Goodtech — Interim / Quarterly Report 2014

Aug 21, 2014

Presentation second quarter 2014

Goodtech ASA, 21 August 2014

Agenda

Highlights Financial review Order book

• Goodtech in brief
• Outlook

Highlights, second quarter 2014

• Lower activity in first half year in addition to significant loss in one project causes weaker turnover and negative EBITDA.
• Positive outlook in our main markets. Increasing order stock.
• Operations improvement program initiated
• Number of employees increased in the end of Q2 reflecting higher activity in the autumn
• Installation of Energy Recovery System in DUBAL plant is completed. Long term testing ongoing. System has passed the first critical phase with success.

Highlights, second quarter 2014

• Operations improvement program includes activities as
• Margins and efficiency improvement
  • Improved project management
  • Reduction of project cost
• Cost reduction

4

• Increase sales activities

Highlights, second quarter 2014, Market

Order backlog continue on high level, MNOK 1.299.

Some of the contracts in Q2:

• MNOK 80 Contract for delivery of complete electrical and automation system delivery for LKAB shipping terminal in Narvik.
• MSEK 100+ Contract for delivery of El, Signal and Telecom to NCC for the Strängnäs project.
• MSEK 25,6 Contract for power transformation and distribution station for Älvsjö plant for Fortum Distribution in Stockholm
• MSEK 32,6 Contract for process instrumentation installation to Völund incineration plant delivery to UK
• MSEK 15 Contract for installation in NSS project Karolinska skolan
• MSEK 14 Contract for installation in NSS project ELON

Highlights, second quarter 2014, Market

• MNOK 40 Contract for delivery biogas treatment plant to Tønsberg - Vestfold Biogass
• MNOK 16 Contract for delivery biogas treatment plant to IVAR
• MNOK 8 Contract for delivery control systems to drilling Rig for Dolphin
• Renewal of frame agreement for Integrated Operations(IO) with Statoil
• Delivery of complete production line for Haldex

6

• Delivery of Manufacturing Execution System (MES) to Hydal, Raufoss

Financial Review

Main figures

(NOK 1.000)	Note	Q2 14	Q2 13	YTD 14	YTD 13	2013
Revenues	8	579 769	646 945	1 138 170	1 222 517	2 433 776
Product expenses		268 678	321 832	514 591	602 221	1 197 535
Salary expenses		247 107	234 757	482 181	450 064	905 011
Other operating expenses		73 657	64 589	142 823	122 458	245 012
EBITDA		-9 673	25 768	-1 425	47 773	86 218
EBITDA %		-1,7 %	4,0 %	-0,1 %	3,9 %	3,5 %
Depreciation	5	6 360	5 915	12 848	11 671	24 021
Non recurring items	6	0	0	0	0	3 087
EBIT		-16 033	19 853	-14 274	36 102	59 110
Net financial items		-3 445	-955	-5 342	-1 849	-8 406
Share of Profit from Associated comp.		0	39	0	39	3 917
Profit before taxes		-19 478	18 936	-19 616	34 293	54 621
Taxes	7	-4 477	4 362	-5 095	7 840	13 132
Net result from continuing operations		-15 001	14 574	-14 521	26 453	41 489
Attributable to:
Ow ners of the parent		-15 185	14 605	-14 874	26 228	41 171
Non-controlling interests		184	-30	353	225	318
Sum		-15 001	14 574	-14 521	26 453	41 489
Earnings per share from continuing operations		-0,46	0,45	-0,45	0,81	1,28
Deluted earnings per share		-0,46	0,45	-0,45	0,81	1,28

Quarterly revenues and earnings - historical

Financial highlights – Balance sheet

NOK million	30.06.14	30.06.13	31.12.13
Fixed tangible assets	77,7	48,3	67,5
Intangible assets	690,6	663,2	696,8
Total fixed assets	768,3	711,5	764,2
Cash	16,8	28,2	33,4
Other current assets	758,4	734,0	739,2
Total current assets	775,2	762,2	772,6
Total assets	1 543,5	1 473,7	1 536,8
Total equity	675,5	685,3	725,2
Non-current borrow ings	22,7	43,8	118,3
Other non-current liabilities	12,7	14,7	11,5
Total non-current liabilities	35,3	58,6	129,9
Current borrow ings	192,6	118,3	77,2
Other current liabilities	640,0	611,5	604,6
Total current liabilites	832,6	729,8	681,8
Total equity and liabilities	1 543,5	1 473,7	1 536,8
Net cash and borrow ings	198,4	134,0	162,2
Equity Ratio (%)	43,8 %	46,5 %	47,2 %
Net Gearing (%)	29,4 %	19,6 %	22,4 %
Liquidity Ratio	0,9	1,0	1,1

Goodtech is not in compliance with SEBs loan covenants at the end of Q2. SEB has waived the covenants with effect for Q2 and Q3.

Definitions:

Net Gearing (%): Net interest Bearing Debt/Total equity Liquidity Ratio : Current Assets/Current Liabilities

Financial highlights – Cash flow

NOK 1.000	Q2 14	Q2 13	YTD 14	YTD 13	2013
Cash flow from operations	-11 001	-27 208	-13 772	-22 182	-8 734
Cash flow from investments	-7 448	-2 858	-27 325	-1 059	-39 187
Cash flow from financials	677	-55 579	-6 324	-126 687	-86 788
Net changes in cash from period	-17 772	-85 644	-47 422	-149 928	-134 709
Net Cash funds at beginning of period	-73 215	20 460	-45 886	82 857	82 857
Effects of exchange rate fluctuation on cash held	948	1 048	3 269	2 935	5 965
Net Cash funds at end of period *)	-90 038	-64 136	-90 038	-64 136	-45 886
*) Consisting of
Cash and cash equivalents - balance sheet	16 848	28 207	16 848	28 207	33 365
Overdraft facility	-106 886	-92 343	-106 886	-92 343	-79 251
Net Cash funds at end of period	-90 038	-64 136	-90 038	-64 136	-45 886

**) Includes investment in Energy Recovery Pilot

Cash flow from operations and EBITDA

Development in Cash flow from operations and EBITDA on 12 months rolling basis

Business areas – figures and facts

Business unit: Projects & Services (P&S)

NOK 1.000	Q2 14	Q2 13	YTD 14	YTD 13	2013	420	Revenues
Omsetning	365 798	407 650	742 956	787 906	1 576 982	410
EBITDA	-3 597	17 196	9 961	37 965	79 800
EBITDA margin %	-1,0 %	4,2 %	1,3 %	4,8 %	5,1 %	400
Ordrereserve	772 659	811 198	772 659	811 198	813 476	MNOK
Antall ansatte	1 217	1 178	1 217	1 178	1 162	390
						380
Highlights						370
• P&S business unit has had poor performance in the	360
	quarter. Turnover lower than Q3 2013.	350
•	Negative EBITDA in Q2, mainly due to loss in one project and lower activity.	340
•	Operation in Norway and North of Sweden has performed	30	EBITDA

Highlights

• P&S business unit has had poor performance in the quarter. Turnover lower than Q3 2013.
• Negative EBITDA in Q2, mainly due to loss in one project and lower activity.
• Operation in Norway and North of Sweden has performed well in the quarter
• • Order backlog almost on the same level as in 2013

Business unit: Infra

							Revenues
NOK 1.000	Q2 14	Q2 13	YTD 14	YTD 13	2013	90
Revenue	77 464	91 532	122 005	150 946	294 412
EBITDA	-4 955	5 825	-6 395	6 638	10 621	80
EBITDA margin %	-6,4 %	6,4 %	-5,2 %	4,4 %	3,6 %	70
Order backlog	329 254	381 897	329 254	381 897	285 736	MNOK 60
No. of employees	74	68	74	68	66

Highlights

• Turnover both in Q2 and YTD is around 20% lower than in 2013.
• Low activity in the larger projects in Q2 and first half year gives low utilization of workforce and low progress in the projects.
• Plan for second half 2014 indicates higher activity level
• Order backlog is on a high level. Large contract for NSS Strängnäs won end Q2
• Market look promising both in Sweden and Norway.
• Won first smaller contract in Norway in Q2

Business unit: Solutions

NOK 1.000	Q2 14	Q2 13	YTD 14	YTD 13	2013	70		Revenues
Revenue	45 363	51 538	97 545	109 818	199 301
EBITDA	450	-1 114	519	-3 088	-10 282	60
EBITDA margin %	1,0 %	-2,2 %	0,5 %	-2,8 %	-5,2 %
Order backlog	68 342	51 630	68 342	51 630	73 184	50 MNOK
No. of employees	128	141	128	141	133	40
Highlights						30 20
• Turnover in Q2 roughly 10% lower than in Q2 2013.	10
• Improvement plan in Solutions gives positive effects on EBITDA also in Q2. Improvement work will continue
• Order backlog has increased with 30 % compared with								EBITDA

Highlights

• Turnover in Q2 roughly 10% lower than in Q2 2013.
• Improvement plan in Solutions gives positive effects on EBITDA also in Q2. Improvement work will continue
• Order backlog has increased with 30 % compared with end Q2 last year.
• • Several new contracts in the period. Largest contract to Haldex for production line.

Business unit: Environment

NOK 1.000	Q2 14	Q2 13	YTD 14	YTD 13	2013		90		Revenues
Revenue	79 861	78 028	153 664	137 421	296 566		80
EBITDA	2 400	4 261	3 732	5 817	8 016
EBITDA margin %	3,0 %	5,5 %	2,4 %	4,2 %	2,7 %		70
Order backlog	122 115	132 349	122 115	132 349	129 835	MNOK	60
No. of employees	79	80	79	80	78		50
		40
Highlights							30
•	Turnover in Q2 2014 on same level as in Q2 2013. Turnover in	20
product sale is lower than planned due to delay in delivery schemes.		10 -
•	EBITDA in Q2 lower than in Q2 2013 due to delay and increased	5
									EBITDA

Highlights

• Turnover in Q2 2014 on same level as in Q2 2013. Turnover in product sale is lower than planned due to delay in delivery schemes.
• EBITDA in Q2 lower than in Q2 2013 due to delay and increased cost in two projects, and turnover in product business is lower in the period.
• Order backlog has increased with MNOK 23 in Q2 compared with Q1. Still lower than Q2 2013, but level is ok.
• SBR / Biovac® sale has increase more than expected in Q2, causing delay in delivery. Confirming positive development in the market, both in Norway and in Sweden.

Business unit: Products

NOK 1.000	Q2 14	Q2 13	YTD 14	YTD 13	2013	30		Revenues
Revenue	18 854	23 372	38 767	50 380	92 716
EBITDA	-617	1 995	-1 408	4 973	7 092	25
EBITDA margin %	-3,3 %	8,5 %	-3,6 %	9,9 %	7,6 %
Order backlog	7 187	8 068	7 187	8 068	4 235	MNOK 20
No. of employees	26	23	26	23	24
Highlights
•	Turnover is weaker than planned in Q2. Lower than Q2 2013.	10 5
•	New sales personnel in end 2013 and in beginning of 2014. New sales action plan has been established.	-
•	EBITDA is weak due to low turnover and increased	4		EBITDA

Highlights

• Turnover is weaker than planned in Q2. Lower than Q2 2013.
• New sales personnel in end 2013 and in beginning of 2014. New sales action plan has been established.
• EBITDA is weak due to low turnover and increased investment in salesforce.
• Cost reduction measures will be implemented.
• P&S Pot Control contract for Norsk Hydro will also give sales volume for Products.
• • Market outlook is positive.

Goodtech – in brief

Goodtech in brief

• Approx 1.500 employees, with a revenue of NOK 2,4 billion
• Strong local presence with almost 40 offices in Sweden, Norway and Åland
• Headoffice in Oslo and listed on Oslo Stock Exchange

Sweden

• Approx 1.150 employees
• 27 offices, from Kiruna in the north to Malmö in south

Norway

• Approx 290 employees
• 10 offices, with headoffice in Oslo

Åland

• Approx 40 employees
• Office in Mariehamn

Market drivers

Upgrade of infrastructure and energy systems

Increased efficiency and competitive ability within the industry

Society's need for more environmental friendly solutions, products and projects

Solid service and product portfolio

• Innovative technologies and solutions
• Turn-key projects
• • Broad specter of services and competence

Market segments

Highlights – Technology development

• Energy recovery technology has been installed in Dubal aluminum plant
• Full scale pilot was put in operation early Q2, and has been verified to give the expected energy recovery output so far.
• Long term test scheme has been established. Shall be concluded end of 2014, early 2015
• Technology has high potential when successfully tested
• Dedicated technology development activities in Solutions
• Develop technology and standardized solutions to stimulate to repeat business in all business units

Commercial and financial risks for Goodtech

Commercial and market risk

• Market for Industry projects and solutions some risk
• Market for Infrastructure projects and solutions some risk

Financial risks

• In general small currency exposure
• In general small risk for contract cancellation
• In general small risk for loss on receivables
• In general some risk related to projects
• Turn-key projects and deliveries
• Some risk related to project execution
  • Various complexity, size and duration of projects
  • Shortage of Project Managers
  • Tougher business climate

• Reducing risk:

• MQSP (Method, Quality, Safety and Procurement) department focus on training, improvement of methods and quality

• Commercial project managers in the projects
• Technology and product development
• Some risk related to technical issues and market positioning

Outlook 2014

Outlook - Market

• Expect continuous upgrade and large investments within infrastructure, energy and oil & gas
• In general, promising markets for Goodtechs services, solutions and products – basis for organic growth
• The uncertainty in some markets due to uncertainty in the global economy seems to decrease.
• Brief market analysis:

Summary / Outlook 2014

Main focus - Improve operations

• Operations improvement program
• Margins and efficiency improvement
• Cost reduction
• Increase sales activities
• Growth strategy postponed
• Our business will continue to focus on growth in the strategic markets
  • Energy / Power
  • Oil & Gas
• Aquaculture redefined to organic growth

Summary / Outlook 2014

• Established improvement program shall bring Goodtech back on track
• Expect to deliver EBITDA on normalized level in second half 2014
• Goodtech shall continue to build stronger positions
• Strategic alternatives will be considered as part of business development to increase company value

The Goodtech way

A better world through the integration of sustainable solutions