CEO comments 2018

DEAR SHAREHOLDERS,

GOOD ORGANIC AND ACQUIRED GROWTH

I am pleased to be able to sum up a strong year for Sdiptech in 2018, which included good organic and acquired growth, as well as improved profitability. Net sales increased by 43 percent to SEK 1.5 billion, of which organic growth was 5.4 percent. For our business areas, the market situation was generally favourable. We focused in particular on raising the profitability of the elevator operations.

A negative profitability trend from 2017 was broken in 2018 and the EBITA* margin developed in a strongly favourable direction over the four quarters, reaching 10.1, 11.7, 11.7 and finally 13.5 percent in the fourth quarter. EBITA* increased by 45 percent to SEK 177 million.

 

Continued favourable organic growth

For our business areas, the market situation has been generally favourable. The market for infrastructure is characterised by strong trends and long-term underlying growth.

  • Infrastructure that was expanded in the 50s, 60s and 70s is now outdated and there are considerable needs for investment in the western world to rectify the issues that have arisen.
  • In pace with increased consumption of, for example, water and electricity, capacity shortages increase the need for invest­ment.
  • At the same time, society seeks to build more sustainable, efficient and secure communities, which is driving technical development in a positive direction.

Our business units hold strong niche market positions that benefit from this favourable market situation, and acquired companies are developing well under Sdiptech’s management. Organic growth in consolidated net sales for 2018 amounted to 5.4 percent, in line with our financial targets.

 

Successful improvement programme in elevator operations

In the autumn of 2017, we launched a profitability improvement programme to manage declining profitability in our elevator compa­nies at that time. The market had developed unfavourably, resulting in price pressure, among other effects; therefore a programme was launched to make the necessary adjustments in operations and focus. The program has since been methodically implemented and the most important measures have been price increases a focus on fewer but more profitable customer segments, labour redundancy management and a strengthening of the aftermarket offering. I am pleased with, and proud of, what we have achieved and can affirm that profitability gradually returned in 2018. The EBITA* profit margin for the Tailored Installations in 2018 increased from 1.5 percent in the fourth quarter of 2017 to 9.8 percent 12 months later.

 

Continued good acquisition rate

In 2018, a total of eight acquisitions were completed and two more were completed in early 2019. The acquisitions have been made in infrastructure segments that we have identified as strate­gically important for societal development and that are characteri­sed by particularly strong trends:

  • Water & Sanitation – four acquisitions
  • Power & Energy – two acquisitions
  • Transportation – two acquisitions
  • Air & Climate control – one acquisition
  • Safety & Security – one acquisition

We have for a long time focused our acquisition strategy on these particular segments and it is gratifying to see the strategy mate­rialise in concrete acquisitions and to see the Group growing with this focus. In the run-up to 2019, we also organised the Group accordingly, continuing to build it in-line with this focus for the long term.

 

NEW MARKET-FOCUSED BUSINESS AREAS

  • Water & Energy – These areas are in focus for global welfare, constituting, among other things, two of the principal goals of the UN’s Agenda 2030. Several strong trends, including increased digitalisation and automation and a gradual intro­duction of stricter environmental regulations, are expected to bring market growth.
  • Special Infrastructure Solutions – Segments such as air and climate control, transportation and security have been identi­fied as particularly crucial to society’s long-term development.
  • Property Technical Services – Technical services for pro­perties, such as elevator renovation and upgrading of mains connections. In the metropolitan cities to which populations and economies are being concentrated, there is a long-term need for repairs and remodelling of properties. Our business units focusing on this area apply a different business logic than that of product companies. As Sdiptech is focusing increasingly on proprietary products, we currently have no plans to expand this business area.

 

STRONG PLATFORM FOR VALUE GENERATION

In 2018, the management team was supplemented in several important areas, with the recruitment of a new CFO, a Head of Acquisitions and a Business Area Manager for our third business area. Combined, we have the appropriate skills and experience to continue developing the Group and delivering continued strong growth.

Our basic growth principle, based on the acquisition of well-mana­ged niche companies, remains unchanged since Sdiptech’s incep­tion. With a complete and experienced management team and a new market-oriented Group organisation, we are well equipped to deliver results that generate value.

In conclusion, I would like to thank all of our dedicated employees for their fantastic efforts in 2018. I would also like to bid a warm welcome all new shareholders who joined us during the year, as well as to all new Sdiptech employees.