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HMS Networks

Interim / Quarterly Report Oct 23, 2012

2921_10-q_2012-10-23_9ef68a81-38fb-4469-b5bd-71d9de972e1d.pdf

Interim / Quarterly Report

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hms networks INTERIM REPORT 2012

JANUARY - SEPTEMBER 2012

First nine months

  • q Net sales for the first nine months increased with 2 % reaching SEK 295 m (289), corresponding to a 1 % increase in local currencies
  • q Operating profit reached SEK 57 m (62), equal to a 20 % (22) operating margin
  • q Order intake for the first nine months increased to SEK 325 m (305) corresponding to a 6 % increase in local currencies
  • q Cash flow from operating activities amounted to SEK 63 m (41)
  • q Profit after taxes totaled SEK 42 m (46) and result per share amounted to SEK 3.78 (4.13)
  • q Net sales for the last twelve months amounted to SEK 389 m (380) corresponding to a 2 % increase in local currencies. Operating result amounted to SEK 67 m (82) corresponding to a 17 % (22) operating margin

Third quarter

  • q Net sales for the third quarter reached SEK 99 m (101) corresponding to a 2 % decrease and operating result reached SEK 23 m (24)
  • q Order intake during the third quarter was SEK 95 m (108)

Comment from the CEO

During the period we could see a mixed picture of the HMS markets with a relatively good North American market continuing its positive development to new record levels. We noticed a slow down on the European market during the period. The Japanese market is still irregular. Together the market is still cautious with uncertain conditions and we expect our customers will remain cautious until market conditions are more stable. Due to this situation and the strength of the Swedish currency HMS is now in a period of weaker growth.

HMS shows stability in reported figures and its financial position. With a focus on cost control we can now report at operating margin at 20 %, which is in line with our long term goal for profitability. This in combination with a continued in flow of design-wins allows us to continue with our long term strategic plan. The development of new technical platforms in the area of Safety and our new embedded platform continues according to plan.

During the period HMS signed an important blanket agreement within Telecom applications for our Remote Management solution. This product is now close to a market break through and we expect to see exciting market opportunities in this area in the future.

Our market is still difficult to predict in the near future, which means that we will continue to balance our long term growth strategy with a cautious approach to our expansion of costs.

Staffan Dahlström CEO for HMS Networks AB

Quarterly data Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4
2012 2012 2012 2011 2011 2011 2011 2010
Net sales (SEK m) 99 99 96 95 101 97 92 92
Order intake (SEK m) 95 113 116 83 108 100 97 88
Operating profit (SEK m) 23 20 14 10 24 20 18 20
Gross margin (%) 59.9 60.6 61.9 60.8 60.6 61.3 59.6 60.4
Operating margin (%) 23.4 20.2 14.9 10.5 24.2 21.0 19.3 21.7
Return on capital (%) 16.2 17.7 17.6 18.6 21.6 22.1 22.6 23.2
Earnings per share (SEK) 1.49 1.36 0.94 0.71 1.67 1.34 1.11 1.31
Equity per share (SEK) 29.43 28.23 27.74 26.77 25.96 24.41 25.08 25.30
Cash flow for operating activities per share (SEK) 2.23 2.63 0.73 0.25 1.74 2.06 -0.08 2.27

Net sales

Net sales for the last twelve months amounted to SEK 389.4 m (380.4) corresponding to a 2.4 % increase. In total the revaluation of the Swedish currency in relation to the major HMS currencies had a SEK 1.5 m positive effect on net sales compared to the previous twelve month period. The order intake for the last four quarters amounted to SEK 407.4 m (392.3).

Net sales for the third quarter 2012 totaled to SEK 99.1 m (100.7), corresponding to a 1.6 % decrease compared to the same quarter the previous year. Adjusted for a SEK -3.2 m currency effect the volume increase was 1.6 % in local currencies. Order intake decreased with SEK 12.6 m to SEK 95.1 m (107.7), of which SEK 90.6 will be delivered during the upcoming twelve months. In local currencies order intake decreased with 8.7 %.

Operating profit

Operating profit totaled to SEK 67.4 m (82.1) for the last four quarters, equivalent to an operating margin of 17.3 % (21.6). Currency effects had a positive impact on the operating result with SEK 2.3 m compared to the previous twelve month period.

The operating profit for the third quarter 2012 totaled to SEK 23.2 m (24.4), corresponding to a 23.4 % (24.2) operating margin. Changes in exchange rates had a SEK 1.6 m negative impact compared with the same period the previous year.

Tax

The tax charge for the first nine months was SEK 15.7 m (17.0). 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.

Equity

The Group's equity amounted to SEK 333.3 m (289.5). The total number of shares at the end of the period was 11,322,400. The Group's equity/assets ratio improved to 81.1 % (73.5).

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) Sep 30 2012 Sep 30 2011 Dec 31 2011
Balance at 1 january 298,543 285,815 285,815
Total comprehensive income for the period 44,524 22,243 53,261
Issue of new shares through warrants 15,289 0 0
Dividends -25,094 -22,306 -22,306
Acquisition non-controlling interests 0 -18,227 -18,227
Closing balance 333,262 289,525 298,543

Currency effects

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 first nine months consist of 57 % in EURO, 25 % in USD, 10 % in Japanese Yen and 8 % in SEK and other currencies. Cost of goods sold consists of 44 % in EURO, 14 % in USD and 1 % in Japanese Yen. Operating expenses consists of 17 % in EURO, 8 % in USD, 7 % in Japanese Yen and 68 % of SEK and other currencies.

The Group applies a policy for currency hedging described in the annual report.

Cash flow, investments and financial position

Cash flow from operating activities in the first nine months 2012 amounted to SEK 62.9 m (41.5).

The investments in tangible assets for the first nine months totaled SEK 10.7 m (7.4). Investments in intangible assets for the period totaled SEK 19.5 m (7.6) and comprise internal development costs. The increase in intangible assets consists of continued development of our new embedded platform, new technical platforms within the safety area and customized projects.

At the end of the period the cash equivalents totaled SEK 25.4 m (31.0) and unutilized credit facilities SEK 30.5 m. The Group's net cash amounted to SEK 24.5 m (1.8). During the second quarter HMS distributed dividend payments to its shareholder equal to SEK 2.25 per share (2.00), in total SEK 25.1 m. During the third quarter a final amortization of the bank loan in the parent company was made. In total, SEK 24.1 m was amortized during 2012, including SEK 16.6 m in the third quarter.

Important events

  • q In January, HMS moved into new and extended office premises in Halmstad.
  • q HMS received the largest single order in the company´s history, SEK 16 m.
  • q HMS received a SEK 2 m order from one of the leading manufacturers of industrial energy metering and monitoring in Europe.

  • q The 2009 stock option program was completed. In this program participants subscribed to 169,500 new shares in the Company.

  • q HMS shipped the 2 millionth Anybus module.
  • q HMS signed a blanket agreement worth SEK 6 m with one of Europe's leading manufacturer of industrial equipment.
  • q The 2012 Annual General Meeting was held at the Company´s head office in Halmstad.
  • q HMS signed a global supplier agreement with a world leading supplier of technology to base stations for mobile telephony.
  • q HMS received a SEK 7 m order for development and delivery of Anybus network cards to one of Japans leading manufacturer of frequency converters.
  • q H.M. King Carl XVI Gustaf and Queen Silvia visited HMS head office in Halmstad.

Outlook

The HMS Group long term growth is supported by a continued inflow of design-wins, a broader product offering within the Gateway product family and Remote Management, the development of new generations of products, a strengthened customer focus and an expansion of the HMS sales channels according to the existing strategy.

The global market for HMS products is expected to remain weak. The market for the HMS product offering and the exchange rate development are still unpredictable but the HMS overall goals are unchanged: A long term average growth of 20 % per year and an operating margin above 20 %.

HMS Networks AB's share

HMS Networks AB (publ) is listed on the Nasdaq OMX Stockholm Small Cap list, in the Information Technology sector. The total number of shares amounted to 11,322,400.

During the second quarter participants in the stock option program decided by the 2009 Annual General Meeting subscribed to 169,500 new shares in the Company. The subscription price for each share was SEK 90.20 and the total dilution amounted to 1.5 %.

The parent company

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 nine months 2012 amounted to SEK 0.4 m (0.7). Cash and cash equivalents amounted to SEK 0.1 m (0.1) and borrowing amounted to SEK 0.0 m (27.9).

HALMSTADGOTHENBURGPUNE COVENTRYBEIJINGTOKYO COPENHAGENKARLSRUHE MILANOMULHOUSECHICAGO 5

Short of the company

Strategies

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 three product lines, which to a certain degree are based on a common technical platform:

q Anybus Embedded - Embedded network interface cards

q Anybus Gateways - Communication translators between different networks

q Netbiter Remote Management - Remote monitoring and controlling of industrial devices

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.

Business model

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.

Accounting policies

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, 2012 did not affect the Groups reporting as of September 30, 2012.

As of the first quarter 2012 customer orders related to development projects including future volume commitments and blanket agreements with estimated future volumes, are included in the period's order intake. As clarification, information about which part of the order intake that will be shipped during the following twelve months, is disclosed.

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.

Risk management

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 2011. In addition to the risks described in these documents, no additional significant risks have been identified.

Nomination committee

In accordance with principles adopted at HMS 2012 annual general meeting, the following persons have been assigned to be a part of the Nomination Committee: Nicolas Hassbjer representing 29 % of the shares, Jan Svensson, Investment AB Latour, representing 22 % of the shares, Evert Carlsson, Swedbank Robur Fonder AB representing 10 % of the shares and Urban Jansson, Chairman of the Board. The Nomination Committee has appointed Jan Svensson as its Chairman.

Shareholders who wish to present proposals to HMS's Nomination Committee may do so by e-mail to: valberedning@hms. se or in writing to: HMS Networks AB, Investors Relations, Att: Nomination Committee, Box 4126, SE 300 04 Halmstad, Sweden no later than February 1, 2013.

Reporting occasions

  • q Year-end Report 2012 will be published on February 7, 2013
  • q Annual General Meeting will be held on April 19, 2013
  • q Q1 Report 2013 will be published on April, 19, 2013
  • q Half-year Report 2013 will be published on July 16, 2013
  • q Q3 Report 2013 will be published on October 16, 2013

Halmstad October 23, 2012

Staffan Dahlström Chief Executive Officer

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

Report of Review of Interim Financial Information

Introduction

We have reviewed this report for the period 1 January 2012 to 30 September 2012 for HMS Networks AB (publ). The board of directors and the CEO are responsible for the preparation and presentation of this interim report in accordance with IAS 34 and the Swedish Annual Accounts Act. Our responsibility is to express a conclusion on this interim report based on our review.

Scope of Review

We conducted our review in accordance with the Swedish Standard on Review Engagements SÖG 2410, Review of Interim Report Performed by the Independent Auditor of the Entity. A review consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing, ISA, and other generally accepted auditing standards in Sweden. The procedures performed in a review do not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the interim report is not prepared, in all material respects, in accordance with IAS 34 and the Swedish Annual Accounts Act, regarding the Group, and with the Swedish Annual Accounts Act, regarding the Parent Company.

Halmstad October 23, 2012 PricewaterhouseCoopers

Olof Enerbäck Authorised Public Accountant

Financial accounts

Q3
2012
Q3
2011
Q1-Q3
2012
Q1-Q2
2011
Q1-Q4
2011
1110-1209
12 months
Net increase in revenue (%) -1.6 15.0 2.0 14.2 11.3 2.4
Gross margin (%) 59.9 60.6 60.8 60.5 60.6 60.8
Operating margin EBIT (%) 23.4 24.2 19.5 21.6 18.8 17.3
Return on capital employed (%)* 21.4 26.5 21.4 26.5 23.2 21.4
Return on total equity (%)* 16.2 21.6 16.2 21.6 18.6 16.2
Working capital in relation to sales (%)* 8.9 7.6 8.9 7.6 8.3 8.9
Capital turnover rate 0.97 0.98 0.97 0.98 0.98 0.97
Debt/equity ratio -0.07 -0.01 -0.07 -0.01 0.00 -0.07
Equity/assets ratio (%) 81.1 73.5 81.1 73.5 76.3 81.1
Capital expenditure in property. plant and equipment
(SEK 000s)
1,273 2,632 10,679 7,428 9,341 12,592
Capital expenditure in intagible fixed assets (SEK 000s) 7,645 576 19,464 7,600 10,744 22,607
Depreciation of property. plant and equipment (SEK 000s) -1,640 -1,243 -4,606 -3,597 -4,661 -5,670
Amortisation of intangible fixed assets (SEK 000s) -1,200 -1,574 -3,514 -3,982 -5,539 -5,071
Number of employees (average) 240 224 238 208 213 235
Revenue per employee (SEK m)* 1.6 1.7 1.6 1.8 1.8 1.7
Total equity per share, SEK 29.43 25.96 29.43 25.96 26.77 29.43
Total equity per share, diluted, SEK 29.43 25.95 29.43 25.95 26.76 29.43
Cash flow from operations per share before dilution, SEK 2.23 1.74 5.60 3.72 4.13 6.01
Cash flow from operations per share after dilution, SEK 2.23 1.73 5.60 3.71 4.12 6.01
Basic number of shares. average, thousands 11,322 11,153 11,228 11,153 11,153 11,209
Number of shares. diluted average, thousands 11,322 11,157 11,232 11,173 11,169 11,213

* The key ratio has been translated into 12 months rolling value when applicable.

Income statements

(SEK 000s) Q3
2012
Q3
2011
Q1-Q3
2012
Q1-Q3
2011
Q1-Q4
2011
1110-1209
12 months
Revenue 99,144 100,720 294,539 288,744 383,592 389,387
Cost of goods and services sold -39,762 -39,658 -115,437 -113,937 -151,099 -152,599
Gross profit 59,382 61,062 179,102 174,807 232,493 236,788
Sales and marketing costs -23,343 -20,991 -74,109 -64,431 -92,543 -102,222
Administrative expenses -7,610 -7,147 -25,343 -22,888 -30,643 -33,098
Research and development costs -5,385 -9,903 -21,192 -27,083 -36,725 -30,834
Other operating income 2,252 1,845 2,795 2,366 1,120 340
Other costs -2,110 -505 -3,774 -484 -1,490 -3,572
Operating profit 23,186 24,360 57,478 62,288 72,213 67,403
Financial income 35 1,413 1,164 1,473 2,591 1,769
Financial costs -122 -229 -446 -708 -1,036 -261
Profit before tax 23,100 25,544 58,196 63,053 73,768 68,911
Tax -6,237 -6,906 -15,714 -17,033 -19,839 -18,520
Profit for the period 16,863 18,638 42,483 46,020 53,929 50,391
Basic earnings per share, SEK 1.49 1.67 3.78 4.13 4.84 4.50
Earnings per share, diluted, SEK 1.49 1.67 3.78 4.12 4.83 4.49

Statements of comprehensive income

(SEK 000s) Q3
2012
Q3
2011
Q1-Q3
2012
Q1-Q3
2011
Q1-Q4
2011
1110-1209
12 months
Profit for the period 16,863 18,638 42,483 46,020 53,929 50,391
Other comprehensive income
Income/expense recognized directly in equity
Cash flow hedges 297 -1,516 3,344 -2,219 -1,035 4,528
Translation differences -295 -193 -424 -143 94 -187
Income tax relating to components of other comprehen
sive income
-78 399 -880 584 273 -1,191
Other comprehensive income for the period, net of tax -75 -1,309 2,041 -1,777 -668 3,150
Total comprehensive income for the period 16,787 17,329 44,524 44,243 53,261 53,541

Balance Sheets

(SEK 000s) Sep 30 2012 Sep 30 2011 Dec 31 2011
ASSETS
Goodwill 236,071 236,071 236,071
Other intangible assets 38,894 21,769 23,353
Property, plant and equipment 21,321 14,580 15,347
Deferred tax assets 726 763 770
Total fixed assets 297,012 273,182 275,541
Inventories 25,783 31,263 35,584
Trade and other receivables 45,815 47,663 42,781
Other current receivables 16,769 10,647 10,634
Cash and cash equivalents 25,367 30,984 26,573
Total current assets 113,734 120,558 115,572
TOTAL ASSETS 410,746 393,740 391,113
EQUITY AND LIABILITIES
Equity 333,262 289,525 298,543
Liabilities
Non-current liabilities 859 29,186 25,192
Deferred income tax liabilities 25,696 17,185 20,705
Total non-current liabilities 26,555 46,371 45,897
Trade payables 23,350 22,838 22,216
Other current liabilities 27,579 35,005 24,457
Total current liabilities 50,929 57,843 46,673
TOTAL EQUITY AND LIABILITIES 410,746 393,740 391,113

Cash flow statements

(SEK 000s) Q3
2012
Q3
2011
Q1-Q3
2012
Q1-Q3
2011
Q1-Q4
2011
1110-1209
12 months
Cash flow from operating activities before changes in
working capital
24,346 24,131 56,053 59,102 64,986 61,937
Cash flow from changes in working capital 953 -4,779 6,808 -17,631 -18,977 5,462
Cash flow from operating activities 25,299 19,352 62,861 41,471 46,009 67,399
Cash flow from investing activities -8,919 -2,010 -30,144 -32,057 -37,114 -35,201
Cash flow from financing activities -16,618 -3,608 -33,923 -33,414 -37,306 -37,815
Cash flow for the period -238 13,734 -1,206 -24,000 -28,411 -5,617
Cash and cash equivalents at beginning of the period 25,605 17,250 26,573 54,984 54,984 30,984
Cash and cash equivalents at end of period 25,367 30,984 25,367 30,984 26,573 25,367

Changes in current receivables/liabilities related to derivate financial instruments are reported as cash flow from operating activities before changes in working capital.

Quarterly data

Revenue,per,region
(SEK,000s)
Q3
2012
Q2
2012
Q1
2012
Q4
2011
Q3
2011
Q2
2011
Q1
2011
Q4
2010
Q3
2010
Q2
2010
Q1
2010
Q4
2009
EMEA 60,049 59,169 60,387 55,876 64,900 61,757 60,379 55,109 57,441 53,697 47,979 46,284
Americas 22,687 20,813 20,429 20,330 18,844 17,418 17,167 19,354 15,715 14,206 12,611 13,373
Asia 16,408 18,920 15,677 18,642 16,976 17,322 13,981 17,184 14,423 21,339 15,471 12,558
Income,statement,
(SEK,000s)
Q3
2012
Q2
2012
Q1
2012
Q4
2011
Q3
2011
Q2
2011
Q1
2011
Q4
2010
Q3
2010
Q2
2010
Q1
2010
Q4
2009
Revenue,(SEK,m) 99,144 98,902 96,493 94,848 100,720 96,498 91,527 91,647 87,579 89,242 76,061 72,215
Gross,profit 59,382 59,953 59,766 57,686 61,062 59,193 54,552 55,385 53,931 53,723 44,518 43,408
Gross,margin 59.9% 60.6% 61.9% 60.8% 60.6% 61.3% 59.6% 60.4% 61.6% 60.2% 58.5% 60.1%
Operating,profit 23,186 19,953 14,338 9,925 24,360 20,224 17,704 19,848 23,502 22,242 17,932 15,802
Operating,margin 23.4% 20.2% 14.9% 10.5% 24.2% 21.0% 19.3% 21.7% 26.8% 24.9% 23.6% 21.9%
Profit,before,tax 23,100 20,810 14,286 10,715 25,544 20,536 16,973 20,232 22,702 22,834 18,295 15,965

Sales

Sales by geographical area for the first nine months 2012 are presented in the graph to the right.

Embedded products reached 69 % of the Group's total sales, Gateway products 27 % 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 reporting is disclosed.

Parent company income statements

(SEK 000s) Q3
2012
Q3
2011
Q1-Q3
2012
Q1-Q3
2011
Q1-Q4
2011
1110-1209
12 months
Revenue 1,878 1,701 6,247 5,823 7,428 7,852
Cost of sales and services 0 0 0 0 0 0
Gross profit 1,878 1,701 6,247 5,823 7,428 7,852
Administrative expenses -1,785 -1,424 -5,892 -5,117 -6,589 -7,364
Operating profit 93 277 355 706 839 488
Interest expense and similar items -93 -221 -355 -650 -839 -544
Profit before tax 0 56 0 56 0 -56
Tax 0 -15 0 -15 -8 -8
Profit for the period 0 41 0 41 -8 -64

Parent company balance sheets

(SEK 000s) Sep 30 2012 Sep 30 2011 Dec 31 2011
ASSETS
Financial fixed assets 244,039 244,039 244,039
Total financial fixed assets 244,039 244,039 244,039
Other receivables 419 318 444
Cash and cash equivalents 143 85 18
Total current assets 562 403 462
TOTAL ASSETS 244,601 244,442 244,501
EQUITY AND LIABILITIES
Equity 123,292 133,147 133,098
Untaxed reserves 8 8 8
Liabilities
Non-current liabilities 0 27,868 24,118
Trade payables 122 8 525
Liabilities to Group companies 119,154 81,511 85,769
Other current liabilities 2,025 1,900 983
Total current liabilities 121,301 83,419 87,277
TOTAL EQITY AND LIABILITIES 244,601 244,442 244,501

Definitions

Return on shareholders' equity

Share of profit after tax attributable to the parent company's shareholders in relation to the average shareholders' equity excluding non-controlling interests.

Return on capital employed

Share of the profit after financial income in relation to the average capital employed.

Capital employed

Total assets less non interest bearing current liabilities and provisions, as well as total deferred tax liabilities.

Capital turnover rate

Operating income in relation to total assets.

Earnings per share

Share of the profit after tax attributable to the parent company's shareholders in relation to the average number of outstanding shares.

Earnings per share after dilution

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.

Working capital

Current assets less cash equiva-lents and current liabilities.

Operating margin

Operating income in relation to net sales.

Equity/assets ratio

Shareholders' equity in relation to total assets.

Net debt

Long-term and current financial liabilities less financial assets.

Net debt/equity ratio

Net debt in relation to shareholders' equity including noncontrolling interests.

Total equity per share

Total equity attributable to the parent company's shareholders in relation to total outstanding shares by the end of the period.

HMS Networks (publ) is a world-leading supplier of communication technology for industrial automation. Sales for 2011 totaled SEK 384 million. Over 90% of these sales were to customers located outside Sweden. All product development and parts of the manufacturing are performed at the head office in Halmstad. Sales offices are located in Tokyo, Beijing, Karlsruhe, Chicago, Milan, Mulhouse, Pune, Coventry and Copenhagen. HMS has 240 employees and produces network interface cards and Gateways to interconnect different networks under the trademark Anybus® and products for remote management under the trademark Netbiter®. HMS is listed on the Nasdaq OMX Stocholm Small Cap list, in the Information Technology sector.

Our vision

"The vision of HMS is that all automation devices will be intelligent and networked. HMS shall be the market leader in connectivity solutions for industrial devices".

Our purpose

"To create long term value for our customers, employees and investors".

Our mission

"We provide world class solutions to connect industrial devices to networks and products enabling interconnection between different industrial networks".

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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