Slide 1: Responsible investment in growth
Responsible investment in growth Second quarter results | 31 October 2015 Issued: 9 December 2015
Slide 2: Legal notice
Legal notice This presentation has been prepared to inform investors Some of the factors which may adversely impact some of and prospective investors in the secondary markets these forward looking statements are discussed in the about the Group and does not constitute an offer of Principal Risks and
Slide 3: Overview
Overview Another strong financial performance ̶ Group revenue +18% ̶ First half profits of £343m (2015: £266m) ̶ Group RoI of 19% Markets are strong with favourable structural and cyclical trends We have executed well with significant share gains Capital guidance increased from £1bn to £1.1b
Slide 4: Suzanne Wood, Finance director
Suzanne Wood Finance director Page 3 Second quarter results | 31 October 2015
Slide 5: Q2 Group revenue and profit
Q2 Group revenue and profit Q2 (£m) 2015 2014 Change1 Revenue 649 529 16% - of which rental 589 478 17% Operating costs (340) (283) 14% EBITDA 309 246 19% Depreciation (107) (85) 21% Operating profit 202 161 18% Net interest (20) (16) 18% Profit before amortisation and tax 182 145 18% Earnings per s
Slide 6: H1 Group revenue and profit
H1 Group revenue and profit H1 (£m) 2015 2014 Change1 Revenue 1,267 987 21% - of which rental 1,129 896 18% Operating costs (675) (532) 20% EBITDA 592 455 22% Depreciation (210) (160) 23% Operating profit 382 295 21% Net interest (39) (29) 27% Profit before amortisation and tax 343 266 21% Earnings
Slide 7: H1 Sunbelt revenue and profit
H1 Sunbelt revenue and profit H1 ($m) 2015 2014 Change Revenue 1,685 1,368 23% - of which rental 1,504 1,247 21% Operating costs (866) (702) 23% EBITDA 819 666 23% Depreciation (272) (217) 25% Operating profit 547 449 22% Margins - EBITDA 49% 49% - Operating profit 32% 33% Excluding gains on equip
Slide 8: H1 A-Plant revenue and profit
H1 A-Plant revenue and profit H1 (£m) 2015 2014 Change Revenue 178 166 8% - of which rental 157 147 7% Operating costs (109) (106) 4% EBITDA 69 60 15% Depreciation (34) (30) 12% Operating profit 35 30 18% Margins - EBITDA 39% 36% - Operating profit 20% 18% Page 7 Second quarter results | 31 October
Slide 9: Capital expenditure update
Capital expenditure update 2015 2016 plan 2016 outlook Sunbelt ($m) - rental fleet 1,268 1,200 – 1,300 1,300 – 1,400 - non rental fleet 100 100 100 1,368 1,300 – 1,400 1,400 – 1,500 A-Plant (£m) - rental fleet 154 130 – 150 125 – 135 - non rental fleet 19 15 15 173 145 – 165 140 – 150 Group capital
Slide 10: Cash flow
Cash flow Significant reinvestment in our rental fleet H1 H1 (£m) 2015 2014 Change EBITDA before exceptional items 592 455 30% Cash conversion ratio1 85.1% 82.7% Cash inflow from operations2 504 377 34% Payments for capital expenditure (733) (534) Rental equipment and other disposal proceeds receive
Slide 11: Net debt and leverage
Net debt and leverage Net debt to EBITDA continues to reduce as we invest in the fleet 3.5 Oct Oct 3.1 Leverage (£m) 2015 2014 3.0 3.0 2.7 Net debt at 30 April 1,687 1,149 2.5 2.4 Translation impact (9) 69 2.5 2.1 Opening debt at closing exchange rates 1,678 1,218 2.0 1.9 2.0 Change from cash flows
Slide 12: Geoff Drabble, Chief executive
Geoff Drabble Chief executive Page 11 Second quarter results | 31 October 2015
Slide 13: Capitalising on structural and cyclical factors to drive revenue growth
Capitalising on structural and cyclical factors to drive revenue growth Six months ended 31 October 2015 Quarter ended 31 October 2015 BOLT-ONS TOTAL RENTAL BOLT-ONS TOTAL RENTAL SAME STORE SAME STORE AND ONLY REVENUE AND ONLY REVENUE GROWTH +13% + GREENFIELDS = GROWTH GROWTH +13% + GREENFIELDS = GR
Slide 14: Sunbelt revenue drivers – rental only
Sunbelt revenue drivers – rental only Continuation of strong performance Average fleet on rent Physical utilisation 80% +23% +22% 70% 60% 50% 2013-14 40% 2014-15 2015-16 30% Q1 Q2 May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr Volume growth of $675m (2014: $519m) Fleet size and growth +24% +32% Y
Slide 15: Good progress across the business
Good progress across the business Driven by same-store growth Q1 Same-stores* Greenfields* Bolt-ons* Oil & Gas Total Proportion of revenue 89% 4% 4% 3% 100% Fleet on rent – % change +13% +1,084% +365% +25% +23% Net yield +1% +32% +12% -30% 0% Physical utilisation – actual 74% 66% 63% 54% 72% Dollar
Slide 16: Rental penetration will continue to grow our market
Rental penetration will continue to grow our market 2010 2015 2020s Rental penetration Low 40s % Low 50s % Mid 60s % Market growth +20 to 25% +20 to 25% Why? Rental industry a more viable option Cost of ownership (Tier 4) Legislation – Health & Safety, Environmental, Department of Transport Pa
Slide 17: We have the right fleet to benefit from these changes
We have the right fleet to benefit from these changes Rental penetration Rental penetration upside c. 80% Low c. 80% c. 30% c. 30% High c. 10% Page 16 Second quarter results | 31 October 2015
Slide 18: The big are getting bigger which provides further opportunity
The big are getting bigger which provides further opportunity US market share 2010 2015 2020s 6% 4% 13% United Rentals 4% Others RSC 3% 8% Sunbelt 7% - mid 3% Top Hertz Equipment Rental Co. (HERC) 30s Top 4-10 61% 47% 100 Top 11-100 10% - mid Others 15% 60s 19% Shift to larger players +33% +20 to 25
Slide 19: We have the right customer mix to benefit from these changes
We have the right customer mix to benefit from these changes 2010 2015 Small to mid sized Key accounts Cash +257% +435% $940m +190% $255m 12% 8% $1,875m $825m $230m $1,700m 20% 30% $1,400m $590m $195m $465m $180m $1,150m 68% 62% $950m $340m $160m $265m $800m $215m $140m $730m $135m Small to mid size
Slide 20: Further share gains available
Further share gains available US market share Capital spend 16 12% 15% 14 12 9% 10 $bn 8% 8 6% 6 4% 4 3% 2% 2 0 0% 2003 2010 2015 2020s 2003 2005 2007 2009 2011 2013 2015F Rental industry capital expenditure Sunbelt as % of industry total Source: IHS Global Insight (October 2015) Achieved through;
Slide 21: We have increased our footprint and gained significant share
We have increased our footprint and gained significant share April 2012 October 2015 0% market share Stores – April 2012 10% Store growth – May 2012 to October 2015 15+% Page 20 Second quarter results | 31 October 2015
Slide 22: Further upside available
Further upside available A further 250 locations in top 100 markets alone Store openings Further opportunity in major markets Greenfields Acquisitions Total Top 100 US markets FY 13 17 6 23 Clustered: 36 markets – 355 stores FY 14 24 15 39 Non clustered: 56 markets – 114 stores FY 15 31 51 82 No pre
Slide 23: Profitable and responsible growth
Profitable and responsible growth Further margin progression available as greenfields and bolt-ons mature Greenfields Acquisitions FY13 (17) FY14 (24) FY15 FY13 FY14 FY15 FY13 FY14 FY15 FY14 FY15 FY15 FY13 FY14 FY15 FY14 FY15 FY15 Rental revenue 12 37 48 20 60 22 Rental revenue 10 38 45 16 46 63 EBI
Slide 24: The market
The market The majority of our markets are very strong with good long-term prospects 200 Construction activity by cycle (T=100 based on constant dollars) Rental revenue forecasts 2015 2016 2017 180 160 Industry rental revenue +7% +7% +7% 140 Source: IHS Global Insight (October 2015) 120 100 1975 - 1
Slide 25: Structural drivers and diversification have created greater opportunities
Structural drivers and diversification have created greater opportunities than construction markets alone 600 500 400 Construction starts (value) 300 Construction starts - Constant 2000 dollars 200 (volume) Sunbelt revenue 100 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016F
Slide 26: A-Plant revenue drivers
A-Plant revenue drivers Growth continues backed by fleet investment Average fleet on rent 80% Physical utilisation +10% +7% 70% 60% 50% 2013-14 40% 2014-15 2015-16 30% May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr Q1 Q2 Year over year change in yield Fleet size and growth +16% +25% +21% +4% +3% +7
Slide 27: A-Plant continues to gain market share profitably
A-Plant continues to gain market share profitably Margins and returns continue to improve EBITDA Operating profit RoI £m % £m % 150 40 100 25 15% 13% 13% 34% 35% 125 118 29% 20 12% 109 28% 30 75 26% 9% 100 15% 14% 9% 15 79 52 75 20 50 46 57 9% 10 6% 5% 49 50 6% 25 3% 10 25 4% 5 3% 25 12 7 0 0 0 0 0%
Slide 28: UK construction industry forecasts
UK construction industry forecasts Improving trends 2014 2015 2016 2017 2018 2019 % of (£m constant 2010 prices) Actual Estimate Forecast Forecast Projection Projection Total Residential 37,470 40,256 42,102 43,118 44,158 45,226 30.1% +7.4% +4.6% +2.4% +2.4% +2.4% Private commercial 36,979 38,764 40
Slide 29: Summary
Summary Another good quarter of revenue and profit growth Our model remains well positioned to benefit from ongoing structural and cyclical opportunities We will continue with our responsible growth strategy – broadening the markets we serve both in terms of geographies and sectors We have i
Slide 30: Appendices
Appendices Page 29 Second quarter results | 31 October 2015
Slide 31: Further market update
Further market update The pattern of US construction starts Fundamentals strong ($bn) 2010 2011 2012 2013 2014 2015 2016 Starts excluding gas + electric plants Total construction 435.3 441.3 492.5 545.2 594.7 674.7 712.0 2014 2015 2016 +2% +1% +12% +11% +9% +13% +6% 11% 8% 10% Residential Million un
Slide 32: Track record of developing scale and profitability of locations
There is a well proven track record of developing the scale and profitability of locations over time Number Operating margin* RoI* Location size Fleet size 2008 2015 2008 2015 2008 2015 Extra large > $15 million 14 73 37% 41% 26% 28% Large > $10 million 35 108 35% 38% 25% 27% Medium > $5 million 174
Slide 33: The benefit of our diversification has been shown in recent relative performance
The benefit of our diversification has been shown in recent relative performance Will remain a key element of our strategy 2007 2015 General Tool Specialty General Tool Specialty 85% 15% 75% 25% Non Non Construction Construction construction construction 65% 60% 35% 40% Total Total 45% Construction
Slide 34: Growth opportunity to build out clusters in major markets
Growth opportunity to build out clusters in major markets Charlotte, NC Minn/St. Paul, MN Denver, CO Population 3m Population 4.5m Population 4.1m Put in Place $4.0bn Put in Place $5.9bn Put in Place $9.6bn Starts $3.9bn Starts $6.2bn Starts $9.9bn Stores 14 Stores 4 Stores 5 Fleet cost $126m Fleet
Slide 35: Impact of oil and gas fleet limited in range and quantum
Impact of oil and gas fleet limited in range and quantum 60ft manlift 80ft manlift 10,000lb telehandler • 70% of our fleet on rent was and is just 6 products 4,000W light tower • Total industry is very similar 100KW generator 120KW generator Minimal impact on General Tool fleet • Physical utilisatio
Slide 36: Divisional performance – Q2
Divisional performance – Q2 Revenue EBITDA Profit 2015 2014 Change1 2015 2014 Change1 2015 2014 Change1 Sunbelt ($m) 864 730 +18% 429 355 +21% 289 242 +19% Sunbelt (£m) 561 445 +26% 278 218 +28% 188 148 +27% A-Plant 88 84 +5% 35 31 +10% 18 16 +12% Group central costs - - - (4) (3) +36% (4) (3) +37%
Slide 37: Divisional performance – LTM
Divisional performance – LTM Revenue EBITDA Profit 2015 2014 Change1 2015 2014 Change1 2015 2014 Change1 Sunbelt ($m) 3,059 2,449 +25% 1,446 1,139 +27% 931 736 +27% Sunbelt (£m) 1,983 1,476 +34% 939 686 +37% 604 443 +37% A-Plant 336 296 +13% 118 95 +24% 52 37 +38% Group central costs - - - (12) (10)
Slide 38: Margins continue to improve
Margins continue to improve US margins have exceeded the previous peak with substantial opportunity for future earnings growth and margin expansion $m Revenue $m EBITDA % Sunbelt 3,500 47 47 50 45 3,059 41 1,500 1,446 3,000 2,742 38 36 37 36 1,293 40 34 35 32 1,250 2,500 31 31 32 2,189 28 988 30 1,8
Slide 39: Financial strength
Financial strength Growth potential is underpinned by the financial strength of the business Leverage £m Debt underpinned by OLV 4,500 3.5 4,000 3.1 3,500 3.0 3.0 3,000 2.7 2,500 £1.0bn 2.5 2.4 2.5 2,000 2.1 1,500 2.0 1.9 2.0 1,000 500 1.5 0 2008 2009 2010 2011 2012 2013 2014 2015 Jul 2008 Apr 2010
Slide 40: Robust and flexible debt structure
Robust and flexible debt structure £1,750m £1,500m £1,250m ● 6 year average remaining commitment £1,000m ● No amortisation £750m ● No financial monitoring covenants £500m ̶ whilst availability exceeds $260m (October 2015: $1,008m) £250m £m 2016 2017 2018 2019 Oct 2021 Oct 2023 Oct 2020 2022 2024 ABL
Slide 41: Cash flow
Cash flow Oct (£m) LTM 2015 2014 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 EBITDA before exceptional items 1,045 908 685 519 381 284 255 359 380 310 225 170 147 150 EBITDA margin 45% 45% 42% 38% 34% 30% 30% 33% 38% 35% 35% 32% 29% 28% Cash inflow from operations before 968 841 646 501 3
Slide 42: Cyclical cash generation
Cyclical cash generation Cash positive once growth moderates – highly generative during downturn High growth Moderate to flat growth Declining market 2011 2012 2013 2014 2015 Ongoing Moderate / flat growth Cyclical downturn Cash flow from Decreasing but remains 280 365 501 646 841 Growing Growing op
Slide 43: $1,008m of availability at 31 October 2015
$1,008m of availability at 31 October 2015 Book value Borrowing base Senior debt £3,708m (April 15 : £3,213m) Calculation Other PPE £96m Inventory £30m 50% of book value Receivables £462m 85% of net eligible receivables £2,803m (April 15 : £2,434m) £302m Availability of £653m 85% of net appraised ($
Slide 44: Debt and covenants
Debt and covenants Facility Interest rate Maturity $2.6bn first lien revolver LIBOR +125-175bp July 2020 Debt $900m second lien notes 6.5% July 2022 $500m second lien notes 5.625% October 2024 Capital leases ~7% Various S&P Moody’s Ratings Corporate family BB Ba2 Second lien BB Ba3 Availability ■ Co