Nekkar — Interim / Quarterly Report 2016

Nov 15, 2016

Q3 Results 2016

15th of November 2016 Toril Eidesvik, CEO Henrik Solberg-Johansen, CFO

3 rd quarter 2016 - headlines

• Strong 3Q order intake
• increased 23% from last quarter and 30% from 3Q 2015
• 3Q turnover reduced 8% from 2015, mainly due to reduced activity in BU Offshore
• Continued improvement in underlying operations
• EBITDA year to date of MNOK 100, compared to an underlying MNOK 42 in the same period 2015
• Good visibility for 2016 turnover

Agenda

• 3 rd quarter headlines
• Key performance drivers
• 3 rd quarter consolidated accounts
• Segment info
• Shareholder structure

TTS - Key performance drivers

Internal "consolidation" will release efficiency and reduce cost 7 1

• Integration releases synergies
• Cost cutting program of MNOK 100
• Sourcing program
• Operational improvements
• Technical coordination

Solid position in a large market

• •Total market for ship and yard equipment ~NOK 330bn
• •TTS with ~20% market share in a NOK 15bn marine equipment market
• •Shipping order book 2016 at ~5000 vessels driving demand for new equipment

Unique position in China

• •China has grown to become the largest shipbuilder in the world
• •TTS has a unique position in China through joint ventures with leading shipbuilding companies CSSC and DSIC
• •TTS with 20-65% market share in China for selected marine products
• •Strong position in Korea

3

2

Established growth platform and large customer base W

• •TTS has built a global marine equipment company with a large revenue stream and blue chip clients
• •~NOK 3.1bn revenue in 2015
• •Global network of offices and service hubs combined with a large customer base gives a solid platform for growth

Comprehensive and diversified product portfolio

• •TTS has built up a solid product portfolio of ship equipment
• •Innovative and reliable solutions
• •Offering products for all major ship types and yards

Huge potential in expanding service business – life cycle approach

• Large installed base, ~23,000 pieces of equipment on ~8,000 vessels
• Expanding lifecycle services for both current installed base and new equipment is also a key growth driver

Well positioned to increase order

•More package sales

5

6

•Moving from product focus to ship type focus, and provide more value per sale, through bundling of products and systems

value per ship 4 TTS is a leading global supplier of handling systems to the marine- and offshore industry Offshore exposure is marginal, and offshore isn't really offshore

Attractive growth opportunities when market bounces back

• Bulk market depressed except for upside in mega-size tonnage
• Car carriers market softer, but higher activity for Ropax and liner RoRo
• Mega container saturating. Shift to feeder +4000 TEU
• High activity on cruise building in Europe and China
• Tank and Gas peak ended
• Positive market for shiplifts continues
• Still risk of cancellations

Internal consolidation releases efficiency and reduces cost

• TTS consists of a number of acquisitions from 1996 to 2015
• Strategy until 2014: «small business culture», with largely independent local units
• Integration of units and functions in progress since 2014 – still unused potential
• Operational improvement programs
• Improve coordination towards market
• Realize synergies
• Increase flexibility
• Technical development
• Work process improvements
• Increase service activities
• Reduce opex with MNOK 100

Order intake and order backlog*

Revenue 2016 TTS Group

*Order intake per quarter 2013-2016 including 100 % of JV Book to bill = Order intake / Revenues. From 2Q2015 THH is consolidated into Group. Order intake 2013-1Q2015: THH + TBH; from 2Q2015: TBH only.

*Order backlog per 30.09.2016 is MNOK 3298 including 100 % of JV company, divided per year of delivery.

Summary and outlook

• Continuous improvement in financial performance first three quarters 2016
• Market position defended in a challenging market, with improved 3Q order intake
• Strong order book
• Short term market outlook challenging, and further capacity adjustments being evaluated to bridge short term drop in activity level in certain business segments
• Mid to long term market is expected to improve
• High focus on profitability
• Integration releases synergies
• Cost cutting program of MNOK 100
• Sourcing program
• Operational improvements
• Technical coordination

Agenda

• 3 rd quarter headlines
• Key performance drivers
• 3 rd quarter consolidated accounts
• Segment info
• Shareholder structure

TTS Group ASA - 3 rd quarter headlines

• EBITDA Q2 2015 of MNOK 34 is excl. one off THH adjustment effects of MNOK 104, of total EBITDA MNOK 138 - EBITDA Q3 2015 of MNOK 8 is excl. one off Offshore inventory write down of MNOK 20, of total EBITDA MNOK-12 - EBITDA Q4 2015 of MNOK 47 is excl. negative effect from Offshore restructuring cost of MNOK 18, of total EBITDA 29

• Earnings continue to improve, 3Q EBITDA + MNOK 41

• Year to date EBITDA + MNOK 100
• Strategy focused on
• Strengthened market position
• Operational improvements
• Synergies to increase flexibility
• Cost reduction in sourcing and operation

Offshore losses and exposure significantly reduced

Profit and loss statement

		Q3 Periodic		Q3 YTD		Full year
MNOK	2016	2015	2016	2015	2015	2014	2013
Turnover	741	805	2 328	2 209	3 051	2 454	2 693
EBITDA	41	-12	100	126	155	105	-130
Operating profit	30	-22	65	87	32	61	-164
Net financial items	-6	5	-30	-8	-47	-38	-37
Profit/loss before tax	24	-16	35	78	-15	23	-201
Net result continued business	7	-25	2	56	-40	-22	-227
Net result incl discontinued business	7	-25	2	56	-40	18	-204
of which attributable to equity holders	6	-29	-4	44	-49	18	-204
of which attributable to non-controlling interest	2	4	6	12	9	-	-

Balance sheet

MNOK
	30.09.2016	30.09.2015	31.12.2015
Non-current assets	984	1196	1106
Current assets	1537	1999	1919
TOTAL ASSETS	2521	3195	3025
Equity	721	967	855
Gross interest bearing liabilities	488	479	523
Other liabilities and provisions	1312	1749	1647
TOTAL EQUITY AND LIABILITIES	2521	3195	3025

Net interest bearing debt / Covenants:  Net interest bearing debt increased to MNOK 255,  Total consolidated cash MNOK 233 per 30.09.2016, of which MNOK 174 is in 50% owned subsidiaries  Unutilized credit facilities MNOK 112  Group equity ratio including subordinated convertible debt is 32 % at the end of Q3 2016  Covenants at Q3 2016 are met	Equity, of which: Equity holders Non-controlling interest Total	30.09.2016 569 152 721	30.09.2015 747 220 967 12

Agenda

• 3 rd quarter headlines
• Key performance drivers
• 3 rd quarter consolidated accounts
• Segment info
• Shareholder structure

RoRo / Cruise / Navy

Cargo handling solutions for car carriers, cruise ships and specialized vessels as well as port handling equipment.

	Q3 Periodic			Q3 YTD	Full Year
MNOK	2016	2015	2016	2015	2015
Turnover	126	146	428	465	641
EBITDA	5	18	15	50	62
Order backlog	701	735	701	735	941

• Strong position in a PCTC-market passed its peak, but with higher activity for Ropax and RoRo
• Increased activity within the cruise sector
• Expect over all reduced activity short term

Container / Bulk / Tank

Cargo handling solutions for container ships, tankers and bulk carriers; including winches, cranes and hatch covers.

	Q3 Periodic		Q3 YTD		Full Year
MNOK	2016	2015	2016	2015	2015
Turnover	275	292	836	675	973
EBITDA **	18	5	40	118	141
Order backlog *	1 530	2 111	1 530	2 111	2 090

(*) Order reserve includes 50% of order reserve in equity consolidated investments in China (**) One of effect from consolidating TTS Hua Hai included in full year 2015 of MNOK 104

• Continued demand for mega-size bulk, but medium sized bulk remains challenging
• Market for mega container ships replaced by container feeder vessels
• Reduced tanker new build activity

Offshore

Cranes for offshore vessels and offshore installations.

	Q3 Periodic		Q3 YTD		Full Year
MNOK	2016	2015	2016	2015	2015
Turnover	38	99	167	269	359
EBITDA*	-0	-48	2	-80	-102
Order backlog	188	268	188	268	219
(*) During 2015, EBITDA w as reduced by MNOK 38 related to restructuring cost and inventory

impairment in the business unit

• Continuous capacity adjustments continue through 2016 and into 2017 to adapt cost to order book
• Risk and exposure at a controllable level in a harsh offshore market

Multipurpose / General Cargo

Heavy lift cranes, mooring winches, hatch covers and side loading systems for multipurpose vessels and cargo ships.

	Q3 Periodic		Q3 YTD		Full Year
MNOK	2016	2015	2016	2015	2015
Turnover	78	78	250	209	259
EBITDA	0	-4	-5	-7	-13
Order backlog	316	606	316	606	573

2016 turnover improved from 2015

• Short term marked challenging. Expect low activity short term. Need for capacity adjustments being evaluated, which may lead to future restructuring
• Longer term market potential promising, both for multi purpose heavy lift and for heavy lift installation vessels for the wind farm industry

Shipyard Solutions

Production lines and systems for cargo handling to shipyards, focusing on transfer systems for docking and launching.

	Q3 Periodic		Q3 YTD		Full Year
MNOK	2016	2015	2016	2015	2015
Turnover	90	44	232	137	216
EBITDA*	8	1	34	5	17
Order backlog	380	229	380	229	204

(*)Gain from sale of property MNOK 9 allocated in Q2/16

• Stable activity and acceptable margins
• Promising market prospects for ship-lifts and other shipyard systems, where TTS has a strong market position
• TTS Liftec continues to deliver positive results, in a market with increased competition

Services

Complete services within maintenance, including spare parts, interval agreements and life time service.

		Q3 Periodic		Q3 YTD	Full Year
MNOK	2016	2015	2016	2015	2015
Turnover	131	146	407	444	591
EBITDA	11	21	38	54	76

• 3Q 2016 turnover and EBITDA below the same quarter last year
• Service market affected by low charter rates in several markets
• Large potential for further development of spare parts and servicing from current installed base of approximately 23 000 units of equipment on approximately 8000 vessels

Shareholder structure at November 9th 2016

Skeie Technology AS	26,16 %
Rasmussengruppen AS	13,29 %
Skeie Capital Investment AS	4,85 %
Barrus Capital AS	4,00 %
Holberg Norge verdipapirfondet	3,80 %
Skagen vekst	3,51 %
Pima AS	2,94 %
Cipi Lamp Ucits Swed	2,58 %
Mertoun Capital AS	2,04 %
Danske Bank A/S	1,83 %
10 largest shareholders	65,00 %
Other	35,00 %
Total	100,00 %

Skeie Technology AS, Skeie Capital Investment AS and members of the Skeie family hold in total 32,02% of the outstanding shares in TTS Group Further, companies controlled by members of the Skeie family hold convertible bonds with 6 628 770 conversion rights, equivalent to 6,3% on fully diluted basis.