AKVA Group — Investor Presentation 2017

Feb 22, 2017

Q4 2016 Presentation

Oslo – February 22nd, 2017 Hallvard Muri, CEO Andreas Pierre Hatjoullis, CFO (acting)

High order backlog – solid underlying performance

Fourth quarter 2016 – Highlights

• Record high sales and order intake
• Order backlog end of year approximately 1.0 BNOK
• EBITDA in the quarter hampered by material clean-up and restructuring cost of 19.9 MNOK related to AKVA group Denmark

• Growth strategy continues with acquisition of Sperre the leading ROV provider, increased capacity in Helgeland Plast

• Total of 2.0 BNOK in order intake 2016

• Record high order intake Q4
• Cage Based segment 420 MNOK in Q4, up 66% YoY
• Driven in particular by Nordic and recovery in Chile
• Software segment 69 MNOK, almost double from same period last year
• Most of the increase comes from Wise Ehf

• Land Based segment 72 MNOK in Q4, up 14% YoY

• Operating revenue of 449 MNOK in Q4 2016 (+105 MNOK from Q4 2015):

• Main increase from Cage Based segment Nordic region, +97 MNOK compared to Q4 2015
• Positive development in Chile YoY (+13 MNOK), as positive market sentiment start giving effect
• Slight decrease in revenue from Land Based segment, all related to restructuring in AKVA group Denmark

Revenue

MNOK

Restructuring cost in Denmark w/material impact on Q4-16

• Good quarter for Nordic region with solid contribution from all entities
• Positive development in Chile and turn around from loss making situation last few quarters
• Aquatec Solutions (AQS) and Plastsveis very strong performance, but partly offset by earn-out to former shareholders of AQS
• Ongoing restructuring in AKVA group Denmark gave a negative effect of 19.9 MNOK in EBITDA

EBITDA

MNOK

• Restructuring and clean-up in AKVA group Denmark negative effect (one-off's) of 19.9 MNOK
• Aquatec Solutions earn-out element reduced EBITDA by 4 MNOK

EBITDA

*Adjusted EBITDA

MNOK

2016 – Highlights

• Total order intake for the year close to 2 BNOK, 24 % up from 2015
• Year on year growth in revenue 12.5%
• Total EBITDA 144 MNOK, up from 135 MNOK last year
• Balance sheet KPI's remains strong
• Acquisition of AD Offshore AS in April and Sperre AS in November

MNOK

AKVA group in brief

• Leading technology and service partner to the global aquaculture industry
• Global presence and subsidiary in 8 countries
• Deliveries in over 65 countries during the last 40 years
• Approx. 792 employees
• 2016 revenues of 1 603 MNOK
• Listed on Oslo Stock Exchange since 2006
• Market cap of ~2 012 MNOK and net debt of 212 MNOK

CAPEX Based Revenue

CAPEX Based Revenue

Presence in all main farming regions

Revenues from regions:

	Q4 2015	Q4 2016
Nordic	73 %	76 %
Export	% 15	% 14
Americas	12 %	10 %

Strategic priority to increase the proportion of OPEX based revenue

OPEX based vs CAPEX based revenue, Q4 2016 Comments

*(Figures in brackets shows Q4 2015)

• Focus on increasing OPEX based revenue by developing software sales, farming services, technology services and rental further
• Introduction of rental business model in Norway in late 2014. Successfully introduced in UK and Canada before the introduction in Norway
• Rental is an "all inclusive" service providing for instance light or picture for an agreed period of time (2 to 5 years duration) - reducing both CAPEX and operational work for the customer
• AKVA Marine Services, our provider of diving, ROV and other services to the salmon farming sector (Farming Services)
• Development of Farming Services still in an early stage opportunities for consolidation

Revenue by product groups and species

By product groups – Q4 2016 By species – Q4 2016

• Cage based technologies = Cages, barges, feed systems and other operational systems for cage based aquaculture
• S&AS Cage based = Service and after sales for cage based aquaculture
• Software = Software and software systems
• Land based technologies = Recirculation systems and technologies for land based aquaculture

• S&AS Land based = Service and after sales for land based aquaculture

• Salmon = Revenue from technology and services sold to production of salmon

• Other species = Revenue from technology and services sold to production of other species than salmon
• Non Seafood = Revenue from technology and services sold to non seafood customers

Q4 – Operational Highlights

• Closing of acquisition of Sperre AS
• Atlantis Update on development licenses

Acquisition of Sperre AS – the leading ROV producer

• Sperre AS becomes the "center of excellence" in AKVA group in terms of ROV technologies as well as relevant subsea technologies
• AKVA group ASA acquired 66% of Sperre AS. Closing of the transaction took place on November 4th, 2016
• The enterprise value on a 100% basis was 126.9 MNOK
• AKVA group ASA has an option to buy the remaining shares after three years
• The acquisition is paid in cash and was financed with a loan from Danske Bank

Risk management

Underwater feeding

Fish health operations

Daily operations (dead fish removal, surveillance, cleaning, etc)

1. On November 26th Norwegian Directorate of Fisheries informed ASF that the concept fell within the general scope of the scheme for awarding development fish-farming licenses.

2. 1. The Directorate will continue on to consider the concept further with an objective to award one or more licenses.
3. 1. ASF is currently in a process with the Directorate to provide additional information, including target financial criteria for the concept.
4. 1. In parallel, the project team is planning and preparing for large scale testing

Submerge and raise the cage – safe and remote

Air to the salmon Artificial air space

Financial performance Q4 2016 – by acting CFO Andreas Pierre Hatjoullis

Revenue

• Record high quarterly turnover
• The Group is more robust underlying good performance stabilizing higher margins
• but the quarter offset by restructuring costs in AKVA group Denmark
• Strong operational cash flow
• Dividend of 0.50 NOK per share to be paid out in Q1 2017

0 5 10 15 20 25 30 35 40 45 50 1Q 2Q 3Q 4Q MNOK

Underlying performance stabilizing on a historical higher EBITDA-level both in NOK and in %

EBITDA offset by restructuring in AKVA group Denmark and earn-out to former shareholders of Aquatec Solutions (marked in grey in graphs)

CBT (Revenue and EBITDA%)

Nordic

• Revenue YoY up 72% (50% organic) in total for the region
• All entities contributing positively YoY with our wide range of products – makes the Group more diversified
• The Farming Services operations is increasing and strengthening the Group

Americas

• Increased activity in Chile delivering a positive EBITDA of 1.8 MNOK in the quarter
• Our operations in Chile is set to meet higher activity when the market conditions improves
• We experienced a slow quarter in Canada, but they are delivering positive margins

Export

• UK delivering a decent quarter due to high level of OPEX based revenues
• Turkey with another very good quarter ending 2016 as their best year
• Continued increased activity in the Sea Bass and Sea Bream industry in the Mediterranean
• Export to emerging markets mainly deliveries to Iran

LBT (Revenue and EBITDA%)

• Aquatec Solutions coming in strong in Q4, but this is partly offset by earn-out to former shareholders of Aquatec Solutions
• Plastsveis delivering a strong quarter increasing EBITDA with MNOK 4.9 YoY

• The restructuring of AKVA group Denmark A/S, to strengthen the company moving forward, has contributed negatively in Q4 with MNOK 24 YoY

• AKVA group Software AS with stable performance YoY

• Wise experienced lower margins due to pressure on salary costs on Iceland
• Ongoing investments in new product modules expected to strengthen the financial performance of the SW segment further
• Q4 2015 includes the gain on WiseDynamics in MNOK 1.5 explaining the deviation YoY

Financials – Detailed P & L

P&L	2016	2015	2016	2015	2015
(MNOK)	Q 4	Q 4	YTD	YTD	Total
OPERATING REVENUES	448 6 ,	344 1 ,	1 603 1 ,	1 425 3 ,	1 425 3 ,
depreciations Operating costs ex	424 9 ,	316 9 ,	1 458 9 ,	1 290 2 ,	1 290 2 ,
EBITDA	23 7 ,	27 1 ,	144 2 ,	135 2 ,	135 2 ,
Depreciation and amortization	20 3 ,	13 9 ,	69 2 ,	47 5 ,	47 5 ,
EBIT	3 4 ,	13 2 ,	75 0 ,	87 7 ,	87 7 ,
Net interest expense	-1 7 ,	-1 7 ,	-6 6 ,	-5 4 ,	-5 4 ,
Other financial items	8 -4 ,	6 -4 ,	-19 8 ,	3 -4 ,	3 -4 ,
financial items Net	-6 5 ,	-6 3 ,	-26 4 ,	-9 6 ,	-9 6 ,
EBT	-3 2 ,	6 9 ,	48 6 ,	78 1 ,	78 1 ,
Taxes	-2 5 ,	-0 8 ,	13 6 ,	19 7 ,	19 7 ,
PROFIT NET	-0 7 ,	6 7 ,	35 0 ,	58 4 ,	58 4 ,
profit (loss) attributable Net to:
Non-controlling interests	0 6 ,	0 4 ,	0 9 ,	1 6 ,	1 6 ,
holders of ASA Equity AKVA group	3 -1 ,	3 7 ,	34 1 ,	56 8 ,	56 8 ,
growth Revenue	30 % 4 ,	12 8 % ,	12 % 5 ,	% 14 4 ,	% 14 4 ,
EBITDA margin	5 3 % ,	7 9 % ,	9 0 % ,	9 5 % ,	9 5 % ,
(NOK) EPS	-0 05 ,	0 28 ,	1 32 ,	2 20 ,	2 20 ,

• Increased depreciation mainly due to increased rental CAPEX and amortization

• Increased due to higher net debt

• Mostly currency and acquisition cost - higher than normal

• Minority shareholders from Q2 2016 and onwards (35%) in AKVA Marine Services AS, (49%) in Wise Blue AS and (34%) in Sperre AS

Group financial profile – remains strong

Available cash Working capital

Including a 90 MNOK credit facility in Danske Bank

Record low working capital level – despite record high activity

Continued strong capital discipline in the Group

Group financial profile – remains strong, continued

ROCE Equity

Excluding effect in AKVA group Denmark, the ROCE would be 13.5% One dividend paid in Q3 2016 of total 19.8 MNOK

Net debt (MNOK) and net debt/EBITDA Change in net debt (TNOK)

debt Net 30 09 2016	213 491
EBITDA	23 678 -
paid Income taxes	9 007
paid Net interest	1 728
paid Capex	24 728
/ Acquisitions Divestments	83 754
Paid dividend	-
Sale of fixed assets	-
effects Currency	052 -1
Other changes working capital in	95 646 -
change Net	-1 159
debt Net 31 12 2016	212 332

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOW	2016	2015	2016	2015
(NOK 000) 1	Q4	Q4	YTD	YTD
Net cash flow from operations	11 932	20 049	105 596	120 240
flow from Net cash change in orking capital w	95 646	-11 836	106 050	-24 500
Net cash flow from operational activities	107 578	8 212	211 645	95 740
Net cash flow from investment activities	-123 326	-6 379	-260 324	-116 557
Net cash flow from financial activities	52 070	-29 380	105 646	74 419
Net change in cash and cash equivalents	36 323	-27 546	56 967	53 602
Net foreign exchange differences	3 034	860	-941	1 980
Cash of and cash equivalents the beginning the period at	126 187	136 203	109 517	53 935
Cash and cash equivalents the end of the period at	165 543	109 517	165 543	109 517

Strong cash flow improvement from operating activities due to capital discipline in the Group

BALANCE SHEET	2016	2015
(MNOK)	31 12	31 12

ASSETS	1 307	1 083
Intangible non-current assets	506	361
Tangible non-current assets	151	103
Financial non-current assets	6	8
Inventory	186	181
Receivables	292	320
Cash cash equivalents and	166	110
LIABILITIES AND EQUITY	1 307	1 083
Equity	434	425
Minority interest	19	3
bearing debt Long-term interest	348	188
Short bearing debt interest -term	30	57
bearing liabilities Non-interest	477	409

Dividend

• The dividend level shall reflect the present and expected future cash generating potential of AKVA group
• AKVA group ASA aims to pay out dividends twice a year, after the 1 st and the 2 nd half of the year.
• Dividend in 2016 is allocated as follows:
• 0.75 NOK was paid out per share in 3Q 2016 based on 1st half financials
• 0.50 NOK will be paid out in 1Q 2017 based on the 2nd half financials

Capex (TNOK) and capex / sales (%)

20 largest shareholders

No of shares		% Account name	Type	Citizenship
13 203 105	51,1 %	EGERSUND GROUP AS		NOR
3 900 000	15,1 %	WHEATSHEAF INVESTMENT		GBR
1 000 621	3,9 %	VERDIPAPIRFONDET ALFRED BERG		NOR
489 417	1,9 %	EIKA NORGE		NOR
461 396	1,8 %	STATOIL PENSJON		NOR
391 920	1,5 %	VPF NORDEA KAPITAL		NOR
356 300	1,4 %	MP PENSJON PK		NOR
346 000	1,3 %	NORRON SICAV - TARGET		LUX
330 067	1,3 %	VERDIPAPIRFONDET DNB		NOR
300 000	1,2 %	MERTOUN CAPITAL AS		NOR
265 352	1,0 %	VPF NORDEA AVKASTNING		NOR
246 598	1,0 %	FORTE TRØNDER		NOR
238 692	0,9 %	OLE MOLAUG EIENDOM AS		NOR
193 924	0,8 %	ARCTIC FUNDS PLC		BEL
166 880	0,6 %	ROGALAND SJØ AS		NOR
150 000	0,6 %	DAHLE BJØRN		NOR
132 595	0,5 %	NORDEA 1 SICAV		GBR
124 108	0,5 %	NORRON SICAV - SELECT		LUX
122 382	0,5 %	STATOIL FORSIKRING AS		NOR
118 985	0,5 %	VERDIPAPIRFONDET NOR		NOR
22 538 342	87,2 %	20 largest shareholders
3 295 961	12,8 %	Other
25 834 303	100,0 %	Total number of shares as per 31.12.2016

Origin of shareholders, 5 largest countries

No of shares	%	Origin	No of shareholders
20 236 547	78,3 %	Norway	1082
4 168 449	16,1 %	Great Britain	24
551 345	2,1 %	Luxembourg	5
243 967	0,9 %	Belgium	7
211 674	0,8 %	USA	9
422 321	1,6 %	Other	76

Total number of shareholders: 1203 - from 21 different countries

Share development

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Order backlog Order intake

• Highest order backlog ever, 998 MNOK
• 41% of total order backlog relates to Land based technology (LBT)

• The strong market activity continues into Q1

• NOK 2.0 billion in order intake 2016

• In Q3 2015 the order backlog of Aquatec Solutions was included for the first time (with MNOK 187)

• Biological condition remains challenging for core customers and thus focus on productivity and efficiency

• New Chilean regulations
• Continued strong earnings and cash flow in the salmon industry

Outlook – AKVA group

• Continued good activity in Nordic cage based segment
• UK and Chile increased activity and recovered from 2016
• Canada competitive market and moderate expectations
• In Export the Mediterranean represents upside potential and we will focus our resources in this region over the next quarters
• Land Based segment Very high activity level, key for AKVA group to be selective and focus on project execution
• S&AS step up efforts in Nordic
• Improve current core untapped potential
• Continue to evaluate opportunity for new products to fit in core business