In the first six months of 2024, construction equipment rental company Storent Holding (Storent) generated a turnover of almost 20 million euros and the company’s EBITDA was 4.4 million euros. To accelerate its long-term development, Storent invested significantly in equipment, IT technology and human resources.
While the company’s rental revenue slightly exceeded the result of the first half of 2023, increasing personnel costs, depreciation and significantly higher interest payments affected the profit indicator. Although the construction market remains challenging, Storent expects gradual market recovery from the second half of 2024.
“In the first half of 2024, Storent invested 15.5 million euros in the replacement and expansion of the fleet. In the coming months, total investments in the fleet will reach 25 million euros to support Storent growth in 2025,” says Andris Pavlovs, Chairman of the Management Board of Storent Holding.
However, in the equipment rental business, the return on investment comes gradually, considering the time of equipment delivery, registration, as well as full entry into circulation. “In the rental turnover of Storent for the first half of the year, the largest increase, 21%, was for splitrented equipment, which is less profitable than renting own equipment. However, the significant increase of the indicator proves that Storent is expected to meet rental demand of much larger volumes of equipment than it currently has available and thus can invest more in own fleet,” added Pavlovs.
The company proposes to change a financial indicator
When companies invest intensively, debt is increasing immediately but EBITDA effect will come in the next 12 months. On June 30, 2024, the financial indicator NetDebt/EBITDA of Storent reached 3.74. It exceeded the ratio of 2.5, set in the prospectus of the issuance of notes, which was published on May 25, 2023.
In mid-August, Storent will initiate a vote for bondholders, by proposing to change the NetDebt/EBITDA indicator. The company will propose that from the Q3 of 2024 to the Q2 of 2025, the NetDebt/EBITDA ratio could be lower than 4.0, while starting from the Q2 of 2025, it could be up to 3.5.
The suggested new indicator is in line with the industry standards in Europe. For example, two major construction rental companies in Europe, with an aggregate annual turnover of over €4bn, had at the end of 2023 corresponding ratios of 4.7 and 3.5 respectively.
In addition, Storent's management has made a forecast for the remaining months of the year and made sure that it secures cash flow, and the company covers all liabilities. The company will make the next coupon payments on September 21, 2024.
Storent eyes expansion by investments
Storent is growing fastest in the Baltic region, where it generates 72% of the total revenue, the rest in Finland and Sweden. Storent has successful co-operation with Rail Baltic, the biggest infrastructure project in the region, as well as with the defense sector.
Recently Storent has opened new rental depots in Saldus, Latvia and Vilnius, Lithuania as well as expanded operations in the eastern part of Finland.
According to forecast of the construction market research company Forecon the rental equipment market is expected to grow by 6% in 2025 in the Baltics, by 8% in Finland and 4% in Sweden in 2025. The largest growth, 11%, is expected to be in Latvia that is Storent’s biggest market. To be able to use market favorable condition in 2025 Storent needs to invest significant amounts already in 2024. The company continues to update its fleet, build up the team, and adapt IT solutions to the needs of equipment rental.