Interim report 2018, January – September

Third quarter

• Net for the third quarter reached SEK 353 m (305), corresponding to an increase of 16 %. The revaluation of the Swedish krona had a positive impact of SEK 29 m
• Operating profit reached SEK 74 m (65) equal to a 21 % (21) operating margin
• Order intake was SEK 360 m (289), corresponding to an increase of 24 %
• Cash flow from operating activities amounted to SEK 73 m (62)
• Profit after taxes totalled SEK 51 m (42) and the earnings per share was SEK 1.09 (0.90)
• Acquisition of 100 % of the shares in Beck IPC GmbH

First nine months

• Net sales for the first nine months amounted to SEK 1,003 m (882), corresponding to a 14 % increase. The revaluation of the Swedish krona had a positive impact of SEK 44 m
• Operating profit was SEK 199 m (181), equal to a 20 % (21) operating margin
• Order intake was SEK 1,046 m (916), corresponding to an increase of 14 %
• Cash flow from operating activities amounted to SEK 144 m (171)
• Profit after taxes totalled SEK 129 m (123) and the earnings per share was SEK 2.78 (2.62)

Comment from the CEO
The third quarter shows both record net sales and record profit for HMS with 353 MSEK in sales and 74 MSEK in operating profit. Despite record level sales, it is still a somewhat weak underlying organic growth in local currencies of 4 %. Our reported growth is supported by positive currency effects as well as sales from German Beck IPC, which was acquired in July. This gives a total sales growth of 16 % in the quarter which is just below our long-term goal.

Our order intake during the quarter landed at 360 MSEK, a growth of 24 % compared to the corresponding quarter last year, which indicates a positive development and continued growth going forward.

We see a stable demand on our major markets as a result of a continued underlying business growth and investments of automation solutions in the industry. During the quarter, the strong development we saw during the second quarter in US have continued. EMEA and Asia had a stable development but with slightly lower growth than before.

On the cost side, we have in the third quarter seasonally lower costs. This together with solid sales and stable gross margin results in an operating profit at a new record level, 74 MSEK, corresponding to an operating margin of 21 %, which is just over our long-term goal. Integration work with Beck IPC is ongoing and we focus on coordinating technology platforms to strengthen our offering in Industrial IoT (IIoT). Overall, the acquisition of Beck IPC has had insignificant impact on the quarter’s operating profit.

Our underlying cash flow remains strong and amounted to 73 MSEK during the quarter, which further strengthens our financial position and gives us relatively low net debt of about 1.36 times
EBITDA on a yearly basis.

We are experiencing that the strained situation within availability for electronics components have improved during the quarter, HMS and many of our customers have taken action to offset the situation. The basic problem remains but the effects are currently estimated to be less than we previously indicated. We will continue to have a slightly higher inventory than normal for the coming quarters, but we don’t expect that the availability of electronic components will have any major impact on delivery capacity.

During the quarter we have continued to develop our solutions within data security and has now got both of our cloud solutions, Argos and Talk2M, certified by CSA-STAR, which is based on
ISO / IEC 27001. We have also launched new Anybus products with support for IIoT protocols such as UPC UA and MQTT, which makes it possible to combine classical communication technologies with new IIoT features, which makes it easier for our existing customers to add IIoT support in their existing products.