Storent Investments AS Audited Consolidated Annual Report 2020
The Group’s development and financial performance during the reporting year
Storent Group’s performance in the reporting year was negatively affected by Covid-19 pandemic in all countries. Rental revenues decreased by 12%, the consolidated turnover decreased by 7% reaching 42.1 million euros. Construction markets in all Baltic and Nordic countries declined by less than 5%, but strong price competition and rental equipment overcapacity in the market led to a further decrease of rental revenue. During the reporting year there were significant changes in the Group’s rental fleet structure, with own equipment proportion decreasing from 87% in prior year to 57% in current year. Covid-19 pandemic and fleet structure negatively impacted Group net result.
Baltic region rental operations decreased by 15% with almost identically decreasing trends in all Baltic countries. The Baltic region accounts for approximately 65% of the Group’s rental income. In 2020, Estonian construction market volume remained at the level of previous year. The market is expected to show a modest growth in 2021, and there’s a strong pipeline of various construction projects to be realized through the year. Latvian construction market increased by 2,7% in 2020. The highest growth rate was in specialized construction works with 7,8% growth. There is a number of large and medium scale projects, including ones financed under EU programs, to be started in 2021, which provides confidence in a further positive trend on construction market. Lithuanian construction market decreased by 0,5% in 2020. A notable increase was in the residential segment with 7% growth. Rail Baltica project will drive demand for rental machinery throughout the Baltics, that provides the management additional confidence for 2021.
Nordic operations have increased by 8% compared to 2019. There’s been a slight decrease of construction volumes in Sweden and Finland through 2020 due to Covid-19 pandemic restrictions, growth has been possible due to the relatively small market share. Since many construction related projects have been delayed, it is confirmed that most of them will enter into active phase throughout 2021. Our March 2021 sales look promising, and we expect further growth as the high season starts in April.
Operations of of subsidiary Storent OOO in Kaliningrad have seen a small revenue increase. The construction market decreased by 7% in 2020 mostly due to Covid-19 effect. The outlook for 2021 remains unclear, at the same time we see several large-scale projects starting, which definitely will drive rental machinery demand in the region.
In January 2020, the Group started cooperation with split-rent and re-rent platform PreferRent, and at the end of 2020 36% of the total rental fleet was supplied from PreferRent. It allowed to increase the Group’s efficiency since PreferRent took over a part of the fleet management function and provided increased rental fleet capacity without the Group incurring additional financial liabilities. According to approved Storent Group strategy, part of the rental fleet was sold to auction and to split-rent vendors, which resulted in own equipment proportion decreasing from 87% to 57% of the total rental fleet volume. Investment plan for rental assets in 2020 was significantly smaller compared to previous periods. Storent Group continued to develop and invest in IT technologies. A flexible approach to rental fleet rotation among Storent Group companies ensured a quicker response to construction market changes and, overall, a more efficient rental fleet usage.
Groups balance sheet has steady structure consisting of 26% shareholders equity, 40% long term liabilities and 34% short term liabilities. Non-current assets constitute 78% of the total assets. Group’s business peculiarity historically was always having a working capital deficit due to large amount of liabilities to finance investments in rental equipment, however this has not prevented the Company from meeting its obligations in accordance with their terms. 3.7 million euros bank account balance at the end of the accounting period is sufficient to ensure Groups operational activities. The Group concluded the financial year 2020 with a loss of 11.5 million euros, which was mostly affected by Covid-19 pandemic. The loss for the year was significantly affected by the recorded impairment of goodwill for Estonian entity in the amount of 4 million euros. The Group management worked on efficiency increase by reducing headcount during 2020 by 22 people, as well as realized savings on other expenses positions during the financial year.
In March 2020 in Baltics and then in late 2020 in Finland and Sweden, Storent launched the first online equipment rental platform that utilizes Artificial Intelligence and Machine Learning. By the end of 2020, in Baltics almost 40% of all equipment rental orders were made online and 70% of transactions were signed digitally. To motivate customers to use online rental solution the Group launched customer reward program “Rental Points”. Customers may earn up to 20% from the rental price in „Rental Points“ when placing orders online and signing transactions digitally. It quickly became a tangible benefit as “Rental Points” may be used as a means of payment for future Storent services.
The future development of the Group
The Group management plans further development of all subsidiaries. The main focus in 2021 will be to continue online sales development, digital transformation and efficiency increase. The Group will continue to transform its IT strategy to comply with the scalability needs. In April 2021 Storent group plans to join PreferRent online rental platform that will offer online rental services ordering from numerous rental companies in Baltics.
The Group plans to continue selling own rental fleet and increase split-rent share in total rental income from current 42% to 50% during 2021. Management estimates that the construction industry will recover after Covid-19 pandemic in the autumn of 2021, yet, since the rental industry is seasonal, management believes that construction volumes will return to the level of 2020 and continue to grow only starting in the spring of 2022. It is expected that Rail Baltica project will give a significant positive impact on the construction industry in the Baltics.
In the Interim Reports for 2020 submitted by AS Storent Investments, the Consolidated Income Statement item “Revenue” amounted to EUR 51 918 189, while in the audited Consolidated Annual Report 2020 Consolidated income statement item “Net revenue” is EUR 42 124 274. The changes relates to the application of the requirements of IFRS 16 sales of property, plant and equipment to determine their presentation as a net result. In the Interim reports, the result of the sale of property, plant and equipment is presented in two items “Revenue” and “Costs of material and services received”. The financial results of 2020 have not been affected by these changes.
AS Storent Investments CFO
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