Risks and uncertainties 

Geopolitical instability (trade wars, protectionist policies, wars and conflicts) in various global, regional or national contexts may directly or indirectly affect AddLife's business or supply chain, with longer lead times, higher costs, or disruptions in delivery.

General global economic, financial and political conditions can have an impact on AddLife. Demand for the company's products and solutions depends to some extent on macroeconomic trends. Uncertainty regarding future economic prospects, including political unrest, may adversely affect customers' purchases of AddLife products, which would have an adverse effect on the company's operations, financial position and earnings. Higher interest rates also entail a financial risk for AddLife.

A significant proportion of the company's sales are made to publicly funded operations in healthcare, research and care. Weakened government finances could have a negative impact on AddLife’s operations and earnings.

Furthermore, changes in the political situation in a region or country, or political decisions affecting an industry or country, could also have a material impact on the sale of the company's products.

AddLife's decentralised business model enables diversification regarding business areas, suppliers and supply chains. This approach reduces exposure to local geopolitical instability. Some of AddLife's larger and more vulnerable companies are also analysing their supply chains to diversify where possible.

AddLife's subsidiaries operate in a largely or partly non-cyclical market, which generally makes the Group less sensitive to economic fluctuations. In most countries and situations, care is prioritised even in when times are difficult. The fact that operations are conducted in many different segments and geographic markets also limits these risks for the group as a whole. AddLife is concentrating on reducing tied-up working capital and ensuring optimisation of cash flow to address higher interest rates.

The decentralised business model means that Group companies have a high degree of adaptability as decisions are taken quickly and close to the business. By continuously acquiring companies in new customer segments and in new markets, the Group can reduce market risks and better respond to economic fluctuations. Furthermore, AddLife is working on strengthening its value-based sales to reduce exposure to weakened government finances.

A significant portion of AddLife's revenue is derived from the sale of products to public sector entities. Political decisions in some countries have led to a reduction in the number of contracting customers by consolidating regions into larger units. This has resulted in larger procurements and often longer contractual periods, leading to increased price pressure and competition.

Sales of some of the company's products rely on different reimbursement systems in the various markets. In several of the company's markets, in many cases, an insurance company finances or subsidises the purchase of the patient’s care products within the framework of existing political reimbursement systems. Part of the success of the sales of AddLife's products in these markets depends on whether they qualify for reimbursement under these different reimbursement schemes.

The organisation and its subsidiaries have a strong focus on public procurement processes. Considerable effort is dedicated to preparing for and ensuring compliance with procurement requirements, as well as to internal training. In addition, the companies have a clearly differentiated offering that creates unique value for customers, which can lead to a less single-minded focus on price, while also improving competitiveness. This offering is based on extensive understanding of customer needs, often involving unique, high-quality products combined with a comprehensive service offer.

Because AddLife operates in many different countries and markets, these risks are limited for the Group as a whole.

AddLife's future growth depends, among other things, on new innovative products and thus the Group's ability to influence, anticipate, identify and respond to changing customer preferences and needs. There is a risk that the subsidiaries within the AddLife Group are unable to implement new technology or adapt their product range and business model in time to be able to leverage the benefits of new or existing technology. The costs associated with keeping up with product and technology developments can be high. Moreover, the level and timing of future operating expenses and capital requirements could significantly differ from current estimates. 

There is a strong focus on proactive business development within the subsidiaries, as well as a focus on future technological adaptation with new acquisitions. Several subsidiaries are making significant investments in research and development and, where necessary, are entering into co-operation with business partners to ensure technological development. Regarding distribution of third-party products, there is a strong ongoing collaboration with suppliers with respect to technological developments. There is also a structured effort to identify new suppliers with innovative products. The companies within AddLife are mainly distributors, which provides greater opportunities to adapt to technological developments by changing suppliers.

AddLife has a large number of customers of varying sizes, some of whom are public and some private operators. Because of the number of customers and the Group structure, agreements with customers vary in character with regard to factors such as contract length, warranties, liability limitations and scope. Moreover, there is a risk that such variation could result in unforeseen liability exposure for AddLife, especially in cases where no specific limitations of liability have been incorporated into the agreements. There are also financial risks in some customer contracts that require the commitment of more working capital. Some long-term customer contracts that do not allow for price adjustments may also entail financial risks.

Although there are contractual risks associated with the scattered customer base that AddLife subsidiaries have, there are also advantages. An individual subsidiary may be highly dependent on an individual customer, but AddLife as a Group is not dependent on any individual customer and no customer accounts for more than about 4 percent of sales. This is a strength in the AddLife business model. AddLife has implemented measures to reduce tied-up working capital and trains employees in pricing strategies and risk management.

In order to deliver products, AddLife depends on external suppliers who must meet the terms of the agreements regarding matters such as volume, quality and delivery date. Incorrect, delayed or missed deliveries could have a negative impact on AddLife's financial position and results. AddLife has agreements with a large number of suppliers over which the company cannot exercise control nor can it have full insight into their operations. Consequently, AddLife is exposed to the risk that suppliers could act in a way that could harm AddLife. A further risk involves management of too many suppliers simultaneously, which is resource intensive and creates inefficiencies for the companies.

Some countries and segments are seeing a trend towards consolidation, as suppliers merge to become fewer in number and larger in size. Other countries and segments are instead seeing a trend towards streamlining by spinning off businesses. In addition, new technologies and suppliers are becoming established as a result of continuous development. In this environment, there is a risk that suppliers could be lost, or that existing suppliers could lose their market potential.
Additionally, there is the risk of suppliers moving from a collaboration with an AddLife subsidiary to another distributor, or opting for their own sales.

In a longer perspective, AddLife is not dependent on any single supplier for the survival of the business. The company's largest supplier accounted for approximately 5 (7) percent of net sales for 2023. AddLife works strategically with the larger suppliers and conducts regular supplier evaluations, with the aim that suppliers will live up to the AddLife Code of Conduct. Processes to regularly review the number of suppliers and focus on the most profitable ones are well integrated into AddLife's daily procedures.

AddLife's subsidiaries choose suppliers who see cooperation with them as the best sales method. Stable supplier partnerships are also one of the parameters evaluated when acquiring companies. AddLife's decentralized business model and its operations as a distributor allow for rapid changes on relatively short notice.

The companies within AddLife continuously work to update the supplier structure and to proactively replace lost suppliers and suppliers with declining market potential. With its growing presence in several European countries, AddLife companies are potentially becoming an even more attractive partner to suppliers.

AddLife acquires companies on an ongoing basis and in 2023 one company was acquired. However, there is a risk that AddLife will not be able to identify acquisition targets or to carry out acquisitions because of, for example, competition with other acquirers or lack of financing.

Acquisitions generally carry risks. In addition to company-specific risks, the acquired company’s relationships with important customers, key personnel and suppliers could be adversely affected. There are risks in terms of the ability to retain talent and the possibility of creating a common culture. Moreover, acquisitions could expose AddLife to unknown obligations. Acquisitions usually involve not only the assumption of all of the assets of the acquired company, but also its obligations. There is a risk that not all potential obligations or commitments have been identified prior to the acquisition, or that the seller lacks the financial ability to compensate AddLife in the event of a breach of warranty.

It is important that the acquisition process and especially the pre-acquisition evaluation (due-diligence) is both thorough and effective and includes legal, financial and sustainability aspects. If companies with significant problems are acquired, for example regarding financial earning capacity or important sustainability aspects, AddLife's reputation or financial performance may become worse than expected.  

AddLife constantly pursues acquisitions to ensure that there is an inflow of interesting objects for the Group.

AddLife has many years of experience in carrying out acquisitions and has a structured process for the acquisition process, integration and follow-up. This process is constantly evolving based on, among other things, lessons learnt from previous acquisitions. AddLife's financial and sustainability-related processes and procedures are built on long experience and are continuously developed and refined. Guarantees to limit the risk of unknown obligations are one of the tools used in contract negotiation.

AddLife works continuously to improve and update its acquisition process and has also strengthened and expanded its expertise in this area.

AddLife applies a decentralised organisational model, which means that subsidiaries in the Group are largely responsible for and conduct business independently. Corporate governance in a decentralised organisation places high demands on financial reporting and monitoring and deficiencies in reporting and monitoring entail a risk of inadequate operational control. The decentralised organisational model has historically been an advantage for the Group.

Group Management controls, checks and monitors the business in the subsidiaries through active board work, group-wide policies, financial targets and instructions regarding financial reporting.

In addition, AddLife works with weekly follow-up of order intake, monthly reporting and follow-up of the financial development of all subsidiaries. This means that the parent company always has good insight and understanding of current and upcoming challenges and opportunities.

AddLife’s continued success depends on experienced employees with specific skills. There are key employees among senior executives in the companies, in Group management and among the Group's employees in general. There is a risk that one or several senior executives or other key personnel could leave the AddLife Group at short notice. If AddLife fails to retain key employees or recruit new competent key personnel in the future, this could have a negative impact on AddLife's financial position and results.

AddLife invests time and effort in the internal skills development and refinement of the corporate culture through the work with AddLife Academy. In the case of acquisitions, the aim is for key employees to remain in the companies and continue to develop the companies' operations and also be given the opportunity for further education as well as career and personal development within the Group's framework.

AddLife conducts an annual employee survey and follows up the results from these to ensure that employees are given the conditions required to develop and thrive at work. AddLife also has an incentive programme for senior executives and key employees within the Group.

AddLife’s business entails risk associated with product liability. AddLife could be subject to product liability claims if the products that are produced or purchased cause personal injury or property damage. There is a risk that such product liability claims are not fully covered by AddLife’s insurance policy. If a product is defective, AddLife may be forced to recall it. In such a situation there is a risk that AddLife cannot make corresponding claims against its own suppliers to receive compensation for the costs incurred by AddLife due to the defective product.

AddLife works continually with suppliers to increase product safety and ensure that products meet the quality requirements that are in place. AddLife regularly reviews its insurance coverage to reduce the risk of unforeseen expenses. AddLife’s own products are subjected to ongoing quality assessment and follow-up.

New environmental legislation linked to transports and product materials could have an impact on sales for AddLife’s subsidiaries. AddLife owns a few properties and according to the Swedish Environmental Code, a property owner is responsible for any pollution or other environmental damage, with responsibility for remediation, which may also include damage caused by previous operations. Increased requirements for sustainability reporting and for certain products in certain markets require more resources from AddLife and the companies. It may also entail financial risks with increased overhead for AddLife.

AddLife’s subsidiaries are primarily engaged in commerce and businesses that have a limited direct environmental impact. At the time of each acquisition, earlier environmental impact are noted and reviewed, and contractual protection is negotiated. AddLife has updated its sustainability strategy and strengthened resources and expertise in sustainability issues. The companies within the group are also engaged in sustainability issues and in the future new alternative product offerings may need to be explored in certain areas.

An IT incident refers to the risk that critical data or one or more of the IT systems used in any way become unusable, locked, fail, or destroyed, such as if AddLife is exposed to cybercrime. AddLife's operations are dependent on the IT systems working and, especially in the event of long-term or extensive interruptions or other IT incidents, there is a risk that certain operations will not be able to be conducted for some time – or in the worst case at all – or will only be able to be conducted with difficulty or at increased costs.

AddLife works with risk assessments regarding IT infrastructure and sensitive data, and has defined processes and controls to protect the company.
The control environment consists of firewalls, patch management, virus programs, penetration testing and automatic scanning of incoming and outgoing email traffic to catch phishing. To increase knowledge, encourage caution and ensure that employees know and follow the company's IT policy and directives, training in IT security was implemented during the year.

Because of AddLife's decentralised business model with independent subsidiaries, only a few companies share an IT platform and infrastructure. Consequently, the risk of a significant financial impact in the event of a major IT incident for the Group is relatively limited.

The healthcare market is highly regulated in all countries where AddLife operates. The company's product range is subject to legislation, such as EU directives and related quality system requirements.  

AddLife puts significant effort and resources into implementing and applying policies to ensure compliance. Annual audits are conducted by designated accredited bodies to ensure compliance. In 2023, the company continued its efforts to comply with the EU MDR, which entered into force in May 2021, and the EU IVDR, which entered into force in May 2022. All of the Group's production facilities are also certified according to the medical device quality standard ISO 13485 and / or the general quality standard ISO 9001.

With operations in about 85 companies and 30 countries, there are risks linked to unethical or illegal behaviour, both within AddLife's companies and among our companies' customers and suppliers. AddLife's continued success is highly dependent on our good reputation and business ethics. Violations of human rights in its own or its suppliers' operations would have a negative impact on the Group's reputation among employees, customers and other stakeholders and affect the demand for the Group's products.

The Group works internally with business ethics through, for example, training programmes in the AddLife Academy and annual follow-up of our internal code of conduct. To ensure the Group's high standard of business ethics, AddLife's Code of Conduct for Suppliers shall be followed.

AddLife also has a group-wide whistleblowing system.