Constellis 2015 Q1 update
2015 Q1 Investor’s Call June 18, 2015
The following discussion and analysis of the Company’s financial condiCon and results of operaCons contains “forward-‐looking statements” that reflect our future plans, esCmates, beliefs and expected performance. We cauCon that assumpCons, expectaCons, projecCons, intenCons, or beliefs about future events may, and oNen do, vary from actual results and the differences can be material. In addiCon, the following discussion includes references to non-‐GAAP measures. For more informaCon, please see the reconciliaCon aTached as an appendix and our first quarter financial report. We believe these adjusted results, in addiCon to our GAAP results, provide a good basis to assess the operaCng and financial results.
June 18, 2015 -‐ Business ConfidenCal
2
Agenda! Constellis Stand Alone! Q1 2015 Earnings Results 2015 EAC Business Update
Olive Group Stand Alone! Q1 2015 Earnings Results 2015 EAC Business Update
Constellis Group Consolidated Earnings Slides! Q1 Earnings Results 2015 EAC
Ques4ons
June 18, 2015 -‐ Business ConfidenCal
3
Constellis Stand Alone
FY 2015 Q1 Financial Results! #
Q1#
Q1#
Variance to PY#
Q1 2015#
#
2014#
2015#
$#
%#
TTM#
Revenue
$92.7
$195.2
$102.5
110.6%
$821.2
Gross Profit
$16.2
$38.8
$22.6
139.5%
$170.0
Indirect Cost
$13.3
$26.3
$13.0
97.7%
$137.3
Interest
$0.7
$5.3
$4.6
657.1%
$17.9
Net Income
$2.3
$7.9
$5.6
243.5%
$17.0
AEBITDA
$6.2
$23.9
$17.7
285.5%
$93.1
Prior Year – –
Key driver in year over year performance is the acquisiCon of Triple Canopy on July 25, 2014. This results in an across board increase to revenue, expenses, and profitability. Increases to indirect costs were parCally offset by realized synergies resulCng from the consolidaCon of support services during the integraCon of Triple Canopy.
Current Year – – –
Q1 revenue was on plan despite delays in WPS projects under TO9 (Kabul) and the startup of TO12 (Basra) Indirect expenses posiCvely reflect actual synergies realized from the TC acquisiCon AEBITDA adjustments = $0.8M ($0.5M in management fees + $0.3M in non-‐recurring costs)
June 18, 2015 -‐ Business ConfidenCal
5
FY 2015 Q1 Balance Sheets! Assets#
3/31/15#
12/31/14#
Cash
$11.1
$7.1
A/R Net
$203.0
$207.1
Inventory
$6.1
$5.9
Prepaids & Other Current
$45.2
$39.2
Total Current
$265.4
$259.3
PPE, Net
$72.1
$74.3
Intangibles
$91.8
$95.7
Goodwill
$176.7
$176.7
Deposits & Other Long-‐Term
$11.1
$12.8
Total Assets
$617.1
$618.8
Assets
– – –
#
Liabilities & Equity#
3/31/15#
12/31/14#
AP & Other Accrueds
$97.0
$108.5
Accrued CompensaCon
$37.3
$34.8
Current PorCon Long-‐Term Debt
$17.8
$17.8
Other Current LiabiliCes
$6.0
$2.8
Total Current
$158.1
$163.9
Long-‐Term Debt
$282.2
$282.5
Other Long-‐Term LiabiliCes
$21.8
$25.2
Total LiabiliCes
$462.1
$471.6
Total Equity
$155.0
$147.2
Total LiabiliCes & Equity
$617.1
$618.8
Strong cash collecCons during the quarter brought down billed A/R by $13.5M, but this was offset by an increase in unbilled related to delays in the review and issuance of contract modificaCons under WPS (i.e. DBA and new task order awards). Increase in prepaids related to new DBA policies across Constellis for which two installments were paid in Q1. Capex was nominal during Q1 at $0.3M
Liabili4es & Equity – –
AP acCvity under IDS WPS was the primary driver in the decrease in AP in Q1. IDS payments made in Q1 related to life support services, O&M providers, and a refund to DoS related to a double payment in Q4. Debt balances did not move much during the quarter as borrowing acCvity under our revolver was offset by principal payments. June 18, 2015 -‐ Business ConfidenCal
6
FY 2015 Q1 Financial Results and EAC! Forecast! Q1#
Q2#
Q3#
Q4#
2015#
Actual#
Forecast#
Forecast#
Forecast#
Forecast#
Revenue
$195.2
$219.5
$248.6
$273.4
$936.7
ContribuCon Profit
$42.9
$47.5
$53.4
$59.1
$202.9
Indirect Cost
$26.3
$35.5
$26.9
$26.4
$115.1
Interest
$5.3
$10.6
$11.6
$11.6
$39.1
Net Income
$7.9
($0.7)
$10.1
$15.9
$33.2
AEBITDA
$23.9
$25.7
$32.8
$40.1
$122.5
•
Current run rate as well as stand-‐up of recent wins & upliNs account for over 90% of forecast revenues
•
EAC reflects revised Cming of WPS life support/infrastructure projects and current pipeline of contract awards pending
•
Q4 ramp-‐up is consistent with prior years due to finalizaCon of award fees and recogniCon of revenue from current year contract awards
June 18, 2015 -‐ Business ConfidenCal
7
Revenue Bridge to 2015 EAC (Excluding Pipeline)! Additions below include increased revenue due to wins, mods & plus-ups! Q1 Actual x 4
ACADEMI AddiCons:
TC AddiCons:
Millions!
$780 •TO 9 add-‐ons
30
•XPG plus-‐ups
3.1
•CNTPO (390, 413)
3.5
•Training
6.6
•TO 12
43
•NJ FPS
3
Total Booked Revenue
Total “in hand” revenue predicted:
$869.20
Incremental Revenue
“go get” to achieve $937M of EAC revenue (supported by factored pipeline opportuniCes)
$67.50
June 18, 2015 -‐ Business ConfidenCal
8
Business Update! Key wins in Q1 • • •
WPS TO-‐12 Basra PoP Jan 15-‐Jan 19: $56M/year 4 x CNTPO Task Orders: $8M/year DHS FPS New Jersey PoP July 15-‐July 19: $6M/year
Key Opportuni4es • • •
IDIQ’s (SWMS – SOCOM $900M, AFRICAP DoS Africa Support $1.5B) MulCple pop-‐up opportuniCes in Afghanistan/Iraq of approx. $30M/year $8.7B in proposals under evaluaCon with a book value of $666m (167 proposals submiTed YTD)
Business Environment • •
Unprecedented # of Requests for Proposal from across the USG Clear indicaCons of conCnued presence in Afghanistan, increased requirements in Iraq and ME
CFO update • • • •
Top priority for the team Several well qualified candidates idenCfied and screening process is acCve and ongoing Thorough search to idenCfy the “right” candidate Sponsors are filling gaps directly as needed
Liquidity • •
Business has sufficient liquidity to fund future growth requirements AnCcipated >60% available on ABL facility by Dec. 31, 2015
• •
Management’s goal to implement group wide HSE staCsCcs by year end No significant events occurred during Q1
HSE
June 18, 2015 -‐ Business ConfidenCal
9
Olive Group Stand Alone
June 18, 2015 -‐ Business ConfidenCal
10
FY 2015 Q1 Financial Results (Olive Group)! Q1#
Q1#
2014#
2015#
$#
%#
TTM#
Revenue
$51.8
$48.6
($3.2)
(6.2%)
$194.6
ContribuCon Profit
$14.0
$15.2
$1.2
8.6%
$59.5
Indirect Cost
$8.1
$10.3
$2.2
27.2%
$36.5
Interest
$0.4
$0.4
$0.0
0.0%
$3.0
Net Income
$5.3
$4.3
($1.0)
(18.9%)
($1.0)
AEBITDA
$8.2
$8.6
$0.4
4.9%
$32.1
•
–
–
Stronger than budgeted delivery margins have supported a strong contribuCon profit, even though revenue was lower than Q1 plan. Indirect costs exceed Q1 plan due to costs incurred in expanding footprint in Africa; acCon has been taken to address this in Q2. AEBITDA adjustments = $1.4M ($1.1M subcontractors subsequently replaced + $0.3M in overhead reducCons at Newport {2014 end of year acquisiCon by OG})
Prior Year – –
Q1 2015#
Current Year –
•
Variance to PY#
The YoY decrease in revenue in Q1 was as a result of a reducCon in revenues from government and EPC clients, parCally offset by an increase in revenues from from IOCs. The main driver for the increase in overheads was the expanded operaCng footprint in Africa in Q4 2014. June 18, 2015 -‐ Business ConfidenCal
11
FY 2015 Q1 Balance Sheet! Assets#
3/31/15#
12/31/14#
# Liabilities & Equity#
3/31/15#
12/31/14#
Cash
$8.03
$12.65
AP & Other Accrueds
$28.56
$31.88
A/R Net
$45.60
$44.93
Accrued CompensaCon
$0.46
$0.46
Inventory
$2.55
$1.63
Current PorCon Long-‐Term Debt
$23.68
$22.68
Prepaids & Other Current
$27.45
$22.41
Other Current LiabiliCes
$-‐
$0.44
Total Current
$83.63
$81.62
Total Current
$52.70
$55.46
Fixed Assets
$36.87
$35.73
Long Term Debt
$2.50
$0.31
Intangibles
$1.24
$1.24
Other Long Term LiabiliCes
$-‐
$-‐
$-‐
$-‐
Total LiabiliCes
$55.20
$55.77
$3.04
$2.54
Total Equity
$69.59
$65.36
$124.79
$121.13
Total LiabiliCes & Equity
$124.79
$121.14
Goodwill Deposits & Other Long-‐Term Total Assets
•
Assets – – –
•
34 addiConal armored vehicles were purchased in Q1 to allow new projects to be mobilized in Iraq. Cash collecCon has remained strong, with only one customer with significant overdue balances. Outstanding balances have since been collected in Q2. Prepaids & other current assets has increased as Olive funded acCviCes elsewhere in the wider Olive group (ie outside of the acquired group of companies).
Liabili4es & Equity –
Debt increased in the quarter due to addiConal drawdowns to fund capex of $3.6m and cash collateralizaCon of bonds $4.5mm
June 18, 2015 -‐ Business ConfidenCal
12
FY 2015 Q1 Financial Results and EAC! #
Q1#
Q2#
Q3#
Q4#
2015#
#
Actual#
EAC#
EAC#
EAC#
EAC#
Revenue
$48.6
$48.6
$55.2
$66.0
$218.4
ContribuCon Profit
$15.2
$14.6
$16.9
$20.7
$67.4
Indirect Cost
$10.3
$9.6
$8.6
$8.5
$37.0
Interest
$0.4
$0.1
$0.0
$0.0
$0.5
Net Income
$4.3
$3.9
$7.2
$10.9
$26.3
AEBITDA
$8.7
$8.6
$11.7
$15.9
$44.9
• • • • •
Delays in award of contracts means pull-‐through of revenue will be delayed by 3-‐4 months. Current backlog (contracted, extensions, opCons) covers 92% of full year forecast. Exit rate for revenue is expected to be strong, with an annualized revenue (Q4) of $265m. Indirect costs are shown on a standalone basis and are before the synergies that will result from the integraCon of Edinburgh InternaConal. Capex of $5m on new vehicles is forecast to support the revenue growth in 2015 on contracts that are yet to be awarded.
June 18, 2015 -‐ Business ConfidenCal
13
Business Update! Key wins in Q1 • • • • • • •
•
Shell Majnoon -‐ $39m over 30 mths starCng in June 2015. Afghan airports -‐ $12m pa – 2 mth extension secured in Q1 ahead of being awarded a further 12 mth contract in Q2. Japanese Ministry of Foreign affairs – Olive were awarded contracts to provide services in Afghanistan, Nigeria and Kenya in Q1 following strong delivery in Kabul and Yemen. Kogas – awarded a global security MSA following close engagement with their senior team. Vestas – awarded a global security MSA on the back of strong performance in Africa. SoSI – several upliNs to exisCng contracts that were sole sourced to Olive. Weatherford – a $12m, 24 mth contract was awarded in February, but the signed contract was then terminated for convenience by the client prior to mobilizaCon. This was due to a change in client strategy, and a pan-‐Iraq security tender will follow later this year. Olive are well placed to win this. ALiSS – Olive Group North America were part of the winning team on the US Govt contract.
Key Opportuni4es • • • •
$6.5B in proposals under evaluaCon with a book value of $237m (103 proposals submiTed YTD) Basra Gas Company – up to $235m over 3 years starCng in Q1 2016 Lukoil -‐ $90m over 3 years starCng in Q4 2015 / Q1 2016 BeechcraU -‐ $170m over 3 years starCng in Q3 2015
Business Environment •
ExploraCon budgets in East Africa have been impacted by the lower oil price. The downside has been that current projects have been scaled back and new projects have been delayed. The upside has been an environment that has enabled the oil majors to exploit cheap asset pricing and be acquisiCve, eg Shell / BG.
•
There have been no impact on the demand for Olive’s services in Iraq either from the fall in the oil price or the ongoing situaCon in Iraq. No significant events to report in Q1 in delivering 6.8m man hours of operaCons support and 4.81m kms driven
•
June 18, 2015 -‐ Business ConfidenCal
14
Integration – Olive!
•
Planning for the integraCon of Olive with Edinburgh InternaConal, and the wider Constellis Group began pre-‐closing and is well advanced.
•
We are currently 35 days into a 60 day integraCon plan to define potenCal savings and execute on those plans. A robust review and approval process is in place for each decision.
•
Over $12m of potenCal savings have been idenCfied to date, with further significant headcount savings expected. EsCmated annualized savings range of $10-‐20m is sCll relevant.
•
Decisions over staffing to be made by end of Q2, with savings flowing through in Q3 financials.
•
Savings will come from both the direct and indirect cost base, and will allow pricing to become more compeCCve.
•
In addiCon to headcount reducCons, savings will be driven by: - - - - - -
the improved use of systems and processes improved procurement methods consolidaCon of insurance policies consolidaCon of outsourced services raConalizaCon of properCes alignment of vehicles maintenance policies
June 18, 2015 -‐ Business ConfidenCal
15
Iraq Situation Update–as at mid June 2015! Turkey
Olive Group Mosul
Erbil 2% of personnel and assets
1
Erbil
Kirkuk
Syria
Bayji
Haditha
Baghdad: 8% of personnel and assets
Samara Ramadi
Rutba
Olive Group
Tikrit
Al Qaim
Iran
Sulaymaniya
2
Falluja
Baghdad
3
Jordan Saudi Arabia Iraq
Kurdish controlled (KRG) Government of Iraq controlled IS controlled (Iraq)
Syria
Syrian Kurdish controlled Syrian rebel controlled Syrian government controlled IS controlled (Syria)
Olive Group Basra Province: 90% of personnel and assets
Basra
4 Kuwait
June 18, 2015 -‐ Business ConfidenCal
1 -‐ Kurdish Regional Government integrity remains intact, external support has seen Kurdish Peshmerga forces regain large amounts of territory in the north. Commercial and diplomaCc work has resumed in Erbil. 2 -‐ Baghdad city and province remain secure from Islamic State. Iraqi forces recaptured Tikrit in April ‘15 and Bayji in June ‘15. 3 – The direct Islamic State threat to the southern (Shia) provinces is reduced to asymmetric aTacks. Islamic States ability to operate in the south remains very limited. 4 -‐ Islamic State’s reach into Basra province remains extremely limited. There has been no interrupCon to commercial operaCons in this area.
16
‘Islamic State’ under increasing pressure!
§
Islamic State are no longer in expansion mode, the organizaCon is under increasing pressure in both Iraq and Syria and has recently lost key ground in both countries, it is increasingly focused on trying to retain territory under its control.
§
A Pentagon assessment in May 2015 stated that Islamic State has lost between 25-‐30% of the territory in Iraq that they held at their peak of power in August 2014. This represents an area of between 11,000 -‐ 13,500 square kilometers.
§
Loss of territory also translates into loss of finances for the organizaCon in the form of ‘local taxes’ and the illegal sale of oil and fuel, further degrading the organizaCons ability to sustain operaCons.
§
The US led air campaign against Islamic State has significantly degraded the organizaCons ability to operate in Iraq, forcing them to modify how they operate on the ground and restricCng movement and resupply from Syria.
§
The ‘Caliph’ (leader) of Islamic State, Abu Bakr al-‐Baghdadi was severely injured by airstrikes in Mosul in March 2015, suffering a spinal injury. Several other key leaders within the organizaCon have also been killed in recent months.
June 18, 2015 -‐ Business ConfidenCal
17
Iraqi Government Gains & International Support!
§ §
The US led internaConal coaliCon conCnues to support the Iraqi government in its fight against Islamic State. Aside from air operaCons, the internaConal community conCnues to provide military advisors, trainers and logisCcal support to the Iraqi military. Iraqi military forces have been significantly strengthened by state sponsored Popular MobilizaCon Units (PMUs), drawn primarily from the civilian populaCon in southern Iraq. PMUs were instrumental in defeaCng Islamic State in Tikrit in April 2015.
§
Beside government gains in the north of Iraq, Iraqi forces have also regained control along the border with Jordan in the west, including the important Trebil border crossing point between Iraq and Jordan.
§
The unity government of Haider al-‐Abadi has been proacCve in ensuring engagement between the Sunni, Shia and Kurdish communiCes, ensuring a unified stance against Islamic State.
§
Further government gains are expected in 2015, focus will be on reclaiming the remaining areas of northern and western Iraq.
June 18, 2015 -‐ Business ConfidenCal
18
Constellis Group Pro Forma Consolidate Earnings
June 18, 2015 Business ConfidenCal
19
FY 2015 Q1 Financial Results (Constellis Group Pro Forma Consolidated)! Q1#
Q1#
2014#
2015#
$#
%#
TTM#
Revenue
$254.3
$242.1
($12.2)
(4.8%)
$1,014.1
ContribuCon Profit
$52.3
$54.0
$1.7
3.3%
$229.5
Indirect Cost
$38.6
$36.6
($2.0)
(5.2%)
$160.0
Interest
$6.0
$5.7
($0.3)
(5.0%)
$18.7
Net Income
$11.9
$12.2
$0.3
2.5%
$32.0
AEBITDA
$32.3
$32.5
$0.2
0.6%
$162.7
•
Variance to PY#
Q1 2015#
FY15 results exclude pro forma adjustment of $10M (annualized) for expected synergies on Olive acquisiCon
June 18, 2015 -‐ Business ConfidenCal
20
FY 2015 EAC (Constellis Pro Forma Combined Consolidated)! Q1#
Q2#
Q3#
Q4#
2015#
Actual#
EAC#
EAC#
EAC#
EAC#
Revenue
$243.8
$268.1
$303.8
$339.4
$1,155.1
ContribuCon Profit
$58.1
$62.1
$70.3
$79.8
$270.3
Indirect Cost
$36.6
$45.1
$35.5
$34.9
$152.1
Interest
$5.7
$10.7
$11.6
$11.6
$39.6
Net Income
$12.2
$3.2
$17.3
$26.8
$59.5
AEBITDA
$32.6
$34.3
$44.5
$56.0
$167.4
# #
•
FY15 results exclude pro forma adjustment of $10M (annualized) for expected synergies on Olive acquisiCon
June 18, 2015 -‐ Business ConfidenCal
21
QuesCons
The following discussion and analysis of the Company’s financial condiCon and results of operaCons contains “forward-‐looking statements” that reflect our future plans, esCmates, beliefs and expected performance. We cauCon that assumpCons, expectaCons, projecCons, intenCons, or beliefs about future events may, and oNen do, vary from actual results and the differences can be material. In addiCon, the following discussion includes references to non-‐GAAP measures. For more informaCon, please see the reconciliaCon aTached as an appendix and our first quarter financial report. We believe these adjusted results, in addiCon to our GAAP results, provide a good basis to assess the operaCng and financial results.
June 18, 2015 -‐ Business ConfidenCal
2
Agenda! Constellis Stand Alone! Q1 2015 Earnings Results 2015 EAC Business Update
Olive Group Stand Alone! Q1 2015 Earnings Results 2015 EAC Business Update
Constellis Group Consolidated Earnings Slides! Q1 Earnings Results 2015 EAC
Ques4ons
June 18, 2015 -‐ Business ConfidenCal
3
Constellis Stand Alone
FY 2015 Q1 Financial Results! #
Q1#
Q1#
Variance to PY#
Q1 2015#
#
2014#
2015#
$#
%#
TTM#
Revenue
$92.7
$195.2
$102.5
110.6%
$821.2
Gross Profit
$16.2
$38.8
$22.6
139.5%
$170.0
Indirect Cost
$13.3
$26.3
$13.0
97.7%
$137.3
Interest
$0.7
$5.3
$4.6
657.1%
$17.9
Net Income
$2.3
$7.9
$5.6
243.5%
$17.0
AEBITDA
$6.2
$23.9
$17.7
285.5%
$93.1
Prior Year – –
Key driver in year over year performance is the acquisiCon of Triple Canopy on July 25, 2014. This results in an across board increase to revenue, expenses, and profitability. Increases to indirect costs were parCally offset by realized synergies resulCng from the consolidaCon of support services during the integraCon of Triple Canopy.
Current Year – – –
Q1 revenue was on plan despite delays in WPS projects under TO9 (Kabul) and the startup of TO12 (Basra) Indirect expenses posiCvely reflect actual synergies realized from the TC acquisiCon AEBITDA adjustments = $0.8M ($0.5M in management fees + $0.3M in non-‐recurring costs)
June 18, 2015 -‐ Business ConfidenCal
5
FY 2015 Q1 Balance Sheets! Assets#
3/31/15#
12/31/14#
Cash
$11.1
$7.1
A/R Net
$203.0
$207.1
Inventory
$6.1
$5.9
Prepaids & Other Current
$45.2
$39.2
Total Current
$265.4
$259.3
PPE, Net
$72.1
$74.3
Intangibles
$91.8
$95.7
Goodwill
$176.7
$176.7
Deposits & Other Long-‐Term
$11.1
$12.8
Total Assets
$617.1
$618.8
Assets
– – –
#
Liabilities & Equity#
3/31/15#
12/31/14#
AP & Other Accrueds
$97.0
$108.5
Accrued CompensaCon
$37.3
$34.8
Current PorCon Long-‐Term Debt
$17.8
$17.8
Other Current LiabiliCes
$6.0
$2.8
Total Current
$158.1
$163.9
Long-‐Term Debt
$282.2
$282.5
Other Long-‐Term LiabiliCes
$21.8
$25.2
Total LiabiliCes
$462.1
$471.6
Total Equity
$155.0
$147.2
Total LiabiliCes & Equity
$617.1
$618.8
Strong cash collecCons during the quarter brought down billed A/R by $13.5M, but this was offset by an increase in unbilled related to delays in the review and issuance of contract modificaCons under WPS (i.e. DBA and new task order awards). Increase in prepaids related to new DBA policies across Constellis for which two installments were paid in Q1. Capex was nominal during Q1 at $0.3M
Liabili4es & Equity – –
AP acCvity under IDS WPS was the primary driver in the decrease in AP in Q1. IDS payments made in Q1 related to life support services, O&M providers, and a refund to DoS related to a double payment in Q4. Debt balances did not move much during the quarter as borrowing acCvity under our revolver was offset by principal payments. June 18, 2015 -‐ Business ConfidenCal
6
FY 2015 Q1 Financial Results and EAC! Forecast! Q1#
Q2#
Q3#
Q4#
2015#
Actual#
Forecast#
Forecast#
Forecast#
Forecast#
Revenue
$195.2
$219.5
$248.6
$273.4
$936.7
ContribuCon Profit
$42.9
$47.5
$53.4
$59.1
$202.9
Indirect Cost
$26.3
$35.5
$26.9
$26.4
$115.1
Interest
$5.3
$10.6
$11.6
$11.6
$39.1
Net Income
$7.9
($0.7)
$10.1
$15.9
$33.2
AEBITDA
$23.9
$25.7
$32.8
$40.1
$122.5
•
Current run rate as well as stand-‐up of recent wins & upliNs account for over 90% of forecast revenues
•
EAC reflects revised Cming of WPS life support/infrastructure projects and current pipeline of contract awards pending
•
Q4 ramp-‐up is consistent with prior years due to finalizaCon of award fees and recogniCon of revenue from current year contract awards
June 18, 2015 -‐ Business ConfidenCal
7
Revenue Bridge to 2015 EAC (Excluding Pipeline)! Additions below include increased revenue due to wins, mods & plus-ups! Q1 Actual x 4
ACADEMI AddiCons:
TC AddiCons:
Millions!
$780 •TO 9 add-‐ons
30
•XPG plus-‐ups
3.1
•CNTPO (390, 413)
3.5
•Training
6.6
•TO 12
43
•NJ FPS
3
Total Booked Revenue
Total “in hand” revenue predicted:
$869.20
Incremental Revenue
“go get” to achieve $937M of EAC revenue (supported by factored pipeline opportuniCes)
$67.50
June 18, 2015 -‐ Business ConfidenCal
8
Business Update! Key wins in Q1 • • •
WPS TO-‐12 Basra PoP Jan 15-‐Jan 19: $56M/year 4 x CNTPO Task Orders: $8M/year DHS FPS New Jersey PoP July 15-‐July 19: $6M/year
Key Opportuni4es • • •
IDIQ’s (SWMS – SOCOM $900M, AFRICAP DoS Africa Support $1.5B) MulCple pop-‐up opportuniCes in Afghanistan/Iraq of approx. $30M/year $8.7B in proposals under evaluaCon with a book value of $666m (167 proposals submiTed YTD)
Business Environment • •
Unprecedented # of Requests for Proposal from across the USG Clear indicaCons of conCnued presence in Afghanistan, increased requirements in Iraq and ME
CFO update • • • •
Top priority for the team Several well qualified candidates idenCfied and screening process is acCve and ongoing Thorough search to idenCfy the “right” candidate Sponsors are filling gaps directly as needed
Liquidity • •
Business has sufficient liquidity to fund future growth requirements AnCcipated >60% available on ABL facility by Dec. 31, 2015
• •
Management’s goal to implement group wide HSE staCsCcs by year end No significant events occurred during Q1
HSE
June 18, 2015 -‐ Business ConfidenCal
9
Olive Group Stand Alone
June 18, 2015 -‐ Business ConfidenCal
10
FY 2015 Q1 Financial Results (Olive Group)! Q1#
Q1#
2014#
2015#
$#
%#
TTM#
Revenue
$51.8
$48.6
($3.2)
(6.2%)
$194.6
ContribuCon Profit
$14.0
$15.2
$1.2
8.6%
$59.5
Indirect Cost
$8.1
$10.3
$2.2
27.2%
$36.5
Interest
$0.4
$0.4
$0.0
0.0%
$3.0
Net Income
$5.3
$4.3
($1.0)
(18.9%)
($1.0)
AEBITDA
$8.2
$8.6
$0.4
4.9%
$32.1
•
–
–
Stronger than budgeted delivery margins have supported a strong contribuCon profit, even though revenue was lower than Q1 plan. Indirect costs exceed Q1 plan due to costs incurred in expanding footprint in Africa; acCon has been taken to address this in Q2. AEBITDA adjustments = $1.4M ($1.1M subcontractors subsequently replaced + $0.3M in overhead reducCons at Newport {2014 end of year acquisiCon by OG})
Prior Year – –
Q1 2015#
Current Year –
•
Variance to PY#
The YoY decrease in revenue in Q1 was as a result of a reducCon in revenues from government and EPC clients, parCally offset by an increase in revenues from from IOCs. The main driver for the increase in overheads was the expanded operaCng footprint in Africa in Q4 2014. June 18, 2015 -‐ Business ConfidenCal
11
FY 2015 Q1 Balance Sheet! Assets#
3/31/15#
12/31/14#
# Liabilities & Equity#
3/31/15#
12/31/14#
Cash
$8.03
$12.65
AP & Other Accrueds
$28.56
$31.88
A/R Net
$45.60
$44.93
Accrued CompensaCon
$0.46
$0.46
Inventory
$2.55
$1.63
Current PorCon Long-‐Term Debt
$23.68
$22.68
Prepaids & Other Current
$27.45
$22.41
Other Current LiabiliCes
$-‐
$0.44
Total Current
$83.63
$81.62
Total Current
$52.70
$55.46
Fixed Assets
$36.87
$35.73
Long Term Debt
$2.50
$0.31
Intangibles
$1.24
$1.24
Other Long Term LiabiliCes
$-‐
$-‐
$-‐
$-‐
Total LiabiliCes
$55.20
$55.77
$3.04
$2.54
Total Equity
$69.59
$65.36
$124.79
$121.13
Total LiabiliCes & Equity
$124.79
$121.14
Goodwill Deposits & Other Long-‐Term Total Assets
•
Assets – – –
•
34 addiConal armored vehicles were purchased in Q1 to allow new projects to be mobilized in Iraq. Cash collecCon has remained strong, with only one customer with significant overdue balances. Outstanding balances have since been collected in Q2. Prepaids & other current assets has increased as Olive funded acCviCes elsewhere in the wider Olive group (ie outside of the acquired group of companies).
Liabili4es & Equity –
Debt increased in the quarter due to addiConal drawdowns to fund capex of $3.6m and cash collateralizaCon of bonds $4.5mm
June 18, 2015 -‐ Business ConfidenCal
12
FY 2015 Q1 Financial Results and EAC! #
Q1#
Q2#
Q3#
Q4#
2015#
#
Actual#
EAC#
EAC#
EAC#
EAC#
Revenue
$48.6
$48.6
$55.2
$66.0
$218.4
ContribuCon Profit
$15.2
$14.6
$16.9
$20.7
$67.4
Indirect Cost
$10.3
$9.6
$8.6
$8.5
$37.0
Interest
$0.4
$0.1
$0.0
$0.0
$0.5
Net Income
$4.3
$3.9
$7.2
$10.9
$26.3
AEBITDA
$8.7
$8.6
$11.7
$15.9
$44.9
• • • • •
Delays in award of contracts means pull-‐through of revenue will be delayed by 3-‐4 months. Current backlog (contracted, extensions, opCons) covers 92% of full year forecast. Exit rate for revenue is expected to be strong, with an annualized revenue (Q4) of $265m. Indirect costs are shown on a standalone basis and are before the synergies that will result from the integraCon of Edinburgh InternaConal. Capex of $5m on new vehicles is forecast to support the revenue growth in 2015 on contracts that are yet to be awarded.
June 18, 2015 -‐ Business ConfidenCal
13
Business Update! Key wins in Q1 • • • • • • •
•
Shell Majnoon -‐ $39m over 30 mths starCng in June 2015. Afghan airports -‐ $12m pa – 2 mth extension secured in Q1 ahead of being awarded a further 12 mth contract in Q2. Japanese Ministry of Foreign affairs – Olive were awarded contracts to provide services in Afghanistan, Nigeria and Kenya in Q1 following strong delivery in Kabul and Yemen. Kogas – awarded a global security MSA following close engagement with their senior team. Vestas – awarded a global security MSA on the back of strong performance in Africa. SoSI – several upliNs to exisCng contracts that were sole sourced to Olive. Weatherford – a $12m, 24 mth contract was awarded in February, but the signed contract was then terminated for convenience by the client prior to mobilizaCon. This was due to a change in client strategy, and a pan-‐Iraq security tender will follow later this year. Olive are well placed to win this. ALiSS – Olive Group North America were part of the winning team on the US Govt contract.
Key Opportuni4es • • • •
$6.5B in proposals under evaluaCon with a book value of $237m (103 proposals submiTed YTD) Basra Gas Company – up to $235m over 3 years starCng in Q1 2016 Lukoil -‐ $90m over 3 years starCng in Q4 2015 / Q1 2016 BeechcraU -‐ $170m over 3 years starCng in Q3 2015
Business Environment •
ExploraCon budgets in East Africa have been impacted by the lower oil price. The downside has been that current projects have been scaled back and new projects have been delayed. The upside has been an environment that has enabled the oil majors to exploit cheap asset pricing and be acquisiCve, eg Shell / BG.
•
There have been no impact on the demand for Olive’s services in Iraq either from the fall in the oil price or the ongoing situaCon in Iraq. No significant events to report in Q1 in delivering 6.8m man hours of operaCons support and 4.81m kms driven
•
June 18, 2015 -‐ Business ConfidenCal
14
Integration – Olive!
•
Planning for the integraCon of Olive with Edinburgh InternaConal, and the wider Constellis Group began pre-‐closing and is well advanced.
•
We are currently 35 days into a 60 day integraCon plan to define potenCal savings and execute on those plans. A robust review and approval process is in place for each decision.
•
Over $12m of potenCal savings have been idenCfied to date, with further significant headcount savings expected. EsCmated annualized savings range of $10-‐20m is sCll relevant.
•
Decisions over staffing to be made by end of Q2, with savings flowing through in Q3 financials.
•
Savings will come from both the direct and indirect cost base, and will allow pricing to become more compeCCve.
•
In addiCon to headcount reducCons, savings will be driven by: - - - - - -
the improved use of systems and processes improved procurement methods consolidaCon of insurance policies consolidaCon of outsourced services raConalizaCon of properCes alignment of vehicles maintenance policies
June 18, 2015 -‐ Business ConfidenCal
15
Iraq Situation Update–as at mid June 2015! Turkey
Olive Group Mosul
Erbil 2% of personnel and assets
1
Erbil
Kirkuk
Syria
Bayji
Haditha
Baghdad: 8% of personnel and assets
Samara Ramadi
Rutba
Olive Group
Tikrit
Al Qaim
Iran
Sulaymaniya
2
Falluja
Baghdad
3
Jordan Saudi Arabia Iraq
Kurdish controlled (KRG) Government of Iraq controlled IS controlled (Iraq)
Syria
Syrian Kurdish controlled Syrian rebel controlled Syrian government controlled IS controlled (Syria)
Olive Group Basra Province: 90% of personnel and assets
Basra
4 Kuwait
June 18, 2015 -‐ Business ConfidenCal
1 -‐ Kurdish Regional Government integrity remains intact, external support has seen Kurdish Peshmerga forces regain large amounts of territory in the north. Commercial and diplomaCc work has resumed in Erbil. 2 -‐ Baghdad city and province remain secure from Islamic State. Iraqi forces recaptured Tikrit in April ‘15 and Bayji in June ‘15. 3 – The direct Islamic State threat to the southern (Shia) provinces is reduced to asymmetric aTacks. Islamic States ability to operate in the south remains very limited. 4 -‐ Islamic State’s reach into Basra province remains extremely limited. There has been no interrupCon to commercial operaCons in this area.
16
‘Islamic State’ under increasing pressure!
§
Islamic State are no longer in expansion mode, the organizaCon is under increasing pressure in both Iraq and Syria and has recently lost key ground in both countries, it is increasingly focused on trying to retain territory under its control.
§
A Pentagon assessment in May 2015 stated that Islamic State has lost between 25-‐30% of the territory in Iraq that they held at their peak of power in August 2014. This represents an area of between 11,000 -‐ 13,500 square kilometers.
§
Loss of territory also translates into loss of finances for the organizaCon in the form of ‘local taxes’ and the illegal sale of oil and fuel, further degrading the organizaCons ability to sustain operaCons.
§
The US led air campaign against Islamic State has significantly degraded the organizaCons ability to operate in Iraq, forcing them to modify how they operate on the ground and restricCng movement and resupply from Syria.
§
The ‘Caliph’ (leader) of Islamic State, Abu Bakr al-‐Baghdadi was severely injured by airstrikes in Mosul in March 2015, suffering a spinal injury. Several other key leaders within the organizaCon have also been killed in recent months.
June 18, 2015 -‐ Business ConfidenCal
17
Iraqi Government Gains & International Support!
§ §
The US led internaConal coaliCon conCnues to support the Iraqi government in its fight against Islamic State. Aside from air operaCons, the internaConal community conCnues to provide military advisors, trainers and logisCcal support to the Iraqi military. Iraqi military forces have been significantly strengthened by state sponsored Popular MobilizaCon Units (PMUs), drawn primarily from the civilian populaCon in southern Iraq. PMUs were instrumental in defeaCng Islamic State in Tikrit in April 2015.
§
Beside government gains in the north of Iraq, Iraqi forces have also regained control along the border with Jordan in the west, including the important Trebil border crossing point between Iraq and Jordan.
§
The unity government of Haider al-‐Abadi has been proacCve in ensuring engagement between the Sunni, Shia and Kurdish communiCes, ensuring a unified stance against Islamic State.
§
Further government gains are expected in 2015, focus will be on reclaiming the remaining areas of northern and western Iraq.
June 18, 2015 -‐ Business ConfidenCal
18
Constellis Group Pro Forma Consolidate Earnings
June 18, 2015 Business ConfidenCal
19
FY 2015 Q1 Financial Results (Constellis Group Pro Forma Consolidated)! Q1#
Q1#
2014#
2015#
$#
%#
TTM#
Revenue
$254.3
$242.1
($12.2)
(4.8%)
$1,014.1
ContribuCon Profit
$52.3
$54.0
$1.7
3.3%
$229.5
Indirect Cost
$38.6
$36.6
($2.0)
(5.2%)
$160.0
Interest
$6.0
$5.7
($0.3)
(5.0%)
$18.7
Net Income
$11.9
$12.2
$0.3
2.5%
$32.0
AEBITDA
$32.3
$32.5
$0.2
0.6%
$162.7
•
Variance to PY#
Q1 2015#
FY15 results exclude pro forma adjustment of $10M (annualized) for expected synergies on Olive acquisiCon
June 18, 2015 -‐ Business ConfidenCal
20
FY 2015 EAC (Constellis Pro Forma Combined Consolidated)! Q1#
Q2#
Q3#
Q4#
2015#
Actual#
EAC#
EAC#
EAC#
EAC#
Revenue
$243.8
$268.1
$303.8
$339.4
$1,155.1
ContribuCon Profit
$58.1
$62.1
$70.3
$79.8
$270.3
Indirect Cost
$36.6
$45.1
$35.5
$34.9
$152.1
Interest
$5.7
$10.7
$11.6
$11.6
$39.6
Net Income
$12.2
$3.2
$17.3
$26.8
$59.5
AEBITDA
$32.6
$34.3
$44.5
$56.0
$167.4
# #
•
FY15 results exclude pro forma adjustment of $10M (annualized) for expected synergies on Olive acquisiCon
June 18, 2015 -‐ Business ConfidenCal
21
QuesCons
