21 Sep 2015

Waco International Media Release
21 SEP 2015

Waco International Holdings Limited (the “Company“, the “Group” or “Waco“) has today announced its intention to list its issued ordinary share capital on the main board of the securities exchange operated by the JSE Limited (the “JSE“), subject to market conditions and the requisite approvals by the JSE (the “Listing“).

Waco is a diversified equipment hire and industrial services business operating in South Africa, sub-Saharan Africa, Australasia (Australia and New Zealand), the United Kingdom and Chile. The Group has core product offerings in forming, shoring and scaffolding, which includes suspended platforms and services such as insulation, cladding, painting, asbestos abatement and blasting, as well as relocatable modular buildings, portable sanitation and integrated hygiene services. Waco expects to be listed in the General Industrials – Diversified Industrials sector of the JSE.

Stephen Goodburn, Chief Executive Officer of Waco said:

“We are progressing our plans to list on the JSE. Waco is a high-growth business focused on equipment hire and industrial services and the listing will enable Waco to access the capital markets to fund future expansion both within the business and through future acquisitions.”

The listing will facilitate a partial realisation of the interests of a private equity consortium led by Ethos Private Equity (“Ethos“) which includes RMB Ventures Six (“RMB Ventures“), Waco management and The Standard Bank of South Africa (“Standard Bank“).

Stuart MacKenzie, Chief Executive Officer of Ethos said:

“Four years ago, Ethos and RMB Ventures committed to partner with Stephen and his team in a growth strategy for Waco, underpinned by a robust balance sheet and supportive shareholders. Waco’s executive team have done a remarkable job in setting the Group up for sustained growth. Waco has proven itself to be a differentiated industrial services business with exciting growth prospects and an exceptional management team. The time is right for it to benefit from public market ownership and broader access to capital.”

The Group’s business operates through a network of more than 100 branches from which it services over 14,000 customers. Customers include a significant number of “blue chip” multinational and national companies and government agencies across a variety of industries, such as industrial maintenance, infrastructure, mining and resources, oil and gas, power generation, construction and engineering, education, healthcare and events.

Stephen Goodburn added:

“The Company is proud of its track record of servicing its customers and we believe we are market leaders in most areas where we operate. Waco has built a platform for growth off its extensive branch network and we will continue with our strategy of diversifying our business yet further across products and geographies.

Waco’s growing African footprint together with its many new product innovations across the sanitation and relocatable modular building businesses is something which we are particularly proud of. The enhanced public profile Waco will receive from the listing should contribute to further opportunities in established and new markets.”

Since July 2012, management has successfully implemented a number of key strategic initiatives that have significantly improved the operational and financial performance of the Group. Over the last three financial years, the Group invested R682 million of capital expenditure to maintain and expand its hire fleet and to further develop its branch network, with a focus on expansion in South Africa and other sub-Saharan African countries. During this period, Waco also invested R166 million in strategic acquisitions, including, most notably, the acquisitions of United Scaffolding in New Zealand and SkyJacks in South Africa. The Group has implemented successful turnaround plans in the United Kingdom and Australia, which have returned the international operations to profitability.

These strategic initiatives have contributed to a 45% increase in the Group’s revenue and a 94% increase in the Group’s Adjusted EBITDA, from R3,076 million and R395 million, respectively, in the 2013 financial year to R4,535 million and R768 million, respectively, in the 2015 financial year. Over the same period, the Group’s RONAMincreased from 17% to 27%.

Waco has a proven, successful business model with an attractive revenue mix comprising mostly equipment hire and contracting income. Management believes that the Group is an established market leader in forming, shoring and scaffolding, and in portable sanitation in South Africa, has the second largest modular building hire fleet in the country and is a market leader in access scaffolding in Australasia. The Group also has a niche position in modular buildings in the United Kingdom. Waco offers its products and services through well-established brand names in each of their markets. Management believes that the Group’s market reputation as well as the size, quality and reach of the hire fleet constitute important competitive strengths, providing significant barriers to entry.

Since 30 June 2015, the Group has continued to perform in line with management’s expectations. Between 30 June 2015 and 31 August 2015, the Group’s Adjusted EBITDA increased in comparison to the corresponding period in 2014. This growth was primarily due to improved profitability in the Group’s international operations segment as a result of the implementation of the Group’s restructuring plans.

Looking ahead, management believes that the strong growth rate achieved over the last three financial years will moderate as a result of the Group’s higher profit base. In the short- to medium-term, management is targeting a sustainable organic revenue growth rate in the high single-digit to low double-digit range, which could be bolstered by future acquisitions. Management also believes that the proportional increase in the Group’s revenue from other sub-Saharan Africa, the continued turnaround of the Group’s international operations and the Group’s emphasis on lowering the cost to serve will support incremental margin expansion in the short- to medium-term.

Stephen Goodburn said:

“I believe Waco has excellent future growth prospects. We believe the Company has leading market positions and well known brands in high growth markets, allowing it to implement its many growth initiatives.”

Rand Merchant Bank, a division of FirstRand Bank Limited (“RMB“), Morgan Stanley & Co. International plc (“Morgan Stanley“) and Standard Bank have been appointed as Joint Global Coordinators and Joint Bookrunners in relation to the Listing. RMB has been appointed to act as JSE Sponsor in relation to the Listing.