Aker Solutions ASA

OSE:AKSO

Earnings Call Transcript 2019-Q1

[Tove Røskaft, Head of Communications & Investor Relations]

Good morning, and welcome to Aker Solutions Presentation of the first quarter results for 2019. My name is Tove Røskaft, and I head our Communications and Investor Relations at Aker Solutions. We -- with me here today is our Chief Executive Officer, Luis Araujo; and our Chief Financial Officer, Svein Stoknes. They will go through the main developments of the quarter. We will also have time for some questions and one-on-one interviews for the press after their presentations.Please note that there are no fire drills scheduled today, so in case of an alarm, I'd like to point out to your nearest emergency exits, which are through the glass door behind you and to your left.Luis, I will now hand over to you.

[Luis Antonio Gomes Araujo, Chief Executive Officer]

Thank you, Tove. Good morning, and thank you for joining us here today. I'm happy to say that the first quarter 2019 was yet another period of strong execution, stable underlying margins and solid order intake.Let me start with the main developments of the quarter. During this quarter, we completed the delivery of the topside processing platform for Johan Sverdrup. The topside was transported to the field and installed in one single lift offshore. We delivered the Kaombo subsea equipment on time. This enabled Total to start production on the Kaombo South at the end of the quarter. The second FPSO on the field will add 115,000 barrels of oil per day. We are very proud to have been part of this large project in Norway.Our umbilical plant in Moss set a new standard for the industry on the Zohr project offshore Egypt by completing the delivery of 280 kilometers of steel tube umbilicals, all delivered in record-breaking 15 months. In March, we were named best supplier for subsea equipment by Petrobras, the biggest user of subsea equipment in the world. This came as a result of our strong performance in the Brazilian pre-salt play. And this is an award we are extremely proud of. We are constantly making moves to optimize our portfolio of products and services. In the first quarter, we made a strategic investment in Airborne Oil & Gas, an innovative maker of fully bonded Thermoplastic Composite Pipe, also called TCP. The lightweight, high-strength and corrosion-resistant composite pipes provide cost and operational benefits for subsea production and oilfield service application, especially in the port. We look forward to work with Airborne to introduce their TCP technology in our subsea portfolio and also to develop new products using this type of materials.After the quarter end, we also announced plans for another technology-driven joint venture with FSubsea. This is called FASTSubsea. And this venture aims at developing subsea boosting pumps that can improve recovery rates for existing and marginal fields without needing heavy equipment on the platform topside.We delivered another period of solid financial performance. In fact, it was the fifth quarter with both revenue and earnings growth, this thanks to our relentless focus on timely delivery and efficiency improvements despite the challenging pricing environment seen in recent years.Now for the main numbers. These are the first quarter figures according to the new IFRS standard: revenue of NOK 7.3 billion; EBITDA of NOK 634 million; and EBITDA margin of 8.7%. Excluding special items, the margin was 8.8%, and EPS was NOK 0.57. We won NOK 5.5 billion in new orders, maintaining the backlog at a healthy NOK 33 billion. Afterwards, Svein will go through the numbers in more details.The market remained active. Our main win was the large Jansz FEED contract, which I will come back to later. The order intake came from small awards, frame agreement call-offs and growth on existing contracts. In Brazil, for our key client, Petrobras, we signed an extension of our subsea service frame agreement and won a contract to maintain storage tanks through our local brownfield company, C.S.E. In February, we won a contract for Wintershall to build a complete digital replica of the Nova subsea production system. This includes a study to enable live data streaming from the subsea equipment. We will help drive forward real-time subsea condition monitoring, production optimization and predictive maintenance for the field. Finally, after many years, the market for carbon capture technology is seeing high activity, and we secured another win on Northern Lights. This expanded scope will see Aker Solutions work in the CO2 subsea injection part of the project.And after the quarter ended, we also secured a contract with Twence in the Netherlands to deliver a carbon capture plant at a waste-to-energy facility. This is the first commercial plant we will deliver with our modular solution named Just Catch. The capture -- the carbon capture market is active, and we are currently working on 20 prospects in Europe similar to this one. The market for early studies also remain active, and we secure 31 front-end studies in the quarter. To us, this is a good indication that the operators remain positive about sanctioning future projects, supported by current market conditions.Now to our star. The highlight of the quarter was the subsea gas compression FEED award. The contract is with Chevron and with Exxon and Shell as partners for the Jansz-Io field offshore Australia. We see this as an international breakthrough for our subsea compression technology. As you know, this technology has already provided great results for Equinor at Åsgard since 2015 when it was installed. The FEED is the first service order under the master contract to develop the entire field. The contract is for front-end engineering and design of a subsea compression station as well as an unmanned power and control floating platform. The subsea compression technology has evolved over the years. And compared with Åsgard, we are more than doubling the production capacity of the system. The water depth is 3x deeper at more than 1,000 meters water depth. Together with our alliance partners, MAN Energy System (sic) [ MAN Energy Solutions ] and ABB, we have reduced the size and cost as well. Our subsea compression technology is an all-electric system, and that's suitable for most live subsea gas fields globally. Just to remind you, the subsea gas compression increase recovery, reduce OpEx, reduce environmental footprint and improve safety for the operator, sees you take people out of harm's way, all very important points to our clients and to the industry at this point in time. Australia will be the first country outside Norway to use subsea gas compression technology. Australia is well suited for gas compression due to its many gas fields, but there's also interest in other regions. To give you an example, we have recently done gas compression studies for 5 clients in 5 different parts of the world.Aker Solutions is today launching a new identity to our Software House, and we call it iX3. The name iX3 represents 3 words starting with "i" that outline its core offering: integrated because iX3 words is -- because iX3 will offer digital solutions that allow customers to make better and data-driven solutions across the whole life of an asset; the second word, innovative, because iX3 will enable customers to make multiple solutions for concept selections and reduce the time to first oil; third word, insight, because data is oil value when it provides insight into assets and operations. iX3 brings together our work on digital twins, engineering automation, intelligent products and asset performance and integrity. Ultimately, this leads to reduced cost, increased efficiency and improved predictability. We are progressing well with our digital offering. And I mentioned earlier today the Nova project for Wintershall. We are also working with BP to monitor live data from a field west of Shetlands. And we have a strong digital alliance with Aker BP. And there is more in the pipeline. By going to the market with a strong brand and a clear offering, I believe we can create better results for our clients and new revenue streams for Aker Solutions.After 4 years of cost cutting and significant underinvestment in oil and gas, replacement ratios are at record lows. Thankfully, oil companies have the portfolio to address the expected decline. They also have record-high free cash flows. And we see pocket projects resurfacing and new projects emerging. Against this backdrop, offshore spending is forecast to increase by up to 5% in 2019 and accelerate to 5% to 15% in 2020, according to industry estimates.As we can see in the top graph, the number of final investment decisions by oil companies continues to rise. And we know CapEx will follow. If we focus on the subsea market, we can see a growing number of subsea tree awards, as seen in the second graph. However, I would like to point out that there is still overcapacity in some segments in our industry, and so we expect markets to remain competitive in certain segments, but we still see prices improving long term.Now to the summary and outlook. Tendering activity remains high in our main markets, and we are currently bidding for contracts totaling about NOK 55 billion. Our tender portfolio show a good balance between regions and segments, and we anticipate some key projects to be awarded this year. We continue to see increasing interest in our carbon capture and storage technology. Our front-end capabilities also generate new opportunities. And all in all, I believe that Aker Solutions is well positioned to capture opportunities in both new and existing markets.So in summary, we closed the first quarter with a healthy order backlog, high tender activity and continued strong execution on Projects and Services. These elements are supporting both top line growth and stable margins.Thank you for listening, and Svein will go through the main numbers in more details. Svein?

[Svein Oskar Stoknes, Chief Financial Officer]

Thank you, Luis, and good morning. So I will now take you through the key financial highlights of the first quarter, our divisional performance and run through our financial guidance before we then move on to Q&A. And as always, all numbers mentioned are in the Norwegian kroner. And please note that as of January 1, 2019, we have adopted the new IFRS 16 accounting standard related to leasing. And to state the obvious, this is purely a change in accounting method of leases, and it has no cash impact. Comparative figures have not been restated, and we have included additional information related to this change of accounting principle in the appendix.So as usual, let's start with the income statement. Overall operating revenue for the first quarter was NOK 7.3 billion, up 32% year-on-year, reflecting continued high activity on several ongoing field design projects as well as increased activity and progress in subsea on the back of work won over the last 18 months. As a result, our Projects reporting segment was up 40% year-on-year. Our Services segment was up 12% year-on-year, reflecting our strategy to grow our Services business. This was primarily driven by the production asset services subsegment.Our reported first quarter EBITDA was NOK 634 million. This included net NOK 3 million of special items while the new IFRS 16 leasing standard lifted our reported EBITDA by NOK 140 million. For your reference, we have set out the table in the appendix that further specifies the special items and the effects of IFRS 16 leasing. Excluding special items, EBITDA was NOK 636 million, an increase from NOK 384 million a year earlier. This was equal to an underlying margin of 8.8% compared to 7.1% in the same period last year.Excluding the effects of IFRS 16, we continue to deliver stable underlying margins. And this should be viewed as a solid achievement as we are currently progressing on our newly awarded work won in a very competitive market, an evidence of continued strong execution and good momentum on efficiency improvement programs. Compared to the same period last year, we also have a higher share of lower-margin field design and production asset services activity in our revenue and margin mix.First quarter depreciation was up year-on-year at NOK 309 million. Excluding the effects of IFRS 16, the depreciation was NOK 192 million, in line with our previous guidance. We now expect underlying depreciation, including the effects of IFRS 16, to be around NOK 1.25 billion per year.Our reported first quarter EBIT or operating profit increased year-on-year to NOK 325 million from NOK 226 million. Excluding special items, EBIT was NOK 329 million, and the margin was 4.5%, up from 3.7% the previous year.Net financial items were minus NOK 96 million in the quarter, excluding a minor unrealized hedging loss of NOK 3 million. We continue to see our net financial items around this level per quarter going forward, excluding the effect of currency and non-qualifying hedges.Our tax charge was equivalent to a rate of 34% in the quarter. And going forward, we continue to expect average P&L tax rates to be in the low- to mid-30% range. We ended the quarter with net income of NOK 149 million or earnings per share of NOK 0.54. Excluding special items, the earnings per share were NOK 0.57, up from NOK 0.31 last year.Now moving to our balance sheet and cash flow performance. Our net current operating assets or working capital continued to normalize and ended the first quarter at NOK 248 million. Excluding the effects of IFRS 16, it ended at minus NOK 62 million. As previously guided, working capital is likely to fluctuate with large project work, and we now expect the level to continue to trend toward about 4% of group revenue over the next 12 months. Excluding IFRS 16, we had net interest-bearing debt of NOK 940 million at the end of the first quarter, up from NOK 347 million at Q4, reflecting the working capital outflow.Our net debt to EBITDA ended the quarter at a solid 0.5x. And our financial position remained strong with a total liquidity buffer at a healthy NOK 6.9 billion. This includes our revolving credit facility with leverage covenant at 3.5x net debt to EBITDA. And as a reminder, our RCF and latest bond covenants are both based on frozen GAAP, i.e., pre-IFRS 16. Our solid financial position continues to give us flexibility and good financial headroom going forward.Our cash flow from operations in the first quarter was negative NOK 303 million, primarily reflecting the working capital outflow. Our investing cash flows totaled a net negative NOK 159 million in the quarter, mainly reflecting our acquisition of a minority stake in the company Airborne and the remaining 30% of the Brazilian entity C.S.E. We now expect overall CapEx and R&D at around 3% of 2019 annual revenue with flexibility.Cash flow from financing was negative NOK 156 million in the quarter or negative NOK 22 million excluding the effect of leases paid under IFRS 16, reflecting a minor change in our external borrowings.Now on to Projects, where first quarter revenue was up 40% year-on-year driven mainly by high activity level in the field design subsegment compared to the same period last year. This resulted in an underlying projects EBITDA margin of 8% in the quarter versus 7.6% last year. The EBIT margin excluding special items was 4.7%, same as last year. As mentioned earlier, the margins for Q1 '19 onwards include the effects of IFRS 16. We had yet another quarter of solid operational performance in our Projects portfolio as we are increasingly ramping up execution on newly awarded work won in a very competitive market. It's important that we continue to realize significant benefits from improvement programs in our Projects portfolio. Order intake in Projects was NOK 3.5 billion in the quarter, down from a very solid NOK 6.5 billion in the year-earlier period, with book-to-bill at 0.6x. The backlog in Projects ended the quarter at a healthy NOK 22.5 billion.Now for some further details for subsea and field design within the Projects reporting segment. Revenue from subsea projects was up by 25% from the same period last year as activity increased on recently awarded work globally. Revenue from field design projects increased 54% year-on-year mainly driven by continued strong activity on several ongoing modification and hookup jobs versus same period last year. In the first quarter, field design accounted for 59% of Projects revenues, up from 54% in the same period last year. First quarter order intake in Projects ended at 0.6x with NOK 2.1 billion in field design and NOK 1.4 billion in subsea. Despite the competitive market, tendering activity is very healthy, and we are currently tendering for about NOK 45 billion of work overall in Projects with the majority in subsea.Our Services revenue increased 12% year-on-year mainly driven by international growth in our production asset services subsegment, which accounted for 58% of Services revenues, up from 51% in the same period last year. Underlying EBITDA was NOK 187 million with a margin of 14.4%, an increase from 11.7% in the same quarter last year. EBIT was NOK 120 million with a margin of 9.3%, up from 8% a year ago. The higher margins were due to good performance and increased activity level versus last year as well as the mentioned effects of IFRS 16.First quarter order intake in Services was strong at NOK 2 billion and resulted in the first quarter book-to-bill of 1.5x mainly related to international awards. Despite the competitive market, tendering activity is healthy, and we are currently tendering for around NOK 10 billion of service work globally. And as a reminder, in addition, a part of Services order intake is short cycled or book and turn in nature.Now over to the order intake and backlog performance for the group as a whole. Overall first quarter order intake ended at NOK 5.5 billion with a very healthy level of unannounced awards in several key regions globally, in particular, brownfield services and growth in existing contracts. The order intake was equivalent to book-to-bill of 0.8x in the quarter. Our backlog totaled NOK 33 billion at the end of the first quarter, which is equivalent to around 1.3x our 2018 revenue. This gives us good visibility moving forward.During the first quarter of 2019, we continued to increase our international order intake. Our backlog is now considerably more geographically balanced despite phasing out some major projects in Africa. Order intake continues to be somewhat uneven caused by large contracts. But as mentioned earlier, tendering activity is still good with some key projects likely to be sanctioned over the next 6 to 12 months. And we're currently engaged in tenders with an estimated sales value of about NOK 55 billion. And as already highlighted, our backlog does not include part of our Services business or potential growth or options on existing contracts.And finally, over to our guidance. We continue to see activity increasing. And at this point, we see our overall 2019 revenue up close to 10% year-on-year with growth in both Projects and in Services. And this reflects our solid order intake over the last 18 months as well as the expected high activity in field design during the first half of this year.We now see our 2019 overall underlying EBITDA margin up year-on-year and to remain around the year-to-date level excluding the effects of the implementation of IFRS 16. As previously stated, to defend our underlying margins during 2019, a continued relentless focus on quality execution, supply chain and operational efficiency improvements are needed as we are continuing to phase in new work won in a very competitive market. We also continue to leverage our differentiating front-end capabilities to capture opportunities and engage with our customers at an early stage. And as activity levels picks up further, it will be important to harvest scale effects from our very fit and streamlined organization and asset base.As part of our continuous improvement efforts, we are looking for ways to optimize our footprint including our use of facilities, bases, yards and offices. Currently, we are in the process of subleasing some of our excess office capacity. As part of this program, that will generate additional cash inflow for Aker Solutions, there could potentially be a need for an impairment of our right-of-use assets related to IFRS 16 in the second quarter. The additional impairment charge could potentially be around NOK 150 million to NOK 250 million with no cash impact.So to sum up, we have a healthy backlog and a solid financial position which continues to give us increased flexibility and financial headroom to position Aker Solutions to fully take advantage of the recovery. We ended the first quarter by continuing to deliver strong project execution with good underlying financial performance and by continuing to build a geographically more balanced order backlog.Thank you. That was the end of our presentation here today, and we will now move on to questions.

[Tove Røskaft, Head of Communications & Investor Relations]

We also have some online audience with us today. So to warm up the audience in the room, I'll start with some questions from the online audience.The first one is from Lars Semb Maalen-Johansen, and he has 2 questions. EBITDA margin from Projects was at 8% in the quarter versus 6% to 7% in the prior quarters. Is this due to IFRS 16? Or is this due to better execution?

[Svein Oskar Stoknes, Chief Financial Officer]

The margin of 8% within Projects is, of course, impacted by the implementation of IFRS 16. If you exclude the effects of IFRS 16, the underlying margin was 6.5% versus 7.1% in the same period last year. And of course, maintaining margins at 6.5% despite phasing in a lot of new work during the quarter is a very strong achievement.

[Tove Røskaft, Head of Communications & Investor Relations]

Okay. Second question from Lars is, a decreasing backlog and a book-to-bill under 1x, should we worry about lack of projects in the future?

[Svein Oskar Stoknes, Chief Financial Officer]

Luis?

[Luis Antonio Gomes Araujo, Chief Executive Officer]

Yes, I can take that. Well, basically, we are increasing revenue so that compensates for the small erosion in backlog, but it was a pretty strong order intake. And as explained during the presentation, we are tendering NOK 55 billion, so it's probably not as high than what we've been tendering the last few quarters. So the opportunities are there. I also mentioned the front end be extremely busy, reminding that last year we had the record in the number of studies. And it seems that strong again in the first quarter. So clients are bringing in more projects, so I think I'm not yet concerned about the number of Projects under the current environment as usual.

[Tove Røskaft, Head of Communications & Investor Relations]

Okay. Thank you. Then we have 2 questions from Sahar Islam. The first question, the tendering pipeline of NOK 55 billion, can you give us an idea of the key geographies within this and the margins you expect to realize on the projects you are bidding on?

[Luis Antonio Gomes Araujo, Chief Executive Officer]

Well, the first part is probably easier to take, which is I think it is spread. We have projects in South America. We have projects in Africa. We have projects in Asia Pacific. So as I said during the presentation, it's very well distributed. So we have, as I said, Africa, Brazil, all the main areas, including also the Gulf coming back, I would say, finally. So in terms of margins, very hard to predict. We don't comment on that usually. It's too early to say. I mentioned that I expect the long-term prices to improve. It has to be -- it's always a reflex of activity and utilization. Looking to our industry, some areas have quite -- still quite a lot of capacity available. It's not across all the chain, which should be a concern for all of us since there are some areas becoming more occupied now and also some capacities removed from the market in some segments. So overall, I think you'll be -- it will continue to be very competitive as it's always been, but we expect the price to improve going forward.

[Tove Røskaft, Head of Communications & Investor Relations]

Okay. Second question from Sahar was how should we think about the shape of working capital through 2019 as we move towards the 4% of revenues normalization you have guided to?

[Svein Oskar Stoknes, Chief Financial Officer]

Yes. As we have repeatedly been guiding on, we are in an upwards trend on normalization of our working capital level. You might find the movement in Q1 in isolation a little bit more sudden than I might have led you to believe. But keep remembering that we ended 2018 on a very strong note, and we are phasing out several projects that have historically been benefiting from a very strong cash flow profile. And then we are phasing in a lot of new work, which has a considerably more balanced cash flow profile. And we will continue gradually moving towards this level of now 4% of revenue over the next 12 months. And when I say 4%, please remember we're talking about net current operating assets. So there's no change in the underlying guidance of our working capital level. The increase is only due to the impact of IFRS 16 on our net current operating assets. It's the only difference. And then there's details outlined in the appendix of the presentation if you want more details on the breakdown.

[Tove Røskaft, Head of Communications & Investor Relations]

Thank you, Svein. Then we have a question from Mick Pickup. When I look at the backlog profile, there has been little change to 2020 coverage in first quarter, which stands significantly down on 2019 coverage a year ago and historical levels. Given high tendering levels, are there any reasons why this year the coverage ratio, at this stage, can be lower than historical levels?

[Svein Oskar Stoknes, Chief Financial Officer]

Okay. So the visibility moving -- looking 1 year ahead is not that different from what it was a year ago. I think looking into 2019, a year ago, we had about NOK 11 billion secured. And this time of the year, we have about NOK 8 billion. And remember, we have about NOK 55 billion of tenders ongoing at the moment, of which we believe several of these will be sanctioned and awarded over the next 6 to 12 months. So we have very strong reason to believe that our visibility looking into 2020 will improve in the quarter -- next few quarters.

[Luis Antonio Gomes Araujo, Chief Executive Officer]

Yes. I'll just complement that sometimes, it's also what I call seasonality. Some projects are still maturing. And assuming that we win our share, so it should improve visibility going forward.

[Svein Oskar Stoknes, Chief Financial Officer]

And remember also that last year, Q4 '17 and Q1 '18 was unusually strong order intake-wise. So...

[Luis Antonio Gomes Araujo, Chief Executive Officer]

Good point.

[Tove Røskaft, Head of Communications & Investor Relations]

Okay. Now I'm sure the audience is warmed up in the room, so maybe we can take a few questions from the room. Don't be shy.

[Chr. Frederik H. Lunde]

Frederik Lunde, Carnegie. Just to rephrase Mick Pickup's question on 2020, do you expect the same kind of -- broadly speaking, the same revenue profile next year? Or will that be a gap year because you have these big engineering contracts on Jansz and also, I guess, in Ghana which could ramp up quite quickly? Do you see those contributing in 2020 in a meaningful way?

[Luis Antonio Gomes Araujo, Chief Executive Officer]

I hope so. Think about Jansz, for example, it's something that we are extremely happy with and proud to be in 2 years of pre-FEEDs and then now with sanction of the FEED and also highlighting that what we signed was not a FEED contract. It was actually a frame agreement for the whole field, so we expect that materializing into larger contracts as obviously FEED is successful. We have 200 people working in this field right now in this build here. So we do believe that it will be a 12-months FEED, 12 to 18. So hopefully, the project will be moving to sanction. And they need more capacity to feed the government facility in Australia. So yes, so on that one, yes. And the other project we are working right now, that hopefully are going to be sanctioned. We've obviously been all sanctioned here. We are very well positioned for those projects, but we're still depending on the client gets the right approvals to proceed. As you know, under the current market conditions, we expect it to happen because, as I mentioned during my presentation, strong cash flow, strong prices and demand. So especially for gas, as we discussed, that should be good drivers to get this moving forward.

[Chr. Frederik H. Lunde]

So without being specific on next year, you will expect revenue growth assuming those projects in particular come in?

[Svein Oskar Stoknes, Chief Financial Officer]

Still early days. But our plans is based on the fact that 2020 is going to be up from 2019 again. But you'll remember now we delivered 12% growth last year. We're indicating we're going to grow by another 10% this year. So it's slightly more phased than what we previously had the reason to believe, that 2020 was going to be a little more of a spike year. But we -- as we look at 2020 right now, we think it's going to be up from 2019 again.

[Luis Antonio Gomes Araujo, Chief Executive Officer]

Actually, it's a good point to highlight that is a unique case. I don't see anybody growing in the market like we are. So...

[Tove Røskaft, Head of Communications & Investor Relations]

Okay?

[Haakon Amundsen, Lead Analyst]

Haakon Amundsen from ABG. Just a question on your CapEx. Can you give us some color on -- it looks like you're increasing a little bit on your investment level, your revenue's up, and the 3% versus 2%. Is there any specific things we should know about?

[Svein Oskar Stoknes, Chief Financial Officer]

I mean if you look at the investments, so the non-CapEx or R&D-related investments, we've done a minority stake in Airborne. As we mentioned, we bought the remaining 30% of C.S.E., the Brazilian entity we bought 70% stake in a couple of years ago now. And we're looking into further investments in the wind -- floating wind area. And we also want to take advantage of other related or similar type of opportunities moving forward. On the CapEx side, the spend level is going to be roughly the same as you've seen in the recent past. We are investing into some services-related areas where we see that some of our clients would like to lease equipment from us rather than to buy. So there will be some investments related to that activity but nothing sort of significant in terms of uptick.

[Luis Antonio Gomes Araujo, Chief Executive Officer]

Yes, we're also concluding our new service facility in Angola, which is we have the first hyperbaric chamber in Africa, which is something that we agree with Senegal, will strengthen our position in that market going forward. So that's -- it's an important item.

[Tove Røskaft, Head of Communications & Investor Relations]

Okay. Since Haakon had the question, James Evans from Exane BNP Paribas had a similar question to Haakon. So I think the add-on on that question from James is, is this R&D level a new normalized level?

[Svein Oskar Stoknes, Chief Financial Officer]

The guidance we now have in our slide is related to 2019, and we're saying that it has some flexibility in it. I think being a technology company and operating in technology space, our R&D spend in the recent past has been somewhat on the low side. So the 2% to 3% is what you should expect moving forward; for 2019, 3%.

[Tove Røskaft, Head of Communications & Investor Relations]

Okay. Thank you. Another question from James was to Luis. Luis, you referenced overcapacity in some segments. Where do you see the most challenged pricing within your business currently?

[Luis Antonio Gomes Araujo, Chief Executive Officer]

Okay. Well, I mentioned in Chevron, of course, we are not, luckily, on drill rigs or vessels -- supply vessels. So my -- and those are overcapacity. But on my portfolio, I would say that probably subsea capacity, even though it has been largely reduced especially by our competitors. And also, we took a shift and so on, so that's an area that we have still capacity, which good and bad. Bad, of course, is the pricing; and very good, is that we can ramp up if the market recovers faster than we think.

[Tove Røskaft, Head of Communications & Investor Relations]

Okay. Any more questions in the audience, yes?

[Magnus Olsvik, Equity Research Analyst]

Yes, Magnus Olsvik, Kepler Cheuvreux and Swedbank. First, a follow-up, I guess, from James' question. What type of segments were you -- do you see as most occupied? Just also following up on your comment earlier.

[Luis Antonio Gomes Araujo, Chief Executive Officer]

Okay. I think that what we need to worry and pay attention in the industry today is not only our own capacity but our sub-supply capacity. As you can imagine, during the downturn, people closed facilities, and they stopped investing. Now with some sub-suppliers, we're trying to convince them to invest. Of course, it's a long -- we have to prove to them that it will be a sustainable business. In terms of being busy, I think people -- and I'm very glad that in Aker Solutions, we maintain a lot of people through the downturn. Even moving down to 2 years, during the downturn, we actually invested a large amount of money to develop the new, what we call, the Åsgard. And if you look back at my presentation 2 years ago, I was presenting already what's done by us and MAN and ABB for the new system because we believe in the future. So by doing that, we preserve more capacity than actually we needed. And now it's great because we have these people, capable people. But I think the industry will lack people, in my view. And then that's -- we are very occupied now, engineering and brownfield. It's also important to highlight in certain locations, business and others, so we do have capacity in some locations such as, I guess, I would say U.K., London and also Asia Pacific. But of course, Norway is extremely busy in the brownfield. But we -- I also have to look forward. And even though this market has its fluctuation like any other markets, I would say probably people is where we have to focus.

[Magnus Olsvik, Equity Research Analyst]

And a second one, obviously, you had a very good unannounced order intake in Q1. Is that something you see continuing for the rest of the year as well? Was this one -- or Q1 a one-off in that regards?

[Luis Antonio Gomes Araujo, Chief Executive Officer]

Yes, I have to say that I hope so. But what happens that we have a lot of frame agreements. And sometimes, when we announce some FEED contracts, I keep repeating this because sometimes it's hard for people to understand that more and more clients are moving straight from FEED into execution. So sometimes, we announce a small FEED. And some of the brownfield can be NOK 50 million, and then suddenly you have is a NOK 500 million order. And we don't announce because we have announced already because we said we've got a FEED with an option for EPC. Plus there is also growth on contracts, so it's very hard to predict sometimes. And so I hope that happens. But if you look back, we also had some growth and now some call-offs in service contracts.

[Svein Oskar Stoknes, Chief Financial Officer]

Somewhat on the high side.

[Luis Antonio Gomes Araujo, Chief Executive Officer]

Yes, I think it's -- I would say that probably this quarter was in the high side on some areas. But -- yes, but we have repeated that before.

[Tove Røskaft, Head of Communications & Investor Relations]

Okay? Any more questions in the -- yes?

[Jonas Bito Shum, Credit Analyst]

Jonas Shum, credit analyst, Swedbank, Kepler Cheuvreux. So you have a bond maturity to swap, and I was thinking could you say something about your considerations about refinancing that?

[Svein Oskar Stoknes, Chief Financial Officer]

Yes. So as you correctly state, we have a bond maturing in October, and we are looking into the right timing of whether to go to market with a new bond. Of course, we have the flexibility with an undrawn revolver, NOK 5 billion worth, where we could use the opportunity to find the exact right timing to go to the debt market and raise another bond. Whether it would be a NOK bond or other alternatives, we haven't decided yet, but we keep all options open.

[Tove Røskaft, Head of Communications & Investor Relations]

Thank you. Any more questions in this room? The online audience seems to have got an answer to all their questions, so this is your chance. Okay?

[Luis Antonio Gomes Araujo, Chief Executive Officer]

Excellent.

[Tove Røskaft, Head of Communications & Investor Relations]

Then I think we say thank you.

[Luis Antonio Gomes Araujo, Chief Executive Officer]

Thank you very much.

[Svein Oskar Stoknes, Chief Financial Officer]

Thank you.

[Tove Røskaft, Head of Communications & Investor Relations]

And we'll have some time with one-on-one with the press.