Q3 FY18 Noteholder Presentation 29 TH AUGUST 2018
The Presenting Team David Flochel Gabriel Pirona CEO CFO
Agenda 01 SELECTA TODAY 02 TRADING UPDATE 03 FINANCIAL RESULTS 04 APPENDIX
01 Selecta Today
01 Selecta Today: the Leading Unattended Self-Service Coffee and Convenience Food Provider in Europe Revenue grew by >2x, from 612 million 1 to 1.4 billion² in past 12 months Increased density and scale of the business, with significant synergy savings 10 million consumers served daily Proven route-based business with unique logistics infrastructure and high density on the last mile Q3FY18 Selecta Business Model: Breakdown by Channels SELECTA: a Rapid Consolidation Key Global Partnerships Trading 20% Q3 Gross Revenue: 380m 4% Total Machine Numbers: ca. 455k 76% On-the-Go Workplace Services HOT DRINKS COLD DRINKS and SNACKS (IMPULSE) TRADING Premium Coffee and Other 55% 30% 15% 1 FY17 Selecta Net Revenue. Excludes disposed entities: East, Baltics and Selecta Finland 2 Pro-forma combined Group Net Revenue FY17 3 OC&C Report, management estimates No. 1 or 2 Position in European Market 3 No. 3 or 5 Position in European Market 3 5
01 Leading Market Positions and Scale Drive Superior Returns SELECTA MANAGE M EN T PRESENTA T I O N SEPTEMBE R 2018 ~4 500 Route Merchandisers Strategic Partnership to Enhance Brand Recognition Leading European footprint positions us as Partner of Choice with global coffee players Natural partner for leading facility management & catering customers as well as large corporates ~1 500 Route Technicians > 5 000 Vehicles Ability to Invest in Best-in-Class Customer Experience Ability to invest in latest technologies Unique modern tech development (e.g. touchscreen user interface) Detailed database and insights into consumption preferences and trends Scale to Drive Operation Efficiency, Margin Expansion, and Superior Returns Centralized planning and tech support ~150 Planners Negotiate best procurement arrangements Highest density yields superior efficiency and savings Largest machine buyer in Europe, resulting in more efficient capex spend and being the partner of choice for machine manufacturers 6
01 Successfully Strengthened #1 Market Leader Position in Europe Ambition Values Strategies Growth Pillars Guided by our Vision & Mission Guided by our Vision & Mission Accelerate our market leadership in Europe with our customers and consumers in mind Being number 1 or 2 in top markets in which we operate Customer Focus Teamwork & winning attitude Integrity Excellence In Execution 01 02 03 04 05 Self-Service Retail Experience Deliver best solutions to consumers by offering flexible payments, loyalty programs & leveraging data to improve offering Route to Market Excellence Drive customer acquisition by selling unique concepts, opening new routes and standardizing sales processes, and maximize customer base value through high retention, profitability and satisfaction Powered by Great People Attract talent and retain capable organization, in line with core values, for the growth and transformation of the company Operational Excellence Deliver high quality service at highest efficiency through continuous improvement, standardization and technology in order to maximize customer satisfaction, retention and profitability Innovation Leadership Set industry standard for innovation, leveraging the latest technologies to enhance our offering in Self-Service Retail and beyond Improved Retention Rates Growing Sales / Machine / Day + Driven by Strong Management Teams Bolt-On M&A Opportunities Innovation Pipeline New Client Wins Vision: Selecta is the European leader in unattended self-serve coffee and convenience food, at the workplace and on-the-go Mission: Selecta is dedicated to providing great quality coffee brands, convenience food & beverages concepts 7
02 Trading Update
02 Reconfirmation of FY18 Outlook Update at the End of Q3 ON TRACK TO DELIVERY FULL-YEAR 2018 GUIDANCE TREND UNDERPINNED BY IMPROVING LEADING INDICATORS FOR ORGANIC GROWTH 1 Gross sales to increase by +2.0% (at constant scope and FX rate 1 ) Business is growing as planned in spite of the ongoing major business transformation and the impact of the SNCF strikes in France 2 Adjusted EBITDA for the full year to increase to 245-255m (at constant scope and FX rate 1, consistent with prior guidance) Pro-forma EBITDA (including pro-forma unrealised synergies) in excess of 300m 3 Synergy program to be cash positive Total 2018/2020 synergy program of 75m 4 (at constant scope and FX rate 1, consistent with prior guidance) Cash capex to be 100-110m (at constant FX rate 1 ) Strong pipeline of commitments Strong uplift in proposals submitted Enhanced density; stronger lever across countries and borders Increase in retention rate Improvement in average sales per machine¹ AND A CONSISTENT, SUCCESSFUL AND ACCRETIVE STRATEGY OF BOLT-ON M&A Successful implementation of on-going M&A activity: goal to deliver 3-5% sales per annum as well as delivering immediate cost synergies Scale continues to make Selecta the consolidator of choice - Completion of acquisition of Stop & Go S.r.l. in Italy - recent acquisition (Q4, August 2018) of Express Vending in the UK 1 Constant foreign currency rates applied: CHF/EUR 1.15; SEK/EUR 9.65; GBP/EUR 0.88 9 9
02 Financial Overview: Q3 FY18 Q3 FY18 revenue in line with expectations Q3 FY18 reported growth +2.1%, despite impact of French railway strikes ( 2m less of sales): LfL growth 2.5% Q3 FY18 adjusted EBITDA at 59.4 or 15.6% margin to gross revenue Underlying Adjusted EBITDA expansion of +2% despite further costs from former PR businesses (as expected) and the impact from loss of earnings due to French rail strikes, as well as deferred extra income (to Q4) Capex efficiencies contributing to the 10.4% increase in EBITDA less net capex ratio Gross revenue ¹ ² Adjusted EBITDA¹ Selecta ( m) +2.1% 372.2 380.0 15.6% Margin +2.0% 58.2 59.4 +10.4% 23.7 26.1 Adjusted EBITDA less net capex¹ ³ Q3 FY17 Q3 FY18 1 Constant foreign currency rates applied: CHF/EUR 1.15; SEK/EUR 9.65; GBP/EUR 0.88. Selecta /PR/Argenta adjusted for subsidiary disposed (Selecta Finland) 2 Revenue gross of vending fees 3 Net capital expenditures is defined as capital expenditures less net book value of disposals of vending equipment 10
Q 3 FY18 N O T E H O L D E R P R E S E N T A T I O N 02 3 Focused Drivers of Organic Growth Best-in-Class Retention Growing Sales / Machine / Day (in ) New Business Pipeline Acceleration ( m) (% retention rate) 92.5% 94.5% 96% +4.9% +3.2% +1.3% Contract signed Agreed Negotiation Proposal sent 28 26 10.5 11.0 10.8 11.1 11.1 11.3 21 14 25 16 23 24 Q4 17 Q3 18 Near term target Q1 17 Q1 18 Q2 17 Q2 18 Public Q3 17 Q3 18 29 61 55 32 80 47 85 47 Dedicated task force in FR/UK Standardised reporting tracking progress Recent renewal successes Pricing, assortment & availability optimisation with telemetry data Cashless Private Uplifting c.2,500 underperforming machines YTD Q1 18 Q2 18 Q3 18 Q4 18 CRM in all markets driving discipline Q3 FY18 closed very positively notable wins Other Customer/Partner Development Highlights AWARDED OUTSTANDING SUPPLIER OF THE YEAR BY SHELL FOR FRESH FOOD AND DRINK Publifon CONTRACT RENEWED FOR 3 YEARS 11 11
03 Financial Results
03 Pro Forma P&L Summary at Actual Rates¹ 3 Months ended 30 th June 2018 Gross revenue In spite of difficult trading conditions, +2.1% at constant scope² and currency ³ (- 6.4m FX impact), +2.5% LfL. The best performance came from the Public and Trading channels. Net revenue Growth YoY at CC of 0.8%, +1.0% LfL with increases in vending fees in the Public channel in the Central markets and UK (higher petrol station vending fees) Adjusted EBITDA Flat YoY at actual rates, +2.0% at CC Negative impact of the rail strikes (SNCF) in France (~ 1.2 m) EBITDA Adjustments 12.7m in Q3 FY18, flat on Q2 Synergy costs ( 10.0m synergy project costs) in the quarter driven by acceleration of initiatives resulting from program upgrade (Group procurement, French integration) and ongoing integration actions (UK and other entities) Reported EBITDA - 4.1m in Q3FY18 vs Q3FY17 m Q3 FY17 Q3 FY18 Variance Variance % Gross Revenue 375.6 377.0 1.4 0.4% Vending fees (30.2) (35.0) (4.8) 15.8% Net Revenue 345.4 342.0 (3.3) -1.0% Materials and consumables used (132.0) (128.7) 3.3-2.5% Gross Profit 213.4 213.3 (0.1) 0.0% % margin on net revenue 61.8% 62.4% 0.6 pts Adjusted employee benefits expense (111.3) (105.3) 6.0-5.4% Adjusted other operating expenses/income (43.2) (49.3) (6.1) 14.1% Adjusted EBITDA 59.0 58.8 (0.2) -0.3% % margin on gross revenue 15.7% 15.6% -0.1 pts Restructuring / Redundancy costs (1.7) (1.8) (0.2) Other synergy project costs - (10.0) (10.0) Pelican Rouge acquisition costs (at SEL and PR) (5.0) - 5.0 Other adjustments (2.1) (0.8) 1.3 Reported EBITDA 50.2 46.1 (4.1) -8.2% % margin on gross revenue 13.4% 12.2% -1.1 pts 1 At actual FX rates 2 Selecta constant scope adjusted for subsidiary disposed (Selecta Finland). FY17 numbers are a pro forma amalgamation of Selecta, Pelican Rouge and Argenta results 3 Constant foreign currency rates applied: CHF/EUR 1.15; SEK/EUR 9.65; GBP/EUR 0.88 13 13
03 Result by Segment at Constant Rates¹ 3 Months ended 30 th June 2018 Net Revenue by Segment + 2.9m YoY at constant currency and constant scope basis² Slight growth in Switzerland, Benelux, Italy, Spain and Sweden offset by decrease in turnaround markets like France and UK South, UK & Ireland: Central: Approx 36% of total revenue; uplift due to better than expected performance in Spain and Italy Approx 37% of total revenue; down by 2.5m largely due to impact of French railway strikes 342.1 Q3 FY17 Constant Scope South, UK & Ireland ( m) Net Revenue by region 3 1.5 (2.5) 3.9 345.0 Central North Q3 FY18 Constant Scope North: Approx 27% of total revenue; up by 3.9m with rapid growth in Denmark, Norway on the back of new wins rollout, and trading activity in Sweden and Belgium Adjusted EBITDA by Segment 58.2 2.3 (2.1) ( m) Adjusted EBITDA by region 0.1 0.8 59.4 + 1.2m vs LY at CC sharp acceleration of profit generation expected in Q4 South, UK & Ireland: + 2.5m driven by synergies in UK and Spain Central: - 2.1m North: Flat due to lower margins in Trading channel HQ: + 0.8m due to synergies savings and cost management Q3 FY17 Constant Scope South, UK & Ireland Central North HQ Q3 FY18 Constant Scope 1 Constant foreign currency rates applied: CHF/EUR 1.15; SEK/EUR 9.65; GBP/EUR 0.88 2 Selecta constant scope adjusted for subsidiary disposed (Selecta Finland). FY17 numbers are a pro forma amalgamation of Selecta, Pelican Rouge and Argenta results 3 Revenue net of vending fees 14 14
03 Liquidity at 30 June 2018 Liquidity Summary Cash at bank up from 85.9m to 101.6m end June Senior notes of 1,306.1m 765m senior secured 5.875% 2024 325m senior secured floating notes 2024 CHF250m senior secured 5.875% 2024 Total accrued interest at June 42.8m Revolving credit facility: 15m drawn in June Group available liquidity 236.6m m Dec 17 Jun 18 Cash at bank 85.9 101.6 Factoring facilities 5.0 7.2 Reverse factoring facilities 7.6 4.3 Revolving credit facility 30.0 15.2 Senior notes 934.2 1,306.1 Accrued interest 7.1 42.8 Finance leases 41.5 43.2 Total senior debt 1,025.3 1,418.7 Net senior debt 939.4 1,317.1 Adjusted EBITDA last twelve months ¹ ² 197.1 235.2 Leverage ratio 4.8x 5.6x Available liquidity ³ 155.9 236.5 Leverage Ratio Pro-forma leverage ratio (post synergies) of 4.5x m Jun 18 Adjusted EBITDA last twelve months² 235.2 Leverage ratio excluding synergies 5.6x Pro-forma leverage ratio (post synergies) 4.5x 1 Dec 17 adjusted EBITDA last twelve months based on Selecta and Pelican Rouge only 2 June 2018 adjusted EBITDA last twelve months based on pro forma results of Selecta, Pelican Rouge and Argenta. 3 Includes cash at bank and unused revolving credit facility 15 15
03 Cash Flow Statement at Actual Rates 3 Months ended 30 th June Cash Flow Statement at Actual Rates YTD Free Cash Flow impacted by adverse working capital changes, due to Pelican Rouge acquisition and pre-integration costs cashed out in H1 FY18, and adverse movements in Q2 and Q3 expected to be reversed in Q4 Q3 negative financing cash outflow driven by Refinancing transactions costs payout, whereas 15m was drawn on the Revolving Credit Facility (RCF) m Q3 FY18 YTD FY18² EBITDA 46.1 129.2 (Profit) / loss on disposals -1.6-6.0 Cash changes from other operating activities -1.9-2.8 Change in working capital and provisions -8.8-89.9 Net cash from operating activities 33.8 30.6 Capex -27.5-71.0 Finance lease payments -5.3-14.0 EBITDA less net capex (comparable scope and constant rates)¹ ³ m Q3 FY17 Q3 FY18 Variance % Adjusted EBITDA 59.0 58.8-0.2 Reported EBITDA 50.2 46.1-4.1 Net capexª 32.1 29.3-2.8 Adjusted EBITDA less net capex³ 26.9 29.5 2.6 On a pro forma basis, adjusted EBITDA less net Capex increases by 9.7% at actual rates and 10.4% at constant rates This improvement is underpinned by capital intensity efficiencies, through the optimisation of investment in new machines and the expansion of external lease / funding schemes Interest received 0.0 0.1 Proceeds from sale of subsidiaries & other proceeds 0.9 13.6 Net cash used in investing activities excluding M&A -31.9-71.4 Free cash flow 1.8-40.9 Acquisition of subsidiary net of cash acquired -9.8-231.7 Free cash flow including acquisition -8.0-272.6 Proceeds from capital increase - - Proceeds/ repayment of loans and borrowings 16.1 343.1 Interest paid and other financing costs -5.5-43.4 Financing related financing costs paid -19.4-51.6 Other 6.8 Net cash used in financing activities -8.7 254.9 Total net cash flow -16.7-17.7 ¹ At comparable scope, i.e. combining Selecta, Pelican Rouge and Argenta for both Q3 FY18 and Q3 FY17, and at constant foreign currency rates: CHF/EUR 1.15; SEK/EUR 9.65; GBP/EUR 0.88 ² No pro forma Q3 FY17 numbers available. YTD FY18: excludes Argenta cash flow for first 4 months, as acquisition happened in month 5 (Feb 2018) 3 Net capital expenditures is defined as capital expenditures less net book value of disposals of vending equipment 16 16
03 Outlook for 2018 Full Year ON TRACK TO DELIVER AS PROMISED 1 Gross sales to increase by +2.0% (at constant scope and FX rate 1 ) Business is growing as planned 2 Adjusted EBITDA for the full year to increase to 245-255m (at constant scope and FX rate 1, consistent with prior guidance) Pro-forma EBITDA (including pro-forma unrealised synergies) in excess of 300m 3 Synergy program to be cash positive Total 2018/2020 synergy program of 75m (at constant scope and FX rate 1, consistent with prior guidance) 4 5 Cash capex to be 100-110m (at constant FX rate 1 ) Free Cash Flow generation that covers our fixed cash charges in FY18 1 Constant foreign currency rates applied: CHF/EUR 1.15; SEK/EUR 9.65; GBP/EUR 0.88 17 17
04 Appendix
04 Pro Forma P&L Multiple Rate View 3 Months ended 30 th June 2018 m Q3 FY17 @ CC rates 1,2 Q3 FY18 @ CC rates 1,2 Variance Variance % Q3 FY17 @ ACT FY18 rates 2 Q3 FY18 @ ACT FY18 rates 2 Variance Variance % Gross Revenue 372.2 380.0 7.8 2.1% 369.3 377.0 7.7 2.1% Vending fees (30.1) (35.0) (4.9) 16.4% (30.1) (35.0) (4.9) 16.4% Net Revenue 342.1 345.0 2.9 0.8% 339.2 342.0 2.8 0.8% Materials and consumables used (130.9) (129.7) 1.1-0.9% (129.9) (128.7) 1.2-0.9% Gross Profit 211.2 215.2 4.0 1.9% 209.3 213.3 4.0 1.9% % margin on net revenue 61.7% 62.4% 0.6 pts 61.7% 62.4% 0.7 pts Adjusted employee benefits expense (110.2) (106.2) 4.1-3.7% (109.3) (105.3) 4.1-3.7% Adjusted other operating expenses/income (42.8) (49.6) (6.9) 16.1% (42.4) (49.3) (6.8) 16.1% Adjusted EBITDA 58.2 59.4 1.2 2.0% 57.6 58.8 1.2 2.1% % margin on gross revenue 15.6% 15.6% -0.8% 15.6% 15.6% 0.9% Restructuring / Redundancy costs (1.7) (1.9) (0.2) (1.6) (1.8) (0.2) Other synergy project costs - (8.8) (8.8) - (8.7) (8.7) Pelican Rouge acquisition costs (at SEL and PR) (4.8) - 4.8 (4.8) - 4.8 Other adjustments (2.1) (2.0) 0.1 (2.1) (2.2) (0.1) Reported EBITDA 49.6 46.8 (2.8) -5.7% 49.1 46.1 (3.0) -6.1% % margin on gross revenue 13.3% 12.3% -1.0 pts 13.3% 12.2% -1.1 pts 1 Selecta constant scope adjusted for subsidiary disposed (Selecta Finland). FY17 numbers are a pro forma amalgamation of Selecta, Pelican Rouge and Argenta results 2 Constant foreign currency rates applied: CHF/EUR 1.15; SEK/EUR 9.65; GBP/EUR 0.88 19 19