Interim report January-June 2013

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Julie Thomas
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Interim report January-June The second quarter > Net sales increased by 7 percent during the second quarter to SEK 1,114 M (1,044).

6) > Profit after tax amounted to SEK 96 M (88) > Earnings per share amounted to SEK 1.38 (1.26) The first half-year > Net sales increased by 9 percent during the period to SEK 2,096 M (1,925).

4) > Profit after tax amounted to SEK 162 M (145) > Earnings per share amounted to SEK 2.33 (2.08) Continued global market leader Sales in the second quarter amounted to SEK 1,114 M.

1 Interim report January-June The second quarter > Net sales increased by 7 percent during the second quarter to SEK 1,114 M (1,044). In local currencies, net sales increased by 12 percent > Operating profit increased to SEK 127 M (121), which corresponds to an operating margin of 11.4 percent (11.6) > Profit after tax amounted to SEK 96 M (88) > Earnings per share amounted to SEK 1.38 (1.26) The first half-year > Net sales increased by 9 percent during the period to SEK 2,096 M (1,925). In local currencies, net sales increased by 14 percent > Operating profit increased to SEK 216 M (200), which corresponds to an operating margin of 10.3 percent (10.4) > Profit after tax amounted to SEK 162 M (145) > Earnings per share amounted to SEK 2.33 (2.08) Continued global market leader Sales in the second quarter amounted to SEK 1,114 M. During the period, the key North American market in particular continued to display a strong performance. In May, the global information and analysis company IHS published its annual report on the video surveillance market. We are proud, just like last year, to be ranked as global market leader in both the Network Cameras and Security Cameras categories. For the first time, Axis is now also ranked as market leader in the Video Encoders category. There is good potential for a positive trend in network video during the years to come. We see strong growth potential for Axis network video products particularly through expansion in emerging markets and in the market for small installations, but also in more mature markets where we already have an established position. Axis market-leading position and our strong business model gives us a good opportunity to drive the development of innovative security solutions and create new possibilities for the future within the scope of our broad competencies. Recruitment of personnel for the longer term is continuing and above all within R&D and the sales organization. During the second quarter, we welcomed 51 new employees to the company. We are continually making efforts to strengthen our corporate culture through introduction programs and training. Investments in technological development have enabled the release of a number of new and strategically important products and solutions during the period. Ray Mauritsson President About Axis Communications As the market leader in network video, Axis is leading the way to a safer, smarter, more secure world driving the shift from analog to digital video surveillance. Offering network video solutions for professional installations, Axis products and solutions are based on an innovative, open technology platform. Axis has more than 1,400 dedicated employees in 40 locations around the world and cooperates with partners covering 179 countries. Founded in 1984, Axis is a Sweden-based IT company listed on NASDAQ OMX Stockholm under the ticker AXIS. For more information about Axis, please visit our website

Events during the second quarter New market report In the latest report by the global information and analysis company IHS (previously IMS) The World Market for CCTV and Video Surveillance Equipment

In, Axis also took first place in the Video Encoders category.

2 Events during the second quarter New market report In the latest report by the global information and analysis company IHS (previously IMS) The World Market for CCTV and Video Surveillance Equipment Edition, Axis is once again ranked as the market leader in the Security Cameras category, which covers both analog and network cameras, and also in the Network Cameras category. In, Axis also took first place in the Video Encoders category. Meanwhile, IHS revised its long-term growth forecast for network cameras downwards from 24 to 22 percent, and for the video surveillance market as a whole from 14 to 13 percent. The report also noted expectations of falling average selling prices for network cameras in the years to come. 1,500 1,450 1,400 1,350 1,300 1,250 1,200 1,150 1,100 1,050 1, Number of employees 1,127 1,088 1,205 1,265 1,333 1,403 1,470 1,521 High rate of innovation During the second quarter, a number of strategically important products and solutions were released. In April, an upgraded version of AXIS Camera Companion was introduced. The new software supports a greater number of cameras in Axis product portfolio. In addition, a new version of the AXIS M30-VE camera was released, which is mainly intended for smaller installations including hotels, stores and restaurants. In May, the AXIS 931-E camera was introduced, the first outdoor-ready thermal camera offering corridor format surveillance. AXIS P5414-E is a new line of PTZ cameras, featuring new innovative mechanics that among others things enable wall-mount installations. The camera is suitable for city surveillance and monitoring of parking houses and school yards, for example. Axis also helped to boost the security of the public and artists during the Eurovision Song Contest in Malmö by offering high technology products in order to meet the international surveillance standards required for the event. Continues taking long-term responsibility Axis third sustainability report was published in May, which describes the company s work in relation to environmental considerations, business ethics and social responsibility. As a marketleading player, Axis has both opportunities and a responsibility to influence the industry as regards climate impact, improved working conditions and to oppose corruption and violations of human rights. Besides clearly set sustainability targets, the company has also initiated a comprehensive anti-corruption program. Distributors and employees have undertaken to comply with the company s zero tolerance against corruption. Meanwhile, regular audits of suppliers take place in order to ensure that they meet the ethical-, environmental-, and work-related standards imposed by Axis. Recognition of employees Axis makes continuous efforts to strengthen its culture and to develop its employees. It is therefore very gratifying that a number of the company s employees were recognized for their work during the quarter. In April, Bodil Sonesson, Vice President, Global Sales at Axis, received the Women s Security Council s Woman of the year Award in the manufacturing category. Axis founder Martin Gren was awarded the Royal Patriotic Society s (Kungliga Patriotiska Sällskapet) Business Medal for outstanding entrepreneurship as well as the Outstanding Contribution to the Security Industry Award at the IFSEC international exhibition in Birmingham. In May, Axis received the Best Places to Work award along with a small number of companies in the state of Massachusetts from the Boston Business Journal. During the second quarter, 51 people were recruited, which means that the total number of employees at the end of the period was 1,521 (1,265). Bodil Sonesson Vice President, Global Sales 2

Comments on the income statement and balance sheet Net sales The second quarter Net sales for the second quarter amounted to SEK 1,144 M (1,044), which was an increase of 7 percent.

3 Comments on the income statement and balance sheet Net sales The second quarter Net sales for the second quarter amounted to SEK 1,144 M (1,044), which was an increase of 7 percent. Growth was 12 percent in local currencies. Foreign currency effects had a negative impact on sales of SEK 58 M. Sales in the EMEA region amounted to SEK 363 M (377) during the second quarter, corresponding to negative growth of 4 percent. Growth was 1 percent in local currency. The macroeconomic turbulence in the region continues to restrain the growth rate in a number of the most important European markets. The demand for network video in the region s emerging markets is still strong. Sales SEK M % 1, Sales in the Americas region amounted to SEK 618 M (543) during the second quarter, corresponding to growth of 14 percent. Growth was 19 percent in local currency. North America is still displaying strong demand and Axis continues to have a leading market position. Investments are being made in South America to develop a strong organization and boost the local presence. 1,100 1, Sales in the Asia region amounted to SEK 134 M (124) during the second quarter, corresponding to growth of 8 percent. Growth amounted to 16 percent in local currency. There is strong interest for network solutions in many parts of the region Through continued investments in personnel, training of partners and local presence, a good basis is being developed for taking advantage of the strong growth potential Sales SEK M Total growth % The first half-year Net sales during the period January June amounted to SEK 2,096 M (1,925), an increase of 9 percent in Swedish kronor and 14 percent in local currency. Foreign currency effects impacted sales negatively during the period by SEK 102 M. Invoiced sales per product group (SEK M) months Video 1, , , , , ,335.1 Other TOTAL 1, , , , , ,354.6 Asia 12 % Americas 55 % Sales per region, EMEA 33 % Invoiced sales per region (SEK M) months EMEA , ,585.7 Americas , , ,256.6 Asia TOTAL 1, , , , , ,354.6 Earnings The second quarter Operating profit during the second quarter amounted to SEK 127 M (121), which corresponds to an operating margin of 11.4 percent (11.6). The unchanged operating margin is largely explained by the fact that costs for the continued expansion were offset by higher sales combined with a slightly improved gross margin. The gross margin remains at a stable level compared to the most recent quarters and amounted to 51.0 percent (49.4) during the quarter. Profit before tax was SEK 126 M (120). Profit after tax amounted to SEK 96 M (88). Changes in foreign exchange rates impacted operating profit negatively by SEK 6 M, compared with the corresponding period of the previous year. 3

600 550 500 450 400 350 300 250 200 150 100 50 0 225 200 175 150 125 100 75 50 25 0 Sales per region, SEK M EMEA Americas Asia Operating profit / EBIT SEK M % 250 100 EBIT SEK M Gross margin % EBIT

4 Sales per region, SEK M EMEA Americas Asia Operating profit / EBIT SEK M % EBIT SEK M Gross margin % EBIT margin % The first half-year The group s operating profit during the first half-year amounted to SEK 216 M (200), which is equivalent to an operating margin of 10.3 percent (10.4). The gross margin amounted to 51.2 percent (49.6). Profit before tax was SEK 214 M (198) and profit after tax was SEK 162 M (145). Changes in foreign exchange rates impacted operating profit negatively by SEK 36 M, compared to the previous year. Condensed income statement (SEK M) months Net sales 1, , , , , ,354.6 Gross profit , , ,222.1 Gross margin (%) Operating profit Operating margin (%) Profit before tax Cash flow, investments and financial position Cash flow from operating activities developed in line with the operating profit for the period January-June and amounted to SEK 226 M (-34). Net investments totaled SEK 48 M (30), of which capitalized development costs amounted to SEK 19 M (7). Axis had SEK 194 M (157) in cash and cash equivalents at the end of the period, as well as unutilized credit facilities of SEK 460 M (320). Accordingly, the company had a total of SEK 654 M (477) at its disposal at June 30,. Equity Consolidated equity amounted to SEK 623 M (529). The total number of shares at year-end was 69,461,250 (69,461,250). Axis has no outstanding stock option programs. The group s equity/assets ratio was 36.6 percent (34.0) at June 30,. (SEK M) Share capital Other contributed capital Other reserves Retained earnings Total equity Opening balance at Jan 1, Total comprehensive income for the period Dividend Closing balance at June 30, Opening balance at Jan 1, Total comprehensive income for the period Dividend Closing balance at June 30, Parent Company The parent company s operations are primarily focused on company-wide administration. The parent company has no employees. During the period, sales amounted to SEK 12 M (11) and operating profit amounted to SEK -6 M (-5). Cash and cash equivalents at the end of the period amounted to SEK 31.8 M (0.0) and borrowing was SEK 40 M (180). No investments have taken place during the period. 4

Outlook There is a continued steady inflow of new projects but the market is still affected by the global financial uncertainty. This is currently restricting the growth rate.

5 Outlook There is a continued steady inflow of new projects but the market is still affected by the global financial uncertainty. This is currently restricting the growth rate. Axis and external market research institutions estimate the long-term global growth potential for the network video market at approximately percent annually. An important factor for continued strong growth is increased penetration in smaller installations and in emerging markets. In order to meet market demand and retain its position as the market-leading supplier of network video solutions, Axis is continuing to develop and release a large number of innovative products, refine the partner network, recruit more employees and to expand globally. Other Risks and uncertainties Axis operations are subject to a further number of risks and uncertainties, which are described in the Annual Report. No new material risks have arisen during the second quarter of. Accounting policies This interim report is prepared in accordance with the Swedish Annual Accounts Act and IAS 34, Interim Financial Reporting. For information on the accounting policies applied, see the Annual Report. The accounting policies are unchanged compared with those applied in. The Axis share The company s share is listed on NASDAQ OMX Stockholm AB in the Large Cap segment, under the ticker AXIS. Axis share had a turnover of 16,324,769 shares during the period January-June, which gave an average turnover of 133,810 shares per trading day, to a value of SEK 22,195,284. The average price of the share during the period was SEK Reporting dates Axis will report on the following dates during the fiscal year: Interim report, January-September: October 17, Year-end report: January 31, 2014 The half-year report provides a true and fair review of the condensed balance sheets and income statements and the explanatory notes provide a true and fair view of the company s financial position and results of operations and the other interim information provides a true and fair review of the company s results and position. Lund den 9 juli Ray Mauritsson Verkställande direktör Roland Vejdemo Styrelseordförande Martin Gren Gustaf Brandberg Olle Isberg Petter Östlund Charlotta Falvin Carl-Fredrik Bergdahl Göran Jansson 5

6 Review report Review report of condensed interim financial information (Interim report) prepared in accordance with IAS 34 and Chapter 9 of the Swedish Annual Accounts Act. Introduction We have reviewed this interim report of Axis AB (publ) for the period January 1-June 30,. The board of directors and the president are responsible for the preparation and presentation of this interim financial information in accordance with IAS 34 and the Swedish Annual Accounts Act. Our responsibility is to express an opinion on this interim financial information, based on our review. The focus and scope of the review We conducted our review in accordance with the Standard on Review Engagements, (SÖG) 2410, Review of Interim Financial Information Performed by the Independent Auditor of the Entity. A review of the interim report consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review has a different focus and is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (ISA) and other generally accepted auditing standards in Sweden. The procedures performed in a review do not enable us to obtain a level of assurance that would make us aware of all significant matters that might be identified in an audit. Accordingly, the conclusion expressed based on a review does not constitute the same level of assurance as a conclusion based on an audit. Conclusion Based on our review, nothing has come to our attention that causes us to believe that the Interim Report, in all material respects, is not prepared for the Group in compliance with IAS 34 and the Swedish Annual Accounts Act and for the Parent Company in compliance with the Swedish Annual Accounts Act. Lund, July 9, PricewaterhouseCoopers AB Ola Bjärehäll Authorized Public Accountant Auditor in charge 6

7 Consolidated statement of comprehensive income (SEK M) - - Fyll year months Net sales 1, , , , , ,354.6 Cost of goods and services sold , , ,132,5 Gross profit , , ,222.1 Other revenues and changes in value Selling and marketing expenses Administrative expenses Research and development expenses Operating profit * Financial expenses Profit before tax Tax Net profit for the period Other comprehensive income Exchange differences Other comprehensive income for the period, net after tax Total comprehensive income for the period Total comprehensive income attributable to: The Parent Company s shareholders Earnings per share for the period, SEK Number of shares, average, thousands 69,461 69,461 69,461 69,461 69,461 69,461 *Net effects of changes in exchange rates in underlying receivables and liabilities in foreign currencies have impacted operating profit positively by SEK 11 M (0) in the second quarter and negatively by SEK 4 M (negatively by SEK 12 M) during the first half-year. Consolidated statement of cash flows (SEK M) months Cash flow from operating activities before change in working capital Change in working capital Cash flow from operating activities Cash flow from investing activities Cash flow from financing activities Cash flow for the period Cash and cash equivalents at the start of the period Cash and cash equivalents at the end of the period

8 Consolidated balance sheet (SEK M) June 30, June 30, Dec 31, Non-current assets Inventories Trade receivables* Other receivables Cash and cash equivalents Total 1, , ,789.6 Shareholders equity Non-current liabilities Trade payables Other current liabilities Total 1, , ,789.6 * This item includes receivables from contract manufacturers of SEK 51 M. Key ratios - - Net sales growth (%) Gross margin (%) Operating margin (%) Profit margin (%) Depreciation/amortization (SEK M) * Shareholders equity (SEK M) Capital employed (SEK M) Interest-bearing liabilities (SEK M) Net interest-bearing liabilities/net receivables (SEK M) ** Total assets (SEK M) 1,702 1,580 1,702 1,580 1,790 Return on capital employed (%) * Return on total assets (%) * Return on equity (%) * Interest coverage ratio (times) * Equity/assets ratio (%) Share of risk-bearing capital (%) Capital turnover ratio (times) Number of employees (average for the period) 1,501 1,243 1,475 1,212 1,278 Sales per employee (SEK M) * Operating profit per employee (SEK M) * * The key figures have been recalculated to rolling 12-month values where appropriate. ** Refers to net of interest-bearing receivables and liabilities. Per-share data June 30, June 30, Dec 31, Share price at end of period, SEK Dividend, SEK P/E ratio Earnings per share, SEK Number of shares, average, thousands 69,461 69,461 69,461 Number of outstanding shares, thousands 69,461 69,461 69,461 8

9 Quarterly data Invoiced sales per product group (SEK 000) Video 1, , , , , Other TOTAL 1, , , , , Invoiced sales per region EMEA Americas Asia TOTAL 1, , , , , Net sales growth (%) Gross profit (SEK M) Gross margin (%) Operating profit (SEK M) Operating margin (%) Parent Company income statement (SEK M) - - Net sales Gross profit Administrative expenses Operating profit Result from participations in group companies Interest income and similar profit/loss items Interest expenses and similar profit/loss items Profit before tax Change in tax allocation reserve Tax Net profit for the period Parent Company balance sheet (SEK M) June 30, June 30, Dec 31, Non-current assets Receivables from group companies Trade receivables and other receivables Tax receivables Cash and cash equivalents Total ,048.9 Shareholders equity Untaxed reserves Liabilities to group companies Current liabilities Total ,

10 Analyst & Press Conference Axis will hold a teleconference for the media and financial analysts today. A presentation is available at: Time: July 9, a.m. Phone number: The presentation will be broadcast live on: For further information please contact: Johan Lundin, Manager, Investor Relations ir@axis.com Tel: Axis discloses the information provided herein pursuant to the Swedish Securities Markets Act and/or the Swedish Financial Instruments Trading Act. This information was submitted for publication on July 9, at 8.00 a.m. CET. 10

Interim report. January September President s comments. The third quarter. January-September

Interim report. January September President s comments. The third quarter. January-September Interim report January September The third quarter > > Net sales increased by 30 percent during the third quarter to SEK 1,906 M (1,462). Net sales increased by 12 percent in local currencies > > Operating