Vow ASA — Investor Presentation 2017

Mar 1, 2017

4Q2016 Presentation

Henrik Badin – CEO Erik Magelssen - CFO

This presentation (the "Presentation") has been produced by Scanship Holding ASA ("Scanship" or the "Company") exclusively for information purposes.

This Presentation includes forward-looking statements regarding Scanship, including projections and expectations, which involve risk and uncertainty. Such statements are included without any guarantee as to their future realization. Although Scanship currently believes that the expectations regarding the Company reflected in such forward-looking statements are based on reasonable assumptions, no assurance can be given that such projections will be fulfilled. Any such forward-looking statement must be considered a long with the knowledge that actual events or results may vary materially from such predictions due to, among other things, political, economic, financial or legal changes in the markets in which Scanship does business, and competitive developments or risks inherent to the Company's business plans. Many of these factors are beyond Scanship's ability to control or predict. Given these uncertainties, readers are cautioned not to place undue reliance on any forward-looking statements. Accordingly, the Company does not accept any responsibility for the future accuracy of the forward-looking statements expressed in this Presentation or the actual occurrence of the forecasted developments. The Company does not intend, and does not assume any obligation, to update any such forward-looking statements as of any date subsequent to the date hereof.

No representation or warranty (express or implied) is made as to, and no reliance should be placed on, any information, including, without limitation, projections, estimates, targets and opinions, contained herein, and no liability whatsoever is accepted as to any errors, omissions or misstatements contained herein, and, accordingly, the Company does not accept any liability whatsoever arising directly or indirectly from the use of this Presentation.

By receiving this Presentation, the recipient acknowledges that he will be solely responsible for its own assessment of the market and the market position of the Company and that he will conduct his own analysis and be solely responsible for forming his own view of the potential future performance of the businesses of the Company. This Presentation must be read in conjunction with the recent financial information, as well as other publicly disclosed information.

Nothing in this Presentation, nor any other information provided to the recipient by the Company or any of its advisers constitutes, or may be relied upon as constituting, investment advice or any financial, tax or legal advice by such persons or anybody else.

About the Company

In brief Company Structure

• Clean tech company designing and delivering Scanship AS systems for wastewater purification, waste management, foodwaste processing and bioresidue treatment
• Headquartered in Norway with subsidiaries in US for sales and service, and Poland for production.
• Market leader with advanced wastewater purification (AWP) type approved with Med B and Med F certificates for MEPC 227(64) chapter 4.2 with nutrient removal
• R&D driven with game changing technologies in the pipeline for waste to energy and exhaust gas management

Company Business Model

Financial Highlights 4Q16/FY2016

• Temporary shift in project revenues as a consequence of having a larger proportion of projects as sister ships where revenues are recognised later in the project cycle
• Changes in Project hour estimates has postponed revenue in 4Q16 of approx. NOK 5m
• NOK 4,5m in reduced margins for 4Q16 from change in project cost estimates and inventory write-offs
• Lower total revenues and negative EBITDA for FY2016
• Increased competition, lost three ship series during the three first quarter
• Two newbuild series delayed from 4Q16, announced as contract awards in 1Q17.
• Scanship total project order intake in 2016 was NOK 112m whereas 75% were sister ships with revenue recognition later in project cycle
• High tendering activity through the first 3 quarters delayed cost reduction initiatives

Key Financials Q4/FY

	Unaudited	Unaudited	Unaudited	Audited
(NOK million)	4Q16	4Q15	2016	2015
Total Revenue	38.4	54.4	171.6	200.3
Gross Margin %	24 %	32 %	28 %	32 %
EBITDA (bef. Non recurring)	$-5.0$	2.9	$-2.6$	11.3
Operating Result (EBIT)	$-6.5$	1.5	$-5.8$	8.6
Result bf. Tax	$-7.0$	2.3	$-4.9$	7.0
Project Backlog	250	226	250	226
Total Assets	123.9	168.4	123.9	168.4
Equity ratio	36 %	30 %	36 %	30 %

Gross Margin before 4Q16 adjustments

	Unaudited	Unaudited	Unaudited	Audited
(NOK million)	4Q16	4Q15	2016	2015
Total Revenue	38.4	54.4	171.6	200.3
Cost of goods sold	-24.5	-36.9	-119.1	-136.4
Gross Margin, before adj.	13.9	17.4	52.5	63.9
Gross Margin %, before adj.	36 %	32 %	31 %	32 %
Effect inventory write-down/
revised project cost estimates	-4.5		-4.5
Gross Margin, after adj.	9.4	17.4	48.0	63.9
Gross Margin %, after adj.	24 %	32 %	28 %	32 %

Revenue & Gross margin

• Revenue growth in Aftersales to NOK 82.4m for FY2016, an increase of 22% from 2015. Net margins in business area remaining on FY 2015 levels as cost reduction was initiated too late and from some issues in executing service assignments that was not resolved before middle of 4Q16
• Project revenues decreased 37% from 2015 due to sister ship effect in 2016, whereas revenue is postponed to later in the project cycle
• Gross margin at 28%, down from 32% in 2015 mainly due to one-offs. Underlying project margin is in line with previous years.

Operational Highlights 4Q16

• During 4Q16 Scanship delivered equipment to:

• Fincantieri for the fifth Viking Ocean Cruises vessels, Viking Spirit
• Fincantieri for the first Costa Asia newbuild, a part of Carnival Corporation & PLC newbuild program
• Meyer Turku for the seventh newbuild in the Mein Schiff class
• Meyer Werft for Norwegian Joy.
• Commissioning and start-up of the systems aboard MSC Meraviglia at STX France, the Viking Sky and the Silver Muse at Fincantieri
• Awarded contracts for equipment supply at Kleven for two Hurtigruten newbuilds and with Fincantieri for one P&O Australia newbuild

MSC Meraviglia float out at STX France

New contract with Kleven for the Hurtigruten newbuilds

Order Backlog & Contract Awards

• Starting 2017 with high order intake amounting to NOK 98m compared to full year 2016 order intake at NOK 112m
• Scanship contract awards in 1Q17:
• Awarded contract with shipbuilder Vard for total clean ship system on the two polar cruise expedition ships to be built for Hapag Lloyd Kreuzfarthen
• Awarded prestigious contract with the Italian shipbuilder Fincantieri for total clean ship system to the industry newplayer Virgin Voyages
• Aquaculture contract with Kruger Kaldnes for a bioresidue treatment system at Salangfisk AS in Norway.
• High tendering activity both in aquaculture, cruise newbuilds and cruise retrofits

Scanship aquaculture sludge treatment plant at Salangfisk AS

Newbuild Contract Overview

Shipyard Shipowner		Ship Class	Scope of	Year of Ship Delivery to Market
			Supply	2017	2018	2019	2020	2021
		Quantum	AWP			Ovation II Equip. Delivery: 1Q17	Ovation III Equip. Delivery: 1Q19
		Breakaway	AWP	Norwegian Joy Equip. Delivery. 3Q15	Norwegian Bliss Equip. Delivery.: 3Q16	708 Equip. Delivery: 1Q18
		Genting Dream	AWP	World Dream Equip. Delivery: 2Q16
		Mein Schiff	AWP	Mein Schiff 6 Equip. Delivery: 1Q16	Mein Schiff 1 Equip. Delivery: 3Q16	Mein Schiff 2 Equip. Delivery: 2Q17
		Oasis	AWP		B34 Equip. Delivery: 3Q15
		Meraviglia	Total Clean Ship	MSC Meraviglia Equip. Delivery: 4Q15		MSC Bellissima Equip. Delivery: 4Q17
		Vigin Star	Total Clean Ship	Viking Sky , Viking Sun Equip. Delivery: 4Q14, 4Q15, 1Q16	Viking Spirit Equip. Delivery: 4Q16	Viking 6 Equip. Delivery: 1Q17, 3Q17
		Vista	AWP		Carnival Horizon Equip. Delivery: 4Q15
		Vista	AWP			Costa Aisia I Equip. Delivery: 1Q17	Costa Aisia II Equip. Delivery: 4Q17
		Vista	AWP			P&O Australia Equip. Delivery: 1Q17
		Silver Muse	Total Clean Ship	Silver Muse Equip. Delivery: 2Q15, 3Q15
		Virgin Voyages	Total Clean Ship			Virgin I Equip. Delivery: 3Q17	Virgin II Equip. Delivery: 3Q18	Virgin III Equip. Delivery: 3Q19
		Polar Expedition	Total Clean Ship		Roald Amundsen Equip. Delivery: 2Q17	Fritjof Nansen Equip. Delivery: 2Q18
		Polar Expedition	Total Clean Ship		Hapag Lloyd I	Hapag Lloyd II

Equip. Delivery: 3Q17 Equip. Delivery: 1Q18

Condensed Consolidated Income Statement

NOKm Relative to Revenue, base=4Q14 Condensed consolidated income statement

(NOK mill)	Unaudited 4Q16	Unaudited 4Q15	Unaudited 2016	Audited FY 2015
Total operating revenue	38.4	54.4	171.6	200.3
Cost of goods sold	29.1	36.9	123.6	136.4
Gross Margin	9.4	17.4	48.0	63.9
Gross Margin %	24%	32%	28%	32%
OPEX	14.4	14.5	50.6	52.6
EBITDA bf. Non-recurring item.	-5.0	2.9	-2.6	11.3
Operating profit (EBIT)	-6.5	1.5	-5.8	8.6
Net finance	-0.5	0.8	0.9	-1.6
Profit before tax	-7.0	2.3	-4.9	7.0

Consolidated Condensed Cash Flow Statement

• Late payments from yard of approx. NOK 5m has reduced cash and reduced net cash flow from operating activities. Payment on most of the overdue invoices have been received in 1Q17
• Outstanding German VAT of approx. NOK 5m expected to be repaid in 2Q17
• Lower investment activities due to receipt of funds from Innovation Norway and Tax incentives (Skattefunn)

	Unaudited
(NOK million)	4Q16
Profit before income tax	-7.0
Net cash flow from operating activities	3.3
Net cash flow from investing activities	-0.0
Net cash flow from financing activities	-2.6
Net change in cash and cash equivalents	-0.6
Cash and cash equivalents ingoing balance	3.0
Cash and cash equivalents at end of period	3.6

	Unaudited	Audited
(NOK Mill)	31.12.2016	31.12.2015
ASSETS:
Total non-current assets	32.6	27.5
Current Assets:
Inventories	3.5	5.7
Trade receivables	56.6	61.2
Contracts in progress	14.2	42.4
Other receivables	13.6	12.2
Cash and cash equivalents	3.6	19.5
Total current assets	91.4	140.9
Total assets	123.9	168.4

• Increase in non-current assets mainly due to product development activities
• Significantly overdue trade receivables at year end 2016 were approx. NOK 5m. The overdue funds were received in 1Q17
• Reduction in Contracts in progress/accruals due to more activity on sister ship-projects

(NOK Mill)	Unaudited 31.12.2016	Audited 31.12.2015
EQUITY AND LIABILITIES
Total equity	44.4	49.8
Total non-current liabilities	4.4	4.3
Current liabilities:
Current borrowings		-
Trade creditors	29.4	36.7
Contract accruals	9.9	27.7
Financial instruments	1.8	9.4
Income tax payable	0.5	0.7
Bank overdraft	23.9	27.3
Other current liabilities	9.7	12.5
Total current liabilities	75.2	114.3
Total liabilities	79.6	118.6
Total equity and liabilities	123.9	168.4

• Other receivables include NOK 5m in receivable for the repayment of German VAT, expected to be received in 2Q17

Scanship Holding ASA

Lysaker Torg 12 P.O. Box 465 1327 Lysaker Norway

Phone: +47 67 200 300 E-mail: mail@scanship.no

www.scanship.no