Company presentation March 2015 Your Aquaculture Technology and - - PowerPoint PPT Presentation

Your Aquaculture Technology and Service Partner

Company presentation

March 2015

Your Aquaculture Technology and Service Partner

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

• r 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

• r 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 14 November 2014. 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.

Your Aquaculture Technology and Service Partner

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 – new dividend policy introduced in 2014

Your Aquaculture Technology and Service Partner

Agenda

Company Market Financials 1 2 3

Your Aquaculture Technology and Service Partner

AKVA group – uniquely positioned for future growth

Cage-based Land-based Software

• The most recognized

brand in aquaculture technology

• Leading technology

solutions and service partner to the global aquaculture industry

• Global presence -

subsidiaries in 8 countries

• 726 employees
• Market cap of NOK

~700m and net debt

• f NOK 88m
• Plastic and

steel cages Infra- structure Feed systems, sensors and cameras Technology and farming services

• Land-based

facilities Land-based equipment Software

1 2 4 3

Your Aquaculture Technology and Service Partner

Cage-based technology

Overview of AKVA group deliveries Comments

• Complete range of technologies to operate any cage based

aquaculture system in sea and lakes

• Most technologies are in-house developed – AKVA has

partnerships on nets, mooring and larger boats

• Solution can be configured according to variation in customer

needs

• Trend towards enlargement and complete system deliveries
• Complete site investment in developed salmon industry costs

NOK 25-40m per site and is growing

• Delivery time for a complete site is 6-8 months
• Significant installed technology base – foundation for ongoing

buildup of technology services 1

Your Aquaculture Technology and Service Partner

Land-based technology

Overview of AKVA group deliveries Comments

• Complete range of technologies to operate land based

aquaculture systems. Most technologies are in-house

• developed. AKVA also holds installation capability
• Solutions can be configured according to variation in customer

needs

• Trend towards enlargement and complete system deliveries
• Complete site investment in developed salmon industry range

from NOK 200 – 400m for a complete facility. Farming technology constitutes 30-50% of total investment

• Delivery time for a complete site is 6- 18 months
• Growing installed technology base – foundation for ongoing

buildup of technology services 2

Your Aquaculture Technology and Service Partner

Technology and farming services

Illustration of technology and farming services Comments

• Building reoccurring technology services based on large

installed technology base

• Utilizing size of AKVA and the most developed infrastructure

established in all salmon producing regions.

• Service agreements secure entry to customers, revenues for

reoccurring maintenance and upgrades as well as customer satisfaction

• Introduction of equipment rental bundled with services

represents the next step in development, utilizing existing service infrastructure and shifting revenue streams from customer CAPEX to customer OPEX 3

Your Aquaculture Technology and Service Partner

Software

Illustration of software offering Comments

• Clear #1 supplier of best of breed software for management,

monitoring and control of fish farming operations (Fishtalk) as well as operational software running and automating farming

• perations (AKVA control and AKVAconnect).
• Clear #1 player in the salmon industry, however systems are

applicable for multiple species

• Reoccurring business model – licensing right to use – prepaid.

Pricing linked to volume of production and inflation

• Developing and launching new modules with similar revenue

potentials and business model as existing modules in place. 4

Your Aquaculture Technology and Service Partner

Presence in all main farming regions

Map of activities Revenue per region, 2014

Nordic Americas Export

Nordic 71 % Americas 16 % Export 13 %

Your Aquaculture Technology and Service Partner

Strategic priority to increase the proportion

• f software and service-related revenue

Revenue reoccurring vs technology, 2014 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
• r picture for an agreed period of time (2 to 5 years duration)
• reduced CAPEX and reducing operational work from the

customer

• Acquisition of Yes Maritime 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 –
• pportunity for consolidation
• Aim of delivering more than 30% of revenue through software

and services – by developing software, farming services, technology services and rental further

Technology 76 % Reoccurring 24 %

Your Aquaculture Technology and Service Partner

Your Aquaculture Technology and Service Partner

AKVA group’s values

Your Aquaculture Technology and Service Partner

AKVA group serves all salmon farmers in the World

Customer examples Revenue per customer, 2014

Customer 1 Customer 2 Customer 3 Other

10% 6% 5% 79%

Your Aquaculture Technology and Service Partner

40 years of history – significant operational improvements undertaken in recent years

2007/2008 UNIAqua / Idema Aqua

Focus on:

• Customer satisfaction
• Profitable growth
• Controlled cost
• Sound financial position

Founder-driven growth

1974 Plastic cages 1980s Feed system 1980s Steel cages 1990s International expansion 2000s Acquisitions 2006 Listed on OSE 2007 Acquisition of Maritech International

Profitable growth

2011 Share issue 2012 Sale of the Maritech

• peration in

Norway 2014 Acquisition of YesMaritime AS 2013 Acquisition of Plastsveis AS 2014 Introduction

• f new

dividend policy

Your Aquaculture Technology and Service Partner

Agenda

Company Market Financials 1 2 3

Your Aquaculture Technology and Service Partner

Strong demand for salmon - analysts expect high and stable salmon prices going forward

Annual harvest volumes of Atlantic salmon Salmon price history and forecast, NOK/kg

2.5 1.5 0.5 0.0 1.0 2.0 2010 2014 +9% Million tonnes 2000 2005 1995 Avg 1996- 2012 2013 Long-term 2) 40 41 41 2014 26 2015e 1) 38 2016e 1) 39

Source: Fish Pool, broker research reports, Arctic Securities Notes: 1) Average across Fish Pool and 6 broker estimates 2) Average across 2 broker estimates – others do not provide long-term forecasts

Your Aquaculture Technology and Service Partner

Aquaculture is becoming increasingly technology-intensive

Source: Salmon farmer annual reports Notes: 1) Based on reported farming capex and harvest volumes for Marine Harvest, Salmar, Cermaq, Lerøy, Grieg, NRS and Bakkafrost, 2014 figures are based on company guidance

Farming capex, NOK/kg harvested 1) Comparison of cage in 1980 to cage in 2014

2006 2014e +2.3x 1.6 3.7

Your Aquaculture Technology and Service Partner

Increased regulation adds complexity to salmon farming

Challenge Regulation AKVA group solution Sea lice

• Proposal to reduce the

regulatory limit from 0.5 sea lice per salmon to 0.1

• Several initiatives in a comprehensive approach to solve the sea lice issue, including involvement

in «lice tube» solution, development of exposed farm concepts as well as use of technologies to distract lice from fish farms

Escapes

• «Zero escape» vision for

the salmon industry with rigid regulatory framework support as well as substantial fines

• Development of more robust less risk exposed technological cage solutions as well as specialized

netting solutions, such as ECOnet. ECOnet is based on PET materials developed as fencing technology in other industries, now being introduced to fish farming by AKVA group

Disease

• Control and reduction of

disease is key in all aquaculture operations, supported by increased rigidity and regulatory framework globally

• Development range of technical solutions, including land based technologies, reducing risk of

disease as well as spreading of disease. Technologies enabling movement of industry from high density areas close to shore line towards more exposed sites key in strategy. Implying larger more robust solutions

Your Aquaculture Technology and Service Partner

Chile is normalising – supportive of Chilean spending

Notes: 1) Based on Multiexport figures, one of the largest Chilean salmon farmers

Chilean farming EBIT/kg, USD / kg WFE 1) AKVA group Chile revenue, NOKm

• 1.1

Q4 12

• 1.0

Q3 12

• 0.1

Q2 12

• 0.4

Q1 12 0.3 2011 1.9 Q2 14 0.2 Q1 14 0.2 Q4 13

• 1.0

Q3 13

• 0.3

Q2 13

• 1.0

Q1 13 2011 2012 2013 161 263 2014 305 166

Your Aquaculture Technology and Service Partner

Driving forces – salmon industry

SHORELINE

The exponential challenge of the coastal zone

• CONCENTRATION OF STAKEHOLDER INTEREST
• WATER QUALITY
• AVAILABLE SPACE FOR EXPANSION
• ENVIRONMENTAL IMPACTS OF CONCENTRATED ACTIVITIES

Your Aquaculture Technology and Service Partner

Driving forces – salmon industry

SHORELINE

The exponential challenge of the coastal zone

MAIN FOCUS AREA FOR TECHNOLOGY INNOVATION MAJORITY OF RESOURCE ALLOCATION

Your Aquaculture Technology and Service Partner

Driving forces – salmon industry

SHORELINE

AVAILABLE TECHNOLOGY MAKES DIVERSIFICATION FROM COSTAL SONE POSSIBLE

EXPOSED SITES FARMING LAND BASED FARMING

Your Aquaculture Technology and Service Partner

Growth on land and in exposed areas will increase technology requirements

Land-based

• Larger smolt increases

production and reduces biological risk

• Potential for full land-

based grow-out Sheltered

• High utilization of

licenses in existing farming regions

• New regions include

Russia, Iceland and Australia Exposed / offshore

• Ongoing trend towards more exposed areas
• Offshore emerging as new segment

Your Aquaculture Technology and Service Partner

The growing movement to participate in the blue revolution

The progressive regions:

Salmon Sea Bass & Sea Bream Other Species – emerging regions

Middle East: Offshore – Saudi , Oman, Iran (Caspian) Lakes/Dams – Iran Land Based – UAE, Saudi, Oman, Iran Sub-Sahara Africa: Offshore – Mauritius, Mozambique Lakes/Dams – Lesotho, Ghana, SE Africa Land Based – SE Africa Asia: Offshore – Indonesia, Malaysia, Japan, South Korea, India, Sri Lanka Lakes/Dams – China, Vietnam Land Based – China, Thailand, Malaysia, Indonesia, Vietnam

Your Aquaculture Technology and Service Partner Cycle development Time

Continued growth expected in the aquaservice segment

• 45 new licenses granted in

Norway in 2014 – will amount to capex of approximately NOK 500m

• Rebound in the Chilean

market Cycle development Short-term growth drivers Salmon farmers “Aquaservice” Mid-term growth drivers

• Kontali expects 3% annual

volume growth in salmon farming in 2014-2020

• Potential for additional

price growth

• Additional growth from

trend towards more exposed areas and land

• Additional growth from

increased regulation

• Additional growth from
• ther species

Your Aquaculture Technology and Service Partner

AKVA group is the undisputed #1 technology and service provider to the aquaculture sector

Cages Aquaculture machinery Water engineering Software & IT Service & Support

• 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 well-

known brands in the industry

• Present in all main

markets 2013 revenue, NOKm 919m 325m 134m 301m 41m

Your Aquaculture Technology and Service Partner

Agenda

Company Market Financials 1 2 3

Your Aquaculture Technology and Service Partner

AKVA group has seen operational revenue growth of 55% since 2012

Notes: 1) 2012 FY for software is excluding a one of gain of MNOK 29 related to the sale of the Norwegian Maritech business

AKVA group revenue Comments

+14% +36% 2014 FY 657 93 2013 FY 52 724 107 2013 FY 973 98 92 167 2012 FY 1) 914 802 724 1 246 914

• Growth in cage-based driven by increased activity in the

Nordic- , Canadian-, and UK market.

• Growth in land based du to the acquisition of Plastsveis AS in

April 2013 and increased activity in our recirculation business

Cage-based Land-based Software 92 98

Your Aquaculture Technology and Service Partner

Target of 10% near-term EBITDA margin – further potential longer term

Notes: 1) 2012 FY for software is excluding a one of gain of MNOK 29 related to the sale of the Norwegian Maritech business

AKVA group EBITDA-margin across segments Comments

• Near-term target of 10% EBITDA margin
• Land-based margins should increase due to restructuring of

business including new management and new operational set- up

• AKVA Group margins set to increase with increasing mix of

Software and Services

• 3%
• 11%

Cage-based 9% 4% 3% Group 8,3% 5% 4% Software 14% 20% 15% Land-based 0% 2014 FY 2013 FY 2012 FY 1)

Your Aquaculture Technology and Service Partner

Operational leverage is a driver for increased margins

Notes: 1) 2012 FY is excluding a one of gain of MNOK 29 related to the sale of the Norwegian Maritech business

AKVA group gross margin and SG&A 1) Comments

• Fixed cost base has been maintained on a stable level since

2012, while revenue has increased significantly

• The number of FTE’s decreased in 2013 due to cost focus and

controlled reduction of exposure in Chile

• The number of FTE’s has increased in 2014 due to the

acquisition of Yes Maritime and due to increased activity in the Nordic and Chilean market

Figures in '000 NOK

2012 2013 2014 Revenue 802 530 918 670 1 246 059 COGS 587 833 674 770 928 395 Gross margin 214 697 243 900 317 664 GM in % 26,8 % 26,5 % 25,5 % SG&A 185 881 196 995 214 299 EBITDA 28 816 46 905 103 365 EBITDA in % 3,6 % 5,1 % 8,3 % # FTEs 650 566 726

Your Aquaculture Technology and Service Partner

Order backlog is all-time high

AKVA group order backlog Comments

• The order backlog still include only a small portion of

technology to 45 newly awarded licenses in Norway and several planned freshwater facilities

• Delivery time of backlog is 1 to 12 months with most of the

delivery in the first six months

• Seasonal pattern of increasing backlog in Q4 and Q1 and

decreasing backlog in Q2 and Q3

200 100 600 300 400 500 4Q 3Q 2Q NOKm 1Q 2014 2012 2011 2013

Your Aquaculture Technology and Service Partner

Healthy balance sheet – bank debt was refinanced in 2014

AKVA group balance sheet Comments

• Bank debt refinanced in January 2014 with improved terms

and conditions

• All bank debt is now long term
• NOK 75m is a 5 years bullet
• NOK 68m is a 5 year serial loan
• AKVA group also has a credit facility of NOK 90m

BALANCE SHEET 2014 2013 (MNOK) 31.12. 31.12.

ASSETS 904 722 Intangible non-current assets 278 251 Tangible non-current assets 74 55 Financial non-current assets 2 2 Inventory 167 144 Receivables 329 212 Cash and cash equivalents 54 58 LIABILITIES AND EQUITY 904 722 Equity 388 337 Minority interest 2 2 Long-term interest bearing debt 129 55 Short-term interest bearing debt 14 78 Non-interest bearing liabilities 372 250

Your Aquaculture Technology and Service Partner

Launch of dividend policy in AKVA group ASA in Q4 2014

33

• 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

• Based on the financial performance and outlook for the company the

Board propose to implement an active dividend policy for AKVA group ASA

• AKVA group ASA aims to pay out dividend twice every year, in Q2 and Q4
• Dividend was paid out in Q4 2014 of NOK 1.00 per share. This amounts to a

total distribution of NOK 25,834,303 in Q4 2014

• 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

• bserved

Your Aquaculture Technology and Service Partner

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 – new dividend policy introduced in 2014