QUARTERLY REPORT March 31, 2018

Transcription

1 QUARTERLY REPORT March 31, 2018

2 TABLE OF CONTENTS DEFINITIONS... 3 NOTICE... 4 CONSOLIDATED FINANCIAL STATEMENTS SUMMARY... 6 MANAGEMENT S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS... 9 APPENDIX : UNAUDITED FINANCIAL STATEMENTS _Toc

3 DEFINITIONS In this document: Company means LOXAM S.A.S., and we, us, our and our group refer to LOXAM S.A.S. and its consolidated subsidiaries, unless the context requires otherwise; Profit from ordinary operations means operating profit plus certain items disclosed separately under other income and expense, including a limited number of items, unusual, abnormal, and uncommon, with significant amounts. These items are disclosed separately in the income statement to make it easier to appreciate the Group s current operating performance; EBITDA means profit from ordinary operations plus depreciation and amortization of fixed assets; Free cash flow means EBITDA (before capital gains on fleet disposals) plus the proceeds from disposals of fixed assets less the following: (i) gross capital expenditures, (ii) finance income and expense (excluding non cash expense or income), (iii) income taxes (excluding deferred taxes), (iv) increases in working capital requirement and (v) miscellaneous items. Gross book value means the total acquisition cost of the fleet equipment; Gross debt means loans and debt owed to credit institutions, bonds, lease liabilities, bank overdrafts and other financial debt, plus accrued interest on debt excluding derivative instruments on the balance sheet; Net debt means gross debt less cash and cash equivalents (cash plus marketable investment securities); Like-for-like means changes in for the period indicated compared to the prior comparable period, excluding changes in the scope of consolidation; 3

4 NOTICE All financial information in this quarterly report has been prepared in accordance with IFRS and is presented in million of euros. This financial information has not been reviewed by our statutory auditors. In this document, we use certain non-gaap measures, such as EBITDA, free cash flow or net debt, as we believe they and similar measures are widely used by certain investors as supplemental measures of performance and liquidity. These non-gaap measures may not be comparable to other similarly titled measures of other companies and may have limitations as analytical tools. Non-GAAP measures such as EBITDA, free cash flow and net debt are not measurements of our performance or liquidity under IFRS and should not be considered to be alternatives to operating profit or any other performance measures derived in accordance with IFRS. They should not be considered to be alternatives to cash flows from operating, investing or financing activities as a measure of our liquidity as derived in accordance with IFRS. Rounding adjustments have been made in calculating some of the financial and other information included in this document. As a result, figures shown as totals in some tables may not be exact arithmetic aggregations of the figures that precede them. Comparability of the financial statements In Q4 2017, the Hune Group depreciation rules have been harmonized to the Loxam Rules. This harmonization was not done in Q and Q accounts have not been restated for this. A purchase price allocation for the Lavendon and Hune acquisitions was completed in Q and had not been performed in Q Q accounts have not been restated for this. Considering the acquisitions of companies and business performed in 2017, the information provided at constant perimeter for Q is compared to Q taking into account : - An additional month of activity of Lavendon and Hune groups (Spain and Portugal) for the Q reference, - a full Q financial information for Hune Sico and Hune Pronto Rental (the information was not available in time for the Q reporting), - The Gardemann disposal (elimination of 2 months of Q financial information). Also, the financial statements for Q include 3 months of financial information of Swan, Loxam Access SRL, the former Cramo branches in Denmark and Degraus. 4

5 The following discussion and analysis is based on, and should be read in conjunction with, our unaudited quarterly consolidated financial statements included elsewhere in this quarterly report and our audited annual consolidated financial statements included in our 2017 annual report. This document contains certain statements that are forward-looking. These statements refer in particular to the Company s forecasts, projections, future events, trends or objectives that are naturally subject to risks and contingencies that may lead to actual results materially differing from those explicitly or implicitly included in these statements. Such forward-looking statements are not guarantees of future performance. The Company, as well as its affiliates, directors, advisors, employees and representatives, expressly disclaim any liability whatsoever for such forward-looking statements. The Company does not undertake to update or revise the forward-looking statements that may be presented in this document to reflect new information, future events or for any other reason and any opinion expressed in this document is subject to change without notice. This document does not constitute, or form part of, an offer or invitation to sell or purchase, or any solicitation of any offer to purchase or subscribe for, any securities of the Company in any jurisdiction whatsoever. This document shall not form the basis of, or be relied upon in connection with, any contract or commitment whatsoever. 5

6 CONSOLIDATED FINANCIAL STATEMENTS SUMMARY Three months Consolidated Income Statement ended March 31, (in millions of euros) Revenue Other income Purchases consumed... (33.2) (38.3) Personnel expenses... (84.2) (97.1) Other current expenses... (101.6) (114.2) Taxes and duties... (6.1) (6.1) Depreciation and amortization Property, plant and equipment... (50.9) (61.4) Depreciation and amortization Intangibles assets... (0.7) (2.9) Profit from ordinary operations Other operating income and expense... (10.1) 0.0 Operating profit Financial income and expense... (18.4) (25.2) Share of profit of associates... (0.2) - Income tax expense (1.5) Net profit Non controlling interests (0.7) Net profit, group share

7 Consolidated balance sheet As of (in millions of euros) December 31, 2017 March 31, 2018 Intangible assets and goodwill... 1, ,333.8 Property, plant and equipment... 1, ,263.2 Investments in associates Financial assets Financial derivatives Deferred tax assets Non-current assets... 2, ,634.1 Inventories Trade and other receivables Other current assets Cash and cash equivalents Current assets TOTAL ASSETS... 3, ,194.3 Shareholders equity Provisions for employees benefits Deferred tax liabilities Borrowings and financial debt long term portion... 2, ,001.4 Financial derivatives Non-current liabilities... 2, ,082.6 Provisions Borrowings and financial debt current portion Supplier and other payables Other current liabilities Current liabilities TOTAL EQUITY AND LIABILITIES... 3, ,

8 Three months ended Consolidated condensed cash-flow statement March 31, (in millions of euros) Cash flow from operations Cash flow from investing activities... (927.6) (83.7) Cash flow from financing activities (20.4) Change in cash and cash equivalents... (46.9) (47.7) Cash and cash equivalents at the end of the period (1) Note : (1) Including bank overdraft 8

9 MANAGEMENT S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion should be read together with our consolidated financial statements and the notes thereto. Our financial statements included herein have been presented in euros and prepared in accordance with IFRS. Overview With a total proforma revenue of 1,441 million for the 12-months period ended March 31, 2018, we are a leading European equipment rental group focused primarily on the construction and civil engineering sectors with 751 branches as of March 31, 2018 of which 498 were located in France. We are organized in three business divisions: Generalist France division, which includes equipment for earth moving (backhoes and loaders), aerial work (booms and scissors), handling (forklifts and tele-handlers), compaction (compactors and rollers), and building (concrete mixers and saws), as well as hand tools such as power drills, chainsaws and jackhammers. As of March 31, 2018, our generalist network included 417 branches. The generalist network trades under the LOXAM Rental brand; Specialist France division, which includes high-access equipment, modular shelters, large compressors and generators, heavy compaction equipment, suspended platforms and scaffolding. As of March 31, 2018, our specialist network in France includes 81 branches. We rent specialist equipment in France under several specific brands, such as LOXAM Access, Lavendon France, LOXAM Module, LOXAM Power, LOXAM Laho TEC, LOXAM TP, LOXAM Event; International division, which comprises our specialist and generalist equipment offerings in 21 countries outside of France (Denmark, Belgium, the Netherlands, Germany, Spain, the United Kingdom, Ireland, Switzerland, Luxembourg, Norway, Morocco, Portugal, Italy, several countries in the Middle East, Colombia and Brazil) with a network of 253 branches as of March 31, We own joint-ventures in Morocco, Brazil, the Middle East and Colombia. In addition to offering over 1,500 different types of generalist and specialist equipment and tools for rent, we also provide services such as transportation, refueling, damage waiver and retail consumable products to complement and support our rental business. As of March 31, 2018, our rental fleet of approximately 270,000 pieces of equipment (excluding accessories) with a gross book value of 2.9 billion. Economic conditions over the first three months of 2018 Our activity is impacted by the seasonality of demand and the first quarter of the year is always the lowest quarter of the year at the Group level. Still, the construction markets have remained positive in Q and the demand for rental services has remained strong throughout the three divisions of the Group. Investment in new equipment Our gross capital expenditure in the first quarter of 2018 amounted to 96.9 million, of which 87.8 million was fleet Capex compared to million, of which million was fleet Capex, in the first quarter of The capex spend in Q has slowed down in comparison with the first quarter of 2017, in line with our capex budget. 9

10 Changes in our rental network We operated 751 branches as of March 31, 2018, compared to 753 as of December 31, Over the first three months of 2018, we opened 1 branch and merged 3 branches as part of our network optimization. Significant events of the three month-period The implementation of some internal reorganization following the acquisitions of Hune and Lavendon has progressed during the first quarter of the year. On February 8, 2018, Loxam SAS acquired 100% interest of Lavendon Access Services SAS ( Lavendon France ), from Lavendon Access Services LTD. Lavendon France has subsequently been merged into Loxam SAS on April, 1. On February 13, 2018, Hune Rental SLU (Spain) acquired 100% of Loxam Alquiler (Spain) shares, from Loxam SAS. Loxam Alquiler has merged into Hune Rental SLU on April 1. Post quarter events We have initiated the merger of our Dutch subsidiaries, carried out mainly through Workx Materieelverhuur BV and Loxam BV, in order to improve the efficiency of our business. Such merger should be completed by the end of Q

11 Explanation of Key Line Items from the Income Statement The following is a summary description of certain line items from our income statement. Revenue includes the fees paid by customers to rent equipment and revenue from related services such as transportation, fuel, damage waivers and the cost of repair and maintenance services charged back to our customers, as well as the retail activities at our branches. Other income principally includes net capital gains on disposals of fleet and non-fleet assets as well as real estate rent paid by subtenants. Purchases consumed includes (1) the cost of goods purchased for resale in our retail activity, as well as the cost of fuel and maintenance parts that are rebilled to customers; and (2) the cost of parts used by the workshops in our branches to maintain our equipment. Personnel expenses relates primarily to the salaries, social security charges and profit sharing expenses for our employees. Other current expenses include (1) external expenses that are directly related to our rental activity, such as transportation, subcontracted maintenance costs, re-rent (subleasing equipment from external renters to fill customer orders when there is not sufficient quantity at our branches) and costs associated with temporary workers; (2) external expenses related to the group, such as rent on real estate and related expenses, general administrative expenses (including insurance, advisory fees, communications and IT), advertising expenses and other management costs; and (3) losses on bad debts, net of change in provisions on current assets. Taxes and duties relates mainly to property taxes and local taxes (including the CET or Contribution Economique Territoriale paid in France). Depreciation and amortization principally include depreciation of fixed assets (fleet and non-fleet). The depreciation policy existing at the Lavendon Group prior to the acquisition has been kept unchanged. The Loxam group depreciation policy has been retrospectively applied to the Hune fleet in the consolidated financial accounts. Since 2017, it also includes depreciation of newly intangible assets (trademarks and customer relationships) follow a purchase price allocation exercise on the Lavendon and Hune acquisitions. Other operating income and expense includes a limited number of items, unusual, abnormal, and uncommon, with significant amounts, disclosed separately in the income statement to make it easier to appreciate the Group s current operating performance. Financial income primarily includes interest income on cash balances, while financial expense comprises interest charges on bank loans and bonds and hedging expenses. It also includes change in fair value of derivatives instruments. Income tax consists of current and deferred taxes calculated in accordance with the relevant tax laws in force in the jurisdictions in which we operate. From January 1, 2018, the corporate tax rate in France stands at 34.43% of the profit before tax. We are also subject to tax rates in the other countries in which we operate, which ranged from 12.5% to 34.0% as of that date. Share of profit of associates includes the result of companies accounted for by the equity method. 11

12 Results of operations The table below sets out our consolidated income statement for the quarters ended March 31, 2018 and 2017 under IFRS. Quarter ended Consolidated Income Statement march 31, (in millions of euros) Revenue Other income (1) Purchases consumed... (33.2) (38.3) Personnel expenses... (84.2) (97.1) Other current expenses... (101.6) (114.2) Taxes and duties... (6.1) (6.1) Depr. and amortization Property, Plant and Equip. (50.9) (61.4) Depreciation and amortization Intangible assets... (0.7) (2.9) Profit from ordinary operations Other operating income and expense (2) (10.1) 0.0 Operating profit Financial income and expense... (18.4) (25.2) Share of profit of associates... (0.2) - Income tax expense (1.5) Net profit Non controlling interests (0.7) Net profit, group share Note : (1) Other income include capital gains on disposals of fixed assets amounting to 7.7million and 8.0 million in Q and Q (2) Other operating income and expense for Q include non recurring costs relating to the acquisition of the Lavendon and Hune Groups. 12

13 The following table sets out certain key figures in each of the Generalist France, Specialist France and International divisions for the three months period ended March 31, 2018 and 2017 under IFRS. Quarter ended March 31, (in millions of euros) Revenue (1) Generalist France Specialist France France International Total revenue EBITDA Generalist France (2) Specialist France (2) France International (4) Real Estate (3) Total EBITDA EBITDA margin % 28.6% Notes: (1) To present Generalist and Specialist revenue generated in France by division, we aggregate the revenue of each branch assigned to that division. Revenue for Generalist France and Specialist France are presented net of rebates. (2) To present Specialist and Generalist EBITDA generated in France by division, we allocate rebates, which are accounted for centrally, pro rata based on revenue, and then allocate direct expenses (which represent the majority of costs) directly to a given branch. Indirect expenses i.e. central or regional head office costs are then allocated to a given branch pro rata its actual revenue, the gross book value of its equipment or the rental value of its equipment depending on the nature of the cost. (3) Real estate EBITDA corresponds to rental income from real estate held by the group that is not assigned to a division less direct external costs. (4) Includes in Q million of non-recurring bad debt provision for a Saudi Arabian joint venture relating to fiscal year 2017 accounts. 13

14 Quarter ended March 31, 2018 compared to quarter ended March 31, 2017 Revenue Revenue increased by 15.6% to million in the first quarter of 2018 from million in the first quarter of On a like-for-like basis and at constant exchange rate, revenue increased by 4.3%. Revenue from our Generalist France division increased by 5.6% in the first quarter of 2018 to million compared to million in the first quarter of 2017, thanks to the good economic environment and in particular the growth of the French construction market. Generalist France represented 44% of total revenue in the first quarter of 2018, compared to 48% in the first quarter of Revenue from our Specialist France division increased by 11.7% to 52.2 million in the first quarter of 2018 compared to 46.7 million in the first quarter of The division benefited from the contribution of Lavendon France for a full quarter in 2018 (versus two months in Q1 2017). Like-for-like, revenue at the Specialist France division grew by 5.2% in Q compared to Q for the same above reason. The Specialist France division enjoyed the same positive economic conditions as the Generalist France division. The Specialist France division represented 15% of total revenue in the first quarter of 2018, compared to 16% in the first quarter of International revenue increased by 30.9% to million in the first quarter of 2018 compared to million in the first quarter of Like-for-like and at constant exchange rate, the revenue of the division increased 2.4%, thanks to the organic growth of our business units. Our International division represented 41% of total revenue in the first quarter of 2018, compared to 36% in the first quarter of Other income Other income decreased by 0.9 million to 10.1 million in the quarter ended March 31, 2018 from 11.0 million in the quarter ended March 31, The decrease is partly due to lower capital gains on fixed assets disposals. Purchases consumed Purchases consumed increased by 15.4% to 38.3 million for the quarter ended March 31, 2018 compared to 33.2 million for the quarter ended March 31, Like-for-like, purchases consumed increased by 5.5% in line with the higher activity of the quarter. Personnel expenses Personnel expenses increased by 15.2% to 97.1 million in the quarter ended March 31, 2018 from 84.2 million in the quarter ended March 31, Personnel expenses increased by 5.7% in France and 31.0% at the International division. Like-for-like, personnel expenses increased by 5.0% due to the combined effect 14

15 of the increase of 3.3% of the average headcount in Q compared to Q and higher social charges rates in France. Other current expenses Other current expenses increased by 12.4% to 114.2million in the first quarter of 2018 from million in the first quarter of Like-for-like, external charges were limited to a growth of 2.4% thanks to a decrease in short term equipment leases. Depreciation and amortization Depreciation and amortization amounted to 64.3 million in the quarter ended March 31, 2018, compared to 51.6 million in the quarter ended March 31, Like-for-like, the depreciation expense increased by 9.5% as a result of the capex made in Also a depreciation of trademarks and customer relationships was recognised for 1.9 million in Q as a result of a Purchase Price Allocation of Lavendon and Hune groups completed in Q Financial income and expense Net financial expense increased by 6.8 million to 25.2 million in the quarter ended March 31, 2018, compared to 18.4 million in the quarter ended March 31, The gross interest expense amounts to 24.5 million while other financial expense amount to 0.7 million in Q Income tax Our profit before tax amounted to 9.0 million in the quarter versus 3.2 million in Q Income tax was an expense of 1.5 million in the quarter ended March 31, 2018, compared to a profit of 0.8 million in the quarter ended March 31, Income tax was higher in Q than in Q1 2017, due to a higher tax at our international business and a lower tax credit at our French operations. Net profit As a result of the various factors described above, we recorded a net profit of 8.2 million in the quarter ended March 31, 2018 compared to a net profit of 3.8 million in the quarter ended March 31,

16 EBITDA Under IFRS, we define EBITDA as profit from ordinary operations plus depreciation and amortization of fixed assets. The following table presents a reconciliation of EBITDA to operating profit and net profit for the periods indicated. Quarter ended (in millions of euros) March 31, EBITDA Depreciation of Property, plant and equipment... (50.9) (61.4) Depreciation of intangible assets... (0.7) (2.9) Other operating income and expense... (10.1) 0.0 Operating profit Financial income and expense... (18.4) (25.2) Share of profit of associates... (0.2) - Income tax expense (1.5) Net profit EBITDA amounted to 98.5 million in Q increasing by 18.2% from 83.3 million in Q Like-forlike and at constant exchange rates, EBITDA increased by 5.1% (+6.5% without the impact of the Saudi Arabian JV bad debt provision), thanks to the growth of the revenue in the quarter. EBITDA from our Generalist France division amounted to 42.3 million in Q1 2018, compared to 40.5 million in Q Our EBITDA margin for Generalist France was stable at 27.9% in Q compared to 28.2% in Q as the division disposed of less old fleet and recorded lower capital gains on fleet disposals. Excluding capital gains on fleet disposal, the division s EBITDA margin gained 0.7 point in the quarter. EBITDA from our Specialist France division amounted to 16.5 million in Q1 2018, compared to 13.4 million in Q Our EBITDA margin for Specialist France rose significantly at 31.6% in Q compared to 28.6% in Q as the division benefits from the combination of an organic growth and good control on its operating expenses. EBITDA from our International division amounted to 38.7million in Q1 2018, compared to 28.7 million in Q On a like-for-like basis and at constant exchange rate, EBITDA increased by 0.6% (+4.2% without the impact of the Saudi Arabian JV bad debt provision). Our EBITDA margin for International was 27.7% in Q compared to 26.9% in Q benefiting from higher capital gains on fleet disposals. Overall, the EBITDA margin in Q stood at 28.6% versus an EBITDA margin of 28.0% in Q

17 Liquidity and Capital Resources Cash is used to pay for working capital requirements, taxes, interest payments, capital expenditures, acquisitions and to service our indebtedness in accordance with repayment schedules. Our sources of liquidity consisted mainly of the following: cash generated from our operating activities; borrowings under our syndicated credit facilities (including the revolving credit facility), bilateral credit facilities and finance leases; and net proceeds from our outstanding debt securities and any other debt securities that we may issue in the future. As of March 31, 2018, the gross financial debt (excluding derivatives) amounted to 2,221.8 million, compared to 2,238.7 million as of December 31, Our net financial debt (excluding derivatives) as of March 31, 2018 amounted to 2,150.8 million, an increase of 29.6 million compared to December 31, As of March 31, 2018, we had 1,632.8 million of outstanding bond debt, after deduction of 16.5 million of issuance costs amortized over the duration of the bonds minus two years using the effective interest rate method. Our bond debt was made of million of senior secured notes due in July 2021, million of senior subordinated notes due in July 2022, million of senior secured notes due in April 2022, million of senior secured notes due in May 2023, million of senior secured notes due in April 2024, and million of senior subordinated notes due in April We also had million of debt outstanding under bilateral facilities from banks, and million under finance leases. We expect to finance future capital expenditures through cash flow from operations, finance leases or bilateral credit facilities. In the three-months period ended March 31, 2018, new finance leases were entered into for 40.0 million. Capital expenditures In Q1 2018, gross capital expenditures amounted to 96.9 million, compared to million in Q Fleet capital expenditure amounted to 87.8 million in Q1 2018, compared to million in Q In Q1 2018, the gross book value of disposed rental equipment was 43.6 million, compared to 38.2 million in Q The increase in fleet disposals was mainly driven by the International division, while disposals decreased in France. Free Cash flow We define free cash flow as EBITDA less net capital expenditures, other operating income and expense, (excluding non cash operating income and expense), financial income and expense (excluding non cash financial income and expense), taxes (excluding deferred taxes), capital gains on fleet disposals and certain other income and expenses and changes in working capital requirement. Free cash flow is presented before the payment of dividends to shareholders, capital movements and acquisitions. Free cash flow amounted to (30.2) million for the quarter ended March 31, 2018 compared to (62.1) million for the quarter ended March 31, The increase in the free cash flow generation between Q1 17

18 2018 and Q is mainly explained by the higher EBITDA recorded in Q1 2018, and the lower capital expenditures recorded in Q versus Q while higher financial expense and negative change in working capital requirement had a negative impact. The following table presents a reconciliation of the EBITDA to free cash flow for the first quarters of 2018 and Quarter (in millions of euros) ended March 31, EBITDA before capital gains on fleet disposals Proceeds from disposals of fixed assets Gross capital expenditure... (115.8) (96.9 ) - Operating income and expense (1)... (10.1) - - Financial income and expense (2)... (18.3) (24.6 ) - Income taxes (3)... (1.9) (2.1 ) +/- Change in working capital requirement... (3.0) (10.0 ) Miscellaneous (4)... (0.4) (0.7 ) Free cash flow (5)... (62.1) (30.2) Acquisitions and disposals (6)... (850.4) - Share capital decrease (7)... (9.6) - Dividends Issue costs amortization and currency variations... (0.3) 0.6 Change in net debt (8)... (922.3) (29.6 ) Notes: (1) Corresponds to non recurring costs related to acquisitions of the Hune and Lavendon groups. (2) Corresponds to financial income and expense immediately payable (i.e., excluding non-cash items). (3) Corresponds to taxes immediately payable (i.e., excluding deferred taxes). (4) Primarily composed of deduction of capital gains of non fleet disposal and other non cash items excluded from EBITDA, mainly related to change in provisions. (5) Before payment of dividends, capital increases and acquisitions. (6) Corresponds to the Lavendon and Hune acquisitions in the period of three months to March 31, (7) Corresponds to the completion of the share buyback programme. (8) Excluding change in derivative instruments. 18

19 Net debt We define net debt as gross debt less cash and cash equivalents (cash plus marketable investment securities). The following table presents a reconciliation of net debt to amounts included in the consolidated balance sheet as of the dates indicated. (in millions of euros) December 31, 2017 As of March 31, 2018 Senior secured notes... 1,149,3 1,149.3 Senior subordinated notes Issuance costs related to notes... (17.9) (16.5) Bank loans and bilateral facilities Accrued interest on debt securities and loans Lease liabilities Other financial debt Bank overdrafts Loans and financial debt (gross debt)... 2, ,221.8 Cash... (117.5) (70.8) Marketable investment securities... (0.1) (0.2) Cash and cash equivalents... (117.5) (70.0) Net debt... 2, ,150.8 Net debt increased by 29.6 million to 2,150.8 million as of March 31, 2018 from 2,121.2 million as of December 31, 2017, primarily as a result of a negative free cash flow of (30.2) million. 19

20 Debt maturity profile The table below provides the maturity profile of our outstanding indebtedness, as of March 31, (in millions of euros) Total and later Bilateral loans Lease liabilities Loans and financial debt owed to credit institutions Other financial debt senior secured notes due senior subordinated notes due senior secured notes due senior secured notes due senior secured notes due senior subordinated notes due Total debt (1)... 2, Note : (1) Total debt figures exclude accrued interest and bank overdrafts and are presented net of issuance costs. No major financial debt repayment is due before July 2021 (Senior secured notes issued in July 2014). Currency and interest rate derivatives Loxam still owns a portfolio of derivative financial instruments hedging interest rate variations for a notional amount of 81.8 million at March 31, 2018 for a maximum term in July These derivatives are recognized in financial liabilities for an amount of 2.4 million at March 31, As of March 31, 2018, 86% of our financial debt had a fixed interest rate vs 84% at the end of The majority of our revenue (75% in Q1 2018), expenses and obligations are denominated in euros. However, we are exposed to foreign exchange rate risk, primarily in respect of British Pounds, Danish Krone, Swiss Francs, Moroccan Dirham, Norwegian Krone, Middle Eastern currencies as well as Colombian Peso. Our foreign exchange rate derivative financial instruments as of March 31, 2018 covered current liabilities denominated in British Pounds for GBP 95.0 million, in Danish Krone for DKK 15.0 million and in US dollar for USD 16.0 million. Critical Accounting Policies and Estimates Critical accounting policies are described in the Appendix within the notes to financial statements. 20

21 21

22 APPENDIX : LOXAM GROUP UNAUDITED FINANCIAL STATEMENTS 22

23 CONSOLIDATED FINANCIAL STATEMENTS AT MARCH 31, 2018 Statement of financial position ASSETS ( '000) Notes Intangible assets and goodwill 5 1,333,889 1,333,795 Property, plant and equipment 6 1,232,597 1,263,156 Investments in associates Financial assets 8 15,626 15,713 Financial derivatives 14 1,181 0 Deferred tax assets 22 21,632 21,388 Non-current assets 2,604,925 2,604,925 Inventories 9 29,315 32,562 Trade and other receivables , ,300 Other current assets 11 64,701 67,884 Corporate income tax receivables 11 19,380 17,494 Cash and cash equivalents ,544 70,998 Current assets 601, ,239 Total assets 3,206,707 3,194,290 LIABILITIES ( '000) Notes Share capital 229, ,818 Additional paid-in capital 1,882 1,882 Consolidated reserves 211, ,204 Net profit for the period 443, ,904 Shareholders equity (Group share) 528, ,202 Non-controlling interests 15,391 14,561 Total equity , ,763 Employee benefits 16 16,608 16,818 Deferred tax liabilities 22 62,064 60,922 Borrowings and financial debt 15 2,037,490 2,001,361 Financial derivatives 14 2,855 3,482 Non-current liabilities 2,119,017 2,082,583 Provisions 17 11,245 10,520 Borrowings and financial debt , ,449 Trade and other payables , ,277 Other liabilities , ,874 Corporate income tax liabilities 18 7,958 7,824 Current liabilities 544, ,945 Total shareholders equity and liabilities 3,206,707 3,194,290 23

24 Consolidated income statement and statement of comprehensive income '000 Notes Revenue 297, ,950 Other income 11,011 10,145 Operating income 308, ,095 Purchases consumed (33,162) (38,274) Personnel expenses 19 (84,240) (97,079) Other current expenses (101,643) (114,233) Taxes and duties (6,073) (6,053) Depreciation and amortization - Tangible (50,896) (61,384) Depreciation and amortization - Intangible (738) (2,905) Profit from ordinary operations 31,687 34,167 Other operating income and expenses 20 (10,107) 42 34,209 Operating profit 21,581 Interest and financing-related expenses (18,861) (24,497) Other financial expenses (987) (1,658) Financial income 1, Financial income (expense) 21 (18,382) (25,220) Profit before tax 3,198 8,989 Share of profit of associates (182) 0 Income tax expense (1,489) Net profit 3,813 7,500 Non-controlling interests (8) (707) Net profit, Group share 3,820 8, Net profit 3,813 7,500 Exchange gains or losses 4,641 1,837 Fair Value adjustments linked to net Investment hedge 602 Items recycled to profit or loss 4,641 2,439 Remeasurement of liabilities for defined benefit retirement plans Tax Items not recycled to profit or loss 0 0 Other comprehensive income 4,641 2,439 Comprehensive income 8,455 9,939 24

25 Consolidated cash-flow statement '000 Notes Net profit 84,275 7,500 Share of profit of associates 7 1,306 0 Income tax expense (including deferred tax) 22 18,860 1,489 Net finance costs ,714 25,220 Other operating income and expense (non cash) (14,045) (42) Depreciation and provisions, net of reversals 247,049 63,782 Capital gains on asset disposals (52,046) (7,727) Cash flow from operations (before cost of financing and tax) 402,112 90,221 Income tax paid (9,323) (2,108) Financial interest paid (92,696) (22,227) Financial interest received 1, Change in working capital requirements (40,727) (10,007) Cash flow from operating activities A 260,805 56,355 Impact of changes in scope (817,570) 0 Acquisitions of fixed assets (432,838) (96,897) Disposals of fixed assets 66,643 13,185 Cash flow from investing activities B (1,183,764) (83,711) Dividends paid (4,941) 0 Capital movements (9,554) 0 Proceeds from loans and borrowings 15 1,918,950 40,012 Repayment of loans and borrowings 15 (1,021,040) (60,378) Cash flow from financing activities C 883,416 (20,366) Change in cash and cash equivalents A+B+C (39,544) (47,723) Cash and cash equivalents at the beginning of the period 155, ,583 Cash and cash equivalents at the end of the period 116,583 70,737 Impact of exchange rate fluctuations (450) (1,876) Change in cash and cash equivalents (39,544) (47,723) Other marketable securities Cash at bank and on hand 117,455 70,764 Current bank borrowings (961) (261) Cash and cash equivalents 116,583 70,737 25

26 000 Consolidated statement of changes in equity Share capital Additional paid-in capital Consolidated reserves Reserves to be recycled (OCI) Shareholders equity (Group share) Noncontrolling interests Total equity At 31 December ,400 1, ,430 (2,818) 479, ,832 Net profit for the period 84,644 84,644 (369) 84,275 Employee benefits 2,674 2,674 2,674 Net investment hedge (842) (842) (842) Exchange gains or losses (23,458) (23,458) (1,157) (24,615) Comprehensive income 84,644 (21,626) 63,019 (1,526) 61,492 Capital movements (2,582) (6,972) (9,554) (9,554) Dividends (4,941) (4,941) (4,941) Changes in scope (120) (120) 15,979 15,859 At 31 December ,818 1, ,041 (24,444) 528,297 15, ,688 Net profit for the period. 8,207 8,207 (707) 7,500 Employee benefits Net investment hedge Exchange gains or losses 2,058 2,058 (221) 1,837 Comprehensive income 8,207 2,660 10,867 (928) 9,939 Capital movements 0 0 Dividends 0 0 Changes in scope Other changes 0 0 At 31 March ,818 1, ,287 (21,784) 539,202 14, ,763 26

27 Notes to the financial statements Note 1 Overview Note 2 Highlights Note 3 - Accounting principles Note 4 - Scope of consolidation Note 5 Intangible assets and goodwill Note 6 Property, plant and equipment Note 7 - Investments in associates Note 8 - Financial assets Note 9 Inventories Note 10 Trade and other receivables Note 11 Income tax receivables and other current assets Note 12 Cash management assets, cash and cash equivalents Note 13 Shareholders equity Note 14 Financial risk management - Financial instruments Note 15 Borrowings and financial debt Note 16 Employees benefit Note 17 - Provisions Note 18 Trade payables and other current liabilities Note 19 - Personnel expenses Note 20 - Other operating income and expenses Note 21 - Financial income (expense) Note 22 - Corporate income tax Note 23 Operating lease commitments Note 24 - Off-balance sheet commitments Note 25 Related-party transactions

28 Note 1 Overview 1.1. Presentation of the Group Loxam is a French simplified joint stock company ( Société par actions simplifiée ) with a capital of 229,818,150 as at 31 March 2018, governed by all of the legislation and regulations for commercial companies in France, and particularly the French commercial code ( Code de commerce ). Its registered office is located at 256 rue Nicolas Coatanlem, Caudan, France. The Group is the European equipment rental market leader, with its business focused primarily on construction and civil engineering professionals. The Group operates mainly in Europe, as well as North Africa, and has a 50.1% stake in a rental company in Brazil. Following the acquisitions of the Lavendon and Hune Groups, the Group also operates in the United Arab Emirates, Bahrain, Saudi Arabia, Oman, Qatar and Kuwait as well as Colombia Basis of preparation The interim consolidated financial statements (the interim financial statements ) for the three-month period ended March 31, 2018 include Loxam SAS and its subsidiaries (together the Group or Loxam Group ), including the Group s share in equity affiliates and joint ventures. These interim financial statements have been prepared by the Group in a voluntary and non-mandatory basis. They have been prepared in accordance with IAS 34 Interim financial reporting and should be read in addition to the latest annual consolidated financial statements of the Group for financial year 2017 ( the latest annual financial statements ). They do not include all the information mandatory for a complete financial report according to IFRS. However, they include a selection of notes explaining significant events and major operations to understand the change in statement of financial position and the Group s performance since the latest annual financial statements Functional and reporting currency The Group s consolidated financial statements are prepared and presented in euros, which is the parent company s functional currency. All the financial data are presented in thousands of euros, rounded to the nearest thousand euros. The total amounts indicated in the tables may differ from the sum of the various items due to rounding. 28

29 Note 2 Highlights Highlights of the period ended March 31, 2018: On February 8, 2018, Loxam SAS acquired 100% interest of Lavendon Access Services SAS ( Lavendon france ), from Lavendon Access Services LTD. Lavendon France was merged into Loxam SAS as at April 1, On February 13, 2018, Hune Rental SLU (Spain) acquired 100% of Loxam Alquiler shares, from Loxam SAS. Loxam Alquiler was merged into Hune Spain as at April 1,

30 Note 3 - Accounting principles 3.1 Presentation of the financial statements The Group s consolidated financial statements are prepared on a historical cost basis, with the exception of certain categories of assets and liabilities, measured at fair value, in accordance with IFRS. The categories concerned are mentioned in the following notes. The financial year-end for all the Group s subsidiaries and entities is December 31, with the exception of Swan Plant Hire Ltd and Lir Holdings Ltd, for which the financial year-end is 30 September. 3.2 Consolidation principle A subsidiary is an entity controlled by Loxam SAS. An entity s control is based on three criteria: - Power over the entity, i.e. the ability to direct the activities with the greatest impacts on its profitability; - Exposure to the entity s variable returns, which may be positive, based on dividends or any other economic benefits, or negative; - Link between power and these returns, i.e. the ability to exercise power over the entity to influence the returns achieved. The financial statements of subsidiaries are consolidated from the date on which the Group acquires effective control until such time as control is transferred outside the Group. The consolidated financial statements include all of the subsidiary s assets, liabilities, income and expenses. Equity and income are shared between the owners of the Group and non-controlling interests. Transactions between consolidated companies and intragroup profits are eliminated when preparing the consolidated financial statements. An associate is an entity in which the Group has significant influence, without having control or joint control over financial and operational policies. The share in the associate s assets and liabilities, including goodwill, is presented on a separate line on the balance sheet. 3.3 Comparability of the financial statements In Q4 2017, the Hune Group depreciation rules have been harmonized to the Loxam Rules. This harmonization was not done in Q and Q accounts have not been restated for this. A purchase price allocation for the Lavendon and Hune acquisitions was completed in Q and had not been performed in Q Q accounts have not been restated for this. 30

31 Considering the acquisitions of companies and business performed in 2017, the information provided at constant perimeter for Q is compared to Q taking into account : - An additional month of activity of Lavendon and Hune groups (Spain and Portugal) for the Q reference, - a full Q financial information for Hune Sico and Hune Pronto Rental (the information was not available in time for the Q reporting), - The Gardemann disposal (elimination of 2 months of Q financial information). Also, the financial statements for Q include 3 months of financial information of Swan, Loxam Access SRL, the former Cramo branches in Denmark and Degraus. 3.4 Accounting judgments and estimates To prepare the consolidated financial statements in accordance with IFRS, the Group makes a certain number of estimates and assumptions that are based on historical information and other factors, including expectations for future events that are considered reasonable in view of the circumstances. The Group s estimates and judgments with the most significant impacts on the financial statements concern the following elements: - Impairment tests for intangible assets with an indefinite useful life (primarily goodwill) (Note 5), - Measurement of obligations relating to defined benefit plans (Note 16), - Measurement of financial instruments at fair value (Note 14), - Qualification of leases (Note 3.13), - Purchase price allocation of Hune and Lavendon Groups. These estimates are based on the information available when they were prepared. They are continuously assessed based on past experience and various other factors that are considered to be reasonable, which form the basis for assessments of the book value of assets and liabilities. Estimates may be revised if the circumstances on which they were based change or new information becomes available. Actual results may differ significantly from these estimates depending on different conditions or assumptions. 3.5 Business combinations a) Business combinations In accordance with IFRS 3, business combinations are accounted for on the acquisition date, which is the date when control is transferred to the Group. Goodwill represents the fair value of the consideration transferred (including the fair value of any interest previously held in the company acquired), plus the amount recognised for any non-controlling interest in the company acquired, less the net amount recognised (generally at fair value) for the identifiable assets and liabilities assumed. When the difference is negative, this is badwill, representing a profit resulting from acquisitions under preferential conditions. Badwill is recognised immediately in profit or loss. The costs relating to the acquisition are expensed as incurred. Corrections or adjustments may be made to the fair value of the assets and liabilities assumed and the consideration transferred within 12 months of the acquisition. As a result, the goodwill may be revised. 31

32 Contingent consideration relating to business combinations is measured at fair value on the acquisition date and subsequently measured at fair value at each future reporting date. After a one-year period from the acquisition date, any change in the fair value of the contingent consideration classified as a financial liability will be recognised in profit or loss. During this one-year period, any changes to this fair value explicitly related to events occurring after the acquisition date will also be recognised in profit or loss. Other changes will be recognised as adjustments to goodwill. Goodwill is not amortized. In accordance with IAS 36 Impairment of Assets, it is subject to impairment tests at least once a year and more frequently if there are any indications of impairment. The conditions for these tests are presented in Note b) Commitment to buy out non-controlling interests (minority interests), entered into at the time of business combinations, if minorities do not retain current access to profits. The anticipated acquisition method is applied: the deferred payment for the buyout commitment is recognised as a liability for the present value of the option s exercise price. Goodwill is calculated taking into account the total percentage including the commitment to buy out the non-controlling interests. c) Commitment to buy out non-controlling interests (minority interests), entered into at the time of business combinations, if minorities retain current access to profits The deferred payment for the buyout commitment is recognised as a liability for the present value of the option s exercise price. Subsequent changes in the value of the commitment are recognised in equity attributable to owners of the parent. d) Acquisition of non-controlling interests (minority interests), agreed on after business combinations For an additional acquisition of shares in an entity that is already controlled, the difference between the acquisition price of the shares and the additional consolidated equity interest acquired is recognised in equity attributable to owners of the parent, while keeping the consolidated value of the subsidiary s identifiable assets and liabilities, including goodwill, unchanged. 3.6 Foreign currency translation methods a) Transactions in foreign currencies Transactions in foreign currencies are converted into euros based on the exchange rate at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are converted based on the exchange rate at the reporting date. Profit and loss data denominated in foreign currencies are converted using the average rate for the period. The resulting exchange gains or losses are recognised in profit or loss for the year under financial income and expenses. b) Financial statements in foreign currencies The assets and liabilities of subsidiaries presented in foreign currencies are converted into euros based on the exchange rate at the reporting date. Income and expenses for these companies are converted into euros 32