Review of Eversholt Rail Group
Mary Kenny and David Stickland
6 May 2015
Index
1. Rail Industry Overview
2. Eversholt Rail Business Overview
3. Review of 2014 Financial Performance
4. Covenants & Ratings
5. Ownership Changes
6. Executive Management Changes
7. Q&A
2
Rail Industry Overview
DfT awards the first franchises since the Brown report
Industry Update
 The Rolling Stock Strategy, published by the Rolling Stock Strategy Steering Group, (‘RSSSG’)
reaffirmed its projection of a doubling of rolling stock numbers.
– In February 2015, an updated ‘Long Term Passenger Rolling Stock Strategy’ was published by the RSSSG, which includes rolling
stock owners, train operators and Network Rail. The group reaffirmed their previous long term conclusions that the industry will
continue to be demand-led, with the UK passenger fleet size forecast to potentially double over the next 30 years
 Network Rail
– In March 2014, Network Rail published its five-year plan to invest £38bn in rail infrastructure. The plan (for the period April 2014 to
March 2019) includes: up to 700 more trains a day between major northern cities, 20% capacity increase of London’s commuter
trains, 850 miles of track to be electrified, upgrades for stations including Birmingham New Street and Manchester Victoria
 Refranchising
DfT awarded:
– Seven-year Thameslink, Southern and Great Northern franchise to Govia Thameslink Railway Limited
– Fifteen-year contract to operate passenger services on the Essex Thameside rail franchise to the existing operator c2c
– Eight-year contract to operate the Inter-City East Coast franchise to Inter City Railways, a joint venture of Stagecoach (90%) and
Virgin (10%)
Transport Scotland awarded the 10-year ScotRail franchise to Abellio ScotRail, operations commenced on the 1 April 2015
DfT launched the TransPennine Express (TPE), Northern and East Anglia refranchising competitions. The TPE and Northern bids are
due to be submitted during Q2 2015
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Eversholt Business Overview
Underlying demand remains high
Eversholt Rail’s Position
• Eversholt Rail is currently in discussion with bidders, the DfT and TfL on all of the “live” franchises. Within these
franchises there are several potential new build opportunities
• Eversholt Rail is also in touch with the existing Train Operating Companies regarding potential directly-awarded
extensions of the East Midlands Trains and First Great Western franchises
• 100% fleet utilisation of the passenger rolling stock for 2014 (2013:100%)
• In November 2014, Eversholt Rail successfully negotiated a one year extension to its existing Revolving Credit
facility (‘RCF’). The RCF is now due to mature in 2019. In addition the business also negotiated improved terms
and conditions on both this facility and on its term loan
• Lease extensions (2014)
– In February, Eversholt Rail signed a series of Single Tender or Direct Award, (STA/DA) lease extensions with Northern Rail to keep
our fleet of 3 Class 321s, 5 Class 322s and 10 Class 158s on lease until February 2016
– In April, Eversholt Rail signed a lease extension with East Coast Main Line Limited to retain our IC225 fleet on lease until 2019-20
– In June, Eversholt Rail signed an STA lease extension with Abellio Greater Anglia to keep our fleets of 61 Class 315s and 94 Class
321s on lease until October 2016
– In October Eversholt Rail signed an STA lease extension with London South Eastern Railway to keep our fleets of 112 Class 375s,
36 Class 376s, 29 Class 395s and 97 Class 465s on lease until June 2018
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Financial performance (Security Group)
For the year ended 31 December 2014
31 December
2014
Year ended
Capital rental income
£m
31 December
2013
£m
270.0
268.1
10.5
5.2
Finance lease income (Depots)
0.9
0.6
Other income
3.6
3.1
Total Income
285.0
277.0
Overheads
(21.4)
(18.2)
263.6
258.8
-
0.6
Net maintenance income
Profit on disposal of property,
plant and equipment
Depreciation
Fair value adjustment on
derivative financial instruments
Net interest and finance cost
(Loss)/profit before tax
(125.5)
(128.6)
 Capital rental marginally higher than 2013 due to additional
investment in fleets
 Higher net maintenance income arises from the increased
level of maintenance activity in the year
 Other income includes asset management fees received
from Cross London Trains Ltd
 Fair value adjustment on derivatives represents the
movement in the fair value of the interest rate swaps
(48.8)
(141.4)
(52.1)
34.7
(152.9)
12.6
 Net interest and finance cost in 2013 included the unwind
of capitalised borrowing costs on the bank acquisition
facilities
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Statement of financial position (Security Group)
As at 31 December 2014
Year ended
Assets
Property, plant and equipment
Finance lease receivables
Trade and other receivables
Deferred Tax
Deferred Revenue
Investment in subsidiary
Inventory
Cash and cash equivalents
Liabilities
Trade and other payables
Borrowings
Derivative financial instruments
Amounts owed to Eversholt Rail (365) Limited
Deferred tax
Deferred revenue
Net assets
Equity
Share capital
Share premium account
Accumulated deficit
31 December 2014
£m
1,708.4
10.0
24.7
22.5
0.0
2.8
1.6
37.5
1,807.5
31 December 2013
£m
1,818.4
10.8
15.5
12.1
0.6
2.8
1.8
88.2
1,950.2
 Property, plant and equipment lower as a result of
annual depreciation charge partially offset by
investment in the fleets
 Year end cash of £37.5m after repayment in
borrowings
42.6
1,757.8
107.3
19.0
85.7
100.6
2,113.0
31.8
1,820.2
58.5
36.5
89.4
115.7
2,152.1
(305.5)
(201.9)
-*
13.7
(319.2)
(305.5)
-*
13.7
(215.6)
(201.9)
 Revolving Credit Facility maturity extended by one
year to 2019 with a further option to extend by one
more year
 Negative mark to market valuation of interest rate
swaps not expected to be realised
* £12,000
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Key Funding Activities
Enhanced funding platform with the capacity for additional investment in rolling stock
 Financing
31 Dec 2014
o Facilities - Term loan 2018, Revolving Credit Facility 2019
o Undrawn RCF provides same day liquidity
o Improved financial efficiency using surplus cash to pay down
drawings on RCF
o Improved financial terms and conditions on the bank facilities
following RCF extension agreement by 1 year to 2019
 Average debt maturity until mid 2020s
Current debt structure
Facility A 5 year term loan (2018)
£100m
£100m
£35m
£16m
Bond A (2020)
£300m
£300m
Bond B (2025)
£400m
£400m
Bond C (Amort. 2021-2035)
£400m
£400m
MetLife Note (Amort. 2028-2036)
£150m
£150m
£1,385.0m
£1,366.0m
£340.6m
£422.8m
Facility B 5+1 year RCF (2019 + 1)
Total
Shareholder Loan (inc capitalised interest)
450
31 Dec 2013
400
350
 Cash reserves of £37.5m:-
250
200
– £27.0m Security deposit (restricted)
150
– £10.5m Unrestricted cash
100
50
-
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
2038
2039
2040
£ millions
300
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Covenants
Ratios substantially below the lock up limits
 All ratios were substantially below the lock
up levels and are projected to remain so
 Intention is to maintain these ratios with
plenty of headroom to provide scope for
Leverage test
(Net debt / EBITDA)
31-Dec-14
Actual
Lock-up
31-Dec-13
Actual
Lock-up
Backward looking
5.16x
< 7.00x
4.96x
< 7.00x
Forward looking
4.55x
< 7.00x
5.21x
< 7.00x
Interest cover ratio
(EBITDA / Interest)
31-Dec-14
Actual
Lock-up
31-Dec-13
Actual
Lock-up
Backward looking
2.87x
> 1.75x
2.48x
> 1.75x
Forward looking
3.15x
> 1.75x
2.88x
> 1.75x
NPV test
(Net Debt / NPV)
31-Dec-14
Actual
Lock-up
31-Dec-13
Actual
Lock-up
Forward looking
50.9%
47.2%
investment
< 70.0%
< 70.0%
8
Ratings
 Fitch reaffirmed bond rating at A- (October 2014)
– Net Debt to NPV considered comfortable
 S&P reaffirmed bond rating at BBB, with a stable outlook (March 2015)
– FFO to Debt 11.3%
 Company and New Shareholders remain committed to ensuring that the bond ratings remain at these levels
9
Ownership changes
 CKI acquired Eversholt Rail on 17 April 2015
– Business as usual
– No change to strategy
– CKI fully supportive of Executive approach & fully supportive of growth opportunities
 Andy Hunter new Chairman
 Non Executives from Industry continue
 KYC (information will follow shortly)
10
Executive Management changes
 David Stickland, CFO, joined Eversholt Rail in November 2014
 Clive Thomas, Head of Commercial and Business Services, retires October 2015. Responsibilities for legal
and company secretarial pass to Dave Stickland from 1 May 2015
 Executive Team for 2015:
– CEO:
Mary Kenny
– CFO:
David Stickland
– COO:
Andy Course
– Head of Relationship Development:
Stephen Timothy
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Questions?
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Appendix - EBITDA Reconciliation
Figures drawn from Security Group Financial Statements
Year ended 31 December 2014
Note
Gross Profit
Administrative expense
Operating lease depreciation
Add back:
Write down in value of inventories within Cost of Sales
Administrative depreciation
Pension costs
Finance lease depreciation within Finance lease income
EBITDA (as stated in Compliance Certificate)
1
1
(Note 4)
(Note 4)
(Note 7)
(Note 7 &
28.6)
£m
159.5
(21.4)
125.5
263.6
0.2
0.6
1.0
0.8
266.2
Note from Security Group Financial Statements
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Copyright/confidentiality notice and disclaimer
© Eversholt Rail (UK) Limited 2015
The contents of this presentation are private and confidential and are provided on the basis that they are not
copied, circulated or otherwise divulged to others without our express written consent.
We acknowledge that some recipients may be subject to the Freedom of Information Act 2000 and we therefore
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disclosed and, in particular, whether the exemptions set out in sections 41 and 43 of that Act are applicable.
This presentation is for general information only and is not intended to provide legal, accounting or tax advice.
Although every care has been taken in its preparation we make no representation and give no warranty as to its
accuracy or completeness.
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