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Kentz Corporation (KENZ)

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Friday 16 May, 2014

Kentz Corporation

Interim Management Statement

RNS Number : 3087H
Kentz Corporation Ltd
16 May 2014
 



Kentz Corporation Limited

Interim Management Statement

London, 16 May 2014: Kentz Corporation Limited ("Kentz", the "Company"), the holding company of the Kentz engineering and construction group ("the Group"), releases the following interim management statement in respect of the period since 1 January 2014.

Overview

·     Kentz executed 48.8 million man hours during the period 1 April 2013 to 31 March 2014, delivering an industry leading safety performance with a TRIR of 0.17

 

·     Year-to-date performance in line with management's expectations

 

·     Backlog at the end of April 2014 was US$4.5bn (Dec 2013: US$3.1bn, April 2013: US$2.8bn)

 

·     Prospect pipeline increased to US$16.3bn at end of April 2014 (Dec 2013: US$15.6bn, April 2013: US$13.7bn)

 

·     Order intake of US$1.8bn in the first four months of 2014 (FY 2013: US$1.7bn)

 

·     The Global Business Unit realignment announced earlier this year has already shown positive signs in business winning and project execution

 

·     Final 2013 dividend of 10.9 US cents per share to be paid on 23 May 2014

 

·     Continued strong financial position to support further growth

 

Christian Brown, Chief Executive of Kentz, said: "Our increasing order backlog to record levels provides us with great confidence for the continued success of Kentz.We are continuing to see further investment from our clients throughout the world and are extremely pleased that the addition of Valerus to the Group has been seamless to date and offers additional opportunities for growth.

"Our performance, year-to-date, has been in line with our expectations and we expect that 2014 overall will produce considerable revenue growth for the Group."

Operational Update

Following very significant growth in our Technical Support Services business in 2013, we are continuing to see further opportunities for our services in our core markets. Following the realignment of services, the focus of this business unit will be centred on providing services to client projects post construction and throughout the operational life of their assets to improve efficiency and extend their useful lives.

With a greater focus by oil and gas companies on controlling costs and rigorous capital discipline, we anticipate that there will be further opportunities for our TSS services throughout the operational phases of client projects as we support owners by ensuring the most efficient use of their shareholder cash and improving their returns.

As outlined at our 2013 full year results, we have achieved strong growth in our backlog for the Engineering and Projects ("E&P")business unit. At the end of April 2014, backlog had grown to c. US$1.5bn. This figure includes approximately US$400m backlog from Valerus, which was consolidated from completion of the acquisition on 3 January 2014. We have been successful in growing the order book in this business unit, demonstrating the turnaround in our core E&P business and evidenced by a number of new awards announced in the first four months of 2014.

Our initial expectation for the Valerus business has already been surpassed with significant bidding activity underway, some of which is being jointly conducted with the legacy Kentz business. We were very pleased to announce a number of contract wins from Valerus including the awards by Crestwood in the USA and Cardón IV in Venezuela.  We anticipate further awards in the coming months which we believe will underpin the revenue targets set for full year performance.  We are confident that the 2014 financial performance of Valerus will exceed management expectations set at acquisition.

Our Construction business unit has been very successful in the Australasia region so far this year with the award of three contracts on the Ichthys LNG project in the Northern Territory of Australia. The scope of work from these contracts include the full range of construction services of structural, mechanical, electrical, instrumentation and piping and highlights our track record in delivering complex solutions for major LNG projects with some of the world's largest energy and resource companies. The overall value to Kentz from these contracts is estimated to be US$890m and provides revenue visibility out to 2017. These awards represent a positive step forward for Kentz given the market's continued uncertainty about further LNG developments proceeding in Australia.

The Gorgon MEI project is progressing well. Our staffing will peak in mid-2014 and we continue to work with our client towards completion in mid-2015.   

Although investment in the mining sector has been very limited in recent years, our African operations have seen further success in Mozambique with the award of Phase 2 of Vale's Moatize coal mining project. Kentz completed Phase 1 of this project in 2012 and have been working with Vale in the interim on the Nacala Corridor Project to provide a logistics solution for the transportation of coal mined at Moatize.

Addition of Alegro Projects and Fabrication Ltd:

Consistent with the Company's 2013 & Beyond strategic initiatives, on 2 May 2014, Kentz Canada completed the acquisition of Alegro Projects and Fabrication Ltd ('Alegro'). Alegro is a field services organisation offering fabrication and construction services to the industrial sector in Western Canada. The addition of the Alegro Team of 85 skilled personnel adds Structural, Mechanical, and Piping (SMP) construction capability to Kentz Canada's existing expertise in Electrical and Instrumentation (E&I) construction and technical services. 

 

Alegro designs, fabricates, and installs piping, structural steel, storage tanks, along with a range of other oilfield equipment. Alegro has been in operation since 2004 and is based in Nisku, Alberta.

 

Alegro has completed a number of significant facilities projects in Alberta, for clients of significant scale in a variety of sectors; specifically in the oil and gas industry.

One of Kentz's strategic objectives was to acquire SMP capabilities, to augment its existing E&I expertise, and to support Kentz as it evolves as a multi-disciplined construction contractor within the Canadian region. This will enable Kentz to target, self-perform, and execute multi-disciplined construction opportunities as a prime construction contractor, as the Company does in many other regions globally.

 

Health and safety

The health and safety of all our employees is the most important value of our company. Kentz executed 48.8 million man hours during the period 1 April 2013 to 31 March 2014, delivering an industry leading safety performance with a TRIR of 0.17.

Financial position

In January, the term loan facility of US$400m, arranged for the Valerus acquisition, was utilised to complete the transaction. We continue to maintain a healthy cash position to support the further development of the business.

Outlook

We have had an excellent start to 2014 and are extremely pleased with the order intake to date. We have identified other exciting project opportunities across all business units and regions which we expect will continue to provide Kentz with significant growth. Our clients continue to invest in both capex and opex and having such a differentiated service offering allows Kentz to participate in many areas of our clients' developments. This is evidenced by the growing pipeline of prospects which stands at US$16.3bn. We expect operational activity to be weighted towards the second half of the year, in line with our client's project schedules. Our acquisition of Valerus has been received very well by our shareholders and clients and we look forward to building on this strong base.

Overall, we are confident of delivering on our targets for 2014 and remain focused on continuing to grow our company in 2015 and beyond.

Ends

For further information please refer to the Kentz website www.kentz.com or contact:

Kentz Corporation Limited
Investors: Ronan Tyrrell

Tel: +44 (0)20 3159 4004

Media: Paul Youens

Tel: +44 (0)20 3159 4003

 

Tavistock Communications

Tel: +44 (0)20 7920 3150

Simon Hudson

Mike Bartlett

Emily Fenton

 

About Kentz

Kentz is a global engineering specialist solutions provider, which serves a blue chip client base primarily in the oil and gas, petrochemical and mining and metals sectors. It is listed on the London Stock Exchange (symbol: KENZ). In the year ending December 2013, the company generated revenues of US$1.66 billion, profit before tax of US$118.0 million and diluted EPS of 68.07 US cents.

Kentz has over 14,500 employees in 36 countries. Its three main business lines are; Engineering and Projects, Construction, and Technical Support Services (TSS). It has a proven track record of delivering mechanical, electrical, controls and instrumentation engineering, construction and management services in some of the most remote locations on earth.

 


This information is provided by RNS
The company news service from the London Stock Exchange
 
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