Quarterly Report • Apr 19, 2013
Quarterly Report
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During the first quarter, HMS acquired the German company IXXAT Automation. IXXAT develops and sells industrial communication products to companies within, for example, machine building, the automotive industry, and medical technology.
We have started to co-ordinate IXXAT's sales and marketing resources with HMS's organization in order to create a common global sales organization for our brands Anybus®, IXXAT® and Netbiter®. In the long term, we also see opportunities to co-ordinate technology and development projects from the acquired business which will affect forthcoming product generations from HMS.
During the first quarter of the year, we saw a continually cautious market without underlying growth, but as we now, as of February, include IXXAT in our results, we reach a new turnover record of 107 MSEK.
Our goal is now to take full advantage of the newly acquired business as well as the resource investments made during the past few years.
During the first quarter, we saw a growing level of orders. Despite this, the previously communicated market uncertainty remains. We see an inflow of new design-wins, which confirms our strong market position. The conditions for continued long-term growth are unchanged, despite the shortterm uncertainty among our customers.
We will continue to drive growth through our three product brands Anybus, Netbiter and IXXAT. Our market is continually uncertain in the short term, which means that we continue to balance our long-term growth strategy with a restrictive view on costs. In the long term, we see the markets for industrial communication and remote management to be growth sectors.
Staffan Dahlström CEO, HMS Networks AB
| Quarterly data | Q1 | Q4 | Q3 | Q2 | Q1 | Q4 | Q3 | Q2 |
|---|---|---|---|---|---|---|---|---|
| 2013 | 2012 | 2012 | 2012 | 2012 | 2011 | 2011 | 2011 | |
| Net sales (SEK m) | 107 | 87 | 99 | 99 | 96 | 95 | 101 | 97 |
| Order intake (SEK m) | 119 | 100 | 95 | 113 | 116 | 83 | 108 | 100 |
| Operating profit (SEK m) | 14 | 6 | 23 | 20 | 14 | 10 | 24 | 20 |
| Gross margin (%) | 61 | 57.6 | 59.9 | 60.6 | 61.9 | 60.8 | 60.6 | 61.3 |
| Operating margin (%) | 12.8 | 7.2 | 23.4 | 20.2 | 14.9 | 10.5 | 24.2 | 21.0 |
| Return on capital (%) | 15.4 | 16.3 | 16.2 | 17.7 | 17.6 | 18.6 | 21.6 | 22.1 |
| Earings per share (SEK) | 0.82 | 0.86 | 1.49 | 1.36 | 0.94 | 0.71 | 1.67 | 1.34 |
| Equity per share (SEK) | 31.17 | 30.21 | 29.43 | 28.23 | 27.74 | 26.77 | 25.96 | 24.41 |
| Cash flow for operating activities per share (SEK) | 4.47 | 1.67 | 2.23 | 2.63 | 0.73 | 0.25 | 1.74 | 2.06 |
Net sales for the last twelve months amounted to 392.5 MSEK (388.6) corresponding to a 1.0 % increase. In total, the revaluation of the Swedish currency in relation to the major HMS currencies had a negative effect on net sales by -9.9 MSEK compared to the previous twelve-month period. The order intake amounted to 427.0 MSEK (407.1).
Net sales for the first quarter 2013 was 107.2 MSEK (96.5) corresponding to a 11.1 % increase compared to the same quarter the previous year. Adjusted for -6.1 MSEK in currency effects, the increase amounted to 17.4 %. During the quarter, the newly acquired IXXAT companies contributed to the group's sales of 16.1 MSEK. Order intake for the first quarter increased by 2.9 MSEK to 119.2 MSEK (116.3), of which 101.7 MSEK is expected to be delivered during the next twelve months. In local currencies, the order intake for the quarter increased by 7.7 %.
Operating profit totaled to 63.1 MSEK (68.8) for the last twelve months, equivalent to an operating margin of 16.1 % (17.7). Currency effects had a negative impact on the operating result with 4,8 MSEK compared to the previous twelve month period.
The operating profit for the first quarter 2013 totaled to 13.7 MSEK (14.3). Changes in exchange rates had a 3.4 MSEK negative impact compared to the same period the previous year. During the first quarter the acquired group, including the effect of depreciation on goodwill and acquisition costs, had no impact on the Group´s operating result
The tax charge for the first quarter was 2.7 MSEK (3.9). The tax charge for the current period has been calculated on the basis of the tax situation applying to the Group at present and the profit development of the reporting entities belonging to the Group.
The Group's equity amounted to 353.0 MSEK (309.4). The total number of shares at the end of the year was 11,322,400. The Group's equity/assets ratio amounted to 46.4 % (78.4)
The graph shows turnover per quarter on the bars referring to the scale on the left axis. The line shows turnover for the latest 12 month period referring to the scale on the axis to the right.
The graph shows operating result per quarter in the bars referring to the scale on the left axis. The line shows operating result for the last 12 month period referring to the scale on the axis to the right.
| Change in Group Equity (SEK 000s) |
Mar 31 2013 | Mar 31 2012 | Dec 31 2012 |
|---|---|---|---|
| Balance at 1 january | 342,056 | 298,543 | 298,543 |
| Total comprehensive income for the period | 10,924 | 10,808 | 53,318 |
| Issue of new shares through the exercise of warrants | 0 | 0 | 15,289 |
| Dividends | 0 | 0 | -25,094 |
| Closing balance | 352,980 | 309,351 | 342,056 |
Assets and liabilities in foreign currencies are revaluated at closing date. Currency hedging contracts are revaluated at the date of closing and are also affecting the result on the date of expiration. Changes in book value due to revaluation of operating balance sheet items and currency hedging contracts are disclosed as other operating income and other operating expenses. Changes in book value related to assets in foreign currencies i.e. liquid funds, are disclosed as financial income and expenses. Net sales and expenses are affected by changes in exchange rates. This will have an impact on income and costs. Net sales for the quarter consist of 62 % in EURO, 24 % in USD, 8 % in Japanese Yen and 6 % in SEK and other currencies. Cost of goods sold consists of 43 % in EURO, 18 % in USD and 1 % in Japanese Yen. Operating expenses consists of 33 % in EURO, 9 % in USD, 4 % in Japanese Yen and 54 % of SEK and other currencies. The Group applies a policy for currency hedging described in the annual report.
Cash flow from operating activities in the first quarter 2013 amounted to -3.8 MSEK (8.1).
The investments in tangible assets for the quarter totaled 1.1 MSEK (5.5). Investments in intangible assets for the period totaled 14,7 MSEK (4.8) and comprise internal development costs. Investments in subsidiacies was 257.8 MSEK. The acquisition of IXXAT has generated a overvalue for the group of approximately 250 MSEK of which 141 MSEK is allocated on technology platforms, customers and brand name. The annual depreciation on the purchase price allocated to technical platforms and customers is estimated to 7 MSEK. During the first quarter 2013 depreciation on purchase price allocated to assets was reflected with 1,1 MSEK in the income statement.
To balance the Group´s currency exposure a 32 m€ loan was used to finance the acquisition made in the first quarter. At the end of the period, the cash equivalents totaled 32.4 MSEK (20.7) and unutilized credit facilities 30.0 MSEK. The Group's net debt amounted to 235.1 MSEK (0.7).
The HMS long term growth is supported by a continuing inflow of design-wins, a wider product offering in the area of Gateway products and Remote Management, new technology platforms from IXXAT and a stronger customer focus in line with our strategy.
The global economy is likely to continue to be weak. The effects on the market for HMS products and the currency effect are difficult to assess. Still, HMS long-term goals are unchanged: A long term average growth of 20 % per annum and a operating margin exceeding 20 %.
This report has been prepared in accordance with International Financial Reporting Standards (IFRS) and IAS 34, for Interim Reporting. Amendments to existing standards, new interpretations and new standards that came into effect as of January 1, 2013 did not affect the Groups reporting as of March 31, 2013.
HMS continues to apply the same accounting principles and valuation methods as those described in the most recent Annual Report. The parent company report is prepared in accordance with RFR 2, accounting for legal entities, and the Swedish Annual Accounts Act and accounting principles and the valuation methods as those described in the most recent Annual Report.
HMS Networks AB (publ) is listed on the Nasdaq OMX Stocholm Small Cap list, in the Information Technology sector. The total number of shares amounted to 11,322,400.
The HMS Group is exposed to business and financial risks through its operations. These risks have been described at length in the Company's annual report 2012. In addition to the risks described in these documents, no additional significant risks have been identified.
The Parent Company's operations are primarily focused on Group-wide management and financing. Apart from the Group's CEO, the Parent Company has no employees. The operating profit for the first quarter 2013 amounted to 0 MSEK (0.1). Cash and cash equivalents amounted to 0.7 MSEK (0.5) and borrowing amounted to 0 MSEK (20.4).
Growth strategy - HMS's main focus is on organic growth. Expansion on existing markets will be through improved and extended product ranges, new technology, high level of service and new sales channels. A certain degree of growth can be through the selective acquisition of businesses that will be a valuable complement to the company's organic growth strategy.
Development strategy - The Company's core expertise is made up of an extensive understanding of industrial network communication.
Product strategy - HMS markets four product lines, which to a certain degree are based on a common technical platform:
Production strategy - HMS maintains an in-house low-volume production of Anybus products in Halmstad. Volume production takes place in close partnership with subcontractors in Europe and Asia in order to achieve flexible costs and to make use of economies of scale.
Marketing strategy - The Anybus network interface cards are marketed and sold to players in industrial and infrastructure automation and Anybus Gateways to system integrators, machine manufacturers and end-users in industrial and infra-structure automation. Netbiter products are marketed and sold to a wide range of customers, from device manufacturers to owners of installations in need of remote management.
Sales strategy - Sales take place via the company's sales offices on defined key markets in 10 countries. Sales on the company's other markets, in some 50 countries, takes place via agents/ distributors.
HMS has designed its business models to fit each market and product line. For the Embedded market, most business is via framework agreements (i.e. design-wins). The sales cycle is relatively long and the design phase is performed in close cooperation with the customer. After that, there is steady revenue over a long period of time. For Gateways and Remote Management, the business model is more traditional, with a short business cycle and manufacturing based on customer orders.
Halmstad April 19, 2013
Staffan Dahlström Chief Executive Officer
This interim report has not been reviewed by the Company's auditor.
Further information can be obtained from: CEO Staffan Dahlström, telephone +46 (0) 35-17 29 01 or CFO Gunnar Högberg, telephone +46 (0) 35-17 29 95
| Q1 2013 |
Q1 2012 |
Q1-Q4 2012 |
1204-1303 12 months |
|
|---|---|---|---|---|
| Net increase in revenue (%) | 11.1 | 5.4 | -0.5 | 1.0 |
| Gross margin (%) | 61.0 | 61.9 | 60.1 | 59.9 |
| Operating margin EBIT (%) | 12.8 | 14.9 | 16.7 | 16.1 |
| EBITDA (SEK t) | 17,713 | 16,839 | 74,620 | 75,494 |
| EBITDA (%) | 15.5 | 17.5 | 19.5 | 18.9 |
| Return on capital employed (%)* | 14.0 | 22.3 | 19.7 | 13.5 |
| Return on total equity (%)* | 15.4 | 17.6 | 16.3 | 15.3 |
| Working capital in relation to sales (%)* | 7.9 | 11.1 | 9.2 | 12.1 |
| Capital turnover rate | 0.70 | 1.00 | 0.94 | 0.70 |
| Debt/equity ratio | 0.57 | 0.00 | -0.09 | 0.13 |
| Equity/assets ratio (%) | 46.4 | 78.4 | 81.9 | 68.7 |
| Capital expenditure in property. plant and equipm. (SEK 000s) | 1,085 | 5,455 | 12,202 | 7,832 |
| Capital expenditure in intagible fixed assets (SEK 000s) | 14,678 | 4,802 | 30,108 | 39,984 |
| Depreciation of property. plant and equipment (SEK 000s) | -1,729 | -1,386 | -6,240 | -6,583 |
| Amortisation of intangible fixed assets (SEK 000s) | -2,239 | -1,115 | -4,553 | -4,574 |
| Number of employees (average) | 346 | 233 | 241 | 269 |
| Revenue per employee (SEK m)* | 1.1 | 1.7 | 1.6 | 1.5 |
| Total equity per share. SEK | 31.17 | 27.74 | 30.21 | 31.17 |
| Total equity per share. diluted. SEK | 31.17 | 27.71 | 30.21 | 31.17 |
| Cash flow from operations per share before dilution. SEK | 4.47 | 0.73 | 7.27 | 10.97 |
| Cash flow from operations per share after dilution. SEK | 4.47 | 0.73 | 7.27 | 10.97 |
| Basic number of shares. average. thousands | 11,322 | 11,153 | 11,252 | 11,294 |
| Number of shares. diluted average. thousands | 11,322 | 11,163 | 11,254 | 11,294 |
* The key ratio has been translated into 12 months rolling value when applicable.
| (SEK 000s) | Q1 2013 |
Q1 2012 |
Q1-Q4 2012 |
1204-1303 12 months |
|---|---|---|---|---|
| Revenue | 107,215 | 96,493 | 381,804 | 392,526 |
| Cost of goods and services sold | -41,769 | -36,727 | -152,433 | -157,475 |
| Gross profit | 65,446 | 59,766 | 229,371 | 235,051 |
| Sales and marketing costs | -29,668 | -25,732 | -105,962 | -109,899 |
| Administrative expenses | -13,104 | -9,304 | -32,997 | -36,797 |
| Research and development costs | -9,717 | -8,911 | -26,476 | -27,282 |
| Other operating income | 1,486 | 307 | 3,960 | 5,139 |
| Other costs | -698 | -1,787 | -4,169 | -3,079 |
| Operating profit | 13,745 | 14,338 | 63,726 | 63,133 |
| Financial income | 0 | 143 | 1,926 | 1,020 |
| Financial costs | -2.046 | -195 | -456 | -1,543 |
| Profit before tax | 11,699 | 14,286 | 65,197 | 62,609 |
| Tax | -2,388 | -3,857 | -13,024 | -11,555 |
| Profit for the period | 9,311 | 10,429 | 52,173 | 51,055 |
| Basic earnings per share, SEK | 0.82 | 0.94 | 4.64 | 4.52 |
| Earnings per share, diluted, SEK | 0.82 | 0.93 | 4.64 | 4.52 |
| (SEK 000s) | Q1 2013 |
Q1 2012 |
Q1-Q4 2012 |
1204-1303 12 months |
|---|---|---|---|---|
| Profit for the period | 9,311 | 10,429 | 52,173 | 51,055 |
| Other comprehensive income | ||||
| Income/expense recognized directly in equity | ||||
| Cash flow hedges | -519 | 624 | 2,205 | 1,062 |
| Translation differences | -5,205 | -81 | -480 | -5,604 |
| Share savings program | 136 | 0 | 0 | 136 |
| Hedging of net investments | 9,085 | 0 | 0 | 9,085 |
| Income tax relating to components of other comprehensive income | -1,885 | -164 | -580 | -2,301 |
| Other comprehensive income for the period, net of tax | 1,612 | 379 | 1,145 | 2,379 |
| Total comprehensive income for the period | 10,924 | 10,808 | 53,318 | 53,434 |
| (SEK 000s) | Mar 31 2013 | Mar 31 2012 | Dec 31 2012 |
|---|---|---|---|
| ASSETS | |||
| Goodwill | 380,272 | 236,071 | 236,071 |
| Other intangible assets | 204,193 | 26,630 | 48,910 |
| Property, plant and equipment | 21,832 | 19,298 | 21,106 |
| Deferred tax assets | 725 | 736 | 852 |
| Total fixed assets | 607,022 | 282,735 | 306,936 |
| Inventories | 35,418 | 31,673 | 26,843 |
| Trade and other receivables | 54,114 | 42,928 | 35,501 |
| Other current receivables | 31,429 | 16,485 | 16,845 |
| Cash and cash equivalents | 32,424 | 20,691 | 31,487 |
| Total current assets | 153,385 | 111,777 | 110,676 |
| TOTAL ASSETS | 760,407 | 394,512 | 417,615 |
| EQUITY AND LIABILITIES | |||
| Equity | 352,980 | 309,351 | 342,056 |
| Liabilities | |||
| Non-current liabilities | 234,182 | 21,370 | 787 |
| Deferred income tax liabilities | 65,026 | 21,744 | 23,168 |
| Total non-current liabilities | 299,208 | 43,114 | 23,955 |
| Trade payables | 27,690 | 17,764 | 25,462 |
| Other current liabilities | 80,528 | 24,283 | 26,142 |
| Total current liabilities | 108,218 | 42,047 | 51,604 |
| TOTAL EQUITY AND LIABILITIES | 760,407 | 394,512 | 417,615 |
| (SEK 000s) | Q1 2013 |
Q1 2012 |
Q1-Q4 2012 |
1204-1303 12 months |
|---|---|---|---|---|
| Cash flow from operating activities before changes in working capital |
6,355 | 6,307 | 65,257 | 65,305 |
| Cash flow from changes in working capital | 44,204 | 1,818 | 16,523 | 58,909 |
| Cash flow from operating activities | 50,559 | 8,125 | 81,780 | 124,214 |
| Cash flow from investing activities | -241,540 | -10,257 | -42,944 | -274,227 |
| Cash flow from financing activities | 191,918 | -3,750 | -33,923 | 161,746 |
| Cash flow for the period | 937 | -5,882 | 4,913 | 11,733 |
| Cash and cash equivalents at beginning of the period | 31,487 | 26,573 | 26,573 | 20,691 |
| Cash and cash equivalents at end of period | 32,424 | 20,691 | 31,486 | 32,424 |
Changes in current receivables/liabilities related to derivate financial instruments are reported as cash flow from operating activities before changes in working capital.
| Revenue per region (SEK 000s) |
Q1 2013 |
Q4 2012 |
Q3 2012 |
Q2 2012 |
Q1 2012 |
Q4 2011 |
Q3 2011 |
Q2 2011 |
Q1 2011 |
Q4 2010 |
Q3 2010 |
Q2 2010 |
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| EMEA | 69,182 | 52,971 | 60,049 | 59,169 | 60,387 | 55,876 | 64,900 | 61,757 | 60,379 | 55,109 | 57,441 | 53,697 |
| Americas | 22,480 | 19,686 | 22,687 | 20,813 | 20,429 | 20,330 | 18,844 | 17,418 | 17,167 | 19,354 | 15,715 | 14,206 |
| Asia | 15,553 | 14,608 | 16,408 | 18,920 | 15,677 | 18,642 | 16,976 | 17,322 | 13,981 | 17,184 | 14,423 | 21,339 |
| Income statement (SEK 000s) |
Q1 2013 |
Q4 2012 |
Q3 2012 |
Q2 2012 |
Q1 2012 |
Q4 2011 |
Q3 2011 |
Q2 2011 |
Q1 2011 |
Q4 2010 |
Q3 2010 |
Q2 2010 |
| Revenue (SEK m) | 107,215 | 87,265 | 99,144 | 98,902 | 96,493 | 94,848 | 100,720 | 96,498 | 91,527 | 91,647 | 87,579 | 89,242 |
| Gross profit | 65,446 | 50,269 | 59,382 | 59,953 | 59,766 | 57,686 | 61,062 | 59,193 | 54,552 | 55,385 | 53,931 | 53,723 |
| Gross margin | 61.0% | 57.6% | 59.9% | 60.6% | 61.9% | 60.8% | 60.6% | 61.3% | 59.6% | 60.4% | 61.6% | 60.2% |
| Operating profit | 13,745 | 6,248 | 23,186 | 19,953 | 14,338 | 9,925 | 24,360 | 20,224 | 17,704 | 19,848 | 23,502 | 22,242 |
| Operating margin | 12.8% | 7.2% | 23.4% | 20.2% | 14.9% | 10.5% | 24.2% | 21.0% | 19.3% | 21.7% | 26.8% | 24.9% |
| Profit before tax | 11,699 | 7,001 | 23,100 | 20,810 | 14,286 | 10,715 | 25,544 | 20,536 | 16,973 | 20,231 | 22,702 | 22,834 |
Sales by geographical area for the first quarter 2013 are presented in the graph to the right.
Embedded products reached 57 % of the Group's total sales, IXXAT 15 %, Gateway products 19 % and Remote Management amounted to 3 %.
All product groups are based on a common technology platform and are marketed and sold in the common sales channels. Therefore, no complete segment follow-up is reported.
| (SEK 000s) | Q1 2013 |
Q4 2012 |
Q1-Q4 2012 |
1204-1303 12 months |
|---|---|---|---|---|
| Revenue | 2,243 | 1,891 | 7,995 | 8,347 |
| Cost of sales and services | 0 | 0 | 0 | 0 |
| Gross profit | 2,243 | 1,891 | 7,995 | 8,347 |
| Administrative expenses | -2,249 | -1,745 | -7,642 | -8,146 |
| Other operating expenses | 0 | 0 | 0 | 0 |
| Operating profit | -6 | 146 | 353 | 201 |
| Financial incomes | 7 | 0 | 0 | 7 |
| Financial expenses | -1 | -146 | -353 | -208 |
| Profit before tax | 0 | 0 | 0 | 0 |
| Year-end adjustments | 0 | 0 | 0 | 0 |
| Tax | 0 | 0 | -7 | -7 |
| Profit for the period | 0 | 0 | -7 | -7 |
| (SEK 000s) | Mar 31 2013 | Mar 31 2012 | Dec 31 2012 |
|---|---|---|---|
| ASSETS | |||
| Financial fixed assets | 244,039 | 244,039 | 244,039 |
| Total financial fixed assets | 244,039 | 244,039 | 244,039 |
| Other receivables | 837 | 829 | 955 |
| Cash and cash equivalents | 717 | 542 | 684 |
| Total current assets | 1,554 | 1,371 | 1,639 |
| TOTAL ASSETS | 245,593 | 245,410 | 245,678 |
| EQUITY AND LIABILITIES | |||
| Equity | 123,285 | 133,098 | 123,285 |
| Untaxed reserves | 8 | 8 | 8 |
| Liabilities | |||
| Non-current liabilities | 0 | 20,368 | 0 |
| Trade payables | 104 | 150 | 1,277 |
| Liabilities to Group companies | 119,749 | 90,666 | 120,073 |
| Other current liabilities | 2,447 | 1,120 | 1,035 |
| Total current liabilities | 122,300 | 91,936 | 122,385 |
| TOTAL EQITY AND LIABILITIES | 245,593 | 245,410 | 245,678 |
Share of profit after tax attributable to the parent company's shareholders in relation to the average shareholders' equity excluding non-controlling interests.
Share of the profit after financial income in relation to the average capital employed.
Total assets less non interest bearing current liabilities and provisions, as well as total deferred tax liabilities.
Operating income in relation to total assets.
Share of the profit after tax attributable to the parent company's shareholders in relation to the average number of outstanding shares.
Share of the profit after tax attributable to the parent company's shareholders in relation to the average number of outstanding shares with addition for the average number of shares that are added when converting the outstanding number of convertible securities and options.
Current assets less cash equiva-lents and current liabilities.
Operating income in relation to net sales.
Shareholders' equity in relation to total assets.
Long-term and current financial liabilities less financial assets.
Net debt in relation to shareholders' equity including noncontrolling interests.
Total equity attributable to the parent company's shareholders in relation to total outstanding shares by the end of the period.
HMS Industrial Networks is the leading independent supplier of products for industrial communication including remote management. HMS develops and manufactures solutions for connecting automation devices and systems to industrial networks under the Netbiter, Anybus and IXXAT brands.
Development and manufacturing take place at the headquarters in Halmstad, Sweden and in Weingarten, Germany. Local sales and support are handled by branch offices in China, Denmark, France, Germany, India, Italy, Japan, UK, and USA. HMS employs over 350 people and reported sales of 58 million EUR in 2012. HMS is listed on the NASDAQ OMX in Stockholm.
"All industrial devices will be intelligent and networked. We shall be the market leading partner in the world of industrial communication"
"To create long term value for our customers, employees and investors".
"We provide reliable, flexible and easy-to-use communication and remote management solutions to the world of industrial communication"
HMS Networks AB (publ) Org.Nr. 556661-8954 Box 4126 | 300 04 Halmstad | Sweden Tel: +46 35 172 900 Fax: +46 35 172 909 http://investors.hms.se
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