Luxembourg – 21 November 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 third quarter which ended 30 September 2024.
Highlights
- Third quarter Adjusted EBITDA of $321 million, up 59% on the prior year period, equating to a margin of 18%
- Robust free cash flow of $138 million in the third quarter, leading to a reduction in net debt of $170 million
- Adjusted EBITDA in the first nine months of 2024 of $775 million, exceeding the prior full year, driven by solid revenue growth and strong expansion of margins to 16% from 11% in the prior year
- On track to deliver full year 2024 Adjusted EBITDA between $1,025 and $1,075 million, growth of over 40% year-on-year
- A high-quality backlog of $11.3 billion implies around 75% visibility on 2025 revenue guidance and supports the outlook for Adjusted EBITDA margin expansion to 18 to 20%
- Approximately $250 million returned to shareholders in line with our commitment to return at least $1 billion to shareholders over the period from 2024 to 2027
| Third Quarter | Nine Months Ended | |||
| For the period (in $ millions, except Adjusted EBITDA margin and per share data) | Q3 2024 Unaudited | Q3 2023 Unaudited | 30 Sep 2024 Unaudited | 30 Sep 2023 Unaudited |
| Revenue | 1,834 | 1,578 | 4,968 | 4,342 |
| Adjusted EBITDA(a) | 321 | 201 | 775 | 470 |
| Adjusted EBITDA margin(a) | 18% | 13% | 16% | 11% |
| Net operating income | 163 | 64 | 319 | 50 |
| Net income | 98 | 36 | 190 | 21 |
| Earnings per share – in $ per share | ||||
| Basic | 0.31 | 0.11 | 0.60 | 0.11 |
| Diluted(b) | 0.31 | 0.11 | 0.60 | 0.11 |
| At (in $ millions) | 30 Sep 2024 Unaudited | 30 June 2024 Unaudited | ||
| Backlog(a) | 11,300 | 12,544 | ||
| Book-to-bill ratio(a) | 0.3x | 2.3x | ||
| Cash and cash equivalents | 440 | 290 | ||
| Borrowings | (803) | (783) | ||
| Net debt excluding lease liabilities(a) | (363) | (494) | ||
| Net debt including lease liabilities(a) | (857) | (1,027) | ||
(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 delivered strong financial results in the third quarter, with solid progress on major projects in Subsea and Conventional, and high utilisation and good performance from our Renewables fleet. In the first nine months of 2024, the Group has delivered Adjusted EBITDA of $775 million, exceeding the prior full year period, and we are on track to meet our profitability objectives for 2024. With approximately three quarters of 2025 revenue already booked in backlog, and with a beneficial project margin mix, I am confident that the business will continue to deliver strong growth in profitability next year. Subsea7’s senior management team is focused on ensuring high conversion of future profitability into cash flow and continues to prioritise shareholder returns within our capital allocation framework, alongside a disciplined approach to reinvestment. In February we committed to return at least $1 billion to shareholders over four years from 2024 to 2027, and the first tranche of approximately $250 million has been completed in November.
Third quarter project highlights
In Subsea and Conventional, our portfolio of projects in Brazil made good progress, particularly Mero 3&4, where Seven Vega completed its first rigid pipelay trip. Yggdrasil, in Norway, also made a good contribution with offshore activities for Seven Arctic and Seven Navica, while in Guyana, the Gas-to-Energy project approached operational completion. Marjan 2, in Saudi Arabia neared completion, with the final platform float-over operation expected by year end.
In Renewables, utilisation of our key installation vessels was very high including Seaway Aimery, at the Revolution inter-array cable project in the US, Seaway Ventus, installing turbines at Borkum Riffgrund 3 in Germany, and Seaway Strashnov and Seaway Alfa Lift at Dogger Bank B in the UK. We were also active with cable lay in Taiwan where Seaway Phoenix and Seaway Moxie were working on the Yunlin project while Maersk Connector continued to progress Hai Long.
Third quarter financial review
Revenue of $1.8 billion increased 16% compared to the prior year period. Adjusted EBITDA of $321 million equated to an Adjusted EBITDA margin of 18%, up from 13% in Q3 2023. This was driven by a strong performance in both business units as major projects made good operational progress.
After depreciation and amortisation of $158 million, net operating income was $163 million, compared to net operating income of $64 million in the prior year period. Net finance costs of $20 million and taxation of $70 million, resulted in net income for the quarter of $98 million compared with $36 million in the prior year period.
Net cash generated from operating activities in the third quarter was $270 million, including a $27 million increase in net working capital. Net cash used in investing activities was $126 million mainly comprising $132 million related to the purchases of property, plant and equipment and intangible assets, including Seven Merlin. Net cash used in financing activities was $78 million including share repurchases of $20 million and lease payments of $60 million. Overall, cash and cash equivalents increased by $150 million to $440 million at 30 September 2024. This resulted in net debt of $363 million excluding lease liabilities, or $857 million including lease liabilities of $495 million.
Third quarter order intake was $0.6 billion comprising new awards of $0.3 billion and escalations of $0.3 billion resulting in a
book-to-bill ratio of 0.3 times. Book-to-bill for the first nine months of 2024 was 1.2 times. Backlog at the end of September was $11.3 billion, of which $1.8 billion is expected to be executed in 2024, $5.3 billion in 2025 and $4.2 billion in 2026 and beyond.
Outlook
Management remains confident in the outlook for the Group supported by a high backlog, a robust tendering pipeline and positive conversations with clients in both the subsea and offshore wind industries.
Regarding full year 2024, revenue is expected to be towards the upper end of the range from $6.5 to $6.8 billion while Adjusted EBITDA is expected to be between $1,025 and $1,075 million.
Looking ahead to full year 2025, revenue is anticipated to be between $6.8 and $7.2 billion. As the mix of activity continues to shift to projects won in a more favourable environment, our Adjusted EBITDA margin is expected to be between 18 and 20%. This margin is expected to continue to improve, exceeding 20% in full year 2026.
Overall, through strong positions in lower-carbon oil and gas, as well as offshore wind, Subsea7 is well-placed to deliver the energy the world needs for today and tomorrow.
Conference Call Information
Date: 21 November 2024
Time: 11:00 UK Time, 12:00 CET
Access the webcast at subsea7.com or https://edge.media-server.com/mmc/p/5nrn5bvo/
Register for the conference call https://register.vevent.com/register/BI6983efafda664e1f94fb1a5d355e684b
For further information, please contact:
Katherine Tonks
Head of Investor Relations
Email: ir@subsea7.com
Telephone: +44 20 8210 5568
Special Note Regarding Forward-Looking Statements
This 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 third 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 21 November 2024 08:00 CET.
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