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Interim report 2022, January - March
First quarter
Net sales for the first quarter reached SEK 517 m (455), corresponding to an increase of 14%. Currency translations had a positive effect of SEK 22 m on net sales
Order intake was SEK 857 m (565), corresponding to an increase of 52%
Operating profit reached SEK 139 m (114), equal to a 26.9% (25.0) operating margin. Adjusted operating profit reached SEK 112 m, equal to a 21.7% adjusted operating margin
Profit after taxes totalled SEK 112 m (94) and earnings per share was SEK 2.41 (1.93). Adjusted profit after taxes totalled SEK 86 m and adjusted earnings per share was SEK 1.84
Cash flow from operating activities amounted to SEK 80 m (132)
Last twelve months
Net sales for the last twelve months reached SEK 2,034 m (1,560), corresponding to a 30% increase. Currency translations had a negative effect of SEK 25 m on net sales
Order intake was SEK 2,830 m (1,611), corresponding to an increase of 76%
Operating profit reached SEK 471 m (335), equal to a 23.1% (21.4) operating margin. Adjusted operating profit reached SEK 444 m, equal to a 21.8% adjusted operating margin
Profit after taxes totalled SEK 381 m (266) and earnings per share was SEK 8.09 (5.70). Adjusted profit after taxes totalled SEK 354 m and adjusted earnings per share was SEK 7.52
Cash flow from operating activities amounted to SEK 456 m (447)
Subsequent events
Acquisition of the remaining 30% of the shares in Procentec B.V.
Comment from the CEO
Strong demand but continued component shortage
The strong demand and order intake from recent quarters continued during the first quarter of 2022. Order intake increased by 52% and amounted to the new record level SEK 857 m (565). However, the global shortage of electronic components continues to be challenging for us as for many other companies. Despite this challenge, our efforts have resulted in increased invoicing for the first quarter, which increased sales by 14% compared to the corresponding quarter 2021 and amounted to SEK 517 m (455).
During the quarter, we have been affected by, and further notified of, increased costs for electronic components. We have also increased our component purchases via the “spot market” to maintain delivery capacity. With price increases to customers and increased internal efficiency, we succeed in reaching a gross margin of 61.8% (64.0%) during the quarter, which is a decrease compared to Q1, 2021 but an improvement compared with the fourth quarter 2021. Given the challenging sourcing situation, we are satisfied that we continue to achieve a relatively good gross margin.
The strong market situation in combination with longer lead times and challenges in component supply means that customers continue to place orders for delivery further out in the future than normal. We continue to build order book that now amounts to SEK 1,194 m, strengthened by approximately SEK 250 m from stocking orders in the first quarter.
Good performance in all markets
Order intake continues to be strong in all markets and we see that customers tackle the uncertainty in the global supply chain, in a similar way. They continue to place orders to increase their safety stock, which contributes to a 30% increase in order intake on all markets – this is in addition to normal demand.
Europe, our largest market, continues to develop well and customers continue to show a high willingness to invest. The increase in sales is greatest in Asia, and especially in Japan, where we see very good demand from our large customers delivering to the automotive and electronics industries.
We can also see that our offering for building automation under the Intesis brand, which primarily works towards air conditioning, shows a solid growth of 32% and thus new record levels.
Acquisition of the remaining 30% of the shares in Procentec
After the end of the quarter, we reached an agreement to acquire the remaining 30% in Procentec. Since we acquired 70% of the company during the fourth quarter of 2020, the business has developed very well. As owners of the entire company, we see further synergies, especially in expanding in North America and Asia via our sales organization. The acquisition gives us a positive non-recurring effect on our operating profit of SEK 27 m from revaluation of the option liability related to Procentec.
Profit and cash flow
We deliver an operating profit of SEK 139 m, including above mentioned non-recurring effect of SEK 27 m. Adjusted operating profit amounts to SEK 112 m (114), which is in line with the corresponding quarter in 2021. However, the conditions are different compared to last year — the market is stronger, and we see major cost increases on components. We have increased our investments in sales and marketing after the pandemic when activity was lower. This also means that we have 17% higher operating costs compared to the corresponding period last year. Despite this, we manage to reach an adjusted operating margin of 21.7%, which exceeds our long-term target of a 20% operating margin.
Cash flow from operations amounted to SEK 80 m (130), after an increase in working capital of SEK 50 m.
Positive HMS sustainability efforts
We have recently published the HMS Annual Report 2021 where an important part is our Sustainability Report. We have continued to work intensively to map and reduce our carbon dioxide emissions, with the ambition of becoming CO2 net positive by 2025. For 2021, we achieved a reduction of -21% for our own emissions in relation to our sales. In Scopes 1 and 2, emission totals were relatively low, 285 tons, for 2021, something we are working on to further reduce. But even more important from a global perspective is that our products have helped our customers to save over 1 million tons of CO2 in 2021, through reduced energy consumption and reduced service trips.
The war in Ukraine
Russia and Belarus accounted for less than half a percent of our sales in 2021. All business has been made through distributors and we do not have our own staff in these countries. We have stopped and cancelled all existing orders to Russia and Belarus and will not take up any business in these markets until sanctions against Russia have ended. We support the Ukrainian people through donations to the Red Cross and we work actively at our units in Sweden and Romania to offer help and work to Ukrainian refugees.
Positive future outlook – despite an uncertain macro situation
We foresee continued challenges when it comes to supply of electronics components for a few more quarters, but we believe in a gradual improvement in the second half of the year. Lockdowns in China due to the corona virus and major political uncertainties make the market difficult to assess in the short term. At present, we see continued investments in increased automation and digitalization, partly driven by companies in Europe and North America who are moving their production closer to their main markets. We also see that high energy prices are accelerating electrification, the conversion to renewable energy and energy storage, areas where we are gaining more and more customers.
In the long term, we continue to believe that the market for Industrial ICT (Information & Communication Technology) will be an interesting area, both in terms of organic growth and acquisitions.
Halmstad April 14, 2022
Staffan Dahlström
Chief Executive Officer
Further information can be obtained from:
Staffan Dahlström, CEO, +46 (0) 35 17 2901
Joakim Nideborn, CFO, +46 (0) 35 710 6983
This information is such that HMS Networks AB (publ) is obliged to make public pursuant to the EU Market Abuse Regulation and the Securities Markets Act. The information was submitted for publication, through the contact persons set out above, at 07.30 CET on April 14, 2022.
HMS Networks AB (publ) is a market-leading provider of solutions in industrial information and communication technology (Industrial ICT). HMS develops and manufactures products under the Anybus®, Ixxat®, Ewon® and Intesis® brands. Development takes place at the headquarter in Halmstad and also in Ravensburg, Nivelles, Bilbao, Igualada, Wetzlar, Buchen and Delft. Local sales and support are handled by branch offices in Germany, USA, Japan, China, Singapore, Italy, France, Spain, the Netherlands, India, UK, Sweden, South Korea and UAE, as well as through a worldwide network of distributors and partners. HMS employs about 750 people and reported sales of SEK 1,972 million in 2021. HMS is listed on the NASDAQ OMX in Stockholm, category Large Cap, Information Technology.
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