Annual Financial Report
CORRECTION: Storent Investments AS Audited Annual Report 2019
Insider information, 2020-05-05 12:43 CEST --
Correction made for title page in Latvian version, no changes in financial data were made.
Development of the Company and results of financial operations in the reporting year
The main type of activity of the Company is related to provision of all the companies of the Storent group with financial resources, region differentiated sales strategies and activities, marketing initiatives and support of Storent brand, information technology systems, as well as provision of management services to related companies. In the reporting year, the Company increased its turnover by 9% reaching 6.7 million euro. The reporting year closed with a profit of EUR 963,316. The financial stability of the Company is supported by a thorough balance sheet structure. Long-term investments amount to 79% of total assets of the Company. Equity amounts to 65% of the total balance sheet amount.
In 2019, the Storent group continued to strengthen its position on the Baltic rental market and still keeps a stable position among top 3 largest rental companies. Construction volumes were steady in all three Baltic countries, allowing to increase our sales volumes. Despite strong price competition among rental companies, rental revenue in the Baltic region increased by 14% with the highest increase being observed in Latvia, where Storent is equipment rental market leader and in Lithuania with its highest construction volume growth rate. Baltic region accounts for approximately 75% of Storent group rent incomes. In 2019 Estonian construction market volume stayed on the previous year level. Latvian construction market increased by 2,9% in 2019. Highest growth rate was achieved in specialized construction works with almost 7,8% and in building construction with 1%. Lithuanian construction market grew by 13% in 2019. Largest increase was in civil engineering segment with 12% growth. Residential and non-residential segments had grown by 17% and 19%, respectively. There are many EU financed construction related projects to be realized in 2020.
Nordic operations have decreased by 11% compared to 2018. There’s been small decrease of construction volumes in Sweden in 2019, and the same trend is expected to continues in 2020. Finnish market showed growth of 3,5% in 2019 and it’s expected to be steady through 2020. Finnish operation showed decrease in the first part of the year, but after revised sale strategy and stabilizing the team, sales returned to the level of Q4 2018. New rental depo in Tampere was opened in summer and in November company changed its name to Storent.
Swedish operations had small decrease mostly related to high level of employee turnover and unsteady customer portfolio. Swedish customers are more cautious in choosing their business partners. They require a longer period of evaluation of cooperation. Our main focus has been on structuring sales process, enlarging sales team and shipping additional fleet in order to continue to grow and penetrate new market segments.
Kaliningrad operation has seen revenues decrease. Although official sources report construction market growth, construction activities are ensured mostly by state financed projects. Customers insolvencies remain to be one of key factors for reduced rent incomes. We see a number of large construction projects started in December, which should serve as driver for rent incomes growth in 2020.
Investment plan for rental assets for 2019 in amount of 7 million euros has been realized and new machines have been delivered to designated countries. Flexible approach to fleet rotation among Storent group companies ensured quicker response to construction market changes and overall, more efficient fleet usage.
Upon beginning of Covid-19 pandemic, management evaluated worst possible scenario from effect of pandemic on Storent group results in 2020, which assumes revenue decrease by 13% compared to 2019. In order to ensure company liquidity with such assumption, talks with all financers have been initiated on 12- month grace period for principal repayment. At this moment principal repayments of shareholders loan and bonds have been postponed for a year. Largest lease companies have agreed to 6-month grace period with possible prolongation. Negotiations continue with equipment manufacturers and some have confirmed to postpone principal repayment for 12 months, we expect to receive confirmations from all manufacturers.
Positive signs related to Covid-19 restrictions softening are seen in all countries as well as market activities increase, which is usual in the beginning of construction season. Storent group management expects that, in spite of an effect from Covid-19 pandemic, it will manage to keep revenues of 2020 in line with ones of 2019.
AS Storent Investments CFO
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