Modulaire - comment

Things aren’t getting worse at Modulaire, but management acknowledges that the UK and French divisions are unlikely to see much improvement before H2 2026. Q3 Revenue and EBITDA were broadly in line with our model. OCF was higher, partly due to a better WC performance than we expected. Non-cash items (we estimate at €18m also boosted OCF. Gross margins were down 230bp to 51%; some of this was down to the UK, but part of it is due to an increase in asset sales vs rentals (which attract a higher margin). Modulaire has instigated a cost-cutting programme but has declined to give any details on the potential savings before Q1 26. However, management said 70% of €1.1bn of costs were part of the plan; savings of 5% would equate to a near €40m boost. We are a little sceptical here as Modulaire has been in PE ownership since 2004 (TDR and then Brookfield). If cost savings were easy, they would have been made by now.  Fleet utilisation has bottomed out at 76%, but management has always maintained that >80% the minimum they are happy with over time.