Seaway 7 ASA Announces Second Quarter and Half Year 2022 Results
Oslo - 28 July 2022 - Seaway 7 ASA (Euronext Growth: SEAW7) announced today results for the second quarter and first half of 2022 which ended 30 June 2022.
For the period (in $ millions, except Adjusted EBITDA margin and per share data)
Earnings per share - in $ per share
Book-to-bill ratio - year-to-date(c)
Net debt excluding lease liabilities(d)
Net debt including lease liabilities(d)
Stuart Fitzgerald, Chief Executive Officer, said:
Seaway 7 ASA published a trading update on 13 June 2022 relating to a number of ongoing projects, including the Hollandse Kust Zuid project. The financial impact on this project, which remains in line with the aforementioned trading update, is the primary contributor to the Q2 2022 negative Adjusted EBITDA of $16 million.
Activity levels on the remaining projects in the portfolio were high in the second quarter with significant progress on projects and offshore operations ongoing in UK, Europe, and Taiwan.
In respect of tenders during the quarter, we have been awarded preferred supplier status for Seagreen 1A Offshore Wind Farm and signed a Letter of Exclusivity for the East Anglia THREE Offshore Wind Farm. Both projects will not be recognised in Seaway 7's backlog until final contractual terms have been agreed and final investment decision has been secured.
There is no change to the Company guidance given to the market in the 13 June 2022 trading update, confirming revenue for the full year 2022 to be in line with previous guidance towards $1 billion with an Adjusted EBITDA margin expected to be approximately 6%.
The Seagreen project, which is significant to the Group's portfolio, continued to make good progress. Of the 114 foundation jackets, 94 foundation jackets have been delivered in the UK. At 30 June 2022, there were 20 foundation jackets outstanding from the yards in China, and within early August 2022 these jackets are anticipated to be signed off and ready for loadout. Completion of fabrication activities on Seagreen is a major milestone for the project. Heavy transportation vessels are in transit to pick up these remaining foundation jackets. By quarter end, 30 foundation jackets and 21 cables were installed. The S7000 returned to the field on the 1 June 2022 and installed a further 9 foundation jackets before she left the field for another commitment, returning in mid-July to continue to install the remaining Seagreen foundation jackets. This critical activity on the project is on track for completion during 2022.
Seaway Alfa Lift's delivery schedule, and resultant impacts on the execution of the Doggerbank project, represent a primary ongoing priority for Seaway 7 management. The repairs of the Liebherr crane A-frame continued and are expected to be complete late 2022 and the vessel is expected to sail to Europe at that time. As per the June 2022 trading update, the mission equipment for the upending and lowering of monopiles is the critical path to the vessel's readiness for operations and this scope is significantly delayed compared to the original planning at project commencement. Mission equipment readiness is now expected in the second half of 2023 and to provide a more robust planning basis we are assuming first use on the Doggerbank project end of Q1 2024. To improve confidence in the vessel delivery program going forward, changes have been implemented within the project organisation and leadership, primarily adding personnel from Subsea 7, with extensive experience in complex mission equipment deliveries.
The installation of foundations for the Dogger Bank A&B project has commenced during July 2022, initially with a third-party vessel. Due to Seaway Alfa Lift's delivery delay, Seaway Strashnov will now be deployed on the project for a full 2023 campaign. The additional cost of the revised execution planning resulted in an increase to the onerous fixed-price contract provision of approximately $35 million, unchanged from what was advised in the June trading update. The provision increase is reflected 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 does not affect the Adjusted EBITDA during the quarter.
As advised in the June 2022 trading update, Seaway Strashnov encountered slower progress than anticipated on the Hollandse Kust Zuid project relating primarily to adverse weather conditions and mechanical breakdowns. The associated cost increases resulted in an onerous fixed-price contract provision of approximately $30 million which was recognised in the second quarter of 2022. As also advised in the June trading update, Seaway Yudin encountered reduced progress on the Formosa 2 project in Taiwan, related primarily to lower offshore productivity. As part of the combination to form Seaway 7 ASA, the economic interest in this project is with Subsea 7 S.A. Group. At the current time, with good generally progress since the time of the trading update, both Hollandse Kust Zuid and Formosa 2 are anticipated to complete in accordance with the revised schedules and forecasts.
During the quarter, Seaway Aimery and Seaway Moxie continued cable installation and test & termination works on the Hollandse Kust Zuid project, Netherlands. Seaway Phoenix started working on the Seagreen project, UK. Maersk Connector started her operational activities for our cable lay portfolio in Taiwan.
The heavy transportation vessels maintained their high levels of utilisation, despite two planned dry dockings for Seaway Falcon and Seaway Hawk , and we saw another improvement in the time charter equivalent day rates in the second quarter. In addition, Seaway 7 entered into a 5-year bareboat charter agreement with purchase options for a new heavy transportation vessel in Q2 2022. The vessel was re-named 'Seaway Swan ' and was delivered to Seaway 7 in good order in Busan, South Korea, on the 8 July. This charter of a state of the art new build vessel re-enforces Seaway 7 strategic positioning, both towards standalone transportation activities where we see market conditions steadily improving, as well as towards broader integrated renewables projects, where heavy transportation increasingly represents a critical and undersupplied element of the value chain.
During Q2 2022, the utilisation of the active fleet was 77%, compared to 65% in the first quarter 2022.
Seaway Ventus has moved into the next phase of construction with keel laying in early June 2022, which is in accordance with the planned construction schedule. The vessel remains on course for delivery in mid-2023.
Second quarter revenue of $260 million decreased by 17% year-on-year and was mainly driven by slower progress than anticipated for the Hollandse Kust Zuid project and less activity on the Seagreen project compared to the prior year period. The negative Adjusted EBITDA margin of 6% remained the same. After depreciation and amortisation of $22 million, the Group recorded a net operating loss of $38 million. Net loss for the quarter was $67 million, after a tax charge of $21 million and finance and other gains and losses of $8 million. The elevated tax charge for the second quarter arises as a result of revised forecasts that indicate a higher negative effective tax rate for the full year. Based on forecast improvement in the second half profitability, it is anticipated that there will be an offsetting tax credit in the remainder of the year.
As communicated in the June trading update, progress on the Seaway Alfa Lift build has encountered delays. The root cause of the delays in the delivery of the vessel is due to the status of the mission equipment, engineering and procurement. These conditions, attributable to OHT ASA, were present on 1 October 2021, the date of the business combination, as a result, the adverse financial impact has been accounted for as an adjustment to the transaction's purchase price allocation.
During the quarter, net cash used in operating activities was $11 million which was impacted by slower than anticipated progress on projects and delayed client payments linked to commercial discussions concerning Covid-19 impacts and consequential delays in Taiwan. Capital expenditure was $16 million and mainly related to Seaway Alfa Lift , Seaway Ventus and planned dry dockings of the heavy transportation vessels. Net cash generated from financing activities of $16 million included receipt of a $21 million short-term loan from the Group's ultimate parent undertaking, Subsea 7 S.A. Group, offset by $5 million payment of lease liabilities. Cash and cash equivalents was $11 million as at Q2 2022.
In the second quarter, the Group recognised new awards of $34 million and escalations of $15 million, resulting in a year-to-datebook-to-bill ratio of 0.3. The backlog at the end of June 2022 was $0.8 billion, of which $465 million is expected to be executed during the remainder of 2022. Not included in the aforementioned backlog is Seaway 7 preferred Contractor positions, which have been formally announced to the market but remain subject to Contract finalisation and/or Client Final Investment Decision.
Forecasts for Offshore Wind activity in the second half of the decade continue to strengthen, driven by ever more pressing climate imperatives, and in recent months increasingly by energy security considerations. However, in recent years a significant number of major players in the renewables sector have seen deterioration and unsustainable financial performance. Supported by favourable market conditions, the industry is now starting to go through a process of revaluating and reallocation of risk and improved pricing, and Seaway 7 is focused on and starting to see this improvement in our future prospects.
For the remainder of 2022, Seaway 7 benefits from a high level of visible activity afforded by its backlog. Further, Seaway 7 pre- backlog positioning, and high levels of ongoing tendering and client engagement give confidence on activity levels and demand for Seaway 7 services going forward.
To support this outlook, we expect to present the financing plan during Q3 2022.
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:
Please join the webcast through:
https://channel.royalcast.com/webcast/hegnarmedia/20220728_1
The webcast will also be available through Seaway 7 website https://www.seaway7.com/investors/results-reports-publications/
Participant Passcode (for all countries):
Please join the call 5-10 minutes prior to scheduled start time.
For further information, please contact:
Mark Hodgkinson ir@seaway7.com
Revenue for the second quarter was $260 million, a decrease of $55 million or 17% compared to Q2 2021 and was mainly driven by slower than anticipated progress for the Hollandse Kust Zuid project and less activity for the Seagreen project compared to the prior year period.
Adjusted EBITDA and Adjusted EBITDA margin were negative $16 million and 6% respectively for the quarter, compared to a negative Adjusted EBITDA of $18 million and Adjusted EBITDA margin of 6% in Q2 2021.
Net operating loss for the quarter was $38 million, compared to $32 million loss in Q2 2021. The year-on-year deterioration in net operating income was driven by slower than anticipated progress on the Hollandse Kust Zuid and Hornsea 2 projects.
Net loss was $67 million in the quarter, compared to a net loss of $40 million in Q2 2021.
The year-on-year deterioration was primarily due to:
Diluted loss per share was $0.15 in Q2 2022 compared to a diluted loss per share of $0.13 in Q2 2021, calculated using a weighted average number of shares of 437 million and 314 million respectively.
Cash and cash equivalents were $11 million at 30 June 2022. The movement in cash and cash equivalents during the quarter was mainly attributable to:
Borrowings and lease liabilities, net debt and liquidity
At 30 June 2022, the Group has access to funding from its ultimate parent undertaking, the Subsea 7 S.A. Group, by means of an unsecured working capital facility agreement of which $120 million was drawn at 30 June 2022.
At 30 June 2022, lease liabilities were $14 million, a decrease of $5 million compared to 31 March 2022.
Revenue for the first half year was $527 million, a decrease of $29 million or 5% compared to H1 2021 and was mainly driven by slower than anticipated progress for the Hollandse Kust Zuid project and less activity for the Seagreen project, partly offset by increased revenue related to offshore heavy transport services following the business combination between OHT ASA and the Subsea 7 S.A. Group's Renewables business unit on 1 October 2021.
Adjusted EBITDA and Adjusted EBITDA margin were negative for the first half year by $1 million and 0% respectively, compared to a negative Adjusted EBITDA of $25 million and Adjusted EBITDA margin of 4% in first half 2021.
Net operating loss for the first half year was $45 million, compared to $52 million loss first half 2021.
The year-on-year improvement in net operating income was driven by:
Net loss was $68 million in the first half year, compared to a net loss of $66 million in first half 2021.
The year-on-year deterioration was primarily due to:
Diluted loss per share was $0.16 in first half 2022 compared to a diluted loss per share of $0.21 in first half 2021, calculated using a weighted average number of shares of 437 million and 314 million respectively.
Cash and cash equivalents were $11 million at 30 June 2022. The movement in cash and cash equivalents during the first half year was mainly attributable to:
Borrowings and lease liabilities, net debt and liquidity
At 30 June 2022, the Group has access to funding from its ultimate parent undertaking, the Subsea 7 S.A. Group, by means of an unsecured working capital facility agreement of which $120 million was drawn at 30 June 2022.
At 30 June 2022, lease liabilities were $14 million, a decrease of $12 million compared to 31 December 2021.
Revenue was $260 million in Q2 2022 compared to $315 million in Q2 2021. The decrease in revenue was mainly driven by slower than anticipated progress for the Hollandse Kust Zuid project and less activity for the Seagreen project compared to the prior year period. Net operating loss was $38 million in Q2 2022 compared to a $32 million loss in Q2 2021. The movement was driven by slower than anticipated progress on the Hollandse Kust Zuid and Hornsea 2 projects.
Vessel utilisation for the second quarter was 77% compared with 61% for Q2 2021. This is mainly driven by the business combination as Q2 2021 does not reflect the utilisation of the heavy transportation vessels.
At 30 June 2022 there were 13 vessels in the Group's fleet, comprising 11 active vessels and 2 vessels under construction.
Revenue was $527 million in H1 2022 compared to $556 million in H1 2021. The decrease in revenue was mainly driven by less than anticipated progress for the Hollandse Kust Zuid project and less activity for the Seagreen project, partly offset by increased revenue related to offshore heavy transport services following the business combination between OHT ASA and the Subsea 7 S.A. Group's Renewables business unit on 1 October 2021. Net operating loss was $45 million in H1 2022 compared to a $52 million loss in H1 2021. The movement was mainly driven by a positive contribution from the heavy transportation vessels.
Vessel utilisation for the first half year was 71% compared with 43% for H1 2021. This is mainly driven by the business combination as H1 2021 does not reflect the heavy transportation vessels.
At 30 June 2022 there were 13 vessels in the Group's fleet, comprising 11 active vessels and 2 vessels under construction. The heavy transport chartered vessel, Seaway Swan, is expected to join the fleet in Q3 2022.
At 30 June 2022 backlog was $0.8 billion, compared to $1.0 billion at 31 March 2022. New awards totalling $34 million was recorded in the quarter and $15 million of escalations. Unfavourable foreign exchange movements of approximately $32 million were recognised In the backlog calculation during the quarter.
$465 million of the backlog is expected to be executed in 2022 and $338 million in 2023 and thereafter.
The principal risks and uncertainties which could materially adversely impact the Group's reputation, operations and/or financial performance and position are noted on pages 26 to 35 of Seaway 7 ASA's 2021 Annual Report. Management has considered these principal risks and uncertainties and concluded that these have not changed significantly in the six month period to 30 June 2022.
The principal risks within health, safety, security, environmental and quality include the risk of a pandemic virus. During the first half of the year, management has continued to mitigate the impacts of the Covid-19 pandemic by monitoring health procedures and adhering to the guidance of world health organisations and local authorities.
The principal risks within business environment include risks related to civil or political unrest, including war. The outcome of the Russia-Ukraine conflict remains uncertain. However, management does not at this date foresee a material direct impact on the Group from the conflict and related sanctions. Management continues to monitor the development of the conflict, including sanctions and indirect impacts, and other associated risks in order to apply suitable mitigations where possible.
We confirm that, to the best of our knowledge, the financial statements for the period 1 January 2022 to 30 June 2022 have been prepared in accordance with current applicable accounting standards and give a true and fair view of the assets, liabilities, financial position and results of the Company and the Group taken as a whole. We also confirm that, to the best of our knowledge, this report together with the Seaway 7 ASA 2021 Annual Report include a fair review of the development and performance of the business and the position of the Group, including a description of the principal risks and uncertainties facing the Group.
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Seaway 7 ASA published this content on 28 July 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 28 July 2022 06:27:08 UTC.