Okay, good morning, everyone. Good morning everyone in the room, everybody online as well. Welcome to the ABL Group Q2 presentation of our figures. My name is Reuben Segal, I'm the Group CEO. I'm also delighted to tell you I'm joined today by Dean Zuzic, our Group CFO. Between us we're gonna go through the Q2 results and the presentation, and give you a flavor of what's been happening over the last few months. As I said, I'm gonna give you a summary of how we've done, some of the highlights, some of the projects we've been doing, as well as some of the figures. Dean will take you through the financial results, and then I will give you a round-up at the end.
Also, just so you're aware, we'll also have a live Q&A session at the end of the presentation, so please hang around and ask whatever questions you would like to do. As always, I give you a notice to the disclaimer. I'm not gonna go through it now. Please feel free to read it in your own time online, but just drawing your attention to the disclaimer. Let's jump into the presentation and the figures. This certainly makes my job a lot easier on a morning like this. I'm delighted to announce that the ABL Group had a record performance in Q2. We had record-performing revenues, record-performing EBIT, and record-performing EBIT margin. During these presentations over the last few months, we have discussed how we get things up, how we get our margins up, et cetera.
I'm delighted to say that we are able to present this to you today. $41.4 million were the revenues for Q2. This is an 8% increase over the same period in 2021. More so though, this is driven by our continued growth into the renewable sector and through OWC, and also now through our engineering business across the group, which is performing very, very well. Also, our EBIT was up at $4.7 million, that's the adjusted EBIT, which is a 60% increase over this period last year. Our EBIT of $3.9 million is 70% up on this period last year. Some real excellent figures for the quarter, through a lot of hard work.
I would like to take this opportunity to thank my own staff for all the hard work that they've done, over the quarter, and congratulate them on some very good results. Also, our net cash position of $8.7 million, also very strong. Yes, it is down over Q1, but the reason for that is very simple. We paid our Nordea loan, as always at the end of every quarter, and also we paid out our $0.30 dividend. The net position actually is an improvement over Q1, so a very strong position. In addition to all of this, we also did the acquisition of Add Energy. We're joined today by the CEO of Add Energy as well, so which has to happen at the same time as everything else going on.
We also did a divestment of our adjusting business. A lot of things happened in Q2, so that combined with the excellent results is a credit to the organization and the people that we have within the organization. Well done to everyone. Where did we perform? As always, in our Renewables sector, Oil & Gas division, and also in our Maritime division. All three performing very, very well across the board. This has been going on now since the beginning of the year, and continues. Where are we exactly? We have talked about our pushing our Renewables into 50%, and that growth continues. We presented 29% last quarter, we're now up at 30% of our overall revenues. That's considering our revenues continue to grow. That's a credit to our Renewables team.
Also, as we've discussed in the past, we're no longer dependent or reliant on one single region. We have now no more than 23% in any region across the organization, with Europe being at 23%. Nice even spread across the regions, nice even spread across the businesses, nice even spread across our segments. It's a nice position to be in. The cyclical reasons that we get from monsoon seasons and all the other things that we have, holiday seasons coming up as well in July and August, we don't get as affected as we used to. We're in a good shape, good shape overall. Apart from the good figures, we have a good diversification across the organization. Since last time we've also now added some new services.
The three key areas that we are in, I'm gonna start from the right rather than the left this time. First of all is our loss management, which is our traditional P&I, hull and machinery business, expert witness for the insurance underwriters. We are still the market leader, we have always been the market leader, and we continue to drive being the market leader in this segment. Our loss prevention, which is traditional marine warranty services, rig moving services, where again, we are a market leader. We continue to grow our rig moving in particular, a lot of growth going Oil & Gas sector, and our marine warranty. I'm going to show you some examples of new projects which we have won during Q2.
Now, the nice thing I can report this time around is we've now added more services to our engineering and consulting business. With the acquisition of Add, which I will talk a little bit about with Add Energy, we now have added well control, well management, in particular integrity management, and also some digital services and products as well. Not only we continue strong where we are, but we've now added more services to the portfolio as well. In fact, the well control goes across all three parts of the organization, not only in consulting and engineering. It's a great position to be in, and I will talk a little bit more about Add in the next slide. There we go. Add Energy.
Apart from the things that we were doing in Q2 and the growth across all sectors, all regions, we also continued our M&A. We have said traditionally in the past we're gonna continue. If the right opportunity comes along that fits with our business, we will do an M&A, and this is that example. To give you a flavor of what happened for Add Energy, this company has been traditionally making around about NOK 300 million a year in revenues. However, in the last couple of years, let's make no qualms about this, they have been down. Last year, they were down just over NOK 200 million. They have been loss-making last year and also loss-making this year. We know that. This is not our first rodeo show. This is why we did this acquisition. They have a lot of very talented people.
They have a very good business model. What we now need to do is to bring it into the ABL Group. That's what we intend to do. The acquisition was a total of NOK 21.75 million. This was made up of NOK 20 million of shares within ABL Group and a further NOK 1.75 million of cash to the Add Energy investors. It was a nice acquisition for us to do. We took over 100%, and that includes the DNB loan that was there as well, which is now being transferred into the shares within ABL Group. Because of the issues that they've had, again, we're making no qualms about where we are and where we're up to with it. We have appointed Dr. Ahilan, who is going to take control over Add Energy during the short and medium term.
That is to get them into our way of thinking, our systems, our processes, and bring them into our business overall. This is a good acquisition for us. We think it's the right time, and we look forward to growing them over the weeks, months and years ahead. Why did we do the acquisition? Because you could say loss-making. Does that work for you? There's many things about Add Energy that work for us. First of all, we have talked about can you get your hands on good technical people? Here we bring in 140 new technical heads. That grows our headcount by more than 10%-12% in one hit.
They also bring in over NOK 200 million of revenues, which grows our top line as well. There are a lot of good things about bringing them in. On the services side, we have diversification in terms of the services that they provide, but also more into the OpEx phase of the operation. One of the things that we don't talk about too much is the CapEx. We work a lot in CapEx projects. By bringing in Add Energy, we now diversify a little bit into OpEx. Again, it allows us to just have a little bit more resilience going forward. They also have new services I'm gonna talk about in a moment which we've not traditionally had before. In addition to that, they're very focused in the U.K., in Aberdeen, into Houston, Canada and Australia.
ABL Group is across the globe. We will take their services and internationalize them across the whole ABL Group. A lot of potential going forward that, you know, the size that they were, it was difficult for them to get that full globalization. We have that, and we will bring that to Add Energy. Really exciting times ahead, I have to say. In addition to that, some of Oil & Gas services we are now taking also into the energy transition, carbon capture, thermal, geothermal type work as well. A lot of really good benefits that you might not necessarily see by just looking at the straight number and of course, an attractive entry point for us. That goes without saying. This is a few snapshots of what they do.
We will talk about more Add Energy in Q3, seeing as the acquisition was just closed in early July. There's six main areas where they focus. Asset integrity, that's mainly focused out of the U.K. and Aberdeen, and also in Houston and Canada. You have your well engineering, well control, which is here in Norway and also across in Australia. Very strong down in Perth, as are we down in Perth. I will show you some examples later on. They also are into the risk and safety. They're in training advisor, decarbonization, carbon capture type projects, energy transition projects, and the new one to us is the software solutions. We also, if you remember last time in Q1, I talked about the emiTr project. This also fits in with that suite.
They have hardware and software, and we will talk about that going forward. A lot of good positive things. In addition to that, to run a good business, you have to always be dynamic. We have talked about our adjusting business. We decided at the end of the day, because of the conflicts of interest that we were having, very hard for us to say on one hand we want to grow our marine warranty. On the other hand, we're saying, "But by the way, if it all goes wrong, we'll also take care of it." It became a problem for us and that problem continued. Also, their working capital requirements were too much as considered where we wanted to be as a company. We decided to diversify. We sold the company to the employees.
It was a nice transaction for us to do. The total value was $5.8 million, of which $200,000 was cash, $1 million was through owner's credit over the next 18 months. Of course we had the working capital, the aging receivables of $4.5 million. That aging receivables, we have already collected a substantial amount. If for any reason we don't collect it, we have the ability to go back to Steege and get that back under some conditions as well. It was a nice deal for us, and it's worked out very well for them as well. We wish them all the best going forward.
In addition to that, but not something that we talk about in the figures itself, we have the 1.3 million share options which were also canceled. We have less liquidity, liquidating our shares as well. It was a very nice transaction for them as well as for us. A lot happening in the quarter. Trying to build the business, grow the business, push our EBITDA, push our margins, push our revenue, diversification and acquisition. Excellent quarter. We're now past 1,000 people. We are truly past 1,000 people. The 1,083 includes Add Energy numbers as well, but it also includes the reduction of around about 35-37 staff from our adjusting business. The net effect is now running at close to 1,100 people.
No new offices to report this time around, at least not this time. I'm gonna give you a little flavor of some of the projects we've been doing as well, in the through all of this. Of course, we continue to push our Renewables business, and we will be having a talk a little bit later this morning at 9:30 A.M. from Katherine who is with us on our Renewables business and offshore wind. This is the Valorous project, and Katherine can talk much more about this later on in the day. This is off the Welsh coast. It will be a total of 27 floating wind turbines to be installed, and we've been appointed as the owners' engineers. Why have we put this on the board here? The main reason is the client. This is Simply Blue and TotalEnergies. This is a repeat client.
They come, and they come, and they come back for more because the quality that we do as an organization and the people that we have deliver first-quality product. For a client like Simply Blue and Total to keep coming back and having faith in the quality that we do is excellent. Well done to Katherine and the team. This is also another Renewables project. This time lender's technical advisor, the due diligence type of work that we've also discussed in the past that we want to push more and more into going forward. Apart from being owner's technical due diligence and being the lender's advisor, this is going to be the world's largest offshore wind farm. To be involved in the largest is exactly what we like to be involved in.
This will be a total of 140 turbines of 11 MW and two substations. It's a good project off the coast of Holland, and we look forward to seeing how that will develop. Let's not Oil & Gas business because that's bubbling in all parts, so this is just one example of many I could show you. This has also happened down in Australia. We talked about Australia last time round. This is the Jansz-Io project. We've been appointed as marine warranty on this project for the entire field development. That includes subsea pipeline, cables, and also the large modules as well for transportation.
Good thing about this, it's a four-year contract, and if you see what we'll talk next time, not this time, about what Add Energy is doing down in Perth as well, it just confirms that things are building all the Oil & Gas. this is a big project with Chevron, one of the largest in the world at the moment. For us to be appointed as the owner's marine warranty is excellent. Just to add on to that, if you see the activity going on in the rig moving space as well, it's building day by day. It all looks well going forward. Here's slightly different project, the NEOM project. You know, we want to be pushing more into Renewables. We want to push more into energy transition, and this is...
If you don't know NEOM, Google it. It'll be one of the world's largest projects, if not the world's largest project going on. For us, it's a relatively small part right now. It's the export jetty, and the interface between the tankers and the jetty and all the systems as well. We've been appointed as the engineers. We'll be doing some FEED design and reviews as well on the NEOM project. It's exactly the right place we would like to be. Green hydrogen, energy transition, renewables. It's a great place to be, the world's largest project. Good inroads with our client, Air Products. Much going on. I didn't want to add too many projects this time around because we had Add Energy as well and adjusting.
What does that mean for the company? We keep growing, and we will continue to grow. This is what we said as an organization, as a board, and as management that we want to continue to grow in all sectors. Our headcount continues to grow. Our permanent headcount continues to grow. What we've done here, we've showed you just the little. The red bit is now the Add Energy part that will come on top in Q3 going forward. With them, you know, we'll be well in excess of 1,100 people, and that growth continues across the organization. Also, our subcontractor mix, we keep it about 30% so that when we have the summer periods that we're able to handle that as well. It's a nice model. It's working very, very well indeed, and that comes out in our results.
At that point, I'm going to stop and hand over to Dean , and he'll give you more flavor on the figures.
Thanks, Reuben. Let's go quickly through the numbers. As Reuben mentioned, we again revenues and EBIT we are showing a stable growth in revenues as we've had these last quarters since 2020. Nice increase of 8% on a quarter-to-quarter comparison. Our EBIT has increased significantly, 70% compared to the last quarter to the same quarter of last year. Driven basically by synergy realization. We've had an increase in activity across the board and, of course, I would say that our pricing power also has I mean increased these I mean last quarters. We hit a double-digit EBIT, 11.3%. First time at least in my history in the I mean company.
I have heard that we have had double-digit EBIT if you go a long way, I mean, back, 2014. At least in the last years, it has been the first time, which we are very satisfied with. We have said that we will aim to get a 10% EBIT margin through the, I mean, cycle, which I feel like we have proven is, I mean, achievable. If we move on, if we look at our segments, basically we have had a good development in, I would say, in all of our areas except maybe the Americas, which we are not that happy with the development in Q2. I will come back to, I mean, that.
We've seen a slight drop in revenues in Asia-Pacific as the only region where we have had a drop in revenue. Much of this is tied to basically two things. One is the sale of the adjusting business. We did get an effect in partly May and June as that was the strongest adjusting region. The continued shutdowns in China have influenced revenue some, I mean, as being the region in the world that has had the longest shutdowns following COVID. In the other regions, we have had a significant uptick. OWC is up 25% quarter-over-quarter.
Our Longitude business and Specialty Engineering is up over 30% on a year-to-year comparison. In terms of EBIT margin, again, I said except for the Americas, and the reason for that in the Americas is basically that utilization in the Americas was somewhat lower than in the other regions in Q2. Even if we talk about a pickup in most of the world, the U.S. is still lagging, and we haven't achieved max utilization expectations there yet. It hasn't picked up as much as in the other regions yet. We have the Middle East, which has been a star performer in Q2, of course, driven by the increased activity the Oil & Gas side.
We've had nice, I mean, margin developments across the globe. 9% Europe, 9% in OWC. We had Longitude of an extremely high 21%. They've had a very good year, I mean, and the Asia Pacific is also contributing with a double-digit EBIT. All in all, good development across the board. Americas lagging. That I guess is the main message here. If we look at the income statement, again, just going through the top-line figures, since we've been through most of them. Revenues we mentioned, $41.4 million, up 8% from $38.3 million in the same period of last year. Stable staff costs, somewhat high operating expenses.
That's basically based on the fact that we are, I mean, growing. We are a much larger organization this year in Q2 than, I mean, what we were last year. Depreciation relatively stable consists of the right to use assets explained half of it. We have a $0.1 million amortization from the acquisition of LOC that will continue for 10 years in total. That is always there in the, I mean, figures and the normal other depreciation that adds up to approximately $0.8 million. That will be our normal depreciation level quarterly. That gives us an EBIT of $3.9 million approximately, unadjusted. Adjusted, $4.7 million.
The adjustments are specified in the, I mean, appendices, but they consist basically of share-based incentives and of M&A activity costs and, I mean, transactional costs. Yeah, I guess that's it. 11.3%. As I said, finance expenses are again stable, consist of interest. For the most of that, we have the loan of $10 million with Nordea. And relatively stable tax, a bit more than 20%, which should be around 25%. I have said earlier should be our normalized tax rate as we move along. Strong cash position. We ended the quarter with a net cash of $8.7 million.
We had $18.7 million in cash, $10 million in bank debts. Capitalized leases increased pretty much now in Q2. That's related to an office move in London where we entered a new five-year contract for the whole company. That should give us significant synergy savings since we've moved three locations into one, I mean, basically. That has increased the capitalized leases in Q2. Net cash flow of -$1.8 million. We had $2.8 million positive cash flow from operations, and then we paid out $4.7 million in dividends and in debt repayments. Dividends, $2.9 million. Debt repayment was around $1 million, and the remainder is in lease payments. Working capital of $35.9 million.
That went down from Q1, from $36.4 million, driven by the adjusting sale. Percentage-wise, we're down at 18.9%. We have said that we are targeting 18%. That is still our, I mean, target. We do expect to free up an additional 5.1 % in working capital related to the adjusting business, as we move through 2022 and the remainder of 2023. We're on track when it comes to working capital, and it is developing as expected. In terms of dividends, we paid out NOK 0.4 in 2020, NOK 0.5 in 2021. We do still have a semiannual dividend policy, paid out NOK 0.3 for the first half of 2022.
Based on the authorization granted by the board, you can expect a dividend in the second half, but it hasn't been declared yet. Again, dependent on our results in the second half and the development in, I mean, working capital, but we do have a policy of returning capital to shareholders, and that has not changed. Back to you, Reuben.
Thanks, Dean. Okay, I'm just going to give you a quick summary of where we are and how we see things going forward. Just to keep everybody aware, after this, there will be a presentation. First of all, there'll be a Q&A session straight after, and then at 9:30 A.M., there will be a session on our Renewables division presented by Katherine. Outlook. As Dean and I have said, it was an excellent quarter, not only because of the figures. Having good revenues and good EBITDA and good margin is what you see the end product, but it takes a lot of work to get there. With the diversification and also acquisition and all the hard work and reducing of working capital, keeping our cash, it's a lot of moving parts.
It was an excellent quarter across everything. To be getting EBITDA margins of 11.3% at this part of the year, it only bodes well for the future. I will say, nevertheless, Q3. We all know Q3 is when everybody goes on holiday, but the business still continues. I'm just giving you a little bit of a warning, but it is typical summer, July and August, but nevertheless, work goes on, rigs still keep moving, and projects are still alive. Things look good going forward, continue to be strong in all sectors of our business. The acquisition of Add Energy, of course, is also gonna come into that. It will push our top line. Absolutely, it will push our top line going forward.
Nevertheless, you have seen their results in terms of EBITDA, and it's something that we will be working on. We have an intention to get them into a break-even point by the end of the year. It will have a negative effect in Q3 for sure. We can't deny that. Our job now is to minimize that and to get them into our territory, and we will be doing just that, mark my word. This is not our first rodeo for taking companies and working with them. You would expect to see that they will have some effect on us in Q3 going forward. The markets are all booming for us. Our Renewables market continues. The growth that we've seen year after year after year continues. This year already, we were having a meeting yesterday.
Can't handle sometimes the amount of growth happening in Renewables, the amount of projects coming online. The Renewables is growing at a fast pace and continues to Oil & Gas, every day you open the newspapers, every day you see new rig contracts, every day you're seeing, more projects being awarded. We're across the globe, and we're working on all Oil & Gas sector is doing very, very well. The good thing is rates are starting to harden as well. We're starting to see an increase in rates across the group. Of course, the projects, we talked about it before, the projects that we signed up two or three years ago are now ending, and we're able to start pushing through some of the new projects with the new contracts with the new rates. And it's happening.
I'm glad to see it's happening. We can see that in our own development, which is why you see the EBIT margin improving as well. It's all going in the right direction. Our capital efficiency also continues. With the diversification away from adjusting, we'll continue to improve that. We'll continue to improve our UBR, our AR, and ultimately our working capital, which Dean's just mentioned. We do intend to pay a dividend as well. We continue to pay dividend. We paid it the back end of Q2, and we continue to do that towards the end of this year as well. Finally, Renewables. We will continue to drive this. We have given them a target of 50%. We continue to drive towards that 50%. There is no change in that as we go forward.
Only thing is we're gonna add more services to it. We're gonna add more to the company, so they're gonna have to run twice as fast. That's the intention, and so far, so good. They're doing what they said they will do. Last but not least, we have said, and we will continue to say that we will continue to look for the right opportunity. We won't be reckless. We will do what's right. If the right opportunity comes along, whether it's in Maritime or Oil & Gas, we will continue to take those opportunities. We will continue to grow organically, but we'll also continue to grow through M&A if the right opportunity comes along. If it doesn't, we'll do what we did in adjusting to. We will always be dynamic.
We will always do what's right for this company, and I hope when I get to see you all in Q3, we're also able to report some good results. On that point, I'm going to end. Thank you very much for all your attendance today. Appreciate that. Thank you to my team as well for doing a really excellent quarter of work. Really it goes out to them for a great job well done. On that point, we will stop, and if anyone's got any questions, feel free to ask. Thank you very much.
Yeah. Tommy Johannessen, SpareBank 1 Markets. Starting off with the Middle East outlook, can you share some thoughts about expected revenue phasing in 2023 from the significant uptick we're expected in the jack-up fleet from Saudi Aramco and ADNOC?
I can't necessarily give you some figures what will happen in 2023. I can only tell you the way the activity goes. You can see it yourself. Rigs are coming in day by day. Saudi Aramco increasing, GDI in Qatar, ADNOC in the UAE. ADES are bringing a lot of rigs into the region as well. I think they're up to 30 rigs at the last count I heard. There's no stopping with that, and we're the leader of rig moving, rig moving services. I don't expect that to change. All that we see, more rigs. More rigs, more revenue. What that will be, I couldn't tell you today. You know, we move almost exclusively 100% of the rigs in India as well, not only the Middle East, but let's take India.
You're seeing the same activity in Mexico, West Africa, even over in Asia-Pacific. Of course, Middle East is the big driver. We're going through our monsoon season now, July and August, but we expect that to pick up again in September. I couldn't give you numbers. All I can tell you is if the rig count goes up by 10%, I expect our revenues to go up by 10%. Hey, we're the leader. That's the best I can say, and I hope that will come through in our results next year as well.
Thank you. On Add Energy, over time, what kind of margins do you expect to realize there? Is it achievable with around 10% EBIT margin as you guide for the group as a whole?
I can't tell you tomorrow we're gonna get 10%. That, I can't say that. What we said is we would like to get them back to break even this year. Right now, that's not happening. That's the first thing. We've got to get them back to break even, and we have the people and the capability to do that. But we're not going to buy Add Energy or anyone else if we can't get them to where we want to be. You know, this time last year, we were running at 4%-5%, and today we're at 11.3%. I can't tell you tomorrow we're gonna get them to 10%. I can't tell you it's next week we're gonna get them to 10%.
We're not gonna buy a company if our intention is only to do 3% or 4%. When we're gonna get there, I can't give you the answer. I'd be wrong for me to give you the answer. First step, stabilize them, bring them back to break even, and then we'll bring them back to profitability. Like I said earlier, this is not our first time we've done this. You know, we've been very successful with LOC, we were very successful with BTS, we'll be successful again. I can't give you a timeline today.
Last one , on net working capital. What will be the drivers of getting that down to 80% beyond the adjusting sale?
I mean, yeah. Shall I answer that?
Yeah, absolutely.
Yeah.
I mean, the drivers are basically working more efficiently on the collection side and being quicker to send out invoices. We've been working with that. I mean, a lot. It's a combination of a lot of things, of starting out with the, I mean, contracts, changing some of the conditions in the, I mean, contracts, allowing us to invoice clients faster, but also being much more efficient on the core, I mean, collection side. We've been working with this pretty focused. I mean, the last year, and we are seeing improvements. It takes some, I mean, time, but I'm pretty sure that we will get there.
Thank you.
Yeah. Okay.
Any other questions?
Yeah. Sander from Nordea Markets here. I was just wondering whether the loss adjusting business contributed to any revenue or EBIT this quarter, or was the 8% growth on a purely organic basis?
I mean, adjusting was still part of our Q2.
Yeah
'Cause they only phased out towards the end.
Ah.
As they were phasing out, you know.
I mean, let's put it this way. I can be honest. I mean, obviously the talks about the sale of adjusting did go on for some, I mean, weeks, meaning that they knew that something was happening in Q2 also.
Yeah.
I don't think they were running as fast as they could. In terms of revenues, yes, there are enough figures for the first six weeks of Q2. I mean, did they have any growth in Q2 in these six weeks compared to last year? The answer to that is, I mean, no.
Okay.
It's not a large contribution, but there is something coming in.
Yeah.
Okay.
On the cost side of things, they obviously have underperformed financially for the past year at least. A bit more specific, what can you do to get down the costs in that business? How fast can we expect it? Is it like three, four quarters?
From the adjusting business?
Yeah.
I mean, also.
Add Energy.
For Add, for Add Energy? I'll leave it to,
Look, it's early days.
Reuben to doing it.
It's early days.
Yeah.
You can see from what they did in the past.
Yeah.
When they were doing revenues of $300 million+, they were making 7%, 8%, 7%. Actually it's not good enough for me, but for us as a management team. We'd like it to be where we are, 10%, 12%. It's like everything. Economies of scale, you can do many things. If we can push Add Energy into, you know, Middle East through all our clients, if we can start to push their hardware into our clients, if we can push them into Malaysia and Indonesia and all across at our rates and our way of doing things, we will get them up. Is it two quarters, three quarters, four quarters? I don't wanna sit here and give you an answer.
You know, if someone asked me when we did the LOC transaction and the BTS transaction, when will we get them into double-digit growth? I wouldn't have given you an answer to that either. Here we are, you know, after LOC's, what? 18 months later. Braemar, we're 2.5 years later. The good thing is they've got the revenue. I think that's the key here. They've got revenue already. They've got an excellent backlog, and they've got a good pipeline. They've got the revenue. I'm not worried about the revenue. We've got to deal with the costs, and we've got to bring them into our organization. Again, they're in Aberdeen, where we are. They're in Australia, where we are. They're in Houston, where we are.
I'm sure under Dr. Ahilan and Ole, we will get this right, or else we wouldn't have done the acquisition. That's the best I can tell you for now.
That's fine. That's fine.
I mean, if you kind of look at our tracker, look at LOC, it took us 12 months to take out the synergies that we had planned.
Yeah
with the, I mean, LOC. I see no reason why by the end of 2023, it gives a bit extra time since this happened now, we shouldn't be in the same position regarding Add as we were with, I mean, LOC. Yeah.
Remember, we did the other acquisitions.
Yeah
At COVID times. COVID is, yeah, with the exception of China, was kind of over. We'll see.
Yeah.
We'll see. A lot of hard work ahead of us, but exciting else we wouldn't have done it.
Yeah.
I think that's this.
That was all for me.
Sorry. The back.
Just reminding our viewers online that they can submit questions.
Could you add some flavor to, in the Middle East, where obviously the activity with rig moves and so on is increasing fast. Could you add some flavor to your, where are you capacity-wise? Do you have some slack? You know, is the leading question for your margins, of course. Could you tell us a little about how that works.
Yeah
the dynamics when activity goes up?
Yeah, we do lose a lot of subcontractors. I think we're in Middle East, we're about 50% on subcontractors. We have that capacity with subcontractors. In addition to that, we saw this coming. This is not a surprise. We've been through these cycles before. Roger, who's actually sat right in front of you, looks Oil & Gas and rig business. He's here. You can ask him later. What we've also done, we have excess capacity in other regions.
Mm-hmm.
When we're busy in one, we're not always busy everywhere else. For example, in Mexico, we have rig movers in Mexico. We've been training them, bringing them across to the Middle East and using them in the Middle East. We sent one of our experienced rig movers to Malaysia. He is now training up the guys in Malaysia, lower cost as well, to be able to bring them across to Middle East to do. And in Malaysia, they have a different monsoon season than we have in the Middle East. We're able to start moving people around. That's one of the beauties of having what we've got. When it's quiet in one place, we can move them somewhere else, and we have the subcontractor model on top. You know, if you look back in 2015, we didn't have that capacity.
It's a bit of everything together. Roger and his team in the Middle East, with Ben and his team are well aware of that. They plan for it well in advance. It's not something they did yesterday. They've been planning for this for the last 12 months. We saw it coming.
Thanks
Hopefully, it gets busier. That's the plan. Any more questions? No more? Any more online?
We have no questions online, so I think we can wrap it up.
Okay. At that point, I would like to say a big thank you to everyone coming today, everybody online as well. Thank you for your participation and for following us as well. To our staff once again for a job well done in Q2. At that point, we'll wrap it up, and we'll hand over to Katherine at 9:30 A.M. We'll have a short break for coffee until Katherine takes over. Once again, many thanks to everyone.
Hello again, everyone. Tough act to follow from the results from Reuben. I'll give it a go. Very different topic, looking specifically at an area of the market that the ABL Group and specifically OWC, the part of the group that I look after, is really a leader in, and that's floating offshore wind. I'm the managing director of OWC, and look after our global business, focused on offshore wind and Renewables consultancy. OWC has been around for a long time, established in 2011, slightly before the rest of the ABL Group. We got to have our 10-year party a little bit before the rest of the group.
We're founded by people who've been involved in wind farm construction since the 1990s when really the industry began. We're a global specialist, but with a local presence. We've got offices everywhere around the world where there's offshore wind activity happening, and we're starting to broaden that out to other Renewables as well. Although we're not gonna try and be in every country where there's other Renewables 'cause that would be, I guess, almost every country in the world at this point. We primarily look at working with developers and investors. Owner's engineering, by which we mean taking a scope with a developer and really supporting them to develop that project, being part of the developer's team in lots of different ways.
We also do, as Reuben's mentioned, technical due diligence and LTA and those kind of investor-led services as well. Got more than 100 people now. We've been growing very quickly, and lots of teams around the world. We obviously. Our heritage is in offshore wind, fixed and floating, but we now also look at floating solar, wave and tidal, onshore wind, onshore solar, battery storage and hydrogen, so covering the kind of the key growth areas for Renewables and particularly, focusing on those that are kind of in the oceans to fit with what we do as a group. Apologies for those of you who already know this, but I wasn't sure what mix we were gonna have in the audience. I'll start with what floating offshore wind is very quickly.
Hopefully, you're reasonably or slightly more familiar with fixed bottom offshore wind. That's where you have an offshore wind foundation that like an oil, Oil & Gas platform kinda sits on the seabed. Floating offshore wind is what we need when we're moving into deeper water. That's where you have kind of a floating structure or hull that you can then put your wind turbine on top of. We have a number of different concepts out in the market, and this picture represents kind of the main subtypes.
If you use the analogy of a sailing boat, the wind turbine kind of captures the wind and the whole hull and turbine wants to kind of tilt over, and then we have to stop that somehow. Each of these different structures does that in a slightly different way. We've got a spar buoy, which does it much like a sailing boat does with a keel. A semi-submersible, which is a bit more like kind of a catamaran, so you've got a bigger area in the water to stop it tipping over. This is really the new part of offshore wind. At the moment, there are only kind of pilot projects and pre-commercial arrays installed around the world.
The biggest one being installed at the moment is Hywind Tampen in Norway, which is 88 MW. When you're comparing to kind of gigawatt scale projects in fixed bottom offshore wind, obviously the industry's a little bit further behind. Moving on to more maybe what you came for. Some of the key risks to development of floating offshore wind. I'm gonna focus today on supply chain readiness and availability, but I'll run through quickly some of the other key barriers to development as well. Floating offshore wind, same Oil & Gas, the costs in deeper water are higher. We still have a higher LCOE than we do for fixed bottom offshore wind. That of course means that you need a different. The energy price is more expensive.
You potentially need subsidies or some kind of mechanism from governments, or off-takers to kind of allow for that higher cost of energy. They're untested technologies. Each component part of floating offshore wind, so the turbines, the concept of the hulls, the concept of the moorings, the cables, they're all tested in their own right. What we don't have is a wind farm, a commercial wind farm that's been out there for 25 years, using all of these technologies together. There will be some unknown unknowns. Supply chain readiness and availability. I'll go into it in a bit more detail in the following slides. Serial production of foundations. Again, we're Oil & Gas, building one FPSO or one big hull for a project, not building 100 units.
It's taking that single unit production experience and turning it into a production line to make 100 units or more at once. Dynamic cables. We're very used to the fixed cable element of offshore wind, running along the seabed. When we've got a floating platform, we need to have a section that goes from the floating unit to the seabed, and that moves around in the water column. As a lot of people know from the insurance industry, there have been a lot of cable failures in offshore wind anyway, so of course this is an area of focus as well. Major component exchange. If you need to exchange a blade or a gearbox on a turbine, typically that you need a large jack-up to do that. In deeper water, you can't use jack-ups.
You're looking at either using something that floats or having to take your unit back to shore to replace those major components. There's quite a lot of work going on in the industry at the moment, including by us in joint industry projects to come up with a really efficient way of changing those major components if they fail over their lifetime. Finally, long-term performance. Again, we don't have a commercial scale wind farm in the water in floating offshore wind, so I'm sure there will be some things that we'll learn during the life. We don't know exactly what the long-term performance is, but Hywind Scotland, for example, has been performing really well, better than some of its fixed bottom counterparts. The signs are looking good so far.
For the supply chain in particular, why is floating offshore wind different? Just some things are the same or very, very similar. You look at your turbine, for example, those just come off the production line, the same production line as we used for fixed bottom offshore wind. Same with, you know, onshore substations, transformers, the fixed elements of the cables, those are all the same. We have some areas that are very different. Particularly ports, we need somewhere with the ability to kind of launch these pretty large footprint foundations. Again, we're talking about, you know, for a commercial scale wind farm, 100 units or more of these at a time. We also need, ideally, deep quaysides, with a high bearing capacity, so we can install the turbines in the port.
This is a real benefit of floating offshore wind, is that you don't necessarily need a big jack-up offshore installing your turbines. Hopefully, you can do it alongside a quayside with a land-based crane. Those large land-based cranes, there's only a couple of them in the world. Most of our quaysides don't have the bearing capacity and don't have the water depth, at the scale we need to do this in kind of a production line mentality. You know, take one unit, kind of move it along the quayside to doing different steps, for example. We don't have enough of those quaysides available around the world. As I mentioned before, serial manufacturing of these large hulls, potentially dry dock space.
Dry docks have, for the most part, been designed to fit something that's the shape of a ship. These are not the shape of a ship. You know, we need some different things there. Specialist technical skills. In fixed offshore wind, we haven't been dealing with moorings, we haven't been dealing with those flexible cables. I mean, you can take Oil & Gas, and we can take experience from fixed offshore wind, but we can't just directly copy everything. I think it is a mistake that people make sometimes thinking that because we've got floating Oil & Gas, we can just copy and paste. I think we've shown over the last few years that you can learn, but you can't just copy and paste.
There are a lot of opportunities in developing this new supply chain. We've got port development. Of course, we have ports already, but all of the development activity that's needed to bring ports up to the standard or with the facilities that we need for floating offshore wind can be really beneficial for the local areas that those ports are in. Lots of investment in local infrastructure at land side as well as in the port. As well, we've seen for fixed offshore wind, the country or the area that builds that first big port to service the industry has really had that first-mover advantage.
Look at Vlissingen, for example, that a large volume of Europe's or the North Sea's offshore wind has gone through those few big ports that were kind of the first movers in getting the facilities ready for fixed offshore wind. Job creation. Of course, any supply chain, there's always gonna be jobs associated with that. Again, investment in that local infrastructure. Opportunities for export. Like everything, again, first mover, you can you then have the opportunity to export to the other markets that are gonna be doing floating offshore wind. Manufacturing output. Heavy industrial output in the U.K., in Norway, around Europe, not necessarily all around Europe, but a lot of our developed countries has dropped. There's an opportunity there to invest in that heavy manufacturing industry as well.
In terms of the opportunity, I know we're in Norway, but in Scotland, we had the ScotWind auction recently. The good thing in terms of quantifying the opportunity is ScotWind's developers had to submit a supply chain development statement, which quantified how much money they were gonna spend on their projects and where they were going to spend it. This is billions of pounds. These are just the floating projects as well, so there's even bigger numbers for all the fixed projects. They're looking at spending GBP 21.4 billion in Scotland for the Scotland projects, GBP 6.9 billion in the rest of the U.K., GBP 15.5 billion in the EU, and GBP 6.2 billion in the rest of the world, and that's just for the floating projects.
The floating projects are where we need that development and that new supply chain. A lot of that will also equate to investment rather than just using our existing capabilities. That'll be replicated in everywhere that we do commercial scale floating offshore wind. It's just that for ScotWind, we happen to have the numbers it publicly available because the auction system meant that we had to publish them. Of course, there are challenges. As I've mentioned, we need those deep water quaysides with high bearing capacity, lots of onshore space. If you've got 100 turbines, that's 300 blades, 100 nacelles, 100 towers. I don't have a picture, but if you see a picture of the kind of the hinterland of a port where they.
These are all laid out ready for installation. It's a lot of acreage that you need to build out an offshore wind project from a port. We also need sheltered space for floating storage. Once you've got your hulls, you need somewhere to keep them. You need some sheltered area around your port because you're not gonna have room in port for all of these structures. It's gonna be a real challenge to provide enough skilled labor in a short period of time. This is something that we know about around the world in the whole supply chain for offshore wind. There are not enough people. There's not enough of anything really to build out our fixed and floating offshore wind ambitions.
I think we're seeing that in a lot of the energy industry. We need more energy across the board, and providing enough of everything that we need to build out all of our energy infrastructure is gonna be a challenge. If we're talking particularly about Norway, about Europe, competing in terms of manufacturing output with lower cost economies is going to be a challenge. Of course, there's been difficulties with COVID, but China is really moving in a lot of the offshore wind space in terms of offering low price components, low price foundations, low price turbines potentially into the market, and putting sufficient investment into our facilities.
If we wanna be doing all of this manufacturing, all of this development in Europe, then we need to invest in the facilities now, or they're not gonna be ready in time, particularly the ports. There is a unique opportunity in Norway. There is an upcoming leasing round for fixed and floating offshore wind. There's two sites that are going to be leased. I'm sure you guys know this already, so I'll do it quickly. There's the Utsira Nord site, which is gonna be a floating development site. It's pretty deep water. Well, again, Oil & Gas standards, but for offshore wind, it's deep water. It's gonna be a qualitative auction process. People often refer to this as kind of a beauty contest.
Developers will submit proposals for the site, and they'll be selected based on their merits rather than an auction price, like you see in, like, the New York Bight auction recently, for example, where it was solely based on price. The fixed bottom site, the southerly one here, is going to be an auction system, so that's going to be done on price, not on a beauty contest. Norway has the advantage that they were a kind of a first mover in floating offshore wind. With the METCentre demo site, we had Hywind 1, the TetraSpar demo, which has just been installed, and there's gonna be another two projects installed this year as well. Of course, there's Hywind Tampen, which is being installed at the moment.
These are really exciting. What Norway really needs to do now with this leasing process is turn that first-mover advantage into proper commercial floating offshore wind projects and fixed offshore wind projects as well. I mean, Norway has a great heritage in manufacturing, particularly kind of the Condeep and the gravity-based structures that are in the North Sea. Those were really innovative at the time, and I don't think have been particularly repeated since. This is Troll A when it was ready for tow out in Norway. You know, although we're not gonna be building structures quite like that for offshore wind, there's obviously still that kind of heritage of innovation, of skills, of the right mindset for getting these big projects done.
Hywind Tampen, of course, is being manufactured in Norway. There are a number of HVDC topsides that have been manufactured in Norway and taken to projects in other countries around Europe. DolWin Beta is the example I've given here. Prysmian and Nexans are two of the major cable suppliers for offshore wind, also have a manufacturing presence in Norway for some of their components. There is a local supply chain that can be built on and that can be used for Norwegian projects. Just highlighted a few of the ports that have the potential to support floating offshore wind. As you'd expect in Norway, there's quite a lot of deep water in the fjords and deep water ports, so that's perfect for floating offshore wind.
That's exactly what we need for that integration piece. There's obviously quite a number of fabrication facilities Oil & Gas heritage, as well, and quite a lot of dry docks. Of course that, you know, we need to look at the size and how these can be best used for floating offshore wind. I think for serial production, the general feeling for floating offshore wind is that dry docks probably won't be the solution in the end. For demo projects and smaller scale developments, they're still very useful. Hywind Tampen, the Spar Buoys , so these are the long cylindrical structures that act a bit like a keel. The fabrication, they're fabricated in concrete. They were slip formed. Fabrication was started in Stord.
They were towed then to... and I'm not gonna try and pronounce it. This place. Someone could tell me how to say it later. I should have checked that earlier. The slip forming was finished, and then all the fit out was carried out. That proves exactly that it can be done in Norway. You know, this is a pre-commercial array. This is showing Oil & Gas assets, which is something that we're looking at in the Gulf, we're looking at for the U.K. side of the North Sea. It's something that's gonna be really relevant to kind of export that knowledge and that know-how to other parts of the world, and for hopefully other projects in Norway as well. People.
I think it all comes together with the people. You can have all the great facilities and the manufacturing and the auction system, but you need people to do it all. I've discussed already, you know, obviously the heritage and everything we've got in Norway Oil & Gas. This is from GWEC the 2022 wind report, where they did quite an in-depth analysis of which skills we can Oil & Gas to offshore wind, and there were some big chunks there in over here where we've got saying, you know, really good skills overlap. We can take people who've been Oil & Gas, and they can move right over into offshore wind with a little bit of support to get into the industry.
There's a really big chunk here where we've got some overlap, and that's where, you know, we need to be thinking about a little bit more training, you know, accepting that people will be a little bit less efficient for, you know, as they start working in a new industry. You know, they can still move over pretty effectively. Then some other areas here where, you know, there's less overlap, or less need in offshore wind for those skills, like drilling, for example, not something we're really into in offshore wind Oil & Gas. as well as taking people Oil & Gas, we also need to be looking at other industries. As I said, we need more people in energy. We need to bring people into the industry.
That also means recruiting graduates and apprentices, training those young people up. If we're talking about an offshore wind pipeline that for projects now that really kinda kicks off in 2030, for projects that are in planning at the moment, like those Scotland projects, for example, the people building those projects, they might just be starting university, so we need to, you know, make sure that those people are coming into the industry as well. Everyone in our industry needs to play a part in this. We all need to be working on inspiring the next generation and really training those young people who are so passionate about working in renewables.
We've got some interns in our London office at the moment, and I was eating lunch with them the other day, and I felt completely ostracized 'cause I was eating meat. They were all vegan. It is a generational thing, and they're all so passionate about the environment and about working in renewables and really making our world a better place, and we need to tap into that. What next? It's really key that we need clear government commitments for project pipelines. If we're going to build ports, if we're going to build heavy manufacturing, we need a project pipeline to give investors in those facilities confidence that they're gonna be used over a number of years, and that they're gonna get a return on their investment.
We're starting to get that in a lot of markets. Norway obviously has some ambitions, but maybe not a clear pipeline on exactly when all those auctions are going to happen. That will need to come. We need collaboration between developers and the supply chain. It's often procurement's often done on a very competitive basis. I think particularly for these floating projects in the early days, we're gonna need to see a lot of collaboration between the developers and the supply chain, because we need to make sure that the supply chain is developed in the right way. We need to make sure that there's that pipeline of projects year on year, and that developers also have the confidence that the supply chain will be there. It goes both ways.
That, yeah, the early engagement to make sure that the investment is targeted correctly. It's no good if we build out a port to service floating offshore wind, and it turns out it doesn't quite meet the needs of the developers. People like us, like OWC, we're working with developers in those early stages using our marine heritage from ABL, and those guys who've been working in marine warranty on all of the early floating projects, using those guys who've been at sea for years and years and know how all this stuff works to really bring that expertise into the early stages of projects to make sure that the projects are being developed sensibly, and then also to be able to go to the supply chain and say, "You know, this is how we think, you know, we can support you.
This is how you can support the developers. This is how the infrastructure can best be developed to really service the market." I think it's also really important when you're developing these projects, to limit some of the technology and design choices to make sure that the supply chain that's available isn't excluded, especially at the moment when the supply chain isn't quite there for commercial scale floating offshore wind projects. You know, how can we make sure that there will be a local port that can service the project? How can we make sure that there will be local supply chain and somewhere to build the project? It's about designing the project to fit the available supply chain as well as designing the supply chain to fit the projects. Lastly, a really important point.
This is a graph of projected floating offshore wind installations, again from GWEC. Our existing pipeline of projects does not provide enough floating offshore wind to meet our net zero ambitions. If you do the kind of the top-down and the bottom up, the bottom up of the pipeline that we've got and the top-down of what we need to support net zero, there's not enough projects in the pipeline. Even what we already think of as ambitious and really stretching the market isn't gonna be enough. There's a lot of work for us all to do. I'm quite excited about it, and I hope some of you guys are as well.
We also have recently written a report with ORE Catapult in the U.K., looking at floating offshore wind markets around the world and doing a deep dive into which markets are gonna be next for floating offshore wind or should be next for floating offshore wind. You can download that from ORE Catapult's website, and there's a link there, and we'll share the presentation afterwards if you want to have a look at that. Other than that, are there any questions?
Hi. Could you share some color on the competition here? Who are your main competitors on offshore wind and floating offshore wind engineering and consulting?
I think it's probably the kind of usual suspects, people in terms of offering those owners engineering services, people like K2, who offer kind of quite similar services to those that we do. In the due diligence space, Mott MacDonald , for example. I think we've been involved in a really large percentage of the early floating offshore wind projects. We think anyway that we're kind of a real market leader in the floating offshore wind space, and having that ABL Group heritage in everything that floats, it really gives us a leg up in that arena as well. Having the OWC side expertise on the fixed offshore wind, bringing in that floating Oil & Gas, from the Maritime industry is really been powerful for us.
Do you have a view of what is the best floating turbine technology or are you sort of agnostic when it comes to advising developers?
Well, that is a very thorny issue. I think there is technology that's right for now, and then there's technology that will be the most efficient in the long term. Obviously we've got some clear market leaders at the moment in terms of kind of installed units and things. We've got Principle Power's WindFloat. Obviously there's a lot of units installed. And it is like, it's a good solid technology. It works. Is it gonna ultimately be the one that has the lowest LCOE? I'm not sure. For getting units in the water, it's doing a really good job. Same with Hywind. It works. It's the spar buoy concept is really good for floating offshore wind.
If you don't have fjords, it's gonna be really difficult to manufacture and install them. I think there's gonna be limited markets around the world where that's a really cost-effective solution. Of course, there's so many concepts out there. The TetraSpar that I showed, that the demo's just been installed, that has potential to be really low LCOE, but obviously the first demo's only gone in the water last year. There's a lot to be proven still on a lot of technologies that could that look really promising.
Thank you.
Any other questions in the room? We don't have any questions online either.
There we go.
Guess it was all clear.
A complete run through of all things floating offshore wind. I'll be hanging around for a few minutes if anyone wants to ask any questions, not to the room. I've got some of my colleagues here as well who are also very happy to talk about floating offshore wind. Always happy to talk about offshore wind.
All right. Thanks everyone.