Fugro N.V.

Good morning and welcome to the Fugro Quarter 3 Trading Update 2020 call. This session will be recorded and there will be a question and answer session after the presentation. I now hand over to the Director, Investor Relations.

Good morning, everybody. This is Catherine van Duttinga from Investor Relations Fugro. We are here for the third quarter analyst call and webcast session. I'm here with Mark Heine, CEO, Paul Verhagen, CFO. They have a presentation first, which will last, I guess, in total about 15, maybe 20 minutes. After that, there will be ample time to answer your questions. I would like to hand over to Mark now.

Good morning to everybody. Welcome for being here. Yeah, we'll have a short presentation. I will start off, and then Paul will finish or will go into the refinancing in a bit more detail on the financial elements of the presentation. So maybe we can start with the first slide, slide number two. Figueroa presents an improved quarter-free adjusted EBIT rate. result in turbulent times. We have been able to react quickly and continue most of our operations and the quick response to the COVID situation, especially focused on cost savings and obviously also the execution of projects helped us to have a decent and pretty good first quarter result on the EBIT level. Revenue obviously declined. We'll talk about that a little bit later. We have also now improved our full year outlook of 2020 with an adjusted EBITDA of $150 million and an adjusted EBITDA of $40 million and positive free cash flow. We also announced a comprehensive refinancing package, which also includes a capital raise via an equity issue. Next slide, please. Here we see the quarter three results. First and foremost, on the revenue side, we declined close to 16%, 15.8%, with very comparable absolute numbers for the revenues for Q2 and Q3 and Q1. But on the EBIT level, an improvement compared to the second quarter, but also compared to previous year in 2019. 11.2% EBIT margin. And also on the backlog side, we still have a solid 12-month backlog with actually growth in three out of the four business lines and a decline specifically in marine asset integrity that is more related to the oil and gas market. So as I said, a good margin due to the cost reduction program and also a good project execution. Cash flow from operating activities close to $40 million, $39.7 million, which is also up compared to last year. Good liquidity, close to $400 million or around $400 million in cash and other available facilities as of the end of the third quarter. And we have, as you have read, also taken another non-cash impairment on CBATU solution of around $30 million, which is still held for sale, and we'll come back on that if you like. If we move to the next slide, this is also quite important that Fugro managed to further diversify itself. The revenue split between the different ant markets is shown here, and you see clearly there that now two-thirds of our business, 66%, is related to infrastructure, offshore wind, and nautical markets. which is a steep increase compared to a couple of years ago and that trend is continuing and this is all caused by a conscious strategic decision to further diversify ourselves and to focus on new growth markets there. And as mentioned here, the market trends, population growth, urbanization, but also the need for reduction on the CO2 side will drive more of these markets to grow and allows us to take on more of these opportunities related to climate change adaptation and sustainable infrastructure development. Also remarkable to mention there is that, for instance, the largest region in the world, Europe, Africa, there's only 14% oil and gas now in the third quarter, a very steep decline. and this is obviously to do with the low oil and gas market, but also the growth in offshore wind, which has been 42% in the first quarter. If we go to the next slide, then we see the cost reduction plan, which is on track with the 120 million annualized savings as presented also in the second quarter or at the end of the second quarter. We have now 55 million included up till year to date. this year and we expect another 25 million cost savings for the remainder of the year. Furthermore, these buckets are still the same as mentioned before. Obviously, a lot is related to the reduction of the workforce up to or around 10% and obviously the reduction in the overhead cost and the freeze on the salaries and other cost savings. Also, what is, I think, quite important is the minimization of using third-party equipment. Short-term charters has helped us to focus on the utilization of our own equipment and, therefore, that had also a reduction in the cost on the third-party side. We move to the next slide. This is also my last slide. I want to emphasize that the margin improvement is visible in both marine and land, which important despite the revenue decline, which is obviously caused by the COVID situation and the related oil and gas decline. If we talk about the various business lines, marine site characterization, very much a business line that is concentrated on the strong growth in offshore wind, the renewables, so to say. Margin is up there. Some decline in oil and gas obviously there as well. but compensated by the strong growth in offshore wind. Marine asset integrity is a business line that is much more dominated by oil and gas, although some of these activities are related to inspection, repair, and maintenance work, which will have to continue even in these difficult market circumstances and with lower investments of the energy companies. this still has been mostly impacted by the slow market in oil and gas. And therefore, the margins are also down in all the regions there. Land is recovering further. We saw some recovery in the second quarter this year. And this year, or in this quarter and the third quarter, we saw the result in both land site characterization and asset integrity results. an improved margin and also even overall a improved revenue, slight revenue increase for the land business, which is important because we have taken a lot of steps to rectify the land business, so to say, that was underperforming for too long. We have seen that recovery coming in in the second quarter of this year and it obviously now, or not obviously, but it continued in the third quarter, which is good to see the effect of all the actions that have been taken. With that, I would like to hand over to Paul for the next slide.