Endúr : Andre kvartal 2021

Q2/H1 REPORT 2021

Endúr ASA

HIGHLIGHTS

KEY FINANCIALS

NOK in million	Q2 2021	Q2 2020	YTD 2021	YTD 2020	FY 2020
P&L
Sales	542,3	58,2	778,2	143,6	280,6
EBITDA	27,1	(1,0)	11,3	0,3	(11,0)
EBIT	(7,0)	(3,5)	(40,7)	(4,8)	(63,9)
Adjusted EBITDA
EBITDA	27,1	(1,0)	11,3	0,3	(11,0)
Restructuring costs	-	-	11,2	-	-
Transaction costs	10,1	0,2	27,8	0,5	10,2
Other special items	-	-	-	-	(7,4)
Adjusted EBITDA	37,2	(0,9)	50,4	0,7	(8,3)
Total assets	2 492,9	299,9	2 492,9	299,9	979,4
NIBD	989,3	70,5	989,3	70,5	178,5
Equity ratio	29,1%	36,1%	29,1%	36,1%	32,6%
EBITDA pct.	5,4%	(1,8)%	1,57%	0,2%	(3,9)%
Adjusted EBITDA pct.	6,9%	(1,5)%	6,5%	0,5%	(2,9)%

SECOND QUARTER HIGHLIGHTS

• Q2 2021 marked the first whole quarter in which all the three recently acquired companies operated under Endúr ownership, and hence also in alignment with Endúr's strategic redirection as resolved in the fall of 2020.
• BMO Entrepenør AS was acquired effective 18. Dec. 2020, and Artec Aqua AS and Marcon- Gruppen i Sverige AB acquired both effective 12. March 2021.
• The Group's order backlog at the end of Q2 remains strong at approx. NOK 2.5 billion., largely unchanged from the end of Q1, implying an order intake in line with group revenues in Q2 2021.
• The continued restrictions posed by COVID-19 has thus far made comprehensive interaction and integrating measures between the new entities challenging.
• Endúr's Norwegian marine infrastructure operations earned a strong margin on historically high revenues in Q2 2021, maintaining also an historically high order backlog.
• The Swedish marine infrastructure operations have seen a y/y revenue decrease, mainly resulting from project delays and a COVID-19 induced downturn in activity. Order intake has recently improved.
• Endúr's aquaculture solutions operations maintains a very high order backlog, with also several highly promising prospects for land-basedgrow-out fish farming facilities in the offing. Costly tail- end activities on two projects completed in Q2 2021 has however negatively impacted the financial result.
• Endúr's subsidiary Endúr AAK AS was divested effective June 30th, 2021.

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Please confer the H1 / Q2 2021 company presentation published with this interim report for comprehensive proforma financial information for both H1 and Q2 2021, as available on the company's website.

FIRST HALF-YEAR HIGHLIGHTS

When considered in concert with the Q2 2021 highlights rendered above, the first half-year highlights include:

• Completion of the acquisition of Marcon-Gruppen i Sverige AB; SPA entered into February 2nd, effective March 12th, 2021.
• Completion of the acquisition of Artec Aqua AS; SPA entered into January 11th, effective March 12th, 2021.
• Endúr undertook a successful placement of a NOK 1100 million senior secured bond loan, the main purpose of which was to refinance all interest-bearing debt in both existing and newly acquired subsidiaries, as well as secure funding for the part cash consideration of the acquisitions completed in Q1 2021.
• The Endúr board of directors has been subject to wholesome changes, reflecting Endúr's now approx. 44 percent industrial ownership resulting from the share consideration part of the recent acquisitions of BMO Entreprenør, Marcon and Artec Aqua. All five shareholder elected board members, including the chairman, have been appointed in 2021.
• In January 2021 Hans Olav Storkås was appointed CEO and Lasse B. Kjelsås appointed CFO of Endúr ASA and the group, replacing Hans Petter Eikeland and Nils Hoff, respectively.

Collectively, the first half of 2021 has thus very much comprised a transformational period for Endúr, with the completion of two major acquisitions, with bankruptcies declared in two loss-making entities (ØPD and Endúr Industrier), the divestment of non-core Endúr AAK, the complete refinancing of the Group's interest-bearing debt and the onboarding of a new board of directors and executive manage- ment. In sum, all these comprehensive changes can be said to originate with the Group's strategic redirection, as resolved in the fall of 2020, cf. the board of directors' report as part of Endúr's 2020 annual report.

This very comprehensive transformation has however, involved material restructuring and transaction costs, which in sum have materially negatively impacted Endúr's financial results In H1 2021.

SUBSEQUENT EVENTS

No material events have taken place subsequent to the 30 June 2021 accounting period closing date.

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OPERATIONAL REVIEW

The main operative (as well as structural) events of the first half of 2021 are unquestionably the inclusion into the Group of Artec Aqua AS and Marcon-Gruppen i Sverige AB, both acquisitions effective March 12th, 2021. Add to this the acquisition of BMO Entreprenør AS, effective late (December 18th) in 2020, which in sum corresponds to an Endúr comprising a wholly different company per the end of H1 than at the start of the year.

BMO Entreprenør and Marcon constitute the main part of Endúr's marine infrastructure segment. The two companies largely operate within their respective domestic markets, which have exhibited rather differing base propensities in the first half of 2021. BMO Entrepenør has furthered their positive development since the fall of 2020, with revenue growth, significant order intake and a record-high backlog, which combined with the company's unyielding focus on costs and best-practice project management has yielded strong financial results and a favourable outlook for the rest of the year.

The Swedish domestic construction and rehabilitation market, marine infrastructure inclusive, has experienced less favourable general economic and business conditions. The Swedish government has less actively and to a lower extent, employed Covid-19 economic recovery measures targeted at the building and construction sector, than their Norwegian counterparty. The effects of this were not very apparent until this year, as ongoing major infrastructure projects carried the sector through 2020.

In 2021 however, Marcon has endured a revenue decrease of 25% relative to the same period in 2020. In addition to the general domestic economic circumstances, marine infrastructure providers such as Marcon were afflicted by an unusually long and cold winter, with frozen waterways and ice packed harbours even far south, causing delays for both ongoing and new projects. The aforementioned revenue decrease is almost wholly attributable to Marcon's activities in the northern part of Sweden.

Marcon and other contractors have been further negatively impacted by a substantial reduction in the private newbuilding and maintenance household sector, causing contractors there to migrate over to the infrastructure sector, with the margin implications of an increased number of bidders on a relatively low project volume.

The revenue decrease irrespective, Marcon has managed to uphold a positive, high single-digit EBITDA margin in H1 2021, attributable to also Marcon's ingrained cost focus and best-practice project management. Marcon has grown their order backlog through the second quarter, albeit not nominally by as much as is customary for a second quarter.

Following their inclusion into the Group, the activities of Artec Aqua comprises by some magnitude the largest part of Endúr's aquaculture solutions segment. A turnkey supplier of land-based aquaculture facilities, based on their in-house developed, industry leading water treatment solutions design, Artec Aqua has grown their revenues and EBITDA more than fourfold over the last five years. Consistently the company has predominantly employed partnership agreements (NO: Samspills- kontrakter) with an "open book, cost plus" contract structure for their turnkey deliveries, involving a shared risk exposure, and a key component to the company's overall risk management.

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In H1 2021 Artec Aqua has undertaken tail-end activities on and completed two projects, both of which financially has impacted the company's accounts negatively in 2021. One of the projects entered into a malus situation, and also had a relatively large fixed-price scope. Over their lifecycles, both projects have achieved fair returns, but the project completion phases proved more involved, with more comprehensive claims and required more than expected resources, hence negatively impacting their financial result. Endúr and Artec Aqua are undertaking a comprehensive review of both projects to ensure that lessons are learned from their dissatisfactory completions.

ORDER BACKLOG

At the end of H1 / Q2 2021, Endúr had a total order backlog of NOK 2 454 million, as allocated between the group operating segments per the below graph.

The order backlog reflects remaining value from signed contracts, including estimated future call-offs of contractual framework agreements and other time-limited agreements. The estimates relating to the residual value of framework agreements are reviewed quarterly. Options related to signed agreements and contracts are not considered in the order backlog.

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