John Wood Group PLC

Good morning everyone and thank you for joining our 2020 results presentation. I hope you and your families are well in what continues to be a difficult, challenging period for us all and we look forward to meeting you again in person when circumstances allow. As always, our CFO David Kemp will take you through our financial performance and I'll bookend David's presentation by focusing on two primary areas. Firstly, looking back in 2020, in the year just gone by, recognising the resilience our business has demonstrated through our people, in our client delivery and financially, how we've responded robustly in the face of significant challenge, and why our strategy has put us in a better position for the future than many of our competitors. Secondly, I'll cover our Future Fit programme, designed to accelerate our strategy and strengthen our position as a sustainable investment proposition. I'll also cover what we're seeing in terms of our market evolution, the work we're winning, and the practical steps we're taking to remain ahead. This includes significant advancement in our sustainability programme, not only in how we are operating as a business, but also how we're supporting clients as we all transition to a cleaner, more sustainable future. I think we can all agree 2020 has been a year like no other. I take great pride in the way our people responded and are still responding to the challenge, focusing on delivering for our clients, supporting our communities and looking out for each other's wellbeing. Our strategy has enabled us to come through an exceptionally challenging year in good shape. Benefiting from the breadth of our end market exposure, we've seen relative resilience in around 65% of our end markets. Our ability to leverage our asset-light model has been key, and we took early and decisive action to protect the balance sheet, margins, and cash flow. By improving utilization and reducing overheads, we've successfully protected margins to deliver EBITDA of $630 million at a margin of 8.3%, down just 0.3% on 2019. We also made excellent progress on portfolio optimisation and reduced net debt by $410 million. We're very pleased to be approaching global resolution on the legacy investigations, which predominantly are related to the use of agents in Foster Wheeler. This will enable us to draw a line under one of the final legacy challenges of the AMIC Foster Wheeler transactions. Looking ahead, short-term headwinds in some markets are expected to endure in 2021, but I'm really encouraged by the evolution of our order book, in line with our strategic positioning, with an increasing proportion from lower-risk, higher-margin consultancy work. As we look to the future, we all recognise the changes affecting our world. We're acutely aware of the impact of COVID-19, a changing energy landscape, a cleaner global agenda and the speed of digitisation. Our common purpose is to unlock solutions to the world's most critical challenges by providing consulting and engineering solutions across energy and the built environment. Today, I'll talk to you about Future Fit, our tactical programme aligned with the purpose and design to accelerate the delivery of our strategic objective to be a premium, differentiated, high margin business that delivers exceptional returns for our stakeholders. Our values of care, commitment and courage continue to guide everything we do, the decisions we make, the results we achieve, and the way people experience working at Wood. In 2020, we demonstrated the benefits of our strategic end market broadening, but there's much more potential for us. Future fit is fundamental to our future prosperity and a key part of our growth story, and I'll be sharing a bit more about it later in the presentation. The fundamental drivers of our strategy and focus across the Future Fit programme have been well trailed, but perhaps worth restating. We started by considering the megatrends of energy transition, sustainable infrastructure and technology and digitisation and its impact on future skills. We then identified the critical challenges facing the world across our own broad energy and built environment markets. To bring all of this together, we illustrate here the interrelationships between the trends, the markets and the solutions we offer. And we've worked diligently to gain an early leadership position in our delivery, where we engineer solutions for a net zero future, including decarbonisation in conventional energy, renewables and low carbon fuel systems. We enable more sustainable and resilient living through our work in remediation and restoration, mobility and transportation. And we create future-ready operating models as we work with customers to optimise asset performance and digital innovation. We've refined our organisational design to deliver these critical solutions by pivoting to an operating model of three service-defined global business units of consulting, projects and operations. Our capabilities span the entire lifecycle from planning through design, build, operate, and repurpose. This new model reinforces our ability in responding to clients' needs by removing internal barriers and complexities, enabling us to grow in markets where we're differentiated by our solutions and capabilities. The clarity and simplicity of our more efficient model underpins our strategic delivery and the next steps of our future FIT programs. I'll cover this more later in the presentation, but now we'll hand over to David to take you through our 2020 financial performance.

Thank you, Robin, and good morning, everyone. Overall, our results reflect the benefits of our successful end market broadening, together with our focus on reducing cost, protecting the balance sheet, and generating strong cash flow. Revenue of $7.6 billion was down 20%. over two-thirds of the reduction was in conventional energy markets, which were very challenging. This was partly offset by strength in the built environment, growth in renewables revenue, which doubled to $520 million, and relatively robust revenue in process and chemicals. We delivered EBITDA of $630 million and operating profit of $214 million. Strong operational delivery in most of our business, together with our ability to leverage our asset-light model, has been key to protecting margins in a difficult environment. We took early and decisive action on cost, improving operational utilisation and reducing overheads by over 230 million in response to lower activity. EBITDA margin was down only 0.3% on 2019. Looking at performance on a like-for-like basis, we delivered very strong margin improvement in two of our three business units. In the Americas, lower revenues largely reflected market conditions in conventional energy, especially in U.S. shale. This was partially offset by relative strength in capital projects in processing chemicals and higher renewables activity in solar and wind. EBITDA margin was significantly down on 2019, due to operational challenges and delayed delivery on a small portfolio of energy projects in our process and energy business. Results in process and energy are 50 million lower than 2019. The delayed projects are expected to complete in the first half of 2021. In EAAA, revenues largely reflected lower activity in conventional energy and in process and chemicals. Despite this, EBITDA was broadly in line with 2019 due to excellent operational execution, good performance from our... The leader has disconnected.

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Margin performance was very strong, up 210 basis points on 2019. In TCS, the reduction in revenue of around 16% reflects our decision not to pursue higher risk and lower margin construction contracts, and the expected roll-off of automation work on TCO. There was also some project delays due to COVID-19. We benefited from strength in the built environment, which accounted for around 55% of activity. EBITDA was in line with 2019, and margin improved significantly, benefiting from good execution, overhead reduction, which started in Q4, 2019 and strong operational utilisation. It's helpful to bridge 2019 to 2020 EBITDA to explain how we offset the impact of lower activity to protect margins. The earnings impact of lower volumes was partially mitigated by a focus on improving operational utilisation. There was no material impact from pricing. We further offset this with the early impact of our overhead cost savings of 230 million. These comprised a combination of temporary and more structural adjustments. And overall, we expect around two-thirds to endure into 2021. The EBITDA impact of businesses disposed, principally nuclear and industrial services, was 46 million. Despite the impact of overruns in ASA, we delivered EBITDA of 630 million, representing a margin of 8.3%, just 0.3% down on 2019. Actions to protect the balance sheet are reflected in our 2020 cash performance. Cash generated pre-working capital of 410 million is stated after provisions of 45 million. The impact of provisions is significantly lower than 2019 due to the lower impact from legacy items. Working capital was an outflow of 114 million due to the expected impact of the unwind of advance payments, 277 million. This offset our strong focus on working capital management and impact of lower activity. Cash exceptionals of 115 million included reorganisation costs of 80 million, which cover actions taken in response to market conditions to deliver 230 million of overhead savings. Excellent progress on portfolio optimisation delivered a net inflow from divestments of 455 million as we completed the disposal of industrial services, nuclear and our interest in TCT. Payments for capex and intangible assets reduced to 81 million as we paused discretionary capex, including our ERP implementation. With continued market uncertainty and our prioritization of balance sheet strength, no dividend payments were made in 2020. Overall, we delivered a significant reduction in net debt to 1.01 billion from 1.22 billion in June 2020 and £1.42 billion in December 2019. Looking at the working capital performance, on receivables and payables, lower activity, the impact of larger EPC contracts rolling off, and our continued focus resulted in a large cash inflow. The other significant driver of our working capital performance was the expected unwind of advance payments of £277 million. This principally related to a larger US EPC contract and followed a significant inflow in 2019, but also reflected lower EPC awards. An asset-like cash generative model underpins our investment case. In 2020, we saw a drag on cash generation from the impact of provision movements on legacy items, exceptional levels of advanced payment unwind, and costs incurred as we took action in response to COVID and oil price volatility. Although EBITDA is at a depressed level, our underlying operating cash flow, excluding these legacy and temporary items, remained strong. Throughout 2020, we have continued to assist the SFO in England in relation to the historical use of agents by Foster Wheeler. Discussions have progressed to the point where we believe it is likely will be able to reach a settlement. This brings progress on the SFO investigation in line with the investigations by the authorities in the US, Brazil and Scotland, which we provided 46 million for in 2019. We believe this will enable us to reach a global settlement and we have provided a further 151 million in 2020. Discussions with all authorities are at an advanced stage. We expect a settlement with the Scottish authorities shortly, with settlement of the SFO, US and Brazilian investigations to follow in Q2. Out of the full provision, we expect around 70 million to be paid in 2021, with the remainder paid in installments over the next three years, 2022 to 2024. The investigations mainly related to the use of agents over a period dating back several decades. before Foster Wheeler merged with AMEC in 2014 and prior to our acquisition of AFW in 2017. A small part of the provision relates to a joint venture in the legacy PSN business. We are pleased to be in a position where we believe we are likely to be able to settle all the relevant matters, enabling us to draw a line under these legacy issues. Robin will talk more about our continuous improvement approach to ethics and compliance later. For 2021, we have provided guidance for cash outflows in respect of provisions, working capital, exceptional items and capex. Provision movements relate to projects, asbestos and disposed businesses have reduced significantly since 2019 as we close out legacy AFW items. With asbestos being an ongoing item, and full year 20 benefiting from insurance proceeds inflow, we expect the movement for 2021 to be in the region of 60 million. Given our risk appetite and tendering policy, we're not forecasting more significant moves in advance payments that would impact working capital. As a result, we currently expect working capital movements to be between neutral and a modest inflow in 2021. We remain focused on reducing exceptional items, and this continues to be our medium-term expectation. In 2021, we expect around 30 million of costs to deliver our Future Fit programme, and onerous lease costs of 25 million, which we expect to reduce to nil in 2024. As discussed earlier, we anticipate the first instalment of 70 million relating to regulatory settlements, with the remainder payable over the next three years. This is subject to approval by the relevant agencies. Lastly, our CapEx and intangible spend will increase to around 115 million as we invest in our FutureFit digital and technology programme and resume our ERP activity. Our capital allocation policy is focused on maintaining a strong balance sheet, and this has been a priority in 2020. We remain committed to achieving our target leverage of 1.5 times net debt to EBITDA on a pre-IFRS 16 basis. We have considerable levels of liquidity with on-drone facilities of over 1.7 billion. We recently extended our revolving credit facility to 2023. Net debt to EBITDA was 2.1 times, which compares to our covenants at 3.5 times. No dividends are proposed by the Board in respect of full year 2020. The decision to resume dividends is dependent on the Board's assessment of the longer-term impacts of COVID and end-market stability. The progression of our order book down 70% at £6.5 billion largely reflects macro conditions. Despite improving commodity prices in our projects business, we have delays to larger conventional energy awards and the deferral of investment decisions in processing chemicals. This has been partly offset by strength in the built environment and robust activity in renewables. We have a well-diversified order book that is evolving in line with our risk appetite and strategic positioning. We have a lower risk profile in order book as we work off larger EPC contracts, particularly in processing chemicals, and pursue new work that is in line with our measured risk appetite. Less than 2% of our order book is related to fixed price work, over 100 million, and 76% is reimbursable. In line with our strategic positioning, a larger portion of our order book is in our higher margin consulting business. We have seen encouraging growth in our consulting backlog, including in the built environment, supporting our expectation of continued strength in built environment activity in 2021. Although the enduring impacts of COVID-19 remain, we have seen some signs of markets stabilising late in 2020. From subdued levels, we saw improving momentum in awards at the end of 2020, with order book up around 5% on November, and this momentum has carried through Q1 2021. As a short cycle business, we have good near-term visibility with 67% of order book due to be levered in 2021. It's worth noting that with over 7,000 active contracts, we have no concentration risk on larger multi-year schools. On a monthly basis, we book and execute a huge amount of work and we expect a swift acceleration in those awards as markets recover. Leveraging our asset light model to focus on margin has been at the heart of our actions in 2020, and we have been successful in protecting margins just below the 2019 level, delivering improved margins in two of our three business units. Our medium-term ambition is to deliver margins of 9.6%, 100 basis points improvement on the 2019 level. Delivering on this objective will involve being in the right markets, winning work at the right margin that reflects the value that we add, delivering exceptional execution consistently, and by being more efficient. This strategic goal remains very much in focus. Nearer term in 2021, we are focused on margin improvement. We will continue to manage utilization in response to demand and will benefit from the evolution of our business mix between consulting and projects. We will also deliver efficiencies as part of our future fit program and expect to benefit from improved project execution. The reversal of temporary cost savings in 2020 will be offset by the structural full year benefit of actions taken. Robin talked earlier about the first step in our FutureFit programme to optimise our operating model, moving to three global business units, consulting, projects and operations. This organisational change will be reflected in our business unit reporting for 2021. In practical terms, consulting largely comprises what was TCS and what was Asset Solutions will operate and report as two global service lines, projects and operations. We have restated our 2020 revenue EBITDA and margin under the new organisational structure. And further details are included in the appendices. At the sub-business unit level, we will provide analysis and commentary on performance across four end markets. Renewables and other energy, processing chemicals, conventional energy, and built environment. We believe this will further improve our disclosure and enable a top-down market-based understanding of the drivers of our business. Looking to 2021. Overall, we expect lower activity in 2021. Activity and projects will be down, driven by the larger contracts in processing chemicals rolling off, and new awards in processing chemicals and conventional energy being limited to smaller, early stage scopes. This will be offset in part by resilience in renewables. In consulting, we expect increased activity levels, driven by the continued strength in built environment activity, particularly in the US. Operations work will benefit from robust demand for OPEX work in conventional energy and growth in process and chemicals. Our financial objective in 2021 will be improving EBITDA margin. In summary, our strategy and flexible asset light business model has enabled us to come through a challenging year. The breadth of our end market exposure has resulted in relative revenue resilience in around 65% of our end markets. We took early and decisive action to successfully protect margins, deliver EBITDA of 630 million and reduce net debt by 410 million. Looking to 2021, we see lower activity overall given market conditions and will remain focused on actions to improve margins and cash flow. I will now hand over to Robin.

Before I come on to our strategy, let me touch on our progress to date with legacy investigations and our approach to ethics and compliance. As David shared earlier, our results include a provision reflecting our expectation of reaching a global agreement to resolve investigations predominantly related to the use of agents by Foster Wheeler prior to its acquisition by AMEC in 2014 together with one investigation around a joint venture in the legacy PSN business. We're pleased to be approaching global resolution of these issues and we anticipate a settlement with the Scottish authorities shortly, followed by settlement with all other authorities, including the SFO, in the second quarter. This allows us to draw a line under one of the final legacy challenges, having cooperated fully with the relevant agencies throughout their investigations and bringing them to satisfactory conclusions. Let me make one thing very clear. This is a legacy issue concerning cases which are historic and individuals who are no longer involved in the business. From a Wood perspective, ethics and compliance is part of our DNA and that type of behaviour will never be tolerated in the company. The executive team and Wood board regard ethics and compliance as a fundamental cornerstone of who we are and how we work. Over the last four years, our focus has been to strengthen even further a very robust approach to ethics and compliance, including a clear and unambiguous code of conduct and culture where corruption is not tolerated at any level, a strong tone from the top with board, the executive leadership team and all senior leaders communicating regularly on Wood's ethical programme and culture, Our Safety, Assurance and Business Ethics Committee is made up of three independent board directors and is attended by myself. We also have a blanket ban on the use of sales agents unless required by law and strict due diligence on any entity engaging on our behalf with any government employee. Our risk-based training programme on managing third-party risk and anti-corruption and anti-bribery more widely, as well as a sustained education drive around our code of conduct. Integrity is our licence to operate and therefore of paramount importance to the business. I am pleased we're putting these legacy issues behind us and moving forward with a focus on the future. Our strategic direction, positioning and medium term strategic priorities are well understood. Attracting new work as the energy transition continues to gather pace and the world seeks solutions for a more sustainable future. maximising the opportunities and growth of core markets, continuing to maintain our focus on margin over revenue, balance risk and rewards as we optimise and standardise our service delivery model, and rationalising our portfolio, disposing non-core assets and investing in our business. All the above will ensure we leverage our differentiation to deliver stakeholder value. As I mentioned earlier, FutureFit is an 18-month programme to accelerate our strategy, which has our medium-term target at its core. The majority of the benefit of FutureFit will be in 2022, as David noted, and we expect to deliver around 40 million in-year benefits this year. There are five areas of focus. Simplifying our market positioning and emphasising our green-to-green lifecycle of solutions to clients by reorganising to three global business units. transforming our operating model to achieve global consistency, predictable execution outcomes. Digitising the way we work by employing solutions which transform our delivery and increase efficiency and accelerating future skills development by investing in the skills which match our opportunities and accelerate employee development. And finally, unlocking growth by focusing on the most attractive markets where we're differentiated and will be rewarded for the value we create. Future fit is fundamental to our future prosperity and a key part of our growth story. And it's worth going into it in a bit more detail around the significant progress made in these areas. We've refined our organisational design, pivoting to an operating model of three service-defined global business units, consulting projects and operations across energy and the built environment. As illustrated, we provide solutions which span the entire life cycle from planning, through design, build, operate, and repurpose. Consulting comes in at the front end, providing new solutions and responses to the megatrends. Our consultants validate investments, assess requirements, deliver studies, and offer expert sector advice. Consulting creates significant pull-through opportunities for our project's capability once capital investment is secured. Our capabilities stretch from front-end engineering to detailed design, procurement, construction, and project management. And then as projects move from the CapEx development phase to the OpEx-driven operations phase, our structure allows us to leverage our global client relationships. We support clients over the longer term through partnership models to deliver operational efficiency, maintenance, modification, and asset management solutions through to decommissioning. Our organizational design reinforces our agility in responding to clients' needs by removing internal barriers and complexities, allowing us to grow in markets where they are differentiated by our solutions and capabilities. Our approach to organisational design is already delivering significant value. The creation of our global consulting business was an important first milestone in the delivery of our strategy as we set out in our capital markets day in 2019 to be a premium differentiated high margin business. We took this step to better position our high value consulting capabilities into a more efficient global and industry-leading offering, and as a result, it's delivered a significantly improved margin of over 12% in 2020. We're seeing strong growth in order book, up 20% in 2019, and have good visibility in near-term opportunities in high-margin work and long-term growth opportunities in the energy transition and the significant sustainable infrastructure market. We're investing in digitising the way we work to transform delivery and increase efficiency. Our digital factory will accelerate the benefits of partnerships with leading technology businesses, including Microsoft, who we are collaborating with to enable clients to deliver their energy transition ambitions and sustainability commitments. It will also be a forum where our community of digital experts pilot ideas and elevate those which will improve our differentiation with clients. Digitising the way we work will enable commercial innovation focused on the value we create. And our approach in this is twofold. Firstly, our internal digital delivery is focused on driving efficiency and reducing risk. By embedding digital capability into client delivery, we can significantly reduce asset expenditure and have a number of live projects in this area. Secondly, we'll develop digital solutions to differentiate our offerings. This includes solutions that support client sustainability goals such as current work scopes on emissions monitoring, decarbonisation, smart urbanisation and city planning. Under the governance of an operating committee headed by a new COO role, our objective is to achieve best-in-class delivery throughout our business. We're focused on three main areas. Firstly, performing. This is about ensuring strong project governance and embedded standardised procedures for project delivery. As part of this, we're developing a universal engineering design system and investing in our project management academy. This has been ongoing and actually has been largely successful focus area right across the company, but we have experienced gaps and issues of consistency of outcome and we also want to accelerate pace. Secondly, improving. Our approach to operational excellence is one of continuous improvement, enhancing our project planning and execution, as well as having robust operations assurance. This approach extends to transforming our supply chain management to deliver efficiencies. And thirdly, innovating. We're leveraging trusted client relationships to drive innovative commercial models which generate reward based on the value we create. Embedding digital delivery and tech-led solutions will also play a key role. I'm confident in our ability to further develop our operational excellence framework and in particular to achieve global, consistent, predictable execution outcomes. FutureFit is also about unlocking growth across energy and the built environment. To deliver a net zero future, The world needs consultants and engineers to create the technical solutions required. A key opportunity is helping IOCs to transition into becoming IECs, International Energy Companies. This means delivering as clearly and efficiently as possible from their existing portfolio, decarbonising assets and helping them invest in new renewable sources of energy. We're already delivering and earning significant revenue from the energy transition, We're focusing our efforts in markets where we're differentiated and where we'll be rewarded for the value we bring. This includes our existing growth areas where we already have a strong track record, having already delivered almost 150 carbon capture and storage studies. Few, if any, of our competitors have such a strong record in industrial decarbonisation. Over 35 gigawatts of solar projects in the last decade and a half over 650 projects in wind, over 120 hydrogen units, whilst also pioneering new solutions in blue, green and biohydrogen. We're also focusing on new growth areas, such as investigating the delivery of electric vehicle charging solutions for one of our major IOC customers, repurposing upstream assets for carbon storage or downstream assets for biofuel refining plants. Turning to the built environment market, Rapid population expansion, rising urbanisation and growing climate risks are putting built and natural environments under more pressure than ever before. This is creating a pressing need for improved infrastructure, cleaner industries, adapted environments and improved access to critical services including water, power and waste sanitation. At Wood we are helping to build a more resilient, sustainable and liveable world and this is evident with the breadth of our portfolio of work. In the US, we've modelled and mapped the flood hazard risks of rivers covering 250,000 miles. We manage 5,000 remediation projects every year, delivering cleaner, protected environments. We carry out essential maintenance work on over 1,500 kilometres of water infrastructure in Australia, and we complete over 200 rail planning and design projects each year. Our focus on minimising the effect on the natural environment and consulting and designing sustainable urban habitats have been key in building our differentiated capability across the built and natural environment. The diversity of our opportunity pipeline gives us confidence in our positioning for growth in the medium to longer term. Our factored pipeline has recovered to pre-COVID levels at around $12 billion. reflecting our successful strategic broadening, and we're seeing an increasing proportion of opportunities in the built environment, renewable and other energy, and processing chemicals. Crucially, our win rate remains very strong, and we're very confident we're maintaining market share. Turning a little bit to our core markets in some more detail, the outlook for renewables and other energy is positive. In the near term, we expect renewables to remain resilient and for momentum and early-stage scopes on UK carbon capture and hydrogen projects to continue. We're seeing acceleration in the low-carbon strategies of many of our key oil major clients, which combined with ongoing investment in renewable power generation and the broader drive to net zero will benefit long-term growth. Projects work in processing chemicals has been impacted by large investment decisions and activity will be down in 2021 as large current EPC projects complete. This will be partly offset by resilience in life sciences work due to investment in expansion for vaccine development and supply chain resilience as well as robust operations activity. In conventional energy, we've seen good momentum in modification and optimisation awards, Projects activity will be lower as upstream awards are limited to smaller early stage scopes and midstream investment constraints continue. Looking further ahead, as the world unlocks and global demand improves, we expect to see an increase in activity, including an acceleration of asset decarbonisation and optimisation. Also, as oil majors pivot to lower carbon models, we expect to see an increase in new independent operators, which will open up asset management opportunities. We enter 2021 with a larger order book and built environment, which will drive strong activity levels as demand for smart and resilient infrastructure continues to be supportive. Fiscal stimulus in response to COVID has a potential to bring significant growth opportunities in the medium term, supported by a shift to recognise that infrastructure spending can be an enabler to deliver climate and economic resilience. In summary, uncertainty around the ongoing effects of COVID are impacting investment decisions and creating short-term headwinds in some of our markets. However, the focus on building back better to accelerate net zero ambitions and develop infrastructure that's resilient to climate and economic events continues to provide us with significant growth opportunities longer term. I focused on what we're delivering in terms of our strategy. but just as important is how we deliver it. Our goal is to maintain our leadership position in environment, social and governance matters and sustainability. In 2020, we committed to a set of targets aligned to the UN Sustainable Development Goals to measure performance against our sustainability strategy in key areas of inclusion and diversity, fair working practices and our impact on communities and the environment. Our targets include Consistently maintaining top quartile ESG investment ratings in our sector. Reducing our scope 1 and 2 carbon emissions by 40% by 2030 on our journey to net zero. Doubling client support aligned to energy transition and a drive for sustainable infrastructure by 2030. And improving the gender balance with 40% female representation in senior leadership roles by the same timeframe. Embedding fairer working practices through our business partnerships, including having 100% of our suppliers signed up to the principles of building responsibly by 2030. And finally, positively impacting communities by contributing $10 million worth of our global causes by 2030. Reflecting the importance of our programme, we continue to differentiate ourselves from our peers by embedding these targets in the bonus and long-term incentive plans of our leadership. There's no doubt at all that 2020 has been an incredibly challenging year, but one that's proven the resilience of our people, the strength of our strategy and the flexibility of our operating model. It's also allowed us to draw a line under one of the final phases of integration and legacy challenges post the AFW acquisition. We haven't just delivered a resilient performance in the face of difficult market conditions, we believe we've also come out of 2020 better positioned for the future than many of our competitors. We took early and decisive action to protect our balance sheet, margins, and cash flow, and our ability to leverage our asset-light model has been key. Short-term headwinds in some markets are expected to endure in 2021, but our order book is demonstrating the benefits of our strategic position with an increased proportion for lower-risk, higher-margin consultancy work. We're committed to retaining our leadership position in our field of ESG matters, And I've also committed to a clear set of targets to measure the performance against our sustainability credentials. Finally, we're embarking on our future FIT program to accelerate strategy, which will further transform our operating model to unlock our medium-term margin aspiration. In short, we've built resilience into the business by design and are moving our strategy forward with accelerating pace. Thank you.

Thank you. Ladies and gentlemen, we will now begin the Q&A session. As a reminder, if you wish to ask a question, please press star and one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press the hash key. Once again, please press star and one if you wish to ask a question. ladies and gentlemen we will now take our first question and the first question comes from victoria mcloughlin from rbc please go ahead your line is open good morning good morning victoria good morning hope you're doing well um so a couple of questions from me i guess um in january about

execution explicitly being directed towards the ASA business to help us deal with some of the process and energy contracts which were being a bit more challenging due to weather or otherwise. How does the future fit reorganisation help to address and prevent these sorts of issues or can it address or prevent these sorts of issues from happening going forward?

Yeah, I'll take that Victoria. Yeah, I know we were Over the course of 2020, as you can imagine, the disruption that COVID has caused on operational projects is not insignificant. We've highlighted these ones in particular. It's a small portfolio within our P&E business in the Americas, as you say. Between COVID disruption, it's just very practical disruption that you do get, and also real freak weather conditions that related specifically to the sites involved. These two things manifest themselves to disrupt the projects themselves. And then productivity, delivery, these things were quite challenged within the year. As we saw that manifest in itself, Victoria, we decided to... accelerate some reorg considerations that we had had anyway. You know, we'd made a lot of progress in some of the performing areas, as you say, where execution excellence program, but we felt there was still more work to be done, you know, just by the kind of outcomes we were experiencing. That's why we restructured the business. We actually implemented that restructure in operational terms early in Q4 last year, which we've obviously announced today, and we've run the accounts to year end in the old structure. We felt also there was a real track record of resilience within our EAAA business, which had a larger capital projects portfolio. So we saw the sense in pulling together, firstly, the capital projects to be a global proposition, One set of processes, procedures, and structure around it, which I think is quite logical and intuitive. And we've got another layer on top of it around the OpCom and introduced the Chief Operating Officer position, and Dave Stewart's taken up that role. Again, you've seen some excellent delivery from Dave over the last, actually, in my time with Dave, but over the last three years, the EAAA business has just been a much more consistent outcome business than ASA in general terms. So we felt the time was right to do it. We're very confident with the oversight we now have with the one concentrated project capability, operational capability, and consultancy capability operating globally as the right way to get the predictable outcomes that we need. We also felt in accelerating that change, to digitize we need to standardize and to standardize there needs to be that complete consistency and there were just one or two gaps that we felt were needed to be bridged.

Super, thanks, that's really helpful. You talked about seeing improvements in the back, or certainly in your order book, sorry, in the fourth quarter and into the Q1. It would be really interesting to get a bit more colour and, you know, is this in any way linked, do you think, to the oil price or is this just a progression of, you know, your greater transition into consultancy? Where, you know, should we be looking to see improvements for the remainder of the first half of the year?

I think it's a good blend, Victoria. If I give you a wee thumbnail, you know, from a consultancy perspective, we're certainly encouraged by what we see And it's a good range of work. You know, there's carbon capture and storage work. We talked about Humber Zero. We've got a number of decarbonization studies ongoing. We're quite active in hydrogen studies, again, at the front end within consultancy. We've picked up some transportation work, you know, which is, again, the benefit of our broader end markets. We talked about solar work in Oman with Shell, and that's an owner's engineer proposition. I think consultancies, we're encouraged by what we're seeing there, and we're also encouraged in operations. Again, we've picked up some North Sea work. We mentioned Spirit, late life delivery work that we've got. We've got another MMO in the North Sea that we're about to announce. We've picked up Equinor. There's some good Equinor work we've picked up in the Norwegian sector in the North Sea. We've got SAS oil work. So I think from an operations perspective, we're quite encouraged, and a chunk of that is in our conventional energy business. And probably, whilst there are some wins in projects, an Ethylene EPC project in China that we trailed, and we've got a GSK project partner work that we've trailed, I think projects is the area where we are coming into the year a bit behind where we would normally be, and that's we think quite logical to where investment decisions are, Victoria, not just oil and conventional markets, but I think just investment generally is still, we're still seeing some headwinds in our project portfolio. But I think across the piece, we just feel a bit more positive as we've come through Q4 into Q1. You know, one swallow doesn't make a summer, but we have picked up work January and February, and we're quite pleased with that. We do think there'll still be some headwinds, and we do think projects, manifesting projects that are material in 2021 will remain, you know, one of the challenges that we face.

I'm going to put the numbers around that, Victoria, just to bridge to, I guess, some of the comments we made in Outlook and You know, you saw from the statement our backlog was down 17% versus 2019. But as you'll also pick from our training update, you know, we gave out our backlog at the end of November, and that grew 5% during December. And as Robin said, we've continued to see that similar momentum in January and February. And, you know, we're encouraged also by the mix of it, which plays into our margin outlook. You know, we now have a greater proportion in high-margin consultancies, as Robin said, particularly in the built environment, and so that's a market. You know, as we look forward to 2021, we expect a benefit. You know, again, just giving, you know, the thoughts around 2021 activity, you know, we flagged about 67% of our backlog related to 2021, you know, so about $4.3 billion in You know, normally at the end of the year, we have about 60% revenue coverage in a normal year. That would be what we'd expect. And again, you know, we look forward to 2021 revenues. As Robin mentioned, it's project activity we expect to be lower. It's just around the, you know, I guess the uncertainty around investment decisions. But we expect, you know, growth in consultancy and growth in our operations activity as well.

Super. Thanks. Those numbers were really helpful, David. Just a final one for me, and then I'll hand it over, I promise. Do you think your current carbon emissions target goes far enough, given the number of the majors and your customers have set net zero targets?

Yeah, I think it's a good question, Victoria. Yes is the short answer. We were always very clear that we wanted to put a science-based reduction target there. And we were also very conscious of a lot of greenwashing going on just now. So we've signed a pledge for net zero by 2050, just for complete clarity. And we've also set ourselves an aggressive, you know, carbon reduction target of 40% by 2030. What we didn't want to do was just put a net zero target out there, as some companies have done, because, you know, you can offset and buy your way out of doing anything that has a practical reduction, if you like, on your own carbon footprint. So that was the balance we tried to strike. We think it actually double commits us in a way that very few companies have actually done that, committed to a science-based target as well as a net zero target. So we've done both and we'll be applying all our efforts to adhere to both. And net zero, we will accelerate as quickly as we possibly can. We're also quite thoughtful over the course of this year we'll get some additional science-based framework in place is our thoughts in terms of what net zero looks like in practical terms because I think a lot of companies have just jumped on it through a number out there and can buy their way out of it and that was something that we were very keen not to do. So that's why we went with both both targets and both objectives. Thanks, Victoria.

Thanks very much. Appreciate it.

Thank you. And your next question comes from the line of Mick Pickup from Barclays. Please go ahead. Your line is open.

Good morning, everyone. Good morning. A couple of questions, if I may. Good morning. A couple of questions. Just looking at your new operating model, and I'm looking at the margins you've given, consulting at 12.3%, ops at 12.5%. They seem pretty healthy already. Projects obviously down lower at 5.8. Can you just talk about where you can think projects should get to on a normalized basis when there's not issues going on? And ultimately, how does that fit in the mix as projects recovers and becomes more of the mix as a lower margin business?

Yeah, you know, you've done quite a lot of the analysis there in terms of the question. You know, as we flagged in 2020, you know, the results in our process and energy division in the Americas were about 50 million lower than they were in 2019. You know, Robin's outlined a range of activities and actions we've taken to remedy that. And so we expect to see, you know, some of that coming through in 2021. And, you know, getting to a much more healthier position as we move forward 2021, 2022. And so, you know, that all relates to projects in our projects business. And so, you know, if we look across the rest of our business, in the AAA, we had some excellent performance on projects. And in other parts of the Americas, we had excellent performance in the projects. So it really was that process and energy business that you know, brought down the margin in our projects business.

Okay. And then looking at your new breakdown of consulting projects and ops by the end market, some of the smaller businesses look to me like they're areas where you should have opportunities. So I'm thinking operations in renewables is only a couple of hundred million today and process and chemical consulting down that sort of level. Just talk about those areas. some of the smaller areas, how you can grow those?

Yeah, no, I think it's a good observation, Mick, and I think it is one of the reasons we've put it out in a kind of matrix structure. Yeah, from an operations perspective, it's probably the most biased business, as you can tell, to a conventional energy footprint, and we've done less operationally in that space. So we're quite thoughtful about, you know, adjacent projects, adjacent markets. We've already got some water business and operations and we're quite thoughtful that we could be doing more maintenance modifications, operational work in water, for example. It doesn't have to be just limited to one or two contracts in Australia as our traditional footprint there. So the short answer would be yes, we do see adjacent spaces. What will decide which adjacent space we enter into will be the relevance of the space and the value that we can extract from it, you know, from a margin perspective. So as a, for instance, you know, offshore wind, we see less of an opportunity there than our traditional, if you like, offshore operations capability, given the prominent role of OEMs in the offshore wind market. Floating wind might be a different proposition, however, but it's relatively immature just now. So we do have some views within, I'm just sticking with operations for a second. We do have some views as to the adjacent spaces we see as most attractive, and we certainly have tasked the team with unlocking a broader, if you like, market footprint, aligned to where we are strategically across these four basic and fundamental markets there. From a consultancy perspective, I think you've picked out one that we think is very fertile ground, actually, consultancy and process and chemicals. is one that we see as very attractive. Obviously, our carbon capture and storage, hydrogen, you know, moving from grey to blue hydrogen, biohydrogen. We really are thoughtful, and that's largely the march is led there by our consultants. Our consultants tend to be, Mick, from a heritage perspective, our process consultancy people have come from the Foster Wheeler stable, and obviously a lot of the projects that we do and process and chemicals is also from the Foster Wheeler stable. So it's very well established good relationships and actually a really strong track record we've observed from a pull-through perspective in that area. But you're absolutely right. We do look at it. We do see the biases in the business and we've outlined it, I think, to be as helpful as we can just in kind of transmitting. You know, we're quite excited about some of the growth potential that we have with a simpler, well-respected service capability across three areas, projects, operations, and consulting, and then simplifying it across these four end markets. So we definitely see some revenue synergy and pull-through opportunities there.

Okay, thank you. I hope it's an easier year.

Thanks, Mick.

Thanks, Mick. Thank you. And your next question comes from the line of Amy Wong from UBS. Please go ahead. Your line is open.

Hi, Amy. Hi. Good morning, Robin. Good morning, David.

Hi.

A couple of questions from me. The first one relates to your medium-term margin target, 100 basis point from the 2019 levels of 8.6%. would be very helpful if we can get a sense of what medium term means. And then secondly, if you were to build, you kind of broadly say you've got some mix in there and some cost savings, could you maybe break down that 100 basis point into how much of it's going to come from mix? And is the cost savings just limited to that 40? Or is 40 just very short term and there's more to come just to give us a bit more numbers or color around that margin improvement.

Let me talk to the numbers, Amy. Our Future Fit program is a multi-year program, and it covers a number of different elements. Part of it is around the organization, and Robin touched on the change in the organization around projects, consultancy, and operations, as well as our COO function. You know, so part of it is around organization. Part of it's around efficiency. But a number of the initiatives are actually more focused on growth and on areas such as digital and technology. So the 40 million is really the portion that we expect to realize in 2021. And that is largely around efficiency. So most of that is around organizational savings. Some of it is around supply chain savings. And so that will be the first tranche of the benefit from FutureFit. And that will obviously help our margin in 2021. And as you've probably seen from the release, overall, we anticipate some modest improvement in margin in 2021, of which FutureFit will help that. In terms of the overall 100 basis points, We've not split that down into the various elements, but the themes around future fit are what's going to drive a significant portion of that. So around efficiency, around how we can better deploy our D&T capability. But equally, we've also flagged today the changing mix in our business. So if you look at our backlog, we've seen some significant growth in consultancy And consultancy for us is a higher margin part of our business. And so we see that next element continuing to evolve and continue to be supportive to our medium-term target of 9.6%. Robin, do you want to add anything?

Yeah, no, I think, Amy, obviously we did our capital markets day in 2017. the end of 2019. And, you know, we view a strategic cycle as being that, you know, three, four year kind of cycle. So from a medium term perspective, that was what we were looking at in terms of what we could do with the margin. I think, you know, as we all very well know, you know, unfortunately, a global pandemic and kind of negative trading WTI in 2020 has provided real turbulence in our end markets. So I think if you were bridging it, it would be, you know, effectively we've lost a kind of 18-month momentum period from an end market perspective. And no matter what we do, and we're very pleased with what we have done in terms of our asset light model and the cost saving that we've done to protect our margin in 2020, you know, inevitably in kind of growing the business and growing the EBITDA margin, we do need the markets to recover and activity levels to pick up. We think we're well positioned for that. We'll obviously have a specific bias. We want to see as much of the consultancy business to grow as quickly as possible. It's just almost stating the obvious from an arithmetical perspective. And to David's point, bridging into the FutureFit program, it is a program that focuses on efficiency, which is part of the in-year delivery from a FutureFit perspective. which includes, amongst other things, B&T, and actually growth. And the growth will require a bit of market momentum as well as our own positioning within the markets. So hopefully that helps kind of frame it. That medium term we would always have in that three- to four-year period is the way we would look at the medium term versus the longer term versus the short term, if that helps. And obviously we're very committed to that. to what we've set out as a target there. We've just got to take cognizance that 2020, to all intents and purposes, I think for a great number of businesses was a bit of a lost year given the turbulence that we experienced in our end markets.

Sure. Thanks for that. I'm just going to do a quick follow-up on that margin profile and the mix going forward. It sounds like you know, consulting, you know, has had a nice, you know, more premium margin that that's been part of your strategy is to emphasize offering that premium service to your customers. And it sounds like that's a big part of hitting that margin improvement is going to be maintaining that. So could you give us some ideas of how you, you know, what is the strategy to maintain that premium margin? What prevents that margin from being competed away given that, you know, energy transition is a very big area where a lot of companies are focused on delivering that to the customer base as well. So a bit more understanding of how wood can maintain that.

Yeah, I think there's a few fundamentals, Amy, that are very helpful. You know, we've got an asset-light model, so we've got levers we can always pull. I think the breadth of end market is really helpful for us. You know, we don't have a customer concentration and we don't have that, you know, pressure where you rely on half a dozen customers to provide 60% of your revenue. We're far from that. We've got quite a very broad customer base across a broad range of end markets. I think you're right. I think maybe energy transition, what is the emerging markets and what's the margin that can be made in the emerging markets? We're always very thoughtful in that. We try and be very selective in determining what value can we add how can we add it and what margin is to be unlocked, if you like, from the market. From a consultancy perspective, we think, you know, a chunk of our consultancy business, 60% plus is a built environment. We do see some fiscal stimulus coming into that world. We do see, you know, the commentary, the broad megatrend commentary is around building back better. I think everyone realizes that there's a lot to be done in the built natural environment. So that's actually, as I say, over half of the consultancy business, and it's completely unrelated in many ways to energy transition per se. It is, we would argue, from a consumption side, if you like. You want cities and urban environments and transportation systems that don't overconsume energy. That's a link we see with it, but it's quite a different marketplace with different dynamics and different customers. I think I would point to, you know, traditionally, all things being equal, we have been able to maintain margins, maintain market share, and maintain our position across our service range. And, you know, our whole bedrock of the wood reputation has been on repeat business. You know, we get an awful lot of repeat business. And even in the last year, with some exceptions across some of our conventional markets, there has not been a great deal of pricing pressure. You know, you need to be competitive enough to win. But, you know, I can assure you our win rate has been in a sweet spot across the three business units, Amy. So that, again, gives us some encouragement that even in tough markets, you know, us setting out what we expect to receive in terms of the services we deliver is something we've been able to unlock and materialise.

I think the only thing I would add, Amy, as well, is just to recognise that what our consulting business achieved in 2020. They grew their margin by 1.9% in what we all recognize as a really challenging year. And so part of that was around the efficiency changes we made back in the end of 2019. Creating TCS was almost the first step of future fit moving to the organization that we have today. They've done a tremendous job around improving the margin already.

Great. Thanks for all that colour, guys.

Thanks, Amy. Thanks, Amy.

Thank you. And your next question comes from the line of James Thompson from J.P. Morgan. Please go ahead. Your line is open.

Morning, James. Morning, Chaps. How are you? Yeah, I wanted to sort of pull together actually, Amy, and Mick's questions a little bit, thinking about cash flow. I mean, you've done a very good job over the past few years of bringing down the real drags on cash in the business. When I look at the outlook now, I don't think that CapEx interests are going to change particularly. I mean, obviously, you've got the incremental costs and the SFO coming through over the next few years, but Onerous lease is almost gone now, etc. So effectively, the uses on cash are not going to change much more. So it comes down to growth. And what I really wanted to do, again, is kind of triangulate the sort of margin expansion ambition with the growth opportunities. With the market coming back here, it feels like there'll be more projects work to bid. Are you going to sort of resist that lower margin work, which obviously may well impact on top line? Because it feels like revenue growth here is what's going to drive obviously EBITDA growth and therefore the cash opening up which is kind of what you talked about in January obviously that's a little bit impaired here so I just really wanted to pull together is there enough growth in consultancy if you don't go after this project work as the market improves do you need to sort of go for some M&A and bits and pieces here so maybe just triangulating all of that kind of what you talked about from a sort of cash flow lens would be very helpful.

Yeah, I guess there's a number of questions in there. I guess from a cash flow perspective, you know, we've given out some guidance around, you know, things like provisions. We expect it to be about 60 million. Working capital we see being flat deposits, so no longer having that impact of advances. Exceptionals we see being 135 million, principally driven by 70 million of regulatory payments. And CapEx we see increasing from 2020 to 115 million, in part driven by our ambitions around digital and technology and further investment there. So I guess to your point, we're seeing a normalization of the cash flow, albeit the regulatory payments give us an additional exceptional item there. In terms of the growth ambition, You know, we do have, you know, growth ambitions across all of our business. We're not signaling that, you know, we've no growth ambitions around our projects. Really, where the market has been in 2020, particularly around the back end, is there has been a lack of activity around projects. There's been a deferral of investment decisions, and we've seen that in our backlog. Some of it has been robust. For example, renewables sits in our projects business, and the backlog there has been relatively robust. Processing chemicals, we've seen a significant runoff. I think the other thing I would flag, so fundamentally we do see our projects business growing. I think the other thing I would just highlight, we have changed the risk appetite in our business, and we've seen the roll-off and the successful delivery of bigger downstream and chemicals projects. And we've actually lowered our ambition around EPC. You know, we've brought in a lower risk appetite. And so that has fed through our business over the last number of years. You know, you can see it in the shape of our backlog. We're 76% reimbursable. Only 2% of our work is in larger projects. But that doesn't mean we've not got a growth ambition for our projects business.

I think maybe if I can add a couple of things, James, to put it in context, the fundamental investment case that we have is we're asset light and there's a good distribution of OPEX and CAPEX revenue-derived investment. In our business, broadly, you've got the enduring long-term investment. operational contracts that provide us with a real stable backlog and business scale. You've got the shorter cycle, higher S-margin consultancy business, you know, that is in a, you know, kind of nine-month, broadly a nine-month backlog and look ahead. And then in the middle of the two, you would have your projects, you know, where you get superior margins, I'm being a bit simplistic, but superior margins by and large, than you would typically in your MMO business, but not as good a margin as you get in your consultancy business. So the fundamentals of our proposition and why we're arranged across these three business units remains the same. In terms of what has happened since we acquired AFW, I think to David's point, we're much more discerning in what we bid and what we're willing to take on. To put it in context, we've got three projects in the portfolio that are north of $200 million in scale EPC projects. Actually, one of them is actually reimbursable rather than lump sum. But these projects all run off this year, complete and successfully complete. Again, the danger is we talked about the P&E business projects, and America's given us some challenges in 2020. It is worth reflecting that probably one of the highest risk projects that you guys would have commented on would have been the YCI project. That was successfully concluded mechanically complete at the end of 2020. So I think the execution capability we have just building on what we said earlier is actually quite compelling across the entire portfolio with one or two anomalies. 2021 is a short-term commentary that we just see investment decisions not being made, and we see projects probably slipping to the right rather than slipping off the table, James, would be the way I would categorize it. But please let us just be really clear, we do see good potential, good medium-term potential in consulting projects and operations. And whilst consultant obviously gives us the highest margin, it also has a lower volume throughput in both operations and projects. So we think it's the blend of the three that makes the investment proposition compelling, particularly when it goes across these quite focused end markets.

Okay, thanks for that. I mean, I guess the fundamental question is can you deliver the margin expansion target and the cash flows with it? So, you know, hopefully the backlog improves and we can kind of see that 2020, 2022 onwards. So that's it for me. I'll just say I think the the reorganisation of the business unit is exactly the right thing to do, actually. People have been looking for it. So I think that's the right change, and it's good to get that granularity at the revenue level. So thanks for that. Thanks, James.

Thank you. Ladies and gentlemen, as a reminder, if you'd like to ask a question today, please press star and 1 on your telephone keypad. Your next question comes from the line of Mark Wilson from Jefferies. Please go ahead. Your line is open.

Morning, Mark. Morning, gentlemen. Morning. Morning. Hi. I'd like to ask on the medium-term margin, following up some of Amy's questions, a 100 basis point increase, arguably some people may look at that and think it seems a bit conservative. 60% of your business delivered 13% margins in the past year, and you point to specific project-related and freak weather margins. impacts in the ASA in America. So improvement in that area is surely coming. So is it in fact that the consulting, the high margin in consulting may have peaked at around 13%? And I say that because I know that TCS order book is up 16%, but headcount is down 22%. So those consultants either going to work harder or you need to hire a lot more. Could you speak to that, please? Thank you.

I think there's just something on the headcount. I'm not sure you're picking up our like-for-like headcount. We sold our nuclear business, which was just under 5,000 people. So I think that's part of your analysis, Mark. In terms of... The nuclear was half that. So in terms of the margin ambition of 9.6%, We think that is a stretching target for us. We set it out three years ago when our margin was at 8.6. Our margin this year is at 8.3%. We think we've got the tools to deliver that over the medium term. Part of that is our consultancy margin. We don't look at it as it's a peaked margin. You know, we grew it 2% this year. We're focused through our future FIT program as to how we can grow it in the future as well. So we don't look at it as a peak margin. And equally, Robin touched on, you know, some of the markets, the market outlook around consultancy. You know, 50%, 60% of the business being in the built environment, which we think has a very encouraging medium-term macro picture. So, yeah, we don't look at consultancies having peak margin. Equally, the 9.6 margin we think is a stretching target. We're very focused on achieving it over the medium term.

Okay, that's great. Thank you very much. And in relation to that on a medium-term basis, in the investment case, what sort of metrics should we look at for a return to a dividend investment? cash exceptionals and provisions and capex going up in 2021. But one imagines that isn't the view for 2020. What sort of returns or balance sheet would you be looking at in order to return to a dividend? Thank you.

Yeah, you know, we obviously took the decision not to pay a full year 2020 dividend. You know, what we've said in the past is is consistent with today. We do recognise the importance of dividends to our shareholders, so that is our bias. The decision to resume the dividend is ultimately one for the board, but it's one we'll reflect on where we are with business uncertainty. We still are in a global pandemic and we still are outside our our overall balance sheet target. You know, we have a net debt EBITDA target of 1.5 times. You know, we're sitting at 2.1 times. So, you know, our balance sheet is a bit different than where we want it to be, and there's uncertainty in the markets. And it's both of those elements. As we get greater visibility on activity levels and how that impacts our balance sheet, we'll then reflect into our decisions around dividends.

Okay, thanks. And there's one last one. Is there any potential scope for the investigation settlements to change during the year? What are the moving parts of that scale? Thank you.

What was I saying there? I guess, you know, we are in advanced discussions. You know, we've we've said what we've said about the SFO investigation. We're in advanced discussions. We expect it to conclude before the end of Q2. And so, you know, we are approaching the end, but we're not quite at the end. And so, you know, there are final approvals that could change things, but that's not our anticipation. You know, we've made a provision today for the $151 million, so just over £100 million. And we think that covers all our investigations related to the Crown Office in Scotland, the DOJ and the SEC, which we previously provided in 2019, and the SFO. So we do see that as being the final provision. And as I said, we do feel we're getting quite close to the end, but we're not quite at the end yet.

Okay, thank you. I'll turn it over.

Thanks, Mark. Thank you. Your next question comes from the line of Amy Sargent from Morgan Stanley. Please go ahead. Your line is open.

Morning.

Morning. Thanks for the presentation and the questions so far. I guess just one to talk a bit more about this sort of backlog mix. So just with the new structure, I noted that projects was around 47% of your 2020 revenues, but the share of backlog is more like 29% currently. How should we think about what's the right level for projects to be as a part of the total business going forward, given the big swings here? And is there a particular mix that you're aiming for between the three new divisions?

There's not a particular mix that we've hard-coded into things. I guess we've signaled the general direction and you've seen that change in direction through the analysis we've given and you've seen in the past years. Our business has moved to having more consultancy in it and more higher margin consultancy. Equally, from our From our market commentary, we've talked about a subdued project environment and project investment decisions. You know, we've seen strength in commodity prices, and we would expect that that to be beneficial for investment decisions, you know, as we go through 2021. You know, we're not seeing that just now, but nor would we have expected to have seen it, you know, immediately impacting project investment decisions. So there's not a target, but we've set out, we expect our projects business to start growing as we do with consultancy and operations as well.

Okay, great. And I guess just following on a bit from the question James asked, Do you think you have all the capacity that you need in consultancy at the moment, or is there areas, particularly within M&A, perhaps, where you might be looking to add, whether geographically or in certain capabilities?

Yeah, we think we've got a good capability, Amy, from a service delivery and market perspective. Consultancy does tend to be global and local. So if we were going to do something, it would almost certainly be a geographic, strategic extension, if you like, of the portfolio. We feel as if we've got a good range of end markets. We feel as if that's quite a good fit. So we don't see ourselves launching into... one or one or two additional end markets we think we're well defined in renewables and other energy processing chemicals conventional built environments so we think that's a good spread for us so we'd be more geographic uh from a consultancy perspective you know our built environment businesses you know not not wholly but you know is is 80 85 plus north american and canadian so uh so they're certainly geographic capability there for us to expand into. From an acquisitive perspective, more broadly, that's not a priority. Just to echo David's point, protecting our balance sheet and operating through organic growth we see as being the right thing to be doing over the short term. Great.

Thanks very much. That's very helpful, Carla.

Thanks, Phoebe.

Thank you. We will now take our last question, and the question comes from Michael Altwood from Citi. Please go ahead. Your line is open.

Hi, good morning. Hi there. Thanks for taking my question. I've just got a couple left, if I could. Just wondering, you clearly made great progress on disposals in 2020. Could you maybe just give some colour as to whether we should expect any further smaller disposals in 2021, or is it now more likely to see wood go back to more of a bolt-on M&A opportunities. And then just secondly, on North America shale, it feels like the public EMPs are retaining sort of financial discipline despite the run-up in oil prices, probably more activity in the private side. I know you're not as early cycle of some, but I just wondered if you could give a bit more colour as to your customer discussions in the North American shale market. Thanks.

In terms of disposals, we've one very small active process just now that is likely to conclude shortly, but it's very modest. We do continually look at our portfolio and take decisions accordingly, but we've no other processes that are running just now, so there's no beyond that small disposal, I wouldn't have any expectations in the short term. In terms of going forward, as Robin touched on, we do see portfolio optimization as part of our business model. At the right time, we do want to get back to those bolt-on acquisitions, and we'll do that when we feel comfortable doing it from a balance sheet perspective and, you know, having the right targets. In terms of U.S.

shale, do you want to... Yeah, just in terms of shale, Michael, yeah, we're seeing it fairly depressed coming into the year. As you say, there is a pickup in oil price. I think that will sanction some incremental investment. You know, rig count is beginning to show signs of improving oil in that regard, but it's from a very low starting point, as I think everyone recognises. It did decline through 2020 quite significantly from our perspective, but it's still material. You know, we still have a pretty material footprint in shale, and we probably view ourselves as one of the go-to organisations that go across the basins. Our prediction would be it'll be the same basins that have activity first, you know, the Permian largely. being first out of the blocks just by the economics of it and the infrastructure that's now in place around it. But, you know, we're certainly not predictive of a spike in any way in shale activity in 2021 as we're looking at things just now in terms of our opportunity pipeline and the active players there.

Okay, thanks so much.

Thanks, Michael.

Thank you. I will now hand the conference back to you for closing remarks, sir.

Yeah, no, thanks for the time today, everyone. It's been, again, a bit artificial with the recorded presentation. Hopefully, I won't count my chickens, but we may well be doing the mid-year in person, but we'll see what happens between now and then. But thanks for the attendance and the questions. Hopefully, that's added a fair bit of colour to the results themselves. Thank you.

Thank you. That does conclude our conference for today. Thank you for participating. You may all disconnect.