Statement from the President and CEO
On our way to an even stronger Ahlsell
As a result of successful growth initiatives, a strong underlying market and three acquisitions we exceeded our growth and profit targets. We also passed two important milestones with the rollout of our strategic plan, Ahlsell 2020, and the IPO in October. Overall, 2016 was a very strong year for Ahlsell.
Ahlsell's development in 2016 was very robust. We experienced an increase in both sales and results in all three of our key markets. Our 2016 performance is the direct result of dedicated employees using the Ahlsell model to leverage positive market conditions to strengthen our position. Overall, net sales increased by 9 percent, of which organic growth accounted for the largest share. Our organic growth was created by successful market investments, continued development of growth initiatives, internal improvements and favourable market conditions.
Our result, measured as adjusted EBITA, was the best result in our 140 year history, with an increase of 13 percent from 2015. We also improved our EBITA margin, despite a slightly lower gross margin in the second half of the year.
Stronger position in our three key markets
Ahlsell's Swedish operation strengthened its market position and increased its net sales by 11 percent for the year. Favourable market conditions, growth initiatives, internal improvements and three acquisitions all contributed to these positive results. During the year, we continued to focus on market initiatives within building, lighting and personal protection equipment, which all contributed. We also achieved encouraging outcomes from the further development of Ahlsell's store concept and our new e-commerce solutions.
In Norway, demand in the oil and gas-related industry stabilised, and structural economic changes contributed to growth in such areas as residential construction, aquaculture and infrastructure. Overall, we benefited from market development and the Norwegian operation delivered both increased growth and improved results. At the same time, we undertook a number of major organisational changes. New management and our transition to a matrix organisation, combined with staff changes, have created a more results-oriented organisation. Looking at the positive development in our fourth quarter, the impact of these initiatives are promising.
Our Finnish business also gave a strong performance, with net sales increasing by 10 percent. The operation benefited from a recovery in the market that was driven by increased construction and a slightly stronger industry sector. In 2016 Ahlsell's focus was on strengthening our market positions within HVAC & Plumbing and Electrical. We also concentrated on developing our sales force, expanding our product range and strengthening our network with additional full-range branches and an increased presence in the Helsinki region.
Other segments, accounting for 3 percent of net sales, showed more varying outcomes. In Denmark, sales and results were unchanged, while Estonia, Poland and Russia were affected by the continuation of challenging market conditions.
New business plan and vision for change
Our strategic plan Ahlsell 2020 was rolled out in March 2016. The plan calls for increased focus on cooperation within the Group and the consistent implementation of the Ahlsell model throughout the company. We will continue to develop our broad offering and the competitive advantages it offers using the successfully proven mix of growth initiatives and acquisitions. An important new element of the business plan is the concept of ONE Ahlsell, which through increased cooperation will lead to more sharing of best practice and consistent operations within the Group. With this, the entire Group will benefit from the expertise available throughout the organisation.
Ahlsell back on the stock exchange
On 28 October 2016, I had the privilege of opening trading on Nasdaq Stockholm and watching the first trades of the Ahlsell share. The IPO gives us increased visibility, which I hope will strengthen awareness of our brand among customers, employees and in the capital market.
Acquisitions to strengthen our position
Acquisitions are a key element of Ahlsell's business model and growth strategy. In 2016, we reviewed our acquisition process and integrated it even more closely into Ahlsell's operating activities. This resulted in a boost in activity and increased our list of potential acquisition targets. We made three acquisitions with combined annual sales of approximately SEK 600 million. These acquisitions strengthen our position in southwestern Sweden and prepare us for the large infrastructure plan for Western Sweden and related projects in the region.
Ahlsell is never far away
We started 2016 with a redesigned online store and its development continued during the year in an effort to strengthen both customer experience and our offering. We have seen a strong appetite for our e-commerce concept and we can conclude that our multiple sales channels cross-supplement and drive sales.
Increased focus on HR
In the Ahlsell 2020 business plan, HR was identified as a strategic focus area and a key to success. Ahlsell's HR function will help develop leadership and expertise supporting managers and leaders with recruitment and other HR work. In 2016, our companies in Sweden, Norway and Finland began the process of creating a shared platform for leadership, education and development of a strong employer brand. Our aim is to retain and attract dedicated and entrepreneurial employees.
An industry leader within sustainability
Ahlsell's vision is to be an industry leader within sustainability and to take clear economic, social and environmental responsibility.
Corporate sustainability requires work in several areas. We are working to achieve more sustainable products, perform responsible procurement, and minimise our own environmental footprint. Responsible procurement includes responsible production, which we achieve with a clear code of conduct, reliable systems for assessment of suppliers and their production, and continuous audits. Our code of conduct is based on the principles set by the ISO 26000 standard and describes the minimum sustainability requirements for both our own conduct and for how our suppliers run their businesses. In 2016 we raised the sustainability agenda to Group level, formulated a Group strategy and began work on a sustainability report.
Future outlook: Increased value with ONE Ahlsell
In 2017, we will continue to develop operations and strengthen our position and brand in all of our markets. We will also drive sustainable development in the industry. We expect market conditions to continue to be favourable and I am certain that we have not yet benefited the full effect of our continuous focus on internal improvement. Overall, our strategic work is leading to increased value for customers, employees, suppliers and shareholders. When our customers are doing well, Ahlsell will also prosper. Therefore we always strive to increase our customers' competitiveness.
Stockholm, March 2017
Group President and CEO, Ahlsell AB