Income Statement Group

     
Restated
1 JANUARY - 31 DECEMBER (25 JUNE - 31 DECEMBER FOR 2013)
 
25.06.13-
Amounts in million NOK
Note
2014
31.12.13
Operating revenues
2 773
1 520
Purchased materials
(1 368)
(743)
Salaries and other personnel expenses
(891)
(508)
Depreciation and amortization
(36)
(27)
Other operating expenses
(327)
(232)
Operating profit
 
151
10
Financial income
6
2
Financial expenses
(69)
(37)
Net financial income (expenses)
(63)
(35)
Profit (loss) before tax and discontinued operations
 
88
(25)
Tax expense
(32)
(6)
Profit (loss) for the period from continuing operations
 
56
(31)
Profit for the period from discontinued operations
35
2
Profit (loss) for the period
 
91
(29)
       
Other comprehensive income
     
Items that will be recycled subsequently to profit or loss
     
Exchange differences on translating foreign operations
 
27
11
Exchange differences reclassified from equity to profit or loss on disposal
(3)
-
Items that will not be recycled subsequently to profit or loss
     
Change in actuarial gains and losses pensions
(28)
21
Tax expense on other comprehensive income
8
(6)
Other comprehensive income for the period
 
4
26
Total comprehensive income for the period
 
95
(3)
       
Profit (loss) for the period attributable to:
     
Parent company shareholders
 
92
(37)
Non-controlling interests
 
(1)
8
Profit (loss) for the period
 
91
(29)
       
Total comprehensive income attributable to:
     
Parent company shareholders
 
96
(17)
Non-controlling interests
 
(1)
14
Total comprehensive income for the period
 
95
(3)
       
Note 1-28 are presented on the page following the financial statements and integral to them.
NOTE 1
GENERAL INFORMATION
Infratek Group AS was established as a limited liability company incorporated in Norway on 28 May 2013. The Company entered into an agreement to acquire the majority of the ownership interests in the listed company Infratek ASA on 25 June 2013. The transaction was conditional on approval from competition authorities in Norway and Sweden,and received final approval from the competition authorities on 23 July 2013. The consolidated financial statements of Infratek Group are prepared and presented from the date the Company achieved control on 25 June 2013. Infratek Group AS acquired the remaining shares in Infratek ASA in 2014 and delisted the company on 20 March 2014.
 
On 31 March 2014,Infratek Group AS changed its name from Heraldic Holding AS.
 
Infratek Group AS and its subsidiaries (collectively referred to as the Group) is a leading supplier of technical services for development and operation of critical infrastructure in Norway,Sweden and Finland. The Group's business activities are directed at the corporate market: primarily grid owners and energy companies,telecom owners and the public sector. See note 5 for more information on the Group's business segments.
                 
The Group operates its business activities through subsidiaries. Infratek Group AS is domiciled in Norway and headquartered at Breivollveien 31 in Oslo.
                 
These consolidated financial statements have been approved for issue by the Board of Directors on 21 April 2015 and are subject to approval by the Annual General Meeting on 26 May 2015.
NOTE 2
SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES
The most important accounting principles used in the preparation of the consolidated accounts are described below. These principles have been applied consistently to all presented reporting periods, unless otherwise stated in the description.
                 
2.1 Basis of preparation
The consolidated financial statements of Infratek Group AS have been prepared and presented in accordance with International Financial Reporting Standards and IFRIC interpretations, as adopted by the EU (IFRSs). The consolidated financial statements have been prepared under the historical cost convention, as modified by the revaluation of available-for-sale financial assets and net defined benefit (asset) liability is recognised at fair value of plan assets less the present value of the defined benefit obligation. The preparation of financial statements according to IFRS requires the use of estimates. Furthermore, the application of the company’s accounting principles requires management to exercise judgment and apply assumptions. Areas highly subjected to the exercise of such judgment or with a high degree of complexity, and areas where assumptions and estimates are material to the consolidated financial statements, are discussed in Note 4.
                 
The Group’s annual financial statements have been prepared in accordance with the going concern principle.
                 
The Group's figures and many of the notes for 2013 have been restated mainly due to the disposal of the discontinued operations in the segment Security - Technical Solutions, see note 25. The statement of financial position as of 31 December 2013, other comprehensive income for 2013 and the statement of changes in equity for 2013 have been restated due to changes in the purchase price allocation, see note 24. Related notes have been restated accordingly.
                 
2.1.1 Changes in accounting principles and information
a) New and amended accounting standards adopted by the Group.
The following standards affecting the consolidated financial statements have been implemented for the financial year beginning 1 January 2014:
                 
· IFRS 10 Consolidated Financial Statements builds on existing principles by identifying the concept of control as the determining factor on whether an entity should be included in the consolidated financial statements of the parent company. The standard provides additional guidance to assist in the determination of control in cases where this is difficult to assess. The standard did not have any material effects on the consolidated financial statements.
                 
· IFRS 11 Joint arrangements replaces IAS 31. IFRS 11 focuses on the rights and obligations of the parties to the arrangement rather than its legal form. There are two types of joint arrangements: joint operations and joint ventures. Joint operations arise where the investors have rights to the assets and obligations for the liabilities of an arrangement. A joint operator accounts for its share of the assets, liabilities, revenue and expenses. Joint ventures arise where the investors have rights to the net assets of the arrangement; joint ventures are accounted for under the equity method. Proportional consolidation of joint arrangements is no longer permitted. The standard did not have any material effects on the consolidated financial statements.
                 
· IFRS 12 Disclosures of Interests in Other Entities includes the disclosure requirements for all forms of interests in other entities, including joint arrangements, associates, special purpose vehicles and other balance sheet vehicles. The standard did not have any material effects on the consolidated financial statements.
                 
· IAS 36 Impairment of assets. Changes relate to disclosures regarding the recoverable amount of non-financial assets. The amendment removed certain disclosures regarding the recoverable amount of CGUs which had been included in IAS 36 at the time of IFRS 13 being issued. The amendment did not have any material effects on the consolidated financial statements.
                 
· IFRIC 21 Levies regulates the accounting of liabilities to pay levies. The interpretation levies does not include tax on income. The interpretation provides guidance on when to recognise a liability for a levy imposed. The Group is not liable to pay material levies and the interpretation did not have any material effects on the consolidated financial statements.
                 
b) New standards, amendments and interpretations of existing standards issued but not effective for the financial year beginning 1 January 2014 and not early adopted:
· IFRS 9 Financial Instruments addresses the classification, measurement and recognition of financial assets and financial liabilities. IFRS 9 was issued in November 2009, October 2010, November 2013 and July 2014. The standard replaces the sections of IAS 39 that relate to the classification and measurement of financial instruments. IFRS 9 requires financial assets to be classified into two measurement categories; those to be measured at fair value and those to be measured at amortised cost. The determination of category is made at initial recognition. The classification depends on the entity's business model for managing its financial instruments and the instruments' contractual cash flow characteristics. For financial liabilities, the standard keeps most of the IAS 39 requirements. The main change is that in cases where the fair value option is used for a financial asset, the part of the fair value change relating to the entity's own credit risk is recognised in other comprehensive income rather than the income statement, unless this creates an accounting mismatch. IFRS 9 entails several changes and simplifications that will lead to an increased use of hedge accounting. The Group has not yet fully assessed the impact of IFRS 9. The standard is effective for annual reporting periods starting from 1 January 2018 onwards, but has not been approved by the EU.
                 
· IFRS 15 Revenue from Contracts with Customers supersedes the current requirements in IAS 11 and IAS 18 and outlines a single comprehensive model to account for revenues arising from contracts with customer. IFRS 15 was issued on 28 May 2014 and the objective of the standard is to establish the principles for reporting useful information to users of financial statements about the nature, amount, timing, and uncertainty of revenue and cash flows arising from a contract with a customer. The main principle is that revenues should be recognised to reflect the transfer of the promised goods and services to the customers in an amount that reflects the consideration that is expected in exchange for those goods and services. The Group has not yet fully assessed the impact of IFRS 15. The standard is effective for annual reporting periods starting from 1 January 2017 onwards, but has not been approved by the EU. Earlier application is permitted.
                 
There are no other IFRSs or IFRIC interpretations that are not yet effective that would be expected to have a material impact on the consolidated financial statements.
                 
2.2 Consolidation principles
a) Subsidiaries
Subsidiaries are all entities (including structured entities) over which the Group has control. The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases.
                 
The Group uses the acquisition method of accounting to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair value of the assets transferred, the liabilities incurred and the equity interests issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Acquisition-related costs are expensed as incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. On an acquisition-by-acquisition basis, the Group recognises any non-controlling interest in the acquiree either at fair value or at the non-controlling interest’s proportionate share of the acquiree’s net assets.
                 
If the business combination is achieved in stages, the aquisition date fair value of the acquirer's previously held equity interest in the acquiree is remeasured to fair value at the acquisition date through profit or loss.
                 
Any contingent consideration to be transferred by the Group is recognised at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration that is deemed to be an asset or liability is recognised in accordance with IAS 39 either in profit or loss or as a change to other comprehensive income. Contingent consideration that is classified as equity is not remeasured and its subsequent settlement is accounted for within equity.
                 
If the sum of the consideration, capitalised amount of non-controlling shareholders and actual value of previous ownership on the acquisition date surpasses the actual value of identifiable net assets in the acquired company, the difference shall be capitalised as goodwill. If the amount is lower than the acquired company's net asset value, the difference should be recognised as income in the statement of comprehensive income.
                 
Intra-Group transactions, inter-company balances, and unrealised profit between Group companies have been eliminated. Profit and losses resulting from inter-company transactions that are recognised in assets are also eliminated. Accounting principles of subsidiaries are modified when necessary to achieve conformity with Group accounting principles.
                 
b) Changes in ownership interests in subsidiaries without change of control
Transactions with non-controlling interests that do not result in loss of control are accounted for as equity transactions. In the case of additional purchases, the difference between the consideration paid and the share's relative share of net assets in the subsidiary is booked to the equity attributable to company shareholders. Gains or losses on disposals to non-controlling interests are also recognised in equity.
                 
c) Disposals of subsidiaries
When the Group ceases to have control of any retained interest in the entity, it is remeasured to its fair value when control is lost, with the change in carrying amount booked to profit or loss. The fair value is the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, joint venture or financial asset. In addition, any amounts previously recognised in other comprehensive income in respect of that entity are accounted for as if the group had directly disposed of the related assets or liabilities. This may mean that amounts previously recognised in other comprehensive income are reclassified to profit or loss.
                 
2.3 Segment reporting
Operating segments are reported in the same way as for internal reporting to the company’s highest decision-making body. The company’s highest decision-making body, which is responsible for allocating resources and assessing the financial performance of the operating segments, is defined as Group management.
                 
2.4 Foreign currency translation
a) Functional currency and presentation currency
Items included in the financial statements of each subsidiary in the Group are recorded in the currency mainly used in the economic area in which the subsidiary operates (its functional currency). Infratek’s consolidated financial statements are presented in Norwegian kroner (NOK), which is the functional currency and the presentation currency of the parent company.
                 
b) Transactions and balance sheet items
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign currency exchange gains and losses resulting from the settlement of such transactions and from the translation of monetary items (assets and liabilities) denominated in foreign currencies at year-end, are translated at the exchange rate on the balance sheet date, and are recognised in the profit and loss account.
                 
c) Group companies
The results and financial position of all the Group entities (none of which has the currency of a hyper-inflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows:
                 
i) Assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet;
ii) Income and expenses for each income statement are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the rate on the dates of the transactions); and
iii) All resulting exchange differences are recognised in other comprehensive income and specified separately in equity.
                 
Goodwill and excess values relating to acquisitions of foreign entities are treated as assets and liabilities in the acquired entities and are translated at the exchange rate in effect on the balance sheet date. Exchange differences arising are recognised in other comprehensive income.
                 
2.5 Property, plant and equipment
Property, plant, and equipment are recognised at acquisition cost less depreciation and impairment charges. Acquisition cost includes costs directly associated with the acquisition of the operating asset.
                 
Expenses that significantly increase the life of assets and/or increase capacity are added to the balance sheet value of operating assets or recorded separately in the statement of financial position, when it is probable that future economic benefits associated with the expense will flow to the Group, and the expense can be reliably estimated. Other repair and maintenance costs are recognised in the profit and loss account for the period in which the expenses are incurred.
                 
Other operating assets that are in use are depreciated according to a straight-line plan, so that the acquisition costs of property, plant and equipment are depreciated to their residual value at the annual depreciation rates as shown below:
                 
Improvement to leased premises
   
- *)
 
 
 
   
Buildings
   
30 years
         
Machinery, furniture, vehicles etc.
   
3-12 years
         
IT-equipment (hardware)
   
3 years
         
                 
*) Improvements to leased premises are depreciated over the length of the particular premises’ leasing contract.
                 
The useful life of each operating asset, along with its residual value, is reassessed each balance sheet date and modified if necessary. When the carrying value of an operating asset exceeds the estimated recoverable amount, the value is written down to that recoverable amount (see Note 2.7).
                 
Gains and losses on the disposal of operating assets are recorded in the profit and loss account at the difference between the sales price and balance sheet value.
                 
2.6 Intangible assets
a) Goodwill
               
Goodwill is the difference between acquisition cost and the Group’s share of net fair value of the identifiable assets at the time of acquisition. Goodwill on the acquisition of subsidiaries is classified as an intangible asset. Goodwill is reviewed annually for impairment, and entered in the statement of financial position at acquisition cost less impairment losses. Impairment losses on goodwill are not reversed. Gains or losses on the sale of an activity include the goodwill in the statement of financial position of the disposed activity.
                 
Following an initial identification of the need to write down goodwill, goodwill at the acquisition date is allocated to the cash-generating units in question. Allocation is made to the cash-generating units or groups of cash-generating units that are expected to benefit from the acquisition. Each unit or group of units to which the goodwill is allocated represents the lowest level within the entity at which the goodwill is monitored for internal management purposes.
                 
Goodwill impairment reviews are undertaken annually or more frequently if events or changes in circumstances indicate a potential impairment. The carrying value of goodwill is compared to the recoverable amount, which is the higher of value in use and the fair value less costs to sell. Any impairment is recognised immediately as an expense and is not reversed in subsequent periods.
                 
b) Software and licences
Software and licences comprise investments associated with the Group’s ERP system (IFS) which is capitalised at acquisition cost less amortization and impairment charges, as well as the establishment of an in-house ICT platform. The ICT investments follow a amortization plan as shown below:
                 
ICT base system investment
10 years
         
ICT Development of systems and other ICT related investments
3-5 years
         
                 
2.7 Impairment of non-financial assets
Intangible assets with indefinite useful lives are not depreciated, but are reviewed annually for impairment. Tangible fixed assets and intangible assets that are depreciated or amortised are reviewed for impairment when indications are that future earnings can no longer support the balance sheet value. Impairment charges are recorded in the profit and loss account as the difference between the balance sheet value and the recoverable amount. The recoverable amount is the higher of fair value less sales costs and value-in-use.
                 
At impairment reviews, fixed assets are grouped at the lowest level at which it is possible to distinguish independent cash inflows (cash generating units). At each reporting date, evaluations are done as to reversal of previous impairment charges of non-financial assets (with the exception of goodwill).
                 
2.8 Financial assets
The Group only has financial assets in the categories loans and receivables. Loans and receivables are non-derivative financial assets with fixed payments that are not traded in an active market. They are classified as current assets unless they fall due more than 12 months after the balance sheet date. If the latter is the case, they are classified as non-current assets. Financial assets are recognised at the transaction date using the acquisiton price including transaction costs, with a subsequent assessment of the amortised value based on the effective interest method adjusted for any estimated loss.
                 
2.9 Inventory
Inventories are stated at the lower of acquisition cost or net realizable value. Acquisition cost is determined by the first-in, first-out (FIFO) method.
                 
2.10 Customer receivables
Customer receivables are amounts due from customers for merchandise sold or services performed as part of the ordinary course of Group business. If collection is expected in one year or less they are classified as current assets. If not, they are classified as non-current assets.
                 
Customer receivables are initially measured at fair value and subsequently measured at amortised costs using the effective interest method. Allocations for losses are recognised when there are objective indicators that the Group will not receive settlement according to original terms. Allocations consists of the difference between nominal value and recoverable value, which is the present value of expected cash flows, discounted at the original effective interest rate.
                 
2.11 Cash and cash equivalents
Cash and cash equivalents comprise cash, bank deposits, and other short-term readily tradable investments with up to three-month initial terms to maturity, and revolving credit facilities. The revolving credit facilities are presented in the balance sheet under short-term debt.
                 
2.12 Share capital and share premium
Ordinary shares are classified as equity. Costs directly attributable to the issue of new shares or options are shown in equity as a reduction in proceeds received in equity.
                 
2.13 Borrowings
Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently carried at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the income statement over the period of the borrowings using the effective interest method.
                 
Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw-down occurs. To the extent there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalised as a pre-payment for liquidity services and amortised over the period of the facility to which it relates.
                 
2.14 Accounts payable
Accounts payable are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Accounts payable are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities.
                 
Accounts payable are initially measured at fair value. Subsequently, accounts payable is measured at amortisation cost by use of effective interest method.
                 
2.15 Current and deferred tax
The tax expense for the period comprises current and deferred tax. Tax is recognised in the income statement, except to the extent that it relates to items recognised directly in equity and other comprehensive income. In this case, the tax is also recognised in equity and other comprehensive income. The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date in the countries where the Company and its subsidiaries and associates operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.
                 
Deferred income tax is calculated, using the liability method, on all temporary differences between the tax values and consolidated accounting values of assets and liabilities. However, deferred tax liabilities are not recognised if they arise from the initial recognition of goodwill. If the Group purchases an asset or liability in a transaction that is not part of a business combination, deferred tax at the transaction date is not recognised. Deferred tax is determined under taxation rates and tax laws that have been enacted or substantively enacted (expected to be signed into law) at the balance sheet date and that are expected to apply when the deferred tax benefit is realised or when the deferred tax is settled. Deferred tax assets are recognised in the statement of financial position to the extent it is probable that future deferred taxable income will be present, and that the temporary differences can be offset from this income.
                 
Deferred tax is calculated on the temporary differences arising from investments in subsidiaries and associates, except where the Group controls the timing of the reversal of the temporary differences, and it is probable that they will not be reversed in the foreseeable future.
                 
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income taxes assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where there is an intention to settle the balances on a net basis.
                 
2.16 Pension liabilities, bonus programs, and other employee-benefit plans
a) Pension liabilities
               
Group companies have various retirement schemes. The schemes are generally funded through payments to insurance companies or trustee-administered funds, determined by periodic actuarial calculations. The Group has both defined benefit and contribution plans.
                 
Defined benefit plan
               
A defined benefit scheme is a retirement benefit scheme that defines the retirement benefits that an employee will receive on retirement. The retirement benefit is normally set as a percentage of the employee’s salary. The liability recognised in the statement of financial position which relates to the defined benefit scheme is the present value of the future retirement benefits that have accrued at the balance sheet date, reduced by the fair value of the plan assets. The present value of future benefits accrued at the balance sheet date is calculated by discounting estimated future payments at a risk-free interest rate stipulated on the basis of the interest rate for high-quality corporate bonds in Norway. The retirement benefit liability is calculated annually by an independent actuary using the linear accruals method.
                 
Actuarial gains and losses attributable to changes in actuarial assumptions or base data are recognised through other comprehensive income on an ongoing basis after provisions for deferred tax. Changes in defined benefit pension liabilities attributable to changes in retirement benefit plans that have retrospective effect, where these rights are not contingent on future service, are recognised directly in the income statement. Changes that are not issued with retrospective effect are recognised in the income statement over the remaining service time.
                 
Net pension fund assets for overfunded schemes are classified as non-current assets and recognised in the statement of financial position at fair value. Net retirement benefit liabilities for underfunded schemes and non-funded schemes that are covered by operations are classified as long-term liabilities. The net retirement benefit cost are divided between salaries and other personnel expenses and net finance, where the retirement benefits accrued during the period is classified as salaries and other personnel expenses and the net of interest on the estimated liability and the projected yield on pension fund assets are classified as net finance.
                 
Defined contribution plans
               
A defined contribution plan is a retirement plan in which the Group pays fixed contributions to a separate legal entity. The Group has no legal or other obligation to pay additional contributions if the unit does not have sufficient assets to pay all employees benefits associated with earnings in present and previous periods. For defined contribution plans, the Group contributes to a publicly or privately managed insurance plan for retirement payments, on a compulsory, agreed-upon, or voluntary basis. The Group has no further payment obligations once these contributions have been paid. Contributions are recognised as salary expenses when they fall due. Pre-paid contributions are recorded in the accounts as an asset to the extent the contribution may be refunded or reduced by future contributions.
                 
Defined contribution pension schemes are recognised in the financial statements of Norwegian, Swedish and Finnish subsidiaries.
                 
b) Severance pay
Severance pay is paid when the Group terminates an employee’s employment before the normal retirement age, or when employees voluntarily terminate employment conditioned on receipt of such compensation. The Group recognises severance pay during the period when it can be proven to have an obligation either to terminate one or more employees pursuant to a formal, detailed, non-rescindable plan, or to provide severance pay as part of an offer to encourage voluntary resignations. Severance pay that falls due more than 12 months after the balance sheet date is discounted to present value.
                 
2.17 Provisions
The Group recognises provisions for restructuring, and legal claims, when: a) the Group has a present obligation, whether legal or constructive, as a result of past events; b) it is more likely than not that the obligation will be settled via a transfer of financial resources; and c) the size of the obligation may be estimated with a sufficient degree of reliability. Allocations for restructuring costs include termination charges on leasing contracts and severance pay to employees. No provisions are made for future operating losses.
                 
In instances where there are multiple commitments of a similar nature, the probability of the liability being settled is determined by assessing the group as a whole. Allocations for the group are recognised even if the probability may be low as to individual settlement outlays associated with individual group elements.
                 
Provisions are recognized at the present value of expected payments to meet the obligation. A before-tax discount rate is used, reflecting current market conditions and risk specific to the obligation. Any increase in the obligation amount arising from changes in the time frame used in calculating the obligation’s present value is recognised as an interest expense.
                 
2.18 Revenue recognition
Revenues are recognised in the profit and loss account as shown below:
                 
a) Sale of goods and services
Revenues from sales of goods and services are valued at the fair value of payments received, less deductions for value-added tax, returns, rebates, and discounts. Intra-Group sales are eliminated. Sales are recognised in the profit and loss account when revenues can be measured reliably and it is likely that the financial benefits associated with the transaction will flow to the Group.
                 
b) Construction contracts
Contract costs are recognised as expenses in the period in which they are incurred. When the outcome of a construction contract cannot be estimated reliably, contract revenue is recognised only to the extent of contract costs incurred that are likely to be recoverable. When the outcome of a construction contract can be estimated reliable and it is probable that the contract will be profitable, contract revenue is recognised over the period of the contract. When it is probable that total contract costs will exceed total contract revenue, the expected loss is recognised as an expense immediately.
                 
Variations in contract work, claims and incentive payments are included in contract revenue to the extent that may have been agreed with the customer and are capable of being reliable measured.
                 
The Group uses the "percentage-of-completion method" to determine the appropriate amount to recognise in a given period. The stage of completion is measured by reference to the contract costs incurred up to the balance sheet date as a percentage of total estimated costs for each contract. Costs incurred in the year in connection with future activity on a contract are excluded from contract costs in determining the stage of completion. They are presented as inventories, pre-payments or other assets, depending on their nature.
                 
The Group presents as an asset the gross amount due from customers for contract work for all contracts in progress for which costs incurred plus recognised profits (less recognised losses) exceed progress billings. Progress billings not yet paid by customers and retention are included within ‘trade and other receivables’. The Group presents as a liability the gross amount due to customers for contract work for all contracts in progress for which progress billings exceed costs incurred plus recognised profits (less recognised losses).
                 
2.19 Leasing agreements
Leasing agreements, in which a significant proportion of the risk and return associated with ownership remains with the lessor, are classified as operational leases. Leasing payments arising from operational leases (less any financial incentives granted by the lessor) are expensed on a straight-line basis over the leasing period.
                 
Leasing contracts that are associated with fixed assets, and as to which the Group largely has all risk and control, are classified as financial leasing. Financial leasing is recognised in the statement of financial position at the beginning of the lease period at the lower of fair value of the leased asset or the present value of the total minimum lease amounts. Each lease payment is allocated between a repayment element and an interest element, in such a way that the statement of financial position shows a constant interest expense on outstanding lease commitments. Interest expenses are recognised in profit or loss as financial expenses. Lease liabilities are classified as other short-term liabilities or other long-term liabilities. Fixed assets acquired through financial lease agreements are depreciated over the expected lifetime or the lease period, whichever is shorter.
                 
2.20 Dividends
Dividend payments to shareholders are classified as current liability as of the time the dividend disbursement has been approved by the general shareholder’s meeting.
                 
2.21 Interest income
Interest income is recognised using the effective interest method. When a loan and receivable is impaired, the Group reduces the carrying amount to its recoverable amount, being the estimated future cash flow discounted at the original effective interest rate of the instrument, and continues unwinding the discount as interest income. Interest income on impaired loan and receivables is recognised using the original effective interest rate.
NOTE 3
FINANCIAL RISK MANAGEMENT
The Group’s business activities primarily entail exposure to interest rate risk, liquidity risk, and credit risk. The Group is not exposed to financial price risk of any particular significance.
             
The Group’s risk management procedures support the Group’s value creation and ensure a continued solid financial platform by identifying and carefully managing financial and operational risk factors. As a rule, risk management is the responsibility of each business unit’s operational management. For a description of other areas of risk to which the Group is exposed, please see the Board Report as well as guidelines for corporate governance.
             
a) Currency risk
Infratek is only to a limited extent operationally influenced by changes in foreign exchange, as the operations are only marginally applying purchase in foreign exchange or trade across countries. When significant foreign exchange risk is present it is evaluated on a case by case basis and secured through forward contracts or similar if required. As of 31 December 2013 and 2014, the Group had no financial derivates for currency hedging.
             
The Group has operations in Norway, Sweden and Finland and is thus exposed economically to exchange rate risk from SEK and EUR to NOK. Equity in foreign subsidiaries does not have currency hedging and exchange rate fluctuations do affect the Group’s equity.
             
Net exchange differences on translating foreign operations to NOK in 2014 was NOK 24 million (NOK 11 million). The table below shows the effect of the Group’s loss / gain on exchange rates by a plus or minus 10 per cent change in exchange rates from SEK and EUR to NOK for the financial year 2014. The amount relates to translation differences which is a part of other comprehensive income and does not affect net profit.
             
Sensitivity analysis translation differences
         
Currency rate change
Amounts in NOK million
     
Currency
+10%
-10%
Effect on other comprehensive income and equity
SEK
28
(28)
Effect on other comprehensive income and equity
EUR
16
(16)
Total effect on other comprehensive income and equity
 
44
(44)
             
b) Interest rate risk
The Group’s operating revenues and cash flow from operations are largely unaffected by changes in interest rates. Variations in the interest rate may, however, affect customers’ willingness to invest, indirectly affecting the Group’s operating revenues and cash flow. The Group is primarily exposed to interest rate risk associated with long-term debt, and to a lesser degree with cash and cash equivalents. The Group's long-term debt mainly consists of a bond of NOK 633 million and other long-term interest-bearing debt of NOK 62 million. The bond is a floating interest rate loan, with a duration of 5 years and coupon of 3 months' NIBOR + 5 %. A +/- 1 percentage point change in NIBOR would impact the Group's interest expenses with approximately -/+ NOK 7 million per year. Other long-term interest-bearing debt of NOK 62 million has a fixed interest rate. Fixed interest debt expose the Group to fair value interest rate risk. At the close of 2014, the Group had net cash holdings of NOK 175 million (NOK 170 million) and had earned NOK 6 million (NOK 1 million) in interest income during the year. Variations in NIBOR, STIBOR and EURIBOR will affect interest income on cash reserve as well as the Group’s capital costs.
             
c) Liquidity risk
Liquidity risk arises from a lack of coherence between cash flow from operations and financial commitments. Infratek’s business activities are subject to seasonal variations that may affect cash flow. As of 31 December 2014, Infratek had cash and cash equivalents of NOK 175 million (NOK 170 million). Infratek also has an unused NOK 100 million credit facility with Swedbank. Infratek’s borrowing agreement with Swedbank is conditional upon certain Covenants related to Infratek AS proforma group. The Group’s cash flow from operating activities in 2014 was positive as a result of a positive pre-tax profit. Infratek is in compliance with all the requirements stipulated in its borrowing agreement. Overall these resources are deemed to provide solid liquidity for the Group.
             
Maturity-analysis long-term debt*
             
2013
 
1 year
2-3 years
3-5 years
5 years or later
 
Amounts in NOK million
Total
       
Bond
-
-
-
-
-
Other interest-bearing long-term debt
1
-
6
1 305
1 312
Total long-term debt
1
-
6
1 305
1 312
             
2014
 
1 year
2-3 years
3-5 years
5 years or later
 
Amounts in NOK million
Total
       
Bond
44
89
716
-
849
Other interest-bearing long-term debt
-
-
-
404
404
Total long-term debt
44
89
716
404
1 253
             
*) Including interest payments
             
Maturity-analysis financial short-term debt:
             
2013
           
Amounts in NOK million
0-30 days
30-60 days
60-90 days
90-120 days
>120 days
Total
Accounts payable
144
31
2
1
1
179
Other current liabilities
93
-
125
-
115
333
Total current financial liabilities
237
31
127
1
116
512
             
2014
           
Amounts in NOK million
0-30 days
30-60 days
60-90 days
90-120 days
>120 days
Total
Accounts payable
107
(2)
-
27
-
132
Other current liabilities
88
-
90
-
67
245
Total current financial liabilities
195
(2)
90
27
67
377
             
d) Credit risk
           
Credit risk is the risk that customers will not settle their accounts. Credit risk is deemed to be part of the Group’s overall commercial risk and is followed up as part of its day-to-day operations. Infratek has established procedures for credit assessment of larger customers and suppliers. Historically, losses due to bad debts have been insignificant and today’s level of credit risk is considered acceptable. The Group's maximum credit exposure equals the carrying value of receivables and bank deposits.
             
With regards to concentration of credit risk, two customers primarily in the Norway and Sweden segments each contributed revenues of more than 10% of the total revenues of the group. Together these two customers contributed to revenue of approximately NOK 936 million (2013: NOK 587 million) during 2014. No other single customers contributed 10% or more to the Group's revenues for the year 2014 and the period 25 June - 31 December 2013.
             
Age-analysis long-term receivables
             
2013
 
1-3 years
3-5 years
5 years or later
Due date not determined
 
Amounts in NOK million
Total
       
Paid core-capital, pension fund
-
-
-
19
19
Subordinated loan, pension fund
-
-
-
2
2
Total long-term receivables
-
-
-
21
21
             
2014
 
1-3 years
3-5 years
5 years or later
Due date not determined
 
Amounts in NOK million
Total
       
Paid core-capital, pension fund
-
-
-
19
19
Subordinated loan, pension fund
-
-
-
2
2
Total long-term receivables
-
-
-
21
21
             
Maturity-analysis accounts receivable
             
2013
           
Amounts in NOK million
Not due
0-30 days
30-60 days
60-90 days
90-120 days
Total
Accounts receivable
399
28
7
3
4
441
             
2014
           
Amounts in NOK million
Not due
0-30 days
30-60 days
60-90 days
90-120 days
Total
Accounts receivable
380
28
3
2
3
416
             
             
Changes in the allowance for doubtful debts
Amounts in NOK million
2014
2013
Balance at beginning of the year
(2)
(8)
Impairment losses recognised on receivables
-
(1)
Amounts written off during the year as uncollectible (confirmed loss)
1
7
Closing balance allowance for doubtful debts
(1)
(2)
             
e) Categories of financial instruments
The Group’s financial instruments are categorized as follows:
             
     
2014
2013
Amounts in NOK million
Loans and receivables
Total
Loans and receivables
Total
Assets
       
Other long-term receivables
21
21
21
21
Accounts receivables and other receivables (excluding non-financial receivables) 1)
623
623
708
708
Cash and cash equivalents
175
175
170
170
Total financial assets
819
819
899
899
             
Amounts in NOK million
Other Financial obligations at amortized cost
Total
Other Financial obligations at amortized cost
Total
Liabilities
       
Bond
633
633
-
-
Other interest-bearing long-term debt
63
63
534
534
Accounts payable and other current liabilities (excluding non-financial liabilities) 2)
377
377
512
512
Total financial liabilities
1 073
1 073
1 046
1 046
             
1) Prepaid expenses and other receivables are not considered financial assets and are omitted compared to the line item in the statement of financial position. See also note 11.
2) Pre-invoiced income and other current liabilities are not considered financial liabilities and are omitted compared to the line item in the statement of financial position. See also note 14.
             
Nominal value less write-downs on sustained losses on accounts receivable and payable is deemed to equal the fair value of an item. As the interest on the bond is floating rate (NIBOR + 5 percent premium), the group has deemed the fair value to be equal to the carrying amount. No events have occured that are deemed to materially affect the premium since the bond agreement was signed.
             
f) Capital management
The Group’s capital is managed with the goal of continued going concern, safeguarding and further developing the Group’s value and to ensure good credit rating and hence borrowing terms reflecting the operations of the Group.
             
The Group monitors its capital structure by following the developments in net debt as well as its leverage ratio, defined as Bond including accrued interest net of cash and cash equivalents divided by EBITDA ("earnings before interest, taxes, depreciation and amortization").
             
Net interest bearing debt
Amounts in NOK million
2014
2013
   
Bond incl. accrued interest
638
na
   
Cash and cash equivalents
(175)
na
   
Net interest-bearing debt (cash)
463
na
   
Leverage ratio
2,9
na
   
             
In relation to the issue of the bond in 2014 the group changed its follow up on capital management. The bond requires an incurrence test to be performed and met in order for Infratek Group AS to distribute funds. The incurrence test is to be tested pro forma immediately after a distribution. The test requires that the leverage ratio does not exceed 3.00, and that the interest coverage ratio (defined as LTM EBITDA divided by net LTM interest cost) exceeds 3.00.
NOTE 4
IMPORTANT ACCOUNTING ESTIMATES AND ASSUMPTIONS
     
Estimates and assumptions are continuously evaluated, based on historical experience and other factors, including expectations as to future events deemed probable under the current circumstances. The Group prepares estimates and makes assumptions for projection purposes when preparing its financial statements. Accounting estimates only rarely accord fully with the final outcome. The differences that arise between estimates and fair value are recognised in the period they become known if they pertain to this period. If the difference pertains to both current and future periods, recognition is distributed over the periods in question.
                 
Estimates and assumptions that can result in a significant risk of material change in the balance sheet value of assets or liabilities in the upcoming accounting year are discussed below.
                 
Revenue recognition
           
Recognition of income from fixed-price contracts uses the percentage-of-completion method. Current income recognition of projects entails uncertainty, as it is based on estimates and assessments. For projects in progress, there is uncertainty associated with progress on remaining work, disputes, work under guarantees, final projections, and other issues. Thus, the final outcome may deviate from the projected result. For completed projects, there is uncertainty associated with any hidden shortcomings, and possible customer disputes.
                 
Estimated impairment of goodwill
           
Each year the Group perform tests to assess the extent of impairment of goodwill, see note 2.6. The recoverable amount from cash-generating units is determined by calculating its value in use. These calculations require the use of estimates (see also note 7).
                 
Deferred tax assets
               
Deferred tax assets are recognised to the extent that it is probable that the tax assets will be realised. Significant judgement is required to determine the amount that can be recognised and depends on the expected timing, level of taxable profits and the existence of taxable temporary differences. The judgements relate primarily to tax losses carried forward in the Group’s parent company. When an entity has a history of recent losses the deferred tax asset arising from unused tax losses is recognised only to the extent that there is convincing evidence that sufficient future taxable profit will be generated.
                 
Pension benefits
             
The present value of the pension obligations associated with defined benefit plans depends on a number of factors that are determined on an actuarial basis using a number of assumptions. The assumptions used in determining the net cost (income) for pensions include the discount rate. Any changes in these assumptions will impact the carrying amount of pension obligations.
                 
The Group determines the appropriate discount rate at the end of each year. This is the interest rate that should be used to determine the present value of estimated future cash outflows expected to be required to settle the pension obligations. In determining the appropriate discount rate, the Group considers the interest rates of high-quality corporate bonds that are denominated in the currency in which the benefits will be paid, and that have terms to maturity approximating the terms of the related pension liability. Some other relevant assumptions are partly based on regular market terms. For additional information, see note 17.
NOTE 5
BUSINESS SEGMENT REPORTING
       
Group management constitutes the Groups leading authority. Operational segments are based upon Group management reporting guidelines when allocating resources and assessing profitability.
               
In 2014, the Group changed its corporate structure to consist of three business areas; Norway, Sweden and Finland, based on the entity’s delivery of products and services. The previous corporate structure consisted of the business areas Local Infrastructure, Central Infrastructure and Security (comprising Security - Technical Solutions and Electrical Safety). Comparative figures for 2013 have been restated based on the new corporate structure.
               
Segment information is presented for the Group’s business areas. The business segments reflect the Group's operations in the geographical areas and is based on the Group’s in-house reporting structure. Group management assesses the segments’ performance on the basis of an adjusted operating profit (EBIT). This method of measurement excludes the effect of non-recurring costs when the costs are the result of an isolated incident which is not expected to be repeated. In the segment table such costs are reported as part of the segment “Other” (Group). The accounting policies of the business segments are the same as those described in the summary of significant accounting principles, see Note 2.
               
An overview of business segments follows:
Norway: Operations in Norway are organized within the areas Electrical Grids, Electrical Safety, Projects and Infra Solutions. Electrical Grids is aimed at the product areas distribution grids, transmision grids, transformer stations and power cables. Electrical Safety provides inspection and monotoring services on behalf of grid companies. Projects operates as an end-to-end supplier of projects within the high voltage electrical infrastructure, while Infra Solutions offer services within street lighting, metering and fibre/telecom.
               
Sweden: Operations in Sweden are organized within the areas Electrical Grids, Projects, Infra Solutions and Railway. Electrical Grids is aimed at the product areas distribution grids, transmision grids, transformer stations and power cables. Projects operates as an end-to-end supplieer of projects within the high voltage electrical infrastructure, while Infra Solutions offer services within street lighting, metering and fibre/telecom. Railway delivers services to constructors and owners of infrastructure for railway.
               
Finland: Operations in Finland delivers products and services within the central transmission grid, especially related to transformer stations.
               
Other (Group): This segment comprises mainly of group costs in the form of costs incurred by Infratek Group AS and Infratek AS in connection with the Board, CEO and Group Finance, day-to-day financial reporting, as well as shortfall of subleasing revenues from the company’s headquarters.
               
Eliminations: This comprises elimination of Group internal sales and profit from discontinued operations. The 2013 amounts also include elimination of profit or loss amounts recognised before the acquisition date, since the business area amounts are presented for the full year 2013.
               
Segment information
Amounts in NOK million
Norway
Sweden
Finland
Other
Eliminations
Group
 
2013 Restated
             
Gross segment operating revenue
1 158
1 384
165
5
(1 192)
1 520
 
Inter-segment sales
8
14
27
8
(57)
-
 
Operating revenues
1 166
1 398
192
13
(1 249)
1 520
 
Purchased material
(507)
(696)
(98)
-
558
(743)
 
Gross profit
659
702
94
13
(691)
777
 
Personnel expenses
(398)
(503)
(62)
(34)
489
(508)
 
Other operating costs
(146)
(196)
(28)
(90)
228
(232)
 
EBITDA
115
3
4
(111)
26
37
 
Depreciation and amortization
(27)
(15)
(3)
(10)
27
(27)
 
EBIT
88
(12)
(2)
(121)
53
10
 
Net financial income (expenses)
(3)
(3)
-
(32)
3
(35)
 
Profit (loss) before tax and discontinued operations
85
(15)
2
(153)
56
(25)
 
Tax
(26)
3
(1)
30
(12)
(6)
 
Profit from discontinued operations
-
-
-
-
2
2
 
Profit (loss) for the period
59
(12)
1
(123)
46
(29)
 
               
               
Amounts in NOK million
Norway
Sweden
Finland
Other
Eliminations
Group
 
2014
             
Gross segment operating revenue
1 061
1 474
232
6
-
2 773
 
Inter-segment sales
5
5
6
26
(42)
-
 
Operating revenues
1 066
1 479
238
32
(42)
2 773
 
Purchased material
(410)
(853)
(119)
-
14
(1 368)
 
Gross profit
656
626
119
32
(28)
1 405
 
Personnel expenses
(353)
(440)
(64)
(34)
-
(891)
 
Other operating costs
(138)
(158)
(27)
(32)
28
(327)
 
EBITDA
165
28
28
(34)
-
187
 
Depreciation and amortization
(15)
(10)
(3)
(8)
-
(36)
 
EBIT
150
18
25
(42)
-
151
 
Net financial income (expenses)
1
3
-
(67)
-
(63)
 
Profit (loss) before tax and discontinued operations
151
21
25
(109)
-
88
 
Tax
(41)
(2)
(5)
16
-
(32)
 
Profit from discontinued operations
-
-
-
-
35
35
 
Profit (loss) for the period
110
19
20
(93)
35
91
 
               
               
Amounts in NOK million
             
2013
Norway
Sweden
Finland
Group/ eliminations
Group total
   
Intangible assets (including deferred tax assets)
40
3
-
615 *)
658
   
Fixed assets
44
49
18
14
125
   
Receivables and inventory
361
350
57
24
792
   
Cash and cash equivalents
384
(17)
67
(264)
170
   
Assets
829
385
142
389
1 745
   
Equity
405
114
90
(243)
366
   
Pension
205
-
-
(3)
202
   
Other liabilities
-
3
-
17
20
   
Bond
-
-
-
-
-
   
Other long-term debt
-
-
-
534
534
   
Current liabilities
219
268
52
83
622
   
Equity and liabilities
829
385
142
389
1 745
   
*) As of 31 December 2013, the goodwill from the acquisition of Infratek AS was not allocated to segments and the whole goodwill amount is presented as part of "Group/eliminations".
   
               
Amounts in NOK million
             
2014
Norway
Sweden
Finland
Group/ eliminations
Group total
   
Intangible assets (including deferred tax assets)
398
145
47
64
654
   
Fixed assets
44
41
20
8
113
   
Receivables and inventory
368
363
30
(77)
684
   
Cash and cash equivalents
369
7
120
(321)
175
   
Assets
1 179
556
217
(326)
1 626
   
Equity
844
278
164
(992)
295
   
Pension
126
-
-
5
131
   
Other liabilities
-
4
0
19
23
   
Bond
-
-
-
633
633
   
Other long-term debt
-
75
-
(12)
63
   
Current liabilities
209
199
52
21
482
   
Equity and liabilities
1 179
556
217
(326)
1 626
   
NOTE 6
PROPERTY, PLANT AND EQUIPMENT
 
     
Machinery, furniture, vehicles etc.
Total
         
Amounts in NOK million
       
Carrying amount as of 25 June 2013
-
-
Acquisition through business combinations
147
147
Acquisitions
12
12
Disposal of fixed assets at carrying value
(9)
(9)
Depreciation from continuing operations
(25)
(25)
Depreciation from discontinued operations
(1)
(1)
Currency translation adjustments and other
1
1
Carrying amount as of 31 December 2013
125
125
Acquisition costs as of 31 December 2013
150
150
Accumulated depreciation as of 31 December 2013
(25)
(25)
         
Carrying amount as of 1 January 2014
125
125
Acquisitions
24
24
Disposal of fixed assets at carrying value
(4)
(4)
Disposal of discontinued operations
(3)
(3)
Depreciation from continuing operations
(30)
(30)
Depreciation from discontinued operations
(1)
(1)
Currency translation adjustments and other
2
2
Carrying amount as of 31 December 2014
113
113
Acquisition costs as of 31 December 2014
165
165
Accumulated depreciation as of 31 December 2014
(52)
(52)
Carrying amount as of 31 December 2014
113
113
         
Rate of depreciation (in %)
7-33%
 
         
2013
       
Annual leasing not recorded in the statement of financial position under property, plant and equipment:
   
Minimum future payments
   
Premises rental
Machinery/ equipment
Total
Amounts in NOK million
       
Due within 1 year
27
38
65
Due later than one year not later than five years
76
51
127
Due later than five years
-
-
-
Total
103
89
192
         
Recognized as operating lease expenses during year
15
19
34
         
2014
       
Annual leasing not recorded in the statement of financial position under property, plant and equipment:
   
Minimum future payments
   
Premises rental
Machinery/ equipment
Total
Amounts in NOK million
     
Due within 1 year
38
27
65
Due later than 1 year not later than 5 years
59
29
88
Due later than 5 years
1
-
1
Total
98
56
154
         
Recognized as operating lease expenses during year
37
31
68
NOTE 7
INTANGIBLE ASSETS
       
   
Software and licences
Total intangible assets
Amounts in NOK million
Goodwill
   
Carrying amount as of 25 June 2013
-
-
-
Acquisition through business combinations
568
31
599
Disposals of operations at carrying value
(14)
-
(14)
Acquisitions of intangible assets
-
9
9
Amortization
-
(2)
(2)
Carrying amount as of 31 December 2013
554
38
592
Acquisition cost as of 31 December 2013
554
40
594
Accumulated amortization as of 31 December 2013
-
(2)
(2)
       
Carrying amount as of 1 January 2014
554
38
592
Acquisitions of intangible assets
-
5
5
Amortization
-
(7)
(7)
Disposal of intangible assets
-
(4)
(4)
Currency translation adjustments
15
-
15
Carrying amount as of 31 December 2014
569
32
601
Acquisition cost as of 31 December 2014
569
40
609
Accumulated amortization as of 31 December 2014
-
(8)
(8)
Carrying amount as of 31 December 2014
569
32
601
       
Rate of depreciation (in %)
-
10 - 33%
 
       
Goodwill impairment testing
     
Management is reviewing the business performance based on geography. Within each country, legal entities have been defined by management as the lowest level generating independent cash inflows. The groups legal entities therefore constitute the CGUs of the group. Goodwill has been alloced to the CGUs based on managements assessment of which CGUs are expected to produced added value. Goodwill has beed allocated to each CGU as shown below:
       
Amounts in NOK million
 
Cash generating unit
Segment
Goodwill
 
Infratek Norge AS
Norway
380
 
Infratek Sverige AB
Sweden
143
 
Infratek Finland AB
Finland
46
 
Total goodwill
 
569
 
       
Turnover, margins and investments are based on management budgets for 2015 as well as projections for the interval 2016 to 2019. Based on projections for 2016 to 2019, an annual growth rate of 3 percent has been employed. The terminal value is further based on the cash flow for year 2019, whereas an annual growth rate equivalent to 1.75 percent for all subsidiaries is employed. These considerations are on average in line with the general expected economic growth (inflation) for the countries where Infratek is operating. As for the terminal value, the reinvestment corresponds to expected depreciation of the unit`s fixed assets. In order to capture assumed risk, a discount rate of 6.7 percent for Norway, 6.5 percent for Sweden and 6.4 percent for Finland has been employed as WACC on cash flows before tax. Goodwill of MNOK 14 was initially allocated to Eiendomssikring AS which the group disposed of during 2014. Within the remaining CGUs, there have been no impairment write-downs in 2014.
       
Sensitivity analysis for key assumptions
     
Group management considers net cash flows for the interval 2016 to 2019, WACC and growth rate in terminal value as key assumptions. The Group has performed a sensitivity analysis for all key assumptions by testing to which extent these must be adjusted to arrive at an impairment situation. The below table shows the assumptions that individually must be employed to arrive at an impairment situation:
 
Key assumption
 
CF CAGR
Growth rate
 
Cash generating unit
2016-2019
TV
WAAC
Infratek Norge AS
-30%
-18%
16%
Infratek Sverige AB
-35%
-99%
27%
Infratek Finland AB
-28%
-18%
16%
NOTE 8
CONSTRUCTION CONTRACTS
   
Restated
Amounts in NOK million
2014
2013
Total operating revenues
2 773
1 520
- of which contract revenues
1 269
741
Sales of goods and services
1 504
779
     
Current contracts as of 31 December
   
Incurred contract expenses 31 December
813
500
Incurred contract profit 31 December
67
42
Progress billings
(861)
(468)
Net value contracts in progress 31 December
19
74
     
Statement of financial position amounts of:
   
Incurred, not invoiced
67
127
Pre-invoiced to customer
(48)
(53)
Net value contracts in progress 31 December
19
74
     
Remaining production on contracts with estimated loss 1)
8
9
1) Estimated production losses on remaining contracts, are recognized to the fullest in profit or loss.
NOTE 9
INVENTORY
 
Amounts in NOK million
2014
2013
Purchased good for resale
5
24 *)
Total inventory
5
24
     
Write-down of inventory recognized as expense during period:
-
-
Total cost of inventories recognized as expense during period **)
660
273 ***)
     
*) Purchased goods for resale as of 31 December 2013 is mainly related to the discontinued operation Security - Technical Solutions.
**) The cost of inventories comprises purchased materials excluding expenses related to subcontractors.
***) The amount for 2013 has been restated due to the disposal of the discontinued operation Security - Technical Solutions. See note 25 for more information.
NOTE 10
OTHER LONG-TERM RECEIVABLES
Amounts in NOK million
2014
2013
Paid core-capital, pension fund
19
19
Subordinated loan, pension fund
2
2
Total other non-current receivables
21
21
NOTE 11
ACCOUNTS RECEIVABLE AND OTHER RECEIVABLES
Amounts in NOK million
2014
2013
Accounts receivable
417
443
Bad debt reserve
(1)
(2)
Net accounts receivable
416
441
Accrued revenues
207
267
Prepaid expenses
16
20
Other receivables
19
19
Total accounts receivable and other receivables
658
747
NOTE 12
CASH AND CASH EQUIVALENTS
Amounts in NOK million
2014
2013
Bank deposits in Group account system
174
167
Bank deposits outside the Group account
1
3
Total bank deposits
175
170
     
Split by currency
NOK
48
119
SEK
7
(19)
EUR
120
67
DKK
-
3
Total bank deposits
175
170
     
The Group employs the Group account system in Swedbank as per 31.12.2014 (DNB Bank ASA per 31.12.2013). A group account system entails joint and several liability for participating companies. Infratek Group AS does not participate in the Group account system. Infratek AS’s accounts constitute the only accounts connected to the banks whereas deposits and withdrawals concerning the subsidiaries’ accounts consist of internal accounts with Infratek AS. Participating companies in the Group account system have a joint guarantor liability for consolidated withdrawals in the Group account system.
     
The Group has a credit facility of MNOK 100 with Swedbank, of which 0 is drawn per 31.12.2014.
     
As of 31 December 2014 and 2013, the Group had the following restricted bank deposits.
     
Restricted cash and cash equivalents
Amounts in NOK million
2014
2013
Downpayment deposits
1
-
Other restricted cash and cash equivalents 1)
17
16
Total restricted cash and cash equivalents
18
16
     
1) Other restricted cash and cash equivalents comprises funds for social purposes benefiting the employees of the Infratek Group.
NOTE 13
ADDITIONAL EQUITY SPECIFICATIONS
             
Share capital and share premium
 
As of 31 December, Infratek’s share capital and share premium was as follows:
             
Amounts in NOK million, except number of shares and par value
 
Number of shares
Par value
Share capital
Share premium
Total
             
As of 31 December 2013
31
1 000
-
185
185
Equity increase through debt conversion
-
100
-
68
68
As of 31 December 2014
31
1 100
-
253
253
             
All shares in Infratek Group AS are owned by Heraldic Midco s.a.r.l.
             
The Board proposes that no dividends are paid for 2014. No dividends were paid for 2013.
             
Non-controlling interests
On 25 June 2013, Infratek Holding AS acquired 76.3 per cent of the shares and achieved control in Infratek AS. Thus, a 23.7 per cent non-controlling interest was recognised in the consolidated financial statements at the acquisition date. See note 24 for more information on this transaction. On 30 September 2013, the company acquired an additional 3.2 per cent of the shares, reducing the non-controlling interests to 20.5 per cent as of 31 December 2013. The acquisition was recognised as an equity transaction and did not result in any gain or loss for the controlling interests.
             
During the first quarter of 2014, the remaining shares in Infratek AS were acquired by Infratek Group AS for a total consideration of NOK 234 million reducing non-controlling interests to zero as of 31 December 2014. These transactions were recognised as equity transactions in the consolidated financial statements, and a loss of NOK 37 million was recognised in controlling interests in the equity statement.
NOTE 14
ACCOUNTS PAYABLE AND OTHER CURRENT LIABILITIES
Amounts in million NOK
2014
2013
Accounts payable
132
179
Public duties payable
90
125
Incurred expenses
155
173
Pre-invoiced income
58
67
Other short-term debt
-
35
Other current liabilities
43
44
Total accounts payable and other current liabilities
478
623
NOTE 15
LONG-TERM DEBT
     
Amounts in million NOK
2014
2013
Bond
633
-
     
Long-term debt towards parent company
-
66
Other long-term debt*
62
461
Other long-term interest-bearing debt
1
7
Total other interest-bearing long-term debt
63
534
     
* With effect 31.12.2013, the parent company of Infratek Group AS, Heraldic Midco s.a.r.l. reassigned the loan to legal persons outside the Group. The reassignement did not cause any changes in the terms of the loan except a change of counterparties for Infratek Group AS.
     
In May 2014, Infratek Group AS issued a bond of NOK 650 million, with the duration of 5 years and coupon of 3 months’ NIBOR + 5 percent. Initial transaction fees of NOK 18.4 million related to the bond issue have been recognised as part of the carrying amount in the statement of financial position. The bond is carried at amortized cost. Fair value of the debt is assessed to be equal to the recognised amount. The bond was listed on the Oslo Stock Exchange on 17 December 2014.
     
Investors have a share pledge in the operating company Infratek AS.
     
The bond agreement has restrictions related to distribution of funds from the Group. The bond agreement requires an incurrence test to be performed pro forma imediately after a distribution of funds. The incurrence test requires that the leverage ratio (net interest bearing debt excluding debt to Triton Funds to EBITDA < 3.0x) and interest coverage ratio (EBITDA to interest costs > 3.0x).
     
Other long-term debt has maturity date in 2034 (2013: 2023) and interest rate of 10 percent.
     
The remaining debt including accrued interest towards parent company has been converted to equity during 2014.
NOTE 16
DEFERRED TAX
       
             
Amounts in NOK million
2014
2013
Deferred tax assets that is expected realised in more than 12 months
53
66
Deferred tax assets that is expected realised within 12 months
-
-
Deferred tax assets recognised in the statement of financial position as of 31 December
53
66
             
Deferred tax that is expected realised in more than 12 months
(4)
-
Deferred tax that is expected realised within 12 months
-
-
Deferred tax liabilities recognised in the statement of financial position as of 31 December
(4)
-
             
Amounts in NOK million
2014
2013
Net deferred tax assets (liabilities) at the beginning of the period
66
57
Recognized in the income statement during the period
(26)
14
Tax effect of actuarial gains and losses through Other Comprehensive Income (OCI)
8
(6)
Disposal of discontinued operations
-
-
Currency translation adjustments and other changes
1
1
Net deferred tax assets (liabilities) as of 31 December
49
66
             
Specification deferred tax asset
             
Amounts in NOK million
Pensions
Loss carry
forward
Operating
assets
Construction
contracts
Other
 Total
Deferred tax assets as of 25 June 2013
63
-
(1)
(9)
8
61
             
Tax effect of actuarial gains and losses through OCI
(6)
       
(6)
Recognized in the income statement in the period
(3)
8
4
3
3
14
Deferred tax assets as of 31 december 2013
54
8
3
(6)
11
70
             
Tax effect of actuarial gains and losses through OCI
8
       
-
Recognized in the income statement in the period
(28)
5
-
1
(4)
(26)
Deferred tax assets as of 31 december 2014
35
13
3
(5)
7
53
 
Specification deferred tax liabilities
             
Amounts in NOK million
Loss carry
forward
Operating
assets
Other
Total
Deferred tax liability as of 25 June 2013
(1)
(3)
-
(4)
             
Deferred tax from discontinued operations
     
-
Recognized in the income statement in the period
-
-
 
-
Deferred tax liability as of 31 december 2013
(1)
(3)
-
(4)
             
Deferred tax from discontinued operations
     
-
Recognized in the income statement in the period
1
(1)
 
-
Deferred tax liability as of 31 december 2014
-
(4)
-
(4)
             
The Group has a total of NOK 96 million in carry forward losses and NOK 2 million in carry forward interest deduction to related parties. Both are related to the operations in Norway and may only be utilized against taxable profits in Norway. No deferred tax asset has been recognized related to carry forward interest deduction to related parties, while deferred tax asset related to carry forward losses has been recognized to the extent the realisation of the tax benefit is probable. Tax losses in Norway related to carry forward interest deductions expire after 10 years, while tax losses related to carry forward losses in Norway has no expiration date.
             
Deferred tax is presented net within each tax regime when the Group has a legal right to offset deferred tax benefits in the statement of financial position.
NOTE 17
PENSION EXPENSES, ASSETS AND LIABILITIES
Group companies have different pension plans organised in pension funds and insurance companies. Pension schemes are generally funded through payments made by the companies, determined on the basis of actuarial calculations or as a fixed percentage of the individual employee’s salary. The Group has both defined contribution and defined benefit plans.
             
Pension liabilities and assumptions
 
Restated
Amounts in million NOK
2014
2013
Present value of accrued pension liabilities for defined benefit plans in fund-based plans
713
662
Fair value of pension assets
(675)
(572)
Actual net pension liabilities for defined benefit plans in fund-based plans
38
89
Present value of liabilities non-fund-based plans
75
86
Social security contribution
19
27
Net pension liabilities in the statement of financial position (after social security contribution)
131
202
             
Changes in defined benefit pension liabilities during the year:
   
Pension liabilities as of 1 January (excl. social security contribution)
748
717
Present value of pension earnings
15
17
Interest expenses
30
28
Actuarial gains and losses
61
3
Pension payments
(21)
(17)
Liabilities due to plan changes
(45)
-
Pension liabilities as of 31 December (exclusive of social security contribution)
788
748
             
Change in fair value of pension assets:
   
Fair value of pension assets as of 1 January
572
520
Expected yield on pension funds
23
21
Actuarial gains and losses
32
22
Total contribution
75
29
Total payments from funds
(27)
(20)
Fair value of pension assets as of 31 December
675
572
             
Actual interest income on pension funds for 2014 was NOK 55 million (NOK 43 million).
             
Movement in actuarial gains and losses recognized in other comprehensive income:
Amount recognized in comprehensive income 1 January
(22)
-
Recognized in other comprehensive income in the period
28
(22)
Amount recognized in other comprehensive income 31 December
6
(22)
Deferred tax recognized in comprehensive income 1 January
7
 
Deferred tax related to actuarial losses recognized in other comprehensive income
(8)
7
Deferred tax recognized in other comprehensive income 31 December
(1)
(15)
Net amount recognized in other comprehensive income after tax 31 December
5
(8)
             
In accordance with IAS 19 the interest rate that is used to discount the pension liability may be established using high-quality corporate bonds in Norway, if an active market for such high-quality bonds exists. The Group has chosen to use the discount rate derived from such high-quality bonds instead of the interest rate for government bonds.
             
Calculations are based on the following assumptions:
2014
2013
Discount rate
2,50%
4,10%
Expected yield on pension funds
2,50%
4,10%
Salary growth
3,10%
3,90%
Social security base amount (G)
3,10%
3,90%
Annual social security pension growth - Private Funds
0,10%
0,50%
Annual social security pension growth - Public Funds
2,35%
3,25%
             
Average turnover for employees is assumed at 2,7 % in 2014 and 2013.
             
Pension effect on profit and loss statement
Total pension expenses recorded in profit and loss statement:
Amounts in million NOK
2014
2013
Defined benefit plans:
   
Cost of present period’s pension earnings
15
9
Interest expenses
31
16
Expected yield on pension funds
(23)
(11)
Social security contribution
2
1
Administrative expenses
2
2
Members’ contributions
(1)
(1)
Change in pension plans
(45)
 
Employer’s contribution to non-capitalized defined benefit schemes in foreign subsidiaries
32
13
Pension costs, defined benefit plans
13
29
Defined contribution plans:
   
Employer’s contribution to defind contribution plans
29
13
Total pension expenses
42
42
             
Total pension costs are classified as:
Salaries and other personnel costs
34
38
Net finance
8
4
Total pension costs
42
42
             
Expected contributions to the post-employment benefit plans for the year ending 31 December 2015 are NOK 112 million excluding public duties.
             
Specification pension fund assets
Amounts in million NOK
2014
2013
Equity instruments
311
46%
172
30%
Interest-bearing instruments
365
54%
372
65%
Property
0
0%
18
3%
Other
0
0%
12
2%
Fair value of pension assets
675
100%
574
100%
             
Specification pension fund assets 2014
     
Quoted pries in active markets for identical instruments
Significant other observable input
Significant unobservable input
Total
     
Level 1
Level 2
Level 3
 
Equity instruments
0%
35%
11%
46%
Interest-bearing instruments
0%
54%
0%
54%
Other
0%
0%
0%
0%
Total
0%
89%
11%
100%
             
             
Sensitivity analysis
Infratek has carried out a sensitivity analysis for the net pension liabilities and estimated pension-related costs. The tables below illustrate the effect of a one percentage point change in the discount rate, salary increases and change in the social security base amount (G) on the net pension liability and pension-related costs, given the original assumptions as described in the table above.
             
Sensitivity analysis for the defined benefit obligation
NOK million
Discount rate
Salary growth
Change in G
Percentage point change
+ 1 %
- 1 %
+ 1 %
- 1 %
+ 1 %
- 1 %
Net pension liabilities
(130)
179
43
(33)
125
(94)
Deferred tax - / tax asset
(35)
48
12
(9)
34
(25)
Effect on equity
(95)
131
31
(24)
91
(69)
             
Sensitivity analysis for estimated pension-related costs
NOK million
Discount rate
Salary growth
Change in G
Percentage point change
+ 1 %
- 1 %
+ 1 %
- 1 %
+ 1 %
- 1 %
Pension cost
(3)
4
2
(2)
2
(1)
Financial expenses
(3)
4
1
(1)
3
(2)
Total pension cost
(6)
8
3
(2)
5
(4)
             
In addition to the above sensitivites, the Group has estimated that a change from GAP2007 to K2013BE would increase the pension liability by NOK 38 million, with a net after-tax effect on equity of NOK 28 million as per 31.12.2014. Infratek has consistantly applied GAP2007 mortality estimates produced by Gabler and considers this to be the best estimate for mortality assumptions.
             
The estimates are based on facts and conditions as of 31 December 2014. Actual results could therefore deviate from these estimates to a material extent.
             
Change in pension plans Norway
In September 2014, Norsk Regnskapsstiftelse publicized an updated statement on the accounting for change in pension plan related to life expectancy adjustment and change in disability benefits on public pension plans. Infratek has implemented this change in its actuarial calculations as per 31 December 2014 with a total positive effect on the profit for the year of NOK 45 million. The table below shows the breakdown of the change of pension plan effect on profit for 2014.
             
NOK million
2014
2013
Life expectancy adjustment (secured pension scheme)
40
-
Life expectancy adjustment (non-secured pension scheme)
(10)
-
Change in disability benefits
15
-
Total effect on profit of change in pension plan
45
-
             
Pensions in Norway
   
Pursuant to Norway’s law on mandatory service pensions, defined contribution plans have been established in all Norwegian companies. The Group’s mandatory service pension schemes (OTP) for employees in Norway are administered by DNB and Storebrand.
             
As of 31 December 2014, 286 employees were covered by defined benefit plans, divided between Hafslund Private Pensjonskasse (56), Hafslund Offentlige Pensjonskasse (186) and KLP (44). As of 31 December 2014, 150 people were receiving pensions under these schemes, divided between Hafslund Private Pensjonskasse (12), Hafslund Offentlige Pensjonskasse (68) and KLP (70). There are few pensioners receiving benefits under Hafslund’s defined benefits schemes, since all pensioners were transferred to Hafslund ASA prior to the company’s flotation in December 2007. In addition, the Group has defined contribution plans with various insurance companies. The defined benefit plans belonging to the Hafslund Group’s two pension schemes, of which Infratek is a member, were closed with effect from 1 January 2007. This means they were closed to new members. Since January 2007, defined contribution plans were introduced for all new employees and for employees who were not previously included in a pension scheme in the Group’s Norwegian businesses.
             
Pension assets are valued at fair value as of the year-end. Pension liabilities (net present value of pension payments earned per the balance sheet date, adjusted for future salary growth) are valued using best estimates based on assumptions as of the balance sheet date. The substantial actuarial loss in 2014 is mainly due to an decreased discount rate in 2014 compared to 2013. The actuarial estimates of pension liabilities have been prepared by independent actuaries. The assumptions regarding salary growth, increase in pension payments, and change in G are based on historic observations, established tariff agreements, and the relationship between certain assumptions.
             
Employees who terminate employment before reaching retirement age receive paid-up policies. Hafslund and Infrateks pension funds manage these paid-up policies, which are associated with earned rights in municipal contribution plans. Infratek has a financial commitment to upwardly adjust these paid-up policies in line with increases in the social security base amount. At such time as paid up policies that have been earned in other contribution plans are issued, Infratek is released from further obligations to the employees to which the policies pertain. Assets and liabilities are valued at the time of issuance of the paid-up policy and are separated from pension assets and liabilities.
             
Other demographic assumptions that have been used in the calculation of Norwegian defined benefit pension liabilities are as follows: for mortality and disability, Norwegian life insurance companies’ table GAP2007. The expected yield on pension assets is based on the interest for high-quality corporate bonds taking into consideration the remaining term, which is the samme discount rate used for pension liabilities. The value-adjusted yield on pension assets was 8.8 percent in 2014 and 7.4 percent in 2013.
             
Pension assets are per 31.12.2014 invested in equity instruments and bonds. Bonds are issued by the Norwegian government, Norwegian municipalities, finance institutions, and corporations. Bonds in foreign currencies are currency hedged. Investments are in Norwegian and foreign shares.
             
Pensions in Sweden
   
As of 31 December 2014 a total of 255 “tjänstemän” employed by Infratek’s Swedish subsidiary were members of the ITP (Industrins og handelns tilläggspension) defined benefit plan. All “tjänstemän” also have an ITPK defined contribution plan. “Tjänstemän” with a salary in excess of SEK 581 000 can select an alternative ITP in the chosen insurance company. 5 employees have, for historic reasons, an alternative ITP with higher benefits relating to retirement, family and incapacity pension. For “tjänstemän” in the Swedish company, Infratek has purchased insurance cover from Alecta which manages and administers the ITP pension insurance scheme. In addition, a special tax in accordance with the collective agreement for the additional pension EFA-Sif, "Sveriges Ingenjörer och Ledarna", corresponding to 1,0 percent of salary.
             
354 “Kollektivanställda” are covered by the Avtalepension SAF-LO, a defined contribution plan. In addition there is a special charge relating to the collective agreement on supplementary pensions EIO-SEF and EIO-SEF corresponding to 1 percent of salary. The defined contribution plan for “kollektivanställda” is administered by Fora.
             
The defined benefits scheme for Infratek’s employees in Sweden, acts as a defined contribution scheme for the Group, with annual premiums being charged as expenses as they accrue. The Group has no pension liability in the statement of financial position related to the pension scheme in Sweden. Employees who leave the company before retirement age receive a paid-up policy. The paid-up policies are managed by the company in which the employee has accrued pension rights. Infratek has no obligations after the employee has received a paid-up policy.
             
Pensions in Finland
   
All companies in Finland are obliged to establish a mandatory service pension for their employees. All employees in Finland are covered by the mandatory service pension scheme, which is based on defined contributions. This scheme is insured through Varma Pension Insurance Company.
             
Before its acquisition by Infratek, 45 employees of the Finnish subsidiary previously had supplementary defined benefits pension plans with Fortum Pension Foundation. This defined benefits scheme provided a defined pension for these employees if the mandatory scheme did not cover this amount. When Infratek Finland Oy was acquired by Infratek this defined benefit agreement was replaced by a supplementary pension agreement with the insurance company Mandatum Life in Finland. This supplementary pension agreement will be funded through annual pension premiums to cover the employees’ accrued pension entitlements. The premiums will be paid by Infratek Finland Oy. The annual premium covers the expected costs associated with the supplementary pension scheme and no further obligations devolve to the company.
             
For these 45 employees there is also a contingent liability in the event that the employee’s employment contract is terminated by the employer. For more information regarding this contingent liability, see Note 27.
NOTE 18
TRANSACTIONS WITH RELATED PARTIES
The Infratek Group is 100% owned by Heraldic Midco s.a.r.l. There have been no related party transactions with Heraldic Midco s.a.r.l. or with parties related to Heraldic Midco s.a.r.l. during 2013 and 2014, apart from long-term debt from Heraldic Midco s.a.r.l. (see note 15) and the transactions mentioned below.
   
With effect 31 December 2013, part of the Group's debt to Heraldic Midco S.a.r.l. was reassigned to legal persons outside the Group. The remaining debt to Heraldic Midco S.a.r.l was converted to equity during 2014. Per 31 December 2014, the Group has no debt to related parties. During 2014, NOK 2 million has been recognized as interest cost to Heraldic Midco S.a.r.l. (NOK 30 million during 2013).
         
The Company has agreements with Triton Advisers Limited and Triton Managers III Limited for councelling and success fee related to acquisition of businesses, respectively. Expenses during 2014 were NOK 6.5 million (NOK 22 million during 2013).
         
For remuneration to the CEO and the Board of Directors, see Note 21 Remuneration payable to Senior Company Officers.
NOTE 19
OTHER OPERATING EXPENSES
Specification of other operating expenses
 
Restated
Amounts in million NOK
2014
2013
Maintenance
(51)
(26)
Consulting services
(49)
(20)
Rent, electricity, etc.
(55)
(28)
Sales and marketing expenses
(4)
(3)
Office expenses
(12)
(8)
Transportation expenses
(96)
(66)
Other operating expenses
(60)
(81)
Total other operating expenses
(327)
(232)
     
Specification of fee to auditor
   
Amounts in thousand NOK
2014*
2013**
Fee statutory audit
2 058
1 150
Fee assurance services
173
39
Fee tax advisory services
44
61
Fee other non-audit services
667
133
Total auditor fee
2 942
1 382
     
* During 2014 the Group has changed auditor from PwC to KPMG. The fees for 2014 have therefore incurred against both auditors.
     
** Fees to auditor for the period 25.6.2013-31.12.2013 have been estimated based on the assumption that the fees have incurred linear over the year.
NOTE 20
SALARIES AND OTHER PERSONNEL EXPENSES
Specification of personnel expenses
         
Restated
Amounts in million NOK
2014
2013
Salaries and other personnel expenses
(672)
(371)
Social security contribution
(153)
(79)
Pension expenses - defined benefit plans
(6)
(29)
Pension expenses - contribution plans
(29)
(12)
Other benefits
(31)
(17)
Total salaries and other personnel expenses
(891)
(508)
           
Average number of man-years*
 
Restated
       
2014
2013
Norway
579
582
Sweden
641
781
Finland
120
125
Total
1 340
1 488
           
*) The parent company Infratek Group AS does not have any employees. The average number of man-years is based on average amounts for the Group for the period 1 January to 31 December 2014 and 2013, respectively.
NOTE 21
REMUNERATION TO BOARD AND GROUP MANAGEMENT
The overview below shows remuneration for the period 1 January to 31 December 2014 and 2013 for top employees in the Infratek Group, defined as Board members in Infatek Group AS and Group management. The 2013 amounts are shown for the whole year, even though the companies have only been consolidated as part of Infratek Group from 25 June 2013.
               
Infratek Group AS has not paid any remuneration to the Board during 2014 and 2013. The Group does not have any option schemes for employees.
               
Remuneration to Group management 2014
Amounts in thousand NOK
           
Name
Position
Salary and remuneration
Bonus
Contribution to pension plans
Change in earned pension rights
Loan
 
               
Senior executives
             
Lars Bangen
Group Chief Executive Officer
2 516
490
-
187
357
 
Vibecke Skjolde
Group Executive Vice President / CFO
1 782
318
55
-
223
 
               
               
Remuneration to Group management 2013
Amounts in thousand NOK
           
Name
Position
Salary and remuneration
Bonus
Contribution to pension plans
Change in earned pension rights
Loan
 
               
Senior executives
             
Lars Bangen
Group CEO / Group Executive Vice President Local Infrastructure
2 010
150
-
164
393
 
Vibecke Skjolde
Group Executive Vice President / CFO
1 777
231
18
-
263
 
Alf Engqvist
Group Executive Vice President Central Infrastructure
SEK 1 770
SEK 114
SEK 57
SEK 576
-
 
Lars Erik Finne
Group Executive Vice President Security
1 487
119
29
89
357
 
Amund Kristiansen
Group Executive Vice President People & Safety
1 282
-
17
-
360
 
Bjørn Frogner
CEO 1 January - 25 October
4 983
313
31
179
212
 
               
Notes:
All amounts are excluding social security contribution
Salary and remuneration includes fixed salary, non-monetary payments, benefit of interest-free loans, electronic communication, etc
               
Additional terms and conditions of group management
Bonus for Group CEO is determined annually based on the Group's development with regard to the Group's operating profit in the range of 3 percent to 9 percent. Bonus of 1 percent is earned per percentage point within this interval.
               
The CEO and CFO has a six-month notice period. In the event that their employment is terminated, They are entitled – upon certain conditions being met – to receive their salary for a period of 6 months in addition to the period of notice.
               
Group management’s pension rights vary based on the duration and type of position within the former Hafslund Group. CEO Lars Bangen is members of Hafslund Public Pension Fund and has a defined benefit scheme, while CFO Vibecke Skjolde is member of the defined contribution scheme of Infratek AS.
               
Members of Group management have group life insurance coverage, health insurance and an interest-free car loan of between NOK 400,000 and NOK 500,000, which is written down by a tenth of the original amount of the loan each year. In addition an annual car subsidy is paid. These benefits are included in the column for fixed salary, etc, and the interest benefit is declared for tax purposes. In addition benefits-in-kind such as internet (home office), mobile phone and newspapers are offered.
NOTE 22
FINANCIAL INCOME AND EXPENSES
Net financial income
   
Amounts in million NOK
2014
2013
Interest income
6
1
Other financial income
-
1
Financial income
6
2
Interest expenses towards parent company
(2)
(30)
Interest expenses related to bond
(29)
-
Other interest expenses
(28)
(2)
Other financial expenses
(10)
(5)
Financial expenses
(69)
(37)
Net financial income (expenses)
(63)
(35)
NOTE 23
TAX EXPENSE
 
   
Restated
Amounts in million NOK
2014
2013
Tax payable
(6)
(20)
Change in deferred tax
(26)
14
Total tax expense
(32)
(6)
     
Tax payable in the statement of financial position as of 31 December
   
Amounts in million NOK
2014
2013
Tax payable
(6)
(20)
Prepaid tax
8
21
Tax (payable) / receivable in the statement of financial position
2
1
     
Reconciliation effective tax rate
   
Tax on the Group’s profit before tax and discontinued operations differs from the amount that would have resulted from application of the nominal taxation rate. Reconciliation of the nominal tax rate and the effective tax rate is shown below:
     
Amounts in million NOK
2014
2013
Profit (loss) before tax and discontinued operations
88
(25)
Expected tax expense, 27 % nominal tax rate
(24)
7
Non-deductible income and expenses
4
(17)
Variance from different tax rates in subsidiaries
3
1
Effect due to change in nominal tax rates *)
-
3
Tax effect relating to prior year
(1)
-
Valuation allowance deferred tax losses
(14)
-
Total tax expense
(32)
(6)
     
Effective tax rate
36%
-24%
     
*) The statutory tax rate in Norway was reduced from 28 % til 27 % with effect from 1 January 2014.
NOTE 24
BUSINESS COMBINATIONS
     
There have been no business combinations in 2014.
   
     
Infratek Group AS , however, during the first quarter of 2014, acquired the remaining shares in Infatek ASA for a total consideration of NOK 234 million. The effect of the acquisition of the minority interest was posted directly to equity. No additional goodwill or other intangible assets were calculated as the Group calculated 100 percent goodwill based on the purchase of the 76,3 percent share in 2013.
     
Acquisition of Infratek ASA
 
On 25 June 2013, Infratek Holding AS acquired 76,3 per cent of the shares in the listed company Infratek ASA. On 30 September 2013, the company acquired an additional 3,2 per cent of the shares, and owned 79,5 per cent of the shares as of 31 December 2013.
     
Purchase Price Allocation (PPA) related to the acquisition of Infratek ASA is as follows:
 
Amounts in million NOK
 
2013
Consideration 76,3 % of the shares
 
682
Total consideration
 
682
     
Fair values of identified assets and liabilities related to the acquisition as of 25 June 2013:
Amounts in million NOK
Final PPA
Provisional PPA
Intangible assets
31
43
Deferred tax assets
57
57
Fixed assets
147
129
Inventory
32
32
Accounts receivable and other receivables
759
759
Cash and cash equivalents
71
71
Other interest-bearing long-term debt
(16)
(16)
Pensions and other liabilities
(219)
(219)
Other allocations and liabilities
(25)
(25)
Accounts payable and other current liabilities
(513)
(513)
Fair values of acquired net assets
325
319
Non-controlling ownership interests
(212)
(212)
Goodwill
568
574
Total
682
682
     
A provisional purchase price allocation (PPA) was performed in relation to the acquisition in 2013. An adjustment of NOK 6 million to the fair value of intangible assets has been made in 2014, increasing net assets and reducing goodwill by the same amount. The PPA is final as of 31 December 2014.
     
Goodwill related to the acquisition:
   
After the fair values of all identifiable assets and liabilities have been evaluated, the Group is left with a net amount which is recognised as goodwill. Calculated goodwill is recognised in the Group's balance sheet based on expectations of increased future revenue growth. See note 7 for additional information. Goodwill from the acquisition is not tax deductible.
     
Net cash consideration
   
Amounts in million NOK
 
2013
Fair value of acquired cash and cash equivalents at acquisition date
 
71
Cash consideration 76,3 %
 
(682)
Net cash consideration
 
(611)
     
The cash consideration for the subsequent acquisition of 3,2 % of the shares in 2013 was NOK 28.0 million. Transaction costs of NOK 41.5 million are recognised on the line "Other operating expenses" in the statement of comprehensive income.
     
Profit or loss impact of the acquired company
   
The acquisition of Infratek ASA was carried out with effect from 25 June 2013. Thus, the consolidated financial statements for 2013 only includes the profit or loss in the acquired company for the period 25 June 2013 - 31 December 2013.
     
Infratek ASA contributed the following revenues and expenses to the consolidated profit or loss for 2013:
     
   
Restated
Amounts in million NOK
 
2013
Operating revenues
 
1 520
Operating profit
 
52
     
     
Acquisition of Infratek Säkerhet Sverige AB
 
On 10 July 2013, Infratek Sikkerhet AS exercised the option to buy the remaining 49 percent of Infratek Säkerhet Sverige AB. Infratek Sikkerhet paid NOK 6.4 million for the remaining shares of the company. When the initial ownership interest of 51% was acuired in 2010, the Group made an assessment that they controlled 100% of the company due to the presence of sale and purchase options and no non-controlling interests were recognised. Thus, no new goodwill arose as a result of the purchase of the remaining 49% of the shares in the company in 2013. Both Infratek Sikkerhet AS and Infratek Säkerhet Sverige AB are classifised as discontinued operations due to the disposal in June 2014, see note 25.
NOTE 25
DISCONTINUED OPERATIONS
     
Discontinued operations in 2013 and 2014
   
On 30 June 2014, the Group disposed of the business area Security – Technical Solutions, while the company Eiendomssikring AS was disposed of on 30 September 2013. Both operations are recognized as discontinued operations from their respective dates of disposal, and comparable income and cash flow figures have been restated accordingly. Profit or loss from and gain on disposal of the business area are recognized on the line “Profit for the period from discontinued operations” in the consolidated income statement.
     
The tables below shows profit or loss and net cash flow from discontinued operations for the year 2014 and for the period 25 June - 31 December 2013. The business area Security - Technical Solutions is included in both periods while the company Eiendomssikring AS is only included in 2013. See below for condensed information on the profit and loss amounts that are included in the table for Eiendomssikring AS in 2013.
     
Profit (loss) from discontinued operations
25 June -
 
31 December
Amounts in NOK million
2014
2013
Operating revenues
122
131
Purchased materials
-52
-56
Salaries and other personnel expenses
-46
-50
Depreciation
-1
-1
Other operating expenses
-22
-27
Operating profit
1
(3)
Financial revenues and expenses
-
-
Profit (loss) before tax
1
(3)
Tax expense
-
-
Profit (loss) for the period
1
(3)
Gain on disposal of discontinued operations
34
5
Profit for the period from discontinued operations
35
2
     
Net cash flow from discontinued operations
25 June -
 
31 December
Amounts in NOK million
2014
2013
Net cash flow from operating activities
-5
8
Net cash flow from investing activities
10
8
Net cash flow from financing activities
20
0
     
     
Disposal of the business area Security - Technical Solutions
On 30 June 2014, the Group disposed of the business area Security – Technical Solutions for a consideration of NOK 55.0 million. The tables below specify the calculation of gain on disposal in addition to the net cash flow impact from the transaction.
     
Carrying amount of assets and liabilities in Security - Technical Solutions as of 30 June 2014:
Amounts in NOK million
2014
 
Non-current assets
7
 
Inventories
18
 
Accounts receivable and other receivables
65
 
Cash and cash equivalents
17
 
Pension and other liabilities
(5)
 
Long-term debt
(26)
 
Accounts payable and other liabilities
(52)
 
Carrying amount of disposed assets and liabilities
24
 
Total consideration
55
 
Accumulated exchange differences reclassified to profit or loss on disposal
3
 
Gain on disposal of Security - Technical Solutions
34
 
     
Net cash inflow on disposal of Security - Technical Solutions
   
Amounts in NOK million
2014
 
Proceeds from disposal *)
0
 
Cash and cash equvalents in Security - Technical Solutions
(17)
 
Net cash inflow on disposal of Security - Technical Solutions
(17)
 
     
*) The disposal was settled as a non-cash transaction in connection with settlement of debt.
 
     
Disposal of Eiendomssikring AS
 
With effect from 30 September 2013, the subsidiary Eiendomssikring AS was sold for a consideration of NOK 24.5 million.
     
The tables below specify the calculation of gain on disposal in addition to the net cash flow impact from the transaction.
     
Carrying amount of assets and liabilities as of 30 September 2013:
Amounts in NOK million
2013
 
Goodwill
14
 
Inventories
8
 
Accounts receivable and other receivables
4
 
Cash and cash equivalents
3
 
Accounts payable and other liabilities
(9)
 
Carrying amount of disposed assets and liabilities
20
 
Consideration including sales cost
25
 
Gain on disposal of Eiendomssikring AS
5
 
     
Net cash inflow on disposal of subsidiary Eiendomssikring AS
   
Amounts in NOK million
2013
 
Selling price *)
15
 
Cash and cash equvalents in Eiendomssikring AS
(3)
 
Net cash inflow on disposal of Eiendomssikring AS
12
 
     
*) At the date of disposal, 30 September 2013, Infratek Sikkerhet AS received NOK 15 million in consideration. The remaining consideration amount of NOK 9.5 million was received on 1 March 2014. Infratek Sikkerhet AS is a part of the business area Security - Technical Solutions which was disposed of in 2014 and which is also classified as a discontinued operation. See earlier in this note for more information on this disposal.
 
     
Profit or loss from discontinued operations (Eiendomssikring AS)
25 June -
 
 
30 September
 
Amounts in NOK million
2013
 
Operating revenues
7
 
Operating profit
1
 
Tax expense
-
 
Profit for the year
1
 
Gain on disposal of Eiendomssikring AS
5
 
Profit for the period from discontinued operations
6
 
NOTE 26
PROVISIONS
Spesification of provisions
   
Amounts in NOK million
2014
2013
Guarantee commitments
-
1
Accruals for building rent obligations
19
19
Total provisions
19
20
     
In 2009, the Group entered into a ten year lease for Breivollveien 31 (Oslo). As a result of sale of entities and other organisational changes, parts of these premises are neither in use nor sublet as per 31 December 2014. The vacant office space and related costs are assessed to fulfill the criteria of a loss making contract.
     
Infratek has since 2010 subleased the 3rd floor of the same premises at Breivollveien 31 (Oslo). As the sublease contracts are signed at a price lower than the Group's overall leasing contract, the Group has made an accrual for loss-making sublease contracts. After the disposal of Security - Technical Solutions in 2014, the Group signed a sublease contract with Infratek Sikkerhet AS. This contract has been added to the accrual per 31 December 2014 with an effect on loss of NOK 5 million.
     
The best estimate on the loss accrual related to the lease contract for Breivollveien 31 (Oslo) is NOK 25 million at the end of 2014 (NOK 24.5 million at the end of 2013), of which NOK 6 million (NOK 5 million) are classified as short-term, and the remaining NOK 19 million are classified as a long-term liability.
NOTE 27
CONTINGENT LIABILITIES
     
Contingent liability regarding Norwegian and Finnish employees
There is a contingent liability with respect to 45 employees of Infratek’s Finnish subsidiary Infratek Finland Oy, who were previously members of Fortum Pension Foundation, should they be made redundant by the company. In the event that they are made redundant, Infratek Finland Oy is obligated to compensate for any difference between estimated defined pension benefits according to the defined benefits based supplementary pension agreement and accrued pension entitlement under the mandatory service pension scheme. The size of the amount depends on whether or not the employee continues to accrue pension rights in the mandatory service pension scheme after their redundancy. This contingent liability is estimated at between EUR 6,000 and EUR 7,000 per employee per year. The amount cannot be calculated exactly until the ordinary pension period begins. As of 31 December 2014, the average age of these 45 employees was approximately 59.
 
Infratek Service AS, which was merged with Infratek Entreprenør AS in 2009, acquired 25 employees from Halden E-verk in 1992. These employees were transferred to KLP in 1992, but have earned pension rights in the Halden Kommunale Pensjonskasse. Since the acquisition, no demands concerning adjustment premiums or similar have been received from Halden Kommunale Pensjonskasse. On this basis, Infratek Entreprenør AS does not consider itself to have any liabilities linked to Halden Kommunale Pensjonskasse.
           
Bank and group guarantees
The Group purchases bank guarantees as security for certain liabilities. Per 31 December 2014, these bank guarantees amounted to NOK 166.3 million including NOK 25.5 million in tax deduction guarantees and NOK 140.8 million in project guarantees. Corresponding guarantees in 2013 were NOK 30.3 million and NOK 136.0 million, respectively.
           
Additionally, Group guarantees adding up to a total of NOK 66.2 million were made whereas the corresponding amount made last year was NOK 61.3 million. See Note 12 for information regarding guarantees related to the Group account system.
           
Contingent guarantee liabilities
         
The Group has posted an accrual for guarantee commitments for NOK 8.5 million related to the Group's operations in Sweden. The accrual is calculated based on experience and best estimate.
           
Litigation
         
A subcontractor of Infratek Group has during 2014 initiated legal actions against the Group. Infratek has assumed no responsibility and based on best estimate has not made any accruals for potential damages other than litigation cost of NOK 1.8 million. Potential damages are up to NOK 7.2 million if the case is lost.
NOTE 28
COMPANIES INCLUDED IN THE CONSOLIDATION OF THE GROUP
Company
 
Registered business address
Ownership/voting rights 2014
Ownership/voting rights 2013
Infratek Group AS (parent company)
Oslo, Norway
na
na
Infratek AS
Oslo, Norway
100%
100%
Infratek Norge AS
Oslo, Norway
100%
100%
Infratek Sverige AB
Stockholm, Sweden
100%
100%
Infratek Finland OY
Helsinki, Finland
100%
100%
Infratek Mätkontroll Sverige AB
Storvik, Sweden
100%
100%
Infratek Elsikkerhet AS
Oslo, Norway
100%
100%
Infratek Sikkerhet AS 1)
Oslo, Norway
-
100%
Infratek Sikkerhet Danmark A/S 1)
Fredriksværk, Danmark
-
51%
Infratek Säkerhet Sverige AB 1)
Stockholm, Sweden
-
100%
Infratek Security Finland Oy 1)
Helsinki, Finland
-
100%
         
1) These companies were a part of the Security - Technical Solutions business area that was disposed as of 30 June 2014. See note 25 for more information about the disposal.