Statement of the Chief Executive
The first six months of the financial year were dominated by uncertainty about the effects of the Covid-19 pandemic. The situation has gradually improved in recent months in line with markets reopening. However, there is significant volatility among the businesses where the majority of the Group's business units are experiencing little or no effects at all while some are experiencing a greater impact from the.
It is gratifying in this context that the Group's largest and most important businesses are continuing to perform well. Elpress, the Group's and the Mechatronics division's largest company, is reaping success on the export side. R-Con, the Communication division's largest unit, delivered another strong quarter and has a strong order book for the next six months and Tormek in the Niche Products division is increasing its volumes in its new structure with its own organisation in the USA. It is also gratifying that the restructuring measures undertaken have had the desired effect. Nikodan, a key unit in the Niche Products division, is an example of this. The company has made a reboot and is now increasing its profit after working through last year's less profitable projects.
By virtue of an ever stronger portfolio of businesses, we are successfully increasing our profit despite lower business volume. Profit after net financial items increased to MSEK 104 during the quarter and the operating margin reached a strong 14.4 percent, which I consider to be really good for a summer quarter with a pandemic in progress. The restructurings and cost adjustments we carry out mean that areas with low profitability either become more profitable or are phased out. In our efforts to increase value added, the business volume which consists of proprietary products is important. These products now represent 63 percent of total sales, which is a further step towards our goal of 75 percent. In proprietary products, we see better margins, profitability and a stronger basis for organic growth, particularly when it comes to exports. This bodes well.
It is also positive that the acquisition situation feels exciting. By virtue of our positive cash flows, strong balance sheet and well-developed acquisition processes, we intend to acquire between 4-6 companies per year and the acquisitions we have completed in recent years have whetted our appetite. After a pause during the pandemic this spring, many discussions have now resumed. This also bodes well.
However, ahead of the coming quarters there is still uncertainty regarding the effects of the pandemic. At the time of writing, reports are coming of increased spread of infection and it is not currently possible to predict the effects of this. However, I feel a great confidence about the future. Lagercrantz has emerged strongly from crises before and I am convinced that even this time we will turn the challenge into something positive. Our decentralised structure, diversity of businesses, operating locations, product and customer categories and geographical spread are real strengths in times of uncertainty. We are continuing to work according to our strategy in order to ensure a positive future development.
President and CEO
Stockholm 23 October 2020
Lagercrantz Group AB (publ)
A phone conference will be held 23 October at 10:00 CET, in English.
Phone: +46 8 619 7530. PIN: 332347#
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