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Your Aquaculture Technology and Service Partner
Company presentationNovember 2014
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
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 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 Q3
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 – 80% of revenue1) Land-based – 12% of revenue 1) Software – 8% of revenue1)
• The most recognized brand in aquaculture technology
• Leading technology solutions and service partner to the global aquaculture industry
• Global presence -subsidiaries in 8 countries
• 695 employees
• Market cap of NOK ~700m and net debt of NOK 44m
Notes: 1) YTD September 2014
• 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 operations (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 YTD
Export
9%
Americas19%
Nordic
72%
Nordic
Americas
Export
Your Aquaculture Technology and Service Partner
Strategic priority to increase the proportion of software and service-related revenue
Illustration of delivery model 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 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 –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
Software and services
75%
Technology
25%
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 YTD 2014
9%
9%
Customer 1
Customer 2
6% Customer 3
Other
76%
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 MaritechInternational
Profitable growth
2011
Share issue
2012
Sale of the Maritechoperation in Norway
2014
Acquisition of YesMaritime AS
2013
Acquisition of Plastsveis AS
2014
Introduction of 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 2014e
+9%
Million tonnes
2000 20051995 Avg 1996-2012
2013 Long-term 3)
404141
2014e 1)
26
2015e 2)
38
2016e 2)
39
Source: Fish Pool, broker research reports, Arctic SecuritiesNotes: 1) Average across actual prices in Jan-Oct and Fish Pool forward prices for Nov and Dec
2) Average across Fish Pool and 6 broker estimates3) 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 reportsNotes: 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
37112
263
2014 Q1-Q3
305
129
166
Q1-Q3
Q4
Your Aquaculture Technology and Service Partner
Driving forces – salmon industry
SHORELINE
The exponential challenge of the coastal zone
EXPOSED SITES FARMING
LAND BASEDFARMING
Your Aquaculture Technology and Service Partner
Growth on land and in exposed areas will increase technology requirements
Land-based
• Larger smolt increasesproduction and reducesbiological risk
• Potential for full land-based grow-out
Sheltered
• High utilization of licenses in existingfarming regions
• New regions includeRussia, 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 – IranLand Based – UAE, Saudi, Oman, Iran
Sub-Sahara Africa:Offshore – Mauritius, MozambiqueLakes/Dams – Lesotho, Ghana, SE AfricaLand Based – SE Africa
Asia:Offshore – Indonesia, Malaysia, Japan, South Korea, India, Sri LankaLakes/Dams – China, VietnamLand 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 other species
Your Aquaculture Technology and Service Partner
AKVA Group is the undisputed #1 technology and service provider to the aquaculture sector
CagesAquaculturemachinery
Water engineering
Software & ITService & Support • AKVA Group is the
undisputed #1 supplier to the aquaculture industry
• Complete offeringincreasingly seen as positive by customers
• Scale providestechnological advantage
• Holds the most well-known brands in the industry
• Present in all mainmarkets
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 revenue growth of 15% 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% +40%
2014 Q1-Q3
657
93
2013 Q1-Q3
59
52
724
77
2013 FY
749
9892 115
2012 FY 1)
72
914
802
542
941
673
• 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-basedLand-basedSoftware
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
10%
4%3%
Group
10%
5%4%
Software
14%
20%
15%
Land-based
1%
2014 YTD2013 FY2012 FY 1)
Your Aquaculture Technology and Service Partner
Operational leverage is a driver of increase in margin
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 at below NOK 200m 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 increased activity in the Nordic market
Figures in '000 NOK 2012 2013 2013 YTD 2014 YTD
Revenue 802,530 918,670 672,766 941,012
COGS 587,833 674,770 492,695 695,752
Gross margin 214,697 243,900 180,071 245,260
GM in % 26.8 % 26.5 % 26.8 % 26.1 %
SG&A 185,881 196,995 141,850 155,274
EBITDA 28,816 46,905 38,221 89,986
EBITDA in % 3.6 % 5.1 % 5.7 % 9.6 %
# FTEs 650 566 591 695
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
0
600
300
400
500
4Q3Q2Q
NOKm
1Q
201420122011 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 66m is a 5 year serial loan
• AKVA Group also has a credit facility of NOK 90m, which is currently unused
BALANCE SHEET 2014 2013 2013
(MNOK) 30.9. 30.9. 31.12.
Intangible fixed assets 254,5 250,1 250,8
Fixed assets 65,2 51,7 55,0
Long-term financial assets 1,8 1,8 2,0
FIXED ASSETS 321,4 303,6 307,8
Stock 134,7 158,8 144,2
Trade receivables 222,4 153,7 155,5
Other receivables 60,4 34,3 56,1
Cash and cash equivalents 97,5 30,5 58,3
CURRENT ASSETS 515,0 377,3 414,2
TOTAL ASSETS 836,4 681,0 722,0
Equity attributable to equity holders of AKVA group ASA 373,0 339,5 336,6
Non-controlling interests 1,9 2,3 2,3
TOTAL EQUITY 374,9 341,8 338,9
Other long term debt 2,5 1,5 0,9
Long-term interest bearing debt 125,8 60,4 55,0
LONG-TERM DEBT 128,2 62,0 55,9
Short-term interest bearing debt 15,7 77,6 77,8
Other current liabilities 317,6 199,5 249,4
SHORT-TERM DEBT 333,3 277,2 327,2
TOTAL EQUITY AND DEBT 836,4 681,0 722,0
Your Aquaculture Technology and Service Partner
Launch of dividend policy in AKVA group ASA
31
• 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
• Proposed dividend to be paid out in Q4 2014 is NOK 1.00 per share. This amounts to a total distribution of NOK 25,834,303
• 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
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 Q3