Frøy ASA — Investor Presentation 2021

Aug 26, 2021

Frøy ASA – Q2 21

26 August 2021

Important notice

This presentation (the "Presentation") has been prepared by Frøy ASA (the "Company" and together with its subsidiaries (the "Group"). This Presentation has been prepared for information purposes only. This Presentation does not constitute an offer to buy or subscribe for any shares in the Company.

This Presentation speak only as of its date, and the views expressed are subject to change based on a number of factors, including, without limitation, macroeconomic and equity market conditions, investor attitude and demand, the business prospects of the Group and other specific issues. This Presentation and the conclusions contained herein are necessarily based on economic, market and other conditions, as in effect on, and the information available to the Company as of, its date. This Presentation does not purport to contain a complete description of the Group or the market(s) in which the Group operates, nor does it provide an audited valuation of the Group. The analyses contained in this Presentation are not, and do not purport to be, appraisals of the assets, stock or business of the Group or any other person.

Neither the Company nor any of its affiliates (nor any of its or their respective directors, officers, employees, professional advisers or representative) makes any representation or warranty, express or implied, with respect to the fairness, correctness, accuracy, reasonableness or completeness of such information. No responsibility or liability (whether in contract, tort or otherwise) is or will be accepted by the Company or any of its affiliates (or any of its or their respective directors, officers, representatives, employees, advisers or agents) as to, or in relation to, this Presentation.

This Presentation contains forward looking information. The words "believe", "expect", "could", "may", "anticipate", "intend" and "plan" and similar expressions identify forward-looking statements. All statements other than statements of historical facts included in this Presentation are forward-looking statements. Such forwardlooking statements involve known and unknown risks, uncertainties and other factors which may cause the Group's actual results, performance, achievements and value to be materially different from any future results, performance, achievements or values expressed or implied by such forward-looking statements. Such forward-looking statements are based on numerous assumptions regarding the Group's present and future business strategies and the environment in which the Group will operate in the future. No warranty or representation is given by the Company as to the reasonableness of these assumptions. Further, certain forward-looking statements are based upon assumptions of future events that may not prove to be accurate.

This Presentation is governed by and shall be construed in accordance with Norwegian law with Oslo District Court as legal venue.

Agenda

• 1. Highlights Q2 2021
• 1. Operational review
• 1. Financial review
• 1. Outlook
• 1. Appendix

Highlights Q2 2021

Highlights in the quarter

Commercial

• Increased activity in the wellboat segment and normal seasonal pattern in the service segment. Delousing services somewhat lower than Q2 20.
• 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

Financial

• Revenue NOK 412m (Q2 20 NOK 385m)
• Revenue from contracts and framework agreements up 34% vs. Q2 20
• EBITDA NOK 159m (Q2 20 NOK 138m)
• EBITDA margin 39% (Q2 20 35%)
• Backlog of approx. NOK 6.3 billion (including options)

Outlook

• High revenue visibility from backlog and framework agreements
• Construction of wellboats progressing according to plan
• New organic and inorganic growth alternatives are being explored on an ongoing basis and are subject to satisfactory risk return profiles

Increased activity and revenues

Underlying revenue growth

• 9% increase in operating revenues Q2 21 vs. Q2 20
• 34% increase in revenues from contracts and framework agreements vs. Q2 20

Seasonality

• Seasonal change in sea temperatures impact demand for aqua services
• Normal seasonal increase in activity in Q2 21, except within delousing services which remained muted throughout Q2

Revenue split per quarter

Note: Q1 20 is based on proforma figures. Operating revenues defined as contract revenues, revenues from framework agreements and spot revenues.

Contract backlog NOK 6.3 bn.

Firm revenue backlog incl options

Fixed backlog

• Total fixed revenue commitments of more than NOK 3.9 billion
• Wellboat fleet with weighted avg. backlog coverage of approx. 5 years1

Options

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

Framework agreements

• Most framework agreements do not have minimum value clauses and are not included in the backlog
• Framework agreements are typically related to diving, cleaning of nets and other service work

Backlog (NOKm)

Operational review

Wellboat

Segment results

• Total revenues NOK 196 million (NOK 170 million)
  • Newbuild contributing to increased revenues vs. Q2 20
• More than 30% increase in revenues from contract and framework agreements vs. Q2 20
• EBITDA margin of 44% (32%)
  • Operations in Q2 20 was characterized by high costs

Other

• 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 delousing services remained slow in the quarter
• The newbuild Kristiansund was delivered from yard last week of June and had minimal revenue contribution in the quarter

NOK million	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

Delivery of Kristiansund

• Wellboat newbuild with 3.200 m3 capacity
• Designed for gentle and safe handling of live fish
• Dual system for removal of sea lice with both freshwater treatment and Hydrolicer capability
• The vessel entered directly into a long-term contract with a large Norwegian salmon farmer
• Kristiansund is Frøy´s fifth vessel in the Havtrans series
• Åsværfjord, the last newbuild in the Havtrans series is expected to be delivered October 2021

Service

Segment results

• Total revenues NOK 185 million (NOK 185 million)
  • 38% increase in revenues from fixed contracts and framework agreements were offset by lower spot revenues
  • Spot revenues in Q2 21 was negatively impacted by lower demand for delousing services
• Adj. EBITDA margin of 38% (39%)

Other

• Seasonal increase in demand for cleaning of nets, cages and general maintenance
• One large service vessel sold in April
• 2 new vessels entered the fleet in Q2 21. The vessels had limited financial contribution in the quarter

NOK million	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 adj. 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

New contracts and capacity in net cleaning services

2 new vessels The net cleaning vessels Frøylys and Frøy Nordkapp entered operation in June

Improved efficiency

High-grading of fleet and equipment - specialized net cleaning vessels with double systems

Increased visibility

Signed multiple agreements for cleaning of nets, including the 4 year framework agreement announced in April

Sea transport

Segment results

• Total revenues of NOK 31 million (NOK 24 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
• EBITDA margin of 24% (18%)

Other

• Strategic priority to increase backlog and visibility in the segment
• During Q2 21 Frøy negotiated multiple agreements that were signed after the end of the quarter

NOK million	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 small service vessels	4	4

13

Three new contracts signed after end of Q2 21

One new 3-year seasonal time charter

Transport of feed from June through December

One new 3-year seasonal framework agreement

Transport of frozen seafood from October/November to May/June

One extended contract

New agreement runs to the end of May 2022, with option to extend through October 2022

Status post new contracts

• Two out of four vessels on contracts to 2024
• One vessel on contract to 2022
• One vessel in spot

Financial impact

• Improved revenue visibility
• Q3 21 backlog approx. + NOK 100 million
• Framework agreement not included in the backlog figure

Financial review

Profit & loss

Highlights Q2 21

• Total revenues of NOK 412 million (NOK 385 million)
• Adj. EBITDA of NOK 159 million1 (NOK 135 million)
• Adj. EBITDA margin of 39%1 (35%)
• Q2 20 gain on shares at fair value of NOK 346 million relates to shares in Norway Royal Salmon (NRS) no longer owned by Frøy
• Net profit of NOK 59 million compared with Q2 20 net profit adjusted for gain on shares in NRS of NOK 44 million

(NOKm)	Q2 21	Q2 20	YTD 21	YTD 20
Total revenue	412	385	768	520
EBITDA	159	138	243	168
Less gain on sale of assets	0	3	1	4
IPO costs	0	0	8	0
EBITDA adj.1	159	135	250	164
EBITDA adj. %	39 %	35%	33%	32%
Depreciation	72	67	146	87
Operating profit	87	71	97	81
Net financial items	21	21	43	32
Gain/loss on shares at fair value	-	346		346
Profit (loss) before tax	65	396	53	395
Taxes	6	6	2	6
Net profit	59	390	51	388

1) Adjusted for IPO costs and gain on sale of assets. Reconciliation of adjusted EBITDA to be found in the appendix

Balance sheet

Highlights Q2 21

• Increased property, plant and equipment vs. Q2 20 due to investments into the ongoing newbuild program
• In Q2 20 other assets included shares in Norway Royal Salmon. The shares were transferred to NTS ASA in Q4 20
• Gross debt increased due to debt on newbuilds
• Net interest-bearing debt of NOK 2 995 million
• Equity ratio 43%

(NOKm)	30.06.2021	30.06.2020	31.12.2020
Goodwill	688	687	687
Property, plant and equipment	4 765	3 534	3 618
Right-of-use assets	453	503	536
Other assets	33	1 813	38
Non-current assets	5 939	6 537	4 878
Inventory	12	9	8
Receivables	235	191	205
Cash and cash equivalents	750	57	149
Total current assets	997	257	362
TOTAL ASSETS	6 936	6 794	5 241
Total equity	2 984	1 118	1 971
Non-current interest-bearing liabilities	2 949	1 753	1 832
Non-current lease liabilities	297	389	372
Deferred tax liabilities	28	43	23
Total non-current liabilities	3 274	2 185	2 226
Current interest-bearing liabilities	404	535	649
Current lease liabilities	95	104	103
Loan to related parties	-	2 628	1
Other current liabilities	212	213	282
Total current liabilities	714	3 491	1 043
TOTAL EQUITY AND LIABILITIES	6 936	6 794	5 241
Net interest-bearing debt	2 995	2 724	2 807
Equity ratio	43 %	16 %	38 %

Cash flow

Highlights Q2 21

• Positive cash flow from operations of NOK 107 million
• Cash flow from investment activities of NOK 462 million driven by the ongoing newbuild program and acquisition of minority shares in Frøy subsidiaries
• Increased borrowing on newbuilds offset by repayment of various short-term debt in the quarter
• 30.06.21 cash position at NOK 750 million

(NOKm)	Q2 21	Q2 20
Cash flows from operating activities
Profit or loss before tax	65	395
Gain/loss on shares at fair value	-	-346
Depreciation and impairment	72	68
Net interest and financial items	21	32
Changes in working capital	10	-28
Other changes	-63	-111
Net cash flows from operating activities	107	10
Cash flows from investing activities
Purchase of property, plant and equipment	-377	-78
Acquisition of subsidiary net of cash	-	55
Acquisition of noncontrolling interest	-86	-
Other	1	2
Net cash flow from investing activities	-462	-20
Cash flow from financing activities
Proceeds from borrowings	427	179
Repayment of borrowings	-358	-59
Payments for the principal portion of the lease liability	-24	-33
Interest paid	-21	-32
Payments of dividends	-1	-47
Net cash flow from financing activities	23	9
Net change in cash and cash equivalents	-332	-1
Cash and cash equivalents, beginning of period	1 082	58
Cash and cash equivalents, end of period	750	57

18

Investments

Total investments

• Total newbuild program est. NOK 2.9 bn.
  • 2021: 2.430m
  • 2022: 420m
  • 2023: 110m
• Total investments is up approx. NOK 100 million vs. Q1 21 due to extra equipment and changes to the original spec on wellboats under construction
  • The additional capex is to a large degree balanced by additional time charter commitments from clients
• Construction of wellboats progressing according to the plan presented in Q1 21
• 2 small service vessels pushed into Q1 22

Wellboat Service Sea transport

Financial position

Financing strategy

• Frøy finance its fleet and equipment with bank debt and leasing
• Debt financing secured before ordering large newbuilds

Newbuild financing

• Bank debt secured on all wellboats
  • +/- 80% loan to value

Debt maturities

• Annual regular installments on bank debt of approx. NOK 280 million on a fully invested basis

NOKm

Installments Loan maturity

Debt repayment schedule

Outlook

Market outlook

Key market trends

Gradual increase in salmon farming volumes expected in Norway, Faroe Island, UK, Canada and Island

Increased complexity due to more exposed farming and larger equipment expected to drive demand for specialist competence and infrastructure

Production of larger smolt expected to reduce the production time at sea and to increase demand for wellboats

Offshore farming with high long-term potential

Frøy observations

Seasonal uptick seen in second quarter in line with historical trend.

High market activity expected third quarter in line with historical seasonality. Increased demand for delousing services during Q3 21.

i i Expect continued strong demand in Frøy´s segments going forward

Frøy focus areas

Execute committed growth plan

Frøy to take delivery of newbuild program with 6 wellboats and 9 service vessels 2021-2023

Expected minimum EBITDA contribution from newbuilds of NOK 250-300m

Develop new opportunities

Secure new contracts and expand scale and scope of operations where Frøy have a competitive edge

Opportunistically consider value accretive M&A

Maximize returns

Maintain a lean cost culture

Continuously focus on improving efficiency in operations

Ensure that projects satisfies and preferably exceeds the minimum return on equity requirement of 10- 18%1

Note: Target returns depend on client, project

Deliver stable and growing dividend to shareholders

Frøy´s ambition is to deliver stable dividends payments

Minimum 50% of net profit to be paid as dividend provided that: I) The fully invested NIBD/EBITDA is below 3.5x and II) sufficient liquidity to meet future obligations

IPO primary proceeds of NOK 1,000 million

Listed on Oslo Børs since March 29 ²⁰²¹ Ticker FROY

Market cap NOK 4,7 billion

4,767 shareholders

Financial calendar

• May 12 2021: 1Q results
• Aug 26 2021: 2Q results
• Nov 11 2021: 3Q results

Research coverage

• Nordea
• Sparebank 1 Markets

Analyst

• Herman Aleksander Dahl
• Knut Ivar Bakken

Share information 30.06.21

Total number of shares

• 86 348 605 shares outstanding

Total number of shares owned by 20 largest shareholders

• 88 % of total number of shares outstanding

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 %

Appendix

Non-IFRS financial measures / Alternative Performance Measures

• 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 Companyʹs 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.

APMs and Key Figures

Non-IFRS financial measures / Alternative Performance Measures

• 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 operating expenses (direct expenses, employee benefit expenses and other operating expenses), gain on sale of assets and IPO costs
• EBITDA and adjusted EBITDA is used by the management as measure the Groupʹs ability to service debt and finance investments. Management also believes the measure enables an evaluation of operating performance.

Reconciliation of adjusted EBITDA – NOK millions

Q2 21	Q2 20	YTD 21	YTD 20
412	385	768	520
42	60	91	93
120	106	232	144
92	82	202	115
159	137	243	168
0	3	1	4
0	0	8	0
159	135	250	164