solar equity story...roll-out of sap ewm (extended warehouse management) has started. 6 business...

Solar Equity Story

Our three value drivers are growth, EBITA margin and net working capital

Investor presentation

Agenda

1. Value proposition and business development

2. Financial targets and strategic focus areas

3. Business update

4. The results we achieved in Q2 and H1 2018

5. Outlook 2018

6. Appendix – facts about Solar

2

Value proposition

Our strategic sourcing and services approach

3

EBITA

Increase

Value proposition

Customer segments

Core capabilities

Delivery model

Objectives

Installation Construction* Industry

Customer productivity

Digital

leadership

Sourcing

excellence

Services

excellence

Operational excellence

Growth

above market

Asset

productivity

Customer

productivity

Customer

satisfaction

* In our financial reporting “Construction” is a subsegment of “Installation”, covering medium to large renovation and construction installation projects.

Operational

excellence

• MAG45

• STI

• Solar Polaris

• BIMobject

• GenieBelt

• Minuba•HomeBob

•Viva Labs

• Solar Project

• Solar Plus

• Fastbox

• TCO• Solar Light

Customer segment

••own development,

acquisitions or

partnerships•

New business development driven through:

Business development

How we drive and accelerate business development

Digital leadership

Sourcing and services

Strategy

Financial targets and strategic focus areas

5

Following our strategy review we havechanged our long-term financial targets

Financial

ratiosFinancial targets*

Growth Core

business

We aim to generate profitable growth

above market levels

Growth Related

business

Organic growth of minimum 15% per

year

EBITA margin

Core business

Minimum 4% by 2020, corresponding to

a ROIC of minimum 15% after tax

Equity ratio 35-40%

Gearing

(NIBD/EBITDA)

1.5-2.5

Payout ratio 35-45%

* If the implementation of new accounting standards entails changes, the target will be recalculated.

Our three major strategic focus areas

● Strategic suppliers: We pursue growth opportunities inconcept sales.

● Industry focus: With industry sales being the most profitable of our main segments, we will continue to strengthen our focus on this business area.

● Operational excellence:We will continue to invest in productivity improvement in order to continuously grow the business and expand the services to our customers.

Quarterly Report Q2 2018

Update on our business activities within core business

Strategic suppliers:

● In Q2, we launched a new initiative to further expand and align our approach to concept sales across all our markets. This was kicked off with cross-country initiatives and continues in assigned working groups, each responsible for a specific product category.

● Their focus is to strengthen each concept for both near-term sales growth and strategic market positioning in each country as well as concept alignment and supplier consolidation across countries.

Industry focus:

● Our Scandinavian industry organisation has started to deliver results.

● With a Total Cost of Ownership (TCO) mindset, we are continually expanding our position by approaching new and existing customers with cross-border solutions and working with them to deliver tailored solutions for optimising their businesses.

Operational excellence:

● Moving parts of Material Planning to our Shared Services Centre in Poland.

● Roll-out of SAP eWM (extended Warehouse Management) has started.6

Business update


Continued value from related business and digital construction investments

Related business

● Integrated Supply: developing deep and long-term relationships with industry customers

● Climate & Energy: taking a solution approach to a strategic growth opportunity

● Competence Development: supporting tactical and strategic development of our key customers

▸ Continued focus on improving profitability while developing synergies with our core business

Digital construction

● Accelerating uptake of BIM in our market the last 12 months, led by modular builders

and large contractors, but also reaching large and medium-sized technical installation firms

● Increased focus from building owners due to significant savings on

construction and facility management as well as for regulatory compliance

● Satisfactory revenue and user growth across all our digital investments

● Clear value-adding roles for Solar, e.g. on digital sourcing and digital construction site logistics

● Solar CPH Summit with top European construction material suppliers in October

on the impact of digital construction on our value chain 7

Focus on improving performance and developing synergies


The results we achieved in Q2 2018

Organic growth, adjusted for number of working days

Organic growth of 1.6% adjusted for

number of working days

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

Q1 Q2 Q3 Q4 FY

2017 2018

8

Q2

2018

Q2

2017

Revenue, DKK million 2,744 2,684

Revenue growth, % 2.2 1.6

Adj. organic growth, % 1.6 7.4

Positive growth in Denmark and the Netherlands

Update on the installation segment:

● The slowdown we have seen in Scandinavia since Q4

2017 continued and we experienced negative growth

in Sweden and Norway. Growth in Denmark remained

flat during the quarter.

● However, the strong growth in the Netherlands and

Poland was sufficient to offset the negative growth in

Scandinavia.

Update on the industry segment:

● We saw continued industrial growth in our markets

apart from Sweden and Norway, resulting in organic

growth - especially in Denmark and MAG45, where

we continue to see double-digit growth.

● Sweden and Norway, in particular, saw negative

growth. In Norway, we saw the same pattern as in Q1:

the North Sea offshore industry and related industries

continue to improve but not sufficiently to offset the

decline within Utility. 9



DKK millionQ2 2018

Revenue

Q2 2018

Adj. org. growth

Installation 1,707 Approx. 0%

Industry 871 Approx. 8%

Other 166

Total 2,744 1.6%

Denmark 841 5.1%

Sweden 584 -5.2%

Norway 452 -3.8%

The Netherlands 668 3.2%

Other markets 223 19.6%

Eliminations -24

Group 2,744 1.6%

1.9% -0.2% 0.2%0.1% -0.1%

0.0% 1.9%

0%

1%

2%

3%

Q2 2017 COGS EOC Staff Debt. Depr. Q2 2018

EBITA margin

EBITA margin unchanged at 1.9% despite negative growth

in Norway and Sweden

10

● Negative impact on gross profit margin mainly

related to increased freight costs.

● Implemented cost reductions compensated for

decrease in gross profit margin.

Q2

2018

Q2

2017




Gross profit, DKK million 568 561

Gross profit margin 20.7 20.9

EBITA, DKK million 52 50

EBITA margin 1.9 1.9



EBITA amounted to DKK 62m for core business and DKK -10m for related business totalling DKK 52m



11

DKK million Revenue EBITAAdj. organic

growthEBITA margin

Q2 2018 2017 2018 2017 2018 2017 2018 2017

Core business 2,599 2,577 62 62 0.5% 7.4% 2.4% 2.4%

Related business 145 107 -10 -12 27.8% 7.9% -6.9% -11.2%

Total 2,744 2,684 52 50 1.6% 7.4% 1.9% 1.9%

2.1% -0.5%

0.2%

0.3% 0.0% 0.0% 2.1%

0%

1%

2%

3%

H1 2017 COGS EOC Staff Debt. Depr. H1 2018

EBITA margin

EBITA for core business was on par, while EBITA for

related business disappointed

12

H1

2018

H1

2017




Gross profit, DKK million 1,154 1,169

Gross profit margin 20.7 21.2

EBITA, DKK million 118 117

EBITA margin 2.1 2.1


The results we achieved in H1 2018

● Negative impact on gross profit margin due to

change in geographical mix, extraordinary write-

down on inventories and margin dilution in MAG45.

● Almost the entire decline in costs can be ascribed

to FX effect. However, MAG45 costs increased by

DKK 13m in order to generate growth both

organically and through the acquisition of Savone.

Restructuring in both STI and Solar Polaris to compensate for lack of revenue


The results we achieved in H1 2018

13

DKK million Revenue EBITAAdj. organic

growthEBITA margin

H1 2018 2017 2018 2017 2018 2017 2018 2017

Core business 5,276 5,302 136 136 2.1% 5.8% 2.6% 2.6%

Related business 296 220 -18 -19 28.8% - -6.1% -8.6%

Total 5,572 5,522 118 117 3.1% 5.8% 2.1% 2.1%

Negative growth in Sweden and Norway in Q2 impacted the development in receivables



-216

-39 25

-3

-13 -4 -250

-300

-250

-200

-150

-100

-50

0

Q1 2018 Oper.act.

Inv. act. Fin. act. Discont.Oper.

Other Q2 2018

DKK million

-3

49 8 -10

72 -155

-39

-60

-40

-20

0

20

40

60

80

100

120

140

Netprofit

Depr.,amort. &impair.

Tax &adj.

Inv. Rec. Liab. Oper.act.

DKK million

Cash flow Cash flow, operating activities

14

Net working capital percentage increased compared toQ2 2017 - gearing at 1.9 primarily impacted by investment in digital improvements



Net working capital average (NWC) Net interest-bearing debt (NIBD)

8,0%

8,5%

9,0%

9,5%

10,0%

10,5%

11,0%

11,5%

1.080

1.100

1.120

1.140

1.160

1.180

1.200

1.220

Q117 Q217 Q317 Q417 Q118 Q218

DKK million

NWC NWC/Revenue LTM

0,0

0,3

0,6

0,9

1,2

1,5

1,8

2,1

2,4

0

100

200

300

400

500

600

700

800

Q117 Q217 Q317 Q417 Q118 Q218

No. of times

DKK million

NIBD NIBD/EBITDA LTM 15

16

• We expect revenue of approx. DKK 11.4bn

corresponding to organic growth of approx. 4%.

Within core business we expect growth of approx.

3%, which is on par with or below the expected

market growth. Related business is expected to show

growth of approx. 25%.

• If the current exchange rates remain unchanged this

will have a negative impact on core business of close

to DKK 100m on revenue and approx. DKK 4m on

EBITA.

• For core business we increase our EBITA

expectations from approx. DKK 365m to approx.

DKK 375m.

• For related business our expectations in terms of

revenue are unchanged. However, we lower our

EBITA expectations from approx. DKK -20m to

approx. DKK -30m.

DKK million Core Related Group

2017 publ. 12.01.2018 309 -45 264

Divestments AT & BE 31 - 31

2017, continuing op. 340 -45 295

Overhead costs -10 - -10

Planned improvements 35 25 60

2018 guidance publ.

09.02.2018365 -20 345

Impact from cost-

reducing initiatives10 - 10

Impact from lower

revenue and gross

profit

- -10 -10

2018 guidance,

updated375 -30 345


Outlook 2018

We reconfirm our guidance

Appendix

Facts about Solar

Solar Group at a glance

We draw on nearly 100 years of experience and knowhow

1919Founded in 1919

1953Listed on the stock

exchange since 1953

DKK 11.1bnDKK 11.1bn in revenue and

EBITA of DKK 295m in 2017

CustomersA lot of close customer

relationships in our markets

>50%E-business share

WarehousesStrategically placed

central warehouses

215,000Approximately 215,000

articles in stock

3,000Approx. 3,000 people

18

Our identity

We strive to improve our customers’ businesses

A leading sourcing and services company mainly within:

Electrical

componentsHeating Plumbing Ventilation

19

Solar’s core business areas:

Electrical, heating and plumbing, and ventilation technologies

LightingInstallation Cables IndustryMarine &

Offshore

Heating, Water

& Sanitation

VentilationSecurityCommunication Renewable

energy

20

Solar’s core business

delivers products and solutions within:

Utility

and

infrastructure

Residential and

Commercial buildings

Industry Public sectorMarine &

Offshore

21

We offer a flexibledistribution setup

Solar’s core business

Optimal supply to our customers

● Day delivery

● Night delivery

● Delivery on worksite

● Delivery at company

address

● Pick-up

● Fastbox*

● Order via e-business before 6

PM and receive before 7 AM*

● We have a 97% delivery

success rate

● We perform extensive quality

control in our operation

Poland

Norway

Sweden

Denmark

The Netherlands

We work while

you sleep

* Electrical, heating and plumbing components

Solar Fastbox concept

At work site within an hour

● With Solar Fastbox

● We make life easier for our customers

● Increase productivity

● Save time and transportation costs

● Solar Fastbox at customer work site within an hour

23

How we serve our customers

Everything starts with the customer

Customer channels

● Webshop

● Mobile

● Direct online connection

(EDI)

● Direct sales

● Drive-ins

● Competence centres

Sales concepts

● Solar Plus

● Solar Light

● Solar Industry Cables

● Solar Blue Energy

Solar Services

● Sales services

● Ordering services

● Delivery and operational

services

● Education and

competence services

24

We work with our customers

Sourcing and services

How we work

● to support them in running their businesses more efficiently.

● to bundle their spend and improve their sourcing.

● to create the best offer and to proactively develop alternatives.

● to raise their productivity, optimise transportation and minimise

required inventory.

● to improve their employees’ skills and efficiency.

26

MAG45’s value proposition - TCO reduction

Integrated supply is an integral approach to optimising the TCO

of tail supply chain in the sourcing, logistics and processes areas

Supplier management and consolidation

Item cost reduction

Technical engineering support

Improve production uptime

Increase item availability

Reduction of inventory value

Supporting process excellence

Reduce process complexity

Single point of contact (on-site)

Solar is listed on Nasdaq Copenhagen

and has a majority of long term investors

Distribution of share capital and votes

as at 30 June 2018 in percent

Holdings of 5% or more of share capital Share capital Votes

The Fund of 20 December,

Vejen, Denmark16.0% 58.1%

RWC Asset Management LLP,

London, England11.9% 5.8%

Chr. Augustinus Fabrikker A/S,

Copenhagen, Denmark10.6% 5.2%

Nordea Funds Oy, Danish Branch,*

Copenhagen, Denmark10.2% <5%

Solar A/S,

Vejen, Denmark5.8% 2.8%

27*Cf. company announcement no. 15 2018, dated 9 July 2018, which is the latest public information.

solar equity story...roll-out of sap ewm (extended warehouse management) has started. 6 business...

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