HEXATRONIC IN BRIEF. The Group s Annual Report 2016/2017 in summary

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1 HEXATRONIC IN BRIEF The Group s Annual Report 2016/2017 in summary

HEXATRONIC IN BRIEF 2016/17 in brief The Group has developed strongly and it has been an eventful year. The number of companies is growing and a new business area has been established.

2 HEXATRONIC IN BRIEF 2016/17 in brief The Group has developed strongly and it has been an eventful year. The number of companies is growing and a new business area has been established. The year in brief Acquisition of training companies ICT Education AB and Iftac AB establishment of a new business area in training. Decision to invest in a new duct line at Hexatronic Cables & Interconnect Systems AB in Hudiksvall. The Swedish Patent and Market Court found in Hexatronic s favour in the patent dispute with Emtelle Ltd. Events since the end of the period Acquisition of American duct manufacturer Blue Diamond Industries LLC. Hexatronic has been moved up to the Nasdaq Stockholm Mid Cap segment. Hexatronic wins submarine cable order worth MSEK 33 in total. The majority of our strategic markets will grow strongly in 2018 and beyond Henrik Larsson Lyon, President and CEO, Hexatronic Group 2 he x atronic in brief 2016/17

HEXATRONIC IN BRIEF 14 COMPANIES IN SIX COUNTRIES Countries with Hexatronic companies Distributors Head office: Gothenburg, Sweden Net sales: MSEK 1,718 1) EBITDA

of employees: 384 14 companies in 6 countries Listed on Nasdaq Stockholm Net sales, MSEK EBITDA (MSEK and %) 2 000 1 800 1 600 1 400 1 200 1 000 800 600 400 200 0

10,1% 10,6% 151 10 % 9,1% 8 % 110 6 % 81 4 % 64 64 2 % 0 % 2013/14 2014/15 2015/16 2016 2017 2016/17 1) Financial summary 2016/17 1) 2017 2016 2015/16 2014/15

64,0 EBITDA margin 11,6% 11,6% 10,6% 9,1% 10,1% 11,1% Operating result (EBIT) 161,6 122,3 88,8 62,9 50,0 59,1 Net earnings 112,3 90,4 54,1 42,1 37,4 46,5 Total

3 HEXATRONIC IN BRIEF 14 COMPANIES IN SIX COUNTRIES Countries with Hexatronic companies Distributors Head office: Gothenburg, Sweden Net sales: MSEK 1,718 1) EBITDA margin: 11.6% No. of employees: companies in 6 countries Listed on Nasdaq Stockholm Net sales, MSEK EBITDA (MSEK and %) / / / /17 1) EBITDA EBITDA-margin 14 % % 11,6% 11,6% 11,1% 10,1% 10,6% % 9,1% 8 % % 81 4 % % 0 % 2013/ / / /17 1) Financial summary 2016/17 1) / / /14 Net sales 1 717, , ,3 890,9 627,3 497,3 Earnings before interest, taxes, depreciation and amortisation (EBITDA) 198,6 151,0 109,8 81,3 63,7 64,0 EBITDA margin 11,6% 11,6% 10,6% 9,1% 10,1% 11,1% Operating result (EBIT) 161,6 122,3 88,8 62,9 50,0 59,1 Net earnings 112,3 90,4 54,1 42,1 37,4 46,5 Total assets 777,1 777,1 657,3 605,2 482,0 280,3 Cash flow from operating activities 102,7 133,4 33,1 56,8 12,0 18,1 Earnings per share after dilution, SEK 2,97 2,38 1,50 1,19 1,21 1,83 1) Extended financial year encompassing 16 months. From 1 January 2018 the financial year matches the calendar year. he x atronic in brief 2016/17 3

THE MARKET The fiber optic market Broadband expansion is happening all around the world. Some nations have come a long way, while several major countries have barely begun.

4 THE MARKET The fiber optic market Broadband expansion is happening all around the world. Some nations have come a long way, while several major countries have barely begun. THE MARKET FOR FIBER TO THE HOME (FTTH) At EU level, and in many individual countries, there are digitalisation goals that include a certain bandwidth per household at a particular point in time. Digital agenda for Europe stipulates the goals, up to 2025, that all important socio-economic drivers such as education, transport hubs and important providers of public services as well as strongly digitalised companies should have gigabit connections, that all households should have a connection that enables 100 Mbps which can be upgraded to 1 Gbps, and that major roads and railways should have stable 5G coverage. The global economy is changing quickly and it is important to the competitiveness of individual countries and the whole of the EU that the goals are accomplished. There is still high activity on the global FTTH market worldwide, and especially on Hexatronic s focus markets of the Nordics, Central Europe and North America. Activity in Asia and Africa also remains high. In a report relating to the percentile coverage of FTTH/FTTB by country in Europe, Latvia is in the lead with 50.6% followed by Sweden with 43.4%, and lagging far behind are major nations like Germany and Italy with just 2.3% each, while the UK has under 1%. With reference to the digitalisation goals, farreaching expansion of the fiber networks is to be expected also in countries that are lagging behind, which entails great potential for Hexatronic. In terms of size, the North American market is comparable to Europe, and expansion there is expected to be high in the next few years. During 2017, the number of homes passed increased by 20% to 50 million households in total, which indicates that the market is active while the potential is high. EXAMPLES OF FACTORS AFFECTING THE MARKET 5G is imminent a technological shift that is required to provide sufficient support for new services and connected products that need higher transfer speeds in the networks, such as driverless vehicles. Video currently comprises around 50% of all traffic, and this is expected to rise to 75% by From 2023, 95% of mobile traffic is expected to come from smartphones. The transition to 5G entails a dramatic condensation of senders/receivers, which has an effect on the fiber networks as these are largely connected to fiber, and the need for fiber will increase. The number of mobile users is expected to increase from around 8 billion to around 9 billion by 2023, according to the Ericsson Mobility Report. The development of Internet of Things (IoT) and smart cities is only in its infancy, and the market is expected to grow dramatically in the years to come. Creative ideas and solutions are emerging and new needs re arising. Products and services are constantly being launched which in different ways streamline our everyday lives and make them simpler. The opportunities and potential applications are virtually endless. Both IoT and smart cities are expected to develop comprehensively in the next few years. The segments expected to grow the most in IoT are the short range ones, i.e. products with a wireless range of up to 100 m, often with a connection to WiFi, Bluetooth and Zigbee. The number of IoT products is expected to grow by about 20% a year up to 2023, which would then result in 20 billion connected devices worldwide a clear indication of the dramatic growth that s anticipated in this segment. We contribute to the digital transformation Together, the companies in Hexatronic Group develop world-class products and solutions that create development opportunities for people around the world. 4 he x atronic in brief 2016/17

HEXATRONIC GROUP OFFERING Fiber Access Matrix is the collective name for our system offering.

installing a complete Matrix project entails longer-term guarantees.

passive fiber optic communication networks.

methods and solutions that streamline installation while also assuring the quality and service life of the networks.

includes more efficient installations and long-life spans.

This allows for various advantages such as improved installation lengths and a lower installation cost overall.

The cables are normally installed by blowing in lengths of over 1 km and can easily be installed manually in shorter lengths.

5 HEXATRONIC GROUP OFFERING Fiber Access Matrix is the collective name for our system offering. The system encompasses all the products required to create high-quality fiber networks, whether installed in the ground, air or under water. The advantage of having a single system is that all the various parts are developed and manufactured to be used together, and that installing a complete Matrix project entails longer-term guarantees. Worldclass products and systems The Group s collective offering primarily focuses on passive products for the construction of passive fiber optic communication networks. The far-reaching expansion of fiber networks is generating demand for the materials, knowledge and know-how necessary to carry out successful installation projects. The large volumes of fiber network being built in the next few years, along with the maturity of the market, calls for refined methods and solutions that streamline installation while also assuring the quality and service life of the networks. Our products are characterized by properties that create the best total cost of ownership for our customers, and this inherently includes more efficient installations and long-life spans. Viper is a complete range of micro cables, which are slimmer, more flexible and more stable than conventional cables. This allows for various advantages such as improved installation lengths and a lower installation cost overall. Viper cables have fast become very popular due to the benefits they entail for customers in the shape of faster, more efficient installations. Raptor is a range of extremely robust nano cables primarily intended for installation in different types of microducts. The cables are normally installed by blowing in lengths of over 1 km and can easily be installed manually in shorter lengths. The cable has great installation properties whether blowing or installing manually, thanks to fast, efficient installation. Stingray is an evolved air blown fiber designed for installation in microducts. Primarily intended for use in FTTH, Stingray s unique design offers advantages in the form of faster installation with fewer problems. The product is delivered in a specially developed package that simplifies handling and installation, while also reducing environmental impact. The LightMate range includes a vast array of connection boxes and cabinets for use in installing fiber networks. Common to all the products are the high quality and the carefully considered details. The result is a product range that has been popular on the Nordic market for many years. he x atronic in brief 2016/17 5

ACQUISITIONS Acquisitions that strengthen our presence on new markets Our global expansion continues, with new companies and products established on several new markets and continents during the year.

We constantly evaluate acquisitions of profitable companies with market-leading positions, along with smaller supplementary acquisitions that can enhance our competitiveness and profitability both

6 ACQUISITIONS Acquisitions that strengthen our presence on new markets Our global expansion continues, with new companies and products established on several new markets and continents during the year. ACQUISITION STRATEGY Hexatronic has an explicit acquisition strategy on our strategic markets. We constantly evaluate acquisitions of profitable companies with market-leading positions, along with smaller supplementary acquisitions that can enhance our competitiveness and profitability both locally and for the Group as a whole. Efforts to establish Hexatronic more strongly on important strategic growth markets such as the USA, UK and Germany are in full swing. These markets have announced major investments in fiber to the home (FTTH) over the next few years, and this is where Hexatronic will grow. The Group s growth strategy is to grow by continuously developing its product range and introducing more added value services such as servicing, aftermarket sales, support and training. OUR PHILOSOPHY FOR SUCCESSFUL ACQUISITION INTEGRATION We apply the following guidelines to assure the successful integration of newly acquired companies: We value and strive to retain the entrepreneurial spirit in acquired companies We develop strong brands and a positive business culture Acquired companies are independent legal entities with their own profit responsibility We never acquire companies to achieve cost synergies Integration and coordination in the Group focus on broader sales, with the aim of enhancing the Group s range of products and systems ACQUISITIONS DURING THE FINANCIAL YEAR The most important development during the year was that a strategic position was established on the American market with the acquisition of American duct manufacturer Blue Diamond Industries LLC. The acquisition was finalised just after the end of the balance sheet date. Bearing in mind the great need for training of installation engineers, project planners and project managers, both on the Swedish market and internationally, the training companies ICT Education AB and Iftac AB were acquired during the financial year. Training is a vital part of the Group s international expansion, and the focus is on selling complete passive fiber optic systems including training. 6 he x atronic in brief 2016/17

7 ORGANISATION A Group under constant development After two acquisitions in 2016/17, the Group is comprised of the Parent Company Hexatronic Group AB with its head office in Gothenburg, along with thirteen subsidiaries. ACQUISITIONS DURING THE FINANCIAL YEAR 1 November 2016 saw the acquisition of training company ICT Education AB, followed by a further training company when Iftac AB was acquired on 2 January After the balance sheet date, on 2 January 2018, American duct manufacturer Blue Diamond Industries LLC was acquired. SUCCESSFUL ENTREPRENEURIAL COMPANIES Hexatronic has 384 employees in 14 independent companies. Flexibility and freedom with responsibility is the fundamental principle that permeates Hexatronic s decentralised organisation, since we are convinced that the best business decisions are made close to the customer and the market. SUPPORT IN THE SUBSIDIARIES DEVELOPMENT The independence of the subsidiaries is important in retaining and recruiting skilled personnel and entrepreneurs. Hexatronic does not micromanage the companies, but instead exercises active ownership through Group-wide functions and financial monitoring. There are Group-wide functions in areas that contribute to the subsidiaries efficiency and profitability such as legal affairs, accounting, finance and business development. HEXATRONIC GROUP IFTAC ICT EDUCATION HEXATRONIC CABLES & INTERCONNECT SYSTEMS HEXATRONIC NETWORK SOLUTIONS HEXATRONIC TIANJIN TRADING CO HEXATRONIC UK HEXATRONIC US HEXATRONIC AS TD FIBEROPTIK PROXIMION BLUE DIAMOND INDUSTRIES* HEXATRONIC INVEST HEXATRONIC NEW ZEALAND * Consolidated in the Group from 2 January 2018 he x atronic in brief 2016/17 7

SUSTAINABILITY/THE SHARE Sustainability Global goals Agenda 2030 The world s nations have committed to lead the world towards a fair, sustainable future Agenda 2030.

8 SUSTAINABILITY/THE SHARE Sustainability Global goals Agenda 2030 The world s nations have committed to lead the world towards a fair, sustainable future Agenda Hexatronic Group can and wants to take part in this development. The goals cover three aspects: economic, social and environmental sustainability. Read more at (Swedish) or (English). Hexatronic s focus areas Of the 17 Sustainable Development Goals in the UN s Agenda 2030, Hexatronic Group has decided to focus on four as a priority. Read more at The Hexatronic share The price of the Hexatronic share rose dramatically in 2016/17. After the end of the balance sheet date, the share was moved up to the Nasdaq Stockholm Mid Cap segment. PRICE DEVELOPMENT During the financial year, the share price fluctuated between a low of SEK on 6 September 2016 and a high of SEK on 28 December The closing price at the end of the financial year was SEK SEK 90,00 80,00 70,00 SHARE PRICE IN SEK CARNEGIE SMALL CAP INDEX NUMBER OF SHARES TRADED PER DAY Number TRADING VOLUME A total of 38,254,457 shares were traded to a total value of SEK 1,693,384,436. An average of 96,762 shares were traded on each day of trading during the financial year. 60,00 50,00 40,00 30, OWNERSHIP STRUCTURE The number of shareholders in the company on 31 December 2017 was 7,504. The holding of the 10 largest shareholders amounted to 53.0% of the capital and votes. Foreign ownership represented 32.6%. (Source: Euroclear) 20,00 10, he x atronic in brief 2016/17

9 FINANCIAL INFORMATION consolidated statement of comprehensive income (sek thousand) months Revenue t h e f i n a n c i a l y e a r months Net sales 1,717, ,896 Other operating income 19,331 7,788 Total 1,737, ,684 Operating expenses Raw materials and goods for resale -961, ,235 Other external costs -233, ,657 Personnel costs -340, ,879 Other operating expenses -2,191-2,597 Earnings before interest, taxes, depreciation and amortisation (EBITDA) 198,642 81,317 Amortisation of intangible assets and depreciation of tangible assets -37,083-18,411 Operating result 161,559 62,906 Financial income Financial expenses -18,576-7,929 Financial items net -17,942-7,798 Result before tax 143,618 55,108 Income tax -31,299-13,006 Net result for the period 112,318 42,102 Other comprehensive income: Items which can later be recovered in the income statement Translation differences for the year in translation of foreign operations -1, Cash flow hedge -3,077 0 Total comprehensive income for the year 107,768 41,623 Total comprehensive income is attributable to Parent Company shareholders in its entirety. 107,768 41,623 Earnings per share before dilution (SEK) Earnings per share after dilution (SEK) For more detailed information, see the full Annual Report 2016/17. he x atronic in brief 2016/17 9

10 FINANCIAL INFORMATION consolidated bal ance sheet (sek thousand) ASSETS Intangible assets 118,585 93,055 Tangible assets 93,933 80,505 Financial assets Total non-current assets 212, ,848 Inventories 236, ,115 Accounts receivable 204, ,620 Current tax receivables Other receivables 1,649 2,361 Prepaid expenses and accrued income 13,394 11,504 Liquid assets 108,239 51,051 Total current assets 564, ,311 TOTAL ASSETS 777, ,160 EQUITY Share capital 1,809 1,684 Other contributed capital 190, ,803 Reserves -8, Result brought forward (including result for the year) 231, ,161 TOTAL EQUITY 415, ,841 LIABILITIES Liabilities to credit institutions 70,530 50,141 Deferred tax liabilities 35,372 29,986 Total non-current liabilities 105,903 80,127 Liabilities to credit institutions 23,510 0 Provisions 3,000 5,000 Accounts payable 140, ,456 Current tax liabilities 11,779 0 Other liabilities 26,215 79,798 Accrued expenses and deferred income 50,546 36,938 Total current liabilities 255, ,192 TOTAL LIABILITIES 361, ,319 TOTAL EQUITY AND LIABILITIES 777, ,160 For more detailed information, see the full Annual Report 2016/ he x atronic in brief 2016/17

11 FINANCIAL INFORMATION consolidated statement of c ash flows (sek thousand) months Operating activities months Operating result 161,559 62,906 Items not affecting cash flow 16,211 7,441 Interest received Interest paid -2,582-1,311 Income tax paid -24,613-23,458 Cash flow from operating activities before changes in working capital 150,804 45,709 Cash flow from changes in working capital Increase (-)/decrease (+) in inventories -38,810-9,476 Increase (-)/decrease (+) in accounts receivable -35,051-25,763 Increase (-)/decrease (+) in other operating receivables 1,997-7,611 Increase (+)/decrease (-) in accounts payable 36,917 27,419 Increase (+)/decrease (-) in other operating liabilities -13,146 26,495 Cash flow from changes in working capital -48,092 11,064 Cash flow from operating activities 102,712 56,773 Investing activities Acquisition of intangible assets -2,670-1,945 Acquisition of tangible assets -35,004-26,560 Acquisition of subsidiaries after deduction of acquired liquid assets -53,604-36,675 Cash flow from investing activities -91,277-65,180 Financing activities Borrowings 43,900 20,140 Amortisation of loans 0-9,999 New share issues 12,246 3,369 Dividends paid -10,392 0 Cash flow from financing activities 45,754 13,511 Change in liquid assets 57,188 5,104 Liquid assets at the start of the year 51,051 45,947 Liquid assets at the end of the year 108,239 51,051 For more detailed information, see the full Annual Report 2016/17. he x atronic in brief 2016/17 11

FINANCIAL INFORMATION All financial information is published on the Hexatronic website: www.hexatronicgroup.

se FOLLOW HEXATRONIC linkedin.com/company/hexatronic LinkedIn is our main social media channel for distributing information about Hexatronic.

LinkedIn is also where we advertise job vacancies. Other channels used by the Group are Facebook, Twitter, YouTube and Issuu. facebook.

12 FINANCIAL INFORMATION All financial information is published on the Hexatronic website: Financial reports can also be ordered from Hexatronic Group AB Sofierogatan 3A SE Göteborg, Sweden or by FOLLOW HEXATRONIC linkedin.com/company/hexatronic LinkedIn is our main social media channel for distributing information about Hexatronic. It contains information about products and technologies we work with, as well as our latest contracts and business events. LinkedIn is also where we advertise job vacancies. Other channels used by the Group are Facebook, Twitter, YouTube and Issuu. facebook.com/hexatronic twitter.hexatronicpartners.se youtube.hexatronicpartners.se issuu.hexatronicpartners.se Hexatronic Group AB, Sofierogatan 3A, SE Göteborg, Sweden Tel +46 (0) hexatronicgroup.com

Hexatronic Group AB (publ) Interim Report January March 2018

Hexatronic Group AB (publ) Interim Report January March 2018 The quarter (January-March 2018) Net sales amounted to MSEK 339.2 (291.3), which represents 16% (51%) growth during the quarter. The operating