ABL Group — Investor Presentation 2019

Feb 28, 2019

Aqualis ASA 2018 Q4 results February 28, 2019

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.
• This Presentation contains certain forward-looking statements relating to the business, financial performance and results of the Company and/or the industry in which it operates. Forward-looking statements concern future circumstances and results and other statements that are not historical facts, sometimes identified by the words "believes", expects", "predicts", "intends", "projects", "plans", "estimates", "aims", "foresees", "anticipates", "targets", and similar expressions. The forward-looking statements contained in this Presentation, including assumptions, opinions and views of the Company or cited from third party sources are solely opinions and forecasts which are subject to risks, uncertainties and other factors that may cause actual events to differ materially from any anticipated development. None of the Company or any of its parent or subsidiary undertakings or any such person's officers or employees provides any assurance that the assumptions underlying such forward-looking statements are free from errors nor does any of them accept any responsibility for the future accuracy of the opinions expressed in this Presentation or the actual occurrence of the forecasted developments. The Company assumes no obligation, except as required by law, to update any forward-looking statements or to conform these forward-looking statements to our actual results.
• AN INVESTMENT IN THE COMPANY INVOLVES RISK, AND SEVERAL FACTORS COULD CAUSE THE ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS OF THE COMPANY TO BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS, PERFORMANCE OR ACHIEVEMENTS THAT MAY BE EXPRESSED OR IMPLIED BY STATEMENTS AND INFORMATION IN THIS PRESENTATION, INCLUDING, AMONG OTHERS, RISKS OR UNCERTAINTIES ASSOCIATED WITH THE COMPANY'S BUSINESS, SEGMENTS, DEVELOPMENT, GROWTH MANAGEMENT, FINANCING, MARKET ACCEPTANCE AND RELATIONS WITH CUSTOMERS, AND, MORE GENERALLY, GENERAL ECONOMIC AND BUSINESS CONDITIONS, CHANGES IN DOMESTIC AND FOREIGN LAWS AND REGULATIONS, TAXES, CHANGES IN COMPETITION AND PRICING ENVIRONMENTS, FLUCTUATIONS IN CURRENCY EXCHANGE RATES AND INTEREST RATES AND OTHER FACTORS.
• SHOULD ONE OR MORE OF THESE RISKS OR UNCERTAINTIES MATERIALISE, OR SHOULD UNDERLYING ASSUMPTIONS PROVE INCORRECT, ACTUAL RESULTS MAY VARY MATERIALLY FROM THOSE DESCRIBED IN THIS PRESENTATION. THE COMPANY DOES NOT INTEND, AND DOES NOT ASSUME ANY OBLIGATION, TO UPDATE OR CORRECT THE INFORMATION INCLUDED IN THIS PRESENTATION.
• By attending or receiving this Presentation you acknowledge that you will be solely responsible for your own assessment of the market and the market position of the Company and that you will conduct your own analysis and be solely responsible for forming your own view of the potential future performance of the Company's business. This Presentation does not constitute an offer to sell or a solicitation of an offer to buy any securities in any jurisdiction to any person to whom it is unlawful to make such an offer or solicitation in such jurisdiction.

Agenda

1. Highlights David Wells CEO

1. Financial review Kim Boman CFO

2. Outlook David Wells

CEO

2018 Highlights Growth continues - Led by offshore renewables

4

Q4 2018 Highlights Growth continues - Led by offshore renewables

• Revenues of USD 9.8 million in Q4 2018 vs USD 8.9 million in Q4 2017
• EBITDA of USD 0.9 million in Q4 2018 vs USD 0.7 million in Q4 2017
• Adjusted EBIT of USD 0.9 million in Q4 2018 vs USD 0.6 million in Q4 2017
• Strong billing ratio¹ of 84 % in Q4 2018
• Continued solid HSE performance and no lost time incidents (LTIs) during the quarter
• Robust financial position with cash balance of USD 5.5 million
• Offshore renewable business growing and increasingly important for group
• Strong operational performance for our new office in Taiwan
• Activity in offshore wind market is high and expanding globally
• The oil & gas market showing signs of recovery
• Order backlog up to USD 7.8 million with similar increase in pipeline of opportunities

New office opened in Perth, Australia

• Aqualis Offshore has established a new office in Perth, Western Australia, to support oil & gas and renewables developments in the Australasia region
• Aqualis Offshore will offer the full suite of the company's services including;
• Concept, FEED and basic design engineering
• Transportation & installation
• Marine consultancy and rig moving
• Dynamic positioning & critical systems
• Marine warranty and marine casualty surveys
• Construction supervision and rig inspection, preservation and reactivation
• Technical due diligence; risk consulting and renewables

Aqualis at a glance – A leading global energy consultancy

Aqualis Offshore – oil & gas focus

Development in revenues ¹ (USDk)

(1) Unaudited pro forma figures. Includes revenues from Tristein AS from May 2014 and onwards

8

• Adjustment to

lines (rig inspection)

• Geographical expansion

E&P spending development

Break even oil price for oil majors Global offshore E&P spending

(1) Free cash flow break even oil price after capex and dividend

Source: Sparebank 1 Markets, Jan 2019 Source: Sparebank 1 Markets, Jan 2019

Rig market development

Working offshore rig count Rig contracting activity

Source: SpareBank 1 Markets & IHS Markit, Jan 2019 Source: SpareBank 1 Markets & IHS Markit, Jan 2019

Wind Turbine Installation Vessel – Construction supervision

• Aqualis completed the construction supervision of Ouyang Offshore's new-build self-elevating wind turbine installation vessel, OuYang 1, at Dayang Offshore Equipment yard in Jiangsu, China. The delivery ceremony was held in January 2019
• Construction supervision for Ouyang Offshore's second wind turbine installation vessel, OuYang 2, is ongoing
• A wind turbine installation vessel can rapidly raise its hull clear of the water to provide a stable platform for offshore construction and O&M works

Bahrain LNG Terminal Project – multi faceted loadout/marine installation operation completed

• Loadout of the 7200 MT topside took place in Thailand onto a smaller installation "Giant 5" barge
• Barge and topside piggy backed onto a large self propelled dry transportation HLV
• Topside and installation barge discharged offshore Bahrain
• Topside installed by floatover within shallower water terminal area
• Installation of the jacket, fabricated in South Korea, was engineered and managed by Aqualis in May 2018

FPSO P-76 – MWS, Naval Architecture and Marine Operations

• MWS for the integration of topsides to the FPSO P-76 at Techint Yard, Brazil
• Additional work included Naval Architecture and Marine Operations scopes, incl. stability manuals, and provision of Towmasters for the tow to Santos Basin

FPSO P-76 departed to the field in December 2018

Selected projects in Middle East

• Q4 2018 completion of MWS work on the Aramco field development jacket and deck loadouts in Dammam for SNP/Taqa
• Increased vessel inspection numbers and RMM client portfolio in KSA
• On going recruitment of new staff to our Bahrain, Doha and Dubai offices

OWC Provides Advisory Services Across the Market

Projects

Development, Engineering, Commercial, Technical & Project Management Support over Whole Lifecycle

Transactions

Technical Due Diligence Advisory

Business Intelligence

Market &Technology Studies & Strategy

Experience Snapshot In Some Segments

Of projects

27 GW (50 projects)

6.5 GW

5.1 GW

We have worked on many projects world wide since 2011

Due Diligence

We have undertaken peer reviews & TDD at many critical stages of projects

Geotech & engineering

We have experience of soil conditions world wide. We also optimise, reduce costs and reduce uncertainty of substructure concepts

Subsea cables

We design & evaluate risks of cable routes, determine or evaluate installation methodologies & advise on O&M & repair issues

Offshore substations

We can advise on specification, siting, procurement & construction of offshore & onshore transmission assets

Project management

We have realised full projects & support developers during preconstruction & construction

3 GW

19 GW

13 GW

Offshore Wind Consultants – offshore wind focus

(1) Unaudited pro forma figures

Global offshore wind market development

Offshore wind capacity development Comments

• Industry analyst expect the global offshore wind market to grow at 17% compound annual return from 2018 to 2025
• Strong growth both in Europe and in emerging markets. Europe's share of global offshore wind capacity expected to fall from 76% in 2018 to 62% in 2025
• China expected to constitute 21% of the global installed base in 2025

Source: SB1M June 2018, 4C offshore, WindEurope 2017

Project Management Consultancy

• The project:
• Confidential Taiwan Offshore Wind project
• c400 MW project
• Circa EUR 2.3 BN of CAPEX
• Jacket-foundation project in a highly seismic area
• Client: Confidential
• OWC Scope:
• We are embedded into the project team 16 roles including: EPC Director, Foundation Package Manager, Site Conditions Manager, Geotechnical Engineers, Risk Manager, Interface Manager, Transportation and Installation Team, GIS Engineer, Permitting/Environmental Support
• We are using its experience across Europe to advise the Client, help set up controls to understand risk, and reduce CAPEX/DEVEX
• Site Investigation (managed by OWC) completed in 2018
• Design/Certification process ongoing, as well as contract negotiation
• OWC brings deep OW experience, local regulatory knowledge and APAC supply chain knowledge (via Aqualis Offshore, group company)

Technical Due Diligence Assignment

• The Project:
• Confidential Taiwan Offshore Wind
• c650 MW project
• Circa EUR 2.3 BN of CAPEX
• Bid stake in the project is 49%
• Client: Confidential
• OWC Scope:
• Project Development & Construction: site suitability, WTGs, foundations & civil works, cables design & installation, project management, QA & certification, construction contracts, CAPEX, schedule, electrical design, grid connection, permitting/consenting/PPA & environmental
• O&M: availability, OPEX assumptions, O&M contracts & decomm
• EY/Production: review of 3rd party energy production forecasts, identify concerns, recommend base energy production assumptions, etc
• Financial model inputs
• OWC Approach:
• OWC put together an international expert team (utilising experts from their London, Hamburg and Taipei offices) for a shortened BO phase inc local OWC Taiwan consenting/PPA experts
• Adjusted the scope to include scenario modelling for contingency sizing estimating/challenging due to risks identified

Order backlog development

Order backlog (USDm) Highlights Q4 2018

• Order backlog at USD 7.8m
• Pipeline of future opportunities increasing, indicating that the low point in this cycle could be behind us
• Pipeline of work expected from call out contracts is positive and increasing, but visibility in our industry is limited and timing could be uncertain.
• Current focus is on supporting clients on dayto-day service operations - typically call-out contracts that are only included in backlog figures when reliable estimates are available

Staff level development

Staff level development¹ Highlights Q4 2018

• Staff levels increased from last quarter
• Employment opportunities in Aqualis attractive in the job market
• Increase in number of own technical staff and number of subcontractors
• The use of subcontractors allows for a more flexible cost base whilst the short term outlook / position of the market is assessed

(1) Average full time equivalent in the quarter. Numbers include subcontractors on 100% utilization equivalent basis and excludes staff made temporary redundant

Stable performance with high billing ratio in Q4 2018 - Total technical staff (including subcontractors), billing ratio¹ %

(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).

Agenda

1. Highlights David Wells CEO

2. Financial review Kim Boman CFO

1. Outlook David Wells CEO

Revenues and adjusted EBIT trend

Revenue LTM (USDm) Adjusted EBIT ¹ LTM (USDm, %)

(1) Adjusted EBIT: Earnings before interest and taxes adjusted for goodwill impairments, share of net profit / (loss) from associates and impairment of loan to and investment in associates

Geographical split

Revenue split (USDm) Adjusted EBIT¹ split (USDm)

• Regional revenue differences y-o-y for entities respectively in Middle East 33%, Far East 33%, Americas -18% and Europe -9% (note: OWC increased revenues with 56% y-o-y. OWC constitutes ~21% of group revenues in Q4 2018 and 17% in year 2018

2)

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

²⁾ Other excludes goodwill impairments, share of net profit / (loss) from associates and impairment of loan to and investment in associates

Income Statement

Amounts in USD thousands	Q4 2018	Q4 2017	FY 2018	FY 2017
Revenues	9,828	8,948	36,185	31,134
Total revenues	9,828	8,948	36,185	31,134
Payroll and payroll related expenses	(4,043)	(3,864)	(15,682)	(15,324)
Other operating expenses	(4,893)	(4,424)	(17,981)	(13,951)
Depreciation, amortisation and impairment	(32)	(3,963)	(129)	(4,061)
Total operating expenses	(8,967)	(12,251)	(33,792)	(33,336)
Gain (loss) on disposal of interest in associates	-	(3,080)	291	(3,426)
Operating profit (loss) (EBIT)	860	(6,383)	2,684	(5,628)
Finance income	118	1 9	167	7 1
Net foreign exchange gain (loss)	9 4	131	2 7	(776)
Profit (loss) before taxes	1,073	(6,233)	2,878	(6,333)
Income tax expenses	(259)	3	(456)	(144)
Profit (loss) after taxes	814	(6,230)	2,422	(6,477)
Financial ratios:
Adjusted operating profit (loss)	860	627	2,393	1,729
EBITDA	892	660	2,522	1,860
Earnings per share (USD): basic and diluted	0.02	(0.15)	0.06	(0.15)

• Revenues for Q4 2018 up 10% from Q4 2017
• EBITDA of USD 0.9 million
• Adjusted EBIT of USD 0.9 million

New IFRS 16 Leases effective from 1 January 2019

• Aqualis group will apply the new standard from its mandatory adoption date of 1 January 2019. The group intends to apply the simplified transition approach with no restatement of comparable periods
• The group expects to recognise right-of-use assets and lease liabilities of approximately USD 0.1 million on 1 January 2019
• The group expects that operating expenses will be reduced and EBITDA will increase by approximately USD 0.1 million for 2019 as a result of adopting the new standard
• Depreciation for 2019 will increase by approximately USD 0.06 million
• Interest expense for 2019 will increase by approximately USD 0.05 million
• Above amounts are preliminary estimates based on current lease contracts. The actual impact upon implementation may change as a result of changed interest rates, signing of new lease contracts and re-assessment of renewal options. The impact may also change if new information and guidance becomes known before the group presents its first consolidated financial statements under the new standard

Highlights Q4 2018 Working capital¹

• Solid financial position with no interest bearing debt and USD 5.5m in cash
• Negative operational cash flow of USD 0.3 million
• Working capital of USD 8.1 million, up from USD 7.0 million in Q3 2018
• The working capital % will fluctuate during the year with regional mix, type of projects and milestone payments

(%)

(1) Working capital / average quarterly revenues last 2 quarters

Agenda

1. Highlights David Wells CEO

2. Financial review Kim Boman CFO

3. Outlook David Wells CEO

Outlook

• The O&G sector is expected to improve in 2019 as the markets gradually rebalance
• Revenues and adjusted EBIT margin expected to increase full year 2019 vs 2018 level1)
• The marine consultancy market in Middle East and Asia Pacific remains strong and growth in other regions expected
• Aqualis expects to gain market share, expand and develop new business lines
• The global offshore renewables market has a strengthening outlook with growth opportunities identified globally leading us to plan for further expansion
• Recruitment drive ongoing and job applications increasing
• Consolidation is needed in the marine and engineering industry, including consultancy, to mitigate oversupply, rationalize global operations and achieve better economies of scale
• Aqualis will continue to actively work on any value adding consolidation opportunities

Appendix

Alternative Performance Measures

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:

EBITDA

Management believes that "EBITDA" which excludes gain (loss) on disposal of interest in associates, depreciation, amortisation and impairments is a useful measure because it provides useful information regarding the Company's ability to fund capital expenditures and provides a helpful measure for comparing its operating performance with that of other companies. A reconciliation between reported operating profit (loss) (EBIT) and EBITDA is shown below. EBITDA may not be comparable to other similarly titled measures from other companies.

Adjusted operating profit (loss)

Management believes that "Adjusted operating profit (loss)" which excludes gain (loss) on disposal of interest in associates and impairments of goodwill 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. A reconciliation between reported operating profit (loss) (EBIT) and adjusted operating profit (loss) is shown below.

Adjusted profit (loss) after taxes

Management believes that "Adjusted profit (loss) after taxes" which excludes gain (loss) on disposal of interest in associates and impairments of goodwill 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. A reconciliation between reported profit (loss) after taxes and adjusted profit (loss) after taxes is shown below.

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 reliable estimates are available. Management believes that the order backlog is a useful measure in that it provides an indication of the amount of customer backlog and committed activity in the coming periods.

Working capital and working capital ratio

Working capital is a measure of the current capital tied up in operations. The amount of working capital will normally be dependent on the revenues earned over the past quarters. Working capital may not be comparable to other similarly titled measures from other companies. Working capital ratio provides an indication of the working capital tied up relative to the average quarterly revenue over the past two quarters.

Balance Sheet

Amounts in USD thousands	31.12.2018	31.12.2017
ASSETS
Property, plant and equipment	141	160
Intangible assets	12 864	13 063
Deferred tax assets	7	69
Trade receivables	8 289	7 886
Other current assets	3 878	3 033
Cash and cash equivalents	5 454	9 709
Total assets	30 633	33 920
EQUITY AND LIABILITIES
Equity	25 555	28 451
Deferred tax liability	314	156
Other non-current liabilities	713	617
Trade payables	1 352	1 888
Income tax payable	159	74
Other current liabilities	2 540	2 734
Total equity and liabilities	30 633	33 920
Financial ratios:
Net debt, USD thousands	(5 454)	(9 709)
Equity/Assets ratio, %	83,4%	83,9%

Cash Flow

Amounts in USD thousands	Q4 2018	Q4 2017	FY 2018	FY 2017
Operating cashflow	(304)	(44)	312	(262)
Investing cashflow	7	1 7	214	(39)
Financing cashflow	-	-	(4,674)	-
Net change in cash and cash equivalents	(297)	(27)	(4,148)	(301)
Cash and cash equivalents at beginning of the period	5,814	9,753	9,709	9,910
Net change in cash and cash equivalents	(297)	(27)	(4,148)	(301)
Effect of foreign exchange rate changes	(63)	(17)	(107)	100
Cash and cash equivalents at end of the period	5,454	9,709	5,454	9,709

• Negative operating cash flow of USD 0.3 million due to increase in working capital

Top 20 shareholders

#	Name	Shares	%
1	Gross Management AS	7 367 996	17,4
2	Carnegie Investment Bank AB	2 453 386	5,8
3	Tigerstaden AS	1 886 663	4,5
4	Danske Bank A/S	1 702 046	4,0
5	Mp Pensjon PK	1 463 128	3,5
6	Lgt Bank AG	1 402 923	3,3
7	Oma Invest AS	1 400 000	3,3
8	Saxo Bank A/S	1 264 743	3,0
9	Nordnet Bank AB	1 238 872	2,9
10	Badreddin Diab	1 001 302	2,4
11	Dnb Nor Markets, Aksjehand/Analyse	971 735	2,3
12	Philip Alan Lenox	830 583	2,0
13	Magne Gislerød	800 000	1,9
14	Acme Capital AS	637 500	1,5
15	Six Sis AG	631 192	1,5
16	Alsto Consultancy Ltd	598 122	1,4
17	Andreas Theofanatos	512 188	1,2
18	Ian Dennis Bonnon	508 260	1,2
19	Kula Invest AS	504 362	1,2
20	Kim Magnus Boman	500 000	1,2
	Top 20 shareholders	27 675 001	65,4
	Source: VPS, 13.02.2019