Railcare Group — Interim / Quarterly Report 2018

Feb 21, 2019

Year-end report 2018

Fourth quarter

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Full-year 2018, January – December 2018

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Significant events in the fourth quarter

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г піансіаі биншіаг у
Amounts in SEK million. unless otherwise stated	Oct-Dec 2018	Oct-Dec 2017	full-year 2018	full-year 2017
Net sales	78.7	86.9	270.1	292.6
Operating profit/loss (EBIT)	2.2	7.4	1.5	16.7
Operating margin, $%$	2.8	8.6	0.6	5.7
Net profit/loss for the period	0.3	4.8	$-1.4$	9.0
Equity/assets ratio, $%$	32.3	31.7	32.3	31.7
Earnings per share after dilution, SEK	0.02	0.20	$-0.06$	0.39

CEO's comments

During the fourth quarter of 2018, we achieved a pre-tax profit of SEK 0.9 million and a turnover of SEK 78.7 million, which gives a margin of 1.1%. During the last quarter of the year, we have seen positive trend changes in the various segments in the form of new contracts and increased call-offs and a new innovation for our machine fleet.

In comparison with the fourth quarter of the previous year, we report lower volume and earnings, mainly due to the sale of a Railvac 16 000 to Norway last year.

In the Construction Sweden segment, we had normal utilisation with cable handling until mid-November, before starting with the snow removal in accordance with our contract with Trafikverket. The snow removal contract applies to the following areas, Stockholm, Gothenburg and Hallsberg, however some of the machines have also been used in other areas with snow, such as Östersund and Boden. With regards to contracts, a framework agreement has been signed with Trafikverket. The authority is planning for a large amount of track work as a result of the government's predetermined national plan and applies to projects throughout Sweden. The framework agreement is strategically important for Railcare as we see that it can provide significant utilisation of our machines and resources for the next coming years. It also means that we now have the opportunity, together with Trafikverket, to optimise our machines whilst working together on the implementation of the planned track works.

The transport project for Kaunis Iron is going according to plan and we have now driven over 200 transports of iron ore since the beginning of August. This creates a good utilisation for us during the winter months, and our five-year agreement also provides stability, growth and profitability for the Transport Scandinavia segment. Other parts of the segment have also performed well with the rental of machines for the snow contract, along with other transport contracts. I am also pleased that our train license has been extended for the fourth quarter by five years after the audit by the Swedish Transport Agency (Sw: Transportstyrelsen).

Construction Abroad has experienced lower volumes in the UK as a result of Network Rail's funding for CP5 diminishing, burdening the segment throughout the year. However, from October we have seen an increase in orders and during the quarter we have completed projects for three of the biggest routes, London North East and East Midlands (LNE), London North West (LNW) and Scotland. At present, we have four English-adapted machines in the UK. From 1st April this year, Network Rail will begin its new five-year business plan, CP6. In October we rented a machine to Norway until the ground frost appeared. In 2019 we will again rent one of the Railvac machines to Norway during the period of May to October. Of course, we closely follow the development of the Brexit issue and prepare ourselves for the various scenarios, but uncertainty remains high.

In the Machine Sales segment, we were pleased to receive an order from Infranord to build five new generator wagons, for delivery in 2019 and 2020. Which gives profitability and growth for the segment, whilst increasing the work for workshop in Skelleftehamn. Continued sales development of the export market is ongoing, and the company has sent several quotes around the world. Within the segment, we also proceed with spare part sales to North America.

Railcare likes to be at the forefront of new innovative solutions for the railway's many challenges. On 18 February 2019, we presented our plans to manufacture an emission-free battery powered MPV, Multi Purpose Vehicle. An MPV is a working vehicle with versatile use in rail maintenance. The development is made by the mining equipment company Epiroc. We can share their development platform and also become their first OEM partner. Thanks to this collaboration, we are at the forefront of the development of railway machines with this new exciting battery technology, which enables us to develop the first prototype of a battery-powered MPV in 2019. Signifying that we will have a new generation of working vehicle with a sustained or better productivity, in a time where the focus on environment, sustainability, and work environment is high.

With a moderate year behind us, we enter 2019 with great enthusiasm. We look forward to working with projects from new and existing customers and with the rail investments being implemented in our home markets for several years to come. Naturally, we continue with our innovative technology development, which gives Railcare a competitive advantage.

Daniel Öholm CEO

Financial summary – Railcare Group

Net sales

Operating expenses

Operating profit

Taxes

Net profit/loss for the period

Cash flow

to higher net sales in the third quarter of 2017, more capital was tied up in accounts receivable, with payment of those receivables being received in the fourth quarter. The Company made larger investments during the fourth quarter of 2018, SEK 10.7 million, compared with SEK 2.4 million in the corresponding period in 2017. This is explained by an investment in two Ballast Feeder wagons for the Swedish market having begun in the fourth quarter of 2018, in contrast with the corresponding quarter in 2017, when no major investments were carried out. The lower operating profit also impacted cash flow negatively.

To some extent, the decrease described above, was offset by financing activities, which generated an inflow of SEK 4.4 million in the fourth quarter of 2018, compared with an outflow of SEK 13.4 million in fourth quarter of 2017. This is explained by a greater reduction in the overdraft facility in the fourth quarter of 2017, with the proceeds from a Railvac delivery having been received then, while new borrowing was higher in 2018 to finance the Ballast Feeder wagons.

Cash flow for full-year 2018 amounted to an outflow of SEK 11.7 million compared with an outflow of SEK 2.2 million in the corresponding period in the preceding year. Disregarding the lower operating profit for 2018, the more substantial differences in cash flow are attributable to investment and financing activities. During 2018, the Company had fewer investment projects, which also affected cash flow from financing activities through reduced borrowing. Dividends paid to shareholders in 2018 were SEK 11.2 million lower than in 2017, also affecting cash flow from financing activities.

Equity/assets ratio

According to Railcare's financial targets, the equity/assets ratio should amount to at least 25 per cent. The equity/assets ratio at the end of the period was 32.3 per cent, compared with 31.7 per cent on 31 December 2017.

Employees

The number of employees in Railcare as of 31 December 2018 was 131, compared with 124 on 31 December 2017. The increase is mainly attributable to the commencement of the project for Kaunis Iron.

Financial summary - business segments

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

Construction Sweden

Net sales within Construction Sweden decreased by 17.2 per cent in the fourth quarter of 2018 compared with the corresponding period in the preceding year and amounted to SEK 37.4 million (45.2). Profit after financial items decreased compared with the previous vear and amounted to SEK 3.6 million (11.8).

The Company has had a number of cable management projects in this segment in preparation for track replacements scheduled for 2019. From mid-November 2018, the Company has been engaged in snow removal projects for the Swedish Transport Administration.

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

Net sales increased by 5.5 per cent over full-year 2018, compared with the corresponding period in the preceding year and amounted to SEK 144.5 million (137.0). Profit after financial items increased compared with the previous vear and amounted to SEK 21.7 million (20.5).

The Swedish Transport Administration's plans include five track replacements in 2019 and eight in 2020. Railcare's organisation is dimensioned for a higher order volume than seen during most of 2018, and the Company intend to maintain a high degree of flexibility to meet increasing demand for delivery capacity.

Amounts in SEK thousands. unless otherwise stated	Oct-Dec 2018	Oct-Dec 2017	Change	full-year 2018	full-year 2017	Change
Net sales	37,411	45.161	$-7,750$	144.473	136,997	7,476
Profit/loss after financial items	3,602	11,772	-8,170	21,697	20.525	1,172
Net margin, %	9.6	26.1	$-16.4$	15.0	15.0	0.0

Key financial ratios and figures - Construction Sweden

Construction Abroad

Net sales in Construction Abroad decreased by 30.4 per cent in the fourth quarter of 2018 compared with the corresponding quarter in the preceding year. Net sales amounted to SEK 14.4 million (20.7). The loss after financial items amounted to SEK 2.3 million (1.5). The decrease in net sales and earnings is due to the volume decline in the UK.

Net sales decreased by 33.9 per cent in full-year 2018 compared with the corresponding period in the preceding year and amounted to SEK 49.6 million (75.1). The loss after financial items decreased compared with the previous vear and amounted to SEK 12.9 million (5.7).

Key financial ratios and figures - Construction Abroad

Amounts in SEK thousands. unless otherwise stated	Oct-Dec 2018	Oct-Dec 2017	Change	full-year 2018	full-year 2017	Change
Net sales	14.440	20.742	$-6.302$	49,631	75,112	$-25,480$
Profit/loss after financial items	$-2,344$	-1.460	$-884$	$-12,851$	-5.675	$-7.176$
Net margin, %	$-16.2$	$-7.0$	$-9.2$	$-25.9$	$-7.6$	$-18.3$

Transport Scandinavia

Net sales in Transport Scandinavia increased by 75.7 per cent in the fourth quarter of 2018 compared with the corresponding quarter in the preceding year. Net sales amounted to SEK 35.8 million (20.4). Profit after financial items amounted to SEK 1.9 million (loss 2.2).

The fourth quarter was stable for the Transport Scandinavia segment, with the Kaunis Iron project providing a good foundation. From mid-November 2018, Railcare's snow removal project for the Swedish Transport Administration has engaged a number of the segment's locomotives. In addition, the Company conducted a number of construction transport projects and had a normal level of utilisation in its workshops.

For the regular transport operations (excluding the Kaunis Iron project), sales amounted to SEK17.3 million (20.4).

Net sales increased by 15.3 per cent for full-year 2018 compared with the corresponding period in the preceding year and amounted to SEK 114.1 million (98.9). Profit after financial items decreased compared with the previous year and amounted to SEK 4.1 million (7.5). The decrease in profit is explained in Financial summary - Railcare Group, in the Operating profit/loss section.

Amounts in SEK thousands, unless otherwise stated	Oct-Dec 2018	Oct-Dec 2017	Change	full-year 2018	full-year 2017	Change
Net sales	35,822	20.392	15,430	114,057	98.886	15,171
Profit/loss after financial items	1.944	$-2.151$	4,095	$-4.124$	7.536	$-11,660$
Net margin, $%$	5.4	$-10.6$	16.0	$-3.6$	7.6	$-11.2$

Key financial ratios and figures - Transport Scandinavia

Machine Sales

Net sales in Machine Sales for the fourth quarter of 2018 amounted to SEK 1.5 million (17.6). The loss after financial items amounted to SEK 0.3 million $(profit 3.4).$

The decrease in both net sales, as well as profit/loss after financial items is attributable largely to the delivery of a Railvac machine to Norsk Jernbanedrift that took place in the fourth quarter of 2017. No machines were sold in 2018.

Net sales decreased by 69.5 per cent in full-year 2018 compared with the corresponding period in the preceding year and amounted to SEK 7.4 million (24.3). The loss after financial items decreased compared with the previous year and amounted to SEK 1.0 million (profit 2.2). For the principal explanation for decrease in 2018, please see the description of development in the fourth quarter.

Key financial ratios and figures - Machine Sales

Amounts in SEK thousands. unless otherwise stated	Oct-Dec 2018	Oct-Dec 2017	Change	full-year 2018	full-year 2017	Change
Net sales	1,508	17,551	$-16.043$	7.429	24,339	$-16,910$
Profit/loss after financial items	$-321$	3.360	$-3.681$	$-993$	2.150	$-3,143$
Net margin, %	$-21.3$	19.1	$-40.4$	$-13.4$	8.8	$-22.2$

Parent Company

Financial targets

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Dividend

Innovation & Design

Events after the period

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Annual General Meeting 2019

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

Shareholder structure

Ten largest shareholders 31 December 2018	Number of shares	Proportion of share capital and votes (%)
Norra Västerbottens Fastighets AB	2,521,335	11.1
Marklund family* through
companies	2,433,905	10.6
TREAC Aktiebolag	2,415,000	10.5
Dahlqvist family through companies	2,002,155	8.7
BNY Mellon NA, W9	989,421	4.3
Ålandsbanken AB	904,510	4.0
NTC IEDP AIF Clients S Non Treaty
30 % Account	789,374	3.4
Bernt Larsson	545,586	2.4
RBC Investor Services Bank S.A.,
W8IMY	523,089	2.3
Försäkringsbolaget Avanza Pension	518,364	2.3
Ten largest shareholders	13,642,739	59.6
Other shareholders	9,370,317	40.4
Total	23,013,056	100.0

Number of shareholders in Railcare Group AB as per 31 December 2018, according to Euroclear

2,372

* No single individual holds shares in excess of 10 per cent of the votes.

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. In November, Norrlandsfonden invoked conversion of half of its convertible debenture, with SEK 5 million thus being converted into 1,111,111 shares at the agreed price of SEK 4.50 per share. The share increase was registered with the Swedish Companies Registration Office on 19 November 2018.

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.

One of Railcare's home markets is the UK. The country's imminent withdrawal from the EU, Brexit, may affect Railcare's operations primarily because it will be more administratively burdensome to have foreign staff in the country and to import and export machines. In Railcare's assessment, demand for the Group's services will persist and, once new administrative routines are in place, the UK's exit from the EU will not have a significant impact on the Group's operations, earnings and financial position.

Transactions with related parties

Annual General Meeting 2018 resolved to increase the total remuneration to Board members to SEK 600,000 in Board fees. No resolution was taken to change the consultancy fees paid to the Deputy CEO for management work. During the year, no other 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.

Skelleftehamn, 21 February 2019 Railcare Group AB (publ) Board of Directors

This report has not been subject to review by the Company's auditors.

FINANCIAL REPORTS

FINANCIAL REPORTS

CONSOLIDATED SUMMARY STATEMENT OF COMPREHENSIVE INCOME

Amounts in SEK thousands Note	Oct-Dec 2018	Oct-Dec 2017	full-year 2018	full-year 2017
Net sales 3	78,674	86,871	270,147	292,579
Capitalised work for own account	1,246	$\mathbf{u}$	5,453	2,241
Other operating income	207	1,533	1,204	1,813
Total	80,127	88,415	276,804	296,633
Raw materials and consumables	$-22,703$	$-35,639$	$-70,532$	$-99,345$
Other external costs	$-19,669$	$-14,908$	$-71,272$	$-61,460$
Personnel costs	$-29,203$	$-23,606$	$-108,443$	$-92,886$
Depreciation and impairment of
tangible and intangible assets	$-6,116$	$-5,802$	-24,096	$-23,210$
Other operating expenses	$-254$	$-1,025$	$-918$	$-3,071$
Total operating expenses	$-77,945$	$-80,980$	$-275,261$	$-279,972$
Operating profit/loss (EBIT)	2,182	7,435	1,543	16,661
Financial income		20	29	49
Financial expenses	$-1,356$	$-783$	$-5,363$	$-4,982$
Net financial items	$-1,356$	$-763$	$-5,334$	$-4,933$
Share of profit after tax from associated companies reported
according to the equity method	105	88	184	231
Profit/loss before tax	931	6,760	$-3,607$	11,959
Income tax	-587	$-1,991$	2,188	$-2,969$
Net profit/loss for the period	344	4,769	$-1,419$	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	$-94$	181	425	218
Other comprehensive income for
the period, net after tax	$-94$	181	425	218
Total comprehensive income for
the period	250	4,950	$-994$	9,208

	Oct-Dec	Oct-Dec	full-year	full-year
Amounts in SEK	2018	2017	2018	2017
Earnings per share before dilution	0.0153	0.2177	$-0.0644$	0.4105
Earnings per share after dilution	0.0153	0.2028	$-0.0644$	0.3932
Average number of shares	22,421,269 21,901,945		22,032,843 21,901,945
Number of shares outstanding on the balance
sheet date	23,013,056 21,901,945		23,013,056 21,901,945

CONSOLIDATED SUMMARY STATEMENT OF FINANCIAL POSITION

Amounts in SEK thousands	Note 31 Dec 2018	31 Dec 2017
ASSETS
Non-current assets
Intangible assets
Capitalised development costs	2,502	3,194
Patent	501	449
Goodwill	3,796	3,681
Transportation licence	684	821
Total intangible assets	7,483	8,145
Tangible assets
Buildings and land	5,534	6,056
Locomotives and wagons	111,773	115,447
Mobile machinery	161,517	130,227
Vehicles	10,299	9,110
Equipment, tools, fixtures and fittings	5,385	5,053
Construction in progress	31,586	50,512
Total tangible assets	326,094	316,405
Financial non-current assets
Holdings reported according to the equity method	595	544
Deposits	658
Other non-current receivables	3,954
Total financial non-current assets	5,207	544
Total non-current assets	338,784	325,094
Current assets
Inventories
Raw materials and consumables	10,349	13,351
Total inventories	10,349	13,351
Current receivables
Accounts receivable	20,172	25,252
Current tax receivables	1,329	2,170
Other current receivables	8,271	9,893
Prepaid expenses and accrued income	10,184	8,673
Total current receivables	39,956	45,988
Cash and cash equivalents	24,081	35,656
Total current assets	74,386	94,995
TOTAL ASSETS	413,170	420,089

CONSOLIDATED SUMMARY STATEMENT OF FINANCIAL POSITION, cont.

Amounts in SEK thousands	Note	31 Dec 2018	31 Dec 2017
EQUITY
Share capital		9,435	8,980
Other capital provided		32,178	27,994
Reserves		1,314	889
Retained earnings (comprehensive income for the period included)		90,677	95,380
Total equity attributable to Parent Company shareholders		133,604	133,243
LIABILITIES
Non-current liabilities
Deferred tax liabilities		23,464	27,389
Convertible loans		4,563	8,690
Liabilities to credit institutions		127,135	125,262
Liability financial leasing agreements		14,856	15,317
Total non-current liabilities		170,018	176,658
Current liabilities
Liability financial leasing agreements		5,742	5,579
Liabilities to credit institutions		48,171	54,495
Accounts payable		26,551	23,849
Current tax liabilities		1,135	988
Other liabilities		4,462	4,994
Accrued expenses and deferred income		23,487	20,283
Total current liabilities		109,548	110,188
TOTAL EQUITY AND LIABILITIES		413,170	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					8,990	8,990
Other comprehensive income				218		218
Total comprehensive income				218	8,990	9,208
Transactions with shareholders
Bonus issue		219	$-219$
Dividend		$\overline{a}$			$-14,455$
Closing balance as per 31 December 2017		8,980	27,994	889	95,380	133,243
Opening balance as per 1 January 2018		8,980	27,994	889	95,380	133,243
Net profit/loss for the period					$-1,419$	$-1,419$
Other comprehensive income				425		425
Total comprehensive income				425	$-1,419$	$-994$
Transactions with shareholders
Conversion of debenture		456	4,184			4,640
Dividend					$-3,285$	$-3,285$
Closing balance as per 31 December 2018		9,435	32,178	1,314	90,677	133,604

CONSOLIDATED SUMMARY STATEMENT OF CASH FLOWS

		Oct-Dec	Oct-Dec	full-year	full-year
Amounts in SEK thousands	Note	2018	2017	2018	2017
Cash flow from operating activities
Operating profit/loss		2,182	7,435	1,543	16,661
Adjustment for non-cash items		3,990	6,876	24,112	25,661
Interest paid		$-1,272$	$-675$	$-4,951$	$-4,546$
Interest received			20	29	49
Income tax paid		2,892	638	$-639$	$-4,203$
Cash flow from operating activities		7.792	14,294	20,094	33,622
before changes in working capital
Cash flow from changes in working
capital
Increase/decrease in inventories		1,650	3,121	1,446	$-2,449$
Increase/decrease in operating
receivables		10,277	30,726	1,624	12,345
Increase/decrease in operating
liabilities		4,836	$-7,178$	4,875	615
Total changes in working capital		16,763	26,669	7.945	10.511
Cash flow from operating activities		24,555	40,963	28,039	44,133
Cash flow from investment activities
Investments in intangible assets		-99	$-106$	$-226$	$-368$
Investments in tangible assets		$-10,710$	$-2,439$	$-27,671$	$-42,898$
Investments in other financial non-
current assets				$-658$
Dividends from associated companies				133
Divestment of tangible assets			1,400	112	1,400
Cash flow from investment					$-41,866$
activities		$-10,809$	$-1,145$	$-28,310$
Cash flow from financing activities
Loans raised		15,000	9,300	20,220	38,700
Net change in bank overdraft facility		$-2,440$	$-12,435$
Amortisation of loans		$-8,131$	$-10,266$	$-28,354$	$-28,727$
Dividends paid				$-3,285$	$-14,455$
Cash flow from financing activities		4,429	$-13,401$	$-11,419$	$-4,482$
Cash flow for the period		18,175	26,417	$-11,690$	$-2,215$
Cash and cash equivalents at the
beginning of the period		5,997	9,039	35,656	37,784
Exchange rate difference in cash and
cash equivalents		$-91$	200	115	87
Cash and cash equivalents at the end
of the period		24,081	35,656	24,081	35,656

PARENT COMPANY SUMMARY INCOME STATEMENT FINANCIAL REPORTS

	Oct-Dec	Oct-Dec	full-year	full-year
Amounts in SEK thousands Note	2018	2017	2018	2017
Net sales	5,135	4,553	23,191	20,529
Other operating income	1	15	32	43
Total operating income	5,136	4,568	23,223	20,572
Operating expenses
Raw materials and consumables	$-141$		$-3,180$	$-2,623$
Other external costs	$-4,326$	$-6,640$	$-16,688$	$-21,103$
Personnel costs	$-2,683$	$-2,624$	$-10,400$	$-9,070$
Depreciation and impairment of tangible and	$-68$	$-64$	$-271$	$-238$
intangible assets
Other operating expenses	$-11$	$-1$	$-36$	$-58$
Total operating expenses	$-7,229$	$-9,329$	$-30,575$	$-33,092$
Profit from participations in associated companies			133
and jointly controlled companies
Operating loss	$-2,093$	$-4,761$	$-7,219$	$-12,520$
Profit from financial items
Profit from participations in Group companies	2,491		2,491	8,981
Other interest income and similar profit/loss items	209	109	593	407
Interest expenses and similar profit/loss items	$-153$	$-196$	$-721$	$-694$
Total profit/loss from financial items	2,547	$-87$	2,363	8,694
Profit/loss after financial items	454	$-4,848$	$-4,856$	$-3,826$
Appropriations	4,900	12,300	4,900	12,300
Tax on net profit/loss for the period	$-664$	$-1,744$	481	44
Net profit/loss for the period	4,690	5,708	525	8,518

PARENT COMPANY SUMMARY BALANCE SHEET

Amounts in SEK thousands Note	31 Dec 2018	31 Dec 2017
ASSETS
Intangible assets
Patents	501	449
Total intangible assets	501	449
Tangible assets
Equipment, tools, fixtures and fittings	179	276
Total tangible assets	179	276
Financial non-current assets
Participations in Group companies	34,236	34,236
Participations in associated companies	204	204
Deferred tax assets	294
Total financial non-current assets	34,734	34,440
Total non-current assets	35,414	35,165
Current assets
Current receivables
Accounts receivable	7	25
Receivables from Group companies	25,346	23,230
Current tax receivables	183	1,592
Other receivables	$\overline{2}$	266
Prepaid expenses and accrued income	1,053	1,733
Total current receivables	26,591	26,846
Cash and bank balances	738	13
Total current assets	27,329	26,859
TOTAL ASSETS	62,743	62,024

PARENT COMPANY SUMMARY BALANCE SHEET, cont.

Amounts in SEK thousands	Note	31 Dec 2018	31 Dec 2017
EQUITY AND LIABILITIES
Equity
Restricted equity
Share capital		9,435	8,980
Total restricted equity		9,435	8,980
Non-restricted equity
Share premium reserve		18,638	14,453
Retained earnings		5,232
Net profit/loss for the period		525	8,518
Total non-restricted equity		24,395	22,971
Total equity		33,830	31,951
Provisions
Deferred tax liabilities			288
Total provisions			288
Non-current liabilities
Convertible loans		4,563	8,690
Total non-current liabilities		4,563	8,690
Current liabilities
Accounts payable		1,301	1,880
Liabilities to Group companies		20,527	16,542
Other liabilities		323	184
Accrued expenses and deferred income		2,199	2,489
Total current liabilities		24,350	21,095
TOTAL EQUITY AND LIABILITIES		62,743	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 Skellefteå, 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 for 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 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 to be applied as of 1 January 2019. The new standard mainly affects the lessee's accounting and generally entails all leases currently reported as operating leases being reported in a manner similar to how financial leases are currently reported – that is, both an asset (corresponding to the right of use), as well as a financial liability (corresponding to future payment commitments) are reported. Leases with short maturities (less than 12 months) and leases for which the underlying asset is of lower value (less than USD 5,000) will be excluded and expensed on a straight-line basis over the term of the lease. 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.

On the transition to IFRS 16, Railcare intends to apply the modified and simple transition method with a certain adjustment of equity in the opening balance on 1 January 2019, since the right-of-use asset are reported as if the standard had been applied since the start date, but discounted by the Group's marginal borrowing rate on the first application date. Comparative figures will not be recalculated. Contracts previously reported as financial leases will continue to be reported as leases under IFRS 16, meaning that the new standard will primarily affect the Group with regard to leases for premises. Assets are expected to increase by a net SEK 40 million and liabilities by SEK 40 million. Although the effects on the income statement will not be significant, the new standard will have a certain positive effect on operating profit/loss (EBIT), since some of the leasing expenses will be allocated to interest expenses.

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.

		Oct-Dec 2018			Oct-Dec 2017
	Segment income	Sales between segments	Income from external customers	Segment income	Sales between segments	Income from external customers
Construction Sweden	37.411	3,317	34.094	45,161	8,660	36,501
Construction Abroad	14,440	1,978	12,462	20,742	3,625	17,117
Transport Scandinavia	35,819	4,847	30,972	20,392	4,662	15,730
Machine Sales	1,508	761	747	17,551	468	17,083
Group common	5,135	4.737	398	4,553	4,113	440
Total	94,313	15,640	78,674	108,399	21,528	86,871

railcane

		full-year 2018		full-year 2017
	Segment income	Sales between segments	Income from external customers	Segment income	Sales between segments	Income from external customers
Construction Sweden	144,473	14,665	129,807	136,997	16,069	120,928
Construction Abroad	49,631	10,431	39,200	75,112	10,642	64,470
Transport Scandinavia	114,057	17,873	96,184	98,886	14,239	84,647
Machine Sales	7.429	4.064	3,365	24,339	3.259	21,080
Group common	23,191	21,600	1,591	20,529	19,075	1,454
Total	338,781	68,634	270,147	355,863	63.284	292,579

Profit/loss after financial items

	Oct-Dec	Oct-Dec	full-year	full-year
	2018	2017	2018	2017
Construction Sweden	3,602	11,772	21,697	20,525
Construction Abroad	$-2,344$	$-1,460$	$-12,851$	$-5.675$
Transport Scandinavia	1.944	$-2,151$	$-4.124$	7,536
Machine Sales	$-321$	3,360	-993	2,150
Group common	$-2,055$	$-4,849$	$-7,520$	$-12,808$
Total	826	6,672	$-3,791$	11,728
Profit/loss after financial items	826	6,672	$-3,791$	11,728
Share of profit after tax from associated
companies reported according to the equity method	105	88	184	231
Profit/loss before tax	931	6,760	$-3,607$	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
	Oct-Dec	Oct-Dec	Oct-Dec	Oct-Dec	Oct-Dec	Oct-Dec	Oct-Dec	Oct-Dec
Segment	2018	2017	2018	2017	2018	2017	2018	2017
Construction Sweden	34,094	36,501	$\equiv$	٠		٠	34.094	36,501
Construction Abroad	12,149	17,116	$\overline{\phantom{0}}$	-	314	$\overline{\phantom{0}}$	12.462	17,117
Transport Scandinavia	25,171	10.671	1.588	2.588	4.214	2.471	30,973	15.730
Machine Sales	$\overline{\phantom{a}}$	12	747	17,071	$\sim$	$\overline{\phantom{0}}$	747	17.083
Group common	398	440	$\overline{\phantom{0}}$	۰.		$\overline{\phantom{0}}$	398	440
Total	71,812	64,741	2,335	19,659	4,528	2,471	78,674	86,871

	Income from services			Sales of goods		Leasing		Total
	full-year		full-year full-year	full-year	full-year	full-year		full-year full-year
Segment	2018	2017	2018	2017	2018	2017	2018	2017
Construction Sweden	129,807	119,880	۰.	1.049		$\overline{\phantom{0}}$	129.807	120,929
Construction Abroad	37,682	62,404	۰.	2,065	1,517	$\overline{\phantom{a}}$	39.199	64,470
Transport Scandinavia	74,276	49,615	5,815	8.252	16.093	26.780	96,184	84,647
Machine Sales		1.487	3.365	19,592			3.365	21,080
Group common	1,591	1,454	$\overline{\phantom{0}}$	-		$\overline{\phantom{a}}$	1,591	1,454
Total	243,356	234,841	9,180	30.958	17,610	26,780	270,147	292.579

KEY FINANCIAL RATIOS AND FIGURES, RAILCARE GROUP SUMMARY

Amounts in SEK thousands,	Oct-Dec	Oct-Dec	full-year	full-year
unless otherwise stated	2018	2017	2018	2017
Net sales	78,674	86,871	270,147	292,579
Sales growth, %	$-9.4$	$-19.7$	$-7.7$	$-17.1$
Operating profit/loss (EBIT)	2,182	7,435	1,543	16,661
Operating margin, $%$	2.8	8.6	0.6	5.7
Net profit/loss for the period	344	4,769	$-1,419$	8,990
Net financial items	$-1,356$	-763	$-5,334$	$-4,933$
Total assets	413,170	420,089	413,170	420,089
Equity/assets ratio, %	32.3	31.7	32.3	31.7
Key financial ratios and figures
per share, SEK
Earnings per share before dilution	0.02	0.22	$-0.06$	0.41
Earnings per share after dilution	0.02	0.20	$-0.06$	0.39
Equity per share	5.81	6.08	5.81	6.08
Dividend per share, SEK				$0.15*$

QUARTERLY DATA, RAILCARE GROUP SUMMARY FINANCIAL REPORTS

	Q 4	Q 3	Q 2	Q1	Q 4	Q 3	Q2	Q1	Q4
Amounts in SEK million	2018	2018	2018	2018	2017	2017	2017	2017	2016
Net sales	78.7	62.3	62.7	66.5	86.9	72.9	58.3	74.6	81.6
Capitalised work for own account	1.2	1.8	2.1	0.3	0.0	0.6	0.8	0.8	0.8
Other operating income	0.2	0.1	0.3	0.6	$1.5\,$	0.1	0.1	0.1	0.6
Total	80.1	64.1	65.1	67.5	88.4	73.5	59.2	75.4	82.9
Raw materials and consumables	$-22.7$	$-16.7$	$-15.2$	$-16.0$	$-35.6$	$-21.8$	$-22.2$	$-19.7$	$-31.1$
Other external costs	$-19.7$	$-18.9$	$-16.7$	$-16.0$	$-14.9$	$-16.2$	$-16.3$	$-14.1$	$-15.6$
Personnel costs	$-29.2$	$-26.9$	$-28.0$	$-24.3$	$-23.6$	$-21.1$	$-23.9$	$-24.2$	$-24.6$
Depreciation and impairment of tangible assets	$-6.1$	$-6.0$	$-6.0$	$-6.0$	$-5.8$	$-5.8$	$-5.9$	$-5.7$	$-5.6$
Other operating expenses	$-0.3$	$-0.2$	$-0.3$	$-0.2$	$-1.0$	$-1.7$	$-0.1$	$-0.2$	$-0.6$
Total operating expenses	$-77.9$	$-68.7$	$-66.1$	$-62.5$	$-81.0$	$-66.5$	$-68.4$	$-64.0$	$-77.5$
Operating profit/loss (EBIT)	2.2	$-4.6$	$-1.0$	5.0	7.4	7.0	$-9.2$	11.4	5.5
Financial income	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.3
Financial expenses	$-1.4$	$-1.3$	$-1.4$	$-1.4$	$-0.8$	$-1.7$	$-1.2$	$-1.3$	$-1.5$
Net financial items	$-1.4$	$-1.3$	$-1.4$	$-1.3$	$-0.8$	$-1.7$	$-1.2$	$-1.3$	$-1.2$
Share of profit after tax from
associated companies reported	0.1	0.0	0.0	0.1	0.1	0.0	0.1	0.1	0.0
according to the equity method
Profit/loss before tax	0.9	$-5.9$	$-2.4$	3.7	6.8	5.4	$-10.4$	10.2	4.3
Taxes	$-0.6$	1.2	2.2	$-0.7$	$-2.0$	$-1.1$	2.3	$-2.2$	$-1.2$
Net profit/loss for the period	0.3	$-4.7$	$-0.2$	3.1	4.8	4.2	$-8.0$	8.0	3.1
Equity/assets ratio, %	32.3	31.6	32.4	33.1	31.7	29.6	30.3	33.5	33.7

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 before tax, participations in the earnings of associated companies and financial items.	This key financial ratio shows the Company's profit/loss generated by operating activities.
Net financial items	Net financial items are calculated as	This key financial figure shows the net amount
	financial income less financial expenses.	resulting from the Company's financial activities.
Net margin	The net margin is calculated as income after financial items divided by net sales.	This key financial figure shows how much of the 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 number of shares outstanding at the end of the period.	This key financial figure shows the Company's net worth per share.
Sales growth, %	Calculated as the difference between net sales for the period and net sales for the	This key financial figure shows the Company's growth and its historical trend, contributing to
	preceding period, divided by net sales for the preceding period.	an understanding of the Company's development.
Operating margin, %	Calculated as operating income divided by net sales.	This key financial figure shows how much of the Company's profit/loss is generated by its operating activities.
Equity/assets ratio, %	Calculated as equity divided by total assets.	This key financial ratio shows the Company's financial position and its long-term ability to 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 the	This key financial figure shows the Company's
dilution, SEK	Parent Company's shareholders divided by the weighted average number of shares outstanding over the period.	earnings per share, regardless of any dilution effect from convertibles outstanding.
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 shares outstanding is adjusted for the dilution effect of all potential shares. The Parent Company has a category of potential common shares with a dilution effect:	earnings per share, regardless of any dilution effect from convertibles outstanding.
	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 fourth 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 21 February 2019.

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.