MMA Offshore : 2022 Half Year Financial Report

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Current Reporting Period: Half year ended 31 December 2021

Previous Reporting Period: Half year ended 31 December 2020

Information regarding the revenue and loss for the period is set out in the covering announcement accompanying this Report and in the Review of Operations in the Directors' Report on Page 4.

Dividends

Given the on-going market conditions, no interim dividend has been declared for the 2022 financial year.

The comparative net tangible asset backing has been adjusted to reflect the impact of the share consolidation completed in February 2021.

Details of associates and joint ventures

In November 2021, the Group acquired a 49.9% interest in Global Aqua Survey (GAS) Ltd, a subsea company operating in Taiwan. The consideration for the investment was 42.5 million New Taiwan dollars (A$2.1m). The share of profit from the entity for the period was nil.

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Directors' Report

The Directors of MMA Offshore Limited (MMA) submit herewith the Financial Report of the Company and its subsidiaries (the Group) for the half year ended 31 December 2021. In order to comply with the provisions of the Corporations Act 2001 (Cth), the Directors report as follows:

The names of the Directors of the Company during or since the end of the half year are:

• Mr I Macliver
• Mr CG Heng
• Mr P Kennan
• Mr D Ross
• Ms S Murphy
• Ms S Langer

Review of Operations

Financial Result

Revenue for the half was $137.3 million, up 14.5% on the previous corresponding period. EBITDA was $14.3 million, as compared to Reported EBITDA of $38.3 million for the first half of FY2021. EBITDA for the previous corresponding period included a number of one-off benefits, including a $14.8 million debt forgiveness benefit, government subsidies totalling $6.2 million and doubtful debt recoveries of $1.3 million, which were not repeated in the current financial year.

The financial result was significantly affected by COVID-19 with the increased transmissibility of the Delta and Omicron variants directly impacting our operations, resulting in vessel downtime, project delays and increased costs.

Cash at bank at 31 December 2021 was $65.3 million, down from $96.2 million at 30 June 2021, as a result of debt repayments totalling $18.8 million, the transfer of $8.8 million in exchange for a first-class bank guarantee in relation to the J&J crane legal dispute which is before the Singapore High Court and increased working capital requirements of $8.3 million due to mobilisations of large project logistics scopes.

Market Conditions

At an operational level we have faced significant challenges due to COVID-19 with the increased transmissibility of new variants directly impacting our operations. Several vessels have been shut down for quarantine reasons during the first half and project timeframes have been impacted by ongoing border restrictions which have increased complexity with regard to mobilising personnel and assets across international and interstate borders. This has added significant cost to our operations and impacted the volume of work which can be undertaken.

The situation is continually evolving, and we are hopeful that as border restrictions and quarantine requirements ease, the burden on the business will reduce.

At a macro level, there are positive signs for activity in both the oil and gas and offshore wind sectors.

Offshore oil and gas sanctioning activity picked up during the 2021 calendar year with many projects which had been delayed due to COVID-19 achieving final investment decision. Offshore activity for the coming five years is expected to be positive with an estimated $180 billion in new projects expected to be sanctioned in MMA's operating regions between 2022 and

20261. The oil price recovery has been sustained through 2021 with an average Brent oil price during the second half of US$76/barrel and prices recently reaching a seven year high of over US$90/barrel.

Offshore wind activity continues to grow strongly with over 3,000 turbines to be installed and US$80 billion expected to be spent on offshore wind farm developments in Asia and Australia between 2022 and 20261. As a vessel intensive activity, offshore wind is expected to drive significant additional vessel demand over that period.

We are also starting to see governments increase their focus on decommissioning requirements, which MMA is ideally positioned to support, with its combination of vessels, subsea and project logistics expertise.

Strategy

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successfully delivered a number of integrated projects over the past two years in both oil and gas and offshore wind and we will continue to refine our integrated service model with the aim of further embedding our services with our clients.

Whilst we expect oil and gas will be a fundamental part of the energy mix for some time, the focus on climate change has increased the pace of the transition to renewable energy, including offshore wind. We see renewables as a key future market for MMA with a significant number of new offshore wind farms expected to be developed in the Asia Pacific region over the coming decade. Over the past two years, MMA has supported a number of offshore wind development projects in Taiwan utilising our vessels and subsea services to deliver a range of work scopes.

A key part of our renewables strategy has been to establish local operating structures to enable us to operate under local content rules. We recently established a local entity in Taiwan and acquired a 49.9% share in a Taiwanese survey business to create a new entity "MMA Global Aqua" to facilitate our growth in that market. We also have a MOU in place with Worley to provide integrated inspection and maintenance services to the offshore wind market in Taiwan and the broader region. We will look to establish similar structures in South Korea, Japan and Vietnam as these markets develop.

We continue to target the government and defence sectors and are currently active in delivering hydrographic survey services to the Australian Navy as part of the HydroScheme Industry Partnership Program ("HIPP"). We have recently secured our third hydrographic survey scope and are investing in technology to continue growing this part of the business.

Underpinning the strategy is the marine expertise within our business which enables us to deliver innovative solutions to our clients to differentiate us from our competitors. We will continue to build and maintain this marine expertise to enable us to deliver our strategy.

MMA derived 23% of first half revenue from non-oil and gas sources including 9% from offshore wind and 4% from government services with a further 10% from other sources such as salvage, cable lay support and marine infrastructure.

Balance Sheet

As at 31 December 2021, MMA had Cash at Bank of $65.3 million, down from $96.2million at 30 June 2021.

The cash balance was impacted by a number of key items during the first half including:

• Voluntary debt repayments totalling $18.8 million;
• Transfer of $8.8 million in exchange for a first-class bank guarantee in relation to the J&J Cranes legal dispute, which is currently before the Singapore High Court;
• $2.1 million in relation to MMA's investment into the MMA Global Aqua joint venture;
• Maintenance capital expenditure of $4.0 million; and
• Increased working capital requirements due to mobilisations of project logistics work scopes requiring third party charters $8.3 million.

As of 31 December 2021, MMA's Total Debt (Bank Debt plus lease liabilities) was $155.4 million, down from $173.6 million in June2021 and Net Debt ( Total Debt less Cash) was $90.1 million as compared to $77.4 million.

MMA's Net Debt / EBITDA based on the last 12 months EBITDA performance is 3.2x and Net Debt to Property Plant and Equipment is 24%.

MMA is currently trading within covenant limits, however a waiver is in place until 31 March 2022 in light of the current impacts of COVID-19 on the business.

In addition, MMA intends to apply the proceeds from future vessel sales to further reduce debt and improve our debt metrics.

Asset Sales

MMA currently has eight vessels classified as "Held for Sale" on the Balance Sheet at an estimated value of $31.7 million. MMA is currently in advanced negotiations on four vessels which if proceed to completion would settle during the second half of the financial year, with active enquiries on a further three vessels.

The lessor of our Batam Shipyard also has an option to purchase the facility for a total of US$15.0 million (A$21 million). The option to purchase may be exercised by the lessor at any time up to 12 March 2024.

Cost Control

Cost control remains an ongoing key focus for MMA whilst ensuring we maintain the quality and safety of our operations. The pandemic has increased the costs and complexity of our operations and has resulted in vessel down time and project delays due to positive cases, as well as increased costs associated with moving crew and assets across international and interstate borders, whilst complying with dynamic quarantine and border restrictions.

The unaudited estimated additional direct cost to the business for the first half was in the range of $2.5 - 3.0 million, with indirect and lost opportunities further compounding the commercial effect of COVID-19.

Whilst we have stripped a significant amount of overhead out of the business in recent years, we continue to seek further efficiencies in our existing business whilst ensuring we invest in the development of our new growth markets.