Growing in challenging markets SABIC site visit Wilton and North Tees 26 November 2015 Copyright Cape Group 2015, All rights reserved. Cape is a registered trade mark of the Cape Group of companies. 1
Introducing the Cape team for today Joe Oatley CEO Joined Cape in June 2012; previously CEO of Hamworthy plc, following senior management and corporate roles at Weir Group plc and Spirent plc. Michael Speakman CFO Joined Cape in December 2012; previously CFO of Expro International Group plc following holding senior operational, divisional and corporate roles with TI Group plc and Smiths Group plc. Simon Hicks Managing Director, UK Appointed as Managing Director of Cape UK operations in May 2014, Simon has 26 years experience in the engineering construction industry, initially working in the construction of new build CCGT Power Stations then moving through various roles in the energy and logistics sectors, joining Cape plc as a Regional General Manager in 2006. Jane Atkinson Operations Director, North Joined Cape in August 2014. Jane began her career in 1990 with British Steel where she has managed all of the major production units. Jane then moved into power generation and became Senior Vice President at Sembcorp Utilities UK, managing coal and gas fired assets including the UK s first Biomass Power Plant. 2
Safety Message Don t follow the crowd 3
Agenda Presentations 1. Market conditions and strategic progress Joe Oatley 2. Exploiting the white spaces to deliver growth Simon Hicks 3. Adding value to SABIC by filling the white spaces Jane Atkinson Q&A Site tour Wilton Lunch and presentation from Jon Hetherington, General Manager Maintenance Site tour North Tees 4
Market conditions and strategic progress Joe Oatley, CEO 5
Current market conditions remain mixed UK, Europe & CIS* 13% 38% 26% 10% 13% UK becoming more challenging; Azerbaijan remains strong UK upstream and related terminal market is increasingly challenging UK coal power station demand reducing due to imminent station closures UK downstream and general industrial markets remain robust Azerbaijan demand robust from both projects and maintenance Nuclear New Build more positive, but timing difficult to judge MENA* 2% 1% 7% 33% 57% Demand remains solid; pressure on margins Project investment in KSA and UAE remains committed Kuwait project demand increasing Qatar oil and gas construction demand remains low Maintenance market across region remains robust Pricing pressure increasing across the region Asia Pacific* 4% 25% 18% 47% Conditions remain mixed across the region Asian project demand expected to reduce in 2016 before increasing in 2017 Asian maintenance market demand stable but hard to access Australian LNG project demand increasing Mining market in Australia remains subdued and very price competitive 6% Oil and gas upstream Oil and gas downstream Chemical and steel Power Generation Mining Other * Percentages relate to 2014 Group revenue excluding share from joint ventures 6
Reminder of our strategy Strategic intent: to be the leader in our chosen markets Operational excellence Differentiate from competition by being the operational leader: Best processes and systems Best people Customer intimacy Embedded relationship with key customers Deliver value creating solutions to our customers Delivers resilience and stability Balanced business Balance across maintenance and construction Broad geographical spread Broaden portfolio Geographic expansion Expand our available market Offer full range of service across the full range of geographies Aim is to have market leading position in our key markets Seek opportunities to enter new high growth markets Drives growth 7
Group revenue Strategy in action: Our maintenance business is growing Maintenance revenue up 33% in 4 years 400m 300m UK, Europe & CIS 800m 700m 200m 100m Up 22% 2010 2014 600m 500m Construction 200m MENA 400m 150m 300m 200m 100m Maintenance 100m 50m Up 95% 2010 2014 2010 2011 2012 2013 2014 200m Asia Pacific Maintenance delivers more stable income streams All regions have grown maintenance revenues 150m 100m 50m Up 32% 2010 2014 8
Strategy in action: Growing by service expansion Motherwell Bridge, acquired 2014 MENA available market up 50% 1.2b 1200 Storage tank construction and maintenance Heat exchanger refurbishment Gasholder construction 1.0b 1000 0.8b 800 0.6b 600 0.4b 400 0.2b 200 Storage tanks Traditional Cape services 0 2013 2015 Redhall Engineering, acquired 2015 Specialist pipework repair Storage tank repair Maintenance and shutdown services 3.0b 2.5b 2.0b 1.5b 1.0b 0.5b UK available market up 45% Mechanical services Storage tanks Traditional Cape services 2013 2015 9
Strategy in action: Growing our geographical footprint Kuwait market size Malaysia market size 350m 300m 350m 300m 250m 200m 150m 100m 50m 250m 200m 150m 100m 50m 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 Organic entry strategy Initial local team in place Current bid pipeline > 70m Targeting first orders Q4 2015 Aiming to have operations established Q4 2015 Current bid pipeline > 150m Key bidding activity on RAPID project Significant future opportunity in maintenance 10
Key areas for investment to support future growth Set up in new countries Kuwait: yard, office and operational team Malaysia: operational team, plant and equipment Business development for the next phase of geographic expansion Systems and technology development Expected 2016 incremental investment 6-8m capex and 2 3m operating expense 11
Summary We continue to face challenging market conditions and expect these to persist for the near future Our strategy is working and provides stability in these challenging markets We have growth opportunities with both an increased service offering and by broadening our geographic footprint We are committed to investment in the key areas for future growth 12
Exploiting the white spaces to deliver growth Simon Hicks, Managing Director, UK 13
The reality is some of the assets we serve are closing Demand* from existing Cape customers and assets 350m 300m 250m 200m 150m 100m 50m 2013 2014 2015 2016 2017 2018 Oil & Gas Power Petrochemical Nuclear Mechanical Decline is faster than anticipated Both Power and Oil & Gas reducing in 15/16 Oil & Gas reduction will continue into 17/18 Project market remains relatively low Defensive measures already taken Source: Cape internal estimates * Indicative revenue for current Cape services from maintenance work with existing customers in the UK assuming market share is maintained, based on Cape management's estimate of likely closure of assets. 14
The market we serve has significant white space 2500b 2.5bn Cape sector market size 2000b 2.0bn 1500b 1.5bn 1000b 1.0bn 500000 0.5bn 2013 2014 2015 2016 2017 2018 Market Size Oil & Gas Power Petrochemical Nuclear Mechanical Cape s target market has increased Addition of mechanical services in 2015 Oil & Gas reduction offset by New Nuclear White space opportunity grown to c. 2bn p.a. Source: Cape internal estimates Excludes market for specialist services 15
White space exists in all sectors we serve Market size by sector and Cape share 800m 700m 600m 500m 400m 300m 200m 100m Oil & Gas Power & Industrial Petrochemical Nuclear Mechanical Infrastructure Cape position in Petrochemical increasing New build power on the horizon New Mechanical Service brings increased opportunity Allied sector in Infrastructure presents an opportunity Source: Cape internal estimates, based on 2014 Excludes market for specialist services 16
The four areas where we are filling the white spaces: Add existing services, existing customer, existing site Existing services, existing customer, Add new sites Existing services, Add new customers, existing sector Existing services, Add new customers, adjacent sector 17
It is essential we align the three key levers of: Customer Delivery Technical Value 18
The HAKI system scaffold differentiates Cape 19
It is essential we align the three key levers of: Customer Delivery Technical Value 20
How we align the levers, for example with EDF: Customer Delivery Technical Addressable Services*: Access Insulation Painting Cleaning CES Tanks Mechanical Refractory Services provided by Cape Services partially provided by Cape *Notes: Addressable Assets serviced are the Key Customer s Assets Cape services via a direct contract with the Asset Owner. Addressable Services are the services required by the Key Customer provided by Cape. Services provided by others No requirement for these services 21
By following our strategy we are filling the white spaces Trust Customer Delivery Technical Customer Intimacy Operational Excellence Broaden Portfolio Develop understanding of customer needs Embed relationship with key customers Best process/systems Best people Expand the range of critical services Value 22
Examples of where we have filled the white spaces Access Services Term, Projects & Events Next Target Mechanical Term & Projects Mechanical Services 27 A deconstruct, 24A re-install Next Target FM Framework 23
An opportunity to support the construction of HPC UK s first new nuclear power station since 1980 s Project spend estimated at 18bn over 12 years EDF Cape relationship in high regard JV Cape-Prezioso to target UK NNB Next step, Final Investment Decision 24
Gas Storage is both a UK and international opportunity UK gas storage is limited to 3-7 days Gas power generation could fill the time gap to NNB Refineries are converting their feedstock to balance cost Cape MB is a global expert in LNG construction Cape services provide a total tank solution 25
To expand into the white spaces, we are investing in: Our customer intimacy Our delivery capability Our technical solutions 26
Adding value to SABIC by filling the white spaces Jane Atkinson, Operations Director 27
The history of Cape at Wilton and North Tees North Tees Wilton International 28
Cape has grown its range of services with SABIC UK 16m 14m 12m Revenue with SABIC UK Tank services Simple contract first awarded in 1996 New contract style established in 2005 with a mission to add value to the client 10m 8m 6m Painting Insulation Environmental Cleaning Alternative Access Painting Pull through services began in 2008 with rope access and took a step change in 2014 with the environmental cleaning business, followed by the tank building in 2015 4m Insulation 2m Scaffolding Scaffolding 2005 2015 29
Adding value to SABIC by filling the white spaces Trust Customer Delivery Technical Full Key Account Management plan in place including; Roles and Responsibilities Summary and Quarterly Report Stakeholder Mapping Cape Internal Mapping Stakeholder Engagement Plan Customer Organisation Chart Single point of contact Stable, competent workforce Productivity improvements Alternative access solutions Flexible workforce Technically adept, improving plant performance. Shaping the prioritisation. Rework and modifications low. Adding value for money. Expanding the range of critical services Value 30
How we have delivered value to SABIC People Efficiency. Savings to SABIC = 850k Optimum Access. Savings to SABIC = 700k Systems and personnel. Investment in SABIC = 500k 31
What we are going to see this morning Innovation in practice Insulation HAKI Scaffolding Blasting and painting 32
And this afternoon.. The ethane tank at SABIC North Tees Cape Motherwell Bridge Cape Industrial Services Cape York Linings Cape developing greater customer intimacy with SABIC & Samsung One team approach to providing value to all stakeholders 33
Copyright Cape Group 2015, All rights reserved. Cape is a registered trade mark of the Cape Group of companies. 34
Storage tank design and construction John Smith Operations Director Motherwell Bridge Martin Glendinning Sales & Marketing Manager Motherwell Bridge Copyright Copyright Cape Cape Group Group 2015, All All rights reserved. Cape Cape is a registered a registered trade trade mark mark of the of the Cape Cape Group of of companies.
Low temperature and cryogenic tanks Background Traditionally, the UK has met demand from its gas sources in the North Sea, but these supplies are in decline. In order to meet this supply shortfall, it is estimated that by 2020 around 70% of the UK's gas will have to be imported. In addition to Liquefied Natural Gas (LNG) the US has an ethane surplus, which offers the process industry, including companies such as SABIC, the opportunity to take supplies of a feedstock which is cheaper than traditional sources, such as naphtha. Large low temperature tanks which are capable of storing products at temperatures as low as -51 C and cryogenic tanks which store liquids at temperatures as low as -268 C are used for the storage of these liquefied gasses. 36
Cape gas and liquid storage solutions Gas Storage Propane, Butane, Nitrogen & Various Industrial Gases Liquid Storage Crude Oil, Heavy Oil, Water Liquefied Gas Storage LNG, LPG, Ethylene, Ammonia, etc. 37
Cape service provision Cape Service Offering Storage tank construction Specialist insulation Specialist coatings Access solutions Source: marinelink.com 38
Size and scale 1.190,000 m 3 - Proposed Grain LNG Tank 2.77,000 m 3 - SABIC Ethane Tank 3.10,000 m 3 - Typical Storage Tank The proposed new tank at Grain is Larger than the Royal Albert Hall with a diameter of 92.4m and a height of 50m high 39
Current works SABIC Ethane Tank Project Name: Ethane Import Terminal for Project Zeppelin Client: Samsung C&T Project Location: SABIC UK Petrochemicals, North Teesside Size: 77,000 m 3 Full Containment Ethane Tank (Dia. 62m x H 34m) 40
Typical construction sequence Concrete outer wall 41
Typical construction sequence Roof assembly 42
Typical construction sequence Completed roof 43
Typical construction sequence Suspended deck 44
Typical construction sequence Roof prior to concrete pour 45
Typical construction sequence Bottom insulation and perlite ring 46
Typical construction sequence Floor and wall liner plates 47
Typical construction sequence Final stages of project Construction of Inner Tank Installation of Internal Pipework Tank Ready for Hydrotest Tank Hydrotest successfully Complete Shell Resilient Blanket / Suspended Deck Insulation & Interspace Perlite Tank Testing & Commissioning 48
Copyright Cape Group 2015, All rights reserved. Cape is a registered trade mark of the Cape Group of companies.