Desjardins 2018 Industrial Conference - Sylvain Girard, EVP and CFO March 22nd, 2018 - SNC-Lavalin
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› Desjardins 2018 Industrial
Conference
› Sylvain Girard, EVP and CFO
› March 22nd, 2018
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). 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 2018. 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.
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 Revenue 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 www.snclavalin.com. 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
A global fully integrated professional services &
project management company leader
Founded in
1911
SNC-Lavalin is a global fully
integrated professional services and
project management company, and Employees
a major player in the ownership of 50,000+
infrastructure
Revenue
From offices around the world,
SNC-Lavalin’s employees are $9.3B
proud to build what matters,
providing comprehensive end-to-end
project solutions to clients in four Listed on TSX
industry sectors
“SNC”
Since 1986
Investment Grade Credit Rating1
BBB
1 Per S&P and DBRS. 3
SNC-Lavalin acquired Atkins on July 3, 2017
2017 2017
Revenue Segment EBIT
(6 months) (6 months)
$1.8B 11.4%
Atkins is one of the
world’s most respected
›Atkins operates in a
design, engineering and
significant part of the value project management
chain – providing solutions consultancies
for the complete journey of
capital programs
Their core business is
helping our clients to plan,
design and enable major
capital programs
4
Operating in 4 regions across the world
Europe
12,000
Americas
16,000 Middle-
Asia
East
Pacific
& Africa
3,000
21,000
Breadth of geographic exposure 2017 Revenues1
11%
Americas 14%
Middle East & Africa $9.3B 52%
Asia Pacific
Europe 23%
1Includes 5
only 6 months of Atkins revenues, as it was acquired on July 3, 2017.
A diversified and resilient business model
while improving our revenue mix
2016 Revenues 2017 Revenues 1 2017 Pro forma Revenues 2
(assuming 12 months of Atkins)
3% 19%
4% 31%
32%
36%
19% 3%
44%
$9.3B $11.1B
$8.5B 5%
2%
14%
4%
30% 19%
12%
23%
60% 40% 35% 20% 45% 29% 33% 38%
Reimbursable Fixed-price Reimbursable Atkins services Fixed-price Reimbursable Atkins services Fixed-price
Oil & Gas Infrastructure Power Mining & Metallurgy Capital Atkins
1 Includes only 6 months of Atkins revenues, as it was acquired on July 3, 2017. 6
2 2017 revenues assume 12 months of Atkins revenues (i.e. Atkins 2017 6 months revenues x 2 = $3.6B)
Comprehensive end-to-end service offering …
Capital Consulting Digital Design Procurement Construction Operations Sustaining
& Advisory & AI & Engineering & Project & Maintenance Capital
Management
Examples
John Hart New Champlain Bridge Gorgon Darlington
19-year concession for the Design, build, finance and Engineering and Re-tube and Feeder
132MW generating station maintain the new bridge construction services Replacement at the nuclear
power station
407 ETR London 2012 Olympics Antucoya ISS Baytown
99-year concession for the Detailed engineering, In-Service-Support to Sustaining capital
108 km electronic toll road procurement and the Royal Canadian engineering services
Helped the development of East London construction management Navy minor warships
for the copper mine
7
…in four sectors of activity with robust growth backdrop
Global Market
2017-21(1)
› Airports & Aviation › Intelligent Transport › Urban Development
› Defense & Security Systems › Urban Transit and Rail
› Environment › Geotechnical Eng. Systems US$1.9
› Ports & Harbours › Water & Wastewater
› Highways, Roads & trillion
Infrastructure Bridges › Property & Facilities
› Industrial › Social Infrastructure
› Bitumen › Unconventional O&G › Sustaining Capital
› Heavy Oil › Upgrading and › Pipelines
› Offshore Refining › Carbon Capture
US$460
› Gas Processing and Utilization billion
Oil & Gas › LNG
› Hydroelectric › Thermal › Renewables
› Nuclear › Transmission and US$400
Distribution billion
Power
› Aluminium › Copper › Fertilizers
› Gold › Iron Ore › Sulphur Products US$150
› Nickel billion
Mining & Metallurgy
› Canada
› Select U.S. opportunities
US$300
› Other BOOT(2) opportunities
billion
Capital
1) Data was internally developed using multiple sources not limited to the following: Business Monitor International, Middle East Economic Digest, International Energy
Agency, US Department of Energy, National and Provincial Budgets of Canada, US Congressional Budget Office, Australia Budget, National Rail budget, American Road
& Transportation Builders Association, Individual company reports.
2) Build, own, operate and transfer. 8
Backlog
December 2017
$10.4B
A sustainable and diversified backlog
Backlog expected to
be >$15B in 2018
Recently named
$10.7B $10.4B preferred proponent
on several major
2.1 projects:
4.1
•REM in Montreal
•Stockyard Hill Wind
3.9
Farm in Australia
(they are expected to be booked
3.9 into backlog in Q118 and/or Q218)
2.2
Under IFRS 15 –
2.4 1.6 ~$3B will be added,
0.3 0.6 due to SNC-Lavalin’s
Dec. 31, 2016 Dec. 31, 2017 long-term O&M
M&M Power O&G Infrastructure Atkins signed contracts
9
On a path of growth and improved E&C earnings
Revenues from E&C Adjusted E&C EBITDA margin
and adjusted net income
from E&C
6.9%
9,364
9,097
(in M$) (in M$)
351.3
4.6% 4.5%
8,223
7,335 226.4
7,149 2.1% 201.9
54.9
2013 2014 2015 2016 2017 2013 2014 2015 2016 2017
Adjusted E&C EBITDA margin
-133.7 Adjusted net income from E&C
102018 growth outlook
› We anticipate increased Segment EBIT for the M&M and Power segments, while O&G and
Infrastructure are expected to be mainly in line with 2017. Atkins will include 12 months of
operations and related financing vs 6 months in 2017.
› Q1 to be the lowest quarter of 2018, gradual increase expected throughout the remaining
quarters of the year.
› Tax rate for the adjusted E&C business expected to be between 20% and 25%.
2018 Adjusted diluted 2018 Adjusted consolidated
EPS from E&C1 diluted EPS1
$2.60 $2.85 $3.60 $3.85
$3.60
to
$3.85
$3.20
$2.46 $2.58
$2.42
2014 2015 2016 2017 2018
Adjusted diluted EPS from E&C Adjusted diluted EPS from Capital Outlook range
1 Based on a WANOS of ~175M 11Vision 2020
Plan to deliver adjusted consolidated EPS of $5
Drivers:
$5.00 › G&A expenses efficiency &
operational excellence
$3.85 continuous improvement
› Project execution
$3.60
improvement
$3.20 › Driving organic growth by:
- Increasing its share in
$2.46 $2.42 $2.58 nuclear through an
expanded offering
- Capitalizing on
Infrastructure investment in
Canada, UK & US
$0.74 - Maximizing Atkins/SNC-
Lavalin revenues synergies
- Mining & Metallurgy
recovery
2013 2014 2015 2016 2017 2018 2020
› M&A post Atkins integration
CAGR: Compound Annual Growth Rate
12A track record of increased dividends
Declared dividend per share
Dividends
were 1.106
increased
for each of 1.053
the past 17
1.01
years
0.97
0.93
2013 2014 2015 2016 2017
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. 13Ethics & compliance update
1 2 3
December 2015
February 2015 October 2015 SNC-Lavalin announces the first-ever
Received Authorization From AMF to Reached a settlement with the African administrative agreement with the
Contract With Public Authorities in Quebec Development Bank Group (AfDB) regarding Government of Canada under the Integrity
allegations of sanctionable practices Regime1
4 5 6
May 2016 September 2016 December 2017
Participation in the Quebec government's Reached a compliance agreement with the Reached an agreement with all the public
Voluntary Reimbursement Program. The Commissioner of Canada Elections in relation to bodies of Quebec that have received its
program was put into force by the an investigation by the Commissioner into offer under the Voluntary Reimbursement
Government of Quebec in November 2015 certain reimbursements Program
7 February 2018
Based on the consultation conducted in fall 7)
6)
2017, the Government of Canada intends 5) Feb-18
Dec-17
to introduce legislation for Canadian 4) Sep-16
Deferred Prosecution Agreements, to be May-16
implemented through Judicial Remediation 3)
Orders Dec-15
2)
Oct-15
1) Providing internal controls and other
Feb-15 sources to identify misconduct and
evaluate adherence
Our ethics and
compliance
Involving measures to take corrective
Ethics & compliance integrated in program is an
integral part of action in response to misconduct
the way we work daily activities
Fostering an ethical culture to prevent
the likelihood of wrongdoing and
compliance violations from occurring
1The Integrity Regime, in effect since July 2015, bars companies and their related legal entities from bidding on government contracts if they are
charged with or convicted of certain criminal or administrative charges 14SNC-Lavalin: a unique platform to invest in the
high growth infrastructure and power sector
1 Investment in the global infrastructure sector is expected to grow, with the North American market particularly attractive
2 Leading international E&C firm of scale, the largest E&C firm in Canada and globally recognised
Optimally placed to capture market growth due to its diversified sector mix, extensive international presence and
3
Why SNC-Lavalin
its competitive advantage from its presence across the value chain
SNC-Lavalin provides high visibility of revenues driven by a diversified backlog and complemented by a portfolio of
4 prime infrastructure concessions which provide stable cashflows
Established track record of financial performance and strong balance sheet discipline that consistently delivers
5 shareholder returns (strong track record of increased dividends)
Experienced management who have developed SNC-Lavalin into a well respected global brand and fostered a culture
6 of Ethics excellence
15SNC-Lavalin: a discounted share price
SNC-Lavalin Peers Peers
Group Group incl.
Average1 Canadian peers
Average2
Share price3 $55.93
Less H4074 (25.91)
Less Other (2.82)
Concessions4
Adjusted E&C price $27.20
2018 adjusted EPS $2.74
from E&C
consensus4
E&C P/E multiple 9.9 15.4 15.9
SNC-Lavalin’s E&C P/E multiple ~ 5 to 6 times lower than peers
1 Includes Fluor, Jacobs, Wood, Balfour Beatty, WorleyParsons, CB&I and Aecom
2 Incudes peers group + WSP and Stantec
3 Close as at March 16, 2018
4 Street consensus as at March 16, 2018
16Appendix
Our capital allocation framework
Sources of Funds Uses of Funds
› Operating cash flows from E&C › Working Capital & Capex needs on
projects new projects
› Operating cash flows from existing › Equity investments driving E&C
concessions and Capital Investments revenues
› Divestiture of matured Capital › Dividend payment
Investments › M&A activities
› Divest non-core assets (e.g. Building) › Opportunistic share buy back
› Leverage
Key objectives of our Framework
› Drive Organic and Inorganic E&C Growth
› Optimize our Balance Sheet while
safeguarding our Investment Grade
› Return Capital to shareholders
18Credit facilities and long-term debt
Credit facilities Other CDPQ
(recourse debt) (recourse debt) (limited recourse debt)
Revolving & Term Facility $350M Debenture
Borrower
› $2,750M Revolving Facility › Maturity: July 2019
› SNC-Lavalin Highway Holdings,
maturing May 2021 › Interest rate: 6.19% non-recourse to SNC-Lavalin
› $2,500M Uncommitted bilateral Group
facilities
$300M Debenture Amount
› £225M Term Facility:
› Maturity: November 2020 › $1,500M divided in two Tranches:
- £75M maturing July 2021
› Interest rate: 2.689% - Tranche A - $1B
- £150M maturing July 2022
- Tranche B - $500M
› Current maximum leverage
ratio of 3.5 › Interest rate ≈ 6.5%
Prepayment
› Tranche A: non-call period of 4
years
In March 2018, $525M of three series of unsecured
debentures were issued. The net proceeds was mainly › Tranche B: right to repay at all
times without penalties
used to reduce the revolving and term facility.
$697M as at Dec. 31, 2017 $648M as at Dec. 31, 2017 $1,475M as at Dec. 31, 2017
19Debt ratios $5.0B
$2.8B $3.5B
$1.5B limited ~0.8x
recourse to ~1.8x LTM Adj. EBITDA(1)
SNC-Lavalin LTM Adj. LTM Adj.
EBITDA(1) ~0.6x EBITDA of
Incorporating full LTM $767M(1)
$1.3B Adj.. EBITDA of
Atkins and DTS(2)
$0.6B
$705M cash(5)
Total Debt (3) Total Recourse Debt Net Recourse Debt Fair Market Value of
Capital Investments Minus
Limited Recourse Debt(4)
~$0.6B net recourse debt represents 0.6x Adj. EBITDA and further
supported by relatively liquid investments of ~$3.5B
Note: Data as of December 31, 2017.
1) Adjusted EBITDA, less interest on CDPQ limited recourse debt, LTM ended December 31, 2017; including Atkins results starting July 3, 2017; EBITDA adjusted
to exclude charges related to restructuring, right-sizing and other, acquisition-related costs and integration costs, gains (losses) on disposals of E&C business,
Capital investments and head office building.
2) Adjusted EBITDA, less interest on CDPQ limited recourse debt, LTM ended December 31, 2017; including full 12 months of Atkins and DTS results; EBITDA
adjusted to exclude charges related to restructuring, right-sizing and other, acquisition-related costs and integration costs, gains (losses) on disposals of E&C
business, Capital investments and head office building.
3) Excludes $313M non-recourse debt from capital investments.
4) Estimated as $5.0B fair market value as per street estimates as of March 16, 2018, less $1.5B CDPQ limited recourse loan.
5) Excluding cash and cash equivalents of Capital investments accounted for by the consolidation method. 20Capital investments portfolio
Name Description Held Concession Location Equity
Since Years Participation
Highways, Bridges & Rail
1. Highway 407 (407 ETR) 108 km electronic toll road 1999 99 Canada (Ontario) 16.8%
2. InTransit BC* Rapid transit line 2005 35 Canada (B.C.) 6.7%
3. Okanagan Lake* Floating bridge 2005 30 Canada (B.C.) 20%
4. TC Dôme** 5.3 km electric cog railway 2008 35 France 51%
5. Chinook* 25 km six-lane road 2010 33 Canada (Alberta) 10%
6. 407 EDGGP 32 km H407 East extension (Phase 1) 2012 33 Canada (Ontario) 50%
7. Highway Concessions One PL Fund (Roads) 2012 9 India 10%
8. Rideau Light rail transit system 2013 30 Canada (Ontario) 40%
9. Eglinton Crosstown 19 km light rail line 2015 36 Canada (Ontario) 25%
10. SSL New Champlain bridge corridor 2015 34 Canada (Quebec) 50%
Power
11. SKH 1,227 MW gas-fired power plant 2006 23 Algeria 26%
12. Astoria II 550 MW gas-fired power plant 2008 Indefinitely USA (NY) 6.2%
13. InPower BC John Hart 132 MW generating station 2014 19 Canada (B.C.) 100%
Health Centres
14. MIHG*** McGill University Health Centre 2010 34 Canada (Quebec) 50%
15. Rainbow* Restigouche Hospital Centre 2011 33 Canada (N.B.) 20%
Others
16. Myah Tipaza Seawater desalination plant 2008 28 Algeria 25.5%
NBV1 = $316M2 FMV3 = ~$5B
* Assets transferred in Q3 2017 into SNC-Lavalin Infrastructure Partners LP (“Partnership”) **To be sold ***To be transferred into the Partnership
1 Net Book Value as at December 31, 2017 2 Excludes MIHG 21
3 Average Fair Market Value as per analysts calculations, as at March 16, 2018407 ETR
Consistent growth and low cost of financing
845
790
Gross Vehicle Kilometres Travelled Dividends 730 750
680
(in millions – KM) 2,709
(in M$) 600
2,641 Total dividends paid
460 by 407 ETR
2,517
2,437 Dividends received
300 by SNC-Lavalin
2,336 2,326 2,340 2,356
2,253 2,253 190
2,215 142
135 114 122 126 133
120 77 101
23 50
32
20
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Bond Maturity Profile
(in M$)
608 625
5003 500 500
480
400 400 400
3501 340 350
300 3003
5.29% / 6.75%
4.30% / 5.33%
250 2502
208 208 200
165 150
2.43%
3.65%
4.99%
3.35%
5.33%
6.47%
5.33%
3.43%
5.96%
5.75%
4.45%
4.19%
3.83%
3.60%
3.98%
2.47%
4.68%
7.13%
3.30%
2020 2021 2022 2024 2026 2027 2029 2031 2033 2035 2036 2039 2040 2041 2042 2044 2045 2046 2047 2052 2053
Senior Bonds ($5.8B) Subordinated Bonds ($0.8B) Junior Bonds ($0.2B)
2Issued 3Issued in September 2017
1Issued in November 2016 in March 2017
22Financial position
December 31 December 31
(in M$) 2017 2016
Assets
Cash and cash equivalents 707 1,055
Other current assets 3,908 3,135
Property and equipment 414 298
Capital investments accounted for by the equity or cost methods 352 448
Goodwill 6,323 3,268
Intangible assets related to business combinations 1,090 194
Other non-current assets and deferred income tax asset 968 900
13,762 9,298
Liabilities and Equity
Short-term debt and current portion of long-term debt - recourse 319 -
Short-term debt and current portion of long-term debt – non-recourse from Capital Investments 16 21
Other current liabilities 4,168 3,941
Long-term debt – recourse 1,027 349
Long-term debt – limited recourse 1,475 -
Long-term debt – non-recourse from Capital investments 297 473
Other non-current liabilities and deferred income tax liability 1,237 618
8,539 5,402
Equity attributable to SNC-Lavalin shareholders 5,225 3,873
Non-controlling interests (2) 23
13,762 9,298
23SNC-Lavalin
Denis Jasmin Tel.: 514-393-8000 Ext. 57553
Vice-President, Investor Relations E-mail: denis.jasmin@snclavalin.com
www.snclavalin.com
Firm Analyst Tel Market Details
AltaCorp Capital Chris Murray 647-776-8246
Price as of March 16, 2018 $55.93
BMO Capital Market Devin Dodge 416-359-6774
Canaccord|Genuity Yuri Lynk 514-844-3708 Shares outstanding – Diluted 175.6M
CIBC World Markets Jacob Bout 416-956-6766
Market capitalization $9.8B
Desjardins Securities Benoit Poirier 514-281-8653
Laurentian Bank Securities Mona Nazir 514-350-2964 52 - week high / low $59.38 / $50.28
Morningstar Inc David Silver 312-244-7251
National Bank Financial Maxim Sytchev 416-869-6517 Dividend per share $0.287 / quarter
Raymond James Frederic Bastien 604-659-8232
Dividend yield ~ 2.0%
RBC Capital Markets Derek Spronck 416-842-7833
TD Newcrest Michael Tupholme 416-307-9389
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