This interim report was prepared in accordance with IFRS and IAS 34 Interim Financial Reporting. Disclosures under IAS 34.16A are made not only in the financial statements, with associated notes, but also in other parts of the interim report. The interim report for the parent company was prepared in accordance with the Swedish Annual Accounts Act and the Swedish Securities Market Act, which complies with recommendation RFR 2 Accounting for Legal Entities, issued by the Swedish Financial Reporting Board. The same accounting policies and basis for calculations as in the latest annual report have been applied in this interim report, with the exception of the amended accounting policies described below.
As of 1 January 2019, IFRS 16 Leases has replaced standard IAS 17 Leases and related interpretations IFRIC 4, SIC 15 and SIC 27. IFRS 16 requires most leases to be reported in the balance sheet.
Addtech applied the simplified transition method, entailing comparative data for previous periods not being presented. The lease liability consists of the discounted remaining leasing fees as of 1 April 2019. For all contracts, the right-of-use asset corresponds to an amount equivalent to the lease liability adjusted for prepaid or accrued lease payments recognised in the balance sheet on the initial date of application. Accordingly, the transition to IFRS 16 entailed no effect on equity.
Addtech’s leases consist mainly of leased premises but also vehicles and other leases (of, for example, production equipment and office equipment). The transition to IFRS 16 entailed an increase in the Group’s total assets through the addition of right-of-use assets and lease liabilities. The lease fees previously reported as operating expenses was replaced by depreciation expenses on the rights-of-use which are reported in operating profit and interest on the lease liability, which is reported as a financial expense. The lease fee is divided between amortisation on the lease liability and interest payments.
Addtech has chosen to apply the relief rule regarding leases of less than 12 months and for contracts where the underlying asset has a low value. Accordingly, these will not be included in the amounts reported in the balance sheet, although they will still be reported as operating expenses in the income statement. In assessing contract duration where there are opportunities for extension or termination, both business strategy and contract-specific conditions are considered in determining whether the Group is reasonably secure in applying them.
On the transition to IFRS 16, all remaining lease fees were calculated applying the margin loan rate. The transition effect on the balance sheet as of 1 April 2019 entailed right-of-use assets of SEK 550 million arising on the asset side. On the liability side, lease liabilities totalling SEK 550 million arose, of which non-current liabilities amounted to SEK 408 million and current liabilities to SEK 142 million.
During the period IFRS 16 has entailed increased depreciation expenses on property, plant and equipment amounting to SEK 157 million and increased interest amounting to SEK 8 million. The lease fees were previously reported as operating expenses.
The effect of IFRS 16 is included in the Group’s income statement, statement of comprehensive income and key financial indicators per share. In the Group’s balance sheet, cash flow statement and in the key financial indicators figures are presented including and excluding IFRS 16 to illustrate the effect of the transition. The comparative financial information has not been restated.
Alternative performance measures
The Company presents certain financial measures in the interim report that are not defined according to IFRS. The Company believes that these measures provide valuable supplemental information to investors and the Company's management as they allow for evaluation of trends and the Company's performance. Since all companies do not calculate financial measures in the same way, they are not always comparable to measures used by other companies. These financial measures should therefore not be considered to be a replacement for measurements as defined under IFRS. For definitions and reconciliation tables of the performance measures that Addtech uses, please see page 22-25.
Risks and factors of uncertainty
Addtech's profit and financial position, as well as its strategic position, are affected by a number of internal factors under Addtech's control and by a number of external factors over which Addtech has limited influence. The most important risk factors for Addtech are the state of the economy, combined with structural change and the competitive situation.
Addtech has four operating subsidiaries within the UK as well as a few other subsidiaries doing business with the UK. The effects of Brexit are to this date unknown, but all affected subsidiaries are closely monitoring the developments. Addtech Group’s total exposure to possible negative effects from Brexit are not considered material.
The risk of being exposed to various types of IT incidents, that is, the risk that critical data or one or more of the IT systems used is somehow rendered unusable or locked, fails or is destroyed, has greatly increased in recent times. During the year, Addtech was subject to a cyberattack that brought to light the importance of having a detailed IT strategy with a relevant level of security. Following the cyberattack in October, a survey has been conducted of the Group's operational IT risks and a new IT strategy is being implemented.
To date, the impact of the COVID-19 pandemic on Addtech has been limited. Overall, fourth quarter demand was in line with expectations. We are monitoring the recommendations issued by the appropriate authorities and are taking relevant health precautions to protect our personnel and to mitigate the contagion in society. The pandemic is affecting the entire global market and will also have an impact on Addtech over the next financial year. Challenges are appearing in the supply chain and uncertainties prevail regarding some of our customers’ prospects of keeping their operations running at full capacity. Although the extent to which Addtech will be affected cannot currently be determined, we are nonetheless preparing and implementing measures to meet a presumed drop in sales over the upcoming quarters. To be able to act quickly in the event of a slowdown, all companies in the Group have prepared action plans and cost-saving programmes ready to be executed to protect earnings, liquidity and cash flow.
Beside this, risks and uncertainty factors are the same as in previous periods, please see section Risks and uncertainties (page 38-40) in the annual report for 2018/2019 for further details. The Parent Company is indirectly affected by the above risks and uncertainty factors due to its role in the organisation.
Transactions with related parties
No transactions between Addtech and related parties that have significantly affected the Group's position and earnings have taken place during the period.
Addtech's sales of high-tech products and solutions in the manufacturing industry and infrastructure are not subject to major seasonal variations. The number of production days and customers' demand and willingness to invest can vary over the quarters.
Annual General Report 2019/2020
The annual report for 2019/2020 will be published on Addtech’s website www.addtech.com in July 2020. A printed version will be distributed to the shareholders who request this.
Annual General Meeting 2020
The Annual General Meeting (AGM) of Addtech AB will take place at 2:00 p.m on Friday 28 August 2020 at IVA at the address Grev Turegatan 16 in Stockholm. A notice of the AGM will be published in July 2020 and will also be available on www.addtech.com.
The Board of Directors has decided to postpone the decision regarding the proposal on dividend for the time being due to the current uncertainty regarding the effects of the COVID-19 pandemic on the Group’s liquidity and cash flow.
Significant events after the end of the financial year
On 1 April, Elkome Group Oy, Finland, was acquired to become part of the Automation business area. Elkome develops, integrates and delivers solutions for applications in industrial IoT primarily for industrial production, smart cities and infrastructure. The offering includes customized computer systems, test systems, info kiosks, software, sensors and industrial communication. The company has sales of about EUR 8 million and 38 employees.
On 2 April Peter Andersson AB, Sweden, was acquired to become part of the Energy business area. Andersson System supplies both trading products and own products within electrical accessories for office and kitchen environments, to the Swedish and Norwegian markets.The products are sold through retailers of office furniture, office interiors, AV equipment, computer accessories and kitchen furnishings. The company has sales of about SEK 30 million and 9 employees.
On 8 April Valutec Group AB, Sweden, was acquired to become part of the Industrial Process business area. Valutec is one of the world’s leading manufacturers of timber kilns to the forest industry. The company has sales of about SEK 350 million and 45 employees
Preliminary purchase price allocations have not yet been completed.
Stockholm May 13, 2020
CEO and President
This information is information that Addtech AB (publ) is obliged to make public pursuant to the EU Market Abuse Regulation and the Securities Markets Act. The information was submitted for publication, through the agency of the contact persons set out below, at 8.15 a.m CET on 13 May 2020.
July 2020 Annual Report 2019/2020
2020-07-14 Interim report 1 April - 30 June 2020
2020-08-28 Annual General Meeting 2020 will be held at IVA, Grev Turegatan 16, Stockholm at 2.00 p.m
2020-10-23 Interim report 1 April - 30 September 2020
2021-02-04 Interim report 1 April - 31 December 2020
For further information, please contact:
Niklas Stenberg, President and CEO, +46 8 470 49 00
Malin Enarson, CFO, +46 705 979 473