Railcare Group — Interim / Quarterly Report 2018

Nov 8, 2018

Interim report January–September 2018

Third quarter

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First nine months of the year

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Significant events during the period

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.
Amounts in SEK million. unless otherwise stated	Jul–Sep 2018	Jul–Sep 2017	Jan-Sep 2018	Jan-Sep 2017	Full-year 2017
Net sales	62.3	72.9	191.5	205.7	292.6
Operating profit/loss (EBIT)	$-4.6$	7.0	$-0.6$	9.2	16.7
Operating margin, $%$	$-7.4$	9.6	$-0.3$	4.5	5.7
Net profit/loss for the period	$-4.7$	4.2	$-1.8$	4.2	9.0
Equity/assets ratio, $%$	31.6	29.6	31.6	29.6	31.7
Earnings per share after dilution*, SEK	$-0.21$	0.18	$-0.08$	0.19	0.39

CEO's comments

For the third quarter of 2018, Railcare Group reported net sales of SEK 62.3 million, with an operating loss of SEK 4.6 million, resulting in a negative operating margin of 7.4 per cent.

The third quarter is usually the time of the year in which the Swedish operations are most busy. Unfortunately, that has not been the case in 2018. We experienced continued low utilisation in the UK and also in the regular operations in the Transport Scandinavia segment. The reason for the lower utilisation in regular transport is that the Swedish Transport Administration (Trafikverket) had only one track replacement project planned for the whole of 2018 and this plus the other transport operations were carried out earlier in the year. In general, order volumes from our railway construction customers were lower in the third quarter. Railcare's organisation and machines are designed and invested for our customers announced increases in both our home markets, Sweden and the UK. Trafikverket and Network Rail's new rail maintenance plans commence in 2019 and will continue for many years to come.

However, we are seeing an increase on the construction side and for our Railvac machines over the year, as we prepare for track replacements planned for 2019. Trafikverket's plans include five track replacements in 2019 and eight in 2020. Railcare's organisation is designed for a higher order volume than we have seen over the past 12-month period, and we intend to maintain a high degree of flexibility to meet the increasing demand for delivery capacity.

In our home market of Sweden, we have a good level of utilisation for all Railvac machines, which are currently engaged with preparatory work ahead of next year's track replacements. These preparations involve handling cables along the stretches of track to be replaced between Eskilstuna and Flen, Simonstorp and Strångsjö, Borås and Hillared, and between Mjölby and Gistad. In August, we had a period of fourteen days during which machines were relocated to new work sites. During the winter season, we will build two new Ballast Feeders for the Swedish market to manage the projects included in Trafikverket's plans. The machines will be ready by April 2019, when the ballast changing season begins. During the quarter, our lining operation performed a number of re-lining assignments for the railway in Sweden.

In the Construction Abroad segment, we are still encountering lower volumes in the UK where our customer, Network Rail, is nearing the end of its Control Period (CP5)¹. Network Rail's current focus is on planning prior to the start of Control Period (CP6), on 1 April 2019². We are attending customer planning meetings regarding our resources, enabling the customer's plans and requirements to become more detailed. I am pleased to confirm that our Ballast Feeder, which has been adapted for the UK market, is working on its first project in Aberdeen, Scotland. Elsewhere within the segment, an English adapted Railvac was on lease to Norway during the period May-October.

For the Transport Scandinavia segment, the third quarter was difficult with significantly lower volumes in regular transport to the construction projects. The

Daniel Öholm, CEO

$1$ https://www.networkrail.co.uk/who-we-are/publications-resources/our-plans-for-the-future/

$2$ https://www.networkrail.co.uk/who-we-are/publications-resources/strategicbusinessplan/

sales for regular transport operations (excluding Kaunis Iron project) amounted to SEK 19 million (34), the decrease in volume subsequently weakened the result. The fundamental individual reason, as described above, is that there have been no major maintenance projects, such as track replacements or major ballast cleaning projects, in which we are usually involved in various ways. Effective from mid-November, five locomotives will be utilised in our snow contract with the Trafikverket.

More positively, we began, during the quarter, transporting iron between Pitkäjärvi, Sweden, and Narvik, Norway, for Kaunis Iron. The project started with one transport per day from 13 August and increased to two per day from 24 September. This business contract generates stability, profitability and growth for Railcare. We have initially incurred start-up costs for the project, including establishing operations, training, recruitment, production planning, adaptation of wagon couplings, etc. The majority of these costs were accounted for in the third quarter of the year and we are now in normal production in accordance with the five-year contract.

On 31 August 2018, we experienced a track switching accident at the Pitkäjärvi railway yard, which is the transhipment terminal for the iron from Kaunis Iron's mine outside Pajala, Sweden. The only damage was to the locomotives and the entire accident was managed very well by our organisation with no stoppage in production. The two damaged locomotives are in the workshop for repair, however the iron is still being transported according to schedule. The entire incident is being treated as an insurance case and we have reserved SEK 0.45 million this quarter for the insurance excess cost.

We are now entering the final quarter of the year and, from mid-November, both our construction and transport operations will be engaged with our snow contracts until mid-March 2019. We are now in full production with our transport of iron for Kaunis Iron. We see future increases in projects in Sweden, including the track replacements planned for 2019 and 2020, as noted in the preparatory work we are currently conducting with our Railvac and its cable handling projects. In Construction Abroad, we are prepared, with the necessary resources, for the announced major CP6 railway initiative starting in the UK on 1 April 2019. We also have the possibility for the export of machines, making an additional contribution should an order be received.

Although the third quarter of 2018 was difficult for certain parts of the company, we are keeping our sights set on the future, with a lot happening and a continued progression within Railcare.

Daniel Öholm CEO

Financial summary – Railcare Group

Net sales

Operating expenses

Operating profit/loss

replacement projects compared with the corresponding period in 2017, and the segment incurring start-up costs for the Kaunis Iron project.

The operating loss (EBIT) increased by SEK 9.8 million to SEK 0.6 million in January-September 2018, compared with the operating profit of SEK 9.2 million for the corresponding period in 2017. The operating margin decreased from 4.5 per cent in January-September 2017 to a negative 0.3 per cent for the corresponding period in 2018.

Taxes

Reported tax for the third quarter of 2018 amounted to income of SEK 1.2 million (expense 1.1).

Tax reported for January to September 2018 amounted to an income of SEK 2.8 million (expense 1.0). Tax for 2018 has been affected positively by SEK 1.7 million by the revaluation of deferred tax liabilities due to a cut in the tax rate in Sweden, adopted in the second quarter of 2018.

Net profit/loss for the period

The loss for the third quarter of 2018 amounted to SEK 4.7 million (profit 4.2), corresponding to decline in earnings of SEK 8.9 million.

The loss for January-September 2018 amounted to SEK 1.8 million (profit 4.2), corresponding to a decline in earnings of SEK 6.0 million.

Cash flow

Cash flow in the third quarter of the year amounted to an outflow of SEK 1.2 million compared with an outflow of SEK 2.7 million in the corresponding period last year. The fact that the outflow was less in 2018, despite the lower earnings, is largely attributable to the better second quarter of the current year, which generated an inflow in the third quarter. In the corresponding period in 2017, the Company had a strong third quarter instead and tied up considerable liquidity in operating receivables at the end of the quarter.

An additional explanation is that the outflow from investment activities was lower in the third quarter of 2018 compared with the corresponding period last year, at SEK 6.8 million, compared with SEK 10.2 million in the corresponding period in 2017. In the third quarter of 2018, investments were primarily made in existing machines and in locomotive adaptations attributable to the transport project for Kaunis Iron.

Cash flow in January-September 2018 amounted to an outflow of SEK 29.9 million compared with an outflow of SEK 28.6 million in the corresponding period last year. The major differences in cash flow are from investing and financial activities. During 2018, we have had fewer investment projects, which also affected cash flow from financial activities through reduced borrowing. Dividends paid to shareholders in 2018 were SEK 11.2 million lower than in 2017, also affecting cash flow from financial activities.

Equity/assets ratio

Personnel

Financial summary - business segments

The segment's net sales also include internal sales between the segments.

Construction Sweden

Net sales within Construction Sweden increased by 8.6 per cent in the third quarter compared with the corresponding period last year and amounted to SEK 30.5 million (28.1). Profit after financial items decreased compared with the previous year and amounted to SEK 0.5 million (1.4).

Within the segment, the company have had a good level of utilisation for all Railvac machines in preparatory work ahead of next year's track replacements. In August, the company had a period of fourteen days during which machines were relocated to new work sites, which burdened earnings.

Culvert re-lining operations have been in progress in several locations on Sweden's railways.

Net sales increased by 16.6 per cent in the January-September compared with the corresponding period last year and amounted to SEK 107.1 million (91.8). Profit after financial items increased compared with the previous year and amounted to SEK 18.1 million (8.8).

Amounts in SEK thousands, unless otherwise stated	Jul–Sep 2018	Jul-Sep 2017	Change	Jan-Sep 2018	Jan-Sep 2017	Change
Net sales	30,478	28,074	2.404	107,061	91,834	15,227
Profit/loss after financial items	542	1.408	-866	18,095	8.752	9,343
Net margin, $%$	1.8	5.0	$-3.2$	16.9	9.5	7.4

Key financial ratios and figures - Construction Sweden

Construction Abroad

Net sales in Construction Abroad decreased by 29.9 per cent in the third quarter compared with the corresponding quarter last year. Net sales amounted to SEK 11.5 million (16.4). The loss after financial items amounted to SEK 3.4 million (1.7). The decrease in net sales and earnings is due to the volume decline in the UK.

Elsewhere within the segment, the company have had an English-adapted Railvac on lease to Norway from May to October.

Net sales decreased by 35.3 per cent in January-September compared with the corresponding period last year and amounted to SEK 35.2 million (54.4). The loss after financial items increased compared with the previous year and amounted to SEK 10.5 million (4.2).

Key financial ratios and figures - Construction Abroad

Amounts in SEK thousands. unless otherwise stated	Jul–Sep 2018	Jan-Sep 2017	Change	Jan-Sep 2018	Jan-Sep 2017	Change
Net sales	11,480	16,386	-4.906	35,192	54,369	$-19,177$
Loss after financial items	$-3.353$	$-1.745$	$-1.608$	$-10,507$	-4.215	$-6,292$
Net margin, $%$	$-29.2$	-10.6	$-18.6$	$-29.9$	$-7.8$	$-22.1$

Transport Scandinavia

Net sales in Transport Scandinavia decreased by 18.9 per cent in the third quarter compared with the corresponding quarter last year. Net sales amounted to SEK 27.9 million (34.3). The loss after financial items amounted to SEK 2.3 million $(profit 8.1).$

For the Transport Scandinavia segment, the third quarter was difficult with significantly lower volumes in regular transports to the construction projects. The predominate reason is that there have been no major maintenance projects, such as track replacements or major ballast projects. The sales for regular transport operations (excluding Kaunis Iron project) amounted to SEK 19,1 million (34,3) and the decrease in volume subsequently weakened the result.

During the quarter, the transport of iron for Kaunis Iron commenced between Pitkäjärvi and Narvik. Most of the start-up costs for the project, including setting up operations, training, recruitment, production planning and adaptation of wagon couplings were reported in the third quarter of the year.

On 31 August 2018, an accident occurred at the Pitkäjärvi railway yard. The two locomotives that were damaged are now in the workshop. The entire incident is being treated as an insurance case and SEK 450 thousand was reserved in the quarter for the insurance excess cost.

Net sales decreased by 0.3 per cent in January-September compared with the corresponding period last year and amounted to SEK 78.2 million (78.5). The loss after financial items increased compared with the previous year and amounted to SEK 6.1 million (profit 9.7). There are several reasons for the low earnings in 2018. The Company experienced a weak start to the year with high repair and maintenance costs due to the exceptionally cold and snowy winter. In the second quarter, Railcare incurred higher costs than planned for locomotive maintenance. In connection with repairs to its own locomotives, the Company rented replacement locomotives. In the third quarter, the Company incurred start-up costs for the five-year agreement with Kaunis Iron, and reserved costs for the above-mentioned track switching accident.

Amounts in SEK thousands, unless otherwise stated	Jul–Sep 2018	Jul–Sep 2017	Change	Jan-Sep 2018	Jan-Sep 2017	Change
Net sales	27,854	34.338	$-6.484$	78,235	78.494	$-259$
Profit/loss after financial items	$-2,281$	8.059	$-10,340$	$-6,068$	9.688	$-15,756$
Net margin, $%$	$-8.2$	23.5	$-31.7$	$-7.8$	12.3	$-20.1$

Key financial ratios and figures - Transport Scandinavia

Machine Sales

Net sales in Machine Sales for the third quarter of 2018 amounted to SEK 2.0 million (3.7). Profit after financial items amounted to SEK 0.1 million (loss 0.3).

Net sales decreased by 12.7 per cent in January-September compared with the corresponding period last year and amounted to SEK 5.9 million (6.8). The loss after financial items decreased compared with the previous year and amounted to SEK 0.7 million (1.2).

Key financial ratios and figures - Machine Sales

Amounts in SEK thousands. unless otherwise stated	Jul–Sep 2018	Jul-Sep 2017	Change	Jan-Sep 2018	Jan-Sep 2017	Change
Net sales	2,047	3,717	$-1.670$	5,923	6.788	$-865$
Profit/loss after financial items	81	$-268$	349	$-672$	$-1.210$	538
Net margin, %	4.0	$-7.2$	11.2	$-11.3$	$-17.8$	6.5

Parent Company

Financial targets

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Dividend

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Innovation & Design

Events after the period

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Annual General Meeting 2019

Railcare's Annual General Meeting 2019 will take place on Wednesday 8 May at 1:00 p.m. CET at the Company's premises at Näsuddsvägen 10, SE-932 32 Skelleftehamn, Sweden.

The Annual Report is expected to be available on Railcare's website, www.railcare.se, no later than three weeks prior to the Annual General Meeting.

Nomination Committee for Railcare Group AB's Annual General Meeting 2019

In consultation with the largest shareholders, the Chairman of the Board of Railcare Group AB has established a Nomination Committee for the Annual General Meeting in 2019. The Nomination Committee comprises Åke Elveros, appointed by Norra Västerbotten Fastigheters AB, Per-Martin Holmgren, appointed by TREAC AB, and Kjell Lindskog, appointed by the Marklund and Dahlqvist families. The Nomination Committee has appointed Åke Elveros as its chairman.

The Nomination Committee is tasked with submitting a proposal to the Annual General Meeting regarding the Chairman of the Board and other members of the Board of Directors, and regarding fees and other compensation to each of the Board members for their Board assignments. The Nomination Committee shall also submit a proposal regarding the election and remuneration of auditors. In addition, the Nomination Committee shall submit a proposal regarding the process for appointing a Nomination Committee in preparation for the Annual General Meeting in 2020.

Shareholders wishing to submit proposals to the Nomination Committee may do so by sending an e-mail to ir@railcare.se.

Shareholder structure

Ten largest shareholders 30 September 2018	Number of shares	Proportion of share capital and votes (%)
Norra Västerbottens Fastighets AB	2,421,335	11.1
TREAC Aktiebolag	2,200,000	10.0
Marklund family through companies	2,033,905	9.3
Dahlqvist family through companies	2,002,155	9.1
Ålandsbanken AB	720,510	3.3
Bernt Larsson	523,323	2.4
Avanza Pension insurance company	497,489	2.3
Emil Burén	400,000	1.8
Taaleri Nordic Value Equity Fund	340,832	$1.6\phantom{0}$
Nordnet Pensionsförsäkring AB	308,075	1.4
Ten largest shareholders	11,447,624	52.3
Other shareholders	10,454,321	47.7
Total	21.901.945	100.0

2,377

Number of shareholders in Railcare Group AB as per 30 September 2018, according to Euroclear

Sources: Euroclear and Railcare

Convertibles outstanding

In 2013, Railcare issued a convertible debenture with a nominal value of SEK 10 million. The holder is the Norrlandsfonden foundation. For more information, see Note K25 on page 52 of the Group's 2017 Annual Report. Norrlandsfonden has invoked conversion equivalent to SEK 5 million. See more under Events after the period.

Significant risks and uncertainties

A description of significant risks and uncertainties can be found in Railcare's 2017 Annual Report and in the prospectus prepared prior to the Company's listing on the Nasdaq Stockholm exchange in April 2018, which can be downloaded from www.railcare.se.

There has been no material change in significant risks and uncertainties since the publication of the Annual Report and prospectus.

Transactions with related parties

During the quarter, no significant changes have occurred, for the Group or the Parent Company, in their relations or transactions with related parties, compared with what is described in the 2017 Annual Report.

Attestation by the Board of Directors and CEO

Catharina Elmsäter-Svärd Ulf Marklund Anna Weiner Jiffer Chairman of the Board Board member, Deputy CEO Board member

Lars Stenlund Adam Ådin Board member Board member

Anders Westermark Daniel Öholm Board member CEO

Review report

Introduction

Scope of review

Conclusion

FINANCIAL REPORTS

FINANCIAL REPORTS

CONSOLIDATED SUMMARY STATEMENT OF COMPREHENSIVE INCOME

				Jan-Sep	Jan-Sep	Full-
Amounts in SEK thousands	Note	Jul-Sep 2018	Jul-Sep 2017	2018	2017	year 2017
Net sales	3	62,308	72,874	191,473	205,708	292,579
Capitalised work for own account		1,760	593	4,207	2,230	2,241
Other operating income		76	69	997	280	1,813
Total		64,144	73,536	196,677	208,218	296,633
Raw materials and consumables		$-16,708$	$-21,757$	-47,829	$-63,706$	-99,345
Other external costs		$-18,910$	$-16,161$	$-51,603$	$-46,552$	$-61,460$
Personnel costs		$-26,920$	$-21,118$	$-79,240$	$-69,280$	$-92,886$
Depreciation and impairment of tangible and
intangible assets		$-5,985$	-5,793	$-17,980$	$-17,408$	$-23,210$
Other operating expenses		$-224$	$-1,680$	-664	$-2,046$	$-3,071$
		$-68,747$		$-197,316$	-198,992
Total operating expenses			-66,509			279,972
Operating profit/loss (EBIT)		$-4,603$	7,027	-639	9,226	16,661
Financial income		5	1	29	29	49
Financial expenses		$-1,264$	$-1,691$	$-4,007$	$-4,199$	-4,982
Net financial items		$-1,259$	$-1,690$	$-3,978$	$-4,170$	$-4,933$
Share of profit/loss after tax from associated
companies reported according to the equity method		$-25$	19	79	143	231
Profit/loss before tax		$-5,887$	5,356	$-4,538$	5,199	11,959
Income tax		1,219	$-1,139$	2,775	-978	$-2,969$
Net profit/loss for the period		$-4,668$	4,217	$-1,763$	4,221	8,990
Other comprehensive income:
Items that may be reclassified to the
profit/loss for the period
Exchange rate differences from the translation of
foreign operations		$-265$	$-211$	519	37	218
Other comprehensive income for the period, net after tax		-265	-211	519	37	218
Total comprehensive income for the period		$-4,933$	4,006	$-1,244$	4,258	9,208

	Jul-Sep	Jul-Sep	Jan-Sep 2018	Jan-Sep 2017	Full-
Amounts in SEK	2018	2017			vear 2017
Earnings per share before dilution	$-0.2131$	0.1925	$-0.0805$	0.1927	0.4105
Earnings per share after dilution	$-0.2131$	0.1800	$-0.0805$	0.1904	0.3932

CONSOLIDATED SUMMARY STATEMENT OF FINANCIAL POSITION

Amounts in SEK thousands Note	30 Sep 2018	30 Sep 2017	31 Dec 2017
ASSETS
Non-current assets
Intangible assets
Capitalised development costs	2,675	3,199	3,194
Patent	445	446	449
Goodwill	3,806	3,600	3,681
Transportation licence	718	855	821
Total intangible assets	7,644	8,100	8,145
Tangible assets
Buildings and land	5,948	6,106	6,056
Locomotives and wagons	113,038	108,790	115,447
Mobile machinery	143,657	134,051	130,227
Vehicles	9,843	9,173	9,110
Equipment, tools, fixtures and fittings	4,963	4,669	5,053
Construction in progress	40,167	58,610	50,512
Total tangible assets	317,616	321,399	316,405
Financial non-current assets
Holdings reported according to the equity method	490	456	544
Deposits	658
Total financial non-current assets	1,148	456	544
Total non-current assets	326,408	329,955	325,094
Current assets
Inventories
Raw materials and consumables	14,643		13,351
Work in progress		11,994 4,478
Total inventories	14,643	16,472	13,351
Current receivables
Accounts receivable	36,106	51,167	25,252
Current tax receivables	7,576	3,318	2,170
Other current receivables	6,676	9,314	9,893
Prepaid expenses and accrued income	9,740	13,720	8,673
Total current receivables	60,098	77,519	45,988
Cash and cash equivalents	5,997	9,039	35,656
Total current assets	80,738	103,030	94,995
TOTAL ASSETS	407,146	432,985	420,089

CONSOLIDATED SUMMARY STATEMENT OF FINANCIAL POSITION, cont.

Amounts in SEK thousands	Note	30 Sep 2018	30 Sep 2017	31 Dec 2017
EQUITY
Share capital		8,980	8,980	8,980
Other capital provided		27,994	27,994	27,994
Reserves		1,408	708	889
Retained earnings (comprehensive income for the
period included)		90,332	90,611	95,380
Total equity attributable to Parent Company
shareholders		128,714	128,293	133,243
LIABILITIES
Non-current liabilities
Deferred tax liabilities		25,600	26,882	27,389
Convertible loans		9,018	8,581	8,690
Liabilities to credit institutions		123,390	155,102	125,262
Liability financial leasing agreements		16,161	19,508	15,317
Total non-current liabilities		174,169	210,073	176,658
Current liabilities
Liability financial leasing agreements		4,419	2,229	5,579
Liabilities to credit institutions		46,165	24,094	54,495
Bank overdraft facility		2,440	12,435
Accounts payable		21,441	20,788	23,849
Prepayments from customers			5,581
Current tax liabilities		1,871	114	988
Other liabilities		5,377	6,751	4,994
Accrued expenses and deferred income		22,550	22,627	20,283
Total current liabilities		104,263	94,619	110,188
TOTAL EQUITY AND LIABILITIES		407,146	432,985	420,089

CONSOLIDATED SUMMARY STATEMENT OF CHANGES IN EQUITY

Amounts in SEK thousands	Note	Share capital	Other capital provided	Reserves	Retained earnings (comprehensive income for the period included)	Total equity
Opening balance as per 1 January 2017		8,761	28,213	671	100,845	138,490
Net profit/loss for the period					4,221	4,221
Other comprehensive income				37		37
Total comprehensive income				37	4,221	4,258
Transactions with shareholders
Bonus issue		219	$-219$
Dividend					$-14,455$
Closing balance as per 30 September 2017		8,980	27,994	708	90,611	128,293
Opening balance as per 1 January 2018		8,980	27,994	889	95,380	133,243
Net profit/loss for the period					$-1,763$	$-1,763$
Other comprehensive income				519		519
Total comprehensive income				519	$-1,763$	$-1,244$
Transactions with shareholders
Dividend		$\blacksquare$			$-3,285$	$-3,285$
Closing balance as per 30 September 2018		8,980	27,994	1,408	90,332	128,714

CONSOLIDATED SUMMARY STATEMENT OF CASH FLOWS

	Jul-Sep	Jul-Sep	Jan-Sep	Jan-Sep	Full-year
Amounts in SEK thousands Note	2018	2017	2018	2017	2017
Cash flow from operating activities
Operating profit/loss	$-4,603$	7,027	$-639$	9,226	16,661
Adjustment for non-cash items	7,566	6,715	20,122	18,785	25,661
Interest paid
Interest received	$-1,155$ 5	$-1,581$	$-3,679$ 29	$-3,871$ 29	$-4,546$ 49
		1
Income tax paid	$-959$	$-2,107$	$-3,531$	$-4,841$	$-4,203$
Cash flow from operating activities before changes in working capital	854	10,055	12,302	19,328	33,622
Cash flow from changes in working
capital
Increase/decrease in inventories	1,042	$-1,919$	$-204$	$-5,570$	$-2,449$
Increase/decrease in operating
receivables	7,304	$-15,124$	$-8,653$	$-18,381$	12,345
Increase/decrease in operating
liabilities	$-1,841$	556	39	7,793	615
Total changes in working capital	6,505	$-16,487$	$-8,818$	$-16,158$	10,511
Cash flow from operating activities	7,359	$-6,432$	3,484	3,170	44,133
Cash flow from investment
activities
Investments in intangible assets	-44	-68	$-127$	$-262$	$-368$
Investments in tangible assets	$-6,228$	$-10,120$	$-16,961$	$-40,459$	$-42,898$
Investments in other financial non-
current assets	$-658$		$-658$
Dividends from associated companies			133
Divestment of tangible assets	112		112		1,400
Cash flow from investment	$-6,818$	$-10,188$	$-17,501$	$-40,721$	$-41,866$
activities
Cash flow from financing activities
Loans raised	5,220	8,004	5,220	29,400	38,700
Net change in bank overdraft facility	1,901	12,435	2,440	12,435
Amortisation of loans	$-8,868$	$-6,499$	$-20,223$	$-18,461$	$-28,727$
Dividends paid			$-3,285$	$-14,455$	$-14,455$
Cash flow from financing activities	$-1,747$	13,940	$-15,848$	8,919	$-4,482$
Cash flow for the period	$-1,206$	$-2,680$	$-29,865$	$-28,632$	$-2,215$
Cash and cash equivalents at the
beginning of the period	7,291	11,818	35,656	37,784	37,784
Exchange rate difference in cash and
cash equivalents	$-88$	$-99$	206	$-113$	87
Cash and cash equivalents at the end
of the period	5,997	9,039	5,997	9,039	35,656

PARENT COMPANY SUMMARY INCOME STATEMENT FINANCIAL REPORTS

Amounts in SEK	Jul-Sep	Jul-Sep	Jan-Sep	Jan-Sep	Full-year
Note thousands	2018	2017	2018	2017	2017
Net sales	5,014	4,489	18,056	15,976	20,529
Other operating income			31	28	43
Total operating income	5,014	4,489	18,087	16,004	20,572
Operating expenses
Raw materials and	$-10$	$-44$	$-3,039$	$-2,623$	$-2,623$
consumables
Other external costs	$-3,298$	$-4,590$	$-12,362$	$-14,463$	$-21,103$
Personnel costs	$-2,210$	$-1,801$	$-7,717$	$-6,446$	$-9,070$
Depreciation and impairment of tangible and	$-68$		$-203$	$-174$	$-238$
intangible assets		-58
Other operating expenses	$-10$	$-52$	$-25$	$-57$	$-58$
Total operating expenses	$-5,596$	$-6,545$	$-23,346$	$-23,763$	$-33,092$
Profit from participations
in associated companies
and jointly controlled			133
companies
Operating loss	$-582$	$-2,056$	$-5,126$	$-7,759$	$-12,520$
Profit from financial
items
Profit from participations				8,981	8,981
in Group companies
Other interest income and	149	118	384	298	407
similar profit/loss items
Interest expenses and	$-187$	$-179$	$-568$	$-498$	$-694$
similar profit/loss items
Total profit/loss from	$-38$	-61	$-184$	8,781	8,694
financial items
Profit/loss after financial
items	$-620$	$-2,117$	$-5,310$	1,022	$-3,826$
Appropriations					12,300
Tax on net profit/loss for
the period	114	469	1,145	1,788	44
Net profit/loss for the
period	$-506$	$-1,648$	$-4,165$	2,810	8,518

PARENT COMPANY SUMMARY BALANCE SHEET

Amounts in SEK thousands	30 Sep 2018 Note	30 Sep 2017	31 Dec 2017
ASSETS
Intangible assets
Patents	445	446	449
Total intangible assets	445	446	449
Tangible assets
Equipment, tools, fixtures and fittings	204	300	276
Total tangible assets	204	300	276
Financial non-current assets
Participations in Group companies	34,236	34,236	34,236
Participations in associated companies	204	204	204
Deferred tax assets	857	1,716	$\theta$
Total financial non-current assets	35,297	36,156	34,440
Total non-current assets	35,946	36,902	35,165
Current assets
Current receivables
Accounts receivable	38	138	25
Receivables from Group companies	751	300	23,230
Current tax receivables	3,183	1,327	1,592
Other receivables		22	266
Prepaid expenses and accrued income	866	1,601	1,733
Total current receivables	4,838	3,388	26,846
		13
Cash and bank balances	1		13
Total current assets	4,839	3,401	26,859
TOTAL ASSETS	40,785	40,303	62,024

PARENT COMPANY SUMMARY BALANCE SHEET, cont.

Amounts in SEK thousands Note	30 Sep 2018	30 Sep 2017	31 Dec 2017
EQUITY AND LIABILITIES
Equity
Restricted equity
Share capital	8,980	8,980	8,980
Total restricted equity	8,980	8,980	8,980
Non-restricted equity
Share premium reserve	14,453	14,453	14,453
Retained earnings	5,232	$\theta$	$\theta$
Net profit/loss for the period	$-4,165$	2,810	8,518
Total non-restricted equity	15,520	17,263	22,971
Total equity	24,500	26,243	31,951
Provisions
Deferred tax liabilities		312	288
Total provisions	$\bf{0}$	312	288
Non-current liabilities
Convertible loans	9.017	8,581	8,690
Total non-current liabilities	9,017	8,581	8,690
Current liabilities
Accounts payable	671	1,338	1,880
Bank overdraft facility	3,663	966
Liabilities to Group companies	520	252	16,542
Other liabilities	329	141	184
Accrued expenses and deferred income	2,085	2,470	2,489
Total current liabilities	7,268	5,167	21,095
TOTAL EQUITY AND LIABILITIES	40,785	40,303	62,024

railcane

NOTES

Note 1 General information

Railcare Group AB (publ) ("Railcare"), Reg. No. 556730-7813 is a Parent Company registered in Sweden and domiciled in Skelleftehamn, with the address Näsuddsvägen 10, SE-932 32 Skelleftehamn, Sweden.

Unless otherwise stated, all amounts are given in SEK thousands. Disclosures in parentheses pertain to the comparison year.

Note 2 Basis for preparation of statements

Railcare's consolidated accounts have been prepared in accordance with the Annual Accounts Act, recommendation RFR 1 Supplementary Accounting Rules for Groups from the Swedish Financial Reporting Board, International Financial Reporting Standards (IFRS) and the interpretations of the IFRS Interpretations Committee (IFRS IC) as adopted by the EU. This interim report has been prepared in accordance with IAS 34 Interim Financial Reporting and the Annual Accounts Act.

The accounts of the Parent Company have been prepared in accordance with the Annual Accounts Act and RFR 2 Accounting for legal entities from the Swedish Financial Reporting Board. The interim report for the Parent Company has been prepared in accordance with the Annual Accounts Act. Effective from 1 January 2018, the Parent Company also applies IFRS 9 and IFRS 15 as specified in RFR 2.

The same accounting and valuation principles have been applied as in the 2017 Annual Report with the exception of the introduction of IFRS 15 Revenue from contracts with customers and IFRS 9 Financial instruments. The Group has assessed the effects of the implementation of IFRS 15 and IFRS 9, concluding that the effects are marginal. Accordingly, the opening balances for 2018 have not been adjusted.

IFRS 16 Leasing will come into effect on 1 January 2019. With some exceptions, the new standard requires the assets and liabilities attributable to all leases, under which Railcare is the lessee, to be reported in the Balance Sheet. Leases where Railcare is the lessor are reported essentially in the same way as at present and are not affected by the introduction of IFRS 16. In 2017, the Group conducted an initial analysis to identify areas where there could potentially be differences. During 2018, work has continued, to identify and analyse the individual contracts and, ultimately, to commence application of a tool for calculating the effects of the implementation of IFRS 16 on the Balance Sheet and Income Statement. The continued work on assessing the effects has not altered the initial analysis as described in the 2017 Annual Report. The Group intends to apply the simplified transition method.

The fair value of financial assets and liabilities is estimated to correspond to book value.

Note 3 Segment information

Description of the segments and their principal activities:

Railcare's Group Management, comprising the Chief Executive Officer (CEO), Chief Financial Officer (CFO), Communications Manager and IR Manager, is the highest executive decision-making body in the Railcare Group and assesses the Group's financial position and earnings and makes strategic decisions. Company management has determined the operating segments based on the data processed by Group Management and used as a basis for allocating resources and assessing earnings.

Group Management has identified four reportable segments in the Group's operations:

Construction Sweden

Railway construction work involving machinery and personnel and renovation of glass-fibre lined culverts beneath railways, roads and industrial areas in Sweden.

Construction Abroad

Railway construction work involving machinery and personnel in countries other than Sweden, currently predominantly in the UK.

Transport Scandinavia

Special transports involving locomotives, wagons and personnel, as well as repair and upgrading services for locomotives and wagons performed in workshops.

Machine Sales

Sales of machines primarily outside Sweden, as well as marketing focused on new areas in which Railcare's construction services can be implemented.

The Group common item is used for reconciliation purposes and includes Group Management and other Group common services.

Although the Machine Sales segment does not meet the quantitative limits required for segments for which information is to be disclosed in accordance with IFRS 8, company management has determined that this segment should nonetheless be reported as it is monitored closely by Group Management as a possible area of growth and is expected to contribute significantly to consolidate income in the future.

Group Management primarily uses profit after financial items in assessing consolidated earnings.

Income

Sales between segments are conducted on market terms. Income from external customers reported to Group Management is valued in the same way as in the Consolidated statement of comprehensive income.

		Jul-Sep 2018		Jul-Sep 2017
	Segment income	Sales between segments	Income from external customers	Segment income	Sales between segments	Income from external customers
Construction Sweden	30,478	4,075	26,403	28,074	2,824	25,250
Construction Abroad	11,480	2,738	8,742	16,386	4,426	11,960
Transport Scandinavia	27,854	2,361	25,493	34,338	1,784	32,554
Machine Sales	2,047	772	1,275	3,717	941	2,776
Group common	5,014	4,618	396	4,489	4,158	331
Total	76,873	14,565	62,308	87,004	14,132	72,872

railcane

		Jan-Sep 2018			Jan-Sep 2017			Jan-Dec 2017
		Sales	Income from			Sales Income from			Sales Income from
	Segment income	between segments	external customers	Segment income	between segments	external customers	Segment income	between segments	external customers
Construction Sweden	107,061	11,348	95,713	91,834	7,409	84,426	136,997	16,069	120,928
Construction Abroad	35,192	8,453	26,738	54,369	7,017	47,352	75,112	10,642	64,470
Transport Scandinavia	78,235	13,026	65,209	78,494	9,577	68,917	98,886	14,239	84,647
Machine Sales	5,923	3,303	2,620	6,788	2,792	3,996	24,339	3,259	21,080
Group common	18,056	16,863	1,193	15,976	14,962	1,014	20,529	19,075	1,454
Total	244,467	52,994	191,473	247,461	41,756	205,706	355,863	63,284	292,579

Profit/loss after financial items

	Jul-Sep	Jul-Sep	Jan-Sep	Jan-Sep	Jan-Dec
	2018	2017	2018	2017	2017
Construction Sweden	542	1,408	18,095	8,752	20,525
Construction Abroad	$-3,353$	$-1.745$	$-10,507$	$-4,215$	$-5,675$
Transport Scandinavia	$-2,281$	8,059	$-6,068$	9,688	7,536
Machine Sales	81	$-268$	$-672$	$-1,210$	2,150
Group common	$-851$	$-2,117$	-5,465	$-7,959$	$-12,808$
Total	-5,862	5,337	$-4,617$	5,056	11,728

Profit/loss after financial items for the Group's operating segments are reconciled against consolidated profit/loss before tax in accordance with the following:

Share of profit/loss after tax from associated companies reported according to the equity method	-25	19	79	143	231
Profit/loss before tax	$-5.887$	5.356	$-4.538$	5.199	11,959

The Group's customers are both private and public players in the railway industry and vary according to area of operations. The Group's customers are largely recurring, and its customer relationships are long term. Most of the Group's income derives from the three segments Construction Sweden, Construction Abroad and Transport Scandinavia.

FINANCIAL REPORTS

		Income from services	Sales of goods		Leasing		Total
Segment	Jul-Sep 2018	Jul-Sep 2017	Jul-Sep 2018	Jul-Sep 2017	Jul-Sep 2018	Jul-Sep 2017	Jul-Sep 2018	Jul-Sep 2017
Construction Sweden	26,403	24,913	$\bf{0}$	337	$\bf{0}$	$\mathbf 0$	26,403	25,250
Construction Abroad	8,109	11,961	$\bf{0}$	$\bf{0}$	632	$\mathbf 0$	8,741	11,961
Transport Scandinavia	20,321	14,063	1,150	3,825	4,022	14,666	25,493	32,554
Machine Sales	108	1,448	1,167	1,327	$\mathbf 0$	$\mathbf 0$	1,275	2,776
Group common	396	332	$\bf{0}$	$\Omega$	$\Omega$	$\Omega$	396	332
Total	55,337	52,717	2,317	5,489	4,654	14,666	62,308	72,872

		Income from services		Sales of goods		Leasing		Total
Segment	Jan-Sep 2018	Jan-Sep 2017	Jan-Sep 2018	Jan-Sep 2017	Jan-Sep 2018	Jan-Sep 2017	Jan-Sep 2018	Jan-Sep 2017
Construction Sweden	95,713	83,377	$\mathbf{0}$	1.048	$\bf{0}$	$\bf{0}$	95,713	84,426
Construction Abroad	25,534	45,287	$\bf{0}$	2,065	1,203	$\bf{0}$	26,737	47,352
Transport Scandinavia	49,103	38,944	4,227	5,664	11,879	24,309	65,209	68,917
Machine Sales	108	1,474	2,512	2,522	$\mathbf 0$	$\mathbf{0}$	2,620	3,996
Group common	1.193	1.015	$\mathbf{0}$	$\bf{0}$	$\Omega$	$\Omega$	1.193	1,015
Total	171,651	170,097	6,739	11.299	13,082	24,309	191,473	205.705

railcane

KEY FINANCIAL RATIOS AND FIGURES, RAILCARE GROUP SUMMARY

Amounts in SEK thousands, unless otherwise stated	Jul-Sep 2018	Jul-Sep 2017	Jan-Sep 2018	Jan-Sep 2017	Full-year 2017
Net sales	62,308	72,874	191,473	205,708	292,579
Sales growth, %	$-14.5$	$-32.6$	$-6.9$	$-24.2$	$-17.1$
Operating profit/loss (EBIT)	$-4,603$	7,027	-639	9,226	16,661
Operating margin, $%$	$-7.4$	9.6	$-0.3$	4.5	5.7
Net profit/loss for the period	$-4,668$	4,217	$-1,763$	4,221	8,990
Net financial items	$-1,259$	$-1,690$	$-3,978$	$-4,170$	-4,933
Total assets	407,146	432,985	407,146	432,985	420,089
Equity/assets ratio, $%$	31.6	29.6	31.6	29.6	31.7
Key financial ratios and figures
per share, SEK
Earnings per share before dilution*	$-0.21$	0.19	$-0.08$	0.19	0.41
Earnings per share after dilution*	$-0.21$	0.18	$-0.08$	0.19	0.39
Equity per share	5.88	5.86	5.88	5.86	6.08
Dividend per share, SEK**					0.15

*) At the end of September 2017 a 5:1 share split was implemented, increasing the number of shares from

4,380,389 to 21,901,945. The comparative figures for earlier periods have been recalculated to achieve

comparability between the periods.

**) Approved by the Annual General Meeting of 25 April 2018

QUARTERLY DATA, RAILCARE GROUP SUMMARY FINANCIAL REPORTS

	Q3	Q2	Q 1	Q 4	Q3	Q2	Q 1	Q 4	Q3
Amounts in SEK million	2018	2018	2018	2017	2017	2017	2017	2016	2016
Net sales	62.3	62.7	66.5	86.9	72.9	58.3	74.6	81.6	108.2
Capitalised work for own	1.8	2.1	0.3	0.0	0.6	0.8	0.8	0.8	0.1
account
Other operating income	0.1	0.3	0.6	1.5	0.1	0.1	0.1	0.6	0.3
Total	64.1	65.1	67.5	88.4	73.5	59.2	75.4	82.9	108.6
Raw materials and consumables	$-16.7$	$-15.2$	$-16.0$	$-35.6$	$-21.8$	$-22.2$	$-19.7$	$-31.1$	$-33.1$
Other external costs	$-18.9$	$-16.7$	$-16.0$	$-14.9$	$-16.2$	$-16.3$	$-14.1$	$-15.6$	$-17.5$
Personnel costs	$-26.9$	$-28.0$	$-24.3$	$-23.6$	$-21.1$	$-23.9$	$-24.2$	$-24.6$	$-22.5$
Depreciation and
impairment	$-6.0$	$-6.0$	$-6.0$	$-5.8$	$-5.8$	$-5.9$	$-5.7$	$-5.6$	$-5.5$
of tangible assets
Other operating expenses	$-0.2$	$-0.3$	$-0.2$	$-1.0$	$-1.7$	-0.1	$-0.2$	$-0.6$	$-1.5$
Total operating expenses	$-68.7$	$-66.1$	$-62.5$	$-81.0$	$-66.5$	$-68.4$	$-64.0$	$-77.5$	$-80.1$
Operating profit/loss (EBIT)	$-4.6$	$-1.0$	5.0	7.4	7.0	$-9.2$	11.4	5.5	28.4
Financial income	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.3	0.1
Financial expenses	$-1.3$	$-1.4$	$-1.4$	$-0.8$	$-1.7$	$-1.2$	$-1.3$	$-1.5$	$-1.9$
Net financial items	$-1.3$	$-1.4$	$-1.3$	$-0.8$	$-1.7$	$-1.2$	$-1.3$	$-1.2$	$-1.7$
Share of profit after tax
from associated companies	0.0	0.0	0.1	0.1	0.0	0.1	0.1	0.0	0.0
reported according to the equity method
Profit/loss before tax	$-5.9$	$-2.4$	3.7	6.8	5.4	$-10.4$	10.2	4.3	26.7
Taxes	1.2	$2.2\,$	$-0.7$	$-2.0$	$-1.1$	2.3	$-2.2$	$-1.2$	$-5.8$
Net profit/loss for the period	$-4.7$	$-0.2$	3.1	4.8	4.2	$-8.0$	8.0	3.1	20.9
Equity/assets ratio, %	31.6	32.4	33.1	31.7	29.6	30.3	33.5	33.7	32.0

DEFINITIONS AND GLOSSARY

General	All amounts in tables are in SEK thousands unless otherwise stated. All values in parentheses are comparative figures for the corresponding period in the preceding year unless otherwise stated. Amounts in tables and other summaries have been rounded off individually. Accordingly, minor rounding differences can be found in totals.
Alternative key financial ratios		This interim report refers to a number of financial measures not defined in accordance with
and figures	IFRS, so-called alternative key financial ratios and figures. These key financial ratios and
	figures are used by Railcare to monitor and analyse the financial outcome of the Group's
	operations and its financial position. These alternative key financial ratios and figures are
	intended to supplement, not replace, the financial measures presented in accordance with IFRS. See definitions and further information below.
Key financial ratios and figures	Definition/calculation	Purpose
Operating profit/loss (EBIT)	Calculated as net profit/loss for the period	This key financial ratio shows the Company's
	before tax, participations in the earnings	profit/loss generated by operating activities.
	of associated companies and financial
	items.
Net financial items	Net financial items are calculated as	This key financial figure shows the net amount
	financial income less financial	resulting from the Company's financial
	expenses.	activities.
Net margin	The net margin is calculated as income	This key financial figure shows how much of the
	after financial items divided by net sales.	Company's earnings remain after all of its
		expenses, except for corporation tax, have been
		deducted.
Total assets	Calculated as the total of the Company's
	assets at the end of the period.
Equity per share, SEK	Calculated as equity divided by the	This key financial figure shows the Company's
	number of shares outstanding at the end	net worth per share.
	of the period.
Sales growth, %	Calculated as the difference between net	This key financial figure shows the Company's
	sales for the period and net sales for the	growth and its historical trend, contributing to
	preceding period, divided by net sales for	an understanding of the Company's
	the preceding period.	development.
Operating margin, %	Calculated as operating income divided by	This key financial figure shows how much of the
	net sales.	Company's profit/loss is generated by its
		operating activities.
Equity/assets ratio, %	Calculated as equity divided by total	This key financial ratio shows the Company's
		financial position and its long-term ability to
	assets.
		pay.
Dividend per share, SEK	Dividend per share approved by a General
	Meeting at which the Annual Report for
	the specified financial year is adopted.
Earnings per share before	Calculated as profit/loss attributable to	This key financial figure shows the Company's
dilution, SEK	the Parent Company's shareholders	earnings per share, regardless of any dilution
	divided by the weighted average number	effect from convertibles outstanding.
	of shares outstanding over the period.
Earnings per share after	To calculate earnings per share after	This key financial figure shows the Company's
dilution, SEK	dilution, the weighted average number of	earnings per share, regardless of any dilution
	shares outstanding is adjusted for the	effect from convertibles outstanding.
	dilution effect of all potential shares. The
	Parent Company has a category of
	potential common shares with a dilution
	effect: convertible debentures. The
	convertible debentures are assumed to
	have been converted into shares and the
	net profit is adjusted to eliminate interest
	expenses less the tax effect. Convertible
	debentures do not give rise to a dilution
	effect when the interest per share that
	may be received on conversion exceeds
	earnings per share before dilution.

Press releases in the third quarter of 2018

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Financial calendar

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About Railcare Group

RAILCARE GROUP AB (publ)

Railvac in 3D

For further information, please contact:

Daniel Öholm, CEO Telephone: +46 (0)70-528 01 83 E-mail: daniel.oholm@railcare.se

Sofie Dåversjö, Communications Manager Telephone: +46 (0)72-528 00 09 E-mail: sofie.daversjo@railcare.se

This information is information that Railcare Group AB is obliged to make public pursuant to the EU Market Abuse Regulation. The information was submitted for publication, through the agency of the contact person set out above, at 7:30 a.m. CET on 8 November 2018.

This document is essentially a translation of Swedish language original thereof. In the event of any discrepancies between this translation and the original Swedish document the latter shall be deemed correct.