FUGRO N.V. FUGRO ANNUAL REPORT 2015 Geo-intelligence & asset integrity solutions ANNUAL REPORT 2015 REPORT ANNUAL Fugro N.V. Veurse Achterweg 10 2264 SG Leidschendam The Netherlands GEO-INTELLIGENCE & Colophon ASSET INTEGRITY SOLUTIONS Fugro N.V. In the 1960s Fugro started as the first soil investigation Veurse Achterweg 10 and foundation engineering company in the Netherlands. 2264 SG Leidschendam Over the past 54 years we have become the world’s The Netherlands leading, independent provider of essential earth and related T +31 (0)70 3111422 construction testing, inspection and monitoring data and F +31 (0)70 3202703 consulting services. From the deepest oil field and the largest E [email protected] wind farm to the most challenging tunnels and bridges, we collect and interpret the data needed to advise our clients on Chamber of commerce 2710091 the optimal design, construction and integrity of their large constructions and infrastructure. Realisation: Domani B.V., Weesp Increasingly, we are extending our service portfolio The cover shows a high-resolution image of with consulting and data management services including Photography and images: one of our clients’ pipelines in the Caspian processing, analysis, interpretation, visualisation and hosting. Fugro N.V. sea. Fugro has gathered the data from one of In short: we don’t only acquire the data but transform it into its proprietary survey vessels, using acoustic information which is crucial to our clients’ design of Fugro has endeavoured to fulfil all legal requirements related technology. This provides the client with constructions and infrastructure, and assuring integrity of to copyright. Anyone who, despite this, is of the opinion optimal insight into the condition and location their assets during construction and operation. By being that other copyright regulations could be applicable should of their offshore infrastructure. involved in all stages of the asset life cycle and by being an contact Fugro. This is a clear example of how we gather, independent services provider, we are a trusted long term process and visualise the data that are crucial partner to our clients. Thus we have become the leading to our clients’ project design and infrastructure geo-intelligence and asset integrity solutions provider. maintenance. Our ability to offer efficient, integrated solutions is key, especially in the oil services market, where the prolonged market downturn is driving the need to cut unproductive costs from the supply chain. We support our clients by providing smarter and more cost effective ways to develop, operate and maintain the integrity of their large construction and infrastructure assets. For the theme pages of this annual report, we have selected 7 examples that illustrate our engagement to offering our clients efficient and integrated solutions. Forward-looking statements This annual report may contain forward-looking statements. Forward-looking statements are statements that are not historical facts, including (but not limited to) statements expressing or implying Fugro’s beliefs, expectations, intentions, forecasts, estimates or predictions (and the assumptions underlying them). Forward-looking statements necessarily involve risks and uncertainties. The actual future results and situations may therefore differ materially from those expressed or implied in any forward-looking statements. Such differences may be caused by various factors (including, but not limited to, developments in the oil and gas industry and related markets, currency risks and unexpected operational setbacks). Any forward-looking statements contained in this annual report are based on information currently available to Fugro’s management. Fugro assumes no obligation to make a public announcement in each case where there are changes in information related to, or if there are otherwise changes or developments in respect of, the forward-looking statements in this annual report. The term ‘shares’ as used in this annual report should, with respect to ordinary shares issued by Fugro N.V., be construed to include certificates of shares (also referred to as ‘share certificates’ or ‘depositary receipts’ for shares) issued by Stichting Administratiekantoor Fugro (also referred to as ‘Fugro Trust Office’ or ‘Trust Office’), unless the context otherwise requires or unless it is clear from the context that this is not the case. In this annual report, Fugro N.V. is also referred to as ‘the company’ or ‘Fugro’. Fugro N.V. and its subsidiary companies are together referred to as ‘the group’. CONTENTS Fugro at a glance 2 Theme pages: Who we are 2 Geo-intelligence and asset integrity solutions 52 Highlights 4 Key figures 5 Risk management 66 Message from the CEO 6 Management statements 74 Profile 9 Report of the Supervisory Board 75 Contributing to building a liveable world 9 Supervisory Board 75 Our values 9 Our vision and mission 10 Remuneration report 84 Our market position 11 Our activities 12 Corporate governance 91 Our people and expertise 13 Our other resources 13 Information for shareholders 99 Our clients 13 Geotechnical division 14 Financial statements 2015 103 Survey division 16 Consolidated statement of comprehensive income 104 Subsea Services division 18 Consolidated statement of financial position 106 Geoscience division 20 Consolidated statement of changes in equity 108 Consolidated statement of cash flows 110 Trends 22 Notes to the consolidated financial statements 112 Subsidiaries and investments accounted Strategy and mid-term targets 25 for using the equity method of Fugro N.V. 179 Company balance sheet 182 Report of the Board of Management 28 Company income statement 183 Board of Management 28 Notes to the company financial statements 184 Summary 29 Cost reduction measures 29 Other information 188 Strategy update 30 Independent auditor’s report 188 Highlights income statement 30 Subsequent events 194 Highlights balance sheet and cash flow 33 Foundation Boards 194 Financial position 35 Statutory provisions regarding the appropriation Dividend 35 of net result 194 Backlog 36 Proposal regarding the appropriation of net result 195 Outlook 36 Operational review per division 36 Report of Stichting Administratiekantoor Fugro Foreign currency 39 (‘Foundation Trust Office’) 196 Employees 39 Subsidiaries and joint ventures 40 Historical review 198 Overview important contracts 41 Glossary 200 Corporate social responsibility 44 FUGRO N.V. ANNUAL REPORT 2015 1 FUGRO AT A GLANCE - WHO WE ARE We are the world’s leading, independent provider of essential earth and related construction testing, inspection and monitoring data and consulting services. From the deepest oil fields and the largest wind farms to the most challenging tunnels and bridges, we collect and interpret the data needed to advise our clients on the optimal design, construction and integrity of their large constructions and BUILDING & infrastructure. OIL & GAS INFRASTRUCTURE POWER MINING data acquisition 70% OFFSHORE 12,000 EMPLOYEES 60 COUNTRIES ent & nagem labo ma rato ta ry da te st in g consulting Aerial mapping aircraft remotely operated vehicles cone penetration testing trucks vessels jack-up drill rigs platforms autonomous underwater vehicles 2 FUGRO N.V. ANNUAL REPORT 2015 Fugro at A GLance BUILDING & OIL & GAS INFRASTRUCTURE POWER MINING data acquisition 70% OFFSHORE 12,000 EMPLOYEES 60 COUNTRIES ent & nagem labo ma rato ta ry da te st in g consulting Aerial mapping aircraft remotely operated vehicles cone penetration testing trucks vessels jack-up drill rigs platforms autonomous underwater vehicles FUGRO N.V. ANNUAL REPORT 2015 3 Fugro at A GLance HIGHLIGHTS GENERAL Fugro is dealing with an unprecedented downturn in the oil and gas markets ■ Reducing capacity, operating cost and investments. ■ Focusing on winning work, strengthening leadership positions and executing well on projects. ■ Delivering strong cash flow after investments. ■ Significant reduction of net debt. ■ Strongly improved performance Seabed Geosolutions. While proceeding with the implementation of its Building on Strength strategy ■ Offering integrated geo-intelligence and asset-integrity solutions, among others by combining the geophysical survey and offshore geotechnical activities into an integrated site characterisation proposition. ■ Strong focus on performance improvement programmes and innovation. ■ Progress portfolio changes ■ Divestment of multi-client data library. ■ Planned portfolio changes in relation to Subsea and Seabed selectively pursued. FINANCIAL ■ EUR 314.7 million cash flow from operating activities after investments of driven by improved EBIT margin, curtailed investments, lower working capital, sale of multi-client data library, and sale and lease back of a vessel. ■ EBIT margin (before exceptional items) increased from 3.2% to 4.8% due to strong improvement in Seabed Geosolutions. ■ Significant net debt reduction leading to net debt/EBITDA of 1.6 versus covenant requirement of below 3.0. ■ Year-on-year revenue decline of 8.1% or 17.3% on a currency comparable basis in a strongly deteriorating oil and gas market. ■ Cost reduction and performance improvement programmes stepped up and progressing ahead of schedule. ■ Backlog for the next 12 months down by 20.4% on currency comparable basis compared to a year ago and by 3.7% compared to the previous quarter. ■ Outlook 2016: positive cash flow and further reduction of cost base in a challenging oil and gas market with continuing pressure on margins. 4 FUGRO N.V. ANNUAL REPORT 2015 FUGRO