Swedish software company Hexagon has confirmed sluggish cornerstone markets, construction and automotive manufacturing, will weigh on its second-half results after reporting a flat second quarter.
The Stockholm-listed company posted 1% lower net sales of €1.35 billion for Q2, versus a year ago, below Bloomberg consensus forecasts for 3% growth.
Some analysts pointed to strong operating margins and growth in annual recurring revenues as positives.
“We believe that 8% growth in recurring revenues – now 41.4% of total sales – like subscription and SaaS will be well received,” said VP Bank’s Jerome Maser.
“The gross margin improved by 170 basis points to a record-high of 67.3% thanks to continued pricing power, stronger software sales and divestment of low-margin activities.
“[Overall] sales developed particularly well in EMEA [plus-4%] and within software and services [plus-4%].”
Maser said while forecast continuing softness in construction and automotive end-markets “should not come as a surprise … it will lead to negative estimate revisions”.
Hexagon’s 2022-to-2026 financial targets include 5-7% per annum organic revenue growth and 26% EBIT margins by 2026. On this week’s results call with analysts consensus calls for Q3 sales growth of 4% and 6% in Q4 was mentioned. However, Hexagon CEO Paolo Guglielmini said the company expected to be trading at similar levels to Q2 in Q3 and there were “a lot of different factors influencing the outlook beyond that”.
“We stay confident on the achievability of that [5-7% organic growth] goal,” he said.
Group revenue for the first half of 2024 was in line with 2023 at €2.65 billion (€5.44 billion total for FY23) with ARR up 8% yoy in Q2 at €561 million.
“During the second quarter of 2024 we have continued to see a slowdown in key end-markets, with slow demand in automotive and machining activities in EMEA and China affecting our Manufacturing Intelligence business, and the global weakness of the construction sector impacting the Geosystems division,” Hexagon said.
The group’s mining-dominated Autonomous Solutions business lifted sales 3% yoy for the first half of FY24 to €276.7 million (mining-related business accounted for 52% of 2023 AS revenue of €571.1 million.
Hexagon said “strong growth” in mining, “driven by good demand for safety related solutions”, was expected to be maintained.
“I’m excited by what’s been done and what’s ahead of us … in terms of autonomy for mining,” Guglielmini said.
He said he was looking forward to showcasing new radar and monitoring solutions at the major MINExpo event in Las Vegas, Nevada, later this year.
“I think we are going to see an acceleration, if not in the second half of the year, into next year, when it comes to more autonomy projects that allow us to re-utilise components of technology that we already have in-house,” Guglielmini said.