Third Quarter Report 2022

Serstech Group, Third Quarter 2022

Net sales: KSEK 3 125 (1 516)

Profit for the period: KSEK -4 698 (-5 074)

Earnings per share: SEK -0.06 (-0.06)

Earnings per average number of shares: SEK -0.06 (-0.06)

Serstech Group, 1 January – 30 September 2022

Net sales: KSEK 13 624 (15 740)

Profit for the period: KSEK -13 302 (-7 347)

Earnings per share: SEK -0.16 (-0.09)

Earnings per average number of shares: SEK -0.09 (-0.09)

CEO comments Q3 2022

The until recently dormant market took some significant steps towards normalcy during the latter part of the quarter, with multiple tenders being published in Europe and Asia. The significance is obvious – after two and half years without tenders, the customers are getting closer to starting to buy again. Since several tenders are now published, there will be orders in the market again within 2-4 months. 

In a completely tender-driven business, the absence of tenders for two and a half years has been challenging for the entire industry, but that is now clearly changing. Serstech has during the quarter started to scale up sales, R&D and component stock further to be ready for coming larger orders. The component shortage means that we need to increase our R&D team to be prepared for product redesigns, as current components go out of stock. We are currently preparing for redesigns and component replacements to be able to produce products beyond our component inventory corresponding to approximately 45 MSEK in sales value. Given our sales volumes over the last three years, this might seem to be excessive in terms of preparedness, but the expected volumes in the market suggest otherwise. We do not want to risk being forced to decline orders due to supply issues. 

Over the last three years, both supply and demand for narcotics have gone up in most parts of the world, but law enforcement has not been able or allowed to invest in equipment to combat this problem during the pandemic. Now they can, which is apparent in the volume of tenders being published in primarily Europe and Asia. In the US, large investments are being made in the southern border states, and Serstech has therefore hired two new salespeople to focus on these local markets. Most buyers are local law enforcement, typically on the county level. The number of counties and law enforcement organizations is high, while the average order is rather small. All-in-all, it is a very attractive market. 

The Russian attack on Ukraine has forced countries around the world, and especially in Europe, to reevaluate their preparedness for attacks using chemical weapons. Serstech has several ongoing sales opportunities, in which the potential customer wants to build better preparedness for such an attack. Our instruments are very suitable for quick identification of chemical warfare agents, and we have a newly expanded substance library, which now also include some of the 4th Generation Warfare Agents, collectively named Novichoks. The new substances have been acquired through collaboration with our US federal government partners.

For about a year, we have been collaborating with French gas detector manufacturer Proengin in marketing and sales. On several occasions in 2022, we have shared exhibition booths at exhibitions around the world and we are working on several sales opportunities together. Proengin’s gas detectors and our Raman instruments complement each other well, and many customer groups need both. By working together, we can provide a solution to a wider customer problem and provide better overall value. At the same time, we have a better sales reach together and become more visible in joint marketing efforts, while sharing the cost.

In August, we received an important reference order from India, the first order since before the pandemic. The order value was of 1.2 MSEK and the customer was the National Security Guard (NSG), which is an elite, national anti-terror force. High-end forces such as NSG are usually very well-funded, which means that they buy equipment based on performance and suitability, rather than price. Serstech’s instruments are small, lightweight and user friendly, which makes them well suited for infantry units and other user groups that need to carry and handle many types of equipment. 

Our sales pipeline keeps growing and many opportunities have changed from having a due date of "within a year” to "imminent”, as tenders have been published. New business opportunities keep appearing around the world, which bodes well for 2023 and onwards. We expect our opportunity hit-rate to increase, since we now have our new Serstech Arx in volume production and our partner network grows ever more skilled and experienced. Business remains slow at the moment, but we expect that to change imminently.

For further information, please contact:

Stefan Sandor,
CEO, Serstech AB
Phone: +46 739 606 067
Email: ss@serstech.com

Thomas Pileby,
Chairman of the Board, Serstech AB
Phone: +46 702 072 643
Email: tp@serstech.com

or visit:  www.serstech.com

This is information that Serstech 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 08:45 CET on November 10, 2022.

Certified advisor to Serstech is Svensk Kapitalmarknadsgranskning AB (SKMG).

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 Q3 2022 report