ADMINISTRATION REPORT

1 April 2018 – 31 March 2019

The Board of Directors and the CEO of Addtech AB, company ID number 556302-9726, hereby submit the annual and consolidated accounts for the 2018/2019 financial year. Comparisons in parentheses refer to the corresponding period of the previous year, unless stated otherwise. 

In the Annual Report, pages 24-31 and 35-98, which can be downloaded here, constitute Addtech’s annual and consolidated accounts. Pages 24-31 and 38-40, which can be downloaded here, constitute Addtech’s Sustainability Report and pages 43-50, which can be downloaded here​​​​​​​, constitute Addtech’s Corporate Governance Report. 

 

Operations 

Addtech is a Swedish listed technology trading group that provides technological and economic value added in the link between manufacturers and customers. Addtech operates in selected niches in the market for advanced technology products and solutions. Its customers primarily operate in the manufacturing industry and infrastructure. Addtech has around 130 independent subsidiaries in 20 countries, operating under their own brands, and about 2,700 employees. The Group’s sales amount to more than SEK 10 billion, with half consisting of sales of standard products and half consisting of sales of customised products and solutions. Addtech generates optimal conditions for the profitability and growth of its subsidiaries. The Addtech share has been listed on Nasdaq Stockholm since 2001. 

 

Market trend

A favourable business climate prevailed during the year in all primary market segments. Demand was good in the electronics, forestry and process industry, energy, mechanical industry, special vehicles and construction and installation segments. Demand from the marine segment in transportation was particularly strong, mainly regarding products and solutions for emissions monitoring and purification. All business areas contributed to the Group’s organic growth, gaining good ground in their ambitions to capture strategic positions in important areas of structural development. The Nordic region remained the largest geographic market but declined in relation to the total as sales outside the Nordic region increased steadily, in line with ambitions and due to increased exports combined with acquisitions and new operations being established by the Group.  

 

The year in brief

For Addtech’s part, financial year 2018/2019 was pervaded by intensive activity resulting in strong earnings and highly positive growth. Sales exceeded SEK 10 billion, representing growth of 26 percent, 11 percent of which was organic. Profit growth, measured in EBITA, increased by 29 percent thanks to good leverage on our organic growth, combined with acquisitions. The acquisition rate was high with 14 completed acquisitions, together contributing annual sales of approximately SEK 960 million. Return on working capital (P/WC) was stable at 53 percent. In connection with the Annual General Meeting on 30 August 2018, Niklas Stenberg took over as the new Managing Director and CEO of Addtech.

 

Quarterly development 

 

First quarter

The first quarter of the year was strong, with an organic sales increase of 9 percent. Combined with several acquisitions being completed, this resulted in total profit growth of 22 percent. Net sales increased by 21 percent and the operating margin continued to improve. Sales of production components to manufacturing companies maintained their positive trend, particularly in customer segments including special vehicles, machinery manufacturing, electronics and ships. There was also good demand from customers in medical technology and wind power while it was weak in telecom. The oil and gas customer segment in Norway showed some improvement, albeit from a low level. There was also positive development in demand for aftermarket products for the manufacturing industry and the forestry and process industry. Sales of infrastructure products to electricity grid customers in the Nordic region increased overall and demand for electricity-related products from construction and installation customers developed well. During the quarter, four acquisitions were implemented.

 

Second quarter

The strong business climate persisted in most of Addtech’s markets during the second quarter of the year. The organic sales increase of 5 percent in the quarter and several acquisitions being completed generated favourable profit growth. The Group’s operating margin continued to increase and remained above 10 percent in all business areas. Overall demand held steady and sales increased in all of the Nordic countries. The business climate was also positive in Addtech’s operations outside the Nordic region. Sales of input components increased to manufacturing companies, including manufacturers of machinery, electronics and special vehicles, as well as the marine segment. The latter two segments in particular, contributed significantly. Demand was also good in wind power plants and medical technology. The oil and gas customer segment continued to develop positively, while demand from customers in the telecom segment was weak. Demand for aftermarket products for the manufacturing industry and the forestry and process industry developed positively. We had good sales of electricity-related products to construction and installation customers, and the demand for infrastructure products from Nordic electricity grid customers was stable. During the quarter, eight acquisitions were completed.

 

Third quarter

The third quarter was characterised by continued high activity in the market. The Group achieved an organic sales increase of 9 percent, and EBITA increased by 29 percent over the quarter. All business areas contributed to the increase. Demand remained favourable in most markets. Norway accounted for the highest rate of increase, and the business situation in Finland improved from an already high level. Demand in Denmark and Sweden was also positive overall, as was the business situation outside the Nordic region. Sales of production components increased to companies manufacturing special vehicles, machinery, electronics, wind power and medical technology, for example. Demand was stable in the telecom segment, while it increased slightly in oil and gas. In the marine segment, development remained very positive. Demand for aftermarket products for the forest and process industry developed well, as did sales to the manufacturing industry. Sales of infrastructure products to electricity grid customers in the Nordic region increased, while demand for niche products in electricity distribution and electricity-related products from construction and installation customers remained stable. 

 

Fourth quarter

The fourth quarter was exceptionally strong. In total, sales increased by 35 percent, of which 22 percent organically. Once again, all business areas delivered an EBITA margin of more than 10 percent. Regarding the geographic trend within the Nordic countries, sales in Denmark and Sweden increased steadily. Norway and Finland had an even slightly higher growth rate. In terms of customer segments, demand remained strong for production components and solutions for special vehicles, machinery manufacturers, electronics and wind power. Demand for aftermarket products for the forestry and process industries increased, as did sales to the manufacturing industry. The trend was particularly strong for products for emissions monitoring and purification. Sales of electricity-related products to construction and installation customers remained stable at a high level, and demand for infrastructure products increased. During the quarter, two acquisitions were implemented, with four more companies being acquired after the end of the financial year.

 

Acquisitions

Addtech is constantly on the lookout for companies to acquire and is engaged in discussions with a number of possible companies. During the financial year Addtech completed 14 acquisitions where it took control of the acquired operations during the year. In the preceding year, 11 companies were acquired. The year’s acquisitions were carried out in all business areas and are diverse in terms of both markets and products. 

Since becoming a listed company in 2001, Addtech has acquired some 90 companies. The following companies were acquired during the year: 

 

Synthecs B.V.**

On 3 April 2018, Synthecs B.V (including subsidiaries) was acquired in the Netherlands and joined the Components business area. The company supplies automation components and solutions in the areas of sensors, machine vision, industrial PC, control systems, etc. to the industrial market in the Benelux countries. The Synthecs Group has approximately 50 employees and generates annual sales of SEK 145 million. 

 

Xi Instrument AB

On 3 April 2018, Xi Instrument AB was acquired in Sweden and joined the Energy business area. Xi Instrument operates in imports of electronic equipment mainly for locating underground supply systems. Xi Instrument has 2 employees and generates annual sales of SEK 13 million.

 

KRV AS

On 9 April 2018, KRV AS was acquired in Norway and joined the Industrial Process business area. KRV is a leading supplier and installer of sprinkler systems in Norway. The company has 27 employees and generates annual sales of approximately SEK 55 million.

 

Scanwill Fluid Power ApS and Willtech ApS

On 9 April 2018, Scanwill Fluid Power ApS and Willtech ApS were acquired in Denmark and joined the Components business area. Scanwill designs and manufactures hydraulic pressure amplifiers and Willtech produces expander plugs for permanent sealing of boreholes in metal. The companies are being merged under the name Scanwill. Combined, these companies have four employees and generate annual sales of SEK 15 million.

 

Duelco A/S

On 19 June 2018, Duelco A/S was acquired in Denmark and joined the Energy business area. Duelco is a well-established supplier of power distribution products to customers in installation, industry, electricity supply, wind power and rail. The company has 30 employees and generates annual sales of approximately SEK 150 million.

 

Prisma Teknik AB and Prisma Light AB

On 28 June 2018, Prisma Teknik AB and Prisma Light AB were acquired Sweden and joined the Energy business area. Prisma Teknik is a leading supplier of advanced pedestrian signals, elbow switches for demanding environments and instruments for measuring crankshaft deflection. Prisma Light AB develops and manufactures LED lighting for outdoor environments. Combined, the companies have a total of 27 employees and generates annual sales of approximately SEK 70 million. 

 

Fibersystem AB**

On 29 June 2018, Fibersystem AB was acquired Sweden and joined the Components business area. Fibersystem is a high-tech and innovative cyber security company that develops fibre-optic solutions and solutions for cyber security. The products are used in a number of different industries around the world, such as infrastructure, healthcare and the manufacturing industry. The company has 12 employees and generates annual sales of approximately SEK 140 million. 

 

TLS Energimätning AB

On 2 July 2018, TLS Energimätning AB was acquired in Sweden and joined the Industrial Process business area. The company supplies measuring equipment for heating, cooling and water to district heating and water treatment plants in the Swedish, Norwegian and Danish markets. The company has 9 employees and generates annual sales of approximately SEK 50 million. 

 

Diamont Point International (Europe) Ltd

On 3 July 2018, Diamond Point International (Europe) Ltd was acquired in the UK and joined the Components business area. Diamond Point develops, manufactures and sells innovative embedded computer systems for demanding OEM applications. The operations focus primarily on the defence sector and rail industry in the UK. The company has 9 employees and generates annual sales of approximately SEK 40 million.

 

Power Technic ApS

On 3 July 2018, Power Technic ApS, was acquired in Denmark and joined the Power Solutions business area. Power Technic is a well-established operator in power supply products, primarily to customers in the Danish market. The company has 6 employees and generates annual sales of approximately SEK 50 million.

 

Nordautomation Oy

On 11 September 2018, Nordautomation Oy, was acquired in Finland and joined the Industrial Process business area. Nordautomation is the Nordic market leader in the design, manufacture and supply of timber handling equipment. The company has 85 employees and generates annual sales of approximately SEK 155 million. 

 

Wood Recycling Sweden AB

On 4 October 2018, Wood Recycling Sweden AB was acquired Sweden and joined the Industrial Process business area. The company has 2 employees and generates annual sales of approximately SEK 7 million.

 

Nylund Industrial Electronics (assets acquisition)

On 2 January 2019, the assets of Nylund Industrial Electronics were acquired in Finland and became part of an existing company in the Components business area. The operations have three employees and generates annual sales of approximately SEK 35 million.

 

Birepo A/S

On 29 January 2019, Birepo A/S was acquired in Denmark and joined the Components business area. Birepo develops and supplies customised lock and security solutions under its own brand. The operations focus primarily on industry, infrastructure, energy and transport. The company has 10 employees and generates annual sales of approximately SEK 35 million.

 

The combined initial purchase consideration for the year’s acquisitions amounted to SEK 660 million, including liquid funds in the acquired businesses of SEK 96 million.

 

If all acquisitions during the financial year had been carried out on 1 April 2018, they would have affected consolidated net sales by SEK 870 million, operating profit by SEK 60 million and profit for the period after tax by SEK 45 million. During the financial year, completed acquisitions increased the number of employees by 276.

 

Divestments

 

Solar Supply Sweden AB

On 20 August 2018, Solar Supply Sweden AB, which had been part of Power Solutions, was sold to E.ON Energilösningar AB. Solar Supply had 5 employees and generated annual sales of approximately SEK 80 million. 

 

Financial development

 

Net sales and profit

Over the year, the net sales of the Addtech Group increased by 26 percent to SEK 10,148 million (8,022). Organic growth amounted to 11 percent and acquired growth amounted to 12 percent, with divestments having a negative effect of 1 percent. Ex-change rate changes had a positive effect of 4 percent on net sales, corresponding to SEK 289 million. 

 

Over the financial year, operating profit increased by 30 percent to SEK 910 million (701) and the operating mar-gin amounted to 9.0 percent (8.7). Net financial items were negative in the amount of SEK 45 million (36) and profit after financial items increased by 30 percent to SEK 865 million (665). Profit after tax for the financial year rose by 28 percent to SEK 672 million (526) and the effective tax rate was 22 percent (21). Earnings per share before dilution for the financial year amounted to SEK 9.85 (7.70). 

YEAR

NET SALES AND
EBITA MARGIN

YEAR

EBITA AND RETURN ON
WORKING CAPITAL, P/WC

Profitability, financial position and cash flow 

The return on equity at the end of the financial year was 29 per-cent (28), and return on capital employed was 21 percent (22). The return on working capital, P/WC (EBITA in relation to working capital), amounted to 53 percent (53). 

 

At the end of the financial year the equity/assets ratio was 36 percent (39). Equity per share, excluding non-controlling interests, amounted to SEK 36.80 (31.10). Consolidated net debt at the end of the year amounted to SEK 1,700 million (1,176), excluding pension liabilities of SEK 260 million (229). 

 

The net debt/equity ratio, calculated on the basis of net debt excluding provisions for pensions, amounted to 0.7 (0.6). 

 

Cash and cash equivalents, consisting of cash and bank balances together with approved but non-utilised credit facilities, amounted to a combined SEK 566 million (573) at 31 March 2019. Before the end of the financial year, additional credits totalling SEK 600 million were granted. These became available on 1 April 2019, at which time SEK 100 million was also repaid. Accordingly, in addition to the credits recognised, an additional SEK 500 million was available to Addtech as of 1 April 2019. 

 

Cash flow from operating activities amounted to SEK 524 million (539) during the financial year. The change in working capital consisted mainly of higher accounts receivable. Company acquisitions and disposals, including settlement of contingent purchase considerations for acquisitions implemented in previous years, amounted to SEK 645 million (477). Investments in non-current assets totalled SEK 94 million (54) and disposals of non-current assets amounted to SEK 12 million (7). Dividends from associated companies amounted to SEK 2 million (4). Repurchases of treasury shares amounted to SEK 38 million (31) and repurchases of call options amounted to SEK 11 million (5). Exercised and issued call options totalled SEK 33 million (36). Dividends paid to shareholders of the Parent Company totalled SEK 269 million (235), corresponding to SEK 4.00 (3.50) per share. 

 

Business areas

The division into business areas reflects Addtech’s internal organisation and reporting system. Addtech reports its business areas as operating segments. In 2018/2019, Addtech was organised into the following four business areas: Components, Energy, Industrial Process and Power Solutions. After 1 April 2019, another business area, Automation, was established. For further in-formation on the Group’s operating segments, see Note 5

 

Components

Net sales in Components during the financial year increased by 30 percent to SEK 3,904 million (3,001) and EBITA increased by 45 percent to SEK 414 million (284). 

 

Energy

Net sales in Energy during the financial year increased by 28 percent to SEK 2,357 million (1,846) and EBITA increased by 13 percent to SEK 244 million (215). 

 

Industrial process

Net sales in Industrial Process during the financial year in-creased by 37 percent to SEK 2,305 million (1,677) and EBITA increased by 54 percent to SEK 219 million (142). 

 

Power solutions

Net sales in Power Solutions during the financial year increased by 6 percent to SEK 1,597 million (1,510) and EBITA increased by 13 percent to SEK 223 million (198). 

 

Risks and uncertainties

Business operations are always associated with risk. Addtech’s profit and financial position, as well as its strategic position, are affected by various internal factors within Addtech’s control and a number of external factors where opportunities to affect the course of events are limited. Effective risk assessment unites Addtech’s business opportunities and performance with the demands of shareholders and other stakeholders for stable long-term value growth and control. When assessing the future development of Addtech it is therefore important to consider not only the opportunities for positive development, but also the various risks in the operations. Naturally, not all risk factors can be described in this section, for which reason an overall assessment must also include other information in the annual report, as well as a general assessment of external circumstances. Addtech works with risk management on both a strategic and operational level. Risk management involves identifying and measuring risks and preventing them from occurring, as well as continually making improvements to mitigate future risks. The Addtech Group has guidelines and policies to identify deviations that could develop into risks. The level of risk in the operations is followed up systematically at Board meetings and in monthly reports, in which deviations or risks are identified and remedied. Addtech’s most significant risks are the state of the economy combined with structural changes and the competition situation. Addtech is also affected by financial risks, such as transaction exposure, translation exposure, financing and interest rate risk, as well as credit and counterparty risk. See Note 3 for a more detailed description of how Addtech manages financial risks. 

RISK/DESCRIPTION ADDTECH’S RISK MANAGEMENT
Economy and market  
Demand for Addtech’s products and services is greatly influenced by macroeconomic factors beyond Addtech’s control, such as growth and investment appetite in the manufacturing industry, the state of the economy in general and conditions in the global capital market. A weakening of these factors in the markets in which Addtech operates could have adverse effects on its financial position and earnings. With a large number of subsidiaries focusing on different niche markets and add-on sales of technical service, support and consumables, Addtech may be less sensitive to economic fluctuations in individual industries, sectors and geographical regions. Addtech also strives continuously to develop businesses that are less dependent on a specific market and to align expenses with specific conditions.
Structural changes  
Globalisation, digitalisation and rapid technological development drive structural change among customers. Developments may increase demand for Addtech’s advanced services but can also result in Addtech’s customers disappearing through mergers, closures and relocations, to low-cost countries for example. Addtech’s clear and unique added value services with their high technology content, specialisation in advanced technical advisory services, outstanding service and strong presence in niche markets offset price competition, Addtech’s competitiveness also enables the Company to deliver beyond its immediate geographical region. Combined with the fact that no customer accounts for more than 2 percent of consolidated sales, the Group’s exposure to a large number of sectors constitutes a certain degree of protection against adverse impacts on earnings.
Competition  
Most of Addtech’s subsidiaries operate in sectors that are vulnerable to competition. In addition, consolidation may occur among suppliers in the sector, and larger merged suppliers may have a broader offering, which could result in pressure on prices. Future competitive opportunities for the subsidiaries will depend on their ability to be at the leading edge of technology and to respond quickly to new market needs. Increased competition or a decline in the ability of a subsidiary to meet new market needs could have a negative impact on Addtech’s financial position and earnings. Addtech strives to offer products and services for which price is not the sole deciding factor. By working closely with both suppliers and customers, we are continuously developing our know-how and competitiveness. We add value in the form of wide-ranging technological knowledge, reliability of de-livery, service and availability, limiting the risk of customers decreasing their demand. To reduce the risk of competition from suppliers, Addtech focuses continuously on ensuring that collaboration with the Group is the most profitable sales strategy.
Environment  
Changed environmental legislation could affect product sales, goods transports and the way in which our customers use the products. An inability to meet customers’ increased environmental requirements can affect sales. There is also a risk that the corporate ID number of a Group subsidiary could entail a historical liability for the company under the Swedish Environmental Code. Addtech’s subsidiaries are primarily engaged in commerce and operations with limited direct environmental impact. The Group conducts limited production. The Group monitors operations and environmental risks through its sustainability reporting and all companies comply with the Group’s Code of Conduct. In conjunction with acquisitions, Addtech con-ducts an analysis of the potential target’s corporate ID number to counter the risk of being held liable for historical environmental issues.
Ability to recruit and retain staff  
Addtech’s continued success depends on being able to retain experienced employees with specific skills and to recruit skilled new people. There are a number of key individuals, both among senior executives and among the Group’s employees in general. There is a risk exists that one or several senior executives or other key individuals could leave the Group at short notice, for reasons of stress, working environment or development opportunities, for example. In the event that Addtech fails to recruit suitable replacements, or to find skilled new key individuals in the future, this could have a negative impact on Addtech’s financial position and earnings. Addtech prioritises building favourable conditions for employees to develop within the Group and to enjoy their work. The Group’s acquisition strategy includes ensuring that key individuals in the companies are highly motivated to continue running their companies independently within the Group. The Addtech Business School is aimed at both new employees and senior executives and serves to increase internal knowledge transfer, promote personal development among employees and develop the corporate culture. The Group’s regular employee surveys serve to ascertain how employees view their employers and their work situation, and what might be improved and developed.
Acquisitions and goodwill  
Historically, Addtech has, for the most part, grown through acquisitions. Strategic acquisitions will continue to represent an important part of our growth. However, there is a risk that Addtech will not be able to identify suitable objects for acquisition due, for example, to competition with other buyers. Expenses attributable to acquisitions may also be higher than expected, and positive impacts on earnings may take longer to realise than expected. The risk of goodwill impairment arises when a business unit under-per-forms in relation to the assumptions that applied at the time of valuation, and any impairment may adversely affect the Group’s financial position and earnings. Further risks associated with acquisitions include integration risks and exposure to unknown commitments. Addtech has many years of solid experience in acquiring and pricing companies. All potential acquisition targets and their operations are examined carefully before implementing the acquisition. There are well-established procedures and structures for pricing and implementing the acquisition, as well as for integrating the acquired companies. In the agreements, an effort is made to obtain the necessary guarantees limiting the risk of unknown liabilities. The large number of companies acquired entails a significant distribution of risk.
Financial risks  
The Group is exposed to various financial risks. Currency risk is the risk of exchange rates having an adverse impact on Addtech’s financial position and earnings. Transaction exposure is the risk that arises because the Group has incoming and outgoing payments based on payment flows in foreign currencies. Translation exposure arises because the Group, through its subsidiaries, has net investments in foreign currencies. The Group is also exposed to financial risk, that is, the risk that financing of the Group’s capital requirements is made more difficult or ex-pensive. Interest rate risk is the risk that unfavourable changes in interest rates have an adverse impact on Addtech’s financial position and earnings. Addtech strives for structured and efficient management of the financial risks that arise in its operations, in accordance with the financial policy adopted by the Board of Directors. The financial policy expresses the ambition of identifying, minimising and controlling financial risks, and establishes responsibility for managing how such risks are to be delegated within the organisation. The aim is to minimise the impact of financial risks on earnings. See Note 3 for a more detailed description of how Addtech manages financial risks.
Suppliers and customers  
To deliver products, Addtech is dependent on the ability of external suppliers to fulfil agreements in terms of volume, quality, delivery date, etc. Deliveries that are erroneous or delayed, or that do not occur, may have an adverse impact on Addtech’s financial position and earnings. Addtech’s reputation is also dependent on its suppliers’ ability to maintain a high level of business ethics, in terms of, for example, human rights, working conditions and the environment. Agreements with customers vary, for example in terms of contract length, warranties and limitations of liability. In some supplier relationships there are no written supplier agreements, which could result in legal uncertainty regarding the content of the agreement. Addtech’s numerous and favourable relationships with carefully selected suppliers reduce the risk of Addtech not being able to deliver as promised. To ensure that the Group’s high standards in terms of business ethics are maintained, all suppliers are also required to observe Addtech’s Code of Conduct for Suppliers. Most of the companies also perform specific supplier reviews. In a longer-term perspective, Addtech is not dependent on any individual supplier or customer. Addtech’s largest customer accounts for about 3.5 percent of consolidated net sales.
Organisation  
Addtech’s decentralised organisation is based on subsidiaries bearing extensive local responsibility for their operations. This imposes high standards on financial reporting and monitoring, with shortcomings in this regard potentially leading to inadequate control of the operations. Addtech controls its subsidiaries through active board participation, Group-wide policies, financial targets and instructions regarding financial reporting. By being an active owner and monitoring the development of the subsidiaries, risks can quickly be identified and addressed in accordance with the Group’s internal guidelines.
Seasonal effects  
There is a risk that Addtech’s operations, earnings and cash flow could be affected by strong seasonal effects driven by customer demand. No significant seasonal effects are associated with Addtech’s sales of high-tech products and solutions to companies in the manufacturing and infrastructure sectors. However, the number of production days, custom-er demand and the willingness to invest may vary from one quarter to another.
Business ethics and human rights  
Addtech’s continued success is strongly dependent on our good reputation and business ethics. Human rights violations in the Group’s own operations or those of its suppliers would have a negative impact on the Group’s reputation among employees, customers and other stakeholders and influence demand for the Group’s products. Internally, the Group works with business ethics through initiatives including the Business School and compliance with anti-corruption and human rights regulations is reviewed annually. Addtech’s many favourable relationships with carefully selected suppliers reduce the risk of human rights violations occurring among our suppliers. To ensure that the Group’s high standards in terms of business ethics are maintained, all suppliers are also required to observe Addtech’s Code of Conduct for Suppliers and specific supplier audits are conducted.

Employees and development 

 

Employees

At the end of the financial year, the Group had 2,759 employees, compared with 2,358 at the beginning of the financial year. During the financial year, implemented acquisitions increased the number of employees by 271. Over the past 12-month period, there were an average 2,590 employees.

2018/2019 2017/2018 2016/2017
Average number of employees 2,590 2,283 2,133
proportion of men 74% 74% 75%
proportion of women 26% 26% 25%
Age distribution-up to 29 years old 11% 10 10%
30-49 years 48% 50% 53%
50 and older 41% 40% 37%
Average age 45 years 46 years 45 years
Personnel turnover 12% 12% 13%
Average length of employment about 9 years about 10 years about 10 years

Research and development 

The Addtech Group conducts limited research and development. The Group’s business model includes continuous dialogue with and feedback to the Group’s suppliers, who conduct most of the research and development relevant to the Group’s product range. 

 

Principles for remuneration to senior executives

The Board of Directors has resolved to propose that the Annual General Meeting in August 2019 approve the same guidelines as in the preceding year: 

 

The guidelines are to relate to remuneration of the CEO and other members of Addtech Group Management (“Group Management”). 

 

Addtech seeks to offer an overall remuneration package that is both reasonable and competitive, and thus able to attract and retain skilled employees. The overall remuneration, which varies in relation to the performance of the individual and the Group, may include the various components stated below.

 

Fixed salary forms the base of the overall remuneration package. This salary shall be competitive and reflect the responsibilities of the position. Fixed salaries are reviewed annually. Variable salary can be based on factors including the Group’s earnings growth, profitability and cash flow. On an annual basis, the variable component may amount to at most 40 percent of the fixed salary. Retirement pension, health insurance and medical benefits are to be structured in accordance with applicable rules and market norms. Where possible, pensions are to be based on defined-contribution plans.

 

Other benefits may be provided to individual or all members of Group Management and are structured to reflect market norms. These benefits may not account for a material portion of an individual’s total remuneration package. 

 

The Board of Directors will evaluate annually whether or not a long-term incentive scheme should be proposed to the Annual General Meeting and, if it should, whether the proposed long-term incentive scheme should include the transfer of Company shares or not. Members of Group Management must observe a notice period of six months on resigning and are entitled to a notice period of at most 12 months on termination of employment by the Company. On termination of employment by the Company, in addition to salary and other employment benefits during the notice period, members of Group Management are entitled to severance pay corresponding to at most 12 months’ salary. No severance pay is payable on resigning.

 

The Board of Directors is entitled to waive the above guide-lines for remuneration in individual cases and if there are particular reasons for doing so. In the event of any such deviation, information about this and the reasons for the deviation shall be reported at the next Annual General Meeting. 

 

The Remuneration Committee appointed by the Board of Directors pre-pares and submits proposals for the remuneration of the CEO to the Board, which decides on the matter. Based on a proposal by the CEO, the Remuneration Committee determines the remuneration for the other members of Group Management. The Board of Directors is informed of the Remuneration Committee’s decision.

 

See also Note 6 Employees and personnel expenses.

 

Dividend

Addtech’s dividend policy is to propose a dividend that exceeds 30 percent of average Group profit after tax over a business cycle. In proposing a dividend, the Group’s equity, long-term financing and investment needs, growth plans and other factors are taken into account that the Company’s Board of Directors consider important. The Board of Directors has resolved to propose dividend of SEK 5.00 (4.00) per share to the Annual General Meeting in August 2019. The dividend corresponds to a total of SEK 336 million (269), corresponding to a payout ratio of 51 (52) percent. 

 

Parent Company

The operations of the Parent Company, Addtech AB, include Group Management and the Group’s reporting and financial management staff units. 

 

The Parent Company’s net sales for the financial year amounted to SEK 62 million (58) and its loss after financial items was SEK 16 million (11). Net investments in non-current assets were SEK 0 million (0). The Parent Company’s net financial liabilities were SEK 175 million (69) at the end of the year.

 

Future prospects and events after the reporting period 

 

Future prospects 

Addtech operates in an international technology trading market in which demand is largely influenced by macroeconomic factors. Group companies operate in different but carefully selected niches, resulting in a smoothing effect between sectors, geographical markets and customer segments. Our independent companies work continuously to adapt to changes based on their markets and competitive situation. 

Historically, Addtech’s continuous pursuit of profit growth, profitability (P/WC) and development have provided favourable average value growth. Our cash flow and financial position form a stable foundation for continued long-term profitable growth based on the same business concept. 

 

Events following the close of the financial year

A reorganisation was implemented effective 1 April 2019, with a fifth business area, Automation, being formed by dividing the Components business area. 

 

On 1 April, Omni Ray AG was acquired in Switzerland and joined the Automation business area. Omni Ray is a technology trading and services company, with a strong position in the Swiss market for automation solutions in industry, infrastructure, transport and medical technology. The company has 65 employees generates annual sales of SEK 330 million. 

 

On 1 April, Thurne Teknik AB was acquired in Sweden and joined the Industrial Process business area. Thurne Teknik is a leading supplier of components, equipment and advanced process systems primarily to the chemical and pharmaceutical industry in the Nordic region and the Baltic states. Thurne Teknik has 19 employees and generates annual sales of approximately SEK 100 million. 

 

On 1 April, AB N.O. Rönne was acquired in Sweden and joined the Industrial Process business area. N.O. Rönne’s principal operations consist of manufacturing special customised gaskets and seals through punching and cutting. The company has four employees and generates annual sales of SEK 8 million. 

On 6 May, Best Seating Systems Walter Tausch GmbH was acquired in Austria and joined the Power Solutions business area. The company is a niche player that supplies ergonomic driver’s seats and peripheral components for machines, buses and trains in Central Europe. The company has five employees and generates annual sales of SEK 23 million. 

 

On 12 June, Thiim A/S was acquired in Denmark and joined the Automation business area. The company develops and supplies components and solutions in industrial automation, customised electronics and electromechanics. The operations mainly target the OEM industry, automation and infrastructure. The company has 15 employees and generates annual sales of approximately SEK 70 million. 

 

 

Proposed allocation of earnings 2018/2019 

 

The following amounts are available for distribution by the Annual General Meeting of Addtech AB:
Retained earnings 387 SEKm
Profit for the year 203 SEKm
590 SEKm
The Board of Directors and the CEO propose that the funds available for distribution be allocated as follows:
A dividend paid to shareholders of SEK 5.00 per share 1) 336 SEKm
To be carried forward 254 SEKm
590 SEKm

* Calculated based on the number of shares outstanding at 31 May 2019. The total dividend payout may change if the number of repurchased treasury shares changes prior to the proposed dividend record date of 2 September 2019.

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