Frøy ASA — Interim / Quarterly Report 2021

Aug 26, 2021

Frøy ASA – Q2 21 | August 2021

Frøy ASA

Q2 21

August 2021

Highlights Q2 highlights

Commercial

• Increased activity in the wellboat segment and normal seasonal pattern in the service segment. Delousing services somewhat lower than Q2 20.
• Increased capacity and improved operational performance in the wellboat segment year over year, improves profit and margins for the Group
• Delivery of Kristiansund in June, wellboat newbuild with 3 200m3 capacity
• Signed a four-year framework agreement for cleaning of nets with a leading Norwegian salmon farmer with estimated total contract value of NOK 250-300 million.

Financial

• Revenues in Q2 21 of NOK 412 million, increased from NOK 385 million in Q2 20
• EBITDA in Q2 21 of NOK 159 million, increased from NOK 138 million in Q2 20
• Backlog of 6.3 billion (including options, but excluding framework agreements without fixed minimum value), slightly down from Q1 21

Outlook

• High revenue visibility from backlog and framework agreements
• Wellboat newbuilds expected to be delivered on schedule
• New organic and inorganic growth alternatives are being explored on an ongoing basis and are subject to satisfactory risk return profiles

Key figures

Key figures1	Q2 21	Q2 20	YTD 2021	YTD 2020*
Financial (NOK 1,000,000)
Contract revenues2	211	189	412	277
Framework revenues	101	44	146	44
Spot revenues	60	107	128	126
Fuel & other reinvoiced revenues3	37	40	80	59
Other revenues4	2	4	3	14
Total revenues	412	385	768	520
EBITDA5	159	138	243	168
EBITDA adjusted6	159	135	250	164
EBITDA adjusted %	39%	35%	32%	32%
Net cash flow from operating activities	107	10	245	60
Net cash flow from investing activities	-462	-20	-1 304	-101
Net cash flow from financing activities	23	9	1 660	-9
Total assets	6 936	6 794
Net interest bearing debt7	2 995	2 724
Cash	750	57
Equity	2 948	1 118
Profitability and capital structure
ROE8	12 %
Equity ratio	43 %	16%
Vessels9
Wellboats	15	13
Large service vessels	11	11
Small service vessels	44	43
Transport vessels	4	4
Total number of vessels	74	71

1) This report is unaudited. Please refer to the appendix in this quarterly report for descriptions and reconciliations of alternative performance measures (non-IFRS measures) including definitions of key figures. * Frøy Gruppen AS was acquired by NTS ASA in a business combination at the acquisition date 3 April 2020. The former Frøy companies are thereby not fully reflected in the consolidated comprehensive income for the Group in 2020 ,but consolidated from 3 April.

2) Contract revenues includes time charter revenues, bareboat revenues and other fixed contract revenues

3) The group reinvoice fuel and other costs to clients when operating on time charter contracts

4) Other revenues include revenue related to sale of vessels and other non-allocated revenues

5) EBITDA: Operating profit plus depreciations and amortizations

6) EBITDA adjusted: EBITDA adjusted for gain on sale of assets and costs related to the IPO

7) Net interest-bearing debt: Total non-current interest-bearing liabilities, plus current interest-bearing liabilities, less cash

8) Annualize return on equity (ROE) calculated as net profit last 12 months / average equity

9) Number of vessels at end of period

Financial results in the quarter and year to date

Group financial review

Frøy Gruppen AS was acquired by NTS ASA in a business combination at the acquisition date 3 April 2020. The former Frøy companies are thereby fully reflected in the consolidated comprehensive income from 3 April 2020.

Profit and loss

(NOK 1,000,000)	Q2 21	Q2 20	YTD 21	YTD 20
Revenue	412	382	768	516
Other income	0	3	1	3
Total revenue	412	385	768	520
Direct expenses (goods/services delivered)	42	60	91	93
Employee benefit expenses	120	106	232	144
Other operating expenses	92	82	202	115
EBITDA	159	138	243	168
EBITDA %	39%	35%	32%	32%
Depreciation	72	67	146	87
Operating profit	87	71	97	81
Financial income	2	0	2	1
Financial expenses	23	21	46	33
Share of profit (loss) from associates	-	-	-1	-
Gain/loss on shares at fair value	-	346	-	346
Profit (loss) before tax	65	396	53	395
Taxes	6	6	2	6
Profit (loss) for the period	59	390	51	388

(Figures in parenthesis refer to the same period previous year.)

Second quarter

Total revenue in Q2 21 amounted to NOK 412 million (NOK 385 million). The increase in revenues is mainly due to increased capacity and improved operational performance in the wellboat segment.

EBITDA in Q2 21 amounted to NOK 159 million (NOK 138 million) while the EBITDA margin ended at 39% (35%). The EBITDA margin increased vs. Q2 20 due to improved operational performance within the wellboat segment.

Operating profit in Q2 21 ended at NOK 87 million (NOK 71 million).

The gain on shares at fair value in Q2 20 relates to shares in Norway Royal Salmon ASA that Frøy owned in 2020. The shares were transferred to NTS ASA in Q4 20.

Net profit Q2 21 ended at NOK 59 million (NOK 390 million). Adjusted for the gain on shares at fair value, net profit in Q2 20 was NOK 44 million.

Year to date (YTD)

Revenue YTD 21 amounted to NOK 768 million (NOK 520 million). YTD 21 EBITDA amounted to NOK 243 million (NOK 168 million).

Revenues and EBITDA increased YTD 21 vs. YTD 20 due to the combination of Frøy and NTS in April 2020 and due to growth in number of vessels in operation.

EBITDA margin YTD 21, adjusted for NOK 8 million in IPO costs, ended at 33% (32%). The higher margin is due to increased margins within wellboats in Q2 21 vs. Q2 20.

Cash flow and net interest-bearing debt (NIBD)

Second quarter

Frøy had positive NOK 107 million cash flow from operations in Q2 21 (NOK 10 million). Higher operating profit and positive change in working capital contributed to the improved cash flow in Q2 21 vs. Q2 20.

Cash flow from investment activities ended at NOK - 462 million in the quarter (NOK - 20 million). Investments in Q2 21 relates to the ongoing newbuild program with wellboat newbuilds being the largest component.

The cash flow from financing activities amounted to NOK 23 million in the quarter. The increase in borrowings on newbuilds is mainly offset by repayment of various short-term debt.

Net cash flow in the quarter amounted to NOK - 332 million (NOK -1 million). The cash position decreased from NOK 1 082 million at the beginning of the period to NOK 750 million at the end of the quarter.

At the end of the quarter Frøy had total assets of NOK 6 936 million (NOK 6 794 million). The increase in total assets vs. Q2 20 is due to an increase in property plant and equipment. The property, plant and equipment increased due to investments into the ongoing newbuild program and delivery of the new wellboats Reisa and Kristiansund.

Gross interest-bearing debt increased year over year to NOK 3 745 million (NOK 2 781 million). The increase in gross debt is related to new debt on to the newbuilds. Net interest-bearing debt at the end of Q2 21 was NOK 2 995 million (NOK 2 724 million).

Equity ratio Q2 21 of 43% (16 %) increased mainly due to the share issue with gross proceeds of NOK 1.000 million carried out in connection with the IPO, the transfer of shares in Norway Royal Salmon ASA and repayment of debt to NTS ASA in December 2020.

Year to date (YTD)

Frøy had positive NOK 245 million cash flow from operations YTD 2021 (NOK 60 million). Cash flow from operating activities increased YTD 21 vs. YTD 20 due to the combination of Frøy and NTS in April 2020 and due to growth in number of vessels in operation.

Cash flow from investment activities was NOK – 1 304 million YTD 2021 (NOK -101 million). Investments YTD relates to the ongoing newbuild program with wellboat newbuilds being the largest component.

The cash flow from financing activities YTD 21 amounted to NOK 1 660 million. The positive cash flow from financing is mainly explained by NOK 1 000 million in new share capital in connection with the IPO and increased borrowings on newbuilds under construction.

Segment overview

Frøy's segment structure

Wellboat segment

Transport of live fish and biological treatments

# employees 217

# vessels 19 (incl. newbuilds)

Service segment

Installation, maintenance and cleaning of salmon farmers site infrastructure

# employees: 385

# vessels: 62 (incl. newbuilds)

Sea transport segment

Transport of salmon feed, frozen seafood and other cargo

# employees: 62

# vessels: 4

Financial results

Revenues in Q2 21 amounted to NOK 196 million. Revenues increased compared to Q2 20 mainly as the newbuild Reisa came into operation in January 2021. The newbuild Kristiansund was delivered from yard last week of June and had minimal revenue contribution in the quarter. Excluding Kristiansund, Frøy operated 14 wellboats in the quarter, one more than in Q2 20.

Activity increased in Q2 21 vs. Q1 21 as higher sea water temperatures increased demand for transportation and logistics carried out by the wellboat segment. The spot market related to deloucing services remained slow in the quarter.

(NOK 1,000,000)	Q2 21	Q2 20
Contract revenues	121	108
Framework agreements	21	-
Spot	21	34
Fuel and other reinvoiced costs	33	28
Other	-	-
Total revenues	196	170
EBITDA	85	55
EBITDA %	44 %	32%
Number of vessels	15	13
Number of vessels on fixed contracts	13	11

Contract revenues in Q2 21 ended at NOK 121 million (NOK 108 million). EBITDA in Q2 21 ended at NOK 85 million (NOK 55 million). The increase in EBITDA is mainly due to the delivery of Reisa in Q1 21 and improved operations compared to Q2 20. Operations in Q2 20 was characterized by high costs due to delayed delivery of a newbuild and extra costs related to a replacement vessel.

In the quarter, Frøy signed a 2-year back-to-back agreement on the wellboat Viktoria Lady. The vessel will be leased on a 2-year bareboat agreement and Frøy will deliver wellboat services on a fixed time-charter agreement to a Norwegian salmon farmer.

Frøy ASA – Q2 21 | August 2021 Service

Financial results

Revenues in Q2 21 amounted to NOK 185 million. This is flat vs. Q2 20 as increased revenues from fixed contracts and framework agreements were offset by lower spot revenues. The increase in revenues from framework agreements was to a large degree driven by growth within net cleaning. Spot revenues in Q2 21 was negatively impacted by lower demand for delousing services. EBITDA adjusted for gain on sale of assets in Q2 21 amounted to NOK 70 million vs. Q2 20 of NOK 72 million.

The activity level increased from Q1 21 to Q2 21 in accordance with the normal seasonal pattern.

Increasing sea temperatures during spring led to increased demand, especially, within cleaning of nets and cages. The activity level within other service categories also increased in line with normal seasonal pattern except for the deloucing services that remained low compared to Q2 20.

(NOK 1,000,000)	Q2 21	Q2 20
Contract revenues	79	71
Framework agreements	80	44
Spot	21	54
Fuel and other reinvoiced costs	4	12
Other	0	3
Total revenues	185	185
EBITDA	70	76
EBITDA adjusted for gain on sale of assets	70	72
EBITDA adj %	38 %	39%
Number of large service vessels	11	11
Number of small service vessels	44	43

Frøy had 55 vessels in operation at the end of the quarter working on a combination of time charter contracts, framework agreements and spot. Frøy Nordkapp, a new net cleaning vessel came into operation in June. Frøylys, a 2016-built vessel that was acquired and refitted, came into operation late June. The large service vessel, Frøy Pioner, was sold in April.

During Q2 21 Frøy signed a four-year framework agreement for cleaning of nets with a leading Norwegian salmon farmer. The agreement is the largest net cleaning agreement entered into by Frøy in terms of volume, value and contract length. Following a gradual implementation, Frøy will deliver all net cleaning services in Norway for the client. The agreement has an estimated total value of NOK 250-300 million over the contract period. The final value of the contract will depend on the number of net cleanings carried out by Frøy during the term of the agreement which will depend on sea temperatures, the level of marine fouling on the nets and changes in the number pens for the salmon farmer. The contract is not included in the backlog as the value of the contract is uncertain and the agreement doesn´t have any fixed minimum value clause.

All large service vessels, except for one, are booked on fixed time charter contracts throughout 2021.

Financial results

Revenues in Q2 21 amounted to NOK 31 million vs. NOK 24 million in Q2 20. EBITDA in Q2 21 amounted to NOK 8 million (NOK 4 million). The spot market for transport of cargo from the continent to Norway has continued to be slow in the quarter, impacting the results in Q2 21 negatively.

Frøy had 4 vessels in operation at the end of the quarter. The vessel Rubin operated on a long-term time charter for transport of feed during the quarter. The vessel, Rotsund, was at the start of the quarter in dock for maintenance work. The vessel entered a fixed time charter contract for transport of feed from June to November 2021. The vessels, Folla and Safir, operated in the spot market in the quarter.

(NOK 1,000,000)	Q2 21	Q2 20
Contract revenues	11	10
Framework agreements	-	-
Spot	20	14
Fuel and other reinvoiced costs	0	0
Other	-	-
Total revenues	31	24
EBITDA	8	4
EBITDA %	24 %	18%
Number of vessels	4	4

Increasing the share of fixed contracts and reducing the share of spot work is a strategic priority in the sea transport segment. During Q2 21 Frøy negotiated multiple agreements that were signed after the end of the quarter. The agreements are described in the section "Events after the close of the quarter". The new contracts will significantly improve the revenue visibility in the segment going forward.

Investments

Wellboat: On June 23rd 2021 Frøy took delivery of the newbuild Kristiansund.

Key investments in the wellboat segment during Q2 21 include contract payments on the newbuilds under construction. As of 30.06.21 Frøy had four remaining wellboats under construction. Construction of the vessels are progressing according to the updated plan from Q1 21. Åsværfjord, the last vessel being built at Havyard shipyard is expected to be delivered October 2021. Gåsø Høvding, that is built at Sefine in Turkey is expected to be delivered during September 2021. The two remaining vessels are scheduled for delivery summer 2022 and summer 2023.

Service: During Q2 21 Frøy acquired the net cleaning vessel Frøylys and took delivery of the newbuild Nordkapp. As of 30.06.21 Frøy had 7 service vessels under construction or rebuilding. Delivery of two net cleaning vessels is pushed into Q1 22 due to delays at the yard. The specialized delousing vessel Frøy Challenger is scheduled for delivery in second half of Q3 21, three smaller service vessels are scheduled for delivery during Q4 21, while one large service vessel and two net cleaning vessels are scheduled for delivery during Q1 22.

Sea transport: Frøy plans to rebuild the multi-purpose fish feed and frozen seafood cargo vessel Folla during Q1 22. Total capex related to the rebuilding is expected to be approx. NOK 45 million.

Total investments 2021-2023 related to the newbuild program is estimated to be approx. NOK 2.9 billion vs. 2.8 billion estimated in Q1 21. The total investments 2021-2023 are expected to increase by approx. NOK 100 million due to extra equipment and changes to the original spec on the wellboats under construction. The additional capex is to a large degree balanced by additional time charter commitments from clients.

Financing

Frøy finances its fleet and equipment with bank debt and leasing.

Wellboats: Frøy has four new wellboats due for delivery, two in 2021, one in 2022 and one in 2023. All the new vessels are funded by long term bank financing with approx. 80% loan to value.

Frøy works to minimize risk related to financing and has historically secured debt financing before ordering new wellboats.

Service: The Company plans to finance the smaller service vessels under construction with leasing facilities, while large service vessels is financed with long term bank facilities. All the newbuilds under construction are fully financed by debt and equity.

In Q2 21 Frøy has entered into fixed rate swaps until 2030 for two facilities totalling NOK 860 million related to the two wellboats that are expected to be delivered summer 2022 and 2023 respectively. In addition, the Group has a principal amount of approx. NOK 390 million on fixed rate contracts today.

Bank debt - repayment schedule

The repayment profile on the bank debt is shown for the rest of 2021 to 2024 below. Frøy intends to refinance bank debt 12 months before maturity and is working to refinance the maturities in 2022. Installments and the total interest-bearing debt are expected to increase the coming two years as the Group takes delivery of more vessels.

Order backlog

Order backlog is defined as the aggregate value of work on signed customer contracts, including options. Framework agreements and other agreements without fixed commitments or minimum value clauses are not included in the backlog figures. Management believes that the order backlog is a useful measure in that it provides an indication of the amount of committed activity in the coming period.

Total backlog

• As of 30.06.21 the total backlog amounted to NOK 6.3 billion including options

Fixed backlog

• Total fixed revenue commitments of approx. NOK 3.9 billion

Options

• Most fixed time charter contracts include extension options
• Total options of more than NOK 2.4 billion

Fixed Options

Backlog (NOKm)

Risk factors

Frøy has not identified any additional risk exposure beyond the risks described in the 2020 annual report and prospectus that was published in connection with the IPO in March 2021. Frøy operates primarily in marine environments, which represents a continual risk of damage to, loss of, or suspension of operation by the Groupʹs vessels due to the forces of nature and climatological risk factors. Frøy is also subject to risks related to laws, regulations and market risk including interest and currency risk. Reference is made to the Outlook section of this report for other comments to Frøy´s risk exposure.

Events after the close of the quarter

After the end of Q2 21 Frøy signed multiple agreements in the sea transport segment. Two of the contracts are overlapping with one 3-year time charter contract for transport of feed from June through December and one 3-year framework agreement for transport of frozen seafood from October/November to May/June. Frøy expects to use the new vessel Folla for these agreements. In addition, Frøy has received an extension on one of its ongoing time charter contracts for transport of feed. The new agreement runs to the end of May 2022, with option to extend through October 2022

The agreements significantly improve the revenue visibility in the segment. The time charter agreements are expected to increase the backlog in the segment with close to NOK 100 million including options. The framework agreement does not have any minimum value clause and is not included in the backlog figures.

Outlook

Results in the second quarter improved year over year as the first vessels from the company´s newbuild program have entered the fleet. The activity level in Q2 21 increased in line with normal seasonality, as sea temperatures increased and as salmon farmers started to prepare sites for a new production cycle, released smolts to sea and carried out more regular maintenance and cleaning of nets. In the quarter, demand for services related to delousing has remained low in most areas in which Frøy operate. Demand for deloucing services has picked up during Q3 21.

The spread of the corona virus and the wide range of control measures implemented to gain control of the virus still represent a risk to Frøy´s operations. Frøy has implemented control procedures on board its vessels to minimize risk of outbreaks, to safeguard employees and maintain efficient service offering to clients. Frøy carefully monitors the development of the pandemic and will continue to implement measures in line with local and national advice and guidelines.

Frøy expects to grow considerably in the coming years, based on the ongoing newbuild program and long-term contracts. New farming methods like offshore farming and larger smolt represent new growth opportunities for Frøy. The Board of directors believe that the underlying trends with more complex operations and need for specialized personnel and infrastructure will continue to drive growth in demand both in the medium and the longer term.

Frøy´s ambition is to be the leading and preferred provider of sustainable aqua services. The Company shall add value for its customers through competence and through solutions that are characterized by safety, flexibility, responsibility and committed professionals.

Frøy´s key focus areas are to;

• Execute on the committed growth plan; Take delivery and deliver results from the newbuilds and rebuilds
• Develop new opportunities: Secure new contracts and develop new solutions
• Maximize returns on ongoing projects: Continuously improve efficiency and maintain cost leadership
• Deliver stable and growing dividends to our shareholders

Distributing dividends to shareholders is an essential part of Frøy´s financial strategy. The ambition is to pay a dividend based on the 2021 results. The Group´s dividend policy states that a dividend of minimum 50% of net profit shall be paid when the Group expect that the financial gearing, on fully invested basis, is at or below NIBD/EBITDA 3.5x and the Group has sufficient liquidity to meet future obligations.

Responsibility statement from the board of directors and CEO

We confirm, to the best of our knowledge, that the financial report for the first half of 2021 has been prepared in accordance with IAS 34 – Interim Financial Reporting, as adopted by EU, and gives a true and fair view of the Group's assets, liabilities, financial position and profits and loss for the period.

Furthermore, we confirm, to the best of our knowledge, that the interim management report includes a fair view of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements, a description of the principal risks and uncertainties for the remaining six months of the financial year, and major related parties transactions.

Frøya, 26 August 2021

Dagfinn Eliassen

Svein Sivertsen Chairman of the Board Board Member Harry Asmund Bøe

____________________ ____________________ ____________________

Board Member

Anne Sofie Utne Board Member

Helge Gåsø CEO

____________________ ____________________ ____________________

Hege Aasen Veiseth Board Member

Consolidated statement of comprehensive income

Frøy ASA

(NOK 1,000,000)
	Note	Q2 21	Q2 20	YTD 21	YTD 20	2020
Revenue		412	382	768	516	1 328
Other income	3	0	3	1	3	5
Total revenue		412	385	768	520	1 332
Direct expenses (goods/services delivered)		42	60	91	93	194
Employee benefit expenses		120	106	232	144	376
Other operating expenses		92	82	202	115	249
Depreciation		72	67	146	87	224
Operating profit		87	71	97	81	290
Financial income		2	0	2	1	3
Financial expenses		23	21	46	33	68
Share of profit (loss) from associates		-	-	-1	-	26
Gain/loss on shares at fair value		-	346	-	346	-
Profit (loss) before tax		65	396	53	395	251
Taxes		6	6	2	6	21
Profit (loss) for the period		59	390	51	388	230
Profit or loss for the period attributable to:
Equity holders of the parent		59	380	51	378	191
Non-controlling interests		-	10	-	10	39
Total		59	390	51	388	230
Other comprehensive income
Net gain (loss) on cash flow hedges		0	-3	8	-21	-14
Total comprehensive income for the period		59	387	59	368	216
Total comprehensive income for the period attributable to:
Equity holders of the parent		59	377	59	357	177
Non-controlling interests		-	10	-	10	39
Total		59	387	59	368	216
Basic earnings per share (NOK)		0,68		0,59

Consolidated statement of financial position

Frøy ASA

(NOK 1,000,000)	Note	30.06.2021	30.06.2020	31.12.2020
ASSETS
Non-current assets
Goodwill		688	687	687
Property, plant and equipment		4 765	3 534	3 618
Right-of-use assets	4	453	503	536
Pension assets		4	1	8
Investments in associates		24	25	25
Other financial assets		6	1 786	5
Total non-current assets		5 939	6 537	4 878
Current assets
Inventory		12	9	8
Trade receivables		194	137	156
Other receivables		41	54	49
Cash and cash equivalents		750	57	149
Total current assets		997	257	362
TOTAL ASSETS		6 936	6 794	5 241
EQUITY AND LIABILITIES
Equity
Paid-in equity
Share capital		86	19	70
Share premium		2286	157	1 329
Total paid-in equity		2 372	176	1 399
Other equity		576	853	547
Total retained earnings		576	853	547
Non-controlling interests			89	26
Total equity		2 948	1 118	1 971
Non-current liabilities
Non-current interest-bearing liabilities		2 949	1 753	1 832
Non-current lease liabilities	4	297	389	372
Deferred tax liabilities		28	43	23
Total non-current liabilities		3 274	2 185	2 226
Current liabilities
Current interest-bearing liabilities		404	535	649
Current lease liabilities	4	95	104	103
Loan to related parties		-	2 628	1
Trade payables and other current liabilities		212	213	282
Taxes payable		4	11	9
Total current liabilities		714	3 491	1 043
Total liabilities		3 988	5 676	3 269
TOTAL EQUITY AND LIABILITIES		6 936	6 794	5 241

Consolidated statement of cash flows

Frøy ASA

(NOK 1,000,000)	Note	Q2 21	Q2 20	YTD 21	YTD 20	2020
Cash flows from operating activities
Profit or loss before tax		65	395	53	395	251
Income taxes paid			-1	-5	-1	-11
Gain/loss on disposal of property, plant and equipment	3	0	3	1	3	5
Gain/loss on shares at fair value		-	-346	-	-346	-
Gain/loss on disposal of financial assets						-26
Depreciation and impairment		72	68	146	87	224
Finance income		-2	-1	-2	-1	-28
Finance expenses		23	33	46	33	68
Changes in working capital		10	-28	-109	-24	140
Other changes		-63	-113	116	-86
Net cash flows from operating activities		107	10	245	60	622
Cash flows from investing activities
Purchase of property, plant and equipment		-377	-78	-1 220	-161	-440
Purchase of financial assets		0	-2	-	-2	-2
Purchase of intangible assets		0	-	-	-	-
Acquisition of subsidiary, net of cash		-	55	-	55	55
Acquisition of non-controlling interest		-86	-	-86	-	-59
Proceeds from investments in financial assets		-	-	2	-	-
Proceeds from sale of property, plant and equipment		1	2	1	4	39
Dividends		-	2	-	2	-
Interest received		-	-	-	-	0
Net cash flow from investing activities		-462	-20	-1 304	-101	-406
Cash flow from financing activities
Proceeds from borrowings		427	179	1 544	181	323
Repayment of borrowings		-358	-59	-764	-75	-174
Issue of Share Capital		-		1 000	-	-
Transaction cost		-		-26	-	-
Payments for the principal portion of the lease liabilities	4	-24	-33	-50	-33	-98
Interest paid		-21	-32	-44	-32	-68
Payments of dividends		-1	-47	-1	-50	-50
Net cash flow from financing activities		23	9	1 660	-9	-67
Net change in cash and cash equivalents		-332	-1	601	-50	149
Cash and cash equivalents, beginning of period		1 082	58	149	107	0
Cash and cash equivalents, end of period		750	57	750	57	149

The consolidated statements of cash flows are prepared using the indirect method.

Consolidated statement of changes in equity

	Attributable to the equity holders of the parent
					Net gain		Non
(NOK 1,000,000)	Share	Share	Total paid	Retained	(loss) on	Other	controlling	Total Equity
	capital	premium	in equity	earnings	cash flow	Equity	interests
					hedges
At 31.12.2020	70	1 329	1 399	563	-16	547	26	1 971
Profit or loss for the period			-	51		51	-	51
Other comprehensive income			-		9	9	-	9
Total comprehensive income	-	-	-	51	9	60	-	60
Acquisition of non-controlling
interest				-1		-1	-26	-28
Issue of Share Capital	16	984	1 000			-		1 000
Transaction cost		-26	-26			-		-26
Group Contribution				-30		-30		-30
At 30 June 2021	86	2 286	2 372	583	-7	576	0	2 948
At 31.12.2019	0	-	0	-	-			0
Profit or loss for the period			-	378		378	10	388
Other comprehensive income			-		-20	-20		-20
Total comprehensive income	-	-	-	378	-20	358	10	-368
Acquisition of a subsidiary	19	157	176	497	-2	495	10	682
Acquisition of non-controlling
interest							68	68
Dividends paid to minority in
subsidiary							-1	-1
At 30 June 2020	19	157	176	875	-22	853	89	1 118

Notes

NOTE 1: General information and significant accounting policies

The consolidated financial statements of the Group for Q2 21 were authorised for issue in accordance with a resolution of the Board of Directors on 26 August 2021. The consolidated financial statements of the Group comprise consolidated statement of comprehensive income, consolidated statement of financial position, consolidated statement of cash flows, consolidated statement of changes in equity, and related notes. The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by The European Union ("EU") and interpretations approved by the EU, including IAS 34. The report does not include all information required in a complete annual report and should therefore be read in conjunction with the Group´s recent financial statements for 2020. The financial report for second quarter 2021 is unaudited. Frøy has not applied any new standards or interpretations after 1 January 2021 that have a significant impact on the Group's accounts.

Presentation currency and functional currency

The consolidated financial statements are presented in Norwegian Kroner (NOK), which is also the functional currency of the parent company. For each entity, the Group determines the functional currency and items included in the financial statements of each entity are measured using that functional currency.

Significant accounting judgements, estimates and assumptions

The preparation of the consolidated financial statements in accordance with IFRS and applying the chosen accounting policies requires management to make judgments, estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates. The estimates and the underlying assumptions are reviewed on an ongoing basis.

NOTE 2: Operating segments

The Group operates within three main segments: wellboats, service and sea transport. The remaining of the Group's activities and business are shown in "Elimination and non-allocated" column below. These activities are mainly related to the administrative and financial components of the entity's revenue generating segments.

				Elimination
	Wellboat	Service	Sea transport	and non	Total
Q2 21 (NOK 1,000,000)				allocated
Contract revenue	121	79	11		211
Framework agreements	21	80			101
Spot	21	21	20	-2	60
Fuel and other reinvoiced costs	33	4	0		37
Other		0		1	2
Total revenues	196	185	31	0	412
Depreciation	31	34	5	1	72
Operating costs	110	116	24	3	253
Operating profit	54	35	2	-5	87
Financial income	0	1	0	0	2
Financial expenses	12	7	3	2	23
Share of profit (loss) from associates	-	-	-	-	-
Earnings before tax	42	29	0	-6	66
Tax		-9	0	2	-6
Net income	42	21	0	-4	59
Balance sheet items					30.06.2021
Assets	3 657	1 339	426	1 515	6 936
Liabilities	2 686	1 024	326	-48	3 988
Equity	970	287	100	1 591	2 948

Q2 20 (NOK 1,000,000)	Wellboat	Service	Sea transport	Elimination and non allocated	Total
Contract revenue	108	71	10	-	189
Framework agreements	-	44	-	-	44
Spot	34	54	14	6	107
Fuel and other reinvoiced costs	28	12	0	-	40
Other	-	3	-	-	4
Total revenues	170	185	24	7	385
Depreciation	28	36	4	0	67
Operating costs	114	109	20	4	247
Operating profit	27	40	0	2	71
Financial income	0	0	0	0	0
Financial expenses	10	8	2	0	21
Gain/Loss shares at fair value				346	346
Share of profit (loss) from associates	-	-	-	-	-
Earnings before tax	17	32	-2	348	395
Tax	-	-7	-	1	-6
Net income	17	25	-2	349	389
Balance sheet items					30.06.2020
Assets	2 652	1 367	325	2 449	6 794
Liabilities	1 776	954	231	2 715	5 677
Equity	875	389	94	-240	1 118

YTD 21 (NOK 1,000,000)	Wellboat	Service	Sea transport	Elimination and non allocated	Total
Contract revenue	235	157	20		411
Framework agreements	21	125			146
Spot	46	46	39	-3	128
Fuel and other reinvoiced costs	73	7	1	1	81
Other	-			1	2
Total revenues	375	334	59	-1	768
Depreciation	66	70	10	0	146
Operating costs	232	234	50	8	525
Operating profit	77	30	-1	-9	97
Financial income	0	1	0	0	2
Financial expenses	24	14	5	4	46
Share of profit (loss) from associates	-	-	-1	-	-1
Earnings before tax	54	17	-6	-14	53
Tax	-	-4	0	2	2
Net income	54	13	-6	-11	50

YTD 20 (NOK 1,000,000)	Wellboat	Service	Sea transport	Elimination and non allocated	Total
Contract revenue	183	71	23	-	277
Framework agreements	-	44	-	-	44
Spot	47	54	25	8	134
Fuel and other reinvoiced costs	46	12	1	-	60
Other	-	3	0	0	4
Total revenues	276	185	50	9	520
Depreciation	44	36	8	0	87
Operating costs	195	109	42	6	352
Operating profit	37	41	0	3	81
Financial income	0	0	1	0	1
Financial expenses	18	8	5	0	32
Gain/loss on shares at fair value	-	-	-	346	346
Earnings before tax	19	32	-4	349	395
Tax	-	-7	0	1	-6
Net income	19	25	-4	349	389

NOTE 3: Other income

Gains or losses that arise from sale of property, plant and equipment are calculated as the difference between net sales price and the booked value of the asset.

Other income (NOK 1,000,000)	30.06.2021
Gain related to sale of PP&E	0,3
Other	-
Total other income	0,3

NOTE 4: Right-of-use assets and lease liabilities – IFRS 16

The Group's leased assets Q2 21

The Group leases several assets, mainly ships and vessels. Leases of land and buildings generally have lease terms between 5 and 10 years, while motor vehicles and other equipment generally have lease terms between 3 and 7 years.

Right-of-use assets (NOK 1,000,000)	Service boats	Land and buildings	Other machines and equipment	Total
Carrying amount 01.01.2021	416	17	104	536
Additions	29		31	59
Depreciations	-18	-2	-18	-39
Termination of contracts	-92			-92
Gains and losses	-11			-11
Carrying amount 30.06.2021	323	14	116	453
Remaining lease term or useful life	10 years	10 years	3-5 years
Depreciation plan	Straight-line

The Group's lease liabilities Q2 21

Changes in the lease liabilities (NOK 1,000,000)	Total
Total lease liabilities at 01.01.2021	475
New leases recognised during the period	59
Total cash payments for lease liabilities	-58
Interest expense on lease liabilities	7
Termination of contracts	-92
Total lease liabilities at 30.06.2021	392
Current lease liabilities in the statement of financial position	95
Non-current lease liabilities in the statement of financial position	297
Total cash outflow during the period	-58

The Group's leased assets Q2 20

Right-of-use assets (NOK 1,000,000)	Service boats	Land and buildings	Other machines and equipment	Total
Carrying amount 01.01.2020	0	10	0	10
Additions	409	11	109	529
Depreciations	-9	-2	-8	-18
Termination of contracts	-16		-1	-17
Gains and losses	-1			-1
Carrying amount 30.06.2020	384	19	101	503
Remaining lease term or useful life	10 years	10 years	3-5 years
Depreciation plan	Straight-line

The Group's lease liabilities Q2 20

Changes in the lease liabilities (NOK 1,000,000)	Total
Total lease liabilities at 01.01.2020	10
New leases recognised during the period	529
Total cash payments for lease liabilities	-33
Interest expense on lease liabilities	5
Termination of contracts	-17
Total lease liabilities at 30.06.2020	494
Current lease liabilities in the statement of financial position	104
Non-current lease liabilities in the statement of financial position	389

Total cash outflow during the period -33

NOTE 5: Related party transactions

All transactions within the Group or with other related parties are based on the principle of arm's length. The following table provides the total amount of transactions that have been entered into with related parties (outside the Group) for the relevant financial period:

		Other related parties*				Entity under common control	Parent company
Related party transactions 01.04.2021 -30.06.2021 and balances 30.06.2021	Siholmen AS	Gåsø Næringsutvikling AS	Frøy Utvikling AS	Frøy Sjøstransport AS	SS Invest	Midt-Norsk Havbruk AS	NTS ASA	Total
Related party balances Current loans and borrowings from related parties							0,10	0,10 -
Related party transactions Sales to related parties Purchases from related parties (incl. Management fees)	0,22	0,03	0,04	0,27 0,06	0,12	1,98	0,10 0,67	- 2,38 1,11

* Other related parties consist of entities that are considered related parties to the CEO. SS Invest is considered related party to board member Harry Bøe

NOTE 6: Major shareholders as of 30.06.21

Name of shareholder	No. of shares	%
NTS ASA	62 269 112	72,1 %
State Street Bank and Trust Comp	4 454 034	5,2 %
HSBC Bank Plc	1 119 098	1,3 %
Gåsø Næringsutvikling AS	819 672	0,9 %
The Northern Trust Comp, London Br	755 022	0,9 %
Amble Investment AS	631 147	0,7 %
Skandinaviska Enskilda Banken AB	600 000	0,7 %
Trøndelag Helgeland Invest AS	597 809	0,7 %
Torgnes AS	570 000	0,7 %
Skipsinvest AS	549 180	0,6 %
BNP Paribas Securities Services	507 030	0,6 %
Verdipapirfondet Fondsfinans Norge	433 863	0,5 %
Verdipapirfondet Pareto Investment	420 000	0,5 %
The Bank of New York Mellon SA/NV	413 132	0,5 %
Skandinaviska Enskilda Banken AB	350 000	0,4 %
Aars AS	327 868	0,4 %
GH Holding AS	327 868	0,4 %
LIN AS	327 868	0,4 %
J.P. Morgan Securities PLC	284 491	0,3 %
Credit Suisse (Luxembourg) S.A.	263 059	0,3 %
Total 20 largest shareholders	76 020 253	88,0 %
Total Other	10 328 352	12,0 %
Total number of shares	86 348 605	100,0 %

At the end of the quarter Frøy ASA had 86 348 605 shares outstanding and 4 767 shareholders.

NOTE 7: Overview of commitments related to the newbuild program

Frøy´s ongoing newbuild program consists of new vessels and rebuilding of vessels in the wellboat and service segment. In the wellboat segment the newbuild program consists of 6 wellboats, where two vessels have been delivered in first half of 2021, two more are scheduled for delivery in 2H 2021, one in 2022 and one in 2023.

In the service segment the newbuild and rebuild program consists of nine vessels under construction and rebuilding where two have been delivered, seven are scheduled for delivery in 2021 and one in 2022.

(NOK 1,000,000)	2 021	2 022	2 023
Wellboat	1 937	290	110
Service	385	85
Sea transport	108
Total	2 430	375	110

The sea transport vessel Folla was acquired in Q1 21 and the company is planning to rebuild the vessel in 2022 (please see the section "investments" for more information). The rebuilding of Folla is not included in the overview as it is not yet committed.

NOTE 8: Financial instruments

At the end of the quarter the Group had three interest rate swap agreements qualifying and booked as cash flow hedges. The fair value of the agreements is calculated as the discounted value of the derivatives future cash flows with the market rate as of 30.06.21.

(NOK 1,000,000)	30.06.2021	31.12.2020
Fair value of interest rate swap / booked value	7,0	15,3

Appendix: Non-IFRS financial measures / Alternative performance measures

To enhance investorsʹ understanding of the Groupʹs performance, the Group presents certain measures that might be considered as alternative performance measures (ʺAPMʺ) as defined by the European Securities and Markets Authority (ʺESMAʺ) in the ESMA Guidelines on Alternative Performance Measures 2015/1057.

An APM is defined as a financial measure of historical or future financial performance, financial position, or cash flows, other than a financial measure defined or specified in IFRS. The Group is of the view that the APMs provide investors relevant and specific operating figures which may enhance their understanding of the Groupʹs performance.

The non-IFRS financial measures/APMs presented herein are not measurements of performance under IFRS or other generally accepted accounting principles and investors should not consider any such measures to be an alternative to: (a) operating revenues or operating profit (as determined in accordance with IFRS or other generally accepted accounting principles), as a measure of the Groupʹs operating performance; or (b) any other measures of performance under generally accepted accounting principles. The non-IFRS financial measures/APMs presented herein may not be indicative of the Groupʹs historical operating results, nor are such measures meant to be predictive of the Groupʹs future results.

The Company believes that the non-IFRS measures/APMs presented herein are commonly reported by companies in the markets in which it competes and are widely used by investors in comparing performance on a consistent basis without regard to factors such as depreciation, amortisation and impairment, which can vary significantly depending upon accounting methods (particularly when acquisitions have occurred), business practice or based on non-operating factors. Accordingly, the Group discloses the non-IFRS financial measures/APMs presented herein to permit a more complete and comprehensive analysis of its operating performance relative to other companies and across periods, and of the Groupʹs ability to service its debt. Because companies calculate the non-IFRS financial measures/APMs presented herein differently, the Groupʹs presentation of these non-IFRS financial measures/APMs may not be comparable to similarly titled measures used by other companies.

The non-IFRS financial measure/APMs are not part of the Company's consolidated financial statements and are thereby not audited. The Company can give no assurance as to the correctness of such non-IFRS financial measures/APMs and investors are cautioned that such information involve known and unknown risks, uncertainties and other factors, and are based on numerous assumptions. Given the aforementioned uncertainties, prospective investors are cautioned not to place undue reliance on any of these non-IFRS financial measures/APMs.

The Group has defined and explained the purpose of the following APMs:

EBITDA AND ADJUSTED EBITDA

EBITDA is defined as total revenue less operating expenses (direct expenses, employee benefit expenses and other operating expenses).

Adjusted EBITDA is defined as total revenue less gain on sale of assets, operating expenses (direct expenses, employee benefit expenses and other operating expenses) IPO costs and gain on sale of assets

EBITDA is used by the management as measure the Groupʹs ability to service debt and finance investments. Segment result is defined as adjusted EBITDA. Management believes the measure enables an evaluation of operating performance and a basis to allocate resources to the segment. For Q1 21 adjustment include costs related to the IPO and NOK 1 000 million equity raise.

Reconciliation of adjusted EBITDA – NOK millions

(NOK 1,000,000)	Q2 21	Q2 20	YTD 21	YTD 20
Total revenue	412	385	768	520
Direct expenses	42	60	91	93
Employee benefit expenses	120	106	232	144
Other operating expenses	92	82	202	115
EBITDA	159	137	243	168
Less gain on sale of assets	0	3	1	4
IPO costs	0	0	8	0
Adjusted EBITDA	159	135	250	164

EQUITY RATIO

Equity ratio is defined as total equity divided by total assets. Equity ratio is used by the management to measure the Group´s solidity.

(NOK 1,000,000)	30.06.2021	30.06.2020
Equity	2 948	1 118
Total equity and liabilities	6 936	6 794
Equity ratio	43 %	16 %

Net interest-bearing debt

Net interest-bearing debt is defined as non-current interest-bearing liabilities + non-current lease liabilities + current interest-bearing liabilities + current lease liabilities – cash and cash equivalents

(NOK 1,000,000)	30.06.2021	30.06.2020
Non-current interest-bearing liabilities	2 949	1 753
Non-current lease liabilities	297	389
Current interest-bearing liabilities	404	535
Current lease liabilities	95	104
Cash and cash equivalents	750	57
Net interest-bearing debt	2 995	2 724

ROE- Return On Equity

Return on equity (ROE) calculated as net profit last 12 months / average equity. ROE is used by the management to measure the Group´s profitability.

(NOK 1,000,000)	30.06.2021	30.06.2020
Equity	2 948	1 118
Net profit last 12 months	238
ROE	12 %

Order backlog

Frøy´s operating revenues consist of time charter agreements, bareboat agreements and spot agreements that normally include the rental of vessels and crew. The time charter agreements include an agreed vessel capacity for a defined period, as well as manning of vessels.

The future minimum lease payments (lease revenues) under non-cancellable operating leases as of 30.06.2021 are, as follows:

Future minimum lease and customer revenues (NOK 1,000,000)	30.06.2021	30.06.2020*
0 to 1 years	934 973
- Lease revenue share	539 921	344 294
- Customer contract share	395 052
1 to 2 years	840 193
- Lease revenue share	504 070	264 771
- Customer contract share	336 123
2 to 3 years	611 644
- Lease revenue share	378 572	193 376
- Customer contract share	233 072
3 to 4 year	424 673
- Lease revenue share	262 929	161 328
- Customer contract share	161 744
4 to 5 years	382 633
- Lease revenue share	238 513	126 043
- Customer contract share	144 120
More than 5 years	723 250
- Lease revenue share	455 070	421 657
- Customer contract share	268 180
Total lease and customer contract	3 917 366
Total lease revenue share	2 379 075	1 511 468

* For 2020 only the lease revenue share is shown