Vibrancy in growth
It’s an year of renaissance for Renaissance that recorded a healthy 34.32 per cent growth with a profitable long-term income base

Renaissance Services, an Omani multi-national oil & gas services group, has consolidated its position at number 4 in the OER 20 for the second year running. This achievement comes on the back of three years of strategic transition in which the company has delivered a remarkable change programme that has created enormous value potential for shareholders.

In a recent open meeting for investors and analysts, CEO Stephen Thomas explained that Renaissance has changed in four fundamental ways: From a pure services provider to a company with a healthy balance between major asset-based businesses and pure services businesses; From a company with high reliance on short-term high-return contracts to a company with long-term sustainable income and profit streams; From a company providing diverse multi-faceted services to a company with a primary focus on oil & gas services; From a company with market leadership positions in primarily Oman-based businesses to an Omani company that is becoming increasingly multi-national and proving its international competitiveness abroad.

When asked to summarise the principal successes of this transformation, Thomas ticks off an eye-catching list of achievements. “We have delivered an impressive growth record for five successive years; we’ve built a sustainable business; we’ve grown our home base in Oman and delivered significant international expansion; we have successfully focused on quality oil & gas services; and we’ve grown and strengthened the balance sheet.”

These claims do stand up to close scrutiny. The growth record is plain to see: in 2002 Renaissance revenue stood at RO29 million and this has grown exponentially year-on-year to the RO142 million achieved in 2006. In the same period profits have risen from RO1.6 million to RO14 million. The sustainable business is visible in major contracts spanning 10, 15, 20 years and more with major oil & gas producers including Agip KCO, BP, Petroleum Development Oman (PDO) and Shell. The Oman-based business has grown to annual revenues of RO35 million in 2006 and this represents 25% of the company’s total revenue, with the balance RO107 million being earned from the company’s international expansion. The company operated in 39 countries in 2006 and owns businesses from the Gulf to the Caspian to the North Sea. The focus on oil & gas is also clear with 72% of 2006 revenue coming from oil & gas operations. The strengthened balance sheet shows equity and reserves increased from RO25 million in 2004 to RO91 million in 2006 backed by comfortable leverage ratios in spite of significant expansion. Over the same period assets have grown from RO18 million to RO122 million.

“Renaissance shareholders own a lot of quality assets,” Thomas enthuses. Renaissance owns one of the top 10 offshore support vessel fleets in the world; has engineering businesses in oil & gas fabrication and afloat ship repair; is a leading turnkey contract services provider; and has successful technology, media and training businesses.

So how has this been achieved? “Simple,” says Thomas, “Our people”, and he means it. “Every day Renaissance people across all our businesses and markets are out there exceeding customer expectations safely and profitably. That is the key.”

So why has the stock price performed below market in 2006? “We do not manage share price,” says Thomas, “That is a matter for the market to decide”. The Renaissance stock finished the year at a P/E ratio of 7.26 against the MSM average of 11.9. Oil & Gas services companies enjoy even greater multiples in many markets throughout the world. But the CEO adds: “What we do manage is the transparency and good governance of our business, and as the market begins to appreciate our performance and the reality and success of our strategic transition we believe there may be a correction in the value perception of our stock”.

Outlook
Renaissance’s investment strategy for 2007-09 is focused on three core initiatives: Increasing the size and reducing the age profile of its offshore support vessel fleet – prudently balancing investment between the fleet engaged in high demand spot markets and the fleet engaged in long-term stable contracts with major oil and gas producers and operators; developing additional capacity and capability in its oil & gas fabrication and ship repair businesses; and expanding capacity and geographical spread of its permanent accommodation for contractors (PAC) facilities in remote oilfields.

In 2006, the company has invested RO32.868 million in new assets and it has a programme to invest a further RO195.500 million over the next three years. With build and lead-in times, these investments begin to contribute significant earnings and free cash flow within one to two years from inception. In addition, the company has not ruled out making at least one more important acquisition in the oil & gas sector.

The company also expects the investments made in the past three years will start to deliver stronger performance going forward. “Our three years of transition are over,” Thomas explains, “I don’t want to get into predicting and managing earnings, but in general terms people can see we are now moving into new three-year phases of exponential growth in profit”.

Certainly, Renaissance has shown that it has a robust business model that can deliver strong and value-driven performance year on year. It has a clear strategy and a focused business plan to deliver a stronger performance in the years to come. The chief executive sums it up succinctly, “The 2006 result combines real achievement with even greater promise.”

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