CEO’s comment on Interim Report Jan-Jun 2021:
Strong growth during the quarter and historically high profitability.
Our strategic shift continued to be successful during the second quarter. Sales increased both organically and through acquisitions by a total of 11 per cent, at the same time as profitability was historically high, cash flow was stable and net cash was nearly SEK 200 million. The IT company Squeed was consolidated as of May and we are pleased to welcome our new colleagues. Demand is high and we are growing within our priority areas.
Historically high operating margin
Having previously focused on margin-strengthening measures, I can see that we are now on a stable, high level of profitability that provides scope for an increased focus on growth. Operating profit for the second quarter amounted to SEK 40 million and the margin was 8.9 per cent. The improvement compared with the year-earlier period was partly due to restructuring costs, but also the strategic shift and productivity improvements. For the rolling twelve months, the operating margin was an historically high 10.2 per cent, which is in line with the financial objective. Sales for the quarter amounted to SEK 445 million and organic growth was 9 per cent.
Acquisition strengthens EDS
The Squeed acquisition in the quarter strengthens the Engineering & Digital Services (EDS) business area’s digital position and adds more than SEK 100 million in annual sales, as well as customers in new industries, such as e-commerce, finance & insurance and media. The business contributes valuable leading-edge expertise in areas that include full-stack development and cloud services, and the integration work is proceeding to plan. During the quarter, growth in life science remained strong (+39 per cent). We see major potential in several long-term business opportunities in the energy sector and are pleased to have concluded a new framework agreement with Vattenfall for the production of smart and sustainable energy. The framework agreement applies from 2021 to 2024, with the option of a two-year extension.
Trends favour Product Information
The Product Information business area continued to report high profitability and the operating margin for the second quarter was 13.8 per cent. Organic growth was 13 per cent, driven by such factors as high demand for digital learning. We anticipate that this growth will continue in pace with even higher priority being assigned to sustainable digital aftermarket transactions by our customers. Semcon is one of the market’s largest suppliers of digital aftermarket information and there is good potential to grow this business even further. The proportion of long-term managed service contracts remains at a high level and our skills centre in Hungary is successfully contributing to multi-site transactions with high productivity.
Accelerated sustainability work
Sustainability is a natural part of Semcon and through smart products and production solutions, as well as digitalised aftermarket services, we contribute to improvements that yield, for example, reduced climate impact. The increased focus in the world around us on the transition to sustainable innovation generates major opportunities for our business and for a future-proof world.
We have now accelerated our climate action agenda and have committed to several sustainability initiatives, including the Science Based Targets Initiative. I am proud that we are further raising our ambition in relation to these key topics. I look forward to working together with colleagues, customers, suppliers and other partners to do all that we can, both within Semcon and through the development of the market’s most sustainable solutions.
Semcon’s shareholders resolved on 2 July to pay a dividend of SEK 3 per share, corresponding to 53 per cent of the 2020 earnings per share after dilution. Even after the dividend and the acquisition of Squeed, we have a strong balance sheet and good position for further growth, both organically and through strategic acquisitions that strengthen our offering and broaden our industry mix.
There is a high level of energy in the operations and I expect our growth journey to continue during the third quarter. Demand for our services is expected to be high and it will be an inspiring autumn. But first, we have the summer to look forward to.