After weak results in 2016, Head Energy Group delivers revenue growth and a nice profit for the first six months of 2017. It is extra positive that 6 of 7 Head Energy units delivers positive results in the first half of 2017 (compared to 2 of 7 in 2016) and that the investments in offshore wind and onshore infrastructure pays off through solid growth and good profitability.
-We are now getting paid for the new business units we launched in 2015 and 2016 (Offshore Wind in Denmark and Engineering Topside in Norway). In addition, we have worked systematically to deliver high quality tenders in all our market segments, and have successfully capitalized on the recent activity pick-up in Oil & Gas. Our Engineering-units had a busy first half and delivered multiple demanding projects to Norwegian and foreign clients, with satisfactory profit-margins and excellent customer feedback. Our Danish Offshore Wind operations have made a definite break-through in 2017 and delivers impressive results / margins and solid growth, states Head Energy CFO, Nils Haukeland.
-We have entered into frame agreements with two of the leading Offshore Wind operators, Dong Energy and Vattenfall, and we also have ongoing deliveries to leading technology providers, including Siemens Wind Power and ABB, Mr. Haukeland adds.
In total, the Head Energy Group order book has doubled since August 2016. The contract portfolio has also improved with regards to customer range, contract duration and profitability. Approximately 70 percent of the order book is currently Oil & Gas related, while Offshore Wind and Onshore Civil Engineering makes up the remaining 30 percent, with roughly equal shares.
Per June 2017, Head Energy Group have revenues of mNOK 111,5, an increase of mNOK 4.6 compared to the same period last year.
-In spite of a still soft Oil & Gas market, we deliver good first half results – especially in the second quarter. We post an EBIT-margin of approximately 2 percent in the first half of 2017 – during the same period last year we posted a loss of more than mNOK 6 (-6 percent), Haukeland says.
Frame agreements provides a solid platform for further growth
Thus far in 2017, Head Energy has signed many frame agreements within both Offshore Wind and Onshore Civil Engineering. COO, Preben Onarheim, points out that Head Energy has developed a solid tendering skill-base and methodology, applicable to all relevant business segments;
-Essentially, it all comes down to the competence and industry-expertise offered by our business units and personnel. Our organization is now capable of highlighting our competence during the various tender processes. This applies to Offshore Wind marine operations and logistics, our Engineering units and our Consulting-units with regards to Offshore Wind, Onshore Civil Engineering, Infrastructure and Oil & Gas. I believe that our ability to present our industry specialists, and excellent cooperation across all our locations, is the reason we have improved our hit rate in tender processes, Onarheim says.
Growth within several business areas
Historically, Consulting contracts towards the oil & gas industry has been the backbone of Head Energy’s operations and results. During the last year, however, Head Energy has managed to build a much broader economic fundament. Morten Leikvoll, CEO of Head Energy, points to growth in Denmark (Offshore Wind, Marine Operations), and the development in Engineering in Norway (Head Energy Multicontrol and Head Energy Solve), as new and important contributors to the improved profitability of the Head Energy Group;
-Note that Head Energy Denmark was introduced in the spring of 2016, and reached profitability in less than a year. The investment is now covered by accumulative profits, and the company can invest in further growth. The work put down by the team in Esbjerg is impressive and outstanding.
-Head Energy Solve and Head Energy Multicontrol also delivers great results, in a market that is still relatively slow. Head Energy Solve has posted solid revenue growth and has turned profitable in the first half of 2017 (the revenues have more than quadrupled and the bottom line has gone from negative to positive). Head Energy Multicontrol has been through a challenging restructuring, but now delivers impressive results generated by a talented and hardworking team and good management, Morten Leikvoll says.
Strong order book suggests strong second half
Based on recently signed contracts, Nils Haukeland expects a strong second half and good full-year 2017 results;
-We expect the momentum from the first half to continue and expect to beat our budget in the second half, and deliver higher revenues than in the first half. Traditionally, the second half is more profitable than the first half – we therefore expect higher margins in the second half, keeping in mind that we delivered a small loss in the first quarter.
-We remain careful optimists with regards to the Oil & Gas market. Our ambition is for Oil & Gas to represent maximum 50 percent of our order book, with Offshore Wind and Onshore Civil Engineering representing the remaining 50%. Today, the split is 70/30. We will increase our Onshore Civil Engineering efforts in the second half. In sum, we are happy with our results so far in 2017, and we expect even better results in the second half, Haukeland concludes.