Administration Report

Financial development during the year

Net sales and profit
The AddLife Group’s net sales increased by 7 percent (14) and totalled SEK 9,685 million (9,084). Acquired growth was 1 percent (22) and organic growth excluding COVID-19-related sales and exchange rate fluctuations was 10 percent (4). COVID-19-related sales have now stopped and are recognised as SEK 0 million (760). Exchange rate fluctuations had a favourable impact on net sales of 6 percent (4), corresponding to SEK 520 million (352).

Non-recurring costs related to profitability improvement measures in Homecare and AddVision had a negative impact of SEK 134 million on the financial year. The costs related to restructuring costs of SEK 8 million, as well as impairment charges of SEK 106 million of intangible assets and SEK 19 million of property, plant and equipment. Non-recurring costs negatively impacted selling expenses by SEK 54 million and administrative expenses by SEK 8 million, while impairment of intangible assets had a negative impact of SEK 70 million on research and development. Moreover, heightened commercial activity and an expanded sales organisation have raised selling expenses, while also pushing sales growth and enhancing growth prospects for the future.

EBITA decreased by 7 percent to SEK 1,135 million (1,221) and the EBITA margin amounted to 11.7 percent (13.4). The decrease is largely attributable to the absence of COVID-19-related sales. The reversal of previously reserved contingent considerations had a positive impact of SEK 147 million (101) on operating profit in the financial year. Exchange rate fluctuations had a favourable impact on EBITA of 5 percent, corresponding to SEK 59 million.

Net financial items amounted to SEK -246 million (-206) and profit after financial items amounted to SEK 339 million (602). Net financial items mainly include interest expenses related to the financing of previous acquisitions and exchange rate fluctuations. Net interest income was SEK -267 million (-103), while exchange rate gains were SEK 30 million (loss: -95). Exchange rate fluctuations relate to translation of loans and contingent considerations denominated in foreign currency. Profit after tax for the year totalled SEK 192 million (483) and the effective tax rate was 43 percent (20), impacted by the effect of non-deductible interest and losses not deemed to be capitalised in the subsidiary Camanio.

Profitability, financial position and cash flow
Return on equity at the end of the financial year was 4 percent (10). The equity ratio at the close of the financial year was 39 percent (38). Equity per share, excluding non-controlling interests, totalled SEK 40.69 (40.76).

Return on working capital (P/WC) totalled 50 percent (61). The long-term P/WC target for the Group and all of its companies is 45 percent. The profitability benchmark P/WC ratio encourages high operating profit and low levels of tied-up capital. When combined with the growth target of 15 percent, this creates conditions that promote long-term profitable growth for the companies and the Group. Average working capital, which when calculating P/WC includes inventories with the addition of the net of accounts receivable and accounts payable, amounted to SEK 2,290 million (2,008) at the close of the financial year.

The Group's interest-bearing net debt decreased during the financial year by SEK 218 million and amounted to SEK 5,192 million (5,410) at the end of the financial year, including pension liabilities of SEK 64 million (60), lease liabilities of SEK 498 million (351) and contingent considerations corresponding to SEK 87 million (266). The outstanding bank loans at the end of the financial year amount to SEK 4,698 million (4,968), of which short-term bank loans amount to SEK 2,212 million (2,432). The Group has a good margin in the covenants applicable under the banking agreements, which stipulate an interest coverage ratio of at least 4.0 times and an equity ratio exceeding 25 percent. At the end of the financial year, the interest coverage ratio was 5.7 times as defined in the banking agreements.

Cash and cash equivalents, consisting of cash and bank balances together with approved but non-utilised credit facilities, totalled SEK 1,013 million (890) at 31 December 2023. The net debt/equity ratio was 1.0, compared with 1.1 at the beginning of the financial year. The aim is to lower debt through internally generated cash flow.

Cash flow from operating activities reached SEK 773 million (909) during the financial year, mainly because of a lower profit after financial items. Contingent consideration paid related to company acquisitions in previous years totalled SEK 16 million (818). Net investments in non-current assets for the financial year totalled SEK 286 million (268) and mainly relate to investments in instruments for rentals to customers. Repurchase of treasury shares amounted to SEK 0 million (60). Issued, exercised and repurchased call options totalled SEK 9 million (33). Shareholders of the parent company were paid a dividend of SEK 146 million (243). 

Business areas

AddLife's operations during the financial year were organised in two business areas: Labtech and Medtech.

Labtech
During the financial year, net sales decreased by 6 percent to SEK 3,654 million (3,880), of which organic sales, excluding COVID-19-related sales and exchange rate fluctuations, increased by 10 percent and acquired growth was 1 percent. COVID-19-related sales have stopped and are now recognised as SEK 0 million (760).
Exchange rate fluctuations had a favourable impact on net sales of 5 percent.

EBITA declined by 29 percent to SEK 473 million (667), corresponding to an EBITA margin of 12.9 percent (17.2).

The organic growth emphasises a strategic commitment to innovation and expansion in areas that continue to show strong demand for advanced technology and solutions, such as Next Generation Sequencing (NGS). By focusing on organic growth, the business area has been able to continue to advance and bolster its position as a leading player in diagnostics and biomedical research.

Medtech
During the financial year, net sales increased by 16 percent to SEK 6,042 million (5,210), of which organic growth, excluding exchange rate fluctuations, was 9 percent and acquired growth was 1 percent. Exchange rate fluctuations had a favourable impact on net sales of 6 percent.

EBITA increased by 19 percent to SEK 684 million (573), corresponding to an EBITA margin of 11.3 percent (11.0). The reversal of previously recognised contingent considerations, primarily related to the acquisition of AddVision and Healthcare 21, had a positive impact on operating profit of SEK 128 million (87) and, adjusted for these, the EBITA margin was 9.2 percent (9.3). The investment in digital solutions for self-monitoring and care alarms had a negative impact on earnings of SEK 77 million (54).

The year was also marked by a recovery in elective surgery in the aftermath of the pandemic, resulting in increased demand for Medtech's products in areas such as orthopaedic surgery, anaesthesia, laparoscopy and general surgery. Key strategic measures were taken during the year to improve profitability going forward.