Nekkar — Investor Presentation 2014

Feb 12, 2015

Q4 Results 2014 Oslo, 12 February 2015

Björn Andersson, CEO Henrik Solberg-Johansen, CFO

Agenda

• 4th quarter headlines
• 4th quarter consolidated accounts
• Roll out strategy 2015-2017
• Financial goals 2015-2016
• Summary
• Appendix

4 th quarter 2014 – key figures

• Turnover 4Q MNOK 734 up from MNOK 638 last year
• EBITDA 4Q of MNOK 142 includes one time effects from change in pension plan in the Norwegian companies amounting to MNOK 106
• Order intake 4Q MNOK 498 excl. JVs. JV order intake 4Q MNOK 656 (100%)*
• Order backlog 4Q 2014 MNOK 4 813, incl. 100% of JVs

(*)TTS holds 50% of the JVs

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Turnover and EBITDA development ⁷³⁴

Note: - Restated 2012 due to changes in IAS 19, recognition of actuarial gain/loss on pension liabilities - EBITDA Q4 2014 of MNOK 36 is excluding pension effect of MNOK 101 ⁴

Order intake and order backlog

Agenda

• 4th quarter headlines
• 4 th quarter consolidated accounts

Profit and loss statement

	4th quarter			Year
MNOK	2014	2013	2014	2013
Turnover	734	638	2 454	2 693
EBITDA *)	142	-110	105	-130
Operating profit *)	128	-121	6 1	-164
Net financial items *)	-7	-22	-38	-37
Profit/loss before tax *)	121	-142	2 3	-201
Net result continued business *)	8 9	-154	-22	-227
Net result incl discontinued business *)	8 9	-154	1 8	-204

*) - 2014 figures include one time effects related to the change in pension plan in Norwegian companies. Effect amounts to MNOK 106 in Q4 and MNOK 101 for the year.

Balance Sheet

MNOK	31.12.2014	31.12.2013
Non-current assets	927	942
Current assets	1 377	1 282
TOTAL ASSETS	2 304	2 225
Equity	610	567
Gross interest bearing liabilities	385	233
Other liabilities and provisions	1 309	1 426
TOTAL EQUITY AND LIABILITIES	2 304	2 225

Net interest bearing debt / Covenants At 31 December 2014 TTS has renegotiated covenants with the banks (ref note 14) o Equity > 20% (nominal bond debt included in EQ) o EBITDA covenants (MNOK) Q4-14 Q1-15 Q2-15 Q3-15 EBITDA covenant accumulated ≥ 31 ≥ 31 ≥ 53 ≥ 80

• Net interest bearing debt decreased to MNOK 262.
• Total cash reserve is MNOK 308 as per 31.12.2014
• Equity ratio inclusive subordinated convertible bond is 30.6 % at year end 2014

Cash flow / Working capital / Interest bearing debt

Cash flow	Q4	Q4	YTD	YTD
MNOK	2014	2013	2014	2013
Net cash flow from operations	76	112	-150	-138
Net cash flow from investments	-14	-12	27	14
Net cash flow from financial activities	-31	-19	101	-3
Net change in cash	32	82	-21	-127
Cash and bank deposits at the start of the period			156	228
Effect of exchange rate changes in bank/cash			-4	55
Cash and bank deposits at the end of the period			131	156

(**) Negative indicates net asset position Cash flow from operations MNOK -150, mainly from increased working capital offshore projects

MNOK	Q4 14	Q3 14	Q2 14	Q1 14	Q4 13
Short term interest b. debt	297	273	295	187	50
Long term int. bearing debt	1	1	1	103	103
Convertible Bond(*)	95	95	95	95	95
Total	393	369	391	385	248
Cash	131	88	88	117	156
NIBD (**)	262	281	303	268	92

(*) Convertible loan included at nominal value

Minor changes in working capital during Q4. 9

RoRo / Cruise / Navy

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

	Q4 periodic		Full Year
MNOK	2014	2013	2014	2013
Turnover	157	149	599	562
EBITDA	25	11	77	53
Order backlog	854	762	854	762

• Improved turnover and profit for the business unit
• Market for RoRo, particularly PCTC, is positive
• Competition is fierce and prices are low in the port segment
• Cruise business is developing, with new contracts signed in 4Q
• The Naval segment is promising, with new resources and higher sales activities

Container / Bulk / Tank

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

	Q4 periodic		Full Year
MNOK	2014	2013	2014	2013
Turnover	105	167	422	535
EBITDA	-7	-52	-5	-71
Order backlog *)	1 687	1 056	1 687	1 056

*) Includes 50 % of JVs

• Profit from JV companies MNOK 3.6 in Q4 and MNOK 14.3 YTD
• Order backlog driven by strong market positions for the JVs in China
• The outlook is neutral
• Business unit head-quarter moving closer to the market. Transfer from Germany to South Korea ongoing, reducing future operating cost

Multipurpose / General Cargo

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

	Q4 periodic		Full Year
MNOK	2014	2013	2014	2013
Turnover	47	8	138	374
EBITDA	-1	-13	-32	-35
Order backlog	562	307	562	307
New contracts give basis for increased productivity in Q4. Volumes from new contracts balance activity with operational cost base Several new contracts in 2014 give basis for increased turnover in 2015
Increased activity in Chinese shipyards - several projects are tendering heavy lift cranes
Improved order backlog combined with cost cutting measures, basis for improved EBITDA margins
Established new JV in China with South China Marine Machinery Ltd (subsidiary of CSSC)

• New contracts give basis for increased productivity in Q4. Volumes from new contracts balance activity with operational cost base
• Several new contracts in 2014 give basis for increased turnover in 2015
• Increased activity in Chinese shipyards several projects are tendering heavy lift cranes
• Improved order backlog combined with cost cutting measures, basis for improved EBITDA margins
• Established new JV in China with South China

Shipyard Solutions

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

	Q4 periodic		Full Year
MNOK	2014	2013	2014	2013
Turnover	53	58	192	168
EBITDA	27	9	32	18
Order backlog	271	308	271	308

• EBITDA for the quarter includes one-off pension effect of MNOK 20. EBITDA excl. pension is MNOK 7.5 for the quarter and MNOK 14.9 for the year
• Stable activity in the quarter. Several interesting projects may develop in 2015
• TTS with a strong position in the ship lift market. Signs of improvement in market for translifter systems

Offshore

Cranes for offshore vessels and offshore installations.

	Q4 periodic		Full Year
MNOK	2014	2013	2014	2013
Turnover	210	143	572	608
EBITDA	33	-75	-50	-114
Order backlog	254	539	254	539

• EBITDA for the quarter includes STX settlement of MNOK 23 and one-off pension adjustment of MNOK 37. EBITDA excl. one-off effects is MNOK - 27 for the quarter, and MNOK -110 for the year
• Cost reduction efforts implemented. Due to long lead time for projects → effect expected gradually during 2015
• Decrease in order backlog, STX cancellation and order intake significantly lower than 2013
• Positive user feedback on product performance and reliability

Services

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

	Q4 periodic		Full Year
MNOK	2014	2013	2014	2013
Turnover	162	113	530	446
EBITDA	64	18	96	43

• High activity in the quarter, 43 % up from last year, and stabile margin
• EBITDA for the quarter includes one-off pension effect of MNOK 40. EBITDA excl. pension is MNOK 24 for the quarter and MNOK 59 for the year
• Structural capacity in the segment provides basis for increased turnover, and improvement to the overall profit margin. However, the service market remains influenced by low ship charter rates in some segments

10 largest shareholders at February 11th 2015:

Total	56.93%
Tamafe Holding AS	2.49%
Holberg Norge Verdipapirfondet	2.50%
Skagen Vekst	3.53%
Skandinaviska Enskilda	3.70%
Barrus Capital AS	4.00%
Skeie Capital Investment AS	4.85%
Stisk AS	6.13%
Lesk AS	6.13%
Skeie Technology AS	10.31%
Rasmussengruppen AS	13.29%

Skeie Technology AS, Skeie Capital Investment AS and members of the Skeie family own in total 32,0 %.

Agenda

• 4 th quarter headlines
• 4 th quarter consolidated accounts
• Roll out strategy 2015-2017

Our long-term goal

Building a global BNOK 6 System and Service provider company in the maritime and offshore industry within 2020

• Grow by internal efficiency and capture market share
• Add peripheral products to complement
• Product costs on par with the market
• Key accounts to support customer relationships
• Major focus to penetrate our installed base and third party equipment

Overall vision for TTS Group

Vision	The global supplier of handling systems to the maritime and offshore industry with the strongest focus on end user satisfaction
Values that drive us	System & Technology competence	Reliability & Customer satisfaction	Health Safety & The Environment
Strategy	A preferred global supplier means:  Be on the makers list and get market share > 30 % in each market segment where we are positioned  Product technology among the top 3 in each segment where we compete  Customer oriented solution that support the life cycle of the vessel from new design to recycling. Wider product offerings to support package sales and reduce sales costs  Profitability on par with industry average

TTS launched its new Global strategy in 2014 Roll out version for 2015-2017

1 Continue to build on the solid position in China	• The leading position in China provides shipping market access. China with ~40% of total shipping order book, Korea at ~30% • TTS aims to continue to leverage its strong market and cost position in China and Far-East, and grow into Korea • Increase the scope of manufacturing co-operation in China
2 Focus on ship type – more integrated package sales	• Currently delivering single products to a high number of vessels • TTS aims to move from product focus to ship type focus, and provide more value per sale, through bundling of products and systems. • Move closer to the end user -> Key Account ownership across TTS
3 Enhanced service offering through strategic hubs	• Focus on major clusters of customer bases and create relationship for services on a ship´s lifetime • Increase ability to serve the customer on the spot and in a timely manner • Develop service entities with technical and design knowledge for all TTS products
4 Focus on profitability	• TTS aims to reach operating income margins on par with industry average over a business cycle • Marine business units delivering decent margins. Further improvement expected in 2015 to reach average industry margins in 2017 • Offshore business unit currently underperforming. Work started in 2014 to turn this around and capture a fair share of the market

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Leveraging TTS' current strong market position

• Unique position in China

• ‒ > 50% market share for hatch covers and hose handling cranes, growing market share for winches and cargo cranes
• ‒ Close to BNOK 1 JV revenues in 2014
• ‒ Strong manufacturing platform
• ‒ All time high order intake in 2014

• Strong product portfolio and position in core market segments

• ‒ Solid global brand image to be built upon
• ‒ Growing markets in many segments
• ‒ Untapped sales potential on package sales per ship
• Growth platform established – BNOK 4.8 in Order backlog in 2014 including JVs
• ‒ Order books across all divisions are growing Organization restructured from product structure to ship type structure
• ‒ Service footprint expanded by strategic hubs
• Dedicated employees and a good working culture

Exploring new strategic opportunities to further strengthen the business

• TTS has built a strong product portfolio and market position in core shipping markets
• TTS believe "package sale" will be a key growth driver going forward
• Our organization reformed from product type to ship type structure
• Increased integration and automation of control systems on a ship in order to reduce on/off loading time is a focus area for ship owners
• TTS Group has a strategy to fill the gaps in its product portfolio and to grow its client offering, in order to deliver more package sale
• This will position TTS for higher order value per ship, and enable TTS to increase its market position in our core markets, i.e. China and Korea.
• In order to position the TTS Group for such growth the Board of Directors of TTS Group has decided to run a strategic process to look for one or more partners to achieve and deliver on its new strategy and continue the impressive record of accomplishment within ship equipment going forward
• The Board of Directors of TTS Group has retained Pareto Securities AS as the financial advisor to assist in the strategic process
• Please see press release dated 12 February 2015 for more information

Our journey to continued revenue growth, increased profitability and improved cash flow

Revenue improving actions	• Continue to build on the solid position in China • Launch ship-type organisation with global service • Use high market share segments to launch package sales and complement with peripheral products
Cost reducing actions	• Product benchmarking to reach top of the range performance • Technical standardization and group sourcing across business units • Incorporate a flat organization structure and new business processes in Offshore and Container, Bulk & Tank
Risk reduction actions	• Focus on core products in well defined segments • Implement group bid reviews and authorization matrix • Best in class work processes across business units
Working capital & capex reduction actions	• Cash flow actions > adjustment of working capital days • Simplification of work process • 2015 capex budget significantly reduced • No dividend plans

TTS has a strong position in the biggest global shipbuilding market

Restructuring from product to ship-type focus

Current TTS product portfolio Product expansion opportunities

Change from product focus to ship type focus

• Key account 20% of ship owners owns 80% of the global fleet
• One face to the market
• More value per sale, packaged deliveries
• Broader service offering per ship type -> Leading to TTS as total service provider

Product platform to support life time services -> TTS a total Service provider

Container ship example - Increased value per vessel

From single product supplier to package solutions

Increase service revenues through increased presence at strategic hot spot hubs

Competitive advantage through "on-the-spot" presence where TTS equipment is sailing

• Increase ability to serve the customer on the spot and in a timely manner
• Service entities with technical and design knowledge for all TTS products
• Hub advantages:
• ‒ Customer accounts (sales)
• ‒ Service capability on all TTS products
• ‒ Stock of critical parts Workshop
• ‒ Technical knowledge (design)
• Hub development areas:
• ‒ Bremerhaven
• ‒ Houston
• ‒ Brazil
• ‒ Singapore
• ‒ Dubai (to be developed)
• ‒ Antwerp (to be developed)

TTS is already on the vessel – ambition to increase value per contract

TTS revenue growth potential

Potential for growth towards 2020, goal of BNOK 6 turnover

BNOK

Our journey to continued revenue growth, increased profitability and improved cash flow

Revenue improving actions	• Continue to build on the solid position in China • Launch ship-type organisation with global service • Use high market share segments to launch package sales and complement with peripheral products
Cost reducing actions	• Product benchmarking to reach top of the range performance • Technical standardization and group sourcing across business units • Incorporate a flat organization structure and new business processes in Offshore and Container, Bulk & Tank
Risk reduction actions	• Focus on core products in well defined segments • Implement group bid reviews and authorization matrix • Best in class work processes across business units
Working capital & capex reduction actions	• Cash flow actions > adjustment of working capital days • Simplification of work process • 2015 capex budget significantly reduced • No dividend plans

Operational Excellence & Synergies

In 2014 MNOK 130 were released in operation & sourcing costs In 2015 we will eliminate another MNOK 100

Breakdown of operating cost reductions

• The divisional layer is removed -> a flat Business Unit structure reporting directly to CEO
• Business processes across legal entities
• One company structure avoiding duplicate functions and administration
• Sourcing and standardisation across the business units
• In total ~MNOK 70 annual cost reduction achieved in 2014
• Further ~MNOK 35 annual cost reduction initiated in 2015 Offshore

Our journey to continued revenue growth, increased profitability and improved cash flow

Revenue improving actions	• Continue to build on the solid position in China • Launch ship-type organisation with global service • Use high market share segments to launch package sales and complement with peripheral products
Cost reducing actions	• Product benchmarking to reach top of the range performance • Technical standardization and group sourcing across business units • Incorporate a flat organization structure and new business processes in Offshore and Container, Bulk & Tank
Risk reduction actions	• Focus on core products in well defined segments • Implement group bid reviews and authorization matrix • Best in class work processes across business units
Working capital & capex reduction actions	• Cash flow actions > adjustment of working capital days • Simplification of work process • 2015 capex budget significantly reduced • No dividend plans

Risk reduction actions and events

• Finalization of loss projects
• Avoiding new high product risk contracts and poor commercial contracts
• New bid reviews processes are implemented, both CEO and the Board involved on lower bid size than previously
• TTS best in class work processes introduced in Offshore
• New BU leader for Offshore with experience from project management and the offshore industry

Our journey to continued revenue growth, increased profitability and improved cash flow

Revenue improving actions	• Continue to build on the solid position in China • Launch ship-type organisation with global service • Use high market share segments to launch package sales and complement with peripheral products
Cost reducing actions	• Product benchmarking to reach top of the range performance • Technical standardization and group sourcing across business units • Incorporate a flat organization structure and new business processes in Offshore and Container, Bulk & Tank
Risk reduction actions	• Focus on core products in well defined segments • Implement group bid reviews and authorization matrix • Best in class work processes across business units
Working capital & capex reduction actions	• Cash flow actions > adjustment of working capital days • Simplification of work process • 2015 capex budget significantly reduced • No dividend plans

Cash flow optimization

• Group wide project to reduce working capital started in 2Q 2014
• Focus on improving outstanding days for receivables and payables, as well as inventory optimization
• Average AR shorter and AP longer, saving a total of MNOK 113 from 2Q to 4Q
• Project continues in 2015, lead by dedicated senior finance manager
• Bid process focused on moving new contracts towards more cash neutral cost/revenue streams
• Dedicated follow up of large milestone payments from group cash manager with focused accountability by project managers
• 2015 capex budget significantly reduced
• No dividend plans

Agenda

• 4 th quarter headlines
• 4 th quarter consolidated accounts
• Roll out strategy 2015-2017
• Financial goals 2015-2016

TTS is on track to improve profitability

• Revenues for TTS Group excluding Offshore expected to grow to BNOK 2.1-2.3 in 2015
• EBITDA margins for TTS Group excluded Offshore expected to improve to approximately 6%
• TTS also expect a modest growth in revenues for the Group excluding Offshore into 2016 with margins approaching industry average levels
• Offshore excluded as it is currently exposed to a weaker market sentiment, and has a different risk profile compared to the other parts of the Group

2015 EBITDA expectations in line with historical margins

Note: Illustrative graph based on historical reported segment figures

Agenda

• 4 th quarter headlines
• 4 th quarter consolidated accounts
• Roll out strategy 2015-2017
• Financial goals 2015-2016
• Summary

Summary

Positive quarter and full year EBITDA

• Positive 4Q EBITDA for the second quarter after four negative previous quarters
• Positive 2014 full year EBITDA

Improvement processes on track

• We have a road map for the improvement processes going forward in 2015 that has not changed. Up to now we have:
• Finalized the cost cutting programs in MPGC, CBT and Offshore (Offshore to continue pending market development in 2015)
• Value chain development in several product segments (sourcing, product development, sales)

Positive view on significant market segments

• The marine market remains good
• Contracting of new vessels, especially bulkers continues to be on acceptable level
• Car carriers continue with several repeats
• Container ships grow, especially feeder-size and 16 000-20 000 TEU
• Multipurpose/General cargo have improved from Q2
• Offshore market under pressure
• TTS exploring new strategic opportunities to further strengthen the business
• Please see press release dated 12 February 2015 for more information

Agenda

• 4 th quarter headlines
• 4 th quarter consolidated accounts
• Roll out strategy 2015-2017
• Financial goals 2015-2016
• Summary
• Appendix

Except for periods with financial turbulence, GDP and Fleet growth are exceeding 2 % p.a. and reached an average of 4 % p.a.

Source: Clarkson Research Services

* Including Tankers (10k DWT+), bulk carriers and container ships

Growth in world seaborne trade vs GDP Growth in world seaborne trade vs fleet size

Growth scenario impacted by:

• Bunker price
• Financial credits availability
• Historic low newbuilding price
• Low inflation
• Low interests on credit lines
• GDP growth worldwide
• Limited risks on financial crisis

We expect 2-3 years of good growth in the Marine industry, while Offshore will need 2-3 years of adjustments

Source: Clarkson Research Services, September 2014

Orderbook by ship type

Newbuild contracting by region (# of vessels)

RoRo and PCC orderbook development (# of vessels)

Newbuild prices (USDm)

OSV fleet development; deliveries (#)

Subsea vessel fleet development; deliveries (#)

Order book

Source: IHS

For further information, please visit us at

www.ttsgroup.com