Earnings Release • Nov 14, 2017
Earnings Release
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REVENUE
* includes frame agreements and exercise of options
** Employees end of quarter
Highlights for Beerenberg (Beerenberg Holdco II AS consolidated) in the 3rd quarter 2017 was
Revenue in 3rd quarter was down 14 % compared to 3rd quarter last year. The decrease in the Service segment is mainly due to new-build project approaching finalization and completed fabric maintenance frame agreement. Activity in Benarx increased significantly compared to last year.
Margin are mainly impacted by a favorable sales mix, improved project execution and finalized cost reduction programs. Some of the favorable margin effects are expected to be temporary.
Financial cost in the 3rd quarter was MNOK 19, up from MNOK 13,3 in 3rd quarter 2016 where the financial cost where influenced by gains related to the debt buy-back program.
The profit before tax was MNOK 51, up from a loss of MNOK 124. 3rd quarter last year was impacted by amortization of goodwill that affected the Q3 result.
Year to date 2017 the revenue is in line with the first 9 months of 2016. Higher activity and external sales in the Benarx segment offset the reduction in the Service seament.
EBITDA margin increased from 10.2% in 2016 to 13.5% year to date 2017. The improved margin is a result of sales mix, improved project execution and lower cost. Some of the favorable margin effects are expected to be temporary.
Total assets were MNOK 1 699 at the end of the quarter with an equity ratio of 23.6%,
Working capital has increased with MNOK 52 during the year, in part due to business mix.
Net interest-bearing debt was MNOK 628 compared to MNOK 842 in 3rd quarter 2016.
The new senior secured bond of MNOK 850 placed in February secures the financing for the company to 2021. In March Beerenberg also repaid the previous bond. Beerenberg has extended its 300 MNOK facility with Danske Bank. The new bond was listed on OSE on the 20th of June 2017.
Cash flow from operations was MNOK 57 in 03 2017.
Investments in the 3rd quarter was MNOK 2, mainly development investments.
Net cash flow from financing activities was negative by MNOK 17 where the majority is interest payment.
Year to date the cash flow from operations was MNOK 148 compared to negative MNOK 2 in 2016. The net cash flow was MNOK 12, mainly explained by the repayment of debt earlier this year. In 2016 the net cash flow was negative MNOK 110.
There are signals that the OPEX driven market activity level (maintenance) is picking up. The outlook for new build related projects remains reasonable; however, most of the new build prospects are likely to affect activity level in 2nd half of 2018 and onwards
The tender activity has been relatively high also during 3rd quarter of 2017 relating both to OPEX (maintenance) and CAPEX (new build) projects.
Total order intake of new contracts was approximately MNOK 520 for the period. The major award was the Brage ISS Service contract with Wintershall currently estimated at MNOK 500 (including estimated value of options).
The current estimated order backlog (including frame agreements and options) is BNOK 10.
At the end of O3 2017 Beerenberg had 1100 employees, slightly down from last quarter.
During the 3rd quarter of 2017 Beerenberg recorded 5 incidents compared to 3 same period last year. The SIF and LTIF track record remains spotless.
Total recordable incident frequency (TRIF) was 4,0 measured on last twelve months' basis (LTM), compared to 3,1 YTD at the end of 3rd quarter 2016.
"Margin development reflects strong operational performance"
The service segment reports a reduction in revenue of 31% from Q3 2016. Lower activity both in New build projects (Greenfield) and M&M frame agreement is recorded. The EBITDA margin improved from 8.7% in Q3 2016 to 15.9% in Q3 2017.
The Benarx segment is reporting an increase in activity of 36% compared to Q3 2016. The higher activity is mainly related to international projects. The EBITDA margin is 25.2% in Q3 2017 compared to 12.5% in Q3 2016.
| Group Summary | Q3 | QЗ | YTD | YTD | FY. | |
|---|---|---|---|---|---|---|
| Amounts in NOK million | Note | 2017 | 2016 | 2017 | 2016 | 2016 |
| Operating revenue | 6 | 471,3 | 548,3 | 1495,2 | 1497,3 | 2081,5 |
| Operating expenses | 389,8 | 493,6 | 1294,0 | 1 3 4 4, 8 | 1862,3 | |
| EBITDA | 7 | 81,5 | 54,7 | 201,3 | 152,5 | 219,2 |
| Depreciation | 7,6 | 8,3 | 22,8 | 24,2 | 31,9 | |
| EBITA | 73,9 | 46,5 | 178,5 | 128,3 | 187,3 | |
| Amortisation | 8 | 3,7 | 157,3 | 11.7 | 173,1 | 181,5 |
| Operating profit (EBIT) | 70,2 | $-110,9$ | 166,7 | $-44,7$ | 5,7 | |
| Finance costs - net | $\overline{4}$ | 18,9 | 13,3 | 87,3 | 51,5 | 67,2 |
| Profit before tax (EBT) | 51,3 | $-124,2$ | 79,5 | $-96,2$ | $-61,5$ | |
| Estimated tax | 12,3 | $-4,6$ | 19,1 | 2,4 | 122 | |
| Net profit | 39,0 | $-119,5$ | 60,4 | $-98,6$ | $-73,6$ | |
| Profit for the period is attributable to: | ||||||
| Shareholders of the parent company | 39,0 | $-119.5$ | 60,4 | $-98,6$ | $-73,6$ | |
| Basic earnings per share (NOK) | 0,15 | $-0,45$ | 0,23 | $-0,37$ | $-0,28$ | |
| Diluted earnings per share are identical as there are no dilutive effect |
||||||
| EBITDA margin | 17,3% | 10,0% | 13,5% | 10,2% | 10,5% | |
| EBITA margin | 15,7% | 8,5% | 11,9% | 8,6% | 9,0% |
| Q3 | OЗ | YTD | YTD | FY | |
|---|---|---|---|---|---|
| Amounts in NOK million | 2017 Note |
2016 | 2017 | 2016 | 2016 |
| Net profit for the period | 39,0 | $-119.5$ | 60.4 | $-98.6$ | $-73.6$ |
| Other comprehensive income: | |||||
| Conversion differences | $-1,5$ | 0,0 | 2,5 | $-0,8$ | $-0.7$ |
| Change in value of derivatives | $-0.6$ | 3.8 | $-5.9$ | 3.5 | |
| Total comprehensive income | 36,9 | $-115,8$ | 57,0 | $-95,8$ | $-69.7$ |
| Q3 FY. QЗ 30.09.2017 30.09.2016 31.12.2016 Amounts in NOK million Note : Goodwill 8 778,7 778,7 778,7 85,7 8 67,0 76,0 Intangible assets 153,4 176,7 169,0 Property, plant and equipment 0,0 Financial Fixed Assets 0,6 0,6 Total non-current assets 999,1 1041,7 1024,3 Goods 39,4 41.7 35,0 540,3 Accounts receivables from customers 358,2 416,2 Earned Not Invoiced Revenue (WIP) 95.1 151,8 69,1 Other Short Term Receivables 14,9 20,1 21,0 Prepayments 3,9 0,6 1,1 214,2 154,0 225,9 Cash and cash equivalents Total Current Assets 699,7 851,9 851,0 TOTAL ASSETS 1698,9 1893,6 1875,3 Share Capital 26,7 26,7 26,7 240,3 240,3 240,3 Share premium 150,4 151,6 Retained Earnings 74,0 60,4 $-98.6$ Current year result after est. Tax Total equity 401,4 318,8 345,0 Deferred tax liabilities 30,4 39,0 13.4 Pension obligations 9,7 6,9 8,6 Warranty provision 12,1 15,3 13,0 Financial Lease Ioan 1,0 0,2 0,8 835,1 994,5 904,0 Bond $\overline{4}$ 20.5 18.7 14,9 Derivatives Total non-current liabilities 911,1 1072.1 954,7 Overdraft & accrued interests 6,5 0,6 0,5 Supplier liabilities 83,1 142,8 182,0 32,2 30,5 35,8 Tax payable Social Security, VAT and other taxes 57,4 74,1 82,5 170,3 Accruals 156,3 147,8 47,5 Deferred Revenue 24,4 0,7 Other Current Liabilities 50,2 60,1 Total Current Liabilities 502,7 575,7 386,4 TOTAL EQUITY & LIABILITY 1698,9 1893,6 1875,3 |
Group Summary | ||
|---|---|---|---|
| $-73,6$ 79,5 |
|||
Contract Contract Contract Contract
| Amounts in NOK million | Conversion | Hedging | Retained | |||
|---|---|---|---|---|---|---|
| Share capital | Share premium | reserve | reserve | earnings | Total | |
| 01. January 2017 | 26.7 | 240.3 | $-0,3$ | $-1,3$ | 79.6 | 345,0 |
| Net profit | 60,4 | 60,4 | ||||
| Other Comprehensive Income | 2,5 | $-5.9$ | $-3,4$ | |||
| Group contribution | $-0.6$ | $-0,6$ | ||||
| Equity as per 30.09.2017 | 26.7 | 240,3 | 2,2 | $-7.2$ | 139,4 | 401.4 |
| Amounts in NOK million | Conversion | Hedging | Retained | |||
|---|---|---|---|---|---|---|
| Share capital | Share premium | reserve | reserve | earnings | Total | |
| 01. January 2016 | 26,7 | 240.3 | 0.4 | $-6,0$ | 153.2 | 414.7 |
| Net profit | $-98.6$ | $-98,6$ | ||||
| Other Comprehensive Income | -0.X | 35 | 2,8 | |||
| Equity as per 30.9.2016 | 26,7 | 240.3 | $-0.4$ | $-2.4$ | 54.6 | 318,8 |
| Q3 | QЗ | YTD | YTD | FY | ||
|---|---|---|---|---|---|---|
| Amounts in NOK million | Note | 2017 | 2016 | 2017 | 2016 | 2016 |
| EBITDA | 81,5 | 54,7 | 201,3 | 152,5 | 219,2 | |
| Taxes paid | $-0,1$ | 0,0 | $-3.7$ | $-3,4$ | $-33,9$ | |
| Change in net working capital | $-23,6$ | 2,9 | $-52,2$ | $-147,4$ | $-6,8$ | |
| Changes to other time restricted items | $-0,5$ | $-1,2$ | 3,0 | $-4,0$ | $-3,5$ | |
| Net Cash flow from operating activites | 57,3 | 56,4 | 148,4 | $-2,3$ | 175,0 | |
| Capex | $-1,8$ | $-2,9$ | $-9,2$ | $-18,3$ | $-17,1$ | |
| Net cash flow from investing activities | $-1,8$ | $-2,9$ | $-9,2$ | $-18,3$ | $-17,1$ | |
| Net repayment of interest bearing debt | 4 | 0,5 | $-35.7$ | $-80,3$ | $-36,3$ | $-127,0$ |
| Payment of Group contribution | 5 | 0,0 | 0,0 | $-0,8$ | 0,0 | 0,0 |
| Interest paid | 4 | $-17,8$ | $-16,1$ | $-69,9$ | $-53,9$ | $-69,8$ |
| Net cash flow from financing activities | $-17,3$ | $-51,9$ | $-151,0$ | $-90,2$ | $-196.7$ | |
| Total cash flow | 38,1 | 1,6 | $-11,7$ | $-110,8$ | $-38.9$ | |
| Opening balance net bank deposits | 176,0 | 152,4 | 225,9 | 264,8 | 264,8 | |
| Closing balance net bank deposits | 214,2 | 154,0 | 214,2 | 154,0 | 225,9 |
Beerenberg Holdco II AS is a company domiciled in Norway. The consolidated financial statements of Beerenberg Holdco II comprise the company and its subsidiaries, together referred to as the Group. The Beerenberg Holdco II Group was established 01. March 2013, as a result of the Beerenberg Holdco II AS acquisition of all shares in Beerenberg Holding AS.
Beerenberg is delivering products and services to its customer in complex environments implying operational risk with regards to quality, cost, time and injuries and accidents (HSE). Beerenberg works systematically to mitigate and manage risk on all levels. The annual report for 2016 provides further information on risks and uncertainties applicable to Beerenberg.
Beerenberg Holdco II AS is wholly owned by Beerenberg Holdco I AS which is wholly owned by Beerenberg Invest AS. Shareholders in Beerenberg Invest are specified in table below.
| Shareholders Beerenberg Invest | A-Shares | % | B-Shares | % | Total Shares | $\%$ |
|---|---|---|---|---|---|---|
| Segulah IV L.P. | 818462 | 81.8% | 219445603 | 82.5% | 220 264 065 | 82,5% |
| AlpInvest Partners Co-Investments 2012 I C.V. | 92 1 21 | $9.2\%$ | 24 931 110 | 9.4% | 25 023 231 | 9,4% |
| AlpInvest Partners Co-Investments 2011 II C.V. | 23319 | 23% | 6310883 | 2.4 % | 6334202 | 2,4% |
| Management | 66098 | 6.6 % | 15312404 | 5.8% | 15378502 | 5,8% |
| Total | 1 000 000 | 100.0 % | 266,000,000 | 100.0% | 267 000 000 | 100,0% |
The interim financial statements for the Group are prepared in accordance with International Financial Reporting Standards (IFRS) as approved by the European Union and their interpretations adopted by the International Accounting Standards Board (IASB).
The interim report does not include all the information required for full annual consolidated financial statements in an Annual Report, and should be read in conjunction with the Annual Report of the Group for 2016. The accounting policies applied in the interim financial statements is the same as those described in the Annual Report for 2016. The condensed consolidated interim financial statements are prepared in accordance with IAS 34 Interim Financial Reporting. The interim financial statements are unaudited.
The Annual Report for 2016 is available at www.Beerenberg.com
In applying the accounting policies, management makes judgments, estimates and assumptions that affect the reported amounts of assets, liabilities, income and expenses. The estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Revision to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.
In preparing these interim financial statement, the significant judgments made by management in applying the Group's accounting policies and the key sources of uncertainty in the estimates were consistent with those applied to the consolidated financial statements as at and for the period ended 31. December 2016.
A new 4-year Senior Secured Bond of MNOK 850 was issued in Q1 2017, and the previous bond of MNOK 1 100 was repaid. In connection with the bond issue Beerenberg extended its MNOK 300 credit facility agreement with Danske Bank.
The Facility agreement includes covenants related to quarterly Net Total Leverage ratio test (below 9.0) and to Incurrence testing (if applicable). The Group is in compliance with covenants as of 30.09.2017.
Short term loans given to parent companies Beerenberg Holdco I AS and Beerenberg Invest AS, both MNOK 0,3, was repaid in Q3. Other than that, no related party transactions were conducted in Q3 2017.
Beerenberg is organized in two operating segments in order to optimize and focus its business. The Services segment includes business related to the traditional ISS-activity in the Group which is mainly related to major framework agreements, and the Benarx segment which consists of advanced insulation topside and subsea.
| Q3 | QЗ | YTD | YTD | FY | |
|---|---|---|---|---|---|
| Amounts in NOK million | 2017 | 2016 | 2017 | 2016 | 2016 |
| Services | 360,0 | 521,9 | 1250,9 | 1 345,3 | 1900,6 |
| Benarx | 95,9 | 70,5 | 294.9 | 275,2 | 361,7 |
| Eliminations | 15,5 | $-44.0$ | $-50,6$ | $-123,1$ | $-180,8$ |
| Total | 471,3 | 548.3 | 1495,2 | 1497,3 | 2081,5 |
| Q3 | QЗ | YTD | YTD | FY | |
|---|---|---|---|---|---|
| Amounts in NOK million | 2017 | 2016 | 2017 | 2016 | 2016 |
| Services | 57,3 | 45,9 | 145,3 | 114,6 | 168,0 |
| Benarx | 24,2 | 8,8 | 56,0 | 37.9 | 51,2 |
| Other | 0,0 | 0,0 | 0,0 | 0,0 | 0,0 |
| Total | 81,5 | 54,7 | 201,3 | 152,5 | 219,2 |
Statoil awarded Beerenberg a 7-year maintenance and modification agreement at the Tjelbergodden facility. The contract value is estimated to MNOK 200.
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