SNC-Lavalin Bridging the digital growth gap 1
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SNC-Lavalin Bridging the digital growth gap 1 Presentation to SNC Lavalins Board January 2019 Dragon Consulting Bayeta Mulato Hugo Oliveira Julio Tendeiro Vasco Amoroso 0. Agenda Executive Summary Challenge Overview of the situation
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01
SNC-Lavalin Bridging the digital growth gap 1 Presentation to SNC Lavalin’s Board
January 2019 Dragon Consulting Bayeta Mulato
Hugo Oliveira
Julio Tendeiro
Vasco Amoroso<br>
January 2019 Dragon Consulting Bayeta Mulato
Hugo Oliveira
Julio Tendeiro
Vasco Amoroso<br>
02
0. AgendaExecutive Summary Challenge
Overview of the situation
Alternatives
Recommendation
Implementation
Implementation Plan
Financials
Risks
Summary 2 Dragon Consulting<br>
Overview of the situation
Alternatives
Recommendation
Implementation
Implementation Plan
Financials
Risks
Summary 2 Dragon Consulting<br>
03
How can SNC-Lavalin achieve growth amid digital transformation? 3 Dragon Consulting<br>
04
4 Dragon Consulting 1. ChallengeHow can SNC-Lavalin achieve growth amid digital transformation? 1 2 3 Key issues<br>
05
Analysis 5 Dragon Consulting<br>
06
6 Dragon Consulting 2. AnalysisBuilding what matters Global Company / Proudly Canadian
Founded 1911 with +55.000 staff
Main markets NAM, EUR and MEA Revenue $10BN<br>
Founded 1911 with +55.000 staff
Main markets NAM, EUR and MEA Revenue $10BN<br>
07
7 Dragon Consulting 2. AnalysisBuilding what matters Global Company / Proudly Canadian
Founded 1911 with +55.000 staff
Main markets NAM, EUR and MEA Revenue $10BN Fully integrated professional services and PM company Acquisition of Atkins (HQ UK) / Core EDPM<br>
Founded 1911 with +55.000 staff
Main markets NAM, EUR and MEA Revenue $10BN Fully integrated professional services and PM company Acquisition of Atkins (HQ UK) / Core EDPM<br>
08
8 Dragon Consulting 2. AnalysisBuilding what matters 1 Clean Power
13% EBIT
$ 500M 2 Infrastructure
7% EBIT
$ 2 BN 3 Mining & M
4% EBIT
$ 500M 5 Nuclear
18% EBIT
$ 1 BN 6 Oil & Gas
7% EBIT
$ 2.5 BN 7 EDPM
11% EBIT
$ 3.2 BN Global Company / Proudly Canadian
Founded 1911 with +55.000 staff
Main markets NAM, EUR and MEA Revenue $10BN Fully integrated professional services and PM company Acquisition of Atkins (HQ UK) / Core EDPM<br>
13% EBIT
$ 500M 2 Infrastructure
7% EBIT
$ 2 BN 3 Mining & M
4% EBIT
$ 500M 5 Nuclear
18% EBIT
$ 1 BN 6 Oil & Gas
7% EBIT
$ 2.5 BN 7 EDPM
11% EBIT
$ 3.2 BN Global Company / Proudly Canadian
Founded 1911 with +55.000 staff
Main markets NAM, EUR and MEA Revenue $10BN Fully integrated professional services and PM company Acquisition of Atkins (HQ UK) / Core EDPM<br>
09
9 Dragon Consulting 2. AnalysisBuilding what matters 1 Clean Power
13% EBIT
$ 500M 2 Infrastructure
7% EBIT
$ 2 BN 3 Mining & M
4% EBIT
$ 500M 5 Nuclear
18% EBIT
$ 1 BN 6 Oil & Gas
7% EBIT
$ 2.5 BN 7 EDPM
11% EBIT
$ 3.2 BN Global Company / Proudly Canadian
Founded 1911 with +55.000 staff
Main markets NAM, EUR and MEA Revenue $10BN Fully integrated professional services and PM company Acquisition of Atkins (HQ UK) / Core EDPM Clear Vision and Mission towards 2020
Top Global
Fully Integrated
Client Centric
Strong performance driven culture
Operational Excellence<br>
13% EBIT
$ 500M 2 Infrastructure
7% EBIT
$ 2 BN 3 Mining & M
4% EBIT
$ 500M 5 Nuclear
18% EBIT
$ 1 BN 6 Oil & Gas
7% EBIT
$ 2.5 BN 7 EDPM
11% EBIT
$ 3.2 BN Global Company / Proudly Canadian
Founded 1911 with +55.000 staff
Main markets NAM, EUR and MEA Revenue $10BN Fully integrated professional services and PM company Acquisition of Atkins (HQ UK) / Core EDPM Clear Vision and Mission towards 2020
Top Global
Fully Integrated
Client Centric
Strong performance driven culture
Operational Excellence<br>
10
10 Dragon Consulting 2. AnalysisBuilding what matters 1 Clean Power
13% EBIT
$ 500M 2 Infrastructure
7% EBIT
$ 2 BN 3 Mining & M
4% EBIT
$ 500M 5 Nuclear
18% EBIT
$ 1 BN 6 Oil & Gas
7% EBIT
$ 2.5 BN 7 EDPM
11% EBIT
$ 3.2 BN Global Company / Proudly Canadian
Founded 1911 with +55.000 staff
Main markets NAM, EUR and MEA Revenue $10BN Fully integrated professional services and PM company Acquisition of Atkins (HQ UK) / Core EDPM Clear Vision and Mission towards 2020
Top Global
Fully Integrated
Client Centric
Strong performance driven culture
Operational Excellence<br>
13% EBIT
$ 500M 2 Infrastructure
7% EBIT
$ 2 BN 3 Mining & M
4% EBIT
$ 500M 5 Nuclear
18% EBIT
$ 1 BN 6 Oil & Gas
7% EBIT
$ 2.5 BN 7 EDPM
11% EBIT
$ 3.2 BN Global Company / Proudly Canadian
Founded 1911 with +55.000 staff
Main markets NAM, EUR and MEA Revenue $10BN Fully integrated professional services and PM company Acquisition of Atkins (HQ UK) / Core EDPM Clear Vision and Mission towards 2020
Top Global
Fully Integrated
Client Centric
Strong performance driven culture
Operational Excellence<br>
11
11 Dragon Consulting 2. AnalysisCovering all spectrums in this industry Capital / Consultancy / Design / Construction operations / Sustainable SNC Lavalin<br>
12
12 Dragon Consulting 2. AnalysisSNC-Lavalin sees customers as key partners Public
Governments
(CA, USA, EUR and OCE)
Value Privacy SNC Lavalin Private
Large Corporation
(CA, USA and EUR)
Value Efficiency
Reduce Risk<br>
Governments
(CA, USA, EUR and OCE)
Value Privacy SNC Lavalin Private
Large Corporation
(CA, USA and EUR)
Value Efficiency
Reduce Risk<br>
13
13 Dragon Consulting 2. AnalysisSNC-Lavalin sees customers as key partners Public
Governments
(CA, USA, EUR and OCE)
Value Privacy SNC Lavalin Private
Large Corporation
(CA, USA and EUR)
Value Efficiency
Reduce Risk<br>
Governments
(CA, USA, EUR and OCE)
Value Privacy SNC Lavalin Private
Large Corporation
(CA, USA and EUR)
Value Efficiency
Reduce Risk<br>
14
14 Dragon Consulting 2. AnalysisWhere does it come from<br>
15
15 Dragon Consulting 2. AnalysisRevenue … how does it work Reimbursable & Engineering Service contracts SNC Lavalin EPC Fixed Price Contracts
(Lumpsum)<br>
(Lumpsum)<br>
16
16 Dragon Consulting 2. AnalysisRevenue … how does it work Reimbursable & Engineering Service contracts SNC Lavalin EPC Fixed Price Contracts
(Lumpsum) EDPM
32% of $7.5BN<br>
(Lumpsum) EDPM
32% of $7.5BN<br>
17
17 Dragon Consulting 2. AnalysisThe world is changing World Population Growth by +4 BN in the next 30 years Poor productivity in Construction Industry continues to be a growing pain<br>
18
18 Dragon Consulting 2. AnalysisThe world is changing World Population Growth by +4 BN in the next 30 years Poor productivity in Construction Industry continues to be a growing pain In your industry, the very low adoption of technology remains an issue and so IT spending/investment
ICT
Media
Finance Services
…..
Construction<br>
ICT
Media
Finance Services
…..
Construction<br>
19
19 Dragon Consulting 2. AnalysisThe world is changing World Population Growth by +4 BN in the next 30 years Poor productivity in Construction Industry continues to be a growing pain In your industry, the very low adoption of technology remains an issue and so IT spending/investment
ICT
Media
Finance Services
…..
Construction Digital Twins 3D Printing, Modularization AI and Analytics Supply Chain Optimization<br>
ICT
Media
Finance Services
…..
Construction Digital Twins 3D Printing, Modularization AI and Analytics Supply Chain Optimization<br>
20
20 Dragon Consulting 2. AnalysisThe world is changing World Population Growth by +4 BN in the next 30 years Poor productivity in Construction continues to be a growing pain In your industry, the very low adoption of technology remains an issue and so IT spending/investment
ICT
Media
Finance Services
…..
Construction Digital Twins 3D Printing, Modularization AI and Analytics Supply Chain Optimization $18 BN / Mainly America<br>
ICT
Media
Finance Services
…..
Construction Digital Twins 3D Printing, Modularization AI and Analytics Supply Chain Optimization $18 BN / Mainly America<br>
21
21 Dragon Consulting 2. AnalysisIn Summary Strong Global Brand
Solid Financials
Core Values
Successful M&A’s<br>
Solid Financials
Core Values
Successful M&A’s<br>
22
22 Dragon Consulting 2. AnalysisIn Summary Pricing Model
Investors reluctance in Digital Investment
Skill Centre disperse location Strong Global Brand
Solid Financials
Core Values
Successful M&A’s<br>
Investors reluctance in Digital Investment
Skill Centre disperse location Strong Global Brand
Solid Financials
Core Values
Successful M&A’s<br>
23
23 Dragon Consulting 2. AnalysisIn Summary Pricing Model
Investors reluctance in Digital Investment
Skill Centre disperse location Leader in Digital transformation
Clean Energy growth potential
Emergent Business opportunities Strong Global Brand
Solid Financials
Core Values
Successful M&A’s<br>
Investors reluctance in Digital Investment
Skill Centre disperse location Leader in Digital transformation
Clean Energy growth potential
Emergent Business opportunities Strong Global Brand
Solid Financials
Core Values
Successful M&A’s<br>
24
24 Dragon Consulting 2. AnalysisIn Summary Pricing Model
Investors reluctance in Digital Investment
Skill Centre disperse location DT from competition
Customers reusing data
Data Privacy Strong Global Brand
Solid Financials
Core Values
Successful M&A’s Leader in Digital transformation
Clean Energy growth potential
Emergent Business opportunities<br>
Investors reluctance in Digital Investment
Skill Centre disperse location DT from competition
Customers reusing data
Data Privacy Strong Global Brand
Solid Financials
Core Values
Successful M&A’s Leader in Digital transformation
Clean Energy growth potential
Emergent Business opportunities<br>
25
25 Dragon Consulting 2. AnalysisIn Summary Pricing Model
Investors reluctance in Digital Investment
Skill Centre disperse location Leader in Digital transformation
Productivity Awareness
Clean Energy growth potential DT from competition
Customers reusing data
Data Privacy Strong Global Brand
Solid Financials
Core Values
Successful M&A’s<br>
Investors reluctance in Digital Investment
Skill Centre disperse location Leader in Digital transformation
Productivity Awareness
Clean Energy growth potential DT from competition
Customers reusing data
Data Privacy Strong Global Brand
Solid Financials
Core Values
Successful M&A’s<br>
26
Alternatives 26 Dragon Consulting<br>
27
27 Dragon Consulting 3. AlternativesHow can SNC-Lavalin achieve growth amid digital transformation? 1 2 3<br>
28
Where to do business? How to do business 3. AlternativesThis changing landscape creates two strategic questions for SNC Dragon Consulting 28<br>
29
Where to do business? How to do business 3. AlternativesThis changing landscape creates two strategic questions for SNC Dragon Consulting 29 Outside the scope of this presentation
Maintain current business units strategy
Focus on Design Engineering growth options<br>
Maintain current business units strategy
Focus on Design Engineering growth options<br>
30
Where to do business? How to do business Scope of this presentation
How to adapt the Design Engineering Business
How to fund these growth options 3. AlternativesThis changing landscape creates two strategic questions for SNC Dragon Consulting 30 Outside the scope of this presentation
Maintain current business units strategy
Focus on Design Engineering growth options<br>
How to adapt the Design Engineering Business
How to fund these growth options 3. AlternativesThis changing landscape creates two strategic questions for SNC Dragon Consulting 30 Outside the scope of this presentation
Maintain current business units strategy
Focus on Design Engineering growth options<br>
31
Recommendationand implementation 31 Dragon Consulting<br>
32
4. Recommendation SNC’s digital growth road is founded on three pillars 32 Dragon Consulting How can SNC-Lavalin achieve growth amid digital transformation? Decreasing Billable Hours Decreasing need for services Low R&D investment in the sector New pricing model New products and services New customer segments in the same markets<br>
33
4. Recommendation SNC’s digital growth road is founded on three pillars 33 Dragon Consulting How can SNC-Lavalin achieve growth amid digital transformation? Decreasing Billable Hours Decreasing need for services Low R&D investment in the sector New pricing model New products and services New customer segments in the same markets<br>
34
4. Recommendation A new pricing model addresses the decreasing billable hours trend 34 Dragon Consulting How can SNC-Lavalin achieve growth amid digital transformation? Decreasing Billable Hours Decreasing need for services Low R&D investment in the sector What When How Currently EDPM business operates under a Cost-Plus reimbursement model
We recommend moving to a value-based pricing system under a fixed price model When How<br>
We recommend moving to a value-based pricing system under a fixed price model When How<br>
35
4. Recommendation A new pricing model addresses the decreasing billable hours trend 35 Dragon Consulting How can SNC-Lavalin achieve growth amid digital transformation? Decreasing Billable Hours Decreasing need for services Low R&D investment in the sector What When How Currently EDPM business operates under a Cost-Plus reimbursement model
We recommend moving to a value-based pricing system under a fixed price model Many lawyers, consultants, and accountants charge per hour
But others charge based on the value they generate to the client regardless of hours
Bain Consulting is the benchmark, as they price based on value and clients happily pay
EDPM services should be priced according to value generating KPIs
How much value does the service generate to the client based on earnings and savings<br>
We recommend moving to a value-based pricing system under a fixed price model Many lawyers, consultants, and accountants charge per hour
But others charge based on the value they generate to the client regardless of hours
Bain Consulting is the benchmark, as they price based on value and clients happily pay
EDPM services should be priced according to value generating KPIs
How much value does the service generate to the client based on earnings and savings<br>
36
4. Recommendation A new pricing model addresses the decreasing billable hours trend 36 Dragon Consulting How can SNC-Lavalin achieve growth amid digital transformation? Decreasing Billable Hours Decreasing need for services Low R&D investment in the sector What When How Currently EDPM business operates under a Cost-Plus reimbursement model
We recommend moving to a value-based pricing system under a fixed price model Many lawyers, consultants, and accountants charge per hour
But others charge based on the value they generate to the client regardless of hours
Bain Consulting is the benchmark, as they price based on value and clients happily pay
EDPM services should be priced according to value generating KPIs
How much value does the service generate to the client based on earnings and savings 2019 – Develop KPIs and test new model in PM services where it’s easier to assess value
2020 to 2022 – Gradually change SNC’s total pricing mix from 75% / 25% to 50% / 50%<br>
We recommend moving to a value-based pricing system under a fixed price model Many lawyers, consultants, and accountants charge per hour
But others charge based on the value they generate to the client regardless of hours
Bain Consulting is the benchmark, as they price based on value and clients happily pay
EDPM services should be priced according to value generating KPIs
How much value does the service generate to the client based on earnings and savings 2019 – Develop KPIs and test new model in PM services where it’s easier to assess value
2020 to 2022 – Gradually change SNC’s total pricing mix from 75% / 25% to 50% / 50%<br>
37
4. Recommendation SNC’s digital growth road is founded on three pillars 37 Dragon Consulting How can SNC-Lavalin achieve growth amid digital transformation? Decreasing Billable Hours Decreasing need for services Low R&D investment in the sector New pricing model New products and services New customer segments in the same markets<br>
38
4. Recommendation New products and services address the decreasing demand 38 Dragon Consulting How can SNC-Lavalin achieve growth amid digital transformation? Decreasing Billable Hours Decreasing need for services Low R&D investment in the sector What When How Leverage Atkins acquisition to optimise organic growth through current offering
Tap into the new Construction Tech Landscape to build new EDP Products and Services When How<br>
Tap into the new Construction Tech Landscape to build new EDP Products and Services When How<br>
39
4. Recommendation New products and services address the decreasing demand 39 Dragon Consulting How can SNC-Lavalin achieve growth amid digital transformation? Decreasing Billable Hours Decreasing need for services Low R&D investment in the sector What When How Leverage Atkins acquisition to optimise organic growth through current offering
Tap into the new Construction Tech Landscape to build new EDP Products and Services Organic
Atkins acquisition can leverage automation of the business and increase productivity
To ensure this, company-wide training needs to be done.
Partnership with CodeAcademy and quarterly hackhathons focused on productivity
Inorganic
Invest in the emerging companies in the ecosystem through a Corporate VC business unit
Follow Xiaomi’s benchmark – Invest instead of acquire and leverage scale to sell new offering<br>
Tap into the new Construction Tech Landscape to build new EDP Products and Services Organic
Atkins acquisition can leverage automation of the business and increase productivity
To ensure this, company-wide training needs to be done.
Partnership with CodeAcademy and quarterly hackhathons focused on productivity
Inorganic
Invest in the emerging companies in the ecosystem through a Corporate VC business unit
Follow Xiaomi’s benchmark – Invest instead of acquire and leverage scale to sell new offering<br>
40
4. Recommendation New products and services address the decreasing demand 40 Dragon Consulting How can SNC-Lavalin achieve growth amid digital transformation? Decreasing Billable Hours Decreasing need for services Low R&D investment in the sector What When How Leverage Atkins acquisition to optimise organic growth through current offering
Tap into the new Construction Tech Landscape to build new EDP Products and Services 2019 – Initiate CA partnership and hackhatons. Map ecosystem and hire new CVC arm
2020 to 2022 – Start selling new Automation and AI services. Gradually invest CVC’s $100M budget Organic
Atkins acquisition can leverage automation of the business and increase productivity
To ensure this, company-wide training needs to be done.
Partnership with CodeAcademy and quarterly hackhathons focused on productivity
Inorganic
Invest in the emerging companies in the ecosystem through a Corporate VC business unit
Follow Xiaomi’s benchmark – Invest instead of acquire and leverage scale to sell new offering<br>
Tap into the new Construction Tech Landscape to build new EDP Products and Services 2019 – Initiate CA partnership and hackhatons. Map ecosystem and hire new CVC arm
2020 to 2022 – Start selling new Automation and AI services. Gradually invest CVC’s $100M budget Organic
Atkins acquisition can leverage automation of the business and increase productivity
To ensure this, company-wide training needs to be done.
Partnership with CodeAcademy and quarterly hackhathons focused on productivity
Inorganic
Invest in the emerging companies in the ecosystem through a Corporate VC business unit
Follow Xiaomi’s benchmark – Invest instead of acquire and leverage scale to sell new offering<br>
41
4. Recommendation SNC’s digital growth road is founded on three pillars 41 Dragon Consulting How can SNC-Lavalin achieve growth amid digital transformation? Decreasing Billable Hours Decreasing need for services Low R&D investment in the sector New pricing model New products and services New customer segments in the same markets<br>
42
4. Recommendation Sharing our R&D to new customers addresses the sector’s low investment 42 Dragon Consulting How can SNC-Lavalin achieve growth amid digital transformation? Decreasing Billable Hours Decreasing need for services Low R&D investment in the sector What When How Due to technology, smaller players in the construction space are getting more sophisticated
But they lack SNC’s scale and R&D achievements. These can be sold into this new customers<br>
But they lack SNC’s scale and R&D achievements. These can be sold into this new customers<br>
43
4. Recommendation Sharing our R&D to new customers addresses the sector’s low investment 43 Dragon Consulting How can SNC-Lavalin achieve growth amid digital transformation? Decreasing Billable Hours Decreasing need for services Low R&D investment in the sector What When How Due to technology, smaller players in the construction space are getting more sophisticated
But they lack SNC’s scale and R&D achievements. These can be sold into this new customers When Focus on standardized software services
Project Management can be turned into a science
Salesforce benchmark
Focus on data analytics solutions optimized to assist this new customer segment
Help these businesses be more productive
No risk of them competing against SNC due to different scale and final customers<br>
But they lack SNC’s scale and R&D achievements. These can be sold into this new customers When Focus on standardized software services
Project Management can be turned into a science
Salesforce benchmark
Focus on data analytics solutions optimized to assist this new customer segment
Help these businesses be more productive
No risk of them competing against SNC due to different scale and final customers<br>
44
4. Recommendation Sharing our R&D to new customers addresses the sector’s low investment 44 Dragon Consulting How can SNC-Lavalin achieve growth amid digital transformation? Decreasing Billable Hours Decreasing need for services Low R&D investment in the sector What When How Due to technology, smaller players in the construction space are getting more sophisticated
But they lack SNC’s scale and R&D achievements. These can be sold into this new customers 2019 – Prototype these new offerings
2020 to 2022 – Start selling them with new sales team Focus on standardized software services
Project Management can be turned into a science
Salesforce benchmark
Focus on data analytics solutions optimized to assist this new customer segment
Help these businesses be more productive
No risk of them competing against SNC due to different scale and final customers<br>
But they lack SNC’s scale and R&D achievements. These can be sold into this new customers 2019 – Prototype these new offerings
2020 to 2022 – Start selling them with new sales team Focus on standardized software services
Project Management can be turned into a science
Salesforce benchmark
Focus on data analytics solutions optimized to assist this new customer segment
Help these businesses be more productive
No risk of them competing against SNC due to different scale and final customers<br>
45
4. Recommendation SNC’s digital growth road is founded on three pillars 45 Dragon Consulting How can SNC-Lavalin achieve growth amid digital transformation? Decreasing Billable Hours Decreasing need for services Low R&D investment in the sector New pricing model New products and services New customer segments in the same markets<br>
46
Financials 46 Dragon Consulting<br>
47
47 Dragon Consulting 5. FinancialsAssumptions for the transformations<br>
48
48 Dragon Consulting 5. FinancialsAssumptions<br>
49
49 Dragon Consulting 5. FinancialsAssumptions for Sales Growth and EBIT Margin<br>
50
50 Dragon Consulting 5. FinancialsOPEX and Capex will be slightly above 100M USD<br>
51
51 Dragon Consulting 5. FinancialsNet Results met your targets for Earning per Share<br>
52
52 Dragon Consulting 5. FinancialsOPEX and Capex will be slightly above 100M USD<br>
53
Risks 53 Dragon Consulting<br>
54
54 Dragon Consulting 5. ImplementationThere are three risks to consider… but they can be mitigated 1 Probability High Low High Impact Risks Mitigations 1 Data privacy and ethics Investments in advanced data protection technology<br>
55
55 Dragon Consulting 5. ImplementationThere are three risks to consider… but they can be mitigated 2 1 Probability High Low High Impact Risks Mitigations 1 2 Data privacy and ethics Reduction of staff due to AI Facilitate skill transfer Investments in advanced data protection technology<br>
56
56 Dragon Consulting 5. ImplementationThere are three risks to consider… but they can be mitigated 3 2 1 Probability High Low High Impact Risks Mitigations 1 2 3 Data privacy and ethics Reduction of staff due to AI Not achieving $5 EPS Facilitate skill transfer Investments in advanced data protection technology Erosion of top talents<br>
57
Summary 57 Dragon Consulting<br>
58
4. Recommendation Growth will be achieved through three pillars and financed through equity 58 Dragon Consulting How can SNC-Lavalin achieve growth amid digital transformation? Decreasing Billable Hours Decreasing need for services Low R&D investment in the sector New pricing model
Increases value capture New products and services
Increases productivity New customer segments
Increase revenues Financed through equity<br>
Increases value capture New products and services
Increases productivity New customer segments
Increase revenues Financed through equity<br>
59
Question and Answers 59 Dragon Consulting<br>