Eqva ASA — Investor Presentation 2016

Nov 18, 2016

HAVYARD GROUP ASA

Presentation Q3 2016 - 18.11.16

Geir Johan Bakke, CEO

Agenda

• Headlines/ milestones Q3
• Outlook
• Main figures
• Detailed figures
• HES/ QA
• Questions

Headlines/Milestones Q3

• EBIT of NOK 38.8 million and EBIT-margin of 8.4 % in third quarter of 2016.
• Progress on projects in work is on schedule
• New contracts
• Contracts for Havyard Ship Technology AS in a new segment for repair and reconstruction, as well as a new shipbuilding contract for a workboat for the sea farming industry with a total value of NOK 100 million, included an option for a additional workboat.
• Havyard MMC has entered into a contract for delivery of equipment for the construction of a well boat for the joint venture company DESS Aquaculture. The contract value is in excess of NOK 50 million, and contains options for delivery of equipment for further three vessels.
• Delivered vessel in third quarter
• Successful delivery of NB 125, SOV windmill service vessel to Esvagt.

Status & Outlook

• We deliver in accordance with our focus areas, which are quality, cost and time, and this, is reflected in the positive economic progress in the group in 2016.
• Strong market position in segments with good activity; wind mill service, fish farming, fishing and ice. We are working on several projects in these segments, but experience strong price pressure and further delays in the decision-making process.
• For Havyard Ship Technology (the shipyard), the activity in 2017 related to newbuildings will be low. Our expectations for 2018 are on the other hand 3 – 4 deliveries, which we expect to be the standard for the coming years.
• Havyard MMC is expected to have good activity also in 2017, with improved profitability as a result of better project execution and control on technology.
• The organization is after the restructuring adjusted for expected future level of activity and with temporary decrease in activity, layoff will be implemented.
• The challenges we see in the marked today are expected to lead to structural changes in the industry.

Group Key Figures

	2016 YTD	2015 YTD	2016 Q3	2015 Q3	2015
Operating revenue	1 471	1 4 1 0	463	493	1768
EBITDA	109	12	46	5	$-33$
EBIT	87	$-7$	39	$-2$	$-61$
EBIT-margin	5,91%	$-0.50%$	8,37%	$-0.42%$	$-3,45%$
Profit before tax	88	19	42	5	$-132$
Earnings per share	2,75	0,94	1,33	0,3	$-4,9$
NIBD	60	198	60	198	116
Working Capital	184	190	184	190	124

Group Key Figures (cont.)

• External order backlog of approx. MNOK 1.240
• MNOK 439 in 2016
• MNOK 575 in 2017
• MNOK 6 in 2018
• MNOK 220 in 2019

Resultat per segment

(NOK million)	Ship	Design &	Power &	MMC	Other	Havyard
	Technology	Solutions	Systems			Group
Operating revenues, External	979 969	184 574	43 124	240 403	22 823	1470 892
Operating revenues, Internal	18 392	23 463	37 352	37 210	$-116$ 417	O
Total operating revenue	998 360	208 038	80 475	277 614	$-93594$	1470892
Operating profit / loss EBITDA	73 816	12 072	$-104$	18 805	4 5 3 5	109 123
Depreciation	10 694	2707	3 8 6 1	4 4 0 8	559	22 2 2 9
Operating profit/(loss) (EBIT)	63 122	9365	$-3966$	14 3 9 8	3 976	86 895
Net financial items	$-6979$	7 701	1348	$-2274$	3 5 1 5	3 3 11
Share of profit/(loss) from as- sociate	0	O	O	O	$-2348$	$-2348$
Profit/(Loss) before tax	56 143	17 066	$-2618$	12 123	5 1 4 3	87 858

• 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 from first half of 2016 continues into Q3.
• Order backlog of MNOK 758
• 1 PSV, 2 AHTS ICE, 1 live fish carrier

- Design & Solutions

• Lower capacity utilization and increased sales of equipment packages reduces margins in 2016 compared with 2015
• Order backlog of MNOK 269
• External: MNOK 243
• Internal: MNOK 26

- NES Power & Systems

• Lower activity and margins (2015 figures are from February 1st)
• Order backlog of NOK 13 million
• External: NOK 8 million
• Internal: NOK 6 million

- MMC

• Increased operating revenue and EBIT in 2016, compared to 2015.
• Order backlog of NOK 285 million
• External: NOK 232 million
• Internal: NOK 53 million

BALANCE SHEET Q2.2016

• Minor changes in non current assets
• Minor equity issue
• Result in associates
• Change in current assets and current liabilities because of increased activity on ship yard per 30.09.16 compared to 31.12.15.

	Note	2016 Q3	2015 Q3	2015
		(unaudited / urevidert)
Equity
Share capital	6	1239	1126	1126
Share premium reserve		22 535	5 4 6 3	5 4 6 3
Treasury shares		$-5$	$-5$	-5
Retained earnings		512 953	596 608	444 759
Non-controlling interest		55 677	21 2 7 5	57 622
Total equity		592 399	624 467	508 965
Long term liabilities
Deferred tax liability	5	54 827	53 520	33 536
Bond loan	7	111 524	148 310	148 898
Loans and borrowings, non-current	7	67 485	73 553	76 036
Other long-term liabilities	7	2794	2 1 3 3	5 0 31
Total long term liabilities		236 630	277 516	263 501
Current liabilities
Accounts payables		173 571	120 151	156 609
Taxes payable		1 2 9 1	3 4 2 8	2734
Public duties payables		20 714	19 513	52 413
Construction loans	7	120 412	480 381	87 286
Bond loan (instalments next period)	7	16 4 27
Loans and borrowings, current	7	27 865	44 126	20 673
Prepayments in excess of construction WIP		139 349	136 420	100 784
Other current liabilities		162 016	174 362	149 162
Total current liabilities		661 645	978 381	569 661
Total liabilities		898 275	1 255 897	833 162
TOTAL EQUITY AND LIABILITIES		1490674	1880 363	1342127

• Net interest bearing debt: MNOK 60
• Working capital: MNOK 184
• Equity ratio: 40 %

CASH FLOW

(NOK 1,000)	2016 YTD	2015 YTD	2015
	unaudited 'urevidert)
CASH FLOW FROM OPERATIONS
Profit/(loss) before tax	87 858	18 570	$-132304$
Taxes paid	$-1AA2$	$-1.807$	$-1807$
Depreciation	22 229	19 476	27 933
Net interest income	7.610	6.003	7.547
Change in bond loan (amortization)	$-2.361$	1369	1957
Impairment			77 015
Share of (profit)/ loss from associates	2 3 4 8	$-26783$	$-27005$
Changes in inventory	$-2268$	$-9685$	$-4118$
Net changes in construction loans	33 126	$-35159$	$-428254$
Changes in accounts receivables/construction WIP	$-150160$	$-65385$	468 128
Changes in accounts payable	16.962	$-66.201$	$-29743$
Changes in prepayments from customers	38 565	81735	45 9 20
Changes in other current receivables/liabilities	18 5 9 5	13 13 8	1369
Net cash flow from/(to) operating activities	71060	$-64730$	6 6 3 7
CASH FLOW FROM INVESTMENTS
Investments in property, plant and equipment	$-2702$	$-3292$	$-7332$
Investment in intangible assets	$-9115$	$-7068$	$-19.915$
Investment in/disposal of financial assets	$-3.351$	12 042	12042
Purchase of subsidiaries	5 130	$-18,270$ 8.106	$-18270$
Interest income			9 4 3 9
Dividends received Changes in long term receivables	$-6329$	$-5449$	5823
Net cash flow used in investing activities	$-16367$	$-13931$	$-18214$
CASH FLOW FROM FINANCING ACTIVITIES
New long term debt		15 994	27 577
Proceeds from issues of shares	17 18 5
Repayment long term debt	$-29374$	$-4073$	$-10275$
Interest costs	$-12740$	$-14109$	$-16986$
Purchase/sale of treasury shares		410	410
Dividends	$-251$	$-10073$	$-11866$
Net cash flow from/ (used in) financing activities	$-25180$	$-11851$	$-11140$
Net change in cash and cash equivalents	29.513	$-90.511$	$-22717$
Cash and cash equivalents at start of the period	224 629	194 563	194 563
Cash and cash equivalents from purchase of subsidiaries		52783	52783
Cash and cash equivalents at end of the period	254 142	156 834	224 629
Restricted bank deposits at the end of the period	77 969	88 412	94 540
Available cash and cash equivalents at the end of the period	176 174	68 421	130 089

Positive CF from operations in Q3:

• Positive result
• Accruals related to projects

Negative CF from Investments Q3:

• Changes in long term receivables
• New minor investments

Negative CF from financing Q3:

• 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 21 months sick leave on 3.37 %
• So far in 2016 sick leave on 3.54 %

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