Annual Report 2013
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EG A/S Annual Report 2013 EG www.eg.dk CVR 84 66 78 11 Table of contents Management’s review 3 Key figures of the EG group 5Looking back at 2013 7Profit for the year 9 About EG Business areas 17Logistics & Production 18 Building & Construction 19 Retail & Media 20Utility 21Public 22 SaaS & Infrastructure Organisation and corporate governance 24 Corporate governance 25 Corporate social responsibility Risk management 26 Risk management Board of directors and executive board 28 Executive functions of the board of directors and the executive board Endorsements 31 Management’s statement 32 Auditor’s report Accounting policies 33 Accounting policies 41 Definitions Consolidated financial statements 42 Income statement 43 Balance sheet 45 Equity 46 Cash flow statement 48Notes Group information 67 Group structure EG A/S Annual Report 2013 2 Key figures of the EG group Revenue and growth EBITA and margin (normalised) 250.0 % 1,800 1,600 200.0 % 1,400 1,200 150.0 % 1,000 12,0 % 180 10,0 % 160 140 8,0 % 120 100 800 100.0 % 600 6,0 % 80 4,0 % 60 400 50.0 % 200 0 200 40 2,0 % 20 2009 2010 2011 Revenue in DKK million Revenue change 2012 2013 0.0 % 0 2009 2010 2011 2012 2013 0,0 % Normalised EBITA, operating profit in DKK million EBITA as a percentage of revenue, normalised EG A/S Annual Report 2013 Management’s review Key figures of the EG group 3 Key figures of the EG group Cash flow from operating activities Post-tax profit and return on equity (normalised) 250,0% 180.00 160.00 200,0% 140.00 35,0 % 140,0 30,0 % 120,0 120.00 150,0% 100.00 25,0 % 100,0 20,0 % 80,0 80.00 100,0% 60.00 40.00 50,0% 15,0 % 60,0 10,0 % 40,0 5,0 % 20,0 20.00 .00 160,0 2009 2010 2011 2012 2013 0,0% Cash flow from operating activities Cash flow from operating activities as a percentage of EBITDA 0,0 2009 2010 2011 2012 2013 0,0 % Normalised profit after tax in DKK million Return on equity (ROE), normalised EG A/S Annual Report 2013 Management’s review Key figures of the EG group 4 Looking back at 2013 Best result ever 2013 was another record year for the EG group with the best result in the company’s more than 30-year history. Revenue came to DKK 1.6 billion, equalling an increase of 6.8 % obtained through a combination of organic and acquisitive growth. The profit also developed favourably with normalised earnings (EBITDA) of DKK 195.2 million – an increase of 19.7 % from 2012. The normalised EBITDA margin increased from 10.9 % in 2012 to 12.2 % in 2013. EG’s revenue mix with a considerable proportion of the revenue coming from cloud solutions, fixed service agreements and software has contributed to the increase in gross profit and predictable revenue streams. These parts of the business represent a growing proportion of EG’s total revenue and profit. EG has the ability to generate good free cash flow, partly due to a continued increase in operating profit and a reduction of funds tied up in working capital. This gives freedom of action on a number of parameters, including acquisitions, which in 2013 included Unitail AB, NaviPartner AS and DataPro A/S. EG has the structure and the power to contribute to consolidating the market, and acquisitions will remain part of our strategy. EG has enjoyed stronger organic growth in 2013. This is partly due to an increased focus on methods and implementation processes in major projects in order to minimise the number of unprofitable hours tied up in existing agreements. In addition, a general strengthening of our sales efforts has resulted in higher growth for EG than for the rest of the market. New owner – updated strategy As of 1 September 2013, the ownership of EG passed to Axcel following a quick, well-executed and pre-planned sales process. This provides stability and clarification on two fronts. Firstly, EG’s performance and potential have been scrutinised at the operational level in terms of key KPIs such as invoicing rate, pipeline development and project progress, and at the strategic level in terms of further opportunities for development. Our strong position operationally and strategically was confirmed by analyses and benchmarks in connection with the change of ownership. Secondly, being owned by Axcel allows us to further strengthen the company during the strategy period, which runs until 2017. Our opportunities include: • Enhanced business and product development to further build EG’s range of IP-based solutions with industry as the core focus. • Consolidation of marketing, sales, delivery and service/support models in order to streamline our efforts in relation to selected business models and ensure that EG’s considerable cross-selling potential is fully realised. • A stronger mandate for the internal lean function to focus on realising the significant efficiency and scale gains that are available across EG. As of 1 January 2014, the organisation has been restructured to reflect the new strategy in order to streamline our different business models, create a structure that better supports knowledge sharing and cooperation across EG and strengthen the professional environments. The main change is EG A/S Annual Report 2013 Management’s review Looking back at 2013 5 Looking back at 2013 the establishment of a new division, ”Technology & Delivery”, which brings together the services that constitute a large part of EG’s cross-selling potential and establishes a common framework for project implementation, delivery models and service and support. The new division will also be at the centre of collaborative product development. The financial statements for 2013 are affected by significant non-recurring costs in connection with the change of ownership, and normalised EBITDA therefore provides a more accurate picture of EG in 2013. Great potential in the existing customer base In 2013, we have really started to reap the business benefits of being one EG. The advantage to our customers is that we are with them all the way and can help them realise a higher overall profit potential. EG may benefit from a potentially greater share of each customer’s IT budget. Due to our extensive customer and solution portfolio and our relatively low share of wallet, targeted cross-selling involves a considerable growth potential which we work determinedly to realise. EG has a clear-cut profile based on value creation through industry focus. We are leading the market with specific solutions for a number of industries such as retail chains, DIY centres, tradesmen, logistics, practitioners and lawyers. We continuously expand our market leading position in these and other industries. The portfolio also includes EG’s extensive development and sale of our own software. This comprises our proprietary ASPECT4 platform, which includes solutions for the transport, textile, DIY, logistics and production industries, as well as industry solutions and add-on solutions with separate IPs based on standard platforms from e.g. Microsoft. The latter in particular will benefit from enhanced product and business development. Overall, the relative part of the mix consisting of cloud solutions, service agreements, software and consultancy has increased compared to hardware. The result is a continuing increase in the gross margin, which has risen from 72.9 % to 77.3 % over the last four years (2010-2013). Strong partnerships EG is supplier-independent. This enables us to advise our customers based on their needs without being tied to a particular technology. EG has strong partnerships with a number of suppliers such as Microsoft, IBM, HP and SAP. EG is one of the largest Microsoft Dynamics partners in the world and has received a number of awards and acknowledgements in this context during the past year, including the title of Dynamics partner of the year in Norway and the title of vertical partner of the year in Denmark. Furthermore, IBM awarded us the title of business analytics partner of the year. This illustrates that the strategy of linking technological expertise with industry knowledge works, regardless of the approach. Optimal portfolio mix EG’s revenue mix includes considerable revenue from cloud solutions, licence fees for proprietary software and fixed service agreements. These areas are characterised by predictable revenue streams and a relatively high gross profit. The weighting of our revenue mix provides a solid foundation for EG’s business and contributes to good results, even in years when general market growth is weak as was the case in 2013. In 2013, EG further optimised its product portfolio as planned, increasing the contract portfolio of cloud solutions and current service agreements to represent a growing share of revenue and EBITDA. Our focus will remain on recurring revenue, and we expect to further increase this part of our portfolio in 2014 and 2015. EG A/S Annual Report 2013 Management’s review Looking back at 2013 6 Profit for the year Financial position • 6.8 % increase in revenue • 12.8 % increase in EBITDA and 19.7 % increase in normalised EBITDA • 7.9 % increase in earnings (EBITA) and 24.2 % increase in normalised EBITA. In 2013, the group generated total revenue of DKK 1,603.3 million, which is an increase of 6.8 %. The in-crease in revenue was boosted by organic growth as well as acquisitions. Conversely, adverse currency movements of NOK had a negative impact of 0.7 %. EG’ increased focus on the sale of cloud solutions, service agreements, software and consultancy rather than hardware sales in recent years has contributed to a continuing increase in the gross margin. Since 2010, the company’s gross margin has risen from 72.9 % to 77.3 % in 2013. With earnings (EBITDA) of DKK 161.7 million, EG achieved the best result in the company’s more than 30-year history and earnings growth of 12.8 % compared to 2012. Normalised EBITDA adjusted for acquisition-related costs, restructuring costs, purchase price adjustments related to the sale of EG to Axcel and normal-isation of acquired companies to which a 12-month period of ownership does not apply totalled DKK 195.2 million (DKK 163.1 million) in 2013, equalling an increase of 19.7 %. The result is considered satisfactory. The growth in revenue and earnings from 2012 to 2013 is partly a result of organic growth in most business areas. Acquisitions have also contributed positively. The progress from 2012 to 2013 is in line with the company’s expectations. Revenue Group revenue came to DKK 1,603.3 million (DKK 1,501.5 million), equalling an increase of 6.8 %. The in-crease in revenue from 2012 to 2013 was boosted by the acquisitions of Unitail AB, NaviPartner AS and DataPro. Within hardware sales, 2013 saw a revenue decline of 6 % compared to 2012. This is a result of EG’s deliberate choice to focus solely on customers to whom we sell industry solutions. Excluding hardware sales, EG had an increase in revenue of 8.1 %. The Logistics & Production division, which provides industry solutions based on AX, NAV, ASPECT4 and SAP to production and logistics customers, recorded revenue of DKK 394.6 million in 2013 compared to DKK 396.0 million in 2012. The Building & Construction division, in particular DIY and Building & Installation, recorded revenue of DKK 280.6 million (DKK 258.5 million) in 2013 and an increase in revenue of 8.5 % from 2012, partly as a result of the acquisition of NaviPartner in Norway. The Retail & Media division, Scandinavia’s largest supplier of value-adding IT solutions for the retail trade and Denmark’s leading supplier of specialised IT solutions for the media industry, experienced massive growth in Dynamics AX for Retail in 2013. Revenue for 2013 was DKK 303.0 million (DKK 253.2 million), equalling an increase of 19.7 %, as a result of organic growth and the acquisition of Unitail AB and DataPro A/S. The Utility division, which provides IT solutions and services to utility companies in the Nordic countries, recorded revenue of DKK 145.0 million (DKK 132.5 million) in 2013, equalling an increase of 9.4 %. The SaaS & Infrastructure division, which provides proprietary industry solutions to selected customer groups and SaaS solutions and operational services to the customers of the EG group, recorded revenue of DKK 413.6 million (DKK 382.4 million) in 2013 and an increase in revenue of 8.2 % from 2012 due to a con-siderable increase in revenue from cloud solutions, whereas traditional hardware sales has seen a decline in revenue. The Public division, which provides IT and efficiency solutions to the Danish government and municipalities, recorded revenue of DKK 110.0 million (DKK 101.1 million) in 2013 and an increase in revenue of 8.9 % from 2012 as a result of organic growth. Gross profit The group’s gross profit has increased from DKK 1,157.3 million in 2012 to DKK 1,238.8 million in 2013, equalling an increase of 7.0 %. The positive trend in gross margin as a percentage of revenue has continued from previous years, and the gross margin amounted to 77.3 % in 2013 compared to 77.1 % in 2012. The group’s increased focus on the sale of cloud solutions, service agreements, software and consultancy rather than hardware sales has contributed to a continuing increase in the gross margin in recent years. Back in 2010, EG’s gross margin was 72.9 %. Earnings performance, EBITDA The EG group’s EBITDA for 2013 amounts to DKK 161.7 million compared to DKK 143.3 million for the same period in 2012, equalling an increase of 12.8 %. The increase in EBITDA is primarily a result of improved profitability of the existing business, but acquisitions have also contributed positively. In the assessment of the increase in EBITDA, considerable resources, both quantifiable and non-quantifiable, have been allo-cated to acquisitions and subsequent integration of the EG A/S Annual Report 2013 Management’s review Profit for the year 7 Profit for the year acquired companies as well as to the sale of the EG group to Axcel. Normalised profit for EG includes purchase price adjustments related to Axcel’s acquisition of the EG group. Normalised EBITDA amounted to DKK 195.2 million (DKK 163.1 million) in 2013, equalling an increase of 19.7 %. Earnings performance, EBITA The EG group’s EBITA for 2013 amounts to DKK 130.3 million compared to DKK 120.8 million for the same period in 2012, equalling an increase of 7.9 %. The increase in EBITA is primarily a result of improved profi-tability of the existing business, but acquisitions have also contributed positively. EBITA is also affected by significant non-recurring costs as mentioned under EBITDA. Normalised EBITA amounted to DKK 174.6 mil-lion (DKK 140.6 million) in 2013, equalling an increase of 24.2 %. Earnings performance, EBIT The EG group realised an EBIT of DKK 101.4 million in 2013 compared to DKK 67.3 million in 2012. Normalised post-tax profit Normalised post-tax profit is the post-tax profit for the year adjusted for extraordinary items that cannot be attributed to continuing operating activities, including disposal of activities, restructuring costs, costs re-lated to the integration of acquired companies and amortisation related to acquisitions. Normalised post-tax profit amounted to DKK 137.3 million in 2013 compared to DKK 103.5 million in 2012. Tax on profit for the year Tax on profit for the year comprises current tax of DKK 27.2 million, adjustment of tax for previous years of DKK -3.5 million and changes in deferred tax of DKK -8.0 million. Tax on profit for the year thus amounts to DKK 15.7 million (DKK 20.0 million). The tax rate is 16,2 % (29 %). Cash flows The combination of the company’s growth and a reduction in funds tied up in working capital has resulted in a continued strong cash flow from operating activities of DKK 75.0 million (DKK 153.8 million). The change in short-term debt (DKK 74.0 million) is primarily due to the settlement of balances with parent companies. The working capital amounts to 10.5 % (11.9 %) of the revenue. Through a continuous tightening of the business model, EG has ensured that an increasing share of the operating profit is converted into free cash flow which can be used for the acquisition of relevant com-panies or for debt reduction. Acquisitions made in 2013 were financed from the company’s own cash flow. Cash flows from investing activities amounted to DKK -114.5 million (DKK -135.4 million). The reduction from 2012 is a result of fewer investments in acquisitions in 2013 compared to 2012. Total investments for the year amounted to DKK 114.5 million of which DKK 32.4 million can be attributed to the acquisition of intangible assets, while investments in property, plant and equipment amounted to DKK 10.0 million. In-vestments in the acquisition of companies amounted to DKK 73.4 million. Cash flows from financing activities amounted to DKK -1.7 million compared to DKK -1.3 million in 2012. Net change in cash and cash equivalents amounted to DKK -41.2 million compared to DKK 17.1 million in 2012. Net working capital The working capital amounts to DKK 168.4 million (DKK 178.5 million). At the end of 2013, the working capital to revenue ratio was 10.5 %, which is a considerable improvement compared to 2012 when the working capital to revenue ratio was 11.9 % and compared to 2008 when the working capital to revenue ratio was 17.6 %. The improvement in working capital from 2012 to 2013 is mainly due to a reduction in overdue debtors and a reduction in contract work in progress. Balance sheet At the end of 2013, the total consolidated balance sheet of EG A/S amounted to DKK 1,039.1 million (DKK 986.7 million). The improvement in the balance sheet is primarily due to an increase in goodwill and other intangible assets as a result of additions relating to the acquisition of companies. At the end of 2013, equity amounted to DKK 514.9 million (DKK 441.0 million). Mergers As part of the group’s strategy to reduce the number of companies, the subsidiary EG NeoProcess A/S has been merged into EG A/S as of 1 January 2013. Events after the end of the financial year No significant events have occurred after the end of the financial year. Expectations EG expects continued progress in revenue and earnings in 2014. EG A/S Annual Report 2013 Management’s review Profit for the year 8 When IT is merely a tool When IT is merely a tool EG’s hallmark is carefully customised industry solutions in which technology, processes and organisation all come together. We have strong skills in market-leading IT platforms, and we effortlessly combine the components to create the technological solution that best supports the customer’s business. To us, business is always more important than technology. This is how we ensure that our IT solutions provide companies with the best possible foundation. Industry solutions lead directly to the goal With deep industry knowledge, we know the challenges of the customer’s industry. We know the pitfalls and are able to anticipate typical problems. We also know the solutions that have worked for other companies in the same industry. Even efficient operations have potential In our experience, a company’s processes are often more complex than they need to be. Compared to the ideal processes of the industry, they often have the potential for improvement. We work with our customers to map out which parts of their processes they should adjust in order to create the greatest business value. A solution that fits Process improvements are an integral part of EG’s industry solutions right from the start. Some companies can use one of our industry solutions straight out of the box, while others require customisations based on the company’s specific characteristics. In all circumstances, a customised industry solution provides the most effective foundation for the future. The company’s workflows are mapped and streamlined. EG A/S Annual Report 2013 Management’s review About EG 9 Solutions from A to Z 360-degree IT solutions from one supplier, offering everything from business development, implementation and operations to service and support. We ensure that the IT solution chosen by the customer is aligned with the customer’s business goals and the characteristics of the industry, allowing the customer to ultimately reap the benefits. We tailor our services to the customer’s needs and put business before IT. We are able to do so because we offer a complete portfolio of solutions. Industry solutions lead directly to the goal Business development BUSINESS DEVELOPMENT Increased productivity and the development of our customers’ businesses are the common threads in everything we do. If a customer requires additional improvements that are not already incorporated into our industry solutions, our strong team of business consultants is ready to help. We know the challenges of the industries we serve. We also know the solutions and how to gain the competitive edge. We have translated this knowledge into best practice processes and incorporated it into our industry-specific standard solutions. This allows our customers to benefit from the obvious improvements right from the start. INDUSTRY SOLUTIONS ARCHITECTURE & DESIGN SERVICES STRATEGIC ADVICE APPLICATION MAINTENANCE & HOSTING HARDWARE & SOFTWARE SERVICE & SUPPORT Operations and infrastructure A company’s technological foundation must be flexible and rock solid at the same time. We offer strategic advice on e.g. infrastructure and security, and we aim to meet all our customers’ needs regarding operations, hosting, service and support. Hardware and software are available through our webshop. EG A/S Annual Report 2013 Management’s review About EG 10 IT that suits the customer Both small and large businesses need an IT solution that supports their workflows. Based on best practice processes in the industry, we can provide just the right solution. The need for individual customisations often makes the difference between small and large businesses. The decision will typically be based on a trade-off between the need for simple, predictable IT and the need for full flexibility. Turnkey industry solutions for small businesses End-to-end projects for large businesses Small businesses need an IT solution that accurately supports their specific workflows, enabling them to work smoothly and without undue delay. Settling for a compromise is not an option. For large businesses, the first step towards a new IT solution is often a thorough analysis of the processes. How can existing workflows be supported, where is the optimisation potential, and how should the efforts be prioritised to fully realise the benefits? In order to maximise the benefits, we look at IT, processes and organisation collectively. Integrated industry requirements Extensive industry knowledge and deep insight into optimal workflows form the basis of our turnkey industry solutions. In other words, our solutions also support the workflows of your business. They include functionality such as integrated calculation of quotations and mobile time capture directly in the workplace for tradesmen and integration to ECG scanners and simple prescription for practitioners. EG offers turnkey industry solutions for a variety of industries, including tradesmen, electricians, plumbers and technicians, housing administrators, lawyers, practitioners, undertakers, plant nurseries, churches and cemeteries. INDUSTRY SOLUTIONS Simplicity from start to finish A cloud-based IT solution covers all your needs. We take care of everything from configuration to hotline and operations. This allows you to focus on your business instead of on IT. With an industry solution as the starting point for further customisations, the final solution will accurately support the streamlined workflows of your business. The result is a tailormade solution that is easy to implement and ensures efficient operations. EG uses standard platforms and technologies from e.g. Microsoft, IBM, HP and SAP. The majority of our industry solutions are customised solutions based on Microsoft Dynamics AX and NAV, C5, XAL, SAP and our proprietary ASPECT4 software. Our industry solutions are provided on a subscription basis, and you can adjust the solution as your requirements change. You save time and resources on the implementation and maintenance of IT, and you know the costs in advance. Simple, predictable and straightforward. EG A/S Annual Report 2013 Management’s review About EG 11 Awards and acknowledgements in 2013 The red carpet is not our usual scene. We prefer to be in the production environment, in the shops, in the warehouses, in the meeting rooms – where the direction is set, action plans are described and solutions are devised and put into operation. Sometimes, however, being successful will attract some attention, and we make sure to dress for the occasion. The highlights of 2013 include: Microsoft: Verticalisation partner of the year in Denmark Awarded to the Microsoft partner who most successfully invests in and goes to market with industry-specific solutions based on Microsoft Dynamics. HerbertNathan: ERP Award of the Year 2013 Awarded to Linco Food and EG. The award is given to a customer and a supplier who have implemented an ERP project with excellence. IBM Business Partner Award 2013 For demonstrating the ability to execute and make an extraordinary effort to achieve success with IBM’s Business Analytics portfolio. Microsoft: Dynamics partner of the year in Norway For achieving solid growth year after year, primarily due to excellent industry solutions and smart concepts for simple deployment. EG A/S Annual Report 2013 Management’s review About EG 12 EG in your everyday life Every day of the year, our customers help to keep the wheels in motion. They create jobs and provide products and services for the benefit of us all. Through efficient workflows supported by IT, we help them to increase their productivity and thus to continue to create value for their customers and for Denmark. We are proud of our customers. When you read your morning paper, your subscription and the printing and distribution of the paper are likely to be managed through an EG solution. There is a high probability that the lorries you overtake on your way to work are controlled by means of EG’s transport solution. When you do your shopping on your way home from work, the efficient shop assistant serving you is using EG’s retail solution with all functions readily available. When you shop online and have a quick overview of available products, the solution providing you with updated data is likely to be an EG solution. Do you have a grand home? An EG solution was used to provide an overview of the project economy during the renovation of a castle. If you live more modestly, your rented or leasehold property is probably managed through an EG solution. The size of your electricity bill may well be the result of a consumption calculation performed with the use of an EG solution. Energy renovation? The windows, fittings and roofing felt will often be manufactured using an EG solution – as is the case with many other products. The tradesman doing the work on your house probably uses an EG solution to manage the building project from start to finish. If you are a DIY person, the staff at your DIY centre probably use a system provided by EG. If you fall out with your neighbour, there is a good chance that your lawyer uses an EG solution to manage the case. When you fall ill, you can confidently contact your GP or the doctor on call – a solution from EG ensures that all necessary information is available. Good job that the medication worked! This way, you do not need to know that EG provides solutions to almost all churches and cemeteries in Denmark. EG A/S Annual Report 2013 Management’s review About EG 13 EG is one of the best in its field – and one of the best workplaces EG’s most valuable asset is its employees, and providing good working conditions for them is a priority to us. In practice, this means: • A meaningful job in which each employee can make a difference • Space for personal development and to make your own decisions • Good work colleagues who lend a helping hand when it is needed, and who are interested in you as a person • Good working conditions with proper handling of everything you would expect from a large company. Local and global The EG group is large and small at the same time. All employees are part of a small and close-knit unit, but also part of a group with more than 1,300 employees who work together across multiple countries and more than 20 locations. Industry focus and specialist skills IT-Branchens Bedste Arbejdspladser Denmark 2013 EG is one of the best large workplaces in Denmark In the Great Place to Work survey for 2013, EG was ranked as the 7th best large workplace and the 9th best IT workplace. The study provides a good basis for comparison with other companies and adds commitment to our ambition to be among the best IT workplaces. EG’s score and ranking in relation to other IT workplaces are publicly available, and that makes the result of our efforts to improve employee satisfaction very tangible and visible. Many of our employees work with industry focus, and others work with specialist skills in areas such as management consulting, IT development and standard platforms. Collaboration across EG is supported by internal processes that are designed to facilitate flexible and productive collaboration. EG A/S Annual Report 2013 Management’s review About EG 14 Multiple areas of expertise combined in a customer solution A production company based in Norway with factories in Norway, Sweden and the Czech Republic and sales activities across Europe needed greater transparency in its overall information flow and an increased focus on sales. Company information and documents were scattered across the ERP system, the e-mail system, the Exchange system and other standalone systems that did not communicate with each other, and the company had no central sales solution. The solution was to implement a combined CRM and CrossWork solution on top of the existing ERP solution. The solutions support the sales process and enable the company’s employees to access all information across systems and locations. ”The project has been an eye-opener for me in that I had to use my skills as a business consultant in a new way and work with systems operating at a higher level than ERP. Working closely with colleagues with other skills and insights from different business areas of EG has been challenging and rewarding,” says business consultant Susanne Fløe and continues: ”It has also stressed the importance of EG’s standard processes in large cross-disciplinary projects. They ensure that we cover all aspects and that the quality is right.” »I am relatively new to EG, and the project has broadened my EG horizons and given me knowledge of many new products and skills that EG offers the market,” says CRM consultant Philip Holst Riis. EG A/S Annual Report 2013 Management’s review About EG 15 Close customer relations create new opportunities A company originally based in Denmark has expanded far beyond the Danish borders with headquarters in Singapore and a presence in most parts of the world. The customer needed to upgrade an old ERP solution and the hardware infrastructure of a cloud-based solution. EG was initially selected as the supplier of infrastructure and subsequently also as the supplier of the new AX solution. The roll-out of AX and infrastructure will be implemented in stages over a three-year period, allowing all units of the company to keep up. ”The project is a good example of how close customer relations and EG’s 360-degree approach create opportunities for new partnerships that create value for the customer and, of course, for EG. Originally, we were to deliver a CRM solution to the customer. This led to infrastructure, which in turn led to AX. Our good relations with the customer give us the opportunity to bring our skills into play alongside our competitors each time new IT initiatives are under way,” says infrastructure architect Jeppe Ellesøe Schøllhammer. ”This project is a good exercise in collaboration across locations and business areas with a highly global customer. Our project team was located in Kolding, Aalborg and Ballerup, and the customer’s business is spread around the world. I am relatively new to EG, but I find that I can rely on internal standard processes to ensure that we all speak the same language,” says AX consultant Bent Høst. He adds: ”During the project, our close relations with the customer enabled us to further optimise the customer’s business with our 360⁰ Health Check and Global Data Management from EG.” EG A/S Annual Report 2013 Management’s review About EG 16 Logistics & Production EG Logistics & Production offers IT solutions based on industry insight to companies within logistics, production and wholesale trade. Streamlined processes and readiness to change is necessary when procedures need to be optimised. Together with the customer, we identify the current processes and analyse how they can become more efficient. For many years, we have accumulated a unique knowledge about best practice processes and solid methods for process optimisation. We are versatile, and this gives us the freedom to give advice on the basis of the customer’s business needs and processes. We will find the technological solution which supports the needs in the best way. Our industry solutions are based on Microsoft Dynamics AX, Dynamics NAV, SAP and ASPECT4. Our consultants have many years of experience with logistics and manufacturing companies and cooperate in teams to ensure the best possible sharing of knowledge. Our total pool of competences is the customer’s assurance that together we find and realise the profit potential. This ensures value-adding solutions. »Together with our customers we increase the productivity in Denmark. « Bjarne Aarup, Director Logistics & Production EG Logistics & Production focuses on the main areas: • Process, project and make-to-order companies • Logistics • Transport • Textiles • B2B trade. 20132012 Revenue, DKK million 394.6 396.0 EG A/S Annual Report 2013 Business areas Logistics & Production 17 Building & Construction EG Building & Construction has an indepth knowledge of the challenges and opportunities in the overall building and construction industry. We know the daily working procedures and we support the process from the first lines are drawn on the drawing board, to a building is built, renovated or demolished. By using best practice processes we create a solid IT foundation under the entire industry. Our competent employees and customised solutions make us the IT suppliers of construction. The craft enterprises often use our pre-packaged industry solutions on a subscription basis and let EG Building & Construction handle everything from development to operation and maintenance. We also manage the payroll administration for more than 1,300 companies within the industry. The solutions allows the customers to focus on their business instead of on IT. For contractors and DIY centres such as Ditas, XL-BYG, Silvan, Stark and jem & fix we have comprehensive solutions which are customised to the needs of the chains and groups within construction. EG Building & Construction is represented in Denmark and Norway. »We are organised in the best possible way – around our customers. « Jørgen Møller, Director EG Building & Construction EG Building & Construction focuses on the main areas: • DIY centres • Contractors • Craft enterprises • Electricians, plumbers and technicians • Landscape gardeners • Industry (Norway). 20132012 Revenue, DKK million 280.6 258.5 EG A/S Annual Report 2013 Business areas Building & Construction 18 Retail & Media EG Retail & Media helps retail and media companies generate growth and increased efficiency by means of business development and by using IT solutions as accelerator. EG Retail ensures efficient operation in the retail trade. By improving the procedures of the retail chains throughout the value chain, we help them deliver the right product at the right time and place and at the right price. We combine this with a nationwide service and support organisation. Our industry-specific solutions are based on AX for Retail and LS Retail, which are both built on the Microsoft Dynamics platform. Our customers count more than 70 retail chains with a total of more than 4,000 shops and more than 15,000 pointof-sale terminals. EG Media specialises in advertisement, subscription and production solutions for media companies. Furthermore, we assist our customers in optimising their customer management and relationships (CRM) as well as their operational and strategic analysis and reporting. Our industry solutions are based on Microsoft Dynamics NAV and implemented in more than 100 graphic design companies and media agencies. »We improve the procedures of the retail chains and ensure efficient and stable operation. « Henrik R. Møller, Director EG Retail & Media EG Retail & Media focuses on the main areas: • Retail chains and wholesale companies • Media and graphic design companies. 20132012 Revenue, DKK million 303.0 253.2 EG A/S Annual Report 2013 Business areas Retail & Media 19 Utility EG Utility focuses on the Nordic market of energy supply. The utility industry is characterised by high complexity, changing political agendas and development of a common Nordic end user market. Our competence builds on an in-depth knowledge of the utility industry and our industry solutions are used across boarders in Denmark, Norway and Sweden. The solutions cover the entire process from meter to cash. An increasing number of utility companies choose to make the daily operation more efficient by outsourcing some of the tasks. EG Utility handles recurring tasks such as invoicing and payroll administration. In this way, the companies can focus on their core areas. The product strategy of EG Utility builds on a modular design that allows customers to select the modules that support their type of utility and needs. The modules are connected to the customer’s current solution and offer the flexibility necessary in a changing market. The focal point of our work in EG Utility is the demands that utility companies are facing in a competitive environment: willingness to adapt, efficient trading in energy, good customer service and handling of large data quantities. »A complex market across borders requires agile, well-thought-out IT solutions. « Bo Haaber, Director EG Utility EG Utility focuses on the main areas: • Heating • Electricity • Gas • Water and drainage • Refuse collection • Broadband, including TV, Internet, telephony and mobile telephony. 20132012 Revenue, DKK million 145.0 132.5 EG A/S Annual Report 2013 Business areas Utility 20 Public EG Public is 100% dedicated to the public sector, state as well as regions and municipalities. EG Public has strong industry knowledge which matches the challenges of the various players on the market. The financial system ØS Indsigt, digital case handling solutions, legal information and citizen self-service systems are examples of areas in which the solutions are completely customised to the daily life in the public administration. We see it as our job to make the working procedures of the public employees simpler and more efficient. This is only possible because we completely understand their everyday lives, routines and challenges. We contribute with high technical competence within the market’s leading IT technologies and platforms. We take responsibility for implementing the solution, whether it involves adjustments to subsystems, a new online portal to streamline processes, or innovative electronic solutions. Backed by the EG group’s wide competences, we are an active and flexible partner when it comes to innovation and value creating solutions for the public market. Today, we deliver solutions to all of the Danish municipalities as well as to regions and state institutions. »We contribute to the public sector reaching its goal of efficiency. This we do by optimising processes and developing solutions based on leading technology. « Bo Haaber, Director EG Public EG Public focuses on the main areas: • Digital case handling solutions • Legislative information • Self-service solutions • Group finances (ØS Indsigt) • Financial management in the state, in regions and in independent institutions. 20132012 Revenue, DKK million 110.0 101.0 EG A/S Annual Report 2013 Business areas Public 21 SaaS & Infrastructure EG SaaS & Infrastructure supplies prepackaged online solutions where the customer is up and running from day one. More and more small and medium-sized companies experience how easy IT can be when the solution matches the needs of the industry, and when full responsibility of the operation is taken at the same time. We offer pre-packaged industry solutions for the following industries: • Doctors – MedWin is a fully developed and user-friendly practitioner system that handles all the administrative tasks in a medical practice. • Housing and property administrators – EG Housing is used by private and council housing and property administrations of all sizes. • Lawyers – with the legal system AdvoPro, the focus is on the case. The system provides a full overview of minutes, reports and important legal documents. • Churchyards – the operation of churchyards becomes easier with an online IT solution that structures the administration of burial places and eases the cooperation with treasurers, auditors and church councils. • Garden centres – PlantSoft Detail is a complete administrative solution for all sizes of garden centres. The system is simple and user-friendly. • Undertakers – Opus2i contains everything which an undertaker business requires: complete accounts and budget, all necessary information for an efficient case management and record-keeping, death reports and mileage overviews. »One supplier who adds value to your entire IT solution. This provides efficiency and safety. « Christian Jensen, Director SaaS & Infrastructure We offer pre-packaged online industry solutions for: • Practitioners • Housing and property administration • Lawyers • Churchyards • Garden centres • Undertakers. EG A/S Annual Report 2013 Business areas SaaS & Infrastructure 22 Cross-disciplinary skills EG has the cross-disciplinary skills that match the companies’ needs for overview, management and safety. Our solutions within CRM, business analytics and knowledge sharing enable us to exchange ideas with our customers on the development of their business. When business strategy and processes are optimised, we add the development resources and the type of operation that match the individual customer best – all combined with comprehensive integration experience and clear-cut skills. Our cross-disciplinary solutions cover: • Business analytics for better management of the company’s budgeting and consolidation. • Knowledge sharing through portals and efficient management of documents and e-mails that provide the overview needed by the companies. • CRM that supports the process from the first contact with a potential customer to the final delivery and the further strengthening of the relation. • Global application development which provides the opportunity to use resources from e.g. India as part of the mix. An attractive model where EG is responsible for project management and knowledge transfer. • Operation & Infrastructure where we offer the management method preferred by the customer – cloud-based, hosted or own operation – supplemented with specialist skills, equipment and support. EG SaaS & Infrastructure focuses on the main areas: • Business analytics • Knowledge sharing based on SharePoint • CRM • Global application development • Operation and Infrastructure. 20132012 Revenue, DKK million 413.6 382.4 EG A/S Annual Report 2013 Business areas SaaS & Infrastructure 23 Corporate governance By virtue of its ownership, the group is subject to ”Guidelines for responsible ownership and good corpo-rate governance” as defined by the Danish Venture Capital and Private Equity Association. The guidelines are available at DVCA’s website, www.dvca.dk. EG A/S intends to fully comply with the guidelines where it is relevant to EG. the internal con-trol environment as well as for determining the relations and framework of the external audit. Standard procedures have been established, focusing on e.g. the updating of financial reporting standards and re-views of any items containing material accounting estimates and items of a one-time nature. The organisation of management tasks is, among other things, based on the Danish Companies Act, the Danish Financial Statements Act, the company’s articles of association and good practice from comparable companies. Also, the management of EG A/S is continuously monitoring the development in the field of corporate governance. In this way, the management ensures that the company, internally as well as externally, is managed in a way that is in keeping with the times and in accordance with applicable law in order to protect the interests of all interested parties. The company has established a function to continuously monitor whether the company’s accounting guide-lines and policies are adhered to. This function reports to the audit and risk committee on an ongoing basis. The board of directors has adopted an updated set of rules of procedure for the board of directors. In addi-tion, the board of directors uses committees for special tasks. Thus, a chairman committee, an audit and risk committee and a remuneration committee have been set up. The following board members are represented on the individual committees: • Chairman committee: Klaus Holse, Per Christensen and Jørgen Lindholm Lau • Audit and risk committee: Jørgen Lindholm Lau • Remuneration committee: Klaus Holse and Per Christensen. Board of directors The board of directors consists of a total of eight members. Two of the representatives have been ap-pointed by the principal shareholder, three of the representatives are independent and three of the repre-sentatives have been elected by EG’s employees. Axcel Fond IV is represented on the board by partner Per Christensen and director Jørgen Lindholm Lau. Board meetings are held four to five times a year. The board of directors determines the company strategy and acts as an active sparring partner to the management of the company. Chairman committee The chairman committee meets with the management of the company on a monthly basis. Audit and risk committee Audit and risk committee meetings are held four to five times a year. The work of the audit committee is described in an annual calendar which is approved by the board of directors. According to the annual cal-endar, the committee is responsible for monitoring the company’s financial reporting and Diversity EG aims to promote diversity, e.g. with a fair representation of women on the board of directors as well as in the executive management group, based on a desire to strengthen the company’s versatility, broaden its competences and improve its decision-making processes. All board members elected at the annual general meeting are currently men, whereas the board members elected by the employees include two women and one man. The board of directors aims to ensure that its members complement each other in the best possible way as regards age, background, nationality, gender, etc. for the purpose of ensuring a competent and versatile contribution to the work of the board at EG. These factors are taken into account when new candidates for the board of directors are identified, and the nomination of candidates will always be based on an assessment of their competences, how they match EG’s requirements and how they will contribute to the overall efficiency of the board of directors. EG’s objective for the coming years is to increase the share of women to approx. 20 % in the management group and to approx. 20 % on the board of directors. Ownership EG A/S is owned by EG Holding A/S, which owns 100 % of the outstanding share capital in EG A/S. A mer-ger of EG A/S, EG Holding A/S and EDB Gruppen Holding A/S with EG A/S as the surviving company is pro-posed with effect from 1 January 2014. Following the merger, EG will be fully owned by AX IV EG Holding III Aps. AX IV EG Holding III Aps is financed by a combination of equity and loan capital. The company’s equity consists of one class of shares, which is owned by AX IV EG Holding III Aps. The loan capital consists of bonded debt. In connection with the acquisition of the shares in EDB Gruppen Holding A/S, AX IV EG Hold-ing III Aps has issued a bond loan. The debt is deemed to be appropriate in relation to the need for finan-cial flexibility at EG A/S. EG A/S Annual Report 2013 Organisation and corporate governance Corporate governance 24 Corporate social responsibility EG strives to run its business in a responsible way and wants to comply with the legislation in the countries and local communities in which the company operates. EG works with specific objectives in a number of relevant areas, but a policy on corporate social responsibility in the group’s strategy and activities has not been adopted. At present, EG’s report on corporate social responsibility does not hold any information about the standards with which the company complies, how EG puts its policy into practice, an as-sessment of what EG has achieved or expectations for the future work. EG wants to show action and direction through its support for the corporate social responsi-bility activities being undertaken and wants to commit to the United Nations Global Compact principles for human rights, labour, environment and anti-corruption where it is relevant to EG as a Scandinavian company. EG operates in the Scandinavian countries which have all adopted international conventions of e.g. human rights and labour rights, and in which these considerations are included in the national legislation. We assess that the risk of violating these rights is minimal within our own business, and EG does not consider it necessary to have a policy on human rights. In addition to the statutory requirements, we seek to minimise the environmental implications of transportation between our offices by using telephone and video conference equipment to the extent possible. EG operates almost exclusively in the Scandinavian market where corruption is virtually non-existent. In 2011, EG introduced a central whistleblower programme that enables all employees of the group to anonymously report situations, incidents or circumstances that seem inappropriate or contrary to the group’s guidelines. As a consequence of Axcel’s ownership of EG, it has been decided that EG will join the UN Glo-bal Compact. This is a natural extension of EG’s support for the corporate social responsibility activities being undertaken, and EG will therefore adapt its internal CSR procedures during 2014 and subsequently adopt the Global Compact guidelines. With its health policy, EG wants to focus on the general health and satisfaction in the com-pany. EG affects the environment through the heating of the company’s locations, transportation of the company’s employees, the use of printers, etc. In this connection, the company is subject to a number of statutory requirements in the countries in which we are represented, and these requirements are complied with. EG A/S Annual Report 2013 Organisation and corporate governance Corporate social responsibility 25 Risk management At the EG group, risk management is considered to be an essential and natural part of the realisation of the group’s objectives and strategy. The daily activities, the implementation of the established strategy and the continuous use of business opportunities involve inherent risks, and the company’s handling of these risks is therefore seen as a natural and integrated part of the daily work and a way to ensure stable and reliable growth. The following sections include a non-exhaustive description of risks related to the group’s activities. The risk factors are divided into commercial risks and financial risks and are listed in random order. EG’s SOX controls EG’s risk management and internal control procedures in connection with the company’s financial reporting have been established to ensure that the financial reporting gives a fair presentation that is free of material misstatements and in accordance with current legislation, standards, other regulation and EG’s standard processes. Furthermore, the process has been established to ensure that appropriate accounting policies are followed and that the accounting estimates are reasonable in the circumstances. EG has a process in which the strength of key controls are evaluated and reported to the audit committee. This results in increased transparency and consistency in the internal control environment. In some entities, not all key controls have been implemented as the entities have not yet adopted EG’s standard processes. Compensatory controls have been established or are in the process of being established to the extent possible. Commercial risks EG provides IT consultancy services and programming, software, operational and service agreements and, to a lesser extent, hardware. EG is dependent on the ability to retain and attract employees with special skills and experience in order to achieve its business goals. As regards consultancy services and programming, EG is very dependent on the invoicing rate of its em-ployees – defined as the proportion of the employees’ time spent on services that can be invoiced. The in-voicing rate of all employees depends on the composition of employees and on how each employee spends his/her time. Consequently, EG has a major focus on this area. A change in the invoicing rate of 1 percentage point across the EG group will result in an increase in the gross profit and thus in EBITA of DKK 23 million. EG seeks to improve how each employee spends his/her time by reducing absence due to sickness and employee turnover. EG’s efforts to reduce the sickness rate as much as possible include a health care pro-gramme. The group’s sickness rate is currently 2.5 %. EG has introduced a welfare programme to improve general employee satisfaction by means of proactive measures for all employees. In the ”Great Place to Work” survey, EG’s efforts resulted in an excellent 7th place among the EG A/S Annual Report 2013 Risk management Risk management 26 Risk management best large workplaces (more than 500 employees) and a 9th place on the list of the best workplaces in the IT industry. EG’s single largest expense is salaries. Almost all of EG’s employees are salaried employees. Consequently, reducing the majority of EG’s expenses is not possible in the short term. EG employs two measures to re-duce this uncertainty. Firstly, a large part of EG’s income should come from fixed agreements with a notice period equal to the notice period applicable to salaried employees. At present, approx. 38 % of the group’s gross profit derives from this type of agreement. Secondly, EG uses its pipeline and order book systems to assess its future staffing requirements and seeks to match these requirements through reorganisation, con-tinuing education and adjustments whenever possible. Another risk parameter is uncertainty in connection with large contracts. EG uses project reviews and pre-liminary analyses to ensure that the correct pricing is applied when fixed-price contracts are entered into. EG has established a PMO (project management office). Its primary purpose is to improve project execu-tion at EG, to provide a consistent ”governance” structure for EG’s projects and to standardise project management policies, processes and methods across EG. The PMO provides guidance, documentation and measurements in relation to ”best practice” for portfolio and project management at EG, and its project management principles, practices and processes are based on standard methods from IPMA (International Project Management Association). The project risk factors and how they can be mitigated in the best pos-sible way for EG and for our customers is a priority area for the PMO. The risk factors are evaluated during the sales phase when the project is signed off for delivery and in relation to milestones for monitoring pro-ject progress in a number of areas such as strategic and financial parameters and quality and delivery parameters (inspired by the internationally recognised COSO risk management model). EG’s future success and continuing growth depend on our ability to continuously improve existing solutions and to develop new solutions and products based on the latest technologies and our customers’ needs. Our assessment is that EG’s current development efforts and acquisition strategy will enable the company to maintain its leading position in the market. The company’s financial results depend on the level of ac-tivity, the economic development and the developments in pay levels in the Scandinavian market. IT risks EG uses IT to a significant extent and is vulnerable to interruptions of operation and breaches of the estab-lished security. EG constantly seeks to improve its IT security in order to ensure that a high level of security is maintained at all times. Financial risks Being owned by EG Holding A/S, EG A/S is exposed to the same risks as EG Holding A/S. For a detailed de-scription, please refer to the financial statements of EG Holding A/S. Interest rate risks EG A/S’ liquidity is placed in bank deposits with a maturity of less than three months. EG A/S’ interest ex-penses are variable and settled in DKK. For a detailed description, please refer to the financial statements of EG Holding A/S. Currency risks EG’s revenue is primarily denominated in DKK, but as a result of acquisitions in Norway and Sweden, the exposure to NOK and SEK is increasing. EG is exposed to currency risks at three levels. Firstly, exchange rate fluctuations related to the translation of the results of foreign subsidiaries at the bal-ance sheet date constitute a risk. The company does not hedge this type of risk. Consequently, the group may be affected in the short term by exchange rate fluctuations related to the translation of the results of subsidiaries into DKK. Secondly, the current cash flow involves a risk. The company does not hedge currency risks associated with the cash flow. Finally, currency risks are associated with the translation of intercompany balances in foreign currency at the balance sheet date. Translation adjustments related to this type of translation are not hedged. Intangible assets Goodwill is allocated to the group’s cash-generating units (CGUs). The parameter for impairment tests is the development in earnings. At least once a year, an impairment test of the carrying amount of intangible assets is performed based on the expected earnings of the cash-generating unit in question for the coming year. Insurance risks EG takes out statutory insurance and any other insurance considered to be relevant. EG regularly reviews its insurance cover with an insurance expert. Investments and acquisitions EG’s strategy includes regular assessments of potential company acquisitions and new software invest-ments. Major acquisitions and investments in software development involve a number of risks related to the investment process and the subsequent integration into EG’s organisation. These risks are assessed and hedged in the best possible way. EG A/S Annual Report 2013 Risk management Risk management 27 Executive functions of board of directors and executive board BOARD OF DIRECTORS CEO of SimCorp A/S Chairman of the board of EG Holding A/S and AX IV EG Holding III ApS Member of the board of The Scandinavian A/S Member of the executive committee of DI Klaus Holse – chairman Partner at Axcel Management A/S Vice chairman of the board of EG Holding A/S and AX IV EG Holding III ApS Vice chairman of the board of TCM Group A/S Vice chairman of the board of VPG Holding A/S Vice chairman of the board of Best Friend Oy Per Christensen – deputy chairman EG A/S Annual Report 2013 Board of directors and executive board Executive functions of board of directors and executive board 28 Executive functions of board of directors and executive board BOARD OF DIRECTORS Jørgen Lindholm Lau Director at the investment company Axcel Vice chairman of the board of Ball Invest ApS Vice chairman of the board of Ball Holding ApS Vice chairman of the board of Ball ApS Vice chairman of the board of Ball Group A/S Member of the board of EG Holding A/S and AX IV EG Holding III ApS Member of the board of AX Ball Invest ApS Member of the board of AXBL Invco ApS Member of the board of Holding A/S Member of the board of Ega Invco Newco ApS Member of the board of Esko-graphics A/S CEO of Broadnet AS Member of the board of EG Holding A/S and AX IV EG Holding III ApS Member of the board of Halberg Holding A/S Martin Lippert Jørgen Bardenfleth Chairman of DHI Group A/S Chairman of Symbion A/S Chairman of Adactit Aps Member of the board of EG Holding A/S and AX IV EG Holding III ApS Member of the board of COWI Holding A/S Member of the board of Athena IT Group A/S Member of the board of Minerva A/S Member of the board of Vallø Stift Member of the board of Symbion Fonden Member of the board of Accelerace Fonden EG A/S Annual Report 2013 Board of directors and executive board Executive functions of board of directors and executive board 29 Executive functions of board of directors and executive board REPRESENTATIVES ELECTED BY EMPLOYEES MANAGEMENT Bent Mosgaard Vice president of EG management Consulting and Process Management Office Member of the board of EG Holding A/S Manager of Investment Holding ApS Leif Vestergaard CEO No directorships or managerial posts outside EG Charlotte Kronborg Bennetsen Financial manager at EG A/S Member of the board of EG Holding A/S Member of the board of BUSCAR A/S Hanne Madsen Team manager at EG A/S Member of the board of EG Holding A/S Managerial posts in subsidiaries that are 100% owned by EG A/S have not been included in this list. EG A/S Annual Report 2013 Board of directors and executive board Executive functions of board of directors and executive board 30 Management’s statement The board of directors and the executive board have considered and approved the annual report 2013 of EG A/S. The financial statements and the consolidated financial statements have been prepared in accordance with International Financial Reporting Standards as approved by the EU. In addition, the financial statements and the consolidated financial statements have been prepared in accordance with additional Danish dis-closure requirements. The management’s review has also been prepared in accordance with Danish dis-closure requirements. Herning, 19 February 2014 In our opinion, the financial statements and the consolidated financial statements provide a fair representa-tion of the company’s and the group’s assets, liabilities and financial position as at 31 December 2013 as well as of the result of the company’s and the group’s activities and cash flows for the financial year 1 January – 31 December 2013. Bestyrelse In our opinion, the management’s review provides a fair representation of the development in the activities and financial situation of the company and the group, the profit for the year and the financial position of the company and the group. Furthermore, it provides a description of the most essential risks and elements of uncertainty faced by the company and the group. Executive board Leif Vestergaard CEO Klaus Holse Per Christensen chairman deputy chairman Jørgen Lindholm Lau Martin Lippert Jørgen Bardenfleth Hanne Madsen Charlotte Kronborg Bennetsen Bent Mosgaard We recommend that the annual report be adopted by the annual general meeting. EG A/S Annual Report 2013 Endorsements Management’s statement 31 The independent auditor’s report To the shareholders of EG A/S Report on the consolidated financial statements and financial statements We have audited the consolidated financial statements and the financial statements of EG A/S for the financial year 1 January – 31 December 2013, including income statement, statement of comprehensive income, balance sheet, statement of changes in equity, cash flow statement and notes, including accounting policies for the group as well as the company. The consolidated financial statements and the financial statements are prepared in accordance with the International Financial Reporting Standards as approved by the EU and additional disclosure requirements of the Danish Financial Statements Act. purpose is to perform audit procedures which are appropriate in these circumstances, but not with the purpose of expressing a conclusion on the efficiency of the company’s internal audit. An audit also includes an assessment of whether the accounting policies applied by management are appropriate and whether management’s accounting estimates are fair as well as our evaluation of the overall presentation of the consolidated financial statements and financial statements. Management’s responsibility for the consolidated financial statements and the financial statements Management is responsible for preparing the consolidated financial statements and financial statements which provide a fair representation in accordance with International Financial Reporting Standards as approved by the EU and additional disclosure requirements of the Danish Financial Statements Act. In addition, management is responsible for the internal control which management considers necessary in order to prepare the consolidated financial statements and financial statements free of material misstatements irrespective of whether this misstatement is a result of fraud or errors. Conclusion In our opinion, the consolidated financial statements and financial statements provide a fair presentation of the group and the company’s assets, liabilities and financial positions as at 31 December 2013 as well as the result of the activities of the group and the company and cash flow for the financial year 1 January – 31 December 2013 in accordance with the International Financial Reporting Standards as approved by the EU and additional disclosure requirements of the Danish Financial Statements Act. Auditor’s responsibility Our responsibility is to provide our conclusion regarding the consolidated financial statements and the financial statements based on our audit. We have performed our audit in accordance with international accounting standards and additional requirements according to Danish audit provisions. This requires that we comply with ethical requirements and plan and perform our audit with a view to ensuring a high degree of security that the consolidated financial statements and the financial statements are free of material misstatements. An audit includes the performance of audit procedures to obtain audit proof of amounts and information stated in the consolidated financial statements and financial statements. The chosen audit procedures depend on the auditor’s evaluation, including evaluation of the risk of material misstatement in the consolidated financial statements and financial statements irrespective of whether the misstatement is a result of fraud or errors. In connection with this risk assessment, the auditor considers internal audits which are relevant for the company’s preparation of the consolidated financial statements and financial statements which provide a fair representation. The In our opinion, the audit evidence obtained provides adequate basis for our conclusion. Our audit did not give rise to any qualifications. Opinion about management’s review According to the Danish Financial Statements Act, we have read the management’s review. We have not carried out further measures in addition to the performed audit of the consolidated financial statements and the financial statements. In our opinion, the information in the management’s review is in accordance with the consolidated financial statements and the financial statements. Herning, 19 February 2014 PriceWaterhouseCoopers Statsautoriseret Revisionspartnerselskab Claus Lindholm Jacobsen Statsautoriseret revisor Henrik Berring Rasmussen Statsautoriseret revisor EG A/S Annual Report 2013 Endorsements Revisionspåtegning 32 Accounting policies General information The annual report of EG A/S, which includes the financial statements of the parent company and the con-solidated financial statements, is prepared in accordance with International Financial Reporting Standards (IFRS) as approved by the EU and the IFRS announcement issued according to the Danish Financial State-ments Act. The annual report is presented in Danish kroner (DKK), which is considered to be the primary currency of the group’s activities and the functional currency of the parent company. Standards and interpretations that have taken effect in 2013 In the annual report of 2013, the EG group has applied all relevant new and amended standards as well as interpretations which have taken effect and been approved by the EU with effect from this accounting pe-riod. Annual improvements to existing standards and existing interpretations The annual improvements to existing standards have resulted in minor amendments and clarifications to IFRS 1, IAS 1, IAS 16, IAS 32 and IAS 34 and do not affect the annual report of the current year. The annual improvements to IFRS have resulted in amendments that affect the annual report of the cur-rent year. These amendments are clarified below: IFRS 13 – Fair value measurement General standard on fair value measurement. The basic principle is that the asset is measured at fair value, whereas the liability is measured at the amount which a third party requires as payment for the liability. The standard also contains disclosure requirements as well as an amendment of the disclosure require-ments of IAS 36. Following this amendment, information must be given about the recoverable amount of each cash-generating unit for which the carrying amount of goodwill or other intangible assets with inde-terminable lifetime is significant, compared to the company’s total carrying amount of goodwill or other in-tangible assets with indeterminable lifetime. The following standards and interpretations have been adopted by IASB and ap-proved by the EU, but will not take effect until the coming financial year and have therefore not yet been implemented: Only new and amended standards as well as interpretations that are relevant for the company are com-mented on. IFRS 10 – Consolidated financial statements Specification of the definition of control over another company. Control exists when the following terms have been complied with: • Control over the company • Risk involved or a right to variable return • Ability to exercise control over the company to affect the return. Adopted by IASB in May 2011. The amendment is not expected to have any effect on the annual report. IFRS 12 – Disclosure of interests in other entities Disclosure requirements for ownership interest in other entities, including subsidiaries, joint arrangements, joint companies (joint ventures) and associated companies. Adopted by IASB in May 2011. The amended disclosure requirements will be followed. IAS 27 – Consolidated and separate financial statements The provisions concerning preparation and presentation of consolidated financial statements – consolida-tion are replaced by IFRS 10. The guideline concerning parent’s financial statements is adjusted unchanged according to IAS 27. Adopted by IASB in May 2011. The amendment is not expected to have any effect on the annual report. IAS 32 – Financial instruments: Presentation The amendment provides additional guidance as to when offsetting is allowed. The amendment does not result in actual amendments to the right to offsetting – it provides additional guidance as to interpreting the standard, and is not expected to have any effect on the annual report. Adopted by IASB in December 2011. EG A/S Annual Report 2013 Accounting policies Accounting policies 33 Accounting policies IAS 36 – Impairment of assets The amendment includes a rollback of the 2013 demand for information about the recoverable amount of assets or cashgenerating units for which the carrying amount of goodwill or other intangible assets with indeterminable lifetime is significant, compared to the company’s total carrying amount of goodwill or other intangible assets with indeterminable lifetime. Also, it imposes demands for information when using the fair value with deduction for expected costs of disposal as the basis for a write-down corresponding to those set out in IFRS 13. The amendment is not expected to have any effect on the annual report. Adopted by IASB in May 2013. The amendments have not yet come into force. In addition, IASB has issued the following standards and interpretations which have not yet been approved by the EU: IFRS 9 – Financial instruments: Classification and measurement The number of categories for financial assets is reduced to two; amortised cost and fair value. The cate-gory ”available for sale” is terminated in connection with this amendment. Adopted by IAS in November 2009. The amendments have not yet come into force. Fair value changes that arise from a change in own credit risk must be recognised in other comprehensive income. Adopted by IASB in October 2010. The amendments have not yet come into force. The amendments are not expected to have any effect on the annual report. IFRS 9 - Financial instruments: Hedge accounting Adopted by IAS in November 2013. The amendment has not yet come into force. The provisions on hedge accounting are simplified. Among other things, the demand that the effectiveness of the hedge must lie between 80 and 125% is revoked. Consolidated financial statements The consolidated financial statements include the parent company EG A/S and subsidiaries in which EG A/S directly or indirectly possesses more than 50% of the voting rights or in other ways is able to exercise or actually exercises control. When estimating whether EG A/S exercises control or has significant influence, potential voting rights are taken into consideration. The consolidated financial statements are prepared as an aggregation of the financial statements of the parent company and the subsidiaries by merging uniform items. The financial statements of the subsidiar-ies are prepared in accordance with the group’s accounting policies. On consolidation, intercompany in-come and expenses are eliminated as well as shareholdings, intercompany balances and dividend as well as realised and unrealised profits and losses on transactions between the consolidated companies. Companies that are not group enterprises but where the group holds at least 20% of the voting right or in other ways has significant influence are considered as associated companies. The financial statements of the associated companies have been prepared according to the same accounting policies as EG’s financial statements. Elimination is performed of unrealised gains and losses on transactions between EG and the associated companies in relation to the size of the share of the associated company. Business combinations Newly acquired or newly founded companies are recognised in the consolidated financial statements from the time of acquisition and establishment, respectively. The date of acquisition is the date when the control of the company is actually achieved. Sold or divested companies are recognised in the consolidated income statement up until the date of disposal or settlement date, respectively. The date of disposal is the date when the control of the company is passed on to a third party. Comparative figures are not adjusted for newly acquired companies. Discontinued activities are presented separately, cf. below. When acquiring new companies, the purchase method applies whereby the identifiable assets, liabilities and contingent liabilities of the acquired company are measured at fair value at the date of acquisition. Identifiable intangible assets are included if they can be separated or if they originate from a contractual right and the fair value can be reliably prepared. EG A/S Annual Report 2013 Accounting policies Accounting policies 34 Accounting policies In connection with business combinations, positive balance between the cost of the company and the fair value of the acquired identifiable assets, liabilities and contingent liabilities such as goodwill under intan-gible assets is included. Goodwill is not amortised but is annually tested for impairment. At the date of ac-quisition, goodwill is allocated to the cash-generating units which will subsequently serve as the basis for the impairment test. Negative balance is recognised in the income statement at the date of acquisition. directly under equity at a separate reserve for foreign currency translation adjustments. In connection with business combinations, the accounting classification is maintained in accordance with the previous accounting policies. The recognition has taken place on the basis of the cost with a deduction of depreciation, amortisation and impairment losses until 31 December 1999. Goodwill is not amortised af-ter 1 January 2000. Income statement Translation of foreign currencies A functional currency is fixed for each of the reporting companies in the group. The functional currency is the currency used in the primary financial environment in which the reporting company operates. Transac-tions in other currencies than the functional currency are transactions in foreign currencies. Transactions in foreign currencies are translated upon initial recognition for the functional currency in accordance with the exchange rate prevailing at the date of transaction. Exchange differences that occur between the exchange rate prevailing at the date of the transaction and the exchange rate at the payment date are recognised in the income statement as an item under financial income and expense, net. Receivables, payables and other monetary items in foreign currency are translated to the functional cur-rency at the exchange rate at the balance sheet date. The difference between the rate at the balance sheet date and the rate at the time of occurrence of the outstanding amount or payable is recognised in the in-come statement under net financials. At recognition in the consolidated financial statements of foreign companies with a functional currency dif-ferent from EG A/S’ reporting currency, the income statements are translated as the exchange rates pre-vailing at the date of the transaction and the balance sheet items are translated at the exchange rates of the balance sheet date. As exchange rate prevailing at the date of transaction, an average price is used for the months in question unless it significantly differs from the actual exchange rates. In the latter case, ac-tual exchange rates are used. Goodwill is considered as belonging to the acquired company in question and is translated at the rate of the balance sheet date. Foreign exchange differences, which have occurred when translating equity at the beginning of the year in companies with a functional currency different from the functional currency of EG A/S at the rate at the balance sheet date as well as when translating income statements from the date of transaction to the balance sheet date, are recognised Translation adjustments concerning long-term receivables in subsidiaries, which are considered an addition to the net assets of the subsidiaries, are directly recognised at the equity under a separate reserve for for-eign currency translation adjustments. Revenue Revenue includes invoiced sale of goods and services insofar as delivery and the passing of risk to the buyer have taken place before the end of the year and insofar as the income can be reliably determined and is expected to be received. Discounts are offset in the revenue which is determined exclusive of VAT and taxes. Contract work in progress is recognised as the production of each project is undertaken, and revenue thus corresponds to the selling price of the work performed during the year. Revenue is recognised when the total income and expenses concerning the projects in question and the stage of completion at the balance sheet date can be reliably determined and when it is likely that the financial advantages, including pay-ments, will flow to the group. As for the sale of licences for standard software, licencing income is recognised immediately after the de-livery of software has taken place insofar as the delivery of standard software does not require acceptance of the delivered functionality. If the customer’s acceptance of the delivered functionality is required, licen-cing income is recognised once acceptance has occurred. As for software leasing, the income is accrued over the lease term, and any associated services such as support and operations are also accrued over the period of agreement. Contracts involving multiple deliveries are recognised as separate units of accounting, and a sale of soft-ware, consultancy and hardware will thus be recognised separately in accordance with the above policies. Other external expenses Other external expenses include operating lease expenses as well as expenses for distribution, sales, adver-tising, administration, etc. Financials Financial income and expenses include interest income and expenses, realised and unrealised capital gains and losses, debts and transactions in foreign currencies, amortisation of financial assets and liabilities as well as charges and refunds EG A/S Annual Report 2013 Accounting policies Accounting policies 35 Accounting policies under the tax prepayment scheme. Financial income and expenses are recog-nised with the amounts that concern the financial year. Dividend from equity investments in subsidiaries is recognised in the parent company’s income statement in the financial year in which the dividend is declared. If the dividend exceeds the accumulated earnings af-ter the date of acquisition, the dividend is recognised as a write-down of the cost of the equity investment. Tax on profit for the year Tax for the year, which is comprised of the current tax for the year and changes in deferred tax, is recog-nised in the income statement with the share attributable to the results for the year and directly to equity with the share attributable to entries directly to equity. EG A/S is taxed jointly with all Danish subsidiaries. The current Danish corporation tax is distributed be-tween the jointly taxed companies in proportion to their taxable profit. Companies that use tax losses from other companies pay joint taxation contribution to the parent company equal to the tax base of the unused losses. Companies with a tax loss that is used by other companies receive joint taxation contribution from the parent company equal to the tax value of the unused losses (full allocation). The jointly taxed com-panies are included in the tax prepayment scheme. Balance sheet Goodwill Goodwill is recognised and measured upon initial recognition as the difference between cost of the acquired company and the fair value of the acquired assets, liabilities and contingent liabilities, cf. the description under ”business combinations”. Goodwill is not amortised but is as a minimum impairment tested once a year. Development projects Small development projects and development projects which are clearly defined and identifiable and for which the technical rate of utilisation, sufficiency of resources and a potential future market or utilisation potential can be proved, are recognised provided that the intention of the group is to manufacture, market or use the project. Furthermore, it is a prerequisite that the cost can be determined reliably and that there is adequate security of a future positive earnings after depreciation. Only the part of development costs that concerns new products, new tools and new technology is capi-talised. Expenses for maintenance and updating of existing products and programmes are recognised in the income statement at the time when they defray. Small development projects as well as the part of the de-velopment projects that is directly or indirectly financed by customers are not capitalised. Upon initial recognition, development costs are measured at cost which mainly includes salaries and wages, which directly and indirectly can be attributed to the company’s development activities. Completed development projects are depreciated by the straight-line method during the estimated useful economic life, which normally is 2-5 years. Development projects are written down to a lower recoverable amount, cf. below. Customer relationships In connection with business combinations, an assessment of the acquired customer relationships is carried out. The measurement is based on future cash flows from the customer relationships where the most im-portant preconditions are development in operating profit before amortisation and tax, customer loyalty and theoretical calculation of tax and contribution to other assets. The customer relationships are meas-ured at cost less accumulated amortisation and impairment losses. Customer relationships are amortised by the straight-line method during the estimated lifetime which is 7-15 years. Customer relationships are writ-ten down at a lower recoverable amount, cf. below. Other intangible assets Other intangible assets are measured at cost less accumulated amortisation and impairment losses. Other intangible assets acquired in connection with business combinations include volume of orders, trademarks and rights, including software and licence rights and are recognised at fair value. Amortisation is carried out during the estimated useful life which is between 2 and 5 years. If considered necessary, it is possible to write down to a lower recoverable amount, cf. below. Property, plant and equipment Land and buildings, technical equipment, machinery and other fixed assets, operating equipment and tools and equipment are measured at cost less accumulated depreciation and impairment losses. Land is not de-preciated. The cost includes costs and expenses directly attributable to the acquisition until the time when the asset is ready to be put to use. The cost of a total asset is divided into separate parts that are depreciated sepa-rately if the useful life of the individual parts is significantly different. EG A/S Annual Report 2013 Accounting policies Accounting policies 36 Accounting policies Subsequent expenses, e.g. in connection with replacement of parts of property, plant and equipment, are recognised in the carrying amount of the asset in question when it is likely that the investment will result in future financial advantages. All other expenses for ordinary repairs and maintenance are recognised in the income statement when they defray. The basis for depreciation is cost less residual value when the useful life has expired. The residual value has been assessed as the amount for which it would be possible to sell the asset at the balance sheet date if the asset had the age and was in a condition expected at the expiry of the useful life with deduction of costs of disposal. method in such companies with addition of goodwill. EG A/S’s share of the associated companies’ profit after tax is recognised in the in-come statement. Equity investments in subsidiaries in the parent company’s financial statements Equity investments in subsidiaries are measured at cost. Where the cost exceeds the recoverable amount, it is written down to this lower value. The cost is reduced by received dividend which exceeds the accumu-lated earnings after the date of the acquisition. A straight-line depreciation is based on the following assessment of the estimated useful life and subse-quent residual value: Impairment of long-term assets Goodwill and other long-term assets are impairment tested annually. Long-term assets which are not de-preciated are also tested for decreases in value in case of signs of such decreases in value. Useful life Buildings 40 years Leasehold im-provements 5 years/vesting period Technical equip-ment, computers, etc. 3-5 years Tools and equip-ment, etc. 5 years Vehicles 5 years Land and art are not depreciated. The carrying amount of goodwill is impairment tested together with the other long-term assets in the cash flow generating units to which goodwill is allocated. The recoverable amount is written down in the income statement if the carrying amount of the expected future net cash flows from the cash flow generating units with which goodwill is connected is at least equal to the carrying amount. Under leasehold improvements, the costs invested in leaseholds will be capitalised in order to make these applicable for the purpose of EG A/S. Deferred tax receivables are evaluated annually and are only recognised to the extent in which it is pre-dominantly likely that they will be used. Property, plant and equipment are written down to the recoverable amount if this amount is lower than the carrying amount, cf. below. The carrying amount of other long-term assets is evaluated annually to determine whether there is an indi-cation of impairment. When such an indication is present, the recoverable amount of the activity is calcu-lated. The recoverable amount is the highest of the fair value of the activity with deduction for expected costs of disposal or value in use. Leases Leases concerning property, plant and equipment for which the company bears all significant risks and en-joys all significant advantages connected with the title (finance leasing), are recognised in the balance sheet as assets. Financially leased assets are depreciated in line with the company’s equivalent property, plant and equipment. The capitalised residual leasing obligation is recognised in the balance sheet as a lia-bility and the interest element of a lease payment is recognised in the income statement during the terms of the contract. Rental payments made under operating leases and other leases are recognised in the income statement during the terms of the contract. The company’s total liability regarding operating leases and leases is stated under contingent liabilities, etc. Equity investments in associated companies Equity investments in associated companies are measured upon initial recognition at cost and afterwards measured at equity value, i.e. the proportionate share under the equity A loss in connection with decreases in value is recognised when the accounting value of an asset or a cash flow generating unit exceeds the recoverable amount of the asset or the cash flow generating unit. Loss in connection with impairment is recognised in the income statement under ”depreciation/ amortisation and impairment losses”. However, impairment of goodwill is recognised in a separate line in the income statement. Goods for resale The inventory primarily consists of purchased goods for resale and spare parts and is measured according to the FIFO principle. The cost of goods for resale is calculated as the purchase price plus delivery costs. In cases where the net realisable value is lower than the cost, the net realisable value is written down to this lower value. EG A/S Annual Report 2013 Accounting policies Accounting policies 37 Accounting policies The net realisable value of inventories is calculated as selling price less sales costs in-curred in order to execute the sales and determined with consideration to marketability, obsolescence and development in expected selling price. as available for sale are recognised directly in equity. Upon realisation the accumulated value adjustment is recognised in equity as an item under financial income and expense, net in the income statement. Trade receivables Receivables are measured upon initial recognition at fair value and subsequently at amortised cost which normally equals nominal value less impairment losses to meet expected losses. Cash Cash consists of deposits in recognised banks. Contract work in progress Contract work in progress is measured at the selling price of the completed work less amounts invoiced and expected losses. The selling price is measured based on the stage of completion as at the balance sheet date and the total expected income of the individual contract work. The stage of completion of a project is determined on the basis of the resources used and the expected total resources compared against an as-sessment of the stage of completion. When it is likely that the total expenses for the work in progress will exceed the total income, the expected loss is immediately recognised as a cost. Contract work in progress is recognised in the balance sheet under receivables or payables depending on the net value of the selling price less amounts invoiced on account. Expenses in connection with sales efforts and the winning of contracts are recognised in the income state-ment when incurred. Deferred income Prepayments under assets include expenses paid for the following financial year. Deferred income is meas-ured at cost. Securities Shares and bonds are measured at fair value at the trade day corresponding to market price for listed se-curities and for an estimated fair value assessed on the basis of the market data and recognised valuation method for unlisted securities. If adequate market data are not available for the calculation of the fair value for unlisted securities, these are measured at cost. Upon initial recognition, shares and bonds are classified as either trading portfolio or available for sale. Market value adjustment concerning trading portfolios is currently recognised in the income statement under financials. Unrealised market value adjustments concerning shares and bonds classified Equity Treasury shares Acquisition costs and considerations as well as dividend on treasury shares are directly recognised in re-tained earnings under equity. Proceeds from sale of treasury shares and issuing of treasury shares in EG A/S in connection with use of share options, are taken directly to equity. Dividend Dividend, which is expected paid for the year, is recognised as a separate item under equity. At resolution at the annual general meeting (time of declaration), dividend is recognised as a liability. Reserve for foreign currency translation adjustment Exchange rate adjustments for subsidiaries with a functional currency different from EG A/S’ presentation currency are taken directly to equity under reserve for exchange rate adjustments. Wholly or partly realisa-tion of the net investment is recognised in the foreign currency translation adjustment in the income statement. Reserve for foreign currency translation adjustment is reset as at 1 January 2004. Provisions Provisions are recognised when the group, due to an event occurring prior to the balance sheet date, has a legal or constructive obligation and it is likely that economic benefits must be given in order to settle the obligation. Provisions are measured according to management’s estimate of an amount to which the obligation is ex-pected to be settled. At the measurement, a discount to net present value is made if it has an important ef-fect on the measurement of the obligation. Warranty commitments are recognised concurrently with the sale based on calculated warranty expenses from previous financial years. EG A/S Annual Report 2013 Accounting policies Accounting policies 38 Accounting policies Expenses for restructuring are recognised as an obligation when a detailed, formal plan is made public to the people in question no later than on the balance sheet date. In connection with acquisitions, provisions for restructuring in the acquired company are only recognised in the calculation of goodwill when an obliga-tion for the acquired company exists at the date of acquisition. Pension obligations The group has entered into defined contribution plans with the majority of the employees of the group. Ob-ligations regarding defined pension contribution plans are recognised in the income statement during the period in which they are accumulated, and accrued payments are recognised in the balance sheet under other payables. Tax payable and deferred tax Current tax liabilities and tax receivables are recognised in the balance sheet as calculated tax on taxable profit for the year adjusted for tax paid on account. When calculating the tax for the year, the tax rates and rules applicable as at the balance sheet date are used. Deferred tax is recognised in accordance with the balance sheet liability method of temporary differences between net assets value and value for tax pur-poses of assets and liabilities. Deferred tax receivables, including the tax base of tax loss allowed for carry-forwards are measured at the value at which the asset is estimated to be realised whether by a tax equalisation of future profits or by countering with deferred tax liabilities within the same legal tax entity. Deferred tax is measured in accordance with the tax rules and tax rates current and valid under the law at the balance sheet date when the deferred tax is expected to become current tax. Changes in deferred tax as a result of changes in tax rates are recognised in the income statement. Financial liabilities Amounts owed to credit institutions, etc. are recognised at borrowing to the received proceeds less calcu-lated transaction costs. In the subsequent periods, the financial liabilities are recognised at amortised cost corresponding to the capitalised value when using the effective interest rate so the difference between the proceeds and the nominal value is recognised in the income statement during the term of the loan. Discontinued activities and assets held for sale Discontinued activities are either important business areas or geographic areas which have been sold or held for sale according to a general plan. The result of discontinued activities is presented as a separate item in the income statement consisting of operating profit after tax for the activity in question and any profit or losses at fair value readjustment of sale of assets connected to the activity. Long-term assets and groups of assets which are held for sale, including assets connected to discontinued activities are presented separately in the balance sheet as short-term assets. Liabilities directly connected to the assets in question and discontinued activities are presented as short-term liabilities in the balance sheet. Long-term assets held for sale are not depreciated but are written down at fair value less expected selling costs if this value is lower than the accounting value. Deferred income Under deferred income which is recognised under liabilities, received payments regarding income for the subsequent year are included. Deferred income is measured at cost. Cash flow statement The cash flow statement of the group is presented according to the indirect method and illustrates the cash flows for the year divided into operating activity, investing activity and financing activity, the year’s changes in cash and cash equivalents as well as cash and cash equivalents at the beginning and end of the year. The effect on cash flow from acquisition and disposal of companies is illustrated separately under cash flows concerning investing activities. In the cash flow statement, cash flows concerning acquired companies are recognised from the date of acquisition, and cash flows concerning disposed of companies are recog-nised up until the time of sale. Cash flows in another currency than the functional currency are recognised in the cash flow statement by using average exchange rates for the months unless these deviate significantly from the actual exchange rates at the date of the transactions. In the latter case, the actual exchange rates are used for the individ-ual days. The cash flow statement cannot be assessed solely on the basis of the published accounting records. Cash flows from operating activities Cash flows from operating activities are calculated as the profit for the year adjusted for non-cash operat-ing items, changes in working capital and paid corporation tax. EG A/S Annual Report 2013 Accounting policies Accounting policies 39 Accounting policies Cash flows from investing activities Cash flows from investing activities include payment in connection with purchase and sale of intangible, property, plant and equipment as well as financial long-term fixed assets. Cash flows from financing activities Cash flows from financing activities include changes in size or composition of share capital, purchase and sale of treasury shares, borrowing and repaying long-term debts as well as dividends for shareholders. Cash and cash equivalents Cash and cash equivalents include cash as well as securities with a maturity period at the date of purchase of less than three months and which can be converted into cash without obstructions and with only an in-significant risk of changes in value. Segmental disclosures The company’s income and expenses are specified with a distribution in proportion to place of creation as the primary segment and a distribution in proportion to main customer groups as the secondary segment. The segments follow the group’s risk as well as managerial and internal financial management. Segment income and expenses as well as segment assets and liabilities include the items which can be di-rectly attributed to the individual segment and the items which can be distributed to the individual segment on a reliable basis. Items not distributed primarily concern assets and liabilities as well as income and ex-penses that are connected with the group’s administrative functions, investment activities, income taxes, etc. Long-term assets in the segments include the assets which are used directly in the operation of the seg-ment, including intangible assets and property, plant and equipment. Shortterm assets in the segments in-clude the assets which are directly connected with the operation in the segment, including inventory, debt-ors and contract work in progress. Liabilities connected to the segments include the liabilities which are de-rived by the operation in the segment, including debt for suppliers, provisions and other debt. Use of estimates and assumptions For EG A/S’ financial statements to comply with IFRS standards, it requires the use of estimates and as-sumptions that affect the reported values of assets and liabilities, respectively income and expenses at the balance sheet date. Even though these estimates represent the best knowledge of management as to cur-rent events and initiatives, the actual result may be different from these estimates. Management considers estimates and assumptions under the following items as being essential for the annual report: • Recognition of income • Deferred tax • Provisions. Recognition of income In connection with recognition of income on long-term projects, IAS 11 concerning construction contracts is applied. The recognition of income is heavily dependent on the determined stage of completion. The determination of the stage of completion of construction contracts is based on estimates and assump-tions regarding future costs for the consumption of projects. Such estimates are uncertain. Management makes estimates and assumptions on the basis of individual assessments of specific projects, as well as on-going follow-up on these projects with a view to identifying deviations from known estimates and assumptions. The results of the individual assessment and on-going follow-up are also used for provisions for losses on projects. Intangible assets The value of the intangible assets depends on the future business development within a large number of areas, especially within retail and MBS. In addition to conditions which can be effected by EG A/S, the fu-ture business structure, the financial development and the technological development are also important. EG A/S involved the publicly known evaluations of the future in its valuation, but a number of uncertainties will exist. Deferred tax Management’s evaluation is required in order to determine the recognition of deferred tax assets. EG A/S recognises deferred tax receivables provided that it is plausible that sufficient taxable income exists in fu-ture for utilisation of the temporary differences. On the basis of factors such as historically realised sur-pluses and approved budgets, management has taken future taxable income into account in the evaluation of whether it is appropriate to recognise the deferred tax assets. EG A/S Annual Report 2013 Accounting policies Accounting policies 40 Definitions EBITDA (Earnings Before Interest, Tax, Depreciation and Amortisation) Operating profit or loss before depreciation and amortisation. Normalised EBITDA EBITDA for the year adjusted for restructuring expenses and integration expenses for ac-quired companies. EBITA (Earnings Before Interest, Tax and Amortisation) Operating profit or loss before amortisation (amortisation of intangible assets acquired through acquisitions or business takeover). Normalised EBITA EBITA for the year adjusted for restructuring expenses and integration expenses for acquired companies. Net working capital: Is determined as: Goods for resale + Trade receivables + Contract work in progress –Trade payables. Net interest-bearing payables: Is determined as: Amounts owed to banks + Employee bonds – Cash. Change in revenue % change in revenue compared to last year. Return on equity (ROE) Profit for the year in % of the equity as at 31 December the year before. Return on equity (ROE), normalised Normalised profit after tax in % of the equity as at 31 December the year before. Equity interest Equity in % of total assets. Number of employees Average full-time equivalents in the financial year. Profit per share (EPS) Ratio between profit for the year and the total number of issued shares less own portfolio of treasury shares. Earnings per share (EPS) normalised Ratio between normalised profit for the year and the total number of issued shares less own portfolio of treasury shares. EG A/S Annual Report 2013 Accounting policies Definitions 41 Income statement Group Parent company EG A/S Annual Report 2013 Consolidated financial statements Income statement 42 Balance sheet Group Parent company EG A/S Annual Report 2013 Consolidated financial statements Balance sheet 43 Balance sheet Group Parent company EG A/S Annual Report 2013 Consolidated financial statements Balance sheet 44 Equity EG A/S Annual Report 2013 Consolidated financial statements Equity 45 Cash flow statement Group Parent company EG A/S Annual Report 2013 Consolidated financial statements Cash flow statement 46 Cash flow statement Group Parent company EG A/S Annual Report 2013 Consolidated financial statements Cash flow statement 47 Notes Group Parent company EG A/S Annual Report 2013 Consolidated financial statements Notes 48 Notes Group Parent company EG A/S Annual Report 2013 Consolidated financial statements Notes 49 Notes Group Parent company EG A/S Annual Report 2013 Consolidated financial statements Notes 50 Notes Group Parent company EG A/S Annual Report 2013 Consolidated financial statements Notes 51 Notes Group Parent company EG A/S Annual Report 2013 Consolidated financial statements Notes 52 Notes Group Parent company EG A/S Annual Report 2013 Consolidated financial statements Notes 53 Notes Group Parent company EG A/S Annual Report 2013 Consolidated financial statements Notes 54 Notes Group Parent company EG A/S Annual Report 2013 Consolidated financial statements Notes 55 Notes Group Parent company EG A/S Annual Report 2013 Consolidated financial statements Notes 56 Notes Group Parent company EG A/S Annual Report 2013 Consolidated financial statements Notes 57 Notes Group Parent company EG A/S Annual Report 2013 Consolidated financial statements Notes 58 Notes Group Parent company EG A/S Annual Report 2013 Consolidated financial statements Notes 59 Notes Group Parent company EG A/S Annual Report 2013 Consolidated financial statements Notes 60 Notes EG A/S Annual Report 2013 Consolidated financial statements Notes 61 Notes EG A/S Annual Report 2013 Consolidated financial statements Notes 62 Notes EG A/S Annual Report 2013 Consolidated financial statements Notes 63 Notes Group Parent company EG A/S Annual Report 2013 Consolidated financial statements Notes 64 Notes EG A/S Annual Report 2013 Consolidated financial statements Notes 65 Notes EG A/S Annual Report 2013 Consolidated financial statements Notes 66 Group structure AX IV EG Holding III ApS EG NaviCom AS CVR 35 38 11 39 Denmark CVR 983 781 233 Norway NaviPartner AS 100 % 100 % CVR 980 557 596 Norway EDB Gruppen Holding A/S Dynaway A/S CVR 31 59 88 50 Denmark CVR 25 30 91 03 Denmark 100 % EG Data Inform Hjørring A/S CVR 12 51 41 74 Denmark EG Holding A/S (Cidron IT) EG Sverige AB CVR 31 59 90 83 Denmark CVR 556164-5648 Sweden EG Norge AS 100 % CVR 959 642 834 Norway EG A/S CVR 84 66 78 11 Denmark EG Utility A/S 100 % CVR 66 23 42 15 Denmark EG Kommuneinformation A/S CVR 24 25 69 01 Denmark EG Retail AS CVR 948 168 898 Norway Datapro A/S CVR 26 55 41 79 Denmark EG A/S Annual Report 2013 Group information Group structure 67 EG has offices throughout Scandinavia EG A/S DENMARK Industrivej Syd 13 C 7400 Herning Phone +45 7013 2211 Fax +45 7013 2299 Ballerup, Herning (head office), Hjørring, Holbæk, Kolding, København, Odense, Skanderborg, Thisted, Aalborg and Aarhus NORWAY Bergen, Gjøvik, Molde, Oslo, Sandefjord, Sandnes and Trondheim SWEDEN Malmø, Mölndal, Stockholm, Örebro and Östersund. EG www.eg.dk CVR 84 66 78 11
