Statement from the President and CEO
A very successful year
" I look back on 2017 with great joy and pride. Ahlsell celebrated its 140th anniversary and this year also proved to be the most successful one in our history to date."
Strong net sales growth
Thanks to successful strategic initiatives, acquisitions and good market conditions,we achieved total net sales growth of 12% in 2017. Of this growth, 9% was organic.This makes me very proud and it confirms that our customers value Ahlsell and that we fulfil our customer promise: to make it easier to be professional. Our net sales totalled MSEK 27,484 (24,606). One of our financial objectives is to grow faster than the market, and we estimate that we exceeded the market by approximately 5 percentage points.
The overall favourable market development created a good base for continued good demand for our products. Most importantly, however is how we, given the good conditions succeed to meet our customers' needs in the best possible way. Our value proposition combined with successful initiatives have been yielding results and we have further strengthened our positions.
To mention a few examples:
• Further development of the branch network has led to more products and services to our customers on a local level. It has been appreciated by the customers and strengthened our cross-selling.
• Investments within the online-sales channel have been received well by our customers, which has made this sales channel the one of the fastest growing.
• Competence development within leadership and sales has led to stronger customer relationships and increased sales efficiency.
• Together with our suppliers, we have launched even more sustainable products for our customers.
• The investment project in the central warehouse in Hallsberg, Sweden, has proceeded according to plan, and the 12,500-sq.m. pipe hall was completed in October. As a result, our central warehouse now comprises 80,000 sq.m. roof covered storage.
Better prerequisites for profitable growth in Norway and Finland
During the year, re-organisations were carried out in both Norway and Finland. The segments are now working according to the successful Ahlsell model which, with a wide offering and proximity to customers, provides good conditions for growth. Decentralised responsibility for results, in a matrix structure, makes the organisations more alert, and increased focus on cross-sales improves profitability.
We experienced strong growth in all of our main markets, i.e. Sweden, Norway and Finland, and within all our three product categories. However, the gross margin declined slightly during the year. Partly due to the sales mix, as product categories with lower gross margins outgrew the others, and a large proportion of projects. Despite this, we managed to improve the EBITA result and reduce our operating costs as proportion of sales. Adjusted EBITA was MSEK 2,405 (2,131), equivalent to an increase of 13%.
2017 was Ahlsell’s first full year as a listed company since the IPO in October 2016. Of the earnings per share of SEK 3.28, the Board of Directors has proposed a dividend of SEK 1.65. This is equivalent to half of the earnings per share and is in line with our target of a payout ratio of 40-60%. In total, the proposal suggests that MSEK 708 will be paid to our shareholders in May 2018.
Acquisitions are part of our DNA
The acquisition rate was high in 2017. We signed agreements to acquire 13 operations, with combined net sales of approximately MSEK 1,450. The acquisitions strengthen both our offering and our proximity to customers. Already today, we are a significant player in the market, yet we still have many interesting acquisitions in our pipeline. Several acquisitions were made within the “Tools & Supplies” product segment, and specifically within personal protective equipment (PPE). All customers need workwear and protective equipment, which makes PPE a very attractive product segment. With our broad product range, we can offer the customers everything they need. We also see an ever increasing demand for security in the market. This leads me to another acquisition; Nordic Sprinkler. After being a minor player in the sprinkler market, this acquisition has strengthened our position considerably. As building standards evolve and greater emphasis is put on safety, the demand for fire prevention and sprinklers steadily increase.
Strengthening our digital position
Another acquisition that goes in line with our digital strategy is the acquisition of Proffsmagasinet. About 25% of the Ahlsell Group's sales derive from e-commerce, and the acquisition of Proffsmagasinet will further strengthen our already strong position. It allows us to leverage their digitisation expertise, giving us better and new ways to meet professional customers. Through internal initiatives and “digital acquisitions”, we can develop our digital services and improve the information flow to meet customers’ needs in the best possible way.
Success begins with employees
The combination of dedicated and competent employees, together with a broad offering, make professional customers choose Ahlsell as their business partner. To ensure that we have dedicated employees also in the future, we further developed our HR activities during the year. We focused on leadership, values, diversity and succession planning.
Sustainability in everything we do
Sustainability is a natural part of our “One Ahlsell” strategy. In 2017, we signed the UN Global Compact and Ahlsell naturally supports the UN's Global Goals for Sustainable Development. Internally, we have identified four focus areas, which constitutes the base in our sustainability strategy. In 2017, much emphasis was put on defining various sustainability goals within the organisation. I am convinced that what gets measured also gets done.
We enter 2018 with a number of completed acquisitions, which gives us a substantial sales increase. This, in combination with our initiatives for strengthened organic growth, provide good opportunities for continued profitable development. Our broad exposure towards several market segments with different economic patterns means that we stand strong. Within industry and infrastructure, I see continuing positive development. The current favourable development in new residential construction is expected to dampen a little during the year, but our exposure to this segment is limited. Historically, our significant exposure to renovation has had a balancing effect on both sales and earnings at times when new construction has been weaker. My assessment is that it will not be any different in the future. All in all, I expect good demand for our products and services as we enter 2018.
A strong Ahlsell
In an ever changing world, we have to continually make our customers’ lives easier to ensure that we continue to be the natural everyday choice in the future. We must be present, not only with our local branches and sales staff, but also there, where the customer prefers to find us. This can be online, by phone, via e-mail or on-site in their businesses. As long as we are there for our customers with reliable deliveries, Ahlsell will stand strong also in the future.
Stockholm in March 2018
Johan Nilsson, President and CEO