Interim / Quarterly Report • Apr 18, 2012
Interim / Quarterly Report
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The previously communicated market uncertainty persists. On our major markets we see continuing positive signs on the American market. The German market is somewhat reserved and the Japanese market is still uncertain.
We see a continuing inflow of design-wins confirming our strong position on the market and the attractiveness of our product offering. However, the effect of these new customers will not materialize (on the income statement) until 2013 and going forward. The demand for customized solutions of the HMS technology is still high and during the first quarter, we received the biggest order in the company´s history, amounting to SEK 16 m. The conditions for a continuing long-term growth are unchanged despite the short term uncertainty among our customers.
We have noticed that our effort to improve our purchase process and relationship to our suppliers is having effect, resulting in a strong gross margin on product sales.
We now strive to reach the full effect of our investment in new resources made during the previous years. Sofar, these investments have resulted in a continuous inflow of design-wins, a more efficient sale and marketing organization, a strengthened Development Department and several new partners adding to the HMS presence on important markets.
Staffan Dahlström CEO for HMS Networks AB
| Quarterly data | Q1 | Q4 | Q3 | Q2 | Q1 | Q4 | Q3 | Q2 |
|---|---|---|---|---|---|---|---|---|
| 2012 | 2011 | 2011 | 2011 | 2011 | 2010 | 2010 | 2010 | |
| Net sales (SEK m) | 96 | 95 | 101 | 97 | 92 | 92 | 88 | 89 |
| Order intake (SEK m) | 116 | 83 | 108 | 100 | 97 | 88 | 87 | 90 |
| Operating profit (SEK m) | 14 | 10 | 24 | 20 | 18 | 20 | 24 | 22 |
| Gross margin (%) | 61.9 | 60.8 | 60.6 | 61.3 | 59.6 | 60.4 | 61.6 | 60.2 |
| Operating margin (%) | 14.9 | 10.5 | 24.2 | 21.0 | 19.3 | 21.7 | 26.8 | 24.9 |
| Return on capital (%) | 17.6 | 18.6 | 21.6 | 22.1 | 22.6 | 23.2 | 23.0 | 21.2 |
| Earings per share (SEK) | 0.94 | 0.71 | 1.67 | 1.34 | 1.11 | 1.31 | 1.46 | 1.48 |
| Equity per share (SEK) | 27.74 | 26.77 | 25.96 | 24.41 | 25.08 | 25.30 | 24.37 | 22.80 |
| Cash flow for operating activities per share (SEK) | 0.73 | 0.25 | 1.74 | 2.06 | -0.08 | 2.27 | 1.86 | 1.64 |
Net sales for the last twelve months amounted to SEK 388.6 m (360.0) corresponding to a 7.9 % increase. In total the revaluation of the Swedish currency in relation to the major HMS currencies had a SEK 12.6 m negative effect on net sales compared to the previous twelve month period. The order intake amounted to SEK 407.1 m (361.0).
Net sales for the first quarter 2012 was SEK 96.5 m (91.5), corresponding to a 5.4 % increase compared to the same quarter the previous year. Adjusted for SEK 1.5 m in currency effects, the increase amounted to 3.8 %. Order intake for the first quarter increased by SEK 19.5 m to SEK 116.3 m (96.8), of which SEK 96.1 m expected for delivery during the next twelve months.
Operating profit totaled to SEK 68.8 m (83.3) for the last twelve months, equivalent to an operating margin of 17.7 %. Currency effects had a negative impact on the operating result with SEK 5.9 m compared to the previous twelve month period.
The operating profit for the first quarter 2012 totaled to SEK 14.3 m (17.7), corresponding to a 14.9 % operating margin. Changes in exchange rates had a SEK 1.0 m positive impact compared with the same period the previous year.
The tax charge for the first quarter was SEK 3.9 m (4.6). 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 SEK 309.4 m (279.8). The total number of shares at the end of the year was 11,152,900. After full dilution, the total number of shares is 11,322,400. The Group's equity/assets ratio improved to 78.4 % (73.3).
| Change in Group Equity | |||
|---|---|---|---|
| (SEK 000s) | Mar 31 2012 | Mar 31 2011 | Dec 31 2011 |
| Balance at 1 january | 298,543 | 285,815 | 285,815 |
| Total comprehensive income for the period | 10,808 | 12,181 | 53, 261 |
| Dividends | 0 | 0 | -22,306 |
| Acquisition non-controlling interests | 0 | -18,227 | -18,227 |
| Closing balance | 309,351 | 279,769 | 298,543 |
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.
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 59 % in EURO, 23 % in USD, 10 % in Japanese Yen and 8 % in SEK and other currencies. Cost of goods sold consists of 41 % in EURO, 14 % in USD and 1 % in Japanese Yen. Operating expenses consists of 16 % in EURO, 7 % in USD, 7 % in Japanese Yen and 70 % 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 2012 amounted to SEK 8.1 m (-0.9).
The investments in tangible assets for the quarter totaled SEK 5.5 m (3.6). Investments in intangible assets for the period totaled SEK 4.8 m (3.4) and comprise internal development costs.
At the end of the period the cash equivalents totaled SEK 20.7 m (25.1) and unutilized credit facilities SEK 20.0 m. The Group's net debt amounted to SEK 0.7 m (10.5).
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, a stronger customer focus, and expansion of the HMS sales channels 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, 2012 did not affect the Groups reporting as of March 31, 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.
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 11,152,900.
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.
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 2012 amounted to SEK 0.1 m (0.2). Cash and cash equivalents amounted to SEK 0.5 m (0.0) and borrowing amounted to SEK 20.4 m (35.4).
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 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.
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 18, 2012
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 2012 |
Q1 2011 |
Q1-Q4 2011 |
1104-1203 12 months |
|
|---|---|---|---|---|
| Net increase in revenue (%) | 5.4 | 20.3 | 11.3 | 7.9 |
| Gross margin (%) | 61.9 | 59.6 | 60.6 | 61.2 |
| Operating margin EBIT (%) | 14.9 | 19.3 | 18.8 | 17.7 |
| Return on capital employed (%)* | 22.3 | 27.4 | 23.2 | 22.3 |
| Return on total equity (%)* | 17.6 | 22.6 | 18.6 | 17.6 |
| Working capital in relation to sales (%)* | 11.1 | 8.9 | 8.3 | 11.1 |
| Capital turnover rate | 1.00 | 0.98 | 0.98 | 1.00 |
| Debt/equity ratio | 0.00 | 0.04 | 0.00 | 0.00 |
| Equity/assets ratio (%) | 78.4 | 73.3 | 76.3 | 78.4 |
| Capital expenditure in property. plant and equipm. (SEK 000s) | 5,455 | 3,605 | 9,341 | 11,186 |
| Capital expenditure in intagible fixed assets (SEK 000s) | 4,802 | 3,390 | 10,744 | 12,157 |
| Depreciation of property. plant and equipment (SEK 000s) | -1,386 | -1,123 | -4,661 | -4,924 |
| Amortisation of intangible fixed assets (SEK 000s) | -1,115 | -1,204 | -5,539 | -5,450 |
| Number of employees (average) | 233 | 197 | 213 | 222 |
| Revenue per employee (SEK m)* | 1.7 | 1.8 | 1.8 | 1.8 |
| Cash flow from operating activities per share. SEK | 27.74 | 25.08 | 26.77 | 27.74 |
| Cash flow from operating activities per share. diluted. SEK | 27.71 | 25.02 | 26.76 | 27.71 |
| Cash flow from operations per share before dilution. SEK | 0.73 | -0.07 | 4.13 | 4.93 |
| Cash flow from operations per share after dilution. SEK | 0.73 | -0.07 | 4.12 | 4.93 |
| Basic number of shares. average. thousands | 11,153 | 11,153 | 11,153 | 11,153 |
| Number of shares. diluted average. thousands | 11,163 | 11,182 | 11,169 | 11,165 |
* The key ratio has been translated into 12 months rolling value when applicable.
| (SEK 000s) | Q1 2012 |
Q1 2011 |
Q1-Q4 2011 |
1104-1203 12 months |
|---|---|---|---|---|
| Revenue | 96,493 | 91,527 | 383,592 | 388,558 |
| Cost of goods and services sold | -36,727 | -36,975 | -151,099 | -150,851 |
| Gross profit | 59,766 | 54,552 | 232,493 | 237,707 |
| Sales and marketing costs | -25,732 | -20,751 | -92,543 | -97,524 |
| Administrative expenses | -9,304 | -7,731 | -30,643 | -32,216 |
| Research and development costs | -8,911 | -8,337 | -36,725 | -37,299 |
| Other operating income | 307 | 1,101 | 1,120 | 325 |
| Other costs | -1,787 | -1,130 | -1,490 | -2,147 |
| Operating profit | 14,338 | 17,704 | 72,213 | 68,847 |
| Financial income | 143 | 17 | 2,591 | 2,717 |
| Financial costs | -195 | -748 | -1,036 | -483 |
| Profit before tax | 14,286 | 16,973 | 73,768 | 71,081 |
| Tax | -3,857 | -4,583 | -19,839 | -19,114 |
| Profit for the period | 10,429 | 12,390 | 53,929 | 51,967 |
| Basic earnings per share, SEK | 0.94 | 1.11 | 4.84 | 4.66 |
| Earnings per share, diluted, SEK | 0.93 | 1.11 | 4.83 | 4.65 |
| (SEK 000s) | Q1 2012 |
Q1 2011 |
Q1-Q4 2011 |
1104-1203 12 months |
|---|---|---|---|---|
| Profit for the period | 10,429 | 12,390 | 53,929 | 51,967 |
| Other comprehensive income | ||||
| Income/expense recognized directly in equity | ||||
| Cash flow hedges | 624 | -259 | -1,035 | -152 |
| Translation differences | -81 | -19 | 94 | 32 |
| Income tax relating to components of other comprehensive income | -164 | 68 | 273 | 41 |
| Other comprehensive income for the period, net of tax | 379 | -210 | -668 | -79 |
| Total comprehensive income for the period | 10,808 | 12,181 | 53,261 | 51,888 |
| (SEK 000s) | Mar 31 2012 | Mar 31 2011 | Dec 31 2011 |
|---|---|---|---|
| ASSETS | |||
| Goodwill | 236,071 | 236,071 | 236,071 |
| Other intangible assets | 26,630 | 20,336 | 23,353 |
| Property, plant and equipment | 19,298 | 13,048 | 15,347 |
| Deferred tax assets | 736 | 701 | 770 |
| Total fixed assets | 282,735 | 270,156 | 275,541 |
| Inventories | 31,673 | 29,376 | 35,584 |
| Trade and other receivables | 42,928 | 48,119 | 42,781 |
| Other current receivables | 16,485 | 9,141 | 10,634 |
| Cash and cash equivalents | 20,691 | 25,128 | 26,573 |
| Total current assets | 111,777 | 111,764 | 115,572 |
| TOTAL ASSETS | 394,512 | 381,920 | 391,113 |
| EQUITY AND LIABILITIES | |||
| Equity | 309,351 | 279,769 | 298,543 |
| Liabilities | |||
| Non-current liabilities | 21,370 | 35,599 | 25,192 |
| Deferred income tax liabilities | 21,744 | 17,102 | 20,705 |
| Total non-current liabilities | 43,114 | 52,701 | 45,897 |
| Trade payables | 17,764 | 25,048 | 22,216 |
| Other current liabilities | 24,283 | 24,403 | 24,457 |
| Total current liabilities | 42,047 | 49,450 | 46,673 |
| TOTAL EQUITY AND LIABILITIES | 394,512 | 381,920 | 391,113 |
| (SEK 000s) | Q1 2012 |
Q1 2011 |
Q1-Q4 2011 |
1104-1203 12 months |
|---|---|---|---|---|
| Cash flow from operating activities before changes in working capital |
6,307 | 15,486 | 64,986 | 55,807 |
| Cash flow from changes in working capital | 1,818 | -16,370 | -18,977 | -789 |
| Cash flow from operating activities | 8,125 | -884 | 46,009 | 55,018 |
| Cash flow from investing activities | -10,257 | -25,222 | -37,114 | -22,149 |
| Cash flow from financing activities | -3,750 | -3,750 | -37,306 | -37,306 |
| Cash flow for the period | -5,882 | -29,856 | -28,411 | -4,437 |
| Cash and cash equivalents at beginning of the period | 26,573 | 54,984 | 54,984 | 25,128 |
| Cash and cash equivalents at end of period | 20,691 | 25,128 | 26,573 | 20,691 |
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 2012 |
Q4 2011 |
Q3 2011 |
Q2 2011 |
Q1 2011 |
Q4 2010 |
Q3 2010 |
Q2 2010 |
Q1 2010 |
Q4 2009 |
Q3 2009 |
Q2 2009 |
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| EMEA | 60,387 | 55,876 | 64,900 | 61,757 | 60,379 | 55,109 | 57,441 | 53,697 | 47,979 | 46,284 | 38,184 | 34,789 |
| Americas | 20,429 | 20,330 | 18,844 | 17,418 | 17,167 | 19,354 | 15,715 | 14,206 | 12,611 | 13,373 | 10,892 | 8,221 |
| Asia | 15,677 | 18,642 | 16,976 | 17,322 | 13,981 | 17,184 | 14,423 | 21,339 | 15,471 | 12,558 | 7,659 | 6,959 |
| Income statement (SEK 000s) |
Q1 2012 |
Q4 2011 |
Q3 2011 |
Q2 2011 |
Q1 2011 |
Q4 2010 |
Q3 2010 |
Q2 2010 |
Q1 2010 |
Q4 2009 |
Q3 2009 |
Q2 2009 |
| Revenue (SEK m) | 96,493 | 94,848 | 100,720 | 96,498 | 91,527 | 91,647 | 87,579 | 89,242 | 76,061 | 72,215 | 56,735 | 49,969 |
| Gross profit | 59,766 | 57,686 | 61,062 | 59,193 | 54,552 | 55,385 | 53,931 | 53,723 | 44,518 | 43,408 | 34,245 | 26,752 |
| Gross margin | 61.9% | 60.8% | 60.6% | 61.3% | 59.6% | 60.4% | 61.6% | 60.2% | 58.5% | 60.1% | 60.4% | 53.5% |
| Operating profit | 14,338 | 9,925 | 24,360 | 20,224 | 17,704 | 19,848 | 23,502 | 22,242 | 17,932 | 15,802 | 13,349 | -2,989 |
| Operating margin | 14.9% | 10.5% | 24.2% | 21.0% | 19.3% | 21.7% | 26.8% | 24.9% | 23.6% | 21.9% | 23.5% | -6.0% |
| Profit before tax | 14,286 | 10,715 | 25,544 | 20,536 | 16,973 | 20,232 | 22,702 | 22,834 | 18,295 | 15,965 | 12,423 | -4,964 |
Sales by geographical area for the first quarter 2012 are presented in the graph to the right.
Embedded products reached 69 % of the Group's total sales, Gateway products 25 % 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 2012 |
Q4 2011 |
Q1-Q4 2011 |
1104-1203 12 months |
|---|---|---|---|---|
| Revenue | 1,891 | 1,735 | 7,428 | 7,584 |
| Cost of sales and services | 0 | 0 | 0 | 0 |
| Gross profit | 1,891 | 1,735 | 7,428 | 7,584 |
| Administrative expenses | -1,745 | -1,528 | -6,589 | -6,806 |
| Operating profit | 146 | 207 | 839 | 778 |
| Interest expense and similar items | -146 | -207 | -839 | -778 |
| Profit before tax | 0 | 0 | 0 | 0 |
| Tax | 0 | 0 | -8 | -8 |
| Profit for the period | 0 | 0 | -8 | -8 |
| (SEK 000s) | Mar 31 2012 | Mar 31 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 | 829 | 596 | 444 |
| Cash and cash equivalents | 542 | 5 | 18 |
| Total current assets | 1,371 | 601 | 462 |
| TOTAL ASSETS | 245,410 | 244,640 | 244,501 |
| EQUITY AND LIABILITIES | |||
| Equity | 133,098 | 155,411 | 133,098 |
| Untaxed reserves | 8 | 8 | 8 |
| Liabilities | |||
| Non-current liabilities | 20,368 | 35,368 | 24,118 |
| Trade payables | 150 | 124 | 525 |
| Liabilities to Group companies | 90,666 | 52,759 | 85,769 |
| Other current liabilities | 1,120 | 970 | 983 |
| Total current liabilities | 91,936 | 53,853 | 87,277 |
| TOTAL EQITY AND LIABILITIES | 245,410 | 244,640 | 244,501 |
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 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 he Nasdaq OMX Stocholm Small Cap list, in the Information Technology sector.
"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".
"To create long term value for our customers, employees and investors".
"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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