Nekkar — Interim / Quarterly Report 2010

Nov 4, 2010

TTS

KVARTALSRAPPORT 3. KVARTAL 2010

INTERIM REPORT TO 30 SEPTEMBER 2010

Marine Port and Logistics Energy

TTS GROUP ASA

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INTERIM REPORT AS OF 3 QUARTER 2010

STATUS 30.09.2010

The result for the 9 first months of the year is influenced by weak results in the Energy division.

In Q3 the TTS Group reports a negative EBITDA of -5.9 MNOK which compares to a loss of -10.6 MNOK in the same quarter last year. The losses are caused by increased cost on ongoing contracts in the Energy division. In addition reclassification of cancelled projects to stock has an earning effect of - 13 MNOK in the quarter.

Revenue for the first 9 months of 2010 has been lower than the same period in 2009. The main reason is that the Energy division has seen lower activity in 2010.

EBITDA in the first 9 months of the year is 16,8 MNOK which is an improvement of 33.7 MNOK compared to same period last year. Improved earnings in the Marine and Port & Logistic divisions are the main reasons for the improvement.

The order intake in Q3 is higher than same period last year. The increase is related to the Marine division. At the end of Q3 the Group reports an order backlog of 3 539 MNOK. This compared to an order backlog at the end of Q3 2009 of 5 145 MNOK

Earnings per share were NOK -1.07 for 3rd quarter. Per September the result was NOK -1.56.

KEY FIGURES AS OF 3RD QUARTER 2010

MNOK	3. Quarter		Per 3. Quarter		Year
	2010	2009	2010	2009	2009
Turnover	648	889	2 326	2 915	3 825
EBITDA	-5,9	-10,6	16,8	-16,9	-84,3
EBITDA margin (%)	-0,9	-1,2	0,7	-0,6	-2,2
Orderintake*	610	436	1 823	1 349	1 201
Order backlog*	3 539	5 145	3 539	5 145	4 510
EPS (NOK)	-1,07	-0,62	-1,56	-5,11	-5,72

(*) Order intake and order backlog in 2009 has been adjusted for the cancellation of MIPPSA contract. The order backlog includes 50% of the joint ventures.

BALANCE SHEET AND LIQUIDITY

Total assets for the group was at the end of Q3 3 659 MNOK with a related equity share of 23.5%.

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The equity is influenced by an adjustment of deferred tax assets which has been reduced with 24.6 MNOK compared to Q2 2010. In addition an assessment of other non-tangible assets has been done during the 3rd quarter. Please refer to Note 9 related to goodwill for further information.

The group is in breach of the equity ratio covenants of the loan agreement with the banks and the group has received a waiver for Q3.

Net interest bearing debt was 883 MNOK, a reduction of 2 MNOK compared to Q2 2010. Compared to Q3 2009 this represents a reduction of 56 MNOK.

In August the group entered into a settlement with the bankruptcy estate of Ability Drilling. The settlement resulted in TTS acquiring a land rig for 75 MNOK with an interest bearing sellers credit of up to 2 years.

TTS Group ASA conducted an equity issue towards Scana Industrier ASA for a total of 42 MNOK in July to improve the equity position of the group.

The group has repaid 50 MNOK to Nordea/Sparebanken Vest consortium related to the temporary facility (which originally was 200 MNOK). The group's loan agreement with Nordea/Sparebanken Vest is due for renewal before year end.

As a consequence of the settlement with Ability Drilling bankruptcy estate there has been a reduction in working capital despite the increased tied up capital in land rigs. The group continues its work to reduce tied up capital through sale of land rigs and other finished goods.

ACCOUNTING PRINCIPLES

The company has prepared the accounts on the same basis as the annual accounts for 2009. In preparing the quarterly results, the group adhered to IAS 34

ELECTION OF NEW EMPLOYEES REPRESENTATIVES TO THE BOARD

In September the election of employees representatives where conducted and resulted in the appointment of Jarle Dyrdal and Karen T. Mørkestøl, both employed by the Energy Division.

BUSINESS AREAS

Marine division

MNOK	3. Quarter		Per 3. Quarter		Year
	2010	2009	2010	2009	2009
Turnover	375,9	621,3	1 624,0	1 682,7	2 325,7
EBITDA	43,9	24,5	112,5	83,9	93,7
EBITDA margin (%)	11,7	3,9	6,9	5,0	4,0

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The Marine division report somewhat lower activity in Q3 compared to previous quarters of 2010. The EBITDA has improved significantly compared to last year where the bankruptcy of the shipyard Wadan influenced the numbers. The margins are influenced by a higher relative share of service revenue.

At the end of Q3 the order backlog was 3 092 MNOK including 50% joint ventures.

Port and Logistics division

MNOK	3. Quarter		Per 3. Quarter		Year
	2010	2009	2010	2009	2009
Turnover	71,7	73,9	230,6	216,3	331,0
EBITDA	7,1	2,4	18,8	7,6	19,6
EBITDA margin (%)	9,9	3,2	8,2	3,5	5,9

The Port & Logistic division reports a high activity level and good earnings. The margins have improved compared to previous quarters, mainly related to product mix and delivery of projects. At the end of Q3 the division reports an orderbacklog of 116 MNOK.

Energy division

MNOK	3. Quarter		Per 3. Quarter		Year
	2010	2009	2010	2009	2009
Turnover	200,9	207,9	471,1	1028,9	1180,4
EBITDA	-55,1	-36,1	-110,4	-107,0	-192,0
EBITDA margin (%)	-27,4	-17,4	-23,4	-10,4	-16,3

The activity level within drilling and offshore equipment has been low in 2010 and together with low margins on ongoing contracts and cost overrun resulted in a loss in Q3 and year to date. In addition reclassification of cancelled projects to stock has impacted earnings with a loss of 13 MNOK. The cancellation has no material impact on cash flow or total assets.

The divisions order backlog at the end of Q3 was 331 MNOK.

Expectations going forward

There are still uncertainties related to the market development for the group. For the Marine division the market has close to normalized, but margin pressure has been registered.

For Port & Logistics the market is expected to be stable going forward.

As for the market development for the Energy division there is still uncertainties. Some increased tender activity has been noted during Q3. There is still significant competition and margin pressure.

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Bergen, 3rd of November 2010
The board of directors of TTS Group ASA

Trym Skeie
Chairman

Bjarne Skeie
Board member

Anne Breive
Board member

Kjerstin Fyllingen
Board member

Jarle Dyrdal
Board member

Rune Selmar
Board member

Karen T. Mørkestøl
Board member

Johannes D. Neteland
CEO

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TTS Group ASA Q3 2010

NOK 1 000	Ikke revidert/ Ikke revidert/ Ikke revidert/ Ikke revidert/ Ikke revidert/ Ikke revidert/ Ikke revidert/ Ikke revidert/ Ikke revidert/ Ikke revidert/ Ikke revidert/ Ikke revidert/ I
	Unaudited	Unaudited	Unaudited	Unaudited	Audited
RESULTAT / PROFIT AND LOSS ACCOUNT	PR. 30.09.10	PR. 30.09.09	3.KV 2010	3.KV 2009	PR. 31.12.09
Driftsinntekter/Tumover	2 309 363	2 899 088	645 582	882 106	3 784 085
Andre driftsinntekter/Other operating income	16 262	16 381	2 447	6 499	41 232
Sum driftsinntekter/Total operating income	2 325 625	2 915 468	648 029	888 606	3 825 317
Varekostnad/Rav materials and consumables used	1 851 018	2 315 016	541 507	715 262	3 089 789
Andre driftskostnader/Other operating costs	480 387	628 600	121 723	186 196	841 434
Resultat fra JV (- er inntekt)/ Result from JV (- is income)	-22 581	-11 280	-9 253	-2 240	-21 641
Driftsresultat før avskrivninger/EBITDA	16 801	-16 868	-5 948	-10 612	-84 265
Avskrivninger/Depreciation	39 927	33 425	13 384	12 479	47 278
Andre avskrivninger/nedskrivninger/other depreciation/writedowns	0	99 257	0	0	99 257
Driftsresultat/Operating profit	-23 126	-149 550	-19 332	-23 092	-230 800
Finansinntekter/Financial income	43 036	21 970	5 644	6 363	42 439
Finanskostnader/Financial expense	110 994	81 375	29 007	26 542	123 581
Resultat for skattekostnader/Profit/loss before tax	-91 084	-208 955	-42 694	-43 270	-311 942
Skattekostnad/Tax	19 056	-29 035	38 526	-9 859	-63 460
Periodens resultat/Net profit/loss for the period	-110 140	-179 921	-81 220	-33 412	-248 482

Oppstilling av totalresultatet

Periodens resultat/Net profit/loss for the period	-110 140	-179 921	-81 220	-33 412	-248 482
Omregningsdifferanser/ Translation differences	-6 262	-17 841	1 080	-10 590	-41 337
Totalresultat/ Comprehensive income	-116 402	-197 762	-80 140	-44 002	-289 819
Fortjeneste pr. aksje (NOK)/Earnings per share (NOK)	-1,56	-5,11	-1,07	-0,62	-5,72
Uhannet fortjeneste pr. aksje (NOK)/Diluted earnings per share (NOK)	-1,56	-5,11	-1,07	-0,62	-5,72
BALANSE / BALANCE SHEET	PR. 30.09.10	PR. 30.09.09		PR. 31.12.09
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Immaterielle eiendeler/Intangible assets	1 292 269	1 218 816		1 309 814
Varige driftsmidler/Tangible assets	121 422	126 721		129 784
Finansielle anleggsmidler/Financial assets	136 600	114 795		111 157
Sum anleggsmidler/Total fixed assets	1 550 290	1 460 331		1 550 755
Varer/Inventories	476 586	312 720		420 495
Andre fordringer/Other debtors	1 426 510	2 026 678		1 526 318
Sum fordringer/Total debtors	1 903 096	2 339 398		1 946 814
Bank/innskudd/kontanter/Bank deposits/cash	206 084	247 014		191 907
Sum omløpsmidler/Total current assets	2 109 180	2 586 412		2 138 720
Sum eiendeler/Total assets	3 659 470	4 046 743		3 689 474
Aksjekapital/Share capital	37 298	33 936		33 935
Sum opptjent egenkapital/Retained earnings	823 692	990 318		901 948
Sum egenkapital/Total equity	860 990	1 024 254		935 883
Aveetning for forpliktelser/Provisions	27 293	23 319		22 339
Annen langsiktig gjeld/Other long-term liabilities	541 400	575 394		430 537
Langsiktig gjeld/Long term liabilities	568 694	598 713		452 876
Kortsiktig gjeld/Current liabilities	2 229 787	2 423 776		2 300 715
Sum gjeld/Total liabilities	2 798 481	3 022 489		2 753 591
Sum egenkapital og gjeld/Total equity and liabilities	3 659 470	4 046 743		3 689 474
EK-andel/Equity to assets ratio	23,5%	25,3%		25,4%
Netto rentebærende gjeld/ Net interest-bearing liabilities
EGENKAPITAL / EQUITY	PR. 30.09.10	PR. 30.09.09	PR. 31.12.09
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Egenkapital IB/Equity OB	935 883	989 056	989 056
Egne aksjer/ Own shares	-	625	625
Emisjon/Share issue	41 509	232 335	230 583
Totalresultat/ Comprehensive income	-116 402	-197 762	-289 819
Opsjonsplaner/Options cost	-	-	5 437
Egenkapital UB/Equity CB	860 990	1 024 254	935 883

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KONTANTSTRØMSANALYSE / ANALYSIS OF CASHFLOW	PR. 30.09.10	PR. 30.09.09	PR. 31.12.09
EBITDA/EBITDA	16 801	-16 868	-84 265
Endring i netto omløpsmidler / Change in net current assets	-16 264	-504 737	-274 564
Kontantstrøm fra operasjonelle aktiviteter / Cash from operations	537	-521 605	-358 829
Kjøp av varige driftsmidler / Acquisition of tangible fixed assets	-31 564	-35 693	-44 674
Andre investeringsaktiviteter / Other investing activities	-1 468	-	-65 268
Kontantstrøm fra investeringsaktiviteter / Cash from investments	-33 032	-35 693	-109 942
Opptak og nedbetaling av lån / New loans and repayment	67 176	399 934	253 611
Innbetaling av egenkapital / Paid-in equity	41 509	234 485	231 208
Netto betalte renter / Net interest paid	-65 653	-53 472	-77 737
Kontantstrøm fra finansieringsaktiviteter / Cash from financing	43 032	580 947	407 082
Endring i kontantbeholdning / Change in cash	10 537	23 649	-61 689
Kontantbeholdning IB / Cash position OB	191 907	267 231	267 231
Valutaefekt på kontanter og kontantekvivalenter / Foreign currency effect on cash	3 640	-43 866	-13 635
Kontantbeholdning UB / Cash position OB	206 084	247 014	191 907

Notes to unaudited interim financial statement 3rd quarter 2010

Note 1 Segment information

From 01.01.10 TTS Group ASA reports on new segments according to the new organization. Figures from 2009 have been revised.

	Marine		Port & Logistic		Energy		Others		Total
	2010	2009	2010	2009	2010	2009	2010	2009	2010	2009
Revenue	1 624,0	1 682,7	230,6	216,3	471,1	1 028,9	0,3	-12,9	2 326,0	2 915,0
EBITDA	112,5	83,9	18,8	7,6	-110,4	-107,0	-4,1	-1,4	16,8	-16,9

Q3

	Marine		Port & Logistic		Energy		Others		Total
	2010	2009	2010	2009	2010	2009	2010	2009	2010	2009
Revenue	375,9	621,3	71,7	73,9	200,9	207,9	-	-14,1	648,0	889,0
EBITDA	43,9	24,5	7,1	2,4	-55,1	-36,1	-1,8	-1,4	-5,9	-10,6

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 2009 is available at www.ttsgroup.com.

NOTE 3 ACCOUNTING PRINCIPLES

TTS Groups' financial reports are prepared in accordance with International Financial Reporting Standards (IFRS)

The consolidated financial statements for Q3 2010 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

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statement and should therefore be read in connection with the consolidated financial statements of 2009.

The accounting principles applied are the same as those described in the consolidated financial statements of 2009.

This consolidated 3rd quarter results of 2010 was approved by the Board at 3th November 2010.

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.

In preparing these consolidated interim financial statements, the key assessments made by the management in applying the group's accounting principles and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements for the financial year ended 31 December 2009.

NOTE 5 RELATED PARTIES

Note 19 in the consolidated financial statement of 2009 describes the transactions with related parties. During 2010 there has 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 recognized deferred tax assets primarily related to the Norwegian companies. Criteria's that have been utilized to estimate that future taxable profit can be utilized against deferred tax losses is;

• The Group has sufficient temporary differences
• Tax losses result from particular identifiable causes

Based upon total tax losses carried forward in Norway as compared with expected short and medium term profit expectations, an adjustment to the estimated usage of tax losses have been made in the 3rd quarter. Based upon set requirements in IAS 12, the expected delay in utilization of losses carried forward, has caused a decrease in deferred tax assets of MNOK 88,5. Evaluation of other tax related items in 3rd quarter related to foreign subsidiaries and other temporary differences result in a net reduction of deferred tax assets of MNOK 24,6 compared to 2Q 2010.

NOTE 7 FINANCIAL RISK MANAGEMENT

The Group's objectives and principles of financial risk management is consistent with what is stated in the consolidated financial statements for fiscal year 2009.

The group has recived waiver for the equity ratio covenant in the loan agreement with the bank syndicate Nordea/Sparebanken Vest for the period Q3 2010.

The group has made an repayment of MNOK 50 to the bank syndicate led by Nordea. The facilities, with the exception of 100 MNOK, are due for renewal before year end.

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As an effect of the Ability Drilling settlement long term debt have increased 75 MNOK in the 3rd quarter 2010.

The group efforts to reduce working capital continues.

NOTE 8 EQUITY

The 5th of July 2010 TTS Group signed an agreement with Scana Industrier ASA to issue 6,722,920 shares in TTS Group ASA through a private placement at a price of NOK 6.30 per share. The share issue represents a 9.9% increase of the share capital of the group.

Net proceeds from the equity issue, NOK 41.507.308 have been added to the group equity.

The shares were registered at the 13th of July 2010.

As per 30.09.2010 TTS Group ASA's share capital is NOK 37.315.599,50 divided on 74.631.199 shares each with a face value of NOK 0,50. As per 30.09.2010 the group holds 35.600 own shares.

NOTE 9 GOODWILL

At 31.12.2009 the group conducted an assessment of impairment losses for each cash generating unit based on requirements and policies in IAS 36.

Please observe that the latest share price at Oslo Stock Exchange does not reflect the booked equity in the consolidated accounts, and as such the test stated in IAS 36-12 have to be considered.

There has been 2 material occurrences that influence the assessment done in 31.12.2009. The earnings Energy division has been weaker than expected and there has been a reduction in long term market interest rates.

There has been made changes that reduces the Energy divisions cost structure and new measures are being planned. The division are tendering for significant contracts that is expected to be concluded in near future. On that basis the group has concluded that there is no impairment of the valuation of the Energy division at 30.09.2010.

NOTE 10 CONTINGENT EVENTS

As per 2. September 2010 TTS Group has made a settlement agreement with now bankrupt Ability Drilling ASA in the dispute relating to the cancellation of land rigs purchase. The settlement results in TTS acquiring one land rig for MNOK 75 financed through a two years interest-based seller credit. As part of the agreement all other claims are settled.

NOTE 11 SUBSEQUENT EVENTS

In connection with the reorganization of the Energy division a merger of all significant Norwegian entities within the Energy division will be merged to one company, TTS Energy AS.