Second quarter
First six months
Comment from the CEO
The second quarter of the year was characterized by major uncertainty concerning the Corona crisis and the subsequent economic situation. HMS sales were negatively affected and compared with the corresponding quarter in 2019, sales decreased by 15% and order intake by 19%.
Above all, we have seen very weak demand in Central Europe, where our large markets such as Germany, France and Italy have shown a significant decline in order intake compared to the corresponding period last year. North America has also had a relatively weak market development. However, Asia has developed positively, and we see stable order intake in our main markets in Japan and China.
Despite the decline in volume, we have managed to improve our gross margin compared to the corresponding quarter in 2019. We reach a gross margin of 62% for the quarter, an improvement that is mainly explained by improved productivity, selective price increases and a favourable product mix.
During these uncertain times, the health of our employees has been our highest priority, which is why we have introduced home-office work in large parts of the Group. Our Spanish operations outside Barcelona were closed for a few weeks due to government decisions, while operations at HMS’ other offices and factories around the world have continued and functioned well under the circumstances.
To counteract the decline in demand, short-time work of about 20% of working hours was introduced in Sweden and Germany during a large part of the quarter. In addition, we have significantly reduced our travelling, cancelled trade fairs and customer events and used digital channels for customer contacts and events. These measures, together with the restructuring program we implemented at the end of last year, has led to reduced organic operating expenses by approximately 14% compared to the same quarter previous year. A strong gross margin in combination with good cost control means that we can deliver an operating profit for the quarter of SEK 69 m, which gives an operating margin in line with our long-term goal of 20%.
The relatively good profitability and good management of our working capital has resulted in a strong cash flow of SEK 115 m for the quarter. This has helped us to reduce our net debt, which is now at a low of SEK 263 m, corresponding to 0.73 times the operating profit before depreciation/amortization and write-downs for the last twelve months.
Our conclusion for the second quarter is that we have managed to adjust and adapt our costs to the lower demand we have seen for a few months. In general, there is great uncertainty about the future and how the Corona crisis will affect our customers’ demand in the coming quarters. At present, we see nothing concrete that indicates a rapid recovery.
HMS has a strong financial position and there are opportunities for both acquisitions and long-term technology innovation to focus on in the coming quarters. This means that we are now ending most of our short-time work in order to be able to invest in the future. Our assessment is that automation and digitalization of industrial processes will see increased demand when we have the Corona crisis behind us. HMS must then be ready to meet this demand with competitive products and solutions.
Despite the turbulence in the short term, we continue to work with a 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 and IIoT will be an interesting area for organic growth and selective acquisitions – and we continue to work according to our motto “Connecting Devices”.
Halmstad July 15, 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 July 15, 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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