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2020-08-17

Kollect records year-on-year growth in Q2 2020 despite COVID-19 with quarterly revenues of SEK 12.1 million

Waterford, Ireland – 17 August 2020, Kollect On Demand Holding AB (publ) (“Kollect” or the “Company”), (Nasdaq: KOLL), is pleased to publish its Q2 2020 Interim Report.

The full report in English can be viewed by clicking here.

Highlights

  • Revenue for continuing operations in Q2 2020 amounted to SEK 12.1 million, corresponding to an increase of 75% compared to Q2 2019 which amounted to SEK 6.9 million.
  • Gross profit for continuing operations in Q2 2020 amounted to SEK 4.3 million, which is an increase of 52% compared to SEK 2.8 million in Q2 2019.
  • Gross margin for the quarter was 35%, compared to a gross margin of 41% in Q2 2019, the decrease is attributable to the mix of revenue.
  • Losses before tax amounted to SEK 0.84 million in Q2 2020 in contrast to the losses before tax of SEK 0.39 million in Q2 2019. The outcome of Q2 2020 reflected the plan that was implemented in the quarter to reduce costs and growth activities where possible and to conserve cash.
  • During Q2 2020, the Company was in receipt of SEK 1.1 million in the form of temporary wage subsidies from the Irish Government in response to the economic shock caused by the COVID-19 pandemic.

Events in the Quarter

Trading in the period

Throughout the second quarter, Kollect was faced with the economic disruption caused by the arrival of COVID-19 and the impact on the wider economies in Ireland and the United Kingdom and the Company’s customers.

As outlined in the press release on 17th April 2020 and monthly trading updates since, the Irish and UK Governments started implementing public health measures in response to the Covid-19 pandemic in mid-March. By the start of Q2 2020, everyone in Ireland was required to stay at home apart from certain essential activities (e.g. shopping for food and medicine, exercise within 2km of home etc.) and people over the age of 70 to remain in their homes at all times.

In response, the Company immediately implemented a plan to cut all costs where feasible, conserve cash and achieve profitability if possible. A number of employees were temporarily laid-off; work-from-home arrangements were implemented for the remaining employees and management team; operations in the UK were suspended; and voluntary reductions taken in management salaries for a time. The Company also availed of Irish State financial supports (i.e. the Irish Government’s Covid-19 Temporary Wage Subsidy Scheme) to maintain employment.

In the event, the Company was able to continue operations as waste removal was regarded as an ‘essential business’. Revenue from Commercial Bin collection and Skip (container) Hire was depressed throughout the quarter as construction, hospitality and other businesses were closed; revenues from Domestic Bin collection, Waste Drop-off (BIGbin) and Junk Removal, however, were above target.

As the quarter came to a close, some commercial activities (e.g. construction) were gradually reopening from mid-May onwards. The Company refocused sales efforts on these customers to regain revenue and market share as quickly as was feasible. In the UK, operations recommenced on 2 June and revenue from Skip Hire and Junk Removal was satisfactory for the month.

Key Figures

Key FiguresQ2 2020Q2 2019H1 2020H1 2019
Q2 2020 v. Q2 2019H1 2020 v. H1 2019
Revenue from continuing operations12,131,5846,939,80521,028,58411,442,805
75%84%
Total Revenue12,131,5849,305,98721,028,58415,805,592
30%33%
Cash4,045,814931,5384,045,814931,538
334%334%
Profit/(loss) before tax(835,104)(388,913)(3,585,104)(504,913)
115%610%
Gross Profit from Continuing Operations4,302,8772,826,6007,722,8774,912,600
52%57%
Total Gross Margin35%41%37%40%
-6%-3%

Revenue from continuing operations for Q2 2020 was up 75% compared with Q2 2019 and H1 2020 was up 84% compared with H1 2019. Gross Profit from Continuing Operations was up 52% in Q2 2020 compared to Q2 2019 and for H1 2020 was up 57% on H1 2019.

The Loss Before Tax in H1 2020 of SEK 3.6 million was up from a loss of SEK 0.5 million H1 2019, which reflected the increase in costs driven by new hires and growth expenditure in Q1 2020 as well as costs of being a listed company. With the introduction of cost reductions in Q2 2020 in reaction to impact of the COVID-19 pandemic, however the Loss Before Tax in Q2 2020 of SEK 0.84 million was versus a Loss Before Tax of SEK 0.38 in Q2 2019.

Waste drop-off

Revenue from the BIGbin business was up 16% in Q2 2020 compared to the same period in 2019. This was due to a combination of increased digital marketing and revenues from new sites that had been opened since Q2 2019.

Unfortunately, the rollout of new sites for waste drop-off services in Q2 2020 was held up, as every local authority delayed or extended planning applications due to the lockdown. The Company, therefore, was able to add only one new BIGbin site in Circle K, Ranelagh in June 2020 (delayed from March 2020). This brought the number of operational sites in Q2 2020 up to 15, of which 5 are Circle K forecourts.

New products

Kollect extended its Skip Hire offering by successfully introducing Skip Bags in April and met satisfactory demand at a more accessible price point for customers than for Skip Hire.

The Company is testing the market for hygiene services among its corporate clients and also the exploring the possibility of launching franchise services before the end of H2 2020.

Sustainability

Q2 2020 was the first full quarter for the Company in the “Irish Tech goes Carbon Neutral” programme. Under this program, all collections made by Kollect are now carbon neutral and the total kilometers of travel that were offset during the quarter was 165,000 km.

Working capital

The Company had SEK 4 million cash on hand at the end of June, which was up from SEK 2.3 million at the end of Q1 2020.

Exchange rate

The Company has also benefitted from a favourable exchange rate between Swedish Krona and the Euro in the year from Q2 2019 to Q2 2020.

Since the Quarter End

Since the end of the second quarter, the Company has continued to keep expenditure to a minimum and conserve cash where possible.

Corporate re-organisation

On July 2, 2020, Kollect implemented a corporate reorganisation by setting up a separate wholly-owned Irish subsidiary called BIGbin Waste Technology Limited (“BWTL”). BTWL acquired the assets and liabilities of the BIGbin business from Kollect On Demand Limited at book value and became the stand-alone operational company for the waste drop-off business in Ireland with effect from 1 July 2020.

A BIGbin is a large, fully-sealed compactor bin, accessible 24/7/365, and specifically designed for installation in convenient locations such as garage forecourts, supermarket car parks, civic amenity sites and in apartment complexes.

Kollect has seen continued growth in its waste drop-off business in Ireland, supported by high gross margins in line with industry expectations.

This purpose of the re-organisation is to bring increased focus on and transparency to the economics of the business. It will also make it easier to raise funding specifically to support continued growth in this business to buy new bins and roll out new sites and to grow the business by acquisition.

Reduction in certain lower margin sales activities

Following a management review in July 2020, it was decided to reduce sales resources allocated to and advertising spend on certain activities with lower gross margins. It is anticipated that this move will lead to a decline in overall revenue from these verticals for a time, as sales will reduce to those from organically generated leads, but higher gross margins. The intention is to grow revenues from these activities again over time once the digital marketing spend has been optimised.

This decision was taken because gross margins remained too low (which was adversely impacting overall gross margin rates) and costs of customer acquisition too high. In addition, these activities were taking up a disproportionate amount of management, sales and customer service time. These resources have been redeployed to higher margin activities or released.

Working capital

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