AKVA Group — Investor Presentation 2020

Aug 14, 2020

Q2 2020 Presentation

Oslo – 14 August 2020 Knut Nesse, CEO A. Pierre Hatjoullis, Group Controller

Agenda

Highlights

Financial performance

Outlook

Highlights Q2 2020 – by CEO Knut Nesse

Order intake development

• Order intake of 994 MNOK
• 100 MNOK contract for delivery of TubenetTM in Norway
• Main increase in order intake is related to ASA Nordic and Land Based
• Last twelve months order intake of 3,251 MNOK

Order intake

Revenue development

• Record high revenue from Americas in Q2, with positive development in Chile and North America
• Increased revenue in Caged Based in Nordic versus Q2 2019
• Low revenue in Land Based due to early phase of new generation of projects and delayed projects
• The software business, Wise, sold in Q3 2019 was included with 23 MNOK in Q2 2019

Revenue

Wise revenue

EBITDA development

• EBITDA of 93 MNOK in the quarter
• Europe & Middle East have improved EBITDA compared to last year
• The Egersund Net companies with solid and improved margins compared to same period last year
• Negative margins in the Land Based segment, below both last year and expected margins

High order backlog

• Order backlog at end of June of 1.8 BNOK
• Strong momentum for Egersund Net
• Order backlog in Americas region remains high
• Increased backlog for Land Based segment
• TubenetTM sale in Norway included in order backlog in Q2 2020

Order backlog

Land Based

Key financial metrics

In August 2018, number of shares increased from 25 834 303 to 33 334 303. When calculating the EPS the monthly average shares outstanding has been used.

Our presence

Agents and distributors

Revenue in geographical regions

Development in OPEX based revenue

• Egersund Net contributing 93 MNOK in the quarter

• Stable development for the rental business (Scotland and Norway) in 2020
• AKVA group Software with stable revenue compared to Q2 last year
• The Norwegian marine service business with solid order backlog and increased revenues compared to Q2 2019

Revenue by product group and species

Cage Based Technology = Cages, barges, feed systems, nets 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 Technology = 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

Q2 – Operational Highlights

• TubenetTM contract of 100 MNOK signed in April 2020 delivery started in Q2
• High activity within the Egersund Net business
• Cage based business in Chile with high activity despite the uncertainty of the COVID-19 outbreak
• Export out of Norway with solid order intake
• Land Based impacted by Covid-19 crisis, two large deliveries cancelled in April
• AKVA group exercised option to acquire remaining shares in Sperre AS in May 2020

Group Strategy process initiated – key themes

Digital Data Platform Computer vision / AI

Land Based On-growing Post Smolt

Innovation Prioritization Fish health concepts

Learning & Development

People and competence Project and contract management

TubenetTM

• A patented concept for improved fish welfare
• Proven to reduce lice infestation with 80%, with the potential to reduce the lice precence to almost 0 if the tube is deep enough
• Suitable for AGD treatment
• Reduced risk of escape: damages to the upper part of the net will not be a concern, as the fish is enclosed at the deeper part of the pen
• Reduced need for net cleaning
• Inner tube has been operated to 16 mtrs depth with great success
• Concept also includes subsea feeder and led lights to be operated for a full cycle

Separate focus on full grow out RAS facilities

• AquaCon AS (Norwegian company)
• Full grow out facility in Maryland, USA
• Total capacity of 45,000 tonnes, whereof first phase of 15,000 tonnes
• Bridge financing in place, whereof AKVA group has participated with 5.5 MNOK
• Term sheet and Engineering Contract signed with AKVA group
• Potential contract for AKVA group of 1,3 BNOK for the first phase – subject to financing

• Nordic Aqua Partners A/S (Danish company)
• Full grow out facility in Ningbo, China
• Total capacity of 9,600 tonnes, whereof first phase of 4,800 tonnes
• Bridge financing in place, whereof AKVA group will participate with 0.65 MEUR
• Engineering Contract signed with AKVA group, and detailed design ongoing
• Potential contract for AKVA group of 500 MNOK for the first phase - subject to financing

Covid-19

• The Covid-19 virus has had a massive impact around the globe. So far AKVA group has been moderately impacted. The major impacts financially for AKVA group has been related to two newly awarded RAS contracts on Land Based being cancelled. AKVA group has taken action with the following focus areas:
  • The core of AKVA group is its employees, therefore AKVA group's main focus is the safety and health of our employees
  • AKVA group has put in place a program to monitor and optimize the overall liquidity in the company
  • AKVA group has implemented actions to maintain the security of supply during this crisis
  • A steady order intake is paramount to ensure work for all AKVA employees and a prerequisite for the other focus areas

Financial performance Q2 2020 – by Group Controller Andreas Pierre Hatjoullis ¹⁸

Q2 2020 – Financial highlights

• Last twelve months order intake and revenue now at 3,251 MNOK and 3,041 MNOK respectively
• Strong growth in revenues from Chile in the quarter versus last year
• Egersund Net with increase in revenues in Q2 2020 versus to Q2 2019
• The land based segment had a decrease in revenues of 26% compared to Q2 2019
• Last year software revenues included 23 MNOK from Wise, an Icelandic business which was sold in Q3 2019

Revenue

Q2 2020 – Financial highlights

• Europe & Middle East improve margins in Q2
• Margins in Americas are slightly down in the period
• AKVA group ASA Nordic delivering improved EBITDA % compared to last year
• Egersund Net contributing with significant higher margins in the quarter compared to Q2 2019
• Land Based segment with low activity and negative margins in the quarter

Cage Based Technology

Nordic

• Results in CBT Nordic up compared to Q2 2019 mainly due to higher EBITDA in AKVA group ASA and AKVA Marine Service
• An increase in order backlog from Q4 2019 and Q2
• Egersund Net with solid contribution also improved margins compared to Q2 2019

Cage Based Technology

Americas

• Revenues significantly higher than 2019 but with a slight decrease in EBITDA compared to last year
• Chile with reduced EBITDA margin in Q2 2020 compared to a solid Q2 last year
• Newfoundland Aqua Service with solid EBITDA margin in Q2

EME

• The export activity out of Norway was high in Q2 2020, but margins are reduced compared to Q2 2019
• Scotland profit in Q2 2020 is down compared to same quarter in 2019
• Strong contribution from Turkey and Spain in Q2 2020

Revenue and EBITDA %

Land Based Technology

• Strong order backlog of 771 MNOK at the end of Q2 2020 despite cancellation of contracts
• The low activity and negative margins due to several incidents
  • COVID-19; postponement and cancellation of contracts most of the activity in Q2 2020 in Norway
  • Restructuring cost due to the pandemic
  • Closing of old projects and start-up of new generation of projects
• Acquisition of Austevoll Rørteknikk in May 2020

Revenue and EBITDA %

Software

• Renewal of Fishtalk has increased subscription sales in Q2
• Digital solutions integrated part of our product offerings
• Last year revenue and EBITDA included 23 MNOK and 0.3 MNOK respectively, from the divested software business, Wise, on Iceland

Financials – Detailed P&L

P&L	2020	2019	2020	2019	2019
(MNOK)	Q2	Q2	YTD	YTD	Total
OPERATING REVENUES	862	798	1 614	1 650	3 077
Operating costs ex depreciations	769	697	1 435	1 453	2 805
EBITDA	93	101	179	198	272
Depreciation	17	21	33	45	64
Depreciation lease assets	21	14	42	27	84
Amortization	13	12	23	24	62
EBIT	42	53	80	102	62
Net interest expense	-7	-5	-13	-10	-22
Interest expense lease liabilities	-5	-5	-10	-10	-20
Other financial items	-1	-1	4	-1	-7
Net financial items	-13	-10	-19	-21	-49
EBT	30	43	61	80	13
Taxes	3	12	13	21	-3
NET PROFIT	26	31	48	60	17
Net profit (loss) attributable to:
Non-controlling interests	0,0	1,1	0,4	1,5	2,0
Equity holders of AKVA group ASA	26	29	47	58	15
Number of shares	33 156	33 216	33 156	33 261	33 156
Revenue growth	8,0 %	27,3 %	-2,2 %	35,7 %	19,3 %
EBITDA margin	10,8 %	12,6 %	11,1 %	12,0 %	8,8 %
EPS (NOK)	0,79	0,88	1,43	1,74	0,44

• Investment in associated companies accounted for by equity method YTD Q2 classified as other operating revenues of 8.4 MNOK

• Minority shareholders (30%) in Grading Systems Ltd and Newfoundland Aqua Service Inc. (1,5%)

Group financial profile – remains strong

Available cash

Working capital Average working capital

• 200 MNOK revolving credit facility fully utilized end of Q2 2020
• 14,8% 16,5% 2Q19 3Q19 9,3% 4Q19 15,0% 1Q20 2Q20 9,0%
• The graph shows absolute working capital and working capital relative to last twelve months revenue

The graph shows 12 months average working capital and average working capital relative to last twelve months revenue

Net interest-bearing debt/EBITDA of 3,0

Net interest bearing debt (MNOK) and net debt/EBITDA

Change in net interest bearing debt (TNOK)

Net interest bearing debt 31.03.2020	779 513
EBITDA	-93 087
Income taxes paid	1 569
Net interest paid	11 572
Capex	35 214
Acquisitions	75 066
Long-term financial assets	12 294
Paid dividend	-
Sale of fixed assets	-319
Currency effects	11 655
Other changes in working capital	-166 400
Net change	-112 435
Net interest bearing debt 30.06.2020	667 078
Right-of-Use Liabilty (IFRS 16)	413 101
Total Net interest bearing debt 30.06.2020	1 080 179

NIBD/EBITDA ratio based on agreement and methodology for calculation with Danske Bank

Amended NIBD/EBITDA covenant

An amended agreement is settled in Q2 2020 with Danske Bank in regards of the impact of IFRS 16 on the net interest-bearing debt/12 months EBITDA covenant

The lease liabilities due to the introduction of IFRS 16 is to be included in interest-bearing debt

The covenant ratio to be increased from 3,0 to 4,25

Group financial profile – remains strong, continued

• Total effect of IFRS 16 on the balance sheet end of June 2020 is 413 MNOK, negatively affecting the equity ratio when comparing to quarters before 2019. Not included in graph above
• Equity ratio would be 31,4% including IFRS 16 liabilities

Group financial profile, continued

• Exceptional items impacting Q4 2019 EBIT with effect on subsequent ROCE calculations until Q3 2020
• ROCE is calculated ex balance sheet items of IFRS 16

• ROACE is calculated with the average balance sheet items last four quarters
• ROACE is calculated ex balance sheet items of IFRS 16

Cash flow statement

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOW	2020	2019	2020	2019	2019
(NOK 1 000)	Q2	Q2	YTD	YTD	Total
Net cash flow from operations	78 724	74 090	155 208	153 039	180 151
Net cash flow from change in w orking capital	166 400	-189 702	19 281	-132 556	30 617
Net cash flow from operational activities	245 124	-115 612	174 489	20 483	210 768
Net cash flow from investment activities	-122 256	-63 330	-177 729	-86 025	-140 099
Net cash flow from financial activities	-56 198	195 795	52 072	93 448	-65 868
Net change in cash and cash equivalents	66 670	16 853	48 831	27 906	4 800
Net foreign exchange differences	-6 395	-959	5 962	-4 288	-664
Cash and cash equivalents at the beginning of the period	155 516	164 587	160 999	156 862	156 862
Cash and cash equivalents at the end of the period	215 792	180 481	215 792	180 481	160 999

Balance sheet

BALANCE SHEET	2020	2019	2019
(MNOK)	30.06	30.06	31.12

ASSETS	3 282	3 260	3 034
Intangible non-current assets	1 072	1 080	1 028
Tangible non-current assets	372	324	364
Right-of-Use Asset	405	430	417
Financial non-current assets	97	68	75
Inventory	508	434	514
Receivables	612	719	476
Cash and cash equivalents	216	155	161
Assets held for sale	-	47	-
LIABILITIES AND EQUITY	3 282	3 260	3 034
Equity	1 028	1 066	986
Minority interest	4	2	4
Long-term interest bearing debt	851	833	665
Short-term interest bearing debt	32	242	127
Right-of-Use Liability	413	435	425
Non-interest bearing liabilities	954	657	825
Liabilities held for sale	-	25	-

Dividend and dividend policy

Dividend Policy

• The company is aiming to give the shareholders a competitive return on investment by a combination of cash dividend and share price increase
• The company's dividend policy shall be stable and predictable
• When deciding the dividend the Board will take into consideration expected cash flow, capital expenditure plans, financing requirements/compliance, appropriate financial flexibility, and the level of net interest-bearing debt
• The company needs to be in compliance with all legal requirements to pay dividend
• The company will target to pay dividend twice a year
• A dividend of NOK 1.00 per share was paid on 3 March 2020, before the main outbreak of Covid-19 in Norway

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• Due to the overall uncertainty caused by COVID-19 the company has decided not to pay any dividend in second half

Cash Dividend

Largest shareholders

20 largest shareholders

No of shares	%	Account name	Type	Citizenship
20 703 105	62,1 %	EGERSUND GROUP AS		NOR
3 900 000	11,7 %	WHEATSHEAF INVESTMENTS LIMITED		GBP
1 192 893	3,6 %	SIX SIS AG	Nominee	CHE
959 058	2,9 %	VERDIPAPIRFONDET NORDEA KAPITAL		NOR
825 932	2,5 %	VERDIPAPIRFONDET ALFRED BERG GAMBA		NOR
697 341	2,1 %	VERDIPAPIRFONDET NORDEA AVKASTNING		NOR
482 840	1,4 %	VERDIPAPIRFONDET NORDEA NORGE PLUS		NOR
356 300	1,1 %	MP PENSJON PK		NOR
344 883	1,0 %	EQUINOR PENSJON		NOR
327 950	1,0 %	J.P. Morgan Bank Luxembourg S.A.	Nominee	LUX
300 000	0,9 %	J.P. Morgan Bank Luxembourg S.A.	Nominee	FIN
218 002	0,7 %	Norron Sicav - Select		LUX
177 883	0,5 %	AKVA GROUP ASA		NOR
150 000	0,4 %	DAHLE		NOR
100 000	0,3 %	UBS Europe SE	Nominee	LUX
100 000	0,3 %	ASKVIG AS		LUX
100 000	0,3 %	BERGEN KOMMUNALE PENSJONSKASSE		NOR
85 610	0,3 %	VERDIPAPIRFONDET DNB SMB		NOR
81 912	0,2 %	EQUINOR INSURANCE AS		NOR
79 990	0,2 %	NORSK LANDBRUKSKJEMI AS		NOR
31 183 699	93,5 %	20 largest shareholders
2 150 604	6,5 %	Other
33 334 303	100,0 %	Total number of shares as per 30.06.2020

Origin of shareholders, 5 largest countries

No of shares	%	Origin	No of shareholders
26 567 337	79,7 %	Norway	1060
3 906 755	11,7 %	Great Britain	16
1 268 891	3,8 %	Switzerland	5
684 662	2,1 %	Luxembourg	4
350 020	1,1 %	Finland	3
556 638	1,7 %	Other	123

Total number of shareholders: 1211 - from 29 different countries

Share development

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AKVA group in brief

Leading technology and service partner

Listed on Oslo stock exchange since 2006

Deliveries in 65 countries over 40 years

Companies in 10 countries. 1 431 employees

Solutions

CAPEX Based Revenue

Order backlog and inflow, 2017 through 2020

Wise Land Based Other

Outlook – AKVA group

• Order backlog remains high
• Service station for nets being built in northern Norway (with partner), plans for additional station underway
• Signed non-binding Term Sheet with the Norwegian company AquaCon AS for a potential supply of equipment, engineering and design to a new land based grow-out facility valued at 130 MUSD
• TubenetTM solution (preventive sea lice solution) launched, strong interest in the market and contract of 100 MNOK signed in April 2020
• Integration of the Newfoundland Aqua Services Ltd on the east-coast of Canada goes as planned
• Maintained focus on full grow out RAS facilities within the Land Based segment
• Digitalization strategy important part of AKVA groups total product offering
• Currently very low salmon price causing some uncertainty on customers willingness to invest in technology
• Finance profile remains strong