Applegreen plc Transformational acquisition of Welcome Break
Applegreen plc – Transformational Acquisition of a Majority Stake in Welcome Break
September 2018
1 Applegreen plc Transformational acquisition of Welcome Break
Disclaimer
THIS PRESENTATION AND ITS CONTENTS ARE CONFIDENTIAL. NOT FOR DISTRIBUTION OR RELEASE, DIRECTLY OR INDIRECTLY, IN OR INTO THE UNITED STATES OF AMERICA, CANADA, AUSTRALIA, JAPAN, THE REPUBLIC OF SOUTH AFRICA OR ANY JURISDICTION WHERE SUCH DISTRIBUTION WOULD BE UNLAWFUL. The information contained in this presentation has been prepared and issued by and is the sole responsibility of Applegreen plc and is being furnished to each recipient solely for informational purposes. The information contained in this presentation is confidential and should not be reproduced, published, transmitted or otherwise disclosed, in whole or in part, to any third party without the prior written consent of Applegreen plc. By accessing this presentation, you will be deemed to have represented, warranted and undertaken that you have read, understood and will comply with the contents of this notice. For the purposes of this notice, "presentation" means this document, any oral presentation, any question and answer session and any written or oral material discussed or distributed during the meeting. This presentation should not be considered as a recommendation by any of Applegreen plc, its directors, employees or advisers, or any other person to acquire shares in Applegreen plc (“Ordinary Shares”). Any recipient of this presentation is recommended to seek its own professional advice in relation to any shares it might decide to acquire in Applegreen plc. This presentation refers to certain events which are to be the subject of an admission document to be published by Applegreen plc (the “Admission Document”). The information set out in the Admission Document may be different from the information contained in this presentation. No assurance is given by Applegreen plc that any Ordinary Shares will be issued or sold and no decision should be made by any person to subscribe for any Ordinary Shares without reading the Admission Document. The information in this presentation does not purport to be comprehensive and is strictly for information purposes only. While reasonable care has been taken in the preparation of this presentation, it has not been verified and no reliance should be placed by any person on the fairness, accuracy, completeness or correctness of the information or opinions contained in this presentation or otherwise made available nor as to the reasonableness of any information contained herein. To the extent available, the industry and market data contained in this presentation has come from official or third party sources. In addition, certain of the industry and market data contained in the presentation comes from Applegreen plc’s own internal research and estimates based on the knowledge and experience of management in the markets in which Applegreen plc operates. While Applegreen plc believes that such research and estimates are reasonable and reliable, they, and their underlying methodology and assumptions, have not been verified by any independent source for accuracy or completeness and are subject to change. Accordingly, no undue reliance should be placed on any of the industry or market data contained in this presentation. No representations or warranties, express or implied, are given by Applegreen plc, Shore Capital and Corporate Limited or its affiliates (“SCCL"), Shore Capital Stockbrokers Limited or its affiliates (“SCSL” and together with SCCL, “Shore”), Goodbody Stockbrokers or its affiliates (“Goodbody”) or any of their respective directors, employees or advisers as to the accuracy, reliability or completeness of this presentation or any other written or oral information which has been or may be made available. Accordingly, none of Applegreen plc, Shore or Goodbody or any of their respective directors, employees, advisers or affiliates take any responsibility for, or will accept any liability in respect of, the accuracy, reliability or completeness of the information in this presentation or any other written or oral information which has been or may be made available or for the opinions contained herein or for any errors, omissions or misstatements and none of them will be liable for any losses arising out of any person's reliance upon such information. The opinions in this presentation constitute the present judgement of Applegreen plc, which is subject to change without notice. No reliance therefore may be put on the reasonableness of any future projections, management estimates, budgets or prospects of returns contained in this presentation. Statements in this presentation with respect to each of Applegreen plc’s and Welcome Break's (“WB") business, strategies, projected financial figures, transaction synergies, earnings guidance, financial guidance, future dividends and beliefs and with respect to the proposed investment in WB by Applegreen plc (the “Transaction”), as well as other statements that are not historical facts are forward-looking statements involving risks and uncertainties which could cause the actual results to differ materially from such statements. Statements containing the words "expect", "anticipate", "intends", "plan", "estimate", "aim", "forecast", "project" and similar expressions (or their negative) identify certain of these forward-looking statements. The forward-looking statements in this presentation are based on numerous assumptions regarding the transaction and each of Applegreen plc and WB's present and future business strategies and the environment in which each of Applegreen plc and WB will operate in the future. Forward-looking statements involve inherent known and unknown risks, uncertainties and contingencies because they relate to events and depend on circumstances that may or may not occur in the future and may cause the actual results, performance or achievements to be materially different from those expressed or implied by such forward-looking statements. Many of these risks and uncertainties relate to factors that are beyond each of Applegreen plc and WB's ability to control or estimate precisely, such as future market conditions, currency fluctuations, the behaviour of other market participants, the actions of regulators and other factors such as each of Applegreen plc and WB's ability to obtain financing, changes in the political, social and regulatory framework in which each of Applegreen plc and WB operates or in economic, technological or consumer trends or conditions. Past performance should not be taken as an indication or guarantee of future results, and no representation or warranty, express or implied, is made regarding future performance. Applegreen plc is not under any obligation to update or keep current the information contained in this presentation or to provide the recipient of it with access to any additional information that may arise in connection with it. This presentation includes certain stand-alone financial and other information for WB. While such stand-alone financial and other information for WB has been sourced primarily from information that has made publicly available by WB. Such stand-alone financial and other information for WB as so adjusted has not been audited or reviewed by any accounting firm or other third party and has not been independently verified and no reliance should be placed thereon. This presentation includes certain combined or pro forma financial information for WB and Applegreen plc. Such combined or pro forma financial information is preliminary in nature, only represents current estimates of the potential impact of the Transaction on Applegreen plc, remains subject to change and is provided solely for illustrative purposes. The underlying figures for WB and Applegreen plc may not be prepared on a comparable GAAP basis or on the basis of the same (or similar) accounting policies. In particular, please note that WB's underlying historical financial information has been prepared in accordance with UK GAAP and is presented in GBP, whereas Applegreen plc's underlying historical financial information has been prepared in accordance with IFRS and is presented in Euro, and that the combined or pro forma financial information contained herein has not been audited or reviewed by any accounting firm or other third party and has not been independently verified. No reliance should be placed on the combined or pro forma financial information contained in this presentation. This presentation is neither an offer to sell, purchase or subscribe for any investment in Applegreen plc nor a solicitation of such an offer. Nor is this presentation intended to grant any form of exclusivity or form the basis of any contract. This presentation is not and does not constitute or form a part of any offer of, or solicitation to purchase or subscribe for, any securities in the United States, Canada, Australia, Japan, the Republic of South Africa or any other jurisdiction where such offer or solicitation would be unlawful. Any such securities have not been, and will not be, registered under the United States Securities Act of 1933, as amended (the “Securities Act”). No public offering of securities will be made in the United States of America. Subject to certain limited exceptions, neither this presentation nor any copy of it may be taken, transmitted or distributed, directly or indirectly, into the United States, its territories or possessions. Any failure to comply with the foregoing restrictions may constitute a violation of U.S. securities laws. This presentation is addressed only to and directed only at persons in member states of the European Economic Area ("EEA") who are qualified investors within the meaning of Article 2(1)(e) of the Prospectus Directive (Directive 2003/71/EC), including any relevant implementing measure in each member state of the European Economic Area which has implemented this Prospectus Directive ("Qualified Investors"). In addition, in the United Kingdom, this presentation is addressed to and directly only at Qualified Investors who (i) are persons who have professional experience in matters relating to investments falling within Article 19(5) of the Financial Services and markets Act 2000 (Financial Promotion) Order 2005, as amended (the "Order"), (ii) are persons who are high net worth entities falling within Article 49(2)(a) to (d) of the Order, or (iii) are other persons to whom this presentation may be lawfully communicated (all such persons together being referred to as "relevant persons"). In the United States, this presentation is addressed to and directed only at "qualified institutional buyers" ("QIBs") as defined in Rule 144A under the Securities Act. This presentation must not be acted on or relied on (i) in the United Kingdom, by persons who are not relevant persons, (ii) in any member state of the EEA other than the United Kingdom, by persons who are not Qualified Investors, or (iii) in the United States, by persons who are not QIBs. Any investment or investment activity to which this presentation relates is available only to relevant persons in the United Kingdom, Qualified Investors in any member state of the EEA other than the United Kingdom and QIBs in the United States, and will be engaged in only with such persons. Shore is authorised and regulated in the United Kingdom by the Financial Conduct Authority. Shore is acting exclusively for Applegreen plc in relation to this presentation and the matter referred to therein and for no one else. Shore will not regard any other person (whether or not a recipient of this presentation) as a client in relation to this presentation or the matter referred to therein and will not be responsible to anyone other than Applegreen plc for providing the protections afforded to their respective clients nor for the giving of advice in relation to this presentation or any transaction, matter or arrangement referred to in this presentation. Goodbody, which is regulated in Ireland by the Central Bank, is acting exclusively for Applegreen plc in connection with this presentation and the matters referred to therein and for no one else. Goodbody will not be responsible to any other person for providing the protections afforded to clients of Goodbody or for providing advice in relation to this presentation or any other matter referred to in this presentation This presentation is not to be taken as any form of commitment on the part of Applegreen plc to proceed with any transaction and the right is reserved to terminate or vary any proposed arrangements at any time. You are strongly advised to consult your own independent advisers on any legal, tax or accounting issues relating to these materials. The receipt of this presentation by any recipient is not to be taken as constituting the giving of investment advice to that recipient. 2 Applegreen plc Transformational acquisition of Welcome Break
Table of Contents
1. Transaction Overview 4
2. Overview of Welcome Break 6
3. Overview of Applegreen 11
4. The combined Group 17
5. Transaction Structure 19
6. Transaction Funding 21
7. Transaction Financial Effects and Synergies 23
8. H1 2018 Interim Results 25
Appendices 31
3 Applegreen plc Transformational acquisition of Welcome Break Welcome Break Birchanger (MSA)
4 4 Applegreen plc Transformational acquisition of Welcome Break
Transaction Overview
─ Following a competitive process, Applegreen plc (“Applegreen”) has agreed to acquire a 55.02% majority stake in Welcome Break from NIBC Infrastructure Fund (“the Seller”) for a consideration of €361.8m¹
─ In addition, Applegreen has entered into a conditional agreement with Welcome Break Investors LLP, a limited partnership acting by its general partner Arjun Infrastructure Partners LLP (“AIP”), the sole other current shareholder of Welcome Break, the result of which will see Applegreen ultimately holding 50.01% of Welcome Break
─ Fully underwritten debt and standby equity financing in place to fund the transaction
Strategic Rationale
─ Transformational deal for Applegreen via well established and compatible Welcome Break business
─ Significantly broadens Applegreen’s MSA network, further deepens exposure to food and beverage
─ Stable long-term infrastructure earnings, fuelled by significant recent investments
─ Significant step up in Applegreen’s earnings and valuable synergy potential across group
─ Strong cash generation allows for rapid deleveraging
─ Pre-emption rights provide a pathway to increase shareholding in Welcome Break
Note (1): excludes leakage and interest between signing and closing 5 Applegreen plc Transformational acquisition of Welcome Break
6 6 Applegreen plc Transformational acquisition of Welcome Break
An infrastructure portfolio generating stable and growing ─ Formed in 1960 with almost 60 years’ experience and cash flows consisting of: c.5,000 employees operating multiple food and retail brands ─ 24 MSAs, including 10 double sided MSAs, in premium locations across the strategic road network ─ Established position as the 2nd largest operator of MSA’s in the UK, attracting an estimated 85m motorway customers p.a. ─ Two TRSAs
─ Welcome Break generated revenues of £720.1m, ─ 20 Drive Thru restaurants (Starbucks) adjusted EBITDA of £65.6m with Net Debt of £385.5m² in the year ended 31 January 2018 ─ 29 Hotels with 2,282 bedrooms, 23 co-located on MSAs ─ Welcome Break has completed three years of a significant four year capital expenditure programme. ─ Three stand alone Pizza Express restaurants £64.7m has been invested up to FYE Jan18 with total investment of c.£100m expected on completion of the programme. Expected to drive significant EBITDA growth ─ 35 retail forecourts and convenience stores with HGV in future years facilities
─ Real estate is predominantly leasehold with a mix of government and commercial leases with weighted average unexpired lease term of 19.7 years and statutory renewal rights. Two MSA sites are freehold Key brand franchise, commercial agreements and relationships
Note (2): excludes shareholder loans 7 Applegreen plc Transformational acquisition of Welcome Break
Map of Locations
MSA (24 in total, 10 double sided)
Hotels (29 hotels, 23 co-located on MSAs)
TRSA (two in total)
8 Applegreen plc Transformational acquisition of Welcome Break
Welcome Break at a glance
Well Defensible assets Strong brand 35 UK locations 2nd largest UK invested with significant with multiple including 29 MSA operator infrastructure barriers to entry brand partners hotels assets
9 Applegreen plc Transformational acquisition of Welcome Break
Financials
Historical Trading Income Statement FYE - Jan (£'m) FYEJan2016 FYEJan2017 FYEJan2018 Turnover 644.0 672.6 720.1
% growth 4% 7% Cost of Sales (504.6) (523.2) (563.8) Gross Profit 139.4 149.5 156.3 EBITDA 62.8 63.0 55.0 Adjusted EBITDA3 55.3 61.8 65.6
% growth 12% 6%
Balance Sheet FYE - Jan (£'m) FYEJan2016 FYEJan2017 FYEJan2018 Non-current assets 401.5 393.3 390.9 Current assets 75.1 63.2 90.2 Current liabilties 57.1 48.0 54.6 Non-current liabilities 716.6 753.3 801.3
Net assets/(Liabilities) (297.1) (344.8) (374.8)
Note (3): excludes exceptional expenses and income 10 Applegreen plc Transformational acquisition of Welcome Break 11
11 Applegreen Gorey (TRSA) Applegreen plc Transformational acquisition of Welcome Break
Distinctive convenience retail offering in the forecourt sector with three key elements
“Low Fuel Prices, Always” “Better Value Always” Food and beverage focus
− Price promise to drive footfall to − Tailored retail offering − 274 food outlets across the estate the stores (30 June 2018) − Mix of own and international brands − Tailored offering to each location
12 Applegreen plc Transformational acquisition of Welcome Break
Overview
─ Applegreen is a major petrol forecourt retailer in the Revenue Growth Republic of Ireland with a growing presence in the United Kingdom and the US
15.1%
€937m
€1,178m €1,428m ─ From an operational base of 64 sites at the end of 2009, CAGR €1,081m Applegreen has grown to 368 sites as at 30 June 2018, across the Republic of Ireland (184 sites), United 2014 2015 2016 2017 Kingdom (112 sites) and the US (72 sites) Adjusted EBITDA Growth ─ Applegreen is the number one MSA operator in the Republic of Ireland. The Group operates a business
model built around the following key features: 20.1%
€28.9m €32.0m €39.8m ─ “Low Fuel Prices Always” price promise CAGR €23.0m ─ “Better Value Always” in shop 2014 2015 2016 2017 ─ High quality food and beverage offering Food & Store Gross Profit Growth ─ Since IPO in 2015, Applegreen’s growth strategy has been focused on acquiring and developing new service
area sites in the three markets in which it operates 25.2%
€92.8m €113.6m CAGR €76.9m ─ Capex of €77.6m in FY2017 expanding and €57.9m upgrading the portfolio 2014 2015 2016 2017 Site Growth
30.1%
200 243 342 CAGR 152
2014 2015 2016 2017 13 Applegreen plc Transformational acquisition of Welcome Break
Republic of Ireland
Service Areas – MSAs and TRSAs ROI Site Numbers ─ Continued market leading position in Republic of Ireland 88% of the ROI estate is now branded Applegreen (2017: 88%) including nine MSA sites 200 177 184 155 30 32 ─ Highly evolved food and retail offerings on national 150 133 roads 27 23 60 63 48 ─ Strong pipeline of TRSA opportunities – two new TRSA’s 100 33 in H1 2018 50 80 87 89 ─ Tesla charge points opening in various sites across 77 Republic of Ireland 0 2015 2016 2017 H1 2018 Petrol Filling Stations – Company Owned PFS - Company Owned PFS - Dealer Owned SA ─ Two new sites added in H1 2018 ROI Cap Ex
Petrol Filling Stations – Dealer Owned €25.0 €22.0 €22.3 €22.7 ─ Three new dealer sites opened during H1 2018 €20.0 €6.9 €12.0 ─ 19% of ROI volumes in H1 2018 sold through dealer €12.9 sites €15.0 €10.0 €8.5 Commercial Fuelcard €15.4 €4.7 €5.0 €10.7 ─ Continued growth in profitability and accounted for €9.1 €3.8 12% of ROI fuel volumes in H1 2018 €- 2015 2016 2017 H1 2018
PFS SA 14 Applegreen plc Transformational acquisition of Welcome Break
United Kingdom
Service Areas – MSAs and TRSAs UK Site Numbers ─ Opened one new MSA in Northern Ireland on M1 61% of the UK estate now branded Applegreen (2016: 39%) Inbound to Belfast in February 2017 115 112 97 11 95 ─ Three existing PFS sites upgraded to TRSAs during 77 11 FY2017 and the first new build TRSA in the UK opened 75 62 6 in July 2017 55 2 101 86 ─ Four MSAs are in early stages of the planning process 35 71 60 ─ Carsley Group sites trading well and newly established 15 TRSAs performing -5 2015 2016 2017 H1 2018 Petrol Filling Stations – Company Owned PFS - Company Owned SA ─ 15 new sites added in the period UK Cap Ex ─ Seven sites as part of the Carsley Group acquisition were integrated in FY2017 €50.0 €44.4 ─ Strong competition for new assets in the market €40.0
─ Good LFL growth in non-fuel gross margin over the €30.0 €26.0 course of FY2017 €22.1 €20.0 €37.0
€10.0 €6.0 €13.0 €8.6 €6.0 €- 2015 2016 2017 H1 2018 PFS / Restaurant SA 15 Applegreen plc Transformational acquisition of Welcome Break
United States of America
North East US Site Numbers • 30 sites trading end of FY2017 – combination of single sites and the strategic partnership with CrossAmerica 80 72 68 Partners 70 60 ─ Four sites added in H1 2018 50 ─ Significant fuel focus with strong margins 40 68 72 30 ─ 7-Eleven convenience stores trading well and future strategic relationships developing 20 11 10 5 11 ─ One 7-Eleven convenience store added in the period 0 5 and an additional two opened since the end of the 2015 2016 2017 H1 2018 period (Four now trading)
South East US Cap Ex ─ 34 PFS sites and eight standalone Burger King restaurants €12.0 €10.0 ─ Brandi Group acquisition in October 2017 integrated successfully and trading in line with expectations €8.0 €6.0 ─ Applegreen have transferred some resources to the US €10.5 to support local management team €4.0 €2.0 €4.0 €2.1 €1.0 €- 2015 2016 2017 H1 2018 16 Applegreen plc Transformational acquisition of Welcome Break 17
17 Applegreen Gorey (TRSA) Applegreen plc Transformational acquisition of Welcome Break
Pro-Forma financials for the enlarged Group
Pro-Forma financials Income Statement (€'m) 31-Dec-17 Turnover 2,249.5
Cost of Sales (1,889.5) Gross Profit 360.0 EBITDA 94.6 Adjusted EBITDA 114.6
Balance Sheet (€'m) 31-Dec-17 Non-current assets 1,137.9 Current assets 210.3 Current liabilties 238.7 Non-current liabilities 776.2 Net assets/(Liabilities) 343.6
Note: Detailed pro-forma adjustments included on page 40 18 Applegreen plc Transformational acquisition of Welcome Break Welcome Break South Mimms (MSA)
2. Overview of Welcome Break and Applegreen
1. Transaction overview 1919 Applegreen plc Transformational acquisition of Welcome Break
Transaction Structure ─ Applegreen has entered into a SPA with the Seller to acquire its 55.02% holding in Welcome Break for a consideration of €361.8m4
─ Applegreen has also entered into a separate conditional agreement with AIP:
─ The net impact of the transactions will be that Applegreen will hold a 50.01% shareholding in Welcome Break and management control
─ Applegreen will initially sell an 8.6%5 shareholding in Welcome Break to AIP for €56.5m
─ AIP will invest a further £80m in return for equity in Welcome Break with the intention to repay junior debt within Welcome Break, delivering the consolidated entity with significant interest savings
─ Applegreen transfers its UK MSA and TRSA assets (representing EBITDA of c.£4m), as well as its UK development pipeline assets, to Welcome Break in exchange for a further c.£120m of equity in Welcome Break
─ Applegreen will have the right to appoint the CEO and CFO of Welcome Break and to receive an annual management fee
─ All “excess cash” to be distributed as dividends by Welcome Break to Applegreen and AIP, unless Applegreen and AIP decide otherwise
─ Intention is for Applegreen to have the ability to increase its shareholding in Welcome Break in due course
Excess cash distribution Path to increased Management control policy in Welcome Break ownership
Note (4): excludes leakage and interest between signing and closing Note (5): to be adjusted for leakage and interest between signing and closing 20 Applegreen plc Transformational acquisition of Welcome Break
Welcome Break 21 Birchanger (MSA) 21 Applegreen plc Transformational acquisition of Welcome Break
Transaction Funding
─ Committed debt facility of €300m: Banking syndicate
─ €150m term loan facility New debt ─ €150m revolving credit facility facilities
─ Margin grid dependent on leverage 6
─ Margin range of 2.00% to 3.75%
─ €175m placing
Equity raise ─ Included a €10m equity commitment from Applegreen founders and largest shareholder, B&J Holdings
Equity Sale ─ €56.5m7 to be paid to Applegreen for the sale of 8.6% holding in Welcome Break to AIP8
Note (6): Ulster Bank Ireland DAC Note (7): to be adjusted for leakage and interest between signing and closing Note (8): see full description of AIP Agreement on page 20 and at steps 2 and 3 on page 32 22 Applegreen plc Transformational acquisition of Welcome Break
2323 Applegreen plc Transformational acquisition of Welcome Break
Transaction Financial Effects and Synergies
─ All Welcome Break debt is non-recourse to Applegreen
─ Standalone Applegreen December 2018 (Pro Forma) adjusted net debt9/ adjusted EBITDA10 of c.2.5x with intention to reduce to below 1.0x by FY2020
─ Consolidated December 2018 (Pro Forma) adjusted net debt9/ adjusted EBITDA10 of c.4.0x with intention to reduce to below 2.5x by FY2020
─ On completion of the transaction Welcome Break will be fully consolidated into Applegreen’s financial statements
─ Significant potential synergies identified from combining two compatible businesses:
─ Wet stock purchasing
─ Dry stock purchasing
─ Admin / IT scale efficiencies
─ Outsourcing
─ Corporate overheads
─ Significant scope to enhance negative working capital generation
Note (9): excludes shareholder loans in Welcome Break of c.€50m Note (10): includes dividend received from Welcome Break 24 Applegreen plc Transformational acquisition of Welcome Break 25
25 Applegreen Gorey (TRSA) Applegreen plc Transformational acquisition of Welcome Break
Applegreen plc H1 2018 Interim ResultsPresentation
Highlights
INTERIM
+17% +26 -€1.1m €30.3m +5% TO €19.4m TO 368 TO -€9.1m FOR H1 2018 TO 0.63c (+18% at constant currency)
H1 2018 performance: ─ Severe weather disruption in domestic markets ─ 2017 acquisitions performing well ─ Wage inflation and availability pressures emerging
Ongoing non-fuel focus: ─ Non fuel L4L gross margin growth of 3.5% (UK 9.8% on constant currency basis) ─ 14 new food offers opened across the estate
US expansion continues; ─ Seven site deal in Columbia, South Carolina ─ 43 sites in Florida from CrossAmerica expected to close in late September 2018
Announced transformational acquisition of majority stake in Welcome Break
26 Applegreen plc Transformational acquisition of Welcome Break
Applegreen plc H1 2018 Interim ResultsPresentation
Profit and Loss Account H12018 H12017 %Var €m €m ─ Adjusted EBITDA grew by 17% (18% on a constant Revenue 854.9 672.5 27.1% currency basis) Gross Profit 109.2 82.2 32.8% Selling & Distribution Costs (63.3) (45.8) 38.2% ─ S&D cost increase is driven by the 37% increase in site Administrative Expenses (16.2) (12.7) 27.6% numbers, particularly the site additions in the US which included a number of food offerings with associated Other income 1.4 0.8 payroll and utility costs Adjusted EBITDAR 31.1 24.5 26.9% Rent (11.7) (7.9) ─ Increase in admin. expenses driven by business growth, targeted marketing campaigns and further Adjusted EBITDA 19.4 16.6 16.9% investment in management capacity Depreciation & Amortisation (8.7) (6.2) Impairment 0.0 0.0 ─ Increase in rent is partially driven by the Brandi Finance Costs, net (0.6) (0.3) acquisition of 42 leasehold sites in October 2017 Adjusted PBT 10.1 10.1 0.0% ─ Adjusted PBT growth impacted by higher Tax (1.4) (1.4) depreciation and interest costs Adjusted PAT 8.7 8.7 0.0% ─ Adjusted EPS growth impacted by higher number of Adjusted EBITDA 19.4 16.6 16.9% shares now in issue following September placing Share Based Payments (0.4) (0.8) Non Recurring Costs (0.6) (0.4) Reported EBITDA 18.4 15.4 19.5%
Adjusted Basic EPS (cents) 9.46 10.82 (12.6%) 27 Applegreen plc Transformational acquisition of Welcome Break
Applegreen plc H1 2018 Interim ResultsPresentation
FY 2017 Cashflow Summary
H12018 H12017 €m €m ─ Strong cash conversion of 173.6%. Favorable Profit Before Tax 9.1 8.9 improvement in working capital position due to Non - cash Adjustments 9.8 7.6 fuel volume growth and improved credit terms Working Capital Movement 14.2 3.8 Taxes Paid (1.4) (0.6) Cash flows from Operating Activities 31.7 19.7
Capital Expenditure (31.2) (32.0)
Proceeds from Share Issue 0.2 0.4 Dividends Paid 0.0 (1.0) Long-Term Borrowings (6.5) 23.3 Net Finance Leasing (0.4) (0.4) Net Interest Paid (0.4) (0.8) Cash Flows from Financing Activities (7.1) 21.5
Net increase in cash and cash equivalents (6.7) 9.2 Opening Cash & Cash Equivalents 57.5 27.7 Exchange Losses 0.1 (0.3) Closing Cash & Cash Equivalents 51.0 36.6
Cash Conversion 173.6% 152.5% Note (1) Cash Conversion is calculated using Adjusted EBITDA and working capital movement, Adjusted EBITDA refers to normalised trading EBITDA, being EBITDA adjusted for share based payments & non-recurring items. Working capital movement is the variance between openingand Net Debt 9.1 10.2 closing debtors, creditors and stock adjusted for fixed asset accruals 28 Applegreen plc Transformational acquisition of Welcome Break
Applegreen plc H1 2018 Interim ResultsPresentation
FY 2017 Balance Sheet Summary
30 June 2018 31 Dec 2017
€m €m ─ Net leverage of 0.5x at 30 June 2018 (31 Non-Current Assets 345.4 322.9 December 2017: 0.3x)
Current Assets 72.2 58.5 Current Liabilities (206.8) (176.5) Working Capital (134.6) (118.0) Capital Expenditure Analysis
Cash and Cash Equivalents 54.6 57.5 H12018 H12017 H12016
Total Debt (63.7) (67.7) €m €m €m Net Debt (9.1) (10.2) Service Areas 4.8 9.0 10.9 PFS 8.4 9.1 10.6 Non Current Liabilities (13.0) (13.4) Rebrands 0.6 1.1 4.1 Dealer 0.8 0.4 0.9 Net Assets 188.7 181.3 USA 4.0 0.3 0.3
Share Capital & Share Premium 191.6 191.4 Development sites 3.4 4.6 0.0 JFT 0.0 0.0 0.0 Capital Reserves (62.0) (63.7) Other 8.3 5.3 4.6 Retained Earnings 59.1 53.6 Total 30.3 29.8 31.4 Equity 188.7 181.3
Return on Capital Employed 14.8% 15.8% Note (1)Return on Capital Employed based on adjusted EBIT (Earnings Before Interestand Taxation)
Note (1) Return on Capital Employed adjusted for impact of assets under construction Adjusted Return on Capital Employed 17.4% 18.0% and development assets held at year end 29 Applegreen plc Transformational acquisition of Welcome Break
Applegreen plc H1 2018 Interim ResultsPresentation
Outlook
─ Momentum continuing across the group
─ Continuing expansion of the estate since 30 June 2018
─ Three new PFS opened in ROI including two Dealer sites
─ One new stand-alone PFS in US
─ Completed the acquisition of a 7-site group in South Carolina
─ Acquisition of a 43-site group in Florida completed in September 2018
─ Acquisition of majority stake in Welcome Break announced in August 2018
"Our financial performance for the first six months of 2018 has been robust notwithstanding the difficult trading conditions caused by the exceptional weather in March, especially in our Irish business. Apart from the impact of this one off event, the underlying business continues to perform well and we remain confident in the prospects for the business in 2018.”
30 Applegreen plc Transformational acquisition of Welcome Break
Summary
3131 Applegreen plc Transformational acquisition of Welcome Break
Transaction Structure – Overview
Step 1
€361.8m 55.02% of WB
Step 2 8.6% of WB £120m of Assets €56.5m
Step 3
£80m to pay down junior debt
Post Completion 50.01% 49.99% Operational Control Management Fee 32 Applegreen plc Transformational acquisition of Welcome Break
Welcome Break Hotel Portfolio
─ Hotel portfolio directly managed and is 8% of FYE Jan 2018 Gross Profit before Wages of Welcome Break
Rebranding RevPAR CAGR ─ Welcome Break operates 29 hotels consisting of 20 Days Inn and nine Ramada strategy to from FY16- upgrade to FY18 of ─ Hotels are a common feature in UK MSA sites Ramada c.4.5%
─ 23 of the hotels are co-located within Welcome Break existing sites and the remaining six located in independent sites
─ Standalone Welcome Break hotel management team which will remain in place post transaction providing continuity for the business c.75% c.51% gross occupancy profit margin ─ Welcome Break has undertaken a strategy to rebrand some of its hotel portfolio from Days Inn to Ramada sites, for which improved occupancy rates and increased rooms rates are being achieved
33 Applegreen plc Transformational acquisition of Welcome Break
Applegreen Site Transfers into Welcome Break as Part of the AIP Agreement
Applegreen UK Trading Sites Transfers: ─ As part of the AIP deal the Company will transfer to Welcome Break their UK MSA Name Location Site Type sites, their TRSA sites deemed suitable for transfer and their UK development pipeline Ballymena North N. Ireland TRSA Hillsborough N. Ireland TRSA ─ Applegreen will receive in exchange a further c.£120m of equity in Welcome Templepatrick Outbound N. Ireland MSA Break Lisburn Outbound N. Ireland MSA ─ Combined EBITDA of existing sites is c.£4m Lisburn Inbound N. Ireland MSA Spaldwick UK TRSA ─ Adjustment mechanism is in place for the valuation of the greenfield sites Spalding UK TRSA Cromwell UK TRSA Kates Cabin UK TRSA Darrington UK TRSA Whitley UK TRSA Fosseway UK TRSA Wyboston UK TRSA
34 Applegreen plc Transformational acquisition of Welcome Break
Site Categories
Service Areas – MSAs and TRSAs Petrol Filling Stations (“PFS”) Motorway Service Areas (“MSA”) Company Owned − MSAs are located on motorways with large facilities, − Traditional forecourt, store offering and food and parking and at least three food and beverage offerings beverages − MSAs offer own brand food and beverage offerings and − Relevant retail proposition built to reflect local a range of internationally recognised brands demographic
Trunk Road Service Areas (“TRSA”) Dealer − TRSAs are mid-size sites on major roads with seating − PFS owned by operator, five year fuel supply areas and one to three food and beverage offerings agreements − High-end stores with attractive ambiance − Fixed margin per litre to dealer
35 Applegreen plc Transformational acquisition of Welcome Break
Note: as of 30 June 2018 36 Applegreen plc Transformational acquisition of Welcome Break
Note: as of 30 June 2018 37 Applegreen plc Transformational acquisition of Welcome Break
Note: as of 30 June 2018 38 Applegreen plc Transformational acquisition of Welcome Break
Note: as of 30 June 2018 39 Applegreen plc Transformational acquisition of Welcome Break
Pro-forma adjustments Pro-forma consolidation adjustments Income Statement
Note 1
• The income statement of Applegreen Group has been extracted without adjustment from the audited published financial statements for the year ended 31 December 2017
Note 2
• The income statement of Welcome Break Group for the 52 week period ended 30 January 2018 been extracted without material adjustment from the Welcome Break Historical Financial Information set out in the Admission Document, converted to Euro using a Euro/GBP of 0.87667 being the average rate applied in the Applegreen Group financial statements for the year ended 31 December 2017
Note 3
• This adjustment relates to the incremental interest cost and related tax benefit of additional borrowings incurred as a part of the funding of the transaction. Applegreen plc claim an Irish tax deduction on its interest on a paid basis. No carry forward of unused amounts is allowed. Therefore, it has been assumed that the Irish entities will have sufficient taxable income to utilise the full interest relief available
Note 4
• The adjustments relate to: o Business combination transaction costs - Transaction costs of €5.3 million relating to the Welcome Break acquisition are expensed in the income statement with the corresponding tax impact of €0.7 million also reflected o Interest on Eurobonds - The Eurobonds are unsecured loans that are required to be held by the shareholders in Welcome Break in the same proportion to their respective shareholdings in the Welcome Break Group. Each noteholder has agreed to convert £151.7 million in total of Eurobonds, out of the total £301.7 million that existed on 31 January 2018, into equity once the AIP Agreement has been implemented to optimise interest deductibility for the Enlarged Group; o Interest saving of €23.8 million on the conversion of a portion of the existing Eurobonds into equity in Welcome Break Group; and €11.9 million of consolidation adjustment to add back the proportion of Eurobonds interest held by Applegreen resulting in a total Eurobond interest saving of €35.7 million o The interest saving and associated break fees totalling €3.6 million associated with the early repayment of Welcome Break Group junior debt o The recognition of minority interest of €20.7m based on 49.99% in the Welcome Break Group following the transaction plus €17.8m of interest saving on Eurobonds attributable to minority interests plus €1.8m saving on interest costs relating to the early repayment of Welcome Break Group junior debt and net of deal costs.
40 Applegreen plc Transformational acquisition of Welcome Break
Pro-forma adjustments Pro-forma consolidation adjustments Balance sheet
Note 1:
• The statement of financial position of Applegreen Group have been extracted without adjustment from the audited published financial statements for the year ended 31 December 2017.
Note 2:
• The statement of financial position of Welcome Break Group as at 31 January 2018 have been extracted from the Welcome Break Historical Financial Information set out in the Admission Document, converted to Euro using a Euro/GBP exchange rate of 0.87667 being the closing rate applied in the Applegreen Group financial statements for the year ended 31 December 2017.
Note 3: • The adjustments relate to the expected fundraising associated with the transaction as follows: • the drawdown of the new Applegreen Group debt facility of €207.0 million (before related fees • and costs) and repayment of the existing debt facility of €64.0 million; • an equity fundraising of €175.0 million, gross of fees and costs; and • costs associated with the debt and equity fundraising, net of tax
Note 4: • The up font acquisition cost of €360.5 million, being the total cash consideration of €361.8 million less agreed adjustments for leakage and interest between signing and closing, for the NIBC 55.02% interest in Welcome Break Group along with related transaction costs of €5.3 million. • The AIP sale proceeds of €56.5 million provided for under the AIP Agreement; • The transfer of Applegreen UK Business Transfer Assets to Welcome Break Group at an estimated valuation of £120 million (€135.3 million). As this is an intergroup transaction, all except the non-controlling interest eliminates on consolidation. Therefore, €67.6 million (being 49.99 per cent.) is being recorded on this transfer; • The expected contribution of the AIP additional equity investment; • The intended repayment (subject to approval of the Welcome Break Group lenders) of €87.5 million of junior debt within the Welcome Break Group along with the related debt break fees of 2 per cent. have been assumed and the related tax impact; • The conversion of a portion of the existing shareholder loans (Eurobonds) into equity in Welcome Break Group to optimise interest deductibility for the Enlarged Group; and • The elimination of pre-acquisition reserves. • No fair value assessment has been carried out in relation to assets and liabilities acquired as part of the Welcome Break Group. All purchase consideration in excess of the Welcome Break Group net assets has therefore been recorded as Goodwill. • After completion, but ahead of 31 December 2018, the Board will be required to undertake a fair value exercise of the identifiable assets and liabilities of the acquired business to assess the purchase price for accounting purposes. This fair value exercise may result in adjustments to the carrying value of the Enlarged Group’s statement of financial position items. 41