Fugro N.V.

Good morning, everyone. I'm Katrien van Buttinga, Fugro Investor Relations. Thank you for attending this Q3 trading update webcast and analyst call. First, you're all in listen-only mode. We have a presentation. Mark Heine, CEO, and Barbara Gele, CFO. I think that that will last around 20 minutes or so. And thereafter, there'll be room for your questions. Mark, I'd like to hand over to you now, please.

Yeah, thank you, Katrien. Good morning, good afternoon, everyone. Welcome to the Q3 2025 trading update. So we start with the first slide and have a look at the key financial headlines of our results. The year 2025 has turned out to be a difficult year up to now, with lower revenue against a very volatile market backdrop, something I will elaborate on a little bit more shortly. Still, the third quarter did show an anticipated performance improvement compared to the first half of the year, and we're now at 12.9% for Q3. The EBIT margin reflects a notable improvement Obviously, compared to the first quarter where we have a margin around zero and a 4.3% margin in the second quarter. Compared to Q3 2024, however, the decline was primarily driven by lower revenue. We're taking control of what we can by reducing our cost base and protecting our cash flow. And Barbara will also talk a bit more about that a little bit later. Our balance sheet remains robust with a net leverage of 1.2 times. Above all, we're staying closely aligned with our client's evolving needs, supporting them through key projects. In this quarter, for example, we are doing a significant, or we started a significant site characterization for E&I Deepwater Gas Field in Indonesia, but also work for RWE and Total Energies in the wind environment, wind postal project, and our innovative and scalable ground IQ land site screening solution is also gaining traction. And also for example, that is specifically done for instance in Germany now on the tenant land wind grid connection project. However, in the short term, the overall environment remains volatile. As per September's trading updates, we anticipate a challenging winter season with a Q4 continuing to be subdued due to lower offshore wind activity and temporary reductions in the oil and gas client spending. Next slide, please. So if I dive into the markets a little bit more, specifically wind and oil and gas, to talk a little bit more about that, offshore wind continues to face headwinds from high interest rates, rising construction costs, limited grid capacity, and shifting political landscapes. Here on the left side, you see a graph from the International Energy Agency, and they are currently estimating quite a change in the wind capacity that will be online in 2030. So there's the gigawatts commissioned by by various areas in the world between 25 and 30. And you see the reduction in the outlook there. So minus 27% for the world in total. That's compared to the outlook in 2024, with obviously strong reduction in the U.S., Europe coming down as well, and the rest of the world as well. China has not taken part of this, or at least is not listed here. Obviously, a country that is developing quite rapidly also in the renewable sphere. If you look at what's happening in the short term, then we can clearly see that, yeah, developers are, yeah, reviewing which projects are economically viable, also against that backdrop of higher costs and also less interest in green energy for the current pricing levels. And I think it's important to say that it will take a little bit of time to further stabilize this market sector. And I think it's important that, obviously, politics also takes some clear decisions on what kind of contract forms and subsidies are required for the development of these projects. So in the longer term, we believe that offshore wind absolutely stays a key part of the diverse energy mix. And when governments come in with contract for different type of solutions, basically subsidizing these programs again, which stopped, for instance, in Europe, I think in 2018 or so, which now comes back on the board and will help and support very much specifically the European market segment where we believe that, Yeah, Europe and also, obviously, China remains the largest wind developers in the world, but also Asia Pacific will steadily grow. U.S. will obviously pause for now, but we see Canada and Latin America coming in over time. Then we could jump to the next slide if we look at oil and gas. Then we have also written in our press release that the oil and gas project startups have temporarily slowed down. This is actually reflecting the short-term view from the energy companies to be very careful in their spending pattern for the second half of this year. So this is really short-term focus, and this was also the main driver for our earlier trading update on the 22nd of September. Also, in this slide, you see on the left side an estimate of the required, yeah, demand for oil. And over time, you see that this is obviously becoming more uncertain with unsanctioned areas. And we see, obviously, a depletion that is rapidly, yeah, continuing. So that means there are definitely new fields required to fill up the gaps or the depleted fields. So it is quite important that investments will continue and that we fill up this gap in 2030 and 2040 that are unsanctioned or even the additional supply that is required. Now, if you look at lately what has been communicated in the world, then there's a very mixed message. On the one side, we see that there is targeted exploration programs going on. However, with a strong emphasis on timelines and cost efficiencies, because the energy companies are also preparing for potentially lower oil and gas prices for longer. You no doubt have seen also the latest submissions of the International Energy Agency that they see some oversupply in, for instance, LNG. but also oil in the short term. So that will keep the prices, I think, around a certain level. And that obviously will impact also the decisions around investments for these energy companies. At the moment, McKinsey is expecting that the capital expenditure will be very focused and probably funneled to more competitive deepwater and shale basins around the world. So very focused and concentrated around areas where they can secure returns in the shorter, quickly. We go to the next slide, then we see a summary of all our key markets in the long term. So multi years ahead, in the mid to longer term, Our key markets are still, I think, solid, we can say. Offshore wind, as you see on the left side, still grows, CAPEX and OPEX. However, significantly slower than what we have presented before. That was a 30 plus percent increases in this market before. It's still growing, but obviously a lot slower. Oil and gas is slightly up since the last presentation of what we showed last time. It was minus 3% for the CAPEX. OPEX was coming down a little bit. Now it's up 1%. So we see some momentum there. We specifically see also momentum in our backlog. Barbara will talk a little bit about that. What we do is not necessarily directly the same as what the market is doing. So always be a little bit careful. between those differences. And if you look at the infrastructure in the long term, that hasn't changed too much. There is still steady growth moving forward with a lot of projects that need to be done to replace existing infrastructure or aging infrastructure. And now I want to hand over to Barbara for more details on the financial side.

Thanks, Mark, and thanks, Peter. to all on the line for joining us for this call. As mentioned by Mark already, Q3 showed a notable improvement versus previous quarters, and this was especially from an EBIT and operating cash flow perspective. And in line with the previous quarters, our top line was impacted by the changing business environment, as Mark alluded to already. In this quarter, we generated around $100 million less in offshore wind revenue than in the same period last year. whereas oil and gas declined modestly. And on the other hand, infrastructure and water-related revenue were up slightly. So then if you look at the EBIT, let's look there, that is 12.9% margin for Q3, and this margin reflects a notable improvement from the previous two quarters, which was Part driven by the cost reduction program that is well underway, which I'll talk about in a bit. And I also want to still compare it a little bit to Q3-24, where the margin decline was primarily driven by the lower revenue in offshore wind. So if you think about that on a like-for-like basis. The improved operational performance is reflected in operating cash flow. And this increased to 95 million, up from 36 million in the second quarter of this year. Next slide, please. So, a couple of comments on the regional performance. We saw a decline in marine revenue of 12%. And the main three drivers for that were a lack of offshore wind in the Americas, rising pressure in the geophysical services in Europe-Africa, And finally, a relatively high volume of low pass margin passed through revenue from inspection and monitoring campaigns in APAC in a comparable period last year. Offshore wind also plays a key role in the 15% downturn within our land business. The nearshore service line was impacted by a slowdown in project volume across Europe, Africa, and Asia Pacific. Most notably, this was in Japan. And in addition, on the land side, we see continued subdued infrastructure markets in Hong Kong and Saudi Arabia due to tightened government budgets. So if we compare to Q3-24, the margin decline, which can be seen in the graph on the bottom, was primarily driven by the lower revenue. While the most significant effect in Europe-Africa, with the most significant effect in Europe-Africa, where the majority of our fleet is deployed. Next slide, please. So if we look at what is happening in the backlog, this is a slide that we showed last quarter for the first time. Because this demonstrates our ability to recalibrate our business through our diversified and market-agnostic business model. Because we serve clients across different end markets and different geographies. And when you look at the composition of the backlog in the top graph, you can clearly see that the decrease in renewables is partly being replaced by oil and gas. The oil and gas backlog increased in all regions except in Middle East and India by 12%. The backlog includes 321 million in renewables today, which is a decrease of 270 million compared to September last year. The large majority of the current renewable backlog is in Europe-Africa and then in APEC. Next slide, please. Then, as we said, we are taking action by reducing our cost base, and we already announced a comprehensive cost reduction program. And this addresses both fixed and variable costs to align with the current market realities with approximately two-thirds from workforce reductions, and a third from operational efficiencies. And while the personnel reductions in certain geographies take time to implement, by now we are delivering significant reductions in staff levels and third-party spend. And in September, we announced further matters in response to the further deteriorated market conditions. And this includes increasing the planned workforce reduction from 750% to 1,050 FTEs, which is a very difficult step, but a necessary step. We expect to be able to complete the majority of these 1,050 FTE reduction by year end. We continuously monitoring top line development, and we will implement further measures if and when required to safeguard profitability and cash flow. and while at the same time maintaining a strong foundation for future growth. Next slide, please. As you can see on the cash flow, operational cash flow in Q3 was 95 million. On the graph on the right, it shows that by the end of September, working capital as a percentage of 12-month revenue amounted to 15.1%, which is in line with the bandwidth of 10 to 15% that we communicate about. And in line with the previous years, it is expected to unwind in the fourth quarter due to the seasonality pattern that we have. On the CAPEX, the CAPEX for Q3 was 30 million compared to 52 million in Q2 last year, in Q3 last year. We maintain our guidance of 250 million for the full year, excluding the head office, as mentioned before. Overall, free cash flow for the quarter totaled $26 million, a year-on-year decline from $103 million, primarily driven by lower EBITDA and higher working capital. Next slide, please. Then let's have a look at the balance sheet. A balance sheet is robust with a net leverage of 1.2 times, and it's well below a leverage target of 1.5 times. The net debt position decreased to $411 million as of September 25, which is down from $437 million at the end of June at mid-year. In October, we arranged a $40 million term loan with a one-year maturity to add flexibility and as a liquidity backup, and we see this as a prudent measure. Equally, we want to ensure that this, that we have sufficient liquidity in the business to fund the ongoing business. And then I want to hand over to Mark, who will talk about the outlook.