Comments by the CEO
GROWTH FOCUSED ON ADDING VALUE
The past year really proved Addtech’s strength.Strong growth, an improved segment mix and an increased international presence show that our long-term strategy is working.
When I was appointed CEO in August 2018, I was already convinced of Addtech’s considerable growth potential. Despite concerns of a weaker economy, Brexit and fears of international trade conflicts, demand remained favourable in most units. Less than a year later, I can conclude that the Group has developed even better than I had dared to believe. We passed SEK 10 billion in net sales, increasing net sales by 26 percent and profit by 29 percent compared with the preceding year. We continued to strengthen our EBITA margin and the return on working capital (P/WC) held steady at 53 percent. That’s a really great outcome and we are, naturally, very proud of.
So, what lay behind the year’s strong growth? There are several factors to mention. While the economy has remained favourable, we have succeeded in our ambition to broaden Addtech on several levels. We have extended our international presence and our sales beyond the Nordic countries are now approaching SEK 3 billion. We have also achieved an even better segment mix. Today, Addtech’s operations encompass multiple niche markets and geographical areas, providing a good spread of risk.
Our business model has helped us capture favourable positions in certain structural development areas early on, including automation, which we have into a separate business area to clarify our offering and obtain better conditions for growth. Additional areas in which we have succeeded well are infrastructure and, of course, markets related to the environment and climate, such as the strongly growing segment in emissions treatment. We are very well positioned here with several subsidiaries selling to world-leading customers in the field and offering proprietary customised solutions and products.
Fundamentally, I see the year’s success as a result of Addtech’s long-term strategies:
market-leading positions, operating mobility and growth through acquisitions. This strategy stands firm. With continued good organisation and order, we can invest our energy where we really make a difference, constantly keeping an eye on areas in which we can further improve by means of our ongoing analyses of both operations and markets.
One thing that really stands out among the figures for the year is our organic growth at an impressive 11 percent. This serves as strong evidence that, through good entrepreneurship, we are continuing to develop how we generate value and grow in partnership with our customers. Over the year, we have observed a clear trend whereby our share of own brands and customised solutions has increased compared with trade products. Accordingly, we have now also updated the description of our business model, see the Business model, targets and strategy. Although we continue to add value in the link between suppliers and customers, the new model describes the dynamics of our operations more clearly.
With regard to acquisitions, the past year was successful, as we welcomed 14 companies to the Addtech family, with five more joining after the end of the financial year. Combined, they account for annual sales of approximately SEK 1.5 billion. All of our acquisitions, large and small alike, have a clear strategic perspective. We usually talk about running small-scale operations on a large scale, bringing together entrepreneurial drive and decentralisation within a shared network for growth. When a company joins the Group, it is placed with similar or complementary companies in a joint business unit within the relevant business area. In this way, it gains colleagues who “speak the same language” and can quickly become part of the culture. This is one of the reasons why Addtech’s acquisition strategy has been so successful over the years.
Our culture is largely built on the idea that if people grow, the business will also grow. We know from experience that this is a profitable model and it is also incredibly satisfying to see people take on greater responsibility and succeed with their ambitions. When people enjoy their work and interact, our internal network also generates several positive leverage effects, including exchanges of experience and various forms of co-creation. Nonetheless, the companies are always free to act based on their own circumstances. An important tool in maintaining our culture is the Addtech Academy, where employees gain knowledge and inspiration in a number of subjects. This, in turn, opens up opportunities for employees to grow into new roles within the Group. Internal recruitment is important for our management supply, and this is particularly evident in the new Group management team that has been in place since April 2019: Our CFO and our three new business area managers all have extensive experience within Addtech.
Conducting business responsibly is essential if we are to retain our leading position in value-adding technology trading. For this reason, all of our decisions, regardless of the area, will have a focus on sustainability. Gender equality is a priority area. We have too few women in leading positions and we want to change that. We are working on this issue in various ways within Addtech, and the level of commitment is substantial. Over the year, for example, a number of female salespeople within the Group took the initiative to establish a new network, AddQ. The idea is to disseminate experiences and contacts and to inspire more women to apply for technical sales positions. This will, in turn, increase the number of women candidates for senior positions.
As I now round off my first year as CEO of Addtech, I can state that we have developed by leaps and bounds since I began as Managing Director of one of the subsidiaries nine years ago. At the same time, one thing remains the same: The level of commitment and the business-driven culture. Entrepreneurship and a small-scale approach are part of our DNA. This makes us unique, and is what will drive our future growth. For this reason, I see working constantly to preserve our culture as one of my most important duties.
Finally, I would like to thank all of Addtech’s employees for an amazing year. The best in the Group’s history to date! I really look forward to taking on the challenges of the future with you.
President and CEO
Our culture is largely built on the idea that if people grow, business will also grow