11.02.2020

Disappointing last report from Cramo

Finnish international rental group Cramo has published its final full year results prior to its acquisition by Boels.

Full year revenues were three percent lower at €612.6 million with revenues declining in all regions except central Europe, which is largely made up of Germany. Pre-tax profits plummeted 38 percent to €48.8 million. The company also cut capital expenditure by 42 percent to €83.3 million.

In the fourth quarter revenues dropped nine percent to €156.7 million, while pre-tax profit was halved to €9.9 million. Capital expenditure was 19 percent lower at €21 million.

Chief executive Leif Gustafsson, said: “Cramo’s fourth quarter performance fell behind the previous year, as expected, and comparable EBITA decreased in all segments. However, the cash flow generation continued to be strong during the quarter and cash flow after investments was €36.9 million, being €15.3 million above last year.”

“To improve our competitiveness and profit generation going forward, a group wide performance enhancement programme was largely implemented during the second half of the year. The first results were actualised already in the fourth quarter as comparable indirect costs decreased by €2.8 million from last year. Full run-rate savings of €10 to 12 million are expected to be realised from 2020 onwards.”

“The group’s sales in the fourth quarter were lower compared to last year in comparable currencies. The market environment continued to level out or even decline compared to the previous year in many countries. In Sweden, sales decreased by 10.9 percent in the local currency compared to the tough comparables of 2018. This was partly caused by weaker market demand and the timing of large industrial projects. The sales contribution from the new industrial projects which was started in late 2019 was still small during the fourth quarter, but the sales and profit contribution is expected to increase during 2020. In Norway, sales development was a disappointment during the fourth quarter, whereas profitability improved. In Finland and eastern Europe, a more challenging market situation also negatively impacted our sales and profitability, but the market outlook for 2020 is more positive especially for Finland. In central Europe, sales continued to grow, mainly driven by KBS Infra, but profitability remained at an unsatisfactory level.”

“Despite short term challenges in the market, we see many growth opportunities, particularly within selected customer segments and product areas where we have the potential to increase our presence and strengthen our market position. We have now reshaped our company after the spin-off of Adapteo, streamlined our cost base, started the implementation of our new strategy Cramo NXT and set the foundation to differentiate ourselves from the competition. Through our innovative solutions, digitalised offering and committed employees, we are well positioned to capture the opportunities of changing markets and customer needs. In 2020, we will invest in growth opportunities and take the benefit from our streamlined cost base to secure the performance guidance, and so that EBITA will be above €75 million.”

“Looking into the future, Cramo will, as a result of the successful tender offer, be delisted and become part of Boels Rental. The combination of Cramo and Boels will create a more competitive organisation that is better positioned for greater growth, increased profitability and with the necessary financial strength to better manage the market challenges and level out economic volatility. The combination is a great strategic fit and utilises the strengths of each respective company. Factors such as the complementary geographical footprint, a stronger combined presence in mainland Europe, the optimised portfolio of products and services offered by joint operations and the improved rental expertise through the combination of first-rate teams are examples of how the combined company will be a true European rental leader in quality and scale.”

“I want to thank all of our personnel for their commitment in developing Cramo into one of the top companies in the rental industry. I would also like to thank all of Cramo’s customers, shareholders and other stakeholders over the years, who placed their trust in us as a publicly listed company.”

Vertikal Comment

While no surprise these results are disappointing, it is hard to see how a wave of cost saving restructuring efforts would have helped generate sales, improve morale or improve the customer experience. Most shareholders this morning will probably be pleased that they received such a decent offer for their shares.

This does not suggest for a second that Boels has bought a ‘pup’, the company’s less corporate management style and longer term view to its operations, could/should prove beneficial to the business. There is much to do but a new long term private owner might well inspire employees and give the business the boost it needs.

It will be interesting to see how the merger into Boels pans out in terms of strategy and success.