Annual Report (ESEF) • Feb 21, 2024
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Download Source FileUntitled Annual Report 2023 Brødrene A & O Johansen A/S Rørvang 3, DK-2620 Albertslund, Denmark CVR no. 58 21 06 17 Contents In brief 4 Our purpose 5 At a glance 6 Performance highlights 7 ESG highlights 8 Letter from the CEO 9 Highlights of the year 10 Five year summary 11 Outlook for 2024 Strategy 13 Business model 14 Industry and market trends 15 Corporate strategy 17 Strategic ambitions 18 Sustainability Performance Gaining market shares in challenging market conditions 24-29 → Business model AO's omni-channel business model secures a coherent customer experience for all customers across touchpoints. → Follow us → AO in brief. → 3 Business model and strategy. → 12 Performance 25 Financial results 27 Q4 financials 28 B2B performance 29 B2C performance Corporate governance 31 Risk management 34 Corporate Governance 36 Board of Directors 41 Executive Board 42 Shareholder information Financial statements 46 Consolidated financial statements 96 Parent company financial statements Statements 127 Management’s statement 128 Independent auditor’s report 132 Company information Performance Corporate governanceStrategy Financial statementsIn briefAnnual Report 2023 In brief 4 Our purpose 5 At a glance 6 Performance highlights 7 ESG highlights 8 Letter from the CEO 9 Highlights of the year 10 Five year summary 11 Outlook for 2024 Situated in Albertslund the automated central warehouse is able to service the store network in Denmark as well as in Sweden. Annual Report 2023 Our purpose AO was founded in 1914 with the purpose of creating value for our customers. The purpose is at least as relevant now as it was 110 years ago. In AO, we lend a hand. We are determined to contribute to making our customers' lives easier. No matter the market conditions or the current mega trends, walking an extra mile for the customer will always be the AO way. AO is proud to be part of the customer team! Financial statementsPerformance In brief Corporate governanceStrategyAnnual Report 2023 B2B 88.5% Serving the construction industry and professional tradesmen B2C 11. 5% Serving private DIY consumers At a glance Segments DK East 29 DK West 28 Sweden 5 B2C Webshops Our long-term ambitions Beat the market by 2% year by year EBITDA margin of 10% 8,000 daily customer interactions in the stores BilligVVS.dk BilligVVS.no CompletVVS.dk Greenline.dk LampeGuru.dk LampeGuru.no LavprisEL.dk LavprisVVS.dk LavprisVærktøj.dk Ljusochlampor.se VVSochBAD.se Stores Solvency 40%+ and capital structure (gearing 1.0 - 2.5) Performance In brief Corporate governanceStrategy Financial statementsAnnual Report 2023 3,583 857 282 576 2019 2019 2019 2019 4,098 946 328 618 2020 2020 2020 2020 4,800 1,119 417 702 2021 2021 2021 2021 5,375 1,310 492 819 2022 2022 2022 2022 5,261 1,234 405 829 2023 2023 2023 2023 4.9 7.9 % 23.9% 16.1% 5.5 8.0% 23.1% 15.1% 6.1 8.7% 23.3% 14.6% 6.0 9.1% 24.4% 15.2% 5.8 7.7% 23.5% 15.8% Performance highlights Revenue (MDKK) Gross profit (MDKK) EBITDA (MDKK) Cost of doing business Gross proft Gross profit margin EBITDA Margin Cost of doing business Cost of doing business ratio Net revenue Revenue per employee Performance In brief Corporate governanceStrategy Financial statementsAnnual Report 2023 Electricity Heating Company cars/ forklift trucks 2020 Baseline 2,2 32 tons CO 2 827 tons CO 2 774 tons CO 2 631 tons CO 2 870 tons CO 2 694 tons CO 2 674 tons CO 2 910 tons CO 2 654 tons CO 2 612 tons CO 2 500 tons CO 2 689 tons CO 2 412 tons CO 2 2,238 tons CO 2 2, 211 tons CO 2 1,566 tons CO 2 2021 2022 2023 Scope 3 results overview t CO 2 e 17% Asia <1% Other countries 83% of our purchases originates from Europe 79% Cat 11 - Use of Sold Products 18% Cat 1 - Purchased G&S 2% Cat 4 - Upstream transportation 1% Cat 9 - Downstream Transportation & Distribution ESG highlights Carbon emissions for scope 1 and 2 Scope 3 baseline established: Use of products is the main contributor to our scope3 emissions Purchasing patterns: Performance In brief Corporate governanceStrategy Financial statementsAnnual Report 2023 At AO, we have taken important steps to make our EA product range available nationwide. When we acquired EA in 2022, the product range was sold through 7 outlets, 6 of which were in the western part of Denmark. At the end of 2023, EA's range is included in another 7 outlets, 5 of which are in the eastern part of Denmark. We are satisfied with the progress and look forward to continuing the roll-out during 2024. Step by step we have seen the synergies from the new shuttle system at our central warehouse kick in, and we are satisfied to observe that our picking capacity has increased significantly. Our central warehouse is ready to support future growth in AO. In times where competitors are closing outlets, AO has continued to invest in ensuring that customers have access 24/7 to appealing stores with the widest possible range of products. We will continue to upgrade our store network during 2024. In addition to offering the best network of stores, we continue to make it easier for our customers to do busi- ness with AO. We provide a range of digital sales chan- nels which are increasingly popular with our customers. Today, AO is an efficient omni-channel business with our nationwide physical store network being combined with innovative digital solutions. We have implemented several sustainability initiatives alongside preparing for future sustainability reporting requirements. AO remains committed to reducing our Letter from the CEO AO has continued its strategic execution during a challenging 2023 own carbon impact by half by 2025, staying on track as planned by the end of 2023. Last but not least, our skilled and highly motivated colleagues continue to be a competitive advantage. Customers can rely on being served by capable employees who willingly go the extra mile. Similarly, AO's sales team can trust that their colleagues across the organisation will support them to better serve our customers. The competition is expected to be fierce in 2024. Demand is anticipated to fall short of wholesale capacity. AO remains selective in bidding for projects with unattractive gross margins but is committed to being active in the project market despite the tough conditions. The future market and customers will require whole- salers to take responsibility for leading the way in promoting and advising customers regarding the green transition and raising the bar in offering increased convenience to customers. This will be another way of lending a hand, and AO will invest in ensuring it is a future leader in these capabilities. The market conditions are expected to put increased pressure on margins and increase the cost of doing business in 2024. Investing in being the winner of tomorrow will always be more important than short- term profit optimisation for AO. While 2023 did not meet our expectations and 2024 may present challenges, our focus is not to merely win one quarter or one year. Our priority is to serve our customers and make decisions based on our customers' needs. We believe this approach positions us well to succeed in the future. Best regards Niels A. Johansen, CEO Performance In brief Corporate governanceStrategy Financial statementsAnnual Report 2023 Highlights of the year As expected, 2023 proved to be a challenging year for the market. Overall demand lowered in the second half of the year, and cost inflation continued to put pressure on earnings. AO took strategic steps to prepare for the future and continued to gain market shares in a competitive market. At the end of 2023, EA's product range was rolled out to 7 additional outlets, whereof 5 are in the eastern part of Denmark. We are satisfied with the execution and are looking forward to contin- uing the roll out during 2024. Step by step we have seen how the new shuttle synergies kicks in, and we are satisfied to observe that the picking capacity has increased significantly. The central warehouse is ready to support future growth in AO. Our new flagship store in Aarhus opened on 2 November 2023, and only two weeks later, our store in Roskilde re-opened after having been enlarged and refurbished. We have dedicated ourselves to ensuring the successful implementation of the new CSRD reporting starting in 2024. Moreover, our ongoing commitment includes advancing efforts to halve our scope 1 and 2 carbon footprint by 2025. Our commercial digitalisation team and our IT organisation have moved closer together in order to further strengthen our efforts to provide our customers with the best and the most innovative digital solutions. AO has continued to gain market shares in 2023 and is in a good position to continue doing so in the future. Performing well in a challenging market Performance In brief Corporate governanceStrategy Financial statementsAnnual Report 2023 Five year summary (mDKK) 2023 2022 2021 2020 2019 Key figures Revenue 5,261.0 5,375.0 4,800.5 4,098.3 3,582.7 Gross margin 1,234.3 1,310.3 1,119.3 945.7 857.4 Earnings before interest, taxes, depreciation and amortisation (EBITDA) 405.3 491.6 417.2 328.2 281.6 Operating profit or loss (EBIT) 292.2 383.6 316.7 223.8 175.9 Financial income and expenses, net (30.4) (6.1) 9.4 (3.0) (6.4) Profit or loss before tax (EBT) 261.8 377.4 326.1 220.8 168.4 Tax on profit or loss for the year (55.7) (83.0) (72.3) (47.9) (37.4) Net profit or loss for the year 206.1 294.5 253.8 172.9 131.0 Non-current assets 1,805.9 1,727.3 1,472.7 1,320.0 1,349.2 Current assets 1,436.5 1,591.0 1,235.9 1,063.2 957.5 Total assets 3,242.4 3,318.3 2,708.5 2,383.2 2,306.7 Share capital 28.0 28.0 28.0 28.0 28.0 Equity 1,475.3 1,4 07.5 1,239.9 1,030.2 870.3 Non-current liabilities 535.2 539.5 295.9 330.6 337.4 Current liabilities 1,231.9 1,371.4 1,172.7 1,022.4 1,099.0 Cash flow from operating activities 346.4 215.8 308.1 375.4 302.7 Cash flow from investing activities (130.2) (333.3) (212.7) (66.3) (52.7) Of which investments in property, plant and equipment, net (94.8) (164.5) (170.5) ( 37.3) (26.1) Cash flow from financing activities (161.7) 15.5 (91.6) (256.2) (186.2) Cash flow for the year 54.5 (102.0) 3.7 52.8 63.8 2023 2022 2021 2020 2019 Financial ratios Gross profit margin 23.5% 24.4% 23.3% 23.1% 23.9% EBITDA margin 7.7% 9.1% 8.7% 8.0% 7.9 % Profit margin 5.6% 7.1% 6.6% 5.5% 4.9% Return on capital employed 8.9% 12.7% 12.4% 9.5% 7. 9% Return on equity 14.3% 22.2% 22.4% 18.2% 16.1% Net gearing 1.3 1.1 0.5 0.8 1.8 Solvency ratio 45.5% 42.4% 45.8% 43.2% 37.7 % Book value 52.7 50.3 44.3 36.8 31.1 Share price at the end of the year 70.3 83.11 136.00 60.40 34.80 Price Earnings Basic (P/E Basic) 9.3 7.7 14.6 9.4 7.3 Dividend per DKK 1 share ** 3.75 5.25 4.5 1.5 0.6 Earnings per share (EPS Basic), DKK ** 7.6 10.8 9.3 6.4 4.8 Diluted earnings per share (EPS-D), DKK ** 7.6 10.8 9.3 6.4 4.8 Number of employees (FTE average) 912 889 784 741 734 Number of employees excluding temporary workers (FTE average) 841 822 705 678 683 Number of employees at year-end (FTE) 833 850 734 686 678 Basic EPS and diluted EPS have been calculated in accordance with IAS 33. Other financial ratios have been prepared in accordance with the CFA Society Denmark's "Recommendations and Financial Ratios". See definition of key figures on page 94 * Financial ratios for the respective periods have been restated retroactively for the share split. ** Comparrative figures related to shares have been restated to reflect share split in 2022. Performance In brief Corporate governanceStrategy Financial statementsAnnual Report 2023 Outlook for 2024 Sensitivity to the outlook for 2024: Geopolitical and macroeconomic tensions brings higher uncertainty to estimates than normally. Continued change in the geopolitical and macroeconomic climate, supply disruptions and devel- opments in raw material prices and interest rates may impact outlook for 2024. Organic growth and gross margins are sensitive to revenue mix from ReMoVe versus projects and to price pressure driven by competition. Follow-up on previously announced outlook for 2023 AO delivered a growth in revenue of -2%. The negative growth was expected due to market slowdown. AO continued to gain market share during 2023. It's AO's ambition to reach an annual growth which is at least 2% higher than the market growth. An EBITDA for the year of DKK 405m corresponding to 7.7% of net sales for the year, and profit before tax of DKK 262m, corresponding to 5.0% of net sales of DKK 5,261m are in line with the latest outlook announced as at 26 October 2023, of net sales of DKK 5,150 – 5,300m, an EBITDA of DKK 400 – 430m and a profit before tax in the order of DKK 260 – 290m. 2024 outlook AO is in a good position to grow the business. Partly due to the current momentum in AO and partly due to market opportunities for instance in expanding the EA product range nationwide, expanding activities within green transition, expanding the geographical footprint in AO Sweden and by seeking M&A opportunities. The market activity slow down that kicked in mid-2023 is expected to continue in 2024. The negative growth is expected to be approximately 10-15% at the beginning of the year. Market activity is expected to gradually increase during 2024, and is expected to show a higher sales index than in the first quarter of the year. While the market growth for the full year is expected to be approximately -3% to -7.5% the AO momentum and the growth within the EA product range is expected to mitigate the market reduction, and thus AO is expecting revenues 1-5% shy of 2023. Given that demand will fall short of wholesale capacity, the competition is expected to be fierce and put pres- sure on gross profit margins. AO will continue the tight cost management but is committed to invest in addi- tional competencies within green transition and climate as well as other focus areas. AO will be continuing the investments in digital solutions, logistics and our outlets. The investment level in 2024 is expected to be approximately DKK 150 - 200m to facilitate the longer term growth. Based on the above estimates and assumptions, AO expects a revenue of DKK 5,000-5,200m, an EBITDA in the range of DKK 340-370m, an an EBT in the range of DKK 200-230m. Estimated earnings for 2024 does not reflect the longer term potentials and ambitions for AO. The 2024 guidance is as follows 2023 Revenue, (mDKK) 5,261 EBITDA, (mDKK) 405 EBT, (mDKK) 262 Outlook 2024 5,000 – 5,200 Growth -5.0% to -1.2% 340 – 370 EBITDA margin 6.5% to 7.4% 200 – 230 EBT margin 3.8% to 4.6% Performance In brief Corporate governanceStrategy Financial statementsAnnual Report 2023 Strategy 13 Business model 14 Industry and market trends 15 Corporate strategy 17 Strategic ambitions 18 Sustainability Using the AO app AO's customers are able to do their business with AO efficiently. Digital share of sales continue to increase. Annual Report 2023 B r a c k e t s T o o l s W a t e r s u p p l y D r a i n & S e w a g e E l e c t r i c a l S a n i t a r y w a r e s H V A C S u p p l i e r s C e n t r a l W a r e h o u s e B 2 C S h o w r o o m s B 2 C W e b s h o p s B 2 B I n t e g r a t i o n B 2 B A p p & W e b s h o p s C a l l c e n t e r P r o j e c t s a l e B 2 B S t o r e s S a l e s c h a n n e l s A e r s a l e D e l i v e r y A O 3 6 5 S u s t a i n a b i l i t y S a l e A d v i c e I n s p i r a t i o n S e r v i c e s The customer is at the centre of everything that we do at AO and has been at the core ever since we were founded Tradesmen B2B Construction B2B AO employee Consumers B2C Business model AO's omni-channel business model secures a coherent customer experience for all customers across touchpoints. AO works with more than 1,000 suppliers and is continuously expanding our range of products to target more customers and support one-stop-shopping. The automated central warehouse in Albertslund and the logistics centre in Horsens are corner stones in AO. 90% of all products are picked automati- cally, thus ensuring both high service quality and efficiency. AO's product range and service are promoted across a number of different sales channels that support the individual customer's preference. AO is providing the best of two worlds via value-added digital services and close customer relations through our local stores. Modern wholesaling is a matter of offering the right products at the right prices and making customers’ lives as simple and as flexible as possible. The AO365 concept is one such example. With AO365, customers hold a digital key to all AO stores, - securing both convenience and flexibility for the individual customer. 1. Suppliers More than 1,000 suppliers provide the widest product range in the wholesale business 3. Sales channels Omnichannel business with 57 physical stores in Denmark and five in Sweden enabling 8,000 daily customer interactions. Digital share of sales makes up 50% of revenue. B2C customers are served out of 10 unique webshops 2. Central warehouse Automated warehouse solution ready to serve growth. 600,000 SKUs available for sale 4. Services As a true omnichannel business AO offers a wide range of services from selfservice through AO365 to advanced project advice via our compentency centres Financial statementsPerformanceIn brief Corporate governance Strategy Annual Report 2023 Industry and market trends AO's strategy is shaped by the prevailing megatrends that exert influence on the current market landscape. These trends present both challenges and significant opportunities for AO's business development. The dominant themes within these market trends revolve around the green transition, climate changes, and the escalating pace of digitalisation. These trends have been categorised into five megatrends that steer our strategic focus areas. Green transition The green transition megatrend symbolises a global shift toward sustainability and eco-conscious practices across industries. It encompasses renewable energy adoption, resource efficiency, and circular economy principles. Consumers increasingly support eco-friendly products and services, driving market demand. 2022 and 2023 have shown that energy prices are a major driver behind green transition demand. AO has a wide range of products that directly service the green transition. In addi- tion, AO aims to be the wholesale company with the best and most accurate data on the environmental impact of our products enabling our customers to make informed choices in their purchases. Digitalisation The digital agenda provides opportunities for efficiency gains but also requires compa- nies to serve their customers with data and enable them to make data-driven decisions. AO has been at the forefront of digitalisation and will continue to be so. Providing our customers with accurate data on the prod- ucts – including ESG data will be a key point in being the best partner for our customers. RPA and AI bring new opportunities for efficiencies. Consolidation Installers are increasingly joining forces either by mergers or by joining purchasing organisations. The consolidation is happening within and across installer segments. Larger groups of installers seek to use their purchasing power to get better terms as well as their larger flexibility to serve a broader range of customers. AO has good and long experience in working with various purchasing organisations and is in a good position to service these organi- sations via our omni-channel offerings. Climate change As part of the climate change adaptation in both Denmark and Sweden there is a need for investments in the water infrastructure. In both countries Sewage & Drainage as well as Water Supply in general are due for an overhaul. AO is in a good position to deliver into these projects. Electrification The electrification agenda is a pivotal shift toward cleaner energy sources, driving inno- vation and sustainability. It encompasses electrifying transportation, revolutionising industries, and advancing renewable energy infrastructure. AO plays a part in the electrification agenda by supplying electrical components, cables, EV chargers, and solar panels. Financial statementsPerformanceIn brief Corporate governance Strategy Annual Report 2023 We lend a hand The Group’s strategy is to serve the professional market via AO in Denmark and Sweden and to serve the private markets in Denmark, Norway and Sweden via our portfolio of differentiated webshops run on a common platform. In the professional market, it is AO’s ambition to be the trademens' and large construction customers' preferred supplier of technical installation materials. As a rule of thumb, the ReMoVe market represents about 70%, while project sales represent about 30%. Corporate strategy At AO, the customer is at the heart of everything we do and develop. We want to create value for our professional and private customers. That’s something we aim to do every single day, and why we say: “We lend a hand”. It builds on AO's genuine and heartfelt interest in understanding the present and future needs of our customers and being able to help them. Part of the team AO is as much a sparring partner as a wholesaler. And we are proud to be part of the team when the tradesmen reno- vate, modernise and maintain Denmark. It is our strategy to remain the leader in the ReMoVe business by continuing the development of the value creation in our omni-channel offerings. Towards common goals AO's projects department creates a secure framework for large construction projects. We are not only focused on the offer, but also on ensuring that your project gets done better, cheaper and faster. It is our strategy to become one of the best partners to construction customers, by developing new digital support services. It pays to start in the right place AO has the industry's most complete B2C offer within simple home improvements and DIY. We are close to the customers with all the inspiration, advice and service they need. It is our strategy to remain the onlineleader in DIY, by contin- uing to offer new product ranges and solutions, and thus making DIY easier. Actively contributing to a sustainable world AO wants to be the leading green whole- saler to the construction industry and make it easy for all installers to comply with climate requirements, and to ensure a minimal environmental impact. AO wishes to help promote a sustainable world by supporting and contributing to a sustainable construction sector. Financial statementsPerformanceIn brief Corporate governance Strategy Annual Report 2023 “ Our strategy is to continue to innovate and develop our omni-channel offer- ings – a hybrid business strategy, embracing the human touch in physical and digital touchpoints and securing efficiency, flexibility and scalability via digitalised stores and harvesting the best of two worlds. We will continue to expand our product range and utilise it across target groups. We aim to increase the business in Sweden too as we see a strong potential for organic growth. The major construction customers are served via our Group projects depart- ment with competencies targeting the special needs of the construction industry. We will increase both the digital, logistics and advisory services, and we will make it easy to comply with the increasing sustainability needs and requirements. In the private DIY market, it's AO’s ambition to be the leading online trading platform for the sale of technical home improvement materials in Denmark and one of the leading online platforms in Sweden and Norway. We will continue to evaluate opportunities within M&A in both B2B and B2C. At AO, we believe that everyone has a duty to manage available resources and opportunities in a responsible way, ensuring the best possible condi- tions for the next generation to build on. That is why we take responsibility through our climate goals: to reduce CO 2 by 50% by 2025 in compliance with GHG Protocol scope 1 and 2, and to make AO carbon neutral by 2030. At AO, the customer is at the heart of everything we do and develop. We want to create value growth for our professional and private customers. That's something we aim to do every single day, and why we say: "We lend a hand". Financial statementsPerformanceIn brief Corporate governance Strategy Annual Report 2023 Strategic ambitions Profitable growth · It is a strategic priority for AO to maintain and expand the industry's best B2B opportunities and the market's best B2C opportunities. · The pressure on profit margins is estimated to increase in the future, but AO will pursue a profitable growth via an ambitious and data-driven purchasing and pricing strategy. · AO has the widest installer coverage with increasing cross-sell across product categories. New growth opportunities await in new business segments and in AO Sweden. · AO´s omni-channel strategy secures both digital efficiency and close customer relations · It´s AO´s ambition to beat the market with a minimum of 2% each year via organic and acquisitive growth High efficiency · It´s AO’s ambition to continue to optimise internal and external processes, so that we use our skills for the complex task that make a difference for our customers and automate simple manual tasks. · AI has been heralded as the most important technology of our time. We believe in a proactive approach to the use of artificial intelligence across AO. · AO has made substantial investments in optimising efficiency and increasing capacity at the central warehouse in Albertslund and the Logistics Centre West in Horsens. We will continue to exploit these synergies. · It's our ambition to have the highest efficiency in the market and to reach an EBITDA margin of 10%. Solid foundation · AO must attract and retain the industry's best employees with high agility, professionalism and well-being. · At AO, we have the best team in the industry. An organisation rounded out by AO's culture and with the industry's most loyal and experienced employees. The most important thing for AO's future competitiveness is the employees. · IT plays a decisive role in AO's transformational power. It is crucial that AO has an IT landscape that is agile, scalable and future-proof, so that we can use as many resources as possible on development rather than operation. · AO has a strong balance sheet and a robust capital structure, enabling AO to resist headwind and to seize opportunities. End of 2023 the debt consists solely of mortgage debt and lease liabilities. To make sure that AO has the flexibility to act on potential M&A opportunities, the Board has decided to change the gearing target from 0.5-1.5 times EBITDA to 1.0-2.5 times EBITDA. Financial statementsPerformanceIn brief Corporate governance Strategy Annual Report 2023 “ Brødrene A & O Johansen A/S Rørvang 3, 2620 Albe rtslund, Den mark CVR-no. 58 21 06 17 Statutory Repor t on Corporate Social Responsibilit y, cf. Section 99a of the Danish Financial St atements Act Sustainability Report 2023 Sustainability At AO, we believe that everyone has a duty to manage available resources and opportunities in a responsible way, ensuring the best possible conditions that the next generation can build on. AO wants to help make our world sustainable by supporting and contributing to a sustainable society by focusing on climate and the environment, social issues and governance based on integrity and fairness. Responsibility and integrity are an integral part of the AO culture and are expressed in our dealings with customers, suppliers and business associates, in the daily management of our employees and our cooper- ation with the society that we are part of and want to contribute to. AO supports and respects the Ten Principles of the UN Global Compact on human rights, workers’ rights, the environment and anti-corruption in all aspects of our company’s business, and we support the UN Global Goals with specific actions in respect of selected Global Goals. The full statutory report on corporate social responsi- bility/ESG for the 2023 financial year, under Section 99a of the Danish Financial Statements Act and the EU Taxonomy Regulation, can be viewed or downloaded at https://ao.dk/globalassets/download/regnsk- absdata/2023/esg_report_2023.pdf AO’s policy for corporate social responsibility has been approved by the Board of Directors and can be viewed or downloaded at https://ao.dk/om-ao/investor-rela- tions/in-english/company-profile/policy-for-csr-2023 Environment and climate AO focuses on continuous improvement of its envi- ronmental and climate initiatives. As a company, AO wishes to protect our environment and climate and is so striving to remain at the cutting edge of developments in the fields prioritised by AO as focus areas, so that society can evolve on a sustainable basis. Our focus areas are: · waste – reduction and recycling · energy consumption – reducing our consump- tion of electricity and heating and the use of fossil fuels · transport – reducing its volume and environ- mental impact. As an IT and logistics company selling a variety of goods to tradesmen, and with very limited in-house production via our activities at Vaga Teknik, our direct and indirect carbon footprint is limited (scope 1 and 2), amounting to 1,566 tons of CO 2 in 2023. → Sustainability report 2023 https://ao.dk/globalassets/download/regnsk- absdata/2023/esg_report_2023.pdf Financial statementsPerformanceIn brief Corporate governance Strategy Annual Report 2023 CO 2 emission CO 2 emission 50% reduction 2,232 50% 2020 2025 AO to be carbon neutral by 2030 As an IT and logistics company selling a variety of goods to tradesmen, and with very limited in-house production via our activities at Vaga Teknik, our direct and indirect carbon footprint is limited (scope 1 and 2), amounting to 1,566 tonnes of CO 2 in 2023. Although our CO 2 emissions are modest compared to the size of the company, we have set an ambitious target to reduce our CO 2 emissions by at least 50% by 2025 and to be CO 2 neutral on scope 1 and 2 emissions by 2030. Scope 3 and SBTi AO has established a scope 3 CO 2 emissions baseline for our operations and value chain. Based on a 2022 baseline, we committed to the Science Based Targets initiative (SBTi) in 2023, and we are currently awaiting SBTi's approval of both our near-term and net zero targets. Electricity Heating Cars/trucks 0 2030 CO 2 emission Carbon neutral * Our carbon footprint is calculated according to the environmental declaration on scope 1 and 2 emissions. Calculated according to the electricity declaration, our climate footprint amounts to 3,118 tonnes of CO 2 . Financial statementsPerformanceIn brief Corporate governance Strategy Annual Report 2023 People Our highly skilled and motivated staff is our greatest asset and forms the foundation of our success and performance. This is why AO seeks to ensure a respon- sible, safe and healthy working environment that promotes the welfare of our colleagues across AO. We focus on: · welfare and retention · development and training · sick leave and occupational accidents. It is important for us to focus on continuous devel- opment of the personal and professional skills of our staff, so that we can continue to meet the ever-changing market needs. AO seeks to ensure that the company’s gender compo- sition is reflected in the company’s various manage- ment levels in the long term. AO has defined targets for the gender composition of the senior management body and the underrepre- sented gender at other company management levels and has devised a policy to increase the proportion of the underrepresented gender at other company management levels. Financial statementsPerformanceIn brief Corporate governance Strategy Annual Report 2023 Statutory report on Gender Composition of Management, cf. Section 99b of the Danish Financial Statements Act Pursuant to Section 139c of the Danish Companies Act, Brødrene A & O Johansen A/S (hereinafter called AO) has set target figures for increasing the proportion of the underrepresented gender at the Board of Direc- tors and at the Company’s other management levels and prepared a policy to increase the proportion of the underrepresented gender at the Company’s other management levels. This statutory report on the gender composition of Brødrene A & O Johansen A/S’ management, cf. section 99b of the Danish Financial Statements Act, is part of the Management’s Review in the Annual Report for 2023 and covers the period 1 January – 31 December 2023. Board of directors Our goal is that the Board of Directors is composed in such a way that it is effectively able to perform its tasks related to strategy development, management and control. We will seek to nominate candidates whose profiles and skills are best suited for the Company taking into consideration AO’s present and anticipated future activities, development, and challenges. When candidates for the Board of Directors are to be nomi- nated, gender is considered with due regard to the Company’s other recruitment criteria, including require- ments for professional qualifications, industry experi- ence, educational background, etc. In 2022, the Board of Directors evaluated the compo- sition of the Board and made a recommendation of changing the composition of the Board to maintain and strengthen the Company’s present and anticipated requirements regarding skills and qualifications. In 2022, the Board of Directors had set a target figure of 20% for the underrepresented gender in the Board of Directors. This was fulfilled at the Annual General Meeting in March 2023, and at the end of 2023 the Company's shareholder-elected Board members consisted of: 1 woman and 4 men (2022: 0 women and 4 men). As a result, the Board of Directors decided to set a new target figure of 40% for the underrepresented gender of the Board of Directors, so that the shareholder-elected Board members are to be composed of 2 women and 3 men on or before the Annual General Meeting to be held in 2028. This target figure is higher than the overall composition of men and women in the Company’s workforce. In the light of this, the Board of Directors finds the target figure ambitious but still realistic within the timeframe set. The targets and composition can be illustrated as follows: Board of Directors 2023 Number of Directors 5 Gender composition of women and men 20%/80% Target for percentage of women in the Board of Directors 40% Target year 2028 Other management levels The Board of Directors has prepared a policy to increase the proportion of the underrepresented gender at the Company’s other management levels defined as the Executive Board, functional and regional managers with staff responsibility. The policy can be viewed at: → Statutory report on diversity https://ao.dk/om-ao/investor-relations/in-english/compa- ny-profile/target-figures-and-policies-for-the-gender-composi- tion-of-management_2023 The overall goal of the policy is to create a good and versatile workplace that promotes equal career oppor- tunities for both women and men in AO. Our plan is to work toward and equal gender composition at other * As defined in the Danish Act No. 568 of 10 May 2022. management levels knowing that this may take some time as the general gender composition in the industry is far from equal. At the end of 2023, the gender compo- sition of the Company’s workforce at Group level was 21% women and 79% men (2022: 19% women and 81% men). In 2023, a re-assessment was made to evaluate whether the planned actions and activities are sufficient to reach our target for the proportion of women managers at other management levels of the Company. It is still our assessment that the initiatives will have a positive long-term effect, and therefore we do not, at present, find any cause to change the initiatives to increase the proportion of women at other management levels. In 2023, we have therefore once more focused on the initiatives mentioned below to increase the proportion of women managers: · All management positions are posted internally, and employees are encouraged to apply for them, regard- less of gender. We focus on encouraging qualified candidates of both genders to apply for any position. · A formal recruitment process is followed in connec- tion with the filling of vacant positions at all manage- Financial statementsPerformanceIn brief Corporate governance Strategy Annual Report 2023 ment levels, as it secures the recruitment of the best qualified employee. To secure equal opportunities for both genders, AO focuses on offering its employees flexible schemes for education, training, and personal development. · A good balance between work life and personal life is ensured through staff development interviews, and a clarification of the individual employee’s own wishes for training needs and career development is established. · Appropriate professional and personal skills devel- opment is offered either by means of training, changes in job content, or changed responsibilities in the employee’s current position. There is particular focus on encouraging both genders to develop their own management skills. · The setting of target figures for the gender composi- tion at other management levels. At the end of 2022 and in accordance with the new rules of the Danish Companies Act, AO set a target figure of 15% women at other management levels to be met in 2023. By the end of 2023, the proportion of women at other management levels was 14%. The setting of target figures is a step in the direction towards achieving a gender composition at AO’s other management levels which reflects the overall gender composition in AO. We expect that continued focus on management courses in the coming years will have a positive impact on the proportion of women at other management levels. The targets and composition can be illustrated as follows: Other management levels 2023 Number of managers at other management levels 49 Gender composition of women and men 14%/86% Target for percentage of women 20% Target year 2025 Reporting and reviewing The set target figures are not to be understood as fixed and unalterable quotas, as the most important thing is that the Company’s managers have the necessary skills. Instead, target figures and policy for the gender compo- sition serve to raise awareness of the gender composi- tion in such a way that it becomes a fundamental part of the assessment on an equal footing with professional and management skills, when the Company recruits or appoints managers. The Board of Directors reviews the target figures, the policy, actions, and results once a year to, if necessary, adjust the set target figures and the prepared policy for the development of the gender composition in the Company. Financial statementsPerformanceIn brief Corporate governance Strategy Annual Report 2023 Diversity policy AO also has a diversity policy which is applied in the composition of the company’s management. The statutory report on diversity under section 107d of the Danish Financial Statements Act and the diversity policy can be viewed or downloaded at: → Statutory report on gender composition of management https://ao.dk/globalassets/download/regnskabsdata/2023/ diversity_2023_report.pdf → Statutory report on diversity https://ao.dk/globalassets/download/regnskabsdata/2023/ diversity_2023_report.pdf → Diversity policy https://ao.dk/om-ao/investor-relations/in-english/compa- ny-profile/diversity_policy_2023 Governance We manage and control our business in a responsible manner at AO, ensuring integrity and fairness in the way in which we do business. As regards sustainability, this work is taking place through a well-defined governance structure to ensure it is rooted throughout the AO organisation. Whistleblower In December 2021, we established an internal whistle- blower scheme that allows our employees, Executive Board and Board of Directors to report any reasonable suspicion of serious matters or offences in the workplace. The scheme is administered externally, and an annual assessment is performed to see whether the scheme is working as intended, and whether we wish to extend it so as to include external partners, citizens, etc. The Board will evaluate the potential need to expand the current scheme on an ongoing basis. Green due diligence In 2022, we developed a green due diligence method that will be used going forward to weight the green transition in connection with takeovers on the basis of a double materiality approach, assessing both the impact of the green transition of the takeover target on AO’s financial performance and the environmental impact on the surroundings. Data ethics It is important for AO to ensure that customers, suppliers and other partners can rely on AO’s data processing. Data and the use of new technologies are crucial when supporting our customers and giving them the best experience when they shop with us. Data is also impor- tant when it comes to assessing the digital security of our suppliers and other partners. Furthermore, we want our staff to feel secure when it comes to AO’s processing of their data, which includes ensuring that only necessary information is recorded and used for objective reasons. We established a data ethics task force in late 2021, and the data ethics policy was re-approved by the Board of Directors in 2023. The statutory report on data ethics under Section 99d of the Danish Financial Statements Act can be viewed or downloaded at: → Statutory report on data ethics https://ao.dk/globalassets/download/regnskabsdata/2023/ data_ethics_2023_report.pdf Corporate governance The Board of Directors maintains engaged and active communication on compliance with Recommendations on Corporate Governance (Anbefalinger for god sel- skabsledelse), which leads to changes in the work of the Board of Directors when necessary. It is important for the Board of Directors to ensure that these recom- mendations add value for the company’s stakeholders. That is why we have chosen to follow 33 of 40 recom- mendations in 2023. CSRD readiness In preparation for the CSRD reporting for 2024 the Board of Directors has approved the preliminary double materiality assessment that sets the direction for AO's ESG effforts. More information can be found in the Sustainability Report. Financial statementsPerformanceIn brief Corporate governance Strategy Annual Report 2023 Performance 25 Financial results 27 Q4 financials 28 B2B performance 29 B2C performance The shuttle system installed in the central warehouse in 2022 is now fully operational. The automated ware- house will be able to serve future growth. Annual Report 2023 Financial results Performance Gaining market shares in challenging market conditions Revenue Organic revenue development was -3.3% (7.9%) and revenue for 2023 was DKK 5,261m (DKK 5,375m), in line with our latest outlook in our Q3 report. Second half of 2023 saw decreasing sales in terms of volume but with a high amount of orders and customer visits. The B2C segment returned to positive growth rates in Q4. Gross profit Gross profit ended at DKK 1,234m (DKK 1,310m), corresponding to a gross profit margin of 23.5% (24.4%). Last year the gross profit margin was affected by one-off effects from supplier-driven price increases impacting 2022 margins with approx. 0.8 percentage point. External costs and staff costs In total, external operating costs and staff costs made up 15.8% of revenue (15.2%). Total organic cost devel- opment has been kept stable despite cost and salary inflation. The decreasing average customer order towards the end of the year contributes to driving the cost ratio upwards. In 2023 we achieved an EBITDA result of DKK 405m (DKK 492m) in line with our latest guidance. Organic growth was -3.3% (7.9%) and gross profit margin ended at 23.5% (24.4%) with minimal one-off impacts Financial statements Performance In brief Corporate governance Strategy Annual Report 2023 Year end FTEs were 833 (850). During 2023 the number of FTEs has been reduced as synergies from the EA acquisition are realised. EBITDA EBITDA ended at DKK 405m (DKK 492m), corresponding to an EBITDA margin of 7.7%. (9.1%). Margins were under pressure from cost inflation and limited price increases. In addition the lower B2C share of the revenue results in lower overall margins. The results of the segments is presented in the following pages. Financials Net financials amounted to DKK -30m (DKK -6m). Increasing interest rates as well as a higher average debt level have affected the financials. Earnings before tax (EBT) EBT ended at DKK 262m (DKK 377m). Income tax Income tax amounted to DKK -56m (DKK -83m), corre- sponding to an effective tax rate of 21.3% (22.0%). Earnings after tax (EAT) EAT ended at DKK 206m (DKK 294m). Equity At the end of the year equity amounted to DKK 1,475m (DKK 1,407m). Thus, the solvency ratio at year-end was 45.5% (42.4%) and the target of maintaining a solvency of 40%+ was achieved. Cash flows Average net working capital for the year was 5.8% (3.5%) of revenue. At the end of the year net working capital was 5.6% (6.0%) of revenue. Cash flow from operating activities totalled DKK 346m (DKK 216m). Change in receivables was DKK 85m (DKK -107m) driven by the Q4 activity as well as timing of payments. Change in inventories contributed with a positive cash flow of DKK 100m (DKK -219m). After Q1 an inventory reduction project was started delivering a DKK 172m reduction in inventory in Q2-Q4. Cash flow from investing activities totalled DKK -130m (DKK -333m). 2022 had a high investment level including the acquisition of EA Værktøj. Cash flow from financing activities was DKK -162m (DKK 16m) reflecting a high level of dividend payouts as well as a reduction of the net interest bearing debt. Net interest bearing debt amounted to DKK 522m (DKK 543m) at year end. Financial gearing was 1.3 times EBITDA (1.1 times). At the end of 2023 AO had undrawn credit facilities of DKK 600m. Financial statements Performance In brief Corporate governance Strategy Annual Report 2023 Q4 financials Q4 saw a slow-down of the market compared to previous quarters of 2023. The number of customer visits stayed high, but the average basket size decreased and the anticipated pick up of the market for heating pumps did not take place. Last year, margins and results were helped by reaching stair bonus levels in supplier bonuses which did not happen to the same degree in 2023. Revenue Revenue development was negative by 7.8% resulting in a revenue of DKK 1.361m (DKK 1.476m). The negative revenue development was seen in the B2B segment whereas the B2C segment returned to growth in Q4. Gross profit Gross profit of DKK 318m (DKK 380m) corresponds to a profit margin of 23.4% (25.7%). In 2022 Q4 gross profit was positively impacted by achieving supplier stair bonus levels. The same effect has only been seen to a limited degree in 2023. In addition supplier bonuses have been more evenly distributed over 2023 than in 2022. The effect comparing quarter to quarter is DKK 25m. External expenses and staff costs Tight cost control has contributed to the external expenses and staff cost totalling DKK 222.9m (DKK 240.7m) despite salary and cost inflation. The cost of doing business ratio was therefore kept stable at 16.4% (16.3%). EBITDA EBITDA ended at DKK 95m (DKKK 139m), corresponding to an EBITDA margin of 7.0% (9.4%). Margins were under pressure from cost inflation and limited price increases. In addition a higher level of depreciations and financial items put pressure on EBITDA. Earnings before tax (EBT) EBT of the quarter ended at DKK 58m (DKK 109m). MDKK Q4 2023 Q4 2022 Revenue 1,361.4 1,476.2 Cost of sales (1,043.6) (1,098.6) Gross profit 317.8 377.6 Other operating income 0.4 2.2 Gross margin 318.2 379.8 External expenses (90.1) (107.9) Staff costs (132.7) (132.7) Earnings before interest, taxes, depreciation and amortisation (EBITDA) 95.4 139.2 Depreciation and amortisation (29.6) (26.7) Operating profit or loss (EBIT) 65.8 112.5 Financial income 0.7 0.0 Financial expenses (8.6) (3.4) Profit or loss before tax (EBT) 57.9 109.1 Tax on profit or loss for the year (11.5) (24,2) Net profit or loss for the year 46.4 84.9 Financial statements Performance In brief Corporate governance Strategy Annual Report 2023 B2B performance B2B The B2B segment services the professional tradesmen as well as large construction companies out of 57 stores in Denmark and five stores in Sweden. In Denmark, AO is the wholesaler with the broadest product range serving more trades than our competitors. The B2B segment has roughly 70% of its revenue within repair and maintenance and 30% within projects. In the B2B segment AO has gained market shares in 2023 but was affected by the market decline in Q4. Revenue Segment revenue was DKK 4,659m (DKK 4,736m) for the year and DKK 1,173m (DKK1,301m) for the quarter. The development was in line with expectations from the last outlook. Gross profit Gross profit of DKK 1,070m (DKK 1,129m) corresponds to a profit margin of 23.0% (23.8%). The reduction in margin is related to the large one-off impacts from supplier-driven price increases in 2022. Direct expenses Tight cost control has contributed to direct expenses being kept stable at DKK 486m (DKK 484m) despite 2023 having three months of EA expenses more on the books. EBITDA Segment EBITDA ended at DKK 585m (DKK 646m). Distribution of sales channels MDKK 2023 2022 Q4 2023 Q4 2022 Revenue 4,658.6 4,735.6 1,173.0 1,303.8 Cost of goods sold (3,427.4) (3,440.3) (864.9) (931.7) Product margin 1,231.1 1,295.2 308.0 372.0 Distribution (160.7) (165.8) (41.5) (46.3) Gross profit 1,070.4 1,129.4 266.5 325.7 Direct expenses (485.9) (483.8) (122.4) (145.1) EBITDA before indirect expenses 584.5 645.6 144.1 180.6 Key figures Gross margin % 23.0% 23.8% 22.7% 25.0% EBITDA % 12.5% 13.6% 12.3% 13.9% Physical 57% Digital 43% Financial statements Performance In brief Corporate governance Strategy Annual Report 2023 B2C performance B2C AO is the market leader within online DIY sales in Denmark. Sales are done out of 11 webshops operating on a shared back-end platform. For the year, sales were declining but Q4 saw a return to growth. Scale of the business is even more important in the B2C segment when it comes to profit margins, and it is the ambition to grow the segment both organically and through acquisitions. Revenue Segment revenue was DKK 603m (DKK 639m) for the year and DKK 189m (DKK 172m) for the quarter. During Q4 the B2C segment had a record-breaking sales during “Black Week” boosting revenue but at slightly lower margins. Gross profit Gross profit of DKK 164m (DKK 181m) corresponds to a profit margin of 27.2% (28.3%). The reduction in margin is mainly related to the large one-off impacts from supplier-driven price increases in 2022 but it is still higher than the margins in the rest of the business. Direct expenses The expense level has been under pressure for cost and salary inflation but has been kept stable at DKK 133m (DKK 135m) EBITDA Segment EBITDA ended at DKK 31m (DKK 46m). It is the ambition that the segment EBITDA margin should reach at least 10% which is to be achieved through growing the top line. Number of households serviced MDKK 2023 2022 Q4 2023 Q4 2022 Revenue 602.5 639.4 188.5 172.4 Cost of goods sold ( 387.8) (411.3) (119.9) (105.4) Product margin 214.6 228.2 68.5 67.1 Distribution (50.7) (47.3) (16.7) (13.0) Gross profit 163.9 180.9 51.8 54.1 Direct expenses (133.2) (135.4) (40.3) (42.9) EBITDA before indirect expenses 30.7 45.5 11.5 11.2 Key figures Gross margin % 27.2% 28.3% 27.5% 31.4% EBITDA % 5.1% 7.1% 6.1% 6.5% 432,1872022 448,1702023 Financial statements Performance In brief Corporate governance Strategy Annual Report 2023 Corporate governance 31 Risk management 34 Corporate Governance 36 Board of Directors 41 Executive Board 42 Shareholder information Annual Report 2023 Risk management The identification and management of business risks form part of the annual strategic plan for the Group, which is approved by the Board of Directors. The Executive Board and the Board of Directors also establish the framework for determination of credit risk, currency risk, interest rate risk and liquidity risk. Risk management is an integral part of the business management at AO. We prioritise having the necessary competencies within the business areas in which we operate. A yearly reassessment of risks and methods for risk identification and management is conducted. To define risk appetite and assess risks, risks are mapped in a classical risk model based on probability (frequency) and financial impact. Risk identification The focus of the risk management process is to identify and evaluate opera- tional and strategic risks for AO in the short, medium, and long term. These risks are defined as events or developments that have a significant negative impact on AO's ability to: · achieve profit goals · execute on the strategy · maintain a "license to operate". Both gross risks (inherent risk) and net risks (residual risk) are considered. Gross risks are defined as the product of the consequence and probability of a risk, assuming that no risk mitigation measures are in place. Net risks are the product of the remaining risk after risk-reducing measures. Net risks should align with AO's risk appetite. Risk assessment The significance of risks is assessed as a combination of the probability of the risk materialising and the consequences if it does. The probability is evaluated based on the frequency with which AO expects the risk to occur, while the consequences are assessed on various parameters: · impact on results (direct or indirect financial effect) · impact on reputation · compliance (license to operate, including personal safety). Risk Management The purpose of identifying, assessing, and subsequently managing risks is to reduce net risk to an acceptable level in accordance with the decided level of risk appetite. In the risk management system, we employ four strategies to handle risks: · avoid – cease or make changes to activities that pose risks. · transfer – shift risk to a third party. · mitigate – seek to minimise identified risks to an acceptable level. · accept – monitor risk and create contingency plans if the risk occurs. Dynamic risk adaption Mitigation Devise and implement stra tegies to reduce the impact of risks. Reporting Communication of identified risks and results from analysis to stakeholders. Analysis Evaluation of risk nature, proba- bility, and impact across variuous business aspects. Identification Systematic recognition of potential risks within AO's operations. Ongoing key risk reassessment Tracking Financial statementsPerformanceIn brief Corporate governance Strategy Annual Report 2023 A New entrants in the market B Geopolitical and macroeconomic uncertainty C Credit Management Description A new or existing player is expanding in the Danish market, resulting in increased competi- tion and/or margin pressure, thereby having a negative impact on the profit. Risk of market decline due to geopolitical or macroeconomic uncertainties. Risk of losses associated with extending credit to customers. Impact The risk of increased consolidation in the Danish market creating stronger competitors could mean that AO loses competitive advan- tages and is unable to meet the goal of gaining market share. The result could be lost revenue and earnings. Probability: Medium Impact: Medium Geopolitical uncertainties can lead to macroe- conomic downturns involving inflation, rising interest rates, increasing energy costs, etc. This could impact the construction industry overall and decrease market demand. Probability: High Impact: Medium Customer credits are an established part of the wholesale industry, and the majority of the group's sales are conducted on credit. The risk increases during downturns in the construction industry, where the likelihood of sudden bank- ruptcies among the customer base rises. Probability: Medium Impact: Medium Risk response Mitigation To minimise the potential impact, AO aims to continue making it as easy and transparent as possible for customers to trade with AO. Emphasis on streamlining the supply chain and overhead costs is intended to ensure that AO can remain competitive in terms of pricing, even compared to larger competitors. Acceptance AO acknowledges that the risk cannot be entirely avoided and actively monitors the actions of existing and potential new compet- itors. Acceptance AO acknowledges that the risk cannot be entirely avoided and actively works to monitor market developments. In budgets and fore- casts, AO establishes the foundation for business initiatives. AO aims to have a scal- able business with lower overhead costs than competitors, which can mitigate the impact. Mitigation AO has established a credit policy and contin- uously monitors customers' outstanding balances. Accounts with overdue balances are closed, reducing the risk of further losses. Transfer AO insures larger customer engagements through credit insurance, providing coverage against significant individual losses. Acceptance There is an acceptance of a certain level of risk in customer credits. Net risks are identified and classified High Medium AO's top risks are mapped out in terms of probability and impact. Financial statementsPerformanceIn brief Corporate governance Strategy Annual Report 2023 D Global supply chain E People F IT risks G Cyberattack Description Risk of product unavailability due to supply chain uncertainties. Risk of inability to attract or retain key employees. Additionally, there is a risk of a deficient talent pipe- line for key positions, including top management. Risk of breakdowns in business-critical systems, including the failure to fully leverage IT integrations. Risk of IT breakdown due to a cyberattack. Impact In the event that AO cannot supply the products customers need, there is a risk of losing customers to competitors, ultimately affecting revenue and earnings. Probability: High Impact: High AO's employees are viewed as a key asset and the primary element in 'winning the market,' making the inability to retain employees a significant risk. There is a risk of dilution of the AO culture. The failure to attract and retain the right leaders and specialists can impede both development and daily opera- tions, ultimately affecting the ability to execute the strategy. Probability: Medium Impact: Medium Frequent but short-term IT outages resulting in oper- ational losses, leading to an inability to maintain the desired efficiency and service level for AO's customers. There is a risk that the lack of optimisa- tion in operations could result in productivity loss. Probability: High Impact: Medium Business disruption due to compromised data, de nial-of-service attacks, ransomware etc. are among the consequences of a cyberattack. The duration of such a business disruption can be lenghty and have significant impact on AO's ablility to conduct business. Probability: Medium Impact: High Risk response Mitigation AO collaborates closely with its key suppliers, gaining an understanding of their supply situations. In dialogue with the sales and procurement organisa- tion, min/max inventory levels are established, and shortages are monitored. Where possible, efforts are made to have alternative products and suppliers for essential items. During crisis periods, buffer stocks are built up to ensure AO can fulfill customer orders. Mitigation AO strives to be an attractive workplace with a focus on employee development. Employee satisfaction surveys are conducted, and action plans are imple- mented to address feedback. Goals are set, and turn- over among employees is monitored. For key positions, including top management, active work is done on succession plans, identifying both internal and external candidates for relevant roles. AO has successfully nurtured internal talents, and there is ongoing effort to identify new leadership talents within the sales organisation. Mitigation AO collaborates closely with its key partners and works on expanding a robust IT organisation to support AO's activities. Mitigation AO has established an IT Security Council reporting to AO's management, which provides guidelines for AO's IT security. Business Continuity Plans are in place to mitigate the impact. Transfer AO has obtained insurance coverage against cyberat- tacks, thus reducing but not eliminating the potential impact. High Medium Financial statementsPerformanceIn brief Corporate governance Strategy Annual Report 2023 Group Management Corporate Governance The Board of Directors/Audit Committee and the Executive Board have overall responsibility for the Group’s internal controls and risk management in connection with the financial reporting process, including compliance with applicable legislation and other regulations in relation to financial reporting. AO has established internal control and risk manage- ment systems to ensure that financial reporting is carried out in accordance with IFRS and other accounting regulations applicable to listed Danish companies. In addition, the systems increase the certainty that the internal and external financial reporting provides a true and fair presentation that is free from material misstatement. The Audit Committee monitors the control and risk management systems in the Group on an ongoing basis. In this context, risks that may affect the Group’s financial reporting process are likewise assessed on an ongoing basis. The risk assessment is based on signifi- cant items and other business-critical areas. Recommendations on corporate governance All recommendations have been analysed and consid- ered by the Board of Directors and the Executive Board of Brødrene A & O Johansen A/S, and the Board of Direc- tors is of the opinion that the management of Brødrene A & O Johansen A/S complies with the most important recommendations in the report. The company has opted to implement another approach to seven areas in 2023, which is one fewer than in 2022. Two-tier governance structure Shareholders Board of Directiors Audit Committee Normination Committee Excutive Board Organisation Remuneration Committee Financial statementsPerformanceIn brief Corporate governance Strategy Annual Report 2023 A summary of the seven areas where the Group has chosen to follow a different practice is provided below: · Given the company’s ownership structure, the Board reserves the right to reject takeover bids in certain cases without submission to shareholders. · The Chief Executive Officer is a member of the Board. · General management is carried out by a member of the Board. · 3 out of 5 of the Directors elected by the Annual General Meeting are not independent as they have been members for more than 12 years. · 2 out of 4 of the members of the Audit Committee are not independent. This committee is made up solely of members of the company’s Board of Directors, which is why there is no requirement for independence. · The Chair of the Board is also the Chair of the Audit Committee. · The company has implemented a whistleblower scheme which is available only to the company’s employees, which is compliant with applicable legislation. Brødrene A & O Johansen A/S has prepared a full report on corporate governance for the 2023 financial year under Section 107b of the Danish Financial Statements Act. This can be viewed or downloaded at: → Corporate Governance 2023 https://ao.dk/globalassets/download/regnskabsdata/2023/ corporate_governance_2023e_report.pdf Financial statementsPerformanceIn brief Corporate governance Strategy Annual Report 2023 Board of Directors Brødrene A & O Johansen A/S’ Board of Directors comprises a total of eight members who have been elected to protect the interests of the shareholders as best as possible and to ensure an appropriate and balanced development of the company both in the short and the long term. The Board of Directors oversees the overall and stra- tegic management of the company. · Five members are elected by the General Meeting. The holders of Class B shares have the right to elect one Board member whereas the holders of Class A shares elect the remaining Board members. The election of Board members representing each indi- vidual share class is determined by a simple majority of votes. The Board members resign every year, but re-elections may take place. · In Denmark, the Company’s employees elect three Board members according to the current provisions of the Danish Companies Act. Staff-elected Board members are elected for a term of four years. In addition, the Company’s employees also elect an equivalent number of alternates who are elected for a similar term. Staff-elected Board members have good knowledge of the Company’s activities and contribute in a construc- tive way to the decisions of the Board, and they have the same rights, duties, and responsibilities as Board members elected by the General Meeting. The Board of Directors holds meetings 6-7 times a year. Audit Committee The purpose of the Audit Committee's work is to make an independent assessment of whether the Company's financial reporting, internal control, risk management and statutory audit are appropriate in relation to the Company's and the Group's size and complexity. The Audit Committee has the following tasks: · to monitor and report on the financial reporting process, · to monitor the efficiency of the Company's internal control, internal audit, if any, and risk management systems, · to monitor the statutory audit of the financial state- ments, · to monitor and review the independence of the auditor, including reviewing and approving the nature and extent of the external auditor's non-audit services, · to recommend the appointment of auditors, Meetings The Audit Committee consists of four members who are appointed from and among the Board of Directors. The Audit Committee hold meetings 4-5 times a year. Nomination Committee The Board of Directors has set up a Nomination Committee consisting of two members responsible for performing the following preparatory tasks: · describing the required qualifications for a given member of the Board of Directors and the Execu- tive Management, the estimated time required for performing the duties of this member of the Board of Directors and the competencies, knowledge and experience that are or should be represented in the two management bodies, · on an annual basis evaluating the Board of Directors and the Executive Management’s structure, size, composition, and results and preparing recommen- dations for the Board of Directors for any changes, · in cooperation with the chairperson handling the annual evaluation of the Board of Directors and assessing the individual management members’ competencies, knowledge, experience, and succes- sion as well as reporting on it to the board of direc- tors, · handling the recruitment of new members to the Board of Directors and the Executive Management and nominating candidates for the Board of Directors' approval, · ensuring that a succession plan for the Executive Management is in place, · supervising Executive Managements’ policy for the engagement of executive employees, and · supervising the preparation of a diversity policy for the Board of Directors’ approval. Financial statementsPerformanceIn brief Corporate governance Strategy Annual Report 2023 Remuneration committee The Remuneration Committee is made up of two members who are appointed from among the Board of Directors. The committee is responsible for: · preparing a draft remuneration policy for the Board of Directors’ approval prior to the presentation at the general meeting, · providing a proposal to the Board of Directors on the remuneration of the members of the executive management, · providing a proposal to the Board of Directors on the remuneration of the Board of Directors prior to the presentation at the General Meeting, · ensuring that the management’s actual remuneration complies with the Company’s remuneration policy and the evaluation of the individual member’s perfor- mance, and · assisting in the preparation of the annual remunera- tion report for the Board of Directors’ approval prior to the presentation for the General Meeting's advi- sory vote. Board member Board Meetings Audit Committee Remuneration Comittee Nomination Comittee Henning Dyremose Erik Holm Peter Gath Niels A. Johansen Ann Fogelgren René Alberg Leif Hummel Marlene L. Jakobsen Michael Kjær Meeting participation in 2023, % 97.4% 100% 100% 100% Participation in Board meetings in 2023 Board evaluation procedure The Board of Directors performs an annual evaluation based on a survey regarding the following: · Board composition and management · Strategy, priorities and financial targets · Meeting effectiveness · Effectiveness of the Chair · Effectiveness of the Board · Financial reporting, business follow-up and compli- ance The conclusion of the evaluation is that the Board of Directors and the Executive Board possess the compe- tencies and qualifications deemed sufficient and neces- sary to run AO in both the short and long term. Proposals for the Annual General Meeting The Annual General Meeting will be held completely electronically at 2 p.m. on March 20 2024. 1. Allocation of profits The net profit for the year amounts to TDKK 206,096. The Board of Directors proposes to distribute a dividend of DKK 3.75 per DKK 1 share, corresponding to around 50% of the profit after tax for the year and 375% of the share capital. 2. Approval of remuneration policy The Board of Directors proposes that the Annual General Meeting approves the amended remuneration policy adopted by the Board of Directors. The full text of the revised remuneration policy is attached to the notice to attend the Annual General Meeting. 3. Authorisation to acquire own shares The Board of Directors proposes that it be authorised by the General Meeting during the period until 1 May 2025 to let the Company acquire own shares equiva- lent to a total of 10% of the Company’s share capital at the time of being granted authorisation, provided that the Company’s total holding of own shares at no point exceeds 10% of the Company’s share capital. The consideration must not deviate by more than 10% from the official price quoted at Nasdaq Copenhagen at the time of acquisition. 4. Authorisation of the Chair The Board of Directors proposes that the Chair of the Annual General Meeting (with the right of substitution) be authorised to register the resolutions passed by the Annual General Meeting with the Danish Business Authority and to make such alterations as the Danish Business Authority may require for registration or approval. Financial statementsPerformanceIn brief Corporate governance Strategy Annual Report 2023 Members of the Board of Directors Henning Baunbæk Dyremose Erik Holm Chair Born: 1945 Joined: 1997, Char since 2007 Nationality: Danish Chair of the Audit Committee Elected by Class A shareholders As Henning Dyremose has been a member of the Board of Directors for more than 12 years, he cannot, according to the ‘Danish Recommendations on Corporate Governance’, be characterised as being inde- pendent of special interests. Deputy Chair Born: 1960 Joined: 2009 Nationality: Danish Member of the Audit Committee Elected by Class A shareholders As Erik Holm has been a member of the Board of Directors for more than 12 years, he cannot, according to the ‘Danish Recommendations on Corporate Governance’, be characterised as being independent of special interests. Qualifications Broad leadership experience in business, finance and politics. Experience as managing director of a wholesale company with the same customers as Brødrene A & O Johansen A/S. Former Minister of Finance. Qualifications Experience as managing director of a wholesale company with the same customers as Brødrene A & O Johansen A/S. Broad leadership experience in sales, finance, and logistics, both in Denmark and internationally. Experience of Board work in other listed companies. Managerial Posts Chair of the Board of AO Invest A/S. CEO of Henning Dyremose ApS, HD Invest, Virum ApS, HCE Invest, Virum ApS, CD Invest, Virum ApS and Elly Dyremose ApS. Managerial Posts Chair of the Boards of CR EL & TEKNIK A/S, Norr11 Holding ApS, Norr11 International ApS, Hotel Kold- ingfjord A/S and ScanCom International A/S. Deputy Chairman of the Boards of SP Group A/S, Arvid Nilssons Fond and AO Invest A/S. Member of the Boards of Miluda Invest ApS, Dragsholm Slot P/S and Hotelselskabet af 8. februar 2018 K/S. CEO of Erik Holm Holding ApS and JU-CH Holding Aps Share ownership 59,770 (59,770) Class B shares Share ownership 0 (0) Class B shares Financial statementsPerformanceIn brief Corporate governance Strategy Annual Report 2023 Ann Fogelgren Peter Gath Niels A. Johansen Member Born: 1974 Joined: 2023 Nationality: Swedish Member of the Audit Committee Elected by Class A shareholders According to the ‘Danish Recommendations on Corporate Governance’ Ann Fogel- gren is considered to be independent of special interests. Member Born: 1965 Joined: 2023 Nationality: Danish Deputy Chair of the Audit Committee Elected by Class B shareholders According to the ‘Danish Recommendations on Corporate Governance’ Peter Gath is considered to be independent of special interests. Member Born: 1939 Joined: 1979 Nationality: Danish Elected by Class A shareholders As Niels A. Johansen has been a member of the Board of Directors for more than 12 years, he cannot, according to the ‘Danish Recommendations on Corporate Governance’, be characterised as being independent of special interests. Qualifications PhD in Information Systems from Copenhagen Business School in 2005 Chief Information Officer of GN Store Nord A/S. Former CIO posts at a number of large Danish companies Former CDO Qualifications State-authorised public accountant in 1996 Cand.jur. (Master of Law) in 1991 Former long term audit partner at KPMG and EY and former Chair of FSR (the Danish Association of Chartered Accountants). Former external auditor for Brødrene A & O Johansen A/S Qualifications Long-time managerial experience as CEO. In-depth knowledge of the wholesale industry of installation materials in Denmark and the rest of Europe. Managerial Posts Member of the Board of AO Invest A/S Managerial Posts Chair of the Board of FSRs Studie- & Understøttelsesfond and Fonden Johannes Hages Hus. Member of the Board of AO Invest A/S, Milde-Fonden, Lyn Mildé A/S and Konsol- idator A/S. CFO of St. Jørgen Holding ApS and CEO of Strategia Finans ApS. Managerial Posts Chair of the Board of Directors of Avenir Invest ApS. Niels A. Johansen is the CEO and member of the Board of Directors of a consol- idated company and the Chair of the Board of Directors of three consolidated companies Share ownership 28,270 (28,270) Class A shares and 2,810,400 (2,810,400) Class B sharesShare ownership 7,000 (0) Class B shares Share ownership 0 (0) Class B shares Members of the Board of Directors Financial statementsPerformanceIn brief Corporate governance Strategy Annual Report 2023 René Alberg Leif Hummel Marlene L. Jakobsen Employee-elected member Elected in 2022, term expires in 2026 Born: 1971 Joined: 2006 Nationality: Danish Product Manager Employee-elected member Elected in 2022, term expires in 2026 Born: 1963 Joined: 2022 Nationality: Danish Warehouse Operations Manager. Employee-elected member Elected in 2022, term expires in 2026 Born: 1983 Joined 2022 Nationality: Danish Store Manager Share ownership 500 (500) Class B shares Share ownership 5,200 (4,200) Class B shares Share ownership 294 (124) Class B shares Members of the Board of Directors Financial statementsPerformanceIn brief Corporate governance Strategy Annual Report 2023 Executive Board Niels A. Johansen Per Toelstang Stefan Funch Jensen Lili Johansen CEO Born: 1939 Chair of the Board of Directors of Avenir Invest ApS. Niels A. Johansen is the CEO and member of the Board of Directors of a consolidated company and the Chair of the Board of Directors of three consolidated companies Holds 28,270 (28,270) Class A shares and 2,810,400 (2,810,400) Class B shares either directly or indirectly CFO, Deputy CEO Born: 1966 CEO of MP Toelstang Holding ApS, Toelstang Invest ApS, Ridersclub ApS Chair of the Board of Directors of Høvegaard ApS Member of the Board of Directors of Kohberg Bakery Group A/S Holds 20,000 (20,000) Class B shares either directly or indirectly CTO Born: 1974 Holds 0 (0) Class B shares either directly or indirectly CHRO Born: 1957 Member of the Board of Directors of Avenir Invest ApS. Holds 28,110 (28,110) Class A shares and 360,000 (360,000) Class B shares either directly or indirectly AO Management Team Jeanette Roed Berthelsen Sales Director, HVAC & Projects David Carlbom Commercial Director, AO Sweden Lars Kestner Sales Director, Electricals Ian Schlottmann Procurement Director Sebastian Sigvaldason Logistics Director Financial statementsPerformanceIn brief Corporate governance Strategy Annual Report 2023 Shareholder information Dividend The Board of Directors proposes that a dividend of DKK 3.75 per DKK 1 share be distributed for 2023 corre- sponding to a payout ratio of 50.9%. The proposal is in line with the capital allocation policy which stipulates a payout ratio of 33% - 50%. Shareholders, capital, and voting rights AO has two classes of shares. Class A shares cannot be negotiated without the approval of the Board, whereas Class B shares are freely negotiable. In addition, the B share class carries special rights in the form of payment of cumulative dividends. The Company’s nominal share capital is TDKK 28,000. Of which TDKK 5,640 are Class A shares and TDKK 22,360 are Class B shares. Each class A share of DKK 100 carries 1,000 votes, whereas each Class B share of DKK 1 carries 1 vote. In addition to the difference in the number of votes, the two share classes differ in the following respects: The Class A shares are non-negotiable instruments, whereas the Class B shares are listed on Nasdaq Copen- hagen under ID code DK0061686714. The holders of Class B shares have a preferential cumu- lative dividend right of 6%. This means that no dividend will be paid for Class A shares until the Class B shares have achieved a cumulative dividend of 6%. In the event of liquidation, Class B shares take prece- dence over Class A shares. Changes to the Company’s Articles of Association require that two thirds of cast votes and two thirds of the represented capital at a general meeting are in favour of the change. The Company’s Board of Directors consists of eight members who do not have to be shareholders. Five members are elected by the Annual General Meeting, and three members are elected by the staff. Holders of Class B shares are entitled to appoint and elect one Board member, while holders of Class A shares elect the remaining Board members. A share B share Shares 56,400 22,360,000 Nominal value per share (DKK) 100 1 Nominal value (DKK) 5,640,000 22,360,000 Votes per share 1,000 1 Treasury shares 823,900 Stock Exchange Nasdaq Copenhagen Ticker: AOJ B ISIN: DK0061686714 Share price year-end (DKK) 70,3 Market Cap year-end (MDKK) 396,492,000 1,571,908,000 AO shares Dividend payments TDKK 2023 2022 2021 2020 2019 Dividend 105,000 147,000 126,000 42,000 16,800 Payout ratio 51% 50% 50% 24% 13% Financial statementsPerformanceIn brief Corporate governance Strategy Annual Report 2023 0 50,000 100,000 150,000 200,000 250,000 300,000 350,000 Jan DKK Shares Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 40 50 60 70 80 90 100 By making factual, relevant, and reliable information available to shareholders and other stakeholders, the management of Brødrene A & O Johansen A/S aims at giving the share market the best possible basis for pricing the Company’s shares fairly. Brødrene A & O Johansen A/S’s Investor Relations activities are designed to ensure that the disclosure of information is in accordance with the current disclosure requirements established by Nasdaq Copenhagen A/S. Brødrene A & O Johansen A/S’s financial communication with stakeholders takes place mainly through company announcements, quarterly webcasts, and investor meetings. Brødrene A & O Johansen A/S does not comment on any information relating to financial results or expec- tations in the period between the end of an accounting period and the date on which results are published. The Company’s management will refrain from holding investor meetings and the like in this period. The Company will also be reluctant to arrange meetings in periods where it is dealing with matters that could result in decisions that are to be announced to the public. Investor relations policy Financial calendar 21/2 2024 Annual Report 20/3 2024 Annual General Meeting 24/4 2024 Quarterly Report Q1 2024 14/8 2024 Quarterly Report Q2 2024 23/10 2024 Quarterly Report Q3 2024 Analysts The AO share is covered by the following financial institutions: · SEB (initiated coverage in 2023) Investor contacts CEO Niels A. Johansen CFO, Deputy CEO Per Toelstang Head of IR Nicolaj Harmundal Petersen [email protected] Number of Class A shares (DKK 100) Number of Class B shares (DKK 1) Number of shares – nominal value Capital, % Votes, % Avenir Invest ApS 56,220 208,000 5,830,000 20.82% 71.65% Niels A. Johansen 160 2,706,400 2,722,400 9.72% 3.64% Other registered shares 20 16,145,164 16,147,164 57.67 % 20.52% Unregistered shares 0 2,476,536 2,476,536 8.84% 3.14% Total, excluding treasury shares 56,400 21,536,100 27,176,100 97.0 6% 98.95% Treasury shares 0 823,900 823,900 2.94% 1.05% Total 56,400 22,360,000 28,000,000 100.00% 100.00% Total volume Closing price AO share price 2023 Financial statementsPerformanceIn brief Corporate governance Strategy Annual Report 2023 Financial statements 46 Consolidated financial statements 96 Parent company financial statements 126 Statements Investing in the network of outlets continues to a priority for AO. We want to be the wholesaler that provides the best service to our customers with the best range of sales channels. Annual Report 2023 Consolidated financial statements Financial statements PerformanceIn brief Corporate governance Strategy Annual Report 2023 Contents Consolidated financial statements Income statement Statement of comprehensive Income Balance sheet Cash flow statement Statement of changes in equity Notes Parent company financial statements Primary statements Income statement Statement of comprehensive income Balance sheet Cash flow statement Statement of changes in equity Notes 1 Basis of preparation 1.1 Accounting policies 1.2 Significant estimated uncertainties and assumptions 2 Income statement 2.1 Segment information 2.2 Cost of sales 2.3 Other operating income 2.4 External expenses 2.5 Staff costs 2.6 Depreciation and amortisation 2.7 Tax on profit or loss for the year 3 Invested Capital 3.1 Intangible assets 3.2 Property, plant and equipment 3.3 Right-of-use assets and lease liabilities 3.4 Inventories 3.5 Trade receivables 3.6 Earnings per share 3.7 Corporation tax receivable/payable 3.8 Deferred tax 3.9 Other payables 4 Capital Structure and financing 4.1 Equity 4.2 Financing activities 4.3 Financial risks 4.4 Financial income 4.5 Financial expenses 5 Other notes 5.1 Acquisition of enterprise 5.2 Contingent liabilities, security, etc. 5.3 Share based remuneration 5.4 Related parties 5.5 Subsequent events 5.6 New accounting regulation Consolidated financial statements Financial statements PerformanceIn brief Corporate governance Strategy Annual Report 2023 Contents Consolidated financial statements Income statement Statement of comprehensive Income Balance sheet Cash flow statement Statement of changes in equity Notes Parent company financial statements Income statement For 1 January – 31 December DKK thousands Note 2023 2022 Revenue 2.1 5,261,016 5,375,006 Cost of sales 2.2 (4,028,780) (4,068,255) Gross profit 1,232,236 1,306,751 Other operating income 2.3 2,029 3,573 Gross margin 1,234,265 1,310,324 External expenses 2.4 (310,666) (318,517) Staff costs 2.5 (518,315) (500,240) Earnings before interest, taxes, depreciation and amortisation (EBITDA) 405,284 491,567 Depreciation and amortisation 2.6 (113,079) (108,014) Operating profit or loss (EBIT) 292,205 383,553 Financial income 4.4 3,338 3,033 Financial expenses 4.5 (33,739) (9,158) Profit or loss before tax (EBT) 261,804 377,428 Tax on profit or loss for the year 2.7 (55,708) (82,959) Net profit or loss for the year 206,096 294,469 Earnings per share 3.6 Earnings per share (EPS) 7.6 10.8 Diluted earnings per share (EPS-D) 7.6 10.8 Financial statements PerformanceIn brief Corporate governance Strategy Annual Report 2023 Contents Consolidated financial statements Income statement Statement of comprehensive Income Balance sheet Cash flow statement Statement of changes in equity Notes Parent company financial statements Statement of comprehensive income For 1 January – 31 December DKK thousands Note 2023 2022 Other comprehensive income Net profit or loss for the year 206,096 294,469 Items which will be reclassified to the income statement Foreign currency translation adjustment relating to foreign entities 987 (6,156) Tax on other comprehensive income 0 0 Other comprehensive income after tax 987 (6,156) Total comprehensive income 207,083 288,313 Financial statements PerformanceIn brief Corporate governance Strategy Annual Report 2023 Contents Consolidated financial statements Income statement Statement of comprehensive Income Balance sheet Cash flow statement Statement of changes in equity Notes Parent company financial statements Balance sheet as at 31 December Assets DKK thousands Note 2023 2022 Non-current assets Intangible assets 3.1 Goodwill 508,539 499,685 Intellectual property rights 44,611 48,153 Software 82,913 64,188 636,063 612,026 Property, plant and equipment 3.2 Land and buildings 832,268 795,870 Leasehold improvements 15,530 13,609 Fixtures and operating equipment 221,966 224,782 Right-of-use assets 3.3 99,838 80,740 1,169,602 1,115,001 Other non-current assets Other investments 247 284 247 284 Total non-current assets 1,805,912 1,727,311 DKK thousands Note 2023 2022 Current assets Inventories 2.2, 3.4 757,411 865,953 Trade receivables 3.5 542,788 636,439 Joint tax contribution 0 15,931 Other receivables 20,573 16,199 Prepayments and accrued income 26,174 21,514 Cash and short-term deposits 89,504 34,973 Total current assets 1,436,450 1,591,009 Total assets 3,242,362 3,318,320 Financial statements PerformanceIn brief Corporate governance Strategy Annual Report 2023 Contents Consolidated financial statements Income statement Statement of comprehensive Income Balance sheet Cash flow statement Statement of changes in equity Notes Parent company financial statements Balance sheet as at 31 December Equity and liabilities DKK thousands Note 2023 2022 Equity 4.1 Share capital 28,000 28,000 Reserve for foreign currency translation adjustments (7,657) (8,644) Retained earnings 1,349,956 1,241,142 Proposed dividend for the financial year 105,000 147,000 Total equity 1,475,299 1,407,498 Non-current liabilities Deferred tax 3.8 70,098 64,612 Credit institutions 4.2 398,705 418,011 Lease liabilities 3.3, 4.2 66,352 56,836 Total non-current liabilities 535,155 539,459 DKK thousands Note 2023 2022 Current liabilities Credit institutions 4.2 109,343 73,689 Lease liabilities 3.3, 4.2 36,844 28,973 Trade payables 4.2, 4.3 1,006,632 1,181,319 Joint tax contribution 8,357 0 Corporation tax payable 3.7 3,062 3,501 Provisions for liabilities 3.9 500 6,740 Other payables 3.9 67,170 77,141 Total current liabilities 1,231,908 1,371,363 Total liabilities 1,767,063 1,910,822 Total equity and liabilities 3,242,362 3,318,320 Segment information 2.1 Contingent liabilities, security, etc. 5.2 Notes without reference 5.3-5.6 Financial statements PerformanceIn brief Corporate governance Strategy Annual Report 2023 Contents Consolidated financial statements Income statement Statement of comprehensive Income Balance sheet Cash flow statement Statement of changes in equity Notes Parent company financial statements Cash flow statement DKK thousands Note 2023 2022 Cash flow from operating activities Operating profit or loss (EBIT) 292,205 383,553 Depreciation and amortisation 2.6 113,079 108,014 Other non-cash operating items, net 3,393 1,543 Cash flow from operations before change in working capital 408,677 493,110 Change in inventories 99,688 (219,340) Change in receivables 84,617 (107,160) Change in trade payables and other current payables (191,014) 145,278 Change in working capital (6,709) (181,222) Cash flow from operations 401,968 311,888 Net financials paid (30,401) (6,125) Corporation tax paid (25,151) (89,970) Cash flow from operating activities 346,416 215,793 DKK thousands Note 2023 2022 Cash flow from investing activities Purchase of intangible assets (33,934) (41,010) Purchase of property, plant and equipment (94,819) (164,530) Sale of other non-current assets 37 0 Acquisition of enterprise 5.1 (1,500) (127,763) Cash flow from investing activities (130,216) 333,303 Cash flow from financing activities Repayment of debt to credit institutions (76,357) (85,975) Raising of loans from credit institutions 92,705 247,973 Repayment of lease liabilities (35,342) (24,169) Dividends paid (142,675) (122,292) Cash flow from financing activities (161,669) 15,537 Cashflow for the year 54,531 (101,973) Cash and short-term deposits at beginning of year 34,973 136,946 Cash and short-term deposits at end of year 89,504 34,973 Financial statements PerformanceIn brief Corporate governance Strategy Annual Report 2023 Contents Consolidated financial statements Income statement Statement of comprehensive Income Balance sheet Cash flow statement Statement of changes in equity Notes Parent company financial statements Consolidated statement of changes in equity DKK thousands Share capital Foreign currency translation adjustment Proposed dividend for the year Retained earnings Total equity Equity at 1 January 2023 28,000 (8,644) 147,000 1,241,142 1,407,498 Net profit for the year 0 0 105,000 101,096 206,096 Foreign currency translation adjustment 0 987 0 0 987 Total comprehensive income 0 987 105,000 101,096 207,083 Dividend distribution 0 0 (142,675) 0 (142,675) Dividend, treasury shares 0 0 (4,325) 4,325 0 Sharebased remuneration 0 0 0 3,393 3,393 Total transactions with owners 0 0 (147,000) 7,718 (139,282) Equity at 31 December 2023 28,000 (7,657) 105,000 1,349,956 1,475,299 Equity at 1 January 2022 28,000 (2,488) 126,000 1,088,422 1,239,934 Net profit for the year 0 0 147,000 147,469 294,469 Foreign currency translation adjustment 0 (6,156) 0 0 (6,156) Total comprehensive income 0 (6,156) 147,000 147,469 288,313 Dividend distribution 0 0 (122,292) 0 (122,292) Dividend, treasury shares 0 0 (3,708) 3,708 0 Sharebased remuneration 0 0 0 1,543 1,543 Total transactions with owners 0 0 (126,000) 5,251 (120,749) Equity at 31 December 2022 28,000 (8,644) 147,000 1,241,142 1,407,498 Financial statements PerformanceIn brief Corporate governance Strategy Annual Report 2023 Contents Consolidated financial statements Income statement Statement of comprehensive Income Balance sheet Cash flow statement Statement of changes in equity Notes Basis of preparation Income statement Invested capital Capital structure and financing Other notes Parent company financial statements Basis of preparation Section 1 1.1 Accounting policies 1.2 Significant estimated uncertainties and assumptions Financial statements PerformanceIn brief Corporate governance Strategy Annual Report 2023 Contents Consolidated financial statements Income statement Statement of comprehensive Income Balance sheet Cash flow statement Statement of changes in equity Notes Basis of preparation Income statement Invested capital Capital structure and financing Other notes Parent company financial statements Section 1 1.1 Accounting policies Brødrene A & O Johansen A/S is a limited company domi- ciled in Denmark. The financial part of the annual report for the period 1 January to 31 December 2023 comprises both the consolidated financial statements of Brødrene A & O Johansen A/S and its subsidiaries (the Group) and separate annual financial statements for the parent company. The consolidated financial statements of Brødrene A & O Johansen A/S for 2023 are presented in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU and additional disclosure requirements in the Danish Financial Statements Act. On 21 February 2024, the Board of Directors and the Exec- utive Board discussed and approved the annual report for 2023 for Brødrene A & O Johansen A/S. The annual report will be presented to the shareholders of Brødrene A & O Johansen A/S for approval at the annual general meeting on 20 March 2024. Basis of preparation The annual report is presented in Danish kroner, rounded to the nearest DKK 1,000. The annual report has been prepared in accordance with the historical cost principle except financial instruments presented at fair value. The accounting policies as described below have been applied consistently throughout the financial year and to the comparative figures. For standards implemented prospectively, the comparative figures will not be restated. Changes in accounting policies Effective as of 1 January 2023, Brødrene A & O Johansen A/S has implemented: · Amendments to IAS 12 Income Taxes: Deferred Tax related to Assets and Liabilities arising from a Single Transaction · Amendments to IAS 1 Presentation of Financial State- ments and IFRS Practice Statement 2: Disclosure of Accounting Policies · Amendments to IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors: Definition of Accounting Estimates · Amendments to IAS 12: International Tax Reform – Pillar Two Model Rules The changed standards have had no effect on recognition and measurement in the annual report. iXBRL reporting The annual report is published in the European Single Electronic Format (ESEF), xHTML, that can be opened by all standard web browsers. The annual report has been tagged using inline eXtensible Business Reporting Language (iXBRL) in accordance with the ESEF taxonomy. The annual report has been submitted in a XHTML document along with specific technical files all included in the file 5299004B6ZEGVCR9ZR75-2023-12-31- en.zip. Consolidated financial statements The consolidated financial statements consist of the parent company Brødrene A & O Johansen A/S and subsidiaries in which Brødrene A & O Johansen A/S has a controlling influence. The Group has a controlling influence over a company if the Group is exposed or entitled to variable returns from its involvement in the company and has the ability to influence these returns through its control over the company. In assessing whether the Group exercises a controlling influence, account is taken of de facto control and potential voting rights, which are real and have substance at the balance sheet date. Financial statements PerformanceIn brief Corporate governance Strategy Annual Report 2023 Contents Consolidated financial statements Income statement Statement of comprehensive Income Balance sheet Cash flow statement Statement of changes in equity Notes Basis of preparation Income statement Invested capital Capital structure and financing Other notes Parent company financial statements Section 1 The consolidated financial statements have been prepared as a summary of the parent company’s and the individual subsidiaries’ financial statements, prepared according to the Group’s accounting policies, with intra-group income and expenses, shareholdings, internal balances and divi- dends, as well as realised and unrealised gains on transac- tions between the consolidated companies, all eliminated. Business combinations Newly acquired or newly established companies are recognised in the consolidated financial statements as of the date of acquisition. Companies sold or liquidated are recognised in the consolidated financial statements as of the date of disposal. Comparative figures are not corrected for newly acquired companies. Discontinued activities are presented separately. The acquisition method is applied when the Group acquires control over the newly acquired company. The acquired companies’ identifiable assets, liabilities, and contingent liabilities are measured at fair value at the acquisition date. Identifiable intangible assets are recognised if they can be segregated or arise from a contractual right. Deferred tax is recognised on the revaluations made. The acquisition date is the point at which control is actually gained over the acquired company. Positive differences (goodwill) between the purchase price and the fair value of acquired identifiable assets, and the liabilities and contingent liabilities, are recognised as goodwill under intangible assets. Goodwill is not amortised but is tested for impairment at least annually. The first impairment test is performed before the end of the year of acquisition. Upon acquisition, goodwill is allocated to cash-generating units, which subsequently form the basis for impairment testing. Negative differences (negative goodwill) are recog- nised in profit/(loss) for the year as at the acquisition date. The purchase price for a company consists of the fair value of the agreed price. If parts of the purchase price are contingent on future events, this part of the price is recog- nised at fair value as at the acquisition date and is classi- fied as either a financial liability or equity according to its content. A contingent purchase price, which is classified as a financial liability, is regularly remeasured at fair value and adjusted directly in the income statement. Costs attributable to business combinations are recognised in profit/(loss) for the year when incurred. If, at the time of acquisition, there is uncertainty about the measurement of the acquired identifiable assets, liabilities, and contingent liabilities, initial recognition takes place on the basis of preliminarily calculated fair values. If subse- quently it turns out that identifiable assets, liabilities, and contingent liabilities had a different fair value at the time of acquisition than first assumed, goodwill is adjusted for up to 12 months after the acquisition. The effect of the adjust- ments is recognised in opening equity and the comparative figures are adjusted. Gains or losses on the disposal or liquidation of subsidi- aries are calculated as the difference between the sales price or the settlement amount, and the carrying amount of net assets including goodwill at the time of sale and costs of the sale or liquidation. Foreign currency translation A functional currency is set for each of the reporting companies in the Group. The functional currency is the currency used in the primary economic environment in which each reporting company operates. Transactions in currencies other than the functional currency are foreign currency transactions. The functional currency of the parent company is DKK. Foreign currency transactions are initially translated into the functional currency at the exchange rate on the trans- action date. Receivables, payables, and other monetary items denom- inated in foreign currencies are translated into the func- tional currency at the exchange rate at the balance sheet 1.1 Accounting policies (continued) Financial statements PerformanceIn brief Corporate governance Strategy Annual Report 2023 Contents Consolidated financial statements Income statement Statement of comprehensive Income Balance sheet Cash flow statement Statement of changes in equity Notes Basis of preparation Income statement Invested capital Capital structure and financing Other notes Parent company financial statements Section 1 date. The difference between the exchange rate at the balance sheet date and the exchange rate at the time of the occurrence or recognition of the receivable or payable in the latest annual report is recognised in the income statement under financial items. When recognised in the consolidated financial statements of companies with a functional currency other than Danish kroner, the income statements are translated at the exchange rate on the transaction date, and the balance sheet items are translated at the exchange rates at the balance sheet date. The average rate for the individual month in question is used for the exchange rate on the transaction date to the extent that this does not give a significantly different picture. Exchange rate differences arising from the translation of the equity of these companies at the beginning of the year at the exchange rates at the balance sheet date and when translating income statements from average exchange rates to the exchange rates at the balance sheet date are recog- nised in other comprehensive income on a separate provi- sion for exchange rate adjustments under equity. Exchange rate adjustments of outstanding balances which are considered part of the total net investment in compa- nies with a functional currency other than Danish kroner are recognised in the consolidated financial statements in other comprehensive income on a separate provision for exchange rate adjustments under equity. Description of accounting policies in notes Descriptions of accounting policies in the notes form part of the overall description of accounting policies. These descriptions are found in the following notes: 2.1 Segment information 2.2 Cost of sales 2.4 External expenses 2.5 Staff costs 4.4 Financial income 4.5 Financial expenses 2.7 Tax on profit or loss for the year 3.1 Intangible assets 3.2 Property, plant and equipment 3.3 Right-of-use assets and lease liabilities 3.4 Inventories 3.5 Trade receivables 3.7 Corporation tax receivable/payable 3.8 Deferred tax 4.2 Financing activities 4.3 Financial risks Accounting policy Prepayments Prepayments recognised under assets consist of costs paid for subsequent financial years and are measured at cost price. Equity Dividend Proposed dividend is recognised as a liability at the time of adoption at the annual general meeting. Dividend that is expected to be paid for the year is shown as a separate item under equity. Treasury shares Acquisition and disposal amounts and dividends for treasury shares are recognised directly in retained earnings under equity. Gains and losses on sales are thus not recog- nised in the income statement. Proceeds from the sale of treasury shares in connection with the exercise of share options are recognised directly in equity. Reserve for foreign currency translation adjustments The reserve for foreign currency translation adjustments consists of exchange rate differences arising on translation of the financial statements of foreign companies from their functional currency to DKK. 1.1 Accounting policies (continued) Financial statements PerformanceIn brief Corporate governance Strategy Annual Report 2023 Contents Consolidated financial statements Income statement Statement of comprehensive Income Balance sheet Cash flow statement Statement of changes in equity Notes Basis of preparation Income statement Invested capital Capital structure and financing Other notes Parent company financial statements Section 1 Accruals and deferred income Accrued expenses recognised under liabilities consist of deferred income and are measured at their cost price. Cash flow statement The cash flow statement shows cash flows from operating, investing, and financing activities for the year, the change in cash and cash equivalents for the year, and cash and cash equivalents at the beginning and end of the year. The liquidity effect of business acquisitions and sales is shown separately under cash flow from investing activities. Cash flow from acquired companies is recognised in the cash flow statement from the date of acquisition, and cash flows from sold companies are recognised up to the point of sale. Cash flow from operating activities Cash flows from operating activities are calculated as profit/(loss) before tax adjusted for non-cash operating items, changes in working capital, interest received and paid, and corporate taxes paid. Cash flow from investing activities Cash flows from investing activities include payments in connection with: the purchase and sale of companies and activities; the purchase and sale of intangible, tangible, and other non-current assets; and the purchase and sale of securities that are not included as cash and cash equi- valents. The conclusion of finance leases is considered a non-cash transaction. Cash flow from financing activities Cash flows from financing activities include changes in the size or composition of share capital and related costs, as well as the raising of loans, the repayment of inter- est-bearing debt, the purchase and sale of treasury shares, and the payment of dividends to shareholders. Cash flows from assets held under finance leases are recog- nised as the payment of interest and repayment of debt. Cash and cash equivalents Cash and cash equivalents consist of cash and short-term deposits. Financial ratios Financial ratios have been prepared in accordance with IAS 33 and the CFA Society Denmark’s ‘Recommendations and Financial Ratios’. When presenting figures, parentheses are used to indicate negative results and deductions. 1.1 Accounting policies (continued) Financial statements PerformanceIn brief Corporate governance Strategy Annual Report 2023 Contents Consolidated financial statements Income statement Statement of comprehensive Income Balance sheet Cash flow statement Statement of changes in equity Notes Basis of preparation Income statement Invested capital Capital structure and financing Other notes Parent company financial statements 1.2 Significant estimated uncertainties and assumptions When calculating the carrying amount of certain assets and liabilities, estimates are made of how future events affect the value of these assets and liabilities at the balance sheet date. The estimates and assumptions may have a significant effect on the financial reporting and can be categorised as significant accounting judgements or significant accounting estimates and assumptions. The estimates made are based on historical experience and other factors that the management considers reasonable in the circumstances, but which are inherently uncertain and unpredictable. The assumptions may be incomplete or inaccurate, and unexpected events or circumstances may arise. Furthermore, the company is subject to risks and uncertainties that may cause actual results to differ from those estimates. It may be necessary to change previous estimates due to changes in the circumstances underlying them or due to new knowledge or subsequent events. Significant accounting judgements, estimates and assumptions Significant accounting estimates and judgements include assumptions and estimates of the future and other uncer- tainty, that could potentially affect the company within the next 12 months. Estimates that are material to the financial reporting are made, inter alia, by valuing the impairment testing of goodwill, receivables, and inventories and by calculating depreciation and impairment. The following estimates and accompanying assessments are deemed material for the preparation of the financial statements: · Impairment testing for goodwill and other intangible assets · Valuation of receivables · Inventory valuation These estimates and assessments are described in the following notes: Note 3.1 Intangible assets Note 3.5 Inventories Note 3.6 Trade receivables Financial statements PerformanceIn brief Corporate governance Strategy Annual Report 2023 Contents Consolidated financial statements Income statement Statement of comprehensive Income Balance sheet Cash flow statement Statement of changes in equity Notes Basis of preparation Income statement Invested capital Capital structure and financing Other notes Parent company financial statements Income statement Section 2 2.1 Segment information 2.2 Cost of sales 2.3 Other operating income 2.4 External expenses 2.5 Staff costs 2.6 Depreciation and amortisation 2.7 Tax on profit or loss for the year Financial statements PerformanceIn brief Corporate governance Strategy Annual Report 2023 Contents Consolidated financial statements Income statement Statement of comprehensive Income Balance sheet Cash flow statement Statement of changes in equity Notes Basis of preparation Income statement Invested capital Capital structure and financing Other notes Parent company financial statements Section 2 The Group has activities within the professional B2B segment and the private B2C segment. The same products are sold to the two segments. The customer base and pricing structure differ signifi- cantly which is why B2B and B2C have been identified as separate operating segments. Geographical information The Group operates primarily in Denmark. International revenue amounts to DKK 377.1m (2022: DKK 407.2m) and less than 10% of the total Group´s revenue relates to foreign countries, and the same applied in 2022. Less than 10% of the book value of the assets of the Group is related to assets outside of Denmark. Sales channels Digital as well as physical sales channels are used in connection with the Group's sales. Digtal sales channels are defined as sales through websites and apps. For 2023 sales through digital sales chan- nels amount to DKK 2,599.2m (2022: DKK 2,621.9m) while sales through physical sales channels amount to DKK 2,661.8m (2022: DKK 2,753.1m). In the B2C segment, all sales are considered digital. Major customers Just as in 2022, the Group has not traded with any individual customer representing more than 10% of the Group's total revenue for 2023. 2.1 Segment information DKK thousands B2B B2C Total2023Revenue 4,658,552 602,464 5,261,016Cost of goods sold (3,427,448) (387,835) (3,815,283)Product margin 1,231,104 214,629 1,445,733Distribution (160,720) (50,748) (211,468)Gross margin 1,070,384 163,881 1,234,265Direct expenses (485,904) (133,211) (619,115)EBITDA before indirect expenses 584,480 30,670 615,150Indirect expenses (209,866)EBITDA 405,284Depreciation and amortisation (113,079)EBIT 292,205Financial income and expenses (30,401)EBT 261,804Key figures B2B B2C TotalGross margin % 23.0 % 27.2 % 23.5 %EBITDA (before indirect expenses) % 12.5 % 5.1 % 11.7 %EBITDA % 7.7 % Financial statements PerformanceIn brief Corporate governance Strategy Annual Report 2023 Contents Consolidated financial statements Income statement Statement of comprehensive Income Balance sheet Cash flow statement Statement of changes in equity Notes Basis of preparation Income statement Invested capital Capital structure and financing Other notes Parent company financial statements Section 2 Accounting policy Revenue Revenue consists of the sale of goods that is recognised in the income statement. Revenue is recog- nised when the control of the individual identifiable delivery obligation is transferred to the customer, and if the income can be calculated reliably and is expected to be received. The recognised revenue is measured at the fair value of the agreed consideration excluding VAT and taxes, and after the deduction of discounts made in connection with the sale. Revenue consists of contracts with a single delivery obligation, and where the individual components of the transaction price are separately identifiable. There are no material differences in relation to sales channels or operating segments. Discounts are deducted from the consideration based on an estimate of the total discounts during the measurement period. Customer bonus due to customers is calculated at the time of sale and deducted from the recognised revenue. Subsequent adjustments to customer bonus is also recognised as revenue. Segment information The Group has activities within the professional B2B segment and the private B2C segment. The two segments share the same chief operating decision maker but are identified as separate operating segments in the internal management reporting. 2.1 Segment information (continued) DKK thousands B2B B2C Total2022Revenue 4,735,570 639,436 5,375,006 Cost of goods sold (3,440,334) (411,277) (3,851,611) Product margin 1,295,236 228,159 1,523,395 Distribution (165,803) (47,268) (213,071) Gross margin 1,129,433 180,891 1,310,324 Direct expenses (483,811) (135,441) (619,252) EBITDA before indirect expenses 645,622 45,450 691,072 Indirect expenses (199,505) EBITDA 491,567 Depreciation and amortisation (108,014) EBIT 383,553 Financial income and expenses (6,125) EBT 377,428 Key figures B2B B2C TotalGross margin % 23.8% 28.3% 24.4%EBITDA (before indirect expenses) % 13.6% 7.1% 12.9%EBITDA % 9.1% Financial statements PerformanceIn brief Corporate governance Strategy Annual Report 2023 Contents Consolidated financial statements Income statement Statement of comprehensive Income Balance sheet Cash flow statement Statement of changes in equity Notes Basis of preparation Income statement Invested capital Capital structure and financing Other notes Parent company financial statements Section 2 2.3 Other operating income The item includes property rental income. 2.4 External expenses DKK thousands 2023 2022Remuneration for the auditor elected by the annual general meeting:Total remuneration may be specified as follows:Statutory audit (1,421) (1,654)Tax and VAT related advisory services (30) (17)Other services (410) (185)(1,861) (1,856) Other services primarily relate to concultancies regarding CSRD implementation and ESG strategies. Accounting policy External expenses External expenses include costs for internal transport, administration, advertising and exhibition costs, etc., including costs for the operation of real estate and losses to debtors. 2.2 Cost of sales DKK thousands 2023 2022Cost of goods purchased during the year (3,676,549) (4,144,030)Distribution costs (211,468) (213,071)(3,888,017) (4 ,357,101)Change in inventories:Inventory at the beginning of the year 865,953 580,478Change in cost during the year 10,019 11,683Inventory writedown, net 22,202 (15,054)Inventory at the end of the year 757,411 865,953Change in inventory for the year (140,763) 288,846Cost of sales for the year (4,028,780) (4,068,255) Accounting policy Cost of sales Cost of sales consists of the cost price of goods sold during the financial year, as well as distribution costs, which are variable in direct relation to revenue. Financial statements PerformanceIn brief Corporate governance Strategy Annual Report 2023 Contents Consolidated financial statements Income statement Statement of comprehensive Income Balance sheet Cash flow statement Statement of changes in equity Notes Basis of preparation Income statement Invested capital Capital structure and financing Other notes Parent company financial statements Section 2 The Group only has defined contribution plans. The increase in full time employees for the Group primarily relates to the full year effect of the acquisi- tion of EA Værktøj which contributed with 110 FTEs from april 2022. Accounting policy Staff costs Staff costs include salaries and wages to employees, costs related to defined pension contribution plans, social security costs and other staff expenses such as training and education expenses. Employee benefits The Group has entered into agreements to provide defined contribution pension schemes for the majority of the Group’s employees. Liabilities relating to defined contribution pension schemes for which the Group regularly pays fixed pension contributions to independent pension companies are recognised in the income statement during the period in which they are earned, and payments due are recognised in the balance sheet under other liabilities. Restricted stock units are measured at fair value at the date of issue and are recognised in the income statement under staff costs. The counter item is recognised directly in equity. The fair value of the granted share options is calculated using the option price model (Black & Scholes). 2.5 Staff costs DKK thousands 2023 2022Wages and salaries (417,318) (412,237)Pension contributions (37,700) (30,211)Share-based remuneration (3,393) (1,543)Other social security costs (9,727) (9,401)Other staff expenses (3,252) (3,140)Staff costs excl. temporary employees (471,390) (456,532)Wages temporary employees (46,925) (43,708)Staff costs total (518,315) (500,240)Wages and salaries include remuneration for:Board of Directors (3,763) (3,588)Board of Directors total (3,763) (3,588)Executive Board (21,570) (27,224)Share-based remuneration (1,402) (1,089)Pension contributions (2,633) (2,639)Benefits (787) (838)Executive Board total (26,392) (31,790)Board of Directors and Executive Board total (30,155) (35,378) Average number of full-time employees, incl. temporary employees 912 889 Average number of full-time employees 841 822 Financial statements PerformanceIn brief Corporate governance Strategy Annual Report 2023 Contents Consolidated financial statements Income statement Statement of comprehensive Income Balance sheet Cash flow statement Statement of changes in equity Notes Basis of preparation Income statement Invested capital Capital structure and financing Other notes Parent company financial statements Section 2 2.6 Depreciation and amortisation DKK thousands 2023 2022Intangible assets (18,700) (26,113)Property, plant and equipment (59,316) (58,337)Right-of-use assets, external (35,342) (24,046)Gains/losses from the disposal of assets 279 482(113,079) (108,014) 2.7 Tax on profit or loss for the year DKK thousands 2023 2022Current tax for the year (49,753) (72,642)Adjustment related to previous years (392) 6Addition from acquisition 0 (1,253)(50,145) (73,889)Adjustment of deferred tax for the year (6,373) (9,430)Adjustment of deferred tax for previous years 810 360Total (55,708) (82,959)Tax on profit/loss for the year can be explained as follows:Calculated tax on profit/loss before tax, not incl. subsidiaries' profits 57,027 82,472Tax effect of:Non-taxable income (886) (1,071)Other non-deductible costs 342 670Adjustment of tax for previous years (775) 88855,708 82,959Effective tax rate 21.3% 22.0%Taxes paid during the financial year (25,151) (89,970) Financial statements PerformanceIn brief Corporate governance Strategy Annual Report 2023 Contents Consolidated financial statements Income statement Statement of comprehensive Income Balance sheet Cash flow statement Statement of changes in equity Notes Basis of preparation Income statement Invested capital Capital structure and financing Other notes Parent company financial statements Section 2 Accounting policy Tax on profit/(loss) for the year Brødrene A & O Johansen A/S is taxed jointly with all Danish subsidiaries as well as with the parent company Avenir Invest ApS. The full liability is shown in the financial statements of Avenir Invest ApS. The current Danish corporation tax is distributed by settling joint tax contributions between the jointly taxed companies in proportion to their taxable income. In connection with this, companies with a tax loss receive a joint tax contribution from companies that have been able to use these losses to reduce their own taxable profits. (Full distribution). The jointly taxed companies are included in the Danish Tax Prepayment Scheme. Tax for the year, which consists of the current tax for the year and changes in deferred tax, is recognised in the income statement for tax attributed to profit/(loss) for the year, and in equity for tax attributable to items directly in equity. 2.7 Tax on profit or loss for the year (continued) Financial statements PerformanceIn brief Corporate governance Strategy Annual Report 2023 Contents Consolidated financial statements Income statement Statement of comprehensive Income Balance sheet Cash flow statement Statement of changes in equity Notes Basis of preparation Income statement Invested capital Capital structure and financing Other notes Parent company financial statements Invested capital Section 3 3.1 Intangible assets 3.2 Property, plant and equipment 3.3 Right-of-use assets and lease liabilities 3.4 Inventories 3.5 Trade receivables 3.6 Earnings per share 3.7 Corporation tax receivable/payable 3.8 Deferred tax 3.9 Other payables Financial statements PerformanceIn brief Corporate governance Strategy Annual Report 2023 Contents Consolidated financial statements Income statement Statement of comprehensive Income Balance sheet Cash flow statement Statement of changes in equity Notes Basis of preparation Income statement Invested capital Capital structure and financing Other notes Parent company financial statements Section 3 3.1 Intangible assets Intellectual property DKK thousands Goodwillrights SoftwareCost at 1 January 2023 499,685 70,113 348,513Foreign currency translation adjustment 0 0 0Additions from acquisitions 0 0 0Additions during the year 8,854 0 33,934Disposals during the year 0 0 (52,035)Cost at 31 December 2023 508,539 70,113 330,412Amortisation and depreciation at 1 January 2023 0 (21,960) (284,325)Foreign currency translation adjustment 0 (30) 0Amortisation and depreciation for the year 0 (3,512) (15,188)Disposals during the year 0 0 52,014Amortisation and depreciation at 31 December 2023 0 (25,502) (247,499)Carrying amount at 31 December 2023 508,539 44,611 82,913 Intellectual property DKK thousands Goodwillrights SoftwareCost at 1 January 2022 412,030 61,955 307,5 03Foreign currency translation adjustment 0 0 0Additions from acquisitions 87,655 8,158 0Additions during the year 0 0 41,010Disposals during the year 0 0 0Cost at 31 December 2022 499,685 70,113 348,513Amortisation and depreciation at 1 January 2022 0 (18,792) (261,380)Foreign currency translation adjustment 0 0 0Amortisation and depreciation for the year 0 (3,168) (22,945)Disposals during the year 0 0 0Amortisation and depreciation at 31 December 2022 0 (21,960) (284,325)Carrying amount at 31 December 2022 499,685 48,153 64,188 In 2023, additions to goodwill derive from the finalisation of the purchase price allocation on the EA acquisition. Apart from goodwill, all intangible assets are considered to have definite useful lives. No significant changes have been made in estimates relating to intangible assets. Intellectual property rights relate to Billig VVS', Greenline's, LampeGuru's and EA Værktøj's trademarks, domain names, etc. Financial statements PerformanceIn brief Corporate governance Strategy Annual Report 2023 Contents Consolidated financial statements Income statement Statement of comprehensive Income Balance sheet Cash flow statement Statement of changes in equity Notes Basis of preparation Income statement Invested capital Capital structure and financing Other notes Parent company financial statements Section 3Section 3 Goodwill At 31 December 2023, Management performed an impairment test of goodwill. Separate cash-gener- ating untis (CGUs) were tested for impairment including an sensitivity analysis for future cash flows. The carrying amount of goodwill and key assumptions may be specified per CGU in the following way: Pre-tax Terminal DKK thousands GoodwillWACCgrowth rateB2B Denmark 151,649 12% 1.5%B2B Sweden 47,017 12% 1.5%B2C 309,873 12% 2.5% The appiied pre-tax WACC and terminal growht rates are unchanged for all CGUs. Goodwill has been allocated to the two operating segments B2B and B2C, which is reflected above. In addition, B2B has been further split into Danish and Swedish goodwill in order to reflect the CGUs. The recoverable amount is based on the value in use, which is determined by means of expected net cash flows on the basis of budgets for 2024 and forecasts for 2025-2028 approved by Management, and an adjusted discount rate of 10% (after tax). The applied discount rate reflects the specific risks related to the respective CGUs, including geography, capital structure, etc. The applied terminal growth rate is not expected to exceed the long-term average growth rate of the markets in which the company operates. The applied 5-year growth rate and growth in terminal values are not expected to exceed the long- term average growth rate of the Group's operating segements. For both operating segments profit margins and market shares are expected to reflect the financial targets of outgrowing the market by 2 percentage points and increasing the EBITDA margin. By comparing the budgets for the respective Group companies and the expected market development it has been concluded that the recoverable amount will be consideraby higher than the carrying amount. Development costs Development costs are included in "Software". The net value of capitalised development costs may be illustrated as follows: DKK thousands 2023 2022Work in Work in Consolidated Completedprogress CompletedprogressCost at 1 January 133,870 22,279 118,651 461Additions during the year 18,560 24,207 14,758 22,279Transfer 9,731 (9,731) 461 (461)Cost at 31 December 162,161 36,755 133,870 22,279Amortisation and depreciation at 1 January (103,275) 0 (81,989) 0Amortisation and depreciation for the year (15,033) 0 (21,286) 0Amortisation and depreciation at 31 December (118,308) 0 (103,275) 0Carrying amount at 31 December 43,853 36,755 30,595 22,279 3.1 Intangible assets (continued) Financial statements PerformanceIn brief Corporate governance Strategy Annual Report 2023 Contents Consolidated financial statements Income statement Statement of comprehensive Income Balance sheet Cash flow statement Statement of changes in equity Notes Basis of preparation Income statement Invested capital Capital structure and financing Other notes Parent company financial statements Section 3Section 3 3.1 Intangible assets (continued) Accounting policy Intangible assets Goodwill is initially recognised in the balance sheet at cost price as described under ‘Business combi- nations’. Goodwill is subsequently measured at cost price less accumulated impairment losses. Good- will is not amortised. The carrying amount of goodwill is allocated to the Group’s cash-generating units at the acquisition date. The determination of cash-generating units follows the management structure and internal finan- cial management. Rights are measured at cost price less accumulated amortisation and impairment losses. Rights are amortised on a straight-line basis over their expected useful life, for a maximum of 20 years. Software is measured at cost price less accumulated amortisation and impairment losses. Software is amortised on a straight-line basis over its expected useful life, for a maximum of 10 years. Impairment of non-current assets Goodwill and intangible assets with indefinite useful lives are tested annually for impairment, the first time before the end of the year of acquisition. The carrying amount of goodwill is tested for impairment together with the other non-current assets in the cash-generating unit to which goodwill is allocated and is written down over the income statement if the carrying amount is higher than the recoverable amount. The recoverable amount is generally calculated as the present value of the expected future net cash flow from the activity to which goodwill is linked. The impairment of goodwill is recognised in a sepa- rate item in the income statement. The carrying amount of the other non-current assets is assessed annually to determine whether there is any indication of impairment. When such an indication is present, the asset’s recoverable amount is calculated. The recoverable amount is the asset’s fair value less the expected cost of disposal or net present value. The net present value is calculated as the present value of expected future cash flows from the asset or the cash-generating unit which the asset is part of. An impairment loss is recognised when the carrying amount exceeds the asset’s recoverable amount. Impairment losses are recognised in the income statement under depreciation. Impairment losses on goodwill are not reversed. Impairment losses on other assets are reversed to the extent that changes have occurred in the assumptions and estimates that led to the impairment. Impairment losses are reversed only to the extent that the new carrying amount does not exceed the carrying amount after depreciation if an impairment loss has not been recognised for the asset. Financial statements PerformanceIn brief Corporate governance Strategy Annual Report 2023 Contents Consolidated financial statements Income statement Statement of comprehensive Income Balance sheet Cash flow statement Statement of changes in equity Notes Basis of preparation Income statement Invested capital Capital structure and financing Other notes Parent company financial statements Section 3 Key accounting judgments and estimates Impairment testing for goodwill and other intangible assets In the annual impairment tests of intangible assets, including goodwill and rights, estimates are made of how the parts of the business (cash-generating units) to which goodwill and rights are attributed will be able to generate sufficient positive net cash flows in the future to support the value of the goodwill and rights. Due to the nature of the business, expected cash flows must be estimated for many years to come, leading to some uncertainty. This uncertainty is reflected by the chosen discount rate. 3.1 Intangible assets (continued) Financial statements PerformanceIn brief Corporate governance Strategy Annual Report 2023 Contents Consolidated financial statements Income statement Statement of comprehensive Income Balance sheet Cash flow statement Statement of changes in equity Notes Basis of preparation Income statement Invested capital Capital structure and financing Other notes Parent company financial statements Section 3Section 3 3.2 Property, plant and equipment Leasehold Fixtures and Land and improve- operating DKK thousandsbuildingsmentsequipmentCost at 1 January 2023 1,032,692 25,822 578,156Foreign currency translation adjustment (1) (3) (104)Additions during the year 57,823 5,714 32,964Disposals during the year (13,028) 0 (7,224)Cost at 31 December 2023 1,077,4 86 31,533 603,792Amortisation and depreciation at 1 January 2023 (236,822) (12,213) (353,374)Foreign currency translation adjustment 76 1 141Amortisation and depreciation for the year (21,445) (3,791) (34,080)Disposals during the year 12,973 0 5,487Amortisation and depreciation at 31 December 2023 (245,218) (16,003) (381,826)Carrying amount at 31 December 2023 832,268 15,530 221,966 Leasehold Fixtures and Land and improve- operating DKK thousandsbuildingsmentsequipmentCost at 1 January 2022 910,438 20,159 516,454Foreign currency translation adjustment (2,093) (6) (550)Additions from acquisitions 25,608 2,018 8,119Additions during the year 102,020 3,651 54,516Disposals during the year (3,281) 0 (383)Cost at 31 December 2022 1,032,692 25,822 578,156Amortisation and depreciation at 1 January 2022 (219,126) (9,811) (317,078)Foreign currency translation adjustment 845 185 445Amortisation and depreciation for the year (18,764) (2,587) (36,986)Disposals during the year 223 0 245Amortisation and depreciation at 31 December 2022 (236,822) (12,213) (353,374)Carrying amount at 31 December 2022 795,870 13,609 224,782 Financial statements PerformanceIn brief Corporate governance Strategy Annual Report 2023 Contents Consolidated financial statements Income statement Statement of comprehensive Income Balance sheet Cash flow statement Statement of changes in equity Notes Basis of preparation Income statement Invested capital Capital structure and financing Other notes Parent company financial statements Section 3Section 3 3.2 Property, plant and equipment (continued) Specification of land and buildings Year of Building acqui-area Carrying Mortgage Address Usesition(sqm)amountloansAdministration and central warehouseRørvang 1-9, DK-2620 Albertslund Administration 8,140Rørvang 1-9, DK-2620 Albertslund Central warehouse 29,687Herstedvang 9-13, DK-2620 Albertslund Central warehouse 3,694Herstedvang 6, DK-2620 Albertslund Central warehouse 5,674Mossvej 2, DK-8700 Horsens Central warehouse 19,167Administration and central warehouse total 66,362 501,499 305,844 StoresØstbanegade 169, DK-2100 Østerbro Store 1990 478Prags Boulevard 53, DK-2300 Amager Store 1990 923Rørvang 1-9, DK-2620 Albertslund Store 1990 1,907Gl. Køge Landevej 362, DK-2650 Hvidovre Store 1999 619Håndværkervænget 18-20, DK-2670 Greve Store 1995 713Englandsvej 360, DK-2770 Kastrup Store 1996 437Kokkedal Industripark 42A, DK-2980 Hørsholm Store 2014 702Industrivej 16, DK-3000 Helsingør Store 2013 736Herredsvejen 12, DK-3400 Hillerød Store 2013 751Centervej 44, DK-3600 Fr.sund Store 2020 700Sandemandsvej 10, DK-3700 Rønne Store 2003 768Københavnsvej 205, DK-4000 Roskilde Store 2022 1,448Industriparken 1, DK-4100 Ringsted Store 2022 864Japanvej 16, DK-4200 Slagelse Store 2014 700Tækkemandsvej 3, DK-4300 Holbæk Store 2000 1,307Valdemarshaab 15, DK-4600 Køge Store 2014 862 Specification of land and buildings (continued)Year of Building acqui-area Carrying Mortgage Address Usesition(sqm)amountloansStores (continued)Holsted Park 6, DK-4700 Næstved Store 2000 1,185Herningvej 23, DK-4800 Nykøbing F Store 2013 700Middelfartsvej 8, DK-5000 Odense Store 2000 1,111Ove Gjeddes Vej 18, DK-5220 Odense SØ Store 2017 800Mandal Alle 5, DK-5500 Middelfart Store 2022 1,343Mønten 5, DK-6000 Kolding Store 1990 1,359Næstmark 21, DK-6200 Aabenraa Store 2005 987Kattegatvej 1, DK-6705 Esbjerg Store 2013 800Ibæk Strandvej 8, DK-7100 Vejle Store 2022 1,564Ibæk Strandvej 12, DK-7100 Vejle Store 2014 702Søren Frichs Vej 24, DK-8000 Århus Store 2004 1,089Tomsagervej 3-7, DK-8000 Århus Store 2022 1,596Jens Juuls Vej 7, DK-8260 Viby Store 2014 700Lillehøjvej 42, DK-8600 Silkeborg Store 2018 800Allégade 40, DK-8700 Horsens Store 1990 1,500Toldbodgade 24, DK-8930 Randers Store 2004 1,337Brodalsvägen 15, SE-433 38 Partille Store and warehouse 2003 1,660Bronsyxegatan 6A, SE-213 75 Malmö Store and warehouse 2000 1,350Total stores 34,498 282,236 115,326Buildings under construction 48,533Land and buildings 100,860 832,268 421,170 Financial statements PerformanceIn brief Corporate governance Strategy Annual Report 2023 Contents Consolidated financial statements Income statement Statement of comprehensive Income Balance sheet Cash flow statement Statement of changes in equity Notes Basis of preparation Income statement Invested capital Capital structure and financing Other notes Parent company financial statements Section 3Section 3 3.2 Property, plant and equipment (continued) Accounting policy Property, plant and equipment, including leases Land and buildings, leasehold improvements, operating equipment, and fixtures and fittings are meas- ured at their cost price less accumulated depreciation and impairment losses. The cost price consists of the acquisition price and costs directly related to the acquisition until the time when the asset is ready for use. The cost price of a total asset is divided into separate compo- nents, which are depreciated separately if the useful life of the individual component is different. Subsequent costs, such as when replacing components of a tangible asset, are recognised in the carrying amount of the asset in question when it is probable that the holding will result in future economic benefits for the Group. All other general repair and maintenance costs are recognised in the income statement as they are incurred. The assets are depreciated on a straight-line basis over their expected useful lives, based on the following assessment of the expected life of assets: Buildings: 50 years Installations: 10 years Leasehold improvements: Maximum 5 years Fixtures and operating equipment: Normally 5 years. 15 years for mini-load storage systems and high bay systems. In 2023 the expected useful lives of mini-load storage systems and high bay systems were reassessed from 10 years to 15 years. The re-assessment has reduced depreciations in 2023 by approximately DKK 17 million. Land is not depreciated. The basis for depreciation is calculated by taking into account the asset’s scrap value and is reduced by any impairment losses. The depreciation period and the scrap value are determined at the time of acquisition and are reviewed annually. If the scrap value exceeds the carrying amount, depreciation ceases. Gains and losses on the disposal of property, plant, and equipment are calculated as the difference between the sale price less selling costs and the carrying amount at the time of sale. Financial statements PerformanceIn brief Corporate governance Strategy Annual Report 2023 Contents Consolidated financial statements Income statement Statement of comprehensive Income Balance sheet Cash flow statement Statement of changes in equity Notes Basis of preparation Income statement Invested capital Capital structure and financing Other notes Parent company financial statements Section 3Section 3 3.3 Right-of-use assets and lease liabilities Fixtures and Land and operating Right-of-use assetsbuildingsequipment TotalBalance at 1 January 2023 65,629 15,111 80,740Foreign currency translation adjustment 197 0 197Additions during the year 13,096 43,611 56,707Disposals during the year (313) (5,819) (6,132)Remeasurement of lease liability 3,266 402 3,668Amortisation and depreciation for the year (22,777) (12,565) (35,342)Carrying amount at 31 December 2023 59,098 40,740 99,838 Fixtures and Land and operating Right-of-use assetsbuildingsequipment TotalBalance at 1 January 2022 53,271 16,820 70,091Foreign currency translation adjustment (172) (67) (239)Additions during the year 30,292 6,887 37,179Disposals during the year (3,036) (714) (3,750)Remeasurement of lease liability 1,505 0 1,505Amortisation and depreciation for the year (16,231) (7,815) (24,046)Carrying amount at 31 December 2022 65,629 15,111 80,740 Lease liabilities 2023 2022Maturity of lease liabilities0-1 year 39,672 29,2781-5 years 60,714 45,158>5 years 10,403 13,939Total un-discounted lease liabilities at 31 December 110,789 88,375Short-term lease liabilities, less than 1 year 36,844 28,973Long-term lease liabilities, more than 1 year 66,352 56,836Lease liabilities recognised in the balance sheet 103,196 85,809Amounts recognised in the income statementInterest expenses on lease liabilities (1,615) (310)Expenses related to low value leasing arrangements (232) (318)Expenses related to short term leasing arrangements (1,563) (1,639)Depreciation related to right-of-use assets (35,342) (24,046)Total (38,752) (26,313) The increase in right-of-use assets within fixtures and operating equipment relates to the transition to EVs where approx. 75% of the leased company cars have been replaced during 2023. In relation to leases, including low-value and short-term leasing arrangements, the Group has paid TDKK 34,490 towards leasing contracts in 2023 (2022: TDKK 22,330). Hereof interest payments related to leasing liablilities amount to TDKK 1,615 (2022: TDKK 808) and instalments on leasing liabilities amount to TDKK 35,211 (2022: 24,169) Financial statements PerformanceIn brief Corporate governance Strategy Annual Report 2023 Contents Consolidated financial statements Income statement Statement of comprehensive Income Balance sheet Cash flow statement Statement of changes in equity Notes Basis of preparation Income statement Invested capital Capital structure and financing Other notes Parent company financial statements Section 3Section 3 3.3 Right-of-use assets and lease liabilities (continued) Accounting policy Leases Right-of-use assets and lease liabilities are recognised in the balance sheet at the time when a lease for a specific identifiable asset is made available to the Group for the lease term and when the Group obtains the right to most of the financial benefits from the use of the identified asset and the right to decide the use of the identified asset. On initial recognition, lease liabilities are measured at the present value of future lease payments using the incremental borrowing rate as the discount factor. The following lease payments are recognised as part of the lease liability: · Fixed payments. · Changes in variable lease payments which fluctuate with changes in an index or interest rate based on the current index or interest rate. · Amounts payable under a residual value guarantee. · The exercise price of call options reasonably certain to be exercised by the Group. · Payments made in periods covered by an option to extend the lease which the Group is reasonably certain to exercise. · Penalties related to a termination option, unless the Group is reasonably certain not to exercise the option. Lease liabilities are measured at amortised cost using the effective interest rate method. A remeasure- ment is made when changes in the cash flow as a result of changes in an index or interest rate is iden- tified, if the estimate of a residual guarantee is changed or if the Group is changing the assessment of whether it is reasonably certain to exercise an extension or termination option, or a call option. Initially right-of-use assets are recognised at cost which is equal to the lease liabilities adjusted for prepaid lease payments and estimated cost of demolition, repairs etc less received discounts or other types of incentive payments from lessor. Subsequently, right-of-use assets are measured at cost less accumulated depreciation. Right-of-use assets are depreciated over the shorter of the lease term and the useful life of the right-of-use asset. The depreciation is recognised on a straight-line basis in the income statement. Adjustments are made to the right-of-use asset in case of changes in the lease liability due to changes in the conditions of the leases or changes in the cash flow from fluctuations in an index or an interest rate. The right-of-use assets are amortised on a straight-line basis over their expected lease periods which constitute: Operating equipment 3 – 10 years Warehouse properties with associated administration 3 – 10 years Stores 3 – 10 years. Right-of-use assets and leasing liabilities are presented separately in the Group’s balance sheet. The Group has chosen not to recognise leases with a term of less than 12 months or a present value of less than DKK 30,000. Instead lease payments are recognised on a straight-line basis in the income statement. Furthermore, the Group has chosen to determine a discount rate on a portfolio of lease agreements with uniform characteristics. Financial statements PerformanceIn brief Corporate governance Strategy Annual Report 2023 Contents Consolidated financial statements Income statement Statement of comprehensive Income Balance sheet Cash flow statement Statement of changes in equity Notes Basis of preparation Income statement Invested capital Capital structure and financing Other notes Parent company financial statements Section 3 3.4 Inventories DKK thousands 2023 2022Carrying amount of inventories recognised at net selling price 42,379 20,887 Accounting policy Inventories Inventories are measured at cost price, which is calculated on the basis of average prices. If the net realisable value is lower than the cost price, an impairment loss is made to the net realisable value. The cost price includes the acquisition price plus the cost of repatriation. The net realisable value is calculated as the expected sale price less costs to execute the sale and is determined on the basis of marketability, obsolescence, and expected development in the sales price. The value of inventories accounted for at fair value is specified in note 3.4 of the annual report. Key accounting judgments and estimates Inventories The estimated uncertainty of inventories relates primarily to slow-moving goods and thus to impair- ment to the net realisable value. Impairment requirements are continuously assessed on inventories based on historical sales and the assessment of future sales. Supplier bonus Reporting from suppliers as well as AO’s own records are used when assessing the supplier bonus that is due to AO. Estimates are used when reporting from suppliers have not been received or when the reporting from suppliers do not reconcile with AO’s records. Ongoing retrospective reviews are performed to ensure that supplier bonus is included correctly in the financial statements. Financial statements PerformanceIn brief Corporate governance Strategy Annual Report 2023 Contents Consolidated financial statements Income statement Statement of comprehensive Income Balance sheet Cash flow statement Statement of changes in equity Notes Basis of preparation Income statement Invested capital Capital structure and financing Other notes Parent company financial statements Section 3 3.5 Trade receivables Trade receivables consist of sale of goods to business customers which, in essence, have the same risk profile. Provisions for bad debts are made in accordance with the simplified expected credit loss model, taking into account AO's credit policy and debt collection procedure. AO has taken up credit insurance on customers with large balances. Historically, the Group has incurred no losses on receivables from subsidiaries, and is not expected to going forward. Calculated on the basis of a weighted loss ratio, the Group's expected credit losses on trade receiv- ables are as follows: Receivable Expected DKK thousands Loss ratioamountloss Total2023Not yet due 0.5 % 512,390 (2,798) 509,592Due within 1-30 days 3.0 % 23,583 (712) 22,871Due within 31-60 days 14.8 % 2,801 (414) 2,387Due in more than 60 days 83.2 % 47,168 (39,230) 7, 93 8Total at 31 December 2023 585,942 (43,154) 542,7882022Not yet due 1.7% 622,040 (10,718) 611,322Due within 1-30 days 6.8% 13,787 (935) 12,852Due within 31-60 days 9.6% 6,250 (603) 5,647Due in more than 60 days 82.8% 38,568 (31,950) 6,618Total at 31 December 2022 680,645 (44,206) 636,439 * Expected losses are shown including VAT. DKK thousands 2023 2022Provision for losses on receivables:Provision for losses on receivables at 1 January excl. VAT 37,621 41,189Realised loss during the year - use of previous provision (8,293) (14,547)Adjustment of provisions for losses 5,689 10,979Provision for losses on receivables at 31 December 35,017 37,621Recognised previously written-off receivables (307) (121)Losses recognised in the year and not previously provided for 0 0Operating effect, net from loss and provision for losses on receivables 5,382 10,858 Accounting policy Receivables Receivables are measured at their amortised cost price. Impairment to counter losses is conducted according to the simplified expected credit loss model, after which the total loss is recognised immedi- ately in the income statement at the same time as the receivable is recognised in the balance sheet on the basis of the expected loss over the total life of the receivable. Intra-group receivables are measured at the amortised cost price. Financial statements PerformanceIn brief Corporate governance Strategy Annual Report 2023 Contents Consolidated financial statements Income statement Statement of comprehensive Income Balance sheet Cash flow statement Statement of changes in equity Notes Basis of preparation Income statement Invested capital Capital structure and financing Other notes Parent company financial statements Section 3 3.5 Trade receivables (continued) Key accounting judgments and estimates Receivables Estimates are used when assessing the probability of receivables. Due to the financial situation in society, the risk of losses on doubtful receivables remains high, which has been taken into account when assessing new customers, by way of impairment losses at the balance sheet date, and in the day-to-day governance and control of the receivables as described in note 4.3. Customer bonus Estimates are used in relation to the determination of the bonus levels reached on bonus agreements with a duration of more than one year. The applied estimates are reviewed on an ongoing basis to ensure a correct valuation of bonus due to customers. 3.6 Earnings per share DKK thousands 2023 2022Net profit or loss for the year 206,096 294,469Average number of shares in circulation 28,000,000 28,000,000Average number of own shares (823,900) (823,900)Average number of shares in circulation 27,176,100 27,176,100The average dilution effect of outstanding RSU's 54,053 15,710Diluted average number of outstanding share options 27,230,153 27,191,810Earnings per share (EPS) of DKK 1. 7.6 10.8Diluted earnings per share (EPS-D) of DKK 1 7.6 10.8 Financial statements PerformanceIn brief Corporate governance Strategy Annual Report 2023 Contents Consolidated financial statements Income statement Statement of comprehensive Income Balance sheet Cash flow statement Statement of changes in equity Notes Basis of preparation Income statement Invested capital Capital structure and financing Other notes Parent company financial statements Section 3 3.8 Deferred tax DKK thousands 2023 2022Deferred tax at 1 January 64,612 52,192Foreign currency translation adjustment (80) (139)Merger / acquisition of enterprise 0 3,499Change in deferred tax for the year 6,296 9,421Change in deferred tax relating to previous years (730) (361)Deferred tax at 31 December 70,098 64,612Deferred tax relates to: Intangible assets 27,692 10,129Property, plant and equipment 51,443 61,726Receivables/inventory (7,576) (5,758)Liabilities (1,461) (1,485)Tax deficit 0 0Deferred tax at the end of the year 70,098 64,612 3.7 Corporation tax receivable/payable DKK thousands 2023 2022Corporation tax paid on account during the year 7,323 6,130Tax on taxable profit for the year (8,602) (7,699)Tax payable relating to previous years (1,783) (1,932)Total corporation tax receivable/payable (3,062) (3,501) Accounting policy Corporation tax Current tax liabilities and receivables are recognised in the balance sheet as calculated tax on taxable income for the year, adjusted for tax on previous years’ taxable income and tax paid on account. Financial statements PerformanceIn brief Corporate governance Strategy Annual Report 2023 Contents Consolidated financial statements Income statement Statement of comprehensive Income Balance sheet Cash flow statement Statement of changes in equity Notes Basis of preparation Income statement Invested capital Capital structure and financing Other notes Parent company financial statements Section 3 Accounting policy Deferred tax Deferred tax is measured according to the balance sheet liability method of all temporary differences between the net asset value and tax value of assets and liabilities. However, deferred tax is not recog- nised on temporary differences relating to non-deductible goodwill and other items where temporary differences - other than business acquisitions - have arisen at the time of acquisition without affecting profit/(loss) or taxable income. Deferred tax is measured based on the tax rules and at the tax rate that will apply as per the legislation on the balance sheet date when the tax liability is expected to be triggered as current tax. Changes in deferred tax as a result of changes in the tax rate are recognised in the income statement. Deferred tax assets are recognised under non-current assets at the value that is expected to be real- ised, either by set-off against deferred tax liabilities or by offsetting tax on future earnings. Deferred tax assets are assessed annually and recognised only to the extent that it is probable that they will be utilised. 3.8 Deferred tax (continued) 3.9 Other payables DKK thousands 2023 2022Holiday allowance 19,678 19,609Salary-related items 20,961 21,705Acquisition of enterprise and earn-out 0 1,500VAT and taxes 16,866 8,148Other payables 9,665 26,17967,170 77,141 At the end of 2023, provisions for liabilities were DKK 0.5 million (DKK 6.7 million). The development in 2023 related to reversal of previous provisions as the related disputes have had favourable outcomes. Financial statements PerformanceIn brief Corporate governance Strategy Annual Report 2023 Contents Consolidated financial statements Income statement Statement of comprehensive Income Balance sheet Cash flow statement Statement of changes in equity Notes Basis of preparation Income statement Invested capital Capital structure and financing Other notes Parent company financial statements Capital structure and financing Section 4 4.1 Equity 4.2 Financing activities 4.3 Financial risks 4.4 Financial income 4.5 Financial expenses Financial statements PerformanceIn brief Corporate governance Strategy Annual Report 2023 Contents Consolidated financial statements Income statement Statement of comprehensive Income Balance sheet Cash flow statement Statement of changes in equity Notes Basis of preparation Income statement Invested capital Capital structure and financing Other notes Parent company financial statements Section 4 4.1 Equity Capital management The Group regularly assesses the need for adapting the capital structure with a view to balancing a higher required rate of return on equity with the increased uncertainty associated with loan capital. At the end of 2023, the equity share of total equity and liabilities amounted to 45.5% (2022: 42.4%). The target is to obtain an equity ratio of a minimum of 40%. The financial gearing as at December 2023 was 1.3 (2022: 1.1). The Group target is to maintain a financial gearing within the range of 1.0 and 2.5. Capital is managed for the Group as a whole. The share capital consists of the following classes: Class A share capital: 56,400 shares of DKK 100 each 5,640,000Class B share capital: 22,360,000 shares of DKK 1 each 22,360,000Total share capital 28,000,000 Of the Company's share capital of TDKK 28,000 TDKK 5,640 is in the form of Class A-shares and TDKK 22,360 is in the form of Class B-shares. Each Class A-share of DKK 100 carries 1,000 votes whereas each Class B-share of DKK 1 carries one vote. In addition to the the difference in the number of voting rights, the two share classes differ in the following respects: The Class A-shares are non-negotiable securities. The Class B-shares are listed on Nasdaq Copen- hagen. The Class B-share capital has a preferential dividend right of 6%. In case of liquidation, Class B-shares take precedence over Class A-shares. As at December 31 2023, there are no outstanding obli- gations related to preferential dividends to Class B-shares. An alteration to the Company's Articles of Association requires that two thirds of cast votes and two thirds of the represented capital at a general meeting are in favour of the alteration. Holders of Class B-shares are entitled to appoint and elect one member of the Board of Directors, while holders of Class A shares elect the remaining Board members. Nomimal value Number of shares(DKK thousands) % of share capitalTreasury shares 2023 2022 2023 2022 2023 20221 January 823,900 823,900 824 824 2.9% 2.9%Holding at 31 December 823,900 823,900 824 824 2.9% 2.9% There have been no transactions with treasury shares in 2023. According to the authorisation of the annual general meeting, Brødrene A & O Johansen A/S is allowed to acquire treasury shares up to a total holding of 10% of the share capital. Financial statements PerformanceIn brief Corporate governance Strategy Annual Report 2023 Contents Consolidated financial statements Income statement Statement of comprehensive Income Balance sheet Cash flow statement Statement of changes in equity Notes Basis of preparation Income statement Invested capital Capital structure and financing Other notes Parent company financial statements Section 4 4.2 Financing activities DKK thousands 2023 2022Mortgage loans - floating interest rate - 5 years 421,170 444,300Bank loans - floating short-term interest rate 86,878 47,40 0Lease liabilities - floating interest rate 103,196 85,809611,244 577,50 9Payables relating to financing activities:Beginning-of-year 577,509 331,711Repayment of debt to credit institutions (76,357) (85,975)Raising of loans from credit institutions 92,705 247,973Debt from acquisition 0 68,083Addition, lease liabilities, net 52,729 39,886Repayment, lease liabilities (35,342) (24,169)Year-end 611,244 577,50 9 According to the leases there are no contingent rents. The contractual cash flows appear from note 4.3. 4.1 Equity (continued) Dividend The payment of dividends to the Company's shareholders has no tax implication for Brødrene A & O Johansen A/S. Proposed dividend for 2023 amounts to TDKK 105,000 corresponding to DKK 3.75 per share. Other reserves Reserve for net revaluation according to the equity method contains value adjustments related to investments in subsidiaries. Included in reserve for development costs is an amount corresponding to capitalised intangible assets meeting the criteria for being defined as a development project. Reserve for net revaluation according to the equity method and reserve for development costs are unavailable for distribution to shareholders. Reserve for foreign currency translation adjustment The reserve for foreign currency translation adjustments includes all translation adjustments that arise as a result of the translation of the financial statements of entities using a functional currency other than Danish kroner. There are no translation adjustments in connection with assets and liabilities constituting a part of the Group's net investment in such entities. Financial statements PerformanceIn brief Corporate governance Strategy Annual Report 2023 Contents Consolidated financial statements Income statement Statement of comprehensive Income Balance sheet Cash flow statement Statement of changes in equity Notes Basis of preparation Income statement Invested capital Capital structure and financing Other notes Parent company financial statements Section 4 Accounting policy Financial liabilities Debt to mortgage-credit institutions and credit institutions is recognised at the time of borrowing at the value of the proceeds received less transaction costs incurred. In subsequent periods, the financial liabilities are measured at amortised cost corresponding to the capitalised value using the effective interest rate, so that the difference between the proceeds and the nominal value is recognised in the income statement over the loan period. Other payables, which include debt to suppliers, are measured at their amortised cost price, and other liabilities at net realisable value. 4.2 Financing activities (continued) Financial statements PerformanceIn brief Corporate governance Strategy Annual Report 2023 Contents Consolidated financial statements Income statement Statement of comprehensive Income Balance sheet Cash flow statement Statement of changes in equity Notes Basis of preparation Income statement Invested capital Capital structure and financing Other notes Parent company financial statements Section 4 4.3 Financial risks The Group's risk management policies As a result of its operations, investments and financing, the Group is exposed to changes in exchange rates and interest-rate levels. It is Group policy not to engage in any active speculation in financial risks. The Group's financial management therefore only concentrates on the management of the finan- cial risks that are directly linked to the Group's operations and financing. Financial risks are managed centrally by the Group's finance function. The overall framework for the financial risk management is defined in the Group's finance policy, which has been approved by the Board of Directors. The finance policy covers the Group's finance policy as well as its policy relating to credit risks associated with financial counterparties and contains a description of the approved risk framework. Management monitors the Group's risk concentration on customers, currencies and other areas on a regular basis. Currency risks The Group's currency risk in connection with Danish operations is limited as revenue is generated in Danish kroner, and goods are primarily purchased in DKK or EUR. The Group's foreign operations are not much affected by currency fluctuations, as income and expenses are largely paid in local currency. Consolidated results will be affected by exchange differ- ences arising on translation of foreign operations' results and on translation of net assets. The Group uses derivative financial instruments to a very limited extent. The derivative financial instru- ments consist of forward exchange contracts for the purchase of EUR. The fair value of the forward exchange contracts amounts to DKK -0.1 million at 31 December 2023, and therefore no further infor- mation is provided. The Group had no significant currency risks relating to receivables or payables in foreign currencies at 31 December 2023, and the consolidated results would therefore not be affected to any major extent by changes in exchange rates at 31 December 2023. The Group has the following currency exposure at 31 December: 2023 2022DKK thousands EUR OTHER TOTAL EUR OTHER TOTALTrade payables 49,387 40,606 89,993 66,278 39,297 105,575Payables to credit institutions (28,078) (74,806) (102,884) 153,708 (25,808) 127,9 00Net exposure 21,309 (34,200) (12,891) 219,986 13,489 233,475Risk in exchange rate fluctuation 1% 10% 1% 10%Estimated effect on income statement and equity 213 (3,420) (3,207) 2,200 1,349 3,549 * Mainly SEK and NOK The Group's currency exposure related to financial instruments is primarily a result of the Group's financing activities . Financial statements PerformanceIn brief Corporate governance Strategy Annual Report 2023 Contents Consolidated financial statements Income statement Statement of comprehensive Income Balance sheet Cash flow statement Statement of changes in equity Notes Basis of preparation Income statement Invested capital Capital structure and financing Other notes Parent company financial statements Section 4 4.3 Financial risks (continued) Interest rate risks As a result of its investing and financing activities, the Group has a risk exposure relating to fluctua- tions in the interest-rate level in Denmark. The main interest rate exposure is related to fluctuations in CIBOR. In 2023, the Group's interest-bearing debt, determined as payables to credit institutions and lease liabilities less negotiable securities and cash decreased by DKK 20.8 million to DKK 521.7 million at the end of the year. Based on the debt, a decrease of one percentage point in the general interest-rate level would result in a decrease in the Group's annual interest expenses before tax of approximately DKK 6.1 million (2022: approximately DKK 5.4 million). Liquidity risks In connection with borrowing, it is the Group's policy to ensure the greatest possible flexibility by spreading the loans on different maturity/renegotiation dates and on different lenders to ensure the best possible terms. The Group's cash resources comprise cash and short-term deposits, securities and undrawn credit facilities. It is the Group's aim to have sufficient cash resources in order to make appro- priate decisions also in connection with unforeseen liquidity fluctuations. The Group's payables fall due as follows: Carrying Contractual Less than 1 to More than DKK thousandsamountcash flows1 year5 years5 years2023Mortgage loans 421,170 582,439 37,407 149,038 395,994Bank loans 86,878 86,878 86,878 0 0Lease liabilities 103,196 110,789 39,672 60,714 10,403Trade payables 1,006,632 1,006,632 1,006,632 0 031 December 1,617,876 1,786,738 1,170,589 209,752 406,3972022Mortgage loans 444,300 597,429 33,663 144,279 419,488Bank loans 47,40 0 47,40 0 47,40 0 0 0Lease liabilities 85,809 88,375 29,278 45,158 13,939Trade payables 1,181,319 1,181,319 1,181,319 0 031 December 1,758,828 1,914,523 1,291,660 189,437 433,427 Financial statements PerformanceIn brief Corporate governance Strategy Annual Report 2023 Contents Consolidated financial statements Income statement Statement of comprehensive Income Balance sheet Cash flow statement Statement of changes in equity Notes Basis of preparation Income statement Invested capital Capital structure and financing Other notes Parent company financial statements Section 4 Assumptions regarding the maturity analysis: · The maturity analysis is based on all undiscounted cash flows, including estimated interest payments according to contractual basis. · Interest payments are estimated on the basis of current market conditions. Based on the Group's expectations for future operations and the Group's current cash resources, no material liquidity risks have been identified. Agreements containing Supply Chain Finance programmes have been concluded. At the balance sheet date liabilities related to Supply Chain Finance programmes amount to DKK 204.2m (2022: DKK 336.0m). In the balance sheet the Supply Chain Finance programmes are classified as trade payables. Group loans and committed credit facilities are not subject to any special terms or conditions (cove- nants). Credit risks The Group's credit risks relate to receivables and cash and short-term deposits. The maximum credit risk associated with financial assets corresponds to the values recognised in the balance sheet. The Group has no material risks relating to individual customers or business partners. Credit rating is based on an individual assessment of customers and business partners and their respective financial situation. The management of the credit risk is based on internal credit limits determined according to the customers' credit rating. As a result of the current market conditions, the Group has amended its credit limits for a number of customers. If the credit rating of a customer is assessed as being insuffi- cient, the terms of payment are amended or security is provided. The Group's credit exposure to customers is monitored on an ongoing basis as part of the Group's risk management. Of the DKK 542.8m in trade receivables DKK 174.4m are credit-insured. In general, no security has been received for overdue or impaired receivables. Categories of financial instruments, and methods and assumptions for determining fair values The carrying amount and fair value of financial instruments are identical with the exception of loans measured at amortised cost, and where the carrying amount at 31 December 2023 amounts to DKK 611.2m (2022: DKK 577.5m) incl. lease liabilities at the end of the year. The methods and assumptions applied in determining fair values of financial instruments are presented below for each class of financial instrument. The methods used have not been changed compared to last year. The fair value of mortgage debt is determined on the basis of the underlying bonds. Short-term float- ing-rate bank loans are measured at nominal value. Trade receivables, cash and short-term deposits, and trade payables are subject to a short credit period and are considered to have a fair value that corresponds to the carrying amount. No further fair value information for financial assets is given when the carrying amount is assumed to be a proper measure of the fair value of the assets. 4.3 Financial risks (continued) Financial statements PerformanceIn brief Corporate governance Strategy Annual Report 2023 Contents Consolidated financial statements Income statement Statement of comprehensive Income Balance sheet Cash flow statement Statement of changes in equity Notes Basis of preparation Income statement Invested capital Capital structure and financing Other notes Parent company financial statements Section 4 4.3 Financial risks (continued) Accounting policy Financial instruments Derivative financial instruments are recognised on the trade date and measured at fair value in the balance sheet. Positive and negative fair values of derivative financial instruments are included in other receivables and other payables, respectively, and the offsetting of positive and negative values is only made when the company is entitled to and intends to settle several financial instruments net. Fair values of derivative financial instruments are calculated on the basis of current market data and recognised valuation methods. Hedge accounting is only used in connection with currency futures. 4.4 Financial income DKK thousands 2023 2022Interest income from current assets 3,338 2,085Gain from sale of subsidiary 0 1,500Foreign exchange gains, net 0 (551)3,338 3,033 Financial statements PerformanceIn brief Corporate governance Strategy Annual Report 2023 Contents Consolidated financial statements Income statement Statement of comprehensive Income Balance sheet Cash flow statement Statement of changes in equity Notes Basis of preparation Income statement Invested capital Capital structure and financing Other notes Parent company financial statements Section 4 4.5 Financial expenses DKK thousands 2023 2022Interest expenses on liabilities (25,541) (8,571)Expenses, lease liabilities, external (1,615) (310)Other interest expenses (387) (277)Foreign exchange losses, net (6,196) 0(33,739) (9,158) Accounting policy Financial income and expenses Financial income and expenses include interest and realised and unrealised capital gains and losses, as well as write-downs on securities and debt, the amortisation of financial assets and liabilities, including supplements and reimbursements under the advance tax scheme, etc. Borrowing costs from general or specific loans attributable to the construction period of qualifying assets are recognised at the cost price of the relevant assets. Financial statements PerformanceIn brief Corporate governance Strategy Annual Report 2023 Contents Consolidated financial statements Income statement Statement of comprehensive Income Balance sheet Cash flow statement Statement of changes in equity Notes Basis of preparation Income statement Invested capital Capital structure and financing Other notes Parent company financial statements Other notes Section 5 5.1 Acquisition of enterprise 5.2 Contingent liabilities, security, etc. 5.3 Share based remuneration 5.4 Related parties 5.5 Subsequent events 5.6 New accounting regulation Financial statements PerformanceIn brief Corporate governance Strategy Annual Report 2023 Contents Consolidated financial statements Income statement Statement of comprehensive Income Balance sheet Cash flow statement Statement of changes in equity Notes Basis of preparation Income statement Invested capital Capital structure and financing Other notes Parent company financial statements Section 5 5.1 Business combinations On April 1 2022 the Group gained control of EA Værktøj Engros A/S and EA Værktøj Ejendomme A/S by acquiring all the shares in the two companies. EA Værktøj is a specialst wholesaler within brackets, electrical tools and handtools, work clothes and PPE. The primary customers of EA are carpenters and woodworkers, and sales are carried out from 7 stores in Jutland, on Funen and Zealand. The acquisition is in line with the Group's focus on becoming af specialist wholesaer for all tradesmen. Prior to the acquisiti on, AO primarily served plumbers and electricians. With the acquisition of EA, the AO Group also serves carpenter and woodworkers as well. For the financial year 2020/2021 which ended 30 September 2021 EA reported a revenue of DKK 280 million. EA Værktøj Engros has been merged into Brødrene A & O Johansen A/S and contributes with TDKK 193,605 and an EBT of TDKK 5,482 to the results of 2022. The result of EA has been negatively affected by costs related to the restructuring and integration of EA Værktøj into the Group. A final valuation was carried out in 2023 reducing the value of the acquired inventory by TDKK 8,854 and increasing goodwill by the same amount. The fair value of acquired assets, liabilities and contingent liabilities, and aqusition price for EA Værktøj have been finally assessed and can be specified as follows: DKK thousands 2022Property, plant and equipment 56,818Inventories 57,281Trade receivables 47,315Other receivables 1,250Cash 137Interest-bearing debt including lease liabilities (94,266)Trade payables (31,609)Provisions (4,886)Other payables (9,315)Acquired net assets 22,725Goodwill 96,509Rights 8,158Deferred tax liabilities (992)Price of acquisition 126,400Acquisitions costs 1,825Cash paid on acquisition 126,400Cash acquired (137)Net cash effect 2022 from aquisition of EA Værktøj 126,263 Financial statements PerformanceIn brief Corporate governance Strategy Annual Report 2023 Contents Consolidated financial statements Income statement Statement of comprehensive Income Balance sheet Cash flow statement Statement of changes in equity Notes Basis of preparation Income statement Invested capital Capital structure and financing Other notes Parent company financial statements Section 5 5.2 Contingent liabilities, security, etc. Land and buildings with a total carrying amount of TDKK 672,294 (2022: TDKK 669,893) are provided as security for the Group's payables to mortgage credit institutions and finance lease liabilities. As a normal part of doing business AO can be invovled in disputes or legal proceedings. The outcome of pending legal actions is not expected to have any material impact on the financial position of the Group. The parent company is jointly taxed with AO Invest A/S and the ultimate Danish parent company Avenir Invest ApS, which is the administration company for joint taxation purposes. The company and there- fore the Group is unlimited, jointly and severally liable with other jointly taxed companies towards the Danish tax authorities for the total corporation tax. Payable corporation taxes within the joint taxation group amounted to TDKK 8,357 at 31 December 2023 (2022: TDKK -8,933). Any adjustment to the taxable income subject to joint taxation might entail an increase in the Compa- ny's liability. Group companies are not subject to withholding tax on dividends. 5.3 Share based remuneration In order to motivate and retain members of the Executive Board and other managers in the Group, Brødrene A & O Johansen A/S has introduced an incentive programme based on the shares of the company. The programme is designed to align the interests of the participants of the share programme with the interests of the shareholders. The intention is to promote long-term value creation in the Group. In 2023 a total of 56,935 (2022: 62,838) Restricted Stock Units (RSUs) have been granted to certain key employees. The RSUs are measured at fair value at the time of the grant using a Black & Scholes model. The fair value is recognised as staff costs and equity on a straight line basis over the vesting period of 36 months. The RSUs can only be settled in shares and no subsequent measurement of the fair value is performed. Restricted Out-Released Granted Out -Fair value Stock Units standing during during standing at the time Vesting 2023RSUs Jan 1the yearthe yearRSUs Dec 31of the grantdateExecutive BoardGrant 2022 44,370 0 0 44,370 4,357 March 2025Executive Board total 44,370 0 0 44,370Other employeesGrant 2022 18,468 0 0 18,468 1,813 March 2025January Grant 2023 0 56,935 56,935 4,3742026Other employees total 18,468 0 56,935 75,403Total 62,838 0 56,935 119,773 Financial statements PerformanceIn brief Corporate governance Strategy Annual Report 2023 Contents Consolidated financial statements Income statement Statement of comprehensive Income Balance sheet Cash flow statement Statement of changes in equity Notes Basis of preparation Income statement Invested capital Capital structure and financing Other notes Parent company financial statements Section 5 5.4 Related parties The Group's related parties comprise the parent company Avenir Invest ApS (Axeltorv 2, DK-1607 Copenhagen V, Denmark), the Board of Directors, the Executive Board and management employees. Avenir Invest ApS has control over the company through its ownership of the majority of the voting rights. During the year, no transactions were carried out with Avenir Invest ApS apart from payment of dividends and corporate tax. During the year, no significant transactions were carried out with the Board of Directors, the Executive Board, management employees or major shareholders apart from normal management remuneration, cf. note 2.5, and dividend payments. 5.5 Subsequent events No events have occurred after 31 December 2023 that are considered to have a material effect on the annual report for 2023. Financial statements PerformanceIn brief Corporate governance Strategy Annual Report 2023 Contents Consolidated financial statements Income statement Statement of comprehensive Income Balance sheet Cash flow statement Statement of changes in equity Notes Basis of preparation Income statement Invested capital Capital structure and financing Other notes Parent company financial statements Section 5 5.6 New accounting regulation At the time of publication of this annual report, IASB has issued the following new and amended finan- cial reporting standards and interpretations that are not compulsory for Brødrene A & O Johansen A/S in preparing the annual report for 2023: · IAS 1 Presentation of Financial Statements - Amendments to IAS 1 Presentation of Financial State- ments: Classification of Liabilities as Current or Non-current · IFRS 17 Insurance Contracts - Amendments to IFRS 17: Initial Application and IFRS 17 and IFRS 9 Financial Instruments – Comparative Information · IFRS 16 Leasing - Lease Liability in a Sale and Leaseback · IAS 7 - Statement of Cash Flows and IFRS 7 - Financial Instruments: Disclosures to clarify the charater- istics of supplier finance arrangements · IAS 21 The Effects of Changes in Foreign Exchange Rates - Ammendments to IAS 21 Lack of exchange- ability None of the standards and interpretations mentioned above have been adopted by the EU. The adopted standards and interpretations that have not yet come into effect will be implemented as they become compulsory for Brødrene A & O Johansen A/S. It has been assessed that none of the above-mentioned standards and interpretations will affect recognition and measurement for Brødrene A & O Johansen A/S. Financial ratio definitions as recommended by CFA Society Denmark Gross profit margin (Gross margin / Revenue) * 100 Profit margin (Operating profit or loss (EBIT) / Revenue) * 100 Return on capital employed (EBIT / Average total assets) * 100 Return on equity (Net profit or loss for the year / Average equity) * 100 Net gearing (Net interest bearing debt (NIBD) / EBITDA) Solvency ratio (Equity / Total assets) * 100 Price Earnings Basic (P/E Basic) Share price at the end of the year / Earnings per share Earnings per share (EPS Basic), DKK Profit after tax / Average number of shares in circulation Diluted earnings per share (EPS-D), DKK Profit after tax / Diluted average number of outstanding share options Book value Equity at the end of the year / Average number of shares in circulation Financial statements PerformanceIn brief Corporate governance Strategy Annual Report 2023 Parent company financial statements Financial statements PerformanceIn brief Corporate governance Strategy Annual Report 2023 Contents Consolidated financial statements Parent company financial statements Income statement Statement of comprehensive Income Balance sheet Cash flow statement Statement of changes in equity Notes Primary statements Income statement Statement of comprehensive income Balance sheet Cash flow statement Statement of changes in equity Notes 1 Basis of preparation 1.1 Accounting policies 1.2 Significant estimated uncertainties and assumptions 2 Income statement 2.1 Cost of sales 2.2 Other operating income 2.3 External expenses 2.4 Staff costs 2.5 Depreciation and amortisation 2.6 Tax on profit or loss for the year 3 Invested Capital 3.1 Intangible assets 3.2 Property, plant and equipment 3.3 Right-of-use assets and lease liabilities 3.4 Investments in subsidiaries 3.5 Inventories 3.6 Trade receivables 3.7 Deferred tax 3.8 Other payables 4 Capital Structure and financing 4.1 Equity 4.2 Financing activities 4.3 Financial risks 4.4 Financial income 4.5 Financial expenses 5 Other notes 5.1 Contingent liabilities, security, etc. 5.2 Related parties 5.3 Subsequent events Parent company financial statements Financial statements PerformanceIn brief Corporate governance Strategy Annual Report 2023 Contents Consolidated financial statements Parent company financial statements Income statement Statement of comprehensive Income Balance sheet Cash flow statement Statement of changes in equity Notes Income statement For 1 January – 31 December DKK thousands Note 2023 2022 Revenue 4,993,407 5,093,723 Cost of sales 2.1 (3,838,845) (3,868,876) Gross profit 1,154,562 1,224,847 Other operating income 2.2 1,520 2,201 Gross margin 1,156,082 1,227,0 4 8 External expenses 2.3 (291,076) (310,082) Staff costs 2.4 (495,051) (476,601) Earnings before interest, taxes, depreciation and amortisation (EBITDA) 369,955 440,365 Depreciation and amortisation 2.5 (144,717) (120,472) Operating profit or loss (EBIT) 225,238 319,893 Subsidiaries' profit after tax 3.4 46,353 47,221 Financial income 4.4 3,686 3,360 Financial expenses 4.5 (26,044) (7,260) Profit or loss before tax (EBT) 249,233 363,214 Tax on profit or loss for the year 2.6 (43,137) (68,745) Net profit or loss for the year 206,096 294,469 Financial statements PerformanceIn brief Corporate governance Strategy Annual Report 2023 Contents Consolidated financial statements Parent company financial statements Income statement Statement of comprehensive Income Balance sheet Cash flow statement Statement of changes in equity Notes Statement of comprehensive income For 1 January – 31 December DKK thousands Note 2023 2022 Other comprehensive income Net profit or loss for the year 206,096 294,469 Items which will be reclassified to the income statement Foreign currency translation adjustment relating to foreign entities 987 (6,156) Tax on other comprehensive income 0 0 Other comprehensive income after tax 987 (6,156) Total comprehensive income 207,0 83 288,313 Financial statements PerformanceIn brief Corporate governance Strategy Annual Report 2023 Contents Consolidated financial statements Parent company financial statements Income statement Statement of comprehensive Income Balance sheet Cash flow statement Statement of changes in equity Notes Balance sheet as at 31 December Assets DKK thousands Note 2023 2022 Non-current assets Intangible assets 3.1 Goodwill 464,822 455,968 Intellectual property rights 44,195 47,6 83 Software 82,913 64,188 591,930 567,839 Property, plant and equipment 3.2 Land and buildings 138,869 142,219 Leasehold improvements 16,500 14,544 Fixtures and operating equipment 219,767 223,662 Right-of-use assets 3.3 195,974 205,272 571,110 585,697 Other non-current assets Investments in subsidiaries 3.4 349,421 336,872 Other investments 247 284 349,668 337,156 Total non-current assets 1,512,708 1,490,692 DKK thousands Note 2023 2022 Current assets Inventories 2.1, 3.5 723,896 834,240 Trade receivables 3.6 517,196 613,305 Receivables from subsidiaries 3.6 139,863 63,179 Joint tax contribution 0 18,645 Other receivables 16,151 12,763 Prepayments and accrued income 22,886 18,020 Cash and short-term deposits 46,810 291 Total current assets 1,466,802 1,560,443 Total assets 2,979,510 3,051,135 Financial statements PerformanceIn brief Corporate governance Strategy Annual Report 2023 Contents Consolidated financial statements Parent company financial statements Income statement Statement of comprehensive Income Balance sheet Cash flow statement Statement of changes in equity Notes Balance sheet as at 31 December Equity and liabilities DKK thousands Note 2023 2022 Equity 4.1 Share capital 28,000 28,000 Reserve according to the equity method 221,846 209,298 Reserve for development costs 62,875 41,242 Reserve for foreign currency translation adjustments 0 0 Retained earnings 1,057,578 981,958 Proposed dividend for the financial year 105,000 147,000 Total equity 1,475,299 1,407,498 Non-current liabilities Deferred tax 3.7 32,371 29,063 Credit institutions 4.2 84,418 87,4 89 Lease liabilities 3.3, 4.2 119,054 135,961 Other non-current liabilities 0 0 Total non-current liabilities 235,843 252,513 DKK thousands Note 2023 2022 Current liabilities Credit institutions 4.2 95,199 61,078 Lease liabilities 3.3, 4.2 80,202 74,353 Trade payables 4.2 976,874 1,154,025 Amounts owed to subsidiaries 53,066 28,032 Joint tax contribution 3,658 0 Corporation tax payable 0 0 Provisions for liabilities 500 6,740 Other payables 3.8 58,869 66,896 Total current liabilities 1,268,368 1,391,124 Total liabilities 1,504,211 1,643,637 Total equity and liabilities 2,979,510 3,051,135 Contingent liabilities, security, etc. 5.1 Notes without reference 5.2 - 5.3 Financial statements PerformanceIn brief Corporate governance Strategy Annual Report 2023 Contents Consolidated financial statements Parent company financial statements Income statement Statement of comprehensive Income Balance sheet Cash flow statement Statement of changes in equity Notes Cash flow statement DKK thousands Note 2023 2022 Cash flow from operating activities Operating profit or loss (EBIT) 225,238 319,893 Depreciation and amortisation 2.5 144,717 120,472 Other non-cash operating items, net 3,393 1,543 Cash flow from operations before change in working capital 373,348 441,908 Change in inventories 101,490 (215,913) Change in receivables 87,855 (80,319) Change in trade payables and other current payables (191,426) 142,892 Change in working capital (2,081) (153,340) Cash flow from operations 371,267 288,568 Net financials paid (22,358) (3,900) Corporation tax paid (17,527 ) (83,403) Cash flow from operating activities 331,382 201,265 DKK thousands Note 2023 2022 Cash flow from investing activities Purchase of intangible assets (33,934) (41,010) Purchase of property, plant and equipment (40,085) (53,395) Change in receivables from subsidiaries (51,650) 42,920 Dividends received 34,792 35,250 Sale of other non-current assets 37 0 Acquisition of enterprise (1,500) (127,163) Sale of enterprise 0 0 Cash flow from investing activities (92,340) (143,398) Cash flow from financing activities Repayment of debt to credit institutions (61,655) (39,860) Raising of loans from credit institutions 92,705 45,000 Repayment of lease liabilities (80,897) (51,090) Dividends paid (142,675) (122,292) Cash flow from financing activities (192,522) (168,242) Cashflow for the year 46,520 (110,375) Cash and short-term deposits at beginning of year 291 110,666 Cash and short-term deposits at end of year 46,810 291 Financial statements PerformanceIn brief Corporate governance Strategy Annual Report 2023 Contents Consolidated financial statements Parent company financial statements Income statement Statement of comprehensive Income Balance sheet Cash flow statement Statement of changes in equity Notes DKK thousands Share capital Equity method Reserve for development costs Proposed dividend for the year Retained earnings Total equity Equity at 1 January 2023 28,000 209,298 41,242 147,000 981,958 1,407,498 Net profit for the year 0 46,353 0 105,000 54,743 206,096 Movement for the year 0 0 21,633 0 (21,633) 0 Foreign currency translation adjustment 0 987 0 0 0 987 Total comprehensive income 0 47,3 40 21,633 105,000 33,110 207,0 83 Dividend distribution 0 0 0 (142,675) 0 (142,675) Dividend treasury shares 0 0 0 (4,325) 4,325 0 Dividend received 0 (34,792) 0 0 34,792 0 Sharebased remuneration 0 0 0 0 3,393 3,393 Total transactions with owners 0 (34,792) 0 (147,000) 42,510 (139,282) Equity at 31 December 2023 28,000 221,846 62,875 105,000 1,057,578 1,475,299 Equity at 1 January 2022 28,000 203,483 28,956 126,000 853,495 1,239,934 Net profit for the year 0 47,221 0 147,000 100,248 294,469 Movement for the year 0 0 12,286 0 (12,286) 0 Foreign currency translation adjustment 0 (6,156) 0 0 0 (6,156) Total comprehensive income 0 41,065 12,286 147,000 87,9 62 288,313 Dividend distribution 0 0 0 (122,292) 0 (122,292) Dividend treasury shares 0 0 0 (3,708) 3,708 0 Dividend received 0 (35,250) 0 0 35,250 0 Sharebased remuneration 0 0 0 0 1,543 1,543 Total transactions with owners 0 (35,250) 0 (126,000) 40,501 (120,749) Equity at 31 December 2022 28,000 209,298 41,242 147,000 981,958 1,407,498 Company statement of changes in equity Financial statements PerformanceIn brief Corporate governance Strategy Annual Report 2023 Contents Consolidated financial statements Parent company financial statements Income statement Statement of comprehensive Income Balance sheet Cash flow statement Statement of changes in equity Notes Basis of preparation Income statement Invested capital Capital structure and financing Other notes Basis of preparation Section 1 1.1 Accounting policies 1.2 Significant estimated uncertainties and assumptions Financial statements PerformanceIn brief Corporate governance Strategy Annual Report 2023 Contents Consolidated financial statements Parent company financial statements Income statement Statement of comprehensive Income Balance sheet Cash flow statement Statement of changes in equity Notes Basis of preparation Income statement Invested capital Capital structure and financing Other notes Section 1 1.1 Accounting policies The financial statements of the parent company Brødrene A & O Johansen A/S for 2023 are presented in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU and additional disclosure requirements in the Danish Financial Statements Act. The accounting policies of the parent company remain unchanged from last year. Significant accounting policies are identical to those applied by the AO Group except for those mentioned below. A general description of accounting policies can be found in note 1.1 of the consolidated finan- cial statements. Result of investments in subsidiaries In the parent company’s income statement, the propor- tionate share of the individual subsidiaries’ profit/(loss) after tax is recognised after the full elimination of internal gains/losses. Investments in subsidiaries in the parent company’s financial statements Investments in subsidiaries are measured according to the equity method. Investments in subsidiaries are measured at the propor- tionate share of the companies’ net worth calculated according to the Group’s accounting policies with the addition or deduction of unrealised intra-group profits and losses, and the addition or deduction of the remaining value of positive or negative goodwill calculated according to the acquisition method. Financial statements PerformanceIn brief Corporate governance Strategy Annual Report 2023 Contents Consolidated financial statements Parent company financial statements Income statement Statement of comprehensive Income Balance sheet Cash flow statement Statement of changes in equity Notes Basis of preparation Income statement Invested capital Capital structure and financing Other notes Section 1 1.2 Significant estimated uncertainties and assumptions When calculating the carrying amount of certain assets and liabilities, estimates are made of how future events affect the value of these assets and liabilities at the balance sheet date. The estimates and assumptions may have a significant effect on the financial reporting and can be categorised as significant accounting judgements or significant accounting estimates and assumptions. The estimates made are based on historical experience and other factors that the management considers reasonable in the circumstances, but which are inherently uncertain and unpredictable. The assumptions may be incomplete or inaccurate, and unexpected events or circumstances may arise. Furthermore, the company is subject to risks and uncertainties that may cause actual results to differ from those estimates. It may be necessary to change previous estimates due to changes in the circumstances underlying them or due to new knowledge or subsequent events. Significant accounting judgements, estimates and assumptions Significant accounting estimates and judgements include assumptions and estimates of the future and other uncer- tainty, that could potentially affect the company within the next 12 months. Estimates that are material to the financial reporting are made, inter alia, by valuing the impairment testing of goodwill, receivables, and inventories and by calculating depreciation and impairment. The following estimates and accompanying assessments are deemed material for the preparation of the financial statements: · Impairment testing for goodwill and other intangible assets · Valuation of receivables · Inventory valuation These estimates and assessments are described in the following notes: Note 3.1 Intangible assets Note 3.5 Inventories Note 3.6 Trade receivables Financial statements PerformanceIn brief Corporate governance Strategy Annual Report 2023 Contents Consolidated financial statements Parent company financial statements Income statement Statement of comprehensive Income Balance sheet Cash flow statement Statement of changes in equity Notes Basis of preparation Income statement Invested capital Capital structure and financing Other notes Income statement Section 2 2.1 Cost of sales 2.2 Other operating income 2.3 External expenses 2.4 Staff costs 2.5 Depreciation and amortisation 2.6 Tax on profit or loss for the year Financial statements PerformanceIn brief Corporate governance Strategy Annual Report 2023 Contents Consolidated financial statements Parent company financial statements Income statement Statement of comprehensive Income Balance sheet Cash flow statement Statement of changes in equity Notes Basis of preparation Income statement Invested capital Capital structure and financing Other notes Section 2 2.2 Other operating income The item includes property rental income. 2.3 External expenses DKK thousands 2023 2022 Remuneration for the auditor elected by the annual general meeting: Total remuneration may be specified as follows: Statutory audit (1,231) (1,304) Tax and VAT related advisory services (30) (17) Other services (410) (185) (1,671) (1,506) Other services primarily relate to concultancies regarding CSRD implementation and ESG strategies. 2.1 Cost of sales DKK thousands 2023 2022 Cost of goods purchased during the year (3,502,625) (3,960,528) Distribution costs (193,669) (194,024) (3,696,294) (4,154,552) Change in inventories: Inventory at the beginning of the year 834,240 552,192 Change in cost during the year 9,899 11,609 Inventory writedown, net 22,308 (15,237) Inventory at the end of the year 723,896 834,240 Change in inventory for the year (142,551) 285,676 Cost of sales for the year (3,838,845) (3,868,876) Financial statements PerformanceIn brief Corporate governance Strategy Annual Report 2023 Contents Consolidated financial statements Parent company financial statements Income statement Statement of comprehensive Income Balance sheet Cash flow statement Statement of changes in equity Notes Basis of preparation Income statement Invested capital Capital structure and financing Other notes Section 2 The Group only has defined contribution plans. The increase in full time employees for the Company primarily relates to the full year effect of the acqui- sition of EA Værktøj which contributed with 110 FTEs from april 2022. 2.4 Staff costs DKK thousands 2023 2022 Wages and salaries (400,684) (395,023) Pension contributions (36,272) (28,789) Share-based remuneration (3,393) (1,543) Other social security costs (5,884) (5,519) Other staff expenses (3,169) (3,105) Staff costs excl. temporary employees (449,402) (433,979) Wages temporary employees (45,649) (42,622) Staff costs total (495,051) (476,601) Wages and salaries include remuneration for: Board of Directors (2,625) (2,508) Board of Directors total (2,625) (2,508) Executive Board (21,570) (27,224) Share-based remuneration (1,402) (1,089) Pension contributions (2,633) (2,639) Benefits (787) (838) Executive Board total (26,392) (31,790) Board of Directors and Executive Board total (29,017) (34,298) Average number of full-time employees incl. temporary employees 879 856 Average number of full-time employees 808 789 Financial statements PerformanceIn brief Corporate governance Strategy Annual Report 2023 Contents Consolidated financial statements Parent company financial statements Income statement Statement of comprehensive Income Balance sheet Cash flow statement Statement of changes in equity Notes Basis of preparation Income statement Invested capital Capital structure and financing Other notes Section 2 2.5 Depreciation and amortisation DKK thousands 2023 2022 Intangible assets (18,676) (26,060) Property, plant and equipment (45,374) (43,458) Right-of-use assets, external (32,883) (23,766) Right-of-use assets, subsidiaries (48,013) (27,323) Gains/losses from the disposal of assets 229 135 (144,717) (120,472) 2.6 Tax on profit or loss for the year DKK thousands 2023 2022 Current tax for the year (39,501) (61,980) Adjustment related to previous years (328) (2) Addition from acquisition 0 (74) (39,829) (62,056) Adjustment of deferred tax for the year (4,085) (7,0 87 ) Adjustment of deferred tax for previous years 777 398 Total (43,137) (68,745) Tax on profit/loss for the year can be explained as follows: Calculated tax on profit/loss before tax, not incl. subsidiaries' profits 44,634 69,519 Tax effect of: Non-taxable income (886) (1,070) Other non-deductible costs 273 618 Adjustment of tax for previous years (884) (322) 43,137 68,745 Effective tax rate 21.3% 21.8% Taxes paid during the financial year (17,527 ) (83,403) Financial statements PerformanceIn brief Corporate governance Strategy Annual Report 2023 Contents Consolidated financial statements Parent company financial statements Income statement Statement of comprehensive Income Balance sheet Cash flow statement Statement of changes in equity Notes Basis of preparation Income statement Invested capital Capital structure and financing Other notes Invested capital Section 3 3.1 Intangible assets 3.2 Property, plant and equipment 3.3 Right-of-use assets and lease liabilities 3.4 Investments in subsidiaries 3.5 Inventories 3.6 Trade receivables 3.7 Deferred tax 3.8 Other payables Financial statements PerformanceIn brief Corporate governance Strategy Annual Report 2023 Contents Consolidated financial statements Parent company financial statements Income statement Statement of comprehensive Income Balance sheet Cash flow statement Statement of changes in equity Notes Basis of preparation Income statement Invested capital Capital structure and financing Other notes Section 3 3.1 Intangible assets DKK thousands Goodwill Intellectual property rights Software Cost at 1 January 2023 455,968 68,502 344,757 Foreign currency translation adjustment 0 0 0 Additions from acquisitions 0 0 0 Additions during the year 8,854 0 33,934 Disposals during the year 0 0 (48,279) Cost at 31 December 2023 464,822 68,502 330,412 Amortisation and depreciation at 1 January 2023 0 (20,819) (280,569) Foreign currency translation adjustment 0 0 0 Amortisation and depreciation for the year 0 (3,488) (15,188) Disposals during the year 0 0 48,258 Amortisation and depreciation at 31 December 2023 0 (24,307) (247,499) Carrying amount at 31 December 2023 464,822 44,195 82,913 DKK thousands Goodwill Intellectual property rights Software Cost at 1 January 2022 368,313 60,344 303,747 Foreign currency translation adjustment 0 0 0 Additions from acquisitions 87,655 8,158 0 Additions during the year 0 0 41,010 Disposals during the year 0 0 0 Cost at 31 December 2022 455,968 68,502 344,757 Amortisation and depreciation at 1 January 2022 0 (17,704) (257,625) Foreign currency translation adjustment 0 0 0 Amortisation and depreciation for the year 0 (3,115) (22,944) Disposals during the year 0 0 0 Amortisation and depreciation at 31 December 2022 0 (20,819) (280,569) Carrying amount at 31 December 2022 455,968 47,683 64,188 Apart from goodwill, all intangible assets are considered to have definite useful lives. No significant changes have been made in estimates relating to intangible assets. Intellectual property rights relate to Billig VVS', Greenline's, LampeGuru's and EA Værktøj's trademarks, domain names, etc. Financial statements PerformanceIn brief Corporate governance Strategy Annual Report 2023 Contents Consolidated financial statements Parent company financial statements Income statement Statement of comprehensive Income Balance sheet Cash flow statement Statement of changes in equity Notes Basis of preparation Income statement Invested capital Capital structure and financing Other notes Section 3 3.1 Intangible assets (continued) Development costs Development costs are included in "Software". The net value of capitalised development costs may be illustrated as follows: DKK thousands 2023 2022 Company Completed Work in progress Completed Work in progress Cost at 1 January 133,870 22,279 118,651 461 Additions during the year 18,560 24,207 14,758 22,279 Transfer 9,731 (9,731) 461 (461) Cost at 31 December 162,161 36,755 133,870 22,279 Amortisation and depreciation at 1 January (103,275) 0 (81,989) 0 Amortisation and depreciation for the year (15,033) 0 (21,286) 0 Amortisation and depreciation at 31 December (118,308) 0 (103,275) 0 Carrying amount at 31 December 43,853 36,755 30,595 22,279 Accounting policy Impairment testing for goodwill and other intangible assets In the annual impairment tests of intangible assets, including goodwill and rights, estimates are made of how the parts of the business (cash-generating units) to which goodwill and rights are attributed will be able to generate sufficient positive net cash flows in the future to support the value of the goodwill and rights. Due to the nature of the business, expected cash flows must be estimated for many years to come, leading to some uncertainty. This uncertainty is reflected by the chosen discount rate. Impairment testing has been described in note 3.1 of the consolidated financial statements. Financial statements PerformanceIn brief Corporate governance Strategy Annual Report 2023 Contents Consolidated financial statements Parent company financial statements Income statement Statement of comprehensive Income Balance sheet Cash flow statement Statement of changes in equity Notes Basis of preparation Income statement Invested capital Capital structure and financing Other notes Section 3 3.2 Property, plant and equipment DKK thousands Land and buildings Leasehold improve- ments Fixtures and operating equipment Cost at 1 January 2023 190,558 28,787 563,485 Foreign currency translation adjustment 0 0 0 Additions from acquisitions 0 0 0 Additions during the year 4,664 5,714 31,413 Disposals during the year 0 (311) (5,964) Cost at 31 December 2023 195,222 34,190 588,934 Amortisation and depreciation at 1 January 2023 (48,339) (14,243) (339,823) Foreign currency translation adjustment 0 0 0 Amortisation and depreciation for the year (8,014) (3,756) (33,604) Disposals during the year 0 309 4,260 Amortisation and depreciation at 31 December 2023 (56,353) (17,690) (369,167) Carrying amount at 31 December 2023 138,869 16,500 219,767 DKK thousands Land and buildings Leasehold improve- ments Fixtures and operating equipment Cost at 1 January 2022 195,148 23,229 501,052 Foreign currency translation adjustment 0 0 0 Additions from acquisitions 0 2,018 8,119 Additions during the year 769 3,540 54,451 Disposals during the year (5,359) 0 (137) Cost at 31 December 2022 190,558 28,787 563,485 Amortisation and depreciation at 1 January 2022 (44,540) (11,207) (303,299) Foreign currency translation adjustment 0 0 0 Amortisation and depreciation for the year (3,799) (3,036) (36,596) Disposals during the year 0 0 72 Amortisation and depreciation at 31 December 2022 (48,339) (14,243) (339,823) Carrying amount at 31 December 2022 142,219 14,544 223,662 Financial statements PerformanceIn brief Corporate governance Strategy Annual Report 2023 Contents Consolidated financial statements Parent company financial statements Income statement Statement of comprehensive Income Balance sheet Cash flow statement Statement of changes in equity Notes Basis of preparation Income statement Invested capital Capital structure and financing Other notes Section 3 3.3 Right-of-use assets and lease liabilities Right-of-use assets Land and buildings Fixtures and operating equipment Total Balance at 1 January 2023 190,693 14,579 205,272 Foreign currency translation adjustment 0 0 0 Additions during the year 39,239 41,643 80,882 Disposals during the year (6,660) (5,782) (12,442) Remeasurement of lease liability 2,796 362 3,158 Amortisation and depreciation for the year (68,960) (11,936) (80,896) Carrying amount at 31 December 2023 157,10 8 38,866 195,974 Right-of-use assets Land and buildings Fixtures and operating equipment Total Balance at 1 January 2022 157,031 15,931 172,962 Foreign currency translation adjustment 0 0 0 Additions during the year 77,757 6,897 84,654 Disposals during the year (3,026) (714) (3,740) Remeasurement of lease liability 2,485 0 2,485 Amortisation and depreciation for the year (43,554) (7,535) (51,089) Carrying amount at 31 December 2022 190,693 14,579 205,272 Lease liabilities 2023 2022 Maturity of lease liabilities 0-1 year 86,694 77,49 0 1-5 years 103,536 118,190 >5 years 30,537 19,499 Total un-discounted lease liabilities at 31 December 220,767 215,179 Short-term lease liabilities, less than 1 year 80,202 76,887 Long-term lease liabilities, more than 1 year 119,054 133,427 Lease liabilities recognised in the balance sheet 199,256 210,314 Amounts recognised in the income statement Interest expenses on lease liabilities (2,809) (1,747) Expenses related to low value leasing arrangements (232) (318) Expenses related to short term leasing arrangements (1,563) (1,639) Depreciation related to right-of-use assets (80,896) (51,089) Total (85,500) (54,793) Financial statements PerformanceIn brief Corporate governance Strategy Annual Report 2023 Contents Consolidated financial statements Parent company financial statements Income statement Statement of comprehensive Income Balance sheet Cash flow statement Statement of changes in equity Notes Basis of preparation Income statement Invested capital Capital structure and financing Other notes Section 3 3.4 Investments in subsidiaries DKK thousands 2023 2022 Cost at 1 January 127,575 126,575 Additions during the year 0 39,745 Disposal due to merger 0 (38,745) Cost at 31 December 127,575 127,575 Value adjustment at 1 January 209,297 203,483 Disposal due to merger 0 0 Dividends (34,792) (35,250) Forign currency translation adjustments 987 (6,156) Subsidiaries' results 46,353 47,221 Value adjustment at 31 December 221,846 209,297 Carrying amount at 31 December 349,421 336,872 2023 2022 Name Registered office Ownership interest Ownership interest AO Invest A/S Albertslund 100% 100% AO Sverige AB Sweden 100% 100% VVSochBAD Sverige AB Sweden 100% 100% Billig VVS AS Norway 100% 100% LampeGuru AS Norway 100% 100% 3.5 Inventories DKK thousands 2023 2022 Carrying amount of inventories recognised at net selling price 41,819 20,766 Accounting policy Inventories The estimated uncertainty of inventories relates primarily to slow-moving goods and thus to impair- ment to the net realisable value. Impairment requirements are continuously assessed on inventories based on historical sales and the assessment of future sales. Key accounting judgments and estimates Supplier bonus Reporting from suppliers as well as AO’s own records are used when assessing the supplier bonus that is due to AO. Estimates are used when reporting from suppliers have not been received or when the reporting from suppliers do not reconcile with AO’s records. Ongoing retrospective reviews are performed to ensure that supplier bonus is included correctly in the financial statements. Financial statements PerformanceIn brief Corporate governance Strategy Annual Report 2023 Contents Consolidated financial statements Parent company financial statements Income statement Statement of comprehensive Income Balance sheet Cash flow statement Statement of changes in equity Notes Basis of preparation Income statement Invested capital Capital structure and financing Other notes Section 3 3.6 Trade receivables Trade receivables consist of sale of goods to business customers which, in essence, have the same risk profile. Provisions for bad debts are made in accordance with the simplified expected credit loss model, taking into account AO's credit policy and debt collection procedure. AO has taken up credit insurance on customers with large balances. Historically, the Company has incurred no losses on receivables from subsidiaries, and is not ex pected to going forward. Calculated on the basis of a weighted loss ratio, the expected credit losses on trade receivables are as follows: DKK thousands Loss ratio Receivable amount Expected loss Total 2023 Not yet due 0.6 % 491,225 (2,754) 488,471 Due within 1-30 days 3.6 % 19,806 (704) 19,102 Due within 31-60 days 15.6 % 2,651 (414) 2,237 Due in more than 60 days 83.5 % 44,861 (37,475) 7,38 6 Total at 31 December 2023 558,543 (41,347) 517,19 6 2022 Not yet due 1.8% 601,879 (10,658) 591,221 Due within 1-30 days 7.6% 12,199 (931) 11,268 Due within 31-60 days 9.8% 6,116 (602) 5,514 Due in more than 60 days 85.1% 35,560 (30,258) 5,302 Total at 31 December 2022 655,754 (42,449) 613,305 * Expected losses are shown including VAT. Financial statements PerformanceIn brief Corporate governance Strategy Annual Report 2023 Contents Consolidated financial statements Parent company financial statements Income statement Statement of comprehensive Income Balance sheet Cash flow statement Statement of changes in equity Notes Basis of preparation Income statement Invested capital Capital structure and financing Other notes Section 3 3.6 Trade receivables (continued) DKK thousands 2023 2022 Provision for losses on receivables: Provision for losses on receivables at 1 January excl. VAT 36,215 39,325 Realised loss during the year - use of previous provision (8,271) (14,009) Adjustment of provisions for losses 5,616 10,899 Provision for losses on receivables at 31 December 33,560 36,215 Recognised previously written-off receivables (298) (120) Losses recognised in the year and not previously provided for 0 0 Operating effect, net from loss and provision for losses on receivables 5,318 10,779 Accounting policy Receivables Estimates are used when assessing the probability of receivables. Due to the financial situation in society, the risk of losses on doubtful receivables remains high, which has been taken into account when assessing new customers, by way of impairment losses at the balance sheet date, and in the day-to-day governance and control of the receivables. Customer bonus Estimates are used in relation to the determination of the bonus levels reached on bonus agreements with a duration of more than one year. The applied estimates are reviewed on an ongoing basis to ensure a correct valuation of bonus due to customers. 3.7 Deferred tax DKK thousands 2023 2022 Deferred tax at 1 January 29,063 21,183 Foreign currency translation adjustment 0 0 Merger / acquisition of enterprise 0 1,190 Change in deferred tax for the year 4,085 7,087 Change in deferred tax relating to previous years (777) (397) Deferred tax at 31 December 32,371 29,063 Deferred tax relates to: Intangible assets 27,654 10,098 Property, plant and equipment 13,621 26,177 Receivables (7,455) (5,729) Liabilities (1,449) (1,483) Tax deficit 0 0 Deferred tax at the end of the year 32,371 29,063 Financial statements PerformanceIn brief Corporate governance Strategy Annual Report 2023 Contents Consolidated financial statements Parent company financial statements Income statement Statement of comprehensive Income Balance sheet Cash flow statement Statement of changes in equity Notes Basis of preparation Income statement Invested capital Capital structure and financing Other notes Section 3 3.8 Other payables DKK thousands 2023 2022 Holiday allowance 18,027 18,003 Salary-related items 18,584 19,380 Acquisition of enterprise and earn-out 0 1,500 VAT and taxes 12,962 2,702 Other payables 9,296 25,311 58,869 66,896 Financial statements PerformanceIn brief Corporate governance Strategy Annual Report 2023 Contents Consolidated financial statements Parent company financial statements Income statement Statement of comprehensive Income Balance sheet Cash flow statement Statement of changes in equity Notes Basis of preparation Income statement Invested capital Capital structure and financing Other notes Capital structure and financing Section 4 4.1 Equity 4.2 Financing activities 4.3 Financial risks 4.4 Financial income 4.5 Financial expenses Financial statements PerformanceIn brief Corporate governance Strategy Annual Report 2023 Contents Consolidated financial statements Parent company financial statements Income statement Statement of comprehensive Income Balance sheet Cash flow statement Statement of changes in equity Notes Basis of preparation Income statement Invested capital Capital structure and financing Other notes Section 4 4.1 Equity Share capital The share capital consists of the following classes: Class A-share capital: 56,400 shares of DKK 100 each 5,640,000 Class B-share capital: 22,360,000 shares of DKK 1 each 22,360,000 Total share capital 28,000,000 Of the Company's share capital of TDKK 28,000 TDKK 5,640 is in the form of Class A-shares and TDKK 22,360 is in the form of Class B-shares. Each A-share of DKK 100 carries 1,000 votes whereas each Class B-share of DKK 1 carries one vote. In addition to the the difference in the number of voting rights, the two share classes differ in the following respects: The Class A-shares are non-negotiable securities. The Class B-shares are listed on Nasdaq Copen- hagen. The Class B-share capital has a preferential dividend right of 6%. In case of liquidation, Class B-shares take precedence over Class A-shares. As at December 31 2023 there are no outstanding obli- gations related to preferential dividends to Class B-shares. An alteration to the Company's Articles of Association requires that two thirds of cast votes and two thirds of the represented capital at a general meeting are in favour of the alteration. Holders of Class B-shares are entitled to appoint and elect one member of the Board of Directors, while holders of Class A-shares elect the remaining Board members. Number of shares Nomimal value (DKK thousands) % of share capital Treasury shares 2023 2022 2023 2022 2023 2022 1 January 823,900 823,900 824 824 2.9% 2.9% Holding at 31 December 823,900 823,900 824 824 2.9% 2.9% There have been no transactions with treasury shares in 2023. According to the authorisation of the annual general meeting, Brødrene A & O Johansen A/S is allowed to acquire treasury shares up to a total holding of 10% of the share capital. Financial statements PerformanceIn brief Corporate governance Strategy Annual Report 2023 Contents Consolidated financial statements Parent company financial statements Income statement Statement of comprehensive Income Balance sheet Cash flow statement Statement of changes in equity Notes Basis of preparation Income statement Invested capital Capital structure and financing Other notes Section 4 4.1 Equity (continued) Dividend The payment of dividends to the Company's shareholders has no tax implication for Brødrene A & O Johansen A/S. Proposed dividend for 2023 amounts to TDKK 105,000 corresponding to DKK 3.75 per share. Other reserves Reserve for net revaluation according to the equity method contains value adjustments related to investments in subsidiaries. Included in reserve for development costs is an amount corresponding to capitalised intangible assets meeting the criteria for being defined as a development project. Reserve for net revaluation according to the equity method and reserve for development costs are unavailable for distribution to shareholders. 4.2 Financing activities DKK thousands 2023 2022 Mortgage loans - floating interest rate - 5 years 90,061 95,048 Bank loans - floating short-term interest rate 89,556 53,519 Lease liabilities - floating interest rate 199,256 210,314 378,873 358,882 Payables relating to financing activities: Beginning-of-year 358,882 286,981 Repayment of debt to credit institutions (61,655) (39,860) Raising of loans from credit institutions 92,705 45,000 Debt from acquisition 0 29,408 Addition, lease liabilities, net 69,839 88,443 Repayment, lease liabilities (80,897) (51,090) Year-end 378,873 358,882 According to the leases there are no contingent rents. The contractual cash flows appear from note 4.3. Financial statements PerformanceIn brief Corporate governance Strategy Annual Report 2023 Contents Consolidated financial statements Parent company financial statements Income statement Statement of comprehensive Income Balance sheet Cash flow statement Statement of changes in equity Notes Basis of preparation Income statement Invested capital Capital structure and financing Other notes Section 4 4.3 Financial risks The companys payables fall due as follows: DKK thousands Carrying amount Contractual cash flows Less than 1 year 1 to 5 years More than 5 years 2023 Mortgage loans 90,061 123,999 8,168 32,284 83,547 Bank loans 89,556 89,556 89,556 0 0 Lease liabilities 199,256 220,767 86,694 103,536 30,537 Trade payables 976,874 976,874 976,874 0 0 Intra-group balances 53,066 53,066 0 53,066 0 31 December 1,408,813 1,464,262 1,161,292 188,886 114,084 2022 Mortgage loans 95,048 130,558 7,4 06 32,051 91,100 Bank loans 53,519 53,519 53,519 0 0 Lease liabilities 210,314 215,179 7 7,49 0 118,190 19,499 Trade payables 1,154,025 1,154,025 1,154,025 0 0 Intra-group balances 28,032 28,032 0 28,032 0 31 December 1,540,939 1,581,315 1,292,441 178,274 110,599 4.4 Financial income DKK thousands 2023 2022 Interest income from current assets 2,918 2,065 Interest income from subsidiaries 768 411 Gain from sale of subsidiary 0 1,500 Foreign exchange gains, net 0 (616) 3,686 3,360 4.5 Financial expenses DKK thousands 2023 2022 Interest expenses on liabilities (17,305) (5,493) Expenses, lease liabilities, external (1,541) (755) Expenses, lease liabilities, subsidiaries (1,268) (992) Other interest expenses (122) (20) Foreign exchange losses, net (5,808) 0 (26,044) (7,260) Financial statements PerformanceIn brief Corporate governance Strategy Annual Report 2023 Contents Consolidated financial statements Parent company financial statements Income statement Statement of comprehensive Income Balance sheet Cash flow statement Statement of changes in equity Notes Basis of preparation Income statement Invested capital Capital structure and financing Other notes Other notes Section 5 5.1 Contingent liabilities, security, etc. 5.2 Related parties 5.3 Subsequent events Financial statements PerformanceIn brief Corporate governance Strategy Annual Report 2023 Contents Consolidated financial statements Parent company financial statements Income statement Statement of comprehensive Income Balance sheet Cash flow statement Statement of changes in equity Notes Basis of preparation Income statement Invested capital Capital structure and financing Other notes Section 5 5.1 Contingent liabilities, security, etc. Land and buildings with a total carrying amount of TDKK 102,256 (2022: TDKK 110,777) are provided as security for the Company's payables to mortgage credit institutions and finance lease liabilities. As a normal part of doing business AO can be invovled in disputes or legal proceedings. The outcome of pending legal actions is not expected to have any material impact on the financial position of the Company. The company is jointly taxed with AO Invest A/S and the ultimate Danish parent company Avenir Invest ApS, which is the administration company for joint taxation purposes. The company is unlimited, jointly and severally liable with other jointly taxed companies towards the Danish tax authorities for the total corporation tax. Payable corporation taxes within the joint taxation group amounted to TDKK 8,357 at 31 December 2023 (2022: TDKK -8,933). Any adjustment to the taxable income subject to joint taxation might entail an increase in the Compa- ny's liability. Group companies are not subject to withholding tax on dividends. Transactions appear from note 5.2. The company manages cash pooling for the Group entities and is jointly and severally liable for this. At 31 December 2023, the cash-pool arrangement amounts to TDKK 89,132 (2022: TDKK 34,682). 5.2 Related parties The Company's related parties comprise the parent company Avenir Invest ApS (Axeltorv 2, DK-1607 Copenhagen V, Denmark), the Board of Directors, the Executive Board and management employees. Avenir Invest ApS has control over the company through its ownership of the majority of the voting rights. During the year, no transactions were carried out with Avenir Invest ApS apart from payment of dividends and corporate tax. During the year, no significant transactions were carried out with the Board of Directors, the Executive Board, management employees or major shareholders apart from normal management remuneration, cf. note 2.4, and dividend payments. In addition, related parties are the Company's subsidiaries to whom letters of subordination have been submitted. Trading with subsidiaries comprises the following: DKK thousands 2023 2022 Sale of goods 109,765 125,744 Rental expenses 48,542 44,623 Management fee 3,955 3,728 Transactions with subsidiaries are eliminated in the consolidated financial statements in accordance with the accounting policies. Financial statements PerformanceIn brief Corporate governance Strategy Annual Report 2023 Contents Consolidated financial statements Parent company financial statements Income statement Statement of comprehensive Income Balance sheet Cash flow statement Statement of changes in equity Notes Basis of preparation Income statement Invested capital Capital structure and financing Other notes Section 5 The Company's balances with subsidiaries at 31 December can be seen in the balance sheet. Balances with subsidiaries comprise ordinary trading balances related to the sale of goods. Ordinary trading balances attract no interest and are subject to the same terms of trade as other customers of the Company. Balances with subsidiaries also comprise the construction and conversion of buildings. Return on balances appears from notes 4.4 and 4.5. The Company has entered into building leases with AO Invest A/S, cf. note 3.3. As the Company is jointly taxed with other Danish Group entities, it is liable to pay taxes of TDKK 3,658 (2022: TDKK -1,360). 5.3 Subsequent events No events have occurred after 31 December 2023 that are considered to have a material effect on the annual report for 2023. 5.2 Related parties (continued) Financial statements PerformanceIn brief Corporate governance Strategy Annual Report 2023 Statements 127 Management’s statement 128 Independent auditor’s report Financial statements PerformanceIn brief Corporate governance Strategy Annual Report 2023 Management’s statement The Board of Directors and the Executive Board have today discussed and approved the annual report of Brødrene A & O Johansen A/S for 2023. The annual report has been prepared in accordance with International Financial Reporting Standards as adopted by the EU and additional disclosure require- ments in the Danish Financial Statements Act. In our opinion, the consolidated financial state- ments and the Parent Company’s financial state- ments give a true and fair view of the Group’s and the Parent Company’s assets, liabilities and finan- cial position at 31 December 2023 and of the results of the Group’s and the Parent Company’s operations and cash flows for the financial year 1 January – 31 December 2023. Further, in our opinion the Management’s Review includes a fair review of the development in the Group’s and the Parent Company’s operations and financial matters, the net profit or loss for the year and of the Group’s and the Parent Company’s finan- cial position as well as a description of the most significant risks and elements of uncertainty facing the Group and the Parent Company. In our opinion, the annual report for the financial year 1 January – 31 December 2023, file name 5299004B6ZEGVCR9ZR75-2023-12-31-en.zip, has been prepared in accordance with the ESEF Regula- tion in all material respects. The annual report is submitted to the Annual General Meeting for approval. Albertslund, 21 February 2024 Executive Board Niels A. Johansen Per Toelstang CEO CFO/Deputy CEO Stefan Funch Jensen Lili Johansen CTO CHRO Board of Directors Henning Dyremose Erik Holm Chair Deputy Chair René Alberg Ann Fogelgren Peter Gath Leif Hummel Marlene L. Jakobsen Niels A. Johansen Financial statements PerformanceIn brief Corporate governance Strategy Annual Report 2023 Independent auditor’s report Report on the audit of theFinancial Statements Our opinion In our opinion, the Consolidated Financial Statements and the Parent Company Financial Statements give a true and fair view of the Group’s and the Parent Compa- ny’s financial position at 31 December 2023 and of the results of the Group’s and the Parent Company’s opera- tions and cash flows for the financial year 1 January to 31 December 2023 in accordance with IFRS Accounting Standards as adopted by the EU and further require- ments in the Danish Financial Statements Act. Our opinion is consistent with our Auditor’s Long-form Report to the Audit Committee and the Board of Direc- tors. What we have audited The Consolidated Financial Statements and Parent Company Financial Statements of Brødrene A & O Johansen A/S for the financial year 1 January to 31 December 2023 comprise income statement and statement of comprehensive income, balance sheet, statement of changes in equity, cash flow statement and notes, including material accounting policy infor- mation for the Group as well as for the Parent Company. Collectively referred to as the “Financial Statements”. Basis for opinion We conducted our audit in accordance with Interna- tional Standards on Auditing (ISAs) and the additional requirements applicable in Denmark. Our responsibili- ties under those standards and requirements are further described in the Auditor’s responsibilities for the audit of the Financial Statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Independence We are independent of the Group in accordance with the International Ethics Standards Board for Accountants’ International Code of Ethics for Professional Account- ants (IESBA Code) and the additional ethical require- ments applicable in Denmark. We have also fulfilled our other ethical responsibilities in accordance with these requirements and the IESBA Code. To the best of our knowledge and belief, prohibited non-audit services referred to in Article 5(1) of Regula- tion (EU) No 537/2014 were not provided. Appointment We were first appointed auditors of Brødrene A & O Johansen A/S on 19 March 2021 for the financial year 2021. We have been reappointed annually by share- holder resolution for a total period of uninterrupted engagement of 3 years including the financial year 2023. Key audit matters Key audit matters are those matters that, in our profes- sional judgement, were of most significance in our audit of the Financial Statements for 2023. These matters were addressed in the context of our audit of the Finan- cial Statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. To the shareholders of Brødrene A & O Johansen A/S Financial statements PerformanceIn brief Corporate governance Strategy Annual Report 2023 Key audit matter How our audit addressed the key audit matter Recognition of revenue Revenue is measured at fair value of the consideration agreed exclusive of VAT, duties and deduction of discounts and customer bonus. We focused on revenue recognition because revenue is the most significant financial statement line item, consists of a large number of IT-dependent transactions and is based on many individual contracts. We refer to note 2.1 of the Financial Statements. We carried out risk assessment procedures to gain an understanding of relevant IT systems, business procedures and controls for revenue recognition, including customer bonus. For relevant controls we assessed whether they were designed and implemented to effectively address the risk of material misstatement. For selected controls, which we planned to rely on in our audit, we tested whether they had been carried out on a consistent basis. We used data analysis to identify revenue transactions that did not follow the usual or expected transac- tion pattern. On a sample basis we tested these transactions to the underlying contractual basis. We performed analytical procedures over revenue and discussed significant fluctuations with management and obtained corroborating evidence of material fluctuations, where deemed necessary. We reviewed Management's calculation of customer bonus and on sample basis tested it to the underlying contracts as well as to subsequent and historical settlements. Measurement of inventories and calculation of supplier bonus receivable Inventories are measured at the lower of cost and net realisable value. The measurement of inventories contains significant accounting estimates related to their net realisable value and expected supplier bonus. The calculation of supplier bonus is based on individual and complex contracts as well as estimates of the total purchases for the year made through international procurement cooperation. We focused on the measurement of inventories as inventories represent a significant line item in the Financial Statements and since technical obso- lescence of inventories and changes in consumption patterns may lead to significant write-downs. We focused on the calculation of supplier bonus receivables as the estimate is based on individual and complex contracts as well as estimates of the total purchases for the year made through international procurement cooperation. We refer to notes 2.2 and 3.4 of the Financial Statements. We carried out risk assessment procedures to gain an understanding of relevant IT systems, business procedures and controls for inventories and supplier bonus.s. For relevant controls, we assessed whether they were designed and implemented to effectively address the risk of material misstatement. For selected controls, which we planned to rely on in our audit, we tested whether they had been carried out on a consistent basis. We attended the physical inventory cycle counts and performed test counts at selected warehouse loca- tions in order to obtain sufficient appropriate evidence of the existence and condition of the inventories. We compared cost prices with underlying documentation and reviewed Management's method, assump- tions and data for its estimate of the net realisable value of the individual goods, including look back analysis of historical inventory write-downs. On a sample basis, we tested Management's calculation of supplier bonus to the underlying contractual basis, as well as management’s look back analysis of historical settlements and confirmations from coun- terparties. In addition, we reviewed Management's assumptions and data for its estimates of the total purchases made through international procurement cooperations and expected final settlements. Statement on Management’s Review Management is responsible for Management’s Review. Our opinion on the Financial Statements does not cover Management’s Review, and we do not express any form of assurance conclusion thereon. In connection with our audit of the Financial State- ments, our responsibility is to read Management’s Review and, in doing so, consider whether Manage- ment’s Review is materially inconsistent with the Finan- cial Statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. Moreover, we considered whether Management’s Review includes the disclosures required by the Danish Financial Statements Act and article 8 of Regulation (EU) 2020/852 (EU Taxonomy Regulation). Based on the work we have performed, in our view, Management’s Review is in accordance with the Consol- idated Financial Statements and the Parent Company Financial Statements and has been prepared in accord- ance with the requirements of the Danish Financial Statements Act and the disclosure requirements of article 8 of Regulation (EU) 2020/852 (EU Taxonomy Regulation). We did not identify any material misstate- ment in Management’s Review. Financial statements PerformanceIn brief Corporate governance Strategy Annual Report 2023 Management’s responsibilities for the Financial Statements Management is responsible for the preparation of consolidated financial statements and parent company financial statements that give a true and fair view in accordance with IFRS Accounting Standards as adopted by the EU and further requirements in the Danish Financial Statements Act, and for such internal control as Management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the Financial Statements, Manage- ment is responsible for assessing the Group’s and the Parent Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless Management either intends to liquidate the Group or the Parent Company or to cease operations, or has no realistic alternative but to do so. Auditor’s responsibilities for the audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the Financial Statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs and the additional requirements applicable in Denmark will always detect a material misstatement when it exists. Misstate- ments can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these Financial Statements. As part of an audit in accordance with ISAs and the additional requirements applicable in Denmark, we exercise professional judgement and maintain profes- sional scepticism throughout the audit. We also: · Identify and assess the risks of material misstate- ment of the Financial Statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collu- sion, forgery, intentional omissions, misrepresenta- tions, or the override of internal control. · Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effec- tiveness of the Group’s and the Parent Company’s internal control. · Evaluate the appropriateness of accounting policies used and the reasonableness of accounting esti- mates and related disclosures made by Management. · Conclude on the appropriateness of Management’s use of the going concern basis of accounting and based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s and the Parent Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the Financial Statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group or the Parent Company to cease to continue as a going concern. · Evaluate the overall presentation, structure and content of the Financial Statements, including the disclosures, and whether the Financial Statements represent the underlying transactions and events in a manner that gives a true and fair view. · Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the Consolidated Financial Statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion. We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence and, where applicable, actions taken to eliminate threats or safeguards applied. From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the Financial State- ments of the current period and are therefore the key audit matters. We describe these matters in our audi- tor’s report unless law or regulation precludes public disclosure about the matter. Financial statements PerformanceIn brief Corporate governance Strategy Annual Report 2023 Report on compliance with the ESEF Regulation As part of our audit of the Financial Statements we performed procedures to express an opinion on whether the annual report of Brødrene A & O Johansen A/S for the financial year 1 January to 31 December 2023 with the filename 5299004B6ZEGVCR9ZR75-2023-12-31-en. zip is prepared, in all material respects, in compli- ance with the Commission Delegated Regulation (EU) 2019/815 on the European Single Electronic Format (ESEF Regulation) which includes requirements related to the preparation of the annual report in XHTML format and iXBRL tagging of the Consolidated Financial State- ments including notes. Management is responsible for preparing an annual report that complies with the ESEF Regulation. This responsibility includes: · The preparing of the annual report in XHTML format; · The selection and application of appropriate iXBRL tags, including extensions to the ESEF taxonomy and the anchoring thereof to elements in the taxonomy, for all financial information required to be tagged using judgement where necessary; · Ensuring consistency between iXBRL tagged data and the Consolidated Financial Statements presented in human-readable format; and · For such internal control as Management determines necessary to enable the preparation of an annual report that is compliant with the ESEF Regulation. Our responsibility is to obtain reasonable assurance on whether the annual report is prepared, in all material respects, in compliance with the ESEF Regulation based on the evidence we have obtained, and to issue a report that includes our opinion. The nature, timing and extent of procedures selected depend on the auditor’s judge- ment, including the assessment of the risks of material departures from the requirements set out in the ESEF Regulation, whether due to fraud or error. The proce- dures include: · Testing whether the annual report is prepared in XHTML format; · Obtaining an understanding of the company’s iXBRL tagging process and of internal control over the tagging process; · Evaluating the completeness of the iXBRL tagging of the Consolidated Financial Statements including notes; · Evaluating the appropriateness of the company’s use of iXBRL elements selected from the ESEF taxonomy and the creation of extension elements where no suitable element in the ESEF taxonomy has been identified; · Evaluating the use of anchoring of extension elements to elements in the ESEF taxonomy; and · Reconciling the iXBRL tagged data with the audited Consolidated Financial Statements. In our opinion, the annual report of Brødrene A & O Johansen A/S for the financial year 1 January to 31 December 2023 with the file name 5299004B6ZEG- VCR9ZR75-2023-12-31-en.zip is prepared, in all material respects, in compliance with the ESEF Regulation. Hellerup, 21 February 2024 PricewaterhouseCoopers, Statsautoriseret Revisionspartnerselskab, CVR no 3377 1231 Anders Stig Lauritsen Flemming Eghoff State Authorised Public Accountant State Authorised Public Accountant mne32800 mne30221 Financial statements PerformanceIn brief Corporate governance Strategy Annual Report 2023 Company information Brødrene A & O Johansen A/S Rørvang 3 DK-2620 Albertslund Phone: +45 70 28 00 00 Website: www.ao.dk CVR number: 58 21 06 17 LEI code 5299004B6ZEGVCR9ZR75 ID code: DK0060803831 Founded: 1914 Registered Office: Albertslund Board of Directors Henning Dyremose, Chair Erik Holm, Deputy Chair René Alberg Ann Fogelgren Peter Gath Leif Hummel Marlene L. Jakobsen Niels A. Johansen Executive Board Niels A. Johansen, Chief Executive Officer Stefan Funch Jensen, Chief Transformation Officer Lili Johansen, Chief Human Resources Officer Per Toelstang, Chief Financial Officer/ Deputy Chief Executive Officer Auditors PricewaterhouseCoopers Statsautoriseret Revisionspartnerselskab Annual General Meeting The Annual General Meeting will be held on 20 March 2024. Company information Financial statements PerformanceIn brief Corporate governance Strategy Annual Report 2023 Brødrene A & O Johansen A/S Rørvang 3, DK-2620 Albertslund, Denmark CVR no. 58 21 06 17 Annual reportAuditor's report on audited financial statementsParsePort XBRL Converter2023-01-012023-12-312022-01-012022-12-315299004B6ZEGVCR9ZR75Regnskabsklasse DOpinionBasis for Opinion5299004B6ZEGVCR9ZR752023-01-012023-12-31cmn:ConsolidatedMember5299004B6ZEGVCR9ZR752023-01-012023-12-315299004B6ZEGVCR9ZR752022-01-012022-12-315299004B6ZEGVCR9ZR752023-12-315299004B6ZEGVCR9ZR752022-12-315299004B6ZEGVCR9ZR752021-12-315299004B6ZEGVCR9ZR752022-12-31ifrs-full:IssuedCapitalMember5299004B6ZEGVCR9ZR752023-01-012023-12-31ifrs-full:IssuedCapitalMember5299004B6ZEGVCR9ZR752023-12-31ifrs-full:IssuedCapitalMember5299004B6ZEGVCR9ZR752022-12-31ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember5299004B6ZEGVCR9ZR752023-01-012023-12-31ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember5299004B6ZEGVCR9ZR752023-12-31ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember5299004B6ZEGVCR9ZR752022-12-31BRO:DividendsProposedOrDeclaredBeforeFinancialStatementsAuthorisedForIssueButNotRecognisedAsDistributionToOwnersRecognisedInEquityMember5299004B6ZEGVCR9ZR752023-01-012023-12-31BRO:DividendsProposedOrDeclaredBeforeFinancialStatementsAuthorisedForIssueButNotRecognisedAsDistributionToOwnersRecognisedInEquityMember5299004B6ZEGVCR9ZR752023-12-31BRO:DividendsProposedOrDeclaredBeforeFinancialStatementsAuthorisedForIssueButNotRecognisedAsDistributionToOwnersRecognisedInEquityMember5299004B6ZEGVCR9ZR752022-12-31ifrs-full:RetainedEarningsMember5299004B6ZEGVCR9ZR752023-01-012023-12-31ifrs-full:RetainedEarningsMember5299004B6ZEGVCR9ZR752023-12-31ifrs-full:RetainedEarningsMember5299004B6ZEGVCR9ZR752021-12-31ifrs-full:IssuedCapitalMember5299004B6ZEGVCR9ZR752022-01-012022-12-31ifrs-full:IssuedCapitalMember5299004B6ZEGVCR9ZR752021-12-31ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember5299004B6ZEGVCR9ZR752022-01-012022-12-31ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember5299004B6ZEGVCR9ZR752021-12-31BRO:DividendsProposedOrDeclaredBeforeFinancialStatementsAuthorisedForIssueButNotRecognisedAsDistributionToOwnersRecognisedInEquityMember5299004B6ZEGVCR9ZR752022-01-012022-12-31BRO:DividendsProposedOrDeclaredBeforeFinancialStatementsAuthorisedForIssueButNotRecognisedAsDistributionToOwnersRecognisedInEquityMember5299004B6ZEGVCR9ZR752021-12-31ifrs-full:RetainedEarningsMember5299004B6ZEGVCR9ZR752022-01-012022-12-31ifrs-full:RetainedEarningsMember5299004B6ZEGVCR9ZR752023-12-31cmn:ConsolidatedMember5299004B6ZEGVCR9ZR752023-01-012023-12-31cmn:ConsolidatedMember15299004B6ZEGVCR9ZR752023-01-012023-12-31cmn:ConsolidatedMember25299004B6ZEGVCR9ZR752023-01-012023-12-31cmn:ConsolidatedMember35299004B6ZEGVCR9ZR752023-01-012023-12-31cmn:ConsolidatedMember45299004B6ZEGVCR9ZR752023-01-012023-12-31cmn:ConsolidatedMember15299004B6ZEGVCR9ZR752023-01-012023-12-31cmn:ConsolidatedMember25299004B6ZEGVCR9ZR752023-01-012023-12-31cmn:ConsolidatedMember35299004B6ZEGVCR9ZR752023-01-012023-12-31cmn:ConsolidatedMember45299004B6ZEGVCR9ZR752023-01-012023-12-31cmn:ConsolidatedMember55299004B6ZEGVCR9ZR752023-01-012023-12-31cmn:ConsolidatedMember65299004B6ZEGVCR9ZR752023-01-012023-12-31cmn:ConsolidatedMember75299004B6ZEGVCR9ZR752023-01-012023-12-31cmn:ConsolidatedMember85299004B6ZEGVCR9ZR752023-01-012023-12-31cmn:ConsolidatedMember15299004B6ZEGVCR9ZR752023-01-012023-12-31cmn:ConsolidatedMember25299004B6ZEGVCR9ZR752022-01-012022-12-31cmn:ConsolidatedMemberiso4217:DKKiso4217:DKKxbrli:sharesxbrli:pure
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