Other Financial information

Profitability, financial position and cash flow

The return on equity at the end of the period was 31 percent (27), and return on capital employed was 21 percent (22). Return on working capital P/WC (EBITA in relation to working capital) amounted to 54 percent (53).

At the end of the period the equity ratio amounted to 35 percent (39). The implementation of IFRS 16 had a negative effect and increased the balance sheet total by SEK 530 million. Equity per share, excluding non-controlling interest, totalled SEK 40.60 (34.25). The Group's net debt at the end of the period amounted to SEK 2,282 million (1,246), excluding pension liabilities of SEK 313 million (229) including leasing liabilities from IFRS 16 totalling SEK 531 million. The net debt/equity ratio, calculated on the basis of net debt excluding provisions for pensions but including leasing liabilities according to IFRS 16 totalled 0.8 (0.5).

Cash and cash equivalents consisting of cash and bank equivalents and approved but non-utilised credit facilities amounted to SEK 1,000 million (887) at 30 June 2019.

Cash flow from operating activities amounted to SEK 253 million (52) during the period, affected primarily from an increase of working capital mainly accounts receivables. The implementation of IFRS 16 has increased cash flow from operating activities by SEK 34 million and decreased cash flow from financing activities by the corresponding amount, on account of the fact that the amortization portion of lease payments is recognized as payments in the financing activities. Company acquisitions and divestments including settlement of contingent consideration regarding acquisitions implemented in previous years amounted to SEK 249 million (140). Investments in non-current assets totalled SEK 33 million (13) and disposal of non-current assets amounted to SEK 2 million (1). Dividend from associated companies amounted to SEK 0 million (2). Repurchase of call options amounted to SEK 12 million (6) and the exercise of call options amounted to SEK 18 million (13).

Employees

At the end of the period, the number of employees was 2,896, compared to 2,759 at the beginning of the financial year. During the period, completed acquisitions resulted in a net increase of the number of employees by 108. The average number of employees in the latest 12-month period was 2,697.

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 900,000 shares. Call options issued on repurchased shares entail a dilution effect of about 0.1 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 1 April, Omni Ray AG, Switzerland, was acquired to become part of the Automation business area. Omni Ray AG is a Zürich-based technical trading company and service provider with a strong position on the Swiss market for automation solutions, mainly focused on industrial applications, infrastructure, transportation and medical industry. The company has a sales of about CHF 36 million and 65 employees.

On 1 April, Thurne Teknik AB, Sweden, was acquired to become part of the Industrial Process business area. Thurne Teknik is a leading supplier of components, equipment and advanced process systems to primarily the chemical and the pharmaceutical industry in the Nordic and Baltic regions. The company has sales of about SEK 100 million and 19 employees.

On 1 April, AB N.O. Rönne, Sweden, was acquired to become part of the Industrial Process business area. N.O.Rönne’s main business is manufacturing of customized gaskets and seals by punching and cutting. The company has sales of about SEK 8 million and 4 employees.

On 6 May, Best Seating Systems Walter Tausch GmbH, Austria, was acquired to become part of the Power Solutions business area. The company is a niche player that supplies ergonomic driver's seats and peripheral components for trains, busses and off-highway machines in Central Europe. The company has sales of about EUR 2.1 million and 5 employees.  

On 12 June, Thiims A/S, Denmark, was acquired to become part of the Automation business area. Thiims A/S develops and delivers components and solutions within the area of industrial communication, customized electronics and electro mechanics. The company has sales of around DKK 50 million and 15 employees.

Acquisitions completed as of the 2018/2019 financial year are distributed among the Group’s business areas as follows:

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If all acquisitions which have taken effect during the period had been completed on 1 April 2019, their impact would have been an estimated SEK 120 million on Group net sales, about SEK 2 million on operating profit and about SEK 1 million on 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 25 million. The contingent purchase considerations fall due for payment within four years and the outcome is subject to a maximum of SEK 35 million. If the conditions are not fulfilled, the outcome may fall within the range of SEK 0-35 million.

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

For acquisitions that resulted in an ownership transfer during the period, transaction costs totalled SEK 12 million (0) and 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 (15) and profit after financial items was SEK -3 million (-19). Net investments in non-current assets were SEK 0 million (0). The Parent Company's net financial asset was SEK 94 million (165) 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.

As of 1 January 2019, IFRS 16 Leases has replaced standard IAS 17 Leases and related interpretations IFRIC 4, SIC 15 and SIC 27. IFRS 16 requires most leases to be reported in the balance sheet.

Addtech applied the simplified transition method, entailing comparative data for previous periods not being presented. The lease liability consists of the discounted remaining leasing fees as of 1 April 2019. For all contracts, the right-of-use asset corresponds to an amount equivalent to the lease liability adjusted for prepaid or accrued lease payments recognised in the balance sheet on the initial date of application. Accordingly, the transition to IFRS 16 entailed no effect on equity.

Addtech’s leases consist mainly of leased premises but also vehicles and other leases (of, for example, production equipment and office equipment). The transition to IFRS 16 entailed an increase in the Group’s total assets through the addition of right-of-use assets and lease liabilities. The lease fees previously reported as operating expenses was replaced by depreciation expenses on the rights-of-use which are reported in operating profit and interest on the lease liability, which is reported as a financial expense. The lease fee is divided between amortisation on the lease liability and interest payments.

Addtech has chosen to apply the relief rule regarding leases of less than 12 months and for contracts where the underlying asset has a low value. Accordingly, these will not be included in the amounts reported in the balance sheet, although they will still be reported as operating expenses in the income statement. In assessing contract duration where there are opportunities for extension or termination, both business strategy and contract-specific conditions are considered in determining whether the Group is reasonably secure in applying them.

On the transition to IFRS 16, all remaining lease fees were calculated applying the margin loan rate. The transition effect on the balance sheet as of 1 April 2019 entailed right-of-use assets of SEK 550 million arising on the asset side. On the liability side, lease liabilities totalling SEK 550 million arose, of which non-current liabilities amounted to SEK 408 million and current liabilities to SEK 142 million.

During the first quarter 2019 IFRS 16 has entailed increased depreciation expenses on property, plant and equipment amounting to SEK 35 million and increased interest amounting to SEK 2 million. These were previously reported as operating expenses.

The performance based figures for rolling 12 months exclude the effect of IFRS 16 in order to provide a fair picture in relation to the comparative period. In the Group’s balance sheet and the table of key financial indicators, performance based figures for rolling 12 months as well as assets and liabilities are also presented as if IFRS 16 was never applied to illustrate the effect of the transition.

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 and reconciliation tables of the performance measures that Addtech uses, please see page 17-21.

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. Addtech has four operating subsidiaries within the UK as well as a few other subsidiaries doing business with the UK. The effects of Brexit are to this date unknown, but all affected subsidiaries are closely monitoring the developments. Addtech Group’s total exposure to possible negative effects from Brexit are not considered material. Beside this, risks and uncertainty factors are the same as in previous periods, please see section Risks and uncertainties (page 38-40) in the annual report for 2018/2019 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 3 July, Finland, Profelec Oy was acquired to become part of the Energy business area. Profelec is a leading supplier of professional electronics in Finland and Baltic States representting several international high value brands in the areas of Test & Measurement and System Components. The company has sales of about EUR 0.6 million and 2 employees.

Preliminary purchase price allocations has not yet been completed.

Stockholm, 12 July 2019

Niklas Stenberg
President and CEO

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