Poor profit blamed on Oil and Gas despite "benefit from growing offshore wind"

In its quarterly report, Fugro has stated that it has seen a year-on-year revenue decline of 14.5% on a currency comparable basis, reflecting ongoing underinvestment in the offshore oil and gas market. The decline was less than during the last two years.
Paul van Riel, CEO: “The offshore oil and gas market continued to decline resulting in a tough first half of 2017. Marine site characterisation activities performed below last year mainly due to pricing pressure, and currently utilisation at Seabed Geosolutions is low. The marine asset integrity business showed an improved performance at close to break-even level.

Our non-oil and gas related activities in markets such as building & infrastructure and power, by now amount to 40% of revenue. The results in these market segments were generally stable or improved. In particular, building and infrastructure in the Land division showed strong growth while we also benefit from a growing offshore wind farm market. Further growth of these businesses continues to be a key focus area.

We are seeing early signs of moving into a more stable environment. The marine site characterisation and marine asset integrity backlog, excluding construction and installation activities, is growing, supported by signals of increased tender activity. The pipeline of potential projects for Seabed Geosolutions is solid.

In order to restore profitability we are implementing additional measures, including significant cost savings, adjusting pricing strategies and focusing on innovative, higher margin services. This will already start to contribute to improved performance in the second half of this year.”

EBIT margin (excluding exceptional items) declined to - 3.3%, mainly caused by continued price pressure in the Marine division and low utilisation at Seabed Geosolutions; marine asset integrity and land businesses improved compared to prior year.

Additional measures being implemented to streamline business processes and further reduce cost, in order to restore profitability.
Negative cash flow of EUR 66.1 million was to a large extent related to seasonality. Cash flow in the comparable period last year was negative EUR 44.3 million excluding EUR 111.1 million proceeds from certain asset disposals.

Net debt/EBITDA of 2.2, well below covenant requirement of under 3.0.
Backlog for the next 12 months is bottoming out with a decrease of 5.5% on a currency comparable basis compared to a year ago and 2.4% compared to the end of March.

Outlook 2017: For the full year Fugro anticipates a decrease in revenue, however less severe than during the first half. The EBIT margin is expected to improve significantly during the second half year compared to the first, resulting in a negative low single digit margin (excluding exceptional items) for the full year. Cash flow from operating activities after investments is anticipated to be positive excluding the purchase of the REM Etive vessel (at conditions significantly more beneficial than a renewed charter agreement).

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