Ramirent has a total number of outlets more than 243 in 11 countries

Transcription

1 R A M I R E N T A N N U A L R E P O R T

2 Ramirent has a total number of outlets more than 243 in 11 countries

3 Ramirent Outlet Network in Europe Finland 100 Norway 38 Sweden 43 Denmark 15 Estonia 10 Latvia 9 Lithuania 3 Poland 13 Russia 4 Hungary 7 Ukraine 1 Total 243 This is an unofficial English language translation of the original Finnish language Annual Report In the event of any discrepancies between the original Finnish language Annual Report 2003 and this unofficial English language translation, the original Finnish language Annual Report shall prevail.

4 RUSSIA NORWAY FINLAND ST. PETERSBURG ESTONIA SWEDEN LATVIA MOSCOW LITHUANIA DENMARK POLAND UKRAINE HUNGARY

5 MAP RAMIRENT IN BRIEF 3 CEO S REVIEW 4 THE GROUP S OPERATING STRUCTURE AND ORGANIZATION 6 RAMIRENT FINLAND 7 RAMIRENT SCANDINAVIA 11 RAMIRENT EUROPE 12 RAMIRENT ALTIMA 14 BOARD OF DIRECTORS REPORT 19 CONSOLIDATED INCOME STATEMENT 21 CONSOLIDATED BALANCE SHEET 22 CONSOLIDATED CASH FLOW STATEMENT 24 PARENT COMPANY INCOME STATEMENT 25 PARENT COMPANY BALANCE SHEET 26 PARENT COMPANY CASH FLOW STATEMENT 28 NOTES 29 KEY FIGURES 42 BOARD OF DIRECTORS PROPOSAL 44 AUDITORS REPORT 45 CORPORATE GOVERNANCE AND MANAGEMENT 47 SHARE TURNOVER AND PERFORMANCE (MONTHLY) 48 OUTLET NETWORK 49 1

6 2 KEMI CHURCH

7 RAMIRENT IN BRIEF Ramirent is the leading company in Northern and Eastern Europe in machinery and equipment rentals for construction and industry. Following the acquisition of Altima, the Group has 240 permanent outlets in eleven European countries (Finland, Norway, Sweden, Denmark, Russia, Estonia, Latvia, Lithuania, Poland, Hungary and the Ukraine). The Ramirent Group s core product groups are construction machinery, personnel hoists, scaffolding, formwork, portable spacial units, on-site electrical and heating systems, and tower cranes. The Group also provides related planning, erection, transportation and advisory services. The Group s main customer segments are construction companies, installation companies, industrial plants, shipyards, national and local authorities, and private persons. The Group has about 40,000 customers. With a network of over 90 rental outlets throughout Finland, Ramirent is the largest machinery rental company in the country. In Norway Ramirent has a wholly-owned subsidiary which, with 38 outlets, is the largest machinery rental company operating in Norway. In Sweden, after the acquisition of Altima, Ramirent is the second largest machinery rental company and operates through Ramirent AB s subsidiaries, Altima AB, Stavdal Byggmaskiner AB and Stavdal Lift AB. Ramirent has a total of 43 outlets in Sweden. In Denmark, Ramirent operates through its subsidiary Altima A/S, which is Denmark s largest machinery rental company and has 15 outlets. Acting through its subsidiaries, Ramirent Europe rents out construction machinery and equipment in Russia, Estonia, Latvia, Lithuania, Poland, Hungary and the Ukraine. At present the Group has a network of 47 rental outlets in these countries. Key figures Net sales and other operating income, million Profit before extraordinary items, million Earnings per share, Return on investment, % Personnel ,4 13,0 1,58 10, ,3 14,3 1,49 13, ,5 11,5 1,89 25, ,0 11,4 1,96 32, ,7 7,7 1,44 29,

8 REVIEW BY THE PRESIDENT AND CEO Review of 2003 Ramirent estimates that the overall Nordic market for the machine rental business was smaller in 2003 than it had been in the previous year. Particularly in the Oslo area in Norway the market weakened significantly. On the other hand, the machine rental market developed positively in Eastern European countries. The rapid strengthening of the euro, especially against the Norwegian krona (the NOK weakened 15.5% against the EUR in 2003) and the Russian rouble and Polish zloty, strained the Group s net sales, profit, capital and reserves and key figures for The net sales of the Ramirent Group increased by 70.3% compared to the previous year. A significant part of the growth in net sales came from the companies in Scandinavia (Norway and Sweden) which were included in the previous year s figures only for three months. The net sales of Ramirent Scandinavia were EUR 94.7 million (26.8). Ramirent Europe also continued to grow strongly, with net sales increasing by 29.9% to EUR 20.8 million (15.7). Finnish operations contracted by 4.6% compared with 2002, totalling EUR 57.2 million (60.0). The Group s gross margin increased by 53% to EUR 45.2 million (29.6). The Group s operating profit increased by 17.7% to EUR 19.3 million (16.4). The operating profit derived from Finnish operations was EUR 10.3 million (11.6). The operating profit from Ramirent Scandinavia was EUR 6.1 million (2.9), while the operating profit from Ramirent Europe was EUR 2.8 million (1.9). The Group s profit before minority interest and taxes decreased by 9.0% to EUR 13.0 million (14.3). The Group s net profit for the year increased by 10.8% to EUR 10.5 million (9.5), while earnings per share also improved to EUR 1.58 (1.49). In accordance with its strategy, the Ramirent Group focused strongly on growth and internationalisation in Ramirent Plc s wholly-owned subsidiary, Ramirent Hungary Berléti Kft, expanded its machinery rental business in Hungary by acquiring the total stock of Gepbazis Kft in May The company operates in the southern Hungarian town of Pécs, where it has four outlets. Ramirent will merge the rental businesses of Gepbazis Kft and Ramirent Hungary Berleti Kft and extend its network of outlets throughout the whole of Hungary in the coming years. Ramirent Plc made a public tender offer to the shareholders of Altima AB (publ) on 10 December In accordance with the offer Ramirent offered Altima s shareholders newly issued Ramirent shares for each Altima share. The offer period commenced on 22 December 2003 and expired on 19 January The more detailed terms and conditions of the offer and the conditions for implementation appear in Ramirent s prospectus concerning the matter. According to Ramirent s Board of Directors, the businesses of the companies (Ramirent and Altima) complement each other well and their combination will create one of the leading European machinery rental companies whose strong structure will support the continuation of international growth, particularly in Central and Eastern Europe. Ramirent founded a Ukrainian subsidiary Ramirent Ukraine Ltd at the end of

9 Outlook for 2004 The overall market in the Nordic countries is expected to remain the same or to grow a little compared with The overall market in Eastern European countries in expected to continue to increase. Due to the Altima transaction in particular, it is expected that the Ramirent Group s net sales will grow significantly in The Group s result for 2004 will be strained particularly in the first half of the year by the costs of integrating Altima into Ramirent. The synergies obtainable from the combination will have their full effect only on the results of Internationalization and growth strategy The Ramirent Group will continue to seek growth in the coming years. At the same time, the Group intends to maintain profitability at a good level. While growth will occur mainly through internationalisation, business in Finland is also expected to continue to grow. The Group s main market areas, in addition to the Nordic countries, are the countries of Eastern and Central Europe. However, internationalisation is not an end in itself. Rather, there are weighty reasons why it is the preferred course for Ramirent. First, the attainment of sufficient growth and corporate size in the Finnish market alone is virtually impossible, due to the limited size of the machinery rental market. On the other hand, powerful growth is essential for the company to be able to compete on an equal footing with other European machinery rental companies in growing markets. Secondly, the machinery rental markets of different countries are at different stages of development and the cyclical rises and falls of these markets are out of sync. Hence, by operating in many countries the company is able to develop much more steadily than by operating in just one country. Thirdly, the machines and equipment used in the machine rental business are the same in different countries. In fact, the machines are often made by the same international manufacturers. Capacity can thus be easily relocated from one country to another, which makes it possible to achieve better capacity utilisation ratios than when operating in only one market. March 2004 Erkki Norvio President and CEO PROFIT BEFORE MINORITY INTEREST AND TAXES OPERATING PROFIT NET SALES EUR million 20 EUR million 20 19,3 EUR million ,4 172, , ,7 11,4 11,5 13,0 10 8,4 12,1 12, ,5 68, ,8 36,

10 THE GROUP S OPERATING STRUCTURE AND ORGANISATION THE RAMIRENT GROUP OPERATING STRUCTURE FINLAND NORWAY SWEDEN DENMARK EUROPE PRODUCT LINES PURCHASES MARKETING The Ramirent Group operates in eleven countries. The operating structure is based on the idea of proximity to customers and operations are channelled through subsidiaries located in different countries. Strategic planning, investments, financing and matters concerning all markets are coordinated at Group level. The Group s Finnish operations are conducted under the Ramirent trademark, with Ramirent Plc as the parent company. Additionally, the Group has two Finnish subsidiaries for scaffolding operations (Teline-Rami Oy and Uudenmaan Telineykköset Oy) and one Finnish subsidiary for tower crane rentals (Rami-Cranes Oy). Geographically, Finnish operations have been divided into eight areas. There are already over 90 permanent Ramirent outlets in Finland. Norwegian operations are handled through the subsidiary. The company has 38 permanent rental outlets in 4 areas throughout Norway. In Sweden, operations are conducted through Ramirent AB s subsidiaries, Altima and Stavdal. Altogether Ramirent has 43 outlets in Sweden. Operations in Denmark are conducted through Ramirent s subsidiary, Altima A/S which has 15 outlets. Operations in Eastern and Central European countries (Russia, Estonia, Latvia, Lithuania, Poland, Hungary and the Ukraine) are carried out by the Ramirent Europe Group through subsidiaries in each of the aforementioned countries. The Group has 47 permanent outlets in these countries. MANAGEMENT GROUP Erkki Norvio Thorolf Hannus Kurt Opseth Mikael Öberg Lars Henningsson Erik Höi Timo Korhonen Petri Söderholm Reijo Fernelius Jorma Nyyssölä RAMIRENT OYJ BOARD OF DIRECTORS Erkki Norvio PRESIDENT & CEO Finance and Administration Thorolf Hannus RAMIRENT FINLAND Petri Söderholm RAMIRENT NORWAY BAUTAS Kurt Opseth RAMIRENT SWEDEN ALTIMA Mikael Öberg STAVDAL Lars Henningsson RAMIRENT DENMARK ALTIMA Erik Höi RAMIRENT EUROPE Timo Korhonen 6

11 RAMIRENT IN FINLAND History The history of Ramirent dates back to 1955 and the establishment of a partnership called Rakennusmies. At that time there was a need for new construction projects and equipment in Finland with post-war reconstruction at its height. The import, manufacture and trading of construction machinery and equipment were defined as the company s lines of business. In the 1960s and 1970s the product range expanded, and the company also took on the development and manufacture of various prefabricated units. At the time, the company was called A-Elementti Oy Rakennusmies. In 1983, Oy Partek Ab acquired the whole stock of the company, and in the following 2 3 years prefabricated unit production was transferred to Partek s own corresponding group. After the company s own production came to an end, its name was changed to A-Rakennusmies Oy. Through this change the company returned to its roots and focused on the import, sales and renting of construction machinery and equipment. In the late 1980s, business grew again and the product range expanded. Further growth was sought mainly through acquisitions. In 1989, A-Rakennusmies acquired Rakennuslaite Oy, which had been renting construction machinery for 15 years. A leading seller and renter of formwork and personnel hoists, Hytec Oy, was merged with the company in In 1992, the major part of Monivuokraus Ky s business and network of rental outlets was acquired, which significantly increased A-Rakennusmies construction machinery rental operations. In 1993, the construction machinery operations of Starckjohann-Telko Oy were joined to the company and in 1994 Tallberg Rakennustekniikka Oy s business was acquired. In 1995, the Betox Oy business was acquired. In December 1995, the business operations of A-Rakennusmies were transferred to a new company held by key persons in A-Rakennusmies through the holding company Gaspar Oy Ab, together with the funds managed by Cap- Man Capital Management Oy and MB Finance Group Oy. Of the previous owners, Oy Julius Tallberg Ab, Oy Partek Ab and Starckjohann Oy retained their holdings in the company until November 1997, when the latter two sold their shares to the company s other shareholders. In 1998, A-Rakennusmies was listed on the main list of the Helsinki Exchanges and the public quotation of its shares began on 30 April, In conjunction with this, the capital investors CapMan Capital Management and MB Finance Group sold most of their holdings. A-Rakennusmies continued its acquisitions. The machinery rental operations of Kehä- Vuokraus and Cranes-Sampo were acquired in 1998 and two scaffolding rental companies, Uudenmaan Telineykköset Oy and Etelä- Suomen Telinepiste Oy, were acquired in The tower crane operations were incorporated as a subsidiary company called Rami-Cranes Oy at the beginning of March 2000 and the scaffolding operations were combined into a subsidiary called Teline-Rami Oy at the beginning of The name A-Rakennusmies Oyj was changed to Ramirent Plc in March In 2002, Ramirent acquired the business operations of the scaffolding rental company Tupla- Rakenne Oy and its sister companies. Market development According to the estimates of Ramirent, the Finnish construction machinery rental market weakened somewhat in 2003, compared with the previous year. The use of rental machinery is still relatively low in Finland by international standards. A slight increase in the use of rental services is expected in the future as construction companies and industry focus on improving profitability and productivity. The Finnish construction machinery rental market is expected to grow 0 5% annually in the future, depending on the development of business activities in construction and industry. Operations and the market situation The Construction Machinery and Personnel Hoists product lines cover the renting of machinery and personnel hoists needed in construction and industrial maintenance, and the sales of related equipment and accessories. The machinery and equipment in these product lines are used in concrete casting, soil compaction, 7

12 8 COLUMN FORM EQUIPMENT. KAMPPI CENTER, HELSINKI, DECEMBER 2003.

13 hoisting, heating, sanding, grinding, welding, drilling and nailing. The product range also includes various cutting machines, pneumatic machinery, electrical and lighting equipment, pumps, and testing and measuring equipment. The combined net sales of these product lines increased somewhat from the previous year. The net sales of rental operations are expected to still grow slightly in The Formwork and Supporting Equipment product line rents and sells shuttering required for on-site concrete casting, and the related planning, erection and supervision services. Shuttering is used to cast vertical and horizontal structures such as walls and vaults. The net sales of Formwork and Supporting Equipment fell short of the previous year s level. In 2004, net sales are expected to remain at the same level or to increase slightly compared with The operations of the Scaffolding and Weather Covers product line are carried out through Ramirent Plc s wholly-owned subsidiaries, Teline-Rami Oy and Uudenmaan Telineykköset Oy. These companies are responsible for the renting and selling of scaffolds and weather covers. The companies comprehensive service also includes planning, erection, transfers, disassembly and transportation. The 2003 net sales of Scaffolding and Weather Covers remained approximately at the previous year s level. In 2004, net sales are estimated to grow somewhat. The Portable Spacial Units and Containers product line rents and sells portable spacial units and containers for use on new construction and renovation sites and for many other purposes. The product range includes office, changing room, canteen, storage and accommodation units. The net sales of Portable Spacial Units and Containers decreased to some extent from the previous year. A small increase is expected in The operations of the Tower Cranes and Hoists product line are carried out through Ramirent Plc s wholly-owned subsidiary, Rami-Cranes Oy. Rami-Cranes Oy is responsible for renting and selling tower cranes and construction site hoists and related maintenance and spare parts services. Rami-Cranes also repairs and provides spare parts services for other kinds of hoists and construction machinery. The net sales of Rami- Cranes decreased to some extent from the previous year. In 2004, net sales are estimated to grow somewhat compared with Net sales of Ramirent s Finnish operations 57,2 M Operating profit of Ramirent s Finnish operations 10,3 M 9

14 10 SUPPORT EQUIPMENT FOR HEAVY CONCRETE SLABS. KAMPPI CENTER, HELSINKI, DECEMBER 2003

15 RAMIRENT SCANDINAVIA History Veidekke ASA, Norway s largest construction company, incorporated its internal machinery rental department into a subsidiary called Bautas in was founded at a good time, as between 1997 and 1999 the company experienced organic growth that tripled its sales. During the same period, Veidekke s share of net sales fell from 100% to less than 50%. In 2000, Bautas acquired its biggest competitor Stavdal, which at the time was listed on the Oslo Stock Exchange. The acquisition doubled Bautas net sales and gave the company a good position in the Swedish market. In Norway Stavdal was merged with Bautas, but in Sweden the company continued to operate under the Stavdal name. In 2001, AF-gruppen, the second largest construction company in Norway, outsourced its construction machinery rental business to Bautas, making an agreement to transfer most of its light machinery to the company. This was a clear sign that Bautas had succeeded in establishing its position as an independent equipment rental company. In 2001, the company also acquired a rental business in southern Sweden, making Stavdal a nation-wide company with operations in all major Swedish regions. In September 2002, Ramirent Plc acquired Bautas and Stavdal. The companies were integrated into the Ramirent Group on 1 October 2002, and the Norwegian and Swedish operations were combined to form Ramirent Scandinavia. Norway () In 2003 the Norwegian machinery and equipment rental market deteriorated significantly when compared with the year before. This was mainly due to a reduction in construction activity. The deterioration was particularly marked in the Oslo region, which accounts for a substantial share of Bautas net sales. The operations of Bautas have not developed according to plan, mainly due to the weakening market situation. However, Bautas maintained its position on the Norwegian market. The overall markets are expected to remain the same or possibly improve slightly in 2004 when compared with the previous year. In 2004, Bautas will primarily focus on improving its profitability. Sweden (Stavdal i AB) In Sweden, the equipment rental market weakened slightly due to a decrease in construction. Regional differences could still be seen, however. Stavdal s net sales increased somewhat from the previous year. Despite this, the company did not achieve its profitability targets, mainly because the planned cost savings were not realized. However, Stavdal maintained its market position in Sweden. In 2004 the Swedish equipment rental market is expected to remain approximately the same as in the previous year. Stavdal will primarily focus on improving its profitability in Net sales of Ramirent Scandinavia 94,7 M Operating profit of Ramirent Scandinavia 6,1 M 11

16 RAMIRENT EUROPE TEMPORARY DOCKING FOR MAINTENANCE AND PAINT WORK ON AN AIRPLANE. History Ramirent Europe s machinery rental business began in Moscow in 1989 with the foundation of a joint venture company in the former Soviet Union with two local partners. In 1993, the Moscow business was transferred to a whollyowned subsidiary, ZAO Techrent. In 1994, Ramirent Europe s operations were expanded by establishing subsidiaries in St. Petersburg and Tallinn. A-Rakennusmies East Oy began operations in 1997, as a result of the eastern operations of A-Rakennusmies Oy being incorporated into a separate company. A fund managed by Capman Capital Management Oy, the Alliance ScanEast Fund L.P., put up 50% of the equity. These operations are presently conducted through Ramirent Europe Oy and its subsidiaries. Ramirent Europe Oy has subsidiaries in seven countries: Russia (OOO Techrent in Moscow and ZAO Peterrent in St. Petersburg), Estonia (AS Ramirent), Latvia (A-Ramirent SIA and Rami teh SIA), Lithuania (A-Ramirent UAB) and Poland (Rema-Rental S.A. and Operator S.A.). In addition, Ramirent Plc has set up a Hungarian subsidiary called Ramirent Hungary Bérleti Kft that started operations in early As a result of a share issue in 2000, Ramirent Plc s holding in Ramirent Europe Oy increased to 65%, with the Alliance ScanEast Fund L.P. s holding correspondingly decreasing to 35%. On 27 February 2004, Ramirent Plc signed an agreement to acquire Ramirent Europe Oy s 35% minority share from Alliance ScanEast Fund L.P. The transaction was closed on 29 March 2004, and Ramirent Plc now owns 100% of Ramirent Europe Oy. General overview Ramirent Europe has developed according to its strategy. In 2003, the net sales of Ramirent Europe increased by 29.9% compared with the previous year. The operating profit also improved to EUR 2.8 million (EUR 1.9 million in 2002). Profit increased in all countries where Ramirent Europe operates. Operations are expected to continue to grow in 2004, although the main focus will be on improving profitability. Estonia (AS Ramirent) In 2003, construction in Estonia increased by about 11%. This, coupled with the expansion of the network of AS Ramirent outlets, led to a very solid year in the Estonian market. The company s net sales increased by 38% from the previous year and the operating profit was 12

17 good. This favourable development is also expected to continue in Latvia (A-Ramirent SIA, Rami teh SIA) Construction increased in Latvia by 14%. The net sales of Ramirent SIA increased by 33% and those of Ramiteh SIA by 25% from the previous year. The operating profit of both companieswas good. This positive development is also expected to continue in the 2004 financial year. Lithuania (A-Ramirent UAB) Construction in Lithuania increased by 25% in The Ramirent subsidiary also increased its net sales, achieving its target of 38% growth from the previous year. The operating profit was good and met expectations. Operating profit is expected to continue to improve in the 2004 financial year. Poland (Rema-Rental S.A.) Rental operations in Poland were mainly conducted through the company s subsidiary Rema- Rental S.A., which is wholly owned by Ramirent Europe. As expected, market conditions were tough in Poland. Construction decreased for the third consecutive year. This time the rate of decrease had slowed down to 5%. The situation is expected to improve during The aim is to further expand the company s product range and network in Poland which currently consists of 13 outlets. The company s net sales increased by 20% from the previous year. The Polish figures include those of Operator Sp Z o.o, a subsidiary of Ramirent S.A.. In 2004, the operations of the company will be combined to Ramirent S.A. The company s operating profit is expected to increase in In January 2004, Ramirent S.A. acquired MVS AG s Polish portable spacial units operations. Russia, (OOO Techrent in Moscow and ZAO Peterrent in St. Petersburg) profit was good. Techrent s operations are expected to develop positively in 2004, and the company will continue to improve its product range and operating conditions. Peterrent s net sales increased by 45% from the previous year, and its operating profit was reasonably good. Development is expected to continue favourably in Hungary (Ramirent Hungary Bérleti Kft) Construction in Hungary increased by 8% in During the financial year, the company acquired Gepbasis Kft, a company in South Hungary. The acquisition substantially strengthened our Hungarian outlet network which now features 7 outlets. Our operations increased according to plan, and strong growth is expected for The Ukraine (Ramirent Ukraine Ltd) The company was registered late in 2003, and its operations will commence in spring Development of the net sales of Ramirent Europe Net sales of Ramirent Europe Operating profit of Ramirent Europe 20,8 Me 2,8 Me Construction in Russia increased by 14% in The net sales of Techrent increased only by 2% from the previous year and its operating 13

18 RAMIRENT ALTIMA THE INDUSTRIAL EVENT OF THE YEAR, HELD IN TAMPERE IN OCTOBER Overview Ramirent Plc made a public tender offer to the shareholders of Altima AB (publ) on 10 December In accordance with the offer Ramirent offered Altima s shareholders newly issued Ramirent shares for each Altima share. The offer period commenced on 22 December 2003 and expired on 19 January Ramirent s public tender offer was accepted to the extent that Ramirent controlled 94.62% of Altima s shares and votes. Ramirent implemented the offer to Altima s shareholders and extended the acceptance period until 13 February On 19 February 2004, Ramirent controlled 98.39% of Altima s total shares and votes. Ramirent Plc s Board of Directors decided not to further extend the offer period. In addition, the Board decided to commence the redemption procedure for minority shareholders in order to redeem the remaining Altima shares as soon as possible. Background and reasons for the offer Ramirent s Board of Directors considers that the merger of Ramirent and Altima is well-founded for strategic, industrial and financial reasons. Through its strategy of international growth, Ramirent aims to become one of the leading machinery rental companies in Europe. Ramirent considers international growth important for several reasons. The combination offers the potential to realise synergies through: a larger and more diversified service offering for customers and a more efficient rental outlet structure. a better bargaining position with respect to suppliers and thus more cost-efficient purchasing. the opportunity to relocate machinery between geographical markets and thus achieve higher capacity utilisation. the opportunity to spread fixed administrative and IT costs over a larger number of units. 14

19 The merger creates opportunities to serve large customers with operations in several countries. According to Ramirent s Board of Directors, the businesses of the companies (Ramirent and Altima) complement each other well and their combination will create one of the leading European machinery rental companies whose strong structure will support the continuation of international growth, particularly in Central and Eastern Europe. The New Group will have a strong balance sheet and is expected to produce substantial synergies. The merger is estimated to create synergies of at least EUR 10 million annually, fully effective as of The costs of realising these synergies are estimated at EUR 5 million. Based on the above, Ramirent s Board of Directors decided on 9 December 2003 to make an offer to future shareholders in Altima to transfer all shares in Altima to Ramirent. As the offer, which was announced on 10 December 2003, will be conducted through a share exchange, the shareholders of both Ramirent and Altima can fully participate in the future development of the New Group. Business Concept The New Group s business concept is to create shareholder value by offering efficient machinery and equipment rental services for the construction and industrial sector in the Nordic region and in other selected European countries. Objectives and Strategy The New Group s objective is to consolidate its position as one of the leading players in the European market for machinery and equipment rentals for the construction and industrial sector by means of strong, profitable growth. The strategy to attain this objective is to work actively in market consolidation, especially in the Nordic region, as well as in Central and Eastern Europe. Following the merger, the New Group will have a market-leading position in the Nordic countries and in certain Eastern European countries. It will also have a robust platform for growth in other European markets. The following main operational approaches will be employed to achieve profitable growth: Focus on organic growth, while continually appraising acquisition opportunities. Continual investments in machinery and equipment to maintain and develop the rental portfolio. Establishment of new rental outlets to meet the requirements of existing and new customers. Higher sales to customers outside the construction sector in a bid to reduce sensitivity to business fluctuations in this sector. Utilisation of the growth potential that arises when construction and industrial companies transfer their in-house machinery operations to machinery rental companies. In the Nordic countries, acquisitions will be undertaken primarily to strengthen existing product lines. In markets outside the Nordic area, where the major growth opportunities are expected, acquisitions will be conducted to strengthen existing product lines and to consolidate and establish a market presence. International growth will be important for the New Group for a variety of reasons: Sufficient size must be attained to compete effectively for market share in growth markets. Being active in a number of markets offers more stable growth and earnings, since different geographical markets develop at varying rates and encounter differing business cycles. Geographical diversification creates higher capacity utilisation, since machinery and equipment may be relocated among countries. The New Group is expected to work primarily in line with the following financial objectives: Operating margin before depreciation will exceed an average of 30% over a business cycle. The equity to assets ratio will exceed 50%. The debt to equity ratio (gearing) will not exceed 50%. 15

20 The New Group s potential to meet these objectives depends on factors such as demand in the machinery rental industry and on the New Group s ability to retain its market position, as well as effectively using its rental portfolio, effectively financing new investments and the ability to realise synergies. Concerning risk factors, please see section 5.14 of Ramirent Plc s Prospectus. Market Worldwide, the market for the rental of machinery and equipment to the construction and industrial sector is showing higher growth than overall sales of machinery and equipment. This is largely attributable to customers seeking higher flexibility and reductions in tied-up capital, leading to higher demand for rental services. Industry analysts estimate that the global market for machinery and equipment rentals amounts to about EUR 55 billion, of which the U.S. market accounts for more than one third and the European market for a little more than 20%. Ramirent estimates that European market growth over the past two decades varied from 5% to 8% annually, and there are factors indicating that, in the longer term, growth has the potential to continue to exceed overall economic growth. Ramirent estimates that the Nordic market for machinery and equipment rentals amounts to almost EUR 1.4 billion. The Swedish market is estimated to total approximately EUR 650 million, making it the largest in the Nordic region. The Norwegian and Danish markets are each believed to amount to some EUR 250 million, and are thus individually slightly larger than the Finnish market, which is estimated at some EUR 200 million. Like the European market, the Nordic market has a good track record for growth over a protracted period and Ramirent estimates the average annual growth over the past two 16

21 decades was some 5%. In the Nordic market, the construction sector accounts for about 50% of value, with the industrial sector accounting for some 20%. The remainder is primarily attributable to sales to customers in the state and municipal sectors and to individuals. Market Trends Outsourcing machinery fleets One measure of the level of development of the machinery rental market in various countries is the share of total sales of machinery and equipment to machinery rental companies. This share is estimated to total some 40% in Sweden, with 30% in Denmark and Norway, and a little lower again in Finland. Eastern and Central European markets have a lower level of market maturity than the Nordic area and display substantially lower shares. For example, Ramirent s management estimates that the proportion of machinery and equipment sold to machinery rental companies is about 10% in the Baltic countries and Poland. This share is expected to rise in Europe generally, but especially in Eastern Europe as construction and industrial companies increasingly transfer their in-house machinery operations to machinery rental companies in an effort to reduce tied-up capital while offering higher availability and superior service. This trend is expected to have a long-term positive impact on the machinery rental industry. Construction companies represent the key customer group for customers in the machinery rental sector. These companies represent a substantial share of market growth, because of the change in their approach to machinery and equipment operations in recent years. The demand for lower tied-up capital and higher efficiency has prompted greater interest in renting machinery and equipment, as well as transferring a company s entire machinery operations to machinery rental companies. Parallel with the trend in the construction industry, higher demand has been noted from other customer groups such as the manufacturing and events industries, as well as municipalities and state administrations who have realised the benefits of renting. Greater consolidation The European machinery rental market was previously represented primarily by two types of suppliers, namely, small and frequently local machinery rental companies, and organisations in major construction companies with responsibility for equipment rentals. In pace with the emergence and growth of the market over the past 20 years, this structure has been consolidated in the hunt for size and cost advantage. In particular, the largest national players are establishing international market positions through acquisitions. French and British players have taken the lead in consolidation, but a similar trend is also noted in the Nordic market. Growth factors The primary driving force in the machinery rental market is customer demand for higher capital efficiency and cost effectiveness via, for example, reductions in labour costs, greater flexibility and superior service. Market growth in the machinery rental industry is also affected by: The percentage of players choosing to rent instead of owning machinery and equipment. Activity in the construction market, as well as among individuals and public sector customers. As a result of on-going consolidation, machinery rental companies have generally become larger and thus offer a broader machinery range and superior availability. Moreover, the major rental companies can provide added value to customers as a result of the economies of scale attained in the form of larger purchasing volumes, higher capacity utilisation and better service, thanks to specialist expertise. Combined, these factors have led to an increase in the percentage of players choosing to rent rather than investing in their own equipment. Consequently, the reduced demand witnessed during recent years as a result of an underlying, weak construction market has been offset by customers choosing to satisfy an increasing proportion of their needs by renting machinery and equipment rather than investing in their own. 17

22 18 MIKAEL AGRICOLA, CHURCH, HELSINKI

23 BOARD OF DIRECTORS REPORT Business Development in the Financial Year Ramirent estimates that the overall Nordic market for the machinery rental business was smaller in 2003 than it had been in the previous year. Particularly in the Oslo region in Norway the market weakened significantly. On the other hand, the machinery rental market increased in Eastern European countries. The rapid strengthening of the euro, especially against the Norwegian krona (the NOK weakened 15.5% against the EUR in 2003) and the Russian rouble and Polish zloty, strained the Group s net sales, profit, capital and reserves and key figures for The net sales of the Ramirent Group increased by 70.3% compared to the previous year. A significant part of the growth in net sales came from the companies in Scandinavia (Norway and Sweden) which were included in the previous year s figures only for three months. The net sales of Ramirent Scandinavia were EUR 94.7 million (26.8). Ramirent Europe also continued to grow strongly, with net sales increasing by 29.9% to EUR 20.8 million (15.7). Finnish operations contracted by 4.6% compared with 2002, totalling EUR 57.2 million (60.0). The operating profit derived from Finnish operations was EUR 10.3 million (11.6). The operating profit from Ramirent Scandinavia was EUR 6.1 million (2.9), while the operating profit from Ramirent Europe was EUR 2.8 million (1.9). In accordance with its strategy, the Ramirent Group focused strongly on growth and internationalisation in Ramirent Plc made a public tender offer to the shareholders of Altima AB (publ) on 10 December 2003, according to which Ramirent offered Altima s shareholders newly issued Ramirent shares for each Altima share. The offer period commenced on 22 December 2003 and expired on 19 January The more detailed terms and conditions of the offer and the conditions for implementation appear in Ramirent s prospectus concerning this matter. According to Ramirent s Board of Directors, the businesses of the companies (Ramirent and Altima) complement each other well and their combination will create one of the leading European machinery rental companies whose strong structure will support the continuation of international growth, particularly in Central and Eastern Europe. Changes in Group Structure Ramirent Plc s wholly owned subsidiary, Ramirent Hungary Berléti Kft, expanded its machinery rental business in Hungary by acquiring the total stock of Gepbazis Kft in May The company operates in the southern Hungarian town of Pécs, where it has four outlets. Ramirent intends to merge the rental businesses of Gepbazis Kft and Ramirent Hungary Berleti Kft and to extend its network of outlets throughout the whole of Hungary in the coming years. Ramirent founded a Ukrainian subsidiary Ramirent Ukraine Ltd at the end of Grou s Net Sales, Profit and Balance Sheet The Ramirent Group s net sales for 2003 totalled EUR million (101.5), an increase of 70.3% on the previous year. Other operating income was EUR 0.5 million (0.8). The Group s operating profit was EUR 19.3 million (16.4). Depreciation grew as a result of major investments to EUR 25.9 million (13.3). Operating profit before depreciation (operating margin) increased by 53.0%, totalling EUR 45.2 million (29.6). Operating profit increased by 17.7%, totalling EUR 19.3 million (16.4), while profit before appropriations and taxes totalled EUR 13.1 million (14.3). The profit after taxes and minority interests was EUR 10.5 million (9.5). The balance sheet total was EUR million (223.1). Earnings per share was EUR 1.58 (1.49) and return on investment 10.3% (13.3%). Capital Expenditure The Group s gross capital expenditure in non-current assets totalled EUR 32.2 million (112.8). Financing and Liquidity Net debt at the end of the year totalled EUR million (113.4) and gearing was 156.2% (160.0%). Interest-bearing debt totalled EUR million (121.1). The Group made substantial investments in 2003, financed mainly by cash flow financing and loans from financial institutions, and also by investment finance. The equity ratio was 31.6% (31.8%). The Group s liquidity was good during the year under review. 19

24 Increasing the share capital in deviation from the shareholders pre-emptive subscription rights The share capital was increased, in deviation from the shareholders pre-emptive subscription rights, by EUR 236, on the basis of the 1998 B and 2000 C option programs. Personnel The Group employed an average of 1,464 people (884). 510 employees (477) worked in domestic operations, while 942 (850) were employed in international operations. The growth in personnel was influenced by the business acquisitions made in Finland in the spring of 2002, the substantial investments made in international operations, and above all the acquisition of the business operations of Bautas. Outlook for 2004 The overall market in the Nordic countries is expected to remain the same or to grow slightly compared with In the Eastern European countries the overall market is expected to continue to grow. Due to the Altima transaction in particular, it is expected that the Ramirent Group s net sales will grow significantly in The Group s result for 2004 will be strained particularly in the first half of the year by the costs of integrating Altima into Ramirent. The synergies obtainable from the combination will have their full effect only on the results of Significant Events after the end of the Financial Year Ramirent Plc s Extraordinary General Meeting held on 13 January, 2004, approved the proposal of the Board of Directors to increase the company s share capital through a rights offering to Altima AB (publ). Ramirent s public tender offer was accepted to the extent that Ramirent controlled 94.62% of Altima s total shares and votes. Ramirent implemented the offer to Altima s shareholders and extended the acceptance period until 13 February On 19 February 2004, Ramirent controlled 98.39% of Altima s total shares and votes. Ramirent Plc s Board of Directors decided not to further extend the offer period. In addition, the Board decided to commence the redemption procedure for minority shareholders in order to redeem the remaining Altima shares as soon as possible. As expected, by a decision dated 2 February 2004, the Russian competition authority gave unconditional clearance for implementation of Ramirent s public tender offer to the shareholders of Altima AB (publ.). The changes in Ramirent s ownership shares were disclosed in stock exchange releases dated 23 January, 2004 and 26 January, After the close of the 2003 financial year, increases in Ramirent Plc s share capital were registered on 28 January, 2004 and 23 February, Thus, the company s fully paid share capital was EUR 10,749,542.45, divided into 12,782,903 shares. On 16 February, 2004, Ramirent Plc received notice from Thomas Tallberg of his intention to resign from membership of the company s Board of Directors with immediate effect. Board of Directors, President & CEO, and the Auditor The Annual General Meeting held on 24 April, 2003, elected the following Board members: Raimo Taivalkoski, Chairman, Thomas Tallberg, Vice Chairman (until 16 February, 2004), Erkki Norvio, Tuire Mannila and Eigil Flaathen. Erkki Norvio is the President and CEO. KPMG Wideri Oy Ab, a firm of authorised public accountants, was elected as the Auditor by the Annual General Meeting, with Solveig Törnroos-Huhtamäki, APA, as the principally responsible Auditor. Proposal of the Board on the Use of Distributable funds The Group s distributable funds amount to EUR 6,778,910. The parent company s distributable funds amount to EUR 15,792,298.16, of which the net profit for the year accounts for EUR 1,703, The Board of Directors proposes to the Annual General Meeting that a dividend of EUR 0.25 per share be distributed, making EUR 3,195, in total. The number of shares has been calculated as 12,782,903 shares, i.e. the number of shares with a right to dividend registered on February 23,

25 INCOME STATEMENT CONSOLIDATED Note (EUR 1000) (EUR 1000) NET SALES Other operating income Materials and services Personnel services Depreciation and writedown Other operating expenses OPERATING PROFIT Financial income and expenses PROFIT BEFORE MINORITY INTEREST AND TAXES Income taxes Minority interests NET PROFIT FOR THE YEAR

26 BALANCE SHEET CONSOLIDATED Note (EUR 1000) (EUR 1000) ASSETS NON-CURRENT ASSETS Intangible assets Tangible assets Investments Other investments 13, 14, TOTAL NON-CURRENT ASSETS CURRENT ASSETS Inventories Current receivables Trade receivables Other receivables Prepayments and accrued income Cash in hand and at the banks TOTAL CURRENT ASSETS TOTAL ASSETS

27 BALANCE SHEET CONSOLIDATED Note (EUR 1000) (EUR 1000) LIABILITIES CAPITAL AND RESERVES Share capital Share premium account Retained earnings Net profit for the year TOTAL CAPITAL AND RESERVES MINORITY INTERESTS CREDITORS Deferred tax Non-current liabilities Loans from financial institutions 22, 25, Pension loans 22, Other loans Current liabilities Loans from financial institutions 23, 25, Pension loans 24, Advances received 351 Trade payables Other liabilities Accruals and deferred income TOTAL CREDITORS TOTAL LIABILITIES

28 CASH FLOW STATEMENT CONSOLIDATED (EUR 1000) (EUR 1000) Cash flow from operating activities: Profit before minority interest and taxes Adjustments: Depreciation and writedown Other income and expenses, not involving payment Financial income and expenses Other adjustments Cash flow before change in net working capital Change in net working capital: Non interest-bearing short-term business receivables increase (-) / decrease (+) Inventories increase (-) / decrease (+) Non interest-bearing short-term debt increase (+) / decrease (-) Cash flow before financing activities and taxes Paid interests and payments of other business financing costs Interests received from business activities Direct taxes paid Cash flow from operating activities (A) Cash flow from investing activities: Investments in tangible and intangible assets Proceeds from sale of tangible and intangible assets Purchased shares of subsidiaries Cash flow from investing activities (B) Cash flow from financing activities: Paid share issue Raising of short-term loans Repayment of short-term loans Raising of long-term loans Repayment of long-term loans Dividends paid Cash flow from financing activities (C) Change in liquid assets, increase (+) / decrease (-) (A+B+C) Liquid assets at the beginning of the financial year Liquid assets at the end of the financial year

29 INCOME STATEMENT PARENT COMPANY Note (EUR 1000) (EUR 1000) NET SALES 1, Other operating income Materials and services Personnel services Depreciation and writedown Other operating expenses OPERATING PROFIT Financial income and expenses PROFIT BEFORE EXTRAORDINARY ITEMS Extraordinary items PROFIT BEFORE APPROPRIATIONS AND TAXES Appropriations Income taxes NET PROFIT FOR THE YEAR

30 BALANCE SHEET PARENT COMPANY Note (EUR 1000) (EUR 1000) ASSETS NON-CURRENT ASSETS Intangible assets Intangible rights Goodwill Other capitalized long-term expenditure Tangible assets Land and water Buildings Machinery and equipment Investments Holdings in Group companies 12, Other shares and holdings 13, TOTAL NON-CURRENT ASSETS CURRENT ASSETS Inventories Non-current receivables Receivables from Group companies Current receivables Trades receivables Receivables from Group companies Prepayments and accrued income Cash in hand and at the banks TOTAL CURRENT ASSETS TOTAL ASSETS