Annual Report • Sep 14, 2018
Annual Report
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Rovsing A/S (Rovsing) develops, manufactures and delivers systems for functional and electrical testing of spacecrafts (primarily satellites) and their payloads.
The products and systems are used for testing of spacecraft sub-systems, including external communication connections and instruments.
The Company's products are modular and are sold either on a stand-alone basis or used as modules in system solutions, customized for the specific spacecraft application. In connection with the configuration of system solutions, third parties' products are also used, and software is configured for the individual spacecraft needs.
The products, inclusive software packages, are flexible and configurable, facilitating tailor-made customer solutions.
More specifically, Rovsing offers, the following equipmentsolutions:
In addition, Rovsing develops software solutions, including solutions based on specific customer specifications, and performs independent software verification/validation (ISVV) for critical spacerelated software developed by third parties.
Rovsing also provides engineering support for large corporations in the space industry at various locations in Europe and in South America. For more than 15 years, Rovsing has been responsible for configuration control of ground installations at the European space base CSG in Kourou in French Guiana.
The main customers of Rovsing are European and US-based space groups such as Airbus DS, Thales Alenia Space, Boeing, Lockheed Martin and their key sub-suppliers. The European Space Agency (ESA), NASA and various national space agencies in Europe are also among Rovsing's customers.
| PROFILE 2 | |
|---|---|
| HIGHLIGHTS OF THE YEAR 3 | |
| FINANCIAL HIGHLIGHTS AND RATIOS 4 | |
| CORPORATE INFORMATION 5 | |
| MANAGEMENTS' REVIEW 6 | |
| SHAREHOLDER INFORMATION14 | |
| CORPORATE GOVERNANCE 16 | |
| RISK FACTORS19 | |
| MANAGEMENT STATEMENT 22 | |
| INDEPENDENT AUDITOR'S REPORT23 | |
| BALANCE SHEET 28 | |
| BALANCE SHEET 29 | |
| STATEMENT OF CHANGES IN EQUITY 30 | |
| CASH FLOW STATEMENT 32 | |
| OVERVIEW OF NOTES TO THE FINANCIAL STATEMENTS33 |
|
| NOTES 34 | |
| BOARD OF DIRECTORS 56 | |
| DEFINITION OF RATIOS 58 | |
| GLOSSARY 59 |
| INCOME STATEMENT | 2013/14 | 2014/15 | 2015/16 | 2016/17 | 2017/18 |
|---|---|---|---|---|---|
| DKK'000 | |||||
| Revenue | 15,567 | 19,636 | 26,632 | 38,968 | 25.127 |
| Earnings before interest, taxes, depreciation and | |||||
| amortisation, EBITDA | -3,389 | -3,340 | -2,120 | 1,260 -1,921 |
-4,513 -7,722 |
| Operating profit (EBIT) | -6,810 | -11,584 | -13,772 | -1,344 | -1,553 |
| Financial income and expenses, net | -324 | -668 | -347 | -2,675 | -9,912 |
| Profit/loss for the year | -8,993 | -10,940 | -11,094 | ||
| BALANCE SHEET | |||||
| Non-current assets | 47,144 | 42,325 | 28,511 | 25,741 | 23,268 |
| Current assets | 12,379 | 14,197 | 12,984 | 15,718 | 12,634 |
| Total assets | 59,523 | 56,522 | 41,495 | 41,459 | 35,902 |
| Equity | 34,949 | 27,064 | 16,326 | 18,217 | 18,210 |
| Non-current liabilities | 8,868 | 9,592 | 0 | 0 | 0 |
| Current liabilities | 15,706 | 19,866 | 25,169 | 23,243 | 17,692 |
| Total equity and liabilities | 59,523 | 56,522 | 41,495 | 41,459 | 35,902 |
| CASH FLOW STATEMENT | |||||
| Cash flow from operating activities | -3,644 | 959 | 5,116 | -5,038 | -11,032 |
| Cash flow from investing activities | -6,065 | -3,567 | -5,780 | -1,329 | -1,578 |
| Cash flow from financing activities | 9,927 | 3,319 | -282 | 7,552 | 11,561 |
| Total cash flow | 218 | 711 | -946 | 1,185 | -1,049 |
| KEY FIGURES | |||||
| EBITDA margin, % | -21.8 | -17.0 | -8.0 | 3.2 | -18.0 |
| EBIT margin, % | -43.8 | -59.0 | -51.7 | -4.9 | -30.7 |
| Return on equity, % | -24.4 | -34.5 | -47.5 | -15.3 | -39,1 |
| Earnings per share (EPS) | -0.03 | -0.04 | -0.04 | -0.01 | -0.03 |
| Cash flow per share (CFPS) | -0.04 | -0.06 | -0.06 | -0.04 | -0.04 |
| Dividends per share of DKK 0.05 | - | - | - | - | - |
| Pay-out ratio, % | - | - | - | - | - |
| Equity per share, DKK | 0.12 | 0.09 | 0.05 | 0.05 | 0.04 |
| Solvency, % | 58.7 | 47.9 | 39.3 | 43.9 | 50,7 |
| Average number of shares (1,000 shares) | 265,921 | 285,851 | 300,344 | 316,778 | 380,140 |
| Number of shares at year-end (1,000 shares) | 283,119 | 299,511 | 302,011 | 333,212 | 404,854 |
The key figures are calculated in accordance with the recommendations issued by the Danish Society of Financial Analysts ("Finansforeningen") in 2015.
Rovsing's financial year is from 1 July to 30 June.
Rovsing A/S Dyregårdsvej 2 2740 Skovlunde, Denmark
| Phone: | +45 44 200 800 |
|---|---|
| Fax: | +45 44 200 801 |
| Website: | www.rovsing.dk |
| E-mail: | [email protected] |
Company reg. (CVR) no.: 16 13 90 84 Date of incorporation: 20 May 1992 Municipality of registered office: Ballerup, Denmark
Michael Hove (Chairman) Jørgen Hauglund Flemming Hynkemejer Ulrich Beck
Hjalti Pall Thorvardarson, CEO Sigurd Hundrup, CFO
BDO Statsautoriseret revisionsaktieselskab Birk Centerpark 30 7400 Herning, Denmark
The annual general meeting will be held on 22 October 2018 at 14:00 at Dyregårdsvej 2, 2740 Skovlunde, Denmark.
At DKK 25.1 million, Rovsing's revenue decreased by DKK 13.8 million, compared to the previous financial year. The Company's earnings before interest, tax, depreciation and amortisation (EBITDA) amounted to DKK -4.5 million, which was a decrease of DKK 5.8 million compared to the previous year.
Tax for the year was DKK -0.6 million compared to DKK 0.6 million previous year.
The profit/loss after tax decreased by DKK 7.2 million from a loss of DKK 2.7 million in 2016/17 to a loss of DKK 9.9 million in 2017/18. The negative development is the combined result of a lower level of activity in ESA-driven projects in 2017/18 and a lower order intake from other space projects outside the ESA organisation, leading to a drop in revenue compared to previous year.
The realised revenue and EBITDA of DKK 25.1 million and DKK -4.5 million, respectively were below the expectations announced by the Company in the interim financial statement for the last quarter of the financial year 2017/18 and is primarily related to a delay in MetOp-SG Programme which impacts the ISVV project where the projected rate of completion could not be achieved as SW elements for Rovsing to validate were not ready.
Management considers the development in revenue, EBITDA and profit and loss for the financial year highly unsatisfactory.
In the financial year 2017/18, Rovsing did not manage to realise the initially projected level of activity on the European market. This can partially be accounted to delays in pipeline activities related to larger ESA driven missions and lower order intake from non-ESA activities. The European institutional market remains the most important market to Rovsing, however the efforts and focus on diversifying the Company's market share will continue to mitigate the fluctuation in activity level.
Rovsing continued its support to the ExoMars 2020 mission in the financial year 2017/18 by delivering, in August 2017 and January 2018, two sets of Discrete and Power Front-end DSTE equipment to
Celestia-STS as a major part of the DCIS and DH SCOE systems for Thales Alenia Space Italy.
A second batch of 21 SAS Modules was delivered to Clemessy Switzerland in September 2017 for use on the MetOp-SG mission.
In October 2017, Rovsing delivered a third set of the SAW FEE to Airbus DS in Bremen, a test system simulating the solar array wings power and telemetry to the European service module (ESM) to the NASA-ESA vehicle Orion MPCV. This set will later be shipped to the USA to support further testing. The SAW FEE(s) are built with Rovsing's SAS, SLP and MASC products and SW suite. The Company continues to support the MPCV industrial team with engineering support and delivering requested changes.
The third set of the Jason-CS/S6 Altimeter EGSE was also delivered in October 2017 to Thales Alenia Space in Toulouse. The test system is based on the DSTE product range.
In December 2017, Rovsing received an order from Airbus DS in Toulouse for an additional Satellite Interface Simulator (SIS) for the JUICE mission. The DSTE based system was the 17th delivery for this mission and was completed in June 2018.
Refurbishment of previously delivered test systems such that they can support follow on satellites for the same mission was also an important element of the financial year. Rovsing made a complete bottom up refurbishment, SW upgrade and requalification of the Sentinel-1 Power SCOE for Thales Alenia Space Italy. The system was originally delivered in 2010 and used for the assembly, integration, testing and launch of the Sentinel-1 A and B satellites. Now the Power SCOE is ready to be used for satellites C and D following the delivery of the refurbished system in June 2018.
Thales Alenia Space France (TAS-F) contracted Rovsing in beginning of 2018 for refurbishment of a single set of the Sentinel-3 A/B Altimeter EGSE in support of the upcoming S3 C and D satellites. TAS-F also contracted Rovsing to build a new Altimeter EGSE, this DSTE based system was delivered in July 2018.
The ESA co-financed development project, aimed at ensuring that Rovsing's ESGE software package is compatible with ESA's future ground software "EGS-CC" standards, has not had the expected progress as delays in "EGS-CC" project have required Rovsing to wait until next release.
Rovsing continued in 2017/18 the ISVV work for the MetOp-SG platform and instruments. Some program delays have impacted the progress as Rovsing has not been able to get their data to continue according to schedule.
An industrial consortium led by Telespazio France won in early 2018 the SETTERS project for renewal of critical equipment for launch vehicle tracking stations around the world. Rovsing will provide project management and quality support as well as RAMS analysis.
In April 2018, Rovsing was awarded as part of a larger consortium the CSG service contracts for 2018 until 2022, where the Rovsing team will be responsible for providing quality assurance and configuration control for ground installations and systems at the European space base CSG in Kourou in French Guiana.
Rovsing continued work under a ATP with Airbus DS (Germany) for the technical support to the ISS COLUMBUS in Bremen, Germany.
A considerable part of Rovsing's activities on the European market is related to programmes which are managed and funded by the European Space Agency (ESA). As ESA's activities and the number of new projects vary over time it is seen by the Management to be of strategic importance to solidify the Company's position and increase order intake outside of ESA. Focusing on the USA, commercial space programs and emerging markets.
It is Rovsing's assessment that the level of the ESA activities will continue its long-term increasing trend, although the number of new projects will continue to be lower in first half of 2018/19 than what has been the case in recent years, and this will most likely impact Rovsing's order intake and revenue in the next few years.
Rovsing's activities on the US market take place in cooperation with the Company's US partner Kratos RT Logic in Colorado Springs.
In a partnership with RT Logic, Rovsing has been supporting Boeing Space Systems by designing the new Solar Array Simulator test system for their factory in Los Angeles. The project has progressed through its design gates in 2017/18 and Rovsing has delivered a couple hundred SAS and SLP modules to RT Logic in February and March of 2018 together with the systems SW suite. The first two systems are already integrated, and final testing and delivery is expected to take place autumn of 2018. The testing is supported by the Rovsing AutoTest instrument suite which was delivered to RT Logic in May 2018 and greatly reduces the time and manual labor required by means of intelligent automation.
Rovsing proceeded throughout the year to explore further opportunities with US customers, positioning the Company to be able to bid with RT Logic on upcoming missions and making Rovsing's products and solutions known in the US market. As could also be seen with the joint press release with Lockheed Martin in April 2018, the Company's position on the US market as been further established in line with the Management strategy.
During 2017/18, Rovsing has continued to explore opportunities with a Chinese partner, raising awareness about the Rovsing's product offerings with potential customers.
In the financial year 2017/18, Rovsing continued to improve the product base and related logistics, production and testing environments. Management sees time and cost-effective production and testing as a vital part of the foundation for Rovsing's test systems and product offerings and to secure Rovsing's ability to deliver according to plan and within budgeted prices.
In October 2017, the share capital was increased by DKK 1.666.060 nominal value or 33.321.204 shares of DKK 0.153 each and the total amount raised was DKK 5.1 million.
In December 2017, the share capital was increased by DKK 1.666.060 nominal value or 33.321.204 shares of DKK 0.141. Of the total capital increase of nominal DKK 1.666.060, nominal DKK 669.557 has been subscribed for by way of cash payment of the subscription price, while nominal DKK 996.504 has been subscribed for by way of conversion of debt. The total amount raised was DKK 4.7 million.
In January 2018 the share capital was increased by DKK 250.000 nominal value or 5.000.000 shares of DKK 0.05 each in connection with the exercise of warrants.
By the end of the financial year 2017/18, Rovsing employed a total of 28 employees, counted on a full-time-equivalent basis. Most employees were employed at the Company's head office in Skovlunde, Denmark, but the Company also has employees at several local destinations where they provide support services and consultancy services.
At the Company's annual general meeting in October 2017 Jørgen Hauglund and Søren Anker Rasmussen were reelected to the Board of Directors, while Michael Hove, Flemming Hynkemejer and Ulrich Beck were elected as new members.
In December 2017, Søren Anker Rasmussen resigned from the Board of Directors.
In January 2018, Michael Hove took over as chairman of Rovsing's Board of Directors while Jørgen Hauglund continued as ordinary member of the Board. Jørgen Hauglund has since informed the Company that he will not seek reelection at the Company's general meeting in October 2018.
In January 2018, the Company's former CEO Cristian Bank resigned from his position with Rovsing. As new CEO, the Company appointed Hjalti Pall Thorvardarson. Hjalti Pall Thorvardarson knows the ins and outs of Rovsing's products, capabilities and customer base having been with the Company for 8 years in leadership roles prior to taking over as CEO.
In March 2018, Management adjusted the organization by terminating 7 FTEs as a consequence to a lower order intake than projected.
Rovsing has, to a certain degree, used share-based incentive schemes as part of compensation packages for members of the management team.
In the financial year 2017/18, a total of 55.000.000 new warrants were granted to members of the Board of Directors, Management team and employees while a total of 5.000.000 warrants were exercised and 2.000.000 warrants were lapsed to the effect that the current net number of warrants outstanding increased by 47.500.000 warrants from 8.300.000 at the end of the financial year 2016/17 to 55.800.000 warrants at the end of 2017/18. For additional information about the Company's share-based incentive schemes, please see note 6 to the financial statements on page 41.
The Board of Directors consider share-based incentive schemes as relevant and effective incentives that allow the Company to reward good performance, retain key persons and at the same time secure alignment of interests between managers and shareholders. Therefore, it is expected that share-based incentives, such as warrants, will be used more in the future as part of the compensation packages for members of the management group and members of the Board of Directors.
• To support customers in the aerospace industry to operate flawless systems by supplying systems and products for ground simulation & testing.
• Rovsing will develop into a strong high-tech SME, recognized as a key player in aerospace with key expertise in the Aeronautics, Space & Defense Industry.
Rovsing's critical skills and competences:
Current product range (2017/18):
Global market of Electrical Ground Support Equipment: USD 100m p.a. ESA ESGE market: EUR 20m p.a.
Revenue amounted to DKK 25.1 million in 2017/18, a decrease of DKK 13.8 million, on 2016/17 revenue. Part of the decrease in revenue compared to the previous financial year was expected and due to a lower level in ESA activities. The lower revenue can also be attributable to a lower order intake from the general pipeline than anticipated during the start of the financial year.
The lower revenue resulted in a decrease in production costs of DKK 4.0 million to DKK 6.4 million.
As a result, gross profit decreased from DKK 28.6 million in 2016/17 to DKK 18.7 million in 2017/18 or a DKK 9.8 million difference.
Staff costs declined by DKK 3.9 million to DKK 18.8 The reduced staff costs reflects the decline in revenue where Management in the latter part of the financial year has implemented a comprehensive reduction in staff to adapt the organisation to the lower activity level.
In addition, the Company's lease and purchase agreements have been analysed and renegotiated in the second half of the year with estimated future savings of DKK 0.75 million per annum.
The above development in revenue and costs led to earnings before interest, tax, depreciation and amortisation (EBITDA) of DKK -4.5 million, from DKK 1.3 million in 2016/17.
Depreciation, amortisation and impairment amounted to DKK 3.2 million in 2017/18, against DKK 3.2 million in 2016/17.
During the financial year the Company secured a new funding structure by way of obtaining a new bond loan and a new convertible bond loan strengthening the capital structure of the Company. This enabled the Company to replace short term loans with relatively high interest rate. Financial items are affected by a one-off commitment fee on the convertible bond loan of DKK 0.4 million and negative currency adjustments of DKK 0.3 million due to the weakening of the USD against Danish kroner. Overall, net financial expenses amounted to DKK 1.6 million compared to DKK 1.4 million in 2016/17.
The Company recorded a loss before tax of DKK 9.3 million in 2017/18, which was DKK 6.0 million lower than the year before. The negative development was primarily due to the poor new order intake during the financial year.
Tax for the year amounted to a cost of DKK 0.6 million in 2017/18, compared to an income of DKK 0.6 million in the preceding financial year. The tax consists of current tax (income) of DKK 0.5 million, which relates to reimbursement under section 8x of the Danish Tax Assessment Act (TAA) and adjustment of deferred tax (cost) amounting to DKK 1.1 million where DKK 0.7 million is a write down of tax asset. The deferred net tax asset amounts to DKK 3.1 million at 30 June 2018. Rovsing expects to be able to utilize the tax asset within the next five years.
The Company reported a loss for 2017/18 of DKK 9.9 million, against a loss of DKK 2.7 million in the preceding financial year.
At the end of 2017/18, total assets amounted to DKK 35.9 million, against DKK 41.5 million at 30 June 2017.
Intangible assets amounted to DKK 19.4 million at 30 June 2018, down by DKK 1.5 million on 30 June 2017. The decrease was due to ordinary depreciation and amortisation of DKK 3.0 million, DKK 0.1 million associated with development of the SAS product and DKK 1.4 million associated with development of two new co-funded ESA projects.
Deferred tax assets amounted to DKK 3.1 million, against a tax asset ofDKK 4.2 million previous year.
Inventories amounted to DKK 1.1 million, representing a year-on-year decrease of DKK 1.8 million. The decrease was primarily owing to deliveries of stock-keeping SAS & SLP modules for the Boeing project.
At 30 June 2018, trade receivables and contract work in progress combined amounted to DKK 10.5 million, which was DKK 1.3 million higher than previous year.
Current assets, except cash, amounted to DKK 12.5 million, a decrease from DKK 14.5 million at 30 June 2017.
Equity amounted to DKK 18.2 million at 30 June 2018, against DKK 18.2 million at 30 June 2017. During the year the equity increased with DKK 9.8 million form capital increases and an adverse effect from loss for the year of DKK 9.9 million.
The Company's funds tied up in working capital were strongly impacted by a total change of DKK 6.7 million in prepayments from customers, trade payables and other payables due to repayment of short term loans from related parties during the financial year. At 30 June 2018, there were only minor customer prepayments, while funding from trade payables fell from DKK 2.7 million at 30 June 2017 to DKK 0.6 million at 30 June 2018 and other payables amounted to DKK 3.0 million at 30 June 2018, against DKK 8.0 million a year earlier.
Funding guaranteed by the Danish Export Credit Agency (EKF) was fully repaid with DKK 4.7 million during the year. In addition, a new bond loan substituted the EFK funding with DKK 4.0 million and in 2017/18 the Company drew DKK 2.5 million on a new convertible bond facility.
As described in the Management's review, Rovsing experienced a decrease in the level of activity in the financial year 2017/18.
For several large-scale projects, the contractual payment terms did not allow Rovsing to invoice customers concurrently with Rovsing incurring costs associated with the projects or to obtain prepayments. As a result, funding from the Company's customers in the form of prepayments was reduced from DKK 0.4 million at 30 June 2017 to DKK 0.1 million at 30 June 2018, with funding from trade payables also declining from DKK 2.7 million to DKK 0.6 million at 30 June 2018 and in addition decrease in other payables (mainly loans to related parties) from DKK 8.0 million at 30 June 2017 to DKK 3.0 million at 30 June 2018. The change in these items had a combined adverse impact on cash flow from operating activities of DKK 6.7 million.
Cashflows from operating activities were positively impacted by a DKK 1.8 million decrease in funds tied up in inventories mainly due to deliveries of SAS modules to a large-scale project with RT-Logic for Boeing, which was completed during the year. Trade receivables increased from DKK 2.6 million at 30 June 2017 to DKK 4.4 million at 30 June 2018 of which DKK 1.1 million is related to one customer who withheld payment of overdue invoices. Payment of the overdue invoices has been received in July 2018.
Total cash flows from operating activities were a net cash outflow of DKK 11.0 million in 2017/18, against a net cash outflow of DKK 5.0 million in the preceding year.
In addition to the negative impact on Company liquidity from operations, investments in product development caused an additional outflow of DKK 1.6 million so that the total net cash outflow from operating and investing activities amounted to DKK 12.6 million, against an outflow of DKK 6.4 million last year.
This cash outflow was covered by means of e.g. a new bond loan with Formue Nord ApS of DKK 3 million and a new bond loan by JMC Equity ApS of DKK 1 million. These bond loans substituted the loan with The Danish Export Credit Agency (EKF) where the Company during the year repaid the loan in full of DKK 4.7 million.
The Company's liquidity requirement was also partly covered by two capital increases in the form of two directed share issues in October 2017 and December 2017. In October 2017 the Company received DKK 5.1 million in proceeds, corresponding to an increase of 10% of the Company's share capital. In December 2017 the Company received DKK 4.7 million, where DKK 1.9 million has been subscribed for by way of cash payment while DKK 2.8 million was subscribed for by conversion of debt.
The liquidity situation during the 2017/18 financial year improved compared to the previous year, however the liquidity situation is still tight at the end of the financial year primarily due to the poor new order intake and funds tied up in working capital, especially trade receivables and work in progress.
During the latter part of the financial year, Management had focus on reducing the Company's fixed cost base, adapt the organisation to the activity level and improving the Company's funding structure.
One contribution was a new convertible loan facility with Formue Nord ApS, where the Company can draw up to DKK 7.5 million in total in tranches of DKK 0.625 million at a time per month. At 30 June 2018 the draw on the facility amounted to DKK 2.5 million.
As another contribution, the Company by way of capital increases during the financial year together with two new bond loans was able to reduce the Company's inexpedient portfolio of short-term loans. A loan of DKK 4.7 million was fully repaid, where the funding was guaranteed by EKF.
Under the current rules for listed companies, Rovsing may issue new shares for up to 20% of the Company's existing share capital within a financial year. Within this framework, the size of a potential capital increase will be assessed relative to the immediate liquidity requirement, the capital aspects of the Company's strategy and investor appetite for buying Rovsing shares.
Should Rovsing carry out a capital increase, the contributed capital would be expected to be used partly for investing in commercial initiatives aimed at consolidating the Company's growth and competitiveness and as a general liquidity buffer. Reference is made to the section on the Company's risk factors on page 19, which describes risk associated with the Company's liquidity.
The Board of Directors recommends to the annual general meeting that no dividend be declared in respect of the 2017/18 financial year.
Considering the above developments, the Company's new strategy, the completed sourcing process and the expected order intake for 2018/19 management expects for the financial year 2018/19 a revenue of around DKK 28-32 million and an EBITDA of around DKK -1 to 1 million.
After the balance sheet date, no events have occurred that materially affect the Company's financial position other than the events described in the Management's review.
For a description of items involving significant recognition and measurement uncertainties, see note 2 to the financial statements.
Rovsing's shares are listed on Nasdaq OMX Copenhagen and traded under the abbreviation ROV and ISIN code DK0060049542. The Company's share capital has a total nominal value of tDKK 20.243 and is divided into 404.854.455 shares of DKK 0.05 each. No shares carry any special rights.
| Outstanding shares | No. of shares |
|---|---|
| Beginning of year | 333,212,047 |
| Issuance of new shares upon exercise of warrants |
5,000,000 |
| Share issue | 66,642,408 |
| End of year | 404,854,455 |
The highest and lowest prices of Rovsing shares in 2017/18 were DKK 0.22 and 0.10, respectively. At the end of the financial year, the share price was DKK 0.10. At 30 June 2018, Rovsing had a market capitalisation of DKK 40.5 million.
The average daily turnover in 2017/18 was 1.225.591 shares with an average of 20 transactions per day.
At 30 June 2017, Rovsing had a total of 3.791 registered shareholders. 95.0 % of the shares in Rovsing are registered in the name of the holder. The table below shows the composition of Rovsing's shareholders.
| Shareholders No. of |
% | |
|---|---|---|
| shares | ||
| MediumInvest A/S | 36,071,044 | 8.91 |
| CATPEN A/S | 25,528,982 | 6.31 |
| Other shareholders | 343,254,429 | 84.78 |
| Total | 404,854,455 | 100.0 |
No employee shares were granted in 2017/18.
In the period until 27 October 2022, the Board of Directors is authorized to issue warrants for board members and/or employees. The Board of Directors may issue warrants with a nominal value up to DKK 2.750.000 in the Company, corresponding to 55.800.000 warrants of DKK 0.05 each.
In the financial year, the former CEO, Cristian Bank exercised 5.000.000 warrants and the Company issued new shares in that connection.
Historically, the Company has paid dividends and made distributions, but the Board of Directors presently has no plans to pay dividends or make distributions in the foreseeable future.
Authorities granted to the Board of Directors are set out in articles 5 and 6 of the articles of association.
The articles of association are found on the Company's website www.rovsing.dk under "Investor relations".
The Company publishes an annual report and interim reports every quarter. These reports are published through NASDAQ OMX Copenhagen.
The annual general meeting of Rovsing will be held on 22 October 2018 at 14:00 at the Company's premises at Dyregårdsvej 2, DK-2740 Skovlunde. The general meeting shall be convened by the Board of Directors not more than five weeks and not less than three weeks before the general meeting by publication of an announcement to NASDAQ OMX Copenhagen, on the Company's website www.rovsing.dk and by e-mail to shareholders recorded in the register of shareholders who have so requested.
Resolutions on any amendment to the articles of association shall be passed by a majority of twothirds of the votes cast as well as of the voting share capital represented at the general meeting. Proposals to amend the articles of association must be submitted in writing to the Company not later than six weeks before the date of the general meeting.
14 September 2018, publication of annual report for 2017/18.
22 October 2018, Annual General Meeting regarding financial year 2017/18.
16 November 2018, publication of interim report for Q1 2018/19.
15 February 2019, publication of interim report for H1 2018/19.
10 May 2019, publication of interim report for Q3 2018/19.
13 September 2019, publication of annual report for 2018/19
Announcement no 279 - 9 August 2018 Financial Calendar 2018/2019
Announcement no 278 - 11 May 2018 Interim Report Q3 2017/2018
Announcement no 277 - 20 April 2018 Contract signature for CSG Services
Announcement no 276 - 17 April 2018 Contract negotiation
Announcement no 275 - 21 March 2018 New credit line
Announcement no 274 - 16 February 2018 Interim Report first half year 2017-2018
Announcement no 273 -26 January 2018 Change of CEO
Announcement no 272 - 22 January 2018 Changes to the Board of Directors at Rovsing A/S
Announcement no 271 - 12 January 2018
Industrial consortium including Rovsing wins contract from CNES
Announcement no 270 - 10 January 2018 Issue of new shares and exercise of warrants
Announcement no 269 - 21 December 2017 Change at the Rovsing Board of Directors
Announcement no 268 - 07 December 2017 Strategic initiatives and directed share issue
Announcement no 267 - 17 November 2017 Interim Report Q1 2017/2018
Announcement no 266 - 29 October 2017 Minutes of the general assembly
Announcement no 265 – 05 October 2017 Notice to General Meeting
Announcement no 264 - 05 October 2017 Capital Increase
Announcement no 263 - 22 September 2017 Annual Report 2016/2017
Announcement no 262 - 24 August 2017 CFO change
Announcement no 261 - 14 July 2017 Finance Calendar 2017/18
Computershare A/S Kongevejen 418 DK-2840 Holte
Hjalti Pall Thorvardarson, CEO Tel: +45 44 20 08 29 E-mail: [email protected]
Michael Hove, Chairman Tel. +45 28 12 66 09 E-mail: [email protected]
Rovsing's Board of Directors regularly reviews the Company's corporate governance and strives to follow the recommendations of the Committee on Corporate Governance. (www.corporategovernance.dk).
The Company has resolved not to follow all the recommendations of the Committee of Corporate Governance, as the Board of Directors finds it appropriate to organize the Company's governance differently in some respects due to Rovsing's specific circumstances.
Certain of recommendations with which the Board of Directors has resolved not to comply are described below. For a full report on the status of the Company's compliance with the recommendations, please refer to the corporate governance report published on Rovsing's website under "Investor Relations" and "Corporate Governance".
http://www.rovsing.dk/uploads/File/Corporate_go vernance_2016_17.pdf . (in Danish only)
According to section 2.3.1 of the recommendations, the Board of Directors is recommended to appoint a vice-chairman. Due to the limited size of the Company, the Board of Directors has not considered it necessary so far to appoint a vice-chairman.
According to section 3.1.4 of the recommendations, the Company's articles of association are to stipulate a retirement age for members of the Board of Directors. Rovsing's articles of association stipulate no such retirement age, and the Board of Directors does not find it necessary to introduce such a limit as it attaches great importance to the experience of its members and finds that a reasonable age composition and renewal can be achieved without any provisions to that effect in the articles of association. The oldest member of the current Board of Directors is Jørgen Hauglund, who was born in 1960.
According to section 3.4.3 of the recommendations, the Board of Directors is to set up an audit committee. The Board of Directors has decided that the functions of an audit committee will be undertaken by the full Board of Directors, see section 31(5) of the Danish Auditors' Act. In the opinion of the Board of Directors, its members possess sufficient knowledge of the Company's accounting and auditing aspects.
According to section 3.4.6 of the recommendations, the Board of Directors is recommended to establish a nomination committee. Due to the size of the Company, the Board of Directors has decided that the functions of a nomination committee will be undertaken by the Company's Chairman in collaboration with the other board members.
According to section 3.4.7 of the recommendations, the Board of Directors is recommended to establish a remuneration committee. Due to the size of the Company, the Board of Directors has decided that the functions of a remuneration committee will be undertaken by the full Board of Directors as the board members are deemed to possess the requisite knowledge and experience to do so.
According to section 4.1.3 of the recommendations, the remuneration of the Board of Directors should not include share options. The Board of Directors at Rovsing does not follow this recommendation as the Board of Directors are all participants in the Company's incentive warrant programme.
Rovsing has two management bodies – the Board of Directors and the Executive Management. The general meeting elects the Board of Directors, which acts as the supreme authority of the Company between general meetings. The Board of Directors is the supervisory management body of the Company, which undertakes the employment of the Executive Management. The role of the Board of Directors is to supervise the Company's activities, development and management. The Executive Management is in charge of the day-today management and operation of the Company and must comply with the guidelines given by the Board of Directors.
Pursuant to the Company's articles of association, the Board of Directors must be composed of three to seven members. The Board of Directors is currently composed of four members, elected for a term of one year. The aim is for the Board of Directors to be composed of persons who possess the necessary skills for performing their duties and have an in-depth understanding of the Company's business affairs. In this respect, the Board of Directors considers the following skills to be important: Insight into the institutional and commercial aerospace market, experience in development, manufacturing and sale of advanced test equipment, experience in international project sales and the related legal aspects, and management experience from a listed company.
The Board members' shareholdings through controlled companies and/or held personally are set out on pages 56.
The remuneration of the Board of Directors for 2017/18 was unchanged at DKK 100,000. The Chairman receives 200% of the basic fee.
At the Company's annual general meeting in October 2017 Jørgen Hauglund and Søren Anker Rasmussen were reelected to the Board of Directors, while Michael Hove, Flemming Hynkemejer and Ulrich Beck were elected as new members.
In December 2017, Søren Anker Rasmussen resigned from the Board of Directors.
In January 2018, Michael Hove took over as chairman of Rovsing's Board of Directors while Jørgen Hauglund continued as ordinary member of the Board. Jørgen Hauglund has since informed the Company that he will not seek reelection at the Company's general meeting in October 2018.
In January 2018, the Company's former CEO Cristian Bank resigned from his position with Rovsing. As new CEO, the Company appointed Hjalti Pall Thorvardarson.
The remuneration of the Executive Management consists of a fixed salary and incentive programmes in the form of a cash bonus and warrants. The weighting of the individual remuneration elements is intended to support the Company's positive performance in the short and long term. The cash bonus is performance-based relative to the annual budget to promote the Executive Management's focus on both revenue and costs. The vesting of warrants is based on the CEO's and CFO's employment with the Company and is described in more detail in note 6 to the financial statements.
Rovsing's internal control systems and procedures in relation to financial reporting are to contribute to ensuring that the financial statements give a true and fair view of the Company's financial position and are free from material misstatement.
Rovsing's Board of Directors is responsible for the establishment and approval of an effective internal control and follow-up system for purposes of the Company's risk management, including relevant guidelines, policies and significant accounting principles.
The Executive Management is responsible for risk management and maintaining an efficient control system, considering applicable legislation and other internal guidelines and procedures. Risk management is focused on risk identification, probability and impact assessment, and risk mitigation measures. The purpose of control activities is to prevent, detect and correct any errors or irregularities. The activities have been integrated in Rovsing's accounting and reporting procedures. These activities include procedures for verification, authorization, approval, reconciliation, result analysis, IT application controls, and general IT controls.
Detailed monthly accounting data are prepared, analysed and monitored at entity and Company level. Rovsing's integrated IT controls and general controls contribute to ensuring that the financial statements give a true and fair view. Reporting instructions, including estimation and close-ofmonth procedures, are updated and implemented on a regular basis. Combined with other policies, these are available to all relevant employees. Any control weaknesses identified by internal
control or external auditors are presented to the Board of Directors, which oversees that Management implements the necessary measures to remedy the weaknesses in a timely manner.
Rovsing has not adopted any policies for corporate social responsibility.
As a knowledge business, Rovsing has no significant impact on the external environment. Accordingly, no measures have been taken to prevent, reduce or remedy environmental damage.
The Company aims to promote diversity in the Company, including to achieve a reasonable representation of both genders on the Board of Directors. The Board of Directors aims for its members to complement each other in the best possible way with respect to age, background, nationality, gender, etc. with a view to ensuring a qualified and versatile contribution to the board activities in the Company. However, the 17
nomination of candidates will always be based on an assessment of the capabilities of the individual candidate and how they match the needs of the Company. The target is to ensure representation of at least 25% of both genders on the Board of Directors in 2020.
The risk factors below are not listed in any order of priority according to significance or probability. It is not possible to quantify the significance to Rovsing of each individual risk factor as each of the risk factors mentioned below may materialise individually or simultaneously to a greater or lesser degree and have a material adverse effect on Rovsing's business, operating profit and financial position.
The Company's expectations for the future are based on a number of assumptions. If these assumptions are not met, in whole or in part, the Company's future results may deviate considerably from the expectations, which may have a material adverse effect on the Company's operations, results and financial position.
The Company's liquidity position is still tight at June 2018 but has improved during 2017/18 compared to previous financial year as a consequence of completed directed share issues and by way of entering two new bond loans and a new convertible bond facility. In addition the Company repaid short term loans with high interest from related parties during the financial year.
The aerospace market is characterised by very late payments by customers from time to time. Such delays may adversely affect the Company's liquidity and increase the risks related thereto, as discussed above. Delayed deliveries to or approvals from customers may have a similar effect.
Rovsing is dependent on a few large and longstanding customers. The European Space Agency, ESA (end customer), typically delegates the overall responsibility for a space programme to the largest European space companies – Airbus Defense & Space, Thales Alenia Space or OHB ("Prime Contractors") – through contracts.
Although, when awarding a contract to a Prime Contractor, ESA also requires an open competitive process in the selection of subcontractors, it is crucial for the Company's future development in the space industry to maintain its good relations with these Prime Contractors. There can be no assurance of this, and the opposite scenario could lead to a loss of future orders and materially affect the Company's future earnings and results.
Even though the Company is not dependent on individual technologies or processes, technological developments may occur in the future which may impair the Company's competitiveness, including if the Company's fails to maintain a certain level of investment in the maintenance and development of its current intellectual property rights or faces difficulty to source parts.
The Company's large customers launch a limited number of calls for tenders a year. The outcome of these tenders will have a not insignificant impact on the Company's revenue, earnings and future competitiveness. The outcome of such tenders depends on various factors which are beyond the Company's control, including the quality and price offered by the other tenderers. As there are only a few calls for tenders, there is a risk of losing more than expected or them all, which will materially affect the Company's future results.
The Company is not yet ISO-certified and is therefore facing a risk of being rejected for that reason as supplier to certain customers in the commercial space industry, and this may have a negative impact on the Company's future development opportunities.
For each ESA programme, a ratio applies to the aggregate contract amount permitted in each participating member state. There is a risk that other Danish businesses are awarded so many contracts under a programme that it reduces Rovsing's contract opportunities under that programme.
Rovsing's products are developed from scratch, and Rovsing has been informed by SSBV that the same applies to the acquired products from SSBV. Despite this, there is a risk that the products will infringe third party rights, including patent rights. Such infringement may involve substantial claims from the rightsholders and/or cause rightsholders to obtain injunctions against supply of the products containing the infringing material, which may materially affect Rovsing's results.
Although Rovsing has switched to basing its deliveries on standard products, Rovsing remains a development business which, in some tenders, has to prepare estimates of the resources required to perform the individual contracts. There is a risk that Rovsing underestimates the (development) costs associated with existing or future projects and therefore cannot achieve the budgeted contribution margins and/or incurs losses in connection with projects.
There is no guarantee that the insurance cover acquired is sufficient to compensate for a loss arising due to a claim, including especially a product liability claim. The Company strives to minimise its exposure by way of its general terms of sale and delivery and its commercial liability and product liability insurance, but there is no certainty that all situations have been agreed in such a way as to prevent an error from having a negative impact on the Company's earnings.
In addition, a loss for which the Company is liable or jointly liable may potentially damage the Company's opportunities to enter into future contracts, as the Company's business concept involves protecting customers against such losses.
Penetration of new markets involves a number of uncertainties – not least in terms of market penetration time. The Company has significant references from the space industry but does not yet possess detailed knowledge of all markets as regards applications. Both the penetration time and the fact that services provided by the Company are often competing with internal resources of other companies, are subject to uncertainty. These factors may materially affect the Company's future revenue and earnings.
A delivery to one market, e.g. the Chinese market, may affect the possibilities for supplying to other markets, e.g. the USA.
Restrictions on export bonds to certain countries can impact the Company's ability to enter into new business markets.
The Company's strategy is initially to accumulate market knowledge, technical skills and marketing skills in the global aerospace market, primarily through recruitment at the board, management, engineer and sales level. When entering new market areas, the headcount will increase with a resulting risk that capacity adjustment problems may arise.
There is a risk that the Company will not succeed in balancing the capacity to ensure coherence between the contracts concluded and availability of sufficient capacity in terms of both quality and quantity, which may affect the Company's future revenue and results.
As a knowledge-based business, the future development of the Company relies on contributions from current and future employees. The Company's employees are its greatest asset. The Company's ability to attract, retain and develop talented employees is therefore considered essential to the Company's future activities, results and financial position.
The Company's development to date in respect of management, development and marketing has been driven extensively by individuals. A loss of one or more of these employees may have a material adverse effect on the Company's business. However, there can be no assurance that this will not happen.
The Company's earnings rely strongly on its ability to secure satisfactory contribution margins of its contracts.
The contribution margin depends on the Company's ability to maintain a high level of expertise within its product areas and its possibilities for reusing product developments.
A lack of the same will have negative consequences.
In its annual report for 2017/18, Rovsing capitalised development costs and product rights totaling DKK 19.4 million and a tax asset of DKK 3.1 million. There is a risk that the products developed cannot be sold to the extent expected and/or that the Company does not generate a profit in the coming financial years, and that the capitalised development costs, product rights and/or tax asset will be written off in connection with future financial statements. Such a scenario will affect Rovsing's results and balance sheet.
In the space industry, the Company's contracts are primarily concluded in EUR or USD. As the Danish krone is pegged to the Euro, the exchange rate risk in this connection is low. However, exchange rate risk occurs while the Company has entered into contracts in USD.
The Company is competing in an ever-changing market with a large number of development businesses in Europe, including a few in Denmark.
As the Company's customers increasingly use standard products, there is a risk that one or more competitors develop competing standard products which become market leading. This and/or the general competition from other development businesses may entail a substantial reduction of the Company's revenue and may in that case materially affect the Company's results going forward.
The Company's market segment mainly consists of the institutional European aerospace market and exclusively exists owing to Denmark's ESA membership.
If Denmark terminates its membership or reduces its contribution considerably, a very substantial part of Rovsing's market will cease to exist, and this will have a very significant impact on the Company's activities, results and financial position. Changes to the geographical return rules may affect the Company's earnings. Lastly, stricter enforcement of the rules, e.g. so that the four large countries (Great Britain, France, Italy and Germany) of ESA's 22-member states gain a larger portion of the contracts, will make the market conditions much more difficult. This also involves a risk to the Company's future development in the European space industry.
At a meeting of ministers in December 2016, Denmark confirmed its continued ESA membership and participation in optional programmes for the period 2017 - 2019 for an aggregate amount of DKK 350 million. This combined with the mandatory membership fee brings Denmark's contribution to ESA programmes to approximately DKK 227 million a year, which is largely unchanged on the year before.
Hence, there are currently no signs that Denmark is about to withdraw from the ESA collaboration.
Nor are there any signs that the geographical return rules will be abolished or that ESA will apply the return rule more arbitrarily in the future, but there is not guarantee of that. There is a risk that changed political priorities may materially affect the member states' funding of ESA programmes, which in that case will affect the Company's prospective income and have a material adverse impact on results.
In 2016 and earlier, ESA commenced discussions with the delegates of the member states regarding a different procurement policy for its future programmes, and during 2017 ESA completed a pilot project with the new procurement policy for the FLEX and PLATO programmes.
Although there are no indications that this new procurement policy will have a negative impact on the geographical return rules, or that ESA will apply the return rules more arbitrarily in the future, there is no guarantee of that.
ESA contracts involve a process in which the individual companies that have submitted bids for the individual project are assessed, and the individual project participants are subsequently selected. A kick-off meeting is held where the selected project participant receives an approval to commence the project, but the actual contract is signed at a later point in time. This process involves a risk that the contracts are never signed and that only the approved part is completed. Rovsing has never experienced a situation where a kicked off contract was not completed, but there is no guarantee that this will not happen. In that case, such a process may involve substantial losses for the Company.
In connection with the development and delivery of Rovsing's high-tech solutions, extensive testing is often conducted in collaboration with customers. However, there is a risk that the products contain defects that are not detected during testing. This may subsequently result in complaint costs.
The Board of Directors and the Executive Management today considered and adopted the annual report of Rovsing A/S for the financial year 1 July 2017 to 30 June 2018. The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU and Danish disclosure requirements for listed companies. The Management's review is also presented in accordance with Danish disclosure requirements for listed companies.
We consider the accounting policies applied to be appropriate. Accordingly, the financial statements give a true and fair view of the Company's assets, liabilities and financial position at 30 June 2017 and of the Company's activities and cash flows for the financial year 1 July 2017 to 30 June 2018.
We believe that the Management's review includes a fair review of developments in the Company's activities and finances, results for the year and the Company's financial position in general as well as a fair description of the principal risks and uncertainties to which the Company is exposed.
We recommend that the annual report be approved at the Annual General Meeting.
Skovlunde, 14 September 2018
Executive Management
Hjalti Pall Thorvardarson (CEO)
Sigurd Hundrup (CFO)
Board of Directors
Michael Hove (Chairman)
Jørgen Hauglund Flemming Hynkemejer Ulrich Beck
We have audited the Financial Statements of Rovsing A/S for the financial year 1 July 2017 – 30 June 2018, which comprise income statement, total statement of income, balance sheet, statement of changes in equity, cash flow statement, notes and a summary of significant accounting policies. The Financial Statements are prepared under the International Financial Reporting Standards approved by EU and additional requirements under the Danish Financial Statements Act.
In our opinion, the Financial Statements give a true and fair view of the financial position of the Company at 30 June 2018, and of the results of the Company operations and cash flows for the financial year 1 July 2017 – 30 June 2018 in accordance with the International Financial Reporting Standards as adopted by the EU and additional requirements under the Danish Financial Statements Act.
Our opinion is consistent with our audit report to the Audit Committee and the Board of Directors.
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 are independent of the Company in accordance with the International Ethics Standards Board for Accountants' Code of Ethics for Professional Accountants (IESBA Code) and the additional requirements applicable in Denmark, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
To the best of our belief we have not conducted any prohibited non-audit services, as stated in Art. 5 (1) of EU Regulation no. 537/2014.
We were first time appointed auditors of Rovsing A/S on 25 October 2013 for the financial year 2013/14. We were re-appointed annually by a resolution of the General Meeting for a total continuous engagement period of five years up to and including the financial year 2017/18.
We draw attention to note 2 Financial estimates and assessments in the Financial Statements describing the uncertainty attached to the valuation of the intangible fixed assets and the recognized tax asset. The value of the recognized intangible fixed assets and the recognized deferred tax asset depends on the Company being able to realize Management's expectations for improvement of activities and results. Actual results will probably differ from the expected results because assumed events often do not happen as expected and, therefore, the valuation of the recognized intangible fixed assets and the recognized deferred tax assets is subject to considerable uncertainty. Our opinion is not modified in respect of this matter.
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the Financial Statements for the financial year 2017/18. These matters were addressed in the context of our audit of the Financial Statements as a whole, and in forming our auditor's opinion thereon, and we do not provide a separate opinion on these matters.
The carrying amount of intangible fixed assets is DKK 19.4 m and is subject to significant estimates. Reference is made to the Financial Statements, page 28 in the Balance Sheet, page 39, note 2 "Intangible fixed assets", and page 36-37 "Accounting policies".
Management's assessment of the value is based on the current value of expected future cash flows and depends basically on two parametres: the sum of the Company's future profits and the minimum return on interest requirement made by an investor providing capital to the Company.
Our most significant audit procedures in relation to valuation of completed development projects, including impairment test, were:
The carrying amount of deferred tax asset is DKK 3.1 m and is subject to significant estimates. Reference is made to the Financial Statements, page 28 in the Balance Sheet, page 39, note 2 "Deferred tax", and page 36-37 "Accounting policies".
Management's assessment of the value is based on budgets and forecasts. The deferred tax asset is recognised on the basis of expected tax profits in the coming 5 years.
Our most significant audit procedures in relation to valuation of deferred tax asset were:
Management is responsible for Management's Review, which is presented at pages 6 to 21 in the Financial Statements.
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 during the audit, or otherwise appears to be materially misstated.
Moreover, it is our responsibility to consider whether Management's Review provides the information required under the Danish Financial Statements Act.
Based on the work we have performed, we conclude that Management's Review is in accordance with the Financial Statements and has been prepared in accordance with the requirements of the Danish Financial Statements Act. We did not identify any material misstatement of Management's Review.
Management is responsible for the preparation of Financial Statements that give a true and fair view in accordance with the International Financial Reporting Standards as adopted by the EU and additional requirements under the Danish Financial Statements Act.
Management is moreover responsible 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 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 in preparing the Financial Statements unless Management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.
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 conducted in accordance with ISAs and the additional requirements applicable in Denmark, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:
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 submit a statement to those charged with governance that we have met relevant ethical requirements relating to independence and inform of all relations and other matters which may reasonably be conceived to influence our independence and, where relevant, associated security measures.
Based on the matters communicated to the Management we determine which matters were the most significant in connection with the audit of the Financial Statements for the period under review and consequently became the Key Audit Matters. We describe these matters in our Independent Auditor's Report, unless legal or other regulatory requirements prevent the publication of the matter, or in the very rare cases where we determine that the matter should not be communicated in our Independent Auditor's Report, because the negative consequences could reasonably be expected to be of more critical importance than the advantages that such communication would bring to the public interest.
Herning, 14 September 2018
26
BDO Statsautoriseret revisionsaktieselskab CVR no. 20 22 26 70
Steen Pedersen State Authorised Public Accountant MNE no. mne23302
| Note | INCOME AND COMPREHENSIVE INCOME STATEMENT | 2017/18 | 2016/17 |
|---|---|---|---|
| DKK'000 | |||
| 3 | Revenue | 25,127 | 38,968 |
| Production costs, external | -6,393 | -10,411 | |
| Gross profit/loss | 18,734 | 28,557 | |
| 4 | Other external expenses | -4,451 | -4,606 |
| 5, 6 | Staff costs | -18,796 | -22,691 |
| Operating profit before depreciation and amortisation (EBITDA) |
-4,513 | 1,260 | |
| 7, 8 | Depreciation, amortisation and impairment | -3,209 | -3,181 |
| Operating profit/loss (EBIT) | -7,722 | -1,921 | |
| 9 | Financial income | 49 | 30 |
| 10 | Financial expenses | -1,603 | -1,373 |
| Profit/loss before tax | -9,275 | -3,264 | |
| 11 | Tax on profit/loss for the year | -636 | 590 |
| Net profit | -9,912 | -2,675 | |
| Comprehensive income | -9,912 | -2,675 | |
| Allocation of profit/loss: | |||
| Shareholders of Rovsing A/S | -9,912 | -2,675 | |
| Transferred from share premium | 0 | 0 | |
| Retained earnings | -9,912 | -2,675 | |
| 12 | Earnings per share | ||
| Earnings per share (EPS Basic) | -0,03 | -0.01 | |
| Earnings per share (EPS-D) | -0,03 | -0.01 |
27
| Note | BALANCE SHEET, ASSETS | 2017/18 | 2016/17 |
|---|---|---|---|
| DKK'000 | |||
| Non-current assets | |||
| Intangible assets | |||
| 13 | Completed development projects | 16,636 | 19,240 |
| 13 | Patents and licenses | 1,359 | 1,681 |
| 13 | Development projects in progress | 1,442 | 0 |
| 19,437 | 20,921 | ||
| Property, plant and equipment | |||
| 14 | Other fixtures and fittings, tools and equipment | 267 | 414 |
| 267 | 414 | ||
| Other non-current assets | |||
| Tax | 484 | 206 | |
| 15 | Deferred tax | 3,080 | 4,199 |
| 3,564 | 4,406 | ||
| Total non-current assets | 23,268 | 25,741 | |
| Current assets | |||
| Inventories | 1,090 | 2,889 | |
| 16 | Trade receivables | 4,394 | 2,647 |
| 17 | Contract work in progress | 6,125 | 6,538 |
| Tax | 206 | 1,508 | |
| Other receivables | 299 | 498 | |
| Prepaid expenses | 378 | 446 | |
| Cash | 143 | 1,192 | |
| Total current assets | 12,634 | 15,718 | |
| TOTAL ASSETS | 35,902 | 41,459 |
| Note | BALANCE SHEET, EQUITY AND LIABILITIES | 2017/18 | 2016/17 |
|---|---|---|---|
| DKK'000 | |||
| 18 | Equity | ||
| Share capital | 20,243 | 16,661 | |
| Reserves for development costs | 2,399 | 938 | |
| Retained earnings | -4,433 | 618 | |
| Total equity | 18,210 | 18,217 | |
| Current liabilities | |||
| Credit institutions | 7,107 | 7,205 | |
| Funding guaranteed by EKF | 0 | 4,650 | |
| 19 | Bond loans | 6,500 | 0 |
| 17 | Prepayments, customers | 100 | 417 |
| Trade payables | 639 | 2,719 | |
| 20 | Other payables | 3,004 | 8,002 |
| 21 | Provisions | 342 | 250 |
| Total current liabilities | 17,692 | 23,243 | |
| Total liabilities | 17,692 | 23,243 | |
| TOTAL EQUITY AND LIABILITIES | 35,902 | 41,459 |
29
EQUITY
DKK'000
| 2016/17 | SHARE CAPITAL |
RESERVES FOR DEVELOP MENT COSTS |
RETAINED EARNINGS |
TOTAL |
|---|---|---|---|---|
| Equity at 1 July 2016 | 15,100 | 0 | 1,226 | 16,326 |
| Comprehensive income for the period |
||||
| Comprehensive income | 0 | 0 | -2,675 | -2,675 |
| Transferred between reserves | 0 | 938 | -938 | 0 |
| Total comprehensive income for the period |
0 | 0 | -3,613 | -2,675 |
| Other transactions | ||||
| Issue of new shares upon exercise of warrants |
50 | 0 | 60 | 110 |
| Share issue | 1,511 | 0 | 2,566 | 4,077 |
| Warrant programme | 0 | 0 | 379 | 379 |
| Total transactions with owners | 1,561 | 0 | 3,005 | 4,566 |
| Equity at 30 June 2017 | 16,661 | 938 | 618 | 18,217 |
| 2017/18 | SHARE CAPITAL |
RESERVES FOR DEVELOP MENT COSTS |
RETAINED EARNINGS |
TOTAL |
|---|---|---|---|---|
| Equity at 1 July 2017 | 16,661 | 938 | 618 | 18,217 |
| Comprehensive income for the period |
||||
| Comprehensive income | 0 | 0 | -9,912 | -9,912 |
| Transferred between reserves | 0 | 1,461 | -1,461 | 0 |
| Total comprehensive income for the period |
0 | 1,461 | -11,373 | -9,912 |
| Other transactions | ||||
| Issue of new shares upon exercise of warrants |
250 | 0 | 0 | 250 |
| Share issue | 2,335 | 0 | 4,651 | 6,986 |
| Share issue by debt conversion*) | 997 | 1,814 | 2,811 | |
| Costs emission | 0 | 0 | -238 | -238 |
| Warrant programme | 0 | 0 | 95 | 95 |
| Total transactions with owners | 3,582 | 0 | 6,322 | 9,903 |
| Equity at 30 June 2018 | 20,243 | 2,399 | -4,433 | 18,210 |
*) The conversion of debt to shares was completed on 5 December 2017 and part of the directed share issue also completed on 5 December 2017.
| Note | CASH FLOW STATEMENT | 2017/18 | 2016/17 |
|---|---|---|---|
| DKK'000 | |||
| Profit/loss for the year | -9,912 | -2,675 | |
| Adjustment for non-cash operating items etc.: | |||
| 8 | Depreciation, amortisation and impairment | 3,209 | 3,181 |
| 26 | Other non-cash operating items, net | 199 | 447 |
| 9 | Financial income | -49 | -30 |
| 10 | Financial expenses | 1,603 | 1,373 |
| 11 | Tax on profit/loss for the year | 636 | -590 |
| Cash flows from operations before changes in working capital |
-4,314 | 1,707 | |
| 27 | Change in working capital | -6,662 | -6,235 |
| Cash flow from operations | -10,976 | -4,428 | |
| Interest receivable | 49 -1,603 |
30 -1,373 |
|
| Interest payable | 1,497 | 834 | |
| Tax reimbursement | |||
| Cash flow from operating activities | -11,032 | -5,038 | |
| 13 | Acquisition of intangible assets | -2,198 | -938 |
| Received development subsidies | 620 | 0 | |
| 14 | Acquisition of property, plant and equipment | 0 | -390 |
| Cash flow from investing activities | -1,578 | -1,329 | |
| Debt raised | 1,850 | 4,650 | |
| Repayment of debt with credit institutions | -97 | -1,285 | |
| Capital increase, net proceeds from issue | 9,796 | 4,077 | |
| Warrants, employees | 250 | 110 | |
| Costs emission | -238 | 0 | |
| Cash flow from financing activities | 11,561 | 7,552 | |
| Net cash flow for the period | -1,049 | 1,185 | |
| Cash, beginning of year | 1,192 | 6 | |
| Cash, end of year | 143 | 1,192 |
| Note | Note | ||
|---|---|---|---|
| 1 | Accounting policies | 14 | Property, plant and equipment |
| 2 | Accounting estimates and judgments | 15 | Deferred tax |
| 3 | Revenue | 16 | Receivables |
| 4 | Expenses for auditors appointed by the general meeting |
17 | Contract work in progress |
| 5 | Staff costs | 18 | Equity |
| 6 | Share-based payment | 19 | Bond loans |
| 7 | Research and development costs | 20 | Other payables |
| 8 | Depreciation, amortisation and impairment | 21 | Provisions |
| 9 | Financial income | 22 | Financial risks and financial instruments |
| 10 | Financial expenses | 23 | Contingent assets and liabilities |
| 11 | Tax on profit/loss for the year | 24 | Collateral |
| 12 | Earnings per share | 25 | Operating rental and lease commitments |
| 13 | Intangible assets | 26 | Non-cash transactions |
| 27 | Working capital changes | ||
| 28 | Related party transactions |
The annual report for 2017/18, which comprises the Company's financial statements, has been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union and additional Danish disclosure requirements for listed companies.
The accounting policies are consistent with those applied in 2016/17.
The annual report is presented in DKK.
The annual report is presented in accordance with the standards (IFRS/IAS) and interpretations (IFRIC) applicable for financial years beginning on 1 July 2017 or later.
Rovsing A/S has adopted the following amended standards and interpretations from 1 July 2017.
Amendments to IAS 1 Disclosure Initiative was published in December 2014 and clarifies that entities are able to use judgements when presenting their financial statements.
Amendments to IAS 16 and IAS 38 Clarification of Acceptable Methods of Depreciation and Amortisation was published in May 2014. The amendments provide additional guidance on how the depreciation or amortisation of property, plant and equipment and intangible assets should be calculated.
Annual improvement to IFRSs 2014-2016 cycle covering 3 standards, from December 2016.
The adoption of the amended standards and interpretations has not had a significant impact on recognition or measurement in the financial statements for 2017/18 and is not anticipated to have a significant impact on the future periods.
The IASB has issued a number of new amended standards and interpretations that are not mandatory for the financial statements for 2017/18. Some of which have not yet been endorsed by the EU. Rovsing A/S expects to adopt the standards and interpretations when they become mandatory. None of these are expected to have a significant impact on recognition and measurement but may lead to further disclosures in the notes.
IFRS 15 – Revenue from Contracts with Customers was published in May 2014 and established a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers. The standard requires extensive disclosures. The standard is effective for annual periods beginning on or after 1 January 2018. During 2017/18 we have evaluated the five-step model framework on our current revenue streams and have not identified any significant effect on recognition and measurements. However, it is expected that disclosure requirements will increase.
The standard will be implemented using the modified retrospective method. Rovsing will make use of the relief from restating comparative figures and will only apply IFRS 15 to contracts that are not completed as of 1 July 2018.
IFRS 16 – Leases. For lessee, the distinction between finance and operating leases will be removed. In the future, operating leases must be recognised in the balance sheet with a right of use asset and a corresponding lease commitment. In the income statement, the lease cost is replaced by depreciation of the leased asset and an interest expense for the financial liability. The standards take effect in 2019 and is expected to increase the balance sheet total but is not expected to have significant effect on profit & loss and cash flow statement. We have started analyzing the Company's current contracts containing a lease to assess the impact of implementing IFRS 16. Based on our preliminary calculations the new standards is expected to result in an increase in total assets of DKK 1.0 million.
IFRS 9 – Financial instruments. The number of categories of financial assets is reduced to 3: amortised cost category, fair value through other comprehensive income category or fair value through the income statement category. Simplified rules regarding hedge accounting are introduced and impairment of receivables must be based on expected loss. The standard comes into force in 2018 and is not expected to have a significant effect on the financial statements.
Rovsing uses DKK as it's functional and presentation currency.
On initial recognition, transactions denominated in foreign currency are translated at the exchange rate ruling on the transaction date. Foreign exchange differences arising between the exchange rate at the transaction date and at the date of payment are recognised in the income statement under financial income or expenses.
Receivables, payables and other monetary items denominated in foreign currency are translated at the exchange rates ruling at the balance sheet date. The difference between the exchange rate ruling at the balance sheet date and the exchange rate at the date when the receivable or payable arose or was recognised in the most recent financial statements is recognised in the income statement under financial income or expenses.
Income from the sale of goods and services is recognised in the income statement provided that delivery and transfer of risk to the buyer has taken place at the balance sheet date and that the income can be reliably measured and is expected to be received. Revenue is recognised excluding VAT and taxes and net of discounts related to sales.
The percentage of completion for projects is determined on the basis of expenses incurred to date for engineering hours etc. associated with developing, manufacturing and installing the product relative to the expected overall expenses for completion of the projects.
Expected losses on uncompleted projects are expensed at the time when the expected loss is ascertained. Service and maintenance contracts are accrued and recognised as income over the term of the contracts.
Other operating costs include cost of goods sold and other external costs incurred to generate the revenue for the year.
Other operating income includes grants, which are recognised in step with completion of the activity eligible for grant.
Other external costs comprise expenses for distribution, sale, marketing, administration, premises, etc.
For equity-settled stock options and warrants, the fair value is measured at the grant date and recognised in the income statement under staff costs over the vesting period. The balancing item is recognised directly in equity.
On initial recognition of the stock options, the number of options expected to vest is estimated. Subsequently, adjustment is made only for changes in the number of employees estimated to become entitled to options or warrants.
The fair value is determined according to the Black-Scholes method.
Rental obligations and obligations under operating leases are recognised in the income statement on a straight-line basis over the terms of the leases.
Financial income and expenses include interest income and expenses, exchange gains and losses on securities, payables and transactions in foreign currencies, amortisation of financial assets and liabilities.
Tax on the profit/loss for the year, consisting of the year's current tax, movements in deferred tax and any prior-year adjustments, is recognised in the income statement as regards the amount that can be attributed to the profit/loss for the year and posted in other comprehensive income or directly in equity as regards the amount that can be attributed to movements in equity.
Deferred tax is measured in accordance with the balance sheet liability method on all temporary differences between the carrying amount and the tax base of assets and liabilities.
The tax value of tax losses carried forward is included in the statement of the deferred tax if the loss is likely to be utilised.
Deferred tax is measured on the basis of the tax regulations and rates that apply at the balance sheet date and are expected to apply at the time when the deferred tax is expected to crystallise as current tax.
Changes in deferred tax due to changes in the tax rates are recognised in the income statement as regards the share that relates to the net profit or loss for the year, whereas the share that relates to entries directly in equity is taken to other comprehensive income or directly to equity.
Intangible assets recognised in the balance sheet are measured at the lower of cost less accumulated amortisation and the recoverable amount.
Investments in development comprise costs and wages directly attributable to the Company's development activities.
Development projects which are clearly defined and identifiable, where the level of technical utilisation, sufficient resources and a potential future market or business opportunity for the Company can be demonstrated, and where the intention is to manufacture, market or utilise the project, are recognised as intangible assets if the cost can be reliably measured, and there is sufficient certainty that the future earnings can cover production and sales costs, administrative expenses and investments in development.
After completion of the development work, development costs are amortised on a straight-line basis over the estimated useful life.
Grants received to cover capitalised development costs are recognised as reduction in the cost of the development asset when the development asset is ready for use and is recognised in the profit & loss as the developed asset is amortised.
Other development costs are recognised in the income statement as incurred.
The usual amortisation period is three to ten years. Acquired rights are amortised over ten years.
Development projects in progress are tested for impairment annually by comparing the carrying amounts of the assets with their recoverable amounts. Other development projects are reviewed on an ongoing basis to determine whether there are any indications of impairment in excess of the amount provided for by normal depreciation. If there is an indication that an asset may be impaired, it is tested for impairment.
If the carrying amount of development projects exceeds their recoverable amount, the carrying amount is written down to the recoverable amount.
Items of property, plant and equipment are measured at cost less accumulated depreciation. Depreciation is charged on a straight-line basis over the expected useful lives of the assets.
Tools and equipment and software are depreciated over three to five years.
Software is measured at cost less accumulated depreciation.
Software is depreciated using the straight-line method over its expected useful life, estimated at three to five years. The assets' residual values and useful lives are assessed annually and adjusted, if appropriate, at each balance sheet date. Gains or losses on the disposal or removal of assets are recognised in the income statement under the same items as the related assets.
Depreciable assets are reviewed on an ongoing basis to determine any indications of impairment in excess of what is expressed in the normal depreciation of assets. If there is an indication that an asset may be impaired, it is tested for impairment. Where the recoverable amount is lower than the carrying amount, the value is written down to the lower recoverable amount.
Inventories are measured at the lower of cost in accordance with the FIFO (first in, first out) method and the net realisable value. Goods for resale are measured at cost, comprising the purchase price plus delivery costs.
The net realisable value of inventories is calculated as the sales amount less costs of completion and costs necessary to make the sale and is determined taking into account marketability, obsolescence and development in expected selling price.
Receivables are measured at amortised cost. Provision is made for bad debts.
Contract work in progress is measured at the selling price of the production performed. The selling price is calculated with due consideration to costs of completion, adjusted for any ascertained losses.
On-account payments received are deducted from the item contract work in progress. On account payments received over and beyond the completed part of the project are calculated separately for each contract and recognised in the item prepayments from customers.
Prepayments comprise costs incurred relating to subsequent financial years.
Contributions to defined contribution plans are expensed as incurred.
Other provisions are recognised when, as a consequence of an event occurring before or at the
balance sheet date, the Company has a legal or constructive obligation, and it is probable that there may be an outflow of economic benefits to meet the obligation.
Current liabilities, which comprise loans, trade payables and other payables, are measured at amortised cost.
Deferred income comprises payments received relating to income in subsequent financial years.
The Company's cash flow statement shows the cash flows for the year, broken down by operating, investing and financing activities, and the year's
changes in cash and cash equivalents as well as cash and cash equivalents at the beginning and end of the year.
Cash flows from operating activities are calculated indirectly as the profit or loss for the year, adjusted for non-cash operating items, financial items paid and tax paid.
Working capital includes current assets less current liabilities, exclusive of the items included in cash. Cash flows from investing activities comprise the acquisition and disposal of intangible assets, property, plant and equipment and financial assets as well as the purchase of short-term securities.
Cash flows from financing activities comprise the raising of loans and repayment of interest-bearing debt and contribution of capital through share issues.
Cash and cash equivalents comprise deposits with banks.
For each project, Management assesses whether the criteria for recognition as intangible assets are met. Completed development projects and product rights are tested annually for indication of impairment. If impairment is identified, an impairment test is performed for the individual development projects.
The carrying amount of completed development projects is DKK 16.6 million (2016/17: DKK 19.2 million).
Development projects in progress are subject to an annual impairment test. The impairment test is made on the basis of various factors, including the future use of the projects, the present value of the expected future earnings and other risks. For Rovsing, the measurement of development projects may to a substantial extent be affected by material changes to the estimates and assumptions on which the calculation of the values is based.
Contract work in progress and ongoing service contracts include non-invoiced services with a value of DKK 6.1 million (2016/17: DKK 6.5 million), which is recognised on the basis of an assessment of the percentage of completion of the delivered service. This assessment is based on the value of fees calculated using standard hourly rates. The fee value is adjusted to match the value calculated according to an estimated percentage of completion. This is part of the ongoing financial management process, and previously made estimates of the percentage of completion are regularly followed up, which reduces uncertainty associated with the calculation of the percentage of completion. See note 17.
In 2018/19, the existing short-term funding facility provided by Jyske Bank as well as two medium term bond loans and a convertible bond loan are expected to be part of the Company's funding structure.
The liquidity situation during the 2017/18 financial year improved compared to the previous year, however the liquidity situation is still tight at the end of the financial year primarily due to the poor new order intake and funds tied up in working capital, especially trade receivables and work in progress.
During the latter part of the financial year, Management had focus on reducing the Company's fixed cost base, adapt the organisation to the activity level and improving the Company's funding structure.
One contribution was a new convertible loan facility with Formue Nord ApS, where the Company can draw up to DKK 7.5 million in total in tranches of DKK 0.625 million at a time per month. At 30 June 2018 the draw on the facility amounted to DKK 2.5 million.
As another contribution, the Company by way of capital increases during the financial year together with two new bond loans was able to reduce the Company's inexpedient portfolio of short-term loans. A loan of DKK 4.7 million was fully repaid, where the funding was guaranteed by EKF.
Rovsing recognises deferred tax assets, including the value of tax-loss carry forwards, if Management considers it likely that there will be sufficient taxable income in future. This assessment is based on budgets and business plans for the coming years and is inherently subject to a high degree of uncertainty. See note 15.
| 40 | NOTES |
|---|---|
| 3 | REVENUE | 2017/18 | 2016/17 |
|---|---|---|---|
| DKK'000 | |||
| Revenue, sale of services | 25,127 | 38,968 |
Revenue for the year and previously year consists exclusively of exports. Revenue from one customer exceeds 10% of the total revenue in 2017/18.
| BY THE GENERAL MEETING | 2017/18 | 2016/17 |
|---|---|---|
| DKK'000 | ||
| Audit of financial statements | 236 | 191 |
| Audit fee for other services | 0 | 23 |
| 236 | 214 |
| 5 | STAFF COSTS | 2017/18 | 2016/17 |
|---|---|---|---|
| DKK'000 | |||
| Wages and salaries | 16,770 | 20,192 | |
| Pension contribution | 297 | 319 | |
| Other social security costs | 1,419 | 1,361 | |
| Share-based payment | 95 | 379 | |
| Other staff costs | 213 | 440 | |
| 18,796 | 22,691 | ||
| The item includes: | |||
| Remuneration of the Executive Management | 1,761 | 1,320 | |
| Share-based payments, Executive Management | 95 | 303 | |
| Pension to the Executive Management | 35 | 0 | |
| Remuneration of the Board of Directors | 508 | 500 | |
| Share-based payments, Board of Directors | 0 | 0 | |
| Average number of full-time employees | 32 | 38 | |
The Company's Executive Management has a bonus scheme based on achieved revenue and EBITDA. In addition, the Executive Management has an incentive programme, under which warrants vest on the basis of the Executive Management member's employment with the Company.
The service contract with the CEO may be terminated by the CEO giving three months' notice and by the Company giving 6 months' notice.
No remuneration has been agreed in connection with the CEO's potential resignation, and there are no special severance provisions for the CEO in connection with a takeover of the Company.
Rovsing A/S has a warrant incentive programme for the Company's Board of Directors, CEO and CFO. The programme comprises a total of 55.800.000 warrants. Each warrant entitles the holder to buy one share of DKK 0.168 each in Rovsing A/S.
The outstanding warrants for the CEO and CFO equal 1.2% of the share capital if all warrants are exercised. The vesting of warrants for the CEO and CFO is based on employment with the Company. For the CEO and CFO 1.666.667 warrants vest after 12 months' employment, another 1.666.667 warrants vest after 24 months' employment and, finally, another 1.666.666 warrants vest after 36 months' employment. The warrants are issued with an exercise price of DKK 0.168 each.
The outstanding warrants for the Board of Directors equal 9.9% of the share capital if all warrants are exercised.The vesting of warrants for the Board of Directors is based on association with the Company. For the Board of Directors 15.201.406 warrants vest after 12 months' tenure, another 15.201.406 warrants vest after 24 months' tenure and, finally, another 15.201.406 warrants vest after 36 months' tenure. The warrants are issued with an exercise price of DKK 0.168 each.
In 2017/18 the costs recognised in the income statement relating to warrants is tDKK 95 (2016/17: tDKK 379).
The calculation of fair value using the Black-Scholes model is made on the assumption of a volatility of 10%, a dividend payout ratio of 0% and an annual risk-free interest rate of 0.25%.
Specification of outstanding warrants:
| Executive Management |
Other employees |
Not allocated |
Board of Directors |
Total | Exercise price per warrant |
Fair value per war rant |
|
|---|---|---|---|---|---|---|---|
| Number of exercisable options: |
|||||||
| Outstanding at 1 July 2017 |
8,300,000 | 0 | 0 | 0 | 8,300,000 | 0.05 | 0.09 |
| Granted in 2017/18: |
4,876,722 | 1,373,715 | 3,145,346 | 45,604,217 | 55,000,000 | 0.168 | - |
| Exercised | -5,000,000 | 0 | 0 | 0 | -5,000,000 | 0.05 | - |
| Lapsed | -2,500,000 | 0 | 0 | 0 | -2,500,000 | - | - |
| Outstanding at 30 June 2018 |
5,676,722 | 1,373,715 | 3,145,346 | 45.604.217 | 55,800,000 | - | - |
| 7 | RESEARCH AND DEVELOPMENT COSTS | 2017/18 | 2016/17 |
|---|---|---|---|
| DKK'000 | |||
| Research and development costs incurred | 1,578 | 938 | |
| Development costs recognised as intangible assets | -1,578 | -938 | |
| Amortisation and impairment of recognised development costs |
2,740 | 2,623 | |
| Development costs for the year recognised in the income statement |
2,740 | 2,623 | |
| 8 | DEPRECIATION, AMORTISATION AND IMPAIRMENT |
2017/18 | 2016/17 |
| DKK'000 | |||
| Amortisation, completed development projects | 2,740 | 2,623 | |
3,209 3,181
Amortisation, patents and licenses 322 322 Impairment, patents and licenses 0 198 Depreciation, other fixtures and fittings, tools and equipment 147 38
| 9 | FINANCIAL INCOME | 2017/18 | 2016/17 |
|---|---|---|---|
| DKK'000 | |||
| Exchange rate adjustments | 49 | 30 | |
| 49 | 30 |
| 10 FINANCIAL EXPENSES |
2017/18 | 2016/17 |
|---|---|---|
| DKK'000 | ||
| Interest, banks, etc. | 1.348 | 1,274 |
| Exchange rate adjustments | 254 | 99 |
| 1,603 | 1,373 | |
| 11 TAX ON PROFIT/LOSS FOR THE YEAR |
2017/18 | 2016/17 |
| DKK'000 | ||
| Current tax | 484 | 206 |
| Prior period adjustments | 9 | 0 |
| Deferred tax | -1,129 | 383 |
| Tax on profit/loss for the year | -636 | 590 |
| Computed tax of profit/loss before tax | 22.0 % | 22.0 % |
| 2017/18 | 2016/17 | |
| Tax on profit/loss for the year is explained as follows: | ||
| Computed tax 22% of profit/loss before tax for the year | 2,041 | 718 |
| Tax effect of: | ||
| Unrecognised deferred tax asset Other non-deductible costs |
-2,703 -26 |
0 -128 |
| Tax on cost charged to equity | 52 | 0 |
| Tax for the year | -636 | 590 |
| 12 EARNINGS PER SHARE |
2017/18 | 2016/17 |
| DKK'000 | ||
| Profit/loss for the year | -9.912 | -2,675 |
| Average number of issued shares (1,000) | 380,140 | 316,778 |
| 2017/18 | Patents and licenses |
Completed development projects |
Develop ment projects in progress |
Total |
|---|---|---|---|---|
| DKK'000 | ||||
| Cost at 1 July 2017 | 22,350 | 29,229 | 0 | 51,579 |
| Additions | 0 | 0 | 2,198 | 2,198 |
| Cost at 30 June 2018 | 22,350 | 29,229 | 2,198 | 53,777 |
| Reclassification | 0 | 136 | -136 | 0 |
| Development grants received | -620 | -620 | ||
| Cost at 30 June 2017 | 22,350 | 29,365 | 1,442 | 53,157 |
| Amortisation and impairment at 1 July 2017 | -20,669 | -9,989 | 0 | -30,668 |
| Amortisation | -322 | -2,740 | 0 | -3,062 |
| Impairment | 0 | 0 | 0 | 0 |
| Amortisation and impairment at 30 June 2018 | -20,991 | -12,729 | 0 | -33,720 |
| Carrying amount at 30 June 2018 | 1,359 | 16,636 | 1,442 | 19,437 |
All intangible assets are considered to have a limited useful life.
At 30 June 2018, Management performed an impairment test of the carrying amount of intangible assets. Assets are written down to the lower of the recoverable amount and the carrying amount. The recoverable amount in this year's test is based on the value in use of the expected cash flow on the basis of budgets and forecasts for the future.
As described in the Management's review, future earnings are substantially associated with product rights and own products. The size of the earnings and their timing are subject to considerable uncertainty. See "Risk factors" in the Management's review for more details.
| 2016/17 | Patents and licenses |
Completed development projects |
Development projects in progress |
Total |
|---|---|---|---|---|
| DKK'000 | ||||
| Cost at 1 July 2015 | 22,350 | 28,291 | 0 | 50,641 |
| Additions | 0 | 0 | 938 | 938 |
| Cost at 30 June 2016 | 22,350 | 28,291 | 938 | 51,579 |
| Reclassification | 0 | 938 | -938 | 0 |
| Development grants received | 0 | 0 | 0 | 0 |
| Cost at 30 June 2016 | 22,350 | 29,229 | 0 | 51,579 |
| Amortisation and impairment at 1 July 2015 | -20,149 | -7,366 | 0 | -27,515 |
| Amortisation | -322 | -2,623 | 0 | -2,947 |
| Impairment | -198 | 0 | 0 | -198 |
| Amortisation and impairment at 30 June 2016 | -20,669 | -9,989 | 0 | -30,658 |
| Carrying amount at 30 June 2016 | 1,681 | 19,240 | 0 | 20,921 |
| Other fixtures and fittings, tools and equipment |
Total |
|---|---|
| 607 | |
| 0 | |
| 0 | 0 |
| 607 | 607 |
| -193 | -193 |
| -147 | -147 |
| 0 | 0 |
| -340 | -340 |
| 267 | 267 |
| 607 0 |
The Company does not hold assets under finance leases.
| 15 | DEFERRED TAX | 2017/18 | 2016/17 |
|---|---|---|---|
| Deferred tax asset at 1 July | -4,199 | -3816 | |
| Change in deferred tax for the year | -1,574 | -383 | |
| Prior period adjustment | -10 | 0 | |
| Unrecognised deferred tax asset | 1,996 | 0 | |
| Write-down of tax asset pursuant to expected realisation (3-5 years) |
707 | 0 | |
| Deferred tax asset at 30 June | -3,080 | -4,199 | |
| Deferred tax in the Company is specified as follows: | |||
| DKK'000 | 2017/18 | 2016/17 | |
| Intangible assets | 3,575 | 3,199 | |
| Property, plant and equipment | -31 | -28 | |
| Current assets | 3,569 | 3,589 | |
| Prepaid grants | 0 | 0 | |
| Tax loss carry-forwards | -17.923 | -15,986 | |
| Non-recognised share of tax asset | 7,730 | 5,027 | |
| Deferred tax asset at 30 June | -3,080 | -4,199 |
Tax losses relate to specific matters and late organisational adjustments. Utilisation of the tax losses is not time-limited. The tax losses are expected to be utilised in future positive earnings within a five-year period.
| 16 | RECEIVABLES | 2017/18 | 2016/17 |
|---|---|---|---|
| DKK'000 | |||
| Trade receivables | 4,394 | 2,647 | |
| Write-downs to cover losses | 0 | 0 | |
| 2,647 | 2,647 | ||
| Other receivables | 299 | 499 | |
| 4,692 | 3,146 | ||
| Overdue receivables for which no write-downs have been made to cover losses: |
|||
| Due within 1-30 days | 3,212 | 2,151 | |
| Due within 30-90 days | 1.182 | 496 | |
| Due after 90 days | 0 | 0 | |
| 4,394 | 2,647 |
| 2017/18 | 2016/17 | ||
|---|---|---|---|
| Carrying amount of receivables by currency: | |||
| DKK | 0 | 0 | |
| USD | 697 | 0 | |
| EUR | 3,696 | 2,674 | |
| 4,394 | 2,674 | ||
| 17 | CONTRACT WORK IN PROGRESS | 2017/18 | 2016/17 |
| DKK'000 | |||
| Contract work in progress, selling price | 60,084 | 60,414 | |
| Invoiced contract work in progress | -54,059 | -54,293 | |
| 6,025 | 6,121 | ||
| recognised as follows: | |||
| Contract work in progress (assets) | 6,125 | 6,538 | |
| Prepayments, customers (liability) | 100 | 417 | |
| 6,025 | 6,121 | ||
| Contract work in progress at cost | 43,861 | 44,102 | |
The Company's formal external capital adequacy requirement is limited to the Company's share capital, which is significantly lower than the Company's equity. The Company regularly assesses the need for adjusting the capital structure so that it complies with the applicable rules and matches the business foundation and scope of activity.
The Company's solvency ratio stood at 50,7 at 30 June 2018 (30 June 2017: 43.9).
| Share capital | 2017/18 | 2016/17 |
|---|---|---|
| Development in no. of shares (1,000) | ||
| No. of shares, beginning of year | 333,212 | 302,010 |
| Issue of new shares | 66,642 | 30,201 |
| Exercise of warrants | 5,000 | 1,000 |
| No. of shares, end of year |
404,854 | 333,212 |
| Share capital, DKK'000 | 20,243 | 16,661 |
The share capital is divided into 404.854.455 shares (2016/17: 333.212.000 shares) with a nominal value of DKK 0.05 each. The shares are fully paid up, and no shares carry any special rights. No shares are subject to restrictions on transferability or voting rights.
In October 2017, the share capital was increased by DKK 1.666.060 nominal value or 33,321,200 shares of DKK 0.153 each.
In December 2017, the share capital was increased by DKK 1,666,060 nominal value or 33,321,204 shares of DKK 0.141. Of the total capital increase of DKK 1,666,060, nominal 669,557 has been subscribed for by way of cash payment of the subscription price, while nominal DKK 996,504 has been subscribed for by way of conversion of debt.
In January 2018 the share capital was increased by DKK 250,000 nominal value or 5,000,000 shares of DKK 0,05 each in connection with the exercise of warrants.
Presently there are 55.800.000 outstanding warrants.
Out of total bond loans of DKK 6,5 million at 30 June 2018 DKK 2,5 million is related to a convertible bond loan facility, which Rovsing entered in March 2018.
The total facility amounts to tDKK 7,5 million and can be drawn in tranches of DKK 0,625 million per month and is running until 31 October 2019. During the period of 6 October 2018 and until 5 December 2019 the creditor may convert the bond loan to shares.
Rovsing has an option to repay the loan at a rate of 108 or to issue new shares. The conversion price is 90% of the volume weighted average price of the shares during five trading days prior to the conversion date.
| 2017/18 | 2016/2017 | |
|---|---|---|
| Staff costs | 2,268 | 4,019 |
| Loans, related parties | 0 | 2,623 |
| Other accrued expenses | 736 | 1,359 |
| 3,004 | 8,002 |
| 21 | PROVISIONS | 2017/18 | 2016/17 |
|---|---|---|---|
| Provisions at 1 July 2017 | 250 | 298 | |
| Provisions made during the year | 92 | -48 | |
| Provisions at 30 June 2018 | 342 | 250 | |
| Which break down as follows: | |||
| Non-current liabilities | 0 | 0 | |
| Current liabilities | 342 | 250 | |
| 342 | 250 |
The French authorities demand that the Company's share of the social costs be increased by EUR 70,000. The authorities find that the Company does not meet the requirements for standard exemption for certain social benefits. Management believes that the authorities have misunderstood the Company's obligations under the contract and the Company's activities. In 2013/14, the demand was considered null and void, but in 2014/15 the Company made a provision of DKK 250,000 as it intends to commence negotiations with the authorities, partly to avoid an expensive lawsuit, partly to avoid the case having any adverse consequences for existing customer relationships. In a court case in 2016, the court rejected the claim submitted by the French authorities. The Company awaits a final confirmation from the authorities that the claim has been waived – the Company expects a final ruling in November 2018. The provision of tDKK 21 in 2017/18 concerns a fine from Nasdaq-OMX for a late announcement to the market of a directed share issue in December 2017.
The Company is exposed to a number of financial risks, the most important of which are foreign currency and interest rate risk, liquidity risk and credit risk.
The Company does not actively speculate in financial risk, and accordingly, the financial strategy aims exclusively to manage and mitigate financial risks that arise as a consequence of the Company's operations, investments and financing.
Most of the Company's contracts are invoiced in EUR or USD. As the Danish krone is pegged to EUR, the Company's EUR risk is considered minimal. Risk attaching to USD is assessed in an ongoing process, as a result of which in 2017/18 the Company did not use financial instruments to hedge its foreign currency risk. The Company monitors developments in EUR/USD/DKK and regularly assesses whether to hedge its exposure to EUR and USD.
Foreign currency exposure:
| Nominal position | ||
|---|---|---|
| Cash and | Financial | |
| receivables | liabilities | |
| EUR/DKK | 3.731 | 283 |
| EUR/USD | 706 | 0 |
| 4.437 | 283 |
The Company had net payables to credit institutions of DKK 7.1 million at 30 June 2018. The debt carries a floating interest rate based on the money market rate. Interest rates paid in 2017/18 ranged from 4,2% -to 4,5 %. The Company had net payables to bond holders of DKK 4.0 million at 30 June 2018 with a fixed interest rate of 8%.
Based on recognised financial assets and liabilities at 30 June 2018, without considering repayments, loans raised and the like in 2017/18, a 1% increase in interest rates would raise the Company's expenses by DKK 0.1 million. A 1% decline in interest rates would result in a correspondingly lower interest expense.
The Company has not used financial instruments to hedge expected developments in interest rates.
Significant, unforeseen liquidity fluctuations are primarily associated with the commercial risks referred to in the section "Risk factors" and breaching of milestones in contracts. The Company aims to have sufficient cash resources to allow it to operate adequately in case of unforeseen fluctuations in liquidity. The Company regularly assesses its cash resources relative to budgets and forecasts for cash flows in future periods. The Company's liquidity reserve, consisting of cash and unutilised credit facilities, is modest relative to the expected cash flows in 2018/19. In 2018/19, the Company expects to continue to use export guarantees to fund certain projects. It should be noted that export guarantees are granted on a project by project basis and there can be no assurance that future projects may obtain export guarantee funding.
As a result of the Company's operations and funding activities, the Company is exposed to credit risk. The Company's credit risks are related to trade receivables and cash. No credit risk is considered to exist in relation to cash as the counterparty is Jyske Bank. Payables to the counterparty exceed cash deposits with the counterparty.
Most of the Company's revenue derives from ESA space industry projects. ESA is the joint-European development organisation for various space programmes. ESA's 22-member states (including Denmark) together funds the activities of ESA. The credit risk associated with ESA is considered minimal. The remaining part of the Company's revenue derives from large, wellconsolidated international companies, for which the credit risk is considered minimal.
| Due | |||||
|---|---|---|---|---|---|
| 2017/18 | Due within | between 1 | Due after 5 | Carrying | |
| 1 year | and 5 years | years | Total | amount | |
| DKK'000 | |||||
| Cash | 143 | 1,43 | 143 | ||
| Trade receivables | 4,394 | 4,394 | 4,393 | ||
| Other receivables (current) | 505 | 505 | 505 | ||
| Other receivables (non current) |
484 | 484 | 484 | ||
| Total loans and receivables | 5,041 | 484 | 5,525 | 5,525 | |
| Credit institutions, floating rate |
-7,107 | -7,107 | -7,107 | ||
| Bond loan | -4,000 | -4,000 | -4,000 | ||
| Convertible loan | -2,500 | -2,500 | -2,500 | ||
| Trade payables | -639 | -639 | -639 | ||
| Other payables | -3,004 | -3,004 | -3,004 | ||
| Financial liabilities measured at amortised cost |
-10,751 | -6,500 | -17,251 | -17,251 |
| Due | |||||
|---|---|---|---|---|---|
| NOTES | Due within | between 1 | Due after 5 | Carrying | |
| 2016/17 | 1 year | and 5 years | years | Total | amount |
| DKK'000 | |||||
| Cash | 1,192 | 1,192 | 1,192 | ||
| Trade receivables | 2,647 | 2,647 | 2,647 | ||
| Other receivables (current) | 2,007 | 2,007 | 2,007 | ||
| Other receivables (non-current) | 206 | 206 | 206 | ||
| Total loans and receivables | 5,846 | 206 | 6,052 | 6,052 | |
| Credit institutions, floating rate | -11,855 | -11,855 | -11,855 | ||
| Trade payables | -2,719 | -2,719 | -2,719 | ||
| Other payables | -8,002 | -8,002 | -8,002 | ||
| Financial liabilities measured at amortised cost |
-22,576 | -22,576 | -22,576 |
The Company has made agreements on public research and development grants. Grants are disbursed either on the basis of costs actually incurred or when the Company delivers on agreed project milestones, which are approved by the granting authority. In two of the agreements, the Company has a repayment obligation if its actual project costs prove to be lower than estimated in the agreements. However, in such cases it is up to the granting authority to decide whether it wishes partial repayment of grants disbursed.
The Company has a co-funding obligation in the agreements to the effect that the Company must pay about 50% of the estimated costs. Costs for completing project deliveries, over and beyond the estimated costs in the agreements, must be borne by the Company.
A floating charge in the amount of DKK 9.25 million has been issued as collateral for credit facilities with a credit institution. The floating charge comprises a charge on goodwill and rights pursuant to the Danish Patents Act, the Danish Trademarks Act, the Danish Design Act, the Danish Utility Models Act, the Danish Registered Designs Act, the Danish Copyright Act and the Danish Act on Protection of the Topographies of Semiconductor Products. Furthermore, the floating charge comprises tools, inventories and unsecured claims arising from the sale of goods and services. The total carrying amount of the floating charge was DKK 25.2 million at 30 June 2018.
The Company leases property and tools and equipment under operating leases. The lease period for tools is typically between 3 and 5 years with a renewal option on expiry. No conditional lease payments are payable under the leases.
In 2017/18, DKK 1.3 million (2016/17: DKK 1.4 million) was recognised in the income statement regarding operating leases.
| Rent obligations | 2017/18 | 2016/17 | |
|---|---|---|---|
| DKK'000 | |||
| Due within 1 year | 915 | 1,115 | |
| Due between 1 and 5 years | 1,906 | 2,970 | |
| Due after 5 years | 0 | 0 | |
| 2,821 | 4,085 | ||
| Other commitments | 2017/18 | 2016/17 | |
| DKK'000 | |||
| Due within 1 year | 170 | 210 | |
| Due between 1 and 5 years | 551 | 557 | |
| Due after 5 years | 0 | 0 | |
| 721 | 767 | ||
| 26 | NON-CASH TRANSACTIONS | 2017/18 | 2016/17 |
| DKK'000 | |||
| Provisions | 92 | 0 | |
| Financial items | 12 | 0 | |
| Share-based payment | 95 | 379 | |
| 199 | 379 | ||
| 27 | WORKING CAPITAL CHANGES | 2017/18 | 2016/17 |
| Receivables | 733 | -993 | |
| Current liabilities | -7,395 | -5,242 | |
| Development grants offset against cost | 0 | 0 | |
| -6,662 | -6,235 | ||
The Company has no related parties with a controlling interest.
The Company has registered the following shareholders as holding 5% or more of the share capital:
The Company's related parties also comprise the members of the Board of Directors and Executive Management as well as these persons' family members. Further, related parties comprise companies in which the above-mentioned persons have significant interests.
Elected to the Board of Directors in October 2017. Took over the chairmanship in January 2018.
Position: Founder and owner of SalesPartners A/S, SalesPartners TM and of MH Investment ApS.
Educational background from Copenhagen Business School as economist.
Shareholding at 30 June 2017: 0 shares.
Shareholding at 30 June 2018: 11.566.900 shares.
Number of warrants at 30 June 2018: 22.701.734.
Elected to the Board of Directors in 2015. Took over the chairmanship in April 2017 and from January 2018 continued as ordinary member of the Board.
Position: Managing director of Hacon ApS.
Jørgen Hauglund has many years' business experience from a large number of international companies and industries and has in-depth knowledge of strategic development and accounting and financing issues.
Shareholding at 30 June 2017: 0 shares.
Shareholding at 30 June 2018: 1.929.076 shares.
Number of warrants at 30 June 2018: 6.599.291.
Elected to the Board of Directors in October 2017.
Educational background: B. Sc. E.E and MBA.
Flemming has had a long-time career in among others Bang & Olufsen A/S, TDC A/S, CEO of Dansk Kabel TV A/S, Triax A/S and RTX A/S.
Shareholding at 30 June 2017: 0 shares.
Shareholding at 30 June 2018: 2.836.879 shares.
Number of warrants at 30 June 2018: 8.528.369.
Elected to the Board of Directors in October 2017.
Position: Airbus Vice President Public Procurement Policy, Airbus Defense and Space
Ulrich has had more than 25 years of experience and expertise in Aerospace, Defense and Space Industry, in Senior Management positions as for Strategy, international Sales and Business Development, International Compliance Officer, transnational Merger Integration or as Chief Financial and Information Officer (as in Spain for development and industrial set up of Airbus Helicopters). Various Financial Management positions at operations, engineering program and corporate level. M&A, Transaction Management and Industrial Strategy projects.
Shareholding at 30 June 2017: 0 shares.
Shareholding at 30 June 2018: 2.482.270 shares.
Number of warrants at 30 June 2018: 7.774.823.
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| Explanation The total number of outstanding shares at any given time, exclusive of the Company's treasury shares. |
|---|
| Cash flows from operating activities divided by average number of shares. |
| Earnings before interest, tax depreciation and amortisation as a percentage of revenue. |
| Earnings before interest and tax as a percentage of revenue. |
| Equity, end of year, as a percentage of total assets. |
| Profit/loss for the year after tax divided by average equity. |
| Average number of outstanding shares at any given time. |
| Equity at year-end divided by number of shares at year-end. |
| Total dividends distributed divided by profit/loss for the year. |
| The Company's share of profit/loss for the year divided by average no. of shares. |
| Traditional way of expressing the Company's financial strength. |
| Dividend payment in Danish kroner per share. |
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| Term | Explanation |
|---|---|
| Application | Specific use of a product |
| Airbus Defense & Space | French, German, British and Spanish company operating in the defense, space and telecommunications industry |
| Check-out system | System for testing and controlling a satellite or instrument |
| DSTE | Digital Simulation & Test Equipment (the product portfolio acquired by SSBV) |
| ESA | The European Space Agency |
| ESRO (European Space Research Organisation) |
Organisation preceding ESA |
| ESTEC | European Space Research and Technology Centre |
| Gaia | Satellite project under ESA |
| Galileo | European satellite navigation system similar to the GPS system in the USA |
| Industrial collaboration agreement | Agreement signed by non-Danish suppliers of defense material to Denmark with the Danish Enterprise and Construction Agency to ensure that the supplier undertakes in return to acquire defense material manufactured by Danish companies. |
| ISVV (Independent Software Verification & Validation) |
Independent verification and validation of software |
| Kick-Off | Kick-Off meeting to start up a project |
| Command control system | Guidance system |
| Critical software | Software, the failure or breakdown of which may cause loss of life, loss of spacecraft or loss of performance of the planned task, or software for which error rectification may prove very costly. |
| Lockheed Martin | US company operating in the defense and space industry |
| Counter-purchase obligation | Obligation on a non-Danish supplier of defense material to the Danish Armed Forces to buy defense-related equipment from Danish companies. |
| Outsourcing | The outsourcing of part of or a whole assignment with a subcontractor |
| Prime Contractor | The company with the main responsibility for carrying out a major ESA project |
| Project manager | Person in charge of carrying out a project |
| Second Generation Location, | Electronic unit providing localisation and navigation |
| Determination, Guidance and Navigation System |
information |
| SSBV | Satellite Holdings BV |
| Thales Alenia Space | European space and defense industry company |
| EGSE | Electrical Ground Support Equipment |
| RF Suitcases | Radio Frequently test equipment for testing satellite communication links |
| Power SCOE | Special Checkout Equipment for testing satellite power systems |
| SAS | Solar Array Simulator |
| SLP | Second Level Protection |
| MetOp-SG | Meteorological Operational Satellite - Second Generation |
Rovsing A/S
Dyregårdsvej 2 2740 Skovlunde, Denmark Company reg. (CVR) no. 16 13 90 84 Tel: +45 +45 44 200 800 Fax: (+45) 45 44 200 801 Website: www.rovsing.dk
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