STATEMENT OF THE CHIEF EXECUTIVE
The past year
The 2019/20 financial year was a strong year for Lagercrantz. Profit after net financial items reached a new all-time-high of MSEK 460, compared to MSEK 431 in the previous year, and cash flow from operating activities increased to MSEK 507, or SEK 7.47 per share.
The portfolio of companies in the Group was also strengthened during the year, where the base increasingly consists of technology-leading product companies, market leaders in their respective niches. The build-up of the Group has occurred over many years and has been self-financed by the fact that already owned companies have generated positive cash flows that could be used for both dividends and for continued acquisitions.
The year also offered increased earnings per share to a new record level of SEK 5.39 per share (5.05) and we have a strong financial position with an equity ratio of 39 percent and substantial credit facilities for continued acquisitions and growth investments.
The strategy behind the successes
Lagercrantz Group's successes are due to the strategy that we have been pursuing consistently for several years. The organisational model involving decentralisation and management by objectives is well-established. Subsidiaries work according to clearly defined earnings and working capital targets as part of a business plan, which is adopted annually, incorporating concrete actions and initiatives. Management by objectives also encourages the identification of new opportunities when the market shows limited growth.
The Group's acquisition strategy is another important success factor. We are continuing to acquire profitable technology companies with strong market positions in niches. A focus on product companies has been the ambition in recent years and the proportion of proprietary products now represents just over 60 percent of Group sales. Our ambition is to reach 75 percent within a few years, which should have a positive impact on margins and on the potential for organic growth. During the year, six acquisitions were completed, where three (Dorotea Mekaniska in Sweden, G9 in Denmark and Frictape in Finland) will become new profit centres with proprietary products. The three others are smaller but equally important additions to pre-existing focus areas in the Group.
Sustainability is another reason for the Group's success. Long-term corporate social responsibility is a hallmark of the Group, and this applies economically, environmentally, socially and in relation to business ethics. Here, we have a lot to be proud of, given our more than 100-year history.
Finally, our focus on high value added is an important reason for the Group's successes. We measure this in the Group's rising gross margin. With very specialised companies, we want to quickly meet customer demands by developing and adapting products and solutions that create added value.
I want to end the year by expressing my heartfelt thanks to all our dedicated employees for their outstanding work.
Approaching the 2020/21 financial year, there is great uncertainty regarding market conditions and the business situation. The Covid-19 pandemic has had a very significant impact on society and business life in just a few months, and even though Lagercrantz has a strong platform, the Group will not be unaffected.
The health situation and our staff are our first priority. These matters are therefore prioritised locally in our businesses in line with local health authority recommendations. Meanwhile, in each business we must align capacity to demand and fluctuations in business volume, and in many cases here, we are now preparing our businesses for a lower business volume.
As of today's date, incoming orders for the first five weeks of the financial year were in line with previous year overall, but with significant fluctuations among the companies. We see that volatility has increased and the order situation is still good within certain businesses, while other companies have seen a significant slowdown. We usually do not provide data on a monthly basis but in this situation we still want to be as transparent as possible, so we can report that the profit for April amounted to approximately MSEK 30, compared to MSEK 37 in April last year.
In times of great uncertainty, the Group's decentralised structure will really come into its own, where our more than 50 companies in about 100 operating locations ensure a large diversification of products, end customer markets and geographies. Given the extraordinary sense of responsibility, commitment and decision-making power I see among our local management teams, I am convinced that the Group is well-prepared and that we will handle every situation in an effective way.
Having said all this, I have the same confidence about the future as earlier. In the near term, the Group and all business operations will go through a very challenging period. However, in the longer term, the basis for our business concept, our focus and our platform of competitive technology companies is very strong.
13 May 2020
President and CEO
A phone conference will be held May 13 at 4 pm CET, in English.
Phone: +46 8 619 7530. PIN: 332347#
Link to presentation:
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