Write downs hit Subsea 7 but liquidity position remains strongCompany News // March 3, 2016
Jean Cahuzac, Chief Executive Officer of Subsea 7, says the company delivered good operational and financial performance in 2015 in what he described as "a very challenging market."
Revenue for the full year 2015 of US$4.8 billion (2014: US$6.9 billion) reflected lower levels of activity resulting from the industry downturn. Adjusted EBITDA was US$1,217 million driven by consistently good project execution and strong cost discipline. Adjusted EBITDA percentage was 26 per cent, five percentage points higher than the prior year in part due to significant progress on several large projects that reached the final stages of execution.
However, a downward revision of forecast activity levels resulted in an impairment charge of US$521 million relating to goodwill and US$136 million relating to vessels and equipment. This contributed to a reported net loss for the year of US$37 million. Excluding the US$521 million goodwill impairment charge, net income was US$484 million.
Subsea 7 said the group’s liquidity position "remains strong" with cash and cash equivalents of US$947 million and net cash of US$423 million as at 31 December. In addition, the group had unutilised credit facilities totalling US$857 million. Working capital discipline contributed towards US$1.0 billion of cash generated from operating activities in the year.
The low price of oil and uncertain market outlook resulted in fewer new awards to market in 2015 as clients delayed projects and reduced their expenditure. In this context, Subsea 7 achieved US$3.4 billion order intake during 2015, reflecting its strong competitive position and collaborative approach to drive lower cost solutions. In February 2016 Subsea 7 was awarded the West Nile Delta Phase Two project, offshore Egypt, this large award is in addition to the US$6.1 billion order backlog reported at 31 December 2015 (2014: US$8.2 billion).
Subsea 7 implemented a number of initiatives in 2015 to position itself for an extended period of low activity and strengthen itself for when the business environment improves. These initiatives included simplification of the group’s reporting structure, formation of new alliances with industry leading partners, investment in innovation to drive lower cost solutions through new technology and better ways of working, and reduction of costs by resizing the business.
The cost reduction and resizing programme announced in May 2015 set out plans to deliver approximately US$550 million of annualised cost savings through a workforce reduction of 2,500 and the removal of 12 vessels from the active fleet by early 2016. Resizing actions exceeded this guidance and Subsea 7 ended 2015 with a workforce of approximately 9,800 people, down from approximately 13,400 a year earlier, and as at the end of February 13 vessels have been removed from the active fleet, with an additional chartered vessel due to be returned to its owner before the end of the first quarter 2016. The restructuring charge of US$136 million relating to the resizing programme, included in adjusted EBITDA, was broadly offset by cost savings delivered by the programme in the same period.
In order to preserve the group’s financial flexibility during the sustained industry downturn, the board of directors will recommend to the shareholders at the Annual General Meeting that no dividend be paid in respect of 2015.