CEO statement

An increasingly strong platform for future growth

Lagercrantz sums up another successful financial year 2023/24. For the full-year, the operating profit (EBITA) increased by 19% to MSEK 1,431 and the EBITA margin strengthened by a further percentage point to a good 17.6%. Earnings per share thus reached SEK 4.25, an increase of 15% compared to the previous year and a new record level for the 14th consecutive year. In addition, cash flow from operating activities increased by 24% to MSEK 1,327 and we have completed nine exciting acquisitions, which add a good 16% in annual business volume with high margin content.

The past year

In relation to markets, the year as a whole was stable for the Group’s businesses. Demand was generally strong for most businesses in the Niche Products division, in electrification, for our safety products and in the marine segment, while more sluggish demand was noted from customers in segments such as infrastructure, building and construction. The Group is not unaffected by the economic situation, and we saw a lower growth rate during the year, but our many businesses provide a good diversification in terms of products, customers and geographies. The strength of our decentralised structure is again proving to be very successful when our subsidiary management teams are focused on clear targets and adapt costs, investments and initiatives to the prevailing situation in their particular customers and the particular market.

Consistent strategy behind success

Behind Lagercrantz Group’s strong performance, lies the strategy and way of working that we have consistently applied for many years. The organisational model incorporating businessmanship, decentralisation and management by objectives is well-established. Each subsidiary works according to clearly-defined earnings and working capital targets as part of a business plan, which is adopted annually, involving concrete measures and initiatives. Management by objectives also encourages the identification of new opportunities and the making of adjustments when the market shows limited growth.  

The acquisition strategy is another important success factor. We consistently acquire proven profitable B2B  technology companies, preferably companies with proprietary products and with strong market positions in niches. In recent years, we have aligned each division with attractive sustainability-oriented sectors where there is underlying structural growth. In addition, we have further increased the responsibility of the divisions for acquisitions, which has had the desired effect in terms of the number and quality of the acquisition opportunities we evaluate. The goal is to acquire an average of at least 10% of the Group’s total annual business volume which currently means 8–12 new companies. We see that Lagercrantz’s approach to nurturing and further developing owner-led technology companies in particular, is increasingly attracting entrepreneurs. They see our success with other previous acquisitions and have great confidence in our ownership concept and governance model without an exit horizon.

The growth in recent years has also meant that along the way we have successfully expanded our geographical scope. We have involved more employees in acquisition activities and we now have several newly acquired companies in the UK, and we are also growing in Germany, the Netherlands and in the U.S. We are growing both in existing technology areas, but we are also looking at new areas, which has resulted in a marine cluster of companies in the International division, for instance.

Our corporate governance is focused on vision and goal setting. We want to grow our profit by 15% per year over a business cycle and we want to do it with high profitability,which means a return on equity of not less than 25%. This profit target means that the Group’s profit will double every five years and we expressed this clearly when we set the goal of SEK 1 billion in profit after net financial items. This clarification was energising and helped by a favourable market, hard work and fine acquisitions, we reached the goal already in summer 2023, i.e. after just two years instead of the target of 5 years. During autumn 2023, we therefore set the bar at doubling our profit again to SEK 2 billion within 5 years. This feels very exciting and demonstrates our strong confidence in our business concept and governance model.

In recent years, our focus on sustainability has increased. This has been a natural part of our business for a long time, and we have clarified our ambitions in the form of goals to more clearly contribute to the green transition. Measuring methods are now being introduced to meet requirements, including according to the CSRD, but we have also worked for three years now with concrete targets that are followed up at a subsidiary level. These targets are leading to improvements internally in the businesses and we also have many projects underway concerning new products and solutions for our customers.

By way of conclusion, I would like to take this opportunity to thank all the employees throughout the Group. Every company’s contribution to the Group is important and I am genuinely grateful for all the fine efforts and initiatives that are taking place in the Group’s almost 80 subsidiaries and also at a divisional and Group level. Thank you.

Outlook

Against this backdrop, I am optimistic despite the current global and economic situation. In the near term, we see that some of our businesses are continuing to be impacted by the economic situation, but we also see improvements in other places. If interest rates and inflation now fall, the willingness to invest should gradually return. The situation remains difficult to judge, but we have strong confidence in the ability of our decentralised organization to adapt. In the longer term, the Group’s broad exposure with niche B2B technology companies in attractive sectors such as electrification, infrastructure and security & safety solutions, provides stability and good growth opportunities.

July 2024

Jörgen Wigh

President and CEO