HMS Networks AB
Annual Financial Report
Year-end report 2020, January - December
Fourth quarter
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- Net sales for the fourth quarter reached SEK 405 m (346), corresponding to an increase of 17%. Currency translations had a negative effect of SEK 10 m on net sales
- Order intake was SEK 408 m (337), corresponding to an increase of 21%
- Operating profit reached SEK 75 m (55, adjusted operating profit previous year was 33), equal to a 18.5% (15.9) operating margin
- Profit after taxes totalled SEK 57 m (67, adjusted profit after taxes previous year was 31)
- Earnings per share was SEK 1.21 (1.46, adjusted earnings per share previous year was 0.68)
- Cash flow from operating activities amounted to SEK 83 m (61)
- HMS acquired 70% of the shares in Procentec B.V.
- HMS acquired the remaining 25.1% of the shares in WEBfactory GmbH
- The Board of Directors have decided on new financial targets for the Group
Yearly
- Net sales for the year reached SEK 1,467 m (1,519), corresponding to a 3% decrease. Currency translations had a negative effect of SEK 19 m on net sales
- Order intake was SEK 1,447 m (1,470), corresponding to a decrease of 2%
- Operating profit was SEK 288 m (243, adjusted operating profit previous year was 246), equal to a 19.6% (16.0) operating margin
- Profit after taxes totalled SEK 220 m (205, adjusted profit after taxes previous year was 188)
- Earnings per share was SEK 4.79 (4.43, adjusted earnings per share previous year was 4.06)
- Cash flow from operating activities amounted to SEK 370 m (254)
- The Board of Directors propose a dividend to the amount of SEK 2.00 (0) per share
Comment from the CEO
Procentec B.v Drivers Ed
Back to growth in the fourth quarter
After some challenging quarters, we are pleased to see a trend break in the fourth quarter, and a recovering market. Both order intake, which amounted to SEK 408 million, and sales, which amounted to SEK 405 million, improved organically compared to the corresponding quarter last year – by 13% and 8% respectively. As communicated in the two latest quarterly reports, the gradual improvement in the market continues, but now also with growth compared to the corresponding quarter last year.
Our efforts to improve the gross margin continue to develop favourably. Despite a currency headwind, we see a gross margin of 61.6% (61.2%) for the quarter and 62.0% (61.1%) for the full year. The quarter’s operating profit amounts to SEK 75 million, a significant improvement compared with the previous year. The positive result is driven by a recovery in sales combined with good gross margins and low operating expenditures. We estimate to have SEK 20 million in non-recurring savings, related to pandemic effects in sales and marketing in the fourth quarter. For the full year the same number is approximately SEK 48 million. For the full year, we achieved an operating margin of 19.6%, which is very close to our long-term target of 20%.
Cash flow continues to be strong at SEK 83 million (61) for the quarter, and a record high of SEK 370 million (254) for the full year, which has contributed to lowering our debt. When we close the year, we have a low net debt in relation to EBITDA of 0.49 (1.20).
Recovery in our main markets
After several challenging quarters for the Central European market, we now see double-digit growth in order intake for the quarter. There are several factors behind the recovery, primarily a more positive outlook from our customers. We also see that the electronics industry in general now have a growing demand, which put pressure on component suppliers and foundries - which in its turn is driving longer lead times that partly also causing our customers to increase inventory levels.
The U.S. market continues to develop steadily with a growth of a few percent in both sales and order intake – primarily driven by end costumers in the consumer and pharmaceutical industries.
Asia shows good growth in sales as a result of this year’s strong order intake in China and Japan. China’s large investments in wind power projects account for a large part of the growth. We foresee this to be a continued growth driver for HMS as China aims to become carbon neutral by 2060.
New Design-Wins indicate continued interest in HMS products
Even though many of our customers have had a challenging year, interest in HMS solutions has continued to be high and we have seen a record number of new sales leads, especially from digital events and campaigns. For products using our Design-Win business model, we can see a continued stable intake of new customers in 2020. In total, we received 165 (199) new Design-Wins during the year, and the total number of active Design-Wins amount to 1,820 (1,797), an increase of 1% compared to the previous year. Of these, 1,418 (1,399) are in production, while 402 (398) are expected to go into production in the coming years. Of this year’s total sales, 46% (49) are related to the Design-Win business model.
HMS2025 strategy launched in November
During the quarter, we presented the company’s new long-term strategy — HMS2025. This comprises new financial targets, which include a growth target with net sales exceeding SEK “π” (3.14) billion and an operating margin target of 20%. To achieve these ambitious goals, we will have an increased focus on acquisitions, which means a slightly adjusted dividend policy. Furthermore, HMS2025 contains new ambitions regarding our focus markets, sustainability, employees and customer satisfaction.
Acquisitions during the quarter
On October 1, HMS acquired 70% of the shares in Dutch Procentec B.V. The remaining 30% is owned by three senior executives in the company. The company, which offers hardware and software to monitoring and diagnostics of network traffic in industrial processes, will provide HMS with new opportunities for business with users of automation equipment. We see great opportunities to develop this business from today’s diagnostic tools to offer services that provide preventive support to reduce operational problems in our customers’ critical industrial networks.
During the quarter, we also acquired the remaining part of German WEBfactory GmbH. As a 100% owner, we can now increase the integration and use of WEBfactory’s software products together with other product segments, and we see great opportunities for new business that combines hardware and software.
A brighter 2021
The fourth quarter was a step in the right direction for HMS. Although there is still great uncertainty in the market and a risk of local lockdowns, we see that the world is adapting to the situation that accompanies the pandemic. We expect that 2021 will be characterized by a continued recovery and see that the growth trend has continued in the start of 2021.
We continue to work with a focus on long-term growth and a balanced view of our costs. In the long run, we continue to believe that the market for Industrial ICT (Information & Communication Technology) will be an interesting area, both in terms of organic growth and acquisitions.
Halmstad February 3, 2021
Staffan Dahlström
Chief Executive Officer
Further information can be obtained from:
Staffan Dahlström, CEO, +46 (0) 35 17 2901
Joakim Nideborn, CFO, +46 (0) 35 710 6983
Procentec B.v Drivers
Attachment
Key issues faced by users of device management tools and how Field Device Integration (FDI) specification attempts to answer them. With the recent public release of the Field Device Integration (FDI) specification, instrument and automation manufacturers can now develop compatible products and host systems for managing field devices.
For the user, the specification combines the attributes of competing Device Integration technologies: EDDL and FDT/DTM. A key objective of the specification is to combine the simplicity of the text-based DD technology with the flexibility of specialized Windows-based FDT features and complex graphical representation.
by Neil Shah, ABB Control Technologies
This article first delves into the key issues faced by users of device management tools and how FDI attempts to answer them. The latter part of the article looks at issues where FDI may fall short.
Fieldbus device management tools
Today, more than 30 open and proprietary communication protocols serve industrial/process automation. Three – HART, PROFIBUS and FOUNDATION Fieldbus – account for 90% of industrial process automation. Obviously these three protocols hold a lot of importance and potential in improving and optimizing plant operations and enterprise asset management. Since these three protocols form the basis for large improvement potential, they play a key role in maintenance and upkeep of field instruments. The tools for commissioning, calibrating, diagnosing, and maintaining these instruments must be capable of taking full advantage of the fieldbus communication protocols. Further, the tools must use these advantages in the simplest possible way, keeping the end user in mind.
More than one type of user of these tools operates at a single plant location. For example, an instrument service technician who is diagnosing a device requires only online communication with the device. A commissioning engineer may want to first configure the device offline and then download the data to the device. Instrument engineers and maintenance managers would want access to an overview of device health. So the management tool for the field device should simultaneously and simply serve to all these users.
Key end-user issues
Today, each major process automation manufacturer has product portfolios ranging from instruments to full-fledge control systems. Most also offer their own tools for managing field devices. The same device may have different device drivers for different tools.
Inconsistent look and feel as well as inconsistent behavior of a field device’s driver in different host systems have been the most irritating issues for the end user. Despite much standardization, the device drivers supplied for one system do not function, look, and feel the same way in other systems. So the user has to maintain different drivers for different tools for the same underlying device. This is also a problem for instrumentation manufacturers as they have to execute tests of their device drivers with multiple device management tools.
The major factors contributing to this situation are:
- Each host fits a device description into its own user interface architecture.
- Each device manufacturer has its own understanding about what tool parameters are important for a user.
- FDI has undertaken activities that to a large extent minimize these inconsistencies.
FDI device package
The FDI device package will serve all devices and tools. Each device comes with an FDI package used by all the tools or systems, including standalone PCs, field instruments, and process control and automation systems. The FDI device package makes sure all device management tools function with Devices without any issues, regardless of the manufacturer. Each host interprets a device driver slightly differently to fit into the layout of its user interface (UI) layout.
Common Host Components
Device vendors typically design their driver for one preferred tool. Although the driver may adapt to the other tools, most often it still does so imperfectly. Specifications and recommendations from the manufacturer don’t solve these issues, leading to FDI’s biggest strength: Common Host Components.
The Common Host Components consist of the EDD Engine and the UI Engine. All FDI device packages will be tested and approved with reference to the FDI reference host containing the Common Host Components. These components will be available for implementation to host system manufacturers for their tools. The usage of Common Host Components ensures that the representation of the FDI Device Package is similar in various tools. Importantly, since the device package developers will use the FDI Reference host during product development, the representation of graphs, images, text, etc. in the device package will be highly optimized as desired by the instrument vendor. Instrument and host system manufacturers will not need to test their device drivers in various tools.
User interface design
A usability style guide elaborately documents several aspects of user interface design. The guide provides examples of source code or sketches of the graphical representation of controls or frames. It also standardizes labels. For example entry level menus like Device Settings, Diagnostics, Operate and Action become labels like “Apply”, “Cancel”, “Next”, etc. Lastly, the guide documents translations in key languages (German, French, Spanish, Italian, Chinese, Portuguese, Japanese and Russian).
In addition, the FDI Device Packages will be based on the Harmonized EDDL applicable for all the three major protocols: HART, PROFIBUS and FOUNDATION Fieldbus. All new EDDs must use the updated and optimized IEC 61804-3 standard. The “User Views” concept and Harmonization of EDDL have been key requirements from the User Association of Automation Technology in Process Industries (NAMUR).
Locked valuable device information
In the initial life cycle of a plant, most users are content with employing the device information within the tool. Sooner or later, however, they get into situations where the valuable information from the device needs to be made available to external tools or systems. They may need to analyze the field device conditions, failures, and calibration data or they just think that another specialized tool would benefit from access to a particular device.
Most device management tools do not allow transparent and easy access to this valuable information. Even if the tool does allow access, a complex series of steps or additional hardware/software may be required. Technologies like OPC-Unified Architecture play an effective role in easily opening up this information to third party tools. The usage of the standard interface OPC-UA in FDI hosts allows easy access from other applications.
Applications can be designed and developed without any support of the supplier of FDI host
OPC-UA services supported by the FDI server allow safe and secure access to the Device or to stored offline data
Generic OPC-UA clients can be maintenance tools or Manufacturing Execution Systems (MES) or Enterprise Resource Planning (ERP) systems Of course not all existing devices will have FDI Device Packages immediately. It will take some time before a sizeable number of FDI Device Packages are available in the market. But users need not worry since FDI will support existing device drivers.
Some unanswered issues
Will FDI answer every issue of all the users of fieldbus device management tools? Not quite. A few areas cannot be simply answered by a specification or standardization. Problem issues may include procuring and installing the tool, non-intuitive tools, inadequate or overly complex tools, and inflexible and non-scalable tools.
The first step sometimes becomes the most time consuming step. Many tools have a heavy footprint that makes them time consuming to download and install. Many tools have .NET and/or SQL as pre-requisites, increasing installation time.
Procentec B.v Driver Job
Additionally, the device drivers must be installed or imported, and updated to the latest version. Additional steps include installing & configuring the modem driver, which varies from vendor to vendor. Then most tools need a manual catalog update. Some tools require the enabling or activation of license. Lastly a few more clicks enable communication, scan, or go-live with the device.
Procentec B.v Driver Jobs
Often, the user just wants to configure the same basic parameters (for example Tag, Range, Unit) or execute the same parameters or functions such as zero settings over and over again. Most tools do not support such tasks. Even if they do, many steps may be involved, increasing user frustration.
Additionally a massive amount of information may be dumped on the screen in unfamiliar colors and icons, which vary widely from tool to tool. One option is to choose the standardized status indicators as prescribed by NAMUR.
Today, the user finds a host of tools – from basic freeware to high-priced fully-integrated tools. Most often the user would like to employ the same tool in different ways. For example, a field technician standing next to transmitter would want a light-weight, quick and simple tool capable of online communication with the device – no more. When in the lab the same technician requires much more functionality, such as diagnostics, calibration, loop-checking, and device exchange.
Scalability and flexibility become important criteria when selecting a tool to satisfy different uses. FDI is about to initiate the rise of a new era in fieldbus technology. Users should note carefully how the providers of device management tools benefit from the new standard.