Subsea 7 S.A. Announces Fourth Quarter and Full Year 2019 Results
Luxembourg - 26 February 2020 - Subsea 7 S.A. (the Group) (Oslo Børs: SUBC, ADR:
âŚ
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SUBCY, ISIN: LU0075646355) announced today results for the fourth quarter and
full year which ended 31 December 2019. Unless otherwise stated the comparative
period is the full year which ended 31 December 2018.
Fourth Quarter and Full Year 2019 highlights
- Adjusted EBITDA of $631 million and margin of 17% for the full year 2019,
reflected good progress on certain projects but lower activity in Renewables
and Heavy Lifting
- Goodwill impairment charge of $100 million related to weakness in the wind
turbine foundation market
- Order intake totalled $3.9 billion in the year, equivalent to a book-to-bill
ratio of 1.1, with eight awards announced in the fourth quarter. Order
backlog increased to $5.2 billion at the year end, with $3.3 billion
expected to be executed in 2020
- Solid financial and liquidity position at 31 December 2019, with cash and
cash equivalents of $398 million, net debt of $181 million including $345
million related to IFRS 16 lease liabilities and $656 million in unutilised
credit facilities
- $304 million returned to shareholders in 2019 comprising $250 million in
share repurchases and $54 million special dividend
Fourth Quarter Full year
For the period (in $
millions, except
Adjusted EBITDA margin 2019 2018 ((d))
and per share data) Q4 2019 Unaudited Q4 2018 Unaudited Audited
Revenue 889 1,023 3,657 4,074
Adjusted EBITDA((a)
)(unaudited) 168 163 631 669
Adjusted EBITDA
margin((a) )(unaudited) 19% 16% 17% 16%
Net operating
(loss)/income excluding
goodwill impairment
charge (16) 23 77 200
Goodwill impairment
charge (100) - (100) -
Net operating
(loss)/income (116) 23 (23) 200
Net (loss)/income
excluding goodwill
impairment charge (29) 32 18 165
Net (loss)/income (129) 32 (82) 165
Earnings per share - in
$ per share
Basic (0.45) 0.12 (0.27) 0.56
Diluted((b)) (0.45) 0.12 (0.27) 0.56
Adjusted diluted((b)) (0.12) 0.12 0.05 0.56
2019 2018
At (in $ millions) 31 Dec 31 Dec
Backlog -
unaudited(Š) 5,187 4,907
Cash and cash
equivalents 398 765
Borrowings (234) (258)
Net cash (excluding
IFRS 16 âLeasesâ
liabilities) 164 507
Net debt (including
IFRS 16 âLeasesâ
liabilities) (181) -((e))
(a) For explanations and reconciliations of Adjusted EBITDA and Adjusted EBITDA
margin refer to Note 8 âAdjusted EBITDA and Adjusted EBITDA marginâ to the
Condensed Consolidated Financial Statements. IFRS 16 âLeasesâ was implemented on
1 January 2019 and comparative figures for 2018 have not been restated, as a
result Adjusted EBITDA for the fourth quarter and year ended 31 Dec 2019
benefitted by $24 million and $105 million respectively.
(b) For the explanation and a reconciliation of diluted earnings per share and
Adjusted diluted earnings per share, which excludes the impact of the goodwill
impairment charge, refer to Note 7 âEarnings per shareâ to the Condensed
Consolidated Financial Statements.
Š Backlog at 31 December 2019 and 31 December 2018 is unaudited and is a non-
IFRS measure.
(d) Audited unless otherwise stated.
(e) IFRS 16 âLeasesâ was implemented on 1 January 2019, comparative figures for
2018 have not been restated, as a result net debt (including IFRS 16 âLeasesâ
liabilities) at 31 December 2018 has not been shown.
John Evans, Chief Executive Officer, said:
âSubsea 7 delivered solid operational results in 2019 as we continued to
progress orders awarded at lower prices during the downturn, and commenced work
on projects with more favourable terms. The outlook for SURF and Conventional
continues to improve, with the level of tendering increasing year-on-year and
pricing recovering gradually. Subsea Integration Alliance, our SPS-SURF
partnership with OneSubsea, a Schlumberger company, has made a significant
contribution to recent order intake. With the award of the full EPIC scope for
the Julimar project following earlier FEED activity and, in recent weeks, the
announcement of contracts that further extend our momentum in large greenfield
subsea projects, we have reaffirmed our strategy of early engagement and an
integrated approach. In Renewables and Heavy Lifting, our cable-lay vessels
continue to deliver good utilisation, but the foundations market remains
competitive. We have therefore had to record a goodwill impairment charge
associated with this business. In the long-term, we remain confident that our
client-focused approach and experience managing complex projects leave us well-
positioned to create sustainable value in addressing our clientsâ transition to
lower carbon solutions.
We are committed to reducing our own environmental impact and this year will
mark the publication of our first Sustainability Report, which will discuss our
sustainability strategy in more detail. The upgrade of our Life of Field vessel,
Seven Viking, to hybrid power, was successful, resulting in a 19% reduction in
CO2 emissions.
In 2020, Subsea 7 has strengthened its management team with the appointment of
three new Executive Vice Presidents. I am confident we have the leadership in
place to deliver strong operational and financial performance while continuing
to drive the growth of the business.â
Full year 2019
Full year revenue of $3.7 billion was 10% lower than the prior year. Good
progress on projects within SURF and Conventional was offset by significantly
lower activity levels within Renewables and Heavy Lifting, which reflected the
timing of large project awards. Adjusted EBITDA of $631 million was down 6%
year-on-year. The margin of 17% benefitted from solid execution offset by low
activity levels in Renewables and Heavy Lifting. A goodwill impairment charge of
$100 million was recognised in the Renewables and Heavy Lifting business, which
reflected weakness in the wind turbine foundations market. Excluding the
goodwill impairment charge, net operating income was $77 million and net income
was $18 million. Adjusted diluted earnings per share was $0.05 versus $0.56 in
2018. The reduction from the prior year was driven in part by impairment charges
totalling $70 million mainly relating to two older vessels that are candidates
for disposal.
In 2019, order intake was $3.9 billion including escalations of approximately
$0.8 billion, resulting in a book-to-bill ratio of 1.1. Notable successes in the
year included contract awards in Saudi Arabia, and new orders for Subsea
Integration Alliance that support the strategy of early engagement and an
integrated approach.
In line with our commitment to capital discipline, in 2019, Subsea 7 invested
$258 million in capital expenditure and returned $304 million to shareholders
consisting of $250 million of share repurchases and a special dividend of $54
million. Following the successful conclusion of the Groupâs $200 million share
repurchase programme on 24 July 2019, the Board of Directors authorised a new
share repurchase programme of up to $200 million.
While we are confident of the improving conditions in our markets, in view of
current global economic uncertainty and market volatility, combined with a
change in law impacting the continuing validity of our advance tax agreement
with the Luxembourg authorities, which we are still evaluating, the Board of
Directors does not recommend the payment of a special dividend to the
shareholders at the Annual General Meeting on the 7 April 2020. Rather, the
Group will manage its returns to shareholders through the current $200 million
share repurchase programme.
Fourth quarter 2019
Fourth quarter revenue of $889 million was 13% lower than the prior year period
reflecting lower activity levels in Africa and Renewables and Heavy Lifting.
Adjusted EBITDA of $168 million, a year-on-year increase of 3%, at a margin of
19% was driven by good execution within SURF and Conventional, as well as
certain commercial settlements. A goodwill impairment charge of $100 million was
recognised in the Renewables and Heavy Lifting business, reflecting near-term
weakness in the wind turbine foundations market. Net loss, excluding the
goodwill impairment charge, was $29 million. Excluding the goodwill impairment
charge, Adjusted diluted earnings per share was a loss of $0.12 compared to
earnings per share of $0.12 in the same period last year. The reduction from the
prior year was driven by impairment charges totalling $70 million mainly
relating to two older vessels that are candidates for disposal.
During the quarter, net cash generated from operations was $162 million with a
favourable movement in net operating assets and liabilities of $23 million.
Capital expenditure was $81 million in the quarter, mainly relating to the
construction of Seven Vega. In addition, the Group acquired 4Subsea. The Group
has a solid financial and liquidity position supported by cash and cash
equivalents of $398 million at 31 December 2019 and a $656 million Revolving
Credit Facility that remains unutilised. Net debt of $181 million at the year
end included IFRS 16 lease liabilities of $345 million.
Despite the slippage of some awards into 2020, the backlog was more than
replenished in the fourth quarter by orders totalling $1.1 billion, including
$184 million of escalations. In SURF and Conventional, key awards included the
Julimar Phase 2 and Ărfugl Phase 2 projects, while in Renewables and Heavy
Lifting awards included the Formosa 2 and Lingshui projects. Backlog at the year
end was $5.2 billion, of which $3.3 billion is expected to be executed in 2020.
The SURF and Conventional business unit made good progress on projects in the
fourth quarter and benefitted from some commercial settlements. In Norway, the
Yme project was completed, while fabrication work continued on the Snorre
Expansion project. In Egypt, the Burullus 9B project has progressed well with
the 2019 offshore campaign successfully completed. On the Mad Dog Phase 2
project, the offshore phase has started with light construction works in
preparation for the pipelay campaign in 2020. The PRP6 project, offshore Brunei,
completed topsides installation works.
Total vessel utilisation was 66% in the fourth quarter 2019, compared to 70% in
the prior year period, reflecting greater seasonality in the North Sea and low
levels of wind turbine foundation activity in the Renewables and Heavy Lifting
business. Utilisation of the cable-lay vessels within Renewables and Heavy
Lifting has remained robust since their acquisition by the Group in 2018. The
Pipelay Support Vessels (PSLVs) on long-term contracts in Brazil achieved high
levels of utilisation in the quarter. At 31 December 2019, the fleet comprised
35 vessels, including Seven Vega, which is under construction, and two stacked
vessels.
Outlook
The continued improvement in the deepwater oil and gas markets this year has
supported increased tendering activity and a gradual improvement in pricing
compared to 2018. Since the year end, the Group has announced a number of
greenfield FEED and SURF awards. In addition, the Group is currently working on
SURF and Conventional tenders with an estimated value of approximately $11
billion, up from approximately $9 billion at the same time last year.
While demand for offshore wind turbine services is growing in support of the
transition to low carbon energy production, continued competition in the
foundations market continues to negatively impact pricing. This is expected to
improve in the longer-term as the market rebalances.
Guidance for full year 2020 is unchanged with both revenue and Adjusted EBITDA
expected to be higher than in 2019, driven by an increase in activity in key
markets. The Adjusted EBITDA margin is expected to remain relatively subdued, as
projects awarded with competitive pricing progress to offshore execution.
For further information, please contact:
Katherine Tonks
Head of Investor Relations
email: katherine.tonks@subsea7.com (mailto:katherine.tonks@subsea7.com)
Telephone: +44 20 8210 5568
Special Note Regarding Forward-Looking Statements
Certain statements made in this announcement may include âforward-looking
statementsâ. These statements may be identified by the use of words like
âanticipateâ, âbelieveâ, âcouldâ, âestimateâ, âexpectâ, âforecastâ, âintendâ,
âmayâ, âmightâ, âplanâ, âpredictâ, âprojectâ, âscheduledâ, âseekâ, âshouldâ,
âwillâ, and similar expressions. The forward-looking statements reflect our
current views and are subject to risks, uncertainties and assumptions. The
principal risks and uncertainties which could impact the Group and the factors
which could affect the actual results are described but not limited to those in
the âRisk Managementâ section in the Groupâs Annual Report and Consolidated
Financial Statements 2018. These factors, and others which are discussed in our
public announcements, are among those that may cause actual and future results
and trends to differ materially from our forward-looking statements: actions by
regulatory authorities or other third parties; our ability to recover costs on
significant projects; general economic conditions and competition in the markets
and businesses in which we operate; our relationship with significant clients;
the outcome of legal and administrative proceedings or governmental enquiries;
uncertainties inherent in operating internationally; the timely delivery of
vessels on order; the impact of laws and regulations; and operating hazards,
including spills and environmental damage. Many of these factors are beyond our
ability to control or predict. Other unknown or unpredictable factors could also
have material adverse effects on our future results. Given these factors, you
should not place undue reliance on the forward-looking statements.
Kilde
