Business Plan 2016 - 2019
BUSINESS PLAN 2016 – 2019 AGENDA Fabrizio Rossini Introduction & Agenda Head of Investor Relation 15 Pietro Salini 16.00 - 16.15 Who we are Chief Executive Officer min Guest speaker 15 16.15 - 16.30 Parag Khanna Infrastructures global market trends min Global Strategist Pietro Salini 20 16.30 - 16.50 A solid path to our future growth Chief Executive Officer min Massimo Ferrari 25 16.50 - 17.15 General Manager Prioritizing Cash Flow generation min Finance & Corporate Group CFO 10 Robert E. Alger 17.15 - 17.25 US market opportunities President & CEO Lane Industries, Inc. min 5 Pietro Salini 17.25 - 17.30 Taking our success story to the next level Chief Executive Officer min 17.30 Q&A & follow-up Cocktail 2 Business Plan 2016 - 2019 Presentation
WHO WE ARE A Leading Global Pure Construction Player 3 Business Plan 2016 - 2019 Presentation
OUR UNIQUE GLOBAL FRANCHISE RECORD ACHIEVEMENTS Projects M&A and Financing Completed in Achievements Divestments Achievements 2016 Completed Panama Canal S&P upgrade to BB+ 2011-2015 ACQUISITIONS Impregilo Athens Opera House New Rating by Revenues CAGR Dagong Europe: BB+ Lane 2011-2015: 43% Gibe III HPP Arm asphalt plant Lake Mead tunnel From € 1.4bn to € 6bn € 400m Bond issued San Francisco Metro New orders: € 26 bn DIVESTMENTS Bank Debt Restructuring Ecorodovias 2014-2015 Construction Shanghai Pucheng Revenues: +25% Backlog Dec-15: Fisia Babcock € 27billion Dividends paid EBITDA: +35% Todini 2011-2015 approx. More than 26 projects EBIT: +29% € 650 million completed since 2011 Net debt lowered by for > € 19 billion 87% 4 Business Plan 2016 - 2019 Presentation
OUR TRACK RECORD New Panama Canal 5 Business Plan 2016 - 2019 Presentation
A SOLID PATH TO OUR FUTURE GROWTH 6 Riyadh Underground, Line 3 Business Plan 2016 - 2019 Presentation
BUILDING OUR FUTURE ON SOLID GROUNDS A STORY OF REVENUE GROWTH Historical Strategic Focus: Scale & Growth Strategy evolution: Smart Growth € 9 Bn Revenues ( € bn) ~6.0 4.7 € 6 Bn 3.9 SCALE 1.4 € 1.4 Bn 2011 2013PF 2015 2015PF 2011 2015PF 2019 € 4 bn of new orders already awarded in 2016 YTD € 26 bn of new orders in 2011-2015 (excluding Lane) Book-to-bill > 1.1x throughout the Business Plan Cash generated 2011-15 re-invested in order to support Cash generated to reduce debt and scale and revenue growth expansion increase shareholder remuneration 7 Business Plan 2016 - 2019 Presentation
THE DRIVERS OF THE BUSINESS PLAN To grow significantly through an efficient new orders selection. Targeting a book-to-bill >1.1x throughout the Business Plan To reduce consistently our portfolio's risk exposure To focus on cash generation through a suitable growth allowing a better use of financial and operational levers Targeting: 9 billion of revenues in 2019 − Of which >30% In USA Cash generation Investment grade Leadership in innovation 8 Business Plan 2016 - 2019 Presentation
EVOLVING OUR STRATEGY RESHAPING THE PORTFOLIO Geographic diversification to Low Risk countries Reshaping the portfolio New commercial approach and dynamic portfolio management Bid selection based on the "Salini Impregilo risk/return approach Commercial Planning Phases Targets fine tuning Criteria and dynamic management Exclusion of Specific Countries TOTAL WORLD CONSTRUCTION MARKET Projects identified Selection of Countries with high GDP trend and increasing investments in € 3,933 bn Construction Market GROUP’S CORE CONSTRUCTION MARKET First Selection Level GO CRITERIA GET CRITERIA € 1,191 bn GO-GET Priority Score Country Attractiveness SALIGL Capability COUNTRIES ANALYSIS & SELECTION Second Selection Historical commercial performances (Win Rate) and Country Margin Trend € 773 bn per Segment INITIATIVES ANALYSIS & PRIORITIZATION Initiative Target Focus on Projects with relevant size € 230 bn COMMERCIAL PLAN Further Commercial Guidelines (e.g. Leadership, Portfolio Concentration, etc.) 32 Countries 525 Projects 9 Business Plan 2016 - 2019 Presentation
EVOLVING OUR STRATEGY RESHAPING THE PORTFOLIO EUROPE NORTH AMERICA MIDDLE EAST 33% 29% 17% Cum. Rev 2016-19 Total € 29 Billion 13% 18% 40% Construction Backlog 2019 5% 18% 42% Total € 39 Billion LATAM ASIA & OCEANIA AFRICA 7% 3% 11% Construction Backlog 2015 Total € 27 Billion 10% 6% 12% 2% 13% 21% Largest proportional increase in the North America portfolio (up to € 7 Billion Backlog) North America and Europe lead cumulative revenues growth 10
EVOLVING OUR STRATEGY RESHAPING THE INTERNAL STRUCTURE Top Management Pietro Salini CEO New organization structured to extract value from global processes Massimo Claudio Ferrari Lautizi GM Finance GM Intl and CFO Operations Centralized processes for procurement, HR, Alessandro De Michele Capex, targeting G&A reduction Rosa Longo Deputy GM GM Administration Domestic & Finance Operations Gian Luca Joseph Attias Grondona Engineering, Focus on technical innovation Group HR & Development & Organization Concessions Director Director Robert E. Alger President & CEO Lane Industries, Inc 11 Business Plan 2016 - 2019 Presentation
PRIORITIZING CASH FLOW GENERATION Stavros Niarchos Foundation Cultural Centre - Athens 12
MARKET FOR INFRASTRUCTURES OUR MARKET OF REFERENCE Global Infrastructures Market ( € bn) Average Annual Growth of Investments in Constructions Average 2009-2014 8,022 7,483 Average 2015-2020 7.7% 6,869 6.9% 5.8% 4,297 4.4% 4.0% 4.0% 3.0% 3.0% 2.4% 2.3% 1.3% 0.7% 2000 2015 2018 2020 (1.5)% (3.6)% 1 2 3 4 Africa Asia Europe North Oceania South World Excluding Further GO-GET Priority Pro-Quota for SI Residential Reduction by Approach America America Country, Size,… Expected change in geographies growth profiles € 3,933bn North America and Europe reverting to growth € 1,191bn € 230bn € 773bn € 191bn Emerging markets slowly losing momentum Group Core Countries Inititiatives Commercial GO-GET Priority Approach Construction Market Analysis & Selection Analysis & Plan (short list) Prioritization Cumulated infrastructure market € 30 trillion Our reference market: € 230 billion Source: CRESME 13 Business Plan 2016 - 2019 Presentation
DE-RISKING OUR PORTFOLIO Construction Backlog by Geography Construction Backog | Country Risk Breakdown 2015 (including Lane) 2019 SAL SAL + LANE € 39 bn Asia & Australia Asia & Australia Africa USA 5% 6% 2% € 27 bn 13% € 25 bn Africa 21% USA 18% LatAm 12% Middle East 80% 13% Europe 71% 67% € 27 Bn € 39 Bn 9% LatAm Middle East 10% 18% Italy 20% 33% 29% 20% Europe Italy 33% 20% Dec-15 Dec-19 Dec-14 Backlog to Revenue Ratio 4.5x 4.3x LOW / MEDIUM HIGH / CRITICAL 1.6x Average EU peers Average US peers 1.8x Largest proportional increase from the US Continuing to improve the quality of our Backlog 14 Business Plan 2016 - 2019 Presentation
A SOLID PATH TO FUTURE GROWTH Revenues by Geography Business Plan Construction Revenues Backlog Coverage Asia & Australia EBITDA 2015PF 6% ~ € 9 Bn Africa 20% USA 23% NWC € 6 Bn € 6 Bn Middle East 15% LatAm 9% New order Italy 11% Europe Capex 16% 99% 85% 64% Backlog 48% € 1.4 Bn 2019 Asia & Australia Financial Africa 7% 5% Items 2011 2015PF 2016 2017 2018 2019 Middle East 10% USA 32% >70% of 16-19 revenues guaranteed by actual backlog € 9 Bn FCF Italy 18% >80% of 16-19 EBITDA guaranteed by actual backlog Europe LatAm >30% EBITDA from USA 18% 10% 15 Business Plan 2016 - 2019 Presentation
SECURED PROFITABILITY IMPROVEMENT Selective Commercial Plan EBITDA Backlog Expected EBITDA margin New orders Average peers 7.4% 5.1% NWC 11% Target Profitability 10% Savings 9% 8.6% Centralized procurement/CAPEX Capex process 8% 7% HR Costs 2015 PF 2016E 2017E 2018E 2019E Financial Items Plants & machinery effective rotation G&A to reduce from 4.5% to about 3.5% at the end of the Plan G&A FCF 16 Business Plan 2016 - 2019 Presentation
WORKING CAPITAL NORMALISATION TARGETING A REDUCTION IN WORKING CAPITAL Expected Working Capital Trend ( € m) EBITDA Focus on new contracts with 11% 900 advance payments 800 9% 700 NWC 7% 600 500 Optimization of stock levels 5% 400 Capex 3% 300 200 1% 100 Improved management of Financial 0 -1% Items payables and receivables cycle 2016E 2017E 2018E 2019E WC WC/Revenue FCF Expected total cash release of around € 150 million 17 Business Plan 2016 - 2019 Presentation
CAPEX OPTIMIZATION Considerations Expected Trend Pure construction companies require EBITDA Capex Capex as a % of Sales greater capex investments Large projects are more Capital intensive Projects complexity and extended Average of duration drive capex requirements ~ € 300-350m NWC Selected Example Capex Financial Items HPP project - € 1.7bn revenues, € 150m capex 2016E 2017E 2018E 2019E FCF Average capex is dependent on the project mix 18 Business Plan 2016 - 2019 Presentation
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