Lavendon Group plc European and Middle Eastern Market Leader for Powered Access Rental

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1 Lavendon Group plc European and Middle Eastern Market Leader for Powered Access Rental 2015 Full Year Results Presentation 25 February February Full Year Results

2 Agenda Overview Financial Performance - Full Year 2015 Strategy & Group Development 25 February Full Year Results 2

3 Overview - Results Ahead of Market Expectations Results in 2015 ahead of market expectations despite tough market conditions Strong finish to the year with all regions growing Best EBITA margins, PBTA and ROCE in over 10 years Strong dividend growth of 17% reflects confidence in future prospects Continued focus on free cash flow and disciplined capital allocation strategy is delivering results Additional capital allocated during the year positions the Group well for 2016 Continued Focus on Growth, Cash Flow and ROCE 25 February Full Year Results 3

4 Strong Six Year Track Record Consistent Delivery m % m x 300 Growth in revenue, EBITA and margins 20 Comfortable leverage ratios while investing in fleet Revenue ( m) EBITA ( m) EBITA margins Net Debt ( m) Gross CAPEX ( m) Net Debt/EBITDA (x) m Growth in Adj PBT, EPS and DPS p m % 350 Improving ROCE Adj PBT ( m) EPS (p) DPS (p) Capital Employed ( m) ROCE (%) Original WACC (%) Revised WACC (%) 25 February Full Year Results 4

5 Financial Performance 2015 Alan Merrell Group Finance Director 25 February Full Year Results 5

6 Financial Summary 2015 Year Ended 2015 Year Ended Movement 2015 At 2014 FX 2014 Actual FX Constant FX Revenue 248.6m 252.2m 246.3m +1% +2% Rental revenue 233.5m 236.9m 231.9m +1% +2% EBITDA* 85.9m 84.4m 79.6m +8% +6% EBITDA margin* 34.5% 33.5% 32.3% +220bps +120bps EBITA* 43.1m 42.6m 39.3m +10% +8% % EBITA margin* 17.3% 16.9% 16.0% +130bps +90bps Adjusted PBT* 38.5m 38.0m 34.1m +13% +11% Earnings per share* 17.95p 17.76p 15.65p +15% +13% Dividend 5.40p 5.40p 4.60p +17% +17% ROCE** 12.3% 12.1% 12.1% +20bps +20bps * Underlying results are stated before amortisation of intellectual property and intangibles recognised on acquisitions and exceptional items ** ROCE stated before the exceptional impairment charge made in February Full Year Results 6

7 Performance by Region 2015 UK Middle East Continental Europe Group Total*** Total revenues 121.1m 57.2m 70.3m 248.6m Rental revenues 110.2m 55.9m 67.4m 233.5m % of Group revenues 47% 24% 29% EBITA* 22.7m 18.4m 7.4m 43.1m % of Group EBITA 47% 38% 15% EBITA margin* 18.7% 32.2% 10.5% 17.3% Fleet size (number) 10,362 3,650 6,996 21,007 % of Group fleet 49% 17% 34% Capital employed 156.3m 74.0m 107.7m 336.6m % of Group capital 46% 22% 32% ROCE** 14.5% 24.9% 6.8% 12.3% ROCE (2014) 13.9% 26.7% 8.1% 12.1% * Underlying results are stated before amortisation of intellectual property and intangibles recognised on acquisitions and exceptional items ** ROCE stated before the exceptional impairment charge made in 2015 *** Includes Corporate items 25 February Full Year Results 7

8 UK Returning to Revenue Growth with Margin Improvement Year on Year Rental Revenue Growth Machines on Hire 6% 7,300 4% 7,100 2% 6,900 6,700 0% 6,500-2% 6,300-4% -6% 6,100 5,900 5, % Jan-15 Apr-15 Jul-15 Oct-15 5,500 Jan Apr Jul Oct Movement on pricing Indexed to Jan 2015 Jan-15 Apr-15 Jul-15 Oct-15 Rental revenue for the year declined by 1% - weighted to H1 with return to YoY revenue growth in Q4 Improving trend with better fleet mix & marginally improved pricing Sale of BlueSky products increased threefold to 5m EBITA increased to 22.7m ( 20.4m) with strong margins at 18.7% (17.0%) Outsourced transport function being brought back in-house Fleet availability improved and additional capacity added towards end of the year 25 February Full Year Results 8

9 100 Middle East Continued Strong Performance Year on Year Rental Revenue Growth Machines on Hire 16% 14% 1, UAE Saudi Arabia Qatar Oman Kuwait 12% % 700 8% 600 6% % 300 2% 200 0% Jan-15 Apr-15 Jul-15 Oct-15 Jan-15 Apr-15 Jul-15 Oct Movement on pricing Indexed to Jan 2015 UAE Saudi Arabia Qatar Oman Kuwait Jan-15 Apr-15 Jul-15 Oct-15 Rental revenues ($) up by 7% - strong growth in the UAE, Qatar, Kuwait & Oman offset decline in Saudi Arabia Revenues driven by volume offsetting pricing decline of 6% Fleet expanded by c.700 units to support growing markets EBITA $28.1m ($25.9m) with improved margins at 32.4% (31.7%) Working capital management increasingly challenging in Saudi Arabia 2.7m negative impact on regional DSO Region remains self-funding -free cash generation expected to increase in 2016 as capex requirements moderate 25 February Full Year Results 9

10 Continental Europe Returning to Growth 14% Year on Year Rental Revenue Growth 4,900 Machines on Hire 12% 10% 4,700 8% 4,500 6% 4,300 4% 4,100 2% 3,900 0% -2% -4% 3,700 3, % 3,300-8% Jan-15 Apr-15 Jul-15 Oct-15 3,100 Jan Apr Jul Oct Movement on pricing Indexed to Jan 2015 Rental revenues ( ) up 3% - volume driven with pricing broadly stable Continued strong growth in France with improving revenue trends in Germany and Belgium EBITA for region of 10.1m ( 11.3m) operating profit growth in France insufficient to offset declines in Germany & Belgium EBITA margins of 10.4% (11.9%) German change programme underway to improve returns 90 Jan-15 Apr-15 Jul-15 Oct February Full Year Results 10

11 Earnings and Dividends Strong Growth p x Underlying EPS increased 15% to 17.95p (15.65p) Proposed total dividend up 17% to 5.40 pence Dividend cover at 3.3x (3.4x) firmly within target cover range of 3 to 4x Dividend growth reflects strong performance, strength of cash flows and confidence in future prospects DPS (p) EPS (p) DPS cover (x) 25 February Full Year Results 11

12 Increased Capex Largely Funded by Cash Flow m 140 Capex Rental fleet 89.9m Other assets 4.5m Opening Debt 2015 Operating Cash Interest/Tax Dividend Capex Asset Disposals Share issue Closing Debt Before FX FX Closing Debt 2015 Movement in unamortised debt issue costs Closing Debt February Full Year Results 12

13 Net Debt Strong Funding Position m Net Debt and Net Debt/EBITA Ratios x m Net Debt Net Debt/EBITDA Target net debt/ebitda ratio Maturity Profile of New Debt Facilities Headroom Drawn Increase in net debt reflects the increased capex programme in the year Net debt/ebitda at 1.39x remains comfortably within targeted range of x Operating comfortably within banking covenants Key debt statistics Facility headroom 35m 64% euro-denominated with 55% at fixed rates Blended interest rate 3.56% EBITA interest cover 9.4x (7.5x) EBITDA interest cover 18.7x (15.3x) Robust medium to long term finance structure in place with liquidity available February Full Year Results 13

14 Strong Cash Flow Dynamics Cash conversion ratios are strong All regions fund replacement capex from annual cash flows Expansion capex largely funded from annual cash flows Middle East self-funding despite increasing investment & increased working capital requirements 25 February Full Year Results 14

15 Capital Replacement Cycle Well Invested Fleet 2015 Closing fleet size: 21,007 Year Group Fleet Age (Years) Net capex for 2016 in line with previous guidance at c. 55m with ongoing flexibility to respond to market conditions Replacement programme ensures fleet is well invested will replace c.1,200 units in 2016 By end 2016: 47% of the fleet will have been refreshed over the last six years Fleet at cost is 560m with net book value of 278m Fleet underpins Group s net asset value of 223m (131p per share) net tangible asset value of 177m (104p per share) 25 February Full Year Results 15

16 Disciplined Capital Allocation Strategy Net capex over last six years: 217m Last six years net operating cash flow after interest & tax: 307m Averaging 0.9x depreciation Dividends paid over last six years: 27m Dividend cover reduced from 6.0x to 3.3x Net debt reduction over last six years: 63m Progress to date : Fleet utilisation increased 58% to 65% EBITA margin increased 11.4% to 17.3% ROCE increased 6.6% to 12.3% Dividend per share CAGR +40% per annum Net debt/ebitda improved 2.1x to 1.4x 25 February Full Year Results 16

17 Financial Summary - Results Ahead of Market Expectations Powerful rental business model with robust margins Strong financial discipline ROCE significantly ahead of WACC Well funded net debt underpinned by strong cash flows Modern well invested fleet Strong overall performance in the year Proposed total dividend up 17% to 5.40p reflecting confidence in future TOTAL GROUP REVENUE 248.6m Year ended 31 December 2014: 246.3m UNDERLYING EBITDA 85.9m Year ended 31 December 2014: 79.6m UNDERLYING EBITA 43.1m Year ended 31 December 2014: 39.3m UNDERLYING PRE-TAX PROFIT 38.5m Year ended 31 December 2014: 34.1m UNDERLYING BASIC EPS 17.95p Year ended 31 December 2014: 15.65p NET DEBT 119.2m Year ended 31 December 2014: 89.7m RETURN ON CAPITAL EMPLOYED 12.3% Year ended 31 December 2014: 12.1% DIVIDEND Underlying results are stated before amortisation of intellectual property and intangibles recognised on acquisitions and exceptional items ROCE stated before the exceptional impairment charge made in the year 5.40p Year ended 31 December 2014: 4.60p 25 February Full Year Results 17

18 Strategy & Group Development Don Kenny Group Chief Executive 25 February Full Year Results 18

19 Maintaining Clear Strategic Direction Strategy: to be market leader in our selected geographies placing safe access solutions at the heart of what we do Strategic Advantages driven by: Strong barriers to entry relative market share and depot infrastructure Customer focus exposure to diverse range of sectors, requirements identified, satisfaction monitored Fleet optimisation to meet market demand and exploit market opportunities Market leading operational capabilities hire desk, engineering & logistics Industry leading R&D BlueSky innovative solutions for safe access Goal: creation of long term shareholder value through the delivery of ROCE>WACC across the business cycle 25 February Full Year Results 19

20 Strategic Priorities Growth Grow UK market share Maintain market leadership Revenue generation & price leadership in local markets Leverage efficient cost base and invest in fleet Cash Flow Continue to manage Middle East working capital Maintain strong cash flow and balance sheet Grow business through self-funded capex Maintain progressive dividend policy ROCE Improve German ROCE to >11% Maintain disciplined capital allocation strategy ROCE > WACC over the cycle in all regions 25 February Full Year Results 20

21 UK Growing Market Share Supportive market environment Targeting market share gains in national and regional customer segments through enhanced BlueSky capabilities and new unique attachments Additional routes to market via Merchants and Re-hire partnerships driving growth in local customer segments Price leadership enhanced through differentiation, value-adding productivity improvements, health & safety excellence and time compression Ongoing self-help initiatives targeting further YOY margin improvement Targeted fleet investment for growth and improved fleet mix profile 25 February Full Year Results 21

22 Middle East Broad Based Regional Growth Capital allocation strategy within the region prioritises investment into those growth markets forecasting the best returns and liquidity dynamics Strong market growth dynamics supported by social needs infrastructure & commercial sectors - growth forecast in 2016 # (c.7%) and longer term Double digit penetration growth of powered access in next 3 years - driven by productivity improvements and health & safety awareness Reliance on oil & gas projects expected to reduce in near term as growth dynamics shift away from Saudi Arabia Country Total number of Machines 2015 Fleet growth YOY (%) Kuwait % Oman % Qatar % UAE 1, % KSA 1, % Bahrain 26-33% Total 3, % Average Utilisation 73% +300bps National strategic priorities driving broad based regional growth eg Dubai Expo 2020, Qatar World Cup 2022, Kuwait Clean Fuels projects, healthcare, education and transport projects in KSA # Ducker, December February Full Year Results 22

23 Continental Europe Driving Improved Returns EU markets emerging from sustained period of stagnation - German markets building momentum with France and Belgium starting to recover Germany is the priority: Operational change programme underway - complete end of 2016 Significant changes to improve performance and deliver ROCE >11% Establishing local champion strategy in seven key industrial conurbations Customer focus to drive better pricing, utilisation & revenue growth France continuing to grow market share - further deployment of local champion strategy and selective fleet investment Belgium broadening its customer base to reduce reliance on key projects and strengthen revenue generating resilience 25 February Full Year Results 23

24 Summary and Outlook Delivering on our Strategic Priorities Results in 2015 ahead of market expectations Best levels of EBITA margins, PBTA and ROCE in over 10 years Delivered on strategic priorities of Growth, Cash Flow and ROCE 17% increase in 2015 proposed dividend reflects Board s confidence in the future Flexible balance sheet and strong cash flow to fund growth and increase shareholder returns Confident of delivering another year of progress current trading in line with Board s expectations Group well positioned to deliver substantial shareholder value over the medium term Continued Focus on Growth, Cash Flow and ROCE 25 February Full Year Results 24

25 Q&A 25 February Full Year Results 25

26 Appendices Appendices Slide Numbers Germany, France & Belgium Performance Reconciliation of Profit Before and After Tax 30 Impact of FX Movement in Historical Depot, Fleet and Utilisation Numbers 32 Information About the Powered Access Industry February Full Year Results 26

27 Germany Revenues Stabilised in Year 15% Year on Year Rental Revenue Growth 2,400 Machines on Hire 10% 2,300 2,200 5% 2,100 0% 2,000 1,900-5% 1,800-10% 1, % Jan-15 Apr-15 Jul-15 Oct-15 1,600 1,500 Jan Apr Jul Oct 110 Movement on pricing Indexed to Jan 2015 Rental revenues ( ) were stable in the year at 48.9m ( 48.5m) Jan-15 Apr-15 Jul-15 Oct-15 Good growth in volumes through the year YoY pricing down by 2% but broadly stable through H2 EBITA declined to 3.5m ( 4.8m) Margins at 6.8% (9.4%) reflect increased resources to drive revenues yet to be fully absorbed 25 February Full Year Results 27

28 France Further Market Share Gains 30% Year on Year Rental Revenue Growth 1,700 Machines on Hire 25% 1,600 1,500 20% 1,400 15% 1,300 10% 1,200 5% 1, % Jan-15 Apr-15 Jul-15 Oct-15 1, Jan Apr Jul Oct Movement on pricing Indexed to Jan 2015 Jan-15 Apr-15 Jul-15 Oct-15 Rental revenues ( ) increased strongly by 11% to 30.3m ( 27.4m) Volume growth weighted to H2 Pricing environment broadly stable Market share increased in difficult trading environment EBITA increased to 5.0m ( 4.3m) Improved margins to 16.2% (15.1%) with revenue absorbing additional costs to support growth 25 February Full Year Results 28

29 Belgium Returning to Revenue Growth Year on Year Rental Revenue Growth Machines on Hire 25% % % % 800 5% 0% -5% % % % % Jan-15 Apr-15 Jul-15 Oct Jan Apr Jul Oct Movement on pricing Indexed to Jan 2015 Jan-15 Apr-15 Jul-15 Oct-15 Rental revenues ( ) declined by 2% to 13.8m ( 14.1m)- weighted to H1 Volumes increased strongly in H2 with YoY revenue growth of 9% in H2 Pricing declined by 9% in year Market remains challenging EBITA reduced to 1.6m ( 2.2m) Margins still reasonable at 10.6% (14.3%) - cost base managed to mitigate revenue decline 25 February Full Year Results 29

30 Reconciliation of Profit Before Tax to After Tax m PBTA Amortisation Exceptional Items PBT Tax PAT Effective tax rate at 21% on underlying profits (2014: 23%) 25 February Full Year Results 30

31 Impact of FX Movement in 2015 $ Average Spot Average Spot Dec Dec Dec US$ used as a proxy for Middle East currencies Sterling strengthened by 11% against the Sterling weakened by 7% against the US$ Impact of c. 3.6m on rental revenues: 7.7m less revenue from operations 4.1m more revenue from Middle East Impact of c. 0.5m on EBITA: 0.7m less EBITA from operations 1.2m more EBITA from Middle East Impact of c. 0.5m on PBTA 25 February Full Year Results 31

32 Historical Depot, Fleet and Utilisation Numbers DEPOTS UK Germany France Belgium Middle East Total AVERAGE RENTAL FLEET ,887 11,432 10,891 10,979 10, ,206 4,016 3,479 3,594 3, ,370 1,422 1,745 1,852 2, ,093 1,147 1,313 1,202 1, ,724 1,961 2,134 2,460 2, ,280 19,978 19,562 20,087 20, ,158 3,342 2,136 1,140 3,158 19,934 CLOSING RENTAL FLEET UTILISATION AVERAGES 11,544 11,111 11,206 11,453 10,380 10,362 4,093 3,753 3,376 3,419 3,329 3, % 47% 58% 58% 67% 58% % 53% 62% 63% 65% 60% % 57% 60% 55% 72% 62% % 56% 64% 63% 70% 63% % 58% 61% 58% 70% 64% % 60% 66% 65% 73% 65% 25 February Full Year Results 32 1,434 1,750 1,729 1,927 1,910 2,249 1,066 1,347 1,236 1,282 1,092 1,226 1,914 2,000 2,260 2,562 2,949 3,650 20,051 19,961 19,807 20,643 19,660 21,007

33 Powered Access Rental Companies Rank 2015 (2014) Company Country Fleet Size 2015 Fleet Size (1) United Rentals USA 99, ,000 2 (2) Sunbelt & A Plant USA & Europe 55,000 52,000 3 (3) Hertz USA 24,000 23,000 4 (5) Lavendon Europe 21,000* 19,000 5 (4) Nikken Japan 20,000 21,000 6 (7) NES Rentals USA 19,000 15,000 7 (6) Ahern Rentals USA 18,000 17,000 8 (9) Sunstate Equipment USA 16,000 14,000 9 (14) Aktio Japan 16,000 12, (10) Loxam Europe 16,000 14,000 Source Access International magazine, 2015; Lavendon position 31/12/15 Powered Access Manufacturers Manufacturer Source Management estimates, 2015 Country Estimated Annual Production Capacity Proportion of Lavendon Fleet Genie Industries USA 50,000 55% JLG Industries USA 65,000 8% Skyjack Pinguely-Haulotte Canada 50,000 12% Pinguely-Haulotte France 12,000 4% 25 February Full Year Results 33

34 Legal Disclaimer This presentation has been prepared to inform investment professionals about Lavendon Group plc ("Lavendon") and does not constitute an offer of securities or otherwise constitute an invitation or inducement to any person to underwrite, subscribe for or otherwise acquire securities in Lavendon or any of its subsidiary companies. The presentation and information communicated verbally to you may contain projections and other forward-looking statements that are necessarily subject to risks and uncertainties because they relate to future events. Our business and operations are subject to a variety of risks and uncertainties, many of which are beyond our control and, consequently, actual results may differ materially from those expressed or implied by any forward-looking statements and projections. Although Lavendon currently believes that the assumptions underlying these forward-looking statements are reasonable, any of the assumptions could prove inaccurate or incorrect and therefore there can be no assurance that any results contemplated in the forward-looking statements will actually be achieved. Nothing contained in this presentation or communicated verbally should be construed as a profit forecast or profit estimate. Lavendon undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. Some of the factors which may adversely impact some of these forward-looking statements are discussed in Lavendon's audited results for the year ended 31 December 2015 under Risks. This presentation contains supplemental non-gaap financial and operating information that Lavendon believes provides valuable insight into the performance of the business. Whilst this information is considered as important, it should be viewed as supplemental to the Lavendon's financial results prepared in accordance with International Financial Reporting Standards and not as a substitute for them. 25 February Full Year Results 34

35 25 February Full Year Results