Modulaire - comment

Operationally, a good quarter with margins better than we expected, leading to a better-than-expected cash flow turn out. However, the outlook for construction in France and Germany is still weak. The SUNs may soften on the continued weak outlook in Europe, but this will be more about bonds being marked lower than trading. Our forward forecasts show that Modulaire has sufficient liquidity to see it through to the improvement in construction in Northern Europe (in particular the UK and France, which we expect to begin to emerge in H2 2026. The company declined to elaborate on the speculation about the Australian business; we are sceptical that Brookfield would want to sell this asset.

Q4 Revenue was in line with our forecast at €413m, but we were overly pessimistic on the fall in gross margins, so EBITDA was €18m higher than our model at €133m. Lower-than-expected capex helped FCF to reach €95m vs our forecast of €70m. Cash on hand was €99m, €27m above our forecast; including undrawn RCF/ABL, liquidity is €280m.

We had expected utilisation rates to improve to 77%, but they slipped 1% to 75%, management is responding by controlling investment in new units, which will boost cash; these are long-lasting assets, and the impact of a couple of quarters of reduced capex on new units is manageable.

Management confirmed that the Australian unit accounts for c20% of revenue, but has slightly lower margins as it has more sold units than leased units.