Annual Report 2009/10

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Lagercrantz Group AB (publ) Box 3508

103 69 Stockholm Tel +46 8 700 66 70 Fax +46 8 28 28 05 www. lagercrantz.com

Organisationsnummer 556282-4556 Säte Stockholm

LAgeRcRAntz gRoup 2009/10

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The Year in Brief

1 April 2009–31 March 2010

• The year was marked by adaptation to lower business volumes. Action taken had a mounting positive effect during the financial year, especially with respect to profit and cash flow. An improvement in the business climate was seen towards the end of the financial year.

• Net revenue for 2009/10 amounted to MSEK 1,720 (2,138).

• The operating result amounted to MSEK 67 (105), equivalent to an operating margin of 3.9 percent (4.9). This result includes items affecting comparability of MSEK –1 (–21). The result after financial items amounted to MSEK 58 (94) and the result after taxes amounted to MSEK 42 (68).

• Earnings per share amounted to SEK 1.91 (3.05).

• Cash flow from operating activities per share amounted to SEK 87 (137), equivalent to a per-share cash flow of SEK 3.96 (6.15).

• The return on equity was 8 percent (14) and the equity ratio was 56 percent (49) at the end of the period.

• The Board of Directors proposes a dividend of SEK 1.50 (1.50) per share.

Net revenue and operating profit

0 500 1 000 1 500 2 000 2 500

2005/06 2006/07 2007/08 2008/09 2009/10 M SEK

0 20 40 60 80 100 120 140 M SEK

Net revenue Operat ing prof it

Earnings performance by quarter

0 5 10 15 20 25 30 35 40 45

2005/06 2006/07 2007/08 2008/09 2009/10 MSEK

0 1 2 3 4 5 6 7 8 Percent

Operating profit Operating margin 2008/09 2009/10 2007/08

2006/07 2005/06

Outcome by quarter 2009/10 and 2008/09

0 100 200 300 400 500 600

Quart er 1 Quart er 2 Quart er 3 Quart er 4

M SEK

0 5 10 15 20 25 30 35 M SEK

Net revenue 2009/10 Net revenue 2008/09 Operating profit 2009/10 Operating profit 2008/09

Return on equity

0 5 10 15 20 25

2005/06 2008/09

Percent

Return on equity

2007/08 2009/10

2006/07

2005/06 2008/09

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Lagercrantz Group AB (publ) – Annual Report 2009/10

Key financial indicators

2009/10 2008/09

Net revenue, MSEK 1,720 2,138

Operating result, MSEK 67 105

Operating margin, % 3.9 4.9

Result after financial items, MSEK 58 94

Result after taxes, MSEK 42 68

Cash flow from operating activities, MSEK 87 137

Equity ratio, % 56 49

Earnings per share, SEK¹ 1.91 3.05

Number of employees at end of period 608 742

Return on equity, % 8 14

Dividend, SEK² 1.50 1.50

¹ Calculated based on average number of shares outstanding.

² As proposed by the Board of Directors for 2009/10.

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Lagercrantz Group in Brief

Lagercrantz Group is a technology group in electronics, electrics, communication and adjacent areas. The Group works with value-creating sales in close proximity to its customers and has market-leading positions in several expansive niches. The business is organised in three divisions:

Electronics markets special products in industrial wireless communication and embedded electronic systems for customers’ products.

Mechatronics sells electric and electro-mechanical products and offers electric connection systems, electrical installation material and customised production of cable harnesses.

Communications offers products, systems and services in digital image transmission/technical security and access and distributes software.

Lagercrantz works with a decentralised management model pursuant to which decisions are made by the subsidiaries close to customers and suppliers. This creates a large measure of engagement on the part of associates, at the same time as the good businessmanship among the employees becomes an important competitive advantage.

Lagercrantz creates value by offering advanced knowledge in technology and business in combination with products from world-leading manufacturers or proprietary products. Through Lagercrantz, the customer gets the best possible solution for performance, immediate availability and total cost. Customers are mostly industrial companies.

Lagercrantz is active in eight countries in northern Europe and in China. The Group has revenue of just short of SEK 2 billion and about 600 employees. The Company’s share is listed on Nasdaq OMX Stockholm since 2001.

Operating result by division

Electronics 21 % (20) Mechatronics 37 % (39) Communications 42 % (41)

Numbers in brackets refer to the preceding year.

Net revenue by division

Electronics 32 % (34) Mechatronics 30 % (29) Communications 38 % (37)

Net revenue by product category

Trading 55% (59)

Proprietary products 20% (17) Niche production 12% (14) Systems integration 8% (5) Services 4% (4)

Other 1% (1)

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Sale by geographic market 2009/10

Other = mainly China, Poland, Switzerland and UK.

Sweden 42% (39) Denmark 36% (35) Norway 8% (9) Finland 7% (9) Germany 5% (4) Other 2% (4)

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President’s Statement

The 2009/10 operating year was marked by financial crisis and recession. With a clear start in November 2008, business volumes in most of the Group’s units began to fall.

Customers’ planning horizon was shortened, many customers wanted to cancel orders already placed and some encountered financial problems. This trend was accentuated during the first six calendar months of 2009. We reacted early in Lagercrantz Group. Plans for a negative scenario were drafted unit by unit and these plans were implemented in lockstep with the deteriorating situation. At this stage our decentralised structure with relatively small and easy-to-grasp units with purposeful, responsible managers constituted a considerable strength. The plans had been drafted locally and were implemented by the subsidiary chief executives, force- fully and with good judgment, which meant a minimum of conflicts and costs.

All in all, the business volume declined by just over 20 percent from the peak in autumn of 2008 and we reduced our staff and our costs by as much. In total, we were forced to have approximately 200 persons leave the Group, which has contributed to a reduction of the cost load by about MSEK 80 compared to the preceding financial year.

Focus during the decline was also to strengthen cash flows and reduce risk by freeing up capital tied up in inventories and trade receivables. We introduced stricter routines for follow-up of outstanding accounts receivable and intensified our efforts to reduce inventories. We therefore managed to end the year without significant bad debt losses and we reduced capital tied up in inventories and trade receivables by about MSEK 70.

During the second half of the operating year we began to see a gradual improvement in the market situation. Action taken took effect simultaneously and we regained the balance between revenue and costs. In terms of profit we have not yet returned to pre-recession levels, but the situation still feels stable and hopeful for the future.

I also wish to say an extra big thank you to all of the Group’s employees. I do express my gratitude every year in my

comments, but last year called for something extra and everybody put their hearts into it.

FUTURE

When we now look forward we see great potential for developing Lagercrantz Group along the course entered upon. This means that we will continue to focus on increasing value added, in part by increasing the proportion of solution sales, system integration and proprietary products.

The proportion of proprietary products has now reached a level of more than 20 percent of the total business volume, from having been almost non-existent a few years ago. Our most recent acquisitions of Norwesco and SwedWire will increase that proportion further.

The Group’s strategy is also to broaden operations into new technology areas. Here high tension current and electro- mechanics have been examples during the past few years, but we have also looked into segments such as camera surveillance and technical security, with a clear niche strategy. Other new areas may be considered as we see that our decentralised organisational model and niche strategy can be put to good use in several technology areas.

We intend to accomplish the transformation of Lagercrantz Group by organic growth and acquisitions. Projects are in progress in several companies for increased value creation, including a larger portion of systems sales. We are also focusing on winning back the business volume we have lost. With lower costs, higher volume will have beneficial effects on profit. In the current situation we will also increase the rate of acquisitions. During the recession we pursued a wait-and-see policy with respect to acquisitions, but now we intend to resume the pace of three to five acquisitions per year. In an extended perspective Lagercrantz Group shall consist of a number of well managed, profitable, clearly niched technology companies, each a leader in its respective area.

We now have an excellent platform on which to continue building Lagercrantz. We have some 20 strong, well-functioning units and we have a financial position that makes pursuing an active acquisitions policy possible.

Stockholm, June 2010

Jörgen Wigh President & CEO

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Business Concept, Vision, Goals and Strategy

Lagercrantz is a technology group that creates customer benefits based on high technical knowledge and business skills, combined with products from world-leading manufacturers or proprietary products.

The vision is to be a leader in value-creating technology trade with market-leading positions in several expansive niches.

Lagercrantz Group’s business concept is – within well-defined niches and in partnership with customers and suppliers – to offer value-creating technical solutions in electronics, electrics, communication and adjacent areas. Lagercrantz offers custom- mised products, standard components, services, software and systems within its technology areas. The value added created by Lagercrantz gives the Group a place as an integrated part of customers’ product development and day-to-day production.

Customers are offered a high degree of competence, availability and service. For Lagercrantz Group’s suppliers, this business model means partnership with a player with effective marketing based on extensive knowledge of the local market and strong customer relationships.

VISION

Lagercrantz Group’s vision encompasses three basic concepts:

leading, value-creation and market-leading positions.

Leading means that, over time, the Group must live up to three basic tenets: growth, profitability and development. The first two requirements make up the Group’s financial goals.

The third requirement, development, means to create positive changes based on new technology or new solutions in the niches where business is conducted; to lead the sector’s development and develop the organisation of Lagercrantz.

Value-creation means that Lagercrantz Group in its sales shall add value to the goods and services offered to the market.

By nurturing Lagercrantz Group’s collective experience, technical and business knowledge and broad contact surface, added value is created for those customers who choose to buy from Lagercrantz Group. Customers are offered development of new solution based on new products and technologies, design and adaptation to a specific need, as well as service, support and training.

Market-leading positions in several expansive niches are also a basic maxim. Historically, Lagercrantz Group has succeeded best in businesses that have had a significant role in a niche.

Lagercrantz Group typically defines a niche as a well defined market. A market-leading position means being number one or two in terms of market shares in the niche.

Such a position offers excellent opportunities for sustained profitability and development by functioning as an important link between the foremost technology suppliers and the most demanding customers. Another benefit is that opportunities are created for building a strong product line adapted to a specific customer need. A strong position in a well-defined area also means that competent staff can be recruited and retained. That is an important factor for securing leadership and competence over the longer term.

GOALS

Lagercrantz Group’s financial goals are:

Earnings growth of 15 percent per year over an economic cycle, in the sense of result after net finance items.

Return on equity of not less than 25 percent.

This means that earnings will double over a five-year period.

Lagercrantz’ general goals are broken down and set before each year in connection with the drawing-up of business plans performed by each subsidiary. The requirement for profitability means that the return on working capital in a business unit must be at least 45 percent. The goals are continually followed up during the year in order to allow for quick response as needed. For the last couple of years the Group has been working with clear internal benchmarking in such a way that each subsidiary can measure the outcome for one’s own unit relative to other companies in the Group. Important work has been going on within the Group to train all employees in the basic economic metrics and the key performance indicators used.

For an extended period the Group has worked consistently to develop existing businesses, at the same time as a number of successful acquisitions have been made. The focus for this work has been to strengthen business models, organisational development and product line changes. Acquisitions have meant that Lagercrantz has been able to grow into new areas, such as power generation and technical security, and that the incidence of new products has increased. Much like other companies, the Group was hit during the 2009/10 financial year by the deep financial crisis that subsequently turned into a clear recession.

As a result hereof the Lagercrantz Group has taken a number of steps in its business units, especially aimed at cost-cutting and capital rationalisation. Among other things, some

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200 employees have had to leave the Group. The worsening market situation impacted the result and goal fulfilment during the year. As the measures taken had greater impact on the Group’s costs, margins gradually strengthened during the year, however. Compared with the year before, total costs were reduced by about MSEK 80. It was also possible to lower capital tied up in inventories and trade receivables by about MSEK 70.

The return on equity was 8 percent (14). The lower figure is the effect of lower consolidated earnings.

STRATEGIES

Lagercrantz Group shall consolidate its position as a profitable and stable growth company by continuing to develop existing businesses in the Group and by acquiring more companies with strong positions in well-defined niches. In order to achieve these goals for earnings growth and profitability, Lagercrantz works with six common main strategies for the Group:

Decentralisation and management by objectives

A strong corporate culture

Businessmanship

Strong market positions in niches

Increased value added

Acquisitions

Decentralisation and management by objectives

Lagercrantz Group has more than 20 operating subsidiaries, each of which operates as an individual profit centre with its own clear business concept, its own goals and with its own strategy. Each management group develops its own business with a great deal of freedom under its own responsibility. In this way the mission-critical decisions are made close to customers and market. That’s where the knowledge about customers needs is the greatest. This also creates short decision- making paths and promotes a high degree of participation.

The subsidiaries are managed by objectives, goals that are of a long-term nature and based on the Group’s three main requirements, for growth, profitability and development.

Business plans are drawn up each year for every company with quarterly goals for earnings and how much capital is tied up in the business. Plans are followed up on a regular basis and action is taken as needed.

During the 2009/10 operating year most of the subsidiaries took extensive action to adapt their organisation, cost level and capital structure to a situation with weaker demand.

Strong corporate culture

Lagercrantz Group nurtures a strong corporate culture, which traces its origin to the way of working and the approach to business that is characteristic of a successful technology trading company. There is rich lode of collective experience in the Group and this is systematically exploited and disseminated in

the form of courses and training, but also by encouraging engagement and team play between associates in different parts of the Group.

The common value base for Lagercrantz Group’s corporate culture rests on four concepts:

Businessmanship – the ability to see opportunities, to create good relationships and to focus on earnings.

Responsibility and freedom – the ability to take control and realise own ideas that generate earnings.

Simplicity and efficiency – the ability to work in a concent- rated manner and to find simple solutions, to prioritise the right things and to do them in the right way.

Willingness to change – the ability to grasp onto new things and to adapt to the market.

Businessmanship

Businessmanship is something very basic for Lagercrantz Group and distinguishes all work that is done. This concept includes contributing knowledge and acting in such a way that added value is created for the customer – by refining the products of others or by offering our own products. Business- manship means having a holistic perspective and the ability to recognise new business opportunities and future needs in the marketplace. It also means working close to customers and to create good sustainable relationships on a long-term basis based on high ethics and honesty.

Businessmanship also encompasses to work resource efficiently and to take responsibility for the effect the business has on the environment. The Group’s companies are continually working on reducing the environmental impact of their operations. Personal selling is an important component of businessmanship. Lagercrantz is a value-creating partner for buyers of technology.

Strong market positions in niches

Lagercrantz Group’s subsidiaries strive to achieve a strong market position in their niche. A niche consists of a well- defined technology area, customer segment or geographic area with a total market value that is normally in the range of MSEK 200–1,000.

This means working on a defined market with considerable possibilities of impacting business terms and conditions. Proxi- mity to the customers, high technical competence and a focused method of working make it possible to create sustainable competitive advantages, even in relation to the largest international players. For Lagercrantz Group, having a leading position means to be number one or two in each respective niche.

Increased value added

Lagercrantz Group is focused on delivering high value added to its customers, and continually strives to raise it. With know-

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ledge of a local market and specialised technical know-how, Lagercrantz Group contributes to the added value by customising, developing and combining products from different suppliers in the solutions presented to the customers.

There is also customer benefit in the fact that Lagercrantz Group makes different manufacturers’ products available on the market and offers training, support and service. The degree of refinement is continually enhanced by phasing out standard components and replacing them with products that generate greater customer value. New products and services are also increasingly being offered. The development is in the direction of areas which are technically complex, or open the doors for a unique offer.

Acquisitions

Lagercrantz Group’s goal for earnings growth will be realised in part by organic growth and in part by acquisitions. The acquired companies strengthen the market position in existing areas, or make it possible to enter new, interesting markets. It is crucial that acquired companies have a well-tested business model and earnings capacity, great competency among its

leaders and associates and good growth opportunities. Expan- sion in the technology areas where Lagercrantz Group is already established is accomplished all over northern Europe.

For other areas, which are new to Lagercrantz Group, acquisitions will in the first instance be made in the Nordic Region.

STRATEGIES STAND FIRM

In response to the steep economic downturn during 2009, Lagercrantz Group’s focus has been on ensuring a stable, profitable business also in turbulent times. Measures were taken to cut costs and reduce capital tied up in the Group. In a strategic perspective, acquisitions had to be deferred but by the end of the financial year the focus thereon has resumed. Lager- crantz Group’s long-term efforts to create growth, profitability and development in the Group based on these strategies have continued. The most important strategies for the immediate future are a broadening of operations in new technology areas, continued work on decentralisation and management by objectives, higher value added and more acquisitions.

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Market

Lagercrantz Group is a technology group in the areas of electronics, electrics, communication and adjacent areas. Customers are mainly industrial companies in northern Europe. Lagercrantz Group has the largest part of its sales in Denmark and Sweden. The largest end customer segments are power generation, electricity distribution and electronics.

Lagercrantz Group is a technology group active in northern Europe. The largest markets are Sweden and Denmark. Lager- crantz Group works exclusively with sales to other companies, so-called business-to-business. Customers are mostly industrial companies. As the service sector in the Nordic Region and northern Europe grows ever larger, Lagercrantz Group’s sales to the sector have increased.

Lagercrantz Group is made up of some 20 subsidiaries that work with a clear niche focus, which means focus on a limited market, where the individual company can achieve a leading market position.

End customers for Lagercrantz Group’s products are found primarily in electrical power generation and distribution, electronics, construction, IT, transportation and telecommunication.

DRIVING FORCES

The major driving forces affecting Lagercrantz Group’s customers, and hence the demand for Lagercrantz Group’s products, is the constantly growing demand for energy, the ongoing globalisation of trade, the increasing flows of information and the growth of new markets, especially in Asia. These driving forces have been affected by the dramatic decline in industrial output during 2009, but even so, investments in infrastructure to meet the global demand for electricity are in a phase of long-term growth, primarily tied to the economic development in China, India and other parts of Asia. Energy distributors around the world need to build new grids and expand already existing ones in order to increase capacity.

Regulations and the economic situation speak for expansion of ever more efficient energy production with minimal environmental impact.

Growing world trade and global competition make for increased productivity in manufacturing industry, so focus has been directed at such areas as purchasing functions and line processes.

The increasing volumes of information in stationary and wireless networks, is impelling the expansion of capacity and development of new technology.

The emergence of new, large markets in Asia has led to growing expansion investments to meet the large demand thus created.

TYPES OF BUSINESS IN LAGERCRANTZ GROUP Trading in different forms constitutes the largest part of the Group’s sales, or just below 55 percent (59). Large manufacturers often choose to act on their own with direct sales to end users on a few key markets, while they seek a strong local partner on other markets. For smaller manufacturing companies, partnerships with local sales companies are often the only way to reach out to their customers.

The trading companies in Lagercrantz Group step into the role of being the ideal partner with strong ties to their customers as well as their suppliers. The location in the supply chain is motivated by the fact that Lagercrantz Group can offer technical and business knowledge, problem-solving, localisa- tion, combinations and systems, as well as training and service.

The technology trading company is the local link that makes world-leading technology accessible to a larger market. For manufacturers the technology trading company ensures qualified counselling, service and after-market activities on the local market.

Lagercrantz Group operates mainly on well defined markets.

This is an important part of the overall strategy of Lagercrantz Group, enabling its companies to operate on the strength of in- depth knowledge about the market and long-term customer relationships.

The trading companies are represented in divisions Electro- nics and Communications in particular. Trading comprises hardware (e.g. electronic components, network products, IT hardware) as well as software (e.g. CAD software) for customers in several market areas and includes sales of every- thing from individual components to various sub-systems for integration in the products manufactured by the customers.

Sales of proprietary products are an increasingly salient type of business in Lagercrantz Group. This means that the subsidiary develops, markets and sells products and offer after- market services based on their own products under their own brand name. Manufacturing of the products takes place in- house or with the aid of partners. These businesses in Lager- crantz Group operate in well defined technology niche, and often with a clear export focus. Sales outside the home market are through the company’s own resources or with the aid of partners, such as, for example, local distributors. Approxi- mately 20 percent (17) of consolidated sales in the form of this

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type of selling, which is found in division Mechatronics (electrical connection systems), Electronics (embedded electronics, such as, for instance, PC solutions and proprietary routers) and Communications (communication solutions for the health care industry). The ambition is to increase selectively the element of businesses with proprietary products in the Group. Experience gained from niched proprietary products is that the margins are higher and that the competitive landscape is different as a consequence of a unique product offer.

Niche production makes up about 12 percent (14) of consolidated revenue and means that the companies manufacture special solutions for account of the customer. This type of selling is done mostly in division Mechatronics in conjunction with production of cable harnesses for use in, for example, wind power stations or static frequency changers.

Approximately 8 percent (5) of the Group’s revenue is derived from systems integration where the companies in Lagercrantz Group undertake to deliver a complete solution, often with after-market service. This type of sales is on the increase and is common in division Communications in particular (integrated security systems, CCTV infrastructure and video conferencing solutions).

THE SUPPLY CHAIN

Lagercrantz Group works with value-adding technology trade.

That is why it is important for the companies in the Group to make the value-creation clearly visible to the customer. One aspect hereof is to work as close to the end customer as possible. Today just over 40 percent (39) of consolidated sales go directly to end customers. Approximately 30 percent (29) of sales go via selling partners and resellers to end customers.

Examples of such partners are installation companies, distributors and wholesalers. About 15 percent (17) of consolidated sales go to contract manufacturers. Another important customer group is systems integrators, who account for approximately 13 percent (12) of the Group’s sales.

CHANGING PURCHASING PATTERNS

Important trends among Lagercrantz Group’s customers that affect conditions for the Group are shorter lead times (time-to- market), outsourcing of certain functions and moving out production. The first two of these trends can be said to constitute positive factors, while moving out constitutes a threat to Lager- crantz Group’s local sales.

Shorter time-to-market and outsourcing mean that the customers to a greater extent need to work with partners for a part of the work previously done internally. This opens opportunities for a strong technology trade company in the initial development phase as well as later in a product’s life cycle. For the customer this means greater security since the customer can buy well-tested solutions where focus can be placed on adaptation to the customer’s specific needs. The customer can free up

resources for marketing work and the entire supply chain is rendered more efficient.

In general, the purchasing pattern is marked by less long- term planning and growing demand for quick deliveries.

Lagercrantz Group’s business model, with key words such as proximity and flexibility, has proved to be successful in this environment of change and many customer relationships have thus been strengthened.

COMPETITION

Lagercrantz Group is active on niche markets and competition is different between them depending on products, volumes and geographic scope. In general, it can be said that in technology trade there are often many alternative products and players on each market. Small local suppliers who represent foreign manufacturers dominate on the Nordic markets. They possess a high level of knowledge about their products that may be on a par with the expertise in Lagercrantz Group. Several of the global manufacturers have their own sales organisations in the Nordic Region and can offer good service and technical competence.

There are also a number of major wholesale companies with a broad product line and who distribute large volumes. Among these, specialist knowledge about individual products is not as pronounced.

In business types proprietary products and systems integration the competitive landscape is different. The element of totally unique and customised products, or tailor-made solutions for a specific customer’s needs, have the effect that there are only a small number of competitors who are able to offer comparable solutions.

CUSTOMERS AND SUPPLIERS

Lagercrantz Group’s sales are spread over a large number of markets and many customers. This means that the dependence on individual customers is relatively limited. No individual customer accounts for more than about 5 percent of consolidated sales. Even for individual subsidiaries, the dependency on the largest customers is limited. On average, a subsidiary’s 10 largest customers account for about two thirds of that company’s sales.

A corresponding situation prevails with respect to suppliers, where Lagercrantz Group’s subsidiaries operate in a number of different technology niches. Very few supplier relationships comprise more than one company in the Group. Lagercrantz Group tries to work close to its suppliers and to develop active co-operation.

CURRENCIES

A majority of the Group’s sales and purchases are made in currencies other than Swedish kronor. The largest transaction currency is euro, which accounts for about 35 percent of sales and 50 percent of purchases. The Danish krona, the exchange

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rate of which is linked to euro, accounts for about 20 percent of sales and 10 percent of purchases. The American dollar is the third largest currency with about 5 percent of sales and just over 15 percent of purchases. Currencies other than Swedish kronor account for more than 70 percent of sales and 80 percent of purchases, respectively.

Lagercrantz continually analyses its risk exposure in foreign currency. Based on sales volume and volatility experienced during the 2009/10 financial year, the Group’s revenue was affected most by euro and U.S. Dollars, followed by Danish kronor measured against the Swedish krona. The biggest effect on gross profit, where weight is also given to the purchasing volume in foreign currency, came from the exchange rate for Norwegian kroner, followed by the U.S. Dollar. This is due to the big difference in purchasing versus sales volume in these currencies.

Major changes in recent years in the exchange rates, have prompted more and more customers to choose to work with the euro as transaction currency. Lagercrantz works actively in trying to minimise the risk that emanates from exchange rate fluctuations by pricing in purchasing currency and by using currency clauses. Refer also to note 40 “Risk management.”

Revenue by market segment

Power generation and electricity distribution 17% (19)

Electronics 19% (16) Construction 10% (11) Telecommunication 7% (10) Security 8% (9)

IT 12% (9) Transportation 6% (8)

Other (including Public sector) 21% (18)

Numbers in brackets refer to the preceding year.

Revenue by market channel

Direct to end customer 41% (39) Distributors/resellers 30% (29) Contract manufacturers 15% (17) Systems integrators 13% (12) Other 1% (3)

Revenue by business type

Trade, hardware 40% (45) Proprietary products 20% (17) Trade, software 15% (14) Niche production 12% (14) Systems integration 8% (5) Service 4% (4) Other 1% (1)

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Division

Electronics

Division Electronics offers solutions based on special components from world-leading manufacturers as well as proprietary products.

Customers are typically manufacturing companies in the fields of marine industry, medical technology, automation, tele-

communication and other industry with stringent demands. The division operates in Denmark, Norway, Sweden, Germany, Poland and China.

Most companies in division Electronics act as value-adding distributors. The customer is offered products and solutions from world-leading manufacturers with a high degree of customer adaptation, support and services. For the suppliers our businesses serve as a sales organisation that builds demand by exercising good businessmanship and a high level of technical expertise. In order to further enhance the value-adding feature, the offer is complemented with products developed in- house. This is especially true in the marine business. Many of the customers pose stringent requirements, particularly when there are subject certification and regulatory control. Examples are marine navigation equipment, sensors for gas measurement and medical-technical equipment in the health care area.

MARKET

Division Electronics mainly addresses OEM customers in electronics in the Nordic Region, Germany and Poland.

Electronics is active in growth areas and seeks leading positions.

In communication Electronics is a leader in areas such as distribution of GSM modules. In embedded electronics the division commands advanced positions in a number of areas, including marine PCs.

2009/10 OPERATIONS

Revenue for division Electronics fell during the year to MSEK 552 (727). The drop in sales is a consequence of the state of the economy, restructuring of operations with low profitability and also of moving the electronics business in Finland to the Finnish trading business in division Mecha- tronics. Sales volumes stabilised during the latter part of the year for most businesses in the division. Since autumn of 2009, increased activity has been seen in some of the division’s customer segments. This has gradually strengthened demand.

Business operations have been adapted which has meant higher margins during the year. Measures taken have included a concentration of the businesses to the Nordic Region,

Germany and Poland, product line development with focus on gross margins, cost-cutting measures and organisational contraction.

The operating profit declined during the year to MSEK 17 (24). The operating margin was 3.1 percent (3.3).

STRATEGY AND BUSINESS DEVELOPMENT Development work in the division is focused on building strong market positions in growth niches and to increase the value-added component in sales. The gross margin continued to grow during the year thanks to product line improvement and competence enhancement measures taken. The proportion of project sales of semi-finished articles and modules for small and medium-sized production series is on the rise at the expense of standard components for large production series.

The element of services and proprietary products is also growing.

PROSPECTS

The strategies and the business model, with distinct decentralisation and management by objective, have led to clear improvements in the business. In the long term division Electronics will continue to develop along the path staked out.

Further stabilisation of the market situation is expected to be seen during the coming year Division Electronics will follow the development closely and adapt its operations to the situation at hand.

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Trading, 78% (70)

Proprietary products, 19% (17) Systems integration, 2% (4) Special production, 1% (3) Other, 0% (6)

Key figures

Division Electronics 2009/10 2008/09 2007/08

Net revenue, MSEK 552 727 778

Operating result, MSEK 17 24 38

Operating margin, % 3.1 3.3 4.9

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Unitronic contributes to well-functioning emergency service

The ability of emergency services to save lives depends to a great degree on how well alarms and information can be brought to the attention of emergency response personnel at a stage when the outcome of the emergency still can be influenced. Lagercrantz Group’s subsidiary

Unitronic has developed a system with personal alarm terminals that enhances that ability.

When the alarm is sounded the alarm response centre must understand the emergency and call out the right units. Every person gets an alarm directly to their personal alarm receiver. An audiovisual alarm provides initial information about the emergency site’s location and needs. The person alarmed can in a secure manner acknowledge receipt of the alarm and provide immediate information on availability. This kind of two-way communication with individual persons and entire groups of personnel makes it possible for the emergency response coordinator to locate available resources quickly and then prioritise and plan the emergency response

accordingly.

This two-way communication operates via GSM networks and the internet. Communication is constantly on-line and cannot be intercepted and is not subject to interference from other traffic. This gives unsurpassed reliability with response times of less than a second. A nationwide alarm will reach everybody within five seconds.

Thanks to full-coverage information, it is possible for the emergency response coordinator to determine which units should be directed to the scene, which route they should take and when they can be expected to show up at the scene of the emergency.

Reserves can be held available and be kept informed for as long as deemed necessary. Specialists and equipment can be summoned as needed and the emergency response can be adapted to the course of events.

The technology that makes this possible has been developed by Lagercrantz Group’s Unitronic subsidiary. By combining reliable communications technology, such as GPRS and internet, with a newly developed protocol for information transmission, Unitronic has solved several difficult problems at one fell swoop: reliability, speed, protection against interception and interference, as well as cost efficiency. Unitronic has combined hardware and its software, also assuming responsibility for the carrier wave and transmission over already established GSM networks.

For more information:

www.selectric.de/cms/startseite www.unitronic.de

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Electronics’ business model – value adding distribution

What is value-adding distribution? Division Electronics’ subsidiaries under the name of Acte in the Nordic Region and Poland, and Unitronic in Germany, operate as value- adding distributors. The business model is described in simplified form in the above illustration. The companies operate focused with a small number of suppliers’ products in niches, seek out and operate close to customers in the product development phase, customise and offer many different types of added value, such as support and service. Deliveries are effected to the customer or to appointed contract manufacturer.

Several other distributors in the market are global players with a very broad product line, the focus of whom will be to maintain inventory of and to provide logistics for more standard-type components.

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Division

Mechatronics

Mechatronics offers systems and products to customers in manufacturing industry, power generation and electricity distribution with high requirements for quality, proximity and support.

Mechatronics conducts business in Denmark, Finland, Sweden, Germany and China.

The offer of division Mechatronics comprises production of customised cable harnesses and adjacent products and services, production and marketing of electrical connection systems, and dealing in mechanical and electro-mechanical products and electronic products. The products manufactured by the division’s companies are characterised by high quality, reliability and extended user life. Trade in Mechatronics comprises products from leading manufacturers. The main focus for the companies in the division is on proximity to its customers in order to be able to offer customer-specific products, provide the best possible technical advice and to offer short delivery times and high availability.

MARKET

Division Mechatronics’ offer is aimed at two main customer categories. Dominating is Nordic manufacturing industry, especially in power generation, primarily wind power, trains and railway, heavy vehicles and machinery, and in telecommunication. The second category is electrical grid owners and electric power distribution. The division holds a market leader position within electrical connection systems on the utility market in the Nordic countries and is an important supplier of cable for several large manufacturers.

2009/10 OPERATIONS

Net revenue declined to MSEK 511 (628).

The decrease is explained mainly by the state of the economy. During the last quarter of the fiscal year an increase in demand from the division’s customers was sensed, both from industry customers, as well as from customers in power generation and electricity distribution.

Efforts to reduce costs and streamline operations were ongoing during the entire year. Steps were taken to shrink the headcount as well as to reduce working capital and to integrate the Finnish electronics business.

Operating profit amounted to MSEK 30 (49), equivalent to a margin of 5.9 percent (7.8).

STRATEGIES AND BUSINESS DEVELOPMENT During the year Mechatronics worked on strengthening, im- proving and streamlining the production apparatus. The division shall provide proximity, flexibility and customer adaptation. Mechatronics shall assume responsibility for quality, control and material optimisation and overall improvement of processes for its customers.

Mechatronics’ offer has been complemented with a view to developing the business in the direction of larger undertakings in the prioritised niches. With more complex deliveries consist- ing of several products assembled in accordance with the requirements of the customer, full justice will be done to Mechatronics’ technical expertise and wide range of products and the value added can be further increased.

Several companies in the division have managed to broaden their customer base in recent years. This has been accomplished on existing geographic markets as well as on new ones. The establishment by subsidiary Elpress in China has been a success in this regard.

In some areas low-cost production initiatives were taken outside the Nordic countries. A partner network has been created for manufacturing some of the division’s products.

PROSPECTS

The global climate issue and requirements for safe and secure electricity distribution to the various functions in society drives the demand. Mechatronics and its customers are active in market segments that are likely to be interesting investment targets, for example, wind power production, energy efficiency and effective transportation.

Norwesco AB was acquired after the end of the financial year. Norwesco develops, manufactures and markets a niche

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line of electro-mechanical products for the electronics and construction industries.

SwedWire AB was also acquired after the end of the financial year. The company develops, manufactures and markets a niche range of steel products.

Both Norwesco and SwedWire are examples of the kind of product companies that Lagercrantz wants increase the share of.

Niche production, 43% (39) Proprietary products, 35% (30) Trading, 21% (27)

Service, 1% (4)

Key figures

Division Mechatronics 2009/10 2008/09 2007/08

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ACTE Supply’s personal engagement develops business

ACTE Supply develops business by focusing on the best complete solution for the customer – the combination of design, development and availability of products and systems. The business model is based on a strong personal engagement.

ACTE Supply is a technical distributor with its focus on contributing to finding solutions for improved performance and development of business, primarily in close co-operation with the customer, but also together with sub-suppliers and producers. Icotek is a producer of cable entry systems and secure electromagnetic compatibility – EMC protection. Demand is strong for Icotek’s products from a wide range of manufacturers, but there is often a limitation in adapting the size of the frame to a standard.

ACTE Supply’s technical experts, together with Icotek’s engineers, have analysed customers’ needs and an efficient solution has been devised. A special flanged cable entry that fits most electrical boxes used in the market has been developed. This solution has generated new business opportunities for Icotek’s standard program to those customers who previously have been limited to con- ventional cable entries with standard measurements. Icotek’s cable entries offer greater flexibility and ease of installation and also facilitate retrofitting and maintenance since the entries can be accessed through a slot.

The solution with the new adapter flange offers increased business opportunities for Icotek through ACTE Supply, at the same time as customers gain access to high-quality cost-efficient solutions.

ACTE Supply offers high technical competence and quality products from leading manufacturers of electro-mechanical components, connectors, cable material and passive components. ACTE Supply’s technical sales force has the full picture of what is being offered in the market and is in a position to guide the customer in the direction of products that are more available in the market, are on hand for immediate delivery and are offered at the right price.

Acte Supply at www.actesupply.se

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Division

Communications

Division Communications offers products,

systems and services in the areas of digital image transmission/technical security, access products and software. The division’s companies are active in Sweden, Norway, Denmark and Finland.

The division’s companies offer solutions to the market based on being a value-creating distributor or a systems integrator. A growing portion of the division’s revenue is comprised of different forms of services.

MARKET

The division is a leader in several areas, including video conferencing solutions in Sweden and distribution of CAD software in Denmark and Norway. The division also has a strong position in camera-based surveillance systems, health care security and other products for technical security, and in access products for telecom and broadband networks and data security.

Regardless of which business they are in, Lagercrantz has chosen a clear niche strategy for its companies, either with an aim at a certain type of customer, or in the form of product segmenting. In all cases the businesses are local, with deep customer and market knowledge.

2009/10 OPERATIONS

Net revenue amounted to MSEK 657 (783). The decrease is a consequence of the recession and overall weaker demand. A more stable development was seen towards the end of the year, when demand was strong in the area of digital image

transmission/technical security, especially from the public sector. Lower sales were recorded in the software area compared to the year before. A stabilisation of the business climate was noted during the last quarter of the year especially in the area’s main business, which is marketing of CAD software. Demand in the Access area was low during the year.

Measures to adapt the businesses were taken during the year.

In Norway the Access business was phased out during the year.

The operating result amounted to MSEK 34 (52) and the operating margin was 5.2 percent (6.6).

STRATEGY AND BUSINESS DEVELOPMENT

In the access area the adaptation of the product line and the offer continued in the quest to find more distinct niches within which to operate.

In technical security the focus on areas where the division already today has a strong position was successful, resulting in a number of new deals. Efforts were also expended on developing the after-market offer. This change has been a positive one and the business has been able to strengthen its market position, especially vis à vis the retail trade and objects with particularly stringent security requirements. The development was also positive for the export business in telecom and security solutions based on DECT telephony for health care and correc- tional institutions. At present the company is developing the next generation hand-held unit.

The division has broadened its offer in CAD solutions to include consultancy.

Growing investments in IT/telecom infrastructure are a strong driving force for the division’s development. Video conferencing is becoming an increasingly appealing alternative to travel as companies are scaling back their travel budgets and show concern for the environment. Another driving force is the trend towards a more closely monitored society in the form of security and camera systems that are relatively unaffected by the state of the market.

In the access area the division focuses on niche products for telecom operators needed to build infrastructure. The area also includes niche IT products.

PROSPECTS

There are possibilities in several areas to strengthen the role in the supply chain, in part through in-house-developed concepts/solutions and in part through a growing proportion of sales of services. This work, together with acquisitions, will be the most important factors for future growth in the division. In addition hereto, a broadening of the product line and increased

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sales of proprietary products are other ways for the division to strengthen its market position.

Trading, 60% (70)

Systems integration, 20% (20) Services, 10% (8)

Proprietary products, 10% (2)

Key figures Division

Communications 2009/10 2008/09 2007/08

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Nordic Alarm meets greater security requirements with new technology Physical protection at nuclear facilities has become an important duty for society, where protection of the public is at the forefront. The Swedish security company Nordic Alarm is at the cutting edge of qualified high-security systems.

Clab is the Swedish intermediate depository for spent nuclear fuel. The nuclear fuel is stored here in two storage areas 30 metres down in the rock. A project is in progress at Clab since 2006 to strengthen the physical protection of the facility.

Basic for the physical protection of the facility is that competent protection personnel is present 24/7. The staff performs its duties from a monitoring station, which is well protected against intrusion and where there is a wealth of sophisticated monitoring equipment. Here are just a few examples:

Two independent systems to detect an attack and sound an alarm;

A TV surveillance system with complete coverage for controlling and following up on alarms and any attacks.

The next basic component of the system is that Clab in its entirety is surrounded by a guarded area delimited by two high and stable fences with barbed wire atop. In front of this enclosure are also barriers to prevent motor vehicles to penetrate the guarded area.

The third is shell protection, i.e. building walls and roofs. All doors and windows are closed at all times, are locked and alarms are set. All other openings are protected by heavy grating. Simply put: It has to be difficult and take a long time for any unauthorised person to get into Clab and it is absolutely impossible to do so without being discovered.

Together with other suppliers, it is Lagercrantz Group’s subsidiary Nordic Alarm that is building area protection and shell protection at Clab. Nordic Alarm supplies a program-controlled integrated security system with great flexibility and high operational reliability. The assignment includes:

Different systems for detecting intrusion and alarms

Surveillance cameras

Central units for alarm and for taping, analysis and presentation of TV images

Entry control systems

A network which is difficult to manipulate and can withstand atmospheric disturbances.

The central intermediate depository for spent nuclear fuel – Clab – is a concern for all of Sweden and Nordic Alarm has become an important part of its physical protection.

Nordic Alarm at www.nordicalarm.se

SKB and Clab at www.skb.se