A word from the CEO
DURING 2022, ALCADON BECAME A CRUCIAL EUROPEAN PLAYER WITH ADVANCED POSITIONS IN GROWTH MARKETS
We are very pleased with the development during 2022, a year in which navigating through the external events proved to be a formidable challenge. The operations were impacted by challenges such as cost inflation, supply chain disruptions and significant exchange rate fluctuations — but, in the end, were also strengthened, as we passed through this ordeal showing a strong performance.
This year gave us the chance not only to demonstrate the strength of our business model and our ability to pass on price increases but also to take decisive steps beyond the Nordic countries. The establishment in the United Kingdom by means of our acquisition of one of the strongest operators in the market —Networks Centre — has significantly enhanced the Group’s conditions for organic growth and transformed us into a truly European player. The Fiberklaar deal in Belgium in the beginning of 2023 and a solid performance in Germany reinforce these conditions and make for a highly interesting development for the Group going forward.
For the full year 2022, the Group’s net sales increased by 51 percent to MSEK 1,110. EBITA increased by 2 percent to MSEK 69 and cash flow from operating activities increased by 33 percent to MSEK 24. Excluding direct acquisition costs, unrealized exchange rate changes and reversed contingent considerations, EBITA increased by
15 percent. Margins were negatively impacted by the foreign exchange developments, the lag in passing on price increases, and the lower margins in acquired entities. However, this was corrected during the fourth quarter, when the organic gross margin increased over the level of Q4 2021. The financial situation is good and solidity remains high at 37 percent. The net debt including lease liabilities amounted to MSEK X as of 31 December 2022.
The year ended on a strong note with a 94 percent increase of net sales during Q4, 5 percentage points of which organic, and a 96 percent increase in EBITA. The pro forma organic increase of net sales was 23 percent. The highest growth in Q4 2022 was achieved in the United Kingdom, at 34 percent pro forma, and in Germany, at 36 percent.
MARKET DEVELOPMENT AND TRENDS
Demand has been good in network infrastructure during 2022. No industry can come through recession-like conditions completely unscathed, but network infrastructure is affected by inevitable megatrends that are creating the conditions for long-term growth. The data volumes are undeniably sure to expand in the future, and this puts great demands on the robustness of networks and storage capacities.
The expansion of digital infrastructure is currently a priority in a number of countries, and growth is very high, in particular in the data center and broadband segment.
Fiber rollout is happening on a massive scale in the United Kingdom, Germany, the United States, Belgium and other countries. In many countries, 5G deployment is also prioritized at present, in order to lay the foundation for increased competitiveness and an attractive market for individuals and companies alike.
Through the establishment in the Benelux, the United Kingdom and Germany and our investments in comprehensive systems and premium solutions, we have today a strong customer offering in what for many years to come will be three of the most interesting markets in Europe.
OBJECTIVES AND VISION FOR 2025
During 2022, Alcadon Group held its first capital markets day, where the Group’s strategy, values and assessment of various geographic markets were presented. New targets over a business cycle and a vision for 2025 were introduced, together with a roadmap to achieve them. The presentations are available at alcadongroup.se.
The annual targets over a business cycle are 20 percent growth; EBITA margin > 10 percent; and net interest-bearing debt/EBITDA between 2 and 3. By 2025, the Group shall have net sales of MSEK 2,600 and an EBITA of MSEK 280. Employee engagement and customer loyalty are other key indicators with clear objectives that will be monitored closely going forward.
These goals will be achieved through a combination of strong organic profitable growth and continued value-adding acquisitions within our niche.
Our ambition is to be the most appreciated European supplier in network infrastructure, with a wide range and offering within the premium segment. Already today, there are few companies that can compete with either our offering to customers or to employees, and we are constantly evolving.
A DESIRABLE MARKET POSITION
There is clear demand in the network infrastructure market for an operator that can offer comprehensive, customized premium solutions across multiple segments and local decision-making close to the customer. Few players today can offer strong product portfolios as well as skills in data centers as well as in broadband and structured cable systems.
The strategic position Alcadon is in today is well anchored in the needs of the market. With a mix of distribution of world-leading brands and product development close to our customers, together with a decentralized business model which favours local and prompt decision-making, we are today a valued supplier. Our history of focusing on the premium range and systems solutions has also been a contributing factor to our success. There is definitely room to improve our position further, and we should be able to successfully establish ourselves in additional geographic markets.
It is of the utmost importance that the Group continues to evolve in line with the established strategy and that our future acquisitions meet clear criteria and further strengthen our position. Thus far, this has been the case, with successful acquisitions in several markets.
EXPECTATIONS FOR 2023 – THE JOURNEY CONTINUES
We can once again affirm that our acquisitions deliver and our model of integration works. Carefully selected, profitable companies, in a niche we understand and with committed employees—that is a great recipe for success.
The general appreciation for our customer offering is further underlined by the strong growth in several markets and the excellent finish to 2022, with 23 percent organic growth pro forma in the Group and close to 100 percent improvement of EBITA. In several respects, the fourth quarter of 2022 was the best in company history. The recently signed framework agreement with Fiberklaar in Belgium also demonstrates that our offering holds it own in the European competition.
Network infrastructure is the basis of a digitized and sustainable society, and we expect the market development to stay healthy over the course of 2023 with strong growth in several geographic markets. The conditions for gaining market share also in the future are favourable in several segments. The growth efforts initiated during 2022 will continue in 2023 and include both product launches and further intensification of the intra-group cooperation, in combination with value-adding acquisitions.
The new share issue that was recently carried out aims to support the organic growth we see ahead and also contribute to further broadening of our ownership base.
The process of switching from Nasdaq First North Growth Market to Nasdaq’s main market in Stockholm will commence in 2023. Several of the necessary criteria for a change of listing are already fulfilled, including the requirement to apply IFRS.
Our journey has only begun, and we are looking forward confidently to 2023.