Atkinsrealis Group Inc. · TSX:ATRL
Atkinsrealis — SNC-Lavalin Group — Q3 2019 Earnings Presentation
32 slides from Atkinsrealis's earnings presentation, Oct 31, 2019
Slide 1: Third Quarter 2019 Conference Call Presentation
Third Quarter 2019 › Conference Call Presentation › October 31st, 2019
Slide 2: Forward-Looking Statements and Non-IFRS Financial Measures
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 ar
Slide 3: Ian Edwards, President and CEO
Ian Edwards President and CEO 3
Slide 4: New Strategic Direction
New Strategic Direction Positioning SNC-Lavalin for long-term sustainable success Exit LSTK construction work Goals of New Strategic Direction › Simplified business › Reduced risk Reorganize › Focus on strengths the Company › Generate consistent earnings and cash flow Restructure Resources segment 4
Slide 5: Solid Q3 Results a Step in the Right Direction
Solid Q3 Results a Step in the Right Direction Q3 results show considerable improvement over previous quarters Net Income Adjusted Net Debt Reduced SNCL Engineering SNCL Projects Income from E&C Services Delivers Strong Results $2.8 billion $165.3 million, $2.4 billion Year-over-year and SNCL Projec
Slide 6: New Strategy Demonstrating Results: Exiting LSTK
New Strategy Demonstrating Results: Exiting LSTK On Track to Complete 80% of LSTK Projects by 2021 Majority of LSTK Project Backlog in Light-Rail Transit Systems 16% Resources LSTK $3.2B Infrastructure LSTK 84% Backlog corresponds to the “Remaining performance obligations” (“RPO”), which is based on
Slide 7: New Strategy Demonstrating Results: SNCL Engineering Services
New Strategy Demonstrating Results: SNCL Engineering Services Dynamic, high-performing business delivering strong Q3 Results › 36.8% increase in Segment EBIT year-over-year › Backlog increased by $1 billion year-over-year; 1.2 book-to-bill ratio for the last 9 months Revenue Segment EBIT Segment EBI
Slide 8: Considerably Strengthened Balance Sheet
Considerably Strengthened Balance Sheet › $2.4 billion decrease in debt › Cash balance of $939 million › Net recourse Debt to EBITDA ratio of 3.4x(1), within covenant Strengthening balance sheet by focusing on the high-margin areas of the business that generate consistent earnings and cash flow (1)
Slide 9: Update on Resources Strategy
Update on Resources Strategy › De-risking and Optimizing the Business 1. Running off existing Resources LSTK backlog 2. Exploring all options for Oil & Gas production and processing fabrication facilities 3. Right-sizing and assessing a transition to services 9
Slide 10: Engineering Services Highlights: EDPM Growth Opportunities
SNC-Lavalin Engineering Services Highlights: EDPM Growth Opportunities › Transformational projects shaping the future › Hinkley Point C › Multi-Use Corridors Initiative › Freight Rail Infrastructure Project › Quebec City Tramway & Montreal Port Terminal Hinkley Point C Freight Rail Infrastructure Pr
Slide 11: Engineering Services Highlights: Nuclear Growth Opportunities
SNCL Engineering Services Highlights: Nuclear Growth Opportunities Building on our industry-leading position in CANDU- related services and products › CANDU › Non-CANDU › Decommissioning Darlington Hunterston B Oyster Creek 11
Slide 12: Engineering Services Highlights: Infrastructure Services Growth Opportunities
SNCL Engineering Services Highlights: Infrastructure Services Growth Opportunities SNC-Lavalin has a global market-leading position in rail and transit › Ottawa LRT › Montreal Airport Confederation Line Montreal Airport 12
Slide 13: Conclusion
Conclusion New strategy showing positive results; Company remains focused on delivery and execution Four Pillars Areas of Focus › Exit LSTK Construction Work › Continued delivery on Company strategy › Focus on Engineering Services Work › Effective risk management and LSTK execution › Restructure Res
Slide 14: Nigel W.M. White, Executive Vice-President, Project Oversight
Nigel W.M. White Executive Vice-President, Project Oversight
Slide 15: LSTK Project Revenues & Gross Margin by Activity
LSTK – 2014 to 2019 Project Revenues & Gross Margin % by Activity 20 15 Clean Power 10 Others LRT Project Performance % 5 0 M&M O&G -5 Hospital Roads and Bridges -10 -15 Thermal Power -20 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0 5.5 Project Revenues, in $B M&M: Mining Metallurgy O&G: Oil & Gas Note: incl
Slide 16: Lump-Sum Turnkey Construction Contracts in SNCL Projects Backlog
Lump-Sum Turnkey Construction Contracts in SNCL Projects Backlog SNCL Projects Total Backlog Resources (September 30, 2019) Reimbursable & Engineering Service Contracts $1.0B Resources 37% Main Projects Resources Lump-sum turnkey 2 in North America construction contracts 3 in MENA $4.2B $0.5B Main P
Slide 17: Main Lump-Sum Turnkey Construction Projects in Backlog
Main Lump-Sum Turnkey Construction Projects in SNCL Projects Backlog Resources Country Completion % Expected substantial Backlog as at Client Project (SNC-Lavalin completion year Sept. 30, 2019 portion) ($M) Project #1 MENA 55 2021 <200 Confidential Project #2 North America 50 2021 <100 Confidential
Slide 18: Expected Phase Out of Main LSTK Projects in Backlog
Expected Phase Out of the Main Lump-Sum Turnkey Construction Projects in SNCL Projects Backlog Backlog Phasing 1,400 Backlog (in C$ millions) 1,200 Infrastructure EPC Projects 1,000 Resources 800 600 400 200 0 2019 2020 2021 2022 2023 2024 (last 3 months) Expected Annual Conversion to Revenue 18
Slide 19: Sylvain Girard, Chief Financial Officer
Sylvain Girard Chief Financial Officer
Slide 20: Q3 2019 Financial Performance (vs Q3 2018)
Q3 2019 Financial Performance (vs Q3 2018) Net income attributable to SNC-Lavalin Shareholders of $2.8B Q3 Adjusted net income from E&C of $165M, or $0.94/share › Net gain of $2.6B ($14.74/share) on the disposal of a 10.01% stake in › Recognition of $83M ($0.47/share) in income tax recoveries on cap
Slide 21: Q3 2019 – Tax Reconciliation
Q3 2019 – Tax Reconciliation Adjusted EBT Expected tax Tax (expense) Adjusted net Adjusted from E&C rate recovery income from diluted EPS E&C from E&C $90M 20.0% ($18M) $72M $0.41 Positive impact of geographic mix and $10M $10M $0.06 other core tax items ($8M) $82M $0.47 Tax recoveries on capital lo
Slide 22: Operating Cash Flows YTD 2019
Operating Cash Flows YTD 2019 (in M$) Q1 2019 Q2 2019 Q3 2019 • YTD Free cash flow was negative $739M with Q3 negative $51M ($51) • Operating cash flow generation from SNCL Engineering Services (excl. Capital) of $350M • SNCL Engineering Services Segment EBIT (excl. Capital) conversion of 88% • Oper
Slide 23: Strong Balance Sheet as at September 30, 2019
Strong balance sheet as at September 30, 2019 Credit facilities Debt Revolving Facility Recourse › $2,516M undrawn under the $2,600M $300M Series 1 Debenture Cash revolving Facility maturing May 2022 › Maturity: November 2020 $939M › Interest rate: 2.689% › $3,000M uncommitted bilateral facilities $
Slide 24: E&C Segment EBIT – Q3 2019 vs Q3 2018
E&C Segment EBIT – Q3 2019 vs Q3 2018 1) Unfavorable reforecasts on (in M$) certain LSTK projects; 2) Continuing underperformance of SNCL EPC Projects SNCL Engineering Services Resources the Oil & Gas production and -$97M processing facilities; 50 103 3) Overhead costs that are in the midst of being
Slide 25: Questions & Answers
Questions & Answers 25
Slide 26: Appendix
Appendix ») SNC +LAVALIN
Slide 27: 2019 Segment EBITDA – SNCL Engineering Services
2019 Segment EBITDA SNCL Engineering Services Segment Q1 2019 Q2 2019 Q3 2019 YTD 2019 EBITDA % (in thousands of $) EDPM (Engineering, Design and Project Management) Revenues 982,955 972,092 969,844 2,924,891 Segment EBITDA 108,256 108,697 131,578 348,531 11.9% Nuclear Revenues 223,694 241,866 213,4
Slide 28: 2019 Segment EBITDA – SNCL Projects
2019 Segment EBITDA SNCL Projects Segment Q1 2019 Q2 2019 Q3 2019 YTD 2019 EBITDA % (in thousands of $) Resources Revenues 585,232 479,154 561,971 1,626,357 Segment EBITDA (49,027) (170,002) (37,960) (256,989) (15.8%) Infrastructure EPC Projects Revenues 263,773 230,525 288,651 782,949 Segment EBITD
Slide 29: Capital Investments Portfolio
Capital investments portfolio Name Description Held Concession Location Equity Since Years Participation 1. 407 EDGGP 32 km H407 East extension (Phase 1) 2012 33 Canada (Ontario) 50% 2. Carlyle Global Infras. Opportunity Fund LP Holding investments in infrastructure projects 2018 n/a United States 8
Slide 30: 407 ETR Information – Q3
407 ETR information – Q3 (in M$, unless otherwise indicated) Q3 2019 Q3 2018 Change Revenues 426.4 382.7 11.4% Operating expenses 52.6 44.6 17.9% EBITDA 373.8 338.1 10.6% EBITDA as a percentage of revenues 87.7% 88.3% (0.6)% Net income 180.2 157.0 14.8% Traffic / Trips (in millions) 33.8 33.5 0.9% A
Slide 31: 2018 Preliminary Revised Figures – Engineering Services
2018 preliminary revised figures1 On a comparable basis with our new 2019 reorganized structure2 SNCL Engineering Services Segment Q1 2018 Q2 2018 Q3 2018 Q4 2018 Total EBIT % Q1 2019 (in thousands of $) EDPM (Engineering, Design and Project Management) Revenues 879,010 913,604 912,998 970,785 3,676
Slide 32: 2018 Preliminary Revised Figures – Projects
2018 preliminary revised figures1 On a comparable basis with our new 2019 reorganized structure2 SNCL Projects Segment Q1 2018 Q2 2018 Q3 2018 Q4 2018 Total EBIT % Q1 2019 (in thousands of $) Resources Revenues 757,099 794,648 844,141 605,476 3,001,364 585,232 Segment EBIT 52,348 15,797 49,564 (374,