Interim report 2023, January – March
First quarter
- Net sales for the first quarter reached SEK 773 m (517), corresponding to an increase of 49%. Currency translations had a positive effect of SEK 41 m on net sales
- Order intake was SEK 682 m (857), corresponding to a decrease of 20%
- Operating profit reached SEK 211 m (139, adjusted operating profit previous year 112), equal to a 27.4% (26.9, adjusted 21.7) operating margin
- Profit after tax totalled SEK 172 m (112, adjusted profit after tax previous year 86). Earnings per share was SEK 3.70 (2.41, adjusted 1.84)
- Cash flow from operating activities amounted to SEK 155 m (80)
- Acquisition of additional 20% of the shares in Owasys Advanced Wireless Devices S.L.
Last twelve months
- Net sales for the last twelve months reached SEK 2,762 m (2,034), corresponding to a 36% increase. Currency translations had a positive effect of SEK 177 m on net sales
- Order intake was SEK 2,889 m (2,830), corresponding to an increase of 2%
- Operating profit reached SEK 725 m (471, adjusted operating profit previous year 444), equal to a 26.2% (23.1, adjusted 21.8) operating margin
- Profit after tax totalled SEK 568 m (381, adjusted profit after tax previous year 354). Earnings per share was SEK 12.17 (8.09, adjusted 7.52)
- Cash flow from operating activities amounted to SEK 506 m (456)
CEO comments
STRONG START TO THE YEAR WITH NEW RECORD SALES
During the quarter, we have seen an improved delivery situation for critical components and semiconductors which enabled us to increase our delivery capacity. With better access to components and our increased production capacity, we once again succeeded in breaking a new sales record in the quarter with a turnover of SEK 773 million (517). This corresponds to an organic growth of 40% compared to the corresponding period last year.
The improved availability of components also means that our customers no longer see the same need to build up their buffer stocks. The quarter began with a strong order intake with several long-term orders, to be followed by a slightly weaker development in line with some customers starting to reduce their buffer stocks. This means, as expected, a slowdown in new orders compared to last year’s unusually strong first quarter that contained early orders to cater for long delivery lead times. Overall, we assess that the reported order intake, which amounts to SEK 682 million (857), is in on par with our customers’ underlying demand.
Overall, the quarter’s somewhat slower order intake and strong invoicing gives a ”book-to-bill” of 0.88, which we think is a healthy pace to reduce our historically large order book.
SLIGHT SLOWDOWN IN EUROPE AND ASIA – STABILIZATION IN THE US
During the first quarter of 2022, we had a large amount of early orders, and in that comparison, we see a lower order intake on all markets. In Europe, we see a cautious slowdown in industrial automation generally driven by lower demand from the automotive industry and warehouse logistics, but a strong development in building automation.
In Asia, we are starting to see inventory adjustments at some of our major customers in Japan and China.
In the US, where we saw a slight slowdown in late 2022, we now see demand stabilizing with growth in both order intake and sales.
NEW RECORD RESULT AND GROSS MARGIN
The work with price adjustments in our product portfolio together with investments in our production systems continues to have a positive impact on our profitability. In the quarter, our gross margin amounted to 64.8% (61.8) driven by a combination of a favorable currency situation, increasing production volumes and price adjustments towards customers.
Our operating expenses increased to SEK 290 million (207), corresponding to an organic increase of 33%. The large OPEX increase is partly driven by high wage inflation, partly by a continued expansion of our sales and marketing organization while we are also in an intensive phase of changing our ERP (Enterprise Resource Planning) system.
Overall, we reached a new record result for the quarter with an operating profit of SEK 211 million (112, adjusted operating profit) corresponding to an operating margin of 27.4% (21.7).
The quarter’s cash flow amounted to SEK 155 million (80), which is almost double compared to the previous year. With that, our cash exceeds our interest-bearing net debt, which makes us well equipped for continued expansion.
PROCENTEC INTEGRATED INTO HMS
In 2022, we acquired the remaining 30% of the shares in Procentec. During the past year, we have worked on integrating Procentec into the HMS organization including changing the brand to Anybus. This re-branding was recently launched at the Hannover Fair and charges our well-established Anybus brand even further.
MARKETING AFTER THE PANDEMIC
Our marketing activities were largely digital even before Covid, but with the pandemic it really took a leap forward. Nowadays, webinars, video, web, search engines and social media are our main channels for finding new customers and have proven to be excellent tools for generating high quality leads. Despite that, the personal meeting is still important to us and our customers as many of our business relationships span over a long time. We therefore prioritize being present at fairs, events and meetings in our most important markets.
OUTLOOK
With a continued strong order book of SEK 1.3 billion, we are in a continued good position for growth in 2023. We expect to gradually reduce our order book in the coming quarters in connection with parts of the customers’ pre-purchase orders being normalized as an effect of improved component availability and shorter lead times.
Customers’ willingness to invest in digitization, productivity improvements and sustainability is high and the underlying demand is still considered to be good, even if there are some concerns linked to how the industry will be affected by weaker consumer purchasing power, increasing energy costs and the complicated macro political situation.
We continue to work with a focus on long-term growth based on a balanced view of our costs. In the long term, we also 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 18, 2023
Staffan Dahlström
Chief Executive Officer
For more information, please contact:
Staffan Dahlström, CEO HMS, +46 (0)35 17 29 01
Joakim Nideborn, CFO HMS, +46 (0)35 710 69 83
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 January 26, 2023.
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, Igualada, Wetzlar, Buchen, Delft, Sibiu, Rotterdam and Bilbao. 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, Australia and UAE, as well as through a worldwide network of distributors and partners. HMS employs over 780 people and reported sales of SEK 2,506 million in 2022. HMS is listed on the NASDAQ OMX in Stockholm in the Large Cap segment and Telecommunications sector.
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