Hexatronic : Interim Report 3 2016-17 (EN)

Hexatronic Group AB (publ)

Interim Report April-June 2017

(Reporting period January-June 2017)

The quarter (April-June 2017)

• Net sales amounted to MSEK 346.2 (274.9), which equates to 26% growth during the quarter.

• The operating result before interest, taxes, depreciation and amortisation (EBITDA) totalled MSEK

  49.2 (31.0), which corresponds to an EBITDA margin of 14.2% (11.3%).

• The operating result amounted to MSEK 42.2 (26.6).

• Net earnings totalled MSEK 30.4 (18.0).

• Earnings per share after dilution totalled SEK 0.80 (0.51).

• Cash flow from operating activities during the quarter amounted to MSEK -5.6 (22.7)

  The period (January-June 2017)

• Net sales amounted to MSEK 637.5 (468.0), which equates to 36% (38%) growth during the period.

• The operating result before interest, taxes, depreciation and amortisation (EBITDA) totalled MSEK

  70.2 (43.8), which corresponds to an EBITDA margin of 11.0% (9.4%). The EBITDA margin on a rolling 12-month basis was 11.3% (9.1%).

• The operating result amounted to MSEK 56.2 (34.7).

• Net earnings totalled MSEK 39.9 (23.9).

• Earnings per share after dilution totalled SEK 1.06 (0.67).

• Cash flow from operating activities during the quarter amounted to MSEK 23.0 (56.8)

Comments from the CEO

Strong development in growth and profitability

We can look back on a very strong quarter, where we delivered one of the highest levels of profitability in the company's history, with an EBITDA margin of 14.2%. The profitability development is primarily due to an advantageous product mix, including submarine cables, but also to economies of scale resulting from organic sales growth.

The early part of the quarter was far quieter than we expected, which is mainly explained by delayed starts in major fibre-to-the-home (FTTH) projects in Sweden. The growth in net sales reached26%, of which 13% was organic. The growth comes from several markets that have developed well, as well as the acquisition of Ericsson's operations in New Zealand and the training companies ICT Education and IFTAC.

We continued to strengthen our organisation during the quarter with more employees in sales, engineering and production. The purpose of the new recruitment is to accommodate our current level of activity, but it is also an investment for the future.

One limiting factor to our growth at present is access to optical fibre, which we use as a raw material in producing fibre optic cables. Ahead of 2017, we believed we had secured our optical fibre requirement for the year. Demand for optical fibre has, however, been greater than expected, which is of course positive in many ways. There is a shortage of optical fibre globally and the major manufacturers have invested in greater capacity, which is expected to reach the market during 2018. We have secured larger volumes for 2018.

We move into Q3 with an order book which, organically, is a full 92% larger than at the same point last year, which is obviously encouraging. During the latter part of Q2 we experienced strong incoming orders due to a high market demand for FFTH projects, which led several of our customers to place orders further in advance than usual to secure their needs for Q3 and also to some extent Q4.

The high demand and strong order book also mean that we need to invest in further production capacity for ducts.

In conclusion, we operate in what remains a very strong market. At the same time, we believe that the global market for fibre to the home (FTTH) and infrastructure for 5G, WiFi and sensors is still in its infancy.

Please join us on our continued journey of growth.

Henrik Larsson Lyon

President and CEO of Hexatronic Group AB (publ)

Events during the quarter (April-June 2017)

• As part of the transition from a split financial year to the calendar year, the company presented financial information for the 2016 calendar year comprising an income statement and balance sheet, a cash flow statement and key metrics.

  Events since the end of the period

• To lay a better foundation for the Group's further expansion, Martin Åberg was appointed Deputy CEO of Hexatronic Group AB, with responsibility for the Group's mergers and acquisitions. Martin will also continue in his role as President of Proximion AB.

Håkan Bäckström, formerly Vice President of Hexatronic Cables & Interconnect Systems AB ('HCI') replaced Henrik Larsson Lyon as President of HCI. Håkan will retain his role as Head of Sales & Marketing for HCI. Henrik will focus on his role as President and CEO of Hexatronic Group AB.

Financial information, Group

See other key metrics on page 17.

Net sales and results

The quarter (April-June 2017)

Net sales during the quarter amounted to MSEK 346.2 (274.9). Net sales increased by 26% for the Group compared to the same quarter last year; 13% of this relates to organic growth and 13% to acquisition-driven growth. The acquisition growth is attributable to Hexatronic New Zealand, ICT Education and Iftac.

EBITDA totalled MSEK 49.2 (31.0), which corresponds to an EBITDA margin of 14.2% (11.3%).

The period (January-June 2017)

Net sales for the period amounted to MSEK 637.5 (468.0). Net sales increased by 36% for the Group compared to the same period last year. The growth in sales is attributable primarily to organic growth, and also to some extent to the acquisition of Hexatronic New Zealand, ICT Education and Iftac.

EBITDA totalled MSEK 70.2 (43.8), which corresponds to an EBITDA margin of 11.0% (9.4%). The EBITDA margin on a rolling 12-month basis was 11.3% (9.1%).

Net sales rolling 12 months, MSEK and EBITDA margin rolling 12 months - (%)

Financial position and liquidity

Liquid assets

Liquid assets on 30 June 2017, excluding overdraft facilities, amounted to MSEK 22.5 (29.5). Unutilised overdraft facilities amounted to MSEK 41.6 (28.7) on 30 June 2017.

Non-current assets

Non-current assets amounted to MSEK 218.9 (137.6) on 30 June 2017. The increase is related to investments in tangible and intangible assets, such as new production lines in Hudiksvall, and to acquired assets in connection with the acquisition of Hexatronic New Zealand, ICT Education and Iftac.

Equity

Equity amounted to MSEK 370.7 (292.4) on 30 June 2017, which equated to SEK 10.26 (8.68) per outstanding share at the end of the reporting period.

Borrowing

The Parent Company has an acquisition facility of MSEK 100 with Nordea bank. The facility was used for the acquisition of assets and liabilities in New Zealand and in the acquisitions of ICT Education and Iftac. The utilised amount on 30 June 2017 totalled MSEK 94.0, and MSEK 83.0 of this is long-term borrowing. The loan falls due for payment on 31 December 2021 and will be repaid quarterly starting November 2017.

Equity ratio

The equity ratio on 30 June 2017 was 49% (51%).