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HMS Networks

Interim / Quarterly Report Jul 23, 2013

2921_rns_2013-07-23_f2c936e6-4419-45f5-8c5e-30e533a2833d.pdf

Interim / Quarterly Report

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hms networks INTERIM REPORT 2013

JANUARY - JUNE 2013

First six months

  • q Net sales for the first six months increased with 21 % reaching SEK 235 m (195), corresponding to a 27 % increase in local currencies
  • q Operating profit reached SEK 41 m (34), equal to a 17 % (18) operating margin
  • q Order intake for the first half year increased with 13 % to SEK 259 m (229) corresponding to a 19 % increase in local currencies
  • q Cash flow from operating activities amounted to SEK 67 m (38)
  • q Profit after taxes totalled SEK 30 m (26) and result per share amounted to SEK 2.63 (2.29)
  • q Net sales for the last twelve months amounted to SEK 422 m (391) corresponding to a 14 % increase in local currencies. Operating result amounted to SEK 70 m (69) corresponding to a 17 % (18) operating margin

Second quarter

q Net sales for the second quarter reached SEK 128 m (99) corresponding to a 29 % increase. Operating result reached SEK 27 m (20) corresponding to a operating margin of 21 % (20)

q Order intake during the second quarter was SEK 140 m (113)

Comment from the CEO

During the second quarter we saw order intake, revenues, operating result and earnings per share on levels not seen before in the Group. The acquisition of IXXAT Automation GmbH earlier this year contributes to these improvements but we can also see tendencies of improved demands.

Japan shows growth due to our Japanese customer's competitive advantage from a weak Japanese currency. Germany shows sign of some growth. The expected positive development in the US has not materialized and we can see a cautious approach.

We see continuing progress with new and existing customers and the order intake during the period indicates future growth.

Our new product platform in the Embedded product group is attracting considerable interest and already starting to generate design wins. We are expecting a positive development in volumes from this platform during 2014 and going forward. The core technology of this product offer, our new NP40 processor was recently awarded the "2013 New Product Innovation Award" by Frost & Sullivan providing good attention for our new product offer in the embedded area.

The product- and market development within Remote Management continues. We have experienced longer sales cycles than expected and despite many pilot series with interesting customers the sales volumes from the Remote Management products are delayed.

The development of IXXAT Automation that was acquired earlier this year is not in line with expectations but we see good opportunities for future synergies in the areas of sales and product development. During the second quarter the coordination of the sales and marketing organisations continued and we now have established common sales organisations in North America and Central Europe for our three brand names Anybus, IXXAT and Netbiter.

We can conclude that we see a mixed picture going forward. On the one hand we had a positive second quarter with good levels of order intake, sales, operating profit and earnings per share. On the other hand the market is difficult to predict in the near future. 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.

Quarterly data Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3
2013 2013 2012 2012 2012 2012 2011 2011
Net sales (SEK m) 128 107 87 99 99 96 95 101
Order intake (SEK m) 140 119 100 95 113 116 83 108
Operating profit (SEK m) 27 14 6 23 20 14 10 24
Gross margin (%) 62.2 61.0 57.6 59.9 60.6 61.9 60.8 60.6
Operating margin (%) 21.3 12.8 7.2 23.4 20.2 14.9 10.5 24.2
Return on capital (%) 17.1 15.4 16.3 16.2 17.7 17.6 18.6 21.6
Earings per share (SEK) 1.80 0.82 0.86 1.49 1.36 0.94 0.71 1.67
Equity per share (SEK) 30.41 31.17 30.21 29.43 28.23 27.74 26.77 25.96
Cash flow for operating activities per share (SEK) 1.41 4.47 1.67 2.23 2.63 0.73 0.25 1.74
Half-year data Q1-Q2 Q3-Q4 Q1-Q2 Q3-Q4 Q1-Q2 Q3-Q4 Q1-Q2 Q3-Q4
2013 2012 2012 2011 2011 2010 2010 2009
Net sales (SEK m) 235 186 195 196 188 179 165 129
Order intake (SEK m)
259 195 229 191 197 174 168 141
Operating profit (SEK m) 41 29 34 34 38 43 40 29
Gross margin (%) 61.7 59.0 61.3 60.7 60.5 61.0 59.4 60.2
Operating margin (%) 17.4 15.8 17.6 17.5 20.2 24.2 24.3 22.6
Return on capital (%) 17.1 7.9 17.7 18.6 22.1 23.2 21.2 8.8
Earings per share (SEK) 2.63 2.35 2.29 2.38 2.46 2.77 2.64 1.86
Equity per share (SEK) 30.41 29.82 28.23 26.77 24.41 25.3 22.8 21.25

Net sales

Net sales for the last twelve months amounted to SEK 421.8 m (391.0) corresponding to a 7.9 % increase. In total the revaluation of the Swedish currency in relation to the major HMS currencies had a SEK 20.1 m negative impact on net sales compared to the previous twelve month period. The order intake for the last four quarters amounted to SEK 453.6 m (420.6).

Net sales for the second quarter 2013 totalled to SEK 128.2 m (98.9), corresponding to a 29.6 % increase compared to the same quarter the previous year. Adjusted for a SEK 6.9 m negative currency effect the volume increase was 36.6 % in local currencies. The acquired company IXXAT contributed to net sales with SEK 27.5 m during the second quarter. Order intake increased with 23.5 % to SEK 139.7 m (113.1), of which SEK 128.8 will be delivered during the upcoming twelve months. In local currencies order intake during the second quarter increased with 29.6 %.

Operating profit

Operating profit totalled to SEK 70.4 m (68.6) for the last four quarters, equivalent to an operating margin of 16.7 % (17.5). Currency effects had a SEK 10.7 m negative impact on the operating result compared to the previous year.

The operating profit for the second quarter 2013 totalled to SEK 27.3 m (19.9). During the second quarter the acquired group, including the effect of depreciation on allocated overvalues and acquisition costs, had a SEK 1.5 m positive impact on the Group´s operating result. On Group level changes in exchange rates had a SEK 4.2 m negative impact compared to the same period the previous year.

Tax

The tax charge for the first half-year was SEK 8.9 m (9.5). 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 344.4 m (316.5). The total number of shares at the end of the year was 11,322,400. The Group's equity/assets ratio improved to 45.0 % (78,0).

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) June 30 2013 June 30 2012 Dec 31 2012
Balance at 1 january 342,056 298,543 298,543
Total comprehensive income for the period 27,775 27,737 53,318
Issue of new shares through the exercise of warrants 0 15,289 15,289
Dividends -25,475 -25,094 -25,094
Acquisition of non-controlling interests 0 0 0
Closing balance 344,356 316,475 342,056

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 half-year consist of 64 % in EURO, 23 % in USD, 8 % in Japanese Yen and 5 % in SEK and other currencies. Cost of goods sold consists of 58 % in EURO, 16 % in USD and 2 % in Japanese Yen. Operating expenses consists of 37 % in EURO, 10 % in USD, 4 % in Japanese Yen and 49 % 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 six months 2013 amounted to SEK 66.5 m (37.6).

The investments in tangible assets for the half-year totalled SEK 1.7 m (9.4). Investments in intangible assets for the period totalled SEK 30.5 m (11.8) and comprise internal development costs. The higher level of capitalized expenses is to the majority related to the development of new technology platforms i.e the new network chip NP40, the new technology platform supporting HMS Safety technology and the chip, brick, module concept. An investment in subsidiaries was 257.8 MSEK. The acquisition of IXXAT has generated a overvalue for the group of approximately 250 MSEK of which 140 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 six months 2013 depreciation on purchase price allocated to assets was reflected with 2.8 MSEK in the income statement

At the end of the period the cash equivalents totalled SEK 10.5 m (25.6) and unutilized credit facilities SEK 12.0 m. The Group's net debt amounted to SEK 262.7 m (8.1). During the second quarter HMS distributed dividend payments to its shareholder equal to SEK 2.25 per share (2.25), in total SEK 25.5 m.

Important events

  • q Bosch Rexroth renews a volume commitment for Anybus products worth approximately 9 MSEK during 2013
  • q Crouzet chooses Netbiter for remote management of their Millennium 3 PLCs
  • q HMS acquires German company IXXAT Automation GmbH
  • q The Annual General Meeting was held at the Company´s headquarter in Halmstad
  • q Frost & Sullivan awards HMS the 2013 New Product Innovation Award for the NP40 processor

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, supplementary technology platforms from IXXAT and an expansion of the HMS sales channels according to the existing strategy.

At present the global market for HMS products is expected to remain weak. The market for industrial communication and remote management will continue as a future growth area and HMS overall goals are unchanged: A long term average growth of 20 % per year and an operating margin above 20 %.

HALMSTADCOVENTRYPUNE GOTHENBURGBEIJINGTOKYO COPENHAGENWEINGARTEN KARLSRUHECHICAGOPARIS MILANBOSTONMULHOUSELA

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, 2013 did not affect the Groups reporting as of June 30, 2013.

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'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.

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 2012. In addition to the risks described in these documents, no additional significant risks have been identified.

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 half-year 2013 amounted to SEK 0.0 m (0.3). Cash and cash equivalents amounted to SEK 0.8 m (0.2) and borrowing amounted to SEK 0.0 m (16.6).

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. Based on this competence in combination with an extensive network of customers, suppliers and external partners the existing and new product offers and solutions are developed for the best possible customer benefits.

Product strategy - HMS markets four 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 IXXAT Communication platforms for industial machines and equipment
  • 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.

Reporting occasions

  • q Q3 Report 2012 will be published on October 23, 2013
  • q Year-end Report 2012 will be published on February 7, 2013

Assurance

The Board of Directors and CEO assure that the interim report provides a true and fair overview of the Parent Company and the Group's operations, position and earnings and describes the material risks and uncertainties faced by the Parent Company and the Group.

Halmstad July 22, 2013

Staffan Dahlström
Chief Executive Officer
Urban Jansson
Chariman of the Board
Göran Sigfridsson Ray Mauritsson
Henrik Johansson Charlotte Brogren
Gunilla Wikman

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

Financial accounts

Q2
2013
Q2
2012
Q1-Q2
2013
Q1-Q2
2012
Q1-Q4
2012
Q3 2012-
Q2 2013
Net increase in revenue (%) 29.6 2.5 7.9 3.9 -0.5 7.9
Gross margin (%) 62.2 60.6 60.4 61.3 60.1 60.4
Operating margin EBIT (%) 21.3 20.2 16.7 17.6 16.7 16.7
EBITDA (SEK t) 32,138 22,663 49,851 39,503 74,620 84,968
EBITDA (%) 25.1 22.9 21.2 20.2 19.5 20.1
Return on capital employed (%)* 15.9 22.7 15.9 22.7 19.7 15.9
Return on total equity (%)* 17.0 17.7 17.0 17.7 16.3 17
Working capital in relation to sales (%)* 5.9 9.4 5.9 9.4 9.2 5.9
Capital turnover rate 0.72 1.00 0.72 1.00 0.94 0.72
Debt/equity ratio 0.66 -0.03 0.66 -0.03 -0.09 0.66
Equity/assets ratio (%) 45.0 78.0 45.0 78.0 81.9 45
Capital expenditure in property. plant and equipm. (SEK 000s) 618 3,951 1,703 9,405 12,202 4,500
Capital expenditure in intagible fixed assets (SEK 000s) 15,843 7,017 30,521 11,819 30,108 48,810
Depreciation of property. plant and equipment (SEK 000s) -1,863 -1,512 -3,592 -2,858 -6,240 -6,974
Amortisation of intangible fixed assets (SEK 000s) -3,015 -1,198 -5,254 -2,313 -4,553 -7,494
Number of employees (average) 339 240 294 237 241 294
Revenue per employee (SEK m)* 1.2 1.6 1.4 1.7 1.6 1.4
Total equity per share. SEK 30.80 28.23 30.80 28.23 30.21 30.41
Total equity per share. diluted. SEK 30.80 28.23 30.80 28.23 30.21 30.41
Cash flow from operations per share before dilution. SEK 1.41 2.63 5.88 3.36 7.27 9.78
Cash flow from operations per share after dilution. SEK 1.41 2.63 5.88 3.36 7.27 9.78
Basic number of shares. average. thousands 11,322 11,209 11,322 11,181 11,252 11,322
Number of shares. diluted average. thousands 11,322 11,209 11,322 11,186 11,254 11,322

* The key ratio has been translated into trailing 12 month value when applicable.

Income statements

(SEK 000s) Q2
2013
Q2
2012
Q1-Q2
2013
Q1-Q2
2012
Q1-Q4
2012
Q3 2012-
Q2 2013
Revenue 128,205 98,902 235,420 195,395 381,804 421,829
Cost of goods and services sold -48,496 -36,727 -90,265 -75,675 -152,433 -167,022
Gross profit 79,709 59,953 145,155 119,719 229,371 254,807
Sales and marketing costs -31,754 -25,034 -61,422 -50,767 -105,962 -116,618
Administrative expenses -11,001 -8,429 -24,105 -17,734 -32,997 -39,369
Research and development costs -11,475 -6,896 -21,192 -15,807 -26,476 -31,861
Other operating income 1,776 415 3,262 542 3,960 7,012
Other costs 5 -55 -693 -1,663 -4,169 -3,532
Operating profit 27,260 19,953 41,005 34,292 63,726 70,439
Financial income 1,228 1,123 1,228 1,174 1,926 2,030
Financial costs -1,569 -266 -3,615 -369 -456 -3,751
Profit before tax 26,919 20,810 38,618 35,096 65,197 68,719
Tax -6,494 -5,619 -8,882 -9,476 -13,024 -12,430
Profit for the period 20,425 15,191 29,736 25,620 52,173 56,288
Basic earnings per share, SEK 1,80 1,36 2,63 2,29 4,64 4,97
Earnings per share, diluted, SEK 1,80 1,36 2,63 2,29 4,64 4,97

Statements of comprehensive income

(SEK 000s) Q2
2013
Q2
2012
Q1-Q2
2013
Q1-Q2
2012
Q1-Q4
2012
Q3 2012-
Q2 2013
Profit for the period 20,425 15,191 29,736 25,620 52,173 56,288
Other comprehensive income
Income/expense recognized directly in equity
Cash flow hedges -2,730 2,423 -3,249 3,047 2,205 -4,091
Translation differences 8,721 -48 3,516 -129 -480 3,168
Share savings program 203 0 339 0 0 339
Hedging of net investments -13,292 0 -4,207 0 0 -4,207
Income tax relating to components of other
comprehensive income
3,525 -637 1,640 -801 -580 1,861
Other comprehensive income for the period, net of tax -3,571 1,738 -1,961 2,117 1,145 -2,930
Total comprehensive income for the period 16,854 16,929 27,775 27,737 53,318 53,358

Balance Sheets

(SEK 000s) June 30 2013 June 30 2012 Dec 31 2012
ASSETS
Goodwill 386,379 236,071 236,071
Other intangible assets 220,540 32,449 48,910
Property, plant and equipment 20,697 21,718 21,106
Deferred tax assets 747 774 852
Total fixed assets 628,363 291,012 306,939
Inventories 36,642 28,872 26,843
Trade and other receivables 60,452 44,343 35,501
Other current receivables 30,120 16,106 16,845
Cash and cash equivalents 10,496 25,605 31,487
Total current assets 137,710 114,926 110,676
TOTAL ASSETS 766,073 405,938 417,615
EQUITY AND LIABILITIES
Equity 344,356 316,475 342,056
Liabilities
Non-current liabilities 238,140 17,549 787
Deferred income tax liabilities 65,187 23,910 23,168
Total non-current liabilities 303,327 41,459 23,955
Trade payables 33,594 20,764 25,462
Other current liabilities 84,797 27,240 26,142
Total current liabilities 118,391 48,004 51,604
TOTAL EQUITY AND LIABILITIES 766,073 405,938 417,615

Cash flow statements

Q2 Q2 Q1-Q2 Q1-Q2 Q1-Q4 Q3 2012-
(SEK 000s) 2013 2012 2013 2012 2012 Q2 2013
Cash flow from operating activities before changes in
working capital
21,228 25,400 27,583 31,707 65,257 61,133
Cash flow from changes in working capital -5,250 4,037 38,954 5,855 16,523 49,622
Cash flow from operating activities 15,978 29,437 66,537 37,562 81,780 110,755
Cash flow from investing activities -16,460 -10,968 -258,000 -21,225 -42,944 -279,719
Cash flow from financing activities -22,484 -13,555 169,434 -17,305 -33,923 152,817
Cash flow for the period -22,966 4,914 -22,029 -968 4,913 -16,147
Cash and cash equivalents at beginning of the period 32,424 20,691 31,487 26,573 26,573 25,605
Cash and cash equivalents at end of period 9,458 25,605 9,458 25,605 31,486 9,458

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)
Q2
2013
Q1
2013
Q4
2012
Q3
2012
Q2
2012
Q1
2012
Q4
2011
Q3
2011
Q2
2011
Q1
2011
Q4
2010
Q3
2010
EMEA 82,481 69,182 52,971 60,049 59,169 60,387 55,876 64,900 61,757 60,379 55,109 57,441
Americas 26,439 22,480 19,686 22,687 20,813 20,429 20,330 18,844 17,418 17,167 19,354 15,715
Asia 19,285 15,553 14,608 16,408 18,920 15,677 18,642 16,976 17,322 13,981 17,184 14,423
Income statement
(SEK 000s)
Q2
2013
Q1
2013
Q4
2012
Q3
2012
Q2
2012
Q1
2012
Q4
2011
Q3
2011
Q2
2011
Q1
2011
Q4
2010
Q3
2010
Revenue (SEK m) 128,205 107,215 87,265 99,144 98,902 96,493 94,848 100,720 96,498 91,527 91,647 87,579
Gross profit 79,709 65,446 50,269 59,382 59,766 59,766 57,686 61,062 59,193 54,552 55,385 53,931
Gross margin 62.2% 61.0% 57.6% 59.9% 60.6% 61.9% 60.8% 60.6% 61.3% 59.6% 60.4% 61.6%
Operating profit 27,260 13,745 6,248 23,186 19,953 14,338 9,925 24,360 20,224 17,704 19,848 23,502
Operating margin 21.3% 12.8% 7.2% 23.4% 20.2% 14.9% 10.5% 24.2% 21.0% 19.3% 21.7% 26.8%
Profit before tax 26,919 11,699 7,001 23,100 20,810 14,286 10,715 25,544 20,536 16,973 20,231 22,702

Sales

Sales by geographical area for the first half-year 2012 are presented in the graph to the right.

Embedded products reached 56 % of the Group's total sales, Gateway products 19 % and Remote Management amounted to 4 %.

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) Q2
2013
Q2
2012
Q1-Q2
2013
Q1-Q2
2012
Q1-Q4
2012
Q3 2012-
Q2 2013
Revenue 1,818 2,478 4,061 4,369 7,995 7,687
Cost of sales and services 0 0 0 0 0 0
Gross profit 1,818 2,478 4,061 4,369 7,995 7,687
Administrative expenses -1,823 -2,362 -4,072 -4,107 -7,642 -7,607
Operating profit -5 116 -11 262 353 80
Interest and similar income 1 -116 0 -262 -353 -91
Profit before tax 0 0 0 0 0 0
Tax 0 0 0 0 -7 -7
Profit for the period 0 0 0 0 -7 -7

Parent company balance sheets

(SEK 000s) June 30 2013 June 30 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 365 542 955
Cash and cash equivalents 779 153 684
Total current assets 1,144 695 1,639
TOTAL ASSETS 245,183 244,734 245,678
EQUITY AND LIABILITIES
Equity 97,810 123,292 123,285
Untaxed reserves 8 8 8
Liabilities
Non-current liabilities 0 16,618 0
Trade payables 215 306 1,277
Liabilities to Group companies 145,347 102,933 120,073
Other current liabilities 1,803 1,577 1,035
Total current liabilities 147,365 104,816 122,385
TOTAL EQITY AND LIABILITIES 245,183 244,734 245,678

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 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.

Our vision

"All industrial devices will be intelligent and networked. We shall be the market leading partner in the world of industrial communication"

Our purpose

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

Our mission

"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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