John Wood Group PLC

Good morning everyone and thank you for joining our half year results presentation. I'm optimistic by the time it comes to delivering our full year results we'll be able to meet again in person but until then I hope everyone remains safe and well. As always I'll take you through some opening remarks before passing over to David who'll take you through their financial performance for the first half of the year. I'll then close the presentation with a focus on two areas. the steps we've taken to ensure that we're fighting fit for the future, and the impact this has already had in unlocking growth opportunities this year. So by the end of today, I hope you'll be encouraged by our margin delivery and the demonstrable growth momentum underpinning a healthy medium and long-term outlook for the business. Firstly, some brief reflections on the first half performance. Whilst the pandemic did continue to cast a shadow in the early months of the year, actions we took to ensure our business was as efficient and effective as possible have been successful in offsetting the impact of lower activity on our margins. The resilience our people have shown throughout this period has also been absolutely outstanding. A low revenue of $3.2 billion was down around 23% on the first half of 2020, We've actually delivered margin improvements across all our business units. Overall, our EBITDA margin of 8.3% is 80 basis points up compared to the first half last year, equating to earnings of $262 million. Looking ahead, we see an improving picture in the second half and beyond. A large part of our optimism stems from the strong growth in our order book, which is up 18% compared to the end of last year with around $3 billion worth of work due for delivery in the second half and recent multi-year awards and operations given us visibility of revenue in 2022 and beyond. Growth in our order book has been led by consulting and operations and we're seeing encouraging signs that we're also now passing the inflection point for our projects business. Finally, We've made significant early progress on our future FIT programme. We're seeing the benefits of an optimised organisational design, improvements in our operating model and have already achieved $20 million worth of efficiency savings year to date, with a further $20 million anticipated in the second half. Before passing to David to go through our financial performance in detail, I'll take a quick look back at the journey we've been on and how this has shaped some of our current focus areas. This time last year, we were approaching the end of a three-year integration programme following the AMEC Foster Wheeler transaction. We took stock of where we were as a business and drew several conclusions. Firstly, our strategy to broaden the business across different end markets has proven to be the correct one, de-risking the business's over-reliance on the upstream market and priming us for future growth and value delivery built upon a highly skilled employee base across the globe. Secondly, we recognised latent opportunity to further unlock the power of the platform we built and to build upon our green-to-green capabilities that enable us to partner with clients across the entire asset lifecycle. Thirdly, we recognised the need to invest again in specific areas to accelerate growth. And lastly, we acknowledged the need to be even more disciplined around operational excellence and narrow the range of delivery outcomes as we completed the legacy projects portfolio process. This prompted us to take two important steps to help accelerate delivery of our strategy and to unlock sustainable growth in the future. We reinforced our focus on energy transition and sustainable infrastructure as primary growth areas and in doing so placed ESG at the very heart of our business strategy by committing to a stronger set of sustainability goals. We also launched Future Fit, our 18-month programme to transform our operating model, deliver near-term efficiencies, accelerate future skills development and secure medium and long-term growth in the markets where we see the greatest opportunities for wood. My focus in the second half of today's presentation will be to show you how these steps have enabled us to enhance efficiency and performance today and put us on the path to sustainable growth. Firstly, however, I'll pass over to David to take you through our financial results in some more detail.

Thank you, Robin, and good morning, everyone. Our H1 results reflect improving momentum and activity and good margin performance across the business. Revenue of £3.2 billion was down around 23% as the ongoing impacts of COVID-19 continued to create challenging market conditions. Around half of the reduction was in process and chemicals, as major projects completed. We saw strength in the built environment, relatively robust activity in renewables, and although conventional energy activity was down, revenue reflects improving market conditions. In Q2, we saw improving momentum and activity with a return to growth in both consultancy and operations, and we expect that momentum to continue in the second half as the group as a whole returns to growth. We delivered EBITDA of 262 million and strong margin improvement with EBITDA margin up 80 basis points to 8.3% with a significant improvement in our projects business. Our focus on high utilization, delivering efficiencies, including those from our future fit program and improved project execution have been key to delivering stronger margins in all three business units. Group margins are also benefiting from improving business mix, with a greater proportion of revenue from higher margin consulting activities. Overall, against the backdrop of challenging activity levels, we are pleased with the improving momentum in the business and delivery of increased margins. Revenue has reduced by 23% compared to the prior period, with COVID-19 impacting activity. Obviously, the first quarter of 2020 was largely unaffected by the pandemic. The main driver of lower volumes in the first half was our projects business. We complete a number of large projects in the first half. The impact of the pandemic on new awards during 2020 and 2021 has resulted in them being replaced with smaller earlier phase scopes. Additionally, our lower risk appetite in being selective over the EPC scopes that we bid has contributed. After accounting for the 61 million revenue impact of the disposal of our nuclear business in Q1 2020, consulting activity was robust. We saw growth in built environment activity, which accounts for over 65% of consulting revenue. Activity was robust in renewables and other energy, including assessments and studies in renewables and decarbonisation, which positions us well as these projects advance. Consulting activity grew in the second quarter compared to 2020, reflecting improving momentum. Revenue in our operations business was relatively resilient after adjusting for a reduction of £12 million related to the disposal of our industrial service business. In operations, we have seen reduced activity in Q1 2021, but growth in Q2 as market conditions and conventional energy improve. Against the backdrop of challenging market conditions, we've made strong progress towards our medium term strategic margin target of 9.6%. Group margins increased by 80 basis points with improved margins in all of our three BUs. The EBITDA impact of businesses disposed during 2020 principally nuclear and industrial services, was £9 million. In addition, EBITDA and investment services reflects benefits from closing out legacy issues in 2020 and additional costs in 2021 towards the completion of the AGES project. The earnings impact of lower volumes was largely offset by improved margin performance in all three business units. This was driven by cost efficiencies, including £20 million from our Future Fit programme and improved project performance. Group margins have improved 80 basis points despite challenging activity levels. Projects margins have improved significantly up 220 basis points benefiting from efficiencies as well as improved execution and a lower risk portfolio. We've been very focused on replicating the exceptional execution we have in large parts of our business across everything we do. Our recently established operating committee is embedding standardised project delivery frameworks and enhanced project governance throughout our organisation. We are already seeing the benefits of this in terms of improved execution. In addition to this, we have continued to focus on ensuring the appropriate level of risk and reward in our portfolio. As we've worked off a number of fixed price projects, we focused on securing new work that is in line with our measured risk appetite, which will also be beneficial in delivering more consistent outcomes. Although the most significant margin improvement was in projects, we have delivered improvements in all three business units in the first half. In consulting, we have built on an already strong margin, delivering a substantial increase of around 100 basis points through our focus on maintaining high utilization and efficiency improvements. Operations margin also improved reflecting continued good execution and efficiencies. The impact of higher margins at business unit levels is amplifying the impact of our improving business mix as we deliver against our strategy. Our actions to better position our high value consulting capabilities into a more efficient global and industry leading offering are reflected in our revenue portfolio. In the first half of 2021, 28% of our revenue was from highest margin activities in consulting compared to 24% in the prior period. Our flexible asset-like commercial model is fundamental to our investment case. Our track record of leveraging our cost base was crucial to our ability to respond quickly and decisively to the unique market conditions in 2020 as a result of the impacts of COVID and oil price volatility. In April 2020, we initiated a number of actions which reduced our overhead costs by £230 million in 2020. In 2021, the additional full year benefits of actions taken in 2020 is offset by the unwind of some temporary measures. However, the 230 million will be supplemented by efficiencies we anticipate from our future FIT programme of 40 million. Although we see market conditions improving, our ability to drive efficiency through our cost base and maintain utilisation at high levels is one of the key drivers of margin improvement in H1 and creates a platform for further margin expansion in line with our medium-term margin target of 9.6%. Turning to the cash flow, net debt has increased by 261 million, largely driven by a working capital outflow of 237 million, which I will cover in detail in the next slide. Cash from operations is an outflow of 107 million and is stated after provisions of 59 million. The impact of provisions is lower than in H1 2020 due to the closeout of legacy issues. Cash exceptions of 46 million include payments in respect of the settlement of legacy investigations and costs related to the delivery of our future fit programme and costs related to prior period onerous leases. Payments for CAPEX and intangibles includes investment in our digital capability, and the resumption of our ERP programme. Overall, expenditure was lower than H1 last year as our disciplined approach to discretionary spend continues. Overall, our net debt was around £100 million higher than expected, with working capital outflows higher than anticipated. This was principally due to receipts due in June being received in July. Overall, we had a working capital outflow of £237 million in the first half, Receipts were lower than anticipated with an outflow of payables in line with reduced project activity. Working capital was also impacted by the expected unwind of advance payments of 61 million as large EPC projects completed. Looking at the full year expectations for net debt, we are confident of delivering a reduction in H2 with a significantly improved working capital performance and improved profitability offsetting the impact of exceptional items in the second half. Exceptional items in the second half will include 60 million of further investigation settlements and future fit costs of 15 million. Working capital will benefit from our typical H2 inflow, the impact of timing of receipts reversing in H2, and an advances build in line with project awards. Improving activity levels and momentum in our order book give us confidence of delivering stronger profitability in the second half. The effect of this and lower net debt is anticipated to deliver a reduction in net debt to EBITDA from the current level of 2.9 times. As we look forward beyond 2021, leverage will continue to benefit from the growth in profitability, lower exceptional cost and the resolution of legacy issues improving cash generation. Our confidence in delivering a stronger H2 and returning to growth is underpinned by positive momentum in our order book. We have seen good growth in order book, which is up around 18% on December 2020. New contract awards and positive scope variations have more than replaced order book delivered as revenue in the first half, giving a book to bill ratio of around 1.4 times. Momentum in Orderbook reflects improving conditions in our core markets. Good growth in consulting, up around 15%, has been driven by strength in the built environment and momentum in energy. Projects Orderbook is down around 3% compared to December 20, but we are encouraged by both recent awards across all our markets and projected second half awards. Operations Orderbook reflects improving demand in conventional energy. with recent growth in order book reflecting the renewal of a number of multi-year contracts and new wins. And these include significant contract awards, such as our five-year specialist engineering contract for a major oil field in Iraq and a late-life asset solutions contract at a UK gas field. Our current order book reflects a lower risk profile in our portfolio, As we have completed larger EPC contracts, particularly in process and chemicals, we have continued to be selective in our bidding for new work. We are focused on ensuring new work is in line with our measured risk appetite, and combined with our focus on execution excellence, will deliver predictable margin outcomes. Around 78% of our order book is now reimbursable, with only 3% from fixed price work over 100 million. Order book of 7.7 billion at 30th of June is up 18% since December 20. Around 3 billion of the order book is due for delivery in the second half, giving us good visibility over 2021 full year revenues. Around 4.7 billion relates to activity beyond 21, laying strong foundations for 2022 and beyond. The building works secured for delivery in 2022 and onwards includes a number of EBC awards and projects secured during June. Early phase activity on these will commence in H2 with the majority of the work to be delivered in 2022. It also includes renewals of multi-year contracts and operations across the Americas, Europe and Asia Pacific. Looking in more detail at projects, we believe we have seen the inflection point in Orderbook. In our projects business, H1 Orderbook reflects the impact of large fixed price contracts in our portfolio completing. However, this has been offset by improving momentum in awards throughout the first half, such that Orderbook is now broadly in line with December 2020. We're encouraged by the mix in our order intake, These include early stage concept and feasibility scopes, which position us well for follow on work as the projects advance and EPC scopes aligned to our measured risk appetite. New awards in the first half have been spread relatively evenly across our core energy markets. We are seeing awards from growing investment in both hydrogen and decarbonisation of assets. In addition, early stage feed scopes in conventional energy are an indicator of activity increasing in anticipation of growing global demand. Looking ahead, we are seeing encouraging trends in bidding and opportunities and expect momentum in awards to continue into the third quarter. In summary, we have a high quality and improving projects order book that reflects a lower risk profile. Looking to the full year, improving activity levels in Q2 and growth in our order book is giving us confidence in delivering a stronger second half, which will represent growth compared to the second half of 2020 and to the first half of this year. Overall, our outlook is unchanged. Activity and projects will be lower due to the completion of large process and chemicals projects. This will be offset by growth in consulting as built environment activity continues to be strong. In addition, we expect growth in operations as activity levels in conventional energy improve. EBITDA margin in the second half is expected to be up on the first half, reflecting increased utilization in some parts of consulting due to seasonal business, as is typical, and a further 20 million of future fit efficiencies. We expect to make further progress towards our medium-term target of 9.6% and anticipate full-year EBITDA margin to be strong, up around 50 basis points on 2020, reflecting high levels of utilization, improved project execution, efficiency improvements, including 40 million of savings from future fit, and our business mix weighted towards higher margin consulting. Looking further ahead, improving momentum in our activity levels and strong growth in order book are laying strong foundations for activity levels and operational cash generation into 2022. In summary, although the ongoing impacts of COVID-19 have continued to create challenging market conditions and impact on our revenue in H1, we're encouraged by improving momentum in activity in Q2 and good growth in order book. We're really pleased with our improved margin performance. Our strong focus on delivering efficiencies, improved project execution, and maintaining high utilization, together with improving business mix, has more than offset the impact of lower activity. Strong growth in order book reflects good momentum in awards, which is delivering a lower risk profile, as new awards, in line with our risk appetite, replace large fixed price contracts completing in H1. Positive momentum in Q2 activity and order book underpins our confidence in returning to growth in the second half relative to both the first half of 21 and the second half of 2020. The order book momentum also lays strong foundations for 2022. Full-year EBITDA margin will reflect further progress towards our medium-term target of 9.6% and we're confident of delivering a net debt reduction in the second half. And we'll now hand over to Robin. Thank you, David.

I'll start with a brief recap of our FutureFit programme. At its core, it has got three primary components. Firstly, unlocking stronger medium-term growth through a simpler organisational design and a concentrated focus on select markets where we believe wood has a differentiated offer. Secondly, driving efficiency savings through operational excellence. And thirdly, value creation through investment in digital solutions and future skills. I'm very pleased with the progress we've made so far. The programme is already delivering benefits with $20 million worth of EBITDA efficiencies in the first half of 2021 and more to come in the second half, and it will deliver value across a range of areas in the medium term. Over the next few slides, I'll touch on some of the outcomes FutureFit has helped to deliver and how they relate to our growth agenda. We prioritised a select number of markets to pursue accelerated growth and have seen excellent progress in each area. And I'd like to call out a few examples. In the first half, we secured over 30 distinct hydrogen contracts. For me, the two exciting elements here are the breadth of the different scopes that we've delivered and the future opportunity that we can see building. We're actively tracking over $600 million worth of hydrogen-related opportunities in our unfathomable pipeline and recently signed as a steering member of the Hydrogen Council, which puts us at the heart of industry-led debate and thinking in the role of hydrogen and how it will play in the net zero future. We've also signed an extremely exciting teaming agreement with Honeywell UOP to combine our respective technologies to deliver carbon-neutral aviation fuel. That will allow the aviation industry to decarbonize. We're hugely excited about this. Just think about it. Jet one spec fuel with zero carbon footprint. Similarly, on carbon capture and storage, we secured over 20 distinct awards in the first half of the year. We've got over 80 opportunities at Unfettered Pipeline, and that's valued at $500 million. The projects we're working on are industry-leading, including the world's largest carbon capture and storage project covering multiple studies in the US that's potentially capturing up to 10 million tonnes of carbon annually. In renewables, we doubled the size of our business in 2020 and see good opportunities in our order book. In our solar and wind business in the US, we've developed a new proposition based on standard block design and lean execution methods, which is already differentiating us and opening up new markets and wins like the Nevada Gold contract that I'll touch on later. The integration of renewable energy and industrial projects is also emerging as a strong growth theme within our future pipeline. With a strong track record in this space, as evidenced by our work in Oman with Shell, where we delivered the first utility-scale PV solar project in the Middle East to cut emissions from an industrial facility. Based on what we continue to observe in the market, we're confident that this carbon reduction trend is a generational shift and a multi-decade growth opportunity. The exciting bit is we're already right at the heart of it, providing the solutions that will deliver this low-carbon future. We're also building some valuable partnerships in the digital and technology space. I'd like to share a couple of great examples that showcase how an investment in digital solutions is driving added value for wood and for our clients. Earlier this year, we formed a new alliance with Aviva, a global leader in industrial software, to develop a connected build solution that uses digital twin technology to drive improvement in design, work, and industrial sectors. We're applying this in projects today, including EPC work and a chemical project in Texas where it's helping to reduce operational costs, energy consumption levels, and wastewater volumes. The other example I'll reference is a collaborative agreement we've signed with Microsoft to give 7,000 of our field workers access to their suite of connected worker apps. These are delivering a range of benefits. For example, the technology allows field technicians to connect to the right experts across a global business so they can discuss life challenges and projects and real-life decisions. This saves both time and money and crucially allows us to bring our very best insights to our clients where it's needed most. Another factor that will be fundamental to our future growth is the breadth of our capabilities. Our ability to provide solutions that span decarbonisation, energy transition and sustainable infrastructure is an offering that few other companies can match. Many of our projects represent the world's firsts or largest or cutting edge solutions. Tell you straight my points, here's a quick snapshot of just some of our contract wins in the first half of this year. Owners engineer in Europe's largest single site onshore wind farm. Reducing the carbon footprint of offshore activities for clients like Equinor and Spirit Energy. Shaping decommissioning strategies in Australia. Cutting edge blue hydrogen production in the Middle East. Delivering the UK's largest waste to energy project in London. And finally, building resilient and future-proofed infrastructure across the US. I could go on, but suffice to say I'm very proud of the diversity of work we're delivering across the globe, and it really differentiates the Wood proposition. As I highlighted earlier, ESG is at the very heart of our business. Earlier this year, we committed to a stronger set of targets to measure our performance against our sustainability strategy, and we're making good early progress. In 2020, we delivered an 8% reduction in our scope one and two carbon emissions, a strong start towards our goal of a 40% reduction by 2030. We currently have over 30% of female representation in senior leadership roles compared to our target of 40% in the same timeframe. More recently, we've also taken strategic steps aligned to the delivery of our purpose. A good example is the work we are doing with Global Goals to engage with stakeholders to promote the importance of achieving UN Sustainable Development Goal number seven around clean and affordable energy. And that's as part of the wider commitment to accelerate the energy transition. I'll now step through each BU in a bit more detail and provide some colour to the near and medium term growth prospects we're seeing. Before doing that, this slide provides a helpful reminder of the shape of our business today. In very simple terms, it's a balanced and well-diversified portfolio. We've got four end markets across energy and the built environment. We've got three complementary business lines that offer green-to-green solutions across the lifecycle of a project. Starting with consulting, in the first half, this business delivered nearly $1 billion worth of revenue and a very strong EBITDA margin of 12.1%. In many aspects, it already reflects the strategic direction of Wood. Premium reputation, differentiated capabilities, high margin returns and solutions for clients across all of energy and the built environment markets. Our order book is strong, up 15% compared to December 2020, with about $1 billion worth of revenue due to be delivered in the second half. Our activities in both energy transition and the built environment markets have been strong, and we expect this to continue. And book to build in June was 1.3 times, giving us confidence of delivering further growth in the second half. We've secured some great wins today. In 2021, which aligns squarely with our strategic focus areas in our consultant growth plan, we already have strategically important senior appointments aligned to key growth areas, including our Vice President of Hydrogen and a Global Director of Decarbonisation. Moving on to projects, this is a part of the business that really has been most impacted by the uncertainties created by the pandemic. But there were still some strong positives to take in the first half of the year. We delivered revenue of $1.2 billion and, as David highlighted, a significantly improved EBITDA margin of 7.5%. This is a full 220 basis points margin improvement on the first half of 2020. From an order book perspective, the early months of the year were relatively quiet as investment decisions continued to be delayed. But through Q2, we've observed encouraging signs of growth and we anticipate this to continue in the third quarter and in 2022. And in line with improving order intake, we're seeing improvement in our book to bill, which has steadily grown through the end of the first quarter into Q2 and is now just before one. We're also pleased with the level of diversification in our order book, reflecting the balance of exposure in our projects business across renewable and other energy, processing chemicals and, of course, conventional energy. As with consulting, we're pleased with the quality of projects we've secured this year and how well they align with our strategic priorities. And finally, operations. This delivered circa a billion dollars worth of revenue in the first half of the year and an adjusted EBITDA margin of 10.7%. Our operations business is typically characterized by long-term contracts with clients who hold enduring relationships with us. This means it delivers stable, predictable returns, largely OPEX-orientated in origin, that provide a helpful counterbalance to some of the more cyclical parts of our business. The order book on operations is excellent, up 34% compared with December 2020, with about $1 billion worth of revenue due to be delivered in the second half. Our strong book-to-bill rate of almost two times reflect our excellent customer relationships and market position, enabling us to secure renewables and multi-year contracts and very encouragingly to continue to win work from our competitor set. This has also given us good visibility over future revenues with the majority of order booked due to be delivered from 2022 onwards. While the majority of revenues and operations still come from conventional energy projects, we are making good progress in diversifying this business with new ones in power generation and activities related to reducing the carbon intensity of conventional energy assets as well as late-life asset solutions. I'll now talk a little bit more about the key themes in our end markets which link to our BU growth plans. For consulting, in energy transition, industrial decarbonisation and the integration of renewable energy into industrial facilities is a key near-term focus area and we're already winning significant work in this space. In sustainable infrastructure, we're recognised as a leader in climate resilience consultancy in North America, And we will continue to capitalise on the stimulus spending with around $900 billion worth of US infrastructure bill well aligned to core areas of our expertise. In projects, investment in renewables will continue. As mentioned earlier, we're investing in standard block design and lean execution capabilities building on our early market entry and strong positions. Economic recovery will be positive for downstream investments and we see significant opportunities in biofuels and biorefining. This development of more sustainable fuel solutions will be vital for a range of industries to meet their net zero targets. Energy transition will impact capital investment in developing new assets, but we're already seeing significant opportunities around decarbonising conventional energy and industrial activities as well as on process and chemical facilities. Finally, in operations, conventional energy will remain a material part of the energy mix for some time to come, and returning demand will see an uptick in activity levels. The type of work will continue to evolve with a strong focus on cost optimisation, emissions reduction, digital solutions, late-life management and decommissioning of mature fields. Our long-term relationships means that we will be a partner of choice in helping IOCs as they evolve into IECs that work across the conventional and low-carbon energy markets and projects. Where IECs divest their interest in the mature basis to independent operators, we also expect to see more demand for integrated asset management services, industrial and power facility modifications across the energy market will focus on both carbon emission reduction and modernisation, creating opportunities for our operations business. I've just spent a bit of time walking through the outlook for HBU, but for me, the real power comes when we collaborate. Let me share a few examples of collaboration wins in the first half of the year. In the US, our projects and consultant team have worked together to win Nevada Gold, where we will deliver a 100 megawatt solar plant, and that will result in a zero emissions mining project. In Asia Pacific, our operations team have opened the door for our consulting team to carry out asset integrity and decarbonisation studies to help an operator client reduce their emissions associated with offshore activities. And finally, in the Middle East, our consulting and projects teams have worked with ADNOC to deliver the pre-feed-in design for a cutting-edge blue ammonia project. This ability to cross-pollinate opportunities and pool expertise will continue to be a differentiator and a foundation for future growth. To close, I'll just reiterate the key highlights. In the first half, we were pleased to have delivered strong margin improvements across all parts of our business. We're very encouraged by the growth we're seeing in our order book and are confident to returning to full growth in the second half of this year. We're reaping the benefits of future fit. It's delivering exactly what we wanted it to, and there's more to come in the second half of 2021 and into 2022. We have an increasingly strong ESG position, and our breadth of capabilities means this will grow even further in the future. It's been an unprecedented last 12 to 18 months of challenge, but we've come through it well. We're energized about the future as we enter a compelling growth phase. With that, I'll now close and invite any questions you may have.

Thank you. As a reminder, if you wish to ask a question, you need to press star 1 on your telephone. To withdraw your question, press the hash key. Once again, if you wish to ask a question, press star 1. And your first question comes from the line of Nick Konstantakis from Exxon. Please ask a question.

Good morning, guys. Thank you for the information, the presentation, and the incremental color of the division. It's very, very helpful. A couple, if I may, please. Firstly, clearly very strong momentum in new energies. I appreciate the color on your commercial success there. I think you break out 35% of revenues in renewable and other energy. Can you just help us understand the quantum of the two, i.e., the pure renewables and the other energy? And just discuss, if you could, how you're thinking about renewables, you know, evolving in the mix over the next, you know, five years or so, the medium term. Then could you please discuss a little bit the status of AEGIS? It feels like completion slipped a bit from December into by mid-2022, so can you just give us some color there? And then lastly, Could you just help us a bit understanding the exceptionals in 2022, just so we understand a little bit the cash momentum that we are talking about, how to think about it in clean terms? Thank you.

Okay, why don't I take the exceptionals and the ages question and let Robin talk about the momentum around new energies and renewables. In terms of ages, we're currently anticipating completion to be in August 2022. And that has slipped largely due to COVID. There's been difficulty in getting effectively US teams into Poland because of COVID. And so that's delayed commissioning work and stretched out the completion date. So we're into the final phase of it, but it is delayed. In terms of the exceptionals looking forward to 2022, We do expect to see a rundown in the exceptionals as we move from 21 to 2022. You know, the most significant item we have this year is obviously the regulatory payments of $70 million. That will reduce down to $40 million in 2022 and will be $40 million in 2023 and 2024 as well. So that will drop down. In 21, we've also got the closure of an office, which is roughly about $20 million, which we've no plans in 2022 at this point for an office. In terms of future fit, again, we've got a significant exceptional in terms of future fit in 21. We'd expect that to be much less significant in 2022. Programme is an 18-month programme, but largely exceptional relates to the redundancy and reorg costs, which have happened in 21.

Just picking up on your renewables and other energy question, Nick, we don't break it down into component parts, and one of the reasons for that is there's an increasing bridge right across decarbonisation, alternative energies, carbon capture and storage, and the renewable energy alternatives. In terms of the scale and pace of it, however, we really are encouraged. We did a trial today in the presentation. We're seeing a pipeline that's got over a billion dollars worth of carbon capture and storage and hydrogen projects combined. That has grown exponentially in the past 18 months, even in the past 12 months, and we've been very active in that area. And frankly, a number of clients now, when they do look at assets, either existing stock and look to decarbonize it, there's usually a bit of a blend in terms of the range of solutions. Sometimes we've got, you know, we trailed our Middle Eastern solar project for Shell, and we're doing electrification offshore using renewable wind generation for Equinor. Increasingly, that decarbonisation scope on existing stock revolves around a carbon capture and storage element. It may well be part of the decarbonisation right through to process optimisation, reducing flaring and venting from the industrial asset, and or electrification through renewable sources. So I say we keep them together and try and just simplify it by capturing it from the four market prognosis that we provide. What we are probably seeing, and it might help you just in terms of your modeling, we are actually seeing material projects coming through in some of these renewable areas. We've always had it in solar and wind, particularly in North America, but we are actually seeing that billion dollar plus on CCS and hydrogen obviously relates to, you know, material projects as well as study work and front-end design work. So that's an increasing activity level that's a bit broader we see coming through. Thank you. Thanks, Nick.

Thank you. And your next question comes from the line of Victoria Makulath from REC. please ask a question. Morning.

Morning. Thanks very much for your time this morning. If we could just start on the net debt and go a bit more into detail, I guess, in the second half of the year. You've talked about the, obviously, offsetting the exceptionals number in the second half from operational improvement and also the working capital reversing. By my numbers, that's £175 million, which is you know, a big improvement. Should we expect to see more than that? I can't quite tell if you were suggesting that, you know, we should see more than that coming out in terms of advances and for the sort of momentum and awards that you've secured in the first half of the year that's starting the second half, we should see there. And secondly, if we could kind of, I guess, as an extension of this, obviously your margin guidance for the second half of the year is significantly higher, not only in the first half of the year, but the last year as well. This is obviously higher consultancy work combined with future fit. How sustainable is this, particularly given, you know, the operations, you know, I guess the new awards and sitting in your backlog of operations is of a higher proportion? And, you know, if I can ask an additional follow-on to that, how are you seeing in terms of these sort of energy transition opportunities, what do the margins look like? Where do they sit on a relative basis to, you know, are they closer to consulting margins, or does it really depend on where the work sits within your business?

Okay. A few questions there, Victoria. So I guess in terms of the net debt guidance, you know, overall, we expect net debt to reduce in the second half from where we are now. And really the drivers of that are going to be the improved profitability. You know, we expect to return to growth in the second half relative to the first half and also relative to the second half of last year. And so that improved profitability will come through in our cash flow. We also expect a working capital inflow. And that inflow is going to be driven by principally three elements. So firstly, you know, we normally expect a second half inflow. You know, December is typically a lower activity type month for us. You know, we do have a seasonal element to our business where we typically build working capital into the summer. So, you know, we'd expect our normal 2H inflow. We'll also benefit from the receipts that we received in July that were originally due in June. And then the third component is around advances, as you picked up. In the first half, we had an outflow of $61 million as we completed some of the big contracts, such as YCI. As you've seen from the presentation, we're getting some good momentum behind our project order intake. We had a very good June. July looks another good month. And Q3, we've got you know, good visibility over potential awards. And so we would expect those, you know, such that they are EPC to generate advances. So we expect a positive inflow from advances in the second half. And that's largely reflecting the inflection point we've seen around projects order intake. In terms of, you know, where we end up, overall we expect the net debt to reduce We don't expect it to be lower than it was at the end of last year, but that helps in terms of coming to a gauge. And, you know, principally, the negative in the cash flow is around the exceptionals in the second half. We'll have about 60 million related to regulatory investigations that we've paid in the second half. We'll have about 15 million related to future fit. We've 20 million related to an office closure. that was booked as P&L in the first half and we'll pay the money in the second half. And then 16 million related to owner's leases that we've had from the prior period that are running down, that run out towards 24. In terms of the second part around the opportunity guidance and the sustainability, We do think our margins are sustainable and improving. We've seen good growth in the first half. We're up 80 basis points compared to 2020 first half. And for the full year, we expect a further increase in margins. I think when you look at the first half, second half margins, it's important to remember we do have a seasonal element to our business. And so we typically expect our our margins in the second half to be higher than our margins in the first half. And, you know, if you think around consulting, you know, consulting's a good example. Although it's consulting activity, you know, it is supporting, in many cases, you know, construction-type activities, so whether it's program management. So we benefit from increased utilization in the second half versus the first half. You know, our consulting business, typically their utilization is lowest in the first quarter. And some of that's weather-related, for example, in Canada. So if I look at it full year to full year, we do see those margins as being sustainable. We do have a medium-term target of 9.6%, and we've made good progress to it in 21, and we expect further progress in 2022. Some of the things are around future fit continuing to deliver and continuing to eke out efficiencies, particularly in operations and consulting. But the biggest opportunity we have around margin is in our projects business. Our margins and projects have recovered significantly in the first half. We're up to a 220 basis points, but we still think there's further room to go there. in terms of pushing up that margin. So over the medium term, we'd expect that to show the biggest improvement. In operations and consulting, frankly, we think we've got excellent margins in both of those businesses just now. There's more we can do, but the potential is less as we go forward. So in terms of relating that to new work, I think one of the things that's been consistent over the the pandemic period is we've not seen the same pressure on pricing. And so we probably, you know, there's a generalization to this. You know, we'd be fairly neutral about pricing across our business. In some parts, we think there's potential for uptick in pricing, you know, particularly in some parts of our consulting business. Equally, in things like U.S. Shale, we have had pressure on pricing. But generally, it's been a neutral pricing story over the pandemic period. So we've not been winning work at effectively lower margins. That's not been the story for us. And then I think your last question was around margins and energy transition opportunities. And I think you largely answered it yourself. It does depend on the type of activities that we do. You know, our margin in renewables and EPC projects is lower than in consulting. You know, in our consulting business, you know, we get excellent margins around, you know, studies, feeds, and those type of activities. So it does more relate to the type of service that we're delivering rather than the market that we're in.

Thanks. That's really helpful. If I can be really incredibly cheeky now, just one more thing. Where is the upside opportunity in projects? Is it delivery? Is it something you can add value in?

I think projects, there's a bit of a mix. Victoria, we've de-risked significantly the projects we go for, so actually we go into the project portfolio. I don't know if you've picked it up, but... When we first acquired Amate Foster Wheeler, we were about 65% reimbursable. That number this year is 80% reimbursable. So that's a significant shift that we've seen. From a project perspective, we're running off the remainder of the kind of large legacy projects there, which is why the revenue has been coming down. We're very selective in the market in which we approach revenue. We've been really pleased with the reorg that we've put in place, the operational excellence drive that we've got, the new OpCom with the chief operating officers really kept that focus. So that's been a big part of the driver. Firstly, we're selecting better projects with better commercial terms, and secondly, getting the outcomes globally. that we were always getting in the Eastern Hemisphere. We've effectively put that team across our entire portfolio across the globe. So that would be the two key constituent parts as to the projects improving.

Super. Thanks very much. Appreciate the excessive number of questions that I definitely allowed there. Thank you.

Thanks, Victoria.

Thank you. And your next question comes from the line of Mark Wilson from Jefferies.

please ask a question morning mark thank you good morning um yeah the growth in order book year today does seem to be largely driven by operations and therefore i'm thinking conventional energy awards regarding these contract renewals we mentioned in iraq is it fair to categorize um that my observation like that or are you actually adding new contract renewals in line with these decarbonization metrics that you've mentioned on some of the existing assets like in the Irish Sea? Thank you.

I'll maybe start and then let Robin add. I think, you know, we're really pleased that backlog's up 18%. I think it would be wrong to characterize it as being in operations. You know, our consulting business is up 15%, which we think is an excellent performance. It's been consistently growing throughout the year. And as we look forward, particularly in that built environment space, we think there's a very favorable macro coming down the line in terms of the US stimulus, where we think our capabilities align very well with where they're planning to spend the money. So we're really encouraged by where we are in terms of consulting, also in terms of the macro picture. Equally in projects, You know, we've added significant projects right across the energy spectrum, and you've seen that in our growth in order book in May to June. And we're encouraged, you know, with July, and we're encouraged with the projection for Q3 as well. So I don't think it's just an operations story. But if you look at operations, again, they've had an excellent first half. We've had several renewals, but we've also picked up new work. in conventional energy and also in processing chemicals.

Thanks for that, David. My follow-up actually is on consulting because, yeah, order book is up nicely there as you speak to. Revenue's slightly down on last year and also the headcount is as well in consulting. But you speak to some strategic appointments in certain growth areas, strategic growth areas. So would you expect consulting headcount overall to be increasing from here?

Yes, we do see a very healthy pipeline, Mark. Actually, if you look at where we are in our energy business, we've trailed well and I think quite clearly how enthused we are with the growth in both carbon capture, hydrogen, renewables, We're doing increasing studies across actually both operations and with our consultancy business on decarbonization of existing industrial clusters and energy assets. So I think that's quite an encouraging part of it. We've not seen any evidence to date of the stimulus coming through in the built environment market. And again, as you may know, our built environment business is orientated very heavily to North America and Canada. And we're very confident that that stimulus funding will see that market grow still further through the second half of this year and certainly into 2022 as the money cascades through the system.

Okay. Maybe one last final point. You speak to the headroom that your debt facilities have over $1.5 billion and yet We've accessed this UK-backed facility for 600 million. Obviously good to have the government backing on that, but I'm just wondering, is that facility at a lower cost than your existing RCF? Because I'm sure that is less than a 2% margin. That's my last question. Thank you.

Yeah, I'll maybe pick up the one on the UK facility. As you say, we've got quite a considerable headroom in terms of our facility. you know, we secured the UKF transition loan, which is a five-year, $600 million facility. Its margins are 165 basis points over a six-month LIBOR, USD LIBOR. We think it's a very attractive rate. It'll be part of our long-term refinancing. And so, you know, we're really pleased with the facility. We think it's a great endorsement of our transition plan and the transition our business has been going through. I know, Mark, you've followed us for a long time, and we've frequently said this. Back in 2014, we were 95% upstream oil and gas. Today, we're 35% attached to conventional energy, and even within that, a significant portion is around decarbonisation type activities, and we'd expect that to grow as we move forward in the future. so really pleased with the uk facility um we think it's it's well priced and it's a good facility at the same time we did retire 300 million of bilaterals and so we drove down the facility in july and we retired the 300 million of bilaterals in july as well okay thank you very much

Thank you. And your next question comes from the line of Amy Surgent from Morgan Stirling. Please ask your question.

Morning, Robert. Morning, David. So yeah, two questions from me, if I may. And thanks for all the detail in the presentation this morning. It was very helpful. So I guess just first on your sort of the winds in hydrogen and carbon capture, a lot of projects mentioned here. I guess if you could give any context on, I guess, how that compares to previous periods. And then also if you could just clarify what you mean by the unfactored pipeline, so this sort of $1 billion plus of unfactored pipeline. Is that something – is there a timeframe where you'd expect to see that? And then my second question – is around where you could potentially win EPC work that comes with those cash advances in the second half in the projects business. So where do you see those opportunities coming through? Thanks very much.

If we look at the wind, renewable energy, alternative energy, and the carbon capture, hydrogen, et cetera, I think there's a few overlapping circles on it, Amy, in reality. Where does it compare with previously? You know, at no point previously were we looking at a pipeline worth a billion dollars worth of hydrogen and carbon capture activities within it. So that to our mind is a significant barometer of where this market is going. We do think from the pandemic we were well positioned anyway. for energy transition, but we do feel the pandemic has accelerated that whole debate. I don't think it would even be arguable, you know, around decarbonisation, lower carbon intensity and alternative fuel sources and resources. So in that regard, we feel that's a good barometer of it and it's probably from a carbon capture and storage, from a hydrogen perspective, the market It looks like it's reaching high points. Probably the balance with that is the hydrogen is just a broader market, Amy. You know, for many years, grey hydrogen has been actually quite a key component part of the downstream footprint. What we're seeing now is increasing investment and dollars going into looking at, you know, light blue, turquoise, and green hydrogen. So the hydrogen rainbow, if you like, is much broader than it has been previously in the past. And just to remind you, we've got a 60-year heritage of steam methane reforming from a hydrogen perspective. You know, that's over 100-odd units sold globally in that period. So actually, we think we're very well-placed, not only with the playlist and track record of unlocking hydrogen as a fuel, but also in terms of our carbon capture and storage technology and thinking that we can apply there. In terms of the pipeline, we call it the unfactor pipeline. The way we look at our order book, Amy, we've got an unfactor pipeline, which is opportunities out there with a straight value attached to them. It's generally public domain and or certainly sector domain knowledge, you know, Customer X is project Y. This is the sort of scale of the project. What we then apply to it in terms of a wood perspective, we apply a go-get. What is the likelihood of a green light and when? And what's the competitive position? How likely are we to win it? That gives us what we call a factored pipeline. And a factored pipeline is a good barometer, again, of what we bid on. what our win rate is, and then what becomes backlog when you secure the individual contracts and component parts. So that's, if you like, the process of going from unfactored to factored to winning, tendering, and backlog. So we've called it the billion dollar. We thought the threshold on the unfactored pipeline was a significant one.

In terms of the second part of that question, Amy, around where would we get advances? As you know, it's typically on EPC activities, which are more likely to be lump sum for us. So if you look, Robin mentioned one in the presentation. Nevada Gold is a project we signed in June. That's an EPC activity. Renewables is an area. we would expect more awards in the second half. Equally, in markets such as minerals, so one of the areas of our business that's seen good growth and we have good expectations across the short and medium term is effectively in our mining and minerals business, where again, we've seen a high demand for effectively transition minerals feeding through into our activities. Equally, life sciences is an area where we've seen an uptick in demand. And again, some of that is related to the pandemic in terms of the reshoring of facilities. So I probably wouldn't narrow it down to one part of our business. Right across the energy spectrum, we've got some good opportunities.

If you look into 2022 EMEA as well, I think we've been quite clear. We do feel that conventional energy is part of energy transition, so it's good. And we talk a lot about the alternative energy pathways and our position in them. But from a conventional energy perspective, we envisage second half of the year, as the world opens up, demand will obviously increase in terms of conventional energy consumption. We think inventories will draw down first, and then we will see a demand-led increase in expenditure in our conventional footprint. That's probably a 2022 commentary and beyond, rather than a second half of 21, just for completeness.

Great. Thanks very much. All right. Very helpful.

Thank you. Once again, if you wish to ask a question, press the star 1, and to cancel, press the hash key. Reza, start one to ask a question. And your next question comes from the line of James Thompson from J.P. Morgan. Please ask a question.

Morning, James. Hey, morning, David. Morning, Robin. Yeah, a couple of questions for me, please. Firstly, just on the 2021 guidance in terms of revenues, obviously you talk about, I mean, firstly, thanks very much for the colour in terms of guidance, particularly in the divisions. I think that's helpful. Revenues, you talk about 6.6 to 6.8, but then you obviously talk about H2 2021 being above H2 2020, which given what you've done in the first half of this year suggests you're already at 6.7 billion for 2021 as a whole. So I just wondered why the range and should we sort of settle really towards the upper end of the range as you see it today, particularly with the backlog growing?

Yeah, no, we've given a range around revenue of 6.6 to 6.8. The bottom of the range there is largely would imply H2 is largely flat. You know, we've also given out effectively the revenue we have already booked for the second half. So, you know, we've got $3 billion in the order book. That gives us really good coverage over the second half. You know, we're comfortable with a range of 6.6 to 6.8. You know, clearly there is a range to that. You know, at the midpoint of that range, we would be growing versus the H2 of the prior year. And in all cases, we'd be growing versus H1 as well. So, you know, we're really comfortable with our revenue guidance. We're very, you know, we've talked a lot about order book on the call. And, you know, that's given us really good visibility over the second half. You know, we're in the low 90% of revenue coverage.

Yeah, indeed. Just sort of sticking with the order book, obviously a lot of colour in there. You know, you've emphasised the projects piece, which, you know, clearly looks pretty good in 3Q. I mean, getting my ruler out, it looks like somewhere sort of 900 to a billion of orders expected in 3Q in projects. I just wondered on the consulting and operations, you know, operations have been pretty good in the first half. Do you expect those to be pretty flat, sort of one times book in the third quarter? You know, just doing the math, I think if that project one comes through and the others are flat, you could be over $8 billion of order book for the first time, I think, probably since the first half of 2019. So are consulting and operations likely to stay relatively flat in the third quarter? Yeah.

We've not given out projections around order book, around consultancy and operations. Operations can be lumpy. We've booked multi-year renewals, which by their nature are lumpy. So we've not given a forecast around where we expect it to be in H2. We do think we've had a very good H1. We do think the macro environment and conventional energy is improving and has improved, particularly in our operations business. Robin touched on the project side of it. In terms of consultancy, the growth in our order book has been consistent through the year. We do feel as though stimulus is going to play a part in the future. I guess the timing is uncertain. We've been encouraged by some of the earlier indicators. We've had a lot of inquiries from agencies testing out effectively supplier availability and supplier capability, which is usually a good sign of effectively tenders coming out or placing of work under existing agreements. And so we're seeing the early signs of this. you know, the stimulus needs to be passed and it needs to feed its way through. So if I look at both of those, you know, we think the macro picture across all of our markets is actually looking promising. Stimulus, we think, is a big factor. But as Robin touched on, we see, you know, improving momentum in conventional energy as well.

Okay, thanks, David. And just one final one, going a little bit back to what Mark was asking around Liquidity, you know, with the order book improving, and as you just said, you know, pretty much all your own markets getting better, the outlook improving, you still need that $1.5 billion worth of liquidity. And following on from that, in the context of this new kind of energy transition low, you know, that has got some conditions attached to it in terms of your own kind of decarbonisation strategy and emissions and things like that. You know, when it comes to refinancing the RCF, I mean, it's due, what, 2023. Do you see an opportunity to lower your borrowing costs if you also attach some of these energy transition goals, which look very achievable, to that borrowing? Thanks.

Yeah, you know, as you picked up, our transition loan has a couple of KPIs attached to it. One, growing effectively our energy transition sustainable infrastructure business, which was already a key strategic objective for us And the second one around emissions, which was in line with our previous target. In terms of future financing and, you know, availability of financing, you know, having gone through the pandemic, you know, we've been pretty cautious around, you know, the availability of finances, I'm sure you can expect. You know, we are going to go through effectively, you know, refinancing over the next 12 months. Our RCF is is May 23, which gives us plenty of room. Clearly, we'll look to achieve the best outcome for the company in terms of financing costs. Maybe just to finish that, clearly ESG metrics are an opportunity to do that. We think we've got a great transition story that has played out over the last seven years and so you can see through the transition facility we think that's a very good financing facility but we're not we're not having to fundamentally change our strategy to achieve that our strategy has been about transition all right thank you thank you and there are no further questions at this time please continue Okay. If there's no further questions, then we'll perhaps wrap it up for the day. Thank you for your time. I guess in terms of the closing remarks, we are very pleased with the momentum we're seeing in our business right across our markets and the growth we've seen in consultancy and operations to date and the projected growth we see in projects. We do think we've We've seen some very good backlog growth, up 18%. And that momentum in trading and momentum in backlog gives us confidence around 2H and in terms of delivering 2H, but also positions us really well for 2022. So with that, I'll wish you all a good day.

Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.