Recovery continues, driven by marine business. Seabed Geosolutions classified as ‘held for sale’
31 Jul 2019 07:00 CET
After a weak first quarter, the second quarter results of Fugro’s core business improved significantly, resulting in an EBIT margin of 2.9% in the first half year compared to 0.1% in the same period last year.
Non-core Seabed Geosolutions is now classified as ‘held for sale’ and therefore revenue and EBIT(DA) are excluded from consolidated financials; a non-cash impairment of EUR 61 million has been recognised.
Revenue growth of 5.7%, driven mainly by offshore wind, oil & gas, and nautical markets.
Fugro remained within all covenants. Net debt/EBITDA was 2.8 and is expected to improve towards the end of the year.
Backlog growth in all regions, with the exception of Asia Pacific due to a significant reduction in capacity in marine asset integrity and an increased focus on projects with better margins.
Outlook 2019: continued revenue growth, further improvement of EBIT margin and positive free cash flow from continuing operations.
KEY FIGURES (X EUR MILLION)
FROM CONTINUING OPERATIONS UNLESS OTHERWISE INDICATED HY 2019 PRO FORMA HY 20191 HY 2018
Revenue 796.9 734.1
comparable growth2 5.7% 16.8%
EBITDA (excluding exceptional items3) 83.3 66.6 47.0
EBIT (excluding exceptional items3) 23.3 23.0 1.1
EBIT margin (excluding exceptional items3) 2.9% 2.9% 0.1%
EBIT 16.8 16.5 (0.8)
Net result (17.6) (11.8) (40.2)
Net result including discontinued operations (86.0) (80.2) (40.5)
Backlog next 12 months 856.3 851.3
comparable growth2 0.5% 0.4%
Cash flow from operating activities after investing (34.4) (47.3) (40.7)
Cash flow from operating activities after investing including discontinued operations (58.9) (72.2) (43.5)
Net debt/EBITDA4 2.8 2.5
The information in this press release is unaudited. Refer to annual report 2018 for definitions.
1 Excluding the impact of IFRS 16 per January 2019. For more details, refer to page 7 and interim financial statements
2 Corrected for currency effect and the divestment of the marine construction & installation activities in 2017
3 Onerous contract provisions, restructuring cost, impairment losses, and other exceptional items totaling EUR 6.5 million compared to EUR 1.9 million in HY 2018 (EBIT impact)
4 Covenant calculation includes Seabed Geosolutions, until a divestment has been completed
Mark Heine, CEO: ‘I am pleased to report a strong improvement in our marine activities, in particular for offshore wind developments and hydrography. By now, Fugro’s business in non-oil and gas is close to half of our revenue. We are also benefiting from the ongoing normalisation of investments in oil and gas, whilst in our land business the asset integrity services are picking up. We anticipate continued supportive market conditions going forward, with higher volumes and recovering pricing.
In line with our Path to Profitable Growth strategy, we are increasingly focusing on activities with better margins, improving the quality of our backlog. The marine asset integrity results show the impact from the restructuring in Asia Pacific while the market conditions are gradually improving. In the Americas, results should improve in the second half of the year, owing to higher utilisation of our vessel fleet.
In the land business we are taking additional measures to bring margins structurally at a higher level. The new top-management structure, that we introduced as of May with an Executive Leadership Team including the Group Directors of the four regions, allows us to gain operational efficiencies and further cost reductions. In addition, our differentiating digital technologies will provide benefits. We are also targeting a divestment of Seabed Geosolutions in the foreseeable future, supporting its ambition to capture the opportunities of a growing ocean bottom node seismic market.’
Strategy update
Fugro is implementing its Path to Profitable Growth strategy. Capitalising on its position as the world’s leading Geo-data specialist, Fugro is focused on three strategic objectives.
Capture the upturn in the energy and infrastructure markets.
Energy markets continue to grow, enabling Fugro to improve its vessel utilisation. Regional teams are working closely together with central fleet management to further increase asset utilisation and mobilisation effectiveness. With a weak first quarter, the land business did not fully capture the opportunities in the infrastructure market; during the second quarter, growth was solid. In the first half of the year, healthy price increases have been realised in the early cyclical marine markets, as well as first marginal price increases in marine asset integrity. Furthermore, to improve profitability, in line with the strategy update from November 2018, Fugro is restructuring its service offering in selected countries.
Differentiate by integrated digital solutions.
Fugro is building its Digital Foundation aimed at delivering Geo-data to clients in the most efficient and value-adding way. As an example, in land site characterisation, the Gaia platform supports clients with real-time monitoring, resulting in lower ground risk and accelerated construction schedules. Recently Fugro opened its new remote service center in Aberdeen, where the first remote FPSO monitoring operation in the North Sea was executed. To date, Fugro has provided over 100,000 project hours around the globe from its seven remote service centres. Fugro’s new unmanned surface vehicle has been delivered and is currently being thoroughly tested before it moves to its first commercial application.
Leverage core expertise in new growth markets.
Fugro is securing new contracts in hydrography, water management, flood protection and satellite positioning. In the first half year, Fugro won a coastal mapping project in Jamaica and Haiti to support the islands’ climate resilience, using its proprietary Rapid Airborne Multibeam Mapping System. Fugro was also awarded the California Delta Conveyance project, delivering integrated services to optimise design and minimise construction risk in this earthquake-prone area.
Seabed Geosolutions classified as ‘held for sale’
Fugro continues to focus on divestment opportunities for its non-core assets. Fugro has stepped up its efforts, in consultation with its co-shareholder, to sell Seabed Geosolutions, and multiple parties have shown interest. As a consequence, Seabed is now reported as ‘held for sale’. In the profit and loss and cash flow statements, comparative figures 2018 have been adjusted, but not in the balance sheet. For further details, see the interim financial statements 2019.
The calculations for the covenant requirements remain unchanged, until a divestment has been completed. Based on the estimated fair value, a non-cash impairment of EUR 61 million on goodwill has been recognised.