Eqva ASA — Audit Report / Information 2016

Feb 28, 2017

HAVYARD GROUP ASA

Geir Johan Bakke, CEO

Agenda

• Headlines/ milestones Q4
• Outlook
• Main figures
• Detailed figures
• HES/ QA
• Questions

Headlines/Milestones Q4

• EBIT of NOK 25.1 million and EBIT-margin of 4.7 % in fourth quarter of 2016.
• EBIT of NOK 112.0 million in 2016 with an EBIT-margin of 5.6%
• Good project execution in 2016 with good results.
• Impairment of financial assets related to ship investments with NOK 40 millions in fourth quarter 2016, and large deficits in shipowning associates with NOK 51 millions in 2016.
• New contract / cancellations in fourth Quarter
• Havyard Ship Technology AS
  • Building of 3 ferries for Fjord1, delivery 2018
  • Cancellation of nb.126 PSV ICE, scheduled for 2019
• Havyard Design & Solutions AS
  • Design and equipment for 2 x Havyard 843 AHTS for Grupo CBO
• Delivered vessels in fourth quarter
• Successful deliveries of new build no. 128 & 129, Havyard 843 ICE AHTS Icebreakers to Femco.

Outlook

Havyard heading for the future

From "ship technology company" to "maritime technology company."

• Strategy is consistent with the needs we see in the market from now on.
• Focus on increasing competitiveness and develop new products and services.
• Demonstrate a greater extent the values of Havyard Group ASA.
• Create profitable, safe and interesting jobs.

The following changes

• Increased focus on development of new innovative products and services.
• Assessment of acquisitions and / or mergers.
• Increase from 4 to 5 business-segments.
• Havyard MMC profiled as MMC with MMC logo.
• New business-segment HPR profiled as its own brand with their own logo.
• Good market activity, 2017 will be challenging regarding activity 2nd half for the shipyard, but we are optimistic for 2018 and 2019.

Group Key Figures

	2016	2015	2016 Q4	2015 Q4
Operating revenue	2003	1768	532	358
EBITDA	140	$-33$	31	$-45$
EBIT	112	$-61$	25	$-54$
EBIT-margin	5.59%	$-3.44%$	4.71%	$-15.00%$
Profit before tax	23	$-132$	$-65$	$-151$
Earnings per share	0.60	$-4.90$	$-2.14$	$-5.84$
NIBD	15	116	15	116
Working Capital	177	124	177	124

Group Key Figures (cont.)

• External order backlog of approx. MNOK 1.170 (Q3 1.240)
• MNOK 729 in 2017
• MNOK 441 in 2018

Resultat per segment

(NOK million)	Ship Technology	Design & Solutions	Power & Systems	MMC	Other	Havyard Group
Operating revenues, External	1282648	281403	51 600	364756	22 823	2 003 229
Operating revenues, Internal	19830	41 128	46 071	43 668	$-150697$	O
Total operating revenue	1 302 478	322 530	97 672	408 424	$-127874$	2 003 229
Operating profit /loss EBITDA	77 698	28 885	$-2041$	34 940	896	140 379
Depreciation	13 0 36	3 673	5 0 7 4	5 917	725	28 4 25
Operating profit/(loss) (EBIT)	64 662	25 212	$-7114$	29 023	171	111954
Net financial items	$-7023$	8 3 0 8	1288	$-3290$	$-37718$	$-38435$
Share of profit/(loss) from as- sociate	0	0	0	0	$-50652$	$-50652$
Profit/(Loss) before tax	57 639	33 520	$-5826$	25 732	$-88198$	22 867
Income tax expense	11 372	8843	$-1392$	$-7437$	$-788$	10 598
Profit/(Loss)	46 267	24 678	$-4435$	33 169	$-87410$	12 269

• Positive EBIT in all segments except Power & Systems

- Ship Technology

• Outfitting Leirvik during 2016
• 832 SOV windmill service, NB 125
• 843 ICE Icebreaker AHTS, NB 128
• 843 ICE Icebreaker AHTS, NB 129
• Better result on ongoing projects.
• Positive trend in 2016
• Order backlog of MNOK 614
• 1 live fish carrier for NFT
• 1 workboat for Inverlussa
• 3 ferries for Fjord1

- Design & Solutions

• Lower capacity utilization and increased sales of equipment packages reduces margins compared to historical margins.
• Order backlog of MNOK 242
• External: MNOK 240
• Internal: MNOK 2

- NES Power & Systems

• Lower activity and margins. (2015 figures are from February 1st)
• Focus on product developement
• Order backlog of NOK 27,1 million
• External: NOK 23,9 million
• Internal: NOK 3,2 million

- MMC

• Increased operating revenue and EBIT in 2016, compared to 2015. Improved margins due to improved project execution and increased activity.
• Order backlog of NOK 218 million
• External: NOK 192 million
• Internal: NOK 26 million

BALANCE SHEET Q4.2016

	Note	2016	2015
		(unaudited / urevidert)
Non current assets
Goodwill		103 045	100 527
Licenses, patents and R&D		89 323	78 529
Property, plant and equipment		234 528	252 454
Investment in associates	8	25 045	75 691
Loan to associates		22 090	18 673
Investment in financial assets	4	26 5 47	63 0 25
Other non current receivable		62 981	59 148
Total non current assets		563 559	648 047
Current Assets
Inventory		113 503	50 075
Accounts receivables		156 592	84 717
Other receivables		53 839	101 280
Construction WIP		224 029	233 379
Cash and cash equivalents		266 057	224 629
Total Current Assets		814 020	694 079
TOTAL ASSETS		1377579	1342127

Changes in non current assets

• Minor equity issue
• Result in associates (deficit) 51 MNOK
• Impairment financial assets 40 MNOK
• Change in current assets and current liabilities because of activity on ship yard per 31.12.16 compared to 31.12.15.

TOTAL EQUITY AND LIABILITIES		1377579	1342127
Total liabilities		839 794	833 162
Total current liabilities		636780	569 661
Other current liabilities		156 850	149 162
Prepayments in excess of construction WIP		116 467	100 784
Loans and borrowings, current	7	6993	20 673
Bond loan (instalments next period)	7	24 640
Construction loans	7	149 163	87 286
Public duties payables		49759	52 413
Taxes payable		11 3 3 3	2734
Accounts payables		121 575	156 609
Current liabilities
Total long term liabilities		203 014	263 501
Other long-term liabilities	7	3 4 3 4	5 0 3 1
Loans and borrowings, non-current	7	63 24 6	76 036
Bond loan	5 7	32 606 103728	33 536 148 898
Long term liabilities Deferred tax liability
Total equity		537 785	508 965
Non-controlling interest		54 502	57 622
Retained earnings		459 514	444759
Treasury shares		-5	$-5$
Share premium reserve		22 535	5 4 6 3
Share capital	6	1 2 3 9	1126
Equity
		urevidert)
	Note	2016 (unaudited /	2015

• Net interest bearing debt: MNOK 15
• Working capital: MNOK 177
• Equity ratio: 39 %

CASH FLOW

(NOK 1,000)	2016	2015
	(unaudited /urevidert)
CASH FLOW FROM OPERATIONS
Profit/(loss) before tax	22 867	$-132304$
Taxes paid	$-3173$	$-1807$
Depreciation	28 4 25	27933
Net interest income	8.299	7547
Change in bond loan (amortization)	$-1944$	1957
Impairment	40 000	77 015
Share of (profit)/ loss from associates	50 652	$-27005$
Changes in inventory	$-63429$	$-4118$
Net changes in construction loans	61.876	$-428254$
Changes in accounts receivables/construction WIP	$-62525$	468 128
Changes in accounts payable	$-35033$	$-29743$
Changes in prepayments from customers	15 684	45 920
Changes in other current receivables/liabilities	36 131	1369
Net cash flow from/(to) operating activities	97831	6.637
CASH FLOW FROM INVESTMENTS
Investments in property, plant and equipment	$-5884$	$-7332$
Investment in intangible assets	$-15,409$	$-19915$
Investment in/disposal of financial assets	$-3522$	12 042
Purchase of subsidiaries		$-18270$
Interest income	7750	9 4 3 9
Dividends received
Changes in long term receivables	$-7249$	5 8 2 3
Net cash flow used in investing activities	$-24314$	$-18214$
CASH FLOW FROM FINANCING ACTIVITIES
New long term debt		27 577
Proceeds from issues of shares	17 18 5
Repayment long term debt	$-32974$	$-10.275$
Interest costs	$-16049$	$-16986$
Purchase/sale of treasury shares		410
Dividends	$-251$	$-11866$
Net cash flow from/ (used in) financing activities	$-32089$	$-11140$
Net change in cash and cash equivalents	41 4 28	$-2277$
Cash and cash equivalents at start of the period	224 629	194 563
Cash and cash equivalents from purchase of subsidiaries		52783
Cash and cash equivalents at end of the period	266 057	224 629
Restricted bank deposits at the end of the period	79 135	94 540
Available cash and cash equivalents at the end of the	186922	130 089
period

Positive CF from operations in Q4:

• Positive result
• Accruals related to projects

Negative CF from Investments Q4:

• Changes in long term receivables
• New minor investments

Negative CF from financing Q4:

• Instalments on debt
• Interest costs

HES/ QA

• Sick leave gradually reduced last years
• An extensive plan is implemented to reduce injuries and absence, and it includes subcontractors
• Average sick leave
• Last 24 months sick leave on 3.52 %
• So far in 2016 sick leave on 3.80 %

HES/ QA

• Quality
• Strong focus on Quality in the Group
• Quality deviations are measured, documented in action lists and handled effectively
• Internal audits in accordance with ISO 9001 and ISO 14001
• Supplier audits
• Audits from customers