AVADA GROUP LIMITED — M&A Activity 2022

Jun 19, 2022

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AVADA Group Limited Acquisition of Construct Traffic

20 June 2022

Important notice and disclaimer

This document dated 20 June 2022 has been prepared by AVADA Group Limited (ACN 648 988 783) (the Company) and is provided for information purposes only. It contains summary information about the Company and its activities and is current as at the date of this document. It should be read in conjunction with the Company’s periodic and continuous disclosure announcements filed with the Australian Securities Exchange, available at www.asx.com.au.

This document does not constitute an offer, invitation, solicitation or recommendation with respect to the purchase or sale of any security in the Company nor does it constitute financial product advice. This document is not a prospectus, product disclosure statement or other offer document under Australian law or under any other law. This document has not been filed, registered or approved by regulatory authorities in any jurisdiction.

The information contained in this document is not intended to be relied upon as advice or a recommendation to investors and does not take into account the investment objectives, financial situation, taxation situation or needs of any particular investor. An investor must not act on the basis of any matter contained in this document but must make its own assessment of the Company and conduct its own investigations and analysis. Investors should assess their own individual financial circumstances and consider talking to a financial adviser, professional adviser or consultant before making any investment decision.

By reading this document you agree to be bound by the limitations set out in this document. No representation or warranty, express or implied, is made as to the accuracy, reliability, completeness or fairness of the information, opinions, forecasts, reports, estimates and conclusions contained in this document. To the maximum extent permitted by law, none of the Company and its related bodies corporate, or their respective directors, employees or agents, nor any other person accepts liability for loss arising from the use of or reliance on information contained in this document or otherwise arising in connection with it, including without limitation any liability from fault of negligence.

Past performance is not indicative of future performance and no guarantee of future returns is implied or given. Nothing contained in this document nor any information made available to you is, or shall be relied upon as, a promise, representation, warranty or guarantee as to the past, present or the future performance of the Company.

Certain statements in this document constitute forward looking statements and comments about future events, including the Company's expectations about the performance of its business. Such forward looking statements involve known and unknown risks, uncertainties, assumptions and other important factors, many of which are beyond the control of the Company and which may cause actual results, performance or achievements to differ materially from those expressed or implied by such statements. Forward looking statements are provided as a general guide only and should not be relied on as an indication or guarantee of future performance. Given these uncertainties, recipients are cautioned to not place undue reliance on any forward looking statement. Subject to any continuing obligations under applicable law the Company disclaims any obligation or undertaking to disseminate any updates or revisions to any forward looking statements in this document to reflect any change in expectations in relation to any forward looking statements or any change in events, conditions or circumstances on which any such statement is based.

This document contains unaudited financial information for the Company that has been prepared by the Company’s management.

This document may not be reproduced or published, in whole or in part, for any purpose without the prior written consent of AVADA Group Limited

Authorised for release by the Board of Directors of AVADA Group Limited

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AVADA Group Limited – Acquisition of Construct Traffic Page 1

An overview of Construct Traffic

LEADING PROVIDER OF TRAFFIC MANAGEMENT SERVICES IN VICTORIA

Construct Traffic (“Construct”) was established in 2007 and is headquartered in Tullamarine, Melbourne. Construct provides traffic control and work zone safety throughout Melbourne and Victoria

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Client base weighted to recurring maintenance work, including gas maintenance, councils, asphalt and road maintenance

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Young fleet (average age < 5 years) with recent acquisitions to support revenue growth

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Existing management to remain, with vendors agreeing to a 12 month earnout and remaining committed to integration and growth

	Vehicles	Traffic Controllers	Depots
VIC	131	342	1
Page 2 AVADA Group Limited – Acquisition of Construct Traffic

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Strategic rationale

A PLATFORM FOR FURTHER GROWTH DELIVERED THROUGH REGIONAL EXPANSION

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Establishing a presence in Victoria of a size and capability on which to build scale in the region

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Delivering on goals of geographical expansion, consistent with the strategy of AVADA

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Benefits of diversification of existing footprint and customer base

Low risk integration plan, leveraging synergies of AVADA

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Accretive earnings profile

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AVADA Group Limited – Acquisition of Construct Traffic Page 3

Strategic rationale

POST ACQUISITION SERVICE NETWORK AND CAPABILITY

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Delivering on goals of geographical expansion, consistent with the strategy of AVADA

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	Vehicles T	raffic Controllers	Depots
QLD(1)	632	1,213	19
NSW(1)	192	408	7
VIC	131	342	1
Total	955	1,963	27

Notes:

(1) As at 31 December 2021

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AVADA Group Limited – Acquisition of Construct Traffic

Page 4

Pro forma income statement

Pro forma summary income statement

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Accretive margin and earnings profile

		AVADA
$m		FY22F(1)	Construct(2)		Combined
	Low	High		Low	High
Revenue	138.2	138.7	34.5	172.7	173.2
Gross Profit	29.3	29.4	7.6	36.9	37.0
Gross margin	21.2%	21.2%	22.0%	21.4%	21.4%
EBITDA	12.6	13.0	5.0	17.6	18.0
EBITDA %	9.1%	9.4%	14.5%	10.2%	10.4%

Notes:

• (1) Ongoing impacts of La Nina and severe weather into May 2022 is expected to result in a shortfall to FY22 EBITDA as set out in the Prospectus dated 9 November 2021. EBITDA is expected to be 16% to 19% below the Prospectus guidance of $15.5m

• (2) FY22 annualised sustainable income statement

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AVADA Group Limited – Acquisition of Construct Traffic

Page 5

Deal metrics

Pro forma leverage ratios

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Strong Balance sheet maintained to support future growth

$m	Low	High AVADA	Construct	Low High Combined
EBITDA - FY22 (refer prior page) Adjustment: IFRS 16(1)	12.6 (1.3)	13.0 (1.3)	5.0 (0.1)	17.6 18.0 (1.4) (1.4)
Indicative annualised EBITDA	11.3	11.7	4.9	16.2 16.6
			Pro forma indebtedness at completion	Available facilities
Acquisition facilities and asset finance(2) Net working capital Bank guarantees and corporate cards			26.3 4.2 0.2	30.0 8.3 0.5
			30.7	38.8
Gross leverage ratio (Mid-point) Covenant(3)			1.87 2.25

(1) Adjusted to reflect covenant requirements

(2) Includes $17.6m upfront consideration, $0.5m one-off payment for vehicles and $0.8m deal costs and stamp duty in respect of the Construct acquisition (3) Short term increase to 2.25

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AVADA Group Limited – Acquisition of Construct Traffic

Page 6

Trading update & business outlook

Significant pipeline into FY23 from deferred work (weather impacted)

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Organic growth and further acquisitions targeted for earnings growth. Significant pipeline from work deferred from FY22

Continued investment in fleet for a stronger asset base

Active margin improvement through synergies and input costs being pursued

Continued assessment of acquisition opportunities, focused on geographical expansion

Ongoing impacts of La Nina and severe weather into May is expected to result in a shortfall to FY22 EBITDA as set out in the Prospectus dated 9 November 2021. EBITDA is expected to be 16% to 19% below the Prospectus guidance of $15.5m

AVADA Group Limited – Acquisition of Construct Traffic Page 7

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ABN 57 648 988 783

Contact Us

Avada Group Limited c/o Kern Group Level 22 / 300 Queen Street Brisbane QLD 4000 T 1300 321 995 E contact@avadagroup.com.au

avadagroup.com.au

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avadagroup.com.au ABN 57 648 988 783