Serstech Half Year Report 2022

Serstech Group, Second Quarter 2022

Net sales: KSEK 8 444 (2 765)
Profit for the period: KSEK -1 986 (-5 299)
Earnings per share SEK -0.02 (-0.06)
Earnings per average number of shares: SEK -0.02 (-0.07)

Serstech Group, Half Year 2022

Net sales: KSEK 10 498 (14 224)
Profit for the period: KSEK -8 594 (-2 270)
Earnings per share SEK -0.10 (-0.03)
Earnings per average number of shares: SEK-0.10 (-0.03)

During the second quarter the activity among our customers was almost at a pre-pandemic level in Europe and the United States, and it has been possible to have customer meetings again. Many tenders have been published in the first half of the year and we have received notifications from our partners about imminent tenders that likely will close over the coming nine months. We have seen that the Ukraine war has caused some delays in purchase decisions and the increased likelihood of a recession could potentially cause further delays over the next twelve months. The security industry is, generally speaking, less affected than other industries by a downturn in the economy, but a downturn could cause the lead times in the sales cycles to increase.

For almost two years, we have focused on developing the important US market and in May, we received the first major order. The order of 7.8 MSEK was delivered in June and we expect payment by mid-August. We now have a first customer reference in this important market, which will further support our fast progress. We estimate that the US market constitutes somewhere between a third and half of the total world market and we see significant opportunities there, despite it being the home market for most of our competitors.

Based on the many tenders currently open for bids and our historical hit-rate, we expect to get some additional large orders over the next 12 months. Due to the payment terms in most tenders, we will however need to pay for production costs (COGS) before we get paid from our partners, which has created a need for a cash buffer. In June, we secured a loan and an increased overdraft credit to be used to temporarily cover the production costs for the expected orders.

For the last 18 months our production partner has been working on securing components for our instruments and the work has been rather successful. Some components are however permanently out of stock, which has required us to do some product redesigns to enable production. We expect to continue to spend most of our R&D resources on such adaptations for the rest of the year. We have also seen a 10-15% increase in production cost, especially driven by increased component prices. Despite the component shortage, we expect to be able to produce enough instruments to meet the demand in 2022.

The two-year absence of new sales opportunities in our industry is coming to an end and we expect 2022 to get us back to growth. Many tenders were published in the first half of the year, and we expect several of these to come to completion in the second half.

For further information, please contact:

Stefan Sandor,

CEO, Serstech AB Phone: +46 739 606067

Email: ss@serstech.com

or

Thomas Pileby,

Chairman of the Board, Serstech AB Phone: +46 702 072643

Email: tp@serstech.com

or visit: www.serstech.com

Certified advisor to Serstech is Svensk Kapitalmarknadsgranskning AB (SKMG), phone: +46 11 323 07 32, e-mail: ca@skmg.se.

About Serstech

Serstech delivers solutions for chemical identification and has customers around the world, mainly in the safety and security industry. Typical customers are customs, police authorities, security organizations and first responders.The solutions and technology are however not limited to security applications and potentially any industry using chemicals of some kind could be addressed by Serstech’s solution. Serstech’s head office is in Sweden and all production is done in Sweden.

Serstech is traded at Nasdaq First North Growth Market and more information about the company can be found at www.serstech.com

Attachment

• Serstech Q2 2022 report