Akastor (Oslo:AKAST) Q2 2026 Earnings Call

0:00 Good morning and welcome to the presentation of Akastor's Second Quarter Results. My name is Ivan Poske, CFO and I'm joined today by our CEO, Karl Erik Kjerstad. As in the previous quarter, our presentation now includes less detailed coverage of HMH as that now is a listed company reporting independently. Their Q2 webcast replay and transcript are available on their website. We will take questions at the end of the session and you may submit them at any time through the online Q and A function. To start, Kalle will take you through the key developments of the quarter. Kalle, over to you. Thank you, Ewen, and good morning, and thank you all for joining us this morning.

0:44 I will start with the key highlights as mentioned for Eivind and before briefly taking you through the portfolio and also our ownership at Ganda. Let's move to Slide two. Second quarter marks another important step in Akastor's transition from value creation to value realization and shareholder distribution. We are pleased to announce that the Board has approved a cash dividend of NOK0.50 per share, supported by proceeds from the sale of Scandi Emerald. In fact, this represents our fifth consecutive quarterly distribution to shareholders. The HMH IPO was completed in April, reducing Akastor ownership to 36% and contributing significant cash proceeds to Akastor during the quarter.

1:36 Also delivered a solid operational and financial performance with adjusted EBITDA of $34,000,000 corresponding to 20% margin and a strong order intake representing a book to bill ratio of 1.2 supporting management's increased activity and expectations for the second half of twenty twenty six. Arkoffs Offshore continued to deliver stable operations across the fleet, supported by strong utilization and operational performance. For Neste Aircraft, an important milestone was reached after quarter end with the successful placement of the new US650 million dollars senior secured bond. The transaction supports refinancing and a planned shareholder recapitalization of up to US350 million dollars And Akastor expects to receive its share of cash proceeds available to shareholders through that recapitalization, but subject to remaining conditions and approvals.

2:38 DDV Offshore also continued its realization process completing the mentioned sale of Skrania Emerald in June for $23,000,000 Finally, this is also the first quarter where we present a fair value adjusted NAV. The key change is HMH, which is now listed and can be valued based on the closing share price at the end of the quarter. All other investments continue to be reflected at book value. As HMH represents around 60% of gross asset value, the listed share price provides a clear market reference for a significant part of the portfolio, making Enab a more relevant measure going forward. Net asset value amounted to SEK4.7 billion at the end of June and that corresponds to NOK17.3 per share.

3:32 Eivin will take you through more details later regarding this in the presentation. Let's move to slide four, the portfolio overview. The portfolio is largely unchanged from the previous quarter with HMH as a listed investment following the IPO completed in April. HMH remains our largest investment with Akastor holding an economic interest of 36.3%, a slight adjustment to the 36.2% used in the second quarter based on the actual share count per June. Net Sphere cost remains an important financial investment and our customer continued to hold an estimated economic interest of around 15%. Akastor ASA at 66.7% on investment, while DDU Offshore is now down to only one remaining vessel following the sale of Scandi Atlantic earlier this year and Scandi Emerald in June.

4:31 In addition, we continue to hold some smaller investments in Akastor Fern Energy Service and EcoM Lefte Technik, which provide further optionality, but represent a smaller share of our total values. Let's take a look at some of the portfolio companies starting out with HMH at slide five. For the second quarter, HMH reported revenues of US701 and an adjusted EBITDA of US34 million dollars corresponding to 20% margin. The margin performance demonstrates the resilience despite the dynamic market environment. Order intake was strong and the first half book to bill ratio of 1.2 supports increased activity and expectations that we have for the second half of twenty twenty six.

5:19 Following the IPO, HMH is now listed and provides a direct market reference for Akastor's largest investment. From an Akastor perspective, HMH's listing is important for two reasons: first, it has established a public market valuation for the investment and secondly, it improved liquidity and further optionality for Akastor ownership position. Our ownership remains however unchanged. We will continue to support HMH's strategy to drive profitable growth and value creation both organically and through selective M and A. We also want HMH to maintain its strong market position through technology leadership and customer focus in innovation. At the same time, we will actively manage our ownership over time with a clear focus on value realization.

6:11 We are not in a rush and any further decision will be based on market condition, liquidity and overview of the underlying values in HMH. Let's move to Slide six and NES Faregroft. During the quarter, NES completed the acquisition of Halian, establishing a platform for diversification into technology services. This is an important strategic development and broadens the company exposure beyond its traditional engineering workforce business. Operationally, the company continued to deliver solid performance and underlying EBITDA increased 7% year on year, while performing last twelve months EBITDA reached US64 dollars reflecting Halion pre acquisition performance and annualized synergies.

6:58 Cash generation was also strong, driven by effective working capital management. Post quarter end, Neos, as mentioned, successfully placed a new $650,000,000 bond, supporting refinancing and a plan shareholder recapitalization. While a substantial portion of the proceeds will be used to refinance existing debt, the bond terms also allow for dividend recapitalization of up to $350,000,000 subject to, as mentioned, leverage and other conditions. This is an important step both for Aneas and for Akastor, giving an important long term capital structure, while creating the potential for cash proceeds to shareholders, shut back to remaining conditions and approvals.

7:44 From an ownership perspective, Oleganden remains to support the growth in nano sphere growth by organic initiatives and also selective M and A, well, in order to optimize value at exit. The planned recapitalization process represent an important building block in this strategy. Slide seven, AKOFS Offshore. AKOFS delivered a strong quarter with a revenue of US44 dollars and an EBITDA of US16 million dollars Operational performance was solid across the fleet. AKOFS delivered a revenue utilization of 98% in the quarter, supported by stable operation following completion of the class renewal survey in the first quarter. Akastor Seafarer delivered a revenue utilization of 93% with a strong operational performance.

8:35 Akastor Santos delivered some lower revenue utilization this quarter with 86% impacted by the temporary thruster motor failure in May, but returned to near full utilization in EU following the repair of this mansion thruster.

8:51 Commercially, Akastor is in a strong position with a good contract coverage and a long term visibility across the fleet. The contract awards and renewals secured over the past year has strengthened the backlog and earnings predictability, providing a solid foundation for the ongoing refunding process and supporting further value creation. Our ownership agenda remains focused on securing delivery on the order backlog and exploring strategic initiatives over time. Slide eight, GDV Offshore. GDV now owns only one remaining anchor handling vessel, Emperorgino, following the sale of Scandi Emeral in June. Scandi Pergino remained on contract in Australia throughout the quarter and delivered a solid 98% utilization.

9:43 During the quarter, the firm contract period was extended to November 2026 to an exercise option providing continued visibility and for the remaining vessel. The sale of Skane Emerald was completed in June for the mentioned $23,000,000 The transaction generated a positive impact on revenue and EBITDA in the quarter and contributed to Akastor's strengthened liquidity position. The DDB transaction are fully aligned with our strategy of value realization. We have reduced exposure to maturing investment, realized cash proceeds and created a basis for further shareholder distributions. Going forward, the focus for DDV is to safeguard operations, secure high utilization for Scandinavia and Peruvianu and optimize value at the exit.

10:35 Then finally, let's look at Slide nine with the key priorities for Akastor going forward. Akastor's strategy remains focused on value creation, enabling liquidity and returning capital to shareholders. We work to work we continue to work actively with our portfolio companies to maximize value through strategic, operational and financial initiatives. That remains the foundation for our ownership model. At the same time, we are increasingly moving from value creation into value realization. The HMH IPO, the DDV vessel sales and refinancing and recapitalization of Nestle aircraft are all examples of this. Our objective is to create portfolio liquidity and optimize the timing of exits either through cash realization or listed shares.

11:28 When proceeds are realized, we will continue to assess distribution to shareholders while at the same time maintaining a strong capital structure. The fifth consecutive dividend approved in connection with the second quarter is a clear example of this strategy put into action. With that, I will hand over to Ewen, who will take you through the financial update in more detail. Ewen, over to you. Thank you, Karl. And I will then take you through our financials, starting on Slide 11 with our balance sheet and the fair value adjustments. As Karl mentioned, following the listing of HMH, we are shifting focus from book values towards fair value adjusted net asset value.

12:14 The key reason is, of course, that the EdgeMatch is now listed, which gives us a clear market reference for this investment, which represents around 60% of our gross asset values. As shown in the table to the left on this slide, the only fair value adjustment is related to HMH, while all the other investments continue to be reflected at book value. So starting with HMH, the carrying value in our books was 3,010,000,000 at quarter end, reflecting then Akastor's 36.3% post IPO ownership share under the equity method. The fair value adjusted value was NOK2.966 billion based on the closing share price of US18.74 dollars per share at the end of June.

13:07 This gave a negative fair value adjustment of NOK 44,000,000. Since quarter end, the share price of HMH has increased, implying a higher fair value of Akastor's HMH investment today than reflected in the net asset value as per Q2. The book value of HMH decreased by NOK $433,000,000 during the quarter, mainly reflecting the reduced ownership following the IPO as well as IPO related accounting effects recognized during the period. Going forward, HMH's book value will reflect Akastor's share of HMH's reported equity under the equity method, while the net asset value view will separately reflect the market value of our listed holding.

13:56 For DDV, book values decreased during the period following the realization of Scandi Mural. The sale was completed for $3,000,000 as mentioned, with value then effectively transferred into cash. Akastor Offshore remains carried at zero in our reflecting the prior reduction of the equity investment. We do, however, continue to carry the shareholder receivable provided to Akastor's full value included here under shareholder receivables.

14:26 Other assets and other liabilities remained relatively stable through the period. Shareholder receivables were reduced following the cash settlements of the HMH shareholder loan in connection with IPO, while cash and fund investments increased to NOK560 million at quarter end. Debt was reduced during the quarter following the DDV realization. In total, book equity value decreased by SEK $472,000,000 during the quarter, primarily reflecting the dividend payment of NOK 1.5 per share paid in May and accounting effects recognized in the period. At the same time, value realizations in HMH and DDV transferred value into cash, strengthening the balance sheet liquidity position.

15:18 Our total fair value adjusted NAV was 4,735,000,000 at the end of June, corresponding to NOK 17.3 per share, which was then broadly in line with the book equity value per share as per June 30.

15:38 Let's then turn to the next slide for the overview of cash movements. In Q2, our net cash position increased by SEK $321,000,000 to SEK $540,000,000 at period end. This was then driven by proceeds from the HMH IPO as well as the sale of Scandi Emerald, partly offset by the dividend payment in May.

16:03 The Q2 consolidated net cash position includes a net cash position of NOK 24,000,000 in DDB Offshore compared to a net debt position of NOK 68,000,000 in DDV in the previous quarter. This reflects the completion of the Scandi Emerald transaction, where part of the proceeds was used to reduce the draw under the DDV RCF.

16:27 It can be noted that the DDV cash position at quarter end was supported by a favorable working capital position, which is expected to normalize during the second half of the year. At quarter end, net interest bearing items amounted to approximately NOK 1,000,000,000, including cash and fund investments as well as interest bearing exposure towards Akastor. Interest bearing receivables then decreased during the quarter, mainly reflecting the repayment of the HMH shareholder loan of twenty seven million dollars Looking ahead, the net cash position will be affected by the approved dividend scheduled for later this quarter.

17:12 Then the overview of our external financing facilities. The corporate US30 million dollars RCF was canceled in May. The facility had been suspended following the HMH IPO due to the release of legacy share pledge over HMH shares. Given Akastor's strong liquidity position and ongoing work towards a better suited financing solution, the facility was canceled to avoid ongoing commitment costs and remove structural constraints related to the HMH shareholding. As mentioned also last time, we are evaluating a new corporate backup facility potentially linked directly to listed HMH shares following expiry of the lockup period.

17:58 This would provide a more flexible and cost efficient alternative to the last facility. For DDV Offshore, there was their revolving credit facility was reduced to US7 dollars following the sale of Scandi MREL with $2,000,000 drawn as per end of June. At quarter end, total available liquidity amounted to $560,000,000 including $44,000,000 of cash held within Didiwe Offshore. This then represents cash and fund investments only as Akastor ASA no longer has a corporate RCF in place and the undrawn portion of the DDV facility is not included in this liquidity metric. Then over to our consolidated P and L.

18:47 Again, as a reminder, most of our holdings are not consolidated in our group financials. And as a result, consolidated revenue and EBITDA represent only a limited portion of underlying values. DDV Offshore delivered total revenues of 156,000,000 in the quarter, including NOK 101,000,000 related to the gain on the sale of Scandi Emerald. Operationally, Scandi Emerald reported limited utilization, reflecting the sale completed in May, while Peregrineur remained on contract throughout the quarter. EBITDA amounted to $113,000,000 driven by the gain related to the sale. Other EBITDA was negative by $19,000,000 And in total, consolidated revenue and EBITDA for the quarter amounted to NOK 156,000,000 and NOK 94,000,000, respectively.

19:41 Then some details on our net financial items. Financial investments contributed negatively by NOK 1,000,000, primarily driven by the share price decline in Akwalis during the quarter, partly offset by positive valuation effects related to our investment in NES. FX accounting effects contributed positively by NOK 30,000,000 and combined with net interest income of NOK 5,000,000 and other financial income of NOK 6,000,000, total net financial items contributed positively by NOK41 million in the quarter. Total net negative contribution from equity accounted investments was NOK137 million in the period. HMH contributed a net negative of NOK 120,000,000, primarily reflecting IPO related effects.

20:33 The negative contribution relates to the reduction in our customers' ownership through the IPO at the valuation below carrying value of our investments, resulting in a dilution loss recognized in the P and L. The result was further impacted by IPO related costs recognized by HMH during the period. As mentioned earlier, following the IPO, HMH is accounted for using the equity method, meaning that our carrying value now represents 36% share of HMH reported equity and is independent of subsequent movements in the listed share price. Other investments contributed negatively by $17,000,000 With that, we are through the presentation and we'll move over to the Q and A session.

21:21 We will take a short pause in order for the listeners to provide their questions. We'll be back soon. Okay, then we're back. We have a few questions regarding the HMH ownership and our strategy for realizing that ownership. So, Karl, I'll start with this for you. How should we think about the customers ownership in HMH following the IPO?

22:15 As mentioned, the IPO was an important milestone for us, both establishing a public market valuation for HMH and also generating liquidity for Akastor. And also after the IPO and the greenshorn exercise, we received approximately US53 million dollars in cash proceeds and repayment of the shareholder loans we had to HMH. The current lockup arrangement expires towards the end of the third quarter. While Akastor strategy remains to realize value over time, we are under no pressure to sell shares at a specific point in time.

23:03 Our focus will remain focused on maximizing shareholder value, and we will continue to assess potential future sales based on market conditions, liquidity and also our view on underlying values in HMH. At the same time, HMH remains our largest investment and we continue to see attractive value creation potential through operational execution, margin improvements and also continued growth in the HMH business going forward. Thank you, Karl. Then partly a related question, how should we think about future shareholder distributions going forward? Well, our approach here will remain unchanged. We seek to return excess capital to shareholders when realizations occur, but at the same time, we're maintaining a strong balance sheet.

24:01 During the first half of twenty twenty six, we have returned to our shareholders and with this last announcement today, additional dividend of 0.50 per share. Further distribution will continue to be assessed in light of realized liquidity and capital requirements. Thank you. Then we received some questions regarding the recapitalization of NES, so I'll take one of those. Can you elaborate a bit around the potential recap of NES Fircroft following their refi? Yes. Nest did this, I would say, successfully refi of this $650,000,000 secured bond.

24:49 And primarily, it serves to refinance the company's existing debt and also establish a more flexible long term capital structure for the company. And as disclosed in the bond documentation, the financing structure allows for shareholder recapitalization, subject to leverage and other conditions has to be satisfied. The liquidation includes capacity for dividend recapitalization of up to $350,000,000 although the eventual amount, timing and structure remains subject to final conditions and approvals. From a cost perspective, the refinancing is an important step as it improves our financial flexibility for Nestor aircraft, while also creating the potential for cash proceeds to shareholders.

25:42 Currently, we are not providing guidance on the fund size or timing of the shareholder distribution, but we can confirm that Akastor expect to receive its portion of share of proceeds and ultimately distribute this to our shareholders given approval from our Board of Directors. Overall, we view the refinances as positive development for both NES Farecroft and Akastor, supporting a strong capital structure, which also create additional avenue for further value creation for the company. Okay. Thank you, Karl. Then we have received a question on the AKOS refi, which I can comment on. Akastor's refi, could you expect the serialization of the shareholder loan in favor of the external financing and what is the timeline there?

26:34 So as we have mentioned in the presentation, the refinancing process in Akast is progressing and we do it in terms of time line. Target a completion during the second half of this year, subject then, of course, to final documentation approvals, etcetera. And we do see good engagement from financing providers supported, of course, by Akastor's strong contract coverage and their backlog and also, of course, their stable operational performance. When it comes to the intention, the proposed financing that we seek is primarily to refinance the company's existing debt facilities and establish a long term financing platform aligned with the new and prolonged then contract portfolio with aligning that with debt maturity profile.

27:31 And also, do aim to secure funding for the exercise of the purchase option for Akkir Wafer, which is then expected to be called later this year with settlement in 2027. So the proceeds from a refi are intended to refinancing existing debt plus then the acquisition of wafer in addition to, of course, general corporate purposes, but we do not see at this point a realization of any shareholder loan in connection with this refi. Yes. So then we have one other question on Neos, which goes to the recap.

28:19 Is this a substitute to a sale or an IPO? Any updated view on the exit optionality? I comment briefly on that since, Karel, you have already sort of mentioned the most there. But I think this is viewed as two separate matters in the refi and potential recap. That primarily reflects the company's operational performance and cash generation, which is strong and then the desire to optimize capital structure. So the new bond, as Kavus said, provides a long term financing platform and also then creates a potential to take out some cash for shareholders. From our perspective, I think it's fair to say that our ownership agenda then remains unchanged from what we have said previously.

29:07 And we see this potential realization of the full value in NES as a separate matter to the recapitalization and refinancing of the company. Then one last question received regarding the Peregrino vessel. Do you have a view on potential contract renewal of their options for Scanda Peregrino after November? And I can take that as well. The current contract, as you've seen on the slide, includes a series of priced options that can extend the firm period for up to, I believe, sixteen months after November 2026. So there is, as such, a mechanism already in place that could provide continued utilization on that vessel.

29:59 And of course, we maintain a dialogue with the customer regarding those options. But at the same time, we assess opportunities in the broader market to ensure continued utilization and to maximize the value of the vessel. And the market, as we view it, remains active in several regions and then also in the regions where Peregrine is situated. And we do believe the vessel is well positioned based on its operational performance and contract track record also beyond November and even if the option should not be declared. So with that, I think that concludes our session.

30:46 I would just like to thank you all for your attention and we look forward to welcoming you back for the presentation of our third quarter results in November. Thank you very much.