COMMENTS BY THE CEO
”A PROOF OF STRENGTH IN A CHALLENGING WORLD”
Obviously, the Covid-19 pandemic overshadowed the year, affecting Addtech’s development in various ways. Despite all of the challenges, our business model and corporate culture again demonstrated their resilience, capacity for rapid adaptation and for identifying new business opportunities in a changing environment.
The financial year 2020/2021 was extraordinary in many ways. The pandemic impacted the business climate negatively in several of the Group’s markets, but demand gradually recovered. Operation lockdowns and production cutbacks among certain customers primarily affected our companies in the marine, special vehicle and mechanical industry segments. At the same time, the business situation was considerably more favourable in power transmission, wind power and the forestry and sawmill segments, in which our companies had strong development. In the electronics, data and telecom segments, as well as in medical technology, the business situation remained stable. At the end of the year, we could affirm that the business situation had normalised and that demand was rising in most of Addtech’s key market segments. At the time of writing, the persistent disruptions in global supply chains remain challenging.
There are several reasons why we managed to handle the challenges well. Our favourable business spread allowed us to balance the product and customer segments experiencing a negative trend with strong or stable growth in other segments. We were also quick to act when we perceived the negative changes caused by the pandemic in our markets. Our decentralised business model allows operational decisions to be made by local management teams. In the operations where the business situation deteriorated, the teams were fast in applying cost saving and efficiency measures. At the same time, many of the companies demonstrated entrepreneurial skills in generating new business opportunities.
In terms of the financial outcome in relation to our long term financial targets we had set, 2020/2021 was somewhat of an intermediate year. A clear signal of strength was our success in achieving a P/WC of 52 percent despite the decline in the accumulated operating profit for the year. In addition, cash flow was considerably better than for the preceding year thanks to stable margins and measures for a more efficient working capital.
I am very pleased that we have maintained a high pace of acquisitions. During the year, we welcomed 14 new companies into the Group, operating in different segments and presenting strong offerings. Four more companies were acquired following the end of the year, adding some SEK 1,450 million in combined sales and 420 new employees. Achieving such a high pace of acquisitions during a pandemic demonstrates the strength of our decentralised acquisition strategy. Acquisitions originate further down in the organisation, meaning that the people with the relationships, knowledge and fine-tuned intuition are the ones driving the process of identifying optimal acquisitions with future potential. Several of the companies acquired during the year are located outside the Nordic region, reflecting our conscious strategy for continued international expansion. Our business model is scalable also outside the Nordic region, and we, we perceive favourable opportunities for increasing our international presence.
During the year, we completed a variety of activities to engage all of our companies in our accelerated sustainability efforts. A majority of our companies now work with sustainability in a structured manner, and the Group has, on the whole, advanced its positions in this area very favourably. Our customers apply ambitious sustainability targets and it is our job to support them identify technical solutions for achieving these. There is no doubt that sustainability generates new business opportunities and, in the future, our companies will therefore be focused on sustainable business through innovative technical solutions. Accordingly, the sustainability perspective is an integrated part of our business strategy.
We have many successful companies and strong brands within the Group. We enjoy a unique opportunity to benefit from our internal network of 140 subsidiaries. We are able to derive advantages from all of the expertise found within the Group, and we stimulate all forms of internal co-creation. In addition, we maintain an ongoing dialogue with our customers and suppliers to engender long-term partnerships aimed at developing new technical solutions.
This year, Addtech celebrates its 20th anniversary. From the outset in 2001, when we were spun off from Bergman & Beving, we have exceeded our financial targets. Despite the dotcom and financial crashes, economic recessions, the oil crisis, the cyber attack and the pandemic, we have achieved an average annual growth in profit of about 18 percent. The trend in our share price has followed this profit trend, generating significant shareholder value. The main reason for this successful journey is that our business model and corporate culture, that is the core of Addtech, are still largely the same as in 2001. Simplicity, decentralised responsibility, small scale business, large scale wise, and our passion for entrepreneurship remain critical for our success. Naturally, we have, over the years, developed and upgraded the operations. Slowly but surely, we have progressed, purposefully increasing our share of proprietary products, brands and sustainable technical solutions that we sell globally in an increasingly digital world.
During the year, a new vision was formulated to act as a guiding light for our continued successful growth – Leading technical solutions for a sustainable tomorrow. Our vision sets out clearly what we are striving for in the long term and that we seek to be part of the solution in the transition towards a more sustainable society. Naturally, we continue to safeguard our strong entrepreneurial culture built on decentralised responsibilities.
I take a highly positive view of Addtech’s continued journey – in both the short and long term. We stand better equipped than ever and see great opportunities for us to continue our profitable growth, building further on our business model and corporate culture. Put simply, the model is scalable. Our focus will continuously be on all of the business opportunities associated with a more modern and sustainable society. Our companies are very well positioned to take advantage of the growth opportunities in selected segments and niches. By balancing organic growth and acquisitions with good cost control, we will continue to be a catalyst for sustainable growth.
Finally, I would like to extend my sincere gratitude to all of our amazing employees for their commitment and capacity to deliver such good results over the past year. I am truly impressed with your efforts and look forward very much to meeting you as usual as we put the pandemic behind us. It is you who make the difference.
President and CEO