Tesmec — Investor Presentation 2020

Apr 14, 2020

• Stringing
• Energy Automation
• Railway
• Trencher

Integrated Solutions Provider

Global Strategy Update

www.tesmec.com

Strategic Overview >

• Impact of Covid-19 >
• Business Acquisition – 4SERVICE >
• Financial Structure Strengthening >
• Outlook 2020-2021 >

Strategic overview

TESMEC Group strategic market segments

• ENERGY
• TELECOM
• INFRASTRUCTURES

Post COVID-19 approach

Further focus on development guidelines:

• CONNECTIVITY IS A MUST (5G opportunities, digitalization)
• xxx ▪ SAFETY-FIRST (Diagnostic, Artificial Intelligence, Cybersec)
• ENVIRONMENTAL IMPACT (Energy transition)

Focus on key geographic areas: USA, China and New developed Countries

TELECOM & CIVIL INFRASTRUCTURES xxx TRENCHER BUSINESS xxx

MARKET TRENDS

• From SALES to RENTAL
• 5G and Telecom

• Infrastructures and mining

• Wide rental fleet

• Clean & Fast solutions
• Complete jobsite management

Energy Business

MARKET TRENDS

• Powerline refurbishment and management (smart grid) due to the aging of existing conductors in western countries
• Interconnection lines to connect renewables sources

ENERGY xxx STRINGING BUSINESS xxx

• Methodologies for rethinking maintenance activities
• Green approach (full electric range)

MARKET TRENDS

• Smart grids
• Energy transition

▪ Cybersecurity

ENERGY xxx ENERGY AUTOMATION BUSINESS xxx

• Protection, monitoring & remote control
• Substation Automation Systems (SAS)
• IoT platform and sensors

Railway Business

MARKET TRENDS

• Safety and Reliability for railway infrastructure
• National investments program to support local economy
• Predictive maintenance through Artificial intelligence and Big data

RAILWAY xxx RAIL BUSINESS xxx

• Complete portfolio of technological solutions for railway electrification and maintenance
• Advanced working vehicles for maintenance purpose

• Diagnostic vehicles with integrated diagnostic systems for unmanned diagnostic and data management platform

• Strategic Overview >

• Impact of Covid-19 >
• Business Acquisition – 4SERVICE >
• Financial Structure Strengthening >
• Outlook 2020-2021 >

st 1 PHASE xxx Health emergency	Different impacts on the several businesses and key countries of the Group Stop of the production activities in Europe No impacts in the Tesmec markets/sector but delays due to the production and logistic lock down
nd 2 PHASE xxx Reopening	Essential services granted in smart working modality Reopening of production activities The gears of the reopening will be impacted by the Government Rules.
rd 3 PHASE xxx Recovery & growth	Recovery and growth thanks to new business opportunities and relevance of Tesmec key drivers: safety, connectivity and sustainability
Summary Management xxx Actions	▪ Efficiency and flexibility actions adopted ▪ Actions to maintain employment levels ▪ Investments in key infrastructure sectors

• Strategic Overview >
• Impact of Covid-19 >
• Business Acquisition – 4SERVICE >
• Share Capital Increase Proposal >
• Outlook 2020-2021 >

MARKET TRENDS xxx	▪ The rental business has a major in the global market. It is growing and expanding in market than ever before ▪ Customers want to increase the flexibility with limited investments in CAPEX
BENEFIT FOR THE xxx CUSTOMERS	▪ Get the maximum operational advantage by having, when and where needed, the most suitable equipment available for the type of work to be performed ▪ Significant savings on time and costs of execution with the possibility to test the machines before deciding whether to buy
TESMEC TO BE	▪ Integration of the 4SERVICE with the Tesmec USA's rental business to improve efficiency and profitability ▪ Keeping the Wet Rental/Full services business in Marais ▪ Strategic Key Area: USA, EU and Australia/New Zealand
BUSINESS DRIVERS	▪ Cash-in business ▪ Recurring business ▪ Increase business volumes and market shares thanks to a stronger and more complete offer and wider range of solutions ▪ Building long-term relationships

• ➢ 4Service S.r.l. is the rental division, 100% owned by MTS S.p.A. (including MTS4SERVICE LLC), sold to Tesmec S.p.A.
• ➢ The purchase price will be injected as future equity and not to be paid at closing of the transaction
• ➢ MTS S.p.A. and Tesmec S.p.A. are controlled by TTC

Transaction Perimeter of the transaction

TESMEC Rental description and rationale TESMEC Rental fleet 2020

Overview of the TESMEC Rental Division

• Tesmec Group, will be reorganized internally dedicating a BU to the rental division, TESMEC Rental. The Tesmec Rental will be focused on dry rental. The company will be able to provide clients with a single one stop shop and with the best suitable machine according to job site requirements, at the best time and place
• This division will facilitate the sale of trenchers, allowing the client a sort of "trial period" for the trencher

4Service S.r.l.	19 trenchers owned + 8 trencher in leasing + 2 trenchers managed
MTS4Service LLC	13 trenchers owned
Tesmec USA – Fleet	16 trenchers owned
	58 trenchers

Rationale of the TESMEC Rental Division

TESMEC Rental is built up to face emerging market trend and internal needs. On one side, the market is changing and rental services might be elaborated to achieve the maximum operative advantage, allowing companies to increase the flexibility of financial resources and to reduce the financial fixed assets. On the other side, the Group might have the opportunity to increase sales, thanks to a wider fleet; and to build clients long-term relationship, thanks to customized rental contracts

Tesmec Group – Key financials post transaction Tesmec Group – Description post transaction

	Tesmec Group FY2019	Tesmec Group Aggregated FY2019
Sales	200.7	198.6
EBITDA	27.4	31.4
EBITDA %	13.7%	15.8%
NFP	118.0	120.4
NFP/EBITDA	4.3x	3.8x
NET EQUITY	46.2	51.5
FCF	(24.9)	(23.1)
ST Fin Assets	(9.9)	(9.9)
Cash	(17.9)	(20.0)
Other LT Debt	145.9	150.3
NFP	118.0	120.4
Shareholder Loan		10.5 *
* The shareholder loan was 7.8 M€ end of March.

Key financials post transaction:

• ✓ 2.1 p.p. EBITDA margin improvement

• ✓ Improvement of NFP/EBITDA of 0.5x

• ➢ The consolidation runner derives from the aggregation of 4Service S.r.l. (sale and rental business) and Tesmec Group, taking into consideration intercompany elisions

• ➢ The combined entity Rental division will have a positive effect on Tesmec Group's Aggregated EBITDA. The EBITDA of €31.4m derives from 4Service S.r.l. EBITDA (€5.4m), Tesmec Group EBITDA (€27.4m), and intercompany elisions (€1.4m) that refer to:
• ✓ the trenchers sold to 4Service S.r.l.: revenues for Tesmec Group amount to €9.6m and the related industrial cost for Tesmec Group was €7.1m resulting in an IC impact of €2.6m. The IC elision is also impacted by the minor costs related to the sale of trenchers by 4Service S.r.l. to the market (margin for 4Service S.r.l. would have been €1.1m higher if it had been part of Tesmec Group)
• ✓ the revenues/cost for the rental of trenchers (€3.1m) and the revenues/cost for the services provided by Tesmec S.p.A. to 4Service S.r.l. (€1.3) are perfectly offset and have no impact at EBITDA level

The pro forma consolidated NFP should not take into account the shareholder loan that lies in 4Service Srl, as it is an outstanding debt towards shareholders, subordinated to the bank debt, as such it is represented separately. The EBITDA represented in the table below doesn't include the transaction costs.

Sale and rental financials are represented - €4.4m Other LT for 4Service S.r.l. is the IFRS 16 effect of the trenchers in leasing

Key Forecast Financials P&L FY19A-2020.Q1

Revenues 2019: ▪ 4Service S.r.l. + MTS4Service LLC	6.4 M€
▪ Tesmec USA – Fleet	3.0 M€
Revenues 2020.Q1:
▪ 4Service S.r.l. + MTS4Service LLC	1.7 M€
▪ Tesmec USA – Fleet	0.8 M€

4Service S.r.l. (only Rental)	FY2019	Mar-2020	The consolidation runner derives from the ➢
Sales EBITDA EBITDA % NFP NFP/EBITDA NET EQUITY	6.9 5.2 75.2% 12.8 2.5x 8.7	11.7	aggregation of MTS4Service LLC and 4Service S.r.l. (carve out of MTS S.p.A.) taking into consideration 3 impacts: IFRS16, intercompany elisions and the restatement of certain line items
FCF	1.8
Shareholder Loan	10.5	7.8	Other LT Debt is relative to the trenchers ➢
Cash	(2.1)	(0.3)	in leasing (according to IFRS 16 standards)
Other LT Debt	4.4	4.2
NFP	12.8	11.7

Market Price	€m	€m	#
Valuation check	Dec-19	Mar-20	trenchers
4Service S.r.l. - Market Price	7.8	6.9	19
Leasing 4Service S.r.l. - Market Price	5.8	5.8	8
MTS4Service LLC - Market Price	10.4	9.3	13
Total fleet market price	23.9	22.0	40
NFP	12.8	11.7
NWC	0.0	1.3
Equity Value market price valuation	11.1	11.6	40

Trading and Transaction multiples based valuation

Trading and transaction valuation		Advantages
EV/EBITDA	≈4.1
EBITDA19	5.2	1) Value is ≈4.1 EBITDA
EV	21.1	2) Value is lower than market price value
NFP Mar20	11.7	3) No cash out for the transaction
Equity Value - Price	9.4

Trading and Transaction multiples based valuation

• ➢ 4Service S.r.l. valuation is around 4.1x, based on comparable transaction multiples, trading multiple and a comparison with Tesmec Group's valuation
• ➢ The negotiated price is €9,4m as per trading and transaction multiples based valuation

Valuation check - @Market Price

Market Price - Valuation check
	€m Mar-2020
4Service S.r.l. - Market Price	6.9
Leasing 4Service S.r.l. - Market Price	5.8
MTS4Service LLC - Market Price	9.3
Total fleet market price	22.0
NFP	11.7
NWC	1.3
Equity Value - market price valuation	11.6

Valuation check - @Market Price

➢ The fleet at market price has a value of €22m, leading to an asset based equity value of €11.6m

• Strategic Overview >
• Impact of Covid-19 >
• Business Acquisition – 4SERVICE >
• Share Capital Increase Proposal >
• Outlook 2020-2021 >

The Tesmec Board of Directors approved a proposal which will be submitted to the Shareholders Meeting for the increase of share capital up to 50 M€

• Strategic Overview >
• Impact of Covid-19 >
• Business Acquisition – 4SERVICE >
• Share Capital Increase Proposal >
• Outlook 2020-2021 >

Outlook 2020-2021

	Guidelines of the Business Plan will be released in June 2020
	1Q and 2Q will be affected by the spread of COVID-19 worldwide with a Turnover
	reduction of 20%-25% compared last year
xxx	3Q and 4Q will recover
2020	The yearend turnover will be less than 2019, due to the 2 months of substantial lockdown
	The EBITDA margin should improve in percentage thanks to the rental activity.
	The Share Capital increase and cash generation will materially improve the ratio between
	the net financial debt and EBITDA
	TESMEC is focused in strategic market segments:
FOCUS ON	▪ SMART GRIDS & ENERGY TRANSITION
xxx STRATEGIC	▪ 5G AND TELECOM
MARKETS	▪ INFRASTRUCTURES & RAILWAYS
	that will drive the Group in the 3rd phase of growth (slide 9)
	▪ ENERGY: increasing needs of "smart and digital" systems, focus on energy transition
	and carbon free solutions
DEVELOPMENT xxx	▪ RAIL: push on maintenance and diagnostic of the railway network, new green
DRIVERS	motorization and high safety standard
	▪ TRENCHERS: investment plan for modern infrastructures, global demand of
	connectivity that requires underground fiber optic networks
	▪ Rationalization of costs structure and improvement of margins
ACTION PLAN	▪ Take advantage of the liquidity measures taken by the governments against COVID-19
xxx	▪ Reinforcement of the management structure in strategic positions to face the new
	challenges

Disclaimer

The Manager responsible for preparing the company's financial reports, Marco Paredi, declares, pursuant to paragraph 2 of Article 154-bis of the Consolidated Law on Finance, that the accounting information contained in this presentation corresponds to the document results, books and accounting records.

Certain information included in this document is forward looking and is subject to important risks and uncertainties that could cause actual results to differ materially.

Any estimates or forward-looking statements contained in this document are referred to the current date and, therefore, any of the assumptions underlying this document or any of the circumstances or data mentioned in this document may change. Tesmec S.p.A. expressly disclaims and does not assume any liability in connection with any inaccuracies in any of these estimates or forward-looking statements or in connection with any use by any third party of such estimates or forwardlooking statements.

This document does not represent investment advice or a recommendation for the purchase or sale of financial products and/or of any kind of financial services. Finally, this document does not represent an investment solicitation in Italy, pursuant to Section 1, letter (t) of Legislative Decree no. 58 of February 24, 1998, or in any other country or state.

In addition to the standard financial reporting formats and indicators required under IFRS, this document contains a number of reclassified tables and alternative performance indicators. The purpose is to help users better evaluate the Group's economic and financial performance. However, these tables and indicators should not be treated as a substitute for the standard ones required by IFRS.

www.tesmec.com