SHAPE AND SHARE CRAMO GROUP Carnegie Nordic Small & Mid Cap Seminar Leif Gustafsson, President and CEO Stockholm, 5 September 2018
CRAMO IN BRIEF
STRONG RENTAL POSITION #2 #1 #2 in Europe in the Nordics (MS) in Europe Norway Finland Russia 300 324 depots 14 countries Denmark Sweden Estonia Lithuania 150,000 customers 230,000 rental units Cramo Germany Czech Rep. Poland Slovakia Ukraine Fortrent Austria Hungary
CRAMO GROUP IN NUMBERS (2017) What Cramo is a rental solutions provider in machinery, equipment and modular space For whom Construction industry Other industries Public sector Household, other Key financials Sales 729,5 MEUR (+2.4%) EBITA 120,7 MEUR (+13.1%) Listed on the Helsinki Stock Exchange since 1988, midcap Depot network 300 depots 14 countries Personnel 2,538, average 2017 (-0.6%) Fleet More than 230.000 items
SHARE OF GROUP SALES Modular Space 17 % Equipment Rental Central Europe 11 % ER Scandinavia 52 % ER Finland and Eastern Europe 20 % EUR 680 million
TWO STRONG BUSINESS DIVISIONS EQUIPMENT RENTAL MODULAR SPACE
EQUIPMENT RENTAL A wide range of rental-related services ranging from different site services, such as proactive site monitoring, construction site logistics, dust control and weather sheltering to safety-related and environmental services, equipment and training. Comprehensive range of tools and complete package solutions in building equipment. Site huts adaptable for various purposes and capacity needs. Access equipment with comprehensive safety solutions for working at heights. Modern, comprehensive fleet of construction equipment for any type of assignments, from major road projects to small-scale jobs as well as industrial projects.
SALES BY CUSTOMER GROUP EQUIPMENT RENTAL Households 2 % Public sector 11 % Other 5 % Other industries 23 % Construction industry 59 % MORE THAN 150,000 CUSTOMERS
MODULAR SPACE 1 PLANNING Analysing customer needs and designing the optimal solution together. DELIVERY Transport of modules and assembly of the temporary space solution. 2 PROJECT TIMELINE PROJECT TIMELINE 4 RETURN Disassembly of the temporary space solution, site restoration and off-site transport. RENTAL PERIOD 3 Rental period varying from two to five years, maintenance and other services available during renting. PROJECT TIMELINE PROJECT TIMELINE
SALES BY CUSTOMER GROUP MODULAR SPACE Other 8% Construction industry 8% Other industries 19% Public sector 65%
FINANCIAL PERFORMANCE
Q2 2018 Highlights Organic sales growth of 6.9% was supported by both business divisions Comparable EBITA improved by 11.5% to EUR 31.0 million (27.8) with margin of 16.4% (15.6%) driven by MS and ER Scandinavia performance Modular Space organic rental sales growth 17.2% and EBITA improvement by 32.9% Operating cash flow was strong EUR 53.2 (27.1) million Agreement to acquire Swedish based Nordic Modular Group Holding AB
Q1/15 Q2/15 Q3/15 Q4/15 Q1/16 Q2/16 Q3/16 Q4/16 Q1/17 Q2/17 Q3/17 Q4/17 Q1/18 Q2/18 Q1/15 Q2/15 Q3/15 Q4/15 Q1/16 Q2/16 Q3/16 Q4/16 Q1/17 Q2/17 Q3/17 Q4/17 Q1/18 Q2/18 14.5 % 10.0 % 10.9 % 14.9 % 15.0 % 12.5 % 12.3 % 9.8 % 12.5 % Q1/17 Q2/17 Q3/17 Q4/17 Q1/18 Q2/18 Q1/17 Q2/17 Q3/17 Q4/17 Q1/18 Q2/18 10.0 % 3.0 % 3.5 % 4.0 % 7.0 % 7.8 % 8.9 % 7.0 % 9.5 % 9.3 % 10.1 % 14.2 % 15.7 % FINANCIAL TARGET REALISATION EQUIPMENT RENTAL MODULAR SPACE 15% Organic** sales growth (y-o-y) 20% Organic** rental sales growth (y-o-y) 10% 15% 5% 0% 3.7 % 3.3 % 10% 5% 0% Organic sales growth (YTD) Market 2017* Market 2018* Organic rental sales growth (YTD) Target 2017-20 20% 15% 10% 5% 0% Comparable ROCE 20% 15% 10% 5% 0% Comparable ROCE Comparable ROCE Target 2017-20 Comparable ROCE Target 2017-20 * Target to grow faster than market. Market growth according to ERA (European Rental Association) in the markets where Cramo is present ** Organic sales growth excludes the impact of acquisitions, divestments and exchange rate changes and IFRS changes 13
Q2/15 Q3/15 Q4/15 Q1/16 Q2/16 Q3/16 Q4/16 Q1/17 Q2/17 Q3/17 Q4/17 Q1/18 Q2/18 Q2/15 Q3/15 Q4/15 Q1/16 Q2/16 Q3/16 Q4/16 Q1/17 Q2/17 Q3/17 Q4/17 Q1/18 Q2/18 Sales (EUR million) R12M sales (EUR million) SALES DEVELOPMENT ORGANIC SALES GROWTH 6.9% IN Q2 AGAINST LAST YEAR Quarters Rolling 12 months R12M Q2/18 vs. R12M Q2/17: +4.8% 250 200 150 100 50 161 172 187 155 179 185 193 163 178 192 Q2/18 vs. Q2/17: +6.2% (+9.7%*) (+6.9%**) 197 175 189 12% 10% 8% 6% 4% 2% Sales growth (%, y-o-y) 760 740 720 700 680 660 640 660 661 668 676 694 707 712 720 719 726 730 742 753 8% 7% 6% 5% 4% 3% 2% R12M sales growth (%, y-o-y) 0% 620 1% 0-2% 600 0% * in local currencies ** organic sales growth in local currencies 14
Q2/15 Q3/15 Q4/15 Q1/16 Q2/16 Q3/16 Q4/16 Q1/17 Q2/17 Q3/17 Q4/17 Q1/18 Q2/18 Q2/15 Q3/15 Q4/15 Q1/16 Q2/16 Q3/16 Q4/16 Q1/17 Q2/17 Q3/17 Q4/17 Q1/18 Q2/18 EBITA (EUR million) R12M EBITA (EUR million) COMPARABLE EBITA DEVELOPMENT IMPROVEMENT DRIVEN BY MODULAR SPACE AND ER SCANDINAVIA Quarters Rolling 12 months 45 23% 140 19% 40 35 30 25 20 15 10 18.4 11.4 % 31.4 27.0 13.0 26.6 14.9 % 38.9 32.6 19.7 27.8 40.2 32.4 31.0 23.1 15.6 % 16.4 % Q2/18 vs. Q2/17: +11.5% 21% 19% 17% 15% 13% 11% 9% EBITA margin (%, line graph) 120 100 80 60 40 85 86 87 12.8 % 90 98 14.1 % 105 111 118 119 120 120 16.6 % 123 R12M Q2/18 vs. R12M Q2/17: +6.5% 16.8 % 127 17% 15% 13% 11% 9% R12M EBITA margin (%, line graph) 5 7% 20 7% 0 5% 0 5% 15
Quarterly EPS (EUR, bar graph) COMPARABLE EPS PERFORMANCE 2.00 2.50 1.80 1.60 1.40 1.20 1.00 0.80 0.60 0.40 0.20 0.24 0.45 0.40 0.16 1.42 0.40 0.64 0.51 0.28 1.85 0.42 0.66 0.51 0.35 2.00 0.48 2.00 1.50 1.00 0.50 EPS R12M (EUR, line graph) 0.00 Q2/15 Q3/15 Q4/15 Q1/16 Q2/16 Q3/16 Q4/16 Q1/17 Q2/17 Q3/17 Q4/17 Q1/18 Q2/18 16 0.00
SWEDISH MARKET OUTLOOK THE MARKET SITUATION IS MIXED IN SWEDEN The market growth has been levelling out during the second quarter and is mixed Construction output (% change in real terms) 2017 2018E 2019F Euroconstruct 6.6 % 2.5 % -0.2 % Local estimate 9.0 % 1.6 % -3.1 % Equipment rental industry growth (% change in real terms) 2017 2018E ERA 3.8 % 3.3 % Forecon 10.0 % 3.0 % We estimate that the market in Stockholm has declined driven by new residential construction, while market in other regions has been growing Market outlook is positive in other regions as well as among industry and civil engineering sector Currently less than one third of Cramo s sales are coming from Stockholm area. The share of sales from new construction is less than 50% in Stockholm. Cramo has been moving its focus more on the high demand areas and customer segments Sources: Euroconstruct June 2018, Sveriges byggindustrier March 2018, Forecon January 2018, ERA 2017
SHAPE AND SHARE STRATEGY
STRATEGIC STEPS 2017-2020 Growth Building a new footprint in chosen markets Targeting organic and inorganic growth Continuously evaluating potential acquisitions target companies and striving for a leading position in chosen markets Optimise Shaping the business structure and model Enhancing the performance culture Creating a new digital concept Striving for zero accidents Align Implementing Group-wide processes and tools Living the Cramo Story Establishing the renewed Cramo Care
AGREEMENT TO ACQUIRE NORDIC MODULAR GROUP The acquisition will strengthen Cramo s position in the Nordic modular space market and expand its business model to include inhouse development and production of modular solutions The enterprise value will be approximately SEK 2.725 billion, which will be financed by bank financing and convertible note, which may be used by the sellers to reinvest in Cramo s Modular Space business under certain conditions Nordic Modular Group s main market is Sweden with operations also in Norway, Denmark and Finland It employs 230 persons with reported sales of SEK 779 million and EBITA SEK 160 million in 2017 Acquisition of KBS Group a leading, high-quality construction site logistics company in Germany in 2018 NMG develops, manufactures, sells and rents relocatable buildings through its three subsidiaries Temporent AB, Nordic Modular Leasing AB and Flexator AB Temporent rents out modular solutions with a fleet consisting of approximately 6,500 modules, serving primarily municipalities and large private companies Nordic Modular Leasing leases out modular units with a primary focus on longer term contracts Flexator designs, manufactures and sells professional modular buildings based on standardised building systems from site huts to advanced solutions Agreement is still pending for the approval from Swedish Competition Authority. Acquisition is expected to be closed by the end of 2018.
CAPTURING OPPORTUNITIES IN A CHANGING WORLD MEGATRENDS DRIVERS Migration Urbanisation Demographic changes Scarcity of resources CRAMO SHARING ECONOMY Digitalization Sustainable development
DIGITAL VISION AND MISSION Vision Digital change leaders Mission Easy accessible, always open channels that adds value Shapers, not followers!
Cramo ecommerce SOLUTION Easy access Easy to find products Efficient portal for account and rental management Detailed product data Easy to make transactions Accurate availability information
CRAMO CARE Cramo Care is our strategy for integrating sustainability step by step into all parts of the business and is based on Cramo s values. Our ambition is to take the lead in advancing sustainability in the rental industry as well as meet the requirements of all stakeholders and internationally recognised standards.
MODULAR SPACE
MARKET OVERVIEW AND POSITIONING CRAMO ADAPTEO WELL POSITIONED TO CAPTURE MARKET SHARES IN AN ATTRACTIVE AND GROWING MARKET Market size 2017 ~110 M ~90 M ~270 M ~130 M ~700 M Market CAGR 2017-2023 10% 5-10% 5-10% 10% 5-10% Overall market attractiveness OPCO market position 2 4 2 2 12* The rental modular space market in current Cramo Adapteo markets is worth ~1.3 bn and is forecasted to grow by approximately 9% p.a. reaching ~2.1 bn in 2023 High attractiveness Low attractiveness Source: Preliminary management estimates in collaboration with PwC Advisory June 2018. * German market position based on Plimsoll study 2017 (based on 2016 market figures).
SERVED CUSTOMER SEGMENTS OFFICES DAYCARE ACCOMMODATION SCHOOLS EVENTS Offices
MODULAR SPACE MARKET DRIVERS KEY MODULAR SPACE MARKET DRIVERS FOR THE PERIOD 2018-2023 1 Renovation needs Low High 2 Sudden drop in space Low High 3 Increasing new-building volumes Low High 4 Increasing number of school students/pupils Low High 5 Growing elderly population Low High 6 Immigration and other demographic changes Low High 7 Modular space rental concept penetration Low High 8 Favorable business case and financials Low High 9 Favorable price development Low High
Q2/16 Q3/16 Q4/16 Q1/17 Q2/17 Q3/17 Q4/17 Q1/18 Q2/18 Comparable EBITA (EUR million) 12.3 % 9.8 % 10.0 % Q2/16 Q3/16 Q4/16 Q1/17 Q2/17 Q3/17 Q4/17 Q1/18 Q2/18 EUR million Sales (EUR million) MODULAR SPACE STRONG PERFORMANCE IMPROVEMENT CONTINUED DURING THE SECOND QUARTER 40 35 30 25 20 15 10 5 0 27.1 Sales Q2/17 vs Q2/18 0.4-0.1 +24.0% Q2/17 Acquisitions Divestments Organic growth 3.5-0.9 FX-changes 3.6 IFRS15 impact 33.7 Q2/18 40 35 30 25 20 15 10 5 0 Sales 27.7 27.1 8.5 6.8 19.1 20.3 +17.2%* 33.7 10.4 23.3 Organic growth +13.6%** vs LY Second quarter sales increased by 24.0% compared to last year (28.2% in local currencies). Organic rental sales growth was 17.2% and organic total sales growth 13.6% IFRS 15 adoption increased second quarter sales by EUR 3.6 million against LY. Several assemblies were ongoing at the end of Q2 due to business seasonality. All countries contributed to EBITA growth especially Finland and Germany. Improvement was attributable to higher utilisation and rental sales as well as improvement actions carried out in 2017 and 2018. 10 8 6 4 2 0 7.1 Other sales Rental sales Sales Comparable EBITA and ROCE 6.7 +32.9% 8.8 19% 17% 15% 13% 11% 9% 7% 5% Comparable ROCE Comparable EBITA Comparable ROCE All figures exclude IACs and are presented as comparable key figures * Organic rental sales growth (y-o-y) in local currencies ** Organic growth reported in local currencies Modular Space has operations in seven countries with capital employed over MEUR 340 at the end of Q2 2018.
POTENTIAL SEPARATION OF MODULAR SPACE The Board of Cramo Group has decided to further investigate and initiate a process to assess the potential separation of the Modular Space business division into its own legal entity.
SUMMARY
Leading player in a growing market Business model supported by megatrends and sharing economy Potential in Modular Space further value creation Ready to capture the potential in innovation and digitalization
QUESTIONS