Fugro N.V.

Welcome to the webinar of VUGRO's half-year 2021 results. I'm Katrien van Buttinga, Investor Relations. I'm here with Mark Heijnen, CEO, and Barbara Geelen, CFO. They will hold a presentation, which will take, I think in total, around 20, 25 minutes or so. After that, there will be time to answer your questions. Mark, I'd like to hand over to you now, please.

Thank you, Katrien, and also welcome from me. Good afternoon, everybody, or good morning. So I will first give you some insight on the highlights for the first half of this year. So, and to start with, yeah, to say is the second quarter of this year is quite different than the first quarter of this year. During the second quarter, after exactly one year after the pandemic started, we have returned back to growth. And this was largely on the account of renewables business, which also highlights the flexibility we have to move assets around to various end markets. And that is also reflected in the profitability that improved for the second quarter, but also for the total of the first half of this year. And we saw that in both the land and the marine business lines. In the coming slides, the three slides, I will briefly highlight the first few bullets, and then thereafter I will talk a bit about the business, some of the changes there, and then I'll hand over to Barbara to talk about the financials in more detail. So in this slide you can see how different actually the second quarter was from the first quarter. Very visible here where we see a decline of 17% in the revenue in the first quarter and a 14.1% growth in the second quarter. that is visible in all the regions except for the Middle East and India, which is obviously a bit more dependent on the oil and gas market, and also the infrastructure markets there obviously rely on the earnings from the oil and gas market there. We also have to say that COVID pandemic is still very visible around the world. Obviously, in some areas here in Europe, we can see the benefits of the vaccinations that really have increased, and that is obviously good to see. It also reflects in the numbers. But actually, in many places of the world, we're still very affected by the COVID pandemic and the difficulties to keep the projects going, the logistics of the projects in itself. In this slide you can see what the margin has done over the first half of the year. And both in the first quarter, but also in the second quarter, we see an improvement compared to last year. It is visible again in land and marine, which is, I think, pleasing to see. On the left side, you see the various quarters there, 8.1% for the second quarter compared to 7.4% in the second quarter last year. On the right side, you see that we have for the first half 2.5% margin for the full first half of the year. contributed by also the land and the marine business, as I said. It's also important to say that the margin obviously went up, not only because of the revenue growth, but also because of the cost savings program that was implemented at the beginning or shortly after the COVID pandemic hit us last year. And we continue to make progress on our diversification, which is very visible in this slide. You can see on the graph in the middle there, currently 60% of our revenue is related to renewables, infrastructure, and nautical. And this is obviously in line, as mentioned before, with our strategic objective to further support our clients with the energy transition, the sustainable infrastructure development, and the climate change adaptation type of work that is more and more required nowadays. And I think what is very important to note here is obviously the continued growth on the renewable side, the offshore wind business, 20% growth for the first half of the year, which is very important because we can also use our assets, the same assets, in the various end markets. So one day we work maybe on offshore wind, the next day on a fiber optic cable installation or a survey that needs to be done for the routes there, or maybe an oil and gas project. Also for the first full half year, we see that oil and gas is still down 20%, quite significant, but that's fully attributed to by the first quarter of this year, because we saw a small increase there in our revenues in oil and gas in the second quarter. Infrastructure was also up, which is good to see after a very challenging 2020. The next slide gives you a few examples of recent project awards in the first quarter or first half of this year. On the left, you see the offshore wind project in Vietnam, where we actually start in a very early stage with weather measurements for this development of offshore wind. Where is the wind, so to say? Where should we place these windmills? That is something that we get involved in, a very early stage. In the middle, you see a project that has been discussed and is very actual, I would say, in the news here in the Netherlands that we also are involved already for multiple years. But now also for a new contract measuring these bridges and key walls in Amsterdam. There are 850 bridges and 2,000 kilometers of key walls only in Amsterdam to inspect. And that gives you an indication how much work there is with the aging assets in the world, because this is only one city in one country, let alone if we broaden that towards the rest of the world. And on the right side, you see a coastal mapping project that we recently got awarded to us in Northern Ireland, bathymetric survey work that we do to actually measure the erosion around the coastlines. And this is also much more important nowadays due to the climate change adaptation work and requirements that we see there in the world. As I already alluded to, markets are changing and driving actually the increasing need for accurate geodata. Our ambition is to support this transition in these various markets, the energy transition with the support to net zero carbon emissions, the sustainable infrastructure development very much to enable safe infrastructure, a safe living environment, Very applicable also to these examples in Amsterdam, but also what we see that we do with reinforcements of the levees and the dikes here in the Netherlands. And then on the right side, the climate change adaptation is obviously a good example there that I just mentioned is to strengthen the climate resilience. And then, in the end, we actually really want to get to the contribution to the UN Sustainable Development Goals. These are the five UN Sustainable Development Goals that we have picked where we feel that we can really have an impact. Obviously, the other 12 that are out there, we want to do well on as well. But these are the ones where we can have most impact. And in the future, FUGO will continue also to report on these and also We aim to actually be more exact on the impact that we have on these UN Sustainable Development Goals. Our strategy really capitalizes on the transition in these markets, so in the energy transition, sustainable infrastructure, and the climate change adaptation. We have three pillars in our strategy, capturing the growth in energy and infrastructure, then leveraging the core expertise in new growth markets. Those are existing markets and existing expertise that we want to apply in the markets that are now growing faster. And that can be because climate change is becoming more prevalent or sustainable infrastructure development. And therefore, we see growth opportunities. And the last pillar in the strategy is the third pillar. They are differentiated by integrated digital solutions. Maybe a very good example there of climate change adaptation is driving the growth in the water market. And the water market consists of a number of elements there. Flood control, I mentioned that already previously. alluded to that with the North Island project there, but it's obviously along the coastlines, but also inshore and inland projects that we do there. Water management in itself, that can be freshwater, but it can be also waterways, more and more projects there. And then in general, the ocean science, mapping the oceans. Think about the ocean decade that just started this year, 10 years of focus from the UN on the oceans to map the oceans globally. Only 20% is mapped in detail, and there's a lot to do. And the areas that are mapped at the moment is the most congested areas where we always have the sailing routes of the vessels, but there's a lot of unexplored terrain there. So there's a lot required because that has a real impact on the climate change and how we can handle that. And that is really driving the growth in the water market. And this is a market that in the future we will keep on the board as one of the key markets for Fugro, so also the nautical market that we report right now, together with the things that are mentioned here on the board, we will form a new water market for Fugro. And during the course of the year, we will communicate more about this. And hopefully we can give you already an insight how large that market is for us at the end of the year. And then moving forward, we will have that on the board on a regular basis. Some examples there, very clear examples on the water market there. I think in the past we have spoken about the seawall resilience project that we have done and that we're still involved in in the USA, in San Francisco. Other examples are the hydrography work, mapping actually, all the oceans around Australia and New Zealand, which is a big project. There's also a 10-year effort for these countries to get this done, and many countries will follow. And they will contribute that data also to the Seabed 2030, another project closely related to the UN Ocean Decade, to map all the oceans in the world. And we do that now also with new technologies, with our airborne laser technology for the shallow water areas and then the unmanned service vehicles that we have, the USVs that we deploy there in this area in Australia to really map the seabed, which is very interesting because we really push the boundaries on the technology there. and we gain a lot of experience there. On the right side, very applicable obviously in the Netherlands, the south of the Netherlands there we have seen floods, which is quite severe, and Fugro has been involved over the last couple of years in a lot of dike projects, levee projects, reinforcement there. And even in the south of Holland now we see the first proofs of the work that Fugro has done. We also won an innovation prize two years ago for a very innovative way and a sustainable way to reinforce these levees, these dikes. And now we have seen actually that it's working quite well. So we will continue to be involved in these kind of projects. What is also good to talk about is our progress on the remote and autonomous operations, the technology that we use. And we see here on the picture several examples of that. I think in the middle, that is maybe good to mention, we see the USVs, the Blue Essence. That's the new USV that we have recently deployed. And the second one is now in the water as well. We're using that, for instance, for inspection work now in Australia for Woodside. We have done the first inspection work there, completely unmanned, out of the control center that you see here as well on the top right side. And also the blue shadow there on the picture on the right side in the middle, that's much more used for mapping the seabed. as I showed you for the hydrographic work that we do in Australia as well. And we will deploy the USVs in various regions, so we'll have one coming to the market in Europe very soon, but also in the Middle East. We will start doing work there and then coordinate it out of the control center. On the top left side, you see also an ROV, which is a smaller electric ROV. We call it the EROV, which is specifically developed to actually operate also remotely from these USVs, which is also something that is in the water right now. Great development. We're really making steps. Obviously, it's a lot in pilot still, pilot phases, but we see real progress there. bottom right there, you see the deep drive system, maybe also good to mention is a technology developed in the marine environment with a coiled rod where we do the CPTs. We can unwind the rod and have then a much more effective and efficient way of collecting cone penetration data. We brought it now also to the land site and have a new solution there, the deep drive system that can be fully automated and remotely controlled so that you don't have any people on the site, but only out of the control center. I can obviously talk about that for hours, but I'll move on. So the second part of the presentation is for Barbara, giving you some more details on the finances, and then we'll come back to me. So over to you, Barbara.

Thanks, Mark. Well, I'm here today. Welcome, everyone. I'm here today to present my first set of results at FUGO, and I'm very pleased that I can start with an increase in our margin. And this is the result of ongoing cost control combined with revenue growth in the second quarter. And I will get back to that in more detail in the next slides. Due to the seasonality of the business, it is not unusual that our first half year cash flow is negative still. A free cash flow of minus 52.5 million clearly requires some explanation, and I will provide that to you as well. Now, on this slide, you see three graphs, the Q1 of this year, Q2 of this year, and the first half, which is a combination basically of both. And then you can see how very different, I would say, the second quarter is vis-à-vis the first quarter. In the top graph, you can see the first quarter development. The revenue decline of 17.2% was still substantial in comparison with the first quarter of 2020 when the impact of COVID became visible towards only the end of the quarter. Marine declined in Q1 by 24.2% due to a weak oil and gas market and COVID. and land showed a limited growth of 0.7%. And in the second quarter, we realized a 14.1% year-on-year growth. Revenue of the marine business lines increased by 11.8% in total. And this swing compared to the first quarter was mostly driven by the site characterization business in Europe and Africa. And in this region, we have experienced continued growth in the offshore wind and a slight increase in the oil and gas work in the second quarter. In the land side, revenue increased by 20.2%. in quarter two, supported by both business lines, asset integrity and site characterization. Activities mainly grew as a result of a pickup of the infrastructure market in three out of four regions, except the Middle East. Overall, first half revenue was down 1.8%. Now, moving to the next slide. I would like to talk about margins, which have improved. In the first quarter, the revenue decline, again Q1, was fully offset by significantly lower third-party cost and personnel and other operating expenses. As a result, EBIT improved slightly. In the second quarter, The margin was supported by the revenue growth, as you could see on the previous slide, and the margin was healthy at 8.1%. In marine, the improvement was driven by Europe-Africa. And in land, the margin benefited from the land restructuring, which has been completed during the past quarters. Asset integrity improved in all regions, as well as site characterization in the Americas. Overall, the first half-year margin was 2.5% compared to 0.6% last year over the same period. Now, on the previous two slides, I have commented on the two separate quarters, quarter one, quarter two of this year. And on the coming slides, also on this slide, I will focus on the regional results during the full half year. So let's first have a look at marine. Europe-Africa was the only region that reported higher revenue. which was entirely driven by marine site characterization business line in the second quarter. And this was a result of the strong growth in the offshore wind business, combined with slightly higher oil and gas levels. In the Americas, site characterization was down, in particular in the first quarter, while asset integrity was up, driven by a number of new ROV support contracts in the region. specifically in Brazil. In Asia Pacific, just like in the Americas, side characterization revenue did not recover, sorry, did recover somewhat during the second quarter. The Middle East, a region with the highest oil and gas revenue and exposure, was the most impacted by the related challenging market conditions. The margin improvement overall in marine was driven by the growth of the off-site characterization in Europe from 1.8% to 3%. Now looking at the land business overall, Europe and Americas are the largest contributors to the EBIT improvement, and land activities grew thanks to a pickup of the infrastructure markets in all regions except for the Middle East and India, as mentioned before, and in particular in the Americas and APEC, and to a lesser extent in Europe and Africa. The margin benefited from the restructuring, which was completed during the past quarters. Asset integrity improved in all regions, as well as site characterization in the Americas. Now, as you know, immediately after the outbreak of the pandemic, we initiated a cost savings program. offsetting the revenue decline, resulting in an annualized savings of around $130 million. In 2020, we already realized 95 million of that, and the remainder was to be realized this year. And this program included, amongst others, a reduction of the workforce by 10%, a salary freeze, and the minimized use of short-term charters and lower overhead costs. And just like my predecessor, Paul Verhagen, already pointed out at the first quarter results, I would like to highlight that not all of the savings are structural. Some costs will return, especially now that revenue has started to grow again. Regarding the bottom half of the P&L statement, I want to just briefly highlight a couple of items. Specific items were composed of 4.8 million impairments, 1 million of restructuring costs, and around 100K of certain other costs. After many years of tax charges, despite making a loss, we can now report an income tax gain of 1.5 million euros. And this was mainly driven by the recognition of deferred tax assets in the Netherlands and a change in tax rate in the UK, in the United Kingdom, from 19 to 25%. All in all, we can report a positive net result for the first time since our 2013 results. Finally, a few words on results from discontinued operations of 11.8 million. This is the combination of Seabed Geo Solutions' good operational results on the project for Equinor in Brazil, partly offset by the costs related to the divestments. And these costs are in line with around the 10 million negative EBIT impact that we mentioned in the closing press release end of June when we announced the closing. Now, let's look at working capital, which was, as I highlighted in the beginning, very much impacted by the revenue growth. And at the end of June, working capital was 218 million. And this is a substantial increase from the 112 million at year-end 2020. But there are a number of good reasons for this. Working capital was exceptionally low at the end of 2020. As a percentage of revenue, it was only 8.1%, in part related to 20 million deferred tax payments. Although we are pleased with the revenue growth in the second quarter, it is logical that this leads to higher working capital. And seasonality is also a factor. As you can see in both graphs on this page, our cash collections tend to be better at the end of the year. The DRO is at 92 at the end of June and is within the range compared to 94 in the same period last year. As the cash flow is impacted by growth, we felt it was good to set that out as well. Now, due to the seasonality of the business, as I mentioned, it's not unusual that our first half-year cash flow is negative. And as you can see on the bottom part of this slide, we did generate a positive free cash flow in the first half of 2020, and this was related to the divestment proceeds from Global Marine. And I am pleased now with the higher cash flow from activities before working capital, which increased from 24 million last year in the first half to 44 million this year. And as explained while presenting the previous slide, the growth in working capital was to a large extent related to revenue growth. And this can be broken down in two components. The largest part related to the revenue growth and seasonality impact, as you can see on the 61. And the remainder is related to DRO and DPO performance, which we remain focused on. CAPEX was relatively low in this period, but we expect a catch up in the second half year, resulting in a total of 80 to 90 million for the full year. Cash flow from discontinued operations, mainly being CBAT, was a plus of 13 million. And this is the result of an excellent performance of the project that we've completed for Equinor, as well as 13.4 million cash proceeds received on completion of the divestment, partly offset by a change in working capital. In conclusion, Revenue growth is a good reason for working capital, higher working capital as far as I'm concerned. However, still I cannot be satisfied with negative cash flow. So this has my full attention. Finally, just a couple of words on debt and liquidity. Net debt at the end of June was 368 million compared to 296 million at year end 2020. And the increase was mainly the result of the higher working capital. Liquidity is good with 369 million in cash and available facilities. And now I would like to hand back to Mark for the outlook. Thank you.

Thank you very much, Barbara. So a couple of words on our key markets. So let's start with renewables. And yeah, obviously, in the world, the energy transition is really strengthening the growth in this market. And you can see that energy companies are shifting their investments towards renewables. 40% to 60% of the spend of 2030 CAPEX is probably on renewables if we look at the reports right now. There's an increasing demand for offshore wind geodata, and that's always a couple of years before the installations are done for the turbines. So if you see on the right side of the picture here at the bottom right, the number of installations of wind turbines offshore, yeah, that really picks up in 2024. Yeah, some of the work is already coming to Fugaro to actually do all the site characterization work there. Europe is definitely still the main market. It's growing fastest. But actually, over the last couple of years, we have seen an increase and a pickup in the Americas, which is already larger, that market now for the Americas on the renewables, offshore wind side, than what they used to do on oil and gas. So that is really growing there. But now also APEC, Asia Pacific, is coming in with various projects that we reported on also in Taiwan, Japan, and Korea. which is very difficult nowadays also with COVID, especially there in Asia Pacific. We have seen quite a bit of hindrance there and some project delays, but it's still moving ahead, most of it. The second market there is oil and gas. And obviously, we have reported that we have seen the first insight in some improvements in this market in the second quarter of this year with some increases there. And obviously, the tightening oil inventories and the recovery in general globally will obviously boost the requirement for these energy sources as well. Especially gas will obviously be important in the years to come. The final investment decisions will pick up in the upcoming years. In the next few years, we see that, and it's in the middle of the picture there, really an increase in FIDs, and that will obviously kick off some new greenfield projects. You also see here in this area that the energy companies are very focused on reducing their CO2 emissions and then their plans for net zero, as Fugger also has launched for 2035. Yeah, all these energy companies are also looking at these plans. targets, and obviously they need also the new technology to drive down the emissions, and we can really, with the technology that we offer, reduce there as well in collecting and acquiring the geodata. Hydrocarbons is, as expected, still an energy source that will be required, and in particular, as I mentioned, gas as a transition fuel, as we have been speaking about already for many years. Then the other and the last key market for Fugro infrastructure has been growing also in the first half of the year. It's obviously something that is fully based on the pickup in economies, but also the government stimulating again these economies. That's very important. We obviously see that in Europe, but also in the Americas. where there's ongoing discussions around quite a big amount, 600 billion, to sustainable infrastructure development. I have to say, a lot of these things are still being debated between the Democrats and the and in the Senate, so to say, with lots of discussions there. So it's not all approved, and therefore the money is not floating yet. And that is, I think, important to note, because a lot of people feel that, yeah, there's big discussion around allocating a lot of money there to the infrastructure market. However, yeah, we need to first have the approvals between the Democrats and the Republicans there to really move forward. But hopefully that will happen very soon. And yesterday we saw some movement on that. And I hope that they get to some agreement there. But this market will continue to be important to food growth as well. You see an 8% growth on average over the years to come. And this obviously will support food growth, especially because we see worldwide aging assets. And this is becoming very important because maintenance is very often also overdue. And to build a safe environment, again, the ultimate purpose for Fugro, this is very important. My last slide is on the outlook for the full year 2021. First, on the markets, as you just have seen, we expect an ongoing growth in offshore wind, renewables, infrastructure, and also the nautical markets. Having said that, also, as we have seen already now in the second quarter, modest recovery of oil and gas, and we also expect for the full year that there will be some recovery in the oil and gas market. What does that bring for us? A careful outlook there, revenue growth, modest margin improvement, an around break-even free cash flow. Barbara obviously showed you all the details there on the cash flow for the first half of the year. That will obviously be different seasonality-wise for the second half of the year. And we have to be careful because COVID... certainly brings some uncertainties for the remainder of the year as well. Europe is showing some good steps there, but there are many places in the world that will be still affected, and it also affects still projects. The majority can go on, but we have to take this in account as well. I thank you very much for your attention there. This is the end of the presentation, and we'll move over to questions from your side.

Thank you to our speakers. Ladies and gentlemen, if you would like to ask a question at this time, please press star or asterisk key followed by the digit 1 on your telephone. Please ensure that the mute function is turned off on your telephone to allow your signal to reach our equipment. If you find that your question has already been answered, you may remove yourself from the queue by pressing star 2. Again, please press star 1 to ask a question, and we'll pause for just a brief moment to allow everyone an opportunity to signal for questions. We'll now move to our first question over the phone, which comes from Luke van Dijk from Deckroof Petercam. Please go ahead. Your line is open.

Yes, two questions. First, about the lead times. At the start of this quarter, the backlog had increased only a bit, and now you show very strong growth. Does that mean there's a lot of last-minute projects coming in from customers, and how does it affect your ability to efficiently plan your capacity? And the second question is about the COVID uncertainty, which you pointed out in the outlook. Can you give a bit more explanation about what the main challenges are that you see outside of Europe and what you look for?

For the questions, Luke, yes, certainly. So indeed, there's a difference between the growth in the backlog, 3.3%, compared to last year, and then the growth in the whole quarter of 14.1%. There is indeed a bit of a lag there. which we have seen also in the past. You saw the backlog from, let's say, minus 6% to 7%, I think, end of last year, minus 1% end of the first quarter, and now plus 3.3%, compared to, obviously, the growth numbers that have changed very drastically from a big minus to a plus in the second quarter. So there is a bit of a delay there. And you're absolutely right also that clients obviously are still finding their feet in some areas. Award work quite late, which is indeed a challenge sometimes for resources. So we also remind our clients, hey, make sure that you actually plan it carefully. Also looking forward to next year. We see that there is tendering going on for the season next year already. And we are actually trying to obviously manage this and also make sure that clients make use of the winter months where possible, which is always a bit more difficult on the offshore wind side. And I have said that before. These windmills are placed in areas where there is a lot of wind and in the winter months there is a lot of wind. and therefore also a lot of waves, and then it's difficult to collect some of the data that we, as Fugro, normally collect. So it's important to take note of that, which was maybe less the case in the oil and gas work we traditionally did, but this is good to take into account. But even there, you see movement. in that market that clients mature and also start to understand that they have to actually move to the beginning and the end of the season as well, which is, I think, a good progression there. I hope that answers your question there. The COVID uncertainties, to talk about that, I will give you a few examples. In Asia Pacific, there are some projects that obviously are done in a marine environment, and some jurisdictions or governments don't allow vessels to come alongside due to COVID. And then you have to go to other ports in other countries to do crew changes, which is sometimes extra time, extra cost. And most of the cost we can charge to the customer. But some of it is obviously also embedded now in the projects, but you never... exactly know what you need to do to actually make these projects happen. So there is some uncertainty there because countries obviously change. This morning or yesterday was in the news that the Americas now sees the effect of the Delta variant in COVID, which will probably in the next few months have more impact there. Europe is doing reasonably well, but we have seen also in this country, the Netherlands, sudden change if you take the wrong decision there. So there is still a lot of effect on COVID pandemic worldwide. We are more used to work with these hurdle or overcome these hurdles and with these restrictions that we have. But we have to take into account that this is still visible and we still feel it. So I cannot ignore it. And I have to also warn you for that, that this is still playing a role.

Thank you.

This is one further reminder, ladies and gentlemen, to star one in your telephone keypad to ask a question. We'll now move on to our next question over the phone, which comes from Thijs van Gelder from EDN Emerald. Please go ahead. Your line is open.

Yeah, good morning, and welcome, Barbara, to our meetings. So let's kick off with the first question. The capex in H1 was really low, but like you explained, will catch up in the second half. Can you maybe specify where you plan to spend the capex on? Is it maybe suspension dry dockings in Q4, or is it primarily Let's say new USVs or so. Second question is related to the other non-core activities. Can we expect any action on the other non-core activities this year or not? Third question is on cGit. It seems to me that SeedKit is doing very well, developing very promisingly. Can you maybe explain what their roadmap is from a Fibro perspective?

Thanks, Thijs, for these questions. Barbara, you wanted to maybe start with CapEx, and I can go into some details there.

Yeah, sure. And there is an element, as I mentioned, 27 million, if you think first half, and there's still six months to go. There is certainly a phasing element in there. We still expect to spend between 80 and 90 million. That's a combination of factors in terms of when do you spend CAPEX, especially also now we're in the busy season, so the timing element of when you do a dry dock and not plays a role in there. I would say where we would spend it, it's a mixed spend on asset integrity of the assets, but also definitely on expansion CAPEX to facilitate new projects partially and also to on the innovation side, if you like, on the USVs. So it's really they're a combination as we're progressing on all activities across the board, say traditional vessels and also on the innovation side. So we do expect to spend that. I hope that answers your question.

Okay, then.

Yeah, maybe you can give a rough estimate of the split maintenance versus expansion CAPEX for the full year.

I can say a few words about that, Thijs. Roughly, we normally say always maintenance between 40 to 60 million on an annual basis. That is, obviously, most of the money goes into the dry docks of the vessels to maintain the major assets there. Obviously, our assets over the years have become smaller. Some of the vessels are now becoming remotely controlled, so they're smaller as well. So over time, we'll probably see that maintenance bucket going down there. but you can estimate that, yeah, of the 80 to 90 million, that half of it is general maintenance. And then there's replacement and growth CAPEX. Yeah, we always place it in the bucket of maybe growth, but it's also replacing because the technology moves so fast that maybe now the new projects are bit with new technology, so it's not necessarily growth in your turnover, but you have to replace, yeah, the old existing technology with new technology. And we're doing, as you probably know, and you can pick up from the internet and from LinkedIn, many posts there on the new technology that Fugro issues to the market. There's quite a lot happening also on the land side and the marine side, so it's a good mix, making use of the expertise from the various areas of the business. It's now centrally coordinated since Yeah, actually, last year, we really brought all the innovation together. It's now in one group, globally coordinated, and that really helps us to make the right plans and the choices that we have to make. So I hope that that gives you some insight there. Your second question is about the remaining non-core activities that we have. We obviously have cleaned up a lot, as you know, over time. There is still a remaining element of global marine, the small stake that is still there in the remaining 90 percent of the global marine element, which is still there, that is running out next year. But there is a potential that that also will be handed over or bought by the new owner that has the other element there, Heng Tong, that they might acquire also the remainder there a bit sooner. But no details there that we can release. This is just an ongoing discussion. The other element is the sea kit development that you mentioned. That is promising indeed. We have also brought the second sea kit to the market now, which is, I think, great to see. We have lots of plans there also to obviously use the experience that we gained in the first few pilot projects and also the first few versions that we built. And there will be more of these science USVs, but obviously over time. And we do that in a careful manner because we want to actually learn while we go and then adapt. and tune it to the right structure and the right choices that we have to make there. But we have plenty of plans to upgrade, to further improve, to extend maybe the size as well. So we have a good program in place there. I'm not going to release any specific details there, but I can confirm that indeed Seacat partnership is working for Fugro. Obviously, we have seen some delays last year due to COVID, and we extended some of the built projects as well a little bit because the market wasn't ready maybe for one or the other. So we need to time everything very well. But it's on a nice trajectory and we're very pleased also with the blue shadows that we have built, obviously for a different purpose. But yeah, we have a good roadmap in place there. ...else for questions there.

At this time, there are no further questions queued, sir, so I'd like to hand back over to Mark Hainer for any closing remarks. I do apologize. We now have further questions queued. We'll now take a follow-up from Thijs Berkel. Please go ahead. The line is now open.

Yeah, sorry. I'm not aware that there were so few people in the call, obviously. So, let's progress, can you maybe specify for more in general, you said COVID causes extra costs in terms of logistics. Are these costs paid and compensated by the customer, or do you have to bear part of these costs as well in the in existing contracts and or in new contracts.

Yeah, I can easily answer that. And maybe Barbara wants to add a few words there after me as well. So it is indeed the case that, as I explained with the example, that logistics is very often the problem, COVID-related problem. There are some delays of projects as well. We have an example of a project in Asia, again, where we were planning to actually mobilize in the third quarter, maybe partly do some work in the fourth quarter. And that has now moved to next year. And that has to do with the fact that the vessels cannot move around, cannot be imported into the country. So that is COVID-related. That's obviously something that we will have to take on board as Fugro. That is not compensated by the customer. If you talk about the standard logistics where we maybe have to mobilize from a different country or a different port, that is normally something that the client is willing to accommodate and also to compensate us for. So there are elements that are definitely in there. But there's also in the past risks that we could describe in the contracts that are not for Fugro because there's uncertainty. Obviously, some customers also expect that you take that on board and that's a more new normal, and that you have to also price that into your tender. I'll stop there. Maybe Barbara wants to add one or two words there.

No, I think that is right, especially if, you know, on the clients, each client is different, but, you know, post the tender process, what we do see is that there's quite a lot of changes at the moment in variants in COVID, and that That makes that sometimes you have to deal with unforeseen circumstances when a country shuts down or restricts all of a sudden, and then you cannot really envisage in the contract. So part of it is already kind of the new normal that the world lives with, but the variations within... are still, you know, you cannot really foresee all of those. And that leads to unforeseen costs in some areas whereby some clients are more reasonable than others or in terms of willing to compensate for those costs incurred depending on the situation. Yeah.

Okay, then maybe as a follow-up for Mark on the outlook, I don't know whether you are still restricted in your guidance statements to the placing which happens. Can you maybe now maybe quantify when you expect to reach your scheduled margin and ROCHI targets?

Yeah, it's a good question, Thijs, and obviously I was expecting that somebody would ask for that. We have in the mid-term, our targets are very clear. The financial targets, 8% to 12% on the EBIT level and 4% to 7% on the cash flow, and then 10% to 15% on the ROCHI. So we have been clear and we'll keep those targets. Obviously, everybody wants to know when will Fugro reach those targets. And we have said last time that we would come with more clarity in the second half of this year. I will stick to that right now, Thijs. I realize that everybody's waiting for that. We will come with that. I want to also discuss this carefully with Barbara. We're running some models, obviously, to make sure that we have all the data included there, and we will come in the upcoming period with more information there.

Yeah, clear. Then I get further questions in the results so far. was better than expected and primarily or maybe only driven by a very strong European operation. The other regions seem to be still loss-making. Can you maybe explain per region what is needed for these regions to become profitable again and or whether you will need to take additional cost reduction measures to make them profitable again? Yeah.

Yeah, of course, Thijs, I will give you a little bit more color. Obviously, Europe is very clearly a good and strong contributor for the second quarter. Also, the Americas land site characterization has improved there. It's good to mention that. And that's on the back of previous restructuring that we have done on the land site. It's also good that globally we see asset integrity improving, which is also an important step that we have taken there. Now, if I go one by one, the regions, one of the issues is that especially due to the market and COVID, you see that some of the markets are still affected and especially with an impact on marine site characterization. Europe has a strong growth in offshore wind and therefore can compensate for maybe the down in oil and gas much better than the other regions can. despite the fact that also there we see increase in activities on the offshore wind side in the Americas and APEC, as I mentioned before. Now, it's not as large as in Europe, so therefore they have more room to actually move the assets around and to deploy their expertise in other markets. So this is one of the reasons why the European region, actually Europe-Africa region, performs better than the other regions, as we also have seen over the last few years. Now, what you can say about the other regions, for instance, the Middle East, they are obviously most reliant on oil and gas, not only on the marine side, but also on the land side. There's obviously investment money that comes out of the oil and gas industry earnings that governments invest again in these countries to further develop. That plays a role. I think for the full year, we do see that most of the business lines will be doing reasonably well and better than what we have seen maybe in the first half of the year. The problem really lies there on the marine site characterization. It is a large chunk of the region very affected by the current situation in the market there. that will have to obviously improve. And we do see those signals that the market will improve there on the Middle East side as well. So then that region will also benefit from that. Now, if you look at Asia Pacific, we do see some improvements on some of the business lines there as well. You really have to go to that granularity. But also there, marine site characterization is really affecting the overall performance for the first half of the year. which is really market-related and also less easy to jump in because you have assets that maybe have lower utilization than you would hope for, and therefore you see the impact there a little bit more. Also there, we see some positive signals that we are improving and doing the right thing. For instance, on the asset integrity side, on the marine side, we're moving much more to the remote solutions, as you know, with the USV we spoke about, and that's really a way to maybe go down in cost base and to also create a win-win situation for the client, obviously with lower costs, but also for Fugro to have a normal margin again on these kind of projects. So that is maybe good to give an indication. If I then move to Americas, as I said already, it's good to see land site characterization improving there margin-wise. Having said that, we still are somewhat disappointed with the effect that COVID had on the land business there and some delays in projects. So it could have been a lot better. And we also expect that moving forward, we have quite a lot of backlog and there should be some work orders given on the contracts that we have already won. So there's quite a lot there that we can base on. base our future work on contracts that are existing, so to say, call-off contract work that we can expect work from moving forward, both on the land asset integrity and the land site characterization. Then also there, first half very affected. I should say probably the first four months very affected in the marine site characterization element, but that is improving since May, so that's really good to see. And also in the Americas, we're still looking at a very selective restructuring steps that we have taken. In Brazil, we are still working on it. We're also in the LAI business still looking at some optimization there in the structure. That is something that obviously will continue Globally, continuously, Barbara and I are reviewing the business performance on a monthly basis and even more often in between. But we discuss it on a monthly basis with the regions in detail. And then we discuss also extra steps that need to be taken maybe in one or the other area.

Thank you, Mark. And maybe final question on the refinancing. Can you roughly provide me the planned schedule of refinancing for the coming 6 to 12 months?

It's an ideal question for Barbara.

Thanks, Mark. Thanks, Thijs. Well, at the moment, this is something that is on the agenda and timing. I do not want to say anything on that at this point in time. But it's something clearly one of the points that I'm looking at since I've started with Hugo.

Okay, clear. Thank you.

Any other questions? We'll now move on to our next question over the phone. Certainly, sir. Our next question comes from Caroline Mulder from ING Bank. Please go ahead. Your line is open.

Yeah, good afternoon. Finally, my questions. A couple of questions. First, about the fleet. How is the situation with regard to short-term charters? Do you have other charters, let me say, for the third quarter available? That's my first question. Utilization rate, in my view, was in the second quarter 71%. It touched better than the second quarter of 2020. Is that correct? Then on Brazil, as I've seen in the text, you had won a couple of projects which are exceeding 12 months. Can you give an idea about the projects you have now with regard to Petrobras on Brazil? on I think it's asset integrity and maintenance work, et cetera. So you can give me the number of projects you have on there. And my final question is about renewables. Can you give me an idea about the backlog breakdown between renewables and oil and gas?

That last part, Quirijn, the breakdown of what?

the order backlog between renewables and oil and gas. And let me say maybe the other thing to give me some flavor on that.

Yeah. Okay. Those were the questions, Quiran. Okay. So, on your first question around short-term charters. So, it's absolutely correct that we have reduced the amount of short-term charters in the first half of the year and drove, obviously, more. The utilization was also one of our strategic goals to really drive the utilization up from our own fleet. which is also visible in the percentages of usage. I think, but I don't know the numbers from the top of my head, but I look at Katrina. I think that you're correct with that the percentage of 71% is higher than the second quarter of last year. So, correct. I had it in the top of my head for the full half year.

Yeah, it was 69% in the second quarter of 2020. And it was 71% in the second quarter of this year.

And then your question, if we have the short-term charters also already secured for the third quarter, obviously we're looking ahead and actually the third quarter is in full swing. So it would be not a very good thing if we still would have to secure short-term charters there. But if we have to, we can always do that. But at some point in time, there's also a limitation to what you want to actually bring in on a very short notice, because we don't want to obviously incur leakage due to high pressure or mobilizations in the last minute. So there is a balance to find there as well. And we're obviously also looking at short-term charters for the next season already to see that we're well prepared for the work that is coming in the years to come and certainly in 2022. If I go over to Brazil...

Yes, sorry. But did you, let me say, already anticipate the third quarter in the, let me say, or is the existing feed you did the work in the second quarter, is that already sufficient for the third quarter?

Yes, I think that what we have currently in the second quarter, the majority will be done with the same amount of vessels and short-term charters. Maybe in some areas we have an addition here or there, because we do see a change, and it continuously changes, Kvira. We had some projects, for instance, in Australia and New Zealand at the beginning of this year. We have done that with short-term charters. Those are obviously released because we don't use them anymore. There was site characterization work. And we will do more work with the owned vessels in the third quarter, for instance, in Asia Pacific. So there is a shift as well. And then in other areas, we might need to pick up a short-term charter only for the third quarter to handle the work. There is quite a lot of change there also really in the short term. If you talk about The charters that we hire for a year or maybe two years, that is more fixed and more firm. But the real short terms can be for a month or for three months. And that is changing quite often. And I'm careful because I might not know about a certain charter that will come in. And then I have said something wrong.

Okay, thank you. And on Brazil?

I move over to Brazil. So there are multiple contracts on the ROV side that we have secured there. First and foremost, and I think that is very important, is the contract, a three-year contract for the Aquarius. That's recently signed. That actually only starts mid-November this year. So the majority of the work will actually be done in the years to come. But we also had a number of other vessels. There are actually three other vessels where we supply ROVs on board, so we don't hire the vessel itself or we don't have that. That's very often a tripartite agreement where Fugro provides the ROVs and the services and somebody else provides the vessel. So I know about three other vessels on top of the Aquaris that we will deliver ROV services on for the years to come. And they're all multi-year contracts.

Dan? Yeah, that's interesting because you were reducing your position in Brazil, in fact, in the last couple of years. Or is that wrong what I'm saying here?

No, you're absolutely right. Obviously, you need to be present in Brazil to be able to work also for Petrobras in an effective manner. And we have a good outlet there. We have trimmed down, as you know, after the contracts on the diving side have been completed. We said, okay, then we will stop the majority of the diving work. So we don't do that anymore. So we have to also trim down the organization quite a bit. Also, over the last few quarters, we still were tuning the organization. And we have said, okay, on the ROV side, there are still opportunities there. Also because obviously Petrobras is looking at moving some diving work to ROV work, which is obviously a robot to replace a human being there, which is obviously wise to do on the safety side as well. So you do see quite a lot of opportunities there on the ROV side. And we have managed to pick up with our position and reputation that we have in Brazil some of these contracts. Then you asked for a breakdown between oil and gas and offshore wind moving forward on the backlog side. And you know very well that we don't guide on that to the outside world. What I can say is that we do see offshore wind continuing. Also in the backlog, we see a larger growth there than oil and gas, probably a little bit lower. in line with what we have seen over the last quarter, where oil and gas is slowly coming back, but still not very convincing, or at least a little bit, and renewables will continue to grow. So exactly as we stated in the outlook there, We see continued growth in the renewables infrastructure market and the nautical markets for the full year for oil and gas. We have seen the first effects in the second quarter and for the full year or for the remainder of the year, we do think that that will continue. We cannot say yet what that means for the full year for oil and gas.

Okay, and maybe a final question from my side. Have you made up your mind with regard to UGIN Explorer?

I'm not going to be very specific about that. But, yes, we know what we will do, and we will come out to the market as soon as the time is right. But we have decided what we will continue to do, and that will be very soon known.

Okay, thank you.

But obviously, as you know, the vessel has been with Fugro since the sale of Seabed. So it is in Fugro. And that is, yeah, unquestionable. Any further questions?

There are no further questions queued. I'd like to hand it back over to yourself, sir, for any closing remarks.

Yeah, I just simply want to thank everybody for your attention and all the questions that you have raised. And I want to wish you a very good remainder of the day. Thank you very much.