President´s statement

It is gratifying to be able to report that the 2010/11 financial year was the Group’s best to date. Profit after net finance items amounted to MSEK 137, which is a record, and an increase by 136 percent compared to the year before. The operating margin reached 7.2 percent, the best number ever, and our internal metric for return on working capital reached the goal of 45 percent, which is also the best level since the Company went public. The response from the equity market was very positive, with a gain in the price of the share from SEK 31.50 to SEK 61.75 during the financial year. Together with the dividend, this makes for a total return to the shareholders of just over 100 percent during 2010/11.

Behind these successes are both the improved market situation and our consistently applied long-term strategy. With respect to this strategy, we are seeing that our organisational model with decentralisation and management by objective is becoming increasingly established, we are broadening ourselves into new technology areas with good results, value added rises consistently and we are raising the rate of acquisitions.

Operationally, the year was marked by effective recovery efforts following the recession. Most of the Group’s units raised their sales volumes, increased their value added and strengthened their gross margins. In most cases while retaining the cost base and with a high rate of capital turnover. Here I wish to extend my heart-felt thanks to all dedicated associates for a job fantastically well done, with endless good efforts during the year.

During the year we have also made more acquisitions than before. Twenty-one profit units at the beginning of the year have become twenty-six during the year and we are quite content with the new additions. These acquisitions mean that the Group’s portfolio of niched technology companies with strong market positions and good profitability is further strengthened. Three of the five acquisitions are product companies and two are value-adding distributors. We are thus raising the value-added component further and the proportion of proprietary products is closing in on 30 percent in the Group. This share was almost non-existent only a few years ago.

Future

When we look ahead we see great potential in continuing to develop Lagercrantz Group along the chosen path. We will continue with our decentralised model, where each unit works with clearly set goals with respect to earnings growth and profitability. Our focus will remain on value added and we will continue to broaden our operations through acquisitions. Medium and high voltage, technical security and electro-mechanics have been examples over the past few years, but we will be open to other areas as well.

May 2011

Jörgen Wigh

President & CEO