Quarterly Report • May 2, 2017
Quarterly Report
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• Hexagon completed the acquisition of MSC Software for a purchase price of 834 MUSD on a cash and debt free basis and the company will be consolidated as of 26 April
| MEUR | Q1 2017 | Q1 2016 | Δ% |
|---|---|---|---|
| Net sales | 778.1 | 724.2 | 3 1) |
| Gross earnings | 475.0 | 442.3 | 7 |
| Gross margin, % | 61.0 | 61.1 | -0.1 |
| Operating earnings (EBITDA) 2) | 251.1 | 215.3 | 17 |
| EBITDA margin, % | 32.3 | 29.7 | 2.6 |
| Operating earnings (EBIT1) 2) | 174.5 | 160.5 | 9 |
| Operating margin, % | 22.4 | 22.2 | 0.2 |
| Earnings before taxes excluding non | |||
| recurring items | 169.4 | 155.3 | 9 |
| Non-recurring items 3) | -50.8 | - | n.a. |
| Earnings before taxes | 118.6 | 155.3 | - 24 |
| Net earnings | 96.2 | 125.8 | - 24 |
| Net earnings, excl. non-recurring items | 138.9 | 125.8 | 10 |
| Earnings per share, EUR Earnings per share, excl. non-recurring |
0.26 | 0.35 | - 26 |
| items, EUR | 0.38 | 0.35 | 9 |
1) Adjusted to fixed exchange rates and a comparable group structure, i.e. organic growth.
2) For definition, see page 14.
3) Non-recurring items in 2017 related to the implementation of a cost savings programme and acquisition of MSC Software.
"It's full speed ahead for Hexagon in 2017! We're pleased with the results in Q1, reporting strong growth in our manufacturing, construction and positioning portfolios and good profit development in all divisions apart from PPM. We announced the acquisition of MSC in direct support of our smart connected factory strategy and launched a group-wide cost savings programme to further accelerate our margin expansion. Hexagon reported 3 per cent organic growth, if we exclude oil and gas related business, organic growth was 6 per cent. However, we are confident that the actions we've taken in PPM this quarter will generate future growth and improved margins.
We are well prepared to take advantage of the opportunities ahead of us. We will continue to accelerate our solutions-centric strategy through increased investments in R&D and solutions-focused sales resources. We will gradually improve growth and profitability through new applications, a richer mix and acquisitions." Ola Rollén, President and CEO, Hexagon AB
7%
Q1
SALES GROWTH
ORGANIC GROWTH
OPERATING MARGIN
22%
3%
Net sales increased to 778.1 MEUR (724.2) and organic growth amounted to 3 per cent. Organic growth was 7 per cent in EMEA, 1 per cent in Asia and -1 per cent in Americas. In EMEA, all major countries reported solid organic growth. In Western Europe, the largest contributors were Germany, France, the Nordic countries and UK. The Middle East returned to growth following a few quarters of negative development. In Asia, China reported 6 per cent organic growth and good progress in all businesses. Other countries in Asia with strong growth were Japan and Australia while South Korea had a weak quarter and declined by double digit. In Americas, North America recorded slight negative organic growth primarily due to weak demand from the mining industry as well as the oil and gas market in the US. However, South America continued to improve and returned to growth for the first time in several quarters driven by strong demand from the mining industry.
Operating earnings excluding non-recurring items (EBIT1), grew by 9 per cent to 174.5 MEUR (160.5), which corresponds to an operating margin of 22.4 per cent (22.2). The operating margin was positively impacted by organic growth and new high-margin products but negatively impacted by unfavourable business mix. Operating earnings (EBIT1) and earnings before taxes were positively impacted by exchange rate movements of 3.3 MEUR.
On 6 February 2017, Hexagon announced a group-wide cost savings programme. The programme, with focus on reducing administration costs, affects approximately 500 employees and is expected to drive cash cost savings of approximately 25 MEUR in 2017 and 44 MEUR per annum as of 2018 when fully implemented. The cash flow impact of this programme amounts to -38.3 MEUR. All of the restructuring costs have been expensed as non-recurring items in the first quarter 2017.
On 2 February 2017, Hexagon announced an agreement to acquire MSC Software (MSC), a leading provider of CAE (simulation) software. Non-cash PPA adjustments of 10.4 MEUR related to impairment of overlapping technologies and cash transaction costs of 2.1 MEUR have been expensed as nonrecurring items in the first quarter 2017.
| Net sales | Earnings | |||||
|---|---|---|---|---|---|---|
| MEUR | Q1 2017 | Q1 2016 Δ% 1) | Q1 2017 | Q1 2016 | Δ% | |
| Geospatial Enterprise Solutions | 403.0 | 369.4 | 4 | 91.0 | 75.7 | 20 |
| Industrial Enterprise Solutions | 375.1 | 354.8 | 2 | 89.2 | 89.6 | -0 |
| Net sales | 778.1 | 724.2 | 3 | |||
| Group cost and eliminations | -5.7 | -4.8 | -19 | |||
| Operating earnings (EBIT1) | 174.5 | 160.5 | 9 | |||
| Operating margin, % | 22.4 | 22.2 | 0.2 | |||
| Interest income and expenses, net | -5.1 | -5.2 | 2 | |||
| Earnings before non-recurring items | 169.4 | 155.3 | 9 | |||
| Non-recurring items | -50.8 | - | n.a. | |||
| Earnings before taxes | 118.6 | 155.3 | -24 | |||
| Taxes | -22.4 | -29.5 | 24 | |||
| Net earnings | 96.2 | 125.8 | -24 |
1) Adjusted to fixed exchange rates and a comparable group structure, i.e. organic growth.
| Movement 1) | Income less cost | Earnings impact | ||
|---|---|---|---|---|
| CHF | Strengthened | 2% | Negative | Negative |
| USD | Strengthened | 3% | Positive | Positive |
| CNY | Weakened | -2% | Positive | Negative |
| EBIT1, MEUR | 3.3 | |||
1) Compared to Q1 2016
| Net sales* | |
|---|---|
| 2016, MEUR | 724.2 |
| Structure, % | 3 |
| Currency, % | 2 |
| Organic growth, % | 3 |
| Total, % | 7 |
| 2017, MEUR | 778.1 |
*Net sales from acquisitions and divestments during the last twelve months are reported as "Structure" in the table above. Percentages are rounded to the nearest whole per cent.
1) Adjusted to fixed exchange rates and a comparable group structure (organic growth).
Geospatial Enterprise Solutions includes a world-leading portfolio of sensors for capturing data from land and air as well as sensors for positioning via satellites. The sensors are complemented by software (GIS) for the creation of 3D maps and models which are used for decision-making in a range of software applications, covering areas such as surveying, construction, public safety and agriculture. This segment consists of Geosystems, Safety & Infrastructure and Positioning Intelligence.
Geospatial Enterprise Solutions (GES) sales amounted to 403.0 MEUR (369.4). Using fixed exchange rates and a comparable group structure (organic growth), net sales increased by 4 per cent. Organic growth was 8 per cent in Asia, 6 per cent in EMEA and -1 per cent in Americas.
Looking at the geographical development, demand in China continued to be solid, especially within positioning, infrastructure and construction, recording high single digit organic growth. Other countries in Asia with strong growth included Australia and Japan. In EMEA, Western Europe recorded single digit growth where the largest contributors were Germany, France, Spain and the Nordic countries. The Middle East returned to growth following a few quarters of negative development. In Americas, North America continued to experience negative growth primarily due to weak demand from the US mining industry and safety solutions within US defence. South America continued to improve and recorded strong double digit growth, driven by solid demand in the mining industry.
Regarding the divisions within GES, organic growth for Geosystems was 4 per cent, primarily due to strong demand from civil construction, machine control and mining. As in the previous quarter, Safety & Infrastructure continued to experience weak demand from US defence and recorded -2 per cent organic growth. However, the demand for Smart City and public safety solutions continued to grow. Positioning Intelligence recorded 22 per cent organic growth with strong demand from agriculture and defence.
Operating earnings (EBIT1) increased by 20 per cent to 91.0 MEUR (75.7), which corresponds to an operating margin of 22.6 per cent (20.5). The operating margin was positively impacted by organic growth, new high margin products and tight cost control.
| MEUR | Q1 2017 | Q1 2016 | Δ% |
|---|---|---|---|
| Net sales | 403.0 | 369.4 | 4 1) |
| Operating earnings (EBIT1) | 91.0 | 75.7 | 20 |
| Operating margin,% | 22.6 | 20.5 | 2.1 |
| Avg. number of employees | 7,788 | 7,891 | -1 |
1) Adjusted to fixed exchange rates and a comparable group structure, i.e. organic growth.
* Q1 2017 numbers ** Full-year 2016 numbers
Industrial Enterprise Solutions includes metrology systems that incorporate the latest in sensor technology for fast and accurate measurements, as well as CAD (computer-aided design) and CAM (computer-aided manufacturing) software. These solutions optimise design, processes and throughput in manufacturing facilities and create and leverage asset management information critical to the planning, construction and operation of plants and process facilities in a number of industries, such as automotive, aerospace and oil and gas. Industrial Enterprise Solutions consists of Manufacturing Intelligence and PPM.
Industrial Enterprise Solutions (IES) sales amounted to 375.1 MEUR (354.8). Using fixed exchange rates and a comparable group structure (organic growth), net sales increased by 2 per cent. Organic growth was 9 per cent in EMEA, flat in Americas and -3 per cent in Asia.
Looking at the geographical development, demand was strong in Eastern Europe (including Russia) in both manufacturing and the power and energy industry. Western Europe also had a solid quarter and reported high single digit organic growth. In Americas, demand in North America was strong in the manufacturing industry but continued to be weak in power and energy. South America experienced another weak quarter in all industrial segments. In Asia, China recorded single digit growth primarily driven by strong demand in the electronics industry. However, South Korea continued to be weak, especially within the shipbuilding market, and declined by double digit.
Regarding the divisions within IES, Manufacturing Intelligence had a solid start to the year and recorded 8 per cent organic growth. Demand within the electronics industry was strong and the aerospace industry continued to grow. PPM faced another challenging quarter and recorded -11 per cent organic growth, due to the continued weak demand from the oil and gas market. Actions have been taken to ensure future growth and increased profitability.
Operating earnings (EBIT1) was in line with the same period last year at 89.2 MEUR (89.6), which corresponds to an operating margin of 23.8 per cent (25.3). The operating margin (EBIT1) was negatively impacted by unfavourable business mix.
| MEUR | Q1 2017 | Q1 2016 | Δ% |
|---|---|---|---|
| Net sales | 375.1 | 354.8 | 2 1) |
| Operating earnings (EBIT1) | 89.2 | 89.6 | -0 |
| Operating margin,% | 23.8 | 25.3 | -1.5 |
| Avg. number of employees | 8,656 | 8,167 | 6 |
1) Adjusted to fixed exchange rates and a comparable group structure, i.e. organic growth.
On 2 February 2017, Hexagon announced an agreement to acquire MSC Software (MSC), a leading provider of simulation software (CAE) for virtual product and manufacturing process development. The acquisition will strengthening Hexagon's ability to connect the traditionally separate stages of design and production – integrating real-world data generated on the production floor with simulation data to further improve a customer's ability to reveal and correct design limitations and production problems prior to manufacturing.
Capital employed increased to 6,393.3 MEUR (6,099.3). Return on average capital employed for the last twelve months was 12.0 per cent (11.7). Return on average shareholders' equity for the last twelve months was 12.6 per cent (13.8). The capital turnover rate was 0.5 times (0.5).
Total shareholders' equity increased to 4,659.8 MEUR (4,054.9). The equity ratio was 59 per cent (55). Hexagon's total assets increased to 7,845.9 MEUR (7,378.1). The increase in total assets is driven primarily by acquisitions.
Hexagon's main sources of financing consist of:
1) A multicurrency revolving credit facility (RCF) established during 2014. The RCF amounts to 2,000 MEUR with maturity 2021
2) A Swedish Medium Term Note Programme (MTN) established during 2014. The MTN programme amounts to 10,000 MSEK with tenor up to 5 years
3) A Swedish Commercial Paper Programme (CP) established during 2012. The CP programme amounts to 15,000 MSEK with tenor up to 12 months
On 31 March 2017, cash and unutilised credit limits totalled 1,886.9 MEUR (1,250.8). Hexagon's net debt was 1,421.3 MEUR (1,767.1). The net indebtedness was 0.27 times (0.39). Interest coverage ratio was 19.8 times (25.3).
During the first quarter, cash flow from operations before changes in working capital amounted to 209.9 MEUR (182.7), corresponding to 0.58 EUR (0.51) per share. Cash flow from operations in the first quarter amounted to 216.4 MEUR (167.9), corresponding to 0.60 EUR (0.47) per share. Operating cash flow in the first quarter, including non-recurring items, amounted to 143.5 MEUR (101.1).
Hexagon's net investments, excluding acquisitions and divestitures, amounted to -64.8 MEUR (-63.3) in the first quarter.
Depreciation, amortisation and impairment amounted to -87.1 MEUR (-54.8) in the first quarter, whereof impairment charges amounted to -26.9 MEUR (-).
The Group's tax expense for the first quarter totalled -22.4 MEUR (-29.5).
The tax rate was 18.9 per cent (19.0) for the quarter. The tax rate, excluding non-recurring items, was 18.0 (19.0) per cent for the quarter.
The average number of employees during the first quarter was 16,515 (16,128). The increase was primarily related to acquisitions. The number of employees at the end of the quarter was 16,609 (16,331).
Earnings per share, excluding non-recurring items, for the first quarter amounted to 0.38 EUR (0.35). Earnings per share, including nonrecurring items, for the first quarter amounted to 0.26 EUR (0.35).
On 31 March 2017, equity per share was 12.89 EUR (11.22) and the share price was 360.00 SEK (316.00).
Hexagon's share capital amounts to 79,980,283 EUR, represented by 360,443,142 shares, of which 15,750,000 are of series A with 10 votes each and 344,693,142 are of series B with one vote each.
In accordance with a decision by a Shareholders' General Meeting in May 2015, an incentive programme (2015/2019) was introduced, under which a maximum of 10,000,000 warrants can be issued. The dilutive effect at full utilization of the programme will be 2.8 per cent of the share capital and 2.0 per cent of the number of votes. The number of warrants that have been issued are 7,107,660 and may be exercised during 1 June 2018 – 31 December 2019.
Associated companies affected Hexagon's earnings during the first quarter by 0.0 MEUR (-0.1).
The parent company's earnings before taxes for the first quarter amounted to 6.9 MEUR (-32.5). The equity was 4,693.4 MEUR (4,773.0). The equity ratio of the parent company was 59 per cent (60). Liquid funds including unutilised credit limits were 1,584.7 MEUR (1,031.6).
Hexagon released the first commercial airborne sensor with state-of-the-art Single Photon LiDAR technology, used for reality capture up to 10 times more efficiently. The sensor is perfect for state and country wide projects, acquiring elevation data at lowest cost per data point.
Stockholm, Sweden, 2 May 2017 Hexagon AB (publ)
Ola Rollén President and CEO Board Member
This Interim Report has not been reviewed by the Company's auditors.
Hexagon applies International Financial Reporting Standards (IFRS) as adopted by the European Union. Hexagon's report for the Group is prepared in accordance with IAS 34, "Interim Financial Reporting" and the Annual Accounts Act. Parent company accounts are prepared in accordance with the Annual Accounts Act. Accounting principles and calculation methods are unchanged from those applied in the Annual Report for 2016. New and amended standards applicable from 2017 have not had any significant impact on the financial statements.
As an international group, Hexagon is exposed to a number of business and financial risks. The business risks can be divided into strategic, operational and legal risks. The financial risks are related to such factors as exchange rates, interest rates, liquidity and the ability to raise funds. Risk management in Hexagon aims to identify, control and reduce risks. This work begins with an assessment of the probability of risks occurring and their potential effect on the Group. There has been no change in the risks facing the Group compared to what was reported in the Annual Report 2016.
No significant related party transactions have been incurred during the first quarter 2017.
On 26 April Hexagon acquired MSC Software (MSC), a US based provider of CAE (simulation) software. MSC has over 1,200 professionals in 20 countries.
Purchase price of 834 MUSD on a cash and debt free basis
In 2016 MSC generated proforma sales of 230 MUSD, with strong profitability and a high percentage of recurring revenue
The acquisition will further strengthen Hexagon's smart connected factory strategy to deliver enterprise solutions within manufacturing verticals
The transaction has been fully financed via bank facilities and Hexagon's net debt to
EBITDA target of 2.5 will not be exceeded Approximately 20-30 MEUR related to a revenue recognition adjustment of deferred revenue (haircut) will impact the income statement during 2017
Excluding haircut, MSC is accretive to Hexagon's earnings as of closing
| MEUR | Q1 2017 | Q1 2016 | 2016 |
|---|---|---|---|
| Net sales | 778.1 | 724.2 | 3,149.2 |
| Cost of goods sold | -303.1 | -281.9 | -1,247.2 |
| Gross earnings | 475.0 | 442.3 | 1,902.0 |
| Sales expenses | -156.8 | -136.0 | -573.3 |
| Administration expenses | -82.1 | -64.4 | -269.1 |
| Research and development expenses | -109.5 | -80.1 | -333.1 |
| Earnings from shares in associated companies | 0.0 | -0.1 | 0.4 |
| Capital gain (+) / loss (-) from sale of shares in Group companies | - | - | 0.7 |
| Other income and expenses, net | -2.9 | -1.2 | 8.5 |
| Operating earnings 1) | 123.7 | 160.5 | 736.1 |
| Financial income | 1.2 | 1.2 | 4.8 |
| Financial expenses | -6.3 | -6.4 | -26.6 |
| Earnings before taxes | 118.6 | 155.3 | 714.3 |
| Taxes | -22.4 | -29.5 | -135.7 |
| Net earnings | 96.2 | 125.8 | 578.6 |
| Attributable to: | |||
| Parent company shareholders | 94.8 | 124.6 | 573.3 |
| Non-controlling interest | 1.4 | 1.2 | 5.3 |
| 1) of which non-recurring items | -50.8 | - | - |
| Earnings include depreciation, amortisation and impairments of | -87.1 | -54.8 | -233.9 |
| - of which amortization of surplus values | -9.6 | -8.5 | -35.2 |
| Basic earnings per share, EUR | 0.26 | 0.35 | 1.59 |
| Earnings per share after dilution, EUR | 0.26 | 0.35 | 1.59 |
| Total shareholder's equity per share, EUR | 12.89 | 11.22 | 12.70 |
| Closing number of shares, thousands | 360,443 | 360,443 | 360,443 |
| Average number of shares, thousands | 360,443 | 360,402 | 360,433 |
| Average number of shares after dilution, thousands | 361,206 | 360,754 | 360,879 |
| MEUR | Q1 2017 | Q1 2016 | 2016 |
|---|---|---|---|
| Net earnings | 96.2 | 125.8 | 578.6 |
| Other comprehensive income | |||
| Items that will not be reclassified to income statement | |||
| Remeasurement of pensions | 9.0 | -17.7 | -9.4 |
| Taxes on items that will not be reclassified to income statement | -1.0 | 1.5 | 1.8 |
| Total items that will not be reclassified to income statement, net of taxes | 8.0 | -16.2 | -7.6 |
| Items that may be reclassified subsequently to income statement | |||
| Exchange rate differences | -37.0 | -155.5 | 69.8 |
| Effect of hedging of net investments in foreign operations | - | -0.1 | -0.1 |
| Taxes on items that may be reclassified subsequently to income statement | 2.1 | -1.4 | 3.9 |
| Total items that may be reclassified subsequently to income statement, net of taxes | -34.9 | -157.0 | 73.6 |
| Other comprehensive income, net of taxes | -26.9 | -173.2 | 66.0 |
| Total comprehensive income for the period | 69.3 | -47.4 | 644.6 |
| Attributable to: | |||
| Parent company shareholders | 67.9 | -48.2 | 639.5 |
| Non-controlling interest | 1.4 | 0.8 | 5.1 |
| MEUR | 31/3 2017 | 31/3 2016 | 31/12 2016 |
|---|---|---|---|
| Intangible fixed assets | 5,824.1 | 5,528.3 | 5,870.8 |
| Tangible fixed assets | 289.5 | 284.5 | 294.8 |
| Financial fixed assets | 22.1 | 25.4 | 21.1 |
| Deferred tax assets | 58.2 | 58.0 | 55.0 |
| Total fixed assets | 6,193.9 | 5,896.2 | 6,241.7 |
| Inventories | 444.7 | 436.5 | 426.7 |
| Accounts receivable | 741.8 | 653.7 | 788.0 |
| Other receivables | 76.4 | 65.6 | 71.0 |
| Prepaid expenses and accrued income | 106.4 | 123.8 | 102.7 |
| Total current receivables | 924.6 | 843.1 | 961.7 |
| Cash and cash equivalents | 282.7 | 202.3 | 284.0 |
| Total current assets | 1,652.0 | 1,481.9 | 1,672.4 |
| Total assets | 7,845.9 | 7,378.1 | 7,914.1 |
| Equity attributable to parent company shareholders | 4,644.7 | 4,044.1 | 4,576.8 |
| Equity attributable to non-controlling interest | 15.1 | 10.8 | 14.0 |
| Total shareholders' equity | 4,659.8 | 4,054.9 | 4,590.8 |
| Interest bearing liabilities | 1,539.1 | 1,526.0 | 1,476.2 |
| Other liabilities | 53.1 | 84.8 | 12.3 |
| Pension liabilities | 123.2 | 141.6 | 132.0 |
| Deferred tax liabilities | 467.9 | 419.6 | 472.7 |
| Other provisions | 5.0 | 2.8 | 69.4 |
| Total long-term liabilities | 2,188.3 | 2,174.8 | 2,162.6 |
| Interest bearing liabilities | 41.7 | 300.2 | 237.2 |
| Accounts payable | 164.3 | 149.5 | 175.7 |
| Other liabilities | 208.3 | 161.2 | 134.9 |
| Other provisions | 49.7 | 27.2 | 73.6 |
| Deferred income | 278.7 | 269.1 | 254.3 |
| Accrued expenses | 255.1 | 241.2 | 285.0 |
| Total short-term liabilities | 997.8 | 1,148.4 | 1,160.7 |
| Total equity and liabilities | 7,845.9 | 7,378.1 | 7,914.1 |
In Hexagon's balance sheet derivatives and other long-term securities holdings are carried at fair value. Derivatives are measured at fair value based on valuation techniques with observable market data as input (level 2 according to definition in IFRS 13). Other long-term securities holdings amount to insignificant numbers. Liabilities for contingent considerations are measured at fair value and based on management's best estimation of the most probable outcome (level 3 according to definition in IFRS 13). Other assets and liabilities are carried at accrued cost.
For financial assets and liabilities that are carried at accrued cost, the fair value is deemed to be coincident with the carrying amount except for long-term liabilities to credit institutions. The difference between the fair value and the carrying amount for these long-term liabilities is deemed to be insignificant relative to the total balance sheet since the interest rate duration is short.
| MEUR | Q1 2017 | Q1 2016 | 2016 |
|---|---|---|---|
| Opening shareholders' equity | 4,590.8 | 4,102.3 | 4,102.3 |
| Total comprehensive income for the period 1) | 69.3 | -47.4 | 644.6 |
| Dividend | -0.3 | - | -156.1 |
| Closing shareholders' equity 2) | 4,659.8 | 4,054.9 | 4,590.8 |
| 1) Of which: Parent company shareholders Non-controlling interest |
67.9 1.4 |
-48.2 0.8 |
639.5 5.1 |
| 2) Of which: Parent company shareholders Non-controlling interest |
4,644.7 15.1 |
4,044.1 10.8 |
4,576.8 14.0 |
| series A | series B | Total | |
|---|---|---|---|
| 2009-12-31 Total issued and outstanding | 11,812,500 | 252,534,653 | 264,347,153 |
| Sale of repurchased shares | - | 20,070 | 20,070 |
| Rights issue | 3,937,500 | 83,845,572 | 87,783,072 |
| 2010-12-31 Total issued and outstanding | 15,750,000 | 336,400,295 | 352,150,295 |
| Rights issue | - | 339,335 | 339,335 |
| 2011-12-31 Total issued and outstanding | 15,750,000 | 336,739,630 | 352,489,630 |
| Sale of repurchased shares | - | 185,207 | 185,207 |
| 2012-12-31 Total issued and outstanding | 15,750,000 | 336,924,837 | 352,674,837 |
| Sale of repurchased shares | - | 967,340 | 967,340 |
| New issue, warrants exercised | - | 1,354,800 | 1,354,800 |
| 2013-12-31 Total issued and outstanding | 15,750,000 | 339,246,977 | 354,996,977 |
| New issue, warrants exercised | - | 2,392,236 | 2,392,236 |
| 2014-12-31 Total issued and outstanding | 15,750,000 | 341,639,213 | 357,389,213 |
| New issue, warrants exercised | - | 2,947,929 | 2,947,929 |
| 2015-12-31 Total issued and outstanding | 15,750,000 | 344,587,142 | 360,337,142 |
| New issue, warrants exercised | - | 106,000 | 106,000 |
| 2016-12-31 Total issued and outstanding | 15,750,000 | 344,693,142 | 360,443,142 |
| New issue, warrants exercised | - | - | - |
| 2017-03-31 Total issued and outstanding 1) | 15,750,000 | 344,693,142 | 360,443,142 |
1) As per 31 March 2017, there were in total 360,443,142 shares in the Company, of which 15,750,000 are of series A with ten votes each and 344,693,142 are of series B with one vote each. .
| MEUR | Q1 2017 | Q1 2016 | 2016 |
|---|---|---|---|
| Cash flow from operations before change in working capital excluding | |||
| taxes and interest | 229.7 | 214.8 | 941.9 |
| Taxes paid | -17.1 | -29.4 | -92.1 |
| Interest received and paid, net | -2.7 | -2.7 | -17.7 |
| Cash flow from operations before change in working capital | 209.9 | 182.7 | 832.1 |
| Cash flow from change in working capital | 6.5 | -14.8 | -50.0 |
| Cash flow from operations | 216.4 | 167.9 | 782.1 |
| Investments tangible assets, net | -9.0 | -14.5 | -50.9 |
| Investments intangible assets | -55.8 | -48.8 | -206.7 |
| Operating cash flow | 151.6 | 104.6 | 524.5 |
| Non-recurring cash flow 1) | -8.1 | -3.5 | -7.9 |
| Operating cash flow after non-recurring items | 143.5 | 101.1 | 516.6 |
| Cash flow from other investing activities 2) | -8.4 | -92.7 | -172.0 |
| Cash flow after other investing activities | 135.1 | 8.4 | 344.6 |
| Dividends paid | -0.3 | - | -156.1 |
| Cash flow from other financing activities | -136.9 | -20.4 | -130.5 |
| Cash flow for the period | -2.1 | -12.0 | 58.0 |
| Cash and cash equivalents, beginning of period | 284.0 | 225.5 | 225.5 |
| Effect of translation differences on cash and cash equivalents | 0.8 | -11.2 | 0.5 |
| Cash flow for the period | -2.1 | -12.0 | 58.0 |
| Cash and cash equivalents, end of period | 282.7 | 202.3 | 284.0 |
1) Non-recurring cash flow in the first quarter of 2017 consists of restructuring and transaction cost.
2) Acquisitions and divestments totaled -7.3 MEUR (-91.4) and other was -1.1 MEUR (-1.3) in the first quarter of 2017.
| Q1 2017 | Q1 2016 | 2016 | |
|---|---|---|---|
| Operating margin, % | 22.4 | 22.2 | 23.4 |
| Profit margin before taxes, % | 15.2 | 21.4 | 22.7 |
| Return on shareholders' equity, 12 month average, % | 12.6 | 13.8 | 13.7 |
| Return on capital employed ,12 month average, % | 12.0 | 11.7 | 11.9 |
| Equity ratio, % | 59.4 | 55.0 | 58.0 |
| Net indebtedness | 0.27 | 0.39 | 0.30 |
| Interest coverage ratio | 19.8 | 25.3 | 27.9 |
| Average number of shares, thousands | 360,443 | 360,402 | 360,433 |
| Basic earnings per share excl. non-recurring items, EUR | 0.38 | 0.35 | 1.59 |
| Basic earnings per share, EUR | 0.26 | 0.35 | 1.59 |
| Cash flow per share, EUR | 0.60 | 0.47 | 2.17 |
| Cash flow per share before change in working cap, EUR | 0.58 | 0.51 | 2.31 |
| Share price, SEK | 360.00 | 316.00 | 325.50 |
| Share price, translated to EUR | 37.77 | 34.25 | 34.07 |
| MEUR | Q1 2017 | Q4 2016 | Q3 2016 | Q2 2016 | Q1 2016 | 2016 |
|---|---|---|---|---|---|---|
| Geospatial Enterprise | 403.0 | 420.1 | 390.6 | 399.2 | 369.4 | 1,579.3 |
| Industrial Enterprise Solutions | 375.1 | 429.4 | 389.1 | 396.6 | 354.8 | 1,569.9 |
| Group | 778.1 | 849.5 | 779.7 | 795.8 | 724.2 | 3,149.2 |
| MEUR | Q1 2017 | Q4 2016 | Q3 2016 | Q2 2016 | Q1 2016 | 2016 |
|---|---|---|---|---|---|---|
| Geospatial Enterprise Solutions | 91.0 | 101.5 | 88.7 | 88.9 | 75.7 | 354.8 |
| Industrial Enterprise Solutions | 89.2 | 110.2 | 96.3 | 103.0 | 89.6 | 399.1 |
| Group costs | -5.7 | -3.0 | -5.2 | -4.8 | -4.8 | -17.8 |
| Group | 174.5 | 208.7 | 179.8 | 187.1 | 160.5 | 736.1 |
| Margin, % | 22.4 | 24.6 | 23.1 | 23.5 | 22.2 | 23.4 |
| MEUR | Q1 2017 | Q4 2016 | Q3 2016 | Q2 2016 | Q1 2016 | 2016 |
|---|---|---|---|---|---|---|
| EMEA | 296.0 | 326.5 | 292.2 | 304.5 | 270.5 | 1,193.7 |
| Americas | 265.9 | 294.9 | 264.1 | 270.0 | 247.5 | 1,076.5 |
| Asia | 216.2 | 228.1 | 223.4 | 221.3 | 206.2 | 879.0 |
| Group | 778.1 | 849.5 | 779.7 | 795.8 | 724.2 | 3,149.2 |
| Q1 2017 | Q4 2016 | Q3 2016 | Q2 2016 | Q1 2016 | 2016 |
|---|---|---|---|---|---|
| 0.1052 | 0.1025 | 0.1051 | 0.1078 | 0.1072 | 0.1056 |
| 0.9386 | 0.9267 | 0.8960 | 0.8855 | 0.9069 | 0.9040 |
| 0.1363 | 0.1356 | 0.1344 | 0.1355 | 0.1386 | 0.1360 |
| 0.9347 | 0.9260 | 0.9183 | 0.9123 | 0.9122 | 0.9174 |
| Q1 2017 | Q4 2016 | Q3 2016 | Q2 2016 | Q1 2016 | 2016 |
| 0.1049 | 0.1047 | 0.1039 | 0.1061 | 0.1084 | 0.1047 |
| 0.9354 | 0.9487 | 0.8960 | 0.9007 | 0.8783 | 0.9487 |
| 0.1358 | 0.1366 | 0.1343 | 0.1356 | 0.1360 | 0.1366 |
| 0.9349 | 0.9312 | 0.9202 | 0.9148 | 0.9312 | |
| 0.9195 |
| Acquisitions | ||
|---|---|---|
| MEUR | Q1 2017 | Q1 2016 |
| Fair value of acquired assets and assumed liabilities | ||
| Intangible fixed assets | 0.0 | 33.0 |
| Other fixed assets | 0.0 | 5.2 |
| Total fixed assets | 0.0 | 38.2 |
| Total current assets | 2.2 | 34.5 |
| Total assets | 2.2 | 72.7 |
| Total long-term liabilities | 0.5 | 9.8 |
| Total current liabilities | 0.2 | 15.4 |
| Total liabilities | 0.7 | 25.2 |
| Fair value of acquired assets and assumed liabilities, net | 1.5 | 47.5 |
| Goodwill | 12.3 | 65.7 |
| Total purchase consideration transferred | 13.8 | 113.2 |
| Less cash and cash equivalents in acquired companies Adjustment for non-paid consideration and considerations paid |
-0.1 | -6.5 |
| for prior years' acquisitions | -6.4 | -26.1 |
| Adjustment for prepaid part of acquisition costs | - | 10.8 |
| Cash flow from acquisition of companies/businesses | 7.3 | 91.4 |
During Q1 2017, Hexagon acquired the following companies:
MiPlan Ltd, a provider of mobile software applications to increase productivity in mines, based in Australia
IDS Georadar, an Australian distributor of structural health monitoring solutions
The acquisitions are individually assessed as immaterial from a group perspective why only aggregated information is presented. The analysis of the acquired net assets is preliminary and the fair value might be subject to change. Contingent considerations are recognised to fair value each reporting period and based on the latest relevant forecast for the acquired company. Estimated liability for contingent considerations amounted to 105.3 MEUR as of March 31, whereof the fair value adjustment during Q1 is 18.8 MEUR. The fair value adjustment is offset by impairment of fixed assets and other shortterm receivables identified in the purchase price allocation analysis.
In February 2017, Hexagon announced that it entered into an agreement to acquire MSC Software (MSC), a leading provider of CAE (simulation) software. Closing was 26 April 2017 after customary regulatory approvals were received. MSC's turnover for 2016 amounted to 230 MEUR.
| MEUR | Q1 2017 | Q1 2016 | 2016 |
|---|---|---|---|
| Net sales | 5.2 | 2.8 | 20.2 |
| Administration cost | -5.4 | -4.4 | -26.9 |
| Operating earnings | -0.2 | -1.6 | -6.7 |
| Interest income and expenses, net | 7.1 | -30.9 | 43.3 |
| Group contribution | - | - | 1.8 |
| Earnings before taxes | 6.9 | -32.5 | 38.4 |
| Taxes | -1.3 | 0.0 | -0.2 |
| Net earnings | 5.6 | -32.5 | 38.2 |
| MEUR | 31/3 2017 | 31/3 2016 | 31/12 2016 |
|---|---|---|---|
| Total fixed assets | 7,188.8 | 7,130.5 | 7,203.6 |
| Total current receivables | 804.2 | 760.7 | 803.3 |
| Cash and cash equivalents | 1.8 | 2.5 | 15.6 |
| Total current assets | 806.0 | 763.2 | 818.9 |
| Total assets | 7,994.8 | 7,893.7 | 8,022.5 |
| Total shareholders' equity | 4,693.4 | 4,773.0 | 4,688.7 |
| Total long-term liabilities | 1,529.7 | 1,518.7 | 1,469.4 |
| Total short-term liabilities | 1,771.7 | 1,602.0 | 1,864.4 |
| Total equity and liabilities | 7,994.8 | 7,893.7 | 8,022.5 |
In addition to the financial measures as required by the financial reporting framework based on IFRS, this report also includes other measures and indicators that are used to follow-up, analyze and manage the business. These measures also provide Hexagon stakeholders with useful financial information on the Group's financial position, performance and development in a consistent way. Below is a list of definitions of measures and indicators used in this report.
| Americas | North, South and Central America |
|---|---|
| Asia | Asia, Australia and New Zealand |
| EMEA | Europe, Middle East and Africa |
| GES | Geospatial Enterprise Solutions |
| IES | Industrial Enterprise Solutions |
| Amortization of surplus values | When a company is acquired, the purchase consideration is allocated to the identified assets and liabilities of the company. Intangible assets are most often allocated the substantial part of the purchase consideration. The amortization of surplus values is defined as the difference between the amortization of such identified intangible assets and what the amortization would have been in the acquired company had the acquisition not taken place at all |
|---|---|
| Capital employed | Total assets less non-interest bearing liabilities |
| Capital turnover rate | Net sales divided by average capital employed |
| Cash flow per share | Cash flow from operations, after change in working capital, excluding non-recurring items divided by average number of shares |
| Earnings per share | Net earnings excluding non-controlling interest divided by average number of shares |
| Equity ratio | Shareholders' equity including non-controlling interests as a percentage of total assets |
| Gross margin | Gross earnings divided by net sales |
| Interest coverage ratio | Earnings after financial items plus financial expenses divided by financial expenses |
| Investments | Purchases less sales of tangible and intangible fixed assets, excluding those included in acquisitions and divestitures of subsidiaries |
| Net debt | Interest-bearing liabilities including pension liabilities and interest-bearing provisions less cash and cash equivalents |
| Net indebtedness | Interest-bearing liabilities less interest-bearing current receivables and liquid assets divided by shareholders' equity excluding non-controlling interests |
| Non-recurring items | Income and expenses that are not expected to appear on a regular basis |
| Operating earnings (EBIT1) | Operating earnings excluding capital gains on shares in group companies and non-recurring items |
| Operating earnings (EBITDA) | Operating earnings (EBIT 1) excluding amortisation and depreciation of fixed assets |
| Operating margin | Operating earnings (EBIT1) as a percentage of net sales |
| Organic growth | Net sales compared to prior period excluding acquisitions and divestments and adjusted for currency exchange movements |
| Profit margin before taxes | Earnings after financial items as a percentage of net sales |
| Return on capital employed (12 month average) |
Twelve months to end of period earnings after financial items, excluding non-recurring items, plus financial expenses as a percentage of twelve months to end of period average capital employed. The twelve months average capital employed is based on average quarterly capital employed |
| Return on shareholders' equity (12 month average) |
Twelve months to end of period net earnings excluding non-controlling interests as a percentage of twelve months to end of period average shareholders' equity excluding non-controlling interests last twelve months. The twelve months average shareholders equity is based on quarterly average shareholders equity |
| Shareholders' equity per share | Shareholders' equity excluding non-controlling interests divided by the number of shares at year-end |
| Share price | Last settled transaction on Nasdaq Stockholm on the last business day for the period |
Hexagon is a leading global provider of information technologies that drive productivity and quality across geospatial and industrial enterprise applications. Hexagon's solutions integrate sensors, software, domain knowledge and customer workflows into intelligent information ecosystems that deliver actionable information. They are used in a broad range of vital industries. Hexagon (Nasdaq Stockholm: HEXA B) has approximately 18,000 employees in 50 countries and net sales of approximately 3.1bn EUR. Learn more at hexagon.com.
Hexagon gives financial information at the following occasions:
Interim report Q2 2017 27 July 2017 Interim report Q3 2017 27 October 2017 Year-end report 2017 6 February 2018
Financial information is available in Swedish and English at the Hexagon website and can also be ordered via phone +46 8 601 26 20 or e-mail [email protected]
The interim report for the first quarter 2017 will be presented on 2 May at 15:00 CET at a telephone conference. Please view instructions at Hexagon's website on how to participate.
Maria Luthström, Investor Relations Manager, Hexagon AB, +46 8 601 26 27, [email protected]
This information is information that Hexagon AB is obliged to make public pursuant to the EU Market Abuse Regulation. The information was submitted for publication, through the agency of the contact person set out above, at 13:00 CET on 2 May 2017.
This communication may contain forward-looking statements. When used in this communication, words such as "anticipate", "believe", "estimate", "expect", "intend", "plan" and "project" are intended to identify forward-looking statements. They may involve risks and uncertainties, including technological advances in the measurement field, product demand and market acceptance, the effect of economic conditions, the impact of competitive products and pricing, foreign currency exchange rates and other risks. These forward-looking statements reflect the views of Hexagon's management as of the date made with respect to future events and are subject to risks and uncertainties. All of these forward-looking statements are based on estimates and assumptions made by Hexagon's management and are believed to be reasonable, though are inherently uncertain and difficult to predict. Actual results or experience could differ materially from the forward-looking statements. Hexagon disclaims any intention or obligation to update these forwardlooking statements.
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