Year-end report from Hexatronic. CEO Henrik Larsson Lyon summarizes 2018 as a year of strong growth and looks at 2019 with confidence. "We will continue to grow outside Sweden and strengthen our market position, especially in the UK, Germany and the US".
The full year (1 January – 31 December 2018)
Net sales amounted to MSEK 1,597.8 (1,299.4), which represents 23% (26%) growth during the full year.
The operating result before interest, taxes, depreciation and amortisation (EBITDA) totalled MSEK 138.2 (151.0), which corresponds to an EBITDA margin of 8.7% (11.6%).
The operating result amounted to MSEK 92.5 (122.3).
Net earnings totalled MSEK 59.3 (90.4).
Earnings per share after dilution totalled SEK 1.62 (2.38).
Cash flow from operating activities during the full year amounted to MSEK 15.6 (133.4)
The board will propose a dividend of SEK 0.40 (0.40) per share for the financial year 2018 to the annual general meeting.
The quarter (1 October – 31 December 2018)
Net sales amounted to MSEK 443.2 (325.0), which represents 36% (7%) growth during the quarter.
The operating result before interest, taxes, depreciation and amortisation (EBITDA) totalled MSEK 31.0 (37.9), which corresponds to an EBITDA margin of 7.0 (11.7%).
The operating result amounted to MSEK 17.4 (30.4).
Net earnings totalled MSEK 6.3 (23.7).
Earnings per share after dilution totalled SEK 0.17 (0.62).
Cash flow from operating activities during the quarter amounted to MSEK 51.6 (56.0)
Comments from the CEO
Continued strong international growth 2018 was a year of continued strong growth for Hexatronic. The main item on our agenda was to increase our presence the UK, Germany and USA. All these markets are in the early stages of developing fiber to the home (FTTH). We made acquisitions in these markets during the year, which means we are continuing to reposition Hexatronic strategically towards distinct emerging markets. On a pro forma basis, i.e. including Opternus and PQMS, sales to the relatively well-developed Swedish market today account for about 35% which is a gradual decrease from 49% in 2017 and 60% in 2016.
Overall, 2018 was a strategically successful year in which we advanced our positions on several emerging markets. In terms of profitability, however, it was a poor year in which we did not achieve our EBITDA target of 10%, mainly due to the biding Swedish FTTH market. In addition to the acquisitions in the UK, Germany and USA, we also made important investments in sales and marketing on these markets, which had an adverse impact on profitability for the full year.
Growth during the quarter totalled 36%, of which 34% related to acquisitions and 2% to organic growth. There is still very strong growth outside of the Nordics, and weaker development primarily on the Swedish market. In terms of financial results, the already seasonally weak quarter was burdened by agent costs of MSEK 3.0 relating to the patent dispute in the UK. In the corresponding period last year, we had a positive effect of MSEK 6.5 relating to the reimbursement of costs from our counterparty in the Swedish patent dispute, which we won. We continued to see good development in the USA, and our operations in the UK showed a strong upward trend. The recent acquisition in Germany has developed according to plan and has also created awareness of Hexatronic on the German market.
Looking ahead to 2019, we believe that the global market will show healthy growth. The Swedish market will be much the same as in 2018. We noticed a certain amount of price pressure on the Swedish market towards the end of 2018, which we are responding to with streamlining and cost cutting. We believe the British market will develop strongly and that we are well positioned to benefit from that growth. We are building up stock in the UK due to the uncertainty surrounding Brexit. Also, the North American market is expected to grow, and we believe we will take market share. The German market will grow from low volumes. We do however believe that the major growth on the German market is a year or so off yet.
We enter the first quarter of 2019 with an order book which is organically 18% higher than at the same point last year. We plan to continue making acquisitions intensively and are bolstering our resources so that we can carry on growing on important emerging markets. The first quarter is normally our weakest quarter due to the winter period. We believe that our comprehensive efforts in the UK, Germany and USA will have a positive effect on both growth and profitability during 2019.
We still have a highly positive view of the FTTH market, the opportunities 5G will bring in the shape of fiber expansion, and our potential for continued profitable growth moving forward.
Thank you for joining us on this journey.
Henrik Larsson Lyon President and CEO of Hexatronic Group AB (publ)
Events during the quarter (October – December 2018)
Hexatronic acquired the German fiber optic company Opternus GmbH. The company is consolidated into the Hexatronic Group from November 1, 2018.