John Wood Group PLC (WG.L) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for standing by, and welcome to today's Wood Trading Update for the 6 months ended on June 30, 2020. [Operator Instructions] Also, I must advise that the call is being recorded today, Friday, June 19, 2020. And without any further delay, I would now like to hand over the call to your first speaker today, Mr. David Kemp. Thank you. Please go ahead.

Good morning, and welcome to our half year trading update call. Before we go to Q&A, I'll take you through some of the key highlights of this morning's statement and provide a bit more color around financial performance in the first half. As you all know, the global engineering and consultancy market is facing some unique and unparalleled challenges from COVID-19 and the volatility in oil prices. This has reinforced our view that our strategy to broaden our consulting, projects and operations business across diverse energy and built environment markets has been the right one. To remind you, the shape of our business is roughly 35% upstream and midstream, 25% chemicals and downstream, 25% renewables and other energy, and 15% built environment. Compared to 2019 H1, our profile has changed with renewables activity up 4% and upstream and midstream activity down 5%. At the start of April, we announced a series of actions to keep our people safe and further protect our stakeholders by reducing costs, protecting cash flow and ensuring continued balance sheet strength. This has remained our focus throughout the second quarter. The safety of our people, clients and suppliers remains our top priority. Since the start of April, we've had over 40,000 people successfully working remotely, and employees continue to work safely at customer sites, supporting vital services across the world. It's their effectiveness in delivering for customers that is supporting continuing demand for our services. In terms of financial delivery, our focus in 2020 is on protecting margin. And that means getting ahead of activity decline by managing utilization and delivering overhead reductions at pace. We have a proven track record of leveraging our flexible asset-light model in response to changing market conditions. For example, during the last downturn, Wood Group reduced overhead by $250 million during 2015 and '16. This morning's statement details the actions that we've already completed to significantly adjust the overhead cost base and accelerate the margin improvement initiatives we committed to at our Capital Markets Day. This will deliver an overhead saving of over $200 million for the full year 2020. Looking at performance in the first half. We continue to win and execute work throughout Q1 and Q2, as evidenced by the relative strength we're seeing in chemicals and downstream and the built environment and the growth in renewables, where we will double our revenues in 2020. On a like-for-like basis, adjusting for the disposals of the nuclear and industrial services businesses in Q1 2020, first half revenues will be down around 11% on the first half of 2019. Reflecting the timing of macro challenges, the fall in H1 revenues was heavily weighted to the second quarter, with revenue in the second quarter of $2 billion. Looking at the market-related influences on activity in the first half, while there is clearly some interaction of COVID in the oil price, we would estimate that 2/3 of the impact is COVID related and around 1/3 related to oil price. And this also reflects our broad end market exposure. Adjusted EBITDA on a like-for-like basis will be down around 19%, with margins down circa 70 basis points. Revenue will be around $4.1 billion, adjusted EBITDA will be around $295 million to $305 million, and operating profit before exceptionals will be around $80 million to $90 million. Looking at the business units. The first half performance of Asset Solutions EAAA and TCS best demonstrate our strategic focus on margin. In EAAA, we saw robust activity levels of capital projects work in petrochemicals and downstream be more than offset by lower levels of upstream oil and gas works -- oil and gas work. Margins are in line with the first half of 2019, reflecting the benefits of swift action on both utilization and cost management. In TCS, lower revenues partly reflect our decision not to pursue higher risk and lower margin construction contracts and the expected roll-off of automation work on TCO. Activity in the built environment market, which accounted for around 45% of TCS revenues in the first half, was pretty resilient. Adjusted EBITDA margins are up on H1 2019, benefiting from the synergy delivery initiatives which started in Q4 2019. In Asset Solutions Americas, revenues were relatively robust, reflecting strength in capital projects activity in chemical and downstream, including the YCI methanol plant and the GCGV plastics facility. We're also seeing a higher activity in solar and wind work, which will double the size of our revenue in renewables in 2020. Lower margins in the Americas were impacted by cost overruns of approximately $30 million on the legacy energy projects from 2019, which are progressing to completion. In April, we made clear focus on protecting cash flow and ensuring balance sheet strength. We have considerable financial headroom. Our financing facilities of over $3 billion include bilateral term loans of $300 million, a revolving credit facility of $1.75 billion and U.S. private placement debt of about $880 million. During the first half of 2020, we disposed of our nuclear and industrial services businesses for approximately $400 million. We also took a number of actions to maintain balance sheet strength, which included withdrawing our final dividend and reducing capital expenditure. The actions we have taken to reduce overhead cost will increase the exceptional charge by approximately $20 million, and this will be heavily weighted towards the first half. Overall, we expect cash exceptional charges to be about $55 million in the first half. The current trading environment inevitably presents challenges to forecasting working capital movements, and we're closely monitoring customer payments. As we set out in our previous guidance, we expect an unwind of advanced payments and our typical HL1 movement will result in a working capital outflow. Overall, we're confident in our assessment that net debt at June 30 will show a reduction from the December 2019 position of $1.42 billion. Despite the market challenges, we have a number of positive indicators as we look to the full year. Our order book at the end of May was $7 billion, and that's down 11% since December 2019, and of which $3.5 billion is due to be delivered in 2020. During April and May, we booked new orders of $1.3 billion, including EPC work for GSK, onshore wind and solar EPC awards in the U.S. and an LNG renewal in the Asia Pacific region. We also secured a 5-year framework agreement with the U.S. Navy for engineering, design and maintenance of fuel installations. Typically, around 80% of our full year revenues are either delivered or secured at this point in the year. However, in 2020, the risk of further delays of postponements persist to both work booked into backlog and to new orders. We're prepared for a wide range of outcomes in 2020, depending on activity across our broad end markets. And our principal focus is on protecting margin by adjusting our cost base in line with our strategic objectives. The full benefit of over $200 million of overhead cost reductions will be recognized in the second half, giving us confidence in delivering significantly stronger second half margin performance. So to summarize, before Q&A, the market challenges from COVID-19 and oil price volatility have reinforced our view that our strategy to broaden our business across diverse energy and built environment markets has been the right one. We've had a strong operational focus on safety and service delivery, with our teams successfully working remotely or safely at sites and delivering for customers. We're continuing to win and execute work with growth in renewables markets and relatively robust activity in chemicals and downstream and built environment markets. On a like-for-like basis, first half revenues will be down 11%, and adjusted EBITDA will be down 19%. We have a clear strategic objective to protect margin and have completed the actions to deliver $200 million of overhead savings in the full year 2020. And we're focused on protecting cash flow and ensuring balance sheet strength. We have considerable financial headroom and are confident in our assessment that net debt of June 30 will show a reduction from the December position of $1.42 billion. And finally, looking to the full year, we're prepared for a wide range of outcomes depending on activity across our broad end markets and are confident of delivering significantly stronger second half margin performance. And with that, I'll now take any questions that you have.

[Operator Instructions] So our first question is from the line of David Farrell from Crédit Suisse.

David, a couple of questions from me, if it's possible. Firstly, can you just give us an update on the problem contracts in the Asset Solutions Americas and the time line for completion of those? How much will they run into the second half of this year? And again, kind of coming back to problem contracts, an update on where we stand with Aegis would be useful. And my second question was, one of your peers recently talked about kind of considering the carbon intensity of the projects it takes on with a view to balancing about ESG and emissions. Is that something that is yet playing on the Board's mind? Is the kind of the emissions' intensity of the work that you're operating on? That will be interesting to kind of hear your thoughts on that, please.

Sure, David, and good morning to you. In terms of update on the problem contracts, as we set out in the release, we've had additional $30 million of cost overruns on legacy projects in ASA. So these were the same challenging projects that we had in the back end of 2019. The projects are due to be complete just after the 30th of June. So we hope they're firmly in the rear mirror now. And clearly, they're frustrating to us because across the whole of our portfolio, we've had some really good execution in very challenging circumstances. So as you'll have seen from the release, we've managed to increase our margins in TCS and kept our margins in EAAA flat. And so the issues we've had in the Americas are frustrating. And we've taken a number of steps to improve the performance from, really, in 2019, bolstering our functional support in that area. We've had a number of changes in terms of leadership. We think we're starting to see the fruit of that, and we'll be pleased to get these projects behind us. In terms of Aegis -- Aegis, there's been some disruption due to COVID. There's been less construction at site. Overall, we think that we'll have some impact on the schedule, probably of order of magnitude a month. In terms of overall cost estimates, it's had some impact on the cost estimate, but not a massively material effect. And there is coverage in terms of time from a force majeure perspective there. In terms of the carbon intensity around projects, it is something that we've discussed as a Board. It's not something we have hard and fast rules around taking work on. But typically, we try to align ourselves into basins that have better economics. And generally, these are the less carbon-intensive basins. I think, equally, what we've seen from some of our activities is we can provide a range of engineering solutions that help around carbon intensity. So that's really been the shape of the conversation that we've had around carbon intensity, around upstream oil and gas work. And again, that's set against the broader context of -- we have been reshaping our portfolio, as you know, David, over the last 5 years. And we're now 35% upstream, midstream oil and gas. We've got a significantly growing renewables segment. We've got an excellent built environment market as well, all of which are well aligned to the themes of energy transition.

Next question is from the line of Michael Alsford from Citi.

I've got a couple of questions more around the cash flow, please. Just firstly, on the working capital, I appreciate that it's obviously an uncertain environment, but could you just directionally think that we should see the recovery of working capital in the second half from the typical drawdown we've seen in the first half of the year? And then secondly, on the cash exceptionals, could you directionally give us some confidence on where they will trend in the second half year? Should we see them being lower than the $55 million that you reported in the first half. And then just finally, on disposals, I'm just wondering, again, should we be expecting more disposals from you going forward in 2020? Or are you happy with the way that the business mix is now positioned going forward?

Okay. It's maybe worthwhile for me taking you through some of the cash flow aspects. In terms of the working capital, we previously flagged back in March that we would have an unwind of advances. We've been very successful in winning EPC contracts and gaining advances on these EPC contracts in 2019. But as we've seen over time, these have been less of a feature of our business. So we expected an unwind of advances. And so that will feature in the first half. And we usually do have an outflow of working capital in the first half, a build of working capital. And then we typically do have a strong inflow in terms of the second half, and that's been a feature of our business and it's driven by the shape of our revenue profile. Obviously, this year is a bit different in that there's a greater uncertainty as to second half revenues and the impacts of things such as COVID-19 and the oil price. In terms of the cash exceptionals, these will step down in terms of the second half. In the first half, we expect them to be about $55 million and the second half -- or for the full year, we expect them to be about $80 million. And that increase of $20 million, it's largely in the first half and reflects the aggressive program we've had around cost reduction. We've tried to take out significant cost very quickly. And so most of that cost of that reduction program will be in the first half. In terms of the disposals, in March, we talked about the disposal of one of our turbine joint ventures. And that's the only disposal that we're currently looking at. As I'm sure you can appreciate, Michael, the market around M&A activity is quite challenging just now. And we would never want to be in the distressed seller camp. In terms of the turbine joint venture, that sale is paused just now as people get their heads around COVID-19. There's still a reasonable chance that it might go ahead in the second half, but it's a reasonable chance. No more than that.

Next question is from the line of Amy Wong from UBS.

A couple of questions from me, please. Could you give us -- I think you said that the 2Q revenues were about $2 billion, so thanks for giving that number. Can you comment on kind of like the rate of decline or the rate of activity that you guys saw through April, May and June? And then if there's any signs of stabilization in terms of the activity levels stabilizing and not further deteriorating or perhaps even accelerating as we're kind of moving through June. So if you can just give us some color on that. And then the second point is on the cost savings number, $200 million, fairly, fairly decent, very good number to see you guys mitigating the top line pressure there. Just can you give us a sense of how much of that $200 million is structural versus variable?

Sure. In terms of the revenue, we gave out effectively our Q1 and Q2. Q2 was less than Q1. In terms of the impact that we've seen, clearly, the most impact was in April as activity adjusted and that also reflects the normal shape of our revenue profile. We do typically have more work in the second and third quarters. As we look forward, I think that is part of the uncertainty that we face. We've really successfully managed to get 40,000 people working at home. And the majority of our sites are working, but there has been disruption. So we've enabled that. It doesn't mean that activity hasn't been disruptive -- disrupted. There is a variety of measures, different measures across a variety of our construction sites across the world. And I think that's the uncertainty, how long that will persist in terms of the second half. If we look at our revenues, and we try to give you more detail around where we are just now, we've got $3.5 billion of 2020 backlog. So when we look at our revenue coverage, ordinarily, that would be a good level of revenue coverage for where we wanted to be at the end of the year. But I think the uncertainty exists in whether more work will get deferred or postponed or moved into 2021. And equally, whether the remaining orders that we need to fill, 2020, get deferred. And that's the uncertainty that we face just now. In terms of the cost savings, we've hopefully been very clear on what our strategy is. It is around protecting our margin. And as much as possible, we want to protect the margin for the full year. And in terms of our approach, it's really been trying to get savings in our business very quickly. And so the $200 million has been delivered now. It's not a future target. In terms of the shape of that $200 million, just over 50% of that was regrettably people leaving our business. And so there's a more structural element to them. Then there's a variety of other things that were in there, which is, obviously, salaries, discretionary spend and some temporary headcount measures to deal with some of the disruption that we've faced, such as furloughing, unpaid leave and PTO in the U.S. I think the extent of whether these become structural depends on the activity scenario that we face in 2021.

Next question is from the line of Mark Wilson from Jefferies.

I'd like to just check, David, with you in terms of the business mix. You talk about renewables business doubling this year and how renewables activities up 4%, with upstream and midstream down 5%. But when I look at your business split percentage, renewables is 25% as it was last year, built environment is 15% as it was last year. But it's actually the chemicals and downstream that has changed, up to 25% from 20% last year. So when you speak to renewables activity up 4% and the business doubling, could you quantify that versus the overall business [indiscernible].

I think -- yes, Mark, no problem. I think there's a relatively simple explanation. First of all, it's a comparison to '19 H1. And within our renewables and other energy, we had nuclear in at that point in time. And so effectively, the renewables and other energy is still at that 25% level. Obviously, we've sold out nuclear, and we've doubled the size of our renewables business.

Got it. Okay. No. Absolutely clear. That's very good. Then could you just tell us whether -- what's happening with the renewable -- the receivables facility now, which was virtually, it was [indiscernible] anything to speak about regarding that?

No. Nothing really to speak about. I think as we said, we have a $200 million facility. It's a relatively small part of our overall financing package. We would -- it was $190 million plus at the end of last year. I would expect it to be about that level. It depends on effectively the activity and the invoicing and as we come up to the half end. But I would expect it to be in much the same place. So effectively no change, Mark.

Next question is from the line of Amy Sergeant from Morgan Stanley.

I just had one question. So you've commented that net debt is expected to continue to reduce as we go to the end of this half. I was just going to ask about your priorities on sort of continuing to pay down that debt and that 1.5x net debt-to-EBITDA target versus resuming the dividend and how you're thinking about that?

I think, clearly, we have a leverage policy of 1.5x. We expect to be outside of that in 2020 because of the -- obviously, the disruption that's happened because of COVID-19 and the oil price volatility. In terms of priorities going forward and the question around the dividend, that's really a decision the Board will make in August. And we'll report that back in terms of our half year results in August.

Next question is from the line of Erwan Kerouredan from RBC.

I've got a question on the consulting practice. So theoretically, and I appreciate the efforts since you're, like, reorganizing the business and so theoretically it gives continued exposure to management teams of your customers. So an advantage in a context where tendering activity is low. I'm just curious, can you describe how the division has evolved through the downturn? And how the nature of projects and conversations with your customers' management team has evolved?

Thanks. I guess we're really pleased with the consulting division we have. It's a $2 billion, $2.5 billion revenue consulting division of really good margins. And as we set out in our strategic update, we felt there was further we could take the margin. So even in a really disruptive environment, we've managed to increase the margin in TCS. In terms of the spread of activities that we're doing, I think we've set out that there's a smaller element of oil and gas work in TCS, and that has had some impact. But equally, we've seen pretty robust activity in the built environment market and some of the renewables markets that are within TCS as well. So in terms of the shape of the business, there's not been any dramatic changes in the markets we face. It's more evolutionary. But again, really pleased. It's a high-quality consulting business that's delivering significant margins. In terms of the order intake, again, it's worthwhile remembering that, that business is made up of many thousands of contracts rather than big elephant contracts. And so again, it provides some insulation around order intake. And year-to-date, its order intake is pretty robust, albeit in a highly disruptive environment.

One follow up, please. So an interesting point about the fact that it's made up of thousands of contracts instead of larger ones. Do you see that mix changing over time?

No. I don't, actually. The largest contract that we've got in there is an automation contract for TCO. I think as we flagged, that's coming to a natural wind down, still significant activity. After that finally completes, I would expect it to be more consulting-type contracts, so rather than less.

Next question is from the line of Henry Tarr from Berenberg.

I guess I just wanted to come back to the net debt side of it. And I guess you've said it's going to be lower through the first half. Is the -- probably that indicates it will be lower but not much lower. So is there any indication on sort of the size of the working capital outflow or kind of cash conversion through the first half? So what the moving parts are to get there. I realize it's sort of unusual circumstances in the first half, but it's still, yes, helpful to see the moving parts on that cash flow.

Yes. No problem, and good morning. No. We've tried to set out the moving parts that we have clarity on. So at the end of the year, our net debt was $1.424 million (sic) [ $1.42 billion ]. We've clearly have the disposals, which will generate proceeds of $400 million. And these happen in the first quarter. And we've set out the guidance around the exceptionals. And we expect that to be $55 million, which is slightly up on the guidance we gave at March, I think, understandably, given the really aggressive program we've had in terms of our costs. In terms of the working capital, we haven't given out a number for that. There's 2 moving parts to it. One, the previously flagged unwind of advances I talked earlier about earlier in the call. And then our usual working capital profile. The reason we haven't given out a specific figure is we're quite cautious on customer receipts in June. So what have we seen in April to May, we've actually not seen any significant challenges around our DSO to date. But we're obviously acutely conscious in the environment that we're in that this might be a factor as we come up to June. And so that's the principal reason we haven't given out a specific figure around working capital. In terms of what we've said around where we expect it, we do expect the net debt to reduce, and we have a good degree of confidence around that. We're not trying to flag that, that's a chest under or chest over or anything like that. It is that we expect it to reduce.

Our next question is from the line of Amy Wong from UBS.

Just a follow up. I was just wanting to get some color on the competitive landscape for bidding on the renewables EPC projects. So a couple of days ago, you announced there was a solar EPC win. How many competitors are you guys seeing on those types of tenders? And if you can also explain, see what -- just give us some kind of number or how competitive it is to win that kind of work right now? And if there's a [ medial ] difference as well, that would be helpful.

So typically, most of our renewables bigger project work is in the Americas just now. And we have more consultancy work across the whole globe. In terms of the competitive landscape, as you can appreciate, it is competitive. What we strive to do is make sure we have good positions with customers and are well positioned in terms of our track record of what we can bring to projects such that we're not bidding against 20 other competitors. So typically, when we're actually getting to the stage that these are projects we want to pursue and we want to bid on, it's in that 4 or 5 type space rather than a 10 or 20 space. But these are competitively -- competitive pieces of work. I think there's very few of them that we've won as a sole source and negotiation.

Next question is from the line James Hubbard from Numis.

So in your release, you say that the revenue decline in H1 is heavily weighted through Q2. Obviously, sequencing this year, it looks like it's pretty much flat on Q1. So I guess the heavily weighted comment deference to what you expected. You expected Q2 to be much stronger than Q1. And so I just want to confirm that's the case, and Q2 is generally a stronger quarter than Q1 for you. And the reason I'm asking is, I'm just trying to follow up with Amy's first question on the kind of momentum. Like, if Q2 has come in much weaker than you originally expected, is that because of your work capacity? Or because clients delaying previously expected work that you're going to do?

In terms of the move from Q2 to Q1, I guess, Q2 was lower than Q1. Usually, Q2 would be a higher revenue month -- a higher revenue quarter than Q1 for us. We do have a seasonal nature to our business. We do expect more revenues in Q2 and Q3. And so the impact of that, I think, is obvious in that we have the disruption around COVID-19 and then an immediate impact in terms of the oil price as well at the same time. So when we say, it was mostly in Q2, it's effectively March in Q2 we saw disruption. In terms of the shape of that disruption, again, in the release, we've taken a stab at trying to estimate what the impact. And as you can appreciate, it's quite difficult. You could argue the oil prices or the volatility in the oil prices is much about COVID as anything else. But we reckon that our revenue in the first half was impacted. 2/3 of the fall off was due to COVID-19 rather than the oil price. As we look through the year, we've successfully enabled our people to work at home and our sites and people are working safely at sites. But there still is a level of disruption. COVID-19, although we've had 3 months of this, people are only getting back to work now. And so there still is a level of disruption. And there's a variety of measures on-site that are disruptive to our site working. I think the question is, how long this persists as we go through the year and, clearly, then the impact that oil prices will have? We commented with some good foundations we have got a broad based business. We have enabled our people to continue working. But we are facing disruption from COVID-19 and the volatility in the oil price, and there's no getting away from that.

Okay. Thank you. If I could just ask one follow on. You mentioned at the end of the period release -- you mentioned at the end of the release considering I think a wider range of scenarios or words to that effect for the outcome for the whole year. I'm just wondering, if you can say anything about how do you think about a downside scenario? If you've got say, $3.5 billion hopefully in the bag, but there's a bit of risk about it, how do you -- do you say, okay, a downside scenario is maybe only $3 billion of that is executed? Is that how you think?

We effectively -- we run a number of downside scenarios around that, I think, clearly set out what we think the risk is. Our revenue coverage in an ordinary year at this point would be pretty good. But this is not a normal year. And the risk is one thing slipping out of 2020 into '21. So still remaining in our backlog, but just the timing slips. But also then that buildup of the further awards. In terms of downside scenarios, we run a variety of different cases around that.

Next question is from the line, again, of Mark Wilson from Jefferies.

I sneaked on there, again. I just wanted to just confirm, again, the $200 million cost savings is an increase on the $40 million and the CapEx cuts of $20 million to $25 million you spoke about in April, and you simply put -- you just increased the cost savings in the intervening time.

So the $40 million that we talked about in April is part of the $200 million. So the $200 million is made up of the salary reduction. Again, to remind you, it was a 10% salary reduction for 9 months. It's made up of redundancies, temporary head count measures and a variety of discretionary spends. So it's all encompassing. It doesn't include the CapEx element. And so the CapEx element that we talked about in April, I think it was $20 million, is still what we expect for the full year, but that's not included in the $200 million. The $200 million is purely overhead. I think the other aspect around savings that perhaps gets less headlines is just managing utilization. And so we've had a laser focus on our utilization throughout the second quarter. And that's making sure we keep it at high levels, that we're getting ahead of any activity challenges that we face.

The next question is from the line of Vlad Sergievskii from Bank of America.

The question is on margins, actually. Very good to hear the positive, encouraging guidance for improvements in the second half. Can I ask, what are the key drivers behind this improvement? The obvious one would be cost savings, of course, which you are delivering, but any other important moving parts behind that?

Good morning, Vlad. No. I would say that the main driver is the cost savings. That is -- and getting through those cost savings in the second quarter sets us up well for the second half. And so that's really the main driver around margins. I think the other thing is just our ability to protect margins in other ways. We've not seen -- if I just look at our upstream business, which is 35% of our business, that's where we've seen some pricing pressure, but we've managed to protect margin around in that area through making effectively cost reductions. So that gives us confidence around the margin as well. I think as we've gone through this period, we've seen some pricing pressure initially, and that seems to have abated as we got towards the end of June.

Perfect. And if I may, a follow up. You mentioned pricing pressure in upstream. Is it pricing pressure related to new tenders? Or pricing pressure on contracts which were already basically secured? And then the very quick one as well. Would you be able to update on the progress on the YCI project, please? Just the level of completion, scheduling, et cetera.

Yes. So in terms of YCI, we're -- it's continuing pretty well. I'm just looking for the absolute level of completion. I think we're still expecting it to complete in the second half and -- off the top of my head, I think it's about 92%, but I'll just check that, if you bear with me one second. Yes. No. It's about 84%, and we would expect it to roll off in Q4. So it's progressing well. The guys are doing a really great job around the execution there. What was your first question, again, Vlad, sorry, I've...

Yes. It was related to pricing pressure in upstream, David. Is it related to new work or on already secured contracts, clients asking for discounts as well?

Probably, if you were wanting a general description, it's probably be more restricted to U.S. shale than any of our other basins. I think the conversations we're having with our clients around the other basins are different than we saw in '15 and '16. I think there's a recognition that the margins that we're working into in upstream oil and gas are not the margins we had in -- coming off a bull market in 2014. And so the conversations we're having with clients generally is around, well, actually, how do we do -- how do we be more innovative? How do we take cost out the system? Already, we've got some really great examples off around that. One of the operators we're working with in the North Sea, we've been talking about this for a while. And it's bringing together some of our digital work around visualization, 3D visualization for maintenance. But it's truly now a partnership arrangement where we benefit around the value that we bring. And there's targets for savings around the installations that we support. So generally, that's more of the shape of the conversation, but U.S. shale is where we face the pricing pressure. And so far we've managed to deal with that around adjusting our cost base.

No further questions. Please continue.

Okay. If there's not any further questions, I'll leave it there. I'll maybe just finish with the key highlights. The key message we want to land is really that we are a broad-based business, and we are organically changing. And we've talked about the success we've had in renewables. Our focus is around protecting our margin in a challenging environment. And you've seen some of the demonstration around that, around the overhead savings that we've delivered already to date. That's obviously allowed us to protect the margin in EAAA in the first half, but increased the margin in TCS. And although we are facing a very disruptive environment, we are continuing to win and execute work. In April and May, we won $1.3 billion of new orders. So the business is still managing to operate, albeit there's a disruptive environment to that. So with that, I wish you an enjoyable rest of the day and weekend, and we'll speak to you in August.

So that does conclude our web conference for today. Thank you all for participating. You may all disconnect. Speakers, please stand by.