- Revenue: Down 12.1% year on year.
- Underlying Operating Profit: Up 20%.
- Operating Margin: 7.6%.
- Net Debt: Just under GBP145 million on a covenant basis; expected to be around GBP65 million by the end of the year.
- Net Debt to EBITDA Ratio: 2.6 at June 30; targeted range of 1 to 1.5x.
- Return on Capital Employed (ROCE): Increased to 7.5%, a 200 basis point uplift.
- Cash Proceeds from Sale of Non-Core Assets: GBP100 million realized in 2024.
- Finance Charges: Up from GBP8.7 million to GBP14 million.
- Effective Tax Rate: 29.5%.
- CapEx Including Development Expenditure: GBP17.6 million.
- Net Disposal Proceeds: GBP14.2 million.
- Net Working Capital Inflow: GBP12.2 million.
- Days Sales Outstanding (DSO): Dropped to 59 days.
- Revenue from Well Services: Increased by over 14%.
- Revenue from Offshore Wind Construction: Now accounts for approximately 35% of revenue, up from 30% in '23.
- Revenue from Inspection, Repair, and Maintenance: Reduced from GBP33 million to just under GBP26 million.
- Revenue from Defence Division: Fairly flat at GBP37 million year on year.
- Revenue from Tank Ships: Up 2% year on year.
- Revenue from LNG Market: Down just under 17%.
- Revenue from RMS: GBP22.8 million in the first half.
- EBITDA from RMS: GBP6.7 million in the first half.
- Revenue from Martek: GBP5.6 million in H1.
- EBITDA from Martek: GBP0.5 million in H1.
Release Date: September 10, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Underlying operating profit increased by 20%, driven by strong performance in well services, tank ships, and submarine rescue platforms.
- Significant reduction in net debt, with GBP100 million realized from the sale of non-core businesses.
- Improved cash management and collection, with a net working capital inflow of GBP12.2 million.
- ROCE increased to 7.5%, reflecting a 200 basis point uplift due to improved profitability and contract discipline.
- Strong demand in core markets such as oil and gas, offshore wind, and defense, with a healthy order book and pipeline.
Negative Points
- Revenue declined by 12.1% year-on-year, primarily due to business closures and the cessation of the Swordfish vessel operations.
- Net debt to EBITDA ratio remains high at 2.6x, although it is expected to reduce further by year-end.
- Corporate costs increased by GBP2 million, reflecting higher investment in capabilities and improvement initiatives.
- Challenges in the subsea and decommissioning business, with insufficient sales growth to offset losses.
- Higher finance charges, up from GBP8.7 million to GBP14 million, due to increased interest costs and fees.
Q & A Highlights
Q: Can you provide a roadmap for improvement in terms of market outlook and self-help measures?
A: Jean Vernet, CEO: On the energy side, we see strong demand in the well service offshore market despite oil price volatility. Offshore wind demand is growing exponentially, driven by global investment commitments. In defence, we have a rich pipeline of activities, both in new product delivery and service contract renewals. Our self-help measures focus on fixing underperforming units and integrating our organization for efficiency.
Q: Can you elaborate on the refinancing of the revolving credit facility (RCF)?
A: Karen Hayzen-Smith, CFO: The refinancing discussions are well advanced. The sale of RMSpumptools in July provided the base for these discussions. The banking group may change slightly, with some banks exiting the UK market. We expect improved terms and fewer restrictions in the new RCF.
Q: What changes have been made in the defence management team, and how confident are you in the tendering pipeline?
A: Jean Vernet, CEO: The defence team has been strengthened with complementary skills, including a new Chief Technology Officer. We have a diverse pipeline of opportunities, both in OEM sales and service contract renewals. Some opportunities are well advanced, and we are in single bidder positions.
Q: How are you managing risks in the Mozambique project, and what is the future upside?
A: Jean Vernet, CEO: The major risk has been security, which has been reviewed by both the client and us. We have senior talent managing the project, and deliveries have been on time. Future involvement will depend on our ability to bring unique value to the customer.
Q: Do you anticipate any further disposals of non-core businesses or assets?
A: Jean Vernet, CEO: We will continue to scrutinize our portfolio, focusing on marine engineering services. Underperforming units with little prospect of meeting hurdle rates may be divested. We aim to allocate resources where we can scale and build stronger synergies.
Q: What is the timeline for achieving the 10% operating profit margin target?
A: Karen Hayzen-Smith, CFO: Various levers are in progress, including self-help measures, supply chain integration, and defence rebound. Improvements are expected to come through as part of our turnaround journey, extending into 2025.
Q: Do you plan to order more tankers as part of your rebuild program, and will new tankers command a rate premium?
A: Jean Vernet, CEO: We will continue to modernize our fleet, focusing on efficiency and lower carbon emissions. The market has a disconnect between supply and demand, making it a good market to be in. New tankers are expected to be more efficient and command a rate premium.
Q: How do you manage the global fleet of compressors for bubble curtains, and what is the visibility for growth in this business?
A: Jean Vernet, CEO: We manage the fleet globally, shipping compressors as needed. High utilization rates and excellent service quality drive growth. Compressors can be repurposed for other markets like oil and gas, and we see potential for new applications in the marine environment.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
