Full year report July 2019 to June 2020 including Interim figures April to June 2020
April – June 2020 (Fourth quarter)
- Net sales of SEK 8.5m, corresponding to a 29.6% increase compared with the same period in 2019 (SEK6.6m).
- Normalized EBITDA (EBITDA before non-recurring items and FX translation) was SEK-0.1m, a reduction of the Normalized EBITDA loss of SEK4.4m compared to the same period in 2019 (SEK-4.5m).
- Net loss was SEK-5.8m compared with the same period in 2019 (SEK-9.6m).
- Cash flow from operating activities of SEK13.2m as a result of improved working capital management and cost reduction.
- Signed 5-year agreement with SCS JV valued at SEK24.2m and agreement with ADAC valued at SEK3.8m.
- Successful completion of a 1.5x oversubscribed directed and rights issue of SEK42.4m.
- Acquired 34% stake in Zutec Australia for a proforma ownership of 90%.
- EGM on May 22, 2020 elected Mikael Näsström new chairman replacing Stefan Charette who remains on the board. Erik Gabrielsson and Per Åkerman joined the board of directors
- Net sales of SEK 26.7m, corresponding to a 24.6% increase compared with the same period in 2019 (SEK21.5m).
- Normalized EBITDA (EBITDA before non-recurring items and FX translation) was SEK-11.9m.
- Net loss was SEK-36.7m compared with the same period in 2019 (SEK-28.9m).
- Earnings per share was a loss of SEK-0.86 compared to a loss of SEK-4.04 last year.
- Gustave Geisendorf appointed new CEO in March and CFO left the company.
Significant events after the period
- New sales organization and leadership announced.
- New finance leadership announced.
- Signed 3-year enterprise agreement of SEK4.3m with Cairn Homes and agreements with National Children Hospital of SEK3.2m.
- Repayment of Athanase loan of EUR1m plus accrued interest.
- EGM on July 17, 2020 elected BDO as new auditors.
Comments from Our CEO
A Year with a Turbulent Start and a Strong Finish with Growth of 30%
I was appointed CEO of Zutec in March 2020 and what a great privilege it has been to work with all the people and customers of this company. Our focus now is on growth by capturing market share in our home markets.
The initial period since my appointment was characterized by turning the company around and I am pleased with the progress. During the last quarter we worked hard on launching the new Zutec, which I called “Zutec 1.1”. This included forming a new board of directors, a new focused strategy, making cost and working capital improvements, raising capital, appointing and hiring a new leadership team, reorganizing the group, consolidating the group structure and winning new deals and customers. I am very pleased that the whole company has come together behind all these initiatives working as a team and we have come out strong and better. I am proud of what we have achieved on a financial level as well in a short period of time:
- Net sales increased by 30% in the last quarter compared to the same quarter last year.
- We came close to break-even on a normalized EBITDA level at SEK-0.1m.
- Our capital structure is strong following the successful completion of the oversubscribed directed and rights issues where we raised SEK42.4m of new equity.
Impact from Covid-19
The pandemic has had a profound impact on the world we are living in. There is a new normal. For Zutec, we have been working remotely since March and we will continue doing so until its entirely safe to return to an office environment. The construction industry has historically been slow to adopt technology and remains the least digitized industry in the world. Covid-19 has been a clear wake up call for the industry and technology has gone from a nice to have to a must have. We have seen this positively impacting Zutec in this last quarter resulting in sales increasing with 30% and winning a number of new meaningful contracts from new clients which we have successfully onboarded. We believe the industry is now ripe for growth and acceleration of digitization in the construction industry.
Cost cutting and working capital improvements
In March we embarked on a meaningful cost cutting program to realign our cost base, however still cognitive of the fact that growth is our main objective. We therefore could not cut too hard as we are anticipating growth. We have however meaningfully reduced our personnel costs and overheads. The impact from this will come through during the next quarter. We have further almost entirely reduced our reliance on consultants as we need to have the core knowledge inhouse. We have improved our working capital policies and procedures. This has included revising our payment terms and ensuring timely payments from customers as well as reaching settlements with some of the legacy debtors. As a result, we have a positive working capital development in this quarter.
Focused growth strategy
Zutec provides cloud-based software to the construction industry. We operate in the SaaS industry and provide web-based applications and mobile applications. The two most important assets at Zutec is our product and our people. I believe Zutec has a fundamentally good and relevant product and we provide a value-add cloud-based software for the construction industry. We work exclusively with the construction industry and that means we can focus. We also have a strong list of existing customers, but we have too few customers and that is what we need to address. Our strategy is therefore reasonably simple; sell what we are already selling but to new customers whilst simultaneously retained our existing customer base. We are winning new clients which is proof that it works, now we need to step up the pace.
New organization and leadership
We launched a new organization with the intention of making sure that we better support our existing customers and organized so that we can scale and grow the business. We have done that by creating centers of excellence throughout the organisation which all need to function in tandem. This “Ecosystem” has been organized into market facing functions and sales support functions. The market facing functions include our sales and services organization. Within sales we are now organized into prospecting/lead generation, sales, key account and customer success. Our services organization includes our implementation and training teams in addition to our customer care functions. The customer journey when a customer comes to Zutec has to be flawless and that is what I believe this “Ecosystem” approach delivers. Our development function has also been recut to be more customer focused and process driven. We also have new leadership in finance and we will be working further towards professionalizing our finance function including quicker and better reporting and improved transparency. As part of this we have also appointed new auditors so that we get a fresh pair of eyes.
We have a new board of directors. Mikael Näsström is our new chairman and he brings a wealth of experience in B2B sales and marketing. He is working alongside Stefan Charette, from our main shareholder Athanase; Brian McGuire, the original founder of Zutec; Erik Gabrielsson, an experienced board professional as well as Per Åkerman, who has a long career and leadership positions in Skanska. With this board of directors together with the new leadership team I believe we can succeed.
Strong momentum on new contracts
We have a clear focus and emphasis on making sure that we get recurring and sticky revenues. This includes going from a selling software on a project basis to selling software on an enterprise basis involving multi-year and multi project contracts. To this effect we split our sales organization into Enterprise and Infrastructure. Within our Enterprise business, targeting residential and commercial new construction. We have during the year secured our first such deal with Cairn Homes but also a number of other similar contracts for Mitchellson, Marlet Property Group and Homeland. Within our Infrastructure business we have secured meaningful contracts with SCS JV for the construction of HS2 (the largest infrastructure project in Europe), ADAC for the construction of the Midfield terminal in Abu Dhabi and Linesight for the National Children Hospital in Dublin.
Successfully completed an oversubscribed rights issue
Having an adequate capital structure for growth is imperative. In June we successfully raised SEK42.4m from existing and new shareholders. As part of that I am pleased to see that a large number of new shareholders have believed in Zutec and we are grateful for the confidence you have stowed on us. We will do our best to deliver. We are equally pleased that our core group of shareholders also invested in the issue. Given that our focus is rapid growth we should not have a leveraged capital structure and we have therefore repaid Athanase’s loan in July 2020 and we now have no interest-bearing debt in the business.
Where do we go from here? From “Zutec 1.1” to “Zutec 2.0”
I believe that we have well ahead of time completed “Zutec 1.1”. We are now embarking on “Zutec 2.0”. Zutec 2.0 is all about growth and disrupting the digitization of the construction industry. I am very excited about this new “release”. Our primary objective is to deeper and wider penetrate our home markets in the U.K., Ireland, Australia and Middle East. We are focusing on our home markets to reduce the risk of right now entering new markets. There is enough to go for in our home markets where we already have a presence. The market for construction is expected to grow by 10% and we grew our business with 30% in this last quarter. We need to invest in that growth by having an even better product offering, making sure that new customers understand the benefits of our products, hire the best talent and be even more agile and disruptive.
I believe we are in a strong position to capitalize not only on the compelling dynamics in the market but also to leverage on the great momentum we have in our business. I am very proud of what the team has accomplished up to now, but even more excited about what comes next. You will be the first to know…..stay tuned.
Gustave Geisendorf, Chief Executive Officer
The year-end 2020 report and interim report for 1 April to 20 June 2020 is attached as a PDF file.
For more information, please contact:
Gustave Geisendorf, CEO at Zutec, firstname.lastname@example.org, +353 1 201 3565
Zutec is a provider of cloud-based construction management software with operations in Dublin, London, Melbourne and the Middle East.
Zutec Holding AB (publ) is listed on Nasdaq First North Growth Market and Mangold Fondkommission AB is the Company’s acting Certified (Tel. + 46 8 5030 1550, CA@mangold.se, www.mangold.se).
This information is inside information that Zutec Holding 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, September 30th, 2020.