ANNUAL REPORT 2010
ARJOHUNTLEIGH - SWEDEN
STABILISING THE BUSINESS AND REGAINING GROWTH
ArjoHuntleigh was established in 2007 through the merger of ARJO and Huntleigh Technology, thereby creating a world-leading healthcare player within mobility-related equipment. With an annual turnover of EUR 750 million and more than 4,400 employees serving the needs of hospitals, long-term care and home care in 100 countries, the company is number 1 within their field.
Historically, ArjoHuntleigh has achieved above market rate organic growth of 4-7% p.a. However, the global financial crisis combined with inward management focus on postmerger cost optimisation as well as increased sophistication of customer buying behaviour have resulted in declining growth and eroding profits. Fundamentally, the belief was that ArjoHuntleigh operates in an attractive industry due to ageing populations around the world, a shortage of care personnel in most markets and new growth markets such as the BRIC countries. Negative growth in 2008-2009 was thus an entirely new and unthinkable situation for the organisation. In late 2009, a new CEO, Alex Myers, was brought onboard with the task of stabilising the business and restoring growth to fulfil the pre-merger ambitions. Establishing a new direction With the new CEO, ArjoHuntleigh decided to launch a combination of a short-term stabilisation strategy focused on efficiencies (“Fit 4 Growth”) and a new growth strategy (“Go 4 Growth”). The goal of the strategy was to identify ways to deliver the target of 5% annual growth while lifting EBITA from 15% to 19%. Furthermore, the ambition was to design the strategy process to give the organisation a needed energy boost and set clear direction in order to regain momentum. ArjoHuntleigh still operates in an attractive industry, although increasing Asian competition and larger customers will continue to put pressure on prices in the future. Thus, focusing on low costs will remain a key requirement for winning in this industry. Future growth, however, will require ArjoHuntleigh to improve commercial skills as well as the quality and rate of innovation and to execute an effective go-to-market strategy and achieve a stronger market position in the US and Asia. In order to strengthen ArjoHuntleigh’s future position and regain growth, top management has decided on four overarching priorities under the “Go 4 Growth” umbrella: improve commercial focus and execution, customer orientation and
innovation capability, achieve a decreased cost level and create a global market footprint. For each of these priorities, a number of specific initiatives were charted; all incorporated in management business plans and budgets. Ensuring future growth Although market conditions have remained very difficult in 2010, ArjoHuntleigh has managed to achieve a significant boost in profitability, thereby meeting their long-term EBITA target ahead of plan. Thus, focus has turned to regaining growth. At the moment, ArjoHuntleigh is working on executing a number of key initiatives: 1. Improving front-end commercial excellence capabilities and execution in key markets 2. Developing stronger innovation management and a pipeline for key product areas 3. Accelerating growth in Asia and the US Despite the new strategy and implementation of growthaccelerating initiatives, there is still some way to go before ArjoHuntleigh regains the targeted growth level of 5% p.a., but the decline has been halted, and a number of key markets are beginning to deliver positive results. A strong focus on growth and product innovation is therefore needed in 2011 to reach the targeted growth level.
ABOUT CEO: Alex Myers Market leader within the healthcare and life sciences industry Established in 1957 Selling medical equipment and integrated solutions for patient hand ling and hygiene, medical beds and therapeutic surfaces, wound healing, DVT prevention, disinfection and diagnostics. Geographically, ArjoHuntleigh has a strong base in Northern Europe, North America and Australia with an emerging position in Asia.