CEO’s comment on Interim Report Jan-Mar 2021:
Historically high operating margin
The trend from the second half of 2020 has continued. Demand for sustainable technology is steadily increasing and we end another quarter with high profitability and strong cash flow. The Group’s operating margin was at a historically high level, 11.0 per cent compared with 10.2 per cent for the year-earlier period.
Strong growth in prioritised areas
The effect of the strategic shift in the offering, industry diversification and business model can be seen in the quarter, for example in our further growth in prioritised areas, such as life science and the digital services. I can still see that the changes made, together with strong macro trends such as greater focus on sustainability and need for digital transformation, offer us a good position for growth.
As expected, sales growth was affected by restructuring during the second quarter and the divestment of operations in India during the fourth quarter of 2020. At the same time, the period included one fewer working day compared with the year-earlier quarter.
Costs fell slightly as we travelled less and spent more time working remotely. We will keep the best things we have learned in terms of flexibility and new working methods, and retain a lower cost level as we move forward. Our latest employee survey shows that employee satisfaction has increased to historically high levels, both for the Group and each business area, which means that our attractiveness as an employer continues to be strengthened.
Measures that strengthened margins
The Engineering & Digital Services business area continued to improve its operating margin during the quarter. This demonstrates that our transfer of know-how and the measures undertaken to improve margins in 2020 had the desired effect. Growth in life science is at a high level, particularly in the Swedish market, and was 32 per cent for the first quarter. Engineering & Digital Services currently has a substantial recruitment need because of favourable growth opportunities, not least in digital services where we have continued to develop our offering. In Norway, Yeti Move, in which Semcon is a co-owner and development partner, recently secured a contract with the Norwegian airport operator Avinor for autonomous snowploughs at airports. This will create new opportunities for the company and Semcon in the future.
Increased demand for aftermarket solutions
Focus in the Product Information business area is on growth as demand for digital aftermarket solutions is steadily increasing. Digital training solutions and sustainable streamlining of service and maintenance were positively affected by new patterns of behaviour linked to the pandemic, a trend we expect will continue. The business area’s operating margin was 16.6 per cent in the first quarter and a total of 790 colleagues now work within Product Information. This is more people than ever before and Semcon has become one of the world’s largest suppliers of digital product information. The proportion of functional sourcing and longterm projects now exceeds 75 per cent of the business area’s sales and recurring license contracts are increasing.
Continued positive trend
We expect the trend to remain positive during the second quarter, which in the preceding year was marked by restructuring. Following the measures taken and with the positive market outlook, I can see that we are moving in the right direction relative to our new financial objectives.