Analyst & Investor Roundtable: Automation. 3 rd December 2014

Transcription

1 Analyst & Investor Roundtable: Automation 3 rd December 2014

2 1 Agenda Introduction to Servelec Automation Alan Stubbs - Servelec Controls Kevan Jones - Servelec Technologies Andy Sullivan Summary & questions Alan Stubbs

3 2 Servelec Automation Automation is a significant contributor to the Group: 70% of group revenue* 48% of gross profit* 67% of order entry* *HY 2014 Operating profit excludes central services, amortisations and share based payments

4 Kevan Jones Managing Director

5 3 Introduction to Servelec Controls The largest independent UK control systems integrator for the Oil & Gas and Power & Nuclear sectors We engineer solutions, integrating best in class products brought in from the market to address customers individual needs Experience: Oil & Gas 40+ yrs, Power & Nuclear 10 yrs Strong relationships: major blue chip clients across both industries Industry leading margins : net margin of circa 22% Significant opportunities for growth in both sectors Oil & Gas Power & Nuclear An integrator providing bespoke solutions to solve customers requirements

6 4 Servelec Controls Controls contribution to Automation division: 41% of Revenue* 55% of Operating profit* 47% of Order entry* Split of business by revenue Oil & Gas Power & Nuclear Servelec Controls Servelec Technologies *HY 2014 Operating profit excludes central services, amortisations and share based payments Strong contributor to overall division

7 5 Bespoke solutions Developing tailored hardware and software solutions by integrating best in class products Providing Integrated Control & Safety Systems (ICSS) such as: Process Control Systems (PCS) BEST IN CLASS PRODUCTS Emergency Shutdown Systems (ESD) Fire and Gas Detection Systems (F&G) System Life Cycle Engineering Consultancy Engineering Design Solutions Manufacturing & Testing Delivery & Implementation Lifetime Support 24/7/365 Solutions built around specific customer requirements

8 Oil & Gas

9 6 Oil & Gas: Introduction to market opportunities Vast UK market driven by opportunities to extend life of Offshore Onshore North Sea Assets Growing UK Continental Shelf project spend, 2014: circa 14bn* North Sea UK Controls & Safety Systems market estimated at circa m* Servelec Controls revenue circa 12m+, 5% market share Additional growth anticipated from remote monitoring Opportunities to expand globally through UK EPCs Irish Sea Southern North Sea *(Based on estimates from DECC Project Pathfinder & PILOT, EIC Database and Oil & Gas UK Industry Updates) 300 platforms in UK Continental shelf Strong UK base with further opportunities for growth

10 Expected revenue 7 Oil & Gas: opportunities during platform lifecycle Control works opportunities vs platform lifecycle Opportunities for controls work extended Operators seeking to extend 50 platform life through lower Upgrade controls Remote Monitoring Potential reduction in operating costs due to unmanning enables lifetime of platform to be extended cost options than traditional operating structure 0 Time Expected Revenue from field Operating cost of unmanned platform Operating cost of manned platform Controls work opportunities Long term opportunities enable extension of North Sea assets

11 8 Oil & Gas: Case study Major System Upgrades to brownfield site 10+ years relationship This major operator has embarked on a long term mission to simplify several of its offshore platforms in 3 strategic stages Stage to 2015 New Emergency Shutdown and Fire & Gas systems 6 platforms completed to date Largest is in progress Sales value: 10m to date Stage to 2017 New field wide Distributed Control System, including onshore terminal Sales value: Circa 8-12m Stage to 2020 Install new instrumentation Streamline platforms and move to remote monitoring Estimated sales value: 2m/ asset Additional future opportunity : The company is currently reviewing the possibility of adopting the same methodology across all operations

12 9 Oil & Gas: Competitive environment Traditional UK market driven by high levels of single source business Main competitors vary by size of project Small projects 50k - 1m Systems integrators (smaller niche companies) Semco Proeon CETIX SERVELEC CONTROLS Servelec Controls Largest of integrators Able to work across large and small projects Partners with OEMs on larger projects Large projects 1m - 5m Equipment manufacturers Siemens ABB Rockwell Emerson Niche player able to compete for all size of contracts

13 10 Oil & Gas: Competitive advantage 40+ years experience in the market Strong reputation throughout the industry and stable existing customer base Deep knowledge of customer platforms and associated client retention Highly skilled & accredited workforce 99% staff Standardised processes Full turnkey capability including long term support contracts and 24/7, 365 cover Strong industry relationships with equipment manufacturers Strong competitive advantage supports industry leading margins

14 11 Oil & Gas: Routes to market Partnerships with equipment manufacturers 5% Existing products and services Direct with owner/operators Engineering, Procurement and Construction (EPCs) 60% 35% Diversification into new products and services Mix of business HY 2014 Strong margins across all routes to market

15 Power & Nuclear

16 12 Power & Nuclear: Introduction to market opportunities Sizeable opportunities available on active and decommissioning sites Three main operators, EDF, Magnox and Sellafield, provide long term contracts Majority of opportunities for Servelec relate to on-site equipment replacement, refurbishment and decommissioning Strong relationships with the three key operators and major EPC suppliers

17 13 Power & Nuclear: Competitive environment High barriers to entry: UK market driven by long term framework agreements and EPC partnership agreements Highly regulated environment Low number of competitors due specific skills sets required and stringent security clearances Key competitors include: Barriers to entry due to long term agreements, skills demand and security

18 14 Power & Nuclear: Competitive advantage Excellent reputation throughout industry Workforce with niche and accredited skillset Accredited for work on Sellafield framework and all staff SQEP (Suitably Qualified Engineering Personnel) 99% staff Technical expertise combined with project management capabilities Lifecycle support with full range of post contract service levels Strong industry relationships with equipment manufacturers Strong customer base Coming of age business with growing track record

19 15 Power & Nuclear: Routes to market Owner/Operators EPCs Opportunities to expand to other EPC suppliers

20 16 Power & Nuclear: Case study EDF Energy - Diagnostic and Monitoring Systems (DMS) - Torness and Heysham 2 Servelec Controls are currently engaged by EDF Energy in a series of major contracts, stretching over 10 years, to replace the Diagnostic and Monitoring Systems (DMS) on the Fuel Routes along with Ancillary Plant Upgrades at both Torness and Heysham 2 nuclear power stations. Current 2007 to 2017 EDF Energy Replacement of obsolete DMS and Ancillary Systems at Torness and Heysham 2 power stations Sales value: 7m to date Planned 2015 to 2020 EDF Energy Replacement of further DMS and Ancillary Systems at Dungeness, Torness, Heysham 2 and Hinkley Point power stations. Dungeness budget has been approved Sales value: Circa 5-10m Future 2015 to 2030 AWE*, Dounreay, Magnox and Sellafield Roll out of developed replacements for obsolete Ancillary Systems Sales value: Circa 10-15m *Atomic Weapons Establishment

21 17 Strategy for growth: Servelec Controls To maximise potential inherent within the UK market, whilst growing a global presence in Oil & Gas Oil & Gas Power & Nuclear Leverage position in mature market Identify opportunities for international growth either thorough UK companies or direct to non- UK businesses New Business Development Director for Aberdeen Increased focus on London and South East Build upon business that is coming of age Appointed specialist high level management team, including Business Development Director Potential for acquisition where it adds value Positive market conditions: ageing oil & gas platforms and growing nuclear footprint

22 18 Servelec Controls Opportunity for questions

23 Andy Sullivan Managing Director

24 19 Servelec Technologies Technologies contribution to Automation: 59% of revenue* 45% of Operating profit* 53% of Order entry* *HY 2014 Operating profit excludes central services, amortisations and share based payments Servelec Technologies Servelec Controls Strong contributor to overall division

25 20 Overview of Servelec Technologies A product specialist: focused on the water, oil & gas and transport industries Technology company: high level and breadth of own IP UK and global client base International business: strong global reach with equal split of business from UK and global markets 25+ year track record in core markets Predominantly repeat business Recurring revenues from support contracts Opportunities to grow through cross sell of products A product specialist delivering end-to end-solutions for direct customers

26 21 Product Portfolio Data optimisation exploitation Data presentation aggregation Business optimisation (software) SCADA / telemetry (software) Data collection Data collection Data conversion Conversion Data hierarchy Remote Telemetry Units (Hardware) Instruments Solution Component Focussed on value-add real-time business optimisation

27 22 Integration of Semaphore: Remote Telemetry Unit manufacturer Acquired by Servelec on 18 th October 2013 Produces RTUs (hardware): Tbox and Kingfisher brands Servelec Seprol brand now moved to sit within Semaphore business Significant improvement in performance at HY 2014 Established brand and global distribution channels Good spread of industry application Operationally geared business already benefiting from economies of scale

28 23 Introduction to market opportunities: UK & Ireland Water Regulated UK Water industry yields good visibility of work within a 5 year timeframe Estimated 43bn UK Investment in water in AMP6 (Asset Management Plan ) Control & Automation estimated at m Addressable market: SCADA, Telemetry and RTUs represents circa 20% of the Control and Automation market at m Water company coverage in AMP5 Strong and established position from which to continue growth

29 24 Introduction to market opportunities: Global markets Applicable global market circa 1bn p.a. North America Oil & Gas is 25% of the global non electrical market and core target Huge opportunity to grow from <2.5% RTU and Core target markets SCADA/Telemetry market share through development of distributor network Acquisition of Semaphore provides the platform for global growth Targeting high growth areas of USA, China and Brazil through distributors

30 25 Competitive environment Most providers able to offer one or maybe two of the key Providers in market Servelec Technologies Business optimisation SCADA RTUs elements only Schneider We believe that Servelec Technologies is one of only two global providers able to offer a Rockwell Automation Siemens Broderson complete end-to-end solution Xylem Enhanced opportunities for cross sell driving higher margin Metasphere ABB Derceto MWH Innovise ICS SEAMS TaKaDu One of only 2 global providers of complete end-to-end solutions

31 26 Competitive advantages One Stop Shop : Data collection, presentation AND optimisation In real time End-to end solutions OR stand alone products Value driven rather than cost driven Founder member of the Water Industry Telemetry Standards community (WITS) at the heart of telemetry policy in the water sector Established global distribution channels SCADA & software outlet Evidence of delivery over a 25+ year track record Responsive to clients requirement Versatile operation, able to respond quickly to market demands

32 27 Routes to market UK MARKETS Solution provision Direct to end-customers Product sale 62% 48% 14% Water Transport Oil & Gas Environmental GLOBAL MARKETS System integrators 8% Oil & Gas Original Equipment Manufacturers (OEM) 4% Transport Water Distributors 26% + Others Mix of business HY 2014 Established routes to UK market, diverse and growing global distribution channels

33 28 Case studies: RTU Belgian Railways DGN Trackside Monitoring Solutions PTT Thailand, Gas Transmission & distribution Pipelines Control & Monitoring 2003 Present day Over 2000 RTU assemblies deployed Bespoke solution for track systems monitoring, e.g. track heating, level crossings, signals. High added value - reduces train delays and thus compensation costs 1999 Present day Approximately 400 RTU systems deployed Pipeline flow monitoring and control, eg industrial customer metering pipe break detection valve control pressure control gas composition reporting High added value minimises customer disruption and thus revenue loss Ongoing programme

34 29 Case studies: SCADA Meteorological Monitoring Systems (MMS) Automation of the collection of weather data from distributed AWS (Weather Stations) Validation of the collected data 1 minute data updates Feeds the UKMO weather forecasting model with data Disseminates standard format coded messages to other Met organisations Ongoing growth and optimisation of the installed system

35 30 Case studies: Business optimisation MISER Network Management Customer since 1988 Optimising water supply network since 2014 System decides operation and instructs SCADA Automatically recalculates and compensates when customer equipment fails real-time Significant savings projected from early trials demand reservoir level electricity tariff pumping

36 31 Product and services: development overview Unified product range through productisation of SCADA/Telemetry and business optimisation Increasing real-time capabilities of existing products Bringing new complementary products to market Business optimisation Network Management Real-Time Operation Productisation Asset Management Leak Detection Real-Time Operation Pilot Deployment Secondary Data SCADA/Telemetry Features & Simplification Productisation Mobile Devices & Cloud RTUs Oil & Gas Flow Computer Low Power Device High Speed Modular RTU Scalable solution using smart products

37 32 Strategy for growth: Servelec Technologies To become a global brand in real-time business optimisation through the delivery of a unified product set across a developing global distribution network Productisation Cross-selling Market development Intuitive, easy to use products Off the shelf solutions Licence fee model Focus on high volume sales Redefining sales process and retraining sales team Marketing investment to achieve global brand visability Identify key distributors Oil & Gas USA & China Water Australasia Utilities Brazil Potential for acquisition niche capability Three pronged strategy for growth

38 33 Servelec Technologies Opportunity for questions

39 34 Summary: Servelec Automation Automation is a significant contributor to the Group result: 70% of group revenue* 48% of gross profit* 67% of order entry* Significant potential remains in existing markets across Oil & Gas, Power & Nuclear and Water Global distribution network provides opportunities to tap into a broader global market both at a project led (Controls) and productisation (Technologies) level Significant opportunities for growth both within UK and globally *HY