Statement of the Chief Executive
To sum up, after Q3 2019/20, we can confirm new successes for Lagercrantz. Our strategy to acquire and on a long-term basis develop niche technology companies, preferably product companies, is again proving to be successful.
These successes are shown by the fact that we reached a new all-time-high in terms of profit and earnings per share. For the first nine months of the financial year (April-Dec), operating profit (EBITA) increased by 13 percent to MSEK 413, which also meant an increase in operating margin to 13.5 percent (12.8). Return on equity reached the target of 25 percent on a moving 12-month basis and our internal P/WC return metric increased to 56 percent, compared to the target of 45 percent. Cash flow was also strong and from operating activities it increased to MSEK 524 (430) for the latest 12-month period.
Progress was also evident in the Group's long-term business development, where we continued the international expansion in a number of companies while other companies made progress in their product development and/or gained new customers/customer segments in existing markets. The proportion of proprietary products, which we have as an important KPI, increased further and now represents 58 percent of total sales. In the future for Lagercrantz, sustainability issues will become even more important and both environmental issues and public welfare are prioritised in the companies, which will strengthen our long-term growth and profitability. At Group level, we have initiated work on further strengthening the follow up of our sustainability efforts, our communication regarding ESG issues (Environment, Social, Governance) and the connection to the UN's global sustainable development goals.
Successful acquisitions are also continuing to strengthen the Lagercrantz Group. During the quarter, Frictape was acquired which generates annual revenue of approx. MEUR 7 and is highly profitable. Frictape conducts an extremely niche business involving security products for helidecks, primarily offshore, and the operations will provide an important addition to the Mechatronics division. The acquisitions carried out in recent years have contributed to profit growth and many of our existing businesses are delivering record results in the Group. This is whetting our appetite and we are continually looking for more profitable, niche companies with growth potential in various fields of technology and geographies.
With all of this as a basis, I am positive about Lagercrantz's future. The economic outlook in the short- and long-term is certainly difficult to interpret and we note that Germany remains weak. Meanwhile, our main markets in the Nordic countries are stable even though customers' business and investment decisions tend to be postponed to a future date during periods of uncertainty. We are following developments closely and adapting our investments and actions to the prevailing situation in every company. In the longer term, the outlook is extremely positive with an ever stronger portfolio of companies with an effective governance model based on decentralised decision-making and clearly set goals. This means that I am convinced of a positive development going forward.
President and CEO
Stockholm, 29 January 2020
Lagercrantz Group AB (publ)
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