Other Financial information

Profitability, financial position and cash flow

The return on equity at the end of the period was 27 percent (28), and return on capital employed was 22 percent (23). Return on working capital P/WC (EBITA in relation to working capital) amounted to 53 percent (53).

At the end of the period the equity ratio amounted to 39 percent (39). Equity per share, excluding non-controlling interest, totalled SEK 34.25 (27.40). The Group's net debt at the end of the period amounted to SEK 1,246 million (945), excluding pension liabilities of SEK 229 million (218). The net debt/equity ratio, calculated on the basis of net debt excluding provisions for pensions, amounted to 0.5 (0.5).

Cash and cash equivalents consisting of cash and bank equivalents and approved but non-utilised credit facilities amounted to SEK 887 million (721) at 30 June 2018.

Cash flow from operating activities amounted to SEK 52 million (85) during the period, affected primarily from an increase of working capital mainly accounts receivables. Company acquisitions and divestments including settlement of contingent consideration regarding acquisitions implemented in previous years amounted to SEK 140 million (172). Investments in non-current assets totalled SEK 13 million (9) and disposal of non-current assets amounted to SEK 1 million (1). Dividend from associated companies amounted to SEK 2 million (3). Repurchase of call options amounted to SEK 6 million (0) and the exercise of call options amounted to SEK 13 million (18).

Employees

At the end of the period, the number of employees was 2,449, compared to 2,358 at the beginning of the financial year. During the period, completed acquisitions resulted in a net increase of the number of employees by 83. The average number of employees in the latest 12-month period was 2,332.

Ownership structure

At the end of the period the share capital amounted to SEK 51.1 million.

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Addtech has three outstanding call option programmes for a total of 1,030,500 shares. Call options issued on repurchased shares entail a dilution effect of about 0.2 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 and disposal

On 3 April 2018, Synthecs Group, Netherlands, was acquired to become part of the Components business area. The group provides automation components and systems in the field of sensors, machine vision, industrial PC' s, Plc's etc. to the industrial sector in the Benelux. The company has sales of around EUR 14 million and 50 employees.

On 3 April 2018, Addtech acquired Xi Instrument AB, Sweden, to become part of the Energy Business Area. Xi Instrument imports electronic devices primarily for use in equipment for locating underground utilities. The company has sales of about SEK 13 million and two employees.

On 9 April 2018, KRV AS, Norway, was acquired to become part of the Industrial Process business area. KRV is a leading supplier and installer of sprinkler systems in Norway. The company has sales of about NOK 50 million and 27 employees.

On 9 April 2018, Scanwill Fluid Power ApS and Willtech ApS, Denmark, were acquired to become part of the Components Business Area. ScanWill designs and manufactures hydraulic pressure boosters, while Willtech produces expansion plugs for permanently sealing drilled holes in metal. The companies are being merged under the name of ScanWill and have sales of about DKK 13 million. The companies have four employees.

Acquisitions completed as of the 2017/2018 financial year are distributed among the Group’s business areas as follows:

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Acquisitions completed during the period have affected net sales by SEK 65 million and operating profit by SEK 4 million and about SEK 3 million has affected profit after tax for the period.

Addtech normally employs an acquisition structure comprising basic purchase consideration and contingent purchase consideration. The outcome of contingent purchase considerations is determined by the future results achieved in the companies and is subject to a set maximum level. Of considerations not yet paid for acquisitions during the period, the discounted value amounts to SEK 18 million. The contingent purchase considerations fall due for payment within three years and the outcome is subject to a maximum of SEK 20 million. If the conditions are not fulfilled, the outcome may fall within the range of SEK 0-20 million.

Transaction costs for acquisitions that resulted in an ownership transfer during the period, amounted to SEK 2 million (3) and are reported under Selling expenses.

During the period, no reassessments were made of contingent purchase considerations (SEK 1 million). The impact on profits are reported under 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 period:

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Parent Company

Parent Company net sales amounted to SEK 15 million (14) and profit after financial items was SEK -19 million (1). Net investments in non-current assets were SEK 0 million (0). The Parent Company's net financial asset was SEK 165 million (245) at the end of the period.  

Other Disclosures

Accounting policies

This interim report was prepared in accordance with IFRS and IAS 34 Interim Financial Reporting. Disclosures under IAS 34.16A are made not only in the financial statements, with associated notes, but also in other parts of the interim report. The interim report for the parent company was prepared in accordance with the Swedish Annual Accounts Act and the Swedish Securities Market Act, which complies with recommendation RFR 2 Accounting for Legal Entities, issued by the Swedish Financial Reporting Board. The same accounting policies and basis for calculations as in the latest annual report have been applied in this interim report, with the exception of the amended accounting policies described below.

IFRS 9, Financial Instruments, deals with classification, measurement and recognition of financial assets and liabilities and introduces new rules for hedge accounting. It has been applied with effect from 1 April 2018. IFRS 9 introduces, for example, a new model for recognition of impairment losses that is based on expected credit losses and that takes forward-looking information into account. 

During 2017/2018, Addtech analysed the impact, if any, on introduction of the new standard. The judgement is that the new impairment recognition model had no material impact on the Group’s financial position, based on historical information regarding bad debts. Because the Group does not use hedge accounting, the relevant parts of IFRS 9 do not affect Addtech's financial statements.

IFRS 15, Revenue from Contracts with Customers, introduces new requirements for recognition of revenue. The Group began to apply the standard as of 1 April 2018 with the forward-looking retroactive transition method under IFRS 15. An analysis of the impact of IFRS 15 in the Group was carried out in 2017/2018. The conclusion from the analysis was that IFRS 15 will not have any impact on accrual accounting of the Group’s revenue. IFRS 15 introduces increased disclosure requirements – see table Net sales by the subsidiaries geographical location, under the heading Disaggregation of revenue. This table presents a disaggregation of the Group’s income and appears for the first time in the interim report for the first quarter of 2018/2019. It will subsequently be included in future interim reports and annual reports.

At the end of the interim report period, the Group’s judgement is that no changes are necessary in the analyses relating to IFRS 9 and IFRS 15 for presentation in the 2017/2018 Annual Report.

Alternative performance 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 17.

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 38-40) in the annual report for 2017/2019 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.

Significant events after the end of the period

On 2 July, Duelco A/S, Denmark, was acquired to become part of the Energy business area. Duelco is a well-established supplier of products for electrical distribution to customers in installation, industry, electric power supply, wind power and railway. The company has sales of about DKK 110 million and 30 employees.

On 2 July, Fibersystem AB, Sweden, was acquired to become part of the Components business area. Fibersystem is a high-tech cyber security innovation company that develops fiber optic transmission solutions and IT security products. The company has sales of about SEK 140 million and 12 employees.

On 2 July, TLS Energimätning AB, Sweden, was acquired to become part of the Industrial Process business area. TLS Energimätning delivers measurement equipment for heat, cooling and water for thermal power plants and waterworks in the Swedish, Norwegian and Danish markets. The company has sales of about SEK 50 million and 9 employees.

On 3 July, Diamond Point International (Europe) Ltd, Great Britain, was acquired to become part of the Components business area. Diamond Point develops, manufactures and markets innovative embedded computer systems for demanding OEM-applications. The company has sales of about GBP 3,5 million and 9 employees.

On 3 July, Power Technic ApS, Denmark, was acquired to become part of the Power Solutions business area. Power Technic is a well-established supplier of power supply products mainly for the Danish market. The company has sales of about DKK 35 million and 6 employees.

On 4 July, Prisma Teknik AB and Prisma Light AB, Sweden, was acquired to become part of the Energy business area. Prisma Teknik AB is a leading supplier of advanced pedestrian crossing signals, elbow switches for demanding environments and instruments for measuring crankshaft deflection. Prisma Light AB develops and supplies LED lighting for outdoor environments. The companies have together sales of about SEK 70 million and 27 employees.

Preliminary purchase price allocations has not yet been completed.

Stockholm, 13 July 2018

Johan Sjö
President and CEO

This report has not been subject to review by the company's auditor.