Bilfinger 2020 - Back to Profitable Growth - Bilfinger SE | Capital Markets Day
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
Bilfinger SE | Capital Markets Day Bilfinger 2020 – Back to Profitable Growth Tom Blades (CEO), Dr. Klaus Patzak (CFO), Michael Bernhardt (CHRO) February 14, 2017
Preliminary figures FY 2016
FY 2016: Highlights
Sound performance in challenging environment
Orders received: decline in FY; Q4 above prior-year period with book-to-bill at 1
Adjusted EBITA: swing to positive €15 million after loss in prior year (€-23 million);
margin improvement despite substantial decline in output volume; restructuring taking hold
Net profit: capital gain from sale of Building and Facility results in a significant increase to €271 million
Cash flow from operating activities: Operating Cash flow significant below extraordinary high prior year;
net liquidity rises significantly due to proceeds from the sale
Balance sheet: stronger with substantially higher equity ratio
Dividend proposal1): €1 per share
Outlook 2017: further improvement of earnings at lower output volume
1) subject to a corresponding resolution by the competent boards
Bilfinger SE | Capital Markets Day | February 14, 2017 page 3Q4 2016:
Current market situation in customer groups
Chemical & Petrochemical
• Stable demand for maintenance services in European markets
• In the US slight revival of investing activities in Chemicals; signs of recovery in project business
Pharma & Biopharma
• Good demand for projects in biotech pharma, however generally limited willingness of customers to invest
Oil & Gas
• Maintenance budgets in UK and Scandinavia at a low level, however trough seems to be reached
• Project business in the US shows first signs for possible recovery in mid-term future
Energy & Utilities
• Demand in project business remains low
• Volume of services requested declining especially in Germany due to insufficient capacity utilization and
profitability of power plants
• Stable demand in services business in Middle East and South Africa
Bilfinger SE | Capital Markets Day | February 14, 2017 page 4Q4 2016:
Segment development in line with expectations
Industrial
Orders received slightly above prior-year quarter, book-to-bill exceeds 1
Significantly lower output volume; EBITA margin (4.4 percent) above prior-year figure (3.6 percent)
Restructuring taking hold, cost base decreasing
Power
Orders received in Q4 at prior-year level, however FY well below prior year, as expected. In view of the
competition and price pressure, highly-selective approach in the German and international project business
Output volume continues to decline significantly as planned; also low capacity utilization in some units impacted
EBITA
Bilfinger SE | Capital Markets Day | February 14, 2017 page 5Expectations for FY 2016
on Group targets fully met
Output volume EBITA adjusted
in € million 2016 expected 2016 2016 expected 2016
Industrial about 3,100 3,197 at prior-year level 120
significant improvement
Power about 1,000 967 -30
over prior-year level
Consolidation / Others 55 at prior-year level -75
significant improvement
Group about 4,100 4,219 15
over prior-year level
Bilfinger SE | Capital Markets Day | February 14, 2017 page 6Orders received in Q4 above prior-year level despite
lower share of „large“ orders
Development Orders Received
-6%/ -1%
• Orders Received Q4:
+6%/ +13% 4,301 4,056 6% above Q4/15 (13% organic)
1,011 1,013 1,026 1,069
Orders 947
• Book-to-bill in Q4 at 1
received 691 810 742 816
(m€) 810
(68%) (80%) (72%) (76%)
(86%) • Order Backlog Q4:
320 203 284 137 253 below prior year quarter due to Power
Q4/15 Q1/16 Q2/16 Q3/16 Q4/16 FY/15 FY/16
Act Act Act Act Act Act Act
• Lower share of large orders in Q4
Order
backlog 2,902 2,849 2,677 2,603 2,618 2,902 2,618
(m€)
Bilfinger SE | Capital Markets Day | February 14, 2017 page 7As expected, double-digit decline in output volume in Q4
also due to tough comparable
Development Output Volume and Profitability
-16%/ -12%
-19%/ -15% • Output volume Q4: -19% (org. -15 %),
1,313 5,003
1,097 1,058 4,219 as expected both segments with a
1,044 1,020
1.7% decrease
0.2% 0.7%
2.1% 0.4% • EBITA adjusted in Q4 below prior year
-1.4% 0 -0.5%
and strong Q3, but positive in the full
year
Q4/15 Q1/16 Q2/16 Q3/16 Q4/16 FY/15 FY/16
Act Act Act Act Act Act Act • EBITA in Q4: Special items in the
amount of € 56 Mio
EBITA
adj. 22 -15 2 21 7 -23 15
(m€)
EBITA
(m€) -32 -54 -64 -53 -49 -157 -221
Bilfinger SE | Capital Markets Day | February 14, 2017 page 8Industrial:
Orders received slightly above prior-year quarter, book-to-bill exceeds 1
-14%/-9%
• Orders received: With € 885m +4%
3.6% 5.1% 4.4%
3.7% (org. +10%) against prior-year quarter
942
788 834 761 814 • Book-to-bill >=1 in the fourth
consecutive quarter
1.8%
• Significantly lower output volume
Q4/15 Q1/16 Q2/16 Q3/16 Q4/16 • Adjusted EBITA margin (4.4 percent)
EBITA adj. Margin (%) Output volume (m€)
Y-o-Y
x/x
Organic above prior-year figure (3.6 percent)
growth growth
• Restructuring taking hold, cost base
Book- decreasing
to-Bill 0.9 1.0 1.0 1.0 1.1
EBITA
34 14 31 39 36
adj.
Bilfinger SE | Capital Markets Day | February 14, 2017 page 9Power:
Selective order intake in challenging markets
-39%/-34%
• Orders received in Q4 at prior-year
level, however FY well below prior year,
356
as expected.
1.5% 247 258 243 218
-2.7% -4.1% -0.4% • In view of the competition and price
-5.5% pressure, highly-selective approach
in the German and international project
Q4/15 Q1/16 Q2/16 Q3/16 Q4/16 business
Y-o-Y Organic
x/x
EBITA adj. Margin (%) Output Volume (m€) growth growth • Output volume continued to decline
significantly as planned
Book-
0.5 0.9 0.7 0.6 0.8 • Low capacity utilization in some units
to-Bill as well as weak project performance
impacted EBITA adjusted
EBITA
adj. 6 -7 -11 -1 -12
Bilfinger SE | Capital Markets Day | February 14, 2017 page 10SG&A costs reduced significantly, but ratio still well above
benchmark
Adjusted Gross Margin (m€) Adjusted SG&A (m€)
445
(8.9%) 412
14 (9.8%) 22
17 47
431 Adjustments -529 -481
395
(8.6%) Reported (-10.6%) (-11.4%)
(9.4%)
-434
-507 (-10.3%)
FY 15 FY 16 (-10.1%)
Act Act
FY 15 FY 16
Act Act
Bilfinger SE | Capital Markets Day | February 14, 2017 page 11Operating cash flow significantly below extraordinary high prior year,
also due to reversal effects
1)
Adjusted cash flow from operating activities (m€) Net Profit (m€)
271
188 -71.3% 173 n.a.
271
Adjust- 39 134 39 153 551 Continued
Operations
ments 17 64 Discontinued
Reported 149 54 -224 -279 Operations
32 -591 -1 Minorities
22 -71 Net Profit
-510
Q4/15 Q4/16 FY/15 FY/16 -510
1) Adjustments according to EBITA adjusted FY/15 FY/15 FY/16 FY/16
Trade Working Capital Development Net Liquidity (m€)
-136 510
2
516 -71 966
-58
-153
67 60 74 58 -40
500
31.12.15
OCF adjusted
Adjustments
Net Capex
Disposals
CF disc. Op.
Other
31.12.16
31.12.15 31.12.16 31.12.15 31.12.16
2)
2)
Net Trade Assets (m€) DSO (days) DPO (days)
2) Definition DSO: Receivables and WIP, DPO: Payables and prepayments received
Bilfinger SE | Capital Markets Day | February 14, 2017 page 12Strong foundations to build on
Starting position
Extensive analysis since mid-2016
Procedure • Deep analysis of the company, its markets and its customers
• Evaluated our strengths, opportunities and challenges
• Analysis based on decades-long industry experience of top management team
Products • Exceptional profile: consistently No. 1 supplier of industrial services for the
process industry in Europe
• Demand for engineering and services is strong and getting stronger
People • Deep expertise, knowledge and best-in-class practices
• Multiple restructuring phases led to brain-drain and loss of direction
• Long-standing customer relationships
Structure • Very fragmented, non-integrated sub-optimal structure
• Silo mentality not reflective of market demands
• Tremendous potential but unrealized opportunities
Bilfinger 2020: Creating a strong basis for profitable growth
Bilfinger SE | Capital Markets Day | February 14, 2017 page 14Back to Profitable Growth
2 Service Lines, 4 Regions, 6 Industries
Our ambition We engineer and deliver
process plant performance
2 Service Lines 4 Regions 6 Industries
• E&T – Engineering & • Continental Europe • Chemicals & • Pharma &
Where to play Technologies • Northwest Europe Petrochem Biopharma
• MMO – Maintenance, • North America • Energy & • Metallurgy
Modifications & Operations Utilities • Cement
• Middle East
• Oil & Gas
People & Customer & Organization &
Financials
Culture Innovation Structures
How to win
Bilfinger SE | Capital Markets Day | February 14, 2017 page 15Raising the growth potential
Industrial service market
Continuous growth of operating plants
• Number of plants in our defined markets growing constantly Number of plants in our markets 45k
• More than 75% of plants are over 10 years old and number 12k
of ageing plants increasing
32k
• Complexity of plants is increasing with positive effect on
service requirements 7k
• Ageing plants require higher level of maintenance and 20k
modernization 4k
33k
12k
25k
• Customers demand greater efficiency 4k
16k
• Authorities impose stricter environmental standards on plant 8k
operators (reduced emissions)
1970 1990 2010 2020
active plants under 10 years old
Structural demand for industrial services active plants over 10 years old
Source: Industrial Info Research
Bilfinger SE | Capital Markets Day | February 14, 2017 page 17Competitive Landscape (Selection)
Unique value proposition for E&T and MMO business
E&T
Geographic scope
MMO
Bilfinger SE | Capital Markets Day | February 14, 2017 page 18Bilfinger Market Model
Contracted out market is USD 125 bn and rising
Total service market (2-4-6) Contracted out market (2-4-6) Contracted out market by regions and
[USD bn] [USD bn] industries (2016)
Northwest Europe Middle East
2.6%
256
231
Regions Continental
Europe
110 E&T
98 +2.9%
3.4%
143 North America
125
71 E&T Cement Metallurgy
63 +3.1% Pharma &
146 Oil & Gas Biopharma
132 +2.4% MMO
Industries
62 72 MMO
+3.7% Energy &
Utilities
2016 2020 2016 2020
Chemicals & Petrochem
Note: E&T market volume comprises projects up to USD Mio 100
Bilfinger SE | Capital Markets Day | February 14, 2017 page 19Bilfinger Market Model
Different market dynamics in different segments
Contracted out market / Bilfinger revenues – Contracted out market –
Growth per region [CAGR 2016-2020, nominal] Growth per industry [CAGR 2016-2020, nominal]
Bilfinger Share of Share of
growth Bilfinger output Bilfinger output
strength volume1 volume1
Chemicals &
Continental 3.5% ~45%
2.1% ~60% Petrochem
Europe
Energy &
3.1% ~20%
Utilities
Northwest
3.6% ~20%
Europe Oil & Gas2 4.1% ~15%
North Pharma &
3.6% 2.5% ~5%
America ~15% Biopharma
Metallurgy 2.2% ~5%
Middle
4.7%
East ~5%
Cement 3.8%Delivering world class performance
Service Portfolio
Strong offering for capex and opex driven services
E&T – Engineering &
Technologies
OPEX
Packaged Units Turnarounds
Efficiency
Modifications
Maintenance
Expansions
Operations
Plant Expansions Emissions Maintenance Contracts
CAPEX
MMO – Maintenance,
De-Sulfurizations
Modifications & Operations Operations
Bilfinger SE | Capital Markets Day | February 14, 2017 page 22Go-To-Market organization
Market focus, customer centric
E&T – Engineering & MMO – Maintenance,
Technologies Modifications & Operations
6 industries
Planning Oil & Gas Continental Europe
International
Regional
Chemicals & Petrochem
Execution Northwest Europe
Energy & Utilities
Pharma & Biopharma
Technologies Middle East
Metallurgy
Construction Cement North America
22 plant types
Bilfinger SE | Capital Markets Day | February 14, 2017 page 23Innovation MMO
World Class Maintenance
Differentiated Proposition
• Leading MMO provider in Europe
• Engineering credentials
• Full service provider
• Proprietary and unique Bilfinger Maintenance
Concept
• International / regional footprint
• Health and Safety excellence
• People excellence
Bilfinger SE | Capital Markets Day | February 14, 2017 page 24Innovation MMO
Bilfinger Maintenance Concept to deliver process plant performance
• BMC is a world class and proven concept to
significantly improve maintenance performance
• Maintenance concepts are analysed and
optimized along 16 standardized modules
• More than 30 tools help to increase HSEQ
performance, increase Hands on Tool time and
reduce maintenance overhead costs
• Over time, the share of proactive based
maintenance is increased and therefore reactive
maintenance can be reduced
• More than 400 projects to assess and improve
maintenance in process industries have been
successfully completed with BMC
Bilfinger SE | Capital Markets Day | February 14, 2017 page 25Performance MMO
BMC has reduced maintenance costs at Yara Glomfjord consistently
Maintenance costs and Production Volume (indexed)
120
108%
100%
100
80 Maintenance - Direct Costs
• Reactive
• Scheduled / Periodic
60
• Proactive Preemptive
40
20
0
Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9
Maintenance cost (nominal amounts) and production development over 10 years
Bilfinger SE | Capital Markets Day | February 14, 2017 page 26Digitilization
Smart App, SPA Platform Integration and Planning Efficiency
From PRO-ACTIVE to PREDICTIVE
• Digitalization integral to MMO strategy
• Execution efficiency
• Planning efficiency
• Supporting asset integrity
• Seamless interface to customers
• HSE assurance
Bilfinger SE | Capital Markets Day | February 14, 2017 page 27Security Integrity
Digitalization drives efficiency
HSE Assurance
• Site access control eliminates paper based
protocols
• High throughput / time saving
• Electronic work flow reduces risk of errors
• Verification of competency and certifications
• HSE compliance
Fixed Mobile
• Direct SAP connectivity
Installation Installation
Bilfinger SE | Capital Markets Day | February 14, 2017 page 28Asset Integrity
Up-to-date online plant documentation
Reverse engineering
An updated documentation set is created
using existing documentation and laser
scanning
Main output
Engineering database with digital plant model
• Updated P&ID
• Single source for all information
• Revision control documentation
• Data consistency
• Data integrity
• Data accessibility
Bilfinger SE | Capital Markets Day | February 14, 2017 page 29Asset Integrity
Laser scanning technology
Data Model As-built 3D
Laser Scanning
processing intelligence model
On-site data capture. Pixel cloud converted 3D model imported Output is a complete
Millions of points of to 3D model and plant information 3D model source for
3D data stored is incorporated for isometrics, BOM,
each component MTO, P&ID …
Bilfinger SE | Capital Markets Day | February 14, 2017 page 30Digitilization
Laser Scanning
Bilfinger SE | Capital Markets Day | February 14, 2017 page 31Health Safety Environment
Key differentiator
Differentiated Proposition
• Recognized HSE leader
• Bilfinger HSE: People, training,
qualification and certification
• Our people can work safely in
dangerous environments
• Strong track record in HSE
performance
• Key benefit for our customers and a
key competitive advantage for us
Bilfinger SE | Capital Markets Day | February 14, 2017 page 32Access
Deliver customer needs
Bilfinger SE | Capital Markets Day | February 14, 2017 page 33Scaffolding
Innovative magnetic anchoring
CHALLENGE SOLUTION
• “Normal anchoring” for scaffolding is • Bilfinger’s scaffolding with magnetic anchor
not always possible with storage tanks points uses permanent magnets to attach a
slim scaffolding construction to the steel tank
• Large, pyramid-shaped scaffolding with wall
additional ballast weigh is required in
certain cases • Scaffolding construction tailored to the client
using 3D infinite elements software to simulate
• Client sought stable scaffolding forces on every magnetic anchor point and to
construction on an ethylene tank in a simulate external influences like wind and
safer, quicker and more cost-effective weather
way
Bilfinger SE | Capital Markets Day | February 14, 2017 page 34E&T at a glance
Covering entire life-cycle of process plants
Modifications Expansions Efficiency Emissions
Planning
Execution
Technologies
Construction
Bilfinger SE | Capital Markets Day | February 14, 2017 page 35Process Plant Performance
Process critical units (packaged units and skids)
Credentials
• Almost 200 years of engineering
tradition and heritage
• Delivering „Performance“
Gas storage Piping
• Efficiency
• Expansions
• Emissions
• Packaged units in each of our six
Bioreactor Containment Liner
targeted industries
Bilfinger SE | Capital Markets Day | February 14, 2017 page 36E&T
Construction
Differentiated Proposition
• Track record in our key
industries
• Experience data base ->
cost, risk, etc.
• Industrial projects from $10
million to $200 million
• Piping at the core
• HSE excellence
Bilfinger SE | Capital Markets Day | February 14, 2017 page 37E&T
Emissions & Environmental
Product portfolio
• Legislation driving emissions /
environmental requirements and
upgrades
• De-salination (forward osmosis)
• CO2 recovery unit
• Flue-gas de-sulfurization
• Marine de-sulfurization
Bilfinger SE | Capital Markets Day | February 14, 2017 page 38Connecting the dots to deliver more
Strategic assessment of all entities
Value add potential and strategic relevance
Power with value add potential Bilfinger ‘from yesterday to today’ Parts of the portfolio for OOP
• Services for multiple industries, MMO • Other Operations are
e.g. refineries Power
Oil & entities with lower degree of
Gas strategic fit to 2-4-6
• Engineering competences,
e.g. gas processing • Profitable businesses with
improvement potential are
• Projects, Engineering “managed for value”
e.g. chemical plants Solutions
E&T
Industrial
Maintenance
• Some entities identified as
• Fabrication, e.g. processing inlet / & ISP dilutive are going to be
outlet or gas oil separation plants OOP fixed and sold
Targeted approach for structuring and integrating
Bilfinger SE | Capital Markets Day | February 14, 2017 page 40Driving profitable growth
Three major growth levers for above market profitable growth
Comparison of growth rates Growth levers and growth impact
[CAGR 2016-2020 in %] In line with market Above market Outpace market
Continental Northwest North
More than 20 growth
Middle East initiatives detailed,
Europe Europe America
Total including:
2.6%
market A
MMO: Expand share of wallet in home market, • References
develop growth regions • Rationale and
tactics
Contracted B • Pre-requisites
out 3.4% E&T: Go-to-Market push in growth regions and mitigation
market • Financial effects
C • Responsibilities
and milestones
All: Expand Bilfinger value chains into hitherto
Bilfinger underserved industry segments
organic >5%
growth1
Tracking will be included in group wide tracking tool B TOP
1 CAGR 2017-2020 in %
Bilfinger SE | Capital Markets Day | February 14, 2017 page 41Company Program „B TOP“
Key initiative for Bilfinger
Initial situation
Transforming Operational Performance
• Past improvement
programs successful but
limited to SG&A
• Several local operational
improvement measures • Setting clear and • Sticking to
ambitious targets • Operationalize ambitious targets
but overall still potential
financial targets
for more performance • Clear • Organic growth
responsibilities • Benchmark key
• New management team
• Defining
+ improvement + • Operational
well experienced in levers excellence
measures and culture
comprehensive and • Profit transition
tracking
continuous improvement implementation
programs for high
performance culture
Bilfinger SE | Capital Markets Day | February 14, 2017 page 42Value Proposition Example
Oil & Gas onshore
Gas Nitrogen Water and gas
Separation Dehydration Oil treatment
compression generation treatment
Process steps served by Bilfinger
Engineered integrated solutions
Gas dehydration unit
A&C site activities
Heat recovery package unit
Safety service activities
Regeneration package unit
Bilfinger SE | Capital Markets Day | February 14, 2017 page 43Improving our financial performance
E&T and MMO
Bilfinger Revenue Model
E&T – Engineering &
Technologies
• Project Based C.
Duration: 3-18 months
• Multi-year Service
− Lump-sum Turnkey Duration: 3+2 years
Contract
- Unit rates
− Time & Material
Contract - Day rates
• Packaged Units / • Regular Modifications
Technology • Periodic Turnarounds
MMO – Maintenance,
Modifications & Operations
Bilfinger SE | Capital Markets Day | February 14, 2017 page 45Bilfinger 2020
Creating a world class company
Value
Stabilization Build up Build out
• Organic growth and
targeted acquisitions
• Increasing financial
• Organic growth and performance
possible selected bolt-
on acquisitions
• Focus on core services,
• Self-help and industries and regions
connecting the dots • Capitalizing our
• Establishing 2-4-6 structure exceptional profile
• Avoid risk • Manage risk
• Consolidate best practice • Offering our services
from across the firm along all value chains
• Reduce SG&A • B TOP Excellence
• B TOP Implementation
Time
Bilfinger SE | Capital Markets Day | February 14, 2017 page 46People and culture
Key personnel
Experienced international operational management team
Engineering & Technologies MMO – Region Continental Europe MMO – Region Northwest Europe
Michael Löffelmann Gerald Pilotto Duncan Hall
Executive President (from 04/17) Executive President Executive President
16 years of industry experience 22 years of industry experience 25 years of industry experience
Jean-Pierre Pasquereau Matti Jäkel Clive Kendal
Executive President Financial Director Financial Director
38 years of industry experience 28 years of industry experience 28 years of industry experience
Jens Borgschulte MMO – Region North America MMO – Region Middle East
Financial Director
26 years of industry experience Terrance Ivers Dr. Roland Gärber
Executive President Executive President
35 years of industry experience 15 years of industry experience
Other Operations
Niklas Wiegand Volker Sembill Stefan Herschler
Executive President Financial Director Financial Director
13 years of industry experience 10 years of industry experience 20 years of industry experience
Bilfinger SE | Capital Markets Day | February 14, 2017 page 48The Bilfinger Way
Mission statement enabling change
• We make it work: The passion of all our
employees is to increase our customers’
plant performance
• Our Values: The three Cs guide us in
our tasks and give us a clear direction
• Aligned Competencies: Our common
strengths define “The Bilfinger Way” to
success
• Integrity and safety: Our foundation
and aspiration is to never compromise
on integrity and safety
Common direction and a high commitment to the Bilfinger Way
Bilfinger SE | Capital Markets Day | February 14, 2017 page 49Our employees
Key differentiator
Status quo Priorities
High level of competence and technical expertise
• Talent Management
• 5,500 engineers
Development, retention and
• 25,000 skilled experts
succession planning
• Overall 37,000 employees
Bilfinger Academy • Bilfinger Academy 2.0
• Tailored programs to secure standards and steady Expanding competencies
improvement of leaders and staff internationally to blue- and white-
• >40,000 e-learnings; >5,000 training days collar workers
HR tools
• Project HRcules
• Various best practices along all steps of the
Standardization and automation of
employee lifecycle: on-boarding, appraisals and
HR processes
incentives
Significant investments in our people and in efficient HR processes
Bilfinger SE | Capital Markets Day | February 14, 2017 page 50Compliance
Top priority
• Strengthening culture of integrity: Prevent, detect, response
as strong measures of our effective compliance program
• One simple set of rules: New mission statement, new code of
conduct, new group policies for the whole group Response
• Outstanding team: Highly experienced General Counsel & Chief Prevent
Compliance Officer, Monitor and external advisors
• High investments: Spend of in high-double-digit-million-€-
amount in previous as well as in coming years for implementation
of effective compliance and integrity program as well as for
conclusion of older cases Detect
• Continuous improvement: Rollout of further state of the art
compliance processes and regular review of effectiveness
Creating a world class compliance system
Bilfinger SE | Capital Markets Day | February 14, 2017 page 51HSEQ
Fundamental focus in our business
Status quo Priorities
• Awareness
Track record of outstanding achievements
Further reinforcement of ‚safety
• Entire regions without an incident for up to a decade
works‘
• Learning
High level of HSE standards
Enhancement of e-learning
• Experienced experts across the Bilfinger group
offerings
Safety focus important part of our DNA • Root cause analysis
• Best practice initiatives as part of continuous Improvement of available best
improvement practices
Reinforcement of high level of HSEQ standards
Bilfinger SE | Capital Markets Day | February 14, 2017 page 52Aligned incentives
Effective going forward
Status quo Priorities
Executive Board:
• Standardized Scheme in place
• Short-Term Incentive: EBITA and Free Cash Flow
• Long-Term Incentive: ROCE and TSR (vs. MDax)
Management Level 1:
• Alignment
• Mainly standardized scheme in place
Introduction of Long-Term Equity based linked
• Short-Term Incentive: EBITA and Free Cash Flow
Bonus to Group Targets 2020
• Insufficient long term focus
• Cascading
Management Level 2 ff: Instantly increasing focus on cash and
• Lack of standardization alignment additionally breaking down of targets
throughout the Management levels
Focusing efforts through aligned incentive schemes
Bilfinger SE | Capital Markets Day | February 14, 2017 page 53Outlook Bilfinger 2020
Our analysis for sustainable und profitable growth
Our market What we are How to win
$ 125 bn CAGR ~3.4 % 2-4-6 Market Focus & Customer Centric People, engineering, credentials,
customer proximity, innovation
>5 % top line
CAGR1
1 CAGR 2017-2020 in %
Bilfinger SE | Capital Markets Day | February 14, 2017 page 55Execution Plan
Ambitions will be achieved in three stages
Value
Build out
Build up
Stabilization
Time
What does it mean in numbers?
How will we execute?
How will we measure and report progress?
Bilfinger SE | Capital Markets Day | February 14, 2017 page 57Company ambition is derived from a comprehensive analysis
Market Model: Growth and Benchmarks / Peer Group
Industry Profit Pool comparison
Ambition 2020*:
Organic CAGR**
>5%
EBITA adj. margin
~5%
Root Cause and Lever Historical Performance
Analysis Own competences
* Mid-cycle targets ** Based on FY 2017
Bilfinger SE | Capital Markets Day | February 14, 2017 page 58Margin ambition is supported by an extensive profit-pool analysis
Adjusted EBITA margin Profit pool according to
FY 2016 Bilfinger profile1 (Mix FY 2020)
• E&T with a defined path to improve
profitability
5 to 9%
E&T
E&T • Entering blended margin range towards
the end of the planning period
EBITA • Based on growth investments 2017 to
-2.4% 2020 business mix will improve beyond
2020 and lead to further upside potential
E&T FY 2016 Blended margin range
Bilfinger profile 2020
• Stable MMO business already within
blended margin range
3 to 5.5%
• 2018ff: Margin improvement towards
MMO 4.9% upper end of blended margin range
EBITA • Based on growth investments 2017 to
2020 business mix will improve beyond
MMO FY 2016 Blended margin range 2020 and lead to further upside potential
Bilfinger profile 2020
1) Estimate based on expected Bilfinger revenues and typical profitability in relevant segments (“Homunculus”), mid-cycle i.e. stable economic environment
Bilfinger SE | Capital Markets Day | February 14, 2017 page 59We will address all P&L line-items
GROSS MARGIN
• LOA1 process
• Project management
Impact on
gross margin:
~200bps AMBITION2
ADDRESSING BOTH LINE ITEMS
EBITA margin
• Process and IT harmonization increase of
• Procurement ~500bps
by 2020
Impact on
SG&A RATIO
SG&A ratio
• Lean headquarters ~300bps
• Lean structures in the field
1) Limits of authority 2) Mid-cycle targets
Bilfinger SE | Capital Markets Day | February 14, 2017 page 60Overall ~100bps gross margin improvement from project
excellence measures by 2020
Define limits of authority
Timeline: fully
LOA PROCESS in relation to defined risk
implemented 2017
categories
Improvement,
PROJECT standardization and Timeline: fully
MANAGEMENT enforcement of project implemented 2018
management process
Bilfinger SE | Capital Markets Day | February 14, 2017 page 61Root cause analysis: mid-sized projects with most
significant loss impact
Root cause analysis on projects over a period of several years
• Most projects >50m EUR were profitable
• Most significant impact from projects between 5 and 25m EUR project size
Gross profit
0
Project size
Bilfinger SE | Capital Markets Day | February 14, 2017 page 62Root cause Analysis:
Issues mainly originate in early stages, detection rather late
• Detection of deviation plan/actual rather late 40%
in the execution
20%
Deviation in Gross profit in %
• Very limited opportunity to counteract at high
percentage of completion 0%
• Need for clear understanding of project risk -20%
and own competences before bid is submitted
-40%
• Need for reliable early warning indicators
• Need for strengthened project planning and -60%
execution competence
-80%
-100%
0% 20% 40% 60% 80% 100%
Percentage of Completion in %
Bilfinger SE | Capital Markets Day | February 14, 2017 page 63Introduction of risk-sensitive LOA processes to avoid
project losses
Status quo
• Authorization by Executive Board based on volume-
Project volume thresholds per risk class
thresholds only
• A number of projects with significant losses did not reach €
Executive Board approval level
Executive Board
Way forward Responsible Board Member
• Improved risk categorization, mandatory for all projects
Divisional Management
• Risk-based Board authorization thresholds
• Approval templates differ according to risk class Regional / legal entity level
• Every project which was approved by Board will be
further monitored by Board Risk category
“Project Days” with Executive Board
Bilfinger SE | Capital Markets Day | February 14, 2017 page 64Mandatory project management process, centrally
monitored and enforced
Project Management Concept
• Group-wide introduction of
Stage-gate Structured
process Data and KPI
consistent processes which
collection are centrally developed and
maintained
• Consolidation of key project data
in a single data warehouse
Project
• Determination of KPIs on earned
manage- HR value base
ment core development
processes and training • Stage-Gate Reviews for tenders,
short-term interval controlling
based on standardized templates
• Continuous monitoring of
improvement
Continuous improvement process (CIP)
Bilfinger SE | Capital Markets Day | February 14, 2017 page 65SG&A costs will be addressed both in headquarters and in the field
Timeline:
Role of HQ and implementation
Lean headquarters
streamline costs already started,
in full swing by 2020
Reduction in number of
Timeline: in full
Lean structure legal entities
swing by 2020
Lead company concept
Bilfinger SE | Capital Markets Day | February 14, 2017 page 66Headquarters costs will be reduced to 1% of output volume
• Role of HQ: Strategic Controller, i.e. business related activities will move into divisions
• Current FTE ambition for 2018/2019 includes investment for improvement of internal control systems
• Transparent and clear cost ownership to be established
• Significant savings potential from lower consulting expenses
-30%
315
89
280
80
220
~1% of
output volume Average
HQ costs FTE
adj.* HQ
2015 2016 … Target 2015 2016 Target Ambition after
2020 2018/2019 full ICS
implementation
and Process/IT
* on a comparable base after re-allocation of Government Services to MMO harmonization
Bilfinger SE | Capital Markets Day | February 14, 2017 page 67Reduction of organizational complexity will reduce SG&A costs
and increase speed
• Currently, only in some countries (e.g. GER) enough critical
279
mass for Shared Services
~-40% • Many small entities which can be served by lead company
232
concept
Operating • In the course of IT roll-out (ERP and HR) additional
Legal opportunities for shared services and outsourcing will arise
Entities
160
• Liquidations and mergers taking into account legal and
Non- tax-related aspects
operating
• Significant reduction targeted
Legal
Entities • Limited direct cost savings, but significant reduction
of complexity which leads to higher efficiency
31.3.2016 Current Ambition*
*Ambition: excludes potential acquisitions
Bilfinger SE | Capital Markets Day | February 14, 2017 page 68Lead company concept for pragmatic regional bundling
Functions Consolidation approach Impact on functions
• Transactional, not Legal Entity (LE) –
or business-specific functions to be Finance:
Transactional
functions transferred to Lead Company unless • Finance function largely covered
provided by shared service center by lead companies
• Smaller associated companies
with shared CFO
• Non-transactional, not LE- or business-
Not LE-/ HR:
specific functions to be transferred to
Non- business-
specific
Lead Company • Main HR work in lead companies
trans-
actional • Associated companies w/o head
func- • Non-transactional, LE- or business- of HR, but with locally required HR
tions LE-/ specific functions will mainly be activities
business- retained in local LE
Comparable approach for IT,
specific • Selected activities may still be Purchasing, etc.
transferable to Lead Company – hence
function-specific investigation required
Bilfinger SE | Capital Markets Day | February 14, 2017 page 69Example North America
Reduction of complexity combined with lead company concept
Current Structure: Target Structure:
Bilfinger SE Bilfinger SE
Gross savings
of ~30% of
Bilfinger Industrial
Services N.A.
Holding Inc.
FCHC Corporation
(inaktiv )
today’s cost base: BIS Holding
Optimizing SG&A
Bilfinger Industrial Bilfinger Westcon Centennial Holding
costs through Centennial
Bilfinger Salamis Inc. FCC Corporation Corporation Inc. Bilfinger Industrial
Inc. Bilfinger Salamis Inc.
improvement of
Services Inc. (inaktiv ) Bilfinger Westcon Inc. Contractors
Services Inc.
Enterprises Inc.
processes and bundling
of administration
Centennial
Contractors
Enterprises Inc.
activities, while • Harmonize ERP-systems
• No bundling within the North American entities investing in • Reduce Management FTE’s through functional
• Functions have been partially outsourced sales-front offices bundling
(e.g. IT, Legal, Taxes) in line with growth • Bundle Accounting, Payroll and IT in particular
• 5 operating companies, 4 ERP-Systems incl. opportunities (FTE-savings in this area around 30%)
various subsystems • Reduce consultant costs in Legal and Tax
while ensuring faster utilization of tax-loss-carry
forwards
• Office bundling
Bilfinger SE | Capital Markets Day | February 14, 2017 page 70Build-up of customer-facing SG&A only if growth
potential is materializing
• Measures defined to reach savings targets • Build-up of additional costs depends on
• Degree of implementation varies order development according to plan
• Additional measure buffer will be built up to Structural
increase probability improvements:
• Monitoring concept will ensure transparency
and discipline • Within “G&A”:
• Reduction of
bureaucracy
434 7.5% of output
• Increase of
volume
customer focus
>-100
• Within “S”:
• From back-office to
SG&A costs front-office
• From Europe to
growth markets
• From established to
new industries
FY 2016 adj. Current SG&A Build-up 2020
program customer-facing
sales activities
Bilfinger SE | Capital Markets Day | February 14, 2017 page 71Process and IT harmonization as well as improvements in
sourcing are supporting the margin ambition
Timeline:
Process and IT Wave-approach, in
Harmonization Bilfinger IT Strategy
full swing by 2020
Timeline:
Continuous
Procurement Bilfinger Purchasing improvement
Initiative Strategy of contribution
to earnings
Bilfinger SE | Capital Markets Day | February 14, 2017 page 72ERP target for 2019 includes 5 systems, all SAP-based
simplified
Current landscape
22 ERP systems Harmonized and complexity reduced target ERP landscape based on 5 SAP systems
SAP systems Input: delivery processes
SAP systems
SAP systems
SAP systems Global single
SAP systems
7 SAP
SAP systems SAP HR system
environments SAP P09
PSH- Consolidated DI3
target
project
SAP P14+
6 Navision system
SAP MC1 SAP CSP
….. environments
…. Global CRM
Business Intelligence Sales Force
Ecaxt
Profitoool
9 Other
environments
Value Stabilization Build up Build out
Global harmonization of
6 key processes: 2020
2019 There is additional
• Purchase to Pay potential to further
3rd migration wave
• Market to Order 2018 2nd migration wave integrate the ERP
• Order to Cash landscape to a single
2017 1st migration wave ERP beyond 2019
• Hire to Retire
• Investment to Disposal Design and build of global
• Book to Report template
Time
Bilfinger SE | Capital Markets Day | February 14, 2017 page 73Significant investments in IT and process harmonization
leading to greater efficiency and transparency
• Investment of ~€50 million mainly in FY 2017 and 2018
• Cost improvement program targeting run costs: Organizational
• Transformation into global IT organization in combination structure &
governance
with lead company concept
• Preparation of Cloud solutions, e.g. for email and collaboration Business
value
• Reduction of number of servers (potentially outsourcing)
Innovation
• Retirement of old ERP systems partner IT strategy
• Ambition for 2020: IT costs within benchmark range:
Benchmark
Today 2.2% of output volume
IT costs
Ambition of 1.8%
while supporting (internal and external) customer benefits and innovation
Bilfinger SE | Capital Markets Day | February 14, 2017 page 74Procurement initiative will lead to higher productivity
Status Quo Ambition 2020
• In general low maturity
level • High maturity level
• Global sourcing not across regions and
established categories
• Many manual process • Savings linked to P/L
steps • Digitalized procurement
• Lack of data • Data driven sourcing
transparency
Procurement spend break-down [in bn EUR]
~2.1 Mainly
Services Potential of
Thereof
Impacting Material & Products >50 bps EBITA
Spend “own” P&L
~1.0
margin impact
overall
Directs
Includes: IT & Telecoms,
Indirects
Fleet, Real Estate, etc.
Bilfinger SE | Capital Markets Day | February 14, 2017 page 75Stopping the cash drain is a key management priority
Status Quo
Free cash flow development Root causes Measures
136
Free cash flow
Free cash flow adjusted Overhead SG&A efficiency program
2
Project management
Project losses initiatives
-111
Working Working capital management
capital
-264
2015 2016
Bilfinger SE | Capital Markets Day | February 14, 2017 page 76Working capital management with focus on shortening
the approval and billing process
74
Measures: Measures:
• Reduction of WIP through 58 • Increased bundling leads to
process improvement better negotiation position,
Administration e.g. payment terms
Operations • Rejection Rate / quality in
Speeding up billing the control of invoices
• Contract analysis, e.g.
billing conditions (required
documentation), flat-rate
billing, payment terms
• Billing quality DSO 12/31/2016 DPO
Supported by increased cash
focus in 2017 incentive system
Bilfinger SE | Capital Markets Day | February 14, 2017 page 77Measures to reduce the time between service completion and
customer acceptance offer significant self help potential
1 | Procurement 2 | Goods and Services 3 | Invoicing 4 | Receipt of Payment
Supplier / Internal Resources
Client Cash
Subcontractor • Inventory
• Receivables Collection
• Liability • Work in Progress
[DPO] [DSO]
Working Capital
WIP Receivables Overdue
• ~20% of DSOs* • ~65% of DSOs • ~15% of DSOs
Fast and comprehensive • Customer has to • Improvement of • Esp. regional
documentation of rendered accept service before payment terms rather differences
services to get customer billing process can be difficult with blue chip
acceptance earlier
initiated customers
*WIP minus prepayments received
Bilfinger SE | Capital Markets Day | February 14, 2017 page 78New organizational setup supports strategy implementation
and 2020 ambition
E&T MMO
In every region:
• Concentrated know-how • Customer proximity
• Centralized project governance • Management of capacity utilization
• Leverage high-value resources • More collaboration and cross selling
• Enables fast roll-out of innovations • Higher SG&A efficiency
Use International Scale Use Regional Scale
Bilfinger SE | Capital Markets Day | February 14, 2017 page 79How this translates into E&T segment performance
in € million FY 2016 Going forward
Orders received 1,219 2017: Stabilization of orders
2017: Output volume decrease expected
CAGR 2018-2020 above Group average
Output volume 1,246 Important growth areas: North America
France, U.K. (Nuclear)
New customers in Pharma & Bio-Pharma
2017: positive EBITA adjusted
Adj. EBITA-margin -2.4% Entering blended margin range towards the end of the planning
period
Focus on implementation of new organization and on
Organization
improvement in project management
Bilfinger SE | Capital Markets Day | February 14, 2017 page 80How this translates into MMO segment performance
in € million FY 2016 Going forward
Orders received 2,422 2017: Positive trend in orders
2017: Slight output volume decrease
CAGR 2018-2020 below Group average
Output volume 2,461
Important growth areas: North America (Chemicals & Petrochem.)
Middle East
2017: Decline in EBITA-margin
Adj. EBITA-margin 4.9% 2018ff: Margin improvement towards upper end of blended margin
range
Organization Impact of new organization also a cost benefit
Bilfinger SE | Capital Markets Day | February 14, 2017 page 81Other Operations includes accretive businesses with significant value
Aiming for disposal in the longer run
615
• Dilutive business with 13 entities to be sold or liquidated within 18 months
sold in 2016 109 • 1 already sold
• 3 entities currently with signed SPA and final closing shortly expected
• Negative cash-effect and capital loss when selling (~30 million €)
dilutive 148
• Five entities individually managed for value while selectively leveraging on
Group resources and capabilities
• Profitable business with improvement potential
accretive 386
• Clear exit strategy within next 5 years
• Management will be incentivized on value created
• Monthly reviews to track successful implementation of individual value
creation plans
consolidation -28
2016 Output Volume
Bilfinger SE | Capital Markets Day | February 14, 2017 page 82Benefit from 49% of the value creation at Apleona
Vendor‘s Note: €100m, 10% interest p.a. upon maturity
Preferred participation note (PPN):
• No management involvement
• Certain information rights, some further rights
• Investment: €195m
• If value develops positively, P&L neutral appreciation
Will receive 49% of sales proceeds (after repayment of debt) at exit
Typical money multiple of owner would lead to a significant value upside
Bilfinger SE | Capital Markets Day | February 14, 2017 page 83Additional efficiency measures needed to reach ambition 2020
leading to slightly higher special items
285
In € million Dec. 31, 2016
Cash and cash equivalents 1,032
Financial debt Restructuring
-522
and 135 145
Net cash 510 SG&A efficiency
Pension provisions -304 165
Expected cash-out disposals Approx. -30
IT investments 50 75
Financial assets (Apleona, JBN) 320 90
80
Future cash-out special items Approx. -285
Compliance 50 60
Intra-year working capital swing Approx. -100 50
Warranties related to 50
Valuation net cash Approx. 100 25
sale of Building 50
and Facility 40
• Management keeps focus on all cash items 0
Future 2017 2018 2019ff
Future P&L 2017 2018 2019ff
• This is supported by incentive system payout
from effect from
special special
items items
Bilfinger SE | Capital Markets Day | February 14, 2017 page 84Company program B TOP will ensure execution and drive
the implementation of a high performance culture
Transforming Operational Performance
Closed Loop Net PL T arget
steady state
TOTAL
MD2-MD5
steady state
Measure Type A
Net PL Target
steady state Impact
MD2-MD5
Measure Type B
Net PL Target
steady state Impact
MD2-MD5
Measure Type C
Net PL Target
steady state Impact
MD2-MD5
Integrated approach for
continuous improvement
impact 2018 impact 2018 [%] impact 2018 2017 [%] impact 2018 2017 [%] impact 2018 2017 [%]
Org Unit PL Responsible[EUR] [EUR] Fullfillment [EUR] [EUR] Fullfillment [EUR] [EUR] Fullfillment [EUR] [EUR] Fullfillment
Region 1 Name 1 0 0 0% 0 0% 0 0% 0 0%
set clear and ambitious targets Target Matrix Region 2
Region 3
Region 4
Cross
Name 2
Name 3
Name 4
Name 5
0
0
0
0
0
0
0
0
0%
0%
0%
0%
0
0
0
0
0%
0%
0%
0%
0
0
0
0
0%
0%
0%
0%
0
0
0
0
0%
0%
0%
0%
HQ Name 6 0 0 0% 0 0% 0 0% 0 0%
TOTAL -
define measures, track implementation
ensure P&L impact
Measure Implementation Progress by Maturity Degree Organic growth
SG&A High value services
Profit Operational excellence
Transition OPEX reduction
1st idea, implementation First (P&L-)
implementation actions
savings target concept, effects and
started complete steady state
Wave 1 Wave 2
definition business plan
Actual Price, Productivity Target
2016 Inflation Measures 2020
MD1 MD2 MD3 MD4 MD5
• clear responsibilities • operationalize financial targets • stick to ambitious goals
• monthly implementation tracking + • benchmark key improvement levers + • cultural change
High performance culture
Bilfinger SE | Capital Markets Day | February 14, 2017 page 85Implementation of B TOP requires substantial initial efforts
but creates a sustainable productivity engine
FY 2017 FY 2018 FY 2019 FY 2020
Measure tracking pre-tool tool-based
Conceptual work
Program rollout
IT tool implementation1)
Training in the field
concept & IT tool review and optimize IT tool productivity wheel in full swing
[rollout] [ramp up] [steady state]
100%
high performance culture
implementation degree
high performance culture
implementation effort
B TOP comprehensive transformation program for profitable growth through cultural change
Bilfinger SE | Capital Markets Day | February 14, 2017 page 86FY 2017 will be the year of stabilization
Starting Point Outlook2)
in € million FY 2016 expected FY 2017
Orders received 4,056 Organic increase
Output volume 4,219 Mid-to-high single-digit organic decline
Adjusted EBITA / Continued improvement
15 / 0.4%
EBITA margin Margin increase ~100bps
€0 €1.00
Dividend proposal1)
(paid for FY 2015) (paid for FY 2016)
1) subject to a corresponding resolution by the competent boards 2) Assumption: on a comparable F/X basis
Bilfinger SE | Capital Markets Day | February 14, 2017 page 87Intention to resume dividend payment and execute Share Buyback
program while targeting investment grade mid- to long-term
Intended • In 2017 for FY 2016: €1.00
Dividend • Forward floor of €1.00
Policy* • Sustainable dividend stream going forward: 40 to 60% of adjusted net profit
Intended • Cancellation of current treasury shares (4%) minus shares to be retained for employee share programs
Share • Executive Board will propose to the Supervisory Board to request shareholders approval for a new 10%
share buyback authorization
Buyback • Executive Board intends to propose to the Supervisory Board a share buyback program of up to €150m
Program* to be executed in FY 2017 and 2018
• Consideration of synergetic M&A begins with the initiation of phase II of the strategy
M&A
• EBITA accretive one year after integration, ROCE beats WACC two years after integration
Criteria • Immediate start of comprehensive integration * Based on current
expectations and
execution of
presented strategy
as well as on
economic outlook
at the time.
Financial Subject to
• Ambition: (mid-term perspective) Investment Grade
Policy necessary
approvals by
supervisory Board
and AGM
Bilfinger SE | Capital Markets Day | February 14, 2017 page 88Ambition 2020 will be reached in three phases with clear milestones
Value
Stabilization Build up Build out
• Strategy defined • Top line growth resumed • Process and System
• Organization announced • First successes in new growth areas harmonization fully rolled out
• Execution master plan • New organization in full swing • Performance culture
• Top Management Team • Consistent project management established
• Dividend proposed process established • Productivity wheel in full swing
• B TOP rolled out • Net Profit break-even • Complexity significantly
• LOA Process rolled out • Adj. FCF positive latest in FY 2018 reduced
• SAP roll-ins commenced • Share buyback completed
• CRM implementation started • Successfully refinanced Financial ambition reached
• Cash focus in
incentive system increased
• Operating performance improved
Time
Bilfinger SE | Capital Markets Day | February 14, 2017 page 89Wrap-up
Bilfinger 2020
Financial ambition
Organic Growth Profit Cash Return
• Positive adj. FCF at the
• EBITA adjusted ~5% Post-tax
latest from 2018 onwards
• Gross margin ROCE2 reported:
>5% CAGR • Over the cycle, from 2018
improvement by ~200bps 8 to 10%
based on FY 2017 onwards: Cash Conversion
• SG&A ratio reduction by
Rate ~ 1 (minus growth
~300bps
adjustment)1
Capital Structure Investment Grade (mid-term perspective)
Sustainable dividend stream going forward
Dividend Policy
Policy: 40 to 60% of adjusted net profit
1Cash Conversion Definition: (Adj. EBITA + Depreciation – 2 Capital Employed w/o PPN
Change NWC - Net CAPEX) / Adj. EBITA
Bilfinger SE | Capital Markets Day | February 14, 2017 page 91Bilfinger 2020
Back to profitable growth
• Bilfinger: Exceptional profile, deep expertise,
long-standing customer relationships
We know what we are
• Market: Increasing demand, unrealized opportunities,
many growth levers
• 2 Service Lines, 4 Regions, 6 Industries
We know what to do
• 3 Phases: Stabilization – Build up – Build out
• Bilfinger 2020: CAGR: >5 %
EBITA (adjusted): ~5%
We know where we are heading
• Sustainable dividend stream going forward
Bilfinger SE | Capital Markets Day | February 14, 2017 page 92Bilfinger SE | Capital Markets Day | February 14, 2017 page 93
You can also read
