Modulaire - comment

Results were in line with our model, but continuing problems in the UK business, and weakness in France will see the SUNs softer today. Free cash flow was in line with our forecast, and Modulaire has €260m in liquidity (€90m in cash and €170m in facilities). We had expected a weak quarter and got one. Our expectation is still for improvement towards the end of 2026, but the UK/French trading environment remains weak. €260m of liquidity is enough to see the company through currently.

Revenue of €360m was -0.6% below our forecast, which was driven by a 4% drop in average units on rent. Gross Margins of 39% (forecast 40%) were higher UK costs (including storage) and some discounting in France. Adjusted EBITDA was in line at €108m (forecast €103m), additional costs in the UK business were a €10m drag to EBITDA. Management expects the quarterly impact to reduce in the rest of the year as the problems started in Q2 25. Operating cash from of €53m was €11m lower than we expected, due to higher working capital outflows. Receivables rose €30m, and we note that the RCF and ABL lines were drawn by €31m, indicating possible payables pressure. Modulaire has the ability to preserve cash by sweating its assets, and demonstrated this with Capex of €26m vs our estimate of €41m.