This is a translation of the Swedish interim report. If there should be any discrepancies, the Swedish language version governs.
 

• Net sales increased by 10.2%, or 7.9% FX adjusted, to MSEK 86.5 (78.5)
• Gross profit increased by 9.3%, or 6.5% FX adjusted, to MSEK 67.0 (61.3)
• EBIT was MSEK 9.6 (11.7)
• Earnings after tax was MSEK 9.0 (10.7)
• Earnings per share was SEK 1.14 (1.35)

• Net sales increased by 10.9%, or 8.8% FX adjusted, to MSEK 166.4 (150.1)
• Gross profit increased by 12.2%, or 9.5% FX adjusted, to MSEK 129.1 (115.1)
• EBIT was MSEK 18.5 (18.2)
• Earnings after tax was MSEK 16.9 (18.0)
• Earnings per share was SEK 2.15 (2.28)

IMPORTANT EVENTS
 

• The AGM on May 19th elected Dan Foreman and Anne Årneby as new members to Nepa's board of directors. The previous board members P-O Westerlund and Martin Burkhalter had declined re-election.
• Lena Landahl was appointed as new Head of HR.
• Jack Suliman was recruited as new Chief Information Officer (CIO).

• Ferry Wolswinkel was recruited to the newly established role Chief Revenue Officer (CRO) and starts on the 3[rd] of October

A WORD FROM OUR CEO

Nepa's net sales increased by 10.2 percent or 7.9 percent currency adjusted in the second quarter compared to the corresponding quarter last year, despite increased uncertainty in the world around us. Our customers' willingness to invest remained good in general in most of our markets. In Finland, we geared up our sales efforts to meet a more hesitant attitude among many of the customers who have market exposure to Eastern Europe and have been affected by the war in Ukraine. The share of recurring revenue continues to be at a high level of 65.4 percent in Q2, which is in line with our targets.

Gross profit increased by 9.3 percent to SEK 67.0 million (61.3) compared to the second quarter last year. The gross margin decreased 0.6 percentage points to 77.5 percent (78.1). Operating profit (EBIT) amounted to SEK 9.6 million (11.7) while the EBIT margin was 11.1 percent (14.9). Profit after tax amounted to SEK 9.0 million (10.7), corresponding to earnings per share of SEK 1.14 (1.35).

Our investments for the future affected costs and thus our margins during the quarter. Among other things, we increased our sales and marketing investments. Of Other external costs totalling SEK 12.9 million, approximately SEK 2.2 million was of a more temporary nature for, among other things, system upgrades. Total Personnel costs increased by 18.2% to SEK 48.9 million, of which SEK 6.4 million are attributable to investments in internally generated intangible assets. We have for example invested in the development of a proprietary platform and digital tools. Adjusting for these, our Operational personnel costs increased by 8.1%, including provisions for an incentive program, the final outcome of which depends on the result for the full year 2022.

On the revenue side we gradually introduced price adjustments in both Q1 and Q2 to compensate for increased costs. The price adjustments will take effect gradually as our long-term customer agreements are renewed. We continue our growth efforts by strengthening management and sales capacity, including the recruitment of a Chief Revenue Officer (CRO).

Cash flow from operating activities amounted to SEK 7.4 million for the quarter and SEK 18.0 million for the first half of the year. We maintain a strong financial position with net cash of SEK 79.6 million at the end of the period.
 

Strengthened position

I am pleased to announce that during the quarter we completed the transition of our business, the legacy clean-up, as planned. As we have previously communicated, we have taken measures for increased internal efficiency and a more streamlined product range to ensure a stable high proportion of recurring revenue, mainly from tracking-based services. We are now focusing on further strengthening profitability and growth.
 

Outlook

It is gratifying to once again be able to report record sales and gross profit levels, but it is not something we are satisfied with. We can grow both faster and with higher scalability, which Nepa will prove when we now take the next step in our strategic plan further described in the Q1 report.

We are on the right track and continue to expect that we will start to see the effects of our investments by the end of the current year. At the same time, it is important to emphasize that we have a tight cost control and can pull the brakes in case of a deteriorating market climate, however this is not something we see a need for now. Although our investments are pressuring our margins this year, we are convinced that they will create value going forward. Nepa enters the expansion phase with a scalable and automated platform, a strong track record among our customers, and a clear strategy for the future.
 

Ulrich Boyer

CEO
 

For further information, please contact:

Ulrich Boyer, CEO                            Michael Wallin, Head of Investor Relations
+46 708 226 618                              +46 708 788 019
ub@nepa.com                                michael.wallin@nepa.com
 

This is a translation of the Swedish interim report. If there should be any discrepancies, the Swedish language version governs. The Swedish version is information that Nepa AB (publ) is obliged to make public pursuant to the EU Market Abuse Regulation. The information was submitted for publication, through the agency of the contact persons set out above, at 08:00 CET on August 19, 2022.