AKVA group ASA 2Q Financial reporting

Highlights

• Operating revenues in 2Q were 176.3 MNOK versus 164.3 MNOK last year. Year to date operating revenues were 334.3 MNOK versus 316.7 MNOK last year.
• Operating loss of 11.9 MNOK in 2Q compared to a loss of 0.4 MNOK in same period last year. Restructuring charges of 6.3 MNOK impacted negatively.
• A waiver extending through 4Q 2010 agreed in 2Q with the group's main bank.
• Order backlog at the end of 2Q2010 was 316 MNOK versus 183 MNOK end of 2Q last year.

In the comments below on the financial accounts, the 2009 figures are presented in parentheses following the 2010 stated values when included. From the change in the group structure that was implemented in the second half last year with a flatter structure, the group does no longer operate according to the split between the two former operational segments OPTECH and INTECH.

Operations and profit

Operating revenues in 2Q were 176.3 MNOK (164.3 MNOK) with an EBITDA of -11.9 MNOK (0.4 MNOK) Last year's initiated downsizing of the organisation have not given the expected and necessary effects. Therefore, further restructuring of the organisation have started.  The aim is to reduce the fixed cost base and at the same time improve precision and quality in the delivery of solutions to our customers.  Restructuring charges of 6.3 MNOK have been booked in the quarter with an expected 10 MNOK of yearly cost reduction.  In addition we have experienced cost overrun on some land based projects.

The depreciations in 2Q were 7.5 MNOK (7.8) which gave an EBIT of -19.5 MNOK (-7.4). Net financial items were 1.4 MNOK (3.0). The reduction is related to currency gain while the net interest bearing costs is somewhat higher than the year before. Profit before tax in 2Q was -20.9 MNOK (-10.4) and net loss -16.3 MNOK after allowing for taxes of -4.6 MNOK.

YTD operating revenues were 334.3 MNOK (316.7) with and EBITDA of -11.4 MNOK (-2.9). Depreciations and amortizations amounted to 15.0 MNOK (15.6) resulting in an EBIT of -26.4 MNOK (-18.5). YTD profit before tax was -30.0 MNOK (23.0) after allowing for net financial items of 3.6 MNOK (4.4). Net profit in the first half 2010 was -21.6 MNOK (-18.0).

Balance sheet and cash flow

Working capital in the group balance sheet, defined as non-interest bearing current assets less non-interest bearing current liabilities was 112.6 MNOK down from 120.0 MNOK from the beginning of the year and down from 141.3 MNOK from end of 2Q last year. The increase in 2Q is part of a seasonal pattern. Focus is maintained on containing the working capital.

Net interest-bearing debt amounted to 156.3 MNOK at the end of 2Q versus 141.9 MNOK at the beginning of the year. Gross interest bearing debt amounted to 210.8 MNOK versus 198.3 MNOK at the beginning of the year. Cash and unused credit facilities amounted to 62.0 MNOK. Total assets and total equity amounted to 681.2 MNOK and 233.9 MNOK respectively, resulting in an equity ratio of 34.3%.

Investments in the first half amounted to 9.2 MNOK whereof 3.8 MNOK is capitalized R&D expenses in accordance with IFRS.

A waiver extending through 4Q 2010 relating to the financial covenants of the major credit facilities and loans was agreed with the company's main bank in 2Q.

Shareholder issues

Earnings per share for 2Q 2010 were -0.95 NOK (-0.53). The calculation is based on 17.222.869 shares average.

Subsequent of the closing of 1H Mr Knut Molaug asked the Board of Directors to be released from his position as CEO of AKVA group ASA which the Board accepted. The Board would like to thank Mr. Molaug for his efforts and contributions for the development of the company.

The search for a new CEO has started, meanwhile the CFO Morten Nærland will be the acting CEO of the group. 

Market and future outlook

The market situation is fairly much the same as at the end of 1Q. UK and Canada are developing fairly well and there are some signs that the Chilean market is slowly improving although from very low level compared to the past. In April the group was awarded a major contract for Cromaris in Croatia for delivery of about 54 MNOK worth of equipment and technology. This is an important contract in positioning the group for cage based farming in the Mediterranean area. However in the Norwegian market, which by far is the most important, the visibility is less clear. The investment activity is relative low despite the salmon industry enjoying high salmon prices and sound underlying earnings. In face of this the group is undergoing a restructuring process aiming at reducing the cost base as well as improving operations to restore profitability at lower revenue levels.

The order backlog was at the end of 2Q 316 MNOK versus 182 MNOK at the end of 2Q last year.

Statement from the Board and Chief Executive Officer

We confirm that, to the best of our knowledge, the condensed set of financial statements for 2Q 2010, which have been prepared in accordance with IAS 34 Interim Financial Statements gives a true and fair view of the Company's consolidated assets, liabilities, financial position and results of operations, and that the interim management report includes a fair review of the information required under the Norwegian Securities Trading Act section 5-6 fourth paragraph.

Dated: 19th August 2010

AKVA group ASA
Web: www.akvagroup.com  

CONTACTS:
Morten Nærland, CEO and CFO
Phone: +47 51 77 85 00
Mobile: +47 91 80 40 32
E-mail: mnaerland@akvagroup.com

AKVA group is the leading provider of technology to the global fish farming industry and the only with global distribution. The products consist of software systems, operational equipment and sensor systems, feed systems, cage systems, net cleaning systems, light systems and recirculation aquaculture systems.