HMS Networks: Interim report 2016, January - September

First nine months 

• Net sales for the first nine months increased with 30 % reaching SEK 687 m (527), corresponding to a 30 % increase in local currencies
• Operating profit reached SEK 110 m (87), equal to a 16 % (17) operating margin
• Order intake for the first nine months increased with SEK 174 m to 698 m (524) corresponding to a 32 % increase in local currencies
• Cash flow from ongoing operations reached SEK 119 m (72)
• Net result after tax amounted to SEK 75 m (57) and result per share amounted to SEK 6.44 (5.01)
• Net sales for the last twelve months amounted to SEK 862 m (683) corresponding to a 25 % increase in local currencies
• Operating result for the last twelve months amounted to SEK 124 m (105) corresponding to a 15 % (15) operating margin

Third quarter 

• Net sales for the third quarter reached SEK 254 m (180) corresponding to a 41 % increase
• Operating result reached SEK 55 m (31) corresponding to a 21 % (17) operating margin
• Order intake during the third quarter was SEK 252 m (180)

Comment from the CEO
During the third quarter we reached new record levels both in net sales and profitability. The growth in net sales is due to a combination of organic growth and the contribution from the two acquisitions made in 2016. Adjusted for currency effects, the growth in net sales during the quarter was 39 % of which 11 % originated from organic growth in our core business. 

A strong development in our base business and a positive contribution from the acquired companies strengthened our gross margin. Together with a lower level of activities in the third quarter due to the vacation period takes HMS to a new record level of SEK 55 m in operating result. This operating margin reached 21% for the third quarter of the year.

Net sales of SEK 254 m and an operating result of SEK 55 m for the quarter means that we financially takes a substantial step forward in line with our growth strategy.

Sales in Central Europe continues to develop well. Great Britain reached new record levels despite uncertainties around Brexit. The growth in Great Britain is driven by long-term projects now materializing in deliveries to customers. We can see a recovery in North America. This recovery is partly boosted by a strong US currency improving our reported figures. Our sales in Asia lead by Japan and China shows good development despite uncertainties related to the strengthened Japanese currency creating challenges for our customers in their export business. We see a weak growth on our Nordic markets - to some extent due to good performance during the comparable period last year.

Our ongoing efforts with the acquired companies eWON and Intesis continues. The plan is primarily to let the companies focus on the development of their success factors and in the long term integrate them into the HMS operations. In the case of eWON we continue to create synergies in the sales organization and the Netbiter product line has now become a part of the eWON product offer. This gives us the most complete product offer in the market for industrial remote monitoring and communication which we now define as "Remote Solutions".

Anybus Wireless Bolt was launched during the third quarter. With Anybus Wireless Bolt it is easy to connect data from industrial machines to different IT systems, something that attracts a lot of interest in the market from IT companies looking to expand their offer to the market with the HMS technology.

The interest in Industrial Internet of Things (IIoT) comes not only from our traditional customer base but also from new customer groups trying to gather information from industrial applications to their IT systems. During the quarter HMS completed a road show in eight different places in Europe and the USA to show that our solutions already today can be used for new IIoT applications. Hundreds of customers attended and we can notice a great interest in our solutions. We have also performed a series of Cyber security (digital security) seminars on the German market showing how our future products offer an increased IT protection for industrial applications. An area we see as an additional possibility for growth in HMS.

We assume a cautious approach to the market development and we consider the conditions for a long-term growth as positive.

Our focus remains to grow our three product brands Anybus, IXXAT and eWON and in the market segment Building Automation in the recently acquired Intesis. We continue to balance our long-term growth strategy with a restrictive approach to expenses and new resources. In the long term, we consider the market for industrial data communication and remote monitoring to be interesting growth areas and we continue to focus on our motto "Connecting devices".

Halmstad October 26, 2016

Staffan Dahlström
Chief Executive Officer

Further information can be obtained from: CEO Staffan Dahlström, telephone +46 (0) 35-17 29 01 or CFO Gunnar Högberg, telephone +46 (0) 35-17 29 95. www.hms-networks-com/ir

This information is such that HMS Networks AB (publ) is required to disclose in accordance with the Swedish Financial Instruments Trading Act and/or the Swedish Securities Market Act. The information was submitted for publication at 07.50 CET on October 26, 2016.

HMS Networks AB (publ) is the leading independent supplier of products for industrial communication and remote management. Reported sales reached SEK 702 m in 2015. Development and manufacturing take place at the headquarter in Halmstad, Sweden, in Nivelles Belgium, in Igualada, Spain and in Weingarten, Germany. Local sales and support are handled by branch offices in China, Denmark, France, Belgium, Germany, Spain, India, Italy, Japan, UK, and USA. HMS employs over 480 people and develops and manufactures solutions for connecting automation devices and systems to industrial networks under the Anybus®, IXXAT® and Intesis® brand and products for remote management and control under the eWON® brand. HMS is listed on the NASDAQ OMX in Stockholm, category Mid Cap, Information Technology.

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