SKAKO

Annual Report (ESEF) • Mar 15, 2023

Untitled | Annual report 2022 Page 1 Orderbacklog (DKKm) 215.2 (+75.8%) Up from 122.4 Revenue (DKKm) 437.9 (+20.4%) Up from 363.7 EBIT (DKKm) 30.8 (+51.7%) Up from 20.3 EBIT margin 7.0% (+1.4pp) Up from 5.6% ROIC 16.5% (+6.2pp) Up from 10.3% 2022 Accounting period: 1 January – 31 December 2022 Bygmestervej 2 5600 Faaborg Denmark SKAKO A/S CVR: 36440414 | Annual report 2022 Page 2 CONTENTS Management review 1. Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 1.1 Letter to our shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 1.2 Key events 2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 1.3 Financial key figures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 1.4 Financial review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 1.5 Financial ambitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 1.6 Guidance 2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 1.7 Why invest in SKAKO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 2. Business unit Concrete . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 2.1 Financial performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 3 . Business unit Vibration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 3.1 Financial performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 4. Corporate governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 4.1 Company announcements 2022 . . . . . . . . . . . . . . . . . . . . . . . 40 4.2 Corporate social responsibility . . . . . . . . . . . . . . . . . . . . . . . . 41 4.3 Risk management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 4.4 Corporate governance and remuneration report . . . . . . . . . . . . . 50 4.5 Executive management . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 4.6 Board of directors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 4.7 Shareholder information . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 5. Financial statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 5.1 Statement by Management . . . . . . . . . . . . . . . . . . . . . . . . . . 57 5.2 Independent auditor’s report . . . . . . . . . . . . . . . . . . . . . . . . . 58 5.3 Consolidated financial statements . . . . . . . . . . . . . . . . . . . . . 63 5.4 Consolidated notes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70 5.5 Parent company financial statements . . . . . . . . . . . . . . . . . . . 113 5.6 Parent company notes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118 Important notice about this document This document contains forward-looking statements. Words such as believe, expect, may, will, plan, strategy, prospect, foresee, estimate, project, anticipate, can, intend, outlook, guidance, target and other words and terms of similar meaning in connection with any discussion of future operation of financial performance identify forward- looking statements. Statements regarding the future are subject to risks and uncertainties that may result in considerable deviations from the outlook set forth. Furthermore, some of these expectations are based on assumptions regarding future events which may prove incorrect. Due to the war in Ukraine, increased geopolitical tension and high inflation, this guidance is subject to a higher-than-normal degree of uncertainty. | Annual report 2022 Page 3 Order intake Orderbacklog Revenue EBIT EBIT margin Earningsper share Employees ROIC (DKKm) (DKKm) (DKKm) (DKKm) (DKK) 530.7 215.2 437.9 30.8 7.0% 8.13 205 16.5% Up from 394.2 Up from 122.4 Up from 363.7 Up from 20.3 Up from 5.6% Up from 4.28 Up from 199 Up from 10.3% 2022 IN BRIEF Revenue split by Concrete & Vibration SKAKO Concrete (DKK) 204.699 EBIT margin 5.5% SKAKO Vibration 237.535 (DKK) EBIT margin 10.0% Plant orders (DKK) 264.295 Aftersales 173.624(DKK) Revenue split by plant orders and aftersales | Annual report 2022 Page 4 1.HIGHLIGHTS | Annual report 2022 Page 5 2022 has been a terrific year, and with our historically high order backlog we expect a continued positive development despite the war in Ukraine, energy crisis and high inflation. Especially concrete and recycling are expanding. | Annual report 2022 Page 6 Two years ago, we launched the financial targets for 2024 for the SKAKO Group. We aimed at reaching a revenue of DKK 460m and an EBIT of DKK 32 - 42m for the financial year 2024 for the SKAKO Group. For the year 2022, we are now presenting a revenue of DKK 430m and an EBIT of DKK 31m. This represents a topline growth of 20% and an EBIT growth of 52% compared to 2021. The group revenue and EBIT is now just short of the ambitions for 2024. Therefore, we have updated our ambition for 2024 as described in the Annual report. We now have an ambition of a revenue of around DKK 530m and an EBIT of DKK 40 to 45m in 2024. All years are different, and challenges and opportunities vary, but the dependance on good and satisfied employees as well as happy customers and partners is always important. We would like to thank everyone for the support and trust in SKAKO in 2022. 1.1 Letter to our shareholders A strong year and ahead of the financial targets in the 2024 plan! The year 2022 was the first year after the pandemic with no negative impact on the financial performance for the SKAKO group. The business climate was impacted by the war in Ukraine in various ways, but they were satisfactorily mitigated, and the climate improved during the year. All business areas performed well, and we experienced a high interest in our propositions to the market. More than anything we are extremely satisfied with the healthy build-up of our order book, which finished off the year with a DKK 90m growth (76%) ending up at DKK 215m. This plant order book represents approximately a full year plant revenue; however, part of it will materialize in revenue as 2024, and we have capacity to take orders with shorter lead times in all parts of the business. SKAKO Concrete experienced an order inflow growth of 37% in 2022 and is executing on a strategy plan with “core market focus” ensuring we can serve all customers from turnkey projects to fast delivery of spare parts and service. This has proven fruitful, and markets like the UK, Germany and the USA are responding very well to this renewed focus. The focus on sustainable solutions and cooperation with customers to reduce their CO2 footprint is becoming more and more common. SKAKO Concrete is operating with a partner strategy to ensure that we cover as many opportunities as possible to include new technologies in new plants. SKAKO Vibration had a year of different developments in the three parts of the business. Hardware business came off to a good start and remained strong all year. Minerals had challenges in 2021 but came back in 2022 with good orders and a promising pipeline in which Northern Africa again appears with major projects. The recycling part of the business had a stable first half of 2022 but from the summer the orders came in at a very high level. In a few months, the recycling business received orders at a value of the entire 2022 revenue level. This high order intake is to some extent believed to be backlog from customers from the Covid period. 1.1 LETTER TO OUR SHAREHOLDERS Jens Wittrup Willumsen Chairman Steffen Kremmer Director, SKAKO Concrete Lionel Girieud Director, SKAKO Vibration Thomas Pedersen Group CFO | Annual report 2022 Page 7 Our purpose We aim to make customers’ production flow efficient, reliable and sustainable Our values We are defining the industry as our knowledge and competencies are inherited from more than 60 years of experience and dedicated to your needs We are reliable as we are known for setting the standards of quality and accuracy within our industry We are accessible as we are well represented around the world and always ready to help Our brand promises We develop sustainable, technology-based and visionary solutions We meet customers with a future-oriented mindset and engage our technical know-how, digitization and innovative capacity in companies’ individual needs We provide profitable business We generate continuous and visible value for our customers and our investors We are big enough to cope - and small enough to care We match customers' needs and deliver scalable solutions We commit ourselves in close partnerships We put our customers’ needs first and bring our service, customer-adapted solutions and engineering expertise. | Annual report 2022 Page 8 1.2 KEY EVENTS 2022 From 30 May to 3 June, SKAKO Vibration had a booth at IFAT in Munich: The leading trade fair for environmental technology. IFAT in Munich Like SKAKO Vibration, SKAKO Concrete has expanded with office facilities in Forskerparken in Odense to improve onboarding of new employees. SKAKO Concrete expands with office facilities in Odense From 14-16 June, SKAKO Vibration participated in the SRR exhibition in Madrid: An international trade fair for recovery and recycling, focusing on improving recycling systems and enhancing process efficiency. SRR in Madrid SKAKO Concrete has published two podcasts about sustainable concrete. What is sustainable concrete? Why is it necessary? And how does SKAKO make it easier to produce sustainable concrete? Podcast about sustainable concrete Q2 Q2 Q2 Q2 | Annual report 2022 Page 9 1.2 KEY EVENTS 2022 In May, from 10-12 May, SKAKO Vibration attended the Exposolidos exhibition in Barcelona, one of the most important trade fair in southern Europe specialized in the handling and processing of bulk solids. Exposolidos in Barcelona To increase sales and improve customer relations in the US market, SKAKO Concrete has made a new strategy for the US organization with an intense customer focus. As part of the strategy, a new Director of Operations and a new Head of Customer Service have been appointed. New strategy in SKAKO Concrete, Inc. From 20-24 June, SKAKO Vibration attended the WIRE exhibition in Düsseldorf - the world's most important trade fair for the wire and cable industry. WIRE in Düsseldorf In April, SKAKO Concrete signed a contract with Centrum Pæle – and in November, the installation of the batching plant had been completed. SKAKO Concrete has been responsible for the design and installation of the batching plant, which is a high row silo equipped with some of SKAKO's core products. New batching plant for Centrum Pæle Q2 Q2 Q4 Q4 | Annual report 2022 Page 10 1.3 Financial key figures 1.3 FINANCIAL KEY FIGURES Key figures and financial ratios – DKK DKK Thousands 2022 2021 2020 2019 2018 INCOME STATEMENT Revenue 437,920 363,706 335,920 354,192 339,273 Gross profit 114,637 92,408 77,865 86,092 79,603 Operating profit (EBIT) 30,842 20,323 15,171 18,005 15,072 Special items (1,650) - - - 1,331 Operating profit (EBIT) after special items 29,192 20,323 15,171 18,005 16,403 Net financial items (4,962) (4,906) (3,084) (2,590) (3,446) Profit before tax 24,230 15,417 12,087 15,413 12,958 Profit for the year 25,074 13,189 10,859 14,246 12,698 BALANCE SHEET Non-current assets 88,599 84,216 84,265 85,947 40,787 Current assets 295,458 254,804 237,793 236,383 219,320 Assets 384,057 339,020 322,058 322,330 260,107 Equity 146,167 132,237 127,252 124,417 109,066 Non-current liabilities 26,473 29,122 38,455 32,851 4,099 Current liabilities 211,417 177,661 156,351 165,062 146,943 Net debt 20,997 26,987 40,187 32,370 5,522 Net working capital 110,681 105,703 111,295 93,427 90,454 OTHER KEY FIGURES Investment in intangible assets 4,153 3,962 7,236 2,703 1,417 Investment in tangible assets 3,179 3,504 5,860 9,415 2,117 Cash flow from operating activities (CFFO) 28,850 30,276 4,806 24,451 8,907 Free cash flow 20,183 22,810 (8,293) (20,855) 29,564 Average number of employees 205 199 195 191 197 | Annual report 2022 Page 11 1.3 Financial key figures Figures before 2019 do not include accounting according to the updated IFRS 16. For calculation of financial ratios please see note 26. Net working capital is calculated as Inventory, Trade receivables and Contract assets less Contract liabilities and Trade payables. Backlog represents revenue from signed contracts or orders executed but not yet completed or performed in full. Key figures and financial ratios – DKK CONTINUED DKK Thousands 2022 2021 2020 2019 2018 FINANCIAL RATIOS Gross profit margin 26.2% 25.4% 23.2% 24.3% 23.5% Profit margin (EBIT margin) 7.0% 5.6% 4.5% 5.1% 4.4% Liquidity ratio 140.1% 143.4% 152.1% 141.3% 149.3% Equity ratio 38.3% 39.0% 39.5% 38.6% 41.9% Return on equity 17.9% 10.2% 8.6% 12.2% 12.4% ROIC 16.5% 10,3% 8,3% 9,1% 11,1% Financial leverage 14.2% 20.4% 31.6% 26.1% 5.1% Net debt to EBITDA 0.5 1.0 1.8 1.4 0.3 NWC/Revenue 25.3% 29.1% 33.1% 26.4% 26.7% Earnings per share (EPS) 8.13 4.28 3.52 4.62 4.12 Equity value per share 48.0 42.9 41.3 40.1 35.4 Share price 62.6 55.2 49.8 45.9 49.2 Price-book ratio 1.3 1.3 1.2 1.1 1.4 Market cap 194,461 171,474 154,700 142,584 151,725 Order backlog 215,202 122,382 91,877 123,654 106,821 | Annual report 2022 Page 12 1.3 Financial key figures Key figures and financial ratios – EUR EUR Thousands 2022 2021 2020 2019 2018 INCOME STATEMENT Revenue 58,883 48,904 45,064 47,415 45,520 Gross profit 15,414 12,425 10,446 11,525 10,680 Operating profit (EBIT) 4,147 2,733 2,035 2,410 2,022 Special items (222) - - - 179 Operating profit (EBIT) after special items 3,925 2,733 2,035 2,410 2,201 Net financial items (667) (660) (414) (347) (462) Profit before tax 3,258 2,073 1,621 2,063 1,739 Profit for the year 3,371 1,773 1,457 1,907 1,704 BALANCE SHEET Non-current assets 11,913 11,325 11,327 11,506 5,462 Current assets 39,728 34,264 31,964 31,644 29,371 Assets 51,640 45,589 43,291 43,150 34,832 Equity 19,654 17,782 17,105 16,655 14,606 Non-current liabilities 3,560 3,916 5,169 4,099 549 Current liabilities 28,430 23,890 21,017 22,395 19,678 Net debt 2,824 3,629 5,402 4,333 740 Net working capital 14,884 14,214 14,960 12,373 12,113 OTHER KEY FIGURES Investment in intangible assets 558 533 973 362 190 Investment in tangible assets 427 471 788 1,260 284 Cash flow from operating activities (CFFO) 3,879 4,071 644 3,273 1,193 Free cash flow 2,714 3,067 (1,113) (2,792) 3,959 Average number of employees 205 199 195 191 197 | Annual report 2022 Page 13 1.3 Financial key figures Figures before 2019 do not include accounting according to the updated IFRS 16. Net working capital is calculated as Inventory, Trade receivables and Contract assets less Contract liabilities and Trade payables. Backlog represents revenue from signed contracts or orders executed but not yet completed or performed in full. On the translation of key figures and financial ratios from Danish kroner to euro, Danmarks Nationalbank’s rate of exchange at 31 December 2022 of 743.93 has been used for balance sheet items, and the average rate of exchange of 743.71 has been used for income statement and cash flow items. Key figures and financial ratios – EUR CONTINUED EUR Thousands 2022 2021 2020 2019 2018 FINANCIAL RATIOS Gross profit margin 26.2% 25.4% 23.2% 24.3% 23.5% Profit margin (EBIT margin) 7.0% 5.6% 4.5% 5.1% 4.4% Liquidity ratio 140.1% 143.4% 152.1% 141.3% 149.3% Equity ratio 38.3% 39.0% 39.5% 38.6% 41.9% Return on equity 17.9% 10.2% 8.6% 12.2% 12.4% ROIC 16.5% 10,3% 8,3% 9,1% 11,1% Financial leverage 14.2% 20.4% 31.6% 26.1% 5.1% Net debt to EBITDA 0.5 1.0 1.8 1.4 0.3 NWC/Revenue 25.3% 29.1% 33.1% 26.4% 26.7% Earnings per share (EPS) 1.09 0.58 0.47 0.62 0.55 Equity value per share 6.45 5.77 5.55 5.36 4.74 Share price 8.42 7.42 6.69 6.14 6.59 Price-book ratio 1.3 1.3 1.2 1.1 1.4 Market cap 26,150 23,058 20,795 19,088 20,319 Order backlog 28,939 16,457 12,350 16,553 14,308 | Annual report 2022 Page 14 1.4 Financial review 1.4 FINANCIAL REVIEW DKKThousands 2022 2021 Change Plant order revenue 264,295 215,943 22.4% Aftersales revenue 173,624 147,763 17.5% Total revenue 437,919 363,706 20.4% Production costs (323,283) (271,298) 19.4% Gross profit 114,637 92,408 23.3% Gross profit margin 26.2% 25.4% 0.6pp Distribution costs (43,923) (40,745) 7.8% Administrative expenses (39,870) (31,340) 25.2% Operatingprofit before special items (EBIT) 30,842 20,323 51.4% Profit margin before special items (EBIT margin) 7.0% 5.6% 1.4pp Special items (1,650) - - Operatingprofit before special items (EBIT) 29,192 20,323 42.0% Profit margin (EBIT margin) 6.6% 5.6% 1.0pp Profit forthe period 25,072 13,189 90.1% Order backlog beginning of period 122,382 91,877 33.2% Order intake 530,739 394,211 34.6% Revenue 437,919 363,706 20.4% Orderbacklog end ofperiod 215,202 122,382 75.8% Order intake and backlog Order intake grew by 35% organically following a higher post-pandemic demand and improved market conditions. The order intake increased by 40% in Concrete and by 29% in Vibration, respectively. The order backlog increased by 75%, comprising a 108% increase in Concrete and a 34% increase in Vibration. The backlog amounting to DKK 215m consists of DKK 143m in Concrete and DKK 73m in Vibration. The strong order backlog means that almost all plant revenue in Concrete for 2023 is covered by the order backlog whereas approx. one third of the revenue in Vibration is covered by the order backlog. Revenue The market conditions improved in 2022 with regards to investment appetite, site access and impact from supply chain constraints. Supported by the strong backlog in 2022, organic revenue increased by 20%. The increase was driven by both divisions where Concrete revenue increased by 24% and Vibration increased by 17%. The strong revenue increase covers progress in both divisions where Concrete realized an increase of 34% in plant sales and 17% in aftersales, and Vibration realized an increase of 16% in plant sales and 19% in aftersales. | Annual report 2022 Page 15 1.4 Financial review Gross profit and margin Gross profit increased by 23% due to revenue growth and and higher efficiency in production. Gross margin increased by 0.6pp to 26.2% with and increase of 1.1pp in Concrete and an increase of 0.7pp in Vibration. Whereas the ratio between plant sales and aftersales remains the same 60/40 compared to 2021, the increase in gross margin follows the efficiency programme in SKAKO Group together with the tight control, indexation of customer contracts and a close cooperation with suppliers. Capacity costs The relatively high increase in capacity costs relates to increased staff to support the very strong activity and revenue growth in both divisions. At the same time costs to travelling and exhibitions were higher than in 2021 where these activities were minimal due to Covid-19 restrictions. EBIT and margin Reported EBIT before special items increased by 51% to DKK 30.8m fuelled by higher revenue and a higher gross proft margin. Underlying performances in both Concrete and Vibration have improved compared to previous years because of increasing focus on higher margins, strategy, cost reductions and development improvements. The strong operating profit during the financial year is a consequence of the strong order intake as well as the ability to plan and execute on both plant orders and aftersales orders in a shorter time than previously. The realized EBIT of DKK 30.8m is in the upper end of the last guidance of DKK 28- 31m communicated on the 04.11.2022 and well above the original guidance of DKK 22-27m in the anual report 2021. Net financial items Net financial items amounted to a cost of DKK 5.2m compared to DKK 4.9m in 2021 and consisting mainly of interest income, interest expenses along with realized and unrealized foreign exchange losses. Special items Special items cover costs amounting to DKK 1.65m related to exit of CFO and related additional costs. Profit for the year Profit for the year increased by 90% to DKK 25.1m where both divisions have improved significantly. The overall result is based on improvement on all essential parameters: Growth in activity, orders and revenue, improvement in margins and adding less costs than growth in activities which means that the company overall has become more efficient and focused. Earnings per share The strong result increases earnings per share increased from DKK 4.3 in 2021 to DKK 8.1 in 2022. For a financial review of each division, please see section 2.2 about SKAKO Concrete and 3.2 about SKAKO Vibration. 1.4 FINANCIAL REVIEW | Annual report 2022 Page 16 1.4 Financial review Balance sheet As of 31 December 2022, the Group’s assets totalled DKK 383.4m (year end 2021: DKK 339.0m) following the strong order intake and revenue growth. The increase in assets is primarily due an increase in inventory, trade receivables and contract assets. Non-current assets increased by DKK 5.5m and amounted to DKK 89.7m (year end 2021: DKK 84.2), while current assets increased by DKK 38.9m to DKK 293.7m (year end 2021: DKK 254.8m). Net debt decreased by DKK 6.2m and totalled DKK 21.0m on 31 December 2022 (year end 2021: DKK 27.0m). The decrease in net debt is due to strong cash performance from operating activities. Current liabilities amounted to DKK 209.0m (year end 2021: DKK 177.7m). The increase in current liabilities is primarily due to an increase in contract liabilities with reference to received prepayments from customers on construction contracts. Return on invested capital In 2022, return on invested capital amounted to 16.5% compared to 10.3% in 2021. The increase in return on invested capital is due to the higher result in 2022 compared to 2021. Net working capital Net working capital increased by DKK 5m compared to 31 December 2021. The increase is primarily due to a higher level of inventories to mitigate supply chain challenges and growth in activities having influence on higher trade receivables. The corresponding net working capital/revenue was 25.3% (2021: 29.1%) and reflects a strong cash focus considering the increase of activity levels. Cash flow development and capital structure Cash flow from operating activities was strong and amounted to DKK 28.9m compared to DKK 30.3m in 2021 which also had a very strong cash flow development due to large prepayments on large customer contracts. The strong cash flow in 2022 was driven by the strong increase in EBIT which was only partly countered by a modest increase in net working capital despite the strong revenue growth. With a strong increase in EBITDA and a decrease in net interest bearing debt of DKK 6.0m the financial gearing (net interest bearing debt/EBITDA) decrease to 0.5 compared to 1.0 in 2021. This is well below the gearing target of up to 2.5 and shows that SKAKO has strong financial capacity to pay out high dividends and to persue acquistions according to our strategy Equity The Group’s equity was DKK 148.0m on 31 December 2022 (DKK 132.2m on 31 December 2021) matching an equity ratio of 38.6% (39.0% on 31 December 2021). The increase in equity is mainly due to profit for the year of DKK 25.1m. Due to a dividend of 12.3m paid in April 2021, the equity does not increase with the full earnings for the year. Dividends Based on the results in 2022 and capital structure of SKAKO A/S as of 31 December 2022, the Board of Directors recommends a dividend distribution of DKK 5 per share (2021: DKK 4 per share) corresponding to 61.0% of profit for the year and a total dividend distribution of DKK 15.4m. With a share price of DKK 62.6 as of 31 December 2022, this corresponds to a dividend yield of 8.0%. Ex-dividend date: 19 April 2023 Record date: 19 April 2023 Payment date: 26 April 2023 Interim dividends No interim dividends have been paid. The Parent company The result for the period in the Parent company amounts to a loss of DKK4.7m. The costs primarily come from remuneration for the Board of Directors and costs for warrants and special items covering cost for the exit of CFO. Events after the balance sheet date There have been no events that materially affect the assessment of this Annual Report 2022 after the balance sheet date and up to today. 1.4 FINANCIAL REVIEW | Annual report 2022 Page 17 1.4 Financial review Quarterly figures are unaudited DKKThousands Q42022 Q42021 Change Plant order revenue 79,972 60,565 32.0% Aftersales revenue 44,280 45,713 -3.1% Total revenue 124,252 106,278 16.9% Production costs (87,572) (76,600) 14.3% Gross profit 36,682 29,678 23.6% Gross profit margin 29.5% 27.9% 1.6pp Distribution costs (10,099) (12,959) -22.1% Administrative expenses (15,701) (8,384) 87.3% Operatingprofitbefore special items (EBIT) 10,881 8,335 30.5% Profit margin before special items (EBIT margin) 8.8% 7.8% 1.0pp Special items - - - Operating profit (EBIT) 10,881 8,335 27.5% Profit margin (EBIT margin) 8.6% 7.8% 0.8pp Profit forthe period 11,115 4,775 132.8% Order backlog beginning of period 212,217 105,225 101.7% Order intake 127,165 123,435 3.0% Revenue 124,253 106,278 16.9% Orderbacklog end ofperiod 215,202 122,382 75.8% Quarterly figures are unaudited Consolidated Q4 – 2022 result To retain and attract employees, it is one of our top priorities to develop our culture. With happy and dedicated employees, we can offer even better solutions. | Annual report 2022 Page 19 SKAKO Group In our annual report for 2020, we introduced the financial ambitions for the SKAKO Group comprising our medium-term financial ambitions until and including 2024. The strong growth in both divisions together with a high order backlog gives the platform for a revised medium-term financial ambition for the SKAKO Group to comprise a revenue growth (CAGR) of approx. 10% from 2022 to 2024 and an EBIT margin of 7-9% in 2024. This corresponds to a revenue of approx. DKK 530m with an EBIT result of DKK 40m - DKK 45m in 2024. We believe that the recent years’ strategic development in the Group has laid the foundation for a favourable development in results in the coming years. The relatively high ambitions for revenue growth are partly aided by the fact that revenues in 2020 and 2021 were impacted by the Covid-19 pandemic, especially in SKAKO Vibration. During the second half of 2023, the board will review the current strategy and consider the ambitions after 2024. 1.5 FINANCIAL AMBITIONS Financial ambitions SKAKO Group 0,0% 1,0% 2,0% 3,0% 4,0% 5,0% 6,0% 7,0% 8,0% 9,0% 0 100 200 300 400 500 600 2020 2021 2022 A-2024 A-2024 New EBIT% mDKK Revenue EBIT margin 1.5 Financial ambitions | Annual report 2022 Page 20 SKAKO Concrete SKAKO Concrete delivered an EBIT margin of 5.5% in 2022 compared to 3.7% in 2021 and 3.3% in 2020 and thereby continued the journey towards a sustainable profitability. With a revenue growth of 24.1% in 2022 and a very high order backlog at the end of 2022, SKAKO Concrete is set for further growth in 2023 and 2024 and thereby also set for exceeding the previous financial ambitions. We expect a yearly revenue growth above 10% and with our continued focused strategy, we expect to improve the EBIT margin further to a level of 6-8%. This corresponds to an EBIT of DKK 17-20 m in 2024. SKAKO Vibration With a revenue growth of 16.9 % and an EBIT margin of 10% in 2022, SKAKO Vibration is also set to exceed the financial ambitions for 2024 like SKAKO Concrete. Revenue growth is expected to dampen somewhat to a level of CAGR 6-8% in the next two years driven especially by the high growth in recycling. We expect to maintain an EBIT margin of 10% as in previous years, this corresponds to an EBIT of DKK 25-28 m in 2024. Financial ambitions SKAKO Concrete 0,0% 1,0% 2,0% 3,0% 4,0% 5,0% 6,0% 7,0% 8,0% 0,0 50,0 100,0 150,0 200,0 250,0 300,0 2020 2021 2022 A-2024 A-2024 New EBIT% mDKK Revenue EBIT margin Financial ambitions SKAKO Vibration 0,0% 2,0% 4,0% 6,0% 8,0% 10,0% 12,0% 0 50 100 150 200 250 300 2020 2021 2022 A-2024 A-2024 New EBIT% mDKK Revenue EBIT margin 1.5 Financial ambitions | Annual report 2022 Page 21 1.6 Guidance 2023 1.6 GUIDANCE 2023 With the high revenue growth in SKAKO Vibration and SKAKO Concrete in 2022 and the very strong order backlog at the end of 2022, SKAKO is set for delivering improved results in 2023. The global supply chain situation is expected to gradually normalize during 2023 with lower energy and commodity prices compared to 2022. However, inflation is still expected to remain at a relatively high level with an uncertain impact on all markets. For SKAKO Concrete, the increase in building infrastructure will be supporting the need for capacity in the concrete manufacturing industries and thereby the demand for new machinery. The pipeline of potential orders is significantly stronger than in 2022. For SKAKO Vibration, the increasing demand for recycling solutions will be driving the market upwards. The increasing global demand for minerals will also continue to drive the requirement for mining solutions. Guidance 2023 Guidance for 2023 is as follows: • Operating profit (EBIT) before special items is expected to be DKK 33-38m • Cost under special items is expected to constitute to DKK 2.0-2.5m and is related to transaction costs in connection with the terminated process with Zefyr Invest. The guidance is based on a continued normalization of the market conditions during 2023, with no new material adverse events affecting the global economies. Due to the war in Ukraine, increased geopolitical tension and high inflation, this guidance is subject to a higher-than-normal degree of uncertainty. | Annual report 2022 Page 22 1.7 Why invest in SKAKO 1.7 WHY INVEST IN SKAKO SKAKO Group At SKAKO we aim to make our customers’ production flow as hassle-free, reliable, and sustainable as possible. We use our know-how to define the industry and develop visionary sustainable and technology-based solutions. Through this, we provide continued value to our partners and customers and increased value to our shareholders. The markets in which SKAKO is operating, are basically in constant growth. There has for decades been a growing demand for building materials as well as industrial machinery. There are currently no signs of long-term reduction of this growth. SKAKO is a leading supplier in the markets we operate in. Consequently, we have a brand promise where our customers expect products of high quality and a high level of sustainability. Further, our customers expect to meet highly qualified employees in all phases of product lifetime. With this business model, we have established a comprehensive installed fleet of SKAKO machinery all over the world and we support our customers with support, spares and retrofit, whenever needed. The SKAKO business model has proven to be sustainable, even under challenging business conditions. SKAKO was also impacted by the Covid-19, but succeeded in remaining profitable during the pandemic, and then managed to grow despite the war in Ukraine. With the continued growth in the existing markets and strong potential to expand the business into new market segments, we are convinced that the potential for future profitable growth is strong Capital structure SKAKO has a capital structure target of net debt to EBITDA of up to 2.5. With a net debt to EBITDA of 0.5 at the end of 2022, SKAKO has ample capacity to pursue value creating M&A. As our earnings improve, we will also be able to return significant value to our shareholders through dividends and share buy- back programmes. For our mid-term financial ambition for the SKAKO Group, please see section 1.5. SKAKO Vibration SKAKO Vibration strives to be one of the leading suppliers of vibratory equipment globally. We are a preferred partner within the automotive industry on targeted markets,, and we have a strong presence and growth within minerals. With the acquisition of SKAKO Dartek in November 2019, we have also intensified our strategic focus on growth in recycling. SKAKO Concrete SKAKO Concrete strives to be the trendsetter in the concrete industry when it comes to sustainability, digitization, and total cost of ownership, and from our foundation of reliable delivery and high-quality products, we seek to offer our customers the best solutions in the industry and maximum benefit from our solutions and services. | Annual report 2022 Page 23 2. SKAKO CONCRETE Orderbacklog (DKKm) 142.7 (+108.0%) Up from 68.6 Revenue (DKKm) 204.7 (+24.1%) Up from 165.0 EBIT (DKKm) 11.2 (+83.6%) Up from 6.1 EBIT margin 5.5% (+1.8pp) Up from 3.7% Order intake (DKKm) 278.7 (+40.0%) Up from 199.1 | Annual report 2022 Page 24 We help our customers meet the market requirements – today and through the entire life span of their plant. Consequently, quality is key in our product development. | Annual report 2022 Page 25 Business areas SKAKO Concrete designs, develops, supplies, and installs complete customized quality plants for concrete production. Also, a significant part of our business is customer care and helping our customers maintain their plants. Throughout the year, we have: • Supplied new plants. • Visited customers as well as potential customers and come up with propositions for customized plants. • Advised customers about spare parts for their existing plants. • Taken in calls on our hotline phone and guided the customers about the use of their plants. • Visited customers with a service contract to inspect their plants and guide them about maintenance and upgrades. The keywords in our business model are high-quality products, sustainability, digitization, reliability, delivery on time, and minimizing the total cost of our products over the life span. We believe that our business is hereby set for the future. QUALITY / DELIVERY RELIABILITY / EARNINGS CULTURE DIGITIZATION SUSTAINABILITY SUBSCRIPTION SOLUTIONS SALES& MARKETING Vision: We want to be trendsetting in the industry within sustainability, digitization and solutions focused on total economy Strategy track: Culture, digitization, sustainability, subscription solutions, sales and marketing Products and solutions: ATLANTIS mixer, ROTOCONIX, SKAKOMAT, CONFLEX, skip hoist Segments: Plant (precast and ready-mix), SKAKOMAT, aftersales Primary markets: Denmark, Sweden, Norway, the UK, the Netherlands, Germany, Austria, Switzerland, France, the USA Below the strategic tracks in our overall business model: Strategy & business model | Annual report 2022 Page 26 Strategy As shown on the graphic on the previous page, the SKAKO Concrete strategy has five focus areas. The overall aim of our strategy is to develop innovative, high-quality, and long- lasting products that can help our customers get ready for future requirements from the market. The development of our organization is based on customer needs, and we are increasing our focus on customer care. • We have made a new strategy for our US organization with an intense customer focus. The aim is to increase sales and improve customer relations in the US market. The first step in the strategy was to appoint a new Director of Operations and a new Head of Customer Service. • We are investing more resources into customer care and sales in France. In general, the SKAKO Concrete strategy has encouraged growth. To avoid resource challenges with design and construction related to our growth, we are looking at ways to expand these areas. When expanding and adjusting our organization, we have “deglobalization” in mind. By becoming more local, we use fewer resources to solve tasks, and in that way, deglobalization is a way to become more sustainable. SKAKO Concrete Denmark 82 Employees Sales & marketing Aftersales Electrical service Mechanical service Hotline Projects Supply & shipping Production Warehouse Mechanical engineering Electrical engineering Group support SKAKO Concrete USA 5 Employees Sales & marketing Aftersales Customer service Installation services Finance support SKAKO Concrete France 12 Employees Sales & marketing Mechanical engineering Aftersales Customer service Hotline Electrical service Finance support Strategy & business model | Annual report 2022 Page 27 Focus areas In 2022, we especially focused on: • Plant supply. After the Covid-19 pandemic period, there has been a significant demand for plants from the market from existing and new customers. • Developing our core products. • Increasing the cooperation between the companies in the SKAKO Concrete Group to learn from each other and ensure that we all have the same approach to the customers. • The local markets and customers by strengthening our forces within sales and customer care in all the countries we operate in. • Getting more sustainable by: • Investigating how we can make a business of refurbishing (components of) concrete mixers, both for the customer and for SKAKO Concrete. • Helping customers reduce their CO2 emissions by supplying plants with zero emissions. • Planning the building of a test centre for our machines in Faaborg, Denmark, to save resources and improve our know-how within sustainability even more. • Working with our culture to create a good work environment that retains and attracts employees. We will keep working on all the above points in the coming years. In that way, we are adapting to the future market. Strategy & business model | Annual report 2022 Page 28 2.1 Financial performance DKK million 2022 2021 Change Plant order revenue 94.1 70.2 34.0% Aftersalesrevenue 110.6 94.8 16.7% Total revenue 204.7 165.0 24.1% Gross profit 46.2 35.3 30.9% Gross profit margin 22.5% 21.4% 1.1pp Operating profit (EBIT) 11.2 6.1 83.6% EBITmargin 5.5% 3.7% 1.8pp Orderbook, beginning 68.6 34.5 98.8% Orderintake 278.7 199.1 40.0% Orderbook, ending 142.7 68.6 108.0% 2.1 FINANCIAL PERFORMANCE Revenue and EBIT margin 2020 2021 Financial review SKAKO Concrete 1,7 0,7 3,3 3,7 5,5 0 1 2 3 4 5 6 7 8 0 50 100 150 200 250 300 2018 2019 2020 2021 2022 A2024 EBIT % tDKK SKAKO Concrete development Revenue EBIT% +24.7% 160.7 177.8 172.4 165.0 204.7 | Annual report 2022 Page 29 2.1 Financial performance Financial performance in 2022 Revenue and order intake in Concrete increased with 24% and 40% respectively leading to an increase in EBIT margin of 1.8pp. Revenue growth was driven by strong growth in plant sales of 34% and aftersales of 17%. Total revenue amounted to DKK 205 m and was driven by growth in all key markets in the US, U.K., France and Germany all supported by continuous strategic initiatives on enhancing customer support and improving project execution. Gross profit increased with 31% to DKK 46.2 m driven by strong revenue growth and an increase in gross profit margin of 1.1pp to 22.5%. This improvement was made possible by strong execution on plant orders and adapting to higher energy and commodity prices in close cooperation with our suppliers. EBIT improved in 2022 and amounted to DKK 11.2m, driven by the increased revenue and higher gross margin. The corresponding EBIT margin improved by 1.8pp despite a year with higher cost due to inflationary pressure and the impact from the war in Ukraine. The EBIT margin of 5.5% is an improvement by 1.8pp and close to the 2024 ambition on 6-8%. Order intake increased by 40.0% compared to 2021, and order backlog increased by 108.0% amounting to DKK 142.7m. The strong order backlog gives a good outlook for 2023 where the majority of plant revenue for 2023 has already been secured. 2.1 FINANCIAL PERFORMANCE | Annual report 2022 Page 30 New batching plant for Centrum Pæle A/S Centrum Pæle A/S is a long-standing SKAKO customer with several SKAKO products. In 2022, SKAKO Concrete designed and supplied a new batching plant for their factory in Hedensted because they wanted to start manufacturing a new product. It is the first plant supplied by SKAKO Concrete, where a conventional row silo plant has been mounted above the mixer plant offering the same advantages as an ordinary high silo plant. "The project management and supervision have been very efficient. We had the project manager from SKAKO on-site when all the deliveries and plant equipment arrived, which was very advantageous. Also, I would like to praise SKAKO's electrical design department for advice and cooperation about electrical supply and the control system“, says Technical Manager at Centrum Pæle A/S Henrik Olsen and concludes: "According to the contract, we were supposed to mix the first concrete in week 46. We mixed the first concrete on Friday in week 45, so the goal was reached on time". 22 April 2022 Signing of contract 15 August 2022 Start of mechanical installation 19 September 2022 Start of electrical installation 30 November 2022 Final handover Case study, Centrum Pæle A/S 30 May 2022 Project drawing approved 2 September Lift of row silo bin onto mixer platform 5 October 2022 Installation of belt conveyors 14 November 2022 First concrete produced | Annual report 2022 Page 31 3. SKAKO VIBRATION Orderbacklog (DKKm) 72.6 (+33.7%) Up from 54.3 Revenue (DKKm) 237.5 (+16.9%) Up from 203.2 EBIT (DKKm) 23.6 (+36.4%) Up from 17.3 EBIT margin 10.0% (+1.5pp) Up from 8.5% Order intake (DKKm) 255.9 (+28.7%) Up from 198.9 | Annual report 2022 Page 32 At SKAKO Vibration, we help customers use and reuse the planet’s resources in the best way possible. | Annual report 2022 Page 33 3.1 Strategy & business model STRATEGY & BUSINESS MODEL Business areas SKAKO Vibration develops, designs, and sells equipment for the recycling, mineral, and fastener industries. Our engineering, assembly, and test facilities are located in Faaborg in Denmark, Strasbourg in France, and San Sebastian in Spain, and our products are based on application know-how and own developed technology. SKAKO Vibration has a flexible production where parts are sourced through both internal and external suppliers. Our main markets are the EU and North Africa, where branch companies are located, and we are present in the USA, South America, and Asia through partnerships with local companies. We build our success on an attractive range of high-quality products and a dynamic organization with a high level of design and application know-how. Strategy SKAKO Vibration is one of the leading suppliers of vibratory equipment and the preferred partner within the fastener industry on targeted markets – especially through European, Asian, and US players. In mineral, we are also strong, particularly in the phosphate mining sector in North Africa and the building sector in Europe. In recent years, we have been focusing on our expansion in recycling with our complete range of products dedicated to this industrial sector, in particular since we made the acquisition of SKAKO Dartek at the end of 2019. After the Covid-19 pandemic period, the revenue coming from mineral and fastener has returned to normal, while the growth coming from the recycling industry has been very high. In the Recycling industry, our equipment sorts and cleans waste resources to enable their best reuse. In the Fastener industry (i.e. “ Hardware” industry), our equipment transforms bulks into smooth material flows. In the Minerals industry, our equipment sorts and cleans raw materials to enable their best use. The development of waste recycling is becoming more and more imperative, for which reason we expect the growth trend of the recycling market to intensify in the decades to come. For the next two years, SKAKO Vibration aims to grow revenue with a CAGR of 6-8 % while maintaining an EBIT margin of 10 %. | Annual report 2022 Page 34 Focusareas This year we especially focused on developing our sorting technologies, which are the key technology in the recycling sector. Thanks to the technical know-how of SKAKO Dartek and our many years of experience in the mineral sector and in the fastener industry, we have a range of products that perfectly meets the challenges of the recycling sector. Throughout the year, we have provided recycling companies with reliable and efficient solutions for conveying and, above all, sorting by dimensions and density of bulk waste. Our products for the recycling sector are very often complementary because of the complexity of the separations to be made between the different materials involved. Expert Center Expert Center Expert Center Denmark France Spain Hardware Minerals Recycling Areas Business units SKAKO Vibration At the end of 2022, we modified our sales organization to support the development in the main industrial sectors we operate in, particularly to intensify our breakthrough in the environmental industry. We have now structured our sales organization into the three business areas: Fastener, Minerals, and Recycling. By doing this, we will improve: • Our understanding of the business areas dynamics • Our sharing of knowledge among our teams • Identification of key customer pain points • Feeding and challenging of leadership with new growth ideas SKAKO Dartek densimetric table type KDM designed to separate materials by difference of density | Annual report 2022 Page 35 3.2 Financial performance 3.1 FINANCIAL PERFORMANCE DKK million 2022 2021 Change Plant revenue 170.7 147.0 16.1% Aftersales revenue 66.8 56.2 18.9% Total revenue 237.5 203.2 16.9% Gross profit 68.5 57.0 20.2% Gross profit margin 28.8% 28.1% 0.7pp Operating profit (EBIT) 23.7 17.3 37.0% EBIT margin 10.0% 8.5% 1.5pp Order book, beginning 54.3 58.6 -7.3% Order intake 255.9 198.9 28.7% Order book, ending 72.6 54.3 33.7% Revenue and EBIT margin 2020 2021 Financial review SKAKO Vibration 8,6 10,4 7 8,5 10 0 2 4 6 8 10 12 0 50 100 150 200 250 300 2018 2019 2020 2021 2022 A2024 EBIT % tDKK SKAKO Vibration development Revenue EBIT% +16.9% 203.2 182.6 180.6 167.6 237.5 | Annual report 2022 Page 36 34% 43% 14% 10% 3.2 Financial performance Financial performance in 2022 SKAKO Vibration had a very strong performance with an increasing order intake of 29% and revenue increasing with 17% while EBIT- margin increased with 1.5pp to 10.0%. The increase in revenue was especially driven by a growth in recycling of 28% partly impacted by order backlog from the COVID-19 period. However, the hardware and minerals also showet good growth. Revenue from plant orders and aftersales increased with 16% and 19% respectively. Activity was high all year with a strong acceleration in the last quater. Focus in 2023 will be to maintain growth and profitability in all business areas with the highest growth expected to come from recycling which is expected to increase its share of total revenue. Gross profit increased with 20% to DKK 68.5m with the margin improving with 0.7pp to 28.8% driven by a more favorable split between plant orders and aftersales combined with strong execution and focus on managing price increases. EBIT increased with 37% to DKK 23.7m driven by higher revenue and gross profit margin. Thereby the EBIT margin increased with 1.5pp to 10.0% in line with our 2024 ambition and despite a year with higher cost due to inflationary pressure and the impact from the war in Ukraine. EBIT margin ending on 10.0% is an improvement of 1.5pp and thereby reaching the top of the EBIT ambition already in 2022. Order intake increased by 28.7% compared to 2021, and order backlog increased by 33.7% amounting to DKK 72.6m. The strong order backlog gives a good outset for 2023 where a big part of plant revenue for 2023 has already been secured. 31% 47% 20% 2% Recycling Minerals Hardware Others Revenue 2022 DKK 237.5m Revenue 2021 DKK 203.2m 3.2 FINANCIAL PERFORMANCE | Annual report 2022 Page 37 Complete recycling metal process with vibratory equipment and induction sorters for RSA in Portugal Reciclagem de Sucatas Abrantina SA (RSA) in Abrantes, Portugal, is a recycling company focusing on the reuse of metal waste. Their new plant treats light fractions of fragmented materials where sand and soil are removed and ferrous metals, non-ferrous metals, paramagnetic metals, and finally, inert materials (plastics, rubbers, foams, etc.) are separated, allowing the valorization of various recycled metals. SKAKO DARTEK was responsible for the complete process of the plant, which was made up of vibratory equipment (vibratory feeders and elastic mesh combi screens) and induction sorters (magnetic drums and eddy current separators). A simple & efficient process for metal recycling, for customer RSA in Portugal 2 October 2018 Date of quote 2 July 2021 Date of order 10 December 2021 Date of delivery 26 January 2022 Date of commissioning 7 February 2022 Start-up in production | Annual report 2022 Page 38 4. Corporate governance | Annual report 2022 Page 39 We bring our engineering and innovative spirit and expertise from offices in Faaborg, Strasbourg and San Sebastian to customers around the world. | Annual report 2022 Page 40 4.1 Company announcements 2022 4.1 COMPANY ANNOUNCEMENTS 2022 Main company announcements in 2022 17 March 01 – Annual report 2021 23 March 02 – Update on dates regarding dividends 29 March 03 – Notice about ordinary general meeting 19 April 04 – Course of general meeting on 19 April 2022 25 May 05 – Interim report for the first quarter 2022 20 June 06 – Changes in SKAKO A/S’s management 24 August 07 – Interim report for SKAKO A/S for the first two quarters of 2022 31 August 08 – SKAKO appoints CFO for the SKAKO Group 15 September 09 – SKAKO wins DKK 20 million contract with large American customer 4 November 10 – SKAKO increases expectations to 2022 10 November 11 – Interim report for the first three quarters of 2022 13 December 12 – SKAKO wins DKK 23 million contract with large international customer 22 December 13 – Financial calendar 2023 The company announcements are available on the company website: https://skako.com/about/investor-relations/#company_announcements | Annual report 2022 Page 41 4.2 Corporate social responsibility 4.2 CORPORATE SOCIAL RESPONSIBILITY Report on Corporate Social Responsibility, cf. Section 99a of the Danish Financial Statements Act SKAKO strives to operate its business in a responsible manner and wants to comply with the legislation in all the countries where operations are conducted. Furthermore, compliance with Human Rights and consideration for the environment are considerable focus areas for the Group. SKAKO’s work with corporate social responsibility is based on value creation and risk management. SKAKO has chosen to focus its work on social responsibility within five areas: Environment, human rights, working environment, anti-corruption, and equality. The policies below have been approved by the Board of Directors. For a description of SKAKOs business model please see sections 2.1 and 3.1. Result for 2022 compared to goal for 2022 SKAKO realized 5.1% lower consumption of kWh in 2022 compared to the goal of 950,000 kWh. switch to LED lighting and heating via heat pumps in Denmark and solar collectors in France as well as general focus on optimization of consumption in production. Results & goals Goal for 2023 Result 2022 Goal for 2022 Result 2021 Result 2020 Result 2019 850,000 804,777 950,000 848,268 865,865 828,828 Policy SKAKO seeks to reduce its impact on the environment by reducing energy consumption year by year. The Group is a know-how and engineering company with production of key components. The production mainly consists of assembling and testing and does not include energy-demanding or polluting processes. All surface treatment processes are outsourced to sub-suppliers. A part of SKAKO’s supplier “Code of Conduct” addresses impact on the environment. See under Human rights for more information about the supplier “Code of Conduct”. Furthermore, SKAKO actively seeks to reduce its energy consumption by, for example, installing LED lighting in its facilities. We are also currently exploring the possibility of installing solar roof panels. In 2022, SKAKO has started a project to outline how SKAKO can become C02 neutral. Environment Actions SKAKO will reduce consumption of kWh year by year in its production sites. We expect, however, to see a small increase in consumed kWh in 2023 since we expect a growth in activity compared to 2022. KPI Consumed kWh in production sites. Risks Energy consumption is a variable of activity. | Annual report 2022 Page 42 4.2 Corporate social responsibility Anti-corruption and bribery Policy SKAKO seeks to avoid corruption and bribery by creating a framework that secures that employees at SKAKO are able to abide to laws and regulations, and that there will never exist any doubt with regards to a SKAKO employee’s impartiality. Actions 1. SKAKO enforces a gift policy. 2. SKAKO has introduced an internal whistle blower scheme to give employees the opportunity to report on corruption, bribery and other matters while being anonymous. 3. SKAKO has developed an Employee “Code of Conduct” e-learning that describes the way SKAKO expects all its employees to act in accordance with laws and regulations. The employee “Code of Conduct” also describes usage of the whistle blower scheme. Every year all SKAKO employees must conduct the Employee “Code of Conduct” e-learning session. 4. Maintain whistle blower scheme to also be available for external parties. KPIs 2. No reported violations of anti-corruption laws and regulations, and SKAKO Employee Code of Conduct. 3. All employees to pass SKAKO’s Employee “Code of Conduct” e-learning. Results for 2022 compared to goals for 2022 1. SKAKO A/S has maintained its gift policy throughout 2022. 2. SKAKO A/S has received no reported violations of anti-corruption laws and regulations, and SKAKO Employee Code of Conduct in 2022. 3. 80% of SKAKO employees have passed the SKAKO Employee Code of Conduct e-learning. The main reason for the result not being 100% is new hires in late 2021 who did not complete the Code of Conduct session yet. 4. In 2022, SKAKO has maintained the whistle blower scheme to also be available to external parties. Furthermore, the whistle blower scheme is part of the SKAKO Employee Code of Conduct e-learning. Results & goals Risks 2. Employees lack knowledge of the whistle blower scheme. 3. Employee “Code of Conduct” e-learning is not prioritized. Goal for 2023 Result for 2022 Result for 2021 Result 2020 2 0 0 0 0 3 100% 80% 95% 99% | Annual report 2022 Page 43 4.2 Corporate social responsibility Human rights Policy To SKAKO, respect of human rights is about the company’s own employees’ conditions and securing that suppliers and sub-suppliers deliver services to the Group in a way that considers their employees’ rights including safety and health. Actions SKAKO has formulated a Supplier ”Code of Conduct” that specifies principles we expect our supplier to follow. This ensures that suppliers and their suppliers produce and deliver their services to the Group in a way that considers the environment and the employees’ rights. KPI The part of our main suppliers that have signed our supplier “Code of Conduct”. Result for 2022 compared to goal for 2022 SKAKO has not reached the goal of having all suppliers sign our code of conduct. This will be another target in 2023 and forward. Code of Conduct for SKAKO group is currently being revised and will be launched in summer 2023. Results & goals Risks Lack of transparency in compliance with SKAKOs Supplier “Code of Conduct”. Goal 2023 Result 2022 Goal for 2022 Result 2021 Result 2020 95% 95% 95% 85% 85% | Annual report 2022 Page 44 4.2 Corporate social responsibility Working environment Policy Our employees are our most valuable asset and key to providing high-quality products and services to our customers. It is vital to SKAKO’s future success that SKAKO is a safe, motivating and developing place to work. Actions 1. The sick rate among employees is monitored and we follow up on employees with high absence. 2. SKAKO will produce an annual employee satisfaction survey to monitor the development in employee satisfaction. Processes are in place to ensure that low-scoring departments receive guidance on how to improve employee satisfaction. 3. Number of on-the-job accidents is measured. 4. All employees must have at least one yearly performance appraisal interview. KPIs 1. The average sick rate among employees. 2. An average employee satisfaction score of at least 3.5. 3. Number of on-the-job accidents. 4. Percentage of performance appraisal interviews each year. Results for 2022 compared to goals for 2022 1. SKAKO is revising its global setup for monitoring sick days. 2. In 2022 an employee survey was performed. 3. In 2022, SKAKO had 10 on-the-job accidents. Management does not find this satisfactory although it has been minor on-the-job accidents and will keep working on eliminating on-the-job accidents entirely. 4. In 2022, we did not meet our target for appraisal interviews. As this is a vital part of the employee well-being, we will keep pushing for this. Results & goals Goal for 2023 Result 2022 Result 2021 Result 2020 Result 2019 1 6.0 5.5 8.4 7.8 7.5 2 >3.5 4.1 N/A 3.8 3.9 3 0 10 5 7 4 4 100% 85% 85% 90% 90% Risks 1. Sick rate increases due to workload. 2. Results are not followed up by actions rendering the measuring superfluous. 3. Management does not reprimand violations of safety standards. 4. Performance appraisal interviews are not prioritized due to workload. *Measured as total number of sick days divided by the averagenumber of employees in the year On a scale from 1 to 5, where 5 is the most positive score | Annual report 2022 Page 45 4.2 Corporate social responsibility Equality, cf. Section 99b of the Danish Financial Statements Act Policy At SKAKO A/S we believe that a diverse and tolerant organization makes the company stronger, increases the competitiveness and creates a good and innovative working environment. We want to develop and benefit from the total potential of all employees and that all employees can develop their full potential in balance between working life and private life. At present, SKAKO A/S has one female board member who entered the Board of Directors in April 2020 whereby SKAKO reached its goal of having at least one female board member by 2022. However, the Board of Directors is aware that this still represents an underrepresentation and wants to support and contribute to the part of female board members being increased. Considering SKAKO A/S’s business and the line of business within which SKAKO A/S is operating, the Board of Directors has set the specific goal that the part of women elected at the general meeting is to amount to at least 40% by 2024. In the view of the Board of Directors, this goal is an ambitious and realistic goal for a company within the lines of business in which SKAKO is operating as these lines of business traditionally do not have a large number of women neither in the board of directors nor at the other management levels. Within the last 12 months we succeeded in hiring one female manager who replaced a male manager. It is the plan of the Board of Directors to further increase the number of female managers in the years to come. Ultimately, SKAKO A/S’s shareholders elect the Board of Directors at the company’s general assembly and consequently also determine the gender composition of the Board of Directors. To the extent that the Board of Directors proposes new candidates for the Board of Directors, the Board of Directors will regard gender as one separate parameter in order to reach the determined goal. When candidates are proposed for SKAKO A/S’s Board of Directors, it is essential that the members represent professional competences relevant to SKAKO A/S. It is SKAKO’s goal to increase the part of women in the management group within a three-year period. SKAKO A/S will reach the goal by requiring candidates of both genders in the recruiting phase and by taking into account the underrepresented gender at succession planning. SKAKO works very intentionally on showing multiplicity in its marketing to signal that the company wants to reflect the society in its employee composition. Actions 1. SKAKO actively seeks to recruit new employees of all ethnicities and genders. 2. SKAKO seeks to have an improved gender distribution in employees and Management. 3. SKAKO seeks to have an improved gender distribution in the Board of Directors. KPIs 1. Share of the underrepresented gender among all employees. 2. Share of the underrepresented gender in Management. 3. Share of the underrepresented gender in the Board of Directors. Results for 2022 compared to goals for 2022 1. In 2022, SKAKO is status quo, compared to 2021. However, the goal has not yet been realized. According to our policy this will be a continuous focus for SKAKO. 2. In 2022, SKAKO is status quo, compared to 2021. Target has not been achieved, but will be part of the evaluation criteria for future recruitments to management 3. In 2022, the Board of Directors remained unchanged, with one female board member. Changes in the Board of Directors is currently not expected. Results & goals Risks 1. We will not reach our targets because SKAKO’s industry is historically a male- dominated industry with limited access to female candidates. Goal for 2023 Result 2022 Result 2021 Result 2020 Result 2019 1 20% women 17% women 17% women 17% women 14% women 2 20% women 17% women 17% women 17% women 13% women 3 20% women 20% women 20% women 20% women 0% women | Annual report 2022 Page 46 4.2 Corporate social responsibility Diversity, cf. Section 107d of the Danish Financial Statements Act Policy At SKAKO A/S we believe that a diverse and tolerant organization makes the company stronger, increases the competitiveness and creates a good and innovative working environment. We want to develop and benefit from the total potential of all employees and that all employees can develop their full potential in balance between working life and private life. Therefore, no discrimination based on gender, religion, ethnicity, sexual orientation, etc. is tolerated in SKAKO. When recruiting members to the SKAKO management team, we are convinced that diversity will add value to the company. To make sure all employees and management in SKAKO comply with SKAKOs policies of tolerance and inclusion, we have established an Employee “Code of Conduct” e-learning that describes the way SKAKO expects all its employees to act in accordance with our policies, and laws and regulations. Actions 1. SKAKO has developed an Employee “Code of Conduct” e-learning that describes the way SKAKO expects all its employees to act in accordance with laws and regulations. The employee “Code of Conduct” also describes usage of the whistle blower scheme. Every year all SKAKO employees must carry through the Employee “Code of Conduct” e-learning. The e-learning provides the management with insight on how to secure diversity in the organization and on management level. 2. Enhance the awareness in the SKAKO management team on the benefits of diversity. This could be in a workshop with this specific purpose KPIs 1. All employees to pass SKAKO’s Employee “Code of Conduct” e-learning. Results for 2022 compared to goals for 2022 1. 80% of SKAKO employees have passed the SKAKO Employee Code of Conduct e-learning. Risks 1. Employee “Code of Conduct” e-learning is not prioritized. Goal for 2023 Result 2022 Result 2021 Result 2020 Result 2019 1 100% 80% 95% 90% 81% Results & goals | Annual report 2022 Page 47 4.2 Data Ethics Data ethics (§99 ÅRL) Policy At SKAKO A/S we are acting with responsibility, when it comes to data ethics. This applies to all data, i.e. business intelligence data, employee information and supplier/ customer information. We have defined eight basic principles of working with data: Welfare: Data on society, democracy and social relations are treated with respect. Dignity: Treatment of data may not be used to harm an individual. Privacy: Any data treatment shall respect privacy and personal data shall be protected. It should always be considered what data are necessary and what are the sources of the data. Own rights: The individual should always have the right to obtain information on what data are stored and know for what purpose the data are intended. Equality: Treatment of data may not discriminate with regards to ethnicity, sexuality, sex, political opinions, religion, generical data, disability or other health related information. Justice: Treatment of data is performed with responsibility to local legislation. Data security: Treatment of data shall be sufficiently safe, robust and reliable. Data shall be stored and shared in way that unintended availability for unauthorized use is impossible. Responsibility: SKAKO is responsible for data collected, stored and distributed by SKAKO. Actions 1. Continuously communicate the basic principles of data ethics to SKAKO staff. 2. Implement annual review of data stored in CRM system. 3. Secure that all customers and suppliers are confirming their consent with data stored in CRM. | Annual report 2022 Page 48 4.3 Risk management 4.3 RISK MANAGEMENT First and foremost, risk management activities in the SKAKO Group focus on financial risks to which the Company is fairly likely to be exposed. In connection with the preparation of the Group’s strategic, budgetary and annual plans, the Board of Directors considers the risks identified in these activities. Financial risks Financial risk management concentrates on identifying risks in respect of exchange rates, credit and liquidity with a view to protecting the Group against potential losses and ensuring that Management’s forecasts for the current year are only to a limited extent affected by changes or events in the surrounding world – be the changes in exchange rates or in interest rates. It is Group policy to exclusively hedge financial risks arising from our commercial activities and not to undertake any financial transactions of a speculative nature. Exchange rate risks With more than 90% of the Group’s sales being invoiced in foreign currencies, reported revenue is affected by movements in the Group’s trading currencies. The Group does not hedge (systematic) currency risks with financial instruments but seeks to minimize such exchange rate risks by matching positive and negative cash flows in the main currencies as much as possible. The Group conducts ongoing conversion to DKK in connection with the purchase and sale of foreign currency and monitoring of currency exposure. If deemed appropriate, foreign exchange rate contracts are entered into. Credit risks The Group’s credit risks relate primarily to trade receivables. For large projects we have a signed Letter of Credit from the customer’s bank before we undertake any work. Our remaining customer base is fragmented so credit risks in general only lead to minor losses on individual customers. Overall, we therefore estimate that we have no major credit exposure on Group level. Liquidity risk The Group aims at having sufficient cash resources to be able to take appropriate steps in case of unforeseen fluctuations in cash outflows. We have access to suitable undrawn credit facilities, and the liquidity risk is therefore considered to be low. Financial reporting process and internal controls SKAKO has established and maintains an internal control setup that supports correct and timely reporting to Management and Market. The responsibility of maintaining sufficient and efficient internal control and risk management in connection with financial reporting lies with the Executive Board. The Board of Directors has assessed the Group’s existing control environment and concluded that it is adequate and that there is no need for setting up an internal audit function. Once every quarter we carry through a detailed planning and forecast process, and any deviations from the plans and budgets are carefully monitored. Furthermore, we perform weekly, monthly and quarterly reviews and assessments of all large projects. | Annual report 2022 Page 49 4.3 Risk management Safeguarding corporate assets Management continuously seeks to minimize any financial consequences of damage to corporate assets including any operating losses resulting from such damage. We have invested in security and surveillance systems to prevent damage and to minimize such damage, should it arise. Major risks, which cannot be adequately minimized, are identified by the Company’s Management, who will ensure that appropriate insurance policies are, on a continuous basis, established under the Group’s global insurance program administered by recognized and credit-rated insurance brokers and that such insurances are taken out with insurance companies with high credit ratings. The Group’s insurance program has deductible clauses in line with normal market terms. The Board of Directors reviews the Company’s insurance policies once a year including the coverage of identified risks and is briefed regularly on developments in identified risks. The purpose of this reporting is to keep the Board members fully updated and to facilitate corrective action to minimize any such risks. Declining market conditions Management continuously monitors market conditions and maintains close relations to significant customers in order to be able to make a timely response in light of changing circumstances. Monitoring of consequences regarding the Corona virus falls under this category, as well as geopolitical risks such as the current Ukraine war, inflation and increasing interest rates. Cyber security SKAKO maintains and enforces an IT safety policy to reduce risks from cyber crime. Furthermore, SKAKO has implemented an IT contingency plan based on recommendations from the Danish Data Protection Agency and other recommended authorities regarding cyber security. SKAKO’s head of IT operations oversees monitoring and enforcing of the IT contingency plan. Project execution The Company continuously executes projects across the world, and in some cases faces challenges in the execution. The Management continuously monitors project execution to identify possible risks as early as possible. Furthermore, projects are actively distributed among project managers to ensure that the most experienced managers execute the most complex projects. | Annual report 2022 Page 50 4.4 Corporate governance and remuneration report 4.4 CORPORATE GOVERNANCE AND REMUNERATION REPORT Recommendations on corporate governance As a listed company on 31 December 2022, SKAKO observes the ´Recommendations on Corporate Governance´ (issued in November 2017 and updated in December 2020) implemented by Nasdaq Copenhagen in its ´Rules for issuers of shares´. The ´Recommendations on Corporate Governance´ contain 40 recommendations and are based on the comply-or-explain principle, which makes it legitimate for a company to explain why it does not comply with them. SKAKO fully complies with 37 of the 40 recommendations, and partially complies with one, and therefore complies with the ´Recommendations on Corporate Governance´ in all material respects. A complete schematic presentation of the recommendations and how we comply, Statutory report on corporate governance, cf. section 107 b of the Danish Financial Statements Act, is available on our website under Investor Relations. We find it relevant to highlight a number of aspects and supplementary information on corporate governance in the SKAKO Group in this chapter. Deviations from recommendations SKAKO has not established a nomination or a remuneration committee. Given the size of SKAKO, the Board of Directors finds it most suitable that the total Board of Directors takes care of the tasks. SKAKO has not yet disclosed a tax policy. This will be uploaded to our website as soon as the Board of Directors has released it. Audit committee The Company’s Board of Directors has set up an audit committee. The Board of Directors appoints the chairman of the Audit Committee, who must be independent and who must not be Chairman of the Board of Directors. According to its charter, the Audit Committee, among other things, assists the Board of Directors in relation to internal accounting and financial control systems, the integrity of the company’s financial reports and engagements with external auditors. The audit committee also carries out ongoing assessments of the company’s financial and business risks. In 2022, the committee reviewed the main accounting principles, tax strategy and compliance and key risks, etc. In 2022, the Audit Committee held four meetings. Remuneration The Company has formulated remuneration policies for the Board of Directors and Executive Management. The policies were approved on the general assembly 28 April 2021. The policies is available on our website under Investor Relations. Furthermore, the Company has produced a remuneration report for the Board of Directors and Executive Management. The report is available on our website under Investor Relations. | Annual report 2022 Page 51 4.5 Executive management 4.5 EXECUTIVE MANAGEMENT Name Steffen Kremmer Lionel Girieud Thomas Pedersen Born in 1962 1971 1975 Title Director Director Group CFO Member of the management since 2019 2016 2022 Number of shares in SKAKO 1,236 5,166 0 Board positions – – – | Annual report 2022 Page 52 4.6 Board of directors 4.6 BOARD OF DIRECTORS Name Jens Wittrup Willumsen Lars Tveen Title Chairman of the Board of Directors and member of the audit committee Considered as a non-independent Board member Deputy Chairman Considered as an independent Board member Born in 1960 1963 Board member since 2010 2017 SKAKO shares Jens Wittrup Willumsen owns 50% of the shares in Frederik2 Aps. Frederik2 Aps owns 800,000 shares in SKAKO. Further, Jens Wittrup Willumsen has a direct ownership of 19,876 shares in SKAKO. Managerial positions in other companies Chairman of the Board: Licensewatch A/S, Kontrapunkt Group A/S, Everland ApS, COMIT A/S, Copenhagen Optimization ApS, The INDEX, Projects A/S, Begravelse Danmark A/S, TMC Nordic Deputy Chairman: Billund Lufthavn A/S Board member: FDM Travel A/S, Charlotte Sparre A/S, Ejendomsselskabet Experimentarium A/S, Museum Kolding, SEC Datacom Group A/S, Cogo ApS Others positions: Colonial ApS, Director own holding company Colonial 2 ApS, Director own holding company Frederik2 ApS, Director own investment company 15,104 Chairman of the Board: Project Zero-Fonden Denmark (local initiative to achieve carbon neutrality by 2029) Board member: The Energy Industry (an association under the Confederation of Danish Industries), Green Energy (Grøn Energi) Special competences Jens Wittrup Willumsen is educated Cand. Merc. from Copenhagen Business School and has had managing positions in Denmark and abroad. His competences include strategy, finance, financing, sales and marketing. Participation in board meetings Jens Wittrup Willumsen participated in all board and audit committee meetings in 2022. Lars Tveen is educated production engineer from Odense University in 1989 and has a bachelor in Commerce from University of Southern Denmark from 1993. Following his education Lars Tveen was appointed at Danfoss as Management Trainee. In April 2022, Lars Tveen was appointed CEO for the Bitten & Mads Clausens Foundation. Lars Tveen participated in all board meetings in 2022. | Annual report 2022 Page 53 4.6 Board of directors Name Carsten Krogsgaard Thomsen Sophie Louise Knauer Title Chairman of the Audit Committee Considered as an independent Board member Considered as an independent Board member Born in 1957 1983 Board member since 2017 2020 SKAKO shares 19,255 – Managerial positions in other companies Board member: NTG Nordic Transport Group A/S Board member: Solar A/S, Rekom Group A/S, CC Globe Holding I ApS, CC Globe Holding II ApS, CC Fly Holding I ApS, CC Fly Holding II ApS, CC Mist NEW Holding ApS, CC Mist NEW Holding II ApS Other positions: Lady invest ApS managing director and owner. Special competences Carsten Krogsgaard Thomsen is educated Cand. Polit. and has had a long career with primary focus on economics and finance. Through his career, Carsten Krogsgaard Thomsen has accumulated extensive experience within M&A, and compliance in listed companies. From 2014 to 2020 Carsten Krogsgaard Thomsen was CFO in NNIT and previously also held positions as EVP and CFO in Dong Energy A/S, EVP in DSB (Danish State Railways), finance and planning manager at Rigshospitalet (the Copenhagen University Hospital) and consultant in McKinsey & Company. Sophie Louise Knauer is educated HA JUR and Cand. Merc. in economy and strategic management from Copenhagen Business School. Her career includes top management in TDC, CEO for People Group A/S and senior consultant at McKinsey & Company. Sophie Louise Knauer has built strong competences within strategic management and digital transformation. Participation in board meetings Carsten Krogsgaard Thomsen participated in all board and audit committee meetings in 2022. Christian Herskind Jørgensen participated in all board meetings in 2022. Sophie Louise Knauer participated in all board meetings in 2022. Christian Herskind Jørgensen Considered as a non-independent Board member 1961 2009 Chairman of the Board: Fonden Amager Bakke, LABFLEX A/S, Taulov DryPort A/S, Skive Holding ApS Deputy Chairman: Fonden til støtte for soldater i internationale missioner (Soldaterlegatet) Board member: Fonden Peder Skram, Su Misura A/S, Nordsøenheden/Nordsøfonden, Associated Danish Ports A/S, LM Byg A/S, Pihl & Søn A/S, BNS A/S Others positions: Herskind Venture Capital ApS, Director own holding company, Ejendomsselskabet Helsingør/Århus, Director Frederik2 ApS, Director own holding company Christian Herskind Jørgensen is educated lawyer from University of Copenhagen and University of London and is also Brigadier. His competences include significant experience within sales, marketing, strategy, management, HR and legal matters. Christian Herskind Jørgensen owns 50% of the shares in Frederik2 Aps. Frederik2 Aps owns 800,000 shares in SKAKO. Further, Christian Herskind Jørgensen has a direct ownership of 109,000 shares in SKAKO. | Annual report 2022 Page 54 Know-how is the key element in our business, which drives us to develop visionary, sustainable, long-lasting, and technology-based solutions. | Annual report 2022 Page 55 4.7 Shareholder information 4.7 SHAREHOLDER INFORMATION As of 31 December 2022, SKAKO’s nominal share capital was 31,064,180 DKK divided into 3,106,418 shares of 10 DKK each. All shares are fully paid, the same class and carry one vote each. The Board of Directors has been authorized by the annual general assembly to initiate a share buy-back programme for up to 10% of the share capital. The authorization was valid until 1 April 2027. SKAKO A/S is listed at NASDAQ OMX Copenhagen A/S under identification code DK0010231877. The share price as of 31 December 2022 was 62.6 corresponding to a market capitalization of DKK 194.5m. By the end of 2023 the company had 1,678 registered shareholders compared with 1,746 registered shareholders by the end of 2021. The registered shareholders own a total of 94.1% of the share capital compared to 94.5% by the end of 2021. Specification of movements in share capital Shareholders with more than 5% of the share Dividends Based on the results in 2022 and capital structure of SKAKO A/S as of 31 December 2022, the Board of Directors recommends a dividend distribution of DKK 5 per share corresponding to 61.0% of profit for the year and a total dividend distribution of DKK 15.4m. With a share price of DKK 62.6 as of 31 December 2022, this corresponds to a dividend yield of 8.0%. Ex dividend date: Record date: Paymentdate: 19 April 2023 26 April 2023 26 April 2023 Financial calendar 2023 DKKThousands 2022 2021 2020 2019 2018 Share capital 31,064 31,064 31,064 31,064 31,064 at 01.01. Capital increase – – – – – Share capital 31,064 31,064 31,064 31,064 31,064 at 31.12. Frederik2 ApS, Copenhagen Danica Pension, Copenhagen Maj Invest Holding A/S, Copenhagen 25.75% 10.63% 9.98% Presentation of the annual report Together with HC Andersen Capital, SKAKO A/S will do an online presentation of the annual report for 2022 on Tuesday 21 March 2023 at 14.00 – 15.00 pm. Registration for event: https://www.inderes.dk/videos/skako-praesentation-af-arsregnskabet-2022. Annual general meeting 2023 The annual general meeting will be held on Wednesday 19 April 2023 at 3 p.m. at the Company’s head office at Bygmestervej 2, 5600 Faaborg, Denmark. Investor Relations Investors, analysts and medias are welcome to contact Jens Wittrup Willumsen (Chairman of the Board of Directors) by phone +45 2347 5640 or by e-mail to skako.dk@skako.com 15 March Annual report for 2022 19 April Ordinary general meeting 2023 23 May Interim report for the period 1 January - 31 March 2023 23 August Interim report for first half-year 2023 8 November Interim report for the period 1 January - 30 September 2023 | Annual report 2022 Page 56 5. FINANCIAL STATEMENTS | Annual report 2022 Page 57 5.1 Statement by Management Board of Directors Steffen Kremmer Director Executive Board Lionel Girieud Director Thomas Pedersen Group CFO Jens Wittrup Willumsen Chairman Christian Herskind Jørgensen Carsten Krogsgaard Thomsen Lars Tveen Deputy Chairman 5.1 STATEMENT BY MANAGEMENT Today, we have discussed and approved the Annual Report 2022 of SKAKO A/S for the financial year 1 January to 31 December 2022. The annual report has been prepared and presented in accordance with International Financial Reporting Standards as adopted by the EU and further requirements in the Danish Financial Statement Act. In our opinion, the consolidated financial statements and the parent company financial statements give a true and fair view of the Group’s and the parent company’s assets, liabilities and financial position on 31 December 2022 and of the results of the Group’s and the parent company’s operations and cash flows for the financial year 1 January to 31 December 2022. Further, in our opinion the Management’s report includes a fair view of the development and performance of the Group’s and the parent company’s business and financial condition, the profit for the year and of the Group’s and the parent company’s financial position, together with a description of the principal risks and uncertainties that the Group and the parent company face. In our opinion, the annual report of SKAKO A/S for the financial year 1 January to 31 December 2022 with the file name 529900WNR3U8C847AW24-2022-12-31- en.zip is prepared, in all material respects, in compliance with the ESEF Regulation. We recommend the Annual Report for 2022 be approved at the Annual General Meeting. Faaborg, 15 March 2023 Sophie Louise Knauer | Annual report 2022 Page 58 5.2 Independent auditor’s report 5.2 INDEPENDENT AUDITOR’S REPORT To the shareholders of SKAKO A/S 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 Company’s financial position at 31 December 2022 and of the results of the Group’s and the Parent Company’s operations and cash flows for the financial year 1 January to 31 December 2022 in accordance with International Financial Reporting Standards as adopted by the EU and further requirements 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 Directors. What we have audited The Consolidated Financial Statements and Parent Company Financial Statements of SKAKO A/S for the financial year 1 January to 31 December 2022 comprise income statement and statement of comprehensive income, balance sheet, cash flow statement, statement of changes in equity and notes, including summary of significant accounting policies 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 International Standards on Auditing (ISAs) and the additional requirements applicable in Denmark. Our responsibilities 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 Accountants (IESBA Code) and the additional ethical requirements 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 Regulation (EU) No 537/2014 were not provided. Appointment We were first appointed auditors of SKAKO A/S on 26 April 2012 for the financial year 2012. We have been reappointed annually by shareholder resolution for a total period of uninterrupted engagement of 11 years including the financial year 2022. We were reappointed following a tendering procedure at the General Meeting on 19 April 2022. | Annual report 2022 Page 59 5.2 Independent auditor’s report Revenuerecognition from construction contracts Revenue from customer contracts is recognised over time. The proportion of revenue to be recognised in a particular period is calculated according to the percentage of completion of the project. This is measured by reference to the costs of performing the contract incurred up to the relevant balance sheet date as a percentage of the total estimated costs of performing the contract. Contract assets amounted to DKK 64 million (2021: DKK 53 million) net and contract liabilities amounted to DKK 47 million (2021: DKK 20 million) net. Recognition of the Group’s revenue involves a high degree of subjectivity in determining significant assumptions for the total estimated costs for the contracts. We focused on this area, as recognition of revenue involves judgements made by Management originating from percentage of completion and estimated cost to completion. Reference is made to note 1 and 16. We considered the appropriateness of the Group’s accounting policies for revenue recognition and assessed compliance with applicable accounting standards. We performed risk assessment procedures with the purpose of achieving an understanding of it-systems, procedures and relevant controls relating to revenue recognition from construction contracts. In respect of controls, we assessed whether these were designed and implemented effectively to address the risk of material misstatement. We performed substantive procedures over input data from contracts and costs allocated to projects. We assessed Management’s estimated cost to completion and contribution margin for construction contracts in order to evaluate the valuation of construction contracts and recognised revenue. We compared the estimated contribution margins to actual contribution margins for finished projects and to prior year’s estimates. We performed a retrospective analysis of Management’s ability to assess the cost to completion and expected contribution margin in prior years. We tested Management’s estimated percentage of completion by assessing subsequent development in costs allocated to the projects and Management’s updated estimates for cost to completion and contribution margin. Deferredtax assets At 31 December 2022, the Group has recognised deferred tax assets of DKK 26 million (2021: DKK 21 million). Management is required to exercise considerable judgement when determining the appropriate amount to capitalise in respect of deferred tax. We focused on this area as the amounts involved are significant and the valuation of tax assets is dependent on highly subjective assumptions on budgeted taxable income for the coming years. Reference is made to note 14. We evaluated Management’s method for estimating the deferred tax assets. In understanding and evaluating Management’s method and assumptions we performed a retrospective analysis of Management’s ability to budget the taxable income in prior years. Further, we examined the Group’s budgets and projections for the coming years including significant assumptions. We evaluated and challenged the adequacy of the significant assumptions determined by Management in developing the accounting estimate. Key audit matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the Financial Statements for 2022. These matters were addressed in the context of our audit of the Financial Statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Key audit matter How our audit addressed the key audit matter | Annual report 2022 Page 60 5.2 Independent auditor’s report 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 Statements, our responsibility is to read Management’s Review and, in doing so, consider whether Management’s Review is materially inconsistent with the Financial 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. Based on the work we have performed, in our view, Management’s Review is in accordance with the Consolidated Financial Statements and the Parent Company Financial Statements and has been prepared in accordance with the requirements of the Danish Financial Statements Act. We did not identify any material misstatement in Management’s Review. 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 International Financial Reporting 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, Management 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. | Annual report 2022 Page 61 5.2 Independent auditor’s report 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. Misstatements 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 professional scepticism throughout the audit. We also: • Identify and assess the risks of material misstatement 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 collusion, forgery, intentional omissions, misrepresentations, 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 effectiveness of the Group’s and the Parent Company’s internal control. • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates 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 Statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter. | Annual report 2022 Page 62 5.2 Independent auditor’s report 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 SKAKO A/S for the financial year 1 January to 31 December 2022 with the filename 529900WNR3U8C847AW24-2022-12-31-en.zip is prepared, in all material respects, in compliance 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 Statements 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 judgement, 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 procedures 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 SKAKO A/S for the financial year 1 January to 31 December 2022 with the file name 529900WNR3U8C847AW24-2022-12-31- en.zip is prepared, in all material respects, in compliance with the ESEF Regulation. Odense,15 March 2023 PricewaterhouseCoopers Statsautoriseret Revisionspartnerselskab CVR no 3377 1231 Torben Jensen State Authorized Public Accountant mne18651 MikaelJohansen State Authorized Public Accountant mne23318 | Annual report 2022 Page 63 5.3 Consolidated financial statements DKK Thousands 2022 2021 Notes 1, 2 Revenue from contracts with customers 437,920 363,706 3, 4 Production costs (323,283) (271,298) Gross profit 114,637 92,408 4 Distribution costs (43,923) (40,745) 4, 5, 6 Administrative expenses (39,872) (31,340) Operating profit before special items (EBIT) 30,842 20,323 7 Special items (1,650) - Operating profit (EBIT) 29,192 20,323 8 Financial income 916 721 8 Financial expenses (5,878) (5,627) Profitbefore tax 24,230 15,417 9 Tax on profit for the year 844 (2,228) Profit for the year 25,074 13,189 Profitfor the year attributable to SKAKO A/S shareholders 25,074 13,189 10 Earnings per share (EPS), DKK 8.13 4.28 10 Diluted earnings per share (EPS), DKK 8.09 4.28 Consolidated income statement 5.3 CONSOLIDATED FINANCIAL STATEMENTS | Annual report 2022 Page 64 5.3 Consolidated financial statements Consolidated statement of comprehensive income DKK Thousand 2022 2021 Notes Profit for the year 25,074 13,189 Other comprehensive income: Items that have been or may subsequently be reclassified to the income statement: Foreign currency translation, subsidiaries 533 773 Value adjustments of hedging instruments - (233) Other comprehensive income 533 540 Comprehensive income 25,607 13,729 Comprehensive income attributable to SKAKO A/S shareholders 25,607 13,729 | Annual report 2022 Page 65 5.3 Consolidated financial statements Consolidated balance sheet 31 December DKK Thousands 2022 2021 Notes Intangible assets 36,188 39,068 Intangible assets under development 4,237 3,113 11 Intangible assets 40,425 42,181 13 Leased assets 8,786 8,035 12 Land and buildings 5,821 5,832 12 Plant and machinery 1,238 1,053 12 Operating equipment, fixtures and fittings 2,458 3,059 12 Leasehold improvements 2,906 1,630 12 Tangible assets under construction 156 97 Tangible assets 21,365 19,706 Other receivables 1,234 1,272 14 Deferred tax assets 25,575 21,057 Other non-current assets 26,809 22,329 Total non -current assets 88,599 84,216 15 Inventories 72,740 64,080 20 Trade receivables 101,385 87,429 16, 20 Contract assets 63,876 53,037 Other receivables 9,270 8,340 Prepaid expenses 3,045 2,843 Cash 45,142 39,075 Current assets 295,458 254,804 Assets 384,057 339,020 | Annual report 2022 Page 66 5.3 Consolidated financial statements Consolidated balance sheet 31 December CONTINUED DKK Thousands 2022 2021 Notes Share capital 31,064 31,064 Foreign currency translation reserve 82 (451) Hedging reserve (49) (49) Retained earnings 99,538 89,338 Proposed dividends 15,532 12,335 Equity 146,167 132,237 Other liabilities 7,562 7,995 18 Provisions 4,345 3,729 17 Loans and borrowings 9,150 11,787 13 Leasing 5,416 5,611 Non -current liabilities 26,473 29,122 18 Provisions 3,530 3,440 17 Loans and borrowings 9,828 9,849 17 Bank loans and credit facilities 38,119 35,970 13 Leasing 3,626 2,845 16 Contracts liabilities 46,829 19,762 Trade payables 81,200 79,081 Income tax 997 316 Other liabilities 27,288 26,398 Current liabilities 211,417 177,661 Liabilities 237,890 206,783 EQUITY AND LIABILITIES 384,057 339,020 | Annual report 2022 Page 67 5.3 Consolidated financial statements Consolidated cash flow statement DKK Thousnads 2022 2021 Notes Profit before tax 24,230 15,417 19 Adjustments 16,341 14,702 Changes in receivables, etc. (25,890) (102) Change in inventories (9,367) (11,003) Change in trade payables and other liabilities, etc. 30,351 17,785 Cash flow from operating activities before financial items and tax 35,665 36,799 Financial items received and paid (4,710) (4,906) Taxes paid and received (2,105) (1,617) Cash flow from operating activities 28,850 30,276 11 Investment in intangible assets (4,153) (3,962) 12 Investment in tangible assets (6,174) (3,504) Disposals 1,690 - Cash flow from investing activities (8,637) (7,466) New borrowings - 1,471 Repayments (2,072) (13,725) Paid dividends (12,335) (9,252) Change in short -term bank facilities 2,149 4,708 19 Cash flow from financing activities (12,258) (16,798) Change in cash and cash equivalents 7,955 6,012 Cash and cash equivalents 1 January 39,075 33,420 Foreign exchange adjustment, cash and cash equivalents (1,888) (357) Cash and cash equivalents 31 December 45,142 39,075 Breakdown of cash and cash equivalents at the end of the year: Cash 45,142 39,075 Cash and cash equivalents at the end of the year: 45,142 39,075 | Annual report 2022 Page 68 5.3 Consolidated financial statements Consolidated statement of changes in equity DKK Thousands Share capital Foreign currency translation reserve Hedging reserve Retained earnings Proposed dividends Equity Equity 1 January 2022 31,064 (451) (49) 89,338 12,335 132,237 Paid dividends (12,335) (12,335) Comprehensive income in 2022: Profit for the year 9,542 15,532 25,074 Other comprehensive income: - Foreign currency translation adjustments, subsidiaries 533 533 Value adjustments of hedging instruments - Other comprehensive income - 533 - - 533 Comprehensive income, year - 533 - 9,542 15,532 25,607 Share-based payment, warrants - 658 658 Equity 31 December 2022 31,064 82 (49) 99,538 15,532 146,167 | Annual report 2022 Page 69 5.3 Consolidated financial statements Consolidated statement of changes in equity DKK Thousands Share capital Foreign currency translation reserve Hedging reserve Retained earnings Proposed dividends Equity Equity 1 January 2021 31,064 (1,224) 184 87,976 9,252 127,252 Distributed interim dividends (9,252) (9,252) Comprehensive income in 2021: Profit for the year 854 12,335 13,189 Other comprehensive income: Foreign currency translation adjustments, subsidiaries 773 773 Value adjustments of hedging instruments (233) (233) Other comprehensive income - 773 (233) - - 540 Comprehensive income, year - 773 (233) 854 12,335 13,729 Share-based payment, warrants 508 - 508 Equity 31 December 2021 31,064 (451) (49) 89,338 12,335 132,237 | Annual report 2022 Page 70 5.4 Consolidated notes 5.4 CONSOLIDATED NOTES 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 2 2. 2 3. 24. 25. Note No. 1. 11. 14. 16. 18. Significant estimates and assessments: Notes to consolidated financial statements Revenue from contracts with customers . . . . . . . . . . . . . . . . . 71 Segment information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75 Production costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77 Staff costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78 Share-based payment, warrants . . . . . . . . . . . . . . . . . . . . . . 80 Fee to parent company auditors appointed at the annual general meeting82 Special items . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83 Net financial items . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84 Tax on profit for the year . . . . . . . . . . . . . . . . . . . . . . . . . . 85 Earnings per share (EPS) . . . . . . . . . . . . . . . . . . . . . . . . . . 86 Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87 Tangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91 Leases – Right-of-use assets . . . . . . . . . . . . . . . . . . . . . . . 94 Deferred tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97 Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99 Contract assets and liabilities . . . . . . . . . . . . . . . . . . . . . . . 100 Bank loans and credit facilities . . . . . . . . . . . . . . . . . . . . . . . 102 Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104 Adjustments, consolidated cash flow statement . . . . . . . . . . . . 106 Exchange rate, liquidity and credit risks . . . . . . . . . . . . . . . . . 107 Contractual liabilities, contingent liabilities and securities . . . . . . . 110 Related parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110 Events after the balance sheet date . . . . . . . . . . . . . . . . . . . 110 Approval and publication . . . . . . . . . . . . . . . . . . . . . . . . . . 110 Group accounting policies . . . . . . . . . . . . . . . . . . . . . . . . . . 111 Description Page Page Description Note No. Revenue from contracts with customers . . . . . . . . . . . . . . 71 Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87 Deferred tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97 Contract assets and liabilities . . . . . . . . . . . . . . . . . . . . . 100 Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104 | Annual report 2022 Page 71 5.4 Consolidated notes Accounting policy SKAKO operates in the following business segments: SKAKO Concrete and SKAKO Vibration. SKAKO Concrete develops, designs and sells a versatile high-end product range of all types of concrete batching plants for ready-mix, precast and jobsite plants. The main focus is on plant sales with a strong aftersales division. SKAKO Vibration develops, designs and sells high-end vibratory feeding, conveying, and screening equipment, used across the complete spectrum of material handling and processing. The main focus is on plant sales with a solid aftersales division. Administrative functions such as Finance, HR and IT are shared by the divisions. The administrative functions are based in the individual countries but supported by Group functions in Denmark. Shared costs are allocated to business segments based on assessment of usage. All intercompany transactions are made on market terms. Segment assets and liabilities comprise items directly attributable to a segment and items that can be allocated to a segment on a reasonable basis. Revenue is the fair value of consideration received or receivable from the sale of our plants and aftersales products or services and is the gross sales price less VAT and any price reductions in the form of discounts and rebates. Geographical information is based on the four regions that support the industries. Revenue is presented in the region in which delivery takes place. Segment income and costs include transactions between business areas. The transactions are eliminated in connection with the consolidation Revenue is recognized over time or at a point in time. Revenue is recognized over time when an asset on behalf of a customer is created with no alternative use and SKAKO has an enforceable right to payment for performance completed year to date, or the customer obtains control of a plant or product and thus has the ability to direct the use and obtain the benefit from the plant or product. Terms of payment are depending on conditions in the specific market. Plant sales orders are in general agreed with prepayment and payment milestones. Plant sales Plant sales are negotiated contracts to design and install concrete batching plants, and vibratory feeding, conveying and screening equipment for customers. Revenue will be recognized over time, as the above criteria are met, using “the percentage of completion method”. The proportion of revenue to be recognized in a particular period is calculated according to the percentage of completion of the project. For most contracts this is measured by reference to the costs of performing the contract incurred up to the relevant balance sheet date as a percentage of the total estimated costs of performing the contract. Reference to cost is assessed to be the most appropriate method as incurred hours and material costs are the value drivers for the projects. The sales value agreed in the contract is recognized over the contract period using above method. Contracts where the recognized revenue from the work performed exceeds progress billings are recognized in the balance sheet under assets Contracts for which progress billings exceed the revenue are recognized under liabilities. Prepayments from customers are recognized under liabilities. If it is likely that the total costs in relation to a construction contract will exceed the total revenue on a specific project, the expected loss is recognized immediately in the income statement in the current period. 1. Revenue from contracts with customers | Annual report 2022 Page 72 5.4 Consolidated notes Accounting policy CONTINUED Significant assessment by Management Assessments regarding contracts with customers is performed when determining if a contract for sale of a plant, spare parts or service, or a combination hereof, involves one or more performance obligations. Assessments regarding recognition method are made when determining if a contract for sale of a plant, spare parts or service is recognized as revenue over time or at a point in time. The assessments relate to whether we have an alternative use of the assets sold and if we have an enforceable right to payment throughout the contractual term. When assessing if an asset has no alternative use, we estimate the alternative use cost amount. We have limited historical data as we rarely redirect our assets. The estimate is based on the specifics of each contract. When assessing if we are entitled to payment throughout the contract term, an assessment is made based on the contract wording, legal entitlement and profit estimates. Significant estimates by Management Total expected costs related to plant sales are partly based on estimates as they include provisions for unforeseen cost deviations in future supplies of raw materials, subcontractor products and services plus construction and handing over. Provisions for warranties on work-in-progress for third parties are based on Management estimates for each project while taking contract obligations into account. 1. Revenue from contracts with customers CONTINUED Both divisions in SKAKO sell a range of spare parts and products as aftersales to the plant sales. Revenue is recognized when control of the products has transferred, being when the products are delivered to the customer. Delivery occurs when the products have been shipped to the specific location, the risks of obsolescence and loss have been transferred to the customer, and SKAKO has objective evidence that all criteria for acceptance have been fulfilled. In both divisions, revenue from the service contracts is recognized in the period in which the services are provided based on amounts billable to a customer. Revenue is recognized based on usage of units, and price lists according to the contract. Aftersales, spare parts and products Aftersales services Order backlog The order backlog represents the value of outstanding performance obligations on effective contracts, where we will transfer control at a future point in time and the remaining performance obligations on contracts where we transfer control over time. | Annual report 2022 Page 73 5.4 Consolidated notes 2022 2021 2022 2021 2022 2021 Plant 94,098 70,145 170,709 146,951 264,295 212,587 - Over time 94,098 70,145 163,605 138,182 257,191 203,819 - A point in time - - 7,104 8,769 7,104 8,769 Aftersales 110,559 94,828 66,833 56,290 173,624 151,118 - Over time - - - - - - - A point in time 110,559 94,828 66,833 56,290 173,624 151,118 Total revenue 204,657 164,973 237,542 203,242 437,919 363,706 Segregation of revenue Revenue,DKK Thousands Concrete Vibration Group Revenue,DKK Thousands 2022 2021 Revenue recognized that was included in the contract liability balance at the beginning of the period: - Plant sales 19,762 6,051 - Aftersales - - Total revenue recognized from contract liabilities 19,762 6,051 Segregation of revenue in segments 1. Revenue from contracts with customers CONTINUED After eliminations | Annual report 2022 Page 74 5.4 Consolidated notes Africa Revenue: DKK 17,338k (2021: DKK 23,878k) Hereof revenue in Morocco: DKK 9,922k (2021: DKK 603k) North America Revenue: DKK 60,808k (2021: DKK 32,006k) Rest of the world Revenue: DKK 19,890k (2021: DKK 24,920k) Europe Revenue: DKK 339,885k (2021: DKK 282,965k) Hereof revenue in Denmark: DKK 48,987k (2021: DKK 30,322) Hereof revenue in France: DKK 74,366k (2021: DKK 60,050k) Hereof revenue in the UK: DKK 29,961k (2021: DKK 26,237k) Hereof revenue in Germany: DKK 43,249k (2021: DKK 34,757k) Hereof revenue in Spain: DKK 58,364k (2021: DKK 40,922k) Geographical revenue information 1. Revenue from contracts with customers CONTINUED Geographical non-current assets information North America DKK 706k (2021: DKK 684k) Europe DKK 85,660k (2021: DKK 83,531k) Hereof in Denmark: DKK 69,385k (2021: DKK 68,747k) Hereof in France: DKK 13,391k (2021: DKK 11,579k) Hereof in Spain: DKK 2,480k (2021: DKK 2,745k) Hereof in Other: DKK 404k (2021: DKK 460k) | Annual report 2022 Page 75 5.4 Consolidated notes 2022 Concrete Vibration Not distributed including parent company Eliminations Group total Concrete 204,657 30 204,687 Minerals 101,477 101,477 Hardware 32,870 32,874 Recycling 79,604 79,604 Other 19,277 19,2777 Internal 4,310 (4,310) - Total revenue 204,657 237,542 (4,280) 437,919 Depreciations (5,120) (5,170) (10,290) Operating profit before special items (EBIT) 11,183 23,684 (4,025) 30,842 Order backlog, beginning 68,653 54,215 (486) 122,382 Order intake 278,697 255,870 (3,828) 530,739 Order backlog, ending 142,651 72,550 215,201 Segment non-current assets 37,682 40,007 11,936 89,625 Segment assets 212,878 229,339 16,042 (74,841) 383,418 Segment liabilities 145,993 119,956 34,570 (65,247) 235,272 Investments in intangible and tangible asset 4,532 4,550 9,082 Average number of employees 86 109 10 205 2022 DKK Thousands 2. Segment information | Annual report 2022 Page 76 5.4 Consolidated notes 2021 Concrete Vibration Not distributed including parent company Eliminations Group total Concrete 164,959 - - - 164,959 Minerals - 87,253 - - 87,253 Hardware - 31,989 - - 31,989 Recycling - 61,767 - - 61,767 Other - 17,738 - - 17,738 Internal 14 4,494 - (4,508) - Total revenue 164,973 203,241 - (4,508) 363,706 Depreciations (3,401) (4,020) - - (7,421) Operating profit (EBIT) 6,079 17,321 (3,077) - 20,323 Order backlog, beginning 34,496 58,593 - (1,212) 91 ,877 Order intake 199,130 198,863 - (3,782) 394,211 Order backlog, ending 68,653 54,215 - (486) 122,382 Segment non-current assets 34,426 42,850 6,940 - 84,216 Segment assets 142,539 199,590 8,492 (11,601) 339,020 Segment liabilities 80,772 133,248 4,364 (11,601) 206,783 Investments in intangible and tangible asset 2,669 6,319 - (1,522) 7,466 Average number of employees 82 117 - - 199 2021 DKK Thousands 2. Segment information | Annual report 2022 Page 77 5.4 Consolidated notes 3. Production costs Accounting policy Production costs are costs incurred to generate revenue. Production costs consist of raw materials, consumables, production staff, research and development cost as well as maintenance of and depreciation, amortisation and impairment losses on property, plant and equipment and intangible assets used in the production process. Research costs are always recognized in the Income Statement in step with the incurrence of such costs. Development costs include all costs not satisfying the capitalization criteria, but incurred in connection with development, prototype construction and development of new business concepts. Direct and indirect research and development incentives in terms of tax incentives and other grants and subsidy schemes for research and development are recognized when there is reasonable certainty that the conditions for such grants are satisfied and that they will be awarded. Grants are offset against research and development costs. The measurement and classification of government grants related to research and development is based on Management’s assessment. The incentive schemes applied do not require positive taxable income and hence government grants received have been accounted for in accordance with IAS 20. DKK Thousands 2022 2021 Cost of goods sold during the year 194,049 169,446 Write -down of inventories for the year, net 692 (391) Research and development costs 2,352 1,143 Production staff costs and other costs 126,190 101,100 Total production costs 323,283 271,298 | Annual report 2022 Page 78 5.4 Consolidated notes 4. Staff costs Accounting policy Staff costs consist of direct wages and salaries, remuneration, pension, share-based payments, training, etc. DKK Thousands 2022 2021 Wages, salaries and other remuneration 117,039 108,590 Contribution plans and other social security costs, etc. 16,846 14,488 Share -based payment, warrants 658 508 Other staff costs 1,865 2,276 136,408 125,862 The amounts are included in the items: Production costs 81,949 74,466 Distribution costs 33,435 34,148 Administrative costs 21,024 17,248 136,408 125,862 The average number of employees was 205 (2021: 199). Staff costs 2022 include the final regulation of the government compensation related to capacity cost of (DKK – 0.1m) Staff costs 2021 include the final regulation of the government compensation, related to cost of goods sold (DKK – 0.1m) and capacity cost of (DKK – 0.3m) | Annual report 2022 Page 79 5.4 Consolidated notes DKK Thousands 2022 2021 Board of Directors and Audit Committee 1,715 1,250 ExecutiveManagement Wages, salaries and other remuneration 6,846 5,538 Contribution plans and other social security costs, etc. 493 365 Share-based payment, warrants 439 329 7,778 6,232 Total remuneration for ExecutiveManagement and Board of Directors 9,493 7,482 Remuneration to Executive Management and Board of Directors The Executive Management have been granted warrants to subscribe for shares in the company, cf. note 5. The Executive Management contracts are based on normal conditions. The board of directors and audit committee fee includes DKK 315k to board member acting as interim CFO during a period of three months. 4. Staff costs CONTINUED | Annual report 2022 Page 80 5.4 Consolidated notes 5. Share-based payment, warrants Accounting policy Plans classified as equity-settled warrants are measured at fair value at grant date and are recognized in the income statement as staff costs in the period in which the final entitlement to the warrants is attained (the vesting period), as well as an inflow directly in equity. In connection with initial recognition of warrants, an estimate is made of the number of warrants to which Group Executive Management and key staff are expected to become entitled. Subsequent adjustment is made for changes in the estimate of the number of warrant entitlements, so the total recognition is based on the actual number of warrant entitlements. The fair value of the warrants allocated is estimated by means of the Monte Carlo model. The calculation takes into account the terms and conditions under which the share warrants are allocated. In 2017 and 2021, respectively, the Executive Management and other key employees in the Group have been granted warrants to purchase a total of 250,000 shares in the company at a set price (strike price). The share-based programme has vesting conditions under which Management must stay employed for three years to receive the remuneration. The following exercise period runs for two years. Warrants granted in 2017 have fully vested on 31 December 2022. | Annual report 2022 Page 81 5.4 Consolidated notes The recognized fair value of warrants in the consolidated income statement amounts to DKK 658k (cost) (2021: -506k, income). The calculation of the fair value of warrants at the time of allocation is based on the following assumptions: 5. Share-based payment, warrants CONTINUED * The expected volatility is based on the historical volatility of SKAKO shares in the preceding 36 months for the 2017 programme. For the 2021 programme, the preceding 48 months have been used ** The expected future dividend at the time of granting 2021 warrants 2017 warrants Total warrants Granted Strike price (all) Exercise period starts Granted Strike price (all) Exercise period starts Total Warrants granted 150,000 55,60 April 2024 100,000 90,39 March 2020 Executive management - hereof forfeited 110,000 -30,000 60,000 -40,000 170,000 -70,000 Total executive management 80,000 20,000 100,000 Other employees - Hereof forfeited 40,000 0,000 40,000 -5,000 80,000 -5,000 Total other employees 40,000 35,000 75,000 Number of warrant entitlements 120,000 55,000 175,000 Granted 22 March 2021 Granted 30 March 2017 Average price per share 55,6 78,0 Annual hurdle rate 0% 5% Strike price per share 55,6 90,39 Expected volatility 33,5% 43,96% Expected dividends* 4,1% 0 Cost of equity 7,00% Risk-free interest rate -0,56% Number of shares allocated 150,000 100,000 Fair value per warrant, DKK 16,90 18,84 Total fair value, DKK thousands 2,535 1,884 | Annual report 2022 Page 82 5.4 Consolidated notes 6. Fee to parent company auditors appointed at the annual general meeting In addition to the statutory audit, PwC, the Group auditors appointed at the Annual General Meeting, provides other assurance engagements and other consultancy services to the Group. A few Group enterprises are not audited by the Parent’s appointed auditors (PwC) or the auditors’ foreign affiliates. The fee for non-audit services delivered by PricewaterhouseCoopers Statsautoriseret Revisionspartnerselskab to the Group amounts to DKK 0.4m (2021: DKK 0.1m) and consists of tax, VAT and accounting advisory. DKK Thousands 2022 2021 PwC Statutory audit 1,442 687 Other assurance engagements 39 0 Tax and indirect taxes consultancy 119 13 Other services 298 107 Other audit firms 1,898 806 Statutory audit 290 199 Other assurance engagements 0 0 Tax and indirect taxes consultancy 290 139 Other services 177 40 757 379 | Annual report 2022 Page 83 7. Special items Accounting policy Special items include significant expenses of a special nature that relates to the dismissal of the former Group CFO in SKAKO Group and that cannot be attributed directly to the Group’s ordinary operating activities. Special items include significant non-recurring items including staff costs. Special items are shown separately from the Group’s ordinary operations as this gives a truer and fairer view of the Group’s operating profit. Special items consists of salaries and other remuneration for the dismissal of the former Group CFO amounting to DKK 1.65m (2021: DKK 0m) 5.4 Consolidated notes | Annual report 2022 Page 84 5.4 Consolidated notes 8. Net financial items Accounting policy Net financial items mainly consist of interest income and interest expenses and also include interest on lease debt as well as realized and unrealized foreign exchange gains and losses. Interest income and interest expenses are accrued based on the principal amount and the effective interest rate. The effective interest rate is the discount rate used for discounting expected future payments attaching to the financial asset or financialliability in order for the present value to match the carrying amount of such asset or liability. DKK Thousands 2022 2021 Interest on cash and bank deposits 772 210 Financial income from financial assets not measured at fair value in the income statement 772 210 Foreign exchange gains, net 144 511 Financial income 916 721 Interest on bank debt (1,433) (1,205) Interest on lease debt (117) (161) Financial expenseson financial liabilities not measured at fair value in the income statement (1,550) (1,366) Foreign exchange losses, net (1,647) (239) Other financial expenses (2,681) (4,022) Financial expenses (5,878) (5,627) Net financial items (4,962) (4,906) | Annual report 2022 Page 85 5.4 Consolidated notes 9. Tax on profit for the year Accounting policy Tax for the year comprises current tax and changes in deferred tax and is recognized in the Income Statement with the share attributable to the profit for the year, and in the other comprehensive income with the share attributable to items recognized in other comprehensive income. Exchange rate adjustments of deferred tax are included as part of the year’s adjustments of deferred tax. Current tax comprises tax calculated on the basis of the expected taxable income for the year using the applicable tax rates for the financial year and any adjustments of taxes for previous years. DKK Thousands 2022 2021 Current tax on the profit for the year (4,161) (1,698) Adjustment of current tax, prior years - (147) Change in deferred tax 4,390 (1,370) Adjustment of deferred tax, prior years - 987 Impact on changes in corporate tax rates 615 - Tax for the period, net income 844 (2,228) Tax using the Danish corporate tax rates (5,330) (3,857) Effect of tax rates in foreign jurisdictions 118 (79) Impact in changes in corporate tax rates - - Tax assets not capitalized - - Tax assets not previously capitalized 6,371 2,234 Permanent and temporary differences and other items (315) (526) 844 (2,228) | Annual report 2022 Page 86 5.4 Consolidated notes 10. Earnings per share (EPS) Accounting policy Earnings per share (EPS) and diluted earnings per share (EPS, diluted) are measured according to IAS 33. Non-diluted earnings per share are calculated as the profit for the year divided by the total average number of shares outstanding during the year (shares issued adjusted for treasury shares). Diluted earnings per share are calculated as the profit for the year divided by the average number of shares outstanding less share options in-the-money (shares issued adjusted for treasury shares). DKK Thousands 2022 2021 Earnings Profit for the year 25,074 13,189 Number of shares, average Number of shares issued 3,106,418 3,106,418 Adjustment for treasury share (22,567) (22,567) Average number of shares 3,083,851 3,083,851 Earnings per share (EPS) 8.13 4.28 Earnings per share, diluted 7.83 4.28 As of 31 December 2022, SKAKO’s nominal share capital was 31,064,180 DKK divided into 3,106,418 shares of 10 DKK each. All shares are of the same class and carry one vote each. Treasury shares represent 0.73% of number of shares issued. | Annual report 2022 Page 87 5.4 Consolidated notes 11. Intangible assets Accounting policy Amortization of completed development projects is charged on a straight- line basis during their estimated useful life. Development projects are written down for impairment to recoverable amount, if lower. Development projects in progress are tested for impairment once a year. The amortization profile is systematically based on the expected useful life of the assets, taking into account the remaining agreement period and consumption (unit of production method) at the time of implementation. The basis of amortization is reduced by impairment, if any. Amortization takes place systematically over the estimated useful life of the assets which is as follows: • Development costs, 2-10 years • Software systems, 2-10 years • Other intangible assets, 3-5 years On initial recognition, goodwill is recognized and measured as the difference between the purchase price – including the value of non- controlling interests in the acquired enterprise and the fair value of any existing investment in the acquired enterprise – and the fair values of the acquired assets, liabilities and contingent liabilities. Please refer to Accounting policies in Note 25. On recognition, goodwill is allocated to corporate activities that generate independent payments (cash generating units). The definition of a cash- generating unit is in line with the Group’s managerial structure as well as the internal financial management reporting. Intangible assets with a finite useful life are measured at cost less accumulated amortization and impairment losses. Goodwill is not amortized but is tested for impairment at least once a year. If the recoverable amount of a cash-generating unit is lower than the carrying amounts of property, plant and equipment and intangible assets including goodwill, attributable to the particular cash generating unit, the particular assets will be written down. Development projects for which the technical rate of utilization, sufficient resources and a potential future market or application in the Group can be demonstrated and which are intended to be manufactured, marketed or used are recognized as completed development projects. This requires that the cost can be determined, and it is sufficiently certain that the future earnings or the net selling price will cover production, sales and administrative costs plus the development costs. Other development costs are recognized in the income statement when the costs are incurred. Development costs consist of salaries and other costs that are directly attributable to development activities. | Annual report 2022 Page 88 5.4 Consolidated notes Significant estimate by Management Impairment testing is carried out annually on preparation of the annual report or on indication of impairment in which discounted values of future cash flows are compared with carrying amounts. The calculations use cash flow projections based on financial budgets approved by Management covering a five-year period. Cash flows beyond the five-year period are extrapolated using growth rates estimated by Management. Goodwill Other intangible assets Intangible assets under development Development projects Software Total Cost at 1 January 2022 25,440 4,426 3,112 1,458 28,671 63,107 Foreign exchange adjustments - - - - - - Investments - - 2,726 - 1,427 4,153 Disposals - - (1,201) - - (1,201) Transferred between categories - - (400) - - (400) Cost at 31 December 2022 25,440 4,426 4,237 1,458 30,098 65,659 Amortisation and impairment 1 January 2022 - 1,771 - 293 18,863 20,927 Foreign exchange adjustment - - - 9 - 9 Disposals - - - - 605 605 Amortisation - 1,097 - 167 2,429 3,693 Amortisation and impairment 31 December 2022 - 2,868 - 469 21,897 25,234 Carrying amount 31 December 2022 25,440 1,558 4,237 989 8,201 40,425 DKK Thousands 11. Intangible assets CONTINUED | Annual report 2022 Page 89 5.4 Consolidated notes Goodwill Other intangible Assets Intangible assets under development Development Projects Software Total Cost at 1 January 2021 25,440 4,426 2,226 808 27,331 60,231 Foreign exchange adjustments - - - 10 (3) 7 Investments - - 2,441 150 882 3,473 Disposals - - - - (603) (603) Transferred between categories - - (1,554) 490 1,064 - Cost at 31 December 2021 25,440 4,426 3,113 1,458 28,671 63,108 Amortisation and impairment at 1 January 2021 - 674 - 178 18,192 19,044 Foreign exchange adjustment - - - - (61) (61) Disposals - - - - (603) (603) Amortisation - 1,097 - 115 1,335 2,547 Amortisationand impairment at 31 December 2021 - 1,771 - 293 18,863 20,927 Carrying amount at 31 December 2021 25,440 2,655 3,113 1,165 9,808 42,181 DKK Thousands 11. Intangible assets CONTINUED | Annual report 2022 Page 90 5.4 Consolidated notes DKK Thousands 2022 2021 Depreciation is included in the items: Production costs 2,585 1,782 Distribution costs 923 636 Administrative costs 185 129 3,693 2,547 Impairment test ofgoodwill: The carrying amount of goodwill related to Dartek, DKK 22,294k, and Conparts ApS, DKK 3,145k. Conparts Goodwill for Conparts have been tested for impairment on 31 December 2022 based on value in use. Net cash flows for the years 2023-2027 are determined on the basis of key assumptions and estimates based on growth and profit margin expectations in accordance with SKAKO's business plans. The discount rate used amounts to 10.0% before tax and estimates for future revenue growth (2021: 8.0% before tax). The uncertainties associated with these expectations are reflected in the cash flow. The valuation method is based on annual revenue growth of 2% in 2023 to 2027 as well as in the terminal period. The test did not result in any impairment of the carrying amounts related to the cash generating units Conparts. A sensitivity analysis has not been carried out, as negative changes in the fundamental assumption, which will result in impairment of goodwill, are considered unlikely to become a reality. 11. Intangible assets CONTINUED Dartek Goodwill for Dartek have been tested for impairment on 31 December 2022 based on value in use. Net cash flows for the years 2023-2027 are determined on the basis of key assumptions and estimates based on growth and profit margin expectations in accordance with SKAKO's business plans. The discount rate used amounts to 10.0% before tax and estimates for future revenue growth (2021: 8.0% before tax). The uncertainties associated with these expectations are reflected in the cash flow. The valuation method is based on annual revenue growth of 2% in 2023 to 2027 as well as in the terminal period. The test did not result in any impairment of the carrying amounts related to the cash generating units Dartek. A sensitivity analysis has not been carried out, as negative changes in the fundamental assumption, which will result in impairment of goodwill, are considered unlikely to become a reality. | Annual report 2022 Page 91 5.4 Consolidated notes 12. Tangible assets Land and buildings, plant and machinery and other facilities, operating equipment and tools and equipment are measured at cost less accumulated depreciation and impairment losses. Depreciation is charged on a straight-line basis over the estimated useful life of the assets until they reach the estimated residual value. Estimated useful life is as follows: • Buildings, 10-40 years • Plant and machinery, 3-10 years • Operating equipment and other tools and equipment, 3-10 years • Leasehold improvements, 3-10 years • Land not depreciated Newly acquired assets are depreciated from the time they are available for use. Accounting policy | Annual report 2022 Page 92 5.4 Consolidated notes Land & buildings Plant & machinery Operating equipment, fixturesand fittings Leasehold improvements Tangible assets in course of construction Total Cost 1 January 2022 8,147 12,558 17,130 5,930 97 43,862 Foreign exchange adjustments 22 (24) - - - (2) Investments 253 636 1,061 1,110 119 3,179 Disposals - (2,083) (1,402) - (60) (3,545) Transferred between categories - (260) 260 400 - 400 Cost at 31 December 2022 8,422 10,827 17,049 7,440 156 43,894 Depreciation and impairment 1 January 2022 2,315 11,505 14,071 4,300 - 32,191 Foreign exchange adjustments - (46) - - - (46) Disposals - (2,083) 32 - - (2,051) Depreciation 286 213 488 234 - 1,221 Depreciation and impairment 31 December 2022 2,601 9,589 14,591 4,534 - 31,315 Carrying amount 31 December 2022 5,821 1,238 2,458 2,906 156 12,579 DKK Thousands 12. Tangible assets CONTINUED | Annual report 2022 Page 93 5.4 Consolidated notes Land & buildings Plant & machinery Operating equipment, fixturesand fittings Leasehold improvements Tangible assets in course of construction Total Cost 1 January 2021 8,023 12,151 15,945 4,766 454 41,339 Foreign exchange adjustments (2) 72 (43) 2 - 29 Investments 126 439 1,231 1,162 37 2,995 Disposals - (104) (3) - (394) (501) Cost 31 December 2021 8,147 12,558 17,130 5,930 97 43,862 Depreciation and impairment 1 January 20 21 2,035 11,344 13,036 4,238 - 30,653 Foreign exchange adjustments - 65 391 2 - 458 Disposals - (104) - - - (104) Amortization 280 200 644 60 - 1,184 Depreciation and impairment31 December 2021 2,315 11,505 14,071 4,300 - 32,191 Carrying amount 31 December 2021 5,832 1,053 3,059 1,630 97 11,671 DKK Thousands DKK Thousands 2022 2021 Depreciation is included in the items: P roduction costs 855 829 Distribution costs 305 296 Administrative costs 61 59 1,221 1,184 12. Tangible assets CONTINUED | Annual report 2022 Page 94 5.4 Consolidated notes 13. Leases – right-of-use assets Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of the following lease payments: • Fixed payments, less any lease incentives receivable. • Variable lease payment that are based on an index or a rate, initially measured using the index or rate as the commencement date. • Amounts expected to be payable by the Group under residual value guarantees. • The exercise price of a purchase option if the Group is reasonably certain to exercise that option. • Payments of penalties for terminating the lease if the lease term reflects the Group exercising that option. The lease payments are discounted using the interest rate for implicit in the lease. If that rate cannot be readily determined, which is generally the case for leases in the Group., the lessee’s incremental borrowing rate is used, being the rate that the individual lessee would have to pay to borrow the funds necessary to obtain an asset of similar value to the right-of-use asset in a similar economic environment with similar terms, security and conditions. Lease payments are allocated between principal and finance cost. The finance cost is charged to profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. Right-of-use assets are measured at cost comprising the following: • The amount of the initial measurement of lease liability. • Any lease payments made at or before the commencement date less any lease incentives received. • Any initial direct cost and restoration cost. Right-of-use assets are generally depreciated over the shorter of the asset’s useful life and the lease term on a straight-line basis. While the Group revalues its land and buildings that are presented within property, plant and equipment, it has chosen not to do so for the right-of-use buildings held by the Group. Payments associated with short-term leases of equipment and vehicles and all leases of low-value assets are recognized on a straight-line basis as an expense in profit or loss. Short-term leases are leased with a lease term of 12 months or less. Low-value assets comprise IT equipment and small items of office furniture. Accounting policy | Annual report 2022 Page 95 5.4 Consolidated notes Lease assets Rentalof promises Equipment Company cars Total Costs 1 January 2022 8,413 809 7,914 17,136 Additions - 52 1,698 1,750 Disposals - (179) (511) (690) Reclassification 2,148 - 389 2,537 Exchange rate adjustment - - - - Costs 31 December 2022 10,561 682 9,490 20,733 Depreciation and impairment loss 1 January 2022 3,257 164 5,680 9,101 Depreciation 1,287 290 1,514 3,091 Depreciation reversed on disposals - (179) (266) (445) Exchange rate adjustment - 200 - 200 Depreciation and impairment loss 31 December 2022 4,544 475 6,928 11,947 Carrying amount 31 December 2022 6,017 207 2,562 8,786 DKK Thousands Lease assets Rentalof promises Equipment Company cars Total Costs 1 January 2021 8,418 809 6,291 15,518 Additions - - 3,172 3,172 Transferred between categories - - - - Disposals - - (1,545) (1,545) Exchange rate adjustment (5) - (4) (9) Costs 31 December 2021 8,413 809 7,914 17,136 Depreciation and impairment loss 1 January 2021 1,673 105 3,866 5,644 Depreciation 1,584 59 2,048 3,691 Depreciation reversed on disposals - - (233) (233) Exchange rate adjustment - - (1) (1) Depreciation and impairment loss 31 December 2021 3,257 164 5,680 9,101 Carrying amount 31 December 2021 5,156 645 2,234 8,035 DKK Thousands 13. Leases – right-of-use assets CONTINUED | Annual report 2022 Page 96 5.4 Consolidated notes Lease liabilities – DKK Thousands 2022 2021 Lease liabilities are recognized in the balance sheet as follows: Non-current liabilities 5,416 5,611 Current liabilities 3,626 2,845 Total lease liabilities 9,042 8,456 Recognized in the profit and loss statement: Interest expenses related to lease liabilities 221 177 Expense relating to short-term leases (included in cost of goods sold and administrative expenses) 3,734 1,893 Expense relating to leases of low-value assets that are not shown above as short-term leases 7 - Expense relation to variable lease payments not included in lease liabilities - - Cash flow from leasing – DKK Thousands 2022 2021 Interests (221) (177) Liabilities payment (3,736) (3,289) Adjustments in total according to leases (3,957) (3,466) 13. Leases – right-of-use assets CONTINUED | Annual report 2022 Page 97 5.4 Consolidated notes 14. Deferred tax Deferred tax is calculated using the balance sheet liability method on temporary differences between the carrying amounts for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is calculated based on the applicable tax rates for the individual financial years. The effect of changes in the tax rates is stated in the income statement unless they are items previously entered in the statement of other comprehensive income. A deferred tax provision is made to cover re-taxation of losses in foreign enterprises if shares in the enterprises concerned are likely to be sold and to cover expected additional future tax liabilities related to financial year or previous years. No deferred tax liabilities regarding investments in subsidiaries are recognized if the shares are unlikely to be sold in the short term. The tax value of losses that are expected with adequate certainty to be available for utilization against future taxable income in the same legal tax unit and jurisdiction is included in the measurement of deferred tax. SKAKO A/S is jointly taxed with all Danish subsidiaries, SKAKO A/S being the administrator of the Danish joint taxation. All the Danish subsidiaries provide for the Danish tax based on the current rules with full distribution. Recognition of deferred tax assets and tax liabilities is made in the individual Danish enterprises based on the principles described above. The jointly taxed Danish enterprises are included in the Danish tax payable on account scheme. If companies in the Group have deferred tax liabilities, they are valued independently of the time when the tax, if any, becomes payable. Significant estimate by Management Deferred tax assets, including the tax value of tax losses allowed for carry forward, are recognized in the balance sheet at the estimated realisable value of such assets, either by a set-off against a deferred tax liability or by a net asset to be set off against future positive taxable income. At the balance sheet date, an assessment is made as to whether it is probable that sufficient taxable income will be available in the future against which the deferred tax asset can be utilized. Deferred tax on temporary differences between the carrying amounts and the tax values of investments in subsidiaries is recognized unless the Parent is able to control the time of realization of such deferred tax, and it is probable that such deferred tax will not be realized as current tax in the foreseeable future. Deferred tax is recognized in respect of eliminations of intra-Group profits and losses. Accounting policy | Annual report 2022 Page 98 5.4 Consolidated notes DKKThousands 2022 2021 Deferred tax recognizedin the balance sheet: Deferred tax assets 25,575 21,057 Deferredtax, net 31 December 25,575 21,057 Deferred tax, net 1 January 21,057 20,997 Foreign currency translation adjustments - - Changes in deferred tax 4,516 60 Deferredtax, net 31 December 25,575 21,057 Deferredtax: Intangible assets (1,498) (1,094) Property, plants and equipment 8,140 9,587 Inventories 388 (273) Provisions 781 1,971 Tax losses 19,375 13,333 Other items (1,611) (2,467) 25,575 21,057 Deferred tax assets not recognized: Intangible assets - - Property, plants and equipment 205 205 Inventories - - Other items 121 121 Tax losses 19,498 26,324 19,824 26,650 Tax losses carried forward are not subject to time limitation. All recognized deferred tax assets are expected to be offset against positive taxable income within a five-year period. Recognition is based on current results and Management’s expectations for the future. The deferred tax assets are evaluated in each joint taxation in the SKAKO Group, consisting of joint taxations in respectively Denmark, France, Germany, Spain, the USA and the UK. Management has performed a sensitivity analysis on expectations for the future. This shows that a 10 % decrease compared to expectations will result in a decrease of DKK 2. 2m in the recognized deferred tax assets. Because the deferred tax assets are evaluated in each joint taxation, the sensitivity cannot be applied on a linear basis. 14. Deferred tax CONTINUED | Annual report 2022 Page 99 5.4 Consolidated notes 15. Inventory Accounting policy Raw materials, work-in-progress and goods for resale are measured at cost according to the FIFO principle (according to which the most recently purchased items are considered to be in stock) or at their net realizable value, whichever is lower. Group-manufactured products and work in progress are measured at the value of direct cost, direct payroll costs, consumables and a proportionate share of indirect production costs (IPC), which are allocated on the basis of the normal capacity of the production facility. IPC include the proportionate share of capacity costs directly relating to Group-manufactured products and work in progress. Inventory – DKK Thousands 2022 2021 Raw materials and consumables 17,684 14,854 Work-in-progress 7,958 7,111 Finished goods and goods for resale 47,098 42,115 Inventories net of write-downs at 31 December 72,740 64,080 Included in IncomeStatement under production costs: Write-down of inventories for the year, net Costs of goods sold during the year 692 193,746 (391) 169,446 Write-downs for the year are shown net as breakdown into reversed write-downs, and new write-downs are not possible. | Annual report 2022 Page 100 5.4 Consolidated notes 16. Contract assets and liabilities Accounting policy Revenue is recognized based on the value of the work completed at the balance sheet date. The revenue corresponds to the sales value of the year’s completed work based on costs incurred as a percentage of the total estimated costs (percentage of completion method). The stage of completion for the individual project is calculated as the ratio between the cost incurred at the balance sheet date and the total estimated cost to complete the project. In some projects, where cost estimates cannot be used as a basis, the ratio between completed sub-activities and the total project is used instead. All direct and indirect costs that relate to the completion of the contract are included in the calculation. When invoicing on account exceeds the value of the work completed, the liability is recognized as a contract liability under short-term liabilities. If projects are expected to be loss-making, the loss is recognized immediately in the income statement. Costs not yet incurred are provided for as other provisions. Provisions are based on individual assessment of the estimated loss until the projects have been completed. Significant assessment by Management Total expected costs related to work-in-progress for third parties are partly based on estimates as they include provisions for unforeseen cost deviations in future supplies of raw materials, subcontractor products and services plus construction and handing over. Provisions for warranties on work-in-progress for third parties are based on Management estimates for each project while taking contract obligations into account. | Annual report 2022 Page 101 5.4 Consolidated notes DKKThousands 2022 2021 Total costs incurred 145,419 133,466 Valuation after IFRS 9 (note 18) (139) (134) Profit recognized as income, net 40,445 32,237 Contract assets 185,725 165,569 Contract liabilities (168,678) (132,294) Net contract assets and liabilities 17,047 33,275 Of which contract assets are stated under assets 63,876 53,037 and contract liabilities (46,829) (19,762) Net contract assets and liabilities 17,047 33,275 Contract assets and liabilities consist of all open projects on 31 December including cost and profit recognized in prior years. The majority of all contract assets and liabilities on 31 December are expected to be revenue recognized in 2023. 16. Contract assets and liabilities CONTINUED | Annual report 2022 Page 102 5.4 Consolidated notes 17. Bank loans and credit facilities Accounting policy Debt to credit institutions is recognized at the date of borrowing at the proceeds received less transaction costs. For subsequent periods, financial liabilities are measured at amortized cost for the difference between proceeds and the nominal value to be recognized as a financial expense over the term of the loan. 2022 0-1 year 1-5 years More than 5 Total Carrying Weightedaverage years amount effective interest rate Cash and cash equivalents 45,142 - - 45,142 45,142 0.0% Assets 45,142 45,142 45,142 0.0% Lease debt (3,626) (5,416) - (9,042) (9,042) 2.4% Other debt (9,828) - - (9,828) (9,828) 0.0% Debt to credit institutions - (9,150) - (9,150) (9,150) 0.4% Short term bank facilities (38,119) - - (38,119) (38,119) 3.9% Liabilities (51,573) (14,566) - (66,139) (66,139) 1.4% Net debt (6,431) (14,566) - (20,997) (20,997) 1.4% DKK Thousands | Annual report 2022 Page 103 5.4 Consolidated notes DKK Thousands Morethan 5 2021 0-1 year 1-5 years Total Carrying Weightedaverage Years amount effective interest rate Cash and cash equivalents 39,075 - - 39,075 39,075 0.0% Assets 39,075 - - 39,075 39,075 0.0% Lease debt (2,845) (5,611) - (8,456) (8,456) 2.4% Other debt (9,849) - - (9,849) (9,849) 0.0% Debt to credit institutions - (11,787) - (11,787) (11,787) 0.4% Short term bank facilities (35,970) - - (35,970) (35,970) 2.3% Liabilities (48,664) (17,398) - (66,062) (66,062) 1.1% Net debt (9,589) (17,398) - (26,987) (26,987) 1.1% Based on the Group’s net debt at the end of the 2022 financial year, a rise of 1 percentage point in the general interest rate level will cause a decrease in consolidated annual earnings after tax and equity of approx. DKK 270k (DKK 266k in 2021). Cash management SKAKO is committed to maintaining a flexible capital structure. On 31 December 2022, SKAKO had undrawn committed credit facilities in the amount of DKK 61,274k (2021: DKK 12,342k). On 31 December 2022, SKAKO had ‘cash and cash equivalents’ and ‘bank overdraft’, net of DKK 7,023k (2021: DKK 3,105k). Capital management SKAKO monitors capital on the basis of the net debt relative to EBITDA. At the end of the year, the net debt to EBITDA ratio was equity ratio was 0.5 (2021: 1.0). SKAKO has a medium-term goal of a net debt to EBITDA ratio below 2.5. 17. Bank loans and credit facilities CONTINUED | Annual report 2022 Page 104 5.4 Consolidated notes 18. Provisions Accounting policy Provisions are recognized when the Group, due to an event occurring before or at the balance sheet date, has a legal or constructive obligation and it is probable that financial benefits must be waived to settle the obligation. Provisions are measured according to Management’s best estimate of the amount whereby the obligation is expected to be settled. Provisions for warranty claims are estimated on a project-by-project basis based on historically realized cost related to claims in the past. The provision covers estimated own costs of completion, subsequent warranty supplies and unsettled claims from customers or subcontractors. Provisions regarding disputes and lawsuits are based on Management’s assessment of the likely outcome settling the cases based on the information at hand at the balance sheet date. Significant assessment by Management Management assesses provisions and the likely outcome of pending and probable lawsuits, etc. on an on-going basis. The outcome depends on future events, which are uncertain by nature. In assessing the likely outcome of lawsuits, etc., Management bases its assessment on internal and external legal assistance and established precedents. Warranties and other provisions are measured on the basis of empirical information covering several years. Together with estimates by Management of future trends, this forms the basis for warranty provisions and other provisions. Long-term warranties and other provisions discounted to net present value takes place based on the future cash flow and discount rate expected by Management. | Annual report 2022 Page 105 5.4 Consolidated notes DKK Thousands 2022 Warranties Other provisions Total Provisions at 1 January 3,027 4,142 7,169 Foreign exchange adjustments 4 2 6 Additions 3,454 4,351 7,805 Used (1,361) (4,144) (5,505) Reversals (1,600) - (1,600) Provisions at 31 December 3,524 4,351 7,875 The maturity of provisions is specified as follows: Current liabilities 2,214 1,316 3,530 Non -current liabilities 1,310 3,035 4,345 3,524 4,351 7,875 DKKThousands 2021 Warranties Other provisions Total Provisions at 1 January 3,439 1,861 5,300 Foreign exchange adjustments 5 (3) 2 Additions 1,426 4,143 5,569 Used (1,143) (1,859) (3,002) Reversals (700) - (700) Provisions at 31 December 3,027 4,142 7,169 The maturity of provisions is specified as follows: Current liabilities 2,034 1,695 3,729 Non-current liabilities 993 2,447 3,440 3,027 4,142 7,169 Provisions for warranty covers a 1-3-year warranty period. Other provisions relate to provisions for disputes, etc. and are essentially expected to be applied within the next five years. 18. Provisions CONTINUED | Annual report 2022 Page 106 5.4 Consolidated notes 19. Adjustments, consolidated cash flow statement DKKThousands 2022 2021 Amortisation and depriciation 10,196 7,421 Change in provisions (84) 1,869 Financial items received and paid 4,637 4,906 Other 507 506 15,256 14,702 DKKThousands 2022 2021 Borrowings 1 January 66,062 73,607 Repayments (4,507) (13,725) Other adjustments - - New borrowings 4,583 6,423 Currency adjustments - (243) Borrowings 31 December 66,138 66,062 Adjustments Change in borrowings and short-term credit facilities | Annual report 2022 Page 107 5.4 Consolidated notes 20. Exchange rate, liquidity and credit risks Accounting policy To measure the expected credit losses, trade receivables and contract assets have been grouped based on shared credit risk characteristics and the days past due. The contract assets relate to unbilled work in progress and have substantially the same risk characteristics as the trade receivables for the same types of contracts. The Group has therefore concluded that the expected loss rates for trade receivables are a reasonable approximation of the loss rates for the contract assets. The expected loss rates are based on the payment profiles of sales over a period of 36 months before 31 December 2022 and the corresponding historical credit losses experienced within this period. The historical loss rates are adjusted to reflect current and forward-looking information on macroeconomic factors affecting the ability of the customers to settle the receivables. Trade receivables and contract assets are written down when there is no reasonable expectation of recovery. Indicators that there is no reasonable expectation of recovery include, amongst others, the failure of a debtor to engage in a repayment plan with the Group, and a failure to make contractual payments for a period of longer than 120 days past due. Impairment losses on trade receivables and contract assets are presented as net impairment losses within operating profit. Subsequent recoveries of amounts previously written down are credited against the same line item. Risk management activities in the SKAKO Group mainly focus on financial risks to which the Company is fairly likely to be exposed. In connection with the preparation of the Group’s strategic, budgetary and annual plans, the Board of Directors considers the risks identified in these activities. Financial risks Financial risk management concentrates on identifying risks in respect of exchange rates, credit and liquidity with a view to protecting the Group against potential losses and ensuring that Management’s forecasts for the current year are only to a limited extent affected by changes or events in the surrounding world – be the changes in exchange rates or in interest rates. It is Group policy to exclusively hedge financial risks arising from our commercial activities and not to undertake any financial transactions of a speculative nature. Exchange rate risks With more than 90% of the Group’s sales being invoiced in foreign currencies, primarily EUR, reported revenue is affected by movements in the Group’s trading currencies. The Group does not hedge (systematic) currency risks with financial instruments but seeks to minimize such exchange rate risks by matching positive and negative cash flows in the main currencies as much as possible. The Group conducts ongoing conversion to DKK in connection with the purchase and sale of foreign currency and monitoring of currency exposure. | Annual report 2022 Page 108 5.4 Consolidated notes Below is a sensitivity analysis in respect of exchange rates, given a positive change of 5% in the currencies with the highest exposures. We do not consider a currency risk on EUR. The estimate has been provided on a non-hedged basis. Liquidity risk The Group aims at having sufficient cash resources to be able to take appropriate steps in case of unforeseen fluctuations in cash outflows. We have access to suitable undrawn credit facilities and the liquidity risk is therefore considered to be low. Credit risks The Group’s credit risks relate primarily to trade receivables and contract assets. For large projects we have a signed Letter of Credit from the customer’s bank before we undertake any work. Our remaining customer base is fragmented so credit risks in general only involve minor losses on individual customers. Overall, we therefore estimate that we have no major credit exposure on Group level. The maximum credit risk relating to receivables matches the carrying amount of such receivables. All trade receivables are considered to be paid within one year Trade receivables can be allocated as follows: The Group has two types of financial assets that are subject to the expected credit loss model: • Trade receivables from contracts with customers • Contract assets from plant sales DKK Thousands Net position Change in currency 2022: Potentialimpact on 2021: Potentialimpact on P/L and Equity P/L and equity EUR 15,243 0% 0 0 USD 12,482 5% 624 362 GBP 6,246 5% 312 102 MAD 32,510 5% 1,626 1,082 DKKThousands 2022 2021 Europe 64,164 58,283 The USA 9,599 5,988 Africa 5,267 4,402 Other 22,355 18,756 101,385 87,429 20. Exchange rate, liquidity and credit risks CONTINUED | Annual report 2022 Page 109 5.4 Consolidated notes While cash and cash equivalents are also subject to the impairment requirements of IFRS 9, the identified impairment loss was immaterial. The loss allowance as at 31 December 2021 and 31 December 2020 was determined as follows for both trade receivables and contract assets: 31 December 2022 – DKK Thousands The closing loss allowances for trade receivables and contract assets as at 31 December 2021 reconcile to the opening loss allowances as follows: Not Due Due 0-30 days Due 31-120 Due 121-365 Due more than Total days days 1 year Expected loss rate 0.1% 0.4% 1.0% 1.9% 30.0% Gross carrying amount – trade receivables 73,857 21,313 982 850 6,602 103,604 Gross carrying amount – contract assets 63,876 0 0 0 0 63,876 Loss allowance 138 85 10 16 1,969 2,218 31 December2021 – DKK Thousands Not Due Due 0-30 days Due 31-120 Due 121-365 Due morethan Total days days 1 year Expected loss rate 0.1% 0.4 % 1.0% 1.9% 100.0% Gross carrying amount – trade receivables 81,550 5,889 495 580 2,015 90,530 Gross carrying amount – contract assets 52,897 0 0 0 0 52,897 Loss allowance 134 26 5 11 2,015 2,191 2022 2021 2022 2021 1 January – calculated under IFRS 9 134 126 2,057 720 Increase in loan loss allowance recognized in profit or loss during the year 138 134 2,080 2,057 Receivables written off during the year as uncollectible - 0 - 0 Unused amount reversed (134) (126) (2,057) (720) At 31 December 138 134 2,080 2,057 DKK Thousands Contract assets Trade receivables 20. Exchange rate, liquidity and credit risks CONTINUED | Annual report 2022 Page 110 5.4 Consolidated notes The company’s financial institutions have provided bank guarantees for consignments and prepayments of a total of DKK 30.0m (2021: DKK 16.7m). Towards the company’s primary financial institution, a deposit of DKK 50m (2021: DKK 50m) has been provided with deposit in unsecured claims, stocks, tangible assets and intangible rights. There is a 12-month rent commitment related to a building in Denmark. The minimum rent liability amounts to DKK 3.1m (2021: DKK 3.0m). The Danish subsidiaries of the Group are liable for tax of the jointly taxed income, etc. of the Group. SKAKO A/S is the administrative company of the joint taxation. 21. Contractual liabilities, contingent liabilities and securities 24. Approval and publication At the Board meeting on 15 March 2023, our Board of Directors approved this Annual Report 2022 for publication. The report will be presented to the shareholders of SKAKO A/S at the annual general meeting on 19 April 2023. 23. Events after the balance sheet date There have been no events that materially affect the assessment of this Annual Report 2022 after the balance sheet date and up to today. 22. Related parties SKAKO A/S has no related parties with a controlling interest. Given its share of ownership, Frederik2 ApS are considered to have significant influence. The company’s related parties comprise the company’s Executive Management, Board of Directors and these persons’ related family members. Related parties also comprise companies in which the before-mentioned persons have controlling or common control. In addition, related parties comprise the subsidiaries cf. page 127 in which SKAKO A/S has controlling or significant influence. | Annual report 2022 Page 111 5.4 Consolidated notes The Group’s general accounting policies are described below. In addition to this, specific accounting policies are described in each of the individual notes to the consolidated financial statements. Definition of materiality IFRS contain extensive disclosure requirements. The Group discloses the information required according to IFRS unless such information is deemed immaterial. 25. Group accounting policies Generally The consolidated financial statements are presented in compliance with International Financial Reporting Standards (IFRS) as adopted by the EU and Danish disclosure requirements for annual reports published by reporting class D (listed) companies cf. the Danish executive order on IFRS issued in compliance with the Danish Financial Statements Act. The registered office of SKAKO A/S is in Faaborg, Denmark. The consolidated financial statements are presented in Danish kroner (DKK), which is the presentation currency for Group activities and the functional currency for the Parent. The consolidated financial statements are presented on the basis of historical cost except for share-based remuneration which are measured at their fair value. The financial statements for the Parent as well as the Parent’s accounting policies are presented from the consolidated financial statements and are shown on the last part of this Annual Report 2022. The accounting policies remain unchanged for the consolidated financial statements compared to 2021. Effect of new accounting standards not yet in force Revised and new standards and interpretations issued, but not yet effective or approved by the EU at the time of publication of this Annual Report 2022 have not been incorporated into this report. Effect of new accounting standards Amendments to IFRS 4, 7, 9 and 16, as well as IAS 39 have no impact on the Group’s accounting policies, due to immateriality to SKAKO. Changes in accounting policies and classification for 2022 No new standards are expected to be implemented in 2022. Administrative expenses Administrative expenses include administrative staff costs, office expenses as well as depreciation, amortisation and impairment losses on assets used for administrative purposes. Distribution costs Distribution costs include costs relating to training, sales, marketing, promotion materials, distribution, bad debts as well as depreciation, amortisation and impairment losses on assets used for distribution purposes. Income statement Income and costs are recognized on an accrual basis. The income statement is broken down by function, and all costs including depreciation, amortization and impairment losses are then charged to production, distribution and administration. Consolidation principles The consolidated financial statements are prepared on the basis of the financial statements for the Parent and its subsidiaries by aggregating uniform items. The financial statements included in the consolidated financial statements are prepared in accordance with the Group’s accounting policies. Intra-Group income, expenses, shareholdings, balances and dividends as well as unrealized intra- Group profits on inventories are eliminated. The accounting items of subsidiaries are recognized 100% in the consolidated financial statements. Consolidated financial statements The consolidated financial statements comprise SKAKO A/S (the Parent) and the enterprises in which the Parent can or actually does exercise control by either directly or indirectly holding more than 50% of the voting rights. | Annual report 2022 Page 112 5.4 Consolidated notes Prepaid expenses Prepaid expenses recognized under assets include costs relating to the subsequent financial years. Prepaid expenses are measured at cost. Cash flow from financing activities comprises cash flows from raising and repaying long-term debt, instalments on lease liabilities and bank overdraft. 25. Group accounting policies CONTINUED Cash flow statement The cash flow statement is prepared according to the indirect method and reflects the consolidated net cash flow broken down into operating, investing and financing activities. Cash flow from operating activities includes inflows from the year’s operations adjusted for non-cash operating items, changes in working capital, financial income received and expenses paid, realized foreign currency translation gains and losses and income tax paid. Cash flow from investing activities includes the purchase, development, improvement or sale of intangible assets and property, plant and equipment. Cash flow from investing activities comprises cash flows from the purchase and sale of intangible, tangible and financial non-current assets. Treasury shares On the sales of treasury shares, the purchase price or selling price, respectively, is recognized directly in equity under other reserves (retained earnings). Equity Foreign currency translation reserve includes foreign currency translation adjustments on the translation of financial statements of foreign subsidiaries from their respective functional currencies into Danish kroner. Foreign currency translation adjustments are recognized in the income statement on realization of the net investment. Hedging reserves include fair value adjustments of derivatives satisfying the criteria for hedging of future transactions. The amounts are recognizedin the income statement or the balance sheet in step with recognitionof the hedged transactions. Cash and cash equivalents Cash and cash equivalents consist of bank deposits and certain overdrafts, and other liquid assets. Deferred income Deferred income includes income received relating to the subsequent financial year. Deferred income is measured at cost. Financial ratios Financial ratios are calculated as follows: • Gross profit margin = Gross profit x 100 / Revenue • Profit margin = EBIT x 100 / Revenue • Liquidity ratio = Total current assets x 100 / Total current liabilities • Equity ratio = Total equity x 100 / Total assets • Return on equity = Profit for the period x 100 / (Equity this year + equity prior year) / 2 • Financial leverage = Net interest-bearing debt x 100 / Equity • Net debt to EBITDA = Net debt / EBITDA (EBIT less depreciations) • NWC/Revenue = Net working capital x 100 / Revenue • Earnings per share = Profit for the period / Shares in free flow • Equity value per share = Equity / Total shares • Share price = Share price at end of period • Price-book ratio = Share price / Equity per share • Market capitalization = Total number of share x Share price • ROIC = NOPAT / (Invested capital this year + invested capital prior year) / 2 • NOPAT = Profit for the period +/- net financial income • Invested capital = Total assets - net cash and credits - deferred tax assets – non-interest-bearing current liabilities Estimates and judgements On the preparation of the consolidated financial statements, Management makes a number of accounting estimates and judgements. These relate to the recognition, measurement and classification of assets and liabilities. Many items can only be estimated rather than accurately measured. Such estimates are based on the most recent information available on preparation of the financial statements. Estimates and assumptions are therefore reassessed on an ongoing basis. Actual figures may, however, deviate from these estimates. Any changes in accounting estimates will be recognized in the reporting period in which such changes are made. See list of significant estimates and assessments in chapter 5.4 | Annual report 2022 Page 113 5.5 Parent company financial statements 5.5 PARENT COMPANY FINANCIAL STATEMENTS Notes Revenue 0 Other income 900 1,2 Administrative expenses (4,025) (4,061) Operating profit beforespecial items(EBIT) (4,025) (3,161) 3 Special items (1,650) - Operating profit (EBIT) (5,675) (3,161) 4,8 Financial income 1,051 148 4 Financial expenses (1,889) (868) Profit beforetax (6,513) (3,881) 5 Tax on profit for the year 1,784 1,381 Profitfor the year (4,729) (2,500) Parent company income statement 2022 2021 DKKThousands 2022 2021 Notes Profit for the year (4,729) (2,500) Other comprehensive income - 0 Comprehensive income (4,729) (2,500) Comprehensive income attributable to SKAKO A/S shareholders (4,729) (2,500) Parentcompanystatementof comprehensive income DKKThousands | Annual report 2022 Page 114 5.5 Parent company financial statements Notes Other intangible assets - - 6 Intangible assets - - Operating equipment, fixtures and fittings - - Leasehold improvements - - Tangible assets under construction - - 7 Tangible assets - - 8 Investments in subsidiaries 164,159 164,159 Other receivables - - 9 Deferred tax assets 1,020 687 Other non-current assets 165,179 164,846 Total non-current assets 165,179 164,846 Receivables from subsidiaries 232 13,960 Trade receivables - - Income tax 2,304 1,305 Other receivables 59 194 Prepaid expenses 231 - Other investments - - Cash 488 20,182 Currentassets 3,314 35,641 Assets 168,493 200,487 Parent company balance sheet - 31 December DKK Thousands 20212022 | Annual report 2022 Page 115 5.5 Parent company financial statements Notes Share capital 31,064 31,064 Retained earnings 73,222 92,825 Proposed dividends 15,532 12,335 T otal equity 119,818 136,224 Debt to subsidiaries 37,803 27,848 Bank loans and credit facilities 6,738 35,970 Trade payables 868 24 Other liabilities 3,266 421 Current liabilities 48,675 64,263 Liabilities 48,675 64,263 EQUITYAND LIABILITIES 168,493 200,487 Parent company balance sheet - 31 December DKK Thousands 20212022 | Annual report 2022 Page 116 5.5 Parent company financial statements Notes Profit before tax (6,513) (3,881) 10 Adjustments (530) 1,227 Changes in receivables, etc. (95) (975) Change in trade payables and other liabilities, etc. 4,074 (1,352) Cash flow from operating activities before financial items and tax (3,064) (4,981) Financial items received and paid (530) (720) Taxes paid and received 1,784 854 Cash flow from operating activities (1,810) (4,847) Change in intra-Group balances 23,683 3,267 Change in short-term bank facilities (29,232) 30,988 Distributed dividends (12,335) (9,252) Cash flow from financingactivities (17,884) 25,003 Change in cash and cash equivalents (19,694) 20,156 Cash and cash equivalents 1 January 20,182 26 Cash and cash equivalents 31 December 488 20,182 Breakdown of cash and cash equivalents at the end of the year: Cash 488 20,182 Other investments - Cash and cash equivalents at the end of the year 488 20,182 Parent company cash flow statement DKK Thousands 2022 2021 | Annual report 2022 Page 117 5.5 Parent company financial statements DKKThousands Share capital Retained earnings Proposed dividends Equity Equity 1 January 2022 31,064 92,825 12,335 136,224 Paid dividends (12,335) (12,335) Comprehensiveincome in 2022: Loss for the year - (20,261) 15,532 (4,729) Other comprehensive income - - - - Comprehensiveincome, year - (20,261) 15,532 (4,729) Share-based payment, share warrants - 658 - 658 Equity 31 December 2022 31,064 73,222 15,532 119,818 Parent company statement of changes in equity DKKThousands Share capital Retained earnings Proposed dividends Equity Equity 1 January 2021 31,064 107,152 9,252 147,468 Distributed interim dividends (9,252) (9,252) Comprehensiveincome in 2021: Loss for the year - (14,835) 12,335 (2,500) Other comprehensive income - - - - Comprehensiveincome, year - (14,835) 12,335 (2,500) Share-based payment, share warrants - 508 - 508 Equity 31 December 2021 31,064 92,825 12,335 136,224 | Annual report 2022 Page 118 5.6 Parent company notes 5.6 PARENT COMPANY NOTES DKK Thousands 2022 2021 PWC Statutory audit 576 366 Other assurance engagements - - Tax and indirect taxes consultancy 119 - Other services 159 83 854 449 1. Staff costs Number of employees in 2022: 0 (2021: 0) For information regarding Executive Management and Board of Directors remuneration, including share-based warrant plans, please refer to note 3 and note 4 in the consolidated financial statements. 2.Fee to parent company auditors appointed at the Annual General Meeting The fee for non-audit services delivered by PricewaterhouseCoopers Statsautoriseret Revisionspartnerselskab to the parent company amounts to DKK 0.3m (2021: DKK 0.1m) and consists of accounting and tax advisory. 3. Special items Special items consists of salaries and other remuneration for the dismissal of the former Group CFO amounting to DKK 1.65m (2021: DKK 0m) | Annual report 2022 Page 119 5.6 Parent company notes DKKThousands 2022 2021 Interest from subsidiaries 631 8 Dividends received from subsidiaries - - Reversal of write-down of shares in subsidiaries - - Financial income from financial assets not measured at fair value in the income statement 631 8 Other financial income 420 140 Financial income 1,051 148 Interest to subsidiaries (626) (391) Interest on bank debt (668) (221) Interest on lease debt - - Financial expenseson financial liabilities not measured at fair value in the income statement (1,294) (612) Other financial expenses (595) (256) Financial expenses (1,889) (868) Net financial items (838) (720) 4. Net financial income | Annual report 2022 Page 120 5.6 Parent company notes DKKThousands 2022 2021 Current tax on the profit for the year 1,450 854 Adjustment of current tax, prior years - - Change in deferred tax 334 - Adjustment of deferred tax, prior years - 527 Impact on changes in corporate tax rates - - Tax for the period 1,784 1,381 Danish corporate tax rates 1,433 854 Effect of tax rates in foreign jurisdictions - - Impact in changes in corporate tax rates - - Tax assets not capitalized 351 527 Permanent differences and other items - - 1,784 1,381 5. Tax on profit for the year | Annual report 2022 Page 121 5.6 Parent company notes DKKThousands 2022 2021 Software Software Cost 1 January 907 907 Investments - - Disposals - - Transferred between categories - - Cost 31 December 907 907 Amortization and impairment 1 January 907 907 Disposals - - Amortisation - - Amortization and impairment 31 December 907 907 Carrying amount 31 December - - 6. Intangible assets | Annual report 2022 Page 122 5.6 Parent company notes DKKThousands Leaseholdimprovements Operating equipment, fixtures and fittings Total Cost 1 January 2022 341 2,168 2,509 Investments - - - Disposals - - - Transferred between categories - - - Cost 31 December 2022 341 2,168 2,509 Depreciation and impairment 1 January 2022 341 2,168 2,509 Transferred between categories - - - Disposals - - - Depreciation - - - Depreciation and impairment 31 December 2022 341 2,168 2,509 Carrying amount 31 December 2022 - - - 7. Tangible assets DKKThousands Leaseholdimprovements Operating equipment, fixtures and fittings Total Cost 1 January 2021 341 2,168 2,509 Investments - - - Disposals - - - Transferred between categories - - - Cost 31 December 2021 341 2,168 2,509 Depreciation and impairment 1 January 2021 341 2,168 2,509 Transferred between categories - - - Disposals - - - Depreciation - - - Depreciation and impairment 31 December 2021 341 2,168 2,509 Carrying amount 31 December 2021 - - - | Annual report 2022 Page 123 5.6 Parent company notes DKKThousands 2022 2021 Cost 1 January 260,534 260,534 Investments - - Disposals - - Cost 31 December 260,534 260,534 Write-down 1 January (96,375) (96,375) Reversal of write-down - - Write-down31 December (96,375) (96,375) Carrying amount 31 December 164,159 164,159 8. Investments in subsidiaries Group companies are listed on page 127. | Annual report 2022 Page 124 5.6 Parent company notes DKKThousands 2022 2021 Deferred tax recognizedin the balance sheet: Deferred tax assets 1,020 687 Deferred tax liabilities - - Deferredtax, net 31 December 1,020 687 Deferred tax, net 1 January 687 159 Changes in deferred tax 333 528 Deferredtax, net 31 December 1,020 687 Deferredtax assets: Tax losses 1,020 687 1,020 687 Deferred tax assets not recognized: Property, plants and equipment 205 205 Inventories - - Other items 121 121 Tax losses 3,754 4,088 4,080 4,414 9. Deferred tax Tax losses carried forward are not subject to time limitation. | Annual report 2022 Page 125 5.6 Parent company notes DKKThousands 2022 2021 Dividends received from subsidiaries - Depreciations - Financial items received and paid (530) 720 Other 507 (530) 1,227 10. Adjustments, cash flow statement Adjustments DKKThousands 2022 2021 Borrowings 1. January 35,970 4,982 Repayments (29,232) - New borrowings - 30,988 Currency adjustments - - Borrowings 31. December 6,738 35,970 Change in borrowings and short-term credit facilities 11. Contracts liabilities, contingent liabilities and securities Please refer to note 20 in the consolidated financial statements. As security for SKAKO Concrete A/S’ and SKAKO Vibration A/S’ outstanding account in relation to its primary financial institution, the company has provided an unlimited, joint and several suretyships. Towards the company’s primary financial institution, a company deposit of DKK 50m (2021: DKK 50m) has been provided with deposit in unsecured claims, stocks, tangible assets and intangible rights. There is a 12-month rent commitment related to the building in Denmark. The minimum rent liability amounts to DKK 3.1m (2021: DKK 3.0m). The company is jointly taxed with all Danish subsidiaries. The company is jointly and severally liable with the other companies in the joint taxation for Danish corporate taxes and withholding taxes on dividend, interests and royalties within the joint taxation. | Annual report 2022 Page 126 5.6 Parent company notes 12. Events after the balance sheet date Please refer to note 23 in the consolidated financial statements. 13. Accounting policies The financial statements for 2022 of the parent company, SKAKO A/S has been prepared in accordance with International Financial Reporting Standards as adopted by the EU and Danish disclosure requirements for annual reports of listed companies under reporting class D. The financial statements have been prepared in accordance with the historical cost convention, as modified by the revaluation of derivative financial instruments at fair value. The accounting policies for the financial statements of the parent company are unchanged from the last financial year and are the same as for the consolidated financial statements with the following additions. Supplementary accounting policies for the parent c ompany Investments in Subsidiaries Investments in subsidiaries are recognized at cost less impairment losses. Where the recoverable amount is lower than cost, investments are written down to this lower value. Dividends received from investments in subsidiaries and associates are recognized in the income statement in the financial year in which the dividends are declared. Intra-group transactions in the Parent Company Financial Statements Intra-group transactions are recognized in the parent company financial statements at the carrying amount. Accordingly, additions to or disposals of investments are recognized at the carrying amount, and any difference between the carrying amount of net assets and the consideration paid is recognized directly in equity. Comparative figures are not restated. Intercompany balances Intercompany balances which are expected to be settled as part of the normal operating cycle, or where an unconditional right to defer settlement. 12. Related parties Please refer to note 22 in the consolidated financial statements. In 2021, the Parent Company has sold services to subsidiaries for DKK 10,8m (2021: DKK 900k) and paid net interest expenses, cf. note 3. | Annual report 2022 Page 127 Subsidiaries Company name Country Interest SKAKO A/S Denmark Parent SKAKO Concrete A/S Denmark 100% SKAKO GmbH Germany 100 % SKAKO Concrete, Inc. USA 100 % SKAKO Concrete S.A. France 100 % Conparts ApS Denmark 100 % SKAKO Vibration A/S Denmark 100 % SKAKO Vibration Ltd. UK 100 % SKAKO Dartek S.L. Spain 100 % SKAKO Vibration S.A. France 100 % SKAKO Vibration Succursale Maroc Morocco 100 % Aktieselskabet af 01.04.2012 Denmark 100 % Bygmestervej 2 DK-5600 Faaborg Denmark Tel.: +45 63 11 38 60 s kako.dk@skako.com www.skako.com CVR No. 36440414 5.6 Parent company notes Annual reportAuditor's report on audited financial statementsParsePort XBRL Converter2022-01-012022-12-312021-01-012021-12-31529900WNR3U8C847AW24Reporting class DOpinionBasis for Opinion2023-03-152023-03-15529900WNR3U8C847AW242022-01-012022-12-31cmn:ConsolidatedMember529900WNR3U8C847AW242022-01-012022-12-31529900WNR3U8C847AW242021-01-012021-12-31529900WNR3U8C847AW242022-12-31529900WNR3U8C847AW242021-12-31529900WNR3U8C847AW242020-12-31529900WNR3U8C847AW242021-12-31ifrs-full:IssuedCapitalMember529900WNR3U8C847AW242022-01-012022-12-31ifrs-full:IssuedCapitalMember529900WNR3U8C847AW242022-12-31ifrs-full:IssuedCapitalMember529900WNR3U8C847AW242021-12-31ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember529900WNR3U8C847AW242022-01-012022-12-31ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember529900WNR3U8C847AW242022-12-31ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember529900WNR3U8C847AW242021-12-31ifrs-full:ReserveOfCashFlowHedgesMember529900WNR3U8C847AW242022-01-012022-12-31ifrs-full:ReserveOfCashFlowHedgesMember529900WNR3U8C847AW242022-12-31ifrs-full:ReserveOfCashFlowHedgesMember529900WNR3U8C847AW242021-12-31ifrs-full:RetainedEarningsMember529900WNR3U8C847AW242022-01-012022-12-31ifrs-full:RetainedEarningsMember529900WNR3U8C847AW242022-12-31ifrs-full:RetainedEarningsMember529900WNR3U8C847AW242021-12-31SKA:DividendsProposedOrDeclaredBeforeFinancialStatementsAuthorisedForIssueButNotRecognisedAsDistributionToOwnersRecognisedInEquityMember529900WNR3U8C847AW242022-01-012022-12-31SKA:DividendsProposedOrDeclaredBeforeFinancialStatementsAuthorisedForIssueButNotRecognisedAsDistributionToOwnersRecognisedInEquityMember529900WNR3U8C847AW242022-12-31SKA:DividendsProposedOrDeclaredBeforeFinancialStatementsAuthorisedForIssueButNotRecognisedAsDistributionToOwnersRecognisedInEquityMember529900WNR3U8C847AW242020-12-31ifrs-full:IssuedCapitalMember529900WNR3U8C847AW242021-01-012021-12-31ifrs-full:IssuedCapitalMember529900WNR3U8C847AW242020-12-31ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember529900WNR3U8C847AW242021-01-012021-12-31ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember529900WNR3U8C847AW242020-12-31ifrs-full:ReserveOfCashFlowHedgesMember529900WNR3U8C847AW242021-01-012021-12-31ifrs-full:ReserveOfCashFlowHedgesMember529900WNR3U8C847AW242020-12-31ifrs-full:RetainedEarningsMember529900WNR3U8C847AW242021-01-012021-12-31ifrs-full:RetainedEarningsMember529900WNR3U8C847AW242020-12-31SKA:DividendsProposedOrDeclaredBeforeFinancialStatementsAuthorisedForIssueButNotRecognisedAsDistributionToOwnersRecognisedInEquityMember529900WNR3U8C847AW242021-01-012021-12-31SKA:DividendsProposedOrDeclaredBeforeFinancialStatementsAuthorisedForIssueButNotRecognisedAsDistributionToOwnersRecognisedInEquityMember529900WNR3U8C847AW242022-01-012022-12-31cmn:ConsolidatedMember1529900WNR3U8C847AW242022-01-012022-12-31cmn:ConsolidatedMember2529900WNR3U8C847AW242022-01-012022-12-31cmn:ConsolidatedMember3529900WNR3U8C847AW242022-01-012022-12-31cmn:ConsolidatedMember1529900WNR3U8C847AW242022-01-012022-12-31cmn:ConsolidatedMember2529900WNR3U8C847AW242022-01-012022-12-31cmn:ConsolidatedMember3529900WNR3U8C847AW242022-01-012022-12-31cmn:ConsolidatedMember4529900WNR3U8C847AW242022-01-012022-12-31cmn:ConsolidatedMember5529900WNR3U8C847AW242022-01-012022-12-31cmn:ConsolidatedMember1529900WNR3U8C847AW242022-01-012022-12-31cmn:ConsolidatedMember2529900WNR3U8C847AW242021-01-012021-12-31cmn:ConsolidatedMemberiso4217:DKKiso4217:DKKxbrli:sharesxbrli:pure