ScanArc Group Q1 report 2012

Highlights

· ScanArc transformed into an investment company
· Outgoing group cash balance at 31 March of NOK 62.4 million
· EBITDA of NOK - 3.5 million in the quarter


Financial results
The Extraordinary General Meeting on 10 February 2012 resolved to approve the transformation of ScanArc into an investment company. Hence, the activities in ScanArc in Q1 have mainly been related to closing of the previous business and the transformation into an investment company. The subsidiary Eras Metal France, which has no operational activity, is under dissolution.

The first quarter group EBITDA was NOK - 3.5 million (NOK - 4.7 million in Q1 2011). Fewer people employed, as well as revenue recognition of employer's contribution to be received from the Norwegian authorities, affected the EBITDA-result positively.

Included in the Q1 2012 EBITDA are several cost components that are non-recurring. Examples of such costs are legal costs of NOK 0.8 million, financial reporting and auditing costs of approximately NOK 0.7 million due to financial reporting complexity following the 2011-transactions, and a fee of NOK 0.2 million related to continued listing on Oslo Axess,

The company's two option programs have affected the first quarter salary and personnel costs by NOK 0.2 million (no cash effect).

The net annual cost base (including finance income) going forward is estimated to NOK 3-4 million, before any potential transaction related costs.


Balance sheet and cash flow
ScanArc has a strong cash and equity position. Cash amounted to NOK 62.4 million as of 31 March 2012 (NOK 69.0 million as of 31 December 2011). The main reason for the cash balance to be NOK 2.0 million higher than the cash estimate provided in the Q4-2011 report, is that the payback of a governmental grant of approximately NOK 1.6 million from subsidiary Eras Metal France is still pending.

The equity ratio was 93% as of 31 March 2012 (86%). Net cash generated from operating activities in Q1 was NOK - 7.3 million, while net change in cash was NOK - 6.6 million. In addition to the negative result for the period commented above, cash used in Q1 were related to items accrued for in 2011, such as severance pay and other compensation to the CEO and Market director of NOK 1.9 million, as well as remuneration to former members of the Board of NOK 0.3 million.


Organisational changes
Based on the proposal to transform the company into an investment company, the Board in January entered an agreement with CEO Ralf Schmidt to continue in the position as CEO from 1 April 2012. This new employment agreement was approved by the extraordinary general meeting on 10 February 2012.

Oddleif Hatlem, who has been CFO for hire since 1 August 2010, will leave the company on 10 May 2012. Gunhild L. Melle is new part time CFO for hire from the same date.

Market director Karsten Haukeli left the company in the beginning of January.

These organisational changes have all previously been announced to the market.


Transactions with related parties
All related party transactions are carried out as part of the ordinary course of business at market prices.

As previously disclosed, on 13 March, the Board entered an agreement where the managing director of the former subsidiary SPT, Bror Magnus Heegaard, acquired the claim ScanArc had towards SPT and ScanArc's remaining stake of 19.9% in SPT. Settlement was agreed to take place when Heegaard transfers 1,300,000 ScanArc shares to ScanArc (treasury shares transaction).

Since Heegaard is a shareholder in ScanArc, and the agreement involved a sale to a shareholder of a value exceeding 5% of the company's share capital, the Agreement was (ref § 3-8 of the Norwegian Public Limited Liability Companies Act) finally approved by the Annual General Meeting on 27 April 2012 before it came into force. Settlement took place on 2 May 2012.

The agreement with Heegaard led to a write down of the claim by NOK 5.6 million to NOK 2.2 million in the accounts as of 31 December 2011. The SPT shares being transferred, was in connection with the sale of the majority (80.1%) of SPT in 2011 written down to NOK 1. Hence, this agreement has not affected the Q1-result.


Pro & contra settlement - Eras transaction
With reference to the annual report for 2011, there is still a disagreement about the final calculation concerning a minor amount. The company has not made any provision regarding this in the accounts as of 31 March 2012, since the company consider any potential claim from the purchaser not to be valid and consider it not to be possible to make a reliable estimate of a potential liability in this case. See note 3 for further information.


Significant events after the balance sheet date
There has been no significant events after the balance sheet date.


Outlook
Operations
Following the structural and strategic changes in the company, and the recent transformation into an investment company, there is currently no operational activity in ScanArc. The winding up of Eras Metal France continued and is expected to be concluded in first half 2012.

Some of the costs recognized in Q1 will affect the Q2 cash balance negatively.

Strategy
Following the transformation into an investment company, the Board has specified the overall investment strategy for ScanArc.

ScanArc aims to invest in Nordic based companies with an attractive business case where profitability can be reached within reasonable time. Furthermore, the companies should operate in industries where ScanArc's CEO and Chairman have operational or strategic experience.

With the basis in a controlling shareholder position in the investments, ScanArc intends to offer operational competence through board memberships and/or management resources depending on what is deemed optimal.

Important investment criterias and characteristics are:

· Product, technology or service with a clear competitive advantage
· Attractive market or product position securing growth opportunities
· "Best in class" potential on parameters like costs, product performance, etc.
· Moderate to low investment capital requirements for ScanArc
· Exit opportunities within a 2-5 year timeframe
· Industries where the CEO and/or the chairman have operational experience



For further information, please contact:

Ralf Schmidt
CEO, ScanArc ASA
Mob.: +47 959 49 978

Gunhild Louise Melle
CFO, ScanArc ASA
Mob.: +47 4000 55 11