Over 40% increase in offshore wind
- Ongoing strong growth in revenue and backlog demonstrates Fugro’s leading positions in buoyant markets. In 2022, 63% of Fugro’s revenue was in wind, infra and water.
- EBIT margin increased to 6.1% driven by land and nearshore performance; marine improved slightly despite high-cost inflation and adjusting the asset base for future growth.
- EBITDA amounted to EUR 230.4 mn (2021: EUR 175.6 mn) and net result to EUR 74.1 mn.
- Operating cash flow up by 50% to EUR 179.4 mn; offset by higher growth-related capital expenditure and working capital, resulting in EUR 23.9 mn free cash flow for the year.
- The 12-month backlog increase of 37.5% is supported by all regions and business lines, reflecting both volume and price increases.
- Outlook 2023: ongoing strong revenue growth and further margin expansion. Capex is estimated at EUR 200-225 million, including the acquisition of two geotechnical vessels, and investments in uncrewed vessel strategy and net zero roadmap. In light of the accelerated market developments, Fugro plans to update the market on the next phase of the Path to Profitable Growth strategy in the second half of the year.
Mark Heine, CEO: “I am pleased with the solid improvement in our margin and operating cash flow, while investing in further growth to benefit from buoyant markets. We experience particularly high demand for our offshore wind site characterisation solutions, of which the major geotechnical contract for Energinet’s North Sea I wind development is a prime example. The rapid growth provides many opportunities, but also comes with challenges, as supply chains and legislative frameworks are still being developed. While offshore wind developments are gearing up, we also see renewed interest in traditional energy sources, in particular gas, to support energy security, which is high on the agenda of many countries.
In all four regions, EBIT margin for the full year improved, driven by a solid improvement in the operational performance of the land business, supported by more nearshore work on power cables for offshore wind farms and LNG facilities. In addition, we are successful in mitigating the impacts of inflationary pressures on fuel, chartered vessels and third-party personnel, in particular in the marine environment.
We are making good progress implementing our ambitious net zero roadmap, resulting in a further decline in vessel emission intensity by 7% in 2022. In combination with an increase in the percentage of women in senior management positions to 19%, we are delivering on our sustainability targets embedded in our business strategy. In light of the high activity levels and tight labour markets, we continue to focus on improving project execution, our safety performance, as well as retention and people development.
For 2023, we are well positioned to make further progress towards our mid-term targets. At the same time, we want to capture the exciting opportunities in our markets, as our clients continue to rely on us for the execution of their current and future projects. Supported by a strong backlog at improved price levels, we are stepping up our investment levels. In the second half of the year, we plan to update the market on our ambitions and roadmap for the next phase for the company.”
Performance review 2022
Fourth quarter
In the fourth quarter of 2022, revenue increased by 8.5% compared to a particularly strong growth in the same period in 2021, supported by high client demand in the renewables market. The EBIT margin declined compared to the fourth quarter of 2021, as a result of disappointing operational performance in marine site characterisation in the Americas.
For the full year, we realised a 14.8% revenue growth thanks to a 42% increase in offshore wind. Infrastructure and oil & gas were up as well, with 7% and 9% respectively. Marine revenue increased by 12.9%, driven by site characterisation. The utilisation of Fugro’s owned and long-term chartered fleet was unchanged compared to last year at 72%. Also in land, the early cycle activities showed the strongest increase, in particular nearshore activities for offshore wind and LNG developments.
The group’s EBIT margin improved to 6.1%, mainly as the result of a solid improvement in the land business as a result of restructurings in multiple countries during the past couple of years. In marine, Fugro is successfully passing on higher cost for fuel, charters and third-party personnel. At the same time, the strong growth in site characterisation requires the additional mobilisation of vessels, which has resulted in delays.
The 12-month backlog increase by 37.5% is supported by all regions and business lines, reflecting both volume and price increases.
Operating cash flow before changes in working capital increased by 50% to EUR 179.4 million. Higher capex and an increase in working capital due to the higher activity levels, resulted in a free cash flow of EUR 23.9 million for the year. As a percentage of 12 months revenue, working capital was 12.9 at year-end, up from 10.9 a year ago; days of revenue outstanding were 85 compared to a low level of 82 in prior year. The increase in capex to EUR 123.1 million, from EUR 79.7 million in the previous year, was largely driven by a higher number of scheduled dry dockings and the conversion of the Fugro Quest to a geotechnical vessel adding capacity to Fugro’s fleet to cater for further growth.
Net debt declined to EUR 207.4 million from 292.7 million at year-end 2021, as a result of the EUR 116 million equity raise in July 2022 as part of the comprehensive sustainability-linked refinancing. At year-end, net leverage amounted to 0.9x. In light of the growth in Fugro’s markets, the company will not propose a dividend over 2022 and will reinvest the generated cash flow in the business.
Outlook 2023
For 2023, Fugro expects ongoing growth in the infrastructure, water and energy markets, in particular renewables, resulting in continuing strong revenue increase and margin expansion. Capex is estimated at EUR 200-225 million, including the acquisition of two geotechnical vessels (see separate press release published today), and investments in Fugro’s uncrewed vessel strategy and net zero roadmap.
With its further diversification into structural growth markets, Fugro is progressing towards its 2023-2024 mid-term targets for EBIT margin, free cash flow and ROCE. In light of the market outlook and backlog development, Fugro plans to update the market on the next phase of the Path to Profitable Growth strategy in the second half of the year.
Change Supervisory Board After having served two successive four year terms on Fugro’s Supervisory Board, Petri Hofsté, chair of the audit committee, will not stand for re-appointment as per the upcoming annual general meeting of shareholders to be held on 26 April 2023.
Sjoerd Vollebregt, chairman of the Supervisory Board: “Petri has been of great importance on Fugro’s Path to Profitable Growth. I would like to take the opportunity to thank her for her valuable contribution, as chair of the audit committee and member of our team.”
We expect to announce details regarding her succession on 14 March 2023 when the agenda of the annual general meeting of shareholders of 2023 will be published.
Recent project awards
- Europe-Africa region: a major geotechnical contract with Energinet for their North Sea I wind development; multiple geotechnical investigations for the Netherlands Enterprise Agency (RVO) for the development of several windfarms: the IJmuiden Ver Site V-VI, Nederwiek (zuid) Site I and Hollandse Kust (west) Site VIII zones; ground investigation at Keadby 3 in the UK for SSE Thermal and Equinor and a multi-year partnership with SP Energy Networks to survey and model their entire transmission network.
- Americas region: survey contract to support site appraisal and concept design activities for Community Offshore Wind; nearshore site investigations and consulting services for New Fortress Energy’s FLNG project in Lakach (Mexico); a 3-year contract for inspection, repair and maintenance services for Petrobras; a multi-year road survey contract in Louisiana.
- Asia Pacific region: site investigations for offshore renewable projects in Australia and Taiwan; a major site investigation for Petronas Carigali Brunei, to support Brunei’s first deepwater LNG project; renewal of a long-term IRM contract for Woodside in Australia and two land site investigation and testing contracts for infrastructure projects in Hong Kong.
- Middle East & India region: A hydrographic survey for Saudi Arabia’s General Authority for Survey and Geospatial Information; marine geophysical surveys for ADNOC in the UAE and for TotalEnergies in Qatar; a hydrocarbon seep survey for Chevron in Egypt and various site characterisation projects for The Royal Commission for AlUla in Saudi Arabia.
- Revenue increased by 14.2%, driven by marine site characterisation, thanks to strong client demand in the oil & gas and offshore wind markets, and land site characterisation, where multiple previously postponed projects kicked off during the year.
- EBIT improved driven by nearshore projects in land site characterisation and marine asset integrity. This was however to a large extent offset by supply chain difficulties which resulted in the delayed start of a large geotechnical survey on the US East Coast in the first half of the year, and in particular the related knock-on effect on other projects, which were pushed into the poor weather season in the fourth quarter.
- The 12-months backlog increased by 38.4%. Marine site characterisation was up mainly as a result of wind and coastal resilience projects; land backlog increased in nearshore, geoconsulting, and road surveys.
- Revenue declined, when in the fourth quarter an unexpected change in permitting for geotechnical site investigations in South Korea caused significant delays for three offshore wind projects, causing standby of vessels.
- The region’s EBIT margin improved significantly, supported by all business lines, with active portfolio management yielding better project margins.
- The 12-months backlog increased by 40.6%. As border restrictions relaxed in the aftermath of the pandemic, the region saw a strong backlog pipeline, in particular marine, driven by both oil & gas and offshore wind projects across South-East Asia, Japan and Korea.
- Revenue increased significantly year-on-year, in particular in the site characterisation business lines. Marine benefitted from a notable increase in oil & gas activity in the Gulf region; land saw a continued high demand for services on large infrastructure projects including the Mali-Thilafushi bridge in the Maldives and the NEOM city development in Saudi Arabia.
- The region’s profitability improvement was limited, mainly due to some extended periods of vessel standby and high third-party expenses experienced in the first half of the year.
- The 12-months backlog increased by 46.6% driven by all business lines.
