Adapteo has identified the following key strengths the management believes to provide Adapteo with a competitive advantage:
Adapteo’s addressable rental market is expected to grow in all of Adapteo’s operating countries: In 2017–2023, over 10% annual growth is expected in the rental market in Finland and Denmark, and 6–8% growth in Adapteo’s other operating countries.* In the coming years, the growing demand for space is supported by structural trends, such as migration and urbanisation, demographic trends and ageing building stock. The rental market is resilient due to the high share of public sector customers who in most cases have a legal obligation to deliver space to varying needs. To a large extent, the rental market is driven by underlying stable demand drivers .*
Adapteo is the market leader in the rental market in Sweden and Finland. The company has a top two position in the rental market in Denmark and Norway and is a strong challenger in Germany**. With the largest rental fleet in the Nordics*, wide distribution network, in-house production and secured supplier capacity Adapteo is able to provide fast delivery to its customers. In addition, Adapteo’s versatile offering enables responding to various end-customer needs. Through its long relationships based on trust, Adapteo is well-positioned in tenders.
A high share of Adapteo’s revenue is recurring by nature, and rental revenue is generated by rental contracts with primarily public sector customers. Historically the total average rental period including prolongations is approximately five years, implying that at any given time, approximately 80 percent of rental sales has been recurring and based on agreements made in previous years. Adapteo also generates a continuous stream of revenue from assembly and other services.
During a rental period, the main income for Adapteo is rental fees. Rental fees generate predictable and stable cash flow, while costs during a rental period are low. With the total average rental period of approximately five years including prolongations, the investment payback for a new module is often achieved during such first rental period.
Rental business generates stable cash flow and maintaining the earnings capacity requires fairly limited investments. The investments generate strong cash flow that can largely be used for discretionary value creative purposes including fleet expansion, or alternatively to distribute dividends. If needed, Adapteo can very rapidly adjust the amount of growth capex to fit the company’s overall strategy, perceived growth opportunities and dividend policy in order to drive shareholder value creation.
*Management consultant analyses
**Management consultant analyses. Measured by revenue. Revenues used in the assessment of Adapteo’s market share in the Rental Market are estimates based on information from public sources on the combined 2017 revenue of the operational companies of Cramo’s Modular Space business division operating in Sweden, Finland, Norway, Denmark and Germany as well as the Swedish, Finnish, Danish, and Norwegian companies of Temporent.
The customer rental income information has been derived from Adapteo’s internal customer invoicing and contract data. Such information has not been prepared in accordance with IFRS and includes certain assumptions made by the management. Accordingly, such data should be considered indicative of Adapteo's customer segmentation and may not be directly comparable to Adapteo’s revenue reported in accordance with IFRS.