent company was prepared in accordance with the Swedish Annual Accounts Act and the Securities Market Act, in compliance with recommendation RFR 2 Accounting for Legal Entites, of the Swedish Financial Reporting Board. The new and revised IFRS standards and IFRIC interpretations that come into force as of the 2016/2017 financial year have had no material effect on the Group's financial reports. Disclosure in accordance with IAS 34.16A is presented both in the financial statements and related notes, as well as in other parts of the interim report.

Alternative perfomance measures

The Company presents certain financial measures in the interim report that are not defined according to IFRS. The Company believes that these measures provide valuable supplemental information to investors and the Company's management as they allow for evaluation of trends and the Company's performance. Since all companies do not calculate financial measures in the same way, they are not always comparable to measures used by other companies. These financial measures should therefore not be considered to be a replacement for measurements as defined under IFRS. For definitions of the performance measures that Addtech uses, please see page 19.

Risks and factors of uncertainty

Addtech's profit and financial position, as well as its strategic position, are affected by a number of internal factors under Addtech's control and by a number of external factors over which Addtech has limited influence. The most important risk factors for Addtech are the state of the economy, combined with structural change and the competitive situation. Risk and uncertainty factors are the same as in previous periods, please see section Risks and uncertainties (page 19-21) in the annual report for 2015/2016 for further details. The Parent Company is indirectly affected by the above risks and uncertainty factors due to its role in the organisation.

Transactions with related parties

No transactions between Addtech and related parties that have significantly affected the Group's position and earnings have taken place during the period.

Seasonal effects

Addtech's sales of high-tech products and solutions in the manufacturing industry and infrastructure are not subject to major seasonal variations. The number of production days and customers' demand and willingness to invest can vary over the quarters.

Dividend and amended dividend policy

Addtech's dividend policy is to propose a dividend that exceeds 50 percent of average Group profit after tax over a business cycle. The Board of Directors proposes dividend of SEK 3.50 (3.25 includes Addlife) per share. The year’s proposed dividend represents a payout ratio that exceeds 50 percent.

Addtech has a succesful record of making acquisitions. There are still good opportunities to make acquisitions with good returns benefiting Addtech's shareholders so therefore, the Board of Directors of Addtech has decided on an altered dividend policy. The new policy has the objective of proposing a dividend that exceeds 30 percent of average Group profit after tax over a business cycle. In the dividend proposal, the Group's equity, long-term financing and investment requirements, growth plans and other factors that the Company Board deems significant are considered.

Proposal to the Annual General Meeting

The Annual General Meeting (AGM) of Addtech AB will take place at 4:00 p.m on Thursday 31 August 2017 at IVA at the address Grev Turegatan 16 in Stockholm. A notice of the AGM will be published in July 2017 and will also be available on www.addtech.com. The Board of Directors proposes dividend of SEK 3.50 (3.25 includes Addlife) per share, which corresponds to a dividend payment of SEK 234 million (218). The proposed record date for dividend is 25 August 2017, expected to be paid on 7 September 2017. In addition, the Board of Directors proposes that the AGM approves a renewed mandate to repurchase own shares corresponding to a maximum of 10 percent of all shares in the Company.

Annual report 2016/2017

The annual report for 2016/2017 will be published on Addtech’s website www.addtech.com in July 2017. A printed version will be distributed to the shareholders who request this.

Significant events after the end of the period

On 3 April 2017, Dovitech A/S, Denmark, was acquired to become part of the Components business area. Dovitech delivers inductive special solutions as well as electromechanical- and automation products. The company has sales of around DKK 80 million and five employees.

On 6  April 2017, Craig & Derricott Holdings Ltd, Great Britain, was acquired to become part of the Power Solutions business area. Craig & Derricott is engaged in design, manufacturing and marketing of low electrical control equipment and switchgear for the UK market and export markets. The company has sales of about GBP 10 million and 90 employees.

The Board of Directors of Addtech has decided on a new dividend policy. The new policy has the objective of proposing a dividend that exceeds 30 percent of average Group profit after tax over a business cycle.

Stockholm, 11 May 2017

Johan Sjö
President and CEO