2013 ANNUAL REPORT
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CONTENT Story: SPK
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Humanizing Technology
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08
2013 in Brief
20 Story: The City of Oslo’s
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About Itera
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CEO Comment
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Story: Juristbyrån
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Itera’s Time Line
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Story: SEAS-NVE
Agency for Health
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Customer Stories
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Story: Itera Web
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Story: Totalkredit
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Board of Directors’ Report
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Key Figures
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Content Financials
39 Consolidated Financial
pany Financial Statement 77 Directors’ Responsibility Statement
Statement 44 Notes to the Consolidated
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Auditor’s Report
Financial Statement
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Shares and Shareholders
65 Parent Company Financial
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Corporate Governance
Statement
WE ARE
69 Notes to the Parent Com-
ITERA ANNUAL REPORT 2013
ITERA IS A COMMUNICATION AND TECHNOLOGY COMPANY We deliver consulting and strategy, design and development, operations and management.
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COMMUNICATION & TECHNOLOGY TWO EXPERTS Stein Arne Nistad and Rikard Strand at Itera, give us their thoughts on digitalization, the future, Metropolis, Snowden, revolutions, fatal consequences, human relations, communication and technology.
Gartner says that by 2020 we will put more computers into our laundry in a week than we have used in our lifetime so far. Itera claims to possess just the right combination of competence required to meet the changes we are in the midst of. So – why communication and technology?
Stein Arne Nistad
Rikard Strand
Director of Strategy and Solutions, Itera
User Centric Infrastructure Chief Consultant, Itera
Stein Arne has been in the IT and communication industry for 25 years. He is a consultant, journalist, author and speaker.
Rikard is a well-known IT evangelist and system architect, with more than 15 years’ experience in managed services.
ITERA ANNUAL REPORT 2013
The digital era is upon us, no question. How should we meet it? What can we expect from the years to come? Should we fear it or welcome it? Surely, digitalization and the technological change facilitates great opportunities, for people and businesses, but also challenges and threats that we have never met or dealt with before. How can we prepare for the changes and challenges ahead? Rikard Strand and Stein Arne Nistad are two of the most experienced specialists at Itera. They have met innumerable customer challenges, and formed solutions, from innovative and high-risk data protection systems to business critical communication strategies. How do they predict and prepare for the continuation of the digital development? And why is Itera so well positioned to face it? Gartner talks about the ongoing digitalization with terms such as Big Data, cloud, mobility or Internet of Things. What are your thoughts on the subject? : I remain quite pragmatic to these terms. It is not as though these are new phenomena. They simply manifest themselves in
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new ways. The idea of man machine integration easily goes back to Frankenstein, or Fritz Lang’s futuristic epic, Metropolis. With Internet of Things, we have a new set of “senses”. We can relate to things, information, distance or time in new ways. Internet of Things is a fun idea, but can only be defined through the usages they are created for. Many people claim that technology is the driving force for value creation. I disagree. Technology is merely a platform through which one can release value. Success will not come from understanding the technology, but from realizing how to use it, and how it affects business models, information, relationships, interaction or organizational development. : Soon, your refrigerator can send you information on what you need from the store. Sensors on your body might warn you that you are about to be ill or have a heart attack. The earthquake in Chile this March was automatically forecasted to seismographs, and people could prepare for it. If you are able to extract the right information from Big Data and use technology in the right way, you can ignite revolutions.
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STEIN ARNE NISTAD Director of Strategy and Solutions, Itera
Big Data. What exactly is Big Data? : Big Data is essentially a lot of data sources containing structured and unstructured information gathered in multiple ways. All this stored data does not present any value until it is analyzed or treated it in a way that makes it useful. A great deal of data is collected, but remains unused. That is what we call “dark data”. : That is the main problem. We have never generated data at this level before. I call it “digital desertification”. Data emerges from so many arenas and in such enormous amounts today, we will need new tools in order to extract anything valuable from it. : A whole new market appears as a result, for those who know how to gather useful information. They might not need it themselves, but others do, and can pay for the service and constructive data. Being able to handle Big Data and extract useful information from it equals success? : Sure. Look at IBM, Oracle, Google, Microsoft and Facebook. They are all working with Big Data. Amazon has introduced “predictive shipping”. Before you order the book, it is on its way to your mailbox. They run constant analysis and have complete control of your habits. Their system knows that you will buy the book before you do. Grocery stores do much of the same. They make sure to give you special offers on products they know you often buy, and will buy again. That way they make sure you visit them again and again. Predictive marketing. : It is all about establishing strategies: “What information do we need to detect relevant behavior in our target groups?” Then you must find solutions that work, but that are not perceived as surveillance or compromising individual rights and privacy in this transparent, digital society. …which triggers the next questions: What will happen to our privacy in this world where physical and virtual realities intertwine? Are we not already monitored? How can we make sure it is not abused? : There is every reason to take these consequences seriously. I do not think we will reach a “Minority Report” state, where you are arrested for crimes you will commit in the future, but Internet of
Things will at a greater and broader extent make your every move traceable. Yet, at least in the Nordic countries, we have very strict rules as to how data can be collected or cross-linked. As long as security and access management is highly prioritized, I do not think the risk of worst-case scenarios is very likely. This is what we work with every single day, and we will stay ahead of the potential risks using least privilege best practices on behalf of businesses and our customers. What every individual chooses to do in his or her own private virtual space is, of course, decisive for him or her. : Look at that iPhone in your hand. Apple can, at any given time, download a new version of their OS, take over your phone, turn the camera on without you knowing it and track everything you do. With several billion smart phones around the globe, the potential for data collection and abuse is tremendous. This is why the whole NSA and Snowden ordeal is so grave. It stirs up a fundamental right you have to control your own device – what is collected from it and what information you produce. You can say that you are not monitored, but it all depends on how you define the term. My tax return is registered and reported without me lifting a finger. More than that, it is more correct than if I had done it myself. Imagine all the systems and data communicating with each other and gathering information just to produce this single document. And it is just the tip of the ice berg. How this community will evolve, and who will hold the power, is all a question of attitude. If we look at it this way, we are building a technological infrastructure tailored for assumption of power with fatal consequences. Quite a gloomy thought… Let us hope it does not head in that direction! : Let us! Wow. Agreed. Assuming the world does not fall into the wrong hands – at least not for the next couple of years – what are your words of advice to our customers on the subject? : The digital development will hit practically all markets. Trends change, users change, possibilities change. All our customers should sit down, face the challenges ahead and ask themselves: “How will digitalization affect my company? How can we meet our customers’ and employees’ expectations for mobility? What do social media mean to us? Where should we communicate with our target groups? How should we administrate our data? Is there
ITERA ANNUAL REPORT 2013
unused potential in our data that we can draw value from for our existing or even new markets?� Having the guts to meet the changes up front is vital. : Do not sit on the fence until the train is so close it runs you over. The most relevant trend is actually to pay attention, and to try to understand the development. We cannot predict anything, but likelihood tells us that Internet of Things will evolve. Expectations towards mobility will increase. Big Data will be an important term. Social media will change people’s way of acting. : This is where you are allowed to lean on partners such as Itera. Our goal is to build close and long-lasting relationships with our customers. This way we learn enough about them to help them make the right choices and strategies to meet the changes ahead. It is our job to keep an eye on trends, be updated and able to advice our customers, based on our experience and skills. We are passionate about these things. Our customers challenge us and we challenge them. Together we can create innovative and engaging solutions that meet the needs and expectations of not only our customers but also the people they are dependent upon pleasing. So, in the end, it is not about cloud, Internet of Things or fancy stuff, but people, relationships and those basic human and inter-human needs? : Exactly. Building relationships that last is, and will be, a competitive advantage. Roles will change; one day you are a customer, the next you are a partner and yet the next you are a supplier. Networks become dynamic. Anyone can make use of technological tools, outsource services or collect any given data. In the end, your ability to preserve your relationship with your customers is what will be business critical and make a difference. It will represent loyalty, competence, value, stability and safety in the middle of all this rapid change. Customer and supplier win equally on safeguarding these relationships. They are the glue that holds the enterprises together and contribute to creating a sustainable development. : We will always be humans, and the importance and impact of human relations will always drive and motivate us. Combined with the smart technology that emerges, this interpersonal understanding and the goals we strive towards together will open up for great
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opportunities. As a result, we will see solutions that truly make a difference for people and businesses. Why is Itera so well equipped to handle the development we are going through? Why communication and technology? : We have been through a transformation for a long time now. We have melted heavy communication and strategy competence, business understanding, need and goal analysis, traditional IT consultant capacity and an extensive experience in tailoring security solutions, operations and system integration. Through defining ourselves as a communication and technology company, we commit to cultivating and developing skills that enable us to meet the development. Itera possesses competence, in the shape of unique people, who are prepared to meet the prerequisites and expectations that arise. We know the technological solutions that can ensure the security and control you need, while at the same time enabling you to meet expectations from your customers, users, patients, partners or employees. In the end, it is all about relationships that need nurturing, human needs and goals which need to be addressed, and the ability to humanize technology.
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PROSPECTS FOR 2014 Itera is entering 2014 with a positive outlook in terms of further strategic development, larger customer relations, increased share of nearshore resources, profitable growth and high employee satisfaction.
OPERATING REVENUES (MNOK)
465
REVENUES BY INDUSTRY ■ Bank, finance, insurance 42% ■ Professional services
18%
■ Public, healtcare, org.
15%
■ Retail
7%
■ Other
18%
2013 IN BRIEF During 2013, the pieces fell into place in the shaping of the new Itera: • Launch of a new brand and visual identity. • Project deliveries in multidisciplinary teams across former organizational borders. • The long-term efforts to develop larger customer relationships continued to show positive effects. • Employee satisfaction developed positively in the entire group, and headcount showed a stable increase throughout the year. • Strengthened position in fast-growing areas such as self-service solutions, cloud services, Identity and Access Management, Big Data, social media and mobility. • The nearshore ratio increased, and more customers utilized the delivery model.
Q1
Q2
Itera entered 2013 as an integrated communication and technology company. The underlying business continued to improve, both in terms of profitability and operational cash flow. The group’s competitiveness also improved through a lower cost structure from increased use of nearshore resources.
The growth of the 30 largest customers amounted to 31 percent compared to the corresponding period last year. During the quarter, Itera signed an agreement of a fullrange “Big Data” data warehouse delivery with a large Nordic retail group. The agreement represented a breakthrough within one of Itera’s focus areas; Big Data.
Q3
Q4
The organization structure was simplified through the merger of the Norwegian subsidiaries into Itera Norge AS. The simplification provided immediate positive effects in terms of higher efficiency and focus.
The positive financial development from the third quarter continued in the fourth quarter. Although the political situation in Ukraine was unstable from the end of 2013, none of Itera’s projects, clients or employees were affected.
ITERA ANNUAL REPORT 2013
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ABOUT ITERA ITERA IS A COMMUNICATION AND TECHNOLOGY COMPANY. We solve the challenges differently because we unify our multidisciplinary strengths to gain deeper insight and see new opportunities. We deliver consulting and strategy, design and development, operations and management.
KEY FACTS
ESTABLISHED IN 1989
LISTED ON THE OSLO STOCK EXCHANGE UNDER
THE TICKER ITE
OPERATIONS IN
460 EMPLOYEES
NORWAY SWEDEN DENMARK UKRAINE
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ARNE MJØS CEO Itera
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CEO COMMENT ITERA’S CEO
ARNE MJØS Thank you
EXPLORE I strongly feel that there has never been a more exciting time to live and work. Digitalization has already changed our lives. We are all connected. All the time. We expect to be able to work, communicate, shop, buy tickets, pay our bills and be entertained – everything brought to us, tailored to meet our specific personal preferences, needs and habits. The real and the virtual worlds overlap. Every person has an activity stream that can be subscribed to. Consumers broadcast their experiences immediately – good or bad – in large networks.
I would like to express my gratitude to all Itera employees for living our values every day: innovative, passionate and skilled. You take pride in walking the extra mile to provide our customers with the best advice, solutions and services. A special salute is appropriate for our Ukrainian colleagues. In spite of a challenging end of 2013, you all did your utmost to ensure that we were able to report “business as usual” to all our customers.
Most sectors and businesses are deeply affected. Social media, new patterns in consumer behavior, and the entry of new business models are changing the market and traditional rules of competition. Known products converge, and new players enter the market.
I enjoy being a part of a strong corporate culture across borders, where you all make a difference.
Neither we, nor our customers, can rely on old communication practices, legacy technologies, established business models or known methodologies. To help our customers navigate, we are closely monitoring and exploring important trends. Internet of Things, social media, digital conversations, gamification, mobile marketingand the convergence of mobile, cloud, Big Data and analytics. The possibilitiesare staggering. Just imagine the explosion of opportunitieswhen Big Data and Internet of Things meet!
The change is revolutionary. Industrial companies are becoming customer service companies. Consumer products companies are becoming Internet companies. Energy companies are becoming information companies. And media and entertainment companies are becoming logistics companies (Accenture Technology Vision 2014 Report).
ADAPT In a world where consumers decide who the winners are, the traditional boundaries and distinctions between communication disciplinesand technology domains dissolve. Communication is about technology, and technology is about communication. This is why we have reshaped our business. Itera is now a communication and technology company. I strongly feel that there has never been a more exciting time to live and work. I am looking forward to 2014.
OUR STORY 1999 Merger and listing 1998 3Enigheden Net Solutions 1994 Objectware 1993 Net Works
1990 Gazette 1989 LAN International
ITERA’S TIME LINE
1989 LAN INTERNATIONAL IS FOUNDED
1990
LAN International is established in Sweden, specializing in design and implementation of IT infrastructure.
The communication agency Gazette is founded in Oslo, with publications as its core business. The range of services expands over the years, and Gazette becomes a full service communication agency.
GAZETTE IS FOUNDED
1993 NET WORKS IS ESTABLISHED
1994 OBJECTWARE IS FOUNDED
1998 3ENIGHEDEN NET SOLUTIONS
Net Works is established in Norway by five former system consultants from Unic Network.
Objectware is founded, and becomes a pioneer within component based software development.
3Enigheden Net Solutions established in Denmark by former key employees from Politiken House Electronic Media.
2000 Itera Sweden 2008 Itera Ukraine
2010 The little big company
2011 Transformation 2013 one Itera
1999 MERGER
2000 ITERA SWEDEN
Objectware acquires Itera is established in Gazette and merges with Sweden through the Itera. acquisition of the Business Intelligence OSE LISTING specialist IT Partner. Itera is listed on Oslo Stock Exchange. ITERA DENMARK Itera is established in LAN TO ITERA Denmark through the LAN International acquisition of the web changes its name to company 3Enigheten. Itera Networks AB, and becomes part of Itera. NET WORKS JOINS ITERA Net Works becomes part of Itera to establish the group’s ASP and hosting operation.
2008 ITERA UKRAINE
2010 THE LITTLE BIG COMPANY
2011 TRANSFORMATION
2013 ONE ITERA: COMMUNICATION AND TECHNOLOGY
Itera starts up in Ukraine through assembling a complete management team, each with more than 10 years experience.
From 2000–2010, Itera operates as a group of independent subsidiaries based on local entrepreneurship, with different brands, services and customers.
Itera starts its transformation towards becoming a unified group and brand.
One Itera is in place. A common culture, strong brand and broad service spectrum provides a strong foundation for entering into a new market position: a company specializing in communication and technology.
THE STORIES TAILOR MADE No challenges are the same. Sometimes you just need some good advice or access to our resources. At other times you may want to solve a project from A to Z.
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1T OTALKREDIT
Optimal user experience on all devices
2S PK
Self-service from Statens Pensjonskasse
3 THE CITY OF OSLO’S AGENCY FOR HEALTH
Increasing awareness about sexual assault
4 J URISTBYRÅN
Flexible and mobile solutions for the employees at Juristbyrån
5S EAS-NVE
Efficient work processes at SEAS-NVE
6 ITERA
A taste of our own medicine
THE STORIES OF SIX CHALLENGES, SOLVED THROUGH STRATEGIC USE OF COMMUNICATION AND TECHNOLOGY.
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MICHAEL HALD GRAVERSEN Marketing Director, Totalkredit
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SHORTENING THE LINES AT
GRÖNA TOTALKREDIT LUND OPTIMAL USER EXPERIENCE ON ALL DEVICES
With the right decision support system Gröna Lund Amusement Park has been able to reduce their lines and make their guests To ensure all their web visitors a good user experience, Totalkredit happier. needed to upgrade their digital presence. CHALLENGE CHALLENGE As any amusement park, Gröna Lund struggled with long lines to their Like most companies, Totalkredit noticed that an increasing amount attractions, booths and food stations. What could they do to make of users prefer to use tablets and smartphones when visiting their lines shorter and their visitors happier? websites. They also noticed that the visitors only stayed for a short period of time. It was clear that a new website based on responsive SOLUTION design was a prerequisite for providing a satisfactory user experiThey wanted an app with red lamps blinking on a map of the amuseence for Totalkredit’s target audiences. In addition, it was essential ment park whenever a spot is overcrowded. Itera’s Business Intelfor Totalkredit to communicate a strong relationship with their ligence experts took their wish to the next level and developed an partners; local and regional banks in Denmark, and support an overall app showing diagrams and color coded key figures with information goal of telling customers that their point of contact is their local updated every five minutes. banks, and not Totalkredit, as far as mortgage advice goes. RESULT SOLUTION Anyone working at Gröna Lund has access to the data and can see Itera translated Totalkredit’s needs into a solution on a standard where action is most needed at any point in time. They can staff platform, supporting responsive design, ensuring all visitors a good the food stations with the most visitors with the most experienced experience, no matter which device was used. By building the project personnel, they know where a pair of extra hands is needed and they upon agile methodology, Itera was able to adapt quickly to changing know which attractions they can advise their visitors to go to at any needs as the project progressed and new demands were uncovered. time to avoid standing in line. This was an important approach to the success of the project as Totalkredit was in need of accept and recognition from their partners along the development process. RESULT All users visiting totalkredit.dk get a clear overview and can quickly access the information they seek. A clear and responsive design makes sure the site is experienced optimally on all devices. When needing more specific counselling, the customers are simply referred to one of Totalkredit’s many partners.
Totalkredit is a unique cooperation between close to 70 banks and cooperatives in Denmark, offering mortgage credit lending and professional house counselling from local banks.
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ROY HAMM Project Manager, the Norwegian足足足足 Public Service Pension Fund
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SHORTENING THE LINES AT
GRÖNA SPK LUND
SELF-SERVICE FROM STATENS PENSJONSKASSE
With the right decision support system Gröna Lund Amusement Park has been able to reduce their lines and make their guests Statens Pensjonskasse (the NorwegianPublic Service Pension happier. Fund) needed a self-service solution that would give users access to carry out their own tasks online. CHALLENGE As any amusement park, Gröna Lund struggled with long lines to their CHALLENGE attractions, booths and food stations. What could they do to make For several years, Statens Pensjonskasse has experienced a solid their lines shorter and their visitors happier? increase in the number of enquiries via email and telephone related to pensions and mortgages. In order to help their customers and SOLUTION members more efficiently they required a self-service solution that They wanted an app with red lamps blinking on a map of the amusewould give users access to carry out their own tasks online. ment park whenever a spot is overcrowded. Itera’s Business Intelligence experts took their wish to the next level and developed an SOLUTION app showing diagrams and color coded key figures with information Statens Pensjonskasse and Itera worked closely together during updated every five minutes. the entire project period to ensure the creation of a user-friendly self-service solution. “Min side (My page)” is a closed page, built on RESULT EPiServer CMS 6, and well suited for further development. It uses Anyone working at Gröna Lund has access to the data and can see ID-porten’s public log-on service in addition to a number of shared where action is most needed at any point in time. They can staff service modules for extracting data from core systems. The solution the food stations with the most visitors with the most experienced had to guarantee sufficient uptime, stability and good security. It personnel, they know where a pair of extra hands is needed and they had to cover a broad target group; from young public servants to know which attractions they can advise their visitors to go to at any pensioners and it had to be simple to use from an editor’s perspectime to avoid standing in line. tive. Furthermore, the closed version had to provide the same user experience and graphic expression as the open site; differentiated only by the log-on process. RESULT Statens Pensjonskasse has reduced the number of email and telephone inquiries by offering its customers and members a userfriendly self-service solution. The new solution has contributed to increased customer satisfaction and increased cost efficiency through more users carrying out tasks via Min Side.
Statens Pensjonskasse (the Norwegian Public Service Pension Fund) is the largest provider of public service pensions in Norway. In addition they offer mortgage and insurance schemes.
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CHRISTIAN EKKER LARSEN Head of Communication, City of Oslo’s Agency for Health
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INCREASING AWARENESS ABOUT SEXUAL ASSAULT
CITY OF OSLO’S
AGENCY FOR HEALTH The Sexual Assault Center (Overgrepsmottaket) at the Oslo Emergency Medical Agency (Legevakten) is aware that many sexual assault victims do not seek help. Will an awareness campaign make a difference?
CHALLENGE Sexual abuse is a social problem that affects both women and men, adolescents and adults. It is assumed that many victims do not tell anyone about what has happened to them, often because they are not aware of the possibilities provided by the support services. The Sexual Assault Center at the Oslo Emergency Medical Agency asked the following question: What can we do to ensure that more victims contact us and receive help? SOLUTION A large proportion of assaults take place during adolescence. Itera therefore developed an awareness campaign aimed specifically at young victims. The campaign uses boards and posters posted in highly visible locations in the city, to remind them that help is available. Some of the boards are “physical”; i.e. the paper is actually crumpled and damaged. This symbolises the physical and mental abuse suffered by the victims. RESULT Even if it is difficult to measure the effect accurately, the campaign does highlight an important and serious issue in today’s society. More awareness hopefully results in more victims seeking help.
The Sexual Assault Center (Overgrepsmottaket) at the Oslo Emergency Medical Agency (Legevakten) is an emergency facility for youth and adults, women and men who recently have been victims of rape, attempt of rape or other sexual violations.
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JOHAN CLASSON Business development, Itera Sweden
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SHORTENING THE LINES AT
GRÖNA JURISTBYRÅN LUND
FLEXIBLE AND MOBILE SOLUTIONS FOR THE EMPLOYEES AT JURISTBYRÅN
With the right decision support system Gröna Lund Amusement Park has been able to reduce their lines and make their guests Juristbyrån needed an IT platform that meets their employees’ happier. needs for mobility and bringing their own devices to work. CHALLENGE CHALLENGE As any amusement park, Gröna Lund struggled with long lines to their Juristbyrån’s IT platform was in need of modernisation. This became attractions, booths and food stations. What could they do to make very clear to Itera and Juristbyrån when Juristbyrån introduced a their lines shorter and their visitors happier? “bring your own device” based strategy. The existing IT platform was not able to handle the new way of working in Juristbyrån, which SOLUTION resulted in performance problems for users. They wanted an app with red lamps blinking on a map of the amusement park whenever a spot is overcrowded. Itera’s Business IntelSOLUTION ligence experts took their wish to the next level and developed an A new IT platform was designed and installed by Itera. The project app showing diagrams and color coded key figures with information was carried out in close cooperation between Juristbyrån and Itera, updated every five minutes. and included daily meetings for follow-up and for making decisions. The new IT platform is based on a new Citrix solution and a log on RESULT portal, which allows traditional software and web applications to be Anyone working at Gröna Lund has access to the data and can see published. where action is most needed at any point in time. They can staff the food stations with the most visitors with the most experienced RESULT personnel, they know where a pair of extra hands is needed and they Among other things, Juristbyrån’s business system now is availaknow which attractions they can advise their visitors to go to at any ble as a web application in the log on portal. The users can flexibly time to avoid standing in line. choose how they want their applications to start from the log on portal. Juristbyrån has better support for reaching their business system from different mobile units and can meet users’ needs for mobility and for bringing their own devices.
Juristbyrån consists of a number of independent lawyers, working in cooperation with Swedbank. They mostly operate in the private sector and with small enterprises, and focus on the opportunities and problems their customers to address in their everyday life.
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JENS LUDVIG Project Director and Head of PMO, SEAS-NVE
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SHORTENING THE LINES AT
GRÖNA SEAS-NVE LUND EFFICIENT WORK PROCESSES AT SEAS-NVE
With the right decision support system Gröna Lund Amusement Park has been able to reduce their lines and make their guests With SEAS-NVE’s wide range of project types, many of which happier. including external project participants, they needed to automate and digitalize their routines and work processes to make things CHALLENGE more efficient and cost effective. As any amusement park, Gröna Lund struggled with long lines to their attractions, booths and food stations. What could they do to make CHALLENGE their lines shorter and their visitors happier? SEAS-NVE’s project managers manually collected the information about their projects once a month. This was both time-consuming SOLUTION and inexpedient, as the managers received crucial key figures only They wanted an app with red lamps blinking on a map of the amuseonce a month. In addition, the project team lacked a common working ment park whenever a spot is overcrowded. Itera’s Business Intelspace, where project managers and project participants could share ligence experts took their wish to the next level and developed an information and documentation. app showing diagrams and color coded key figures with information updated every five minutes. SOLUTION Itera developed a project portal with a user-friendly and intuitive RESULT interface. The portal supports the existing project models and handles Anyone working at Gröna Lund has access to the data and can see both small, large and complex projects. Furthermore, the portfolio where action is most needed at any point in time. They can staff outline was developed in a way that allows the chief project manager the food stations with the most visitors with the most experienced and other interested parties to supervise status and progress in both personnel, they know where a pair of extra hands is needed and they single projects and the total portfolio at any time. know which attractions they can advise their visitors to go to at any time to avoid standing in line. RESULT For SEAS-NVE, the solution has lead to comprehensive cost reductions, better quality insurance of the project management, higher reactivity in cases of deviation, simplified and manageable document handling and a user-friendly tool that collects all information, documents etc. in one place. Accordingly, time is saved when the chief project manager and project participants no longer must manually report to management.
SEAS-NVE is, with more than 600 employees and a revenue of 2.8 billion DKK, among Denmark’s absolute largest energy and utility companies, and at the same time Denmark’s largest customer owned power company. They deliver power and fiber to more than 400 000 customers and share holders, and their products range from their core delivery, electricity, to advanced consulting within windmill technology.
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ANE GJENNESTAD CCO, Itera
GRÖNA ITERA LUND WEB A TASTE OF OUR OWN MEDICINE
With the right decision support system Gröna Lund Amusement Park has been able to reduce their lines and make their guests Itera has carried out a comprehensive turnaround operation. The happier. design of our new website became an organisational development project with communication and technology as the instruments herCHALLENGE alding the change. As any amusement park, Gröna Lund struggled with long lines to their attractions, booths and food stations. What could they do to make CHALLENGE their lines shorter and their visitors happier? Itera made extensive structural changes over the course of 2013. The change from an organisational structure with independent subsidSOLUTION iaries to development of an organisation under a joint brand with a They wanted an app with red lamps blinking on a map of the amusejoint culture, entailed that almost everything had to be changed. Not ment park whenever a spot is overcrowded. Itera’s Business Intelleast the way we present ourselves. Who are we now? And how do we ligence experts took their wish to the next level and developed an ensure that everyone plays a role in the new story about ourselves? app showing diagrams and color coded key figures with information updated every five minutes. SOLUTION During the entire process, we viewed the task of developing a new RESULT web as an organisational development project. We wanted to handle Anyone working at Gröna Lund has access to the data and can see this project in the same manner that we would have handled it for one where action is most needed at any point in time. They can staff of our customers. In other words; a taste of our own medicine. the food stations with the most visitors with the most experienced Every one of our almost 500 employees in four countries were personnel, they know where a pair of extra hands is needed and they invited to participate. We used tools such as virtual workshops and know which attractions they can advise their visitors to go to at any digital storytelling. We collected input, developed the strategy, time to avoid standing in line. worked with personas and tested different ideas. We put together resource groups across organisational borders to ensure that important considerations would be taken into account. And most important of all, we really challenged ourselves to think outside the box. After all, our ambition is to make a difference. RESULT Itera’s new web has a completely new visual design and verbal expression which reflects who we are after making the internal changes. We have used a wide variety of communication and technology elements, and we have been innovative: the story of who we are is told using an animation film. Alert visitors will also discover «Upside», which is our bulletin board for sharing what inspires us.
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CRAF COMPE CONT
FTING ELLING TENT.
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BOARD OF DIRECTORS Jan-Erik Karlsson Trude S. Husebø Mimi K. Berdal Ole Jørgen Fredriksen
ITERA ANNUAL REPORT 2013
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BOARD OF DIRECTORS’ REPORT In 2013, Itera was merged into an integrated company. Former independent subsidiaries were integrated to form a Nordic communication and technology company. The company’s strategic focus results in more extensive, long-term customer relationships, a wide range of services, improved scalability through use of resources located nearshore and a robust Nordic brand. THE COMPANY Itera is a communication and technology company that designs, develops and operates innovative digital solutions and services for Nordic companies and enterprises. The Group also has two niche companies: Cicero Consulting supplies advisory services and solutions to the banking and finance sector, while Compendia specializes in products and services in HR, quality and management. Itera Norge AS was established in the third quarter through the merger of the Norwegian subsidiaries Itera Gazette, Itera Consulting and Itera Networks. The merger quickly resulted in increased efficiency throughout the organization in the form of simpler routines, coordinated working methods and an increased focus on corporate culture and organizational development. The simplification also contributed to improved clarity in both internal and external communication. The business units in Norway, Sweden, Denmark and Ukraine now use Itera as their sole brand name and present themselves as unified and defined both internally and externally. The Group’s head office is in Oslo, and the Group also has offices in Bryne, Stockholm, Copenhagen, Kiev and Lviv. MARKET CONDITIONS The Group did well in the Norwegian and Danish markets, with growth throughout the year. The Swedish market was a little slow during the first six months, but showed signs of improvement during the final six months of the year. During 2013, Itera continued to develop larger, long-term customer relationships where the Group can deliver a wide range of services and act as a close and strategic business partner. The client base consists of well-established companies in the Nordic countries, and many customers are entering into agreements for a wider range of products and services than previously.
More than half of the Group’s income is derived from clients with more than 1,000 employees. The majority of the clients operate in many of the same countries as Itera, focus on innovation, operate in industries with a high rate of change where digitalization is a strong trend, and innovation is a clear competitive advantage. The majority of branches must take into account digitalization, an increase in consumer power, changes in purchasing habits and the emergence of new business models. The Group’s customers emphasize that Itera’s inclusive range of services in communication and technology provides them with the basis on which to exploit innovativeness and adapt well to market developments. During 2013, the Group entered into contracts with clients such as Storebrand, KLP, If, Gjensidige, Santander, Nordea, DnB, Nets, the Norwegian Public Service Pension Fund, The Norwegian Environment Agency, The Norwegian Directorate of Health, The Union of Education Norway, NRK, Forsvarsbygg, Haavind, Schibsted, Reitan, NorgesGruppen, Tine and Eurosko. The above serves to illustrate the sectors from which Itera generates the major part of its revenues: banking/financing/insurance, the public sector/health/organizations, the service industry sector and the retail sector. The breadth of the assignments illustrates the extent of the Group’s expertise in communication and technology: digital strategy development, communication strategy, service design, games development, project management, modernization of core systems, search solutions, web solutions, digital magazines, annual reports, test, information security, management/administration and operations. During the course of the year, the Group has developed larger and more strategic customer relationships that serve to increase the Group’s financial predictability. The growth related to the 30 largest companies was 38 percent for the year compared to 2012. Nearshore activities have increased in volume, contributing to improvements in competitiveness and scalability. The percentage of capacity located nearshore was 32 percent at the close of 2013, compared to 22 percent at the close of 2012. The implementation of projects by teams composed of resources from across national boundaries works very well, and has been a delivery model for which demand has increased from customers as the year progressed.
32
RESULTS In 2013, the Group generated revenues of MNOK 465.22 compared to MNOK 438.2 in 2012. This is an increase of 6 percent. Revenues in Norway were MNOK 357 compared to MNOK 331 in 2012, equal to a growth of 8 percent. Growth in Denmark was 19 percent, revenues in 2013 was MNOK 37 compared to MNOK 31 in 2012. The Swedish market showed a reduction of 7 percent, with revenues in 2013 of MNOK 71 compared to MNOK 76 in 2012. Gross margin 1 was MNOK 374.6 compared to MNOK 358.0, an increase of 4.6 percent. Operating results before depreciation were MNOK 43.9 compared to MNOK 25.9 in 2012. This is equivalent to a profit margin of 9.4 percent before depreciation, compared to 5.9 percent for the previous year. The Group’s total depreciation and amortization for the period was MNOK 21.4, compared to MNOK 18.6 in 2012. Operating results were MNOK 22.5, compared to MNOK 7.3 in 2012. This is equivalent to an operating margin of 4.8 percent, compared to 1.7 percent for the previous year. Personnel expenses for the year amounted to MNOK 279.4, a reduction of 0.9 percent. The decrease in personnel expenses is due to the rise in nearshore based resources in deliveries. Average personnel expenses per employee were reduced by 3 percent. Other operating expenses for the year amounted to MNOK 51.3 compared to 50.2 in 2012. Net financial items amounted to MNOK -2.8 compared to MNOK -0.4 in 2012. Profit before tax was MNOK 20.4 compared to MNOK -6.81 in 2012. Tax expenses for the year totaled MNOK 4.6, compared to MNOK 2.2 in 2012. Itera paid a total of MNOK 1.2 in 2013. The Group has a deferred tax advantage of MNOK, of which MNOK is recognized in the balance sheet. The Group has capitalized all deferred tax advantages. Net income for the year was MNOK 15.8, compared to MNOK 4.6 in 2012. It is the opinion of the Board of Directors that the annual accounts provide a true and fair view of the Group’s activities in 2013, and the financial position at the end of the year. RESEARCH AND DEVELOPMENT In 2013, NOK 3.7 million was provided for development of new solutions compared to NOK 6.0 million in 2012. The amount was provided on a continuous basis, as the criteria for recognition are considered to be met. The solutions are mainly related to existing contracts with fixed future income. CASH FLOW AND FINANCIAL POSITION Itera had cash flow from operations amounting to NOK 57.7 compared to MNOK 6.0 in 2012. The Group paid dividends to shareholders
of NOK 5 million in 2013. No treasury shares were purchased. Itera’s cash balance at the end of the year was NOK 68.0 million, compared to NOK 28.8 million in 2012. The difference between cash flow from operations and the Group’s operating result is primarily due to writeoff costs that have no cash effect, but also to some accrual differences in the accounting date for recognizing and the payment date. In addition to research and development, investments of NOK 15.2 million were made for hardware, software and inventory, compared to NOK 11.7 million in 2012. The increase is related to the new and larger operations contracts entered into by the Group. Itera held no treasury shares at the close of the year. At the close of the year, equity was MNOK 86.9, compared to MNOK 72.4 for the previous year. This is equivalent to an equity percentage of 40 percent, compared to 41 percent the year before. FINANCIAL RISK The financial risk factors affecting the company include currency risk, liquidity risk and credit risk. The Management and Board of Directors monitor these factors closely and implement measures when necessary. Itera’s Scandinavian operations provide income and incur expenses in Norwegian, Danish and Swedish crowns. The changes in the exchange rate for Swedish and Danish crowns therefore affect the Group’s results. This risk is mitigated as associated expenses are incurred in the same currencies. The Group is exposed to U.S. dollars through its nearshore activities in the Ukraine. The Board considers the Group’s liquidity to be satisfactory, and does not consider it necessary to implement further measures to reduce liquidity risk. Historically, the Group has incurred very low losses on receivables. This trend continued in 2013. BUSINESS RISK Nearshore activities in Ukraine expose the Group to new risk factors, including country risk, data security and corruption. These are typical for new markets where the business climate, laws and society are less developed or unfamiliar to us. Violation of legal demands and our standards of business ethics could result in large fines, prevent us from doing business or cause damage to our reputation. Changes in legislation, taxation systems and regulations can also lead to significant changes in how we implement our services and solutions, or lead to increased costs that affect our profitability. Itera closely monitors country risk, has a zero tolerance policy with respect to corruption and does not carry out domestic activities where the problem of corruption is greatest. We have implemented best practices and controls for data security in the Group, as well as legal frameworks to safeguard data security and intellectual property across national borders.
ITERA ANNUAL REPORT 2013
33
ORGANIZATION The number of employees at the end of the year was 460, compared to 428 in the previous year. The increase in the number of employees by 32 is an increase of 7 percent. For the year overall, there were 433 man years, compared to 428 in 2012. The majority of operations take place in Norway, where the Group has 233 (238) employees. The Group’s Swedish operations include 68 (71), Danish operations 21 (20) and Ukrainian operations 155 (99) employees.
Itera’s nearshore activities are fully integrated with the Nordic activities. This means that all operations in the Group adhere to the same procedures and ethical standards. The IT infrastructure is common with all customer information stored on servers located in the Nordic Region. Financial processes are carried out as a central function and the Group’s auditor is KPMG in all countries with the exception of Denmark. Random sampling is practiced, and any deviations are followed up and rectified.
Absence due to illness for the period was 3.5 percent (2.7), which the Board considers to be satisfactory. No accidents or injuries were suffered during the year. The Board considers the work environment to be good. We regularly carry out environmental studies of the Group’s work environment.
All Ukrainian employees have signed agreements of confidentiality and commitment with regard to the handling and processing of data and other security arrangements.
The Board wishes to thank all Group employees for their efforts in 2013. SOCIETY Itera recognizes its responsibilities for the society the Group is part of and wishes to contribute to positive development in the areas that are most relevant for the Group’s activities. The Group’s ethical guidelines describe the standards that apply in the Group’s relationships with its customers, suppliers, public authorities and employees. The Itera Business Code of Ethics can be found on the company website (itera.no/investor-relations.) Corruption Itera practices zero tolerance of all forms of corruption. Nearshore activities in Ukraine expose the Group to a certain risk of corruption in that the country scores low on Transparency International’s corruption index. Itera has therefore chosen to protect the Group against such risk by not supplying services to the public and private sectors in Ukraine where such problems have been identified, and restricts its activities to exporting to countries where western business standards are the norm. The Group has also formulated guidelines for all employees concerning the acceptance of gifts, other benefits or advantages and/ or other forms of gratuity. Refer also to the Group’s Code of Ethics: (itera.no/investor-relations). Data and information security Itera has implemented good control routines and frameworks for data security in the Group across national borders. The Group’s Information Security Management System (ISMS) is implemented throughout the Group and is based on the framework standard ISO27002.
The Group implements a leading judicial framework for the secure transfer of data and information across national borders called BindingCorporate Rules (BCR). This includes internal routines and rules covering the transfer of personal details from companies in the EU to the Group’s activities outside the EU. Integrity and general legislation Itera adheres to national legislation in all countries in which the Group operates. All employees are encouraged to report internally if they have cause for concern with regard to the Group’s integrity or observes transgressions or breaches of law and/or regulations. Reports can be submitted confidentially if so desired, and the whistle blower cannot be pursued with negative reactions, regardless of whether the content of the report shows to be a reality or not. HUMAN RESOURCES Equality Itera places great importance on equality. Men and women should be given the same wage terms and opportunities for professional and personal development. The Group wishes to make it possible for employees of either gender to combine their work and private life, and therefore offers leave arrangements, home office solutions and part time positions to support this. The proportion of women in the Group is 38 percent (28) in 2012. At the close of the year, the Group’s management consists of five men and three women, while the Board of Directors is made up of two women and two men. There are considerable differences between the Group’s companies with respect to the proportion of women. The companies that are most technology focused have a lower proportion of women, whereas the parent company and subsidiaries that deliver services in communication and contents have around 43 percent women compared to 47 percent in 2012. Management positions are unevenly distributed between men and women. The Company has a goal of improving this balance in its various management Groups, although the required skills and expertise will be the overriding criterion.
34
Diversity Itera places great importance on Group diversity, and will recruit, develop and keep its best employees regardless of gender, ethnicity and disability. See also itera.no/investor-relations.
One of the Group’s environmental measures has been to locate all activities in Oslo in a single location. Transport to and from different office buildings has been eliminated and energy consumption is now limited to a single location.
Employee satisfaction The Group monitors employee satisfaction twice annually with the main survey in September and a supplementary survey in April. The same survey is applied throughout the Group, which provides good indicators of general tendencies and local deviations. The survey measures important areas such as the perceived balance between work and leisure time, professional development, workload and degree of commitment and adherence to Itera’s values.
Further, the Group has limited paper consumption through the introduction of printer systems where documents are not printed unless the requisitioner logs in when picking up the document.
The results are distributed to all employees. After the main survey, all employees are afforded the opportunity to participate in decisions concerning the areas to be given priority and measures and initiatives to be implemented during the time ahead to further improve results. Measures and initiatives that can be deemed to have a positive effect for several business areas shall be implemented under the auspices of the Group’s HR function. Measures and initiatives that have a more local impact shall be implemented by the division or department in question under the guidance of the Manager. The supplementary survey in April monitors whether the measures / initiatives chosen have had the desired effect or whether adjustments must be introduced until the next main survey.
All employees have a mandatory obligation to consciously observe the environmental impact of work-related activities, and to select solutions, products and methods that have a minimum impact on the environment. This is described in the Group’s Ethical Guidelines (itera. no/investor-relations).
The survey carried out in 2013 showed a positive development in all the Groups divisions. Two of the Group’s divisions were ranked amongst the best work places in Norway and Sweden respectively, while nearshore activities have previously been voted as the best employer in the Ukrainian IT industry. Development of skills and expertise A high standard of excellence in skills and expertise is a decisive factor for maintaining the Group’s competitiveness. Itera has a strong and dedicated commitment to the development of skills and expertise of all employees in all professional disciplines including management. The educational and training programs are conducted under the auspices of ‘Itera Academy’, which is the Group’s overlaying concept for all competence activities. Education courses and training available in Itera Academy are closely linked with the Group’s strategy and the varying needs of the business areas, and encompass courses from the role of the consultant for newly-qualified staff through courses at several levels in project management, system development and user experience to management courses for both new and experienced leading staff. EXTERNAL ENVIRONMENT Pollution of the external environment as a result of Itera’s operations is limited. The Group’s environmental impact is for the most part linked to energy consumption, travel and waste from office activities.
The Group’s environmental initiatives focus on using organized recyclingschemes for obsolete IT equipment, reducing travel activities through the increased use of teleconferencing, and responsible waste management.
SHARES AND SHAREHOLDERS The share capital in Itera ASA is MNOK 24,655,987, divided into 82,186,624 shares at a value of MNOK 0.30 per share. During the year, the share capital was decreased by MNOK 226,117 through the withdrawal of 753,722 treasury shares. At the close of the year, Itera holds no treasury shares. The Company has a continuous share option scheme, where the redemption price is significantly higher than current share prices. At the close of the year, Itera ASA had 1,789 shareholders. The 20 largest shareholders held 46.7 million shares, equivalent to 56.8 percent of the share capital. Dividends were paid out in 2013 of MNOK 5, equal to NOK 0.06 per share. MANAGEMENT AND CORPORATE GOVERNANCE Itera’s management is based on the Accounting Act and Norwegian recommendations for corporate governance and management. Please see the separate section on how section 3-3 b 2nd article of the Accounting Act and the points in the recommendation are followed up. Itera ASA Board of Directors held twelve meetings in 2013. The Group’s strategy and development were important items on the agenda of all the meetings. The Board has two committees; an Audit Committee and a Compensation Committee. The Audit Committee consists of two board members, and held two meetings in 2013. The Remuneration Committee consists of two board members, and held two meetings in 2013. The Committee prepares and makes recommendations to the Board concerning remuneration to the CEO. The Committee also acts as the advisory body for the CEO for issues concerning remuneration and
ITERA ANNUAL REPORT 2013
35
other key personnel issues relating to the Group’s management. Please refer to the separate section at the back of this report.
dents or injuries were suffered during the year. The Board considers the work environment to be good.
THE PARENT COMPANY Internal support processes and joint solutions are structured as Group Functions in the parent company Itera ASA in areas where significant economies of scale and synergies can be realized. Group Functions are developed in line with the companies’ needs and cover areas including accounting/finance, HR, information and communication and internal IT.
It is the opinion of the Board of Directors that the annual accounts provide a true and fair view of the parent company’s activities in 2013, and the financial position at the end of the year.
As an owner, the parent company receives Group contributions and dividends from the subsidiaries. In 2013, the Group received MNOK 9.3 in Group contributions. Book value of investments in subsidiaries is MNOK 110.0. The parent company administers the Group’s Group Account arrangement. The positive cash flow in the Group is also shown as an increase in liquid assets in the parent company as this shows the total holdings in the Group Accounts arrangement. The parent company presents the subsidiaries’ deposits in the arrangement as liabilities to Group companies. The Norwegian companies are also jointly registered for value added tax, and the parent company will be responsible for the payment of value added tax for all the said subsidiaries. The obligation is shown as a liability in the balance sheet, but is balanced in inter-company balances with the subsidiaries. A number of long-term loans have been granted to some subsidiaries in 2013. The number of employees at the end of the year was 17 (20), of whom 11 are female. Absence through illness for the year was 3.4 percent (4.0 percent), which the Board considers to be satisfactory. No acci-
CONTINUED OPERATIONS In accordance with Article 3-3 a of the Accounting Act, we confirm that the premises for continued operation are present, and forms the basis for the preparation of the annual accounts. The 2014 budget and the Group’s equity and liquidity situation is the basis for this assessment. PROFIT ALLOCATION The Board proposes that this year’s profits for the parent company, Itera ASA, amounting to TNOK 2 041, should be distributed as follows: • TNOK 28 765 to dividends • TNOK 26 724 from other equity. The Board’s proposal for the dividend corresponds to MNOK 0.35 per share. PROSPECTS Itera’s strategy has solid foundation in all parts and at all levels of the Group, and our targeted work will continue. The overall strategy remains unchanged, with the development of large and long term customer relationships, higher operational efficiency and the use of delivery models that combine resources across the Nordic countries and nearshore. The Group experiences satisfactory activity in all markets in which it is present, and follows the development of market trends closely.
Oslo, 20 March 2014 The Board of Directors of Itera ASA
Ole Jørgen Fredriksen Chairman
Mimi K. Berdal Vice chairman
Trude S. Husebø Board member
Jan Erik Karlsson Board member
Arne Mjøs CEO
36
FINANCIAL KEY FIGURES 2013
KEY FIGURES Definitions Profit and loss Operating revenue EBITDA EBIT Profit before taxes Result for the year Financial position Total fixed assets Total bank deposits Total current assets Total assets Shareholder’s equity Total current liabilities Equity ratio Current ratio Share information Number of shares Average number of outstanding shares Equity per share EBITDA per share Earnings per share Dividend per share Employees Number of employees at year end Average number of employees
1 2
2013
2012
465 194
438 207
43 899
25 851
22 523
7 255
20 439
6 846
15 800
4 618
54 221
59 929
67 958
28 824
165 871
117 430
220 092
177 359
86 935
72 443
133 157
104 916
40 %
41 %
1.25
1.12
82 186 624 82 186 624 82 186 624 82 458 801
3 4 5 7
1,06
0.88
0.53
0.31
0.19
0.06
0.06
0.00
460 433
428 445
Definitions 1. Share equity divided by total assets 2. Most liquid assets and short-term receivables divided by current liabilities 3. Equity divided by number of shares 4. Profit/loss before tax plus depreciation divided by average numner of outstanding shares 5. Net profit/loss for the year divided by average number of outstanding shares 6. Net cash flow divided by average number of outstanding shares 7. Dividend divided by average number of outstandig shares
ITERA ANNUAL REPORT 2013
TOP 30 CUSTOMERS GROWTH
OPERATING REVENUES (MNOK)
465
+30%
EBITDA (MNOK)
NET OPERATIONAL CASHFLOW (MNOK)
44
58
REVENUES BY INDUSTRY
REVENUES BY COUNTRY
■ Banking, finance, insurance
42%
■ Norway
77%
■ Professional services
18%
■ Sweden
15%
■ Public, healthcare, organisations
15%
■ Denmark
■ Retail
7%
■ Other
18%
8%
37
CONTENT GROUP
CONTENT PARENT
39 Statement of comprehensive income 40 Statement of financial position 42 Statement of cash flow 43 Statement of equity 44 Reporting entity 48 Note 1: Operating segments 48 Note 2: Working in progress 49 Note 3: Earning per share 49 Note 4: Other current receivables 49 Note 5: Other current liabilities 50 Note 6: Financial risk management 51 Note 7: Payroll and personnel expenses 51 Note 8: Share-based payments 52 Note 9: Remunerations 55 Note 10: Pension 56 Note 11: Net financial items 56 Note 12: Accounts receivable 57 Note 13: Fixed assets 59 Note 14: Leasing contracts 59 Note 15: Income taxes 62 Note 16: Foreign currency 62 Note 17: Cash and cash equivalents 62 Note 18: Contingencies 63 Note 19: Shareholders 64 Note 20: Transactions with related parties 64 Note 21: Events after balance sheet date
65 Statement of income 66 Statement of financial position 68 Statement of cash flow 69 General 71 Note 1: Payroll and personnel expenses 71 Note 2: Shared based payments 72 Note 3: Pensions 72 Note 4: Fixed assets 73 Note 5: Subsidiaries 73 Note 6: Foreign currency 74 Note 7: Loans to group companies 74 Note 8: Income taxes 75 Note 9: Equity 75 Note 10: Financial items 75 Note 11: Intercompany liabilities 76 Note 12: Debt to credit institutions 76 Note 13: Restricted cash 76 Note 14: Related parties 76 Note 15: Contingencies 77 Directors’ and CEO’s responsibility statement 78 Auditor’s report 80 Shares and shareholders 82 Corporate governance 86 Development 2009–2013
39
STATEMENT OF COMPREHENSIVE INCOME GROUP
NOK 1000
NOTE
2013
2012
465 194
438 207
465 194
438 207
90 630
80 221
7,8,9,10
279 400
281 924
13
21 376
18 596
Other operating expenses
51 266
50 211
Total operating expenses
442 671
430 952
22 523
7 255
383
758
Operating revenue Sales revenue Total operating revenue
1
Operating expenses Cost of sales Payroll and personell expenses Depreciation
Operating profit Other financial income
11
Other financial expenses
11
2 467
1 167
Net financial items
-2 084
-409
Profit before taxes
20 439
6 846
4 639
2 228
15 800
4 618
15 800
4 618
Income taxes
15
Profit for the year Of which: Shareholders in the parent company Earnings per share
3
0.19
0.06
Diluted earnings per share
3
0.19
0.06
15 800
4 618
Currency translation differences
2 323
-899
Unrealized net gain/-loss on investment in foreign subsidiaries
1 622
-194
Tax effect on other income and expenses
-459
0
19 286
3 525
19 286
3 525
Comprehensive income for the year Profit for the year Other income and expenses, reversed through the income
Total comprehensive income for the year
Attributable to: Parent company shareholders
40
ITERA ANNUAL REPORT 2013
STATEMENT OF FINANCIAL POSITION GROUP
NOK 1000
Note
2013
2012
Deferred tax assets
15
9 146
12 903
Other intangible assets
13
ASSETES Fixed assets Intangible assets and deferred tax assets 17 216
20 423
26 362
33 326
27 858
26 603
Total tangible assets
27 858
26 603
Total fixed assets
54 221
59 929
2
15 657
5 892
12
69 682
74 176
Total intangible assets and deferred tax assets Tangible fixed assets Machinery, equipment and software
13
Current assets Work in progress Receivables Accounts receivable Other receivables
4
Total receivables Bank deposits Total current assets Total assets
17
12 573
8 537
97 912
88 606
67 958
28 824
165 871
117 430
220 092
177 359
41
STATEMENT OF FINANCIAL POSITION GROUP
NOK 1000
Note
2013
2012
Share capital
24 656
24 656
Total paid-in capital
24 656
24 656
Retained earnings
62 279
47 787
EQUITY AND LIABILITIES Paid-in capital
Total retained earnings
62 279
47 787
Total equity
86 935
72 443
15 827
11 889
15 827
11 889
27 171
17 714
Liabilities Non-current liabilities Non-current interest bearing liabiliteis
14
Total non-current liabilities Current liabilities Accounts payable Payable tax Public duties payable Other current liabilities
5
151
0
24 576
25 978
65 431
49 335
Total current liabilities
117 330
93 027
Total liabilities
133 157
104 916
220 092
177 359
Total equity and liabilities
Oslo, 20 March 2014 The Board of Directors of Itera ASA
Ole Jørgen Fredriksen Chairman
Trude S. Husebø Board member
Mimi K. Berdal Board member
Jan-Erik Karlsson Board member
Arne Mjøs CEO
42
ITERA ANNUAL REPORT 2013
STATEMENT OF CASH FLOW GROUP
NOK 1000
Note
2013
2012
20 439
6 846
-1 152
-389
0
-10
21 376
18 596
-9 765
-4 425
4 494
-2 207
9 458
2 619
10 640
2 221
Cash flow from operating activities Profit before taxes Taxes paid
15
Profit/loss from fixed assets sales Depreciation
13
Change in work in progress Change in accounts receivable
12
Change in accounts payable Change in other items Effect of currency changes Net cash flow from operating activities
2 236
-1 158
57 726
22 092
0
105
Cash flow from investment activities Payment from sale of fixed assets Investment in fixed assets
13
-5 146
-5 596
Investment in intangible fixed assets
13
-3 670
-6 066
-8 816
-11 557
-6 131
-3 089
Net cash flow from investment activities Cash flow from financial activities Payment of long term debt
14
-4 931
0
-11 062
-3 089
1 286
-36
Net change in bank deposits
39 134
7 818
Bank deposits as of 1 January
28 824
21 006
Bank deposits as of 31 December
67 958
28 824
Dividend Net cash flow from financial activities Currency effect on cash
43
STATEMENT OF EQUITY GROUP
NOK 1000
Share capital
Own shares
Other deposit equity
Translation differences
Other equity
Total equity
Shareholders’ equity as of 31 December 2011
24 882
-225
0
-3 532
47 795
68 920
0
0
0
-1 093
4 618
3 525
-225
225
0
0
0
0
Comprehensive income for the year Reduction of the share premium reserve Shareholders’ equity as of 31 December 2012
24 656
0
0
-4 626
52 412
72 442
Comprehensive income for the year
0
0
0
3 486
15 800
19 286
Dividend
0
0
0
0
-4 931
-4 931
0
0
138
0
0
138
24 656
0
138
-1 140
63 281
86 935
Cost effect Stock options Shareholders’ equity as of 31 December 2013
44
ITERA ANNUAL REPORT 2013
NOTES GROUP
REPORTING ENTITY Itera ASA (the company) is domiciled in Oslo, Norway. Itera’s consolidated financial statements for the financial year 2013 covers the company and the subsidiaries Itera Norge AS, Cicero Consulting AS, Compendia AS, Itera Offshoring Services AS, Itera Sweden AB, Itera Consulting AB, Itera Networks AB, Objectware AB, Itera Consulting ApS and Itera Consulting Ukraine.
BASIS OF PREPARATION Confirmation of financial framework The consolidated financial statements are submitted in accordance with applicable EU-approved IFRS regulations and their i nterpretations as of 31 December 2013, as well as in line with additional Norwegian information requirements which follow from the Accounting Act as of 31 December 2013. The proposed annual accounts were confirmed by the board and the CEO on 20 March 2014. The annual accounts will be considered at the ordinary general meeting on 22 May 2014. The board has the option of m aking changes to the annual accounts up until the time of final approval.
The most significant estimates requiring management judgment are the following: • • • •
Projects in progress – see note 2 Provision for losses on accounts receivable – see note 12 Capitalized development costs (R&D) – see note 13 Value of deferred tax asset – see note 15
Itera Norge AS leases operating equipment. The lease contracts have been evaluated based on the requirements stipulated in IAS 17, and it has been determined that these shall be posted as financial leasing. Reference is made to note 14. In some cases, proceeds from sales will cover several deliveries. Itera will then distribute the proceeds among the various deliveries and record this income based on the time of delivery for the various deliveries. IFRS 13 Fair Value Measurement applies as of 2013. The group has not selected policies where assets and liabilities may be recognized at fair value, or it does not have assets and liabilities which must be recognized at fair value. It has been determined that no financial instruments must be recognized at fair value.
ACCOUNTING POLICIES Basis of measurement The consolidated financial statements have been prepared on the basis of historical costs except for the following items: • Financial instruments at fair value in the profit and loss account, loans and receivables and other financial liabilities at amortized cost.
Functional and presentation currency These consolidated financial statements are presented in Norwegian kroner (NOK), which is the functional currency of the parent company. All financial information has been rounded to the nearest thousand. Balance sheet items of subsidiaries in other functional currencies are translated using the exchange rates prevailing on the balance sheet date, while profit and loss items are translated using the exchange rates on the transaction date. The average monthly exchange rate is used as an approximation of the exchange rate at the time of the transaction. Translation differences are recorded as other income and expenses.
Use of estimates and judgments The preparation of financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected.
The accounting policies set out below have been applied consistently for all periods and by all group entities.
Basis of consolidation Subsidiaries are entities controlled by the company. Control exists when the group has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, potential voting rights that currently are exercisable are taken into account. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that the control ceases. The accounting policies of the subsidiaries have been changed when necessary to align them with the policies adopted by the group.
Transactions eliminated on consolidation Intra-group balances and transactions, and any unrealized income and expenses arising from intra-group transactions, are eliminated in the consolidated financial statements. Unrealized gains arising from transactions with equity accounted investees are eliminated against the investment to the extent of the group’s interest in the investee. Unrealized losses are eliminated in the same manner, but only to the extent that there is no evidence of impairment.
Foreign currency transactions Transactions in foreign currencies are translated to the respective functional currencies of the group entities at the exchange rate at the
45
NOTES GROUP
date of the transactions. Monetary assets and liabilities denominated in foreign currencies are translated to the functional currency at the exchange rate at the balance sheet date. Exchange differences arising on translation are recognized in the profit and loss account, except that differences arising on translation of long-term receivables considered part of an investment, are recognized directly in equity.
Depreciation of fixed assets
Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value, are translated to NOK at the exchange rate at the date that the fair value was determined. Assets and liabilities for foreign subsidiaries, including goodwill and adjustments for fair value included in the consolidation, are translated into NOK using the exchange rate at the balance sheet date. Income and expenses for foreign subsidiaries are translated to NOK at the approximate exchange rate at the time of the transactions. Currency translation differences are posted as translation reserves included in the equity.
The estimated useful lives for the current and comparable periods are as follows: • Fixtures and fittings 5-10 years • Software 3 years • Machinery and equipment 3 years
Share capital
Intangible assets
Ordinary shares are classified as equity. Expenses directly attributable to the issue of ordinary shares and share options are recognized as a deduction from equity, net of any tax effects.
Intangible assets are recognized on the balance sheet if it can be proven that there are probable future economic benefits that can be attributed to the asset which is owned by the company and its future recoverability can reasonably be established. Intangible assets are capitalized at cost. Intangible assets with indefinite useful lives are not amortized, but impairment losses are recognized if the recoverable amount is less than the cost price. The recoverable amount is calculated each year or if there are any indications of impairment. Intangible assets with a finite useful life are amortized and any need for impairment losses to be recognized is considered. Other intangible assets are amortized from the date they become available for use.
Purchase of own shares (treasury shares) When own shares are repurchased, the amount of the consideration paid, which includes directly attributable costs, is recognized as a change in the equity. Treasury shares are presented as a deduction from the total equity net of any tax effects. When treasury shares are sold or reissued subsequently, the amount received is recognized as an increase in the equity, and the resulting transaction surplus or deficit is transferred to/from retained earnings.
Cost of equity transactions Transaction costs directly relating to an equity transaction are recognized against equity after deducting tax expenses.
Tangible fixed assets Fixed assets are entered in the accounts at historical cost less accumulated depreciation and accumulated impairment losses. At the group’s transition to IFRS on 1st January 2004, the fair value was assumed to be the estimated historical cost. The acquisition cost includes expenditures directly attributable to the acquisition of the asset. The cost of self-developed assets includes the cost of direct labour, any other cost directly attributable to ensuring that the assets function as intended, and the cost of dismantling and removing the assets. Gains and losses on disposal of tangible fixed assets constitute the difference between the sale proceeds from and the carrying amount of the assets, and are recognized net as other income in the profit and loss account.
Depreciation is recognized on a straight-line basis over the estimated useful life of each asset. Leased assets are depreciated over the shortest of either the lease period or the useful life unless it is reasonably certain that the group will obtain ownership by the end of the lease period.
Depreciation methods, useful lifetimes and residual values are reviewed at the balance sheet date.
Expenses linked to the purchase of new software are recognized in the balance sheet as an intangible asset provided these expenses do not form part of the hardware acquisition cost. Expenses incurred as a result of maintaining or upholding the future usefulness of software are expensed as incurred unless the changes in the software increase the future economic benefit from the software.
Research and development Expenditures associated with research activities are recognized in the profit and loss account when incurred. Development activities are related to significant new concepts or solutions. Development expenditures are capitalized only if they can be measured reliably, the product or process is technically and commercially feasible, future economic benefits are probable, and the group intends to and has sufficient resources to complete the development and to use or sell the asset. The capitalized expenditures include the cost of materials, direct labour and directly attributable overhead costs. Other development expenditures are recognized as incurred.
46
ITERA ANNUAL REPORT 2013
NOTES GROUP
Capitalized development expenditures are measured at cost less depreciation and impairment.
the extent that these entail that cash refunds or reduced future payments become available.
Amortization intangible assets
Share-based payments
Intangible assets are depreciated using the straight-line method over the estimated useful lifetime from the time they become available for use. The estimated useful lives for the current and comparable periods are as follows:
Employee stock options in the Group represent rights for the key employees included in the stock option programme to acquire shares in Itera ASA at a future point in time at a pre-determined price. As a general rule, such subscription is conditional upon attainment of specific targets and that the individual is still employed at the time of exercise.
• Capitalized development costs
3-5 years
Leasing Lease agreements are classified as financial or operational according to the actual content of the agreements. If the greater part of the financial risk and control of the object of the leasing agreement is the responsibility of the lessee, the agreement is classified as a financial lease, and the associated assets and liabilities are capitalized. Other lease agreements are classified as operational leases and the lease fee is carried to expense as leasing costs.
Work in progress Work in progress represents the accrued and not invoiced revenues deducted expected losses. Invoicing for the individual projects is based on contractual payment milestones.
Accounts receivable Trade and other receivables are recognized at nominal value on the balance sheet deducted any foreseeable losses. The interest element is disregarded if insignificant. In case of objective evidence of any impairment, the difference between the posted value and the present value of future cash flows is recognized as a loss.
The value of the options is recognized at fair value at the time of grant. The calculated value is posted as personnel expenses, with a cross entry in other called-up and fully paid share capital. The cost is distributed across the accrual period up until the employees gain an unconditional right to the options. The amount carried to expense is adjusted to reflect the actual number of stock options for which associated service and non-market conditions have been met. The employer’s national insurance contribution associated with the employees’ taxable advantage is currently recognized over the accrual period, based on the accrual rate and value at the balance sheet date.
Provisions A provision is recognized if, as a result of a past event, the group has a current legal or constructive obligation that can be estimated reliably, and it is probable that a payment or transfer of some other asset will be required to settle the obligation. The calculated provisions constitute the present value of the expected future cash flow, discounted a market-based discount rate before tax.
Operating revenues Impairment A financial asset is assessed at each reporting date to determine whether there is any objective evidence of impairment. Individually significant financial assets are tested for impairment on an individual basis. The remaining financial assets are assessed collectively in groups that share similar credit risk characteristics. All impairment losses are recognized in the profit and loss account. Impairment losses are reversed if such reversal may objectively be linked to an event which occurred after such losses were recognized.
Defined contribution pension schemes The Itera group finances its pension scheme for the employees through collective defined contribution pension schemes. A defined contribution pension scheme is a plan under which an entity pays fixed contributions into a separate fund or pension fund and has no legal or constructive obligation to pay any further amounts. Contribution obligations are recognized as personnel expenses in the profit and loss account when due. Prepaid contributions are recognized as an asset to
Revenues from services rendered are recognized in the profit and loss account in proportion to the stage of completion of the transaction at the balance sheet date. The stage of completion is assessed by reference to surveys of work performed. Revenues related to subscriptions are recognized over the contract period. Revenues from long-term projects are recognized on the basis of the precentage of completion. The precentage of completion is calculated on cost of job to date divided on expected total cost. If the outcome of a long-term project cannot be estimated reliably, the contractual revenue is only recognized to the extent that it can be assumed that the accrued contractual costs will be covered by the customer. If the agreed compensation covers several products or services, the compensation is allocated among the various sub-deliveries. Recording of income takes place in line with delivery of the various products or services. Revenues from subscriptions are distributed across the subscription period. Expected losses associated with a contract are posted in the profit and
47
NOTES GROUP
loss account when it is determined that the expected costs associated with the contract in question will exceed the anticipated revenues from said contract. Revenues from sale of goods are measured at the fair value of the compensation or claim and recognized in the profit and loss account when the risk has been transferred to the buyer.
Finance income and expenses Finance income comprises interest income on financial investments. Interest income is recognized using the effective interest method. Dividends are recognized in the profit and loss account on the date they are decided by the general meeting of the companies distributing them. Financial expenses comprise interest expenses on borrowings and changes in the fair value of financial assets. All borrowing costs are recognized in the profit and loss account using the effective interest method.
Tax expenses Tax expenses comprise current and deferred tax. Deferred tax/tax assets are calculated on all taxable temporary differences. Deferred tax assets are recognized when it is probable that the indi vidual company will have a sufficient profit for tax purposes to utilize the tax asset. The individual companies recognize formerly unrecognized deferred tax assets to the extent that it has become probable that the company may utilize the deferred tax asset. Similarly, the companies will reduce their deferred tax assets to the extent that it is no longer probable that the related tax benefit may be realized.
Statement of cash flow The statement of cash flow has been prepared based on the indirect method. Cash and cash equivalents comprises cash and bank deposits and other short-term liquid investments.
Earnings per share The basic EPS is calculated by dividing the profit or loss for the period attributable to ordinary shareholders of the company by the weighted average number of ordinary shares outstanding during the period. The diluted EPS is determined by adjusting the profit or loss and the weighted average number of ordinary shares outstanding for the effects of all potentially dilutive effects, which comprise share options granted to employees.
Events after the balance sheet date New information obtained after the balance sheet date on the group’s financial position at the balance sheet date is taken into account in the financial statements. Events after the balance sheet date that do not affect the company’s financial position at the balance sheet date, but will affect the company’s financial position in the future, are recognized if significant.
IFRS standards which have not yet been implemented
Several new standards, amendments of standards and interpretations have not yet entered into force for the accounting year which ended on 31 December 2013, and have not been used for the consolidated financial statements. The most significant of these standards are: • IFRS 10 Consolidated Financial Statements • IFRS 11 Joint Arrangements • IFRS 12 Disclosure of Interests in Other Entities • Amended IAS 27 Consolidated and Separate Financial Statements • Amended IAS 28 Investments in Associates and Joint Ventures It is not expected that any these standards will have any significant effect for the company accounts and the consolidated accounts. As the company does not have any defined benefit pension schemes, the amended IAS 19 will not have any accounting effect.
48
ITERA ANNUAL REPORT 2013
NOTES GROUP
1 OPERATING SEGMENTS The operation in the Itera group consists of seven companies. Every company has a management team and a CEO who is responsible for the company’s financial results. The internal structure for management, budgeting and financial reporting including reporting to the chief decision maker, the group CEO, is also based on every single company. The activities in the different subsidiaries are all related to delivering IT solutions to the customers and is considered to have similar economic characteristics. The group is then considered to be one segment. Transactions and transfers between the companies are carried out on ordinary commercial terms, corresponding to the terms used for external parties. Geographical areas 2013 NOK 1000
Ukraine
Norway
Sweden
Denmark
Group
Sales revenue
2 357
413 727
73 710
39 524
529 319
Group eliminations
-2 357
-56 408
-3 181
-2 178
-64 124
0
357 319
70 529
37 346
465 195
Total revenue Investments
1 008
17 571
140
166
18 885
Total assets
1 390
169 910
31 465
17 326
220 092
Total liabilities
-208
111 973
12 364
9 029
133 157
Ukraine
Norway
Sweden
Denmark
Group
1 015
390 228
77 991
31 426
500 659
2012 NOK 1000 Sales revenue Group eliminations
-1 015
-58 849
-2 300
-288
-62 452
Total revenue
0
331 379
75 691
31 138
438 207
Investments
0
15 383
1 740
300
17 424
Total assets
626
109 617
47 385
19 732
177 360
0
56 366
42 294
6 256
104 916
Total liabilities
2 WORK IN PROGRESS Work in progress consist of earned, not invoiced revenue. NOK 1000
2013
2012
Gross work in progress
18 057
5 918
Provision for impairment
-2 400
-26
Net work in progress
15 657
5 892
Sales of services are entered as income on delivery. Customer projects are entered in the P&L accounts in accordance with percentage completion of the project. When the result of the transaction cannot be reliably estimated, only income equal to accrued project costs is recognised.
49
NOTES GROUP
3 EARNINGS PER SHARE NOK 1000
2013
2012
Profit for the year
15 800
4 618
Average number of outstanding shares
82 187
82 458
2 558
393
82 187
82 458
Outstanding options for employees Average number of shares including dilution EBITDA per share
0.53
0.31
Basic earnings per share
0.19
0.06
Diluted earnings per share
0.19
0.06
82 187
82 458
Average number of outstanding shares
0
0
82 187
82 458
Dilution of outstanding stock options Average number of shares including dilution
In that the redemption rate of options is considerably higher that the current share price, the options have no diluting effect.
4 OTHER CURRENT RECEIVABLES NOK 1000
2013
2012
282
40
Prepaid expenses
5 560
6 540
Other current receivables
6 731
1 957
12 573
8 537
Pension fund
Total
5 OTHER CURRENT LIABILITIES NOK 1000
2013
2012
Holiday pay
16 367
16 200
Customer prepayments
23 738
21 469
16 012
9 568
9 313
2 098
65 431
49 335
Accrued wages and bonuses Accrued other expenses Total
50
ITERA ANNUAL REPORT 2013
NOTES GROUP
6 FINANCIAL RISK MANAGEMENT The Itera group is exposed to different financial risks such as; credit risk, liquidity risk, currency risk and interest rate risk. Overall, these risks are considered as low. The group has established guidelines to deal with these risks. The main principle is to minimize exposure to financial risks, and the group holds no financial assets or liabilities for speculative purposes. The nearshore operations in Ukraine expose the Group to new risks, such as country risk, IT security and corruption. Itera has zero tolerance for corruption and has no domestic business in countries which are exposed to the risk of corruption.
Credit risk Credit risk is the risk of financial loss to the group’s receivables from customers and other short term receivables. The group has established a credit policy under which each new customer is analysed individually for creditworthiness. The group’s exposure to credit risk is not linked to the individual customer but customers as a group. Unless an agreement for delayed settlement has been made with a counterpart, a provision is made for all receivables older than 90 days and recognized in the financial statements. The group’s exposure in accounts receivable is presented in note 12.
Liquidity risk Liquidity risk is the risk that the group will be able to meet its financial obligations as they fall due. The group’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the group’s reputations. The group has established an overdraft facility with its banking partner, see note 17. In order to accommodate the growth in the group’s companies, lease financing arrangements have been established for major investments in software and hardware.
Currency risk The group is exposed to currency risk through its businesses in Sweden, Denmark and Ukraine. The exposure to currency risk is limited by the fact that the expenses are in the same currencies in Sweden and Denmark. Of the group’s total revenue, 16 percent is in Swedish kroner (SEK) and 9 percent is in Danish kroner (DKK). A 10 percent change in the NOK value against SEK and DKK will affect the company’s turnover with 2.5%. In Ukraine the group operates in three different currencies, USD, Euro and Hryvnia. The main exposure is in USD. The company is working on a hedging strategy to reduce this exposure.
Interest rate risk The group is exposed to interest risk related to bank deposits. The group is also exposed to connection with the lease financing agreements and when drawing against the overdraft facility. The group has no stocks, shares or other assets with an inherent interest rate risk.
Fair value Itera does not have significant differences between fair value and book value in the financial instruments. .
51
NOTES GROUP
7 PAYROLL AND PERSONNEL EXPENSES NOK 1000 Salaries National insurance contribution Pension cost Stock options Other benefits Capitalized payroll Total payroll and personnel expenses Average number of employees
2013
2012
233 002
233 599
33 479
35 139
8 906
8 560
138
0
6 476
8 826
-2 600
-4 200
279 400
281 924
456
445
8 SHARE-BASED PAYMENTS As of 31 December 2013 Itera had 2 558 000 stock options that were outstanding to employees of which 726 000 to employees in the parent company. Itera has two current option programs. • One was implemented in 2011 under which there are 393 000 options outstanding against employees as of 31.12.2013. • A new options program was established in 2013. The program has 2 165 000 options outstanding. The redemption rate for the options is 2.95 (2011) and 2.30 (2013) respectively. The options are targeted at key personnel in the group. The options are conditioned on the achievement of defined targets, both financial and others. The options have a redemption period of 1 to 4 years. The real worth of the options is calculated at the date of allocation and is charged as an expense over the accrual period of 1 to 4 years. A total cost of TNOK 162 incl. AGA is in 2013 (NOK 0) linked to the options programs. The real worth is calculated using the Black-Scholes-Merton option pricing model. It is assumed that the historical volatility is an indication of future volatility. Expected volatility is therefore set equal to historical volatility. The interest rate is based on interest gleaned from Norges Bank for the same period as the life of the options. For calculation purposes interest rates of between 1.57 % and 2.02 % are implemented in the 2013 program period. 4.25% is applied for the full period of the 2011 program. An annual turnover of 10 % is estimated for both programs. As a calculation tool an estimated dividend of NOK 0.30 per annum was used.
Number
Lapsed in 2013
2011
393 000
-
2013
2 165 000
-
Program
1) 2)
Number as of 31 December 2013
Fair value
Exercise price 1)
Share price 2)
Grant date
Exercise period
393 000
NOK 0.11
NOK 2.95
NOK 2.95
18 July 2011
2014–2015
2 165 000
NOK 0.15
NOK 2.30
NOK 2.30
22 Aug 2013
2014–2017
The redemption price is the average share price that applies during the last 30 days prior to the date of award. The share price is set at the market value on the date of award. The company is operating on the premise that the exercise price is the same as the price on the date of award and that the options do not have any intrinsic value on this date.
52
ITERA ANNUAL REPORT 2013
NOTES GROUP
Program
Number
Interest rate
Volatility
2011
393 000
4.25%
40.0%
2013
2 165 000
1.57% – 2.02%
43.5%
Total
2 558 000
9 REMUNERATIONS Pursuant to Section 6-16a of the Norwegian Public Limited Act, the Board of Directors will present the following remuneration guidelines to the Annual General Meeting: “The Board of Directors’ statement on the stipulation of salaries and other remunerations to executive employees The Itera group’s guidelines for determining remunerations to the chief executive officer (CEO) and executive employees, at all times, support prevailing strategy and values, while contributing to the attainment of the Group’s targets. The remunerations should inspire conduct to build the desired corporate culture with respect to performance and profit orientation. In connection with this statement, the Board of Directors (the Board) has passed no resolution entailing changes to the principles for the stipulation of remunerations compared with statements presented previously. The total remuneration to the CEO consists of fixed salary, variable salary, pension, insurance schemes and other benefits. The CEO will also be included in the Group’s stock options programs. The total remuneration is determined based on a total evaluation, and the variable part of the salary is primarily based on the Group’s financial performance. The remuneration is subject to an annual evaluation and is determined by the Board. The CEO determines the remunerations to executive employees in agreement with the Chairman of the Board. The total remuneration to executive employees consists of fixed salary, variable salary, pension, insurance schemes and other benefits. Executive employees will also be considered for inclusion in the Group’s stock options programs. The total remuneration is determined based on the need to offer competitive terms. The remunerations should promote the Group’s competitiveness in the relevant labour market, as well as the Group’s profitability, including the desired trend in income and costs. The total remuneration must neither pose a threat to Itera’s reputation nor be market leading, but should ensure that Itera attracts and retains executive employees with the desired skills and experience. The remuneration is subject to an annual evaluation and is determined based on general salary levels in the labour market and especially in the IT industry. Bonuses paid in 2013 are based on results achieved in own companies and personal performance achievements in 2012. Benefits in kind can be offered to executive employees to the extent such benefits have a logical connection the employee’s function or are in line with the market practice. Executive employees are covered by the contributory pension schemes of the respective companies. A stock option program for executive- and key employees was established in 2011 and a new share program was established in 2013. Each year the Board considers whether or not such options programs should continue. Any options will be allocated without an intrinsic value. Proposals relating to new stock options programs will be presented to the general meeting. As a main rule, no termination payment agreements will be signed. However, the Group will honour existing agreements. The Board confirms that the payments to excutive employees follows the guidelines set forth in the statement and presented for the Annual General Meeting of 23 May 2013. The guidelines remain unchanged from 2012 to 2013.”
53
NOTES GROUP
Compensation to the executive management NOK 1000 Salary
Bonus
Other benefits
Total taxable remuneration
Pension benefit cost to company
1 932
0
107
2 039
67
Chief Financial Officer
1 257
54
11
1 322
67
Anders Lier
EVP Business Develpoment
1 844
0
10
1 854
62
Kristian Enger
EVP Business Communication and Consulting
1 308
200
9
1 517
62
Name
Position
Arne Mjøs
Chief Executive Officer
Torunn Havre
Niko Nyström
EVP Technology Consuling
1 282
197
10
1 489
62
Jon Erik Høgberg
EVP Managed Services
1 302
0
9
1 311
62
Ane Gjennestad
Chief Communications Officer
953
0
4
957
61
Merete Jordal
Chief Technical Officer
969
0
11
980
63
10 847
451
171
11 469
506
Salary
Bonus
Other benefits
Total taxable remuneration
Pension benefit cost to company
1 799
551
124
2 474
64
468
0
4
472
25
2 267
551
128
2 946
89
Total 2013
Name
Position
Arne Mjøs
Chief Executive Officer
Torunn Havre
Chief Financial Officer from 20 August
Total 2012
The CEO and CFO have no termination payment agreements. The operation in the group consists of seven companies. Every company has a management team and a CEO who is responsible for the company’s financial results. The management of Itera ASA consist of the groups CEO, CFO, CTO ang CCO in addition to the Executive Vice Presidents (EVP) for the business units.
54
ITERA ANNUAL REPORT 2013
NOTES GROUP
Compensation to the Board of Directors Name
Position
2013
2012
Ole Jørgen Fredriksen
Chairman
300
376
Mimi K. Berdal
Board member
190
240
Trude S. Husebø
Board member
190
190
Jan-Erik Karlsson
Board member
175
0
Johan Lindqvist
Board member
0
175
John M. Lervik
Board member
0
175
855
1 156
Total
Payment was made in 2013 to J. E. Karlsson of TNOK 54 in addition to the stipulated Director’s fees for additional work in connection with advisory and consulting services. Included in remunerations to the Board of Directors are payments as follows: • M. Berdal NOK 15 000 as leader of the Audit Committee, O.J. Fredriksen NOK 15 000 as member of the Audit Committee • T. Husebø NOK 15 000 as leader of the Compensation Panel, J. E. Karlsson NOK 15 000 as member of the Compensation Panel
Compensation to the nomination committee Name
Position
2013
Erik Sandersen
Leader
30
Gisle Evensen
Member
15
Olav W. Pedersen
Member
15 60
Total
Shares and stock options held by the Board as of 31 December 2013 Name
Position
Shares
Options
Ole Jørgen Fredriksen
Chairman
650 000
0
Mimi K. Berdal
Board member
83 000
0
Trude S. Husebø
Board member
0
0
Jan-Erik Karlsson
Board member
153 076
0
886 076
0
Shares
Options
15 018 298
480 000
Total
Shares (directly or indirectly) and stock options held by the executive management as of 31 December 2013 Name
Position
Arne Mjøs
Chief Executive Officer
Torunn Havre
Chief Financial Officer
Total
Arne Mjøs holds all stocks and options through Arne Mjøs Invest AS
0
150 000
15 018 298
630 000
55
NOTES GROUP
Audit fees NOK 1000
2013
2012
Audit fee for Itera ASA
381
196
Audit fee for the subsidiaries from KPMG Norway
421
391
Audit fee from KPMG abroad
153
155
Audit fee from KPMG
955
742
81
48
226
259
82
42
Other authorization statements from KPMG Other services from KPMG Audit fees from other audit companies Other authorization statements from other audit companies Other services from other audit companies
0
0
49
30
Costs of audit fees are exclusive VAT.
10 PENSION All of the group’s pension schemes are contributory schemes. Pension expenses correspond to the paid premiums and have been entered under payroll and personell expenses in the profit and loss account. The group’s pension schemes in Norway comply with the Norwegian Mandatory Occupational Pension Act (OTP). Pension cost 2013
2012
Norway
NOK 1000
5 706
5 641
Sweden
2 055
1 726
Denmark
1 145
1 193
8 906
8 560
Total
56
ITERA ANNUAL REPORT 2013
NOTES GROUP
11 NET FINANCIAL ITEMS Finance income
2013
2012
322
375
0
173
61
210
Total financial income
383
758
Finance expenses
546
1 052
1 776
14
Net foreign exchange gain Other
Net foreign exchange loss Other Total financial expenses
145
101
2 467
1 167
12 ACCOUNTS RECEIVABLE NOK 1000 Gross accounts receivable as of 31 December Provision for bad debt Net accounts receivable as of 31 December
Age distribution of accounts receivable
2013
2012
69 939
74 553
-257
-377
69 682
74 176
Total
Not due
0-30 days
30-60 days
60-90 days
> 90 days
As of 31 December 2013
69 939
50 978
17 518
79
420
944
As of 31 December 2012
74 553
47 714
24 603
746
1 491
0
Accounts receivable per country/currency 2013
%
2012
%
Norway
48 211
69%
55 790
75%
Sweden
15 522
22%
11 919
16%
Denmark
6 206
9%
6 845
9%
69 939
100%
74 553
100%
Total
Losses on accounts receivable are classified as operating expenses in the income statement. Maximum credit risk is equal to the net accounts receivable above.
57
NOTES GROUP
13 FIXED ASSETS 2013 NOK 1000
Development cost
Software
Machinery & equipment
Fixtures & fittings
Leased IT-equipment
Total
47 845
9 117
38 792
18 958
15 138
129 850
3 670
2 007
2 650
489
10 069
18 885
Acquisition cost Accumulated as of 1 January Additions during the year Disposals during the year Exchange differences Accumulated as of 31 December
0
0
0
-249
0
-249
269
77
1 971
802
3 314
6 433
51 784
11 201
43 413
20 000
28 521
154 919
27 421
7 293
34 730
9 758
3 620
82 822
6 861
1 266
4 233
2 802
6 214
21 376
0
0
0
-249
0
-249
Depreciation Accumulated as of 1 January Depreciation Disposals during the year Exchange differences Accumulated as of 31 December
285
65
1 758
954
2 831
5 893
34 567
8 624
40 721
13 265
12 665
109 842
20 423
1 824
4 061
9 200
11 518
47 026
17 216
2 577
2 691
6 735
15 856
45 075
3-5 years
3-5 years
3 years
5-10 years
3-5 years
linear
linear
linear
linear
linear
Carrying amounts As of 1 January As of 31 December Estimated useful lives Depreciation plan
58
ITERA ANNUAL REPORT 2013
NOTES GROUP
2012 NOK 1000
Development cost
Software
Machinery & equipment
Furniture & fixtures
Leased IT-equipment
Total
Acquisition cost Accumulated as of 1 January
41 779
9 100
37 660
16 125
9 706
114 370
Additions during the year
6 066
17
2 384
3 829
5 432
17 727
Disposals during the year
0
0
-1 242
-994
0
-2 236
Exchange differences
0
0
-10
-2
0
-12
47 845
9 117
38 792
18 958
15 138
129 850
20 554
6 014
30 198
8 573
1 060
66 399
6 870
1 280
4 848
2 189
3 410
18 596
0
0
-297
-994
-850
-2 141
-3
-1
-20
-10
0
-33
27 421
7 293
34 730
9 758
3 620
82 822
As of 1 January
21 225
3 086
7 462
7 552
8 646
47 971
As of 31 December
20 423
1 824
4 061
9 200
11 518
47 026
3-5 years
3-5 years
3 years
5-10 years
3-5 years
linear
linear
linear
linear
linear
Accumulated as of 31 December Depreciation Accumulated as of 1 January Depreciation Disposals during the year Exchange differences Accumulated as of 31 December Carrying amounts
Estimated useful lives Depreciation plan
Intangible fixed assets (development cost) are primarily related to the development of new concepts. The concepts under development are primarily related to contracts entered into with fixed future income. In 2013 NOK 3.6 million (NOK 6.0 million) was capitalized in connection with the development of concepts. Expenditure incurred in connection with developments is primarily related to the wages and salaries paid to employees who have participated in developing these concepts. As of 31 December 2013, NOK 17.2 million (NOK 20.4 million) was entered under intangible fixed assets. The group does not have significant differences between net book value and fair value.
59
NOTES GROUP
14 LEASING CONTRACTS The group has entered into leasing contracts in connection with investments in IT equipments related to the major hosting agreements. Assets leased under financial leasing contracts are as follows 2013
2012
IT equipment
NOK 1000
26 051
15 982
Accumulated depreciation
-10 677
-4 463
15 374
11 519
Net book value Future minimum lease payments Up to 1 year
7 006
1 to 5 years
9 751
After 5 years Total future minumum lease payments Interest Present value of future minumum lease payments
0 16 757
930 15 827
Of which - current liabilities - non current liabilities
0 15 827
15 INCOME TAXES Income taxes Tax payable Change in deferred taxes Tax balancing in previous years Total
3 940
4 953
700
-2 726
-1
0
4 639
2 228
20 441
-2 180
Tax payable Profit before taxes
380
689
3 209
-2 060
Utilization of previously recognized tax losses
-9 400
-4 018
Total
14 630
-7 569
Permanent differences Change in temporary differences
60
ITERA ANNUAL REPORT 2013
NOTES GROUP
NOK 1000
2013
2012
-2 729
217
Current assets
-148
-31
Other temporary differences
680
0
Losses carried forward
-33 913
-53 418
Total
-36 110
-53 232
Deferred tax assets
-9 146
-14 639
Recognized in the balance sheet
-9 146
-12 903
-753
30
Current assets
-38
-9
Gain and loss account
184
0
Specification of the deferred tax Fixed assets
Recognized assets and liabilities related to deferred tax asset Fixed assets
Losses carried forward
-8 538
-12 924
Total
-9 146
-12 903
-12 903
-14 191
700
-2 726
-24
0
459
0
Changes in deferred tax asset Opening balance Recognized in comprehensive income Calculation difference Tax effect of items entered against income and costs Effects of group contribution
2 622
4 014
Closing balance
-9 146
-12 903
20 441
6 846
5 723
1 917
234
0
85
-78
Tax rate reconciliation Profit before tax Tax calculated at the domestic Corporate tax rate of 28% Effects from changed tax rate Different taxrate in subsidiares Permanent differences Unrecognized tax losses for the period
104
219
0
496
Recognized previously unrecognized tax losses
-1 507
-323
Income taxes in the consolidated income statement
4 639
2 228
22,7%
32,5%
Effective tax rate
61
NOTES GROUP
NOK 1000
2013
2012
Losses carried forward
31 Dec
31 Dec
Norway
-21 543
-45 774
Sweden
-12 370
-7 644
0
0
-33 913
-53 418
Denmark Total
Based on the Itera’s losses to be carried forward as of 31 December 2013 has a deferred tax advantage of NOK 9.1 million of which NOK 9.1 million is recognized in the balance sheet. The deficits to be carried forward are not time-limited. The future utilization of the recognized deferred tax asset is likely, based on budgets and cash flow analyses.
62
ITERA ANNUAL REPORT 2013
NOTES GROUP
16 FOREIGN CURRENCY Information regarding exchange rates used in the Itera group for 2013. Exchange rate 1 Jan
Average
Exchange rate 31 Dec
SEK
0.8549
0.9020
0.9472
DKK
0.9840
1.0470
1.1237
EUR
7.3410
7.8087
8.3825
USD
5.5664
5.8768
6.0837
UAH
0.6935
0.7118
0.7291
17 CASH AND CASH EQUIVALENTS 2013
2012
Cash and cash deposits
67 958
28 824
of which restricted (witheld tax)
-6 948
-7 346
61 011
21 478
25 000
32 700
86 011
54 178
Unrestricted cash and cash equivalents Unused credit facilities Cash reserve
The group has a cash-pool agreement so that the item “cash and bank deposits” is a net item and includes any draws against the overdraft facility. The overdraft facility agreement with Danske Bank has the following loan premises: • net interest bearing debt (NIBD)/EBITDA in the Itera group shall not be more than 2.5 • book equity in the Itera group excluding goodwill shall be minimum 30% of the total balance Key annual figures shall be measured as of 31 December, at the latest 120 days after year’s end. The group is not in breach of the loan premises as 31 December 2013. As surety for the operating credit drawn against the overdraft facility the bank has security in the receivables in the Norwegian subsidiaries.
18 CONTINGENCIES As of 31 December 2013, the group had a total rent commitment amounting to NOK 24.8 million. The group’s leases expire during the period 2014 to 2015, with the major lease contracts expiring in mid-2016.
63
NOTES GROUP
19 SHAREHOLDERS Share capital As of 31 December 2012 Itera ASA had a share capital amounted to NOK 24 655 987 distributed among 82 186 624 shares, each with a face value of NOK 0.30 and fully paid.
Ownership structure At the close of the year, Itera ASA had 1 789 (1 910) shareholders. At year-end 11% (5%) of the company’s Share capital was owned by foreign investors. The company’s 20 largest shareholders owned 57% (61%) of the company’s shares.
Own shares The Itera Group had no own shares at the start of the year, the group has not purchased any own shares during the course of 2013. The Itera Group had no own shares at the close of the year. Shareholders as of 31 December 2013 The top 20 largest shareholders Arne Mjøs Invest AS
Shares
%
15 718 298
19.1%
Assuranceforeningen SKULD
5 479 401
6.7%
OP Capital AS
3 465 000
4.2%
Verdipapirfondet DNB SMB
3 000 000
3.7%
Eikestad AS
2 925 000
3.6%
Jøsyra Invest AS
2 200 000
2.7%
Marxpist Invest AS
2 031 588
2.5%
Septim Consulting AS
1 830 600
2.2%
Bo Investering AS
1 705 828
2.1%
Gamst Invest AS
1 306 982
1.6%
Johs. Haugerudsvei AS
1 073 639
1.3%
GIP AS
1 000 000
1.2%
Aanestad Panagri AS
900 000
1.1%
Ole Jørgen Fredriksen
650 000
0.8%
Verdipapirfondet Storebrand Norge
627 398
0.8%
DNB NOR Bank ASA Egenhandelskonto
617 401
0.8%
600 000
0.7%
Jan Morten Måøy
569 212
0.7%
Jørund Arne Lie
500 000
0.6%
Fredrik Wiese
500 000
0.6%
Total
46 700 347
56.8%
Other shareholders
35 486 277
43.2%
Total number of shares
82 186 624
100.0%
Morten Johnsen Holding AS
64
ITERA ANNUAL REPORT 2013
NOTES GROUP
20 TRANSACTIONS WITH CLOSE ASSOCIATES There have been no material transactions with related parties in the period from 1 January to 31 December 2013.
21 EVENTS AFTER BALANCE SHEET DATE There have been no material events after 31st of December 2013 of significance for the annual report.
65
STATEMENT OF INCOME PARENT
NOK 1000
NOTE
2013
2012
14
19 367
18 082
19 367
18 082
16 536
17 953
Operating revenue Sales revenue Total operating revenue Operating expenses Payroll and personell expenses
1,2,3
Depreciations
4
1 465
1 149
Other operating expenses
1
7 324
8 426
Total operating expenses
25 326
27 529
Operating profit
-5 959
-9 446
9 363
14 258
Financial items Income from investments in subsidiaries
10
Interest income from group companies
400
244
Other financial income
505
257
1 037
770
Interest paid to group companies
127
516
Net financial items
9 105
13 473
Profit before taxes
3 146
4 027
Other financial expenses
12
Income taxes
8
1 105
1 130
Profit/-loss of the year
9
2 041
2 897
To dividend
28 765
4 931
To/-from other reserves
-26 724
-2 034
2 041
2 897
Allocations and transfers
Total allocations and transfers
66
ITERA ANNUAL REPORT 2013
STATEMENT OF FINANCIAL POSITION PARENT
NOK 1000
NOTE
2013
2012
ASSETS Fixed assets Intangible assets Deferred tax asset
8
Total intangible assets
4 933
6 038
4 933
6 038
3 046
2 906
3 046
2 906
Tangible fixed assets Machinery, equipment and software
4
Total tangible assets Financial fixed assets Investment in subsidiaries
5
109 953
109 953
Loan to group companies
7
28 955
16 536
30
0
Total financial fixed assets
138 938
126 489
Total fixed assets
146 917
135 433
10 868
26 467
Other financial assets
Current assets Receivables Intercompany receivables
10
Other receivables
2 194
390
Total receivables
13 062
26 857
35 229
6 080
Total current assets
48 290
32 937
Total assets
195 207
168 370
Bank deposits
13
67
STATEMENT OF FINANCIAL POSITION PARENT
NOK 1000
NOTE
2013
2012
24 656
24 656
EQUTY AND LIABILITIES Paid-in capital Share capital
2 028
1 890
Total paid-in capital
26 684
26 546
Retained earnings
56 332
83 056
Other paid-in capital
Total retained earnings Total equity
56 332
83 056
9
83 016
109 602
1 974
406
15
11 204
1 832
11, 12
67 621
49 769
9
Liabilities Current liabilities Accounts payable Public duties payable Intercompany liabilities
28 765
4 931
Other short term liabilities
2 626
1 830
Total current liabilities
112 191
58 768
Total liabilities
112 191
58 768
195 207
168 370
Provision for dividend
Total equity and liabilities
Oslo, 20 March 2014 The Board of Directors of Itera ASA
Ole Jørgen Fredriksen Chairman
Mimi K. Berdal Board member
Trude S. Husebø Board member
Jan-Erik Karlsson Board member
Arne Mjøs CEO
68
ITERA ANNUAL REPORT 2013
STATEMENT OF CASH FLOW PARENT
NOK 1000
2013
2012
Cash flow from operating activities 3 146
4 027
-9 363
-14 258
Depreciation
1 465
1 149
Change in accounts payable
2 022
-558
Effect of currency changes
1 742
214
Profit before taxes Group contribution, not paid
Change in other items
3 494
3 778
Net cash flow from operating activities
2 507
-5 649
-1 605
-1 246
0
-950
Group contribution
14 258
8 500
Payment of intercompany borrowings
-5 232
0
7 421
6 304
Cash flow from investment activities Investment in fixed assets Investment in shares
Net cash flow from investment activities Cash flow from financial activities Changes in cash-pool
24 150
6 260
Purchase own shares
0
-1 598
Dividend
-4 931
0
Net cash flow from financial activities
19 219
4 662
Net change in bank deposits
29 147
5 316
Bank deposits as of 1 January
6 080
764
35 227
6 080
Bank deposits as of 31 December
69
NOTES PARENT
GENERAL The financial statements consist of the profit and loss statement, balance sheet, cash flow statement and notes and have been prepared in accordance with the Public Limited Liability Companies Act, the Accounting Act and the Norwegian Generally Accepted Accounting Principles (NGAAP).
Basis of measurement The company accounts have been prepared on the basis of historical costs. Transactions are allocated to the value of the remuneration at the time of the transaction. Revenues are recognized in the financial statements when earned and expenses are matched with earned revenues.
Share capital Ordinary shares are classified as equity. Expenses directly attributable to the issue of ordinary shares and share options are recognized as a deduction from equity, net of any tax effects.
Purchase of own shares (treasury shares) When own shares are repurchased, the amount of the consideration paid, which includes directly attributable costs, is recognized as a change in the equity. Treasury shares are presented as a deduction from the total equity net of any tax effects. When treasury shares are sold or reissued subsequently, the amount received is recognized as an increase in the equity, and the resulting transaction surplus or deficit is transferred to/from retained earnings.
Intangible assets Use of estimates and judgments The preparation of financial statements in conformity with NGAAP requires the management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.
Intangible assets are recognized on the balance sheet if it can be proven that there are probable future economic benefits that can be attributed to the asset which is owned by the company and its future recoverability can reasonably be established. Intangible assets are capitalized at cost. Intangible assets with indefinite useful lives are not amortized, but impairment losses are recognized if the recoverable amount is less than the cost price.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected.
Fixed assets
Subsidiaries Subsidiaries are entities controlled by the group. Control exists when the group has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, potential voting rights that currently are exercisable are taken into account. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases.
Fixed assets are entered in the accounts at historical cost, with deductions for accumulated depreciation and accumulated impairment losses. If the fair value of a fixed asset is lower than the book value, and the impairment is not temporary, the fixed asset will be written down to fair value.
Impairment
Valuation of investments in subsidiaries
A financial asset is assessed at each reporting date to determine whether there is any objective evidence of impairment. Individually significant financial assets are tested for impairment on an individual basis. The remaining financial assets are assessed collectively in groups that share similar credit risk characteristics.
Investments in subsidiaries are valued at the historical cost reduced by any write-downs. The investments are written down to fair value unless the impairment is due to temporary circumstances. Impairment losses are reversed when the basis for impairment no longer is present.
All impairment losses are recognized in the profit and loss account. Impairment losses are reversed if such reversal may objectively be linked to an event which occurred after such losses were recognized.
Dividends, group contributions and other distributions from subsidiaries are recognized in the same year as they are accrued in the subsidiary’s accounts. If the distributions exceed the earned income after the acquisition date, this is considered as a repayment of the invested capital, and such distributions will reduce the book value of the investment.
Subordinated loans and other long-term loans The parent company has provided subordinated loans to several of its subsidiaries. For foreign subsidiaries, the loan is provided in the local currency of the subsidiary. The loans are recognized at the exchange rate at the reporting date. Any changes in value due to changes in the exchange rate are recognized under financial items.
Foreign currency transactions Receivables and liabilities denominated in foreign currencies are translated to Norwegian kroner (NOK) at the exchange rate at the balance sheet date.
Loans in NOK are recognized at the nominal value.
70
ITERA ANNUAL REPORT 2013
NOTES PARENT
Accounts receivable Trade and other receivables are recognized at nominal value on the balance sheet deducted any foreseeable losses. The interest element is disregarded if insignificant. In case of objective evidence of any impairment, the difference between the posted value and the present value of future cash flows is recognized as a loss.
Defined contribution pension scheme The company finances its pension scheme for the employees through a collective defined contribution pension scheme. The pension cost corresponds to the premium paid.
Shared-based payments Employee stock options in Itera represent a right for key employees to aquire shares in Itera ASA at a future point in time at a pre-determined price. As a general rule, such right is conditional upon attainment of specific targets and that the individual is still employed at the time of exercise. The value of the options is calculated at the time of grant and recognized as payroll expenses over the accrual period. Options are normally assigned a subscription price that corresponds to the share price at the time of grant; i.e. without intrinsic value. The employer’s national insurance contribution associated with the employees’ taxable advantage is currently recognized over the accrual period, based on the accrual rate and value at the balance sheet date.
Operating revenues The parent company’s revenues are generated from delivery of common accounting/financial, HR, IT and information/ communication services under Group Functions. The parent company’s revenues are based on a cost plus model. Revenue is recognized at the time of delivery of the services.
Finance income and expenses Finance income comprises interest income on funds invested and group contributions or dividends from subsidiaries. Interest income is recognized using the effective interest method. Group contributions and dividends are recognized in the profit and loss account on the date allocated in the company from which they are distributed. Financial expenses comprise interest expenses on borrowings and changes in the fair value of financial assets. All borrowing costs are recognized in the profit and loss account using the effective interest method.
Tax expenses Tax expenses comprise current and deferred tax. Tax expenses are recognized in the profit and loss account. Deferred tax assets and liabilities are recognized using the liability method on a non-discounted basis, providing for any differences between the carrying amounts of
assets and liabilities for financial reporting purposes and the amounts used for taxation purposes as well as losses carried forward.
Statement of cash flow The statement of cash flow is prepared using the indirect method. Cash and cash equivalents include cash and bank deposits.
71
NOTES PARENT
1 PAYROLL AND PERSONNEL EXPENSES NOK 1000 Salaries National insurance contribution Pension cost Other benefits Total payroll and personell expenses Average number of employees
2013
2012
12 663
14 239
1 947
2 064
555
440
1 235
1 210
16 536
17 953
18
17
For information regarding remuneration for senior management, see note 9 in the group section. Audit fees Audit fees
381
Other authorization statements
0
Tax services
26
Other services Total audit fees
25 433
2 SHARED BASED PAYMENTS As of 31 December 2013 Itera had 2 558 000 stock options that were outstanding to employees of which 726 000 to employees in the parent company. Itera has two current option programs. • One was implemented in 2011 under which there are 393 000 options outstanding against employees as of 31.12.2013. • A new options program was established in 2013. The program has 2 165 000 options outstanding. The redemption rate for the options is 2.95 (2011) and 2.30 (2013) respectively. The options are targeted at key personnel in the group. The options are conditioned on the achievement of defined targets, both financial and otherwise. The options have a redemption period of 1 to 4 years. The real worth of the options is calculated at the date of allocation and is charged as an expense over the accrual period of 1 to 4 years. A total cost of TNOK 162 incl. AGA is in 2013 (NOK 0) linked to the options programs. The real worth is calculated using the Black-Scholes-Merton option pricing model. It is assumed that the historical volatility is an indication of future volatility. Expected volatility is therefore set equal to historical volatility. The interest rate is based on interest gleaned from Norges Bank for the same period as the life of the options. For calculation purposes interest rates of between 1.57 % and 2.02 % are implemented in the 2013 program period. 4.25% is applied for the full period of the 2011 program. An annual turnover of 10 % is estimated for both programs. As a calculation tool an estimated dividend of NOK 0.30 per annum was used.
72
ITERA ANNUAL REPORT 2013
NOTES PARENT
Number
Lapsed in 2013
Number as of 31. December 2013
Fair value
Exercise price 1)
Share price 2)
Grant date
Exercise period
2011
393 000
-
393 000
NOK 0.11
NOK 2.95
NOK 2.95
18 July 2011
2014-2015
2013
2 165 000
-
2 165 000
NOK 0.15
NOK 2.30
NOK 2.30
22 Aug. 2013
2014-2017
Program
1) 2)
The redemption price is the average share price that applies during the last 30 days prior to the date of award. The share price is set at the market value on the date of award. The company is operating on the premise that the exercise price is the same as the price on the date of award and that the options do not have any intrinsic value on this date.
Program
Number
Interest rate
Volatility
2011
393 000
4.25%
40.0%
2013
2 165 000
1.57% – 2.02%
43.5%
Total
2 558 000
3 PENSIONS Itera ASA has pension schemes organized through an insurance company. The company’s pension scheme is a defined contribution plan and the cost correspond to the premium paid. Pension expense charged for 2013 amounts to NOK 555 thousand (NOK440 thousand). The group’s pension schemes in Norway comply with the Norwegian Mandatory Occupational Pension Act (OTP).
4 FIXED ASSETS 2013 NOK 1000
2012
Machinery & equipment
Software
Total
Machinery & equipment
Software
Total
3 949
4 304
8 253
2 538
4 468
7 006
204
1 401
1 605
1 579
0
1 579
Acquisition cost Accumulated 1 January Additions during the year Disposals during the year Accumulated 31 December
0
0
0
-168
-164
-332
4 153
5 705
9 858
3 949
4 304
8 253
2 303
3 044
5 347
2 144
2 054
4 198
548
917
1 465
159
990
1 149
Depreciation Accumulated 1 January Depreciation Disposals during the year
0
0
0
0
0
0
2 851
3 961
6 812
2 303
3 044
5 347
As of 1 January
1 646
1 260
2 906
394
2 414
2 808
As of 31 December
1 302
1 744
3 046
1 646
1 260
2 906
3–5 years
3–5 years
3–5 years
3–5 years
linear
linear
linear
linear
Accumulated 31 December Carrying amounts
Estimated useful lives Depreciation plan
73
NOTES PARENT
5 SUBSIDIARIES NOK 1000
Registered office
Share capital*
Shareholding and voting interest
Book value 1 Jan
Changes
Book value Profit and loss 31 Dec 2013
Equity 31 Dec
Itera Gazette AS
Oslo
500
100%
5 000
-5 000
0
0
0
Itera Consulting AS
Oslo
1 000
100%
16 630
-16 630
0
0
0
Itera Networks AS
Oslo
1 000
100%
28 100
-28 100
0
0
0
Itera Norge AS
Oslo
2 500
100%
0
49 730
49 730
10 814
39 378
Itera Offshoring Services AS
Oslo
200
100%
7 500
0
7 500
3 870
5 306
Cicero Consulting AS
Oslo
200
100%
21 438
0
21 438
40
9 226
Compendia AS
Bryne
182
100%
14 237
0
14 237
7 656
8 205
Itera Sweden AB
Stockholm
100
100%
0
0
0
-17
17 083
Itera Networks AB
Stockholm
4 400
100%
0
0
0
-3 857
2 212
Itera Consulting AB
Stockholm
111
100%
0
0
0
15
2 561
Objectware AB
Stockholm
100
100%
0
0
0
-2
3 748
Itera Consulting Denmark ApS
København
1 424
100%
16 559
0
16 559
4 960
19 445
Itera Consulting UA
Kiev
50
100%
489
0
489
826
1 598
109 953
0
109 953
Total
108 762
* The share capital is entered in local currency (thousand), for the Ukrainian company, the currency is Euro.
Itera Gazette AS, Itera Networks AS and Itera Consulting AS merged in 2013 as the entity Itera Norge AS.
Group contributions Itera ASA has received NOK 9.3 million in group contributions from the Norwegian subsidiaries.
6 FOREIGN CURRENCY Information regarding exchange rates used in Itera ASA for 2013. Exchange rate 1 Jan
Average
Exchange rate 31 Dec
SEK
0.8549
0.9020
0.9472
DKK
0.9840
1.0470
1,.1237
EUR
7.3410
7.8087
8.3825
USD
5.5664
5.8768
6.0837
UAH
0.6935
0.7118
0.7291
74
ITERA ANNUAL REPORT 2013
NOTES PARENT
7 LOANS TO GROUP COMPANIES NOK 1000 Company name Itera Networks AS Itera Offshoring Services AS Itera Sweden AB
Loans
Subordinated loans
Total 2013
Total 2012
83
0
83
4 000
9 362
0
9 362
0
0
10 871
10 871
7 247
8 639
0
8 639
5 289
18 084
10 871
28 955
16 536
2013
2012
Change in deferred taxes
1 105
1 130
Total
1 105
1 130
3 146
4 027
148
10
Itera Networks AB Total
8 INCOME TAXES NOK 1000 Income taxes
Tax payable Profit before taxes Permanent differences
363
7
-3 658
-4 044
0
0
-562
-222
-24
0
Loss carried forward
-17 683
-21 341
Total
Change in temporary differences Utilization of previously recognized tax losses Total Specification of deferred taxes Fixed assets Provisions according to accounting practices
-18 269
-21 563
Deferred tax assets
-4 933
-6 038
Deferred tax recognized in the balance sheet
-4 933
-6 038
75
NOTES PARENT
NOK 1000
2013
2012
3 146
4 027
Tax calculated at the domestic Corporate tax rate of 28%
881
1 120
Effects from changed fax rate
183
0
42
10
1 105
1 130
35.1%
28,1%
Tax rate reconciliation Profit before tax Income taxes
Permanent differences Income taxes in the statement of income Effective tax rate
9 EQUITY NOK 1000 Equity as of 31 December 2012
Share capital
Other paid-in capital
Retained earnings
Total equity
24 656
1 890
83 056
109 602
Profit for the year
0
0
2 041
2 041
Cost effect stock options
0
138
0
138
0
0
-28 765
-28 765
24 656
2 028
56 332
83 016
2013
2012
Dividend Equity as of 31 December 2013
10 FINANCIAL ITEMS Itera ASA has received NOK 9.3 million in group contribution from the Norwegian subsidiaries.
11 INTERCOMPANY LIABILITIES NOK 1000 Company name Itera Consulting AS
17 076
4 045
Cicero Consulting AS
6 408
5 958
Compendia AS
14 412
13 942
Itera Networks AS
13 581
11 895
150
105
Itera Consulting ApS
9 408
8 065
Itera Consulting AB
1 480
1 282
67 621
49 769
Itera Offshoring Services AS
Total
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ITERA ANNUAL REPORT 2013
NOTES PARENT
12 CASH POOL In the group accounts Itera ASA is responsible for their own and for the Norwegian subsidiary companies’ deposits/withdrawals within the group accounts. The bank deposits for Itera AS as presented in the balances include deposits which the subsidiary companies have made within the group accounts and effected net against a withrawal which the parent company has made in the accounts. The subsidiary companies’ deposits into the accounts are presented as intercompany liabilities. Please refer to note 11.
13 RESTRICTED CASH Itera ASA has bank deposits and cash holdings of NOK 35.2 million of which NOK 0.6 million is restricted deposits.
14 RELATED PARTIES Itera has organized joint solutions in accounting and finance, HR, IT and information/communication for Group Functions. These functions are organized in Itera ASA and work across all the subsidiaries. The parent company invoices the subsidiaries at cost plus model. A total of NOK 19.4 million (18.1) was invoiced in 2013 for the services.
15 CONTINGENCIES The Norwegian companies have a common registration at the NorwegianBrønnøysund Register Centre. The public duties thus include the payable VAT for all the Norwegian companies of the group. The Parent reports the full payable VAT for the Norwegian companies and has a corresponding Intercompany receivable.
77
DIRECTORS’ RESPONSIBILITY STATEMENT
On this date, the Board of Directors and the Chief Executive Officer have approved the annual report and annual accounts for the Itera group and the parent company for the 2013 calendar year as of 31 December 2013 (Annual Report 2013). To the best of our knowledge: • t he consolidated financial statements have been prepared in accordance with IFRS and related interpretations as well as additional applicable Norwegian disclosure requirements under the Norwegian Accounting Act as of 31 December 2013 • t he separate financial statements for the parent company have been prepared in accordance with the Norwegian Accounting Act and the NorwegianGenerally Accepted Accounting Practice as of 31 December 2013 • t he annual report for the group and parent company is prepared in accordance with the requirements in the Norwegian Accounting Act and the Norwegian Accounting Standard no. 16 as of 31 December 2013 • t he information in the financial statements provides an accurate view of the assets, liabilities, financial position and result as a whole as of 31 December 2013 for the group and parent company •T he annual report for the group and the parent company provides an accurate view of: – the development, result and position of the group and the parent company – the principal risks and uncertainties the group and the parent company are faced with
Oslo, 20 March 2014 The Board of Directors of Itera ASA
Ole Jørgen Fredriksen Chairman
Mimi K. Berdal Board member
Trude S. Husebø Board member
Jan-Erik Karlsson Board member
Arne Mjøs CEO
78
ITERA ANNUAL REPORT 2013
AUDITOR’S REPORT
79
AUDITOR’S REPORT
80
ITERA ANNUAL REPORT 2013
SHARES AND
SHAREHOLDERS The objective of Itera ASA (the company) is to ensure its share holders a competitive return in the form of dividends and higher share price in comparison with alternative investments. Shareholder policy Itera endeavours to ensure shareholders a competitive return on their investment in the form of a higher share price and dividends. The share price shall reflect the company’s earnings and underlying values. Open communication and equally treatment of the shareholders shall contribute to increased shareholder values and trust among investors.
Investor information Itera ASA was listed on the Oslo Stock Exchange (OSE) on 27 January 1999 under the ticker code ITE. The company shall treat all share holders equally concerning information which may affect the market value of the shares. All information of relevance for the share price is published via the notification system of the Oslo Stock Exchange as well as on the company’s website www.itera.no, to ensure such information is made available to all stakeholders simultaneously. The quarterly reports are also made available on Itera’s website in the form of online webcasts. The shares have been assigned the ISIN NO 0010001118, and the company’s organisation number at the NorwegianBrønnøysund Register Centre is NO 980 250 547.
Share capital As of 31 December 2013, Itera ASA had a share capital of NOK 24 655 987 distributed among 82 186 624 shares, each with a face value of NOK 0.30. All shares have the same voting rights at the General Meeting.
Shareholders As of 31 December 2013, Itera had 1 789 (1 910) shareholders. At year-end, 11% (5%) of the company’s shares were owned by foreign investors. The company’s twenty largest investors owned 57% (61%) of the company’s shares.
Dividend During 2013, a dividend of NOK 0.06 (0.00) per share was paid, for a total of NOK 5 (0) million.
81
SHARES AND SHAREHOLDERS
Share price
Stock option schemes
The Itera share opened the year at NOK 2.19 and closed at NOK 2.78, corresponding to a change of 27% (-17%). The highest share price duringthe year was NOK 2.98 and the lowest price was NOK 1.55. Itera had a market value corresponding to NOK 228 (156) million at 31 December 2013.
The Company has established option schemes for key personnel. A new option scheme was implemented in 2013. There were 2,558,000 outstanding stock options at year-end. Reference is also made to Note 8.
Shareholders as of 31 December 2013 The top 20 largest shareholders Arne Mjøs Invest AS
Shares
%
15 718 298
19.1%
Assuranceforeningen SKULD
5 479 401
6.7%
OP Capital AS
3 465 000
4.2%
Verdipapirfondet DNB SMB
3 000 000
3.7%
Eikestad AS
2 925 000
3.6%
Jøsyra Invest AS
2 200 000
2.7%
Marxpist Invest AS
2 031 588
2.5%
Septim Consulting AS
1 830 600
2.2%
Bo Investering AS
1 705 828
2.1%
Gamst Invest AS
1 306 982
1.6%
Johs. Haugerudsvei AS
1 073 639
1.3%
GIP AS
1 000 000
1.2%
Aanestad Panagri AS
900 000
1.1%
Ole Jørgen Fredriksen
650 000
0.8%
Verdipapirfondet Storebrand Norge
627 398
0.8%
DNB NOR Bank ASA Egenhandelskonto
617 401
0.8%
600 000
0.7%
Jan Morten Måøy
569 212
0.7%
Jørund Arne Lie
500 000
0.6%
Fredrik Wiese
500 000
0.6%
Total
46 700 347
56.8%
Other shareholders
35 486 277
43.2%
Total number of shares
82 186 624
100.0%
Morten Johnsen Holding AS
82
ITERA ANNUAL REPORT 2013
CORPORATE GOVERNANCE The Board of Directors and management at Itera ASA perform an annual review of the principles guiding corporate governance and how it functions within the group. Itera presents a statement of corporate governance principles and practices in accordance with Paragraph 3-3b of the Norwegian Accounting Act and the Norwegian Code of Practice for Corporate Governance (issued by NUES) of 23 October 2012, including the amendments published on 21 December 2012. NUES’ Code of Practice is available at the following website: www.nues.no. The description of Itera’s implementation of the 15 points in the Code of Practice is provided below.
1. Implementation and reporting on corporate governance Itera (the company) is in full compliance with the Code of Practice with the exception of points 13 and 14. The corporate governance principles applied by Itera ASA ensure an appropriate division of roles and good collaboration between the company’s owners, the Board and its executive management as well as reassuring control of the activities. The purpose of an appropriate division of roles in concert with good collaboration and reassuring control is to help ensure optimum creation of value over time for the owners and other stakeholders. The company’s Code of Ethics addresses conflicts of interest, relations with clients, suppliers and the media, insider issues and other relevant financial interests of a personal nature. The Code of Ethics applies to all employees of the Itera Group. Incentives other than purely financial ones are gradually gaining ground among employees. Thus, Itera’s management principles include a clear value base – a set of values that the employees may identify with. Itera also emphasises inclusion of social and moral aspects in its decision-making processes. Consequently, clients and projects are selected partly based on whether they are aligned with our value base and vision: ”Make a difference.” This shall apply in all Itera settings; the employees shall have the sense that Itera is ‘more than just a job’, clients shall have the sense that collaborating with Itera provides real value, the owners shall have the sense that the return is greater than from comparable investment alternatives, and Itera shall be perceived as a positive contributor in its environment.
TORUNN HAVRE Chief Financial Officer
83
CORPORATE GOVERNANCE
2. Business
5. Freely negotiable shares
Itera designs, develops and operates innovative solutions and services for enterprises who achieve their business goals through smart use of communication and technology. Itera’s Articles of Association are available via the company’s website: www.itera.no.
The shares are freely negotiable. The Articles of Association contain no restrictions on negotiability.
The annual report describes the company’s targets and strategies, and the company’s quarterly presentations keep the financial market up to date on the latest developments.
6. General meetings All shareholders are entitled to participate in the General Meeting of the company. Shareholders may vote based on their ownership share through a legal representative or proxy. All shares in the company have equal voting rights. There are no ownership restrictions or known shareholder agreements.
3. Equity and dividends The capital situation is continuously evaluated by the Board in light of the company’s established targets, strategies and risk profile. The objective of the company is to ensure its shareholders a competitive return in the form of dividends and share price development in comparison with comparable investment alternatives. Itera’s dividend policy shall strike a balance between a sound equity level and a sensible return to the shareholders. Annual dividend payments depend on the company’s financial standing, need for working capital, cash flow and investment / acquisition opportunities. Each year, as part of the preparations for the General Meeting, the Board conducts an assessment of whether to request authorisation from the General Meeting to increase the share capital and / or buy back own shares. Such authorisations will normally be valid for one year, and the reasons for issuing them shall be clearly communicated to the General Meeting.
4. Equal treatment of shareholders and transactions with close associates The company shall treat all shareholders equitably. There is only one class of shares. The Articles of Association contain no restrictions on voting rights, and there is an emphasis on equal treatment of all shareholders. All information of relevance for the share price is published through the Oslo Stock Exchange and on the company’s website.
Minutes from the General Meetings are made available via the Oslo Stock Exchange’s information system and the company’s website: www.itera.no. NUES’ Code of Practice recommends that the General Meeting should vote separately on each candidate for any corporate bodies to which members are elected by the General Meeting. Itera requires election of the entire Board.
7. Committees Nomination Committee The General Meeting has established a Nomination Committee in accordance with Itera’s Articles of Association. The General Meeting has stipulated instructions regarding the duties of the Nomination Committee. The Nomination Committee submits a recommendation to the General Meeting regarding election of the Board of Directors. The recommendation shall provide relevant information on the background and independence of the candidates. The Nomination Committee also proposes remuneration for the members of the Board. The compensation paid to the Nomination Committee is stipulated by the General Meeting. The following are members of the Committee: Erik Sandersen, Gisle Evensen and Olav Werner Pedersen.
Audit Committee The company’s transactions in its own shares (buy-backs) are carried out through the stock exchange at prevailing stock exchange prices. In the event of any not immaterial transactions between the company and shareholders, members of the Board, executive personnel or close associates of any such parties, the Board will normally arrange for a valuation by an independent third party.
The Board has established an Audit Committee in accordance with Itera’s Articles of Association. The Committee has two members. The mandate of the Committee is to oversee the company’s reporting procedures and assess the effectiveness of the internal control and risk management activities. The Audit Committee maintains contact with the auditor and evaluates the independence of the auditor. The Audit Committee reports to the Board. The members of the Board have
84
ITERA ANNUAL REPORT 2013
access to all relevant documentation as well as the minutes of the Audit Committee meetings. The following are members of the Committee: Mimi K. Berdal and Ole Jørgen Fredriksen.
Compensation Committee The Board has established a Compensation Committee. The Committee has two members. The mandate of the Committee is further development and coordination of the group’s compensation systems. The following are members of the Committee: Trude S. Husebø and Jan-Erik Karlsson.
8. Board of Directors: composition and independence The company has no corporate assembly. According to Itera’s Articles of Association, the company is to have a Board consisting of 3 to 5 members. The Board is currently comprised of four members. The composition of the Board is to be balanced in terms of competence, experience and background of relevance for the company’s activities. The Board’s composition should preferably also reflect both the company’s ownership structure and the need for independent representatives. The current Board is comprised of four members elected by the General Meeting of the company, and its composition satisfies the requirements relating to independence stipulated in the Norwegian Code of Practice for Corporate Governance. No executive personnel are members of the Board. There were 12 board meetings in 2013, and the meeting attendance was at 96 per cent.
9. The work of the Board of Directors The Board prepares an annual plan for its work with special emphasis on objectives, strategy and implementation. Instructions have also been established for the work of the Board which govern the responsibilities, duties and roles of the Board, the Chairman of the Board and the CEO. The Board receives monthly financial reports for the Itera Group and all subsidiaries where the management addresses the economic developments and financial status. The Board discusses strategy and budgets at extended board meetings. The Board conducts 10-12 board meetings a year and carries out an annual evaluation of its own work.
10. Risk management and internal control Risk management and internal control are safeguarded through various processes both at the Board level and as part of the daily management of the Itera Group. The Audit Committee, on behalf of the Board, followsup risk management and internal control activities beyond what is reported and discussed at board meetings.
Risk management The Board receives regular reports on risk development at board meetings and through financial reports as well as the status of the administration related to the business activities. The Board also considers measures in relation to the risk factors. The premise for risk management at Itera is that the CEO of the Group is responsible for risk within the company and therefore must have the necessary insight into and understanding of its risk profile to facilitate management in a financially and administratively sound manner. The CEO and CFO continually assess the financial results and attainment of objectives for the various business activities, as well as critical issues and events that may affect future developments and optimum use of resources. These elements are included in a monthly review of each of the subsidiaries, along with risks related to financial reporting over both the short and long term. The CEO, the CFO and the management of the subsidiary in question as well as relevant experts participate at these review meetings, which are chaired by the Group’s CEO.
Internal control In connection with the budget planning process and adoption of the budget, the Board examines the internal control systems and evaluates the most important risk factors that the Group is faced with. In recent years, the Group has pursued a growth strategy, and it has been important for the Board to ensure that the internal control systems cover all activities at any given time. The subsidiaries’ senior management is responsible for establishing appropriate and effective internal controls in accordance with applicablerequirements and ensuring compliance with these. Accounting/finance, HR, IT and information/communication are organised under Group Functions as common solutions across all subsidiaries of the Group. This ensures internal control across companies and national borders. Accounting/Finance has established common accounting procedures in the Group to the extent such procedures will be efficient, including account charting and reporting. The Maconomy accounting system is used by all Group companies. Procedures have been established for authorisation of expenses based on an internal control matrix, and expenditures require dual approval. Group Functions Finance is organised with a separate finance/accounting function which is responsible for accounting among the subsidiaries. This function is also responsible for quality assurance of the accounting information in the form of reconciliations, etc. Some of the accounting work is performed at the Ukraine Division, which currently has three employees, in addition to 1.5 man-years in Norway. In addition to the Accounting Department, the Group has separate Business Controllers that help the companies with financial reporting, analyses, forecasts and budget work. Separate accounting functions have been established in both Denmark, Sweden and the Ukraine. The CFO and finance man-
85
CORPORATE GOVERNANCE
ager are responsible for monitoring the procedural efficacy by quality assuring reconciliations, performing analyses, following up various key performance indicators etc. The reports from the subsidiaries are consolidated monthly, and this reporting includes preparation of analyses which are followed up. A group template has been established for the reporting, and spreadsheets are used for the consolidation process. There is a sub-group in Sweden, but only the parent company, Itera ASA, prepares consolidated accounts. The CEO and CFO continually assess the financial results and attainment of objectives for the various business activities, as well as critical issues and events that may affect future developments and optimum use of resources. These elements are included in a quarterly review of each of the subsidiaries, along with risks related to financial reporting over both the short and long term. The CEO, the CFO and the management of the subsidiary in question as well as relevant experts participate at these review meetings, which are chaired by the Group’s CEO. The Group CEO proposes risk reduction measures if relevant on the basis of financial reports and follow-up meetings. The external auditor submits a description of the main audit elements for the previous accounting year to the Audit Committee, with particular emphasis on any significant weaknesses identified in the internal control of the financial reporting process.
11. Remuneration of the Board of Directors The Nomination Committee presents a proposal for remuneration to be paid to the members of the Board to the General Meeting. The General Meeting determines the directors’ fees based on the proposal prepared by the Nomination Committee, and the remuneration to be paid to the members of the Nomination Committee based on a proposal prepared by the Board. Information regarding the remuneration paid to and the shareholding of the directors is available in the notes to the annual report.
Summons to the General Meetings and annual reports are made available via the company’s website in accordance with the principles for sound corporate governance. Information to the stock market is provided on an equal and simultaneous basis. The company maintains a continuous dialogue with shareholders, analysts and others. Information to the stock market is provided on an equal and simultaneous basis. Such dialogues are based on the cautionary principle. The company is in the process of preparing written instructions for its reporting to the market and contact with shareholders and other stakeholders.
14. Take-overs The Board aims for equal treatment of shareholders and transparency regarding any potential take-over of the company. In the event of a take-over bid, the Board and management shall ensure that everyone is given sufficient information to form a view of the offer. The Board has not established separate guidelines for how to react to a take-over bid, but will adhere to the relevant provisions and recommendations in legislation and the Norwegian Code of Practice for Corporate Governance. The Board is of the opinion that this is sufficient to ensure proper and equal protection of all shareholder interests. The Board will inform the shareholders of its view of the offer and whether or not the members of the Board themselves wish to accept the offer in the event that they have taken a position on this.
15. Auditor The company’s external auditor is KPMG. KPMG audits all group companieswith the exception of the company in Denmark. The auditor participates in the meetings held by the Audit Committee.
12. Remuneration of executive personnel The Board has established separate guidelines for remuneration of executive personnel in accordance with Section 6-16a of the Norwegian Public Limited Liability Companies Act. The company’s Compensation Committee is involved in the process to establish the remuneration of executive personnel. The guidelines for remuneration of executive personnel are described in Note 9 to the annual report.
13. Information and communications The company endeavours to provide correct and sufficiently detailed information on a quarterly basis, and to publish it as swiftly as possible. Quarterly figures are normally reported within six weeks of the end of the quarter in question. Preliminary annual accounts are reported in February. Open quarterly presentations are held and made available as simultaneous real-time webcasts and made available for viewing later. Quarterly reports, presentation material and webcasts are available via the company’s website.
The auditor prepares reports for the Audit Committee and the Board. These reports include an auditing plan, an assessment of the c ompany’s internal controls as well as a review of significant accounting principles and estimates. The auditor is present at the meeting held by the Board to consider the annual accounts, and participates in the General Meeting. Information on the remuneration paid to the auditor is provided in the annual report.
86
ITERA ANNUAL REPORT 2013
DEVELOPMENT 2009–2013
REVENUES
EBITDA
EBIT
NOK million
NOK million
NOK million
500
50
45
400
40
35
300
30
25
200
20
15
100
10
5
-5
2009
2010
2011
2012
2013
2008
2010
2011
2012
2009
2013
2010
2011
EMPLOYEES
EBITDA-MARGIN
EBIT-MARGIN
Number
%
%
500
15
15
400
12
12
300
9
9
200
6
6
100
3
3
2009
2010
2011
2012
2013
2009
2010
2011
2012
2013
2009
2010
2011
BANK DEPOSITS
CASH FLOW from operations
EQUITY RATIO
NOK million
NOK million
%
80 70 60
65
70
55
60
45
50
35
40
25
30
15
20
5
10
50
2012
2013
2012
2013
2012
2013
40 30 20 10
-5
2009
2010
2011
2012
2013
2009
2010
2011
2012
2013
2009
2010
2011
87
DEVELOPMENT 2011–2013 QUARTERLY
REVENUES
2011
2012
2013
NOK million
EMPLOYEES
2012
2013
Number
130
500
104
440
78
380
52
320
26
260
Q1
2011
Q2
EBITDA
Q3
2011
Q4
2012
Q1
2013
NOK million
Q2
EBITDA-MARGIN
Q3
2011
Q4
2012
2013
% 20
15
18
13
16 11 14 9
12 10
7
8
5
6 3 4 1
2
-1
Q1
Q2
EBIT
Q3
2011
Q4
2012
Q1
2013
NOK million
Q2
EBITDA-MARGIN
Q3
2011
Q4
2012
2013
% 15
15
10
10
5 5
5
-5
10
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
2013 ANNUAL REPORT