Supply chain challenges figure high in latest Tagmaster report

Stockholm, Sweden

Tagmaster has released its latest interim report covering the period from January to March 2022, and although there is positive comment regarding strategy and market climate improvement, as with many manufacturing companies in the security security industry and indeed in the wider industrial landscape, delivery chain issues are still causing problems with component supply and project delays.

Jonas Svensson, CEO at Tagmaster made the following commented on the situation, "Thanks to great flexibility and committed employees, we were able to handle the imbalances in the supply chain in a good way and we have also been able to compensate for increased costs with raised prices for our products and solutions. During the quarter we were able to continue with investments in mobility solutions for Smart Cities based on advanced sensor technology. Our solutions contribute to the necessary transition to a more sustainable transport system, which gives us a good future position."

During the quarter, the company has been affected by actual and announced further cost increases for electronic components and input goods. "We have increased our component purchases via the spot market to be able to keep commitments to our customers. With increased prices to customers and internal efficiency, we managed to reach a gross margin that is in line with the first quarter of 2021. Given the challenging purchasing situation, we are satisfied with a continued good gross margin, which shows that our offering can withstand price increases without losing attractiveness."

We expect continued challenges in the coming quarters and overall, price compensation is something we will continue to work. We estimate that the component shortage affected negatively on sales with approximately 6 percent, corresponding to approximately SEK 5 million.

"During the period, we continued to invest in technology leadership in all our areas and to develop more complex solutions that give our offering increased competitiveness to bring us up in the value chain," explained Svensson. According to the report, focus is increasingly on solutions that can contribute to a more sustainable transport system where analysis, AI and Deep Learning play an important role. The acquisition of French Citilog during the second quarter of 2021 has also sharpened the company's offering on the technology side and adds value through synergies on the sales and customer side.

The acquisition of Citilog explains the Group's increased operating costs by 39 percent compared with the same period in 2021, when Citilog was not yet part of the Group. During the quarter, some of Citilog's customer projects and the expected growth were postponed, which had a negative impact on both sales and EBITDA of approximately SEK 5.7 million and SEK 5 million, respectively. "During the quarter, we were also affected by delayed projects within Rail Solutions in France, which had a negative effect on sales of approximately SEK 3 million", Svensson added.

Taken together, these increased costs in combination with project delays and thus reduced sales have affected both gross profit and operating profit during the period.

"During the period, our work to set up a joint sales force for Citilog and our American subsidiary Sensys Networks continued according to plan in combination with the planned measures to adjust costs within Citilog.

The Group's sales during the first quarter amounted to SEK 79.5 million, which is an increase of 6.9 percent compared to the same period in 2021. Organically, however, we see a decrease in sales of 11.5 percent. Our Traffic Solutions business amounted to SEK 68.2 million, which is an increase of 9.1 percent compared with the corresponding period in 2021. During the quarter, Traffic Solutions accounted for 86 percent of sales, while Rail Solutions accounted for 14 percent".

Svensson believes that Tagmaster is well positioned in a market with long-term good conditions for growth and good profitability, and he also believes that the fact that they work to improve the traffic environment in cities and metropolitan areas around the world gives them a very good position in the face of the massive restart packages that are being launched in Europe and the USA and which are largely focused on green investments.

"The strategy and value-creating potential have not changed due to the short-term limitations in the supply chain and our investments in growth through innovation, commercial focus and acquisitions mean that we have a positive view of the company's development for the coming year," concluded Jonas Svensson.


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