INTERIM REPORT - · PDF file®WELLTEC / INTERIM REPORT Q3, 2017 2 CONSOLIDATED KEY FIGURES AND RATIOS Welltec International ApS – Group Q3 2017 Q3 2016 9M 2017 9M 2016 FULL YEAR

INTERIM REPORT

Company announcement no. 7/2017

October 30th, 2017

Q3–2017

INVESTOR CONFERENCE CALL

Welltec will discuss its results during an investor conference

call today at 5 pm CET. The conference call will be available for

bondholders, prospective investors, broker-dealers and securi-

ties analysts and can be accessed by dialing in a few minutes

before the start and informing the operator that you would like

to participate in Welltec’s investor conference call.

Relevant dial-in details and conference ID can be obtained by

contacting [email protected]. Finally, the Interim Report

will be available on the 'Investor' section of Welltec’s website at

http://www.welltec.com/investors/download-center/.

Welltec International ApS

Gydevang 25, DK-3450 Allerød

Central Business Registration No: 30 69 50 03

For further information, please contact:

Søren Søgaard, Acting Chief Financial Officer,

mobile: +45 2034 0488

mail: [email protected]

Anders Q. Christensen, Corp. Chief Accountant,

mobile: +45 2423 2296

mail: [email protected]

WELLTEC® / INTERIM REPORT Q3, 2017 2

CONSOLIDATED KEY FIGURES AND RATIOS

Welltec International ApS – Group Q32017

Q32016

9M2017

9M2016

FULL YEAR 2016

STATEMENT OF COMPREHENSIVE INCOME/(LOSS)

Revenue 45 47 129 144 189

Earnings before interest, tax depreciation and amortization (EBITDA)* 15 17 42 51 68

Operating profit/(loss) (EBIT) before special items (1) 1 (1) (54) (50)

Operating profit/(loss) (EBIT) (2) 0 (4) (56) (53)

Net financials (10) (6) (29) (24) (29)

Profit/(loss) before tax (12) (6) (33) (80) (81)

Loss for the period (11) (8) (30) (73) (70)

CASH FLOWS

Cash flows from operating activities 11 14 27 41 62

Cash flows from investing activities (5) (5) (18) (8) (19)

Cash flows from financing activities (13) (28) (27) (47) (49)

Total cash flows (7) (19) (18) (14) 6

STATEMENT OF FINANCIAL POSITION

Trade receivables 52 51 52 51 45

Equity 151 174 151 174 177

Total assets 541 573 541 573 570

Investments in intangible assets** 3 3 9 9 12

Investments in tangible assets** 4 4 12 13 20

KEY RATIOS (%)

EBITDA margin* 32.7 35.1 32.6 35.3 36.1

EBIT margin before special items (1.7) 1.7 (1.0) (37.4) (26.6)

ROIC excl. goodwill 2.9 3.3 8.0 9.7 14.4

Return on equity (7.1) (4.3) (18.3) (34.8) (33.2)

Number of employees, average 740 733 724 738 736

EBIT margin before special items = Operating profit/(loss) [EBIT] before special items x 100

Revenue

*EBITDA margin = Operating profit before special items, depreciation, amortization and impairment and adjusted for issued warrants (non-cash) x 100

Revenue

Return on equity = Profit/(loss) for the period x 100

Average equity

ROIC excl. goodwill = EBITA

Average capital investment excl. goodwill

*EBITDA is defined by Welltec as reported operating profit (EBIT) before special items, amortization, depreciation, impairment losses and issued warrants (non-cash). Depreciation for these pur-

poses includes depreciation attributable to development and manufacturing which is capitalized because it is considered a part of the costs that are directly attributable to the manufacturing of

products. Welltec’s definition of EBITDA may differ from the definition of EBITDA used by other companies. EBITDA as defined by Welltec is reported to allow for a more accurate assessment of

the business operations. Welltec’s definition of EBITDA should not be considered in isolation from, as substitutes for, or superior to the reported results prepared in accordance with International

Financial Reporting Standards (IFRS).

**Investments in intangible and tangible assets are defined as addition of fixed assets including additions from financial leasing and additions through business combinations.

(USD in millions)


Q3 2017 COMPARED TO Q2 AND Q3 2016

Q32017

Q22017

CHANGE%

Q32016

CHANGE%

FULL YEAR 2016

Revenue 45 44 0.8 47 (5.3) 189

Cost of services provided (32) (29) (9.9) (31) (4.1) (127)

Gross profit 12 15 (16.9) 16 (23.1) 62

Development and manufacturing costs (1) (1) 12.5 (2) 42.6 (3)

Administrative and sales costs (12) (13) 2.8 (14) 10.9 (53)

Amortization of acquired intangibles in a business combination (0) (0) 0.7 (0) 30.3 (56)

Operating profit (EBIT) before special items (1) 1 Nm 1 Nm (50)

Special items (1) (1) (23.6) (0) Nm (2)

Operating profit (EBIT) (2) 0 Nm 0 Nm (53)

Net financial expenses (10) (10) (1.3) (6) (61.5) (29)

Income taxes 1 1 17.6 (2) Nm 12

Loss for the period (11) (8) (31.0) (8) (43.9) (70)

ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Revenue

Revenues of USD 45 million was up compared to Q2, 2017,

which is a result of increased activity with varied regional con-

tributions and changes in sales mix. The increasing revenue is a

strong testament to Welltec having hit the trough, as this is the

first time since 2012 that revenue in Q3 is stronger than in Q2.

Cost of services provided

The cost of services provided were USD 32 million, an increase

of 10% compared to the previous quarter. The increase in cost

was primarily driven by higher depreciations and amortizations,

direct costs related to Completion sales for the period and a

4% increase in operational staff to meet current and future

increase in activity.

Development and manufacturing costs

The development and manufacturing costs were USD 1 million

compared to USD 1 million in last quarter.

Administrative and sales costs

Administrative and sales costs were 3% lower than last quarter

at 13 million, driven by continued focus on cost reductions to

protect margins and cash-flow.

Amortization and impairment of acquired intangibles

in a business combination

Amortization and impairment of acquired intangibles in a

business combination was equal between this quarter and last

quarter.

(USD in millions)


Earnings before interest, tax, depreciation and amortization

(EBITDA)

EBITDA was 5% lower than last quarter at USD 15 million,

representing an EBITDA margin of 33%, against 35% in the

last quarter.

Operating profit/(loss) (EBIT) before special items

EBIT amounted to a loss of USD 1 million compared to a gain

of USD 1 million in last quarter.

Special Items

Special items of USD 1.1 million compared to USD 0.9 million

in the last quarter.

Net financial expenses

Net financial expenses amounted to USD 10 million in line with

second quarter of 2017. The financial expenses comprise inter-

est expenses of USD 7 million and net exchange rate losses of

USD 3 million.

Income taxes

Income tax amounted to an income of USD 1 million in line

with second quarter of 2017.

Loss for the period

Loss for the third quarter was USD 11 million compared to a

loss of USD 8 million in last quarter. This development is a result

of lower EBIT.

Cash flows

Cash flows from operating activities of USD 12 million com-

pared to USD 8 million in the same period last year was mainly

driven by lower income taxes paid and changes in working

capital.

Capital expenditures of USD 5 million was in line with last

quarter, reflecting continued benefits from automation, and

a continued prioritization of investments in D&E and mainte-

nance of current tractor and tool fleet.

OUTLOOK

2017 full year expectations

The outlook for Q4 looks positive, and we see activity levels

elevated and forecast revenue to be in line with Q3. This again

signals an improvement in the industry operating environment,

as Q4 is typically the second weakest quarter of the year.

We remain committed to investing in technological innovation,

with forecast Q4 capex in line with previous quarters.

Indications for 2018

We expect continued improvement in the market climate and

hence increased job activity, improving utilization of average

operational staff per job, thus further realizing benefits from

economies of scale.

On the intervention services front, we will continue to capi-

talize on the new technologies introduced in 2017 as well as

to maintain momentum in activity levels, pricing pressure is

expected to remain.

As for completion solutions, we have a strong order pipeline

secured for 2018.

All in all, we see positive signs for 2018.


CONSOLIDATED INTERIM FINANCIAL STATE-MENTS FOR WELLTEC INTERNATIONAL APS

Statement of comprehensive income/(loss)

(USD in thousands) Q32017

Q32016

9M2017

9M2016

FULL YEAR2016

Revenue 44,507 47,000 128,671 143,555 189,012

Cost of services provided (32,042) (30,783) (89,447) (95,150) (126,902)

Gross profit 12,465 16,217 39,224 48,405 62,110

Development and manufacturing costs (907) (1,581) (3,031) (4,786) (3,055)

Administrative and sales costs (12,171) (13,659) (37,101) (41,292) (53,191)

Amortization of acquired intangibles in a business combination (138) (198) (411) (55,971) (56,168)

Operating profit/(loss) (EBIT) before special items (751) 779 (1,319) (53,644) (50,304)

Special items (1,150) (485) (2,778) (2,004) (2,393)

Operating profit/(loss) (EBIT) (1,901) 294 (4,097) (55,648) (52,697)

Net financial expenses (10,078) (6,287) (29,003) (24,527) (28,647)

Loss before tax (11,979) (5,993) (33,100) (80,175) (81,344)

Income taxes 993 (1,693) 3,117 7,582 11,645

Loss for the period (10,986) (7,686) (29,983) (72,593) (69,699)

Other comprehensive income/(loss) for the period

Items that will be reclassified subsequently to the Income statement, when specific conditions are met:

Unrealized exchange rate adjustments of foreign subsidiaries and branches

1,789 367 3,639 3,655 2,601

Total comprehensive loss (9,197) (7,319) (26,344) (68,938) (67,098)

Distribution of loss for the period

Loss for the period attributable to:

Welltec International ApS shareholders’ share of loss (10,986) (7,686) (29,983) (72,593) (69,699)

Total comprehensive loss attributable to:

Welltec International ApS shareholders’ share of comprehen-sive loss (9,197) (7,319) (26,344) (68,938) (67,098)


Statement of financial position

(USD in thousands) 9M2017

9M2016

FULL YEAR2016

Non-current assets

Intangible assets

Goodwill 242,340 242,340 242,340

Technology 2,962 2,919 2,914

Customer relationship 0 84 0

Brand 13,924 13,924 13,924

Completed development projects 44,577 59,909 58,455

Development projects in progress 11,365 10,672 8,313

Patents and licences 17,514 15,890 16,473

Total intangible assets 332,682 345,738 342,419

Tangible assets

Land and buildings 9,831 10,115 10,031

Leasehold improvements 1,392 1,590 1,507

Plant equipment and fleet 57,206 66,874 65,578

Other fixtures and fittings, tools and equipment 2,547 4,620 3,852

Plant equipment and fleet under construction 20,424 22,470 22,804

Total tangible assets 91,400 105,669 103,772

Financial assets

Deferred tax assets 6,119 835 2,083

Other receivables 1,204 1,746 1,776

Total financial assets 7,323 2,581 3,859

Total non-current assets 431,405 453,988 450,050

Current assets

Inventories 5,566 5,415 4,223

Receivables

Current portion of non-current assets 0 143 0

Trade receivables 51,751 51,499 45,489

Tax receivables 7,910 5,907 6,835

Other receivables 5,104 5,181 7,271

Prepayments 3,386 3,908 3,119

Total receivables 68,151 66,639 62,714

Cash and cash equivalents 36,043 46,928 53,500

Total current assets 109,760 118,982 120,437

Total assets 541,165 572,970 570,487


Statement of financial position

(USD in thousands) 9M2017

9M2016

FULL YEAR2016

Equity

Share capital 850 850 850

Currency translation reserve (29,351) (31,936) (32,990)

Retained earnings 179,746 205,247 209,180

Total equity 151,245 174,161 177,040

Non-current liabilities

Deferred tax liabilities 24,647 32,921 24,778

Finance lease commitments 8,491 7,726 7,465

Issued bonds 294,476 292,444 293,241

Bank debt 29,289 27,518 26,029

Total non-current liabilities 356,903 360,609 351,513

Current liabilities

Current portion of non-current liabilities 2,432 2,024 1,398

Trade payables 5,646 8,296 8,354

Current tax liabilities 2,523 2,645 4,228

Other payables 22,416 25,235 27,954

Total current liabilities 33,017 38,200 41,934

Total liabilities 389,920 398,809 393,447

Total equity and liabilities 541,165 572,970 570,487


Condensed statement of changes in equity

(USD in thousands)

Share capitalCurrency

translation reserve Retained earnings Total

Equity at 01.01 2016 835 (35,591) 277,249 242,493

Loss for the period - - (72,593) (72,593)

Unrealized exchange rate adj. of foreign subsidiaries and branches - 3,655 - 3,655

Total comprehensive loss for the period 0 3,288 (72,593) (68,938)

Purchase of own shares - - (695) (695)

Capital increase 15 - 276 291

Share-based payment to executives - - 1,010 1,010

Other transactions 15 0 591 606

Equity at 30.09.2016 850 (31,936) 205,247 174,161

Equity at 01.01 2017 850 (32,990) 209,180 177,040

Loss for the period - - (29,983) (29,983)

Unrealized exchange rate adj. of foreign subsidiaries and branches - 3,639 - 3,639

Total comprehensive income (loss) for the period 0 3,639 (29,983) (26,344)

Purchase of own shares - - (80) (80)

Share-based payment to executives - - 629 629

Other transactions 0 0 549 549

Equity at 30.09.2017 850 (29,351) 179,746 151,245


Condensed statement of cash flow

(USD in thousands) Q32017

Q32016

9M2017

9M2016

FULL YEAR2016

Operating profit/(loss) (EBIT) (1,901) 294 (4,097) (55,648) (52,697)

Non-cash adjustments 15,194 17,319 42,157 104,357 121,922

Changes in working capital (1,044) (389) (7,895) 1,469 4,353

Income taxes paid (804) (3,209) (3,830) (8,835) (11,809)

Other receivables, long-term 2 114 573 (134) (21)

Cash flows from operating activities 11,447 14,129 26,908 41,209 61,748

Investments in intangible assets (3,113) (3,030) (8,982) (8,965) (12,290)

Investments in tangible assets (2,027) (2,295) (9,560) (10,725) (17,754)

Sale of tangible assets 65 0 153 0 88

Sale and investment in securities 0 0 0 11,387 10,640

Financial income received 24 43 56 274 595

Cash flows from investing activities (5,051) (5,282) (18,333) (8,029) (18,721)

Financial expenses paid (12,338) (13,112) (25,034) (26,653) (27,230)

Other financial expenses (427) 0 (687) (706) (487)

Purchase of own shares and warrants 0 0 (80) (695) (793)

Purchase of own bonds 0 (15,133) 0 (18,565) (19,099)

Capital increase 0 0 0 291 305

Installments on current debt and non-current debt (602) (214) (1,228) (862) (1,432)

Cash flows from financing activities (13,367) (28,270) (27,029) (47,001) (48,736)

Increase/decrease in cash and cash equivalents (6,971) (19,423) (18,454) (13,821) (5,709)

Cash and cash equivalents, beginning balance 42,560 66,352 53,500 61,040 61,040

Exchange rate adjustment at beginning of period 454 0 997 (291) (1,831)

Cash and cash equivalents, ending balance 36,043 46,928 36,043 46,928 53,500

Hereof restricted cash 204 136 204 136 203


Note 1: Accounting policies

The interim financial statements are presented as condensed,

consolidated interim financial statements in accordance with

IAS 34 ‘Interim Financial Reporting’ as adopted by the EU. No

interim financial statements have been prepared for the parent

company. The interim financial statements are presented in

thousands of US dollars (USD), which is the parent company’s

functional currency.

The accounting policies applied in the consolidated interim

financial statements are consistent with the accounting policies

applied in the consolidated financial statement for 2016, which

are in accordance with the International Financial Reporting

Standards as adopted by the EU. The annual report for 2016

contains a more detailed description of the accounting policies

applied.

New financial reporting standards in 2017

Welltec International ApS has implemented all such new and

amended financial reporting standards and interpretations

adopted by the EU that apply to financial years beginning on or

after January 1 2017.

Welltec International ApS has assessed that the new and

amended standards and interpretations that are effective for

financial years beginning on or after January 1 2017 are either

not relevant or not of significant importance.

Change in accounting policies

There have been no changes in accounting policies.

NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS

Documents

INTERIM REPORT - · PDF file®WELLTEC / INTERIM REPORT Q3, 2017 2 CONSOLIDATED KEY FIGURES AND RATIOS Welltec International ApS – Group Q3 2017 Q3 2016 9M 2017 9M 2016 FULL YEAR