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Reach Subsea (REACH.OL)
Industrials · Subsea services (ROV/IMR + USVs) · LTM Q1 2026
Analysis date: 2026-06-08
Price at analysis: NOK 5.30
Method: mttssn_streamlined_v1
Conviction: LOW
HOLD
Conviction: LOW
A Norwegian subsea-services contractor (ROV, survey, IMR for offshore energy and renewables) in a clear cyclical trough: LTM adjusted ROIC ~−3% (FY2025 ~5.5%) sits well below its 9% WACC, with economic profit −NOK 284M, after invested capital roughly tripled since 2022 on the lease-funded Reach Remote uncrewed-surface-vessel build-out. The backlog has softened (NOK 1.0bn vs 1.3bn YoY) and the dividend was cut. At EV/IC ~1.3x the market pays for a recovery the numbers don't yet show. HOLD, low conviction; base NOK 5.5.
Adj. ROIC
-3.0%
WACC 9% → spread -12.0pp
Economic Profit
NOK -284M
−NOK 284M @ 9% WACC (trough)
FCF Yield
n/a
Pressured by the USV capex/lease build
Price / Target
NOK 5 → NOK 6
+4% base; HOLD
Revenue (LTM)
NOK 2.5B
LTM; backlog softening
EBIT Margin
-4.4%
LTM adj EBIT negative (FY2025 +)
EV / IC
1.32×
Enterprise value / invested capital
Net Debt
NOK 1.4B
Net debt ~NOK 1.4bn; lease-heavy
Thesis

Reach Subsea provides subsea services — remotely-operated-vehicle (ROV) operations, survey, and inspection-maintenance-repair (IMR) — to offshore oil & gas and, increasingly, offshore wind, chartering vessels rather than owning a heavy fleet. Its strategic bet is Reach Remote: a fleet of uncrewed/autonomous surface vessels intended to lower the cost of subsea work. That build-out, largely lease-funded, has roughly tripled invested capital since 2022 — and the returns have not yet followed.

The current numbers are trough-like: we add back a NOK 23M impairment (vessel ROU + customer-relationship intangibles) and remove a small disposal gain, reaching LTM adjusted EBIT ~−NOK 90M (FY2025 +NOK 170M) and an LTM adjusted ROIC of ~−3% (FY2025 ~5.5%) — well below the 9% WACC, for economic profit of −NOK 284M. The backlog has softened to ~NOK 1.0bn (from 1.3bn) and the dividend was cut from NOK 0.42 to 0.17. At EV/IC ~1.3x the equity already prices a utilisation recovery plus Reach Remote optionality; until utilisation visibly inflects or the USV economics prove out, the risk/reward is unattractive.

Valuation · reverse-DCF & scenarios

With LTM adjusted NOPAT negative, the reverse-DCF is not meaningful; on FY2025 NOPAT the returns sit below the WACC, so EV/IC ~1.3x is pricing a recovery rather than current economics.

Base NOK 5.5 (the market prices a utilisation recovery); bull NOK 7.5 if utilisation inflects, the backlog rebuilds and Reach Remote USVs scale profitably; bear NOK 3.8 if offshore softness persists and the USV build-out keeps dragging returns below the WACC.

Reverse-DCF panel unavailable: non-positive nopat.

Scenario24m targetUpsideProb.Driver
BullNOK 8+42%30%Utilisation inflects, backlog rebuilds, USVs scale
BaseNOK 6+4%40%Market prices a utilisation recovery
BearNOK 4-28%30%Offshore softness persists; USV build-out keeps dragging
Prob-weightedNOK 6+5%100%Scenario-weighted expected value
Key drivers

1. Offshore-services cycle

Utilisation + day-rates drive the recovery — the dominant swing factor.

2. Reach Remote USVs

Uncrewed-vessel economics are the optionality — if they prove out, ROIC re-rates.

3. Offshore-wind exposure

IMR/survey demand from offshore renewables is a structural growth vector.

4. Backlog rebuild

A return of contract awards (from ~NOK 1.0bn) signals the inflection.

Key risks
Conclusion

Reach Subsea is a cyclical subsea-services contractor in a trough — adjusted ROIC below its 9% WACC and economic profit deeply negative — after a lease-funded uncrewed-vessel build-out tripled invested capital ahead of the returns. HOLD, low conviction; base NOK 5.5.

Constructive only on a visible utilisation inflection, a rebuilding backlog, or a lower entry; the Reach Remote optionality is real but unproven, and the current price already discounts the recovery.

Footnote evidence & sources

Every adjustment traces to the cited note/page in the source filing — click to open it there. Annual report / 10-K: 📄 open  ·  Latest interim: 📄 open

Adjustment / figureValueSourceWhy mttssn treats it this way
Revenue (operating income, total) FY20252,677Consolidated statement of comprehensive income, p.87 📄 p.87Group operating income total NOK 2,677.0m; ties exactly to Borsdata anchor and the 12M column of the Q1 2026 report.
Operating result (EBIT) FY2025149Consolidated statement of comprehensive income, p.87 📄 p.87Reported operating result NOK 149.4m, the starting point for the adjusted-EBIT bridge.
Impairment FY2025 (add-back)22.883Note 14/15 — Impairment, p.116-118 📄 p.116Non-recurring IAS 36 impairment: NOK 15.0m on the Northern Maria vessel right-of-use asset (Note 14) + NOK 7.9m on customer-relationship intangibles (Note 15). Added back to EBIT as a one-off.
Other income / asset-disposal gain FY2025 (removed)2.413Note 5 segment + Note 14, p.104 📄 p.104Gain on sale of assets booked in 'Other income/losses'; segment note states it is excluded from segment operating result, so removed from adjusted EBIT.
Depreciation & amortisation FY2025970Consolidated statement of comprehensive income / Note 24, p.87,134 📄 p.87Heavy D&A (incl. NOK 707m ROU vessel-charter depreciation) confirms IFRS 16 lease accounting — lease interest sits below EBIT, so no NOPAT lease add-back.
PPA amortization (customer relationships) FY2025 — kept in opex5.163Note 15 — Intangible assets, p.117-118 📄 p.117Amortization of acquired iSurvey/Guardian customer-relationship intangibles; rejected as an add-back per mttssn convention (real cost of acquired customer base).
Share-based payments (IFRS 2) FY2025 — kept in opex17.17Cash flow statement / Note 19, p.90,125 📄 p.90IFRS 2 equity-settled SBC NOK 17.2m; rejected as an add-back — a genuine compensation expense retained in personnel cost.
Total interest-bearing debt (carrying) 31.03.20261,742Note 5 — Borrowings, p.46 📄 p.46Bank 131.2m + IFRS 16 leases 1,111.3m + bonds 499.9m. Leases dominate (chartered vessels = core asset), so retained in invested capital.
Cash and cash equivalents 31.03.2026336Statement of financial position, p.39 📄 p.39Netted against gross IB debt to derive net IB debt; company convention also excludes NOK 11.4m accrued bond interest.
Total equity 31.03.20261,032Statement of financial position / Equity, p.39,41 📄 p.39Q1 2026 equity, down from 1,218.3m at year-end on the quarterly loss; 'Other reserves' 53.5m (translation) stripped to equity ex-OCI 978.3m for IC.
Income taxes FY2025 (benefit, overridden)-27.102Note 10 — Taxes, p.108-109 📄 p.108FY2025 tax was a NOK 27.1m benefit (effective -33%) from deferred-tax-asset recognition; non-representative, so NOPAT uses 22% normalized Norwegian rate.
Investment in associated companies 31.03.2026270Statement of financial position / Note 12, p.39 📄 p.39Equity-method associates (Eidesvik Reach, Eidesvik Agalas Reach, Guardian Geomatics Arabia); share-of-profit sits below EBIT, investment embedded in consolidated equity and thus in IC.
Q1 2026 EBIT (LTM driver)-192Statement of profit or loss, p.38 📄 p.38Q1 2026 operating result -192.1m vs +68.2m a year earlier; the swing turns LTM adjusted EBIT negative and signals a cyclical trough.
Order backlog 31.03.20261,000Highlights / Key figures, p.3 📄 p.3Backlog NOK 1.0bn vs 1.3bn a year earlier; tender value steady ~NOK 10bn. Demand-visibility context for the recovery thesis.
Analysis history

How the mttssn view has evolved — each prior dated note is preserved.

Quality · Buffett tenets6 / 15
Understandable business
Subsea services — ROV/survey/inspection-maintenance-repair (IMR) for offshore energy + renewables, increasingly via uncrewed surface vessels (Reach Remote); legible but project-based.
Durable moat
Thin: a capable fleet, crews and a technology bet (Reach Remote USVs), but subsea services is a cyclical, day-rate-driven, price-taking market.
Able & honest management
Growth-investing aggressively — the lease-funded Reach Remote uncrewed-vessel build-out tripled invested capital since 2022 — but the dividend was cut (NOK 0.42→0.17) and returns have lagged the spend.
Financial strength
In a cyclical trough: LTM adjusted ROIC ~−3% (FY2025 ~5.5%) sits well below the 9% WACC, EP −NOK 284M; IC is lease-heavy from the USV build-out.
Margin of safety
EV/IC ~1.3x prices a utilisation recovery + Reach Remote optionality the current numbers don't yet support; needs a visible inflection or a lower entry.