Fugro N.V. (FUR) Earnings Call Transcript & Summary

Okay. Welcome, everybody, here in the room and also on the webcast, to our analyst meeting for the annual results, 2019 of Fugro. So we'll take you through a presentation as we do, normally. I will do that together with Paul Verhagen, who will take over, in particular, talking about results, and I'll start with some highlights of 2019, the markets and the strategy and then an update on the results. So first, talking about the highlights of 2019. I think we can be pleased with having a second year of continued revenue growth after a very deep down crisis that we have had a number of years. And then with '18 and '19, recovering revenue growth and also margin expansion. So that's very good, and we'll talk about the details there. Important to note that for the core activities, we see the margin now being 4.2%, coming from 1.9% last year, yes, driven specifically by the performance of Marine, in particular. I'll talk about the details a little bit later. Also, the revenue growth of 2.7%, some people might say, a little bit modest, which is a little bit logical as well growing -- coming from a year last year where we have grown close to 20%. This is on top of the 20% from last year, so to say, 18-point something percent. And then also because we have taken some conscious decision around focusing on what kind of tenders we want to win, and also, prioritizing more the profitability and the cash flow above the revenue growth. Strong improvement for cash flow from the core business, and we'll talk about the details there a little bit later. Even a positive net result, if we take out some of the specific items there, mainly related to the Southern Star arbitration and the impairment of Seabed, we see also a positive net result. And as you have all picked up today, we have announced a comprehensive refinancing of our capital structure to extend our maturity profile on the net debt. So a little bit more details there on the key financials for 2019. As I said, improved EBIT margin from 1.9% to 4.2% for the core activity. That's Adjusted EBIT. So focusing on the continuing business, so to say. And that was driven by Marine. And then we can also clearly state that land is lagging behind, in particular, the Land Site Characterization activities, and we'll come back on that. Marine Site Characterization, again, another year of strong performance, growth -- rapid growth, and also, margin improvement compared even on top of the margin improvement that we saw the year before. And then as announced before, also the asset integrity, the late cyclical business on the Marine site has also turned the corner since quarter 2 last year we see an improvement compared to the year before. Then regionally, mixed performance, various reasons for that. Paul will elaborate a little bit more on the details there. And then last but not least, but also very important, the strong backlog growth, solid backlog there with close to 10% growth compared to last year, in particular, in Europe and the Middle East, India. Then if we look at the markets and the strategy there on the strategy implementation, we'll start with an important note there because I think Fugro is much more resilient, so to say, for the future, knowing that we are less dependent on oil & gas. So we're now close to 50% oil & gas, 52% to be exact. And we have seen, in particular, also this year again, or in 2019, strong growth in the non-oil & gas activities, and in particular, renewables, and there you have to think about offshore wind. I will come back on that, but very active around the world on offshore wind farms developments from the early cyclical marine business but also slowly moving into the late cyclical business there. And then nautical, which consists of coastal resilience projects, hydrography, very important in the future. And now we see a lot more requests, also thinking about the risks around climate change, sea-level rise, coastal resilience, flood protection, all these kind of things are sitting in the nautical bucket there. And as I said before, oil & gas, even declining a little bit, but that's specifically because we took some conscious decision around how to move forward in Asia Pacific on the asset integrity business. We have reduced capacity there, moved some vessels around. And there, we see a less revenue all out of oil & gas. So 2 vessels [ less ] there, which has an impact on the overall revenue growth there, which has an effect. And then, therefore, you see a bit of a decline in the revenue on oil & gas. So that's not a like-for-like comparison if you compare that with last year. Maybe a bit more specific about the key markets of Fugro. First, oil & gas. 52%, close to 50% now, but still very important for Fugro. And I understand that a lot of people obviously are concerned about the oil price and the instability of this market as well. Nevertheless, we see also a recovery there, and we see that recovery continuing. Although it's gradual, it's not very fast, and maybe, people have hoped for a fast recovery there. But that's -- it is coming back. We still see that recovery coming in. And that is a combination of factors there. You have more FIDs, basically approved new fields that will be developed in the future. So those are kicking in. But a lot of the work that Fugro is involved in is the early cyclical business, and that is very often even before FID. So you have the FID being a proxy, but not necessarily a good proxy, not for the early cyclical business. You also see deepwater projects coming back in. A few, which is important because that is also a signal that this market is coming back. Nevertheless, these clients, oil & gas or energy companies, nowadays take much more conscious decisions where they want to grow, how they want to connect it to the existing fields. So there is a different environment. No doubt about it. Also, and that is probably catering for the offshore development, is we see the shale investment stagnating, and basically, the growth there trimming down. So that is also a signal that probably more in the future will have to come from the offshore development. Then if I move over to the next key market for Fugro, quite an important market nowadays, that is rapidly growing, and we all know why that is because obviously, sustainability -- environmental sustainability, very important for everybody in the world, climate change temperature rise, and we all want to actually get to greener energy. Offshore wind is a good solution there. And you see, obviously, over the last couple of years, Europe being a very important development market. But over the last 2 years, also, the U.S. really picked up. Also the energy companies, the traditional oil & gas companies, moving into this field where they have to diversify themselves, almost aggressively as well. So you see more parties playing in this industry. And for Fugro, this is an important market where we can actually deploy our assets and our expertise very easily in various markets. So we don't have to make many changes to what we do. It's the same service that we deliver, having the expertise on collecting the Geodata, advising on the geodata that we analyze there. This is exactly the same. So 1 day, we can work on oil & gas. The next day, we can move to offshore wind. This is important because that influences also the price level in this market for Fugro. And as both oil & gas and offshore wind are recovering or growing fast in offshore wind and oil & gas coming back, you see that there's a bit more tension there on the availability of assets. This is good, in particular, for the high season area or periods. So quarter 2, quarter 3, in the off season, you see obviously still activity coming down. Also good to note is that apart from the U.S. and Europe, Asia Pacific becomes more and more important. And Fugro is also getting involved in the first project in Australia. So we're having a really good market position there. And we get involved in all the field developments there, also in the offshore wind. Then if I move to the next market -- key market for Fugro is infrastructure market, there, you see a continuous growth or continued growth, basically based on urbanization, higher population on this planet. I've mentioned it many times before, 2.5 billion additional people by 2050. So in 30 years, we have 2.5 billion, 30% more people on this planet, of which 1.3 billion will move to cities, which is almost 800,000 people per week from now that move to cities, which ask for a more complex infrastructure, more tunnels, more roads, more bridges, more water, more energy required. This is helping Fugro in this field because there is more demand for these complex developments, also related to climate change. There are many developments in the infrastructure sector, around sea level rise, flood protection, as I mentioned before. So an important market that will continue to grow. If you look at our client diversification, the client base, we are a very diversified player there. We have a nice spread throughout the sectors now, and it's growing in the non-oil & gas or especially in the offshore wind nautical and infrastructure area. So that is good. But also if you look at the client types and even more so, the concentration of the clients, very nicely diversified. There's no client larger than 4% of the total revenue of Fugro, which is obviously important to note. If we lose one of these top clients, which we haven't done, touch wood, over the last decades, we always continue to work for them. And I think, this is a nice pattern because it creates a very stable platform for building and expanding our business on. So all the key players are there. We work for the -- for all the majors. Some years, you see some of the large energy companies in the top 5. Another year, and over the last couple of years, you obviously see the large offshore wind players in the top 5. If we then think about the Fugro services and the business that we have, we should say very clearly that sustainability in itself, in the widest form is really embedded in all the services that Fugro provides. So our ultimate purpose to create a safe and livable world is really applicable for the services that we provide there because not analyzing the geodata, not analyzing the risks involved, if you want to build something on this planet, is really a problem. So you have to get the Fugro expertise involved, somehow, to actually create a safer environment to make sure that you build something strong enough, that it is at the right depth, that you have the right foundation, so to say, and that you have your risk under control. So for us, it translates into continuously rethinking what we do and how we do it, and here are some examples shown, for instance, how do we cater for the energy transition by helping, obviously, the offshore wind environment to further develop, on the Marine Site Characterization and also marine asset integrity, on the inspections that are needed, around these monopoles, around these platforms in the future. And then, we see also a change in the way we operate. So you see a lot more options to help our customers to reduce the CO2 footprint, by, for instance, working more remotely, which we spoke about in our strategy launch in November 2018. And we're really making good progress on that. We have now 7 remote operation centers. So very advanced, where we have robotics operated from a distance, sometimes 1 kilometer down on the Seabed, more than 1,000 kilometers from the shoreline. Stream data, it works with no latency or hardly any latency. And we can really help the customers there to have less people in a hostile environment offshore and reduce the CO2 footprint by doing that but also to make it much more efficient to deliver the data quickly to the customers and where they can actually monitor operations, sometimes real time, which gives a huge benefit in the future, so to say. So not only diversifying by moving into different industries, but also helping the energy companies in the oil & gas environment to reduce the CO2 footprint in the existing business, so to say. Then you see a big demand for sustainable cities. As I spoke about, the urbanization, the higher population there globally and the high demand to actually create a safe environment for everybody to live with the tunnels that are required, and we see the amount of tunnel projects in the world, for instance, increasing a lot, but also think about all the bridges in the world that are, so to say, at risk to maybe potentially collapse as we have seen in the past in some areas as well. You really need to start monitoring this continuously, and that is also something where Fugro is really stepping in to offer our services to make sure that this is done in the right manner, so to say, to ensure the safety there. I spoke about coastal zone mapping, which is a good example of the climate change impact that we see and the demand for governments to actually better understand the oceans. And there are a number of initiatives like Seabed 2030, which is of the foundations in the world that is really focused on mapping all the oceans by 2030, which is almost an impossible task because there's so much to do. But we really help them by also donating data and sometimes by extending some commercial projects to actually help them to do some extra work on the back of projects to really achieve their goals by 2030. We cater for the sustainable development goals. We have 5 listed there. Moving forward, we'll talk about these 5. We really feel that we can contribute there. And obviously, we're also focused on the other 12, where we don't want to actually do things worse -- in a worse manner. So -- but in these 5, we can really contribute. A few more examples on the next page. We also involved in -- even in derisking exploration activities, the seep surveys, for instance, that we do, which is very straightforward work based on our expertise. With standard survey equipment, we can help the energy company, so to say, to determine a smaller footprint where they have to look for oil or gas. So where the resources, so to say, and then they have to do less large area mapping surveys, which helps them also to reduce, again, CO2 footprint and to reduce that impact there. We have spoken about the Roames technology in the past, a very important and applicable nowadays. You see a lot of bushfires in Australia, for instance, we spoke about that, and it's in the news. But also in the U.S. There is danger that if you don't control these power networks correctly and you don't know where vegetation is, for instance, you have the risk that you start bushfires, so to say. And Fugro is offering a unique service there where we [ mat ] these networks very quickly, process the data overnight and deliver this to the customers. This is, yes, a business that still needs to further upscale. And we were investing a lot of money in maturing the technology over the last couple of years, which also didn't help in producing a good bottom line figure for the land business, the land asset integrity, but we're getting into a phase right now where the technology is more mature. And now we can roll it out to other areas in the world. And another example from the land side is the 3D road mapping that we do, where we help basically the pavement maintenance. If you can detect very accurate -- accurately the millimeter or sub-millimeter cracks in the tarmac, so to say, and you step in quickly, you can save a lot of money on the maintenance. Because as soon as you get into the winter months, these roads will crack open by basically weather and harsh conditions. And if you're there in early phase, then you can do a lot of good there. And last, but not least, I spoke about the remote solutions, also for rig move, for instance. This is an example we have done almost close to 100 -- 98 remote rig positioning jobs in 2019. This is really rapidly expanding. These are really good examples of how we contribute with all our services. These are the day-to-day services that we offer to our customers. And therefore, I think, a statement of sustainability -- environmental sustainability, being embedded in the Fugro business is really true. So a little bit more on the strategy there, a few more slides, and then I hand over to Paul for the financial elements. We all know this strategic canvas. We rolled it out in November 2018. We have there 3 key objectives: strategic targets, capturing the upturn in Energy & Infrastructure, still very applicable; differentiating by integrated solutions -- digital solutions; and we have extensive road maps on our innovation side, but also an organization with digital transformation champions, so to say, that really make that happen in the regions to really roll it out that we develop partly in joint manner with the regions, and globally with our innovation teams and then push it out to the regions. And then last but not least, leveraging our core expertise in new growth markets, markets we were already working in, likely coastal resilience. But there's a higher demand simply because of the currently -- the world trends, so to say, and we see opportunities there. So if you look at the next page, a bit of a timeline there. In November, we launched our Path to Profitable Growth strategy with the 3 targets there. Then in May 2019, we announced a new top structure of Fugro. We basically removed one layer. We have no division directors anymore. We are one company, fully integrated. We came from 4 divisions. Then we created 2 divisions. Now we have no divisions, anymore. Really one team and 4 regional Group Directors that have the full control of the P&L on a day-to-day basis, directly reporting to me. So we have a pretty flat organization where we can really act efficiently. If you implement strategy, you talk about strategy, first and foremost, strategy before structure. That's what we did -- we have done in with November and May 2019, so to say. And now we really in 2020, are focused on the culture of the company. We want to build a purpose-driven company culture. And we're launching our new company values in the course of this year. We have had a lot of discussions with people in the organization, so to say, to get input from them. And now we have a good set of values. And we're going to have a nice campaign launching this worldwide. Also part of the strategy, and very important, and people might have questions around, that is the land business, where we have seen and communicated on, during the course of 2019, that we felt that some of the businesses there were lagging behind, not performing good enough. I spoke about the asset integrity, which is the third bullet here on the board, power, but also, rail and roads. We really were injecting money, again, in developing a mature solution. So we have transformed this business, over the last couple of years, significantly coming from a very commoditized business into a really technology front leading position, where we have acquired a few companies to have technology differentiator, so to say, on the power side and the rail side, for instance. And that is now coming to a mature level, where we can now also upscale in the rest of the world. But in the past, and also in 2019, this business element was not producing too much return or any return in the past because we were still injecting the money and investing, maturing the business there, and maturing the technology. Jumping back to the first bullet there, and that is very important. We spoke about that earlier or before in the second quarter or the third quarter of 2019. There were some specific areas in the world and services in the world where we said, okay, these are underperforming services in particular countries, and we need to step in. We have done that. We have done that in quarter 3 and quarter 4. The results of that are not visible yet. So you could say, well, should we not see the first things? Yes, of course, there are some things visible, but we believe that in the upcoming quarters, this should also bring a structural change to this business element. This is more related, a combination of things on the asset integrity side, where we cut down on the commodity business, but also the Land Site Characterization side where we had to step in, in particular, services in particular countries. And that effort will continue. Obviously, if you have a new picture on the board, you evaluate that on a monthly basis. And if there's anything else needed, we -- I can assure you, we will step in and take action on it. Then if we look at the U.S., it's quite a large market for the land business, roughly close to [ EUR 100 million ] or so. So a significant chunk of the total land business. And we have seen a transition coming out of a couple of years ago from oil & gas, in particular, large LNG plants that we were serving the new builds of that, that completely dried up. That happened already in '18, so to say. And we still see that we're moving into a different market area, the infrastructure market, where we see a bit more competitive pricing, and we had to actually turn it around to be more selective in what we tender, where we can focus on the right price levels and also, not unimportant, the right cost levels. So this is an ongoing effort. We will have to do a bit more. This is a large business for us. We have started some of the work there, but we'll continue to do more moving forward. If we can fix the larger countries like the U.S., then the business will look completely different moving forward. So it's a very important element for us. Then the last bullet there, it's important that Fugro can really add value, if we talk about the larger, more integrated services, the more complex infrastructure projects. So if we focus on those, and we have been doing that since the launch of the November 2018 strategy, so to say, this was the outcome of the strategy analysis. And over time, we have managed to get involved in these projects, albeit, some of the countries where we launched, like the U.K., for instance, some of these projects were delayed due to the instability in that country, so to say. We all know about that. But we will see larger complex integrated projects starting in the years to come, and we are very much focusing on that. This is also one of the ways to further boost the land performance. That will take time, the last bullet, for sure. It's not something that you quick -- quickly fix overnight. So it's a mixture of short term actions, mid- to longer-term actions as well. And it has also a lot of strategic questions, okay, what is your portfolio? Where do you want to play? And where do you want to operate, so to say, with what service? And we have made a lot of these decisions already and are implemented, and we will continue to work on that because, obviously, what we show today on the land business is not good enough. Then I get to my last slide before I hand over to Paul about the results. This is all about the non-core assets, and we have seen some movements there over the last couple of months. And this is obviously important for everybody to take note of. First and foremost, in December, you got aware of the purchase of the 40% of the share of CGG in Seabed Geosolutions and the termination of the JV agreement, which is a bit of an awkward one because we acquired a 40% share, and we also got some money for it, EUR 31.3 million. That had to do with the fact that there were some previous agreements in place between Fugro and CGG. And basically, without going into too much detail, they had to buy themselves out, out of these agreements. So this resulted in a positive cash and return for Fugro buying this stake. Now we own 100%. So people were confused because we were about to divest this element. It's non-core, and we're still committed to divest this element of Fugro Seabed Geosolutions because we believe that there should be a better owner that can actually help them to further expand and grow because this is a business that requires more investments, and therefore, also a party that has the capital to further invest in this growing business, because it's an interesting market. And there's a lot of interest from the energy companies to move from streamer towards notes because it has a higher resolution, better quality data. So there's a lot of interest. It's a buoyant market right now, and potentially, it's also good to see some consolidation in that market. The latest on that is there's an active process ongoing. As you know, we have an investment banker helping us with that at a multiple party share that have shown interest. And the assets will be kept held-for-sale because we don't want to show there's a high likelihood to divest it in the next 12 months, but we don't want to give it away for too low price. So we want to get the right price for it as well. So Paul can say a bit more, if you want to know what the balance sheet position is at the moment. Global Marine, that has also been announced in 2 tranches, basically, first and foremost, end of last year, you saw the signed agreement for the element of the Huawei, joint venture of Global Marine. So that will be divested, and that will be closed, in principle, in this first quarter of this year. That represents a value for Fugro of EUR 33 million, of which, EUR 20 million should come in in the first quarter this year. The other one is related to the EUR 13 million related to a put, that will come in over 2 years. And then the last element, which is also very important, the core Global Marine activity, was basically agreed to divest by the main shareholder, HC2 from the U.S., to close that out by the end of this quarter as well. So that will represent a value of roughly $40 million. So in total, $73 million for the stake that Fugro has in Global Marine. And then last but not least, as you know, we still have an interest in some exploration projects in Australia, a left over from our Seismic business that we divested in 2012, which will generate, in the mid-term hopefully, some return. We have some -- you shouldn't expect too much from that at the moment. That's too early. At the same time, you should also not expect too much cost related to that. So no changes on the last box there. And with that, I would like to hand over to Paul to talk about the results. And I will come back to close out with the outlook of the company. Paul?

Yes. Thanks. Okay. Thank you, Mark. Results for now. Key messages, and quite a few. You've seen already sort of 2.7% growth, 4.2% EBIT margin, year-on-year improvement in Europe-Africa and APAC. I will come back to that. Where, Americas and Middle East actually was disappointing. Net result was positive, if you exclude the specific items mainly related to Southern Star. You've seen the announcement. It was $26.8 million to $27 million and plus related legal costs, it's close to EUR 30 million. And then we had a Seabed impairment. I will come back to that. If you take that out, even that result was positive for the core. Free cash flow, EUR 58 million. Net debt/EBITDA, 1.9. So well below our 3 thresholds. And maybe most important, we anticipate to refinance our EUR 575 million revolver and also the EUR 190 million convertible bonds. And I will come back to that. Maybe first, this picture here, revenue and EBIT expansion driven by Marine. You clearly see there the EUR 60 million growth in revenue in Marine, 5.7% growth. Land decline, close to minus 4% and some positive FX effect. Marine, actually, both business lines grew, but in particular, Marine site characterization grew steeply to a large extent driven by offshore winds, and as Mark already alluded to, but also Marine asset integrity grew despite some steep decline in APAC, where we have made some clear choices, prioritizing profitability over revenue growth, adjusting the capacity, but nevertheless, still a small growth in MAI. Land site characterization, mid-single-digit revenue decline. And Mark spoke about it. We have some issues in this business that we are addressing, as we speak. Quite a few things have been done, but more to be done. And LAI, we saw a small growth result improvement, but still, a marginal loss remaining. Now EBIT, you see there, the Marine business improved EUR 47 million, Land year-on-year declined by EUR 9 million. So from EUR 30 million to EUR 68 million. Then by region, Europe-Africa had a very strong year. Come back to that in the Europe-Africa slides. Revenue growth and clear EBIT growth, of course. Americas was, maybe, the worst that can happen, very steep revenue growth and a year-on-year decline of bottom line. That's exactly what you don't want. And the team is fully aware of that in the Americas, and they're working hard, of course, to turn that around. There were some specific issues. We'll come back to that. APAC, a steep revenue decline, but at the same time, a big improvement in profitability, as you can see. And Middle East, small revenue decline and a small decline in EBIT. So first, Europe-Africa, you have 4.9% revenue growth, all in Marine. And more important, Europe-Africa, and I think already at half year, we mentioned that at 10.5%, basically within the midterm targets already. Having said that, I think everything worked for Europe-Africa in 2019. Good activity levels, good utilization, steep growth in Marine site characterization, but also growth in Marine asset integrity in the oil & gas business, limited dry docks as we've said last time, you will see some more swings year-on-year by region because some years, you have more maintenance than other years. So you have to take that into account as well. But overall, a very good year for the Europe-Africa region. Also, land was very similar to last year. Americas, actually the result that you see here, which does not look nice, it all happened. The vast majority happened already in the first half of the year. We had all these extended maintenance, unforeseen repairs, additional charges to finish work in time as per commitments that we had with customers. We have perfect storm almost not good. H2 was significantly better compared to. H1, that's positive, but still, H2 was also not very good. It was marginally profitable, whilst H1 was actually a steep negative. But also in H2, again, we had some unforeseen vessel downtime, which, of course, we will attack and try to prevent that going forward. To a certain extent, this is part of our business. This will always happen to us. So we should not have an illusion that this in 2020 will not happen anymore. This is just part of our model. But what happened in the U.S. is excessive. That's also not normal, and that should, of course, not be repeated in 2020. Now Land, flat. So no real year-on-year decline, but at a too low level, it's marginally profitable. Mark talked about, it's a relatively large animal in the overall land business. This business needs to be turned on. Otherwise, it will be very difficult to make a return on the global investments that we do in land if and when the U.S. would not perform. And so we have specific dedicated focus and teams in place to help the U.S. to make -- complete that transition, I'd say, from oil & gas a few years ago to mainly infrastructure and water-related type of activities. But, overall, minus EUR 12 million for the year, with such growth is, of course, very disappointing. APAC, definitely not where we want to be, 0.4%, but very pleased with the improvements. We come from minus EUR 19 million, so a EUR 20 million year-on-year improvement, which is pretty significant. We have a steep revenue decline. So less working capital and better results that, in itself, is positive. Double-digit decline in Marine asset integrity, conscious choices, reorganization of the fleet, clear selective tendering, happily leaving some work to customers to competitors with lower-priced projects. And so far, so good. I would say, we made a pretty good step towards becoming more profitable in APAC. Now unfortunately, Land Site Characterization reasonable decline year-on-year. Actually, this business in APAC has always been very profitable. It's still reasonably profitable, just to be clear. What you see here is just the year-on-year decline. But Hong Kong is a big chunk of our Land business in APAC. And anyhow you all read the newspapers already before, let's say, the issues in Hong Kong started, the economy in Hong Kong was already slowing down somewhat. But that was compounded by all the other issues, which did not help our results. And now on top of that, of course, you get corona. It does not have a lot of impact yet, but might have some impact going forward. We'll see. But so far, so good, I would say. So pleased, again, with the improvements, but clearly, 0.4% margin is not where we want to be. Middle East and India, yes, disappointing to be honest, and particular in the Land business, steep decline year-on-year, as you can see from slide quite a few countries where we don't have very large presence, but all the small losses. And if you add it up, it starts to add up. So we have [ to tag those ] and the majority of the restructuring there has been completed. Marine Site Characterization revenue down, although results up, and it was mainly related to the fact that we had a low activity level in Egypt because some projects moved out if that we'd have known earlier, we could have redeployed the vessel more towards Africa because we had plenty of work. But by the time we knew that projects were slipping, actually, it was already too late and impacted as a result of that also Q4. Unfortunately, that's also part of our business. So that in itself was disappointing. MAI was up. So that's good. But there's still some specific services with MAI in the Middle East that we're addressing that are just not at a proper level of profitability. Seabed held-for-sale. Yes, also here a little bit the same story as the Americas. The bulk of the bad news happened in the first half already. You're all aware of these 3 projects that we had all completed. Maybe good to say that we had 2 subsequent projects with very good execution and good profitability, but they were unfortunately somewhat smaller. These projects and the larger ones that we suffered on in the first half. Second half was good in terms of project execution, but unfortunately, we had planned for some more work in Q4 with a certain customer, who ultimately decided not to move forward with a certain project that we were anticipating, resulting in an underutilized crew. And actually, this is the crew where we have the highest fixed cost which is the case of his crew. So that, of course, impacted the Q4 results. Also, maybe it's technical in 2018, and these results, minus 16% is a little bit inflated because there is a EUR 5.2 million one-off. So actually, 2018 was worse than what you see. And also '19 is worse than what you see here because since it's held for sale, we have stopped depreciation. But basically, the same amount we have impaired in the second half based on the fair value evaluation that has been done. Now results impacted by specific items, which is really a pity otherwise also net result would have been positive. Now EBIT, you see it there before specific, you've seen at EUR 68 million and after its EUR 25 million or EUR 26 million, rounded. You see the increase in interest cost. That's purely the impact of IFRS 16, EUR 11 million impact year-on-year. Exchange rate variance is significantly lower than the year before, but still negative. The euro is too strong apparently relative to many other currencies. Some good performing equity stakes that we have now 2 years in a row, delivering good returns, EUR 9 million, and also last year, EUR 9 million. That's a positive, of course. Tax, somewhat lower and that's mainly because of recognition of previously unrecognized tax losses. And then you get to a net result of minus EUR 14 million. And including disc. ops. you see the biggest chunk there is the impairment in Seabed, EUR 61 million was already taken in the first half, EUR 14 million in the second half. If we would have continued depreciation, which we would normally do, it would not have been held for sale, basically only the goodwill would have been impaired. There was still EUR 4 million goodwill left that is impaired, and the remaining part is actually the depreciation, which was not done because of held for sale. So then the specific items, just to give you some more insight, Onerous contract charges very small, but restructuring costs, EUR 7 million some restructuring in Marine, in particular, in APAC, of course, where we needed to cut costs, given the revenue decline. But also in land, of course, where you would expect it, we had the arbitration of the Southern Star and the EUR 6 million, the bulk of that is legal costs related to that arbitration. And then impairment losses, a small impairment on Finder, one permit that we most likely will not extend. And thus for a small value in our books, and we took the impairment. And then in Seabed, I talked about it, the impairment is EUR 76 million, of which EUR 14 million was in this half year. Working capital, exceptionally low. Why do we say that? Mainly because working capital is impacted by the EUR 24 million payable related to the Southern Star arbitration. It's paid in January, but end of December, it was payable in our books, improving working capital. So the real, let's say, working capital, you should look at is 11%, so adjusted for 1.5%, which is still very good if you look at the trend there. So very pleased with the results. Pretty stable pattern, 88, 86, 87, 88 days. So, so far, we have been able to collect well and to get paid as per the -- mainly as per -- for the vast majority as per the agreed terms with customers. So well done by many, many people in Fugro, who are on top of this very clearly. Also here, technical story. Again, this is because the Southern Star because of the Southern Star on the left-hand side, you get this large change in working capital, which is a little bit artificial. That includes the EUR 47 million includes the EUR 24 million payable. If you forget the Southern Star would not have happened, you would have seen EUR 81 million operating cash flow before changes in working capital. So a pretty decent number. And then an additional EUR 23 million because of good working capital management, EUR 70 million in cash from investments, EUR 83 million of that was, by the way, Capex, and the rest were some income from asset sales and other things we've done. And then also, this number includes a positive impact from IFRS 16, EUR 24 million. So also, excluding the impact from IFRS 16, the cash flow before financing, so the free cash flow for the continuing business, the core business, would have been positive. So good cash flow performance. Now well within our covenants. You see it here. Actually, the 1.9x would have been 1.8x, but because of the special item in Southern Star that impacted also this calculation. So I know a lot of room, of course, under the covenant -- all the other covenants, a lot of room as well. And then Net debt, the EUR 666 million is including IFRS 16. That's why this 3 numbers, the EUR 503 million is excluding. So next year -- this year, I should say, I only show you including IFRS 16. The time -- a year now, time to get used to these numbers, including ourselves. It's a big change, actually. And then the EUR 241 million is excluding subordinated debt. So it's basically the senior debt that we have at year-end in our books, which is relevant for the leverage covenant calculation. Refinancing. So what it says is we anticipate to refinance. This is not yet the formal launch, but the fact that we, let's say, communicated by this should give you comfort that this has happened is to be happen pretty, pretty soon. Yes, we want to refinance the EUR 575 million revolving credit facility. We want to buy back the EUR 190 million bond, which, by the way, is not necessary to make this a success, just to be clear. Even if you would not manage to it to buy back the bond that would not be ideal, but would not stop us from refinancing. Senior secured note, EUR 500 million to EUR 550 million. We did some pre sounding with quite a few potential investors and feedback was good and it has given us the comfort to put this here in front of you. The EUR 200 million RCF, which is conditional on the success of the senior secured note. And we may issue new shares using existing shareholder authorization up to 10% of issued shares. And why do we do that? The reason why we consider to do this is very simple. It will accelerate deleveraging of the balance sheet. If we deliver on our plans, there might be no real need to do this. At the same time, there's a lot of uncertainty in the world, you never know. But this will just make the whole delevering go even faster. We have divestment proceeds coming in. We still have Seabed for sale. So we expect, of course, significant improvements, going forward, into our capital structure based on everything that you've seen in the last, I think, hour or so, almost hour. But this is now we communicated, and we feel pretty confident that this can be done, no guarantee, but a lot of confidence. Then capital allocation, I believe that's my last slide. This is in order of priority. You've seen this slide before at the strategy update in November '18. First priority, of course, is fund the business organically. With Capex, we believe, around, on average, EUR 80 million to EUR 110 million. So it can be also EUR 130 million and certainly EUR 70 million but on average, over the period, EUR 80 million to EUR 110 million per year. Second, clear priority is further strengthening balance sheet and reduce Net debt. So it's not only improving EBITDA and reducing leverage. Also, we want to bring down the absolute level of net debt, even regardless of how good EBITDA will become. Acquisitions, of course, we are looking, of course, around as well. But in any case, what we are planning for, if any, will be small and bolt-on and most likely technology-based. And dividend policy, as you know, 35% to 55% of net profit, once leverage allows. And that's it. Mark, back to you.

Thank you, Paul. Yes, 3 more slides from my side, the outlook, and then we open up for some questions here. So first, the management agenda. I think it's important that we communicate on what we have basically for ourselves lined up. First and foremost, obviously, continued improvement on the profitability. And with a special focus on the land activity, there were still some underperforming elements to drive that profitability up as well. So every leg in Fugro needs to start firing, so to say, contributing to the overall result, working towards our midterm targets of 8% to 12% for the overall group by the midterm, 2021, 2023. Then the second item, generates sustained free cash flow, very important. And just to, maybe, add to what Paul said, the EUR 58 million of the continued operation cash flow that we generated is excluding the CGG income because that's in discontinued operations, just to emphasize that a little bit because that might be confusing. Because that cash is not part of the EUR 58 million there. That's very important to our free cash flow, but also reducing net debt, as Paul already stated in one of his previous slides. Refinancing is obviously critical. There was a lot of speculation over the past years how Fugro or year, how Fugro would refinance the EUR 190 million convertible bond we have now launched basically the announcement for the total refinancing, and we are well in advance, basically 1 year, more than 1 year before maturity of our first products there. So refinancing, critical for the upcoming period. Divestment of the non-core assets, Seabed Geosolutions, Global Marine is, yes, in a closing phase, so to say, hopefully, by the end of Q1, obviously, now the key priority for us is also to divest Seabed Geosolutions as we have had it on sale already for some time. And again, once again, to find a better home for it, a party that can invest in it to further let it flourish, so to say, in a very good market that's quite buoyant moving forward. Then implementing our sustainability road map is very important. We have some ambitious targets there. We also diversifying Fugro rapidly over the last couple of years coming down to almost 50% of non-oil & gas work, so to say, hydrography, renewables, infrastructure, very important elements of Fugro now, and we'll see that mix further, yes, probably increasing, which is good for the future because the world is obviously very keen or moving in a different direction, and we will serve any market that is basically providing us opportunities that can be an energy market, that can be infrastructure that can also be related to climate change projects. So very important the sustainability road map, also some steep targets for ourselves in a few years from now to reduce the CO2 footprint for ourselves, the energy consumption, but also, for instance, things like using single-use plastic, we don't want to do that anymore, and we really have an ambitious plan there. It can all be found on the website, clear targets for Fugro there. And then last but not least, which is also very important, Fugro is a people business. We have spoken about that before. Assets are important, but the people, with the expertise that we have and the knowledge and the history that Fugro has, is very important. So as I already said, we're working in 2020 on the culture of the company, building a purpose-driven culture by new values, company values, but also further strengthening the employee engagement and talent development. Talent development for the young people, but also for the experienced staff that we have, everybody is important in Fugro because we are a people business. Two more slides. The backlog -- 12-month backlog, decent growth of close to 10% or strong growth, you could even say double-digit almost, so to say, and that's good because it gives you good indication that this business will grow moving forward. It's also interesting to see that, for instance, Asia Pacific, after a decline after the conscious decisions that we have taken, we see it growing there slowly now as well. Steep growth in Europe-Africa, which is also a good signal and steep growth in Middle East, India. So all in all, I think a very good backlog for the company. Americas grew already last year, probably a little bit too fast if you could say, if you look at the bottom line result, so this is a small decline there. But at the same time, after a steep growth of last year of 17%. And that brings me to the last slide, the outlook for 2020 very important to say that we continue on a path to profitable growth. We have been delivering over the last 2 years on this path to profitable growth. We will continue to do that, working towards our midterm period, so to say, 2021, 2023. We have clear targets on the EBIT margin between 8% and 12%, cash flow target there as well and ROCE target of more than 10% in all the business areas, driving the profitability up, capturing the market opportunities and, obviously, producing a sustained free cash flow. And with the cash flow, we can further reduce debt. And if the net debt comes down enough and we get at a certain level, then in a few years from now, we can consider paying dividends as well. And then we are back into a normal situation where the company needs to be. CapEx guidance for 2020 is around EUR 90 million within that bucket that Paul mentioned between EUR 80 million and EUR 110 million on average towards the midterm target. With that, I would like to thank you for listening. And we open up for some questions here in the room. And I will take these questions together with Paul. So if you want to join me?

Yes, Luuk.

Luuk, Banque Degroof Petercam. First, a question about the fleet utilization, which was relatively weak. And if I calculate correctly, then especially Q4 is around 67%. Can you indicate what apart from the vessel in the Middle East was causing that and where you see most upside for what types of vessels do you see room to improve? And the second question is about Seabed, if you can update us on the current book value? And also to what extent the divestment had any impact on the plant or potential equity issue? And then the final question for now is on lands, where you had the 3 difficult markets, Hong Kong, the Middle East and the U.K., can you update us on the outlook for those 3 areas?

Yes, okay. Sure, I'll take the first question. So the vessel utilization, maybe good, first and foremost, it was 72%, 1% down on the year before, 73%. That is not to the level where we want to have it, but it is at a decent level on average for a full year. We have communicated before that probably for a company that has a full vessel fleet, a global fleet, you get to 78%. 80% is roughly the max because you will always have assets around the world, in particular areas that are underutilized that you cannot bring suddenly to the other side of the world. Now that's one reason. Having said that, the vessel utilization was influenced by a particular bad start of the year and then also at the end of the year. So you clearly see the off-season period kicking in there, apart from the vessel in Egypt that Paul spoke about, we also had vessel maintenance in the U.S. in the fourth quarter that we had to go through, but also in Europe, at the end of the year, we had some vessel maintenance and some of it, you can plan it very well but then you take 1 or 2 weeks longer. And then, yes, it already affects your vessel utilization. Generally, I think we have these things well under control. Breakdowns, obviously, is something more unpredictable. So -- but for me, the vessel utilization should be a target to drive that up to the 75% range. And if we can push it further, even better. But definitely, there is room to further grow as we have also communicated before. Unfortunately, in the last year, we had to actually hire then short-term charters to recover from the vessels from our sales that are then in repair mode, and that is obviously not a good thing because it impacts your third-party cost, which you clearly see at the beginning of the year in the Americas. Paul?

Seabeds Yes. Seabed is currently in our books, capital employed for EUR 87 million. It's based on fair value, less cost to sell. Having said that, it's a pretty wide range. If you do the analysis and what the fair value could be. So that's -- this is actually where we came out with some support from external advisers, as well. The, let's say, equity, [indiscernible] that we are, let's say, considering it's not dependent on the divestment of Seabed. I think that was your question, not if that would be linked. The [indiscernible] is basically dependent on market conditions. That's the most and important element for this decision. We have not yet taken a decision, but at least I can say the Seabed divestment is not part of the elements to consider the go or no go, yes. Then land.

Then those particular markets that are important to Fugro, for instance, Hong Kong, it's very difficult to do a prediction there, how that further develops. Nevertheless, we have a good backlog there. We saw some delays in some projects. We picked up end of last year and a project for the extension of the airport there, which is a very solid project for Fugro. Yes, there are some delays. But eventually, the work will continue. We see it also continuing and it will produce a decent income, but it had a slowdown, how that market eventually will further develop, I don't know, but we have picked up new work. So it's not cooling down completely on the Hong Kong side. Having said that, coronavirus, obviously, I also don't want to predict too much on that. On the Mainland of in China, we don't have a very large footprint. So the effect there is limited. Having said that, it's now being spread a bit more in the region. So you never know which direction that goes. So we monitor that on a daily basis, just to be sure that we are on top of it. The impact up to now has been limited. Then if you talk about the Middle East, for instance, then, yes, you have to see in general, that region has gone through a period where they have invested less in infrastructure, simply because they had less income from the oil & gas as well. So you have seen that being a result of that. So it's not only impacting oil & gas markets, but also the infrastructure market. I do see that stabilizing. So further activity popping up again in that region as well. In actual fact, we saw the backlog growing in the Middle East quite deeply. And also, especially on the land side, since the beginning of this year, we have been quite busy in the Middle East, in general. Last but not least, the U.K., quite an important market for Fugro as well. That's actually our largest country. We have more than 1,700 people over the year close to 11,000 sitting in the U.K. and basically, yes, it has been very unstable over the last period of time with a lot of projects being postponed and delayed. Now that there's a bit more clarity, I can't really talk about full clarity, a bit more clarity maybe around the big word Brexit. We believe that certainly, the government will push certain larger infrastructure projects forward simply to boost the economy. So we should be able to benefit from that as well. I hope that answers the question. Any other questions?

I'm next. Thijs Berkelder, ABN AMRO. The first question on Capex. You plan to spend EUR 90 million, of which, EUR 40 million to EUR 60 million on maintenance. Can you explain where you plan to spend the gross Capex, Land versus Marine, for instance? And in Marine, how much in new technologies like unmanned vessels? Secondly, you gave a nice explanation on moving towards sustainability. How should your fleet of the future look like, in your view? Is there still a role for the vessels you are still operating? Or will the whole survey market move to unmanned vessels? We've seen announcements by Ocean Infinity, XOCEAN, i-Tech, et cetera, et cetera. Thirdly, on Seabed. Can you give some kind of an outlook for Seabed profitability? Second half still was not EBITDA positive. Multiples in that sector are, according my Bloomberg, something like 2x EBITDA. So 2x nothing is more or less nothing. So how do you think to make EUR 80 million? And then I still have a lot of other questions. The main topic maybe, can you give hard numbers on how the new covenant ratios look like?

Okay. Shall I'll start with --

Yes, please we just take them one by one.

Okay, one by one. So first, the CapEx Thijs, and then we'll morph into the sustainability aspect as well. So correct. I think EUR 40 million to EUR 60 million is maintenance. The remainder is primarily focused on new technology. So you talk about indeed remote solutions, autonomous solutions, software development related to that, both our land and marine activity. So we're talking about, I'm not going to give you an exact split or exact numbers how we invest because we feel that it's also competitively sensitive. And you talk about a number of players there in the market. We obviously follow that very closely. To give you an example, we have signed another partnership with the second key industry player on the autonomous vessel side, we're not making a lot of noise about these things. We're just moving along with the road map that we have developed for ourselves. We feel that is more important than making noise about that because we just have to deliver. The first autonomous vessels that we built are in the water. We have done the first commercial project for that as well. Very pleased with the data that comes out of it, and we're just moving along, the almost yes, aggressively or actively with this road map. It consists of many things, and I think that's also important to mention, it's not only about the assets, and we have spoken about that before. It's about the combination of expertise, experience and the asset. And that is very important. I will give you a very clear example, Fugro just recently won an artificial intelligence competition where we have won and beaten some of the competition by far. And the way we've done that is by combining real innovative solutions with the expertise, the years of experience of Fugro and that was the way how we could actually move so much faster and more efficiently than the competition that was only focusing on the technology itself. So that's an example how we look at it. We have our own road map. And we have also a ROCE to deliver on. So return on investment, which is clearly, for us, important. So we have our partnerships. We work on that we're not making too much noise about it because we know what we want to do there. So in that sense, that caters a little bit also for the sustainability road map, we're making also good progress on the remote solutions which is, I think, important with the remote control centers there, where we have the ability to also move other services into the remote control centers, and I'm talking about Land Services, for instance, and where you saw in the past that the mining business was maybe a step ahead of us, and we were looking at the mining business, how do we do these things remotely. Now the mining business is actually coming to us as well to see, hey, how are you doing these things or even other industries like space agencies? So I think we're making good progress on that road map. These things all take time because you need to deliver. And the clients all like a nice technology. But it needs to deliver good data, quality products. And you need to deliver that also on time. So -- but, yes, competition is doing great things as well, which is great, and you have to move fast nowadays with anything you do, deploy it fast, learn fast and then move on. So that's the approach that we take. Trying to answer the question on the sustainability and the technology. Is that okay? Yes, you want more details? Maybe first to Paul.

Yes, on Seabed, indeed 2 x 0 is 0. That, I can confirm. What is -- I think what's important is, normally, we don't guide, Thijs, you should know, on individual businesses, but for Seabed, it's pretty obvious that we will do better than 2019 that might be clear. We have a reasonable backlog, but more to be won. There's a lot of tendering going on, but yes, you still need to win it first, of course, before you can put it in the order book that is important. I mentioned deliberately on the valuation. It's a pretty large ratio, right? The Seabed, let's say, seismic no business market is pretty depressed. The most clear peer, of course, had quite some pain, 2019 as well. So that's also not really a very fair and one-on-one benchmark that you can take for fair value analysis. So we've engaged 2 parties to help us with fair value analysis taking into account indeed to low multiples and the low result that was achieved in 2019, but also some other elements, but also, of course, a [ DCF ] as we see it. So there's a lot of things that went into that calculation. The only thing I can confirm is it's not easy. Given the state of this market today, it was a right range and the EUR 87 million is where we ultimately landed.

Did I understand correctly that you plan to spend another EUR 20 million of CapEx?

In Seabed?

In Seabed?

No, you did not understand that correctly. No, definitely not. No. We spent actually one of the reasons why the cash flow from disc. ops. from discontinued operations was so negative, which you'll see in the financial statements is because we spent a lot of CapEx in 2019, 2/3 or so of the negative cash flow is money spent in the Seabed. We've made quite a turnaround here in terms of technology. We have diversity shallow water cables. We're focusing more and more on [indiscernible]. We still have the [indiscernible] product, but also that is under review to see what we will do with that one. But it will become a simpler organization focused on Manta, and we've done now a few projects with the Manta notes, exceptional data quality, very good feedback from customers, very good deployments, very efficient so that in itself is positive, but of course, you need still the proper [ balance log ] and good design of your cost structure and good design of your pricing structure as a result of that. But the assets are there, at least. That's we reinvested quite a lot in 2019 is not planned for in 2020. Covenants, that was the other question. Yes, what I can say is the typical senior secured note on note market, bond market is covenant light. They typically have incurrence-based covenants, no maintenance covenants. Yes. So this whole covenant pressure will basically be gone if and when we have refinanced the covenants in the revolving credit facility will mirror the covenants of the bond, which is positive. There will be one leverage maintenance covenant in the RCF, assuming that this all happens, which gives us enough headroom that we haven't seen for the last few years. I'm very comfortable there as well. Once we complete the refinancing, we'll give you the precise details. But for now, I think it's important to note that it's very covenant-light and mostly incurrence based.

But you already are going out to the bond market right now, and they do get these details already or not?

Under certain conditions, they get these details.

But is it logical to assume that the 3x will go down to 2.5x or lower?

No, no. It will go up significantly. And I would say, we'll go up. We get a lot of headroom. And again, for the bond, it does really matter. Even at 1x, it will not be 3x, it will be -- actually, for the bond it's not relevant. What we have for the bond is if you -- let's suppose if you want to attract new debt -- new secured debt, then at that moment in time, it's incurrence based. They look, okay, you have a certain covenant. Can you attract new debt, new secured debt? Then there's different buckets and different baskets and a different incurrence-based covenants for unsecured debt. So this -- it provides a lot of flexibility, which is needed, of course, because this is a public product. You're not going to negotiate a waiver with God knows how many bondholders. And this is very market practice and the product that we're looking at is very much a reflection of what happens in the market, not better, but also not worse.

The vessel fleet, you still had a question on the vessel fleet of the future. First and foremost, I believe that we already have partly vessel fleet of the future because our average age is still quite young, 12 years for the total fleet. The -- a lot of them were built in the last, let's say, 10 years or so. So we have a pretty modern fleet there, well maintained as well. Some of them are maybe 5 or 6 years old, you step on board and you feel that they are brand new. So we have high-quality assets there. Those are also built according to the new standards. So they're all diesel electric. So we don't sail with heavy diesel engines. I do believe that things will be shifting in some areas of the market that we serve. So we will see much more remote solutions, smaller assets where possible. This is not possible for all the activities that we have. So over the years, you see expansion in Fugro coming from lighter assets and more remote assets. So absolutely true, fully aligned with your thinking there. But it will move gradually, and you will see that we probably will phase out the older vessels. We will still use the vessels that we have for the particular work where we need these assets. And then I have to remind you as well that we still hire a lot of short-term charters in the season to really ramp up to be able to serve the market, the market demand, those are less sophisticated, more standard vessels, not purpose built. Fugro has been the only party building those things specifically for survey and geotech activities. And if we talk about the geotech assets that will change in the end maybe as well. But for now, I think some of the drilling that we do will have to be done from a decent platform and I don't see that happening from a small 9-meter USV or even a 20-meter USV. So for now, that will take time. But absolutely true, this will move, and this will move probably faster than everybody can realize. Quirijn. You get a microphone down there.

Quirijn Mulder from ING. I would focus my questions on land. You tried to convince us of the situation at land. And to speak about certain elements which have to be tackled? Or how did you say that still underperforming elements in land. But your story to me is not very convincing in the way that let me say, the revenues are EUR 1.1 billion. Let me take out EUR 100 million for Land Asset Integrity that is still loss-making because of all the investments...

Quirijn, you're referring to the marine revenues now. The starting point is Marine. Land has EUR 450 million or so revenue.

Okay, sorry. EUR 450 million, part is Land Asset Integrity. And other part is related to temporary things like Brexit and Hong Kong, et cetera. But there's still a lot of things there, and your targets for 2023 is something like 6% to 9% EBITA margin. How are you going to come there, given the fact that the problems at land are now prolonging for a longer and longer period. I think 2000 -- it was 1% margin in 2018 and 0% in 2019. And are you convinced that you take the right message there because it seems to me that, also, if I look at your clients, [ Arcadis ] and [indiscernible] you mentioned in your presentation that these guys are making 8% to 10% margins and you make 0. So -- and given the fact that I think that your services are at least at the same level as these players, I would expect something like maybe 8% to 10% as well for Fugro. And not even your target for 6% to 9% and certainly not 0%. So please, can you elaborate again what you're going to do there, which gives us some more confidence that something is happening there?

Yes. Okay. And Paul jump in later on, maybe if you add something there. So the land business, in itself, revenue is roughly EUR 450 million. Then I spoke about the roughly EUR 100 million LAI, Land Asset Integrity business. We spoke about that. That comes out of a transformation from commodity business, and we're still completing some of that because we have closed down some activities in the Middle East, in particular, for instance that were loss making. So that, that even affected the Land Asset Integrity business. So those actions in itself that have been taken, should contribute to a better result in Land Asset Integrity in that EUR 100 million bucket, so to say. Then we have put in quite a bit of money there, and we write that money down into the business immediately for investing and maturing the technology, so we could also stop doing that. Then you see a better result now today. But in the end, you will not grow the business in the future according to our plan. So we have decided to actually mature the technology on that side. So basically, in the future, when we can ramp up because the EUR 100 million then needs to grow. The investments will probably taper off at some point in time, then the EUR 100 million, so we'll start to generate more income. And that can already happen this year. So I expect that to happen this year. We spoke about another EUR 100 million bucket, the U.S.A. In particular, there, we will spend more time. I'm not going to give all the details here, but we'll spend more time formalizing on top of the actions that we have taken already a solid and robust strategy for that particular market and focused on -- more focused on infrastructure because we have now morphed into almost not coincidentally, but oil and gas tapered off after the LNG plants in '17 basically maturing '18, early '18, and that has completely evaporated, although those are coming back. Some of that is coming back as well, that activity on the LNG side. But we have to actually adapt to that new situation there and this is something that we're working on to take the right decisions in that new market that they are operating. So this is another particular action that we take. In actual fact, we just launched another effort in that region to specifically dive into that. Is that going to create immediate return? No, because those actions have been taken already. But we're going to step up there to actually have a really robust detailed solutions for the U.S.A. for the markets that we serve there. And then you have a number of elements where we, let's say, the rest of the world, where big chunks are in Hong Kong, and we have spoken about that, general markets like the U.K., being quite large and Europe in general. Europe, in general, by the way, is generating a decent return on the land side, it can be better, but we should not be too displeased with that comparing with the rest. So that is good. But we're also there. We're taking some steps, in particular, on the land side to make sure that we have a well-articulated market that we serve or markets that we serve and that we have also the right teams focused on capturing these opportunities. Because once again, I see a lot of opportunities in that business. With growth potential as well, but it needs to be focused and tuned with the right people on these jobs. And we have taken a lot of steps already, also what Paul said, but we will continue to work on this without giving you all the details there because it's sometimes even sensitive, but we are taking those steps and we'll definitely deliver on that. And we'll see a better return this year, but in the future, as you say, yes, 6% to 9%. We need to step up another notch, for sure. And I believe it's possible more than possible, also, considering what you have said there around maybe other players in the market that can have a decent return there. I hope that helps you. Any other questions?

Henk Veerman, Kempen & Co. My first question is on the -- for Paul on the cash flow generation in 2020. In the outlook, you say that the goal is to create or to generate sustainable free cash flow. But how can you be so certain that you will generate material free cash flow in 2020, given that your CapEx increases, your working capital may reverse excluding the Southern Star arbitration case as well, and you need to reinvest in working capital, given as you grow significantly? And then you also pay high interest costs, I assume, on the new loans?

Yes. That is all true. I mean, we have growth, working capital will grow. Capex, we expect to be somewhat higher than this year, as in 2019, I mean, this year, and also interest cost is expected to increase. Of course, we have not yet completed the new refinancing. So I cannot speculate on the interest cost, but it will at least increase compared to where we are today. Now to a large extent, it will come from improvement in profitability, of course. So we need to drive improvement there. Clearly, both Marine should continue to -- the journey that it started beginning of 2018. And so far, until now delivered on that. Now we just talked extensively about Land. We will not yet be at 6% to 9% in 2020, but we do expect to make step in 2020. Working capital, of course, is a continuous area to focus on, not only on receivables, but we're also now professionalizing our procurement I think since 6 quarters or so, we are really working on that across the globe. Stepping up, putting more professional teams in place, having a new Head of Global Procurement. So also there, we should hopefully see some further benefits in terms of our working capital. But now it all needs to come from improvement in profitability, clearly. Yes.

And you mentioned in the presentation that you had a EUR 36 million tailwind on top line, but how much was the tailwind on EBITDA on currencies?

That's relatively small. There is a sensitivity table in the annual report of last year, and there will be one in this year. I think, typically, a 10% change in maybe dollar. That's the biggest impact has less than 0.5% impact on our profitability. So if anything, very small. We have a reasonable natural hedge in place.

And then the FX effects on your net cash or your cash position, not net cash. Your cash position were about EUR 10 million...

Yes.

predominantly driven by the kwanza. How much of the 200 million on your balance sheet is still in this currency?

16 million, 1-6. So that's -- the impact of that will get less, unfortunately, for the wrong reasons, but it will get less going forward.

And last question. This is the first press release where in Marine and in land, you give less detail on the profitability in Marine Site Characterization versus asset integrity. Given the large improvement in your margin, though, I think it's fair to assume that most of it is driven by site characterization, also on an absolute basis. How sustainable is that? And is it still reasonable to expect another increase in margins given your performance already over 2019?

No, we've guided, of course, that margins will improve. We're definitely not yet at our mid-term targets where we want to be as a company. We still need to double. So the answer is clearly, yes, it's absolutely possible. If you look at Europe, Africa, where they are. And if you compare it to the Americas, still negative, APAC breakeven and Middle East at 3%. There's a lot of room for opportunity. And every region has its own, let's say, challenges and opportunities that we need to address. Quite a few things have happened in the last, let's say, 12 to 24 months from the trough to where we are today. We are very pleased with the improvement that we've seen in the Marine business. Marine Site Characterization, of course, started this whole journey, but now also 3 quarters in a row, also, Marine Asset Integrity is improving profitability and delivering globally a decent return. Land, that's clear. We are not pleased with the land performance, but working hard to get that turned around. So the answer is clearly, yes. There's absolute room to further improve. But it's a matter of the other things that we focus on today, more than a few years ago. It's selective tendering, it's making sure value-based pricing, the right prices in place, just feel comfortable to lose projects because the pie is getting bigger. So it doesn't hurt as much. I mean, we charter a lot during summertime because we have so much work. And it's better to charter a little bit less and then do less work at better prices than to just go, like we have done during the downturn, the focus was, of course, on asset utilization and just keeping the assets busy, and that focus is now, as we already said a few times changing. And yes, with that, it should be possible to improve margins further.

And I think maybe good to add there is on the Asset Integrity Side, Marine asset Integrity, I think what we have seen the first turnaround in 2019 from quarter 2 and it's sustained in quarter 3 and in 4, better result there as well. But that market hasn't really turned around yet. So that is a lot of the things and the steps that the market has -- that Fugro has taken, but the market still needs to make a pretty big step upwards. So if that asset integrity market also recovers further with the new projects getting launched and new developments really kicked off, then there's growth potential and margin improvement there as well.

Andre Mulder, Kepler. Four questions. First question on dividends. When leverage allows, is that tied to this 1.5x net debt-to-EBITDA? Next question is on your refinancing, the buyback of the bonds, the revolver and the new shares? Can you say anything about the chronological order of those events? Next, the guidance is rather fake. If you want to place bonds or shares why not be a bit more outspoken on guidance, so your backlog is up 10%. So it's quite easy to see that, at least, your sales will be rising. Now you're sticking to capturing market opportunities to drive margins. As if those market opportunities are not there, your margin will not go up. So it's a pity that's too fake. Last question is on defense lines. One has gone now. What about repelling this non-folding certificate? So there's only a handful of companies that still trades on that basis.

Great. I will take the first 2, and then I think Mark can do the last 2. On the dividend, and if you say once leverage allows, and let's say, our leverage guidance that we've given is 1.5x, it's a guidance. It's not one-on-one link. So it's not like once leverage reaches 1.49x that we start paying dividends. If you start dividends, you need to have, of course, a clear view that's sustainable. For many years, you don't want to turn on, turn off, turn on, turn off. That's one. Two, also the absolute level of debt. And on that, we haven't given any guidance, and I'm also not planning to do that now. Is important that debt comes down further, almost regardless of EBITDA improvement. We just want to be conservatively financed. And we've left the pain in the downturn. So net debt should reduce as well. Having said that, it is important for us to pay dividends as well. Fugro has always paid dividends until this deep downturn has started. But we'll do it in a responsible manner. We will not start before we really believe that it can be done in a responsible manner and in a sustainable manner. So it's a guidance, the 1.5x. It's not one-on-one. It's not a hardcoded link.

Resumption is not related to you placing shares.

Sorry, what?

The dividend resumption is not related to your placing shares because that will also get dividend get leverage down, which opens up the opportunity to restart dividends.