Fugro N.V. ($FUR)

Good morning, all. Thank you for dialing to this webcast -- audio webcast. Catrien van Buttingha is my name, Investor Relations. I'm here with Mark Heine, CEO; and Barbara Geelen, CFO. We have a short presentation to give to you about the Q1 trading update, which will last, I don't know, I think, around 10, 15 minutes in total max, and then we'll open the floor for your questions. Mark, please go ahead.

Yes. Thank you, Catrien. Good morning, everyone. Q1 2026 trading update. As anticipated, Q1 was seasonally low and the market conditions remain challenging with a lower offshore wind activity impacting our top line. Revenue declined by 2.1% on a currency comparable basis. We saw growth in other markets, especially oil and gas and infrastructure, largely offset by offshore wind softness. The EBITDA margin slightly improved to 10.4%. EBIT margin was in line with last year, driven by lower revenue, largely offset by cost reductions. The EUR 120 million cost reduction program is completed, but we're also prepared to take further action if required. Free cash flow improved due to significantly lower capital expenditure. However, working capital increased because of large ongoing contracts, high activity of billing, especially at the end of the quarter and very high payables last year in the third quarter. Remain focused on what we can control, maintaining cost discipline, actively managing vessel capacity, improving cash flow conversion through reduced capital expenditure and lowering working capital from elevated levels seen in the recent quarters. At the same time, strengthening sales momentum remains a clear priority with a strong focus on accelerating the conversion of opportunities into awards. Our backlog for the coming 12 months stands at EUR 1.4 billion, slightly lower than last year, 3.5% lower with a strong tendering activity across markets. Next slide, please. The direct impact of the conflict in the Middle East has so far been largely confined to our operations in the UAE and Qatar. And this relates to, amongst others, to our two key vessels there, Fugro Proteus and Pacific Grouse. The latter one is a charter, a long-term charter that will probably release later in the year. And yes, they have been facing limitations on operations in the UAE and Qatar. And please note that these vessels currently do not require the passage through the Strait of Hormus. The other vessels in the region, the Kobi Ruegg and the Fugro Mapper have been and are operating outside of the affected area and are less exposed. Still, we have experienced some knock-on effects in other countries and regions. Going forward, we continue to monitor the situation, ready to respond when necessary with safety of our people as our foremost priority. Next slide, please. If we talk about the markets, a brief update compared to what we said earlier in the full year presentation -- publication. Offshore wind markets in Europe are indeed showing first signs of recovery with increased tender activity in several key markets in quarter 1 2026. And that's notable in the U.K., Germany, Netherlands, France and Ireland. The war in the Middle East, which might well have meaningful and long-lasting implications for the global energy sector with increasing localized oil and gas investments and a diversification of the energy sources. We dive a little bit deeper in oil and gas, what's also here on the board, and we spoke about that before as well. Energy companies in oil and gas are selectively expanding their oil and gas portfolios through targeted exploration programs with obviously a strong emphasis on tight time lines and cost efficiency. And there's heightened attention on energy security and energy independence, and that's also expected to support continued client investments, particularly where the higher oil prices improve project economics. If we talk about the offshore wind market, we already said that we see the signs of recovery of the market. It will take some time. So it is important to note that this is obviously happening. We see it happening. We see activity increasing over time, but it will take a little bit of time before that materializes where they increase installations only from 2030, '31 onwards. In Asia Pacific, short-term challenges remain, as we said before, but the sector is cautiously optimistic about the auction frameworks that are revised there and the bottlenecks are addressed. Obviously, we don't see any new fields coming to the market in the U.S. albeit we saw the first emerging wind activities in Latin America, Brazil and Canada. And with that, I would like to hand over to Barbara.

Thank you, Mark, and good morning, everyone. Thanks for joining us. I want to first talk about revenue and margin developments. In Marine, revenues declined by 2.4% with the vessel utilization of 60%. Overall, we increased market share during the period despite ongoing pricing pressure. In the Americas and to a lesser extent, Europe Africa, lower volumes of offshore wind work were only partly mitigated by higher activity levels in traditional energy markets. Middle East and India recorded growth driven by surveys for multiple field developments in the UAE and Saudi Arabia. The Marine EBIT was adversely impacted by delays arising from vessel-related challenges on an inspection and monitoring project in Denmark. Land revenue declined marginally, as you can see. The EBIT improvement was mostly related to the strong growth in nearshore projects in Europe-Africa, which was partially offset by permitting delays stemming from the prolonged U.S. government shutdown. Next slide, please. Now first, let's look at the free cash flow graph on the left. First of all, operating cash flow before changes in working capital was EUR 13 million for the first quarter of the year. The working capital increased by EUR 55 million, and this was driven by higher billing due to higher activity towards the end of the quarter in combination with high payables for the comparable period last year. A couple of additional comments on the working capital. While we previously noted large receivables at year-end 2025 have been collected, we are reporting an increase in Q1, as you can see on the right-hand side graph compared to year-end 2025. And this is outside our targeted 10% to 15% bandwidth, which we are always communicating about. And obviously, we're not pleased with that, and we remain focused on bringing working capital back within the bandwidth. And also please note that March 2025 was exceptionally low. If we look at the cash flow CapEx, one more comment. You can clearly see comparison of the spend EUR 101 million in Q1 last year versus EUR 31 million of this year. The net leverage amounted to 1.8x at the end of March. And in connection with our full year guidance, we expect this ratio to return to below the 1.5 targets towards year-end. Next slide, please. And if we look at the backlog, the 12 months backlog stands at EUR 1.385 billion, which is a modest 3.5% decline. And just like previous quarters, this reflects the step down in offshore wind-related activity since Q4 2021. And I do want to point out that this is a lower decline than we have seen during the past couple of quarters, and this decline was largely mitigated by successful replenishment of the backlog with oil and gas and infrastructure projects. And this underscores our ability to recalibrate our business to our diversified and market-agnostic business model, serving clients across different end markets and geographies. And we see a solid tendering activity across most markets now, although conversion into awards remains slower than usually. And now I would like to hand back for the outlook to Mark.

Thank you, Barbara. For the outlook 2026, we can say once again that we anticipate margin improvements as our cost savings and efficiencies are now fully implemented. The capital expenditure will be reduced to EUR 150 million to EUR 165 million for the year, well below the 2025 levels. First quarter, you saw is EUR 30 million compared to EUR 100-plus million last year. We're closely monitoring the situation in the Middle East. So far, the impacts have been mainly confined to the UAE and Qatar, but the broader implications are uncertain in the longer term. The safety and well-being of our people remain our top priority. That's always good to emphasize there. The medium- to long-term outlook across our core markets remain sound. In addition, emerging markets, including nuclear, critical minerals and security solutions for safeguarding vital undersea infrastructure also present promising midterm opportunities. With that, I would like to go over to questions. Over to you.

[Operator Instructions] Our first question comes from Thijs Berkelder from ABN AMRO ODDO BHF.

I first want to thank Barbara for her period as CFO, and I wish her good luck in the rest of her career. Can you give us any update on the succession track of the CFO? Where are we? Second question is on small nuclear reactors. You were active there for AI and data centers in the U.S. last year already, Rolls-Royce now three of these SMRs in the U.K. and there are many more to come in the rest of Europe. And finally, in Marine, offshore wind is weak, but the grid market is very strong. Are you switching in Marine from -- in focus from offshore wind to grid? And is grid reported in renewables or in infrastructure?

Thank you, Thijs. So three questions. First, the succession of Barbara. I guess I need to answer that because that would be strange if Barbara does that. But obviously, thanks to Barbara as well for her period. Let me emphasize that. At Fugro, where she really brought the company to the next level on the financial side. So thanks a lot, Barbara. We're in a good decent process for succession of Barbara for a new CFO that runs well. And as soon as we have more to announce, then we'll let you know. And the second question was about nuclear SMRs. We are involved in those. We have communicated about that with a project in the U.S. last year. We have also secured the next project there, and we're bidding for a few projects in the U.S. So this is something that you will probably hear more of from Fugro moving forward. We also spoke about the partnership that we signed for the U.K. with Fermi. So we're also really on top of that moving forward on this market in Europe. Europe obviously still needs to make some changes around accepting nuclear developments in some -- in the wider European region. So this is to be done. And then I expect this also to take off in the rest of Europe. We'll be on top of that. In the U.S., for instance, we are one of the three parties that can actually do the ground investigation work and be accredited for that. And then the last question is around the grids and offshore wind. Indeed, the grid market is active. That's obviously onshore, then we will put that in infrastructure. And we are involved in several of these grid developments, for instance, in Germany with the line interesting development there, obviously, but there are several other activities that we're getting involved in. But if it's offshore, then it will be part of renewables. So that is what I can say there.

The next question comes from Philip Ngotho from Kepler Cheuvreux.

I have three, if I may. First of all, on the comment on the cost reduction program that you could take additional measures if required. I was wondering what measures that could possibly be because I mean you have done already quite a bit, of course, in terms of FTEs. So where could you still see cost savings opportunity if it's needed? Second question is also on the comment that you made that you're taking market share despite ongoing pricing pressure. I was wondering if you could provide a bit more commentary around that. Is the pricing pressure also intensifying versus the last quarter? And in the past, you spoke, of course, about geophysical versus geotechnical where geophysical is much more competitive. Is that trend the same? Or is geotechnical also seeing pricing pressure? And I'm also wondering, are there a situation where you're choosing not to bid just because prices are not right in your view? And last question is on working capital. I was just wondering if you could indicate which regions saw the largest deterioration in Q1.

Barbara, you might want to start with the last one, the working capital?

Yes. First of all, thanks going back. But yes, so on working capital, what are the regions? Well, there is some distinction to be made in the regions. There are -- as we mentioned before, there is in APAC, there are some large contracts which we are executing at the moment, and we expect the working capital to decrease there as a result of these large contracts. Middle East has been hampered. You will not be surprised also by the Ramadan and the conflict. And there, that is also a different, I would say, how should I say that it's a different structurally situation in the Middle East of working capital as we are all aware, Europe, Africa is very sound. And that is also where the revenues towards quarter end and the invoices send out are mostly located, I can say. That's why we also say that the receivables portfolio remains sound. And the Americas is pretty stable, I would say, from a working capital perspective. That's what I can share. So there are some differences within regions. Overall, the sum of the part is too high at the moment, but we're confident we can bring that back within the bandwidth and some regions are already showing that in April due to the good collections. That's what I can share.

Okay. Thank you, Barbara. Then the other two questions. So the cost reduction program, I think you're right, Philip, that we have done a lot. So in that sense, a small further cost reductions are not going to make a difference, then we need to look at our assets where we are actually also preparing this year for a few changes. If you take assets out, then obviously, everything related to those assets, that cost will come down as well. I spoke earlier about a vessel in the Middle East, a geotechnical vessel, the Pacific Grouse. That will be taken out once we have brought the resilience over from the U.S. to the Middle East. Obviously, we monitor the situation there very carefully if we want to proceed with that. But this is the plan and the Pacific Grouse will absolutely go out this year, latest, I think, September time, but maybe a little bit earlier. We're also looking at Explorer beyond lifetime. That vessel still operating in the Americas, also geotechnical platform will take out in the second half of the year. The date or when we do that is primarily depending on when we don't have work anymore for that vessel. She is at the moment working. So that's good. We're also looking at taking a geophysical vessel out, the Meridian this year. This is another thing that we're going to do and not replacing those vessels with something else. We have a few more vessels that had low utilization also last year and need to change. For instance, the Equator in Asia Pacific, we are in the process of flagging her Indonesian so that we can deploy her in that country. And we're also obviously deploying the Resolve with our Blue Dragon, the new seabed robot, the geotechnical robot that should also drive utilization up for a vessel like Resolve. So just a few indications what we're working on related to cost savings and also changes in assets there. If we talk about market share, yes, we made that comment because we see that competition actually has more idle capacity vessels alongside. Fugro is still working against the lower pricing. So we have seen that in previous crisis as well that we managed to keep going, but pricing is under pressure. And we see and expect that, that will probably increase that pressure a little bit more during the course of the year up until the time that we see activities in wind and oil and gas really stabilizing and increasing again. We also see that in geotech now coming in because there is also competition that has less work there. So obviously, that puts pricing under pressure. So that's what we can say about market share and competition and pricing pressure.

The next question comes from Luuk Van Beek of Degroof Petercam.

First of all, a question about the oil and gas, which seems to be showing a recovery. And those customers are typically quite cash flow driven and with the higher oil and gas prices, they have higher cash flows. Do you see any signs that are accelerating things that are in the pipeline that would benefit you? And furthermore, on the wind market, you mentioned that most of the work will be executed in -- or installed in 2030, 2031. But obviously, your activities are mainly ahead of that. So can you indicate in what period we should expect the impact for your revenues from these installations?

Yes, Luuk, I think everybody is asking three questions, but I will take your two. So oil and gas, we obviously see this market picking up. I said before as well in the previous announcements, full year that we were actually expecting oil and gas to already increase last year. We did not see that because we saw the second half of the year more cash discipline from the oil and gas companies and therefore, keeping the cash in the wallet, so to say, postponing things. We do see projects back on the board. We are not 100% sure how fast these things are going because, yes, oil prices and gas prices are high, higher. They also face a lot of challenges, obviously, these companies. So they need to get the act together. And yes, with a higher oil price for a couple of months, it doesn't mean necessarily that then immediately all these things will move ahead because yes, any investment decision -- final investment decision is obviously taken with a view of longer-term oil and gas price developments. But it is absolutely helping, and we do see those markets being more buoyant. Also, it's more acceptable to talk about new oil and gas projects because the world starts to realize that this is still on the board for many years to follow. So in that sense, we see a general, more buoyancy in that market. If you talk about wind and the installations 2030, '31, obviously, we know about the conference in Hamburg earlier this year. There, they communicated the 9 countries together, 15 gigawatts installation per year from '31 onwards. That means that they need to start doing ground investigation work probably 2 to 3 years before that. So you could expect in '27 onwards more activity for Fugro. The big question mark there, Luuk, is at the moment, which parties are starting earlier because everybody knows that the activity will increase, and this is going to happen for many years to follow because they said up to 2040 every year, 15 gigawatts installation. I still need to see if that's achievable. But having said that, even if it's less than that, that's 3 to 5x more than what is being done over the last couple of years. So enormous uptake. And that means that, yes, in the years to come, maybe already some things this year as we see with AR 7. AR 8 is pulled forward because the industry is pushing the U.K. to launch a new license round to bring more fields to the market. So that is positive. We see obviously France making strong commitments around additional investments in the wind market. Also the Netherlands committed to two additional licenses. So there is quite some buoyancy there, but everything takes a little bit of time. It's not like, okay, this is brought to the market and then immediately, these projects kick off. Having said that, we are executing. You also saw in our press release a new announcement on a project in Taiwan, which is positive for the development in Asia Pacific and give some more confidence that this market is also continuing for Copenhagen Investment Partners is starting there. And you also see that we are about to execute a large project from AR 7, which is also announced there in the press release, which will start during this season this year. So you can see if there are new licenses, then absolutely before even the licenses come to the market, we will work for the government, RVO, BSH or Energinet, you name them, or we'll start working for the energy operators to collect more ground investigation work.

Our next question comes from Jeremy Kincaid from Van Lanschot Kempen.

I have a few questions about the vessel changes. Obviously, the Explorer and Meridian, you say they will be taken out. What does taken out mean? Does it mean they'll be sold for parts or sold as whole boats or just destroyed? And also those 2 vessels, I believe, are owned and not chartered. So can you explain some of the thought process behind retiring those vessels, which are owned rather than taking a chartered vessel out of your fleet? And then my next question is also about the Pacific Grouse. You're planning to release that charter later in the year. Do you have to deliver it to a certain location back to the original owner? In other words, is the fact that the Strait of Hormuz is closed, could that be an issue for you in the future? And then finally, you mentioned that there was a project in Denmark you're working on, which impacted earnings in the Marine business in the first quarter. Do you think that will continue to impact earnings in the second quarter?

Thank you, Jeremy. Maybe first about the changes there on the Explorer and the Meridian. Those are owned vessels. I recall discussions started probably more than 10 years ago around retiring the Meridian, then we extended for 5 years. And you go -- yes, blocks of 5 years more or less or 3 years because you need to go from survey to survey, so a special survey every 5 years or an intermediate survey every 3 years, so to say, or in the midterm between those 5 years. And basically, then there's a judgment call to make how many millions do you need to invest to get the vessel again on an accreditation or certification to be operational. So that is something that over time, when the vessels become too old become too expensive, and then we need to make a judgment call. So we had the Meridian and actually the Explorer already twice on the board to take out. So it has been basically yes, on the board for a longer time, we have extended that. So basically, we squeeze the maximum out of those vessels and then at some point in time, also to drive utilization up, we want to have a bit more tightness in that market. No doubt, there will be times that we need to hire probably a third-party vessel then again if we need to ramp up. But that's possible because we have also the equipment to put on temporary vessels if we need to. Explorer is obviously geotech, Meridian and geophysics. So that's important to know. Pacific Grouse straight of homes. I need to check where we need to deliver that vessel, I think in the region, but I need to confirm that, Jeremy. I don't know because it has been a few years ago that we hired that. I thought it came out of the region, but something to be confirmed. And then Denmark, do you want to answer that, Barbara?

Yes. We're nearing completion there on them.

Next question comes from Quirijn Mulder from ING.

Especially thanks to Barbara for all these contributions to Fugro. Let me say a couple of words on the working capital question. And the reason is related to what -- let me say, if you speak about 17% at the end of the quarter, what percentage was caused by the decline of -- let me say, by the decline of the payables compared to the first quarter of 2025 to get an idea about how the split between, let me say, the activities in the month of March and the payable adjustments as I see it. And the second question is about the U.S. as you -- or about Americas, in fact. We see a strong development of order intake. When is it being executed, do you think? Because it looks like that the relation between, let me say, revenues and backlog is quite high at this moment. So is it being executed, let me say, in the coming months? Or is it being executed for later, let me say, second half of 2026? That are my two questions.

Thank you, Quirijn. Maybe first on working capital, Barbara.

Yes, I can say, Quirijn, and thanks for your kind words, that the payable decrease was a major component actually. So if you look at the delta between year-end and quarter end, it's mostly in the receivables that have gone up. And as I mentioned, these are very young receivables. So we don't see a deterioration. But if you compare it to last year, where really the step-up, if you like, is there is no longer the payables and those were unwind and partially that is related to the lower CapEx. And as we mentioned, it was -- we went from EUR 100 million to EUR 230 million and there were some personnel expenses in there. So that is really the biggest by far, the biggest component is the unwind of the payables. And you're right to say that it is high. That's why we're saying we bring it back. We did see an absolute decrease in receivables quarter-on-quarter. However, not to the same effect as the revenue drop. And that's why also the percentage went up. So there's a couple of factors there.

And the factor of high CapEx last year will also remain because that was last year was high and this year it will be significantly lower. So we'll see that effect to a certain extent working through. If you talk about U.S., Americas in general and the backlog increasing and then when it's being executed, well, quite clearly, you have seen also not necessarily high activity executed then in the first quarter. You're right. And that has to do with some delays in the start-up of these projects. We do expect in the coming quarters that these things will continue to kick off. So we have a lot of things in the backlog, especially also on the land business and nearshore business that will really start in the second and the third quarter. Good example is we are doing some work for some of the islands there, for actually security purposes of the U.S., some survey work. And we could not mobilize the equipment. This is just an anecdote. We could not mobilize the equipment because there was no military plane available to mobilize the equipment and that was obliged to that area because of the conflict in the Middle East. You can't really come up with these things in advance, but this is just a consequence of what can happen in the world if you have conflict like that. So that project is now being mobilized, but it was delayed because we would initially start already in the first quarter.

Our next question comes from Kristof Samoy from KBC Securities.

First of all, Barbara, all the best for the future to you. I have two questions. First one, coming back on the U.S. backlog as a follow-up. Could you -- because the evolution is quite positive. Could you disclose some kind of percentage to what extent the backlog composition is firm signed orders and then quotes with high award potential? That's the first question on the U.S. backlog. And then on the regional performance. I know on a quarterly basis, you do not disclose profits per region. But could you shed some more light on the evolution of the profitability of the different regions in the first quarter? What the trends were per region? Were they above?

Sorry, the last question you were dropping out a little bit, Kristof. Could you repeat that?

Okay. So on the regional performance, you do not disclose regional profit margins or regional profits on a quarterly basis. But could you give some more color on the evolution of the profitability during the first quarter of different regions and which one went according to plan and which one [indiscernible]...

Well, maybe I can comment on this last question before going to the other one. I think it's -- what I can say about Q1, Q1 is always the lowest season. And the project business, there's quite a lot of pluses and minuses in the regions. I think if you look at the -- also the backlog and the composition, that is a good representation. And I think it goes too far now to qualify that further because it's only 1 quarter in the year.

Okay. And then your question around backlog, that depends a little bit. Yes, if you look at the EUR 1.4 billion roughly for the next 12 months, then there's roughly around 65% is firm and others are highly likely prospects. If we talk about obviously a different period, the remainder of the year or the next 3 months, there are different percentages involved. Specifically around the U.S., I don't have that split from how much is firm or highly prospects.

No. What we can say there is that, obviously, indeed, you see a strong increase in the backlog in the Americas. That's also related to traveling from a lower base after the offshore wind drop last year. But having said that, on the AI and the data center then that looks very positive and encouraging, I would say. So this is mainly on the land and the Marine Asset Integrity side of the business.

Our next question comes from Thijs Berkelder from ABN AMRO ODDO BHF.

A couple of smaller questions. Can you quantify the impact of the late arrival of the vessel in Denmark on the Q1 results roughly? Second question, you sold office in Hong Kong cash in EUR 13 million. Did you also account for a book profit in Q1? And is that included in your reported adjusted EBITDA? Third question is on your activities around Cyprus. Are these -- created these activities hampered or ongoing?

Yes. Maybe I will take the last question there. So Cyprus, we have seen some impact. We could, for instance, not do a crew change in the place that we wanted to do. So we have to deviate to different ports. So there was some impact minimal, but some impact there. Before I hand over to Barbara for the profit there, maybe first on the Denmark side, that was the Fugro result that we basically mobilized for that with ROVs on board. And that had to do with maybe a bit more color with the Aquarius that we sent over to the U.S. to serve the large Brazilian contract because we have now -- or sorry, the well that moved over to the U.S. The Aquarius is already working there in Brazil, albeit the price is in a dry dock at the moment. So that's also good to mention, unfortunately, a bit longer than expected. That has some impact on the first quarter as well. But the result in Denmark basically was mobilized last minute. It had some issues, and then we had some permit issues from Total that took a bit longer. So it had a couple of million impact there in the region. So that's what I can say on the result. Then maybe to Barbara.

Yes. So the sale of the building in Hong Kong was indeed included in the EBITDA and EBIT and booked as other income.

But what kind of book profit should we think of?

Well, it's in the cash flow, right? It's less -- it's around EUR 10 million.

EUR 10 million book profit or EUR 10 million proceeds or both?

Both.

Our next question comes from Quirijn Mulder from ING.

I have one question. So for me, it's a little bit unclear why, let me say, your revenues were a little bit -- were down, okay, but not dramatic. It's 2% organically. And you had realized massive cost savings. So I understand that it is partly to blame because of low pricing in certain projects. And to what extent is also related to extra cost? Can you give me some idea -- some flavor on how you can explain that? So cost savings, as you told, EUR 10 million, let me say, EUR 120 million in the full year, combined with revenues 2% organically down, that should lead to higher earnings. Is there maybe a good explanation for that?

Well, there's a couple of factors. And if I can answer that question. So first of all, historically, Q1 EBIT is low and the margin is low. And the EBIT margin now is protected as a result of the cost savings on the personnel costs and other operating expenses. And I think we should not forget that we had a revenue drop of EUR 427 million last year. So we adjusted the cost base to the new reality. The cost base did decrease quarter-on-quarter as demonstrated by this by, as you say, a flat EBIT with a EUR 32 million revenue drop. So within that, the cost savings are included and that is what we can say. And then there is indeed additional operational issues as we just explained. And there is also the Hong Kong building that was there. Plus we had limited impact of the conflict in the Middle East. However, based on the millions of EBIT that is still in Q1, a couple of million. So there's a couple of pluses and minuses that are playing a role in the EBIT, but the cost savings are definitely there. Otherwise, the EBIT would have been much lower.

Thank you. And with that, I will now turn the call back over to Catrien for any final remarks. Catrien, go ahead.

Yes. Thank you so much for participating in this call. If you have any other questions or remarks, you know where to find me. Thank you. Have a good day.