HMS Q1 Report 2019

First quarter

Net sales for the first quarter reached SEK 380 m (320), corresponding to an in crease of 19 %. Currency translations had a positive effect of SEK 25 m on net sales

Operating profit reached SEK 60 m (63) equal to a 16 % (20) operating margin

Order intake was SEK 387 m (350), cor responding to an increase of 11 %

Cash flow from operating activities amounted to SEK 52 m (20)

Profit for the period totalled SEK 41 m (37) and the earnings per share was SEK 0.88 (0.80)

Last twelve months

Net sales for the last twelve months amounted to SEK 1,425 m (1,225), cor responding to a 16 % increase. Currency translations had a positive effect of SEK 88 m of net sales

Operating profit was SEK 248 m (218), equal to a 17 % (18) operating margin

Order intake reached SEK 1,470 m (1,255), corresponding to an increase of 17 %

Cash flow from operating activities amounted to SEK 224 m (174)

Profit for the period totalled SEK 175 m (140) and the earnings per share was SEK 3.76 (2.99)

Subsequent events

After the quarter, HMS acquired 74.9 % of the shares in the German company WEB factory GmbH. The acquisition will have a limited impact on HMS' s earnings per share in 2019

Comment from the CEO The year has started with solid growth and profitability, which in the first quarter led to new record sales of SEK 380 m. The increase is mainly explained by acquisition effects from the German Beck IPC and favorable currency situation. At the same time, we see signals of increased uncertainty in the short-term perspective on investments in our industrial segment, but we believe that the long-term picture continues to look bright thanks to favorable technology trends that drive investments and transformations in our business segments in the longer term.

During the quarter, we have seen continued positive development in the US, but with signals of a coming slowdown in the future. In Germany and the rest of Central Europe, we see a mixed picture with continued weak development in the Automotive segment, which also impacts the investments made by their subcontractors, but the market remains favorable in other segments. In Asia, the weak trend we saw at the end of 2018 continues with a mix where China and India are relatively good, but the Japanese market, which is HMS largest area in Asia, is hesitant mainly in the Automotive and Semiconductor segments.

We report a somewhat weaker gross margin than normal, which is primarily explained by lower margins from the previously acquired company Beck IPC. The integration work of Beck IPC is ongoing and various initiatives to improve the gross margins are ongoing.

We continue to invest in expanding our sales organization. During the quarter, new sales offices were opened in Seoul (South Korea) and Dubai (UAE). We see these as important markets in the long-term and our own presence will give us increased growth in these markets. Our continued investments within sales and markets combined with the lower gross margin affects our operating margin, which is a few percentage points lower than normal in the quarter.

During the quarter, we presented new future concepts for 5G. This has been done in demonstration applications together with, among others, Ericsson and ABB at the Mobile World Congress and Hannover Messe. We see 5G as a future important technology for wireless secure communication in industrial applications. Although it will take a few years before these will be installed on a larger scale, we already see a great interest from industrial customers to move from today's Wi-Fi solutions to new private cellular solutions based on 4G and 5G.

At the German Hannover Messe in early April, we successfully launched our new HMS HUB cloud solution, based on a technology that is the result of the acquisition of Beck IPC in 2018. HMS HUB enables connection of HMS intelligent products to communicate via HMS HUB, via cloud or on-premise, to process and filter data before sending information to our customers' IT or cloud systems.

During the quarter, we entered into an agreement to acquire 74.9 % of the German software company WEBfactory GmbH. Closing took place after the end of the quarter, April 1, 2019. The company, with annual sales of approximately EUR 2.5 m and 27 employees, will be an important complement to HMS' Industrial IoT strategy and gives us the opportunity to create additional value for customers who use our products to connect industrial appliances and machines to our cloud solutions. In the short term, this acquisition will not have any major impact on HMS' profitability, but it is a strategically important reinforcement that we believe will be very important for HMS within a few years.

Despite the somewhat uncertain investment climate in our main segments going forward, we stick to our ambitious growth targets for the coming years - a long-term annual growth of 20% per year and an operating margin of 20%. Our focus is to drive continued growth in all our business areas. We continue to focus on our long-term growth goals based on a balanced view of our costs. In the long-term, we believe that the market for industrial data communication will be an interesting growth area and we will continue to focus on our motto HMS - Connecting Devices .

Halmstad April 25, 2019

Staffan Dahlstr m

Chief Executive Officer

Further information can be obtained from:

CEO Staffan Dahlstr m, telephone +46 (0) 35 17 29 01

CFO Joakim Nideborn, telephone +46 (0) 35 710 69 83

This information is such that HMS Networks AB (publ) is required to disclose in accordance with the Swedish Financial Instruments Trading Act and the Swedish Securities Market Act. The information was submitted for publication, through the contact persons set out above, at 08.00 CET on April 25, 2019.

HMS Networks Q1 Report 2019 (English)

LINK:	http://www.hms-networks.com/press/2019/04/25/hms-q1-report-2019...
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