Oslo – 17 November 2022 – Seaway 7 ASA (the Group or Seaway7) (Euronext Growth: SEAW7) announces today results for the third quarter 2022 which ended 30 September 2022.
Third quarter highlights
• Third quarter 2022 revenue at $374 million and adjusted EBITDA of $21 million.
• Completion of the Hollandse Kust Zuid foundations installation and the Formosa 2 project.
• Completion of the Seagreen foundation fabrication activities in China with the final 19 foundation jackets on their way to the UK.
• First monopile foundations installed on the Dogger Bank A&B project.
• Post quarter end, financing completed with $650 million committed funding provided by shareholders, banks and ultimate parent, Subsea 7 S.A.
• Order intake in the second quarter of $198 million resulting in backlog of $0.6 billion at third quarter end.
• Satisfactory progress with Seaway Alfa Lift and Seaway Ventus newbuild vessels.
• Seaway Swan added to the fleet. Seaway7 now operates 14 vessels with 12 active and 2 under construction.
For the period (in $ Third Quarter Nine Months Ended
millions, except
Adjusted EBITDA margin Q3 2022 Q3 2021 30 Sep 2022 30 Sep 2021
and per share data) Unaudited Unaudited Unaudited Unaudited
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Revenue 374 377 901 934
Adjusted EBITDA(a) 21 19 19 (6)
Adjusted EBITDA margin(a) 6% 5% 2% (1%)
Net operating (loss)/income (3) 5 (48) (47)
Net loss (8) (3) (76) (69)
Earnings per share – in $ per share - restated(b)
Basic (0.02) (0.01) (0.15) (0.19)
Diluted(b) (0.02) (0.01) (0.15) (0.19)
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30 Sep 2022 30 Jun 2022
At (in $ millions) Unaudited Unaudited
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Backlog(c) 598 803
Book-to-bill ratio – year-to-date(c) 0.4 0.3
Cash and cash equivalents 8 11
Borrowings (195) (120)
Net debt excluding lease liabilities(d) (188) (109)
Net debt including lease liabilities(d) (233) (122)
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(a) For explanations and reconciliations of Adjusted EBITDA and Adjusted EBITDA margin refer to Note 8 ‘Adjusted EBITDA and Adjusted EBITDA margin’ to the Condensed Consolidated Financial Statements.
(b) The weighted average number of shares utilised in the earnings per share calculation has been restated for each period presented following the rights issue undertaken by the Group. For further information and for the explanation and a reconciliation of diluted earnings per share refer to Note 7 ‘Earnings per share’ to the Condensed Consolidated Financial Statements.
(c) Backlog is a non-IFRS measure. Book-to-bill ratio represents total order intake divided by revenue recognised in the year. Comparative figure is for the year-to-date ended 30 June 2022.
(d) Net debt is a non-IFRS measure and is defined as cash and cash equivalents less borrowings.
Stuart Fitzgerald, Chief Executive Officer, said:
In the third quarter of 2022, Seaway7 delivered strong revenue of $374 million and a slightly improved EBITDA of $21 million. The Group completed the foundations installation of the Hollandse Kust Zuid project in the Netherlands in early September 2022 as well as the Formosa 2 project in Taiwan in mid-August 2022. Completion of both projects represents two significant milestones in our delivery for 2022.
Activity levels on the other projects in the portfolio were high in the third quarter with good progress on projects and offshore operations ongoing in UK and Europe. Cable lay activities in Taiwan remain challenging due to external factors hindering the progress of works, primarily from reduced client progress with foundation installation.
In respect of tenders during the quarter, the Group signed a sizeable contract for Moray West inner-array cables (UK) which has been recognised in backlog at quarter end.
Post quarter end, Seaway7 completed its financing arrangements, with committed funding from its shareholders, banks and ultimate parent, Subsea 7 S.A. thereby providing Seaway7 will a fully funded business plan. The financing funds the new build vessel programme of Seaway Alfa Lift and Seaway Ventus from the third quarter 2022 through to completion and supports the future anticipated working capital needs of the Group.
Third quarter operational review
The Seagreen project in the UK continued its good progress. Of the 114 foundation jackets, 95 foundation jackets have been delivered in the UK at the end of the third quarter 2022. Fabrication of the remaining foundation jackets has been completed in China and the last final transport vessel is currently offloading in Nigg (UK). Completion of fabrication activities on Seagreen is a major milestone for the project. The third quarter saw continued good progress with the installation of foundation jackets and inner array cables. By quarter end a total of 65 foundation jackets and 43 cables were installed.
The installation of foundations for the Dogger Bank A&B project in the UK has commenced in July 2022 with a third-party vessel, whilst the Seaway Strashnov started its mobilisation early September 2022 to continue the offshore operations in the fourth quarter of 2022. Due to Seaway Alfa Lift’s delivery delay, Seaway Strashnov will be deployed on the project for a full 2023 campaign. The additional cost of the revised execution plan was recognised in the second quarter as a prior year revision to the fair value exercise of measuring and recognising the identifiable assets acquired and liabilities assumed relating to the business combination to form Seaway 7 ASA and has not affected the Adjusted EBITDA for 2022.
Seaway Strashnov continued its good run in July and August and completed the foundations on Hollandse Kust Zuid in the Netherlands in line with the revised schedule. With the completion of the foundations installation on this project, Seaway7 had successfully installed 113 monopiles on Dynamic positioning (DP), a first in the industry using this new installation method.
After two seasons of operations in Taiwan, Seaway Yudin completed offshore operations on the Formosa 2 project in the second half of August 2022.
Seaway Aimery and Seaway Moxie continued working on the Hollandse Kust Zuid project inner array cables installation in the third quarter. By the end of the quarter, Seaway7 installed 99 out of the 140 cables. Seaway Phoenix continued working on the Seagreen project, UK. Maersk Connector experienced delays during her operational activities for Seaway7’s cable lay portfolio in Taiwan which was caused by external factors.
The heavy transportation vessels maintained high levels of utilisation in the third quarter despite Seaway Falcon being idle most of the quarter. The utilisation, in combination with the time charter equivalent rates on the other vessels, maintained a positive result for the heavy transportation vessels in the third quarter. The Group entered into a bareboat contract with United Faith, and has taken delivery of a new build vessel, MV Xin Qun 3, which was renamed “Seaway Swan”. Seaway7 now operates six heavy transportation vessels with the new vessel further extending the Group’s capacity to load larger and longer cargoes such as XXL monopiles, and modules that would typically need to be skidded on and off the vessel over the stern. In the third quarter, Seaway Swan had its first voyage transporting four large Ship-to-Ship cranes from their pick-up point in Asia to north Africa.
During the third quarter 2022, the utilisation of the active fleet was 90%, compared to 77% in the second quarter 2022.
For the newbuild foundation installation vessel, Seaway Alfa Lift, the repairs of the Liebherr crane A-frame continued in the third quarter and are expected to be complete late 2022, whilst the vessel is expected to sail to Europe in the first quarter 2023. The mission equipment for the upending and lowering of monopiles is still the critical path to the vessel’s readiness for operations. Progress continues according to the revised planning communicated to the market in the second quarter 2022 earnings call update We expect to install the mission equipment on the vessel during the winter of 2023/2024, with first use on the Dogger Bank A&B project end of the first quarter 2024.
Seaway Ventus has moved into the next phase of construction with leg-fabrication and outfitting, the Gusto crane is progressing as planned and most of the equipment factory acceptance tests have been completed successfully. The vessel remains on course for delivery mid-2023 from the yard in China with current first committed project being end of the first quarter 2024.
Third quarter financial review
Third quarter revenue of $374 million was broadly flat year on year driven by generally high activity across the portfolio. The Adjusted EBITDA margin of 6% improved by 1% compared to the prior year period. After depreciation and amortisation of $24 million, the Group recorded a net operating loss of $3 million. Net loss for the quarter was $8 million, after a tax charge of $4 million.
During the quarter, net cash used in operating activities was $40 million, mainly driven by unfavourable movements in working capital. Capital expenditure was $33 million and related to milestone payments for Seaway Alfa Lift and Seaway Ventus. Net cash generated from financing activities of $69 million included receipt of a $75 million short-term loan from the Group’s ultimate parent undertaking, Subsea 7 S.A., offset by $6 million payment of lease liabilities. Cash and cash equivalents were $8 million as at Q3 2022.
In the third quarter, the Group recognised new awards of $102 million and escalations of $96 million, resulting in a year-to-date book-to-bill ratio of 0.4. Backlog at 30 September 2022 was $0.6 billion, of which $166 million is expected to be executed during the remainder of 2022. Not included in the aforementioned backlog is preferred contractor positions and contract awards, which have been formally announced to the market, but remain subject to contract finalisation and/or client final investment decision.
Outlook
Forecasts for offshore fixed wind activities remain strong for the next decade with compounded annual growth rates of more than 15% predicted, which is driven by ever more pressing climate imperatives, and more recently, energy independence considerations.
Supported by favourable market conditions and challenging financial performance across a number of segments within the supply chain in recent years, the industry is now in the process of a move towards a more sustainable risk-reward balance and improved pricing levels. The Group is actively driving these commercial and risk profile improvements in its tendering and client engagements towards future business, and furthermore is able to be more selective on which projects to pursue to best match our assets and capabilities.
With tender levels remaining high, our confidence on activity levels and demand for Seaway7 services going forward is strong. Looking forward to 2023 Seaway7 anticipates reduced Revenues compared to 2022, but with a higher absolute and percentage EBITDA margin. Capex in 2023 is anticipated to be in the range of $310-330 million. Beyond 2023 Seaway7 expects material growth in EBITDA delivery from the business, driven by additional fleet capacity with both the Seaway Alfa Lift and Seaway Ventus operational, as well as work secured under strong market conditions, with improved contract and commercial terms.
Special Note Regarding Forward-Looking Statements
Forward-Looking Statements: This announcement may contain ‘forward-looking statements’. These statements relate to our current expectations, beliefs, intentions, assumptions or strategies regarding the future and are subject to known and unknown risks that could cause actual results, performance or events to differ materially from those expressed or implied in these statements. Forward-looking statements may be identified by the use of words such as ‘anticipate’, ‘believe’, ‘estimate’, ‘expect’, ‘future’, ‘goal’, ‘intend’, ‘likely’ ‘may’, ‘plan’, ‘project’, ‘seek’, ‘should’, ‘strategy’ ‘will’, and similar expressions. The principal risks which could affect future operations of the Group are described in the ‘Risk’ section of the Group’s Annual Report. Factors that may cause actual and future results and trends to differ materially from our forward-looking statements include (but are not limited to): (i) our ability to deliver fixed price projects in accordance with client expectations and within the parameters of our bids, and to avoid cost overruns; (ii) our ability to collect receivables, negotiate variation orders and collect the related revenue; (iii) our ability to recover costs on significant projects;(iv) unanticipated delays or cancellation of projects included in our backlog; (v) competition and price fluctuations in the markets and businesses in which we operate; (vi) the loss of, or deterioration in our relationship with, any significant clients; (vii) the outcome of legal proceedings or governmental inquiries; (viii) uncertainties inherent in operating internationally, including economic, political and social instability, boycotts or embargoes, labour unrest, changes in foreign governmental regulations, corruption and currency fluctuations; (ix) the effects of a pandemic or epidemic or a natural disaster; (x) changes in, or our failure to comply with, applicable laws and regulations (including regulatory measures addressing climate change); (xi) operating hazards, including spills, environmental damage, personal or property damage and business interruptions caused by adverse weather; (xii) equipment or mechanical failures, which could increase costs, impair revenue and result in penalties for failure to meet project completion requirements; (xiii) the timely delivery of vessels on order and the timely completion of ship conversion programmes; (xiv) our ability to keep pace with technological changes and the impact of potential information technology, cyber security or data security breaches; and (xv) the effectiveness of our disclosure controls and procedures and internal control over financial reporting. Many of these factors are beyond our ability to control or predict. Given these uncertainties, you should not place undue reliance on the forward-looking statements. Each forward-looking statement speaks only as of the date of this announcement. We undertake no obligation to update publicly or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
Webcast and conference call information:
Date: 17 November 2022
Time: 14:30 CET
Please join the webcast through:
https://channel.royalcast.com/landingpage/hegnarmedia/20221117_3/
The webcast will also be available through Seaway7 website
https://www.seaway7.com/investors/results-reports-publications/
Conference call details
Participant Passcode (for all countries): 447972
Participants dial-in numbers:
Norway: +47 21956342
Sweden: +46 406820620
UK: +44 2037696819
USA: +1 6467870157
International dial in: +44 2037696819
Please join the call 5-10 minutes prior to scheduled start time.
For further information, please contact:
Mark Hodgkinson
ir@seaway7.com