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Edited Transcript of BOKA.AS earnings conference call or presentation 22-Aug-19 9:30am GMT

Half Year 2019 Koninklijke Boskalis Westminster NV Earnings Presentation

Papendrecht Aug 27, 2019 (Thomson StreetEvents) -- Edited Transcript of Koninklijke Boskalis Westminster NV earnings conference call or presentation Thursday, August 22, 2019 at 9:30:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Carlo van Noort

Royal Boskalis Westminster N.V. - CFO & Member of Management Board

* Peter A. M. Berdowski

Royal Boskalis Westminster N.V. - Chairman of Management Board & CEO

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Conference Call Participants

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* Andre F. M. Mulder

Kepler Cheuvreux, Research Division - Analyst

* Henk Veerman

Kempen & Co. N.V., Research Division - Research Analyst

* Luuk Van Beek

Banque Degroof Petercam S.A., Research Division - Analyst

* Maarten Verbeek

The Idea-Driven Equities Analyses Company - Equity Analyst

* Thijs Berkelder

ABN AMRO Bank N.V., Research Division - Equity Research Analyst

* Tijs Hollestelle

ING Groep N.V., Research Division - Research Analyst

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Presentation

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Peter A. M. Berdowski, Royal Boskalis Westminster N.V. - Chairman of Management Board & CEO [1]

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All of you to listen to the half year results. We thought it would be nice to start with an impression of a beautiful job we carried out successfully. It's not always just about figures but also emotion, which is involved in our line of business. I think it's a fine example of a beautiful project we carried out, so we'd like to give you a short impression of the lifting of Vanguard last month.

(presentation)

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Peter A. M. Berdowski, Royal Boskalis Westminster N.V. - Chairman of Management Board & CEO [2]

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Well, wasn't that beautiful? All right. Are you going to click -- my device isn't working, it appears. All right. We're moving. Well, welcome to all of you to the presentation of the half year results. I'm seconded by Carlo van Noort. He was appointed last May as successor of Hans Kamps as CFO, who you've been accustomed to for many years. And he -- the first half year was a very busy year for my colleague. The advantage being that he was in cables as a Financial Director for a long time, so his expertise in that matter is excellent.

Well, I'm going to give the introduction, and Carlo will take care of figures, and I'll take care of the bit at the end as well.

So much for the introduction. Well, the first half year, as you've all been able to see, in many respects, it's been quite a nice year if you look at revenue. We've had a good half year with a nice increase in the revenue, there's a lot of volume and a lot of work, especially in Dredging for that matter. EBITDA, with various items included, EUR 136 million. Last year, that was EUR 167 million. The net profit is considerably lower if you will look at it like-for-like with adjustment for impairments we had last year, and that is caused by a number of items. We've got some EUR 100 million of contract provisions, which we've taken in the offshore section, especially for cables. We've got about EUR 42 million extraordinary income. And under all this, the solvency decreased a bit to 50.9%, but -- which is still strong. And we've also succeeded in these challenging market conditions to boost our order book a bit further.

Well, in order to tackle this straight away, it is quite an important development in the first half year, especially reflected in the figures. Now what happened in connection with offshore projects in decommissioning but also in cables, we've had to take some EUR 100 million of provisions mainly in cables, as I said. What's happened? Well, most of you attended the full year figure presentation, and you may remember something I said about the cable market. I used the term horrendous, horrific, always stating by the by that this was particularly applicable to the North Sea because it's strongly dependent on the area for which you do or do not receive any subsidies anymore. Until recently, customers had some EUR 0.15 per kilowatt income, and that's just gone back to some EUR 0.05 per kilowatt. Well, that has led to enormous pressure on clients for the profitability of projects. And although we have seen that development going on, I must confess that we were surprised by the speed at which this went. We did had a very critical view of this last year because we then saw that there was quite an accumulation of disputes in the offing. Why is that? Because well, many of those disputes in which we were involved were connected with being pushed into the winter for many projects, and of course, that is the worst season to carry out work in the North Sea.

Cables and the laying of cables usually takes place at the end of the total project of wind farms. Nowadays, we plan for 2 seasons where we used to start plan for 3 seasons. Well, all in all, that's usually a good fit, but in practice, we often see a lot of hurdles on the way.

Well, with cables, you're the last one involved, and you're confronted with that. So we had a number of works in 2018 that should have been completed before the winter but which were pushed gradually into the winter, which was caused mainly by the customers. Well, of course, you get situations then with discussions as to who is responsible for which days you can't work. We dwelt on that briefly. But in the second quarter, through all those different disputes, we said look out. We need to watch out not to count in our -- to our advantage too easily. And in the end, we said, work in cables, the building tradition was that various income flows were appreciated in the future and included proportionately.

Now at the end of half year, we said we want to reset that, so we reset it to the standard way in which Boskalis does it. We take losses as we see them, especially if you can predict them. And you only take claims and include them in your figures once you've got your -- the money in the bank. Well, it means that for various projects, you take into account the risks involved, and this has led to this major provision of EUR 100 million divided over some 7 projects. And we have not included any proceeds, of variations or received claims at all. We are confident that we will recover a substantial portion of those. What is substantial? Well, that would be dozens of millions. That's what we assume for now, based also on earlier claims, which we dealt with in the sector. However, we want to be cautious, and that is why in this appreciation for the half year, we have not taken that into account to be facing the second half of the year with some more kind of peace of mind. So that's had a big effect.

1/3 of the loss provisions is cash and 2/3 are noncash. So this means that prospectively, we had looked very carefully at the pipeline of the projects we are working on what we could expect on the basis of our experience so far. I'm really emphasizing that. Well, we have tried to be prudent in resetting the appreciation of all the work in progress that yields this effect. A question which was asked to me this morning as well, "Why -- how do you look at this activity? How do you look at the future?" Well, it's an important section for us. We earn good money with this 5 years, for 5 years with the same clients and organizations. It's not as if we've lost neck and we've lost our ability to know the ropes and deal with them. But I am comparing it a bit to what's going on in the infra section in the Netherlands. In the short term, we've faced a very much changed session in connection with the Ministry of Public Works and the way it approaches contracts. These public utility companies, too, is only a handful, and they show the same change. Well, we've got the 0 subsidy paying there, but don't underestimate the problems that many of these problems are contending with. In a broad sense, look at major investments or capital lending, et cetera. So the market has become tighter, more nervous, sharper. Of course, you can still remain active in such a market. It's not as if we are going to withdraw from cable laying activities, but it does mean we have to adjust our own attitude as well and look at it more with a dredging attitude.

And formally, the market was totally different. There were partnerships, and there was good -- there were good discussions with each other to solve conflicts, but that is no more for now. This morning, I said the gloves are off now. We have to take action ourselves. So the main things we did in management is replace sitting management by experienced management from the dredging environment that is more accustomed to dealing with such customers and that attitude. That's an important part of our explanation. But we definitely expect good things for cables in the short term. And otherwise, we do see a big difference between countries where there are still subsidies being granted and countries where there aren't. In Taiwan, there's also, as always, EUR 0.17 per kilowatt hour to be earned, so there are opportunities there. It also depends on the type of customers you come across. The market in Europe seems to be dominated by typical public utilities companies. You see commercial developers developing activities, especially in Taiwan. And those are parties that you can still work with in a more constructive manner and in partnerships. We do see a future for cables, but we are forced to be more selective and to become more assertive. That is the underlying message. So we've had a very critical review of our whole portfolio and tried to provide for things that we thought would be wise, especially in view of claims we still expect.

So much for the introduction. On to you, Carlo.

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Carlo van Noort, Royal Boskalis Westminster N.V. - CFO & Member of Management Board [3]

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Yes. Let me start with the revenues and the EBITDA per segment. Let me start with the revenues. As Peter indicated already, we've seen an increase during the first half year by comparison with 2018 for about 10%, EUR 100 million. As you see on the slide, this is mainly attributable to Dredging and Inland Infra in Europe, including Netherlands. The infrastructure activities have been more or less stable, and we've seen growth in the Middle East. We have major projects such as Duqm and the Singapore projects, et cetera. Offshore Energy now has been stable, by and large, equal to last year. On the underlying level, you see a decrease in services with obviously the divestment of a number of Dockwise ships last year. And contracting activities have seen a share of seabed intervention, for instance. And if you look at Nord Stream activities, we've seen a slight increase in the first half year where in comparison with 2018.

Then in terms of revenues, we've seen a sharp increase with Towage & Salvage, and revenues are nearly related to Towage because Salvage is part of the joint ventures and not taken into a couple of consideration. But Towage has seen some major emergency responses and wreck removal operations, which can be seen in the revenues.

Now we have the operating results, the EBIT results per segment. Dredging and Infra has been stable compared to the first half of 2018. And here, the Netherlands operations in Inland Infra have seen great contribution, including Dredging as well.

Then energy, I think the explanation has just been given. This includes the EUR 100 million in considerations -- provisions rather. And I want to add for my side that we've been very prudent in the assessments, and I think this reflects the prospective costs of projects. We've taken a very prudent outlook on the possible time delays of the projects. And we have taken provisions because if there are disappointments, we need to have the necessary buffers. So it would be very prudent in our pricing reflected in the amount of EUR 100 million.

Now Towage & Salvage. In terms of revenues but also in terms of EBIT, the first half year has been good in Salvage. And let me point out here something relevant, particularly comparing this year to 2018, which is the fact that the previous joint venture operations are nothing to stock. They were frozen, so to speak. They are not taken to stock in the results here, meaning that in the first -- second half year, you'll see a reduction in the Towage & Salvage activities. So that will -- there will be a continued line from the amounts you see here.

And then we have the holding expenses as the last item. I'll come back to this in a moment. But you see the extraordinary item, the EUR 42 million, and I mentioned several times before and also indicated and commented in the press release, these are amounts that will be commented upon on the following slides.

Now a few words about the order book. As Peter already said, we've seen a slight increase in the order book, which is reflected in the underlying segments. In Dredging and Offshore Energy, you see almost a similar amount with a slight increase. And the Dredging segment has seen some new works in Indonesia; Adelaide, Australia; and in The Netherlands, the N206 motorway is an over EUR 100 million project.

In Offshore Energy, we have a number of projects: Hornsea 2, which is a number of export cables that will be laid in 2020, '21; and London Array, a nice project. This is one of the first wind farms in the U.K., where we are conducting some repairs and replacement of cables currently. It's a wonderful project amounting to about EUR 80 million, making a fine contribution to the second half year.

Once again, you see a good earning model working with aging wind farms requiring replacements, and we have the necessary equipment to carry out such jobs. And that covers, by and large, the order book.

A few words now about Dredging and Inland Infrastructure. Let me focus on this. We've seen our revenue increase particularly from the Middle East and the Eastern Hemisphere, major project there. We've seen a healthy EBITDA level. And the results that were just given lead us to a slight increase in EBITDA. The order book is on track and nearly identical to 2018.

A few words now about utilization of our fleets. Hoppers have seen a slightly lower level than 2018 with 32 weeks. And we look at the industry average, something we can do with great precision at the moment, which is about 27 weeks. Some competitors have seen lower levels. Even so, 32 is pretty well as a utilization rate. And the cutters had some repairs here in the first week, which is -- or some hoppers, sorry, had repairs, so that's reflected. And then cutters, well, the Helios was used in Duqm in Oman, so they had almost full utilization, which is reflected in the average utilization rates of our cutters.

Offshore Energy now. As the revenues have been stable, EBITDA and operating profits don't need further explanation. I think it's clear how we have lost about EUR 100 million. And in the second half year, we see a further improvement in comparison to the first half year, including a number of wonderful projects that are already in the order book.

Let me mention Gardline and Horizon, 2 projects that are seasonal activities in Europe in the second half. And in the second half, we see a fair contribution from survey operations and also Horizon operations expected.

Towage & Salvage. As I already said, we've seen a wonderful year with Towage. We've had a number of major emergency response activities, both from 2018 and 2019. I think one example, one of the major projects in Salvage in 2019 was mentioned in the little clip, and the tanker salvage operation in the Strait of Hormuz made it to the news. So we've seen a strong year in Salvage. And as said before, now Kotug Smit and Saam Smit are no longer part of the equation. The figures have slightly changed.

The Holding & Eliminations. Well, we have some expenditures that are concentrated on the holding level, and that is an explanation why the expenses were higher than this year. And the EBITDA here includes the toward EUR 42 million book profit of the sale of Kotug Smit Towage.

Extraordinary items have been already explained several times, but let me once again point out what is important here. We've seen a EUR 42 million book profit on the divestment of Kotug Smit Towage. We've taken a prudent approach to the valuation or the assessment and that leads to a wonderful book profit, which has already been paid. After August, it has been divested, so the actual amount is in the bank. And we have sold the vessel pool in addition, which required some activities in the second quarter. And that means we have seen a positive book result as well. 2018 also saw the impairment charges that were reflected in the results.

Now a few words about the balance sheet. I think we have a wonderful balance sheet with a solvency of over 50%. Let me take you through the items briefly. Property, plant and equipment, this is the write-down level, which is equal to the investments, the capital expenditure. Then we have intangible and other fixed assets. IFRS 16 has led to us a change. We have about EUR 90 million in assets under use, according to IFRS, and this also covers the credit side where you find them reflected in the provisions and long-term liabilities. You have an increase here of EUR 70 million under IFRS 16, and you have EUR 20 million that you find under current liabilities.

Then the third line, associated companies, this includes assets held for sales, so that's about EUR 270 million. This is Kotug Smit and Saam. And once again, Kotug Smit has now been paid for, and Saam is expected to be closed in the coming months of this -- in a decent way, orderly receiving the money in the bank.

And that brings us to the working capital. In brief, current assets and current liabilities, if you add both up, you see that we have seen a worsening of the working capital in comparison to the situation by the 31st of December. And if you compare it to the first half year of 2018, the amount is nearly unchanged. Well, you have a seasonal impact as usual but also a number of projects, which in Q2 were closed. A number of dredging projects, for instance, where we worked full production and where the proceeds came in, in mid-August. And we've looked into this and the level of projects in the second half of the year, and we expect to see a great improvement towards the working capital position that we have by the end of 2018. And this can be deducted from the 18 to 20 leading projects. And the breakdown should show normalization by the end of the year. And the net debt has increased, including a number of other factors, I will come back to in a moment. And once again, we think that Harbour Towage activities that were divested and the EUR 270 million that come in lead to the improvement of the working capital. And I think you can come to a calculation that towards the end of the year, that amount will go down considerably.

Capital expenditure now. EUR 113 million, Peter will come back to this in the outlook on the investment plans. Well, there's a timing effect here, as usual. When exactly some payment, for instance, for vessels actually hit the account, that will be reflected upon in a moment.

Cash flow. I think a very clear message here. Based on the results as reported, including the write-down and amortization, I think we come to this amount of EUR 128 million.

Then a few more words about cash flow. Something we see is the following. Our net debt increases by about EUR 290 million, as you see at the bottom of the line. Well, we have slightly lower results that's reflected here. But the major factor is the acquisition with BoDo and Horizon, about EUR 90 million. Then we have capital expenditure, this is a net amount because we have also divested some items. And then we have the cash dividend that's incorporated, so EUR 0.50 per share. And then we have EUR 11 million from the share buyback program. This is also reflected in the figures. Meaning that this adds up in the second -- first half of the year. But you'll see the EUR 270 million landing in the bank from the divestment of the Harbour Towage activities. So we think that the almost total of this amount will be reversed, will be brought to a significantly different level. We can break down this in detail, and obviously, there may be some prefinancing requirements for new projects or similar efforts. But we see the high level by the end of June, meaning that a number of projects were carried out on the full steam, and therefore, revenues will come in during the second half of the year. I think that covers what I wanted to say about cash flow.

Now for the record, a few words about IFRS 16. I think the impact of 2 IFRS 2016 on our balance sheet is limited. We have it in EUR 90 million, I mentioned before. That affects the balance sheet. EBITDA, well, it's EUR 11 million per half year. So that shows us also the amount for the full year and the effects in net profits for the full year by EUR 0.4 million. And that covers my contribution.

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Peter A. M. Berdowski, Royal Boskalis Westminster N.V. - Chairman of Management Board & CEO [4]

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Thank you. Well, it may be useful to dwell for some moments on what I have called portfolio repositioning. We made some steps in the past year, and we're further focusing our company towards Dredging, Offshore Energy, Harbour Towage. For starters, well, as we announced last year, we are going to leave Kotug Smit and Saam Smit. If you should have that question, what do we want to do with Keppel Smit? Well, those are port or Harbour Towage activities. In the end, we will divest those as well. So gradually, you can expect us, but we will do so in good consultation with partners. We shall draw back from that -- withdraw from that.

Well, when looking at your reports, which I'm always interested in reading, you can see that our evaluation of this division is included rather in a diverse manner. Some of you are more positive. Others think the evaluation is equal to that of Smit 10 years ago. So we all have our own particularities and idiosyncrasies in that respect. We -- to give you some more context on: a, what do we have; b, what is market value as we realized it at this moment. That's the ultimate test for market value.

Starting with Kotug Smit. What have we done in the past half year? That's a revenue of some EUR 66 million and EBITDA of some EUR 14 million and a net result of EUR 0.1 million. You can multiply that by 2 for the year. Then you talk about EUR 200,000. We have agreed that we will pay out, distribute 50% of that for dividend, so that's EUR 50,000 for each of the partners' cash.

So how much capital is there included and what will we get from it? On a cash basis, this is a no-brainer for you. It's different of course if you fully own the cash flow, then your view is totally different. But that's the problem when you are in a joint venture. You don't have the ownership. And for that reason, we cannot keep consolidating. The net result will appear in our EBITDA, so whether we take 5 or 6x EBITDA, the valuation, the appreciation is about EUR 500,000 to EUR 600,000 in the total value of Boskalis. That's your point of departure then. We sold it to slightly higher price. The enterprise value is EUR 300 million. Of course, there is a debt included, which we have to deduct. But in the end, this resulted in EUR 94 million cash for an activity that was in the appreciation of purely EBITDA related valuation of the total company.

This also gives you some indication of the value of companies like this outside, about 10x EBITDA. That's not exceptional. Of course, we did our houseware hub homework properly. Where are we? Where about are we in the market? Is it 6-some? Or is it 7x, as some assume? Well, that is in connection with those activities. We thank your colleagues, too. These are cash-generating activities. We've been approached by people who thought this -- a kind of bond, too. I like that creativity on the part of the buyer. We sold this to a family-owned business who -- which had trouble financing. But in the end, they did that very decently and transferred the money to us, EUR 300 million, the week afterwards. So that gives you some idea of the market value for these kinds of activities at the moment.

We wait for the approval of competition in Mexico and Brazil, but that takes some time as we now know. We expect those approvals to come in, in the third quarter. Here, you see a revenue of that half year, $95 million. Watch out. It doesn't make any difference for the multiples. An EBITDA of some $34 million. And there, you see a net result of some $8.4 million. Well, here, too, on an annual basis, for easy calculations, half of this can be distributed as dividend. That's about EUR 400 million -- EUR 4 million -- sorry. So according to the same calculations, you would expect some EUR 50 million to EUR 60 million worth. That's the multiple of the EBITDA for Boskalis. While then, suddenly, it turns out to be worth more, $560 million. That's for 100% with a multiple of 8.5x. So I'm indicating in your perception, it's in the EBITDA, so we are including it. Well, the underlying EBITDA is lacking there.

And the second thing is multiples at which we sell are considerably higher than the multiples applicable to Boskalis at this moment. Well, cash, we will receive some $200 million, and the book profit of EUR 42 million is totally connected with currency gains that we have made in the track since the takeover of Smit some 10 years ago. At that time, we bought at a relatively cheap dollar, and we're selling at a relatively expensive dollar. But the underlying items, you can feel this coming. So what will be left at the end of the line? First half year, excluding Smit, Saam and Kotug Smit, well, you're still talking about calculating everything back into euros on a half year basis. It's about EUR 170 million revenue and EUR 60 million EBITDA. That's just the 100%. Translating that to the whole year and then taking half, then I'm saying that we're talking about EUR 60 million EBITDA that we are generating there. Now if I simply take -- use a multiple of 9, you talk about a value of some EUR 540 million. For us, that is half of the EUR 1,080 million I would count. And the net debt half of EUR 150 million. So for us, if we were to sell this in the present market, there would be some EUR 400 million value incorporated.

But how do I see that coming back in the EBITDA? You see a net result of EUR 13 million. And in the whole year, I can assume that as well. And that is appreciated at 5x EUR 13 million, which is EUR 45 million. So that is a value in the market at EUR 400 million versus a market value according to most analysts of about EUR 45 million. That's a value, an underlying value of the share between EUR 2.5 to EUR 3 per share. So that is quite substantial. I'm simply telling you this. It's not as if I wanted to do your work. But on the basis of the sales that we've concluded recently, it's become clear to us what the real value of this is. Of course, the underlying reason for doing so was clear. There's a lot of hidden value in these joint ventures, which are not -- which is not expressed in the appreciation of the share. It's simply a fact that this value is not reflected in our share price. I could say a lot more about this, but it's not happening. Of course, that does give us pause for thought.

Why have we sold the Harbour Towage activities? They're not core, but they are worth more than in the eyes of our shareholders. And it's not as if our shareholders have a wrong view, but that's simply the way it is, but it does make us think. It does give us food for thought. You should realize that there is still a lot of hidden value in this division, which is lagging behind, and this is where we shall look very critically to see whether that value will come out sufficiently in our constellation as it is for your information.

Well, Horizon, we took 62% share after a lot of pushing and negotiating. It's good to know that at this moment, it's still incorporated as a joint venture in the books, so it's not fully integrated in spite of the majority. This is to do with the control position as it is at present. Together with the remaining shareholder, we've -- we are discussing this. We don't want to pay too much because people think they have a kind of controlling. We want the controlling value in the company, but we have started our first steps and the aim is to get full control towards next year. If that succeeds, it's not certain but we are aiming for that, this means that next year, we shall consolidate 100%. And then you are talking about a revenue of EUR 100-plus million, and an EBITDA margin around 18 at this moment, which is not reflected in the EBITDA figures as they are now.

Well, so much for a background to these joint ventures. Finally, the outlook, and then, of course, we'll get to questions. Dredging shows reasonably stable volumes. We expect Dredging to keep doing so. There's a lot of work over the market, especially in the Middle East and Southeast Asia. We shall be involved in that quite a lot. Of course, the unpredictability of countries is an issue, but I'm reasonably optimistic about projects coming up there.

Offshore Energy then. Well, the second half for contracting will be better than the first half, which is not a big task if you first make a loss provision of EUR 100 million. I got an intelligent question for that. How is it possible that you saw such a quick recovery within the offshore division so soon in the second half of the year?

Services. Well, they are stable both for transport and for subsea. And in survey, we see a further growth also under the influence, of course, of Horizon.

Towage. As stated, Saam Smit will be completed in the third quarter, and the rest of the business is reasonably stable. Keppel Smit will be tackled later on. As soon as we have more news, we'll tell you. Salvage will have a strong full year. It's got a very sound foundation so far. Well, the earnings guidance are at -- is at EBITDA level. As we said, we expect a reasonably stable, somewhere around EUR 450 million. And of course, there will be purists among you who will ask whether it's between EUR 350 million. And yes, I said stable. I saw you're startled, Martijn. Well, EUR 350 million. And then there are those that say, well, that is either EUR 349 million or EUR 351 million. Well, we are not taking such small cuts in our business. It's stable around EUR 350 million, give or take EUR 10 million or EUR 20 million. But that is what we are talking about.

Well, CapEx as stated before, we've had a relatively calm half -- first half year, but that's the deal with the installments of payments. The Krios, a new cutter, is entirely on track. We have not had any delays due to the problems in connection with IRC with the refinancing for the next 2 years. That is -- will be solved, by the way. In addition, we've, of course, acquired the necessary equipment for cables, plow and trencher. Expectation is that will end up somewhere around EUR 250 million. Half of that has been -- is now a commitment. We -- well, we will keep monitoring this almost on a weekly basis. What do we and what do we not want to have? Of course, we're always on the lookout for opportunities that present themselves because vessels are up for sale from companies that have ended in dire straits. So that is the outlook. And of course, now we have room for questions.

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Questions and Answers

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Unidentified Company Representative, [1]

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If there are any questions, please now, yes?

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Henk Veerman, Kempen & Co. N.V., Research Division - Research Analyst [2]

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Henk Veerman from Kempen & Co. I have 2 questions about Towage. First of all, you mentioned the first pricing competition. Can you elaborate on the precise nature?

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Peter A. M. Berdowski, Royal Boskalis Westminster N.V. - Chairman of Management Board & CEO [3]

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What do you mean? I thought for a moment, we had -- we'll go doing a postmortem. It is cables, yes, okay.

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Henk Veerman, Kempen & Co. N.V., Research Division - Research Analyst [4]

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Yes, cables. Can you give some background on the pricing levels for U.S. contracts in the markets in comparison to 1 year ago? And the second question, during the last CMD, the strategy update you mentioned a strong position you have in the submarkets given the high market share that you have and also given the materials. So what is left of that in the current market? And how this has affect the offshore strategy in wind and others?

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Peter A. M. Berdowski, Royal Boskalis Westminster N.V. - Chairman of Management Board & CEO [5]

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Well, I think the margins -- look, you always make precalculations, no post calculations. In the past 2 years, under the pressure of competition, we've seen that -- well, formally, you had margins of 15% to 20%. You now have the more within the range of 10% to 15%. So in that sense, there is price pressure, definitely. But you are still talking about healthy margins on paper anyway.

Having said that, you need to ask to what extent are the risk factors that present themselves? How far have you included those in the costs? That's from a precalculation perspective. Our position in that market is still very strong. And of course, we need to distinguish between the North Sea and the rest of the world's waters. We're still the market leader. Of course, you have to distinguish between cable producers that are in export cables and into connectors. They don't invite us to lay those cables. But in Cathay, we are the fixed partner to lay his cables like that. That's an important part of the job, and it's important to tell you that, that is not the part of the work where we have the majority of our problems. Most of those problems are connected with array cables rather than export cables. Export cables in logistics are much more straightforward, and you are much less dependent on the progress in the farm itself. That's the big difference.

In that sense, to export cables are anyway an interesting sport for us to go in for. We are an important partner for Cathay. There's an east wind project in Germany. Many -- involving many hundred millions. That's a typical example of an export cable project where you have an interesting position for the customer. With array cables, you've got much many more providers because you are not fixed on a few producers of the cables. And often, you can choose the cables yourself. So there you are, the main contractor, in connection with the cable whereas for export cables, that's often the reverse. And in Cathay is the main contractor, and then we are the subcontractor there. Of course, we work in partnership as well, but they are more in the lead there because the fulcrum of the investment is in the cable. For array cables, that is different. There we can make our own choice, but there are many more parties appearing in the picture. You've got the new -- you've got the Nord, well, which kind of seems an offshore. That is with Subsea 7 nowadays. And there is Deep Ocean. Of course, it is withdrawing, as I understand. So you've got more players in the market, more capacity and fiercer competition. And again, most of the problems we have is actually all problems are in the array cables and not in the export cables.

So looking ahead, we are also critically reviewing the array cable projects that we want to be involved in. And we ask ourselves whether we see a risk profile that is sufficiently sound. Our strategy for being in cables is unchanged. We are still aiming for that. We also invest in specialist burial tools, in that connection. So we want to hang on to that position. But as I said, we'll have to be more selective and assertive.

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Henk Veerman, Kempen & Co. N.V., Research Division - Research Analyst [6]

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And the provision is noncash for 2/3? In offshore wind, that's about EUR 65 million. Can we expect the level of activities going forward to remain stable or even to decreased given the fact that you become or will become more selective in tendering on projects?

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Peter A. M. Berdowski, Royal Boskalis Westminster N.V. - Chairman of Management Board & CEO [7]

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Well, I'm always saying people are very proud of an increase in the order portfolio internally, too. I say, well, an order portfolio is an order book, is a tool, a means to achieve something. That's the bottom line. So you have to be wary of only looking at top line. By analogy, with the infrastructure, Carlo was there for a long time in the Netherlands. In the Netherlands, EUR 450 million revenue is beautiful and to get some more relaxation there, you are also say, "Well, this year, we did EUR 600 million. And next year, it will be EUR 700 million. Our ambition is to go EUR 1 billion infrastructure." I say, well, you can assume that we have that EUR 1 billion within 3 months on an annual basis, but that's not the real challenge. The real challenge is finding a good equilibrium between projects that cover your fixed charges and that's also connected, of course, with how many fixed workforce do I want and what's the fixed structure. If you got 12 orders, you need to work until half of December to get out of your cost section. So the choices you make there are very decisive, too. I am not saying as if we have to hang on to this revenue level. We have to realize reasonable margins. And if that means half-ing your revenue, that wouldn't keep me awake. Any margin I can make is a profit even if it's EUR 100 million. Of course, there is an equilibrium in capacities. We don't have very expensive vessels. We have 3 cable-laying vessels. That is not the world in costs involved book value of EUR 70 million to EUR 80 million. So in that sense, we are not compelled to do this. There is simply scope to be selective, but we also have to master the discipline in our company to do so. And I think we may have moved on too much due to the enthusiasm of management there to go for volume. If we lay more cables, we'll be even more efficient. But at the certain moment, there is no more returning because your portfolio may be too much filled and you are delaying the completion of projects. So I think part of the solution is in reducing the turnover and not the growing the (inaudible)

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Henk Veerman, Kempen & Co. N.V., Research Division - Research Analyst [8]

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Now question about the Dockwise fleet. The high-end philosophy is clear. Can you be clear about the level of discussions about the future agenda on the way you book slots for instance, in terms of timing?

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Peter A. M. Berdowski, Royal Boskalis Westminster N.V. - Chairman of Management Board & CEO [9]

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Well, I can color that a bit for you. In 2019, we have -- we started with an almost empty portfolio. And for 2020, we see a lot more filling of that portfolio. And for '21, '22, substantially more so. So that is quite a big difference with this year to call the Vanguard, for one. Of course, we had the lower utilization of Harbour Towage ships, but that was also due to the first half year. Second half year was reasonable but not of the level we like. Next year, if I'm not mistaken, it will be full and the year after, too. I'm not saying it's already fully booked. I don't want to scare off any potential customers, but it's quite a different view from the way we looked at this 1 year ago. So especially in HMT, we see a lot more going on in the market. And for the first time, we see customers who start to worry and notify you at an early stage. And what about closing in 2022 because that's as far as the Horizon goes. So we are more positive in that respect than a year ago.

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Henk Veerman, Kempen & Co. N.V., Research Division - Research Analyst [10]

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And then last question about the 7.9 EBIT margin in Dredging, and I saw a small note at the end of the press release.

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Peter A. M. Berdowski, Royal Boskalis Westminster N.V. - Chairman of Management Board & CEO [11]

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8 to 10 still.

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Henk Veerman, Kempen & Co. N.V., Research Division - Research Analyst [12]

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And can we expect the margin to be comparable this year to the level of last year?

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Peter A. M. Berdowski, Royal Boskalis Westminster N.V. - Chairman of Management Board & CEO [13]

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You can expect anything. Expectations are free. I'm not giving you any guidance there. Expectations, cherish them as much as you like.

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Luuk Van Beek, Banque Degroof Petercam S.A., Research Division - Analyst [14]

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Luuk Van Beek of Degroof Petercam. A question about guidance. If you look at the first half year without EUR 100 million and the book profit, I end up with an EBITDA of EUR 490 million. And for the second half in order to come to the guidance, including the book, you need EUR 132 million, so that's EUR 220 million less. But if I look at the market environment and other factors, then it should be in the same order of magnitude in my view. Does this mean that you have some reserves left?

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Peter A. M. Berdowski, Royal Boskalis Westminster N.V. - Chairman of Management Board & CEO [15]

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If your question is do you think the guidance is different from the one I give you an hour ago, well, I can tell you we have not reached any new insights since then. The guidance is EUR 350 million. And all the underlying calculations, well, that's your job to do those.

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Luuk Van Beek, Banque Degroof Petercam S.A., Research Division - Analyst [16]

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Are there any specific factors that may lead to the expectation for the second half be weaker than the first half?

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Peter A. M. Berdowski, Royal Boskalis Westminster N.V. - Chairman of Management Board & CEO [17]

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I'm not making any statements to that effect. The only thing I can say, you can do your additions in different ways. I hear what you're saying. I'm not going to speculate on all sorts of components and EBITDA. The guidance is what it is. At this moment, we maintained our statement we made during the presentation with the view full year figures, around EUR 350 million, yes.

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Luuk Van Beek, Banque Degroof Petercam S.A., Research Division - Analyst [18]

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Okay. And now about Dockwise. The order book for the coming years is filling up now. We see also investment decisions following in the oil and gas sector. Do you see other oil and gas-related activities showing some promises of increase in work volumes or work amounts?

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Peter A. M. Berdowski, Royal Boskalis Westminster N.V. - Chairman of Management Board & CEO [19]

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Well, of course, it's a bit dictated by the order of the cycle. We see some recovery there, but I would like to add straightaway that we don't expect to go back to 2014, 2015. Those were really peak years. So I don't expect such recovery, but we do see concrete signs of recovery. So they will be an example in kind. Both Gardline, but Horizon, too, in the Middle East. Of course, Gardline has been impacted, too. But Horizon is only oil and gas. And there we see a very good levels of work and nice price levels, too. The next one would be around pipeline interventions where we are completing Nord Stream now. There, too, we see lots of requests, lots of applications for tenders, lots of them in the Middle East. We've scored a beautiful project in Australia, Scarborough. We're quite chuffed with that. But there, too, you have the necessary activity. Dockwise is often a bit later. It's also filling up nicely. Looking at the number of tenders we submit for transport positioning in connection with FPSO, there's a lot of activity going on in the same angle you've got floating wind much more. I always thought can that be made profitable, but you do see quite a number of projects there. And there, within marine salvages, we're in a very good position. So across-the-board, you see that there's an increase in activities, particularly further down in time.

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Unidentified Analyst, [20]

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I have a question by Offshore Energy. You had a framework analysis with Aramco. There has been less news about this recently. Do you have any projects that may pop up in the near future in this light?

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Peter A. M. Berdowski, Royal Boskalis Westminster N.V. - Chairman of Management Board & CEO [21]

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Well, it has quieted down a bit for us but not at McDermott. There are a few parties which are enthusiastically taking part there with price levels that we consider totally unsound. And we were saying it's very nice to have that position. I've had that position for 7 years, so I can move along. There are various parties fighting with each other to tender for jobs at idiotic price levels. Well, they may be more experienced and they may have gone through a different learning curves, but those are levels that we can't touch. I'm not talking about 3%, but 10% or 20%. They don't -- you need to think about -- you don't need to think about. That's an advantage we keep tendering. We make a -- do our calculations. We look at the working methods involved, but we're still orienting ourselves and we're still learning. And I have no intention whatsoever that I have to score there to do something for a Saudi Aramco, for instance. Saudi Aramco is one of the most difficult customers to do business within the world. We worked for them a lot in connection with dredging. You have to make sure you've got a reasonable margin to have sufficient outlook for profit at the end of the day. So we are critically selective, and we are looking very, very closely at price levels, both on the costs and on the sales side. And given the prices at present, they can to be matched, but we don't want to match them. Whether those prices will make other parties happy, well, there are lots of discussions you may have heard about the figures of McDermott. The future will tell.

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Unidentified Analyst, [22]

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And then a second recurrent question, if you can give us an overview of the Dredging market and your view of the developments there?

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Peter A. M. Berdowski, Royal Boskalis Westminster N.V. - Chairman of Management Board & CEO [23]

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A brief survey. Well, in general, I think it's safe to say that we see the gravity of that, mainly in the Middle East and Southeast Asia starting there, perhaps Singapore. A number of you have visited that project or several. Duqm is progressing nicely. We are on track. And the polder there is also important. And President, earlier this week, held a State of the Union about the future of Singapore, and he indicated that the threat of sea-level rise is very much at the back of his mind. So you will have -- more will have to done in connection with the protection of Singapore, and he's announced the plan to invest about 100 billion in the coastal protection of Singapore by means of laying out polder islands, and in connection with the first polder that we're involved in. He said, "Well, don't be afraid. Don't think it is possible because in Holland, they're doing this all the time." And we are working with a Dutch party to work -- to elaborate this in Singapore, 100 billion, but of course, over a period of 100 years. But well, that could still be a nice volume if you break that down on a year basis. Well, of course, we'll see whether the trends change. But the climate change, of course, provides opportunities for Boskalis, definitely.

Well, you talk about mitigating measures. We are in the corner where we can really make substantial contributions. And there are areas in the world where people are forced to be much more concretely worried about this than we are, and Singapore is an example of that. So for the short -- long term, that's interesting. For the short term, we've got Tuas base in Singapore. The tender will probably be presented this year. That's about SGD 1.5 billion. A lot of it is civil engineering, but a part of it is dredging-related, and that is an interesting and substantial job.

Now Indonesia, there's been a lot of hullabaloo around the reelections, but it seems as if the dust has been laid now. Fluid was stopped for a long time, and we are carefully talking about restarting that. The first permits for the other islands in Jakarta be -- seem to be coming on now. So we are carefully thinking about restarting our work in Indonesia. We've got Makassar and Lotte, which we have contracted for early in 2020. Those projects will start to tangle LNG port of BP. We're going to do a test with the WID. That would be a nice job of 2 years for BP there by Semarang. We are reclaiming a dike bodies. There's about 10 million cubic meters, but there could be more than 50 million.

In Bali, there's a long discussion about extending the runway of the airport. And we are -- that's seriously ongoing now, too.

So Singapore and Indonesia are 2 important markets. There are other 2 important markets. The Philippines is one, connect developments around Manila Bay. One of the first trips I made was towards the President of the Philippines to talk about Manila Bay developments. Now we are 22 years on from that. It seems as if something is happening now. [Pasay Pine Narra] has been running longer. That's a private development for real estate in the Bay. I think we are -- they're talking to a serious party there, but you do have the play of permits. We know obtaining permits is difficult not only in winning extracting the sand but also in reclamation. So it seems as if permits were going to be completed somewhere this week, and then the customer could start awarding the work. Of course, the question is which of the 5 would that be? I'm not going to speculate which, whether we are going to be the lucky one or one of the others. It's a very substantial work, which is good for the industry because that would be a utilization of 2 to 3 jumbo trailers for 2 to 3 years. So that is a quite a welcome item, of course. In the Philippines, too, in the same Bay, there's an airport in San Miguel, well-known brewer, big family with a lot of money, and they've obtained the concession for the airport. And at present, they are exploring the market to see whether that airport can really be laid out. The financing has not been finalized yet in connection, of course, with what it should cost, but that is the start of an interesting project.

In Thailand, there are 2 big port developments, both involving someone who has 200 million. Laem Chabang, challenging cutter work, 2 to -- 1 to 2 years cutter utilization. Map Ta Phut, harbor development, 1 year for a cutter, interesting activities there. And as regards financing, those have -- are now -- have been round up and seem to be in the market within 1 to 2 years.

In India, you've got various harbor developments, some of them public and some of them private. It takes a long time, but there are things going on.

Well, in Adelaide, we contracted for either for Scarborough, Port of Melbourne, we'll have a follow-up work. And also, we see in Perth, there's a lot of offshore engineering company starting up again and that is in anticipation of what we mentioned earlier on. There seems to be some gradual recovery.

In the Middle East, the second important region. In Oman, for Duqm, we expect an expansion by some of the harbor, partly for the Navy, partly multiport. This is induced by the desire of the English and also American Navy to have a harbor outside the Gulf region. Well, in view of recent developments, that's quite understandable because you are a bit of a target in the Straits of Hormuz. They want to harbor at the other side, too. And Oman has taken up the challenge and is going to facilitate that. It would be an interesting job, and we are well positioned for it. There will be tenders, but we are a sitting contractor so there is that on to our advantage.

Well, those barriers in Czech work. They don't have the equipment they need, so we are talking to Czech to take our part of the work, too. Access channel has been going on for a bit longer, but it's still serious. It'll take some time before it's going on.

Qatar, a second base project like the one we did before. There's a lot of cutter work in new port. In Bahrain, we've just contracted for Manama, and there's follow-up activities involved as well.

The second crossing to Saudi is being discussed as well. Abu Dhabi, there's a lot of oil and gas-related projects also for dredging because selections made for artificial islands. Island Ras Al also for petrochemical industry, it's been awarded to the local player, but he does not have the equipment to do so, so there are opportunities for some subcontracting for us. And there are always new islands on the market to be reclaimed, and there are various crossings involved needed for those islands.

Iraq, finally, special, very special country, special conditions. We hope that together with Smit Lamnalco, we can win the extension of the tunnel contract. In the next few months, we'll make that clear. The Al Fao harbor, with there, we are working together with the Chinese. Major, major development. The decision-making took very long because of the new government that had to be installed first. It seems to be in place now, so we hope that we'll start moving now, too. And we are involved in the logistic island in the river there. We hope to be awarded a contract for a prephase for the engineering work. In the end, that could be some EUR 250 million as a sequel to the preliminary phase.

In Africa and Europe and in the West, of course, there are various developments. In Europe, there's a talk of the Romanian beaches. The first contracts will be awarded. We hope that they will be awarded to us and that Phase 2 will also be put out on the market. So you are talking about several hundred millions. If the beach suppletion activities are finally contracted for, that's a total of EUR 250 million. Russian Arctic LNG is an important project there. And I think that we then have mentioned the main highlights.

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Tijs Hollestelle, ING Groep N.V., Research Division - Research Analyst [24]

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Tijs Hollestelle from ING. I want to go back to the cable laying. Your competitors, essentially in terms of outlook and the outlook we find in the annual report of the listed and non-listed companies, basically reflect your position on the Dredging market on development of oil and gas, but they remain enthusiastic in their approach of offshore wind also in terms of volume. Now I don't want to nag you, but your description of the developments in the markets is logical with the subseas disappearing. Have you heard of other companies running into such problems? Because from my understanding of Boskalis, we hope for -- to see other contractors suffering as well. Don't give me any names.

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Peter A. M. Berdowski, Royal Boskalis Westminster N.V. - Chairman of Management Board & CEO [25]

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Well, I don't know whether you have seen the reports on subsea and subseas, but that made it very explicit that there is more competition. Seaway Heavy Lift, for a year now, they are now full -- whole owner of that. In its half year report, it says very explicitly that the wind market has changed drastically, that's one. I also speak to 3 colleagues regularly, more often. None of those 3 colleagues tells me anything to the sound of, "Wow! The wind is doing great." But we're all struggling with the same circumstances. Subsidies are gone now and clients' attitudes have changed drastically, not to say dramatically. And we are not alone in this. We all have our pains to contend with, and we all select our own if decide on our own approach. And if like some Belgian colleague, you are still burdened by concessions from the past with subsidy levels above EUR 0.20 and you still share in the proceeds of such a concession, you may still have an income flow of EUR 25 million to EUR 30 million, which will keep dripping on for 2, 3 years. That compensates for a lot of grief that you have to shoulder apart from that. But talking about the project also from our Belgian colleagues under contracted for under the new regime and the challenges facing them there, well, whether it's Pieter van Oord or Luke [Vanderbilt] or [Yuppy]. We all have the same observation there. This -- within a very short period of time, that has become a very daunting market, and it's become extremely difficult to earn a decent living on that market. That's why I put it in a broader context for you earlier on. In this way, at the end of the day, you won't have a profitable market left, and you will have a problem carrying out projects on this scale and keeping developing projects like these. You have to distinguish between areas where there are 0 subsidies and others where there are still EUR 0.15, EUR 0.16, EUR 0.17 per kilowatt hour of subsidies. So that's quite a difference for you. I don't hear any enthusiastic stories from colleagues. But it's up to everyone to present it as they see fit to the world outside. We select a more level-minded -- level-headed approach, and we simply call a spade, a spade. And face the problems when we see them, and we don't want to drag them along for 3 years because we solved them.

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Tijs Hollestelle, ING Groep N.V., Research Division - Research Analyst [26]

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Clear. And then a follow-up question, for us, it's always difficult.

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Peter A. M. Berdowski, Royal Boskalis Westminster N.V. - Chairman of Management Board & CEO [27]

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It's much easier for me.

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Tijs Hollestelle, ING Groep N.V., Research Division - Research Analyst [28]

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Well, you have some more insight on what's happening. But the way I see it now in cable laying, some projects have nearly been completed. You mentioned some projects that were in full execution throughout winter season, but you're starting up some new projects as well. And under IFRS, you can't really give an outlook or becoming prudent before the project has been started because you base yourself on assumptions.

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Peter A. M. Berdowski, Royal Boskalis Westminster N.V. - Chairman of Management Board & CEO [29]

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But I can give you an example. If we, for TenneT Borssele Alpha, the first cable. If we have certain problems with that in the setting, the customer, too. Borssele Beta is almost a copy of the whole exercise. I can say, well, definitely, we'll try have learned now. Also through the winter and everything I've experienced, I'm going to assume cautiously that the second cable will present the same financial picture, roughly speaking. I said this, prudence involved, of course. You can trust me to discuss this very thoroughly with our accountant. And Carlo himself has also reviewed this very, very critically and meticulously. But the learning effect of one project from the other and translating that to a comparable setting with a comparable customer, well, that involves some prudence. And what we have not done and we want to steer clear of that to create some kind of special kitty, a contingency fund to help us through the winter if things turned out poorly. We have really looked at on a project basis at the places where there are problems, current problems, problems to be of expected. And we honestly said, all things being equal, that would have to -- that would lead to this cost level, possibly to that loss. But we have not taken into account any setoffs in that respect. But that is, by analogy, what the Dredging.

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Tijs Hollestelle, ING Groep N.V., Research Division - Research Analyst [30]

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Yes, and that is your reputations. So therefore, the logical conclusion would be a 0 margin in revenue so there would be a 0 effect. And in the long term, having your documentation in order and having income to the claims, then this result is feasible. That's the way to understand it.

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Peter A. M. Berdowski, Royal Boskalis Westminster N.V. - Chairman of Management Board & CEO [31]

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It will become clear at a certain moment.

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Tijs Hollestelle, ING Groep N.V., Research Division - Research Analyst [32]

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And therefore, the risk of projects that are started is limited because you've already applied this view?

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Peter A. M. Berdowski, Royal Boskalis Westminster N.V. - Chairman of Management Board & CEO [33]

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That's been a very conscious choice. I could also have decided on another approach. Let's try and see how it works out. Let's just tentatively keep doing what we were doing. That would have been a different number. But when closing the year, we will be shilly-shallying again. Well, especially when you take a provision for claims, my experience is that your negotiating position is undermined. Time must be our friend, not our enemy. We should not conclude claim positions at an accelerated pace because we have to provide for something in our figures.

So now we simply steer a very prudent cause. I feel relaxed about all the claims. I'll -- it may take me 2 years to drag it away before hell breaks loose. But I don't want to be stressed in such a project.

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Tijs Hollestelle, ING Groep N.V., Research Division - Research Analyst [34]

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That's clear. There was a question a moment ago about the provisions. This -- is part of this reflected in the working capital positions on the balance sheet?

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Peter A. M. Berdowski, Royal Boskalis Westminster N.V. - Chairman of Management Board & CEO [35]

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Yes, part of that is in the working capital.

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Tijs Hollestelle, ING Groep N.V., Research Division - Research Analyst [36]

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Or do you define it as a provision? Or is it rather work in progress?

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Peter A. M. Berdowski, Royal Boskalis Westminster N.V. - Chairman of Management Board & CEO [37]

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Well, in the work valuation, there's also work involving loss. Well, that's also included, to a certain extent, cash definite.

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Thijs Berkelder, ABN AMRO Bank N.V., Research Division - Equity Research Analyst [38]

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Thijs Burkholder from ABN AMRO. I have a question about decommissioning. You also took a provision for that. Can you tell me what the reasons were? And can you share our vision on the decommissioning market in general?

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Peter A. M. Berdowski, Royal Boskalis Westminster N.V. - Chairman of Management Board & CEO [39]

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Well, decommissioning is a totally different story from cables. These are works that we contracted for 4 years ago with the old Smit organization, as it was then. According to the philosophy of Smit Salvage, how difficult can it be to decommission a platform? You go there with sheerleg. You use a torch cutter, you pull it off, and Bob's your uncle. Well, that's how we have to do it at Salvage, also when pressed for time. But in the past 4 years, we've learned that, that is not a vision that you can simply apply it to decommissioning, especially not on the North Sea with very critical customers but also very critical authorities. Decommissioning is reversed commissioning, decommissioning. So there's a great deal of red tape to be cut through before you reach the moment when the torch cutter can actually be fired up and you can do the lift. So firstly, do not underestimate what the preliminary activities involved be with the Salvage approach. We've said, well, normally, we do this with sheerlegs and that works fine, and then we wait for better, better wind there. We only -- and then we lift it up. I only need 2 days, then I'll have it lifted. But there -- it's not as coarse as all that. In the end, your whole overhead organization, walk to work vessels, crew boat vessels, subcontractors who have to be ready. That window has to be much broader in your costs so that when you can actually start your activities, you are actually on site. That is something you cannot underestimate gradually, we've had on the conclusion we can't do this with sheerlegs. We need to wait until we've got the Bokalift 1, which we did. And as soon as we have the Bokalift 1, we have to work with that vessel because that vessel is weatherproof in such projects. And planning is easier, the planning of your windows. Of course, there's a different price involved. It's not a sheerlegs. I do see that as a learning process, a costly one, but that's connected with doing business and contracting for jobs.

Well, in those 4 years, we've learned very well to see what can we, what can't we do, what kind of vessels do you need, what can your partners do? We started last weekend. We did the first lift, well, without a hitch. Tomorrow, the second lift will be done. So on 1 trip, we can have 3 platforms, 2 big ones, 1 smaller, and take them back to the harbor. So the lift and transport activities work fine. And the execution works fine, too. But there's a different price involved than with these Smit Salvage vessels and approach. But you have to see it within that context properly then. So we've said decommissioning is an interesting market, especially now that our experience has taught us how to go about it, but now also that we've got the proper lift vessel to do so, the Bokalift 1 is excellent for the North Sea.

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Thijs Berkelder, ABN AMRO Bank N.V., Research Division - Equity Research Analyst [40]

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So that means it's premature to speak about the Bokalift 2?

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Peter A. M. Berdowski, Royal Boskalis Westminster N.V. - Chairman of Management Board & CEO [41]

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Well, I wouldn't want to say that. But there will never be a time for a copy of the Bokalift 1. You will have to add something extra then. And we are looking at that very seriously, again, in the combination of wind and decommissioning.

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Thijs Berkelder, ABN AMRO Bank N.V., Research Division - Equity Research Analyst [42]

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Then a follow-up question. I guess you're strengthening the balance sheet by the divestment of Towage assets and maybe also by the capital joint venture, which I guess also is intended to build a war chest for your new strategy. The old strategy, very emphatically, you consider that the market's situation is too complex to carry out major acquisitions at the risk you don't want to take. Is that shifting currently?

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Peter A. M. Berdowski, Royal Boskalis Westminster N.V. - Chairman of Management Board & CEO [43]

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Well, I can tell you so, in 6 months. We are studying that. That's the essence of the exercise of the new corporate business plan. I'm not going to give you any advance idea on that.

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Thijs Berkelder, ABN AMRO Bank N.V., Research Division - Equity Research Analyst [44]

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I understand that. But at the same time, the question is relevant for Boskalis.

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Peter A. M. Berdowski, Royal Boskalis Westminster N.V. - Chairman of Management Board & CEO [45]

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For customers. Must be Fugro shareholders.

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Thijs Berkelder, ABN AMRO Bank N.V., Research Division - Equity Research Analyst [46]

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Are you looking at Global Marine at Terramare?

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Peter A. M. Berdowski, Royal Boskalis Westminster N.V. - Chairman of Management Board & CEO [47]

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Well, I'm looking at Global Marine with a smile from a very, very big distance, and I'm calmly waiting until it goes down entirely. I wish the shareholders a lot of success with their sales. But I think you are advising shareholders there.

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Thijs Berkelder, ABN AMRO Bank N.V., Research Division - Equity Research Analyst [48]

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No, I'm on the other side of the Chinese wall.

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Peter A. M. Berdowski, Royal Boskalis Westminster N.V. - Chairman of Management Board & CEO [49]

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That's the other side of the Chinese wall. Global Marine is nothing and will not be -- will be nothing, I assure you. Before Fugro came up with it, we offered to buy the whole shebang from Fugro for $50 million, but there was a very much better proposition with more value and that's what they decided on. Well, if you don't need any cash as a company, you can forward to go that cause. But I think Global Marine also has a few joint ventures with Chinese parties, right? Well, I wish you a lot of success with that.

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Thijs Berkelder, ABN AMRO Bank N.V., Research Division - Equity Research Analyst [50]

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Well, then the second crane vessel, the Bokalift 2, what does not depend on?

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Peter A. M. Berdowski, Royal Boskalis Westminster N.V. - Chairman of Management Board & CEO [51]

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Bokalift 2?

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Thijs Berkelder, ABN AMRO Bank N.V., Research Division - Equity Research Analyst [52]

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Yes. Bokalift 2.

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Peter A. M. Berdowski, Royal Boskalis Westminster N.V. - Chairman of Management Board & CEO [53]

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Well, that is connected with, of course, some orientation in the market that we are conducting. Again, it is tremendously helpful with vessels like these. In any case, we are going to be smart. So we're going to try and do it on the basis of an existing platform because if you want to buy such a ship out of the blue, there's such risks for earning back your spendings. So we want to use an existing platform which -- on which we will put a crane. It does not -- it can't be an investment of EUR 300 million. That will not be sound. That will not be justified. It needs to be surveyable. There must be unique features, part of that may be in the lifting equipment or the lifting features but also in the transport and the stability of the ship. The workability is an important point if you want to work in Taiwan. Then a feature is also whether a ship was built in China because you can't come in to Taiwan with a Chinese vessel, a Chinese-built vessel. All of those are criteria you must weigh carefully. And for India, it would be very useful also by means of the Vanguard if you've got a launching customer, a launching project. And we are looking into that very seriously and there are talks going on to do so. If you then make the combination, when you've got a launching customer, that will always be in wind. But then, particularly when I focus on Taiwan, I can, East of Suez, place a vessel with unique features, which has a healthy utilization with activities in Taiwan and the surroundings. There are wind farms coming up in Vietnam and South Korea. So if you can deploy your ship there in that way, East of Suez, both for the Middle East but also near India, there are more developments going on. Then you can count with 220 days of utilization, sort of critical lower level, and then you can make a decision. Well, this should make it clear that we are seriously looking at this and calculating. But there is a certain measure of realism in a sense of earning it back before we will actually take that step. But it is not as if it is an entirely hypothetical activity. We are looking at that very seriously.

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Thijs Berkelder, ABN AMRO Bank N.V., Research Division - Equity Research Analyst [54]

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And the same applies to Vanguard 2?

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Peter A. M. Berdowski, Royal Boskalis Westminster N.V. - Chairman of Management Board & CEO [55]

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Vanguard 2 is less concrete than Bokalift 2, which also has to do with the concrete utilization that you can fill. It's also connected strongly to the endless chicken-and-egg discussion we have with FPSO builders. We may have the ideal solution for MODEC and for SBM Offshore for transporting box-shaped FPSOs, and then you don't need to fall back on trusses of your own. Well, you don't -- you won't need any trusses then. So why should you use them? I think we have a very perfectly suitable solution, you're talking about EUR 20 million per transport. And in terms of pricing, it's also convincing. But the main question for those people always remains, "Do I have the flexibility? And what if I'm 2 years -- 2 months delayed and you are in another job?" Then you are locked in. So the flexibility issue is a big, big issue. And of course, we can say, well, we are going to build in a standard way and deliver on the hour. But then they say, "Well, you might be 3 months off the mark." And that's other than EUR 350 million EBITDA. Those are really big exceptions that I always want to account for. What we can't give slots -- 6-month slots for the Vanguard for, say, EUR 20 million. It doesn't work that way. That's an important part of the discussions going on, and a lot of that connected with, "If I've only got one ship, I can only rely on one ship. I've got no fallback." The solution would be 2 vessels, of course. Well, easy math, you don't need many transports per year to do this profitably. But I do want a kind of framework agreement before we do so. So that's the chicken-and-egg discussion, which is also determined by the fact that neither MODEC nor SBM Offshore have really seen the clear light of day there already. Well, how many FPSOs did SBM Offshore build in the past 4 years?

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Thijs Berkelder, ABN AMRO Bank N.V., Research Division - Equity Research Analyst [56]

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A follow-up question about the balance sheet and your policy on dividend. Well, those policies usually are developed at the end of the year. But based on the assumption that you have a flat EBITDA, EUR 350 million according to the plan, a stable level, could we then assume that dividend would remain stable as well?

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Peter A. M. Berdowski, Royal Boskalis Westminster N.V. - Chairman of Management Board & CEO [57]

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Well, that is what we did, say, 6 months ago. The stability of dividend is what we aim for. So we still have that ambition. Of course, we make this dependent on the second half year. That's one. Secondly, we shall also look very carefully at the corporate business plan. At that moment, you will know how -- what your prospects are for the next 3 years. So it's a combination of those elements. Well, as I said in March, we are very much alive to the fact that a certain degree of stability or cash dividend is important, so we'll definitely take that on board in our considerations.

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Thijs Berkelder, ABN AMRO Bank N.V., Research Division - Equity Research Analyst [58]

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And the current buyback operation?

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Peter A. M. Berdowski, Royal Boskalis Westminster N.V. - Chairman of Management Board & CEO [59]

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We'll continue up to EUR 100 million, but you are seeing how slow it is. We could buy something -- some of them today, but that was disappointing. I thought that there would be 1 million for the shares, all kinds of ETS that take swing always. But you see that if or we don't want to be a disturbing factor in the market, so you are limited in the volumes you can buy back if you go up 250,000 shares in the market, you only want to pick up 10%. You're not moving very fast. But it will be continued for the time being, definitely.

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Andre F. M. Mulder, Kepler Cheuvreux, Research Division - Analyst [60]

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Andre Mulder from Kepler. I have a question about Towage and Salvage. Why Keppel Smit, yes, and Lamnalco, no? I thought that Keppel Smit is 1 size smaller than Lamnalco. I'm not sure whether the calculation would work if you apply this sort of one to the other because there's the difference between the 2.

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Peter A. M. Berdowski, Royal Boskalis Westminster N.V. - Chairman of Management Board & CEO [61]

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Well, it's easy to give you a straight answer. What we've said, we are going to leave Harbour Towage activities. We're not going -- moving away from terminals. There's the big difference in kind of operators you see as well. None of my colleagues -- I don't want to disparage my colleagues but every Tom, Dick and Harry can hire a harbor tug somewhere, and there's plenty of colleagues, of people in the house who financed that straightaway. A tug is an asset with residual value. You can always sell it at any place. So nearly everybody these days can get a loan for a tug. So the accession is relatively low. You see that reflected in returns and return requirements set for them. The only answer is a bigger scale, but you need a very big scale, and we're not going to do that because the returns don't exceed 5% and that is not what we want. That's not what our ambition is. But for terminals, this is different there. You talk about different -- difficult countries or good customers, so you can still be distinctive there in the oil and gas environment. And dare we say, well, for the time being, exclamation mark, we see this as an activity that fits us. And we often act in an extension of each other. There's a number of places where we are both looking at the laying out of the activities and the terminal operations so there's more logics and more synergy involved, and you are substantially higher on the S-curve. So whether we will hang on to this approach to the distant future, I don't want to say here. It depends on developments and settlements for the next few years because if you're -- it also depends on competitors because if more competitors at the lower end of the S-curve are also creeping up, then at the end of the day, conclusion will be that little value can be added. But for the short term, there's a difference for Keppel Smit, which is in harbor tugs and Smit Lamnalco. Of course, there are elements in Smit Lamnalco that I think are more harbor-related than terminals. Of course, we look at Smit Lamnalco to say, I do want to focus on oil and gas, and at least put the harbor-related activities up for discussion more.

Well, talking about the evaluation, the appreciation, you can reason in 2 different ways. Formally, you would also say harbor tugs are always valued lower than terminal activities because terminals involve long-term contracts. Of course, the comment was there's a factor, 1 or 2, in the multiple. Instead of 5 to 6, it's 7 to 8, so to speak. Well, nowadays, you've got the whole connotation of anything that is offshore is ugly. We don't want to be involved in that, but I don't see why I should assume why you are going to approach 9 or 10 with Smit Lamnalco. But in Harbour Towage, I have full confidence that you're in that bracket. Well, if you put it up for sale.

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Andre F. M. Mulder, Kepler Cheuvreux, Research Division - Analyst [62]

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Can you say a few words about the ratio between the value of the 2?

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Peter A. M. Berdowski, Royal Boskalis Westminster N.V. - Chairman of Management Board & CEO [63]

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From EBITDA, do you have it for me? EBITDA, you have to calculate Smit Lamnalco versus KST, involves a factor 5 in EBITDA. Smit Lamnalco is 5x bigger than KST. So that is big.

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Andre F. M. Mulder, Kepler Cheuvreux, Research Division - Analyst [64]

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Can you say something about Salvage? You said you expect a very strong first year?

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Peter A. M. Berdowski, Royal Boskalis Westminster N.V. - Chairman of Management Board & CEO [65]

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That will be for the second half, but that's a very sound foundation now. So you've created most of that for the...

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Andre F. M. Mulder, Kepler Cheuvreux, Research Division - Analyst [66]

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But it was the reverse last year?

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Peter A. M. Berdowski, Royal Boskalis Westminster N.V. - Chairman of Management Board & CEO [67]

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Yes, it was the reverse last year but that depends on how things unfold. We had a very strong half year with the settlement of Salvage, too, which we have not incorporated in the figures yet. So in total, that should be a strong year.

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Andre F. M. Mulder, Kepler Cheuvreux, Research Division - Analyst [68]

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EUR 17 million in costs attributed to holding? Is that the reality? Or should we calculate the usual amount of 2022?

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Peter A. M. Berdowski, Royal Boskalis Westminster N.V. - Chairman of Management Board & CEO [69]

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I would say keep calculating around '22.

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Maarten Verbeek, The Idea-Driven Equities Analyses Company - Equity Analyst [70]

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Maarten Verbeek, The IDEA! I have a question about the EBITDA outlook for the whole year. So what does it cover or not cover? Does it include the reversal of the impairment?

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Peter A. M. Berdowski, Royal Boskalis Westminster N.V. - Chairman of Management Board & CEO [71]

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Everything is in it.

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Maarten Verbeek, The Idea-Driven Equities Analyses Company - Equity Analyst [72]

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Possible book profit on the divestment of the Towage, for instance?

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Peter A. M. Berdowski, Royal Boskalis Westminster N.V. - Chairman of Management Board & CEO [73]

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Yes. Everything is included.

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Maarten Verbeek, The Idea-Driven Equities Analyses Company - Equity Analyst [74]

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So it doesn't include what you possibly expect in terms of claims.

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Peter A. M. Berdowski, Royal Boskalis Westminster N.V. - Chairman of Management Board & CEO [75]

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No, they are emphatically not included.

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Maarten Verbeek, The Idea-Driven Equities Analyses Company - Equity Analyst [76]

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And then the last question, although I think it's already clear. If we look at the full year figures, you said that the net operating profit exceeding 2018 would be a challenge. That's off the table completely?

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Peter A. M. Berdowski, Royal Boskalis Westminster N.V. - Chairman of Management Board & CEO [77]

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That would be extremely challenging, but you'll never know what drops -- may drop from the sky.

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Maarten Verbeek, The Idea-Driven Equities Analyses Company - Equity Analyst [78]

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But if we deduct the reversal in book profit, could you even report profit?

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Peter A. M. Berdowski, Royal Boskalis Westminster N.V. - Chairman of Management Board & CEO [79]

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Well, I don't know how you're going to correct me and what I'll have left. What we wanted to say about it is what we've said and I present the rest to you, leave it to your own imagination.

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Thijs Berkelder, ABN AMRO Bank N.V., Research Division - Equity Research Analyst [80]

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And Thijs Berkelder, ABN AMRO. Inland Infra, can you say anything about margins?

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Peter A. M. Berdowski, Royal Boskalis Westminster N.V. - Chairman of Management Board & CEO [81]

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4% to 5% unchanged, yes. But still, that's very stable, and the whole portfolio we see this year is filled well. But next year has also been filled up nicely with interesting and attractive projects. And looking ahead, we see a lot of work in the area of dike and reinforcements as well. We are excellently positioned for that. We've got 5 dikes in which we are involved in The Netherlands now, and which we'll do our bit there. But as I said, under the doctrine of revenue, it's not an aim in itself. We want to have decent margins in the 4% to 5% are maintained. But there, too, you have to choose your battles because there are a lot of them we did not take part in and we did not want to be involved in, not in the runoff either.

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Thijs Berkelder, ABN AMRO Bank N.V., Research Division - Equity Research Analyst [82]

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ING. A follow-up of question. You also have to dredge your line up to [Imoden]?

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Peter A. M. Berdowski, Royal Boskalis Westminster N.V. - Chairman of Management Board & CEO [83]

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We are dredging there all the time.

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Thijs Berkelder, ABN AMRO Bank N.V., Research Division - Equity Research Analyst [84]

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You don't have to wait for it to be ready

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Peter A. M. Berdowski, Royal Boskalis Westminster N.V. - Chairman of Management Board & CEO [85]

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No, there are always activities. The cast-ons have to be level. And so we have to do leveling work and dredging work there. So in that whole route of our customer, the joint venture, [Baum] and Volker. There are continuously activities taking place also linking up with or preparatory to the various steps they make. So we are continuously involved in all the steps taking place there. That's why I know the planning is so well.

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Thijs Berkelder, ABN AMRO Bank N.V., Research Division - Equity Research Analyst [86]

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Hence, my question. Well, they also have to shift and they have to pay you for that.

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Peter A. M. Berdowski, Royal Boskalis Westminster N.V. - Chairman of Management Board & CEO [87]

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I do not think that this is the place to discuss that. You should have been next door for that.

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Thijs Berkelder, ABN AMRO Bank N.V., Research Division - Equity Research Analyst [88]

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We tried but we failed.

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Peter A. M. Berdowski, Royal Boskalis Westminster N.V. - Chairman of Management Board & CEO [89]

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The extra EUR 8 million is not for us, I can reassure you there.

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Thijs Berkelder, ABN AMRO Bank N.V., Research Division - Equity Research Analyst [90]

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Let me try again on strategy. I don't have the impression that many things are about to change.

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Peter A. M. Berdowski, Royal Boskalis Westminster N.V. - Chairman of Management Board & CEO [91]

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Nor do I. We are clearly saying we are working in 2 divisions, Dredging and Offshore and Offshore Energy. We say we want to position ourselves very expressly for [fossil] and sustainable. And we are in largely transport-related activities and installation-related activities. Well, that sets the scene for you then. So -- and in line with that, we shall do so. Of course, survey is an important new branch that we want to take further. And discussion about the Bokalift 2 and the Vanguard 2 are the bigger components. But otherwise, we've been so long to place it as it is now. I hope there is an element of a period when we will harvest. It's always been sowing and cutting and lopping and doing so much.

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Thijs Berkelder, ABN AMRO Bank N.V., Research Division - Equity Research Analyst [92]

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So you won't dedicate this to CapEx or large vessels, that would mean that you have lots of money left at the end of the day. What are you going to do with them?

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Peter A. M. Berdowski, Royal Boskalis Westminster N.V. - Chairman of Management Board & CEO [93]

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I don't want to advance on that, but I think we've given clear signal this year what we are looking at, that's our shareholders, either in dividend or in shares. We are not going to fill our piggy bank to -- fully. We don't want to waste money either. We can't afford to squander it. We don't, of course, want to keep everything in our pocket. We can always go to the market where there's a good opportunity. And then the shareholder interest is first and foremost.

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Thijs Berkelder, ABN AMRO Bank N.V., Research Division - Equity Research Analyst [94]

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No need in the existing fleet to...

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Peter A. M. Berdowski, Royal Boskalis Westminster N.V. - Chairman of Management Board & CEO [95]

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No, not really, not major either. That analysis is correct on your part. I hope it will be mountains of gold as you are saying.

All right. Thank you very much for coming and your critical questions. Enjoy the rest of your day.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]