Zigup Plc · LSE:ZIG
Zigup — Northgate — FY2018 Earnings Presentation
30 slides from Zigup's earnings presentation, June 2018
Slide 1: Northgate
N@RTHGATE
Slide 2: Agenda
Agenda - Introduction Andrew Page - Highlights Kevin Bradshaw - Financial Review David Tilston - Business Review Kevin Bradshaw -Q&A N@RTHGATE
Slide 3: N@RTHGATE
N@RTHGATE
Slide 4: FY 2018 Highlights
® FY 2018 Highlights A key year of transition: - New growth strategy developed - Restructured UK, applied self-help, returned VOH to growth - Executed transactions adding 3,400 vehicles in UK + Step changed VOH growth in Spain + Minimum term propositions launched — growing strongly - Implemented fle
Slide 5: David Tilston, CFO June 2018
David Tilston, CFO 26 June 2018 N@RTHGATE
Slide 6: Higher revenue and EBITDA, lower operating profit
Higher revenue and EBITDA, lower operating profit FY 2018 FY 2017; % change Total Revenue 701.7 667.4 +5.1% Underlying EBITDA 251.0 241.3 +4.0% Underlying Operating profit 68.3 84.6 -19.2% Underlying PBT 57.0 75.0 -24.0% Underlying EPS 34.8p 47.3p -26.4% Dividend Per Share 17.7p 17.3p +2.3% 6 N@RTHG
Slide 7: Disposal profit decline drove lower operating profits
Disposal profit decline drove lower operating profits Group underlying operating profit movement (£m) £m 84.6 + Disposal profits 80.0 > UK down -47% 70.0 13.9 — 07 68.3 > Spain down -42% 60.0 > Includes £4.2 million negative impact from previous depreciation rate changes 50.0 + Rental profits >» UK
Slide 8: Free cash flow negative due to higher capex
@ Free cash flow negative due to higher capex FY 2018 FY 2017 Change £m £m £m Underlying operating cash generation 240.5 238.3 2.2 New vehicle purchases (486.9) (346.3) (140.6) Vehicle disposal proceeds 186.9 177.0 9.9 Other capex (11.0) (4.8) (6.2) Net tax and interest (22.2) (21.2) (1.0) Other fin
Slide 9: Cash flow positive before growth capex
@ Cash flow positive before growth capex FY 2018 FY 2017 Change £m £m £m EBITDA 251.0 241.3 Net Replacement Capex (185.8) (172.9) (12.9) EBITDA — Net Replacement Capex 65.2 68.4 (3.2) Growth Capex (incl. inorganic) (125.2) (1.2) (124.0) Total Capex (incl. inorganic) (311.0) (174.1) (136.9) + “Steady
Slide 10: Bank facilities extended
@ Bank facilities extended 10 Facility Drawn Headroom ' Borrowing UK Bank Facility 457 343 114 Jul. 2021 2.38% Loan Notes 88 88 - Aug. 2022 2.38% Other Loans 23 1 12 Nov. 2018 0.94% Total 568 442 126 2.27% + Maturity date of majority of UK Bank facility extended in April 2018 by one year, to July 20
Slide 11: Leverage covenants increased
@ Leverage covenants increased 1 April Headroom Po ues ani ciel Interest Cover 6.22x £34m (EBIT) 9.23x Loan to Value 70% 43% £277m (Net Debt) 37% Debt Leverage 2x 1.76x £31m (EBITDA) 1.31x + Leverage covenant restriction, calculated in accordance with banking documentation, increased to 2.75 x when
Slide 12: Business Review
Business Review Kevin Bradshaw, CEO 26 June 2018 N@RTHGATE / Mehicle Hire N@RTHGATE
Slide 13: Recap of the drivers of our rental strategy
@ Recap of the drivers of our rental strategy Structural Growth of Term Hire & Rental % LCVs in vehicle parc 14.3% 14.0% 12.0% 10.3% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% 2011 2017 =Term Hire = Flex Rental Sources: BVRLA, SMMT, DFT, Sewells, OC&C analysis 13 Strategic Opportunities: Flex - Defend & grow sh
Slide 14: UK VOH returned to growth
@ UK VOH returned to growth Average VOH growth vs. prior year quarter 3.2% : -2.0% 5.9% 6.5% 74% Q4'17 at's Q2'18 Q3'18 Q4'18 Closing VOH at Q4’18 up 6.9% (organic) 14 Driven by self-help actions: - Extensive leadership changes - Marketing function rebuilt - Upgraded telemarketing & digital capabili
Slide 15: Additional 3,400 UK vehicles acquired
@ Additional 3,400 UK vehicles acquired £36m 3,400 3,400 200 + 2,000 Vehicles on Hire » * Competitor customers converted + Rates & contracts renegotiated 2000 + Existing Northgate customers mFY 2019 a FY 2018 3,200 > * 1,400 Vehicles * To be redeployed or sold CASH VEHICLES VEHICLE ACQUIRED STATUS 1
Slide 16: UK margins reflected growth strategy
UK margins reflected growth strategy UK Rental Margin “) % 10.9% 1.0% i 0.5% 0.1% [i 8.7% 0.6% FY 2017 Pricing Mix Utilisation Costs FY 2018 Notes : (1) Reported underlying rental profit / reported rental revenue 16 More competitive pricing Less prepared to lose business in a market with robust comp
Slide 17: Organic VOH growth & acquisition drove UK fleet growth
Organic VOH growth & acquisition drove UK fleet growth 17 UK Fleet Changes Vehicles 70,000 3,200 60,000 50,000 46,400 40,000 30,000 20,000 10,000 Note : Closing fleet includes acquired vehicles awaiting redeployment or sale Vehicle sales FY 2018 FY 2017 De-fleeted 15,800 18,200 Third-party & stock m
Slide 18: Spain VOH growth rate stepped up
Spain VOH growth rate stepped up Average VOH growth vs. prior year quarter 14.2% 14.1% 11.5% 8.1% 3.1% Q417 Q118 Q218 Q3'18 Q418 FY 2018 Closing VOH up 13.3% to 42,700 18 Favourable macro conditions + Service sector thriving + Shift out of LCV ownership into minimum term Northgate out-performing mar
Slide 19: Spain margins broadly flat
19 Spain margins broadly flat Spain Rental Margin (1) % 15.6% 2.2% 15.4% 1.5% [0.0% i FY 2017 Pricing Mix Utilisation Costs FY 2018 Notes : (1) Reported underlying rental profit / reported rental revenue More competitive pricing Product mix changes Higher proportion of minimum term contracts — now a
Slide 20: VOH growth drove Spain fleet growth
VOH growth drove Spain fleet growth 20 Vehicles 60,000 50,000 40,000 30,000 20,000 10,000 0 Spain Fleet Changes 18,900 -12,700 41,800 Opening fleet Purchases Defleets L 48,000 Closing fleet Vehicle sales FY 2018 FY 2017 De-fleeted 12,700 13,500 Stock movement 300 (800) Total vehicle sales 13,000 12,
Slide 21: New fleet optimisation policy
New fleet optimisation policy > Maximise cash returns > Previous disposal ages > Lower volume of FY 2019: - UK 39 months replacement venicle > Net replacement > Reduce net debt - Spain 41 months purchases and sales capex 25-35% lower > Lower net replacement than FY2018 . capex > Improve ROCE >» New
Slide 22: Outlook & guidance — UK & Ireland
Outlook & guidance — UK & Ireland + New guidance incorporates evolution of strategy, recent trading including acquired vehicles, and Ireland + \VOH growth in late FY 2018 continued into FY 2019 * Disposal profits a less significant component of guidance after depreciation rate change Previous UK Gui
Slide 23: Outlook & guidance — Spain
Outlook & guidance — Spain + New guidance incorporates evolution of strategy and recent trading + \VOH growth in late FY 2018 continued into FY 2019 * Disposal profits a less significant component of guidance after depreciation rate change Previous Guidance (October 2017) Updated Guidance FY 18 FY 1
Slide 24: Outlook and Guidance - Group
Outlook and Guidance - Group FY 2019: Rental Profit > Disposals Profit > Interest Charge > Net Replacement Capex > Organic growth capex > ROCE > + e jet leverage > Expected to grow strongly, driven by continuing VOH growth and expanding margins in Spain Expected to be significantly lower due to flee
Slide 25: Summary of Northgate equity story
@ Summary of Northgate equity story 25 Market leader in large, growing profitable markets Growth underpinned by structural shift from ownership to rental Historically under-managed, substantial self-help upside New, compelling growth strategy New, strong UK management, supplementing strong Spanish t
Slide 26: N@RTHGATE
N@RTHGATE
Slide 27: Appendix
) APPENDIX
Slide 28: Group revenue movement
Group revenue movement 28 800.0 700.0 667.4 24.2 5.0 ~~ -8.4 oy oe gs a s ot ye? oe 701.7 UK rental revenue -3.1% > Average VOH -2.9% Spain rental revenue +14.8% > Average VOH +11.9% UK disposals +3.5% > Volumes -2.9% Spain disposals +16.3% > Volumes +2.4% Ireland +11.2% Includes £12.2 million FX be
Slide 29: Increase in Net Debt
@ Increase in Net Debt Net debt increased by £129.4 million 450 238 [uy pS * Positive “steady-state” cash generation 4 222 — a 125.2 > EBITDA — Net replacement Capex £51.9 million 350 309.9 300 . . : 250 185.8 * Increase in debt driven mainly by £112.8m growth capex to expand fleet 50 -251.0 ° > = x
Slide 30: Depreciation Rate Changes
Depreciation Rate Changes Previous Rate Changes: Cumulative impact Year-on-year impact Group UK & Ire. Spain £m £m £m £m 5.3 5.3 5.3 - 43 (1.0) (1.0) = 15.7 11.4 8.4 3.0 12.0 (3.7) (5.9) 2.2 30 April 2017 63 (5.7) (4.1) (1.6) 24 (4.2) (2.7) (1.5) 24 (2.1) 3 (2.1) 30 Rate Changes with effect from 1 M