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

Good morning, everyone with this half year 2023 results of Fugro. Welcome, everyone. We have some people here locally available and also quite a few people on the webcast. So welcome both parties there. So we'll give you a short introduction to the results of the first half of 2023 and then we'll open up for questions. I will start and then I'll hand over to Barbara to talk about the details of the finances. But before we do that, maybe the first few highlights of the finances of the first half of this year they are visible here on the board in 2 parts. First and foremost, the top line, you see a steep growth of 24.1% of revenue growth and that all has to do with high demand for our services in specifically the energy markets and then in particular also wind at sea. So we also see that coming through in our backlog, in a 12-month backlog with a 21.3% growth there. And then if you look at the bottom line results, the return is also very decent of 8.9% EBIT margin, which is quite an increase and improvement compared to previous year and years, I can say. And that is driven by all the regions, which is obviously also pleasing to see. Net result came out of EUR 71.7 million. And then the free cash flow is also positive for the first half of the year, which is obviously pleasant as well. If we then look at, yes, our targets that we have communicated quite some time ago initially in 2018 to achieve these mid-term targets on EBIT, ROCE and cash flow. We have updated them after COVID. Initially, they were planned to be between '21 and '23, 2021, '23, and we have updated that. We wanted to achieve these targets in '23 or '24. And there was an update needed because of COVID, so many changes we have seen in these markets. Now it's good to see that we are at the moment delivering on all these midterm targets, and that's good to see. If you look at the EBIT margin, and then this is a 12-month rolling results. So if you look back 12 months, then the average is 8.2%. EBIT margin on the free cash flow, we're at 3.6%, just below the 4% that we give, if you would ignore the purchase of the Fugro resilience then we're a little bit higher. And then last but not least, ROCE is now also above the 10%, 12.2%. And we're very pleased that we now can actually move to the next phase for Fugro, and we have announced that at the end of the year we'll come with an update on our strategy on the 14th of November with a Capital Markets Day, and we feel it's time for the next phase of Fugro. As always, we are looking at the projects. It's always good to make it tangible, what we have been doing and I think there are some wonderful projects in Fugro on the board, we can probably talk about that for a full day, but I just have a few examples gathered here. One of the striking projects we're working on is the green energy hub here close by in Wilhelmshaven in Germany. It's an important project, a key strategic project, development of green energy. It's a combined project where we do nearshore and onshore work and then also complement it with quite a bit of consultancy work. And we're using new technology, 3D subservice scanning technology, we call it Swans, and that's also combined with the processing that is done with machine learning which I think is really increasing the accuracy of the models that we -- the subservice models that we create. And this was also key to actually meet the very strict deadlines of the project, which was actually limited due to the nesting periods of migrating birds. So here, we can see that the technology is really helping us to speed up, and this is also being used now more and more in other projects around the world. Another example is the offshore development, wind development for leading light wind, a new name for many of you which is an American-led partnership between a lead developer in energy and also a New York-based co-developer, Energy RE. And this is a project that's also a combined project where we integrate multiple services, primarily on the site characterization side, so very early stage in the work that we normally do. And it's a combining geophysical -- geotechnical work, but also environmental baseline studies to actually define the whole ecosystem there offshore, and then they can actually start to design their wind farm. Quite an important project for us, a sizable project, and we have started this project in the first quarter, and it will continue probably until mid-2024. Then another project good to mention, which is an important project in the Middle East. It's the lower Zakum for ADNOC, which is also a combined multi-business line operation, as we call it, the site characterization on the marine side, subsea inspection, but also land and nearshore activities involved. And this is spread out some projects or some elements started earlier than others. And you also read in the press release that this project is also specifically on the land side, a bit delayed and is pushed into the second half of the year. But we're now up and running on the marine side and the nearshore side which is quite important we do multiple services there and a project that will last for quite some time and also consultancy work is helping there to actually advise the client on the right decisions to take. It all has to do with the expansion of the existing field there. And then the last project, which is also a very striking project, has been on the board for quite some time for Fugro Star of the South. It's the first offshore wind project in Australia. Fugro got involved in 2019 and then started to do, yes, the geophysical surveys in 2020. And then we see -- and this is quite typical for the work that Fugro does that we get involved in multiple phases. And the geotechnical phase only started this year, which normally is a little bit closer together but in Australia, also due to COVID there were some delays. And finally, we can also do the geotechnical side, and then they can start developing the offshore wind farm, the first one in Australia there. Quite important because Australia has probably 20-plus offshore wind projects on the board. There is license rounds that actually also planned for this year. Some of it already happened, and there's quite a bit of work coming up in this area of the world as well. So I think some great examples to take note of, and it is always good to make it tangible and to understand what Fugro really does in the field. Then if we look at our key markets, what is happening there? And I think there are 2 main elements that are actually influencing the markets that we serve the world, and that's obviously climate change, a lot of discussion around that. And then also the energy trilemma, you might have heard about that. It's basically consisting of 3 main elements there. It's energy availability, energy affordability and then also the wish to go greener. So those 3 things are often competing with each other, and that's also what we have seen over the last period of time, especially after the war in Ukraine. In Europe, it is quite important to have the affordability and availability of energy and then the wish to go very fast on the green side. And this is sometimes a bit of a conflict and there's a balance to find there. And that has an influence on the markets that we serve, the energy market, the infrastructure and the water market, both of these elements. Renewables, obviously steep growth, we have seen quite a bit of growth there in renewable energy, but there's also still traditional energy required from oil and gas, particularly gas is more popular nowadays, but you see also those markets to continue to be quite important. Infrastructure is changing because we need sustainable infrastructure. We need also protection for sea level rise but we also have periods of dry period, so to say, where there's not enough water. So there are quite a bit of complex questions around water in the world. Too much water, not enough water and then also focused on having clean oceans and that is also something that we'll see and hear more about moving forward. Then slowly getting to the end of my section. But first and foremost, the most important slide, I always think that's the diversification of Fugro over the last, yes, 8 to 10 years, you can see quite a diversification. We came out of a dominant traditional energy, oil and gas market, 80-plus percent oil and gas, and we're now less than half of that. We see, obviously, also oil and gas picking up again. This has to do with 2 things. This particularly this year or this first half of the year, we have seen that a bit more often at the beginning of the year, we see a bit of a swing there as well. But infrastructure is down due to the land business, particularly that is primarily land focused and therefore, the percentages obviously shift a little bit. But you also see that the activities in oil and gas are rising and you see that growth there on the right side, the 36% in oil and gas and then even more so on the renewables side, 60%, which is obviously very steep. And that all has to do with the fact that the whole world actually wants to develop offshore wind fields right now. That is moving around the world. So we saw that in Europe, Africa already for 25 years. So last year, we celebrated 25 years of activities in offshore wind, and it had an additional boost after the war in Ukraine with the -- yes, the energy trilemma, as I just mentioned. And then we also see now Americas already for 2 years picking up, and that's really happening now Asia Pacific and Australia is coming up more steeply as well. So quite important. The decline in infrastructure as mentioned before is related to the reduced land revenues, particularly due to the Middle East but also due to business rationalization that we have seen in Europe. Last but not least, you see a bit of a swing, and we have seen that over the last year also on the water market, which is still very small, and then 1 or 2 projects can make quite some difference. And with that, I would like to close this part of the presentation and hand over to Barbara to talk more in details about the finances before we go over to questions.

Thank you, Mark. So equally, as Mark has just mentioned, I'm pleased to present this set of results. The 3 components: growth, profitability and cash flow. Across the globe we are benefiting from high client demand in our end markets from our solutions. And you can see that north of 20% growth, both on revenue and on backlog. If you then look at profitability and margin expansion, it's not about growth per se as we've said in the past, but it's about profitable growth and it's about controlled growth. And there, you can clearly see that we've been able to expand our EBITDA and EBIT margins. And then lastly, on the right-hand side we look at cash flow. And we've done quite well on the cash flow, increasing the operating cash flow by EUR 59 million in the first half of this year. And in the next few slides, I will discuss the underlying developments of each of these parameters. So as part of the path to profitable growth strategy, and Mark already showed this slide in the way as well, I thought it was interesting to show you the trajectory that we've on and we've been on. This is a gradual improvement that we've been able to realize on a quarter-to-quarter basis. And if we look at this trajectory from last 12 months, again, full year, all 12 month numbers on the board, last 12 months in June 20, 3 years fast-forward to LTM June 23, we see a top line growth of more than EUR 400 million. And we see a margin expansion on the EBIT line of 3.2% to 8.2%. And then we have COVID in between. So we have gradually but steadily been improving our margins, if you think about the last 12 months development. And the same is visible for the backlog, within that same time period we've increased our backlog with more than EUR 450 million. Profitability. In the second quarter of this year, we have realized a strong year-on-year improvement just like we did in the first quarter from negative to positive 5.4%. And in the second quarter, as you can see in the middle, it was 11.8%, up from 8.7%, resulting in 8.9% EBIT margin for the first half of the year. And this was a combination of factors of all regions contributing, overall, better contracting conditions, increasing asset utilization and better operational performance, which led to this improvement. And the increase was most visible and significant in the marine site characterization of the business. If we then look at Marine of the 2 businesses, we have marine and land, let's zoom in the Marine. The increase in revenue amounted to 30.9%, mainly driven by offshore wind, but also by increased activity levels in the oil and gas markets. The vessel utilization was up 73% compared to the first half year in which it was 67%, when we had a relatively high number of scheduled vessels maintenance activities. So a number of vessels were actually not sailing at that point. And all the regions, as you can see, are reporting higher margins, and this results in a step-up of 30.9% on the revenues, but equally a step-up and a margin expansion to 10%, again due to better contracting conditions and operational efficiencies. And this in the marine site characterization is where we see the largest growth, especially, as Mark said, wind on water. And whereas we still experienced some teething problems last year with asset availability and project execution due to the sudden client demand acceleration, we have now been able to improve the margins across the board. And I would like to highlight that the Marine Asset Integrity margins are also up. Then we look at the other side of the business, land, and Mark already alluded to it. In land, our revenue increased by 8.6%. And this was supported by near-shore activities for offshore wind and LNG developments. This is a continuation of what we've seen from last year. And this provides a good insight actually and proof point into the synergies between our marine and land business. In the Americas, for example, the lab business benefited from nearshore activities in the Gulf of Mexico and in the U.S.A., as well as from multiple remote sensing and mapping projects. And we've seen the same in Europe, Africa where site characterization reported good growth, mainly in the U.K. from nearshore and onshore activities. Now in the first half of the year, if you look at the EBIT margin part of the slide, you see that the margin was impacted by 2 isolated events in the Middle East. It's some execution challenges in a way of we had downtime on a jack-up platform, which lasts longer than what we had expected and we had the slippage of a launch project into the second half of the year. That was the project example that Mark also highlighted, which is multi-business line projects. And as we've seen as we've shown over the past quarters, there is an underlying structural improvement in the land margins and this is supported by all regions. It's supported by the business rationalizations and the restructurings we've done in multiple countries. And as I've said before, land is a much local business, much more local business than marine. And things will be happening, and this will have our continuous attention in terms of looking at rationalization or is it profitable? When not? We moved out of Russia, as you all know. So things are happening in that portfolio and will continue to happen in that portfolio. Overall, we're very positive on the outlook for land and especially, again, as I mentioned, on the nearshore component of it, where land meets marine. Then let's look at the cash flow. The free cash flow increased by EUR 85 million. And this was mostly the result of the increase from EUR 70 million to EUR 131 million, EUR 60 million of higher operating cash flow before working capital. And we saw an increase in working capital and we knew that was coming because we have this top line growth and that will consume more working capital. Our growth was 24%, that is impact on working capital. The CapEx for the first half of the year was EUR 72 million, and I'll get back to CapEx on the next slide. But first, let's have a look at working capital. In absolute terms, the working capital increased to EUR 275 million, which can be actually fully explained by the combined effect of revenue growth and the seasonality. We see this happen every year moving towards the end of Q2. However, thanks to the strict working capital management, we've actually been very able and very capable to control the increase in working capital. As you can see, it was 15.7% last year for the same period, declining to 14.1% of last 12 months revenue. And you see the DRO decrease from 89 days to 82 days. So we're very focused on it. And it's important because with the rising interest rates, it's important to continue to focus on working capital. What I have said also is that we are working with larger projects now. The sizes of some of the projects are really big, and that also is a counterbalance consumes more working capital. So overall, I'm actually quite pleased with the working capital movement that we can show here today. Now let's look at CapEx, 72 million for the first half. And as of last year, our investment levels are trending up due to the need to adjust our asset base. Double-digit growth requires adjusting asset base, requires adjusting the employment base. We need more assets and more people to execute the work. And of course, we said part of the top line growth is price, which, of course, has priority over volume, but it's a combination of both because the demand is so strong. And we are acting on that. And the increase in CapEx now is mainly related to expansion and transformation CapEx. And with transformation CapEx, we refer to the investments in future technology and solutions, the digitalization of our business, the conversion of our vessels to a higher reliability, to methanol solutions, to meet the demands and the commitments we've made on the Net road map and the design and construction lastly of uncrude vessels. And in the first half of the year, CapEx increased slightly, and that was mainly due to the delivery of one of the new geotechnical vessels that we have acquired. And we've renamed this vessel, the Fugro Resilience. It was delivered in the second quarter and we are undergoing a conversion program for the vessel to become workable for the geotech market, and we expect the vessel to be working from early '24 onwards. Now the maintenance CapEx was below for the same period when a relatively large number of vessels was in scheduled periodical maintenance, as I just mentioned. So that's the comparison. But as previously guided for the full year, the CapEx is estimated at EUR 200 million to EUR 225 million including the 2 vessels of which the second vessel will be delivered in the second half of the year. So let's look at the bottom of the P&L. Finance expenses were in line with comparable period last year. They reduced marginally with JPY 50.5 million resulting from lower interest charges secured from the refinancing in July last year and lower interest expense on the convertible bond due to the partial buyback in the second half of '22. However, this was offset by higher variable interest rates and an increase in leases, mainly vessel related. The exchange rate variances are mainly related to the devaluation of the U.S. dollar and related currency compared to the same period last year where we saw it go up and go down. The share of profit of equity accounting investees includes CG, our Chinese joint venture and the payment we've received from Global Marine Group, as we've communicated earlier to the market of EUR 9.7 million gain on the disposal of Fugro's remaining interest. Now the income tax expense of $4.6 million for the period comprises a current tax expense of EUR 60 million, largely offset by a deferred income tax gain of EUR 11 million, driven by the recognition and utilization of previously unrecognized tax losses mainly in the U.S. And you can see with the performance of the U.S. improving, we are actually able to use those losses. Then let's look at the balance sheet. We have a solid balance sheet. Net debt amounted to EUR 266 million. That's actually higher than compared to the end of last year when it was EUR 207 million. And this was mainly due to an increase of leases, and we've spoken about the increase of leased vessels and this is the impact of IFRS 16 as we include that. So you can see that in the chart on the bottom right of the slide. Despite the steady increase in the last 12 months in EBITDA, this has resulted in a slightly increase in net leverage. So we now have a leverage of 1. Finally, with regards to the group-wide financing, I would like to comment that we have extended the maturity of the debt facilities by 1 year. So the final maturity is not 25% now, but August 26, which gives room and flexibility, so we're quite pleased with that. And with that, I'm going to do the last slide, and that's the outlook. As mentioned, we expect ongoing revenue growth, especially in the energy markets, especially in particular, the renewable market. The EBIT margin and return on capital employed are anticipated to be within the midterm target range of 8% to 12% and 10% to 15%, respectively. And free cash flow is anticipated to be positive. And while we were still faced with an uncertain macroeconomic environment and geopolitical movements, supply chain and inflationary pressures, we remain focused on these as well. And in conclusion, we are delivering on our midterm targets, and we're getting ready, as Mark mentioned, to move into the next stage for Fugro. And at the Capital Markets Day in November, we will update the market on our strategy going forward, our future ambitions on the midterm and the related targets. Thank you very much. Handing back to Mark.

Yes. Thank you very much, Barbara. Okay. This means that we're now getting to the moment where we can get some questions, and we'll try to answer. So that will come out of the room here. So feel free to ask questions.

Good afternoon. Congratulations with your results... Nice start of the year. So if I'm looking at, let me say, the first quarter of 2022, then you were taking some measures to act against the inflation in what sense did it impact your results in the second quarter and what is there still the leeway to go further? And how is the situation with regard to utilities and energy costs, et cetera? So maybe you can elaborate on cost anyway. My second question is about the infrastructure is down, oil and gas and renewables are growing. As far as I know, infra is mostly on land and renewables and oil and gas, mostly offshore. How do you handle that in terms of employees, et cetera? Because it looks to me there's somewhat an imbalance in that respect. And my third question and my last question is about the CapEx, EUR 200 million, EUR 225 million. And it looks to me that your Topaz vessels, let me say, the pure nominal acquisition of those is maybe EUR 50 million but you still have to convert them. So my question into geotechnical vessels, my question is, is the yard capacity available? Have you arranged that? And it's not a part of the CapEx of the EUR 225 million being passed on to 2024, given the fact that the last Topaz vessel or the Fugro resilience or Fugro places or whatsoever, will be used into, let me say, will be converted into 2024. So maybe you can elaborate on that as well.

Thank you very much, Quirijn for the questions. We'll answer them together. I will give you -- start with the first question and then I'll hand over to Barbara to complement that. So we spoke about measures that we have taken against the inflation. And the first measure that we obviously will have to take is increasing the prices. And we have been doing that for some time. Obviously, trying to factor in the cost increase on material but also in particular, salaries that move up and we have been doing that a bit longer than only in the first quarter of this year. So we started obviously much earlier last year with those measures. They have obviously also impact on the second quarter. However, the tendering that is done right now is probably for quarter 3 and later even for next year. So we need to factor in all the time, basically what the cost is doing and how the inflation is behaving that we step in quick enough to correct for that and that we at least are not on the wrong side there eventually when we start to execute the work. Maybe more generic on cost, Barbara, if you want to complement?

Yes. I think it's as Mark says, a lot of it is now included in the contract. So there is the composition of, i.e., the new normal and the fact that we continue to make our contracts more robust, and that is ongoing. And as I said, controlled growth also means controlled cost with that. So where we are get more flexibility and the derisk in the supply chain is there an important element of making sure that we also, from a cost, for example, from a liquidated damages perspective or else, we get the not so stringent as before contracting conditions.

Yes. And to complement that, I think what we also do is, obviously, early ordering of critical spares and critical goods that we need because some of the equipment that we need, for instance, to build additional drill rigs for the vessels that we just acquired, it takes a lot of time so we have to think further ahead and obviously kick off these orders earlier to be able to serve the market on time. Okay, the next question was around infrastructure down oil and gas renewables going up and then saying land, marine. I think what is important to note is that we have given some of the reasons on the infrastructure related to land, why we have seen some changes, one-off changes there related to the Middle East, the breakdown of the jack-up which meant that we couldn't execute the work anymore, which had an impact on the revenue. And then also the project, specifically on the land side. It's a combined project, as we said, also marine elements to it there offshore, but also onshore work related to that and that onshore work is actually starting later. If you take those measures, including the rationalization of the business that we have done in Europe and one of the items there is, for instance, the official closure of and sale of the Russia entity that was still in the numbers early last year, first half of last year. So that altogether had some impact. If you would take those all into account with the growth that we have seen, 8.6%, then land underlying is doing also very well in that sense. So we also have to say that oil and gas and renewable work, especially the renewable work has an element of nearshore and that nearshore has executed and also reported in the land business because there's a lot of land expertise and equipment used in the nearshore activities. So it's really complementing each other. And that means that land is also reporting revenues on the renewables side. So in that sense, we believe that it's still complementing each other. The revenue difference is primarily driven by the asset size and that you have a lot of vessels involved on the marine side. People wise, actually, it's quite equal. If you look at the people there might be a small difference, but we need a lot more people on the land side to generate the same amount of revenues. So that's what we can say about the second question. And then the last question is about CapEx. And I will say something about the yard and I hand over to Barbara there. The yard for the resilience is secured, n fact, the resilience is in the yard so absolutely no problem and we obviously also have all sorts of things arranged for the second vessel that is coming in later. And in that sense, yes, Barbara, you can say something about where the CapEx falls in which year because [indiscernible] you obviously anticipating that it has some impact, Barbara?

Yes, a large part, so we spent EUR 72 million in the first half. We're still guiding for EUR 225 million for the remainder of the year. So it is indeed -- it's more to the back end, so to speak, so will there be overflow? Some of it, yes, there might be some overflow on the hand, we can already say that large items are committed. And why is that? Because it comes back to what Mark says. And we have learned to be more agile, we had the Quest, we had lessons learned and what we see in the supply chain, especially on steel, electric cables, the supply chains are just -- also forced you to plan ahead better, but sometimes also for us to commit earlier but at the end of the day, to get the better execution of the CapEx. And that is really what we're focused on. I think we're really getting better at that also in timing when a vessel is in the yard or not. And that's -- because if it's not out sailing we're quite busy. We try to maximize and optimize utilization. So this, I would say, we're very much improving also on the internal discussions on executing it. So will there be overflow? Maybe there will be overflow especially on the 2 new vessels, maybe -- however, the commitments that we will have to make earlier may counterbalance that. So the guidance for now stands, I would say.

And maybe good to add there, Quirijn, it's running according to our plan so in that sense no major changes there in how we handle those 2 new vessels. And as Barbara says for the second vessel and as you said yourself, there will be some overflow to the next year.

Can I ask some questions?

Absolutely.

Andre Mulder Kepler. First question on staff shortages. What I see with companies is they're saying that inflationary pressure of raw materials easing but that staff is still a big problem. What do you encounter in terms of staff shortages and your ability to attract sufficient staff with these kind of growth numbers?

Yes. A very good question, Andre. And it's obviously one of the things that's high on our priority list, and we do a lot on it. We have hired more than 1,200 people in the first half of the year. That's exactly double as we have done in the first quarter so it's roughly 600-plus people per quarter that we hire and that we started a train. We have seen over the whole world reduction of attrition numbers. So we do better in maintaining our staff or keeping the staff in Fugro, which is also important because we need more people. Looking at the number of vacancies and I haven't done that this week or so, but we had close to 1,000 vacancies worldwide on many different positions and many of them are obviously operational positions. So while I have the chance, we need a lot more people, and we have great jobs to offer to them. We are able to find people, they like to join Fugro. We have a good vision and where we want to go. I think everybody can have an impact on key themes in the world, climate change, climate change adaptation work, energy transition, so I think that really resonates with staff and people that join us. And when they join us, they also report back that Fugro is really doing these things and is really contributing to that better and safer world. And that is, I think, helping us for sure to find people. Now having said all that, yes, we still have a lot of vacancies. We need to do more. We need to also train a lot of people, and we are also professionalizing our training schools, we have for more than a decade a very sophisticated Fugro Academy to train our people because a lot of the things that we do is very specific for Fugro. So we can't really hire people that are trained for Fugro work, so we need to train them up ourselves. And we are actually ramping up those training capacities and the way we look at it, simply to also modernize it, simply to handle more people, new staff to -- that join Fugro. So it is a major topic on the board and we will continue to really focus on that further enhance the capabilities to handle more new staff. Having said that, we also need to grow, as Barbara said, in a controlled manner. So we cannot ramp up maybe faster than we currently do.

A question on the backlog. You gave a split of the drivers of sales, which, for example, oil and gas at 42%. Renewables at 32%, have you got any indication of how the backlog is structured?

Barbara, do you want to answer that?

Well, the backlog is structured, I would say that the trends that you see now in the match and the buildup we could expect the renewables to continue and oil and gas actually at similar pace. So I do think that on the infrastructure side as we had some big items there in the moment, that's a GDP-related business that we will see how that will develop. But we're quite positive overall on that. Water is changing in terms, as I said, it's a small portion of the overall backlog still in terms of end market segments. So you see more variable movements in the past, but I think the longer outlook for that is positive.

So looking at these right stat numbers, does that slowing of oil and gas and actually a decline in last year, does that also show up in your backlog?

Yes. You see always differences in our backlog behavior throughout the year. And I think what Barbara is saying is very true that we see a similar picture in our backlog as we see in our revenues. So in that sense, no major shifts there apart from what you just said on the infrastructure side, which was obviously influenced by some particular items. So we'll see over the full year a similar trend that we have been seeing over the last couple of years. So as we continue to further diversify we believe that renewables will further grow, and that is quite clear. You have heard also probably over the last couple of weeks some delays and some cancellations on offshore wind projects which is happening in some places in the world because of the rising cost and the supply chain issues that clients and contractors face problems with execution sometimes on some wind farms. We don't believe that it will have an impact necessarily in the work that we are doing because there's so much that needs to be done in the forefront that these things normally will continue. We also expect oil and gas to continue to grow in the upcoming period because there have been a lot of underinvestment over the last, yes, 5 to 7 years in oil and gas, and they need to actually ramp up, and you can also get more details on that from the various oil companies. But they see obviously the oil price and share price moving as well and they very often directly respond to those behaviors, that doesn't mean it's a rationale around what is required in the market rather than what they actually make from the current production.

2 sort of remaining questions for timing. First one, again, on the backlog, you now shall work for 12 months. You commented in the past that especially offshore wind has a longer horizon. Are you still thinking of possibly producing a backlog, which shows the total volume instead of just 12 months? That's one question. Second question is, in offshore wind we see the Vikings entering the market, TGS, PGS. Can you make any sort of comparison what they're doing and what you're doing?

Barbara, maybe your first question.

Yes, we have indeed -- what we have been seeing in the market, especially renewable market is that we are gaining a bigger contract spending more than one season. Now, this indeed, -- this has been extending our backlog for part. We already have, of course, multiyear framework agreements in place for a long time. That was more on the oil and gas side, so no news there. We are -- this is something that we are contemplating in the future but it's not on the board right now. This is potentially a change that we would be considering but that's earliest next year, I would say, because it also needs to be meaningful. And if you look at the -- how we are now communicating about the backlog, if you look at the chart that I showed over the last 3 years, as -- we believe it's a pretty solid leading indicator for how Fugro is performing at the moment. So no news or change in the foreseeable future, I would say.

And then related to your second question, TGS, PGS and other players. I could say there is everybody is moving into the renewables business. So -- and also competitors are ramping up, and there's more business. So there is a lot happening there. We're following that very closely. TGS, PGS, both obviously make a nice fair field not too long ago. We also have agreements with them and work together with them, make use of each other and work more often in cooperation with each other as well. If you look at what PGS recently announced starting a project with P-Cable which is very similar for high-res, large-scale high-res, relatively shallow water or shallow subservice seismic shallow seismic that they collect is very standard work that we also have been doing. The key thing there is to make this business attractive for yourself, you need to have the right equipment, the right people to do it because it's quite critical in how you actually execute the work. So we'll have to see if they actually managed to stay in this business over time. I have no idea it depends a little bit how busy they are on the seismic side, I would say, on the deep seismic. But I think we have to realize that there are a lot of players now in offshore wind. 5 years ago, there were only a few because there was plenty of other work around and now everybody is jumping into that business more than before and at the same time, we believe that we are well positioned and have also enough work to capture there. Thank you, Andre.

Thanks.

Thijs Berkelder, ABN AMRO ODDO BHF. First question is on your outlook. In H1, you already delivered an EBIT margin of 8.9% despite the problem still in the Middle East. And we're looking at second half versus first half, typically, Q3 is more or less similar as Q2 and Q4 normally better than Q1. So what is the outlook for the second half? The Middle East project is now ongoing. So is it logical to expect 10% margin already in the second half?

Yes. That is a logical question to ask, and I think you have done your sums yourself as well. Yes, I think everybody knows that it's with also the backlog that we have there that normally second half of the year is not worse than our first half of the year. Having said that, we have seen in the first half of the year that everything went well. We had actually extremely good weather in some of the first and also the second quarter. So we had some great execution there. No breakdowns, particularly in the operations. So despite the fact that I think you're totally right in what you say. I think we need to assume that things go wrong in the work that we do, and we do a lot of work, a lot more work, 24% more work, so to say, -- it's not all volume, as Barbara said, it's also price. But there is, yes, always the element of risk that we need to also take on board. That's what I can say. And we have guided for, obviously, within the midterm margin range for EBIT.

Clear. Second question coming back on CapEx. Just to check, you still have a purchase option for the Voyager and the Scout. Is that included in that CapEx number or not? And what -- there's a statement in the half year report on a potential further extension of the lease. Can you maybe explain a bit more on that?

That is what we're contemplating at the moment. As you know, last year, we lifted the owners option that -- so we could secure the vessels. And we're now in the process of extending most likely the lease, yes. That's what is in the midyear report. Yes.

But it was not part of the CapEx number in the guidance?

No, we are looking at some CapEx for the Scout and Voyager. That is partially this year, next year and the year thereafter as we are making investments in those 2 vessels because we feel they are good vessels, and it's worthwhile the investment. So there will go CapEx in it. So some of the CapEx and the 23 numbers is going towards these vessels.

But it's not the purchase price?