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ECONOMIC REPORT
2016
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The majority of customers tend to use local companies to provide support services and so suppliers in this space
are heavily reliant upon revenues generated from the UKCS with less opportunity to enter overseas markets.
In general, the support and services sub-sector is more closely linked with production activity rather than
exploration or development. Therefore, companies in this part of the supply chain saw a slower rate of decline in
their revenues than most sub-sectors, with a 14 per cent reduction between 2014 and 2015.
Figure 42: UK Support and Services Segment Financial Results and Forecasts
Currency
£ million
2011
2012
2013
2014
2015E
2016E
2017E
Revenue
5,578
6,297
7,254
7,554
6,462
5,609
5,685
% Change
13%
15%
4%
(14%)
(13%)
1%
EBITDA
466
523
629
632
415
262
251
EBITDA
margin
8%
8%
9%
8%
6%
5%
4%
Source: EY
However, in what has traditionally been a lower margin segment of the supply chain, continued focus by operators
on reducing costs and increasing efficiency has caused significant pressure on profitability, despite the relatively
modest reduction in revenue. The annual results for the sample of listed companies indicate a 34 per cent reduction
in EBITDA with a similar fall expected in 2016.
This is consistent with the challenges being experienced by specific disciplines within the segment:
•
Helicopter operators
are facing continued pricing pressure as customers seek to tie cost to flight time, rather
than accepting high availability premiums even when the aircrafts are not in use.
•
Recruitment companies
are experiencing more revenue pressure than many other organisations in the support
and services sector as revenues are closely linked with employment, which is significantly down (see section
7 on employment). However, relative fixed costs in these businesses will be limited and, for larger diversified
companies, some form of natural hedge will have existed with an improved UK economy in 2015-16 prior to the
referendum vote to leave the EU.
The support and services part of the supply
chain saw a slower rate of decline in their
revenues than most sub-sectors as it is closely
linked with production activity.