Subsea 7 S.A. Announces Fourth Quarter and Full Year 2023 Results
Luxembourg – 29 February 2024 –
Subsea 7 S.A. (Oslo Børs: SUBC, ADR: SUBCY, ISIN: LU0075646355, the
Company) announced today results of Subsea7 Group (the Group,
Subsea7) for the fourth quarter and full year which ended 31
December 2023. Unless otherwise stated the comparative period is
the full year which ended 31 December 2022.
Fourth quarter and full year highlights
- At least $1 billion
of shareholder returns over four years through a combination of
dividends and share repurchases
- Full year Adjusted
EBITDA of $714 million, up 28% year-on-year, equating to a margin
of 12%
- Fourth quarter
Adjusted EBITDA of $245 million, a margin of 15%, up 45% on the
prior year period
- Full year order
intake of $7.4 billion resulted in a book-to-bill of 1.2 times and
continued backlog growth to $10.6 billion
- Full year 2024
guidance reconfirmed: Adjusted EBITDA expected to be within a range
from $950 million to $1.0 billion
|
Fourth Quarter |
Full Year |
For the period (in $ millions, except Adjusted EBITDA margin and
per share data) |
Q4 2023Unaudited |
Q4 2022Unaudited |
2023Audited |
2022Audited |
Revenue |
1,631 |
1,291 |
5,974 |
5,136 |
Adjusted
EBITDA(a) |
245 |
169 |
714 |
559 |
Adjusted EBITDA
margin(a) |
15% |
13% |
12% |
11% |
Net operating
income |
55 |
109 |
105 |
149 |
Net
(loss)/income |
(11) |
27 |
10 |
36 |
|
|
|
|
|
Earnings per share –
in $ per share |
|
|
|
|
Basic |
(0.06) |
0.10 |
0.05 |
0.20 |
Diluted(b) |
(0.06) |
0.09 |
0.05 |
0.19 |
|
|
|
|
|
At (in $ millions) |
|
|
202331 Dec |
202231 Dec |
Backlog(a) |
|
|
10,587 |
9,008 |
Book-to-bill
ratio(a) |
|
|
1.2x |
1.4x |
Cash and cash
equivalents |
|
|
751 |
646 |
Borrowings |
|
|
(845) |
(356) |
Net (debt)/cash
excluding lease liabilities(a) |
|
|
(94) |
290 |
Net (debt)/cash including lease liabilities(a) |
|
|
(552) |
33 |
(a) For explanations and reconciliations of
Adjusted EBITDA, Adjusted EBITDA margin, Backlog, Book-to-bill
ratio and Net debt refer to the ‘Alternative Performance Measures’
section of the Condensed Consolidated Financial Statements.
(b) For the explanation and a reconciliation of
diluted earnings per share refer to Note 7 ‘Earnings per share’ to
the Condensed Consolidated Financial Statements.
John Evans, Chief Executive Officer, said:
Subsea7 closed 2023 with a strong operational
performance in the fourth quarter, resulting in Adjusted EBITDA of
$714 million for the year, up 28% on the prior year. After
another year of active tendering, the Group secured $7.4 billion of
high quality contract awards, taking our backlog to $10.6 billion,
a year end level last seen in 2013. With $5.7 billion of firm work
for execution in the coming year, the Group has excellent
visibility on 2024, and we expect to deliver Adjusted EBITDA growth
of at least 33%. Confidence in the Group’s outlook for cash
generation in 2024 and beyond, combined with a sharp reduction in
capital expenditure following the completion of our two newbuild
wind vessels, supports the Board’s recommendation for shareholder
returns totalling at least $1 billion over the next four years.
This extends Subsea7’s track record of shareholder returns since
2011 to $3 billion and underscores the commitment of both
management and the Board to strong capital stewardship.
Fourth quarter operational highlights
During the fourth quarter, Subsea7 made good
progress on its portfolio of Subsea and Conventional projects. In
Australia, where environmental permits for both Scarborough and
Barossa have been obtained by our clients, we completed the
fabrication of pipeline stalks at the Bintan spoolbase and Seven
Oceans and Seven Oceanic commenced offshore operations. In Türkiye,
we ramped up activity for Sakarya Phase 2a with the commencement of
procurement. In Brazil, we progressed engineering on the combined
Mero 3&4 while, on Bacalhau, Seven Vega, Seven Pacific and
Seven Cruzeiro installed pipelines and umbilicals.
With the North Sea winter off-season underway
for the offshore wind industry, Seaway Strashnov was deployed to
the Sanha Lean Gas subsea project in Angola, and Seaway Aimery and
Seaway Moxie underwent scheduled maintenance in the Netherlands.
Seaway Alfa Lift continued to install transition pieces at Dogger
Bank A. In Taiwan, Seaway Phoenix continued cable lay activities at
Changfang and Xidao and, at Yunlin, one export cable and four
inner-array cables were installed by Maersk Connector. The newbuild
Seaway Ventus began its transit from the yard in China to
Europe.
Fourth quarter financial reviewRevenue of $1.6
billion increased 26% compared to the prior year period. Adjusted
EBITDA of $245 million equated to an Adjusted EBITDA margin of 15%,
up from 13% in Q4 2022. This reflected the third consecutive
quarter of double-digit margins in Renewables and a strong
performance in Subsea and Conventional across our portfolio of
projects.
Depreciation and amortisation charges were $142
million. In addition, we recognised a net impairment charge of $48
million, including $74 million of impairment charges, relating to
i) Seaway Alfa Lift monopile installation equipment, owing to a
contractual dispute in relation to which Subsea7 intends to use all
legal resources available to reach a satisfactory outcome, and ii)
a loss on Seaway Yudin disposal. These were partly offset by
impairment reversals of $26 million. Net operating income was $55
million compared to $109 million in the prior year period. Net
finance costs of $18 million and a net foreign exchange loss of $28
million, resulted in net loss for the quarter of $11 million
compared with net income of $27 million in the prior year
period.
Net cash generated from operating activities in
the fourth quarter was $529 million, including a better than
expected $306 million improvement in net working capital, equating
to a cash conversion of 2.2 times. Net cash used in investing
activities was $374 million mainly related to the final payments
for Seaway Ventus and the first instalment of $153 million for the
Group’s investment in OneSubsea. Net cash generated from financing
activities was $62 million with net proceeds from borrowings of
$119 million partly offset by lease payments of $42 million.
Overall, cash and cash equivalents increased by $221 million
to $751 million at 31 December 2023 and net debt was $552 million,
including lease liabilities of $458 million.
Fourth quarter order intake was $1.2 billion
comprising new awards of $0.6 billion and escalations of $0.6
billion resulting in a book-to-bill ratio of 0.8 times. Backlog at
the end of December was $10.6 billion, of which $5.7 billion is
expected to be executed in 2024, $3.8 billion in 2025 and $1.1
billion in 2026 and beyond.
Commitment to shareholder returns
Reflecting its confidence in the outlook and the
expected financial performance of Subsea7, the Board of Directors
proposes that the Company returns at least $1 billion to
shareholders over four years, from 2024 to 2027.
At the Annual General Meeting on 2 May 2024, the
Board of Directors will propose that shareholders approve a cash
dividend of NOK 6.00 per share, equating to approximately $170
million, payable in two equal instalments in May and November 2024.
The Company’s dividend policy will be revised to reflect an
increase in the regular dividend to NOK 6.00 from NOK 1.00 per
share to be paid in two equal instalments.
The Company has also committed to repurchase
approximately $80 million of its own shares in 2024, resulting in
shareholder returns of approximately $250 million.
Outlook
We anticipate that revenue in 2024 will be
between $6.0 billion and $6.5 billion, while Adjusted EBITDA is
expected to be within a range from $950 million to $1.0 billion.
Our expectation for capital expenditure in 2024 has increased
slightly to $300-320 million (from $280-300 million) driven by
spend deferred from 2023 into 2024. As the mix of activity
continues to shift to projects won in a favourable environment, our
Adjusted EBITDA margin is expected to be within an 18-20% range in
full year 2025.
Longer term, we continue to see a positive
outlook for demand for our Subsea and Conventional business,
supported by a tender pipeline of $21 billion. As a source of
reliable energy, the hydrocarbon industry is likely to remain a key
contributor to global production under plausible ranges of energy
transition scenarios. We are confident that our focus on the
deepwater subsea market, with attractive economics, will enable us
to maximise the return on the significant historical investments
made in our modern subsea fleet.
In Renewables, last year’s project delays and
cancellations put many countries’ clean energy ambitions under
pressure and prompted a swift response in countries such as the UK
and US, with positive indications for our tender pipeline in 2024.
While the growth trajectory for the offshore wind market may not be
smooth it is certainly clear that long-term demand is set to
significantly exceed the current fleet capacity of the industry.
With a strong focus on achieving an equitable risk-return balance,
we believe our offshore wind business will deliver sustainable
value creation for shareholders.
Conference Call Information Date: 29 February
2024Time: 11:00 UK Time, 12:00 CETAccess
the webcast at subsea7.com or
https://edge.media-server.com/mmc/p/n24x2p3g/Register for
the conference call at
https://register.vevent.com/register/BI0cebba0bd6bc487695d2e8a1c4b53bd8
For further information, please
contact:
Katherine TonksHead of
Investor RelationsEmail:
ir@subsea7.comTelephone: +44 20 8210
5568
Special Note Regarding Forward-Looking
StatementsThis document may contain ‘forward-looking
statements’ (within the meaning of the safe harbour provisions of
the U.S. Private Securities Litigation Reform Act of 1995). These
statements relate to our current expectations, beliefs, intentions,
assumptions or strategies regarding the future and are subject to
known and unknown risks that could cause actual results,
performance or events to differ materially from those expressed or
implied in these statements. Forward-looking statements may be
identified by the use of words such as ‘anticipate’, ‘believe’,
‘estimate’, ‘expect’, ‘future’, ‘goal’, ‘intend’, ‘likely’ ‘may’,
‘plan’, ‘project’, ‘seek’, ‘should’, ‘strategy’ ‘will’, and similar
expressions. The principal risks which could affect future
operations of the Group are described in the ‘Risk Management’
section of the Group’s Annual Report. Factors that may cause actual
and future results and trends to differ materially from our
forward-looking statements include (but are not limited to): (i)
our ability to deliver fixed price projects in accordance with
client expectations and within the parameters of our bids, and to
avoid cost overruns; (ii) our ability to collect receivables,
negotiate variation orders and collect the related revenue; (iii)
our ability to recover costs on significant projects; (iv) capital
expenditure by oil and gas companies, which is affected by
fluctuations in the price of, and demand for, crude oil and natural
gas; (v) unanticipated delays or cancellation of projects included
in our backlog; (vi) competition and price fluctuations in the
markets and businesses in which we operate; (vii) the loss of, or
deterioration in our relationship with, any significant clients;
(viii) the outcome of legal proceedings or governmental inquiries;
(ix) uncertainties inherent in operating internationally, including
economic, political and social instability, boycotts or embargoes,
labour unrest, changes in foreign governmental regulations,
corruption and currency fluctuations; (x) the effects of a pandemic
or epidemic or a natural disaster; (xi) liability to Fourth parties
for the failure of our joint venture partners to fulfil their
obligations; (xii) changes in, or our failure to comply with,
applicable laws and regulations (including regulatory measures
addressing climate change); (xiii) operating hazards, including
spills, environmental damage, personal or property damage and
business interruptions caused by adverse weather; (xiv) equipment
or mechanical failures, which could increase costs, impair revenue
and result in penalties for failure to meet project completion
requirements; (xv) the timely delivery of vessels on order and the
timely completion of ship conversion programmes; (xvi) our ability
to keep pace with technological changes and the impact of potential
information technology, cyber security or data security breaches;
(xvii) global availability at scale and commercially viability of
suitable alternative vessel fuels; and, (xviii) the effectiveness
of our disclosure controls and procedures and internal control over
financial reporting. Many of these factors are beyond our ability
to control or predict. Given these uncertainties, you should not
place undue reliance on the forward-looking statements. Each
forward-looking statement speaks only as of the date of this
document. We undertake no obligation to update publicly or revise
any forward-looking statements, whether as a result of new
information, future events or otherwise.
This information is considered to be inside information pursuant
to the EU Market Abuse Regulation and is subject to the disclosure
requirements pursuant to Section 5-12 the Norwegian Securities
Trading Act.
This stock exchange release was
published by Katherine Tonks, Investor Relations, Subsea7, on 29
February 2024 08:00 CET.
- SUBC 4Q23 Earnings Release
- SUBC 4Q23 Earnings Presentation
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