Annual Report.

Transcription

1 L Annual Report

2 Contents [ 3 ] The Managing Director speaks [ 4 ] Annual Report [ 8 ] Financial statement [ 10 ] Accounts [ 10 ] Income statement [ 11 ] Balance [ 13 ] Cash flow statement [ 14 ] Notes to consolidated financial statements [ 24 ] Auditor s report 2010 key figures HSE Lost time injury frequency per million workhours - LTIF 0,9 0,6 0,4 Total recordable injury frequency per million workhours - TRIF 2,7 3,1 1,7 Number of critical incidents Earning Return on total capital 9,1% 18,4% 12,9% Return on net capital 29,2% 57,3% 66,4% Solidity Own capital 34% 27% 22% Dept ratio 1,1 2,3 3,3 Liquidity Liquidity ratio 1 & 2 1,6 1,7 1,3 Lost time injury frequency LTIF (lost time injury frequency) shows the number of injuries with subsequent absence per 1 million hours. Total injury frequency TRIF (total recordable injury frequency) shows the number of treatment injuries per 1 million hours. Critical incidents frequency per 1 million hours. Return on total capital shows the company s profit on the total capital employed in the company. Return on net capital shows the profit on the owner s investment in the company. Own capital shows the own capital as % of total capital. Debt ratio shows the relationship between total debt and own capital. Liquidity ratio 1 shows the relationship between liquid assets and short-term debt. Liquidity ratio 2 shows the relationship between liquid assets, excluding stock, and short-term debt.

3 The Managing Director speaks Fabricom was in 2010 awarded several new contracts which are regarded very important in a long-term perspective. However, the company has also experienced the effects of the global finance crisis, which led to internal adjustments reflecting a reduced activity level compared with previous years. During 2010 Fabricom made a significant market breakthrough. Fabricom was during the summer awarded an M&M frame contract involving the Sleipner field by Statoil. Being awarded such an M&M contract was a strategic target for Fabricom, due to character of the work and the long term potential this contract provides (8 years incl. options). It provides an important arena for Fabricom to continuously improve our execution models to obtain more cost efficient maintenance and modifications which can be applied on the waste majority of the NCS offshore installations. During the Autumn Fabricom was, as one of three Norwegian contractors, awarded a frame agreement for Facilities Multidiscipline Engineering Studies by Statoil. This frame agreement applies for both on- and offshore work in Norway and internationally. In November Statoil awarded the Kvitebjørn Precompression contract, with an estimated value of approx billion kroner to BGR in cooperation Fabricom. The contract includes the full EPCIc responsibility for the modifications on the Kvitebjørn platform. The most challenging project events during 2010 were the Snorre Redevlopment and KEP2010 shutdown campaigns which took place in August and September. The Snorre and the KEP2010 shut-downs had collectively a peak manning level of approx. 400 persons. Both shut-down campaigns executed the planned work successfully and helped to consolidate Fabricom s position as a prudent provider of shut-down services. Fabricom s strong HSE record was further improved during The overall results were again regarded to be very good. In this respect we have received feedback from several clients that Fabricom still is considered to be among the top HSE performers within our business. The good results and the positive feedback shall however not be an excuse to reduce our HSE focus, but an inspiration to continue and intensify our efforts across our organization, as well as in the interactions with our suppliers and clients. Also in 2010 we experienced the negative effects of the global financial crisis where rather few project inquiries were introduced in our market place. Following some years with record high volume ( ) Fabricom had to adjust the company s cost structure. This restructuring work is scheduled to be completed within the 1. quarter of Fabricom annual report 3

4 Annual Report The Company s activities and locations Group Fabricom includes the parent company Fabricom AS and subsidiaries Fabricom PMAE AS, Fabricom Nord AS, Fabricom Vigor AS and VM Alliansen DA. The VM Alliansen DA does not employ any personnel. Fabricom (Company and Group) performs engineering, modification, maintenance and installation work for the oil and gas industry for both onshore and offshore plants and installations. Fabrication work is carried out at workshops in Dusavik, Stavanger and at Frakkagjerd outside Haugesund. The business is managed from the group s head office located in Stavanger, and the Company has in addition local branches and offices at Tysvær, in Trondheim, in Orkanger and in Hammerfest. All other subsidiaries are managed from the Stavanger head office. During the spring 2010 Vigor s fabrication workshop in Orkanger was shut down due to overcapacity. Fabricom (Company and Group) have 4 business areas (Maintenance & Modifications, Offshore Modifications, Onshore Contracts and Technology, Front End & Field Technology). Figure 1 shows the activity in these business areas for 2010 and % 36 % 4 % 52 % 3 % 43 % 12 % 19 % Figure 1: Activity in the business areas 2010 and Offshore Modification Onshore Technology & FEED M&M Offshore Modification Onshore Technology & FEED M&M As in 2009, 2010 was also a year with great uncertainty in the market. From the top year 2008 with a turnover of 1,6 billions, Fabricom s activity level has fallen to 1,1 billions in 2009 and 0,94 billions for In 2010 Fabricom (Company and Group) produced a total of hours compared to hours in In anticipation of contract awards during the year, the Company has had spare capacity for a few engineers (5 15 positions). In fourth quarter it was necessary to lay-off approximately 50 operators, and in January 2011 another 20 operators had to be laid-off. Lower activity has also resulted in a much lower proportion of contracted personnel during 2010, compared to 2008 and The number of permanent employees has remained stable in All Fabricom s 2010 activities took place in Norway or offshore on the Norwegian Continental Shelf (NCS). 32% were onshore projects and 68% were projects offshore on NCS. Equivalent numbers for 2009 were 36% onshore and 64% offshore. Main activities Fabricom (Company and Group) is undertaking total responsibility for engineering, planning, installation, fabrication and commissioning of projects for both offand onshore existing installations. In addition Fabricom (Company and Group) performs studies, FEED (Front End Engineering Design), detail engineering services and maintenance activities for the oil and gas industry in Norway. Fabricom (and Group) performs operations within 4 business areas: 1. Maintenance & Modification Maintenance & Modifications (Norwegian:-V&M) was established as a business area to provide our customers with delivery of M&M long term contracts. The GEM M&M contract for ConocoPhillips Norway was included in the contract portfolio. This contract originally expired on but the duration was extended to for smaller projects and closeout activities. In the first quarter of 2010 Fabricom was awarded a contract for time limited Modification capacity (TMV) for the installations on the Snorre and Statfjord platform. The value of this contract is estimated to between 100 and 200 million NOK over a 12 month period. Following the Fabricom strategic plan of 2009 and improvements to win new contracts Fabricom was 4 Fabricom Annual REPORT 2010

5 prequalified to compete for Statoil s frame agreements for M&M contracts on installations both on the Norwegian continental shelf and onshore. In July 2010 Fabricom was awarded frame agreement for Maintenance and Modifications (M&M) for the Sleipner field. The agreement has duration of 4 years, and Statoil has an option to extend the agreement for two (2) periods of two (2) years. The agreement includes studies, detailed engineering, fabrication and installation, and may include projects up to 150 million NOK. Based on the estimated hours Fabricom expect that approximately 230 persons will be engaged in work under this agreement. Expected value of the assignments is estimated to approximately 500 million NOK distributed over four years. Work will be performed both in Fabricom s offices in Stavanger, Fabricom s fabrication yard in Dusavik, as well as on the Sleipner offshore installations. The results of the M&M activities are so far good, and the future looks promising. 2. Offshore Modifications Stand-alone modification projects on offshore installations are carried out by Offshore Modifications. During 2010 two large projects were ongoing within this business area, Valhall Redevelopment and Snorre Redevelopment. On the Valhall Redevelopment project Fabricom was subcontractor to Wood Group with responsibility for project activities related to the existing Valhall platforms. The project will be completed in The Snorre Redevelopment for Statoil, is an EPCIs contract for upgrading of both Snorre A and Snorre B platforms. At the end of 2010 the project was approximately 93% completed, and is scheduled to be closed out during Fabricom was during August and September 2010 performing a nearly mh shutdown at Snorre A, a major achievement with satisfactory result. In fourth quarter Fabricom was awarded Kvitebjørn Pre-Compression project from Statoil in cooperation with Bergen Group Rosenberg. This is a very important contract for Fabricom and work will continue until the second quarter of Expected contract value will be approximately 600 million NOK. 3. Onshore contracts The KEP 2010 project has had significant activity in 2010 with the installation and hook up of modules and prefabricated delivered from Belgium. 250 people have at peak been involved in the project. The project was completed in The Client, Statoil and Gassco, have been satisfied with the result for the work performed. development studies and studies for onshore plants, and also to be a contributor of technology development within our core business areas. This organisation comprises a group of highly qualified Senior Engineers with a defined responsibilities area as contract leaders for dedicated studies. These Contract Leaders will provide continuity to our Clients, ensuring that ongoing assignments are properly manned and that best practice, knowledge and experience are incorporated and used efficiently. During 2010 Fabricom signed frame agreements for multidiscipline studies with Statoil, GDF Suez and Noreco, and supplies the following projects for this business area: Concept study for Veslefrikk Drilling Upgrade with KCAD/RDS Concept and FEED studies for Helihangar, Statfjord B, Statoil Technical engineering support to Talisman for the YME field development project Technical engineering support on smaller assignments for Noreco, BG Norge, GDF Suez E&P Norge, Marathon, ConocoPhillips and Statoil In addition Fabricom has established strategic cooperation arrangements with several specialized engineering companies to offer a broader competence range to our clients. Our competence range now covers all areas of relevance to a field development study and all relevant competence areas for studies on upstream onshore facilities. The subsidiaries Fabricom PMAE AS and Fabricom Nord AS are part of the legal structure of the Group, but do not represent separate business areas. Ownership Fabricom AS (Company and Group) is owned 100 % by the Dutch holding company Fabricom Nederland B.V. This company is a part of the Belgium Group Fabricom which in turn is owned by the French multinational industrial enterprise GDF Suez. GDF Suez has a total of employees world-wide, and the company delivers solutions globally within the areas of oil and gas production, energy distribution, water and waste management. The owner s aim is to take advantage of synergy effects in the GDF Suez through international co-operation and sharing of experience. The groups total resources, competence and products are therefore available to Fabricom (Company and Group) to facilitate growth and development in the Norwegian market. 4. Technology, Front-end & Field Development All Fabricom deliveries for early phase studies are undertaken by the business area Technology, Front End & Field Development. The goal of this group is to increase the focus on Engineering services for front end studies, field 2010 Fabricom annual report 5

6 Fabricom (Company and Group) in Norway is part of the Group s international division, Fabricom Oil, Gas & Power, performing work together with: Fabricom Oil and Gas (Holland) which specializes in both on-and offshore drilling and modification work Fabricom Contracting Ltd. (UK) which specialises in onshore refinery and petrochemical works as well as module fabrication Fabricom Offshore Services LTD (FEED studies and engineering for the oil and gas industry) Fabricom in Belgium which specialises in piping fabrication, prefabrication of modules and installation work Fabricom Netherland which specialises in providing services and maintenance to the oil and gas industry ,6 12,2 4, Medical treatment injuries per 1 mill. work hours Lost time injuries per per 1 mill. work hours Total injuries per 1 mill. work hours 9,7 8,9 5,5 4,4 6,9 3,4 3,1 2,7 2,8 1,7 7,9 3,5 3,4 5,5 2,5 1,8 1,0 0,9 0,0 0,0 1,3 0,4 0,6 0, Figure 2: Development of injury frequency in Fabricom the last 9 years. Synergies between the companies in this division ensure transfer of international competence and experience for the benefit of our clients in the oil and gas industry both onshore and offshore. Continued activity Continued activity is assumed for Fabricom (Company and Group) and the financial statements for 2010 have been prepared based upon this assumption. The Board confirms that the financial statements give a true picture of properties, debts, financial position and results. Safety and working environment In 2006 Fabricom became an IA company (Inkluderende Arbeidsliv). The Company works actively to ensure low absence due to sickness, and the IA agreement is a part of this strategy. In 2010, total sickness absence in Fabricom (Company and Group) was 4.4% (compared to 6.1% in 2009). This means that sick leave has been reduced by more than ¼ compared to The reduction in sickness absence is very satisfactory. Contributing causes may be good sickness prevention and monitoring, as well as good working environment in Fabricom. Fabricom (Company and Group) has a target of zero injuries to people and the environment. The frequency target for number of LTI s (Lost Working Time Injuries) follows the primary target, and therefore the company s target is to avoid all incidents that can lead to injuries to people. During 2010 one LTI and two medical treatment injuries were registered. At the end of the year the LTIF (Lost Work Time Frequency) was 2,7 per million work hours. The result of TRIF is a reduction of 15% compared to last year, and the second best result ever for Fabricom. Fabricom s (Company and Group) Management are aware of the potential safety risks associated with our activities. Therefore we will continue to increase our efforts to develop safe working methods, to invest in new and improved equipment and, not least, to continue to influence attitudes and behaviour promoting HSE in our Company culture. External environment The activities of Fabricom (Company and Group) involve only a few minor environmental pollution risks due to the nature of the work and services. However the policy of Fabricom (Company and Group) in this area is that no pollution is insignificant, and we have therefore developed an external environmental control system, which is now documented, implemented, certified and followed in accordance with ISO This means that Fabricom is conscious of waste handling and the use of raw materials and non-regenerative natural resources. Our environmental control system covers engineering, fabrication, installation and commissioning, and enables us to undertake all phases of project execution in accordance with international environmental requirements. During the year external audits of the system were performed. Measurement indicator for external environment was in 2010 set to a sorting rate of waste of 85% for our prefabrication yards in Dusavik and Vimek. Result was respectively 82% and 87%. This is a clear improvement from 2009 where Dusavik and Vimek sorted respectively 76% and 82% of the waste. 6 Fabricom Annual REPORT 2010

7 As a part of GDF Suez, Fabricom (Company and Group) has an extensive reporting duty within the Group within the environment area, as well as to customers and regulatory authorities. In general, preventive action is prioritized in all our activities to avoid and reduce pollution of earth, air and water. Gender equality Fabricom (Company and Group) has a personnel policy that is inclusive. This is amongst other visible in the work the Equal Opportunities committee performs. Fabricom s remuneration policy is built on the principle of equal pay for equal work, and is gender neutral. The remuneration level is grounded in the current agreements between the various unions and the Company. Fabricom (Company and Group) has prepared an action plan with the intent to promote equality in the different departments. The action plan for 2010 has contributed to specify areas for improvement, which also will apply and get the focus in % of executive positions were filled by females at the end of 2010, compared to 19.3% in Women in leadership positions are 18.5% against 16.1% in At the end of the year, there were no women represented in the Company s group of directors. There are twelve (12) women in senior positions with manager responsibility in the Company. There is one (1) woman represented as employee representative in the Board. One (1) woman is on the GDF Suez (Paris) Group equality committee. In Fabricom s action plan one of the points is to increase the number of women in the various departments where this may be appropriate. Equal Opportunities Committee has considered one case in 2010 that are not yet finalized. Fabricom has continued the 4YOU - the good working environment - campaign for all our employees. The campaign will help to develop and maintain a good working environment. The Company has zero tolerance for bullying and harassment of our colleagues. Life phase policy Fabricom (Company and Group) aims to ensure that the employee shall remain present in the Company throughout his/her career until retirement. One of the means for accomplishing this is an active IA policy, where the employee receives the necessary supervision and facilitation. This implies working time, work tasks and physical adaption. Senior Policy Fabricom (Company and Group) considers the senior staff (58 years +) as particularly valuable for the Company from their long experience and expertise. It is therefore important that these persons receives working tasks and challenges that are stimulating, so they are motivated and want to continue his/her career for many years. To motivate the individual to remain in employment for as long as possible, Fabricom has established a Senior Club where members meet for different activities and information. Furthermore, the seniors will through established procedures as appraisal interviews and special interview forms, be able to communicate their wishes and needs. If Fabricom has the opportunity to implement the required adaptations, this is done. As of December 31st 2010 Fabricom had about 100 employees over 58 years. Child care leave Fabricom (Company and Group) encourages its male employees to participate in child care, and take paid child care leave in excess of the minimum legal requirement. Fabricom achieves this by adapting and dividing work tasks in consultation with department leaders and the individual employee. Child care leave will not be an obstacle to career or salary development. Fabricom has adapted for flexible and individual solutions for the withdrawal of breast-feed with pay. Cultural, religious and ethnic arrangements Fabricom (Company and Group) has a personnel policy that is inclusive for people with ethnic background other than Norwegian, and has established human resources policies to achieve this. The Company has 108 employees (16%) with non- Norwegian ethnic backgrounds, representing 30 different nations. Fabricom has in addition made use of hired labor from many nations. Integration of foreign cultures has been a challenge, but an informative and positive process for the Company and its employees. Fabricom has in 2010 assisted with the support of Norwegian courses for several of our foreign collaborators. Fabricom is a sponsor for the NHO Project Global Future. Global Future aim to mobilize and integrate people with high academic and non-norwegian, multicultural backgrounds to leadership positions in corporations. Financial Statements In the opinion of the Board of Directors, the profit and loss account and balance sheet with notes give adequate information concerning the financial standing of Fabricom (Company and Group) at the year-end. After finalisation of the accounts, no events have occurred that materially effects the evaluation of the Company or Group s result. Concerning allocation and price development for the products included in the Group activities, the Board does not know of any matter that affects the evaluation of the Group throughout the financial statement Fabricom annual report 7

8 Fabricom AS financial statements for 2010 are finalised showing a profit of NOK The Board of Directors propose the following application of the year s result: Reserve for valuation variants Dividends Other equity Total accounting cost and risk due to changes in exchange rates. Since its establishment in Norway in 1992, Fabricom (Company and Group) has delivered positive results. The Group s substantial equity and solidity contribute to increased confidence and strengthened freedom of action. See figure 3. The Company s free equity ia NOK after payment of the proposed annual dividend. Financial Statements Turnover Result of operation During 2010 Fabricom went through the closing of some projects that had been entered into during market regime. At the same time the finance crises introduced significantly stronger competition and new contract regimes. The new M&M frame agreements developed also slower than planned. In total this made 2010 into a challenging year wrt the financial results. But at the same time the basis was established for the expected oil and gas investment phase. Profit and loss Figure 3: Fabricom turnover and operating result last 9 years During the year Fabricom was awarded new studies, TVM Future Prospects and SVM contracts with Statoil, and Kvitebjørn contract The macroeconomic assumptions is underlying for the with Statoil in cooperation with Bergen Group Rosenberg. growth of our business areas. The operators on the The Company delivered in 2010 a positive result with an Norwegian continental shelf have indicated an increase operating profit margin of 2.9% for Company and Group. in investment and maintenance budgets from Several major contracts will be awarded in 2011, and New technology, new operating methods, utilization of Fabricom expect that the backlog will improve throughout existing infrastructure, combined with increased oil prices the year. Ongoing and planned improvement projects in and stricter safety requirements, have contributed to an both the systems and processes, will make Fabricom at a extensive need for maintenance and upgrades of existing competitive player in the years ahead. platforms and facilities in connection with the Norwegian oil and gas operations. Fabricom (Company and Group) has in Balance Sheet Liquidity this area for many years documented the ability to find good Fabricom AS has accumulated a solid equity base solutions, and execute complicated deliveries. amounting to 43% of the total balance. Group Fabricom It is our primary goal to strengthen Fabricom s Norway has also accumulated a solid equity base positions in the Norwegian oil and gas market, so that amounting to 34% of the total group balance. Most of the we are considered as a preferred supplier by our Clients, liquid assets are placed on short term deposits in bank. we secure attractive jobs for our employees and deliver Fabricom (Company and Group) has earned an average of satisfactory profit for our owners. 1,5% interest on these arrangements. The Norwegian modification market is a typical Neither the Company nor Group have long-term debts. niche market. Clients in this market demand and expect The liquidity balance in the Company and Group is knowledge and experience from work on onshore and at year end weakened compared to Liquidity from offshore installations, geographical proximity to their own operations is negative both for Company and Group. organisation and flexibility. This makes maintenance- Throughout the year an insignificant number of currency and modifications projects on the Norwegian continental transactions/foreign exchange trades have taken place. shelf especially suitable for Fabricom s engineering and Consequently there has been no significant impact on production environment. Fabricom (Company and Group) Fabricom Annual REPORT 2010

9 will also here actively seek to utilize the experience and expertise that the group s international businesses possess, amongst others within technical service, cleaning / environmental engineering, gas processing, etc. in development of its position on the Norwegian continental shelf and in the North Sea in general. Even though the market prognosis for Fabricom s business areas is showing a positive improvement, there will be strong competition for new contracts. It has recently become apparent that some competing companies will increasingly execute engineering and prefabrication delivery in low-cost countries. This applies for both engineering- and fabrication work. There is also an increasing use of foreign manpower in connection with assignments undertaken for the shipping industry and onshore installation assignments. This development is expected to continue, making it necessary for Fabricom to continue to develop new competitive solutions for delivery. In 2010 Fabricom carried out a significant improvement program that will continue into 2011 with unaltered strength. Besides improving our tools, methods and systems to meet the specific needs of the individual business areas, Fabricom will also continue actively to further develop the competence skills in our own organisation. To realise the defined goals to develop the Company s business, we plan a considerable amount of recruitment. The Company will also consider new acquisitions of companies operating within our business area. It is our primary goal to strengthen Fabricom s position in the Norwegian oil and gas market, so that we are considered as a preferred supplier by our Clients, we secure attractive jobs for our employees and deliver satisfactory profit for our owners Fabricom annual report 9

10 Fabricom accounts 2010 Income statement Note Operating income and operating expenses Revenue 3, Total operating income Raw materials and consumables used Payroll expenses Share of result subsidiaries Depreciation of fixed assets and intangible assets Other operating expenses 12, Total operating expenses Result of operations Financial income and financial expenses Other interest received Other financial income Other interest expenses Other financial expenses Result of financial income and expenses Operating result before tax Tax on ordinary result Operating result Result for the year Minority interests Majority interests Transfers: Reserve for valuation variants Dividends Other equity Total transfers Fabricom Annual REPORT 2010

11 Fabricom accounts 2010 Balance sheet Note ASSETS Fixed assets Intangible fixed assets Goodwill Total intangible assets 0 0 Tangible fixed assets Land, buildings and other property Fixtures and fittings, tools, office machinery etc Total tangible assets Financial fixed assets Investment in stocks and shares Investment in subsidiaries Total financial fixed assets Total assets Current assets Debtors Trade debtors 5, Other debtors Total debtors Marked funds investment Bank deposits, cash in hand etc Total current assets TOTAL ASSETS Fabricom annual report 11

12 Fabricom accounts 2010 Balance sheet Note EQUITY AND LIABILITIES Equity Paid in-capital Share capital a NOK 7, Total paid-in capital Retained earnings 0 0 Reserves for valuation variances Other equity Total retained earnings Minority interests Total equity Liabilities Provisions for liabilities 0 0 Investment in subsidiaries Deferred latent tax liabilities Pension liabilities Total provisions Current liabilities Trade creditors Tax payable Public duties payable Dividends Other short-term liabilities 4,5, Total current liabilities Total liabilities TOTAL EQUITY AND LIABILITIES

13 Fabricom accounts 2010 Cash flow statement Note Cash flow from operating activities Net profit before taxation Income tax paid Profit/loss on sale of fixed assets Depreciation Change of work in progress/contribution split Change in accounts receivable Change in accounts payable Change in short term receivable/current liabilities Net cash from operating activities Cash flow from investing activities 0 0 Proceeds from sale of fixed assets Purchase of fixed assets Net cash used in investing activities Cash flow from financing activities 0 0 Change in long term borrowings Repayment of existing debts Investments in share in Vigor Industries and Orkla Engineering Payments of minority interest Investments in marked funds Dividends paid Net cash used in financing activities Net change in cash and cash equivalents Cash and cash equivalents per Cash and cash equivalents per Fabricom annual report 13

14 Notes to the consolidated financial statements 2010 Notes to consolidated financial statements NOTE 1 ACCOUNTING PRINCIPLES The accounts for Fabricom AS and the consolidated Group accounts are prepared in accordance with the Norwegian Accounting Act of 1998 and generally accepted accounting practices. Accounting principles are described below. Consolidation principles The consolidated accounts include Fabricom AS and subsidiary companies in which Fabricom AS has a direct controlling influence in fact and in law. The consolidated accounts is prepared with equal accounting principles for similar transactions in all companies.the companies internal sales and internal accounts are eliminated in the consolidated accounts. Shares and interests in associated companies in the consolidated accounts are eliminated according to the acquisition method. This implies that assets and liabilities in the acquired company valuates to actual value at the time of acquistion, and a possible excess price clasifies as goodwill Principle rules for evaluation and classification of assets and liabilities Assets intended for permanent possession are classified as fixed assets. Other assets are classified as current assets. Outstanding claims due within one year are classified as current assets. Classification of short-term debt and long term debt are based on the same evaluation. Fixed assets are valued at acquisition cost, but are written-down to real value when the loss in value is considered to be permanent. Fixed assets with limited economic life are written-down according to plan. A few balance sheet items are evaluated according to other principles as explained below. Goodwill Capitalized goodwill in connection with the acquisition of other businesses is determined by the part of the purchase price beyond the value of individual assets at the acquisition date. Goodwill is posted at historical cost price and is depreciated over the first five accounting years in equal amounts. Actual value goodwill is evaluated against written-down value at year end for a possible write-down of booked value. Shares and interests in associated companies Investments in associated companies and subsidiaries are valued according to the equity method. Investments in shares are valued at cost. Trade debtors and other debtors Trade debtors and other debtors are valued at face value. In addition there is an appropriation for unsecured debtors. Projects / Work in progress Projects / work in progress are valued at direct cost for materials and wages, including social cost with the addition of indirect cost based on budgeted administration cost. The company therefore allocates cost on an as-incurred basis. Profit are included on projects where there are reliable estimates of outcome. Percentage of completion is based on incurred MHRS in percentage of total estimated MHRS. Profit is taken on large project when percentage of completion is above 20 %. In addition a security margin from 2 % to 5 % is calculated before any result is taken into account. Any losses are taken into account as soon as they are identified. The net value of work in progress/advance invoicing of production is posted in the balance sheet by deducting advance payments from customers from the project value. Work on account is valued at sales value at Taxes Tax cost is placed together with the accounting result before tax. Tax cost consists of payable taxes for the year (tax on this years taxable result) and changes in net deferred taxes. The tax cost is divided between ordinary result and extraordinary result according to taxable basis. Deferred tax liabilities and deferred tax assets are shown as net items in the balance sheet. Pension liabilities AFP The company participates in the arrangement for negotiated pension between the trade unions (LO) and the employers association (NHO), AFP arrangement. The Company has recorded calculated pension liability included payroll tax in the balance sheet. For further information see note 13. Group pension liabilities The company has a contribution pension plan which complies with compulsory occupational pension. For further information see note 13. Expenses related to contribution pension plan is charged according to received invoices from insurance company. Foreign currency The company calculates foreign currency at the exchange rate on the accounting date. Gains and losses on foreign currency exchange are classified as financial transactions. Estimates The compilation of the result assume that the company use estimate and assumption which affects the result and the valuation of assets, liabilities and commitments on the balance date. These are settled to best estimate based on the information on the balance date according to generally accepted accounting principles. Actual figures can deviate from estimates. 14 Fabricom Annual REPORT 2010

15 Notes to the consolidated financial statements 2010 NOTE 2 INTANGIBLE ASSETS AND FIXED ASSETS Land Buildings Machinery/ Total Fixtures Purchase cost Increase Decrease Purchase cost Accumulated ordinary depreciation Book value Ordinary depreciation for the year Ordinary depreciation rate in % Economic life ~ 20 years 5-7 years Depreciation is linear over the technical/financial lifetime. Goodwill Land Buildings Machinery/ Total Fixtures Purchase cost Increase Decrease Purchase cost Accumulated ordinary depreciation Book value Ordinary depreciation for the year Ordinary depreciation rate in % Economic life 5 years ~ 20 years 5-7 years Depreciation is linear over the technical/financial lifetime. Goodwill of NOK is regarding acquisition of shares in Vigor Industries and Orkla Engineering in January Fabricom annual report 15

16 Notes to the consolidated financial statements 2010 NOTE 3 SUBSIDIARIES COMPANY S INCLUDED IN THE ACCOUNTS OF Company Registered office Share ownership Voting rights VM Alliansen DA Stavanger 66,67 % 66,67 % Fabricom PMAE AS Stavanger 100,00 % 100,00 % Fabricom Nord AS Stavanger 100,00 % 100,00 % Fabricom Vigor AS Orkanger 100,00 % 100,00 % Share Equity Result Company Time of Registered ownership/ capital for the year Book value purchase office voting rights (100 %) (100 %) VM Alliansen DA 2001 Stavanger 66,67 % Fabricom Nord AS Stavanger 100,00 % Fabricom Vigor AS Orkanger 100,00 % Fabricom PMAE Stavanger 100,00 % Total investments in subsidiaries The companies are valued according to the equity method, see table below: VM Alliansen Fabricom Fabricom Fabricom DA PMAE AS Nord AS Vigor AS Acquisition cost Equity value at date of acquisition Opening balance Received payments Share of year result Depreciation of excess value Group contribution Closing Balance Excess value Profit from associated companies are included in the companies revenue, see note 10. Result from Fabricom PMAE AS, Fabricom Nord AS, Fabricom Vigor AS are shown in separate line in the income statement. Fabricom AS guarantee for the operation in the companies Fabricom PMAE AS and Fabricom Nord AS. Accumulated negative equity is shown under provision for liabilities in the balance sheet. 16 Fabricom Annual REPORT 2010

17 Notes to the consolidated financial statements 2010 NOTE 4 WORK IN PROGRESS Balance value per is as follows: Change Invoiced for ongoing projects 0 0 Booked cost ongoing projects 0 0 Net inventory value of work in progress per Net inventory value of work in progress per is included in other short-term liabilities in the balance sheet. The note information is identical to information given under Fabricom AS. NOTE 5 ACCOUNTS WITH COMPANIES IN THE SAME CORPORATION/ASSOCIATES Trade debtors: 24 0 Account receivable within the group Account receivable subsidiaries Other debtors subsidiaries Liabilities: Account payable within the group Account payable subsidiaries Other short-term liabilities within the group Other short-term liabilities subsidiaries NOTE 6 CASH, BANK, ETC. The bank and cash balance is NOK Of which NOK are tied-up funds for payment of taxes. The bank and cash balance is NOK Of which NOK are tied-up funds for payment of taxes Fabricom annual report 17

18 Notes to the consolidated financial statements 2010 NOTE 7 EQUITY CAPITAL Reserve for Share valuation Other equity Capital variants capital Total Equity capital Profit of the year Correction Fabricom Nord Proposed dividend Equity capital Equity capital Profit of the year Correction Proposed dividend Equity capital NOTE 8 NUMBERS OF SHARES AND SHAREHOLDERS The company s shareholder and title Number Percentage ownership Fabricom Nederland B.V % Numbers of shares and face value are specified in the balance sheet. There are no classes of shares in the company. Note information is identical to information given under Fabricom AS. NOTE 9 TAXES Temporary differences in connection with: Current assets/liabilities Fixed assets Pension liabilities Other temporary differences Carryforward Total temporary differences Deferred tax (+)/tax advantage (-), 28 % Fabricom Annual REPORT 2010

19 Notes to the consolidated financial statements 2010 Cont. note Specification of the difference between accounting profits before tax and taxable income for the year Accounting profit before tax /- Reversal result from subsidiaries /- Change in temporary differences Difference in accounting and taxable value profit from associates Depreciation of excess value Permanent differences = Tax basis Taxable income Taxes payable for the year Group contribution given Remaining payable tax previous years Tax payable in the balance Tax cost in the profit and loss account Taxes payable on taxable income for the year Change in deferred tax Correction tax payables Total tax expenses NOTE 10 SALES REVENUE The company s business is engineering, mechanical construction and associated technical services. The work is done in part in its own fabrication plant and in part at the customers construction sites. The main employment area in 2010 has been Rogaland and the Norwegian continental shelf. The company s turnover is mainly from EPCI(C) contracts (engineering, procurement, construction and installation) where there is no accurate allocation of the turnover among the area of operations. Allocation of turnover is therefore based on estimate and do not necessarily represent the actual value added within the individual area of operations. Sales revenue distributed on type of business and geographical location: Studies & Technology M&M projects Onshore pro jects Offshore modification Result from associates Total sales revenue Fabricom annual report 19

20 Notes to the consolidated financial statements 2010 NOTE 11 FINANCIAL MARKET RISK The company s financial market risk is limited. The currency exchange risk is connected to foreign suppliers of services and is limited in extent and maturity. The credit and liquidity risk is regarded as negligible. Note information is identical to information given under Fabricom AS. NOTE 12 PAYROLL COST Payroll cost consist of the following items: Salaries Social security contribution Pension cost, see note Other personnel cost Total payroll cost Average number of employees Remuneration Managing Director Board of Directors Payroll Other remuneration 159 Payroll cost Managing Director is booked in subsidiary; Fabricom PMAE AS. Auditor Auditor fee booked as cost is NOK 515 of which NOK 105 is related to audit of subsidiaries. There has been no invoice for other services during the year. Loans None of the company s employees have loans from the company. Guarantees for loans to employees have been made within the limit for NOK Fabricom Annual REPORT 2010

21 Notes to the consolidated financial statements 2010 NOTE 13 COSTS, OBLIGATIONS AND FUNDS RELATING TO PENSIONS Pension liabilities AFP The company has pension agreement (AFP) for its employees in accordance with LO/NHO arrangement from 62 year to 67 year. As of the arrangement includes 22 persons in Fabricom AS and 32 persons in Group Fabricom Norway. Calculated pension liability including payroll tax is included in the balance. Group pension liabilities Fabricom AS and subsidiaries Fabricom PMAE AS, Fabricom Nord AS and Fabricom Vigor AS are obliged according to law to have a occupational pension (OTP). Pension agreement for the company and Group comply with this law AFP pension Current service cost Interest cost Benefits paid Liability (gain) / loss (+) Payroll tax Undercovered AFP obligation, incl payroll tax This year net pension cost AFP AFP pension Present value of Defined Benefit Obligations, end of year Net pension liabilities Payroll tax, 14,1 % of future pension liabilities Net pension liability including payroll tax Pension Net AFP pension cost this year Net group pension cost, defined benefit Accrued OTP expenses Total pension cost profit and loss account Pension liabilities AFP Group pension scheme Undercovered AFP obligation, incl payroll tax Total pension liabilities in the balance Economic assumptions: Discount rate 3,20 % 4,00 % Salary increase 4,00 % 4,25 % Long term inflation 2,75 % 2,75 % Social security escalation rate 3,75 % 4,00 % Pension increase 3,75 % 4,00 % Local tax rate 14,10 % 14,10 % Demographic assumptions: Turnover; withdrawal decrements before 45 years old 2,00 % 2,00 % Turnover; withdrawal decrements after 45 years old 2,00 % 2,00 % Preretirement rate at age 62 50,00 % 50,00 % Disability decrements IR % IR % Ordinary mortality (spouse) K2005 K2005 Retiree mortality K2005 K2005 As actuarial assumptions for demographic factors and departures are use of normal assumptions within insurance the basis Fabricom annual report 21

22 Notes to the consolidated financial statements 2010 NOTE 14 RAW MATERIALS AND CONSUMABLES Raw materials and consumables Subcontractors Total raw materials and consumables NOTE 15 MORTGAGES Amount of company s booked debt secured by mortgage 0 0 Booked value of assets used as security for overdraft facility and guarantee liability, NOK 89 million in Account receivable Total mortgages Furthermore, guarantees have been made for fulfilment of smaller leasing contracts regarding cars and other equipment. NOTE 16 SECURITIES AND GUARANTEES Guarantee liabilities The company has made guarantees to customers for a total of 89 million NOK (through Atradius) as security for correct execution of contracts. In addition see note 15. The company has a surety up to NOK towards Atradius to cover for contract guarantees Atradius furnish towards VM Alliansen DA. The company has given a guarantee for operations and liabilities in the subsidiaries Fabricom PMAE AS and Fabricom Nord AS. These companies exist solely to trade internally with Fabricom AS and will not appear as separate business areas. 22 Fabricom Annual REPORT 2010

23 Notes to the consolidated financial statements 2010 NOTE 17 LEASING AGREEMENT All number in 000 Type of leasing Yearly leasing cost Start of lease Duration Lease of office accommodation Hodnegården Stavanger Lease of office accommodation Møkster Stavanger Lease of office accommodation Åsen Stavanger Lease of office accommodation Åsen Stavanger Lease of workshop Dusavik Stavanger Lease of workshop Dusavik Stavanger Lease of warehouse Dusavik Stavanger All number in 000 Type of leasing Yearly leasing cost Start of lease Duration Lease of office accommodation Hodnegården Stavanger Lease of office accommodation Møkster Stavanger Lease of office accommodation Åsen Stavanger Lease of workshop Dusavik Stavanger Lease of workshop Dusavik Stavanger Lease of warehouse Dusavik Stavanger Lease of office accommodation Orkanger Lease of workshop Orkanger Fabricom annual report 23

24 Auditor s report 24 Fabricom Annual REPORT 2010

25 2010 Fabricom annual report 25

26 Core business Fabricom work to increase safety, production and profitability! Fabricom is a total supplier of onshore and offshore related maintenance and modification projects. The company holds high competence within project management, engineering, fabrication and construction. Fabricom's deliverables leads to increased productivity, profitability and safety. Fabricom is experiencing growth and has a clear vision to be a preferred supplier of technological products, services and solutions in the Norwegian oil & gas industry. 26 Fabricom Annual REPORT 2010