Half year 2018 results

Transcription

1 Half year 2018 results

2 Cautionary statement This presentation may contain forward-looking statements. Forward-looking statements are statements that are not historical facts, including (but not limited to) statements expressing or implying Fugro s beliefs, expectations, intentions, forecasts, estimates or predictions (and the assumptions underlying them). Forward-looking statements necessarily involve risks and uncertainties. The actual future results and situations may therefore differ materially from those expressed or implied in any forward-looking statements. Such differences may be caused by various factors including, but not limited to, developments in the oil and gas industry and related markets, currency risks and unexpected operational setbacks. Any forward-looking statements are based on information currently available to Fugro s management. Fugro assumes no obligation to make a public announcement in each case where there are changes in information related to, or if there are otherwise changes or developments in respect of, the forward-looking statements in this presentation. 2

3 Highlights HY 2018 Strong revenue growth after three years of decline Supportive markets with strong growth renewables, gradual recovery oil & gas and continued growth building & infrastructure EBIT margin turns positive with significantly better performance of Marine division Some price recovery but continued oversupply & challenging pricing environment in offshore market Continued focus on price improvement, cost control and positive cash flow generation Strategy update to be presented mid-november 3

4 Financial highlights HY 2018 Strong revenue growth* Solid 12 month backlog % * * * + 3.1% 1,776 1, HY 2017 HY 2018 June 2017 June 2018 EBIT margin turns positive Improved, yet negative free cash flow EBIT margin (excl exceptional items) % 0.5% x HY 2017 HY 2018 HY 2017 HY * Corrected for currency effect (of around - 7% on revenues and - 2% on backlog) and for portfolio changes related to divestment of marine construction and installation activities in 2017

5 Recent projects - Marine Site investigations Hornsea, UK Hydrocarbon seep survey for TGS, Brazil Cost effective way of determining location and properties of hydrocarbon seeps from sea floor > 200,000 km 2 in Campos & Santos basins Reduces client s exploration cost and risk: Less seismic costs by more focused surveys Reduced exploration risk through improved identification of viable reservoirs Geophysical, geotechnical and unexploded ordnance (UXO) surveys for world s largest offshore wind farm De-risking of client s project: site characterisation and related advice deliver vital information for costing and design Gas hydrate research project, China Award by GMGS for gas hydrate exploration in South China Sea Assessment of reservoir volumes for China s 2 nd marine production test Fugro s 5 th campaign for GMGS 5

6 Recent projects - Land High-speed rail site investigation,uk ADNOC s Hail & Ghasha project, Abu Dhabi Site investigation work as part of design and construction preparation for Phase 1 of HS2 network Assisting Align consortium s design team to minimise ground risk and optimise foundation design Integrated site investigation for artificial islands required to develop UAE s largest gas reserve Cost reduction for client by optimised planning of O&G infrastructure and accelerated project schedule Project delivered safely, without incident, ahead of schedule and under budget Mapping Essential Energy s network, NSW, Australia Mapping overhead power lines, for maintenance and planning of new network Reduction in client s asset and vegetation management costs, better regulatory reporting and risk prioritisation 6

7 Markets improving in site characterisation, with regional differences Americas Growth in exploration (Mexico, Brazil, Caribbean, Canada, Guyana) Low activity levels US Gulf of Mexico Growth offshore wind on US North East coast New market of deep sea mining in Pacific Good North American infrastructure market South America building & infra activity up; continued recovery of mining sector Europe Higher activity in North Sea O&G E&P Oversupplied IRM market due to limited construction opportunities Offshore wind strong; asset integrity opportunity emerging Building & infrastructure market up Major projects moving forward in UK, despite Brexit uncertainty Africa More investments in O&G exploration Opportunities for seep studies Infrastructure markets still fragile in aftermath of low oil and mineral prices Mining picking up in Southern Africa. Middle East & India Continued investment by local NOCs in O&G Site characterisation market improving in Arabian Gulf Increase in major building & infra projects, boosted by oil price Mining activities increasing in several countries Asia Pacific Higher work volumes in O&G but margin pressure due to oversupply Offshore wind market gaining traction Hong Kong infrastructure market stagnating 7

8 Key priorities 2018 CLIENTS Strengthen commercial capabilities PEOPLE Increase engagement, training and diversity CASH Cost discipline and positive cash flow EXCELLENCE Standardise & digitalise services and work safely INNOVATION Launch commercially successful innovations 8

9 First observations new CEO Strong brand and technological platform Market leading positions and satisfied customers Unique ability to offer global and bundled services Professionalism and expertise of Fugro employees Results improving, yet further improvement clearly required Fugro has to become more resilient as oil & gas is cyclical Commercial acumen to be improved Acceleration of digitalisation and innovation targeted 9

10 Market update

11 Fugro s different market segments Revenue - % of group total FY14 FY15 FY16 FY17 HY18 oil & gas building & infra renewables * power nautical * mining other * until FY2017, renewables included in power, and nautical in building & infrastructure

12 Market summary Brent oil price reached highest level in 3 years US shale remains important for oil market balance, but further near-term growth is limited by infrastructure bottlenecks Offshore oil projects becoming more competitive and are required to meet demand growth Offshore project FIDs growing with positive impact on oilfield services expenditure as from 2019 Strong growth offshore wind, North America upcoming Building and infrastructure remains steady growth market 12

13 Key market indicators 2018 Steady growth world economy Brent oil price expected to increase significantly versus 2017 Offshore oilfield services expenditure bottoming out in 2018 Market forecast annual growth 2018 vs 2017 Global growth Brent oil price Offshore OFS expenditure +3.9% +24% -3% Strong growth offshore wind capex Building & infrastructure investments continue to grow Metals & minerals prices increasing Offshore wind capital expenditure Buildings & Infrastructure expenditure Metals & minerals price index +37% +8% +9% 13

14 mb/d USD/bbl Brent oil price at highest level in 3 years Brent oil price increased due to supply disruptions and Iran sanctions by USA OPEC+ agreed to ease production cuts to maintain market balance and prevent oil price spike Oil supply/demand development Brent oil price development Total Stock Change Total Supply Total Demand IEA 13 June 2018; Rystad Energy 5 July

15 Offshore projects becoming more competitive US shale remains important factor for oil market balance Cumulative peak oil production and breakevens for new developments Further near-term shale growth is limited by infrastructure bottlenecks Offshore offers many lower cost opportunities but with higher upfront cost and longer lead times Goldman Sachs 4 June 2018 Brent 27 July 2018 WTI 27 July

16 New offshore developments required to meet demand growth Current producing fields expected to decline by 14.6 mb/d as fields are depleting Global oil production 2017 vs New shale developments potentially add 12.5 mb/d, but constrained by infrastructure bottlenecks New offshore developments required to meet demand growth and compensate for depleting mature fields Rystad Energy 8 May

17 USD billions USD billions USD billions Offshore oilfield services expenditure to increase as of 2019 Increase in offshore project sanctioning activity expected to result in oilfield service expenditure growth from 2019 onwards Offshore FID* capex forecast 40 Rystad Energy 19 February * FID = final investment decision Conventional Shale Oil sands Offshore OFS expenditure forecast Exploration Development Production Decommissioning Rystad Energy 23 July 2018 Onshore OFS expenditure forecast

18 EUR billions Gigawatts (GW) Offshore wind continues to grow, North America upcoming Investment in new offshore wind farms continues to grow New offshore wind farms larger in capacity and turbine size Major regions are Northwest Europe and China Fugro involved in first offshore wind farms in USA, Taiwan, India Offshore wind capex forecast Offshore Annual wind offshore installed wind capacity installation forecast forecast Europe North America Asia India Europe North America Asia India 4C Offshore 15 June

19 Trillions Trillions Stable growth of buildings & infrastructure expenditure Growth in buildings expenditure largely driven by need for housing and commercial Infrastructure investments largely driven by need for roads, rail, energy and utilities Global infrastructure expenditure forecast Roads Rail Other Infrastructure Sewage Telecommunications Electricity and Power Oil and Gas Water Infrastructure Global buildings expenditure forecast Commercial Industrial Residential Institutional

20 Highlights HY 2018 Strong revenue growth after three years of decline Supportive markets with strong growth renewables, gradual recovery oil & gas and continued growth building & infrastructure EBIT margin turns positive with significantly better performance of Marine division Some price recovery but continued oversupply & challenging pricing environment in offshore market Continued focus on price improvement, cost control and positive cash flow generation Strategy update to be presented mid-november 20

21 Financials

22 Financial key take-aways EBIT margin turned positive and improved to 0.5% from - 3.3% in H1 2017; Q2 mid single digit margin Excluding higher working capital impact, cash flow up from - EUR 37 million H to + EUR 12 million Days of revenue outstanding improved to 88 days from 92 days in same period last year Net debt/ebitda 2.5, fixed charge cover 2.5 Outlook FY 2018 o o comparable revenue growth and marginally positive EBIT margin positive cash flow from operating activities after investments, dependent on revenue growth and related working capital requirements 22

23 Strong revenue growth and improved EBIT Revenue % * EBIT (margin) excluding exceptional items Capital employed 1,268 1,237 ROCE excluding exceptional items Cash flow X EUR million Revenue Growth boosted by global development of offshore renewables market and gradual recovery of O&G market EBIT HY 2017 HY 2018 Largest improvement at Marine as EUR 37.3 million loss was turned close to break-even Lower EBIT for Land partly related to EUR 6.1 million one off in H Seabed s revenue growth and EUR 5.2 million one off were partly offset by weather related project delays in Trinidad Capital employed Reduced due D&A in excess of capex and lower deferred tax assets Cash flow % HY % 4.0 HY 2018 HY 2017 HY 2018 Improvement resulting from strong revenue growth and related working capital requirements - 2.5% - 0.5% HY 2017 HY HY 2017 HY * Corrected for currency effect (of around - 7%) and portfolio changes related to divestment of marine construction and installation activities in 2017

24 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 Second quarter of revenue growth after 12 quarters of decline % -1% 0% 13% -2% Strong year-on-year growth -12% -22% -30% -20%-21% -23% -26% -13% -16% -20% -3% 3% 30% 774 Revenue growth in all divisions %* HY 2017 Marine Land Geoscience HY 2018 comparable - 99 Currency and portfolio effect X EUR million 797 HY * Corrected for currency effect (of around - 7%) and portfolio changes related to divestment of marine construction & installation activities in 2017

25 EBIT turns positive driven by improved results Marine division excl. exceptional items X EUR million -2-6 One-off HY * HY 2017 Marine Land Geoscience HY * Including EUR 5.2 million one-off related to sale of spare cable assets

26 Marine EBIT turnaround driven by strong revenue increase Revenue EBIT (margin) excluding exceptional items Capital employed Asset Integrity Site Characterisation % * HY 2017 HY % - 0.4% HY 2017 HY 2018 X EUR million Revenue HY 2017 HY 2018 Site characterisation up 44.2% reflecting higher activity levels in renewables projects globally and in O&G Asset integrity revenue up 12.8% due to due to more work under existing long-term contracts in Asia Pacific Vessel utilisation 5 percentage points higher than last year, driven by site characterisation EBIT Improved in most regions compared to H as result of higher revenue and cost reductions Strong improvement at site characterisation; asset integrity profitability is lagging revenue growth Capital employed Depreciation in excess of capex and lower DTA offset by intercompany reclassification of working capital between Land and Marine 26 * Corrected for currency effect (of around - 7%) and for portfolio changes related to divestment of construction and installation activities in 2017

27 Land division s performance close to last year Asset Integrity Site Characterisation Revenue 246 Revenue + 0.3% * HY 2017 HY 2018 * 231 One-off EBIT (margin) excluding exceptional items 4.9% 6 6 HY % 4 HY Capital employed 208 HY 2017 HY 2018 Growth in building & infrastructure revenue was offset by decrease in oil and gas from 11% to 7% of total revenue Site characterisation up by 3.5%, especially in Europe Asset integrity revenue down 10.3% mostly due to exceptional weather conditions in USA and Australia X EUR million EBIT Site characterisation: mid single digit margin, slightly higher than last year when excluding positive one-off of EUR 6.1 million Asset integrity: high single digit negative margin, below last year as result of lower revenue Capital employed Depreciation in excess of capex, lower DTA and intercompany reclassification of working capital between Land and Marine 27 * Corrected for currency effect of around -6%

28 Seabed: higher activity level Revenue % ** EBIT (margin) excluding exceptional items Capital employed X EUR million Revenue HY 2017 HY % 0 HY 2017 Seabed: 3 projects executed in Brazil, Nigeria and Trinidad EBIT 3.3% 5-3 HY HY HY 2018 Seabed: improved EBIT resulting from revenue growth and EUR 5.2 million one off related to sale of spare cable assets, partly offset by weather related delays at Trinidad project Capital employed Seabed: increase relates to investment in Manta nodes and higher working capital Other: EUR 23 million for indirect interests in Australian exploration projects, partly offset by other provisions and payables One-off Seabed Other * * * Corrected for currency effect of around -10% * * Indirect interests (via Finder Exploration) in Australian exploration projects 28

29 Lower net finance costs x EUR million HY 2018 HY 2017 Finance income 4 3 Interest expenses (19) (21) Exchange rate variances (17) (17) Finance expenses (36) (38) Net finance costs (32) (35) Interest expenses Interest expenses decreased by EUR 1.9 million Paid interest up from EUR 12.6 million to EUR 14.0 million, due to higher average debt despite lower average interest rate Other expenses decreased mainly related to reduced amortisation as result of early repayment USPP loans Exchange rate variances Mainly related to devaluation Angolan Kwanza 29

30 Increased working capital in line with revenue growth Working capital x EUR million HY 2018 HY 2017 Working capital of which inventories of which trade & other receivables of which trade & other payables (390) (345) Working capital as % of revenue Working capital improvement Good collection and billing performance resulted in improvement in DRO from 92 a year ago to 88 Due to strong revenue growth, working capital as % of 12 months rolling revenue, grew to 14.6% in Q2 Working capital as % of annualised Q2 revenue is 12.5% Days of revenue outstanding 18.2% 16.4% 15.3% 11.9% 15.2% 10.9% 12.6% 11.0% 14.6% HY14 FY14 HY15 FY15 HY16 FY16 HY17 FY17 HY18 HY14 FY14 HY15 FY15 HY16 FY16 HY17 FY17 HY18 30

31 Positive cash flow excluding impact of higher working capital Cash flow from operating activities after investments was negative resulting from strong revenue growth and related working capital requirements Excluding impact of higher working capital, cash flow was positive and significantly above HY Cash flow 1H 2018 Cash flow H X EUR million Free cash flow excluding changes in working capital Changes in working capital -44 Free cash flow Free cash flow excluding changes in working capital Changes in working capital -66 Free cash flow 31

32 Well within covenants and good liquidity Net debt/ EBITDA Debt maturity per June 2018 (X millions, euro equivalents) 3.0 covenant revolving credit facility subordinated convertible bond 2016 subordinated convertible bond * * 100 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 Fixed charge cover 2Q17 3Q17 4Q17 1Q18 2Q * Will be lower than EUR 290 million when bond will be (partly) converted into equity Net debt (X EUR million) covenant Net debt Net debt for covenant purposes* Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 4Q14 2Q15 4Q15 2Q16 4Q16 2Q17 4Q17 2Q18 32 * Difference between net debt and net debt for covenant purposes relates to debt component of convertible bonds

33 Outlook

34 Backlog: increase after three years of decline 12 month backlog comparable growth* x EUR million 2Q17 1Q18 2Q18 Y-on-Y Q-on-Q Site characterisation Marine % 1.9% Asset integrity Marine (0.6%) (8.4%) Marine % (4.1%) Site characterisation Land (8.7%) (1.5%) Asset integrity Land (2.7%) (5.0%) Land (7.3%) (2.4%) Geoscience (Seabed) % (17.9%) Total % (5.1%) % definite orders 70% 74% 75% %* Q17 2Q17 3Q17 4Q17 1Q18 2Q18 Marine Land Geoscience * Corrected for currency effect (of around 2% Y-on-Y and +3% Q-on-Q) and for portfolio changes related to divestment of marine construction & installation activities in 2017

35 Outlook 2018 Revenue growth on comparable basis Marginally positive EBIT margin Positive cash flow from operating activities after investments, dependent on revenue growth and the related working capital requirement at year-end Capex of around EUR 80 million 35

36 Q&A 36