NRC Group — Earnings Release 2013

Feb 27, 2014

Sale of a subsidiary and major contract

As part of the continued restructuring of the company, Blom have signed an agreement to sell the subsidiary Blom Romania. The sale contributes to a more focused operation and reduced exposure. Blom has concentrated on developing new business areas based on the company's core competence. The company is satisfied that it has signed a two-year contract for the delivery of airborne remote sensor services for ice monitoring in northern waters. This contract award in combination with the conversion of interest-bearing bond debt, provide the company with a good foundation for long-term, profitable growth.

The company reported revenues of NOK 52 million in the 4th quarter, compared with NOK 61 million for the same quarter in 2012. EBITDA for the quarter was NOK 16 million, compared with NOK 13 million for the corresponding quarter in 2012. This corresponds to an EBITDA margin of 30.8 per cent, compared with 22.0 per cent in the 4th quarter of 2012. The operating loss for the quarter was NOK 7 million, compared with an operating profit of NOK 3 million for the same period in 2012. The pre-tax loss was NOK 9 million, compared with a pre-tax loss of NOK 5 million for the corresponding quarter in 2012.

The company's revenues for 2013 totalled NOK 265 million, compared with NOK 265 million in 2012. EBITDA for 2013 was NOK 32 million, compared with NOK 49 million in 2012. This corresponds to an EBITDA margin of 12.3 per cent for 2013, compared with 18.7 per cent in 2012. The operating loss for 2013 was NOK 55 million, compared with an operating profit of NOK 12 million in 2012. The pre-tax loss was NOK 64 million, compared with NOK 20 million for the corresponding period in 2012.

Individual transactions resulting from extensive restructuring have had a significant impact on the results for the 4th quarters of 2013 and 2012, as well as the full years 2013 and 2012. This applies to substantial costs related to writedowns, as well as revenues related to the sale of businesses and the conversion of bond debt.

Despite the substantial restructuring over the last two years, the company will continue its efforts to adapt its structure, cost base and product portfolio in order to improve the company's earning capacity. The company will continue to implement measures to develop business opportunities in markets where the company's competence can be exposed to a better risk and reward profile.

As at 31 December 2013, the company can present a satisfactory balance sheet after the conversion of bond debt and extensive write-down of company assets, including a full write-down of intangible assets. The company's equity ratio is 29 per cent and the current ratio has also been significantly improved.

A new Board of Directors and shareholder structure with confidence in the company's competence and opportunities is a strong motivation for the company's employees.

Results

	th quarter 4		As at 31/12
IFRS	2013	2012	2013	2012
(Amounts in NOK 1,000)
Operating revenues	51,598	60,742	264,575	265,146
EBITDA	15,913	13,372	32,442	49,484
EBIT	-6,594	2,686	-54,906	12,028
EBT	-9,094	-5,234	-64,195	-19,752

The company has implemented an extensive restructuring of the business in 2012 and 2013. This has resulted in the sale and wind-up of subsidiaries, which has reduced the number of employees by more than 50 per cent. In addition, the company's assets have been subjected to substantial depreciation and write-downs, and the company's total assets have been reduced from NOK 590 million to NOK 162 million. The company's bond debt has been converted into equity, and the effect of this is shown in the statement of income under other gains/losses. The final settlement with Pictometry had a positive impact on the results for 2012.

This report has been prepared in accordance with IAS 34 on interim accounts. The interim accounts do not contain all the information that is required in complete annual accounts, and they should be read in conjunction with the consolidated accounts for 2012. The interim accounts have been prepared in accordance with the same principles as the annual financial statements for 2012 with the exception of the implementation of IAS 19 (pensions). Comparable figures have been restated as a result of this change. The result from the businesses sold is presented on a separate line in the statement of comprehensive income. The report has not been audited.

Operations

Operational development

To improve profitability under the prevailing market conditions in parts of Europe in recent years, Blom has chosen to focus more on market niches in which the company has a competitive advantage or geographic regions in which we either see an increasing need for the company's services or can develop new business opportunities.

In Sweden, the company's increased focus on specific customer segments and a changed product mix has resulted in revenue growth and an improvement in earnings. Certain important customer segments in Norway have shown a considerable decline in volume, which has resulted in lower prices. Blom has, nonetheless, maintained its market share. Overall, the market situation in the Nordic region creates a need for innovation and a focused growth strategy in which the company's competence can be exposed to new markets with better growth opportunities.

The efficiency improvement measures implemented in Mid-Europe in 2013 are expected to improve future margins.

In November 2013, an agreement was signed to sell Blom Romania SRL. After the sale is completed, the company will have limited commercial exposure to Eastern Europe.

The challenging macroeconomic conditions in Iberia continue, but the decline has lessened. The implementation of a reduced geographic exposure combined with a more focused product range will establish the foundation for the company's reduced level of activity in this region in 2014.

In spite of the company's underlying operations showing somewhat less weak profitability this year, the company's results are not satisfactory. Blom is focusing therefore on the development of products and services to increase the creation of value for the company's customers.

As a result of these efforts, on 5 February 2014 the company signed a twoyear agreement with Viking Supply Ships AS (VSS) for the delivery of airborne sensor services in 2014 and 2015. These services are linked to VSS's operations in northern waters and will be part of a larger ice monitoring programme. The contract is expected to generate annual revenues of NOK 35 to 50 million, with satisfactory margins. For Blom, the contract is an important confirmation of the company's ability to adapt and make use of its competence in new markets. VSS has an option for two additional years under certain conditions.

Finance and accounts

4 th QUARTER 2013

Operating revenues from the segments in the 4th quarter:

Operating revenues (NOK 1000)	th Qtr. 2013 4	rd Qtr. 2012 4
Nordic	29,967	33,366
Mid-Europe	11,864	10,068
Eastern Europe	1,824	3,471
Iberia & Latin America	7,943	13,387
Total	51,598	60,742

As at 31/12/2013

Operating revenues from the segments as at 31 December 2013 were:

Operating revenues (NOK 1000)	31/12/13	31/12/12
Nordic	167,556	164,804
Mid-Europe	52,891	36,770
Eastern Europe	9,874	5,578
Iberia & Latin America	34,254	46,326
Other segments / unallocated	0	1,600
Total	264,576	265,146

From continuing operations the company had a positive cash flow from operating activities of NOK 21 million in the 4th quarter.

In the 4th quarter, the company made operational investments of NOK 2 million. The corresponding figure for the year 2013 is NOK 14 million.

As a result of lower interest-bearing debt compared to the same period last year net financial expenses totalled NOK 2.5 million for the quarter. Consulting fees and other expenses related to the restructuring of the company's bond debt have, at the same time, been charged.

The equity ratio is 28.8 per cent as at 31 December 2013, compared with 9.6 per cent as at 31 December 2012. Cash and cash equivalents for continuing operations increased by NOK 19 million to NOK 43 million during the quarter.

Organisation and personnel

The company has a team of employees with a high level of competence. This represents the foundation for the company's growth. As at 31 December 2013, there were a total of 207 employees in the operative companies, down from 253 at the end of 2012. At Blom's production facilities in Indonesia and Eastern Europe, there were a total of 258 employees. The group has a total of 465 employees, which is a reduction of 120 since 31 December 2012.

Shareholder matters

As at 31 December 2013, the company's share capital was NOK 50,353,245.00, divided into 10,070,649 shares, each with a nominal value of NOK 5.00. The total number of shareholders as at 31 December 2013 was 2,413, and foreign shareholders accounted for 0.26 per cent of the share capital. Blom owns a total of 395,336 of the company's own shares, which represents 3.93 per cent of the total number of outstanding shares.

Conversion of all of the company's outstanding bond debt totalling NOK 97.3 million was approved by the company's Extraordinary General Meeting of 27 September 2013. The new shares were registered on 20 November 2013. A capital reduction and reverse-split of shares was adopted at the same time.

After conversion of the bond loan, reduction of capital and reverse-split of shares on 20 November, the company's share capital was NOK 50,353,245, divided into 10,070,649 shares, each with a nominal value of NOK 5.00.

After conversion of the bond debt, Merckx AS owns 73.4 per cent of the shares in Blom and emerges as the company's principal shareholder. Blom ASA acquired 395,229 of the company's own shares as a result of the conversion of bond debt.

At the company's Extraordinary General Meeting of 29 November 2013, the Board of Directors approved a reduction of the company's capital to ensure greater flexibility in its assessment and selection of various future strategic development options.

The General Meeting approved a reduction of the company's share capital by NOK 40,282,596 from NOK 50,353,245 to NOK 10,070,649 by a reduction of the nominal value of the company's shares from NOK 5.00 to NOK 1.00. After the expiration of the deadline for objections by creditors, the reduction of the capital was carried out on 27 January 2014. The reduction in capital took place in the form of a transfer to other reserves, and thus no disbursements were made in connection with the reduction in capital.

Outlook

In spite of the fact that the company has undergone extensive restructuring over the last two years, the company will continue to focus on further cost cuts, streamlining and development of the business, so that the company can achieve optimal cost structures.

The Board is of the opinion that the sums of implemented and planned measures will enable the company to deliver profitable operations in 2014 and future years. in the opinion of the Board of Directors. The Board of Directors is satisfied with the company's ability to complete a demanding restructuring process at the same time as the company has established itself in new business areas with better visibility and margins.

	Oslo, 26 February 2014
Siv Staubo	Tore Hopen	Birgitte Ellingsen
Board Chairman	Board Member	Board Member
Kristian Lundkvist		Dirk Blaauw
Board Member		CEO

Consolidated Statement of Income – Blom Group

4.Qtr.2013	4.Qtr.2012		31/12/13	31/12/12*
51,598	60,742	Operating revenues	264,575	265,146
15,216	11,231	Cost of materials	79,213	75,497
33,265	33,084	Salaries and personnel costs	140,809	138,693
22,506	10,686	Depreciation and write-downs	87,348	37,456
11,411	3,055	Other operating and administrative costs	36,318	25,355
-24,207	0	Other gains and losses	-24,207	-23,884
58,192	58,056	Operating expenses	319,482	253,118
-6,594	2,686	Operating profit/loss	-54,906	12,028
-2,500	-7,920	Net financial items	-9,289	-31,780
-9,094	-5,234	Pre-tax profit/loss	-64,195	-19,752
3,560	-1,549	Taxes	2,965	-1,513
-5,533	-6,783	Profit/loss from continuing business	-61,230	-21,265
4,950	-31,531	Profit/loss from discontinued business	1,791	-45,362
-583	-38,314	Profit/loss for the year	-59,440	-66,627
		Profit/loss attributable to:
-583	-38,314	Shareholders	-59,440	-66,627
-583	-38,314	Profit/loss after tax	-59,440	-66,627
		Comprehensive profit/loss:
2,789	570	Currency translation differences	6,041	-808
168	-3,040	Recalculation of pension obligations	168	-1,164
2,374	-40,784	Comprehensive profit/loss	-52,231	-68,599
		Comprehensive income attributable to:
2,374	-40,784	Shareholders	-52,231	-68,599
2,374	-40,784	Comprehensive profit/loss	-53,231	-68,599
Earnings per share:
From continuing business			-45.01	-101.82
From discontinued business			1.32	-217.20
From profit/loss			-43.70	-319.02
	Diluted earnings per share:
From continuing business			-45.01	-101.82
From discontinued business			1.32	-217.20
From profit/loss			-43.70	-319.02

*Comparison figures restated as a result of implementation of the amendments to IAS 19 (pensions)

Balance Sheet – Blom Group

ASSETS (Amounts in NOK 1000)

	31/12/13	31/12/12*
Intangible assets	684	1,327
Property, plant and equipment	20,636	98,912
Fixed asset investments	1,151	180
Total non-current assets	22,471	100,419
Work in progress	30,965	45,094
Trade receivables	36,117	39,162
Other current receivables	15,054	32,409
Total receivables	51,171	71,571
Cash and cash equivalents	42,725	64,609
Assets classified as held for sale	48,072	144,382
Total current assets	172,933	325,655
TOTAL ASSETS	195,404	426,075

Balance Sheet – Blom Group

EQUITY AND LIABILITIES (Amounts in NOK 1000)

	31/12/13	31/12/12*
Called-up and fully paid share capital:
Share capital	10,071	16,849
Treasury shares	-1,977	-110
Share premium account	97,720	20,458
Other reserves:
Currency translation differences	-35,759	-41,389
Retained earnings	-14,210	45,062
Total equity	56,256	40,870
Pension obligations	3,233	5,849
Non-current liabilities	10,506	78,428
Total non-current liabilities	13,739	84,277
Credit facilities	0	5,657
Other interest-bearing current liabilities	3,864	51,513
Total interest-bearing current liabilities	3,864	57,170
Trade payables	25,955	51,480
Unpaid government taxes	18,931	18,439
Other current liabilities	43,449	44,780
Total other current liabilities	88,335	114,699
Liabilities classified as held-for-sale	33,209	129,058
Total current liabilities	125,408	300,928
Total liability	139,147	385,205
TOTAL EQUITY AND LIABILITIES	195,404	426,075

*Comparison figures restated as a result of implementation of the amendments to IAS 19 (pensions)

Change in equity from 1 January to 31 December

	2013	2012*
Equity as at 31 December	40,870	-196,284
Profit/loss for the period	-59,440	-66,629
Change in share capital due to conversion / reduction of capital	-8,645	15,576
Change in share premium reserve due to conversion	77,262	290,177
Pension obligations	168	-1,163
Currency translation differences	6,041	-807
Equity	56,256	40,870

*Comparison figures restated as a result of implementation of the amendments to IAS 19 (pensions)

Cash Flow Statement – Blom Group

2013 2012 Indirect model (Amounts in whole NOK 1000) 2013 CASH FLOW FROM OPERATING ACTIVITIES -9,094 -5,234 Pre-tax profit/loss -64,195 Depreciation and amortisation of property, plant and equip 22,506 10,687 + ment 87,348 -5,399 9,090 +/- Change in trade receivables -4,009 26,173 31,830 +/- Change in inventories and work in progress -1,532 -1,445 -14,074 +/- Change in supplier debt -3,150 -11,667 -19,848 +/- Change in other accruals and unrealised foreign exchange -15,647 Net cash flow from operating activities – continuing 21,075 12,451 A = business -11,854 Net cash flow from operating activities – discontinued busi 11,470 -1,616 ness 11,339 32,545 10,836 A = Net cash flow from operating activities – total 10,153 CASH FLOW FROM INVESTMENT ACTIVITIES -1,590 -5,602 – Purchases of property, plant and equipment -11,053 0 339 – Receipts from sale of shares and other investments 7,487 Net cash flow from investment activities – continuing -1,590 -5,263 business -3,566 Net cash flow from investment activities – discontinued busi -65 -1,112 ness -153 -1,655 -6,375 B = Net cash flow from investment activities – total -3,719	2012 -19,752 37,456 10,060 14,910 -20,966 -42,249 -20,541
	36,691
	16,150
	-28,643
	20,450
	-8,193
	-6,989
	-15,182
CASH FLOW FROM FINANCING ACTIVITIES
0 20,036 + New debt 0	38,933
-231 -3,297 – Repayment of debt -9,604	-12,674
Net cash flow from financing activities – continuing -231 16,739 business -9,604	26,259
Net cash flow from financing activities – discontinued busi 0 -1,102 ness -2,108	-36,767
-231 15,637 C = Net cash flow from financing activities – total -11,712	-10,508
30,660 20,098 A+B+C Net change in cash and cash equivalents -2,641	-9,540
31,308 47,146 + Cash and cash equivalents at the start of the period 67,244	76,784
61,967 67,244 = Cash and cash equivalents as at 31 December 61,967	67,244
42,725 54,362 Cash and cash equivalents – continuing business 42,725

19,242 12,882 Cash and cash equivalents – discontinued business 19,242 12,882

Segments – Blom Group

(Amounts in NOK 1,000)

Operating revenues	4.Qrt.2013	4.Qrt.2012	As at 31/12/13	As at 31/12/12
Nordic	29,967	33,366	167,556	164,804
Mid-Europe	11,864	10,068	52,891	46,838
Eastern Europe	1,824	3,471	9,874	5,578
Iberia & Latin America	7,943	13,837	34,254	46,326
Other segments / unallocated	0	0	0	1,600
Total	51,598	60,742	264,575	265,146
EBITDA	4.Qrt.2013	4.Qrt.2012	As at 31/12/13	As at 31/12/12
Nordic	3,258	18,913	46,490	44,368
Mid-Europe	-1,644	-419	-463	2,059
Eastern Europe	724	-1,507	3,312	1,163
Iberia & Latin America	-4,693	-7,245	-11,538	-8,746
Other segments / unallocated 1)	18,269	3,631	-5,359	10,640
Total	15,913	13,372	32,442	49,484
EBIT	4.Qrt.2013	4.Qrt.2012	As at 31/12/13	As at 31/12/12
Nordic	-16,322	12,705	-33,168	21,976
Mid-Europe	-4,078	-3,631	-7,205	-6,311
Eastern Europe	652	-1,514	3,137	1,150
Iberia & Latin America	-4,832	-9,022	-12,092	-16,744
Other segments / unallocated 1)	17,986	4,148	-5,578	11,957
Total	-6,594	2,686	-54,906	12,028
Assets 2)	31/12/2013	31/12/2012	As at 31/12/13	As at 31/12/12
Nordic	48,061	104,180	48,061	104,180
Mid-Europe	16,864	20,804	16,864	20,804
Eastern Europe	5,107	26,915	5,107	26,915
Iberia & Latin America	18,379	25,343	18,379	25,343
Other segments / unallocated	106,993	248,833	106,993	248,833
Total	195,404	426,075	195,404	426,075
Investments	4.Qrt.2013	4.Qrt.2012	As at 31/12/13	As at 31/12/12
Nordic	2,042	4,550	12,140	20,485
Mid-Europe	50	0	918	2,942
Eastern Europe	379	0	693	2,055
Iberia & Latin America	5	1,221	154	3,861
Other segments / unallocated	0	384	152	6,405
Total	2,477	6,155	14,058	35,748

1) Other segments / unallocated include other gains/losses.

2) Allocated assets include external trade receivables, work in progress, non-current assets and intangible assets with the exception of deferred tax assets. Other / unallocated assets include assets classified as held for sale as at 31 December 2012 and 31 December 2013.

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