Documente Academic
Documente Profesional
Documente Cultură
Engineering/Consulting Industry
for the
Canadian ACEC Leadership Summit 2014
Paul Zofnass, President
Winnipeg
June 20th, 2014
www.efcg.com
(212) 752-2203
Participants in the
2013 EFCG CEO Survey
Revs
($MM)
> 1 Bil
250-1 Bil
100-250
50-100
25-50
< 25
Total
# of
Firms
27
25
41
44
41
47
225
Gross Revs. *
($Bil)
2013
73
12
6
3
1
1
95
Top 50 Participants
Approximately By Revenues (roughly > $300 MM)
(HQ in parenthesis; Canadian firms in bold)
1 Jacobs
(US)
26 Grontmij
2 URS
(US)
27 GHD
(Netherlands)
(Australia)
3 SNC Lavalin
(Canada)
28 ICF
(US)
4 WorleyParsons
(Australia)
29 HNTB
(US)
5 AECOM
(US)
30 Louis Berger
(US)
6 CH2M HILL
(US)
31 Leidos
(US)
(US)
32 Coffey
(Australia)
8 Arcadis
(Netherlands)
33 Hill
9 Fugro
(Netherlands)
34 SMEC
(Australia)
35 Ausenco
(Australia)
10 Tetra Tech
11 Parsons Brinckerhoff
(US)
(US/UK)
(US)
(US)
12 Stantec
(Canada)
37 Atkins N.A.
(UK)
13 WSP-Genivar
(Canada)
38 TRC
(US)
14 HDR
(US)
39 IBI Group
15 Mott MacDonald
(UK)
40 Garney
(US)
(Canada)
(Australia)
41 Terracon
(US)
17 Golder
(Canada)
42 LiRo
(US)
18 MWH Global
(US)
43 Kimley-Horn
(US)
19 Amec E&I
(US)
44 Kleinfelder
(US)
20 Ramboll
(Denmark)
45 POWER
(US)
21 Cardno
(Australia)
46 STV
(US)
47 Dewberry
(US)
(US)
22 CDM Smith
23 Sweco
24 ERM
25 Aurecon
(US)
(Sweden)
(US)
49 MMM
(Canada)
(Australia)
50 QuEST
(Singapore)
Data from
CEO Conferences
(Historical Perspective)
1995
2000
2005
2010
2013
Total
3
14
23
19
24
77
160
7
20
23
26
31
66
173
13
23
24
36
32
59
187
18
29
36
38
38
51
210
27
25
41
44
41
47
225
Total
3
5
4
2
1
1
14
9
9
4
2
1
1
26
24
11
4
3
1
1
43
58
15
6
3
1
1
83
73
12
6
3
1
1
95
Total
21%
34%
24%
11%
5%
5%
100%
35%
35%
15%
9%
4%
3%
100%
55%
26%
8%
7%
2%
2%
100%
70%
18%
7%
3%
2%
1%
100%
77%
13%
6%
3%
1%
1%
100%
# of Firms
> 1 Bil
250-1 Bil
100-250
50-100
25-50
<25
Revenues ($ Billions)
> 1 Bil
250-1 Bil
100-250
50-100
25-50
< 25
% of Total Revenues
> 1 Bil
250-1 Bil
100-250
50-100
25-50
< 25
2013
2014
2015
5.0%
Es t
7.0%
Pro j
4.3%
Es t
7.5%
Pro j
3.5%
Act
7.1%
Es t
11.2%
Es t
11.8%
Pro j
11.0%
Es t
12.1%
Pro j
9.5%
Act
11.4%
Es t
7.0%
Pro j
Internal Growth
Historical Perspective
(Medians)
14%
12.9%
9/11
12%
10%
11.0%
11.0%
11.0%
10.0%
9.0%
8%
6%
Financial
Crisis
9.0%
7.8%
7.0%
6.0%
5.8%
7.1%
20-yr
Avg
7.0% 7.0%
5.0%
5.0%
4.2%
4%
3.0%
3.1%
3.5%
2%
0.0%
0%
Volatile? Or Not?
E/C Median
10%
20-yr
Avgs.
8%
E/C: 7.0%
6%
World: 5.2%
US: 4.5%
4%
2%
US GDP
0%
-2%
World GDP
-4%
-6%
20 yr avg. E/C median firm outperforming US GDP by 50%+, World GDP by 33%+
US & World GDP growth data source: IMF
Profitability
Historical Perspective
Median EBIBT/Net Revenues
14%
12.0%
12%
11.4%
11.4%
11.3%
10.6%
10.5%
10%
9.6%
9.3%
8.5%
8%
9.9%
11.0%
10.4%
9.4% 9.5%
9.9%
9.5%
8.8%
7.8%
6.5%
6%
Performance by Size
(medians)
Profit Margin
(EBIBT/Net Revs)
Est.
2014
Proj.
2015
3-Year
Avg.
Act.
2013
Est.
2014
> 1B (15)
1.0%
4.0%
5.0%
3.3%
10.7%
10.4%
250 MM - 1B (18)
3.4%
6.7%
6.0%
5.4%
7.8%
9.1%
5.3%
7.0%
7.0%
6.4%
11.3%
13.0%
25 MM - 100 MM (38)
4.5%
10.0%
8.5%
7.7%
9.6%
11.5%
< 25 MM (12)
2.5%
13.8%
10.0%
8.8%
9.3%
12.0%
(medians)
Median
Rev.
Size ($MM)
Act.
2013
Internal
Revenue Growth
Est.
Proj.
3-Year Vs. '13-'15
2014
2015
Avg. for all firms
Profit Margin
(EBIBT/Net Revs)
Act.
Est.
2013
2014
13 14 15
Environmental (20)
96
5.4%
12.2%
8.5%
8.7%
11.3%
13.0%
Water/Wastewater (6)
164
3.1%
2.9%
7.0%
4.3%
10.9%
12.3%
Transportation (14)
104
3.0%
4.8%
5.0%
4.3%
9.5%
9.7%
29
-4.4%
11.0%
10.0%
5.5%
6.4%
10.6%
124
4.2%
7.0%
10.0%
7.1%
10.6%
12.6%
37
14.0%
19.0%
10.0%
14.3%
9.3%
10.8%
Power (6)
295
8.7%
10.5%
9.0%
9.4%
11.0%
13.1%
*Based upon firms with roughly 40% or more of revenues in that respective sector, so for the most part eliminating
performance of larger, diversified firms
10
Best Sector
'11
'12
13
80
85
101
57
64
42
29
32
26
25
44
29
47
45
40
0
11
10
5
8
8
4
17
12
8
10
6
2
2
5
0
0
4
22
27
11
5
3
3
11
3
2
22
20
8
7
8
1
4
0
0
1
5
14
3
2
1
4
4
4
13
11
0
349
401
327
'11
-1
-7
-4
-6
-26
-26
0
-8
-1
0
0
-2
-2
-2
-4
-5
-26
-60
-22
-26
-19
Worst Sector
'12
-1
-12
-3
-11
-18
1
0
-21
0
2
1
-1
-1
-7
-5
-5
-8
-49
-21
-39
-39
13
0
-10
-3
-7
-28
0
0
-4
-1
0
0
-8
0
-2
-10
-4
-3
-17
-16
-47
-48
-247
-237
-208
2013
Net
Positive
101
32
23
22
12
10
8
8
5
5
4
3
3
0
-2
-3
-3
-3
-15
-43
-48
Variability in Performance
By Business Sector
2013 Internal Growth
2013 Profitability
25%
16%
23%
14%
21%
12%
19%
10%
17%
8%
15%
13%
6%
11%
4%
9%
2%
7%
0%
5%
Env
Top Quartile
W/WW
Median
Transport
Bottom Quartile
Env
Top Quartile
W/WW
Median
Transport
Bottom Quartile
12
(medians)
Internal
Revenue Growth
Profit Margin
(EBIBT/Net Revs)
Act.
2013
Est.
2014
Proj.
2015
3-Year
Avg.
Act.
2013
Est.
2014
Private (48)
5.2%
10.0%
9.0%
8.1%
11.3%
13.1%
State/Muni (16)
4.8%
8.0%
7.0%
6.6%
8.6%
11.1%
Federal (2)
1.3%
4.4%
5.0%
3.6%
7.8%
8.6%
13
International Markets
Data from 2013
(# of responses)
CEO Conference
Which countries/regions are the fastest & slowest growing? Most & least profitable?
Fastest Growing
20
25
Slowest Growing
3
5
Most Profitable
18
16
Least Profitable
1
3
Net Happiness*
Quotient
34
33
Brazil
Middle East
17
15
Africa / S Africa
10
US
13
Australia
Asia
7
16
6
6
7
9
4
17
4
2
China
-4
India
-4
11
26
14
-21
-8
Country/Region
Canada
South/Central America
Europe
UK
* Net Happiness = (Fastest growing + Most profitable) - (Slowest growing + Least profitable) by number of votes
Canada & South America hot; Europe not; India & China loss leaders
US in middle
Do you plan to increase or decrease International Operations over the next 5 years?
Increase
91
Decrease
6
No Change
49
14
Calculation:
Revenue
- Expenses
= Profit
Expected
Actual
100
90
10
95
90
5
Design / Build
(Data from 2013 CEO Conference)
5 Years Ago
Today
5 Years From Now
Design/Build Projects
Median % of Revs. for:
% of Firms doing D/B
All Firms
Only Firms doing D/B
45%
0%
5%
61%
2%
5%
66%
5%
10%
16
Risk-Adjusted:
Is it more profitable?
Public-Private Partnerships
% of Firms working on P-3's
Median% of Revs.*
Today
23%
4%
5 Years From Now
38%
8%
Sustainability Services
% of Revs from Sustainability Services
Median Firm
2011
2012
2013
2%
3%
4%
Increased
Decreased
48%
3%
Types of services:
Climate Change (6)
Buildings / Infrastructure (35)
Energy (34)
Water (12)
Environmental (9)
Transportation (3)
Envision
E/C Industry-Wide Collaborative Effort to Develop Rating System
to measure sustainability in major infrastructure projects
Joint effort by:
Institute for Sustainable Infrastructure, ACEC, ASCE & APWA
Zofnass Program for Sustainable Infrastructure at Harvard
Sponsors: Arcadis, Autodesk, EXP, Golder, Granite, CH2M Hill, HNTB, MWH, NV5,
Stantec, Power Engineers, Inter-American Development Bank (IDB)
20
What do you call the costs you take when you perform work that
cannot be billed, or the bill is rejected or reduced?
75th Percentile
Median
25th Percentile
% of Net Revs
4.0%
2.0%
1.0%
*75th percentile writes down 4% of Net Revs. If avg. EBIBT/Net Revs is 10%, it would have been 14%, or 40% more!
That means for half of firms, median profit would be 40% higher, if avoided write-offs!
21
Acquisition Activity
(Historical Perspective; CEO Conference data)
Revenue Size
of Respondents
89%
80%
64%
60%
36%
60%
57%
40%
35%
30%
20%
23%
12
20 E
13
P
20
11
20
10
20
09
20
08
20
07
20
06
20
05
20
04
20
20
02
03
10%
0%
20
Data from
CEO Conferences
23
Organic
Growth
Growth From
Total
+ Acquisitions = Growth
Top
75th
By Rev. Size
> 1 Bil
5%
9%
14%
15%
5%
5%
10%
15%
100 MM-250 MM
6%
3%
9%
12%
50 MM-100 MM
6%
5%
11%
15%
25 MM-50 MM
7%
3%
10%
15%
< 25 MM
10%
0%
10%
15%
20 yr avg
11x*
9x*
5 yr avg
10x
6x
Typical
Range
5x
3x
Public Value
M&A Value
Typical
Range
Traditional
Employee Owned
(Internal Value)
What is yours?
25
2.
3.
4.
5.
Cash surplus and low interest rates (ROI of acq. vs. cash or debt)
6.
7.
8.
9.
The Challenges of
Internal Ownership Transition (IOT)
1. Employee shareholders pull capital out when they retire
(and younger employees have limited excess cash to invest)
2. Working capital needs are huge, relative to revenues, so growth requires
significant capital
3. Profitability is low compared to other industries and capital needs
4. Much growth is coming via acquisitions, which requires more capital
5. Current Generation prefers Spending to Investing
6. Valuation Conundrum:
Lower IOT valuations may be unfair, incentivize a sale,
and make acquisitions difficult
Higher valuations make share repurchase more difficult
Importance of Ownership, Compensation & Capitalization Plan (OCCP)
27
EFCG Services
Assisting e/c Firms with:
Internal Ownership Transition & OCCPs
Valuations & Valuation Strategy
Peer Benchmarking Analysis: Financial/Operating Performance
M&A: Buy / Sell / Merge
EFCG Conferences: CEO, CFO, HR, Rising Leaders
Strategic advice for Boards / Mgt. Committees
Industry Overview Presentation & Management Education
Resolving Internal Disputes
28