HMS Networks: Interim report 2016, January - March

26 april 2016

Last twelve months

• Net sales for the last twelve months amounted to SEK 732 m (620) corresponding to a 13 % increase in local currencies. The revaluation of the Swedish currency had a positive impact of SEK 35 m on net sales
• Operating profit for the last twelve months was SEK 90 m (108) corresponding to a 12 % (17) operating margin
• Order intake for the twelve-month period was SEK 706 m (637)
• Cash flow from operating activities for the twelve-month period   amounted to SEK 87 m (92)
• Profit after tax for the last twelve months amounted to SEK 51 m (71) and earnings per share was SEK 4.46 (6.26)

First quarter

• Net sales for the first quarter increased by 18 % to SEK 201 m (170)
• Operating profit was SEK 20 m (32) corresponding to a 10 % (19) operating margin
• Order intake for the first quarter was SEK 199 m (174)
• eWON SA, acquired during the first quarter, affected sales and the result during two months
• Costs related to the acquisition had a SEK 3 m negative impact on the operating profit during the first quarter

Comment from the CEO
During the first quarter 2016 we reached a new sales record of SEK 201 m and a growth of 18%. Behind these figures we have a substantial positive impact from the acquired Belgium company eWON SA but also a weaker than expected development from HMS traditional operations. eWON develops and sells products for remote access and remote monitoring of industrial control systems to, for example machine manufacturers. The acquisition is an excellent complement to the HMS technology platforms for Remote Management as well as it contributes with a well established network of sales channels in Europe and USA.

For the traditional operations of HMS we saw a continuing cautious development of the market with a weak growth. In the quarter we can also report an unfavourable product mix to a few large customers resulting in a lower gross margin. This in combination with investments in new resources and the Industrial Internet of Things initiated during the previous year resulted in a weak start of 2016.

During the first quarter, we have started to coordinate the eWON sales and marketing resources with HMS existing organization for our three brands Anybus®, IXXAT® and eWON®. In the longer term there are also good opportunities to coordinate technology and development of the acquired business, which is expected to have a positive impact on future generations of products from HMS.

Our aim now is to achieve the full effect of the opportunities we see in the newly acquired operations and the recent investments in new resources.

Order intake also including eWON improved during the period compared to Q4 2015, but we did not quite reach the level reported for the same quarter in 2015. Including eWON, we can see an increasing order intake in the first quarter of 2016. However, the uncertainty we previously expressed, remains in our markets. We continue to see new design wins which strengthens our strong position in the market.

An increased strain from the amortization of intangible assets, costs related to the acquisition and investments in additional resources, primarily in sales and marketing, are affecting the profit for the first quarter.

The German and Japanese markets continue to develop strongly. For the US, we continue to see a mixed picture with a weak market and some delays in placing orders from some customers.

The product line Netbiter, which in the future will be a part of the eWON brand, is showing a sales increase of 40% in the first quarter, although from small volumes. With the strong products from eWON, we believe that this area of the HMS product offering will be able to develop even better in the future.

During the first quarter, we launched two interesting products within the Industrial Internet of Things (IIoT). Firstly, the Anybus .NET gateway which is an easy way to connect industrial control systems (OT) to IT systems via .NET. We also launched the Anybus SG-gateway for Smart Grid applications, which enables communication between machines with high power consumption and systems for Smart Grid energy distribution.

Our focus is to drive growth within our three product brands. We continue to balance our long term growth strategy with a cautious approach to costs. In the long term, we believe that the market for industrial communication and remote monitoring will be an interesting growth area, and we continue to focus on our motto "HMS - Connecting Devices".

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 April 26, 2016.

HMS Industrial Networks is the leading independent supplier of products for industrial communication and remote management. Reported sales reached SEK 701 m in 2015. Development and manufacturing take place at the headquarters in Halmstad, Sweden, in Nivelles Belgium and in Weingarten, Germany. Local sales and support are handled by branch offices in China, Denmark, France, Belgium, Germany, India, Italy, Japan, UK, and USA. HMS employs over 430 people and develops and manufactures solutions for connecting automation devices and systems to industrial networks under the Anybus and IXXAT brand and products for remote management and control under the eWON and Netbiter brands. HMS is listed on the NASDAQ OMX in Stockholm, category Mid Cap, Information Technology.

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