Relentless focus on positive cash flow and strengthening market leading positions
▪ Year-on-year revenue decline of 26.9% or 24.5% on a currency comparable basis in line with the market.

▪ EBIT margin (excluding exceptional items) decreased to 0.2% due to steep decline in activity and strong pricing pressure.

▪ Agreement reached to divest the Asia Pacific subsea services business, in line with strategy to focus on core activities.

▪ Additional measures implemented to reduce third party and personnel costs in line with lower volumes.

▪ Deteriorated market conditions led to non-cash impairments and other exceptional items of EUR 151.7 million.

▪ Cash flow from operating activities after investments of EUR 67 million, including proceeds from the sale and lease back of a geotechnical vessel and the sale of the CGG term loan.

▪ Net debt to EBITDA of 1.8 compared to covenant requirement of below 3.0.

▪ Outlook 2016: positive cash flow from operating activities after investments, further reduction of cost base and negative low single digit EBIT margin (excluding exceptional items) expected for the full year.

Key figures (x EUR million) HY 2016 HY 2015
Revenue 904.9 1,237.7
currency comparable growth (24.5%) (7.3%)
EBITDA1 excluding exceptional items 2 98.9 197.7
EBIT excluding exceptional items2 1.4 70.4
EBIT margin excluding exceptional items (%)2 0.2% 5.7%
Net result (202.1) (9.9)
Backlog next 12 months 1,065.2 1,506.8
currency comparable growth (26.3%) (23.9%)
Cash flow from operating activities after investments 66.8 121.8
Net debt/ EBITDA3 1.8 2.0

The information in this report is unaudited

1 EBITDA is EBIT before depreciation, amortisation (including amortisation on multi-client library) and impairments related to goodwill, other intangible assets, property, plant and equipment

2 Impairments, onerous contract charges and restructuring costs of EUR 151.7 million in HY2016 compared to EUR 26.0 million in HY2015

3 Refer to Annual report 2015 for definition EBITDA for covenant purposes

Paul van Riel, CEO: “In the first half of this year, budgets of our oil & gas clients again declined significantly, with new projects being deferred or cancelled and strong price pressure as a result of overcapacity. We are continuing to adjust our cost base and capacity to market reality. This enables us to largely counter the lower volumes; the strong rate reductions, however, result in severe margin pressure. The building, infrastructure and power markets continue to provide good opportunities except in the countries that are hit hard by low oil and gas and other commodity prices.

I am pleased that we reached an agreement on the divestment of our Asia Pacific subsea business. That fits in our strategy to focus on our core business while the minority stake we obtain in the acquiring entity allows us to participate in the benefits once the market recovers.

Our key priorities remain generating positive cash flow to delever the balance sheet and a further strengthening of our market leading positions. The price reductions and efficiency gains throughout the supply chain are significantly lowering the oil price required to justify investments. In combination with increasing evidence that a balance between oil supply and demand will be achieved in the course of next year, this is expected to spur project approvals, also in a lower oil price environment. It is, however, still uncertain when this will have positive impact on our business.”

*** Herewith Fugro's 2016 half-year results press release. For the 2016 half-year report (the press release plus a couple of additional disclosures), please refer to www.fugro.com/investors/publications. ***


Fugro divests Asia Pacific subsea services business to Shelf Subsea

Divestment achieves an important strategic objective for Fugro
Fugro acquires equity interest of around 25% in Shelf Subsea in addition to receiving cash proceeds of AUS 20 million (around EUR 14 million)
Transfer of 1 owned vessel, 3 chartered vessels and 18 ROVs
Transfer of approximately 285 Fugro employees
Transfer of Fugro subsea offices in Perth and Singapore
Fugro NV (Fugro) and Shelf Subsea Holdings UK Ltd (Shelf Subsea) announce today that they have signed an agreement under which Shelf Subsea will acquire the Fugro subsea services business in Asia Pacific for approximately EUR 14 million cash and a significant issuance of around 25% equity in Shelf Subsea to Fugro. With this divestment, Fugro takes another important step in its strategy to focus on its core survey and geotechnical business.

Transaction overview
With this agreement Fugro will divest its subsea services business in Asia Pacific to Shelf Subsea. The Shelf Subsea business was formed in 2015 by private equity investors SCF Partners, Viburnum Funds and senior management, and generated revenue in 2015 of around AUD 40 million (EUR 27 million). It operates from offices in Perth and Singapore and upon closing of this transaction will become a leading subsea services player in the Asia Pacific region providing inspection, repair, maintenance (IRM), light installation, air and saturation diving services and construction support. All Fugro subsea staff in Asia Pacific will transfer to Shelf Subsea and the Regional Director Asia Pacific for Fugro’s Subsea Services division, Colin McGinnis, will become the Chief Executive Officer of Shelf Subsea.

As part of the transaction, Fugro will become an approximately 25% shareholder in Shelf Subsea. This creates the opportunity for Fugro to share in value creation at Shelf Subsea. It will strengthen the relationship between the companies as the transaction also encompasses a service agreement for Fugro survey and the provision of other Fugro services to Shelf Subsea.

Strategy execution
A key element of Fugro’s ‘Building on Strength’ strategy is to focus on its geotechnical and survey businesses and to adjust its portfolio accordingly. As a consequence, Fugro explored the divestment of its heavier subsea services activities. Within Fugro’s subsea portfolio, its Asia Pacific business is the largest provider of IRM, light installation and construction support services from larger vessels. Hence, with this transaction, Fugro has taken a major step in adjusting its business portfolio in line with its strategy.

Financial information
Revenue in 2015 of Fugro’s Asia Pacific subsea services business was EUR 142 million. The book value of the related net assets was EUR 22 million (as per 30 June 2016). An impairment of EUR 10.6 million was recorded as at 30 June in connection with the business being classified as held for sale, and the anticipated transaction consideration.

The transaction involves the transfer of 3 vessel charter contracts, 1 owned vessel, 18 remotely operated vehicles and 285 Fugro employees located in offices in Perth and Singapore.

Paul van Riel, CEO Fugro: “The transaction represents an important strategic step for Fugro to focus our portfolio around our core geotechnical, survey and related businesses. We are pleased to have acquired a stake in Shelf Subsea going forward to retain upside on our investment and to cement the relationship between our companies. Within the relationship, Fugro and Shelf Subsea will provide services to each other as applicable.

We believe Shelf Subsea will provide excellent long term opportunities for our highly qualified management and staff that are transferring. We also believe clients will benefit from Shelf’s increased capability which sees the provision of subsea services as its core mission. We are looking forward to working with Shelf Subsea and contributing to its successful development.”

John Edwards, Chairman Shelf Subsea “The acquisition of the APAC subsea business of Fugro and the companies’ future relationship are very complementary to our existing capabilities and will see the combined entity become a leading independent subsea contractor in this region, well positioned to take advantage of anticipated improving market conditions.

Timing and conditions
The transaction is subject to customary closing conditions. The expectation is that the transaction will be closed within the coming months.

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