Hunting Plc · LSE:HTG
Hunting — FY2019 Earnings Presentation
29 slides from Hunting's earnings presentation, February 2020
Slide 1: Results Presentation for the Year Ended 31 December 2019
Strong financial platform operating in difficult market conditions RESULTS PRESENTATION FOR THE YEAR ENDED 31 DECEMBER 2019 Precision engineering www.huntingplc.com Results Presentation: February 2020 1
Slide 2: Key Message
Key Message Offshore acquisitions Returning cash to shareholders Increased dividend Strength of balance sheet Excellence in operations Results Presentation: February 2020 2
Slide 3: Group Summary
Group Summary Robust year-end financials against an uncertain market back-drop Financials remain sound - Revenue of $960.0m (2018: $911.4m) - Underlying EBITDA $139.7m (2018: $142.3m)* - Margin slippage mainly reflects competitive pricing pressures, particularly at Hunting Titan - Net cash before
Slide 4: Group Income Statement
Group Income Statement1 Creditable result in challenging markets 2019 Margin 2018 Margin $m % $m % Revenue 960.0) 911.4) Gross profit 266.4) 28 275.1) 30 EBITDA 139.7) 15 142.3) 16 Profit from operations 94.3) 10 104.7) 11 Net finance expense (1.2) (0.7) Profit before tax 93.1) 104.0) Tax charge (17
Slide 5: Segmental Results
Segmental Results1 Segment support evident by inter-segmental sales 2019 2018 Results from Results from Revenue Operations Revenue Operations $m $m $m $m Hunting Titan 375.5) 68.6) 418.2) 106.9) US 363.2) 26.9) 329.7) 14.2) Canada 35.7) (4.3) 44.8) (1.8) EMEA 123.0) (1.3) 107.3) (13.8) Asia Pacific
Slide 6: Revenue by Product Grouping
Revenue by Product Grouping Growth in offshore drives strong increases in OCTG and Subsea 2019 2018 Change $m $m % Perforating Systems 363.0 404.1 -10 OCTG and Premium Connections 357.0 277.4 +29 Advanced Manufacturing 104.5 98.5 +6 Intervention Tools 51.7 55.1 -6 Subsea 44.5 30.5 +46 Drilling Tools
Slide 7: Amortisation & Exceptional Items
Amortisation & Exceptional Items Asset impairment related to US onshore markets 2019 2018 $m $m Amortisation of acquired intangible assets 28.5 29.3) Drilling Tools asset impairment 19.0 -) Closure of African operations - Release of excess provision on Cape Town closure - (2.0) - Provision for closu
Slide 8: Group Balance Sheet
Group Balance Sheet Strong financial footing 2019 2018 $m $m Property, plant and equipment 354.7) 360.2) Right of use assets 36.7) -) • IFRS 16 leases Goodwill and intangible assets 308.7) 329.7) • 77% is Titan related Working capital 433.3) 436.5) • Tight control Taxation 19.8) 13.7) • Cash tax she
Slide 9: Working Capital
Working Capital Inventory to meet contractual requirements 2019 2018 $m $m Inventories - Hunting Titan 123.2) 140.0) - US 127.4) 110.4) - Other segments 100.2) 97.8) 350.8) 348.2) Receivables 2203.20203.2) 231.1) Payables (120.7) (142.8) Total 433.3) 436.5) Inventory days 214 185) Receivable days 79
Slide 10: Capital Investment
Capital Investment Modest levels and below annual depreciation rates 2019 2018 $m $m Hunting Titan 14.3 12.6 US – Drilling Tools – mud motor fleet 5.1 5.2 US – Manufacturing – plant and machinery / Ameriport expansion 5.7 1.5 Other plant and machinery 10.9 10.8 36.0 30.1 Results Presentation: Februa
Slide 11: Group Cash Flow
Group Cash Flow Strong EBITDA conversion to cashflow 2019 2018) $m $m EBITDA 139.7 142.3) Add: share based payments 9.1) 13.2) 148.8) 155.5) Working capital movements 7.6) (96.6) • Closely monitored Finance charges and net tax paid (7.6) (4.6) • Tax losses shelter Proceeds from disposal of assets 8.
Slide 12: Balanced Portfolio
Balanced Portfolio Operations Markets & Products Core Values Global Footprint: All Phases Of The Well Life Customer focused North America, EMEA Cycle: Asia Pacific Construction Culture of Quality Completion Strong Asset Base: Intervention Social and Environmental Modern fleet of equipment, Responsib
Slide 13: New Products and Technologies
New Products and Technologies ESUB™ Perforating System T-Set One™ Setting Tool H-2™ Perforating System Subsea Chemical Injection Metering Valve Subsea 20k Subsea Hydraulic Coupling EquaFrac® Limited Hunting Release Tool-Ballistic Hydraulic Valve Shaped Charge Results Presentation: February 2020 13
Slide 14: Connection Technology
Connection Technology We continue to see robust growth in our semi-premium TEC-LOCKTM connections for onshore use and our premium WEDGE-LOCKTM connections for offshore use. TEC-LOCK Joints threaded WEDGE-LOCK Joints threaded 100,000 12,000 90,000 80,000 10,000 70,000 8,000 60,000 50,000 6,000 40,000
Slide 15: North America: Onshore Markets
North America: Onshore Markets Market Outlook Continued pressure for financial performance Onshore US wells drilled New funding from financial institutions is limited - 2019: 21,700 - 2020: 18,600 Commodity pricing pressure US Frac Jobs Major Oil Service Companies (OSCs) impairing equipm
Slide 16: North America
North America Changing onshore environment Onshore operators are seeing increasing Our H-1® and H-2™ perforating gun systems production degradation attributable to “frac hit” or technology provides the customer with a safe, "parent/child” well issues. Parent/child wells are easy to use perforati
Slide 17: International Markets
International Markets Market Outlook Global E&P spend shifting to international projects Onshore wells drilled Major Oil Service Companies (OSCs) redirecting strategies to - 2019: 7,801 support international markets - 2020: 7,868 Offshore wells drilled Capital spend leaning towards offshor
Slide 18: Operational Overview: North America
Operational Overview: North America All US businesses contributing Subsea Acquisition of RTI Energy Systems and Enpro RTI order intake exceeds $11m in GOM Subsea enhancing our Subsea portfolio Introduction of enhanced Chemical Injection Connection technology growth in onshore and Metering
Slide 19: Subsea: Opportunity for Growth
Operational Overview Subsea: Opportunity for Growth In the coming years, growth in the subsea market is expected to 43% Increase Sanctions outpace other areas of the CAGR 9% in Capex offshore service industry from 2019 to Exceed $100B Sanctions in in 2019 2023 2019 Hunting has expanded our subsea fo
Slide 20: Subsea: History of Excellence
Operational Overview Subsea: History of Excellence Hunting acquired National Coupling Company in 2009 creating the Hunting Subsea Division located in Stafford, Texas Supplied over 1 million hydraulic couplings to the industry in over 3,500 different configurations Our couplings service all of th
Slide 21: Subsea: RTI Energy Systems Product Portfolio
Operational Overview Subsea: RTI Energy Systems Product Portfolio Subsea Technologies Titanium Stress Joints High strength Superior fatigue performance Natural corrosion resistance Decades of service – zero failures Steel Riser System Components Steel risers and steel stress joints Machi
Slide 22: Subsea: RTI Titanium Stress Joints
Operational Overview Subsea: RTI Titanium Stress Joints As offshore exploration continues to shift to Flexible joints have been the industry standard deeper water, more robust solutions are required for Floating Production Storage and Offloading to meet the challenges Systems (FPSOs) Hunting i
Slide 23: Subsea: Hunting's Latest Addition – Enpro Subsea
Operational Overview Subsea: Hunting’s Latest Addition – Enpro Subsea Highly Experienced and Respected Enpro’s Product Portfolio Follow Hunting’s Philosophy Management Team of The Life Cycle of the Well The founding management team were the innovators behind the world leading Multiple Application Re
Slide 24: Subsea: Enpro's Leading Product – Flow Access Module
Operational Overview Subsea: Enpro’s Leading Product – Flow Access Module What is the Benefit of a FAM? Utilising the Enpro FAM approach, the customer does not have to spend months up front designing the system to build project specific equipment Flow Access Model (FAM) Enpro is able to quickly desi
Slide 25: Operational Overview: International
Operational Overview: International Strategic Alliance with Jindal SAW India Subsea Exclusive distribution agreement with Xi’an, Well- Robust order intake for Asia Pacific, North Sea, sun Electronics Technology PLC, China South America and GOM markets Continued growth in North Sea, Norway an
Slide 26: Summary of Investment Case
Summary of Investment Case Robust financial footing Broad technology-based product portfolio focused on the oil and gas industry Modern, well-equipped and geographically well-positioned facilities within global energy markets Financial strength for bolt on technology-focused acquisitions E
Slide 27: Appendix: Group Income Statement – Adoption of IFRS 16
Appendix Adoption of IFRS 16 Leases1 Group Income Statement – Year ended 31 December 20192 Deduct Reverse depreciation Under operating and finance Under IAS 17 lease charge charge IFRS 16 $m $m $m $m) Revenue 969606960.0) - - 960.0) Gross profit 266.2) 4.1 (3.9) 266.4) Net operating expense (173.3)
Slide 28: Appendix: Group Balance Sheet – As at 31 December 2018
Appendix Adoption of IFRS 16 Leases1 Group Balance Sheet – As at 31 December 2018 Lease liabilities Under Right of use and Provision Under IAS 17 assets released IFRS 16 $m $m $m $m Property, plant and equipment 360.2) - - 360.2) Right of use assets - 39.7 - 39.7) Goodwill and intangible assets 329.
Slide 29: Appendix: Adoption of IFRS 16 – Key Points
Appendix Adoption of IFRS 16 – Key Points 1) Adoption is from 1 January 2019 2) Modified retrospective adoption with no restatement of prior years 3) Approximately 70 leases capitalised as “Right-of-use Assets” – mainly leasehold properties 4) Bank covenants measured against pre IFRS 16 financials R