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Cramo's Business Review for January-September 2018

Cramo Plc    Business Review 26 October 2018, at 9.00 am (EET)

Cramo's Business Review for January-September 2018

Profitable growth continued

JULY–SEPTEMBER 2018

JANUARY–SEPTEMBER 2018

SIGNIFICANT EVENTS DURING AND AFTER THE THIRD QUARTER

KEY FIGURES AND RATIOS (MEUR)7-9/187-9/17Change %1-9/181-9/17Change %2017
        
Sales197.9191.93.1%562.2532.85.5%729.5
Comparable EBITA*41.640.23.5%95.787.79.1%120.0
% of sales21.0%20.9% 17.0%16.5% 16.5%
EBITA41.540.52.4%93.988.06.7%120.7
% of sales21.0%21.1% 16.7%16.5% 16.5%
Comparable profit for the period*31.829.28.8%69.060.613.9%83.3
Profit for the period30.329.81.7%65.861.27.6%84.2
Comparable earnings per share (EPS), EUR*0.710.668.6%1.551.3713.1%1.87
Earnings per share (EPS), EUR0.680.671.5%1.481.387.4%1.89
Comparable ROCE, %*   11.8%11.9% 11.9%
ROCE, %   11.6%11.1% 11.9%
Comparable ROE, %*   16.4%15.9% 15.4%
ROE, %   15.9%14.7% 15.6%
Net debt / EBITDA   1.941.73 1.65
Net interest-bearing liabilities   468.4403.016.2%382.3
Gross capital expenditure (incl. acquisitions)51.455.3-7.0%200.5159.325.8%213.9
of which acquisitions/business combinations   43.29.3363.9%9.4
Cash flow from operating activities49.947.55.2%123.9116.86.1%186.5
Cash flow after investments-5.522.3 -30.613.7 33.1
Average number of personnel (FTE)   2 6992 5495.9%2 538


CEO LEIF GUSTAFSSON:

During the first three quarters of 2018, Cramo’s organic sales grew by 7.7% and comparable EBITA increased by 9.1% to EUR 95.7 million. The Group’s profitability also continued to improve compared to the previous year. The market environment remained good for both of our business divisions.

The Equipment Rental division’s third quarter was mixed. Scandinavia and several Eastern European and Central European countries continued performing well. The slowdown of residential construction growth in the Stockholm area had no material impact on third quarter sales in Sweden, which increased by 3.2% in local currency. Norway continued to improve sales and profitability supported by good market demand. Sales declined particularly in Finland, which negatively impacted the profitability of the ER Finland and Eastern Europe segment. Actions to change the current direction have been executed and positive effects are expected to follow starting from the first quarter of 2019. We will also continue our performance improvement actions in Germany.

I’m particularly satisfied with the performance of the Modular Space division as good improvement continued during the third quarter both in terms of sales and profitability; organic rental sales grew by 13.8% and EBITA increased by 16.6%. Germany in particular contributed positively as the firm actions taken to increase the operational effectiveness are showing results.

After the reporting period, on 4 October, the Swedish Competition Authority approved Cramo’s acquisition of the Swedish-based Nordic Modular Group Holding AB (“NMG”). After the acquisition, Modular Space is growing more than 60% in sales and it will expand into long-term rental business with inhouse manufacturing. The transaction is expected to have a positive impact on Cramo Group’s comparable EPS in 2019. As previously announced, Cramo has assessed strategic alternatives for its Modular Space business (Cramo Adapteo). The objective of the assessment is to maximize long-term shareholder value for Cramo’s shareholders. An outcome is likely to result in a separation of the Equipment Rental and Modular Space business divisions, which may include a demerger and separate listing of Cramo Adapteo during 2019. Cramo will announce further information on the schedule and process when the integration of NMG into Cramo Adapteo has progressed.

MARKET OUTLOOK

The construction market outlook for the rest of the year 2018 is mainly positive in Cramo’s operating countries. Growth is expected to continue, although the country-specific variances are considerable. In many countries, the growth that accelerated in 2017 is predicted to slow down. According to Euroconstruct June estimates, the construction market will grow by 4.5% in Norway, 3.4% in Finland and 2.5% in Sweden in 2018. In Austria and Germany, growth is forecasted to be 0.8-1.6%. Growth is rapid in the Czech Republic, Slovakia, Hungary and Poland, where Euroconstruct estimates on average 10.4% market growth. Forecon’s construction market growth estimate for Estonia, Lithuania and Russia is 4-5%. The Sveriges Byggindustrier is projecting 2% growth for the Swedish construction market in 2018, according to their latest October estimate. In 2019, market is expected to decline by 3%. The Confederation of the Finnish Construction Industries forecasted in October that the construction market in Finland will grow by approximately 3% in 2018. The peak in the construction market is expected to be reached in 2019 and a slight decrease projected thereafter.

The European Rental Association (ERA) forecasts that the equipment rental market will grow in 2018 in all of Cramo’s operating countries within the scope of ERA’s forecast. Forecon estimates that the equipment rental market will grow by approximately 3-5% in Finland, 1% in Sweden and 2% in Estonia and Lithuania in 2018. Forecon estimates that the equipment rental market will grow in 2019 by 3 % in Finland, 1% in Sweden and 1-2% in Estonia and Lithuania.

GROUP’S PERFORMANCE

Cramo Group’s consolidated sales for January–September totalled EUR 562.2 (532.8) million, showing an increase of 5.5% (+9.3% in local currencies). Sales growth was positively affected by acquisitions, particularly KBS Infra, that increased sales in total by EUR 22.7 million. In addition, the adoption of IFRS 15 standard on 1 January 2018 increased sales by EUR 2.9 million due to earlier revenue recognition compared to the previous year. The divestment of the Danish equipment rental operations and Latvian and Kaliningrad operations in 2017 decreased sales by EUR 16.3 million compared to previous year, while the impact of the exchange rate changes on sales was EUR -18.5 million. The Group’s organic sales growth came to a solid 7.7% and was particularly supported by Equipment Rental Scandinavia and Modular Space delivering strong sales during the first three quarters.

Sales in the third quarter increased by 3.1% (7.5% in local currencies) and amounted to EUR 197.9 (191.9) million. The adoption of IFRS 15 standard on 1 January 2018 decreased sales by EUR 4.5 million in the third quarter due to earlier revenue recognition compared to previous year. The Group’s organic sales growth for the quarter stood at 6.3%. From the business segments, Equipment Rental Scandinavia, Equipment Rental Central Europe and Modular Space contributed positively to the Group’s organic sales growth.

Cramo Group’s comparable EBITA for January–September came to EUR 95.7 (87.7) million, showing an increase of 9.1%. Comparable EBITA margin was 17.0% (16.5%) of sales. Profitability improved mainly due to organic sales growth in the Modular Space and Equipment Rental Scandinavia segments. In addition, performance improvement actions carried out in Modular Space are also showing positive results. The adoption of the IFRS 15 standard increased the portion of rental-related sales in the Group’s and Modular Space’s sales and, therefore, had a slight negative impact of 0.3 percentage points on the Group’s gross margin and 0.1 percentage points on the Group’s EBITA-margin compared to the previous year. In January–September, items affecting comparability of EBITA amounted to EUR -1.8 million and were related to the advisory and transaction costs of the KBS Infra and NMG acquisitions.

Comparable EBITA for the third quarter increased by 3.5%, totalling EUR 41.6 (40.2) million or 21.0% (20.9%) of sales. Profitability improvement was driven by ER Scandinavia, ER Central Europe and Modular Space segments. The adoption of the IFRS 15 standard’s earlier recognition of assembly services decreased the portion of rental related sales in the Group’s and Modular Space’s sales in the third quarter and, therefore, had a positive impact of 1.3 percentage points on the Group’s gross margin and 0.3 percentage points on the Group’s EBITA margin compared to previous year. The Group EBITA included EUR -0.1 million non-allocated items affecting comparability in July–September 2018. The costs were related to consulting costs regarding potential demerger of the company.

In January–September, cash flow from operating activities improved and was EUR 123.9 (116.8) million, resulting mainly from the higher operational result and profit before taxes. Cash flow after investments totalled EUR -30.6 (13.7) million, of which EUR 19.0 million was related to the acquisition of shares of KBS Infra. In the third quarter, cash flow from operating activities increased to EUR 49.9 (47.5) million. Cash flow after investments was EUR -5.5 (22.3) million. The comparison period includes a positive impact of EUR 28.0 million related to the divestments executed in August 2017.

Profit for the period totaled EUR 65.8 (61.2) million in January–September and EUR 30.3 (29.8) million in July–September. Third-quarter profit was positively impacted by the decrease in tax rate in Sweden, which decreased the amount of deferred tax liabilities. In addition, the Group’s finance net included EUR -1.4 million non-allocated items affecting comparability in the third quarter. The costs were related to foreign exchange hedging of NMG purchase price. Comparable earnings per share for January–September improved to EUR 1.55 (1.37) and earnings per share to EUR 1.48 (1.38). The corresponding figures for the third quarter were EUR 0.71 (0.66) and EUR 0.68 (0.67) respectively. Comparable return on capital employed came to 11.8% (11.9%). Net debt/EBITDA increased to 1.94 (1.73) mainly due to increased net debt followed by the KBS Infra acquisition. Comparable return on equity was above our long-term financial target level and stood at 16.4% (15.9%).

Cramo Group’s capital expenditure in January–September was EUR 200.5 (159.3) million. In the Equipment Rental division, investments were increased to EUR 156.7 (107.1) million. Of gross capital expenditure, EUR 43.2 (9.3) million was attributable to acquisitions and business combinations and was related to acquisition of the assets of KBS Infra. Other capital expenditure was mainly related to fleet procurement. Investments fell in the Modular Space division to EUR 42.0 (50.4) million. Cramo Group’s capital expenditure during the third quarter was EUR 51.4 (55.3) million. In the Equipment Rental division, investments increased to EUR 39.6 (37.0) million. In the Modular Space division, investments were below last year’s level, totalling EUR 11.4 (18.0) million.

CRAMO’S FINANCIAL REPORTING IN 2019

Cramo Plc’s Financial Statements for 2018 will be published on Friday, 8 February 2019.

The Annual report containing the full financial statements for 2018 will be published on the company’s website in week 10/2019.

Cramo will publish its Half Year Financial Report and two Business Reviews in 2019 as follows:

• 2 May 2019: Business Review for January-March 2019

• 30 July 2019: Half Year Financial Report for January-June 2019

• 31 October 2019: Business Review for January-September 2019

The Annual General Meeting 2019 will take place on Thursday, 28 March 2019 in Helsinki.


CONFERENCE CALL

A conference call for analysts, investors and press will be held on 26th October at 11.00 am (EET). To participate in the conference call please dial in 5-10 minutes prior to the start time on +358 9 7479 0404 and provide a conference code 6493394. The conference call will be held in English. Questions can be asked after the presentation.

A recording of the conference call will be available later on the same day at www.cramogroup.com.

CRAMO PLC

Leif Gustafsson
President and CEO

Further information:
Mr Aku Rumpunen, CFO, tel: +358 10 661 10, +358 40 556 3546, email: aku.rumpunen@cramo.com
Mr Mattias Rådström, SVP, Communications, Marketing and Investor Relations, tel: +46 70 868 7045, email: mattias.radstrom@cramo.com


Distribution:
Nasdaq Helsinki Ltd.
Major media
www.cramogroup.com

Cramo is Europe’s second largest rental services company specialising in construction machinery and equipment rental and rental-related services as well as the rental of modular space. Cramo operates in about 300 depots in fourteen countries. With a group staff around 2,500, Cramo's consolidated sales in 2017 was EUR 729.5 million. Cramo shares are listed on Nasdaq Helsinki Ltd.

Read more: www.cramogroup.com, www.twitter.com/cramogroup

 

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Cramo Q32018_English.pdf