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Transcript of SNC-Lavalin: An Overview /media/Files/S/SNC-Lavalin/investor... · PDF file 7. Myah...

  • SNC-Lavalin: An Overview ›Investor Presentation

    ›May 2020

  • 2

    Operating Cash

    Flows

    $336 million, highest quarterly

    operating cash flow since

    Q4 2017​

    Adjusted Net

    Income from E&C

    $78.9 million, up from a loss of $284.1

    year-over-year​

    Cash Balance

    Increased

    87% year-over-year, net recourse debt to EBITDA

    ratio now 2.1x

    SNCL Projects ​

    SNCL Projects

    Segment EBIT of

    -$28M, performance

    better than the past

    four quarters

    Forward-looking statements

    Reference in this presentation, and hereafter, to the “Company” or to “SNC-Lavalin” means, as the context may require, SNC-Lavalin Group Inc. and all or some of its

    subsidiaries or joint arrangements, or SNC-Lavalin Group Inc. or one or more of its subsidiaries or joint arrangements.

    Statements made in this presentation that describe the Company’s or management’s budgets, estimates, expectations, forecasts, objectives, predictions, projections of the

    future or strategies may be “forward-looking statements”, which can be identified by the use of the conditional or forward-looking terminology such as “aims”, “anticipates”,

    “assumes”, “believes”, “cost savings”, “estimates”, “expects”, “goal”, “intends”, “may”, “plans”, “projects”, “should”, “synergies”, “target”, “vision”, “will”, or the negative thereof

    or other variations thereon. Forward-looking statements also include any other statements that do not refer to historical facts. Forward-looking statements also include

    statements relating to the following: (i) future capital expenditures, revenues, expenses, earnings, economic performance, indebtedness, financial condition, losses and

    future prospects; (ii) business and management strategies and the expansion and growth of the Company’s operations; and (iii) the expected impacts of the COVID-19

    pandemic on the business and its operating and reportable segments. All such forward-looking statements are made pursuant to the “safe-harbour” provisions of applicable

    Canadian securities laws. The Company cautions that, by their nature, forward-looking statements involve risks and uncertainties, and that its actual actions and/or results

    could differ materially from those expressed or implied in such forward-looking statements, or could affect the extent to which a particular projection materializes. Forward-

    looking statements are presented for the purpose of assisting investors and others in understanding certain key elements of the Company’s current objectives, strategic

    priorities, expectations and plans, and in obtaining a better understanding of the Company’s business and anticipated operating environment. Readers are cautioned that

    such information may not be appropriate for other purposes.

    Forward-looking statements made in this presentation are based on a number of assumptions believed by the Company to be reasonable as at the date hereof. The

    assumptions are set out throughout the Company’s annual 2019 Management Discussion and Analysis (MD&A) and as updated in the first quarter 2020 MD&A. If these

    assumptions are inaccurate, the Company’s actual results could differ materially from those expressed or implied in such forward-looking statements. In addition, important

    risk factors could cause the Company’s assumptions and estimates to be inaccurate and actual results or events to differ materially from those expressed in or implied by

    these forward-looking statements. These risk factors are set out in the Company’s 2019 annual MD&A and as updated in the first quarter 2020 MD&A.

  • SNC-Lavalin: shaping & delivering world-leading concepts & projects

    3

  • Founded in

    1911

    Employees

    ~47,000

    Revenue

    ~$9.5B

    Listed on TSX

    “SNC” Since 1986

    Investment Grade Credit Rating1

    BBB- & BB+

    A global leader in professional services & project management

    4 1 Per DBRS and S&P.

    SNC-Lavalin is…

    A fully integrated professional services and

    project management company with offices

    around the world.

    SNC-Lavalin connects people, technology and

    data to help shape and deliver world-leading

    concepts and projects, while offering

    comprehensive innovative solutions across the

    asset lifecycle in four strategic sectors.

  • Operating in 4 regions across the world

    5

    Americas

    ~15,000

    Europe

    ~13,000

    Asia

    Pacific

    ~5,000

    Middle

    East

    & Africa

    ~14,000

  • Providing a comprehensive end-to-end service offering …

    6

    DecommissioningConsulting

    & Advisory

    Procurement Project & Construction

    Management

    Operations

    & Maintenance

    Design

    & Engineering

    Sustaining CapitalIntelligent networks

    & cybersecurity

    …in four sectors of activity

    Engineering, Design and

    Project Management (EDPM)

    Infrastructure Nuclear Resources Capital

    Supported by:

  • 17%

    8%

    48%

    1%

    9%

    17%

    41%

    10% 12%

    3%

    23%

    11%

    With a breath of geographic and industry exposure

    7

    51%

    22%

    5%

    22%

    2019

    Revenue

    $9.5B

    Geographic areas Industry segments

    2019

    Revenue

    $9.5B

    Dec. 31, 2019

    Backlog

    $15.3B

    Industry segments

    Americas

    Europe

    Asia Pacific

    Middle East &

    Africa Canada 30% USA 19%

    Latin America 2%

    EDPM

    Nuclear1Infrastructure

    Services

    Capital

    Resources

    Infrastructure EPC

    Projects Infrastructure EPC

    Projects

    Resources

    Capital

    Infrastructure

    Services2

    Nuclear

    EDPM

    1 36% of Nuclear revenues are from final decommissioning, waste management and environmental clean-up

    2 The Infrastructure Services backlog includes the full term of the Company’s O&M signed long-term contracts, which can

    cover a period up to 40 years.

  • 8

    Strategy

  • 9

    Goals of New Strategic Direction:

    › Simplified business

    › Reduced risk

    › Focus on strengths

    › Generate consistent earnings and cash flow

    Exit LSTK construction work

    Reorganize the Company

    Restructure Resources segment

    Grow

    Engineering

    Services

    New strategic direction

    Positioning SNC-Lavalin for long-term sustainable success

    (1)

    (1) LSTK: Lump-sum turnkey

  • 10

    “The volatility and unreasonable risk

    associated with lump-sum, turnkey

    projects have been the root cause of the

    Company’s past performance issues.”

    - Ian L. Edwards

    › The current LSTK contracting model within the industry is broken as it places undue risk on the company

    › Many of SNC-Lavalin’s industry peers have also exited LSTK

    › By exiting this contracting model and running off the LSTK project backlog as efficiently as possible, SNC-Lavalin will

    be able to significantly reduce risk while optimizing free

    cash flow generation from the higher performance parts of

    the business

    › The world is moving to a digitized, technology environment. Given our innovative solutions, SNC-Lavalin

    is well positioned to capture the benefits of this change.

    Why exit the LSTK model?

  • Expected phase out of the main Lump-Sum Turnkey Construction projects in

    SNCL Projects backlog

    11

    * The Husky White Rose project is not included in the graph as the project completion was suspended by the client in March 2020

    0

    200

    400

    600

    800

    1,000

    1,200

    2020 (last 9 months)

    2021 2022 2023 2024

    LS TK

    B ac

    kl o

    g (i

    n $

    m ill

    io n

    s)

    Expected Annual Conversion to Revenue

    LSTK Backlog Phasing*

    Infrastructure EPC Projects

    Resources

  • 12

    Reorganized the Company into two clear businesses

    SNCL Engineering Services (growth & future)

    Infrastructure

    Services EDPM Nuclear Capital

    2 Business

    lines

    › Infrastructure LSTK projects run off

    › Resources LSTK projects run off

    › Resources Engineering Services (exploring a combination of closures and divestitures and

    potential transition to services-based

    business)

    SNCL Projects (controlled exit)

  • 13

    ›De-risking and Optimizing the Business

    1. Running off existing Resources

    LSTK backlog

    2. Exploring all options for Resources,

    particularly Oil & Gas

    3. Right-sizing and assessing a transition

    to services

    Restructuring Resources segment

  • 14

    SNCL Engineering Services:

    Future growth opportunities

  • SN