Good morning. Welcome to our Webcast and Presentation of the Report for the Second Quarter and Half Year of 2024 for Reach Subsea ASA. The report and this presentation were released earlier this morning, and I am Jostein Aaldal, CEO of Reach Subsea, and with me is CFO Birgitte Vendelbo Johansen. I will first take you through some of the highlights and technical achievements during the quarter and so far this year, and plus give you an insight on in our long-term strategy regarding remote operations and robotics. And Birgitte will go through the financials in more details in a bit. Some practical information, please feel free to submit your questions through the webcast player, and we will provide answers during our Q&A session shortly after the presentation.
So far, our results shows that we are delivering on our strategy and achieving our goals, and therefore, it is a great pleasure for Birgitte and me, on behalf of our entire team, to present this report to you. Let's start with a quick look at the key highlights from the past quarter, starting with slide number three. The underlying financial performance is in line with the second quarter last year when we take away the one-off effect of a sale of an ROV system in 2023. Taken also into consideration that the Deep Cygnus was out of service almost 90% of the quarter due to docking and battery installation, the quarterly numbers are very good.
That said, Deep Cygnus is now in operation, more fuel efficient than ever and is equipped, occupied, and will contribute fully for the rest of the year. Looking at the first six months period, we are well ahead of last year, and this showcases our increased capacity and our expanded global presence. The company is on a new level with more organic growth to come. Our safety commitment and outstanding project execution is key to our business, and once again, a big credit to all our people, both offshore and onshore, for their excellent operations. A key milestone was achieved for Reach Remote in the quarter, with successful sea launch and also award of a technology qualification contract with Equinor.
I will come back to the technology highlights and how we drive the development of new sensors and robotics into our industry. Strong outlook is evidenced by order backlog and outstanding tender value, more than doubling compared to last year. All in all, a strong second quarter in terms of operations and results, and a steady progress towards our strategic goals. Vessels are a crucial component of our day-to-day business, and over the past two years, we have increased our vessel capacity through long-term charters. Please turn to slide number four for a look at our core fleet, the coming years. It is important to have a good operational control of core assets and of course, control of our cost base, especially in this rising market. The terms we have on our fleet is highly competitive in the years to come.
News for the quarter, we extended the charter party of Havila Subsea for up to four more years, and the smaller survey vessel, Offshore Surveyor, joined our fleet late in second quarter, and she will be occupied in the Australian market for the coming years. Looking forward, we will take delivery of two new world-class ROV systems, which are being mobilized on board the Olympic Taurus in these days. This, together with the mobilization of added equipment on board the GO Electra and Northern Maria later in the autumn, gives us the whole fleet fully mobilized with ROVs and equipment for the coming years. This will enhance services from all our spreads and add selling and margins on the whole fleet, giving us a further organic growth potential.
The Agalas new build is coming in 2026, and she is built for efficiency and dual fuel, methanol and diesel, and she is prepared for the greener future. The timing of ordering is very good, as we see a huge increase in new build cost for similar vessels. And in that context, the purchase of Viking Reach a year ago is another good example of good timing. The replacement cost of such a vessel is almost double during that short time. More detailed information and also pictures of the vessels can be found in the report and on our website. We constantly evaluate further expansions of the fleet in form of projects and more long-term charters. And not least, the first two Reach Remote vessels will also join the fleet this year.
I will come back to those two in a bit. But let's move to slide number five, our services, which makes the value and our day-to-day business. For ease, we can then divide our services into three categories, and common for all is our expertise in planning complex of offshore operations. First, the inspection, maintenance, and repair, and construction, where our services ranging from construction and decommissioning services to specialized inspection, maintenance, and repair operations. So in brief, our services encompass the entire subsea value chain from engineering and project management to final reporting. We are a reliable partner for our clients, supporting them throughout the entire life cycle of all types of assets in the ocean space. Secondly, survey.
We deliver high-end survey services for typical oil and gas and offshore wind farm development projects, as well as detailed inspection of existing subsea assets around the world. The survey services are mostly ROV-based and performed from our fleet of traditional vessels, but also from our unmanned survey platforms. Our services integrate survey and data processing, data management and analytics, and ultimately, the final reporting. Thirdly, monitoring. With this unique in-house technology, we provide innovative services for hydrocarbon production, carbon storage projects, and environmental monitoring. In short, our gWatch is used for reservoir modeling by regular measuring the change in gravity throughout the lifetime of the reservoir. By using these passive methods, we offer data directly to our clients, reservoir management, and field development strategies in a cost-effective manner and with a minimal environmental footprint.
It was commercialized back in 2013, and is currently used on all large gas fields in Norway. A proven technology that is rapidly reaching other parts of the world. For example, Australia, where we have started on a nine-year monitoring contract, so constant technology development is important, so let's go to slide number six. We are a leader in technology development and application of innovative methods for all our services in the offshore industry. Constant innovation and introduction of new technology gives us a huge competitive edge, and remember, the latest in ROV subsea sensor or data processing tool has yet to be invented, and here are three examples of our in-house developments. The Reach Dragonet gradiometer system, this is a good example where the sensor and complete tool is specified and designed in-house.
The system delivers high-precision magnetic anomaly detection with low noise. In short, detecting and identify objects on and below the seabed, more efficient and reliable than other systems available today. It was successfully launched in the second quarter on board the Viking Reach and went straight into production for Equinor. This is also a very good example of the short way to market for our in-house technology developments through our services. gWatch Remote, our unique world-leading gWatch technology goes remote for unmanned operation. The technology is undergoing a development project to improve robustness and operational efficiency to prepare for remote operations with the Reach Remote vessels in fourth quarter, 2024. We can then offer our clients a fully robotic monitoring service. Last but not least, Reach Horizon.
As we keep advancing our remote capabilities, we are performing an increasing part of our projects remotely. We have an internal software platform for command and control of remote systems, as well as supervising data acquisition. A key success factor is to manage all systems under one umbrella, have control of communication and IT security. We have called it Reach Horizon, and it's a vital part of our remote services. But the software is under constant development as the IT world is moving rapidly. But this system has been in use for some time, which brings us to slide number seven. We have, over the past years, actually operated fully unmanned and remote with smaller vessels or vehicles. Our goal for bringing robotic technology into the subsea industry is, in fact, a reality. One example is the DriX.
This is our eight-meter long, remotely controlled and autonomous survey vessel, equipped with the high-performance subsea equipment and communication systems for over-the-horizon control and operation. With this, we offer our clients high quality surveys in shallow waters, and the vessels are of a French manufacturer by Exail, and we have named them Orca One and Two. Orca One has operated continuously for over a year, and this has been the longest running operation record for our DriX globally. In second quarter, we took delivery of our second unit, Orca Two, and immediately mobilized the vessel for the mapping project we have ongoing in Saudi Arabia.
The operation of two DriX units from the same operation team has led to even more efficient operations, and with our Reach Horizon system, we follow the operation and data collection online in Haugesund, Oslo, Perth, Aberdeen, or practically anywhere in the world. With the operation of the DriX units, we have further developed our remote capability, and the learning here will be transferred and implemented in the operations of the bigger Reach Remote vessels. Over to the next level of unmanned vessels, the Reach Remote on slide number eight. This groundbreaking project integrates uncrewed surface vessels with subsea robotics like ROVs, AUVs, our gWatch systems, and all other types of underwater tooling. Both vessels are now on the water, and number one is going through all necessary sea trials in Trosvik.
As soon as this is approved and good to go, the vessel will start the technology qualification program in the North Sea, sponsored not only by Equinor, but also by several other international energy companies. This program includes a number of different work tasks, like pipeline inspection, survey, and ROV intervention, similar to regular tasks performed with manned vessels. The duration of the program is estimated to approximately one month and will prove the functionality of the whole concept from marine positioning to ROV operations, to secure data transfer to shore, and so on, all unmanned. Reach Remote 2, which is catching up with the Reach Remote 1, will undergo same sea trials, but will naturally have a slightly shorter program.
This initiative is the cornerstone of our next generation remote services, and together with our partners, Kongsberg and Massterly, we are setting new standards for global maritime and subsea operations. Interest in the Reach Remote is growing internationally, and also here we see that the short way to market when we introduce new technology through our services, and also our presence in different geographical markets. We have a robust pipeline of both national and international projects that are ideally suited for these vessels. So status is, we are on route, slightly behind the original plan, I must admit, but we are soon there, that Reach and Reach Remote is well-established in different markets and time zones. Exciting times the coming months, of course, but with this, I will hand over the word to Birgitte with the financials.
Thank you, Jostein. Good morning, everyone. Before I start, just a reminder that you can ask questions in the chat on the webcast. Looking at the second quarter, we see strong underlying financial performance, well in line with the same period last year. In the second quarter of 2023, we sold an ROV for about NOK 30 million , with more or less 100% financial gain. We regard this as a one-off event, hence, the effects from the sale have been excluded in this presentation for comparison purposes. Revenue was NOK 623 million , compared to NOK 607 million in 2Q last year, ex the one-off ROV sale effect.
Year-to-date, we now have almost NOK 1.2 billion in revenue, well ahead of the first six months in 2023, where the revenue was about eight hundred and seventy million. EBIT was NOK 121 million n 2Q, slightly above the NOK 118 million EBIT, ex the one-off ROV sale effect in 2Q 2023. Year-to-date, the EBIT is NOK 150 million, compared to NOK 110 million, ex the one-off ROV sale effect for the first six months of 2023. Pre-tax profit for the second quarter was NOK 117 million , compared to NOK 81 million last year, ex the one-off ROV sale effects.
Interest expenses related to our IFRS 16 charter commitment debt, and partly unrealized currency loss, explain most of the year-on-year difference in net financial items. Year-to-date, the pre-tax profit was 102 million NOK, compared to 86 million NOK the first six months of 2023. Our investment program for 2024 includes a Reach Remote, as Jostein said, as well as scaling up the service scope on our marketed fleet by mobilizing our work ROVs, service spreads, and other equipment, and we continue to have a solid cash position, and our net interest-bearing debt, excluding the IFRS 16 charter commitment debt, is still negative. So let's look into the details and what lies behind the figures on the next slide. These graphs illustrates Reach's financial journey the last seven years on a rolling 12-month basis.
We've had a substantial revenue growth, a result of increased activity, with expansion to new business segments and regions with an increased asset base. By increasing the IQ or the scope on the vessels, we have grown both our revenue and profits steadily over time. Our acquisitions the last three years have contributed strongly to our performance and our ability to offer integrated projects to our clients. Our revenue has increased by more than 163% over the last two years, if you take away the ROV sale one-off effect, and has now exceeded NOK 2.3 billion . We have focused on a sustainable and profitable growth, and our operating result and pre-tax profit has improved in line with the revenue growth. Next slide, please.
So let's look at the quarterly revenue development, year on year, based on segments, sectors, and regions. To the left, we see that our second quarter turnover from renewables and other sector was about 31%, while projects in the oil and gas sectors represent 69%. Last year, the split was 30%- 70%, and year on year, the growth came from both sectors. The illustration in the middle splits the revenue in our two major market segments, data and solutions. Solutions refer to a service project where we do installments, maintenance, repair, decommissioning, et cetera, and data is where we deliver a data package to the client. Typically, a survey of a pipeline or cable route, positioning or an inspection of infrastructure, to mention a few examples.
The data segment will become even more important when the Reach Remote enters the market, and survey projects will be ideal for this type of equipment. In 2Q, 64% of the turnover came from solutions due to a few larger service and work to work contracts, including a high number of vessel days, while 36% came from data. The activity within data, which includes survey projects without vessel exposure, is higher, estimated to be around 50/50 to solutions measured in project days. We also present our geographical distribution of turnover on the illustration to the right, to illustrate our strategic expansion to new areas, as well as meeting new and existing client needs. In the second quarter, activity in Europe, including Norway, represented 78% of our revenue, compared to 49% last year.
And the 2024 figure is driven by large turnover projects in the North Sea and Europe in the summer season. The growth in Asia Pacific is expected to increase as a result of the acquisition of Guardian Geomatics, a transaction we closed in the fourth quarter last year. Next slide, please. So looking at our balance sheet, we continue our sustainable growth also in the second quarter of 2024, balancing cash and working capital and debt with a robust equity level. And at the same time, we have delivered to our shareholders with paying dividend according to our policy. In the second quarter of 2024, we paid NOK 0.36 per share to our shareholders, which is a double from last year. We have a cash and working capital position of NOK 315 million and limited existing financial debt to credit institutions.
We have increased our charter commitment, hence our leasing liabilities. Our equity share is still almost 30% of the total balance sheet. Reach is well positioned for the remaining investments in the Reach Remote and vessel and equipment mobilization for our fleet in order for us to have all vessels ready for integrated subsea and survey projects. Next slide, please. We report quarterly on our sustainability goals. We recently started preparing for CSRD and ESRS reporting with an updated double materiality analysis reports and establishing an ESG group, with a dedicated resource to follow up activities and reporting within the group. In the second quarter report, we present status on the key performance indicators for 2024. A combination of focus on emissions and the environment, being a responsible employer worldwide and keeping a high governance focus.
The KPIs represent our belief in ESG focus as a foundation for profitable growth the coming years, in line with our strategic goals. On the environmental side, we have a quite steady activity in non-oil and gas projects, and we had no major spills to the sea. Our CO2 footprint is below our maritime peers, and taking delivery of the Reach Remote USVs will be focused the next couple of months. Safety is our always our absolute priority, and we are proud to have strong, positive HSEQ statistics, especially combined with the growth in projects, size and complexity. In addition to focusing on turnover and safety at work, we are committed to having at least 10 apprentices this year. A group of new young talents started their Reach career this month.
On the compliance and governance side, we have continuous improvement projects to ensure that we always operate within the highest industry standard. Training within cybersecurity, ethics, and ESG in our training portal is an important focus area this year to ensure awareness among our colleagues. Then I hand the word back to you, Jostein, for a summary.
Thank you, Birgitte. Let me sum up with the last slide as a backdrop. To sum up, we are on track, and we are well-positioned for continued growth and value creation. The Reach Subsea Group are today represented across regions from north to south in Norway. We are in Sweden, U.S., U.K., Singapore, Australia, Trinidad, and Brazil. So our global recognized subsea expertise and services enable us to serve a diverse range of customers worldwide. The market outlook is extremely promising. With the substantial investments anticipated in our main markets over the coming years, we are in a position to be a key player in this expansion, as I mentioned earlier, we have soon the whole fleet mobilized for value-added sales and margins.
And over the past years we have built a strong reputation and a solid operational track record as a provider of subsea services. But also, our cutting-edge technology and advanced internal software systems provide us with a significant competitive edge. And as Birgitte mentioned, our financial strength has been improving year by year, and giving us the great flexibility to make the right investments and expansions moving forward. And as I said, it is important to note that our growth plans will remain disciplined and shareholder-friendly, as we have been so far. And I'm confident that our team's excellent execution in this robust market will continue to deliver outstanding services to our clients, and also achieve strong financial results going forward.
In essence, we aim to capitalize on a very favorable market outlook for our traditional services in the coming years, and, at the same time, pioneer next generation services like the Reach Remote, and so on. Also, as I highlighted earlier, there is a short way to market for new technology through our services, and also our presence in the different geographical markets. With that, let me conclude this presentation, with our saying, "Everything within reach." Please continue to submit your questions, in the webcast player, and we will return shortly to answer them.
Questions, you can still continue to submit questions if you like, in the chat on the webcast. The first question is: Hello, everyone. Can you please explain the margins of the solutions and data divisions in more details? Well, what we can say about the margins is that we operate in the same market area, so that means the margins are not that different from solutions and data, because if they were, we would choose our projects based on that. It's quite a lot of the same suppliers and clients in both segments, so it's no specific margin differences there. The next question is for you, Jostein.
With your deep insight into every tender and market of the world, how has the outlook for the next three to five years changed in your view since going into 2024 ?
Yeah. That was a good question, and the market has changed for the past. We've been through a downturn, so to speak, the past eight years, and now we are heading into an upturn for the coming eight. That's more philosophical, of course, but we see that there is a big unbalance between the supply and demand, and that's due to lack of investments and recruitment in our industry for the past eight-year period.
And I think we're gonna be seeing. We are not into crazy pricing yet, but I guess we're gonna see some upturn in the market, of course, because it takes some time to get in balance of supply and demand. So that's my insight of the coming years.
Yeah. Thanks. The next question: What would the turnover have been if Deep Cygnus had not been 90% out of service in this quarter? Well, such a vessel will have a typical turnover between NOK 30 million and NOK 50 million each month. So let's say somewhere between NOK 60 million and NOK 120 million in increased turnover in the period if Deep Cygnus had been working on typical projects. The next question is for you, Jostein: How do you want to work through the growing backlog? Are these services that generate higher turnover with the same ship deployment?
Yeah, yeah, our backlog going forward is based on our services more than vessel only. So we last year, we had some vessel only revenue. But going forward, it's dominated by the services. So also the backlog next year are some exciting projects around the world. So it's a higher margin backlog than well compared to last year .
Yeah, and the next one is regarding the DriX. Could you give an indication of the revenue impact these units have? Are the margins in line with the rest of Reach?
Look, should I answer?
Yeah, if you want to.
Yeah, yeah.
Yeah.
Yeah, the DriX are, of course, smaller vessels. The margin is based on the data deliveries. It is a tool in our world as we use for the final product, which is the data deliveries. The data deliveries have the same margin as the other projects. The DriX are very efficient tools. They make actually a good margin when you see the overall performance. Good tools. It is completely unmanned and remote. We are actually there with the remote technology and so on. Margin-wise, it's quite good.
Yeah. And the next one: good morning. Can you please clarify how much cash outlay remains on the Reach Remote post the Q2 reports, and how much cash outlay remains on the vessel upgrades, and how much of that have you secured bank financing for? Well, all these details you can find in the note 13 in the reports. What I can say in general is that we plan to take delivery of the first Reach Remote now in the third or fourth, early fourth quarter. And then, of course, most of the financing will be bank financing, since it's equity first principle. After that, there will be some testing, which will be in equity payment. But all the details you can find in the reports. There's another one.
You have quite a bit of capacity lined up, both Agalas vessel and Reach Remote vessels. Do you see additional need, or are you happy for now?
Are you asking me, Birgitte? No, no, we are not happy with that. We have to see the next expansion, of course, but as I said, there is a good market for us to expand, both in the traditional services, the demand services, but also in the robotic world, so we have to take it step by step, Birgitte. There will be. We are looking into expansions, sort of daily, but we have to grow in a sober manner, actually.
How do you see the upcoming winter season compared to previous years?
Yeah, the winter season coming up, it's quite good because of one, we are more presence globally, so that's a advantage for us. But also the general market is quite active when we go into the typical winter months is in the North Sea. But there are a lot of activities around the world. So, it and it's looking good for the coming winter and also the coming winters, I would say.
Yep, and can you elaborate on the options for further expansion of the Reach Remote fleet? What are your plans?
The big plan is the scale-up, of course, when we go into the first two months and get them out in operation. So, during the next months, we're gonna have some good discussions on the next scale-up. So, the plan is to have a fleet of Reach Remotes in near future. It is the question of delivery time, of course, and everything. But, I think, as soon as we have proven that the first two months of working and functioning and all that, we will push the button on the scale-up.
So, exciting times through the next months and this winter. So.
Yeah
Hopefully, the next months will be there in 2026 and so on. So.
Do you have any long-term contracts in your portfolio, or is it possible to add some?
Yeah, there are long-term jobs. We are holding a bit back on that. We like the sort of spot market, but a good balance between long-term jobs and short-term is of course the best. We have a couple of vessels occupied for the next year, but it is, of course, finding the balance and not lock up all your capacity for too long as well, so it is the dynamic of the market, of course, and we have been in the market for many, many years, so we know this sort of balance.
Yeah. There is one more question, this is the last one. How do you see competition pressure as Fugro and Next Geosolutions share ambition targets in the market where you operate? How do you differentiate from competition?
Yeah, competition is good. It keeps you awake in the morning and drive you to be best, and I think we are best. So, but competition is good. So, we strive to be better than the bigger companies, so.
Yeah. Good. One final question popped in here. Are there any vessel yard stays, such as Cygnus, scheduled for second half of 2024? At least we have the Viking Reach going into the yard in September. And also there might be a shorter or a docking period for two more vessels. So Taurus and Northern Maria might also go into. Well, Taurus will definitely go into to have a mobilization period and also potentially Northern Maria.
Yeah, Taurus is finished in a week's time, so she's in dock, so.
Yeah.
But I don't know. Yeah, one big docking, second half, and then we have the other scheduled dockings in the first half of 2025.
Yeah. Okay, should you have any more questions, you can find our contact details on our webpage. If not, see you next time.
Yep.