5 Year Figures - Group 2013
2012
2011
2010
2009
Profit and Loss Account Gross Revenue Gross Profit Operating Profit before Depreciation (EBITDA) Operating Profit (EBIT) Annual Profit
483,5 275,0 147,5 76,5 55,7
459,0 269,0 145,8 72,8 32,8
433,7 248,2 125,8 55,4 50,9
433,8 248,5 117,7 51,4 7,0
420,6 230,0 103,3 37,9 -32,1
Balance Sheet Fixed Assets Investment in tangible assets Current Assets Total Assets Equity
564,0 29,2 243,2 807,3 405,2
593,2 61,1 250,7 843,8 379,6
615,3 97,3 180,8 796,1 376,8
640,0 96,8 149,0 789,0 334,9
677,0 92,4 127,5 804,5 333,9
Cash Flow From Operations From Investments From Financing Change in Liquid Assets Free cash flow
138,5 -41,7 -93,4 3,5 96,8
162,7 -68,4 -30,7 63,6 94,0
127,8 -68,8 -26,5 32,6 59,1
107,4 -57,9 -24,2 25,4 49,5
88,7 -67,8 -19,5 1,5 21,0
Key Figures EBITDA Margin Net Profit Ratio Return on Investments Current Ratio Solvency Ratio
30,5 15,8 9,5 159,5 50,2
31,8 15,9 8,6 149,0 45,0
29,0 12,8 7,0 155,8 47,3
27,1 11,8 6,5 137,8 42,4
24,6 9,0 4,7 125,8 41,5
14.143 38.574 263 1,838 0,212
14.546 38.789 260 1,765 0,126
14.804 38.716 262 1,655 0,194
16.255 37.471 266 1,631 0,026
16.792 36.525 291 1,445 -0,110
Company Particulars Fixed-network telephone customers Mobile telephone customers Full-time employees Revenue per employee (DKK m.) Result per employee (DKK m.)
All numbers in MDKK Net profit ratio Return on investment Current ratio Solvency ratio
= = = =
(operating profit x 100)/gross revenue (operating profit x 100)/total assets (current assets x 100)/short-term debt (equity including minority shareholders X 100)/total assets
Table of content Management’s Review 2013................................................................................................................... 4 FT Samskifti – A Steady Market .............................................................................................................. 7 FT Net – Quality and Transparency ......................................................................................................... 9 Shefa – Solid Connections to the Rest of the World ............................................................................. 10 Televarpið – A Year of Transition .......................................................................................................... 11 Risk Management ................................................................................................................................. 12 Environmental Responsibility ............................................................................................................... 13 The Financial Year 2013 ........................................................................................................................ 14 Management’s Statement .................................................................................................................... 16 Independent Auditor’s Report .............................................................................................................. 17 Income statement ................................................................................................................................. 19 Balance sheet ........................................................................................................................................ 20 Cash flow statement ............................................................................................................................. 22 Notes to the Annual report ................................................................................................................... 23 Accounting Policies ............................................................................................................................... 29 Board of Directors and Management ................................................................................................... 33
Company Information Registered name: P/F Telefonverkið · Registration number: 2697 Brand name: Føroya Tele · Address: Klingran 1-5, 188 Hoyvík Municipality: 100 Tórshavn · Tel +298 303030 · Fax: +298 303031 Website: www.ft.fo · E-mail: ft@ft.fo
Faroese Telecom Group Annual Report and Accounts 2013
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Management’s Review 2013 Financial Highlights 2013
Revenue Total Costs Results before provisions Free cash flow
DKK 482 m DKK 336 m DKK 147 m DKK 97 m
Faroese Telecom delivered strong results in 2013 with good growth in revenue and operations becoming more efficient. Faroese Telecom has rationalised operations in the past several years in order to offer our customers simple, safe and lasting solutions. This effort is now bearing fruit, and customers in the Faroes will now reap the benefits of these rationalisations. Before taxes the result was DKK 72 million. Profits after taxes were DKK 55 million in 2013. This result is a significant improvement on the previous year, when profits after taxes were DKK 32.8 million. Increased sales is one factor in the improved results. However, the restructuring of the company over the last several years is also a major contribution to the strong results. Consequently, Faroese Telecom is today a stronger company.
A Focused Business In 2013 Faroese Telecom has continued to execute the company’s strategy, focusing on enhancing the core services tied to the infrastructure and network, which the company owns, administers and develops. Faroese Telecom’s overall strategy states: • • •
We place the customer at the centre of all our activities We strengthen our position as a fullservice provider We develop the skills to create simple solutions
To focus on business activities that are at the core of our competence, Faroese Telecom has chosen to divest itself of ventures that
Dividend Profit before/after taxes Full time employees
DKK 30 m DKK 72/56 m 263
otherwise divert our attention from our primary services. Therefore, the news site Portal.fo, which Faroese Telecom has owned since the turn of the millennium, has been sold.
Our Lifeblood is in the Cables Faroese Telecom’s network consists of a plethora of land-based lines, cables and antennas. This infrastructure is the prerequisite for strong telephony, broadband and mobile broadband services. Likewise, Faroese Telecom’s subsea cables are the arteries connecting the islands to the rest of the world. Contact with the rest of the world is ensured through three cables: Shefa2, Farice and Cantat-3. Most of the Internet traffic goes through the Shefa cable whereas the other cables function as back-up. The cables are of pivotal importance to Faroese society, a charge Faroese Telecom takes with the utmost seriousness. Since the Shefa cable, which Faroese Telecom owns, was put into operation in 2007, it has malfunctioned on average twice a year. Fishing vessels are usually the cause for the faults, the cable being caught in their equipment and cut in two. By marking were the cable is laid and through other information we have tried to prevent such faults but in 2013 there have again been several malfunctions. The Shefa cable has malfunctioned in total 15 times since 2007. To improve this situation Faroese Telecom will reroute parts of the cable in 2014. Preliminary explorations are being conducted in the areas where most of the incidents have occurred. When these are completed, the plan is to secure the cable better into the seabed where
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possible, and otherwise position it where it is the least vulnerable.
Digital TV for Everyone Faroese Telecom has entered an agreement with the Ministry of Education, Research and Culture to expand Televarpið’s (Faroese Telecom’s television provider) digital network, so it encompasses all the islands. In the future Kringvarpið, the Faroese national television, will solely transmit through this network, and the analogue network will be shut down. People will therefore need to have an antenna and the equipment necessary to receive the digital signal; however, they will not need a Televarpið subscription. Televarpið has continually expanded its network, which in recent years has covered approximately 95 % of Faroese households. After further developments in 2013, 97.4 % of the population now has access to Televarpið. The goal is that by 2015 all households in the Faroes will have access to the network, so everyone will be able to use it, when the analogue signal is turned off. Additionally, Televarpið has upgraded its transmission network to MPEG-4 technology to ensure it can meet future demands, also freeing capacity for new channels and better quality.
location of the islands. We are a sparsely populated island community with fjords and mountains. Therefore, there are fewer people to bear the cost for the development of the network demanded by the islands’ remote location and topography. A comparative study conducted by the Faroese Competition Authority in 2013 has shown that wholesale prices in the Faroes are in fact reasonable compared to neighbouring countries. The study confirmed that landline and internet prices are comparable to prices in neighbouring countries. The rates for mobile telecommunications on the other hand are too high in the Faroes. Faroese Telecom therefore aims to offer its customers mobile telecommunications services at more competitive rates. The services will be tailored to match value with rates, providing customers with a range of simple products to choose from.
Telecommunication Costs and FT Net FT Net, a Faroese Telecom subsidiary, operates the telecommunications network with the objective to ensure that all service providers have equal access to the network. The purpose of FT Net is to guarantee that all providers receive the same access to the network under identical conditions and rights.
Televarpið has also re-bundled its packages in 2013, replacing the well-known colour labelled packages with new ones: a basic, a family and a large package. The packages have been re-bundled in order to adapt to changes in the market and offer a package structure that meets our customers’ needs. The basic package gives primarily access to the Nordic public service channels at a reasonable price, the family package aims to meet the general needs of a family, while the large package provides access to a great selection of football matches and movies—it also includes a netbased TV service.
The comparative study conducted by the Telecommunications Authority in 2013 showed that wholesale prices are not the reason for the high telecommunication costs in the Faroes. The study showed that wholesale prices in the Faroes are by and large on the same level as in the neighbouring countries.
Price Cuts
Retaining FT Net within the Faroese Telecom group makes it possible to meet certain demands that otherwise could not be fulfilled. Today, Shefa provides services for the offshore industry, both in the waters west of
It is a fact that telecommunication services are more expensive in the Faroes than in the neighbouring countries and Europe as a whole. This is partly due to the remote
Charges against Faroese Telecom have been filed with the Faroese Competition Authority for abusing its ownership of the telecommunications network, but these charges have never been upheld.
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the Shetland Islands and in the Danish part of the North Sea. These services not only demand specialised knowledge and competences but also a company of a certain size. Faroese Telecom, as a group, is able to meet these needs but, in case the group was split, it would be difficult for any one of the subsidiaries to do so on their own. These services to the oil industry provide the Faroes with revenue needed to finance necessary investments. In conclusion, the Faroese Telecom board believes it will greatly harm the Faroese telecommunication network if FT Net is split from Faroese Telecom. A variety of
competences are necessary to operate and continually develop a cutting edge telecommunications company. Also, in order to invest in new technology and cable connections, you need a large and financially strong company. Therefore, before the political system makes a decision to separate the network from Faroese Telecom, it must carefully consider the consequences of such a move, what it will cost to operate and develop the telecommunications network in the Faroes and what risks are involved in such a move.
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FT Samskifti – A Steady Market Faroese Telecom’s retail services are formally organised in the subsidiary, FT Samskifti, to secure transparency in the group’s revenues and cost and to be able to verify that FT Samskifti buys services from FT Net on terms comparable to other service providers. FT Samskifti covers both the private and corporate sectors
The Market Landline subscriptions are, as in previous years, declining, while a slight increase is seen in mobile and broadband subscriptions. Data services have also been on the increase the past year. Faroese Telecom’s market share has remained relatively stable. According to the latest available statistics from the Telecommunications Authority of the Faroe Islands for the final six months in 2013, there are only minor shifts between the companies who compete in the telecommunications sector. According to the statistics, Faroese Telecom had 14,652 landline subscriptions in December 2013 compared in 15,040 at yearend 2012. Although this is a reduction of landline subscriptions, Faroese Telecom’s market share is exactly the same, 80.5 %. Faroese Telecom’s mobile subscriptions increased from 40,523 at year-end 2012 to 42,714 in December 2013. And the company’s market share increased from 69 % in 2012 to 70.3 % in December 2013. Broadband subscriptions increased marginally from 12,687 in December 2012 to 13,026 in December 2013, which in both cases is a market share of approximately 78 %.
The Private Sector In the private sector Faroese Telecom continues to invest energy in order to be on the forefront of developing already existing services as well as offering new services to our customers.
The number of fixed-line customers continues to decline; however, this reduction is not as dramatic as in other countries. NetTala, a VoIP service making it possible for our customers to make calls over the Internet, is now also available to our private customers. This is a service that is especially good for customers who often are abroad, whether in work errands or during their studies. They now have an alternative option to their mobile phones, when they call the islands. NetTala may also be a viable alternative to the landline connection. Faroese Telecom has invested in a new prepaid charging system. This radical overhaul provides a range of new services to our prepaid customers; they can now e.g. purchase data packages for mobile broadband and gain access to roaming services. This system will be expanded further in the future. Broadband is now also available for vacation homes, where customers can turn it on and off as needed, paying only for it when it is turned on. Faroese Telecom’s mobile broadband network, called 3G+, has been expanded and covers now about 97% of the population. The villages of Árnafjørður, Haraldssund, Hvítanes, Kvívík, Lambi, Leynar, Skálavik, Stykkið and Sumba received 3G+ in 2013.
The Corporate Sector Great emphasis has been placed on improving the service level for and interaction with our corporate customers. To reach this goal all employees now use a new CRM system that helps them to focus on maintaining satisfied customers. The NetTala switchboard solution for our larger corporate customers has gone through a significant development in 2013. NetTala is a hosted telephony solution that allows our customers to make all their telephone calls over the Internet. NetTala is a secure system with excellent voice quality. NetTala is also a
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flexible system that can coordinate fixed-line phones, wireless phones, softphones and GSM. NetTala also includes a large bundle of options such as various message options, call history and simultaneous calls. NetTala can now also used together with TotalView, a service provided by from Formula, which many Faroese companies and institutions today use for call status, time management, vacation days, sick leave, etc.
Hosted solutions are part of our effort to be a full-service provider. We establish stronger ties with our customers, who receive more effective advice, services, support and maintenance. Faroese Telecom’s SjóNet service has been expanded at the same time as a new larger package is offered. The new package is tailored for ships and boats that need to be constantly on-line.
Development in Subscription Numbers at Year-end
Televarp Subscriptions 12.000 10.000 8.000 6.000 4.000 2.000 -
Fixed-Line Subscriptions 18.000 16.000 14.000 12.000 10.000 8.000 6.000 4.000 2.000 -
2008 2009 2010 2011 2012 2013
2008 2009 2010 2011 2012 2013
Internet Subscriptions 14.000 12.000 10.000 8.000 6.000 4.000 2.000 -
Mobile Subscriptions 50.000 40.000 30.000 20.000 10.000 -
2008 2009 2010 2011 2012 2013
2008 2009 2010 2011 2012 2013 Postpaid
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Prepaid
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FT Net – Quality and Transparency When FT Net was incorporated as a separate subsidiary of the group the primary purpose was to ensure complete transparency between network and service operations. This was done in order to ensure that all service providers have equal access to the network, enjoying the same terms and conditions. FT Net also takes the responsibility to ensure that the Faroese network is continually updated, expanded and future-proofed, all to the benefit of the Faroese society.
Preparation for the repair work commenced in early 2013, and the subsea cable between Gomlurætt and Skopun was repaired in October, restoring the fibre connection to Sandoy and Suðuroy. The subsea cable between Miðvágur and Hvalba was repaired in November. This means that Suðuroy again has two telecommunication connections to depend on. Until the cables were repaired, telecommunication connections to Sandoy and Suðuroy were conducted by radio signal.
The Faroes are an island community with mountains, fjords and straits. Therefore, it is more costly to expand a good network that reaches every nook and cranny of the islands. In Denmark you can reach thousands of customers with one antenna, but that is not possible in the Faroes, due to our different topography. Despite this, the Faroes have a good and advanced network, the envy of many other countries. This becomes evident when we interact with telecoms in other countries. Already in 2010 we had 100 % broadband coverage. Now the aim is to increase the capacity and speed.
The cable was repaired in cooperation with Faroe Islands Fishery Inspection. The coast guard vessel Brimil has obtained specialised equipment, which means that the Faroes no longer need to seek outside help in repairing the cables. This is a great advantage, since it is both expensive and difficult to hire foreign cable ships to repair subsea cables.
In 2013 FT Net has continued to expand the fibre network, the villages of Elduvík, Leynar and Sandvík now have fibre access. In order to better our telecommunication services, a new technical station was built in the village of Leynar.
In 2013 preparation were made to invest in the expansion of the VDSL2 broadband network for the next few years. FT Net’s customer base is businesses that provide telecommunication services to their customers. Currently, FT Net has contracts with FT Samskifti, Vodafone, Elektron and other suppliers, who all have access to the network on equal terms. FT Net also services internal tasks in the Faroese Telecom group, such as management, maintenance, construction and service engineering.
There were problems with the connection to the island of Suðuroy in both 2012 and 2013 due to faults in the subsea cables.
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Shefa – Solid Connections to the Rest of the World Shefa owns two international subsea cables. The Shefa-2 cable connects the Faroes to the Scottish mainland and was put into operation in 2008. Most of the Faroese telecommunications with the rest of the world goes through this cable. In 2012 Faroese Telecom also took over the Cantat-3 cable. It has been a good solution for Faroese Telecom on several accounts, e.g. to provide added security for Faroese telecommunication to the rest of the world. Faroese Telecom has also purchased capacity in the Farice-cable. It is necessary to have access to several cables to make the connections secure and stable. A modern society cannot function without being able to communicate with the rest of the world. Therefore, it is necessary to have access to several cables, since it is not uncommon that seabed cable break or malfunction.
In addition to providing services in the Faroes, Shefa has also a number of customers abroad. Shefa cooperates e.g. with several oil companies who have oil and gas terminals in the Orkneys and the Shetland Islands. And telecommunication services are provided to oil platforms in the Danish part of the North Sea through the Cantat-3 cable. In 2013 the Shefa cable defaulted 4 times near the Orkneys. Never before has the cable malfunctioned that often. To avoid this in the future and since Shefa is adamant about providing strong and secure communication connections to the whole world, the cable will be rerouted in order to minimise further faults.
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Televarpið – A Year of Transition Televarpið has transmitted satellite television since 2002 and offers a wide range of channels, bundled in different subscription packages, tailored for the Faroese consumer. During these years a large part of the Faroese population has become Televarpið customers. By year-end 2013 there were 9,398 customers compared to 9,649 at year-end 2012, i.e. a small decline in subscriptions. However, the number of subscriptions was on the increase in the second half of 2013. Televarpið is the largest TV service provider in the Faroes and reaches approximately 97% of households. 2013 has been an eventful year for Televarpið. In addition to spending resources on securing and expanding the network so it reaches the whole country, all TV-channels were transferred to MPEG-4 technology, the subscription packages were bundled anew, a new net-based TV service was added to the largest subscription package, sending channels in HD was commenced and Televarpið got a new logo and website. An agreement was made with the Ministry of Education, Research and Culture that the company’s digital network would cover the whole country by 2015, so that the Ministry’s analogue network can finally be shut down. In
several rounds 33 analogue stations were turned off in 2013. According to plan, another 13 will be turned off in 2014 and the remaining in 2015. The transition to MPEG-4 technology was made in three rounds in 2013. The last transition was conducted on 11 September 2013. As the transitions were made, new channels were added to the various subscription packages, and capacity was freed to send some channels in HD. When the transition to MPEG-4 was completed, Televarpið bundled the subscription packages anew, now offering three subscription packages compared to the previous four. Customers with the largest subscription package also have access to netbased TV, a new service, which makes it possible to watch selected cannels on computers and tablets at home. Customers must have a subscription with a broadband provider to enjoy this streaming service. Televarpið will continue to develop its network in 2014 in order to meet the agreement with the Ministry of Education, Research and Culture that coverage will be nationwide. Energy will also be spent on developing new streaming services.
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Risk Management General risk
Financial risk
Faroese Telecom is dependent of numerous technologies. Some investments in technologies may prove not to have the life expectancy that was expected or do not yield profit as hoped. This may be due to changed technological conditions. Progress can also have a negative effect, if Faroese Telecom does not keep abreast with recent developments, especially when compared with companies with which the group is in direct competition.
The group is subject to changes in currency value and interest margin through operations, investments and funding. It is not in accordance with group politics to speculate in financial risks. Financial risk management only exists to manage the financial risks that the company has already taken upon itself in the best way possible.
Currency risk
Faroese Telecom is also linked to the Faroese economy because the majority of its revenue and business are in the Faroes. This renders the company more sensitive to fluctuations in the Faroese economy. Whatever the outcome Faroese Telecom must be able to manage any risk accordingly and is continually working to reduce all risks.
The bulk of Faroese Telecom’s activities are in the Faroes and most of transactions are conducted in Danish Kroner. Other transactions are in Euros, US Dollars and British Pounds. Having considered transactions in other currencies than the Danish Krone and their attended risks, these are not considered material to the financial position of Faroese Telecom and these currencies are accordingly not hedged.
Infrastructure risk
Interest risk
Because of their remote location, the Faroe Islands are dependent on stable subsea cables to the mainland. Therefore, the Faroe Islands and Faroese Telecom are exposed to the risk of losing telecommunication and data connections to the rest of the world.
Since the group has loans, changes in interest rates can influence Faroese Telecom’s financial position. Faroese Telecom has the majority of its loans in fixed interest rate loans, to better secure against interest rate fluctuations.
Faroese Telecom owns two cables connecting the Faroe Islands with the mainland, Shefa-2 and Cantat-3, which was taken over in 2012. Furthermore, additional capacity is purchased on the Farice subsea cable between Iceland, the Faroe Islands and Scotland. Thus, there are now three subsea cable connections available, which reduces the risk considerably.
Credit risk The group has no significant risks by any particular customer or business partner. The group monitors its receivables closely.
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Environmental Responsibility The Environment As one of the major corporations in the Faroes, Faroese Telecom takes the responsibility to be on the forefront in environmental concerns. Our goal is to utilise every resource fully, use energy responsibly, tend our grounds well and be exemplary in our environmental conduct.
The company has also tried out an electric car. The car has been used for in-town errands, and has proven to be as efficient and suitable as the other cars. The car’s environmentally friendly profile is one factor in the decision to add an electric car to the fleet when a vehicle needs to be replaced.
Faroese Telecom’s overall aim is to initiate measures to minimise electricity consumption and protect the environment. Making the cooling system more efficient has proven more demanding and difficult than first expected. However, it is now sufficiently improved for the free cooling system to be put into operation early in 2014.
In a company of Faroese Telecom’s size, paper consumption is high. Therefore, everyone is asked to print out only what is necessary and all paper products are recycled. The organic waste from Faroese Telecom’s restaurant and the cut grass from the compound’s grounds are composted on site. In general, every effort is made to dispose of waste in an as environmentally friendly manner as possible.
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The Financial Year 2013 Faroese Telecom has delivered strong financial results in 2013 and has become significantly more efficient. This is necessary to ensure that Faroese Telecom in the future can provide easy-touse, high-quality, value-for-money telecommunication services.
Revenue Faroese Telecom’s revenue in 2013 was DKK 483 million compared to DKK 460 million in 2012, i.e. an increase of just over DKK 23 million or 5 % compared to 2012.
Costs Total costs were DKK 336 million in 2013. Compared to the previous year, this is an increase of DKK 17 million or 5 %. Wages and other staff costs increased in 2013 by DKK 4 million compared to 2012 but remains about DKK 3 million lower than in 2010. This is a result of a continued effort to make operations more efficient. Profit before depreciations (EBITDA) was DKK 148 million in 2013 compared to DKK 146 million in 2012. This is an increase of DKK 2 million or 1 %. Depreciations of fixed assets decreased from DKK 73 million in 2012 to DKK 71 million in 2013. Profit before interest and taxes (EBIT) was DKK 77 million in 2013 compared to DKK 73 million in 2012. This is an improvement of 5 % compared to 2012.
Financials and Extraordinaries Results from equities in associated companies show a profit of DKK 1 million in 2013 compared with a loss of DKK 18 million in 2012. The loss in 2012 stems from write-offs in connection with the sale of Faroese Telecom’s equity share in Itexo. Faroese Telecom still owns shares in Itexo, but the shareholders have decided to close the company down and share its assets among
the shareholders. This will likely be completed in 2014. Results before taxes amount to a profit of DKK 72 million in 2013 compared to a profit of DKK 49 million in 2012. This is an increase of 49 %. Faroese Telecom’s annual result is a net profit of DKK 56 million in 2013 compared to a profit of DKK 33 million in 2012. This is an increase of 69 % compared to 2012.
Investments Faroese Telecom investments in 2013 amounted to DKK 42 million compared to DKK 68 million in 2012.
Finances Total assets amounted to DKK 807 million as per 31 December 2013 compared to DKK 844 million at year-end 2012. Total equity was DKK 405 million at year-end 2013 compared to DKK 380 million the previous year. Fixed assets amounted to DKK 564 million at year-end 2013 compared to DKK 593 million at year-end 2012. Immaterial fixed assets increased with DKK 5 million in 2013 to DKK 36 million, material fixed assets decreased from DKK 559 million to DKK 525 million, and financial fixed assets are DKK 3 million – approximately the same as in 2012. Total receivables decreased from DKK 98 million in 2012 to DKK 89 million by year-end 2013. Cash on hand was DKK 137 million at year-end 2013, approximately the same as at year-end 2012. Current assets were DKK 243 million at yearend 2013 compared to DKK 250 million at year-end 2012. Faroese Telecom’s total debt at year-end 2013 was DKK 344 million compared to DKK 412 million the previous year. Of the total debt DKK 191 million is long-term debt.
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Dividend
Significant Events after Year-End
The Board of Directors proposes a dividend of DKK 20 million to the shareholder. In addition the Board proposes an extraordinary dividend of further DKK 10 million, all in all DKK 30 million for the financial year 2013.
Faroese Telecom has since 2013 been working on a new range of services, which will change the Faroese telecommunication market, especially in the mobile phone area.
Ownership The Faroese shareholder.
Government
is
the
sole
Outlook for 2014 Faroese Telecom expects revenues and profit before interest to be lower in 2014 than they were in 2013. In accordance with the forecast made in the annual report for 2012 the 2013 profit before interest were higher than in 2012.
A self-service platform called ver has been launched, where the Faroese customer can get considerably cheaper mobile phone subscriptions. The prerequisites are that the customer sets up an account himself, sets up automatic monthly payment. In return the customer will receive a mobile phone subscription, where price per minute is up to 50% cheaper than subscriptions that have been on the Faroese market so far. The new service is expected to reduce the profitability of Faroese Telecom.
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Management’s Statement The Board of Directors and Management have today reviewed and approved the Group annual report and accounts 2013 for Faroese Telecom (P/F Telefonverkið). The annual report has been prepared in accordance with current Faroese accounting regulations. It is furthermore our opinion that the Management´s Review includes a fair descriptiom of the matters the review mentions.
In our opinion, the accounting regulations used are adequate and provide a true and fair view for the consolidated and individual annual accounts accurately reflecting the company’s assets and liabilities, financial situation as per December 31, 2013, as well as cash flow and the results of its operations in the 1 January – 31 December, 2013 financial year. The annual report is presented for adoption to the annual general meeting.
Hoyvík, 1 May 2014
Management Kristian R. Davidsen, CEO
Board of Directors Klaus Pedersen, Chairman of the Board
Christian Joensen, Board Member, Employee Representative
Jóhannus Egholm Hansen, Deputy Chairman Janus Djurhuus, Board Member, Employee Representative Annbritt Klausen, Board Member Ulla S. Stenberg, Board Member, Employee Representative Fanny M. Petersen, Board Member
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Independent Auditor’s Report To the shareholders of P/F Telefonverkið Report on Consolidated Statements and Parent Financial Statements
Financial Company
We have audited the consolidated financial statements and the parent company financial statements of P/F Telefonverkið for the financial year 1 January – 31 December 2013. The consolidated financial statements and the parent company financial statements comprise income statement, balance sheet, cash flow statement and notes for the Group as well as for the parent company including summary of significant accounting policies. The financial statements have been prepared in accordance with The Faroese Financial Statement Act.
Management's responsibility for the Consolidated Financial Statements and the Parent Company Financial Statements Management is responsible for the preparation and fair presentation of the consolidated financial statements and parent company financial statements in accordance with the Faroese Financial Statement Act, and for such internal control that management determines is necessary to enable the preparation of consolidated financial statements and parent company financial statements that are free from material misstatements, whether due to fraud or error.
Auditor’s Responsibility Our responsibility is to express an opinion on the consolidated financial statements and the parent company financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing and additional requirements according to Faroese Auditing Law. This requires that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance as to whether the consolidated financial statements and the parent company 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 parent company financial statements. The procedures selected depend on the auditors' judgement, including the assessment of the risks of material misstatement of the consolidated financial statements and the parent company financial statements, whether due to fraud or error. In making those risk assessments, the auditors consider internal control relevant to the company's preparation and fair presentation of the consolidated financial statements and parent company financial statements in order to design 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 the Management, as well as evaluating the overall presentation of the consolidated financial statements and the parent company 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 result in any qualification.
Opinion In our opinion, the consolidated financial statements and the parent company financial statements give a true and fair view of the Group's and the parent company's assets, liabilities and financial position at 31 December 2013 and of the results of the Group's and the parent company's operations and consolidated cash flows for the financial year 1 January – 31 December 2013 in accordance with The Faroese Financial Statement Act.
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Statement on the Management’s review Pursuant to the Faroese Financial Statement Act, we have read the Management review. We have not performed any other procedures in addition to the audit of the consolidated financial statements and the parent company
financial statements. On this basis, it is opinion that the information given in Management’s review is consistent with consolidated financial statements and parent company financial statements.
our the the the
Tórshavn, 1 May 2014 SPEKT løggildir grannskoðarar Sp/f
Finnbjørn Zachariasen State Authorized Public Accountant
Faroese Telecom Group Annual Report and Accounts 2013
Page 18
Income statement 1 January to 31 December GROUP
PARENT COMPANY
2013
2012
2013
2012
(DKK 1,000)
(DKK 1,000)
(DKK 1,000)
(DKK 1,000)
482,474
458,959
64,208
53,516
1,011
1,008
1,011
1,008
Total income
483,485
459,967
65,219
54,523
Cost of materials etc.
Note
1 Net sales Other operations income
-111,890
-107,622
-3,046
-3,136
Cost of assets
-65,435
-54,998
-8,563
-6,411
Other operating costs
-28,961
-26,129
-9,802
-8,058
-2,196
-2,220
0
0
275,004
268,998
43,809
36,918
-127,516
-123,228
-23,364
-25,163
147,488
145,770
20,445
11,755
-71,022
-72,942
-11,826
-15,029
76,466
72,828
8,618
-3,274
Administrative fee levied by Telecom Authority Gross profit 2 Employee expenses Profit before depreciation 5.6 Depreciation on asset Profit before financial adjustment 7 Profit before tax on equity in subsidiaries
0
0
61,636
70,140
Profit on equity in associated companies
695
-17,571
695
-17,571
Interest and related income
1,308
1,234
302
632
Interest and related expenses
-6,341
-7,930
-3,674
-4,663
Profit before tax
72,127
48,561
67,578
45,263
-13,466
-13,238
-11,926
-12,439
58,662
35,323
55,651
32,824
3,010
2,499
55,651
32,824
3 Tax Profit including minority shareholders Minority shareholders share of profit at year-end Profit at year-end
55,651
32,824
Distribution of profit at year-end Carried forward from previous year Profit at year-end
294,723
294,723
55,651
55,651
Adjustment of beginning of the year account Total
0
0
350,375
350,375
Proposed distribution: Dividends
30,000
30,000
Carried forward to next year
320,375
320,375
Total distribution
350,375
350,375
Faroese Telecom Group Annual Report and Accounts 2013
Page 19
Balance sheet 31 December GROUP
PARENT COMPANY
2013
2012
2013
2012
(DKK 1,000)
(DKK 1,000)
(DKK 1,000)
(DKK 1,000)
Goodwill
15.981
17.799
15.981
17.799
Proprietary licences
20.542
13.880
1.548
1.599
36.523
31.679
17.529
19.398
Property, buildings and pylons
179.848
181.233
135.369
138.496
Cables, exchanges and radio transmitters
273.268
296.363
4.731
5.655
63.041
73.520
15.382
16.231
Note ASSETS
5 Intangible assets
Furnishing and other equipment Work in progress 6 Total tangible assets
8.364
7.576
2.931
436
524.521
558.693
158.414
160.817
Equity in subsidiaries Equity in associated companies Other securities
0
0
170.227
172.515
2.749
2.054
2.749
2.054
226
226
226
226
0
500
0
0
7 Total financial assets
Receivables in associated companies
2.976
2.781
173.202
174.796
TOTAL FIXED ASSETS
564.021
593.153
349.145
355.011
Inventory, finished goods and consumables
16.498
18.856
82
137
Total inventory
16.498
18.856
82
137
Sales receivables
85.276
91.670
501
995
Subsidiaries' receivables
0
0
305.132
223.377
Dividends from subsidiaries
0
0
53.100
59.550
0
0
9
591
9
416
2
0
4.211
5.876
478
830
89.496
97.963
359.221
285.343
Cash
137.239
133.773
32.759
38.299
TOTAL CURRENT ASSETS
243.232
250.592
392.062
323.778
TOTAL ASSETS
807.253
843.744
741.207
678.789
12 Deferred tax Other receivables Prepayments 8 Total receivables
Faroese Telecom Group Annual Report and Accounts 2013
Page 20
Balance sheet 31 December GROUP
PARENT COMPANY
2013
2012
2013
2012
(DKK 1,000)
(DKK 1,000)
(DKK 1,000)
(DKK 1,000)
Share capital
60.000
60.000
60.000
60.000
Share premium fund
24.869
24.869
24.869
24.869
Earnings carried forward
320.375
294.723
320.375
294.723
9 Total shareholder equity
405.243
379.592
405.243
379.592
14.119
12.009
Note LIABILITIES
10 Minority shareholders share of equity 11 Pension fund provision
-
-
3.728
1.405
3.728
40.007
38.804
0
0
Total provisions
43.735
40.209
3.728
1.405
13 Financial institutions
79.533
121.391
21.250
68.730
112.094
122.362
0
0
191.627
243.753
21.250
68.730
9.790
31.307
2.500
26.718
11.482
11.482
0
0
12 Deferred taxes
14 Prepayment Total long-term debt 13 Long-term debt payable next year 14 Prepayment (short-term)
1.405
Liabilities to subsidiaries
0
0
251.767
155.854
Goods and services debt
28.637
41.197
1.740
2.504
20.240
9.753
18.701
7.977
30.000
30.000
30.000
30.000
3 Taxes Encumbered dividends Other debt
52.380
44.441
6.277
6.009
Total short-term debt
152.529
168.181
310.986
229.062
TOTAL DEBT
344.156
411.934
332.236
297.792
TOTAL LIABILITIES
807.253
843.744
741.207
678.789
15 Related parties 16 Mortgages contingencies, etc.
Faroese Telecom Group Annual Report and Accounts 2013
Page 21
Cash flow statement GROUP
PARENT COMPANY
2013
2012
2013
2012
(DKK 1,000)
(DKK 1,000)
(DKK 1,000)
(DKK 1,000)
Total revenue
483.485
459.967
65.219
54.524
Total expenses
-335.997
-314.197
-46.376
-42.768
Cash Flow - income + expenses
147.488
145.770
18.843
11.756
Changes in work in progress and inventory
2.358
-2.008
55
-27
Changes in receivables and prepayments
8.967
-4.250
-20.778
-110
Changes in goods and services debt, other debt and pension fund provisons -15.244
29.512
55.914
-27.529
169.024
54.034
-15.910
Cash flow from ordinary operations Interest expense, net
143.570 -5.034
-6.695
-3.372
-4.029
Cash flow from operations
138.536
162.329
50.662
-19.939
Investment in intangible assets
-12.481
-7.239
-1.038
-1.042
Investment in tangible assets, net
-29.214
-61.117
-6.516
-5.543
Investment in financial assets, net
0
0
500
0
Cash flow from investments
-41.695
-68.356
-7.053
-6.585
Free cash flow
96.841
93.973
43.609
-26.524
Loan repayment
-63.375
-21.710
-71.698
-15.506 53.000
Dividends received from subsidiaries
0
0
52.550
Dividends paid
-30.000
-9.000
-30.000
-9.000
Cash flow from financing
-93.375
-30.710
-49.148
28.494
3.466
63.263
-5.539
1.970
Cash on hand at 1 January
133.773
70.510
38.299
36.329
Cash on hand at 31 December
137.239
133.773
32.759
38.299
Cash flow for the year from operations, investments and financing
Faroese Telecom Group Annual Report and Accounts 2013
Page 22
Notes to the Annual report Total Note
Faroes
Abroad
(DKK 1,000)
(DKK 1,000)
(DKK 1,000)
483.485
428.799
54.686
1 Revenue group - geographically divided GROUP
PARENT COMPANY
2013
2012
2013
2012
(DKK 1,000)
(DKK 1,000)
(DKK 1,000)
(DKK 1,000)
-110.626
-106.792
-19.675
-21.124
-11.868
-11.414
-2.108
-2.514
2 EMPLOYEE EXPENSES Wages Pension payments Other employee costs Total employee expenses
-5.022
-5.022
-1.581
-1.524
-127.516
-123.228
-23.364
-25.163
-
-
-2.878
-2.710
1.435
1.593
0
0
263
260
39
43
-12.263
-7.981
-1.019
1.257
0
-1.776
-10.324
-12.877
Remuneration Executive & Board of Directors Wages regarding investments Full-time employees
3 TAXES Tax on current year taxable income Tax on capital equity Adjustment of deferred taxes Total taxes
-1.203
-3.481
-583
-819
-13.466
-13.238
-11.926
-12.439
4 PAYMENT TO AUDITOR ELECTED AT THE GENERAL MEETING Statutory auditing
623
555
175
165
Other statements with assurance
35
35
0
0
Tax advice
60
60
0
0
Other work performed
163
272
52
91
Total for SPEKT
881
922
227
256
Faroese Telecom Group Annual Report and Accounts 2013
Page 23
Notes to the Annual report Note - DKK 1,000 5 INTANGIBLE ASSETS GROUP Purchase price 1 January 2013
Goodwill
Proprietary licenses
Total
30.077
147.084
177.161
Disposed during the year
-500
-1.354
-1.854
Additions during the year
0
12.481
12.481
Purchase price 31 December 2013
29.577
158.211
187.788
Depreciation 1 January 2013
-12.278
-133.203
-145.481
500
1.354
1.854
Depreciation on disposed assets Depreciation for current year
-1.818
-5.819
-7.637
Total depreciation 31 December 2013
-13.596
-137.668
-151.264
Booked value 31 December 2013
15.981
20.542
36.523
Booked value 31 December 2012
17.799
13.880
31.679
5-20 years
3-4 years
Depreciation period
PARENT COMPANY Purchase price 1 January 2013
30.077
51.039
81.116
Disposed during the year
-500
-1.354
-1.854
Additions during the year
0
1.038
1.038
Purchase price 31 December 2013
29.577
50.722
80.299
Depreciation 1 January 2013
-12.278
-49.439
-61.717
500
1.354
1.854
Depreciation on disposed assets Depreciation for current year Total depreciation 31 December 2013
-1.818
-1.089
-2.907
-13.596
-49.175
-62.771
Booked value 31 December 2013
15.981
1.548
17.529
Booked value 31 December 2012
17.799
1.599
19.398
5-20 years
3-4 years
Depreciation period
Faroese Telecom Group Annual Report and Accounts 2013
Page 24
Notes to the Annual report Note - DKK 1,000 6 TANGIBLE ASSETS GROUP Purchase price 1 January 2013
Real estate, Cables, Furnishing, buildings and exchanges and fixtures and pylons radio equipment other equipment Work in progress
242,436
625,256
255,436
7,576
0
-1,949
-4,250
-7,576
Disposed during the year Additions during the year
3,776
14,087
12,829
8,364
Purchase price 31 December 2013
246,212
637,394
264,014
8,364
Depreciation 1 January 2013
-61,203
-328,893
-181,916
0
0
293
3,642
0
Depreciation on disposed assets Depreciation for current year
-5,161
-35,526
-22,699
0
Total depreciation 31 December 2013
-66,363
-364,126
-200,973
0
Booked value 31 December 2013
179,848
273,268
63,041
8,364
Booked value 31 December 2012
181,233
296,363
73,520
7,576
5-50 years
10-15 years
4-5 years
175,922
30,534
59,893
436
0
0
-2,652
-436
Depreciation period
Real estate with a total booked value of DKK 17.0m has not been depreciated
PARENT COMPANY Purchase price 1 January 2013 Disposed during the year Additions during the year Purchase price 31 December 2013
219
71
4,180
2,931
176,141
30,605
61,420
2,931
Depreciation 1 January 2013
-37,426
-24,879
-43,661
0
0
0
2,202
0
Depreciation on disposed assets Depreciation for current year
-3,346
-995
-4,579
0
Total depreciation 31 December 2013
-40,772
-25,874
-46,038
0
Booked value 31 December 2013
135,369
4,731
15,382
2,931
Booked value 31 December 2012
138,496
5,655
16,231
436
5-50 years
10-15 years
4-5 years
Depreciation period
Real estate with a total booked value of DKK 17.0m has not been depreciated
Faroese Telecom Group Annual Report and Accounts 2013
Page 25
Notes to the Annual report Note - DKK 1,000
Equity in subsidiaries
Equity in associated companies
Other securities
Purchase price 1 January 2013
-
650
226
Additions during the year
-
0
0
Disposed during the year
-
0
0
Purchase price 31 December 2013
-
650
226
Revaluations and write-downs 1 January 2013
-
1.404
0
Javning av primo
-
0
0
Revaluations and write-downs on disposed assets
-
0
0
Profit before tax on equity
-
808
0
Tax on subsidiaries
-
-113
0
Revaluations and write-downs 31 December 2013
-
2.099
0
Booked value 31 December 2013
-
2.749
226
Booked value 31 December 2012
-
2.054
226
246.686
650
226
Additions during the year
0
0
0
Disposed during the year
-500
0
0
Purchase price 31 December 2013
246.186
650
226
Revaluations and write-downs 1 January 2013
-74.171
1.404
0
0
0
0
7 FINANCIAL ASSETS GROUP
PARENT COMPANY Purchase price 1 January 2013
Revaluations and write-downs on disposed assets
0
0
0
Profit before tax on equity
61.636
808
0
Tax on subsidiaries
-10.324
-113
0
Dividends
-53.100
0
0
Revaluations and write-downs 31 December 2013
-75.959
2.099
0
Booked value 31 December 2013
170.227
2.749
226
Booked value 31 December 2012
172.515
2.054
226
The equity proportion in subsidiaries and associated companies is divided as follows: Na me P/F FT Net P/F FT Sa ms ki fti P/F Tel eva rpi รฐ P/F Shefa P/F Formul a P/F Vi kma r
Equi ty porti on 100% 100% 100% 100% 55,0% 40,0%
8 RECEIVABLES All receivables in the parent company and the group are due and payable within one year
Faroese Telecom Group Annual Report and Accounts 2013
Page 26
Notes to the Annual report GROUP
PARENT COMPANY
2013
2012
2013
2012
(DKK 1,000)
(DKK 1,000)
(DKK 1,000)
(DKK 1,000)
Share capital
60.000
60.000
60.000
60.000
Paid-in surplus
24.869
24.869
24.869
24.869
Note 9 EQUITY
Profit carried forward Profit carried forward 1 January
294.723
291.899
294.723
291.899
Profit for the year carried forward
58.662
35.323
55.651
32.824
Minority shareholders share of profit
-3.010
-2.499
0
0
Dividend
-30.000
-30.000
-30.000
-30.000
Carried forward 31 December
320.375
294.723
320.375
294.723
Total shareholder equity
405.243
379.592
405.243
379.592
12.009
9.960
-
-
0
0
-
-
3.010
2.499
-
-
-900
-450
-
-
14.119
12.009
-
-
1.405
2.268
Share capital is comprised of one share with a face value of DKK 60m
10 MINORITY SHAREHOLDERS SHARE OF EQUITY Minority shareholders' share of equity 1 January Adjustments Minority shareholders' share of profit Minority shareholders share of dividend Minority shareholders' share of equity 31 December
11 EMPLOYEE PENSION FUND Provision for pension fund 1 January Pension payments
1.405
2.268 -863
-863
-863
-863
Adjustments during the year
3.186
0
3.186
0
Provision for pension fund 31 December
3.728
1.405
3.728
1.405
-1.410
12 DEFERRED TAXES Deferred taxes 1 January
38.804
35.323
-591
Adjustment of deferred taxes
1.203
3.481
583
819
Deferred taxes 31 December
40.007
38.804
-9
-591
13 LOAN DEBT AND PREPAYMENTS Due within 1 year
21.272
42.789
2.500
26.718
Due within 1 and 5 years
85.088
117.119
10.000
54.980
Due after 5 years
106.539
126.635
11.250
13.750
Total loan debt and prepayments
212.899
286.543
23.750
95.448
Faroese Telecom Group Annual Report and Accounts 2013
Page 27
Notes to the Annual report 14 PREPAYMENTS This is prepayment from customers 15 Related parties Føroya Tele's related parties are: P/F FT Samskifti, P/F FT Net, P/F Shefa, P/F Televarpið, P/F Formula. Trading with related parties The company has been trading with subsidiaries during the year. This has been carried out under the same conditions as every other trading performed by the company Decisive influence The Faroese Government holds all the shares in the company
16 SECURITIES AND OTHER CONTINGENT LIABILITIES SECURITY INTEREST GROUP: As security for transactions with financial institutions, security interest in real estate for a total of DKK 303m were registered with the Faroese Department of Records. The booked value of the secured assets is DKK 150m PARENT COMPANY: As security for transactions with financial institutions, security interest in real estate for a total of DKK 255m were registered with the Faroese Department of Records. The booked value of the secured assets is DKK 138m SHEFA The parent company guarantees that SHEFA fulfills its contractual obligations to customers abroad The parent company guarentees also for repayment of Shefa's mortgage debt The company is under joint taxation with its 100% affiliated companies. The companies are jointly and severelly liable for all tax claims
Faroese Telecom Group Annual Report and Accounts 2013
Page 28
Accounting Policies The annual report of Faroese Telecom 2013 is prepared in accordance with and pursuant to the provisions in the Faroese Annual Accounts Act for companies in group C, large. And the Annual report is prepared in accordance with the same accounting principles as the previous year.
Acquired or newly established companies are adopted to the group statement from the purchase date. Sold or liquidated companies are taken into the group statement up to the sales date/date of liquidation. Comparative figures are not corrected to purchased, sold or liquidated companies.
About booking and evaluation in the annual report
The method of acquisition is used when companies are purchased. Goodwill between purchase value and daily value on acquired assets and liabilities are entered as material assets and written off with a similar amount in the income statement after an assessment of the life span, however, no longer than 20 years.
Assets are booked in the balance sheet when there is a probability that the company in the future must relinquish financial benefits, and the value on the assets can be settled reliably. Liabilities are booked in the balance sheet when it is probable that the company in future must relinquish financial benefits, and the size of the liabilities can be settled reliably. Assets and liabilities are initially booked at cost price. Eventually assets and liabilities are booked as described below, in individual account bookings. Income is booked in the income statement when it is gained. Expenses used to reach the annual profit are booked in the income statement.
Group statement The Group statement comprises the parent company Faroese Telecom in addition to subsidiaries where Faroese Telecom directly or indirectly holds more than 50 per cent of the voting rights, or in some other manner has a decisive influence. In the group statement, internal income and expenses, internal exposures as well as internal profits and losses of transactions between the consolidated companies will be balanced.
Minority shareholders Account amounts belonging to subsidiaries in the group statement are entered at full amount. Minority shareholders’ relative share of the profit and equity in subsidiaries are balanced annually and booked as a special entry in the income statement and balance sheet.
Exchange of foreign currency Transactions in foreign currency will not be converted to the rate until the day of transaction. Differences in currency that are between the rate on the transaction date and the rate on the day of payment are entered into the income statement as a financial entry. Assets, debt and other financial amounts in foreign currency are converted to the rate of exchange at the end of the accounting year. The difference between the rate of exchange at the end of the accounting year and the day when the asset or debt began is booked into the income statement under financial income and cost.
Equity in subsidiaries is balanced by proportioning the trade value of net assets and dues of the subsidiaries on the purchase date.
Faroese Telecom Group Annual Report and Accounts 2013
Page 29
Operations account Net sale Income from sale of goods and services are booked in the operating account if distribution and risk transfer has occurred before year-end. Net income is booked without VAT and other taxes and with deduction of all discounts given. Works in progress to be paid for by external invoicing are booked when the work in finished. In accordance with Paragraph 96, item 1 in the Faroese Annual Accounts Act net sale is not subdivided into branch of industry, but it is subdivided by geographical area.
companies after internal profit/loss balancing and with deduction of goodwill write-off. The proportion of taxes attributed to the subsidiary companies is included in the amount “Taxes on Annual Result� in the income statement.
Financial income and expenses Financial income and expenses comprise interest income and expenses, gain or loss on investments, debt and transactions in foreign currency.
Non-recurring income and expenses
Expenses to material and consumables include consumables used in the sale of goods and other operations.
Non-recurring income and expenses are income and expenses that stem from events or transactions that definitely deviate from normal operations, are without influence from the company and are not expected to be recurring.
Fixed asset expenses
Taxes on annual result
Costs related to fixed assets include all costs, including, but not limited to, supplies, rental, electricity and heating of buildings, machines and vehicles by the company.
Corporation tax and changes in deferred taxes concerning the annual result are booked to the income statement, while taxes from booking straight to the equity are booked straight to the equity.
Expenses from material and consumables
Other operating expenses Operational costs include all other costs of operation.
Telecom authority operating levy The Faroese Government stipulated the fee to be levied as contribution to the administration of the Postal and Telecom Surveillance Authority.
Result of equity capital in subsidiaries and associated companies
Provisions for deferred taxes are calculated at the rate of 18 per cent of the anticipated variance between the income and expenses stated in the income statement and the actual taxable income for the same period. The parent company is jointly taxed with P/F FT Samskifti, P/F FT Net, P/F TelevarpiĂ° and P/F Shefa. The corporation tax is divided between the jointly taxed companies in relation to the proportion of their taxable income.
The amount includes the proportion of the annual result of subsidiaries and associated
Faroese Telecom Group Annual Report and Accounts 2013
Page 30
Balance Sheet Intangible Asset Expenses Intangible assets are booked at cost price with a reduction of the accumulated depreciations. Depreciation is spread equally throughout the various fiscal years and is based on anticipated product life, though no longer than 20 years. The depreciation period is longest for strategic investments in companies with a strong market position. Development projects are booked as assets if they are presented in detail, if the company is capable and intends to take advantage of results, if the cost price can be calculated reliably, and if there is sufficient security that future income will be able to give a rate of return on the development cost, in addition to production, sales and administrative costs. Other development costs are booked as expenses to the balance sheet when the costs are realized. The current depreciation schedule is: Goodwill
5-20 years
Proprietary licenses
3-4 years
Intangible assets are written-down to reextraction value, if this is below the accounting value. The need for depreciation is determined annually on an asset-to-asset basis.
Tangible assets Tangible assets are booked at cost price with a reduction of the accumulated depreciations. Depreciation is spread equally throughout the various fiscal years and is based on anticipated period of useful life and assessed remaining value. Plots of land are not writtendown. Cost price is purchase price in addition to expenses that are directly connected to the purchase on the date when the asset is ready for use. The current depreciation schedule is: Buildings
50 years
Repair and refurbishment of corporate facilities
5 years
Pylons/masts
30 years
Cables
15 years
Telephone exchanges and radio stations
10 years
Furnishing, fixtures and vehicles
5 years
Computer equipment
4 years
Tangible assets are written-down to re-extraction value, if this is below the accounting value. The need for depreciation is determined annually on an asset-to-asset basis.
Equity capital in subsidiaries and associated companies Equity capital in subsidiaries and associated companies are booked to the balance sheet with the proportion of the inner value of the company in addition to the remaining value of possible goodwill. Net revaluation of equity capital in subsidiaries and associated companies are transferred to the equity in the net revaluation fund using the internal value equity method where the accounting value is higher than the purchase value. The method of acquisition is used when companies are purchased. Goodwill between purchase value and daily value on acquired assets and liabilities are booked together with equity capital in subsidiaries and associated companies, and written-off with a similar amount in the income statement after an assessment of the life span, however, no longer than 20 years. Subsidiaries and associated companies with negative accounting inner values are booked at zero, and any possible assets belonging to these companies will be written-down with a proportional part of the parent company’s negative inner value. If the parent company’s negative inner value is greater than the asset,
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the remaining amount will be booked as dues if the parent company is lawfully obligated to take on the financial obligations of the company.
Negatively deferred tax (tax receivables) is valued at the value this is expected to decrease the corporate tax in the future.
Other securities Listed securities are booked as current assets and are valued at market value at the end of the fiscal year.
Liabilities are deferred if the company at the end of the accounting year is lawfully obligated to, and it is probably that the company must relinquish financial benefits.
Inventory
Debt
Inventory is booked at cost price in accordance with the FIFO - method. If the net sale value is lower than the cost price then inventory will be written-down to the lower value.
Loans are booked to the balance sheet when it is taken at the amount received after the initial expenses are deducted.
Other deferred liabilities
Other debt is valued at net realization value.
Cost price for trade goods, material and consumables corresponds to purchase price.
Cash flow statement
For finished goods, cost price comprises cost price for material, consumables, direct wages and indirect production cost.
The cash flow statement shows the company’s cash flow through the year as well as liquidity at year-end. The cash flow statement is sub-divided into three main areas: Operations, Investment and Financials.
Receivables Receivables are valued at amortized cost price, where possible losses are taken into consideration.
The cash flow statement evidences cash flow from operations indirectly based on operations income and expenses.
Work in progress for external invoicing
Liquidity assets refer to cash and short-term securities listed under current assets.
Work in progress for external invoicing is valued at sales value of the work. Sales value is calculated based on how much of the work is finished at year-end. When sales values cannot be determined satisfactorily, sales value is set at assessed cost.
Equity and dividend Dividend proposals are booked as dues in the balance sheet.
Corporate taxes and deferred taxes Corporate tax is booked into the balance sheet as calculated tax of the annual taxable income.
The amount is calculated as the result from primary operations, adjusted for non-liquid operating amounts, plus gains/losses in working capital, financial and extraordinary amounts less taxes paid. Working capital refers to currents assets, less cash and short-term debt, excluding bank debt, mortgage debt, taxes and dividends. Thus, cash and any securities booked under current assets are not included. Investment cash flow refers to the sale and purchase of current assets.
Deferred tax is calculated based on the difference between the accounting and taxation of assets and dues.
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Board of Directors and Management Klaus Pedersen, Chairman of the Board Occupation: Address: Education: Member since: Board member in:
CFO, Chr. Hansen Holding A/S Charlottenlund, Denmark Cand.merc. 2009 P/F Telefonverkið Various companies within the Chr. Hansen Group
Jóhannus Egholm Hansen, Vice Chairman Occupation: Address: Education: Member since: Board member in:
Senior Vice President, FLSmidth Group. CEO and President Director, PT. FLSmidth Indonesia. Jakarta, Indonesia Shipmaster / Lawyer 2010 P/F Telefonverkið DEF 1994 A/S Redep A/S PT. FLSmidth Construction Indonesia P/F Itexo
Fanny M. Petersen Occupation: Address: Education: Member since: Board member in:
Head of Human Resources, Eik Banka P/F Tórshavn, Faroe Islands Cand.merc.dat 2009 P/F Telefonverkið
Annbritt Klausen Occupation: Address: Education: Member since: Board member in:
Consultant, Executive Search, Amrop A/S Charlottenlund, Denmark Cand.merc.fir 2013 P/F Telefonverkið
Ulla Stenberg, Employee Representative Occupation: Address: Education: Member since: Board member in:
IT Manager Tórshavn, Faroe Islands Office Clerk 2005 P/F Telefonverkið
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Christian Joensen, Employee Representative Occupation: Address: Education: Member since: Board member in:
IT developer Saltangará, Faroe Islands Engineer 2011 P/F Telefonverkið
Janus Djurhuus, Employee Representative Occupation: Address: Education: Member since: Board member in:
Project Coordinator Tórshavn, Faroe Islands Technician 2011 P/F Telefonverkið
Kristian R. Davidsen, CEO Occupation: Address: Education: Board member in:
CEO, P/F Telefonverkið Tórshavn, Faroe Islands Engineer and HD-O P/F Net P/F Samskifti P/F Televarpið P/F Shefa P/F Formula Sp/f Faroe Maritime Technic Sp/f Búgv
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Faroese Telecom · P.O. Box 27 · FO-110 Tórshavn · Faroe Islands · Tel: +298 30 30 30 · Fax: +298 30 30 31 · ft@ft.fo