ABL Group — Investor Presentation 2017

Oct 26, 2017

THIRD QUARTER RESULTS 2017 October 26, 2017

aqualis.no

Disclaimer

• This Presentation has been produced by Aqualis ASA (the "Company" or "Aqualis ") solely for use at the presentation to investors and other stake holders and may not be reproduced or redistributed, in whole or in part, to any other person. This presentation is strictly confidential, has not been reviewed or registered with any public authority or stock exchange, and may not be reproduced or redistributed, in whole or in part, to any other person. To the best of the knowledge of the Company, the information contained in this Presentation is in all material respect in accordance with the facts as of the date hereof, and contains no material omissions likely to affect its importance. However, no representation or warranty (express or implied) is made as to, and no reliance should be placed on, any information, including projections, estimates, targets and opinions, contained herein, and no liability whatsoever is accepted as to any errors, omissions or misstatements contained herein, and, accordingly, neither the Company nor any of its subsidiary companies or any such person's officers or employees accepts any liability whatsoever arising directly or indirectly from the use of this Presentation. This Presentation contains information obtained from third parties. Such information has been accurately reproduced and, as far as the Company is aware and able to ascertain from the information published by that third party, no facts have been omitted that would render the reproduced information to be inaccurate or misleading.
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Agenda

1. Highlights David Wells CEO

1. Financial review Kim Boman CFO

2. Outlook David Wells

CEO

Q3 2017 Highlights - Strong operational performance

• Revenues of USD 7.3 million in Q3 2017 vs USD 6.4 million in Q3 2016
• High activity level maintained in a traditionally weak quarter
• Operating profit (EBIT) of USD 0.1 million in Q3 2017 vs loss of USD 0.7 million in Q3 2016
• Billing ratio¹ for technical staff of 83% in Q3 2017, same level as in Q2 2017
• Improved cash balance of USD 9.8 million at the end of Q3 2017
• Order backlog at USD 8.5 million vs USD 10.3 million at the end of Q2 2017
• Activity in offshore wind market still remains high and new contracts have been secured
• ADLER Solar² increasing the bidding activity, but sales taking longer time to close
• Continued solid HSE performance and no lost time incidents (LTIs) during the quarter

Energy consultancy with significant market niche positions

• Global presence with established market position
• Marine consultancy and engineering services
• Clients: Asset owners, oil companies, EPC contractors, financial institutions, insurance companies

Offshore Oil and Gas Offshore renewables Solar¹

• Main activity in Europe
• Geotechnical & engineering, project management and due diligence for technology, projects and markets

• Clients: Developers, utilities, vessel owners, financial institutions, insurance companies, investors

• Strong position in Germany. Increasing exposure in Japan

• Technical services for the entire life cycle of PV plants
• Clients: PV manufacturers, plant operators, EPC contractors, financial institutions, insurance companies, investors

Enhanced service offering through the groups global network, client base, resources and expertise

1) Aqualis has an ownership of 49.9% in ADLER Solar

Norway - Johan Sverdrup Drilling Platform

The various modules for the Johan Sverdrup Drilling Platform have been manufactured at different yards.

Aqualis Offshore AS has performed on behalf of Nymo AS hazard analyses (HAZOPS) for the loadout, transportation, lifting and stacking of the modules as well as a HAZOP of the final transport of the Drilling Equipment Set (DES).

Australia - Ichthys project – Positioning of CPF and FPSO

• Engineering
• Position Keeping Marine Procedure and Execution
• Attendance offshore to supervise the station keeping operation
• Provision of Station Keeping Masters
• 24 hours operation

FPSO

• 21 mooring lines (spread) in clusters of 7
• Mooring lines are to be pre-installed and pre-laid on the seabed, before the vessel arrives in field

CPF

28 mooring lines (spread) in clusters of 7

Ichthys Explorer – Positioning of CPF (Ichthys Explorer)

On 29 May 2017 the 120,000 tonnes "Ichthys Explorer" reached its final destination in Australian waters, 220 kilometres off the north coast of Western Australia.

Ichthys Explorer – Positioning of CPF

Aqualis Offshore managed the position keeping procedure and provided the position keeping masters offshore while the CPF has been secured with eight anchors in total – two in each corner – to make it storm safe

The full mooring of the CPF uses a 28-point spread mooring system with chain-wire rope-chain line make-up attached to driven anchor piles

Ichthys Venturer – Positioning of FPSO (Ichthys Venturer)

In August 2017 Aqualis Offshore successfully completed our position keeping role for the Ichthys Venturer FPSO which is now fully moored in Australian waters.

Vessel specs : Length 335 m Beam 59m Deadweight 340,000 tonnes

Aqualis Offshore also managed the position keeping procedure and provided position keeping masters offshore while the FPSO was secured with a 21-line mooring system.

With all mooring lines connected, Aqualis Offshore's position keeping masters are staying on board for heading control through the installations of the umbilical and flexible risers

Bahrain LNG Terminal – Platform Transportation & Installation

The project is being developed to supplement local gas production in Bahrain to ensure capacity to meet peak seasonal gas demand and industrial growth

The LNG import terminal will be located offshore approximately 4 km east of the onshore receiving facility at the Khalifa Bin Salman port

An offshore LNG terminal with an FSU will be constructed. The project will have a capacity of 800 million standard cubic feet per day and will be completed in early 2019

It will comprise a floating storage unit (FSU), an offshore LNG receiving jetty and breakwater, an adjacent regasification platform, subsea gas pipelines from the platform to shore, an onshore gas receiving facility, and an onshore nitrogen production facility

Aqualis Offshore's scope of work covers the regasification platform

Bahrain LNG Terminal – Jacket Transportation & Installation

Aqualis SOW:

• Engineering related loadout, transportation and float on / off operation for jacket installation, including marine procedures
• Site supervision during loadout and installation

Jacket Weight (NTE) = 2,022 MT

Transportation Vessel "CCCC Semi-Submersible HLV Wishway"

Route: South Korea to Bahrain (floatoff location water depth > 20m)

Will be installed by float off and controlled submergence onto seabed

Bahrain LNG Terminal – Topside Transportation & Installation

Aqualis SOW:

• All engineering related loadout, transportation and floatover operations for topside installation, including specification and marine procedures.
• Assist Client in management of project interfaces.
• Monitoring of grillage and vessel outfitting preparation by shipyard.
• Site supervision during loadout and floatover operations.

Topside Weight (NTE) = 7,200 MT

Transportation Vessel "Boskali Giant 5/ 6" Route: Thailand to 4.3km north east of the Muharraq Sewage Treatment Plant, Bahrain (water depth 17m)

UK – Offshore Wind Geotechnical Project

Offshore Wind Consultants Limited (OWC) has been awarded a contract for Scottish Power Renewables' East Anglia THREE offshore windfarm to provide project management services on a geotechnical site investigation covering:

• conceptual foundation design
• risk appraisal
• turbine layout assessment
• strategy support

The East Anglia THREE project is the second project to be developed in the East Anglia Zone

It covers an area of approximately 305 square kilometres, and ScottishPower Renewables anticipates up to 172 wind turbines, each having a rated capacity of between 7 megawatts (MW) and 12 MW with an installed capacity of up to 1,200 MW.

Module M-05 being loaded out in Brazil onto m.v. "Jumbo Fairmaster" at Teporti Terminal in Itajai Port, Santa Catarina for the voyage to China

This is the heaviest ever single lift by a ships crane weighing in at 1140 tonnes

Aqualis Offshore was acting as MWS for Teporti on behalf of COOEC.

GOM - MP261JP Platform Decommissioning Project

• Removal of jacket and Topside using Versabar's VB 10000 twin truss crane

OWC and Aqualis -Strong platform in place for developing offshore wind business

Geotechnical assessment & support:	6.6 GW
Project management & support (incl. OE):	5.5 GW
Subsea cables consultancy (route, risk, remediation):	5.0 GW
Offshore Substations advisory:	2.4 GW
TDD & Peer Review of offshore wind projects:	2.5 GW
Total Experience	22.0 GW

• Strong market foothold based on industry recognised experience, a strong brand and an excellent reputation
• Aim to strengthen its market position within offshore wind market in Europe and assess opportunities for geographical expansion
• New project recently secured in the US and other opportunities evaluated
• Emerging floating offshore wind market

Note: Excludes work on assignments considered confidential, so above project list is not exhaustive.

Order backlog development

Order backlog (USDm) Highlights Q3 2017

• Decrease in order backlog to USD 8.5m, partly related to change in scope on project held by OWC
• Pipeline of work expected from call out contracts is more positive, but visibility is limited and timing is hard to predict
• Backlog upside affected by re-focused strategy of supporting clients on day-to-day service operations which are typically callout contracts that are only included in backlog figures when reliable estimates are available

Staff level development

Staff level development¹ Highlights Q3 2017

• The net increase in staff levels is related to increase in use of subcontractors
• The increased use of subcontractors allows a more flexible cost base whilst the short term outlook / position of the market is assessed

(1) Full time equivalent. Numbers include subcontractors on 100% utilization equivalent basis (2) Figures excluding ADLER Solar and staff made temporary redundant

Improved billing ratio trend at start of 2017

- Total technical staff (including subcontractors), billing ratio %

Notes:

(1) Billing ratio for Technical Staff including subcontractors. Excludes management, business development, admin support staff and temporary redundancies. Figure calculated as billable hours / available hours. Available hours excludes paid absence (public holidays, time off in-lieu, compassionate leave, authorized annual leave) and unpaid absence (sabbatical and other unpaid leave). Figures excluding ADLER Solar

Agenda

1. Highlights David Wells CEO

2. Financial review Kim Boman CFO

1. Outlook David Wells CEO

Revenue and adjusted EBIT trend

Revenue development (USDm) Adjusted EBIT trend (USDm, %)

Adjusted EBIT: Earnings Before Interest and Taxes adjusted goodwill impairments

Geographical split

• Regional revenue differences y-o-y for entities respectively in Middle East +24%, Far East +20%, Europe +1% and Americas 0%

1) After allocation of group costs to entities. Corporate group costs that are not allocated to entities are included in «other»

2) Includes share of net income from associates, eliminations and corporate group costs

ADLER Solar - Repositioning of services progressing

Foundation	Growing	«Infrastructure»
Recall/After sales	Repowering	EPC	Add on services
• De- and re-mounting and repair of components. Work on warranty or guarantee claim • Clients: solar module manufacturers (and other solar component manufacturers) • Strong market position (#1 in Germany). Offered since incorporation in 2009 and has historically constituted the majority of activity • Approx 32% of gross revenues YTD 2017	• Change of modules and other components according to legal feed-in regulations • Clients: PV plant owners, banks, investors • Emerging market. Strong market position (#1 in Germany). Service launched in 2016 • Approx 29% of gross revenues YTD 2017	• Engineering, procurement and contruction of new pv sites • Clients: PV plant owners, investors • Fragmented market, many playes have gone out of business. Service launched in 2017 • Approx. 4% of gross revenues YTD 2017	• Expert reports, test center, inverter repair, technical due diligence, consultancy services • Clients: solar component manufacturers, PV plant owners, investors, insurance companies • Approx. 35% of gross revenues YTD 2017
More use of subcontractors

Income Statement

Amounts in USD thousands	Q3 17	Q3 16	YTD 17	YTD 16	FY 2016
Total revenues	7,312	6,364	22,187	21,380	27,564
Payroll and payroll related expenses	(3,706)	(4,280)	(11,460)	(15,188)	(19,303)
Other operating expenses	(3,329)	(2,631)	(9,527)	(8,691)	(11,016)
Depr., amort. and impairment	(34)	(48)	(98)	(178)	(794)
Total operating expenses	(7,069)	(6,959)	(21,085)	(24,057)	(31,113)
Share of net income from associates	(113)	(103)	(346)	(329)	(506)
Operating profit (loss) (EBIT)	130	(698)	756	(3,006)	(4,055)
Finance income	12	2	53	17	47
Finance expenses	-	(2)	(2)	(3)	(0)
Net foreign exchange gain (loss)	(464)	326	(906)	(576)	(10)
Profit (loss) before taxes	(322)	(372)	(99)	(3,568)	(4,018)
Income tax income (expenses)	(103)	(13)	(147)	(55)	144
Profit (loss) after taxes	(425)	(385)	(246)	(3,623)	(3,874)
Financial ratios
Operating margin (EBIT), %	1.8	(11.0)	3.4	(14.1)	(14.7)
Profit after tax, %	(5.8)	(6.1)	(1.1)	(16.9)	(14.1)

• Revenues for Q3 2017 up 15% from Q3 2016
• Operating profit of USD 0.1 million
• Results from associated companies amounted to a loss of USD 0.1 million

Strong Balance Sheet

Amounts in USD thousands	30.09.2017	31.12.2016
Equipment	191	184
Intangible assets	17,022	16,257
Investment in associates	2,812	2,853
Loan to associates	234	289
Deferred tax assets	103	122
Trade receivables	5,839	5,475
Other current assets	4,017	2,815
Cash and cash equivalents	9,753	9,910
Total assets	39,971	37,905
Equity	34,864	33,081
Deferred tax liability	460	425
Other non-current liabilities	574	527
Trade payables	1,569	1,093
Other current liabilities	2,504	2,779
Total equity and liabilities	39,971	37,905
Financial ratios
Net debt, USD thousands	(9,753)	(9,910)
Equity/Assets ratio, %	87%	87%

• Strong financial position, cash of USD 9.8 million
• No interest bearing debt
• The net working capital will fluctuate during the year with type of projects, milestone payments and the overall revenues

Cash Flow

Amounts in USD thousands	Q3 17	Q3 16	YTD 17	YTD 16	FY 2016
Operating cashflow	799	(652)	(218)	(3,533)	(4,127)
Investing cash flow	(52)	(0)	(55)	(5)	(382)
Financing cash flow	-	-	-	(368)	(368)
Net change in cash and cash equivalents	747	(652)	(273)	(3,906)	(4,877)
Cash and cash equivalents beginning period	8,948	11,684	9,910	14,864	14,864
Net change in cash and cash equivalents	747	(652)	(273)	(3,906)	(4,877)
Net foreign exchange difference	58	59	116	133	(77)
Cash and cash equivalents end period	9,753	11,091	9,753	11,091	9,910

• Net operating cash flow of USD 0.8 million. Impacted by decrease in net working capital

Agenda

1. Highlights David Wells CEO

2. Financial review Kim Boman CFO

3. Outlook David Wells

CEO

Outlook: Is the market turning ?

• Aqualis view is that the upcycle has started, but prices and margins are still low.
• The oil and gas market has shown more stability and some strengthening in certain regions. Aqualis expects growth in the Middle East and for Asia to remain strong. This expectation is likely due to improved market conditions and gaining increased market share
• The order backlog and visibility remains primarily short term. The overall activity level for Aqualis in Q4 2017 is expected to be roughly in line with Q3 2017
• The offshore wind market is expected to maintain high activity levels but with continued rate pressure over the next quarters
• The fall in solar module price is expected by the ADLER Solar management to lead to increased demand for new installations of PV plants in Germany. ADLER Solar has had a good start in Q4 2017 with several contract wins and high bidding activity. The results for ADLER Solar are expected to improve in Q4 2017 with additional profitability measures being implemented
• Consolidation is needed in the marine and engineering consultancy industry to mitigate oversupply, rationalize global operations and achieve better economies of scale
• Aqualis has over the past year moved to a more flexible cost base. Aqualis aims to continue to strengthen its overall market position

Appendix

Top 20 shareholders

	Name		Shares	%
1	GROSS MANAGEMENT AS		7 367 996	17,42
2	TIGERSTADEN AS		3 396 188	8,03
3	MP PENSJON PK		1 667 628	3,94
4	Carnegie Investment	NOM	1 580 886	3,74
5	AGITO HOLDING AS		1 350 000	3,19
6	Saxo Bank A/S	NOM	1 079 212	2,55
7	LGT Bank AG	NOM	1 016 830	2,40
8	DIAB BADREDDIN		1 001 302	2,37
9	DnB NOR MARKETS, AKS DNB Bank ASA		988 000	2,34
10	LENOX PHILIP ALAN		830 583	1,96
11	GISLERØD MAGNE		800 000	1,89
12	SIX SIS AG 25PCT ACCOUNT	NOM	624 682	1,48
13	ALSTO CONSULTANCY LT 1 ST FLOOR 5		598 122	1,41
14	Nordnet Bank AB	NOM	587 840	1,39
15	BONNON IAN DENNIS		555 074	1,31
16	VERDIPAPIRFONDET DNB V/DNB ASSET		530 380	1,25
17	THEOFANATOS ANDREAS		512 188	1,21
18	KULA INVEST AS		504 362	1,19
19	OMA INVEST AS		500 000	1,18
20	SIX-SEVEN AS		472 717	1,12
	Top 20 shareholders		25 963 990	61,39

Source: VPS, 17.10.2017

Global footprint – active in all major oil and gas regions

Energy consultants to the oil & gas, offshore renewable and solar sectors

1) Per September 2017. Including FTE subcontractors but excluding ADLER Solar. Adler Solar has ~76 employees

The European Securities and Markets Authority (ESMA) issued guidelines on Alternative Performance Measures ("APMs") that came into force on 3 July 2016. The Company has defined and explained the purpose of the following APMs:

Operating profit adjusted

Management believes that "Operating profit adjusted" which excludes impairments of goodwill and other charges/(income) is a useful measure because it provides an indication of the profitability of the Company's operating activities for the period without regard to significant events and/or decisions in the period that are expected to occur less frequently

Profit (loss) after taxes adjusted

Management believes that "Profit (loss) after taxes adjusted" which excludes impairments of goodwill and other charges/(income) is a useful measure because it provides an indication of the profitability of the Company's operating activities for the period without regard to significant events and/or decisions in the period that are expected to occur less frequently.

Order backlog

Order backlog is defined as the aggregate value of future work on signed customer contracts or letters of award. Aqualis' services are shifting towards "call out contracts" which are driven by day-to-day operational requirements. An estimate for backlog on "call out contacts" are only included in the order backlog when reliably estimates are available. Management believes that the order backlog figure is a useful measure in that it provides an indication of the amount of customer backlog and committed activity in the coming periods