Modulaire - comment
The weak Q226 report was not entirely unexpected after earlier reportings this year. But we will have to adjust our model downwards, as Leasing and D&I were each down €9m vs. our March forecast. Management was at pains to point out that without the UK business, EBITDA would have been up €1m YoY, but the UK is very much part of it, where the company integrated four businesses simultaneously into a falling-volume environment. So volumes are falling with lower demand, and the company has been discounting to defend occupancy, compressing the per-unit rental rate and pulling leasing revenue down disproportionately to the volume drop. As a result, the UK is struggling with excess fleet in storage, raising storage costs simultaneously. But we like to look at D&I. When a unit goes on rent, it has to be delivered and installed first — so D&I revenue precedes leasing revenue on the way in. When a contract ends, the unit has to be collected and de-installed — so D&I revenue trails leasing on the way out (although typically more slowly, because the company will just leave the units for free for a while to avoid a trip to storage). The net effect is that D&I is a leading indicator on the upswing (new deliveries spike before the leasing revenue builds) and a lagging indicator on the downswing (collection trips continue after units have already come off rent).
Worryingly, at -15%, D&I is down much more than Leasing. We are therefore concerned that units on rent are still falling, and D&I represents slow collections of units coming off contract (because there is no new destination other than storage) and few new starts, foretelling further pain ahead.
We will be looking for D&I revenue to lead the way out, but that will first drive costs again, because driver capacity and logistics infrastructure will take time to rebuild.
Rather long story short: We expect management to keep liquidity by sweating the fleet, but consider the bonds rich for what lies ahead again. Good thing that maturities don't start in earnest before the end of '28.
