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Nekkar Interim / Quarterly Report 2009
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Interim / Quarterly Report
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KVARTALSRAPPORT 4. KVARTAL 2009
INTERIM REPORT TO 31 DECEMBER 2009
INTERIM REPORT TO 31 DECEMBER 2009
Introduction
Earnings per share in the fourth quarter of 2009 were NOK -1.01 based on a turnover of NOK 909.8m. Earnings before depreciation (EBITDA) were NOK -67.4m. The results from Dry Cargo Handling, Port and Material Handling, Drilling Equipment and Deck Machinery divisions are as expected. Marine Cranes division has very weak results which influence the TTS group's results. The weak result in Marine Cranes division is in connection with cancelled contracts, loss on accounts receivable, revised inventory value and increased cost on delivery of new developed cranes.
The order backlog decreased by NOK 957m to NOK 4 510m in fourth quarter. The main reason for the reduction is removal of to land rig orders at a total of NOK 35m due to lack of financing. Additionally contracts at a total of NOK 216m have been cancelled during Q4 in the Marine Cranes division.
Turnover in 2009 was NOK 3 825.3m yielding earnings before depreciation (EBITDA) of NOK -84.3m. In addition to weak results in Q4 for TTS Group, during the first quarter the Drilling Equipment division booked depreciation on accounts receivable of NOK 72m and write-down on goodwill of NOK 34m. The year is also marked by write-down of goodwill in TTS group of NOK 65m in Q1. Increased development- and assembly cost during 2009 in Drilling Equipment and Marine Cranes divisions are also negative contributions.
Fourth quarter 2009
A turnover of NOK 909.8m (NOK 1 249.1m in the fourth quarter of 2008) yielded earnings before depreciation (EBITDA) of NOK -67.4m (NOK -21.4m), and operating profit of NOK -81.3m (NOK -32.8m) and a pre-tax profit of NOK -103.0m (NOK -66.1m). Net profit was NOK -68.6m (NOK -41.2m).
At 31 December 2009
Profit per share as per 31 December were NOK -5.7 (NOK 1.59 as per 31 December 2008) based on a turnover of NOK 3 825.3m (NOK 4 196.59m), earnings before depreciation (EBITDA) of NOK -84.3m (NOK 145.5m) and an operating profit of NOK -230.8m (NOK 114.6m). Pre-tax profit was NOK -311.9m (NOK 36.8m), while net profit was NOK 248.5m (NOK 36.4m)
Balance sheet
Total assets as per 31 December 2009 were NOK 3 709.7m (NOK 4 380.7m as per 31 December 2008) and equity at NOK 935.4m (NOK 989.1m), giving an equity-to assets ratio of 25.2% (22.6%). The bank loan requires a minimum equity-to assets ratio of 25 percent and the bond loan (NOK 450m) requires a minimum equity-to assets ratio of 22.5 percent.
Net interest-bearing debt as per 31 December 2009 was NOK 838.5m (NOK 513.2m), which is a reduction of 100 MNOK in the quarter. Cash reserves were at NOK 192.0m (NOK 267.2m).
Accounting principles
The accounting principles are the same as were employed in the 2007 accounts. The preparation of the interim report is based on IAS 34. The interim report has not been audited.
Market
During 2009 both shipping and offshore markets have been marked by financial crisis and reduced growth in the world economy. Reduced demand, weak results and lack of financial ability has caused cancellation or postponement of several contracts. Due to this TTS' order backlog has been reduced from NOK 8 159m a year ago to NOK 4 510m at 31.12.2009.
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In the Drilling Division contracts for land rigs and work-over rigs at a total of NOK 940m have been removed due to customer's bankruptcies or lack of financing. There has also been cancellations at a total of NOK 1 025m in the Marine- and Offshore segment.
BUSINESS AREAS
During 2009 TTS Group ASA has reported on the following five divisions: Dry Cargo Handling, Marine Cranes, Port and Material Handling, Deck Machinery and Drilling Equipment.
Dry Cargo Handling
| 4th quarter | As of 4th quarter | |||
|---|---|---|---|---|
| MNOK | 2009 | 2008 | 2009 | 2008 |
| Turnover | 286.7 | 296.7 | 1 215.5 | 1 239.6 |
| EBITDA | 13.0 | 18.8 | 41.7 | 85.0 |
The operation was as expected and satisfactory in Q4. For the year as a whole, operations were good, but the result are weaker than expected due to losses in connection with the bankruptcies of the shipyards Gdynia in Poland and Wadan in Germany.
Order intake during the quarter was according to expectations, but for 2009 in total the division's order intake has been lower than expected. The market activity during first half of 2009 was low; however the level of activity has increased in second half of the year.
Our business in China has developed positively during the year, with good order intake and increased market shares. The order backlog in the Chinese joint venture company was NOK 2 330m at 31.12. 2009, corresponding to approximately three year's production.
The order backlog as per 31 December 2009 was NOK 2 441m (NOK 3 151m as per 31 December 2008) including 50% of the Chinese joint venture order backlog.
Marine Cranes
| 4th quarter | As of 4th quarter | |||
|---|---|---|---|---|
| MNOK | 2009 | 2008 | 2009 | 2008 |
| Turnover | 324.8 | 309.8 | 1 093.5 | 1 107 |
| EBITDA | -100.9 | 5.9 | -97.7 | 41.8 |
The division experienced a weak quarter with a considerable deficit. The deficit is connected to write-offs of inventory and cancellation of contracts in the region of NOK 55m. Assembly cost on advanced offshore cranes has also increased by approximately NOK 45m.
2009 has been challenging for the division including high development cost and a number of cancelled contracts. Consequently, the results for the year as a whole are weak.
Contracts worth NOK 216m were cancelled in Q4, mainly offshore contracts.
The order backlog as per 31 December was NOK 896, 3, compared to NOK 2 371m a year ago.
Port and Material Handling
| 4th quarter | As of 4th quarter | |||
|---|---|---|---|---|
| MNOK | 2009 | 2008 | 2009 | 2008 |
| Turnover | 114.7 | 113.3 | 331.0 | 350.5 |
| EBITDA | 12.0 | 16.0 | 19.5 | 32.5 |
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Operation in the division was good and the results were according to expectations in the quarter. Operation for the year as a whole has been satisfactory, but the results are somewhat weaker than expected due to postponement of several bigger projects.
Order intake during the quarter was considerable, a total of NOK 136.6m. The largest contract of approximately NOK 93m concerns delivery of port equipment to a harbour in Great Britain. The order backlog for the port and Material Handling division as of 31 December 2009 was NOK 242m, as compared to NOK 326m at the same time in 2008.
Deck Machinery
| 4th quarter | As of 4th quarter | |||
|---|---|---|---|---|
| MNOK | 2009 | 2008 | 2009 | 2008 |
| Turnover | 93.2 | 162.5 | 372.2 | 447.7 |
| EBITDA | 7.3 | -2.9 | 17.7 | 22.3 |
Deck Machinery division had good operation and results in the quarter, especially services have contributed to the positive results. For 2009 in total the results are satisfactory, especially compared to the difficult market situation during the year.
The order backlog for Deck Machinery division as of 31 December 2009 was NOK 871m, as compared to NOK 902m at the same time in 2008.
Drilling Equipment
| 4th quarter | As of 4th quarter | |||
|---|---|---|---|---|
| MNOK | 2009 | 2008 | 2009 | 2008 |
| Turnover | 83.9 | 359.5 | 791.2 | 1 057.4 |
| EBITDA | 9.9 | -58.0 | -52.3 | -24.6 |
The division's result in the quarter is marked by low level of activity and few new orders. The division has taken write-offs of stock value and claims on cancelled contract at a total of NOK 15m in Q4.
The order backlog for the Drilling Equipment Division as per 31 December was NOK 133.7m (NOK 1 410m as per 31 December 2008). Two contacts concerning land rig and work-over rigs have been removed from the order backlog during Q4, and a bigger contract for land rig was removed from the order backlog in January 2009. In total this sum up to NOK 940m.
Goodwill
In the first quarter of 2009 TTS booked a write-down of goodwill of NOK 65m for TTS Group and a write-down of NOK 34m for the Drilling Equipment division.
TTS has also in fourth quarter estimated utility value compared to booked value to consider if further depreciations are needed. On group level, this applies in particular in the Drilling Equipment division, but also in the Marine Cranes division due to the weak development last year. In spite of a difficult year in 2009 there is a considerable potential for growth for both divisions in the future. During 2008 and 2009 TTS has developed an extensive product portfolio for the energy sector.
Based on the above assumptions and expectations, further write-down of goodwill will not be required.
Liquidity and assets
To strengthen the equity TTS conducted a rights issue of NOK 252m by issuing 42m shares at a subscription price of NOK 6 per share during Q3.
TTS has also extended the bond loan of NOK 500m which was due May 2010 and May 2012. As a part of the renegotiations, it was agreed on first payment due in November 2009 which
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has been paid and next payment due of NOK 50m in May 2010. TTS has extended the credit lines with the banks with NOK 200m during 2009.
FUTURE PROSPECTS / RISK ANALYSIS
2009 has been a difficult year with several bankruptcies among customers and with cancellations of more than 20 per cent of the order backlog and high development costs.
For the group as a whole it is expected a higher level of enquiries during 2010 than last year.
The TTS group is reorganised in 3 divisions in order to increase focus on business, improve project management and lower cost. As of 1 January 2010 TTS will report on the three divisions: Energy, Marine and Port and Logistics.
Bergen 25 February 2010
The Board of TTS Group ASA
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TTS Group ASA Q4 2009
| NOK 1 000 | Ikke revidert/ Ikke revidert/ Ikke revidert/ Ikke revidert/ Ikke revidert/ | |||
|---|---|---|---|---|
| Unaudited | Unaudited | Unaudited | Unaudited | |
| RESULTAT / PROFIT AND LOSS ACCOUNT | PR. 31.12.09 | PR. 31.12.08 | 4.KV 2009 | 4. KV 2008 |
| Driftsinntekter/Turnover | 3 784 085 | 4 176 497 | 884 997 | 1 235 965 |
| Andre driftsinntekter/Other operating income | 41 232 | 19 985 | 24 851 | 13 739 |
| Sum driftsinntekter/Total operating income | 3 825 317 | 4 196 482 | 909 848 | 1 249 704 |
| Varekostnad/Røe materials and consumables used | 3 089 789 | 3 333 041 | 774 772 | 1 053 745 |
| Andre driftskostnader/Other operating costs | 841 434 | 735 694 | 212 834 | 222 377 |
| Resultat fra JV (- er inntekt)/ Result from JV (- is income) | -21 641 | -17 712 | -10 361 | -5 128 |
| Driftsresultat før avskrivninger/EBITDA | -84 265 | 145 459 | -67 397 | -21 290 |
| Avskrivninger/Depreciation | 47 278 | 30 843 | 13 853 | 11 556 |
| Andre avskrivninger/nedskrivninger/other depreciation/writedowns | 99 257 | 0 | 0 | 0 |
| Driftsresultat/Operating profit | -230 800 | 114 616 | -81 250 | -32 846 |
| Finansinntekter/Financial income | 42 439 | 46 174 | 20 470 | 30 688 |
| Finanskostnader/Financial expense | 123 581 | 123 970 | 42 206 | 64 006 |
| Resultat før skattekostnader/Profit/loss before tax | -311 942 | 36 819 | -102 987 | -66 164 |
| Skattekostnad/Tax | -63 460 | 427 | -34 426 | -24 940 |
| Periodens resultat/Net profit/loss for the period | -248 482 | 36 392 | -68 561 | -41 224 |
Oppstilling av totalresultatet
| Periodens resultat/Net profit/loss for the period | -248 482 | 36 392 | -68 561 | -41 224 |
|---|---|---|---|---|
| Omlagningsdifferanser/ Translation differences | -41 337 | 42 757 | -21 918 | 37 184 |
| Totalresultat/ Comprehensive income | -289 819 | 79 149 | -90 479 | -4 040 |
| BALANSE / BALANCE SHEET | PR. 31.12.09 | PR. 31.12.08 | ||
| --- | --- | --- | --- | |
| Immaterielle eiendeler/Intangible assets | 1 309 814 | 1 279 996 | ||
| Varige driftsmidler/Tangible assets | 129 784 | 124 696 | ||
| Finansielle anleggsmidler/Financial assets | 111 157 | 104 114 | ||
| Sum anleggsmidler/Total fixed assets | 1 550 755 | 1 508 806 | ||
| Varer/Inventories | 420 495 | 212 828 | ||
| Andre fordringer/Other debtors | 1 526 318 | 2 391 958 | ||
| Sum fordringer/Total debtors | 1 946 814 | 2 604 686 | ||
| Bankinnskudd/kontanter/Bank deposits/cash | 191 907 | 267 233 | ||
| Sum omløpsmidler/Total current assets | 2 138 720 | 2 871 919 | ||
| Sum eiendeler/Total assets | 3 689 475 | 4 380 725 | ||
| Aksjekapital/Share capital | 33 935 | 12 887 | ||
| Sum opptjent egenkapital/Retained earnings | 901 948 | 976 169 | ||
| Sum egenkapital/Total equity | 935 883 | 989 056 | ||
| Avesting for forpliktelser/Provisions | 22 339 | 33 560 | ||
| Annen langsiktig gjeld/Other long-term liabilities | 452 390 | 532 297 | ||
| Langsiktig gjeld/Long term liabilities | 474 729 | 565 857 | ||
| Kortsiktig gjeld/Current liabilities | 2 278 862 | 2 825 808 | ||
| Sum gjeld/Total liabilities | 2 753 591 | 3 391 665 | ||
| Sum egenkapital og gjeld/Total equity and liabilities | 3 689 475 | 4 380 721 | ||
| NØKKELTALL / KEY RATIOS | PR. 31.12.09 | PR. 31.12.08 | 4.KV 2009 | 4. KV 2008 |
| --- | --- | --- | --- | --- |
| EK-andel/Equity to assets ratio | 25,4% | 22,6% | ||
| Fortjeneste pr. aksje (NOK)/Earnings per share (NOK) | -5,72 | 1,41 | -1,01 | -1,59 |
| Uhannet fortjeneste pr. aksje (NOK)/Diluted earnings per share (NOK) | -5,72 | 1,41 | -1,01 | -1,59 |
| KONTANTSTRØMSANALYSE / ANALYSIS OF CASHFLOW | PR. 31.12.09 | PR. 31.12.08 | ||
| --- | --- | --- | --- | |
| Kontantstrøm fra operasjonelle aktiviteter/Cash from operations | -383 017 | 84 368 | ||
| Kontantstrøm fra investeringsaktivitet/Cash from investments | -97 558 | -215 685 | ||
| Kontantstrøm fra finansieringsaktivitet/Cash from financing | 405 251 | 37 402 | ||
| Endring i kontantbeholdning/Change in cash | -75 324 | -93 915 | ||
| Kontantbeholdning IB/Cash position OB | 267 231 | 353 138 | ||
| Kontantbeholdning UB/Cash position CB | 191 907 | 267 233 | ||
| EGENKAPITAL / EQUITY | PR. 31.12.09 | PR. 31.12.08 | ||
| --- | --- | --- | --- | |
| Egenkapital IB/Equity OB | 989 056 | 933 598 | ||
| Egne aksjer/ Own shares | 625 | -2 915 | ||
| Emisjon/Share issue | 230 583 | 5 950 | ||
| Totalresultat/ Comprehensive income | -289 819 | 79 149 | ||
| Opsjonsplaner/Options cost | 5 437 | 5 447 | ||
| Utbetaling utbytte i Shareholder's dividend | - | -32 173 | ||
| Egenkapital UB/Equity CB | 935 883 | 989 056 |
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Notes to unaudited interim financial statement 4th quarter 2009
Note 1 Segment information
At 31.12.2009
| DCH | MC | PMH | DM | DE | Others | Total | |
|---|---|---|---|---|---|---|---|
| Turnover | 1 215,5 | 1 093,5 | 331,0 | 372,2 | 791,2 | 21,9 | 3 825,3 |
| EBITDA | 41,7 | -97,7 | 19,5 | 17,7 | -52,3 | -13,3 | -84,3 |
At 31.12.2008
| DCH | MC | PMH | DM | DE | Others | Total | |
|---|---|---|---|---|---|---|---|
| Turnover | 1239,6 | 1107 | 350,5 | 447,7 | 1057,4 | -5,7 | 4196,5 |
| EBITDA | 85 | 41,8 | 32,5 | 22,3 | -24,6 | -11,6 | 145,4 |
Q4 2009
| DCH | MC | PMH | DM | DE | Others | Total | |
|---|---|---|---|---|---|---|---|
| Turnover | 286,7 | 324,8 | 41,0 | 89,1 | 240,3 | 4,9 | 986,8 |
| EBITDA | 13,0 | -100,9 | 12,0 | 7,3 | 9,9 | -8,6 | -67,4 |
Q4 2008
| DCH | MC | PMH | DM | DE | Others | Total | |
|---|---|---|---|---|---|---|---|
| Turnover | 296,7 | 309,8 | 113,3 | 162,5 | 359,5 | 7,3 | 1249,1 |
| EBITDA | 18,8 | 5,9 | 16 | -2,9 | -58 | -1,2 | -21,4 |
Note 2 General information
TTS Group ASA is registered and domiciled in Norway, and the head office is located in Bergen.
The consolidated financial statement cover TTS Group ASA with its subsidiaries and part of joint ventures.
The consolidated financial statement for the year ended 31 December 2008 is available at www.tts-marine.com.
Note 3 Accounting principles
The consolidated financial statements for Q4 2009 have been prepared in accordance with IAS 34 for Interim Financial Statements. The interim accounts do not include all the information required for a full financial statement and should therefore be read in connection with the consolidated financial statements of 2008.
The accounting principles applied is the same as were described in the consolidated financial statements of 2008.
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Note 4 Estimates
The preparation of the interim accounts requires the use of valuations, estimates and assumptions that affect the application of accounting principles and the reported amounts of assets and liabilities, income and expenses. Actual results may differ from these estimates.
The significant judgements underlying the application of the Groups accounting policies and the key sources of estimation uncertainty are the same as for the consolidated financial statement of 2008.
Note 5 Related parties
Note 19 in consolidated financial statement of 2008 describe the transactions with related parties. During 2009 there have been no material changes or transactions that have significance for the financial position and profit for the period.
Note 6 Deferred tax assets
The group has recognised deferred tax assets primarily related to the Norwegian companies. The following criteria have been employed to estimate that it is probable that future taxable profit will be available against which unused tax losses can be utilised.
- The Group has sufficient temporary differences
- Tax losses result from particular identifiable causes
Note 7 Ability
TTS has an ongoing legal dispute with the bankruptcy estate of Ability Drilling ASA, specifically the subsidiary companies Ability Drilling Malta Ltd and Ability Drilling Malta 2 Germany Ltd. The background for lawsuit is that these subsidiaries have submitted a claim for compensation based on the alleged cancellation of delivery contracts for land rigs ordered from TTS Sense AS. In addition to TTS Sense AS, the parent company TTS Group ASA is part of the conflict through parent company guarantees.
The bankruptcy estate of Ability Drilling ASA originally submitted a claim for in excess of NOK 480 million on behalf of the aforementioned subsidiaries. This claim was submitted at the end of June 2009. Following a thorough review, the claim was rejected by TTS. Correspondence and other contacts between the parties failed to resolve the issue. At the same time, the bankruptcy estate of Ability Drilling ASA took no legal action to follow up on the alleged claim of Ability Drilling ASA and its subsidiaries. On the basis of TTS' firm belief that the claim lacks both factual and legal basis, the company therefore instituted legal proceedings against the aforementioned subsidiaries of Ability Drilling ASA in Stavanger District Court on 6 October 2009, requesting a declaratory judgment that the termination of the delivery contracts is invalid. The lawsuit further included a request for payment of outstanding amounts from Ability Drilling Malta Ltd. and Ability Drilling Malta 2 Germany Ltd. These subsidiaries have not been declared bankrupt.
On 14 December 2009, TTS received a defence pleading and countersuit. In the countersuit, TTS was requested to pay to Ability Drilling ASA's subsidiaries in excess of NOK 555 million. The increase from the original amount is the result of VAT. At the same time, a deduction has been made for in excess of NOK 40 million from the sale of rig number 1. It is TTS's opinion that the countersuit failed to bring about any new information with regard to the factual and legal basis of the matter. Consequently, on 15 February 2010, our defence pleading was submitted to Stavanger District Court, rejecting the submitted claims. Our attorneys are preparing an extensive pleading to Stavanger District Court. This pleading will reply to a great number of the challenges set forth by the opposing party, submitted in their defence pleading and countersuit. TTS' pleading will also set forth our claims for the remaining payments from Ability Drilling Malta Ltd. and Ability Drilling Malta 2 Germany Ltd. In total, these claims will constitute more than NOK 200 million. TTS will also set forth a claim for 9 percent interest on overdue payments from 31 August 2009. Furthermore, we have submitted a claim requesting that the defending companies are required to cover TTS' litigation costs. It is TTS' intention to request that a date be set for a hearing as soon as possible.
In TTS' accounts at 31.12.2009, no claims toward Ability Drilling Malta Ltd. and Ability Drilling Malta 2 Germany Ltd were recognised in the balance sheet. All outstanding claims toward Ability Drilling ASA and its subsidiaries were recorded as losses in TTS' accounts for the first quarter of 2009. Land rig 3 and 4 were under construction at TTS' facility at Jattā in Stavanger when the bankruptcy proceedings against Ability Drilling ASA were instituted. Based on TTS' right of retention and right of enforcement sale due to failure to meet contractual payments on part of the customer, TTS decided to recognise on the balance sheet land rigs 3 and 4 as work-in-progress/inventory at the closing of accounts on 31.03.09.
Land rig 3 and 4 were conservatively estimated upon recognition in the balance sheet. They were roughly estimated to 60 percent of the original contractual value, with adjustments made for degree of completion. This was done to allow for the considerable uncertainty which existed in the land rig market and the subsequent estimated loss in value of land rigs since the establishment of the contract price. Subsequently, the rigs were recognised in the balance sheet at a value of NOK 105 million. Furthermore, an allocation of NOK 14 million was made for the costs of an anticipated start-up of production for completion of the rigs. At 31.12.09 the rigs are 90 percent and 80 percent completed. The estimation of value on the balance sheet is the same as at the end of the first quarter.
TTS is putting in considerable effort in order to sell land rig 3 and 4. With the current state of the market it would not be unrealistic to assume that the rigs will be sold during 2010. The sales proceeds will be set off against the remaining outstanding claims that TTS holds against Ability Drilling Malta 2 Germany Ltd (landrig 3) and Ability Drilling Malta Ltd (landrig 4). TTS' opposing party has on several occasions, latest in its defence pleading and countersuit, stated that they contest TTS' right to make an enforcement sale for land rig 3 and 4, and further stated that they will consider a petition for a temporary injunction to prevent a possible enforcement sale. In our view, TTS has an indisputable right to carry out an enforcement sale, as the customers have failed to carry out settlement in accordance with agreements entered into. As there is no claim toward TTS, there is no foundation for petitioning for a temporary injunction. Even if the court should find that the bankruptcy estate has a just claim against TTS, it is our opinion that there is no foundation for a temporary injunction as the bankruptcy estate with its subsidiaries lack reason for imposing security. An enforcement sale of the rigs would not entail that the opposing party's
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alleged claims become significantly complicated or subject to material damage or disadvantage, which are the requirements of the law.
At 31.12.2009, TTS had made no allocations in its accounts for the claims which Ability Drilling Malta Ltd and Ability Drilling Malta 2 Germany have submitted toward TTS Sense AS and the TTS Group ASA. Business relations to the Ability companies are regulated by the law of sales and general principles of contract law. Based on the facts of the matter and established contractual regulations, TTS' attorneys cannot see that the opposing party can succeed with the claims submitted. Given this understanding, it is our opinion that allocating this amount would not be right, on the basis of the criteria provided by IAS 37.
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