Eqva ASA — Investor Presentation 2015

Aug 26, 2015

Presentation Q2 2015 26.08.15 Geir Johan Bakke CEO

Agenda

• Headlines/ milestones Q2
• Outlook
• Main figures
• Detailed figures
• HES/ QA
• Questions

Headlines/Milestones Q2

• EBIT of NOK -11 million and EBIT-margin of -3.1% in second quarter of 2015
• EBIT of NOK -5 million and EBIT-margin of -0.55 % in first half of 2015
• Lower EBIT margin was expected in Q2 due to lower utilization in all business areas. This affected Havyard Ship Technology in particular, which in addition suffered extraordinary warranty costs.
• Implementation of four days' working week was successful, but not sufficient to adapt capacity to the workload in the period.
• Good development of order intake in Havyard MMC within equipment for fishery and aquaculture.
• No newbuild delivered in Q2.

Outlook

• Challenging times for our customers within the offshore market give low expectations of new orders in this segment.
• Our diversification strategy, where we have developed and delivered products for fisheries, aquaculture as well as the renewable energy sector gives us a competitive advantage over new suppliers entering these markets.
• The group as a whole depends on new order intake in most segments to fill capacity for the coming periods.
• We will continue to strengthen our competitiveness through restructuring, rationalization and downsizing for adapting the capacity. The effects of the downsizing will have full impact from the start of 2016.

Main Figures

		2015 YTD 2014 YTD	Q 2 15	Q 2 14	2014
Operating revenue	917	1125	353	696	2411
EBITDA	8	53	$-4.7$	21	66
EBIT	-5	43	$-11.1$	15	45
EBIT-margin	$-0.5%$	3.8%	$-3.1%$	2.2%	1.9%
Profit before tax	13	43	$-14.1$	15	39
Earnings per share	0.64	1.28	$-0.53$	0.40	1.24
NIBD	186	143	186	143	167
Working Capital	188	213	188	213	164

Main Figures (cont.)

• Order backlog of approx. MNOK 2.299
• MNOK 870 in 2015
• MNOK 1.429 in 2016
• External Order intake Q2 250 mill

Detailed Figures

- Ship Technology

• Delivered in 2015
• 832 SOV windmill service, NB 118
• 832 SOV windmill service, NB 119
• Outfitting in Leirvik at 30.06.15
• 535 Fishing vessel, NB 121
• 843 AHTS ICE, NB 122
• Zero result in these projects in 2015 are reducing margins compared to second quarter of 2014
• No order intake in period.
• Order backlog of MNOK 1.889
• 1 PSV, 1 SOV, 3 AHTS ICE, 1 Fishing vessel (delivered July), 1 Live fish carrier

Detailed Figures (cont.)

- Design & Solutions

• Lower capacity utilization reduces margins in the second quarter of 2015 compared with second quarter of 2014
• External Order intake Q2 126 mill
• Order backlog of MNOK 249
• External: MNOK 237
• Internal: MNOK 12

Detailed Figures (cont.)

- Power & Systems

• Restructuring
• Havyard Production & Service incorporated in Ship Technology
• Norwegian Electric Systems incorporated in Power & Systems from February 2015
• Lower capacity utilization and work on projects where loss provisions were set in earlier periods gives reduced margins in second quarter of 2015
• No order intake in period.
• Order backlog of NOK 176 million
• External: NOK 54 million
• Internal: NOK 122 million

Detailed Figures (cont.)

- MMC

• Lower capacity utilization and continued work on projects where loss provisions were made in 2014 reduces margins in second quarter of 2015 compared with the second quarter of 2014
• External Order intake Q2 124 mill
• Order backlog of NOK 139 million
• External: NOK 119 million
• Internal: NOK 20 million

BALANCE SHEET Q2.2015

(INON TOOD)			2014
	2015 Q 2	2015 Q1
	(unaudited)	(unaudited)
ASSETS
Non current assets
Goodwill	60 094	60 094	23 918
Licenses, patents and R&D	67218	65 950	59 912
Property, plant and equipment	257680	262 174	263 549
Investment in associates	79 145	76950	88 190
Loan to associates	16788	15 194	14817
Investment in financial assets	159 921	172071	172071
Other non current receivable	70 460	69 200	68 827
Total non current assets	711 306	721 633	691 284
Current Assets
Inventory	52759	44 985	40 673
Accounts receivables	136 261	93 928	79 1 23
Other receivables	96962	97627	88 274
Construction WIP in excess of prepayments	597918	356 455	642 464
Cash and cash equivalents	168 317	220 916	194 562
Total Current Assets	1052217	813 911	1045096
TOTAL ASSETS	1763 523	1 535 544	1736380
EQUITY AND LIABILITIES	2015 Q2	2015 Q1	2014
	(unaudited)	(unaudited)
Equity
Share capital	1 1 2 6	1 1 2 6	1 1 2 6
Share premium reserve	5462	5462	5462
Treasury shares	-7	-7	-7
Retained earnings	587998	599 974	583 750
Non-controlling interest	24 188	23 154	6009
Total equity	618768	629 709	596 340
Long term liabilities
Deferred tax liability	56 592	58 955	48 447
Bond loan	147836	147 219	146 941
Loans and borrowings, non-current	74 5 28	75 394	61574
Other long-term liabilities	1497	1926	2 1 9 1
Total long term liabilities	280 453	283 494	259 153
Current liabilities
Accounts payables	137984	103 845	149 267
Taxes payable	3428	3428	3925
Provision for dividend
Public duties payables	39 342	10 056	19 3 10
Construction loans	370 247	134 493	515 540
Loans and borrowings, current	40727	27 605	38 2 30
Prepayments in excess of construction WIP	149 559	144 620	53 164
Other current liabilities	123 015	198 294	101 451
Total current liabilities	864 302	622 341	880887
Total liabilities	1 144 755	905 835	1 140 040
TOTAL EQUITY AND LIABILITIES	1763 523	1 535 544	1736380

• Per Q2 Purchase of Norwegian Electric Systems
• Increases goodwill MNOK 36
• Reduces investment in associates MNOK 12
• Increases non-controlling interest MNOK 17
• Increases retained earnings MNOK 22

• Increases working capital MNOK 36

• Net interest bearing debt: MNOK 186

• Working capital: MNOK 188
• Equity ratio: 35 %

CASH FLOW

(NOK 1000)	2015 YTD	2015 Q 2	2014
	(Unaudited)	(Unaudited)
CASH FLOW FROM OPERATIONS
Profit/(loss) before tax	13 628	$-14178$	39 100
Taxes paid	$-1807$		$-57903$
Depreciation	12735	6458	21 0 64
Profit of purchase in associates	$-22603$
Impairment
Share of (profit)/loss from associates	$-2929$	$-1980$	$-6036$
Changes in inventory	$-7214$	$-8187$	$-1801$
Net changes in construction loans	$-104566$	276 481	380752
Changes in accounts receivables/construction WIP	64 200	$-235638$	$-377893$
Changes in accounts payable	$-37350$	15 15 6	20 989
Changes in prepayments from customers	90839	18470	$-179638$
Changes in other current receivables/liabilities	$-57337$	$-104712$	15 2 33
Net cash flow from/(to) operating activities	$-52404$	$-48130$	$-146$ 133
CASH FLOW FROM INVESTMENTS
Investments in property, plant and equipment	$-18140$	$-15836$	-42 585
Investment in intangible assets		1702	$-20290$
Investment in/disposal of financial assets	12 150	12 150	136824
Purchase of subsidiaries	$-18270$
Interest income	7217	5490	12 6 26
Dividends received			1990
Changes in long term receivables	$-3603$	$-2853$	-4968
Net cash flow used in investing activities	$-20646$	653	83 597
CASH FLOW FROM FINANCING ACTIVITIES
New long term debt	15 9 94		146 400
Repayment long term debt	$-3734$	$-1295$	$-43020$
Purchase of minority shares in Havyard MMC			$-25191$
Interest costs	$-8165$	$-4033$	-13475
Purchase/sale of treasury shares			5999
Dividends	$-10073$		-94 996
Net cash flow from/ (used in) financing activities	-5978	$-5328$	$-24283$
Net change in cash and cash equivalents	$-79028$	$-52805$	$-86819$
Cash and cash equivalents at start of the period	194562	134 231	281 381
Cash and cash equivalents from purchase of subsidiaries	52783
Cash and cash equivalents at end of the period	168 317	168 317	194 562
Restricted bank deposits at the end of the period	89 4 71	89471	114 377
Available cash and cash equivalents at the end of the period	78 846	78 846	80 185

Negative CF from operations in Q2:

Low profit and reduction in other current receivables/liabilities

Positive CF from Investments Q2:

Sale of shares in Fosnavåg Vekst

Negative CF from financing Q2:

Interest costs

HES/ QA

• Sick leave gradually reduced during 2013 and stable around 3.5 % in 2014
• An extensive plan is implemented to reduce injuries and absence, and it includes subcontractors
• First half year of 2015 the sick leave is 4.24 %
• The increase is considered to be of temporary character

HES/ QA

H-value Number of work related injuries with absence pr. million working hours

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 costumers