4th Quarter Interim Financial Report

Transcription

1 b 4th Quarter Interim Financial Report 2017

2 VV Holding AS Q4 Report 2017 Page 2 TABLE OF CONTENT DISCLAIMER... 3 PRESENTATION OF THE GROUP... 4 COMMENTS BY THE CEO... 6 KEY FINANCIAL FIGURES... 8 RESULTS OF OPERATIONS... 8 FINANCIAL POSITION OPERATING AND FINANCIAL REVIEW UPDATE OF MATERIAL RISK FACTORS AND EVENTS AFTER REPORTING PERIOD CONDENSED INTERIM FINANCIAL STATEMENTS NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS RESPONSIBILITY STATEMENT APPENDIX 1 - ALTERNATIVE PERFORMANCE MEASURES CONTACTS... 27

3 VV Holding AS Q4 Report 2017 Page 3 DISCLAIMER VV Holding AS is providing the following interim financial statements for Q to holders of its NOK 2,235,000,000 Senior Secured Floating Rate Notes due This report is for information purposes only and does not constitute an offer to sell or the solicitation of an offer to buy the notes or any other security. This report includes forward-looking statements that are based on our current expectations and projections about future events. All statements other than statements of historical facts included in this notice, including statements regarding our future financial position, risks and uncertainties related to our business, strategy, capital expenditures, projected costs and our plans and objectives for future operations, including our plans for future costs savings and synergies may be deemed to be forward-looking statements. Words such as believe, expect, anticipate, may, assume, plan, intend, will, should, estimate, risk and similar expressions or the negatives of these expressions are intended to identify forward-looking statements. By their nature, forward-looking statements involve known and unknown risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. Forward-looking statements are not guarantees of future performance. You should not place undue reliance on these forward-looking statements. In addition, any forward-looking statements are made only as of the date of this notice, and we do not intend and do not assume any obligation to update any statements set forth in this notice.

4 VV Holding AS Q4 Report 2017 Page 4 PRESENTATION OF THE GROUP The Norsk Gjenvinning Group is Norway s leading recycling company offering a wide range of sustainable waste management services and providing secondary raw materials. Norsk Gjenvinning is present in two markets; upstream and downstream; In the upstream market, Norsk Gjenvinning provides waste management services to local businesses, the municipal sector and private households in Norway, Sweden and Denmark The downstream markets consist of production/pre-treatment and sales of (i) secondary raw materials, such as recovered paper, plastic and metals to commodity producers in Scandinavia, Europe and Asia and (ii) fuels to waste-to-energy customers in Norway and Sweden The Group s vision is to turn waste into the solution for tomorrow s resource problems. The Group s mission is to work tirelessly to become the industry s most customer-oriented, efficient and profitable player, with the goal of being perceived as the most important recycling company in the Nordic region. The Group s operations are based on our four core values; salesmanship, proactivity, responsibility and team spirit. The Group has approximately 1,200 employees, 44,000 customers and handles 1.8 million tonnes of waste per year 41% of which goes to material recycling, 44% to energy recycling and 15% to landfill and other. The following illustrates the Group Structure: The Group s structure consist of the following business areas: Recycling: Operations include customized solutions for collecting, sorting, handling and management of all types of waste, together with related services. Metal: Operations include collection, sorting and treatment/recycling of all kinds of ferrous and non-ferrous metals, including vehicles, cables, and electrical waste. Household Collection: Operations consist of collection of household waste on behalf of Norwegian and Swedish municipalities. Project businesses: Operations consist of demolition, environmental mapping and a broad spectrum of industrial cleaning services. Other business areas: Operations consist of i) downstream sales of recycled materials, processed waste and trading, ii) secure handling and destruction of documents, iii) development and operation of Landfill projects and iv) Danish industrial services Norsk Gjenvinning Norge AS is owned by VV Holding AS, and POS Holding AS as the ultimate parent. POS Holding AS is controlled by Altor Fund III. On 20 December 2017 an agreement on the sale and purchase of all the shares in POS Holding AS was entered into between Altor Fund III, GN Invest AS, Fazaju AS, Siljan Industrier AS, Creo Foundation AS and Seventh Private Equity Participations (Ireland) Limited, as sellers and Sun Bidco AS as purchaser. The purchaser is a holding company controlled by funds managed by Summa Equity. Completion of the transaction is expected to occur on 28 February 2018.

5 VV Holding AS Q4 Report 2017 Page 5 Consolidated companies: VV Holding AS (Issuer) Norsk Gjenvinning Norge AS 100% Norsk Gjenvinning AS 100% Norsk Gjenvinning Downstream AS 100% Norsk Gjenvinning Metall AS 100% Norsk Gjenvinning Miljøeiendommer AS 100% Norsk Gjenvinning Offshore AS 100% Norsk Gjenvinning Renovasjon AS 100% Norsk Makulering AS 100% Nordisk Genanvendelse aps (DK) 100% Nordisk Återvinning Trading AB (SE) 100% Nordisk Återvinning Service AB (SE) 100% Norsk Gjenvinning Renovasjon Service AS 100% NG Fellestjenester AS 100% NG Vekst AS 100% Eivind Koch Rørinspeksjon AS 100% Humlekjær og Ødegaard AS 100% IBKA Norge AS 100% IBKA A/S (DK) 100% IBKA AB (SE) 100% IBKA UK Ltd (UK) 100% Løvås Transportfirma AS 100% Tomwil Miljø AS 100% Metall & Gjenvinning AS 100% Rivningsspesialisten AS 100% Wilhelmsen Containerservice AS 100% Ødegaard Gjenvinning AS 100% Bingsa AS 100% Hegstadmoen 7 AS 100% Taranrødveien 85 AS 100% Opphaugveien 6 AS 100% Øra Eiendom Utvikling AS 100 % Norsk Gjenvinning M3 AS 100% Asak Massemottak AS 100% Løvenskiold Massemottak AS 100% Kopstad Massemottak AS 100% Borge Massemottak AS 100% Skjørten Massemottak AS 100% Solli Massemottak AS 100% Norsk Gjenvinning Renovasjon Ressurs AS 100% Norsk Gjenvinning Renovasjon Stab AS 100% Adact AS 100% NG Startup I AS 100% NG Startup II AS 100% NG Startup III AS 100% NG Startup X AS 100% Revise AS 100% Ownership <100% R3 Entreprenør Holding AS 81.25% R3 Entreprenør AS 81.25% Østfold Gjenvinning AS 66% isekk AS 55% If not explicitly mentioned otherwise, the financial information contained in this report relates to the unaudited financial information on a consolidated basis at the Issuer level for the three and twelve months ended December 31, 2017 and December 31, 2016 respectively.

6 VV Holding AS Q4 Report 2017 Page 6 COMMENTS BY THE CEO In Q4 we continued our systematic work to industrialize Norsk Gjenvinning. Higher effectiveness, lower costs, higher quality and volume growth were important contributors to the results improvement. We expect a weak Q1 due to import restrictions for recovered paper to China and lower volumes due to adverse weather conditions and Easter falling in Q1 this year. We do however stick to our guidance for 2018 as we expect a normalization of volumes as we approach summer and positive contributions from our other businesses. Market development for recovered paper is still uncertain. HIGHLIGHTS Q4 and YTD 2017 Slight increase in waste volumes compared to Q4 2016; YTD waste volumes are up by 2.7% Operating revenue is up 11.2% compared to Q4 2016; YTD adjusted operating revenue is up by 5.4% Gross profit is up by NOK 52.5 million compared to Q4 2016, and YTD adjusted gross profit is up NOK 99.3 million, driven by improved gross profit per tonne waste and growth in Household Collection and other businesses. Adjusted gross margin is down by 0.5 percentage points compared to Q4 2016, and down by 0.2 percentage points YTD. Adjusted EBITDA was NOK 77.0 million, up by NOK 13.9 million compared to Q4 2016; YTD adjusted EBITDA is up NOK million NG200 cost and productivity initiatives implemented according to plan. Operating costs reduced by an additional NOK 17.2 million in Q4 in NG core divisions; NOK 53.2 million YTD. Our aim is to both be a leading service provider to customers in demand of waste solutions (the upstream market), and the most efficient supplier of recycled raw materials to customers in Europe and Asia (the downstream market). Leading service provider to upstream customers in demand of waste solutions In our upstream markets, we have for a long time worked diligently to improve our position through increased service quality, more effective sales, improved pricing, more innovative solutions, and increased efficiency of our inbound logistics. During Q4, the positive developments we saw in Q2 and Q3 continued in most of our markets. We closed YTD Q4 with an increase in volumes of 2.7% compared to the same period of last year, from 1,427,973 tonnes in 2016 to 1,466,742 tonnes in Both recycling and scrap ferrous fractions were up, while non-ferrous metals volumes were slightly down compared to Total operating income increased by 11.2% in Q4, from NOK 1,023 million in Q to NOK 1,138 million in Q YTD Q4, our gross profit per ton improved significantly by 10.3 % YoY and our total adjusted gross profit increased by NOK 52.5 million. This was mainly due to our continued focus on gross margin management and growth in other businesses. We expect this development to continue as competitors are following suit to manage their gross margins. Q4 results were further strengthened by the effects of SG&A cost reductions implemented at the end of In addition, we are starting to see efficiency improvements in sales and inbound logistics through NG Flow, our business system based on Lean principles. Going forward we expect to see substantial operational improvements and efficiency gains in our upstream operations. The most efficient supplier of recycled raw materials to downstream customers In the downstream markets, we are working systematically to improve our position as the most cost efficient supplier of high quality recycled raw materials through the industrialization of our value chain.

7 VV Holding AS Q4 Report 2017 Page 7 Throughout 2017, our position has improved due to the completed NG200 cost reduction program. Plant consolidation has been one of the most important drivers of our positive results development as we continue to reduce the number of plants in operation through a combination of shut-downs and outsourcing to local partners. During Q4 we continued to consolidate our plant footprint by outsourcing our plant at Balsfjord. Going forward we expect a further reduction in costs on a per tonne basis, due to efficiency gains from implementation of NG Flow throughout the value chain. During 2017 we have focused on full implementation of Lean production principles at our seven largest processing plants. We have also taken important steps to improve long haul logistics efficiency by centralizing operations and implementing Lean. Our downstream sales organization continued to contribute to our gross profit improvements in Q4 by renegotiating and optimizing our portfolio of downstream customers of recycled raw materials. The gross profit effects from increased gate fees in 2016 were reversed for all main products. Our woodchips portfolio held a robust position this summer due to our low inventories and expanded downstream customer base. However, the recovered paper prices weakened in Q4 due to uncertainty about Chinese import quotas and possible changes on the maximum percentage level of waste in recovered paper. The effects from scrap metals on our results were also positive in Q4, in spite of a breakdown on the Shredder line caused by a faulty coupling between the main motor and rotor. The event resulted in 12 days of lost production. We had strong and stable access to raw materials throughout Q4, and in November we set another single month production record at the Øra plant. Increased volumes through the value chain led to more efficient downstream logistics and an increase in exports that led to increased gross margins. However, possible new threshold for percentage levels of waste in metals into China made the market somewhat uncertain; clarifications are expected in Q For 2017 as a whole we set a new record for exports of ferrous and non-ferrous metals. Strong results development and positive outlook Overall, our adjusted EBITDA increased in Q by NOK 13.9 million year over year, and NOK million YTD, and we are satisfied with this positive results development. Our main focus going forward is on increased productivity and efficiency along the full value chain, combined with efforts to further improve gross margins through volume growth and other appropriate measures. We expect a weak Q1 due to the short-term impact of Chinese import quotas on prices, the difficult winter weather conditions, and fewer working days due to Easter in March as opposed to April in Erik Osmundsen CEO

8 VV Holding AS Q4 Report 2017 Page 8 KEY FINANCIAL FIGURES (NOK 000) Q Q Variance YTD Q YTD Q Variance Total operating income Gross profit (1) Gross margin 49,7 % 50,1 % (0,5 %) 50,1 % 50,4 % (0,2 %) EBITDA (2) EBITDA margin 7,4 % 5,2 % 2,2 % 10,0 % 7,7 % 2,3 % Adjusted EBITDA (3) Adjusted EBITDA margin 6,8 % 6,2 % 0,6 % 9,8 % 7,5 % 2,3 % Net cash flow from operating activities Capital expenditures ( ) ( ) Net interest bearing debt (4) Total assets Consolidated unaudited figures. Performance measures presented above includes items which are not defined under IFRS. These measures are presented as they are relevant for assessing underlying performance for a given period. (1) Gross profit represents total operating income less cost of goods sold. (2) EBITDA represents operating results before depreciation and amortization. (3) Adjusted EBITDA represents EBITDA adjusted for certain non-recurring and/or non-cash costs. (4) Net interest bearing debt represent total third party indebtness (including shareholder loan from parent) less cash and cash equivalents. RESULTS OF OPERATIONS Total operating income increased by NOK million or 11.2% from NOK in Q to NOK million in Q Recycling and Metals continue to show strong revenue development compared to last year, the growth in Q compared to the same period previous year is 3.6% and 20.6% respectively. The increase is driven by higher volumes together with higher upstream prices in Recycling and higher downstream prices in Metals. Household Collection had an increase in operating income of 47.8% compared to the same period previous year. The growth is driven by startup of new contracts and higher activity on existing contracts. Division Household Collection took over three Reno Norden contracts in Norway in Q4. Operating income in Project businesses decreased by 11.8%, which is a result of non recurring revenue from a significant service stop at an industrial customer in Q4 of Gross profit increased by NOK 52.5 million, or 10.2% from in Q to NOK million in Q The gross margin fell from 50.1% in Q to 49.7% in Q The increase in gross profit is primarily driven by the increase in prices both upstream and downstream and improved efficiency in logistics operations. The reduction in gross margin is due to changes in the revenue mix. Adjusted EBITDA increased by NOK 13.9 million or 22.1% from NOK 63.1 million in Q to NOK 77.0 million in Q In addition to what is mentioned above, significant cost cuts have contributed to the increase in EBITDA. Year to date adjusted EBITDA increased by million or 38.1%. Our cost reduction initiatives are being implemented according to plan, lowering adjusted operating costs by NOK 17.2 million in Q compared to Q4 2016, NOK 53.2 million YTD respectively in NG core divisions. These figures are adjusted for NOK 26.9 million in bonus accruals in 2017 as compared to NOK 3 million in 2016.

9 VV Holding AS Q4 Report 2017 Page 9 The following table reconciles EBITDA to adjusted EBITDA for the periods indicated: YTD Q YTD Q Consolidated Consolidated (NOK 000) unaudited unaudited EBITDA Change in provision for onerous contract (1) (2 114) (3 066) Gains on sale of real estate (2) - (17 310) Close down of landfill project (3) (7 000) Net other non-recurring items (4) Adjusted EBITDA (1) During the fourth quarter 2015, an onerous contract was identified in the Household collection division. A provision of NOK 9.2 million was recognized as other operating expenses in the three and twelve-month periods ending December 31, The contract in question runs until August 2019, with a two year option for the counterpart. An assumption of total contract duration of five years and eight months has been used in the calculation of the estimated loss. (2) During Q3 of 2016 three properties where sold for a total gain on sale of NOK 17.3 million. (3) During Q4 of 2016 all unamortized expenses relating to a landfill project was taken to profit or loss as there where high uncertainty as to whether and when the affected landfill would reopen. The project was sold in January 2018, and the impairment recognised in 2016 was thus reversed (up to recoverable amount). (4) For 2017 the item relates to expenses in division household collection relating to legal cases. For 2016 the items relate to a provision for a tax case (2.4 MNOK) and other expenses (1.8 MNOK). The adjustments reconciling EBITDA and adjusted EBITDA represent an illustration of how underlying operational EBITDA has been affected by, what the company perceives to be one-time items. CAPITAL EXPENDITURES Capital expenditures decreased by NOK 21.2 million, or -10.5%, from NOK million in the full year of 2016 to NOK million in Growth capital investments YTD Q were slightly above NOK 60 million related to new collection vehicles and containers in Division Household Collection. CASH FLOW YTD Q YTD Q (NOK 000) Consolidated, unaudited Consolidated, unaudited Net cash flow from operating activities Net cash flow from investing activities ( ) ( ) Net cash flow from financing activities ( ) ( ) Net change in cash and cash equivalents for the period (50 161) Effect of exchange rate changes (1 934) Cash and cash equivalents at the beginning of the period Cash and cash equivalents at the end of the period Net cash flow from operating activities in 2017 showed a net inflow of NOK million, which was NOK 65.4 million higher than previous year. The increase compared to previous year is driven by higher operating results. Net cash outflow from investing activities in 2017 was NOK million compared to NOK million in the same period previous year. The net increase in cash outflow is driven by sales of real estate in Q3 2016, net cash outflow on other investments in 2017, which is partly offset by lower capital expenditures in 2017 comparted to previous year. Net cash outflow from financing activities was NOK million in 2017 compared to NOK million in previous year. The reason for the low variation in cash flow from financing activities are higher down payments on borrowings, debt related expenses increased dividends/group contribution to parent which is offset by lower interest payments and a net draw on the financial leasing facility. Cash and cash equivalents increased by NOK 9.3 million full year 2017 from NOK million per December 31, 2016 to NOK million as of December 31, In 2016 cash and cash equivalents fell by NOK 52.1 million.

10 VV Holding AS Q4 Report 2017 Page 10 FINANCIAL POSITION NET INTEREST BEARING LIABILITIES Net interest bearing debt of the Issuer and its subsidiaries, on a consolidated basis was NOK 2,384.5 million as of December 31, 2017, compared to NOK 2,359.2 as of December 31, Net interest bearing debt has increased primarily due to the increased draw on the financial leasing facility. As of December 31, 2017 NOK 1,500 million of the interest bearing debt is swapped from floating to fixed interest rate. From January 10 th the total amount of swap contracts will be reduced to NOK 1,400 million and will remain at this level until maturity of the bond. CAPITALISATION The following table sets forth the cash and cash equivalents and capitalization of the Issuer and its subsidiaries, on a consolidated basis. (NOK 000) As of December 31, 2017 As of December 31, 2016 Cash and cash equivalents Indebtedness: Revolving credit facility (1) Leasing liability (2) NOK Senior secured notes (3) Senior bank debt Total third-party indebtedness Shareholder loan (4) Total equity Total capitalization (1) The Issuer has entered into a Revolving Credit Facility Agreement on July 10, 2014 to provide for a Revolving Credit Facility in the amount of NOK million to finance or refinance the general corporate and ongoing working capital needs of the Group. As of December 31, 2017, the Revolving Credit Facility is undrawn. Accrued, unpaid interest amounted to NOK 0.5 million. (2) The Issuer has entered into a Leasing Facility Agreement on July 10, 2014 in the amount of NOK million to finance the needs of the Group and for investments in collection vehicles in Division Household collection. As of December 31, 2017, the Leasing facility is drawn by NOK million on financial lease agreements. (3) On July 10, 2014 the Issuer conducted a successful placement of a senior secured floating rate note in the amount of NOK 2,235.0 million. As of December 31, 2017 the total amount outstanding, including accrued unpaid interest and unpaid amounts on interest rate swaps are NOK 2,270.3 million. The issuer may, provided that an incurrence test is met, at one or more occasions issue additional bonds under the existing bond agreement up to the amount of NOK 500 million. (4) The shareholder loan is subordinated to all secured senior obligations. As of December 30, 2017 the total amount outstanding, including accrued unpaid interest is NOK million.

11 VV Holding AS Q4 Report 2017 Page 11 OPERATING AND FINANCIAL REVIEW In the first quarter of 2017 the Group changed the internal organization of the business areas which led to a change in the composition of its reportable segments. The following tables reflect these organizational changes, and the comparable period of last year has been restated on the same basis. See note 4 (segment disclosures) for further information regarding the changes. As of Q the Group has four major business areas which are presented below. These are Recycling, Metal, Household Collection and Project businesses. The former business area Industry & Offshore is part of the Project businesses from January 1, Adjusted EBITDA in the operating and financial review of the major business areas represents EBITDA as adjusted for certain non-recurring and/or non-cash costs and before allocation of overhead HQ costs. RECYCLING (NOK 000) Q Q Variance YTD Q YTD Q Variance Total revenue Adjusted EBITDA (18 119) Adjusted EBITDA margin 9,3 % 12,7 % (3,4 %) 12,3 % 10,8 % 1,5 % YTD Q YTD Q Variance Collection assignments ,7 % Total waste treated (tons) ,7 % Total revenue in Recycling increased by NOK 21.3 million, or 3.6%, from NOK million in Q to NOK million in Q Year to date total revenue increased by NOK million or 5.9% from NOK million in 2016 to NOK million in The increase in revenue is due to new contracts, price increases upstream and positive development in downstream prices, partly offset by one less working day in Q vs last year. The new contracts have led to a full year 6.7% increase in collection assignments and 2.7% increase in tonnes of waste treated. Adjusted EBITDA before internal charges decreased with NOK 18.1 million, from NOK 74.6 million in Q to NOK 56.5 million in Q The decrease is due to higher operational cost, related to site closures, preparation for new facility in Trondheim, general maintenance and consultants related to NG Flow. YTD EBITDA increased with NOK 51.0 million from NOK million in 2016 to million in The growth in adjusted EBITDA is due to significant cost cuts, increase in activity and volume, increased upstream prices and increased paper and scrap metal ferrous prices downstream. METAL (NOK 000) Q Q Variance YTD Q YTD Q Variance Total revenue Adjusted EBITDA (7 559) (861) Adjusted EBITDA margin 3,0 % (3,6 %) 6,7 % 2,5 % (0,1 %) 2,6 % YTD Q YTD Q Variance Ferrous volumes (tons) ,1 % Non-ferrous volumes (tons) ,1 % Total revenue in Division Metal increased by NOK 42.9 million, or 20.6%, from NOK million in Q to NOK million in Q Year to date revenue increased by NOK million, or 20.3% from NOK million in 2016 to NOK million in This is mainly due to a 4.1 % increase in ferrous volumes in 2017 compared to 2016 and significant increases in downstream prices for steel and metals. The decline in non ferrous volumes is mainly due to the loss of one large contract related to bottom ash. Adjusted EBITDA before internal charges increased by NOK 15.2 million, from NOK -7.6 million in Q to NOK 7.6 million in Q The increase is due to increased activity, and restructuring cost of NOK approx. 10 million in Q The increase is partly offset by the loss of the large contract related to bottom ash. Year to date adjusted EBITDA increased by NOK 23.7 million from NOK 0.9 million to NOK 22.8 million. The increase is mainly driven by higher ferrous volumes, offset by a reduction in bottom ash production. In addition, gross profit per tonne for both ferrous and non-ferrous metals has increased in 2017.

12 VV Holding AS Q4 Report 2017 Page 12 HOUSEHOLD COLLECTION (NOK 000) Q Q Variance YTD Q YTD Q Variance Total revenue (34 392) Adjusted EBITDA (2 841) (2 947) Adjusted EBITDA margin 3,2 % 9,4 % (6,2 %) 13,5 % 13,0 % 0,5 % Total revenue decreased year to date, but increased in Q4. Revenues increased NOK 29.4 million, or 47.8%, from NOK 61.6 million Q to NOK 91.0 million Q Year to date revenues decreased by NOK 34.4 million or 10.6%. Development in revenues year to date is influenced mainly by the loss of the Oslo contract (expired end of September 2016), partially offset by increased revenues due to higher activity on existing contracts, start up of new contracts and index adjustments. In Q4 the effect of startup of new contracts contributes to increased revenues comparing Q and Q Adjusted EBITDA margin increased year over year, but decreased in Q4, mainly due to startup of new contracts and severe weather conditions end of year In Q4, Division Household Collection was awarded the contract for collection of municipal waste in Tranemo municipality and took over three contracts following the bankruptcy of Reno Norden. Competitors have filed complaints over the Tranemo award and the final outcome for this contract is still unknown as of report date. In Q Division Household Collection signed the contract for collection of municipal waste in Gislaved, Gnosjö, Vaggeryd, Värnamo and Svenljunga municipalities. PROJECT BUSINESSES (NOK 000) Q Q Variance YTD Q YTD Q Variance Total revenue (13 252) (64 840) Adjusted EBITDA (2 393) Adjusted EBITDA margin 3,3 % 5,0 % (1,7 %) 6,5 % 3,3 % 3,2 % Total revenue declined by NOK 13.3 million, or 11.8 %, from NOK million in Q to NOK 99.5 million in Q The decrease was mainly due to an extraordinary service stop at an industrial customer in Q4 of 2016, an urgent project in Q and a lower activity level in the north-west. Adjusted EBITDA before internal charges decreased by NOK 2.4 million from NOK 5.7 million in Q to NOK 3.3 million in Q The decrease in EBITDA is mainly due to the decline in revenues. Year to date adjusted EBITDA increased by NOK 9.3 million or 67%. The increase is driven by reductions in expenses, which are partly offset by the decline in revenue of NOK 64.8 million year to date.

13 VV Holding AS Q4 Report 2017 Page 13 MARKET CONDITIONS The inventory price risk is related to paper and metals that are discovered in the sorting process of waste (it is not possible to predict these volumes) and the estimation of throughput timing. Inventory positions on Aluminum, Copper and Nickel are being hedged. DEVELOPMENT IN METAL PRICES ALUMINUM LME aluminum prices increased further during Q4. It peaked at USD on 28 December. Chinese production cuts and further realization of the Chinese Green Fence policy will keep some uncertainty in the market. Robust demand expectations promise a stable market with a moderate outlook. LME Aluminium 2016 and 2017 COPPER LME copper rallied towards the end of the year to above USD The import stop in China of Cu scrap with low copper content will be in effect from and it is expected that exports will decrease significantly already in the first half of Good demand, especially for electric vehicles, promises a stable environment for Cu prices in LME Copper 2016 and 2017

14 VV Holding AS Q4 Report 2017 Page 14 NICKEL LME Nickel prices peaked in the beginning of November at over USD , up from USD in the beginning of Q4. Despite relatively stable supply and demand conditions, Nickel is expected to continue its volatile development in LME Nickel 2016 and 2017 STEEL SCRAP Steel scrap prices were on the rise in Q4. They ended the year at a high point and on the same level as in April/May. Celsa Basis price developed in line with the international price development. Reduced export of Chinese semi-finished products and good demand for finished steel products were the main reasons for the relatively high price level of steel scrap. DEVELOPMENT IN PAPER PRICES Recovered paper prices continued to decline in Q4. The main driver is import restrictions to the Chinese marked. As a result, European mills are oversupplied and inventory levels are on a high level. We expect the situation to continue in most of Q1. Further development is highly dependent on national legislation in China. DEVELOPMENT WASTE-TO-ENERGY WOODCHIPS The price level has been stable through Q4, and is expected to remain stable during Q Inventory still exists in some regions, but is estimated to be reduced within Q1. The downward market trend shows tendencies to have reached its bottom and prices are expected to stabilize and increase in REFUSE DERIVED FUEL (RDF) Volume and price of RDF was stable with low inventory throughout Q This pattern is expected to continue throughout Q

15 VV Holding AS Q4 Report 2017 Page 15 UPDATE OF MATERIAL RISK FACTORS AND EVENTS AFTER REPORTING PERIOD No significant changes in risk factors have been identified. For additional explanations regarding risks and uncertainties, please refer to the Board of Directors Report section Risk and Risk Management and Note 23 Financial Risk Management in the 2016 Annual Report. MATERIAL CHANGES IN LIQUIDITY AND CAPITAL RESOURCES The Group continually analyzes its liquidity and capital resources position. The Group has assessed its currently available capital resources and its current liquidity position as satisfactory and not noted any material changes in the current period. EVENTS AFTER REPORTING PERIOD The following significant events have taken place after December 31, Agreement for sale Hegstadmoen 7 AS As described in more detail in note 5 to these interim financial statements, the Group reached in January an agreement for sale of all shares in Hegstadmoen 7 AS. As the sale was considered as highly probable as of December 31, 2017 the related balances has been presented as Assets Held for sale in the statement of financial position.

16 VV Holding AS Q4 Report 2017 Page 16 CONDENSED INTERIM FINANCIAL STATEMENTS INTERIM CONSOLIDATED STATEMENT OF PROFIT OR LOSS (NOK 000) Q Q YTD Q YTD Q Revenue Other income Total operating income Cost of goods sold Employee benefits expense Depreciation/amortization/impairment Other operating expenses Other (gains)/losses - net (1 083) Operating profit (9 868) Finance income (8 574) Finance costs Net income from associated companies Profit / (loss) before income tax (39 959) (69 480) (28 062) ( ) Income tax expense (7 923) (8 845) (4 633) (25 003) Profit / (loss) for the period from continuing operations (32 036) (60 636) (23 429) (86 156) Profit / (loss) attributable to: Owners of the parent (34 144) (62 332) (32 359) (92 100) Non-controlling interests The interim financial information has not been subject to audit.

17 VV Holding AS Q4 Report 2017 Page 17 INTERIM CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (NOK 000) Q Q YTD Q YTD Q Profit / (loss) for the period (32 036) (60 636) (23 429) (86 156) Items that may be subsequently reclassified to profit or loss Currency translation differences (5 106) Interest rate swaps - cash flow hedges (after tax) Net other comprehensive income / (loss) for the period Comprehensive income / (loss) for the period (25 943) (51 524) (5 743) (65 448) Comprehensive income attributable to: Owners of the parent (28 052) (53 220) (14 673) (71 392) Non-controlling interests The interim financial information has not been subject to audit.

18 VV Holding AS Q4 Report 2017 Page 18 INTERIM CONSOLIDATED STATEMENT OF FINANCIAL POSITION ASSETS (NOK 000) December 31, 2017 December 31, 2016 Non-current assets Property, plant & equipment Intangible assets Goodwill Deferred tax assets Investments in associated companies Other receivables Total non-current assets Current assets Inventories Trade and other receivables Other financial assets Cash and cash equivalents Assets held for sale Total current assets Total assets The interim financial information has not been subject to audit.

19 VV Holding AS Q4 Report 2017 Page 19 INTERIM CONSOLIDATED STATEMENT OF FINANCIAL POSITION EQUITY AND LIABILITIES (NOK 000) December 31, 2017 December 31, 2016 Equity Share capital and reserves attributable to owners of parent Non-controlling interest Total equity Non-current liabilities Loans and borrowings Other financial liabilities Deferred income tax liabilities Post-employment benefits Provisions for other liabilities and charges Total non-current liabilities Current liabilities Trade and other payables Current income tax Loans and borrowings Other financial liabilities Provisions for other liabilities and charges Total current liabilities Total liabilities Total equity and liabilities The interim financial information has not been subject to audit.

20 VV Holding AS Q4 Report 2017 Page 20 INTERIM CONSOLIDATED STATEMENT OF CASH FLOWS (NOK 000) YTD Q YTD Q Profit / (Loss) before income tax (28 062) ( ) Adjustments for: Income tax paid (9 965) (1 579) Depreciation, amortization and impairment charges Items reclassified to investing and financing activities Other P&L items without cash effect (11 202) Changes in other short term items (53 957) (6 629) Net cash flow from operating activities Payments for purchases of shares and businesses (9 000) (12 600) Proceeds from sale of business Payments for purchases of non-current assets ( ) ( ) Proceeds from sale of non-current assets Net other investments (11 420) - Dividend from associated companies Net cash flow from investing activities ( ) ( ) Proceeds from borrowings Repayment of borrowings (3 390) (1 111) Debt related expenses (3 217) - Net change in credit facility Dividend paid to non-controlling interest (5 355) (2 757) Net group contributions received/(paid) (5 000) (2 347) Net interest paid ( ) ( ) Net cash flow from financing activities ( ) ( ) Net increase in cash and cash equivalents (50 161) Effect of exchange rate changes (1 934) Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period The interim financial information has not been subject to audit.

21 VV Holding AS Q4 Report 2017 Page 21 INTERIM CONSOLIDATED STATEMENT OF CHANGES IN EQUITY CONDENSED STATEMENT OF CHANGES IN EQUITY YTD Q (NOK 000) Attributable to the owners of the parent Non-controlling interest Total equity At 1 January Profit / (loss) (32 359) (23 429) Net other comprehensive income / (loss) Transactions with non-controlling interest - (5 355) (5 355) Group contributions (7 597) - (7 597) At 31 December CONDENSED STATEMENT OF CHANGES IN EQUITY YTD Q (NOK 000) Attributable to the owners of the parent Non-controlling interest Total equity At 1 January Profit / (loss) YTD (92 100) (86 156) Net other comprehensive income / (loss) Transactions with non-controlling interest - (2 757) (2 757) Group contributions (4 803) - (4 803) At 31 December The interim financial information has not been subject to audit.

22 VV Holding AS Q4 Report 2017 Page 22 NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 - ACCOUNTING PRINCIPLES VV Holding AS is a wholly owned subsidiary of POS Holding AS (and is part of the Norsk Gjenvinning-Group). These interim condensed consolidated financial statements have been prepared in accordance with IAS 34 Interim Financial Reporting. The interim condensed consolidated financial statements do not include all the information and disclosures required for full annual financial statements and should be read in conjunction with the Annual Report These condensed consolidated interim financial statements have not been audited or subject to a review by the auditors. Accounting principles applied in the preparation of these condensed consolidated interim financial statements for the period ended December 31, 2017, are consistent with those applied in the annual consolidated financial statements for Comparative prior period information has been prepared on the same basis as current period information. All figures refer to thousands of Norwegian kroner (NOK 000) unless otherwise specified New standards effective from the financial year starting at January 1, 2018 The Group has implemented the new standards IFRS 9 financial instruments and IFRS 15 Revenue from contracts with customers as of January 1, Neither of the new standards has resulted in any material implementation effects. This is in line with the expectations of the Group, as disclosed in the Annual report NOTE 2 - FINANCIAL ITEMS (NOK 000) Q Q YTD Q YTD Q Interest income Other financial income 5 (9 389) Financial income (8 574) Non cash interest expenses Cash interest expenses Other financial expenses Financial expenses Net financial income (expenses) (62 316) (61 175) ( ) ( ) NOTE 3 - SENIOR SECURED FLOATING RATE NOTES On July 10 (the Issue Date), 2014 VV Holding AS (the Issuer) issued Senior Secured Floating Rate Notes (the Bond) in the amount of NOK 2,235 million. The Bond matures on July 10, 2019 (the Maturity Date) and is to be repaid in full at the Maturity Date. Interest is set quarterly at NIBOR bp. The Issuer may, provided that the incurrence test is met, at one or more occasions issue additional bonds under the Bond agreement, in the amount of up to NOK 500 million, up to five (5) business days prior to the Maturity Date. The incurrence test is met if the ratio of Net Interest Bearing Debt to EBITDA, as defined in the Bond agreement, is not greater than: 5.00 prior to the date falling 18 months after the Issue Date 4.50 from and including the date falling 18 months after the Issue Date to, but not including, the date falling 48 months after the Issue Date 4.00 from and including the date falling 48 months after the Issue Date to, but not including the Maturity Date. The bonds are listed on the Oslo Stock Exchange. For further information about the Bond, we refer to the Bond agreement.

23 VV Holding AS Q4 Report 2017 Page 23 NOTE 4 - SEGMENT NOTE Currently the reportable operational segments in the group compromise of Recycling, Metal, Household collection and Project businesses. The category All other segments consists of the operating segments Downstream, Security Shredding, Landfill operations and Danish industrial services which are not reportable. HQ and eliminations consist of the head office and holdings together with real estate and eliminations. During the first quarter of 2017 the Group changed the internal organization which led to a change in the composition of its reportable segments. The following tables reflect these organizational changes in the reportable segments, and the prior period have been restated on the same basis. The former operational segment Industry & Offshore (I&O) have been dissolved and these activities are included in the segment Project businesses. A small portion of I&O is left in the operational segment Danish industrial services. Further there has been a change in the composition between Recycling and Downstream, where activities formerly reported in the Downstream segment now is part of the segment Recycling. Group management executives is the group s chief operating decision-maker (CODM). Management has determined the operating segments based on the information reviewed by the Group management executives for the purposes of allocating resources and assessing performance. REVENUE 2017 (NOK 000) Revenue from external customers Inter segment revenue Total segment revenues Q YTD Q Q YTD Q Q YTD Q Recycling Metal Household collection Project businesses All other segments HQ and eliminations (69 108) ( ) (65 298) ( ) Total REVENUE 2016 (NOK 000) Revenue from external customers Inter segment revenue Total segment revenues Q YTD Q Q YTD Q Q YTD Q Recycling Metal Household collection Project businesses All other segments HQ and eliminations (50 875) ( ) (47 541) ( ) Total

24 VV Holding AS Q4 Report 2017 Page 24 CODM assesses the performance of the operating segments based on EBITDA before allocation of overhead HQ costs. Interest income and expenditure are not allocated to segments, as this type of activity is driven by the central treasury function, which manages the cash position of the group. Consolidated balance sheet values are not reported to the CODM at the segment level. EBITDA BEFORE INTERNAL CHARGES (NOK 000) Q Q YTD Q YTD Q Recycling Metal (7 559) (861) Household collection Project businesses All other segments (15 682) HQ and eliminations 562 (10 403) (3 397) (8 296) Total Depreciation and amortization expense (63 611) (62 977) ( ) ( ) Finance income (8 574) Finance costs (63 463) (52 601) ( ) ( ) Net income from associated companies Profit before tax (39 959) (69 480) (28 062) ( ) NOTE 5 NON-CURRENT ASSETS HELD FOR SALE As of December 31, 2017 a total of NOK million in non-current assets have been classified as held for sale. The assets are located in five separate single purpose entities which operate real estate. The assets classified as held for sale are measured at the carrying value, of which NOK million relates to property, plant & equipment and NOK 8.0 million relates to deferred tax assets. On January 9, 2018 the Group entered into a sales agreement regarding the sale of all shares in one of the single purpose companies, Hegstadmoen 7 AS. As of December 31, 2017 the carrying value of the related assets are classified as held for sale in the statement of financial position (NOK 21.8 million). A total of NOK 20.6 million of the assets held for sale relate to property, plant & equipment. The remaining balance of NOK 1.1 relates to deferred tax assets. Estimated net proceeds from the sales transaction are approximately NOK 71 million. The net proceeds will be applied in accordance with the Bond Loan agreement's NOTE 6 - EVENTS AFTER THE REPORTING PERIOD Events after the reporting period have been described on page 14 under the heading Update of material risk factors and events after the reporting period.

25 NOTES TO THE CONDENSED FINANCIAL STATEMENTS RESPONSIBILITY STATEMENT NOTES TO THE CONDENSED FINANCIAL STATEMENTS VV Holding AS Q4 Report 2017 Page 25 We confirm that, to the best of our knowledge, the condensed interim financial statements for the twelve months of 2017 which have been prepared in accordance with IAS 34 Interim Financial Reporting give a true and fair view of the Group s consolidated assets, liabilities, financial position and results of operations, and that the interim report includes a fair review of the information under the Norwegian Securities Trading Act section 5 6 fourth paragraph. Lysaker, February 27, 2018 Ole Enger Chairman of the Board (sign.) Per-Anders Hjort Deputy Chairman of the Board (sign.) Maria Tallaksen Director (sign.) Erik Osmundsen Chief Executive Officer (sign.) Pål Stampe Director (sign.) Yngve Longva Moland Director (sign.) Lasse Stenskrog Director (sign.) Cecilie Skauge Director (sign.)

26 VV Holding AS Q4 Report 2017 Page 26 APPENDIX 1 ALTERNATIVE PERFORMANCE MEASURES In the financial statements the Group presents performance measures which are not defined under IFRS. These performance measures is categorized as Alternative Performance Measures (APM). APM Definition Why APM gives useful information Operating profit The number is directly derived from the statement of profit or loss Commonly used measure of profitability. EBITDA Calculated as profit before depreciation, impairment, financial income, financial expense, income from associated companies and tax. The number comes directly from the statement of profit or loss. Commonly used measure of profitability. Group management believe that the adjusted performance measure gives Adjusted EBITDA more relevant information for analytical = EBITDA +/- any element (positive or purposes and to make representations. negative) with character of being a onetime event, non-recurring, extra The elements which are excluded is considered to give limited relevance for ordinary, unusual or exceptional. evaluation of historic and future performances for the Group as it is at period end. EBITDA before internal charges Net debt Debt ratio = EBITDA before allocation of headquarter cost to the segments. = non current debt to credit institutions + current debt to credit institutions + nominal value senior secured note bond + incurred interest expense senior secured note bond cash and cash equivalents = adjusted EBTIDA / net debt Group management believe that the adjusted performance measure gives more relevant information for consideration of profitability and resource allocation to segments. Commonly used measure of a companie s debt financing. Commonly used measure for capital management.

27 VV Holding AS Q4 Report 2017 Page 27 CONTACTS Dean Zuzic CFO Phone: Published by VV Holding AS 27 th February 2018