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
Quarterly Report Q2 2018
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
Quarterly Report Q2 2018
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
Quarterly Report Q2 2018
The results we achieved in Q2 2018
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
Revenue, DKK million 2,744 2,684
Revenue growth, % 2.2 1.6
Adj. organic growth, % 1.6 7.4
Gross profit, DKK million 568 561
Gross profit margin 20.7 20.9
EBITA, DKK million 52 50
EBITA margin 1.9 1.9
Quarterly Report Q2 2018
The results we achieved in Q2 2018
EBITA amounted to DKK 62m for core business and DKK -10m for related business totalling DKK 52m
Quarterly Report Q2 2018
The results we achieved in Q2 2018
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
Revenue, DKK million 5,572 5,522
Revenue growth, % 0.9 7.4
Adj. organic growth, % 3.1 5.8
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
Quarterly Report Q2 2018
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
Quarterly Report Q2 2018
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
Quarterly Report Q2 2018
The results we achieved in Q2 2018
-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
Quarterly Report Q2 2018
The results we achieved in Q2 2018
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
Quarterly Report Q2 2018
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.