Further improvement to operating margin
Comment from CEO Markus Granlund:
Through our focus on continuous improvements in all dimensions, we improve operating profit in the first quarter and strengthen the operating margin from 8.5 percent to 9.1 percent.
Implemented efficiency measures, productivity increases and price increases together with a high demand for e.g. our digital services have contributed to improved profitability. Our ambition to achieve a greater degree of industry diversification is also generating results. The share of the Group's total sales to industrial and life science customers is now greater than the turnover towards the automotive industry.
Technology and digitization affect everyone, making our work at Semcon more relevant than ever for more customers and industries. Digitization also creates considerable scope for sustainable development. Our commitment to the Fossil Free Sweden project through the roadmap for the digitization consultancy industry is an important initiative, and we initiated a collaboration during the quarter. A number of new strategically important framework agreements were signed at the beginning of the year, including a framework agreement with the Agency for Digital Government (DIGG). We also co-founded the AI Innovation of Sweden initiative, to accelerate research and innovation in the field.
The restructuring of the new Engineering & Digital Services business area was completed as planned. The ambition is to become better equipped for rapid technology shifts, new customer needs and changing user behaviour. We now have an even stronger platform to develop our digital offering, but also to enhance our internal potential and efficiency. Adjusted for restructuring costs, the business area's operating profit is almost on a par with last year. Growth was impacted by the ongoing skills shift towards a greater focus on digital competencies. However, growth is expected to gradually increase as the switchover gains momentum.
Digitization also pervades the Product Information business area, which together with new strategically important contracts have contributed to a continued improvement in earnings. Customer satisfaction is high and our offering is attractive as it contributes significant value in, for example, the customers' aftermarket business through cost-efficient product information solutions. We expect the positive trend to continue in 2019.
Operating profit for the second quarter will be affected by non-recurring expenses related to the restructuring of the Engineering & Digital Services business area of approximately SEK 4 million and the quarter contains one fewer working day compared with the corresponding period last year. The restructuring is expected to have a marginal positive impact on earnings for the full year 2019. Total annual savings are expected to amount to some SEK 10 million with full effect in 2020.
We have establish a higher level of profitability and created an excellent foundation with a strong financial position that offers the right conditions for increased growth and improved earnings. At the same time, we continue to develop our culture and internal work environment as a means of attracting and inspiring employees.
This information is such information as Semcon 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 person set out above, at 08.00 a.m. CET on 24 April 2019.
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