Course of business
The developments in the first months of 2009 are in line with earlier expectations. Revenue showed an increase of over 5% compared to the first months of 2008. Price pressure has increased for a number of activities in the more competitive market segments. Currency fluctuations had little impact.
The demand for Fugro’s services in the oil and gas sector continues, especially for projects for the National Oil Companies (NOCs) and larger international oil and gas companies. For a number of medium size and smaller companies the lower oil price has led to postponements of new projects.
Work for offshore wind farms is increasing in several European countries.
The demand for onshore and coastal infrastructure related services shows a mixed picture. In a number of regions, like Dubai and California, the activity level declined. Elsewhere, like in the United Kingdom and Saudi Arabia, the award of some large projects lead to good utilisation. Announced stimulus packages in countries like the United States may soon lead to an impulse for data collection for new infrastructure related projects.
Exploration activities for the mining industry have substantially declined. However, as this represents about 4% of Fugro’s revenue the effects are limited, also because part of the capacity can be used for investigations for oil and gas onshore.
In view of the above mentioned developments Fugro has in the meantime implemented a number of measures, like:
- termination of two vessel charters (one for seismic and one for geotechnical investigations);
- cancellation of the charter of a ROV support vessel under construction (Fugro Energy);
- decommissioning (scrapping) of a survey vessel;
- staff reduction in offices with mining related activities;
- caution with investments in new equipment.
The order backlog for the coming 12 months is at the same level as at the start of 2009 (EUR 1.6 billion), which is about 15% higher than one year ago.
In the meantime the earlier announced new vessels Geo Natuna (seismic) and Fugro Solstice (ROV-support) have commenced service. This further enhances the targeted modernisation of the vessel fleet.
The acquisition costs for a few smaller companies with a total annual revenue of around EUR 15 million) amounted to approximately EUR 15 million.
The current staff level (including the addition of about 80 persons through acquisitions) is with about 13,650 staff almost equal to that at the year end of 2008.
As recently announced, Fugro signed a strategic alliance agreement with EMGS (Norway) with respect to marine electro magnetic surveys for the offshore oil and gas exploration. As part of the agreement Fugro supplied a secured convertible loan of about EUR 17 million to EMGS.
Financial position
With the business going well in the first months of 2009 Fugro was able to maintain its healthy financial position with an equity of some EUR 1 billion and a net financial debt of approximately EUR 475 million. The cash flow and existing bank facilities are more than sufficient to finance the planned investments and potential further acquisitions. In the meantime discussion with banks regarding an extension for the coming years of the credit lines that are scheduled for prolongation in 2010 are progressing well.
Outlook
Barring unforeseen circumstances and strong currency fluctuations, we expect for the first half year 2009 a modest increase of the revenue to over EUR 1 billion (HY 1 – 2008: EUR 992.9 million) and a net result of about EUR 110 million (HY1 – 2008: EUR 109.3 million), which is similar to the profit in the first six months of last year. This results in a net profit margin of over 10% (HY1 – 2008: 11.0%).
Fugro will publish the results over the first six months of 2009 on Friday 7 August 2009. Like in previous years and also in view of the continuing uncertain market circumstances, we will then give an outlook for the expected profit for the full year 2009.
