CEO comments from the first half year 2017

Dear Shareholders,


During the first half of the year, we allocated an extensive amount of resources to preparing to list our Series B share on Nasdaq First North Premier in conjunction with a new share issue of SEK 500 million. With this, we have created the financial conditions to continue on our course with acquisitions and further development of the operational organization, in order to achieve our growth target of growing EBITA to SEK 600–800 million in 2021.


Good conditions for continued expansive growth

Sdiptech is a long-term effort developed from smaller volumes relatively recently. But the acquisition operations have been thoroughly developed, and relative to its size, Sdiptech is wellequipped to deliver high growth contributions from acquisitions in the coming years. The market strategy is focused on metropolitan areas where there is a long-term growth trend and sustainable demand within our core areas of operation. We have high goals for the coming years, which are reasonable, given our prerequisites and position.


Earnings variations is a natural effect that characterizes us

Sdiptech is in an expansive growth phase in which we have, and will continue to have in the foreseeable future, quarterly fluctuations in earnings compared with larger corresponding companies. The fluctuations can arise from many different events, such as investments in increased production capacity, organizational growth initiatives, delivery dates for larger orders or natural profitability variations in the product- and services mix. The bigger a company is, the greater its critical mass available to absorb these types of business events and their resulting impacts. Earnings variation is a natural effect that characterizes us but which will gradually decrease as the Group grows.


Reduction of earnings in the second quarter

During the second quarter, net sales increased by SEK 50.7 million while earnings were significantly lower than in the previous year. The decline in earnings is linked to investments in the second quarter within our core functions to support the operations of subsidiaries as well as for internationalization of our acquisition efforts. Otherwise, the earnings deviation can be attributed to two companies in the core business. From Metus, which is part of our global elevator business, where the company actively worked to increase capacity for meeting a strong worldwide demand for new installations. And from Castella Entreprenad, where profitability varies in accordance with fluctuations in the mix of active projects.


Good development rolling twelve months

Despite a weak second quarter, we are increasing both earnings and sales long-term, and this is reflected in our calculations for the rolling twelve months. The entire organization and I are focused on continuing to drive strong and sustainable growth, thereby building long-term shareholder value.


The Group’s run rate on a rolling twelve-month basis (RTM run rate) for net sales currently amounts to SEK 1.073 million and SEK 143 million for EBITA, with an EBITA margin of 14.3 percent.



During the first half of the year, the Group has acquired three companies as well as an additional company after the end of the period, totaling SEK 18 million EBITA.


New niche in wastewater treatment

With Topas Water and Service, acquired in the first quarter, we are taking an important step in the installation and operation of wastewater treatment.


Geographic expansion in elevator industry

With Aufzüge Friedl GmbH and ST Liftsystems GmbH, acquired during the second quarter, we are establishing ourselves in the Vienna elevator market and complementing our global elevator offering with a new export of our own.


Extended offering in vibration monitoring

Through the acquisition of AVA Monitoring, acquired after the second quarter, we are strengthening our presence in vibration monitoring through strong products for measurement systems for vibration and environmental control in conjunction with infrastructure projects.



Several ongoing aquisition processes

The size of our total pipeline is good, about 350 companies at the time of writing. The influx of new companies is stable and the conversion process is moving forward with good momentum. Currently, we have entered into an agreement of intent regarding an additional acquisition with an EBITA of approximately SEK 10 million, run rate. In addition, bidding with around ten companies is being conducted, half of which are active since the previous quarter’s report, by which prospects are good for exceeding the first half of the year in the second half.


Long-term growth

Despite having quarterly variation, Sdiptech has had good growth over time, driven by acquisitions. RTM run rate reflects where the Group including acquisitions stands on a full-year basis and is therefore an appropriate measurement to reflect our growth. In terms of RTM run rate, we increased sales by 44.7 percent in the past year, of which 7.9 percent was organic growth. The corresponding figure for EBITA shows a greater variety, both upwards and downwards, but over the past year, growth has been 63.3 percent, of which 1.5 percent is organic.


In conclusion, I would like to warmly welcome all our new shareholders to Sdiptech. My most important message to you and to any future shareholder is that Sdiptech’s growth model is strong and we have high, achievable objectives for expansion – and this is a long-term journey that creates significant value for shareholders.