Investor Summary Presentation Why Invest. August 2018

Transcription

1 Investor Summary Presentation Why Invest August 2018

2 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, target, should, synergies, 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; and (ii) business and management strategies and the expansion and growth of the Company s operations. 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 2017 Management Discussion and Analysis (MD&A) and as updated in the first and second quarter 2018 MD&A. The 2018 outlook also assumes that the federal charges laid against the Company and its indirect subsidiaries SNC-Lavalin International Inc. and SNC- Lavalin Construction Inc. on February 19, 2015, will not have a significant adverse impact on the Company s business in 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 2017 MD&A and as updated in the first and second quarter 2018 MD&A. The 2018 outlook referred to in this presentation is forward-looking information and is based on the methodology described in the Company s 2017 MD&A under the heading How We Budget and Forecast Our Results and is subject to the risks and uncertainties described in the Company s public disclosure documents. The purpose of the 2018 outlook is to provide the reader with an indication of management s expectations, at the date of this presentation, regarding the Company s future financial performance and readers are cautioned that this information may not be appropriate for other purposes. Non-IFRS financial measures and additional IFRS measures The Company reports its financial results in accordance with IFRS. However, the following non-ifrs measures and additional IFRS measures are used by the Company: Adjusted net income from E&C, Adjusted diluted EPS from E&C, Adjusted net income from Capital, Adjusted diluted EPS from Capital, Adjusted consolidated diluted EPS, EBITDA, Adjusted E&C EBITDA, Segment EBIT and 2017 Backlog. Additional details for these non-ifrs measures and additional measures can be found below and in SNC-Lavalin s MD&A, which is available in the Investors section of the Company s website at Non-IFRS financial measures do not have any standardized meaning under IFRS and therefore may not be comparable to similar measures presented by other issuers. Management believes that, in addition to conventional measures prepared in accordance with IFRS, these non-ifrs measures provide additional insight into the Company s financial results and certain investors may use this information to evaluate the Company s performance from period to period. However, these non-ifrs financial measures have limitations and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. 2

3 A global fully integrated professional services & project management company leader SNC-Lavalin is a global fully integrated professional services and project management company, and a major player in the ownership of infrastructure Founded in 1911 Employees 50,000+ From offices around the world, SNC-Lavalin s employees are proud to build what matters, providing comprehensive end-to-end project solutions to clients in six industry sectors Revenue ~$10B Listed on TSX SNC Since 1986 Investment Grade Credit Rating 1 BBB 1 Per S&P and DBRS. 3

4 An improving diversified business model Clean Power Nuclear 2017 Revenues Capital Thermal Power Mining & Metallurgy 4% 3% 4% 5% 8% $9.3B 1 Oil & Gas 37% Mining & Metallurgy Clean Power Nuclear 10% YTD 2018 Revenues (6 months) Thermal Power Capital 3% 5% 1% 2% $5.0B 26% Oil & Gas 18% EDPM 32% 21% 21% EDPM Infrastructure Infrastructure 75% Reimbursable & Engineering Service Contracts 25% EPC Fixedprice Contracts 1 Includes only 6 months of Atkins revenues, as it was acquired on July 3,

5 Redefining SNC-Lavalin New management New Culture New Board New business mix New Beginning Change senior leadership & culture Develop new strategy with focus on growth opportunity in Resources Step Change and Operational Excellence Adjust cost structure to the resources market slowdown Target $200M in G&A savings & Deliver Vision Reposition SNC-Lavalin on a path of strong profitable growth Balance portfolio across sectors geography risk profile Increased focus on Ethics & Compliance Crisis SNC-Lavalin turns documents to authorities Investigations Lawsuits Allegations 2014 Expand Resources Capabilities Kentz acquisition Expand O&G capabilities Grow O&G revenues from $500M (2013) to $4B (2015) Position SNC-Lavalin as a top 10 O&G player Focus Atkins acquisition to expand Services offering, regional breadth and Infrastructure and Nuclear expertise Deliver on operational excellence Deliver a client-centric organization Deliver a performance-driven culture Administrative Agreement with the Commissioner of Fair and final settlement agreement signed with Canada Elections and with the Ordre with Quebec s Voluntary PWGSC des ingénieurs du Quebec Reimbursement Program 2018 Agreement to settle class actions brought in 2012 Federal Charges settlement or DPA 5

6 On a path of growth and improved E&C earnings Revenues from E&C Adjusted E&C EBITDA margin and adjusted net income from E&C (in M$) 9,364 8,223 9,097 (in M$) 4.6% 4.5% 6.9% ,149 7, % Adjusted E&C EBITDA margin Adjusted net income from E&C 6

7 SNC-Lavalin: a discounted share price E&C P/E multiples vs peers SNC-Lavalin Peers Group Average 1 Peers Group incl. Canadian peers Average 2 Share price 3 $53.18 Less H407 4 (27.66) Less Other Concessions 4 (2.97) Adjusted E&C price $ adjusted EPS from E&C consensus 4 $2.69 E&C P/E multiple SNC-Lavalin s E&C P/E multiple ~ 9 times lower than peers 1 Includes Aecom, Balfour Beatty, Fluor, Jacobs, McDermott, Wood and WorleyParsons 2 Incudes peers group + Stantec and WSP 3 As of market close August 13, Analysts consensus as at August 13,

8 SNC-Lavalin s E&C business undervalued Trading multiples vs peers As of market close August 13, 2018 Comparable Company Analysis Summary Share Price (C$) Market Cap (C$mm) Enterprise Value (C$mm) CY18E - 19E Growth EV / EBITDA P / E Debt / CY18E EBITDA Revenue EBITDA EPS CY2018E CY2019E CY2018E CY2019E Total Net Dividend Yield (3) WSP $72.07 $7,496.6 $9, % 8.4% 10.8% 12.7x 11.8x 20.9x 18.9x 2.5x 2.2x 2.1% Canadian Peers (1) SNC (Ex-Capital) $22.54 $3,959.5 $5, % 16.4% 16.1% 6.2x 5.3x 8.4x 7.2x 2.5x 1.7x 2.2% Stantec $34.09 $3,895.5 $4, % 13.9% 22.6% 11.2x 9.8x 19.1x 15.6x 2.3x 1.8x 1.6% SNC (Consolidated) $53.18 $9,340.0 $12, % 14.2% 15.7% 11.3x 9.9x 14.8x 12.8x 3.3x 2.6x 2.2% Canadian Peer Average (2) 5.1% 12.9% 16.5% 10.0x 9.0x 16.1x 13.9x 2.4x 1.9x 2.0% Average (excluding high & low) (2) 5.4% 13.9% 16.1% 11.2x 9.8x 19.1x 15.6x 2.5x 1.8x 2.1% Jacobs $93.28 $13,290.2 $15, % 14.3% 13.1% 10.3x 9.0x 14.9x 13.2x 2.2x 1.5x 0.8% U.S. Peers International Peers AECOM $42.86 $6,871.7 $10, % 10.2% 11.9% 9.3x 8.4x 11.7x 10.4x 4.4x 3.4x Fluor $72.72 $10,226.1 $10, % 29.6% 52.0% 10.2x 7.9x 24.0x 15.8x 2.2x neg. 1.5% (4) (4) (4) McDermott $25.39 $4,583.9 $7,527.1 nmf nmf nmf 7.8x 5.7x 13.3x 9.5x 4.7x 3.6x U.S. Peer Average 4.8% 18.0% 25.7% 9.4x 7.7x 16.0x 12.2x 3.4x 2.8x 0.6% Average (excluding high & low) 5.0% 14.3% 13.1% 9.8x 8.2x 14.1x 11.8x 3.3x 3.4x 0.4% Wood $11.13 $7,443.1 $9, % 16.9% 28.7% 10.2x 8.7x 15.7x 12.2x 4.2x 2.4x 4.0% WorleyParsons $17.47 $4,788.0 $5, % 8.8% 11.4% 13.6x 12.5x 25.0x 22.4x 2.5x 2.0x 1.1% Balfour Beatty $4.89 $3,323.7 $2, % 4.6% 17.9% 6.2x 5.9x 15.9x 13.4x 4.7x 0.5x 1.2% International Peer Average 5.4% 10.1% 19.3% 10.0x 9.0x 18.8x 16.0x 3.8x 1.6x 2.1% Average (excluding high & low) 5.2% 8.8% 17.9% 10.2x 8.7x 15.9x 13.4x 4.2x 2.0x 1.2% Peer Average (2) 5.1% 13.7% 20.5% 9.8x 8.5x 16.9x 13.9x 3.2x 2.1x 1.5% Average (excluding high & low) (2) 5.1% 12.7% 17.4% 9.7x 8.4x 16.9x 13.6x 3.2x 2.1x 1.3% Source: Bloomberg, Capital IQ, company filings. Note: Figures presented in C$ unless otherwise noted. (1) SNC metrics are presented ex. capital (formerly referred to as ICI) value of $36.40 per share as per available research reports. (2) Averages exclude SNC (Consolidated). (3) Pro forma the acquisition of Louis Berger announced on July 31, (4) Non-meaningful due to the transformative acquisition of CBI completed on May 10,

9 Vision 2020 Delivery ahead of schedule 2020 Objectives Become one of the top global, fully integrated, professional services and project management companies in profitability and profit growth Be recognized as a client-centric delivery-focused organization Strong, performance-driven culture Continuous focus on operational excellence 9

10 Vision 2020 Plan to deliver adjusted consolidated EPS of $5 $2.46 $2.42 $2.58 $1.34 $1.51 $3.20 $2.15 Between $3.85 and $ $0.36 $ Adjusted diluted EPS from E&C Adjusted diluted EPS from Capital Outlook range $5.00 Drivers: G&A expenses efficiency & operational excellence continuous improvement Project execution improvement Driving organic growth by: - Increasing our share in nuclear through an expanded offering - Capitalizing on Infrastructure investment in Canada, UK & US - Maximizing Atkins/SNC- Lavalin revenues synergies - Mining & Metallurgy recovery M&A post Atkins integration Adjusted diluted EPS from E&C expected in the range of $2.60 and $

11 A track record of increased dividends Dividends were increased for each of the past 17 years Declared dividend per share Payout ratio* 125% 39% 41% 40% 34% (in $) Key Goals: Maintain dividend growth trajectory Stabilize dividend payout at around 30% of consolidated adjusted net income * % of consolidated adjusted net income. 11

12 Credit facilities and long-term debt Credit facilities (recourse debt) Revolving & Term Facility $2,600M revolving Facility maturing May 2022 $3,000M uncommitted bilateral facilities $500M non-revolving 5-year term loan (proceeds used to repay in full the CDPQ tranche B loan) Current maximum leverage ratio of 3.75 Debentures (recourse debt) $350M Debenture Maturity: July 2019 Interest rate: 6.19% $300M Series 1 Debenture Maturity: November 2020 Interest rate: 2.689% $150M Series 2 Debenture Maturity: March 2019 Interest rate: floating rate $175M Series 3 Debenture Maturity: March 2021 Interest rate: floating rate $200M Series 4 Debenture Maturity: March 2023 Interest rate: 3.235% $150M Series 5 Debenture Maturity: June 2019 Interest rate: floating rate CDPQ loan (limited recourse debt) Borrower SNC-Lavalin Highway Holdings, non-recourse to SNC-Lavalin Group Amount Tranche A - $1,000M Tranche B - $0M (the full $500M was repaid in April 2018) Interest rate 6.5% Prepayment Tranche A: non-call period of 4 years $2,178M as at June 30, 2018 $979M as at June 30,

13 407 ETR Consistent growth and low cost of financing Gross Vehicle Kilometres Travelled (in millions KM) 2,253 2,253 2,215 2,336 2,326 2,340 2,356 2,437 2,517 2,641 2,709 Dividends (in M$) Total dividends paid by 407 ETR Dividends received by SNC-Lavalin Bond Maturity Profile (in M$) % 4.30% / 5.33% % % % % 6.47% % % % 5.75% 5.29% / 6.75% % % % 3.65% % 3.83% 3.60% 3.72% % % Senior Bonds ($5.8B) Subordinated Bonds ($0.8B) Junior Bonds ($0.2B) 1 Issued in November Issued in March Issued in September Issued in May

14 SNC-Lavalin Denis Jasmin Vice-President, Investor Relations Tel.: Ext Firm Analyst Rec. Tel AltaCorp Capital Chris Murray Buy BMO Capital Market Devin Dodge Buy Canaccord Genuity Yuri Lynk Buy CIBC World Markets Jacob Bout Buy Desjardins Securities Benoit Poirier Buy Laurentian Bank Securities Mona Nazir Buy Morningstar Inc David Silver Hold National Bank Financial Maxim Sytchev Buy Raymond James Frederic Bastien Buy RBC Capital Markets Derek Spronck Buy Scotia Capital Mark Neville Buy TD Newcrest Michael Tupholme Buy Market Details Price as of August 14, 2018 $54.00 Shares outstanding Diluted 175.6M Market capitalization $9.5B 52 - week high / low $61.54 / $50.87 Dividend per share $0.287 / quarter Dividend yield ~ 2.1% 14