Year-end report 2020, January - December

Fourth quarter

Net sales for the fourth quarter reached SEK 405 m (346), corresponding to an in crease of 17%. Currency translations had a negative effect of SEK 10 m on net sales

Order intake was SEK 408 m (337), cor responding to an increase of 21%

Operating profit reached SEK 75 m (55, adjusted operating profit previous year was 33), equal to a 18.5% (15.9) operating margin

Profit after taxes totalled SEK 57 m (67, adjusted profit after taxes previous year was 31)

Earnings per share was SEK 1.21 (1.46, adjusted earnings per share previous year was 0.68)

Cash flow from operating activities amounted to SEK 83 m (61)

HMS acquired 70% of the shares in Procentec B.V.

HMS acquired the remaining 25.1% of the shares in WEBfactory GmbH

The Board of Directors have decided on new financial targets for the Group

Yearly

Net sales for the year reached SEK 1,467 m (1,519), corresponding to a 3% decrease. Currency translations had a negative effect of SEK 19 m on net sales

Order intake was SEK 1,447 m (1,470), corresponding to a decrease of 2%

Operating profit was SEK 288 m (243, adjusted operating profit previous year was 246), equal to a 19.6% (16.0) operating margin

Profit after taxes totalled SEK 220 m (205, adjusted profit after taxes previous year was 188)

Earnings per share was SEK 4.79 (4.43, adjusted earnings per share previous year was 4.06)

Cash flow from operating activities amounted to SEK 370 m (254)

The Board of Directors propose a dividend to the amount of SEK 2.00 (0) per share

Comment from the CEO Back to growth in the fourth quarter

After some challenging quarters, we are pleased to see a trend break in the fourth quarter, and a recovering market. Both order intake, which amounted to SEK 408 million, and sales, which amounted to SEK 405 million, improved organically compared to the correspond ing quarter last year by 13% and 8% respectively. As communicated in the two latest quarterly reports, the gradual improvement in the market continues, but now also with growth compared to the cor responding quarter last year.

Our efforts to improve the gross margin continue to develop favour ably. Despite a currency headwind, we see a gross margin of 61.6% (61.2%) for the quarter and 62.0% (61.1%) for the full year. The quarter's operating profit amounts to SEK 75 million, a significant improvement compared with the previous year. The positive result is driven by a recovery in sales combined with good gross margins and low operating expenditures. We estimate to have SEK 20 mil lion in non-recurring savings, related to pandemic effects in sales and marketing in the fourth quarter. For the full year the same number is approximately SEK 48 million. For the full year, we achieved an operating margin of 19.6%, which is very close to our long-term target of 20%.

Cash flow continues to be strong at SEK 83 million (61) for the quarter, and a record high of SEK 370 million (254) for the full year, which has contributed to lowering our debt. When we close the year, we have a low net debt in relation to EBITDA of 0.49 (1.20).

Recovery in our main markets

After several challenging quarters for the Central European mar ket, we now see double-digit growth in order intake for the quar ter. There are several factors behind the recovery, primarily a more positive outlook from our customers. We also see that the electronics industry in general now have a growing demand, which put pressure on component suppliers and foundries - which in its turn is driving longer lead times that partly also causing our customers to increase inventory levels.

The U.S. market continues to develop steadily with a growth of a few percent in both sales and order intake primarily driven by end costumers in the consumer and pharmaceutical industries.

Asia shows good growth in sales as a result of this year's strong order intake in China and Japan. China's large investments in wind power projects account for a large part of the growth. We foresee this to be a continued growth driver for HMS as China aims to become carbon neutral by 2060.

New Design-Wins indicate continued interest in HMS products

Even though many of our customers have had a challenging year, interest in HMS solutions has continued to be high and we have seen a record number of new sales leads, especially from digital events and campaigns. For products using our Design-Win business model, we can see a continued stable intake of new customers in 2020. In total, we received 165 (199) new Design-Wins during the year, and the total number of active Design-Wins amount to 1,820 (1,797), an increase of 1% compared to the previous year. Of these, 1,418 (1,399) are in production, while 402 (398) are expected to go into production in the coming years. Of this year's total sales, 46% (49) are related to the Design-Win business model.

HMS2025 strategy launched in November

During the quarter, we presented the company's new long-term strat egy HMS2025. This comprises new financial targets, which in clude a growth target with net sales exceeding SEK (3.14) billion and an operating margin target of 20%. To achieve these ambitious goals, we will have an increased focus on acquisitions, which means a slightly adjusted dividend policy. Furthermore, HMS2025 contains new ambitions regarding our focus markets, sustainability, employees and customer satisfaction.

Acquisitions during the quarter

On October 1, HMS acquired 70% of the shares in Dutch Procen tec B.V. The remaining 30% is owned by three senior executives in the company. The company, which offers hardware and software to monitoring and diagnostics of network traffic in industrial processes, will provide HMS with new opportunities for business with users of automation equipment. We see great opportunities to develop this business from today's diagnostic

LINK:	http://www.hms-networks.com/news-and-insights/news-from-hms/2021/02/03...
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