Company presentation August 2016
Important Information About this Company Presentation This Company Presentation has been prepared by AKVA group ASA ("AKVA group" or the "Company") for information purposes only, and does not constitute investment advice or an offer to sell or a solicitation of an offer to buy any securities in any jurisdiction to any person. Any recipient or reader of this Company Presentation contemplating to make an investment in the Company must rely on their own examination of the Issuer, including the merits and risks involved. Each recipient and reader of this Company Presentation should consult with its own legal, credit, business or tax adviser as to legal, credit, business and tax advice. By receiving or accessing this Company Presentation you acknowledge that you will be solely responsible for your own assessment of the market and the market position of the Company and that you will conduct your own analysis and are solely responsible for forming your own opinion of the potential future performance of the Company s business. The information contained in this Company Presentation has not been independently verified. No representation or warranty (express or implied) is made as to the accuracy or completeness of any information contained herein, or any oral information provided in connection therewith, and it should not be relied upon as such. The Company accepts no liability whatsoever arising directly or indirectly from the use of this Company Presentation. This Company Presentation is current as of 10 March 2016. Nothing herein shall create any implication that there has been no change in the affairs of AKVA group since such date. This Company Presentation contains forward-looking statements relating to the Company's business, the Company's prospects and other forward-looking statements. Forward-looking statements concern future circumstances and results and other statements that are not historical facts, sometimes identified by the words "believes", "expects", "predicts", "intends", "projects", "plans", "estimates", "aims", "foresees", "anticipates", "targets", and similar expressions. The forward-looking statements contained in this Company Presentation, including assumptions, opinions and views of the Company or cited from third party sources, are solely opinions and forecasts which are subject to risks, uncertainties and other factors that may cause actual events to differ materially from any anticipated development.
AKVA group highlights Undisputed #1 supplier of technology and services to the aquaculture sector Salmon farming is driven by high demand, high prices and increased technological sophistication New salmon farming growth to come from land-based and more exposed locations with higher technological requirements AKVA group is well positioned for continued growth and margin improvement active dividend policy
Agenda 1 Company 2 Market & trends 3 Financials
OPEX based revenue CAPEX based revenue AKVA group uniquely positioned for future growth Leading technology solutions and service partner to the global aquaculture industry Global presence - subsidiaries in 8 countries 1 Cage-based 2 Plastic and steel cages Feed systems, sensors and cameras Infrastructure Land-based Land-based facilities Land-based equipment 751 employees 3 Software Market cap of NOK ~1700m and net debt of NOK 172m 4 Technology and farming services
Presence in all main farming regions Map of activities Revenue per region YTD June 2016 Export 12 % Americas 9 % Nordic Americas Export Nordic 79 %
AKVA group serves all salmon farmers in the World Customer examples Revenue per customer 2016 Customer 1 Customer 2 Customer 3 Other
Strategic priority to increase the proportion of software and service-related revenue Revenue reoccurring vs technology YTD June 2016 OPEX based revenue; 24% CAPEX based revenue; 76 % Comments Introduction of rental business model in Norway. Already successfully introduced in UK and Canada Rental is an all inclusive service providing for instance light or picture for an agreed period of time (2 to 5 years duration) - reduced CAPEX and reducing operational work from the customer Acquisition of YesMaritime in 2014, a provider of diving, ROV and other services to the salmon farming sector (Farming services) Development of Farming Services still in an early stage opportunity for consolidation Aim of delivering more than 30% of revenue through software and services by developing software, farming services, technology services and rental further
Agenda 1 Company 2 Market & trends 3 Financials
Aquaculture is becoming increasingly technology-intensive Farming capex, NOK/kg harvested 1) Comparison of cage in 1980 to cage in 2014 +2.5x 4,0 1,6 Source: Notes: 2006 2015 Salmon farmer annual reports 1) Based on reported farming capex and harvest volumes for Marine Harvest, Salmar, Cermaq, Lerøy, Grieg, NRS and Bakkafrost, 2015 figures are based on company guidance
Driving forces salmon industry LAND BASED FARMING EXPOSED SITES FARMING The exponential challenge of the coastal zone SALMON LICE CONCENTRATION OF STAKEHOLDER INTEREST WATER QUALITY AVAILABLE SPACE FOR EXPANSION ENVIRONMENTAL IMPACTS OF CONCENTRATED ACTIVITIES SHORELINE
M. Tons live weight (WFE) Production cost (NOK/kg) Industry entering into a stagnant phase with rapidly increasing costs 1 400 000 1 200 000 CAGR 12-15 +0,1 % 50 45 40 1 000 000 35 800 000 600 000 30 25 20 400 000 200 000 15 10 5-1992 2015 0 Sales volume Source: Deloitte, Directorate of fisheries
Industry phase development effects on technology demand Industry stagnant phase
Cage farming development SHELTERED EXPOSED OCEAN FARMING SHORELINE INCREMENTAL DEVELOPMENT: ENLARGEMENT AND INCREASED ROBUSTNESS INCREMENTAL DEVELOPMENT: BASED ON EXPERIENCES FROM AQUACULTURE AND OFFSHORE INDUSTRY
Development of land based and closed containment technologies LAND BASED TECHNOLOGY CLOSED CONTAINMENT TECHNOLOGY AT SEA SHORELINE
ATLANTIS SUBSEA FARMING AS Established in partnership with the companies Sinkaberg-Hansen AS and Egersund Net AS 33.3% of the shares each Purpose of developing submersible fish-farming facilities for salmon on an industrial scale Has applied for six development licences to enable large-scale development and testing of the new technology and operational concept Through its innovative development work, ATLANTIS aims both to contribute to better and more sustainable use of current farming sites as well as to enable use of more exposed sites than is currently possible. The goal is to achieve production gains and improve fish welfare by submerging the facilities, as they will be far less exposed to the environmental and physical conditions than in a surface position Although ATLANTIS represents a significant leap forward in terms of innovation, it is also an objective for the concept to keep costs at a level that helps strengthen the industry's competitive position. The aim is also that the technology and operating methods developed through ATLANTIS can be made available and adopted by the industry relatively quickly 16
The growing global movement to participate in sustainable aquaculture Middle East: Offshore Saudi, Oman, Iran (Caspian) Lakes/Dams Iran Land Based UAE, Saudi, Oman, Iran Asia: Offshore Indonesia, Malaysia, Japan, South Korea, India, Sri Lanka Lakes/Dams China, Vietnam Land Based China, Thailand, Malaysia, Indonesia, Vietnam The progressive regions: Salmon Sea Bass & Sea Bream Other Species emerging regions Sub-Sahara Africa: Offshore Mauritius, Mozambique Lakes/Dams Lesotho, Ghana, SE Africa Land Based SE Africa
Continued growth expected still in early stage of development Cycle development Growth drivers Cycle development Oil The salmon industry is still the frontier. Analysts expects limited volume growth in salmon farming in 2014-2020. This implies high salmon prices which is the prime driver for growth in the technology and service industry Aqua Additional growth from increased regulation, adding complexity and adding need for compliance Additional growth from other species and regions Time Additional growth from maturation of the industry the players are getting more specialized
AKVA group is the undisputed #1 technology and service provider to the aquaculture sector Cages Aquaculture machinery Water engineering Software & IT Service & Revenue, Support NOKm AKVA group is the undisputed #1 supplier to the aquaculture industry Complete offering increasingly seen as positive by customers Scale provides technological advantage Holds the most wellknown brands in the industry Present in all main markets
Agenda 1 Company 2 Market & trends 3 Financials
AKVA group has seen operational revenue growth of 87% from 2012 to 2016 Software 919 803 98 94 97 52 AKVA group revenue Land-based CAGR +17% 1 246 106 167 Cage-based 1 425 132 222 1 500 138 308 Comments Growth in cage-based driven both technology sales and reoccurring revenues Growth in land based due to high activity in the market. The acquisition of Plastsveis AS in April 2013 and Aquatec Solutions AS in September 2015 also contribute to growth Software with steady organic profitable growth 657 724 973 1 071 1 054 Notes: 2012 1) 2013 2014 2015 2016 LTM June 1) 2012 for software is excluding a one of gain of MNOK 29 related to the sale of the Norwegian Maritech business
Target of 10% near-term EBITDA margin further potential longer term 3% AKVA group EBITDA-margin across segments 2012 1) 2013 2014 2015 2016 LTM June 20% 20% 20% 15% 14% 9% 9% 9% 10% 10% 8% 8% 6% 5% 4% 4% 0% Comments Mid-term target of 10% EBITDA margin is achieved Land-based margin continue to increase due to restructuring of business segment and recent acquisitions of new companies AKVA group margins set to increase with increasing portion of Software and Services -11% -3% Cage-based Land-based Software Group Notes: 1) 2012 FY for software is excluding a one of gain of MNOK 29 related to the sale of the Norwegian Maritech business
Operational leverage is a driver for increased margins AKVA group gross margin and SG&A 1) 2012 2013 2014 2015 2016 LTM Figures in '000 NOK June Revenue 802 530 918 670 1 246 059 1 425 338 1 499 557 COGS 587 833 674 770 928 395 1 041 212 1 097 009 Gross margin 214 697 243 900 317 664 384 127 402 548 GM in % 26,8 % 26,5 % 25,5 % 26,9 % 26,8 % OPEX 185 881 196 995 214 299 248 967 252 627 EBITDA 28 816 46 905 103 365 135 159 149 921 EBITDA in % 3,6 % 5,1 % 8,3 % 9,5 % 10,0 % # FTE 650 566 726 670 751 OPEX/Revenue 23,16 % 21,44 % 17,20 % 17,47 % 16,85 % Comments Relative cost base has improved over the last years Hands on in all operations constantly challenging cost development in all units The number of FTE s decreased in 2013 and 2015 due to cost focus and controlled reduction of exposure in Chile The number of FTE s has increased in 2014 and 2016 mostly due to the acquisition new companies Notes: 1) 2012 is excluding a one of gain of MNOK 29 related to the sale of the Norwegian Maritech business
Strong financial profile Equity, Working Capital and ROCE % Comments 500 000 450 000 25 % Constant focus on balance sheet performance in all Group units 400 000 350 000 300 000 ROCE % 20 % 15 % Strong balance sheet KPIs Focus on improving ROCE 250 000 200 000 150 000 323 771 325 274 338 856 389 252 428 432 WC 459 594 10 % 100 000 5 % 50 000-2011 2012 2013 2014 2015 2016 YTD Equity WC ROCE % 0 %
Strong financial profile Net debt (MNOK) and net debt/ebitda Comments 178 172 4,0 Bank debt refinanced in January 2014 with improved terms and conditions 148 118 88 92 1,3 89 82 76 98 136 71 3,0 2,0 Low financial gearing Financially positioned for further growth, both organically and through M&As 58 28 44 0,4 0,9 0,8 0,7 0,8 1,0 0,5 1,1 1,0-2 Q2-2014 Q3-2014 Q4-2014 Q1-2015 Q2-2015 Q3-2015 Q4-2015 Q1-2016 Q2-2016 - Net interest bearing debt NIBD/EBITDA(12months rolling)
Order backlog is all-time high AKVA group order backlog Comments NOKm 900 800 700 600 500 400 300 200 100 0 1Q 2012 2013 2014 2Q 2015 3Q 2016 4Q All time high order backlog at the end of Q2 2016 Increased order backlog over the last years Delivery time of backlog is 1 to 18 months with most of the delivery in the first six months Increased portion of land based gives a longer duration in the order backlog Some seasonal pattern of increasing backlog in Q4 and Q1 and decreasing backlog in Q2 and Q3, however with more land based and service activity we expect less seasonal variations in P&L and order inflow during the year
Current dividend policy in AKVA group ASA A two step policy: The dividend level shall reflect the present and expected future cash generating potential of AKVA group. AKVA group will target a net interest-bearing debt/equity ratio of less than 0.5x When the target debt vs. equity level is met, at least 60% of the annual free cash flow after operational and financial commitments is intended to be distributed as dividend Applicable statutory restrictions shall be observed The Company s main objective is to maximize the return on the investment made by its shareholders through both increased share prices and dividend payments A dynamic dividend policy was launched in 2014. Based on the financial performance and outlook the company aims to pay out dividend according to the two step policy twice every year, after the first half and the second half of the year. Dividend details (in NOK) Year Cash Dividend per Total cash dividend Payment date 2016 0.75 19 400 000 Q3 2016 2015 1.00 25 800 000 Q4 2015 2014 1.00 25 800 000 Q4 2014 2008 1.00 17 200 000 Q2 2008 27
More than 1100 shareholders from 21 countries - 30. June 2016 20 largest shareholders No of shares % Account name Type Citizenship 13 203 105 51,1 % EGERSUND GROUP AS NOR 3 900 000 15,1 % WHEATSHEAF INVESTMEN GBR 969 049 3,8 % VERDIPAPIRFONDET ALF NOR 489 417 1,9 % EIKA NORGE NOR 484 300 1,9 % MP PENSJON PK NOR 482 485 1,9 % STATOIL PENSJON NOR 467 991 1,8 % SKANDINAVISKA ENSKIL Nominee LUX 361 073 1,4 % VERDIPAPIRFONDET DNB NOR 300 000 1,2 % MERTOUN CAPITAL AS NOR 277 514 1,1 % NORDEA NORDIC SMALL GBR 253 815 1,0 % VPF NORDEA KAPITAL NOR 238 692 0,9 % OLE MOLAUG EIENDOM A NOR 198 501 0,8 % VPF NORDEA AVKASTNIN NOR 196 300 0,8 % DAHLE BJØRN NOR 173 550 0,7 % ROGALAND SJØ AS NOR 140 000 0,5 % VERDIPAPIRFONDET EIK NOR 130 280 0,5 % ARCTIC FUNDS PLC BEL 128 180 0,5 % J.P. MORGAN LUXEMBOU Nominee GBR 127 593 0,5 % STATOIL FORSIKRING A NOR 114 752 0,4 % MOLAUG OLE NOR 22 636 597 87,6 % 20 largest shareholders 3 197 706 12,4 % Other 25 834 303 100,0 % Total number of shares as per 30.06.2016 Origin of shareholders, 5 largest countries No of shares % Origin No of shareholders 19 872 312 76,9 % Norway 992 4 490 621 17,4 % Great Britain 33 577 328 2,2 % Luxembourg 4 256 069 1,0 % USA 12 195 752 0,8 % Switzerland 6 442 221 1,7 % Other 88 Total number of shareholders: 1135 - from 21 different countries Share development Last 12 months Share price 80 70 60 50 40 30 20 10 0 jul. 15 aug. 15 sep. 15 okt. 15 nov. 15 des. 15 jan. 16 feb. 16 mar. 16 apr. 16 mai. 16 jun. 16 Last 5 years Share price 80 60 40 20 0 2012 2013 2014 2015 2016 Subscribe to Oslo Stock Exchange Releases from AKVA by email on: http://ir.akvagroup.com/investor-relations/subscribe Trading volume 0 70 000 000 60 000 000 50 000 000 40 000 000 30 000 000 20 000 000 10 000 000 0 Trading volume 180 000 000 150 000 000 120 000 000 90 000 000 60 000 000 30 000 000 28
AKVA group highlights Undisputed #1 supplier of technology and services to the aquaculture sector Salmon farming is driven by high demand, high prices and increased technological sophistication New salmon farming growth to come from land-based and more exposed locations with higher technological requirements AKVA group is well positioned for continued growth and margin improvement active dividend policy