Boskalis Annual Report 2018

boskalis at a glance ANNUAL REPORT 2018 – BOSKALIS 12 In addition, we need to be able to act as lead contractor, and project management experience is essential. In the contracting segment with its higher margin potential we expressly position ourselves towards the top of the S curve. The more straightforward services assets are positioned at the lower end of the S curve. Some of these services support contracting projects but the bulk of the business is third-party services revenue. Here the emphasis lies on sustaining fleet utilization levels whilst maintaining a responsible risk profle, with cost leadership being an important prerequisite. The S curve concept is dynamic in time and we therefore need to be critical with regard to the scope for adding suffcient value to assets at the bottom of the S curve. A structural shift in supply and demand can for example cause a former value-adding asset to be structurally repositioned lower on the curve. If this results in an asset becoming a commodity that cannot be moved up the S curve, we will consider divesting it. Conversely, modifying an existing asset or deploying it in a new market segment – for The Rockpiper installing rock next to the DolWin Alpha and Gamma converter platforms ASSETS Added Value Complexity Contracting Services Figure 5: S curve - creating value with assests Figure 4: S curve – creating value with assets

example in conjunction with our high-value contracting activities – can result in it being repositioned higher on the curve. Boskalis manages its portfolio of assets actively to be able to respond to such market dynamics. The essence of our value-adding asset concept is that we aim to move up the S curve. Results: Our decision in 2018 to discontinue the low-end transport activities is a good illustration of our focus on value adding assets. At the time of the Dockwise acquisition, part of the fleet served the high-end oil and gas clients, whilst the lower half clearly served a more commoditized market segment. When market demand was strong these low-end vessels made a healthy contribution, but as the balance between supply and demand shifted, this part of the business became a price takers market with ultimately negative cashflows. Without there being a prospect to add value with these assets, the decision was made to discontinue these transport activities. The announcements early 2019 to sell the stakes in the Saam Smit Towage (SST) and Kotug Smit Towage (KoST) joint ventures are also a reflection of our value adding focus. Whilst harbor towage is a relatively stable and low-risk activity within the group, the ability to generate incremental value versus competitors is extremely limited. The competitive situation in the regions where SST and KoST operate made this situation all the more visible. The intended sale of both stakes therefore allows Boskalis to allocate the cash from these transactions to growth opportunities higher on the S-curve and to return part of it to shareholders. Activity and Market focus Our core activities are focused on geographic regions and market segments that offer us the greatest opportunities whereby we provide our services on both a combined and a standalone basis. Our mix of activities gives us a broad geographical scope. Some of our activities, such as Dredging, Transport, Towage and Salvage, have a truly global reach, while others have a regional focus. For example, our Inland Infra activities are concentrated on