ANNUAL REPORT
2013
TURNING KNOWLEDGE INTO VALUE
2
ANNUAL REPORT | MERIT GLOBE | 2013
It commits to be Merit We are looking forward in continuing to help our clients create value and profits. 2013, summarized briefly we have two messages. Consolidation and investment in and around Infor M3. At the same time we can say that this is connected. It has been many years of continuous growth in both the domestic and emerging markets and several new products. During 2013, Merit therefore will ”consolidate” with the focus on improving the efficiency of operations in and around Infor M3 and M3 Merit-optimized products and services, Merit and Merit Portal Operations. At the same time, we continue the business development of the company. In the start of 2013 we established an office in the Czech Republic, Brno. A success with almost 10 established and competent resources. We are now also established in Spain, Barcelona. There are exciting opportunities in a market showing recovery after a long and heavy period. Merit is now established in 11 countries with its own offices, serving customers in 18 countries. Merit’s history and perspective are based on customers and knowledge about Infor M3. With Infor, the solution Infor M3, have got an industrial owner with focus and dedication. Infor has made us confident about the future. We also have the scalability to the industries we focus on. The scalability targets industries and verticals where M3s positioning provides the best price / performance and ”cost of own-
ership” - to all our customers. We can also see this in the fact of the increasing rate of new customers who choose M3 and Merit Portal. In 2013, a new major release of Infor M3 was launched, version 13. For Merit, this means investing in skills and adaptation in our own products. Meanwhile the first deliveries of the new version should be done. Autumn / Winter 2013, we started a serie of implementation projects with initial start right after New Year 2014. Without big surprises. We are again able to say that we have a product with very good quality to work with, from Infor. Quality and performance is on par or better than the last version. We know, as of today, not any other Infor partner that has delivered as many M3 version13 projects than Merit. At the same time, we can already say that it will also apply to 2014. Infor M3 version 13 is a hit version in relation to new and improved functionality and in terms of quality and performance. Here will our competitors envy us. With focus on Infor M3 as the best solution to our targeted markets, will growth and new Merit countries apply in the years to come, and this is according to our strategy. We are looking forward to the future - to help our clients create value and profits. Being Merit commits.
CONTENTS CEO’s introduction
page
3
Merit’s Unique Offering
page
4
Annual Report
page
5
Economy and Finances
page
6
Organization
page
7-8
Income statement
page
9
Balance sheet
page 10-11
Cash flow statement
page
Notes
page 13-21
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ANNUAL REPORT | MERIT GLOBE | 2013
Organization is the soul of our business. We focus each day in working together with our customers to implement Merit’s slogan and guiding principle - “turning knowledge into value.” Our future direction is set.
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ANNUAL REPORT | MERIT GLOBE | 2013
Merit’s Unique Offering: We aim to improve our clients competitiveness by streamlining business processes and implementing modern integrated software.
Sales
Account Manager
CUSTOMER TEAM
Operations Service Manager
Industry competence within a few selected industries
Project Solution Manager
Leading Industry suites � – covering your business requirements
ss rld-Cla Ser vices o W ed Applica f Bre tio o t ns s Be ustry Suites d In Industry/Vertical
Merit Customer
M
er
Infor M 3 it A
P ro Best of Breed apps gets the best of the Industry Suite – optimized workflow using the suitable devices
ppSu
je cts |
ite | I n
ac te r f
O p e r a ti o
es
ns Secure efficient implementation with minimized risk and long-term operation of solutions
ANNUAL REPORT | MERIT GLOBE | 2013
Annual Report Merit has been through an expansion phase to further development of the company’s position in the existing market. In 2013, focus has been on consolidating the business to improve own profitability. This will continue in 2014. Business Merit Globe AS (MGAS) is the parent company in Merit group. MGAS is a provider of business solutions, Enterprise Management Solutions, within defined branches and with more than 238 employees in eight countries in Northern and Central Europe. The company’s products are based on software from Infor M3 and in-house developed software within Business Intelligence (BI) and Event Management. In addition to being a parent company, MGAS is a holding, an organization that covers common functions such as corporate management, management within the business areas, economy and finance, IT, marketing and business development. Merit has been through an expansion phase to further development of the company’s position in the existing market. We still believe there are many very interesting possibilities in this mar-
ket. In 2013, focus has been on consolidating the business to improve own profitability. This will continue in 2014. We are a leading supplier in selected branches with primarily business solutions (ERP) such as Infor M3. This has helped us position in existing branches with our own software Merit Portal.
Main market remarks The market in 2013 was challenging. On the other hand, we see that the new release of Infor M3 triggered great demand of existing customers in the markets we operate in. Our own applications (Merit Portal/Best of Breed) and service-based concepts (Merit Operations & Merit Partnership) have also helped a regular and recently increased demand. We experience increased demand of different types of hosting services, and this influences own product development and unique solutions. At the same
time, sales of mobile solutions increases, especially sales solutions on tables and smartphones. This leads to an adjustment of the ERP-system’s interfaces; also new user groups are involved, both internally and externally. We have partnership agreements with Infor in Central, Western and Northern Europe. These agreements give us a great framework for future growth. Infor is a leading, global software company, and has a development plan for M3 and other applications which is very exciting. With Infor as a partner, we will continue to provide the best solutions for our defined markets, also in the future.
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ANNUAL REPORT | MERIT GLOBE | 2013
Economy and Finances Earnings Merit had NOK 306.650.188,- in earnings in 2013, a small decrease from NOK 317.404.010,- in 2012. Hourly consultant fees increased in 2013. Sales of own products has increased to NOK 8.100.000,- in 2013; an increase of 15% compared to 2012. Sales of own products is and will be an important part of Merit’s profitability.
Expenses In 2013, Merit could achieve a decline of expenses and total expenses were NOK 319.255.567,-. Decline in expenses was mainly due to reduced payroll expenses, as well as other expenses, due to decrease of work force in 2013. During 2013, the work force was decrease by 22 to 238, this effect will further be visible in 2014. In 2013 deductions were 5,7% of expenses.
Result Result (EBITDA) in 2013 was NOK 7.579.904,- compared to NOK 14.980.172,- in 2012. This represents a decrease of 49,4%. EBITDA-margin was 2,5%. The company is not satisfied with the results and has implemented cost reduction measures which are expected to give positive effects in 2014. Merit has a long-term KPI of EBITDA margin of 15%. The corporation will continue to focus on increasing operation’s efficiency.
Result after tax was NOK -10.760.209,in 2013 which is a decrease from NOK -7.270.524 in 2012. he decrease is NOK 3.489.685,-.
Result parent company The parent company has – since fission in 2010 – only had internal turnover, earnings and expenses. This resulted in a profit of NOK 588.023,-.
Balance and financial situation The total balance of Merit was NOK 135.626.086,- in the end of the accounting period. Customer receivables were NOK 62.620.133,-. The receivables were evaluated and are to be seen as solid. The assets were NOK 40.786.849,- on the day the balance was taken. It was very important for Merit to increase solidity of the company. Solidity of assets was 30,1% compared to 33% in 2012. Merit aims to have 30% assets in the future. Debt was NOK 94.839.236,- when the balance was taken; NOK 23.954.118,were bank debt. Cash and cash equivalents of NOK 9.113.918,- are placed in the bank. Merit has a cash pool with possibility for credit in the bank. This solution provides the possibility to use surplus liquidity in the companies. In accordance with accountings law § 3-3a the board confirms that operations may be continued with given situation, and annual financial statement 2013 is provided under these conditions. The long-term
prognosis for the company, as well as asset and liquidity situation are the basis for this decision.
Balance and financial situation parent company The parent company has 55% assets per 31.12.2013.
Financial risk The largest financial risks the company faces are foreign exchange risk, risk of liquidity, and credit risk. Management evaluates these risks continuously and communicates guidelines on how to mitigate these risks. Merit’s financial strategy is to have enough liquidity and/or credit possibilities at any time to finance operations and investment according to company strategy. Surplus liquidity is places in the bank. The customer base of the company consists largely of large solid organizations with high credit rating. New business connections are credit checked beforehand. The company has during 2013 improved routines and procedures for handling receivables and has increased focus on terms of credit and receiving payment according to these.
Allocation of result 2013 Profit of NOK 588.023,- is transferred to Merit Globe AS to cover loss.
ANNUAL REPORT | MERIT GLOBE | 2013
Organization Merit’s companies are spread in a good way geographically, both in Northern and Central Europe. Merit has 22 offices in 8 countries, and in 2013 we had 238 employees. During 2013, Merit expanded both geographically and with new services and product-areas. One example of the latter is Merit Operations. Background for this establishment is an increasing customer base seeing advantages in us monitoring and supervising the companies’ value adding processes. The establishment is an integrated part of Merit’s existing business which focuses on helping customers grow stronger. Merit will continue to build on this established strategy in Europe. We now have access to customers in several countries and will focus on sales and implementation of products and strategies we have developed.
Competence Building Solution Consulting is established as a group on parent-company level and all
Merit companies participate. This group is responsible for acquiring competency in and knowledge of new product-areas and new functionality and takes part in defining with products Merit should focus on and build competency in. Merit Project and Merit Operations are responsible for implementation projects and operation of the implemented solution. In principle, the entire consultant staff is part of these areas in Merit.
products. When the last version of Infor M3 was launched, Merit was the first partner globally to implement it at a customer. Merit aims to be on the forefront when it comes to certification in Infor programs. Additionally, internal requirements and competency certificates have been established to value the skills and experience in different areas.
Research and Development
Certification
An important part of Merit’s business plan and idea is to sell and implement in-house developed products, Merit Portal. More than 100 of our customers use these products on a daily basis in their businesses. The goal is to provide customers with tools to make their business processes more effective and user-friendly, as well as providing business-critical data in an efficient and intuitive manner.
Merit has strong focus on increasing competency. This is true for own products and also partner products. As an example, we have also been one of the first to build competency in new versions of Infor
Our products are well established within data warehousing and analysis, as well as transaction reporting within value chains. Our solutions are used both via web-interface on PCs but also on mobile
Professional groups Merit has worked towards establishing professional groups for different competency areas. These groups may be linked towards branches, solutions or processes. Competency groups are organized by country with contact points and cooperation between countries.
Services Competence Building Merit’s service organization focuses on the following areas: -->
Projects
Operations
Proven implementation methodology Deep industry knowledge for the focused verticals Complete resource teams
Application Monitoring Process Control Application Support Merit’s “Emergency support”
Scalable from small local projects to
(24/7 customer support service)
large and international projects
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ANNUAL REPORT | MERIT GLOBE | 2013
devices where also barcode reporting is used excessively. In 2013 our product development focused especially on further developing the portal concept, as for example sales portal and supplier portal. At the same time, we have developed and implemented our first solutions for mobile platforms such as iOS and Android. These solutions focus on utilizing possibilities of integrating new technologies with the company’s ERP-system solution. Demand of such solutions is growing strongly, which is also reflected in future research and development activities. Our product development organization consists of product specialists with great understanding of business processes; they develop with both broad and deep technical understanding and competency. We wish to provide an interesting and dynamic work place by giving our employees the possibility to work closely with customers and solution consultants. We invest a large amount of the turnover in research and development. We are concerned with providing good opportunities for further developing competencies. Together with the possibility to
affect future product development with respect to functionality and technology, this has led to an attractive work place for existing and new employees.
Well-beeing The parent-company Merit Globe AS had three employees in 2013; the companies together had 238. The board defines the work-environment in Merit as satisfactory. Absences are at a normal rate. There have not been recorded any serious injuries associated with work. We focus heavily on well-being and workenvironment. Committed and motivated colleagues provide good services and satisfied customers. Merit wishes to arrange positive and healthy experiences outside working hours. Sports and other leisure activities provide a different environment outside the work-environment. Many have become especially well-known with each other through cycling, skiing, running, hiking, and other leisure activities. Some of these activities are supported by Merit, whilst others are initiated by colleagues.
Anti-Discrimination Policies All Merit employees are obligated to support a positive and professional work-environment. This includes that all employees treat each other respectfully and all forms for discrimination are prohibited. This includes amongst others discrimination based on religion, color of the skin, sex, sexual orientation, age, nationality, race and disability. The company works actively to increase equality, ensure equal opportunities and rights, and stop and prevent discrimination.
Equality Policies Merit has a long-term goal to increase the percentage of female employees, but right skills and competency will always weight more when hiring.
Environmental impact Merit works to reduce negative effects on the environment. We use video- and web-conferencing as must as possible to reduce air travel. We reduce the amount of printouts to a minimum and all printers have 2-sided printout as default setting.
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ANNUAL REPORT | MERIT GLOBE | 2013
Income statement PARENT COMPANY 2013
2012
Note
2013
GROUP 2012
Revenue 0
0
Sales revenue
6
10 143 340
9 142 406
Other operating income
12
10 143 340
9 142 406
Total revenue
307 275 204
311 690 311
1 374 984
5 710 699
308 650 188
317 401 010
32 903 369
29 014 349
Operating expenses 0
0
7 523 363
7 449 362
278 378
187 001
5 697 781
Cost of sales Payroll expenses
5,9
209 056 210
204 143 794
Depreciation
7,8
18 185 283
18 471 889
4 074 990
Other operating expenses
5,9
59 110 705
69 262 695
13 499 522
11 711 353
Total operating expenses
319 255 567
320 892 727
-3 356 182
-2 568 947
Operating profit/(loss)
-10 605 379
-3 491 717
Income from investments in subsidiaries
0
0
0
0
2 868 858
749 115
0
0
0
0
3 159 078
2 411 885
-290 220
-1 662 770
-10 895 599
-5 154 487
-135 390
2 116 037
-10 760 209
-7 270 524
Majority interests
-11 143 365
-8 052 919
Minority interests
383 157
782 395
Financial income and expenses 4 264 710
6 612 898
711 033
803 724
Interest income from group companies
1 624 388
187 764
Other financial income
0
2 405 200
126 938
636 076
2 293 626
1 956 690
Other financial expenses
4 179 567
2 606 420
Net finance
823 385
37 473
235 362
408 311
588 023
-370 838
Write-down on financial assets
2
Interest expenses to group companies
Profit/(loss) before income tax
Income tax expence
13
Net profit/(loss)
Distribution
Allocated to: 588 023
-370 838
Uncovered losses
588 023
-370 838
Total
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ANNUAL REPORT | MERIT GLOBE | 2013
Balance sheet as of December 31 PARENT COMPANY 2013
2012
Note
2013
GROUP 2012
Fixed assets
Intangible assets 0
0
Research and development
8, 9
8 504 949
11 570 557
12 416
0
Deferred tax asset
13
1 388 609
334 425
0
0
Goodwill
8
34 194 649
47 372 893
12 416
0
Total intangible assets
44 088 207
59 277 875
2 695 532
3 253 705
2 695 532
3 253 705
0
0
988 526
241 191
988 526
241 191
47 772 265
62 772 771
Tangible assets 378 456
604 640
Fixtures and fittings, tools, office machinery etc.
378 456
604 640
Total tangible assets
7,11
Financial assets 79 225 476
79 196 836
Investments in subsidiaries
2
15 228 231
77 391
Other receivables
12
94 453 707
79 274 227
Total financial assets
94 844 579
79 878 867
Total fixed assets
Current assets
Receivables 694 623
10 859 807
Accounts receivables
10,11,12
62 620 133
59 539 740
13 099 309
25 085 150
Other receivables
13
16 119 770
13 862 412
13 793 932
35 944 957
Total receivables
78 739 903
73 402 152
1 935 526
1 252 823
9 113 918
13 697 126
15 729 458
37 197 780
87 853 821
87 099 278
110 574 037
117 076 647
135 626 086
149 872 049
Cash and cash equivalents
Total current assets
Total assets
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ANNUAL REPORT | MERIT GLOBE | 2013
Balance sheet as of December 31 MORSELSKAP 2013
2012
Note
2013
KONSERN 2012
Share capital
14, 15
1 754 751
1 739 286
14
0
59 799 867
1 754 751
61 539 153
37 985 520
-12 017 115
37 985 520
-12 017 115
1 046 578
663 421
40 786 849
50 185 459
0
0
0
0
23 954 118
24 435 870
Equity Paid-in capital 1 754 751
1 739 286
0
59 799 867
Share premium
1 754 751
61 539 153
Total paid-in capital
Retained earnings 59 306 942
-2 302 723
Other equity
59 306 942
-2 302 723
Total retained earnings
0
0
61 061 693
59 236 430
14
Minority interests
14
Total equity
Liabilities Provisions 0
14 137
Deferred tax
0
14 137
Total provisions
13
Current liabilities 23 954 118
24 435 870
Liabilities to financial institutions
10, 11
1 668 298
917 783
Accounts payable
12
6 650 211
6 823 188
261 915
0
Income tax payable
13
989 402
632 252
335 522
107 124
16 495 406
17 463 607
23 292 491
32 365 303
Other current liabilities
46 750 099
50 331 673
49 512 344
57 826 080
Total current liabilities
94 839 236
99 686 590
49 512 344
57 840 217
Total liabilities
94 839 236
99 686 590
110 574 037
117 076 647
135 626 085
149 872 049
Public duties payable 10,12
Total equity and liabilities
Ă…lesund, 21. Mai 2014
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ANNUAL REPORT | MERIT GLOBE | 2013
Cash flow statement PARENT COMPANY 2013
2012
Note
2013
GROUP 2012
Cash flow from operating activities 823 385
37 473
-4 264 710
-6 612 898
0
0
278 378
187 001
0
2 405 200
10 915 699
-7 727 980
-19 234 127
21 251 113
-11 481 375
9 539 909
Profit/(loss) before taxes
-10 895 599
-5 154 487
0
0
Income tax paid
-1 622 252
-1 827 565
Depreciation
18 185 283
18 471 889
0
0
Changes in inventories, accounts receivables and accounts payable
-3 253 370
5 037 865
Changes in other accruals
-6 513 491
-9 479 923
Net cash flow from operating activities
-4 099 429
7 047 779
-627 121
-1 609 292
Proceeds from sale of shares
0
-9 229 875
Share of the (profit)/loss of associates
Impairment of financial assets
Cash flow from investing activities -371 763
-791 642
Purchase of tangible fixed assets
-28 640
-9 229 875
0
0
Payments in relation with capitalized proprietary R & D
0
-9 183 232
0
0
Proceeds from sale of Goodwill
0
2 148 250
-1 266 870
-77 391
-747 335
-77 391
-1 667 273
-10 098 908
-1 374 456
-17 951 540
-481 752
-480 247
1 372 429
0
0
0
890 677
-480 247
Net change in cash and cash equivalents
-4 583 208
-11 384 008
Changes in long term receivable Net cash flow from investing activities
Cash flow from financing activities 7 165 219
301 185
1 372 429
0
Changes in group accounts Proceeds from capital increase Share issue expenses
5 293 703
0
Proceeds from group contribution
13 831 351
301 185
682 703
-257 814
1 252 823
1 510 637
Cash and cash equivalents at 01.01
13 697 126
25 081 134
1 935 526
1 252 823
Cash and cash equivalents at 31.12
9 113 918
13 697 126
Net cash flow from financing activities
NOTES | MERIT GLOBE | 2013
Notes to the accounts for 2013 Note 1 - Accounting Principles The annual report is prepared according to the Norwegian Accounting Act 1998 and to the generally accepted accounting principles.
Basis for consolidation The consolidated financial statements comprise the parent company Merit Globe AS and the subsidiaries as described in Note 2. Subsidiaries are companies in which the Group has a controlling interest. A controlling interest is normally achieved when the Group owns more than 50% of the shares in the company, while also being in the position to exercise control over the company. The minority share of the equity is included in the consolidated equity. The consolidated accounts are prepared such that the group of companies are presented as a single economic entity. Intercompany transactions have been eliminated from the consolidated accounts. The consolidated accounts are prepared according to the same accounting principles for both parent and subsidiary. Acquired subsidiaries are reported in the annual accounts on the basis of the parent company’s acquisition cost. Subsidiaries are consolidated in the accounts when a controlling interest is achieved, and is included until it no longer applies.
Subsidiaries Subsidiaries are valued by the cost method in the company accounts. The investment is valued as cost of acquiring shares in the subsidiary, providing that write down is not required. Write down to fair value will be carried out if the reduction in value is caused by circumstances which may not be regarded as incidental, and deemed necessary by generally accepted accounting principles. Write downs are reversed when the grounds of the initial write down are no longer present. Dividends and other distributions are recognized in the same year as appropriated in the subsidiary accounts. If dividends exceed withheld profits after acquisition, the exceeding amount represents reim-
bursement of invested capital, and the distribution will be subtracted from the value of the acquisition in the balance sheet.
Sales revenue Sales revenues are recognized at the time of delivery. Revenues from services are recognized at execution. The share of sales revenue associated with future services are recorded in the balance sheet as deferred sales revenue, and are recognized at the time of execution. Revenue from projects on fixed price terms that run over a longer period of time are recognized according to the degree of completion. The degree of completion is estimated based on time consumed in relation with estimated total time on the project.
Balance sheet classification Net current assets comprise creditors due within one year, and entries related to goods circulation. Other entries are classified as fixed assets and/or long term liabilities. Current assets are valued at the lower of acquisition cost and fair value. Short term creditors are recognized at nominal value. Fixed assets are valued by the cost of acquisition, in the case of non-incidental reduction in value the asset will be written down to the fair value amount. Long term creditors are recognized at nominal value.
Trade and other receivables Trade receivables and other current receivables are recorded in the balance sheet at nominal value less provisions for bad debts. Provisions for bad debts are calculated on the basis of individual assessments. In addition, for the remainder of accounts receivables outstanding balances, a general provision is carried out based on expected loss.
Foreign currency translation Foreign currency transactions are translated using the year end exchange rates.
Property, plant and equipment Property, plant and equipment is capitalized and depreciated over the estimated useful economic life. Direct maintenance costs are expensed as incurred, whereas improvements and upgrading are assigned to the acquisition cost and depreciated along with the asset. If carrying value of a non-current asset exceeds the estimated recoverable amount, the asset is written down to the recoverable amount. The recoverable amount is the greater of the net selling price and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value.
Research and development Research and development costs are capitalized providing that a future economic benefit associated with development of the intangible asset can be identified. Otherwise, the costs are expensed as incurred. Capitalized research and development are amortized linearly over the economic lifetime.
Government grants Government grants for development projects are recognized when it is probable that the Company will receive the grant. The grant is recognized as a reduction of expensed or capitalized development costs.
Income tax Tax expenses in the profit and loss account comprise both tax payable for the accounting period and changes in deferred tax. Deferred tax is calculated at 27 percent on the basis of existing temporary differences between accounting profit and taxable profit together with tax deductible deficits at the year end. Temporary differences, both positive and negative, are balance out within the same period. Deferred tax assets are recorded in the balance sheet to the extent it is more likely than not that the tax assets will be utilized. Tax payable and deferred tax is recorded directly against the equity to the extent that the tax positions relate to equity transactions.
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14
NOTES | MERIT GLOBE | 2013
Cash flow statement
Use of estimates
The cash flow statement is presented using the indirect method. Cash and cash equivalents includes cash, bank deposits and other short term highly liquid placement with original maturities of three months or less.
The preparation of the financial statements requires management to make estimates and assumptions that affect the reported amounts in the profit and loss statement, the measurement of assets and liabilities and the disclosure of
contingent assets and liabilities on the balance sheet date. The estimates are related to capitalization of R&D, provision for bad debts and evaluation of projects. Actual results can differ from these estimates.
Note 2 - Investment in subsidiaries PARENT COMPANY Company
Acquisition year
Location
Share owners
Voting rights
Book value 31.12
Merit Consulting AS
2010
Ålesund
100 %
100 %
19 219 030
Merit Platform Partner AS
2009
Ålesund
51 %
51 %
576 500
Merit Consulting OY
2008
Finland
100 %
100 %
25 882 782
Merit Consulting AB
2009
Sweden
100 %
100 %
5 469 839
Tirem Invest AB**
2010
Sweden
100 %
100 %
0
Merit Consulting AS
2009
Denmark
100 %
100 %
5 638 311
Merit Consulting GmBH
2010
Germany
100 %
100 %
4 937 847
Merit Central Europte AG
2010
Switzerland
100 %
100 %
15 893 768
Merit Consulting UK
2008
England
100 %
100 %
1 578 759
Axcentro Solutions LLC*
2010
Switzerland
0
Capesso Provider AS*
2011
Gjøvik
0
Merit Czech Consulting s.r.o.*
2013
Czech Republic
0
Sum
79 225 476
* Axcentro Solutions LLC, Capesso Provider AS and Merit Czech Consulting, s.r.o are included in the Group, but are owned by subsidiaries. ** The investment in Tirem Invest AB is written down to NOK 0 by NOK 2 405 200 in 2012 and NOK 14 125 902 in 2011.
Note 3 - Merger and reorganization PARENT COMPANY
Merger between Merit Consulting I AS and Merit Consulting AS: The wholly owned subsidiary Merit Consulting I AS merged with the subsidiary Merit Consulting AS in 2012. The merger was completed at continuity in booked values with effect from 1.1.2012. The shareholders in Merit Consulting AS got shares in Merit Globe AS as settlement. In relation to the settlement there was a capital increase in Merit Globe AS of NOK 376 978 and a share premium of NOK 3 305 529.
Merger between Merit Consulting AS and Merit Consulting Øst AS: Merit Consulting AS merged with the subsidiary Merit Consulting Øst AS in 2012. The merger was completed at continuity in booked values with effect from 1.1.2012. The shareholders in Merit Consulting Øst AS got shares in Merit Globe AS as settlement. In relation to the settlement there was a capital increase in Merit Globe AS of NOK 48 230 and a share premium of NOK 5 409 831.
Reorganization of ownership through buyout of minority shareholders in foreign subsidiaries: The minority shareholders in the foreign subsidiaries in the group was in 2012 bought out by Merit Globe AS, with the purpose of achieving 100 % ownership in all subsidiaries. The minority shareholders got shares in Merit Globe AS as settlement. In relation to the settlement there was a capital increase in Merit Globe AS of NOK 306 078 and a share premium of NOK 47 191 107. After completion of the mergers and reorganization in 2012, Merit Globe AS now has 100 % ownership in all subsidiaries except of Merit Platform Partner AS. For a list of subsidiaries we refer to note 2.
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NOTES | MERIT GLOBE | 2013
Note 4 - Financial market risk PARENT COMPANY
entered into any hedging transactions to reduce this risk. The risk is however reduced by the fact that income and expenses in each company in the group to a great extent is in the same currency.
a financial institution at floating interest rates. The company has not entered into any fixed rate contracts.
The company and the Group are exposed to interest- and exchange rate risk. The Group has no formal hedging strategy.
Exchange rate risk The company and the Group have transactions in different currencies. It is not
Interest risk The company has overdraft facilities with
Note 5 - Wage costs, number of employees, remuneration, loans to employees and auditor’s fee PARENT COMPANY 2013
2012
Wage costs
2 882 636
3 230 392
Salaries
587 864
382 430
200 027
112 057
3 852 836
3 724 483
0
0
Refunds
0
0
Capitalized costs
7 523 363
7 449 362
3
3
2013
GROUP 2012
162 484 970
158 716 979
Social security tax
24 567 093
25 752 069
Pension costs
15 419 269
16 441 134
9 537 909
11 764 254
-2 953 031
-530 642
0
-8 000 000
209 056 210
204 143 794
239
265
Other payments
Total
Average number of employees
PARENT COMPANY
Other remunerations include administrative costs for Group management, amounting to NOK 3 554 550 (2012: NOK 2 569 271). Board of directors’ remuneration has been paid, at NOK 190 000 in 2013 (2012: NOK 112 200. No bonus is expensed to management in 2013 (NOK 875 902 excl. social security tax in 2012). No bonus is expensed to the CEO in 2013 (NOK 250 000 excl. social security tax in 2012). Management remuneration Chief Executive Officer
Salary 1 240 710
Other remuneration 216 736
GROUP
Management remuneration Some of subsidiaries are obliged to have a pension plan according to Norwegian pension regulations. The companies have a pension plan that meets the criteria in the regulations. PARENT COMPANY
Loans and guarantees for management, representatives and stockholders etc. The company has not provided loans or security to anyone in the management or shareholders, or any of their affiliates. PARENT COMPANY 2013
Auditor fee has been divided as follows
GROUP 2013
160 000
Statutory audit fee
625 603
0
Assurance services
26 175
20 540
Tax advisory fee
25 775
94 592
Other services VAT is not included in the figures of auditor’s fee.
250 996
16
NOTES | MERIT GLOBE | 2013
Note 6 - Revenues PARENT COMPANY 2013
2012
2013
GROUP 2012
Geographical distribution 0
0
Norway
158 719 626
171 667 353
0
0
Nordic countries
84 335 488
94 720 164
0
0
Europe
58 165 816
45 302 794
0
0
307 275 204
311 690 311
Note 7 - Tangible assets PARENT COMPANY Fixture and fittings, tools, office machinery, etc.
Total
52 194
52 194
Acquisition cost 31.12.
843 836
843 836
Acc.depreciation 31.12.
-465 380
-465 380
Net carrying amount at 31.12.
378 456
378 456
Depreciation for the year
278 378
278 378
Additions
Useful economic life Amortization plan
3 years Linear
GROUP Fixture and fittings, tools, office machinery, etc.
Total
8 782 808
8 782 808
Additions
627 121
627 121
Disposals
-512 336
-512 336
Conversion differences
225 643
225 643
Acquisition cost 31.12.
9 123 236
9 123 236
Acc.depreciation 31.12.
-6 427 704
-6 427 704
Net carrying amount at 31.12.
2 695 532
2 695 532
Depreciation for the year
1 410 937
1 410 937
Useful economic life
3-10 years
Acquisition cost 01.01.
Amortization plan
Linear
17
NOTES | MERIT GLOBE | 2013
Note 8 - Intangible assets GROUP Goodwill
R&D
Total
65 042 359
15 884 348
80 926 707
Conversion differences
221 756
463 412
685 168
Acquisition cost 31.12.
65 264 115
16 347 760
81 611 875
-31 069 466
-7 842 811
-38 912 277
Net carrying amount at 31.12.
34 194 649
8 504 949
42 699 598
Amortization for the year
13 400 000
3 374 346
16 774 346
5 years
5 years
Linear
Linear
Acquisition cost at 01.01.
Acc. amortization at 31.12.
Useful economic life Amortization plan
Note 9 - Government grants GROUP
Merit Consulting AS and Merit Platform Partner AS have ongoing development projects that are approved as SkatteFUNN-projects in Norway. In total, the companies have applied for grants amounting to NOK 2 200 000. In 2013, the subsidiary Merit Platform Partner AS has applied for a government grant from Innovasjon Norge amounting to NOK 960 430. The amounts are recognized as a reduction in capitalized development expenses and payroll expenses.
Note 10 - Bank deposit PARENT COMPANY
2013 191 824
GROUP 2013
Restricted bank deposits
4 438 792
PARENT COMPANY
The Merit Globe group has established a multi-account system where Merit Globe AS is the holder, while the other group companies are sub-account holders or participants. The bank can offset any balance against one another so that the net position represents the balance between Handelsbanken and Merit Globe AS. Each participant’s deposit or liability on the sub-account represents an intercompany balance with Merit Globe AS. These intercompany balances are classified as other current liabilities or other current receivables.
18
NOTES | MERIT GLOBE | 2013
Note 11 - Debts and receivables PARENT COMPANY 2013
2012
694 623
10 859 807
378 456
604 640
1 073 079
11 464 447
Pledged assets
Accounts receivables Property, plant and equipment Total
2013
GROUP 2012
24 779 390
32 256 392
1 072 956
1 276 324
25 852 346
33 532 716
PARENT COMPANY
The parent company and the group have an overdraft facility agreement; cf. Note 10, of NOK 25 million in total, and an additional credit of NOK 5 million in 2013. As of 31.12.2013 NOK 23 954 118 (2012: 24 435 870) is drawn on this facility. The assets in the table above are pledged as collateral. There are financial covenants related to the agreement. The company meets all of these requirements as of 31.12.2013.
Note 12 - Intercompany balance group companies and associates PARENT COMPANY Receivables Accounts receivables
2013
GROUP 2012
694 623
10 859 807
Other receivables
12 347 951
9 055 221
Long term receivables
15 228 231
13 961 361
Total
28 270 805
33 876 389
2013
2012
980 000
406 017
Other short term payables
22 797 961
31 325 206
Total
23 777 961
31 731 223
Payables Accounts payables
Interest is calculated on intercompany balances in 2013. Management services have been posted as income in 2013, amounting to NOK 10 143 340 in the parent company (2012: NOK 9 142 406).
19
NOTES | MERIT GLOBE | 2013
Note 13 - Income taxes PARENT COMPANY 2013
2012
Income tax expenses
2013
GROUP 2012
261 915
0
Tax payable
989 402
1 831 283
0
0
Too much/little allocated in previous year(s)
-70 608
56 753
-36 553
408 311
Change in deferred tax
-1 054 184
228 001
235 362
408 311
Total income tax expense
-135 390
2 116 037
Parent company 2013
2012
823 385
37 473
15 550
6 183
Permanent differences
0
2 405 200
Write-down on shares
0
-990 600
-4 264 710
-5 622 298
96 475
-50 491
-3 329 300
-4 214 533
0
-1 407 765
4 264 710
5 622 298
935 410
0
PARENT COMPANY 2013
2012
Ordinary result before tax
Income from investment in subsidiaries Group contribution Changes in temporary differences
Applied loss carried forward Group contibution Tax base
Temporary differences outlined
2013
GROUP 2012
45 984
0
Fixed assets
-438 272
-313 163
0
0
Other differences
-323 001
-313 317
0
0
Accounting provisions
-6 018 753
-650 000
-45 984
0
Total
-6 780 026
-1 276 480
Loss carried forward
-13 011 863
-26 048 866
-19 791 889
-27 325 346
-5 343 810
-7 651 097
3 955 201
7 316 672
-1 388 609
-334 425
0
GROUP
Tax base estimation
-45 984
50 491
Net temp differences as of 31.12
-12 416
14 137
Deferred tax/deferred tax asset (27% this year, 28% last year)
0
0
Deferred tax asset in subsidiaries not in balance sheet
0
0
Deferred tax asset
It is expected to receive NOK 2 200 000 (NOK 1 980 000 in 2012) in SkatteFUNN (Norwegian R&D refund plan) in Norwegian subsidiaries. NOK 0 (990 000 in 2012) is classified as a reduction of tax payable in the balance sheet, and NOK 2 200 000 (NOK 990 000 in 2012) is classified as other current receivables.
20
NOTES | MERIT GLOBE | 2013
Note 14 - Owners equity PARENT COMPANY Share capital
Share premium reserve
Other equity
Sum
1 739 286
59 799 867
-2 302 723
59 236 430
0
0
588 023
588 023
15 465
1 221 775
0
1 237 240
-61 021 642
61 021 642
0
0
59 306 942
61 061 693
Owners equity 01.01. Profit for the year Capital increase Reallcotated share premium reserve Owners equity 31.12.
1 754 751
GROUP
Owners equity 01.01. Profit for the year Capital increase
Share capital
Share premium reserve
Other equity
Minority int.
Total
1 739 286
59 799 867
-12 017 115
663 421
50 185 459
0
0
-11 143 365
383 157
-10 760 208
15 465
1 221 775
0
0
1 237 240
-61 021 642
61 021 642
0
0
124 358
0
124 358
1 754 751
0
37 985 520
1 046 578
40 786 849
Reallcotated share premium reserve Conversion differences Owners equity 31.12.
0
21
NOTES | MERIT GLOBE | 2013
Note 15 - Share capital and shareholder information PARENT COMPANY Share capital: Number of shares
Face value
Book value
1 754 751
1 kr
1 754 751
Ordinary shares
Ownership share
Voting rights
Kjell Harald Danielsen
128 764
7,34 %
7,34 %
Erik Outzen, Daglig leder
116 782
6,66 %
6,66 %
Jon Jåre Aarskog, Styremedlem
98 283
5,60 %
5,60 %
Arnfinn Hjellen
89 715
5,11 %
5,11 %
Markus Tronich
77 153
4,40 %
4,40 %
Frank Skorgen
76 195
4,34 %
4,34 %
Hallgeir Øvrebust
74 485
4,24 %
4,24 %
Kjetil Hjellegjerde
62 341
3,55 %
3,55 %
Håvard Valderhaug
55 424
3,16 %
3,16 %
Lars Sæther
52 297
2,98 %
2,98 %
Audun Krutvik
48 488
2,76 %
2,76 %
Bjørn Vanebo
48 488
2,76 %
2,76 %
Trond Langørgen
47 024
2,68 %
2,68 %
Ragnhild Sunde
44 617
2,54 %
2,54 %
Bjørn Vidar Remme
41 907
2,39 %
2,39 %
John Andre Tran
41 605
2,37 %
2,37 %
Morten Bremseth
41 561
2,37 %
2,37 %
Egil Gussiås, Styremedlem
36 366
2,07 %
2,07 %
Eirik Nesje
31 171
1,78 %
1,78 %
Halvard Aarønes
25 975
1,48 %
1,48 %
Total
1 246 769
71,05 %
71,05 %
Other
507 982
28,95 %
28,95 %
1 754 751
100,00 %
100,00 %
Ordinary shares
Shareholders per 31.12:
Total number of shares
www.meritglobe.com NORWAY
GERMANY
BERGEN GJØVIK MOLDE OSLO
LANDSHUT
SANDNES TRONDHEIM ÅLESUND
SWITZERLAND
Phone: +47 400 03 650 E-mail: norway@meritglobe.com
SWEDEN GÖTEBORG KALMAR LINKÖPING MALMÖ STOCKHOLM Tel.: +46 8 410 234 00 Phone: sweden@meritglobe.com
FINLAND HELSINKI TURKU TAMPERE
Phone: +49 176 832 799 44 E-Mail: germany@meritglobe.com
BASEL ZUG Phone: +41 41 561 44 00 E-Mail: centraleurope@meritglobe.com
CZECH BRNO Phone: +41 78 688 99 13 E-Mail: centraleurope@meritglobe.com
ITALY Phone: +41 78 688 9912 E-Mail: centraleurope@meritglobe.com
UK MANCHESTER
DENMARK
Phone: +44 78 94 414026 E-mail: enquiries@meritglobe.com Infor Business partner covering Great Britain, Ireland, the Netherlands,
ODENSE
Belgium and Luxemburg.
Phone: +358 290 091 040 E-mail: finland@meritglobe.com
Phone: +45 42 14 91 20 E-mail: denmark@meritglobe.com