Geared for Growth
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2017 Annual Report Geared for growth Building what matters Financial highlights 2 President’s message 4 Leadership team 7 Chairman’s message 8 Board of directors 9 Scorecard 10 2017 highlights 12 Offering and services 14 Company structure 16 Capital 17 Infrastructure 18 Power 20 Oil & Gas 22 Mining & Metallurgy 24 Atkins 26 New configuration 28 2017 Management’s discussion and analysis 29 Information for shareholders 222 Values that guide us The benefits we bring Our values are the essence of our For over 100 years, we’ve been company’s identity. They represent developing and delivering the right how we act, speak and behave together, projects to our clients and their and how we engage with our clients customers. Our effective execution and stakeholders. strategies allow us to expertly manage project risk and ensure our clients’ Safety return on investment. Today, we’re We put safety at the heart of everything we do, recognized for our sustainable project to safeguard people, assets and the environment. execution and tangible contributions Integrity to improving people’s lives around We do the right thing, no matter what, and are accountable for our actions. the world. Collaboration We work together and embrace each other’s unique contribution to deliver amazing results for all. Helping build what Innovation matters in communities We redefine engineering by thinking boldly, proudly and differently. around the world. The Pierre Lassonde pavilion of the Musée national des beaux-arts du Québec – Canada SNC-Lavalin 2017 Annual Report 1 Financial highlights 2017 revenues BY BY INDUSTRY GEOGRAPHIC SEGMENT AREA 36% Oil & Gas 14% Power 52% Americas 14% Asia-Pacific Mining & Middle East Infrastructure Europe 23% 5% Metallurgy 23% & Africa 11% 19% Atkins 3% Capital SNC-Lavalin is a partner of the Signature on the Saint Lawrence consortium responsible for the design, construction, and operations and maintenance of the New Champlain Bridge Corridor Project under a public-private partnership with the Government of Canada. Photo credit: Infrastructure Canada 2 New Champlain Bridge Corridor Project – Canada Net income attributable Adjusted consolidated to SNC‑Lavalin shareholders diluted EPS (IN MILLIONS CA$) (IN CA$) 17 382.0 17 3.20 16 255.5 16 2.58 15 404.3 15 2.42 14* 1,320.7 1,333.3 14 2.46 13 35.8 13 0.74 * Includes a net gain of $1,320.7 on disposal of AltaLink Revenues Dividends (IN BILLIONS CA$) (IN CA$) 17 9.3 17 1.106 16 8.5 16 1.053 15 9.6 15 1.01 14 8.2 14 0.97 13 7.9 13 0.93 SNC-Lavalin 2017 Annual Report 3 President’s message Geared for growth Last year was an extraordinary one at SNC‑Lavalin. We continued to deliver against our strategic objectives, strengthened our business and resolved a number of legacy issues. We also concluded the biggest and most transformative acquisition in our 106‑year history by bringing Atkins into the SNC‑Lavalin family. I’m extremely proud of the teamwork, rigour and efficiency that enabled us to complete successfully one of our industry’s largest transactions. Acquiring and integrating Atkins, a respected powerhouse in design, Delivering on our strategy engineering and project management, reshapes our organization, expands our capabilities and makes us a true global player. It We made significant progress against our strategy of achieving reinforces our position in higher margin market segments while Operational Excellence, building a client‑centric organization, a placing us among the world’s leading fully integrated professional performance‑driven culture, and delivering both business growth services and project management companies. The acquisition and shareholder returns. also represents a pivotal next step toward achieving the next phase Ensuring people’s safety in our offices and at our project sites of our growth agenda—Vision 2020. is central to sustaining this progress. It also lies at the heart of any high‑performing culture. Two years ago, we launched Perfect From strength to strength Days to remind us to reset our attention on safety, security and the environment on a daily basis. In 2017, this reminder helped us Our financial performance figures prominently among last year’s achieve 41 days free of any safety, security and environmental accomplishments. The persistent efforts of our 50,000 employees incident across our entire organization—11 days over target and enabled us to achieve results within our annual earnings guidance 14 days more than in 2016. Despite growing our workforce by and better position the company for longer term success. 50% last year, we intend to deliver more than 45 Perfect Days In 2017, our net income attributable to SNC‑Lavalin shareholders in 2018. reached $382 million, or $2.34 per diluted share, a 50% increase Culture is another powerful lever for energizing employees and compared to 2016. Our year‑over‑year adjusted net income from achieving results. In 2017, we rolled out our first Company Culture engineering and construction (E&C) grew by 55% to $351 million Survey to sharpen our focus on excellence, attracting and retaining or $2.15 per diluted share. We maintained our investment top talent, and long‑term performance and growth. The survey’s grade credit rating and secured a diversified revenue backlog findings are helping us implement targeted initiatives to build a of $10 billion at year‑end that leaves us well‑positioned for the more collaborative and client‑centric organization. year ahead. Today, I see many more employees going the extra mile to We also returned approximately $178 million to shareholders thoroughly understand clients’ needs and improve delivery. through dividends. In February 2018, our long‑term outlook, Employees are continuing to embrace Operational Excellence liquidity and revenue backlog enabled us to raise our quarterly to drive efficiencies across our businesses. dividend by 5%. This represents the 17th consecutive year of a dividend increase. 4 “I’m extremely proud of our teamwork, rigour and efficiency.” SNC-Lavalin 2017 Annual Report 5 President’s message Our sectors in 2017 By bringing Atkins into the fold, we’ve created a compelling life‑ of‑asset offering with deep technological expertise that’s geared Last year, we completed several challenging contracts, won for greater project and technical complexity across higher important projects in all our sectors and are currently shortlisted margin businesses. We’re now one of the world’s few professional for a number of megaprojects around the world. services and project management companies able to take on Our Infrastructure sector, which includes our industry‑leading large, multi‑billion projects from concept to reality. rail & transit division, generated consistent results and achieved To leverage our expanded capabilities in markets with strong a significant turnaround in performance. We’re now equipped growth opportunities, we began 2018 with an enhanced global to bid and deliver much more efficiently and profitably than ever structure. I’m confident that our new Nuclear, Clean Power before. We’re also well‑positioned to support the Government and Engineering, Design and Project Management sectors will of Canada’s expected $180‑billion investment in infrastructure enable us to better seize these opportunities and serve our over the next decade. clients worldwide. In Power, our hydroelectric and nuclear energy strength was broadened by Atkins’ global expertise in nuclear engineering Ready for the future maintenance, decommissioning and waste management. In We’re determined to make the most of what we consider to addition, new capabilities in renewable energy, including offshore be a very bright future. Launched in February 2018, our new wind, gave us a full project lifecycle service offering. To optimize corporate vision—to strive to be the premier engineering solutions these enhanced capabilities, we refocused Power into separate partner, committed to delivering complex projects from vision Nuclear and Clean Power sectors in January 2018. to reality for a sustainable lifespan—reflects this determination. In an industry facing well‑documented challenges, our Oil & Gas So does our strong digital technology focus, which includes sector increased its earnings before interest and taxes by 32% in harnessing the innovative power of artificial intelligence, to better 2017. We leveraged our top‑tier customer relationships, expanded meet client needs. We’ll continue to build our digital expertise our addressable market and developed innovative technical and organically and through strategic acquisitions. commercial solutions for clients. Today, we’re competing with a greater sense of purpose and We also worked to mitigate the mining industry’s cyclical nature strength. Our robust backlog, high‑quality and diversified pipeline, by diversifying our Mining & Metallurgy offering. We grew our better service mix and extensive digital expertise point to a wealth sustaining capital business by helping mining clients maximize of opportunities ahead. They also bolster our ability to achieve their operations’ output. Despite a slower than anticipated market our growth agenda and an adjusted consolidated earnings per recovery, we’re well‑positioned to build on opportunities in 2018. share of $5 by 2020. Through Capital, our investment and asset management division, The coming year is about delivering on the tremendous we explored and continue to explore selective equity investments potential of our platform across all business units, including to drive growth and improve our financial returns. Our overriding nuclear, renewable energy and rail & transit. At SNC‑Lavalin, objective is to optimize our deal flow across the asset lifecycle, we’re more ready than ever. from initial investment in capital projects to holding assets throughout their life until maturity. Geared for growth At SNC‑Lavalin, we’ve taken systematic steps to build an efficient platform to support our ambitious growth agenda. We divested Neil Bruce some non‑core and low‑growth businesses, further de‑risked President and Chief Executive Officer our business model and applied tighter governance mechanisms to proactively manage our project portfolio.