Annual Report 2007/08
2 - Systemair
Welcome to Systemair
Welcome to Systemair’s Annual Report on the fi nancial year 1 May 2007 – 30 April 2008. In an eventful year, the highlights were the award of the Swedish Trade Council’s Swedish Export Prize and the launch of the Company’s shares on the oMX Stockholm Stock Exchange in october 2007.
This is our fi rst annual report as a listed company. our aim has been to provide a clear and lucid picture of Systemair, what we do and what our role in the market is. We have also taken the opportunity to provide a background to our business. Furthermore, we explain why well-ventilated buildings are so important and how the new demands for low energy consumption fi t well with our products and represent an asset in terms of our growth and development.
I hope that you will fi nd the report enjoyable reading.
Gerald Engström CEo Systemair
Systemair’s headquarters, along with its largest production faci- lities, are located in Skinnskatteberg, Sweden. Across the lake is another production facility and Frico’s main warehouse, compri-
sing a total of approximately 50,000 sqm of premises.
Contents
Systemair in brief 4
Goals and goal attainment 5
CEO’s statement 6-8
A brief history 9
Operations – Business concept - Acquisitions 10-15
Ventilation systems 16-17
Market 18-22
Systemair brands 23-25
Products 26-29
Production 30-33
Quality 34
Enterprise resource planning and IT 35
Personnel 36-37
The Systemair share 38-39
Financial Report 41
Directors’ Report 42-45
Proposed Distribution of Unappropriated Profits 45
Consolidated Income Statement 46
Consolidated Balance Sheet 47-48
Changes in Equity – Group 49
Consolidated Cash Flow Statement 50 Parent Company Income Statement 51 Parent Company Balance Sheet 52-53 Changes in Equity – Parent Company 54 Parent Company Cash Flow Statement 55 Accounting Policies and Notes to the Accounts 56-79
Audit Report 80
Key Ratios and Definitions 81
Supporting material – 2007/2008 Annual Report 82-85 Board of Directors and Group Management 86-87
Addresses 88-89
Annual General Meeting information 91
4 - Systemair 4 - Systemair
Systemair in brief
Systemair is a leading ventilation company, with activities in 38 coun- tries in Europe, north America, the Middle East, Asia, South Africa and Australia. The Company had sales of just over SEK 3.1 billion in the fi nan- cial year and approximately 1,900 employees. Since its foundation in 1974, the Company has seen sales rise every year, while at the same time positive operating profi ts have been returned. over the past 10 years, the Company’s average growth has been 16%. The Group comprises around 50 companies.
Systemair has well-established op- erations in growth markets – notably those of Central and Eastern Europe, including Russia. The Group’s prod- ucts are marketed under the brands Systemair, Frico, VEAB and Fantech.
Systemair shares have been traded on the Mid Cap list of the oMX nordic Exchange in Stockholm since october 2007.
• Systemair shares were admitted to the Mid Cap list of the oMX nordic Exchange in Stockholm on 12 october 2007.
• The Swedish Trade Council’s Swedish Export Prize was awarded to Systemair in May 2007
• Koolclima, a Spanish manufacturer of ventilation products, was acquired in June 2007.
• Sales company Matthews & yates was established in Australia in november 2007
• Climaproduct, an Italian sales company based in Milan, was acquired in February 2008.
Signifi cant events in 2007/2008
SySTEMAIR In BRIEF
net sales, SEK million Return on capital employed, % operating profi t (EBIT), SEK million/
EBIT margin, %
Cash fl ow from current operations, SEK million
Key fi gures
2007/08 2006/07 2005/06
Net, sales, SEK,million 3 091,6 2 664,2 2 321,2
Growth, % 16,0 14,8 22,4
Operating profit, SEK million 402,5 329,4 253,0
Operating margin,% 13,0 12,4 10,9
Profit margin, % 11,3 11,7 10,4
Return on capital employed, % 25,8 26,8 24,7
Earnings per share, SEK 4,7 4,9 3,4
Equity per share, SEK 15,3 12,4 13,2
Equity/assets ratio, % 37,3 33,9 45,6
Dividend per share, SEK* 1,50 1,46 0,77
Number of employees at year-end 1 827 1 644 1 335
2007/08 2006/07 2005/06 2004/05 2003/04 3500 3000 2500 2000 1500 1000 500 0
2007/08 2006/07 2005/06 2004/05 2003/04 300 250
150 100 50 0 200 350
2007/08 2006/07 2005/06 2004/05 2003/04 30 25
15 10 5 0 20
Average number of employeees
2007/08 2006/07 2005/06 2004/05 2003/04 2000
1600
1200
800
400
0
* Dividend to be recommended by Board of Directors to the Annual General Meeting (AGM), to be held in Skinnskatteberg, Sweden, on 27 August 2008.
2007/08 2006/07 2005/06 2004/05 2003/04 300 250 200 150 100 50 0 350 400 450
2 4 6 8 10 12 14 16 18
Growth net sales, %
2007/08 2006/07 2005/06 2004/05 2003/04 25
15
10
5
0 20
GoAl
Goals and goal attainment
Systemair’s overall goal is to be one of the leading ventilation companies in Europe.
Goal Description Fulfilment
Growth
The goal is to be achieved by both organic growth and acquisitions. The average annual rate of growth over the past 10 years was 15.6%, and 15.9% over the past three years.
organic growth is to be achieved via in-house product development and higher market shares in Western Europe. Access to new geographical markets will be gained via acqui- sitions or new ventures.
over the past 10 years, the operating margin has averaged 7%, and over the past three years 10%. The Company’s judgement is that, given its current structure and continuingly strong growth, the conditions for achieving this goal are favourable.
The Group’s financial position is good and the equity/assets ratio on 30 June 2008 was 37,3%. The Company constantly evaluates possibilities for strategic acquisitions. It is envisaged that financing will be secured at the time of the particular transaction. over time, the goal is that the equity/assets ratio should not, by a substantial margin, persistently exceed the Company’s goal.
The AGM resolves on the dividend to be paid following consideration of the Board’s rec- ommendation. The aim is to secure a stable financial position for continued acquisitions, the establishment of sales companies and progressive expansion of production capacity.
At the same time, shareholders should receive a reasonable share of the Company’s earnings.
To achieve average annual growth of no less than 12% in sales over a business cycle.
To achieve an average operating margin of no less than 10% over a business cycle.
The Group’s equity/assets ratio should not fall below 30%.
In view of Systemair’s ambitions for growth, the goal for dividend is set at around 30% of the Company’s profit after tax.
Sales rose by 16%, including organic growth of 13%.
operating margin, %
Equity/assets ratio, %
The Board of Directors has recom- mended a dividend of 1,50 SEK per share, corresponding to 32% of the result after taxes.
Profitability
Financial position
Dividend policy
2007/08 2006/07 2005/06 2004/05 2003/04 50
30
10
0 20 40
2007/08 2006/07 2005/06 2004/05 2003/04 10
6
2 0 4 8 12 14
6 - Systemair
An eventful year
We can take satisfaction from Systemair’s continued strong expansion. The operating profi t increased by 22 % to 403 MSEK
Sales rose by 16% to 3 092 MSEK, of which organic growth accounted for 13%.
The goal for average growth in sales is 12% over a business cycle. It is satisfying to achieve this goal, but at the same time we regard a year like the past one as fairly rou- tine, with strong demand in most markets.
The past business year was special: it was the year in which the Company fl oated on the OMX Stock Exchange in Stockholm on 12 October 2007. This is a milestone to the Company, and opens up quite a number of new possibilities for us. Our stock market fl otation was a step that was both necessary and logical, both to the Group and to me as owner. The Group can make more, or bigger, strategic acquisitions and further raise the pace of growth in its existing companies. In addition, Systemair will become better known outside the ventilation sector. Also a future change of generation will be considerably easier with listed shares.
The fl otation was preceded by approx- imately a year of preparations. Handels- banken and Nordea underwrote the launch, Mannheimer & Swartling Advokatbyrå were our legal advisers and our auditors Ernst & Young played a valuable role in making the company fi t for fl otation.
We prepared an excellent prospectus and our road show was effective. To stand in
the Stockholm Stock Exchange, ring the symbolic bell and watch trading start was a wonderful experience. Interest was keen, and the Systemair share was oversubscribed nine times. Unfortunately, the launch of our shares took place a few days before the market dipped, leading to a decline for the major listed companies and general turbulence in the stock market. Not the stock market story we had hoped for, but the business remains strong and long-term owners should obtain a good return further down the line.
Strong expansion an assurance of continued growth
I am satisfi ed with most of what we did during the year. We are continuing to expand geographically in markets that together guarantee our continued growth.
Our product range is developing strongly, especially in the ever-more important sec- tor of energy-effi cient products. We have many newly developed products and, via Systemair’s sales companies in 38 countries, a business that is strongly internationalized.
The acquisition of Imos, of Slovakia, towards the end of the preceding fi nan- cial year, has delivered good results and constitutes an effective base for further ventures, above all, in our new Fire Safety product area. Our ambition is to build up the product area with fi re dampers from Imos-Systemair and smoke extract fans that
"The past business year was special:
it was the year in which the Company fl oated on the OMX Stock Exchange in Stockholm on
12 October 2007"
CEo´S STATEMEnT
are produced by our subsidiary in Slovenia.
Fire dampers prevent fi re or smoke from spreading through the building by “sealing”
the ventilation ducts. This is a growing market, and my judgement is that in the long term our fi re safety products will ac- count for around 10% of sales.
Late in the preceding year, we acquired the assets and liabilities of Matthews &
Yates, a UK company tracing its roots back to the 1850s. We relocated production to our modern facilities in Slovenia and Germany. The acquisition gives us access to MRT (Metro, Road and Tunnel) fans, a product area showing strong growth.
Major infrastructure projects are under way all over the world, and the demand for MRT products is rising sharply. A major need for renovation also exists, and many older facilities require modernization with up-to-date technology. By establishing Systemair Software in India with advanced expertise especially in CFD (Computational Fluid Dynamics or CFD) analysis, we are strengthening our position in this sector.
We began the process of acquiring the Italian ventilation equipment company with a Letter of Intent in August 2007, and concluded it in February 2008. Through the acquisition, we are nearing our goal of having our own sales company in every country of interest in Europe.
”The listing is a milestone
to the company”
8 - Systemair
Gerald Engström CEO Systemair AB
CEo´S STATEMEnT
Continued focus on ventilation unit production
Systemair today has perhaps the market’s broadest selection of ventilation units with energy recovery. We are concentrating a large share of our development resources in this sector. During the year, we develo- ped new, improved energy recovery units for residential ventilation, plus a series of energy-effi cient compact units, complete with control equipment and designed for use in commercial buildings.
Our production of conventional energy recovery units in large sizes – based in Denmark and production also in Norway and Spain – performed well. A future project on joint technology platforms serving the product programmes will create the possibility of satellite production in additional markets.
Export Prize and visit by Crown Princess
The 2007/08 fi nancial year began with Systemair being awarded the Swedish Trade Council’s Swedish Export Prize. The prize was presented by HM King Carl XVI Gustav. At the end of the year, we welco- med HM Crown Princess Victoria to our headquarters in Skinnskatteberg for a tour and presentation of Systemair.
outlook
In North America, operations focused on the housing market. The turbulence of the past year naturally also affected our business. We streamlined production by consolidating it at our main factory in New Brunswick, Canada. This is a modern faci- lity that enables us to make more effi cient use of the production capacity we have.
Since the end of the fi nancial year, we have started work on broadening operations in North America by acquiring Emerson Ventilation. The new company will be renamed Systemair and will make ventila- tion products for the commercial market.
The market will be served via Fantech, our North American subsidiary, which to date has mainly delivered products for housing ventilation.
In preparation for the next fi nancial year, we are working to a number of priorities regarding products and growth. We are continuing to develop products in the Cleantech sector, i.e. low-energy products.
We are in an advanced position in products of this type and have identifi ed growing demand.
We are continually evaluating future acquisition prospects with complementary products or synergies in existing markets, or access to new markets. We regularly receive offers for business acquisitions and
are in dialogue with owners of a number of companies in the industry. We also intend to maintain, at the least, the current pace of company acquisitions.
Finally, I would like to thank our customers, shareholders, employees and other partners. You have all helped to our positive development!
The1970s and 1980s
1974
• The company was founded as LHG Kanalfl äkt and production began in Skinnskatteberg. Just over 50% of production was exported to Norway.
1976
• The fi rst sales subsidiary was established, LHG Kanavapuhallin, in Finland.
1981
• Exports to the USA via RB Kanalfl äkt, which was established and owned by a local agent. Systemair acquired 50% of the shares in the company in 1987 and the remaining 50% in 2001/2002.
1985
• German producers of fan motors Ziehl-Abegg and ebmpapst were suppliers from the start, then became partners via their Swedish subsidiary Ziehl-ebm, today ebmpapst AB and second largest share- holder in Systemair.
1986
• Gerald Engström took over as CEO.
1989
• Acquisition of sales company in Denmark.
1989-91
• The Norwegian sales company Jolin was acquired in stages.
1990s
1992
• Acquisition of then OTC-listed Frico International. The product range was expanded by the addition of air curtains and fan heaters.
1995
• Acquisition of Environment Air, Canada, customer and maker of heat exchangers.
1996
• Acquistion of factory in Bouctouche, Canada, for the production of duct fans and heat exchangers for the North American market.
End of the 1990s
• It was decided that sales should be conducted mainly via wholly owned sales subsidiaries.
1997
• Own representative offi ce in Moscow, Russia.
• SCIE Systemair, a sales agent, was acquired. The name was later the name for the Group.
1998/99
• Acquisition of:
- Europair, Södertälje, which developed and marketed air diffusers.
- LTI Lüftungstechnik, Windischbuch, the second largest production unit and central warehousing facility. LTI´s sales companies in the UK, Poland and Singapore became the fi rst subsidiaries named Systemair.
1999/00
• Acquisition of sales company AS APF Grupp, Estonia, with subsidiary in Latvia.
• Establishment of representative offi ce in Shanghai, China.
The 2000s
2000/01
• New distribution centre in Skinnskatteberg.
• Acquistion of Danvent, Denmark, a producer of ventilation units for major buildings.
• Acquistion of 75% of the shares outstanding in UAB Alitas, Lithuania.
• Sales subsidiary in Turkey, under name of Systemair.
A brief history
2001/02
• Systemair was adopted as the single name for the whole group.
• Acquistion of:
- Veab Heat Tech, Hässleholm, a leading maker of air duct heaters and fan heaters.
- Equipment maker Auranor Aggregater, of Eidsvoll, Norway.
- Sales company Bivent, Austria.
- Phoenix Components, UK, with production and sales of air curtains under the Shearfl ow brand.
• Sales subsidiaries were established in Hong Kong, Hungary and Ireland.
2002/2003
• Acquisition of:
- Sales company Meijdijk Ventilatietechnik, Netherlands.
- The Klockargården property in Skinnskatteberg - fl oor area of 26 000m2 on a 30 hectare site.
• Inauguration of Systemair´s development centre in Skinnskatte- berg, an AMCA-accredited laboratory for measuring air fl ows, sound, energy consumption and electrical safety.
2003/2004
• Acquistion of:
- Fans&Spares, a distributor with 9 branches in England.
- Gelu, a Germany maker of air curtains.
- Antlia, a distributor in Switzerland.
• Establishment of a new sales company in Belgium.
2004/2005
• Establishment of:
- Sales companies in Romania and South Africa.
- Frico company in the Netherlands.
- Production facility in Ukmergé, Lithuania.
2005/2006
• Acquistion of:
- Marvent, Slovenia, a producer of high-temperature fans for fi re gas ventilation.
- Multiventilacao, a sales company in Portugal.
• Establishment of sales companies in Dubai, Spain and India.
• Gerald Engström, CEO, Systemair, was nominated as Entre- preneur of the Year in Sweden.
2006/07
• Acquisition of:
- Altexa, sales company in Austria.
- The assets of Matthews&Yates, UK, a leading manufacturer of axial fans.
- Imos, Slovakia, a manufacturer of air terminal devices.
• Establishment of a representative offi ce in Beijing, China.
2007/2008
• Acquistion of:
- Koolclima, Spain, a maker of ventilation equipment.
- Climaproduct, Italy, a distributor.
• Establishment of:
- Systemair Software, India.
- Matthews&Yates, Australia.
• Systemair shares were fl oated in the OMX Stockholm Exchange.
• Systemair was awarded the Swedish Trade Council´s Swedish Export Prize.
A BRIEF hISToRy
10 - Systemair oPERATIonS
Systemair´s duct fans are simple to install. The mounting bracket is already attached. Long spigot connection and special mounting clamp prevents the transfer of vibration to the duct.
operations
Since then, Systemair’s product range has expanded considerably, and today the Company develops, makes and markets high-quality ventilation products in the product areas of fans, air terminal devices and air handling units, as well as air curtains and heating products. The Group’s pro- ducts are sold mainly under the Systemair and Fantech brands (ventilation products) and Frico (air curtains and fan heaters) and Veab (duct heaters, fan heaters and dehumidifi ers).
Right from the start in 1974, the Com- pany has every year increased its sales while returning positive operating profi ts.
Over the past 10 years, the Company has averaged annual growth of 16%, with an average operating margin of 7,6%.
The Group’s products are used both in new-builds, and for renovations and
Systemair began operations in 1974 on the basis of a product concept. That concept was a fan design on a mainframe computer. The design was later developed into the circular duct fan.
Country with sales offi ce or other representation
Systemair’s circular duct fans make for easy design and installation of fan systems.
The circular duct fan – "The direct route"
Earlier solution
conversions of both commercial and residential properties. Our customers are mainly ventilation fi tters and distributors of ventilation and electrical products, as well as prescriptive consultants.
Systemair has decided to operate, above all, via our own sales organization with owned sales companies to reach our customers. Experience shows that owned sales companies are more profi table and generate higher growth than dependence on agents. Today, we are a leading producer and supplier of ventilation products, with subsidiaries in 38 countries in Europe, Asia, North America, the Middle East and South Africa. Thanks to our early presence in growth markets such as Central and Eas- tern Europe, including Russia, Systemair has well-established and growing opera- tions in these countries.
MISSIon ST
ATEMEnT
operating fr
om the cor
e values of simplicity and r
eliability , our mission is to de
velop, man ufactur e and mark
et high-quality v
entilation products.
Business Concept
The Nordic countries 30%
Western Europe 30%
Eastern Europe + CIS-countries 27%
North America 8%
World rest 5%
Turnover – geographical organization
12 - Systemair 12 - Systemair
CEO Gerald Engström Finance and IR
Glen Nilsson Market
Svein Nilsen
Supply
Peter Olofsson Production & IT
Mats Lund
Economy
Anders Ulff Business dev.
Taina Veittikoski
Information Berit Gestrin Product dev.
Mats Sandor
Business- and Production Boards
Subsidiaries in the Nordic countries
• Denmark
• Finland
• Norway
• Sweden
Subsidiaries in Western Europe
• Austria
• Belgium
• France
• Germany
• Great Britain
• Ireland
• Italy
• Netherlands
• Portugal
• Switzerland
• Spain
Subsidiaries in Eastern Europe
& CIS
• Bulgaria
• Czeck republic
• Estonia
• Latvia
• Lithuania
• Poland
• Romania
• Russia¹
• Slovakia
• Slovenia
• Turkey
• Ukrain¹
• Hungary
Subsidiaries in North America
• Canada
• USA
Subsidiaries in World rest
• Australia
• China
• Dubai UAE
• Hongkong
• India
• Malaysia
• Singapore
• South Africa
¹ Operations in Russia and Ukrain are rep. offices Management
Corporate shared service functions
}
}
oPERATIonS
Availability
Delivery reliability
Our mission and business concept have proven their durability – thanks to the number of geographical markets, shared IT systems and an extensive product range, the business model is generating stable growth and continuing expansion. The model also delivers production benefi ts. We can produce in longer series and do not need to produce for a large number of small customer orders.
This generates benefi ts of scale in both pro- duction and logistics. The shared IT system means we can maintain a high-quality of service without tying up excessive amounts of capital.
organization
With our sales organization and our owned sales companies we have control of distribution and a marketing operation focusing on our own products and brands.
Owned sales companies also provide direct information on and good knowledge of the demands in different markets. We have direct communications with customers and the ability to respond faster to changes and trends.
Systemair – core values
Systemair operates from core values of quality, availability and delivery reliability, with the customer at the centre.
Quality
Systemair makes high-quality standardized products. our main focus is on devel- oping products that are simple and robust and that supply, remove, convey, heat or distribute air in a building. our products are easy to choose, install, maintain and use.
We have adopted the strategy of producing a major share of our range for stock.
Instead of starting to produce when we receive an order, we can deliver right away, from a centralized or local warehouse facility. The strategy of producing for stock rather than in response to customer orders also translates into higher productivity. Manufacturing takes place in twelve modern production facilities in Europe and north America.
Systemair products are in many cases delivered to a construction site, and it is extremely important for deliveries to arrive exactly when promised, i.e.in right time in the building project. The Group has built up an effi cient production and logistical organization in which the centralized and local warehousing facilities are integrated with each other via the shared ERP system.
organisational structure – Group management and other functions operating in the Group
Goal for continued growth
Systemair’s overall objective is to become one of the leading players in the global ventilation industry. The goal is to be part of, and infl uence, trends and develop- ments, to have the resources to enter new, attractive markets and to invest in econo- mies of scale in production and production development; logistics and availability; and sales tools and competenc.
We are striving to be the best-reputed company where our core values are con- cerned.
We anticipate establishing or acquiring at least two new sales companies per year, with the aim of operating owned sales companies in all European markets of importance. In addition, operations will be developed in selected markets in Asia and the Middle East.
oPERATIonS
Taina Veittikoski, ai MD Systemair Climaproduct and Fredrik Andersson MD Systemair Russia
overall strategies for continued growth
Our strategy for attaining our overall objectives is based on:
• Continuous marketing to ventilation fi tters, distributors and consultants in the indoor climate sector
• Innovative product development and high-quality products.
• Continued development of Systemair’s own sales organization.
• A focus on energy-effi cient ventilation products.
• A continued strategy of acquisition and establishment to expand market shares.
14 - Systemair
Integration
• Seminars in company values
• Management and Business Board
• Introduction of:
- Reporting routines - Planning tools
• Review of:
- Customer and suppliers - Organization - Costs and margins
Following- up
• Budgetoriented
• Key financials
• Strategic development
• Education
Agreement
• Price
• Continued support from management
• Products
Analysis
• Market position
• Profitability
• Customers
• Corporate culture
• Competitors
• Financial position
• History
• Management
• Product portfolio
• Possible improvement
• Group integration
• Legal due diligence
Search process
• Group management
• Subsidiaries/represen- tation office
• Partners
• Customers
• Suppliers
The acquisition process
Acquisitions, disposals and integration
Systemair has expanded through a combination of organic growth and company acquisitions. The businesses we have acquired have been suc- cessfully integrated into the Group. Today, we have accumulated exten- sive experience of identifying, acquiring and integrating companies.
Every acquisition is followed up via a long- term, structured monthly evaluation of the way the organization is developing. Every one of the Group’s subsidiaries has a Busi- ness Board, comprising the local CEO and one or two of the Group’s senior executi- ves. The Business Board sets objectives and develops and evaluates operations in each individual market.
Acquisitions and business establishments
In June, we acquired the assets of Kool- clima S.L., a Spanish manufacturer of ventilation products.
Koolclima’s air handling units hold a strong position in the Spanish market. The company, based just outside Madrid, has around 50 employees and reported sales of approximately SEK 71 million in 2006.
The acquisition creates good opportunities for continued growth in Spain. We have acquired an efficient production facility in southern Europe and are extending our product range with products designed for hotter climates, especially on the air handling unit side. At the same time, we are acquiring a solid platform for sales of our standard range.
In October, Systemair established a soft-
ware development and consulting company, Systemair Software, in India. The com- pany, a joint venture between Systemair (60 percent) and the Indian development company Mechartés based in New Delhi.
Mechartés, which develops software for the defence industry and other industrial technologies, is a spin-off from the India Institute of Technology.
Systemair Software develops software for computer simulation of air flows in rooms, energy modelling for buildings and simulation of the ways in which smoke gases spread from multi-storey car parks.
Another important function is further development of software documentation for Systemair’s products.
In October, we also established a sales company in Australia, Matthews & Yates, to strengthen our positions in the Australia and New Zealand markets. The reason
markets above all solid-fuel stoves and tiled stoves under the brands Camina, Svenska kakelugnar and Wärmo. The company had 13 employees in the past financial year and sales of SEK 57 million, mainly in the Swedish market. Camina’s products fall outside Systemair’s core area and the sale of the company represents a streamlining of Systemair’s business
Integration of new companies
Systemair is developing through a com- bination of organic growth and company acquisitions. The businesses we have acquired have been successfully integrated into the Group and we consider that today we have accumulated extensive experience of identifying, acquiring and integrating companies.Immediately after an acquisition, a num- ber of areas in the business acquired are evaluated, above all Corporate Culture and Value Base and Customers and Suppliers in or- der to identify possible markets and adapt the product range; Organization to increase the focus on the customer and enhance productivity in line with the Systemair bu- siness model; and Costs and Margins to draw up a plan and establish goals.
A shared corporate culture and value base are essential to the successful integration of the new company. We set aside substantial resources for this process. For example, Group management holds reviews of the situation with the management and key personnel in the company acquired.
This takes place immediately after the acquisition, in the form of seminars and Group-wide activities that take place over a few days at Systemair headquarters. When the opportunity arises, all employees are invited to visit Skinnskatteberg, an event that is highly appreciated and has figu- red importantly in bringing about faster integration. Very recently, in April 2008, all employees of the newly acquired Climapro- duct visited Skinnskatteberg in two groups to get to know Systemair and meet their new colleagues at headquarters. To have the opportunity of seeing the modern facility inspires trust and the positive experience is reinforced by the beauty of the landscape and a series of joint activities. We see this as an effective means of combating pre- conceived notions and quickly establishing contacts at different levels of the company.
At every visit of this type – irrespec- tive of whether it involves management personnel alone or all employees – we run through our values, or stone tablets as we call them. These represent a collective agreement and a code of conduct gover- ning how each and every person who is employed at Systemair should, may and can act in his or her work. (See page 36)
oPERATIonS
why the company is not called Systemair is that a company with a similar name already exists. Offices and warehouse are located in Melbourne. In the past, we only marketed a limited range of products via distributors in Australia. With a company established locally, our intention is to build up effective sales for Systemair’s entire product range, and we believe that the prospects are good for attractive developments in the Austra- lian market.
In August, Systemair signed a Letter of Intent to acquire the Italian company Cli- maproduct and in February the acquisition was concluded. Climaproduct has annual sales of approximately SEK 100 million and an operating profit of around SEK 10 million. Climaproduct was establis- hed 24 years ago and employs around 40 people. The company has headquarters in Milan and a small production facility at Padova. Climaproduct, which has acted as a distributor for Systemair since 1992, also delivers ventilation products from manu- facturers other than Systemair. Systemair products today represent only a minor share of Climaproduct’s total sales. Via this acquisition, we are securing a platform in Italy, and identify good prospects for in- creased sales of Systemair’s entire product range.
Disposals of companies
In August, Systemair sold all shares outstanding in Camina AB to EcoTec Värmesystem AB. Camina develops andSystemair Academy brings employees together from all over the world for both technical training and instruction in corporate culture and values.
16 - Systemair
Ventilation and health
Effective ventilation contributes to good health. An adult person eats on average around 1 kilo of food, drinks approximately 3 kilos of fl uid and breathes all of 15 kilos of air daily. Nearly 90% of the air is breathed indoors. So it is no mystery that indoor air affects our health, a fact that has also been confi rmed by several scientifi c investigations.
In a study of 11,000 children in Värm- land Province, central Sweden, 200 healthy children and 200 sufferers of asthma or allergies were selected for participation in an in-depth study of indoor climate and health. The study demonstrated that ventilation in the home signifi cantly impac- ted on health. Children in well-ventilated homes quite simply have a better chance of staying healthy, even if good air circula- tion does not entirely eliminate the risk of asthma or allergies.
It also emerged that 60% of all apartments and 80% of all single-family houses failed to meet offi cial requirements for effective ventilation, and this is one rea- son why new, modern ventilations systems
Ventilation
Effective ventilation systems create a healthy indoor climate by introducing fresh air into buildings and removing the used air. A good indoor climate not only improves health, it also leads to better pro- ductivity.
are often installed as part of renovation and conversion projects.
Ventilation and comfort
Temperature and lighting affect how we perceive the indoor environment and the same may be said about ventilation. Gene- ral awareness of the importance of venti- lation is growing, and decision-makers are, more and more, also taking into account the need for ventilation from the point of view of comfort.
For many commercial buildings, a good indoor climate is, pure and simple, a com- petitive advantage. People prefer to go to a restaurant with a pleasant indoor climate and are more likely to return to a hotel where the room feels fresh when they wake in the morning. In shops, too, the indoor climate plays a very important part in determining whether customers like shopping there.
Ventilation and productivity
Researcher Don Milton in Massachusetts, USA, headed a major fi eld study into how people are affected by ventilation. The investigation showed that, among those who worked in premises where only the minimum ventilation requirements were observed, sickness absence was 50% higher than among those who worked in premises with double the airfl ow.Researchers P. Wargocki and R. Djuka- novic of the Technical University of Den- mark demonstrated in a study conducted in
2005 that the productivity gains from good quality indoor air outweigh by far the costs of the ventilation system.
Ventilation and safety
In tunnels, along metro lines and in under- ground parking facilities, it is essential to remove exhaust gases and introduce fresh air to enable people to be present in such areas without risk. The demands are parti- cularly high in the event of a fi re, since the smoke generated by fi res is dangerous and must be removed quickly.
Safety ventilation is also needed in major buildings and developments such as hotels, airports and shopping centres. Ventilation slows the spread of fi re and fi re gases in buildings. Fans keep evacuation routes clear of smoke and create smoke-free zones, ma- king it easier for rescue teams to do their job. This allows fi res to be fought more effectively and with better results. Highly reliable fans, capable of removing smoke and air at high temperatures over a long period, are an essential requirement.
Ventilation and energy effi ciency
We need ventilation systems in order to feel well, be productive and be securely protec- ted. At the same time, the issue of energy consumption in buildings is more relevant than ever. The key question is how energy consumption can be cut while at the same time the quality of indoor air is improved.The solution is energy recovery and effi - cient fans, combined with demand-side ma- naged ventilation, which effectively reduces the need for energy. So an investment in a good ventilation system is attractive not only from the energy perspective but also in terms of productivity!
Good ventilation is important to
• health
• Comfort
• Productivity
• Safety
• Energy effi ciency
VEnTIlATIon
Scientifi c studies indicate that ventilation has a signifi cant effect on a child´s health.
VEnTIlATIon
Global warming
The debate on how man is affecting global warming reached a turning-point in 2007, with the establishment of a consensus that carbon dioxide emissions from human ac- tivity are at least partly to blame for global warming.
Ventilation and air conditioning in buil- dings account for a major share of energy use. Figures from Europe and the USA in- dicate that this area represents around 15%
of total energy consumption, compared to the 12% for aviation, for example. At the same time, properly designed ventilation products and systems substantially cut energy consumption and therefore can have considerable impact on overall energy consumption.
To Systemair, this means that demand for “Cleantech” products, i.e. products that are energy-effi cient and so reduce energy consumption, may be expected to rise sharply over the next few years.
Cleantech products from Systemair
Of Systemair’s total product sales, some 40% are entirely or partly Cleantech pro- ducts. Our energy-effi cient products may be divided into three groups, Air Handling units with Heat Recovery, Air Curtains and Other Cleantech Products.Air handling Units with heat Re- covery
A great deal of energy is used either to heat buildings in cold climates or to cool buildings when it is hot. To avoid losing en- ergy via walls, windows and other openings, better and better insulated housing is being built. To prevent problems with damp and mould, ventilation systems that bring in fresh air from the outside are needed. Air handling units with heat recovery deliver fresh air into buildings. A heat exchanger
Cleantech
enables recovery of the energy used during heating or cooling of the building. With heat recovery, up to 90% of the energy in exhaust air can be reclaimed.
Air Curtains
In buildings where doors are mostly open, energy losses can be considerable. When a door is opened, cooled or heated indoor air fl ows out and the energy used to heat or cool the air is lost. This happens, for ex- ample, in shops, restaurants and warehouse buildings.
Air curtains make a barrier of air, so that the heated or cooled air stays in the building. With an air curtain operating opti- mally, up to 90% of energy losses through the doorway can be avoided. Less draft on the premises mean that lower temperature is perceived as comfortable.
other Cleantech Products
Systemair’s other Cleantech products in- clude Control equipment for demand-side management, Fans with EC motors and Radiant heaters.With control equipment for demand-side management, ventilation may be reduced when demand is lower (for example, when no-one is present on the premises). As a result, no more energy than necessary is used. In many cases, this can result in major energy savings.
Demand for fans powered by energy- effi cient motors is rising steadily. A large amount of the energy consumed in ope- rating a fan is lost during magnetization in the fan’s electric motor. In what are known as EC motors, permanent magnets are used. In combination with modern control equipment, this reduces the energy losses in the motor and therefore also the energy consumption. The effi ciency of the motor increases and the speed may be regulated
without any loss of effi ciency.
Radiant heaters can deliver useful savings in warehouses, for example. These products create a higher perceived temperature than with traditional systems and can be used to heat different zones in a large building effi ciently. For example, the temperature in a warehouse or shop may be lowered by a few degrees compared to other heating methods, offering both energy savings and increased comfort in the workplace/at the till.
HVAC Other
hVAC as a share of total energy consumption
VEnTIlATIon
Air handling units Air curtains Other Cleantech Other products
Cleantech- products Sales per Cleantech product area
18 - Systemair
The Market
Systemair develops, manufactures and markets ventilation products for business and residential properties, in the form of new-builds and renovation projects. our geographical business areas are the nordic region, Western Europe, Eastern Europe and the CIS, north America and other Markets. The latter category includes Asia, parts of the Middle East, Africa and oceania.
The market differs considerably from one geographical area to another, for example in terms of competition, distribution chan- nels and prices. The Nordic countries have a highly developed ventilation market with stringent requirements for energy efficiency in buildings. In countries with a hot climate, the same tradition does not exist and consequently neither does the same need for ventilation systems. The market is also affected by varying views of the need for ventilation systems.
Brands
The Group's brands are Systemair, Frico, Fantech and Veab:
Systemair represents a standardized range of ventilation products, such as fans, air terminal devices and air handling units.
Frico specializes in air curtains, plus hea- ting systems such as fan heaters and radiant heaters.
Fantech is the brand used in North Ame- rica. The products marketed are duct fans
and other ventilation products and energy recovery units above all for residential use.
Veab manufactures and markets heating products such as duct heaters, fan heaters and air dehumidifiers.
Size of market
The ventilation market may be divided into sales for:
• Construction and renovation of commercial properties (offices, manufacturing, retail) and residential properties.
• Construction and modernization of infrastructure projects.
Sales for commercial properties account for the majority of total sales, while in North America the residential market ac- counts for the majority of sales.
About 90% of the Group’s sales take place in the commercial sector with the highest increase being office buildings and shopping centres. We see an increased de- mand for Systemair's products for indoor climat as well as for fire safety.
With the acquisition of Matthew & Yates in 2007, we anticipate that our market share in infrastructure ventilation (Metro, Road and Tunnel fans) will increase, especially in large-sized fans.
ThE MARKET
Trinity College, Dublin, Ireland. Systemair has delivered 12 major ventilation systems, as well as fans, intake air units and air diffusers.
20 - Systemair
Nordic region
The Group is developing and growing very dynamically in the Nordic region. Norway, in particular, has contributed strongly, thanks to a high level of activity in the building industry and strong marketing activities. We have good market shares in the Nordic region and so are anticipating somewhat slower growth here.
Western Europe
In most markets, we are still a minor player and as a result we identify – on the basis of our current product portfolio and our new product areas – ample potential for growth and higher market shares.
Systemair’s acquisition in Italy represents an opportunity to gain access to the market
and expand sales of the Group’s pro- ducts. Our Spanish acquisition, Koolclima Systemair, has provided increased access to that market and substantially higher sales, even if the market there is now entering a cyclical phase of decline. To address the new situation, we have set processes in motion to restructure the company and to seize larger market shares.
We have enjoyed good growth in Wes- tern Europe and are establishing ourselves as a major player in the industry. Our strategy here is to do more of what we are already doing, and to intensify our marke- ting activities.
Eastern Europe
The market continues to display strong economic growth, with rising demands for improvements in the indoor climate in both commercial and residential properties.
This expansion has favoured Systemair.
We established an early presence in these countries and have efficient distribution channels and established brands.
We enjoy strong growth in Eastern Eu- rope and anticipate that this will continue.
The Balkans constitute an area of low per capita GDP, but our sales companies in Bulgaria and Romania are showing good growth. Both countries have considerable potential, especially in the longer term. We have strengthened our sales organizations locally, and during the year concluded agreements with several new distributors in the region.
Geographical business areas and growth markets
In view of the major differences between the markets, Systemair has chosen to divide operations into geographical, rather than production, areas.
North America
The economical situation in North Ame- rica has also effected our operation and we have durng the year taken strategic actions to increase operations
Since the end of the financial year, we have acquired a company and hope to be able to return to a growth situation in the commercial property market, following the decline in the residential market.
Other markets
We identify good opportunities for growth in several regions.
The Middle East accounted for the hig- hest growth in percentage terms during the financial year. For example, we recorded doubled turnover in Dubai, over the past two years. The extremely high level of building activity and an increased presence were partly responsible for driving this growth.
We expect expansion to continue in the area over the next few years by expanding the available product portfolio and sales organization, as well as via acquisitions in order to support this growth.
India has major underlying needs in the new-build and conversion sectors, with foreign investment and high economic growth. We are building up our organiza- tion and have established market channels with substantial sales of our products. We have already been able to record that Syste- mair is well known in the target groups at which we are aiming.
ThE MARKET
Country with own sales office or other representation
The Nordic countries 30%
Western Europe 30%
Eastern Europe + CIS-countries 27%
North America 8%
World rest 5%
Strengths and competition advantages
As the focus on the indoor environment has intensifi ed, the Group has developed its market strategy vis-à-vis ventilation fi tters, distributors and consultants in the indoor climate sector.
The following strategies have been deve- loped into major strengths and competitive advantages:
• Early presence in growth markets has emerged as an excellent platform for further growth.
• High product availability and fast delivery via an effi cient production and logistical organization.
• Focused product development and a broad product range. We allocate sub-
stantial resources to the development of effective, user-friendly and environ- ment-friendly ventilation products.
• Acquisition and integration of compa- nies has produced extensive experience and a structured acquisition process.
• A highly diversifi ed customer base reduces our vulnerability to fl uctua- tions in the economy and to lower demand from individual customers.
• Good relationships with leading supp- liers has strongly aided the Group’s growth and product development, con fi rming the perception of Systemair as a leading supplier of high-quality ventilation products.
Customers
The Group’s customers are mainly ventila- tion contractors/fi tters and distributors of ventilation and electrical products.
Systemair has operations in a large num- ber of geographical markets and a broad customer base consisting of various sizes of customer. The Group’s largest customer ac- counts for 3% of net sales and the 10 largest for, on aggregate, just 13% of sales. This broad and geographically diverse customer base offers considerable stability and redu- ces our exposure to economic fl uctuations in individual markets, as well as to changes in demand from individual customers.
ThE MARKET
Driving forces and trends
Demand for ventilation products is linked to growth in the building industry, which in turn is infl uenced by the general state of the economy. Renovation, conversion and extension projects are not affected in the same way by fl uctuations in economic growth, and the market is less cyclical, thanks to the continuing need for mainte- nance of existing buildings.
In addition to the general trend of the buil- ding industry, demand is also being driven by other factors. This means that growth in the ventilation market is higher than in the building market. The factors involved include the rising interest in higher energy effi ciency and demands for a better indoor climate, as well as increased understanding of the correlation between effi cient ventila- tion, health and performance.
Competitors
Productgroups, competitors Chief competitors, Europe
Fans Central units
Residen- tial units
Compact units
Air terminal
devices Air curtains
Fire protec-
tion
FläktWoods X X X X X - X
Flexit (X) - X X (X) - -
Swegon - X X X X - X
Exhausto X X X X - - -
Östberg X - X - - - -
Trox - - - (X) X - X
VTS - X - X - - X
Nuaire X X X X - - X
Vent-Axia X X X X - - X
GEA X X - X - - X
TLT X - - - - - X
Gebhardt X - - - - - X
Rosenberg X X - X - - X
S&P X - X - - X X
Wolf - X (X) - - - -
CIAT - X - X - - -
Aldes - - - - X - X
Novenco X X - - - - -
SE no DK GB DE Pl FR ES RU
FläktWoods X X - X - - - - -
Flexit - X - - - - - - -
Swegon X X X - - - - - -
Exhausto X X X - - - - - -
Östberg X X - - - - - - -
Trox - - - - X - - - -
VTS - - - - - X - - X
Nuaire - - - X - - - - -
Vent-Axia - - - X - - - - -
GEA - - - - X - - - -
TLT - - - - X - - - -
Gebhardt - - - - X - - - -
Rosenberg - - - - X X - - -
S&P - - - X - X - X -
Wolf - - - - X - - - -
CIAT - - - - - - X - -
Aldes - - - - - - X - -
Novenco - X X - - - - - -
Productgroups, competitors
Fans Central units
Residen- tial units
Compact units
Air terminal devices
Air curtains
Fire protec-
tion
Systemair X X X X X X X
Chief competitors, Europe
SE no DK GB DE Pl FR ES RU
Chief competitors, Europe
SE no DK GB DE Pl FR ES RU
Systemair X X X X X X X X X
22 - Systemair 22 - Systemair ThE MARKET
Systemair was founded in 1974 and has today subsidiaries in 36 countries all over the world, employes around 1700 and has a turnover of approx. 285 million euro. The broad product range includes duct fans, roof fans, axial fans, smoke extract fans, air handling units, air terminal devices, air curtains and accessories. In October 2007 Systemair was listed on the OMX Nordic Exchange in Stockholm.
More sizes and improved energy efficiency Topvex is a space saving top connected heat recovery air handling unit that has become very popular. Now we present Topvex TR, designed and developed specifically to meet the new regulations calling for grea- ter energy efficiency and therefore lower power demands in ventila- tion products.
An important new feature of Topvex TR is the use of new high effi- ciency EC motors which substantially contribute to lower energy use.
Thanks to increased impeller size, Topvex TR is able to run more quiet- ly resulting in lower sound levels.
The new Topvex TR offers:
• A greater choice of sizes, now giving airflows up to 1.5 m /s
• EC-motors that reduce the energy used by 50% (approximate)
• The three largest units can be separated into two equal sizes
• Includes a complete control package (factory wired).
Find more details in our online catalogue at www.systemair.com
New Topvex TR available in 6 sizes with airflow range 0.3-1.5 m /s
Systemair AB • SE-739 30 Skinnskatteberg, Sweden Tel +46 222 440 00 • Fax +46 222 440 99 mailbox@systemair.se • www.systemair.se
Topvex has evolved Systemair complete Jet Fan System
Systemair was founded in 1974 and has today subsidiaries in 36 countries all over the world, employes around 1700 and has a turnover of approx. 285 million euro. The broad product range includes duct fans, roof fans, axial fans, smoke extract fans, air handling units, air ter- minal devices, air curtains and accessories. In October 2007 Systemair was listed on the OMX Nordic Exchange in Stockholm.
Systemair Middle East FZE S2AC04 Jebel Ali Free Zone PO Box 186 28 Dubai United Arab Emirates Systemair offers complete Jet fan
System for car park ventilation. The system is including jet fans, co sen- sors and panels. Systemair has in house capabilities to perform the CFD simulation. Please contact Sys- temair Middle East for all your ven- tilation requirements.
AJR
AJ8
Tel: +971 4 886 09 06 • Fax: +971 4 886 09 07 E-mail: niklas@systemair.ae Systemair are proud
suppliers of jet fans for the Dubai Mall, the Middle East’s biggest jet fan installation.
Jet fans_UAE:Layout 1 2008-04-11 07:56 Sida 1
Market communications
Systemair strives for a unifi ed image around the world, to facilitate effective communication and strengthen the brand and corporate identity. A standard graphic profi le is used for all communications materials, including brochures, website information and
installations at trade fairs.
Nordbygg Trade Fair in Stockholm, 2008
Systemair´s website.
Systemair´s advertising and marketing materials.
