Known and unkown territory
As CEO of Vitec, I have lived through the Swedish 1990s crisis, the internet bubble around the turn of the millennium, the 2008 financial crisis, and right now, the coronavirus crisis. In the 1990s, Vitec was a small company with limited resources and extremely sensitive to discontinued individual projects. At its worst, around 1993, it was a matter of days to save the company when all liquidity was wiped out. At the turn of the millennium, we had a better business model and we were profitable, which other "IT companies" in general were not, and by the financial crisis we had learned the importance of risk diversification. Many of the components we experienced in those different crises are present now in this crisis, but the lockdown of the entire society is of course a new ingredient.
In our normal operation, our risk diversification is excellent; this will be put to the test in the current situation. Our business ranges from beauty salons in Norway, which are forbidden to operate - with total and immediate closure as a consequence, to pharmacies in Denmark, which is considered an essential business in a pandemic. We have 15,000 customers in 24 different business niches in 4 countries; public services account for approximately 40% of all customers. In the short term, we have only been marginally affected. If the lockdown of society becomes prolonged, we expect an impact on service revenue and the variable portion of recurring "unit-based" revenues. Bankruptcies on the customer side cannot be ruled out, either, but as long as there are customers, our systems are necessary for their daily operations.To be properly prepared for a pronounced negative and prolonged course of events, Group management has been in close dialogue with all business units. We have analyzed potential scenarios and established a strategy to plan for such eventualities with measures to address various outcomes.
Liquidity planning and cash flow are key when uncertainty is high. Our current situation is good, with a large amount of advance invoicing that is reflected in a strong positive cash flow at the beginning of the year. So far, we have not seen any customer losses, but they can of course occur the longer the lockdown continues. Our liquidity situation is extremely good and our financial opportunities are considerable.
We are engaged in acquisition discussions that started well before the coronavirus outbreak, which can continue with only digital contacts. However, we have found that initiating new discussions is more difficult when it is impossible to meet in person.
In line with our growth, our previous segment reporting is no longer adequate. Beginning with this report, we will present data for each of our business units. Previously, the individual business units have only been one part in one of our seven segments. From now on, the operations, sales and percentage of recurring revenues of each business unit will be described in greater detail. Dependence on individual customers and the distribution among countries will also be clarified. In addition, this approach reflects our acquisition strategy, as we look for companies that meet our criteria and allow niche to become a less interesting aspect. We believe this change will provide a more relevant description of our business, geography, size and distribution of customers.
So, in this time of the pandemic - what do we do?
We listen to the authorities, wash our hands, work from home, hold digital meetings, serve our customers and carry on.
Lars Stenlund, CEO
For more information, please contact:
Patrik Fransson, Investor Relations, Vitec Software Group AB (publ), email@example.com,mob. +46 76 942 85 97
This information is information that Vitec Software Group AB (publ) is obligated to make public pursuant to the EU Market Abuse Regulation. The information was submitted for publication, through the agency of the contact persons set out below, at 08:00 CET April 17, 2020.
Vitec is market leader for Vertical Market Software in the Nordic region. We develop and deliver standard niche software. Vitec grows through acquisitions of well-managed and well-established software companies. The Group's overall processes together with the employees' in-depth knowledge of the customer's local market enables continuous improvement and innovation. Our 800 employees are based in Denmark, Finland, Norway and Sweden. Vitec is listed on Nasdaq Stockholm and had net sales of SEK 1 156 million in 2019. Find more at www.vitecsoftware.com.
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