Download Middle East - Interserve

Interserve in the Middle East
December 2010
The Middle East in context
Revenue & margin progression,
2004 – H1 2010
Contribution to Group
operating profit*
£350m
Rest of World
8%
12%
£300m
10%
£250m
8%
Middle East &
Africa
35%
£200m
UK
57%
6%
£150m
4%
£100m
2%
£50m
* Analysis based on proportion of H1 2010 total operating
profit before group services
£0m
0%
2004
2005
2006
Revenue
2007
2008
2009* H1 2010*
Margin (profit after tax)
* Qatar tax reported at associate level from 2009
onwards, offset by lower Group tax charge
The Middle East has grown to become a major
driver of Interserve’s business
2 The Trusted Partner
Key messages - Middle East
• We have a long & successful trading record across the region
• Our business is well diversified, by geography & activity
• Region provides excellent example of how Interserve is developing
• Cash collection remains robust
• Good potential for continued medium-term growth, albeit current
activity levels are below recent highs
3 The Trusted Partner
Middle East overview
Geographic exposure
Saudi Arabia
4%
Oman
10%
Other
7%
Dubai
11%
Abu Dhabi
11%
Qatar
57%
Sector exposure
Industrial
14%
Residential
10%
Activity exposure
Leisure
Equipment hire
32%
11%
Construction
53%
Commercial
Infrastructure
45%
20%
Services
15%
4 The Trusted Partner
Current market environment
Tendering and work-winning
• High levels of tendering activity across the region, though speed and rate
of conversion into orders below historic highs as clients re-tender contracts
• Nevertheless, future workload above levels of a year ago
Liquidity
• Level of debtors in region has reduced from early 2009 levels
• Continuing to work closely with clients, debt recovery will remain an area
of significant focus
• Have accommodated increased debt provisioning within strong trading
results
5 The Trusted Partner
Positive outlook
•
Good medium-term growth prospects for the region
•
Interserve is expanding both service offering & geographical
footprint to capture more of the opportunity in the region
•
•
Support Services
•
Saudi Arabia
•
Libya
Expect increasing competition but margins to remain attractive
relative to levels in developed markets
The Middle East is set to remain a major driver of
Interserve’s business in the future
6 The Trusted Partner
Regional Economy in Context
Economic outlook vs. rest of world
Real GDP Growth (%)
2007
2008
2009
2010
2011
2012
2013
Qatar
UAE
Oman
Saudi Arabia
Oil price assumptions ($/bbl)
14.0
5.2
7.7
3.3
69
15.0
7.4
13.0
5.7
94
7.7
-3.0
1.4
0.4
60
15.2
4.9
3.6
2.6
77
10.3
4.0
2.4
2.5
80
6.7
4.4
2.9
2.7
85
3.8
4.0
2.9
3.7
90
USA
Eurozone
Japan
China
World
2.1
2.7
2.3
13.0
4.1
0.4
0.7
-0.7
9.0
2.1
-2.6
-4.0
-5.2
8.7
-1.7
2.6
1.6
2.9
9.7
3.8
1.6
1.5
0.9
7.5
3.0
2.3
1.9
1.2
8.6
3.6
2.3
2.0
1.3
7.6
3.7
2007
2008
2009
2010
2011
2012
2013
12.7
9.5
0.2
12.3
10.6
8.8
1.2
27.7
7.6
-1.1
-0.1
-6.2
12.7
7.2
9.4
5.0
11.9
8.3
8.3
4.2
10.4
10.1
7.9
4.8
9.0
9.2
7.3
5.2
Fiscal Balance (% of GDP)
Qatar
UAE
Oman
Saudi Arabia
Source: Business Monitor International, Q4 2010
8 The Trusted Partner
Qatar - our largest Middle East market
Major presence for over
10 years
Extensive range of activities
Highest GDP per capita
in world
World’s 3rd largest gas reserves
Interserve’s businesses in Qatar
Engineering &
fabrication services
Construction
Mechanical &
electrical services
Equipment hire
Training
9 The Trusted Partner
Qatar economic drivers
• Oil & gas sector contributes c. 60% of GDP
―
―
―
Heavy investment to increase LNG production expected through to 2012
Forward LNG production pre-sold through long-term contracts (i.e. demand-led investment)
Support & maintenance of infrastructure required beyond this
2006
2007
2008
2009
2010
2011
RasGas
16.0
20.7
20.7
28.5
36.3
36.3
QatarGas
9.9
9.9
9.9
25.5
33.3
41.1
25.9
30.6
30.6
54.0
69.6
77.4
Qatar LNG production
Million tonnes per annum
Total
• Government investment in infrastructure as part of Qatar National
Vision 2030
―
―
State-funded infrastructure projects (port, airport, rail system, utilities & water systems etc)
Development of education & science sectors as hubs for region (e.g. Education City)
• Strong fiscal position, large balance of payments surpluses expected to
persist
―
2010/2011 Budget based on $55/bbl oil price, so surplus now likely in 2010/2011 even after allowing
for record level of government spending (targeting completion of major infrastructure projects)
10 The Trusted Partner
Qatar – major project examples
Project Title
Client
Approx.
Value
Approx.
Timetable
National Rail System
Qatar Railways Development Company
US$ 17bn
na
New Doha International Airport
Civil Aviation Authority
US$ 9bn
2005 – 2014
New Doha Port
Higher Committee for the Coordination &
Pursuance Executive Council
US$ 7bn
2010 – 2014
Lusail Development
Lusail Real Estate Development Company
US$ 5.5bn
2011 – 2018
Heart of Doha
Dohaland
US$ 5.5bn
2010 – 2016
The Pearl Qatar
United Development Company
US$ 5bn
2006 – 2012
Ras Girtas Power & Water Plant
Ras Girtas Company
US$ 3.8bn
2009 – 2011
Al Wa’ab City
Nasser Bin Khaled & Sons Holding Company
US$ 3.2bn
2006 – 2011
Entertainment City
Abu Dhabi Investment House
US$ 3bn
2010 – 2015
Doha Metro
Ministry of Communications & Transport
US$ 3bn
2011 – 2015
Qatar – Bahrain Causeway
Public Works Authority
US$ 4bn
2010 - 2015
(Phase 1)
Source: BMI Qatar Infrastructure Report Q4 2010, Construction Week
11 The Trusted Partner
UAE economic drivers
• Economic outlook stabilising: rebound in oil prices set to see UAE return
to growth in 2010 after contraction in 2009, and expect balanced budget
in 2010. Oil price remains most important growth driver
• Sept 10 announcement that Dubai World has reached an agreement with
creditors to restructure its debt was a welcome development, but much
debt restructuring still to be completed (e.g. Nakheel sukuk bond
issuance still awaited) and confidence remains fragile in Dubai
• Nevertheless, economic activity in Dubai appears to have troughed,
though likely to be many years before returns to prior levels
• Abu Dhabi now main engine for growth given it enjoys 90% of the UAE’s
oil wealth, though emirate keen to avoid becoming another Dubai and is
taking a more conservative approach to its development
12 The Trusted Partner
Oman economic drivers
• 2010: Govt had forecast a budget deficit of RO 800m forecast, c. 3% of
GDP, for 2010 but set to turn in a surplus on higher than budgeted oil
price (budget estimate was US$50/barrel)
• 2011: Budget based on oil price of US$55/barrel, government
investment set to rise 11% yoy in 2011 (after record year of investment
in 2010)
• Economy highly dependent on oil production and prices – oil production
comprises c. 70% of national income – so government keen to diversify
economy, providing impetus to spending on power, transport & tourism
13 The Trusted Partner
Construction
Qatar - Gulf Contracting
•
•
Based in Doha, JV established in 1996
with Al Darwish United, one of Qatar’s
major construction companies since its
formation in 1976 (Interserve 49%: Al
Darwish 51%)
Principally operates as building and
civil engineering contractor to large
blue-chip international clients, plus:
― Designs & manufactures market leading
“Spacemaker” prefabricated buildings.
― Al Manjara joinery carries out fit-outs
for banks, hotels and palace.
― Also Interior Fit-Outs division called
Interspace.
•
No of employees: c. 8,000
•
Revenues: c. QAR 1.4bn
Turnover by Activity
Residential
Oil & Gas
11%
26%
Commercial
17%
Industrial
12%
Utilities
34%
Key Customers:
•
•
•
•
•
•
•
•
Siemens
Nakilat
Areva
Qatar Airways
Marubeni
Punj Lloyd
Trags
HSBC
15 The Trusted Partner
UAE - Khansaheb Civil Engineering JV
•
•
Khansaheb Civil Engineering was
the first engineering contractor in
the UAE, founded in 1935 and
based in Dubai. Interserve been in
partnership with Khansaheb since
1981 (Interserve 45%: Khansaheb
55%)
Key clients include:
―
―
―
―
•
Turnover by Activity
Residential
Leisure
1%
Commercial
27%
26%
Majid Al Futtaim
Easa Al Gurg
Ducab
TDIC
Also delivering FM contracts,
leveraging UK expertise and local
knowledge/contacts
•
Moving into Abu Dhabi, market
with significant potential, though
taking time to pick up
•
No of employees: c. 7,500
•
Revenues: c. AED 1.2bn
Infrastructure
Retail
14%
6%
Transport
Industrial
2%
24%
16 The Trusted Partner
Oman - Douglas OHI JV
•
•
•
Based in Oman, a JV
established in 1981 with Oman
Holdings International
(Interserve 49%: OHI 51%)
Expertise in oilfield activities,
power station & water
desalination projects
Key customers:
―
―
―
―
Renaissance Services
Occidental
Ministry of Justice
Al Hosn Investments
•
No of employees c. 3,900
•
Revenue: c. RO 50m
Turnover by Activity
Residential
8%
Leisure
20%
Commercial
24%
Oil & Gas
14%
Government
Industrial
16%
18%
17 The Trusted Partner
Services
Serving the vast, growing Middle East
petrochemical industry
Qatar
•
World’s 3rd largest natural gas reserves (330
year reserve life), world’s leading LNG
•
producer
Gas production set to rise from 107bcm to 180
bcm pa from 2009 to 2019
Oman
•
Govt targeting increase in oil production from
870k b/d in 2010 to 1m b/d in 2015
Abu Dhabi
•
•
Geographic expansion opportunity
Oil production to rise from 2.65mn b/d to
3.5mn b/d from 2009 to 2019, alongside
increase in gas production from 50bcm pa to
120bcm pa over same period
19 The Trusted Partner
Qatar - Madina Group
•
Madina Group formed in 1997,
Interserve took 49% stake June 2007
•
Operates through four subsidiaries:
―
―
―
―
Madina WLL – design, engineering &
fabrication services
Qatar International Safety Centre
Qatar Inspection Services
Severn Glocon – sale & R&M of control valves
•
Principal markets: oil & gas,
engineering process industry
•
Service provision: 50% new build, 50%
R&M
•
No of employees: c. 1,400
•
Revenues: c. QAR 265m
Turnover by Activity
Petrochemical
Gas
5%
Other
6%
18%
Offshore
71%
Key Customers:
•
•
•
•
•
•
Maersk
ExxonMobil
Shell
RasGas
Qatar Petroleum
Oryx
20 The Trusted Partner
Contract example
- Qatar Shell GTL project
Shell’s largest GTL project in the world at Ras Laffan, Qatar
•
•
5 year, £30m services contract
The provision of qualified personnel to deliver training
programs for the Shell Pearl GTL Project
•
Managing a purpose-built & fully resourced central training
facility
•
Programs cover health, safety, vocational environment &
management training
•
•
•
100,000+ personnel passed through the training centre to-date
Subsequently added infrastructure maintenance contract
Opportunity to grow with major international client
21 The Trusted Partner
Qatar - How United Services
Turnover by Activity
•
•
49% Interserve: 51% Al
Darwish United
Principal business is
provision of mechanical &
electrical services to the
construction industry,
including provision of new
build, maintenance and
post contract support.
•
Principal markets: banking,
infrastructure, residential
•
No of employees: c. 1,000
•
Revenues: c. QAR 120m
Residential
Oil & Gas
20%
8%
Infrastructure
Commercial
23%
4%
Industrial
3%
Banking
Transport
36%
6%
Key Customers:
•
•
•
•
•
Gulf Contracting
ExxonMobil
Qatar Cool
HSBC
Salam Industries
22 The Trusted Partner
Oman – OTI
•
•
Based in Oman, OTI provides
professional training and consultancy
services and was established in 1992.
The joint acquisition by OHI and
Interserve was completed in June 2010
(Interserve 49%: OHI 51%)
OTI currently specialises in:
― Health, Safety & the Environment (HSE)
― Business, Leadership & Language (BLL)
― Defensive Driving Courses (DCC)
•
Key customers:
―
―
―
―
Galfar Engineering
Oman LNG
Ministry of Education
Petroleum Development of Oman
•
No of employees c. 40
•
Revenue: c. RO 1m
Turnover by Activity
Other
BLL
13%
10%
HSE
52%
DDC
25%
23 The Trusted Partner
Middle East FM market
• Less mature market
Middle East FM opportunity pipeline
£300m total life
8%
• Relationship development
14%
Secured
42%
Bidding
Pre‐qualify
• Limited competition
20%
• Attractive margins
Pipeline
Long‐term
16%
24 The Trusted Partner
Middle East Support Services – Our USP
Local Partner Associate Companies
• Infrastructure
• 20,000 employees
• Reputation
• Local Relationships/Understanding
25 The Trusted Partner
Equipment Services
RMD Kwikform Middle East
•
•
Over 30 years trading in the
region
Provides formwork, falsework and
access solutions to contractors
• Estimated market shares: Oman
29%, Bahrain 34%, Qatar 14%, UAE 7%
•
Saudi Arabia start-up in 2H 2009
•
No of employees: c. 350
•
Revenue: c. £70m
27 The Trusted Partner
Saudi Arabia – growth opportunity
General
• Company registered 2H 2009
• Sponsor: Badr Al Mutlaq Group
Rationale for Entry
• Growth market
• Oligopoly
• Old fashioned products & services
• Poor service levels
Saudi
Arabia
Capital:
Riyadh
Population: 28.69m
GDP:
c. $500bn
GDP Growth: c.4%
Al Mutlaq Group
• Established 1954
• RMD Kwikform’s sponsor in Saudi Arabia
• Operates in a variety of sectors including
real estate, retail and manufacturing
28 The Trusted Partner
Saudi Arabia economic drivers
Expansionary fiscal policy
• On back of recovering oil prices in 2010 government now expecting a budget
surplus in 2010 and has subsequently approved a record budget for government
investment in 2010/11
• The Ninth Development Plan for the Kingdom of Saudi Arabia, announced in
August 2010, sets out to invest SAR1,444bn (US$385bn) between 2010 and 2014
• Main focus of government investment is infrastructure, particularly transport
(railways, airports & ports) & independent water and power plants (IWPP’s)
Major Growth Drivers
• Demographics – around 66% of the population is less than 25 years old
• Eastern Province:
― Oil-related work
•
Central Province:
― Government
― Education
― Residential developments
•
Western Province:
― Islamic tourism & associated hotels/hospitality
― Airport, roads
29 The Trusted Partner
Key messages - Middle East
• We have a long & successful trading record across the region
• Our business is well diversified, by geography & activity
• Region provides excellent example of how Interserve is developing
• Cash collection remains robust
• Good potential for continued medium-term growth, albeit current
activity levels are below recent highs
30 The Trusted Partner
Investor relations contact:
Matt Jones, Head of Investor Relations
0118 960 2280
[email protected]