2015 4 results/VSS-AB-EN Q4 201… · Q4 VIKING SUPPLY SHIPS AB (PUBL) 2015 INTERIM REPORT. P. 2 I VIKINGSUPPLY.COM 4 Sea of Okhotsk Ice management and supply operations in ice 2012-2017

P. 1 I VIKINGSUPPLY.COM

Q4

Q4Q4

VIKING SUPPLY SHIPS AB (PUBL)

2015

INTERIM REPORT


Q4

Sea of OkhotskIce management and supply operations in ice 2012-2017Alaska

Ice management and anchor- handling 2010, 2012 and 2015

CanadaIce berg management Grand Banks Canada (2012 and 2013) West Greenland

Moved more than 200 ice-bergs during 2010

& 2011

Northern Sea RoutePassage of the Northern Sea Route three times

Kara SeaIce management 2014

NE Green-land Icebreaking/seis-mic support 2012 & 2013, ice-mgt in 2008

Barents Sea All duties 2011-ongoing

Baltic SeaSeasonal Icebreaking since 2000.

The North PoleIce management and core drilling 2004

Viking Supply Ships AB (publ) is a Swedish company with headquarter in Gothenburg, Sweden. Viking Supply Ships AB (publ) is organized into five segments: Anchor Handling Tug Supply vessels (AHTS), Platform Supply Vessels (PSV), Services, Ship Management as well as the subsidiary TransAtlantic AB. The operations are focused on offshore and icebreaking primarily in Arctic and subarctic areas as well as shipping operations in the Baltic Sea. The company has in total about 500 employees and the turnover in 2015 was MSEK 1,977. The company’s B-share is listed on NASDAQ OMX Stockholm, segment Small Cap, www.vikingsupply.com.

Viking Supply Ships AB (publ) Tel: +46 31–763 23 00Visiting address: E-mail: [email protected] Bommen 4A www.vikingsupply.comBox 11397, SE-411 04 Gothenburg, Sweden

For further information, please contact CEO, Christian W. Berg, ph. +45 41 77 83 80 or IR & Treasury Director, Morten G. Aggvin, ph. +47 41 04 71 25.

Front picture: Istock

Q4

Q4

Q4

Q4 EARNINGS PER SHARE AFTER TAX SEK -0.7 (0.6) FY15: SEK -2.5 (1.2)

RESULT AFTER TAX MSEK -123 (108) FY15: MSEK -440 (200)

EBITDA MSEK 86 (260) FY15: MSEK 268 (695)

REVENUE MSEK 457 (794) FY15: MSEK 1,977 (3,190)

ARCTIC FOCUS


Q4

CO

NTE

NT

CEO STATEMENT 3

SUMMARY OF EVENTS IN Q4 4

SUBSEQUENT EVENTS 5

LIQUIDITY AND GOING CONCERN 5

RESULTS AND FINANCE 6

OPERATIONAL HIGHLIGHTS 7 FOR Q4

FINANCIAL POSITION AND 8 CAPITAL STRUCTURE

CONDENSED CONSOLIDATED 10 PROFIT AND LOSS ACCOUNT

CONDENSED CONSOLIDATED 10STATEMENT OF COMPREHENSIVE INCOME

CONDENSED CONSOLIDATED 11 BALANCE SHEET

CONDENSED CONSOLIDATED 11 CASH FLOW STATEMENT

CHANGES IN THE GROUP’S 12 SHAREHOLDERS’ EQUITY

DATA PER SHARE 12

PARENT COMPANY 12

PARENT COMPANY INCOME 13 STATEMENT

PARENT COMPANY BALANCE 13 SHEET

CHANGES IN PARENT COMPANY 13 SHAREHOLDERS’ EQUITY

NOTES TO THE CONDENSED 14CONSOLIDATED FINANCIAL STATEMENTS

DEFINITIONS 19

CEO STATEMENTThe fourth quarter resulted in a negative result for the Group. This was mainly caused by an impairment of the PSV fleet, negative impact of net financials as well as tax impairments related to the restructuring of TransAtlantic AB (TA AB). The market in which Viking Supply Ships A/S (VSS A/S) is operating is still weak, which is impacting both the result of the period as well as the contract backlog. During the quarter the Container operations and Ship Management operations were divested from TA AB, which significantly reduces the exposure towards this segment entering 2016. For the fourth quarter, profit after tax for the Group was negative MSEK 123.

VSS A/S recorded a profit before tax of negative MSEK 92 in the fourth quarter. The profit before tax was negatively impacted by an impairment loss on the PSV fleet of MSEK 77 and an unrealized currency loss of MSEK 22. The offshore market was weak for most of the quarter, but during the latter part of the quarter, the increased amount of vessels in lay-up combined with harsh weather did give a certain effect. Towards the end of the quarter, Tor Viking returned to the North Sea from its charter with Shell US. The vessel transited the Northern Sea Route unassisted, which has never been achieved this late in the season before.

The market for PSVs is still poor. Despite an increasing number of vessels entering lay-up, the market has not improved and both rates and utilization were weak in the North Sea market throughout the quarter. The Group is currently assessing its options for the two remaining PSVs in operation.

Within the Services segment, Viking Ice Consultancy (VIC) is continuously pursuing contract opportunities with a clear ambition to secure work for the coming seasons.

The restructuring process of TA AB has given positive effects, and with the completed divestments, the risk related to this business segment is significantly reduced as we enter 2016.

OUTLOOKThe downturn within the oil industry has proved to be harder and longer than anticipated. As a result, the offshore market will remain challenging going forward. During 2015 a significant number of vessels have been laid-up, which has gradually improved the market balance in the North Sea. However, due to additional rigs coming off contract during 2016, the overall market conditions are expected to be weak in the coming years, unless more vessels are taken out of the market. Due to the worsened market conditions and the cancellation of contracts, the company’s liquidity is strained. As a consequence, we have for some time had a dialogue with the banks, in order to secure a long term, stable financing solution for the company. The dialogue is positive and constructive and the company aims to have a long term solution in place within the first quarter of 2016

It remains the core focus within VSS A/S to increase the contract coverage going forward. However, due to the market conditions, this will be a challenge. Nevertheless, VSS A/S still sees contract opportunities within the core market of harsh environment exploration and production going forward. With the reduced significance of TA AB within the Group it is expected that the financial impact from the industrial shipping segment will decrease going forward.

Gothenburg 29 February, 2016.

Christian W. Berg, CEO and President


Q4

FOURTH QUARTER• Total revenue was MSEK 457 (794)

• EBITDA was MSEK 86 (260)

• Result after tax was MSEK -123 (108)

• Result after tax per share was SEK -0.7 (0.6)

YEAR TO DATE 2015• Total revenue was MSEK 1,977 (3,190)

• EBITDA was MSEK 268 (695)

• Result after tax was MSEK -440 (200)

• Result after tax per share was SEK -2.5 (1.2)

SUMMARY OF EVENTS IN Q4

• EBITDA for Q4 was MSEK 86 (260).

• The average fixture rate in Q4 was NOK 515,000 (497,000) for the AHTS fleet and GBP 4,330 (7,620) for the PSV fleet. The average utilization in Q4 excluding laid-up vessels was 68% (73) for the AHTS fleet and 70% (49) for the PSV fleet.

• In December, an early termination of the contract for the AHTS Brage Viking was received, but the vessel will remain on-hire to mid-August 2016. The termination represents a loss of income during the remaining firm period of the contract of MUSD 33 in 2016 and 2017.

• Towards the end of the quarter, Tor Viking completed its contract with Shell US. On its way back to the North Sea, the vessel transited the Northern Sea Route unassisted, which has never been performed this late in the season before.

• The deteriorated market conditions within the global oil and gas market have continued to negatively impact the earnings and financial position of the Group. The Group’s liquidity position is strained and in the current market, the Group is unable to fulfill existing covenant undertakings in its loan agreements. A solution with the Group’s lenders is necessary and accordingly, the Group, during Q4, initiated a dialogue with its lenders, with an ambition to secure a long term stable financing solution within the end of Q1 2016 (See note 1, Liquidity and going concern and note 4, Interest bearing liabilities).

• The AHTS vessel Odin Viking was laid up during Q4.

• Due to the challenging market conditions, VSS A/S has recognized an additional impairment loss during Q4 of MSEK 77 related to the PSV fleet.

• The sales of TransAtlantic Container AB and the ship management operations were concluded during Q4 and resulted in a positive book gain of MSEK 35.

• TransFighter’s earlier freight contract, which expired at the end of Q4, was not renewed due to declining volumes. The vessel is open in the market and new contract opportunities are under evaluation.


Q4

SUBSEQUENT EVENTS• Calculations of contract coverage and loan-to-value ratios as at 31 December 2015 showed a requirement

for the Group to deposit cash or provide additional security during Q1 2016. No such payments have been made and the Group remains in constructive dialogue with its lenders to find a viable long term financing solution for the Group. As part of this dialogue, VSS AB’s majority shareholder, Kistefos AS, has informed the banks of its intention to support an equity issue of MUSD 15 of which Kistefos AS intends to guarantee for its pro-rata share. As the company currently is in breach with loan to value clauses and contract coverage clauses all borrowings are classified as short-term, even though the company has entered into a standstill agreement with the banks (see below, note 4, Interest bearing liabilities and note 6, Operational and financial risk).

• VSS A/S and the lenders have in February 2016 entered into a standstill agreement, running up to and including 20 March 2016, where lenders have committed not to request early repayment of loans and the Group is given time to find a long-term solution (see note 1, Liquidity and going concern).

• After the end of the quarter, Magne Viking was certified according to the IMO Polar Code. The vessel, which is the first vessel globally to comply with the code, was approved by DNV GL.

• Due to family reasons, Christian W. Berg will take temporary leave from the position as CEO of Viking Supply Ships A/S. Mr. Berg will remain CEO of the parent company Viking Supply Ships AB, but to reduce his workload, Mr. Tord Ytterdahl will temporarily take over the responsibilities as CEO of Viking Supply Ships A/S.

• The Chief Commercial Officer has resigned from his position. The CEO of Viking Supply Ships A/S will be responsible for VSS A/S’ commercial activities going forward.

• The subsidiary VSS A/S has from 1 January 2016 changed its functional currency from NOK to USD.

• At expiration and redelivery of two bareboat chartered vessels in TA AB there is a residual value guarantee commitment for the Group in favor of the financing bank. The commitment amounts to a total of MSEK 63 and is due for payment. Negotiations with the bank are ongoing in order to postpone this payment.

• In a loan agreement regarding one of the vessels within TA AB there is a loan-to-value clause. The bank has invoked this clause and has requested an instalment of MSEK 47. The Group does not agree with the bank’s market value assessment of the pledged assets and has initiated discussions with the bank regarding the accuracy in this request.

LIQUIDITY AND GOING CONCERNThe condensed interim financial statements for the twelve months ending 31 December 2015 have been prepared using the going concern assumption. The primary uncertainties and risks in relation to these considerations include a continued weakening of the market conditions.

Conditional of a positive outcome of the dialogue with the lenders, and due to the fact that the Group at 31 December 2015 had a market value adjusted equity of MSEK 2,035, management expects that the Group will be successful in securing a long-term stable financing solution for the Group within the near future.

KEY FINANCIALS Q4 2015 Q4 2014Net sales, MSEK 457 794EBITDA, MSEK 86 260Result after tax, MSEK -123 108Earnings per share after tax, SEK -0.7 0.6Shareholders´equity per share, SEK 7.8 11.5Return on equity, % -34.4 34.3Equity ratio, % 33.7 39.0Market adjusted equity ratio, % 42.7 44.8


Q4

1000

800

600

400

200

0

400

350

300

250

200

150

100

50

0

Q1-

14

Q2-

14

Q3-

14

Q4-

14

Q1-

15

Q2-

15

Q3-

15

Q4-

15

Revenues, MSEK (left scale) EBITDA, MSEK (right scale)

RESULTS AND FINANCETotal revenue for the Group for the full year was MSEK 1,977 (3,190), of which VSS A/S contributed with MSEK 1,114 (1,897) and TA AB contributed with MSEK 863 (1,293).

The Group’s EBITDA for the full year was MSEK 268 (695), of which VSS A/S contributed with MSEK 293 (783) and TA AB contributed with MSEK -25 (-88).

Net financial items were MSEK -191 (-267). Financial items include unrealized currency losses of MSEK -81 (-73) and realized value-adjustments on interest rate swaps of MSEK -1 (-3).

The Group’s result after tax for the year was MSEK -440 (200), of which VSS A/S contributed with MSEK -332 (345) and TA AB contributed with MSEK -108 (-128). The result for year-to-date was negatively impacted by a total impairment loss in Q3 and Q4 on the PSV fleet of MSEK 262 and restructuring costs and book gains from divestments in TA AB amounting to net MSEK 9.


Q4

OPERATIONAL HIGHLIGHTS FOR Q4ANCHOR HANDLING TUG SUPPLY VESSELS (AHTS) Total AHTS revenue was MSEK 240 (407) in Q4. Total EBITDA was MSEK 82 (280).

During Q4, three vessels have been operating in the North Sea spot market, while four vessels have been operating on term contracts. In addition, Odin Viking was in October laid up as a result of the weak market conditions in the offshore industry. During Q4, Tor Viking completed the charter with Shell US and the vessel is now back in the North Sea.

The North Sea market was weak for most of the quarter. Increased amount of lay-ups combined with harsh weather did however give a positive effect towards the end of 2015, but rates and utilization still remained at low levels.

The total AHTS contract backlog including optional periods at the end of the quarter was MSEK 741.

AHTS Q4 FIXTURE RATE (NOK) UTILIZATION (%)AHTS vessels on term charters 579,600 (536,000) 96 (100)AHTS vessels in the spot market 279,000 (407,800) 34 (45)Total AHTS fleet 515,000 (497,000) 68 (73)

Table above excludes one laid-up vessel.

Firm contract Option Spot Layup

AHTSJAN ‘16

FEB ‘16

MAR ‘16

APR ‘16

MAY ‘16

JUN ‘16

JUL‘16

AUG‘16

SEP‘16

OCT‘16

NOV‘16

DEC‘16

Tor Viking

Balder Viking

Vidar Viking

Odin Viking Loke Viking

Njord Viking

Magne Viking

Brage Viking

1. Oil major, firm till 1st August 2016 + 1x6 months option2. Oil major, firm till 31st December 2016 + 2x6 months option3. Oil major, firm until mid August 2016

1

2

3

1

Figures in the tables are as of 31 December 2015.

PLATFORM SUPPLY VESSELS (PSV)Total PSV revenue was MSEK 7 (22) in Q4. Total EBITDA was MSEK -12 (-12). The PSV vessels were during Q4 impaired by MSEK 77, which in addition to the Q3 impairment results in an annual impairment loss of MSEK 262.

During Q4, two vessels were trading in the North Sea spot market, while three vessels remained laid-up in Sweden.

The market balance within the PSV segment is still poor, despite an increased number of vessels entering lay-up. As a consequence, the North Sea spot market has remained weak throughout the quarter.

The total PSV contract backlog at the end of the quarter was MSEK 0.


Q4

PSV Q4 FIXTURE RATE (GBP) UTILIZATION (%)PSV vessels on term charters - (-) - (-)PSV vessels in the spot market 4,330 (7,620) 70 (49)Total PSV fleet 4,330 (7,620) 70 (49)

Table above excludes three laid-up vessels.

Firm contract Option Spot Layup

PSVJAN ‘16

FEB ‘16

MAR ‘16

APR ‘16

MAY ‘16

JUN ‘16

JUL‘16

AUG‘16

SEP‘16

OCT‘16

NOV‘16

DEC‘16

Frigg Viking

Idun Viking

Nanna Viking

Freyja Viking Sol Viking Figures in the tables are as of 31 December 2015.

SERVICES AND SHIP MANAGEMENT Total Services and Ship Management revenue was MSEK 31 (86) in Q4. Total EBITDA was MSEK -2 (11).

Viking Ice Consultancy (VIC) is continuously pursuing contract opportunities. Despite the reduced activity within the industry, VIC has identified several potential contracts going forward.

VIC is also working together with VSS A/S to prepare for the IMO Polar Code, a project that will continue into 2016.

TRANSATLANTIC ABThe subsidiary TransAtlantic AB recorded revenues of MSEK 179 (279) in Q4. EBITDA was MSEK 18 (-19). Total revenue has been reduced compared to the corresponding period last year due to the sale of TransAtlantic Container AB and TransBrilliante and the redelivery of TransOsprey in November and TransHawk in December. The sales of TransAtlantic Container AB and the Ship Management operations were concluded and all together generated an additional profit of MSEK 35 in December.

The container and bulk freight markets have continued to be weak during the fourth quarter, however the time charter rates reported for Container, small bulk and RoRo vessels are slightly improving. TransPine and TransWood have been sold during Q4 and will consequently be redelivered from the long bareboat charters as planned in early Q1 2016. TransFighter’s earlier freight contract, which expired at the end of Q4, was not renewed due to declining volumes. The vessel is open in the market and new contract opportunities are under evaluation.

FINANCING POSITION AND CAPITAL STRUCTURE At the end of the year, the Group’s equity amounted to MSEK 1,386 (equivalent to 7.81 SEK/share). The Equity declined during the year by net MSEK 656 due to the dividend of MSEK 98, the loss for the year of MSEK 440, a positive effect from revaluation of pension obligations of MSEK 2 and a negative change in the translation reserve of MSEK 120 attributable to currency differences on net investments in subsidiaries, mainly related to the weakened NOK against SEK. Gross investments during the year amounted to MSEK 187 (419) mainly related to dockings and the increase in financial assets related to cash which has been deposited as additional security for ship loans (see note 4, Interest bearing liabilities). The sale of the small bulk vessel TransForte was concluded in February 2015. The transaction resulted in a positive cash effect of net MSEK 3 after repayment of the related ship loans.


Q4

For further information of the Group´s financial position see note 4, Interest bearing liabilities and note 5, Cash and cash equivalents.

Viking Supply Ships AB is obliged to publish this report in accordance with the Swedish Securities Act and/or the Swedish Financial Instruments Trading Act. This report has been prepared in both Swedish and English versions. In case of variations in the contents between the two versions, the Swedish version shall govern. This report was submitted for publication at 8:30 am (CET) on 29 February, 2016.

The undersigned certify that the interim report gives a true and fair picture of the Group’s financial position and results, and describes material risks and uncertainties facing the Parent Company and the companies included in the Group.

This interim report is unaudited. Gothenburg, 29 February, 2016Viking Supply Ships AB

Christen Sveaas Folke Patriksson Bengt A. Rem Chairman Deputy chairman Board member Håkan Larsson Magnus Sonnorp Christian W. BergBoard member Board member CEO

Christer LindgrenEmployee representative

ANNUAL REPORTViking Supply Ship AB´s Annual Report will be available on the website: www.vikingsupply.com during week 16.

ANNUAL GENERAL MEETINGViking Supply Ship AB´s Annual General Meeting will be held on Thursday, 10 May 2016. The notice convening the Annual General Meeting will be published not later than four weeks prior to this date.

NOMINATIONS COMMITTEEInformation on the Nominations Committee is available on the website: www.vikingsupply.com

PRESS AND ANALYST CONFERENCEIn conjunction with the publication of this interim report, an earnings call will take place on 29 February 2016 at 10.00 am (CET) with Viking Supply Ships AB’s CFO, Ulrik Hegelund and IR & Treasury Director, Morten G. Aggvin. In connection with the conference, a presentation will be available on the company’s website, www.vikingsupply.com. Please see Investor Relations/Reporting Center.

FINANCIAL CALENDAR 20166 May 2016 Q1 Interim report10 May 2016 Annual General Meeting5 August 2016 Q1-Q2 Interim report10 November 2016 Q1-Q3 Interim report

INVESTOR RELATIONS Please contact or CFO Ulrik Hegelund, ph. +45 41 77 83 97 or IR & Treasury Director, Morten G. Aggvin, ph. +47 41 04 71 25

The interim report is available on the company’s website: www.vikingsupply.com.


Q4

CONDENSED CONSOLIDATED PROFIT AND LOSS ACCOUNT MSEK NOTE Q4

2015Q4

2014Q1-Q4

2015Q1-Q4

2014Net sales 457 794 1,977 3,190Other operating revenue 41 1 41 1Direct voyage cost -76 -131 -400 -651Personnel costs -165 -190 -669 -743Other costs -171 -230 -681 -1 118Depreciation/impairment 2 -120 -32 -474 -195Operating result -34 212 -206 484Net financial items -48 -99 -191 -267Result before tax -82 113 -397 217Tax 7 -41 -5 -43 -17RESULT FOR THE PERIOD 3 -123 108 -440 200

Attributable to:Parent Company's shareholders -123 108 -440 200Non-controlling interests 0 0 0 0RESULT FOR THE PERIOD -123 108 -440 200

Earnings attributable to Parent Company's share-holders, per share in SEK (before and after dilution) -0,7 0,6 -2,5 1,2

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOMEMSEK NOTE Q4

2015Q4

2014Q1-Q4

2015Q1-Q4

2014Result for the period -123 108 -440 200Other comprehensive income for the period:Items that will not be restored to the income statemementRevaluation of net pension obligations 2 -2 2 -2Items that later can be restored to the income statemementChange in translation reserve, net -44 -146 -120 -45Other comprehensive income -42 -148 -118 -47TOTAL COMPREHENSIVE INCOME FOR THE PERIOD

-165 -40 -558 153

Total comprehensive income attributable to:Parent Company's shareholders -165 -40 -558 158Non-controlling interests 0 0 0 -5TOTAL COMPREHENSIVE INCOME FOR THE PERIOD

-165 -40 -558 153


Q4

CONDENSED CONSOLIDATED BALANCE SHEETMSEK NOTE Q4

2015Q4

2014Vessels 2 3,470 3,982Other tangible fixed assets 2 5Intangible fixed assets 1 7Financial assets 213 163Total fixed assets 3,686 4,157Current assets 5 431 1,103TOTAL ASSETS 3 4,117 5,260Shareholders' equity 1,386 2,042Long-term liabilities 4 1,008 2,362Current liabilities 4 1,723 856TOTAL EQUITY, PROVISIONS AND LIABILITIES 4,117 5,260

VALUATION OF FINANCIAL ASSETS AND LIABILITIES The valuation of financial assets and liabilities in the balance sheet is based on acquisition value or fair value. The valuation of FX derivatives and interest rate derivatives is based on fair value. The balance items “Long-term liabilities” include derivatives of MSEK 18 (24). Valuation of other financial assets and liability items in the balance sheets are based on acquisition value.

ASSESSMENT OF FAIR VALUE OF FINANCIAL INSTRUMENTSThe valuation of financial instruments is based on classification in three levels: Level 1, fair values based on market values, where the instruments are traded on an active market are available. Level 2, no market values based on an active market are available, valuations are instead based on measurements of discounted cash flows. Level 3, at least one variable is based on own assessments. The fair value valuation of the Group´s FX- and interest rate instruments are based on input according to level 2.

CONDENSED CONSOLIDATED CASH FLOW STATEMENT MSEK Q4

2015Q4

2014Q1-Q4

2015Q1-Q4

2014Cash flow from operations before changes in working capital 86 276 205 527Changes in working capital 87 33 147 -97Cash flow from current operations 173 309 352 430Cash flow from investing activities -68 -87 -145 -132Cash flow from financing activities -95 -223 -477 -251Changes in cash and cash equivalents 10 -1 -270 47Cash and cash equivalents at beginning of period 188 447 450 381Exchange-rate difference in cash and cash equivalents -3 4 15 22CASH AND CASH EQUIVALENTS AT END OF PERIOD 195 450 195 450


Q4

CHANGES IN THE GROUP’S SHAREHOLDERS’ EQUITYSHAREHOLDERS' EQUITY (MSEK) Q4

2015Q4

2014Q1-Q4

2015Q1-Q4

2014Equity at beginning of period 1,551 2,082 2,042 1,749New share issue less cost for issuance - - - 145Dividend - - -98 -Sale of non-controlling interests - - - -5Total comprehensive income for the period -165 -40 -558 153SHAREHOLDERS' EQUITY AT END OF PERIOD 1,386 2,042 1,386 2,042

SHARE CAPITAL (MSEK) Q4 2015

Q4 2014

Q1-Q4 2015

Q1-Q4 2014

Share capital at beginning of period 177 177 177 148New share issue - - - 29Share capital at end of period 177 177 177 177

NUMBER OF SHARES ('000) Q4 2015

Q4 2014

Q1-Q4 2015

Q1-Q4 2014

Number of outstanding shares at beginning of period 177,444 177,444 177,444 147,870New issued shares - - - 29,574Total number of shares at end of period 177,444 177,444 177,444 177,444Average number of shares outstanding 177,444 177,444 177,444 164,804

DATA PER SHARESEK Q4

2015Q4

2014Q1-Q4

2015Q1-Q4

2014EBITDA 0.5 1.5 1.5 4.2Result after tax (EPS) -0.7 0.6 -2.5 1.2Equity 7.8 11.5 7.8 11.5Operating cash flow 0.0 0.7 0.3 2.5Total cash flow 0.1 0.0 -1.5 0.3

PARENT COMPANYThe Parent Company’s result after tax for the full year was MSEK -330 (-114). The result was during the fourth quarter impacted by an impairment of a deferred tax asset of 40 MSEK and an impairment of shares in subsidiaries of 200 MSEK.

The activity in the Parent Company mainly consists of the shareholdings in VSS A/S and TA AB, as well as limited Group wide administration.

During June a dividend was paid to the shareholders at the amount of 98 MSEK. At the end of the year the Parent Company’s equity was MSEK 1,990 (2,417 on Dec 31, 2014), and total assets were MSEK 2,337 (2,723 on Dec 31, 2014). The equity ratio on the balance day was 85 % (89 on Dec 31, 2014). Cash and cash equivalents at the end of the period was MSEK 34 (97 on Dec 31, 2014) of which 31 MSEK comprised of client funds.


Q4

PARENT COMPANY INCOME STATEMENTMSEK Q4

2015Q4

2014Q1-Q4

2015Q1-Q4

2014Net sales 83 88 344 325Other operating revenue 1 0 1 0Direct voyage costs - -2 - -2Personnel costs -1 -1 -2 -66Other costs -82 -85 -342 -261Depreciation/impairment - 0 - 0Operating result 1 0 1 -4Net financial items -204 -24 -291 -110Result before tax -203 -24 -290 -114Tax on result for the year -40 - -40 -RESULT FOR THE PERIOD -243 -24 -330 -114Other comprehensive income for the period:Items that will not be restored to the income statemementRevaluation of net pension obligations 1 -2 1 -2TOTAL COMPREHENSIVE INCOME FOR THE PERIOD -242 -26 -329 -116

PARENT COMPANY BALANCE SHEETMSEK Q4

2015Q4

2014Financial fixed assets 2,193 2,612Current assets 144 111TOTAL ASSETS 2,337 2,723Shareholders' equity 1,990 2,417Provisions 7 8Long-term liabilities 163 220Current liabilities 177 78TOTAL SHAREHOLDERS' EQUITY, PROVISIONS AND LIABILITIES 2,337 2,723

CHANGES IN PARENT COMPANY SHAREHOLDERS’ EQUITYMSEK Q4

2015Q4

2014Q1-Q4

2015Q1-Q4

2014Equity at beginning of period 2,232 2,443 2,417 2,388New share issue less cost for issuance - - - 145Dividend - - -98 0Total comprehensive income for the period -242 -26 -329 -116SHAREHOLDERS' EQUITY AT END OF PERIOD 1,990 2,417 1,990 2,417


Q4

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS1. LIQUIDITY AND GOING CONCERN The condensed interim financial statements for the twelve months ending 31 December 2015 have been prepared using the going concern assumption.

The deteriorated market conditions, including downward pressure on rates and utilization, decreasing vessel values and contract backlog, have negatively impacted the liquidity, earnings and financial position of the Group. Despite increasing willingness among ship owners to lay up vessels, there has been no sign of any significant recovery.

The Group’s liquidity position is strained and in the current market, the Group does not have sufficient liquidity to service its debt obligations as they fall due going forward including the requirements to deposit the requested cash or additional security as required under contract coverage- and loan-to-value clauses during Q1 2016. Further, the Group has not been able to comply with events of default provisions in loan agreements which together with contract coverage- and loan-to-value clauses in loan agreements makes all borrowings short-term, including loans amounting to MSEK 985, which as at 31 December 2015 have been classified as long-term debt in the balance sheet.

As a consequence, a dialogue with the lenders has been initiated to secure a long-term stable financing solution within the end of Q1 2016. The outcome of this dialogue is that the lenders have committed to a standstill agreement, running up to and including 20 March 2016. This in order to give Viking Supply Ships A/S time for a long-term solution to be put together with a view to establish a formal restructuring, on which Viking Supply Ships A/S can base its continued operations. The plan is conditional upon the lenders undertake to standstill with respect to claims under the loan agreements and that the lenders use reasonable efforts to support and complete a plan for restructuring of Viking Supply Ships A/S’ debt. In the standstill period, Viking Supply Ships A/S will service its obligations regarding scheduled interest payments, but is not obliged to service its obligations regarding payment of scheduled instalments.

As part of the dialogue, VSS AB’s majority shareholder, Kistefos AS, has informed the lenders of its intention to support an equity issue of MUSD 15 of which Kistefos AS intends to guarantee for its pro-rata share.

In addition to above, there is a residual value guarantee commitment for the Group at expiration and redeliveryof two previous bareboat chartered vessels in favor of the financing bank. The commitment amounts to a total of MSEK 63 and is due for payment. Negotiations with the bank are ongoing in order to postpone this payment.

In a loan agreement regarding one of the vessels within TA AB there is a loan-to-value clause. The bank has invoked this clause and has requested an instalment of MSEK 47. The Group does not agree with the bank’s market value assessment of the pledged assets and has initiated discussions with the bank regarding the accuracy in this request.

Based on the above description of the outcome of the dialogue with the lenders and a continued belief in securing contracts within the core market segment, management has concluded that the Group will be able to continue as a going concern at least until 31 December 2016. This conclusion is based on management’s knowledge of the Group, the expected outcome of the constructive dialogue with the lenders, estimated outlook for 2016 and the uncertainties and risks described above. Thus, management considers it appropriate to base the condensed interim financial statements for the twelve months period ending 31 December 2015 on the going concern assumption.

2. TANGIBLE FIXED ASSETSTangible fixed assets are recognized at cost or after deductions for accumulated depreciation according to plan and possible impairment. Straight-line amortization according to plan is applied. Management has for Q4 evaluated the values of the PSV segment and concluded that the PSV vessels are impaired resulting in an impairment loss of MSEK 77. The impairment is based on average vessel valuations from internationally acknowledged shipbrokers, showing at total PSV fleet value of MSEK 645 (ranging from MSEK 590 to MSEK 684). The value is supported by a calculated value in use based on discounted cash flows using a weighted average cost of capital (WACC) of 9%. Based on key assumptions related to fixture rates, utilization,


Q4

contract coverage, cost levels and currency exchange levels as well as an estimated residual value at the end of the forecasted period, discounted cash flow calculations has been prepared covering a period of 15 years. The impairment test is sensitive to changes in the underlying assumptions including the pace and timing of assumed market recovery, which are uncertain due to the current challenging market conditions. The impairment loss of MSEK 77 is in addition to the impairment loss of MSEK 185 in Q3.

The external vessel valuations from internationally acknowledged shipbrokers for the AHTS segment shows market values in excess of the carrying amount of the owned AHTS fleet by 23 % on average.

3. SEGMENT INFORMATIONThe segment information is presented in five segments:

-The segments AHTS and PSV comprise 13 offshore vessels that are equipped for and have the capacity to operate in areas with harsh environment, further 7 of the Anchor Handling Tug Supply (AHTS) vessels are equipped to operate in Arctic areas.

-The segment Services provides ice management services and logistical support in the Arctic regions.

-The segment Ship Management is involved in commercial management of five icebreakers owned by the Swedish Maritime Administration.

-The segment TA AB is a focused ship owner and tonnage provider in the RoRo and short sea bulk markets.

Q4MSEK

AHTS PSV SERVICES SHIP MGT.

TRANS-ATLANTIC

AB

TOTAL

Net sales 240 7 0 31 179 457EBITDA 82 -12 -2 0 18 86Result before tax 19 -109 -2 0 10 -82Total assets 3,112 725 0 0 280 4,117

Q1-Q4MSEK

AHTS PSV SERVICES SHIP MGT.

TRANS-ATLANTIC

AB

TOTAL

Net sales 951 30 0 133 863 1,977EBITDA 404 -107 -4 0 -25 268Result before tax 133 -457 -5 0 -68 -397Total assets 3,112 725 0 0 280 4,117

There are no significant transactions between the segments.

4. INTEREST BEARING LIABILITIESThe vessels owned by the Group are financed through bank loans with pledge in the vessels. Further securities have been given in the form of pledge in revenue and insurance policies. The total interest-bearing debt at the end of the quarter was MSEK 2,334 (2,695).

The interest bearing liabilities are associated with financial covenants, according to which the Group must fulfil certain key ratios. At the balance date all covenants were in compliance (see note 1, liquidity and going concern).

Further, the interest bearing liabilities are also associated with loan clauses, such as contract coverage clauses and loan-to-value clauses, according to which the Group must fulfill certain levels of contract coverage and loan-to-value, pursuant to the individual loan agreements. If these levels are not met, then the Group must deposit cash or additional security, according to the terms in the relevant loan agreements. Any such amount in deposit will vary up and down and the variation is dependent upon currency exchange rates, amortizations under the loan and vessel valuations. If the levels of contract coverage and loan-to-value, pursuant to the terms in the individual loan agreements, yet again are met then the obligation of providing additional security will cease. At the balance date the Group had provided the lenders corresponding to MSEK 104 in additional security.

Calculations of contract coverage and loan-to-value ratios as at 31 December 2015 showed a requirement to deposit cash or provide additional security during Q1 2016, partly to be remedied before the end of January 2016. The Group has in 2016 not deposited cash or provided additional security on these loans and the


Q4

respective total loan amount of MSEK 1,182 is classified as short-term debt as at 31 December 2015. The Group has asked its lenders to waive such requests for additional deposits, and the Group remains in constructive dialogue with its lenders in order to find a long-term stable financing situation (see note 1, Liquidity and going concern).

Further, the Group has in 2016 received reservation of rights letters from its lenders related to events of default provisions in loan agreements, which together with contract coverage- and loan-to-value clauses in loan agreements makes all of the Group’s borrowings short-term debt. This also includes loans amounting to MSEK 985, which as at 31 December 2015 have been classified as long-term debt in the balance sheet.

In addition to above, there is a residual value guarantee commitment for the Group at expiration and redelivery of two previous bareboat chartered vessels in favor of the financing bank. The commitment amounts to a total of MSEK 63 and is due for payment. Negotiations with the bank are ongoing in order to postpone this payment.

In a loan agreement regarding one of the vessels within TA AB there is a loan-to-value clause. The bank has invoked this clause and has requested an instalment of MSEK 47. The Group does not agree with the bank’s market value assessment of the pledged assets and has initiated discussions with the bank regarding the accuracy in this request.

In March 2012 the Group issued a 5 year senior unsecured bond loan in the Norwegian capital market, with maturity in March 2017, totaling MNOK 300. The bond agreement has a limit of MNOK 750. The bond was listed on Nordic ABM in Oslo on 28 June, 2012. In March 2013 an additional MNOK 85 was drawn in a tap issue. As at balance date the Group is holding nominal MNOK 189 of this bond, implying 196 MNOK is outstanding.

The Group has 44% (41) of its interest bearing debt in USD, 19% (18) in GBP, 1% (3) in EUR and 35% (38) in NOK. The Group has 100% (90) of the total loan portfolio swapped into fixed interest rates within the interval of 90 days up to three years and 0% (10) of the total loan portfolio swapped into fixed interest rates for more than 3 years.

4.1. Classification by type of debt

MSEK Q4 2015

Q4 2014

Long-term bond loan 189 205Short-term bond loan 0 0Long-term debt to credit institutions 796 2,060Short-term debt to credit institutions 1,349 430TOTAL INTEREST BEARING LIABILITIES 2,334 2,695

4.2. Debt maturity

1400

1200

1000

800

600

400

200

MSEK

2016 2017 2018 AFTER 2018

Bank debt Bond


Q4

5. CASH AND CASH EQUIVALENTS Consolidated cash and cash equivalents available at the end of the quarter amounted to MSEK 195 (450). Cash assets include client funds of MSEK 53.

MSEK Q4 2015

Q4 2014

Restricted cash 1) 104 4Free cash and cash equivalents 195 450TOTAL 299 454

1) The amount is included in the item “Financial Assets” in the balance sheet.

6. OPERATIONAL AND FINANCIAL RISK The Group operates in highly competitive markets and is exposed to various operational and financial risk factors. The financial risk is mainly related to liquidity risk, funding risk and currency risk. The Group works actively to identify, assess and manage these risks.

The Groups liquidity is due to the market conditions strained and is in the current market unable to fulfill existing covenant undertakings in loan agreements. A solution with the lenders is necessary and accordingly, a dialogue with the lenders has been initiated during Q4, with an ambition to secure a long-term stable financing solution within the end of Q1 2016 (see note 1, Liquidity and going concern).

The main operational risk factors relate to the overall macroeconomic market conditions, degree of competition, flow of goods in prioritized market segments and finally the overall balance of supply and demand of vessels, affecting rates and profit margins. The objective of the overall risk management policy of the Group is to ensure a balanced risk and return relationship.

The offshore market is to a high degree dependent on the investment level in the oil industry which in turn is driven by the oil price development on the global market. The recent decline in the offshore market has impacted the Group´s profitability and liquidity. The Group has a clear focus on increasing the number of vessels on term contracts within the offshore operations to mitigate fluctuations in rates and utilization.

The business activities in the TA AB segment operate in a competitive market with profit margins under pressure.

Long-term loans are the principal form of financing. Accordingly, interest rate fluctuations have an impact on the Groups earnings and cash flow. To reduce this risk the Group aims to actively manage the interest exposure through various types of hedging instruments.

The foreign exchange risk is primarily reduced by matching the exposure to revenues in various currencies with costs in the corresponding currency. In the same manner, assets in a certain currency are primarily matched with liabilities in the same currency.

7. OTHER INFORMATION Company information Viking Supply Ships AB is a limited liability company registered in Sweden, with its domicile in Gothenburg, and corporate registration number 556161-0113. Viking Supply Ships AB is listed on the Small Cap list of the NASDAQ OMX Nordic Exchange in Stockholm under the ticker VSSAB.

Corporate tax The general situation for the Group is that taxes payable are limited to foreign entities. Accordingly, recognized corporate tax mainly comprises deferred tax. The divestment of the majority of the remaining Swedish operations during Q4 brought a deferred tax expense of MSEK 40, when an earlier capitalized deferred tax asset related to Swedish tax losses carry forward was impaired. The tax losses carry forward amounted at end of the year, net for Swedish entities, to MSEK 1,057. The recognized net deferred tax asset for the Swedish operations amounted by the end of the period to MSEK 0 (40 on Dec 31, 2014). The recognized deferred tax liability for the operations outside Sweden amounted to MSEK 3 (16 on Dec 31, 2014).

Transactions with closely related parties Kistefos has, through a consultancy agreement, made management and financial services available to the Group, for which a total compensation of MSEK 0.3 has been paid for during the year. Apart from this, there were no other significant transactions with closely related parties.


Q4

Accounting policiesThis interim report for the Group was prepared in accordance with the application of IAS 34 Interim Financial Reporting and applicable rules in the Swedish Annual Accounts Act and for the Parent Company, in accordance with the Swedish Annual Accounts Act and the Swedish Financial Reporting Board’s recommendation FRF 2 Accounting for Legal Entities. Unless otherwise noted, the same accounting policies for both the Group and the Parent Company have been applied as those used in the most recent Annual Report.

VSS A/S publishes a separate report as a result of the issued debt certificates. Some values in that report are not comparable to the values in this report, as a result of different acquisition values and depreciation schedules between VSS A/S and the Group. VSS A/S has as of Q3 2011 been built through Group-internal transfers of vessels and operations at then current market prices, which is why differences in acquisition values have arisen.

Number of employeesThe average number of full time employees in the Group for the year was 740 (Jan-Dec 2014: 796).

Number of sharesShare distribution on 31 December 2015:Number of Series A shares 11,634,946Number of Series B shares, listed 165,809,372 Total number of shares 177,444,318


Q4

DEFINITIONS AHTSAnchor Handling Tug Supply vessel

EARNINGS PER SHAREProfit after financial items less 1) current tax, 2) tax on profit for the year (current and deferred tax) in accordance with the consolidated income statement

EBITEarnings before interest and taxes

EBITDAEarnings before interest, taxes, depreciation and amortization, corresponding to profit/loss before capital expenses and tax

EQUITY RATIOShareholders’ equity divided by total assets

THE GROUPViking Supply Ships AB, a Limited Liability Company registered in Sweden, with all subsidiaries

IFRSInternational Financial Reporting Standards – an international accounting standard used by all listed companies. Some older standards included in IFRS include IAS (International Accounting Standards)

MARKET ADJUSTED EQUITY RATIOShareholders’ equity divided by total assets, adjusted for asset market valuations

MARKET VALUE ADJUSTED EQUITYShareholders’ equity adjusted with the difference between book values and market values.

OPERATING CASH FLOWProfit/loss after financial income/expense adjusted for capital gains/losses, depreciation/amortization and impairment

OPERATING COSTOperating cost consists of crew, technical and administration costs

OPERATING PROFIT/LOSS Profit/loss before financial items and tax

OSVOffshore Support Vessels

PROFIT MARGINProfit after financial items divided by net sales

PSVPlatform Supply Vessel

RETURN ON EQUITY Profit after financial items less tax on profit for the year, divided by average shareholders’ equity

RORORoll-on/roll-off ships are vessels designed to carry wheeled cargo, such as automobiles, trucks etc.

TOTAL CASH FLOWCash flow from operating activities, investing activities and financing activities


Q4

QU ARTERLY4

Documents

2015 4 results/VSS-AB-EN Q4 201… · Q4 VIKING SUPPLY SHIPS AB (PUBL) 2015 INTERIM REPORT. P. 2 I VIKINGSUPPLY.COM 4 Sea of Okhotsk Ice management and supply operations in ice 2012-2017