4QTO 31 DECEMBER
TTS GROUP ASA
INTERIM REPORT
2016
TTS Group continues delivering positive operating results, however
disturbed by impairments
TTS has successfully stabilized key business divisions and are proceeding well with its
internal improvement program. The group has in all quarters of 2016, continued the
positive trend from 2015. We are starting to benefit from the positive effects of our
improvement program. Combining our ambition to maintain and grow market position
and our continued focus on synergies and operational efficiency with a goal to reduce
year-on-year operating cost with MNOK 100 across the Group, we expect to maintain
our positive margins in a challenging market.
We have an order backlog that covers more than 80% of the expected new-build
turnover for 2017. This gives a good basis for our 2017 operations. We expect reduced
activity in 2017 compared to 2016, particularly due to short-term challenges within the
car carrier and heavy lift segments. Although the market for Container/Bulk/Tank also
remains challenging, we expect stable turnover in the 100% owned units, but somewhat
reduced activity in the 50% owned Chinese companies. The market for ship-lifts remains
strong. For the services sector, we see a large potential for further development of both
the spare parts sales and the general service activity.
Business unit Offshore continues to deliver marginally positive operating results in the
fourth quarter, which confirms the improvement from an operating loss of MNOK 50 last
year to a positive break even this year. We still expect a weak offshore market in the
foreseeable future, and have reduced the TTS Group's exposure towards the Offshore
sector, which today represents around 7 percent of our turnover.
Business unit Multipurpose General Cargo has experienced a low order intake in 2016.
The turnaround of the heavy lift market and the development of the offshore wind
installation market takes longer time than previously expected. Due to this, the business
unit has reported impairment of MNOK 118, of which inventories MNOK 20, fixed assets
MNOK 16 and goodwill MNOK 82. To reduce the cost base for the business unit and
adapt the operations to the current market, we plan a ramp down of our German
manufacturing setup. We announce a restructuring program for the unit. This will add
restructuring cost of around MNOK 30, which will hit the first quarter 2017 result.
We continue our efforts to develop a more flexible organization that can shift resources
between segments, and thereby be better suited to scale activity by market changes.
Despite a challenging market for marine equipment, we have a strong market position
with a global presence, and a comprehensive and diversified product portfolio. Together
with committed competent colleagues, this creates a strong platform for future growth
when the market improves.
TTS GROUP
MNOK 2016 2015 2016 2015
Turnover 758 842 3 087 3 051
EBITDA ** 13 29 113 155
Order intake 446 937 2 398 2 733
Order backlog * 2722 4 015 2 722 4 015
EPS (NOK) Total -1,11 -1,07 -1,17 -0,55
Q4 Full year
** 2016 EBITDA includes a negative inventory impairment in the Multipurpose/General cargo segment of MNOK 20
** 2015 EBITDA includes a positive one off effect from consolidating TTS Hua Hai of MNOK 104 (Q2/15), a negative inventory
impairment in the Offshore segment of MNOK 20 (Q3/15), and a negative impact from restructuring allocation in Offshore of
MNOK 18 (Q4/15).
* Order backlog includes 50% of backlog from equity consolidated investments in China
4th quarter turnover reduced 10% from 2015, particularly due to
reduced activity in Offshore and RoRo/Cruise/Navy
Continued improvement in underlying operations, with an underlying
EBITDA year to date of MNOK 133, compared to MNOK 89 in 2015 **
Impairment in Multipurpose/General cargo of MNOK 118 due to
weakened market expectations
Good visibility for 2017 turnover
FINANCIAL PERFORMANCE
The 4th quarter turnover MNOK 758 was on level with 3rd quarter, but 10% lower than 4th quarter 2015, with the Offshore and RoRo/Cruise/Navy segments being the largest contributors to the reduced turnover.
Operating profit (EBITDA) in the 4th quarter was MNOK 33, excluding the impairment of inventory in Multipurpose / General cargo, which confirms a trend with a positive EBITDA in the area between MNOK 25 and 40 in 2016.
The full year underlying** EBITDA for 2016 was MNOK 133, a significant improvement compared to the same period underlying*** EBITDA for 2015 of MNOK 89.
The Earnings before interest and tax (EBIT) in 4th quarter 2016 was MNOK -94, hit by impairment of fixed assets (MNOK 16) and goodwill (MNOK 82) in business unit Multipurpose / General cargo.
** 2016 Excluding inventory impairment MNOK 20
*** 2015 Excluding positive one off effect MNOK 104 from THH consolidation, and negative impact of Offshore restructuring and inventory impairment MNOK 38
TOTAL ASSETS AND NET INTEREST-BEARING DEBT
Total assets at the end of 4th quarter 2016 was MNOK 2 216, a decrease of MNOK 810 compared to the end of 2015 and MNOK 305 compared to 3rd quarter 2016.
Net working capital at the end of the 4th quarter was MNOK 124, an increase of MNOK 45 from 3rd quarter, of which MNOK 70 relates to increase in the 50/50 owned subsidiaries in China, partly offset by a reduction in the 100% owned entities.
Net interest-bearing debt at the end of the 4th quarter was MNOK 294, an increase of MNOK 40 from 3rd quarter. The effect of the consolidation of THH and TTS-SCM represents a total reduction of the reported net interest-bearing debt of MNOK 99.
The equity at the end of the 4th quarter was 27,3%. Including the convertible bond debt the equity was 31,6%.
TTS has covenants for both equity ratio and EBITDA related to its debt and bonding facilities with Nordea and DNB. The debt- and bonding facilities were renewed in 4th quarter 2016. The subordinated debt matures in 2nd quarter 2017. The group has started the process to refinance/prolong the subordinated convertible bond loan in 1st quarter 2017.
ORDER BACKLOG
The order intake for 4th quarter 2016 was MNOK 446, a decrease of 52% compared to the unusually high MNOK 937 in 4th quarter 2015. The largest decrease is in business units RoRo/Cruise/Navy and Container/Bulk/Tank.
The order backlog* at the end of 4th quarter reached NOK 2,7 billion (4,0 billion), of which approximately NOK 1,8 billion is expected to be turned into revenue in 2017. Consequently, about 80 % of the expected revenue from new build activity in 2017 is expected to be covered by existing contracts.
Order-cancellations year to date is MNOK 198 in fully consolidated companies, of which MNOK 77 in 4th quarter. Cancellations in equity-consolidated investments in China was MNOK 126 in 2017.
*including 50% of the order backlog of MNOK 138 (323), in equity consolidated investments in China Expected turnover from the Services segment is not included in the reported order backlog
RORO, CRUISE, NAVY
MNOK 2016 2015 2016 2015
Turnover 127 176 555 641
EBITDA 0 13 15 62
Order backlog 652 941 652 941
Q4 Full year
CONTAINER, BULK, TANK
MNOK 2016 2015 2016 2015
Turnover 302 298 1 138 973
EBITDA ** 24 24 64 141
Order backlog * 1 403 2 090 1 403 2 090
Q4 Full year
* Order backlog includes 50% of order reserve in equity consolidated investments in China
** One of effect from consolidating TTS Hua Hai included in full year 2015 of MNOK 104
RORO/CRUISE/NAVY
The business unit reports a decrease in turnover and margin compared to last year. The reduction of margin is an effect of changes in the product mix, as well as losses on a few specific projects.
The order backlog at the end of the quarter was MNOK 652, a reduction of MNOK 49 from last quarter, and MNOK 289 lower than at the end of 4th quarter 2015. Going forward, the Group expects lower new orders and risk of delays from the customer side on existing orders in the market for car carriers. Although this is replaced by higher activity in the market for RoPax and Cruise, we expect a significantly lower turnover in this segment in 2017.
CONTAINER/BULK/TANK
The business unit reports an EBITDA in line with the same quarter last year. Change of consolidation method from the equity method to full consolidation of the 50% owned company THH from 2nd quarter 2015, explains the major part of the reported difference in revenue and margin when comparing full year 2016 with 2015. Consolidated turnover and EBITDA from THH 2016 (2015) represent MNOK 837 (667) and MNOK 58 (48) respectively. Reported EBITDA in Q2 2015 further included one-off effects of MNOK 104.
Reduced utilization of the Jiangnan steel fabrication plant in China (a company 40% owned by THH) continues to give negative contribution from equity-consolidated investments. For 4th quarter 2016 (2015) the net contribution from equity consolidated investments was MNOK -3 (MNOK 3). Total 2016 (2015) contribution was MNOK -20 (MNOK 6).
The weak market for winches in South-Korea has led to a reduced order intake in 2016 compared to 2015. In China however, THH had an order intake in 4th quarter of around MNOK 170, which is in line with 4th quarter 2015.
MULTIPURPOSE, GENERAL CARGO
MNOK 2016 2015 2016 2015
Turnover 72 50 322 259
EBITDA * -19 -6 -24 -13
Order backlog 205 573 205 573
Q4 Full year
* 2016 EBITDA includes an inventory impairment of MNOK 20 (Q4/16).
OFFSHORE
MNOK 2016 2015 2016 2015
Turnover 59 90 226 359
EBITDA * 2 -22 4 -102
Order backlog 150 219 150 219
Q4 Full year
* 2015 EBITDA includes an inventory impairment of MNOK 20 (Q3/15) and a restructuring allocation of MNOK 18 (Q4/15).
MULTIPURPOSE/GENERAL CARGO
The business unit’s 4th quarter 2016 EBITDA excluding impairments is close to zero, a marginal improvement from the same quarter last year. The weak EBITDA margin is due to customer-initiated delays in project deliveries, combined with a slow market.
The 2016 order intake was low. We expect the turnaround of the heavy lift market as well as the development of the offshore wind installation market will take longer time than previously expected. Due to this, the business unit has reported impairment of MNOK 118, of which inventories MNOK 20, fixed assets MNOK 16 and goodwill MNOK 82.
To reduce the cost base for the business unit and adapt the operations to the current market, we plan a ramp down of the German manufacturing setup. We announce a restructuring program for the unit. This will add restructuring cost of around MNOK 30, which will hit the 1st quarter 2017 result.
OFFSHORE
The business unit delivers an EBITDA around zero for the fourth consecutive quarter, a
result of the continuing adaption of capacity and cost to the market. From the peak in 3rd
quarter 2014, the number of full time employee equivalents has been reduced by around
70%.
The offshore market is still weak, with generally low visibility and demand, combined with
fierce price competition, and we expect the market to remain challenging throughout
2017 and into 2018. However, the business unit has managed to enter into new
contracts with acceptable margins.
SHIPYARD SOLUTIONS
MNOK 2016 2015 2016 2015
Turnover 66 79 298 216
EBITDA 2 12 36 17
Order backlog 335 204 335 204
Q4 Full year
SERVICES
MNOK 2016 2015 2016 2015
Turnover 126 147 533 591
EBITDA 4 21 42 76
Q4 Full year
SHIPYARD SOLUTIONS
The 4th quarter results from the business unit is somewhat below the same quarter last year. Total 2016 EBITDA has improved both for Syncrolift, increased from MNOK 13 to MNOK 17 and for Liftec, increased from MNOK 4 to MNOK 8. This confirms a solid market position in the niche market for shiplifts, transfer systems and other logistics solutions for the production industry.
A profit of MNOK 9 from sale of the office/warehouse utilized by TTS Syncrolift AS in 2nd quarter is included in full year result.
TTS Syncrolift, which is a leading ship lift provider, continues its positive trend from previous quarters, with stable positive earnings and order intake.
In 1st quarter 2017, TTS signed an agreement to sell Liftec. The agreed value of the transaction is a gross base price of MEUR 5,8 including net cash, payable at closing, and an earn-out of maximum MEUR 1,8 over the next three years if specific targets are met. The transaction is expected to be completed within the end of February 2017.
SERVICES
Both turnover and EBITDA for the business unit Services in 4th quarter 2016 is
somewhat reduced compared to 4th quarter 2015, influenced by the low charter rates in
several shipping markets.
Although the service market still remains influenced by low ship charter rates and
increased competition, particularly within heavy lift equipment, we see a large potential
for further development of both spare parts sales and servicing based on TTS' worldwide
services network and the substantial installed base of TTS equipment.
The shipbuilding market has experienced significant reduction of activity, with strong competition and price pressure. However, within certain segments, demand and activity are still good. TTS Group is well diversified across market segments, geographical presence and product portfolio. TTS benefits from this position, which gives the company a strong market position in a challenging market.
Short term, the low level in the new-building activity is expected to affect TTS turnover negatively. We see a risk of postponements and cancellations in most business units. In addition to the weak offshore market, we particularly see short-term challenges within the car carrier and heavy lift segments. Although the market for Container/Bulk/Tank also remains challenging, we expect stable turn over in the 100% owned units, but somewhat reduced activity in the 50% owned Chinese companies. The market for ship-lifts remains strong. For the services sector, we see a large potential for further development of both the spare parts sales and the general service activity.
To reduce the cost base for Business unit Multipurpose General Cargo and adapt the operations to the current market, we plan a ramp down of our German manufacturing setup. In February, we announce a restructuring program for the unit. This will add restructuring cost of around MNOK 30, which will hit the first quarter 2017 result.
Long term, a positive development of the market is expected in line with increased demand for seaborne transport. TTS Group has a strong ambition to, as a minimum; maintain its share of the overall market.
At the end of the quarter, the order backlog was NOK 2,7 billion, of which approximately NOK 1,7 billion is expected to be turned into revenue in 2017. This means that about 80% of the expected revenue from new-build activities in 2017 is covered by existing contracts. Expected turnover from the business unit Services is not included in the Group's reported order backlog.
TTS Group has a well-established market position as one of the three largest suppliers within its market segments. The company’s strong position in China provides a good foothold in the world's largest shipbuilding market, which accounts for 40% of the global shipbuilding. In its further development of a robust strategy on "stand alone" basis, TTS Group focuses on customer base, improving operations, increasing flexibility and reducing cost in order to meet the market competition and increase profitability.
TTS GROUP
AMOUNTS IN NOK 1 000
Unaudited Audited Unaudited Unaudited
PROFIT AND LOSS ACCOUNT Note YTD 31.12.2016 YTD 31.12.2015 Q4 2016 Q4 2015
Turnover from projects 2 3 086 706 3 051 243 759 028 842 101
Total operating turnover 3 086 706 3 051 243 759 028 842 101
Raw materials and consumables used 1 955 972 1 939 679 471 683 491 446
Other operating costs 999 732 1 072 468 271 371 324 782
Result from JV ( - is income) 17 970 -115 889 2 561 -2 670
EBITDA 113 032 154 984 13 413 28 543
Depreciation 43 444 58 134 9 159 27 503
Other depreciation/write-downs 98 647 64 843 98 648 55 670
Operating profit -29 059 32 007 -94 394 -54 630
Financial income 48 415 38 442 15 354 2 889
Financial expense 73 141 85 771 10 207 42 029
Net finance -24 726 -47 329 5 147 -39 140
Profit/loss before tax -53 785 -15 322 -89 247 -93 770
Tax 6 31 819 24 841 -1 872 2 594
Net result continued business -85 605 -40 163 -87 375 -96 364
Net result divested business 0 0 0 -0
Net result * -85 604 -40 163 -87 375 -96 364
Attributable to equity holders of the company 4 -100 827 -48 674 -96 350 -92 946
Attributable to non-controlling interests 15 223 8 511 8 976 -3 419
NET RESULT FOR THE YEAR
Net result for the period -85 604 -40 163 -87 375 -96 364
Currency effects -58 924 102 983 33 719 -15 884
Total comprehensive income -144 528 62 820 -53 656 -112 249
Attributable to equity holders of the company -143 534 23 229 -77 304 -111 887
Attributable to non-controlling interests -994 39 592 23 648 -362
Earnings per share (NOK) -1,17 -0,55 -1,11 -1,07
Diluted earnings per share (NOK) -1,17 -0,55 -1,11 -1,07 Average number of shares used as calculation basis
for diluted EPS (000) 86 493 86 493 86 493 86 493
* 2016: Net result affected by MNOK - 118 from impairment of assets BUMPG
* 2015: Net resultat affected by MNOK + 66 from consolidation effects (+104 in BUCBT) and impairment effects (- 38 in BUOFF)
TTS GROUP
Note Unaudited Audited
AMOUNTS IN NOK 1 000 31.12.2016 31.12.2015
Intangible assets 6, 7 709 762 886 850
Tangible assets 8 94 338 134 521
Financial assets 9 72 316 84 975
Sum anleggsmidler 876 416 1 106 346
Inventories 10 143 135 414 157
Total receivables 5 1 021 352 1 091 790
Bank deposits/cash 12 175 784 413 210
Total current assets 1 340 271 1 919 157
Total assets 2 216 688 3 025 503
Share capital 3 9 527 9 527
Other equity 429 052 624 980
Non-controlling interests 166 004 220 059
Total equity 604 583 854 566
Provisions 6 47 981 51 581
Long term interest bearing debt 12 271 750 0
Long term liabilities 319 731 51 581
Current interest bearing debt 12 198 307 522 812
Current liabilities 5 1 094 066 1 596 545
Total current liabilities 1 292 373 2 119 357
Total liabilities 1 612 104 2 170 938
Total equity and liabilities 2 216 688 3 025 503
NOK 1 000 Share capital Treasury shares
Share premium
reserve Other equity
Shareholders
equity
Non controlling
interest Total equity
Equity as of 1.1.2016 9 527 -12 149 378 475 612 634 505 220 060 854 565
Comprehensive income - - - -143 534 -143 534 -994 -144 528
Share option cost - - - 670 670 670
Equity transactions with non controlling interests - - - - - -53 061 -53 061
Equity Closing balance 9 527 -12 149 378 279 686 438 579 166 004 604 583
NOK 1 000 Unaudited Audited
AMOUNTS IN NOK 1 000 31.12.2016 31.12.2015
EBITDA 113 032 154 984
Change in net current assets -239 922 -155 153
Cash from operations (A) -126 890 -169
Aquisition and sale of non-current assets 5 786 220 112
Other investing activities 0 -23 950
Cash from investments (B) 5 786 196 162
New loans and repayment -15 079 122 931
Payments to shareholders * -53 061 -
Net interest paid -31 609 -53 565
Cash from financing ( C) -99 750 69 365
Change in cash (A+B+C) -220 854 265 358
Cash position OB 413 210 130 602
Effect of exchange rate changes on cash -16 572 17 250
Cash position CB 175 784 413 210
* includes payment of dividend to minority shareholders in TTS Hua Hai Co.Ltd.
New standards, amendments and interpretations not yet adopted by TTS:
IFRS 9
IFRS 9 replaces the existing guidance in IAS39, and is effective from the annual reporting beginning after 1 January 2018. The fair value hedge structure applied by TTS Group is set within the framework of IAS39. TTS is currently assessing the potential impact of IFRS 9, but do not expect any major change or impact on the consolidated financial statements.
As per 31 December 2016 the market value of FX-derivatives qualifying as fair value hedges is negative by MNOK 43.
IFRS 15
IFRS 15 provides a renewed basis for defining revenue recognition principles, affecting both nature, timing, amount and uncertainty of revenue and cash flow arising from an entity's contracts with customers.
IFRS 15 is effective from the annual reporting beginning after 1 January 2018.
TTS is currently assessing the impact from IFRS 15, both related to revenue recognition and impact on customer contracts. The new definition is expected to postpone revenue and margin recognition from customer projects within the RoRo/Cruise/Navy, Offshore, Multipurpose/General Cargo, and Shipyard Solutions segments.
The new definitions are expected to have a marginal impact on revenue and margin recognition coming from the segments reflecting our Container/Bulk/Tank, Services and Other.
IFRS 16
IFRS 16 principally require lessees to recognize assets and liabilities for all leases.
IFRS 16 is effective from the annual reporting beginning after 1 January 2018.
TTS is currently assessing the impact from IFRS 16. As set out in note 6 to the annual report 2015, committed nominal lease payments at the end of 2015 was MNOK 269, of which MNOK 55 has been paid in 2016.
Based on the current structure of lease contracts, a 10% discount rate and 3,5% annual increase in nominal leases, our lease assets and lease liabilities as per 1 January will increase by approximately MNOK 160.
NOTE 1. GENERAL INFORMATION
Reporting entity
TTS Group ASA is registered and domiciled in Norway, and the head office is located in Bergen.
The consolidated financial statements cover TTS Group ASA including its subsidiaries. There has been no change in consolidated companies from Q3-2016 to Q4-2016. During 1st half of 2016, TTS Group established new subsidiaries, which is a part of the overall Service Network expansion. The new subsidiaries are located in Dubai (United Arab Emirates), and in Antwerp (Belgium).
As of 2nd quarter 2015, changes in the joint venture agreement related to the jointly owned 50/50% company TTS Hua Hai Co Ships Equipment Co Ltd. in China, required TTS to change its consolidation method from the equity method to full consolidation. Operation in TTS SCM commenced as of 2nd quarter 2015, and the company is fully consolidated into TTS accounts.
Jointly controlled and associated companies are accounted for using the equity method.
The Board of Directors approved the consolidated financial statements for the year ended 31 December 2015 on 19 April 2016.
The annual report 2015 including the consolidated financial statements for the TTS Group, the separate financial statements for TTS Group ASA and the auditors' opinion from KPMG, are available at our website www.ttsgroup.com
Basis of preparation
TTS Group’s financial reports are prepared in accordance with International Financial Reporting Standards (IFRS), as adopted by the European Union.
The unaudited consolidated financial statements for 4th quarter 2016 have been prepared in accordance with IAS 34 Interim Financial Statements. The interim accounts do not include all the information required for a full financial statement and should therefore be read in connection with the consolidated financial statements of 2015.
The accounting principles applied are the same as those described in the consolidated financial statements of 2015.
This condensed consolidated 4th quarter interim report of 2016 was approved by the Board on 14 February 2017.
Judgments, estimates and assumptions
The preparation of the interim report requires the use of judgments, estimates and assumptions that affect the application of accounting principles and the reported amounts of assets and liabilities, income and expenses. Actual future outcome may differ from these estimates.
In preparing these consolidated interim financial statements, the key assessments made by the management in applying the Group’s accounting principles and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements for the financial year that ended 31 December 2015.
Turnover EBITDA Turnover EBITDA Turnover EBITDA Turnover EBITDA Turnover EBITDA
RoRo, Cruise, Navy 2016 127 0 126 5 158 -1 143 11 555 15
2015 176 13 146 18 160 16 160 15 641 62
Container, Bulk, Tank 2016 302 24 275 18 291 18 270 4 1138 64
2015 298 24 292 6 318 111 72 2 980 141
Offshore 2016 59 2 38 0 59 -3 70 5 226 4
2015 90 -22 99 -48 92 -8 79 -24 359 -102
Multipurpose, General Cargo 2016 72 -19 78 0 101 -1 71 -5 322 -24
2015 50 -6 78 -4 38 1 94 -4 259 -13
Shipyard Solutions 2016 66 2 90 8 72 18 69 7 298 36
2015 79 13 44 1 43 0 51 4 216 18
Services 2016 126 4 131 11 138 14 138 13 533 42
2015 147 21 146 21 161 20 136 13 591 76
Corporate / Other 2016 6 0 2 -2 2 -14 4 -8 14 -24
2015 3 -14 1 -6 0 -2 2 -7 6 -27
Total 2016 758 13 741 41 822 33 766 26 3087 113
2015 842 29 805 -12 811 138 593 1 3051 155
2014 734 142 549 2 617 -10 554 -28 2453 105
Q4 Q3 Q2 Q1 Full year / YTD
NOTE 2. SEGMENT INFORMATION
TTS Group reports on the following segments.
RoRo/Cruise/Navy (BURCN)
Container/Bulk/Tank (BUCBT)
Offshore (BUOFF)
Multipurpose/General cargo (BUMPG)
Shipyard Solutions (BUSYS)
Services (BUSER)
BURCN delivers complete cargo handling solutions to RoRo, PCTC, cruise and navy
vessels, including terminal loading and passenger systems. Product range includes external and internal ramps, covers and doors, liftable decks, passenger gangways and linkspan systems.
BUCBT delivers complete cargo handling solutions to the container, tanker and bulk
vessels. Product range includes 10-40 t winches, 15-50 t cranes and specialized hatch covers designs.
BUOFF delivers support solutions to the offshore based oil industry and the supporting
service industry. Product range includes 15-50 t offshore cranes, 40-400 t active heave compensated cranes, mooring winches, internal and external covers and doors.
BUMPG delivers supporting solutions to the vessels which is designed to operate in the
multipurpose or general cargo market, requiring specialized operating capabilities. Product range includes 40-2200 t heavy lift cranes, side loading systems, hatch covers and mooring winches.
BUSYS includes shiplift and transfer systems, as well as complete production lines to
the yard industry. Product range includes ship lift system, ship transfer systems, multiwheelers and translifters.
BUSER includes service and after sales for all segments within TTS. This enables TTS
to offer service and after sale worldwide for the full range of its products.
YTD 31.12.2016 YTD 31.12.2015 Q4 2016 Q4 2015
Net income available to shareholders -100 827 -48 674 -96 350 -92 946
Effect of dilution - - - -
Diluted net income available to shareholders -100 827 -48 674 -96 350 -92 946
Weighted average number of shares outstanding 86 493 86 493 86 493 86 493
Effect of dilution - - - -
Diluted numbers of shares 86 493 86 493 86 493 86 493
Earnings per share (NOK) -1,17 -0,55 -1,11 -1,07
Diluted earnings per share (NOK) -1,17 -0,55 -1,11 -1,07
31.12.2016 31.12.2015
Current receivables 42 834 49 067
Current liabilities -11 871 -8 781
30 963 40 285
Balance sheet items to/from Joint Ventures
Net receivables (+) / liabilities (-) to/from Joint Ventures
NOTE 3. SHARE CAPITAL AND EQUITY
As per 31 December 2016 TTS Group ASA has issued 86 605 660 shares, each with a face value of NOK 0.11 giving a share capital of total NOK 9 526 623.
TTS Group ASA holds 112 882 own shares.
No options or other equity instruments have been awarded in 2016.
At period closing there are 19.184.090 conversion rights related to the subordinated
convertible bond. In addition, senior employees’ holds 475.000 share options with a
strike price of 4.75.
NOTE 4. EARNINGS PER SHARE
Earnings per share (EPS) is based upon the weighted average number of shares outstanding during the period. Diluted EPS includes the effect of the assumed conversion of potentially dilutive instruments. Instruments that have a positive intrinsic value has been included in dilution effects.
NOTE 5. RELATED PARTIES
Note 21 and accounting principles section 2.2 in the consolidated financial statements of 2015 describe the principles related to elimination of transactions between group subsidiaries. Eliminated transactions have no significance for the financial position and profit for the period.
The Group has carried out various transactions with subsidiaries and joint ventures. All the transactions have been carried out as part of the ordinary operations and at arm’s length prices.
Closing price at Oslo Stock Exchange per 31 December 2016 was NOK 3.78.
AMOUNTS IN NOK 1 000 31.12.2016 31.12.2015
Gross deferred tax asset1 29 680 43 221
Gross deferred tax liability1-46 350 -51 581
-16 670 -8 360
1) Gross deferred tax asset is recognized as intangible assets and gross deferred tax liability is recognized as provisions
Net deferred tax asset (+) / liability (-)
NOTE 6. TAX
TTS Group is taxable in more than one jurisdiction based on its operations. A loss in one jurisdiction may not be offset against taxable income in another jurisdiction. Thus, the Group may pay tax within some jurisdictions even though it might have an overall loss or have tax losses exceeding taxable profit at the consolidated level.
Deferred tax
Deferred income tax reflects the impact of temporary differences between the amount of assets and liabilities recognized for financial purposes and such amounts recognized for tax purposes. The net recognized deferred tax consists of the following:
Recognized deferred tax asset primarily relates to tax losses in the Norwegian and German companies, as well as short term tax differences from the Chinese companies. The criteria that have been utilized to estimate that future taxable profit can be utilized have been unchanged during the year.
AMOUNTS IN NOK 1 000 31.12.2016 31.12.2015 31.12.2016 31.12.2015
Net book value, beginning of period 701 807 564 464 141 821 67 918
Acquisition - 140 692 - 98 497
Divestment - - - -
Additions - 4 390
Depreciations/Amortizations - - -18 610 -24 557
Impairment -82 269 -28 050 - -16 625
Foreign currency differences -43 739 24 701 -18 928 12 199
Net book value, end of period 575 799 701 807 104 283 141 821
Other intangible assetsGoodwill
NOTE 7. GOODWILL AND OTHER INTANGIBLE ASSETS
TTS Group tests the value of goodwill and other intangible assets annually or at the end of each reporting period if any indication that the assets may be impaired.
TTS shares are freely traded at Oslo Stock Exchange. Closing price of last trading date in December 2016 was NOK 3,78 per share, indicating a nominal trade value of TTS of MNOK 327.
Book value of equity at 31 December 2016 was MNOK 439 excluding minority interest.
At the end of the current reporting period, TTS Group has not identified any changes in the overall financial market that give basis for a significant change in the average cost of capital.
The CGU "NMF", which was acquired in the 3rd quarter of 2012, encompass the activities within the legal entities TTS NMF GmbH - Germany, and TTS SCM - China. EBITDA in the 4th quarter 2016, excluding impairments, is around zero, a marginal improvement from the same quarter last year. The weak EBITDA margin reflects customer-initiated delays in project deliveries, combined with a slow market, which reduces overall utilization. Low charter rates combined with available unutilized tonnage from other marine sectors have delayed or cancelled investment prospects in new tonnage relevant to the CGU, which is reflected in a low order intake during 2016. TTS expects that the turnaround of the heavy lift market, as well as the development of the offshore wind installation market will take longer time than previously expected. Consequently, the book value of goodwill allocated to the CGU has been impaired by MNOK 82 in 4th quarter 2016.
An additional impairment of fixed assets by MNOK 16, and inventories by MNOK 20, in the CGU in 4th quarter 2016 reflects a reduction of short-term/mid-term utilization of resources.
During the past two years, the CGU "Offshore Solutions" in TTS has experienced substantial losses, combined with a low order intake. Changes in the segment structure combined with market conditions which remain challenging, gave basis for impairment of goodwill in 2015. The market development in 2016 is still weak. The book value of intangible assets in BUOFF is approximately MNOK 10 with a planned straight-line depreciation of close to MNOK 4 per year.
The CGU "Liftec" is a well-recognized supplier within the European niche market for translifters based on the activities within the legal entity TTS Liftec Oy. Based on market outlook and margins at yearend 2015, an impairment of goodwill of MEUR 2 (~MNOK 19) was allocated to the 4th quarter 2015. As of 2 February 2017, TTS Group has entered into a sales agreement of the shares in TTS Liftec OY. The sale is expected to give basis for a gain allocated to 1st quarter 2017. The gain reflects the company's improved performance and market development during 2016 compared to expectations at year-end 2015.
The CGU "Marine AB" has over the past years delivered improving turnover, and acceptable project margins. In 2016, we see a decrease in turnover and margin compared to last year. The reduction of margin is an effect of changes in the product mix, as well as losses on a few specific projects. Going forward, the Group expects lower new orders and risk of delays on existing orders in the market for car carriers. Although this is replaced by higher activity in the market for RoPax and Cruise, we expect a significantly lower turnover in this segment in 2017. Even after taking reduced market expectations into account, the expected future net cash flows from the CGU support that value in use exceeds book value.
TTS Group considers that there are no major events, changes in assumptions or other new information indicating a change in the valuation of goodwill or other intangible assets from year-end 2015 in the other business segments. Estimates related to future market expectations could have material impact on the impairment test.
Overview of goodwill and other intangible assets (excl. deferred tax asset) are as follows:
AMOUNTS IN NOK 1 000 31.12.2016 31.12.2015
Net book value, beginning of period 134 521 160 897
Acquisition - 2 979
Divestment - -
Additions 6 334 9 634
Depreciations/Amortizations -24 757 -29 318
Impairment -16 378 -20 098
Foreign currency differences -5 382 10 427
Net book value, end of period 94 338 134 521
AMOUNTS IN NOK 1 000 31.12.2016 31.12.2015
Net book value, beginning of period 84 975 102 582
Acquisition - 66 006
Divestment - -
Reclassification - -81 876
Share of profit (+) / loss (-) -17 970 1 007
Share of dividend received - -
Foreign currency differences 5 311 -2 744
Net book value, end of period 72 316 84 975
NOTE 8. NON-CURRENT ASSETS
NOTE 9. EQUITY ACCOUNTED INVESTMENTS
As per 31 December 2016, equity accounted investments include TTS Bo Hai Machinery Co Ltd. in which TTS Group ASA holds 50% of the shares, and Jiangnan TTS Ships Equipment Manufacturing Co Ltd. in which TTS Hua Hai Ltd. holds a 40% share portion. Both units are reported as part of the Container/Bulk/Tank segment. Losses in 2016 relates to the running operation of the steel production factory in Jiangnan.
TTS recorded an MNOK 16 impairment of fixed assets in the Multipurpose/ General Cargo segment in 4th quarter 2016. Higher cost of producing standardized heavy lift equipment in European high-cost countries has a negative impact on competitiveness, and hence on equipment utilization. The impairment reflects an expected reduction of utilization of the production equipment in Hamburg.
AMOUNTS IN NOK 1 000 31.12.2016 31.12.2015
Inventories, incl non current 183 707 439 515
Obsolescence -40 572 -25 358
Total inventories 143 135 414 157
NOTE 11. CHANGE OF CONTROL IN 50/50 OWNED COMPANIES
Governing agreements for the 50/50 owned company, TTS Hua Hai Ships Equipment Ltd Co. were changed in 2nd quarter 2015, and lead to THH being fully consolidated as from 2nd quarter 2015. Please find additional information on the 2015 effects in TTS Annual report 2015, note 27.
In 4th quarter 2016, TTS recorded an MNOK 20 obsolescence accrual of inventory in the Multipurpose/General Cargo segment. The accrual is a consequence of reduced potential to utilize parts of the inventory towards ongoing projects.
NOTE 10. INVENTORIES
Bank loan covenants 1Q 2017 - 3Q 2017 4Q 2017 1Q 2018 - 4Q 2018
NIBD*/ EBITDA
** maximum 4,25 4 3
Equity***
minimum 24 % 24 % 25 %
Minimum liquidity reserve MNOK 50 MNOK 50 MNOK 50
* NIBD = Net interest bearing debt, excluding subordinated convert ible bond loan, and including 50% of cash from 50% owned consolidated subsidiaries
** EBITDA from 100% owned companies + 50% of EBITDA from 50% owned consolidated subsidiaries, adjusted for one-t ime effects, including impairment, restructuring, gainsfrom
sale of businesses and changes of accounting regulat ions
*** Equity, including subordinated convert ible bond loan
AMOUNTS IN NOK 1 000 31.12.2016 31.12.2015
Bank deposits in fully owned companies 76 679 77 490
Bank deposits in 50/50 owned companies 99 105 335 720
Bank deposits 175 784 413 210
On 19 December 2016, TTS Group ASA entered into an agreement with Nordea and DNB on new financing agreements for credit and guarantee facilities, which represents an extension of the agreements the company had at the beginning of the prior fiscal year. The extended agreements expire on 1 January 2019. The credit facility in the agreement is 1 073 MNOK, consisting of:
MNOK 173, term loan facility (DNB)
MNOK 100, term loan facility (Nordea)
MNOK 200, multi-currency overdraft facility (Nordea)
MNOK 600, guarantee facility (Nordea MNOK 465, DNB MNOK 135)
The term loan facilities are classified as long term debt as per 31 December 2016. Overdraft facilities is classified as short-term debt.
The debt covenants per 4Q/2016 are not changed:
Accumulated EBITDA for 2016 > MNOK 100 Equity ratio > 25% (nominal value of remaining bond-
debt is to be included in the basis of calculation)
Minimum liquidity reserve (MNOK 50)
NOTE 12. FINANCIAL RISK MANAGEMENT
The Group's objectives and principles of financial risk management are consistent with what is stated in the consolidated financial statements for the fiscal year 2015. On 17 December 2015, the bondholders agreed to an extension of the subordinated debt until 18 April 2017. The TTS General Assembly approved the extension 5 January 2016. The amendments mainly involves a 15-month extension of the maturity date from 18 January 2016 to 18 April 2017, and a change of fixed coupon rate from 8% to 12%p.a. Changes also include minor amendments to conversion and redemption provisions. Terms and conditions in the renewed agreement have been evaluated according to IAS 39. Based on the evaluation the renewed agreement is considered a prolonging of the prior bond debt agreement. There has been no execution related to the subordinated bond facility during 2016. The nominal amount and conversion price of the convertible bond loan is unchanged from 4th quarter 2015 and is MNOK 95.3, giving right to 19.184.104 shares upon full conversion. The subordinated convertible bond debt is classified as short term debt as per 31 December 2016. The group has initiated a process to refinance/prolong the subordinated convertible bond loan in 1st quarter 2017.
An overall description of debt facilities, and additional information regarding financial risk management is available as part of the notes to the annual report 2015.
At end of 4th quarter 2016 TTS Group meet the set covenants.
TTS Korea has prolonged its prior credit facilities with Kookmin Bank in Korea, of which MNOK 25 was drawn. The credit facility is classified as short-term debt.
At the end of 4th quarter 2016, TTS Group has drawn MNOK 173 out of the total MNOK 173 loan facility with DNB. TTS group has drawn MNOK 178 of the total MNOK 300 loan and overdraft facilities with Nordea.
Consolidation of TTS Hua Hai and TTS SCM has significant effects on the cash flow and presented cash in the balance. Cash within the 50/50 companies is not available to other companies within TTS
Group.
The debt covenants from 1Q 2017 are:
NOTE 13. SUBSEQUENT EVENTS
Major events reported to Oslo Stock Exchange after 31st December 2016
On 2 February 2017, TTS signed an agreement with the Danish company Novatech ApS to sell TTS Liftec Oy. Revenues in 2016 was MEUR 12, with an EBITDA of MEUR 0.9. The agreed value of the transaction is a gross base price of MEUR 5,8 including net cash, payable at closing, and an earn-out of maximum MEUR 1,8 over the next three years if specific targets are met. In accordance with the company's bank loan agreements, 50% of the proceeds from the sale of TTS Liftec Oy will be applied as down payment on existing term loans.
Additional information on subsequent events is available at www.newsweb.no – ticker TTS.
Shareholders per 31.12.2016 Shares Share portion
SKEIE TECHNOLOGY AS 1) 22 655 763 26,2 %
RASMUSSENGRUPPEN AS 11 512 506 13,3 %
SKEIE CAPITAL INVESTMENT AS 1) 4 203 361 4,9 %
BARRUS CAPITAL AS 3 465 005 4,0 %
HOLBERG NORGE 3 292 500 3,8 %
PIMA AS 3 015 044 3,5 %
SKAGEN VEKST 2 411 069 2,8 %
CIPI LAMP UCITS SWEDBANK SMB 2 232 886 2,6 %
MERTOUN CAPITAL AS 1 769 598 2,0 %
DANSKE BANK AS 1 564 417 1,8 %
ITLUTION AS 1 475 261 1,7 %
KRISTIANRO AS 1 102 287 1,3 %
SKANDINAVISKA ENSKILDA BANKEN AB 1 011 552 1,2 %
AVANT AS 1 000 000 1,2 %
AVANZA BANK AB 947 153 1,1 %
RBC INVESTOR SERVICES BANK S.A. 800 000 0,9 %
NORDNET BANK AB 757 869 0,9 %
PHAROS INVEST I AS 682 000 0,8 %
GLASTAD INVEST AS 668 000 0,8 %
SIX-SEVEN AS 551 250 0,6 %
TRYM SKEIE 1) 323 140 0,4 %
SKEIE CONSULTANTS AS 1) 300 000 0,3 %
SKEIE ALPHA INVEST AS 1) 250 000 0,3 %
Other 20 614 999 23,8 %
86 605 660 100,0 %
1) Shares ow ned or controlled by members of the Skeie family.
Bondholders as per 31.12.2016
Conversion
rights
Share portion if
fully diluted
MP PENSJON PK 6 036 217 5,7 %
SKEIE TECHNOLOGY AS 1) 3 912 474 3,7 %
Skandinaviska Enskilda Banken AB NOM 1 685 110 1,6 %
DANSKE BANK A/S NOM 1 252 515 1,2 %
SKEIE CONSULTANTS AS 1) 1 207 243 1,1 %
AKERSHUS FYLKESKOMM. PENSJONSKASSE 804 828 0,8 %
TAMAFE HOLDING AS 1) 804 828 0,8 %
MERTOUN CAPITAL AS 804 828 0,8 %
SKEIE CAPITAL INVESTMENT AS 1) 704 225 0,7 %
Other 1 971 822 1,9 %
19 184 090 18,1 %
1) Shares ow ned or controlled by members of the Skeie family.
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