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FORWARD LOOKING INFORMATION This presentation contains - - PowerPoint PPT Presentation

FORWARD LOOKING INFORMATION This presentation contains forward-looking statements and forward-looking information within the meaning of applicable securities laws, and are subject to risks and uncertainties that could cause actual results to


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FORWARD LOOKING INFORMATION

This presentation contains forward-looking statements and forward-looking information within the meaning of applicable securities laws, and are subject to risks and uncertainties that could cause actual results to differ. The use of any of the words "expect", "anticipate", "continue", "estimate", "objective", "ongoing", "may", "will", "project", "should", "believe", "plans", "intends" and similar expressions are intended to identify forward-looking information or statements. The forward-looking statements and information are based on certain key expectations and assumptions made by Cervus, including expectations and assumptions concerning the results

  • f its due diligence review of the businesses proposed to be acquired by Cervus and the ability to the various approvals required.

Additional detail about the material factors and/or assumptions employed to arrive at forward-looking information, as well as the material risk factors that may affect actual results, are contained in the MD&A section of our most recent quarterly filing which is available on the SEDAR website at www.sedar.com. Although Cervus believes that the expectations and assumptions on which such forward-looking statements and information are reasonable, undue reliance should not be placed on the forward looking statements and information as Cervus can give no assurance that they will prove to be correct. By its nature, such forward-looking information is subject to various risks and uncertainties, which could cause the actual results and expectations to differ materially from the anticipated results or expectations expressed. Readers are cautioned not to place undue reliance on this forward-looking information, which is given as of the date hereof, and to not use such forward-looking information for anything other than its intended purpose. Cervus undertakes no obligation to update publicly or revise any forward-looking information, whether as a result of new information, future events or otherwise, except as required by law. The Presentation is intended for educational and informational purposes only and do not replace independent professional judgment. Statements of fact and opinions expressed are those of the participants individually. The reader should consult with a lawyer, accountant and other professionals in respect of contents hereof.

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LEADING EQUIPMENT DEALERSHIP INTEGRATOR

AGRICULTURE

  • History of successful

integration and operations

  • Stable cash flow
  • Opportunistic growth:

acquisitions, service efficiency, parts & service (P&S)

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TRANSPORTATION

  • Diversification: different

product line, same business model

  • Profitability plan: operational

efficiency, market share growth, P&S

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SLIDE 4

CUSTOMER BASE IS CONSOLIDATING

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  • Larger farms, larger fleets need larger dealers
  • Growth by acquisition

– Succession, consolidation trends

  • Organic growth

– Economies of scale, service optimization

  • Backed by strong, leading OEMs
  • Multiple barriers to entry
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PROFITABILITY VIA SCALE AND DIVERSITY

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A G R I C U L T U R A L C O N S T R U C T I O N & I N D U S T R I A L T R A N S P O R T A T I O N

1 22 12 1 13 6 9

8 1 4 2 5 5

5

18 11

DEALERSHIPS DEALERSHIPS DEALERSHIPS DEALERSHIPS

64

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SEGMENTED OPERATIONAL RESULTS

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C&I MARKET DYNAMICS AND OUTLOOK

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  • Tracks AB and SK

general economy

  • Recovery of oil and

gas industry a major factor

  • Ongoing focus:

– Expense management – Parts and service efficiency

$0 $20 $40 $60 $80 $100 $120

Historical and Forecast Oil Prices (WTI, USD)

Historical High Base Low

Historical values source from U.S. Energy Information Administration. Forecast values source from Alberta Energy Regulator. Revised July 2017.

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SLIDE 8

AGRICULTURE MARKET DYNAMICS

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  • Increasing scale of
  • perations
  • Installed base requires

regular repair and maintenance

  • More favorable

dynamics in Canada

  • Factors: weather, FX,

commodity prices, farm income, input costs

2 4 6 8 10 12 14 20 40 60 80 100 120 140 2010 2011 2012 2013 2014 2015 2016

Net Farm Income

U.S. Canada

Stats Canada, Economic Research Service

$M $B

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SLIDE 9

AGRICULTURE OUTLOOK

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Positive Indicators

  • Average crop yield, (above) average quality
  • Forecast average 2017 net farm worth: $2.8M
  • FCC 2017 forecast: 7% increase equipment sales

Growth Potential

  • Service efficiency
  • Parts & service sales growth
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TRANSPORTATION MARKET DYNAMICS

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  • Equipment population

growth

  • Installed base requires

regular repair and maintenance

  • Factors:

– SK: cyclical, tracks oil & gas – ON: manufacturing, import/export, FX

50 100 150 200 250 300

PACCAR: Class 8 Truck Units Sold (000s)

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TRANSPORTATION OUTLOOK

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Parts & service

  • High aftermarket volume
  • 2016: 30% increase in

service bays

Targets

  • Service efficiency and

growth

  • Market share growth
  • Profitability plan: cost

reduction

Equipment Aftermarket

2016 Revenue

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SLIDE 12

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FOCUSING ON OPERATIONS

  • Product support solutions – after sales

– Parts, service, rental, training, precision agriculture

  • Consistent processes and systems
  • Performance delivery

– Market share > OEM average – Inventory turnover > 3x – Product support absorption > 100% – Workforce efficiency: total billable ratio 72% – ROIC 15%

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SLIDE 13

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READY FOR THE RIGHT OPPORTUNITY

Acquisitions strategy

  • Good fit with existing operations
  • Higher value, streamlined operations with proven track

record

  • Lower value, fixer-uppers with opportunities to add

value

Effective integration

  • Service playbook - apply from day one
  • Consistent process and systems integration
  • Leadership readiness
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SLIDE 14

INVESTMENT HIGHLIGHTS

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  • 10-15% annualized growth rate target
  • Agriculture: stable cash flow, positive outlook
  • ON Transportation: profitability plan
  • Western Canada: upside potential with improving

resource prices

  • Strengthened balance sheet

– Long Term Debt/Equity from 52% in Q3 2016 to 28% in Q3 2017

  • Sustainable dividend
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ANNUAL FINANCIAL RESULTS

400 800 1200 2012 2013 2014 2015 2016 2016 YTD Q3 2017 YTD Q3

Revenue ($millions)

75 150 225 2012 2013 2014 2015 2016 2016 YTD Q3 2017 YTD Q3

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Gross Profit ($millions)

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ANNUAL FINANCIAL RESULTS

$millions (except per share amounts) FY 2016 FY 2015 Income (loss) attributable to shareholders 23.7 (27.4) Adjusted profit1 10.8 13.3 Net EPS (basic) 1.51 (1.77) Adjusted net EPS (basic)2,3 0.69 0.86 Total assets 476.9 629.8 Long-term liabilities 43.0 148.6 Total liabilities 263.0 436.5

1The Company calculates adjusted earnings as income attributed to shareholders adjusted to

exclude the impact of: settlements with the Canada Revenue Agency, unrealized foreign currency gains and losses, acquisition and integration costs, and gains and losses on the sale of real estate; 2Adjusted basic earnings per share is calculated as adjusted earnings divided by the weighted average shares outstanding during the period; 3These financial measures are identified and defined within our year end Management’s Discussion and Analysis under the section “Non- IFRS Financial Measures”.

10 20 30 40 50 60 2012 2013 2014 2015 2016

EBITDA ($millions)

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YTD FINANCIAL RESULTS

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$millions (except per share amounts) Nine Months Ended 9/30/2017 Nine Months Ended 9/30/2016 Income attributable to shareholders 16.2 15.0 Adjusted income1 14.7 10.4 EPS (diluted) 0.98 0.91 Adjusted EPS (diluted)2,3 0.88 0.63 Total assets 513.1 556.9 Long-term liabilities 63.3 79.8 Total liabilities 289.8 349.9

1The Company calculates adjusted income as income attributed to shareholders adjusted to

exclude the impact of: unrealized foreign currency gains and losses and gains and losses on the sale of real estate; 2Adjusted basic earnings per share is calculated as adjusted earnings divided by the weighted average shares outstanding during the period; 3These financial measures are identified and defined within our year end Management’s Discussion and Analysis under the section “Non-IFRS Financial Measures”.

10 20 30 40 50

EBITDA ($millions)

EBITDA

(nine months ended 9/30, $millions)

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TSX:CERV

Key Financial Information (as at December 31, 2017)

Share price $15.04 Shares outstanding 15.6 million Market capitalization $238 million Quarterly dividend $0.07 Yield 1.86% Institutional ownership ~35% Insider ownership ~27%

Key Financial Ratios (for the year ended December 31, 2016)

Net debt1,2/EBITDA 1.10 Long term debt1/total capitalization 0.28 Payout ratio3 0.41 ROE3 5.1%

1‘Long term debt’ (long term debt, finance lease obligations, liabilities associated with assets held for sale and debenture payable); 2Net debt is ‘Long term debt’ less

cash and cash equivalents; 3Adjusted earnings were used to calculate these ratios, please see the 2016 Annual Report for Non-IFRS Financial Measures disclaimer

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LEADERSHIP

Management Team

Graham Drake President, CEO and Director Adam Lowther CFO Cal Johnson VP Operations, Agriculture Canada Fred Hnatiw VP Operations, Transportation, C&I Stella Cosby VP People

Board of Directors

Peter Lacey Chair of the Board; Former President and CEO Don Bell WestJet Airlines Co-Founder Larry Benke Former President and CEO of Colt Companies Steven M. Collicutt President and CEO of Collicutt Energy Services Angela Lekatsas Vice‐President and Treasurer of Agrium Inc. Dan Sobic Former Executive Vice-President of PACCAR Inc.

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