SERVICE (SRV)

155

Number of Employees

€26.4M

Turnover

€4M

EBITDA

VISION

To be a reference as a maintenance service provider and equipment and installation revamping for the energy sector, in the global market

MISSION

To promote solutions and provide maintenance services and revamping with quality, ethics, safety and responsibility, maximizing value creation for our clients

STRATEGY

To strengthen relationships with our clients in today’s markets, meeting their expectations with innovative and diversified solutions
To increase our geographic footprint, focusing on new markets

WHICH GEOGRAPHIES?

Throughout 2016, the Service business unit had its performance scope revised, integrating all of the maintenance, repair and rehabilitation capacities that were, up to then, dispersed throughout the different product Business Units. This reorganisation aimed to maximize the maintenance business growth potential, as well as giving better and more comprehensive customer service

STRATEGIC PILLAR

Technological
Innovation

Empowerment of the Business Unit geared by product logic
Expanding our range of services, focusing on a line of business that holds a sustainable and competitive advantage
Maximising and developing the business of equipment and electrical installations revamping

Operational
excellence

Management optimisation of workshops and repairing units
Improvement/transferring repairing units’ facilities, in selected geographical areas

Proactive
comercial
approach

Primordial approach to small/medium size markets/clients, with relevant installed equipment
Development of existing commercial structures in the geographic areas where Efacec has a strategic interest
Developing local partnerships to broaden our potential client base and to increase our local knowledge and establishing agreements with equipment providers
Intensify our joint commercial efforts, aiming to capture synergies with the markets and/or with the clients (upsell and cross-sell)

Focus
on the client

Improving our SLAs (Service Level Agreements) agreed with our clients
Improving the compliance of our delivery deadlines (On Time Deliver)

Talent
Development

Building a dual career model, fostering the professional development of technical tasks, as well as management tasks
Revising our performance assessment model, transversally incorporating into EFACE the functional families specificities versus functional groups
Revising our compensation and benefits model, promoting guidance to our strategic (e.g.: commercial proactivity) and tactical goals (e.g.: lowering our loss rate) of all the Business and Group Units
Defining a talent management model that allows us to identify any employees with higher potential, guiding them into faster paced professional development tracks
Putting together a behavioural, functional and management training plan, one that enables us to prepare our employees for the Efacec 2020 vision

The strategy we’ve outlined is materialised in 10 initiatives, which should have a positive impact on the EBITDA starting in mid-2017.

GLOBAL MARKET VISION

In 2016, the asset base installed in the energy utilities continued to age, especially in the European and North American regions. In fact, it was possible to postpone new investments and to extend service life on critical assets that are part of the network, some over 4 to 5 decades old, mainly by inspecting and monitoring at a wider scale.

At a global level, there was also a clear tendency to resort to outsourcing on service activities by the utilities, which was followed through by Efacec itself in the Iberian market. By contrast, the relevant African markets, like Angola and Mozambique, experienced great constraints on their energy investments, thanks to the lowering price of crude oil barrels.

OPERATIONAL PERFORMANCE

In 2016, Service revenues were distributed in the following way, by business segment:

2016 was marked by the placing into service of the HDVC 96.7MVA 230114kV Trafo Union converter-transformer, after an in-depth intervention that included substituting the winding, designed and manufactured according to Efacec’s own technology, at the Hydroelectric power plant in Cahora Bassa, Mozambique. It was an on-site repairing job, unseen in Efacec’s history, and therefore a very important landmark that proved the client’s confidence in this Group’s capabilities.

In 2016, UN SRV was also responsible for remodelling EDP’s Boavista Substation, by revamping a type ND5 S QMMT, made by Efacec in 1964. The intervention was done by completely remodelling all boxes, substituting technologically outdated low-oil-content circuit breakers, at the end of their service life, for up-to-date vacuum circuit breakers. The methodology that was used to substitute these circuit breakers allowed for the transformation of a compartmentalised QMMT (with several connecting compartments) for an armored QMMT (isolated compartments, through a grounded metal structure), allowing for greater reliability and safety in the installation’s operation.

Throughout 2016, REN has kept their trust in Efacec, by procuring different transformers’ reconditioning projects, of which we should point out the servicing provided to the Recarei transformer, of 450 MVA, 400/220/19.97 kV. This service was part of REN’s machinery reconditioning and expanding service life policy. The job consisted in drying out the active part, substituting the oil, substituting and improving of the transformer’s external protection and refrigeration accessories, including general paint job, with stripping, new conserver, equipped with a balloon to prevent air from coming into contact with the oil, benefiting the fire protection system and also oil monitoring system and crossings.

In Portugal, we have to point out the designing, supplying and assembling of two static excitation systems, and stator rewinding, with total restacking of the magnetic nucleus, of a 5000kVA, 6kV, 750rpm alternator in Senhora de Monforte Plant. In this job, we have to point out the supply of excitation systems, with Efacec’s own development, design and installation, as well as the fact that this was done in record time, so that the client’s losses due to lack of power generation would be minimal.

As far as Europe is concerned, we want to point out that, in 2016, Germany’s VOITH asked Efacec for technical support in the winding of a new 265MVA, 15.75kV, 375rpm alternator, in Waldeck’s hydro power plant. For Spain, we saw a significant increase in the repairing jobs for large machinery, in workshops, due to the aging existing transformers.

FINANCIAL PERFORMANCE

ECONOMIC INDICATORS

(MILLIONS OF EUROS)

As far as orders are concerned, UN SRV has registered an increase of 0.8% when compared to the previous year, specifically because of its performance in the Portuguese (11%) and Angolan (110%) markets. In contrast, we saw decreasing numbers in the Spanish (23%) and Mozambican (27%) markets.

As far as revenues are concerned, the decrease was essentially due to the Mozambican market, where there was a decrease of EUR 3 million, compared to 2015.

As far as gross margins are concerned, UN SRV showed an improvement of EUR 1 million in absolute terms, when compared to 2015. In relative terms, the gross margin evolved from 23.9% to 28.4%, specifically because of our performance in the Portuguese and Angolan markets.

In turn, the EBITDA saw a favorable evolution related to our improvement in the gross margins. In addition, the EBITDA also made a positive contribution due to diminishing indirect costs (EUR 0.6 million) and exchange rate differences that, in 2016, came to a positive result of EUR 0.5 million – in 2015, the negative result was as high as EUR 0.7 million. The decrease in overhead costs that occurred in 2016 allowed for some significant improvement in the business’s profitability.

EXPECTATIONS FOR 2017

Globalising the UN SRV is both need and opportunity: a need, because of the Portuguese market’s small dimension, and an opportunity because of the chance to gain access to new and diverse clients. Therefore, improving the Business Unit’s financial and economical performance is inevitably connected to the s uccessful globalisation and access to new clients.

At an international level, UN SRV holds its own structures in Angola, Algeria, Spain and Mozambique. Today, we’re ready to provide regular maintenance services in France and Morocco, and it’s foreseeable that, in 2018, the same possible in the UK and in the USA. Both countries are crucial for the Unit’s strategy, since historically there is good acceptance of Efacec’s products, besides the existing installed equipment of considerable size, as well as a close relationship with our clients.

In 2017, we also want to continue to reinforce our commitment to work safety. This issue enables us to significantly improve our working environment, our productivity and quality of work, as well as better organise and diminish the probability of work-related accidents. Efacec has been acknowledging the need to optimise all procedures that aim to ensure the safety of our employees, as well as our commitment to overcome the sector’s common normative standards. Because UN SRV has most of its activities occurring at the clients’ own facilities, and these activities entail elevated risk, it believes safety is of the utmost importance. For this reason, 2017 will be a year when we will vehemently commit to improving our employees’ behavior in this matter, intending to strengthen a culture of discipline and operational excellence, one that will lead us to a zero-accidents’ goal, therefore contributing to improving our results.

Nowadays, clients seek Efacec for the benefits to their activities, as well as meeting their demands for answers to their problems, expectations and needs. With this in mind, our business’s success is strongly leveraged by our deep understanding of our clients’ needs, by our ability to anticipate them and by our continuous efforts to always offer the best possible solution.

As far as people are concerned, we’ll be investing heavily in the development of our employees’ individual skills and techniques, of the ones that are in direct contact with the client, through specific training and follow-up.

A GLANCE
AT THE BUSINESS

TIAGO
GONÇALVES

SERVICE BUSINESS UNIT

How is Service positioned in the maintenance sector? And what are the competitive advantages that characterise it and distinguish it from our competitors’?

The Service capacity enables us to provide services using our own equipment or other manufacturers’, keeping the highest standards of safety and quality, through a set of highly specialised professionals, offering vertical integration of services to a rather diversified plethora of clients, from small industries to large utilities. For this reason, Efacec can assure its clients that they’ll receive adequate diagnosis of their equipment’s status, as well as its ability to bring a solution, in the best possible timing and through its own means, to the verified anomalies.

Since globalisation is such a complex process, how do you intend to diminish the risks of acting in other countries, in a business where being close to your client and building a relationship is as important as it is in this one?

Since there is no one-size-fits-all solution, it’s impossible to completely remove all the risks that are inherent to the globalisation process. Today’s solution, appropriate for this specific situation or for that particular location, may not work in the same way in a different cultural reality. Yet, from our experience, preparing in a specific manner, performing in-depth studies of each market, committing to building a strong relationship with our clients and seeking the best partners and the best settings in which to perform, may help in successfully mitigating our risks and costs.

The Portuguese market is, and always will be, the Service’s business anchor, and for this reason that is where we’ve been focusing our R&D activity, the specialised know-how and our decision center. As far as the international markets are concerned, we’ve chosen smaller teams, and they are our frontline for intervention, or strategic partnerships with other smaller companies that are able to be fast-responders effectively, whenever our clients need us to. We do intervene with specific Portuguese resources and means whenever necessary, if the complexity of the situation so requires. In a global market, such as today’s, it is key that every company has the skill and the distinct resources that may enable them to overcome hardships and bring solutions to the client. The issue is not who fixes problems, but whether they do get fixed.

In detail, how would you describe your future prospects for the service and the growth strategies that are in line for the unit?

As the markets become wider and more open, and the competition grows and innovative solutions appear at a fast pace, Efacec can’t help but transform itself. Nowadays, companies have to be prepared at any given moment, to change, adapt and react to the enormous challenges that come about, threatening their activity. Globalisation is one of the answers, as well as establishing our differentiation with the clients. Competitiveness is more and more related with customising our product and differentiated customer service, as well as the ability to establish partnerships with other players in the market.

Worldwide, there’s a tendency to significantly reduce investment in new facilities and in equipment remodeling. In contrast, there’s also a clear bet on really knowing the condition of the existing equipment and optimising its usage to the limit. Efacec’s stance will have to one of not just focusing on finding solutions for problems and fixing mal-functioning equipment, but also cooperating with our clients to avoid failure, to support critical-asset management, to avoid overmaintenance and premature replacement of equipment, therefore maximizing the assets’ availability.

Armando Fernandes - Unidade de Negócio de Aparelhagem

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Paulo Vaz - Unidade de Negócio de Automação