KEY FACTS THIS IS DATA RESPONS CONTENTS

Transcription

1 ANNUAL REPORT 2013

2 2 DATA RESPONS ASA ANNUAL REPORT 2013

3 Data Respons is a full-service, independent technology company and a leading player in the embedded solutions market. THIS IS DATA RESPONS DATA RESPONS is a full-service, independent technology company and a leading player in the embedded solutions market. We provide products, services and embedded solutions at all levels of complexity to OEM companies, system integrators and vertical product suppliers in a range of market segments such as defence, medical, automation, oil services, maritime, transportation, cleantech and telecoms. EMBEDDED SOLUTIONS can be described as the computer brain of a machine, system or industrial end product, and can be used in a broad range of industrial applications, such as rugged control units for military vehicles, graphic monitoring systems for greener train operations, laser solutions for calculating medical data or fiscal measuring systems for oil and gas. OUR PRESENCE IN ASIA ensures quality both in the industrialisation process and the delivery phase, while innovation and development of technological solutions takes place locally with the customers in cooperation with our highly-skilled experts from our offices located in important industrial regions in Scandinavia and Germany. This collaboration makes for an ideal partnership. CONTENTS 04 BOARD OF DIRECTORS REPORT 09 The Board of Directors 10 INVESTOR INFORMATION 11 Key figures 13 FINANCIAL STATEMENTS AND NOTES 14 Income statement 15 Statement of comprehensive income 16 Statement of financial position 18 Statement on changes in equity 20 Statement of cash flows 22 Notes 47 Auditor s report OUR CUSTOMERS include global companies such as Ericsson, Saab, Cisco, FMC Technologies, Bombardier, Aker Solutions, Kongsberg Group, Schlumberger, Statoil, Rolls Royce, Laerdal Medical, National Oilwell Varco, ABB and Hexagon. KEY FACTS ESTABLISHED: VISION: A smarter solution starts from inside. OFFFICES: Denmark (1), Germany (2), Norway (7), Sweden (4) & Taiwan (1). BUSINESS FORM: Public limited company, listed on the Oslo Stock Exchange (ticker: DAT). CERTIFICATIONS: ISO 9001:2008, ISO 14001:2004 AND OHSAS 18001:2007 NUMBER OF EMPLOYEES: 367 FINANCIAL CALENDAR Presentation of Q Annual General Meeting Presentation of Q Presentation of Q Presentation of Q DATA RESPONS ASA ANNUAL REPORT

4 CHAPTER 1: BOARD OF DIRECTORS REPORT BOARD OF DIRECTORS REPORT ORDER INTAKE (NOK million) Focused efforts on the company s key markets and a more efficient organisation improved profitability in REVENUE (NOK million) EBITDA (NOK million) statement on the annual financial statements In accordance with the Norwegian Accounting Act 3.3a the board confirms that the company fulfil the requirements necessary to operate as a going concern, and the 2013 financial statements have been prepared on the basis of this assumption. As a publicly listed company, Data Respons ASA prepared the consolidated financial statements for the Data Respons group for the financial year 2013 in accordance with IFRS (International Financial Reporting Standards) as adopted by the European Union. in 2013 was NOK 51.8 million (31.9). The order intake during 2013 totalled NOK 819 million (843), and the order backlog was NOK 626 million (613). The company s profitability showed strong improvement during Data Respons is more focused on its core business, and has become a more cost effective organisation. Both business segments showed positive development in profitability. The primary reasons are record high products & solutions deliveries, good overall utilisation in services and continued performance on cost reduction income statement The report includes comparisons with figures for the same period in 2012 (in parenthesis). Operating revenue was NOK (800.5) million (844.1), a decrease of 5 %. EBITDA was NOK 50.1 million (35.3). EBIT was NOK 46.2 million (30.7). Profit before tax was NOK 44.1 million (25.2). Cash flow from operations Data Respons is well-positioned as a leading full-service embedded technology company and has a positive development in the company s strategic markets. A combination of revenue growth in the company s main markets and a lower cost base has improved profitability. Going forward the company s key financial focus is to improve the profitability even further. 4 DATA RESPONS ASA ANNUAL REPORT 2013

5 CHAPTER 1: BOARD OF DIRECTORS REPORT balance sheet, liquidity & cash flow The group s total assets at the end of the fourth quarter were NOK 478 million. Equity was NOK 291 million, which gives an equity ratio of 61 %. The profitability continued to improve during 2013 and the company expects this development to continue. Current assets amounted to NOK 291 million and current liabilities were NOK 178 million. At December 31, 2013, the non-current assets amounted to NOK 187 million, whereof deferred tax assets were NOK 2 million and intangible assets (goodwill) amounted to NOK 175 million. The group s cash flow from operations was NOK 51.8 million. The cash balance as of December 31, 2013 amounted to NOK 44.1 million, of which NOK 13.3 million was restricted. The group had no interest-bearing debt and consider the debt ratio as appropriate for the group. The parent company has unused credit facilities of NOK 80 million, and further information connected to these are specified in Note 17. financial risk The group s activities expose it to a variety of financial risks, such as price, interest rates, currency, credit and liquidity. Overall these risks are regarded as low. Management of financial risk is performed by the group s central finance department under the guidelines set out by the Board of Directors. The main principle is to minimise exposure to financial risk, and the group holds no financial assets or liabilities for speculative purposes. For further details on financial risk management, see Note 19. operations Data Respons is a leading embedded solutions provider for the industrial market in Europe. Embedded solutions can be described as the brains of a machine, system or industrial end product. Data Respons supplies embedded solutions to leading OEM companies, system integrators and vertical product suppliers in a range of vertical markets such as Telecom, Medical, Transportation, Defence and Oil Services/ Maritime and Automation. Data Respons ASA is listed on the Oslo Stock Exchange (Ticker: DAT), and is part of the information technology index. The company has offices in Norway, Sweden, Denmark, Germany and Taiwan. business segments products and solutions Operating revenue in 2013 was NOK million (444.6). EBITDA was NOK 33.9 million (31.9). The order intake in 2013 totalled NOK 454 million (467). The order backlog ended on NOK 515 million (503). The company experienced high activity levels for products & solutions, resulting in increased profitability and high order intake. During 2013, Data Respons has been awarded large contracts from customers within its key markets. The company expects the positive development to continue and has a solid order back log of over NOK half a billion within the products & solutions business segment. The long term profitability is expected to improve based on a more cost-effective and focused business model. This includes strategic relationships with customers in our main markets, a stronger coordination of the Nordic operations and the transferral of tasks to our Asian organisation and global partners. Fluctuations in revenue and profitability between periods must be expected in the products & solutions business segment. The company s long-term strategy to strengthen total solution capabilities and to focus on the whole value chain has given Data Respons a unique position. Data Respons long experience with its own operations in Asia is of special importance. In order to meet the continued demand for increased performance and more functionality, many of our customers focus on strategic partnerships. Whilst Data Respons builds and delivers customised embedded solutions, our customers can achieve lower costs of ownership, increased efficiency and shorter time-to-market. Data Respons is positioned as the leading channel for embedded computer solutions and products in the Nordic region. The company has a strong and increasing base of recurring solution customers and has a solid order backlog going forward. Solution deliveries secure long-term and strategically important customer relationships and provide a significant potential for future growth. KEY FIGURES NOK million Operating revenue EBITDA Order backlog Order intake Employees ORDER BACKLOG (NOK million) REVENUE BY COUNTRY NUMBER OF EMPLOYEES % 0 8% 43% 3% REVENUE BY INDUSTRY 4% 15% 16% 13% 28% % 6% Norway Germany Sweden Denmark Defence Transportation Medical Other industries Telecom Automation Oil Services/ Maritime DATA RESPONS ASA ANNUAL REPORT

6 CHAPTER 1: BOARD OF DIRECTORS REPORT Data Respons had a strong cashflow from operations in 2013 and the board proposes a dividend of NOK 1.00 per share. BY REPORTING SEGMENT NOK million Products/Solutions Services Eliminations Group REVENUE BY SEGMENT 45% BACKLOG BY SEGMENT 18% 55% 82% Products & Solutions Services EMPLOYEES BY SEGMENT EMPLOYEES BY COUNTRY 12% 63% 44% 38% 37% 2% Products & Solutions Services Products & Solutions Services Norway Germany Sweden Denmark services Operating revenue in 2013 was NOK million (408.5). EBITDA was NOK 25.1 million (12.5). The order intake in 2013 totalled NOK 365 million (376). The order backlog ended on NOK 111 million (109). The planned downsizing of non-strategic areas has impacted revenue in services in For the continued operations the company has experienced good demand from customers during the year. The services segment showed positive development in profitability due to improved overall utilisation, a good market position and concentration on core market regions. Data Respons continues to leverage on its leading position in offering customers access to highly experienced specialists with a broad range of expertise from different disciplines of embedded solutions. A strong competence platform is strategically important in order to develop new recurring solution customers and to stand out as a complete solutions provider in the market. market development Data Respons has a solid customer base within several industry sectors. Our geographical deployment and more than 25 years of experience has given the company relevant vertical competence within these markets. Data Respons customer list includes world-leading companies like Ericsson, Saab, Cisco, FMC Technologies, Bombardier, Aker Solutions, Kongsberg Group, Schlumberger, Statoil, National Oilwell Varco, Rolls Royce, Laerdal Medical, ABB and Hexagon. Data Respons has a strong and well distributed customer list. The number of large-scale customers increased during 2013 and the company expects this trend to continue going forward. The weak economy in Europe had some impact in 2013, but for Data Respons the market development is positive for most of our major vertical markets. Based on feedback from our customers, partners and the market in general, the company expects increasing need for advanced communication solutions, more integrated systems and increasing use of consumer-based technologies. In addition, there is a growing demand for reliable, safe and robust solutions for tough environmental conditions, areas in which Data Respons has strong competence and experience. Main markets like Telecom, Defence, Transportation and Oil Services/Maritime account for 75 % of the company s total revenue. Data Respons strong competence and complete value chain in delivering services and products and solutions for extreme and special environmental conditions, make the company an attractive partner for these segments. geographic regions Data Respons is located in Norway, Sweden, Denmark, Germany and Taiwan. Our business model is based on close cooperation and understanding our customer s business needs. To facilitate a close cooperation, Data Respons believes in having regional offices with competent engineering staff in important industrial clusters in order to build strategic long-term relationships with our key customers. Norway is the largest market area with 46 % of the group s fourth quarter revenue, attributable to a strong development in sectors such as Oil Services/Maritime, Telecom, Medical and Defence. Sweden accounts for 43 % of the revenue and experienced positive development in revenue and profitability during 2013, even though the overall economic conditions still are weak. The company has built a strong position in several vertical markets (Transportation, Telecom, Defence and Industry) in Sweden, with increased ability to win new embedded solution contracts with large customers. The company s services operations have frame agreements with more than 20 large industrial companies in Sweden. Denmark and Germany represents respectively 3 % and 8 % of the 2013 revenue. In our Asian organisation, there have been high activity levels, as an increasing number of solution deliveries and projects are carried out in cooperation with our Asian partners. organisation and work force At the close of 2013, the group had 367 employees working at 15 offices in Norway (140), 6 DATA RESPONS ASA ANNUAL REPORT 2013

7 CHAPTER 1: BOARD OF DIRECTORS REPORT Sweden (161), Denmark (8), Germany (45) and Taiwan (13). The average number of employees at the parent company was 5. The average number of employees in the group was 368, and there were 64 female employees in the group at the end of the year, of which 14 in top or middle management. Equal pay for work of equal value, regardless of gender, is emphasised at Data Respons. Salary and terms of employment for comparable positions are the same for women and men. Recruitment, promotion and development of the staff are based on merit and equal opportunity regardless of ethnicity, colour, religion, gender, age, national origin, sexual orientation, marital status and disability. Discrimination, bullying or harassment is not accepted at Data Respons. Employees are asked to report incidents of such behaviour to their immediate supervisor or the employee representative. corporate governance Data Respons organisation is structured and managed in accordance with the Norwegian Code of Practice for Corporate Governance. The Board of Directors states that Data Respons has been in compliance with the code throughout The Board of Directors report on corporate governance can be read at the company s website: objectives The objectives of the company are to provide products and services and own and manage stocks and shares within IT-related activities, and other activities naturally connected to this. nomination committee Data Respons has a Nomination Committee which is elected by the general meeting. The committee makes proposals to the general meeting regarding the election of shareholder-elected members to the Board. The general meeting decides the remuneration of the Nomination Committee. The committee is comprises three members, none of which are board members or employees at Data Respons. The Nomination Committee proposes the remuneration of the directors for the coming year to the general meeting. Proposals from the Nomination Committee are justified, and the proposals from the Nomination Committee are made available on the company s website along with the invitation to the AGM. The current members of the Nomination Committee are Haakon Sæter, Andreas B. Lorentzen and Narve Reiten. In addition, the company has an Election Board for the election of employee representatives to the board, and comprises three members which are employed at Data Respons. board of directors The Board of Directors of Data Respons is responsible for the group s strategic development, and it shall keep itself informed at all times of the company s financial position, as well as adopt plans and budgets for the business. The board s role, responsibilities and work methods have been defined thoroughly in the rules of procedure that were adopted in The rules of procedure also define the tasks and duties of the CEO in relation to the board in greater detail. The composition of the Board of Directors complies with the requirement that the board be independent from the company management, and independent from major business associates of the company. Management is not represented on the Board of Directors. The Chairman of the Board of Directors is elected by the general meeting. Board members are normally elected for a term of two years. Board members are encouraged to own shares in the company. Page 9 of the annual report provides a detailed description of the individual members backgrounds, qualifications and shareholdings. The board has appointed an Audit Committee which provides assistance to the board in fulfilling their responsibility to the shareholders, potential shareholders, and investment community relating to corporate accounting, reporting practices of the company, and the quality and integrity of the financial reports of the company. As part of this process, the external auditors participate in several meetings of the Audit Committee. In carrying out its responsibilities, the Audit Committee should ensure that the corporate accounting and reporting practices of the company are in accordance with all legal requirements and are of the highest quality. The audit committee consists of three board members. The board has also appointed a Compensation Committee. The board s Compensation Committee is a subcommittee of the Board of Directors of Data Respons ASA and is independent of group management. Its role is to make preparations for the board s discussions of questions involving compensation. The Compensation Committee is responsible only to the full corporate board and its authority is limited to making recommendations to the board. work of the board In 2013 there were 6 directors on the board, 4 of whom were elected by the general meeting and 2 of whom were elected by the employees. In 2013 the board held a total of 10 meetings. The work of the board is governed by detailed rules of procedure. The board has an annual programme of work including specific topics and fixed items such as the approval of the annual financial statements, interim financial statements and budgets. The board is also responsible for overall strategy and for setting long-term goals, as well as important decisions about acquisitions, establishment of new operations and major investments. In 2013 there were 3 men and 3 women on the board. internal control The Board of Directors evaluate, at least annually, the company s most significant risks and the related internal control measures in place. The Board of Directors oversees and evaluates the company s internal control and risk management functions related to financial reporting. The management is responsible for establishing and maintaining adequate internal control of financial reporting. The objective of the internal control of financial reporting is to provide reasonable assurance regarding the reliability of financial reporting and the preparation of Data Respons financial statements for external reporting purposes in accordance with International Financial Reporting Standards. The effectiveness of internal control of financial reporting is evaluated annually by the Board of Directors. As part of the audit of the finan- DATA RESPONS ASA ANNUAL REPORT

8 CHAPTER 1: BOARD OF DIRECTORS REPORT cial statements, the external auditor reports on the effectiveness of internal controls related to financial reporting to the audit committee and the Board of Directors at least once every year. corporate social responsibility Taking overall responsibility is an important core value at Data Respons. The group aspires to be a responsible corporation in terms of labour standards, human rights and environmental protection. The company has implemented corporate social responsibility policies, which are publicly available on the company website: The CSR policies are in accordance with UN Global Compact Principles and cover governance and integrity management, anti-corruption policies, environmental protection, human rights and labour standards. CSR is an important focus for Data Respons, and several aspects of our CSR policy have been strengthened both in internal operations and through the company s interactions with external stakeholders. Among our internal initiatives, CSR policies and procedures are integrated into the internal audit procedures, CSR training has been made mandatory for new employees and the level of knowledge concerning company CSR policies has been implemented as a standard in the annual employee survey. Furthermore, a whistleblower regime that secures a potential whistleblower s complete anonymity has been implemented and made available for all employees. For external stakeholders, Data Respons has taken a clear position to cooperate with customers and give sincere answers to surveys and requests regarding CSR, Green Compliance and Conflict Minerals. With regards to suppliers, we have included UN Global Compact 10 principles in contracts with our major partners. The Global Compact principles cover areas such as human rights, labour rights, the environment and anti-corruption. In 2013, we also reached agreements with our major partners to get full support on tracking conflict minerals. We believe that measures undertaken throughout the year has significantly raised the awareness and knowledge of CSR policies within the firm, as well as contributed to our major partners taking important steps in securing a responsible complete value chain. We are continuously striving for a closer integration of CSR policies into our strategy, day-to-day operations and in contact with stakeholders. Going forward, we expect improvements and have several actions planned for the immediate future. Among other initiatives, we will implement a combined ISO and CSR audit at our major partners from 2014 onwards. We will expand our contractual requirements with suppliers to include Green Compliance standards such as RoHS2 (restriction of hazardous substances in electronic material) and REACH (registration, evaluation, authorisation and restriction of chemicals). We will also increase our scope to cooperate with all suppliers by including questions on CSR policies and actions in our supplier surveys. We will continue to place demands on our suppliers and monitor their progress, and we are certain that our actions and demands will ensure a continued responsible value chain in the future. safety, health & environment (she) Data Respons is not regulated by environmental licences or injunctions. The company does not pollute the external environment. Average sick leave over the course of the year was 2.6 %, and none of the group s subsidiaries recorded work related accidents that resulted in personal injury or property damage. The working environment is regarded as good, and improvement measures are implemented continuously. Employees and management have a constructive collaboration, which has a positive impact on our operations. allocation of the result for the year Data Respons ASA reported a profit before tax of NOK 42.5 million (22.4) in The net profit for the year was NOK 32.2 million (15.3) and total comprehensive income was NOK 31.7 million (15.7). The Board of Directors proposes a dividend payment of NOK 1.00 per share, in total NOK 48.4 million. Taking the proposed dividend into consideration, NOK 16.7 will be transferred from other equity. Before distribution of dividends, the parent company had equity of NOK million at December 31, The equity in the company accounts for 97 % of total assets and is considered adequate based on the extent and risk of the company s operations. outlook The company believes that the long-term outlook for the embedded solutions market is positive. The need for more intelligent products, better infrastructure and enhanced user functionality are driving forces in the market. Advanced and cost-effective computer technology facilitates new solutions, which is vital for its development. Data Respons is well positioned as a complete solutions provider for the industrial market in the Nordic region and in Germany. The company has customers in a wide range of vertical industries and a balanced portfolio of large-cap customers. Although the market conditions are mixed, the main outlook from most of our global customers is improving. The company is monitoring the development thoroughly and will carry out operational adjustments in case the situation should change. Profitable growth, positive operational cash flow and a strengthened position in key markets is Data Respons main focus. The company s growth, cash flow and profitability levels can fluctuate between reporting periods. Based on the current demand from our customers, a more focused organisation and a strong order backlog, the company expects improved profitability and positive cash flow from operations going forward. declaration on the financial statements We confirm that the financial statements for the year 2013, to the best of our knowledge, have been prepared in accordance with International Financial Reporting Standards (IFRS), gives a true and fair view of the company s and group s consolidated assets, liabilities, financial position and results of operations, and that the annual report includes a fair review of the development, results and position of the company and group, together with a description of the most central risks and uncertainty factors facing the companies. THE BOARD OF DIRECTORS OF DATA RESPONS ASA Høvik, March 19, 2014 Ole Jørgen Fredriksen CHAIRMAN OF THE BOARD Kathryn Moore Baker MEMBER OF THE BOARD Ulla-Britt Fräjdin Hellqvist MEMBER OF THE BOARD Erik Langaker MEMBER OF THE BOARD Åsa Grübb-Weinberg EMPLOYEE REPRESENTATIVE Jarl Guntveit EMPLOYEE REPRESENTATIVE Kenneth Ragnvaldsen CEO 8 DATA RESPONS ASA ANNUAL REPORT 2013

9 CHAPTER 1: BOARD OF DIRECTORS REPORT The Board of Directors OLE JØRGEN FREDRIKSEN KATHRYN MOORE BAKER ERIK LANGAKER Number of shares/options: /0 Number of shares/options: 0/0 Number of shares/options: /0 Fredriksen (born 1950) was elected Chairman of the Board in April Fredriksen has a Bachelor degree from the Norwegian School of Economics & Business Administration (NHH), and has held various key management positions within the computer industry. He is an independent advisor with broad experience from 10 different Board positions in stock listed companies. Fredriksen was co-founder, CEO and President of ASK ASA for 15 years. Baker (born 1964) was elected to the Board in April She is a partner at Reiten & Co and has over 25 years of experience in strategy, finance and company development. Ms. Baker has a BEcon from Wellesley College and an MBA from the Amos Tuck School at Dartmouth College. She has extensive board experience from companies such as SafeRoad, BW Gas, Bertel O. Steen Invest and EuroProcessing International. Langaker (born 1963) was elected to the Board in November Langaker has 20 years of experience in finance and M&A from international markets. Langaker has founded/co-founded more than 10 technology companies. He has extensive board experience from companies such as StormGeo Group, GeoKnowledge and Viken Fibernett. ULLA-BRITT FRÄJDIN-HELLQVIST ÅSA GRÜBB-WEINBERG JARL GUNTVEIT Number of shares/options: /0 Number of shares/options: 0/0 Number of shares/options: 2 000/0 Fräjdin-Hellqvist (born 1954) was elected to the Board in November She holds a MSc in Engineering Physics from Chalmers and has held leading positions at Volvo Cars and the Swedish Confederation of Enterprise She has extensive board experience and is currenly Chairman of the Board at Kongsberg Automotive and SinterCast, board member at several public, private and state owned companies. Fräjdin-Hellqvist works as an independent contractor and partner. Grübb-Weinberg (born 1955) was elected as an employee representative in April She holds a degree in social studies from Stockholm University and has broad experience from various technology-based companies. Grübb-Weinberg has worked in Data Respons since 2006 and is currently Account Manager at the Stockholm office. Guntveit (born 1966) was elected as an employee representative in May He holds a Bachelor of Engineering in Computer Science from Gjøvik University College. He has 20 years experience from various technology-based companies and as entrepreneur. Guntveit has worked in Data Respons since 2006 and is currently OEM Solution Manager at the Høvik office. CHAIRMAN OF THE BOARD MEMBER OF THE BOARD MEMBER OF THE BOARD EMPLOYEE REPRESENTATIVE MEMBER OF THE BOARD EMPLOYEE REPRESENTATIVE DATA RESPONS ASA ANNUAL REPORT

10 CHAPTER 2: INVESTOR INFORMATION INVESTOR INFORMATION Data Respons ASA is listed on the Oslo Stock Exchange (Ticker: DAT), and is included in the information technology index. The company has offices in Denmark, Germany, Norway, Sweden and Taiwan. FINANCIAL CALENDAR Presentation of Q Annual General Meeting Presentation of Q Presentation of Q Presentation of Q4 14 SHARE PRICE PERFORMANCE JANUARY 2013 DECEMBER 2013 ANALYST COVERAGE ABG SUNDAL COLLIER Aleksander Nilsen aleksander.nilsen@abgsc.no SHARE INFORMATION Highest price (NOK) Lowest price (NOK) Price at year end (NOK) Market value (NOK million) Dividend per share TRADING AND TRANSACTIONS Number of transactions Average number of transactions per day 3 2 Number of shares traded (million) SHAREHOLDER STRUCTURE Number of shareholders Foreign ownership 1.5 % 2.1 % Number of shares owned by Data Respons ASA - - Number of shares outstanding (million) Data Respons believes that it is important to have an open and active dialogue with the stock market, and that all shareholders are treated equally. 10 DATA RESPONS ASA ANNUAL REPORT 2013

11 CHAPTER 2: INVESTOR INFORMATION Key figures KEY FIGURES NOK income statement Operating revenue Operating expenses EBITDA Depreciation and amortisation Impairment of goodwill Operating profit/loss Profit/loss before tax and non-controlling interest Net profit/loss after tax balance Total assets Equity Cash and cash equivalents key figures Revenue growth -5.2 % -0.7 % 20.2 % -2.7 % % Gross margin 47.4 % 48.4 % 50.6 % 55.8 % 53.8 % EBITDA margin 6.3 % 4.2 % 1.6 % 0.5 % -2.8 % EBIT margin 5.8 % 3.6 % -9.3 % -0.5 % % Net profit margin 4.0 % 1.5 % % -1.6 % % Cash flow from operations Return on equity 11.6 % 5.1 % % -3.4 % % Return on total assets 10.2 % 7.1 % % -0.7 % % Liquidity ratio % % % % % Equity ratio 61.0 % 59.6 % 54.8 % 61.7 % 65.0 % Working capital key figures for shares Earnings per share (EPS), basic (NOK) Cash flow per share from operations (NOK) Dividend per share (NOK) Book equity per share (NOK) Number of shares as of December Average number of shares Average number share transactions per day Share price as of December 31 (NOK) Market capitalisation (NOK million) definitions Return on equity Profit/loss for the year / Average equity Return on total assets EBIT / Average total assets Liquidity ratio Current assets / current liabilities Equity ratio Equity / Total assets Working capital (Current receivables + Inventories) - Current liabilities Earnings per share (EPS) For calculation of EPS, see Note 9 DATA RESPONS ASA ANNUAL REPORT

12 CHAPTER 2: INVESTOR INFORMATION Key figures REVENUE BY SEGMENT KEY FIGURES OPERATING REVENUE (NOK million) 45% 55% Products & Solutions Services NOK million Operating revenue EBITDA Order backlog Employees PRODUCTS AND SOLUTIONS REVENUE KEY FIGURES OPERATING REVENUE (NOK million) 55% NOK million Operating revenue EBITDA Order backlog Employees SERVICES REVENUE 45% KEY FIGURES NOK million Operating revenue EBITDA Order backlog OPERATING REVENUE (NOK million) Employees DATA RESPONS ASA ANNUAL REPORT 2013

13 FINANCIAL STATEMENTS AND NOTES Data Respons places great importance on providing up-to-date information on its activities and financial development to shareholders and other parties with interests in the capital market. DATA RESPONS ASA ANNUAL REPORT

14 Income statement Data Respons financial statements for the year 2013 have been prepared in accordance with International Financial Reporting Standards (IFRS). INCOME STATEMENT *Restated DATA RESPONS ASA NOK 1000 Note Sales revenue Operating revenue Cost of goods sold Payroll expenses 10, Depreciation and amortisation Impairment of goodwill Other operating expenses 3, Operating profit/loss Group contribution and dividends from subsidiaries Other financial income 16, Impairment of shares in subsidiaries 3, Other financial expenses 16, Share of profit of associates Profit/loss before tax Income tax expense Profit/loss for the year profit attributable to - Equity holders of the company Non-controlling interest Earnings per share, basic (NOK) Earnings per share, diluted (NOK) * Due to changes in accounting principles (IAS19R), comparative figures for 2011 and 2012 have been restated. No items in the consolidated income statement have been significantly affected by the change. See Note 1 for further information. 14 DATA RESPONS ASA ANNUAL REPORT 2013

15 Statement of comprehensive income STATEMENT OF COMPRENSIVE INCOME * Restated DATA RESPONS ASA NOK 1000 Note Profit for the year other comprehensive income Items that may subsequently be reclassified to profit or loss Currency translation differences Items that will not be reclassified to profit or loss Currency translation differences on non-controlling interests Actuarial gains and losses on defined benefit plans Tax on actuarial losses Other comprehensive income Total comprehensive income comprehensive income attributable to - Equity holders of the company Non-controlling interest * Due to changes in accounting principles (IAS19R), comparative figures for 2011 and 2012 have been restated. In the statement of comprehensive income, actuarial gains and losses and the related tax expense have been restated. See Notes 1, 10 and 11 for further information. DATA RESPONS ASA ANNUAL REPORT

16 Statement of financial position STATEMENT OF FINANCIAL POSITION NOK 1000 Note * Restated ASSETS DATA RESPONS ASA NOK 1000 Note non-current assets Intangible assets 3, Machinery and equipment 3, Shares in subsidiaries Investments in associates Pension funds Other non-current assets Deferred tax assets Total non-current assets current assets Inventories 6, Trade receivables 7,8, Other current receivables 7, Current financial assets Cash and cash equivalents Total current assets Total assets * Due to changes in accounting principles (IAS19R), comparative figures for 2011 and 2012 have been restated. In the statement of financial position, pension liabilities have been restated, with corresponding effects on deferred tax assets and equity. See Notes 1, 10 and 11 for further information. 16 DATA RESPONS ASA ANNUAL REPORT 2013

17 Statement of financial position STATEMENT OF FINANCIAL POSITION * Restated EQUITY AND LIABILITIES Note DATA RESPONS ASA NOK 1000 Note equity Issued capital Share premium Retained earnings Equity attributable to equity holders of the company Non-controlling interests Total equity liabilities non-current liabilities Deferred tax liabilities Pension liabilities Other non-current liabilities 5, Total non-current liabilities current liabilities Interest-bearing loans and borrowings 13, Trade payables Income tax payable Public duties payable Current financial liabilities Other current liabilities 8, Total current liabilities Total liabilities Total equity and liabilities * Due to changes in accounting principles (IAS19R), comparative figures for 2011 and 2012 have been restated. In the statement of financial position, pension liabilities have been restated, with corresponding effects on deferred tax assets and equity. See Notes 1, 10 and 11 for further information. THE BOARD OF DIRECTORS OF DATA RESPONS ASA Høvik, March 19, 2014 Ole Jørgen Fredriksen CHAIRMAN OF THE BOARD Kathryn Moore Baker MEMBER OF THE BOARD Ulla-Britt Fräjdin Hellqvist MEMBER OF THE BOARD Erik Langaker MEMBER OF THE BOARD Åsa Grübb-Weinberg EMPLOYEE REPRESENTATIVE Jarl Guntveit EMPLOYEE REPRESENTATIVE Kenneth Ragnvaldsen CEO DATA RESPONS ASA ANNUAL REPORT

18 Statement of changes in equity STATEMENT OF CHANGES IN EQUITY * Restated attributable to equity holders of the company Noncontr. Interest Total Equity Issued Share Treasury Translation Other Note NOK 1000 capital premium shares differences equity Total Equity as of January 1, Profit for the year Other comprehensive income for the year Total comprehensive income for the year Employee share option sheme Equity as of December 31, Profit for the year Other comprehensive income for the year Total comprehensive income for the year Employee share option sheme Reduction of share premium Equity as of December 31, Profit for the year Other comprehensive income for the year Total comprehensive income for the year Changes in non-controlling interests Dividends Employee share option scheme Issue of share capital Equity as of December 31, * Due to changes in accounting principles (IAS19R), comparative figures for 2011 and 2012 have been restated. Equity effects of the changes are provided in Note DATA RESPONS ASA ANNUAL REPORT 2013

19 Statement of changes in equity STATEMENT OF CHANGES IN EQUITY * Restated DATA RESPONS ASA NOK 1000 Note Issued capital Share premium Treasury shares Other equity Total Equity Equity as of January 1, Profit for the year Other comprehensive income for the year Total comprehensive income for the year Employee share option sheme Equity as of December 31, Profit for the year Other comprehensive income for the year Total comprehensive income for the year Employee share option scheme Reduction of share premium Equity as of December 31, Profit for the year Other comprehensive income for the year Total comprehensive income for the year Dividends Employee share option scheme Issue of share capital Equity as of December 31, * Due to changes in accounting principles (IAS19R), comparative figures for 2011 and 2012 have been restated. Equity effects of the changes are provided in Note 1. DATA RESPONS ASA ANNUAL REPORT

20 Statement of cash flows STATEMENT OF CASH FLOWS DATA RESPONS ASA NOK 1000 Note cash flow from operating activities Profit before income tax Depreciation and amortisation Impairment of goodwill Employee share option scheme Finance cost - net Share of profit from associates Changes in working capital: - Inventories Trade receivables Trade payables Provisions for pensions Other accruals Income tax paid Net cash flow from operating activities cash flow from investing activities Acquisition of subsidiaries, net of cash acquired Loss of control in subsidiaries Dividends from subsidiaries Group contributions received Purchase of machinery and equipment Interest received Purchase of financial assets Proceeds from sale of financial assets Payments regarding loans to subsidiaries Other investing activities Net cash flow from investing activities cash flow from financing activities Net change in overdraft facilities Proceeds from issue of shares Interest paid Dividends paid to equity holders of the company Dividends paid to non-controlling interests Proceeds from sale of interest in a subsidiary Net cash flow from financing activities Net change in cash and cash equivalents Cash and cash equivalents at the start of the period Exchange gains/losses on cash and cash equivalents Cash and cash equivalents at the end of the period DATA RESPONS ASA ANNUAL REPORT 2013

21 DATA RESPONS ASA ANNUAL REPORT

22 Notes Note 1 NOTE 1 ACCOUNTING PRINCIPLES GENERAL INFORMATION Data Respons ASA is a public limited company registered in Norway. The company s head office is located at Sandviksveien 26, 1363 Høvik, Norway. The group s business operations are described in Note 2. ACCOUNTING PRINCIPLES Data Respons s consolidated financial statements and the company financial statements of Data Respons ASA for 2013 have been prepared in accordance with International Financial Reporting Standards (IFRSs) and the interpretations set out by the International Accounting Standards Board, as approved by the European Union. The financial statements are based on the historical cost principle with the exception of financial derivatives. The consolidated financial statements have been prepared using consistent accounting principles for similar transactions and events under otherwise similar circumstances. new and amended standards adopted by the group The following standards have been adopted by the group for the first time for the financial year beginning on or after January 1, 2013 and have a material impact on the group: IFRS 13 Fair Value Measurement IAS 1 Financial Statement Presentation (amendment) IAS 19 Employee Benefits (amendment) IFRS 13 Fair Value Measurement aims to improve consistency and reduce complexity by providing a precise definition of fair value and a single source of fair value measurement and disclosure requirements for use across IFRSs. The requirements, which are largely aligned between IFRSs and US GAAP, do not extend the use of fair value accounting but provide guidance on how it should be applied where its use is already required or permitted by other standards within IFRSs. The change has not had a significant impact on the group financial statements in The amendment to IAS 1 Financial Statement Presentation relates to other comprehensive income. The main change resulting from these amendments is a requirement for entities to group items presented in other comprehensive income (OCI) on the basis of whether they are potentially reclassifiable to profit or loss subsequently to the reporting period. IAS 19 Employee Benefits (IAS19R) was revised in June 2011and effective from The changes on the group s accounting policies has been as follows: to immediately recognise all past service costs; and to replace interest cost and expected return on plan assets with a net interest amount that is calculated by applying the discount rate to the net defined benefit liability (asset). Comparative figures for 2011 and 2012 have been restated to reflect the change in accounting principles. The effect on group accounts has been to reduce the pension liabilities by NOK 0.9 million in 2011 and NOK 2.8 million in Remeasurement gains of NOK 0.7 million for 2011 and NOK 1.8 million for 2012 have been recognised in other comprehensive income. Effects on equity, payroll expense in the income statement and other comprehensive income are shown in the table below. Refer to Note 10 and Note 11 for details on effects on pension liabilities and deferred tax arising from the change in accounting principles. DATA RESPONS ASA NOK EFFECT OF CHANGES IN ACCOUNTING PRINCIPLES Equity as of December 31, reported Effect of change in accounting principle previous periods Effect of change in accounting principle (income statement) Effect of change in accounting principle (OCI) Equity as of December 31, restated DATA RESPONS ASA ANNUAL REPORT 2013

23 Notes Note 1 new standards and interpretations not yet adopted A number of new standards and amendments to standards and interpretations are effective for annual periods beginning after January 1, 2013 and have not been applied in preparing these consolidated financial statement. None of these is expected to have a significant effect on the consolidated financial statements of the group. FUNCTIONAL CURRENCY AND PRESENTATION CURRENCY The group presents its financial statements in NOK. This is also the functional currency of the parent company. Subsidiaries with a different functional currency are translated using the closing date rate for balance sheet items and monthly average rates for the income statement. Translation differences are charged against other comprehensive income. When a foreign subsidiary is partially or completely disposed of or sold, translation differences related to the subsidiary are recognised in the income statement. CONSOLIDATION subsidiaries The consolidated financial statements include Data Respons ASA and companies in which Data Respons ASA has a controlling interest. A controlling interest is normally achieved when the group owns more than 50 % of the shares in the company or the group is in a position to exercise actual control over the company. Non-controlling interests are included in the group s equity. The consolidated financial statements include the parent company Data Respons ASA and the following subsidiaries: Data Respons Norge AS (100 %) Data Respons Asia AS (100 %) Digitas AS (100 %) Data Respons AB (Sweden) (100 %) Sylog Sverige AB (Sweden) (75 %) Professional Finder AB (Sweden) (75 %) iwise AB (75 %) Data Respons OY (Finland) (100 %) Data Respons A/S (Denmark) (100 %) Data Respons GmbH (Germany) (100 %) Subsidiaries are fully consolidated from the date on which control was transferred to the group. They are de-consolidated from the date that control ceases. The consolidated financial statements show the overall financial results and the overall financial position when presenting the parent company Data Respons ASA and its controlling interests in other companies as a single financial entity. Companies in which the group has a sole controlling interest (subsidiaries) have been fully consolidated line by line in the consolidated financial statements. The profit or loss for the year and share of equity attributed to non-controlling interests are presented on separate lines. Intercompany transactions and balances have been eliminated. The consolidated financial statements have been prepared using uniform principles, which means that the subsidiaries follow the same accounting principles as the parent company, and that these principles have been applied consistently over time. Acquired subsidiaries are recognised in the consolidated financial statements based on the historical cost to the parent company. Historical cost includes best estimate on future additional payments based on earn-out agreements. The historical cost is allocated to identifiable assets and liabilities in the subsidiary, which are recorded in the consolidated financial statements at fair value at the time of acquisition. Acquisition-related costs are expensed as incurred. Identifiable assets are defined as both tangible fixed assets and intangible assets, excluding goodwill. Any excess value or shortfall in value beyond that which can be attributed to identifiable assets and liabilities is recognised in the balance sheet as goodwill. Excess values in the consolidated financial statements are depreciated on a straight-line basis over the anticipated economic life of the acquired assets, less any residual value. Goodwill and excess values attributed to intangible assets with an indeterminable useful life are not depreciated, but are tested for impairment in accordance with IFRS. associates and joint ventures Associates are all entities over which the group has significant influence but not control, generally between 20 % and 50 % of the voting rights. Joint ventures are entities where the group has shared control with one or more other parties, generally where Data Respons has 50 % voting rights. Investments in associates and joint ventures are accounted for using the equity method of accounting. Under the equity method, the investment is initially recognised at cost, and the carrying amount is increased or decreased to recognise the investor s share of the profit or loss of the investee after the date of acquisition. The group s investment in associates includes goodwill identified on acquisition. classification and valuation of balance sheet items Current assets and current liabilities comprise of items that fall due within one year of the balance sheet date, as well as items related to the operating cycle. Other items are classified as non-current assets or non-current liabilities. Financial instruments are classified and measured in accordance with IAS 39 Financial Instruments; Recognition and Measurement. For the group it is primarily loans and receivables that are relevant categories. Financial assets with fixed or determinable cash flows that are not listed in an active market are classified as loans and receivables. The group will on occasion use derivatives to hedge against fluctuations in currency exchange rates. Derivatives not designated as hedging instruments according to IFRS are recognised at fair value with changes against other financial income/expenses. Derivatives designated as fair value hedges are recognised at fair value in the statement of financial position. The corresponding change in value of the hedged item is also recognised in the statement of financial position. The net effect of the two is charged against other financial income/expenses. receivables Accounts receivable and other receivables are recognised in the balance sheet at nominal value, less provisions for estimated losses. Provisions for losses are made on the basis of individual assessment of the individual receivables, as well as past experience. machinery and equipment Machinery and equipment is recognised in the balance sheet and depreciated on a straight-line basis over the estimated useful life less any residual value. Direct maintenance of machinery and equipment is expensed as other operating expenses, while enhancements or improvements that increase the capacity are added to the cost price and depreciated in line with the asset. Depreciation periods and profiles and residual values are assessed annually. intangible assets Intangible assets consist of identifiable intangible assets. Intangible assets are recognised in the balance sheet if it is probable that the expected future financial benefits attributable to the asset will pass to the company and the asset s historical cost can be measured separately and in a reliable manner. Intangible assets with a limited useful life are recognised at historical cost, less accumulated depreciation and impairment. Depreciation is charged on a straight-line basis over the estimated useful life. The depreciation period and method are reviewed annually. Intangible assets with an indeterminable useful life are not depreciated, but are tested annually for impairment at the balance sheet date, or more frequently if there is an indication of impairment. DATA RESPONS ASA ANNUAL REPORT

24 Notes Note 1 goodwill The difference between the historical cost at the time of acquisition and the fair value of net identifiable assets at the time of acquisition are classified as goodwill. Goodwill is recognised in the balance sheet at historical cost, less any accumulated impairments. Goodwill is not depreciated, but is tested annually for impairment at the balance sheet date, or more frequently if there is an indication of impairment. In cases where negative goodwill is identified in connection with business combinations, the purchase price allocation is reassessed before any negative goodwill is recognised in income. research and development Expenses related to research activities are recognised in the income statement when they are incurred. Expenses relating to development activities are recognised in the balance sheet if these relate to an identifiable product that is technically and commercially feasible and the group has adequate resources to complete the development. Expenses that are recognised in the balance sheet include materials expenses, direct payroll expenses and other directly attributable expenses. Capitalised development expenses are recognised in the balance sheet at historical cost, less any accumulated depreciation and write-downs. Capitalised development expenses are depreciated over the estimated useful life of the asset. Intangible assets under development, however, are not depreciated and are tested for impairment annually or more frequently if there is an indication of impairment. valuation of investments in subsidiaries Subsidiaries are valued in accordance with the historical cost method in the parent company s financial statements. Investments are valued at the historical cost of the shares unless a write-down of the shares has been necessary, in which case they are written down to fair value. If the customer only pays for the finished product, the company, in cases where there is a contractual delivery, recognises revenue and capitalises development work in line with the degree of completion. Capitalised development work is subsequently expensed in line with the delivery of the products. services Revenue from the sale of services is recognised according to the stage of completion. The stage of completion is measured as accrued hours in relation to total estimated hours. Estimated loss on contracts will be recognised in the income statement in its entirety in the period when it has been identified. Interest income is recognised as it is accrued. Dividends are recognised as income when they have been approved by the general meeting of the distributing company. inventories Purchased inventory is valued at the lower of historical cost (using the FIFO principle) or net realisable value. Write-downs are made for any inventory that is assumed to be obsolete. currency transactions in foreign currency Transactions in foreign currencies are translated at the rate in effect on the date of the transaction. Monetary items in foreign currencies are translated to Norwegian kroner (NOK) using the rate in effect at the balance sheet date. Exchange rate fluctuations are recognised in the income statement on an on-going basis during the accounting period. provisions Provisions are made in the financial statements where the group has a liability (legal or self-imposed) as a result of a past incident, if it is probable that a financial settlement will be made as a result of this liability, and if the amount of such a settlement can be measured reliably. If the impact is significant, the provisions are calculated by discounting the estimated future cash flows by a discount rate before tax that reflects the market s pricing of the current value of money and, where relevant, risks specifically linked to the liability. Provisions for restructuring are included if the group has approved a detailed and formal restructuring plan, and the restructuring has either started or been announced. Provisions for loss-making contracts are included when the group s estimated revenue from a contract is lower than the estimated expenses that will be incurred to fulfil the contractual obligations. revenue recognition Revenue is recognised when it is probable that transactions will generate future financial benefits that will pass to the company, and the value of such benefits can be estimated reliably. Sales revenue is recognised net of value added tax and discounts. The group has revenue from three different categories: products and solutions Revenue from the sale of goods is recognised when delivery has been made and most of the risk and return potential has been transferred. Revenue from the sale of solutions is a combination of the sale of development services and the subsequent delivery of products. The recognition of revenue from solutions is dependent on the pricing model selected. In cases where the customer pays separately for development work and the products, and pricing is established independently, revenue is recognised in accordance with the principles applicable to services and products described below. foreign operations The assets and liabilities of foreign operations, including goodwill, are translated into NOK using the exchange rate in effect at the balance sheet date. Revenue and expenses relating to foreign operations are translated into NOK using monthly average exchange rates. Translation differences resulting from the translation of net investments in foreign operations are specified as currency translation differences under other comprehensive income. government grants Government grants are recognised in the financial statements where it is reasonably certain that the company will fulfil the terms of the grants, and that the grants will be received. Operating subsidies are accounted for systematically over the period that the subsidies are received. Grants are recorded in the financial statements as a deduction in the expenses they are meant to cover. pension obligations A defined contribution plan is a pension plan under which the group pays fixed contributions into a separate entity. The group has no legal or constructive obligations to pay further contributions if the fund does not hold sufficient assets to pay all employees the benefits relating to employee service in the current and prior periods. A defined benefit plan is a pension plan that is not a defined contribution plan. Typically defined benefit plans define an amount of pension benefit that an employee will receive on retirement, usually dependent on one or more factors such as age, years of service and compensation. The liability recognised in the balance sheet in respect of defined benefit pension plans is the present value of the defined benefit obligation at the end of the reporting period less the fair value of plan assets. The defined benefit obligation is calculated annually by independent actuaries using the projected unit credit method. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of high-quality corporate bonds 24 DATA RESPONS ASA ANNUAL REPORT 2013

25 Notes Note 1 that are denominated in the currency in which the benefits will be paid, and that have terms to maturity approximating to the terms of the related pension obligation. Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or credited to equity in other comprehensive income in the period in which they arise. Pastservice costs are recognised immediately in the income statement. As of December 31, 2013 the group does no longer have any significant defined benefit pension arrangements. For defined contribution plans, the group pays contributions to publicly or privately administered pension insurance plans on a mandatory, contractual or voluntary basis. The group has no further payment obligations once the contributions have been paid. The contributions are recognised as payroll expenses when they are due. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in the future payments is available. employee share option scheme Employee share options are calculated at the fair value at the time they are granted and accrued on a linear basis over the vesting period until the exercise date. The employer s social security contributions linked to vested options are accrued correspondingly over the life-span of the option. income tax Income tax expense in the income statement comprises both income tax payable for the period and changes in deferred tax. Deferred tax is calculated at the current tax rate on the basis of temporary differences between the financial accounting and tax-related values, and tax loss carry forward at the end of the financial year. Negative and positive temporary differences that reverse or may reverse during the same period are offset and the tax effect of the net amount is calculated. The tax loss carry forward is recognised in the balance sheet as a deferred tax asset if it is considered adequately probable that the losses can be utilised in the future. use of estimates The management has used estimates and assumptions that have affected assets, liabilities, income, expenses and information on potential liabilities. This applies in particular to the recognition of revenue related to long-term manufacturing projects, development projects, capitalised development expenses, pension liabilities and the valuation of goodwill. Accounting estimates may change as a result of future events. Estimates and their underlying assumptions are assessed continuously. Changes to accounting estimates are included in the financial statements for the period in which the change occurs. If the changes also apply to future periods, the impact is spread over the current and future periods. estimated impairment of goodwill The group tests annually whether goodwill has suffered any impairment. The recoverable amounts of cash generating units have been determined based on value-in-use calculations. These calculations require the use of estimates (see Note 3). revenue recognition The group uses the percentage of completion method in accounting for its fixed price contracts to deliver certain solutions projects. Use of the percentage of completion method requires the group to estimate the services performed to date as a proportion of the total services to be performed. No significant fixed price contracts are active as of December 31, pension benefits The present value of the pension obligations depends on a number of factors that are determined on an actuarial basis using a number of assumptions. The group relies on recommended assumptions as presented by the Norwegian Accounting Standards Board for calculation of Norwegian pension liabilities. The group does not have any significant defined benefit pension arrangements as of December 31, cash and cash flow statement The cash flow statement has been prepared in accordance with the indirect method. Cash and cash equivalents include cash, bank deposits and other short-term liquid investments that can be converted immediately and without any significant exchange rate risk to a known cash amount, and with maturity date less than three months from the purchase date. segments The group is organised into operating segments based on the underlying operations as these are reported to and monitored by group management. The business segments reported are Products & Solutions and Services. contingent liabilities and assets Contingent liabilities are not recognised unless these arise from, and are assessed as a result of business combinations. Material contingent liabilities are disclosed unless the probability of the liability materialising is remote. Contingent assets are not recognised in the annual financial statements. events after the balance sheet date New information received after the balance sheet date relating to the company s financial position at the balance sheet date has been taken into consideration in preparing the annual financial statements. Events occurring after the balance sheet date that do not affect the company s financial position at the balance sheet date, but that will affect the company s financial position in the future are disclosed in if these are material. DATA RESPONS ASA ANNUAL REPORT

26 Notes Note 2 NOTE 2 OPERATING SEGMENTS The group is divided into two operating segments: Products & Solutions and Services. products and solutions The Products & Solutions segment consists of development and delivery of custom solutions by combining engineering services with standard embedded computer products from leading partners or deliveries of standard embedded computer products. services Data Respons offers consultancy services for a range of technology related development projects. operating segments 2013 NOK 1000 Products & Solutions Services Corporate* Eliminations ** Group External operating revenue Internal operating revenue Operating revenue Operating expenses EBITDA operating segments 2012 NOK 1000 Products & Solutions Services Corporate* Eliminations ** Group External operating revenue Internal operating revenue Operating revenue Operating expenses Operating profit/loss operating segments 2011 NOK 1000 Products & Solutions Services Corporate* Eliminations ** Group External operating revenue Internal operating revenue Operating revenue Operating expenses Operating profit/loss * The item corporate includes all transactions recognised in the parent company Data Respons ASA. **The item eliminations includes eliminations of intercompany revenue and expenses. 26 DATA RESPONS ASA ANNUAL REPORT 2013

27 Notes Note 2 Revenue is reported to mangement in four geographic regions: Norway, Sweden, Denmark and Germany. revenue 2013 NOK 1000 Products & Solutions Services Eliminations Group Norway Sweden Denmark Germany Eliminations Operating revenue revenue 2012 NOK 1000 Products & Solutions Services Eliminations Group Norway Sweden Denmark Germany Eliminations Operating revenue revenue 2011 NOK 1000 Products & Solutions Services Eliminations Group Norway Sweden Denmark Germany Eliminations Operating revenue DATA RESPONS ASA ANNUAL REPORT

28 Notes Note 3 NOTE 3 INTANGIBLE ASSETS, MACHINERY AND EQUIPMENT DATA RESPONS ASA NOK 1000 Goodwill Other intangible assets Total intangible assets Machinery and equipment Machinery and equipment Cost or valuation as of January 1, Additions Disposals Translation differences Cost or valuation as of December 31, Accum. depr. and impairm. as of January 1, Depreciation for the year Impairment for the year Disposals Translation differences Accum. depr. and impairm. as of December 31, Net book value as of December 31, Cost or valuation as of January 1, Additions Disposals Translation differences Additions/disposals from acquired/sold companies Cost or valuation as of December 31, Accum. depr. and impairm. as of January 1, Depreciation for the year Disposals Translation differences Additions/disposals from acquired/sold companies Accum. depr. and impairm. as of December 31, Net book value as of December 31, Both the parent company and group use straight-line depreciation for all machinery and equipment. The estimated economic life of machinery and equipment is 3 to 5 years. Intangible assets are amortised over the life of the asset, which is estimated to be from 2.5 to 10 years. EXPENCED LEASE RENTALS IN THE NOK Rental of premises in Norway Rental of premises outside Norway Operational leasing of IT equipment Operational leasing of vehicles The group does not have any purchase options on the properties. In Norway the lease for the head office at Høvik ends at June 30, 2015 with an option for 5 years extention, while the terms of lease for the foreign units vary from a lease requiring 9 months notice to a lease with an expiry date of April 30, The leases will continue on unchanged terms. Leasing contracts on vehicles have a duration of 36 months. 28 DATA RESPONS ASA ANNUAL REPORT 2013

29 Notes Note 3 INTANGIBLE ASSETS Other intangible assets consist of capitalised development expenses, as well as intangible assets recognised at fair value upon the acquisition of companies. In 2013, no development project expenses were capitalised. changes in goodwill 2013 There was one acquisition in 2013, of iwise AB, resulting in an addition to goodwill of NOK 12.5 million. See Note 5 for further information. All goodwill is recorded in local currency, and as a result, changes in currency exchange rates will affect the value of goodwill. Compared to the currency rate at the acquisition date, goodwill was adjusted upwards by NOK thousand at the end of 2013, compared to a downwards adjustment of NOK thousand at the end of impairment test of goodwill Goodwill recognised through the acquisition of companies and units is allocated to the individual unit if the cash flows are still identifiable. In cases where units have been merged and operations are integrated, it is difficult to isolate the cash flows. In these cases the combined goodwill will be assessed for the merged unit. ALLOCATION OF GOODWILL NOK Data Respons Norge AS Data Respons AB (SE) Sylog Sverige AB (SE) iwise AB (SE) Data Respons A/S (DK) Total The recoverable amount for the cash flow-generating units is calculated based on the value the asset will generate for the business operations. Cash forecasts are based on budgets approved by the Board of Directors for 2014 with a projection for a five-year period based on the assumptions below. Cash flows beyond the budgeted period are extrapolated using estimated growth rates for the individual units. Future EBIT margin and cash flow is based on the management s best estimate and judgment. The most import assumptions for calculation of the recoverable amount are as follows: discount rate: A calculated WACC of 11.6 % after tax has been used as the discount rate for all units. CGUs in the group are based in the Nordic / Northern European region, and regional differences are not estimated to make a significant impact on the applied WACC rate at the balance sheet date. The corresponding WACC before tax is 16.1 %. The WACC before tax is calculated on the basis of the applied WACC after tax and using a 28 % tax rate. revenue growth: Historically the group has achieved growth from continuing operations, and management believe that the long-term outlook for the embedded solutions market is prosperous. However, as the group is focusing efforts in key markets and downsizing less profitable business units, growth rates are expected to vary among the companies. Expected growth rates in 2014 vary between 1 % and 19 %. Beyond 2014, the group expects growth rates at 2-10 % in the forecasted four-year period. extrapolated growth rate: The growth rate beyond five years has been set at 0 % for all units. ebit margin: The group has used EBIT margins that reflect management s best estimate of earnings potential in the period. EBIT margins applied in the calculation of value-in-use range from 6 % to 14 %, dependent on past financial performance and expected profit margins for each unit. sensitivities: No indications of impairment losses have been identified for Data Respons Norge AS, Data Respons AB, Sylog Sverige AB or Data Respons GmbH in The recoverable amounts of these cash generating units exceed their carrying amounts by significant margins. A sensitivity analysis has been performed for these CGUs, in order to determine if a reasonable change in key assumptions would cause the units carrying amounts to exceed their recoverable amounts. A reduction in the estimated growth rate by 5 percentage points, a reduction in the estimated EBIT margin by 1 percentage point or an increase in WACC after tax by 1 percentage point would not lead to impairment losses in either of the four units. As iwise AB was acquired in December 2013, and the financial performance of the company has not deviated significantly from projections at the time of purchase, the value in use of the company is still considered to cover the carrying value in the group accounts. See Note 5 for more information on the business combination. DATA RESPONS ASA ANNUAL REPORT

30 Notes Note 4 NOTE 4 SUBSIDIARIES AND OTHER INVESTMENTS Company Date of acquisition Registered office Ownership and voting interest subsidiaries Data Respons Norge AS Bærum 100 % Data Respons Asia AS Bærum 100 % Data Respons AB Kista (SE) 100 % Data Respons A/S Herlev (DK) 100 % Data Respons OY Espo (FI) 100 % Data Respons GmbH* Karlsruhe (DE) 100 % Digitas AS Bærum 100 % Sylog Sverige AB Kista (SE) 75 % Professional Finder AB Kista (SE) 75 % iwise AB Stockholm (SE) 75 % associates / joint arrangements Lundinova AB Lund (SE) 50 % TechPeople A/S Herlev (DK) 50 % * Ipcas GmbH was merged into Data Respons GmbH as of January 1, sylog sverige ab In February 2013, Data Respons ASA sold 25 % of the company s shares in Sylog Sverige AB, decreasing its ownership and voting rights in the subsidiary from 100 % to 75 %. The shares were sold for SEK 9 million. At the time of the transaction, non-controlling interests of NOK 20 million were recognised in the group balance sheet. The transaction did not result in any changes to total assets in the group. Effects on equity following the transaction are shown in the Statement of Changes in Equity. Profit allocated to non-controlling interests were NOK 2.3 million in 2013, and at the end of the year non-controlling interests amounted to NOK 19.4 million. Summarised financial information for 2013 and at December 31, 2013: NOK 1000 Sylog* Current assets Non-current assets Current liabilities Non-current liabilities Revenue Profit or loss Dividends paid to non-controlling interests * Includes fully owned subsidiaries of Sylog Sverige AB: Professional Finder AB and iwise AB. 30 DATA RESPONS ASA ANNUAL REPORT 2013

31 Notes Note 4 lundinova ab 50 % of Lundinova AB was sold on June 5, 2013 from Data Respons ASA to Lundinova Invest AB, leaving 50 % ownership for Data Respons ASA. Shares, voting rights and board representation is divided equally among the two owning parties, and important decisions require consensus between the owners. The investment is classified as a joint venture according to IFRS 11, and is accounted for using the equity method. The carrying value of the company was SEK 3 million prior to the transaction. The total consideration for the shares was valued at 50 % of the carrying value, and the transaction did not result in any significant gain or loss in the group financial statements. The consideration for the shares is a loan that is to be repaid in the period At the time of losing control, the company had cash and cash equivalents of NOK 1 million, trade receivables of NOK 3 million, trade payables of NOK 1 million, other current assets of NOK 1 million and other current liabilities of NOK 3 million. For the parent company, the sale of 50 % of the shares in Lundinova AB resulted in reversal of previous impairments of NOK 1 million. techpeople a/s 50 % of TechPeople A/S was acquired on May 16, 2012 by Data Respons A/S. KIF Invest ApS owns the remaining 50 % of the company. Shares, voting rights and board representation is divided equally among the two owning parties, and important decisions require consensus between the owners. The investment is classified as a joint venture according to IFRS 11, and is accounted for using the equity method. The group s share of the result in the joint ventures, and its aggregated assets and liabilities, are as follows: DAT share Financial year 2013 At December 31, 2013 NOK 1000 Revenue Profit or loss Other compr. income Total compr. income Operating cash flow Assets Liabilities Carrying value Lundinova AB TechPeople A/S Data Respons provided a loan of DKK 1.1 million to TechPeople A/S in 2012 which was repaid in full in Data Respons has no commitments to provide financial support to any of the joint ventures. DATA RESPONS ASA Company Currency Issued capital Ownership Book value (NOK 1000) Data Respons Norge AS NOK % Data Respons Asia AS NOK % - Data Respons AB (SE) SEK % Data Respons OY (FI) EUR % Data Respons A/S (DK) DKK % 0 Data Respons GmbH (DE) EUR % Digitas AS NOK % - Sylog Sverige AB (SE) SEK % Total subsidiaries Lundinova AB (SE) SEK % 858 Total joint ventures 858 The investments are carried using the historical cost method in the parent company s financial statements. The impairment test performed as of December 31, 2013 did not result in any impairment of book value of the investments. The impairment test for book value of subsidiaries and joint ventures in the Data Respons ASA company accounts were based on the same assumptions as used in the impairment test of goodwill in the group accounts. Refer to Note 3 for further specification. DATA RESPONS ASA ANNUAL REPORT

32 Notes Note 5-6 NOTE 5 BUSINESS COMBINATIONS BUSINESS ACQUISITIONS On December 5, 2013, Sylog Sverige AB acquired 100 % of the shares in iwise AB. iwise and Sylog have for the past 8 years had a strategic partnership where iwise as a subcontractor has provided expertise to Sylog s customers. The acquisition is a continuation of an established collaboration over many years. iwise has 20 employees and offices in Stockholm, and had a turnover of SEK 24 million for 2013 with an operating margin of approximately 10 %. The company has been consolidated into Sylog s financial statements from December The total consideration for the shares was NOK 14.1 million, consisting of a cash consideration of NOK 5.6 million and estimated additional payments of NOK 8.5 million that are contingent on the company s financial performance over the period of measured as EBITDA. The company has historically operated with consistent profit margins and the final consideration is not expected to deviate significantly from the estimates at the time of the acquisition. A change in profit margins throughout the three-year period of 0.5 percentage points would lead to a corresponding change in total consideration of NOK 0.6 million. The goodwill of NOK 12.5 million arises from a number of factors such as expected synergies through combining a highly skilled workforce and to some extent obtaining economies of scale and unrecognised assets such as the workforce. The following table summarises the assets acquired and the liabilities assumed recognised at the acquisition date: NOK 1000 Fair value at acquisition Cash and cash equivalents Trade and other receivables Trade and other payables Deferred tax liabilities -427 Total identifiable net assets Goodwill Total consideration Acquisition-related costs of NOK 0.1 million have been charged to other expenses in the consolidated income statement. The revenue included in the consolidated income statement since the acquisition date contributed by iwise was NOK 1.5 million, of which NOK 1.5 million group internal revenue. iwise also contributed with profit of NOK 0.2 million in the same period. Had the company been consolidated from January 1, 2013, the consolidated income statement for 2013 would show pro-forma revenue of NOK million and pro-forma profit of NOK 33.4 million. SUMMARY OF ACQUISITIONS IN PREVIOUS YEARS There were no acquisitions in 2012 or NOTE 6 INVENTORIES NOK 1000 GOODS PURCHASED FOR RESALE DATA RESPONS ASA NOK Historical cost Written down to fair value General provisions for obsolescence Book value Value of inventory pledged as collateral DATA RESPONS ASA ANNUAL REPORT 2013

33 Notes Note 7-8 NOTE 7 TRADE AND OTHER RECEIVABLES NOK 1000 DATA RESPONS ASA NOK Trade receivables Provisions for impairment of receivables Trade receivables, net Accrued revenue Prepayments Other current receivables Total other receivables Total receivables Provisions as of January Realised losses Provisions for the period Disposals from sold companies Provisions as of December Losses on trade receivables are classified as other operating expenses in the income statement. Maximum credit risk is represented by the row Total receivables. AGING ANALYSIS OF TRADE RECEIVABLES NOK 1000 Carrying amount Not due Number of days past due date Trade receivables as of December 31, Trade receivables as of December 31, Trade receivables as of December 31, NOTE 8 INTERCOMPANY BALANCES DATA RESPONS ASA Current receivables Current liabilities NOK Data Respons Norge AS Data Respons Asia AS Data Respons AB Sylog Sverige AB Lundinova AB Data Respons A/S Data Respons GmbH Total Intercompany balances are mainly due to short term loans provided to Data Respons Asia AS of NOK 0.7 million and a short term loan from Data Respons GmbH of NOK 6.8 million. Sales revenue for Data Respons ASA consists mainly of group management fee. DATA RESPONS ASA ANNUAL REPORT

34 Notes Note 9 NOTE 9 SHARE CAPITAL, SHAREHOLDERS, EARNINGS PER SHARE The registered share capital of Data Respons ASA consisted of shares with a par value of NOK 0.50 as of December 31, Each share carries one vote. A total of 8.3 million shares were traded on the Oslo Stock Exchange in 2013, an increase from 3.3 million shares in At the end of the year Data Respons ASA had 845 Norwegian shareholders and 27 foreign shareholders. The foreign shareholders owned 1.4 % of the shares. During 2013, no treasury shares were bought or sold. The company did not own any treasury shares at the end of the year. In 2013, new shares were issued in connection with the company s employee share saving scheme. Data Respons has implemented an employee share saving scheme directed at all employees in Norway, where each employee may subscribe to a maximum of shares. The subscription price was set to NOK 5.36 per share, representing the weighted average share price of transactions in the DAT share on Oslo Stock Exchange in the period of May 2 - May 24 less a 20 % discount. A total of 72 employees subscribed to shares. On the basis of an authorization granted by the Annual General Meeting held on April 25, 2013, the Board of Directors resolved to increase the share capital by NOK from NOK to NOK through the issue of new shares with a nominal value of NOK 0.50 per share. The Articles of Association are adjusted accordingly. LIST OF 20 LARGEST SHAREHOLDERS AS OF DECEMBER 31, 2013 Shareholder Ordinary shares Proportion of ownership CUSTOM HOLDING AS % MP PENSJON PK % STOREBRAND VEKST % BRAGANZA AS % FOUGNER INVEST AS % VARNER INVEST AS % JP MORGAN CHASE BANK, NA % MERTOUN CAPITAL AS % DNB NOR BANK ASA % SILVERCOIN INDUSTRIES AS % STOREBRAND NORGE I % BERNT AS % VERDIPAPIRFONDET DNB SMB % RO INVEST AS % LEIF HÜBERT % VENTOR AS % ATTOL AS % STOREBRAND AKSJE INNLAND % VERDIPAPIRFONDET STOREBRAND NORGE % TANJA A/S % TOTAL % OTHER % TOTAL NUMBER OF SHARES % SHARE ISSUES IN 2013 Date Type Subscription price Number of shares After new issue Capital increase DATA RESPONS ASA ANNUAL REPORT 2013

35 Notes Note 9 POWER OF ATTORNEY TO ISSUE SHARES AND PURCHASE TREASURY SHARES Passed Type Year issued Maximum share limit Shares issued/ purchased 2013 Remaining number of shares Duration Capital increase Until Treasury shares Until The Board has been granted power of attorney to increase the company s share capital by a maximum of NOK through the issue of maximum new shares, each with a par value of NOK The authorisation is valid until the annual general assembly in 2014 and can be used by the Board in connection with acquisitions of new companies as part of the company s strategy, in connection with the company s employee share saving scheme or to raise cash. The company s shareholders have waived their pre-emptive subscription rights in accordance with Section 10-4 of the Norwegian Public Limited Companies Act. The board may decide that the share deposit shall take the form of assets other than cash or rights to incur particular obligations for the company pursuant to Section 10-2 of the Norwegian Public Limited Liability Companies Act. The Board has been granted power of attorney to purchase up to shares with an equivalent nominal value of NOK The amount which may be paid per share is to be minimum NOK 1.00 and maximum NOK The Board is free to choose the method by which the purchase or sale is executed. The authorisation is valid until the annual general meeting in The purpose of the authorisation is to give the company the facility to implement the buy-back of shares with subsequent cancellation, in order to optimise the company s capital structure. Furthermore, the company wishes to be able to use such authorisation to purchase and sell treasury shares in connection with complete or partial settlement for acquired companies or in conncection with the company s employee share saving scheme. EARNINGS PER SHARE The earnings per share ratio is calculated by dividing the Profit/loss for the year attributable to the company s shareholders by a time-weighted average of outstanding ordinary shares throughout the year, less the company s treasury shares. The diluted earnings per share ratio is based on the same calculation as above, however, it also takes into account potential shares that have been outstanding during the period and will have a diluting effect, i.e. reduce the earnings per share for the ordinary shares. The company has only one category of potential shares that can result in dilution: share options. Potential ordinary shares are treated as dilutive only if their conversion to ordinary shares would decrease profit per share or increase loss per share from continuing operations attributable to ordinary equity holders. NOK Profit/loss for the year attributable to the equity holders of the company (NOK 1000) Weighted average number of outstanding shares (1000) Effect of dilution: -Employee share option scheme Weighted average number of outstanding shares, diluted (1000) Earnings per share, basic Earnings per share, diluted CALCULATION OF TIME-WEIGHTED SHARES Date Number of shares* Number of days Weighted number of shares DIVIDENDS The Board of Directors proposes that dividends of NOK 1.00 per share are paid for the 2013 financial year. REDUCTION OF SHARE PREMIUM At December 31, 2011 the parent company had a share premium of NOK million and other equity amounted to NOK million. The share premium was reduced in order to covered the uncovered losses in the parent company, according with the Norwegian Public Limited Companies Act Section 3-2. The Annual General Meeting on April 26, 2012 decided to reduce the share premium by an additional NOK 80 million. The amount was transferred to other equity. DATA RESPONS ASA ANNUAL REPORT

36 Notes Note 10 NOTE 10 PENSIONS The parent company is required to operate a company pension scheme pursuant to the Mandatory Occupational Pension Act, and operates a pension scheme that meets this requirement. This scheme covered a total of 5 people in The group s employees in Norway, 147 people, were members of a defined benefit pension scheme in 2013 that covered a disability pension. The pension liabilities were covered through an insurance company. This scheme has in December 2013 been replaced by a defined contribution arrangement. The effect of plan changes are shown in a seperate table below. The group does not have any significant defined benefit pension schemes as of December 31, The group s net pension assets at December 31, 2013 consist mainly of a pension premium fund that will be utilised to cover payments to the group s defined contribution pension schemes. The pension obligation as of December has been assessed by an actuary in line with IAS 19R. Figures for previous years have been restaded to reflect changes in IAS19R: eliminate the corridor approach and recognize all actuarial gains and losses in OCI as they occur; to immediately recognize all past service costs; and to replace interest costs and expected return on plan assets with a net interest amount that is calculated by applying the discount rate to the net defined benefit liability (the latter had no significant impact on group accounts). The assumptions applied in the calculation were based on recommendations from the Norwegian Accounting Standards Board adjusted for company specifics. As of December 31, 2013 and December 31, 2012 the discount rate applied is based on covered bonds, compared to a discount rate based on government bonds as of December 31, The annual pension expenses are included under payroll expenses in the consolidated income statement. In addition to the aforementioned schemes in Norway, the group s foreign subsidiaries have defined contribution pension schemes, and the expenses associated with these schemes are included under payroll expenses in the income statement. The expenses broken down into defined contribution and defined benefit schemes are specified in Note 15. NOK 1000 DATA RESPONS ASA NOK the pension expense is calculated as follows: restated restated restated restated Net present value of current year s accrued pension benefits Pension plan changes, curtailment or settlement Interest cost on accrued pension liabilities Defined benefit pension expenses for the year Remeasurements loss (gain) to OCI pension liabilities and pension assets: Defined benefit obligation Fair value of plan assets Net amount recognised in balance sheet changes in the liabilities: Net pension liabilities as of January Recognised pension expenses Remeasurement loss / gain Premium payments Net pension liabilities as of December DATA RESPONS ASA ANNUAL REPORT 2013

37 Notes Note 10 NOK 1000 DATA RESPONS ASA NOK EFFECT OF CHANGES IN ACCOUNTING PRINCIPLES Net pension liabilities at January 1, reported Effect of change in accounting principle Net pension liabilities at January 1, restated Net pension liabilities at December 31, reported Effect of change in accounting principle Net pension liabilities at December 31, restated Pension expenses for the year, reported Effect of change in accounting principle Pension expenses for the year, restated The following assumptions have been used for the calculation of the pension expenses and net pension liabilities: Discount rate 4.10 % 3.75 % 3.30 % Expected return on plan assets 4.10 % 3.60 % 4.80 % Rate of compensation increase 3.75 % 3.75 % 4.00 % Expected rate of pension increase 0.60 % 0.00 % 0.70 % Expected increase of social security base amount (G) 3.50 % 3.50 % 3.75 % Percentage distribution of pension assets by investment category: Equities 6.80 % 9.20 % % Alternative investments 3.50 % 0.00 % 0.00 % Bonds % % % Money market % % % Long-term bonds % % % Real estate % % % Other 1.10 % 1.90 % 1.20 % The actuarial assumptions are based on normal assumptions used by the insurance industry with regard to demographic factors: Table K2013 BE. DATA RESPONS ASA ANNUAL REPORT

38 Notes Note 11 NOTE 11 INCOME TAX NOK 1000 DATA RESPONS ASA NOK summary of temporary differences Receivables Other current assets Non-current assets Receivables in foreign currency Pensions Effect of change in accounting principle* Provisions for contingent liabilities Group contributions** Total Tax loss carryforward Total positive /(negative) temporary differences Deferred tax asset at current tax rate Of which, deferred tax assets not recognised Deferred tax assets in the balance sheet Deferred tax liability at current tax rate Deferred tax liability in the balance sheet * Impact of changes in accounting principles resulted in a reduction in pension liabilities and a corresponding change in deferred tax. See Note 1 and 10 for further details. ** In accordance with IFRS, group contributions are entered as income in the parent company the year after the allocation for tax purposes in the subsidiaries. The deferred tax assets in the balance sheet relate primarily to the tax loss carryforward in the Norwegian companies. These companies have shown healthy profits, and it is expected that it will be possible to utilise the tax loss carryforward. Unrecognised deferred tax assets relate to the tax losses carryforward in Denmark, Sweden and Germany. The tax losses can be carried forward indefinitely. NOK 1000 DATA RESPONS ASA NOK income tax expence comprises Income tax payable in Norway Income tax payable outside Norway Total income tax payable Change in deferred tax in Norway Change in deferred tax outside Norway Total change in deferred tax Unrecognised change in deferred tax Total income tax expense/(revenue) DATA RESPONS ASA ANNUAL REPORT 2013

39 Notes Note NOK 1000 DATA RESPONS ASA NOK calculations of tax base for the year Profit/loss before tax % tax tax effect of: Permanent differences Change in not-recognised deferred tax Adjustment from previous years Differences in tax rates Change in tax rates Income tax expense (revenue) for the year Effective tax rate 28 % 49 % -12 % 24 % 32 % -1 % NOTE 12 OTHER CURRENT LIABILITIES NOK 1000 DATA RESPONS ASA NOK Prepayments from customers Accrued wages/bonuses/holiday pay Accrued expenses Other current liabilities* Total other current liabilities * Other current liabilities consists of additional payments according to earn-out agreements that are due within a year. DATA RESPONS ASA ANNUAL REPORT

40 Notes Note 13 NOTE 13 OTHER PROVISIONS FOR LIABILITIES NOK 1000 NOK 1000 Other provisions Provisions as of January 1, Recognised in the income statement during the year - Provisions for the year - - Reversal of unutilised provisions - Recognised in the balance sheet during the year - Utilised during the year - - Additions from acquired companies Translation differences - Provisions as of December 31, Classified as current liability in the balance sheet Classified as non-current liability in the balance sheet OTHER PROVISIONS In connection with acquisition of companies, an earn-out agreement is often entered into, where the previous owners receive additional payments based on the performance of the acquired company in a specified time period after the acquisition. All earn-out obligations relate to the acquisition of iwise AB, see Note 5 for further details. The additional payments will be made in cash by the acquiring company Sylog Sverige AB. Earn-out obligations from acquisitions will be settled in the period The parent company does not have any earn-out obligations as of December 31, ESTIMATED EARN-OUT PAYMENTS NET PRESENT VALUE (NOK 1 000) Total Provision as of December 31, DATA RESPONS ASA ANNUAL REPORT 2013

41 Notes Note GUARANTEES Guarantees of NOK 4.7 million have been provided in connection with lease agreements. Guarantees and overdraft facilities are secured by a lien on inventory and trade receivables in Data Respons Norge AS. A total lien of NOK 40 million has been placed on inventories and a total lien of NOK 70 million has been placed on trade receivables. NOK 1000 DATA RESPONS ASA NOK guarantees Guarantees book value of secured assets used as collateral Trade receivables Inventories Total NOTE 14 RELATED PARTY TRANSACTIONS The Board of Directors, group management and other key employees are required to report any potential related party transactions. Other than ordinary business transactions between group companies there have been no related party transactions in All transactions within the group are based on ordinary commercial terms using the arm s length principle. For the parent company, transactions with group companies consist mainly of fees for group management services. See Note 15 for information on the remuneration of group management and Board of Directors, as well as Note 8 for balances between Data Respons ASA and other group companies. DATA RESPONS ASA ANNUAL REPORT

42 Notes Note 15 NOTE 15 PAYROLL EXPENSES, EMPLOYEES, REMUNERATION AND LOANS NOK 1000 payroll expences DATA RESPONS ASA NOK Wages and salaries Social security tax Pension expenses, defined benefit scheme Pension expenses, defined contribution scheme Other benefits Total The average number of employees during the financial year was 5 in the parent company. The average number of employees in the group was 368, and there were 367 employees at the end of the year. There were 64 female employees in the group, 14 of whom were top or middle managers. SHARES, OPTIONS AND REMUNERATION TO THE CEO, KEY EMPLOYEES, BOARD OF DIRECTORS AND NOMINATION COMMITTEE Salaries and fees Pensions Other benefits in kind Total remuneration No. of shares No. of options Kenneth Ragnvaldsen, CEO Jørn Toppe, COO Rune Wahl, CFO Ole Jørgen Fredriksen, Chairman of the Board Kathryn Moore Baker, Board member* Ulla-Britt Fräjdin Hellqvist, Board member Erik Langaker, Board member Åsa Grübb Weinberg, Board member, employee representative Jarl Guntveit, Board member, employee representative Haakon Sæter, Nomination committee member Narve Reiten, Nomination committee member Andreas Berdal Lorentzen, Nomination committee member * Kathryn Moore Baker is Chairman of the Board at Custom Holding AS. REMUNERATION OF THE BOARD OF DIRECTORS On April 25, 2013 the Annual General Meeting decided that the remuneration of the Board of Directors should be a fixed salary of NOK , NOK and NOK for respectively the Chairman of the board, shareholder elected board members, and employee representatives. Based on the current composition of the Board of Directors this amounts to a total of NOK in renumeration. In addition, a compensation per meeting shall be paid to members of the Audit Committe and Compensation Committee of NOK , NOK and NOK for respectively the committee leaders, members or employee representatives. For the Nomination Committee, NOK shall be paid to the leader and NOK shall be paid to other members. No loans or guarantees have been provided to the Board of Directors, key employees, other employees or their related parties. There are no shareholder agreements in Data Respons ASA. 42 DATA RESPONS ASA ANNUAL REPORT 2013

43 Notes Note 15 BOARD S GUIDELINES AND MAIN PRINCIPLES FOR THE STIPULATION OF SALARIES AND OTHER REMUNERATION TO KEY EMPLOYEES In accordance with the provisions of the Public Limited Companies Act, the Board of Directors has prepared the following declaration of guidelines and main principles for the stipulation of salaries and other remuneration for key employees. The object of designing a compensation package for the CEO and other key employees is to provide a competitive package that contains incentives to strive for profitable growth and increase the creation of value for the shareholders within the scope of the company s adopted values and strategies. The individual manager shall be paid a fixed basic salary in line with market salaries for corresponding positions in comparable companies. A variable salary shall be paid in addition to the fixed salary. The variable salary is dependent on achieving profitability improvement, growth and cash flow targets for the group. For the CEO and the other key employees the variable salary will be a maximum of 40 % of the fixed base salary. The company has a share option scheme for group management and managers in the group s subsidiaries in accordance with the approved framework at the Annual General Meeting This scheme replaced an earlier scheme that expired in The share option scheme was established to give the company s management incentives to strive to create value for the shareholders. The Board of Directors is in general positive to performance related arrangements which are linked to value creation for shareholders or the company s earnings performance over time. The CEO and group management is covered by the company s pension scheme on the same terms as other employees. This pension scheme is described in Note 10. The CEO is entitled to 12 months salary after termination or amendment of his position/employment. Other members of group management have a mutual notice period of up to six months and no special arrangements. EMPLOYEE SHARE OPTION SCHEME On April 25, 2013 the Annual General Meeting of Data Respons ASA approved a share option program for 6 employees in top management positions with a total scope of options. The options will be issued in 3 equal parts over a 3 year period. The share options can only be exercised in the 10 business days following the annual general meeting in 2016, alternatively in the 10 business days following May 1, 2016 if the annual general meeting in 2016 has not yet taken place on May 1. The strike price will be set at market price the start of each vesting period for the 1/3 issued. In May 2013 the strike price for the first vesting period was set to NOK In May 2014 and May 2015 the strike price for the second and third vesting period will be set. The first options will be issued in May The second options will be issued in May 2015, and the last options under this agreement will be issued in May 2016, totalling options. MOVEMENTS IN THE NUMBER OF OUTSTANDING SHARE OPTIONS AND THE ASSOCIATED WEIGHTED AVERAGE EXERCISE PRICES ARE AS FOLLOWS: NOK NOK 1000 Average Exercise price Options Average Exercise price Options Average Exercise price Options NOK NOK NOK As of January Granted Forfeited Exercised Expired As of December The fair value of the options granted to employees has been calculated using the Black & Scholes valuation model for options. The most important input data included the share price of NOK 7.00 when granted, estimated exercise price of NOK 6.92 for all 3 years, estimated volatility of % based on the share prices over a period of one year leading up to the issue date, risk-free interest rate of %, and a term of 1, 2 and 3 years, respectively. The cost is calculated based on the total of options to be issued and will be accrued over the vesting period with deductions for the estimated number of forfeited options. In accordance with IFRS 2, the fair value of options granted to employees is accrued over the vesting period and in 2013 a total of NOK 0.6 million was expensed related to options granted to the CEO and key employees, whereof NOK 0.3 million related to the scheme that expired in 2013 and NOK 0.3 million related to the scheme approved in The cost for the new scheme amounted to NOK per option. NOK 1000 REMUNERATION TO THE AUDITOR DATA RESPONS ASA NOK 1000 net of VAT Auditing services Other certification services Tax advice Other non-auditing services DATA RESPONS ASA ANNUAL REPORT

44 Notes Note NOTE 16 FINANCIAL ITEMS NOK 1000 DATA RESPONS ASA NOK financial income Interest received from group companies Interest income Other financial income Total other financial income financial expences Interest expenses Other financial expenses Total other financial expenses NOTE 17 CASH AND CASH EQUIVALENTS NOK 1000 DATA RESPONS ASA NOK Cash and bank deposits of which restricted Unrestricted cash and cash equivalents Unutilised overdraft facilities Unutilised other credit facilities Cash reserve The Data Respons group has established a corporate account system in which Data Respons ASA is the corporate account holder, while the other group companies are subaccount holders. The bank can set off any withdrawals or deposits against each other, so that the net position represents the balance between the bank and Data Respons ASA. As of December 31, 2013 there was a net positive balance in the corporate account system of NOK 26.0 million. The overdraft limit for the corporate cash pool system is NOK 40 million, and the group had unrestricted cash outside the cash pool of NOK 4.9 million. A total of NOK 70.9 million in cash and overdraft facilities was immediately available for the group as of December 31, The Data Respons group also has available unutilised NOK 40 million in credit facilities as of December 31, The NOK 40 million credit facility is available to the company until March 10, The total unutilised cash reserve for the group at December 31, 2013 is NOK million. Restricted cash consists of employee s tax deductions of NOK 4.8 million and SEK 9 million (NOK 8.5 million) on in a restricted account in connection with a capital increase in Data Respons AB that was carried out in The capital increase was registered in January 2014 and the cash is no longer restricted. There are financial covenants which may restrict the use of the credit facilities. The equity-to-asset ratio should be minimum 40 % for the group. As of December 31, 2013 the ratio was 61 %. Furthermore, there is a covenant requirement linked to EBITDA where the net interest bearing debt divided by a 12 months rolling consolidated EBITDA should not exceed 3.0. As of December 31, 2013 there was no net interest bearing debt. NOTE 18 OTHER OPERATING EXPENCES NOK 1000 DATA RESPONS ASA NOK Expenses related to premises and equipment External services Marketing expenses Other operating expenses Total DATA RESPONS ASA ANNUAL REPORT 2013

45 Notes Note 19 NOTE 19 FINANCIAL RISK MANAGEMENT The group s activities expose it to a variety of financial risks, including price risk, interest rate risk, currency risk, credit risk and liquidity risk. Overall these risks are regarded as low. Risk management is performed by the group s central finance department under the guidelines set out by the Board of Directors. The main principle is to minimise exposure to financial risk, and the group holds no financial assets or liabilities for speculative purposes. There have been no significant changes in the group s objectives, policies or processes for managing capital during the reporting period. MARKET PRICE RISK As of December 31, 2013 all significant financial assets and liabilities are classified as loans or receivables under IAS 39, and their value is not subject to any market price risk. CREDIT RISK The group s exposure to non-payment of contractual obligations is reflected by outstanding trade receivables and accrued revenue specified in Note 7. Identified default risks for individual customers are reflected in bad debt allowances. The group s customers largely consist of large and mediumsized companies with good solvency, and the customer base is diversified into different vertical market segment. Neither of the group s operating segments had any significant concentration of credit risk. Credit checks are performed on new customers. Historically, bad debt losses have been low, and the group does not expect to see any major increase in losses. LIQUIDITY RISK AND CAPITAL MANAGEMENT The primary objective of the group s capital management is to maintain a healthy capital ratio to support the group s continued operations, dividend payments according to the newly established dividend policy and for potential expansion. Dividend policy: - Data Respons objective is to pay out a minimum of 50 % of net income in the form of dividends. - The payout should reflect Data Respons aim to give its shareholders competitive returns benchmarked against alternative investments in comparable companies. - The dividend pertaining to a fiscal year will be declared at Data Respons annual general meeting in the following year. - Data Respons may consider buying back shares in addition to ordinary dividend payments. Such considerations will be made in the light of the financial situation of the company. The group will primarily finance dividends and potential expansions through cash generated by the operational activities. To cover temporary funding needs, the group has secured a credit facility of NOK 80 million. There are financial covenants which may restrict the use of the credit facilities, see Note 17 for specifications regarding cash and credit facilities. The group has days in credit terms from the main suppliers. Surplus cash holdings will be kept in interest-bearing bank accounts with reputable banks. As of December 31, 2013 the group has NOK 44.1 million in cash and no interest-bearing debt and consider the debt ratio as appropriate. CURRENCY RISK The group has operations in five different countries with five different currencies and is as such exposed to currency fluctuations when translating into the group currency NOK. Exposure from individual subsidiaries varies according to the nature of their business. The Services segment abroad generate a currency exposure for the group on the net profit only, as both revenue and expenses are in the same local currency. Hedging has been deemed unnecessary. For the Products & Solutions segment the exposure is higher, as parts are purchased from different suppliers across the globe and predominately invoiced in USD or EUR. With most of our major customers, the group has entered into an agreement whereby material fluctuations in price of components due to currency, lead to a corresponding adjustment of the selling price. The group then achieves a natural hedge on a significant part of its embedded products and solutions sales. In instances where it is not possible to enter such an agreement with the customer, currency hedges on large deliveries of components will be considered. INTEREST RATE RISK The group primarily finances its operations and acquisitions through equity and cash generated from operational activities, and has no investments in long-term interest-bearing financial assets or interest bearing debt. Consequently the exposure to interest rate fluctuation is low and hedging is deemed unnecessary. The following table demonstrates the sensitivity to a reasonably possible change in interest rates, with all other variables held constant: NOK 1000 Increase/ decrease in basic points Effect on profit before tax OIL PRICE RISK The oil services / maritime sector accounts for a substantial part of operating revenues in Norway. A substantial reduction in the oil price could result in lower demand in the Norwegian customer base. DATA RESPONS ASA ANNUAL REPORT

46 Notes Note NOTE 20 RESEARCH AND DEVELOPMENT The group does not have significant costs related to R&D activities, and no intangible assets have been recognized in the balance sheet related to R&D activities in NOTE 21 GOVERNMENT GRANTS Data Respons has two research projects that is approved as R&D projects covered by the SkatteFUNN scheme in accordance with Section of the Taxation Act. NOK has been recognised in the income statement as a reduction in payroll expenses and included in the balance sheet under other receivables. No other government grants have been awarded in NOTE 22 EVENTS AFTER THE BALANCE SHEET DATE There have been no material events subsequent to the reporting period that might have a significant effect on the financial statements for NOTE 23 FINANCIAL ASSETS AND LIABILITIES All significant financial assets are classified as loans and receivables and all significant financial liabilities are measured at amortised cost. The group does not hold significant financial assets or liabilities measured at fair value through profit or loss, held-to-maturity investments or available-for-sale financial assets. 46 DATA RESPONS ASA ANNUAL REPORT 2013

47 CHAPTER 3: FINANCIAL STATEMENTS AND NOTES Auditor s report AUDITOR S REPORT DATA RESPONS ASA ANNUAL REPORT