Author Topic: SNC - SNC-Lavalin Group  (Read 21770 times)

Cigarbutt

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Re: SNC - SNC-Lavalin Group
« Reply #60 on: December 16, 2019, 11:43:31 AM »
^"If you don't like the law, change the law, don't break it."
https://policyoptions.irpp.org/magazines/may-2019/conflicts-written-into-deferred-prosecution-agreement-regime/

I would say though that the bad apple phenomenon went to the core and actors have not been exactly forthcoming. These circumstances would tend to go against a simple slap on the fingers.


finetrader

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Re: SNC - SNC-Lavalin Group
« Reply #61 on: December 16, 2019, 12:22:21 PM »
Quote
https://policyoptions.irpp.org/magazines/may-2019/conflicts-written-into-deferred-prosecution-agreement-regime/

long story short: former AG used bad judgment. this needs to be rectified
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absolutbrian

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Re: SNC - SNC-Lavalin Group
« Reply #62 on: December 18, 2019, 07:25:17 AM »
Trading halted this morning. My guess is that it's linked to the court case but nothing was announced.  SNC is returning to court for a pre-trial hearing in a Montreal court on several corruption-related charges.

I believe the company is on the right path. The decision earlier this year to withdraw from fixed-priced contracts was a good one. SNC is focusing on engineering services, which have a lower risk and higher margin profile that comes with more predictable cash flows.
An example of the "new" SNC is this: a $10 billion, 10-year nuclear services contract awarded by the U.S. Department of Energy to a joint venture that includes SNC. It's a long-term contract. Engineering services is really the direction in which they are going.

2020 will be the year where a lot of those fixed price contracts will be coming off the balance sheet. Once that backlog is executed/cleaned up, the valuation profile should look like a WSP or Stantec, or Jacobs, which trades at higher metrics.

Of course there are still risks associated to the fixed-price contracts and legal issues. But again these issues and potential losses are already reflected in the stock price. So you are not paying your ball eyes out.

One massive source of the Lump-sum-turn-key problems was the Chilean Codelco contract, which is now completed and in the past. As of Q3-2019, 84% of the $3.2b LSTK projects are light train related, which is one of SNC's strenght (or less risky).

As for the corruption legal case, we are talking about another 3-4 years unless some action is taken before (message to the government to get their act together and do the right thing and move on. Are we really to drag this for another couple years? There's no way the Liberals want the word SNC to come back in the next election.)

absolutbrian

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Re: SNC - SNC-Lavalin Group
« Reply #63 on: December 18, 2019, 07:54:57 AM »
Headline: SNC-Lavalin reaches agreement to plead guilty to charges of corruption in Libya

This was fast. A division of SNC-Lavalin Group Inc. will plead guilty to fraud charges related to work the company did in Libya. The crown has suggested a $280m fine paid over 5 years and a 3 year probation for SNC-Construction.

More to come...
« Last Edit: December 18, 2019, 08:01:56 AM by absolutbrian »

no_free_lunch

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Re: SNC - SNC-Lavalin Group
« Reply #64 on: December 18, 2019, 08:40:43 AM »
Thanks absolutbrian,

Quote
The prosecution and defence are both recommending a $280-million fine to be paid over five years, and that SNC-Lavalin Construction, the division in question, be placed on probation for three years.

https://www.cbc.ca/news/canada/montreal/snc-lavalin-trading-court-libya-charges-1.5400542

This sounds really positive to me.  This shouldn't bankrupt the company and the fine is actually lower than I expected.

finetrader

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Re: SNC - SNC-Lavalin Group
« Reply #65 on: December 18, 2019, 09:49:19 AM »
SNC stock resumed trading

market is lovin it
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no_free_lunch

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Re: SNC - SNC-Lavalin Group
« Reply #66 on: December 18, 2019, 10:01:13 AM »
This press release provides some more details on what the probation means.  You can make your own interpretation but from my perspective, as an investor, it critically means they are not going to be banned from federal contracts.  This seems to have been the best case scenario.  The fact that they were able to get the settlement done so quickly is excellent.

As a shareholder I'm lovin it.  As a canadian citizen, not so much.

Quote
SNC-Lavalin Group Inc. will comply with the probation order for the three-year period. Accordingly, SNC-Lavalin Group Inc. will engage an independent monitor who will provide initial and annual reports, executive summaries of which will be posted on the company's website, and will make any changes to its compliance and ethics programs that are identified by the independent monitor and are required. SNC-Lavalin group is already subject to monitoring by Public Services and Procurement Canada and the World Bank, and has put in place a robust ethics and compliance program that meets the highest international standards.

On behalf of the Board of Directors, Kevin G. Lynch , Chairman said, "We are pleased to settle these legacy issues and remove these legal uncertainties overhanging the Company. We feel this settlement is fair, and we deeply regret this past behaviour which was contrary to our values and ethical standards. The company has changed a great deal, embraced a world-class integrity regime and culture, and going forward we have renewed confidence about the Company's future."

Ian L. Edwards , President and Chief Executive Officer, SNC-Lavalin commented, "This is a game-changer for the Company and finally allows us to put this issue behind us. I apologize for this past misconduct and welcome the opportunity to move forward. We are beginning an exciting new chapter that is focused on our future growth and further de-risking our business. I want to thank all of our stakeholders, and especially our employees, for their continued dedication and support."

https://finance.yahoo.com/news/snc-lavalin-group-settles-federal-164400647.html

absolutbrian

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Re: SNC - SNC-Lavalin Group
« Reply #67 on: December 18, 2019, 11:00:14 AM »
The fine of $280 million paid over 5 years is much lower than the $500m anticipated.

From a valuation standpoint, the stock currently implies that SNCL Engineering Services is trading at an EV/LTM EBITDA of 9x (assuming the worst-case scenario for the completion of LSTK projects and future settlement of C$280m). This is still well below the average for engineering services peers of 13.3x.

Cigarbutt

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Re: SNC - SNC-Lavalin Group
« Reply #68 on: December 19, 2019, 09:56:52 AM »
So SNC negotiated a very good deal.
280M is at the lower end of the expected range and is to be paid overtime..
They were able to obtain this by pleading guilty to a reduced count, by promising to behave during the probation and after having shown that the turnaround had been started. They are now very likely to maintain access to national bidding, which was an existential threat. Apparently, from court documents, a 705M fine had been contemplated and, effectively, the 280M will include forfeiture from Libya profits estimated at 150M.
The market now reflects this new reality and the decision now to hold is based on a buy-and-hold decision grid, so it has become a different story.
https://www.theglobeandmail.com/opinion/editorials/article-snc-lavalin-got-what-it-wanted-its-still-a-win-for-the-rule-of-law/
Overall the process was messy, erratic and not terribly elegant, and many people will be left unhappy but IMO this ends up pretty much where it should have. Good luck to the longs.

absolutbrian

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Re: SNC - SNC-Lavalin Group
« Reply #69 on: January 23, 2020, 12:30:10 PM »
Interesting hirings at SNC that hints at the direction the company will take.

Louis G. Véronneau is the Chief Transformation Officer. A new post created.  Louis is a M&A expert. The read here is that SNC will look into divesting certain assets in its restructuring and redeploy the proceeds to create value. Louis was the guy at Bombardier that sold the Series C to Airbus and other assets. My assumption is the resource sector is on the block and to reinvesting the proceeds in engineering services.

There's also the newly created role of President of Infrastructure Projects and on an interim basis, to the newly created role of Executive Vice-President Infrastructure Services. I don't know anything about them except they are there to improve performance. I see this as a good sign.