Fugro N.V.

Good afternoon. Welcome to the Full Year Results webcast of VUGO. I'm Katrien van Buttingaai, Vest Relations. I'm here with Mark Heijnen, CEO, and Paul Vragen is CFO. They'll give a presentation that will last about 30 minutes or so, I guess, in total, and afterwards there will be room for questions. Mark, can I turn it over to you, please?

Sure. Thank you very much, Katrien. I will first go for an introduction and then hand over to Paul for the detailed financials. We'll start with some highlights of 2020. I would like to say that obviously 2020 was a special year. As we all know, COVID very present and started the second quarter of the year, obviously having an effect on Fugro. Therefore, we also see over the full year a revenue decline of 12.4%. However, having said that, looking back on the full year, we can be pleased with the results that we managed to get in this quite difficult year for many companies as well for Fugro. I will touch base on all these items that are here listed on the highlights. So I will go to the next slide to talk a bit more about the revenue development. So for the full year, as I said, 12.4% decline. If you look at the second half of the year, it's more, it's 14.4%, which obviously has to do with two quarters affected by COVID. Whereas in the first half, it's obviously only majority in the second quarter. If you then look at the bottom line result, the EBIT margin, then there you can see that that was hugely affected in the first half of the year. We also started with a difficult first quarter in 2020. and then compounded with the second quarter where the revenue came down by 19.3%, that had an enormous effect on the bottom line. Having said that, Figueroa managed to step in very quickly and therefore also see the result of that in the second half of the year, and we even managed to achieve a better result, a better margin for the second half of the year compared to the second half of the year in 2019, a margin of 6.5%. compared to 5.4. If we look at the diversification of Fugro, which is also an important element that we have spoken about quite a lot over the last period of time, especially also around the refinancing, Fugro is diversifying. This is a conscious decision from the company to see if we can balance the mix better with different end markets. Obviously talking about oil and gas, used to be very prevalent, close to 80% in 2014, and now down in 2020 to 45% for the full year. If you look at the two separate half years, and we have to realize that quarter by quarter, we mentioned that in quarter three, due to the refinancing, we actually issued quarterly results for the market. We will continuing to list half year by half year. That has to do with the fact that there's quite a bit of fluctuation between the quarters. and therefore we will continue to present these by half year. Also, we saw in the second half of the year a further decline of oil and gas and stepping up even more in the offshore wind. The renewables is then 24%, close to a quarter of the total revenues for fuel growth, which is a nice imbalance with infrastructure, also 24%, and also growth in nauticals. There's a small correction between the quarters in the second half of the year, 6 million correction is also listed there in the footnote. But all in all, we see a growth in offshore renewables for the full year of 28%, which is remarkable, especially if you look at the COVID year. If we, oops, let me see, I went a bit too quick. If we look at the market by market, no, one back, yeah. So the trends in the Fugro markets, I think there's the general global trends we can talk about, and we spoke about that population growth, urbanization, climate change, but also the technology developments are quite important for the whole world. And that has an effect on the specific industry that Fugro is working for. And this results in topics like energy transition, climate change adaptation, but also sustainable infrastructure development. and then obviously the digitalization that the company needs to go through. So this is our key industry trends that we will continue to focus on and to also support these industries in this development that we will see becoming more and more important every year from now on. In the short term, if you look at the markets, we can obviously see that the pandemic, the COVID pandemic will have an effect and continue to have an effect on the global economy, on the world, the society in general. And that will continue for the upcoming quarters. That is obviously clear and it creates uncertainty. We have to be clear about that as well. But Fibro does expect in the second half of the year that we will get to more normal market circumstances. That's maybe good to mention there. What we also see is that the pandemic has an effect on a number of topics, global topics, primarily climate change. And we'll come back on that a little bit later in another slide. If we look at the energy transition in itself, then you can talk about the renewables in particular. We see obviously a number of movements there, especially the growth in offshore wind, which has been for multiple years now above 20%. And also for the upcoming years, we expect a steep growth in the offshore wind development. Oil companies or energy companies, I must say, they shift their investment program also much more to the offshore wind development, the renewables development, wind and solar. But for Fugro specifically in the offshore environment, the wind market is quite important. And we see growth in Europe, as we spoke about, but also in the Americas and Asia Pacific. And that is growing in every sector. area of the world. If you look at oil and gas in total, you could say that that will remain volatile for 2021. Reports obviously give different insights there, but especially Fugro is quite careful in estimating a return on the oil and gas side. But also, having said that, oil and gas will continue to play a role for Fugro, and also moving forward, I think oil and gas is also needed for a sustainable world for decades to follow. Some examples in this area, and it's always good to be a bit more concrete, what is FIGRO doing there? Well, if you look at the energy transition, for instance, in the wind business, you see that we also get involved now in floating wind. Here you see an example of a project that we support in Portugal. The first floating wind projects are starting up right now. FIGRO has to play a role there for the foundation, the mooring on the seabed, but also for the positioning. and moving these structures offshore in the right location. This is a semi-submersible offshore wind floating solution and Fugro has helped there with various services and solutions that we have to offer. So we see probably floating wind picking up more and more in the upcoming years. Specific companies are only focusing on floating wind. We'll see more and more in that sense. On the right side you see another project in Germany where there's power cables, underground power cables installed to actually transport all the wind power that is collected also offshore. This is a big project. FIBRO is involved with the AAA services that we have, so acquisition of geodata, analytics in our laboratories, we have 37 laboratories in the world, and then also providing the advice that is required for these projects. and the geodata forms a central role there. If I go to the next important industry trend that Fugro supports is the sustainable infrastructure development, which is obviously an important driver as a whole in the world where we see urbanization and population growth becoming very prevalent. And if you look at this market trend for a number of years, infrastructure market is growing. We also managed to pick that up again, that growth, and we expect 2021 to grow again. Obviously, COVID has stopped that growth for a period of time, especially because projects were delayed, postponed, not so much canceled. But those projects are also being picked up right now globally. We see projects starting again. That always takes time. Certainly in the winter months, it will take a little bit longer. But we definitely see with the government support that you see in various countries coming up now, the recovery of this market segment. Very important. We also bring in more digital solutions there that we actually can drive efficiency and actually make the operations more effective, cost effective as well. Maybe if we look at an example there. This is a very good example of something that we do very close by here in the Netherlands, in Amsterdam. We're monitoring with new technology, Fugro Total Light Solution, which is something that we're just deploying for the first projects now. Very innovative, based on light, we can actually monitor the behavior, the stability of these walls and bridges, in Amsterdam, which is very critical, especially in an area where we see more and more aging assets in the world. Everywhere the assets become older, maintenance is postponed. It will be an enormous program to get back to that maintenance program. And in the meantime, you need to start monitoring to ensure the safety for the people that live there. And that will become more and more important everywhere in the world. We see similar requests coming up more and more. And you can, with the technology nowadays, also go to near real-time or real-time measurements where you continuously monitor these structures. If we then talk about climate change adaptation, that is also very important in a world that faces this climate change and the temperature rise. We see an enormous effect by climate change with natural disasters of extreme weather. I don't have to give you the examples there. And there's an enormous investment needed. We're talking about 140 to 300 billion investment required to actually get the adaptation in the world implemented. This is an area where Fugro can actually help with solutions for flood protection, coastal resilience, but also areas where water is scarce, is drying up. We will see an enormous effect on foundations there. And we see that here in the Netherlands, we see that globally as being a big topic. But also freshwater, sourcing freshwater is becoming important everywhere. Now, we see a number of areas and the new Biden administration also gives us hope that even there in that area of the world, there will be more attention to the climate change adaptation work. And Fugro can play an important role there. Let's look at a few examples there. Some good projects here. We have been very active in Romania, where we, for the World Bank and Romania, did an extensive survey on building a digital terrain model to actually calculate what floods could take, how it works, model things. Very important for climate change, flood control type of work. On the right side, we see something else where we talk about mapping the seabed, which is hydrography work that we do in many places in the world. This is in Australia, where we also deployed our USVs, the new USVs that we launched, the Blue Shadows, we call them now. And they basically collect seabed information, water depth, which is very important to also better understand the behavior of the oceans, and how actually it affects the coastlines, and therefore also important for coastal resilience. This is something that is now more and more outsourced to commercial parties. Even this year, the UN started the UN Ocean Decade. That started at the beginning of this year, which is a decade long, where they will focus on mapping all the oceans. There's only 19% mapped of the oceans, so there's still a lot of work to be done. Then two more slides from my side and I hand over to Paul. We also announced that we have a ambition to contribute to moving towards carbon neutrality. Very important. The full management team in Fugro is very committed to work towards carbon neutrality in 2035. And we will do that for our own operations. So you talk about scope one and scope two here. We have a number of actions listed there. We obviously have to look at our vessel fleet because that's very important. 80% of the carbon emission and footprint comes from the Fugro vessels and the vessels that we obviously use in our operations. And we have a whole program obviously replacing them with remote solutions, lightly crude solutions, uncrude solutions, but also maybe with hybrid propulsion or energy sources, different fuels, and maybe even different platforms in the future. And it obviously has an impact on many stakeholders here, our clients, employees. Clients want to progress with their programs as well. So it's very important that we as a supplier in this market actually help the world to become faster in changing to carbon neutrality. By the way, Europe has a target in 2050 to be carbon neutral. So I think companies have an obligation to contribute to that. Then my last slide before we go into detailed finances. This is a slide that many of you have seen before. We have used it during our refinancing as well, where we list very clearly our key investment highlights, the strong points of Fugro. We believe that they are still very applicable. We are well positioned, much more resilient company that obviously focuses on our technology, our solutions that we can offer. much more mobile, much more remote, much more flexible in basically serving markets that still change over time. And we have seen in 2020 that we have adapted ourselves quite well under very difficult circumstances. And with that, I would like to hand over to Paul for the results.

Thank you, Mark. Maybe first a few key messages. Modest year-on-year EBIT decline despite the strong revenue decline with even a recovery in H2 as Mark already said. Acted quickly and decisively with cost measures which contributed of course to the EBIT recovery in H2 growth in offshore wind and also important improvements in land. As I said, the actions in land start to yield results in the second half, clearly visible, I will show it in the upcoming slides. Very good working capital performance, resulting in a DRO of 83 days. Good cash flow, 105 million Euro, including some, let's say one offs, like the 50 million divestment proceeds from Global Marine and 20 million COVID related deferred tax payments. And as you all know, refinancing is done successfully and will provide flexibility to deliver on our path to profitable growth strategy. One too far. Here you see the cost measures. So you see that we had a very significant revenue decline. So the EBIT in 2019 was 68 million. Revenue declined by 245 million, so if no cost measures would have been taken, then if the same cost base, we would, of course, would have been down with the same amount. But you see there the various buckets, Other income year-on-year increased by 15 million. Third-party costs were lowered by 132 million. Personnel expense lowered by 55 million. And other expenses, mainly discretionary, lowered by 20 million. And DNA also slides over, resulting in a 48 million EBIT in 2020. Maybe good to note that these cost reductions that you see here are also supported by currency developments. is around 30 to 40 million currency impact, further reducing the cost. And in my next slide we will show now that there we put it excluding currency effect and also only the measures that we have specifically taken and not the benefits from other cost reductions that we have seen. Yeah, we're on track to realize 130 million cost savings. You've seen it also in the previous slide, which is in excess of our previous target. It was 120 million. Here you see the various buckets where we have explicitly taken action. 95 million is in the pocket, is done, and we expect in the coming three, four months in this year, year and year, a saving of around 35 million as per the various buckets that you see highlighted here. For the full year 2021, of course, you have to realize that this cost program kicked in already from, let's say, April, May onwards last year. So from that moment onwards, of course, the comp is similar to the reduced cost base as we have it today. So the big change you will see in the first, let's say, four months or so. That's one. And two, another important point is that these savings reflect the savings of actions that we specifically take and do not include some other items that result in cost increases, like, for instance, salary increase. So this is the net amount of personnel expense reduction as a result of tax we've taken. But, of course, that will be partially offset even when we decide to do a salary increase somewhere in the first part of this year. The same is true for discretionary expenses. Of course, COVID has resulted in no travel, no marketing conferences, low office utilization, low utility costs, Obviously, when this gets back to normal, these costs will increase somewhat compared to the very low level that we see here. Now, despite double-digit revenue decrease, modest fiscal year EBIT decline, we mentioned that already, you see the 12.4% revenue decline for the full year and 14.4% for the second half. It was around minus 10% in the first half. I think most important here is the H2 EBIT which improved from 5.4% to 6.5% with a decline in marine, I will come back to that, and a pretty significant improvement in the land business. Here we see the marine figures. So for the full year, revenue decline of 15%. Half year, so second half year, 20% decline. And in the first half, it was approximately a 10% decline. You see the margin full year coming down from 5.7 to 3.5. But also in the second half year, a strong recovery compared to H1. H1 was 1%. H2 is 5.9%, but year on year still a decline from 7.6 to 5.9, but which is limited again on the back of the 20% revenue decline, mainly because of the cost measures we've taken and the very strong growth in offshore wind. Land, here you see a different picture in terms of revenue. For the full year, revenue down 5.4%, but for the second half, flat, marginal growth even, 0.6%. And in the first half, we had a tough time, particularly in the Americas. We were down approximately 10%. You see here the margin development, 2019 more or less flat, 2020 3.4%. And you see the big improvement in... In the second half, 16 million. And I think most important here is that this improvement is visible in all regions. All four regions, the improvement is basically carried across the board. And that is very important. Two, the 16 million includes 3 to 4 million transaction gain on the sale of property in China. That's, of course, a one-off and should be adjusted for that if you do a like for like. And maybe also important to note, although I don't have the specific figures, in H2 there's government support included, also in H1, but more in H2 than in H1. And some of that government support is most likely related to H1. But we can only account for it once we know that we get it. So some of the H1 government support was accounted for in H2. Now the four regions, Europe, Africa, 11% down in revenue. Second half revenue decline was actually, contrary to all the other regions, was lower than the first half. So the first half revenue decline was higher, around 13%, and the second half around 9% to 10%. Still, despite this 11% revenue decline, a decent EBIT margin, although down year-on-year from 10.5% to 7.9%. But I think more important, Europe-Africa did an incredible job in the second half, still with a significant almost 10% revenue decline. We saw the margin improve to 12.8%. compared to 10.4% in the second half of 2019. So very, very strong result in Europe-Africa. And again, that has everything to do with the cost measures taken, but also, of course, with the strong growth in offshore wind. Americas, different picture, 12.6% revenue decline for the full year. Second half revenue decline was higher, was almost 15%. First half, around 10%. You see very different pictures for marine and land. Marine improving year-on-year in the bottom part of the slide, land coming down. If you zoom in into the half years, you see that the improvement of marine was fully in the first half and was down year-on-year in the second half, on the back of a pretty steep revenue reduction. Land is the opposite. The result that you see there coming down is fully related to the first half and land year-on-year was improving in the second half. Again, on the back of quite some measures that we have taken. One too far, Asia-Pacific, yeah. APEC, 10% declines. You see basically across the board all double-digit declines, 30% in the second half and around 7%, 67% in the first half. The revenue decline in Asia-Pacific is fully related to, for the full year at least, fully related to marine site characterization, because we saw growth in the marginal growth, but still growth in the other business lines, which is in itself good, of course. You see there the decline in EBIT for the marine business, but a very significant improvement in the land business. This part, of course, includes also this transaction result of China, But overall, we saw growth in the land business all in the second half, but even so much that the full year resulted in a growth with cost measures and growth plus cost measures give this result, which is pretty good, obviously. Middle East and India. Yeah, that's challenging H2. And what we see in all the regions is that H2 is better than H1, except for the Middle East and India. You see there the revenue decline of 20%. Now, the revenue decline in the second half was slightly more than 30%, and around 10% in the first half. So a very significant revenue decline. It has everything to do, of course, with the large ONG, oil and gas exposures, that we still have in the Middle East and India, with limited offshore wind and other work that we see in the other regions. The land business improved a lot, as you see there, also growth in the land business, so that's a positive, but the marine business, in particular again due to the oil and gas exposure, had a pretty difficult time and we are taking further actions to adjust the organization and the call space, of course, to the new revenue reality. And CBET, yeah, CBET is still held for sale, as you all know, most likely, and has been very severely impacted in 2020 by COVID. As you know, the large project was stopped in the middle of the project. unexpected, to be honest, with a pretty big impact on the bottom line. We have had basically no work since May of last year and started to work at the end of this year for a project in Brazil. Workforce reduced by around 60%, so a very significant cut, and as you see quite a few specific items a 70 million non-cash impairment, 25 million on-roads contract provision, mainly related to this SM79 project, and net result in an adjusted EBDA of 4 million, which includes, by the way, a 5 million gain related to the sale of shallow water cable assets. Then everything below the EBIT, there's quite a few things. You see there are 28 million in specific items. That's mainly restructuring cost, 18 million. But as you've seen, we target 60 million personnel expense savings at a cost of 18 million. So that's not too bad. non-cash impairment of 6 million and other costs, many legal costs related to the Southern Star arbitration of 5 million. Then in the financial expenses you see a big currency revaluation loss, so revaluation loss on cash balances and related to US dollar cash balances, Singapore dollar cash balances, Angola, but also a few smaller ones like the Brazilian REI, the Norwegian Crown, etc. but the largest one were the three that you see on this slide. In addition, we had a DTA deferred tax assets write down in the US of 19 million. And yeah, if you add it all up, that brings you to the 74 million net result from continuing operations, negative minus 74. And then we see that basically the 100 million negative, there is almost all specific items impairments and restructuring cost and onerous contract provision. Working capital, very good performance. As you know, we are typically around 90 days, plus or minus five. Every quarter we see swings, obviously. Now this quarter, again, it will cause a lot of attention and effort on it. We managed to get to 83 days, the best I've seen in Fuglo so far. really good performance, good contributions from all regions, which is also important. Then in addition, there is a 20 million deferred tax payment in this 8.1% of revenue working capital in this 1.112. That will partially, let's say, be paid in the course of 2021, approximately 50%. And we expect that at year-end 21, we still will have around 10 million deferred tax payments in our working capital. Maybe also good to note that last year, so December 29, we also saw very low working capital. And that was because of the working capital, the impact of the Southern Star provision on working capital. And there was a payable in there. It was not yet paid. And that payment was done in 2021. and of course impacting as a result of that also the cash flow of 2020. Now you see the cash flow, 105 million free cash flow. Last year, 58 million. You see the swings here. Operating cash flow before change is 86. Working capital, a big, big plus. Of course, because of this deferred tax payment, also because of the revenue decline, because of revenue declines, Of course, we release cash from working capital, and once revenue starts to grow again, you build up working capital. The divestment proceeds from Global Marine, 50 million, Capex, 81, and some others, resulting in a pretty decent cash flow of 105 million. The refinancing is known, I can be quick, it's done, successful, very pleased that we have been able to achieve this. towards the end of last year. You see here the maturity profile. We have 59 million and that was a deliberate choice of the 2021 bonds remaining. They'll be paid of course at maturity. There's still 100 million of the other bonds maturing in 24 with a put in 2022, November. And then of course the term loan and the RCF. And the RCF is undrawn at this moment and only the term loan is fully drawn. Then the net debt, 296 million including IFRS 16 and only 163 million excluding the impact from IFRS 16. As a result of the refi and of course the equity raise, you might have expected of course a strong improved balance sheet which you see here. a leverage of 2.1, including the impact of IFRS 16. If you just forget IFRS 16 for a second, it's 1.6 at a relatively low point in the cycle, I believe. So a decent, very good leverage. Interest coverage 3.2 and solvency 41%. So all of that looks good. And that brings me to the outlook, and Mark will do that. So over to you, Mark.

Yeah, thank you very much, Paul. First, have a quick look at the backlog, the 12-month backlog there. We see an 8% decline currency comparable. Obviously, we're comparing here with pre-COVID numbers, which was still growing backlog at the end of 2019. I maybe have to recall that we had eight quarters in a row, 18-19-20. consecutive quarters of growth and improvement of the bottom line. That obviously stopped due to COVID. And if you look at the total revenue decline of 12.4% over actually the whole year of 2020, then an 8% decline in backlog is not surprising. It's actually quite solid to have such a backlog. So we're quite pleased with that. Primarily growth in Europe, Africa, where we also saw the strongest decline, obviously, on the revenue side, or at least absolute numbers in 2020. If we then look at the overall outlook, on the next slide, then we can say, and I said these things already, that the pandemic obviously will continue to have some impact on the economy in the upcoming quarters. It will also still affect Fugro, maybe with some project delays, maybe some cancellations. Although, having said that, we know how to work with the current environment quite well. Most of the projects are, yeah, started up again. And therefore, we can also say very clearly that the second half of the year, we anticipate more normal circumstances. Also, after all, the vaccinations probably in a large part of the world have been done. The offshore wind is continuing to grow, and we expect there also to benefit from that. Infrastructure is expected to pick up again this year, and then due to the government support, as I mentioned, oil and gas remains volatile, as mentioned as well. We continue to focus on managing our cost, our cash flow, but also concentrate on operational and commercial improvements, excellence there, and obviously with the aim to further improve the margins as we were on that track in 18 and 19 and will continue to go back on that path to profitable growth. CapEx guidance is between 80 and 90 million for the full year of 2021. Last but not least, the management agenda. No surprises there. As I mentioned, we first and foremost focus on our cost base and the cash flow generation. Then we want to strengthen operational commercial excellence, complete the land turnaround, the restructuring there. We have seen, as Paul mentioned, the benefits in all the regions. We have taken a lot of steps. It started already in 2019. We have presented about that a number of times. We see the result right now. It kicked in during the course of the year in 2020. And we obviously want to complete that now and move on with a more solemn land outlook. Then we focus on technology, as I mentioned before, new solutions, digital solutions. There are some exciting stuff in the pipeline, and we will continue to bring that to the market and benefit from that, very much integrating the geo data based on all the digital and technology possibilities that are there. Last but not least, Paul mentioned it already, the SIPA geo solution, we still have that held for sale. We continue to sell that. We expect, as Paul mentioned, to complete a transaction in the first half of the year. And we cannot say anything more about that right now. Unfortunately, I understand that everybody would like to hear more details, but that's just how these things work. And last but not least, we will continue to focus on our ESG roadmap, environment, governance, social elements, all of them. And as I said, we also target net zero in 2035. And that is the end of the presentation and we can open up for questions. So I would like to hand over to the operator for questions.

Thank you. And if you wish to ask a question, please signal by pressing star one on your telephone keypad. Again, that is star one to queue for a question. We will now take our first question from Luke van Beek of Diggroof Petercam. Please go ahead.

Yes, first of all, a question about the difference between site characterization and asset integrity. Site characterization has been doing quite well on sales and backlog. In the past, it was always a leading indicator for performance in asset integrity. Is that still the case, or has that changed with the growing importance of wind?

Yeah. Thanks, Luke, for that question. Yeah, that's absolutely still an indicator you see, and we have seen that over the last couple of years, and we spoke about that a number of times, that it's almost by the book, as you can expect. You first see site characterization work kicking in for the design of projects before the development can start, and then only one to two years later, you see the development of the project itself, Asset integrity work is also related to ongoing maintenance and inspection and monitoring. That is a little bit less dependent on what is done for new projects. So in that sense, you will have a stable basis there for asset integrity as well that will always continue. But in principle, you're absolutely right. It is going up and down with the cycle of the market, which is also a little bit complex now because we have seen multiple things happening over the last couple of years. We were nicely recovering in 2018 and 19, and we first saw site characterization picking up again, then only at the end of 19 or the second half of 19, we saw asset integrity picking up. But with COVID, this obviously disturbed the whole picture again. And now you see that obviously site characterization also having an effect on projects that are maybe not handed out yet. So we'll probably see some of that also in the results overall. But in principle, you're absolutely right. It's a good indication. If a site characterization pops up, then later on you will see asset integrity to follow one or two years thereafter.

And second, when I tried to calculate the asset, the vessel utilization for Q4, it seems to have been quite solid. Is there just a quarterly fluctuation or are you also confident for vessel utilization for 2021?

So we're not specifically guiding for the percentage of vessel utilization for 2021. What you normally see, if you have a busy season on the marine side, then Q2, Q3 is busy. And then it will roll over into Q4. That generates then a nice utilization in Q4. However, as always, in winter months, it tapers off and then You see that in Q1, there's less activity because either it stopped in Q4 or it ends early in January. And then you have some quiet period always in the first quarter. If you're busy again in the season, then you will have more activity in quarter four. So that's how we look at it.

And then finally on the... the remote operations, autonomous vessels and so on. You mentioned briefly in your presentation, can you give an overview of what you have developed so far and how your experience is also regarding your competitiveness in the market with this offering?

Yeah, there's a lot of things happening in Fugro and also obviously around us because this is a hot topic for many companies looking at remote solutions, uncrewed solutions, lightly crewed solutions. So you see a lot happening around us as well. We follow that obviously with interest. If we look at ourselves, and that's what we can concentrate on, we're really accelerating that program for ourselves already for quite some time. We have now five use fees in the water. The first sea kit unit is also launched and deployed now. So we're doing the first test with that and then we can actually start using it commercially, which is very important because we need to gain the hours of experience, because it works well, but there's always learnings, and you need to modify the ones that you built while you're still testing the first units, so to say, so you learn a lot along the way, you make the modifications, and we're very pleased with what we have developed thus far. We also have just recently got a subsidy program for a docking station for one of these USVs, so that's a new development where we actually look at how we can download data, refuel these use fees, which is a new development. And we will start with that or we're busy with that right now. And at some stage, we will also announce that to the market. Now, the solutions always go further than only the equipment itself. You need to look at the data. What do you do with the data? How do you integrate that with the end solution for the client? That is actually ultimately what the client asked for. So we very much concentrate on how can we speed up the delivery of the data? How can we keep the quality very high? How can we have our laboratories deliver on time? So there's a lot of things happening around that also with the eight remote control centers that we have operating now in the world. And we see the activity there really increasing rapidly. So we make more hours, we have more projects that actually are supported by remote solutions. So we're very pleased with the development in Fugro. Obviously, we follow very carefully what's happening outside. There are a number of parties that also make very nice steps, very interesting, very good. It keeps us sharp. It keeps us on our toes, what is also needed. But it's only a few parties that actually make the same progress or not the same, but, yeah, they make steps also on that front.

Okay, thank you.

We'll now take our next question from Joyce Berkander of ABN AMRO. Please go ahead.

Yeah, good morning. First question, Paul. I first want to thank you for all the hard work in the past few years. And that's simply because otherwise we maybe would forget it. Good luck at ASMI. Can you give us an update on the CFO succession process?

I think that's more from Harik to say something about that, Thijs.

Yeah, Thijs, thanks for the question. It would be interesting if Paul selects his successor, but that process has been kicked off, so the search program has started. We obviously have an executive search company involved there, And we will make an announcement as soon as we can be more clear about that. But that process is in full swing.

So you hope to have a candidate there before the AGM?

I'm not going to speculate on that. These processes take time. And in that sense, it's only a few months ago that Paul announced that he's leaving. Fugro which is obviously unfortunate I personally like to work with Paul over the last couple of years and you thank Paul we will do the same on our side because he has contributed a lot to Fugro and he has a warm heart to Fugro as well so I know that he will follow us very carefully but he is leaving us at the end of April and we are obviously very busy finding a replacement for him how the new person and when that person can start exactly. I cannot speculate on that. There might be a small overlap or gap. We will have to come up with a clear explanation how we will deal with that. And we'll do that in due course.

Very good. The second question is about marine site characterization. I see that backlog is even higher than a year ago. Can you maybe specify whether it's higher in all regions or not?

Yes, we can say something about it. Specifically in Europe, Africa, where the backlog is higher on the marine site characterization side. Obviously a lot related to offshore wind developments, which is obviously picking up here as well. There's a lot happening already in offshore wind for many years in Europe. At the same time, there's still a lot planned, as you know, and you follow in the news as well. And then we expect also the Americas to follow thereafter. There's a lot of development kicked off earlier last year and the year before. And we expect also Asia-Pacific to pick up, but a little bit later. So the big growth in offshore wind is probably more 2022. than this year. So, but it's at the moment the backlog primarily Europe, Africa on the marine side, characterization side.

Okay. Thank you. The third question is on the future of technology on ESG. Your payback guidance for 2021, what is roughly the difference between growth and maintenance and then How should we see it? How much money will be spent on new and manned service vessels? I think there's another one seated vessel at Blent, but I guess that you will have to move faster and relate to that. Will this be accompanied at the same time with potentially the divestment of manned vessels And as a consequence, also the, let's say, the exit of potential, let's say, FIFO employees on your vessels.

Yeah. Okay. Thanks, Thijs. I will answer part of the question and I'll hand over to Paul to be a bit more specific on the maintenance and the new CAPEX, so to say. What I can say in general, we see this as a gradual change So you will not see in a very sudden moment all the vessels that we have being redundant and then that you move over to the new technology. And we see that already building up this experience over the last period of time where we actually are operating with our use fees, where we also follow very carefully what's happening around us and how people are deploying their assets and how much utilization they have. So we follow that very carefully. We want to have a decent return on the investments that we actually deploy. So we have a program for ourselves, how fast we want to go. And yes, we are going fast and we are accelerating on a number of items as well ourselves because that's just part of our program and the technology possibilities that we have. But having said that, you need to also learn in that process and it will take time. Not everything can be done. by the uncrewed solutions, so to say, or the autonomous solutions, so you still need the platforms that we currently have as well. Over time, we will phase out the older ones, we will not replace them, and we'll step into the new technology more and more, and we will follow that very carefully. Maybe we need to speed up at certain moments in time, maybe we need to slow down a little bit. That really depends how quick our clients, our industries are actually picking up these solutions and what the real demand is. Because at the same time, we see a lot happening, but also the industries in some areas are pretty conservative and it takes time to actually convince and to move into the new technology and the new solutions. But definitely from the CAPEX there is quite a chunk listed to the new money or new money going into a new development, so to say. Paul, maybe you can be a bit more specific about the maintenance CAPEX.

Yeah, that will be around 50-50, I think. It depends a little bit on dry dogs, when and how they happen. But if you take 50-50 into account, so 50% maintenance related and the other 50% on the back of 80 to 90 million that I'm talking. will be project-based and new developments, both for land and marine. We always talk vessels, but don't forget there's also a land business. It's also land. There's quite some exciting stuff coming in. So also there we will continue to invest and maybe coming back to add one point on your retirement of, let's say, the more traditional vessels. Step one, of course, will be to charter less. And that's already what we did in 2020 actually, where the relative weight of our own vessels for instance was significantly higher than what we saw in 2019. So there also we have room to play in combination of course with retiring when needed all the vessels.

And maybe to come back on one element there, Thijs, is that you asked about the people in Fugro. I specifically think that we still need the people, probably deployed in a different way. So people move to operation centers, remote control centers. They are getting more involved in the technology development themselves, maybe in smartly processing the data, faster delivery over time. Yes, certain positions will probably be redundant and not needed, but you will have to have other roles there. And as we also have committed to further growth in the future, a path to profitable growth, we also think that we can redeploy most of the people that we will probably make redundant over time in working in a different way.

Okay, thanks. We'll come back for a second round.

We'll take our next question from Andre Mulder of Kepler.

Please go ahead. Good afternoon from Mulder. Can you give us a thought to report on a segment basis, so not marine land anymore, but within renewables or gas and so on?

To report in market segments, Andre Mulder, No, that has not been a consideration that we always consider many different things, but it's not the direction that we will take. We will continue with the market segmentation as we report right now based on the regions, and we will continue to report, as you know, marine and land, but that's also to give you the same insights that you had in the past. So I think with the regional reporting we already have, and more insights than we provided in the past. I don't know, Paul, you want to add anything? It's great to hear you say so.

You built now quite many offshore winds that I want to be involved in. Can you give us an indication of where you think that the margin is compared to oil?

Yeah. Yeah, so we spoke about that quite a bit. Maybe two things to mention there. First and foremost, and that's also one of the reasons why we would not go or we don't have a preference to go to end market segment reporting, is that the investments that we make and the expertise that we have, we can deploy actually completely independent from the market. So we have no investments that we do specifically for one or the other market. In the end, it doesn't really matter what we start building or what somebody starts building on the land or marine environment. Yes, there might be slightly different questions because monopole in the ground has a different question than maybe a platform with four legs. That's completely true, but it's the same expertise, it's the same equipment, and therefore we believe that it's more important to actually report region by region and continue to report the difference between land and marine. But we also supply the information as you had in the past based on market segmentation, which might change a little bit over time. So I think this is important to mention that the investments are agnostic to the end market. And I'm thinking the second part of your question was related to... Help me there.

The margins.

Oh, the margins. Yeah, sure. Sorry, André. So coming back on the margins... In actual fact, and you can also see that in the performance, if you look at the decline in oil and gas over 2020, and you see actually the step up of 28% over the total year for offshore wind, that we actually achieved similar margins. And if you look at the region, as Paul said, Europe, Africa, second half of the year, actually improved the margin, and that's on the back of a lot of the offshore wind work that we have picked up there. So, We have already stated for some time that the margins in offshore wind and oil and gas are quite similar in some areas and we can achieve those margins simply because we can move our assets around between the various markets. Whereas maybe a party in the industry that has very specific investments required for one end market might have more difficulty to move the asset around, and therefore, we'll see different competition in different markets. And that is, for us, slightly different, and therefore, we see the same or similar margins. And you can have good projects and bad projects, both on the oil and gas side and in the offshore wind side.

Then a question on ESG. How will that reflect in your near-near addiction? And secondly, to what extent has ESG an impact on the loans and interest charges?

Okay, the first question, André, can you repeat that? Because I couldn't hear that.

How does that ESG part, how does that boil down into a little ring on your face?

In the remuneration. Oh, in the remuneration. So we have targets for the long-term incentive program for the top management of the company, the board of management and the executive leadership team and more senior people that have performance shares. There's an element, the strategic target, already for a number of years and also for the years to come we will focus specifically on ESG and the progress made there. And we just defined... another target related to CDP, Carbon Disclosure Project, how we want to have a score there in 2023 that we actually get down and higher up actually on the ladder there in becoming a more leading party on the ESG side as well. And then you had your second question was around

debt and interest charges.

So what is the question in relation to ESG?

I see with some companies that they may progress on these, it will result in lower interest charges.

No, so I assume you refer to green bonds indeed. That's of course something we will look at for the next refi when that is to be done. It's something that we have discussions with various banks, of course. They're happy to pitch these type of solutions. It's not something we will do short-term, but you know the term loan has a three-year maturity, so it is possible that that might be replaced by a green bond. I don't know, but it's something we will definitely look at.

And last question, what's your main book? Tell me more about it.

I think Kaplan-Ployd is in the press with 0.4, so zero.

Okay, thank you.

We'll take our next question from Hank Verman of Kempman. Please go ahead.

Hi, good afternoon. Thanks for taking my questions. My first question is on the government support. Maybe I missed it, but can you quantify the government support in the P&L, so not in the cash flow statement, but in the P&L?

Yeah, no, I can do it, Henk. There is 16 million government support in the full year, approximately 5, 6 million in the first half, and the remaining balance in the second half. It's part of the adjusted EBIT. And then most likely your next question will be, why is it not part of specific items? That is because the cost and the underutilization and the furlough etc. that we had is also of course part of the adjusted EBIT. So the only reason why you get government support is because of low utilization, no productivity, negative impact on your results and for that purpose of course there's a mitigating impact through this government support and that's why it's included in the operational result because it offsets the negative impact that we also have in the operation results.

Right, right. And then the question related to that is, let's say if you take the 35 million cost savings that still have to hit the P&L this year, so 2021, But you combine that with, let's say, a headwind from this $20 million and also, as you spoke about, the potential raise of salaries within the organization. Should we expect a life-for-life basis? Should we expect operational expenditures to increase or decrease in 2021? Yeah.

No, I would still expect them to decrease for the very simple reason that indeed you quoted the 35 million already. So that will be year and year in the P&L. Everything else equal, like currency equal, etc. There can be currency movements, of course, that change things again. But a salary increase will not be to that extent, obviously. Other potential discretionary increases will definitely also not be to that extent. So we should see a... based on a similar revenue level, similar currencies, a reduction in cost.

Okay, that's clear. And then another question was on, if I remember correctly, you still have a call option that will monetize, that you monetize in this year, related to the global marine. Can you remind us what the current value of that is and what the cash impact will be this year?

It's 10 to 15 million, but I believe it's next year, but I'm not 100% sure.

I think it's 2022. They can always actually discuss earlier execution of it, so that is possible. And then it's roughly 10 to 12 million indeed.

Okay, and our last question is on the medium-term targets, because I think previously some people expected that to be updated at this point in time, but I I appreciate, given the market circumstances, you delayed it somewhat, but let's say, is it a happy result? Is that a correct timing? Or did you also see a vote to update the medium-term targets?

Yeah, very good question, Henk. Yes, the medium-term targets obviously are still there, but you don't know when we expect them to be achieved. We used to have a certain specific time window for that. We have taken that out. However, the levels of targets are still there. Yes, we will update you in the upcoming period. We are looking at that very carefully right now. I think you have a decent assumption there. And yeah, at the same time, we can also be clear that COVID created at least a year delay, maybe more, and we will come back about that and be a bit more specific.

Okay, thank you very much.

We'll take our next question from Corin Mulder of ING. Please go ahead.

I know we're here from ING with a couple of questions. First, about the NOA regulation you spoke about, let me say that the first half year NOA regulation was accounted for in the second half. So what can we expect in the first half of 2021 with regard to that accounting effect? That's my first question. The second question is about the cost savings. So you guided at the end of the third quarter, cost savings 55 realized, 25 in the fourth quarter. But the realization is in fact 95 and that means of course 40 million for the fourth quarter. So what is the background of that and what is the impact, let me say, if I would look at your guidance for 150 and I'm very cynical looking at 50 million difference, then it looks like that this 160 million is purely realized because of that 50 million extra. Maybe you can elaborate on that. Then my question on the order book. The order book was minus 4% at the end of third quarter. It's now minus 8%. If I look at the order intake, it was let me say 25% lower, that's including currency. Is there a specific reason? Is there something related to COVID that you have looked very carefully at your existing contracts and that you did some work on these contracts? That's my third question. And then my last question is about the oil price. You are quite pessimistic about the oil, let me say, about the outlook for the industry. And now you speak about volatility of the industry, but underlying looks like you're more optimistic and maybe you can also give me some idea about the story with regard to the North-South field in Qatar, because you are working for McDermott and maybe if I look at the size of this contract, then let me know more behind. Is that maybe something you can elaborate on that as well? That were my questions with my sub-questions.

Thank you. I'll take the first two and then Mark will take the latter two. On the government support, Quirijn, first in the Netherlands, we refer to now, we go to zero government support because you only qualify under certain conditions, although we saw a significant revenue decline in our land business in the Netherlands. It was not big enough. to qualify for government support. So the government support is from outside the Netherlands, it's around the globe, APEC, Americas, etc. Then, what I said on the accounting was that not all the H1 support was accounted for, only to the extent we knew what we would get. And of course, if somewhere in the course of early second half, you get confirmation that you get government support over, let's say, the impact of Q2, then, of course, you have to book that part in H2 because H1 is closed by then. So there was around 6 million booked in accountants for in H1 and the remaining part in H2. Then on the cost, not sure if I really got your question. What I can say is that we are ahead significantly With the savings program, there's two slides in the deck. You've seen that with significant cost reductions. We still think that, let's say, if you take the first four months of 2021 compared to the first four months of 2020, that there will be approximately a $35 million saving. Most of the actions to realize that saving have been done. It is an annualized saving, as you know. The reason why it went up from 120 to 130 is simply because we had a higher run rate, so that is the reason. Procurement is higher, so the third-party cost, savings, discretionary expense, which is an other expense, is even somewhat higher. And that's reflected now in this update. And you should see that back in the year-on-year comparison in Q1, or let's say the first four, maybe even five months of the year. Then maybe to you, Mark, for the order book, order intake and the oil price and oil and gas market.

Yeah, so, Quirijn, you asked about the backlog and third quarter, fourth quarter, or at least the comparison there, 4% down at the end of third quarter and 8% down at the end of the year. Yeah, what we can say there is a couple of things, probably. It's good to mention that. It's not an exact science, so be careful if you compare quarter by quarter because there are quite a few fluctuations and sometimes we have some larger projects coming in just in the third quarter or just in the fourth quarter. So if you really want to make a good comparison, you have to actually go back one year and see which contracts actually came in and this has an effect. Is COVID also... Yes, of course, COVID has an effect on the order book and backlog because we see that clients actually delay the process and how fast they hand out work. So you see that we are talking about many projects that are still in the pipeline and being discussed, but the clients take just longer time before they actually commit to a new project. And that is also because they face difficulties around COVID they might delay it a little bit, but also these processes of tendering can take longer. And that's certainly what we also have experienced. If I then go to the oil price, I did not 100% follow what you mentioned about Qatar and the McDermott project, because we certainly did also not get all the work there. We did not win all the work there, but I don't have all the details about that particularly, so we can talk about that maybe another time. But if we look at oil and gas, you see quite a few reports already that are a bit more optimistic about oil and gas. At the same time, we want to be a little bit careful there. We anticipate for our own plants still a potential reduction in 2021. If it is actually better, then we will obviously can benefit from that. But we also should realize, despite the fact that people always connect the oil price and almost the share price of Fugro one-to-one to each other, this takes time. So if the oil price moves up last week or this week, it doesn't mean that Fugro has more work next month. It takes time before these companies start to act. Yes, Fugro is in the early phase and will actually see it as one of the first companies to get more work But those things take a little bit of time.

Thank you.

Again, as a reminder, if you wish to ask a question, please signal by pressing star 1. We will now take a follow-up question from Christ Berkelder of ABN AMRO. Please go ahead.

Yeah, it's me again. Wait a sec, wait a sec. Okay. Can you give me a number where your staff base in numbers currently is and preferably mixed between marine and land?

The number of staff between marine and land?

I don't have it precisely in my head, but we can give you the info. It's below 10,000 and I don't have the precise bit in my head.

Okay. Then second question, looking at CBET. In 2021, you already have a couple of projects to act. Can you maybe remind us on roughly the timing through the year and further on whether actual discussions at this moment still take place? with interested parties and slash why should an asset held for sale and does not need to be reported in the normal operations.

Maybe on the projects, Thijs, we are now working in Brazil, two projects, most likely they will be sequential, so for one crew basically current expectation is that from now until summer September we will be working and we'll see of course if more work will be won because we're also still tendering of course but this is what we currently have in the backlog and as I said we are executing our network now as we speak. On the health for sale It's still held for sale because there's a high probability that we will sell this before or within the first half year. We are talking to a party, obviously, very concretely, very specifically. There is interest even from other parties. More than that I cannot say now, but our expectation is that we will close this. But at the same time, as you know, you can always come very close to closing it, but if you then ultimately still don't get to a final agreement, then It might still change, but that is not our expectation at this moment in time. Based on everything we know today, it looks like that this will be solved in the first half of the year.

Okay, and maybe not based on the other assets held for sale, the exploration assets in Australia?

Yeah, so that's related to the Finder work, which is... is a bit more long-term vision that you should have there because these things progress very slowly, but we still have some interest in some licenses there. Over time, they will be divested. There's nothing actively going on on our side. We're just a part owner, so to say, of these assets, and there's Finder in charge to move along with that. Also in the current environment some of these licenses will probably only mature later on being handed out or sold and in that sense I don't expect any major change there in the short term. And then we spoke already about the remaining part of Global Marine.

And continuing with Australia, One and a half year ago you talked about a seabed net in Australia, a $1 billion contract over 10 years. What has come out of that potential so far and what are the steps nearby for maybe indeed seeing those kind of revenues?

Yeah, yeah. So there are multiple work orders that came out already in 2020. So in actual fact, it only started to kick off in the beginning of 2020. And Fugero picked up, I think four, but it could be wrong, but certainly three. But I think recently we built a fourth chunk for this project, which will last, as you say, for probably a decade. And there's multiple programs that will be handed out for various areas around Australia. And we're very actively working on that.

Okay, good to hear. Final question, the Americas. The backlog is down in the Americas and probably also in the Marine side characterization. What do you now see in the early days of the Biden administration? Was it, just in your view probably, And when I look at offshore wind related, primarily the timing of the government change, or should we expect, let's say, maybe a delay for another six months or so? What is your view there?

Yeah, good question, Dijk. We have obviously seen multiple things happening in the Americas, and as Paul spoke about as well, it's It's difficult if you analyze America as a whole because sometimes the marine going down or going up and then the next time it's the other element doing the other thing around. And therefore it's sometimes difficult to conclude if you only look from a distance. But if we look at America as a whole, we do expect certainly the offshore wind and also the infrastructure market to further grow. So both land and marine will benefit from that. We have been actively talking to the transition team of the Biden administration. So even in the last couple of months when he was not appointed yet or officially on seat, there were ongoing discussion with the transition team there. We do expect that this will get more activity to the table and also for Fugro to be able to benefit from that. These things will take time. Yes, there is months involved before they're handed out, contracted and so on. And certainly during COVID and now in the Americas with the severe weather that they have in certain elements. Yeah, things take time.

Okay, clear. Thanks. You're welcome.

We will now take a follow-up question from Corin Mulder of ING. Please go ahead.

Yeah, this is Purijn again. I have one question about wind. Your wind pool year growth was 28%. If I look at the first half year, 41%. Third quarter, 42%. That means, in my view, that the last quarter was not any growth in wind. And so why are you... Yeah, you were optimistic about 22%. So what's happening here? Is that... weather related, or maybe you can tell me.

Yeah, a couple of things on that, Quirijn, and you might recall the slide that I've shown. So if we look at first half versus second half, the share of wind is, or the growth was 28% in both areas. We did, and I just mentioned as well, had a correction between the third and the fourth quarter there as well, because we had 6 million which was allocated to wind in the third quarter, which was in fact oil and gas, that had to do with the situation that we normally do not report these figures quarter by quarter, so there was a lot of pressure on that, there was a mistake made, 6 million, which is reclassified as corrected for the second half of the year, so the numbers that you see on the slide deck is correct, and in that aspect, yes, the share in offshore wind is correct, lower than in the other areas or in the high season because we do see a difference between oil and gas and offshore wind in that aspect and that's also quite logical because the windmills you build in areas where you have pretty high winds which means that in the off season in the winter season you have high winds and rough weather conditions so the wind parties normally concentrate their work around the summer months and they have high activity second, third quarter, sometimes running into the fourth quarter. But there is a difference there, for sure. And that's basically what we see and what we can say about this. But there is still growth, also growth in the fourth quarter in the wind business. Double digit growth. What was the adjusted growth in the third quarter then? I don't know the exact growth numbers there.

Yeah, I think it was just around 33 or 34%. The Q4 was around 12 or so, I believe. So 28% in the second half. And also in the first half, you referred to 40%. That was in Q2. The first half growth was also around 28%. So H1, H2, very similar. Having said that, That's a coincidence because this is pretty lumpy work. So you can have, and we've seen it before, quarters of 40% growth and quarters of 5% growth. That's just when these projects are being executed. So that in itself is not a strange thing. But by coincidence, this year, 28, more or less 28 at least. I don't have a precise number. The full year is 28. The second half is 28. So the first half must also be 28, around that level.

And I think it's very important what I just mentioned that there is a difference there because they are in the condition or under the conditions environment where there's a lot of wind and therefore they tend to actually stay away from the real winter months.

Okay, so the correction in the first half year was 12 million then?

No, no, there is no correction. Let me try once more. There is no correction in the first half year, yeah? So the first half year growth, and we will confirm the numbers precisely. I don't have them precisely, but I think first half was around 28, with 40% growth or so in Q2, and I think 10 or 12, whatever, 13 or so in Q1. Around that level, we will confirm that. The second half, initially we reported 42% growth in offshore wind. That should be 33 or 34%. There was a 6 million... error that was reported as offshore wind that should have been oil and gas we corrected that in Q4 so therefore Q4 looks a little bit low but it's not the growth in Q4 the real growth is I think around 12% so the growth in the second half correct numbers so forget corrections correct numbers around 28% the growth in the first half also around 28% that's pure coincidence because It could also have been that the first half was 10% and the second half 50%. We never know up front because, again, typically offshore wind contracts are pretty large and can be lumpy. So, of course, depending on when you execute what kind of work, you can see differences from month to month, quarter to quarter. And that's one of the reasons why it's maybe better to report this on a half-year base than to report this every quarter because of the – yeah. the differences that you can have and potentially the wrong conclusions that you might draw from it.

So 28% and 28%. Okay, perfect. My final question is, is there any progression in the South Star story?

Yes, that is completely done and behind us, so there's nothing else to expect on that.

And there are no further questions at this time. I would like to turn the conference back to our hosts. Okay. Thank you very much, everybody, for participating.

And we'd like to wish you a good rest of the day.