First quarter
Last twelve months
Comment from the CEO
Although the first quarter of the year has been dramatic in most parts of the world, HMS’ operations has not been affected to a larger extent. We have had a good order intake, solved challenges in our supply chain and been able to deliver products to our customers. Despite the challenging market situation, the quarter generally shows a positive development.
Order intake amounted to SEK 401 m, an increase of 4% compared to the corresponding period last year, partly driven by customers increasing their inventory during these uncertain times. Sales amounted to SEK 361 m, a decrease of 5% compared to the corresponding period last year. Underlying organic growth declined by 8%, but this is partially compensated by last year’s acquisitions and the continued weakening of the Swedish krona.
The quarter shows a strong gross margin slightly above 62%, which is a significant improvement compared to the corresponding quarter last year. The gross margin for the quarter is a result of internal efficiency improvements and a favourable product mix. A strong gross margin and the previously implemented cost-savings program resulted in an operating profit for the quarter of SEK 67 m, corresponding to an operating margin of 19%.
During the quarter we have seen negative organic growth for our brands Anybus, Ixxat and Intesis. On the other hand, we see positive development for the Ewon brand under which we offer solutions for remote monitoring of machines – an offering which may have received an extra boost during these times when it is difficult for service technicians to travel.
For Intesis, we have seen some disruptions in our supply chain, since Spanish authorities imposed restrictions due to covid-19, that affected our manufacturing in Spain. Otherwise, we have been able to continue production and deliveries of products according to plan.
We see a continued slowdown in the market situation in Central Europe, primarily driven by a decline in Germany. In Asia, the year started with growth mainly in Japan, but this was against a weak comparable figure from 2019. In North America, we see a sideways market development with sales on the same level as corresponding quarter in 2019. In general, there is great uncertainty about the future and how the corona crisis will impact the demand from our customers in the coming quarters and the rest of 2020.
We continue to see good cash flow, which strengthens our financial position. We have reduced our net debt to SEK 390 m and have a equity ratio of 59%, which means that we are well prepared for the challenging situation we will most likely have for a number of months to come.
During the fall of 2019, a cost-savings program was implemented aimed to continue investments in segments with growth potential and strengthen cost control in areas with weaker growth outlook. This program has worked well and resulted in the savings we expected.
Our assessment is that Automation and Digitalization of industrial processes will see an increased demand when we have the corona crisis behind us. HMS will then be ready to meet this demand with competitive products and solutions. The second quarter has started with a decline in order intake of about 20% compared to the corresponding period last year and we expect the coming months and quarters to be challenging for our customers. We are therefore working to reduce our costs in the short term in order to cope with the corona crisis in the best possible way, but at the same time to be ready to expand when we see that our markets are beginning to recover. The company’s management and board have therefore decided to implement short-time work and a revocation of the board’s proposal for a dividend.
We have recently initiated temporary short-time work for our employees where we cut down working hours to 80% for the majority of staff in Sweden and Germany, where we have about 2/3 of the Group’s employees. This will continue until we see a clearer picture of how our markets are developing.
Despite the turbulence in the short term, we continue to focus on long-term growth and a balanced view of our costs. In the long term, we continue to believe that the market for industrial communication will be an interesting growth area and we will continue to focus on our motto “Connecting Devices”.
Halmstad April 23, 2020
Staffan Dahlström
Chief Executive Officer
Further information can be obtained from:
Staffan Dahlström, CEO, +46 (0) 35 17 2901
Joakim Nideborn, CFO, +46 (0) 35 710 6983
This information is such that HMS Networks AB (publ) is obliged to make public pursuant to the EU Market Abuse Regulation and the Securities Markets Act. The information was submitted for publication, through the contact persons set out above, at 08.00 CET on April 23, 2020.
HMS Networks AB (publ) is the leading independent supplier of solutions for industrial communication and the Industrial Internet of Things. HMS develops and manufactures products under the Anybus®, Ixxat®, Ewon® and Intesis™ brands. Development takes place at the headquarters in Halmstad, Ravensburg, Nivelles, Igualada, Wetzlar and Buchen. Local sales and support are handled by branch offices in Germany, USA, Japan, China, Singapore, Italy, France, Spain, the Netherlands, India, UK, Sweden, South Korea and UAE, as well as through a worldwide network of distributors and partners. HMS employs over 600 people and reported sales of SEK 1,519 million in 2019. HMS is listed on the NASDAQ OMX in Stockholm, category Mid Cap, Information Technology.
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