Defining the scope of the financial statement analysis

Before undertaking a financial statement analysis, the critical action is to define the scope of the analysis, particularly in terms of the time frame of historical financial information included in the analysis and whether financials will be analyzed on a consolidated group level or individual business unit level.

Consolidated financial statements vs. individual business unit

A core aspect of the historical financial statement analysis is whether a company's historical financial data is analyzed on a consolidated basis or as the sum of all individual business units.

Generally, this decision is formed dependent on whether the company is split into different business units with structural differences in operational characteristics or not. A company with integrated business units should be analyzed on a consolidated basis, and vice versa. In Aker BioMarine, its divisions are near integrated and therefore considered best suited for a consolidated historical financial statement analysis.

Length of the financial statement examination period

Concerning the length of the financial statement examination period, we define one period of analysis as a single financial year. The primary objective of historical financial statement analysis is to produce valuable quantitative information about historical financials to support financial valuation forecasts. Thus, selecting a historical period of analysis that coincides with today's operational characteristics is vital. In essence, if a company has experienced significant changes to its operational performance in recent years, analyzing over a lengthier period may not provide the optimal insight into future financial performance. Conversely, a firm with long-term steady operational performance in a stable business environment will find a more extensive examination period suitable as it may strengthen the reliability of historical financial information.

As for Aker BioMarine, the company experienced relatively modest growth after de-listing from Oslo Børs in 2012 until 2016. From 2017 and onward Aker BioMarine has seen substantial operational growth. It has had a near doubling of revenues from 2017 to 2019. This

is also reflected in the company's prospects changing drastically from 2015 compared to today's outlook.

Moreover, since 2015 Aker BioMarine has seen significant changes in its operational characteristics, and we consider 2015 and 2016 as less relevant for our analysis as we believe it would create more distortion than benefits in our analysis. Therefore, a period of three fiscal years (2017-2019) will be examined in our historical financial statement analysis.

Comparable firms

One key issue in a historical peer analysis is to establish comparability. That is comparability across the company being valued, and the selected peer company in terms of characteristics such as earnings growth prospects, profit margins from operations, access to critical resources, risk, and more. In the case of Aker BioMarine, there are no other publicly listed companies in the krill fishing industry. In this way, the comparable companies used in our analysis will not fulfill the general condition that a peer company should have industry affiliation, and establishing such a direct link between Aker BioMarine and other public companies could prove to be a challenging process. This implies that the krill fishing companies described in section 2.3 are not applicable in the peer analysis.

Establishing comparability

In our selection of peer companies, we believe that the traditional fishing companies listed in the public marketplace today have a low degree of comparability to Aker BioMarine and companies in the krill fishing industry. This is mostly since peers in well-developed traditional fisheries have a far lower potential for growth in comparison to the considerable amount of allowed biomass that is yet to be captured by the krill fisheries. In this sense, krill fishing companies are in a unique growth position compared to that of traditional fisheries. More so, profit margins also differ notably, and Aker BioMarine can extract relatively high margins from its production of high-end krill oil products, whereas traditional fisheries in the marketplace today are operating with much more conservative margins. Examples of such public listings in the traditional fisheries segment include Clearwater Seafoods, Oceana Group, and Sanford Limited.

This comparability issue also applies to salmon farming companies, with prospects of volume growth being somewhat limited in this industry due to high regulation and overproduction challenges. While Norwegian salmon farming companies can achieve high-end pricing of their

salmon, utilization of products and end-markets varies greatly, and we deem publicly listed companies in this category less relevant for a peer analysis of Aker BioMarine.

Finally, we see a high degree of relevance and comparability in several publicly listed companies within the Brands and Ingredients segment. As we presented in the introduction, these two segments are the two segments in which Aker BioMarine splits their operational revenue, with 68% of 2019 revenue within Ingredients and the remaining 32% in Brands (Aker BioMarine, 2020b). Moreover, with Aker BioMarine’s ambitions to remain heavily invested in the krill oil segment we except the company to continue to hold operational characteristics in the future that is similar to that of companies in the Ingredients segment. This also applies to the Brand segment, in which the company’s efforts through the Epion and Lang brands give reason to a comparison to companies in this category. To add further leverage to our arguments, these are also the two segments that Aker BioMarine uses in various company presentations and investor material when comparing their performance with peer companies.

We have confidence that our selected peer companies are reasonably motivated and that they, to the best of our knowledge, deliver some of the highest degrees of comparability to Aker BioMarine in the public market today.

We have selected two peers from both Ingredients and Brand to capture both segments Aker BioMarine operates in for our historical financial analysis. The selected companies from Brands are Midsona and Glanbia, while Ingredients' peers are Probi and Koninklijke DSM.

The following sub-chapter will briefly present the selected peers.

Midsona AB (Brands)

Midsona AB is a publicly listed Swedish company that develops, manufactures, and markets products in health, herbal medicines, and hygiene. The company is a leader in the Nordic region in natural and organic products and has the vision to become a European leader in health and well-being. The nutrition company had a market capitalization of SEK 4.45bn on November 22, 2020 (Yahoo Finance, 2020b), with a 2019 revenue of SEK 3.08bn (Midsona, 2020).

Glanbia Plc (Brands)

Glanbia Plc is a global nutrition group with operations in 32 countries, with an Irish heritage.

The group has a leading market position in sports nutrition, dairy ingredients, non-dairy ingredients, vitamins, and mineral premixes. The group is a worldwide supplier of dietary

supplements, but have their largest markets in Europe and North America. The company is listed on London Stock Exchange and had a market capitalization of EUR 2.89bn on November 22, 2020 (Yahoo Finance, 2020c), with a 2019 revenue of EUR 3.9bn (Glanbia, 2020).

Probi AB (Ingredients)

Probi AB is an international company focused on developing, producing, and delivering proven probiotics. The company has a long history of exploring and refining solutions that make the health-enhancing benefits of probiotics available for people globally. The global supplier of supplements and probiotics is listed on Nasdaq Stockholm and had a market capitalization of SEK 4.40bn on November 22, 2020 (Yahoo Finance, 2020d), and 2019 revenues were SEK 626.19mn (Probi, 2020).

DSM Koninklijke (Ingredients)

DSM is a Dutch-based multinational company which is specialized in health nutrition and materials. The company's global end markets include food- and dietary supplements, personal care, feed, and pharmaceuticals. The company is publicly traded at the Amsterdam Stock Exchange with a market capitalization of EUR 24.75bn on November 22, 2020 (Yahoo Finance, 2020e), with 2019 revenues of EUR 8.63bn (DSM, 2020).

Other considerations

In this section, we outline various other considerations we have taken in connection with the historical financial analysis of Aker BioMarine. Firstly, we recognize that including the most up-to-date financial information of the company is pivotal in creating a company's financial valuation as of October 30, 2020. Since we are well into 2020, this means that the financial information of the 2019 annual report, in practice, does not reflect the latest information.

Knivsflå (2020g) proposes one way to combat this by creating ”trailing” financial statements based on the latest available quarterly financial information. Since Aker BioMarine is a new publicly listed company, several factors limit the publicly available financial information we have on the firm. Most prominently, firms listed on Merkur Market are not obliged to report quarterly financials, and the various interim financial reports released so far this year by the company are heavily condensed and not suited for a historical financial statement analysis.

For this reason, we will only include information from the latest annual reports in our historical financial analysis. The latest financial information is included in our financial forecasting.

For clarity, in preparing this thesis, we contacted the company about the possibility of obtaining the latest full and detailed quarterly financials for the company. Our request was not possible to fulfill because these are not made publicly available as of today. We were also offered to come by their office to look at older, physically printed historical financials, but could not do so due to the ongoing COVID-19 pandemic as their office is located outside of Bergen.