Interim report for the period from 1 january to 30 september 2019

Zengun Group AB started its operations on 24 May 2019 when the company acquired all of the shares in Zengun Group Holding AB (Corp. Reg. No. 559050-0699) and its wholly owned subsidiaries from Segulah Fund V. Financial information for the former group (Zengun Group Holding AB) has been included as a basis for comparison.

ZENGUN Group AB (publ)

Third quarter
• Net turnover amounted to MSEK 561.0.
• EBITDA totalled MSEK 25.4.

24 May 2019 – 30 September 2019
• Net turnover amounted to MSEK 764.4.
• EBITDA totalled MSEK 32.9.
• Operating cash flow was negative MSEK 21.8.

ZENGUN Group Holding AB (former group)

Third quarter
• Net turnover amounted to MSEK 561.0 (528.1), up 6% or MSEK 33.0
• EBITDA totalled MSEK 25.7 (25.7).
• Operating cash flow was negative MSEK 86.3 (positive: 52.8).

January – September
• Net turnover amounted to MSEK 1,744.7 (1,542.1), up 13% or MSEK 202.6
• EBITDA totalled MSEK 75.8 (89.2).
• Operating cash flow was MSEK 88.8 (31.2)

Significant events in the third quarter

  • At an Extraordinary General Meeting on 22 August, Jan Örnevik was appointed as the company’s new Chairman of the Board and Cecilia Safaee as a new Board member.
  • In September, an agreement was signed for the completion of some 420 housing units at Haga Norra in Stockholm for the housing developer BRABO in partnership with Fabege.

Significant events after the end of the quarter

  • In October, a turnkey agreement was signed with CA Fastigheter for the construction of a 19 storey high-rise together with an annex in Södermalm in Stockholm. Some 130 apartments are planned in the high-rise which will be ready for occupancy in autumn 2021.
  • In October, a turnkey agreement was signed with the Vision trade union for the remodelling of its headquarters on Kungsgatan in Stockholm.

Statement by the CEO:

Intensive production phase and new contracts

The high rate of production that we have noted to date this year continued through the third quarter, and the period ended with a particularly strong September. Operating activities recorded year-on-year turnover increases of 6% for the quarter and 13% for the first nine months.

We posted robust underlying earnings with healthy and stable margins. However, our total margin was impacted by poor profitability at RA Bygg. The change program aimed at strengthening the property maintenance and construction services concept as well as improving profitability at RA Bygg has already been initiated and will continue through the autumn.

Our increased focus on cash flow and on reducing tied-up working capital has delivered results. Over the first nine months of the year, cash flow held a stable and healthy level. I am confident in the work we have invested. The temporary third-quarter decline was attributable to the high level of capital tied up in accounts receivable, since a major part of the invoicing for the quarter was conducted in September.

Demand remains positive in the locations where we operate; the majority of our projects are in central Stockholm. Most of our ongoing projects comprise the remodelling of commercial properties. There is considerable need to change and adapt existing premises to achieve greater flexibility and efficiency. Our customers continue to be pro-active and we have noted no slowdown in the market. Naturally we continue to monitor the market closely.

Our order book remains strong. In September, our contract with Brabo and Fabege was expanded to include the internal completion of the 420-plus apartments we are constructing at Haga Norra in Solna. We established operations at the site in spring 2018 with the initial project planning for Bilia’s facility, and we have driven the work forward through several stages. The continuation of the contract, with the completion of the homes we have started, is highly gratifying and confirms that our project focus and collaborative approach to our customers and other stakeholders lead to results.

Two further major contracts were signed at the start of the fourth quarter. Zengun has been entrusted by CA Fastigheter to construct the new Strato landmark building. In the centre of Södermalm, by Zinkensdamn, we will construct a unique, 19-storey high-rise together with an annex, where some 130 apartments will be ready for occupancy in autumn 2021. We have also contracted with the Vision trade union for the remodelling of its headquarters on Kungsgatan in central Stockholm. In both projects, Zengun has completed the initial project planning phase and thereafter signed construction contracts. Both assignments are using a turnkey partnering approach.

The underlying operations are robust and, moving forward, we see continued intensive production at many of our major projects in parallel with many exciting opportunities for new projects together with our customers.

Sture Nilsson
Managing Director and CEO

For more information please contact:

Sture Nilsson, Managing Director and CEO, +46 70 580 04 15
Anna-Carin Bjelkeby, CFO, +46 70 580 62 25

Financial calendar 2020

Year-end report January – December 2019      21 February
Annual Report 2019                                           22 April
Interim Report January – March                        14 May
Interim Report January – June                          27 August
Interim Report January – September                11 November

Prior to publication, this information constituted insider information. This information is of such a kind that Zengun Group AB (publ) is legally required to disclose pursuant to the EU’s Market Abuse Regulation. This information was submitted through the agency of the above contacts for publication on 20 November 2019 at 7:30 a.m. (CET).

Zengun is one of the leading construction contractors in Stockholm and carries out construction projects on behalf of well-known customers in the real estate industry. While the main focus is on commercial properties, the portfolio also includes residential projects and projects in the public sector. Zengun is a complete supplier and partner, with a customer-centric approach that comprises a cornerstone of its business concept. The company has approximately 200 employees and annual turnover of just over SEK 2 billion. #zengunbuildingstockholm