Annual Report • Feb 4, 2011
Annual Report
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Order intake amounted to SEK 342.3 m (257.9)
Cash flow from operating activities improved to SEK 74.8 m (31.0)
| Quarterly data | Q4 | Q3 | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 |
|---|---|---|---|---|---|---|---|---|
| 2010 | 2010 | 2010 | 2010 | 2009 | 2009 | 2009 | 2009 | |
| Net sales (SEK m) | 91.6 | 87.6 | 89.2 | 76.1 | 72.2 | 56.7 | 50.0 | 65.6 |
| Order intake (SEK m) | 87.5 | 86.9 | 89.7 | 78.1 | 81.0 | 59.7 | 60.2 | 57.0 |
| Opera ti ng profi t (SEK m) | 19.8 | 23.5 | 22.2 | 17.9 | 15.8 | 13.3 | ‐3.0 | 5.0 |
| Gros s ma rgin (%) | 60.4 | 61.6 | 60.2 | 58.5 | 60.1 | 60.4 | 53.5 | 58.4 |
| Opera ti ng ma rgin (%) | 21.7 | 26.8 | 24.9 | 23.6 | 21.9 | 23.5 | ‐6.0 | 7.6 |
| Ea rnings per sha re (SEK) | 1.31 | 1.46 | 1.48 | 1.16 | 1.02 | 0.84 | ‐0.34 | 0.32 |
| Yearly data | 2010 | 2009 | 2008 | 2007 | 2006 | |||
| Net sales (SEK m) | 344.5 | 244.5 | 316.6 | 270.4 | 227.4 | |||
| Order intake (SEK m) | 342.3 | 257.9 | 313.2 | 268.4 | 233.4 | |||
| Opera ti ng profi t (SEK m) | 83.5 | 31.1 | 85.0 | 54.5 | 51.7 | |||
| Gros s ma rgin (%) | 60.2 | 58.4 | 57.4 | 52.6 | 50.9 | |||
| Opera ti ng ma rgin (%) | 24.2 | 12.7 | 26.9 | 20.2 | 22.7 | |||
| Ea rnings per sha re (SEK) | 5.41 | 1.88 | 5.43 | 2.81 | 3.16 |
During 2010 net sales reached a new record level for HMS. Net sales amounted to SEK 345 m which is 41% more than 2009, but more important almost 9% more than the previous record year 2008. The strong recovery during the first half of 2010 has leveled out with a sales increase for the last quarter of 27%. The strengthening of the Swedish currency in relation to the most important currencies for HMS affected sales negatively with SEK 26 m compared to the previous year. The strengthened Swedish currency also had a somewhat negative effect on the gross margin during the later part of the year. The inflow of new design wins related to Embedded products continued as expected, resulting in 913 (814) design wins at the end of the year. In all we have added 200 design wins in the area of Embedded products during the last two years. These new design wins build up an important foundation for our future growth in the area of Embedded products.
On the important geographical markets Germany continues its good development, we have noticed a recovery on the US market while the Japanese market is still difficult to predict. During the fourth quarter HMS carried out a lot of customer activities and participated in several trade shows. We are happy to conclude that the interest for HMS, our brand names Anybus® and Netbiter® together with our product launches of new products are on record levels.
As a part of our long term strategy we have strengthened the development‐, marketing‐ and international sales departments. To accomplish this we have employed 25 new people during the year taking us to a total number of 190 employees. During 2011 we will continue to work in line with our strategy to achieve a long term profitable growth. This means that we will continue to recruit new people mainly in the area of sales and development. We will launch new products in order to offer a broader product range and we continue to establish new sales channels and to strengthen the HMS position as the preferred supplier of industrial communication solutions.
After the year end HMS acquired the remaining minority shareholding of Intellicom Innovation AB. We see a great opportunity with Intellicom and their Netbiter concept which together with the HMS' technology for industrial communication takes us a step closer to providing solutions to our customers communication needs. Netbiter makes remote control and remote management of devices and machines possible creating cost savings and improved productivity for our customers.
HMS Networks is a world‐leading supplier of communication technology for industrial automation. Sales totaled SEK 345 in 2010. 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 and Mulhouse. HMS has 190 employees and produces network interface cards and products to interconnect different networks under the trademark Anybus®. The network interface cards are embedded in automation equipment such as robots, control systems, motors and sensors. This allows subcomponents in machines to communicate with one another and with different networks in order to build more efficient and flexible manufacturing systems. HMS is listed on NASDAQ‐OMX Nordic Exchange in Stockholm in the category Small Cap, Information Technology.
Net sales for 2010 amounted to SEK 344.5 m (244.5) corresponding to a 41% increase. In total the revaluation of the Swedish currency in relation to the major HMS currencies had a SEK 26.5 m negative effect on net sales compared to the previous year. The order intake for the year amounted to SEK 342.3 m (257.9).
Net sales for the fourth quarter was SEK 91.6 m (72.2), corresponding to a 27 % increase compared to the same quarter the previous year. Adjusted for SEK ‐6.4 m in currency effects the increase amounted to 36 %. Order intake increased by SEK 6.5 m to SEK 87.5 m (81.0) corresponding to a 16 % increase in local currencies.
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.
The operating profit was SEK 83.5 m (31.1) for the year, equivalent to an operating margin of 24.2 %. Currency effects had a negative impact on the operating result with SEK 14.8 m compared to the previous year.
The operating profit for the fourth quarter 2010 was SEK 19.8 m (15.8). Changes in exchange rates had a SEK 3.4 m negative impact compared to the same period the previous year.
The Group's equity amounted to SEK 285.8 m. 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 71.9 % (70.0).
| Change in Group Equity (SEK 000s) |
Dec 31 2010 |
Dec 31 2009 |
|---|---|---|
| Balance at 1 January | 240,434 | 224,426 |
| Total comprehensive income for the period | 60,934 | 28,961 |
| Warrants | 0 | 3,384 |
| Dividends | -11,153 | -16,337 |
| Acquisition minority share | -4,400 | 0 |
| Closing balance | 285,815 | 240,434 |
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 income and other 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 expenses. Net sales consist of 59 % in EURO, 19 % in USD, 11 % in Japanese Yen and 11 % in SEK and other currencies. Cost of goods sold consists of 50 % in EURO, 20 % in USD and 2 % in Japanese Yen. Operating expenses consists of 17 % in EURO, 8 % in USD, 9 % in Japanese Yen and 66 % of SEK. The group applies a policy for currency hedging described in the annual report
The tax charge for the period was SEK 22.4 m (7.8). 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.
Cash flow from operating activities amounted to SEK 74.8 m (31.0) for the year.
The investments in tangible assets for the period totaled SEK 6.4 m (2.4). Investments in intangible assets for the period totaled SEK 8.4 m (5.0) and comprise internal development projects.
At the end of the period the cash equivalents totaled SEK 55.0 m (25.5) and unutilized credit facilities SEK 20.0 m. The Group's net cash amounted to SEK 15.5 m (‐30.3). During the second quarter HMS distributed dividend payments to its shareholder equal to SEK 1.00 per share, in total SEK 11.2 m.
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 year amounted to SEK 0.6 m (1.5). Cash and cash equivalents amounted to SEK 0.1 m (0.1) and borrowing amounted to SEK 39.2 m (54.1).
Sales by geographical area are presented in the above graph.
The number of design wins increased by 99 (83) during the year. At year end the total number of design wins amounted to 913 (814) of which 750 (654) was in the production phase and 163 (160) was in the design phase.
Embedded products reached 72% (66) of the group's total sales and Gateway products amounted to 24% (28).
The HMS Group long term growth is supported by a continued inflow of design wins, a broader product offering within the Gateway product family, a strengthened customer focus and an expansion of the HMS sales channels. At present the HMS Group implements an expansion plan mainly by hiring new employees to strengthen the development‐ and sales departments. Consequently we will have higher operating expenses going forward. At present the market for electronic components is improving and the risk of disruptions in HMS future possibilities to deliver its products is today lower. The improvement of the global economy is considered to continue. The market for the HMS product offering and the exchange rate development is still unpredictable but the HMS comprehensive goals are unchanged. A long term average growth of 20 % per year and an operating margin above 20 %.
This report has been prepared in accordance with the Swedish Annual Accounts Act and IAS 34, for Interim Reporting. Amendments to existing standards, new interpretations and new standards that came into effect as of January 1, 2010 did not affect the Groups reporting as of December 31, 2010.
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 2.3, accounting for legal entities, and the Annual Accounts Act and accounting principles and the valuation methods as those described in the most recent Annual Report.
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 2009. In addition to the risks described in these documents, no additional significant risks have been identified.
In accordance with principles adopted at HMS 2010 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 15 % of the shares, KG Lindvall, Swedbank Robur Fonder AB representing 10 % of the shares and Urban Jansson, Chairman of the Board. At a meeting following the assignment Jan Svensson was elected as the Chairman of the nomination committee.
The Board of Directors proposes a dividend to the amount of SEK 2.00 (1.00).
HMS Networks AB (publ) is listed on the NASDAQ‐OMX Nordic Exchange in the category Small Cap, Information Technology. The total number of shares amounted to 11,152,900.
The Annual General Meeting will be held at the Company's head office on Thursday April 14, 2011 at 10.00 am. The 2010 Annual Report (in the Swedish language) will be available on the Company's homepage four weeks previous to the date of the Annual General Meeting. A printed version of the 2010 Annual Report can be ordered by sending name and address to [email protected].
Halmstad February 2, 2011
Staffan Dahlström Chief Executive Officer
This yearend report has not been reviewed by the Company's auditor
Further information can be obtained from: CEO Staffan Dahlström, on telephone +46 (0) 35‐17 29 01 or CFO Gunnar Högberg, on telephone +46 (0) 35‐17 29 95
| Key ratios | ||||
|---|---|---|---|---|
| Group | Q4 | Q4 | Q1-Q4 | Q1-Q4 |
| 2010 | 2009 | 2010 | 2009 | |
| Net increase in revenue (%) | 26.9 | -7.3 | 40.9 | -22.8 |
| Gross margin (%) | 60.4 | 60.1 | 60.2 | 58.4 |
| Operating margin EBIT (%) | 21.7 | 21.9 | 24.2 | 12.7 |
| Return on capital employed (%)* | 27.6 | 10.5 | 27.6 | 10.5 |
| Return on total equity (%)* | 23.2 | 8.8 | 23.2 | 8.8 |
| Working capital in relation to sales (%)* | 6.3 | 7.6 | 6.3 | 7.6 |
| Capital turnover rate | 0.94 | 0.67 | 0.94 | 0.67 |
| Debt/equity ratio | -0.05 | 0.13 | -0.05 | 0.13 |
| Equity/assets ratio (%) | 71.9 | 70.0 | 71.9 | 70.0 |
| Capital expenditure in property, plant and equipm. (SEK 000s) | 3,109 | 415 | 6,433 | 2,423 |
| Capital expenditure in intagible fixed assets (SEK 000s) | 2,705 | 1,128 | 8,354 | 4,955 |
| Depreciation of property, plant and equipment (SEK 000s) | -1,129 | -1,062 | -4,191 | -4,154 |
| Amortisation of intangible fixed assets (SEK 000s) | -1,240 | -1,098 | -4,855 | -4,075 |
| Number of employees (average) | 178 | 154 | 167 | 154 |
| Revenue per employee (SEK m)* | 1.9 | 1.6 | 2.1 | 1.6 |
| Cash flow from operating activities per share, SEK | 2.27 | 1.63 | 6.71 | 2.89 |
| Cash flow from operating activities per share, diluted, SEK | 2.26 | 1.63 | 6.70 | 2.79 |
| Basic number of shares, average, thousands | 11,153 | 11,153 | 11,153 | 10,717 |
| Number of shares, diluted average, thousands | 11,175 | 11,153 | 11,158 | 11,121 |
* The key ratio has been translated into 12 months rolling value when applicable.
| Group | Q4 | Q4 | Q1-Q4 | Q1-Q4 |
|---|---|---|---|---|
| (SEK 000s) | 2010 | 2009 | 2010 | 2009 |
| Revenue | 91,647 | 72,215 | 344,530 | 244,536 |
| Cost of goods and services sold | -36,262 | -28,807 | -136,973 | -101,818 |
| Gross profit | 55,385 | 43,408 | 207,557 | 142,718 |
| Sales and marketing costs | -21,078 | -15,598 | -69,273 | -54,983 |
| Administrative expenses | -7,062 | -5,386 | -25,051 | -20,854 |
| Research and development costs | -8,704 | -7,930 | -31,530 | -29,211 |
| Other operating income | 1,342 | 1,517 | 6,076 | 5,991 |
| Other costs | -35 | -209 | -4,254 | -12,535 |
| Operating profit | 19,848 | 15,802 | 83,525 | 31,125 |
| Financial income | 615 | 397 | 1,340 | 1,841 |
| Financial costs | -232 | -235 | -802 | -4,514 |
| Profit before tax | 20,232 | 15,965 | 84,063 | 28,452 |
| Tax | -5,187 | -4,275 | -22,406 | -7,782 |
| Profit for the period | 15,044 | 11,689 | 61,657 | 20,671 |
| Profit attributable to shareholders of the parent company | 14,595 | 11,386 | 60,288 | 20,116 |
| Profit attributable to minority interest | 449 | 303 | 1,369 | 555 |
| Basic earnings per share, SEK | 1.31 | 1.02 | 5.41 | 1.88 |
| Earnings per share, diluted, SEK | 1.31 | 1.02 | 5.40 | 1.81 |
| Group (SEK 000s) |
Q4 2010 |
Q4 2009 |
Q1-Q4 2010 |
Q1-Q4 2009 |
|---|---|---|---|---|
| Profit for the period | 15,044 | 11,689 | 61,657 | 20,671 |
| Other comprehensive income | ||||
| Cash flow hedges | -1,144 | -2,627 | -234 | 11,469 |
| Translation differences | -130 | -179 | -551 | -163 |
| income | 301 | 691 | 62 | -3,016 |
| Other comprehensive income for the period, net of tax | -973 | -2,115 | -723 | 8,290 |
| Total comprehensive income for the period | 14,070 | 9,574 | 60,934 | 28,961 |
| Profit attributable to: | ||||
| Owners of the parent | 13,622 | 9,271 | 59,565 | 28,406 |
| Minority interest | 449 | 303 | 1,369 | 555 |
| Group | Dec 31 | Dec 31 |
|---|---|---|
| (SEK 000s) | 2010 | 2009 |
| ASSETS | ||
| Goodwill | 236,071 | 236,071 |
| Other intangible assets | 18,151 | 14,652 |
| Property, plant and equipment | 10,685 | 8,564 |
| Deferred tax assets | 756 | 802 |
| Total fixed assets | 265,663 | 260,089 |
| Inventories | 23,679 | 13,043 |
| Trade and other receivables | 38,612 | 33,098 |
| Other current receivables | 9,481 | 7,073 |
| Cash and cash equivalents | 54,984 | 25,512 |
| Total current assets | 126,757 | 78,724 |
| TOTAL ASSETS | 392,420 | 338,814 |
| EQUITY AND LIABILITIES | ||
| Equity | 282,207 | 237,010 |
| Minority interest in equity | 3,609 | 3,423 |
| Total equity | 285,815 | 240,434 |
| Liabilities | ||
| Non-current liabilities | 39,509 | 55,828 |
| Deferred income tax liabilities | 16,484 | 11,319 |
| Total non-current liabilities | 55,993 | 67,147 |
| Trade payables | 28,714 | 16,432 |
| Other current liabilities | 21,897 | 14,800 |
| Total current liabilities | 50,611 | 31,233 |
| TOTAL EQUITY AND LIABILITIES | 392,419 | 338,814 |
| Cash flow statements | ||||
|---|---|---|---|---|
| Group | Q4 | Q4 | Q1–Q4 | Q1-Q4 |
| (SEK 000s) | 2010 | 2009 | 2010 | 2009 |
| Cash flow from operating activities before changes in working | ||||
| capital | 19,695 | 16,921 | 77,264 | 25,620 |
| Cash flow from changes in working capital | 5,584 | 1,205 | -2,452 | 5,371 |
| Cash flow from operating activities | 25,279 | 18,126 | 74,812 | 30,991 |
| Cash flow from investing activities | -10,214 | -1,544 | -19,187 | -7,379 |
| Cash flow from financing activities | -3,750 | -22,611 | -26,153 | -64,277 |
| Cash flow for the period | 11,315 | -6,029 | 29,472 | -40,665 |
| Cash and cash equivalents at beginning of the period | 43,669 | 31,541 | 25,512 | 66,177 |
| Cash and cash equivalents at end of period | 54,984 | 25,512 | 54,984 | 25,512 |
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 | Q4 | Q3 | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 |
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (SEK 000s) | 2010 | 2010 | 2010 | 2010 | 2009 | 2009 | 2009 | 2009 | 2008 | 2008 | 2008 | 2008 |
| EMEA | 55,109 | 57,441 | 53,697 | 47,979 | 46,284 | 38,184 | 34,789 | 40,320 | 46,658 | 51,226 | 50,451 | 52,256 |
| Americas | 19,354 | 15,715 | 14,206 | 12,611 | 13,373 | 10,892 | 8,221 | 15,431 | 16,911 | 19,718 | 15,786 | 11,307 |
| Asia | 17,184 | 14,423 | 21,339 | 15,471 | 12,558 | 7,659 | 6,959 | 9,865 | 14,351 | 12,022 | 13,884 | 11,993 |
| Income statement | Q4 | Q3 | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 |
| (SEK 000s) | 2010 | 2010 | 2010 | 2010 | 2009 | 2009 | 2009 | 2009 | 2008 | 2008 | 2008 | 2008 |
| Revenue | 91,647 | 87,579 | 89,242 | 76,061 | 72,215 | 56,735 | 49,969 | 65,616 | 77,920 | 82,966 | 80,121 | 75,556 |
| Gross profit | 55,385 | 53,931 | 53,723 | 44,518 | 43,408 | 34,245 | 26,752 | 38,313 | 53,747 | 46,597 | 42,682 | 38,816 |
| Gross margin | 60.4% | 61.6% | 60.2% | 58.5% | 60.1% | 60.4% | 53.5% | 58.4% | 69.0% | 56.2% | 53.3% | 51.4% |
| Operating profit | 19,848 | 23,502 | 22,242 | 17,932 | 15,802 | 13,349 | -2,989 | 4,963 | 26,979 | 21,435 | 18,024 | 18,594 |
| Operating margin | 21.7% | 26.8% | 24.9% | 23.6% | 21.9% | 23.5% | -6.0% | 7.6% | 34.6% | 25.8% | 22.5% | 24.6% |
| Profit before tax | 20,231 | 22,702 | 22,834 | 18,295 | 15,965 | 12,423 | -4,964 | 5,028 | 25,621 | 21,722 | 17,187 | 16,422 |
| Parent company (SEK 000s) |
Q4 2010 |
Q4 2009 |
Q1-Q4 2010 |
Q1-Q4 2009 |
|---|---|---|---|---|
| Revenue | 1,667 | 1,939 | 6,769 | 7,284 |
| Cost of sales and services | 0 | 0 | 0 | 0 |
| Gross profit | 1,667 | 1,939 | 6,769 | 7,284 |
| Administrative expenses | -1,484 | -1,634 | -6,133 | -5,784 |
| Other costs - net | 0 | 0 | 0 | 0 |
| Operating profit | 183 | 304 | 636 | 1,500 |
| Profit from participations in group companies | 0 | 0 | 0 | 74,926 |
| Interest expense and similar items | -183 | -182 | -636 | -1,496 |
| Profit before tax | 0 | 122 | 0 | 74,931 |
| Appropriations | 0 | -8 | 0 | -8 |
| Tax | -39 | -12 | -39 | -12 |
| Profit for the period | -39 | 102 | -39 | 74,911 |
| Balance Sheets | ||
|---|---|---|
| Parent company | Dec 31 | Dec 31 |
| (SEK 000s) | 2010 | 2009 |
| ASSETS | ||
| Financial fixed assets | 244,039 | 244,039 |
| Total financial fixed assets | 244,039 | 244,039 |
| Other receivables | 265 | 565 |
| Cash and cash equivalents | 99 | 143 |
| Total current assets | 364 | 708 |
| TOTAL ASSETS | 244,403 | 244,747 |
| EQUITY AND LIABILITIES | ||
| Equity | 155,411 | 166,604 |
| Untaxed reserves | 8 | 8 |
| Liabilities | ||
| Non-current liabilities | 39,118 | 54,118 |
| Trade payables | 131 | 972 |
| Liabilities to Group companies | 48,760 | 22,592 |
| Other current liabilities | 975 | 453 |
| Total current liabilities | 49,866 | 24,018 |
| TOTAL EQITY AND LIABILITIES | 244,403 | 244,747 |
Return on shareholders' equity Share of profit after tax attributable to the parent company's share‐ holders in relation to the average shareholders' equity excluding minority shares.
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.
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 share‐ holders' equity including minority shares.
"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".
"We provide world class solutions to connect industrial devices to networks and products enabling interconnection between different industrial networks".
"To create long term value for our customers, employees and investors".
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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