The Group’s development and financial performance during the reporting year

The reporting year was a good for the Group. The consolidated turnover increased by more than 5% reaching 47,7 million euros. Growing construction market in all Baltic and Nordic countries has been one of factors that accelerated company growth. Rent income increased for both, own and vendor equipment rentals. Most significant increase was in sale of rental equipment. For the first time Storent group started to resell oldest items of rental fleet.

Baltic region operations increased rental income by 14% with highest growth rate in Latvia, where Storent is equipment rental market leader. Baltic region accounts for approximately 75% of group rent income. In 2019 In Estonia construction market volume stayed at 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 a small decrease of construction volumes in Sweden in 2019, and the same trend is expected to continue in 2020. Finnish market showed growth of 3,5% in 2018 and it’s expected to steady in 2020. Finnish operations showed decrease in the first part of the year but after revised sale strategy and stabilizing team sales returned in the level of last year in quarter 4. New rental depo in Tampere was opened in summer and in November company made name changes from Leinolift Oy to Storent Oy, becoming a full Storent brand name user. Swedish operations had small decrease mostly related to high level of employee turnover and unsteady customer portfolio. Our main focus has been on structuring sales process, enlarging sales teams and shipping additional fleet as these are important factors in order to continue to grow and enter new market segments.

Kaliningrad operations have seen revenue decrease. Although official sources report construction market growth, construction activities are ensured mostly by state financed projects. Customers’ insolvencies remains to be one of key factors for reduced rent income. We see number of large construction projects started in December, which should serve as driver for rent income 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.

The balance sheet structure of the Group continues to be strong enough. Non-current assets constitute 87% of the total assets. Long-term liabilities constitute 25% of the total balance sheet. Security for creditors ensured by registered and paid stock capital in value of 33.3 million euros, as well as 3.9 million euros bank account balance at the end of the accounting period. The Group finalized the year 2019 with a profit of 19 749 EUR.

The future development of the Group

The Group management plans to continue investing in the development of all subsidiaries. The main focus area in 2020 will be digital transformation and efficiency increase. The Group has transformed its IT strategy to comply with the scalability needs in the future and already in March 2020, Storent became the first online equipment rental company that integrates Artificial Intelligence and Machine Learning systems. Simplified processes with powerful online platform is available for customers on PC but is primarily designed for mobile use. Removal of paper from day-to-day processes to be replaced with digital signatures, smart ID and other electronical signatures are more and more used in rental deals within the Group. The company holds an extensive amount of historical data and a highly professional management team. Artificial Intelligence and Machine Learning is developed to determine the query patterns and generate decisions in daily operations. The dynamic pricing model will be implemented utilizing Artificial Intelligence with transparent pricing policy where rental prices depend on the duration of the rental period – the longer the rent, the lower the price for customers. To motivate customers to use online rental solution the Groups has launched Customer benefit program “Rental point”. Customers may earn up to 20% from the rental price in „Rental Points“ by placing orders online and by using digital signatures during transactions. This will be a tangible and easily trackable benefits as “Rental Points” can be used as a payment mean for Storent services. The Group has signed a cooperation agreement with online platform PreferRent.com to increase the fleet capacity without incurring additional financial liabilities. The Group plans to double split-rent share in total income from current 20% to 40% in two years.

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.

Baiba Onkele

AS Storent Investments CFO

Mobile: + 371 29340012

E-mail: baiba.onkele@storent.com

www.storent.com