COMMENTS BY THE CEO
Continued improvement in margins and profit
Strengthened Margins and Improved Results
Improved margins are our highest priority, and during the quarter, margins were clearly strengthened in both business areas. EBITA increased by 10 percent, adjusted for currency fluctuations. This is a result of the continuous update of product portfolios towards more advanced and differentiated products and services. The companies also demonstrated good cost control, while efficiency improvements and structural changes are having an effect, which means that margins are improving even if volumes may vary in the short term. This, together with lower debt and declining interest rates compared to the previous year, led to a significantly improved profit.
Organic and Acquired Growth
Organic and acquired growth, adjusted for currency effects, amounted to a total of 5 percent in the quarter. Growth was strong within Labtech, significantly higher than market growth, despite continued caution regarding capital investments in academic research. Growth was driven by won tenders, improved prices, and the launch of new products. In Medtech, organic growth was somewhat lower, mainly due to fewer days with planned surgery, changes in the product portfolio, and some hesitation regarding capital investments in healthcare, especially in the UK. Several new products were introduced during the quarter and are expected to contribute to future growth. The acquisition of Edge Medical at the beginning of the quarter contributed to growth, and with support from other companies within AddLife, new products are expected to be added to the product portfolio.
Summary and Outlook
The companies within AddLife are delivering in line with our priorities and are strengthening their market positions based on strong customer relationships, competent and reliable service organisations, and advanced products.
AddLife’s companies have their customers mainly in healthcare and research, areas where demand is stable and generally insensitive to economic fluctuations. With over 90 percent of sales and 80 percent of suppliers within Europe, we are also well positioned in a market situation characterized by uncertainty regarding global trade. Healthcare systems in Europe are striving to improve efficiency and patient quality of life by increased use of digital solutions, robotics, personalized medicine, near patient diagnostics and treatment and reducing waiting lists. These initiatives align very well with the evolving product portfolios and services provided by the AddLife companies.
After several quarters of strong cash flow, net debt has decreased significantly, enabling a gradual increase in the pace of acquisitions. During the second quarter, inventory levels remained constant despite significant sales growth. Accounts receivable increased, driven by strong sales at the end of the quarter. During the quarter, Edge Medical was acquired, a company that meets the acquisition criteria we have defined. Payment for this acquisition, combined with dividends and negative currency effects, resulted in a slight increase in debt during the quarter. AddLife will, during the current and next year, gradually increase acquisition activity in line with our strategies and criteria, while maintaining our previously communicated ambition to keep leverage, measured as Net Debt/EBITDA, around 3.0 or lower.
AddLife is planning for a combination of organic and acquired growth and has, during the quarter, developed detailed growth plans and initiated further efforts to continue developing our staff and organisation for future growth.
The business has developed well during the first half of the year, the companies within AddLife are well-positioned, and the outlook for the rest of the year is good. I would like to thank all employees for your great commitment and dedicated work, and wish everyone a wonderful summer!
President and CEO