Q1 from Hexatronic - Strong growth and increased profitability
"The first quarter of the year was very strong with growth of 45% on the same quarter last year, just over half of which was organic. The increase in profitability for the quarter was even stronger. EBITA increased by 187% and earnings per share rose by 329%," says Henrik Larsson Lyon, CEO Hexatronic Group
Hexatronic signs a 3-year exclusive agreement with Centric Fiber in USA, to a value of MUSD 10.
Hexatronic signs a strategic supply agreement with Vocus in Australia.
Hexatronic wins new submarine cable orders totaling approximately MSEK 60.
Hexatronic acquires 75 percent of the shares in the German engineering company TK-KONTOR-FREITAG GmbH.
The board adjusts the profitability target to 10 percent EBITA on rolling 12 months basis (from 9 percent).
Pernilla Lindén is appointed CFO and member of the Group Management Team at Hexatronic Group and will take office August 9, 2021.
Events since the end of the period
Hexatronic has issued a redundancy notice for the fiber optics assembly operation in Örebro, with the aim of relocating all production to Baltronic in Estonia and coordinating our warehouses in Sweden to Hudiksvall. The relocation is part of efforts to strengthen the company’s competitiveness on a growing international market, while the Swedish market is expected to shrink in the future.
Hexatronic CEO Henrik Larsson Lyon in interview about Q1, 2021
Comments from CEO
Strong growth and increased profitability The first quarter of the year was very strong with growth of 45% on the same quarter last year, just over half of which was organic. The increase in profitability for the quarter was even stronger. EBITA increased by 187% and earnings per share rose by 329%.
For the current rolling 12-month period, with 23% sales growth and 10.8% EBITA, we are exceeding our goals of at least 20% growth and an EBITA margin of at least 10%. We saw minor negative effects on operations from COVID-19 during the quarter, which are mainly related to higher transport costs and the indirect effect of COVID-19 with increasing raw material prices. We believe the higher prices for plastics will have some negative impact on our gross margin during the second quarter.
Sales growth in Europe excluding Sweden was 87% during the quarter, primarily driven by continued strong development in the UK, as well as the acquisition of Qubix in Italy. The British market is showing very strong development and we are seeing increasing levels of activity in Germany, but still at a lower level than in the UK.
Sales in North America grew by 44%, mainly driven by a strong underlying market for duct. We have also increased capacity with our new factory in Texas. Our sales of systems are beginning to gain momentum and are expected to make an important contribution to our development in North America this year. One sign of this was the agreement we concluded with Centric Fiber in Texas to supply our entire FTTH system over the next three years, worth at least MSEK 85.
Sales in Sweden increased by 8%, which was slightly above expectations. Our judgement is still that the Swedish market will remain at much the same level as in 2020. The level of activity in the submarine cable operation has remained high. We will have high levels of deliveries during the second half of 2021 and the first half of 2022.
Cash flow from operating activities in the first quarter was slightly negative, as we are building up stock and have tied up a lot of capital in accounts receivable.
During the quarter we acquired 75% of TK-KONTOR-FREITAG. The aim of the acquisition is to build up a training operation in Germany, and to offer our customers design and planning services in addition to our FTTH system.
We issued a redundancy notice for our fiber optics assembly operation in Örebro, with the aim of relocating all production to Baltronic in Estonia and coordinating our warehouses in Sweden to Hudiksvall. This was a very difficult decision to make, but it was necessary in order to maintain our long-term competitiveness.
We will continue to invest for profitable growth in our growth markets of North America, the UK and Germany, and for increased production in the factory in Hudiksvall, which supplies all markets with fiber optic cable. We also see good scope for continuing to make acquisitions, and we believe that we have increased our activity and the number of discussions over the past year compared with the previous year.
The order book has continued to develop positively. We entered the second quarter with an order book 67% higher organically than at the same point last year. Excluding submarine cable projects, the order book was 28% higher.
COVID-19 has had only a minor impact on our operation in recent quarters. We therefore intend to stop reporting preliminary sales and results after the close of the quarter. In the longer term, we believe that experiences from COVID-19 will have a positive impact on investments in communication networks, and this has been confirmed by the infrastructure programmes announced in both the USA and the EU.
Thank you for joining us on this journey.
Henrik Larsson Lyon President and CEO Hexatronic Group AB (publ)