Annual Report 2009 Brødrene A & O Johansen A/S

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1 20 09 Annual Report 2009 Brødrene A & O Johansen A/S

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5 CONTENTS Page FIVE-YEAR SUMMARY 6 SUMMARY 8 MANAGEMENT S REVIEW 8 AO s business foundation 8 Vision and strategy 8 Activities of the year 10 Financial review 12 Outlook 12 Special risks 14 Corporate governance 14 Social responsibility 14 Environmental issues 16 Shareholder information 16 STATEMENT BY THE SUPERVISORY BOARD AND EXECUTIVE BOARD 20 INDEPENDENT AUDITOR S REPORT 22 ACCOUNTING POLICIES 23 STATEMENT OF COMPREHENSIVE INCOME FOR 1 JANUARY 31 DECEMBER 29 BALANCE SHEET 30 STATEMENT OF CHANGES IN EQUITY 33 CONSOLIDATED CASH FLOW STATEMENT 34 PARENT COMPANY CASH FLOW STATEMENT 35 NOTES TO THE FINANCIAL STATEMENTS 36 COMPANY INFORMATION 61 AO OUTLETS AND OFFICES 62 INFORMATION ABOUT THE SUPERVISORY BOARD S MANAGERIAL POSTS 64 This financial statement is available in Danish and English. In case of doubt, the Danish version shall apply.

6 FIVE-YEAR SUMMARY Key figures (in DKK million) Income statement adjusted Revenue 2, , , , ,991.1 Gross profit Costs (514.1) (607.7) (726.2) (736.9) (577.5) Operating profit or loss Financials, net (9.3) (8.6) (21.1) (31.7) (20.2) Pre-tax profit or loss (15.9) 3.8 Tax on net profit or loss for the year (25.5) (34.0) (13.2) 1.2 (1.1) Net profit or loss for the year (14.7) 2.7 Total assets 1, , , , ,406.8 Investments in plant, property and equipment Share capital Equity Number of employees , Financial ratios Gross profit in % Profit margin Return on investment Return on equity (2.5) 0.5 Solvency ratio * Book value 891 1,024 1,059 1,007 1,019 Share price at the end of the year 1,200 1,624 2, Price Earnings Basic (P/E Basic) (13.0) Dividend per DKK 100 share Earnings per share (EPS Basic) (26) 5 Diluted earnings per share (EPS-D) (26) 5 Basic EPS and diluted EPS have been calculated in accordance with IAS 33 (Note 15). Other financial ratios have been calculated in accordance with the Danish Society of Financial Analysts Recommendations & Financial Ratios * The solvency ratio for 2008 has been calculated on the basis that the proceeds from a lease concluded in December 2008 have been paid and used to reduce bank loans. 6 ANNUAL REPORT 2009

7 If you don t know where you re going, it doesn t matter which way you go. That is why we have implemented action plans in all divisions so everyone knows which way we are heading Morten Chrone, Chief Commercial Officer ANNUAL REPORT

8 SUMMARY AO s revenue in 2009 fell to a total of DKK 1,991.1 million compared with DKK 2,724.0 million in 2008, primarily on account of the financial and socio-economic crisis that hit the building industry particularly hard. In 2009, the pre-tax profit or loss amounted to a profit of DKK 3.8 million. In 2008, the Group incurred a total loss of DKK 15.9 million. In 2009, cash flow from operating activities amounted to a positive DKK million against DKK 71.5 million in The profit or loss after tax amounted to a profit totalling DKK 2.7 million against a loss totalling DKK 14.7 million the year before. The Supervisory Board proposes that no dividend be distributed for The crisis that hit the building industry particularly hard continues to make it difficult to predict the future. Accordingly, management does not consider it relevant to announce earnings expectations for Management expects the result before tax to be positive. MANAGEMENT S REVIEW AO S BUSINESS FOUNDATION Brødrene A & O Johansen A/S was established in 1914 and listed on the Copenhagen Stock Exchange in The Group trades in a broad range of technical installation materials and targets the following markets: The professional market (the PROF market). The do-it-yourself market (the DIY market). The Group has more than 18,000 customers who are offered a stock of approximately 60,000 different items. The Group s customers are serviced by a central warehouse in Albertslund and a logistics centre in Horsens, 47 outlets in Denmark, five in Sweden, and one in Estonia. The customer structure in the professional market is significantly fragmented whereas the DIY market is characterised by relatively few, large customers. AO operates in a market with a few, large providers and is active in Denmark, Sweden and Estonia. In 2009, international revenue constituted less than 10% of the Group s total revenue. On average, the AO Group had 747 employees in 2009 against 950 the year before. By the end of 2007, the Group had a total of 1,035 employees compared with 703 at the end of THE PROFESSIONAL MARKET The professional market for technical installation materials comprises heating, plumbing and sanitaty ware products, electrical, water and drainage products as well as tools. The product range represents 45-50% of the cost of new building and the percentage is increasing. The above-mentioned market may be divided into the following sectors: new building and repair, renovation and maintenance. With its efficient warehouse and distribution system, AO is able to offer prompt deliveries of technical installation materials to installation contractors, building contractors, sewerage contractors, construction companies, gardeners, masons, municipalities, utilities and public institutions. The total market for goods distributed via wholesalers is estimated at DKK 12 billion in Denmark and approximately DKK 2.5 billion in Estonia and the part of Sweden serviced by AO. THE DIY MARKET The Danish DIY market is serviced by AO s SEKO EL & VVS department with a technical product range that covers electrical as well as heating, plumbing and sanitary products. The company s primary customer group consists of DIY centres, specialised outlets and other retailers. The above-mentioned market, supplied via wholesalers, is estimated at DKK 600 million. VISION AND STRATEGY It is AO s vision to be the professional tradesman s preferred supplier of technical installation materials to the market for repairs, renovations and maintenance and one of the preferred suppliers to the market for new building. In the DIY market, it is the Group s vision to be one of the preferred suppliers of electrical as well as heating, plumbing and sanitary products. By being a trendsetter, AO provides valueadded services for its customers. It is AO s strategy to develop, utilise and express the Group s individuality which is based on AO s concepts and culture. The key concept is one-stop shopping where the customers are offered a complete technical product range as part of a collection and delivery system. The concept is supported by import and development of own products targeting both the professional and the DIY markets. In this regard, AO participates in international collaboration through WIM (Wholesalers of Installation Material), a network of similar wholesalers in Europe. The purpose of this collaboration is to exchange relevant information and purchase goods at competitive prices. AO has developed a number of IT concepts to strengthen the customers ability to compete and streamline their business procedures. Customers can access these concepts as registered users of the AO.dk industry portal. 8 ANNUAL REPORT 2009

9 Recruitment is strategically decisive as success or failure can have a dramatic impact on the organisation s performance and results. We wish to ensure that the recruitment process contributes to the success of the manager and ensures a professional match between the job and the candidate Lili Johansen, HR Manager ANNUAL REPORT

10 The Group comprises the following companies and foreign branches: All subsidiaries are wholly-owned by Brødrene A & O Johansen A/S. Brødrene A & O Johansen A/S Rørvang 3 DK-2620 Albertslund Denmark AO-MAVAB, a branch of Brødrene A & O Johansen A/S, Denmark Bronsyxegatan 6 A SE Malmö Sweden Ervex AB Brodalsvägen 15 SE Partille Sweden AO Invest A/S Rørvang 3 DK-2620 Albertslund Denmark Vaga Tehnika Eesti OÜ Kadaka tee 76 E EE Tallinn Estonia E-byg.com A/S Rørvang 3 DK-2620 Albertslund Denmark Ervex i Borås AB Regementsgatan 24 SE Borås Sweden Parent company Subsidiaries VVS NET Rørvang 3 DK-2620 Albertslund Denmark El-torvet.com Rørvang 3 DK-2620 Albertslund Denmark At AO.dk, the customer may, e.g., order goods 24 hours a day, see pictures of the goods and track invoices. AO s Atlantis Showrooms are exhibition premises that the professional tradesmen may use for their own exhibitions. The AO Training Centre offers AO employees a comprehensive further training programme that supports the company s strategy and culture to enable them to adapt to the changing needs in the market through continued training. The product knowledge of employees, their customer service and communication of the Group s philosophy are based on knowledge, thereby ensuring AO s credibility. Innovation is the basis for AO s ability to remain competitive. AO primarily wishes to create growth through own development. The financial objective is: - In consideration of the market situation, to realise a pre-tax profit corresponding to 5-6% of revenue in the long run - To maintain a solvency ratio of approximately 40%. Due to the financial crisis, which has hit the building industry hard, it is not realistic that AO can meet this objective in the short term. 10 ANNUAL REPORT 2009 ACTIVITIES OF THE YEAR The financial and socio-economic crisis severely affected the whole of 2009 which became a challenging year for the AO Group and many of its customers. A rapidly declining construction sector and a depressed market for repairs, renovations and maintenance resulted in a strong reduction in the level of activity in the building industry and a noticeable fall in the Group s revenue. The fall in the level of activity in the building industry created extremely difficult conditions and serious financial challenges to AO and the Group s customers. This affected the earnings performance in 2009, including large provisions for losses on receivables. The Group s focus areas in 2009 were therefore to adapt costs to current market conditions, improve the gross profit margin and reduce interest-bearing debt. One of the results of this development was that the average number of employees at AO in 2009 was reduced by 203 employees to a total of 747. As at 31 December 2009, the Group employed 703 employees compared with 881 as at 31 December 2008, equivalent to a 20% reduction. Despite the tough competition in 2009, the AO Group managed to improve its average gross profit margin by 2.6% to a total of 30.2%. In 2009, costs were incurred for the new ERP system which was commissioned at the end of December In April 2009, the new ERP system was also implemented in the DIY division. With the exception of the Swedish branch, the parent company now has a fully integrated EPR system. This has further improved our ability to optimise the warehouse functionality and streamline the company s business processes which in turn has resulted in savings within sales and administration. This project will continue in In 2009, the DIY division was moved to Rørvang, Albertslund. The company s buildings in Hvidovre will therefore be put up for sale. In 2009, the development of the Group s own product ranges continued. In the professional market, the in front of wall range was introduced under the name JOHANSEN while a tool range was introduced under the name WORKER. In the DIY market, the development of the SEKO product ranges continued. In Ningbo near Shanghai in China, AO has a purchasing office which purchases an increasing number of electrical as well as heating, plumbing and sanitary products which are sold under AO s own brand. In addition, AO is active in international collaboration through WIM (Wholesalers of Installation Material). The financial and socio-economic crisis also affected the Group s international activities which nevertheless developed as expected. In late summer 2009, to better service and

11 With the launch of a new e-business system, we welcome our customers in brand new surroundings René Richardt System Consultant ANNUAL REPORT

12 advise customers and strengthen AO s competitive edge, the Group opened two competence centres in Albertslund and Horsens, respectively. At these competence centres, AO has gathered experienced employees with specific knowledge and training in the Group s different business areas. The interest in electronic ordering continues to grow and to further strengthen this area, AO introduced a new and more user-friendly version of the AO.dk e-business platform in October. As a result of the commissioning of a new ERP system for sales and administration, the activities in the training area primarily focused on upskilling the employees in the use of the ERP system. At the company s annual general meeting on 27 March 2009, Erik Holm, Managing Director of Dyrup A/S, replaced Jens Johansen on the Supervisory Board. On 1 September 2009, Morten Chrone was appointed Chief Commercial Officer. Mr Chrone, who left a position on the executive board of NCC Construction Danmark A/S, became a member of AO s Executive Board with responsibilities for the Group s commercial activities. FINANCIAL REVIEW statement of comprehensive income In 2009, the Group realised a revenue of DKK 1,991.1 million compared with DKK 2,724.0 million in 2008, equivalent to a fall of 27%. The reduction in revenue was due to a strong fall in the level of activity within the building industry as a result of the financial and socioeconomic crisis, increased tightening on the Group s credit policy and a conscious choice to increase the focus on profitability rather than market share. The Group realised a gross profit of DKK million against DKK million in The reduction was entirely due to a fall in turnover, as the Group increased its gross profit margin from 30.2% in 2009 against 27.6% in In 2009, total operating costs amounted to DKK million against DKK million the previous year. This fall was reflected in all types of cost. In 2009, staff costs were reduced by a total of DKK 95.8 million to DKK million as a result of a reduction in the number of employees whereas the fall in other external expenses was primarily due to 12 ANNUAL REPORT 2009 a reduction in transport costs on account of the fall in revenue. The banks tightened credit granting has created financial difficulty for several of the Group s customers. Despite ongoing close follow-up on existing customers and stricter rules for granting credit to new customers, the costs relating to provisions for loss on receivables amounted to DKK 25.9 million against DKK 29.3 million in Financial income is at the same level as last year. As a result of the reduction in interest-bearing debt and falling interest rates, the financial expenses for 2009 decreased by DKK 11.6 million to a total of DKK 31.1 million. In 2009, the Group realised a pre-tax profit of DKK 3.8 million against a pre-tax loss of DKK 15.9 million the previous year. The profit after tax amounted to DKK 2.7 million against a loss of DKK 14.7 million in The financial crisis, which was followed by an actual economic crisis, made it extremely difficult to predict the future. In the 2008 annual report, management therefore did not consider it relevant to announce earnings expectations for Management expected a positive result for the year which was reiterated in the latest interim report from November The result for 2009 agrees with expectations. The Supervisory Board does not consider the result satisfactory, but it is acceptable given the current market conditions. BALANCE SHEET As at 31 December 2009, Group assets amounted to DKK 1,406.8 million against 1,632.4 million in Non-current assets fell by a total of DKK 7.2 million; primarily as a result of a limited number of investments and the sale of a building in Esbjerg. As at 31 December 2009, short-term assets amounted to DKK million against DKK million in The Group s inventory fell by DKK 50.1 million as a result of the reduction in activities and the streamlining of the warehouse functionality. The fall in revenue resulted in a reduction in trade receivables of DKK 57.4 million. In addition, other receivables were reduced by DKK million, primarily as a result of the proceeds from a property lease with Danske Leasing A/S regarding the Horsens logistics centre. The Group s short-term liabilities fell by DKK million, primarily due to reduction of payables to credit institutions. As at 31 December 2009, Group equity amounted to DKK million corresponding to a solvency ratio of 41.3%. CASH FLOW STATEMENT In 2009, the Group had a positive cash flow from operating activities in the amount of DKK million against 71.5 million in One of the reasons for the change was a reduction in inventory and trade receivables and an increase in trade payables. In 2009, net investments amounted to DKK 24.9 million against DKK 76.6 million the previous year. The fall was a result of a conservative approach due to the current market situation as well as the sale of a property in Esbjerg. In 2009, cash flow from financing activities was negative in the amount of DKK million against a positive cash flow in 2008 of DKK 16.3 million. The change is the result of a reduction of Group payables. As a result of the above, the total net effect on cash flow for the year was negative in the amount of DKK 6.3 million. OUTLOOK Seriously affecting the world throughout 2009, the financial and socio-economic crisis continues to make it difficult to predict the future. The extremely cold winter has had a negative effect on the market development during the first months of the year, especially in weather-sensitive areas like water and sewerage. Management therefore expects a greater fall in this market during the first six months of the year and therefore a total fall in the market for 2010 compared with A negative result is therefore expected for the first six months of In 2010, AO will continue to focus on and give priority to creditworthy customers, the contribution margin and ongoing adjustment of interest-bearing debt and costs. On the basis of the above and the current knowledge of management, it is not deemed relevant to announce earnings expectations for It is expected that the Group will achieve a positive result for 2010 as a whole. With its concepts and outlets as well as a unique product range and a new, integrated ERP system, AO is well equipped to tackle the future.

13 We have established SEKO as a separate division in order to strengthen our position in the DIY sector which is already solid Daniel Nielsen, Head of Division ANNUAL REPORT

14 special risks Financial risks Currency risk: The Group s currency risk in connection with Danish operations is limited as revenue is generated in Danish kroner and goods are primarily purchased in DKK or EUR. International operations are not initially affected by exchange rate fluctuations, as income and expenses are settled in the local currency. When translating the result of international operations, the Group is affected by exchange rate changes. Interest rate risk: The Group s net interest-bearing debt, determined as mortgage debt and bank loans less negotiable securities as well as cash and cash equivalents, fell in 2009 to DKK million against DKK million in Based on the net debt, an increase of one percentage point in the interest-rate level will result in an increase in the Group s annual interest expenses before tax of approximately DKK 6.0 million. Credit risks: The Group has no major risks relating to individual customers or business partners. Credit is granted according to individual assessments of the customers and their financial situation. The Group assesses that it has no other credit risks than what is customary for the industry. CORPORATE GOVERNANCE In 2008, NASDAQ OMX Copenhagen A/S published updated recommendations for good corporate governance. The ground rule in these recommendations is the comply or explain principle. The Supervisory Board and Executive Board of Brødrene A & O Johansen A/S have reviewed and considered all recommendations, and the Supervisory Board remains of the opinion that the management of Brødrene A & O Johansen A/S practices all the main recommendations in the report. The result of the review is described on the company s website ( The following is a discussion of the main areas where the Group has decided to adopt a different policy: Role of shareholders and interaction with the company s management Capital and share structure The recommendations are partly complied with but at the time of the listing on the stock exchange in 1963, the ownership structure involved both ordinary shares and preference shares. This has ad ded value to the shareholders over many years in the form of bonus shares and div-idends. The Supervisory Board wishes to maintain this ownership structure, which means, e.g., that a potential takeover of the company may only take place with the consent of holders of ordinary shares. The ordinary shares cannot be negotiated without the consent of the Supervisory Board whereas preference shares are freely negotiable. In addition, holders of ordinary shares have a preferential cumulative dividend right. The duties of the Supervisory Board and the right of shareholders in the event of a takeover bid The recommendations are complied with in part. According to the item above, the company can only be taken over with the consent of holders of ordinary shares and the approval of the Supervisory Board. The composition of the Supervisory Board The composition of the Supervisory Board The recommendations are complied with in part. In accordance with the Articles of Association for Brødrene A & O Johansen A/S, one board member is elected by holders of preference shares while the remaining board members are elected by the holders of ordinary shares. The current Supervisory Board is deemed to have the necessary expertise to make decisions and exercise control. The independence of the Supervisory Board The recommendations are complied with in part. The majority of the shareholder-elected board members, including the Chairman and the Deputy Chairman, are deemed to be independent. However one member of the Executive Board is also a member of the Supervisory Board. Time allocated to Supervisory Board s work and the number of directorships The recommendations are complied with in part. The Supervisory Board assesses that the duties of the individual board members are such that each board member is able to set aside sufficient time for work on the board. Remuneration of the Supervisory Board and Executive Board Remuneration policy The recommendations are not complied with as the Supervisory Board is of the opinion that an explanation of the remuneration policy has no major influence on the assessment of the company s stakeholders and its management. Severance schemes The recommendations are not complied with. In the event that severance pay is paid to the Executive Board, the amount will be published in the annual report. Openness about remuneration The recommendations are complied with in part as the Supervisory Board assesses that information about the remuneration of individual members of the Supervisory Board and the Executive Board has no major influence on the opinion of stakeholders of the company and its management. The Supervisory Board and the Executive Board have the overall responsibility for the risk management of the Group and for internal controls in connection with the financial reporting, including compliance with relevant legislation and other regulations as regards financial reporting. The company has established risk management systems and internal control systems to ensure that the internal and external financial reporting provides a true and fair presentation that is free from material misstatement. Brødrene A & O Johansen A/S has prepared a complete report on corporate governance for the 2009 financial year that can be viewed or downloaded from HR/investor/Virksomhedsledelse.pdf. SOCIAL RESPONSIBILITY Brødrene A & S Johansen A/S has prepared a report on social responsibility that includes the company s social responsibility policy, how AO translates its social responsibility policy into action and the company s evaluation 14 ANNUAL REPORT 2009

15 We will organise demonstration days and theme weeks to attract new customers to our shop Gabriella Flarup, Apprentice ANNUAL REPORT

16 of what has been achieved as a result of the company s work with social responsibility during the financial year. The mandatory report on social responsibility for the 2009 financial year can be viewed or downloaded from HR/investor/crs-politik.pdf. ENVIRONMENTAL ISSUES The administration of Brødrene A & O Johansen A/S and the central warehouse in Albertslund have been environmentally certified according to DS/EN ISO since The Vaga Teknik branch, which is located together with the new logistics centre in Horsens, has been environmentally certified according to the same standard since 2001 and in October 2008 the entire land register at the new logistics centre in Horsens became certified. In connection with the annual review of the company s environmental management system, the company s overall objectives for its environmental policy for 2009 were defined as follows: The company must recycle more than 60% of its total waste. The environmental impact caused by the company in connection with its distribution of goods is to be relatively reduced. According to analyses for 2009, the company recycled 68% and 77% of its total waste at the central warehouse and the logistics centre, respectively. The objective to relatively reduce the environmental impact caused by the company in connection with the distribution of goods was met in In 2009 the rental and service functions and the new warehouse facilities at Herstedvang 6 in Albertslund were the subject of pre-certification, and the final certification is expected to take place at the end of In 2009 it was also decided and implemented that all AO s 47 outlet stores should be subject to the same requirements to waste sorting as the certified addresses. SHAREHOLDER INFORMATION Dividend The Supervisory Board proposes that no dividend be distributed for Shareholders, capital and voting rights The company s nominal share capital is DKK 57 million. Of this, DKK 5,640,000 are in the form of ordinary shares and DKK 51,360,000 are in the form of preference shares. Each ordinary share of DKK 1,000 carries 100 votes whereas each preference share of DKK 100 carries one vote. In additional to the difference to the number of votes, the two share classes differ in the following respects: The ordinary shares are non-negotiable instruments whereas the preference shares are listed on NASDAQ OMX Copenhagen A/S under ID code DK The preference shares have a preferential cumulative dividend right of 6%. In case of liquidation, preference shares take precedence over ordinary shares. Changes to the company s Articles of Association require that two thirds of cast votes and two thirds of the represented capital at a general meeting are in favour of the change. The company s Supervisory Board consists of five members who do not have to be shareholders. Holders of preference shares are entitled to appoint and elect one member of the Supervisory Board while holders of ordinary shares elect the remaining board members. The shareholder composition is shown below: Number of ordinary shares Number of preference shares Number of shares nom. value Capital in % Votes in % Evoleska Holding AG Seerosenstrasse 20 CH-6362 Stansstad Switzerland 5,622 2,080 5,830, % 52.36% Sanistål A/S Håndværkervej 14 Postboks 164 DK-9100 Aalborg Denmark 0 223,005 22,300, % 20.69% J-F. Lemvigh-Müller Holding A/S Vestre Teglgade 16 Postboks 0777 DK-2450 Copenhagen SV Denmark 0 55,851 5,585, % 5.18% Other registered shares ,542 14,472, % 13.58% Unregistered shares 0 75,142 7,514, % 6.97% Total excl. treasury shares 5, ,620 55,702, % 98.8% Treasury shares 0 12,980 1,298, % 1.2% Total 5, ,600 57,000, % 100.0% 16 ANNUAL REPORT 2009

17 All of our 47 outlets carry electrical goods and have staff who are happy to assist. That makes us Denmark s most widely represented wholesaler Jesper Pasler, Electrical Goods Consultant ANNUAL REPORT

18 Shares owned by top management in Brødrene A & O Johansen A/S as at December 2009 According to the company s internal policy about the purchase and sale of securities issued by Brødrene A & O Johansen A/S, members of the company s Supervisory Board, Executive Board and other individuals specified on the company s insider list may buy and sell such securities during a period of four weeks following the publication of the company s annual or interim report. ID code: DK Total holding of preference shares 4) Share price 1) Supervisory Board 2) + 4) 1, ,056 Executive Board 2) + 3) + 4) 24,748 12,571,984 Other insiders 2) 1, ,704 Total insiders 2) 27,968 14,207,744 Note: 1) The calculated share price of DKK 508 is based on the closing price on 31 December ) The statement also includes information about the shareholdings of related parties of the mentioned insiders. 3) Shares owned by individuals who are members of both the Supervisory Board and the Executive Board have been included as part of the shareholdings of the Executive Board. 4) In addition, the Supervisory Board, the Executive Board and the related parties of the mentioned individuals own ordinary shares at a nominal value of DKK 5,638,000. The total capital in the form of ordinary shares amounts to DKK 5,640,000. Stock exchange announcements in 2009 Date No. Text 27 February Preliminary announcement of financial statements March Insider trading. 6 March Insider trading. 9 March Insider trading. 10 March Insider trading. 11 March Insider trading. 13 March Insider trading. 13 March Insider trading. 16 March Insider trading. 17 March Notice convening the annual general meeting. 17 March Annual report March Insider trading. 19 March Insider trading. 19 March Insider trading. 19 March Insider trading. 19 March Insider trading. 19 March Insider trading. 24 March Insider trading. 24 March Insider trading. 25 March Insider trading. 27 March Development of annual general meeting. 3 April Major shareholder announcement. 14 April Major shareholder announcement. 20 May Interim report 1st quarter June New Chief Commercial Officer for Brødrene A & O Johansen A/S. 29 June Insider trading. 21 August Interim report first six months of November Interim report first nine months of December Financial calendar for December Insider trading. 18 ANNUAL REPORT 2009

19 Financial calendar for 2010 Date Text 10 February 2010 Shareholder deadline for submitting items for the agenda at the annual general meeting. 3 March 2010 Annual report for March 2010 The annual general meeting of Brødrene A & O Johansen A/S will be held at 11.00am at the company s head office. 20 May 2010 Interim report 1st quarter August 2010 Interim report first six months of November 2010 Interim report first nine months of Like last year, the Supervisory Board has decided to hold another two meetings, in June and December respectively. Proposal for the annual general meeting 1. Amendments to the Articles of Association At the annual general meeting, the Supervisory Board will present a proposal for a number of amendments to the Articles of Association on account of a new company act. 2. Incentive pay At the annual general meeting, the Supervisory Board will propose approval of the updated general guidelines for incentive pay to the Executive Board of Brødrene A & O Johansen A/S. 3. Treasury shares At the annual general meeting, the Supervisory Board will propose that the company be authorised to acquire treasury shares until 1 May 2011 up to the limit of 10% of the company s total share capital at a price corresponding to the listed share price at the time of acquisition +/-10%. 4. Distribution of net profit The Supervisory Board proposes that the loss for the year, cf. page 26 of the statement of comprehensive income of the parent company... (DKK thousand) (8,726) plus dividend from treasury shares for (DKK thousand) 0 transferred from previous years... (DKK thousand) 247,983 total amount available...(dkk thousand) 239,257 be distributed as follows: Dividend... (DKK thousand) 0 Transferred to retained earnings...(dkk thousand) 239,257 Total...(DKK thousand) 239,257 ANNUAL REPORT

20 STATEMENT BY THE SUPERVISORY BOARD AND EXECUTIVE BOARD The Supervisory Board and the Executive Board have today considered and approved the 2009 annual report for Brødrene A & O Johansen A/S. The annual report has been presented in accordance with the International Financial Reporting Standards as adopted by the European Union as well as additional Danish disclosure requirements for annual reporting of listed companies. In our opinion, the consolidated financial statements and the financial statement provide a true and fair presentation of the Group s and parent company s assets, equity and liabilities and financial position as at 31 December 2009, and of the Group s and parent company s activities and cash flows for the financial year 1 January 31 December It is furthermore our opinion that the management s review contains a fair statement of the development of the Group s and parent company s activities and financial affairs, the net profit or loss for the year and of the Group s and parent company s financial position, as well as a description of the most significant risks and elements of uncertainty facing the Group and the parent company. The annual report is submitted to the annual general meeting for approval. Albertslund, 3 March 2010 EXECUTIVE BOARD Niels A Johansen Chief Executive Officer Morten Chrone Chief Commercial Officer SUPERVISORY BOARD Henning Dyremose Michael Kjær René Alberg* Chairman Deputy Chairman Thomas Drue* Erik Holm Carsten Jensen* Niels A Johansen Preben Damgaard Nielsen * employee board member 20 ANNUAL REPORT 2009

21 Our receivables management has felt the effects of the difficult market conditions - which has created new challenges in our day-to-day work Lis Nielsen, Accounts Clerk ANNUAL REPORT

22 Independent auditor s report To the shareholders of Brødrene A & O Johansen A/S We have audited the consolidated financial statements and the financial statements of Brødrene A & O Johansen A/S for the financial year 1 January 31 December 2009, pages The consolidated financial statements and the financial statements comprise the accounting policies, statement of comprehensive income, balance sheet, statement of changes in equity, cash flow statement and notes for both the Group and the company. The consolidated financial statements and the financial statements are prepared in accordance with International Financial Reporting Standards as adopted by the European Union as well as Danish disclosure requirements for annual reporting of listed companies. In connection with the audit, we have read the management s review, which is prepared in accordance with Danish disclosure requirements for annual reporting of listed companies, and have expressed our opinion hereon. Management s responsibilities Management is responsible for preparing and presenting consolidated financial statements and financial statements that provides a true and fair presentation in accordance with the International Financial Reporting Standards as adopted by the European Union as well as Danish disclosure requirements for annual reporting of listed Albertslund, 3 March 2010 KPMG Statsautoriseret Revisionspartnerselskab companies. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and a true and fair presentation of consolidated financial statements and financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. Management is also responsible for preparing a management s review that is a true and fair statement in accordance with Danish disclosure requirements for annual reporting of listed companies. Auditor s responsibility and basis of opinion Our responsibility is to express an opinion on the consolidated financial statements and the financial statements based on our audit. We have conducted our audit in accordance with Danish auditing standards. These standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the consolidated financial statements and the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements and the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement in the consolidated financial statements and the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers any internal control relevant to the company s preparation and fair presentation of the consolidated financial statements and the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements and the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Our audit did not give rise to qualifications. Opinion In our opinion, the consolidated financial statements and the financial statements provide a true and fair presentation of the Group s and parent company s assets, equity and liabilities and financial position as at 31 December 2009, and of the financial results of the Group s and parent company s activities and cash flows for the financial year 1 January 31 December 2009 in accordance with the International Financial Reporting Standards (IFRS) as adopted by the European Union and further Danish disclosure requirements for annual reporting of listed companies. Comments on the management s review In accordance with the Danish Financial Statements Act, we have read the management s review included in the annual report. We have taken no further actions in addition to the audit of the consolidated financial statements and the financial statements. On that basis, it is our opinion that the information in the management s review is consistent with the consolidated financial statements and the financial statements. Kurt Gimsing State-Authorised Public Accountant This is an English version of the Danish annual report. The annual report has been translated by the company, and KPMG has not read the translation. For this reason, the wording in this Independent Auditor s Report is only to be construed as covering the Danish version and is not to be taken to cover the English annual report. 22 ANNUAL REPORT 2009

23 ACCOUNTING POLICIES Brødrene A & O Johansen A/S is a public limited company domiciled in Denmark. The 2009 annual report comprises the consolidated financial statements of Brødrene A & O Johansen A/S and its subsidiaries as well as separate financial statements of the parent company in accordance with the requirements of the Danish Financial Statements Act. The 2009 annual report of Brødrene A & O Johansen A/S has been prepared in accordance with the International Financial Reporting Standards (IFRS) as adopted by the European Union and Danish disclosure requirements for annual reporting of listed companies. Furthermore, the annual report meets the International Financial Reporting Standards (IFRS) drawn up by the IASB. Basis of preparation Correction of errors in previous annual reports In 2009, it was ascertained that the amount recognised in 2008 and previous periods for the holiday pay obligation of Brødrene A & O Johansen A/S to its employees was too low. It has only been practically possible to calculate the effect of the error back to 1 January The effect of the error has therefore been recognised under equity at the beginning of the year as at 1 January The effect of the error in the opening balance sheet at the beginning of the year as at 1 January 2008 has been determined as follows: Increase in other payables, total DKK 9,320,000 Decrease in deferred tax liability, total DKK 2,330,000 Decrease in retained earnings, equity, total DKK 6,990,000 The error did not affect the result for 2008 and BASIS OF PREPARATION The annual report is presented in DKK rounded off to the nearest 1,000 DKK. The annual report is prepared in accordance with the historical cost convention. Securities in the form of short-term assets have been recognised at fair value with value adjustment in the statement of comprehensive income. The accounting policies described below have been employed consistently during the financial year and for the comparative figures. Changes in accounting policies With effect from 1 January 2009, Brødrene A & O Johansen A/S has implemented IAS 1 (updated 2007) Presentation of Financial Statements, IAS 23 (updated 2007) Borrowing Costs, IFRS 8 Operating Segments, IFRS 2 Share-based Payments: Vesting Conditions and Cancellations, Amendments to IAS 32 and IAS 1: Puttable Financial Instruments and Obligations Arising on liquidation, Amendments to IFRS 1 and IAS 27: Cost of an Investment in Subsidiary, Jointly-Controlled Entity or Associate, Amendment to IFRS 7: Improving Disclosures about Financial Instruments, part of Improvements to IFRS May 2008 with effect from 1 January In 2009, IFRIC 15 Agreements for the Construction of Real Estate and IFRIC 16 Hedges of a Net Investment in a Foreign Operation were adopted with another effective date in the European Union than the similar IFRICs issued by IASB. Brødrene A & O Johansen A/S has therefore implemented these IFRICs with effect from 1 January 2009 in order that their implementation follows the effective dates of the IASB. The new standards and interpretations have not affected recognition, measurements or result for DESCRIPTION OF ACCOUNTING POLICIES CONSOLIDATED FINANCIAL STATEMENTS The consolidated financial statements include the parent company Brødrene A & O Johansen A/S and its subsidiaries in which Brødrene A & O Johansen A/S has a controlling interest in the company s financial and operational policies with the aim of achieving a return or other advantages from its activities. Control is realised by direct or indirect ownership of more than 50% of the voting rights or in other ways obtain control of the company in question. A group chart can be seen on page 10. The consolidated financial statements are prepared as a summary of the parent company s and the individual subsidiaries financial statements determined in accordance with the Group s accounting policies, with the elimination of intercompany income and expenses, share holdings, intercompany balances and dividends as well as realised and unrealised earnings in connection with transactions between the consolidated companies. BUSINESS COMBINATIONS Newly acquired or newly formed companies are recognised in the consolidated financial statements from the date of acquisition. Sold or wound up companies are recognised in the consolidated income statement up until the date of disposal. Comparative figures are not corrected for newly acquired companies. Discontinued activities are presented separately. The purchase method is used for acquisitions of new companies. This means that newly acquired companies identifiable assets and liabilities and contingent liabilities are measured at fair value on the date of acquisition. Identifiable intangible assets are recognised if they can be separated or arise from a contractual right, and the fair value can be reliably determined. Deferred tax is recognised for the revaluations conducted. The date of acquisition is the date on which the Group obtains control of the acquired company. In case of business combinations, positive balances (goodwill) between the cost of the company and the fair value of acquired identifiable assets, liabilities and contingent liabilities are recognised as goodwill under intangible assets. Goodwill is not amortised, but tested for impairment annually. The first impairment test is conducted before the end of the year of acquisition. Upon acquisition, goodwill is attributed to the cash-generating units, which subsequently form the basis for the impairment test. Negative balances (negative goodwill) are recognised in the income statement at the date of acquisition. ANNUAL REPORT

24 The cost of a company comprises the fair value of the agreed consideration and any costs which may be directly attributed to the acquisition. In so far as parts of the consideration are conditional on future events, these parts of the consideration are recognised in the cost to the extent that the events are probable, and the consideration may be reliably determined. In case of uncertainty as to the measurement of the acquired identifiable assets, liabilities and contingent liabilities on the date of acquisition, initial recognition is based on provisionally determined fair values. Should it subsequently become apparent that identifiable assets, liabilities and contingent liabilities had a different fair value than first anticipated at the date of acquisition, goodwill will be adjusted for up to 12 months after the acquisition. The effect of the adjustment is recognised under equity at the beginning of the year and comparative figures are adjusted. Subsequently, goodwill is only adjusted as a consequence of changes in estimates of conditional acquisition price except in cases of material error. Profit or loss on sale or winding-up of subsidiaries is determined as the difference between the selling price or the disposal consideration and the carrying amount of the net assets, including goodwill at the date of the sale as well as estimated sales costs or disposal costs. FOREIGN CURRENCY TRANSLA- TION A functional currency is determined for each of the reporting companies in the Group. The functional currency is the currency used in the primary financial environment in which the individual reporting company operates. Transactions in currencies other than the functional currency are foreign currency transactions. Upon initial recognition, foreign currency transactions are translated to the functional currency at the exchange rate prevailing at the date of the transaction. Receivables, payables and other monetary items in foreign exchange are translated to the functional currency at the exchange rate on the balance sheet date. The difference between the exchange rate on the balance sheet date and the exchange rate at the time of the occurrence of the receivable or payable or recognition of the item in the latest financial statements is recognised in the income statement under cost of sales. When recognising companies with a functional currency other than DKK in the consolidated financial statements, income statements are translated to Danish kroner at average exchange rates whereas balance sheet items are translated at the exchange rates prevailing at the balance sheet date. Differences in exchange rates generated by translation of the equity of these companies at the beginning of the year to the exchange rate on the balance sheet date, together with the translation of income statements from average exchange rates to the exchange rates on the balance sheet day, are recognised directly under equity as a separate reserve for foreign currency translation adjustments. Exchange rate adjustment of balances, which are considered to be part of the total net investment in the companies with a functional currency other than DKK, is recognised in the consolidated financial statements directly under equity as a separate reserve for foreign currency translation adjustments. statement of comprehensive income Revenue Revenue from the sale of goods is recognised in the income statement in so far as the transfer of risk to the buyer has taken place prior to the end of the year; and the income can be reliably determined and payment thereof is expected. The revenue is measured exclusive of VAT, duties and any discounts granted in connection with the sale. External expenses External expenses comprise costs relating to distribution, administration, advertising and exhibitions etc., including operation of real property costs. Other operating income and expenses Other operating income and expenses comprise items of a secondary nature in relation to the companies activities. Financial income and expenses Financial income and expenses comprise interest, realised and unrealised capital gains and losses together with write-downs relating to securities and payables, amortisation of financial assets and liabilities, including financial lease commitments as well as surcharges and allowances under the tax prepayment scheme, etc. Borrowing costs from general or specific loans pertaining to the period during which the assets are recognised in the accounts, are recognised in the cost of the assets in question. Dividend from investments in subsidiaries are recognised as income in the parent company s income statement in the financial year in which the dividend is declared. Tax on net profit or loss for the year Brødrene A & O Johansen A/S is taxed jointly with all Danish subsidiaries. The current Danish corporation tax is distributed on the jointly taxed companies in proportion to their taxable income. In addition, companies with tax losses receive a joint tax contribution from companies that have been able to use these losses to reduce their own taxable income. (Full distribution). The jointly taxed companies are part of the tax prepayment scheme. Tax for the year, which consists of the year s current tax and the change in deferred tax, is recognised in the income statement for the share attributable to the profit or loss for the year, and directly in equity for the share attributable to items relating directly to equity. BALANCE SHEET Intangible assets Upon initial recognition, goodwill is recognised in the balance sheet at cost as described in Business combinations. Goodwill is subsequently measured at cost less accumulated amortisation and write-downs. Goodwill is not amortised. The carrying amount of goodwill is allocated to the Group s cash-generating units at the date of acquisition. Determination of cashgenerating units follows the management structure and internal financial control. Other intangible assets, including intangible assets acquired in connection with business combinations are measured at cost less accumulated depreciation and write-downs. Other intangible assets are depreciated on a straight-line basis over the expected useful life. Property, plant and equipment Land and buildings, leasehold improvements and operating equipment are measured at cost less accumulated depreciation and write-downs. Cost includes the acquisition price together with costs directly linked to the acquisition until the such time when the asset is ready to be taken into use. The cost of a total asset is split into separate parts that are depreciated individually if the useful life of the individual components differs. 24 ANNUAL REPORT 2009

25 AO s internal employees visit construction sites when new projects commence. In that way, our customers meet us face to face which facilitates communication. René Alberg, Sales Assistant ANNUAL REPORT

26 For assets held under a finance lease, the cost is determined as the lowest of the fair value of the assets or the present value of the future minimum lease payments. When determining the present value, the lease agreement s internal interest rate is used as the discount rate or the Group s alternative borrowing rate. Subsequent costs, e.g. from replacement of components of property, plant and equipment, are recognised in the carrying amount of the asset in question where it is probable that future economic benefits will flow to the Group. All other costs for general repairs and maintenance are recognised in the income statement when incurred. Depreciation is made on a straight-line basis over the estimated useful life, based on the following assessment of the estimated useful lives of the assets: Buildings: Installations: Leasehold improvements: Operating equipment: Land is not depreciated. 50 years 10 years Max. 5 years Max. 5 years The basis of depreciation is determined in consideration of the asset s residual value and is reduced by write-downs, if any. The residual value is determined at the time of acquisition and is revalued annually. Depreciation ceases if the asset s residual value exceeds its carrying amount. Profit or loss on disposal of property, plant and equipment are determined as the difference between the selling price less selling costs and the carrying amount at the time of sale. Profit or loss is recognised under depreciation in the income statement. Investments in subsidiaries in the parent company s financial statements Investments in subsidiaries are measured at cost in the parent company s annual report. If indications of impairment are present, an impairment test is carried out. Where cost exceeds the recoverable amount, a write-down to this lower value is carried out. Impairment of non-current assets Goodwill and intangible assets with indefinable useful lives are tested annually for impairment, initially prior to the end of the year of acquisition. The carrying amount of goodwill is tested for impairment together with the other noncurrent assets in the cash-generating unit to which the goodwill is allocated and is written down in the income statement, in so far as the carrying amount is higher than the recoverable amount. As a main rule, the recoverable amount is determined as the present value of the expected future net cash flows from the company or the activity (cash-generating unit) to which the goodwill is linked. Impairment loss relating to goodwill is recognised as a separate item in the income statement. Deferred tax assets are annually assessed and are only recognised where it is probable that they will be utilised. The carrying amount of other non-current assets is tested annually for indications of impairment. If indicated, the recoverable amount of the asset is calculated. The recoverable amount is the fair value of the asset less expected costs of disposal or value in use. The value in use is calculated as the present value of expected future cash flows from the activity or the cash-generating unit in which the asset is included. An impairment loss is recognised when the carrying amount of an asset exceeds the recoverable amount of the asset. Impairment losses are recognised in the income statement under amortisation. Impairment of goodwill is not reversed. Write-downs on other assets are reversed in so far as changes have occurred in the assumptions and estimates leading to the write-down. Write-downs are reversed only where the asset s new carrying amount does not exceed the carrying amount of the asset after write-downs, if the asset had not been written down. Inventory Inventory is measured at cost calculated on the basis of average prices. If the net realisable value is lower than the cost, the inventory is written down to this net realisable value. Cost comprises the purchase price including delivery costs. The net realisable value is determined as the expected selling price less the cost of the sale and is determined with due regard for negotiability, obsolescence and the expected development of the selling price. Receivables Receivables are recognised at amortised cost less amortisation for expected losses. Amortisation takes place where objective indication has been made as to the impairment of the receivable. Write-down is carried out individually. Prepayments and deferred income Prepayments, recognised as assets, comprise outlays that concern the subsequent financial year and are measured at cost. Securities Shares and bonds are recognised as of the trade date under current assets and measured at fair value corresponding to the share price of listed securities. Changes to the fair value are recognised in the income statement under financials as they occur. Equity Dividend Proposed dividend is recognised as a liability at the time of adoption by the annual general meeting. Dividend, which is expected to be paid for the year, is shown as a separate item under equity. Treasury shares Acquisition costs, considerations and dividends in respect of treasury shares are recognised directly in retained earnings under equity. Gains and losses from sale are therefore not recognised in the income statement. Proceeds from the sale of treasury shares in connection with the exercise of share options are recognised directly in equity. Reserve for foreign currency translation adjustment Reserves for foreign currency translation adjustment includes currency translation differences arisen from the translation of financial statements of foreign companies from their functional currency to DKK. Employee contributions The Group has defined contribution plans for the majority of its employees. Liabilities related to defined contribution plans, where the Group regularly pays fixed pension contributions to independent pension funds, are recognised in the income statement in the period in which they are earned, while due contributions are recognised in the balance sheet as other payables. Corporation tax and deferred tax Current tax liabilities and current tax receivable are recognised in the balance sheet as tax calculated on the year s taxable income, adjusted for tax on previous years taxable income and for tax paid on account. 26 ANNUAL REPORT 2009

27 GPS surveillance of all cars means that we always know exactly which goods are where John K. Nielsen, Driver ANNUAL REPORT

28 Deferred tax is measured under the balance sheet-liability method on all temporary differences between carrying amounts and tax values of assets, equity and liabilities. However, deferred tax liabilities for temporary differences related to taxable non-amortisable goodwill as well as other items are not recognised where temporary differences apart from acquisitions have arisen at the date of acquisition without affecting the profit or loss or taxable profit. Deferred tax is measured on the basis of the tax rules and tax rate that will apply under the legislation on the balance sheet date when the tax liability is expected to be realised as current tax. Changes in deferred tax as a result of changes in the tax rate are recognised in the income statement. Deferred tax assets are recognised under non-current assets at the value at which they are expected to be realised by off-set against deferred tax liabilities or by off-set against tax on future income. Financial liabilities Payables to mortgage credit institutions and financial institutions are recognised on the date of borrowing at the amount of the proceeds received less transaction costs. In the subsequent periods, the financials liabilities are measured at amortised cost equivalent to the capitalised value using the effective interest rate method so that the difference between the proceeds and the nominal value is recognised in the income statement during the term of the loan. In addition, the capitalised residual lease commitment on financial leases is recognised as financial liabilities, measured at amortised cost. Other liabilities, which include trade payables and other payables, are measured at amortised cost. Leases Lease commitments are broken down in the financial statements as financial and operational lease commitments. A lease is classified as financial when it materially transfers risks and benefits by ownership of the leased asset. Other leases are classified as operational. Accounting of financially leased assets and the associated commitment are described in the sections on property, plant and equipment and financial liabilities. Lease payments concerning operational leases are recognised on a straight-line basis in the income statement over the lease term. Prepayments and deferred income Deferred income, recognised as equity and liabilities, comprise deferred income and are measured at amortised cost. CASH FLOW STATEMENT The cash flow statement shows the cash flow from operating, investing and financing activities, the year s change in cash and cash at the beginning and end of the year. The effect on cash flow from the acquisition and disposal of companies is shown separately under cash flows from investing activities. Cash flows from acquired enterprises are recognised in the cash flow statement from the date of acquisition and cash flows from disposed enterprises are recognised until the time of disposal. Cash flow from operating activities Cash flows from operating activities are determined as pre-tax profit or loss adjusted for non-cash operating items, changes in working capital, received and paid interest and paid corporation tax. Cash flow from investing activities Cash flows from investing activities include payment in association with the acquisition and disposal of enterprises and activities as well as acquisition and disposal of property, plant and equipment, intangible assets and other non-current assets together with the purchase and sale of securities, which are not recognised as cash and cash equivalents. Inception of financial leases are regarded as non-cash transactions. Cash flows from financing activities Cash flows from financing activities include changes in the size or the composition of the share capital and related costs as well as the raising of loans, repayment on interestbearing debt, acquisition and sale of treasury shares and payment of dividend to owners. Cash flows from assets held under a finance lease are recognised as payment of interest and debt repayment. Cash and cash equivalents Cash and cash equivalents include cash at bank and in hand. Segment information Group activities relating to the trade of technical installations take place in an integrated manner and are dealt with as one segment. Financial ratios Financial ratios have been prepared in accordance with IAS 33 and the Danish Society of Financial Analysts Recommendations & Financial Ratios Negative results and deductions are shown in brackets. 28 ANNUAL REPORT 2009

29 STATEMENT OF COMPREHENSIVE INCOME FOR 1 JANUARY 31 DECEMBER (All amounts are in DKK thousand) PARENT COMPANY CONSOLIDATED NOTE: ,599,932 1,918,916 Revenue 1,991,112 2,724,010 (1,877,243) (1,339,043) 3 Cost of sales (1,389,743) (1,971,465) 722, ,873 Gross profit 601, , Other operating income , ,873 Gross profit 601, ,709 (260,133) (203,885) 5 External expenses (190,237) (242,033) (403,934) (311,141) 6 Staff costs (320,329) (416,114) 7 Depreciation and write-down of property, plant (42,016) (35,517) and equipment and intangible assets (41,033) (49,421) (28,617) (25,428) 8 Other operating costs (25,890) (29,312) (734,700) (575,971) Total operating costs (577,489) (736,880) (12,011) 3,902 Operating profit or loss 24,049 15,829 15,798 10,049 9 Financial income 10,895 11,045 (38,422) (25,564) 10 Financial expenses (31,087) (42,735) (34,635) (11,613) Pre-tax profit or loss 3,857 (15,861) 5,639 2, Tax on net profit or loss for the year (1,119) 1,213 (28,996) (8,726) Net profit or loss for the year 2,738 (14,648) Other comprehensive income Foreign currency translation adjustment in connection with the translation of (5,159) 2,832 foreign entities 4,270 (8,340) 0 0 Tax on other comprehensive income 0 0 (5,159) 2,832 Other comprehensive income after tax 4,270 (8,340) (34,155) (5,894) Total comprehensive income 7,008 (22,988) Proposal for the distribution of net profit 0 0 Proposed dividend (28,996) (8,726) Retained earnings (28,996) (8,726) 15 Earnings per share Earnings per share (EPS) 5 (26) Diluted earnings per share (EPS-D) 5 (26) ANNUAL REPORT

30 Balance sheet as at 31 December ASSETS PARENT COMPANY CONSOLIDATED NOTE: Non-current assets Intangible assets 58,439 58,439 Goodwill 100, ,446 46,962 57,058 Other intangible assets 57,058 46, , , , , Property, plant and equipment 166, ,712 Land and buildings 413, ,589 6,908 4,999 Leasehold improvements 4,999 6,908 59,616 46,838 Operating equipment 48,291 61, , , , ,990 Other non-current assets 131, , Investments in group enterprises Other investments ,330 10, Deferred tax 10,541 2, , ,093 11,041 2, , ,139 Total non-current assets 635, ,228 Current assets 444, , Inventory 413, , , , Trade receivables 289, , ,486 0 Receivables from group enterprises ,065 12, Corporation tax receivable 10,789 10,691 27,611 40,666 Other receivables 44,372 25, Receivables, sales and lease-back 0 123,060 3,461 2,627 Prepayments and deferred income 2,627 3, , , , ,294 8,955 5, Securities 5,234 8,955 3,933 2,338 Cash at bank and in hand 5,535 7, , ,114 Total current assets 771, ,174 1,449,022 1,203,253 Total assets 1,406,761 1,632, ANNUAL REPORT 2009

31 With the WORKER tool series we now have our own quality tool range for professional customers Philip Enevoldsen, Product Consultant ANNUAL REPORT

32 Balance sheet as at 31 December EQUITY AND LIABILITIES PARENT COMPANY CONSOLIDATED NOTE: Equity 57,000 57,000 Share capital 57,000 57,000 (5,669) (2,837) Reserve for foreign currency translation adjustments (4,798) (9,068) 200, ,000 Other reserves 200, , , ,257 Retained earnings 328, , Proposed dividend , ,420 Total equity 580, ,839 Non-current liabilities 1,498 5, Deferred tax 27,661 24,009 2,004 17, Mortgage credit institutions 140,386 69, , , Other credit institutions 189, , , ,078 Total non-current liabilities 357, ,948 Current liabilities Mortgage credit institutions 4,331 5, , , Other credit institutions 273, ,040 40, ,385 Trade payables 128,790 45, ,422 Payables to group enterprises ,451 55,984 Other payables 59,411 92, Prepayments and deferred income 3,000 3, , ,755 Total current liabilities 468, , , ,833 Total liabilities 825,914 1,058,563 1,449,022 1,203,253 Total equity and liabilities 1,406,761 1,632,402 2 Segment information 20 Contingent liabilities, security, etc Notes without reference 32 ANNUAL REPORT 2009

33 STATEMENT OF CHANGES IN EQUITY PARENT COMPANY CONSOLIDATED ,000 57,000 Share capital as at 1 January 57,000 57, Capital increase/reduction during the year ,000 57,000 Share capital as at 31 December 57,000 57,000 (510) (5,669) Reserve for foreign currency translation adjustment as at 1 January (9,068) (728) (5,159) 2,832 Transferred from distribution of net profit 4,270 (8,340) Reserve for foreign currency translation adjustment (5,669) (2,837) as at 31 December (4,798) (9,068) 200, ,000 Other reserves as at 1 January 200, , Changes during the year , ,000 Other reserves as at 31 December 200, , , ,983 Retained earnings as at 1 January 325, ,545 (6,990) 0 Correction, holiday pay obligations 0 (6,990) (28,996) (8,726) Transferred from distribution of net profit 2,738 (14,648) 0 0 Dividend, treasury shares Tax on changes in equity , ,275 Retained earnings as at 31 December 328, , Proposed dividend as at 1 January Dividend paid Dividend on treasury shares Transferred from distribution of net profit Proposed dividend as at 31 December , ,420 Equity as at 31 December 580, ,839 ANNUAL REPORT

34 Consolidated cash flow statement Note: Cash flow from operating activities Operating profit or loss 24,049 15,829 Financials, net (20,192) (31,690) Ordinary results 3,857 (15,861) Unrealised translation adjustments (134) 568 Amortisation and depreciation: Intangible assets 5,683 11,177 Property, plant and equipment 35,239 40,922 38,738 49,915 Working capital: Changes in trade receivables 57,386 59,922 Changes in other receivables (5,751) 2,158 Changes in inventory 50,082 27,837 Changes in trade payables 83,476 (45,432) Changes in other current liabilities (32,832) 152,361 11,596 56,081 Corporation tax paid (5,775) (19,192) Cash flow from operating activities 191,231 71,511 Cash flow from investing activities Buildings (2,492) (143,864) Leased premises (618) (4,092) Operating equipment (12,077) (28,262) Other intangible assets (15,779) (20,395) Disposal of property, plant and equipment 6, ,982 (24,936) (76,631) Cash flow from financing activities Sale of securities 3,891 0 Repayment of non-current liabilities (17,022) (5,695) Incurrence of debt to credit institutions (270,236) 145,017 Receivables, sales and lease-back 110,754 (123,060) Dividend paid, excluding dividend on treasury shares 0 0 (172,613) 16,262 Effect on cash flow for the year (6,318) 11,142 Cash and cash equivalents: At the beginning of the year 7,925 4,245 Foreign currency translation adjustment 3,929 (7,462) At the end of the year 5,536 6,318 7,925 (11,142) Change in cash and cash equivalents 6,318 (11,142) 34 ANNUAL REPORT 2009

35 PARENT COMPANY CASH FLOW STATEMENT NOTE: Cash flow from operating activities Operating profit or loss 3,902 (12,012) Financials, net (15,515) (22,623) Ordinary results (11,613) (34,635) Unrealised translation adjustments (160) 568 Amortisation and depreciation: Intangible assets 5,683 11,177 Property, plant and equipment 29,834 35,517 31,220 42,397 Working capital: Changes in trade receivables 60,612 54,712 Changes in receivables from group enterprises 183,908 (8,057) Changes in other receivables (12,221) 2,618 Changes in inventory 49,690 25,711 Changes in trade payables 80,759 (39,363) Changes in other current liabilities (31,467) 331,281 7,990 43,611 Corporation tax paid (985) (18,046) Cash flow from operating activities 354,040 33,895 Cash flow from investing activities Buildings 0 (122,984) Leased premises (618) (4,092) Operating equipment (11,771) (27,358) Other intangible assets (15,779) (20,395) Disposal of property, plant and equipment (28,138) (174,212) Cash flow from financing activities Sale of securities 3,891 0 Repayment of non-current liabilities (13,531) (384) Incurrence of debt to credit institutions (324,591) 147,185 Dividend paid, excluding dividend on treasury shares 0 0 (338,122) 146,801 Effect on cash flow for the year (12,220) 6,484 Cash and cash equivalents: At the beginning of the year 3,933 2,390 Foreign currency translation adjustment 10,625 (4,941) At the end of the year 2,338 12,220 3,933 (6,484) Change in cash and cash equivalents 12,220 (6,484) ANNUAL REPORT

36 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND THE FINANCIAL STATEMENTS NOTE: 1 Accounting estimates and judgements Estimation uncertainty In determining the carrying amount of certain assets, equity and liabilities, estimates are required of how future events will affect the value of these assets and liabilities at the balance sheet date. The estimates are based on historical experience and other factors which the management assesses as being reasonable in the circumstances, but which are of course uncertain and unpredictable. The assumptions may be incomplete or inaccurate and unexpected events or circumstances may arise. In addition, the company is subject to risks and uncertainties that may lead to the actual results deviating from the estimates. The special risks of Brødrene A & O Johansen A/S are mentioned in the management s review and in Note 22. It may be necessary to amend past estimates as a result of changes in the conditions on which past estimates were based or on account of new knowledge or later events. In 2008 and 2009, the development in the world economy and the financial markets resulted in major changes to the uncertainty surrounding a number of key assumptions about the future, including credit risks, interest-rate levels, the volume of sales, etc. compared with previous years. Estimates that are important forthe financial statements are carried out in connection with the determination of amortisation/depreciation and write-downs. Discount factors and growth rates used for 2009 At the end of 2009, the risk-free interest rate especially the short-term interest rate was subject to unusual fluctuations as a result of the international financial situation. Items in the balance sheet where expected future cash flows form the basis of determining the value in use are estimated using a rate of interest that reflects the expectation that the financial markets will become stable again in the long term, and the risk-free interest rate has therefore been fixed at less than the current market rate. Impairment test for goodwill In connection with the annual impairment test for intangible assets, including goodwill, it is estimated to what extent the parts of the company (cash-generating units) to which the goodwill relates will be able to generate sufficient positive net cash flows in the future to support the value of goodwill and other net assets. As a result of the nature of the business, estimates of expected cash flows have to be made for several years into the future which results in a certain amount of uncertainty. The chosen discount rate reflects this uncertainty. The impairment test and associated sensitive conditions are described in detail in Note 12. Recovery of deferred tax assets Deferred tax assets relating to all unutilised tax deficits are recognised to the extent it is considered probable that the losses can be off-set against taxable income within a reasonable number of years. The amount to be recognised is determined on the basis of an estimate of the likely time and amount of future taxable income. Receivables An estimate is used to assess the recoverability of receivables. As a result of the international financial situation, the risk of losses on doubtful receivables is increasing, a fact that has been taken into account in the assessment of write-downs on the balance sheet date and in the day-to-day management and control of receivables. Accounting policies As part of the Group s accounting policies, management carries out additional assessments beyond those mentioned, which may have a significant impact on the recognised amounts in the annual report. These assessments include e.g. whether leases should be treated as operational or financial leases. In 2008, management undertook such assessments in connection with the conclusion of a lease. The Group has entered into a lease on the property Mossvej, Horsens. On the basis of the conditions of the lease, management has concluded that the lease should be treated as a financial lease. 36 ANNUAL REPORT 2009

37 In 2010, we plan to make the Odense outlet more cheerful by changing exhibitions every month Charlotte Henriksen, Sales Assistant, Water and Sewerage ANNUAL REPORT

38 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND THE FINANCIAL STATEMENTS PARENT COMPANY CONSOLIDATED NOTE: Segment information Group activities relating to the sale of technical installations take place in an integrated manner and are dealt with as one segment. Geographical information The Group primarily operates in Denmark and more than 90% of its revenue in 2009 (2008: > 90%) relates to Denmark. The revenue of the subsidiary Ervex AB, Sweden, constituted 3.5% (2008: 3.7%) of the Group s total revenue. In 2009, the profit for the year of Ervex AB, Sweden, amounted to DKK 4,956,000 (2008: 6,725,000) out of the Group s total profit of DKK 2,738,000 (2008: (DKK 14,648,000 )) Important customers The Group has not traded with any individual customer representing more than 10% of the Group s total revenue for 2009, and the same applied in Cost of sales 1,851,548 1,287,759 Cost of sales for the year 1,338,067 1,943,644 Change in inventory: 469, ,278 Inventory at the beginning of the year 463, , ,502 Inventory write-downs for the year 4, (718) (2,908) Reversed write-downs on inventory (2,908) (718) (444,278) (394,588) Inventory at the end of the year (413,649) (463,731) 25,695 51,284 Change in inventory for the year 51,676 27,821 1,877,243 1,339,043 Cost of sales for the year 1,389,743 1,971,465 Cost of sales includes: 1,182 2,455 Realised foreign exchange gains, total 2,455 1,182 6,441 2,463 Unrealised foreign exchange gains, total 2,463 6,441 Reversal of write-downs on inventory relating to the sale/scrapping of written-down inventory. 38 ANNUAL REPORT 2009

39 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND THE FINANCIAL STATEMENTS PARENT COMPANY CONSOLIDATED NOTE: Other operating income The item includes property rental income 5 External expenses Remuneration to the auditors elected by the annual general meeting: Total remuneration to KPMG may be specified as follows: Statutory audit Other assurance engagements Tax and VAT related advisory services Other services External expenses for the parent company include rent paid to subsidiaries totalling DKK 22,162,000 (2008: DKK 28,726,000) 6 Staff costs 808 1,100 Remuneration to the parent company s Supervisory Board 1,523 1, , ,784 Salaries and wages 288, ,796 24,377 21,173 Pension contributions 21,622 24,794 6,750 5,641 Other social security costs 7,566 9,477 1,693 1,443 Other staff expenses 1,511 1, , , , ,114 Wages and salaries include remuneration to: 808 1,100 Supervisory Board 1,523 1,230 15,303 7,612 Executive Board 7,612 15,303 Average number of full-time employees employees during the financial year In 2008, the remuneration to the Executive Board included provisions for salary to a retired member of the Executive Board. The Executive Board and other top managers are covered by performance-based bonus plans. The Group only has defined contribution plans. 7 Depreciation and write-downs on intangible assets and property, plant and equipment 11,177 5,683 Intangible assets 5,683 11,177 31,220 29,889 Property, plant and equipment 35,276 38,738 (381) (55) Gains from the sale of shares 74 (494) 42,016 35,517 41,033 49,421 ANNUAL REPORT

40 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND THE FINANCIAL STATEMENTS PARENT COMPANY CONSOLIDATED NOTE: Other operating costs The item includes realised losses on debtors and provisions for bad debts 9 Financial income 10,775 8,565 Interest income from current assets 10,347 10, Capital gain on securities Other interest income , Interest income from group enterprises ,798 10,049 10,895 11, Financial expenses 37,693 25,229 Interest expenses on liabilities 30,699 42, Capital loss on securities Other interest expenses ,422 25,564 31,087 42, Tax on net profit or loss for the year 1, Current tax for the year (3,525) (5,927) (17) (2,359) Adjustments relating to previous years (2,247) (17) 1,529 (1,794) (5,772) (5,944) 4,419 1,578 Adjustment of deferred tax for the year 1,447 7, Reduction of Swedish corporation tax from 28% to 26.3% (309) 3,048 Adjustment of deferred tax relating to previous years 3,048 (309) 5,639 2,887 Total (1,119) 1,213 Tax on the profit or loss from ordinary activities can be explained as follows: 8,659 2,823 Calculated tax on the profit or loss from ordinary activities before tax (1,132) 3,965 Adjustment of tax in foreign (290) 55 divisions/subsidiaries in terms of 28/26.3% 158 (571) Tax effect of: Non-taxable income (2,522) (996) Other non-deductible costs (1,491) (2,522) (326) 689 Adjustment of tax relating to previous years 801 (326) 5,639 2,887 (1,119) 1, % 24.9% Effective tax rate 29.0% 7.4% 18, Tax paid during the financial year amounts to 5,775 19,192 Swedish corporation tax was reduced from 28% to 26.3% in ANNUAL REPORT 2009

41 We have virtualised our entire server park. This results in increased stability and in particular a lower environmental load Rune Keller, IT Technician ANNUAL REPORT

42 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND THE FINANCIAL STATEMENTS 12 Non-current assets: (Consolidated) Goodwill Other intangible assets Land and buildings Leasehold improvements Operating equipment Financial assets Acquisition cost as at 1 January ,994 74, ,695 22, , Foreign currency translation adjustment (548) 0 (1,833) 0 (426) 0 Additions during the year 0 20, ,864 4,092 28,262 0 Disposals during the year 0 0 (122,984) (2,593) (1,848) 0 Acquisition cost as at 31 December ,446 95, ,742 23, , Depreciation as at 1 January (37,089) (102,903) (16,947) (223,010) 0 Exchange rate adjustment Depreciation on disposed assets 0 0 3,886 2,525 1,580 0 Depreciation for the year 0 (11,177) (7,366) (2,618) (28,754) 0 Depreciation as at 31 December (48,266) (106,153) (17,040) (249,849) 0 Carrying amount as at 31 December ,446 46, ,589 6,908 61, Of which financially leased assets 122,984 Goodwill Other intangible assets Land and buildings Leasehold improvements Operating equipment Financial assets Acquisition cost as at 1 January ,446 95, ,742 23, , Foreign currency translation adjustment Additions during the year 0 15,779 2, ,077 0 Disposals during the year 0 0 (7,756) (625) (20,226) 0 Acquisition cost as at 31 December , , ,180 23, , Depreciation as at 1 January (48,266) (106,153) (17,040) (249,849) 0 Exchange rate adjustment 0 0 (91) 0 (120) 0 Depreciation on disposed assets 0 0 1, ,209 0 Depreciation for the year 0 (5,683) (7,429) (2,527) (25,320) 0 Depreciation as at 31 December (53,949) (111,944) (18,942) (255,080) 0 Carrying amount as at 31 December ,446 57, ,236 4,999 48, Of which financially leased assets 120,908 Other intangible assets include customer lists, brands and supplier lists taken over in connection with the acquisition of a company, as well as software, etc. relating to a new ERP system. Apart from goodwill, all intangible assets are considered to have limited useful lives. The Group has entered into a financial lease on buildings. Upon expiry of the lease, the Group will acquire the buildings at a favourable price. Theleased asset serves as security for the lease commitment. No changes have been made in significant estimates relating to property, plant and equipment. 42 ANNUAL REPORT 2009

43 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND THE FINANCIAL STATEMENTS 12 Non-current assets: (Parent company) Goodwill Other intangible assets Land and buildings Leasehold improvements Operating equipment Financial assets Acquisition cost as at 1 January ,439 74,833 58,647 22, , ,100 Additions during the year 0 20, ,984 4,092 27,358 0 Disposals during the year (2,490) (1,135) (548) Acquisition cost as at 31 December ,439 95, ,631 23, , ,552 Depreciation as at 1 January (37,089) (14,377) (16,933) (219,413) 0 Depreciation on disposed assets ,490 1,066 0 Depreciation for the year 0 (11,177) (729) (2,597) (27,894) 0 Depreciation as at 31 December (48,266) (15,106) (17,040) (246,241) 0 Carrying amount as at 31 December ,439 46, ,525 6,908 59, ,552 Of which financially leased assets 122,984 Goodwill Other intangible assets Land and buildings Leasehold improvements Operating equipment Financial assets Acquisition cost as at 1 January ,439 95, ,631 23, , ,552 Additions during the year 0 15, ,771 0 Disposals during the year (625) (20,056) 0 Acquisition cost as at 31 December , , ,631 23, , ,552 Depreciation as at 1 January (48,266) (15,106) (17,040) (246,241) 0 Depreciation on disposed assets ,056 0 Depreciation for the year 0 (5,683) (2,813) (2,527) (24,549) 0 Depreciation as at 31 December (53,949) (17,919) (18,942) (250,734) 0 Carrying amount as at 31 December ,439 57, ,712 4,999 46, ,552 Of which financially leased assets 120,908 Specification of investments: Name Registered office Ownership interest Ownership interest AO Invest A/S Albertslund 100% 100% Vaga Tehnika Eesti OÜ Estonia 100% 100% E-byg.com A/S Albertslund 100% 100% Ervex AB Sweden 100% 100% ANNUAL REPORT

44 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND THE FINANCIAL STATEMENTS PARENT COMPANY CONSOLIDATED NOTE: Goodwill Management has carried out an impairment test of the carrying amount of the goodwill as at 31 December 2009 based on the allocation of the cost of goodwill on the cash-generating units mentioned below. The carrying amount of goodwill as at 31 December 2009 can be specified as follows: Goodwill determined upon acquisition of the MARK & VA warehouse in Tågarp AB 3,107 Goodwill determined upon acquisition of SEKO-electric A/S 5,613 Goodwill determined upon acquisition of P. C. Christensens Eftf. A/S 20,219 Goodwill determined upon acquisition of Aktieselskabet Poul Thoft Simonsen 29,500 Goodwill determined upon acquisition of Ervex AB 42,007 Total 100,446 The recoverable amount is based on the value in use which has been determined by using the expected net cash flows based on the budgets for approved by management. A discount rate before tax of 12% was used in the calculation. The budgeted contribution margin and market share for the budget period have been estimated on the basis of realised figures for During the budget period, it is assumed that the market remains unchanged in 2010 and For the remainder of the budget period, weak growth in the market has been assumed. The annual average growth rate used for extrapolation of future net cash flows for the years following 2014 is estimated to be 2%. The growth rate is not expected to exceed the long-term average growth rate on the parent company s markets. Management is of the view that changes in the underlying assumptions are unlikely to result in the carrying amount of goodwill exceeding the recoverable amount. Other non-current assets Management has not identified factors that would indicate a need to conduct an impairment test for other intangible assets or on property, plant and equipment. 13 Inventory Carrying amount of inventory 0 0 recognised at net selling price Trade receivables The Group s trade receivables as at 31 December 2009 include receivables totalling DKK 97,532,000 (2008: DKK 94,624,000 ) which have been written down to DKK 22,887,000 based on individual assessments (2008: DKK 20,609,000). The write-downs are due to the bankruptcy of customers and poor payers. Write-downs contained in the above receivables have developed as follows: 59,742 81,518 Write-downs as at 1 January 82,619 60,425 39,552 35,907 Write-downs during the year 36,488 40,481 (11,167) (22,301) Realised during the year (22,415) (11,167) (6,609) (13,071) Reversed (14,039) (7,120) 81,518 82, December 82,653 82,619 The credit quality of non-due receivables which have not been written down has been assessed according to the Group s internal credit rating procedures to be of good quality with a lower risk of losses, see also Note 22 for information about credit rating procedures, etc. 44 ANNUAL REPORT 2009

45 A later deadline to the customers means that we have to be more on our toes but that s ok Osita Chizube, Warehouse Assistant ANNUAL REPORT

46 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND THE FINANCIAL STATEMENTS PARENT COMPANY CONSOLIDATED NOTE: Trade receivables (cont.) In addition, the following trade receivables, overdue as at 31 December but not written down are recognised: Maturity period: 88,002 16,082 Up to 30 days 20,815 92,442 16,551 9,680 Between 30 and 60 days 9,933 16,747 35,758 33,463 Over 60 days 33,803 36, ,311 59,225 64, , Earnings per share Net profit or loss for the year 2,738 (14,648) Average number of shares in circulation 570, ,000 Average number of treasury shares (12,980) (12,980) Average number of shares in circulation 557, ,020 The average dilution effect of outstanding share options 0 0 Average number of shares in circulation with a dilution effect 557, ,020 Earnings per share (EPS) of DKK (26) Diluted earnings per share (EPS-D) of DKK (26) 16 Corporation tax receivable/payable 15,519 11,807 Corporation tax paid on account in the year 14,314 16,618 1, Tax on taxable profit for the year (3,525) (5,927) 17,065 12,372 Total corporation tax receivable/payable 10,789 10, Equity Capital management The Group continuously evaluates the need for adjustment of the capital structure to offset the higher return requirements on equity in relation to the increased certainty associated with loan capital. As at the end of 2009, the equity share of total equity and liabilities amounted to DKK 41.3% (2008: 38.0%). The aim for the equity share is approximately 40%. The capital is managed for the Group as a whole. The share capital consists of the following classes: Ordinary share capital: 44 shares of DKK 1,000 each 44, shares of DKK 4,000 each 936, shares of DKK 5,000 each 90, shares of DKK 10,000 each 220, shares of DKK 50,000 each 4,350,000 5,640,000 Preference share capital: 513,600 shares of DKK 100 each 51,360,000 Total share capital 57,000, ANNUAL REPORT 2009

47 The entire world is our workplace and with our purchasing office in China and our foreign contacts, we make sure we have the right products and prices for our sales people Christian Holten, Product Range Manager ANNUAL REPORT

48 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND THE FINANCIAL STATEMENTS Of the company s share capital of DKK 57,000,000, DKK 5,640,000 is in the form of ordinary shares and DKK 51,360,000 is in the form of preference shares. Each ordinary share of DKK 1,000 carries 100 votes whereas each preference share of DKK 100 carries one vote. In addition to the difference in the number of voting rights, the two share classes differ in the following respects: The ordinary shares are non-negotiable instruments. The preference shares are listed on NASDAQ OMX Copenhagen A/S. The preference share capital has a preferential dividend right of 6%. In case of liquidation, preference shares take precedence over ordinary shares. Changes to the company s Articles of Association require that two thirds of cast votes and two thirds of the represented capital at an annual general meeting are in favour of the change. The company s Supervisory Board consists of five members who do not have to be shareholders. They are elected as follows: Holders of preference shares are entitled to appoint and elect one member of the Supervisory Board, while holders of ordinary shares elect the remaining board members. Treasury shares Number Nominal value (thousand DKK) % of share capital January 12,980 12,980 1,298 1, % 2.3% Purchase % 0.0% Sale % 0.0% Holding as at 31 December 12,980 12,980 1,298 1, % 2.3% All treasury shares are owned by Brødrene A & O Johansen A/S. In accordance with authorisation by the annual general meeting, Brødrene A & O Johansen A/S may acquire a maximum of an additional nominal amount of DKK 4,400,000 of treasury shares, equivalent to 10%. Dividend No dividend will be paid for The payment of dividend to the company s shareholders has no tax implications for Brødrene A & O Johansen A/S. Reserve for foreign currency translation adjustment The reserve for foreign currency translation adjustments includes all translation adjustments that arise as a result of the translation of the accounts of units using a functional currency other than Danish kroner. No translation adjustments take place for assets and equity and liabilities that represent part of the Group s net investment in such units. Other reserves Other reserves are distributable reserves that can be used for payment of dividend. 48 ANNUAL REPORT 2009

49 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND THE FINANCIAL STATEMENTS PARENT COMPANY CONSOLIDATED NOTE: Deferred tax 5,608 (832) Deferred tax as at 1 January 21,679 31,444 (2,330) 0 Correction, holiday pay obligation 0 (2,330) 0 0 Translation adjustment 94 (278) (3,797) (1,578) Change in deferred tax for the year (1,447) (6,844) 0 (55) Reduction of Swedish corporation tax from 28% to 26.3% (158) 0 (313) (3,048) Change in deferred tax relating to previous years (3,048) (313) (832) (5,513) Deferred tax as at 31 December 17,120 21,679 Deferred tax is recognised in the balance sheet as: (2,330) (10,541) Deferred tax (asset) (10,541) (2,330) 1,498 5,028 Deferred tax (liability) 27,661 24,009 (832) (5,513) 17,120 21,679 Deferred tax relates to: 0 0 Intangible assets 0 0 6,972 36,921 Property, plant and equipment 59,554 29,483 (1,376) (1,991) Receivables (1,991) (1,376) (4,098) (29,902) Liabilities (29,902) (4,098) (2,330) (10,541) Tax losses allowed for carryforward (10,541) (2,330) (832) (5,513) Deferred tax at the end of the year 17,120 21,679 The value of taxable losses have been recognised as it is considered likely that they can be realised. 19 Payables to credit institutions 2,390 18,170 Mortgage debt, mortgage credit institutions 144,717 74, , ,233 Loans 342, , , ,611 Lease commitments 119, , , , , ,997 Payables to credit institutions are recognised in the balance sheet in the following manner: 205, ,050 Non-current liabilities 329, , , ,964 Current liabilities 277, , , , , ,997 Financial lease Liabilities relating to assets held under a finance lease are therefore recognised as liabilities to credit institutions: 3,123 1,312 Less than 1 year 1,312 3,123 5,744 7,841 1 to 5 years 7,841 5, , ,458 More than 5 years 110, , , ,611 Total carrying amount 119, ,984 According to the lease, there is no contingent rent. The lease is described in detail in Note 12. The carrying amount of assets held under a finance lease appears from Note 12. ANNUAL REPORT

50 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND THE FINANCIAL STATEMENTS Note: 20 Contingent liabilities, security, etc. Land and buildings with a total carrying amount of DKK 321,758,000 (2008: DKK 284,240,000) are provided as security for the Group s payables to mortgage credit institutions. 21 Acquisition of subsidiaries 2009 Brødrene A & O Johansen A/S did not acquire any companies in Brødrene A & O Johansen A/S did not acquire any companies in ANNUAL REPORT 2009

51 We re going to work on the integration between AO, AO-Mavab and Ervex for the benefit of both existing customers and new customers Mikael Nyström, Outlet Manager ANNUAL REPORT

52 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND THE FINANCIAL STATEMENTS NOTE: 22 Currency and interest rate risks The Group s risk management policy As a result of its operations, investments and financing, the Group is exposed to changes in exchange rates and interestrate levels. It is Group policy not to undertake active speculation in financial risks. The Group s financial management therefore only concentrates on the management of financial risks that are directly linked to the Group s operations and financing. The Group has central control of financial risks. The overall framework for the financial risk management is laid down in the Group s finance policy, which has been approved by the Supervisory Board. The finance policy covers the Group s finance policy as well as its policy relating to credit risks associated with financial counterparties and contains a description of the approved risk framework. The Group uses a fully integrated finance management system for the management of financial positions. Management monitors the Group s risk concentration on customers, currencies and other areas on a monthly basis and any changes to the risk concentration. In 2009, changed and tighter risk management of customers was introduced to counter the Group s increased risk exposure as a result of the financial and socio-economic crisis. Currency risks The Group s currency risk in connection with Danish operations is limited as revenue is generated in Danish kroner and goods are primarily purchased in DKK or EUR. International activities are not much affected by currency fluctuations, as income and expenses are largely paid in local currency. When translating the result of international activities, the Group is affected by changes in the exchange rates. The Group does not use derivatives to hedge currency exposures. As regards investments in foreign entities, the Group s equity as at 31 December 2009 would be reduced with DKK 6 million (2008: DKK 5 million), if the SEK exchange rate was 10% lower than the current rate. Other currency risks relating to investments in foreign entities are insignificant. The Group had no major currency risks relating to receivables or payables in foreign currencies as at 31 December 2009, and the consolidated results would therefore not be affected to any major extent by changes in exchange rates as at 31 December The Group has the following currency exposure as at 31 December: 2009 EUR GBP USD NOK SEK OTHER TOTAL Trade payables 8, , ,957 Credit institutions 216,332 4,960 27, (4,506) 3, ,041 Net exposure 225,219 4,960 27,638 3,863 (3,851) 3, ,998 Estimated future development 1% 10% 10% 5% 10% 1% Estimated effect on income statement and equity 2, , (385) 32 5, ANNUAL REPORT 2009

53 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND THE FINANCIAL STATEMENTS NOTE: 22 Currency and interest rate risks (cont.) 2008 EUR GBP USD NOK SEK OTHER TOTAL Trade payables 12, ,740 Credit institutions 498,910 4,458 4, ,480 2, ,719 Net exposure 511,337 4,460 5, ,828 2, ,459 Estimated future development 1% 10% 10% 5% 10% 1% Estimated effect on income statement and equity 5, ,326 The Group s currency and interest rate risks related to financial instruments are primarily a result of the Group s financing activities. The parent company s currency exposure is identical to that of the Group. Interest rate risks As a result of its investment and financing activities, the Group has a risk exposure relating to fluctuations in the interest-rate level in Denmark. The main interest rate exposure is related to fluctuations in CIBOR. In 2009, the Group s interest-bearing debt, determined as payables to credit institutions less negotiable securities, cash at bank and in hand and receivables relating to sales and lease-back were reduced to DKK million from DKK million in Based on the net debt, an increase of one percentage point in the general interest-rate level would result in an increase in the Group s annual interest expenses before tax of approximately DKK 6.0 million (2008: approximately DKK 7.5 million). Liquidity risks It is the Group s policy when borrowing to ensure maximum flexibility by spreading the loans on different maturity/renegotiation dates and on different lenders to ensure the best possible terms. The Group s liquidity reserves comprise cash and cash equivalents, securities and unexercised credit facilities. It is the Group s aim to have sufficient liquidity reserves in order to make appropriate decisions also in connection with unforseen liquidity fluctuations. ANNUAL REPORT

54 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND THE FINANCIAL STATEMENTS NOTE: 22 Currency and interest rate risks (cont.) The Group s liabilities fall due as follows: 2009 Carrying Contractual amount cash flows Less than 1 year 1 to 5 years More than 5 years Credit institutions 487, , , , ,884 Financial lease commitments 119, ,327 7,608 38, ,681 Trade payables 128, , , December 735, , , , , Carrying Contractual amount cash flows Less than 1 year 1 to 5 years More than 5 years Credit institutions 771, , ,798 91, ,408 Financial lease commitments 122, ,963 9,410 30, ,441 Trade payables 45,314 45,314 45, December 939,311 1,100, , , ,849 Proceeds from financial leases, DKK million were received in 2009 and were used to reduce the Group s payables to credit institutions. The Group s liabilities fall due as follows: 2009 Carrying Contractual amount cash flows Less than 1 year 1 to 5 years More than 5 years Credit institutions 362, , ,568 67,853 44,972 Financial lease commitments 119, ,327 7,608 38, ,681 Trade payables 121, , , December 603, , , , , ANNUAL REPORT 2009

55 The Albertslund head office - with corresponding administration, outlet store and central warehouse of 78,000 m 2 ANNUAL REPORT

56 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND THE FINANCIAL STATEMENTS NOTE: 22 Currency and interest rate risks (cont.) Carrying amount Contractual cash flows 2008 Less than 1 year 1 to 5 years More than 5 years Credit institutions 697, , ,597 62,452 48,231 Financial lease commitments 122, ,963 9,410 30, ,441 Trade payables 40,626 40,626 40, December 860, , ,633 92, ,672 Assumptions applying to the maturity analysis: The maturity analysis is based on all undiscounted cash flows, including estimated interest payments. Interest payments are estimated based on current market conditions. Based on the Group s expectations for future operations and the Group s current liquidity reserves, no major liquidity risks have been identified. Group loans and guaranteed credit facilities are not subject to special terms or conditions (covenants). Credit risks The Group s credit risks relate to both receivables and cash at bank and in hand. The maximum credit risks associated with financial assets correspond to the values recognised in the balance sheet. The Group has no major risks relating to individual customers or business partners. Credit is granted according to individual rating of customers and business partners and their respective financial situation. The management of the credit risk is based on internal credit limits determined according to the customers credit rating. As a result of the current market situation, the Group has amended its credit limits for a number of customers. If the credit rating of a customer is assessed as being insufficient, the terms of payment are amended or security is obtained. The Group s credit exposure to customers is monitored on an ongoing basis as part of the Group s risk management. In certain cases, the Group receives security for sale on credit, and received security is recognised in the assessment of the write-downs necessary to meet losses. Such security may consist of financial guarantees or contracts of surety. The maximum credit risk is reflected in the carryingamount of the individual financial assets recognised in the balance sheet. In general, no security has been received for overdue or impaired receivables. No receivables were renegotiated in 2009 or Fair values The Group has the following financial instruments measured at fair value; securities consisting of listed securities forming part of level 1 according to the fair value hierarchy. The fair value of financial instruments is approximately equal to the carrying amount. See also Note ANNUAL REPORT 2009

57 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND THE FINANCIAL STATEMENTS NOTE: 22 Currency and interest rate risks (cont.) Categories of financial instruments Carrying value Fair value Carrying amount Fair value Securities (fair value) 5,234 5,234 8,955 8,955 Financial assets measured at fair value in the income statement 5,234 5,234 8,955 8,955 Trade receivables 289, , , ,870 Other receivables 44,372 44,372 25,481 25,481 Receivables, sales and lease-back , ,060 Cash at bank and in hand 5,535 5,535 7,925 7,925 Loans and receivables 339, , , ,336 Credit institutions 487, , , ,013 Financial lease commitments 119, , , ,984 Trade payables 128, ,790 45,314 45,314 Financial liabilities measured at amortised cost 735, , , ,311 ANNUAL REPORT

58 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND THE FINANCIAL STATEMENTS NOTE: 23 Operational leases Interminable, operational minimum lease payments can be specified as follows: The Group leases buildings and operating equipment under operational leases. The term of the leases vary between years with the possibility of extending at the end of the term. None of the leases contain contingent rent. Consolidated Parent company year 19,625 22,426 34,656 33, years 27,414 30,515 27,414 30,615 > 5 years 11,960 16,446 11,960 16,442 58,999 69,387 74,030 80,563 In 2009, the consolidated income statement recognised DKK 27,989,000 (2008: DKK 30,977,000) concerning operational leases. In 2009, the income statement of the parent company recognised DKK 50,151,000 (2008: DKK 59,147,000) concerning operational leases. 24 Related parties Related parties in the Group include Evoleska Holding AG, the Supervisory Board, the Executive Board and management employees. Evoleska Holding AG has a controlling influence in the company via its ownership of the majority of the votes. No transactions were carried out with Evoleska Holding AG in the course of the year. During the year, no transactions were carried out with the Supervisory Board, the Executive Board, management employees or major shareholders apart from normal management remuneration, cf. Note 6. In addition, group enterprises also constitute related parties to the parent company. Trading with group enterprises comprises the following: Consolidated Parent company Sale of goods to group enterprises - - (106) 371 Rent to group enterprises ,162 28, ANNUAL REPORT 2009

59 Our logistics centre in Horsens. 17,000 m 2 below roof and 200,000 m 2 in total ANNUAL REPORT

60 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND THE FINANCIAL STATEMENTS NOTE: 24 Related parties (continued) Transactions with group enterprises are eliminated in the consolidated financial statements in accordance with the accounting policies. The parent company s balances with group enterprises as at 31 December can be seen in the balance sheet. Balances with group enterprises comprise ordinary trading balances related to the sale of goods. Ordinary trading balances are not subject to interest and are subject to the same terms of trade as other customers of the parent company. Balances with group enterprises also comprise the construction and refurbishment of buildings. The interest on balances appears from Note 9. The parent company has entered into building leases with AO Invest A/S, cf. Note Subsequent events No events have occurred after 31 December 2009 that are considered to have any significant effect on the 2009 annual report. 26 New accounting regulations IASB has issued the following new accounting standards (IAS and IFRS) and interpretations (IFRIC). These are not compulsory for Brødrene A & O Johansen A/S as regards the 2009 annual report: IFRS 3, amendments to IAS 27; several amendments to IAS 32 and 39 as well as IFRIC 9; amendments to IFRS 2; amendments to IFRS 1; parts of improvements to IFRSs (May 2008); improvements to IFRSs (April 2009); IFRIC 17-19; amendment to IFRIC 14; revised IAS 24 and IFRS 9. Amendments to IFRS 2; amendments to IFRS 1; improvements to IFRSs (April 2009); IFRIC 19; amendments to IFRIC 14; revised IAS 24 and IFRS 9 have not yet been approved by the European Union. Brødrene A & O Johansen A/S expects to implement the new accounting standards and interpretations when they become compulsory. The standards and interpretations that are approved with a different effective date in the European Union than the similar IASB effective dates will be implemented at an earlier date to coincide with IASB effective dates. None of the new standards or interpretations are expected to have a major influence on the financial reporting for Brødrene A & O Johansen A/S. 60 ANNUAL REPORT 2009

61 COMPANY INFORMATION Brødrene A & O Johansen A/S Rørvang 3 DK-2620 Albertslund Tel: Fax: Website: CVR No: ID code: DK Founded: 1914 Registered office: Albertslund Supervisory Board Henning Dyremose, Chairman Michael Kjær, Deputy chairman René Alberg Thomas Drue Erik Holm Carsten Jensen Niels A Johansen Preben Damgaard Nielsen Executive Board Niels A Johansen, Chief Executive Officer Morten Chrone, Chief Commercial Officer Auditors KPMG Statsautoriseret Revisionspartnerselskab Kurt Gimsing Annual General Meeting The annual general meeting is scheduled for 25 March ANNUAL REPORT

62 AO OUTLETS AND OFFICES AO OUTLETS AND OFFICES HEAD OFFICE AND LOGISTICS CENTRE Brødrene A & O Johansen A/S Rørvang 3 DK-2620 Albertslund Tel: Fax: ao@ao.dk Brødrene A & O Johansen A/S Logistics Centre West Mossvej 2 DK-8700 Horsens Tel: Fax: Competence centres: East Tel: West Tel: Outlets, EAST AO-Albertslund Rørvang 3 DK-2620 Albertslund Tel: Fax: AO-Amager Prags Boulevard 53 DK-2300 Copenhagen S Tel: Fax: AO-Ballerup Tempovej 27 DK-2750 Ballerup Tel: Fax: AO-Frederiksberg Finsensvej 86 DK-2000 Frederiksberg Tel: Fax: AO-Frederikssund Centervej 44 DK-3600 Frederikssund Tel: Fax: AO-Frederiksværk Nørregade 37 DK-3300 Frederiksværk Tel: Fax: AO-Greve Håndværkervænget 20 DK-2670 Greve Tel: Fax: AO-Helsingør Ellehammersvej 2 A DK-3000 Helsingør Tel: Fax: AO-Hillerød Frejasvej 23 A DK-3400 Hillerød Tel: Fax: AO-Holbæk Tækkemandsvej 3 DK-4300 Holbæk Tel: Fax: AO-Hvidovre Gl. Køge Landevej 362 DK-2650 Hvidovre Tel: Fax: AO-Hørsholm Ådalsvej 50 DK-2970 Hørsholm Tel: Fax: AO-Kastrup Englandsvej 360 DK-2770 Kastrup Tel: Fax: AO-Køge Københavnsvej DK-4600 Køge Tel: Fax: AO-Lyngby Firskovvej 25 DK-2800 Lyngby Tel: Fax: AO-Nykøbing F Århusvej 19 N DK-4800 Nykøbing F Tel: Fax: AO-Næstved Holsted Park 6 DK-4700 Næstved Tel: Fax: AO-Nørrebro Lygten 37 DK-2400 Copenhagen NV Tel: Fax: AO-Ringsted Industriparken 1 DK-4100 Ringsted Tel: Fax: AO-Roskilde Københavnsvej 170 DK-4000 Roskilde Tel: Fax: AO-Rødovre Hvidsværmervej 165 DK-2610 Rødovre Tel: Fax: AO-Rønne Sandemandsvej 10 A DK-3700 Rønne Tel: Fax: AO-Slagelse Karolinevej 2 B DK-4200 Slagelse Tel: Fax: AO-Vesterbro Ingerslevsgade 54 DK-1705 Copenhagen V Tel: Fax: AO-Vordingborg Krondrevet 1 DK-4760 Vordingborg Tel: Fax: AO-Østerbro Østbanegade 169 DK-2100 Copenhagen Ø Tel: Fax: Outlets, WEST AO-Esbjerg Kvaglundvej 82 DK-6705 Esbjerg Tel: Fax: AO-Fredericia Prangervej 143 DK-7000 Fredericia Tel: Fax: AO-Haderslev Norgesvej 41 DK-6100 Haderslev Tel: Fax: AO-Herning Lollandsvej 1 DK-7400 Herning Tel: Fax: AO-Hjørring Læsøvej 3 DK-9800 Hjørring Tel: Fax: AO-Hobro Smedevej 4 DK-9500 Hobro Tel: Fax: AO-Holstebro Jens Baggesens Vej 12 DK-7500 Holstebro Tel: Fax: AO-Horsens Allégade 40 DK-8700 Horsens Tel: Fax: AO-Kolding Mønten 5 DK-6000 Kolding Tel: Fax: AO-Nyborg Falstervej 10 E DK-5800 Nyborg Tel: Fax: AO-Odense Middelfartvej 8 DK-5000 Odense C Tel: Fax: AO-Randers Toldbodgade 24 DK-8930 Randers Tel: Fax: AO-Risskov Ravnsøvej 7 DK-8240 Risskov Tel: Fax: AO-Silkeborg Stagehøjvej 27 DK-8600 Silkeborg Tel: Fax: AO-Skive Viborgvej 21 C DK-7800 Skive Tel: Fax: AO-Sønderborg Nørrekobbel 7 D DK-6400 Sønderborg Tel: Fax: AO-Vejle Sjællandsgade 25 B DK-7100 Vejle Tel: Fax: AO-Viborg Vævervej 2 DK-8800 Viborg Tel: Fax: AO-Aabenraa Næstmark 21 DK-6200 Aabenraa Tel: Fax: AO-Aalborg Sønderbro 2 A DK-9000 Aalborg Tel: Fax: AO-Århus Søren Frichs Vej 24 DK-8000 Århus C Tel: Fax: ATLANTIS Atlantis-Albertslund Rørvang 3 DK-2620 Albertslund Tel: Fax: Atlantis-Hillerød Frejasvej 23 A DK-3400 Hillerød Tel: Fax: AO-VAGA Vaga Teknik Mossvej 2 DK-8700 Horsens Tel: Fax: Fax: (Workshop) VAGA TEHNIKA EESTI OÜ Vaga Tehnika Eesti OÜ Kadaka tee 76 E EE Tallinn Estonia Tel: Fax: AO-MAVAB AO-MAVAB Box 12 SE Tågarp Sweden Tel: Fax: AO-MAVAB Bronsyxegatan 6 A SE Malmö Sweden Tel: Fax: AO-MAVAB Svetsarevägen 1 SE Kristiansstad SWEDEN Tel: Fax: ERVEX Ervex AB Brodalsvägen 15 SE Partille Sweden Tel: Fax: Ervex i Borås AB Regementsgatan 24 SE Borås Sweden Tel: Fax: SEKO EL & VVS SEKO EL & VVS Rørvang 3 DK-2620 Albertslund Tel: (electrical products) Tel: (heating, plumbing and sanitary ware products) Fax: RENTAL SERVICE Brødrene A & O Johansen A/S Rental Service Herstedvang 6 DK-2620 Albertslund Tel: Fax: REPAIR WORKSHOP Brødrene A & O Johansen A/S Service Workshop Herstedvang 6 DK-2620 Albertslund Tel: Fax: LASER WORKSHOP Brødrene A & O Johansen A/S Laser Workshop Kvaglundvej 82 DK-6705 Esbjerg Ø Tel: Fax: ANNUAL REPORT 2009

63 ANNUAL The market is undergoing a dramatic development. The will to change is no longer an option it s a necessity Niels A Johansen, Chief Executive Officer REPORT