TTS ASA : Strong Q4 performance gives positive full year result

The Q4 operating result before depreciation (EBITDA) was MNOK 141.8. Adjusted for the one-time effect of pension plan changes in the Norwegian entities, the operating profit still improves strongly, leaping from a loss of MNOK 110 in Q4 2013 to a profit of MNOK 36.1. Preliminary full year EBITDA excl. pension adjustments increased from a loss of MNOK 130.3 in 2013 to a profit of MNOK 4.2.

"The positive development is mainly attributable to our continuous work on improving internal processes, cutting cost and adjusting activities to current market conditions within segments experiencing low tides," says Andersson, and points to a decrease of about MNOK 70 each for both indirect overhead cost and material cost.

"2014 saw an all-time high for our service operations and a continued strong performance in the market for RoRo and Cruise. These achievements were regrettably offset by restructuring costs and by a poor performance within Offshore. In addition we now also see that several loss-generating projects that have weighed down the accounts for quarters, are close to reaching their end," says Andersson.

Q4 revenues increased from MNOK 638 in 2013 to MNOK 734 in 2014. Full year turnover decreased from MNOK 2,693 in 2013 to MNOK 2,435 in 2014. The reduction was expected and primarily attributable to lower activity in the Container / Bulk / Tank and Multipurpose / General Cargo units. However, the Q4 order intake of MNOK 498 relates mainly to large orders in these two units, so there are signs that these segments are picking up. The Group order backlog per year-end 2014 amounts to MNOK 3,627 compared to MNOK 2,971 at the end of 2013. An impressive new order intake in TTS's joint ventures in China, where market growth is considerable, is the main explanation for the increased order backlog. The figures includes 50% of the order backlog related to Chinese joint-ventures.

Securing long-term financial facilities

The TTS Group ASA was in breach of certain loan covenants in parts of 2014 and received waivers from its lenders. For the period from Q4 2014 through Q3 2015, the banks have established a new set of covenants combining a lower equity ratio with gradually increasing EBITDA requirements.

Moreover, the process of evaluating the Group's financial structure has been initiated in order to prepare for the scheduled maturity of the Group's current bank facilities in Q4 2015 and of the remaining outstanding part of the bond loan in Q1 2016.

Business units in brief

The TTS Group established a new corporate structure in the third quarter of 2014, entailing six business units. The RoRo / Cruise / Navy unit continued its strong performance in 2014 with a Q4 and full year EBITDA of MNOK 25 and 77 respectively. The order backlog grew from MNOK 762 to 854.

The Container / Bulk / Tank unit faces challenging market conditions caused by low freight rates in certain segments. The results are also affected by restructuring costs related to transfer of operations from Germany to Korea - a measure expected to have substantial positive long-term effects. The unit's Q4 EBITDA loss was MNOK 7, up from a loss of MNOK 52 in 2013. The Chinese joint ventures contributed positively to the unit's result and had an impressive order intake in 2014.

For the Multipurpose / General Cargo unit, low revenues reflect that it has taken longer than expected for the market for heavy lift cranes to pick up. The order backlog - growing from MNOK 307 in 2013 to MNOK 562 in 2014 - however points to increased activity in the segment.

The Offshore unit recorded a Q4 EBITDA loss excl. pension adjustment of MNOK 4.3, yet a considerable improvement compared to a loss of MNOK 75.2 in Q4 2013. The unit faces challenges related to a current slow in the market, and is implementing a new round of downsizing following the major restructuring undertaken in 2014.

Shipyard Solutions recorded a Q4 turnover and EBITDA excl. pension adjustments of MNOK 53 and 7.5 respectively, reflecting the unit's strong position in a moderately sized market for shiplifts and transfer systems.

Group efforts to become a more proactive service provider with a stronger global footprint resulted in an all-time high for the Services unit in 2014 - in terms of both turnover and operating profit. Full year operating income was MNOK 530, an increase of MNOK 84 compared to 2013. Full year EBITDA excl. pension adjustments amounted to MNOK 59, a sound increase from MNOK 43 in 2013.

Outlook

During 2014, the TTS Group has implemented strong cost-cutting measures and initiatives to improve internal processes and value chains. These actions will continue with full force in 2015 along with new market initiatives aiming to provide complete ship-type solutions for key customers. "Although there is some work remaining, we are close to putting behind us a number of challenging projects - primarily within offshore - that have weighed down the accounts for quarters. Conditions will continue to be difficult in the offshore sector, but we are adjusting operations according to lower market activities. Furthermore, we see positive trends in important marine segments, so I think it is fair to say that we are proceeding steadily towards a better long-term performance," says Andersson.

Further growth: In order to position the TTS Group for further growth the Board of Directors of TTS Group has decided to run a strategic process to explore opportunities for both acquisitions and partnerships. Please see separate release.

Bergen, 12 February 2015