Hexatronic : Year-end report 2021

Hexatronic Group AB (publ)

Year-end report January - December 2021

Key ratio

	2021	2020			2021	2020
MSEK	Q4	Q4	%		Jan-Dec	Jan-Dec	%
Net sales	1,169.5	599.8	95%		3,491.6	2,080.8	68%
EBITA	122.8	65.8	87%		393.8	204.8	92%
EBITA margin	10.5%	11.0%			11.3%	9.8%
Operating result (EBIT)	108.7	58.9	85%		355.1	177.3	100%
Net earnings	73.2	45.5	61%		252.4	126.5	100%
Earnings per share after dilution, SEK	1.81	1.21	50%		6.47	3.37	92%
Cash flow from operating activities	85.9	139.5	-38%		104.7	249.8	-58%
Liquid assets	675.1	212.3	218%		675.1	212.3	218%

Events during the quarter

• Hexatronic has acquired all the telecom activities of REHAU Group - one of the main players in the German microduct market.
• Hexatronic has aquired Data Center Systems who provides fiber connectivity solutions to the US data center market.
• Hexatronic has signed two contracts with existing customers on the German market amounting to a total order value of MEUR 21.
• Hexatronic invests 18 MUSD in a new micro duct plant in the US.
• Hexatronic has carried out a directed share issue and raised proceeds of SEK 550 million.

Events since the end of the period

• Hexatronic adjust the profitability target to at least 12 percent EBITA-margin over a business cycle. The previously set profitability target was at least 10 percent EBITA-margin on a rolling 12-month basis.
• Hexatronic's growth target has been adjusted to annual growth rate of at least 20%, over a business cycle. Previously set growth target was to grow more than its market organically and with an annual growth rate of at least 20 percent.
• The board of Directors will propose a dividend of SEK 0.50 (0.50) per share for the financial year 2022 to the Annual General Meeting.

COMMENTS FROM THE CEO

A year of impressive development!

2021 can be summed up as a record year, with very strong growth both in terms of sales and profitability. The year also marked a breakthrough for our system sales in the USA and Germany. Sales increased by 68 percent, of which 39 percent was organic growth. Profitability (EBITA) increased 92 percent equating to a margin of 11.3 percent, which exceeds our target of 10 percent by a good margin. We have therefore decided to revise our goal for the EBITA margin to at least 12 percent.

Sales during the quarter were very strong with an increase of 95 percent on the same quarter the previous year, of which 48 percent was organic growth. Profitability for the quarter showed an ongoing positive trend with an EBITA margin of 10.5 percent, equating to an increase of 87 percent. Adjusted for a remeasurement of outstanding share-based incentive programmes, the EBITA margin totalled 12.3 percent, corresponding to an increase of 119 percent. The adjustment, which totals MSEK 21, is a direct result of the share price development during the quarter.

We continue to see rising costs for raw materials, which burdened the gross margin for the fourth quarter by around one to two percentage points, and will probably also impact negatively on the first quarter of 2022. We are working actively to pass on the cost increases to our customers.

Sales in Europe excluding Sweden increased by 112 percent for the year. The main drivers of this growth are Great Britain, Germany and Norway. We had a breakthrough in Germany during the quarter, with two major contracts worth a total of MEUR 21. In Great Britain, an extension of the framework agreement with CityFibre was signed after the end of the quarter with an expected order value of

100 MGBP over three years. We remain positive in our outlook on developments in these markets for the years to come.

Sales in our largest market, the USA, grew by 89 percent during the year, primarily driven by a strong underlying infrastructure market for duct, although our system sales in FTTH (Fiber to the home) are also growing well. We retain our very positive view of the North American market for the years ahead, particularly the major infrastructure programmes to be implemented towards the end of the year.

Sales in Sweden remained on a high relatively unchanged level compared to the previous year. A slightly weaker FTTH market was balanced out by expansion in the transport networks.

We have considerably bolstered and developed our microduct business during the year. With the acquisition of REHAU's telecom business in Germany and Austria, and the acquisition of Weterings in the Netherlands earlier in the year, we now purchase far higher volumes of materials, have a broader product offering and a completely different level of market presence in Europe. Along with the upcoming duct factory in the USA, we have in a short time become a far larger player on the global microduct market, with a whole new level of proximity to our customers on our growth markets.

2021 has been an intensive year for acquisitions, with a total of seven companies acquired. In addition to REHAU's telecom business, we also acquired US company Data Center Systems (DCS) during the quarter, active in fiber optic solutions for data centers. All our acquisitions during the year provide exciting growth opportunities over the next few years. We will remain active in acquisitions in

order to boost our presence in growth markets and expand our offering.

The order book has continued to develop very positively. We ended 2021 with an order book that was 179 percent higher organically than at the same point in the previous year. The strong order book is well distributed across most of our companies, with those in the USA accounting for the largest increase.

With the strong order book and a continued positive view of the market's development, we will continue to invest in increased production capacity. During the quarter we carried out a directed share

issue which raised MSEK 550. The main aim was to strengthen the balance sheet for further acquisitions, as well as investments in higher capacity.

Welcome to join us on our growth journey.

Henrik Larsson Lyon

President and CEO

Hexatronic Group AB (publ)

Net sales and earnings

The fourth quarter (1 October - 31 December 2021)

The Group´s net sales for the fourth quarter of 2021 increased 95 percent to MSEK 1,169.5 (599.8), as a result of organic and acquisition driven growth. The increase was 93 percent cleared for exchange-rate effects.

Analysis of change in	Q4		Q4
net sales (MSEK)	2021	(%)	2020	(%)
Year-earlier quarter	599.8	-	463.2	-
Organic growth	285.9	48%	105.0	23%
Acquisitions and structural changes	273.1	45%	51.5	11%
Exchange-rate effects	10.8	2%	-19.9	-4%
Current quarter	1,169.5	95%	599.8	29%

The Group's net sales on its strategic growth markets of the Great Britain, Germany and North America continued to grow during the fourth quarter.

Geographical net sales	Q4	Allocation	Growth
(MSEK)	2021	(%)	(%)
Sweden	193.9	17%	3%
Rest of Europe	512.0	43%	116%
North America	305.0	26%	144%
Rest of the world	158.6	14%	215%
Total	1,169.5	100%	95%

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EBITA increased 87 percent to MSEK 122.8 (65.8) in the quarter. The EBITA margin amounted to 10.5 percent (11.0) and has been affected negatively of MSEK 21 due to IFRS 2 revaluation of outstanding share-based incentive programmes. EBITA excluding revaluation amounted to MSEK 143.8, corresponding to an EBITA margin of 12.3 percent.

Net financial items during the quarter amounted to MSEK -12.3(-3.7), whereof net interest amounted to MSEK -8.5(-2.7), unrealised foreign exchange differences to MSEK -3.1(-0.1) and other financial items to MSEK -0.6(-0.9).

Net earnings for the fourth quarter amounted to MSEK 73.2 (45.5) and earnings per share after dilution, increased by 50 percent and amounted to SEK 1.81 (1.21). Tax for the period was MSEK -23.2(-9.7) which means the average effective tax rate for the Group was 24.0 percent (17.6) for the quarter.

The full year (1 January - 31 December 2021)

The Group´s net sales for the full year increased 68 percent to MSEK 3,491.6 (2,080.8), as a result of organic and acquisition driven growth. The increase was 70 percent cleared for exchange-rate effects.

Analysis of change in	Jan-Dec		Jan-Dec
net sales (MSEK)	2021	(%)	2020	(%)
Year-earlier	2,080.8	-	1,842.3	-
Organic growth	811.3	39%	199.8	11%
Acquisitions and structural changes	646.0	31%	65.2	4%
Exchange-rate effects	-46.6	-2%	-26.5	-1%
Current period	3,491.6	68%	2,080.8	13%

The Group's net sales on its strategic growth markets of the Great Britain, Germany and North America continued to grow during the full year.

	Geographical net sales	Jan-Dec		Allocation		Growth
	(MSEK)	2021		(%)		(%)
	Sweden	603.1		17%	-1%
	Rest of Europe	1,540.7		44%	112%
	North America	935.2		27%	89%
	Rest of the world	412.6		12%	66%
	Total	3,491.6		100%	68%

EBITA increased 92 percent to MSEK 393.8 (204.8) during the full year. The EBITA margin amounted to 11.3 percent (9.8) and has been affected positively of approximately MSEK 8.3 by a forgiven covid-19 loan in Blue Diamond Industries, as well as negatively of MSEK 32 by IFRS 2 revaluation of outstanding share-based incentive programmes. EBITA excluding forgiven loan and revaluation amounted to MSEK 417.5, corresponding to an EBITA margin of 12.0 percent.

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Net financial items during the full year amounted to MSEK -23.0(-12.4), whereof net interest amounted to MSEK -18.3(-9.8), unrealised foreign exchange differences to MSEK -2.7(-0.7) and other financial items to MSEK -1.9(-1.9).

Net earnings during the full year amounted to MSEK 252.4 (126.5) and earnings per share after dilution, increased by 92 percent and amounted to SEK 6.47 SEK (3.37). Tax for the full year was MSEK -79.7(-38.4) which means the average effective tax rate for the Group was 24.0 percent (23.3).

Cash flow and investments

Cash flow from operating activities in the quarter amounted to MSEK 85.9 (139.5), including a change in working capital of MSEK -70.6 (99.3). The negative change in working capital is primarily attributable to increased capital tied-up in inventories.

Cash flow from operating activities during the full year amounted to MSEK 104.7 (249.8), including a change in working capital of MSEK -358.8 (52.6). Changes in working capital are mainly explained by increased capital tied up in inventories and accounts receivable, offset by increased in accounts payable.

Investments during the full year amounted to MSEK 1,154.3 (299.0). Investments of intangible and tangible assets amounted to MSEK 202.0 (65.0) and is mainly related to new production lines in our facilities in the US and Sweden (Hudiksvall). Acquisition of subsidiaries after deduction of acquired liquid assets amounted to MSEK 952.2 (163.7).

Net sales (MSEK) and EBITA margin (%) rolling 12 months

4,000		12%

3,500

3,000

2,500

10%

8%

MSEK

2,000		6%

1,500

1,000

0,500

4%

2%

0,000		Q1 Q2 Q3 Q4		Q1 Q2 Q3 Q4		Q1 Q2 Q3 Q4		Q1 Q2 Q3 Q4		Q1 Q2 Q3 Q4		Q1 Q2 Q3 Q4		0%
		2016			2017		2018		2019		2020			2021
			Net sales rolling 12 months		EBITA margin rolling 12 months

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