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Edited Transcript of AQUA.OL earnings conference call or presentation 29-Aug-19 9:00am GMT

Q2 2019 Aqualisbraemar ASA Earnings Call

ASKER Sep 4, 2019 (Thomson StreetEvents) -- Edited Transcript of Aqualisbraemar ASA earnings conference call or presentation Thursday, August 29, 2019 at 9:00:00am GMT

TEXT version of Transcript

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Corporate Participants

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* David Wells

AqualisBraemar ASA - CEO & Director of UK

* Glen Ole Rødland

AqualisBraemar ASA - Chairman

* Grant Smith

AqualisBraemar ASA - COO Insurance Services

* Kim Boman

AqualisBraemar ASA - CFO

* Mark McGurran

AqualisBraemar ASA - Group MD of Marine Surveying & Consultancy

* Reuben Segal

AqualisBraemar ASA - COO & Director

* Will Cleverly

AqualisBraemar ASA - MD of OWC

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Presentation

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Glen Ole Rødland, AqualisBraemar ASA - Chairman [1]

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Good morning to everybody, and welcome to the presentation of AqualisBraemar. My name is Glen Rødland, I'm the Chairman of AqualisBraemar. We are very pleased to welcome the audience here today and also all of you viewing on the web. We are going to give you a introduction to the new company after the merge that was completed end of June, and it's -- the company has changed quite a bit. I hope we can illustrate that during today's session. We have more than doubled our revenue, and we have moved from being a -- predominantly an oil and gas focused company to be more energy service and renewables, which is growing very fast. And also, the shipping industry is one of our major client right now.

So first, this presentation, we will go through the second quarter figures. I have to warn you they are maybe more confusing than they should be because of the merge. So the figures, the P&L down to EBIT are only the old Aqualis. Then after EBIT, we have a large financial gain from the transaction. We will get back to that so that -- that's where you see the P&L from the former Braemar. And then the balance sheet is end of June, so it includes both companies. But the CFO, Kim, will elaborate a bit more about that. So we will see this later on.

From third quarter, it should be a normal P&L, we hope, and hopefully, with nice figures. So those presenting today: first, it will be David Wells, the CEO; and then Kim Boman will go through the numbers. Then after we have been through the second quarter, we will do a presentation more in depth of the 4 business lines. It will be Will Cleverly, which is heading up renewable offshore wind. Then Mark McGurran will present the marine area, and then Grant Smith will take us through the adjusting. And finally, but not last, of course, Reuben Segal will take us through the oil and gas part of the business. And at the end, David and myself will sum up the presentation today and the outlook going forward and where we are focusing our resources.

So with that, I leave the floor to David.

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David Wells, AqualisBraemar ASA - CEO & Director of UK [2]

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Okay. Okay. Thank you, again. Appreciate the intro, Glen. So I'll just say, my name is David Wells. I think most of you have met me before. I'm based in London. I'm the CEO of the company, and I'm just going to take you through the results, the Q2 results of 2019 and a little bit of background into our merger and how we've progressed in that time. So just going forward from here, obviously, we have the forward-looking statements, which I'd like you to bear in mind for what you hear at this presentation. And we're going to go through the highlights now, followed by the financial review from Kim Boman, who'll give the numbers.

So before we start, I think it's important just to understand that these numbers are a little bit confusing at first reading, and we just need to understand how the numbers fit together. Glen has just indicated some of it, but it is important to appreciate the consolidated statement or the financial position has been -- as of 30th of June, has been brought into one of the slides. But in general, outside of that, the numbers are legacy Aqualis ASA prior to the merger. There are a couple of exceptions. The financial income, as reflected in the consolidated statement, does have a one-off gain, reflected -- associated with the merger, which is within those numbers. And the consolidated statement of cash flows does have a -- does reflect the Braemar Technical Services cash equivalent -- cash and cash equivalents as of 30th of June, reflected in the investing activities.

Apart from that, after the closure of Q2, we had a private placement and rights issue in the market where we raised some additional capital. That has not been reflected in the accounts at all for Q2. So to move on, as you can imagine, Q2 has been very busy for us. We have been very much focused on the merger of the 2 companies, Braemar Technical Services with Aqualis, to form the new company AqualisBraemar. It's been a very exciting period. It's been a very busy period, and we bring the 2 companies together with a lot of optimism about the future and where we can take the combined company. I will give a little bit more detail shortly about where we are and what we're doing and why we think it's good for us.

But to start with, I just want to start with the highlights from the quarter. So we put in revenues of USD 9.9 million for Q2, which is about 3% up on Q2 of last year, so a marginal increase. We have reported operating loss of $300,000 for the quarter, which when we take out the one-off costs associated with the transaction and some of the one-off costs associated with that as well, the underlying performance was actually a profit of $500,000 during the course of the quarter, slightly down on Q2 of last year. But that's the -- that is kind of attributable to, I'll call out, to operations with green operations, some slipping of rig moves and so on.

We haven't actually lost any business, but some of the frequency or some of the work we've been doing slipped a little bit in Q2, but we're still on track at the moment. I'm glad to say we've maintained our high billing ratio of 85%. One of the key metrics that we measure quite carefully within the month-on-month figures is the amount of backlog that we have, and this has increased again on this quarter, the fourth consecutive quarter where our backlog has increased. And that gives us some confidence that the oil and gas market, which is the main driver of our backlog, is alive and kicking even -- albeit very gently and not coming forward as fast as we'd like it to do so. But nevertheless, I think we're at the bottom. We're still moving forward.

Within those numbers was a sterling performance from our offshore wind arm, offshore renewables -- Offshore Wind Consultants. They had a stellar performance during the quarter and continue to do so. It's a very, very exciting part of the industry at the moment, a lot of activity around the world, and they're really putting in a good performance, which has been really good for us. And I guess the important thing at the end as well that we had a strong financial position, $7.8 billion. That number will be broken down a little bit by Kim. It doesn't reflect the money we raised from the rights issue. But within that $7.8 million, there is some one-off payments we made to Braemar Technical Services associated with the merger.

So moving forward, let's talk about the merger and acquisition, and the growth for the company. We completed it during Q2. A lot of management focus has been on this. There's been an awful lot of work going on with it and how to bring the 2 companies together. We are very excited. As a company, we're very excited.

We have -- we think this is a very compelling strategic combination of 2 companies, 2 very complementary companies. And what's been really exciting about it is that we don't compete too much. Even though we're competitors in nature, we're not actually competing too much across the service sectors that we look after. It's been hugely welcomed by the market from the insurance markets to the offshore asset owners and EPC contractors. We haven't had any negative feedback whatsoever. That gives us great positivity.

And I'll say, our staff as a whole have really embraced it. We are pleased to have raised the extra money that we went out for. We thank you for your support for showing confidence in ourselves, and we will obviously aim through this acquisition to be giving shareholder value as we go forward in the growth of our company.

We have been busy. Subsequent to Q2 ending, we have co-located all our main offices around the world. So we have co-located in London, in Dubai, in Houston, in Singapore and in Shanghai, one office remaining, Abu Dhabi, which will be completed in Q3. So we are operating already as one company. And from the very start, we have a lot of cost synergies that we have started to identify. And in terms of revenue as well, revenue synergies, we have been working well together, and we've pulled in quite a few pieces of work that we probably wouldn't have got as stand-alone companies. So that's been hugely exciting.

What's even better, I guess, is that the cost synergies target that we initially identified of around about $1 million. We think that that's probably a bit of an underestimate, and will be expecting that number to increase to around about USD 2 million, which should be very good for the company as we move forward. So we're highly excited. We are moving very fast on bringing things together. And I think today will be nice for you because we have the 4 business lines that we're going to service. We have the heads of those business lines with us, and they're going to give a little bit of talk, a little bit of color about what they do so you can see the extent of our footprints and how we service the market.

So where do we stand now as a single company? We have 4 regions around the world. And what is nice after this acquisition and merger is that those 4 regions have a pretty even revenue strip -- revenue split across the board, about 25% in each part of the world. If you break that down further into the service sectors, about 1/2 is related to oil and gas, about 1/4 is related to shipping, and about 12% to 15% each is related to loss adjusting and to offshore renewables.

In terms of where we come from and where we're going to, we did have 19 offices in 15 countries end of last quarter. We now have about 48 offices in 33 countries as we speak now. So that's a huge increase in the footprint. It's -- it gives us a real advantage over our competitors. I guess now we are the largest independent energy and marine consultant in the world, and we'll use that to our advantage. None of our competitors have this kind of footprint. It is welcomed by our clients. It gives us access to all markets very quickly without the need to mobilize people from one part of the world to another, and it's something that we'll try and leverage very quickly to our advantage. As I say, we've got 4 different business lines. I'm not going to go into those in detail at this point because we have my -- we have our colleagues here who will take you into them in much more detail. But those 4 there you can just quickly see -- as I brush through the slides, you can see what the 4 are.

Order backlog. I did mention that briefly at the outset. It is something we measure quite carefully month-on-month and quarter-on-quarter. As you can see, we now stand at USD 10.7 million for that backlog. We've had a steady increase quarter-on-quarter for the last year, which has been good. Most of that backlog comes from the oil and gas market. So it's nice to see these numbers increasing because it's indicative to ourselves that the market has stabilized and, hopefully, moving forward. And within that, there is some renewables as well, but it's mainly oil and gas related.

Staff levels are also -- this acquisition has really put us into a fine position. Previously, we were 170, 180, 190 full-time equivalents. Now we're well over 400, 430, 440, something like that at the moment. So it's a substantial increase in numbers, a substantial increase in very competent technical staff. I think looking at the people we have, the confidence levels we have are unsurpassed in the market there and really gives us a good foundation from which to grow for servicing our clients.

Utilization levels. So this is, say, legacy Aqualis numbers here. We maintained ourselves at 85% at the end of the quarter. Interestingly, we seem to have a dip at the beginning of each year. It seems to be a recurring theme, and then we grow ourselves out of it. So I guess the Christmas and New Year period is too much for most people, and we start to gradually work our way out of it. But at end of June, we were back up to levels as high or higher than for most of the previous 2 years. So that has been good and pleasing for us.

And finally, before I move on to numbers, the synergy estimates here. We have already started to gain good progress. We've co-located a number of offices. Some of the cost savings are just now starting to come through. We have already got lower general administrative costs coming through. We are 100% focused on increasing efficiencies of the company. So not only with how we service the administration side but also with accounts and accounting systems. And we have a lot of work that we have ahead of us. But within the next 12 months, I hope that we'll realize lots of those cost synergies.

Conversely to that, on the revenue side, we've already started getting in extra work that we probably wouldn't have won by ourselves. By having both companies working together, we're starting to realize some of those synergies cross-selling between companies. And also, we intend to use that footprint that we have around the world to our advantage, particularly for people like Will in the offshore renewables, where he's breaking into extended footprint around the world, and we will try and migrate people across from office to office.

So in general, I think the quarter has been very busy. It's been good for the company. It's been good for meeting our strategic targets of increasing the size of company and growing our influence in the market. And I do believe it will be ultimately good for our shareholders, which, of course, is one of our main aims here to ensure that everybody is looked after.

So with that, I'm going to pass across to Kim to give you some numbers and give you some detail of how we have performed.

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Kim Boman, AqualisBraemar ASA - CFO [3]

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Thanks, David. It's been a busy and eventful quarter with the closing of the BTS transaction. Just to add to David's comments regarding synergies, this is something we will be reporting on, only recorded on the process to realize these synergies.

To facilitate the comparison of historical figures, we have included the historical figures for BTS and Aqualis side-by-side for first half 2018 and '19. And as you can see, the revenues are slightly down if you compare first half 2019 versus first half '18 and with the adjusted EBIT margin also slightly down. The operating loss for BTS, if you look -- as a stand-alone entity in the first half 2019 was roughly $1.9 million. The underlying loss is about $0.6 million. The difference between the $0.6 million and the adjusted is mainly due to restructuring provisions and some additional accruals that were made in the balance sheet.

As David has pointed out, the financial position of BTS has been consolidated into AqualisBraemar as of end of June. And so balance sheet figures are consolidated. While per P&L, it's only below the EBIT line, operating profit line, they have an impact on the financial income.

Aqualis revenues in Q2 2019 are up 3% versus Q2 2018. The -- we are quite proud of that. Despite that we have been in the middle of a transaction, we are a quite small company, and we have used a lot of the management resources to drive this process. And we have been trying to maintain a strong focus on clients in the meantime. So I'm quite pleased to see that we have been able to still show that growth in revenues. The adjusted EBIT was $0.5 million, EBITDA -- EBIT in Q2 2019, a slight decrease from Q2 2018.

As David pointed out, the star performer in this quarter has been our offshore wind business, Offshore Wind Consultants. They had a stellar performance, and the revenues that they have had have increased -- have during the increase of revenues in the far eastern Europe. So in the Far East, in Taiwan mainly and in Europe, it's spread across Europe. Middle East has also a good quarter, while Americas is slightly down on adjusted EBIT, but the revenues are slightly up.

As pointed out, the results have been impacted by integration and transaction costs in the quarter. And they include a gain of $11.1 million in the financial income -- in finance income. The gain is calculated based on the net assets we acquired from BTS as of end of June this year, which was $18.9 million. And then we deduct the consideration, which was a mix of shares mainly and a part of warrants, which is the value $7.9 million. And the main -- the difference is then the $11 million, which has been taken as a gain in the quarter. We maintain a good or strong financial position. We have $7.8 million. The impact of this transaction was that we acquired or we got $3 million in additional cash. So adjusted for transaction, our cash would have been $4.8 million. But we also received a short-term transitional cash input into the BTS entities to have a short-term liquidity for $3 million. If you take our pro forma cash end of June, if you take into account capital raise of $6 million, our net cash will be $10.6 million. So that would be the $7.8 million adding the private placement and rights issue, and they're targeting the loan to BTS -- no, to Braemar Shipping Services and taking out the transaction costs. We had a negative operational cash flow in the quarter driven by increase in working capital. We had a large -- quite large increase in revenues from Q1 to Q2 in '19, which increased the working capital.

With that, I'll leave the word to Will Cleverly. Welcome to (inaudible) now.

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Glen Ole Rødland, AqualisBraemar ASA - Chairman [4]

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Thank you, Kim. Before we start the presentation of the 4 business lines, I would just like to say a few words about the history of the company. If you look on this graph, most of the key team that is heading up Aqualis and now Braemar -- AqualisBraemar has a history from Noble Denton. And myself, I was also a part of -- we were part of a buyout of Noble Denton, then it was Hitech and front lift back in 2005-'06. And during that period, we owned Noble Denton. We took the company from GBP 25 million to GBP 125 million. And that company was subsequently sold to DNV and to Germanischer Lloyd or to Germanischer Lloyd, which later merged with DNV.

Then we started Aqualis, started from scratch. We didn't have anything. We recruited a lot of people in the industry that was back started in '12 or early '13 and we did 2 acquisitions. We grew the company up to GBP 41 million of revenue. And then this blue -- light blue area is the downturn in the oil and gas industry. And of course, we are not immune, quite a contrary. So we had a dramatic correction down to $27 million in one year. So we lost, of course, quite a bit of money. But since then, we have stabilized the business and even grew the business up to $36 million, which was the revenue for '18.

Now with the transaction with Braemar, we are -- pro forma -- last year, we had $76 million. So what I'm indicating here is that it is a team that have grown business before. Noble Denton and the south of Aqualis. We have been through a recession. We are now -- hopefully, that's what I'm trying to convey, so time will show, but we are back on a growth track. That's what we are hoping. The market, hopefully, will help us. And also, we will do transactions and improve the business.

The second thing I would like to focus on before we start is that there was a common denominator for the business we own, and that is all this company is based out of London. You can see that. That's like the major center or cluster for the insurance industry. The marine insurance industry and the oil and gas related industry. And in addition to oil, it also has, as you can see, of those circles at the top part. But we do 2 things on behalf of the oil and gas -- on behalf of the insurance industry. We manage losses when there was accident. We will talk more about that. That's the adjusting on the wind side, especially.

And then we also work to avoid losses or limit losses to avoid accidents. And that's the marine warranty and rig moves and offshore renewables are all into that. So what you will see later on that even the offshore part of the business where most of our customers are shipowners and rig owners, indirectly 70% of the business is generated directly and indirectly from that insurance industry. So that's the common denominator, and that's why we are based in London and most of our competitors are also based in London.

So with that background, I would like to give the floor to Will Cleverly, which will take us through the growth engine right now. Thank you.

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Will Cleverly, AqualisBraemar ASA - MD of OWC [5]

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Thanks very much, Glen. My name is Will Cleverly. I'm the Managing Director of Offshore Wind Consultants. Offshore Wind Consultants is a fully owned renewable arm of AqualisBraemar, but we kept the brand name because Offshore Wind Consultants explains exactly what we do. We service the entire offshore wind value chain, and so we work with all the major developers. We also work with the supply chain, and we work with the investors. As these wind farms continue to change hands, people need good due diligence to work out what the risks are.

So a split of our work over the last 12 months. You can see from the left-hand chart it's predominantly in project management. So we provide project management services and the development and the construction of offshore wind farms with or on behalf of the developers. Offshore, we also provide client reps, experienced mariners and professionals who are involved in the transportation and installation of these wind farms. And the final chunk is our niche consultancy arm. This includes technical due diligence, but also small lump sum packages of very profitable work in the geotechnical and earthquake sector. The chart is mirrored on the right with our client mix, again, predominantly developers, the likes of Ørsted, of Macquarie of Scottish power, who are building these wind farms. And second biggest portion being the investors who are buying these wind farms as they change hands. We also provide all the geotechnical services within AqualisBraemar, so that's our internal profit line. And the final small segment being [OFTO], which is the name for U.K. cable infrastructure companies.

So this is a snapshot of what we've done since 2011. We're quite proud of this. We've worked on over 55 projects, 30 gigawatts of wind farm in development. And you'll see that the majority of this is in the geotechnical space, 21 gigawatts. This is a really useful arm that we have because it brings us into wind farms right at the beginning. It's at the time when you're working at where your foundations should be, what size they should be and advising the client on next steps. And if you do that well, then you continue through the process and the work turns into a long baseload. And from that, we get our subsea cables work and our project management that take up the rest of our portion.

Six gigawatts of project management is quite a lot. It's about 15% of the installed offshore wind farms around the world OWC have helped realize. So I'm sure you'll have seen these sort of charts before. Offshore wind farms continue to grow at pace year-on-year. At the moment, we're at about 40 gigawatts. By 2025, this could be 150 gigawatts. By 2030, it could be 200 gigawatts. And I think this is pretty unparalleled in terms of growth in industries around the world, so we're very pleased to be playing in this space.

Indeed, if you look at the next 6 years, and excluding China, so places where we have companies in Hamburg, in London, in Boston and in Taiwan, there is a combined annual growth rate of 26%. And I'll go on to show later that OWC are increasing at an even greater rate than that.

So the major change in the industry from prior to 2015 to post 2015 is, originally, most of the wind farms were built in Europe, starting in Denmark then the U.K. and then Germany. So our offices replicated that. We had an office in London, which is our head office, which we still own and an office in Hamburg. Going forward, we see global -- we see offshore wind as a much more global industry, and we followed this. We opened up an office in Taiwan last year and opened up an office in Boston at a similar time to follow or even be ahead of the areas where offshore wind is due to grow. And with AqualisBraemar coming together, the number of offices has doubled, as David said. So areas like Vietnam, like Indonesia, like South Korea that we intended to go, we're already there. So we have a head start on our competitors in the growing offshore wind industries around the world.

The other major changes is in the developers. Historically, it's been the major utilities who've build the wind farms, Ørsted ex DONG Energy leading the way. And OWC have worked with the majority of these players and continue to do so. But in the last 5 years, the proportion of offshore wind farms that are owned by these major developers has decreased, which is good for OWC because it provides more and more clients, some of whom are less experienced and all of whom need and appreciate that support that OWC can offer.

So I'm just going to talk briefly through a couple of examples of what we do. This is a project that I've personally been working on over the last year. It's the biggest project that OWC do. It's the project management of an offshore wind farm off the west coast of Taiwan. And it's particularly interesting from an engineering perspective because it's in a highly seismic area as well as having typhoons and infrastructure issues. In fact, the lessons we've learned on the seismic side in terms of how an earthquake affects the jack up foundation and a turbine is something that we have now developed into quite a niche area that we can use with other clients. And this example shows how we're involved throughout the project.

So we have package managers, contract managers, risk interface geotechnical engineers. At all levels, we're embedded into the project and with client helping to develop this one of the first wind farms in Asia of this size. And that experience leads quite nicely on to the other side of things that we do, which is the due diligence. Wind farms are changing hands all the time, and a trusted technical due diligence partner is needed. And if it's someone who's already out there, who's walked the yards, who's kicked the tires, been in the ports, we've seen the space and the foundations and the risks, you can provide much better and much quicker technical due diligence on someone else trying to invest into this space. And the second example is one where we provided such quick and well-received due diligence. And on the back of this, we've been awarded some further work by the same client.

My final example is one that's close to my heart. This is the first project of this size that OWC won back in 2012. And it's a nice example of when you get involved right at the beginning. Here, we helped plan their site investigation. So right at the start, where they were working at where in the zone it would be sensible to build a wind farm. We helped with this, we advised, we used our geotechnical knowledge to reduce their risk and their CapEx. And from that, we were engaged into the project. And from that, we're engaged into the construction. And from that, we've engaged into the O&M phase. So we're still involved 6 years later with the same client, with the same project, and it's a nice example of how when you do a good job, you'll continue to be employed and the revenue keeps coming in.

So I'll conclude with some numbers. Our revenue has grown year-on-year and, in fact, in the last 3 years, has grown at quite a rate. The combined annual growth rate over the last 3 years is 30%, which is higher than the industry. So it shows we're growing with the industry, but we're also taking other people's market share in it, which we're very pleased with. The last 12 months has been particularly good on the back of some major project wins in Taiwan and elsewhere. Our EBITDA as a percentage of our revenue is something we're very pleased with, and it gives us some cash to help us grow into the next areas. In combination with a reduced net working capital as a percentage of our revenue now down to under 20%, that frees up some cash flow, which will help us grow further. And hopefully, the OWC success story will continue into the next few years. Thank you.

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Mark McGurran, AqualisBraemar ASA - Group MD of Marine Surveying & Consultancy [6]

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Thank you, Will. My name is Mark McGurran. I'm responsible for our marine business stream globally. What we do in the marine business stream is we service by means of surveying and marine consultancy any asset in relation to risks which are placed in the marine insurance market. That's not to say we only do insurance work, but those are the assets we deal with, whether they're ships, shipyards, cargoes, port and harbors, even waterways and anything in between. We service these markets by providing a team of marine engineers, such as myself, master mariners, naval architects and scientists. Since the merger, our team has grown significantly as you've seen from the numbers that David has provided. And many of those disciplines, I've just mentioned, master mariners, especially, and marine engineers and naval architects have grown as well. So it's put us post merger in a really strong position to sell a very large team with a very large global footprint to our market.

As you can see from the pie chart here, a large majority of the work we do within the marine business stream is what we call H&M, which is Hull & Machinery and that is services on behalf of Hull & Machinery insurance underwriters based all over the world, as Glen mentioned, predominantly in London, but many of them local to this part of the world as well. And you can see from the graph that whilst that takes up a large portion of what we do, there are many other areas we service as well. And those areas, we are obviously targeting for growth and expansion. And post merger, we're in a fantastic position to do so. Included in the other sector is due diligence, which gives us a very nice crossover with the due diligence work that Will was just explaining to you about. And so we do that on behalf of lenders and other interested financial parties.

As I said, a large part is Hull & Machinery work, which deals with casualties. So what happens in a marine casualty, obviously, the vessel suffers some form of casualty and then usually our clients will be either the P&I club, which covers the insurance of any third-party liability or the Hull & Machinery or other insurers, which cover the asset. The text, you can see here in the blue color is where we act, and the black is just explaining where -- how we go along. The -- we're able to offer our clients a great deal of support and advice throughout this chain, and we're able to add value even more so now moving into the future post merger with many of these areas. And given our increased global footprint, obviously, I'm sure you can appreciate when you're dealing with casualty work, there is an element of uncertainty involved as to where these casualties occur. And the more offices you have, the more likely you are to have the right kind of staff in close proximity to these casualties, which gives us the best opportunity to persuade our clients that it's us they should be calling.

We track several areas of data to try and improve how we target our growth and our expansion and how we win our work. You can see from the client mix charts that although predominantly, the work we do is on behalf of insurers, it's not always the insurers that give us the phone call or the e-mail to instructors. There are many parties involved, be the owner, the insurers, the brokers or, in fact, legal lawyers and financial institutions and financial interests. We track these numbers because it gives us a great opportunity to see where else we can get work from, and it gives us a good spread of many different possibilities to win the work based, as David said, often in the insurance world, but there are many conduits to which we can pick up these instructions. The vessel services graph also shows us -- we track this quite closely to see where we are, which physical assets we are servicing more than others and which are growing and which are not. And this helps us with our future recruitment plans and our marketing plans, and we can closely monitor what sort of assets are having problems and what sort of assets are coming into the market and how we can better serve the clients. The -- under the other section is included in this chart, yachts, which is an area of business that we're also involved in, but it's not specifically identified on this graph. But this graph does allow us to target where we want to expand and where we would like to grow into.

Obviously, when you're dealing with casualties, you need ships to be in operation, and you need them to have the casualties in the first place. The global shipping fleet has been in continuous growth for some time now. Obviously, that growth does vary over the years. And there are short-term indicators we see in certain fleets and certain sectors, which again, we track so that we can try to keep our service offering as relevant as possible to our clients.

They -- what's not shown here is the claims' data. We know from some other data we track that the amount of total losses, that is where a ship is completely lost, is actually dropping, which isn't necessarily a bad thing. If a vessel is lost in deepwater, obviously, there's little for us to do. But the amount of serious and complex incidents are in fact increasing. So that gives us the scope to assist and support our clients through that casualty process. We're also seeing an increase in the political complications of wreck removal and of pollution response, and we're very well placed now globally to support our clients through these hard times that they face.

Insurance claims continue to be steady in number. They do fluctuate. Obviously, they do go up and down. But they -- there is a steady base which continues over the years, which seems usually quite unaffected by any global economic cycles that are occurring. So it's a good base for us to grow the business from.

A big part of our focus is passenger fleets and superyachts, not just on claims for passenger fleets, we do a lot of due diligence work. That's a growing sector for us, but we also obviously get involved in claims. Most passenger ships are large, complex, high-value assets, so their insurance placement is an important part of their own value cycle, and we can often help not just insurers, but the clients, the shipowners themselves with any of the marine issues that -- where we can consult on the system on. Yachts, again, it's not just claims. A big part of the yacht world is transactional-based, so we are very well placed now with a growing yacht team, and obviously, as I mentioned, a growing global footprint to support the yacht and the superyacht industry. We specialize in yachts. The larger ones, especially those over 30 meters, but even more so and even bigger ones over 50 meters. And that fleet is -- still continues to grow globally.

I'm now going to talk about a couple of projects that we've done. Could you play video, please? I can't, can I? I don't know why.

(presentation)

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Mark McGurran, AqualisBraemar ASA - Group MD of Marine Surveying & Consultancy [7]

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We were recently instructed on behalf of the Hull & Machinery insurers of a vessel called Carnival Vista, which is a very large modern cruise ship, which was operating in the Bahamas. She suffered a propulsion failure, which required her to be removed from the water for assessment and repair. Unfortunately, in that part of the world, there wasn't an operating dry dock big enough to fit her in, so a solution was developed to charter in a semisubmersible heavy-lift vessel from a company called Boskalis, who we worked with to ensure that these repairs were undertaken correctly.

And post merger, it gave us a fantastic opportunity to cross-sell, and we were able to get our offshore marine warranty team involved out of our Houston office to do the engineering and the marine warranty involved in getting this vessel onto this heavy lift -- or getting the cruise ship onto the heavy-lift vessel and safely removing her from the water so that we could carry out the repairs that were needed. This hadn't been done for a vessel of this size before. She's over 320 meters long, 733,000 gross tons, and she's almost 50 meters wide. So this sort of very high level and high-profile project is exactly where we want to be in the market dealing with, at eye level, international players in the market. And this gave us a great deal of visibility.

It's something which has been talked about a lot. These sort of videos and pictures have been circulated through a lot of media channels, and it's given us some great visibility. Internally, obviously, it was a real positive win for us because not only did we get our Hull & Machinery team and our marine team involved, but as I said, we managed to cross-sell into other areas of the business. And it's a very good example of how the synergies of our new organization are able to assist our clients and drive our business forward.

Sorry, I'll just -- another area of quite high-profile work we've been involved in is the recent attacks on some shipping assets in the Middle East. We've received instructions from various different parties, including P&I clubs, Hull & Machinery underwriters. And because of the type of attacks these were, many of these policies -- many of these instances fell under the war risk policies of the vessel owners. So we don't just sell to Hull & Machinery, we sell across the insurance spectrum to war risk, to loss of hire, to repairers' liability insurers to port risk-liability insurers. And this is another example of quite high level -- sorry, high-profile work that we've been involved in, which has ended up in the press. So it gives us a fantastic opportunity to make sure that all of our clients know that we are involved in many of these high-level incidents and high-profile incidents. These sort of incidents, of course, the repairs themselves might be done and dusted in certain cases, but some of these will go on for a long time. And our advice and support to the clients will continue on for some time. Some of these claims are as high as $17 million. So there is a lot of work for us to do and a lot of support for us to give to our clients in this regard.

I'll talk a bit about the numbers. As I said, the -- with the trends we've seen in the market, serious losses increasing and total losses decreasing and the claims numbers generally moving around a bit over the years. We've seen some fluctuations in revenue and in profit. We've addressed those in recent years. Moving forward into the last 12 months, we've seen an increase in profitability, which is -- and also an increase in our top line revenue, of course, which has allowed us to invest further in expanding our services.

And of course, now post merger, we've shortcutted that process quite effectively. We've got some important legislation changes coming up in regards to some environmental IMO issues, which we're confident we can support our clients moving through, and that will give us an opportunity for growth. The steady revenue increase, we're very optimistic will continue and if that will grow. And we're also very positive that our market share, which we believe in certain sectors to be very strong, we believe we're the market leaders in several of our areas that we will maintain that and increase it. Some areas we've -- we're so strong that it's -- we're protecting it now. And we've got many other areas which we can grow into moving forward into the future.

And with that, I'm going to hand over to Grant. Thank you very much.

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Grant Smith, AqualisBraemar ASA - COO Insurance Services [8]

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Thanks, Mark. Morning, everybody. My name is Grant Smith, and I'm the CEO of the Insurance Services division, which includes the marine and the loss-adjusting arm of the combined AqualisBraemar entity. So I'm very pleased to be here with you all to discuss what that means for us in the business going forward, to talk to you about the loss-adjusting business in particular. For those of you who may not be as familiar with that sector, we're effectively international intermediaries in the insurance process. We bring the high-skilled engineering and technical experience of our team. And we use those skills to help and assist in an insurance or claims casualty situation. We specialize in the oil and gas sector and the E&P markets, in particular, with a large share of the market presence there.

So obviously, as with the offshore business, we've been affected, as Glen discussed, through the cyclical changes in the market, but we've been making steps to diversify into the other natural resources sectors that we have available to us, increasing our footprint as we move forward.

If I take a minute to discuss our client mix, we effectively are 100% working for the insurance industry. Obviously, we have close relationships with the risk managers and the asset owners, and our job is to be this independent intermediary that helps them through the claims process. And we derive our revenue through hourly billings or fee rates related to the services that we do. Our business is very much a low-frequency, high-value, loss-adjusting business. We don't get involved in the small day-to-day transactions, auto risks, casualties of that nature. We're always involved in the sort of higher-end niche business, which is -- which provides a greater revenue stream.

Our mix is predominantly about 49% is working for the Lloyd's market, and London Lloyd's insurance market. I personally spent over a decade in London before moving to North America. The mix there is either pure syndicates or insurance companies that have established syndicates inside of the Lloyd's market stream. The synergy, again, between our marine and our energy book is that a lot of the energy syndicates are also the marine syndicates that do the insurances. So we have a natural crossover of clients and relationships that are also the same underwriters that will be doing the pre-risk and using the pre-risk services that Reuben will share with you. So we have a very good multiple point of contact into these insurers globally. We also work with the insurance companies, the large internationals, AIGs, Swiss Re, Munich Re, Allianz that aren't syndicated through Lloyd's, but they provide the insurance capacity and services to the market.

And the last sector, the insurance mutuals is the P&I clubs, where we do a lot of work for P&I clubs or OAL, which is the largest insurance mutual for oil and gas industry, and that's a growing sector for us as well. Our legal firms, we do a lot of technical due diligence, expert witness work either to provide dispute resolution or to assist in litigation support. That's a growing sector for us. And again, with Will and Mark, we've got a specific team post-merger that's working on expanding our due diligence and expanding our expert witness services, which we see as a key growth area because we really do provide the best technical expertise globally that specializes in the marine and the energy assets that are involved.

So what sort of losses do we get involved in, predominantly property damage claims that you would expect fire, explosion, collisions, anything of that nature? And with the reduction or the reduction in the E&P activity, there's been a lot less construction activity. But still, to this day, constructional risks insurance plays a vital part of our business, when they're building the assets offshore, even with the best efforts of our largest surveyors and the due diligence people that are trying to control risks, it's a very highly active operation, involving many parties and things go wrong. So the constructional risk sector as we see a return to E&P activity in offshore construction, we certainly see that to be another returning growth area. Historically, the revenue has been much more significant in that space than it has at the current levels, but it still represents about 20% of our income, even in the declined activity. The liability and pollution is an area we've been especially developing, doing high-risk and complex pollution cleanup for mediation. It tends to give us a large tail of work, which will run on for many years and provides a very stable revenue stream.

But through this next -- excuse me, through this next firm -- slide, you'll see that we provide significantly in the upstream sector. So E&P exploration and production, FPSOs, mobile offshore drilling units, land rigs, the exploration phase of the business. We really want to try and stress that we move forward into the downstream space to capitalize into the growth and the losses that we've been experiencing or the market's been experiencing in there. This graph is taken from the Willis Energy Loss Database or WELD, which is a market leader on providing casualty information for us on insured or insurable losses. What it illustrates is that the purple section on the bottom is the downstream losses, so refinery petrochemical. So around 2015, as we entered the recession in the oil and gas, the E&P market with the oil price drop, you'll see that the upstream losses have shrunk, which has obviously impacted our business through the operation of that, but the downstream losses as the margins have grown between the refining have meant that the downstream and petrochemical losses have significantly increased. So it's an area of diversification that we are working on closely to strengthen our business and to increase the spread of the assets.

I'll give you an example of some of the claims that we'll be working on. This is a large refinery loss in North America, about 350,000 barrels of synthetic crude oil produced through that facility. We had a leak of naptha Vapor Cloud Explosion, which resulted in the fire and explosion of that facility. We were working as the loss adjuster on that particular situation. There are 6 joint venture partners, all international, and we were involved in helping each of them with their claims and their insurance claims and recoveries into their various markets, which involved captive insurance companies, so like insurance companies that are owned by the oil companies themselves. The mutual -- insurance mutual of OAL, the Lloyd's market and the various other players, loss values and a incident around this nature, circa $300 million, so -- and it will take anything from 12 to 18 months to be wrapping up a claim of that nature. So we have a high level of engagement.

Not just on the onshore, obviously, the offshore. This is a asset location in the Gulf of Mexico, was involved in a severe weather loss or issues around the pipeline, when they should have ceased laying operations particularly put down the pipeline or continue laying. In this situation, they lost control of the vessel that came off-station, caused damage to the pipeline recovery. Again, we were working on that project, the joy of the construction projects for us as loss adjusters is they'll often -- once you get involved in the project, they often deliver more than 1 claim. So on this project, we've had 6 claims coming in. This one loss was circa $100 million to the client in operations. And so we've been involved in that process, but it gives us a good touching point to deal with them on multiple levels.

And this last example is one of our pollution liability-type losses, with 225 meters cubed of oil escaped into the water. We were dealing in this situation with a workforce of about 1,100 people. We dealt with over 430 individual liability claims, dealing with the stakeholders, which includes, of course, the First Nations people that -- whose lands the pipeline was on, dealing with the regulators, dealing with nearby farmers, homeowners. These claims are particularly good for us in the growth area of the length and the amount of time that they go on in the remediation efforts. And it's an area where we think we can bring our skills to help the process and to improve the stewardship of the environment and taking care of what's going on.

Finally, I'll move briefly to the numbers. Obviously, with the E&P activity and the large space that we're in there, we've seen a reduction over time in recent years from 2015, 2016. We tend to have a bit of a tail because the claims that we'll have, even when the oil price dropped, we will slide into that down curve a little bit slower than other people because of the length of time that we have to run the claims to completion. So we're really feeling like we're at the bottom of the market now as the signs of joint rig activity that's moving through the industry are giving us optimism that return in the E&P activity is returning. The EBIT numbers, I would point out that they do include a number of costs associated within transactions that haven't been removed. We've got some credit lines in there, we are through -- where we haven't taken fully into account. Not that they're bad debts, but they're being aged because of collection issues with the Chinese market. But underlying, I think our performance will be bouncing back once these costs are taken into account. Next time I'm with you. I'm sure that we'll see an increase in the underlying EBITDA of this business. It's a very exciting time for us to move forward with the organization, the ability to cross-sell the services that we have, and I thank you for your time.

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Reuben Segal, AqualisBraemar ASA - COO & Director [9]

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Okay. Good morning, everybody. My name is Ruben Segal. I'm the COO of Aqualis, AqualisBraemar now. And I'm also responsible for the offshore division of the company as well as the company overall. I'm going to take you through the business that we've had traditionally, so when we started the company, and now as we are since we did the merger with Braemar, total now as AqualisBraemar. The business in offshore oil and gas accounts for about 50% of the overall company revenues.

When we started the company, it was important for us to do 3 things. First of all, we wanted to be independent. Second of all, we wanted to have a global footprint. And thirdly, it was important for us to cover the whole life cycle of the offshore business. We started this early on and with the acquisition of Braemar it has allowed us to take this further, give us more ability to service both the CapEx and the OpEx business, and I will take you through that.

So our business streams and the business sectors that we're work in, it was important for us to be able to get through, certainly, the down cycle that we've had recently and to keep ourselves secure during the various stages of the downturn. So for us, it was important to be a part of the OpEx side of the business as well as the CapEx side of the business. So if you look at the business that we're in. For instance, our rig moving business is one of the strongest performing sectors. Of course, that did get a hit during the recent downturn.

But it is one sector that started to come out and we are very strong in this particular area. Things such as new build construction and engineering, although we still play in the sector today. Of course, it got affected initially. But I'm going to show you some examples of projects that we are doing, where we still are very strong even to this day as compared to some of our competitors. But overall, especially with the merger with Braemar, what it allowed us was to start getting into more of the areas that we were not playing in. And again, related to the insurance sector, which already Grant has been discussing with you, and I'll show you how the insurance sector, although not a key client for us, underlines every part of our business, every part of our business in most of the work that we do.

In particular, that's the Marine Warranty Services, which Braemar brought a large majority of work in to us, particularly in Asia Pacific as well as in the Middle East and also allowed us to do more in the Americas as well. Our marine consultancy business has always been very strong since we started as Aqualis a few years back. But in particular, our rig moving is the core area for us. It's a core area where we keep developing, and I'm going to take you through some of those numbers.

So before the merger, Middle East was a very strong region for us overall. It has always been strong since we started the company. It's been strong as we've gone through the company. But of course, Middle East was highly affected by the recent downturn. That was because there was a lot of rig moving activity over there. And of course, with the down cycle and the number of rigs moving, that did affect us. It was important for us to try and diversify away a little bit from the Middle East. We were very strong in the Middle East, but we also have to understand that Asia Pacific, there was a lot of activity and we didn't have a strong footprint at the time.

When we brought Braemar into the equation, Braemar's offshore division was very strong in Asia Pacific. They were in all the different countries that we were not in, they were in Indonesia, Malaysia, Vietnam and that allowed us was a much stronger footprint in the offshore oil and gas sector across Asia Pacific, it grew us also in the Americas and also assisted us over in the Middle East. What it did mean is that we were not as over-reliant on the Middle East as we used to be. And now our business is much more robust in the oil and gas division. So that was the key message when we brought Braemar in, was to try and give us more flexibility, more robustness in our business and make us less dependent on the Middle East business, and that has certainly happened. And since the merger, we've been very successful already in winning new work over in Asia Pacific, in the Marine Warranty division, which has allowed us to get a strong footprint there.

So our business, rig moving was a core, core activity of AqualisBraemar or Aqualis business when we first started, it used to account for nearly 50% of our business. Again, that meant we were very over-reliant on the OpEx side of the business. Again, bringing Braemar into that, in particularly, their strong footprint in the Marine Warranty Services meant that we were able to become less reliant on rig moving. So again, we became less reliant on the Middle East, less reliant on rig moving, and now gave us a much more robust business. We became very robust in the Marine Warranty, very robust in the rig moving, and now also in marine operations. We are not only the market leader in these regions, we are now the market leader globally in all these service lines. And that was one thing that we aimed to do when we started Aqualis back in 2013, was to be able to be the global leader in all divisions. And now with the merger with Braemar, that has allowed us to do that. And now what's important is for us to keep taking this forward, keep getting stronger in those divisions and keep growing certainly, the bottom line as well as the top line.

The other thing that we said is that rig owners and vessels, vessel owners were very important to us. Very early on, as we did not have a long history, it was important for us to get very close relationships with these guys, which we did. Again, we became over-reliant upon that. We went into the 2015/'16 downturn in the CapEx business, so our operators and owners became squeezed. We all know they came squeezed. So by bringing Braemar into this, again, it pushed us more into the offshore contracting side, moving to the NOCs, the IOCs of the Marine Warranty. And again, it started to divest our client base, which was also important. But underlying with all of it, although the others only count for 1%, the others being the insurance industry, it is the exact opposite of what Grant was saying. Grant is very important, 100% on the insurance industry. We are also 100% reliant on the insurance industry but behind the back of our clients. It's a slight reverse of what Grant is doing, which meant it made it a perfect fit. We see the underwrite -- we see the clients and the contractors and the shipyards, while Grant is seeing all the insurance companies. So it was a perfect fit for us.

But these are the key statistics behind. We started the company back in 2013. At that stage, as you've seen early on the numbers, it was a dramatic uptake. We were able to do that because the spending in the business was strong, very, very strong. Back in 2013, '14, 350 billion was going into the industry. 3 years later, that halved and has been at a very, very flat pace for the last 2 or 3 years. We've all been affected by this. We got very affected, you saw the numbers that you put up earlier by Glen how we got affected. But with effective management and with the way that we were running our business, we were able to come out of that quite fast, more -- faster than any of our competitors.

We were able to take a strong footprint in the business, we were able to grow our topside, we were able to grow our bottom line, and we've been able to continue that growth. And the next phase was for us to bring Braemar into that equation and continue that. So even in a very flat industry, we've been able to keep growing. And I think that's the important takeaway here. But saying that, there is an uptick. It is coming through. The number of subsea wells being drilled has now started to increase. It's gone up quite considerably over the last 2 or 3 years. But of course, we don't see that until 2 or 3 years after they get sanctioned.

We are in the Marine Warranty space, we are in the operational phase, the T&I phase, and we don't get to see that until 2 or 3 years afterwards. So what we expect to happen is that in back-end of 2019 and '20 that activity should start to increase. And again, this comes through. The rig -- we always watch the rig count. The global rig count has been decimated over the years, a lot of rigs went into cold stack, warm stack, a lot of new build construction came out in China, and that had a real impact on the industry. But what we've seen over the last 12 months, those rigs starting to come out, they're starting to get into operation. The Chinese have been able to put their rigs into operation, and we now get the backside of that. We are getting more of the operations, we are getting more of the business out of that now. So we are seeing the business come out, slow. It's certainly not coming out as quickly as it went down. But we are able to get a very strong footprint in that. And certainly, with the acquisition of Braemar, it meant that we get a stronger position in the market.

So here's just 2 or 3 examples to take you through where we are and what we've been doing. We have been involved in the largest, most complex, most difficult operations that have ever been carried out in the oil and gas sectors. Even though we are a new company, our management, the people that we have are highly experienced. They've been around in the industry for 25, 30 years, and they've been involved in the largest projects ever undertaken. This is a case that happened in Bahrain, it was a project that grew arms and legs, as they always do. This particular top side was being constructed over in Asia, it got bigger and bigger and bigger and bigger. Owner didn't understand how to install it, due to its size. So we ended up building this topside onto its original installation barge, we then put the original installation barge onto the top of another barge and take the whole asset across from Asia to the Middle East and Bahrain, which had very little facilities and we installed it using a floatover operation. These are unique jobs, these are niche jobs, we don't get a lot of crowded players competing against us. We are able to handle this with the experience that we have in-house. And this was a very successful project. And this is about a year to 18 months' worth of work.

You've seen this vessel a little bit earlier in a different way. We also are probably the world's largest provider of dry transportation globally because of our global footprint, because of the stuff that we have, because of the type of business that we've been involved in. We do a lot of these transportations around the globe. So this was one of the new FPSOs that was built over in Asia Pacific to be transported to Brazil. And this particular unit was loaded on the world's largest heavy-lift vessel and successfully transported. This is the largest single cargo ever to be transported. In the same month, we also did the largest volume of cargo to ever be transported in the most difficult circumstances offshore in Gulf of Mexico as well. So we're very proud of these type of jobs, and that's why we keep getting the repeat business, and it keeps us ahead of our competitors, and we intend to stay in that market, and we intend to stay strong in that market.

As you saw very early on, the offshore wind industry has started to really come through. So we started to use the expertise that we have in the oil and gas industry and bringing that into our offshore and wind industry. Even though the OpEx -- sorry, the CapEx business has gone down, we are still strong. We have stayed in the Chinese market, we have stayed in the construction market, and we are today doing the construction of offshore wind assets. That helps us with what we're doing with offshore wind. It helps us our position in Asia. It showed that there was still life in the industry, and we are still able to capture business from it. So even when our competitors and the industry is suffering, we are still staying strong in those areas. And that, again, is core to what we've been doing. And that comes through in our numbers as well.

And finally, as I said earlier on, the rig moving operations will core through everything we've done from the day we started. We are by far the market leader in this business for rig moving, rig warranty, rig moving hands on, tow master type of work, the strongest globally. By bringing Braemar into this as well, it also increased our footprint into Asia Pacific, where we wanted to get more of a stronger footprint and we've been able to do that. We move most assets of most companies around the globe. In some way, shape or form, every major rig owner is one of our clients and we are very proud of this, and you may have seen other press releases on the way we've been doing over the last 12 months. Very, very core business for us, and frankly, with the rig activity now increasing, it's put us in a very strong position going forward.

So finally, just on the numbers, it's been a ride, to say the least. Braemar pre-acquisition, were doing very, very strong. Back in 2013, '14, very, very strong. As were we as Aqualis when we came together, we were also doing very strong, zero to hero overnight. But then we all got badly affected by the downturn. Everybody, not only us. And it was important for us to change our model, change our focus, change our way. We were a young team, fresh team, dynamic team and we were able to do that. Even though the market was still declining, we were starting to grow. We came out of it in the back end of '16, we've been profitable ever since.

And what was important when we bought Braemar on was to increase that capacity in Asia Pacific, increase our capacity in Marine Warranty and give us a more robust business. One thing, I will note, you see over the last 12 months, we've been going through this acquisition, of course, we've been bringing 20 old offices together in the offshore business. It's quite a tall order in 3 months. We've had some one-off costs with the transaction. We've got some one-off costs with just making some changes around effective management and double admin staff and double offices. There are costs associated with that and that's being taken into our accounts in the back end of Q2. And hence, the reason why you see that negative number. That's not a number we hope to show you going forward. But it's been a very strong 6 months. It's been a very strong 3 months since we merged with Braemar, a lot of hard work has gone into it. We are a market leader. We are going to remain a market leader, and we're going to take that forward and the next time I see you, hopefully, we can give you some good news.

On that point, I'm going to hand you back to David Wells, and he will take you through the rest of the presentation. Sorry, I'm going to hand you to Glen, and he's going to take you through the rest of the presentation.

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Glen Ole Rødland, AqualisBraemar ASA - Chairman [10]

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Thank you, Reuben. So I hope this presentation have showed -- these 4 business lines have showed that we have what -- as I'm a business person, not a technical person, but I'm quite impressed by the competence and the diversification of a very excellent and capable and experienced organization. So I think on the front end, I think we have conveyed that we are very, very, what should I say, global, and we are leading in some small niches. Of course, we -- it sounds like we are global, but what we are doing is very niche oriented.

So that's why we can have a company of $70 million, $80 million of revenue and claim we are a leader. We are doing very niche and special jobs. But there was another thing. So that's the good news. We have a very good capable front end. What I have to admit is that on the, call it, the back office, if I might call it that, everything that comes after we have done the job, there was a lot to be improved. We are in 33 countries with 48 offices. Bringing these companies together, Braemar was 3 divisions. They were all former acquisitions made by Braemar. So Marine was a separate company, Offshore was a separate company, and adjusting was a separate company. So when we brought these together, we had -- we now have 4 CRM systems in the company. That we are now -- right now, we're rolling out this year 1 CRM system in Offshore. And the plan is to have everything on the same platform within short. And this is very important information and having everybody see the same dashboard is very important. And we also -- from -- you have seen the figures, we have been quite open. There's a lot of days outstanding, to put it mild, I would say that's an understatement. If you then include unbilled revenue, it's even worse. So we are going to work on this as we move forward to make the capital allocation much more efficient.

If you look at this, I will not go through the numbers here in detail. But we have outstanding receivables and unbilled revenue of $33 million altogether, $33 million. I'll get back to that a little bit later. You also see that there was a big difference in overhead of the 2 companies. Aqualis have 22% overhead, the former Aqualis, while the former Braemar companies had 35%. By cutting $2 million, just by cutting $2 million -- and the average is then 29%. Just by cutting the $2 million, we have done already -- I hope we can improve on that, but that's where we are reporting now. And as Kim said, we are going to continue to report how we do. But that's a 3% improvement, that alone on the overhead. So we are going to work.

And finally, but not last, if you look on the subcontractor mix at the bottom here, we have a lot of offices. We have a lot of projects. If you look on it at aggregate level, we look like we are very diversified, but we have to admit that the office in South Africa or the office in Vietnam might not be that diversified. The totality is quite diversified. But you have a job in South Africa, or you don't have that. It might go back and forth. That's why what we have done in Aqualis when we were -- went through the downturn was that we changed dramatically from having own employees to have a mix of own employees and subcontractors. So you see already with 57% of our hours, billable hours that led to 82% of utilization, while Braemar is at 61%. And of course, in a business like this where the margin are where they are, there's a big difference of having 82% versus 61% utilization. And part of the answer is to get this number up to 7%, but that will come over time.

So here is a very short explanation, why do we have a gain of $11 million, $12 million of the finance this quarter. We -- if you look on this, you see that the total assets we took over was $22 million to the right, $22 million. $20 million of that or $20.2 million is working capital on build revenue. So the assets -- these are people business. It's only people, all the assets have 2 feet. So the money that is tied up in the balance sheet is tied up in days outstanding and unbilled. So in Braemar, that was $22 million. And then, as Kim alluded to, we paid $7.1 million plus the warrants that come from top so if the warrant become -- that earn out become effective, we will pay a $9.9 million or $10 million. So the gain is the difference. To put it simple, there were some other effects into this, but the gain is the difference between what we book in the balance sheet and what we paid, to make it simple. So though still thinking about this, you can take one thing. We bought this for $10 million -- so $7 million, and we will never get a return on the capital. It's -- so that's -- so it was a fair price, or you can see this is a big opportunity. We will do 2 things. That's the plan. We have to improve ourselves, we were not sure with the first quarters. But over time, reduce working capital, so we get this down. And second thing is to get the EBITDA and EBIT up. So both will help return on capital. And that's the clear aim, and I think there's a lot to be done. I'm quite optimistic about it.

If you look on -- I'm personally a very strong believer in measurement. It's like in sports, if you measure how fast people run, they run faster. If you measure how high they jump, they jump higher. And if you -- like in football or handball or basket, measure the number of scores, they try to score more. And that's the whole secret about the KPIs, key performance indicator. You need to measure what drives profitability and shareholder values. And I can say quite kind of bluntly that the KPIs in the business we took over and also in Aqualis, we are not perfect. But we need to drive performance of the company. So what we are going to do is to -- there was a culture, and we have a bit of the same in Aqualis that revenue is very important. Yes, it's important. But so are costs and so are the capital used to drive those revenue. So what we are doing we will decentralize the responsibility for the P&L. It's like a McDonald's do or Burger King or whatever, like, [Rema Tusen] here in Norway, like retail stores, it's franchised. So you move it out and everybody have to be responsible for the top line, the bottom line and the capital they use. And I think that's very important to drive the ascent. What we are trying to aim at here is to reduce the capital employed at the company, we are going to improve with 33 countries. There is a lot of cash in various pockets around the globe. We are going to professionalize that -- take it to a different level and make sure that we optimize the cash. And I think this company has too much cash, but we will get back to then, where we can prove we are right.

Then, as I say, this is -- this business is not that far away from investment banking or a law firm or auditing or whatever, all the capital have 2 feet and their own will. So you can't like -- you need to keep them happy. And you need to involve them in the business. And we -- from the outset, Noble Denton was owned 40% by the employees and 60% by the financial sponsors. Here, we -- in Aqualis, it was 17% that was owned by the key employees, but because of the new issue and plus that Braemar came in, it's now down to 11%, but we are going to have -- issue more shares. And there was at the last AGM, we sanctioned a program for shares, and we want to involve all -- most of the Braemar people into this too -- and a bonus program. So it's pretty similar to other kinds of, what should I say, professional organization. And I think that's key in order to retain people and recruit people. We want to grow, have more people on board, so this is very important that we get people on board.

And I think, this is not -- I'm not necessarily a specialist in that, but I think we are about to hit the bottom in the market or are at the bottom of the market. In renewables, it's just like claims. Of course, the 117% we did in the first half will not necessarily be repeated. But I think the direction is nice and can be kept. So Will is very optimistic and I like that, but we are going to do our best to grow within this and more than that.

Oil and gas, I think, is at the bottom or close and as we've alluded to, we see signs that this is about to increase, even though we are a bit latecomers. And adjusting, which Grant presented, you saw for them, they are trying to diversify into downstream and into other areas. But just now, E&P or the upstream is still the bread and butter. So that will benefit the adjusting too.

And finally, but not last, tighter supply of people. There are a lot of boats and rigs laying in fjords and everywhere waiting for jobs. And that's the benefit we hope that we see uptick and more rigs are being moved and ships are moving a lot. But with people, there are not many people that after the downturn is at the sofa, just watching shows -- TV shows at home, they have got other jobs. They are professional. They are good. They are good engineers. They are good mariners. They are good professionals. They have got other jobs. So when this market starts picking up, and the rates have dropped quite dramatically during the downturn. This is for oil and gas, it's not as severe within adjusting and marine. But within oil and gas, the rates are down 30% to 40%. I'm quite sure that there will be pressure from the employees' growth, and it will lead to better rates and hopefully better margins.

Finally, but not last, I would just say before I leave this final word to David is that this company, we claim we are cash light, I would say, that's crude with modifications. We are too heavy on working capital. But this is a company that is going to be a dividend company going forward. And we are targeting to pay annual dividend based on the earnings we have going forward. But in addition, I think, based on what I've said, that there are potential for extraordinary dividend in the next couple -- 2 or 3 years, that comes out of more efficient use of capital and we see this more a onetime effect. So that's the target. We -- now we have done the talk, we need to do the walk. It's not as simple as do to talk, but hard work and good focus, I think we can do both of them.

So with that, I'll leave the final word to David.

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David Wells, AqualisBraemar ASA - CEO & Director of UK [11]

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Thank you, Glen. Okay. So I thought I'd just summarize, I have to say that Glen's summary there is pretty good, it's pretty robust and he's saying all the things which I was going to say myself, so I'm not sure I need to repeat them all. But obviously, going forward now, Q3, in particular, Q4 and into next year, we'll be very much focused on bringing the 2 companies together, increasing efficiencies, increasing client opportunities, increasing -- just expansion as well. I think there's a lot of potential ahead of us. I'm really happy -- all of us are quite excited. I think that came through on the conversations that people have given you that we are in a place where I think we have an opportunity ahead of us, and I do think that we can really get the company together and get it growing nicely. So that's where our focus will be, on bringing 2 companies together. We've already started the synergies. We've already started on bringing on the line the 2 companies, as I said, most of the big offices are now together, operating in one place. And as we move forward, there will be more and more focus on costs. More and more focus on getting outstanding receivables recovered and improving the bottom line.

In general, though, I think the market going forward is looking quite good. Glen has just given you quite a quick summary. I think the renewables market is on fire at the moment, it's looking very good, plenty of opportunities around the world. It's up to us to go out and get them and to bring them on board and to probably expand our footprint into places where we feel there's good opportunities. The marine market, as Mark said, there's more and more ships being built. So there's going to be more and more opportunities in that market. And we're quite dominant and quite well aligned to service that market. And there's plenty of opportunity within it to increase into areas where we're not -- we haven't been servicing that effectively in the past with the bringing on of new people into the company.

Oil and gas market, well, as we mentioned, we do think it's coming out of recession, albeit slowly. There's an increasing number of FIDs that have been approved, there's increasing number of investment commitments have been made, there's increasing number of feeds we started. There's increasing number of FPSOs coming to the market or likely to come to the market. So there's lots of opportunities coming there. We have quite a strong pipeline at the moment of opportunities, a lot of projects are sitting there, waiting to be closed out. Some of those have been slipping to the right for quite a long time, but they haven't gone away yet. So we're hopeful that they will come forward, and we will build up from there.

As mentioned, we do watch the rig market very closely. We do service an awful lot of rigs around the world. We were having a debate yesterday of how many rigs we do actually service and we reckon it's somewhere about 30% of the market, 30%, 40% of the market that we service at the moment, on jack up rigs that is. And that -- those utilization numbers are increasing at the moment. As everything that goes back to work, as a whole new crew goes out, there's at least 2 PSVs working with a single rig, maybe 3. Submarine operations are increasing. There's more opportunities of vessel inspections. There's more opportunity for rig inspections. There's more opportunities with DP type work. So there's a lot of potential as that market starts returning to some degree of normalization. But in general, I think we're in a strong position. I think we have some great people in the company. I'm really excited by what I've seen so far and the commitment that most of our employees have put into bringing the companies together. I think there's a great fit between the 2 companies. There's not much overlap. The clients like it, the insurance market likes it. We've had very, very -- in fact, I think, I haven't received any, in the way of negative feedback from anybody regarding bringing the companies together and it's also affected some consolidation into the market, which has been badly needed. So effectively, there's less players out there as well. So that should be good for us.

So I guess, in essence, very excited. Q3 is going to be busy, Q4 is going to busy. I hope over time, we can show you the fruits of our labor and show you that we're growing the company, we're adding value, we're adding value for shareholders and the community as a whole. So with that, I hope you enjoyed the conversations that people have given to you, a little window into what we do, and I would be happy to stay open to take some questions if you have any. So thank you very much.

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Questions and Answers

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Unidentified Analyst, [1]

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What sort of margins do you aim for going forward in sort of normalized markets?

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David Wells, AqualisBraemar ASA - CEO & Director of UK [2]

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Well, in normalized markets, we'd be aiming for at least 10% bottom line. In the heyday of 20 -- sort of 2012, 2013, we were aiming for 15% to the bottom line. We're not there at the moment in the whole group, especially oil and gas, but we will aim to get back there. I do think what with -- the driver here is, I do think, as Glen alluded to that resources are becoming less available. When we do offshore jobs now to get contractors to work for us, we have to search quite hardware, where previously it wasn't so difficult.

In the Marine business, the number of people of expertise for vessel surveys, vessel inspections on doing the claims work is not as many as before. There's not so many master mariners about as they were. The loss adjusting side is busy. There's not so many spare people floating around at the moment. And renewables as well. Renewables [is feeding] the bench. There's not so many good people about. They have to work quite hard to get people as well. So I think as time goes on, I would like to think lack of people means increasing of rates and therefore, margins can increase. But that is hypothesis at the moment. We have to prove it.

Yes?

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Unidentified Analyst, [3]

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This is a question to Will.

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David Wells, AqualisBraemar ASA - CEO & Director of UK [4]

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Will, do you want to come down here? Yes.

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Unidentified Analyst, [5]

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So I was just thinking about, are you like -- kind of like a [saving] unit where your people are very specialized so they're kind of doing offshore wind work? Or are you able to draw resources from the group so you kind of -- so you have kind of like -- so if you can use people from the whole group to add up in the projects? I'm just curious to understand how it works.

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Will Cleverly, AqualisBraemar ASA - MD of OWC [6]

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Yes. Of course. So within Offshore Wind Consultants, the renewables arm, we have about 50 people. But we use the wider AqualisBraemar Group all the time. So places where -- to even -- to give you an example, the Taiwanese wind farm that I was talking about, the jackets are being fabricated in Korea and Indonesia and people that can be fabricating managers for an oil and gas jacket, like we have in abundance in AqualisBraemar are just as good and have the experience to do the work for Offshore Wind. So we lean on the AqualisBraemar facilities all the time. There's a lot of cross selling and cross work that we can do together.

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Unidentified Analyst, [7]

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So percentage-wise, can you give any -- how much is the group and how much is the Wind team?

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Will Cleverly, AqualisBraemar ASA - MD of OWC [8]

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I'd be making it up. So yes, we can get back to you with a number.

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David Wells, AqualisBraemar ASA - CEO & Director of UK [9]

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Good. Yes?

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Unidentified Analyst, [10]

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Could you say something about the (inaudible) receivables (inaudible) everything is quite well or...

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David Wells, AqualisBraemar ASA - CEO & Director of UK [11]

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Yes, yes. I think well, Kim, you might want to answer that one.

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Kim Boman, AqualisBraemar ASA - CFO [12]

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Yes. In Braemar, it's the high degree of receivables that are (inaudible) years. We have written off those receivables that go with the capital. So if you look on the [history], they have contracts which are (inaudible).

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Unidentified Analyst, [13]

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(inaudible)

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Kim Boman, AqualisBraemar ASA - CFO [14]

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Yes. (inaudible) depending on business, for a Marine (inaudible).

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Grant Smith, AqualisBraemar ASA - COO Insurance Services [15]

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It's the nature of the subscription market as well. So we have many multiparty billings that are involved. So -- and the timing of losses because we tend to bill when we -- sorry, thank you. We tend to bill when we...

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David Wells, AqualisBraemar ASA - CEO & Director of UK [16]

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Grant? I guess, if you'll come down here (inaudible).

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Grant Smith, AqualisBraemar ASA - COO Insurance Services [17]

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We tend to bill when we're making payment recommendations for the client and then the collection for the insurance claim comes with our invoicing and associated with that timing of it. It's a peculiarity to the business, which we are working on collections on driving that forward. But it's -- we are in line with industry peers or competitors on our working capital, but it's something that we have got to focus on in the organization that we could -- we think we can make some improvements on and we'll be working forward. But it's bad debt ratios, no, not really. We -- it's just the timing on collection of the payments that we're working on. Most of these guys are A Class rated because that's where the oil and gas companies are going when they're buying their insurance assets, they are the same clients as we're using so we very seldom have default.

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David Wells, AqualisBraemar ASA - CEO & Director of UK [18]

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I think what's important, we haven't discussed actually what the subscription market actually means. So in the marine world and in the loss adjusting world, when you're working for a client, you're actually working for maybe 10 or 12 different insurance companies at once.

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Grant Smith, AqualisBraemar ASA - COO Insurance Services [19]

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Or 20.

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David Wells, AqualisBraemar ASA - CEO & Director of UK [20]

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Or 20. So when we submit our invoice, it has to go to all those different parties as a percentage of what their interest lies. So when we chase our invoices, it's not just chasing one client to get one payment. It's chasing all those different companies. And that's one of the reasons I think why we have slow payments coming up here.

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Grant Smith, AqualisBraemar ASA - COO Insurance Services [21]

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Just to add to that, we have marine cases, so in certain regions, clients will not typically pay before the marine case is sold. So the insurance case could go on for 1 year or 2 year before you get paid. That's fine if you're able to price them on it -- price the contract at the start so you get paid for it.

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David Wells, AqualisBraemar ASA - CEO & Director of UK [22]

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Yes. Go ahead.

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Unidentified Analyst, [23]

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I was just trying to pin us down to one of your (inaudible). I understand there's quite (inaudible) but can you kind of (inaudible)?

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David Wells, AqualisBraemar ASA - CEO & Director of UK [24]

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Well, we -- yes, that's an interesting question actually. We have a lot of competitors, but not necessarily a single competitor, which does all the things that we do. There's one or 2 companies out there who have a broad range of coverage. DNV, for instance, as an example, there's another company called London Offshore, which is similar. But I think now as a combined company, we are certainly bigger than all our competitors apart from Classification Societies. And we just compete in different sections. And I think what's quite interesting about them is that most of our major competitors at the moment are going through some difficult times at the second. So this is an ideal opportunity for us to get ourselves together and get ourselves growing whilst they're -- whilst they have their eye off the ball. But there's no -- there's lots of little competitors all over the place who snipe at us and obviously, try and get work by reducing rates, and those ones we have to try and deal with. But reputation carries a lot in this -- in what we do.

I hope that's answered your question. It hasn't really -- it's gone around the circle perhaps, but it's a difficult one to answer.

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Grant Smith, AqualisBraemar ASA - COO Insurance Services [25]

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Many of the Classification Societies have been trying to move into the insurance space. And I think there's been a resistance from the insurance space to the Classification Societies. The insurers are looking for the more niche service providers, and they don't want to classify as being sent in to do what they consider to be niche and specialized jobs. So we have been resisting that, and David has been leading that with Reuben in the offshore space in particular. So -- and like I said, the Classification Societies have made a pitch for acquisitions. And that's really where we've been competing. So I think we're -- it's the independence that we provide from that, which is putting us favorably in the eyes of the insurance market.

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David Wells, AqualisBraemar ASA - CEO & Director of UK [26]

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Good.

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Grant Smith, AqualisBraemar ASA - COO Insurance Services [27]

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Anything else?

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David Wells, AqualisBraemar ASA - CEO & Director of UK [28]

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Okay. Just want to thank you so much indeed.

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Unidentified Company Representative, [29]

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David, we're coming out the rain by the way.

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David Wells, AqualisBraemar ASA - CEO & Director of UK [30]

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Yes, I appreciate it.