STRATEGIC ACQUISITION OF ALEXANDER DENNIS - May 28, 2019 Alexander Dennis is a Scotland headquartered global leader of lightweight single and ...
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STRATEGIC ACQUISITION OF ALEXANDER DENNIS
Alexander Dennis is a Scotland headquartered global leader of
lightweight single and double deck buses and motor coaches
May 28, 2019
Company Overview
Business Description
ADL is a leading global manufacturer of double deck and single deck buses and motor coaches.
Headquartered in Larbert, Scotland with international offices in Hong Kong, Singapore, Malaysia, New Zealand, Europe,
Canada, the United States and Mexico.
More than 120 years of British engineering heritage.
In 1995 Mayflower Corporation bought Scottish bus-maker Walter Alexander (founded 1924) and in 1998 English bus-maker
Dennis Group (founded 1895). Mayflower joined Henlys Group in a JV rolling Alexander, Dennis and Henlys' Plaxton (founded
1907) into one company called TransBus International. The JV was not successful and Mayflower collapsed in 2004.
Alexander Dennis was incorporated in 2004 as a private consortium to buy a major portion of the collapsed Mayflower
Corporation. Henlys' Plaxton was taken over by management and operated under the ownership of Plaxton Holdings until 2007
when it was bought by Alexander Dennis.
Propulsion expertise includes Clean Diesel, CNG, Hybrid and Battery-Electric. ADL is the UK electric bus leader (on BYD
chassis) with international electric models launching in 2019
ADL provides aftermarket services in all of its markets including parts, maintenance and servicing
Key ADL Statistics Key ADL Financials (£ mm)(1)
2017 2018 Growth
Number of employees 2,587
Units Sold 2,345 2,533 (3% EV) 8.0%
Buses in Service 31,600 £576 £631 9.5%
Revenue
Assembly Facilities Scotland (3), England (1), US (1), Canada (1)
Adjusted EBITDA / % Margin £40 / 7% £44 / 7% 10.0%
Service and Parts England (3), New Zealand (1), Singapore (1), Malaysia
(1), Canada (1), USA (1) Free Cashflow (2) £6.6 £18.1 175%
Distribution locations
1. All financial information regarding ADL contained in this presentation has been derived from ADL’s financial statements which are prepared in accordance with UK Generally Accepted Accounting Principles
(“GAAP”). NFI prepares its financial statements in accordance with International Financial Reporting Standards (“IFRS”). UK GAAP differs in certain material respects from IFRS. Adjusted EBITDA is a non-IFRS and
non-UK GAAP measure. See “Non-IFRS measures” under cautionary statements at the end of this press release.
1
Transaction Highlights
£320 million (US$405 million), transaction value funded through a combination of cash and shares
– Transaction signed and closed on day of announcement (no regulatory approvals)
– ADL’s primary shareholders and ADL’s CEO and CFO have elected to receive in aggregate 1.47 million NFI shares
(approx. 10% of the transaction value) issued at $31.94 per share
TRANSACTION
– Equating to 2% of NFI shares outstanding following completion of the transaction
HIGHLIGHTS
ADL management team to remain in place and will continue executing its growth strategy
Purchase price multiple of approximately 7.3x 2018 (for the 12 months ended Dec 30, 2018) Adjusted EBITDA (1)
Immediately accretive to earnings per share and free cash flow per share(1) (before potential synergies)
The cash consideration paid pursuant to the transaction was financed with a new US$300 mm credit facility with the remainder
funded from NFI’s existing syndicated credit facility
– New credit facility has substantially the same terms as NFI’s existing syndicated credit facility
FINANCING
AND PRO NFI pro forma total debt to estimated combined Adjusted EBITDA(1) of approximately 2.9x as at December 30, 2018
FORMA
LEVERAGE Significant deleveraging is expected over the next 18 months (to within target leverage of 2.0x to 2.5x total debt / Adjusted EBITDA)
similar to the MCI transaction
NFI maintains dividend policy presently at $1.70 per share annually, paid quarterly
1. See footnote on slide 1 and “Non-IFRS measures” under cautionary statements at the end of this presentation.
2. British pounds have been converted to US dollars using an exchange rate of £1.00=US$1.2663; 2018 actual figures have been converted at an exchange rate of £1.00=US$1.3355.
2
Strategic Acquisition Rationale
MARKET LEADERSHIP ADL is the #1 UK bus manufacturer and #1 global producer of double-decker buses with a well established international presence
- Significant installed base in UK, Hong Kong, Canada, USA and New Zealand
INTERNATIONAL Growing North America business which augments NFI’s product breadth and customer reach
DIVERSIFICATION Successful track record of accessing and growing in new markets globally
- Recent success in Continental Europe (Poland, Switzerland and Germany) provides a platform for further expansion into Western Europe
A PLATORM FOR - Operating model in Mexico to be utilized to investigate additional growth
GROWTH ADL revenue split: Bus = 84% of total sales, Motor coach = 5%, and Parts/Service = 11%
Adds its class leading, internationally proven line-up of single-deck and double-deck buses
ENHANCES NFI Sharing of best practices, and the optimization of existing partnerships internationally
PRODUCT PORTFOLIO Enhances NFI’s technical competencies on lightweight chassis / bodies
UK’s market leading electric bus business with significant product know-how and first mover advantage
COST EFFECTIVE ADL operates flexible assembly model (both internal and 3rd party) with deep manufacturing and engineering talent
PLATFORM Operates successfully in very competitive environments with cost competitive buses assembled in the UK primarily for the UK, in the US and
Canada for domestic markets and even more cost competitive in foreign markets with local sourcing and 3rd party assembly
Immediately accretive to earnings per share and free cash flow(1)(2) per share (before synergies)
FINANCIALLY Rapid deleveraging to NFI’s target range of 2.0x to 2.5x total debt to Adjusted EBITDA is expected over the next 18 months(1)
COMPELLING Significant acquisition whilst maintaining NFI dividend policy
Potential to capture revenue and cost synergies from the sharing of best practices and a combined market approach in North America
Strong cultural alignment between NFI and ADL with longstanding relationships and mutual respect
STRONG
- Share similar cultures and values, especially towards quality, technology, innovation and customer experience
CULTURAL FIT WITH
COMMITMENT TO - Clear alignment on management strategy, market outlook, and EV adoption expectations
SAFETY AND ADL commitment to sustainable mobility and completely aligned with NFI
ENVIRONMENT ADL management to remain in place and to drive performance and international growth
1. See footnote on slide 1 and “Non-IFRS measures” under cautionary statements at the end of this presentation.
3
ADL is well aligned with NFI’s Strategy
NFI MISSION: To move people with leading transportation solutions that are safe, accessible, efficient, and reliable.
NFI VISION: To enable the future of mobility with innovative and sustainable solutions.
NFI STRATEGY:
1. Offer global operators the best buses, services and value in the industry
Migrate from selling buses to providing solutions…that deliver best value & support for life
Provide complete offering: Bus (“Workhorse of the Fleet”) supported by Parts & Service
Lead market innovation with diverse propulsion offering on proven bus platforms
Increased focus on Aftermarket Parts and Services (such as telematics, infrastructure, etc.)
2. Operate as a world class OEM using LEAN Principles (OpEx) & Quality Roadmap
Be recognized as an Employer of Choice
Excel in supply chain, strategic sourcing and appropriate in-sourcing
Continuous pursuit of eliminating waste and cost reduction to improve competitiveness
Excel at customer support, response and follow-up
Operate as a responsible, sustainable and environmentally conscious business
3. Perform while seeking Growth and Diversification into New Markets
Deliver attractive returns to shareholders through capital appreciation and dividends
Operate with a prudent capital structure preserving flexibility to invest and grow the business
Seek to diversify: Product (type of bus) and/or Market (Public vs. Private) and/or Geography (North America vs. International)
Market leadership, world class operations and prudent growth into new markets
4
Product Segment Overview
Manufacturing
Aftermarket
Single Deck / Double Deck Buses Motor Coaches
2018A Sales(1): 2018A Sales(1): 2018A Sales(1):
£528 mm £32 mm £71 mm
(84% of total) (5% of total) (11% of total)
Enviro200EV Panther
Enviro400 Panorama
Broad range of lightweight double deck (2 axle and 3 axle) Full range of bodies with best-in-class reliability, Sale of body and chassis parts,
and single deck products configurability, and fuel efficiency engineering, maintenance, and diagnostics
Complete design offering Utilization of Volvo and Scania chassis Online ordering through AD24 platform
– Proprietary in-house production and development of bus
chassis and bodies Strong UK presence with export opportunities available Currently UK focused with planned
– UK EV chassis through strategic relationship with BYD (Successful entrance to New Zealand market) international expansion
Best-in-class reliability and fuel efficiency Developing tech-driven aftermarket
systems to develop sales, improve margins
and enhance the customer experience
Leader in Green Propulsion Options
Partnerships with leading technology partners and global battery
manufacturers including BYD
Enviro200 electric vehicle variant best selling in the UK with 70%
market share(2)
Double deck EV variants launching in 2019 in the UK and North
America (on ADL Chassis)
1. Sales also include used / third-party chassis (£26 mm / 4% of total). All figures based on UK GAAP.
5 2. Source: UK Bus Registration Data, ADL Management estimates.
Global Player with Diversified Revenue Stream
ADL 2018A Revenue Breakdown(1) ADL Manufacturing Footprint
11% U.K.
1%
Asia Pacific
12% North America
49% Other Developing
Aftermarket
27%
Countries with recent ADL Deliveries
Single / Double Deck Buses Motor Coaches
United Kingdom Ireland United States Canada United Kingdom Ireland
ADL
ADL Manufacturing Location
3rd Party Manufacturing Location
Hong Kong Singapore Malaysia New Zealand Poland New Zealand
Countries with Operations / Sales Offices
Mexico Switzerland
1. Excludes FX adjustments.
6
Track Record of Successful International Expansion
Scottish investor Colin Robertson Joint Venture with Partner in Manufacturing Nappanee, USA Entry into Mexican ADL wins contract
group acquires joins ADL as Kiwi Bus Builders Malaysia to start alliance with ABC in facility acquired in and Swiss market to supply double
former Alexander CEO in New Zealand production in the United States early 2017 deck fleet to BVG in
and Dennis APAC Electric model of Berlin
businesses; ADL ADL acquires Manufacturing Multi-year order Enviro200
is formed Plaxton (UK #1 alliance with from Metrolinx in launched in the UK Initial sales of
coach body Zhuhai in China Toronto, Canada electric model of
builder) Enviro400 to be
JV with New Flyer Entry into Malaysia delivered in 2019
in North America and Singapore
markets
AD24 launched. An
Supplied coach online portal for
bodies to PolskiBus parts sales, training
in Poland and manuals
2004 2007 2008 2012 2015 2016 2017 2018
7
The UK Market Leader
Body Market Data (2018)(1) Long Standing Relationships with Prime UK Customers
4% 3%
5%
21%
67%
Other
Chassis Market Data (2018)
10%
5%
12%
59%
14%
ADL has over 50% market share in the UK
Other(2)
May 20, 2019: Stagecoach announced orders for 351 “cleaner, greener” buses and coaches this year on
networks in England, Scotland and Wales, as well as its megabus.com routes in the UK. ADL will build
312 vehicles: including 131 low-floor double-deckers, 95 single-deckers and 28 midi-buses.
Source: UK Bus Registration Data, ADL Management estimates
1. Includes double, midi and single deck
2. Others include: BYD (4%), Scania (4%), Mercedes (1%), Van Hool (1%)
8
Strong APAC Foundation and Growth Opportunities
Hong Kong is the bedrock of the APAC Business Other Key Growth Areas
Successful Expansion into New Zealand
Alexander Dennis holds a market leading position in Hong Kong ADL has grown sales in New Zealand significantly since entry
The cyclical nature of the market is driven by the 18 year replacements cycle Now the market leader in lightweight single decks
Following the completion of peak replacement, volumes are beginning to Increasingly introducing double deck offering and taking markets share
normalize. Potential upside in the reduction of current 18 year life of buses to 15
Developing coach business in partnership with Scania
New bridge between Zhuhai and Hong Kong could drive further capacity
Only manufacturer to support the entire range of vehicles
Near term EV opportunity
New Products Customer Focus Superior Attributes
Key Success Drivers
Flexible local manufacturing approach (use of Zhuhai 3rd Party body
2-axle sub-10.6m Tailoring of product Continued manufacturing facility 3rd party Malaysia Chassis facility)
double deck to to customer competition against
replace 3-axle requirements low cost local Willingness and ability to tailor products to local requirements
equivalent alternatives via
reliability and
Sub-10m midi bus
reduced total cost of
ownership
April 26, 2019: Singapore’s Land Transport Authority awarded ADL an order for 50 new Enviro500
double deck buses built to a new three door, two staircase layout. The design builds upon the concept
bus that ADL developed in 2016, adding further innovation including the use of the latest aluminum
composite body technology and a host of new safety and energy-saving features. The 50 new buses
will join 216 ADL Enviro500’s already in operation in Singapore, all supported locally from a 25,000
square foot facility in the north of Singapore which opened last year.
10Impressive North American Growth
ADL North American Customers North American Vehicle Deliveries 2015 - 2018
55 23
148
127
86
64
2015 2016 2017 2018
(1)
ADL standalone ADL in joint venture with NF
ADL’s North American Product Line is Complementary to NFI
Medium Duty Medium Duty Motor Coach
Low Floor Heavy Duty Heavy Duty Heavy Duty
Shuttle (27’, 29 Transit (30’, 35’) (35”, 45’)
Cutaway Transit (35’, 40’) Transit (60’ articulated) Double Deck (45’)
and 34’)
(ranging from
21’ to 34’)
1. NFI was in a joint venture with ADL from 2013 to 2017 to sell a variant of ADL’s Enviro200 product, known as the MiDi. Sales from the MiDi in North America have been presented separately
from ADL’s other North American vehicle sales
12NFI has a history of Successful Acquisitions and Growth
Strong, established track record of accretive, Acquired US low-floor
Acquired UK/Global
value creating M&A transactions cutaway and medium-
bus and coach
duty buses OEM
manufacturer
NFI’s acquisitions have enhanced and
expanded its product portfolio and created
opportunities for synergies between acquired Acquired U.S HD KMG
transit bus OEM
businesses Acquired assets of US NFI launched US based
Fiberglass supplier Part Fabrication Business
NFI has demonstrated a strong track record
as a dividend paying growth story, returning
over 700% to shareholders since 2012 $3,362
Acquired Orion (Transit
Bus parts Distributor) Acquired Can/US
(1)
from Daimler FRP Supplier $843
$2,382
$2,274 Pro forma
Acquired North
America’s leading ADL
Global bus body motor coach OEM
manufacturer equity
NFI converted investment in NFI $1,539
Acquired U.S. part $1,451
fabricator in 2010 from IDS to
Common Share $1,199
$984 $926 $865
$289 $318 $374
(1)
$97 $80 $95 $107 $151 $59
$61
2010 2011 2012 2013 2014 2015 2016 2017 2018
Revenue ($ mm) Adj. EBITDA ($ mm)
1. See footnote on slide 1 and “Non-IFRS measures” under cautionary statements at the end of this presentation.
2. British pounds have been converted to US dollars using an exchange rate of £1.00=US$1.2663; 2018 actual figures have been converted at an exchange rate of £1.00=US$1.3355.
14NFI Group Leadership
Paul Soubry
President & CEO
Joined in 2009
Janice Harper Brian Dewsnup
Chris Stoddart Ian Smart Colin Robertson
Executive Vice President President
President President CEO ADL &
Human Resources NFI Parts
Transit Bus Motor Coach President NFI
Joined in 1998
Joined in 2008 Joined in 2011 International Joined in 2006
Joined in 2007
Glenn Asham
Executive Vice President
Chief Financial Officer
Joined in 1992
David White
Executive Vice President
Supply Management
Joined in 1996
Colin Pewarchuk
Executive Vice President
General Counsel
Joined in 2006
15NFI has maintained a Strong Balance Sheet while Growing Dividend
Track Record of Balance Sheet Deleveraging Stable and Growing Dividend
NFI has paid consistent and growing dividends every month / quarter since its IPO
New US$300 million Senior Secured Credit Facility
in 2005
– Facility matures in October 2023 and has substantially the
Senior Secured
same terms NFI’s existing syndicated credit facility As a result of continued robust free cash flow generation NFI increased its annual
Credit Facilities dividend to $1.70 per share, effective March 2019
Remainder of purchase price funded with availability on
existing NFI revolver
– Represented a 13.3% increase from the previously announced annual
dividend rate of $1.50
Expected pro forma total indebtedness to estimated combined
Adjusted EBITDA(1) of approximately 2.9x as at December 30,
NFI has consistently grown its dividend over time
Pro Forma 2018
Strong near-term cash flow generation supports rapid de-
leveraging
Historical NFI Leverage Profile Historical Annualized Dividend (C$)
Senior Debt / LTM Adj. EBITDA Annualized Dividend per Share
2.9x
2.7x
$1.70
2.2x 2.0x 2.0x $1.50 $1.50 $1.50
1.9x 1.8x 1.9x 1.9x 1.9x $1.30 $1.30 $1.30 $1.30
1.7x 1.6x 1.6x
$0.95 $0.95 $0.95 $0.95
$0.70
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Pro-
Q1 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
forma
2016 2017 2018 2019
Q4 2016 2017 2018 2019
1. See footnote on slide 1 and “Non-IFRS measures” under cautionary statements at the end of this presentation
16Combined Technology and Electric Vehicle Leadership
Leader in Zero Emission Buses and Infrastructure Strategic Partnerships
Electric variants available on Support mobility projects from
common Xcelsior Platform start to finish ADL offers biogas, hybrid and fully electric variants through
partnerships with Scania, BAE systems and BYD, respectively
Industry leading range of Focus on energy management
100kWh to 818kWh of electricity optimization
Range of up to 260 miles (418 Provide infrastructure planning
km) and development
Complete FTA Altoona test Provide cohesive transition of
program bus fleets to zero-emission In partnership with Stagecoach and Fusion Processing, ADL
electric technology has launched the UK’s first autonomous bus which has
already begun depot trials
Other NFI Technology Initiatives ADL Aftermarket Business
New Flyer’s Connect 360™ is real-time smart
analytics reporting platform to enhance battery-electric ADL’s total digital offering encompasses parts
bus operation, intelligence, and efficiency sales, training, manuals, service bulletins,
customer forums and vehicle solutions technology
New Flyer’s Autonomous Technology program includes
ADAS AV development and deployment of technology for Advanced
Driver-Assistance Systems (ADAS) and Automated Vehicles
(AV), with a guiding principle focused on public safety.
17Key Transaction Highlights
• Market Leadership, international diversification, and a platform for growth
• Enhances NFI product portfolio
• Cost effective platform
• Financial compelling
• Strong cultural fit with commitment to safety and environment
18Cautionary Statements
Non-IFRS measures
All financial information regarding ADL contained in this presentation has been derived from ADL’s financial statements which are prepared in accordance with UK
GAAP. NFI prepares its financial statements in accordance with IFRS. UK GAAP differs in certain material respects from IFRS.
ADL’s “Adjusted EBITDA” referred to in this press release has been calculated by ADL’s management and consists of earnings before interest, income taxes,
depreciation, amortization, product development costs and other non-cash charges and certain non-recurring charges. References to “Adjusted EBITDA” are to
earnings before interest, income taxes, depreciation and amortization after adjusting for the effects of certain non-recurring and/or non-operations related items as
referred to in the Company’s public filings plus estimated adjustments to ADL’s Adjusted EBITDA for conversion from UK GAAP to IFRS. NFI’s free cash flow
means net cash generated by operating activities adjusted as referred to in the Company’s public filings. References to ADL’s free cash flow means net cash
generated by operating activities with certain adjustments, prepared on a UK GAAP basis. Management believes Adjusted EBITDA and free cash flow are useful
measures in evaluating the performance of the Company. However, these terms are not recognized earnings measures under UK GAAP or IFRS and do not have
standardized meanings prescribed by UK GAAP or IFRS. Readers are cautioned that these terms should not be construed as an alternative to net earnings or loss
or cash flows from operating activities determined in accordance with UK GAAP or IFRS. NFI's and ADL’s method of calculating Adjusted EBITDA and free cash
flow may differ materially from the methods used by other issuers and, accordingly, may not be comparable to similarly titled measures used by other issuers.
Forward-looking statements
This press release contains forward-looking statements relating to expected future events and results, including plans for the combination and integration of the
acquired business into NFI’s existing business and expected synergies, the diversification and growth of the combined businesses, the accretive effects of the
transaction to revenue, earnings and cash flow of NFI and expected future financial deleveraging. Actual events and results may differ materially from management
expectations as projected in such forward-looking statements for a variety of reasons, including risks related to acquisitions, joint ventures and other strategic
relationships with third parties, risks related to operations in existing, new and emerging markets, the ability to implement the operational changes necessary to
achieve expected or potential synergies, market and general economic conditions, political developments in the countries where the Company operates and
funding availability for customers to purchase buses and coaches and to purchase parts or services, the covenants contained under NFI’s credit facilities could
impact the ability of NFI to make strategic investments and fund dividends and the other risks and uncertainties discussed in the materials filed with the Canadian
securities regulatory authorities and available on SEDAR at www.sedar.com. Due to the potential impact of these factors, the Company disclaims any intention or
obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, unless required by applicable law.
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