3Q 2016 financial reporting
High market activity - growth strategy continues. AKVA group completed third quarter with good overall performance. Revenue in the third quarter of 2016 ended on 354 MNOK (355 MNOK) with an EBITDA of 38 MNOK (41 MNOK). Third quarter EBITDA margin was 10.8% (11.4%). The P&L growth in the quarter was softened by slow operations in Americas and by restructuring of AKVA group Denmark A/S.
The growth strategy in AKVA group continues with the acquisition of Sperre AS, a leading ROV and subsea provider to the aquaculture industry, as well as investments in increased capacity in Helgeland Plast AS and increased presence in the Mediterranean.
AKVA group is ending the quarter with the highest order backlog ever of 886 MNOK.
"AKVA group continues to deliver stable high margins despite the challenges we face in Americas and in AKVA group Denmark A/S this quarter. The recent year's transformation of AKVA group to become a better performing and more diversified Group is reflected in the Q3 results. Our growth strategy continues with the recent acquisition of Sperre AS, investments in Helgeland Plast AS as well as extension of our activities in the Mediterranean. Operationally and financially AKVA group is well positioned for further growth. This is also underlined with the highest order backlog ever at the end of a quarter", says CEO of AKVA group ASA Trond Williksen.
Cage Based Technology (CBT)
Nordic CBT had a good performance in Q3. A wide range of products continues to contribute to the financial performance. Helgeland Plast AS continues with good performance this year and the Farming Services area with AKVA Marine Services AS is also performing well.
We have experienced reduced activity in Americas this quarter compared to same quarter last year resulting in a reduction in EBITDA year on year of 8.7 MNOK in Q3. There has been low activity in Chile in Q3 due to reduced service and technology sales in a challenging market caused by uncertainty of future direction and regulatory regime, now finally about to be resolved. We have over the last years reduced our financial exposure in Chile significantly. The Chilean operation is now leaner and well prepared for an upturn in the market when this happens. Canada had another unusually slow quarter. Australia continues to be a small, but profitable operation.
UK had a decent quarter and continues to have a high level of OPEX based revenue. Turkey continues with another very good quarter. We are experiencing increased activity in the Sea Bass and Sea Bream industry in the Mediterranean. Export to emerging markets have a relative low, but profitable operation in Q3. Emerging markets are dominated by a few but large contracts and this will continue to give variations in the P&L quarter by quarter.
Software has ended another good quarter. Both AKVA group Software AS and Wise lausnir ehf experienced improved performance year on year in Q3. The software segment also have improved performance year on year YTD, both on topline and in margins. Software continues to invest in new product modules, which is expected to strengthen the financial performance of the software segment further.
Land Based Technology (LBT)
There have been good financial performance in Aquatec Solutions A/S and Plastsveis AS in Q3 and the high market activity continues. However, Q3 was a weak quarter for AKVA group Denmark A/S. New management has initiated needed efforts to make the unit more efficient. This restructuring have resulted in a negative EBITDA of MNOK 4.9 in Q3. The work to improve and make this a more streamlined entity continues into Q4. The land based segment ended the quarter with a high order backlog which represents 47% of the total order backlog in the Group at the end of Q3 2016. The land based segment increased its revenues year on year with 85% and contributed 22% of total revenues in Q3 2016, hence land based is becoming a significant part of AKVA group.
We have experienced continued good market activity throughout the third quarter of 2016. The order inflow in Q3 2016 was 417 MNOK (505 MNOK). Underlying operational order inflow (adjusted for the one time intake of the order backlog of Aquatec Solutions in Q3 2015) increased from 318 MNOK to 417 MNOK in the quarter. The order backlog at the end of Q3 2016 was 886 MNOK (643 MNOK). This is the highest order backlog ever for AKVA group.
The balance remains strong. Working capital as a percentage of 12 months rolling revenue is 8.8% (9.1%). We are able to maintain a very low working capital despite record high activity. Cash and unused credit facilities amounted to 165 MNOK at the end of Q3 (226 MNOK).Total assets and total equity amounted to 1,179 MNOK (1,163 MNOK) and 438 MNOK (443 MNOK) respectively, resulting in an equity ratio of 37% (38%) at the end of Q3.
Acquisition of Sperre AS - the leading ROV provider
Sperre AS will be the "center of excellence" in AKVA group in terms of ROV technologies as well as relevant subsea technologies. The intention and ambition is to develop an undisputed industrial leadership in the ROV and subsea technology area within aquaculture. AKVA group ASA acquires 66% of the shares in Sperre AS. The closing of the transaction will take place on November 4th, 2016. The enterprise value for all the shares in Sperre AS is NOK 126.9 million. In addition, AKVA will pay an adjustment amount based on the net debt and working capital position at closing. AKVA group ASA have an option to buy the remaining 34% of the shares after three years, where the pricing is based on financial performance in the three year period. The acquisition will be paid in cash and will be financed with a loan from Danske Bank.
Changes in operational structure
From August 2016 and onwards land based technologies was carved out as a new Group entity. The entity is headed by Morten Nielsen who became a new member of the Group management team, responsible for all land based operations in AKVA. In addition, Morten Nielsen also holds the roles as General Manager in both Aquatec Solutions and AKVA group Denmark.
Sperre AS will be included as a new unit in the Nordic cage based segment of AKVA group.
Expansion into the Mediterranean - new office in Spain
We now see positive signs in the Sea Bass and Sea Bream market in the Mediterranean. AKVA group is therefore about to establish a new office on the east coast of Spain. We will have service resources on the ground to support our customer base. This office will strengthen our presence and position in the Mediterranean region.
Deliveries into Iran
AKVA group has worked actively in Iran for the last 2-3 years and we have now delivered the second cage farm in this market to Bushehr Aramseyd Co. Reysali Delvari Dam. We are doing sales of both cage based and land based technology into Iran. These are equally big markets, i.e for cage based and land based technology. The Iranian Government strategy is to grow cage farming by 200.000 tons in 5 years (Barramundi, Sea Bream, Rainbow Trout, Sturgeon, etc). The Government is already issuing licenses, providing financing and setting deadlines for starting-up production.
Atlantis Subsea Farming AS
In partnership with the companies Sinkaberg-Hansen AS and Egersund Net AS, AKVA group ASA established the company Atlantis Subsea Farming AS on February 1st, 2016 with the purpose of developing submersible fish-farming facilities for salmon on an industrial scale. Atlantis Subsea Farming AS has applied for six development licenses to enable large-scale development and testing of the new technology and operational concept.
Atlantis Subsea Farming AS is in dialogue with the Directorate of Fisheries and we are waiting for a final resolution on the issue of development licenses.
We have a good mid-term outlook due to high market activity and the large order backlog. The good demand in the Nordic cage based segment continues. The land based activity in AKVA group is growing. This trend is expected to continue and the land based segment is becoming a larger part of AKVA group. UK and Europe is expected to perform well going forward with a growing order backlog.
Canada experienced less project sales so far compared to last year and we have moderate expectations in this market going forward. We still have low expectations in Chile, but there are now clear signs of improvement in this market. Our exposure in Chile is reduced compared to prior years. Our Turkey and Australian operations are expected to continue to perform well in the next quarters with a good order backlog. Exports to emerging markets have a more optimistic view compared to last year. However, the activity is still expected to fluctuate due to the nature of the business. AKVA group continue to actively seek strategic M&A opportunities within relevant segments. We continue our effort to build service and after sales as a key business element in all our markets and segments.
About AKVA group
AKVA group is a technology and service partner to the aquaculture industry worldwide. The company has 768 employees, offices in 8 countries and a total turnover of NOK 1.4 billion in 2015. We are a public listed company operating in one of the world's fastest growing industries and supply everything from single components to complete installations, both for cage farming and land based aquaculture. AKVA group is recognized as a pioneer and technology leader through more than 30 years. The Corporate Headquarter is in Bryne Norway.
Dated: 3 November 2016
AKVA group ASA
Trond Williksen Chief Executive Officer
Phone: +47 51 77 85 00
Mobile: +47 91 63 01 73
Eirik Børve Monsen Chief Financial Officer
Phone: +47 51 77 85 00
Mobile: +47 91 63 98 31
This information is subject of the disclosure requirements acc. to §5-12 vphl (Norwegian Securities Trading Act)