# Petrofac Limited Good results that reflect solid execution and excellent progress - Link: https://www.directorstalkinterviews.com/petrofac-limited-good-results-that-reflect-solid-execution-and-excellent-progress/412768283 - Published: 2019-02-28T07:57:05+00:00 - Author: Charlotte Edwards **Petrofac Limited** (LON:PFC), today announced results for the year ended 31 December 2018 · Solid operational performance in all our businesses · Business performance net profit (1)(2) down 2% to US$353 million · Reported net profit (2) of US$64 million post impairments and exceptional items · New order intake (3) of US$5.0 billion; backlog (4) of US$9.6 billion at 31 December 2018 · Net debt eliminated; net cash of US$90 million · Full year dividend of 38.0 cents per share | | Year ended 31 December 2018 | Year ended 31 December 2017* | | US$m | Businessperformance | Exceptional items and certain re-measurements | Reported | Businessperformance | Exceptional items and certain re-measurements | Reported | | Revenue | 5,829 | – | 5,829 | 6,395 | – | 6,395 | | EBITDA | 671 | n/a | n/a | 748 | n/a | n/a | | Net profit/(loss)^((2)) | 353 | (289) | 64 | 361 | (390) | (29) | * Re-presented due to the reclassification of an item from exceptional items and certain re-measurements to business performance as set out in note 6 to the consolidated financial statements. > **Ayman Asfari, Petrofac’s Group Chief Executive, commented:** > “Petrofac has reported good results that reflect solid execution and excellent > progress delivering our strategy. > “Healthy new order intake reflects our strong competitive position. Furthermore, > operational excellence has protected margins and maintained good progress delivering > our project portfolio. Our results have also benefitted from the sale of non-core > assets as we transition back to a capital light business. Together, these have > returned Petrofac to a net cash position well ahead of schedule. > “Looking forward, we are well-positioned for 2019 with good revenue visibility. > Whilst we have a busy tendering pipeline and are well-placed on a number of bids, > there is a higher degree of uncertainty in the level of awards in the near-term. > We are nevertheless targeting a book to build of greater than one. Our management > and people remain resolutely focused on best-in-class delivery for clients, positioning > the business for growth and enhancing returns.” > Petrofac Chairman René Médori said: “The Board commends Ayman and his management > team for delivering another excellent set of results in challenging circumstances. > This reflects their clear, unwavering focus on delivering for our clients and > maintaining operational excellence, whilst continuing to engage with the SFO.” **DIVISIONAL HIGHLIGHTS** Engineering & Construction (E&C) Solid results reflecting project phasing and mix · High level of activity with 213 million manhours worked, down 2% year-on-year · US$3.8 billion of new order intake, including US$1.9 billion of awards in growth markets · Many projects commissioned or nearing completion o Alrar and Reggane projects in Algeria commissioned o Lower Fars Heavy Oil, Manifold Group Trunkline and KNPC Clean Fuels projects in Kuwait in pre-commissioning or phased hand-over o Achieved major milestone on Upper Zakum with the oil facility ready for start up o Jazan tank farms, Fadhili sulphur recovery plant and RAPID projects nearing completion o Topside platform successfully installed in North Sea on Borwin 3 offshore wind project · Revenue of US$4.1 billion, down 15% primarily due to project phasing · Net margin down 0.5 ppts to 7.0%, largely reflecting project mix and cost overruns · Net profit down 21% to US$285 million · Completed disposal of JSD6000 installation vessel (90%) Engineering & Production Services (EPS) Good results largely driven by EPCm growth · US$1.2 billion of new order intake, predominantly in the UK, Oman, Turkey and Iraq · Revenue of US$1.5 billion, up 6% o Lower brownfield project activity o Operations broadly flat year-on-year o Strong growth in EPCm projects reflecting new awards and project phasing · Net margin unchanged at 6.5% with lower overheads offset by higher tax and minority interests · Net profit up 7% to US$96 million Integrated Energy Services (IES) Return to profit driven by production mix and higher oil prices · Revenue of US$282 million, up 24% (up 33% excluding asset sales) o Equity production up 47% to 3.7 mmboe (net) o Higher average realised price (5) of US$59/boe (2017: US$52/boe) o Lower revenue from PECs post Santuario migration · EBITDA up 65% to US$160 million (up 66% excluding asset sales) o Strong growth in contribution from equity production o Higher net cost recovery from Magallanes & Arenque PECs · Net profit increased to US$39 million (2017: US$21 million net loss) · Completed sales of Chergui (100%), Mexican operations (49%) and Greater Stella Area (100%), with further contingent and deferred payments expected over the next few years **EXCEPTIONALS AND CERTAIN RE-MEASUREMENTS** The reported net profit of US$64 million was impacted by exceptional items and certain re-measurements of US$289 million (US$207 million was recognised in the first half of the year), of which approximately US$265 million were non-cash items: · Asset sales during 2018 triggered US$196 million (post-tax) of non-cash exceptional items in relation to the JSD6000 installation vessel, a 49% interest in our Mexican operations, the Chergui concession and the Greater Stella Area development; · A downward fair value adjustment of US$43 million (post-tax) due to uncertainty concerning the timing and outcome of migration of the Pánuco PEC to a PSC and consequently whether the contingent consideration pay out conditions will be achieved; and, · Other exceptional net items of US$50 million (post-tax), including onerous leasehold property provisions of US$18 million. As a result of the asset sales during the year, the carrying value of the IES portfolio( 6) at 31 December 2018 decreased to US$0.5 billion (2017: US$1.0 billion). **NET CASH/(DEBT) AND LIQUIDITY** We ended the year with net cash of US$90 million at 31 December 2018 (2017: US$612 million net debt), benefiting from better than expected working capital inflows at the year-end, lower capital expenditure and US$506 million of net divestment proceeds (7). The Group retained strong liquidity of US$1.9 billion at 31 December 2018 (2017: US$1.6 billion). **DIVIDEND** The Group’s dividend policy targets a dividend cover of between 2.0x and 3.0x business performance net profit. In line with this policy, the Board is proposing a final dividend of 25.3 cents per share (2017: 25.3 cents). The final dividend will be paid on 24 May 2019 to eligible shareholders on the register at 26 April 2019 (the‘ record date’). Shareholders who have not elected to receive dividends in US dollars will receive a sterling equivalent. Shareholders can elect by close of business on the record date to change their dividend currency election. Together with the interim dividend of 12.7 cents per share (2017: 12.7 cents), this gives a total dividend for the year of 38.0 cents per share (2017: 38.0 cents). Dividends paid in 2018 were covered by free cash flow. **OUTLOOK** The Group is well-positioned with an order backlog of US$9.6 billion at 31 December 2018 (2017: US$10.2 billion) and US$5.3 billion of secured revenue for 2019. Share on: