2011/12 – a record year
The 2011/12 operating year signified a new record year for Lagercrantz Group. Profit after finance items amounted to MSEK 171, which compared to last year’s record of MSEK 137 is an increase of 25 percent. The Group also reached new heights in terms of profitability. The operating margin (EBIT in percent) was 8.1 percent (7.2) and the return on equity rose to 22 percent, the highest figure since going public. These successes were achieved despite a turbulent macro-economic environment.
The spring of 2011 was marked by optimism. At Lagercrantz we experienced good and growing demand in most of the Group’s areas. During summer 2011 came the crisis in Europe, which led to mounting uncertainty. At Lagercrantz we sensed greater hesitation on the part of customers. Orders were delayed as long as possible and ordered quantities were smaller than before. The rate of growth also suffered to a degree. Yet, in the face of all this, the effects of the crisis on our business were not as great as almost everybody feared. As 2011 turned into 2012 the anxiety among our customers and overall subsided in lockstep with stabilizing political action in Europe. Several macro-economic analysts are still warning that it is too early to sound the all clear. We therefore continue to be extra observant. In the beginning of 2012 we are noting a more stable market situation and higher organic growth.
Behind Lagercrantz Group’s successes and ability to fend off turbulence in the world around us lies the strategy that we have been pursuing steadfastly for several years. The organisational model, with decentralisation and management by objective, is well established. All subsidiaries work towards clear earnings goals and when the market changes we see more and more initiatives on the part of our subsidiary heads to adjust costs and to act in response to the market situation.
The acquisition strategy is also important in the transformation of Lagercrantz Group. We are constantly on the look-out for profitable B2B technology companies with strong market positions. In our quest also to raise the value added in our business, we have in recent years increasingly searched for product companies. The proportion of proprietary products has increased and is today almost 30 percent of our sales. All in all, it is gratifying to note that our earnings growth is derived from improvements in our existing business, as well as from successful acquisitions.
I conclude the year by taking this opportunity to extend my heart-felt thanks to all our dedicated associates for their fantastic work and many valuable initiatives during the year.
Future – New division
Lagercrantz Group’s development in recent years certainly whets the appetite. The business concept is strong and to develop it further we are establishing a new division, Niche Products, starting with the 2012/13 operating year.
Niche Products will be the Group’s fourth division and will initially consist of three of our subsidiaries: Swedwire, Svensk Stålinredning and Vendig. Our subsequent ambitions are to apply our dedicated resources and to acquire additional niched product companies. The orientation will be based on how we in recent years have operated when weighing opportunities in different technology areas, primarily in the Nordic countries. Along the way, we then form groups of companies and clusters in different product areas. Starting with this year-end report and the Annual Report for 2011/12 we will be reporting the Group incorporating this change. It is interesting to note that Niche Products already at the outset records good key financial indicators. Division Mechatronics, where the three subsidiaries have been included, will as a consequence of the new division get a more distinct orientation towards electrically related products. Included here are the Group’s largest subsidiary Elpress, Norwesco, the Group’s three cable harness units, and our trading operations in electro-mechanics. With this, Mechatronics will be getting a more distinct profile, and its key financial indicators will continue to look good.
With these changes we are creating new growth opportunities for Lagercrantz Group. We will continue to build, stone by stone, applying our decentralised business philosophy. We will continue to focus on margins and value added and we will continue to build our business with additional acquisitions. Going forward, Lagercrantz Group will continue to consist of a number of well-managed, sharply niched technology companies, each a leader in its area.
May 2012
Jörgen Wigh
President & CEO