Hunting Plc · LSE:HTG
Hunting — H1 2020 Earnings Presentation
26 slides from Hunting's earnings presentation, August 2020
Slide 1: Resilience Against Market Volatility: Results Presentation H1 2020
RESILIENCE AGAINST MARKET VOLATILITY HUNTING PLC RESULTS PRESENTATION FOR THE SIX MONTHS ENDED 30 JUNE 2020 www.huntingplc.com Results Presentation: August 2020 1
Slide 2: Resilience
Resilience Enpro acquisition completed expanding our Subsea Portfolio, RTI, continuing to perform well and growing backlog Returning cash to shareholders Balance sheet remains robust. Cash in bank, no debt, liquidity Generated Positive EBITDA in worst market ever Operating the business wit
Slide 3: Group Summary
Group Summary Strong balance sheet in volatile market Strong balance sheet and satisfactory financials - Revenue of $377.7m (H1 2019: $508.9m) - Underlying EBITDA $28.4m (H1 2019: $77.4m) - Underlying EBITDA Q2 $6.6m - Net assets at 30 June 2020 of $1.0bn (YE 2019: $1.2bn) - Total cash and bank $4
Slide 4: Group Income Statement
Group Income Statement1 H1 H1 2020 2019 Margin $m Margin % $m % Revenue 377.7) 508.9) Gross profit 82.6) 22% 145.6) 29% EBITDA 28.4) 8% 77.4) 15% Profit from operations 5.7) 2% 55.6) 11% Net finance expense (1.8) (1.0) Profit before tax 3.9) 54.6) Tax charge (2.6) (13.3) Profit after tax 1.3) 41.3)
Slide 5: Segmental Results
Segmental Results1 H1 H1 2020 2019 Results from Results from Revenue Operations Revenue operations $m $m $m $m Hunting Titan 102.5) 1.7) 206.1) 42.2) US 167.0) 4.6) 181.1) 12.9) Canada 12.8) (1.0) 19.5) (3.0) EMEA 50.9) (3.1) 67.0) 0.2) Asia Pacific 71.3) 3.5) 75.1) 3.3) Inter-segment elimination (2
Slide 6: Revenue by Product Grouping
Revenue by Product Grouping H1 H1 2020 2019 $m $m Change Perforating Systems 97.2) 199.4 -51%) OCTG 169.2) 181.7 -7%) Advanced Manufacturing 40.9) 59.4 -31%) Intervention Tools 17.0) 24.9 -32%) Subsea 33.8) 18.9 +79%) Drilling Tools 6.3) 11.3 -44%) Other 13.3) 13.3 -) 377.7 508.9 -26%) Results Prese
Slide 7: Amortisation & Exceptional Items
Amortisation & Exceptional Items H1 H1 2020 2019 $m $m Amortisation of acquired intangible assets 12.3) 14.5 Impairment: - Goodwill 79.8) - - Other intangible assets 39.2) - - Property, plant and equipment 19.3) - - Right-of-use assets 2.1) - - Inventory 33.3) - Receivables 1.2) - Restructuring cost
Slide 8: Group Balance Sheet
Group Balance Sheet Solid financial footing June December 2020 2019 $m $m Property, plant and equipment 331.0) 354.7) Right-of-use assets 30.5) 36.7) • IFRS 16 leases Goodwill and other intangible assets 207.0) 308.7) • Impairment of $119.0m recognised Working capital 429.7) 433.3) • Inventory impai
Slide 9: Working Capital
Working Capital June December 2020 2019 $m $m Inventories - Hunting Titan 135.8) 127.5) - US 131.2) 135.9) - Other segments 118.1) 113.9) Gross inventories 385.1) 377.3) Provision for inventories (54.0) (26.5) Net inventories 331.1) 350.8) Receivables 176.2) 203.2) Payables (77.6) (120.7) Total 429.
Slide 10: Group Cash Flow
Group Cash Flow H1 H1 2020 2019 $m $m EBITDA 28.4) 77.4) Add: share based payments 4.9) 6.6) 33.3) 84.0) Working capital movements (31.0) (21.3) • Trade creditors reduction Net tax paid (6.0) (3.6) Proceeds from business and asset disposals 2.2) 4.7) Lease payments (6.0) (6.2) Other (3.7) (3.8) Free
Slide 11: Capital and Intangible Asset Investment
Capital and Intangible Asset Investment Modest levels, 50% of budgeted capex H1 2020 $m Hunting Titan– Detonation Cord Line 2.4 Titan– other 0.5 US– Investment in Subsea businesses 1.5 US– other 4.8 Other 1.3 Capital Investment 10.5 Intangible Asset Investment 1.5 Total 12.0 1 Capex budget cut by 50
Slide 12: COVID-19 Response
COVID-19 Response Meeting the challenge in Operations Work environment Market discontinuity, added cost • Staggered shifts • Productivity impacted • Work-from-home • Clients delaying or cancelling orders • Team alignment to ensure continuity, health and • Client connectivity hampered safety Hu
Slide 13: Taking Decisive Action
Taking Decisive Action Head count reductions • Reduced our workforce by circa. 30% at August 2020 Changing our strategy in Canada Facility closures • Skyline facility in Canada • Ramsey Road • Oklahoma City • Various Distribution Centres Compensation frozen Capex budget for 2020 cut by 50%
Slide 14: Evaluating Our Footprint
Evaluating Our Footprint Closure of Canada Manufacturing Canada Operating Losses USD $m Adopt distribution/sales model and exit from in-country 2017 2018 2019 manufacturing $(3.3) $(1.8) $(4.3) OCTG business model better suited for distribution of Hunting Threaded Connection Technology Structura
Slide 15: Operational Overview: North America
Operational Overview: North America The worst market in history US US Rig Count: • Cost-saving measures implemented July 2019: • Subsea Technologies (RTI) receiving two • Onshore: 918 large orders for GOM • Offshore: 24 • Significant growth in TEC-LOCK™ product July 2020: • Permian completion
Slide 16: North America: Onshore Markets
North America: Onshore Markets Market: H1 2020 and Current Estimated Frac Crews Unprecedented decline in US shale activity 335 338 318 From an initial 450 available frac crews, this number 276 rapidly declined as the COVID-19 impact took hold in April 2020 185 • Below 50 crews working in mid-May 7
Slide 17: Advanced Manufacturing Group (AMG)
Advanced Manufacturing Group (AMG) Hunting’s Advanced Manufacturing Group, which includes the Electronics and Dearborn divisions, has maintained a good backlog despite market conditions. The AMG division is currently ISO and ITAR certified The Electronics division has been successful in engaging
Slide 18: Connection Technology
Connection Technology TEC-LOCK™ continues to see robust growth in the onshore semi-premium market. In the first half of 2020, we have more than doubled our volumes compared to the same period last year. 60,000 50,000 40,000 30,000 20,000 10,000 0 Joints Threaded 2019 2020 Results Presentation: Augus
Slide 19: Operational Overview: International Markets
Operational Overview: International Markets Asia Pacific • Cost-saving measures implemented • OCTG product shipments strong in H1 to China, India, Middle East • Jindal relationship expanding business in India EMEA • Cost-saving measures implemented • Good first half for Well Testing equipment •
Slide 20: New Products and Technologies
New Products and Technologies Continued Product Innovation – 11 Releases in H1 2020 Hunting continues to introduce new technologies into the market. EFI ControlFire® We develop our products on the basis that different end users have different Cartridge economic, operational and technological req
Slide 21: New Products and Technologies
New Products and Technologies Perforating Products – Maintaining Leadership In Class Exploding Bridge Foil Initiator (EFI) Cartridge Stray voltage and signals create safety hazards potentially leading EFI Cartridge to accidental detonation of the tool string topside Hunting developed the concept
Slide 22: New Products and Technologies
New Products and Technologies Perforating Products – Solving the Industry’s Problems Develop what the markets needs across the spectrum While much of the industry is focused on guns, charges and electronics, Hunting’s focus is on addressing the challenges faced by our customers. Examples include
Slide 23: Offshore Markets
Offshore Markets Market: H1 2020 and Current Rig activity at historic lows Gulf of Mexico 2020 is expected to see the lowest rig count in The offshore rig count average history Q1 21 Q2 15 Valaris, the world’s largest rig contractor, filed for Current Rig Count 13 Chapter 11 in August Subs
Slide 24: Positioning Hunting for Offshore opportunities
Positioning Hunting for Offshore opportunities Irrespective of whether offshore projects are long lead time and complex or smaller optimising existing field and topside production, Hunting manufactures products to be utilised in both Hunting has added more offshore proprietary technology to our
Slide 25: Summary of Investment Case
Summary of Investment Case Robust financial footing Broad and growing proprietary technology based product portfolio Modern, well equipped and geographically well positioned facilities within global energy markets Ability to participate in all E&P plays Financial strength for bolt-on techn
Slide 26: A Balanced Portfolio
A Balanced Portfolio Operations Markets & Products Core Values Global Footprint All Phases of the Well Life Safety North America, EMEA Cycle Asia Pacific Construction Customer focused Completion Intervention Culture of Quality Strong Asset Base Modern fleet of equipment, All Environments Social and