INTERIM REPORT Image Systems AB (publ) January-June 2022
| Second quarter April–June | Interim period January–June |
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Financial overview
| MSEK | Apr-June 2022 | Apr-June 2021 | Jan-June 2022 | Jan-June 2021 | Full year 2021 |
| Order intake, MSEK | 39.8 | 46.7 | 82.5 | 98.4 | 182.8 |
| Order backlog, MSEK | 82.7 | 62.4 | 82.7 | 62.4 | 72.0 |
| Net sales, MSEK | 45.0 | 44.1 | 79.4 | 78.4 | 158.7 |
| Gross margin, % | 66 | 59 | 69 | 64 | 68 |
| EBITDA, MSEK | 4.2 | 3.6 | 6.4 | 4.1 | 19.4 |
| EBITDA margin, % | 9.3 | 8.2 | 8.1 | 5.2 | 12.2 |
| Operating profit (EBIT), MSEK | -0.5 | -0.9 | -3.6 | -5.3 | 0.8 |
| Earnings per share, SEK | -0.01 | -0.01 | -0.04 | -0.06 | 0.00 |
| Cash flow from operating activities, MSEK | 9.1 | 0.3 | 11.4 | neg | 15.7 |
| Solidity, % | 55 | 54 | 55 | 54 | 58 |
| Average number of employees | 75 | 84 | 75 | 83 | 82 |
A WORD FROM THE CEO
“Our goal is to build a Group with good growth and profitability by maintaining a focus on measurement technology, software and recurring revenue.”
The second quarter for the Group has progressed in line with expectations. Net sales and earnings were on par with the previous year's levels. Order intake was about
15 percent below the previous year, which is explained
by the ongoing streamlining of the product portfolio in the RemaSawco business unit. The phasing out of older product generations is a strategic decision, where our aim is to focus on a reduced number of profitable products that will offer our customers greater opportunities to digitalize their sawmills. In the short term, this may have
a slight negative impact on the volume of sales. This is offset by enhanced profitability in the product mix sold.
The Motion Analysis business area showed strong performance during the quarter, with increased sales and improved EBITDA margin.
Healthy demand
We received a number of orders for both business areas during the second quarter, which consolidates our strategic approach. RemaSawco has signed a framework agreement with Moelven Timber that can generate orders up to SEK 27.4 million. The first order was awarded after the end of the quarter.
As restrictions are lifted around the world, traveling to customers can resume. This is of benefit to the operations in Motion Analysis. The growth in recurring revenue, which is one of the long-term objectives of Motion Analysis, is slowly establishing a positive trend.
Focus on change
The Group's strategic objective for RemaSawco is to create the leading Nordic systems supplier in measurement technology, data analysis and optimization solutions for the sawmill industry. As previously disclosed, the needed transformation is now under way in RemaSawco. This transformation is progressing as expected and has already shown positive results. Reaching the ambitious targets will, among other things, require an adjustment of competence. In the long term, this will create favorable conditions for continued margin improvements.
First half of the year
We are continuously improving margins with regard to both projects and sales of products in the Group, and I note that both the Group's gross margin and EBITDA margin have strengthened. Gross margin improved by approximately 5 percentage points to 69 percent, while the EBITDA margin improved by approximately 3 percentage points to 8.1 percent for the first half of the year. The first six months of the year can be summarized by noting that we now can check off a number of milestones of our strategy. We have many more to go, and we are keeping up a good pace to achieve them as well. Our EBITDA margin is steadily moving in a positive direction, and our order book is growing and consists of projects with good profitability.
Johan Friberg
CEO and President
THE GROUP'S DEVELOPMENT IN THE SECOND QUARTER
Order intake, net sales and profit
Order intake amounted to MSEK 39.8 (46.7). Order backlog as of June 30, 2022, amounted to MSEK 82.7 (62.4).
Net sales amounted to MSEK 45.0 (44.1), of which MSEK 2.6 (1.5) related to capitalized development expenses across both business units.
Gross margin amounted to 66 (59) percent.
EBITDA amounted to MSEK 4.2 (3.6). Other external expenses increased compared with the corresponding period last year, which mainly is attributable to the Group's ongoing trademark investments and costs relating to the ongoing organizational changes in RemaSawco. As pandemic-related restrictions are lifted, activities such as travel also increase. Personnel costs temporarily rose in the second quarter due to the organizational change.
Depreciation/amortization amounted to MSEK -4.7 (-4.5). The increase in depreciation/amortization is explained by the onset of depreciation for a number of development projects that were completed. Net financial items amounted to MSEK -0.3 (-0.5).
Result after taxes amounted to MSEK -0.6 (-1.3).
Financial position, investments and cash flow
The Group’s investments in non-current assets amounted during the quarter to MSEK 2.8 (1.9) of which MSEK 2.6 (1.5) is related to capitalized development projects. Capitalization of development projects takes place in both business areas.
The operational cash flow amounted during the quarter to MSEK 6.3 (-1.6). Solidity amounted to 55 (54) percent as of June 30, 2022. Net indebtedness amounted to 0.1 (0.3) times.
Available liquid funds including undrawn overdraft facilities amounted to MSEK 27.7 (15.1) as of June 30, 2022.
THE GROUP’S DEVELOPMENT DURING THE INTERIM PERIOD
Order intake amounted to MSEK 82.5 (98.4). Order backlog as of June 30, 2022, amounted to MSEK 82.7 (62.4).
Net sales amounted to MSEK 79.4 (78.4), of which MSEK 5.4 (3.7) related to capitalized development expenses. Capitalization of development projects takes place in both business areas.
Gross margin amounted to 69 (64) percent.
EBITDA amounted to MSEK 6.4 (4.1). In the previous year, the operating profit was burdened by a one-off item of MSEK 1.4 for pension costs in RemaSawco. Depreciation/amortization amounted to MSEK -10.0 (-9.4). Net financial items amounted to MSEK -0.6 (-0.7).
Result after taxes amounted to MSEK -3.9 (-5.7).
RemaSawco
RemaSawco supplies measurement and optimization systems for the sawmill industry. The product range, based on proprietary measuring products and software, addresses everything from timber intake, sorting, sawmill lines and board handling to modern automation solutions.
Performance in the second quarter
The sawmill industry continues to be characterized by a high level of activity. The rate of investment has remained unchanged, and we are seeing continuing strong interest in RemaSawco's product portfolio. RemaSawco is currently implementing the organizational change that was decided on and disclosed during the first quarter, which aims to strengthen the focus on profitable products and enhance the level of customer service. The streamlining of the product portfolio continues according to plan by way of phasing out older products. This has resulted in several customer requests to replace the discontinued products. The conversion aims to create scalability and key components for the digitalization of sawmills and related processes.
The order intake of MSEK 32.7 during the second quarter is lower than in the previous year (39.7) but in line with the company's expectations considering RemaSawco's ongoing restructuring process. The orders received by RemaSawco during the quarter included a major order of MSEK 16.7 from Moelven, covering products from throughout the product portfolio. Thanks to the high pace of change currently, the Company has already managed to develop a strong comprehensive solution for the key customers. Net sales of MSEK 35 are somewhat below the previous year's levels (37.2). Operating margin before depreciation/amortization is somewhat lower compared with the corresponding period in the previous year, but in line with expectations.
| MSEK | Apr-June 2022 | Apr-June 2021 | Jan-June 2022 | Jan-June 2021 | Full year 2021 |
| Order intake, MSEK | 32.7 | 39.7 | 67.1 | 84.3 | 155.6 |
| Net sales, MSEK | 35.0 | 37.2 | 62.1 | 62.9 | 130.3 |
| EBITDA, MSEK | 2.1 | 2.6 | 3.0 | 0.6 | 14.4 |
| EBITDA margin, % | 6.0 | 7.0 | 4.8 | 1.0 | 11.1 |
Product development
An intensive effort is under way to create replacement products for our key customers to substitute all products currently being phased out. During the period, RemaSawco developed its solution for digital fingerprinting between timber sorting and board sorting further, and we consequently obtained final acceptance from our customers. The upgrade of RemaSawco's existing log sorting system RS-715 is proceeding as planned.
Motion Analysis
Image Systems offers its customers software for the analysis of high-speed film, a niche where the company is world leading. The software is sold under the product names TEMA and Track Eye. TEMA customers are predominantly found in the civil sector and TrackEye customers in defense-related testing and the aerospace industry.
Performance in the second quarter
Motion Analysis reports a quarter in line with expectations. Motion Analysis’ order intake was evenly distributed across North America, Europe and Asia.
Net sales for the quarter were positively affected by the delivery to China that was postponed due to lockdowns during the previous quarter. The positive trend in the EBITDA margin is explained by a favorable product mix. Market conditions remain strong, and operations benefit from once again having the option of traveling to customers. Our assessment is that the current world situation with increased defense spending may favor sales of the Company’s products in the long run.
| MSEK | Apr-June 2022 | Apr-June 2021 | Jan-June 2022 | Jan-June 2021 | Full year 2021 |
| Order intake, MSEK | 7.1 | 7.0 | 15.4 | 14.1 | 27.2 |
| Net sales, MSEK | 10.0 | 6.9 | 17.3 | 15.5 | 28.4 |
| EBITDA, MSEK | 3.5 | 1.8 | 5.5 | 5.1 | 8.3 |
| EBITDA margin, % | 35.0 | 26.5 | 31.8 | 32.9 | 29.2 |
Product development
During the quarter, the Company focused on finalizing a new generation DIC system (Digital Image Correlation), which also was delivered to the customer. In addition, Image Systems’ wide-ranging efforts to develop a new software platform entered its next intensive phase during the period, in which the development of 3D and 3D-related functionality will be implemented as platform modules. Moreover, a major release of the Company’s TrackEye product was rolled out to all existing customers.
Other information
The Parent Company
The Parent Company’s net sales amounted to MSEK 2.0 (1.7). Operating profit amounted to MSEK -2.1 (-1.6). Result after taxes amounted to MSEK -2.0 (-1.4). Investments in fixed assets amounted to MSEK 0.0 (0.0). The Parent Company’s available liquid funds amounted to MSEK 0.0 (0.0) as of June 30, 2022. The Parent Company’s equity as of June 30, 2022, amounted to MSEK 137.6 (133.3), and solidity was 92 (90) percent.
Significant events after the period
During the second quarter, a framework agreement was concluded with Moelven Timber, which can generate a business volume of up to MSEK 27.4. After the end of the quarter, a first order of MSEK 4.4 under the framework agreement was received from one of the Group’s sawmills, Moelven Dalaträ,
The Annual General Meeting resolved on a name change to Metronix AB (publ). The change of name aims to better express the Group's vision to establish a centre of excellence in non-contact measuring technology and more clearly distinguish between the brands of the Group and the subsidiaries. Work on the name change is under way, and a new website will be presented as the name change becomes effective.
Personnel
The average number of employees was 75 (84). The number of employees at the end of the period was 75.
Number of shares
The number of shares on June 30, 2022, amounted to 89,207,818.
Accounting policies
Image Systems applies the International Financial Reporting Standards (IFRS) as adopted by the EU. The interim report for the Image Systems Group is prepared in accordance with IAS 34, Interim Financial Reporting, and the Swedish Annual Accounts Act. Disclosure in accordance with IAS 34, Interim Financial Reporting, is provided in notes as well as elsewhere in the interim report.
The interim report for the Parent Company, Image Systems AB, is prepared in accordance with the Swedish Annual Accounts Act as well as the Swedish Financial Reporting Board’s recommendations RFR 2 Accounting for Legal Entities.
Image Systems applies the ESMA (European Securities and Markets Authority) Guidelines on Alternative Performance Measures. Definitions of indicators are provided on page 15 and relevant reconciliations on page 14.
Risks and uncertainties
The Group’s significant risks and uncertainties include business risks related to agreements with customers and suppliers as well as other external factors such as currency fluctuations. The Group’s significant financial and business-related risks are discussed at depth in the management report and under Note 3 in the 2021 Annual Report. No significant new or changed risks or uncertainties have been identified during the quarter.
Audit
This interim report has not been reviewed by the Company’s auditors.
Financial Calendar
Interim report July-September 2022 November 9, 2022
Year-end report 2022 February 10, 2023
Long-term financial objectives
Image Systems aims to create long-term increase in value for its shareholders. To achieve this, the Board of Directors has set long-term financial objectives:
EBITDA >15%
Solidity >50%
Dividend 20% of the profit after taxes
The Board of Directors and the CEO confirm that this interim report provides a true and fair view of the Parent Company's and the Group’s operations, financial position and performance and describes material risks and uncertainties faced by the Parent Company and the companies belonging to the Group.
Linköping, August 19, 2022
Anders Fransson Jörgen Hermansson Catharina Lagerstam
Chairman of the Board Director Director
Jan Molin Matilda Wernhoff Annika Ölme
Director Director Director
Johan Friberg
Chief Executive Officer
The information in this report is disclosed pursuant to the EU Market Abuse Regulation. The information was submitted for publication, through the agency of the contact person set out below, at 8:00 AM on August 19, 2022.
Financial reports are available on the Company’s website http://www.imagesystemsgroup.se
Questions will be answered by:
Johan Friberg, CEO and President, telephone +46(0)13-200 100, e-mail johan.friberg@imagesystems.se
Image Systems AB, Snickaregatan 40, 582 26 Linköping, Sweden. Corporate registration number 556319-4041
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