GENERATIONS FOR
GENERATIONS
ATIONS
Arendals Fossekompani Q3 update
10 November 2023
arendalsfossekompani.no
Disclaimer
This Presentation includes and is based on forward-looking information and statements that are subject to risks and uncertainties that could cause actual results to differ from the projected results. These statements and this Presentation are based on current expectations, estimates and projections about global economic conditions and the economic conditions of the regions and industries that compose major markets for the businesses of Arendals Fossekompani ASA and its subsidiaries and affiliates (the "AFK Group"). These expectations, estimates and projections are generally identifiable by statements containing words such as "expects", "believes", "estimates" or similar expressions.
Important factors that could cause actual results to differ materially from those expectations include, among others, economic and market conditions in the geographic areas and industries that are or will be major markets for the businesses of the AFK Group, energy prices, market acceptance of new products and services, changes in governmental regulations, interest rates, fluctuations in currency exchange rates and such other factors as may be discussed from time to time in the Presentation. Although the AFK Group believes that its expectations and the Presentation are based upon reasonable assumptions, it can give no assurance that those expectations will be achieved or that the actual results will be as set out in the Presentation.
The AFK Group is making no representation or warranty, express or implied, as to the accuracy, reliability or completeness of the Presentation, and neither the AFK Group nor any of its directors, officers or employees will have any liability to you or any other persons resulting from the use of the Presentation.
Arendals Fossekompani in brief
- Long term industrial investment company $\bullet$
- Invest in B2B, energy and/or technology $\bullet$
- Active ownership $\bullet$ .
Main investments 9 (2 listed)
Employees 2,578
Countries 25
Listed on the Oslo Stock Exchange
1913
Head Office Arendal, Norway
AFK ownership 71%
Market cap (30.09) 1,002 MNOK
Head office Sherbrooke, Canada
Listed at Oslo Børs
AFK ownership
95%
Head office Skien, Norway
AFK ownership 100%
Head office Arendal, Norway
AFK ownership 100%
Head office Arendal, Norway
AFK ownership 100%
Head office Arendal, Norway
Market cap (30.09) 3,129 MNOK
AFK ownership 80%
AFK ownership
95%
Head office London, UK
Listed at Oslo Børs
Head office Arendal, Norway
$\mathcal{N}$
Our portfolio spans across the business life cycle
Strong underlying performance in portfolio companies
Highlights Q3 2023
Financial
- Arendals Fossekompani Group revenues: NOK 1.2 bn. 10% growth YoY.
- Operating profit: NOK 60m (127m), negatively affected by lower electricity prices.
- Quarterly dividend: NOK 1.00 per share. $\bullet$
Key developments in portfolio
- Strong performance from key portfolio companies $\bullet$ Volue, ENRX and Tekna.
- Still strong results from NSSLGlobal, but margins $\bullet$ are returning to more normal levels, as anticipated.
- Lower electricity prices had negative effects on $\bullet$ revenue and operating profit, compared Q3 last year.
Recurring revenue growth and margin expansion
Development last 5 quarters
Revenue and other income (MNOK) and operating margin
• Revenues: NOK 334 million (294 million).
Q3 update
- Adjusted EBITDA: NOK 63 million (50 million).
- Adjusted EBITDA-margin: 19% (17%).
- Recurring revenue: NOK 254 million, an increase of 40% compared to the third quarter of 2022, representing 76% of total revenues in the quarter.
- SaaS revenues: NOK 105 million, an increase of 50% compared to the third quarter of 2022, representing 31% of total revenues in the quarter.
- Large ongoing changes in end markets, like increased price and production volatility, as well as overall market complexity, are driving growth and further business opportunities for the company.
AFK ownership 80%
Head office London, United Kingdom
Q3 update Profits are stabilizing and pipeline is strong
Development last 5 quarters Revenue and other income (MNOK) and operating margin
- Revenues: GBP 21.4 million (GBP 22.1 million).
- EBIT: GBP 3.5 million (GBP 6.5 million).
- Lower operating profit in Q3 compared to unusually high profit in Q3 2022, largely driven by less high-profit government airtime revenues and some foreign exchange losses.
- Margins have come down to a normalized level, a development that has been anticipated for some time.
- Continued strong underlying performance, supported by a strong pipeline, solid customer base, competitive technology and service driven organization.
- During the third quarter, NSSLGlobal won GBP 10.0 million of new business.
ATEKNA
Listed at AFK ownership Head office Market cap (30.09) Sherbrooke, Canada 1,002 MNOK Oslo Børs 71%
Q3 update Strong revenue growth and improved margins
Development last 5 quarters
Revenue and other income (MNOK) and operating margin
- Revenue growth of 54% and adjusted EBITDA improved by CAD 2.2 million compared to Q3 2022.
- Year-on-year revenue and profitability growth is driven by increased customer demand, as well as successful implementation of capacity and productivity improvement programs.
- Seasonality (summer vacations) in Tekna's main markets affected the company's revenues, resulting in a 18% lower revenues in Q3 compared to Q2.
- Total order backlog of CAD 23.7 million, a 58% increase from third quarter last year, supporting revenue growth for 2023 compared to 2022.
Q3 update Heat still performing well, developing charge segment
Development last 5 quarters
Revenue and other income (MNOK) and operating margin
- Revenues increased by 8% year-over-year to EUR 36.8 million in the quarter, primarily driven by a higher activity level within the Heat division.
- Solid revenue growth in Europe. Some sliding project deliveries in Asia and North America are pushing revenues into Q4.
- Operating profit was EUR 2.6 million (7% margin) in Q3, up from EUR 1.2 million during the same period last year (4% margin).
- Order intake remains strong. Total order intake EUR 38.1 million, compared to EUR 36.7 million in Q3 last year.
- A total order backlog of EUR 171.5 million, creating a solid foundation for continued profitable growth for the remainder of the year and also into 2024.
ampwell
AFK ownership Head office 100% Arendal, Norway
Q3 update Ramping up to meet growing demand
Development last 5 quarters Revenue and other income (MNOK) and operating margin
- Revenues in Q3 were EUR 2.0 million, compared to EUR 3.4 million in Q3 2022.
- Fluctuating revenues and profits are expected as the company is in early-stage development. In addition, lower revenues are partly driven by a German temporary general price cap on electricity prices, delaying investments in new storage.
- Operating profit was EUR -1.8 million. Operational ramp-ups in both Commeo and Cellect, as well as Ampwell parent company, contributed to negative margins.
- The first part of Commeo's new production facilities is estimated to be finalized in second half of 2024 and will over time enable above 1 GWh production capacity.
- Following the launch of an important pilot project with Volkswagen charging company Elli in July, Cellect is now targeting several companies with utility scale portfolios of storage assets that need to be managed.
alytic
AFK ownership 95%
Head office Arendal, Norway Portfolio Kutel Factlines. KONTALI Veyt
Q3 update Growing ARR and introducing new products
Development last 5 quarters
Revenue and other income (MNOK) and operating margin
The annual recurring revenues (ARR) for the portfolio grew to NOK 39 million, representing an 8% increase compared to the previous quarter and 52% YTD.
ARR growth was driven by underlying strong demand and customer growth, introduction on new products and upselling to existing customers
- Kontali grew ARR by 14% compared to previous quarter.
- Veyt grew ARR by 38% compared to the previous quarter.
- Factlines: ARR growth of 5% compared to the previous quarter.
- Utel has a strong emphasis on outbound sales. The company's sales pipeline is strong and ARR movement in the coming quarters is expected.
N: VANNKRAFT
AFK ownership 100%
Head office Arendal, Norway
Ower electricity prices, higher production
EBA
- Average electricity price in the NO2 price area during Q3 was 57 EUR/MWh, 84% reduction compared to Q3 2022 (352 EUR/MWh)
- Hydropower production amounted to 115 GWh (42GWh) in Q3.
- The primary cause of the lower price level compared last year was higher precipitation than normal, lifting the hydro reservoir levels Norway. Also, last year's unusually strong electricity prices were partly driven by high prices for gas due to uncertain gas supply in Europe.
Financials
$14$
$\sqrt{5}$
Profitability is still strong, but affected by lower electricity prices compared to Q3 last year
- Profitability improvement in portfolio $\bullet$ companies Volue, ENRX and Tekna.
- NSSLGlobal: Profitability still strong, but lower compared to high levels previous year.
- Reduced profit from hydropower due $\bullet$ to considerably lower electricity prices.
Outlook: $\bullet$
AFK expects both revenues and operating profit for the Group to be higher in 2023 compared to 2022.
The Group expects continued revenue growth in 2024, whilst operating profit is expected to be in line with 2023.
| Operating Profit (MNOK) |
Q32023 |
Q3 2022 |
Difference |
| volue |
25 |
19 |
$+6$ |
| NSSLGlobal |
47 |
76 |
$-29$ |
| ATEKNA |
$-22$ |
$-45$ |
$+23$ |
| ENRX |
29 |
12 |
$+17$ |
| N: VANNKRAFT |
34 |
90 |
$-56$ |
| ampwell |
$-27$ |
$-10$ |
$-17$ |
| alytic |
$-22$ |
$-12$ |
$-10$ |
| X Vergia |
$-2$ |
$-2$ |
$\blacksquare$ |
| $\mathbf{N}$ Property |
$-3$ |
$-2$ |
$+1$ |
| Arendals Fossekompani Consolidated |
60 |
127 |
$-67$ |
15
Total available liquidity in AFK Parent 30.09.23 (NOK million)
NOK 1.1bn in cash, 2.4bn in available liquidity
Guiding
Following high activity levels in all portfolio companies, 2023 revenue and operating profit for AFK Group as a whole is expected to be higher than in 2022.
The Group expects 2024 revenue to be higher than in 2023. Operating profit for 2024 is expected to be in line with 2023.
- Volue guides on long term organic growth of 15% as well as $\bullet$ improvements in adjusted EBITDA and cash conversion for both 2023 and 2024.
- Tekna expects revenues to be higher and operating profit to improve in 2024 compared to 2023.
- ENRX expects revenues and operating profit to be higher in $\bullet$ 2024 compared to 2023.
- NSSLGIobal expects 2024 revenues to be in line with 2023. $\bullet$ Operating profit is expected to be lower next year, largely due to lower airtime revenues.
Outlook and Closing Summary
$\lambda$
Outlook
- Energy transition, electrification and $\bullet$ digitization will continue to drive growth in portfolio companies.
- Capital to be carefully allocated toward $\bullet$ accelerating most promising growth opportunities.
- Short to medium term focus on realizing $\bullet$ full value potential in existing portfolio.
- We do not expect significant new investments on AFK level in short to medium term, and limited capital market activity, however M&A agenda in portfolio companies.
Closing summary
- Strong underlying results with positive outlook, $\bullet$ but profitability this quarter is affected by lower electricity prices compared to last year.
- Focused business development on-going $\bullet$ in all portfolio companies driving growth in long term NAV.
- Diversified and well positioned portfolio $\bullet$ ensuring both stable cash flow and attractive growth opportunities
- Balance sheet supports both continued $\bullet$ cash dividend and fuelling growth.
ENRX
Company Deep Dive
Bjørn E. Petersen, Chief Executive Officer of ENRX
The right energy can take you anywhere
OUR MISSION
+
One of the global market leaders in induction heating for advanced manufacturing.
70+years
25+years
A global innovator within wireless inductive charging and contactless power transmission.
Top3
player in selected induction heating markets
The global leader within induction technology
€132 m
Revenue 2022
22%
Revenue Growth YTD 2023
1 100+
Number of employees
Global trends and shifts
Electrification in most industries strongly favour induction technology
Increasing the adoption of electric vehicles and autonomous mobility
Product development based on Industry 4.0 standards trigger renewal of customer equipment range, while enhancing recurring service revenue potential
Induction heating works virtually everywhere
Heating systems from ENRX can be used in almost every industrial application imaginable. We create value by combining induction expertise and materials know-how with experience of production processes worldwide.
25,000 +
Induction systems installations in many of the world's most demanding industries.
Countries.
Wireless systems paves the way for the future
Wireless energy transfer is underway to change the way in which we work and live our lives – how we extract raw materials, manufacture products, organise transports and build cities.
25 +
million km driven on wireless charging.
100 +
km of industrial tracks worldwide.
Large and growing markets
Driven by increasing electrification and automation
ENRX segment focus and strategy towards 2030
Source: Market research conducted by third party consultant, Company estimates (1) Not part of market sizing due to uncertainty of mass market adoption
Well-defined growth and profitability targets
ENRX outlook for 2030
The induction technology
champion Revenue growth Margin expansion Capital-light growth strategy boosted by green transition
Leveraging leading position within heating into emerging charging segments on the back of IP protected technology platform
Moderate organic growth and market share gains in heating complemented with strong growth potential within charging
Strong CAGR throughout decade excluding additional growth from potential M&A targeted to strengthen product and technology offering
Economies of scale, boosting margins and further strengthening free cash flow generation and return on capital employed
OUR VISION
VISITING ADDRESS Langbryggen 9, 4841 Arendal
POSTAL ADDRESS Box 280, 4803 Arendal
+47 37 23 44 00 [email protected] arendalsfossekompani.no
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