In many ways, the 2020/2021 financial year was extraordinary, mainly due to the effects of the Covid-19 pandemic. On the whole, we can assert that Addtech demonstrated a favourable resilience and, given the high pace of business and good cost control, we managed to maintain a respectable operating margin. Despite the uncertainty, we also carried out 14 successful acquisitions in attractive niche areas. All of this combined, again shows the strength and stability of our long-term business model. Following two years strongly influenced by external factors, during which our employees truly demonstrated their capacity to identify new opportunities and adapt quickly to new circumstances, we now look ahead to a new year. Better equipped than ever and with a good order backlog.
FOURTH QUARTER – Continued favourable demand
The recovery in demand continued in the fourth quarter, with a positive trend in most key segments. The most positive impact derived from the favourable market situation in segments including the forest industry and wind power, as well as a continued clear recovery in the engineering industry and special vehicles. As expected, the strengthened market situation was partly offset by a reduced number of project deliveries during the quarter, which mainly affected the Automation business area. In the Energy business area, the inflow of new projects involving infrastructure products for the national and regional grids decreased from very high levels, as had been expected. Our belief remains that this market will continue to be favourable for a long time to come. On the whole, all of the business areas developed according to plan, although sales were slightly down on a very strong fourth quarter last year.
Maintaining a good cost control and our long-term streamlining measures, we managed to achieve an operating margin for the quarter that was almost in line with last year’s strong closing, adjusted for revaluations of contingent purchase considerations, which impacted this year’s quarter negatively by SEK 15 million and the previous year positively by SEK 30 million.
FULL-YEAR – Good hedge gave stable outcome
Due to the pandemic, the business climate over the year was weak in several of the Group’s markets, with demand recovering sequentially. Overall, sales and earnings for the full-year decreased for comparable units. Adjusted for the sharp slowdown in scrubber-related sales, and with the sales and profits contributed by completed acquisitions, both sales and earnings increased, with an improved margin.
In particular, the pandemic has posed challenges for our units operating in the marine, special vehicles and mechanical industry segments. At the same time, other segments with great development potential have performed well, such as transmission, wind power and the forest and sawmill industries. The business situation has generally been stable in electronics, data and telecom as well as medical technology. Towards the end of the financial year, the business situation normalised, and demand increased in most of the Group’s important market segments.
Geographically, Sweden and Denmark had a stable development, viewed over the full-year. Finland has been negatively affected by the deteriorating business situation, particularly in the mechanical industry, and Norway by the lack of willingness to invest in oil and gas. Countries outside the Nordic region are hardest hit by pandemic shut-downs and restrictions. However, over the second half of the financial year, the market situation for our companies with operations in these markets improved sequentially.
Throughout the year, the units experiencing a deteriorating business situation worked actively with measures on costs and working capital. These measures are ongoing and, in total, the adjustments have encompassed 250 employees. The measures entail a cost level better adapted to current sales volumes and will offset the costs that are expected to recur as the companies’ marketing activities gradually increase as volumes improve.
For the full-year, cash flow was significantly better than for the preceding year, at SEK 1,503 million (1,117), thanks to stable margins and measures for more efficient working capital. We managed to achieve a P/WC of 52 percent despite the fact that the accumulated operating profit for the year decreased. Our liquidity remains good, and we have satisfactory credit head room for continued investment opportunities.
ACQUISITIONS – Strong acquisition pace
We have maintained a strong acquisition pace which proves the strength of our acquisition strategy. A total of 14 acquisitions were made during the year and four more after the end of the year. In total, these 18 acquisitions add approximately SEK 1,450 million to sales and approximately 420 new employees to the Group.
Acquisitions of successful, market-leading companies in various technical niches represent an important part of our growth strategy. Several of this year’s acquisitions also have a clear sustainability profile and thus fit well into our long-term sustainability vision. We continue to see good acquisition opportunities, both in the Nordic region and in selected parts of Europe.
OUTLOOK – Catalyst for sustainable growth
Our decentralised organisational structure and entrepreneurial culture, with decisions made close to the customer, has once again shown its strength and the past financial year is also clear proof of the strength of our business model. The starting position for the current year is good, the order backlog is well filled, with demand remaining favourable in April. However, we are humbled by the situation surrounding the development of the pandemic. There is also some uncertainty about how the ongoing supply chain constraints will affect our companies’ delivery capacity in the upcoming quarters.
We are continuing our development towards the new normal, where sustainable technology solutions and digitalisation are increasingly coming into focus. We are very well positioned to take advantage of the growth opportunities in selected segments and niches in structurally driven development areas. By balancing organic growth and acquisitions with good cost control, we will continue to be a catalyst for sustainable growth.
This year, it will be 20 years since Addtech was spun off as an independent listed company. Our average annual earnings growth has been 18 percent, demonstrating our ability to deliver long-term sustainable growth and favourable returns for shareholders. For us as a group, we have formulated a new vision to act as a guiding light for our continued successful growth – Leading technical solutions for a sustainable tomorrow. This vision provides inspiration for the entire group, while of course we continue to safeguard our strongly entrepreneurial culture based on decentralised responsibility.
Finally, I would like to thank all of our committed employees for their invaluable efforts over the year. We look forward to the coming year with great confidence and continued sustainable profitable growth.
President and CEO