Addtech AB — Annual Report 2020

Jul 14, 2020

K AP I TEL

K AP I TEL

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THE YEAR IN BRIEF

Strong profitable growth despite challenges

COMMENTS BY NET SALES THE CEO A highly successful SEK year 11,735 MILLION

122 ADDTECH ANNUAL REPORT 2019/2020

ADDTECH ANNUAL REPORT 2019/2020 1

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K AP I TEL
Value chain
Digitalisering, studenter/invå-
Bro eller väg/infrastruktur nare
12 30
CEO
Contractor
pouring concrete
6
Business
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“ Major external events often lead to technological innovation, generating opportunities for us” Niklas Stenberg, President and CEO, Addtech AB

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The Annual Report is prepared in Swedish and translated into English. Should differences occur between the Swedish Annual Report and the English translation, the Swedish version shall prevail.

Contents

This is Addtech 4 Comments by the CEO 6 CEO Niklas Stenberg presents his view on the financial year. The art of generating sustainable value 8 How does Addtech actually work? Our business model produces technological solutions that contribute lasting value to customers, suppliers and owners. Our strategic playing field 10 What external forces affect us most, who are our principal stakeholders and what strategies do we employ to achieve our objectives?

BUSINESS: With an eye for the business of the future 12 External demands for technological development that is both profitable and sustainable entails substantial opportunities for Addtech. Meet some of the entrepreneurs working with development on a daily basis.

	Addtech. Meet some of the entrepreneurs working with development on a daily basis.
	Our business areas	20
	- Automation - Components	21 22
	- Energy	23
	- Industrial Process	24
	- Power Solutions	25
	ORGANISATION: Small-scale operations on a large scale bringsimplicityand effciency	26
	Addtech is a highly decentralised and entrepreneurially
	driven Group. This makes it possible to drive change with
	people in focus – from reduced climate footprint to issues
	of gender equality.
	VALUE CHAIN: With the world as our workplace Although its roots are in Nordic industry, Addtech is also	30
	growing internationally. This places the focus even more
	strongly on the importance of control and acting responsibly in the value chain.
	The Addtech share Administration Report	34 37
	Corporate Governance Board of Directors and Management Financial statements 2019/2020 Group Parent Company Notes Assurance by the Board of Directors Audit Report Other information Multi-year summary Defnitions Sustainability Notes	47 52 56 61 65 105 106 109 110 114

2 ADDTECH ANNUAL REPORT 2019/2020

THIS IS ADDTECH

VISION We are to be a leading value-adding technology provider, perceived as the most skilled and long-term partner of our customers, suppliers and employees.

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Addtech is a Swedish, listed company, providing value-adding technology products and solutions, with a long history of sustainable, profitable growth. We acquire, own and develop independent subsidiaries that generate technical, financial and sustainable added value for both customers and suppliers. In this way, Addtech’s subsidiaries help enhance the efficiency and competitiveness of all parties.

BUSINESS CONCEPT IN BRIEF

Addtech offers high-tech products and solutions for companies in the manufacturing and infrastructure sectors. We contribute added technical and financial value by being a skilled and professional partner for customers and manufacturers.

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WE ARE PRESENT IN 20 COUNTRIES

Although Northern Europe is Addtech’s principal market, our operations are becoming increasingly internationalised. In addition to proprietary operations in 20 countries, exports are made to a further 20 countries. Our subsidiaries represent marketleading manufacturers from all over the world, and many of Addtech’s products are found in the end products of customers who export globally.

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2,900 130 EMPLOYEES SUBSIDIARIES

WE BUILD SHAREHOLDER VALUE THROUGH

• our 130 subsidiaries and their capacity to generate earnings growth

• corporate governance that ensures the companies achieve even better results and development

• acquisitions that bring in new employees, customers and suppliers

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YEAR
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QUARTER
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28% INCREASED OPERATING PROFIT 56% EBITA/WORKING CAPITAL (P/WC) 11,735 NET SALES, SEK MILLION 11.6%

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NET SALES NET SALES
AND EBITA MARGIN AND EBITA MARGIN
Net Net
Sales % Sales %
12,000 14 3,000 14
2,500 12
9,000 12
2,000 10
6,000 9 1,500 8
1,000 6
3,000 6
500 4
0 3 0 2
15/16 16/17 17/18 18/19 19/20 Q1 Q2 Q3 Q4
Net Sales, SEK million Net Sales, SEK million
EBITA margin, % EBITA margin, %
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EBITA MARGIN
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CORE VALUES

Simplicity – Efficiency – Change – Responsibility and freedom

2019/2020

• Cyberattack. In October 2019, 80 of Addtech’s subsidiaries were affected by a ransomware attack estimated to have impacted net sales by approximately SEK 130 million and EBITA by approximately SEK 100 million for the financial year.

• Strong growth. Net sales rose by 16 percent to SEK 11,735 million (10,148), distributed evenly between organic and acquired growth.

• Continued acquisitions. Over the year, 12 companies were acquired, with three more being added after the end of the financial year. Combined, these acquisitions added total annual sales of approximately SEK 1,200 million.

• COVID-19. The challenges presented by the ongoing pandemic lie largely ahead of us, and all units within Addtech have developed action plans to be able to take action if and when required.

• Strengthened earnings growth. EBITA increased by 26 percent (29) to SEK 1,364 million (1,085). All business areas contributed to the increase.

• Sustainability. During the year, we detailed our longterm sustainability visions supporting UN Agenda 2030.

Addtech focuses primarily on the following UN global goals

ABOUT THE ANNUAL REPORT

The Annual Report describes Addtech’s operations and financial results in 2019/2020. The legal Annual Report comprises pages 37-105 and 8-17. The Annual Report also includes a voluntary report on sustainability that is inspired by integrated reporting, and also includes the Statutory Sustainability Report on pages 41-43 and the Sustainability Notes on pages 114-120. The Annual Report also includes a Corporate Governance Report on pages 47-54.

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4 ADDTECH ANNUAL REPORT 2019/2020

ADDTECH ANNUAL REPORT 2019/2020 5

C O M M ENTS BY THE C EO

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VD HAR OR DE TC O M M ENTS BY THE C EO
“ This year, we fully
demonstrated
the power of the
Addtech model”
Strengthened sustainability initiatives, continued focus on cost control and the
continuous work with Addtech’s culture. According to CEO Niklas Stenberg,
these will be among the most crucial key factors over the upcoming year.
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The 2019/2020 financial year showed two different faces. On the one truly hand, it was a highly successful year. The numbers speak for themselves: sales rose by 16 percent, divided equally between organic growth and contributions from acquisitions, operating profit increased by 28 percent and the EBITA margin reached a record high of 11.6 percent. On the other hand, we encountered the toughest possible circumstances in the second half of the financial year – initially in the form of a large-scale cyberattack and later in the form of the COVID-19 pandemic that has shaken up the entire global economy.

finances, we have a solid foundation on which to continue our successful journey of acquisition.

our customers and by means of demands and ambitions expressed by society in general. This drives technological development, opening opportunities for us. Even today, a large proportion of our businesses have developed solutions with strong links to sustainable development. Looking ahead, we will work even harder in identifying sustainable business opportunities, both by developing business in existing companies and through acquisitions, and we will keep explaining the efforts being made in the subsidiaries. We also want to take greater responsibility in society by contributing to the green transition in industry and infrastructure. For this reason, the Board of Directors and Group Management have chosen to express Addtech’s ambitions more clearly by developing

industry and special vehicles. In the marine scrubber segment, demand fell sharply in the second quarter. At the same time, we fortified our favourable positions in a number of structurally driven growth areas, such as automation, infrastructure, green energy and electrification. One of the most important strengths of Addtech companies is the ability to capture trends and identify growth niches at an early stage – a capacity we are constantly developing.

During the year, we have continued our strategy of investing in successful, well-managed, market-leading niche companies with potential to generate profitable growth. We welcomed a total of 12 new companies to the Group, with three more joining us after the end of the financial year. In total, they contribute about SEK 1,200 million in annual sales. It is worth highlighting that several of them are clearly linked to sustainability, and with their own, strong brands.

We continued to increase the value we add for the market and we also broadened our presence both geographically and in various customer segments during the year, helping us spread the risks and increase the stability of our operations. Our cash flow improved significantly and, with stable

In the first half of the year, we saw demand evening out at a high level in certain customer segments, particularly traditional

We definitely see a growing ambition to offer sustainable products and services, not least from our own companies, but also from

a new sustainability vision that supports the UN 2030 agenda. Areas of particular importance for us are reducing our carbon footprint and increasing the diversity of our labour force by, for example employing more women in decision-making positions. We are also focusing additionally on supplier evaluations, where our subsidiaries are already doing a good job, but where we as a Group need to increase our efforts.

I am certain that developing the profitability of our business is how we, like industry and society in general, will succeed with the green transition. The annual report that you are currently reading represents part of that process, since we this year have decided to partially integrate our Sustainability Report with the annual review, to increase transparency regarding where we stand in our work on sustainability.

For us, transparency is key, which is also linked to how we acted in the cyberattack to which we were exposed in the third quarter. The attack affected 80 of our 130 companies, corresponding to half of our annual sales. The attackers encrypted our central IT environment and then demanded a ransom to reinstate it. For us, the natural course of action was to explain openly what had happened to us. Cybercrime is a growing problem in society and we can help stem the trend by raising awareness of the problem and sharing our experiences.

The cyberattack served as a supreme test of our decentralised culture. Each of our companies are headed by entrepreneurs who know their markets, customers and suppliers well and who are also used to accepting their own responsibility. Their capacity to resolve issues enables the entire Group to realign very quickly. We have seen many examples of this over the years, although this crisis stands out somewhat in my view. Our companies’ capacity to both tackle a cyberattack and, at the same time, largely continue conducting their operations, is simply amazing and would have been entirely impossible without a culture strongly characterised by entrepreneurship and small scale operations.

This year, we truly had the opportunity to demonstrate the power of the Addtech mo-

del, with the cyberattack more or less giving way to a new crisis: the COVID-19 pandemic. The consequences of the pandemic remain difficult to review at the time of writing. What we do know is that this is a different crisis, in which development is dependent on factors beyond our control, such as contagion and political decisions. Accordingly, we have prepared carefully for several different scenarios. While striving to protect our employees and others from infection, we are also focusing strongly on cost control to safeguard profits and cash flow.

But we can also see opportunities. Major external events often lead to technological innovation, generating opportunities for us. Technological development will not halt, our strategy is firm, and we also know that companies with stable business models and robust finances have better opportunities to act when opportunities arise. It is my belief that our role in the market will instead be strengthened by the changes currently taking place in the world. For this reason, we must dare to be progressive, hitting the accelerator and the brakes at the same time. This is already part of our entrepreneurial culture and, in the future, we will work in a number of ways to further consolidate and strengthen our positions.

In conjunction with this year’s Annual General Meeting, our 19th, our Chairman, Anders Börjesson, will step down. Anders has been Chairman of the Board of Addtech since its public listing in 2001 and is, to a large extent, the founder of the entire Addtech philosophy. He has also meant a lot to me personally. Although he has now chosen to hand over the baton of the Chairmanship, I look forward to having him nearby both myself and Addtech also in the future, as a major owner and as a highly inspiring mentor. Finally, I would like to extend a huge and sincere thank you to all of our employees for their sometimes almost superhuman efforts during the year. Thank you for taking your full decentralised responsibilities! I look forward to taking on the new challenges of the current financial year alongside you.

Niklas Stenberg

President and CEO Addtech AB

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ABOUT ADDTEC H

THE ART OF GENERATING SUSTAINABLE VALUE

Our model is to create technological solutions that deliver sustainable value for all: for customers, for suppliers and for our owners.

the years, the idea has been refined and developed, although the core remains the same: generating technical and financial added value for customers. Our approximately 130 subsidiaries act as technology partners and specialists helping customers find customised and sustainable technological solutions. Over the years, our decentralised structure, in which

Addtech’s business model builds on a concept born more than 100 years ago: value-adding technology trading. In the early 1900s, engineers Arvid Bergman and Fritz Beving founded Bergman & Beving, whose concept was to import technical products from Germany and sell them on to Swedish industry, which was expanding rapidly at that time. Over

decisions are made by entrepreneurs close to the market, has also built a strong and business-driven culture of responsibility and freedom, efficiency, change and simplicity. Maintaining a sustainable perspective in everything we do is a central and integral part of our business. We consider ourselves to be an important part of society, and we are able to

BUSINESS MODEL AND FOCUS – VALUE ADDING TECH PROVIDER

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Suppliers Customers
ADDTECH VALUE ADDING:
R&D, Design,
OWN PRODUCTS Production,
Sales & Marketing 35 [%]
AND BRANDS
OF SALES
MODIFIED Custom design,
modifications and niche
PRODUCTS & production. Sales & 30 [%]
SOLUTIONS Marketing and services OF SALES
MARKET TRENDS, TECHNICAL KNOWLEDGE
Technical knowledge of
TRADING local market needs and
expectations. Sales & 35 [%]
PRODUCTS Marketing, logistics OF SALES
GUIDANCE ON PRODUCT DEVELOPMENT
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Our solutions include both unique proprietary products, customised solutions and trade products. from our broad network of suppliers. We add value for our customers by making their products more competitive in the end market. We also generate value for suppliers, for whom our knowledge increases their opportunities to adapt their products and systems to the customers’ needs. We have suppliers all around the world and we make a large part of our purchases from companies outside the Nordic region, including in other parts of Europe, as well as in North America and Asia.

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O M ADDTEC H
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contribute in many ways, for example by creating sustainability work to the UN Global Goals, jobs, generating tax revenue and by helping and to develop a new sustainability model our customers make more sustainable choices. on which to base our efforts. The foundation In 2019/2020, we updated our stakeholfor this comprises the five areas that we and der dialogue and materiality analysis. Read our stakeholders value most. We have then more about this in the Sustainability Notes linked these to three strategic areas of focus: nearer the end of the report. In connection The business, the organisation and the value with this, we chose to start adapting our chain. For each area, there is a long-term

vision that is measurable and limited in time to the year 2030 in accordance with the global goals. This gives us direction and helps us advance in our sustainability efforts. In the coming years, we will establish priorities and visions throughout the Group to develop together a strategic plan of action for achieving our objectives.

OUR SUSTAINABILITY MODEL

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SUSTAINABLE VALUE CHAIN
Through structured supp-
lier follow-ups, we seek to
foster fair terms of employ-
ment and environmentally
friendly production for a
sustainable value chain.
SUSTAINABLE ORGANISATION
With equal-opportunity
and climate-smart opera-
tions, we seek to build an
attractive and sustainable
organisation.
SUSTAINABLE BUSINESS
By offering technological
solutions that contribute to
our customers’ transition
and development, we aim
to generate sustainable
business.
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We want to make a positive difference in society. In line with our business model, our operational sustainability efforts are decentralised and conducted by the subsidiaries. To foster optimum conditions for the companies in managing and developing their sustainability efforts, we developed during 2019/2020 a new sustainability model based on the stakeholder dialogue and materiality analysis performed during the financial year. Read more about this work in the Sustainability Notes on pages 114-120.

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ADDTECH ANNUAL REPORT 2019/2020 9

ABOUT ADDTEC H

ABOUT ADDTEC H

Our strategic playing field:

MARKET DRIVERS, STRATEGIES AND TARGETS

For further information, see the Sustainability Notes on pages 114-120.

What drives our markets Globalisation: Increased internationalisation changes trade patterns, which in turn opens up new growth opportunities for our customers. Climate change: Drives society’s demand for energy solutions that are sustainable in the long term.	What drives our markets Globalisation: Increased internationalisation changes trade patterns, which in turn opens up new growth opportunities for our customers. Climate change: Drives society’s demand for energy solutions that are sustainable in the long term.	What drives our markets Globalisation: Increased internationalisation changes trade patterns, which in turn opens up new growth opportunities for our customers. Climate change: Drives society’s demand for energy solutions that are sustainable in the long term.	Technological development: Constant need for new sustain- able solutions in, for example, automation, 5G, robotisation, and electrifcation. Industrial transformation: Due to demands for specialisation and automation, industry seeks additional external partners to help them fnd technological solutions that are sustainable in the long term. Economy and global situation: Addtech’s growth and proftability are linked to industrial development but also to geopolitical develop- ment and major world events, such as pandemics.	Technological development: Constant need for new sustain- able solutions in, for example, automation, 5G, robotisation, and electrifcation. Industrial transformation: Due to demands for specialisation and automation, industry seeks additional external partners to help them fnd technological solutions that are sustainable in the long term. Economy and global situation: Addtech’s growth and proftability are linked to industrial development but also to geopolitical develop- ment and major world events, such as pandemics.	Technological development: Constant need for new sustain- able solutions in, for example, automation, 5G, robotisation, and electrifcation. Industrial transformation: Due to demands for specialisation and automation, industry seeks additional external partners to help them fnd technological solutions that are sustainable in the long term. Economy and global situation: Addtech’s growth and proftability are linked to industrial development but also to geopolitical develop- ment and major world events, such as pandemics.
Our stakeholders Customers: We work in partnership with our customers and help them deve- lop technological solutions that are sustainable in the long term. Suppliers: We work closely with our supp- liers, contributing knowledge that helps increase their success.			Employees: It is our employees who make the difference. If they thrive and develop, Addtech will grow. Shareholders: Addtech’s shareholders contri- bute capital and expect returns. Through responsible ownership, they can contribute to acceptance and legitimacy in society. Social partners: We conduct frequent dialogues with the relevant social partners, such as public authorities, trade associations and trade unions.
Strategies and success factors Market-leading niche positions: The Addtech companies shall be market leaders in selected niches with a high knowledge and technology content. This is important for stable growth and durable proftability.		Operational agility: The companies should be able to act quickly and agilely in response to new business opportunities. The Group should also be able to act quickly by, for example, merging or splitting operations, and maintaining effcient processes for integrating new companies into the operations.	Growth through acquisitions: Company acquisitions and add-on acquisitions are an essential part of Addtech’s growth philosophy. They make it possible to expand quickly into new segments, to broaden the product offering to build new market positions. Three long-term success factors: •Competent employees •Decentralised organisation •Consistent action and strong corporate culture Focus areas currently selected: •New talent with equal opportunities – to secure future competence. •Entrepreneurship 2.0 – to safeguard constant development and innovation •Increased decentralised responsibility – to preserve and strengthen responsibilliy throughout the organisation. •Co-creation – to identify synergies between the companies.
Our fnancial targets and sustainability visions	Earnings growth: >15% Outcome 19/20: 28%	Reduced carbon dioxide intensityby2030: 50% Outcome base year 19/20 (CO2/SEK million sales) 2.2 tonnes P/WC: >45% Outcome 19/20: 56%	Percentage of sales contributing to sustainable development in 2030: 100% Outcome 19/20: 40%	Percentage of women in managementpositions in 2030 40% Outcome 19/20: 14%	Percentage of purchasing volume evaluated based on the Code of Conduct in 2030: 80% Outcome 19/20: 51%

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WITH AN EYE FOR THE BUSINESS OF THE FUTURE

The world faces major challenges, with increasing demand for technological development that is both profitable and sustainable. For Addtech, this entails numerous opportunities to generate future value, both for customers and for society.

Electrification, power grid expansion, automation, flow control, Industry 4.0, infrastructure development, medical technology… the list of the areas of technology in which Addtech companies are active is long. Every day, the Group’s 130 subsidiaries around the world endeavour in different ways to help customers identify the best technological solutions fortheir particular needs. Many of these solutions have clear connections to sustainability. Accordingly, Addtech often helps customers enhance their business while also benefiting society by, for example, reducing emissions, improving energy efficiency in transport, making workplaces safer and benefiting people in other ways.

But what do solutions offered by Addtech companies look like in practice? One example lies hidden in an anonymous brick building on an industrial estate outside Eskilstuna. This is where the Swedish operations of chains supplier FB Kedjor are housed. Although selling chains may seem uncomplicated, the operations involve more than that – with the company’s employees facilitating additional opportunities in the link between the customer and the supplier.

Alongside steel producer SSAB, FB Kedjor

recently developed a completely new and ground-breaking solution for district heating supplier Söderenergi. District heating plants are extremely demanding environments, in which materials often corrode quickly. Some equipment has to be replaced after only a

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year or so. With a special sustainable steel from SSAB, however, Söderenergi developed a product with a service life thirty times longer than for earlier materials, and also offering environmental benefits in the form of greener electricity and heating for end customers, as well as reduced carbon dioxide emissions.

John Karlsson, Managing Director of FB Kedjor, tells us about the project:

“For the customer, the challenge lay in the plate at the bottom of the conveyor’s tipper ” Issues of climate and the trough breaking apart, destroying the actual supporting structure. At FB Kedjor, we took environment are connected the initiative to bring together Söderenergi with specialists from SSAB, a company with which directly to what we sell.” we were very familiar. Under our direction, a Mikko Sammasmaa, Sammet Dampers team was assembled to develop and assess a special steel for bottom plates that could withstand the extremely demanding conditions in the long term.”

Long term was the appropriate term: The special steel that was tested proved to have a service life of about 80 years. After about five years of analysis, development work, production and review, the team confirmed that everything had worked out perfectly.

“The change of material entails a number of positive and measurable environmental consequences. According to SSAB’s calculations, carbon dioxide emissions will decrease by about 1120 tonnes during the lifetime of the plant,” explains John Karlsson. FB Kedjor has achieved similar sustainable solutions for other customers, in which it »

ADDTECH ANNUAL REPORT 2019/2020 13

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has also developed the materials used in the chain itself to achieve quantifiable positive effects.

customers with the world’s most advanced solutions for reducing maritime emissions. “We have a product that really helps customers make a big difference. Our dampers are used on the world’s largest vessels, where they actively help eliminate emissions and pollution,” says Mikko Sammasmaa, Marketing Director.

“Our approach, which we call FB EcoUpgrade, begins with sitting down with customers and discussing their problems and what they want to achieve. Quite often, customers want us to help them manage their active environmental efforts, developing sustainable solutions, while generating economic benefits. In this way, we can support customers in assuming global responsibility and making a real difference,” says John Karlsson.

This niche has grown rapidly within Addtech, and Sammet has tripled its sales over the past financial year alone. Although demand levelled off in the final six months of the year, with much of the industry largely waiting for new regulations to take effect, long-term demand remains strong. This is driven by society increasingly continuing to impose stringent demands on environmentally efficient solutions, says Mikko Sammasmaa.

In his view, today’s customers have a growing understanding of the area of sustainability and they want to improve in this. Although price, reliability of delivery and quality, for example, remain important, many companies want to make a difference and are happy to make use of FB Kedjor’s sustainability skills.

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“Regulations and directives on climate and the environment are continuously being sharpened and amended. We work on the front line of our particular industry, and we see clearly that stricter environmental regulations entail increased business opportunities. We are able to meet requirements and have a mission to contribute to a cleaner and more sustainable future.”

“And that involves more than just the environmental aspects. The human aspect, including work-related injuries, stress and the working environment, is also important. FB Kedjor does more than deliver products, we are on a mission to help our customers advance their sustainability work. Put simply, we think long-term, for the sake of future generations,” says John Karlsson.

Sammet is also accustomed to being examined by its customers from the perspective of sustainability, Mikko Sammasmaa explains.

“We have noted that customers have very high expectations of us, and many choose to conduct sustainability reviews, both of us and of our suppliers. At the same time, however, working to improve the climate and environment motivates us and we know that is engages our employees. We work extensively on these issues internally, with

Another Addtech company clearly associated with sustainability is Sammet Dampers. Based in Jyväskylä in central Finland, the company sells industrial dampers that regulate gas flows in various industrial processes, with the whole world as its market. The marine segment, in which Sammet provides

Opportunities for growth: Sammet

Dampers has operations all over the world. Zaki Issa, Packing Engineer, and Sari Asikainen, Supply Assistant, plan the company’s deliveries.

Improved distribution of segments and geographies

In recent years, Addtech has actively broadened the distribution of its operations in terms of both customer segments and geographies. This helps further stabilise the Group’s development by smoothing out business fluctuations over a business cycle.

Sales by customer segment 2019/2020

Sales by geographic market 2019/2020

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Building and installation (9%) Data and telecommunications (5%) Electronics (7%) Energy (16%) Vehicles (10%) Medical technology (6%) Mechanical industry (14%) Forestry and process (10%) Transport (15%) Other (8%)

Sweden (26%) Denmark (15%) Finland (13%) Norway (16%) Other (30%)

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Climate-intelligent solution: Together with steel manufacturer SSAB’s special steel, FB Kedjor was able to produce a more durable

product for the customer.

components for wind turbines, for example, to selling equipment for the transmission networks carrying the electricity all the way to the electrically powered equipment.

substantial strategic grass roots commitment. Issues of climate and the environment are connected directly to what we sell.”

Something that has always characterised Dovitech, an Addtech company in the Addtech companies is their capacity to Denmark, spans a substantial part of the quickly identify and monitor the major technobusiness spectrum that electrification logy trends impelling markets and commuentails. With a turnover of approximately DKK nities alike. One of the strongest trends at 100 million, Dovitech is one of Addtech’s mathe moment is electrification. In practice, the jor subsidiaries, and its products and solutions trend intervenes and generates opportunities can be found in Vesta’s wind turbines, as well for virtually all Addtech business areas: From as in advanced medical technology equipmecontributing to green electricity by supplying nt and ordinary household appliances. »

Percentage of sales contributing to any of the UN’s global goals

Over the financial year, Addtech calculated the overall percentage of existing operations currently contributing in some way towards the UN’s global goals. Today, this equals approximately 40 percent of total sales. More information about this calculation can be found in the Sustainability notes on pages 114-120.

Distribution by business area, %

Distribution by UN global goal, %

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SDG 3: Good health and well-being (4%) SDG 6: Clean water and sanitation (1%) SDG 7: Affordable and clean energy (28%) SDG 9: Industry, innovation and infrastructure (38%) SDG 11: Sustainable cities and communities (9%) SDG 12: Responsible consumption and production (2%) SDG 14: Life below water (18%)

Energy (32%) Industrial Process (29%) Power Solutions (19%) Automation (12%) Components (8%)

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“We are often associated with green energy because we have major customers in wind power, although we do so much more than that,” says Michael Rosenkrantz, Managing Director of Dovitech.

“For me, issues of sustainability are absolutely crucial because it is always about people at the end of the day. Not only do we sell many components – we also package them and add value that will ultimately benefit people. In my view, sustainability is also about daring to take a long-term approach to customer ~~relations. We have come to know~~ our customers over a long period of time. We know what they want and they, for their part, know what we are capable of – that we do not consider anything to be impossible,” says Michael Rosenkrantz, who also underscores the advantage offered by the Addtech network as a whole:

are electronics components involved in that area? Well, just imagine what a difference cameras and sensors can make for those working with maintenance in the process industry,” Michael Rosenkranz explains. In his view, the electrification trend is set to continue:

He shows a number of pictures in rapid succession. These include quite a few examples from the industry: A wave power plant, a skyscraper with turbines on the roof, an electric car ferry, an industrial robot, an X-ray machine. Although the images also represent things more associated with everyday life: A water-efficient washing machine, an electric car charging pole, LED fittings, a hearing aid, a pensioner’s stairlift... In other words, there seem to be Dovitech solutions all around us. “Today, of course, electronics are almost everywhere, meaning we are also involved somehow. People are often surprised when we show everything we work with, it’s not at all what they expect. One highly interesting area, for example, is people’s security. How

“A great many things will happen. Just look at Norway where almost everything is electrified nowadays, from cars to large ferries, which is what we are working on at the moment. In ten years’ time, these markets will be even bigger. For that reason, we are already working to safeguard a favourable position, including in development projects. One such project that I personally find highly exciting at the moment is the development of an electric hybrid aircraft, in which we are involved and provide solutions.”

“The Addtech companies embody considerable know-how in many of the foremost future technology trends in. In my view, we have enormous potential to develop additional areas of business together.”

For Dovitech, sustainability is also a key factor in the future development of the business.

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A solution for every need: Addtech’s
companies operate in a number of sectors,
not least marine transports, where several
companies, including Sammet Dampers,
contribute energy-saving solutions.
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	ECONOMIC SOCIETAL VALUE 2019/2020, SEK MILLION
	Financial valuegenerated	11,735
	Financial value distributed	11,510
	Of which, manufacturingcosts	8,725
	Of which, salaries and remunerations (salaries, pensions, payroll taxes,
	social securitycontributions)	2,114
	~~Of which, disbur~~sements to creditors Of which, disbursements to shareholders Of which, disbursements togovernments (tax)	62 336 273
	Remaining in the company	225

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MEGA TRENDS DRIVING DEVELOPMENT

The development of Addtech’s five business areas is driven by both major mega trends and smaller niche trends. Read more about the business areas on pages 20-25 and the development for the year in the Administration report on pages 38-39.

Industry 4.0, smart cities, Internet of Things

Automation: Components:

Components: Electrification, environmental and climate development, Technological development Energy: Renewable energy, power grid expansion, higher degree of technology in installations Industrial Process: Environmental and climate regulations, optimisation and safety, new products in flow processes Power Solutions: Electrification, increased focus on ergonomics, increased focus on batteries

16 ADDTECH ANNUAL REPORT 2019/2020

ADDTECH ANNUAL REPORT 2019/2020 17

K AP I TELBUS I NESS

BUS I NESSK AP I TEL

Acquisitions with a focus on culture

Growing through acquisitions is a key strategy for Addtech. By acquiring niche market leaders, Addtech is always able to identify new growth opportunities, regardless of the broader economic situation. But there is one aspect that must always fit – the culture.

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In seeking out companies, there is a particular phrase that is often used at Addtech: It is allowed to take time. Because each acquisition is unique, the process is too. Some acquisitions progress rapidly, while, for others, its can take several years to progress from the initial contact to signed agreements. It is not strange to view each acquisition as unique. Part of the explanation behind Addtech’s success is that the companies are often run by the same people who originally founded them. They can attest to the importance of a good fit, even in cultural terms.

grown substantially and our entrepreneurship has developed further,” says Anders Claeson.

An important part of the strategy is to acquire sustainable companies with market-leading niche positions and to develop them sustainably in the long term. For Daniel Prelevic, Deputy Business Area Manager for Industrial Process and coordinator of the Group’s acquisition efforts, the extent to which companies have progressed on sustainability is playing an increasingly important role in analysing and valuing potential acquisitions.

Addtech, they treated us in a very correct manner,” says Anders Claesson. “There was a genuine interest in getting to know us at Sittab properly. They wanted to know who our key individuals were and answered our employees’ questions regarding what the acquisition would entail. It was almost as if their DNA held how they should respond.”

Someone who knows what it feels like to be bought out is Anders Claesson, Managing Director of Sittab, which was acquired in 2013. He was one of three owners, and at first he did not want to sell at all. Sittab was doing well, achieving success and profitability with its ergonomics products for construction machines. Anders Claesson felt there were good reasons to continue on his own. But after a few meetings, he chose to rethink. “When we were being bought out by

“Addtech is truly passionate about acquisitions – we take a genuine interest in developing the operations alongside their founders and aim to do this long term. This means entering lifelong partnerships with the companies. We sometimes joke that we embark on a lifelong marriage and never get divorced, but actually, we almost never sell

Addtech also applies a “cluster approach” to its acquisitions. When a new subsidiary enters the Addtech family, it is placed alongside similar or complementary companies in shared business units within a business area. This allows the companies to quickly immerse themselves in an environment where they can grow alongside like-minded companies. For the sellers of Sittab, the extent to which the buyer’s culture matched theirs was ultimately a decisive factor.

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ACQUISITION YEAR 2019/2020

741

ACQUIRED NET SALES, SEK MILLION

“In the end, my partners and I reached our decision when we realised what an amazing ‘family’ we would be joining, with all of its market-leading subsidiaries and skilled employees,” Anders Claesson continues. “Following the acquisition, all of my expectations were met and Sittab is even stronger today than I could have dreamt.”

12

companies,” says Daniel Prelevic. There are plenty of attractive acquisition candidates, both large and small, he comments: “We find opportunities continuously and are constantly on the lookout, in several markets. The opportunities are plentiful because the business units and the business areas are able to expand and build positions in existing market segments, or to supplement this with new segments. Working with acquisitions is highly stimulating, not least because you learn so much. At Addtech, we are inquisitive by nature, we always want to learn more because that enables us to support our companies even better.”

ACQUISITIONS

NEW 170 EMPLOYEES

Over the years, Addtech has acquired some 100 technology trading companies run by entrepreneurs and built up a successful process for the Group’s integration and development of these companies. Not only do the acquisitions bring new market positions, they also bring new expertise and strengthen the Group’s entrepreneurial spirit. “Since being acquired by Addtech, we have

WHY SELL TO ADDTECH?

• Long-term and secure owner

• Realising growth potential

• Generational shift

• Securing the workplace

• Adding expertise and networks

“ We find opportunities continuously and are constantly on the lookout, in several markets.” Daniel Prelevic, Addtech

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ACQUISITIONS, ADDTECH 2019/2020 2018/2019 2017/2018 2016/2017 2015/2016
Number of acquisitions 12 14 11 10 10
Net sales (SEK million) 741 960 698 503 643
Number of employees 170 276 171 129 161
On a full-year basis at the time of acquisition
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18 ADDTECH ANNUAL REPORT 2019/2020

ADDTECH ANNUAL REPORT 2019/2020 19

BUS I NESS AR E AS

BUS I NESS – AUTO M ATI ON

Automation

INTELLIGENT SOLUTIONS FOR CONNECTED BUSINESSES

Customised technical solutions and services are of growing importance in digitalised businesses and industries. Many industrial companies are in the middle of their process of transitioning to Industry 4.0, in which more efficient production and flows will increasingly be linked to intelligent IT and sensor solutions. The Automation business area is positioned in niches that follow the manufacturing industry’s development towards automation and robotics for intelligent factories, as well as expanding communication networks infrastructure, cyber security solutions and other investments in line with the growth of the future sustainable towns and cities. Automation’s unique offering encompasses the entire chain from moving mechanical solutions to intelligent systems and communication networks. The compa-

nies within Automation maintain long-term relationships with leading international suppliers, and have own products in many areas.

SALES BY GEOGRAPHIC MARKET

Sweden (23%) Denmark (17%) DEVELOPMENT IN 2019/2020 Finland (14%) Over the year, Automation experienced Norway (14%) generally favourable underlying demand, Other (32%) flattening off at a high level. The business area’s largest segment, mechanical industry and medical technology, continued to have a positive position in terms of both input components and automation solutions. OpeSALES BY CUSTOMER SEGMENT rations exposed to the defence sector also experienced favourable demand, while the data and telecom segment varied between geographical markets. Read more on page 38 of the Administration Report.

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“ We see a substantial future need for our unique offering. We will be able to offer customers value, particularly in intelligent automation solutions, security and defence.” Patrik Klerck, Business Area Manager Automation

Building and installation (3%) Data and telecommunications (10%) Electronics (3%) Energy (7%) Vehicles (4%) Medical technology (15%) Mechanical industry (20%) Forestry and process (10%) Transport (9%) Other (19%)

AUTOMATION

KEY FINANCIAL INDICATORS

AUTOMATION KEY FINANCIAL INDICATORS
Key fnancial indicators	2019/2020	2018/2019
Net sales, SEK million	2,425	1,946
EBITA, SEK million	267	194
EBITA margin, %	11.0	10.0
Return on working capital, %	52	52
Average number of employees	477	376
Acquired annual sales*	424	325

• On a full-year basis at the time of acquisition.

ADDTECH ANNUAL REPORT 2019/2020 21

C O M P ONENTS

BUS I NESS

BUS I NESS – ENERGY

Components CUSTOMISED SOLUTIONS WITH A FOCUS ON NORDIC INDUSTRY

Component’s operations focus on tech-

renewable fuels, are strong driving forces for the business area.

SALES BY GEOGRAPHIC MARKET

nology trading and solutions based largely on the supplier´s range of components. The business area is strongly rooted in the Nordic manufacturing sector, holding favourable positions in major customer segments, such as original accessories for applications in the engineering sector, special vehicles, energy and electronics. Solutions are customised in close partnership with customers and the market’s best suppliers. Together with a local presence, this adds value, affording the business area’s companies competitive advantages in each of their niche markets. Society’s pursuit of sustainable development and customers’ growing needs for environmentally friendly solutions, including in electrification and the realignment to

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Sweden (30%)
Denmark (19%)
Finland (19%)
Norway (11%)
Other (21%)
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DEVELOPMENT IN 2019/2020

Demand for input components from Nordic manufacturers held a good level over the year, despite tough comparison figures from the preceding year. The cautiousness in the economy could be discerned in demand for mechanical industry levelling off. The business situation was favourable in the electronics industry as well as in wind power, defence, medical technology and vehicles. Read more on page 38 of the Administration Report.

SALES BY CUSTOMER SEGMENT

Building and installation (5%) Data and telecommunications (3%) Electronics (23%) Energy (13%) Vehicles (17%) Medical technology (4%) Mechanical industry (17%) Forestry and process (4%) Transport (4%) Other (10%)

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“ We always focus on people. Ultimately, our products contribute to those sorts of things that improve life – from green electricity and medical technology to solutions for the intelligent society of the future.”

Martin Fassl, Business Area Manager Components

COMPONENTS

KEY FINANCIAL INDICATORS

COMPONENTS KEY FINANCIAL INDICATORS
Key fnancial indicators 2019/2020	2018/2019
Net sales, SEK million 2,082	1,960
EBITA, SEK million 218	220
EBITA margin, % 10.5	11.2
Return on working capital, % 48	57
Average number of employees 396	369
Acquired annual sales* -	85

• On a full-year basis at the time of acquisition.

Energy FAVOURABLE POSITIONS IN A PROGRESSING MARKET

Energy focuses on the markets for electri-

to drive demand in the transport sector, parSALES BY GEOGRAPHIC MARKET ticularly rail. The trend is also favourable in public construction and professional lighting, for example. Sweden (29%) Denmark (16%) Finland (8%) DEVELOPMENT IN 2019/2020 Norway (25%) As a whole, the business area had a positive Other (22%) market situation during the financial year, with demand remaining high for infrastructure products for national and regional power grids and for wind power. The units that are active in sales of niche products for SALES BY CUSTOMER SEGMENT electrical power distribution, the expansion of the fibre-optic network, as well as construction and installation experience a certain slowdown in demand in the second half of the year. Read more on page 38 of the Administration Report.

city distribution and electrical installation, as well as on products and solutions in the areas of electrical safety, energy efficiency and connection technology. The companies hold leading positions in their individual market niches and adapt standard components in close cooperation with customers and suppliers, or offer their own niche products. The market for energy and electrical installation is relatively stable, while an interesting phase of development is simultaneously taking place, with a need for international investment in infrastructure for power grids, for example. These grid upgrades are being driven by reinvestment, the integration of the electricity markets and renewable sources being connected, primarily wind power. Infrastructure development is also expected

Building and installation (24%) Data and telecommunications (6%) Electronics (5%) Energy (40%) Vehicles (2%) Medical technology (1%) Mechanical industry (9%) Forestry and process (4%) Transport (5%) Other (4%)

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“ The major energy transition about to take place in society also demands the efficient transfer of energy to end customers. The companies within Addtech Energy play an extremely significant and responsible role here.”

Hans Andersén, Business Area Manager Energy

ENERGY

KEY FINANCIAL INDICATORS

ENERGY KEY FINANCIAL INDICATORS
Key fnancial indicators	2019/2020	2018/2019
Net sales, SEK million	2,412	2,357
EBITA, SEK million	282	244
EBITA margin, %	11.7	10.4
Return on working capital, %	53	50
Average number of employees	681	655
Acquired annual sales*	29	233

• On a full-year basis at the time of acquisition.

22 ADDTECH ANNUAL REPORT 2019/2020

ADDTECH ANNUAL REPORT 2019/2020 23

I NDUSTR I A L PROC ESS

BUS I NESS

BUS I NESS – P OWER SO LUTI ONS

Industrial Process

BUSINESS BENEFIT THROUGH IMPROVED PROCESS FLOWS

Industrial Process focuses on developing business value for customers by applying superior technical expertise to offer customers product solutions and services helping to streamline industrial process flows. Value is added through more competitive products, reduced environmental impact, time gains and other aspects contributing to customers’ opportunities to increase their profitability. With society’s demands for companies to reduce their environmental impact continuously increasing, the business area still enjoys considerable growth opportunities. Many companies hold good positions in certain market niches and have substantial opportunities to grow faster than the market. The marine segment, for example, is expected to continue growing due to stricter new emission requirements. The paper, energy, chemical and pharmaceutical industries,

among others, also have an increasing need of equipment for controlling and analysing different processes.

SALES BY GEOGRAPHIC MARKET

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Sweden (24%) Denmark (14%) Finland (11%) Norway (19%) Other (32%)

DEVELOPMENT IN 2019/2020

In many ways, the business area stood at the forefront of the Group’s positive development through exceptionally strong growth in demand in the marine segment and services for environmental improvement solutions. In the second half of the year, it could be seen that demand was evening out at a high level in terms of the demand in the mechanical industry and special vehicles, as well as in the forest industry, while the business situation was stable in other process industries. The business area’s strong organic growth resulted in very good leverage on margins. Read more on page 38 of the Administration Report.

SALES BY CUSTOMER SEGMENT

Building and installation (3%)

Data and telecommunications (0%) Electronics (1%) Energy (7%) Vehicles (5%) Medical technology (3%) Mechanical industry (15%) Forestry and process (22%) Transport (40%) Other (4%)

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“Society’s growing demands for environmental adaptation continuously drive new business opportunities for us. Marine is just one example, we also see great opportunities in forest, energy and chemistry going forward.” Claus Nielsen, Business Area Manager Industrial Process

INDUSTRIAL PROCESS

KEY FINANCIAL INDICATORS

INDUSTRIAL PROCESS KEY FINANCIAL INDICATORS
Key fnancial indicators	2019/2020	2018/2019
Net sales, SEK million	3,204	2,305
EBITA, SEK million	445	219
EBITA margin, %	13.9	9.5
Return on working capital, %	83	51
Average number of employees	882	730
Acquired annual sales*	190	267

• On a full-year basis at the time of acquisition.

Power Solutions

COMPONENTS AND SOLUTIONS WITH POWER AND CONTROL AT THEIR CORE

Power Solutions focuses on components and solutions for power supply and for steering and controlling movements or energy flows. Customers operate mainly within special vehicles, the energy sector and the electronics industry. Addtech’s companies are often involved in the customer’s design phase, and can therefore participate in determining and optimising the customer’s end-product. This has led to most customers being OEMs, although some are end-users. Development in the business area’s companies is driven largely by rapid technological development in society and new regulatory requirements, particularly regarding electrification, which will entail demand for technically knowledgeable actors able to contribute in the design phase of the products. Another driving force is the demand for system solutions and products for special vehicles, such

as battery solutions and ergonomic products for forklifts, mining equipment and forestry machines. The business area has many strong proprietary brands, with the companies holding considerable cutting-edge expertise and leading market positions.

SALES BY GEOGRAPHIC MARKET

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Sweden (29%) Denmark (7%) Finland (14%) Norway (7%) Other (43%)

DEVELOPMENT IN 2019/2020

For the business area as a whole, demand was favourable over the year, even though the business situation varied between different customer and product segments. In the fourth quarter, the market situation for customised battery solutions remained favourable on the whole, particularly within medical technology. Demand for control and ergonomics products in specialised vehicles remained favourable, although evening out at a high level. Read more on page 39 of the Administration Report.

SALES BY CUSTOMER SEGMENT

Building and installation (10%) Data and telecommunications (7%) Electronics (12%) Energy (13%) Vehicles (34%) Medical technology (8%) Mechanical industry (5%) Forestry and process (0%) Transport (4%) Other (7%)

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“ What we deliver to our customers is connected closely with rapid technological development in society, but also to sustainable development. We are an important link for our customers in their efforts to build a better society”

Per Lundblad, Business Area Manager Power Solutions

POWER SOLUTIONS

POWER SOLUTIONS
KEY FINANCIAL INDICATORS
Key fnancial indicators	2019/2020	2018/2019
Net sales, SEK million EBITA, SEK million EBITA margin, % Return on working capital, % Average number of employees Acquired annual sales*	1,630 231 14.2 60 425 98	1,597 223 14.0 63 415 50

• On a full-year basis at the time of acquisition.

24 ADDTECH ANNUAL REPORT 2019/2020

ADDTECH ANNUAL REPORT 2019/2020 25

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ORGANISATION ORG AN I SATI ON
SMALL-SCALE OPERATIONS
ON A LARGE SCALE BRING
SIMPLICITY AND EFFICIENCY
In a decentralised and entrepreneurially-driven Group such as Addtech, it is
possible to drive change on both smaller and larger scales – generating benefits
in terms of both business development and sustainability.
Addtech has a unique model: It is both large- These primarily involve sales and margins, “ I believe we are success-
scale and small-scale at the same time. The which help us determine whether each
fundamental notion is that the best business company is on the right track or not,” says ful because we have a very
decisions are made by those who live close to the market. For this reason, the organisation is Malin Enarson. clear organisational structure
decentralised to the greatest possible extent At the same time, the Group always main- and targets and because of
and entrepreneurially oriented, enabling the tains a close dialogue with the companies.
companies to focus on their operations. How does this fit with the decentralised our core values.”
“We’re not really that complicated. We buy model? The answer is partly in the division
companies, we support development and into business areas and their business units Malin Enarson, CFO Addtech
we work hard with our corporate culture. (see page 20).
This simplicity is precisely what I find so “Bringing together companies with adja-
unique with the Addtech model,” explains cent operations provides several benefits. Another important advantage of decen-
Malin Enarson, CFO at Addtech, who is also Firstly, this opens opportunities for compa- tralisation and culture of simplicity is that:
responsible for issues of sustainability. nies operating in the same niche, to get to Operations can quickly be realigned. This was
“Historically, we have, of course, proven know one another. We know from experience particularly noticeable in the autumn of 2019,
clearly that we are able to grow both durably that when people find themselves in the right when 80 of the Addtech companies suffered
and profitably. I believe we are successful environment, they start to collaborate. This a large-scale cyberattack (read more in the
because we have a very clear organisational means that our internal network can lead to Administration Report on page 37).
structure and targets and because of our exchanges of experience and to voluntary “This was truly an example of the organi-
core values. We have a very flat organisa- collaboration, which provides, in turn, positive sation’s capacity. Despite extremely difficult
Malin Enarson, CFO at Addtech (right) tion, in which we work together and help leverage effects on both the development of circumstances, the companies managed to
and Finance Manager Monica Stignäs one another, on matters of sustainability, for our businesses and on our earnings,” says switch to alternative methods and still deliver
(left) run the reporting process with instance.” Malin Enarson. a strong financial result,” says Malin Enarson,
one guiding principle: Reporting should Addtech demands as little as possible “Secondly, the model also ensures that emphasising that the same adaptability was a
be easy for the companies, not for the from the companies with regard to reporting we get a very good connection with our major advantage in the spring of 2020, when
people at head office. or other central directives. The instruction is, companies,” she continues. “Each business the COVID-19 pandemic altered the conditions
instead, somewhat simplified: Do what you unit has its own manager who also sits on of the entire global economy very quickly.
should, how and when you want – but keep the Board of Directors of the companies
the deadline and explain all deviations. in that business unit. In this way, we get to The close relationship between the Group
“The guiding principle is that things should know the companies and their niches very and the companies also provides a favourable
be easy for our companies, not for us at well, enabling us to coach the companies, foundation from which the Group’s sustaina-
the head office. We do not, for example, and not least, capture opportunities for bility is developed. In 2019/2020, the Group
demand detailed budgets from our subsidi- further acquisitions and add-ons. This insight initiated a long-term process to adapt its
aries. Instead, we have development plans, also means that we can constantly fine-tune, efforts to the UN’s global goals (See also
in which we set targets for the coming year. develop and optimise the operations.” pages 114-120). In practice, however, many of »
26 ADDTECH ANNUAL REPORT 2019/2020 ADDTECH ANNUAL REPORT 2019/2020 27
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ORGANISATION

ORG AN I SATI ON

that contribute positively to the climate, for example within electrification. Naturally, we cannot save the planet alone – but we can purposefully and continuously identify new ways of combining profitable business with ambitious sustainability work,” Michael Ullskog explains.

Addtech’s companies have already achieved People in focus substantial progress on issues of sustainability, simply because they have seen that this It is the people who form the backbone of benefits their business. This applies to climate Addtech. Accordingly, the objective is to issues in particular. In the Power Solutions have the most satisfied employees in the business, Craig & Derricott in the UK deveindustry. The ambition is to build long-term lops, manufactures and markets low voltage relations and to offer secure forms of appliances and subsystems for markets in the employment, a good working environment UK, Europe and the Middle East. and individual development opportunities “Reducing our energy consumption is in organisations epitomising diversity and extremely important to us,” says Kevin Miller, gender equality. On average, Addtech Managing Director of Craig & Derricott. “Our employees stay with the company for a own company specific target is to progreslong time: About ten years. sively reduce our energy consumption by 10 percent annually. However, our own products also need to be sustainable to meet our customer’s increasing sustainability demands. Today, we offer high-tech energy control and ABSENCE DUE reduction products that are truly sustainable TO ILLNESS and have minimal environmental impact.” 3%

about what we want to achieve and how it should be measured.”

There is also already commitment on this matter among employees. One example is the Group-wide AddQ network, which was established in 2018 by a number of female salespeople to encourage more women to choose sales as a career path in the Addtech subsidiaries.

Another sustainability target is to increase the proportion of women in Addtech to reflect, as a minimum, the general gender distribution within the technology sector. Addtech seeks to improve in this regard, and the pursuit of equality is therefore a particularly highly prioritised area.

“Technology sales is a really fun job, in which it doesn’t matter if you are a woman or a man,” says Kristina Kristoffersson, Key Account Manager at Compotech and initiator of AddQ. “Today, we are far too few women, however, which is why AddQ is working to establish female role models, for example, to significantly increase the proportion of female salespeople at Addtech, and to also retain them longer.”

“The technology sector as a whole faces major challenges in securing future talent. We cannot, of course, have operations that predominantly attracts employees from only 50 percent of the population – men that is. We want to recruit talented people, regardless of gender. It is therefore crucial that we think and behave right, so that more women choose the technology sector in general and Addtech in particular,” says Hans Andersén, head of the Energy business area and responsible for pursuing issues of diversity within the Group. He believes that the laddish image of the technology sector may still prevail – despite the reality having changed.

ABSENCE DUE TO ILLNESS EMPLOYEES 3%

She points out that technology sales involve multiple tasks – from selling individual components, such as equipment power cables, to extensive project sales spanning longer periods.

Another Addtech company, Compotech, is also seeing a raised level of ambition among its customers, suppliers and employees in terms of sustainability and environmental awareness.

“Personally, I have worked with technology sales for more than 30 years, primarily focusing on project sales. Although I am very interested in technology, which is both essential and rewarding, I believe my ability to listen and understand customers’ real needs is perhaps my most important characteristic in my role as a salesperson. For many women, building good relations is easy, meaning that many more women ought to accept all of the stimulating challenges that technology sales present,” says Kristina Kristoffersson.

Percentage of women per function within Addtech

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% “We mapped our environmental impact pursuing issues of diversity within the Group. focusing on project sales. Although I am
80 some time ago and set a target, among He believes that the laddish image of the very interested in technology, which is both
others, to reduce carbon dioxide emissions technology sector may still prevail – despite essential and rewarding, I believe my ability to
70
by 30 percent by the spring of 2020,” says the reality having changed. listen and understand customers’ real needs
60 Michael Ullskog, former Managing Director “In my view, the best teams are the diverse is perhaps my most important characteristic
of Compotech in Stockholm and now busi- ones. They are often innovative and creative, in my role as a salesperson. For many women,
50 ness unit manager for Components Sweden perform well and bring together different building good relations is easy, meaning that
within the Components business area. perspectives and experiences. Accordingly, many more women ought to accept all of the
40
“We looked at a number of aspects, such striving for an even gender distribution plays stimulating challenges that technology sales
30 as our transports, our business trips and a key part in achieving this diversity. But, as a present,” says Kristina Kristoffersson.
product purchasing, and we did manage to Group, we must also dare to demand results
20 reach the target. Today, we prioritise business from our subsidiaries and we must be clear
10
14 65 14 19 26
0
Group Management
Administration, finance, purchasing
Sales
Technical service, support, production,
warehousing
Proportion of women, total
28 ADDTECH ANNUAL REPORT 2019/2020
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Emissions of greenhouse gases 2019/2020

Our total emissions in relation to sales (i.e. carbon dioxide intensity) amounts to 2.2. For calculations and the preceding year’s figures, see the Sustainability Notes on pages 114-120.

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Tonnes Co2e
30,000
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----- Start of picture text -----

25,000
Total emissions (25,312)
20,000 Emissions from own vehicle fleet (2,071)
Emissions from energy consumption (2,494)
Upstream freight emissions (10,581)
15,000
Downstream freight emissions (7,781)
Business travel emissions, air travel (2,385)
10,000
5,000
0
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Distribution of emissions
Scope 1: 8% of total emissions
Scope 2: 10% of total emissions
Scope 3: 82% of total emissions
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Scope 1 refers to our direct emissions and Scope 2 consists of emissions from our energy consumption. The majority of our emissions occur within our value chain, that is, within Scope 3, and consists largely of freight and business trips.

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Energy consumption
Energy consumption from renewable sources, 59%
Energy consumption from non-renewable sources, 41%
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Each year, we intend to increase the proportion of electricity and heating we consume that derives from renewable energy sources. In the Group, this process takes place in a decentralised way, with the conditions for increasing the share of renewable energy being a little different depending on the country in which the companies operate. Over the year, our energy consumption in relation to our sales was somewhat lower than the preceding year: 2,1. For more information, see the Sustainability Notes on pages 114-120.

ADDTECH ANNUAL REPORT 2019/2020 29

K AP I TELVA LUE C HA I N

VA LUE C HA I N

WITH THE WORLD AS OUR WORKPLACE

In recent years, Addtech has grown beyond the Nordic region, both by accompanying customers as they expand into new markets and through new acquisitions. Internationalisation generates additional business opportunities, but simultaneously increases the importance of taking responsibility throughout the value chain.

Although Addtech’s roots are in Nordic industry, the proportion of its business conducted outside the Nordic countries is growing steadily. Over the past fiscal year, the Swiss company Omni Ray was acquired by Addtech Automation, for example, and Addtech Power Solutions acquired German company DMC Digital Motor Control, as well as Dutch company Q-tronic (read more on page 40).

There are several explanations for this international expansion. As customers have become increasingly global, Addtech companies have simply followed their customers into new markets, both through exports and by establishing their own operations. Addtech also works with many of the world’s leading suppliers, who in turn often have a global presence.

For Addtech, such development entails additional business opportunities and more stable operations. By constantly adding new customer segments and establishing itself in more countries, the Group can, for example, reduce market risks and better mitigate cyclical fluctuations.

However, internationalisation also entails new challenges, not least with regard to issues of responsibility. Ensuring that good business ethics, zero tolerance of corruption

and human rights are respected at every stage of the value chain is becoming increasingly important. For a long time, Addtech has conducted all operations on the basis of its Code of Conduct, which is based, among other things, on the UN Global Compact guidelines. In 2017, the Group also introduced a special Code of Conduct for its suppliers. The purpose was to show clearly what requirements Addtech sets, and to make visible the demands that customers in turn place on Addtech. “ Customers impose incre- the value chain is central for us, at the same “Although the question of responsibility in asingly stringent demands time, our decentralized model means that on us in terms of sustain- we, as a Group, work a little differently with these issues than many others. Since the ability, and this in turn subsidiaries live closest to both customers means that we impose and suppliers, they conduct the ongoing dialogue and make the actual evaluations,” tougher requirements on says Malin Enarson, CFO and responsible for sustainability issues at Addtech. our suppliers, in terms of She points out that Addtech’s ability to both environmental and act as a link between customers and suppliers provides unique opportunities to social issues”

suppliers provides unique opportunities to contribute to economic, environmental and social values alike:

Helle Aker Jensen, Sustainability Manager Hans Følsgaard A/S

“Our subsidiaries have long-term relations with their suppliers and in many cases already have well-structured sustainability work, with their own targets and ambitions »

ADDTECH ANNUAL REPORT 2019/2020 31

VA LUE C HA I N

VA LUE C HA I N

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Addtech around the world

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Number of
countries with
operations:
20
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Number of
countries to which
Addtech exports:
20
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for how they can take responsibility in the value chain. At the same time, as a group, we also need to show more clearly how we can contribute to positive change in society. Accordingly, we have now chosen to set a new Group-wide vision to further raise the level of the companies’ supplier monitoring.”

sustainability at all levels.

“We want sustainability awareness to permeate the entire operations. All employees should take into account the aspects of sustainability in the decisions that are made. In this way, it becomes natural to ask the right questions, both of themselves and of suppliers, for example when it comes to transports: How can we package the products correctly, how can this container be filled so that it is climate efficient? How can we minimize plastic and plastic packaging for the products we receive and handle? How do we develop even more sustainable solutions?”

The Addtech Group’s largest subsidiary, Hans Følsgaard, is one of the Addtech companies that are already far ahead in terms of sustainability issues. For example, the company signed the UN Global Compact in 2012 and produces its own sustainability report. Although the operations are based in Denmark, the whole world is the workplace, with global customers and suppliers in a number of different areas, including automation, electrical technology, infrastructure, greentech, telecom and much more. Accordingly, for Hans Følsgaard, the matter of supplier evaluations is high on the agenda.

All suppliers, both new and existing, must sign to having made themselves familiar with the Code of Conduct, and evaluations are conducted on a continuous and regular basis, says Helle Aker Jensen.

“We maintain very long-term relations with both customers and suppliers – we have worked with some for 50-60 years. Quite simply, we get to know one another very well and we meet often. Many of the suppliers also have stringent sustainability requirements themselves. This results in an intensive dialogue, which in turn builds a trust from which we all benefit greatly. My view is that the suppliers really appreciate our commitment. We are at the forefront, and when our suppliers see our work and our sustainability report, they appreciate our commitment and see us as role models. In that sense, we are helping improvements also outside of our

“Customers impose increasingly stringent demands on us in terms of sustainability, and this in turn means that we impose tougher requirements on our suppliers, in terms of both environmental and social issues, such as working conditions and zero tolerance of corruption. This is a necessity to be able to withstand the competition,” says Helle Aker Jensen, who is responsible for sustainability at Hans Følsgaard.

The starting point in the company’s sustainability work is integrating the issue of

Addtech’s ethical framework

Percentage of purchasing volume evaluated based on the Code of Conduct

Addtech’s Code of Conduct controls how the Group does business, behaves and reacts in everyday life. The Code builds on the Group’s own core values, the UN Global Compact, the ILO’s core conventions and the OECD’s guidelines for multinational companies. The Code of Conduct also contains the Environmental Policy. The Code has been adopted by the Board of Directors and encompasses all companies and employees. It is available at www.addtech.com, where Addtech’s Code of Conduct for Suppliers is also available, explaining what the Group expects from business partners.

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51%
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Addtech has a large number of suppliers around the world. Most production takes place at our suppliers’ facilities. The vision is for 80 percent of the purchasing volume to be evaluated in 2030, see also the Sustainability Notes on pages 114-120.

own operations - which is exactly what UN Global Compact is all about.”

Every second year Hans Følsgaard conducts a major evaluation of its suppliers, who are each required to answer a number of questions about their operations and their sustainability work. In the most recent survey in 2018, the company received answers from suppliers who together account for more than 80 percent of Hans Følsgaard’s sales. The company also conducts both its own inspections and third-party inspections on an ongoing basis. It has almost never happened that suppliers have failed to meet expectations,” says Helle Aker Jensen:

“Let me take our Chinese suppliers as an example. Although many probably expect higher risk in Chinese companies, we have conducted numerous audits and follow-ups, and everything has always been in line with requirements. We are now starting to work with the global goals, and we will involve our suppliers in this work, too. We have not yet decided exactly how, but we feel that it is important to involve the whole value chain so we move in the same direction.”

HOW ADDTECH EXPANDS:

• Exports of proprietary products • Accompanying customers into new markets

• • Establishing own operations • Acquisitions

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32 ADDTECH ANNUAL REPORT 2019/2020

ADDTECH ANNUAL REPORT 2019/2020 33

ADDTEC H SHAR ES

ADDTEC H SHAR ES

Addtech shares

333.50, which was noted on 20 February 2020. The lowest price paid was SEK 188.60, which was noted on 18 March 2020. The closing price at the end of the financial year was SEK 244.50, corresponding to a market capitalisation of SEK 15.9 billion (12.5).

Share price trend and trading

Addtech Addtech’s Class B shares are listed on Nasdaq Stockholm. Since the listing in September 2001, the average price increase, up to and including 31 March 2020, has been 17 percent annually. Over the corresponding period, the exchange’s OMX Stockholm index changed by an average 5 percent.

During the period from 1 April 2019 to 31 March 2020, 29.9 million shares (13.4) were traded for a total value of slightly more than SEK 7.9 billion (2.5). In relation to the average number of Class B shares outstanding, this corresponds to a turnover rate of 47 percent (21). Broken down per trading day, an average 119,597 Addtech shares (53,661) were traded for an average value of approximately SEK 32 million (10).

Over the financial year, the price of the Addtech share rose by 27 percent. Over the corresponding period, the exchange’s OMX Stockholm index fell by 5 percent. The highest price paid during the year was SEK

Share capital

At the end of the period, share capital amounted to SEK 51.1 million divided into the following number of shares with a quota value of SEK 0.75 per share.

			Percentage	Percentage
Share class	Number of shares	Number of votes	of capital	of votes
Class A shares, 10 votes per share	3,229,500	32,295,000	4.7	33.2
Class B shares,1 voteper share	64,968,996	64,968,996	95.3	66.8
Total number of shares before repurchases	68,198,496	97,263,996	100.0	100.0
Of which,repurchased Class B shares	-1,049,918		1.5	1.1
Total number of shares after repurchases	67,148,578

Chapter 6, Section 2a of the Swedish Annual Accounts Act requires listed companies to disclose specific circumstances that may affect the prospects for acquiring the Company via a public share offer. In the event of the Company being de-listed from Nasdaq OMX Stockholm or a party other than the present principal shareholder attaining an ownership holding exceeding 50 percent of the capital or votes, the granted credit line in terms of contractual credit facilities of SEK 2,500 million and overdraft facilities of SEK 1,300 million can be terminated.

Repurchases of treasury shares and incentive programmes

(108.05). These shares correspond to 1.5 percent (1.7) of the number of shares issued and 1.1 percent (1.2) of the votes.

The Annual General Meeting in August 2019 authorised the Board of Directors to repurchase a maximum of 10 percent of all shares in the Company during the period extending until the 2020 Annual General Meeting. During the financial year Addtech repurchased 150,000 of its own Class B shares. At the end of the year, 1,049,918 (1,141,387) of the Company’s own Class B shares were held, with an average purchase price of SEK 130.91

Addtech has four outstanding call option programmes for a total of 1,007,000 shares. Call options issued on repurchased shares entail a dilution effect of about 0.3 percent over the past 12-month period. Addtech’s holdings of treasury shares are expected to match the needs of the outstanding call option programmes.

Outstanding	Number of	Corresponding	Percentage of	Initial redemption
programme	options	number of shares	total shares	price	Redemptionperiod
2019/2023	300,000	300,000	0.4%	321.80	5 Sep 2022 – 2 Jun 2023
2018/2022	300,000	300,000	0.4%	232.90	6 Sep 2021 – 3 Jun 2022
2017/2021	300,000	300,000	0.4%	178.50	14 Sep 2020 – 4 Jun 2021
2016/2020	107,000	107,000	0.2%	159.00	16 Sep2019 – 5 Jun 2020
Total	1,007,000	1,007,000

Ownership structure

proportion of foreign owners corresponded to 45 percent (39) of total capital.

On 31 March, 2020, the total number of shareholders was 6,208 (5,191), of whom 5,063 (3,983) each held 1,000 shares or less. The 15 largest shareholders accounted for 61.6 (57.6) percent of the total number of shares and 71.5 (68.7) percent of the total number of votes. Anders Börjesson (including related parties) is the largest shareholder in terms of votes, with a shareholding corresponding to 15.8 percent, followed by Tom Hedelius, with a shareholding corresponding to 15.2 percent. The

Additional information

Addtech’s website www.addtech.com is updated continuously with information about shareholder changes and share price performance. The site also presents information about which analysts monitor Addtech.

KEY FINANCIAL INDICATORS

KEY FINANCIAL INDICATORS
	2019/2020	2018/2019	2017/2018
Earnings per share, SEK	12.85	9.85	7.70
Equity per share, SEK	44.95	36.80	31.10
Price/earnings ratio	19	20	22
Share dividend, SEK	4.00 1)	5.00	4.00
Payout ratio, %	31	51	52
Dividend yield, %	1.6	2.6	2.4
Last price paid, SEK	244.50	193.00	168.00
Price/equity, multiple	5.4	5.2	5.4
Market capitalisation, SEK million	15,885	12,539	10,915
Average number of shares outstanding	67,123,333	67,046,711	66,949,710
Number of shares outstanding at end of year	67,148,578 2)	67,057,109	66,992,351
Number of shareholders at end of year	6,208	5,191	5,327

1) Dividend proposed by the Board of Directors.

2) The difference between the total number of shares and shares outstanding equals the shares repurchased by Addtech: 1,049,918 Class B shares at 31 March 2020.

ADDTECH’S LARGEST SHAREHOLDERS, 31 MARCH 2020

ADDTECH’S LARGEST SHAREHOLDERS, 31 MARCH 2020
Shareholders Number of Class A shares Number of Class B shares	Percentage of
	capital votes
Anders Börjesson (with companies and family) 1,527,162 121,500 Tom Hedelius 1,473,990 16,200 State Street Bank And Trust Co, W9 6,117,874 SEB Investment Management 5,709,470 Swedbank Robur Fonder 5,669,455 JPM Chase NA 4,122,226 Lannebo Fonder 3,300,000 NTC Fidelity Funds Northern Trust 2,593,913 Brown Brothers Harriman & Co 2,568,739 Livförsäkringsbolaget Skandia 2,085,517 Sandrew AB 1,800,000 Säve family 60,000 1,160,200 CBNY-Norges Bank 1,366,525 Odin Fonder Norden 1,233,762 Odin Fonder Sverige 1,069,602	2.4 15,8000 2.2 15,2000 9.0 6,3000 8.4 5,9000 8.3 5,8000 6.0 4,2000 4,8 3,4000 3.8 2,7000 3.8 2,6000 3.1 2,1000 2.6 1,9000 1.8 1,8000 2.0 1,4000 1.8 1,3000 1.6 1,1000
Total, 15 largest shareholders3) 3,061,152 38,934,983	61.6 71.5

• [3)] The proportion of capital and votes includes treasury shares held by Addtech AB.

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SIZE CLASSES

SIZE CLASSES
	% of share	Number of	% of number of
Number of shares	capital	shareholders	shareholders
1 – 500	1	4,474	72
501 – 1,000	0	589	9
1,001 – 5,000	2	730	12
5,001 – 10,000	2	165	3
10,001 – 15,000	1	48	1
15,001 – 20,000	1	26	0
20,001 –	93	176	3
Total	100	6,208	100

HOLDINGS BY CATEGORY

HOLDINGS BY CATEGORY
2019/2020 Number of shareholders Percentage of capital	2018/2019
	Number of shareholders Percentage of capital
Swedish shareholders 5,822 55 Foreign shareholders 386 45	4,897 61 294 39
Total 6,208 100 Legal entities 589 81 Naturalpersons 5,619 19	5,191 100 506 80 4,685 20
Total 6,208 100	5,191 100

SHARE PERFORMANCE CHART

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Class B share Class B share (incl dividend paid) OMX Stockholm PI Number of shares traded, in thousands
450 4,500
420 4,200
390 3,900
360 3,600
330 3,300
300 3,000
270 2,700
240 2,400
210 2,100
180 1,800
150 1,500
120 1,200
90 900
60 600
30 300
0 0
Apr 2010 Apr 2011 Apr 2012 Apr 2013 Apr 2014 Apr 2015 Apr 2016 Apr 2017 Apr 2018 Mar 2019 Mar 2020
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Administration Report

1 April 2019 – 31 March 2020

The Board of Directors and the CEO of Addtech AB, company ID number 556302-9726, hereby submit the annual and consolidated accounts for the 2019/2020 financial year. Comparisons in parentheses refer to the corresponding period of the previous year, unless stated otherwise.

Because, in terms of its size, Addtech exceeds the limit set out in item 6:10 of the Swedish Annual Accounts Act, the Administration Report shall include a Sustainability Report. The company has chosen to present its Sustainability Report separately from the Administration Report, in accordance with item 6:11 of the Annual Accounts Act. In accordance with items 6:12 – 14 of the Annual Accounts Act, the Sustainability Report is included as an integral part of the front sections of the published Annual Report, as well as in the sustainability notes in the rear sections of the Report.

Operations

Addtech is a Swedish listed technology trading group that provides technological and economic value added in the link between manufacturers and customers. Addtech operates in selected niches in the market for advanced technology products and solutions. Its customers primarily operate in the manufacturing industry and infrastructure. Addtech has around 130 independent subsidiaries in some 20 countries, operating under their own brands, and about 2,900 employees. Consolidated sales amount to more than SEK 11 billion, with an estimated one third of those deriving from trade products and two thirds from customised products and solutions, as well as proprietary brands. Addtech generates optimal conditions for the profitability and growth of its subsidiaries. The Addtech share has been listed on Nasdaq Stockholm since 2001.

The year in brief

In summary, the 2019/2020 financial year was highly successful. Despite the cautious mood of the market, an extensive cyberattack in the third quarter and the end of the financial year being pervaded in many ways by the outbreak of the COVID-19 pandemic, we delivered strong profitable growth, both organically and through acquisitions of several new companies in different technical niches.

Sales rose by 16 percent, distributed evenly between organic and acquired growth. We continued to deliver increased earnings profitably, margin increases in organic sales contributing in particular to an increase in operating profit by 28 percent and a record-high EBITA margin of 11.6 percent (10.7). All business areas contributed to growth in both sales and earnings, with Industrial Process at the fore.

Our cash flow strengthened significantly, due mainly to improved margins and effects from changes in working capital. Cash flow from operating activities amounted to SEK 1,117 million (524). We also secured an extension of our credit framework by SEK 1,300 million to a total of SEK 3,800 million in the fourth quarter. No repayments are planned for the upcoming 12-month period.

The acquisition rate was high with 12 completed acquisitions, together contributing annual sales of SEK 740 million. The return on working capital (P/WC) was 56 percent.

Market development over the year

In most geographical markets, the Group’s underlying demand was generally favourable throughout the financial year. Looking at the Nordic countries, Addtech’s growth rate was highest in Finland and Norway, while it was stable in Sweden and Denmark. Outside the Nordic countries, the market situation varied. Our units in Central Europe developed positively overall, while political and economic uncertainties in the UK resulted in a weak trend in the operations there.

In terms of customer segments, demand for production components and solutions for special vehicles and machinery manufacturers levelled off, while demand in electronics, medical technology and wind power increased. Demand for aftermarket products for the forestry and process industries remained, on the whole, stable, while sales to the manufacturing industry declined. Sales were particularly strong for emission measurement and purification products, which accounted for about 70 percent of sales by the Transport segment. Demand for scrubber solutions waned gradually over the year, mainly due to the decreasing price difference between various fuels. Sales of electricity-related products to construction and installation customers was stable, while demand for infrastructure products increased.

In the final weeks of March, several units noted reduced demand due to the COVID-19 pandemic, particularly in special vehicles and parts of the engineering sector. Other units experienced increased demand, driven by customers in medical technology

Cyberattack in October 2019

On 30 October 2019, Addtech suffered an extensive cyberattack. Among the Group’s companies, 80 of them, representing about half of consolidated sales, were infected by malicious encryption code via the Group’s central IT environment. The criminal group behind the attack demanded a ransom to lift the encryption. Addtech immediately reported the crime to the police and then built up a new, central IT environment. All of the affected companies had access to functioning IT environments again on 19 December, and it was possible to continue operations throughout the attack, albeit at varying degrees. The overall financial impact was less than initially expected.

During the third quarter the negative impact was estimated to approximately SEK 130 million on net sales, and SEK 90 millon on EBITA. The impact on EBITA was distributed with about 40 percent in direct costs, which was essentially carried by the parent company, while approximately 60 percent was negative effect on EBITA from operations (“Operating effect”). The Operating effect was distributed with about 10 percent on business areas Autmation and Energy, about 25 percent respectively on business areas Components and Power Solutions, and about 30 percent on business area Industrial Process. Net sales was deemed unaffected

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during the fourth quarter, while the EBITA was affected negatively with approximately SEK 10 million in direct costs, which was essentially carried by the parent company.

The police investigation has not resulted in any arrests. Addtech has worked closely with the relevant authorities and other stakeholders and has also actively shared its experience to help raise awareness in society of the growing issue of cyber crime.

Development by business area over the year

The division into business areas reflects Addtech’s internal organisation and reporting system. Addtech reports its business areas as operating segments. During 2019/2020, Addtech was organised into the following five business areas: Automation, Components, Energy, Industrial Process and Power Solutions. For further in formation on the Group’s operating segments, see Note 5.

AUTOMATION

Net sales by Automation during the financial year in creased by 25 percent to SEK 2,425 million (1,946), while EBITA increased by 38 percent to SEK 267 million (194).

A declining rate of growth in underlying demand was noted in the first quarter. Several acquisitions contributed to volumes while margins were affected somewhat negatively. For Automation’s largest segments, mechanical industry and medical technology, the market situation remained favourable, although demand evened out at a high level. In the data and telecom segment, demand was good. Net sales increased by 25 percent to SEK 591 million (472) and EBITA increased by 23 percent to SEK 60 million (49).

In the second quarter, Automation continued to perceive underlying demand as evening out, albeit at a high level. For mechanical industry and medical technology, involving deliveries of input components and automation solutions, the market situation remained favourable and demand was stable. In the defence industry, as well as in data and telecom, the market situation was also favourable. Net sales increased by 25 percent to SEK 552 million (444) and EBITA increased by 26 percent to SEK 57 million (45).

The business situation during the third quarter was positive and demand was stable with regard to deliveries of production components and automation solutions. The market situation also favoured operations exposed to the defence industry, while demand in data and telecom varied between geographical markets. Net sales increased by 22 percent to SEK 588 million (481) and EBITA increased by 6 percent to SEK 51 million (48).

In the fourth quarter, Automation experienced increased demand in key customer segments, including the mechanical industry, the defence industry and medical technology. This is partly explained by the recovery from the cyberattack, as well as by the effects of customers experiencing increased demand for products towards the end of the quarter given the prevailing COVID-19 pandemic. Net sales increased by 26 percent to SEK 694 million (549) and EBITA increased by 91 percent to SEK 99 million (52).

COMPONENTS

Over the financial year, net sales by the Components business area increased by 6 percent to SEK 2,082 million (1,960) and EBITA amounted to SEK 218 million (220).

In the first quarter, the market for production components remained at a stable level despite strong comparative figures from the preceding year.

Demand was down somewhat in Sweden and Denmark, while the market situation was favourable in Norway and Finland. Demand was favourable in mechanical industry and special vehicles, although with a somewhat lower growth rate than previously. The business situation in the electronics industry was good. Net sales increased by 6 percent to SEK 504 million (474) and EBITA amounted to SEK 54 million (58).

The market for production components held at a good level in the second quarter. In Norway and Finland, the market situation remained favourable, and in Denmark and Sweden it continued to be stable. The companies perceived a levelling-off in demand in the mechanical industry while the market situation for special vehicles was stable. The business situation was favourable in the electronics industry, wind power, defence, oil and gas, as well as marine industries. Net sales increased by 13 percent to SEK 511 million (451) and EBITA increased by 10 percent to SEK 58 million (53).

Demand for production components from Nordic manufacturing companies remained stable in the third quarter. The market situation in Norway and Finland was favourable, and it remained stable in Denmark and Sweden. The companies in the business area still perceived a levelling-off in demand in the mechanical industry while the market situation for special vehicles was stable. The business situation was favourable in the electronics industry, wind power, defence, oil and gas, as well as in marine industries. Net sales increased by 2 percent to SEK 489 million (482) and EBITA amounted to SEK 41 million (45).

Components’ volume growth in the fourth quarter was stable. Demand from Nordic manufacturing companies for production components was high. The business situation was favourable in Norway and Denmark, varying in Finland and levelling off somewhat in Sweden. Market segments where development was positive were transport, defence, medical technology, wind power and projects in electrification. Net sales increased by 4 percent to SEK 578 million (553) and EBITA increased by 2 percent to SEK 65 million (64).

ENERGY

During the financial year, the Energy business area’s net sales increased by 2 percent to SEK 2,412 million (2,357) and EBITA increased by 16 percent to SEK 282 million (244).

For Energy’s most important market segments, the business situation remained favourable in the first quarter. In the Nordic countries, demand for infrastructure products for national and regional grids remained high. The market situation for niche products in electricity distribution was stable, although with somewhat slower growth. Demand was good for cabling products for the manufacturing sector, as well as for construction and installation products. Net sales increased by 16 percent to SEK 619 million (535) and EBITA increased by 20 percent to SEK 67 million (56).

During the second quarter, the market situation for Energy as a whole was positive. In the Nordic countries, demand remained high for products for electricity grids operators. The units selling niche products for electricity distribution perceived varied demand, although at a good level. Units serving the expansion of fibre-optic networks and the construction and installation segments noted some slackening in demand. Net sales increased by 4 percent to SEK 593 million (571) and EBITA increased by 17 percent to SEK 75 million (64).

For Energy as a whole, the market situation remained positive in the third quarter. Demand for infrastructure products for national and regional grids held at a high level. However, units operating in selling niche products for electricity distribution perceived lower demand. There was a continuing slump in demand from customers active in the build-out of the fibre-optic networks, as well as in construction and installation. Net sales

amounted to SEK 596 million (607) and EBITA increased by 14 percent to SEK 62 million (54).

Demand for Energy’s infrastructure products for national and regional grids and for wind power, held at high levels and the market situation remained stable throughout the fourth quarter. The units that are active in sales of niche products for electrical power distribution, the expansion of the fibre-optic network, as well as construction and installation continued to experience a certain slow-down in demand. Net sales amounted to SEK 604 million (644) and EBITA increased by 12 percent to SEK 78 million (70).

INDUSTRIAL PROCESS

Over the financial year, net sales by the Industrial Process business area in creased by 39 percent to SEK 3,204 million (2,305) and EBITA increased by 103 percent to SEK 445 million (219).

In the first quarter, the business situation remained exceptionally strong in the marine segment. Demand was very strong for products and services for solutions that improve the environment. The market situation was favourable in the manufacturing industry and demand was good for products in the forest and process industry in all geographic markets. Net sales increased by 62 percent to SEK 807 million (498) and EBITA increased by 107 percent to SEK 103 million (50).

In the second quarter, sales of products and services for environmental

improvement solutions in the marine segment remained at a very high level, while demand for new projects was lower. Operations exposed to the mechanical industry, special vehicles and forest industry showed noted somewhat lower demand, while the business situation in other process industries was favourable. Net sales increased by 74 percent to SEK 865 million (497) and EBITA increased by 164 percent to SEK 134 million (50).

In the third quarter, sales of products and services for environmental improvement solutions in the marine segment remained at a very high level, while demand for new projects was significantly lower. In manufacturing, demand in mechanical industry and special vehicles, as well as in the forest industry was somewhat lower, while the business situation remained stable in other process industries. Net sales increased by 33 percent to SEK 800 million (603) and EBITA increased by 100 percent to SEK 95 million (48).

Sales of products and services for environmental improvement solutions in the marine segment remained favourable in the fourth quarter, while demand for new projects held at a lower level. Organic growth gave very good leverage on the margins while Industrial Process experienced non-recurring effects in the form of service assignments with high margins and currency effects that had a positive impact on profit. Net sales increased by 4 percent to SEK 732 million (707) and EBITA increased by 60 percent to SEK 113 million (71).

POWER SOLUTIONS

During the financial year, the Power Solutions business area’s net sales increased by 2 percent to SEK 1,630 million (1,597) and EBITA increased by 4 percent to SEK 231 million (223).

The business situation for Power Solutions varied between different customer and product segments, although demand was generally stable in the first quarter, compared with the first quarter last year. The companies within the business area’s largest customer segment, special vehicles, experienced a somewhat declining growth rate in demand for control and ergonomics products, albeit from a very high level. The market situation was favourable for customised batteries and wind power, and demand for products in power supply was stable. Net sales amounted to SEK 417 million (419) and EBITA increased by 14 percent to SEK

65 million (57).

In most of Power Solutions’ niche markets, the business situation during the second quarter was good. The market for customised batteries remained highly positive. The special vehicles customer segment experienced demand evening out at a high level. Sales of power supply systems were stable, as was demand for components for the wind power industry. Net sales increased by 6 percent to SEK 402 million (380) and EBITA increased by 10 percent to SEK 62 million (56).

On the whole demand was stable in the third quarter, although the business situation varied between different customer and product segments. The market for customised batteries remained highly positive, while demand in special vehicles continued to be perceived as declining somewhat. Sales of power supply systems were lower, while demand for components for the wind power industry was stable. Net sales amounted to SEK 377 million (384) and EBITA amounted to SEK 36 million (56). During the fourth quarter, demand was very good for the business area as a whole. For customised battery solutions, the market situation remained highly favourable, particularly in medical technology. The business situation also remained favourable for the units operating in power supply and wind power. Demand for control and ergonomics products in the special vehicles customer segment was favourable, particularly with regard to components for several customers’ stocks of spare parts. Net sales increased by 5 percent to SEK 434 million (414) and EBITA increased by 27 percent to SEK 68 million (54).

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YEAR
SHARE OF NET SALES, %
Sales by business area
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100
50
0
15/16 16/17 17/18 18/19 19/20
Power Solutions
Industrial Process
Energy
Components
Automation
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Acquisitions

Addtech is constantly on the lookout for companies to acquire and is engaged in discussions with a number of potential companies. During the financial year Addtech completed 12 acquisitions, diversified in terms of their markets and geographies, where it took control of the acquired operations during the year. All business areas completed acquisitions during the year.

Since becoming a listed company in 2001, Addtech has acquired some 100 companies. The following companies were acquired during the year:

Omni Ray AG

On 1 April, Omni Ray AG was acquired in Switzerland and joined the Automation business area. Omni Ray is a technology trading and services company, with a strong position in the Swiss market for automation solutions in industry, infrastructure, transport and medical technology. The company generates annual sales of approximately SEK 330 million and has 65 employees.

Thurne Teknik AB

On 1 April, Thurne Teknik AB was acquired in Sweden and joined the Industrial Process business area. Thurne Teknik is a leading supplier of components, equipment and advanced process systems primarily to the chemical and pharmaceutical industry in the Nordic region and the Baltic states. The company generates annual sales of approximately SEK 100 million and has 19 employees.

AB N.O. Rönne

On 1 April, AB N.O. Rönne was acquired in Sweden and joined the Industrial Process business area. N.O. Rönne’s principal operations consist of manufacturing special customised gaskets and seals through punching and cutting. The company generates annual sales of approximately SEK 8 million and has four employees.

Best Seating Systems Walter Tausch GmbH

On 6 May, Best Seating Systems Walter Tausch GmbH was acquired in Austria and joined the Power Solutions business area. The company is a niche player that supplies ergonomic driver’s seats and peripheral components for machines, buses and trains in Central Europe. The company generates annual sales of approximately SEK 23 million and has five employees.

Thiim A/S

On 12 June, Thiim A/S was acquired in Denmark and joined the Automation business area. Thiim A/S develops and delivers components and solutions in industrial communications, customised electronics and electromechanics. The operations focus primarily on the OEM sector, automation and infrastructure. The company generates annual sales of approximately SEK 70 million and has 15 employees.

Profelec Oy

On 3 July, Profelec Oy was acquired in Finland and joined the Energy business area. Profelec is a well-established supplier of professional electronics in Finland and the Baltic states, representing several international brands in the areas of testing and measuring, as well as system components. The company generates annual sales of approximately SEK 6 million and has two employees.

BKC Products Ltd.

On 12 August, BKC Products Ltd. was acquired in the UK and joined the Industrial Process business area. BKC Products mainly supplies products and technical solutions for power transmission and conveyor applications. The company generates annual sales of approximately SEK 12 million and has five employees.

Promector Oy

On 29 August, Promector Oy was acquired in Finland and joined the Automation business area. Promector designs and manufactures unique production line equipment and specialises in the area of pharmaceuticals and diagnostics. The company generates annual sales of approximately SEK 24 million and has 20 employees.

Wireco-NB Oy

On 3 February, Wireco-NB Oy was acquired in Finland and joined the Energy business area. Wireco is a supplier of special cables and cable accessories for industrial and mining applications, mainly in Finland. The company generates annual sales of approximately SEK 23 million and has six employees.

Caligo Industria Oy

On 27 February, Caligo Industria Oy, was acquired in Finland and joined the Industrial Process business area. Caligo develops and supplies flue gas purification and heat recovery systems, primarily for district heating plants and the woodworking industry in the Nordic countries and France. The company generates annual sales of approximately SEK 70 million and has nine employees.

DMC Digital Motor Control GmbH

On 2 March, DMC Digital Motor Control GmbH, was acquired in Germany and joined the Power Solutions business area. DMC designs and manufactures electric motor controllers for battery-powered applications, including electric vehicles. The company generates annual sales of approximately SEK 30 million and has ten employees.

Q-tronic

On 2 March, Q-tronic B.V, was acquired in the Netherlands and joined the Power Solutions business area. Q-tronic provides electrical component solutions and subsystems for electric vehicles, mainly in the Benelux countries. The company generates annual sales of approximately SEK 45 million and has ten employees.

Financial development

NET SALES AND PROFIT

Over the financial year, the net sales of the Addtech Group increased by 16 percent to SEK 11,735 million (10,148). Organic growth amounted to 8 percent and acquired growth amounted to 8 percent, with divestments having a negative effect of 1 percent. Ex change rate changes had a positive effect of 1 percent on net sales, corresponding to SEK 107 million.

EBITA for the financial year amounted to SEK 1,364 million (1,085), representing an increase of 26 percent. The introduction of IFRS 16 affected EBITA positively by SEK 5 million. Over the financial year, operating profit increased by 28 percent to SEK 1,161 million (910) and the operating margin amounted to 9.9 percent (9.0). Net financial items were negative in the amount of SEK 56 million (45) and profit after financial items increased by 28 percent to SEK 1,105 million (865). Profit after tax for the financial year rose by 30 percent to SEK 873 million (672) and the effective tax rate was 21 percent (22). Earnings per share before dilution for the financial year amounted to SEK 12.85 (9.85).

PROFITABILITY, FINANCIAL POSITION AND CASH FLOW

The return on equity at the end of the financial year was 32 per cent (29), and return on capital employed was 21 percent (21).

The return on working capital, P/WC (EBITA in relation to working capital), amounted to 56 percent (53).

At the end of the financial year the equity/assets ratio was 36 percent (36). The application of IFRS 16 had a negative effect, with total assets increasing by SEK 624 million. Equity per share, excluding non-controlling

interests, amounted to SEK 44.95 (36.80). Consolidated net debt at the end of the year amounted to SEK 2,253 million (1,700), excluding pension liabilities of SEK 332 million (260), including lease liabilities of SEK 627 million from the application of IFRS 16.

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.

The net debt/equity ratio, calculated on the basis of net debt excluding pension provisions but including lease liabilities in accordance with IFRS 16, amounted to 0.7 (0.7).

Cash and cash equivalents, consisting of cash and bank balances together with approved but non-utilised credit facilities, amounted to a combined SEK 2,407 million (566) at 31 March 2020. Before the end of the financial year, additional credits totalling SEK 1,500 million were granted. These became available on 31 March 2020, at which time SEK 200 million was also repaid. As a result, Addtech had a total credit framework of SEK 3,800 million as of 31 March 2020.

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----- Start of picture text -----

NET SALES AND EBITA MARGIN
Net
sales %
12,000 14
9,000 12
6,000 9
3,000 6
0 3
15/16 16/17 17/18 18/19 19/20
Net sales, SEK million
EBITA margin, %
----- End of picture text -----

Cash flow from operating activities amounted to SEK 1,117 million (524) during the financial year. The application of IFRS 16 resulted in increased cash flow of SEK 154 million from operating activities, while cash flow from financing activities decreased by the corresponding amount since, as a result of the introduction of IFRS 16, the amortisation portion of the leasing fees is recognised as a disbursement in the financing activities. Company acquisitions and disposals, including settlement of contingent purchase considerations for acquisitions implemented in previous years, amounted to SEK 430 million (645). Investments in non-current assets totalled SEK 109 million (94) and disposals of non-current assets amounted to SEK 6 million (12). Dividends from associated companies amounted to SEK 1 million (2). Repurchases of treasury shares amounted to SEK 42 million (38) and repurchases of call options amounted to SEK 23 million (11). Exercised and issued call options totalled SEK 39 million (33). Dividends paid to shareholders of the Parent Company totalled SEK 336 million (269), corresponding to SEK 5.00 (4.00) per share. The dividends were paid out in the second quarter.

Risks and uncertainties

Business operations are always associated with risk. Addtech’s profit and EBITA AND RETURN ON WORKING CAPITAL, P/WC financial position, as well as its strategic position, are affected by various internal factors within Addtech’s control and a number of external factors SEK where opportunities to affect the course of events are limited. Effective million risk assessment unites Addtech’s business opportunities and performance 1,400 with the demands of shareholders and other stakeholders for stable long1,300 term value growth and control. When assessing the future development of Addtech it is therefore important to consider not only the opportunities for 1,200 positive development, but also the various risks in the operations. Naturally, not all risk factors can be described in this section, for which reason an 1,100 overall assessment must also include other information in the annual report, as well as a general assessment of external circumstances. 1,000

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SEK
where opportunities to affect the course of events are limited. Effective million %
risk assessment unites Addtech’s business opportunities and performance 1,400
with the demands of shareholders and other stakeholders for stable long-
1,300 90
term value growth and control. When assessing the future development of
Addtech it is therefore important to consider not only the opportunities for 1,200
positive development, but also the various risks in the operations. Naturally,
not all risk factors can be described in this section, for which reason an 1,100 75
overall assessment must also include other information in the annual
report, as well as a general assessment of external circumstances. 1,000
Addtech works with risk management on both a strategic and operatio- 900 60
nal level. Risk management involves identifying and measuring risks and
preventing them from occurring, as well as continually making improve- 800
ments to mitigate future risks. The Addtech Group has guidelines and
policies to identify deviations that could develop into risks. The level of risk 700 45
in the operations is followed up systematically at Board meetings and in
monthly reports, in which deviations or risks are identified and remedied. 600
The risk factors of greatest significance to Addtech are the economic 500 30
situation, or other events affecting the economy, such as the worldwide
COVID-19 pandemic, in combination with structural changes and the 400
competitive situation. Addtech is also affected by financial risks, such as
transaction exposure, translation exposure, financing and interest rate risk, 300 15/16 16/17 17/18 18/19 19/20 15
as well as credit and counterparty risk. See Note 3 for a more detailed
description of how Addtech manages financial risks. EBITA, SEK million
The risk of being exposed to various types of IT incidents, that is, the P/WC, %
----- End of picture text -----

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

40 ADDTECH ANNUAL REPORT 2019/2020

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AD M I N I STR ATI ON R EP OR T

RISK/DESCRIPTION

Economy and market

Demand for Addtech’s products and services is greatly influenced by macroeconomic factors beyond Addtech’s control, such as growth and investment appetite in the manufacturing industry, the state of the economy in general and conditions in the global capital market, or, as during the spring of 2020, pandemic outbreaks that affect the business climate. A weakening of these factors in the markets in which Addtech operates could have adverse effects on its financial position and earnings.

Structural changes

Globalisation, digitalisation and rapid technological development drive structural change among customers. Developments may increase demand for Addtech’s advanced services but can also result in Addtech’s customers disappearing through mergers, closures and relocations, to low-cost countries for example.

Competition

Most of Addtech’s subsidiaries operate in sectors that are vulnerable to competition. In addition, consolidation may occur among suppliers in the sector, and larger merged suppliers may have a broader offering, which could result in pressure on prices. Future competitive opportunities for the subsidiaries will depend on their ability to be at the leading edge of technology and to respond quickly to new market needs. Increased competition or a decline in the ability of a subsidiary to meet new market needs could have a negative impact on Addtech’s financial position and earnings.

Environment

Changed environmental legislation could affect product sales, goods transports and the way in which our customers use the products. An inability to meet customers’ increased environmental requirements can affect sales. There is also a risk that the corporate ID number of a Group subsidiary could entail a historical liability for the company under the Swedish Environmental Code.

Ability to recruit and retain staff

Addtech’s continued success depends on being able to retain experienced employees with specific skills and to recruit skilled new people. There are a number of key individuals, both among senior executives and among the Group’s employees in general. There is a risk exists that one or several senior executives or other key individuals could leave the Group at short notice, for reasons of stress, working environment or development opportunities, for example. In the event that Addtech fails to recruit suitable replacements, or to find skilled new key individuals in the future, this could have a negative impact on Addtech’s financial position and earnings.

Organisation

Addtech’s decentralised organisation is based on subsidiaries bearing extensive local responsibility for their operations. This imposes high standards on financial reporting and monitoring, with shortcomings in this regard potentially leading to inadequate control of the operations.

Seasonal effects

There is a risk that Addtech’s operations, earnings and cash flow could be affected by strong seasonal effects driven by customer demand.

ADDTECH’S RISK MANAGEMENT

With a large number of subsidiaries focusing on different niche markets and add-on sales of technical service, support and consumables, Addtech may be less sensitive to economic fluctuations in individual industries, sectors and geographical regions. Addtech also strives continuously to develop businesses that are less dependent on a specific market and to align expenses with specific conditions.

Addtech’s clear and unique added value services with their high technology content, specialisation in advanced technical advisory services, outstanding service and strong presence in niche markets offset price competition, Addtech’s competitiveness also enables the Company to deliver beyond its immediate geographical region. Combined with the fact that no customer accounts for more than 3.5 percent of consolidated sales, the Group’s exposure to a large number of sectors constitutes a certain degree of protection against adverse impacts on earnings.

Addtech strives to offer products and services for which price is not the sole deciding factor. By working closely with both suppliers and customers, we are continuously developing our know-how and competitiveness. We add value in the form of wide-ranging technological knowledge, reliability of de livery, service and availability, limiting the risk of customers decreasing their demand. To reduce the risk of competition from suppliers, Addtech focuses continuously on ensuring that collaboration with the Group is the most profitable sales strategy.

Addtech’s subsidiaries are primarily engaged in commerce and operations with limited direct environmental impact. The Group conducts limited production. The Group monitors operations and environmental risks through its sustainability reporting and all companies comply with the Group’s Code of Conduct. In conjunction with acquisitions, Addtech con ducts an analysis of the potential target’s corporate ID number to counter the risk of being held liable for historical environmental issues.

Addtech prioritises building favourable conditions for employees to develop within the Group and to enjoy their work. The Group’s acquisition strategy includes ensuring that key individuals in the companies are highly motivated to continue running their companies independently within the Group. The Addtech Business School is aimed at both new employees and senior executives and serves to increase internal knowledge transfer, promote personal development among employees and develop the corporate culture. The Group’s regular employee surveys serve to ascertain how employees view their employers and their work situation, and what might be improved and developed.

Addtech controls its subsidiaries through active board participation, Group-wide policies, financial targets and instructions regarding financial reporting. By being an active owner and monitoring the development of the subsidiaries, risks can quickly be identified and addressed in accordance with the Group’s internal guidelines.

No significant seasonal effects are associated with Addtech’s sales of high-tech products and solutions to companies in the manufacturing and infrastructure sectors. However, the number of production days, custom er demand and the willingness to invest may vary from one quarter to another.

RISK/DESCRIPTION

Business ethics and human rights

Addtech’s continued success is strongly dependent on our good reputation and business ethics. Human rights violations in the Group’s own operations or those of its suppliers would have a negative impact on the Group’s reputation among employees, customers and other stakeholders and influence demand for the Group’s products.

Acquisitions and goodwill

Historically, Addtech has, for the most part, grown through acquisitions. Strategic acquisitions will continue to represent an important part of our growth. However, there is a risk that Addtech will not be able to identify suitable objects for acquisition due, for example, to competition with other buyers. Expenses attributable to acquisitions may also be higher than expected, and positive impacts on earnings may take longer to realise than expected. The risk of goodwill impairment arises when a business unit under-per forms in relation to the assumptions that applied at the time of valuation, and any impairment may adversely affect the Group’s financial position and earnings. Further risks associated with acquisitions include integration risks and exposure to unknown commitments.

Financial risks

The Group is exposed to various financial risks. Currency risk is the risk of exchange rates having an adverse impact on Addtech’s financial position and earnings. Transaction exposure is the risk that arises because the Group has incoming and outgoing payments based on payment flows in foreign currencies. Translation exposure arises because the Group, through its subsidiaries, has net investments in foreign currencies. The Group is also exposed to financial risk, that is, the risk that financing of the Group’s capital requirements is made more difficult or ex pensive. Interest rate risk is the risk that unfavourable changes in interest rates have an adverse impact on Addtech’s financial position and earnings.

Suppliers and customers

To deliver products, Addtech is dependent on the ability of external suppliers to fulfil agreements in terms of volume, quality, delivery date, etc. Deliveries that are erroneous or delayed, or that do not occur, may have an adverse impact on Addtech’s financial position and earnings. Addtech’s reputation is also dependent on its suppliers’ ability to maintain a high level of business ethics, in terms of, for example, human rights, working conditions and the environment. Agreements with customers vary, for example in terms of contract length, warranties and limitations of liability. In some supplier relationships there are no written supplier agreements, which could result in legal uncertainty regarding the content of the agreement.

IT security and cyber risks

Throughout society, the digital risks are continuously rising Like most companies, Addtech and its subsidiaries rely on various information systems and other technologies to manage and develop their operations. Unplanned outages and cyber security incidents, such as data breaches, viruses, sabotage and other cyber crimes, can result in both loss of revenue and loss of reputation. IT events or cyber incidents among third parties, including suppliers or customers, can affect Addtech’s capacity to deliver products and services and to generate profits.

ADDTECH’S RISK MANAGEMENT

Internally, the Group works with business ethics through initiatives including the Business School and compliance with anti-corruption and human rights regulations is reviewed annually. Addtech’s many favourable relationships with carefully selected suppliers reduce the risk of human rights violations occurring among our suppliers. To ensure the Group’s high standard regarding business ethics, the Addtech Code of Conduct for Suppliers shall be followed and specific supplier audits be conducted.

Addtech has many years of solid experience in acquiring and pricing companies. All potential acquisition targets and their operations are examined carefully before implementing the acquisition. There are well-established procedures and structures for pricing and implementing the acquisition, as well as for integrating the acquired companies. In the agreements, an effort is made to obtain the necessary guarantees limiting the risk of unknown liabilities. The large number of companies acquired entails a significant distribution of risk.

Addtech strives for structured and efficient management of the financial risks that arise in its operations, in accordance with the financial policy adopted by the Board of Directors. The financial policy expresses the ambition of identifying, minimising and controlling financial risks, and establishes responsibility for managing how such risks are to be delegated within the organisation. The aim is to minimise the impact of financial risks on earnings. See Note 3 for a more detailed description of how Addtech manages financial risks.

Addtech’s numerous and favourable relationships with carefully selected suppliers reduce the risk of Addtech not being able to deliver as promised. To ensure the Group’s high standard regarding business ethics, the Addtech Code of Conduct for Suppliers shall be followed. Most of the companies also perform specific supplier reviews. In a longer-term perspective, Addtech is not dependent on any individual supplier or customer. Addtech’s largest customer accounts for about 3.5 percent of consolidated net sales.

To safeguard stable IT environments and prevent incidents, Addtech conducts regular risk assessments, as well as maintaining and reviewing IT security at both the Group and subsidiary levels. The major cyberattack that Addtech suffered at the end of 2019 served as key lessons regarding the Group’s capacity to systematically identify, analyse and assess IT risks. By maintaining access to both internal and external resources it is possible to cut the time needed to respond to and rectify unplanned IT disruptions. Addtech also engages external cyber security experts to ensure that the level of security is continuously adjusted and updated on the basis of prevailing threat scenarios and customers’ increasing cyber security demands.

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AD M I N I STR ATI ON R EP OR T

Employees and development

EMPLOYEES

At the end of the financial year, the Group had 2,981 employees, compared with 2,759 at the beginning of the financial year. During the financial year, completed acquisitions increased the number of employees by 170. Over the past 12-month period, there were an average 2,913 employees.

	2019/2020	2018/2019	2017/2018
Average number of employees	2,913	2,590	2,283
Proportion of men	74%	74%	74%
Proportion of women	26%	26%	26%
Age distribution up to 29 years	11%	11%	10%
30-49 years	48%	48%	50%
50 and older	41%	41%	40%
Average age	45 years	46 years	46 years
Personnel turnover	10%	12%	12%
Average length of employment	About 9	About 9	About 10
	years	years	years

RESEARCH AND DEVELOPMENT

The Addtech Group conducts limited research and development. The Group’s business model includes continuous dialogue with and feedback to the Group’s suppliers, who conduct most of the research and development relevant to the Group’s product range.

Principles for remuneration of senior executives

The Board of Directors has resolved to propose that the Annual General Meeting in August 2020 approve new guidelines for the remuneration of senior executives:

The guidelines shall apply to remunerations agreed after the 2020 Annual General Meeting and to changes after that time to previously agreed remunerations. The guidelines do not cover remunerations determined by the Annual General Meeting. For employment relationships subject to non-Swedish regulations, appropriate adjustments may be made regarding pension benefits and other benefits to comply with mandatory regulations or established local practices and to satisfy, as far as possible, the overall intention of those guidelines.

The guidelines shall apply to the remuneration of the CEO and other members of Addtech’s Group Management. The guidelines also apply to Board members to the extent that they receive remuneration for services rendered to the company beyond their Board assignments. Where appropriate, the provisions applicable to the company also apply for the Group.

How the guidelines foster the company’s business strategy, long-term interests and sustainability

Successfully implementing the company’s business strategy and advancing its long-term interests, including its sustainability, require Addtech to recruit and retain qualified employees. This requires the company to be able to offer competitive overall compensation, which these guidelines allow. Overall remuneration shall be market-based and competitive and shall be set in relation to responsibilities and powers.

The forms of compensation, etc.

Remuneration shall be market-based and include the following components: fixed salary, any variable salary under separate agreements, pensions and other benefits. In addition, the Annual General Meeting

may, independently of these guidelines, determine share and share price-related remunerations.

Fixed salary

Fixed salary shall consist of fixed cash salary and shall be reviewed annually. The fixed salary shall be competitive and reflect the requirements of the position in terms of expertise, responsibility, complexity and the manner in which the position contributes to the achievement of business objectives. The fixed salary shall also reflect the executive’s performance and should therefore be specific to each individual and differentiated.

Variable salary

In addition to fixed salary, the CEO and other senior executives may from time to time and in accordance with separate agreements, receive variable salary on meeting pre-agreed criteria. Any variable salary shall consist of annual cash salary and may not exceed 40 percent of fixed annual salary. In addition, an additional premium of 20 percent may be paid on variable salary used by the executive to acquire shares in Addtech AB.

To avoid unhealthy risk-taking, there should be a fundamental balance between fixed and variable remuneration. Fixed salary shall account for a sufficient portion of the senior executive’s total remuneration to allow the variable portion to be reduced to zero. Variable salary shall be tied to one or more predetermined and measurable financial criteria established by the Board of Directors, such as the Group’s earnings growth, profitability and cash flow. By linking the remuneration of senior executives to the company’s results, variable remunerations promote the implementation of the company’s business strategy, long-term value creation and competitiveness. The terms and calculation bases for variable salary are to be determined for each financial year. Compliance with variable salary payment criteria shall be measurable over a period of one financial year. Variable salary is settled in the year after which it was earned.

At the end of the measurement period for compliance with variable salary criteria, the extent to which the criteria have been shall be assessed. The Board of Directors is responsible for the assessment of variable cash remuneration for the CEO. The CEO is responsible for the assessment of variable cash remunerations to other senior executives. Where financial targets are applied, the assessment shall be based on the financial information most recently published by the company.

The terms for variable salary may be designed such that, under exceptional economic circumstances, the Board of Directors retains the option of limiting variable salary or refraining from paying it if such a measure is deemed reasonable. In designing variable remunerations for senior management, the Board of Directors shall consider introducing reservations that (i) condition the payment of certain portions of such remuneration to the services on which the vesting is based proving sustainable over time, and (ii) allow the company to recover any such remuneration disbursed based on information subsequently proven to be manifestly incorrect.

Additional variable cash compensation may be paid under extraordinary circumstances, provided that such extraordinary arrangements are limited in time and are made only at the individual level, for the purpose of either recruiting or retaining executives, or as compensation for services rendered beyond the ordinary duties of the individual. Such remuneration may not exceed an amount equal to 40 percent of fixed annual salary and shall not be paid more than once a year and per individual. Such remunerations shall be approved by the Board of Directors following a proposal by the Remuneration Committee.

Pension

For the CEO and other senior executives, pension benefits are paid in accordance with individual agreements. As a general rule, pension benefits, including health insurance, shall take the form of defined-contribution solutions, the amount of pension disbursed being determined by

the outcome of the pension insurance policies taken out. Defined-benefit pension solutions may occur in individual cases, however. Variable salary can be pensionable. Premiums for defined-contribution pension solutions shall not exceed 40 percent of pensionable salary. Pensionable salary corresponds to fixed monthly salary multiplied by a factor of 12,2 and, where appropriate, variable salary. Wage waivers can be used to enhance occupational pension by means of individually determined pension provisions, provided that the total cost to the company is rendered neutral.

Other benefits

Other benefits, potentially including a company car, travel benefits, supplementary health and care insurance, as well as occupational health and wellness allowances, shall be market-based and constitute only a limited part of the total remuneration. Premiums and other costs related to such benefits may total at most 10 percent of fixed annual salary.

Terms and conditions of termination

All senior executives must observe a notice period of six months. In the event of termination by the company, a notice period of at most 12 months shall apply. In the event of termination by the company, senior executives may (in addition to salary and other employment benefits during the period of notice) be entitled to severance pay equal to at most 12 months’ fixed salary. This severance pay is not offset against other income. No severance pay shall be paid in the event of resignation by the employee.

In addition to severance pay, compensation for any restriction of competition may be paid. Such compensation shall compensate for any loss of income and shall be paid only to the extent that the former executive is not entitled to severance pay. This compensation shall be based on the fixed salary at the time of dismissal and shall not exceed 60 percent of the fixed salary at the time of termination (subject to mandatory collective agreement provisions) and shall be paid for the period of the commitment to restrict competition, which shall not extend beyond 12 months after the termination of employment.

Remuneration of Board members

In specific cases, it shall be possible, for a limited period of time, to pay elected members of Addtech’s Board of Directors for work within their respective areas of expertise that does not constitute Board work. Market-based fees shall be payable for such work (including services performed through a company wholly owned by the Board member), provided that such work contributes to the implementation of Addtech’s business strategy and the safeguarding of the company’s long-term interests, including its sustainability. Such consultancy fees may never exceed the annual Board fee paid to each Board member.

Salary and conditions of employment for employees

In preparing the Board’s proposal for these remuneration guidelines, the remuneration and conditions of employment of the company’s employees have been considered. This has been done by including information on employees’ overall remuneration, the components of that remuneration, as well as increases in remuneration and the rates of increase over time, in the decision-making processes of the Remuneration Committee and Board of Directors in assessing the fairness of the guidelines and the limitations they impose.

Preparation and decision-making process

The Board of Directors has resolved to establish a Remuneration Committee. The Committee’s tasks include preparing principles for the remuneration of senior executives and the proposed guidelines for the remuneration of senior executives approved by the Board of Directors. The Board of Directors shall draw up proposals for new guidelines at

least every four years and submit its proposals for adoption by the Annual General Meeting. The guidelines shall apply until new guidelines are adopted by the General Meeting. The Remuneration Committee shall also monitor and evaluate programmes for variable remunerations for senior executives, the application of guidelines for the remuneration of senior executives and current remuneration structures and levels within the company. Remunerations for the CEO shall be determined by the Board of Directors following preparation and recommendation by the Remuneration Committee within a framework of approved principles. Following proposals by the CEO, the Remuneration Committee determines remunerations for other members of Group Management. The Board of Directors is informed of the Remuneration Committee’s decisions. The Board of Directors does not address or determine matters of remuneration not involving the CEO or other senior executives, to the extent that they are affected by such matters.

Share-based incentive programmes determined by the Annual General Meeting

Each year, the Board of Directors shall assess the need for share-based incentive programmes and, if necessary, submit proposals for resolution by the Annual General Meeting. Decisions on possible share and share price-related incentive programmes aimed at senior executives shall be made by the Annual General Meeting and shall contribute to long-term value growth.

Departure from the guidelines

In individual cases and where there are specific reasons for doing so, and where a deviation is necessary to satisfy the company’s long-term interests (including its sustainability) or to safeguard the company’s financial viability, the Board of Directors may decide to partially or entirely waive these guidelines. As stated above, the Remuneration Committee’s is tasked with preparing decisions by the Board of Directors on matters of remuneration, including decisions on deviations from the guidelines. Decisions on deviations from the guidelines shall be presented at the ensuing Annual General Meeting.

For further information on remuneration to senior executives, see also Note 6 Employees and personnel expenses.

Dividend

Addtech’s dividend policy is to propose a dividend that exceeds 30 percent of average Group profit after tax over a business cycle. In proposing a dividend, the Group’s equity, long-term financing and investment needs, growth plans and other factors are taken into account that the Company’s Board of Directors consider important.

The Board of Directors has resolved to propose dividend of SEK 4.00 (5.00) per share to the Annual General Meeting in August 2020. The dividend corresponds to a total of SEK 269 million (336), corresponding to a payout ratio of 31 (51) percent.

Parent Company

The operations of the Parent Company, Addtech AB, include Group Management and the Group’s reporting and financial management staff units.

The Parent Company’s net sales for the financial year amounted to SEK 71 million (62) and its loss after financial items was SEK 41 million (16). Net investments in non-current assets were SEK 0 million (0). The Parent Company’s net financial liabilities were SEK 341 million (175) at the end of the year.

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C OR P OR ATE GOVER NANC E

Future prospects and events after the reporting period

FUTURE PROSPECTS

Addtech operates in an international technology trading market in which demand is largely influenced by macroeconomic factors. Group companies operate in different but carefully selected niches, resulting in a smoothing effect between sectors, geographical markets and customer segments. Our independent companies work continuously to adapt to changes based on their markets and competitive situation.

Historically, Addtech’s continuous pursuit of profit growth, profitability (P/WC) and development have provided favourable average value growth. Our cash flow and financial position form a stable foundation for continued long-term profitable growth based on the same business concept.

We have a favourable underlying momentum in the Group, with good positions in structurally driven areas of development, such as energy conversion and electrification. In times of crisis, companies with stable business models and strong financial circumstances are able to benefit from new opportunities that arise. For this reason, it is important that we continue to focus on our long-term objectives.

As reported under the section Risks and uncertainties above (Pages 42-43), risks for various types of IT incidents have increased recently. The outbreak of the COVID-19 pandemic in the first quarter of 2020 also has a significant impact on the business, see further details under Events following the close of the financial year below.

The risk and uncertainty factors are otherwise the same as in earlier periods. The Parent Company is indirectly affected by the above risks and uncertainties through its function in the Group.

EVENTS FOLLOWING THE CLOSE OF THE FINANCIAL YEAR

The COVID-19 pandemic that erupted during the fourth quarter of the financial year had initially limited impact on the Group’s operations. Addtech continues to follow the recommendations of the relevant authorities and takes relevant health precautions to protect staff and reduce the spread of infection in society. The pandemic affects the entire world market and will also affect Addtech in the coming financial year. There are challenges in the supply chain and uncertainties exist about our customers’ ability to keep their businesses running at full capacity. We prepare and take measures on an ongoing basis to be able to act quickly and meet a decrease in sales. All companies in the Group have prepared action plans and cost-cutting programs ready to be executed to protect earnings, liquidity and cash flow.

At the time of writing, approximately 120 of the Group’s total approximately 3,000 employees have been notified of redundancy and a further 800 employees are affected by short-term lay-offs. Sales in the first quarter of 2020/2021 is estimated to have been negatively affected by approximately 7 percent compared to sales in the first quarter previous year due to the current pandemic. Sales for the first quarter totaled SEK 2,805 million (2,934), a decrease of 4 percent of which 7 percent organically, with an operating margin of 8.7 percent (10.0).

On 1 April, Elkome Group Oy was acquired in Finland and joined the Automation business area. Elkome develops, integrates and delivers solutions for applications in industrial IoT, primarily targeting industrial production, smart solutions for sustainable cities and infrastructure. Solutions include customised computer systems, info kiosks, test systems, software, sensors and industrial communications. The company generates annual sales of approximately EUR 8 million and has 38 employees.

On 2 April, Peter Andersson AB was acquired in Sweden and joined the Energy business area. Andersson System provides electrical accessories for office and kitchen environments in Sweden and Norway, both as trade products and as products developed in-house. These products are sold via retailers in office furniture, office equipment, AV equipment, com-

puter accessories and kitchen fittings. The company generates annual sales of approximately SEK 30 million and has nine employees.

On 8 April, the company Valutec Group AB was acquired in Sweden and joined the Industrial Process business area. Valutec is one of the world’s leading manufacturers of wood dryers for the forest industry. The company generates annual sales of approximately SEK 350 million and has 45 employees.

Proposed allocation of earnings 2019/2020

Proposed allocation of earnings 2019/2020
The following amounts are at the disposal of the
Annual General Meetingof Addtech AB:	2019/2020
Retained earnings	SEK 228 million
Proft for theyear	SEK 209 million
TOTAL	SEK 437 million
The Board of Directors and the CEO propose
that the funds available be allocated as follows:
That a dividend of SEK 4.00 per share be paid	SEK 269
to shareholders*	million
To be carried forward	SEK 168 million
TOTAL	SEK 437 million

• Calculated based on the number of shares outstanding at 30 June 2020. The total dividend payout may change if the number of repurchased treasury shares changes prior to the proposed dividend record date of 1 September 2020.

Corporate governance

PRINCIPLES OF CORPORATE GOVERNANCE

The Addtech Group views sound corporate governance as an important basis on which to build a trustful relationship with shareholders and other key parties. The Swedish Code of Corporate Governance, applied by the Group, seeks to achieve a favourable balance between shareholders, the Board of Directors and senior management. In Addtech’s operations, rational corporate governance, imposing strict standards on openness, reliability and ethical values, has always been a guiding principle.

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NOMINATION ANNUAL GENERAL
COMMITTEE MEETING
Remuneration
Committee
AUDITOR B OARD OF DIRECTORS
Audit
Committee
PRESIDENT AND CEO &
GROUP MANAGEMENT
Industrial Power
Automation Components Energy Process Solutions
Business units Business units Business units Business units Business units
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COMPLIANCE WITH THE SWEDISH CODE OF CORPORATE GOVERNANCE

Addtech’s shares are admitted to trading on the Nasdaq Stockholm exchange and, accordingly, Addtech complies with the Nasdaq Stockholm Rule Book for Issuers. As a listed company, Addtech also applies the Swedish Code of Corporate Governance (the Code), which can be accessed via www.bolagsstyrning.se. Deviations from the Code and the motivations for these are accounted for in this text on an ongoing basis. The company deviates on three points, two of which are found in the section on the Nomination Committee, and one in the section on the Quarterly review by the auditors.

This Corporate Governance Report has been reviewed by the company’s auditors. The URL of the company’s website is www.addtech.com

COMPLIANCE WITH APPLICABLE EXCHANGE RULES

No violations of applicable exchange rules occurred in 2019/2020 and Addtech’s operations were conducted in accordance with generally accepted stock market practices.

SHARES AND SHAREHOLDERS

Addtech AB’s share register is maintained by Euroclear Sweden AB. According to this share register, Addtech had 6,208 shareholders as of 31 March 2020, with a total 68,198,496 shares divided into 3,229,500 Class A shares, conveying ten votes apiece, and 64,968,996 Class B shares, conveying one vote apiece. There were 97,263,996 votes in total. More information regarding Addtech’s share and shareholders can be found in the Addtech share section of this Annual Report.

KEY EVENTS IN 2019/2020

The resolutions of Addtech’s Annual General Meeting were announced on 29 August 2019, which included a dividend of SEK 5.00 per share,

amounting to a dividend payout ratio of 51 percent and corresponding to SEK 336 million in total.

On 30 October 2019, Addtech suffered an extensive cyber attack, burdening EBITA for the financial year by a total of approximately SEK 100 million. More information on the cyber attack can be found in the administration report on page 37.

In February 2020, the Board of Directors decided to clarify the company’s long-term Sustainability Vision 2030, which supports the Paris Agreement and the UN’s 2030 Agenda for Sustainable Development. In March, the Deputy CEO of the company, Anders Claeson, retired. During the financial year, a total of 12 acquisitions were conducted, adding annual sales of approximately SEK 740 million.

ARTICLES OF ASSOCIATION

The Articles of Association state that the name of the company is Addtech Aktiebolag and that its financial year extends from 1 April to 31 March. The Articles of Association include no specific provisions regarding the appointment and dismissal of Board members or amendments to the Articles of Association. The Articles of Association contain no limitations regarding the number of votes that may be cast by each shareholder at a General Meeting. The full Articles of Association, adopted in their current form by the Extraordinary General Meeting of 19 November 2013, can be accessed under Investors/Corporate Governance/Articles of Association at the company’s website.

ANNUAL GENERAL MEETING

Shareholders exercise their influence over the company at the Annual General Meeting, or, where applicable, at an Extraordinary General Meeting, such meetings being Addtech’s highest decision-making body. The Annual General Meeting shall be held in Stockholm within six months of the end of the financial year. At the Annual General Meeting, resolutions are made regarding matters including the election of the Board of Directors and the Chairman of the Board, the election of auditors, the approval of the income statement and balance sheet, the appropriation of the company’s earnings and the discharge from liability of Board members and the CEO, the Nomination Committee and its work, as well as guidelines for the remuneration of senior executives. Addtech’s website presents information regarding the company’s previous Annual General Meetings. Information is also presented there regarding shareholders’ entitlement to have matters addressed by the Annual General Meeting and the deadline by which Addtech must have received shareholders’ requests for these matters to be addressed. No specific arrangements regarding the function of the General Meeting are applied within Addtech due to provisions in the Articles of Association or, as far as the company is aware, to shareholder agreements.

At General Meetings, resolutions are normally passed by a simple majority vote and, in elections, the recipient of the largest number of votes is considered elected. For certain decisions however, such as amendments to the Articles of Association, a qualified majority is required.

2019 ANNUAL GENERAL MEETING

Addtech’s Annual General Meeting was held on Thursday, 29 August 2019 in Stockholm. The meeting was attended by 159 shareholders, in person or by proxy. They represented 67.31 percent of the total number of votes and 55.29 percent of the capital. Anders Börjesson, Chairman

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of the Board, was elected Chairman of the Meeting.

All Board members and all members of Group Management attended the Meeting. Authorised public accountant Joakim Thilstedt, Principal Auditor for Addtech, and authorised public accountant Jonas Eriksson also attended the Meeting.

The Annual General Meeting resolved the following:

• That a dividend of SEK 5.00 per share be paid.

• To re-elect Board members Anders Börjesson, Eva Elmstedt, Kenth Eriksson, Malin Nordesjö, Ulf Mattsson, Johan Sjö and Henrik Hedelius. To elect Anders Börjesson as Chairman of the Board.

• To re-elect registered auditing firm KPMG AB for a period of one year.

• The Annual General Meeting approved guidelines for the remuneration of senior executives in accordance with the Board of Directors’ proposal.

• The Annual General Meeting resolved, in accordance with the Board of Directors’ proposal, to issue call options on repurchased shares and to transfer repurchased shares to executives.

• Prior to the next Annual General Meeting, the Board of Directors is authorised to acquire a quantity of Class B shares, such that the Company’s holding of own its shares does not, at any given time, exceed 10 percent of the total number of shares in the Company.

The remaining resolutions of the Annual General Meeting are included in the complete minutes of the Meeting, which are available at www. addtech.com together with other details of the Annual General Meeting.

Börjesson, Chairman of the Board (appointed by Tisenhult Invest), Tom Hedelius (appointed by the Hedelius family), Åsa Nisell (appointed by Swedbank Robur Fonder), Per Trygg (appointed by SEB Investment Management) and Mats Gustafsson (appointed by Lannebo Fonder). The composition of the Nomination Committee was presented in connection with publication of the third quarter report on of 5 February 2020. Henrik Hedelius replaced Tom Hedelius as the representative for the Hedelius family on the Nomination Committee in March 2020.

The composition of the Nomination Committee agrees with the principles set out by the Annual General Meeting. Of the members of the Nomination Committee, two are Board members and also dependent in relation to the Company’s major shareholders, which is a deviation from Rule 2.4 of the Code, requiring, if more than one Board member is a member of the Nomination Committee, that at most one of them may be dependent in relation to the Company’s major shareholders. The Nomination Committee has deemed it appropriate that two Board members are included in the Nomination Committee and that both of these are dependent in relation to major shareholders since they represent the Group’s two largest groups of shareholders and are also highly familiar with both the Company and other shareholders. The chairman of the Nomination Committee is Anders Börjesson, who is also Chairman of the Board, representing a deviation from rule 2.4 of the Code, stating that the chairman of the Nomination Committee shall not be a Board member in the Company. The Nomination Committee has deemed it appropriate that the chairman of the Nomination Committee be the member representing the largest group of shareholders, who is also highly familiar with both the Company and other shareholders.

Ulf Mattsson, Malin Nordesjö, Johan Sjö and Henrik Hedelius. Anders Börjesson was elected as Chairman of the Board. A presentation of the Board members is provided in the Board of Directors section in this Annual Report and on the Company’s website.

In preparing its proposal regarding the Board of Directors, the Nomination Committee has applied Section 4.1 of the Code as its diversity policy. Taking the Company’s operations, phase of development and general circumstances into account, this respects the need for the Board of Directors to be appropriately composed and characterised by versatility and breadth in terms of its skills, experience and background. An even gender distribution is to be sought.

Independence of the Board of Directors

Several different types of independence requirements apply to the Board of Directors and its committees. Addtech applies independence requirements stemming from applicable Swedish legislation, the Swedish Code of Corporate Governance and the rules of the Nasdaq Stockholm exchange. Ahead of the Annual General Meeting, the Nomination Committee assesses the independence of the Board of Directors. With the exception of Johan Sjö who was employed by the Company until 31 August 2019, all Board members are independent in relation to the Company. Of the members who are independent in relation to the Company, Eva Elmstedt, Kenth Eriksson and Ulf Mattsson are also independent in relation to the Company’s major shareholders. Accordingly, it is deemed that the Board of Directors meets the requirement that at least two of

the Board members who are independent of the Company shall also be independent of major shareholders.

Rules of procedure

Each year, the Board of Directors adopts written rules of procedure for the work of the Board in accordance with the Swedish Companies Act. The rules of procedure determine the distribution of work between the Board members, including the Board’s committees, the number of regular Board meetings, matters to be dealt with at regular Board meetings and the duties of the Chairman of the Board. The Board of Directors has also issued written instructions stating how financial reports are to be presented to the Board of Directors and how efforts are to be distributed between the Board of Directors and the CEO.

Duties of the Chairman of the Board

The Chairman of the Board is responsible for ensuring that Board work is well organised, conducted efficiently and that the Board of Directors meets its obligations. The Chairman of the Board monitors operations in dialogue with the CEO. The Chairman of the Board is also responsible for ensuring that other Board members are provided the introduction, information and documentation necessary for maintaining a high level of quality in discussions and decisions, and checks that decisions made by the Board of Directors are executed. The Chairman of the Board represents Addtech regarding issues of ownership.

Work of the Board of Directors in 2019/2020

2020 ANNUAL GENERAL MEETING

Addtech’s 2020 Annual General Meeting will be held on Friday, 28 August at IVA in Stockholm. For further information regarding the 2020 Annual General Meeting, see Addtech’s website, www.addtech.com

DUTIES OF THE NOMINATION COMMITTEE

The Nomination Committee is tasked by the shareholders with assessing the composition and work of the Board of Directors for the Annual General Meeting, with proposing Board members and a Chairman of the Board to the Annual General Meeting, and, when applicable, with proposing the election of a registered auditing firm and auditing fees, as well as principles for how members of the Nomination Committee are appointed. The members of the Nomination Committee receive no remuneration from the Company for their work on the Nomination Committee.

In preparation for the 2020 Annual General Meeting, the Nomination Committee held 4 minuted meetings. The Nomination Committee’s complete proposal to the Annual General Meeting is presented in the notice convening the Meeting and on the Company’s website.

COMPOSITION OF THE NOMINATION COMMITTEE

The Annual General Meeting has resolved that the following principles shall apply until further notice. Accordingly, the Annual General Meeting does not adopt such principles and determine the duties of the Nomination Committee annually unless the actual principles or duties are to be amended. The Nomination Committee intends to propose revised principles at the 2020 Annual General Meeting. The Nomination Committee comprises representatives of the five largest shareholders in terms of votes at the end of the calendar year (grouped by owner as per 31 December) and the Chairman of the Board, who is also tasked with convening the first meeting of the Nomination Committee. From among its number, the Nomination Committee appoints a chairman. The composition of the Nomination Committee shall be announced publicly at the latest six months prior to the Annual General Meeting.

In accordance with this, the following individuals were appointed as members of the Nomination Committee on 31 December 2019: Anders

Members of the Nomination Committee

The Nomination Committee in preparation for the 2020 Annual General Meeting (was appointed by the largest shareholders in terms of votes as of 31 December 2019).

			Share of
			votes, % 31
	Name	Representing	Dec 2019
	Anders Börjesson (Chairman)	Holders of Class A shares for Tisenhult Invest	15.8
	Henrik Hedelius	Holders of Class A shares for
		the Hedelius family	15.2
	Åsa Nisell	Swedbank Robur Fonder	5.7
	Per Trygg	SEB Investment Management	5.6
	Mats Gustafsson	Lannebo Fonder	3.6
	TOTAL		45.9

DUTIES OF THE BOARD OF DIRECTORS

The principal duty of the Board of Directors is to manage the Group’s operations on behalf of the shareholders in a manner best meeting the shareholders’ interest in a favourable return on capital over the long term. The Board of Directors bears the ultimate responsibility for Addtech’s organisation and the administration of Addtech’s operations. It is responsible for the Group’s long-term development and strategy, for continuously monitoring and assessing the Group’s operations and for other duties pursuant to the Swedish Companies Act.

Composition of the Board of Directors

In accordance with the Articles of Association, the Board of Directors shall consist of at least three and at most nine members. Members serve from the close of the Annual General Meeting at which they are elected until the close of the ensuing Annual General Meeting. There is no limit to the number of periods for which a member can sit on the Board of Directors consecutively. The 2019 Annual General Meeting re-elected Board members Anders Börjesson, Eva Elmstedt, Kenth Eriksson,

In accordance with the Board of Directors’ rules of procedure, the Board of Directors is to meet in connection with the presentation of interim reports, at an annual strategy meeting and at its annual statutory meeting, and on other occasions if necessary.

The Board of Directors held 12 meetings over the financial year, of which 4 were held before the 2019 Annual General Meeting and 8 following the Annual General Meeting. The following table shows the Board members’ attendance:

				Remunera-
			Board	tion	Audit		Independent in
			attendance,	Committee	Committee		relation to
			total	attendance,	attendance,	Independent	the Company’s	Total
			number of	total number	total number	in relation to	major share-	remuneration,
Board member	Elected	Born	meetings*	of meetings	of meetings**	the Company	holders	SEK
Anders Börjesson (Chairman)	2001	1948	12(12)	1 (1)	4 (4)	Yes	No	790,000
Eva Elmstedt	2005	1960	12(12)	1 (1)	4 (4)	Yes	Yes	420,000
Johan Sjö	2008	1967	12(12)		4 (4)	No	Yes	370,000
Ulf Mattsson	2012	1964	12(12)		4 (4)	Yes	Yes	370,000
Malin Nordesjö	2015	1976	12(12)		4 (4)	Yes	No	370,000
Kenth Eriksson	2016	1961	12(12)		4 (4)	Yes	Yes	370,000
Henrik Hedelius	2017	1966	12(12)		4 (4)	Yes	No	370,000

• Number of meetings attended by the member, including the statutory meeting.

• ** The Audit Committee comprises the Board of Directors in its entirety. Its work is performed as an integral part of the work of the Board of Directors.

The company’s CFO acts as the Board of Directors’ secretary and as the secretary of the Nomination Committee. The Board of Directors addressed the following at its meetings:

All meetings followed an approved agenda that was provided to members prior to Board meetings, together with documentation for each agenda item. Regular Board meetings usually take half a day to allow time for presentations and discussions. The CEO, or someone appointed by him, presents all matters concerning the operations of the Company and the Group.

• Approval of significant policies, including the Board of Directors’ rules of procedure, attestation policy, financial policy, Code of Conduct, insider policy, communication policy and dividend policy.

Other Company officials participate in Board meetings to present specific matters or if otherwise deemed appropriate.

• Strategic focus and significant targets, as well as an updated vision for sustainability.

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• Key issues involving optimisation of capital structure, financing, dividends, repurchasing of the Company’s own shares, investments, acquisitions and disposals of operations.

• Follow-up and control of operations, financial development, disclosure of information and organisational matters.

• Review and report by the Company’s external auditors.

• Review with the auditors without the presence of Group Management for assessment of the CEO and Group management.

• Assessment of the work of the Board of Directors. Each year, the Chairman of the Board initiates and directs this assessment.

• Approval of interim reports, the Year-end Report and the Annual Report.

• An extraordinary Board meeting addressed the data breach to which the Group was exposed on 30 October 2019.

• Two extraordinary Board meetings in the spring of 2020 addressed the impact on the Group of the Coronavirus pandemic.

Assessment of the work of the Board of Directors

The Board of Directors conducts an assessment of its work on an annual basis. Each year, the Chairman of the Board initiates and directs the assessment of the work of the Board of Directors. The assessment serves to further develop working methods, dynamics, efficiency and working climate, as well as the principal focus of the work of the Board of Directors. This assessment also focuses on access to, and the need for, specific areas of expertise among Board members. The assessment includes interviews, joint discussions and the Chairman holding separate discussions with individual Board members. The assessments are discussed at a Board meeting and also serve as a basis for the Nomination Committee’s work to propose Board members.

Remuneration Committee

The Remuneration Committee appointed by the Board of Directors consists of Anders Börjesson, Chairman of the Board and Board member Eva Elmstedt, with CEO Niklas Stenberg attending to present information. The Remuneration Committee prepares the “Board’s proposal for principles regarding remuneration of senior executives”. The proposal is considered by the Board of Directors before being submitted for resolution by the Annual General Meeting. Based on the resolution of the Annual General Meeting, the Board of Directors determines the remuneration for the CEO. The CEO does not present information regarding his own remuneration and does not participate in the Board’s decision. Based on a proposal by the CEO, the Remuneration Committee determines the remuneration for the other members of Group Management. The Board of Directors is informed of the Remuneration Committee’s decision. The Remuneration Committee is then tasked with monitoring and assessing the application of the guidelines for the remuneration of senior executives adopted by the Annual General Meeting. The Remuneration Committee shall also monitor and assess programmes of variable remuneration for Company management ongoing and completed during the year. During the financial year, the Remuneration Committee met on one occasion.

Audit Committee

The duties of the Audit Committee are performed by the Board of Directors as a whole and are conducted as an integral part of the work of the Board at its regular meetings. The Chairman of the Board and Board member Malin Nordesjö are knowledgeable in the areas of accountancy and auditing. The Audit Committee is tasked with monitoring the Company’s financial reporting, monitoring the effectiveness of the Company’s internal control and risk management regarding the financial reporting,

keeping informed regarding the audit of the annual and consolidated accounts, assessing and monitoring the impartiality and independence of the auditor and, in doing so, paying particular attention to whether the auditor provides the Company with services other than auditing services, and helping draw up proposals for the Annual General Meeting when electing an auditor.

In connection with the adoption of the 2019/2020 annual accounts, the Board of Directors was briefed by the Company’s external auditors and presented with their report. At this meeting, the Board of Directors was also briefed by the auditors without the presence of the CEO or other members of Company management.

AUDITOR

In accordance with the Articles of Association, a registered auditing firm must be elected as auditor. The 2019 Annual General Meeting elected KPMG AB as the Company’s auditor until the close of the 2020 Annual General Meeting. Authorised Public Accountant Joakim Thilstedt is the Principal Auditor, and is assisted by Jonas Eriksson.

The company’s auditor follows an audit plan into which viewpoints collected from the Board of Directors have been integrated and reports his observations to the company and business area management teams, to Group Management and the Board of Directors of Addtech AB. This occurs both during the audit and when approving the annual accounts. KPMG audits Addtech AB and nearly all of its subsidiaries. The company’s auditor also takes part in the Annual General Meeting, describing and commenting on his audit work.

The independence of the external auditor is regulated in a specific directive adopted by the Board of Directors. This states the areas where the services of the external auditor, which are not part of the regular auditing, may be enlisted. The company’s auditors continually assesses their independence in relation to the Company and each year submit a written affirmation to the Board stating that the auditing firm is independent of Addtech. In the past year, the auditors performed advisory assignments, mainly concerning accounting, taxation matters and listing rules.

Quarterly review by auditors

During the 2019/2020 financial year, Addtech’s six-month or nine-month report was not reviewed by Addtech’s external auditors, representing a deviation from rule 7.6 of the Code. Having consulted the Company’s external auditors on the matter, the Board of Directors does not believe that any benefit and additional expense for the Company for increased quarterly review by the auditors can be justified.

Elected auditor KPMG AB

JOAKIM THILSTEDT

Principal Auditor

Authorised Public Accountant, Stockholm. Born 1967. Joakim Thilstedt has been the Principal Auditor for the Addtech Group since 2016/2017 and is also the Principal Auditor for ÅF Pöyry, Ahlsell, Nordic Entertainment Group and LE Lundbergföretagen.

JONAS ERIKSSON

Assistant Auditor

Authorised Public Accountant, Stockholm. Born 1974. Jonas Eriksson has been the Assistant Auditor in the audit of the Addtech Group since 2013/2014 and also works with the auditing of AddLife AB, Beijer Alma AB, Knowit AB, Swedol AB and Synsam AB. Jonas is also the Principal Auditor for Nordiska Kompaniet (NK) and several medium-sized companies, including Carglass Sweden AB and the Silva Group.

CHIEF EXECUTIVE OFFICER AND GROUP MANAGEMENT

CEO Niklas Stenberg directs the operations in accordance with the Swedish Companies Act and the frameworks established by the Board of Directors. In consultation with the Chairman of the Board, the CEO prepares the data and information needed by the Board of Directors to reach decisions at Board meetings, as well as giving presentations and motivating proposed decisions. The CEO directs the work of Group Management and makes decisions in consultation with other members of Group Management. At the end of the 2019/2020 financial year, Group Management consisted of Niklas Stenberg (CEO), Malin Enarson (CFO), Patrik Klerck (Business Area Manager Automation), Martin Fassl (Business Area Manager Components), Hans Andersén (Business Area Manager Energy), Claus Nielsen (Business Area Manager Industrial Process) and Per Lundblad (Business Area Manager Power Solutions). Group management regularly reviews operations at meetings headed by the CEO.

The Chief Executive Officer is presented in greater detail in the Board of Directors and Management section of this Annual Report and on the Company’s website.

REMUNERATION OF SENIOR EXECUTIVES

The principles for the remuneration of senior executives at Addtech are adopted by the Annual General Meeting. Senior executives comprise the CEO and other members of Group Management. The 2019 Annual General Meeting approved the Board of Directors’ proposal regarding guidelines for the remuneration for senior executives. These guidelines are essentially consistent with the principles previously applied.

Addtech seeks to offer an overall remuneration package that is both reasonable and competitive, while enabling the Company to attract and retain skilled employees. The overall remuneration, which varies in relation to the performance of the individual and the Group, may include the various components stated below. Fixed salary forms the base of the overall remuneration package. This salary shall be competitive and reflect the responsibilities of the position. Fixed salaries are reviewed annually. Variable compensation is based primarily on the Group’s growth in earnings, profitability and cash flow. On an annual basis, the variable component may amount to at most 40 percent of the fixed salary. Each year, the Board of Directors evaluates whether or not a long-term incentive scheme should be proposed to the Annual General Meeting and, if it should, whether the proposed long-term incentive scheme should include the transfer of Company shares or not. Retirement pension, health insurance and other benefits are to be structured in accordance with applicable rules and market norms. Where possible, pensions are to be based on defined-contribution plans.

For further details regarding remuneration for senior executives, please see Note 6 of this Annual Report. The principles for the remuneration of senior executives approved by the Annual General Meeting were adhered to during the financial year. The Board of Directors intends to propose revised principles for the remuneration of senior executives at the 2020 Annual General Meeting.

Long-term incentive schemes

At the end of the financial year, Addtech had four call option programmes outstanding, involving a total 1,007,000 Class B shares. The purpose of long-term incentive schemes is to enable Group executives, through an investment of their own, to participate in and work for a favourable trend in the value of the Company’s shares.

The schemes are also expected to generate improved conditions for recruiting and retaining skilled personnel for the Addtech Group, to

provide competitive compensation and to unite the interests of the shareholders with those of the executives. The schemes are intended to contribute to executives increasing their shareholding in Addtech over the long term. The executives encompassed by the schemes are those who, in an otherwise heavily decentralised organisation, are able to impact profit positively by means of partnerships between Group subsidiaries. The share-related incentive schemes approved by the Annual General Meeting do not entail a net charge against Company equity.

Remuneration to the Board of Directors and auditors

Each year, the Annual General Meeting of Addtech AB adopts guidelines regarding the remuneration of the Board of Directors and the auditors. In accordance with the resolution of the 2019 Annual General Meeting, Board fees are to total SEK 3,060,000and are to be distributed as follows: SEK 740,000 to the Chairman of the Board, SEK 370,000 to each of the other Board members appointed by the Annual General Meeting and SEK 50,000 to each member of the Remuneration Committee. For further details of Board fees, see Note 6 in this Annual Report.

In accordance with the resolution of the Annual General Meeting, auditor’s fees are to be paid in accordance with an approved invoice. For further details of auditor’s fees and of fees for non-auditing services, see Note 7 of this Annual Report.

OPERATING ORGANISATION AND MANAGEMENT

During the 2019/2020 financial year, Addtech was organised into the following five business areas: Automation, Components, Energy, Industrial Process and Power Solutions. The division into business areas reflects Addtech’s internal organisation and reporting system.

Overall, the Addtech Group comprises some 130 independent companies in 20 countries. Although decisions regarding the companies’ operations are taken close to the market, from a governance perspective it is important to integrate the acquired company regarding certain areas of significance for the Group, including financial reporting, administrative procedures and common core values.

Each operating company has a board of directors, in which that company’s Managing Director is a member, as well as executives from the business area or business unit. Within each business area, companies are grouped in business units based on product or market concepts. The Managing Director of each company reports to a Business Unit Manager, who in turn reports to the Business Area Manager. Each Business Area Manager reports to the CEO of Addtech AB. The business areas and business units hold internal board meetings chaired by the CEO and attended by the CFO of Addtech AB, along with the relevant Business Area Manager and controller. Other officials participate in the business area’s Board meetings to present specific matters or if otherwise deemed appropriate.

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Sitting, from the left: Johan Sjö, Ulf Mattsson, Malin Nordesjö, Anders Börjesson, Eva Elmstedt, Henrik Hedelius, Kenth Eriksson.

From the left: Claus Nielsen, Per Lundblad , Martin Fassl, Malin Enarson, Niklas Stenberg, Patrik Klerck, Hans Andersén.

Board of Directors

Disclosures of shareholdings and call options pertain to 31 May 2020.

Group Management

Disclosures of shareholdings and call options pertain to 31 May 2020.

ANDERS BÖRJESSON KENTH ERIKSSON Chairman of the Board Board member

Board member M. Eng. and MBA Born 1961. Board member since 2016. Other board assignments: Chairman of the Board at Concentric. Board member at Technology Nexus. Professional experience: CEO of Tradimus and senior positions within Electrolux. Partner at Athanase Industrial Partner. Shareholding: 59,100 Class B shares.

M.Sc. Econ. Born 1948. Chairman of the Board since 2001. Other board assignments: Chairman of the Board of Tisenhultgruppen and Lagercrantz Group. Board member at a number of companies within Tisenhultgruppen. Professional experience: President and CEO of Bergman & Beving. Shareholding: 1,527,162 Class A shares and 121,500 Class B shares (including through companies and family members).

HENRIK HEDELIUS

Board member

EVA ELMSTEDT

M.Sc. Econ. Born 1966. Board member since 2017. Senior Advisor at United Bankers LTD. Other board assignments: Board member at Bergman & Beving and Two H. Professional experience: Board member at Bergman & Beving, Mannerheim Invest, Vinovo, Team Sportia, Gigasense and Mind Industrial Group. Senior positions at Jarl Securities, Storebrand Kapitalförvaltning, Swedbank and ABN Amro. Shareholding: 9,900 Class B shares (including related parties).

Board member

Bachelor of Economics and Computer Science. Born 1960. Board member since 2005. Other board assignments: Chairman of the Board of Proact IT Group. Board member at Arjo, Gunnebo, Semcon and Smart Eye. Professional experience: Senior positions at, for example, Nokia Networks, Ericsson and mobile operator 3. Shareholding: 21,189 Class B shares (including related parties).

ULF MATTSSON

Board member

M.Sc. Econ. Born 1964. Board member since 2012. Senior Advisor for EQT and PJT Partners. Other Board assignments: Chairman of the Board at Eltel, VaccinDirect and Lideta. Board member at Oras Invest Oy and Priveq V. Professional experience: CEO at Domco Tarkett, Mölnlycke Health Care, Capio, Gambro and Karo Pharma. Shareholding: 8,000 Class B shares.

MALIN NORDESJÖ

Board member

M.Sc. Econ. Born 1976. Board member since 2015. Other board assignments: Board member at Bergman & Beving and at a number of companies in Tisenhult-gruppen. Professional experience: Senior positions at Tisenhult-gruppen and Tritech Technology. Shareholding: 19,502 Class B shares.

JOHAN SJÖ

Board member

M.Sc. Econ. Born 1967. Board member since 2008. Other Board assignments: Chairman of the Boards of AddLife, Momentum Group, OptiGroup and Prosero Security Group. Board member at Camfil and M2 Asset Management. Professional experience: CEO of Addtech AB and senior positions within Bergman & Beving and previously within Alfred Berg/ ABN Amro. Shareholding: 10,080 Class A shares, 30,000 Class B shares. Call options equivalent to 25,500 shares.

NIKLAS STENBERG Bachelor of Laws President and CEO. Born 1974. Employed by the Group since 2010. Professional experience: Various senior positions within Addtech and Bergman & Beving and previously as a lawyer. Shareholding: 44,034 Class B shares. Call options equivalent to 69,500 shares (including related parties).

MALIN ENARSON

M.Sc. Econ. CFO Born 1973.

Employed by the Group since 2004. Professional experience: Business Controller Addtech Power Solutions, several accountancy roles at Addtech, auditor at Mazars (SET) Revisionsbyrå.Shareholding: 4,482 Class B shares. Call options equivalent to 34,500 shares (including related parties).

HANS ANDERSÉN

Electric Power Engineer

Business Area Manager, Energy. Born 1961. Employed by the Group since 2006. Professional experience: CEO and owner of AB Gevea and Business Unit Manager, Energy Supply. Shareholding: 90,292 Class B shares. Call options equivalent to 66,000 shares (including related parties).

MARTIN FASSL

M.Sc. Econ

Business Area Manager, Components. Born 1960. Employed by the Group since 1994. Professional experience: Various senior positions within Addtech and Bergman & Beving. Shareholding: 46,745 Class B shares. Call options equivalent to 42,500 shares (including related parties).

PATRIK KLERCK

CLAUS NIELSEN

M.S c Mechanical eng.

Export Technician

Business Area Manager, AutomaBusiness Area Manager Industrial tion Born 1969. Employed by the Process. Born 1969. Employed Group since 1995. Professional by the Group since 1994. experience: Various senior posiProfessional experience: Various tions within Addtech and Bergman senior positions within Addtech & Beving. Shareholding: 16,258 and Bergman & Beving. ShareClass B shares. Call options equiholding: 6,781 Class B shares. valent to 55,000 shares (including Call options equivalent to 34,500 related parties). shares (including related parties).

PER LUNDBLAD

Mechanical Engineer and Market Economist DIHM Business Area Manager, Power Solutions Born 1967. Employed by the Group since 2008. Professional experience: CEO and partner at Emcomp International AB Business Unit Manager, Power Systems. Shareholding: 3,930 Class B shares. Call options equivalent to 37,500 shares (including related parties).

52 ADDTECH ANNUAL REPORT 2019/2020

ADDTECH ANNUAL REPORT 2019/2020 53

C OR P OR ATE GOVER NANC E

Consolidated income statement 56 Consolidated statement of comprehensive income 57 Consolidated balance sheet 58 Consolidated statement of changes in equity 59 Consolidated cash flow statement 60 Parent Company income statement 61 Parent Company comprehensive income 61 Parent Company balance sheet 62 Changes in the Parent Company equity 63 Parent Company cash flow statement 64 Note 1 Accounting and valuation principles 65 Note 2 Critical estimates and assumptions 71 Note 3 Financial risks and risk management 71 Note 4 Revenue from contracts with customers 74 Note 5 Segment reporting 76 Note 6 Employees and personnel expenses 78 Note 7 Remuneration to Auditors 82 Note 8 Depreciation/amortisation 82 Note 9 Other operating income and expenses 82 Note 10 Operating expenses 83 Note 11 Financial income and expenses 83 Note 12 Appropriations – Parent Company 83 Note 13 Taxes 83 Note 14 Intangible non-current assets 85 Note 15 Property, plant and equipment 87 Note 16 Leases 88 Note 17 Financial assets and liabilities 90 Note 18 Inventories 92 Note 19 Prepaid expenses and accrued income 92 Note 20 Equity 92 Note 21 Untaxed reserves 93 Note 22 Provisions for pensions and similar obligations 94 Note 23 Provisions 97 Note 24 Non-current interest-bearing liabilities 98 Note 25 Current interest-bearing liabilities 98 Note 26 Accrued expenses and prepaid income 98 Note 27 Pledged assets and contingent liabilities 99 Note 28 Cash flow statement 99 Note 29 Acquisitions of companies 101 Note 30 Earnings per share before and after dilution 103 Note 31 Parent Company disclosures 103 Note 32 Related party disclosures 103 Note 33 Events after the balance sheet date 104

FINANCIAL STATEMENTS 2019/2020

Systems for internal control and risk management in financial reporting

INTERNAL CONTROL

The Board of Directors bears the overall responsibility for ensuring that the Group has an effective system of management and internal control. This responsibility includes evaluating the financial reports that the Board of Directors receives on an annual basis and setting requirements regarding content and format of these reports to assure their quality. This requirement means that the financial reporting must fulfil its purpose while complying with applicable accounting regulations and the other requirements imposed on listed companies. Each year, the CFO re ports on the Group’s internal control work to the Board of Directors.

CONTROL ENVIRONMENT

Addtech builds and organises its operations around de centralised responsibility for profitability and earnings. In decentralised operations, internal control is based on deeply rooted process that served to define targets and strategies for each area of operations. Internal directives and Board-approved policies convey well-defined decision-making channels, authorities and responsibilities. The Group’s foremost documents for financial control are the financial policy, the reporting manual and the instructions issued ahead of each annual/quarterly closing. A Group-wide re porting system, with related analysis tools, is used in the Group’s process for closing the annual/quarterly accounts. At a more comprehensive level, all operations in the Addtech Group must comply with the Group’s Code of Conduct.

RISK ASSESSMENT

With regard to the risks that the Board of Directors and Group Management consider significant, Addtech applies well-established procedures of internal control and risk management in its financial reporting. Risk assessments start with the Group’s income statement and balance sheet to identify the risk of material error. In the Addtech Group as a whole, the greatest risks in the financial reporting are associated with intangible non-current assets related to business acquisitions. The exposure is determined by the degree of dependence on internal control or assessments that could affect the financial reporting. The Group applies annual procedures for impairment testing to identify any indications that impairment should be recognised.

CONTROL ACTIVITIES

Control activities include transaction-related controls such as authorisation and investment rules and clear payment procedures, but also analytical controls performed by the Group’s controllers function and the central finance and accounting function. Controllers and finance managers at all levels within the Group play a key role in building environment needed for transparent and accurate financial reporting. The role imposes considerable demands on integrity, expertise and individuals’ capabilities.

Regular finance conferences are held to discuss current is sues and ensure the effective sharing of knowledge and experience within the finance and accounting functions. The monthly review of results that is performed via the internal reporting system and that is analysed and commented on internally by the Board of Directors is a key, overarching control activity. The review includes an evaluation of results in comparison with set targets and previous performance, as well as a follow-up of key indicators.

Each year, all Group companies perform a self-assessment regarding matters of internal control. The companies comment on how important issues were handled, such as business terms and conditions in customer contracts, customer credit assessments, checking and evaluating

inventory, payment procedures, documentation and analysis of closing accounts, and compliance with internal policies and procedures. For critical issues and processes, an accepted minimum level has been set and all companies are expected to meet this level. The responses of each company are validated and commented on by that company’s external auditor in connection with the regular audit. The responses are then compiled and analysed, after which they are presented to business area management and Group management. The results of self-assessment process are taken into consideration in planning self-assessment and external auditing for future years.

In addition to the self-assessment process, a more in-depth analysis of internal control is performed in about 25 operating companies each year. This process is referred to as an internal audit and is performed at the companies by business area controllers and employees from the Parent Company’s central finance and accounting function. Central processes at the companies, and control points for these, are analysed, tested and recorded. The external auditors study the records kept in connection with the auditing of the companies. The process provides a solid basis on which to chart and assess internal control within the Group. An external party also reviews and assesses the Group’s internal control processes on a regular basis.

INFORMATION AND COMMUNICATIONS

Governing guidelines, policies and instructions are accessible from internal digital fora, such as Teams. Codes of Conduct are available publicly on the Addtech website. These documents are updated on an ongoing basis as needs arise. Amendments are communicated separately by e-mail and at meetings for those concerned.

Accessibility of internal information via internal channels is determined by means of authorisations. Group employees are organised into different groups whose access to information differs. All financial guidelines, policies and instructions can be accessed by the Managing Directors, Chief Accountants, Business Unit Managers, Business Area Managers and Business Area Controllers of each of the companies, as well as by the central financial and accounting staff. Financial data at the Group level is also controlled centrally by means of authorisations.

REVIEW

The outcome of the internal control work is analysed and reported annually. An assessment is made regarding what improvement measures should be undertaken in the various companies. The boards of the various Group companies are informed of the outcome of the internal control work within each company and of what improvement measures should be implemented. Together with the boards of the companies, the Business Area Controllers then review these efforts on an ongoing basis over the ensuing years.

The Board of Directors of the Addtech Group receives monthly comments from the CEO regarding the business situation and how the operations are developing. The Board of Directors discusses all quarterly financial accounts and Annual Reports prior to these being published. The Board of Directors is given an annual status report regarding the internal control work and its outcome. The Board of Directors is also informed of the assessment made by the external auditors of the Group’s internal control processes.

INTERNAL AUDIT

Given the risk assessment described above and how the control activities are designed, including self-assessment and in-depth analysis of the internal control, the Board of Directors has chosen not to maintain a specific internal audit function.

Assurance by the Board of Directors 105 Audit Report 106 Multi-year summary 109 Definitions 110 Sustainability notes 114

ADDTECH ÅRSREDOVISNING 2019/2020 ADDTECH ÅRSREDOVISNING 2018/2019 55

54 ADDTECH ANNUAL REPORT 2019/2020

C ONSO LI DATED I NC O M E STATEM ENT

C ONSO LI DATED STATEM ENT OF C O M PR EHENS I VE I NC O M E

Consolidated income statement

SEK million Note 2019/2020	2018/2019
Net sales 4, 5 11,735 Cost of sales -8,088 GROSS PROFIT 3,647 Selling expenses -1,869 Administrative expenses -707 Other operating income 9 111 Other operating expenses 9 -26 Proft fromparticipations in associated companies 5	10,148 -7,025 3,123 -1,677 -565 47 -21 3
OPERATING PROFIT 3-10, 16 1,161 Financial income 11 6 Financial expenses 11 -62 NET FINANCIAL ITEMS -56	910 5 -50 -45
PROFIT BEFORE TAX 1,105 Tax 13 -232	865 -193
PROFIT FOR THE YEAR 873 Attributable to: Parent Company shareholders 862 Non-controlling interests 11 Earnings per share before dilution (SEK) 30 12.85 Earnings per share after dilution (SEK) 30 12.80 Average number of shares after repurchases (’000s) 67,123 Number of shares at end of period after repurchases (thousands) 67,149	672 660 12 9.85 9.80 67,047 67,057

Consolidated statement of comprehensive income

Consolidated statement of comprehensive income
SEK million	2019/2020	2018/2019
Proft for the year	873	672
Items that may later be reversed in the income statement
Changes for the year in fair value of cash fow hedges	2	0
Translation differences for the year on translation of foreign operations	59	37
Tax attributable to items that may later be reversed in the income statement	-1	0
Items that may not be reversed in the income statement
Revaluations of defned beneft pension plans	-12	-31
Tax attributable to items that maynot be reversed in the income statement	3	7
OTHER COMPREHENSIVE INCOME	51	13
COMPREHENSIVE INCOME FOR THE YEAR	924	685
Attributable to:
Parent Company shareholders	910	672
Non-controlling interests	14	13

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C ONSO LI DATED BA L ANC E SHEE T

C ONSO LI DATED STATEM ENT OF C HANGES I N EQU I T Y

Consolidated balance sheet

Consolidated statement of changes in equity

SEK million Note 31 Mar 2020 31 Mar 2019 ASSETS NON-CURRENT ASSETS Intangible non-current assets 14 3,240 2,953 Property, plant and equipment 15 310 270 Right-of-use assets 16 626 - Deferred tax assets 13 27 20 Other fnancial assets 37 25 TOTAL NON-CURRENT ASSETS 4,240 3,268 CURRENT ASSETS Inventories 18 1,642 1,417 Tax assets 2 1 Accounts receivable 3 2,003 1,887 Prepaid expenses and accrued income 19 128 96 Other receivables 128 81 Cash and cash equivalents 363 295 TOTAL CURRENT ASSETS 4,266 3,777 TOTAL ASSETS 8,506 7,045 EQUITY AND LIABILITIES EQUITY 20 Share capital 51 51 Other contributed capital 344 344 Reserves 180 123 Retained earnings,including proft for theyear 2,443 1,952 Equity attributable to Parent Company shareholders 3,018 2,470 Non-controllinginterests 58 50 TOTAL EQUITY 3,076 2,520 LIABILITIES Non-current liabilities Non-current interest-bearing liabilities 24 2,154 719 Provisions for pensions 22 332 260 Deferred tax liabilities 13 284 353 Non-current non-interest-bearingliabilities 2 12 Total non-current liabilities 2,772 1,344 Current liabilities Current interest-bearing liabilities 25 462 1,277 Accounts payable 1,028 955 Tax liabilities 159 87 Other liabilities 435 357 Accrued expenses and prepaid income 26 528 458 Provisions 23 46 47 Total current liabilities 2,658 3,181 TOTAL LIABILITIES 5,430 4,525 TOTAL EQUITY AND LIABILITIES 8,506 7,045	SEK million	2019/2020
		Share capital Other contri- buted capital Reser- ves Retained earnings, in- cluding proft for theyear Total, Parent Company share- holders Non-control- linginterests Total equity
	EQUITY, OPENING BALANCE, 1 APR 2019 Proft for the year Cash fow hedges Translation differences Revaluations of defned beneft pension plans Tax attributable to other comprehensive income Other comprehensive income	51 344 123 1,952 2,470 50 2,520
		– – – 862 862 11 873
		– – 2 – 2 – 2
		– – 56 – 56 3 59
		– – – -12 -12 – -12
		– – -1 3 2 – 2
		– – 57 -9 48 3 51
	Comprehensive income for the year Call options issued Call options redeemed Options repurchased Repurchases of treasury shares Dividend Change in non-controllinginterests	– – 57 853 910 14 924
		– – – 6 6 – 6
		– – – 33 33 – 33
		– – – -23 -23 – -23
		– – – -42 -42 – -42
		– – – -336 -336 -10 -346
		– – – 0 0 4 4
	EQUITY, CLOSING BALANCE, 31 MAR 2020	51 344 180 2,443 3,018 58 3,076
	SEK million	2018/2019
		Share capital Other contri- buted capital Reser- ves Retained earnings, in- cluding proft for theyear Total, Parent Company share- holders Non-control- linginterests Total equity
	EQUITY, OPENING BALANCE, 1 APR 2018 Proft for the year Cash fow hedges Translation differences Revaluations of defned beneft pension plans Tax attributable to other comprehensive income Other comprehensive income	51 344 87 1,603 2,085 46 2,131 – – – 660 660 12 672 – – 0 – 0 – 0 – – 36 – 36 1 37 – – – -31 -31 – -31 – – – 7 7 – 7 – – 36 -24 12 1 13
	Comprehensive income for the year Call options issued Call options redeemed Options repurchased Repurchases of treasury shares Dividend Change in non-controllinginterests	– – 36 636 672 13 685 – – – 4 4 – 4 – – – 29 29 – 29 – – – -11 -11 – -11 – – – -38 -38 – -38 – – – -269 -269 -9 -278 – – – -2 -2 – -2
	EQUITY, CLOSING BALANCE, 31 MAR 2019	51 344 123 1,952 2,470 50 2,520 2019/2020 2018/2019 4.00 1) 5.00
	SEK
	Dividend per share

For disclosures regarding contingent liabilities and pledged assets, see Note 27.

1) As proposed by the Board of Directors.

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C ONSO LI DATED CASH F LOW STATEM ENT

PAR ENT C O M PANY I NC O M E STATEM ENT

Consolidated cash flow statement

SEK million	Note 2019/2020 2018/2019
OPERATING ACTIVITIES
Proft after fnancial items	1,105 865
Adjustment for items not included in cash fow	28 354 229
Income taxpaid	-273 -230
Cash fow from operating activities before changes in working capital	1,186 864
Cash fow from changes in working capital
Change in inventories	-88 -237
Change in operating receivables	-90 -378
Change in operatingliabilities	109 275
CASH FLOW FROM OPERATING ACTIVITIES	1,117 524
INVESTING ACTIVITIES
Acquisitions of property, plant and equipment	-85 -70
Disposals of property, plant and equipment	4 5
Acquisitions of intangible non-current assets	-20 -23
Acquisitions of operations, net liquidity effect	28 -431 -662
Disposals of operations, net liquidity effect	28 1 17
Change in fnancial assets	-1 8
CASH FLOW FROM INVESTING ACTIVITIES	-532 -725
FINANCING ACTIVITIES
Repurchases of treasury shares	-42 -38
Call options redeemed, issued and repurchased	16 22
Borrowings	28 351 915
Loan repayments	28 -326 -326
Amortisation of leases	28 -156 –
Other fnancing	-4 -1
Dividend paid to Parent Company’s shareholders	-336 -269
Dividendspaid to non-controllinginterests	-10 -9
CASH FLOW FROM FINANCING ACTIVITIES	-507 294
CASH FLOW FOR THE YEAR	78 93
Cash and cash equivalents at beginning of the year	295 192
Exchange rate difference in cash and cash equivalents	-10 10
CASH AND CASH EQUIVALENTS AT END OF THE YEAR	363 295

Parent Company income statement

SEK million	Note	2019/2020	2018/2019
Net sales		71	62
Administrative expenses		-108	-84
OPERATING PROFIT	6–8, 16	-37	-22
Proft from fnancial non-current assets	11	20	22
Interest income and similar items	11	7	3
Interest expenses and similar items	11	-31	-19
PROFIT AFTER FINANCIAL ITEMS		-41	-16
Appropriations	12	310	278
PROFIT BEFORE TAX		269	262
Tax	13	-60	-59
PROFIT FOR THE YEAR		209	203

Parent Company comprehensive income

SEK million	2019/2020	2018/2019
Proft for theyear	209	203
OTHER COMPREHENSIVE INCOME	–	–
COMPREHENSIVE INCOME FOR THE YEAR	209	203

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PAR ENT C O M PANY BA L ANC E SHEE T

C HANGES I N THE PAR ENT C O M PANY EQU I T Y

Parent Company balance sheet

SEK million	Note	2019/2020	2018/2019
ASSETS
NON-CURRENT ASSETS
Intangible non-current assets	14	1	–
Property, plant and equipment	15	0	1
Financial non-current assets
Participations in Group companies	17	1,004	1,004
Receivables from Groupcompanies	17	1,804	1,984
Total fnancial non-current assets		2,808	2,988
TOTAL NON-CURRENT ASSETS		2,809	2,989
CURRENT ASSETS
Receivables from Group companies		536	808
Other receivables		16	2
Prepaid expenses and accrued income	19	11	11
Total current receivables		563	821
Cash and bank balances		-	0
TOTAL CURRENT ASSETS		563	821
TOTAL ASSETS		3,372	3,810
EQUITY AND LIABILITIES	20
EQUITY
Restricted equity
Share capital		51	51
Statutory reserve		18	18
Unrestricted equity
Retained earnings		228	387
Proft for theyear		209	203
TOTAL EQUITY		506	659
UNTAXED RESERVES	21	131	447
PROVISIONS
Provisions for pensions and similar obligations	22	15	15
LIABILITIES
Liabilities to Group companies	24	127	264
Liabilities to credit institutions	24	1,600	600
Total non-current liabilities		1,727	864
Liabilities to credit institutions	25	156	1,130
Accounts payable		3	5
Liabilities to Group companies		791	665
Tax liabilities		0	0
Other liabilities		13	2
Accrued expenses andprepaid income	26	30	23
Total current liabilities		993	1,825
TOTAL EQUITY AND LIABILITIES		3,372	3,810

Changes in the Parent Company equity

SEK million	2019/2020
	Restricted equity Unrestricted equity Total equity Share capital Statutory reserve Retained earnings, inclu- ding proft for theyear
EQUITY, OPENING BALANCE, 1 APR 2019 Proft for theyear	51 18 590 659
	– – 209 209
Comprehensive income for the year Dividend Call options issued Call options redeemed Repurchases of call options Repurchases of treasuryshares	– – 209 209
	– – -336 -336
	– – 6 6
	– – 33 33
	– – -23 -23
	– – -42 -42
EQUITY, CLOSING BALANCE, 31 MAR 2020	51 18 437 506
SEK million	2018/2019
	Restricted equity Unrestricted equity Share capital Statutory reserve Retained earnings, inclu- ding proft for theyear Total equity
EQUITY, OPENING BALANCE, 1 APR 2018 Proft for theyear	51 18 672 741 – – 203 203
Comprehensive income for the year Dividend Call options issued Call options redeemed Repurchases of call options Repurchases of treasuryshares	– – 203 203 – – -269 -269 – – 4 4 – – 29 29 – – -11 -11 – – -38 -38
EQUITY, CLOSING BALANCE, 31 MAR 2019	51 18 590 659

For comments on equity, see Note 20.

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PAR ENT C O M PANY CASH F LOW STATEM ENT

NOTES

Parent Company cash flow statement

SEK million	Note 2019/2020 2018/2019
OPERATING ACTIVITIES
Proft after fnancial items	-41 -16
Adjustment for items not included in cash fow	28 0 0
Income taxpaid	-61 -65
Cash fow from operating activities before changes in working capital	-102 -81
Cash fow from changes in working capital
Change in operating receivables	-10 -3
Change in operatingliabilities	13 5
CASH FLOW FROM OPERATING ACTIVITIES	-99 -79
INVESTING ACTIVITIES
Acquisitions ofproperty, plant and equipment and intangible non-current assets	-1 0
CASH FLOW FROM INVESTING ACTIVITIES	-1 0
FINANCING ACTIVITIES
Repurchases of treasury shares	-42 -38
Call options issued and redeemed	16 22
Borrowings	28 326 909
Loan repayments	28 -300 -300
Change in receivables from Group companies	153 -615
Change in liabilities to Group companies	-11 114
Dividend paid	-336 -269
Group contributions	294 258
Other fnancingactivities	0 -2
CASH FLOW FROM FINANCING ACTIVITIES	100 79
CASH FLOW FOR THE YEAR	0 0
Cash and cash equivalents at beginningof theyear	0 0
CASH AND CASH EQUIVALENTS AT END OF THE YEAR	0 0

Notes

~~NOTE 1~~

Accounting and valuation principles

GENERAL ACCOUNTING PRINCIPLES

The consolidated annual accounts have been prepared in compliance with International Financial Reporting Standards (IFRS) issued by the Inter national Accounting Standards Board (IASB) and with interpretations issued by the International Financial Reporting Interpretations Committee (IFRIC) as approved by the European Union (EU). Recommendation RFR 1 Supplementary Accounting Rules for Groups, issued by the Swedish Financial Reporting Board, has also been applied.

The annual accounts of the Parent Company have been prepared in accordance with the Swedish Annual Accounts Act (1995:1554) and recommendation RFR 2 Accounting for Legal Entities issued by the Swedish Financial Reporting Board. The accounting principles applied by the Parent Company and the Group are consistent with one another, except in the accounting of pensions, untaxed reserves and appropriations. See also “Parent Company accounting principles”.

On 13 June 2020, the Board of Directors approved the annual accounts of the Parent Company and the consolidated accounts for publication. The Parent Company’s income statement and balance sheet and the consolidated income statement and balance sheet will be submitted for approval by the Annual General Meeting on 28 August 2020.

PRESENTATION OF THE ANNUAL REPORT

The financial accounts are presented in millions of Swedish kronor (SEK million) unless otherwise stated. The functional currency of the Parent Company is the Swedish krona (SEK), and this is also the currency of presentation for the Parent Company and the Group. Assets and liabilities are recognised at their historical cost, except for certain financial assets and liabilities that are measured at fair value. Assets held for sale are recognised at the previous carrying amount or fair value, less selling expenses, whichever is lower.

Preparing financial accounts in accordance with IFRS requires management to make judgements, estimates and assumptions affecting the application of the accounting principles and the carrying amounts for assets, liabilities, income and expenses. These estimates and assumptions are based on historical experience and several other factors deemed reasonable under the circumstances at the time. Estimates and assumptions are reviewed regularly.

The annual accounts have been prepared in accordance with IAS 1 Presentation of Financial Statements, with the effect that separate income statements and balance sheets, as well as statements of other comprehensive income, financial position, changes in equity and cash flow, are prepared, with notes being provided detailing the accounting principles and disclosures applied.

Receivables and liabilities, as well as income and expenses, are offset only where required or expressly permitted in accordance with IFRS.

NEW STANDARDS AND INTERPRETATIONS APPLIED AS OF 1 APRIL 2019

IFRS 16 Leases

As of 1 January 2019, IFRS 16 Leases replaces 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 has mapped and assessed the Group’s leases and analysed the effects of the transition to IFRS 16 that occurred during the 2019/2020 financial year, commencing 1 April 2019. Addtech applies 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 currently of leased premises, vehicles and other leases (of, for example, production equipment, office equipment and other assets not considered individually significant). On transition to IFRS 16, these were reported in the balance sheet, entailing 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 are replaced by depreciation expenses on the rightsof-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. Agreements terminating within 12 months of the transition but with an original maturity of more than 12 months have not been included in the calculation of lease liabilities and right-of-use assets. Accordingly, are included in the amounts reported in the balance sheet, although they are still reported as operating expenses in the income statement.

Additionally, Addtech has used hindsight when determining the lease term if the contract contains options to extend or terminate the lease. 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 approximately SEK 550 million arising on the asset side. On the liability side, lease liabilities of approximately SEK 550 million arose, of which non-current liabilities amounted to SEK 408 million and current liabilities to SEK 142 million.

NEW STANDARDS AND INTERPRETATIONS APPLICABLE TO FINANCIAL YEARS COMMENCING 1 APRIL 2020 OR LATER

No new IFRS standards or IFRIC statements will have a material impact on the Group’s earnings or financial position during the financial year 2020/2021. No newly issued IFRS standards or interpretations have been applied prematurely.

CONSOLIDATED ACCOUNTS

The consolidated accounts include the annual accounts of the Parent Company and those companies that are under the con trolling influence of the Parent Company. A controlling influence exists if the Parent Company has influence over the object of investment, is exposed or entitled to variable yield from its commitment and is able to exert its influence over the investment to affect the yield. In assessing whether a controlling influence exists, potential shares with an entitlement to vote are taken into account, as well as whether de facto control exists. Shareholdings in Group companies are eliminated in accordance with the acquisition method,

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NOTES

NOTES

NOTE 1 CONT.

which means, in brief, that identifiable assets, liabilities and contingent liabilities in the acquired company are measured and recognised in the consolidated financial accounts as if they had been acquired by means of direct acquisition and not indirectly by acquiring shares in the company. The valuation is based on fair value. If the value of the net assets is less than the acquisition price, consolidated goodwill arises. If the opposite occurs, the difference is recognised directly in the income statement. Goodwill is determined in local currency and recognised at cost, less any impairment losses. Consolidated equity includes the Parent Company’s equity and the portion of the subsidiaries’ equity earned after the time of acquisition. Companies acquired or disposed of are consolidated or de-consolidated from the date of acquisition or disposal.

Contingent purchase considerations are measured at fair value on the transaction date and are subsequently remeasured on each reporting occasion. Effects of this revaluation are recognised as income or expenses in consolidated profit for the year. Transaction expenses in conjunction with acquisitions are expensed. It is possible for a holding that is not a controlling interest to be measured at fair value on acquisition, entailing goodwill being included in non-controlling interests. Alternatively, non-controlling interests constitute part of net assets. The choice is determined individually for each acquisition.

Intra-Group receivables and liabilities, as well as transactions between companies within the Group and related unrealised gains, are eliminated in their entirety. Unrealised losses are eliminated in the same way as unrealised gains, unless there is a need to recognise impairment.

EXCHANGE RATE EFFECTS

Translation of the financial reports of foreign Group companies Assets and liabilities in foreign operations, including goodwill and other surpluses and deficits on consolidation, are converted to Swedish kronor applying the exchange rate valid on the balance sheet date. Income and expenses in foreign operations are translated to Swedish kronor applying the average rate, which is an approximation of the rates prevailing at the time of each transaction. Translation differences arising on the translation of foreign operations are reported through other comprehensive income, under the translation reserve in equity.

Transactions in foreign currencies

A transaction denominated in a foreign currency is converted to the functional currency at the exchange rate on the transaction date. Monetary assets and liabilities in foreign currency are converted to the functional currency applying the exchange rate prevailing on the balance sheet date. Non-monetary assets and liabilities recognised at historical cost are converted applying the exchange rate on the trans action date. Exchange differences arising on conversion are reported in the income statement. Exchange differences on operating receivables and operating liabilities are included in operating profit, while ex change differences on financial receivables and liabilities are reported among financial items.

FINANCIAL ASSETS AND LIABILITIES, RECOGNITION AND DE-RECOGNITION

Financial instruments recognised in the balance sheet primarily include, on the assets side, cash and cash equivalents, accounts receivables and derivatives. Liabilities include accounts payable, loans payable, contingent purchase considerations and derivatives. A financial asset or financial liability is recognised in the balance sheet when the Company becomes a party to the terms and conditions of the instrument. Accounts receivable are recognised in the balance sheet when an invoice has been sent. A liability is recognised when the counter party has completed its undertaking and a contractual obligation to pay prevails, even if no invoice has yet been received. A financial asset (or part thereof) is removed from the balance sheet when the entitle-

ments of the contract are realised or expire, or if the Company loses control over them. A financial liability (or part thereof) is removed from the balance sheet when the obligation in the contract is fulfilled or otherwise ceases to exist. A financial asset and a financial liability are only offset and recognised at the net amount in the balance sheet when the Company is legally entitled to offset these amounts and the Company intends to settle the items with a net amount or simultaneously realise the asset and settle the liability.

FINANCIAL ASSETS AND LIABILITIES,

MEASUREMENT AND CLASSIFICATION

Except those in the category of financial assets measured at fair value through profit, or loss, all financial assets/liabilities (including derivatives) are initially recognised at fair value plus/minus transaction costs. On initial recognition, a financial instrument is classified based on the type of instrument, Addtech’s business model for the instrument and the types of cash flows to which the instrument gives rise. The classification determines how the financial instrument is measured after initial recognition, as described below.

Financial instruments measured at fair value are classified in a hierarchy based on the origin of the data used in the evaluation. Level 1 comprises financial instruments with quoted prices in an active market. Level 2 comprises financial instruments valued based on observable market data but not quoted prices in an active market. Level 3 comprises those measured using data, such as cash flow analyses, not based on observable market data.

Financial assets and liabilities measured at fair value through profit or loss

Because hedge accounting is not applies, this category comprises the Group’s derivatives and contingent additional purchase considerations in connection with acquisitions of subsidiaries. These items are reported at fair value in the balance sheet, with changes in value recognised in profit or loss.

Financial assets measured at amortised cost

Holdings in financial assets constituting a liability for the counterparty, and where payments consist exclusively of payments of principal and interest, are reported at amortised cost. The Group’s items in this category consist essentially of accounts receivable, cash and cash equivalents and other operating receivables. Due to the short maturities of these assets and the insignificant effect of discounting, these items are measured at their nominal amount. Accounts receivable and other operating receivables are recognised after deducting expected credit losses, which are assessed foremost on an individual basis and secondarily on the basis of the extent to which payments are overdue. Impairments of accounts receivable are recognised in operating expenses.

Equity instruments recognised at fair value

through other comprehensive income

A minor holding of unlisted shares in housing companies is recognised at fair value through other comprehensive income.

Financial liabilities measured at amortised cost

This category essentially consists of loans and accounts payable. The liabilities are measured at amortised cost. Accounts payable are measured without being discounted to their nominal amounts.

CASH AND CASH EQUIVALENTS

Cash and cash equivalents consists of cash funds and immediately available holdings in banks and equivalent institutions, as well as short-term liquid investments that mature within three months of the time of acquisition and that are exposed to only a negligible risk of fluctuation in value.

DERIVATIVES AND HEDGING

Derivative instruments include currency clauses, currency forward agreements and currency swaps used to offset risks of exchange rate fluctuations. An embedded derivative, such as a currency clause, is disclosed separately unless closely related to its host contract. Hedge accounting

is not applied. Derivatives are initially recognised at fair value, with the result that transaction costs are charged to profit or loss for the period. Following initial recognition, the derivative instrument is measured at fair value via the income statement.

Increases and decreases in the value of such derivatives are recognised as income and expenses respectively in operating profit or loss or in net financial items, based on the intended use of the derivative and whether its use is related to an operating item or a financial item.

ASSETS AND LIABILITIES, CLASSIFICATION

Current assets consist of assets expected to be realised within one year or the Company’s normal business cycle. Other assets are non-current assets. A liability is classified as non-current if, at the end of the reporting period, the Company has an unconditional right to defer settlement for at least 12 months after the reporting period and if it is not an operating debt expected to be settled within the Company’s normal business cycle. Other liabilities are classified as current.

PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment are recognised at cost, less accumulated depreciation and any impairment. The cost comprises the purchase price, including customs and excise duties, as well as costs directly attributable to the asset to bring it to the location in such condition that it can be used as intended by the acquisition. Discounts etc. are deducted from the purchase price. Examples of directly attributable costs included in the cost are shipping and handling, installation, title registration and consulting services.

In the case of so-called qualifying assets, borrowing expenses are also capitalised in the cost. Qualifying assets do not normally occur within the Group. Additional expenses for a property, plant and equipment item are added to the cost only if they increase the future economic benefits. All other expenses, such as those for repair and maintenance, are expensed on an ongoing basis. Decisive for the assessment of when an additional expense should be added to the cost is whether the expense pertains to the replacement of identified components, or parts thereof, in which case such expenses are capitalised. In cases where new components are created, the expense is also added to the cost. Any undepreciated carrying amounts for replaced components, or parts of components, are retired and expensed in conjunction with the replacement. Depreciation is applied on a straight-line basis over the estimated useful life, taking any residual value at the end of that period into account.

Property, plant and equipment comprising parts with different useful lives are treated as separate components.

The carrying amount for a property, plant and equipment item is removed from the balance sheet on the scrapping or disposal of the as set, or when no future economic benefits are expected from its use. Gains or losses realised upon the disposal or scrapping of an asset consist of the difference between the selling price and the carrying amount of the asset, less direct selling expenses. Gains or losses are recognised as other operating income or other operating expenses.

Property, plant and equipment	Useful life
Buildings	15–100 years
Leasehold improvements	3–5 years
Equipment	3–5 years
Land improvements	20 years
Machinery	3–10 years

LEASES

Principles applied from 1 April 2019

Until the financial year 2018/2019, Addtech has applied IAS 17 Leases. From 1 April 2019, lease contracts are accounted for according to IFRS 16 Leases, meaning that lessees recognise right-of-use assets and lease liabilities in the balance sheet. The standard includes practical expedients for short-term leases (leases with a lease term 12 months or shorter) and

for leases for which the underlying asset is of low value. At the inception of a contract, Addtech assesses whether the contract is, or contains, a lease based on the substance of the contract. A contract is, or contains, a lease if it conveys the right to control the use of an identified asset for a period of time in exchange for consideration.

Lease liabilities

At the commencement date of a lease contract, a lease liability is recognised with a value corresponding to the net present value of the lease payments that are not paid at that time. These lease liabilities are presented as longand short-term financial liabilities in the balance sheet.

The lease term is determined as the non-cancellable period together with extension periods or periods covered by an option to terminate the contract if Addtech is reasonably certain to use the extension option or not to use the termination option. Both business strategy and contract specific conditions are taken into consideration when determining the lease term for contracts including extension and termination options.

The lease payments include fixed payments, variable lease payments that depend on an index or a rate, and amounts expected to be payable under residual value guarantees. Variable lease payments that do not depend on an index or a rate are recognised as cost in the period which they relate to.

For discounting of the lease payments, the implicit rate in the contract is used, if that rate can be readily determinable. In other cases, Addtech’s incremental borrowing rate is used. This rate reflects Addtech’s credit risk as well as each contract’s lease term, currency, and quality of the underlying asset as intended security. After the commencement date of a lease, the lease liability is increased by interest and reduced by lease payments made. The lease liability is remeasured as a consequence of modifications, changes in the lease term, changes in lease payments, or changes in an assessment to purchase the underlying asset.

Right-of-use assets

Addtech recognises right-of-use assets in the balance sheet at the commencement date of the lease. The right-of-use assets are valued at cost reduced by accumulated depreciation and any impairments and are adjusted for remeasurements of the lease liability. The cost of the right-ofuse asset compromises the amount of the initial measurement of the lease liability, initial direct costs, and any lease payments made at or before the commencement date of the lease. The right-of-use assets are presented separately from other assets in the balance sheet and are depreciated linearly of the lease term.

Application of practical expedients

Addtech applies the practical expedients concerning short-term leases and leases for which the underlying contract is of low value. Expenses for these contracts are recognized linearly over the lease term as operating expenses in the income statement.

Principles applied until 31 March 2019

A difference is made between financial and operating leases. A financial lease is characterised by the contract transferring substantially all risks and rewards incidental to ownership of the asset. If that is not the case, the contract is classified as an operating lease contract. The group primarily has operating leases meaning that lease payments are expensed linearly over the lease term as operating expenses.

INTANGIBLE NON-CURRENT ASSETS

An intangible asset is an identifiable non-monetary asset, without physical substance, that is used for marketing, producing or supplying goods or services, or for leasing and administration. To be recognised as an asset, it must be probable that the future economic benefits attributable to the asset will benefit the Company and that the cost can be calculated reliably. Additional expenses for an intangible asset are added to the cost only if they increases the future economic benefits beyond the original

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assessment and if the expense can be calculated reliably. All other expenses are expensed as they are incurred.

Goodwill represents the difference between the cost of a business combination and the fair value of identifiable assets acquired, liabilities assumed and contingent liabilities.

Goodwill and intangible non-current assets with indefinable useful lives (trademarks) are measured at cost, less any accumulated impairment. Goodwill and trademarks are allocated among cash-generating units or groups of cash-generating units and are not amortised but tested annually for impairment.

Aside from goodwill and trademarks, intangible assets are recognised at their original cost, less accumulated amortisation and impairment. In the case of so-called qualifying assets, borrowing expenses are also capitalised in the cost. Qualifying assets do not normally occur within the Group. Amortisation is charged on a straight-line basis and is based on the useful lives of the assets, which are reviewed on an annual basis. An asset’s useful life is based on historical experience of use of similar assets, areas of application and other specific features of the asset. Amortisation is included in cost of sales, selling expenses or administrative expenses, depending on where in the business the assets are used. Development expenses, where the results of research or other knowledge are applied to achieve new or improved products or processes, are recognised as an asset in the balance sheet if the product is technically and commercially viable and the Company has sufficient resources to complete development and then use or sell the intangible asset. Other development expenses are expensed as they are incurred.

Expenses for internally generated goodwill and trademarks are recognised as expenses in profit or loss as they are incurred.

Intangible non-current assets	Useful life
Capitalised development projects	3–5 years
Customer relationships	10 years
Supplier relationships	5–10 years
Software for IT operations	3–5 years
Technology	10 years
Trademarks	indeterminable

IMPAIRMENT OF PROPERTY, PLANT AND EQUIPMENT, INTANGIBLE ASSETS AND PARTICIPATIONS IN SUBSIDIARIES AND ASSOCIATED COMPANIES

The carrying amounts of Group assets are tested as soon as there is an indication that the asset in question has decreased in value. If there is such an indication, the need for impairment is determined after calculating the recoverable amount of the asset, which is the asset’s value in use or its fair value, whichever is higher. Impairment is recognised if the recoverable amount is less than the carrying amount. The value in use is calculated as the present value of future payments that the Company is expected to receive by using the asset. The estimated residual value at the end of the useful life is included in the value in use. If the recoverable amount of an individual asset cannot be determined, the recoverable amount is set at the recoverable amount for the cash-generating unit to which the asset belongs. A cash-generating unit is the smallest group of assets that give rises to continuous payment in flows that are independent of other assets or groups of assets. Good will on consolidation is attributed to the business areas (which coincide with the Group’s operating segments) with which the goodwill is associated. Impairment is reversed when the grounds for the impairment entirely or partially cease to apply. However, this does not apply to goodwill or intangible non-current assets with indeterminable useful lives.

In addition to the above, for goodwill, other intangible assets with an

indeterminable useful life and intangible assets not yet ready for use, the recoverable amount is calculated annually.

INVENTORIES

Inventories, that is, raw materials and finished goods for resale, are carried at the lower of cost and net realisable value. hence taking into account the risk of obsolescence. The cost is calculated using the first in, first out (FIFO) principle or weighted average prices.

In the case of finished and semi-finished goods manufactured in-house, the cost consists of direct manufacturing costs and a reason able portion of indirect manufacturing costs. Measurement takes normal capacity utilisation into account.

CAPITAL

No express measure related to equity is applied internally. Externally, Addtech’s objective is to maintain a robust equity/assets ratio.

Equity

Addtech’s dividend policy for involves a pay-out ratio exceeding 30 percent of consolidated average profit after tax over a business cycle.

Repurchasing of treasury shares occurs, and the Board normally pro poses obtaining a mandate to repurchase treasury shares that entails acquiring an amount of shares such that Addtech’s own holding at no time exceeds 10 percent of all shares in the Company. Repurchasing serves to provide the Board with increased scope for action in its work with the Company’s capital structure, to enable the use of repurchased shares as payment in acquisitions, and to secure the Company’s commitments in existing incentive programmes.

The entire purchase consideration for share repurchase is charged against retained earnings. Proceeds from disposals of equity instruments are recognised as an increase in retained earnings, as are any transaction expenses.

EMPLOYEE BENEFITS

Employee benefits following cessation of employment, pension commitments

Addtech has defined-contribution and defined-benefit pension plans in Sweden, Norway and the UK. The plans cover a large number of employees. The defined-benefit pension plans are based mainly on the individual’s final salary. Group subsidiaries in other countries have mainly defined-contribution pension plans.

In defined-contribution plans, the Company pays stipulated fees to a separate legal entity and has no obligation to pay additional fees. Expenses are charged to the Group’s profit or loss at the rate at which the benefits are earned. Defined benefit pension plans pay compensation to employees and former employees based on their salary on retirement and the number of years for which they were employed. The Group bears the risk for payment of promised benefits.

The Group’s net obligation regarding defined-benefit plans is calculated individually for each plan by estimating future benefits that employees have earned through employment in current and previous periods. These benefits are discounted to a present value. Any unreported costs related to employment in previous periods and the fair value of any plan assets are deducted. Defined-benefit pension plans are both funded and unfunded. When a plan is funded, assets have been set aside, these are referred to as plan as sets. These plan assets can only be used for payments of benefits in accordance with the pension agreements. The net value of the estimated present value of the obligations and the fair value of plan assets is recognised in the balance sheet, either as a provision or as a non-current financial receivable. When a surplus in a plan cannot be fully utilised, only the portion of the surplus that the Company can recover through reduced future fees or repayments is recognised. A surplus in one plan is only offset by a deficit in another plan if the Company is entitled to utilise a surplus in one plan to settle a deficit in another plan, or if the obligations are intended to be settled on a net basis.

The pension expense and pension obligation for defined-benefit pension

plans are calculated using the Projected Unit Credit Method. This method distributes expenses for pensions at the rate at which employees perform services for the Company that increase their rights to future benefits. The aim is to expense expected future pension disbursements in a manner entailing an even cost over the employee’s period of employment. This calculation takes into account anticipated future salary increases and anticipated inflation. The Company’s commitment is calculated annually by independent actuaries. The discount rate used is equivalent to the interest rate on high-quality corporate bonds or mortgage bonds with a maturity equivalent to the average maturity of the obligation and currency. For Swedish pension liabilities, the interest rate for Swedish housing bonds is used as a basis and for Norwegian pension liabilities, the interest rate for Norwegian corporate bonds is used.

Revaluations may arise when establishing the present value and fair value of the plan assets for the obligation. These may arise either because the actual outcome differs from previously made assumptions (known as experience-based adjustments), or because assumptions were changed. Such revaluations are recognised in the balance sheet and in profit or loss under other comprehensive income. The net present value of the de finedbenefit obligation is established by means of discounting estimated future cash flows. The discount rate used is equivalent to the interest rate on high-quality corporate bonds or government bonds with a maturity equivalent to the average maturity of the obligation and currency.

A portion of the Group’s defined-benefit pension commitments has been

financed through premiums to Alecta. Because, the requisite information cannot be obtained from Alecta, these pension commitments are re ported as a defined-contribution pension plan.

The special employer’s contribution constitutes part of the actuarial assumptions and is therefore recognised as part of the net obligation/asset. For reasons of simplicity, the part of the special employer’s contribution that is calculated based on the Swedish Act on Safeguarding Pension Obligations in legal entities is recognised as an accrued expense rather than as part of the net obligation/asset.

Policyholder tax is recognised on an ongoing basis for the period to which the tax relates and is therefore not included in the calculation of liabilities. In the case of funded plans, the tax is on the return on plan assets and is recognised in other comprehensive income. For unfunded or partially unfunded plans, the tax is levied on profit for the year.

When the expenses for a pension are determined differently in a legal entity than in the Group, a provision or claim for taxes on pension expenses is recognised, such as a special employer’s contribution for Swedish companies based on this difference. The present value of the provision or claim is not calculated.

Benefits upon termination of employment

A cost for benefits in conjunction with termination of employment is recognised only if there is a formal, detailed plan to terminate employment prior to the normal date.

Short-term benefits

Short-term benefits to employees are calculated without discounting and are recognised as an expense when the related services are performed.

A provision for the expected costs of bonus disbursements is recognised when the Group has a valid legal or informal obligation to make such disbursements as a result of services received from employees and where the obligation can be calculated reliably.

Share-based incentive programmes

The Group’s share-based incentive programmes make it possible for Group management to purchase shares in the Company. The employees have paid a market premium for call options on Class B shares.

The programme includes a subsidy so that the employee receives the same sum as the option premium paid in the form of cash payment, i.e.

salary. This subsidy shall be paid two years after the decision to implement the issue, providing that the option holder remains employed by the Group and owns call options at that time. The subsidy, and related social security expenses, is distributed as a personnel expense over the vesting period. Addtech is not obliged to repurchase the options when an employee resigns from employment. Holders may redeem options irrespective of continued employment within the Group. See also Note 6.

PROVISIONS AND CONTINGENT LIABILITIES

A provision is recognised in the balance sheet when the Company has a formal or informal commitment as a result of an event that has occurred, it is probable that an outflow of resources will be required to settle the commitment and the amount can be estimated reliably. If the effect is material, the provision is based on a present value calculation.

Provisions are made for future expenses resulting from warranty commitments. The calculation is based on expenditure during the financial year for similar commitments or the estimated costs for each undertaking. Provisions for restructuring costs are recognised when a detailed restructuring plan has been adopted and the restructuring has either begun or been announced. Contingent liabilities are recognised when a possible obligation exists stemming from past events and the existence of the obligation is confirmed only by the occurrence or non-occurrence of one or more uncertain future events not entirely within the Company’s control. Other obligations are also recognised as contingent liabilities if they result from past events but are not recognised as a liability or provision because it is unlikely that an outflow of resources will be required to settle the obligation or because the size of the obligations cannot be determined with sufficient accuracy.

REVENUE RECOGNITION

The Group recognises revenue when the Group fulfils a performance commitment, which is when a promised good or service is delivered to the customer and the customer assumes control of the goods or services. Control of a performance commitment can be transferred over time or at a particular point in time. The revenue consists of the amount that the Company expects to receive in payment for goods or services transferred. For the Group to be able to recognise revenue from agreements with customers, each customer agreement is analysed in accordance with the five-step model included in the standard:

Step 1: Identify an agreement between at least two parties that entails an entitlement and a commitment.

Step 2: Identify the various commitments. An agreement includes undertakings to transfer goods or services to the customer (performance commitments). All commitments that are distinguishable in nature are to be reported separately.

Step 3: Determine the transaction price. The transaction price is the amount of compensation the Company is expected to receive in exchange for the promised goods or services. The transaction price must be adjusted for variable components, including any discounts.

Step 4: Distribute the transaction price between the various performance commitments. Usually, the Company is able to allocate the transaction price of each individual item or service based on a stand-alone sales price.

Step 5: Fulfilment of the performance commitments and recognition of revenue, either over time or at a particular point in time, depending on the nature of the performance commitment. The amount recognised as revenue is the amount that the Company has previously allocated to the performance commitment concerned.

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The Group’s revenue consists of sales of high-tech products and solutions to customers, primarily in manufacturing industries and infrastructure. The Group’s sales consist mainly of sales of goods, but also including service assignments to some extent.

Sales of goods

Sales of goods occur in all of the Group’s segments. Sales consist mainly of standard products, but also, to some extent, of proprietary manufactured products. Framework agreements with customers usually occur where an agreement with a customer is considered to arise only once the customer has placed an order based on the terms of the framework agreement, since it is only at this time that enforceable rights and obligations arise for the Group and the customer. The period between an order being placed and goods being delivered is normally brief. Each separate product in the order is considered to constitute a separate performance commitment.

In the relevant agreement with the customer, the transaction price usually consists only of fixed amounts. To the extent that the transaction price includes variable amounts, the Group estimates the amount to which it will be entitled and includes this in the transaction price, taking limitations of uncertain amounts into account. Revenue is reported on a single occasion because the conditions for transfer of control over time are not met. The Group considers control to have transferred on completion of delivery in accordance with applicable delivery terms, which coincides with the time at which the risks and benefits transfer to the customer.

Service assignments

Service assignments occur primarily in the Energy and Industrial Process segments. These assignments essentially comprise project agreements in which the Group delivers and, to a certain extent, installs products for specific customer projects. Such assignments are considered to constitute a combined performance commitment, since no individual product is distinct within the framework of the agreements. The transaction price normally consists only of fixed amounts. Because control of the performance commitments is considered to be transferred to the customer over time, revenue is also recognised over time. The Group applies a production method for measuring progress towards completion of a performance commitment.

FINANCIAL INCOME AND EXPENSES

Interest income on receivables and interest expenses on liabilities are computed using the effective interest method. The effective interest rate is the rate that makes the present value of all future incoming and outgoing payments during the term equal to the carrying amount of the receivable or liability. Interest income includes accrued rebates, premiums and other differences between the original value of the receivable and the amount received on maturity.

INCOME TAXES

Tax expenses/income are recognised in the income statement, except when the underlying transaction is recognised in other comprehensive income or directly in equity, in which case the associated tax effect is recognised in other comprehensive income or in equity. Current tax refers to tax that is to be paid or refunded for the current year. This also includes adjustments of current tax attributable to prior periods.

Deferred tax is calculated using the liability method based on temporary differences between carrying amounts and tax bases of as sets and liabilities. The amounts are calculated depending on how the temporary differences are expected to be settled and by applying the tax rates and tax rules enacted or announced as per the balance sheet date. Temporary

differences are not taken into account in Group goodwill, nor in differences attributable to participations in subsidiaries or associated companies owned by Group companies outside Sweden that are not expected to be taxed in the foreseeable future. In the consolidated financial statements, untaxed reserves are allocated to deferred tax liability and equity. Deferred tax assets related to deductible temporary differences and tax loss carry-forwards are only recognised to the extent it is likely they will reduce tax payments in the future.

SEGMENT REPORTING

Assets and liabilities as well as income and expenses are attributed to the operating segment in which they are used, earned and consumed, respectively. The operating segment’s earnings are monitored by the highest executive decision-maker, i.e. the CEO of Addtech.

The division into operating segments is based on the business area organisation, by which the Group’s operations are managed and monitored. These are Automation, Components, Energy, Industrial Process and Power Solutions. Operations that do not belong to these areas of operation are included under the heading Parent Company and Group items.

EARNINGS PER SHARE

Addtech discloses earnings per share (EPS) in direct connection with the income statement. Calculation of EPS is based on consolidated profit or loss for the year attributable to Parent Company shareholders and on the weighted average number of shares outstanding during the year. To calculate diluted EPS, the average number of shares is adjusted to take into account the effect of potentially dilutive ordinary shares that, during the periods reported, result from options awarded to employees.

CASH FLOW STATEMENT

In preparing the cash flow statement, the indirect method was applied as per IAS 7 Statement of Cash Flows. In addition to flows of cash and bank funds, current investments maturing within three months of the acquisition date that can be converted into bank deposits at a previously known amount are classified as cash and cash equivalents.

EVENTS AFTER THE BALANCE SHEET DATE

Events that occurred after the balance sheet date but whose circumstances were identifiable at the end of the reporting period are included in the reporting. If significant events occurred after the balance sheet date but did not affect the recognised earnings of operations or financial position, the event is disclosed under a separate heading in the Administration Report and in note 33.

RELATED PARTY DISCLOSURES

Where appropriate, information will be provided about transactions and agreements with related companies and natural persons. In the consolidated accounts, intra-Group transactions fall out side this reporting requirement.

ALTERNATIVE KEY FINANCIAL INDICATORS

The Company presents certain financial measures in the Annual Report that are not defined in accordance with IFRS. The Company believes that these measures provide valuable supplementary information to investors and the Company’s management as they enable the evaluation of trends and the Company’s performance. Since not all companies calculate financial measures in the same way, these are not always comparable with measures used by other companies. These financial measures should therefore not be seen as compensation for measures that are defined in accordance with IFRS. For definitions of the key financial indicators used by Addtech, see pages 110-111.

GOVERNMENT GRANTS

Government grants refers to support from the government in the form of transfers of resources to a company in exchange for that company fulfilling (in the past or future) certain conditions regarding its operations. The Group is active in areas where government grants are insignificant in scope.

PERSONNEL INFORMATION

The Swedish Annual Accounts Act requires more information than IFRS, including information about the gender distribution of the Board of Directors and Group management. Data on gender distribution refer to the situation as per the balance sheet date. “Board members” are members of the boards of directors of the Parent Company and Group companies who have been elected by General Meeting. In this context, “Senior executives” refers to members of Group Management and the Managing Directors and Deputy Managing Directors of Group companies.

PARENT COMPANY ACCOUNTING PRINCIPLES

The Parent Company applies the same accounting policies as the Group, except where the Swedish Annual Accounts Act and the Swedish Act on Safeguarding Pension Obligations prescribe different procedures, or if the connection to taxation necessitates different accounting.

The Parent Company prepared its annual accounts in accordance with the Swedish Annual Accounts Act (1995:1554) and recommendation RFR 2 Accounting for Legal Entities, of the Swedish Financial Reporting Board. RFR 2 prescribes that, in the annual accounts of its legal entity, the Parent Company shall apply all EU-approved IFRS and standard interpretations to the greatest extent possible within the scope of the Annual Accounts Act and taking the relationship between accounting and taxation into account. The recommendation specifies which exceptions from, and additions to, IFRS must be made.

Interests in Group companies are recognised in the Parent Company using the cost method, entailing transaction costs being included in the carrying amount for holdings in subsidiaries. Any changes in liabilities for contingent purchase considerations are added to or reduce the cost. The Group expenses transaction expenses, while entering changes in liabilities for contingent purchase considerations as income or expenses. Instead of IAS 19, the Swedish Act on Safeguarding Pension Obligations is applied in the Parent Company when calculating defined-benefit pension plans. The most significant differences compared with IAS 19 are the method for determining the discount rate, that the de fined benefit obligation is calculated based on current salaries with out assuming future salary increases and that all actuarial gains and losses are recognised in profit or loss as they occur.

The Parent Company recognises untaxed reserves including deferred tax liabilities, rather than dividing them into deferred tax liabilities and equity as is done for the Group.

The parent company does not apply IFRS 16 in accordance with the exemption in RFR 2. As a lessee, lease payments are expensed linearly over the lease term. Right-of-use assets and lease liabilities are not recognised in the balance sheet.

Group contributions are recognised in the Parent Company in accordance with the alternative rule. A Group contribution received from a subsidiary by a Parent Company, or a Group contribution paid from a Parent Company to a subsidiary is recognised in the Parent Company as an appropriation. Shareholder contributions are recognised directly in the equity of the recipient and are capitalised in the contributor’s shares and participations, to the extent that no impairment needs to be recognised.

~~NOTE 2~~

Critical estimates and assumptions

The carrying amounts of certain assets and liabilities are based in part on estimates and assumptions. This applies particularly to impairment testing of goodwill (Note 14) and to defined-benefit pension obligations (Note 22). Assumptions and estimates are continually evaluated and are based on historical experience and expectations regarding future events deemed reasonable under prevailing circumstances. Tests are performed each year to determine if goodwill is impaired. The recoverable amount for cash-generating units has been deter mined by calculating values in use. For these calculations, certain estimates must be made.

A large part of the Group’s pension commitments for salaried employees are defined-benefit commitments covered by collective policies with Alecta. Since it is not currently possible to obtain data from Alecta on the Group’s share of commitments and plan assets, the pension plan signed with Alecta must be recognised as a defined-contribution plan. The consolidation ratio reported by Alecta does not indicate any deficit, although it is not possible to obtain detailed information from Alecta about the size of the pension commitment.

The present value of pension commitments recognised as defined-benefit commitments depends on multiple factors determined on an actuarial basis applying a number of assumptions. In establishing these assumptions, Addtech consults with actuaries The assumptions used to deter mine the present value of the commitment include the discount rate and salary increases. Each change in these assumptions will affect the carrying amount of pension commitments. See also Note 22.

~~NOTE 3~~

Financial risks and risk management

RISK MANAGEMENT POLICY AND OBJECTIVES

Addtech strives for structured and efficient management of the financial risks that arise in operations, which is manifest in the financial policy adopted by the Board of Directors. The financial operations are not conducted as a separate line of the business; they are merely in tended to constitute support for the business and reduce risks in the financial operations. The policy stipulates goals and risks in the financial operations, and how they are to be managed. The financial policy expresses the goal of minimising and controlling financial risks. The policy defines and identifies the financial risks that arise at Addtech and how responsibility for managing these risks is distributed in the organisation. The financial risks defined in the financial policy are trans action exposure, translation exposure, refinancing risk, interest rate risk, margin risk, liquidity risk and issuer/borrower risk. Operational risks, that is, financial risks related to operating activities, are man aged by each subsidiary’s management according to principles in the financial policy and subordinate process descriptions approved by the Group’s Board of Directors and management. Risks such as translation exposure, refinancing risk and interest rate risk are managed by the Parent Company, Addtech AB. Financial derivatives with external counterparties may only be entered by Addtech AB. The subsidiaries hedge their risk via Addtech AB which, in turn, obtains hedges on the external market.

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NOTES

NOTES

NOTE 3 CONT.

CURRENCY RISK

The Addtech Group conducts extensive trade abroad and a material currency exposure therefore arises in the Group, which must be managed in such a way as to minimise the impact on earnings resulting from exchange rate fluctuations.

The Group applies decentralised responsibility for currency risk management. This involves risk identification and risk hedging occurring at subsidiary level. It is important to capitalise on the size of the Group and natural conditions to match flows, and the subsidiaries must therefore hedge their risk via the Parent Company which, in turn, obtains hedges on the external market.

For Addtech, currency risk arises 1) as a result of future payment flows in foreign currency, known as transaction exposure, and 2) be cause parts of the Group’s equity comprise net assets in foreign subsidiaries, known as translation exposure. Monetary financial assets and liabilities in currencies other than each Group company’s functional currency occur to a limited extent.

TRANSACTION EXPOSURE

Transaction exposure comprises all future contracted and forecast ingoing and outgoing payments in foreign currency. The Group’s currency flows usually pertain to flows in foreign currency from purchases, sales and dividends. Transaction exposure also comprises financial transactions and balances. During the year, the Group’s payment flows in foreign currencies were distributed as follows:

	Currency fows, gross 2019/2020 Currency fows, net
	Infows Outfows 2019/2020 2018/2019
EUR USD NOK JPY DKK GBP CHF	2,813 2,887 -74 -195 930 1,123 -193 -187 90 67 23 27 72 108 -36 -41 61 152 -91 -82 26 117 -91 -54 28 85 -57 -60

The effects of exchange rate fluctuations are reduced by buying and selling in the same currency, through currency clauses in customer contracts and, to a certain degree, by forward purchases or sales of foreign currency. In the industry, currency clauses are a common method for handling uncertainty associated with future cash flows. A currency clause means that compensation is paid for any changes in the exchange rate exceeding a certain predefined level during the contract period. If these thresholds are not reached, for example when the exchange rate changes by less than 2 percentage points, no compensation is paid. The currency clauses adjust the exchange rate change between the time the order is placed and the invoice date. Currency clauses are symmetrically designed, meaning that compensation is charged or credited when the exchange rate rises or falls beyond the predefined thresholds.

Of consolidated net sales, currency clauses cover about 10 percent (12) and sales in the purchasing currency make up about 38 percent (39). In certain transactions, there is a direct link between the customer’s order and the associated purchase order, which is a good basis for effective currency risk management. However, in many cases the dates

of the orders do not coincide, which may reduce the effectiveness of these measures. The subsidiaries have reduced their currency exposure by using forward foreign exchange contracts. At the end of the financial year, there were outstanding forward foreign exchange contracts in a gross amount of SEK 183 million (166), of which EUR equalled SEK 115 million (117), JPY SEK 0 million (15), USD SEK 34 million (24), PLN SEK 22 million (4), DKK SEK 2 million (4), GBP SEK 9 million (1) and NOK SEK 1 million (0). Of the total contracts, SEK 148 million (113) matures within six months, SEK 35 million (51) within 12 months and SEK 0 million (2) within 18 months. Hedge accounting does not apply to forward foreign exchange contracts and they are classified as a financial asset measured at fair value through profit or loss. Hedge accounting applies to embedded derivatives consisting of currency clauses, and they are classified as derivatives used in hedge accounting. The cash flow effect from embedded derivatives normally occurs within six months.

The Group has a net exposure in several currencies. If each separate currency pair changes by 5 percent, the aggregate effect on profit would total about SEK 68 million (46), all else being equal. Inflows and outflows in the same currency mean that the Group’s exposure is relatively limited. Currency flows in the Parent Company are mainly in Swedish kronor (SEK). To the extent that internal and external loans and investments in the Parent Company are in foreign currency, 100 percent of the capital amount is hedged.

Translation exposure

The translation exposure of the Addtech Group is currently not hedged. The Group’s net assets are divided among foreign currencies as follows:

Net investments	31 Mar 2020 31 Mar 2019
	SEK million Sensitivity analysis1) SEK million Sensitivity analysis2)
NOK EUR DKK PLZ TTD GBP HKD USD CNY	828 41.4 827 41.4 1,104 55.2 792 39.6 1,065 53.3 1,000 50.0 -13 -0.7 -22 -1.1 26 1.3 25 1.3 401 20.1 392 19.6 79 4.0 52 2.6 20 1.0 15 0.8 137 6.9 75 3.8

1) Impact of +/–5% in exchange rate on consolidated equity

2) Circumstances in the previous year

When translating the income statement of units with a functional currency other than SEK, a translation effect arises when exchange rates vary. With the present distribution of Group companies’ different functional currencies, a change of 1 percentage point in the exchange rates would have an effect of SEK +/- 72 million (64) on net sales and SEK +/- 8 million (5) on operating profit.

The exchange rates applied in the financial accounts are shown in the following table:

Exchange rate	Average rate Closingdayrate
	2019/2020 2018/2019 31 Mar 2020 31 Mar 2019
CHF 1 CNY 100 DKK 100 EUR 1 GBP 1 HKD 1 JPY 1000 NOK 100 PLZ 1 TRY 1 TTD 1 TWD 1 USD 1	9.72 9.04 10.45 9.30 137.60 133.51 142.21 137.91 142.64 139.04 148.13 139.29 10.65 10.37 11.06 10.40 12.18 11.76 12.48 12.11 1.23 1.14 1.30 1.18 88.20 80.80 93.00 83.60 106.35 107.77 96.10 107.65 2.48 2.42 2.43 2.42 1.67 1.73 1.53 1.64 1.42 1.33 1.47 1.37 0.31 0.30 0.33 0.30 9.56 8.96 10.10 9.26

FINANCING AND LIQUIDITY

The overall objective of Addtech’s financing and debt management is to secure financing for the operations in both the long and short term, and to minimise borrowing costs. The capital requirement is to be secured through an active and professional borrowing procedure comprising overdraft and other credit facilities. Raising of external financing is centralised at Addtech AB. Adequate payment capacity is to be achieved through contractual credit facilities. Surplus liquidity is primarily used to pay down outstanding credits. The Parent Company is responsible for the Group’s long-term financing as well as its supply of liquidity. The Parent Company provides an internal bank which lends to and borrows from the subsidiaries. The Group’s and Parent Company’s non-current and current interest-bearing liabilities are shown in Notes 24 and 25.

To manage surpluses and deficits in different currencies, Addtech uses currency swaps from time to time. This allows the Group to reduce its financing costs and the Company’s liquid funds to be used in an efficient manner.

Refinancing risk

The refinancing risk is the risk of Addtech not having access to sufficient financing on each occasion. The refinancing risk increases if Addtech’s credit rating deteriorates or if Addtech becomes too de pendent on one source of financing. If all or a large part of the debt portfolio matures on a single or a few occasions, this could involve the turnover or refinancing of a large proportion of the loan volume having to occur on disadvantageous interest and borrowing terms.

In order to limit the refinancing risk, the procurement of long-term credit facilities is commenced no later than nine months before the credit facility matures. On 31 March 2020, the Group’s credit facilities amounted to SEK 3,800 million (2,001), represented by bank overdraft facilities of SEK 1,300 million (1,301) and other agreed credit facilities of SEK 2,500 million (700). During the year, overdraft facilities increased by SEK 0 million (200) while other agreed credit facilities increased by SEK 1,800 million (300). At 31 March 2020, the Group had utilised SEK 156 million (1,031) of the bank overdraft facilities and SEK 1,600 million (700) of the other credit facilities. Unutilised bank overdraft facilities and credit facilities amounted to SEK 2,028 million (270). The Group’s credit facilities are contingent upon loan covenants, the conditions of which are fulfilled with a wide margin. For covenants, Addtech uses two ratios: EBITDA/net financial items and equity/assets.

INTEREST RATE RISK

The interest rate risk is regulated by ensuring that the average fixed interest term of the debt portfolio varies between 0-3 years. The debt portfolio consists of bank overdraft facilities and outstanding external loans. The interest rate at 31 March 2020 was variable, that is, 0-3 months. Addtech’s main exposure to interest rate risk is in its debt portfolio. Aside from the pension liability, interest-bearing external debt totals SEK 2,616 million (1,996).

With the current net financial debt, the impact on the Group’s net financial items would be SEK +/- 20 million if interest rates were to fluctuate by 1 percentage point.

ISSUER/BORROWER RISK AND CREDIT RISK

Issuer/borrower risk and credit risk are defined as the risk of Addtech’s counterparties failing to fulfil their contractual obligations. Addtech is exposed to credit risk in its financial transactions, that is, in investing its surplus liquidity and executing forward foreign exchange transactions, and in its commercial operations in connection with accounts receivable and advance payments to suppliers. Maximum credit risk exposure from financial assets is consistent with the carrying amount of those assets.

Addtech’s financial function at the Parent Company is responsible for assessing and managing issuer/borrower risk. The financial policy prescribes that surplus liquidity only be invested with counterparties that have a very high credit rating. As in prior years, in 2019/2020 no surplus funds were invested with any counterparties other than Swedish banks, aside from the Group’s normal bank contacts.

To utilise its subsidiaries’ detailed knowledge of Addtech’s customers and suppliers, Addtech has each company assess the credit risk in its commercial transactions. New customers are assessed before credit is granted, and credit limits set are strictly enforced. Short credit periods are the goal, and avoiding excessive concentration of business with individual customers and with specific sectors helps minimise risks. No individual customer accounts for more than 4 percent (3) of total credit exposure during a one-year period. The equivalent figure for the ten largest customers is about 17 percent (12). Exposure per customer segment and geographic market is presented in Note 5.

Bad debt losses totalled SEK 7 million (7) during the year, equal to 0 percent (0) of net sales.

Accounts receivable,SEK million 31 Mar 2020	31 Mar 2019
Carrying amount 2,003 Impairment 17	1,887 9
COST 2,020	1,896
Change in impaired accounts receiva- ble 2019/2020	2018/2019
Amount at beginning of year -9 Corporate acquisitions -4 Year’s impairment losses/reversals -5 Settled impairment 1 Translation effect 0	-10 -1 1 1 0
TOTAL -17	-9
Time analysis of accounts receivable that are overdue but not impaired 31 Mar 2020	31 Mar 2019
< = 30 days 272 31–60 days 53 > 60 days 50	233 26 22
TOTAL 375	281

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NOTES

NOTES

~~NOTE 4~~

Revenue from contracts with customers

Disaggregation of revenue from contracts with customers

Geographical locations of subsidiaries SEK million	2019/2020
	Automation Components Energy Industrial Process Power Solutions Group items Addtech Group
Sweden Denmark Finland Norway Europe Other countries	714 832 774 800 1,007 -6 4,121
	557 546 568 540 97 -10 2,298
	347 461 187 629 117 -1 1,740
	245 227 593 686 107 -1 1,857
	545 10 277 268 209 – 1,309
	17 6 13 281 93 0 410
Total revenue from contracts with customers	2,425 2,082 2,412 3,204 1,630 -18 11,735

Geographical locations of customers SEK million	2019/2020
	Automation Components Energy Industrial Process Power Solutions Group items Addtech Group
Sweden Denmark Finland Norway Other countries	560 620 697 776 463 -4 3,112
	422 396 388 457 119 -3 1,779
	347 395 205 331 233 -4 1,507
	326 223 595 613 113 -1 1,869
	770 448 527 1,027 702 -6 3,468
Total revenue from contracts with customers	2,425 2,082 2,412 3,204 1,630 -18 11,735

Customer segments SEK million	2019/2020
	Automation Components Energy Industrial Process Power Solutions Group items Addtech Group
Vehicles Mechanical industry Data and telecommunications Medical technology Electronics Energy Forestry and process Building and installation Transport Other	97 354 48 160 554 -39 1,174
	485 354 217 481 82 24 1,643
	242 63 145 0 114 23 587
	364 83 24 96 130 7 704
	73 479 121 32 196 -80 821
	170 271 965 224 212 35 1,877
	242 83 96 705 0 48 1,174
	73 104 579 96 163 41 1,056
	218 83 121 1,282 65 -9 1,760
	461 208 96 128 114 -68 939
Total revenue from contracts with customers	2,425 2,082 2,412 3,204 1,630 -18 11,735

Disaggregation of revenue from contracts with customers

Geographical locations of subsidiaries SEK million	2018/2019
	Automation Components Energy Industrial Process Power Solutions Group items Addtech Group
Sweden Denmark Finland Norway Europe Other countries	657 857 772 720 1,052 -6 4,052 485 536 491 522 75 -9 2,100 380 351 169 325 103 -1 1,327 223 205 639 373 101 -1 1,540 195 11 286 259 181 0 932 6 – – 106 85 0 197
Total revenue from contracts with customers	1,946 1,960 2,357 2,305 1,597 -17 10,148

	2018/2019
	Automation Components Energy Industrial Process Power Solutions Group items Addtech Group
Sweden Denmark Finland Norway Other countries	558 642 686 710 494 -5 3,085 353 370 320 373 114 -2 1,528 363 290 172 204 195 -3 1,221 268 209 640 359 110 -2 1,584 404 449 539 659 684 -5 2,730
Total revenue from contracts with customers	1,946 1,960 2,357 2,305 1,597 -17 10,148
Customer segments SEK million	2018/2019
	Automation Components Energy Industrial Process Power Solutions Group items Addtech Group
Vehicles Mechanical industry Data and telecommunications Medical technology Electronics Energy Forestry and process Building and installation Transport Other	97 353 0 185 511 72 1,218 584 333 165 507 79 -44 1,624 136 59 71 0 128 12 406 195 78 23 92 112 8 508 175 431 165 23 223 -3 1,014 156 255 1,061 208 192 -45 1,827 194 79 94 576 0 -30 913 39 137 589 138 176 37 1,116 78 59 71 415 96 -9 710 292 176 118 161 80 -15 812
Total revenue from contracts with customers	1,946 1,960 2,357 2,305 1,597 -17 10,148

Performance commitments

The Group’s sales, of both goods sales and services, are invoiced, normally with payment terms of 30-90 days.

The Group’s performance commitments are included in agreements with an original expected term of no more than one year. For further in formation on the Group’s performance commitments, see Note 1 on the consolidated accounts, Accounting and valuation principles.

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NOTES

NOTES

~~NOTE 5~~

Segment reporting

The division into business areas reflects Addtech’s internal organisation and reporting system. Addtech reports its business areas as operating segments. Addtech is organised into the following five business areas: Automation, Components, Energy, Industrial Process and Power Solutions.

the energy and electrical installation market via specifiers and electricity wholesalers.

Automation

Automation markets and sells intelligent solutions, subsystems and components to, for example, industrial automation and infrastructure, including solutions for robotics, control systems, sensors, industrial networks and communication networks.

Industrial Process

Industrial Process markets and sells solutions, sub-systems and components, often under proprietary brands, helping optimise industrial processes and flows. Customers operate mainly in the northern European manufacturing and processing industries.

Components

Components markets and sells components and sub-systems within mechanics, electromechanics, hydraulics and electronics. Customers mainly operate within the Nordic manufacturing industry.

Power Solutions

Power Solutions develops, markets and sells components and systems solutions that safeguard power supply, as well as steering and controlling movements or energy flows. Customers operate mainly within special vehicles, energy, electronics and telecom. The business area has strong proprietary brands and niche production.

Energy

Energy markets and sells products for the transmission and distribution of electricity, as well as products in the areas of electrical safety, electrical installation and connection technology. Its customers mainly operate in

Data by operating segment Net sales	2019/2020 2018/2019
	External Internal Total External Internal Total
Automation Components Energy Industrial Process Power Solutions Parent Companyand Groupitems	2,421 4 2,425 1,942 4 1,946 2,079 3 2,082 1,957 3 1,960
	2,409 3 2,412 2,356 1 2,357
	3,199 5 3,204 2,298 7 2,305 1,627 3 1,630 1,595 2 1,597 – -18 -18 – -17 -17
TOTAL	11,735 0 11,735 10,148 0 10,148

Operating proft,assets and liabilities	2019/2020 2018/2019
	Operating proft Assets1) Liabilities1) Operating proft Assets1) Liabilities1)
Automation Components Energy Industrial Process Power Solutions Parent Companyand Groupitems	214 1,742 483 146 1,363 311 182 1,381 485 191 1,173 302 232 1,686 547 196 1,550 405 414 1,831 736 198 1,372 504 202 1,216 305 194 1,083 245 -83 650 2,874 -15 504 2,758
Operating proft, assets and liabilities Financial income and expenses	1,161 8,506 5,430 910 7,045 4,525 -56 -45
Proft after fnancial items	1,105 865

1) Excluding transactions on Group accounts and financial transactions with Group companies.

Investments in non-current assets	2019/2020 2018/2019
	Intangible assets1) Property, plant and equipment1) Total Intangible assets1) Property, plant and equipment1) Total
Automation Components Energy Industrial Process Power Solutions Parent Companyand Groupitems	2 6 8 1 5 6 0 13 13 – 15 15 1 20 21 0 12 12 10 28 38 2 25 27 1 18 19 1 12 13 6 1 7 2 1 3
TOTAL	20 86 106 6 70 76

1) Amounts do not include effects of corporate acquisitions

Depreciation, property, plant and equipment	2019/2020 2018/2019
	Intangible assets Property, plant and equipment Total Intangible assets Property, plant and equipment Total
Automation Components Energy Industrial Process Power Solutions Parent Companyand Groupitems	-53 -32 -85 -46 -5 -51 -36 -48 -84 -28 -8 -36 -51 -42 -93 -49 -12 -61 -32 -54 -86 -20 -15 -35 -30 -27 -57 -30 -11 -41 -1 -12 -13 0 -2 -2
TOTAL	-203 -215 -418 -173 -53 -226
Signifcant proft or loss items, other than depreciation o amortisation,not matched by payments in 2019/2020	r Netgains Change in pension liability Other items Total
Automation Components Energy	0 2 -65 -63 0 3 10 13 -1 0 -8 -9
Industrial Process	0 – 15 15
Power Solutions Parent Companyand Groupitems	– 0 -5 -5 – -3 -12 -15
TOTAL	-1 2 -65 -64
Data bycountry	2019/2020 2018/2019
	Net sales external Assets1) Of which, non-current assets Net sales external Assets1) Of which, non-current assets
Sweden Denmark Finland Norway Other countries Parent Company,Groupitems and unallocated assets	3,112 2,952 1,485 3,085 2,630 1,260 1,779 1,579 757 1,528 1,358 620 1,507 1,165 633 1,221 864 369 1,869 1,076 527 1,584 1,035 521 3,468 1,409 753 2,730 942 453 – 325 21 – 216 0
TOTAL	11,735 8,506 4,176 10,148 7,045 3,223

1) Excluding transactions on Group accounts and financial assets. External net sales are based on the customers’ location, and the carrying amounts of assets are based on where the assets are located.

Investments in non-current assets	2019/2020 2018/2019
	Intangible assets Property, plant and equipment Total Intangible assets Property, plant and equipment Total
Sweden Denmark Finland Norway Other countries	8 23 31 3 27 30 1 7 8 0 3 3 9 24 33 2 22 24 0 5 5 0 6 6 2 27 29 1 12 13
Total	20 86 106 6 70 76

The Group has no single customer from whom income accounts for 10 percent of total revenue, for which reason there is no related reporting.

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NOTES

NOTES

~~Note 6~~

Employees and personnel expenses

Average number of employees	2019/2020 2018/2019
	Men Women Total Men Women Total
Sweden Parent Company Other companies Denmark Finland Norway Other countries	7 4 11 5 6 11 712 245 957 660 220 880 265 121 386 243 112 355 333 82 415 273 76 349 261 94 355 249 84 333 579 210 789 490 172 662
Total	2,157 756 2,913 1,920 670 2,590
Salaries and remunerations	2019/2020 2018/2019
	Senior execu- tives of which bonuses Other employees Senior execu- tives of which bonuses Other employees
Sweden Parent Company Other companies Denmark Finland Norway Other countries	32 8 5 27 6 6 57 12 458 53 8 444 40 4 278 34 4 247 31 4 206 23 3 167 25 3 237 25 3 224 38 2 267 30 2 166
Total	223 33 1,451 192 26 1,254

Senior executives are defined as Group Management and the Managing Directors and Deputy Managing Directors of the Group’s subsidiaries.

Salaries,remunerations and social securityexpenses	Group Parent Company
	2019/2020 2018/2019 2019/2020 2018/2019
Salaries and other remunerations Contract-based pensions for senior executives Contract-based pensions for others Other social securityexpenses	1,674 1,446 37 33 28 24 5 4 137 116 2 3 275 254 13 12
Total	2,114 1,840 57 52

At the end of the year, outstanding pension obligations to the Group’s senior executives amounted to SEK 10 million (9) for the Group and SEK 0 million (0) for the Parent Company. Different accounting principles are applied regarding pension expenses in the Parent Company and in the Group (see Note 1 Accounting principles).

Proportion of women	Group Parent Company
	31 Mar 2020 31 Mar 2019 31 Mar 2020 31 Mar 2019
Board of Directors (excl. alternates) Other senior executives	7% 5% 29% 29% 17% 16% 14% 20%

PROCESS FOR EVALUATING AND DETERMINING

REMUNERATIONS TO THE BOARD OF DIRECTORS, THE CEO AND GROUP MANAGEMENT

The guidelines applied to the remuneration of senior executives in the 2019/2020 financial year correspond to those adopted at the 2019 Annual General Meeting and are equivalent, essentially, to the guidelines proposed for the upcoming year, as set out in the Administration Report. The principle for remuneration to the Board of Directors, Chief Executive Officer (CEO) and Group management is that remuneration should be competitive. The Nomination Committee proposes Board fees to the Annual General Meeting. Fees are paid to the Board of Directors in accordance with a resolution by the Annual General Meeting.

For remuneration to the CEO, members of Group Management and other senior executives in the Group, the Board of Directors has appointed a Remuneration Committee consisting of the Chairman of the Board and the Deputy Chairman of the Board, with a Board member and the CEO attending in a re porting capacity. The CEO, members of Group Management and other senior executives are paid a fixed salary, variable remuneration and convention al employment benefits. Pension benefits and incentive programmes also apply as detailed below. The Remuneration Committee follows the guidelines on remunerations for senior executives approved by the Annual General Meeting of Addtech AB.

CALL OPTIONS FOR SENIOR EXECUTIVES

Background and motivation for long-term incentive programmes

The purpose of long-term incentive schemes is to enable Group executives, through an investment of their own, to participate in and work for a favourable trend in the value of the Company’s shares.

The schemes are also expected to generate improved conditions for recruiting and retaining skilled personnel for the Addtech Group, to provide competitive compensation and to unite the interests of the shareholders with those of the executives. The schemes are intended to contribute to executives increasing their shareholding in Addtech over the long term. The executives encompassed by the schemes are those who, in an otherwise heavily decentralised organisation, are able to impact profit positively by means of partnerships between Group subsidiaries. The share-related incentive schemes approved by the Annual General Meeting do not entail a net charge against Company equity.

Similar call option schemes for senior executives and a select number of management members in the Addtech Group were adopted by the 2009-2019 Annual General Meetings. With the exception of the CEO, Board members have not been entitled to acquire call options. The schemes involve call options for shares repurchased by Addtech, with each call option entitling the holder to acquire one repurchased Class B share. As financial instruments, the call options are freely transferable. To encourage participation in the scheme, a subsidy is paid corresponding to the premium paid for each call option. This subsidy will be paid out two years after the Annual General Meeting, providing that the option holder’s employment with the Group has not been terminated and that the call options have not been sold before this time. The expenses for the scheme consist of the subsidy plus social security expenses. The subsidy corresponds to the option premium that the Company receives on the transfer of the call options and, accordingly, the scheme entails no net charge on the Company’s equity.

In the event that the option holder does not wish to exercise all of the call options acquired, the Company is entitled to repurchase call options from the holder. Options are to be acquired at a price corresponding at most to their market value at any given time. Call options may not, however, be repurchased during any period in which trade in the Company’s shares is forbidden.

2019/2023 scheme

The allotment for 2019 approved by the 2019 Annual General Meeting included 25 executives and a total of 300,000 call options, corresponding to 0.4 percent of the total number of shares and approximately 0.3 percent of the total number of votes in the Company. The allotment varied between 12,500 and 25,000 options per person. The Chief Executive Officer acquired 19,000 and other members of Group Management 102,000.

Each option entitles the holder to acquire one repurchased Class B share between 5 September 2022 and 2 June 2023. The purchase price for shares when exercising options will correspond to 120 percent of the volume-weighted average price paid for the Company’s Class B shares on NASDAQ Stockholm between 30 August 2019 and 12 September 2019. In the event that, on invoking call options, the market price for Class B shares in the Company exceeds 200 percent of the average price during the period 30 August 2019 to 12 September 2019, the exercise price shall be raised by the amount exceeding 200 percent in SEK 1 increments. The premium for the call options will correspond to the market value of the call options in accordance with an external independent valuation applying the Black & Scholes model. The measurement period for calculating the option premium will be based on the volume-weighted average price paid for the Company’s Class B shares on NASDAQ Stockholm between 6 September 2019 and 12 September 2019.

The exercise price for the call options was set at SEK 321.80. The market value of the call options was set at SEK 21.10. The expenses for the scheme consist of the subsidy paid in September 2021, as detailed above, and the social security fees payable on that subsidy. The total cost of the subsidy, including social security fees, is estimated at approximately SEK 6.9 million after corporation tax. The subsidy corresponds to the option premium that the Company receives on the transfer of the call options. The personnel expense accrues over the vesting period.

2018/2022 scheme

The allotment for 2018 approved by the 2018 Annual General Meeting included 24 executives and a total of 300,000 call options, corresponding to 0.4 percent of the total number of shares and approximately 0.3 percent of the total number of votes in the Company. The allotment varied between 12,500 and 27,500 options per person. The Chief Executive Officer acquired 27,500 and other members of Group Management 87,500.

Each option entitles the holder to acquire one repurchased Class B share between 6 September 2021 and 3 June 2022. The purchase price for shares when exercising options will correspond to 120 percent of the volume-weighted average price paid for the Company’s Class B shares on NASDAQ Stockholm between 31 August 2018 and 13 September 2018. In the event that, on invoking call options, the market price for Class B shares in the Company exceeds 200 percent of the average price during the period 31 August 2018 to 13 September 2018, the exercise price shall be raised by the amount exceeding 200 percent in SEK 1 increments. The premium for the call options will correspond to the market value of the call options in accordance with an external independent valuation applying the Black & Scholes model. The measurement period for calculating the option premium will be based on the volume-weighted average price paid for the Company’s Class B shares on NASDAQ Stockholm between 7 September 2018 and 13 September 2018.

The exercise price for the call options was set at SEK 232.90. The market value of the call options was set at SEK 13.30. The expenses for the scheme consist of the subsidy paid in September 2020, as detailed above, and the social security fees payable on that subsidy. The total cost of the subsidy, including social security fees, is estimated at approximately SEK 4.3 million after corporation tax. The subsidy corresponds to the option premium that the Company receives on the transfer of the call options. The personnel expense accrues over the vesting period.

At the end of the financial year, Addtech had four call option programmes outstanding, involving a total 1,007,000 Class B shares.

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NOTES

NOTES

NOTE 6 CONT.

2017/2021 scheme

The allotment for 2017 approved by the 2017 Annual General Meeting included 24 executives and a total of 300,000 call options, corresponding to 0.4 percent of the total number of shares and approximately 0.3 percent of the total number of votes in the Company. The allotment varied between 7,000 and 25,500 options per person. The Chief Executive Officer acquired 25,500 and other members of Group Management 115,000.

Each option entitles the holder to acquire one repurchased Class B share between 14 September 2020 and 4 June 2021. The purchase price for shares when exercising options will correspond to 120 percent of the volume-weighted average price paid for the Company’s Class B shares on NASDAQ Stockholm between 1 September 2017 and 14 September 2017. In the event that, on invoking call options, the market price for Class B shares in the Company exceeds 200 percent of the average price during the period 1 September 2017 to 14 September 2017, the exercise price shall be raised by the amount exceeding 200 percent in SEK 1 increments. The premium for the call options will correspond to the market value of the call options in accordance with an external independent valuation applying the Black & Scholes model. The measurement period for calculating the option premium will be based on the volume-weighted average price paid for the Company’s Class B shares on NASDAQ Stockholm between 8 September 2017 and 14 September 2017.

The exercise price for the call options was set at SEK 178.50. The market value of the call options was set at SEK 10.80. The expenses for the scheme consist of the subsidy paid in September 2019, as detailed above, and the social security fees payable on that subsidy. The total cost of the subsidy, including social security fees, is estimated at approximately SEK 3.5 million after corporation tax. The subsidy corresponds to the option premium that the Company receives on the transfer of the call options. The personnel expense accrues over the vesting period.

2016/2020 scheme

The allotment for 2016 approved by the 2016 Annual General Meeting included 20 executives and a total of 300,000 call options, corresponding to 0.4 percent of the total number of shares and approximately 0.3 percent of the total number of votes in the Company. The allotment varied between 7,500 and 37,500 options per person. The Chief Executive Officer acquired 31,500 and other members of Group Management 135,000.

Each option entitles the holder to acquire one repurchased Class B share between 16 September 2019 and 5 June 2020. The purchase price for shares when exercising options will correspond to 120 percent of the volume-weighted average price paid for the Company’s Class B shares on NASDAQ Stockholm between 1 September 2016 and 14 September 2016. The premium for the call options will correspond to the market value of the call options in accordance with an external independent valuation applying the Black & Scholes model. The measurement period for calculating the option premium will be based on the volume-weighted average price paid for the Company’s Class B shares on NASDAQ Stockholm between 8 September 2016 and 14 September 2016.

The exercise price for the call options was set at SEK 159.00. The market value of the call options was set at SEK 11.80. The expenses for the scheme consist of the subsidy paid in September 2018, as detailed above, and the social security fees payable on that subsidy. The total cost of the subsidy, including social security fees, is estimated at approximately SEK 3.6 million after corporation tax. The subsidy corresponds to the option premium that the Company receives on the transfer of the call options. The personnel expense accrues over the vesting period.

Between 16 September 2019 and 31 March 2020, 99,500 options were repurchased under current market conditions, based on an independent external valuation applying the Black & Scholes model. During the corresponding period, 93,500 options were also redeemed for the same number of shares.

BOARD OF DIRECTORS

In accordance with the resolution of the Annual General Meeting, the total Board fees of SEK 2,960 thousand (2,275) approved by the Annual General Meeting are distributed between the Board members not employed by the Parent Company.

MANAGING DIRECTOR OF THE PARENT COMPANY

During the period 1 September 2019 to 31 March 2020, the Managing Director of the Parent Company, Niklas Stenberg, received fixed salary of SEK 5,252 thousand and variable salary of SEK 1,893 thousand. Variable remuneration included SEK 345 thousand regarding the subsidy expense for the year for participation in the Group’s incentive programmes. He also received taxable benefits amounting to SEK 6 thousand. Pension premiums of SEK 1,548 thousand were paid.

From the age of 65, the Managing Director is covered by a defined contribution pension plan, the scale of which depends on the outcome of pension insurance agreements. The size of the pension premiums is determined annually by the Remuneration Committee. Variable salary paid based on the Group’s earnings may not exceed 30 percent of fixed salary and is not pensionable. An additional premium may be payable corresponding to 20 percent of paid variable remuneration used to acquire shares in Addtech AB. On termination by the Company, the period of notice is of 12 months and, on resignation by the Managing Director, the period of notice is six months. Beyond salary paid during the period of notice, on termination by the Company, the Managing Director is entitled to severance pay equivalent to one year’s salary. In the event that the Managing Director resigns, he does not receive any severance pay.

OTHER MEMBERS OF GROUP MANAGEMENT

For other members of Group Management, fixed salary of SEK 12,023 thousand (13,850) was paid and variable salary of SEK 4,777 thousand (4,048). Variable remuneration included SEK 1,439 thousand (988) regarding the subsidy expense for the year for participation in the Group’s incentive programmes. The variable remuneration was expensed in the 2019/2020 financial year and disbursed in 2020/2021. He also received taxable benefits amounting to SEK 318 thousand (307). From the age of 65, members of Group management are covered by pension entitlements in accordance with individual agreements. Certain pension solutions are defined premium plans, with the size of the pension depending on the outcome of pension insurance agreements, while others are defined benefit plans. In terms of the expense, both the defined benefit pension plans and the defined premium plans are basically equivalent to the ITP plan. During 2019/2020, a total of SEK 2,984 thousand (2,854) in pension premiums was paid for the group “Other members of Group management”.

Variable salary paid based on the Group’s earnings may not exceed 30 percent of fixed salary. An additional premium may be payable corresponding to 20 percent of paid variable remuneration used to acquire shares in Addtech AB.

On termination by the Company, the maximum period of notice is of 12 months and, on resignation by the employee, the period of notice is six months. Severance pay is payable equivalent to no more than one year’s salary. In the event that the employee resigns, he/she does not receive any severance pay.

Remuneration and other benefts 2019/2020	Basic salary/ Board fees Variable remuneration1) Other benefts Pension expenses Total
Chairman of the Board	0.7 – – – 0.7
Other Board members	2.3 – – – 2.3
Managing Director	5.3 1.9 0 1.5 8.7
Other senior executives2)	12.0 4.8 0.3 3 20.1
Total	20.3 6.7 0.3 4.5 31.8

1) Including remuneration to senior executives participating in incentive programmes.

2) At the end of the financial year, there were six other senior executives, one woman and five men.

	Basic salary/	Variable	Other	Pension
Remuneration and other benefts 2018/2019	Board fees	remuneration1)	benefts	expenses	Total
Chairman of the Board	0.7	–	–	–	0.7
Other Board members	1.6	–	–	–	1.6
Managing Director	4.7	1.8	0.2	1.5	8.2
Other senior executives2)	13.9	4.0	0.5	2.9	21.3
Total	20.9	5.8	0.7	4.4	31.8

1) Including remuneration to senior executives participating in incentive programmes.

2) During the year, there were four other senior executives, one woman and three men.

Board fees,SEK thousands		2019/2020	2018/2019
Name	Position	Fee	Fee
Anders Börjesson1)	Chairman of the Board, Chairman of the Remuneration Committee	740	650
Eva Elmstedt1)	Board member, member of the Remuneration Committee	370	325
Kenth Eriksson	Board member	370	325
Henrik Hedelius	Board member	370	325
Ulf Mattsson	Board member	370	325
Malin Nordesjö	Board member	370	325
Johan Sjö2)	Board member	370	–
Total		2,960	2,275

• 1) During the 2019/2020 financial year, a fee of SEK 50 thousand, beyond the above, was paid to each member of the Remuneration Committee.

• 2) During the period 1 April 2019 to 31 August 2019, Johan Sjö was employed by the Company as senior advisor. Remuneration of SEK 2,649 thousand was paid, as well as pension premiums of SEK 722 thousand. Board fees have been paid effective from the 2019 Annual General Meeting.

80 ADDTECH ANNUAL REPORT 2019/2020

ADDTECH ANNUAL REPORT 2019/2020 81

NOTES

NOTES

~~Note 7~~

Remuneration to Auditors

	Group Parent Company
	2019/2020 2018/2019 2019/2020 2018/2019
KPMG Audit assignment Tax consultation Other assignments	8 8 1 1 0 0 – 0 2 1 0 0
Total remuneration to KPMG Other auditors Audit assignment Tax consultation Other assignments	10 9 1 1 2 1 – – 0 0 – – 1 0 – –
Total remuneration to other auditors	3 1 – –
TOTAL REMUNERATION TO AUDITORS	13 10 1 1

~~Note 8 Note 9~~

Other operating income and expenses

Depreciation/amortisation

Depreciation/amorti- sation byfunction	Group Parent Company 2019/2020 2018/2019 2019/2020 2018/2019 -73 -27 – – -290 -188 – – -53 -11 -1 -1 -2 0 – – -418 -226 -1 -1 Group Parent Company 2019/2020 2018/2019 2019/2020 2018/2019 -203 -173 – – -7 -6 – – -3 -3 0 -1 -17 -17 – –	Group 2019/2020 2018/2019
		Other operating income Rental revenue 6 3 Gain on sale of operations and non-current assets 3 7 Change in value of derivatives 1 0 Exchange rate changes, net 21 – Revaluations of contingent purchase considerations 61 20 Other 19 17
Cost of sales Selling expenses Administrative expenses Other operatingexpenses
Total
Depreciation/amorti- sation byasset class
		Total 111 47 Other operating expenses Property expenses 0 0 Loss on sale of operations and non-current assets 0 0 Exchange losses, net – 0 Revaluations of contingent purchase considerations -9 -12 Other -17 -9
Intangible assets Buildings and land Leasehold improvements Machinery Equipment Right-of-use assets
	-31 -27 -1 0
	-157 – – – -418 -226 -1 -1
Total
		Total -26 -21

~~Note 10~~

~~Note 12~~

Operating expenses

Appropriations – Parent Company

Group 2019/2020 2018/2019 Inventories, raw materials and consumables 7,287 6,320 Personnel expenses 2,182 1,909 Depreciation/amortisation 418 226 Impairment of inventories 15 13 Impairment of doubtful accounts receivable 7 7 Other operatingexpenses 781 813 Total 10,690 9,288	2019/2020 2018/2019
	Group contributions received – 425 Group contributions paid -6 -131 Reversal of tax allocation reserve 316 67 Provision made to tax allocation reserve – -84 Excess amortisation/depreciation 0 1
	Total 310 278

Had the Parent Company reported deferred tax on year-end appropriations as per the policies applied in the consolidated financial statements, the deferred tax expense would have totalled SEK 66 million (61).

~~Note 11~~

~~Note 13~~

Financial income and expenses

Taxes

~~Note 11~~ Financial income and expenses	~~Note 13~~ Taxes
Group 2019/2020 2018/2019 Interest income on bank balances 4 3 Dividends 0 0 Exchange rate changes, net 0 0 Other fnancial income 2 2 Financial income 6 5 Interest expense on fnancial liabilities measured at amortised cost -28 -14 Interest expense on fnancial liabilities measured at fair value -3 -11 Interest expense on pension liability -6 -6 Changes in value from revaluation of fnancial assets/liabilities, net -6 -9 Other fnancial expenses -19 -10 Financial expenses -62 -50 Net fnancial items -56 -45 Parent Company 2019/2020 2018/2019 Interest income: Group companies 20 22 Proft from non–current fnancial assets 20 22 Interest income, etc.: Group companies 5 1 Other interest income, change in value of derivatives and exchange rate differences 2 2 Interest income and similar items 7 3 Interest expenses, etc.: Group companies -2 -1 Other interest expense, change in value of derivatives, exchange rate differences and bankingfees -29 -18 Interest expense and similar items -31 -19 Financial income and expenses -4 6
		Group Parent Company
		2019/2020 2018/2019 2019/2020 2018/2019
	Current tax for the period Adjustment from previousyears	-346.7 -235.1 -60.4 -58.2 1.4 -0.8 0.0 –
	Total current tax expense Deferred tax	-345.3 -235.9 -60.4 -58.2 113.7 43.0 0.0 -0.4
	Total recognised tax expense	-231.6 -192.9 -60.4 -58.6
	Group	2019/2020 % 2018/2019 %
	Proft before tax 1,104.6 865.2 Weighted average tax based on national tax rates -240.3 21.8 -192.6 22.3 Tax effect of Non-deductible expenses -6.1 0.6 -6.1 0.7 Non-taxable income 1.9 -0.2 3.1 -0.4 Changed tax rate 5.3 -0.5 6.7 -0.8 Transaction expenses, revaluations of contingent considerations for acqui- sitions 7.1 -0.6 -3.1 0.4 Other 0.5 -0.1 -0.9 0.1
	Recognised tax expense -231.6 21.0 -192.9 22.3
	Parent Company 2019/2020 % 2018/2019 %
	Proft before tax 269.2 262.1 Tax based on current tax rate for Parent Company -57.6 21.4 -57.7 22.0 Tax effect of Standard interest on tax allocation reserves -0.5 0.2 -0.3 0.1 Non-deductible expenses -0.7 0.3 -0.7 0.3 Other -1.6 0.7 0.1 0.0
	Recognised tax expense -60.4 22.6 -58.6 22.4

82 ADDTECH ANNUAL REPORT 2019/2020

ADDTECH ANNUAL REPORT 2019/2020 83

NOTES

NOTES

NOTE 13 CONT.

DEFERRED TAX, NET, AT END OF YEAR

DEFERRED TAX, NET, AT END OF YEAR
Group	31 Mar 2020 31 Mar 2019
	Receivables Liabilities Net Receivables Liabilities Net
Non-current assets Untaxed reserves Pension provisions Other Net recognised	2 -266 -264 2 -259 -257
	– -54 -54 – -120 -120 27 10 37 24 0 24 30 -6 24 24 -4 20 -32 32 0 -30 30 0
Deferred tax, net, at end of year	27 -284 -257 20 -353 -333

Group	31 Mar 2020
	Amount at beginning ofyear Recognised in the income statement Acquisitions & divestments Recognised in other comprehensive income Translation effect Amount at end ofyear
Non-current assets Untaxed reserves Pension provisions Other	-257.2 42.8 -47.3 0.2 -2.4 -263.9
	-119.7 65.9 -0.3 – – -54.1
	23.7 -0.3 10.4 2.7 0.0 36.5
	20.0 5.3 – -1.4 0.6 24.5
Deferred tax, net	-333.2 113.7 -37.2 1.5 -1.8 -257

Group	31 Mar 2019
	Amount at beginning ofyear Recognised in the income statement Acquisitions & divestments Recognised in other comprehensive income Translation effect Amount at end ofyear
Non-current assets Untaxed reserves Pension provisions Other	-230.1 42.5 -67.6 0.1 -2.1 -257.2 -114.8 -0.9 -4.0 0.0 – -119.7 17.6 -2.0 0.5 7.6 0.0 23.7 20.0 3.4 -1.7 -1.7 0.0 20.0
Deferred tax, net	-307.3 43.0 -72.8 6.0 -2.1 -333.2

Parent Company	31 Mar 2020 31 Mar 2019
	Amount at beginning ofyear Recognised in the income statement Amount at end ofyear Amount at beginning ofyear Recognised in the income statement Amount at end ofyear
Financial instruments	0.1 -0.3 -0.2 0.5 -0.4 0.1
Deferred tax, net	0.1 -0.3 -0.2 0.5 -0.4 0.1

The Group has tax loss carryforwards of SEK 57 (83) that have not been capitalised.

~~Note 14~~

Intangible non-current assets

	2019/2020
Group	Acquired intangible assets Intangible assets developed internally
	Goodwill Supplier relationships, customer relationships and technology Trade marks Capitalised R&D expenses Leases and similar rights Software Software Total
Accumulated cost At beginning of year Corporate acquisitions Investments Divestments and scrappings Reclassifcations Translation effect for theyear
	1,767 1,970 22 41 0 83 4 3,887
	211 216 0 0 – 1 – 428
	– 0 0 9 1 10 – 20
	– – – – – – – –
	– – – 1 – – – 1
	19 18 – 1 0 1 – 39
At end of year Accumulated amortisation and impairment At beginning of year Corporate acquisitions Depreciation/amortisation Divestments and scrappings Translation effect for theyear	1,997 2,204 22 52 1 95 4 4,375
	– -826 0 -32 0 -72 -4 -934
	– – – – – -1 – -1
	– -193 0 -5 0 -5 – -203
	– – – – – – – –
	– 4 – 0 0 -1 – 3
At end of year Carrying amount at end of year Carrying amount at beginning of year	– -1,015 0 -37 0 -79 -4 -1,135
	1,997 1,189 22 15 1 16 0 3,240
	1,767 1,144 22 9 0 11 0 2,953

Group	2018/2019
	Acquired intangible assets Intangible assets developed internally
	Goodwill Supplier relationships, customer relationships and technology Trade marks Capitalised R&D expenses Leases and similar rights Software Software Total
Accumulated cost At beginning of year Corporate acquisitions Investments Divestments and scrappings Reclassifcations Translation effect for theyear	1,456 1,633 22 19 0 70 4 3,204 305 311 – 21 – 7 – 644 – 18 – 1 – 4 – 23 -6 -7 – – – 0 – -13 – – – – – 2 – 2 12 15 – 0 0 0 – 27
At end of year Accumulated amortisation and impairment At beginning of year Corporate acquisitions Depreciation/amortisation Divestments and scrappings Translation effect for theyear	1,767 1,970 22 41 0 83 4 3,887 – -656 0 -16 0 -65 -4 -741 – – – -14 – -4 – -18 – -168 – -2 0 -3 – -173 – 3 – – – 0 – 3 – -5 – 0 0 0 – -5
At end of year Carrying amount at end of year Carrying amount at beginning of year	– -826 0 -32 0 -72 -4 -934 1,767 1,144 22 9 0 11 0 2,953 1,456 977 22 3 0 5 0 2,463

84 ADDTECH ANNUAL REPORT 2019/2020

ADDTECH ANNUAL REPORT 2019/2020 85

NOTES

NOTES

NOTE 14 CONT.

Parent Company	31 Mar 2020 31 Mar 2019
	Software Total Software Total
Accumulated cost At beginning of year Investments	2.8 2.8 2.8 2.8 0.9 0.9 – –
At end of year Accumulated amorti- sation At beginning of year Depreciation/amorti- sation	3.7 3.7 2.8 2.8 -2.8 -2.8 -2.8 -2.8 -0.2 -0.2 – –
At end of year Carrying amount at end of year Carrying amount at beginning of year	-3.0 -3.0 -2.8 -2.8 0.7 0.7 0.0 0.0 0.0 0.0 0.0 0.0

	Group
Goodwill by business area Automation Components Energy Industrial Process Power Solutions	31 Mar 2020 31 Mar 2019
	531 450
	337 331
	478 472
	335 235
	316 279
Total	1,997 1,767

TESTING OF GOODWILL

The Group’s recognised goodwill amounts to SEK 1,997 million (1,767), allocated as above to the units where impairment testing is performed. Goodwill is not monitored internally at a level lower than the business areas, and impairment testing is therefore performed at that level. The business areas coincide with the Group’s operating segments. Impairment testing took place most recently in March 2020.

The recoverable amount was based on value in use, calculated from a current estimate of cash flows over the year ahead. Forecast earnings and investments in working capital and non-current assets for the next financial year, 2020/2021, are based on previous outcomes and experiences. The forecast is produced on the basis of a relatively detailed budgeting process for the various parts of Group. The major components of the cash flow are sales, the various operating costs and investments in working capital and non-current assets.

The sales forecast is based on judgements taking into account factors such as order bookings, the general economy and the market situation.

The forecast for operating costs is based on current pay agreements and previous years’ levels of gross margins and overheads, adapted to expectations for the year ahead taking into account factors as referred to for the sales forecast. Anticipated investments in working capital and non-current assets are linked to the growth in sales.

Since the operations are deemed to be in a phase that is representative of the long-term perspective, the cash flow from the first forecast year is extrapolated by a long-term growth rate of 2 percent (2) per year for all business areas. Cash flows were discounted applying a weighted cost of capital corresponding to roughly 11 percent (10) before tax. The key assumptions that have the greatest effect on the recoverable amount are gross margin, discount rate and long-term growth rate, where gross margin is most important. Neither a 1-percent increase in the discount rate, a 1-percentage point de crease in long-term growth, nor a 1-percent decrease in the margin shows a need for impairment. These calculations show that value in use significantly exceeds the carrying amount. Consequently, impairment testing indicated no impairment. The margin for impairment is considerable for all business areas and it is not judged that any possible changes in important assumptions that may reasonably expected to lead to impairment.

OTHER IMPAIRMENT TESTING

Each year, trademarks are tested for impairment, applying the same policies as for goodwill. No events or changed circumstances have been identified motivating impairment testing of other intangible assets currently being amortised.

~~Note 15~~

Property, plant and equipment

Group	31 Mar 2020
	Buildings and land Leasehold improvements Machinery Equipment Construction inprogress Total
Accumulated cost At beginning of year Corporate acquisitions Investments Divestments and scrappings Reclassifcations Translation effect for theyear
	181 37 332 378 7 935
	– 2 3 34 – 39
	6 2 21 41 15 85
	0 0 -3 -7 – -10
	4 1 4 -1 -10 -2
	6 1 8 6 1 22
At end of year Accumulated amortisation and impairment At beginning of year Corporate acquisitions Depreciation/amortisation	197 43 365 451 13 1,069
	-85 -26 -247 -306 -1 -665
	– -1 -2 -26 – -29
	-7 -3 -17 -31 – -58
Divestments and scrappings	0 0 2 4 – 6
Reclassifcations	0 0 0 0 0 0
Translation effect for theyear	-3 -1 -6 -3 0 -13
At end of year	-95 -31 -270 -362 -1 -759
Carrying amount at end of year	102 12 95 89 12 310
Carrying amount at beginning of year	96 11 85 72 6 270

Group	31 Mar 2019
	Buildings and land Leasehold im- provements Machinery Equipment Construction inprogress Total
Accumulated cost At beginning of year Corporate acquisitions Investments Divestments and scrappings Reclassifcations Translation effect for theyear	143 32 283 332 2 792 23 4 29 27 4 87 12 2 18 33 5 70 – -2 -1 -16 0 -19 3 – 1 -1 -5 -2 0 1 2 3 1 7
At end of year Accumulated amortisation and impairment At beginning of year Corporate acquisitions Depreciation/amortisation Divestments and scrappings Reclassifcations Translation effect for theyear	181 37 332 378 7 935 -75 -24 -216 -269 -1 -585 -4 -1 -14 -20 – -39 -6 -3 -17 -27 – -53 – 2 2 12 – 16 – – – – – – 0 0 -2 -2 0 -4
At end of year Carrying amount at end of year Carrying amount at beginning of year	-85 -26 -247 -306 -1 -665 96 11 85 72 6 270 68 8 67 63 1 207

86 ADDTECH ANNUAL REPORT 2019/2020

ADDTECH ANNUAL REPORT 2019/2020 87

NOTES

NOTES

NOTE 15 CONT.

Parent Company	31 Mar 2020 31 Mar 2019
	Leasehold improvements Equipment Total Leasehold improvements Equipment Total
Accumulated cost At beginning of year Investments Divestments and scrappings	4 3 7 4 3 7 – – – – – – – – – – – –
At end of year Accumulated depreciation according to plan At beginning of year Depreciation/amortisation Divestments and scrappings	4 3 7 4 3 7 -4 -2 -6 -3 -2 -5 0 -1 -1 -1 0 -1 – – – – – –
At end of year Carryingamount at end ofyear	-4 -3 -7 -4 -2 -6 0 0 0 0 1 1
Carrying amount at beginning of year	0 1 1 1 1 2

~~Note 16~~

Leases

liability amounted to 627 MSEK whereof 169 were short-term and 458 long-term. The average remaining lease term at the end of March 2020 was 34 months. The Group’s right-of-use assets relate primarily to leased premises, vehicles, and other leases (e.g. leases of production equipment, office equipment, and other assets not considered individually significant). Depreciation on right-of-use assets is specified in note 8 Depreciation/ amortisation. Interest expense on lease liabilities amounted to 8 MSEK in the financial year 2019/2020. In addition to the interest expense, the cash flow statement was affected by instalment on the lease liability, amounting to 162 MSEK. The effect from low-value and short-term leases is not included in these amounts.

The effect on the group from the transition to IFRS 16 Leases is described in note 1 Accounting and valuation principles. The method chosen by the Group for the transition to IFRS 16 means that comparative figures are not recalculated. The transition effect from previous accounting standard to IFRS 16 is described in the tables below. Future minimum lease payments amounting to 564 MSEK at the end of March 2019 have been discounted with the incremental borrowing rate. At the transition to IFRS 16 a weighted average incremental borrowing rate of 1 percent was used. Leases for which the underlying asset is of low value and short term-leases have been exempted and extension periods have been added. The opening lease liability with IFRS 16 in the beginning of April 2019 amounted to 558 MSEK. At the end of 2019/2020, the lease

Operating leases Addtech as lessee	Group Parent Company	Parent Company
	2018/2019 2019/2020	2018/2019
Lease payments Lease payments made during the fnancial year of which variable payments Future minimum lease payments under non-cancellable contracts fall due as follows: Within one year Later than one year and within fve years 5years or later	169 6 2 – 148 1 369 0 102 –	5 – 5 3 –
Total	619 1	8

	Group
	2019/2020
Transition from IAS 17 to IFRS 16 Total future minimum lease payments 31 March 2019 Total future minimum lease payments 31 March 2019 Adjustment* Discount at incremental borrowing rate Less leases shorter than 12 months Less low-value leases Add extension option Financial leses 31 March 2019 Other
	619
	-55
	-23
	-28
	-3
	60
	12
	-24
Add lease liability 1 April 2019	558

• Due to an extensive contract review in connection with the transition to IFRS 16, and after the figures were established in the annual report for 2018/2019, we noted that the operational leasing reported according to IAS 17 deviated from actual operational leasing for a number of companies. As a result, the figures have been adjusted compared with the previous year.

Group	2020-03-31
	Buildings Vehicles Other Total
Accumulated cost Opening balance (acc. to IAS 17) Change in accounting principles Acquisition of companies Additional rights-of-use Leases ended Thisyear’s recalculation effect
	– – – –
	477 57 24 558
	40 0 1 41
	144 33 8 185
	-8 -2 -1 -11
	4 1 0 5
Closing balance Accumulated depreciation and impairment losses Opening balance (acc. to IAS 17) Acquisition of companies Amortisation Leases ended Translation effect for theyear	657 89 32 778
	– – – –
	-6 0 0 -6
	-114 -30 -7 -151
	2 2 1 5
	0 0 0 0
Closing balance Carryingamount atyear-end	-118 -28 -6 -152
	539 61 26 626
Carrying amount at start of year	– – – –

	Group
	2019/2020
Maturity structure, lease liabilities 31/30 2020 Within one year 1–2 years 2–5 years Later than 5years
	174
	145
	261
	70
Total undiscounted lease payments Reported amount	650
	627

Significant operating leases primarily constitute rental contracts for premises in which the Group conducts business.

88 ADDTECH ANNUAL REPORT 2019/2020

ADDTECH ANNUAL REPORT 2019/2020 89

NOTES

NOTES

~~Note 17~~

Financial assets and liabilities

Receivables from Groupcompanies	Parent Company
	31 Mar 2020 31 Mar 2019
At beginning of year Increase during the year Decrease duringtheyear	1,984 1,692 40 584 -220 -292
Carrying amount at end of year	1,804 1,984

Specifcation ofparticipations in Groupcompanies	Parent Company
	Country Number of shares Quotient value Holding,% Carrying amount 31 Mar 2020 Carrying amount 31 Mar 2019
Addtech Nordic AB,556236-3076,Stockholm	Sweden 1,750 100 100 1,004 1,004
Total	1,004 1,004

A complete statutory specification is included as an annex to the annual accounts submitted to the Swedish Companies Registration Office. The specification can be obtained from Addtech AB.

Participations in Groupcompanies	Parent Company
	31 Mar 2020 31 Mar 2019
Accumulated cost At beginningofyear	1,119 1,119
At end of year Accumulated impairment At beginningofyear	1,119 1,119 -115 -115
At end of year Carrying amount at end of year Carrying amount at beginning of year	-115 -115 1,004 1,004 1,004 1,004

Group	31 Mar 2019
	Measured at fair value through proft or loss Equity instruments recognised at fair value through other comprehensive income Measured at amortised cost Total carrying amount
Other fnancial assets Non-current receivables Accounts receivable Other receivables Cash and cash equivalents Non-current interest-bearing liabilities Current interest-bearing liabilities Accounts payable Other liabilities	– 4 – 4 – – 12 12 – – 1,887 1,887 3 – 77 80 – – 295 295 75 – 644 719 123 – 1,154 1,277 – – 955 955 2 – – 2

Current and non-current loans are carried at amortised cost. The difference between the carrying amount and fair value is marginal for these items. The same applies to other financial instrument for larger amounts, since maturity is short. Interest bearing liabilities measured at fair value in the income statement refer to contingent purchase considerations for acquisitions of operations.

Financial instruments measured at fair value	31 March 2020 31 March 2019
	Carrying amount Level 2 Level 3 Carrying amount Level 2 Level 3
Derivatives – fair value, hedging instruments Derivatives – fair value throughproft or loss	6 6 – 2 2 – 5 5 – 1 1 –
Total fnancial assets at fair value per level Derivatives – fair value, hedging instruments Derivatives – fair value through proft or loss Contingent purchase considerations – fair value throughproft or loss	11 11 – 3 3 – 1 1 – 0 0 – 4 4 – 2 2 – 151 – 151 198 – 198
Total fnancial liabilities at fair value per level	156 5 151 200 2 198

Fair value and carrying amount are recognised in the balance sheet in accordance with the above table.

Carrying amounts and financial instruments are recognised in the balance sheet according to the following tables.

Group	31 Mar 2020
	Measured at fair value through proft or loss Equity instruments recognised at fair value through other comprehensive income Measured at amortised cost Total carrying amount
Other fnancial assets Non-current receivables Accounts receivable Other receivables Cash and cash equivalents Non-current interest-bearing liabilities Current interest-bearing liabilities Accounts payable Other liabilities	– 4 – 4
	– – 19 19
	– – 2,003 2,003
	11 – 117 128
	– – 363 363
	46 – 2,108 2,154
	105 – 357 462
	– – 1,028 1,028
	5 – – 5

• Level 1 refers to when fair value is determined based on quoted prices in an active market. At the end of the reporting period, the Group had no items in this category.

• Level 2 refers to when fair value is determined based on either directly or indirectly observable market data not included in level 1. This is done for foreign currency accounts and embedded derivatives.

Level 3 is not observable in the market. A cash flow-based valuation is carried out for the Group’s contingent purchase considerations For the Group’s other financial assets and liabilities, fair value is estimated to be equal to the carrying amount.

Contingentpurchase considerations 2019/2020 2018/2019 Carrying amount, opening balance 198 215 Acquisitions during the year 63 84 Reversed through the income statement -52 -8 Purchase considerations paid -65 -105 Interest expenses 3 10 Exchange rate differences 4 2	Impact of fnancial instruments on net earnings 2019/2020 2018/2019
	Assets and liabilities measured at fair value through the income statement -5 -9 Equity instruments recognised at fair value through other comprehensive income 0 0 Measured at amortised cost -35 -20
	Total -40 -29
Carrying amount, closing balance 151 198

90 ADDTECH ANNUAL REPORT 2019/2020

ADDTECH ANNUAL REPORT 2019/2020 91

NOTES

NOTES

~~Note 20~~

~~Note 18~~

Inventories

Equity

GROUP

Group 31 Mar 2020 31 Mar 2019	Group 31 Mar 2020 31 Mar 2019
Raw materials and consumables 173 162 Work in progress 101 89
Finishedgoods	1,368 1,166
Total	1,642 1,417

OTHER CONTRIBUTED CAPITAL

Refers to equity contributed by shareholders.

Group 31 Mar 2020 31 Mar 2019 Raw materials and consumables 173 162 Work in progress 101 89	GROUP OTHER CONTRIBUTED CAPITAL Refers to equity contributed by shareholders.
Finishedgoods 1,368 1,166		Group
Total 1,642 1,417	Reserves1) Translation reserve	2019/2020 2018/2019
The consolidated cost of sales includes impairment losses of SEK 15	Opening translation reserve	123	87
million (13) on inventories. No signifcant reversals of prior impairment were made in 2019/2020 or 2018/2019.	Translation effect for theyear Closing translation reserve Hedging reserve2) Revaluations recognised in Other comprehensive income	56 179 0 9	36 123 0 0
~~Note 19~~	Recognised in proft or loss on disposal (other operating income/expenses)	-7	0
Prepaid expenses and accrued income	Tax attributable to revaluations for the year Tax attributable to disposals	-2 1	0 0
	Closinghedge reserve	1	0
Gr Parnt Cman	Total reserves	180	123

	Gr Parnt Cman
	oup e opy
	31 Mar 2020 31 Mar 2019 31 Mar 2020 31 Mar 2019
Rent Insurance premiums Pension costs Lease fees Other prepaid expenses Other accrued income	19 21 2 2 9 8 3 3 3 3 1 1 4 4 0 0 45 41 5 5 48 19 0 0
Total	128 96 11 11

1) Refers to reserves attributable to shareholders in the Parent Company.

• 2) Refers to cash flow hedges, consisting of currency clauses in customer contracts.

TRANSLATION RESERVE

The translation reserve includes all exchange differences arising on the translation of the financial reports of foreign operations prepared in a currency other than the Group’s presentation currency for financial reports. The Parent Company and Group present their financial reports in Swedish kronor (SEK).

HEDGING RESERVE

The hedging reserve includes the effective portion of the accumulated net change in fair value for a cash-flow hedging instrument attributable to hedge transactions that have not yet occurred.

RETAINED EARNINGS, INCLUDING PROFIT FOR THE YEAR

Retained earnings including profit for the year include earnings in the Parent Company and its subsidiaries. Prior provisions to the legal re serve are included in this equity item.

REPURCHASED SHARES

Repurchased shares includes the cost of treasury shares held by the Parent Company. At the end of the reporting period, the Group’s holding of treasury shares was 1,049,918 (1,141,387).

DIVIDEND

After the reporting period, the Board of Directors proposed a dividend of SEK 4.00 per share. The dividend is subject to approval by the Annual General Meeting on 28 August 2020.

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Proposed allocation of earnings 2019/2020
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Retained earnings	SEK 228 million
Proft for theyear	SEK 209 million SEK 437 million

The Board of Directors and the CEO propose that the funds available be allocated as follows:

funds available be allocated as follows:
A dividend paid to shareholders of SEK 4.00 per share1)	SEK 269 million
To be carried forward	SEK 168 million
	SEK 437 million

• 1) Calculated based on the number of shares outstanding at 30 June 2020. The total dividend payout may change if the number of repurchased treasury shares changes prior to the proposed dividend record date of 1 September 2020.

PARENT COMPANY

RESTRICTED RESERVES

Restricted reserves are funds that cannot be paid out as dividends.

STATUTORY RESERVE

The purpose of the statutory reserve is to save a portion of net profit that will not be used to cover a loss carried forward.

RETAINED EARNINGS

Retained earnings comprises the previous year’s unrestricted equity, less any dividend paid. Together with profit for the year and any fair value reserve, retained earnings constitute the sum of unrestricted equity, that is, the amount available to be paid as dividends to shareholders.

NUMBER OF SHARES

The number of shares at 31 March 2020 consisted of 3,229,500 Class A shares, entitling the holders to 10 votes per share, and 64,968,996 Class B shares, entitling the holders to one vote per share. The quotient value of the share is SEK 0.75.The Company has repurchased 1,049,918 Class B shares within the framework of the Company’s ongoing repurchasing programme. After subtracting repurchased shares, the number of Class B shares is 63,919,078.

		31 Mar 2020	31 Mar 2020
Number of shares	Class A	Class B	All share
outstanding	shares	shares	classes
At beginning of year	3,229,500	63,827,609	67,057,109
Redemption of call
options	–	241,469	241,469
Repurchases of treasury
shares	–	-150,000	-150,000
Conversion of Class A
shares to Class B shares	–	–	–
At end of year	3,229,500	63,919,078	67,148,578
		31 Mar 2019
Number of shares	Class A	Class B	All share
outstanding	shares	shares	classes
At beginning of year	3,229,500	63,762,851	66,992,351
Redemption of call
options	–	264,758	264,758
Repurchases of treasury
shares	–	-200,000	-200,000
Conversion of Class A
shares to Class B shares	–	–	–
At end of year	3,229,500	63,827,609	67,057,109

~~Note 21~~

Untaxed reserves

	Parent Company	31 Mar 2020	31 Mar 2019
	Tax allocation reserve, 2013/2014	–	67
	Tax allocation reserve, 2014/2015	–	75
	Tax allocation reserve, 2015/2016	–	55
	Tax allocation reserve, 2016/2017	–	91
	Tax allocation reserve, 2017/2018	47	75
	Tax allocation reserve, 2018/2019	84	84
	Tax allocation reserve, 2019/2020	–	–
	Accumulated excess depreciation/ amortisation	0	0
	At end of year	131	447

SEK 28 million of the Parent Company’s total untaxed reserves of SEK 131 million represent deferred tax included in the deferred tax line item in the consolidated balance sheet.

92 ADDTECH ANNUAL REPORT 2019/2020

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NOTES

NOTES

according to ITP2 and secured by insurance in Alecta is recognised as ~~Note 22~~ a defined-contribution plan. The year’s fees for pension insurance with Alecta totalled SEK 31 million (30). Fees for the next financial year are considered to be in line with those for the year reported. The collective Provisions for pensions and similar obligations consolidation level for Alecta was 133 percent (144) in March 2020. The pension plan according to ITP1 is recognised as a defined-contribution Addtech has defined-contribution and defined-benefit pension plans plan.

Provisions for pensions and similar obligations

Addtech has defined-contribution and defined-benefit pension plans in Sweden, Switzerland and the UK. The plans cover a large number of employees. Subsidiaries in other countries have mainly defined-contribution pension plans. The Parent Company’s data on pensions are reported in accordance with the Swedish Act on Safeguarding Pension Obligations.

DEFINED-BENEFIT PLANS

These pension plans primarily comprise retirement pensions. Each employer generally has an obligation to pay a lifelong pension and vesting is based on the number of years of employment. The employee must subscribe to the plan for a certain number of years to be fully entitled to retirement benefits. Each year increases the employee’s entitlement to retirement benefits, which is recognised as pension earned during the period and as an increase in pension obligations. Both funded and unfunded pension plans apply in Sweden, Switzerland and the UK. The funded pension obligations are secured by plan assets that are managed by insurance companies. The Group estimates that SEK 4 million (1) will be paid in 2020/2021 to the funded defined-benefit plans. The total number of commitments of 963 (902) included in the obligation consists of 132 active (71), 488 paid-up policy holders (518) and 343 pensioners (313).

DEFINED-CONTRIBUTION PLANS

These plans are mainly retirement pension plans, disability pensions and family pensions. Premiums are paid on an ongoing basis during the year by each Group company and the size of the premium is based on the salary. The pension cost for the period is included in profit or loss. Obligations for retirement pensions and family pensions for salaried employees in Sweden are secured by insurance in Alecta. According to statement UFR 3 of the Swedish Financial Reporting Board, this is a defined-benefit plan covering multiple employers. For the 2019/2020 financial year, the Company did not have access to information enabling it to report this plan as a defined-benefit plan. Thus the pension plan

Obligations for employee benefits, defined-benefit pension plans

Obligations for employee benefts, defned-beneft pension plans
Pension liabilityasper balance sheet	Group	Parent Company
	31 Mar 2020 31 Mar 2019	31 Mar 2020	31 Mar 2019
Pension liability PRI Otherpension obligations	270 250 62 10	15	15 –
		–
Total cost of defned-beneft plans	332 260	15	15

Obligations for defned-beneftplans and the value ofplan assets	Group Parent Company
	31 Mar 2020 31 Mar 2019 31 Mar 2020 31 Mar 2019
Funded obligations: Present value of funded defned-beneft obligations Fair value ofplan assets	255 53 – – -193 -43 – –
Net debt, funded obligations Present value of unfunded defned-beneft obligations	62 10 – – 270 250 15 15
Net amount in the balance sheet (obligation +, asset –) Pension obligations and plan assets per country: Sweden Pension obligations Plan assets	332 260 15 15 303 281 15 15 -25 -23 – –
Net amount in Sweden Switzerland Pension obligations Plan assets	278 258 15 15 200 – – – -149 – – –
Net amount in Switzerland UK Pension obligations Plan assets	51 – – – 22 22 – – -19 -20 – –
Net amount in the UK	3 2 – –
Net amount in the balance sheet (obligation +, asset –)	332 260 15 15

Reconciliation of net amount forpensions in the balance sheet	Group Parent Company
	2019/2020 2018/2019 2019/2020 2018/2019
Opening balance Cost of defned-beneft plans Disbursements of benefts Funds contributed by employer Revaluations Corporate acquisitions Translation effect	260 229 15 15 13 8 1 1 -7 -7 -1 -1 -4 -1 – – 12 31 – – 54 – – – 4 0 – –
Net amount in the balance sheet (obligation +, asset –)	332 260 15 15

Changes in the obligation for defned-beneftplans recognised in the balance sheet	Group
	2019/2020 2018/2019
Opening balance Pensions earned during the period Interest on plan assets Benefts paid Funds contributed by employees Revaluations: Gain (-)/loss (+) resulting from demographic assumptions Gain (-)/loss (+) resulting from fnancial assumptions Experienced-based gains (-)/losses (+) Corporate acquisitions Translation effect Gains and losses from settlements	303 273 7 2 7 7 -5 -8 3 – – – 20 25 -14 5 189 – 15 1 – -2
Present value of pension obligations	525 303

Changes inplan assets	Group
	2019/2020 2018/2019
Opening balance Funds contributed by employer Funds contributed by employees Benefts paid Interest income recognised in proft or loss Return on plan assets, excluding interest income Corporate acquisitions Translation effect Gains and losses from settlements	43 44 4 1 3 – 2 -1 1 1 -6 -1 135 – 11 1 – -2
Fair value of plan assets	193 43

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NOTES

NOTES

NOTE 22 CONT.

Pension costs	Group Parent Company
	2019/2020 2018/2019 2019/2020 2018/2019
Defned-beneft plans Cost for pensions earned during the year Interest on plan assets Interest income recognised inproft or loss	7 2 1 – 7 7 0 1 -1 -1 – –
Total cost of defned-beneft plans Total cost of defned-contribution plans Social securitycosts onpension costs	13 8 1 1 157 139 7 7 19 17 1 1
Total cost of benefts after termination of employment	189 164 9 9

Allocation ofpension costs in the income statement	Group
	2019/2020 2018/2019
Cost of sales Selling and administrative expenses Net fnancial items	37 32 146 126 6 6
Total pension costs	189 164

Actuarial assumptions	2019/2020 2018/2019
	Sweden Switzerland UK Sweden Switzerland UK
The following material actuarial assumptions were applied in calculating obligations: Discount rate, 1 April, % Discount rate, 31 March, % Future salary increases, % Future increases in pensions, % Personnel turnover, % Mortality table	2.10 – 2.86 2.55 – 3.08 1.30 0.45 2.81 2.10 – 2.86 2.25 1.00 – 2.75 – – 1.20 0.00 2.61 1.80 – 3.08 10.0 – – 10.0 – – DUS14 BVG 2015 GT S3PMA/S3PFA DUS14 – S2PMA/S2PFA

Sensitivityofpension obligations to changes in assumptions	Sweden	Switzerland	UK	Total
Defned-beneft pension obligations at 31 March 2020	303	200	22	525
The discount rate increases by 0.5%	-30	-18	-2	-50
The discount rate decreases by 0.5%	35	19	2	56
Life expectancy increases by 1 year	15	–	1	16
Life expectancy decreases by 1 year	-15	–	-1	-16

~~Note 23~~

Provisions

Group	Premises	Personnel	Warranties	Other	Total
Carrying amount at beginning of period	1	9	26	11	47
Corporate acquisitions	–	–	2	–	2
Provisions made during the period	–	5	7	1	13
Amounts utilised during the period	0	-2	-7	-3	-12
Unutilised amounts reversed	–	–	0	-4	-4
Translation effect	0	0	0	0	0
Carrying amount at end of period	1	12	28	5	46
Group2018/2019	Premises	Personnel	Warranties	Other	Total
Carrying amount at beginning of period	1	2	22	6	31
Corporate acquisitions	–	–	2	–	2
Provisions made during the period	0	9	17	5	31
Amounts utilised during the period	–	-2	-13	0	-15
Unutilised amounts reversed	–	–	-2	–	-2
Translation effect	0	0	0	0	0
Carrying amount at end of period	1	9	26	11	47

Premises

The provision for premises refers to premises that the Group has vacated and cannot sublet or use during the remainder of the lease.

Personnel

The provision refers to costs of personnel, including estimated remuneration upon termination of employment in connection with changes in operations. A provision is made when there is an approved restructuring plan and the restructuring has been announced.

Warranties

Recognised provisions for warranties associated with products and services are based on calculations performed based on historical data or, in specific cases, on an individual assessment.

Other

The discount rate used is equivalent to the interest rate on high-quality corporate bonds or mortgage bonds with a maturity equivalent to the average maturity of the obligation and currency.

For Swedish pension liabilities, the interest rate for Swedish housing bonds is used as a basis and for pension liabilities in Switzerland and the UK, the interest rate for corporate bonds is used. The weighted average maturity for the commitment is around 18 years (18), which is used as a basis on which to determine the discount rate. Future increases in pensions are based on inflation assumptions. In Sweden, the remaining period of employment (life expectancy) is based on DUS 14, statistical tables prepared by Insurance Sweden and Försäkringssällskapet (the Insurance Society), in Switzerland on BVG 2015, and in the UK on S3PA, CMI 2019.

Other includes provisions not classified under premises, personnel or warranties, such as equipment that cannot be used due to changes in operations. All provisions are classified as short-term and are expected to lead to an outflow of resources within 12 months of the balance sheet date.

The sensitivity analyses are based on a change in an assumption, while all other assumptions are held constant. The same method, the projected unit credit method, is used to calculate the sensitivity in the defined-benefit obligation as to calculate the pension obligation recognised in the balance sheet.

96 ADDTECH ANNUAL REPORT 2019/2020

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NOTES

NOTES

~~Note 24~~

~~Note 25~~

Current interest-bearing liabilities

Non-current interest-bearing liabilities

	Group Parent Company	Group Parent Company
	31 Mar 2020 31 Mar 2019 31 Mar 2020	31 Mar 2019
Credit facilities Approved bank overdraft facility Approved other liabilities to credit institutions Reclassifcations Unutilisedportion	1,300 1,301 1,300 1,201 400 1,200 -300 -400 -300 -2,044 -270 -2,044	1,300 400 -400 -270
Credit amount utilised Other liabilities to credit institutions Leasing liability Other interest- bearingliabilities	157 1,031 156 22 119 0 169 – – 114 127 –	1,030 100 – –
Total	462 1,277 156	1,130

	Group
	31 Mar 2020 31 Mar 2019
Liabilities to credit institutions: Maturing within 2 years Maturing within 3-5 years Maturingafter 5years or later	917 201 710 418 0 1
Total non-current liabilities to credit institutions Leasing liability: Maturing within 2 years Maturing within 3-5 years Maturingafter 5years or later	1,627 620 141 – 251 – 66 –
Total leasing liability Other interest-bearing liabilities: Maturing within 2 years Maturing within 3 years Maturing within 4-5 years Maturingafter 5years or later	458 – 48 84 17 11 4 – – 4
Total other non-current interest-bearing liabilities	69 99
Total	2,154 719

Other interest-bearing liabilities largely consist of contingent purchase considerations with estimated interest of 5.0 percent.

The Addtech Group’s current liabilities to credit institutions are divided among currencies as follows:

The non-current interest-bearing liabilities in the Parent Company at 31 March 2020 amounted to SEK 1,600 million (600). Other interest-bearing liabilities largely consist of additional contingent purchase considerations with estimated interest of 5.0 percent.

Currency	31 Mar 2020 31 Mar 2019 Local currency SEK million Local currency SEK million
SEK CNY Other	– – 100 100 10 15 8 11 1 7 1 8
Total	22 119

The Addtech Group’s non-current liabilities to credit institutions are divided among currencies as follows:

Currency	31 Mar 2020 31 Mar 2019
	Local currency SEK million Local currency SEK million
SEK Other	1,600 1,600 600 600 3 27 0 0
Total	1,627 600

The Group’s financing is primarily managed by the Parent Company Addtech AB.

~~Note 26~~

Accrued expenses and prepaid income

	Parent Company	Parent Company	Accrued expe	nses and prepaid income
	31 Mar	31 Mar
	2020	2019
Liabilities to credit institutions:				Group Parent Company
Maturing within 2 years Maturing within 3-5 years	900 700	200 400	Other prepaid	31 Mar 2020 31 Mar 2019 31 Mar 2020	31 Mar 2019
Maturingafter 5years or later	–	–	income	1 1 0	–
Total non-current liabilities to credit			Salaries and
institutions	1,600	600	holiday pay	331 286 14	14
Liabilities to Groupcompanies	127	264	Social security
TOTAL	1,727	864	contributions and pensions	99 95 8	6
The Parent Company’s liabilities to Group maturity dates.	companies have no fxed		Other accrued expenses1) Total	97 76 8 528 458 30	3 23

Acquisitions

~~Note 27~~

The following adjustments were made as a result of the value of assets and liabilities in companies acquired during the year, together with adjustments such as contingent considerations paid for acquisitions made in previous years:

Pledged assets and contingent liabilities

2019/2020	2018/2019
Non-current assets 440	689
Inventories 82	63
Receivables 110	185
Cash and cash equivalents 65	101
Total 697	1,038
Interest-bearing liabilities and provisions -138	-150
Non-interest-bearingliabilities andprovisions -142	-241
Total -280	-391
Total adjustments of assets and liabilities 417	647
Consideration paid, the year’s acquisitions -417	-647
Consideration paid, prior years’ acquisitions -79	-116
Cash and cash equivalents in acquired companies 65	101
Effect on consolidated cash and cash equivalents -431	-662

	Group Parent Company
	31 Mar 2020 31 Mar 2019 31 Mar 2020 31 Mar 2019
Pledged assets for liabilities to credit institutions Real estate and site leasehold mortgages Floating charges Other pledged assets	38 35 – – 41 13 – – 1 1 – –
Total Contingent liabilities Guarantees and other contingent liabilities Guarantees for subsidiaries1)	80 49 – – 122 25 46 0 – – 136 131
Total	122 25 182 131

All operations acquired during the year were consolidated in the accounts using the acquisition method.

1) Relates to PRI liabilities.

Divestments

The following adjustments have been made as a result of the valuation of assets and liabilities in companies divested during the year:

~~Note 28~~

1)Relates to PRI liabilities. ~~Note 28~~	1)Relates to PRI liabilities. ~~Note 28~~	Divestments The following adjustments have been made as a result of the valuation of assets and liabilities in companies divested during the year:
Cash fow statement		2019/2020 2018/2019
		Non-current assets 0 8 Inventories 0 16 Receivables 1 18 Cash and cash equivalents 0 3 Interest-bearing liabilities and provisions – -8 Non-interest-bearingliabilities andprovisions 0 -22
Adjustment for	Group Parent Company
items not included
in cash fow	2019/2020 2018/2019 2019/2020 2018/2019 418 226 1 1 -52 -8 – – -1 -6 – – 2 0 2 2 -4 14 – – -9 3 -3 -3 354 229 0 0
Depreciation/amor- tisation Revaluations of contingent purchase considerations Gain/loss on sale of operations and non-current assets Change in pension liability Change in other provisions and accrued items Other
		Divested net assets 1 15 Capital gains 0 5
		Consideration received 1 20 Cash and cash equivalents in divested operations 0 -3
		Effect on consolidated cash and cash equivalents 1 17 Cash and cash equivalents in the cash fow statement consist of cash and bank balances. The same defnition used in determining cash and cash equivalents in the balance sheet has been applied in the cash fow statement.
Total

For the Group, interest received during the year totalled SEK 4 million (3), and interest paid was SEK 19 million (13). For the Parent Company, interest received during the year was SEK 27 million (25), and interest paid was SEK 17 million (13).

[1) ] Other accrued expenses mainly consist of overhead accruals.

98 ADDTECH ANNUAL REPORT 2019/2020

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NOTES

NOTES

NOTE 28 CONT.

Reconciliation of debts arising from financing activities

Group	1 Apr 2019 Cash fows Non-cash fow affectingchanges 31 Mar 2020	1 Apr 2019 Cash fows Non-cash fow affectingchanges 31 Mar 2020
	Acquisi- tions of subsi- diaries Adjust- ments via proft or loss Exchange rate differences New leases Termi- nated leases New accounting principle IFRS 16
Bank overdraft facility Liabilities to credit institutions Other interest-bearing liabi- lities Leasingliability	1,030 -873 – – 0 – – – 157 739 897 10 – 3 – – – 1,649 229 1 -4 -48 5 – – – 183 – -156 – 8 6 216 -5 558 627
Liabilities stemming from fnancing activities	1,998 -131 6 -40 14 216 -5 558 2,616
Group		1 Apr 2018 Cash fows Non-cash fow affectingchanges 31 Mar 2019
		Acquisitions of subsidi- aries Adjustments via proft or loss Exchange rate differences
Bank overdraft facility Liabilities to credit institutions Other non-current interest-bearingliabilities		820 210 - – – 1,030 315 371 52 – 1 739 233 8 -13 3 -2 229
Liabilities stemming from fnancing activities 1,368 589 39 3 -1 1,998 RECONCILIATION of debts arising from fnancing activities
Parent Company 1 Apr 2019 Cash fows 31 Mar 2020
Bank overdraft facility 1,030 -874 156 Liabilities to credit institutions 700 900 1,600
Liabilities stemming from fnancing activities 1,730 26 1,756
Parent Company 1 Apr 2018 Cash fows 31 Mar 2019
Bank overdraft facility 821 209 1,030 Liabilities to credit institutions 300 400 700
Liabilities stemming from fnancing activities 1,121 609 1,730

~~Note 29~~

Acquisitions of companies

Acquisitions completed as of the 2018/2019 financial year are distributed among the Group’s business areas as follows:

		Date of acquisi-	Net sales,	Number of
Acquisition (divestment)	Country	tion	SEK million*	employees* Business area
Synthecs Group	Netherlands**	April, 2018	145	50 Automation
Xi Instrument AB	Sweden	April, 2018	13	2 Energy
KRV AS	Norway	April, 2018	55	27 Industrial Process
Scanwill Fluid Power ApS and Willtech ApS	Denmark	April, 2018	15	4 Components
Duelco A/S	Denmark	July, 2018	150	30 Energy
Prisma Teknik AB and Prisma Light AB	Sweden	July, 2018	70	27 Energy
Fibersystem AB	Sweden**	July, 2018	140	12 Automation
TLS Energimätning AB	Sweden	July, 2018	50	9 Industrial Process
Diamond Point International (Europe) Ltd	UK**	July, 2018	40	9 Automation
Power Technic ApS	Denmark	July, 2018	50	6 Power Solutions
(Solar Supply Sweden AB)	(Sweden)	(August, 2018)	(80)	(5) (Power Solutions)
Nordautomation Oy	Finland	September, 2018	155	85 Industrial Process
Wood Recycling Sweden AB	Sweden	October, 2018	7	2 Industrial Process
Nylund Industrial Electronics (assets acquisi-
tion)	Finland	January, 2019	35	3 Components
Birepo A/S	Denmark	January,2019	35	10 Components
Omni Ray AG	Switzerland	April, 2019	330	65 Automation
Thurne Teknik AB	Sweden	April, 2019	100	19 Industrial Process
AB N.O. Rönne	Sweden	April, 2019	8	4 Industrial Process
Best Seating Systems Walter Tausch GmbH	Austria	May, 2019	23	5 Power Solutions
Thiim A/S	Denmark	June, 2019	70	15 Automation
Profelec Oy	Finland	July, 2019	6	2 Energy
BKC Products Ltd.	UK	August, 2019	12	5 Industrial Process
Promector Oy	Finland	August, 2019	24	20 Automation
Wireco-NB Oy	Finland	February, 2020	23	6 Energy
Caligo Industria Oy	Finland	February, 2020	70	9 Industrial Process
DMC Digital Motor Control GmbH	Germany	March, 2020	30	10 Power Solutions
Q-tronic B.V	Netherlands	March, 2020	45	10 Power Solutions
Elkome Group Oy	Finland	April, 2020	85	38 Automation
Peter Andersson AB	Sweden	April, 2020	30	9 Energy
Valutec Group AB	Sweden	April, 2020	350	45 Industrial Process

• Refers to assessed condition at the time of acquisition or divestment on a full-year basis.

• ** Prior to 1 April 2019, the company belonged to the Components business area.

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NOTES

NOTES

NOTE 29 CONT.

The value of assets and liabilities included in acquisitions from the 2018/2019 financial year have been determined conclusively. No significant adjustments have been made to the calculations. According to the preliminary acquisition analyses, the assets and liabilities included in the acquisitions for the year were as follows:

	2019/2020 2018/2019
	Carrying amount on acquisition date Adjustment to fair value Fair value Carrying amount on acquisition date Adjustment to fair value Fair value
Intangible non-current assets Other non-current assets Inventories Other current assets Deferred tax liability/tax asset Other liabilities	2 214 216 10 327 337 13 – 13 61 2 63 82 – 82 68 – 68 175 – 175 281 – 281 0 -36 -36 -6 -69 -75 -116 -52 -168 -222 -15 -237
Acquired net assets Goodwill Non-controllinginterests	156 126 282 192 245 437 211 306 -3 –
Consideration1) Less: cash and cash equivalents in acquired operations Less: consideration notyetpaid	490 743 -65 -96 -73 -83
Effect on consolidated cash and cash equivalents	352 564

1) The consideration is stated excluding acquisition expenses.

The combined consideration for the year’s acquisition was SEK 490 million, of which SEK 427 million, according to preliminary acquisition analyses, was allocated to goodwill and other intangible assets. Had the acquisitions been completed on 1 April 2019, their impact would have been an estimated SEK 750 million on consolidated net sales, about SEK 40 million on operating profit and about SEK 20 million on profit after tax.

be compared with SEK 1,767 million as of 31 March 2019. The change is attributable to acquisitions and exchange differences. Consolidated goodwill is assessed annually for impairment, and no needs for impairment have been identified.

The values allocated to intangible non-current assets, such as supplier relationships, customer relationships, technology and trade marks, were assessed at the discounted value of future cash flows. The amortisation period is determined by estimating the annual de crease in sales attributable to each asset. Supplier relationships are generally amortised over a period of 5-10 years customer relation ships and technology are amortised over 10 years. Trademarks are not amortised but are tested annually in accordance with IAS 36. Annual calculated amortisation regarding intangible non-current as sets for the year’s acquisitions amounts to about SEK 22 million.

Addtech uses an acquisition structure with a base purchase price and contingent consideration. The outcome of contingent considerations is dependent on future results achieved in the companies and has a set maximum level. Of contingent considerations for acquisitions during the financial year that are yet to be paid, the discounted value amounts to SEK 67 million. The contingent considerations fall due within three years and the outcome may not exceed SEK 94 million. If the conditions are not met, the outcome may be in the range of SEK 0-94 million.

For acquisitions that resulted in ownership transfer during the financial year, transaction costs totalled SEK 7 million (7) and are recognised in selling expenses.

Revaluations of contingent considerations had a net positive impact of SEK 52 million (8) on the financial year. The impact on profits is recognised in other operating income and other operating expenses, respectively. No material changes in acquisition analyses were made in the financial year with regard to acquisitions carried out in the year or in previous years.

Consolidated goodwill at the time of the acquisition, regarding the expected future sales trend and profitability, is the amount by which the acquisition value exceeds the fair value of net assets acquired. Goodwill is motivated by the anticipated future sales trend and profitability, as well as the personnel included in the acquired companies.As of 31 March 2020 non-taxable goodwill amounted to SEK 1,997 million, to

~~Note 30~~

Earnings per share before and after dilution

Earnings (SEK)	per	share	before and after dilution	2019/2020	2018/2019
Earnings	per	share	before dilution	12.85	9.85
Earnings	per	share	after dilution	12.80	9.80

See Note 1 for the method of calculation.

The numerators and denominators used to calculate the above earnings per share are derived as stated below.

EARNINGS PER SHARE BEFORE DILUTION

The calculation of earnings per share for 2019/2020 is based on profit for the year attributable to Parent Company shareholders, total ling SEK 862 million (660), and a weighted average number of shares outstanding during 2019/2020 of 67,123 thousand (67,047). The two components were calculated in the following manner:

	2019/2020	2018/2019
Proft for the year attributable to the equity
holders of the Parent Company, before dilu- tion (SEK million)	862	660

WEIGHTED AVERAGE NUMBER OF SHARES DURING THE YEAR, BEFORE DILUTION

BEFORE DILUTION
In thousands of shares	2019/2020	2018/2019
Total number of shares, 1 April	67,057	66,992
Effect of treasuryshares held	66	55
Weighted average number of shares
during the year, before dilution	67,123	67,047

EARNINGS PER SHARE AFTER DILUTION

The calculation of diluted earnings per share for 2019/2020 is based on profit attributable to Parent Company shareholders, totalling SEK 862 million (660), and a weighted average number of shares outstanding during 2019/2020 of 67,300 thousand (67,189). The two components were calculated in the following manner:

	2019/2020	2018/2019
Proft for the year attributable to Parent
Company shareholders, after dilution
(SEK million)	862	660

AVERAGE NUMBER OF SHARES OUTSTANDING,

AFTER DILUTION

AFTER DILUTION
In thousands of shares	2019/2020	2018/2019
Weighted average number of shares during
the year, before dilution	67,123	67,047
Effect of share options issued	177	142
Weighted average number of shares
during the year, after dilution	67,300	67,189

~~Note 31~~

Disclosures regarding the Parent Company

Addtech AB, corporate ID number 556302-9726, is the Parent Company of the Group. The Company’s registered office is located in the city of Stockholm, in the county of Stockholm and Addtech AB is a limited liability company under Swedish law.

Head office address: Addtech AB (publ.) Box 5112 SE-102 43 Stockholm. Sweden Tel +46 8 470 49 00 www.addtech.com

~~Note 32~~

Related party disclosures

For the Addtech Group, related parties mainly comprise senior executives. Information about personnel costs is provided in Note 6 Employees and employee expenses.

102 ADDTECH ANNUAL REPORT 2019/2020

ADDTECH ANNUAL REPORT 2019/2020 103

NOTES

ASSUR ANC E BY THE BOAR D OF D I R ECTORS

~~Note 33~~

Assurance by the Board of Directors

Events after the balance sheet date

The breakout of the COVID-19 pandemic in the fourth quarter of the financial year initially had limited impact on the Group’s operations. Addtech continues to monitor the recommendations issued by the appropriate authorities and is taking relevant health precautions to protect its personnel and to mitigate 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 our customers’ prospects of keeping their operations running at full capacity. We continuously prepare and undertake measures to be able to respond quickly to address reduced sales. All companies in the Group have prepared action plans and cost-saving programmes ready to be executed to protect earnings, liquidity and cash flow.

At the time of writing, approximately 120 of the Group’s total approximately 3,000 employees have been notified of redundancy and a further 800 employees are affected by short-term lay-offs. Sales in the first quarter of 2020/2021 is estimated to have been negatively affected by approximately 7 percent compared to sales in the first quarter previous year due to the current pandemic. Sales for the first quarter totaled SEK 2,805 million (2,934), a decrease of 4 percent of which 7 percent organically, with an operating margin of 8.7 percent (10.0).

solutions for applications in industrial IoT, primarily targeting industrial production, smart solutions for sustainable cities and infrastructure. Solutions include customised computer systems, info kiosks, test systems, software, sensors and industrial communications. The company generates annual sales of approximately EUR 8 million and has 38 employees.

On 2 April, Peter Andersson AB was acquired in Sweden and joined the Energy business area. Andersson System provides electrical accessories for office and kitchen environments in Sweden and Norway, both as trade products and as products developed in-house. These products are sold via retailers in office furniture, office equipment, AV equipment, computer accessories and kitchen fittings. The company generates annual sales of approximately SEK 30 million and has nine employees.

On 8 April, the company Valutec Group AB was acquired in Sweden and joined the Industrial Process business area. Valutec is one of the world’s leading manufacturers of wood dryers for the forest industry. The company generates annual sales of approximately SEK 350 million and has 45 employees.

According to the preliminary acquisition analyses, the assets and liabilities included in acquisitions following the end of the year were:

The Board of Directors and the CEO consider the consolidated accounts and annual accounts to have been prepared in accordance with IFRS as adopted by the EU and in accordance with generally accepted accounting principles and give a true and fair view of the position and earnings of the Group and the Parent Company. The Administration Report for the Group and the Parent Company provides a true and fair view of the operations, position and earnings of the Group and the Parent Company and describes the significant risks and uncertainties faced by the Parent Company and the companies included in the Group. In other regards, the earnings and position of the Group and the Parent Company are presented in the Income Statements, Balance Sheets, Cash Flow Statements and appurtenant notes included in the Annual Report.

Stockholm, 13 July 2020

Anders Börjesson Eva Elmstedt Kenth Eriksson CHAIRMAN OF THE BOARD BOARD MEMBER BOARD MEMBER

On 1 April, Elkome Group Oy was acquired in Finland and joined the Automation business area. Elkome develops, integrates and delivers

	Carrying amount	Adjustment
	on acquisition	to fair	Fair
SEK million	date	value	value
Intangible non-current assets	22	504	526
Other non-current assets	23	–	23
Inventories	46	–	46
Other current assets	159	–	159
Deferred tax liability/tax asset	-2	-107	-109
Other liabilities	-90	–	-90
Acquired net assets	158	397	555
Goodwill			497
Non-controllinginterests			-130
Consideration1)			922
Less cash and cash equivalents in acquired operations			-107
Less considerationsyet to bepaid			-99
Effect on consolidated cash and cash equivalents			716

Henrik Hedelius Ulf Mattsson Malin Nordesjö BOARD MEMBER BOARD MEMBER BOARD MEMBER

Johan Sjö Niklas Stenberg BOARD MEMBER CEO

Our Audit Report was submitted on 13 July 2020.

KPMG AB

1) With the acquisition of Valutec Group AB comes a commitment to acquire the remaining 14 percent of the company. This commitment is valued to SEK 98 million and will be reported as a non-current interest-bearing liability.

Joakim Thilstedt Jonas Eriksson AUTHORISED PUBLIC ACCOUNTANT AUTHORISED PUBLIC ACCOUNTANT PRINCIPAL AUDITOR

104 ADDTECH ANNUAL REPORT 2019/2020

ADDTECH ANNUAL REPORT 2019/2020 105

AUD I TOR ’S R EP OR T

AUD I TOR ’S R EP OR T

Auditor’s report

To the general meeting of the shareholders of Addtech AB (publ.), corp. id 556302-9726

Valuation of acquired intangible assets and the parent company’s interests in group companies.

Report on the annual accounts and consolidated accounts

See disclosure 14 and 17 and accounting principles on pages 67-68 and 71 in the annual account and consolidated accounts for detailed information and description of the matter.

OPINIONS

We have audited the annual accounts and consolidated accounts of Addtech AB for the financial year 2019-04-01—2020-03-31. The annual accounts and consolidated accounts of the company are included on pages 37-105 in this document.

Description of key audit matter

The book value of acquired intangible assets, consisting of goodwill, supplier relationships, technology etc., amount to SEK 3,240 million as at 31 March 2020, representing 38 % of total assets.

In our opinion, the annual accounts have been prepared in accordance with the Annual Accounts Act, and present fairly, in all material respects, the financial position of the parent company as of 31 March 2020 and its financial performance and cash flow for the year then ended in accordance with the Annual Accounts Act. The consolidated accounts have been prepared in accordance with the Annual Accounts Act and present fairly, in all material respects, the financial position of the group as of 31 March 2020 and their financial performance and cash flow for the year then ended in accordance with International Financial Reporting Standards (IFRS), as adopted by the EU, and the Annual Accounts Act.

Goodwill and intangible assets with an indefinite useful life should be subject to an annual impairment test. Other intangible assets are tested when impairment indicators are identified. Impairment tests are complex and include significant levels of judgments. The calculation of the assets’ recoverable amount is based on forecasts and discounted future cash flow projections, which are established with reference to factors such as estimated discount rates, revenue- and profit forecasts and predicted long-term growth that may be influenced by management’s assessments.

The parent company’s interests in group companies amount to SEK 1,004 million as at 31 March 2020. If the book value of the interests exceeds the equity in the respective group company, an impairment test is performed following the same methodology and using the same assumptions as for goodwill valuation.

A corporate governance statement has been prepared. The statutory administration report and the corporate governance statement are consistent with the other parts of the annual accounts and consolidated accounts, and the corporate governance statement is in accordance with the Annual Accounts Act.

We therefore recommend that the general meeting of shareholders adopts the income statement and balance sheet for the parent company and the group.

Response in the audit

We have obtained and assessed the group’s impairment tests to ensure they have been carried out in accordance with the technique stipulated in IFRS. Furthermore, we have evaluated management’s future cash flow forecasts and the underlying assumptions, which includes the long-term growth rate and the assumed discount rate, by obtaining and evaluating the group’s written documentation and plans. We have also considered previous years’ forecasts in relation to the actual outcome.

Our opinions in this report on the the annual accounts and consolidated accounts are consistent with the content of the additional report that has been submitted to the parent company’s audit committee in accordance with the Audit Regulation (537/2014) Article 11.

BASIS FOR OPINIONS

An important part of our work has also been to evaluate how changes to the assumptions may impact the valuation. The evaluation has been carried out by obtaining and assessing the group’s sensitivity analysis. We have also analysed the disclosures in the Annual Report and considered whether they accurately reflect the assumptions that group management apply in their valuation and whether they, in all material respects, are in line with the disclosures required by IFRS.

We conducted our audit in accordance with International Standards on Auditing (ISA) and generally accepted auditing standards in Sweden. Our responsibilities under those standards are further described in the Auditor’s Responsibilities section. We are independent of the parent company and the group in accordance with professional ethics for accountants in Sweden and have otherwise fulfilled our ethical responsibilities in accordance with these requirements.This includes that, based on the best of our knowledge and belief, no prohibited services referred to in the Audit Regulation (537/2014) Article 5.1 have been provided to the audited company or, where applicable, its parent company or its controlled companies within the EU.

Completeness in accounts following the Cyber-attack

Se the administration report page 37 in the annual accounts and consolidated accounts for detailed information and description of the matter.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinions.

Description of key audit matter

The group were during the financial year effected by a severe cyber-attack, where 80 of the group’s companies were affected by harmful encryption code. A new IT-environment has been built and the infected data for the part of the financial year that was affected has been recreated. The recreation of the accounting records has been made for several different sources in the effected companies. Controls have been made by the companies to ensure that all transactions are included in the accounts.

KEY AUDIT MATTERS

Key audit matters of the audit are those matters that, in our professional judgment, were of most significance in our audit of the annual accounts and consolidated accounts of the current period. These matters were addressed in the context of our audit of, and in forming our opinion thereon, the annual accounts and consolidated accounts as a whole, but we do not provide a separate opinion on these matters.

Response in the audit

We have obtained the documentation from the companies for the recreation of accounting records from the different sources and assessed the controls made by the companies to ensure the completeness of the accounting records. We have also performed data analysis and tested that the recreated transactions have been recorded in order to ensure that the accounting records in all material aspects are complete.

Furthermore, we have read the information in the administration report and evaluated whether it gives a true and fair view of the incident.

OTHER INFORMATION THAN THE ANNUAL ACCOUNTS AND CONSOLIDATED ACCOUNTS

Detta dokument innehåller även annan information än årsredovisningen This document also contains other information than the annual accounts and consolidated accounts and is found on pages 1-36 and 109-120. The Board of Directors and the Managing Director are responsible for this other information.

Our opinion on the annual accounts and consolidated accounts does not cover this other information and we do not express any form of assurance conclusion regarding this other information.

In connection with our audit of the annual accounts and consolidated accounts, our responsibility is to read the information identified above and consider whether the information is materially inconsistent with the annual accounts and consolidated accounts. In this procedure we also take into account our knowledge otherwise obtained in the audit and assess whether the information otherwise appears to be materially misstated.

If we, based on the work performed concerning this information, conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

RESPONSIBILITIES OF THE BOARD OF DIRECTORS AND THE MANAGING DIRECTOR

The Board of Directors and the Managing Director are responsible for the preparation of the annual accounts and consolidated accounts and that they give a fair presentation in accordance with the Annual Accounts Act and, concerning the consolidated accounts, in accordance with IFRS as adopted by the EU. The Board of Directors and the Managing Director are also responsible for such internal control as they determine is necessary to enable the preparation of annual accounts and consolidated accounts that are free from material misstatement, whether due to fraud or error.

In preparing the annual accounts and consolidated accounts The Board of Directors and the Managing Director are responsible for the assessment of the company’s and the group’s ability to continue as a going concern. They disclose, as applicable, matters related to going concern and using the going concern basis of accounting. The going concern basis of accounting is however not applied if the Board of Directors and the Managing Director intend to liquidate the company, to cease operations, or has no realistic alternative but to do so.

The Audit Committee shall, without prejudice to the Board of Director’s responsibilities and tasks in general, among other things oversee the company’s financial reporting process.

AUDITOR’S RESPONSIBILITY

Our objectives are to obtain reasonable assurance about whether the annual accounts and consolidated accounts as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinions. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs and generally accepted auditing standards in Sweden will always detect a material misstatement when it exists.

Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these annual accounts and consolidated accounts.

As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional scepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the annual accounts and consolidated accounts, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinions. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• Obtain an understanding of the company’s internal control relevant to our audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Board of Directors and the Managing Director.

• Conclude on the appropriateness of the Board of Directors’ and the Managing Director’s, use of the going concern basis of accounting in preparing the annual accounts and consolidated accounts. We also draw a conclusion, based on the audit evidence obtained, as to whether any material uncertainty exists related to events or conditions that may cast significant doubt on the company’s and the group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the annual accounts and consolidated accounts or, if such disclosures are inadequate, to modify our opinion about the annual accounts and consolidated accounts. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause a company and a group to cease to continue as a going concern.

• Evaluate the overall presentation, structure and content of the annual accounts and consolidated accounts, including the disclosures, and whether the annual accounts and consolidated accounts represent the underlying transactions and events in a manner that achieves fair presentation.

• Obtain sufficient and appropriate audit evidence regarding the financial information of the entities or business activities within the group to express an opinion on the consolidated accounts. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our opinions.

We must inform the Board of Directors of, among other matters, the planned scope and timing of the audit. We must also inform of significant audit findings during our audit, including any significant deficiencies in internal control that we identified.

We must also provide the Board of Directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with the Board of Directors, we determine those matters that were of most significance in the audit of the annual accounts and consolidated accounts, including the most important assessed risks for material misstatement, and are therefore the key audit matters. We describe these matters in the auditor’s report unless law or regulation precludes disclosure about the matter.

106 ADDTECH ANNUAL REPORT 2019/2020

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AUD I TOR ’S R EP OR T

M U LTI -YE AR SU M M ARY

Report on other legal and regulatory requirements

OPINIONS

In addition to our audit of the annual accounts and consolidated accounts, we have also audited the administration of the Board of Directors and the Managing Director of Addtech AB for the financial year 201904-01—2020-03-31 and the proposed appropriations of the company’s profit or loss.

We recommend to the general meeting of shareholders that the profit be appropriated in accordance with the proposal in the statutory administration report and that the members of the Board of Directors and the Managing Director be discharged from liability for the financial year.

BASIS FOR OPINIONS

We conducted the audit in accordance with generally accepted auditing standards in Sweden. Our responsibilities under those standards are further described in the Auditor’s Responsibilities section. We are independent of the parent company and the group in accordance with professional ethics for accountants in Sweden and have otherwise fulfilled our ethical responsibilities in accordance with these requirements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinions.

RESPONSIBILITIES OF THE BOARD OF DIRECTORS AND THE MANAGING DIRECTOR

The Board of Directors is responsible for the proposal for appropriations of the company’s profit or loss. At the proposal of a dividend, this includes an assessment of whether the dividend is justifiable considering the requirements which the company’s and the group’s type of operations, size and risks place on the size of the parent company’s and the group’s equity, consolidation requirements, liquidity and position in general.

The Board of Directors is responsible for the company’s organization and the administration of the company’s affairs. This includes among other things continuous assessment of the company’s and the group’s financial situation and ensuring that the company’s organization is designed so that the accounting, management of assets and the company’s financial affairs otherwise are controlled in a reassuring manner.

The Managing Director shall manage the ongoing administration according to the Board of Directors’ guidelines and instructions and among other matters take measures that are necessary to fulfill the company’s accounting in accordance with law and handle the management of assets in a reassuring manner.

AUDITOR’S RESPONSIBILITY

Our objective concerning the audit of the administration, and thereby our opinion about discharge from liability, is to obtain audit evidence to assess with a reasonable degree of assurance whether any member of the Board of Directors or the Managing Director in any material respect:

• has undertaken any action or been guilty of any omission which can give rise to liability to the company, or

• in any other way has acted in contravention of the Companies Act, the Annual Accounts Act or the Articles of Association.

Our objective concerning the audit of the proposed appropriations of the company’s profit or loss, and thereby our opinion about this, is to assess with reasonable degree of assurance whether the proposal is in accordance with the Companies Act.

Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with generally accepted

auditing standards in Sweden will always detect actions or omissions that can give rise to liability to the company, or that the proposed appropriations of the company’s profit or loss are not in accordance with the Companies Act.

As part of an audit in accordance with generally accepted auditing standards in Sweden, we exercise professional judgment and maintain professional scepticism throughout the audit. The examination of the administration and the proposed appropriations of the company’s profit or loss is based primarily on the audit of the accounts. Additional audit procedures performed are based on our professional judgment with starting point in risk and materiality. This means that we focus the examination on such actions, areas and relationships that are material for the operations and where deviations and violations would have particular importance for the company’s situation. We examine and test decisions undertaken, support for decisions, actions taken and other circumstances that are relevant to our opinion concerning discharge from liability. As a basis for our opinion on the Board of Directors’ proposed appropriations of the company’s profit or loss we examined the Board of Directors’ reasoned statement and a selection of supporting evidence in order to be able to assess whether the proposal is in accordance with the Companies Act.

THE AUDITOR’S OPINION REGARDING THE STATUTORY SUSTAINABILITY REPORT

The Board of Directors is responsible for the sustainability report on pages 114-120, and that it is prepared in accordance with the Annual Accounts Act.

Our examination has been conducted in accordance with FAR:s auditing standard RevR 12 The auditor’s opinion regarding the statutory sustainability report. This means that our examination of the statutory sustainability report is different and substantially less in scope than an audit conducted in accordance with International Standards on Auditing and generally accepted auditing standards in Sweden. We believe that the examination has provided us with sufficient basis for our opinion. A statutory sustainability report has been prepared.

KPMG AB, Box 382, 101 27, Stockholm, was appointed auditor of Addtech AB by the general meeting of the shareholders on the 29 08 2019. KPMG AB or auditors operating at KPMG AB have been the company’s auditor since 1997.

Stockholm, July 13, 2020

KPMG AB

Joakim Thilstedt

AUTHORIZED PUBLIC ACCOUNTANT Principal Auditor

Jonas Eriksson

AUTHORIZED PUBLIC ACCOUNTANT

Multi-year summary

	SEK million,unless otherwise stated 2019/2020	2018/2019	2017/2018	2016/2017
	Net sales 11,735	10,148	8,022	7,178
	EBITDA 1,579	1,137	881	755
	EBITA 1,364	1,085	838	715
	Operating proft 1,161	910	701	604
	Proft after fnancial items 1,105	865	665	580
	Proft for the year 873	672	526	450
	Intangible non-current assets 3,240	2,953	2,463	1,892
	Property, plant and equipment and fnancial non-current assets 374	315	239	217
	Right-of-use assets 626	-	-	-
	Inventories 1,642	1,417	1,118	942
	Current receivables 2,261	2,065	1,507	1,286
	Cash and cash equivalents 363	295	192	178
	TOTAL ASSETS 8,506	7,045	5,519	4,515
	Equity attributable to shareholders 3,018	2,470	2,085	1,701
	Non-controlling interests 58	50	46	40
	Interest-bearing liabilities and provisions 2,948	2,256	1,598	1,189
	Non-interest-bearingliabilities andprovisions 2,482	2,269	1,790	1,585
	TOTAL EQUITY AND LIABILITIES 8,506	7,045	5,519	4,515
	Capital employed 6,023	4,775	3,728	2,930
	Working capital 2,415	2,029	1,591	1,362
	Financial net debt 2,585	1,960	1,405	1,011
	Net debt excluding pensions 2,253	1,700	1,176	801
	EBITA margin, % 11.6	10.7	10.5	10.0
	Operating margin, % 9.9	9.0	8.7	8.4
	Proft margin, % 9.4	8.5	8.3	8.1
	Return on equity, % 32	29	28	28
	Return on capital employed, % 21	21	22	23
	Return on working capital (P/WC), % 56	53	53	53
	Equity/assets ratio, % 36	36	39	39
	Debt/equity ratio, multiple 0.8	0.8	0.7	0.6
	Net debt/equity ratio, multiple 0.7	0.7	0.6	0.5
	Interest coverage ratio, multiple 20.5	22.1	22.7	23.9
	Financial net debt/EBITDA,multiple 1.6	1.7	1.6	1.3
	Earnings per share, SEK 12.85	9.85	7.70	6.60
	Earnings per share after dilution effect, SEK 12.80	9.80	7.65	6.55
	Cash fow per share, SEK 16.65	7.80	8.05	8.25
	Equity per share, SEK 44.95	36.80	31.10	25.45
	Dividend per share, SEK 4.001)	5.00	4.00	3.50
	Average number of shares after repurchases (thousands) 67,123	67,047	66,950	66,824
	Average number of shares after repurchases, adjusted for dilution (thousands) 67,300	67,189	67,178	67,008
	Shareprice on 31 March,SEK 244.50	193.00	168.00	148.50
	Cash fow from operating activities 1,117	524	539	551
	Cash fow from investing activities -532	-725	-520	-395
	Cash fow from fnancing activities -507	294	-12	-126
	Cash fow for theyear 78	93	7	30
	Average number of employees 2,913	2,590	2,283	2,133
	Number of employees at end of year 2,981	2,759	2,358	2,176

1) As proposed by the Board of Directors.

108 ADDTECH ANNUAL REPORT 2019/2020

ADDTECH ANNUAL REPORT 2019/2020 109

DEF I N I TI ONS

DEF I N I TI ONS

Definitions

Acquired growth[1]

Changes in net sales attributable to business acquisitions compared with the same period last year.

Acquired growth is used as a component to describe the change in consolidated net sales in which acquired growth is distinguished from organic growth, divestments and exchange rate effects, see reconciliation table on the next pages.

Capital employed¹

Total assets minus non-interest-bearing liabilities and provisions.

Capital employed shows the size of the company’s assets that have been lent to the company’s owners or that have been lent out by lenders, see reconciliation table on the next pages.

Cash flow from operating activities per share[1]

Cash flow from operating activities, divided by the average number of outstanding shares after repurchase.

This measure is used so investors can easily analyse the size of the surplus generated per share from operating activities.

Debt/equity ratio[1 2]

Financial net liabilities divided by equity.

A measure used to analyse financial risk.

Earnings per share (EPS)

Shareholders’ share of profit for the period after tax, divided by the weighted average number of shares during the period. Performance measures under IFRS.

Earnings per share (EPS), diluted

Shareholders’ share of profit for the period after tax, divided by the weighted average number of shares during the period, adjusted for the additional number of shares in the event of outstanding options being used.

EBITA[1]

Operating profit before amortisation of intangible assets.

EBITA is used to analyse the profitability generated by operating activities, see reconciliation table on the next pages.

EBITA-margin[1]

EBITA as a percentage of net sales.

EBITA margin is used to the show the degree of profitability in operating activities.

EBITDA[1]

Operating profit before depreciation and amortisation.

EBITDA is used to analyse the profitability generated by operating activities, see reconciliation table on the next pages.

Equity ratio[1 2]

Equity as a percentage of total assets.

The equity/assets ratio is used to analyse financial risk and show the percentage of assets that are funded with equity.

Equity per share[1]

Equity divided by number of shares outstanding at the reporting period’s end.

This measures how much equity is attributable to each share and is published to make it easier for investors to conduct analyses and make decisions.

Financial net debt[1]

The net of interest-bearing debt and provisions minus cash and cash equivalents.

Net debt is used to monitor changes in debt, analyse the Group indebtedness and its ability to repay its debts using liquid funds generated from the Group’s operating activities if all debt fell due for repayment today and any necessary refinancing.

Financial net debt/EBITDA[1]

Net financial debt divided by EBTIDA.

Net financial debt compared with EBITDA provides a performance measure for net debt in relation to cash- generating earnings in the business, i.e. it gives an indication of the business’ ability to repay its debts. This measure is generally used by financial institutions to measure creditworthiness.

Financial items[1] Finance income minus finance costs.

Used to describe changes in the Group’s financial activities.

Interest coverage ratio[1]

Earnings after net financial items plus interest expense and bank charges divided by interest expense and bank charges.

This performance indicator measures the Group’s capacity through its business operations and finance income to generate a sufficiently large surplus to cover its finance costs, see reconciliation table on the next pages.

Net debt excluding pensions[1]

The net of interest-bearing debt and provisions excluding pensions minus cash and cash equivalents.

A measure used to analyse financial risk, see reconciliation table on the next pages.

Net debt excluding pensions/ equity ratio[1 2]

Net debt excluding pensions divided by shareholders’ equity.

A measure used to analyse financial risk, see reconciliation table on the next pages.

Net investments in non-current assets[1]

Investments in non-current assets minus sales of non-current assets.

This measure is used to analyse the Group’s investments in renewing and developing property, plant and equipment.

Operating margin[1]

Operating profit as a percentage of net sales.

This measure is used to specify the percentage of sales that is left to cover interest and tax, and to provide a profit, after the company’s costs have been paid.

Operating profit[1]

Operating income minus operating expenses.

Used to describe the Group’s earnings before interest and tax.

Organic growth[1]

Changes in net sales excluding currency effects, acquisitions and divestments compared with the same period last year.

Organic growth is used to analyse underlying sales growth driven a change in volumes, product range and price for similar products between different periods, see reconciliation table on the next pages.

Outstanding shares

Total number of shares less treasury shares repurchased by the Company.

Profit after financial items[1]

Profit/loss for the period before tax.

Used to analyse the business’ profitability including financial activities.

Return on capital employed[1]

Profit before tax plus financial expenses as a percentage of capital employed. The components are calculated as the average of the last 12 months.

Return on capital employed shows the Group’s profitability in relation to externally financed capital and equity, see reconciliation table on the next pages.

Return on equity[2]

Earnings after tax divided by equity. The components are calculated as the average of the last 12 months.

Return on equity measures the return generated on owners’ invested capital.

Return on working capital (P/WC)[1]

EBITA divided by working capital.

P/WC is used to analyse profitability and is a measure that encourages high EBITA and low working capital requirements.

Working capital[1]

Working capital (WC) is measured through an annual average defined as inventories plus accounts receivable less accounts payable.

Working capital is used to analyse how much working capital is tied up in the business, see reconciliation table on the next pages.

¹ The performance measure is an alternative performance measure according to ESMA’s guidelines.

² Minority interest is included in equity when the performance measures are calculated.

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RECONCILIATION TABLES, ALTERNATIVE KEY FINANCIAL INDICATORS

EBITA and EBITDA
Group,SEK million	2019/2020	2018/2019	2017/2018	2016/2017
Operating proft	1,161	910	701	604
Amortisation,intangible non-current assets(+)	203	175	137	111
EBITA	1,364	1,085	838	715
Depreciation, property, plant and equipment (+)	215	52	43	40
EBITDA	1,579	1,137	881	755

Interest coverage ratio

Interest coverage ratio
Group	2019/2020	2018/2019	2017/2018	2016/2017
Proft after fnancial items, SEK million	1,105	865	665	580
Interest expenses and bank charges,SEK million(+)	57	41	31	25
Total	1,162	906	696	605
Interest coverage ratio, multiple	20.5	22.1	22.7	23.9

Capital employed and return on capital employed

Working capital and return on working capital (P/WC)

Workingcapital and return on workingcapital (P/WC)
Group,SEK million 2019/2020	2018/2019	2017/2018	2016/2017
EBITA(rolling12 months) 1,364	1,085	838	715
Inventories, annual average (+) 1,594	1,304	1,037	941
Accounts receivable, annual average (+) 1,854	1,542	1,231	1,043
Accountspayable,annual average(-) 1,033	817	677	622
Working capital (annual average) 2,415	2,029	1,591	1,362
Return on working capital (P/WC) (%) 56%	53%	53%	53%

Capital employed and return on capital employed
Group,SEK million	2019/2020	2018/2019	2017/2018	2016/2017
Proft after fnancial items	1,105	865	665	580
Financial expenses(+)	79	62	71	39
Proft after fnancial items plus fnancial expenses	1,184	927	736	619
Total assets, annual average (+)	7,926	6,324	4,996	4,143
Non-interest-bearing liabilities, annual average (-)	-1,947	-1,604	-1,319	-1,167
Non-interest-bearing provisions,annual average(-)	-379	-378	-335	-268
Capital employed	5,600	4,342	3,342	2,708
Return on capital employed, %	21%	21%	22%	23%

Acquiredgrowth and organicgrowth
Group	2019/2020	2018/2019	2017/2018	2016/2017
Acquired growth (SEK million, %)	774 (8%)	999 (12%)	557 (8%)	574 (9%)
Organic growth (SEK million, %)	765 (8%)	903 (11%)	356 (5%)	403 (7%)
Divestments (SEK million, %)	-59 (-1%)	-65 (-1%)	-115 (-2%)	-
Exchange rate effects(SEK million,%)	107(1%)	289(4%)	46(1%)	46(1%)
Total growth (SEK million, %)	1,587 (16%)	2,126 (26%)	844 (12%)	1,023 (17%)

Net debt excluding pensions and net debt/equityratio excluding pensions
Group	2019/2020	2018/2019	2017/2018	2016/2017
Financial net debt, SEK million	2,585	1,960	1,405	1,011
Pensions,SEK million(-)	-332	-260	-229	-210
Net debt excluding pensions, SEK million	2,253	1,700	1,176	801
Equity,SEK million	3,076	2,520	2,131	1,741
Net debt/equity ratio excluding pensions, multiple	0.7	0.7	0.6	0.5

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Sustainability notes

active ownership through Board work and follow-up, but does not govern the companies at a detailed level. Every year, the companies report their own sustainability work. If deficiencies are identified, the companies apply appropriate measures with the support of the Group.

ABOUT SUSTAINABILITY REPORTING

Addtech’s sustainability efforts are a central and integrated part of our business, organisation and value chain. We have therefore also chosen to integrate the Sustainability Report into our Annual Report for the financial year from April 2019 to March 2020. This report covers Addtech AB company ID number 556302-9726 with associated subsidiaries.

Addtech’s Code of Conduct is a cornerstone of our sustainability work and an integrated part of the business. Our Code of Conduct, together with our core values, is the foundation of how we do business, behave and act in our daily work and in our relationships with the surrounding world. The Code includes human rights, working conditions, gender equality and diversity, anti-corruption and environmental responsibility and builds on the UN Global Compact, ILO’s core conventions and on the OECD Guidelines for Multinational Enterprises. It encompasses all companies and employees. The Code of Conduct is reviewed by the Board of Directors annually. It is available on our website www.addtech.com together with our Code of Conduct for Suppliers. Any improprieties or irregularities that are in conflict with our Code of Conduct shall be reported to our whistle-blower function.

In the reporting, Addtech has been inspired by the International Integrated Reporting Framework (IIRC). This is a framework that aims to report and create context around the factors that affect a company’s possibility to create value in the short, median and long term. The reporting also pertains to the statutory reporting of sustainability according to the Annual Accounts Act 06:10-14. The UN’s global goals were used as a framework for the materiality analysis, the stakeholder dialogue and our objectives. Key indicators are reported according to the Global Reporting Initiative (GRI) Standards, Greenhouse Gas Protocol and Addtech’s own key indicators for sustainable development. The sustainability notes are examined by an external party, see statement on page 121.

On the following pages, supplementary sustainability information is presented, such as: governance, materiality analysis and material areas, stakeholder dialogue, sustainability targets, key indicators and calculation methods.

MATERIALITY ANALYSIS

In order to be able to work strategically and in a manner integrated with sustainable development, we updated our materiality analysis and stakeholder dialogue during the year, and defined targets for our long-term work. The materiality analysis was established in Group Management in November 2019.

GOVERNANCE

Ultimately, the Group’s Board of Directors is responsible, through Group Management, for Addtech’s overall, long-term sustainability targets. These targets are supplemented by targets and action plans developed by each business area for its companies. Our operational sustainability work is therefore conducted in line with our well established corporate culture through a decentralised responsibility in our companies. Addtech practices

Material to stakeholders

In connection with the update of our materiality analysis, a stakeholder dialogue was held with prioritised stakeholder groups. The UN Global Sustainable Development Goals were used as a starting point for the

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STAKEHOLDER DIALOGUE IMPORTANT ISSUES PRIORITISED
GROUP METHOD FOR THEM GLOBAL GOALS
In-depth interviews with a selection Earnings trend, human
of our largest shareholders and rights, anti-corruption,
analysts that follow the Addtech climate impact, sustaina-
Shareholders
share, capital market day, Annual ble business models and
General Meeting, Annual Report, gender equality.
Interim Reports and website.
In-depth interviews with focus Gender equality, working
groups from every business area, conditions, skills develop-
Employees sustainability surveys for selected ment, responsible suppliers,
employees, development inter- sustainable business oppor-
views, courses and the intranet. tunities and climate impact.
In-depth interviews with a selection Innovation, human rights,
of our largest customers, the com- responsible resource con-
Customers panies’ own channels and meetings sumption, anti-corruption,
and the website. working conditions and
climate impact.
In-depth interviews with a selection of Business ethics, customer
our most important suppliers,the sub- satisfaction, collaboration
Suppliers sidiaries’ own channels and meetings, and the climate impact.
supplier evaluations and visits.
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Material to Addtech

dialogue. The dialogue consisted of in-depth interviews and surveys where the stakeholder groups responded to questions on what sustainability issues were important to them and what expectations they have of Addtech’s continued sustainability strategy. They also had the opportunity to prioritise the global goals that were the most important to those with whom Addtech works. The results are reported in the Y axis of the materiality matrix: Material to Stakeholders.

In a survey, the Board of Directors and Management Group for Addtech AB prioritised the global goals according to what goals can constitute risks, as well as business opportunities for the Group. The responses were then presented at a workshop with the Management Group where the relation between Addtech’s ambitions and stakeholder expectations were discussed. The results are reported in the X axis of the materiality matrix: Material to Addtech.

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0 1 2 3 4 5 6 7 8 9 10
MATERIAL TO ADDTECH
10
9
8
7
6
5
4
MATERIAL TO STAKEHOLDERS 3
2
1
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Prioritisation

are of significance to Addtech, but to be able to focus and drive the work forward, a prioritisation is needed. Our material areas are followed up with GRI indicators and our own key indicators.

The table below presents Addtech’s most material sustainability areas and their relation to the global goals. The questions are ranked according to the company’s and the stakeholders’ prioritisation. All of the global goals

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Priority Global goal Implication for Addtech Area KPI
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PRIORITISED AREAS	PRIORITISED AREAS	PRIORITISED AREAS	PRIORITISED AREAS	PRIORITISED AREAS
1	7: Affordable and clean energy 7.2 Increase the share of renewable energy 7.3 Double the global rate of improvement in energy effciency	That we increase the share of business that contributes to the transformation to re- newable energy consumption and improve the effciency of our own energy use. Also included in goals 9 and 13.	Energy consumption	GRI 302-1 Energy consumption GRI 302-3 Energy intensity GRI 302-4 Reduction of energy consumption
2	13: Climate action 13.3 Improve knowledge and capacity on climate change mitigation	That we map, set targets and reduce our emissions from transports, purchases and energy consumption.	Emissions of greenhouse gases	GRI 305-1 Scope 1 GRI 305-2 Scope 2 GRI 305-3 Scope 3 GRI 305-4 GHG emissions intensity GRI 305-5 Reduction of GHG emissions
3	9: Industries, innovation and infrastructure 9.4 Upgrade infrastructure and retroft industries to make them sustainable	That we increase the share of business that offers technical solutions for the transformation to sustain- able innovation, industries and infrastructure.	Economic value	GRI 201-1 Direct economic value generated and distributed Addtech KPI: The share of sales that contrib- utes to sustainable development in total by business area and by global goal.
4	8: Decent work and economic growth 8.8 Protect labour rights and promote safe and secure work environments	That we ensure a long-term perspective in our growth without risking working con- ditions for our own employ- ees and at our suppliers.	Employees Employment Training and development Social supplier evaluation	GRI 102-8 Number of employees and proportion of full-time and part-time employments. GRI 401-1 New employee hires and employee turnover GRI 404-1 Average hours of training per year per employee GRI 404-3 Percentage of employees receiving reg- ular performance and career development reviews Addtech KPI: Percentage of purchasing volume evaluated based on the Code of Conduct
5	5: Gender equality 5.5 Ensure women’s full and ef- fective participation and equal opportunities for leadership at all levels of decisionmaking.	That we have a gender equal and inclusive working environment that promotes female leadership.	Diversity and equal oppor- tunity	GRI 405-1 Diversity of governance bodies and employees GRI 404-1 Average hours of training per year per employee, by gender Addtech KPI: Proportion of women, sales Addtech KPI: Number of reported whistle-blower cases
6	12: Responsible consumption and production 12.2 Sustainable management and effcient use of natural resources	That we have a product life cycle with effcient use of natural resources.	Environmental supplier evalu- ation	Addtech KPI: Percentage of purchasing volume evaluated based on the Code of Conduct
7	3: Good health and well-being 3.4 Reduce mortality from non- communicable diseases and promote mental health	That we work systematically to promote health and safety at our workplaces	Health and safety	GRI 403-1 Accidents and sick leave
LESS PRIORITISED AREAS
8	11: Sustainable cities and communities		Included in goal 9.
9	14: Life below water		Included in goal 9.
10	10: Reduced inequalities		Included in goal 5
11	6: Clean water and sanitation		Included in goal 9.
12	1: No poverty
13	16: Peace, justice and strong institutions
14	4: Quality education
15	17: Partnerships for the goals
16	15: Life on land
17	2: Zero hunger

2030 in accordance with the global goals. With a distinct direction, we want to clarify where we want to go and what value we want to create and using key performance indicators, we want to ensure that we develop in the right direction. Focus in the next year will be to establish priorities and visions throughout the Group to develop together a strategic plan of action and necessary activities for achieving our objectives.

VISIONS AND KEY PERFORMANCE INDICATORS

The materiality matrix has then be converted into a sustainability model consisting of five of the highest priority areas for both Addtech and stakeholders, with a breakdown into three strategic focus areas: the business, the organisation and the value chain. For each strategic focus area, there is a long-term vision that is measurable and limited in time to the year

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BUSINESS ORGANISATION VALUE CHAIN
2030 the vision is that 100% 2030 the vision is to have 40% women 2030 the vision is to have evaluated 80%
of sales will contribute to in senior positions and reduce our carbon of the purchase volume based on our
sustainable development dioxide intensity by 50% Code of Conduct
KPI 2019/2020 2018/2019 2017/2018
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THE BUSINESS	THE BUSINESS	THE BUSINESS	THE BUSINESS
Sustainable development
Percentage of sales from business that contributes to sustainable development (%)*	40	–	–
Distribution by business area (%)	Energy: 32	–	–
	Industrial Process: 29	–	–
	Power Solutions: 19	–	–
	Automation: 12	–	–
	Components: 8	–	–
Distribution by global goal (SDG) (%)	SDG 3: Good health and well-being: 4	–	–
	SDG 6: Clean water and sanitation: 1	–	–
	SDG 7: Affordable and clean energy: 28	–	–
	SDG 9: Industry, innovation and infrastructure: 38	–	–
	SDG 11: Sustainable cities and communities: 9	–	–
	SDG 12: Responsible consump- tion and production: 2	–	–
	SDG 14: Life below water: 18
Economic value
Financial value generated (SEK million)	11,735	10,148	8,022
Financial value distributed (SEK million)	11,510	9,787	7,765
Of which, manufacturing costs (SEK million)	8,725	7,398	5,825
Of which, salaries and remunerations (salaries, pensions, payroll taxes, social security contributions) (SEK million)	2,114	1,840	1,496
Of which, disbursements to creditors (SEK million)	62	50	40
Of which, disbursements to shareholders (SEK million)	336	269	235
Of which, disbursements to governments (tax) (SEK million)	273	230	169
Remaining in the company (SEK million)	225	361	257

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KPI 2019/2020 2018/2019 2017/2018
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ORGANISATION (SOCIAL)	ORGANISATION (SOCIAL)	ORGANISATION (SOCIAL)	ORGANISATION (SOCIAL)
Diversity& equal opportunity
Proportion of women, management (%)*	14	11	12
Proportion of women, administration, fnance & purchasing (%)	65	66	66
Proportion of women, sales (%)	14	14	14
Proportion of women, technical service, support, production, warehousing (%)	19	21	22
Proportion of women, total (%)	26	26	26
Proportion of employees who ever felt discriminated (%)* (Survey is done every two years)	–	1.8	–
Number of reported whistle-blower cases*	0	0	0
Employment
Total number of employees	2,913	2,590	2,283
Percentage of permanent employees (%)	97	98	96
Percentage of full-time employees (%)	94	94	93
Personnel turnover (%)	10	12	12
Personnel turnover, women (%)	10	13	13
Personnel turnover, men (%)	10	11	12
Health & safety
Absence due to illness (%)*	3	3	2
Number of accidents	32	32	29
Training& development
Total number of invested training hours	24,137	22,585	22,556
Number of invested training hours/employee	8.29	8.72	9.88
Percentage of invested training hours per female employee, weighted gender distribution (%)	54	52	57
Percentage of invested training hours per male employee, weighted gender distribution (%)	46	48	43
Percentage of documented performance and development interviews (%)	63	63	62
ORGANISATION (ENVIRONMENT)
Emissions ofgreenhousegases*
Carbon dioxide intensity (total emissions tonnes CO2e/net sales, SEK thousands)	2.2	2.2	2.2
Total emissions (tonnes CO2e)	25,312	22 265	17,600
SCOPE 1 (tonnes CO2e)	2,071	1,869	1,643
Emissions from own vehicle feet (tonnes CO2e)	2,071	1,869	1,643
SCOPE 2 (tonnes CO2e)	2,494	2,318	2,134
Emissions, energy consumption (tonnes of CO2e)	2,494	2,318	2,134
SCOPE 3 (tonnes CO2e)	20,747	18,078	13,823
Upstream freight emissions (tonnes of CO2e)	10,581	9,892	8,134
Downstream freight emissions (tonnes of CO2e)	7,781	6,038	4,464
Business travel emissions, air travel (tonnes of CO2e)	2,385	2,148	1,225
Energyconsumption
Total energy consumption (MWh)	24,935	23,184	21,343
Of which electricity (MWh)	16,317	15,595	14,744
Of which heating (MWh)	8,618	7,589	6,599
Share of electricity from renewable sources (%)	59	59	54
Energy consumption in relation to net sales (%)	2.1	2.3	2.7

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KPI 2019/2020 2018/2019 2017/2018
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VALUE CHAIN	VALUE CHAIN	VALUE CHAIN	VALUE CHAIN
Social & environmental supplier evaluation
Percentage of purchasing volume evaluated based on the Code of Conduct (%)*	51	–	–

• See below for calculation methods and comments.

Calculation methods and comments on outcomes

HEALTH & SAFETY

PERCENTAGE OF SALES FROM BUSINESS THAT CONTRIBUTES TO SUSTAINABLE DEVELOPMENT

We apply a zero vision regarding work-related accidents, illness and incidents and promote health and well-being among our employees. We therefore continuously follow up key performance indicators for health and safety.

Addtech wants to be part of the transformation to a sustainable development and sees considerable opportunities in business that contributes positively to society and the environment. A self-assessment has been done based on each business area’s existing product and service offering that addresses any of the sustainability challenges mentioned in the UN Global Sustainable Development Goals and their 169 targets. The revenue from these assignments are then estimated to be able to do a calculation of their share of total sales at a Group level, rounded to the nearest ten. The purpose of this key performance indicator is to identify a present situation to over time increase the share of our sales that contributes to a sustainable future and new business opportunities.

For the calculation of the number of accidents, each company in the Group has reported the number of injuries that occurred due to or during the work, but not injuries caused during travel to and from work. The year was characterised by a continued low sickness absence.

EMISSIONS OF GREENHOUSE GASES

We want to conduct our business with the least possible impact on the climate. We therefore work to improve efficiency and reduce our resource consumption and emissions. Our carbon dioxide emissions are calculated according to the international standard Greenhouse Gas Protocol and are reported in three different scopes. The precautionary approach has been applied for all calculations.

PROPORTION OF WOMEN, MANAGEMENT

The technology trading industry has historically been, and is still, male-dominated. Addtech wants to gradually increase the share of women and promotes female leadership. We therefore have an explicit vision to have gender equal management groups in the Group by 2030. The calculation of the share of women in management positions is done of the number of women who work in management groups at the Group and company level, in relation to the total number of employees that work in management groups. The purpose of the key performance indicator is to identify a present situation to be able to promote equal opportunities and increase participation of women in management and decision-making. During the year, we achieved an increase from 11 percent to 14 percent women in management positions. Read more about how we work with this on pages 28-29.

• Scope 1 pertains to direct emissions from operations owned and controlled by us, including emissions from production and fuel consumption for vehicles where the operational control method has been used in the calculation and based on reported mileage and average emissions of 134 g Co2e/km from the Group’s vehicle fleet. With a new car policy that was implemented during the year, we want to encourage the selection of more environmentally friendly cars with the aim of reducing our emissions in Scope 1.

• Scope 2 pertains to indirect emissions from purchased and consumed electricity, heating and cooling. The emissions in Scope 2 were reported in accordance with the GHG Protocol’s guidelines for location-based emissions. The emissions factor for consumed electricity and heating is based on a high calculated average for Nordic electricity production and Swedish district heating production where 1 KWh is estimated to generate 0.1 kg CO2e. In the future, we intend to prepare location-specific emissions factors for electricity and heating consumption.

NUMBER OF REPORTED CASES OF DISCRIMINATION

Addtech endeavours to have no discrimination in the workplace. Every two years, an employee survey is done for all employees in the Group that includes questions about equal opportunity, diversity and discrimination. For the calculation of the share of employees who every felt discriminated, the number of responses of the nature “Do not agree” to the statement “I have never been discriminated against at work” is put in relation to the total number of employees. The work to promote an inclusive working environment without discrimination takes place decentralised through the companies’ own systematic work environment efforts with the support of Group-wide guidelines.

• Scope 3 pertains to indirect emissions from sources that are not owned or controlled by Addtech, and include among other things purchasing, logistics and business travel. The calculations are based on reports from transport providers and travel agencies. For upstream transports, all freight transports from suppliers to warehouse are calculated and with downstream transports, all freight transports from customer to warehouse are calculated. The transports that go directly from supplier to customer are counted as downstream. Our largest identified emissions in Scope 3 are within category 4: upstreams transport and distribution, category 9: downstream transport and distribution and 6: business travel (only air travel). The emissions from purchasing and use of our products have not been estimated in this phase.

NUMBER OF REPORTED WHISTLE-BLOWER CASES

The cause of the whistle blowing may relate to any kind of impropriety or irregularity that is in conflict with our Code of Conduct, which covers bribery and corruption, the working environment, discrimination and environmental responsibility. In 2019, the implementation was initiated of a new whistle-blower system in order for the handling and categorisation of the whistle-blower cases to be done by an external party.

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During the year, the decision was made that we want to reduce our carbon dioxide intensity by 50 percent by 2030. With that vision, we want to grow in an even more climate-efficient manner. This work will continue in 2020/2021 with encouraging all companies in the group to set their own goals in line with the overall vision.

PERCENTAGE OF PURCHASING VOLUME EVALUATED BASED ON THE CODE OF CONDUCT

We have a large number of suppliers around the world and a majority of purchasing takes place from non-Nordic suppliers in Europe, the USA and Asia. The circumstance that production largely does not take place within our operations entails certain sustainability risks. At the same time, our supplier relations are often long and characterised by close cooperation

on how the supplier’s products can be used in different customer applications. This benefits quality, price, lead times and customer satisfaction at the same time that it gives us the opportunity to have a constructive dialogue on the supplier’s sustainability risks and development. We are also constantly looking for new suppliers that can supplement or strengthen our business development. It is therefore important that both new and existing suppliers are evaluated in accordance with our Code of Conduct, an effort that is done decentralised at our companies. Our vision is to regularly review, evaluate and conduct a constructive dialogue with suppliers equivalent to 80 percent of our purchasing volume that is prioritised according to strategic importance and higher risk. With this, we seek to achieve positive economic, social and environmental changes in our supply chain.

Auditor’s Independent Limited Assurance Report on the review of non-financial disclosures for Addtech AB: s annual report 2019/2020

To Addtech AB, org. no. 556302-9726

INTRODUCTION

I have been assigned by the Board of Directors for Addtech AB to perform a limited assurance engagement of Addtech AB: s non-financial disclosures in the annual report for the accounting year of 2019/2020. Addtech AB has defined the scope of the non-financial disclosures on pages 114120 in the annual report.

responsibilities in accordance with these requirements. The auditing procedures performed in a limited assurance review do not enable me to obtain such assurance that I would become aware of all significant matters that might have been identified in an audit. The stated conclusion based on a limited assurance review therefore does not have the assurance that a stated conclusion based on an audit has.

RESPONSIBILITY OF THE BOARD OF DIRECTORS AND GROUP MANAGEMENT

My limited assurance of the non-financial disclosures is based on the criteria chosen by the Board of Directors and Company Management, as defined above. I believe these criteria are suitable for the preparation of the non-financial disclosures. I believe that the evidence I have obtained during my review is sufficient and appropriate for the purpose of providing a basis for my statements below.

It is the responsibility of the Board of Directors and Group Management to ensure the preparation of the reported data in accordance with the applicable criteria. The criteria are set out page 114 in the annual report, which are aligned with the relevant sections of the sustainability reporting frameworks issued by Global Reporting Initiative and Greenhouse Gas Protocol, as well as Addtech AB’s own non-financial disclosures. This responsibility also includes the level of internal control that is necessary to prepare non-financial disclosures that does not contain material misstatements, whether due to fraud or errors.

Statements

Based on my limited assurance, no circumstances have occurred that gives me a reason to believe that the non-financial disclosures has not, in all material aspects, been prepared in accordance with the criteria stated above.

AUDITOR’S RESPONSIBILITY

My responsibility is to express a conclusion on the specified non-financial disclosures based on my limited assurance.

I have performed a limited assurance engagement in accordance with the International Standard on Assurance Engagements (ISAE) 3000 Assurance Engagements other than Audits and Reviews of Historical Financial Information . A limited assurance consists of making inquiries to those responsible for the issuing of the non-financial disclosures, conduct analytical reviews and undertaking other review measures. A limited assurance has a different focus and a smaller scope compared to the focus and scope of an audit in accordance with IAASB’s auditing standards and generally accepted auditing standards.

Stockholm, July 13, 2020

Grant Thornton Sweden AB

Markus Håkansson

Certified Public Accountant/Specialist member FAR

Grant Thornton Sweden AB applies ISQC 1 (International Standard on Quality Control) and thus has a comprehensive quality control system which includes documented guidelines and procedures regarding compliance with professional ethical requirements, standards of professional practice and applicable requirements in laws and regulations. I am independent in relation to Addtech AB in accordance with generally accepted auditing standards in Sweden and have fulfilled my professional ethical

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