Annual Report • Apr 29, 2019
Annual Report
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| Platform first | 03 |
|---|---|
| Cloud-based solutions offer major commercial opportunities | 06 |
| Artificial Intelligence (AI) will affect every business | 08 |
| Sustainability is business | 10 |
| 2018 CEO Comment: Going Digital | 12 |
|---|---|
| Highlights: Awards & Recognitions | 16 |
| Highlights: Facts 2018 | 17 |
| Highlights: 2018 in Brief | 18 |
| Highlights: Key Figures | 19 |
| Board of Directors' Report | 21 |
| Corporate Governance | 28 |
| Financial Statements Itera Group | 34 |
| Financial Statements Itera ASA | 64 |
| Statement by the Board of Directors and the CEO | 77 |
| Auditor's Report | 78 |
| Shares and Shareholders | 82 |
| Development 2014–2018 | 83 |
The platform model underlies the success of many of today's biggest, fastest-growing and most powerfully disruptive companies, from Google, Amazon and Microsoft to Airbnb, Uber and eBay. Platforms are beginning to transform a range of economic and social arenas, from healthcare and education to energy and government.
The opportunities offered by the platform model are now opening up to every company in every industry. Finn.no (a marketplace), Vipps (a mobile payment solution) and Veracity (DNV GL's industry platform) are three examples from Norway.
There are two parts to the platform model, namely platform business models and intelligent technology platforms, with platform business models enabled by intelligent technology platforms.
A platform business model brings together consumers and producers and allows them to exchange information, goods or services on the one hand and money on the other. Such a platform creates communities and markets with network effects that allow users to interact and transact.
Investors value platforms more highly than traditional businesses. Seven of the ten largest companies by market capitalization are platform organizations. About 60% of today's billion-dollar "unicorn" startups are platform businesses. The digital economy will represent 25% of the world's entire economy by 2020.
Business leaders across all industries are recognizing the opportunities presented by platforms in terms of generating new kinds of growth, and they are rethinking the traditional roles their companies play from a platform perspective.
Cloud-based technology platforms are key enablers for platform businesses. In fact, many companies are accelerating their adoption of
This democratization of technology is ensuring that any business – whether a startup or a small or large business – can take advantage of sophisticated technology due to the products and services being more affordable and user-friendly.
intelligent cloud technologies as a crucial first step towards breaking into the platform world.
Today, cloud-based technology platforms such as Microsoft Azure, Google Cloud and Amazon Web Services (AWS) include features and functionality that used only to be available to large companies. This democratization of technology is ensuring that any business – whether a startup or a small or large business – can take advantage of sophisticated technology due to the products and services being more affordable and user-friendly.
These products and services include massive data analytics, the Internet of Things (IoT), machine learning, artificial intelligence (AI) and natural language processing. New voice user interfaces such as Google's Assistant, Apple's Siri and Amazon's Alexa are all based on cloud technology.
According to predictions from Cisco, cloud data centres will virtually replace traditional data centres within a few years. Cloud technology is disrupting the IT-industry itself, and it offers far higher levels of virtualization, standardization, automation and security than traditional data centres.
In addition, the processing power inside IoT devices is accelerating as a result of recent innovations in edge computing. Rather than data having to go to the cloud to be processed and then sent back out to a device, data can also be collected and analysed on and between devices. For instance, an autonomous car and a set of traffic lights can communicate with each other directly, rather than via the cloud.
Technology platforms comply with every international security standard and are enabling edge computing and the massive growth of IoT devices and sensors. To become a digital business, new technology platforms are the only option as no traditional data centres are designed for this new digital world.
The IoT is transforming one industry after another, driving massive growth in the adoption of connected and intelligent devices as a strong foundation for new use cases. We are now reaching a tipping point where digital twin solutions can be created securely and at scale to model both the digital and physical worlds.
Digital twins provide a digital model of the relationships and interactions that exist between people, places and devices and can be applied to any physical environment. Using platforms with sophisticated digital models and AI capabilities, we can improve our work and personal lives across industries.
Once a digital model is in place, the technology platform connects the IoT devices and sensors that keep everything up-to-date with the physical world. The concept of digital twins can be used to make all types of environment smarter, e.g. offices, electric cars, electric grids, schools, hospitals, banks, stadiums, warehouses, factories, parking lots, streets, etc. – and even entire cities.
We are using platforms to create breakthrough applications for a variety of industries. One example is that we have combined IoT, digital twins and AI to create a smart building platform that helps building owners and operators to manage their buildings with greater efficiency
New platforms are driving the most profound change since the industrial revolution. Itera is playing its role in delivering this change.
and to organise space in the way that best suits people's needs. The new solutions include predicting maintenance needs, analysing energy requirements, optimizing how the available space is used and creating more efficient processes to improve employee satisfaction and productivity.
A second example is that we are leveraging a new smart energy platform that is digitizing the whole utility value chain, from energy generation through to transmission, distribution and consumption. Massive volumes of data collected from many sensors throughout the value chain are informing how new products are designed, are facilitating better decisions and are enabling better customer service for a lower price. In addition, technology advances in rooftop solar, electric cars and smart metering technology have allowed consumers to become producers of electricity too, supplying energy back to the electric grid through the platform.
A third example is how digital health platforms are democratizing the healthcare industry. New digital health solutions are enabling people to access their fitness and health data from wearable technology like smart watches, to interact with their data and to access fitness and health services. We have partnered with the global startup Validic to access the health and fitness data generated by devices with the highest level of security. Using AI, experts are training algorithms to analyse large quantities of data and to extract insights to improve predictive capabilities, to enable greater personalization and to democratize access to enhanced care.
Platforms are no longer just being used by tech and born-digital organizations. Companies across all industries are recognizing the opportunities in terms of the new kinds of growth and rewards they offer. Organizations with adaptability at their core that succeed in making strategic use of digital technologies to build successful platform business models will become winners. Those who do not will miss their chance and lose out.
At Itera, Platform first is at the core of our business, and this applies to both business platforms and technology platforms. We collaborate with customers in new ways to define new business platforms and to develop, deliver and scale up disruptive, leading-edge solutions on intelligent technology platforms.
Our projects are carried out by a DevOps team that brings together expertise in business analysis, design, development, testing and operations. We combine our specialist capabilities with the capabilities of providers of business or technology platforms. Through strong partnership with the tech giants Microsoft, Google and Amazon, we are tapping into their global research labs, innovation centres and delivery centres. Our solutions are based on advanced analytics, IoT, AI and machine learning capabilities that are available in the platforms.
New platforms are driving the most profound change since the industrial revolution. Itera is playing its role in delivering this change.
The IT industry is currently going through one of the biggest changes ever seen in its history.
Text: Niko Nyström, Transformation
Virtually all new IT solutions used to run on dedicated infrastructure (servers, storage, security solutions etc.) in small, local server rooms or data centres. Over the course of just a few years, about 50% of global computing power has been moved to enormous data centres, a phenomenon that has primarily been driven by a small number of major providers (Amazon, Google and Microsoft).
These providers offer cloud-based platforms that are radically changing the way in which our customers work. Our impression is that Norwegian companies largely have a good understanding of the advantages of cloud-based solutions and are making increasing use of them. Companies in industries such as tech and media have
already made a lot of progress in this regard. Other industries, such as banking and insurance, undertook a lot of small test projects in 2018, and are now in the process of significantly expanding their use of such solutions.
The major providers of cloud services are currently investing enormous sums in improving their cloud platforms. Existing services are being developed further and new, cloud-based services are being launched at a rapid pace. Organizations in Norway and elsewhere can use these platforms to continuously offer their customers new services without having to invest significant resources in developing them on their own. The major providers also ensure such services are stable and secure, as the standards of operational security and security routines they offer are superior to those that all but a very few of their customers could achieve on their own.
In general, we can see that almost all of our customers are planning to start using or to increase their use of cloud-services in 2019.
We are seeing a marked increase in the use of cloud-based solutions in many traditional areas in IT architecture. These areas include software solutions in areas such as CRM, HR, finance, co-operation and communication. Many companies are also working on further developing their existing solutions and the IT infrastructure that they use. Operations for a significant number of such solutions, but obviously not all, can be moved to the cloud.
When we at Itera develop new services for our customers, the testing and development environments we use are normally set up as cloud-based services. This also applies to the production environments in which the services are further developed over time. The reason for this is that it makes it easier for us to develop new services quickly and enables us to scale them up or down depending on usage and costs in line with our customers' needs.
At Itera, we are now engaged in the biggest employee competence development program we have undertaken, and we are working to
develop the cloud services expertise of all our employees, whether they are a manager, a digital designer, a service designer, a developer or an architect, or are focused on operations or management. We think that this is absolutely critical if we are to strengthen our position as a specialist at creating digital business and our role as our customers' preferred implementation partner.
In 2018 we started building a new organizational unit, Managed Cloud Services, which has specialist expertise in cloud-based solutions. This unit is growing rapidly and undertakes projects involving creating new, cloud-based solutions, moving existing solutions to the cloud and operating them over time.
Over the last year the Itera team has delivered high-quality, future-oriented cloud-based solutions to customers such as BITS, E-Nettet, Gjensidige, Home and Nets. The use of cloudbased solutions will increase significantly over the next few years, creating exciting growth opportunities for both Itera and its customers. In general, we can see that almost all of our customers are planning to start using or to increase their use of cloud-services in 2019. We want to be their preferred partner on this journey.
Several industries have already been facing a seismic shift because of AI. In the near future, far more industries will face the same, sooner than they expect. AI is a very broad term that represents huge possibilities – both for your company, your competitors and every possible new player in the market.
In general, smart digitalization will be the end of many businesses but also the beginning of many others.
Despite the fact that Europe is far behind the United States and especially China, in Norway we are adapting to the new reality as well. About a year ago, Amazon Go opened its first fully automated store in Seattle, and it now has eight
stores in the United States. These stores use cameras, computer vision algorithms, sensor fusion, machine learning, image analysis and radio frequency identification to make physical shopping easier than ever before. Upon entering the shop, you simply scan your phone, grab everything you need and then walk out. No cashier points are needed. You get the receipt on your phone as soon as you leave the shop.
Before the start of summer this year, the Coop Extra in Bogstadveien, Oslo, will implement a similar type of system. In short, once the shop's employees have left at 11pm, technology will take over until the following morning. Customers will be able to log themselves into the store using their mobile phone. This exemplifies how new technology is being used to make shopping easier. The extent to which the Coop will use AI remains a company secret. What is
An understanding of the opportunities and threats any given technology brings is important but not sufficient; what is more crucial is knowing how it will affect people, brands and markets.
clear is that the system will not be as complex as Amazon Go's. However, it shows us that what happens abroad soon affects us in Norway.
The same applies in the area of viewing recommendations. Netflix uses AI, or more specifically machine learning, to make recommendations for what to watch. RiksTV in Norway now does the same.
Norwegian banks are also starting to be affected by what is happening beyond our borders. A recent trend report published by Cicero Consulting, Mito and Itera showed that AI will become increasingly important for the Norwegian banking industry in the years to come. Norway's largest banks have already started projects in the fraud prevention area and developed their own chatbots. Initiatives such as cognitive surveillance, intelligent savings, robotic accounting, voice assistants and automatic text analysis have also been undertaken. Automatic text analysis has been used by JP Morgan Chase to reduce the amount of time spent on a particular task from 360,000 hours to seconds. Churn analysis can be used to predict which customers are about to leave you. This information enables you to implement proactive measures.
Itera has previously carried out churn analysis for other industries. We believe we will see this used by the banking industry as well as by other industries within a short space of time.
The use of AI is developing at a far greater pace than before. Today AI assists us in every area of our lives, whether we are trying to read our emails, Google something, use social media, get driving directions, or start a new business. We are also seeing smart buildings and smart cities emerge around us.
The reason why the use of AI is increasing much more quickly now is that we now have access to far greater computing power. Machines are everywhere, and the amount of data we can feed into computers is endless. In addition, Microsoft, Google and Amazon Web Services now all include AI as an integral part of their cloud platforms. This means that it is much easier than before to get projects started.
Technology-driven innovation and digitisation are changing industries overnight. Itera has consultants that can take care of all aspects of your AI initiatives, from business consulting, content, service and interaction design through to development, testing and operations through managed cloud services.
Which projects you test out first should be based on commercial considerations, not technology. This increases the likelihood of you getting the most out of your investment. We use the digital and technological changes taking place in the market to create good business models and thus ensure our customers continue to be competitive in the market of tomorrow. Using our insight, we conduct analysis work to identify business opportunities and their value. New technology is central to this. Cloud platforms are revolutionising the possibilities that are available in terms of creating smart services that use large amounts of data, artificial intelligence, machine learning, AR, VR, digital twins and other new technologies. However, an understanding of the opportunities and threats any given technology brings is important but not sufficient; what is more crucial is knowing how it will affect people, brands and markets. We combine insights such as these to create digital strategies and change programs that provide short-term gains and long-term results. Welcome to the future of creating digital business. Welcome to Itera.
2018 will forever be the year when a whale stranded on an Asian beach with a stomach full of plastic opened people's eyes. This was a graphic illustration of the challenges we are facing as a species and was impossible to overlook.
The trickle of consumers demanding sustainable products, of employees choosing sustainable employers and of investors seeking sustainable investments is turning into a flood. Sustainability is a core component of the future of business and businesses that are able to integrate sustainability into their operations will be attractive. Sustainability is no longer about charitable giving and sponsorship; it is fundamental to business itself. To deliver long-term business value, companies need to ensure that they have a positive social, environmental and financial bottom line.
Used in the right way, design and technology have the potential to play a key role in relation to many of the environmental challenges we are facing. This last year, we have seen new mobility
solutions that reduce fossil-fuel vehicles, smart building solutions that reduce energy consumption, a massive shift to cloud data centres and consumer solutions that raise awareness about food, consumption and health.
What, then, are the benefits of initiatives such as these? Research shows that 1,000 cloud servers produce about 50% less carbon emissions than traditional servers, which is equivalent to the carbon emissions produced by 261 homes, taking 444 cars off the roads or planting 5,810 trees to offset carbon emissions (Medium Corporation, 2018). A 2016 study by the UC Berkeley's Transportation Sustainability Research Center found that for every car-sharing car that is introduced, up to 11 privately owned cars off are taken off the road. We need initiatives such as these and many, many more if we are to create a sustainable future.
At Itera, we are highly conscious of the opportunity that we have to contribute to sustainable
When undertaking innovation projects, we seek to find solutions that are of value to consumers, businesses and the environment.
solutions thanks to our expertise in business, design and technology. With our committed employees working in collaboration with some of the largest organizations in the Nordics, we can and will make a difference.
Our specialists in sustainability work with clients to develop strategies that are good for business and the environment. When undertaking innovation projects, we seek to find solutions that are of value to consumers, businesses and the environment. And our cloud services are ready to welcome businesses that want to reduce the carbon emissions of their IT operations.
We are ready to live by our "Make a difference" vision. Are you?
"The Sustainable Development Goals are the blueprint to achieve a better and more sustainable future for all. They address the global challenges we face, including those related to poverty, inequality, climate, environmental degradation, prosperity, and peace and justice."
www.un.org/sustainabledevelopment/sustainable-development-goals/
Itera delivered solid financial results in 2018, reflecting strong demand for our services as the specialist in creating digital business, as well as the continued success of our strong customer-centric strategy that puts innovation at the heart of how we serve our customers.
In 2018, we delivered organic revenue growth of 12% and an operating profit (EBIT) margin of 8.1%. Itera shares produced a total return, including dividends, of 21% in 2018, which compares with a return of -2% for the Oslo Stock Exchange Benchmark index (OSEBX). Our strong performance in 2018 - on top of our outstanding total return of 75% over the previous two years and of 167% over the previous three years clearly demonstrates that we are executing our strategy in a durable and sustainable way.
We remain the partner of choice for a range of selected leading companies and public-sector organizations in the Nordics. We deliver services to international businesses in more than 15
countries. We also continue to build strong, long-term relationships with our customers, and most of our 30 largest customers have been with us for ten or more years.
A key component of our growth strategy is the investments we have made in new, high growth areas to drive our differentiation and competitiveness. In 2018, we invested in a new managed cloud services unit that has clearly set us apart from traditional hosting providers. The new unit was created by bringing together talented employees from all disciplines to create a DevOps (Development and Operations) environment for our customer with our full range of services.
The use of cloud computing services and applications continues to increase at a rapid rate, leading to the rise of vast 'hyperscale' cloud data centers. According to Cisco's Global Cloud Index, cloud data centres account for over 50% of all data centre processing power
Today, we are focused on providing a full range of services and capabilities to help create digital business while giving customers access to a large pool of digital talents.
in 2018, and this will increase to 70% in 2021, with traditional data centres virtually replaced within three years.
We have therefore created a sunset strategy for our own data centres that will run in parallel with a program to lift and shift our data centre customers to the cloud. We will further strengthen our position in the fast-growth cloud market in 2019 while downscaling investments in own data centres.
The revenue generated by our core digital business excluding the sunset business grew by about 18% in 2018 – approximately 74% of our total revenue – and delivered a profit (EBIT) margin of 11.7%. The revenue generated by the sunset business decreased by -3% in 2018, with an EBIT margin of -2.1%.
Today, we are focused on providing a full range of services and capabilities to help create digital business while giving customers access to a large pool of digital talents. Our customers see us as their realization partner for creating digital business.
At Itera, we focus on taking a Platform first
approach across all disciplines. The platform model is the basis of the success for many of today's biggest, fast-growing and most powerfully disruptive companies, from Google and Amazon to Airbnb, Uber and eBay. These new business platforms are driving the most profound change since the industrial revolution.
In this context, a platform is a business platform or a technology platform. A business platform is a business model that brings together consumers and producers and allow them to exchange information, the goods or service, and currency. The platform creates communities and markets with network effects that allow users to interact and transact. Finn.no (market place), Vipps (mobile payment) and Veracity (DNV GLs industry platform) are three local examples.
Business platforms are enabled by new cloudbased technology platforms, including Microsoft Azure, Google Cloud and Amazon Web Services (AWS). The technology platforms incorporate advanced analytics, Internet of things (IoT), artificial intelligence, machine learning and many other capabilities. Today, new solutions based on cloud-enabled continuous delivery and cloud-native application architecture enable much faster innovation and much greater business agility.
We collaborate with customers in new ways to develop, deliver and scale up disruptive, leading-edge solutions. We combine our specialist capabilities with the capabilities of providers of major business and technology platforms – from research labs to innovation centres and delivery centres. We also engage with start-ups in areas like artificial intelligence, block chain and digital health.
We are highly relevant to senior executives, deliver great experiences for our customers' customers, create new concepts and revenue streams, and operate services on behalf of customers in DevOps environments.
Leveraging intelligent insights from data across customers, products, and employees is critical to be able to stay competitive and keep up with digital transformation in any industry. In the data-driven world we live in today, our Fast and hybrid delivery model enables our customers to drive innovation at speed and scale.
Building on a strong Nordic heritage, we com-
bine local presence with nearshore capabilities into a hybrid delivery model with interdisciplinary teams, flexible distribution of work across borders and an attractive blended price tag.
Our hybrid delivery capabilities are very scalable and provide access to a much larger workforce than is available in the Nordic region. We are tapping into the world's fourth largest pool of digitally talented people, after the USA, India and Russia, a pool which is only a few hours away from the Nordic region by plane.
We have a world-class business framework for managing customers, data, processes and employees across borders. We really help customers adapt their IT sourcing model, so they can respond quickly and harness new opportunities with high quality and security. We can provide a full range of services and capabilities to help create digital business including information security, GDPR and EU data protection laws.
We are particularly proud that Itera was awarded the title of "Customer Experience Provider of the year 2018" by the Global Sourcing Association (GSA). This global award is evidence that our fast and hybrid delivery model is one of the best sourcing models in the world, which is thanks to our agile Nordic business culture and interdisciplinary, cross-border teams.
Our vision is to make a difference. We solve challenges differently because we combine our multidisciplinary strengths to gain deeper insight and explore new opportunities.
We focus on the Nordics, which are among the world's most advanced digital economies. Our ambition is always to turn a great experience for our customer's customer into a competitive differentiator. This is possible through our sincere commitment to multidisciplinary teams, a design thinking mindset and our promise to ensure technology is human at every interaction, through all touchpoints, every single day.
We also serve customers that are based in the Nordics in 15 different countries elsewhere in Europe and the rest of the world. Our fast and hybrid delivery model and cloud solutions are improving the scalability of our business model, which involves turning our local presence into
partnerships with our customers. In 2018 we strengthened our position in Iceland and in Western Norway and expect the good development to continue.
We also continue to build strong, long-term relationships with our customers. Our 30 largest customers accounted for 79% of our total revenue in 2018, an increase of 1 percentage point from 2017. The amount of revenue we earn from our largest customers is increasing steadily year by year, with several of our customers now spending more than NOK 50 million per year.
As a talent and innovation-led organization, it is ultimately our employees who make the difference in terms of driving innovation and delivering high-quality services to customers. One of Itera's top priorities is to attract the best people and to invest in further developing our employees and their specialist skills.
As soon as new employees arrive at Itera, they have access to the tools they need to develop and evolve through the Itera Academy, skills training to continuously update their expertise, exciting projects to work on and interesting career paths to follow. We are committed to creating conditions that help everyone to develop new skills, regardless of their position or mission.
We are continuing to leverage our position as the leading partner to key providers in the technology platform ecosystem. In 2018, more than 200 staff from Itera attended training and certification programs in technology platforms such as Microsoft Azure, Google Cloud and Amazon Web Services (AWS). We are leveraging continuous learning paths that are customized for the individual, including in IoT, analytics, machine learning and artificial intelligence.
Itera also attends leading conferences and events around the world to ensure it captures the next drivers of growth. In 2018, we worked to make Itera even more relevant to its customers by focusing on new smart industries such as digital health, smart energy and smart buildings. We are especially proud that Itera was recognized for the third year in a row as one of the 25 most innovative companies across all industries in Norway by Innovasjonsmagasinet.
Our employees work across disciplines on
We are particularly proud that Itera was awarded the title of "Customer Experience Provider of the year 2018" by the Global Sourcing Association (GSA).
Together with our partners and our first-mover customers in digital health, smart energy and smart buildings, we are innovating to improve people's lives in accordance with the United Nation's Sustainable Development Goals.
game-changing initiatives to innovate new solutions and services. Regular social events called MAD ("Make A Difference") Nights are held for all employees in all our locations in order to build a strong ONE Itera culture guided by our core values: Innovative, Passionate, Skilled.
Itera is deeply committed to inclusion and diversity. We embrace diversity as a source of innovation, creativity and competitive advantage. We think it is particularly important to promote an interest in computer science and digital expertise among women, as this creates a more diverse pipeline of talent for our industry and beyond.
We also remain focused on reducing the environmental impact of our offices and operations and on fostering sustainable growth for Itera and our customers. Together with our partners and our first-mover customers in digital health, smart energy and smart buildings, we are innovating to improve people's lives in accordance with the United Nation's Sustainable Development Goals.
We head into 2019 with excellent momentum in our business and are very well-positioned in the marketplace. With our specialized capabilities, our talented people, our ONE Itera culture and our management of the business, I am very confident that we will take our platform-first strategy to the next-level of execution and will continue to deliver value for all our stakeholders.
In closing, I would like to warmly thank everyone at Itera for their continued hard work and dedication to our customers and our business. I would also like to thank our customers, strategic partners and shareholders for their support on our journey.
AWARDS & RECOGNITIONS
For the third consecutive year, Itera was recognized as one of the 25 most innovative companies across all industries in Norway. Awarded 2016, 2017 and 2018 by Innovasjonsmagasinet, the leading innovation publication in Norway with more than 25.000 readers and wide-spread national distribution.
The international industry organization Global Sourcing Association (GSA) selected Itera as winner of the category "Customer Experience Provider of the Year" in its annual awards ceremony.
GSA was started more than 30 years ago and is a non-profit industry organization for the global sourcing industry. GSA collects and shares the industry's best practices and creates a network for providers and buyers of crossborder services.
The jury's assessment was based on "the supplier's ability to bring lasting value to its customers through best practice and service innovation." Furthermore, the following criteria was evaluated: strategic vision, strategy for partnerships and talent development, communication practices, customer references, governance, certifications and proven results in innovation.
BEST TEST AUTOMATION PROJECT (EUROPEAN SOFTWARE
TESTING AWARD)
Finalist with the Itera customer Íslandsbanki.
Finalist with the Itera customer Íslandsbanki.
FACTS 2018
IN BRIEF 2018
Itera executed well against its strategy in 2018, resulting in new and larger customers, high employee engagement, a strengthened brand and solid financial results, with a shareholder return of 21 percent.
Itera delivered a total annual return to shareholders (including dividends) of 21% in 2018, which compares with -2% for the Oslo Stock Exchange Benchmark Index (OSEBX).
Operating revenue for 2018 was NOK 531.3 million, equivalent to a growth of 12%.
Itera increased its presence in Bergen to better serve the Western Norway region with hybrid (onshore/nearshore) deliveries and continued to expand in the Icelandic market. By the year-end, more than 60 full-time employees were engaged
in projects based in the country.
The revenue from Itera's 30 largest customers grew by 17% in 2018 and accounted for 79% of the Group's operating revenue, up from 71% in 2017.
Itera achieved an organic revenue growth of 11% in the first quarter of 2018 relative to the same period in 2017. Denmark almost doubled its revenue. The Group entered into agreements that significantly expanded and extended existing relationships with customers including KLP, Gjensidige, Santander, RiksTV, Íslandsbanki and APCOA Parking.
The Group's scalable hybrid model attracted significant interest, including from the Norwegian Minister of Trade and Industry, Torbjørn Røe Isaksen, who visited Itera's office in Kiev. Due to the high growth of hyperscale cloud, Itera established a new Managed Cloud Services unit to lift and shift its data centers to the cloud. Itera was named "Customer Experience Provider of the Year" by the international industry organization Global Sourcing Association (GSA).
Itera was named as one of Norway's top 25 most innovative companies across all industries for the third consecutive year. Operating revenue was up 21% compared with the same period in 2017. An ordinary dividend of NOK 0.25 per share was paid to the shareholders based on the Group's 2017 results.
Q2 Q4
Itera finished 2018 with an EBIT margin of 12.0% in the fourth quarter, fuelled by 9% growth in its core digital business. The Group intensified its focus on the largest, cloud-based technology platforms, namely Microsoft Azure, Amazon Web Services (AWS) and Google Cloud, in order to ensure it is at the forefront of designing and developing innovative solutions based on advanced services within AI, big data and the IoT.
KEY FIGURES
OPERATING REVENUES (MNOK) SHAREHOLDER RETURN
NEARSHORE RATIO
NUMBER OF EMPLOYEES
KEY FIGURES
| Definitions | 2018 | 2017 | |
|---|---|---|---|
| Profit and loss | |||
| Operating revenue | 531 323 | 475 025 | |
| EBITDA | 63 957 | 59 668 | |
| EBITDA Margin | 12.0 % | 12.6 % | |
| EBIT | 42 816 | 39 333 | |
| EBIT Margin | 8.1 % | 8.3 % | |
| Profit before taxes | 41 419 | 38 325 | |
| Result for the year | 31 677 | 29 635 | |
| Cash Flow from Operations | 56 809 | 49 664 |
| Total fixed assets | 50 061 | 46 530 |
|---|---|---|
| Total bank deposits | 55 279 | 59 854 |
| Total current assets | 144 807 | 150 925 |
| Total assets | 194 868 | 197 454 |
| Shareholder's equity | 47 443 | 50 638 |
| Total liabilities | 147 425 | 146 816 |
| Equity ratio 1 |
24 % | 26 % |
| Current ratio 2 |
1.02 | 1.08 |
| Number of shares | 82 186 624 | 82 186 624 | |
|---|---|---|---|
| Average number of outstanding shares | 81 086 951 | 81 690 873 | |
| Equity per share outstanding | 3 | 0.59 | 0.62 |
| EBITDA per share outstanding | 4 | 0.79 | 0.73 |
| Earnings per share outstanding | 5 | 0.39 | 0.36 |
| Dividend per share outstanding | 6 | 0.25 | 0.45 |
| Number of employees at year end | 486 | 491 |
|---|---|---|
| Average number of employees | 488 | 443 |
Share equity divided by total assets
Most liquid assets and short-term receivables divided by current liabilities
Equity divided by number of shares 4. Profit/loss before tax plus depreciation divided by average numner of outstanding shares
Net profit/loss for the year divided by average number of outstanding shares
Dividend divided by average number of outstandig shares
Itera (the Group) is a specialist in creating digital business. It utilises its strong, multidisciplinary skills to design, develop and operate innovative digital solutions for Nordic companies and organisations. Norway, Sweden, Denmark and Iceland constitute the Group's main markets. Itera has a strong customer portfolio across a range of sectors, but its centre of gravity is in banking and insurance, which represent more than 50% of the Group's annual revenue.
The Group also owns two niche companies: Cicero Consulting, which provides advisory services and solutions to the banking and finance sector, and Compendia, which specialises in products and services for the HR, quality and management areas.
The Group is headquartered in Nydalen in Oslo. The Group also has offices in Bryne, Bergen, Stockholm, Copenhagen, Kiev and Bratislava.
Itera experienced strong market demand for its services in 2018 and has continued to build its solid position as a specialist in creating digital business. Emerging technologies, like artificial intelligence (AI), machine learning (ML) and Internet of Things (IoT) are leading to changes in all industries, and there is substantial demand for services and products to be digitalised. Itera is correspondingly experiencing demand both for its strategic advisory services as well as for its concept development, technical development and application management services. Many of the Group's customers have transitioned from having a one-track focus on optimising their existing business to running one or more additional parallel tracks in order to continuously explore new ideas and business models. Itera's delivery methodologies are well suited for handling both perspectives, and its range of services is well adapted to market demand.
itera helps its customers to digitalise their business to achieve higher efficiency, improved customer satisfaction through new and personalised products and services, greater customer loyalty, a stronger brand, a better reputation and stronger barriers against competitors, which in
turn contribute to additional sales and increased profitability.
A central part of Itera's strategy is to maintain and develop its largest, strategic customer relationships. The revenue from Itera's 30 largest customers grew by 17% in 2018 and accounted for 79% of the Group's operating revenue, up from 71% in 2017. New agreements were entered into or existing agreements were extended with strong industry brands including Gjensidige, Santander, If, Storebrand, Nets, BITS, APCOA Parking, Össur, Íslandsbanki and UEFA. These agreements span the whole range of services offered by the Group, from consultancy and strategy via design and development through to IT operations and application management. The design and development projects cover both businesscritical core systems and communications solutions for Itera's customers to use with their own customers, existing as well as potential. The IT hosting and management services to an increasing degree involve setting up and hosting cloud-based platforms and applications rather than more traditional technology.
One area in which Itera is strongly positioned is banking and insurance, which are, like a number of other sectors, being strongly affected by new technology and undergoing extensive upheaval. Itera is finding the market position it has created in collaboration with its customers to be solid, and the Group strengthened its position in 2018 in this area thanks to its deep insight into advanced technology, its good commercial understanding, and its strong focus on creating good user experiences.
In order to be a professional, relevant and valueadding partner to customers, Itera emphasises innovation in both its development of new and relevant services and in its deliveries to customers. Considerable effort is put into continuous competency development and the development of processes relating to deliveries, quality assurance and efficiency, and Itera's work in these areas is delivering results: for the third consecutive year, Itera was recognised as one of Norway's 25 most innovative companies in any industry in 2018 by Norway's leading innovation news magazine, Innovasjonsmagasinet, in collaboration with Innovation Forum Norway.
Itera's core digital business experienced strong growth and improved margins, especially from its nearshore locations and in Denmark. Its traditional data centre operations are experiencing negative growth and profitability. Itera is investing into its cloud service offering to migrate the data centre customers into the cloud. This supports Itera's strategy of using the cloud platforms to digitalise our customers' business.
The Group's consolidated operating revenue for 2018 totalled NOK 531 million as compared to NOK 475 million in 2017. Deliveries out of the Group's nearshore centres in Ukraine and Slovakia accounted for almost 60% of this growth, half of which was to customers on Iceland. Denmark also contributed to a significant part of the growth.
Operating revenue in Norway was NOK 473 million as compared to NOK 433 million in 2017, representing an increase of 9%. Operating revenue in Denmark increased by 50% to NOK 56.6 million from NOK 37.8 million in 2017.
The Group's operating result before depreciation and amortisation (EBITDA) was a profit of NOK 64.0 million as compared to a profit of NOK 59.7 million in 2017. This represents an operating profit margin before depreciation and amortisation of 12.0%, as compared to 12.6% in 2017. Payroll and personnel expenses were NOK 328 million in 2018, which represents an increase of 11% from 2017. The increase was mainly due to growth in average number of employees compared to 2017, as well as to the effect of adopting IFRS 15 and the consequent reduction in capitalised personnel expenses. Other operating expenses amounted to NOK 52.3 million in 2018 as compared to NOK 47.7 million in 2017. Total depreciation, amortisation and write-downs were NOK 21 million, an increase of 4% from 2017.
The Group's operating result was a profit of NOK 42.8 million in 2018 as compared to a profit of NOK 39.3 million in 2017.
Net financial items were NOK -1.4 million as compared to NOK -1.0 million in 2017. The Group's result before tax was a profit of NOK 41.4 million as compared to a profit of NOK 38.3 million in 2017. Tax expense totalled NOK 9.7 million in 2018 as compared to NOK 8.7 million in 2017. Tax paid in 2018 was NOK 9.8 million as compared to NOK 8.7 million in 2017.
The result for the year was a profit of NOK 31.7 million as compared to a profit of NOK 29.6 million in 2017.
The Board of Directors is satisfied with the progress achieved by Itera in 2018 in terms of its financial results. Its core digital business is delivering at a higher growth and with better profitability than many of its peers. The traditional data centre operations have embarked on a transformation to cloud services which will be an important strategic asset in the future.
It is the opinion of the Board of Directors that the annual accounts provide a true and fair view of the Group's activities in 2018 and its financial position at the end of the year.
Expenditure of NOK 7.9 million relating to the development of new solutions was capitalised in 2018 as compared to NOK 13.4 million in 2017. There was significantly less spending on the Cicero Financial System (CFS) after the large extensions and improvements implemented in 2017. The ComPublish solution was extended with a chatbot functionality named "HR Henry". This new functionality has peeked a lot of interest among new as well as prospective subscription customers. The expenditure on research and development was capitalised as it was incurred since it was considered that the requirements for capitalisation were met. The solutions principally relate to contracts entered into that have fixed future revenue associated with them or with demonstrated commercial interest.
Itera generated cash flow from operating activities of NOK 56.8 million in 2018 as compared to NOK 49.7 million in 2017. The Group paid shareholders a dividend totalling NOK 20.5 million in 2018. At 31 December 2018, Itera had a cash balance of NOK 55.3 million as compared to NOK 59.9 million at 31 December 2017. The difference between cash flow from operating activities and the Group's operating profit is primarily due to depreciation
costs that have no effect on cash flow, but also reflects tax payments and financing costs.
In addition to the investment made in research and development, NOK 12.4 million was invested in 2018 in hardware, software and fixtures etc. as compared to NOK 6.0 million in 2017.
Total assets at 31 December 2018 amounted to NOK 194.9 million (NOK 197.5. million). Non-current assets were NOK 50.1 million (NOK 46.5 million). Accounts receivable were at NOK 52.3 million (NOK 54.0 million).
The Group's equity at 31 December 2018 was NOK 47.4 million as compared to NOK 50.6 million at the same point in 2017. This represents an equity ratio of 24.3% as compared to 25.6% at the same point in 2017. Long-term interest-bearing liabilities totalled NOK 4.7 million (NOK 6.8 million). Other current liabilities were NOK 51.1 million (NOK 60.3 million).
Itera held 1,242,165 of its own shares at the end of 2018, while at the end of 2017 it held 213,935 own shares.
The Group is exposed to currency risk, liquidity risk and credit risk. The Group's executive management team and the Board of Directors monitor these risk factors continually and take action as required.
The revenues and expenses associated with Itera's activities in the Nordic region are denominated in Norwegian kroner (NOK), Danish kroner (DKK), and Swedish kronor (SEK). Changes in the exchange rate of the Norwegian krone against the Danish krone and the Swedish krona therefore affect the Group's results. This risk is limited by the fact that the majority of associated expenses are also incurred in these currencies. The Group is also exposed through its nearshoring activities in Ukraine and Slovakia to expenses in American dollars (USD) and euros (EUR). The currency risk associated with this is limited by the fact that the prices Nordic customers are charged for these services are largely adjusted on a monthly basis in accordance with changes in the exchange rates.
The Board of Directors considers the Group's
liquidity situation to be satisfactory and does not regard it as necessary to take further measures to reduce the Group's liquidity risk.
The Group has historically incurred very low losses on receivables. This trend continued in 2018.
The Group's nearshore activities in Ukraine and Slovakia mean it is exposed to risk factors such as country risk, data security risk and corruption. This is typical for new markets in which the business climate, laws and society are less developed or less familiar to us. Breaches of legal requirements or of business ethics standards can significantly harm the Group, hinder its ability to do business and damage its reputation. Changes to legislation, tax systems and other regulations can also lead to significant changes in how the Group implement its services and solutions, and to higher costs that would affect the profitability. Itera closely monitors country risk, and has a zero-tolerance policy on corruption. It does not carry out any domestic activities in countries where the problem of corruption is at its greatest. Best practice data security procedures and checks have been implemented at the Group together with a legal framework that safeguards data security and intellectual property across national borders.
The Group has a strong portfolio of customers in the Nordic region, where many customers are served from more than one of Itera's locations. Itera strengthened its progress in this area in 2018 by making good use of its nearshore delivery units and resources across the entire Group.
The Group's headcount at 31 December 2018 was 486 as compared to 491 at the end of 2017. The average number of full-time equivalent positions at the Group in 2018 was 488 as compared to 443 in 2017.
The proportion of Itera's capacity that is located nearshore (its nearshore ratio) was 45% at the end of 2018 as compared to 43% at the end of 2017. The Group's delivery centres in Kiev and Bratislava provides significant scalability and cost effectiveness in a heated market for digital business.
Absence due to sickness in 2018 was 3.4%, which the Board considers satisfactory. No accidents or
injuries occurred during the course of the year. The Board considers the working environment to be good. Surveys are regularly carried out to assess the Group's working environment.
The Board wishes to thank all the Group's employees for their efforts in 2018.
Itera recognises that it has a responsibility to the society of which it is part, and seeks to contribute to the positive development of those areas of society which are most related to its activities.
The Group's ethical guidelines describe the standards that apply to the Group's relationships with customers, suppliers, the public authorities and its own employees.
Further information on Itera's ethical guidelines – The Itera Business Code of Ethics – is available at www.itera.no/investor/ir/policies.
Itera does not tolerate any form of corruption.
The Group is exposed through its nearshore activities in Ukraine to a certain level of corruption risk as the country has a low score on the Transparency International Corruption Index. Itera has therefore decided to protect the Group from this risk by not delivering services to the public or private sectors in Ukraine where the problem of corruption is principally found, and by only exporting its services to countries where western business standards are the norm.
The Group has guidelines for all employees concerning the acceptance of gifts and other benefits or advantages. The Group's ethical guidelines can be consulted for further information.
Itera has implemented an information security framework applicable for all subsidiaries. This includes, but is not limited to, processes, technology and organisation to be compliant with GDPR and to comply with our unique status with approval of EU Bindings Corporate Rules – for Providers (BCR-P). BCR-P is designed and provided by EU Article 29 Management Group and
executed locally by the three Scandinavian Data Protection Authorities. BCR-P gives Itera the authority to manage personal data on behalf of the Group's customers, from Itera locations outside EU borders (Ukraine).
Itera's nearshore activities are fully integrated with its Nordic activities, and the entire Group therefore follows the same procedures and ethical standards. The Group operates a common IT infrastructure with all customer data stored on servers located in the Nordic region. Financial processes are carried out by a central function.
All employees that are part of the Group's nearshore activities have signed confidentiality agreements that include undertakings in respect of data processing and other security arrangements.
Itera complies with the national legislation and regulations of all the countries in which it operates. All its employees are encouraged to disclose internally any cases in which they have concerns with regard to the Group's integrity or where they are aware that laws or regulations are being breached. Employees can make such disclosures confidentially if they so wish, and the Group will not take adverse action against whistle-blowers, regardless of whether the content of the disclosure is found to be true or false.
Itera regards gender equality as important. It believes that women and men should be given the same remuneration and the same personal and professional development opportunities. The Group seeks to ensure employees of both genders are able to combine their work and private lives, and therefore offers maternity and paternity leave arrangements, home office solutions and part-time positions to support this.
31% of the Group's employees in 2018 were women as compared to 32% in 2017. The Group's executive management team consisted of six men and two women in 2018. The shareholder-elected Board members are two women and two men, while the employee-elected representatives and observers are two women and two men.
There are large differences in the proportion of women employed in the Group's various areas of expertise. The proportion of women is lower in technology-focused areas in development and operations, while the proportion of women is higher in areas that are more specialised in consultancy, communication, content and testing. More than half the parent company's employees are women. There is an uneven distribution of men and women in management positions. The Group has a goal of improving this balance in its management groups.
Itera regards diversity at the Group as important, and seeks to recruit, develop and retain the best employees regardless of gender, ethnicity or disability. The Group's ethical guidelines also serve to promote diversity and prevent discrimination. For more information, see www.itera.no/investor/ ir/policies.
Itera is committed to ensuring internationally recognised human rights, such as those defined in the United Nation's Universal Declaration of Human Rights and other UN conventions, are respected. No-one shall in any way contribute to an individual's human rights being breached or circumvented. The Group places special emphasis on ensuring that employees' fundamental rights are respected. Itera has operations in countries outside Scandinavia, specifically Ukraine and Slovakia, and considers that the establishment of these workplaces has contributed to increasing the living standards of its employees in these countries.
In 2018, Itera implemented a new methodology for continuously measuring and improving the employee engagement, which Itera sees as a key indicator of well-being. The engagement is measured every 2 weeks in the form of a digital survey with about 10 questions each time. Over time, each employee has had the opportunity to give his/her score and feedback within a wide range of relevant topics, such as experience of work-life balance, professional development, workload and adherence to Itera's values. Employees are given the opportunity to share their opinion on which areas and measures should be prioritized for
improving the results. Measures that are assumed to have effect for several parts of the organization are implemented under the guidance of the Group's HR function. Measures that are more locally targeted are carried out by the department in question under the direction of the relevant manager.
The overall result of the 2018 surveys shows that employees find Itera a good place to work
A high level of skills and expertise is crucial to the Group's competitiveness. Itera works in a targeted way to develop the skills and expertise of all its employees with regard to both specific technical disciplines and management. The skills and expertise programs run at Itera together constitute the "Itera Academy", which is the overall structure for all training. The training available through the "Itera Academy" is closely linked with the Group's strategy and with the various requirements of the business areas, and ranges from courses on the role of the consultant for new graduates, through courses of varying levels on project management, system development and user experience, to management skills training for both new and experienced managers.
Itera's activities only pollute the external environment to a limited extent. The Group's environmental impact is principally a result of its use of energy, business travel and the waste created by its office activities. The Group is Eco-Lighthouse certified (re-certified for another three years in 2018), which means it operates environmentally friendly and sustainable procedures in areas including business travel, procurement and waste management.
The Group is headquartered in a BREEAM-NOR certified building. BREEAM is the world's longest-established (1990) and Europe's leading environmental assessment tool for buildings, and BREEAM certification is based on a building's documented environmental performance across nine sustainability categories: management, health and well-being, energy, transport, water, materials, waste, land use and ecology, and pollution. The office part of the building has received an assessment rating of "Very good".
Other environmental initiatives at the Group seek to promote the use of organised recycling schemes for obsolete IT equipment, to reduce travel by ensuring video meetings are used as effectively as possible and to encourage responsible waste management.
All employees have a duty to consider the environmental impact of work-related activities and to favour solutions, products and methods that impact the environment as little as possible. Details of this can be found in the Group's ethical guidelines, see www.itera.no/investor/ir/policies.
The share capital of Itera ASA is NOK 24,655,987 divided into 82,186,624 shares each with a face value of NOK 0.30 per share.
Itera held 1,242,165 own shares at the end of 2018. The Group has three ongoing share options programs, and the exercise price for all of these programs was below the share price at the end of 2018. In 2017, Itera introduced an annual Employee Share Purchase Programme, where employees could purchase shares up to a market value of NOK 20,000 at a 20% discount. The key objectives of these programmes are to align the interest of employees and shareholders, and to give employees an opportunity to take part in the value creation and long-term development of the Group. In total, 85 employees purchased a total of 199,633 shares through the offering in 2018.
Itera had 1,870 shareholders at the close of 2018. The 20 largest shareholders owned 58.0 million shares, which represents 70.63 % of the share capital.
A dividend totalling NOK 20.5 million was paid in 2018 based on the Group's 2017 results, which is equivalent to NOK 0.25 per share. The Board of Directors proposes the payment of a dividend of NOK 0.25 per share based on the Group's 2018 results.
Itera applies corporate governance that is based on the requirements of the Norwegian Accounting Act and the Norwegian Code of Practice for Corporate Governance. The separate section on corporate governance provides more information
on how Itera complies with Section 3-3(b) paragraph 2 of the Norwegian Accounting Act and the provisions of the Norwegian Code of Practice for Corporate Governance. The Board of Directors of Itera ASA held 7 board meetings in 2018.
The Board of Directors has two subcommittees, namely the Audit Committee and the Compensation Committee. The Audit Committee consists of two board members and held four meetings in 2018. The Compensation Committee consists of two board members and held two meetings in 2018. The Compensation Committee prepares and makes recommendations to the Board regarding the CEO's remuneration. The Compensation Committee acts as an advisory body for the CEO on compensation-related issues and other significant personnel questions related to the executive management.
Further information on this area is provided in the corporate governance report at the end of this report.
Internal support processes and shared solutions are structured as Group Functions in the parent company Itera ASA in areas where this facilitates significant economies of scale and synergies. The scope of Group Functions is managed in line with the Group's requirements, and covers areas such as accounting/finance, HR, communication, marketing and internal IT. The parent company's operating revenue of NOK 31.3 million (NOK 27.1 million) was related to sales of these services to other Group companies.
The parent company's operating result was a loss of NOK 5.3 million (NOK 6.9 million). Its operating loss reflects the costs of owning the subsidiary companies.
As the owner, the parent company receives group contributions and dividends from the subsidiary companies. In 2018, the parent company received group contributions and dividends totalling NOK 44.6 million (NOK 52.8 million). The parent company's profit before tax was NOK 33.6 million (NOK 45.8 million) and the profit after tax was NOK 33.6 million (NOK 45.1 million).
The Board of Directors proposes that the profit of NOK 33,570k recorded by the parent company Itera ASA is allocated as follows:
The book value of the parent company's investments in the subsidiary companies is NOK 110.0 million. The parent company administers the Group bank account system. The Group's positive cash flow also appears as an increase in the liquid assets held by the parent company as this shows the combined bank deposits held in the Group bank account system. The parent company reports the bank deposits held by the subsidiary companies in the Group bank account system as liabilities to Group companies. The Norwegian companies are also jointly VAT registered, and the parent company is responsible for paying VAT on behalf of all these companies. The total VAT liability is reported as a liability on the parent company balance sheet, but is offset by intragroup receivables due from subsidiaries.
The parent company's headcount at the end of 2018 was 17 as compared to 16 as at end of 2017. 11 of the 17 employees are women. Absence due to sickness in 2018 was 4.1% as compared to 4.8%
in 2017. No accidents or injuries occurred during the course of the year. The Board considers the working environment to be good.
It is the opinion of the Board of Directors that the annual accounts provide a true and fair view of the parent company's activities in 2018 and its financial position at the end of the year.
In accordance with Section 3-3a of the Norwegian Accounting Act, it is confirmed that the going concern assumption is applicable and that the annual accounts have been prepared on this basis. The budgets for 2019 and the Group's equity situation and liquidity situation provide the basis for the going concern assumption.
Itera has a well-founded strategy and it continues to work in a targeted way. Its overall strategy of developing larger, long-term customer relationships, achieving greater operational efficiency and using delivery models that combine resources from across the Nordic region and its nearshore locations remains unchanged. The Group is seeing satisfactory levels of activity in all the markets in which it is represented, and is keeping a close watch on how market trends are developing.
Oslo, April 25, 2019 The Board of Directors of Itera ASA
Morten Thorkildsen Chairman of the board
Gyrid Skalleberg Ingerø Board member
Mimi K. Berdal Board member
Charlotte Bech Blindheim Board member
Jan-Erik Karlsson
Board member
Erik Berg Solheim Board member
The Board of Directors and executive management of Itera ASA carry out an annual review of the principles for corporate governance and how they function within the Group. Itera provides here an account of its principles and practice for corporate governance pursuant to Section 3-3b of the Norwegian Accounting Act and the Norwegian Code of Practice for Corporate Governance (NUES) as issued on 17 October 2018.
The Norwegian Code of Practice for Corporate Governance is available on www.nues.no/en/.
A description of how Itera complies with the 15 recommendations set out in the Code of Practice for Corporate Governance is provided below.
Itera ASA's principles for corporate governance ensure an appropriate division of roles and good collaboration between the company's owners, its Board of Directors and its executive management as well as satisfactory control of its activities. This helps to ensure the greatest possible value creation over time in the best interests of owners and other stakeholders.
The company's ethical guidelines address conflicts of interest, relationships with customers, suppliers and the media, inside information issues and other relevant financial interests of a personal nature. The ethical guidelines apply to all employees of the Itera Group.
Itera's employees increasingly regard non-financial incentives as important. Itera's management principles therefore contain a clear set of values for employees to identify with. Itera also focuses on making social and moral considerations part of its business processes. This means that customers or projects may be rejected on account of their being in conflict with the Group's set of values and vision, which is: "Make a difference". This applies to all the contexts in which Itera is present; the aspiration is for Itera's employees to view working at Itera as more than just a job, for its customers to find real value in collaborating with Itera, for its owners to receive a greater return from their investment than would be the case with other comparable investments, and for the company to make a positive contribution to economic and social development the local environments in which it operates.
Itera complies with the Norwegian Code of Practice for Corporate Governance with no material deviations from the Code's recommendations, with the exception of the deviations set out in sections 6 and 14.
Itera is a specialist in creating digital business, with communication, technology and innovation as the core competency tools. Itera delivers projects and services in cross-functional teams to Nordic organisations that see the instrumental contribution that innovation, efficient communication and smart utilization of technology can make to achieving their goals. Itera's core sectors are banking and insurance, public, healthcare, the service industry, energy and utility. The company's Articles of Association are available on its website (www.itera.no).
The annual report contains details of the company's goals and strategies, and the financial markets are provided with continual updates by the company's quarterly presentations.
The company's capital situation is kept under constant review in relation to its objectives, strategy and desired risk profile.
The company's objective is to generate a competitive return for its shareholders through dividends and increases in the share price that is in line with comparable investments. Itera's dividend policy is intended to strike a balance between capital adequacy and providing shareholders with a reasonable return. The company's current dividend policy is to distribute at least 50% of the Group's adjusted annual profit after tax. Payment of the annual dividend is dependent on the company's financial situation, its working capital requirements and investment/acquisition opportunities. The Annual General Meeting approves the annual dividend based on a proposal from the Board of Directors. For 2018, the Board of Directors proposes the
payment of an ordinary dividend of NOK 0.25 per share. The Board of Directors has also resolved to ask the Annual General Meeting to renew its authorisation to pay a supplementary dividend for 2018 if the Group's financial situation makes this possible.
At the Annual General Meeting in 2018, the Board of Directors was granted authorisation to increase the company's share capital by up to NOK 1,232,799 by issuing for subscription up to 4,109,331 new shares with a nominal value of NOK 0.30. The authorisation is effective until 1 July 2019 and replaced the authorisation approved by the Annual General Meeting held on 22 May 2017. The Board is authorised to waive the preferential rights of shareholders pursuant to Section 10-4 of the Norwegian Public Limited Companies Act. The authorisation also covers capital increases for non-cash payment or other special subscription terms pursuant to Section 10-2 of the Norwegian Public Limited Companies Act. The authorisation also covers resolutions in connection with mergers pursuant to Section 13-5 of the Norwegian Public Limited Companies Act.
At the same Annual General Meeting, the Board of Directors was granted authorisation to buy back own shares up to a nominal value of NOK 1,725,919, equivalent to 5,753,064 shares each of a face value of NOK 0.30. The authorisation is effective until 1 July 2019 and replaced the authorisation granted at the Annual General Meeting held on 22 May 2017. The authorisation was used to buy back 2,500,000 shares in June 2018 for the purpose of implementing employee share purchase programmes.
The Board of Directors as part of its preparations for the Annual General Meeting carries out an annual review of whether it should ask for authorisation from the Annual General Meeting to increase the company's share capital and/or to be allowed to buy back own shares. Any authorisation is normally granted for one year, and the basis for such authorisation must be clearly communicated at the Annual General Meeting.
The company is committed to treating all shareholders equally. There is only one class of shares. The Articles of Association do not impose any restrictions on voting rights. Treating all shareholders equally is regarded as important. All information liable to influence the company's share price is published through the Oslo Stock Exchange's information system and on the company's website.
The company's transactions in its own shares (share buy-backs) are carried out through the stock exchange at market rates. The Board will normally obtain independent valuations for any material transactions involving the company and its shareholders, members of the Board, executive personnel or close associates of such parties.
Itera shares are listed on the Oslo Stock Exchange and are freely negotiable. Itera has one class of shares, and each share equals one vote at the General Meeting. The shares have no trading restrictions in the form of Board consent or ownership limitations. The Articles of Association of Itera ASA contain no restrictions on negotiability or voting rights and all shares have equal rights.
According to the conditions in Share Purchase Programme offered to the Group's managers and key personnel in 2018, a three-year lock-in period applies to ownership of the shares purchased under this programme. Itera considers that such trading limitation does not cause disturbances in the market due to limited scope and thus is not in violation of the NUES recommendation.
All shareholders are entitled to participate in the Annual General Meeting. Arrangements have been made that allow shareholders to vote in accordance with their ownership through a legal representative or proxy. All shares in the company carry equal voting rights. There are no ownership restrictions, and the company is not aware of any shareholder agreements.
Minutes from the Annual General Meeting are made available using the Oslo Stock Exchange's information system and on the company's website (www.itera.no).
NUES recommends that the Annual General Meeting should vote separately on each individual candidate for any corporate bodies to which members are elected. Itera's practice is for the entire Board to be elected.
The Annual General Meeting has established a Nomination Committee in accordance with Itera's Articles of Association. The Annual General Meeting issues the mandate for the work of the Nomination Committee. The Nomination Committee nominates candidates for appointment to the Board of Directors for consideration by the Annual General Meeting. The nominations are required to provide relevant information about the candidates' background and independence. The Nomination Committee also makes proposals regarding the remuneration paid to members of the Board. The remuneration paid to the Nomination Committee is determined by the Annual General Meeting.
The members of the Nomination Committee are Bjørn Wicklund, Fredrik Thoresen and Olav Werner Pedersen.
The Nomination Committee publishes an invitation to submit proposals for candidates for election to the Board on the company's website. The Nomination Committee will also send a letter to the largest shareholders inviting their proposals.
The Board has established an Audit Committee in accordance with Itera's Articles of Association. The Audit Committee has two members. Its mandate is to supervise the company's reporting procedures and to assess the effectiveness of internal control and risk management activities. The Audit Committee is in regular contact with the auditor and ensures the auditor is independent. The Audit Committee reports to the Board. Members of the Board have access to all relevant documentation as well as to the minutes of all Audit Committee meetings.
The members of the Audit Committee are Mimi K. Berdal (chair) and Gyrid Skalleberg Ingerø.
The Board has established a Compensation Committee to develop and coordinate the Group's compensation systems. The Compensation Committee has two members - Jan-Erik Karlsson (chair) and Morten Thorkildsen.
Itera does not have a corporate assembly. Itera's Articles of Association state that the company is to have a Board of between four and six members. The Board currently has six members, four of whom are elected by shareholders at the Annual General Meeting. Itera's employees are represented by two employee electives and two observers. Fifty percent of the shareholder and employee elected board members and observers are women.
It is regarded as important for the Board to be balanced in terms of its members' expertise, experience and backgrounds in relation to areas that are of relevance to the company's activities. It is also desirable for the composition of the Board to reflect both the company's ownership structure and the need for independent representatives. The current Board includes four members elected by shareholders at the company's Annual General Meeting, and its composition satisfies the independence requirements set out in the Norwegian Code of Practice for Corporate Governance. No member of the executive management is a member of the Board.
The Board of Directors held 7 board meetings in 2018 with an attendance rate of 86%.
The Board prepares an annual plan for its work with an emphasis on targets, strategy and implementation. In addition, the Board has a formal mandate that regulates its areas of responsibility, its duties and the allocation of roles between the Board, the Chairman of the Board and the CEO. The Board receives monthly financial reports for the Group as a whole and for the subsidiary companies, in which the executive management
comments on financial performance and financial position. The Board discusses the company's strategy and budgets at extended board meetings.
The Board will normally obtain independent valuations for any material transactions involving the company and its shareholders, members of the Board, executive personnel or close associates of such parties.
The Board holds 7-10 meetings a year and assesses its own work on an annual basis. In addition, the Nomination Committee make an annual assessment of each Board member's performance and contribution.
Risk management and internal control are carried out by the Group using a range of processes, both at Board level and by the Group's executive management. The Audit Committee monitors risk management and internal control on behalf of the Board in ways that are additional to the reports and discussions on the issue at Board meetings.
The Board is regularly updated on risk management at its meetings, by routine financial reports and by the reports produced by the executive management on the Group's business activities. The Board also assesses the need for measures to be taken in response to risk factors.
The basis of risk management at Itera is that the CEOs of the companies that form the Group are responsible for risk within their individual companies and must therefore have necessary knowledge and understanding of their companies' risk profiles, so that these companies can be managed in a financially and administratively responsible way.
The CEO and CFO continually assess the financial results of the various business areas, the extent to which they are meeting the objectives that have been set, critical situations and events that might influence the future performance of the company, and whether optimal use is being made of resources. The CEO and CFO carry out this work in close cooperation with the management of the individual units.
The Board assesses the internal control systems and considers the most important risk factors facing the company as part of the budget planning and budget approval process. The Group has in recent years pursued a growth strategy and the Board is committed to ensuring that all the Group's activities are covered at all times by internal control systems.
The senior management of the subsidiary companies is responsible for ensuring there are appropriate and effective internal controls that meet all applicable requirements, and is responsible for ensuring compliance with the internal control requirements.
Accounting & Finance, HR, IT and Communications are organized as common Group Functions across the Group. This ensures there is internal control across the companies and across national borders. Accounting/ Finance has implemented shared accounting procedures for the Group where it has proved efficient to do so, including in relation to charts of accounts and reporting. The companies in the Group all use the same accounting system, Maconomy. A specific approval authority matrix has been implemented that determines the authorisation routines for expenditure, and the approval of two individuals is required for payments to be made. The Group Finance Function has a separate finance/accounting function that manages accounting in the subsidiary companies. This function is also responsible for quality control of accounting information by performing reconciliations and other checks. Some accounting work is carried out by the Group's accounting department in Ukraine, which currently has four employees. There were also the equivalent of three full-time positions in the accounting department in Norway in 2017. In addition to the accounting department, there are separate Business Controllers that assist the companies with financial reporting, analysis, forecasting and budgets. There is a separate accounting function in Ukraine and an external accounting firm servicing the Slovakian branch. The CFO and the head of accounting are responsible for continually assessing whether the accounting routines are functioning as required, including controlling reconciliations and analysing and monitoring a range of KPIs. The reports produced by the subsidiary companies are consolidated on a monthly
basis, and analyses are carried out as part of the reporting process, with action taken as required. Reporting is carried out using the Group's standard reporting template, with consolidation being carried out using spreadsheets.
The CEO and CFO continually assess the financial results of the various business areas, the extent to which they are meeting the objectives that have been set, critical situations and events that might influence the future performance of the company, and whether optimal use is being made of resources. Meetings are held with the subsidiary companies every quarter to review these topics and others, and also to consider the risks related to financial reporting, over both the short and long term. The CEO, the CFO, the management of the subsidiary companies and relevant experts participate in these meetings, which are led by the CEO. The Group CEO proposes any risk-reduction measures that are required on the basis of the companies' financial reports and any follow-up meetings that are held.
The Nomination Committee makes recommendations to the Annual General Meeting regarding the remuneration paid to the Board of Directors. The remuneration paid to the members of the Board is determined by the Annual General Meeting once it has considered the proposals of the Nomination Committee. The remuneration paid to the Nomination Committee is determined by the Annual General Meeting once it has considered the proposals of the Board. Information on the remuneration paid to the members of the Board and their shareholdings can be found in the notes to the accounts in the annual report.
NUES recommends that members of Board of Directors should note participate in any incentive or share option programme. Employee elected Board members in Itera may be part of incentive and/or share option programmes in their capacity as employees. Inclusion in such programme may occur prior to or after the employee's election to the Board. Itera considers such inclusion to be independent of and unrelated to the employee's Board position and thus not in violation of the NUES recommendation.
The Board has produced guidelines on the remuneration of executive personnel in accordance with the rules set out in Section 6-16a of the Public Limited Liability Companies Act. The Company's Compensation Committee is involved in the process of determining the remuneration paid to executive personnel. Details of the Board's guidelines on the remuneration of executive personnel are set out in Note 9 'Remuneration of senior employees'.
The company strives to provide accurate and sufficiently comprehensive information every quarter, and to be quick to publish it. The company normally publishes quarterly figures within six weeks of the end of a quarter. The company's provisional annual accounts are published in February. Open quarterly presentations are held with a webcast made available so that they can be viewed either live or subsequently.
The notice calling the Annual General Meeting and the annual report are made available on the company's website three weeks prior to the date of the Annual General Meeting.
The company strives to publish information in a non-discriminatory and simultaneous manner. The company maintains regular dialogue with shareholders, analysts and other parties. The company takes a cautious approach in its contacts with these parties. The company limits its communication with investors and analysts in the two weeks prior to the publication of an interim report. In addition, the company does not issue comments to the media or any other parties about the Group's results during this period. This is to ensure all market participants concerned are treated equally.
The Board of Directors is committed to equal treatment of shareholders and will ensure openness with respect to any potential take-over of the company. In the event of a takeover bid for Itera, the Board of Directors and executive management will seek to ensure all shareholders have access to sufficient information for them to be able to form a position on the bid. The Board has not issued separate guidelines on how it would operate in the event of a formal takeover bid, but it would conduct itself in accordance with
the relevant provisions and recommendations set out by legislation and the Norwegian Code of Practice for Corporate Governance. The Board regards this as sufficient to ensure that shareholders' interests are safeguarded in an equal and proper manner.
The Board will inform shareholders of its opinion of any bid, and the Board will in connection with this inform shareholders about whether they themselves wish to accept the offer should they have taken a position on it.
The company has elected PwC as its external auditor. PwC audits all the companies in the Group that are subject to statutory audit.
The auditor participates in all meetings of the Audit Committee.
The auditor prepares reports for the Audit Committee and the Board. These reports include an audit plan, an assessment of internal control at the company and a review of significant accounting principles and estimates. The auditor participates in the Board meeting at which the annual accounts are considered. The auditor participates in the Annual General Meeting. Information about the fees paid to the auditor can be found in the annual report.
| STORIES | CEO COMMENT | HIGHLIGHTS | BOARD OF DIRECTORS | C O R P O R AT E G OV E R N A N C E | F I N A N C I A L STAT E M E N T S | |
|---|---|---|---|---|---|---|
| CONTENT | 35 | Consolidated statement of comprehensive income | ||||
| GROUP | 36 | Consolidated statement of financial position | ||||
| 38 | Consolidated statement of cash flows | |||||
| 39 | Consolidated statement of changes in equity | |||||
| 40 | Corporate information and basis of preparation | |||||
| 40 | Summary of significant accounting policies | |||||
| 46 | Note 1. | Segments | ||||
| 47 | Note 2. | Work in progress, contract costs and contract liabilities | ||||
| 48 | Note 3. | Earnings and diluted earnings per share | ||||
| 48 | Note 4. | Other current assets | ||||
| 48 | Note 5. | Other current liabilities | ||||
| 49 | Note 6. | Financial risk management | ||||
| 50 | Note 7. | Salaries and personnel costs | ||||
| 50 | Note 8. | Share-based remuneration | ||||
| 51 | Note 9. | Executive personnel | ||||
| 55 | Note 10. | Pensions | ||||
| 55 | Note 11. | Financial income and expenses | ||||
| 55 | Note 12. | Accounts receivable | ||||
| 56 | Note 13. | Non-current assets | ||||
| 58 | Note 14: | Financial leases | ||||
| 58 | Note 15. | Taxes | ||||
| 59 | Note 16. | Exchange rates | ||||
| 59 | Note 17. | Cash and cash equivalents | ||||
| 60 | Note 18. | Operating leases and capital commitments | ||||
| 60 | Note 19. | Implementation of IFRS 15 | ||||
| 62 | Note 20. | Shareholders | ||||
| 63 | Note 21. | Transactions with related parties | ||||
| 63 | Note 22. | Subsequent events |
NOK 1000, except earnings per share Note 2018 2017
| Revenues | 1, 19 | 531 323 | 475 025 |
|---|---|---|---|
| Cost of goods and services | 19 | 87 275 | 73 360 |
| Salaries and personnel expenses | 7,8,9,10,19 | 327 769 | 294 316 |
| Depreciation and amortisation | 13 | 21 141 | 20 335 |
| Other operating and administrative expenses | 9,21 | 52 322 | 47 682 |
| Total operating expenses | 488 507 | 435 692 | |
| Operating profit | 42 816 | 39 333 | |
| Financial income | 11 | 1 234 | 713 |
| Financial expense | 11 | 2 631 | 1 721 |
| Net financial income (expenses) | (1 397) | (1 008) | |
| Profit before taxes Income taxes |
15 | 41 419 9 742 |
38 325 8 691 |
| Net income | 31 677 | 29 635 | |
| Earnings per share | 3 | 0,39 | 0,36 |
| Diluted earnings per share | 3 | 0,39 | 0,36 |
| Consolidated statement of comprehensive income | |||
| Net income | 31 677 | 29 635 | |
| Other comprehensive income | |||
| Translation differences on net investment in foreign operations | 260 | 693 | |
| Total comprehensive income | 31 937 | 30 328 | |
| Total comprehensive income attributable to: | |||
| NOK 1 000 | Note | 2018 | 2017 |
|---|---|---|---|
| ASSETS | |||
| Deferred tax assets | 15, 19 | 3 630 | 3 023 |
| Intangible assets | 13 | 22 954 | 22 272 |
| Property, plant and equipment | 13, 14 | 23 477 | 21 235 |
| Total non-current assets | 50 061 | 46 530 | |
| Current assets | |||
| Work in progress | 2, 19 | 4 188 | 15 794 |
| Contract costs | 2, 19 | 16 407 | - |
| Accounts receivable | 12 | 52 267 | 54 047 |
| Other current assets | 4 | 16 665 | 21 230 |
| Cash and cash equivalents | 17 | 55 279 | 59 854 |
| Total current assets | 144 807 | 150 925 | |
| Total assets | 194 868 | 197 454 |
| NOK 1 000 | Note | 2018 | 2017 | |
|---|---|---|---|---|
| EQUITY AND LIABILITIES | ||||
| Equity | ||||
| Share capital | 24 656 | 24 656 | ||
| Other equity | 22 788 | 25 982 | ||
| Total equity | 47 443 | 50 638 | ||
| Other provisions and liabilities | 871 | - | ||
| Non-current interest-bearing liabilities | 14 | 4 741 | 6 799 | |
| Total non-current liabilities | 5 613 | 6 799 | ||
| Accounts payable | 23 941 | 20 710 | ||
| Tax payable | 15 | 9 537 | 8 531 | |
| Public fees payable | 33 130 | 33 041 | ||
| Contract liabilities | 2, 19 | 24 146 | 17 396 | |
| Other current liabilities | 5 | 51 058 | 60 339 | |
| Total current liabilities | 141 812 | 140 017 | ||
| Total liabilities | 147 425 | 146 816 | ||
| Total equity and liabilities | 194 868 | 197 454 |
Oslo,25 April, 2019 The Board of Directors of Itera ASA
Morten Thorkildsen Chairman of the board
Gyrid Skalleberg Ingerø Board member
Mimi K. Berdal Board member
Charlotte Bech Blindheim Board member
Arne Mjøs Chief Executive Officer
Jan-Erik Karlsson
Board member
Erik Berg Solheim Board member
| NOK 1000 | Note | 2018 | 2017 | |
|---|---|---|---|---|
| Profit before taxes | 41 419 | 38 325 | ||
| Income taxes paid | 15 | (9 844) | (8 708) | |
| Depreciation and amortisation | 13 | 21 141 | 20 335 | |
| Change in work in progress | 5 489 | (1 482) | ||
| Change in accounts receivable | 12 | 1 780 | (14 425) | |
| Change in accounts payable | 3 232 | (3 732) | ||
| Change in other accruals | (6 124) | 18 713 | ||
| Effect of changes in exchange rates | (283) | 639 | ||
| Net cash flow from operating activities | 56 809 | 49 664 | ||
| Investment of fixed assets | 13 | (11 395) | (5 735) | |
| Investment in intangible assets | 13 | (9 289) | (13 724) | |
| Net cash flow from investing activities | (20 684) | (19 458) | ||
| Payments for purchase of own shares | 20 | (22 556) | (1 590) | |
| Proceeds from sale of own shares | 20 | 11 075 | 3 298 | |
| Payments of finance lease liabilities | 14 | (8 721) | (8 114) | |
| Dividends paid to equity holders of Itera ASA | (20 493) | (35 113) | ||
| Net cash flow from financing activities | (40 695) | (41 519) | ||
| Effects of exchange rate changes on cash and cash equivalents | (5) | 75 | ||
| Net change in cash and cash equivalents | (4 575) | (11 239) | ||
| Cash and cash equivalents as of 1 January | 59 854 | 71 092 | ||
| Cash and cash equivalents as of 31 December | 55 279 | 59 854 | ||
| Cumulative | |||||||
|---|---|---|---|---|---|---|---|
| NOK 1000 | Note | Total paid in capital |
Own shares |
Other paid in equity |
translation differences |
Other equity |
Total equity |
| Equity as of 1 January 2017 | 24 656 | (290) | 480 | (928) | 30 397 | 54 315 | |
| Net income for the period | - | - | - | - | 29 635 | 29 635 | |
| Other comprehensive income for the period |
- | - | - | 693 | 693 | ||
| Share option costs | - | - | 216 | - | (1 134) | (918) | |
| Employee share purchase programme |
- | - | 318 | - | - | 318 | |
| Purchase of own shares | 8 | - | (75) | - | - | (1 515) | (1 590) |
| Sale of own shares | - | 300 | - | - | 2 998 | 3 298 | |
| Dividends | - | - | - | - | (35 113) | (35 113) | |
| Equity as of 31 December 2017 | 24 656 | (64) | 1 014 | (235) | 25 268 | 50 638 | |
| Implementation of IFRS 15 | 2 | - | - | - | - | (3 005) | (3 005) |
| Net income for the period | - | - | - | - | 31 678 | 31 678 | |
| Other comprehensive income for the period |
- | - | - | 260 | - | 260 | |
| Share option costs | - | - | (466) | - | - | (466) | |
| Employee share purchase programme |
8 | - | - | 312 | - | - | 312 |
| Purchase of own shares | - | (750) | (21 806) | - | - | (22 556) | |
| Sale of own shares | - | 442 | 10 634 | - | - | 11 075 | |
| Dividends | - | - | - | - | (20 493) | (20 493) | |
| Equity as of 31 December 2018 | 24 656 | (373) | (10 312) | 25 | 33 448 | 47 443 | |
Itera ASA (the Company) including its subsidiaries (the Group) is a specialist in creating digital business, with design, technology and innovation as its core competency tools. Itera provides solutions and services to customers in industries where change and innovation are central to adapt rapid changes, such as insurance, banking and finance, high tech, energy, media and public sector. Itera has offices in Norway, Sweden, Denmark, Ukraine and Slovakia.
Itera ASA is a public limited company registered and domiciled in Norway. The office address is Nydalsveien 28, 0422 Oslo, Norway. Itera ASA is listed on Oslo Stock Exchange (ticker ITE).
The consolidated financial statements for Itera ASA were approved by the Board of Directors on 25 April 2019 and are subject to approval by the Annual General Meeting on 21 May 2019.
The consolidated financial statements have been prepared in accordance with the International Financial Reporting Standards (IFRS) and related interpretations as approved by the EU as in effect at 31 December 2018, and with all additional disclosure requirements pursuant to the Norwegian Accounting Act as in effect at 31 December 2018. The consolidated financial statements have been prepared on the historical cost principle.
The consolidated financial statements are presented in Norwegian Kroner (NOK). Amounts are rounded to the nearest thousand, unless otherwise stated. As a result of rounding adjustments, amounts and percentages may not add up to the total.
The most important accounting principles applied by the Group in the preparation of the consolidated financial statements are described below. These principles have been applied identically to all the periods that are presented, unless otherwise stated.
Subsidiaries are companies where the Group has a controlling interest. Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. A controlling interest is normally achieved when the Group owns, directly or indirectly, more than 50% of the voting shares in the target company. The results of subsidiaries acquired or disposed of during the year are included in the income statement from the date when control is obtained and until the date when control ceases. All intercompany transactions, outstanding balances and unrealised group internal profits or losses are eliminated.
The consolidated financial statements are presented in NOK, which is Itera ASA's functional currency. Transactions in foreign currencies are initially recognised in the functional currency at the exchange rate at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated to the functional currency using the exchange rate at the reporting date. All exchange differences are recognised in the income statement with the exception of exchange differences on a net investment in a foreign entity. These exchange differences are recognised as a separate component of other comprehensive income until the disposal of the net investment, at which time they are recognised in the income statement. Non-monetary items measured at historical cost in foreign currency are translated using the exchange rates at the dates of the initial transactions. The date of initial transaction for non-monetary assets on which the Group has paid an advance consideration is the date of the payment of the advanced consideration. The Group has foreign entities with functional currency other than NOK. At the reporting date, the assets and liabilities of foreign entities with functional currencies other than NOK are translated into NOK at the rate of exchange at the reporting date and their income statements are translated at the average exchange rates
for the year. The translation differences arising from the translation are recognised in other comprehensive income until the disposal of the net investment, at which time they are recognised in the income statement.
A critical accounting estimate is one which is both important to the presentation of the Group's financial position and results and requires management's most difficult, subjective or complex judgements, often as a result of the need to make important estimates based on assumptions about the outcome of matters that are inherently uncertain. Management evaluates such estimates on an ongoing basis, based upon historical results and experience, consultations with experts, trends and other methods which management considers reasonable under the circumstances, as well as forecasts as to how these might change in the future. Areas of significant estimation uncertainty include:
Itera delivers most of its non-subscription services on Time & Material agreements. However, it may occasionally enter into fixed or target price agreements for development work. In such cases, the revenue is recognised proportionately to its estimated completion rate and contract value. Completion is measured as incurred hours relative to the estimate to complete the project. The Group bases its estimates on historical results, taking into consideration the type of customer, the type of transaction and the specifics of each arrangement. As of the end of 2018, there were no fixed or target price projects outstanding which may have represented any significant estimation uncertainty.
Itera has capitalised development costs related to its Intellectual Property Rights (IPR). The IPR generate monthly subscription revenues over the length of the customer contracts, and the capitalised development costs are amortised over their estimated useful life. Significant technological changes or loss of major customer contracts may impact the remaining useful life or the fair value of the asset, respectively. The Group conducts impairment tests on the assets to assess whether there is a need to write down or accelerate the amortisation of the assets when such triggering factors occur. The current carrying value of the assets are low compared to the associated revenue generated from this. The Group thus considers the risk of impairment to be limited.
Payments for the purchase of own shares are recognised as a reduction in equity and proceeds from any sales as an increase. Transaction costs directly related to equity transactions less taxes are recognised against equity as a reduction in the proceeds.
Tangible fixed assets are recognised at acquisition cost, less accumulated depreciation and accumulated impairment losses. Acquisition cost includes expenses directly attributable to purchasing the asset. Acquisition cost for assets developed in-house includes direct salary costs, other costs directly attributable to ensuring that the assets function as intended, and the costs of dismantling and removing the assets. Gains and losses on disposals of tangible fixed assets are presented as part of the operating profit/loss and calculated as the difference between the consideration received and the carrying value of the asset.
Tangible fixed assets are depreciated on a straight-line basis over their estimated useful life. Leased assets are depreciated over the shorter of the lease term and estimated useful life, unless it is reasonably certain that the Group will obtain ownership after the end of the lease term.
The estimated useful lives for the current and comparison periods are:
Fixtures and fittings: 5-10 years Other fixed assets: 3 years
Depreciation methods, useful lives and residual values are reviewed at each balance sheet date.
Development activities relate to significant new concepts or solutions. Development costs are capitalised only to the extent that they can be measured reliably, the product or process is technically or commercially viable, the future economic benefits are likely, and the Group intends and has sufficient resources to complete its development as well as to sell or make use of it. Capitalised expenses include costs for materials, direct salary costs, and directly attributable overhead costs. Other development costs are expensed as incurred. Capitalised development expenditure is carried at cost minus amortisation and impairment.
Expenses relating to the acquisition of new software are capitalised on the balance sheet as intangible fixed assets. Expenses incurred to maintain or extend the future usefulness of software are directly expensed unless the changes to the software increase its future economic usefulness.
Intangible assets are amortized on a straight-line basis over their estimated useful life from the date they become available for use. The estimated useful lives for the current and comparison periods are:
Capitalised development costs: 3–5 years Software and IT equipment: 3–5 years
Leases are classified as either finance leases or operating leases at the time they are entered into on the basis of their content. If substantially all the financial risks and control of the underlying lease object is transferred to the lessee, the lease is classified as a finance lease, and the related assets and liabilities are capitalised. Operating lease payments are recognised as an operating expense on a straight-line basis over the term of the lease.
Accounts receivable are recognised in the balance sheet at their nominal value, less a provision for expected losses. The interest element is disregarded if it is not material. The expected credit loss on trade receivables and work in progress is measured using a simplified lifetime model.
The Itera Group finances its pension arrangements for employees through collective defined contribution-based schemes. A defined contribution pension scheme is a plan under which an entity pays fixed contributions into a separate fund or pension fund and has no legal or constructive obligation to pay any further amounts. Contribution obligations are recognised as personnel expenses in the profit and loss account when due. Prepaid contributions are recognised as an asset to the extent that they entail cash refunds or that future payments to the scheme are reduced.
Employee share options at the Group give employees the right to subscribe for shares in Itera ASA at a future point at a predetermined price (exercise right). This right as a rule is dependent on the Group achieving concrete targets and the employee still being employed at the time of exercise.
Employee share options are valued at fair value on the grant date. Their calculated value is recognised as a personnel expense, with a counter entry to other paid-in equity. The cost of share options is divided over the period until the employee becomes unconditionally entitled to exercise the options. The expensed amounts are adjusted to reflect the actual amount of stock options exercised if the associated service and nonmarket conditions are met.
The social security tax costs associated with employees' taxable benefits are expensed as incurred over the accrual periods on the basis of the accrual rates and values at the balance sheet date.
Provisions are recognised when the Group has incurred a legal or constructive obligation as a result of a previous event and it is likely that this will lead to it making a payment or transferring other assets in order to settle the obligation, and the size of the obligation can be measured reliably. Provisions are measured at the present value of the expected future cash flows, discounted using a market-based discount rate before tax.
Revenue arising from subscriptions is recognised over the course of the contract period. Revenue from a transition project that is an integral part of a subsequent operating services contract is recognised on a linear basis over the period of the latter contract. Revenue from services is recognised when the hours are delivered. When the contract outcome cannot be measured reliably, revenue is recognised only to the extent that the expenses incurred are eligible to be recovered. Revenue is measured based on the consideration specified in a contract with a customer.
Revenue from the sale of goods is measured based on the consideration specified in a contract with a customer. Where the consideration covers multiple sub-deliveries, it is broken down and recognised when the various components are delivered.
Cost of goods and services is the costs paid to external suppliers for goods or services directly related to Itera's delivery of goods and services. Cost of goods and services includes costs due to third-party contractors, the rental of software, purchases of software and hardware for resale, travel expenses for consultants and other costs.
Depreciation and amortisation expenses are based on management's estimates of residual value, depreciation and amortisation method and the useful life of property, plant and equipment and intangible assets. Estimates may change due to technological developments, competition, changes in market conditions and other factors and may result in changes in the estimated useful life and in the amortisation or depreciation charges. Technological developments are difficult to predict and the Group's views on the trends and pace of development may change over time. Critical estimates in the evaluations of useful lives for tangible and intangible assets include, but are not limited to, expected developments in technology and markets. The useful lives of property, plant and equipment and intangible assets are reviewed at least annually taking into consideration the factors mentioned above and all other important relevant factors. Estimated useful lives for similar types of assets may vary between different entities in the Group due to local factors such as growth rate, maturity of the market, history and expectations for replacements or transfer of assets. A change in estimated useful life is a change in accounting estimate, and depreciation and amortisation plans are adjusted prospectively.
The Group has made investments in property, plant and equipment, as well as intangible assets including both development costs and software.
Intangible assets not yet in use are tested for impairment annually or more often if indicators of impairment exist, whereas other assets are tested for impairment when circumstances indicate there may be a potential impairment. Factors that indicate impairment which trigger impairment testing include the following: significant fall in market values; significant underperformance relative to historical or projected future operating results; significant changes in the use of the assets or the strategy for the overall business, including assets that are decided to be phased out or replaced and assets that are damaged or taken out of use; significant negative industry or economic trends; significant loss of market share; significant unfavourable regulatory and court decisions and significant cost overruns in the development of assets.
Financial income comprises interest income from financial investments and bank deposits. Interest income is recognised using the effective interest rate method. Dividends are recognised in profit and loss when they are approved by the annual general meeting of the company from which they will be received. Financial expense comprises interest expense on borrowings and changes in the fair value of financial assets. All borrowing costs are recognised in profit and loss using the effective interest rate method. Financial income and financial expense also comprise foreign currency gains and losses.
Tax expense comprises both tax payable and changes in deferred tax. Deferred tax/tax assets are calculated on all differences between the accounting values and tax values of assets and liabilities.
Deferred tax assets are capitalised on the balance sheet when it is probable that the individual company will have sufficient taxable profits in subsequent periods to be able to use the tax asset. The individual companies recognise previously non-capitalised tax assets to the extent that it has become probable that they will make use of them. Likewise, the individual companies reduce the value of their deferred tax assets to the extent that they no longer regard it as probable that they will be able to make use of their deferred tax assets.
The statement of cash flow is prepared using the indirect method. Cash and cash equivalents comprise cash, bank deposits and other short-term liquid investments. Interest paid is presented as part of operating activities.
The accounting policies applied are consistent with those applied in the previous financial year, except for the implementation of new accounting standards as described below.
The Group adopted the new IFRS 15 Revenue from Contracts with Customers standard with effect from 1 January 2018. The cumulative effect of the initial application of IFRS 15 was recognised as an adjustment to the Group's opening balance sheet as at 1 January 2018, reflecting the introduction of contract costs and liabilities in relation to open contracts for trade and other receivables and trade and other payables respectively, with the costs of obtaining and fulfilling a contract capitalised as other current assets. The comparison figures for 2017 have not been restated. See note 19 for further details.
IFRS 9 Financial Instruments (effective from 1 January 2018) replaces the old incurred loss model with an expected loss model. Implementing IFRS 9 did not have a significant impact on the Group's financial statements.
The Group will adopt IFRS 16 Leases on 1 January 2019. This will result in almost all leases being recognised on the statement of financial position, as IFRS 16 removes the distinction between operating and finance leases. Under the new standard, an asset (the right to use the leased item) and a financial liability to pay rental costs are recognised in the statement of financial position. The Group will apply exceptions allowed by the standard for short-term and low-value leases. The accounting for lessors will not significantly change.
The Group will adopt the modified retrospective approach upon transition, which will result in all the transition impact being reported as adjustments to opening balances, and comparative periods will not be restated. The Group will use the practical expedient contained in IFRS 16 which permits companies not to reassess whether contracts meet the definition of a lease and will apply IFRS 16 to all existing operating leases as of 31 December 2018.
When applying the new model from 1 January 2019, the Group will recognise a liability to make lease payments (i.e. a lease liability) and an asset representing the right to use the underlying asset during the lease term (i.e. a right-of-use asset) for all leases with a lease term of more than twelve months, unless the underlying asset is of low value, and will recognise depreciation on its right-of-use assets separately from interest on lease liabilities in the income statement.
The Group will remeasure lease liabilities upon the occurrence of certain events (e.g. a change in the lease term, a change in future lease payments resulting from a change in an index or rate used to determine those payments). Generally, the amount of the remeasurement of the lease liability will be recognised as an adjustment to the right-of-use asset.
Implementing IFRS 16 in 2019 is expected to increase lease liabilities and right of use assets by NOK 54 million, see note 18 for further details.
The business activities of the Group are carried out by 6 operational companies in 5 countries. Each company has its own management team and a CEO who is responsible for the company's financial results. Each company also has its own internal structure for management, budgeting and financial reporting, including reporting to the Group CEO. The Chief Operating Decision-Maker (CODM), who is responsible for allocating resources and assessing performance of operating units, has been identified as the steering committee consisting of the CEO and the CFO. The activities carried out by all the subsidiaries are for all practical purposes related to delivering IT and communication solutions to customers. In particular, the Group utilises its nearshore delivery capabilities seamlessly across its various operating units and locations. The reported revenue in 4 reporting segments, from both external customers and intragroup sales, is less than 10 % of the combined revenue. The reporting segments in Norway are aggregated into a single segment since the segments have similar economic characteristics. As such, the CODM examines the Group's performance as a single reporting segment.
Transactions and transfers between the companies are carried out on normal commercial terms.
Revenues from transactions with the largest external customer in Norway amount to NOK 56.5 million.
NOK 1000
| 2018 | Norway | Sweden | Denmark | Ukraine | Slovakia | Group |
|---|---|---|---|---|---|---|
| Sales revenue | 619 553 | 1 699 | 57 463 | 7 779 | 23 016 | 709 510 |
| Intragroup eliminations | (146 675) | - | (847) | (7 779) | (22 886) | (178 188) |
| Net sales revenue | 472 878 | 1 699 | 56 615 | - | 130 | 531 323 |
| Services | 302 940 | 1 699 | 30 429 | - | 130 | 335 198 |
| Services 3rd Party | 25 057 | - | 14 028 | - | - | 39 084 |
| Subscriptions | 128 651 | - | 6 203 | - | - | 134 854 |
| Other revenue | 16 231 | - | 5 955 | - | - | 22 186 |
| 472 878 | 1 699 | 56 615 | - | 130 | 531 323 | |
| Operating profit | 32 852 | 299 | 8 618 | (64) | 1 111 | 42 816 |
| Investments | 16 157 | - | 42 | 7 570 | 213 | 23 982 |
| Total assets | 170 074 | 285 | 13 077 | 9 228 | 2 203 | 194 868 |
| Total liabilities | 127 200 | 91 | 16 516 | 1 646 | 1 971 | 147 425 |
| 2017 | Norway | Sweden | Denmark | Ukraine | Slovakia | Group |
| Sales revenue | 558 090 | 3 810 | 38 584 | 2 267 | 29 199 | 631 951 |
| Intragroup eliminations | (124 694) | - | (765) | (2 267) | (29 199) | (156 925) |
| Net sales revenue | 433 396 | 3 810 | 37 819 | - | - | 475 026 |
| Services | 273 833 | 3 810 | 24 650 | - | - | 302 293 |
| Services 3rd Party | 20 887 | - | 1 217 | - | - | 22 104 |
| Subscriptions | 123 484 | - | 5 756 | - | - | 129 239 |
| Other revenue | 15 192 | - | 6 197 | - | - | 21 389 |
| 433 396 | 3 810 | 37 819 | - | - | 475 026 | |
| Operating profit | 33 581 | 754 | 3 596 | 99 | 1 303 | 39 333 |
| Investments | 17 697 | - | - | 3 327 | - | 21 024 |
| Total assets | 179 499 | 1 991 | 10 041 | 3 548 | 2 376 | 197 455 |
| Total liabilities | 135 534 | 361 | 8 352 | 615 | 1 954 | 146 816 |
WORK IN PROGRESS, CONTRACT COSTS AND CONTRACT LIABILITIES
Services revenue is generated from rendering of services to customers by Itera's own consultants. The service contracts are with a few exceptions Time & Material agreements where the invoicing is based on hours performed at agreed rates.
Services 3d party revenue is generated from rendering of services to customers performed by subcontractors.
Subscriptions revenue is generated from services provided on regular basis with fees based on fixed amounts or volumes.
Other revenue includes sale of hardware and software from Itera's web shop and reinvoicing of travel costs and materials purchased on behalf of customers.
Work in progress is a Group internal definition and comprises earned and recognised revenue that has not yet been invoiced. Work in progress is transferred to receivables when the rights to payment become unconditional, which usually occurs when invoices are issued to the customers.
| 2018 | 2017 |
|---|---|
| 15 794 | 14 311 |
| 4 906 | 16 318 |
| (7 078) | (15 224) |
| (9 240) | - |
| (194) | 389 |
| 4 188 | 15 794 |
Contract costs comprise expenses related to fulfilling a contract, typically implementation costs in the initial stage of a contract, capitalised and expensed over the expected contract periods.
Contract liabilities comprise prepayments from customers for delivering services.
Both contract costs and contract liabilities are recognised in the statement of financial position from 2018 following implementation of IFRS 15. Please refer to note 19 for further details. The balance value of contract liabilities in 2017 includes Customer prepayments earlier included in Other current liabilities.
| NOK 1000 | 2018 |
|---|---|
| Balance, beginning of period | 17 728 |
| Costs capitalised in the period | 4 786 |
| Amortisation | (4 879) |
| Impairment losses | (1 228) |
| Balance, end of period | 16 407 |
| NOK 1000 | 2018 | 2017 |
|---|---|---|
| Balance, beginning of period | 28 357 | 29 373 |
| Increases due to cash received, excluding amounts recognised as revenue during the period |
15 404 | 17 396 |
| Revenue recognised that was included in the contract liability balance at the beginning of the period |
(19 615) | (29 373) |
| Balance, end of period | 24 146 | 17 396 |
Management expects that approximately 40% of the transaction price allocated to the unsatisfied contracts as of 31.12.2018 will be recognised as revenue in the 2019 fiscal year. Another 40% will be recognised as revenue in the 2020 fiscal year, and the remaining 20% will be recognised in the fiscal years 2021-2023.
| NOK 1000, except earnings per share | 2018 | 2017 |
|---|---|---|
| Profit for the year | 31 677 | 29 635 |
| Average number of outstanding shares | 81 087 | 81 691 |
| Outstanding employee share options | 2 618 | 3 126 |
| Dilution effect of outstanding share options | 1 135 | 900 |
| Average number of shares including dilution | 82 222 | 82 591 |
| Basic earnings per share | 0,39 | 0,36 |
| Diluted earnings per share | 0,39 | 0,36 |
The average share price for 2018 calculated on the basis of the market closing price for the Itera share on each trading day (except for days when no shares were traded when the bid price has been used) was NOK 9.18.
Basic earnings per share calculations are based on the weighted average number of common shares outstanding during the period, while diluted earnings per share calculations are performed using the average number of common shares and dilutive common shares equivalents outstanding during each period.
The share option exercise prices are NOK 6.42, NOK 3.89 and NOK 2.58 for the 2017, 2016 and 2015 programmes, respectively.
| NOK 1000 | 2018 | 2017 |
|---|---|---|
| Prepaid expenses | 10 168 | 7 101 |
| Other current receivables | 6 497 | 14 129 |
| Total | 16 665 | 21 230 |
| Total | 51 058 | 60 339 |
|---|---|---|
| Accrued other expenses | 4 780 | 6 354 |
| Current lease payments | 4 205 | 6 975 |
| Accrued wages and bonuses | 19 987 | 25 297 |
| Holiday pay | 22 085 | 21 713 |
| NOK 1000 | 2018 | 2017 |
Customer prepayments were reclassified as Contract liabilities in the statement of financial position following the implementation of IFRS 15 from 2018. See notes 2 and 19 for further details.
The Itera Group is exposed to financial risks such as: credit risk, liquidity risk, currency risk and interest rate risk. The Group's exposure to these risks is considered to be low. The Group has established guidelines to manage its exposure to these risks. The main principle is to minimize exposure to financial risks, and the Group accordingly holds no financial assets or liabilities for speculative purposes.
The Group's nearshore operations in Ukraine and Slovakia exposes it to new risks, such as country risk, IT security risks and the risk of corruption. Itera has a zero-tolerance policy on corruption.
Credit risk is the risk of financial loss to the Group's receivables due from customers and other short-term receivables. In order to manage this risk, the Group has established credit approval procedures to evaluate the creditworthiness of all material counterparties The Group's exposure to credit risk is not dependent on individual customers but customers as a group. Unless an agreement for delayed settlement has been made with a counterparty, an accounting provision is made for all receivables older than 90 days. Information on the Group's risk exposure in respect of accounts receivable is provided in note 12. The Group's customers are private and public companies. The Group assesses the credit worthiness of all new customers and periodically for existing customers.
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group manages its liquidity in such a way as to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when they fall due without incurring unacceptable losses or risking damage to the Group's reputation. The Group has established an overdraft facility with its banking partner. See note 17 for further information.
In order to accommodate growth in the Group's operational companies, lease financing contracts have been entered into for major investments in software and hardware.
The Group is exposed to currency risk through its businesses in Sweden, Denmark, Ukraine and Slovakia. The exposure to currency risk is limited by the fact that businesses in Sweden and Denmark have revenue and costs in the same currency, and in addition most borrowing is arranged within the Group. Of the Group's total revenue, 11% is in Danish kroner (DKK). A 10% change in the NOK exchange rate against SEK and DKK would have a 1.1% effect on the Group's revenue. The effect of currency deviation on financial assets and liabilities denominated in non-functional currency is not material.
The Group's nearshore companies operate in three different currencies: USD, Euro and Ukrainian Hryvna. The main exposure is in USD. The Group has to a large extent currency adjustment mechanisms in its agreements with customers to counteract its exposure to the US dollar, where service fees are regulated in accordance to currency exchange rates USD/NOK or EUR/NOK.
The Group is exposed to interest rate risk in relation to its bank deposits. The Group is also exposed in connection with lease financing contracts and when drawing against the overdraft facility. The Group does not hold any financial securities or other assets that have an inherent interest rate risk. The effect on profit and loss of change in interest rate is insignificant.
Itera does not have significant differences between fair value and book value in respect of financial instruments, which for all practical purposes comprise accounts receivable and accounts payable, other current receivables and other current liabilities and lease liabilities.
| 8 |
|---|
| SHARE-BASED |
| REMUNERATION |
| NOK 1000 | 2018 | 2017 |
|---|---|---|
| Salaries | 278 501 | 256 309 |
| Share option costs | 614 | 909 |
| Social security taxes | 30 465 | 28 506 |
| Pension costs | 9 913 | 9 070 |
| Other benefits | 15 956 | 12 701 |
| Salaries and personnel expenses capitalised | (7 680) | (13 179) |
| Total payroll and personnel expenses | 327 769 | 294 316 |
| Average number of employees | 488 | 443 |
The Group had three share option programmes running in 2018. All schemes are settled by the granting of shares. The oldest of the current share option programmes was established in 2015. The options were targeted at key employees in the Group. The financial targets for 2015 were not achieved, so 80% of the options lapsed. The remaining 20% of the options can be exercised at the end of the programme in 2019.
Other share option programmes were approved in 2016 and 2017 with the same conditions as the previous programs, with options granted to key employees at the Group. The financial targets for these programmes were achieved for 2016 and partly for 2017. 80% of the options can be exercised between 2017 and 2020 for the 2016 programme and between 2018 and 2021 for the 2017 programme, with up to 25% of these options available for exercise each year. Any options not exercised in a year may be carried forward to subsequent years. The remaining 20% of the options can be exercised at the end of the programme in 2020 and 2021, respectively.
The fair value of the options was calculated on the date they were granted, and the options granted are being expensed over the accrual periods of four years in accordance with the graded vesting principle. Fair value is calculated using the Black-Scholes-Merton option pricing model.
The calculation of fair value assumes that historical volatility is an indication of future volatility. Expected volatility is therefore set equal to historical volatility. The interest rate is based on rates obtained from Norges Bank for the same period as the life of the options.
For all the option programmes an annual staff departure rate of 10% is assumed. For calculation purposes, an annual dividend of NOK 0.20, NOK 0.30 and NOK 0.45 is forecast for the 2015, 2016 and 2017 programmes, respectively.
Share option costs (including employer's social security contributions) of NOK 614k were expensed in 2018 (NOK 909k in 2017).
| Outstanding | Expired in | Exercised | Outstanding | Fair value | Exercise | Share price when |
Date | Exercise | |
|---|---|---|---|---|---|---|---|---|---|
| Programme | 31.12.2017 | 2018 | in 2018 | 31.12.2018 | when issued | price 1) | issued 2) | of issue | period |
| 2015 | 268 000 | - | - | 268 000 | NOK 0.25 | NOK 2.58 | NOK 2.58 | 07.09.2015 | 2016-2019 |
| 2016 | 1 477 000 | - | 326 000 | 1 151 000 | NOK 0.26 | NOK 3.89 | NOK 3.89 | 08.07.2016 | 2017-2020 |
| 2017 | 1 380 800 | 68 800 | 112 920 | 1 199 080 | NOK 0.60 | NOK 6.42 | NOK 6.42 | 28.06.2017 | 2018-2021 |
| Total | 3 125 800 | 68 800 | 438 920 | 2 618 080 |
1) The exercise price is the average share price over the 30 days prior to the date the option is granted.
2) The exercise price is set at fair value on the date the option is granted. The company works on the basis that the exercise price is the same as the share price on the date the option is granted and that the options do not have any intrinsic value on this date.
| Programme | Number | Interest rate | Volatility | Lifetime |
|---|---|---|---|---|
| 2015 | 268 000 | 0,77 % | 30.0% | 3.77 YEARS |
| 2016 | 1 151 000 | 0,49 % | 25.0% | 3.94 YEARS |
| 2017 | 1 199 080 | 0,90 % | 28.9% | 3.96 YEARS |
| Total | 2 618 080 |
In 2017, Itera introduced an annual Employee Share Purchase Programme, where employees could purchase shares up to a market value of NOK 20,000 at a 20% discount. In total, 85 employees purchased a total of 172,536 shares. The programme was repeated in 2018 where 98 employees purchased a total of 199,633 shares at the same conditions. The discount is recognised against the equity.
In 2018, a Share Purchase Programme was offered to the Group's managers and key personnel in order to foster alignment of interests between executives and shareholders, as well as contribute to retention of key people. The programme was in lieu of a Share Option Programmes that have been used in previous years.
Under the programme, the invitees were offered to purchase up to a defined number of shares at a valuation discount of NOK 2.78 per share. The discount was related to a three-year lock-in period of the shares. The Company has an option to re-purchase all or some of the shares with the same discount in the event the shareholder terminates his or her employment in the Group within the lock-in period. 22 key employees and executives showed their long-term commitment by purchasing a total of 972,377 shares for a total investment of NOK 8.2 million under this programme.
9 EXECUTIVE PERSONNEL
Pursuant to Section 6-16a of the Norwegian Public Limited Companies Act, the Board of Directors will present the following remuneration guidelines to the Annual General Meeting:
The objective for the Itera Group's guidelines for the remuneration of the chief executive officer (CEO), senior employees and other key employees is to support the Group's strategy and corporate values and to promote the achievement of the Group's objectives. The purpose of remuneration is to encourage conduct that builds the desired corporate culture in terms of performance and focus on profitability. In preparing this statement, the Board has not found it necessary to make any changes to its earlier statements on the principles for the remuneration of senior employees.
The CEO's total remuneration is made up of a fixed salary, normal employment benefits, and bonus, together with pension and insurance benefits. The CEO will also participate in the Group's share option programmes. The CEO's total remuneration will be determined on the basis of a comprehensive evaluation, with the variable element of remuneration primarily based on the Group's financial performance. The CEO's remuneration is subject to annual evaluation and is determined by the Board.
The CEO determines the remuneration of senior employees in collaboration with the Board. The Board has set up a separate subcommittee to advise on the guidelines for the remuneration of senior employees and other key employees. The total remuneration of senior employees is made up of a fixed salary, normal employment benefits and bonus, together with pension and insurance benefits. Senior employees will also be considered for inclusion in the Group's share option programmes. The total remuneration of senior employees is determined on the basis of the need to offer competitive terms. It is intended that the level of remuneration should ensure that the Group is competitive in the relevant labour market, and should promote the Group's profitability, taking into account the desired trend in income and costs. However, the level of total remuneration must not be such as to damage the Group's reputation or to be market leading but should be sufficient to ensure that Itera attracts and retains senior employees with the desired expertise and experience.
Bonuses earned in 2018 were based on results achieved by the companies for which senior employees were responsible, together with their performance relative to their personal targets for the year. Senior employees may also be eligible for normal employment benefits to the extent that such benefits are relevant in relation to the employee's function or are in line with market practice.
Senior employees are members of the defined contribution pension schemes of the respective companies.
The company established share option programmes in 2015, 2016 and 2017. In 2018, a share purchase programme was rolled out as an alternative long-term incentive programme for executives and key employees. Proposals for new share option and purchase programmes will be submitted for approval by the Annual General Meeting.
As a general rule, the Group will not enter into termination payment agreements with employees. However, the Group will honour existing agreements.
The Board confirms that the remuneration of senior employees in 2018 was in accordance with the statement on the remuneration of senior employees submitted to the Annual General Meeting held on 22 May 2018. The guidelines for the remuneration of senior employees were unchanged from 2017 to 2018."
Remuneration is subject to annual evaluation and will be determined on the basis of general salary levels in the labour market in general and the IT industry in particular.
NOK 1 000
| 2018 Name |
Position | Salary | Bonus | Other benefits |
Total remune ration |
Pension cost |
Options reported |
|---|---|---|---|---|---|---|---|
| Arne Mjøs | Chief Executive Officer | 2 252 | 847 | 21 | 3 120 | 83 | 588 |
| Bent Hammer | Chief Financial Officer | 1 467 | 605 | 16 | 2 088 | 79 | - |
| Ane Gjennestad | Chief Communications Officer |
1 055 | 133 | 15 | 1 202 | 72 | - |
| Merete Jordal | IT Director | 1 049 | 121 | 12 | 1 182 | 69 | - |
| Niko Nyström | Executive Vice President | 1 544 | 450 | 12 | 2 005 | 75 | 240 |
| Jon Erik Høgberg | Executive Vice President | 1 635 | 324 | 13 | 1 972 | 76 | 419 |
| Kristian Enger | Executive Vice President | 1 582 | 539 | 13 | 2 135 | 74 | 240 |
| Igor Mendzebrovski | Executive Vice President | 1 728 | - | - | 1 728 | - | - |
| John Aaling | CEO Itera Aps (DK) | 1 321 | 212 | 16 | 1 549 | 152 | - |
| Total 2018 | 13 634 | 3 230 | 116 | 16 980 | 680 | 1 488 |
| 2017 Name |
Position | Salary | Bonus | Other benefits |
Total remune ration |
Pension cost |
Options reported |
|---|---|---|---|---|---|---|---|
| Arne Mjøs | Chief Executive Officer | 2 160 | 847 | 23 | 3 030 | 81 | 1 866 |
| Bent Hammer | Chief Financial Officer | 1 353 | 605 | 15 | 1 973 | 77 | - |
| Ane Gjennestad | Chief Communications Officer |
1 019 | 133 | 15 | 1 167 | 68 | 187 |
| Merete Jordal | IT Director | 1 028 | 121 | 12 | 1 161 | 67 | 162 |
| Niko Nyström | Executive Vice President | 1 458 | 450 | 12 | 1 920 | 73 | 246 |
| Jon Erik Høgberg | Executive Vice President | 1 611 | 324 | 18 | 1 953 | 74 | 356 |
| Kristian Enger | Executive Vice President | 1 525 | 539 | 13 | 2 077 | 72 | 327 |
| Igor Mendzebrovski | Executive Vice President | 1 561 | - | - | 1 561 | - | - |
| John Aaling | CEO Itera Aps (DK) | 1 254 | 207 | 15 | 1 476 | 135 | 65 |
| Total 2017 | 12 970 | 3 226 | 122 | 16 318 | 648 | 3 208 | |
The company has not entered into agreements with any members of the executive management on termination payments or any other form of compensation upon termination of employment.
Bonus presented are the amounts earned in the financial year which may deviate from amounts paid out in the fiscal year.
The business activities of the Itera group are carried out by six operational companies. Each company has its own management team and a CEO who is responsible for the company's financial results. In addition to the Chief Executive Officer and the Chief Financial Officer, the executive management of Itera ASA is made up of the heads of the individual Business Units, together with the Group's Chief Technical Officer and the Chief Communications Officer.
| NOK 1000 | |||
|---|---|---|---|
| Name | Position | 2018 | 2017 |
| Morten Thorkildsen | Chairman of the Board | 335 | 336 |
| Mimi K. Berdal | Board member | 225 | 225 |
| Jan Erik Karlsson | Board member | 230 | 200 |
| Gyrid Skalleberg Ingerø | Board member | 220 | 100 |
| Eli Giske | Board member (resigned) | - | 100 |
| Erik Berg Solheim | Board member | 10 | - |
| Charlotte Bech Blindheim | Board member | 10 | - |
| Berit Klundseter | Board member (resigned) | 10 | 20 |
| Odd Khalifi | Board member (resigned) | 10 | 20 |
| Total | 1 050 | 1 001 | |
| Total | 45 | 60 | |
|---|---|---|---|
| Geir Moe | Member (resigned) | - | 15 |
| Olav W. Pedersen | Member | 15 | 15 |
| Erik Sandersen | Chairman (resigned) | 30 | 30 |
| Name | Position | 2018 | 2017 |
| NOK 1 000 |
| STORIES | CEO COMMENT | HIGHI |
|---|---|---|
| Name | Position | Stocks | Options |
|---|---|---|---|
| Jan Erik Karlsson | Board member | 303 076 | - |
| Mimi K. Berdal* | Board member | 111 000 | - |
| Gyrid S. Ingerø | Board member | 38 000 | - |
| Erik Berg Solheim | Board member | 34 896 | 20 000 |
| Charlotte Bech Blindheim | Board member | 766 | - |
| Total | 487 738 | 20 000 |
* Mimi K. Berdal holds all her shares through MKB Invest AS.
| Navn | Stilling | Stocks | Options |
|---|---|---|---|
| Arne Mjøs * | Chief Executive Officer | 21 853 977 | 479 000 |
| Jon Erik Høgberg | Executive Vice President | 637 551 | 247 880 |
| Niko Nyström | Executive Vice President | 353 696 | 233 880 |
| Kristian Enger | Executive Vice President | 432 707 | 233 880 |
| Bent Hammer | Chief Financial Officer | 275 607 | 303 840 |
| John Aaling CEO Itera Aps (DK) |
121 377 | 89 280 | |
| Ane Gjennestad ** | Chief Communications Officer | 125 000 | 87 280 |
| Total | 23 799 915 | 1 675 040 | |
* Arne Mjøs holds all his shares through Arne Mjøs Invest AS, which also holds a future contract expiring 21 June 2019 on 3,350,000 shares at an average price of NOK 9.4689 per share. The total controlling interest of Arne Mjøs is thus 25,203,977 shares (30.7%).
** Ane Gjennestad holds shares privately and through Triceps AS.
| NOK 1000, excluding VAT | 2018 | 2017 |
|---|---|---|
| Statutory audit of Itera ASA | 148 | 174 |
| Statutory audit of subsidiaries in Norway | 188 | 201 |
| Statutory audit of international subsidiaries | 39 | 26 |
| Audit fees | 375 | 401 |
| Tax advisory services | - | - |
| Fees for other certification services | 44 | 44 |
| Other services provided to subsidiaries in Norway | 328 | 506 |
| Other services provided to international subsidiaries | 37 | 64 |
Fees to the auditors include fees to audit firms KPMG and PwC.
All of the Group's pension schemes are defined contribution schemes. The Group's pension expense is represented by the premiums paid and is included in payroll and personnel expenses in the Statement of Comprehensive Income. The Group's pension schemes in Norway comply with the Norwegian Mandatory Occupational Pension Act (OTP).
| Total | 15 890 | 13 157 |
|---|---|---|
| Denmark | 1 832 | 1 643 |
| Norway | 14 058 | 11 514 |
| NOK 1000 | 2018 | 2017 |
| Net foreign currency losses | (496) | (656) |
|---|---|---|
| Total financial expenses | 2 631 | 1 721 |
| Other financial expense | 600 | 57 |
| Foreign currency losses | 1 412 | 946 |
| Interest expense | 619 | 719 |
| Net financial income | 1 234 | 713 |
| Foreign currency gains | 917 | 290 |
| Interest income | 317 | 423 |
| NOK 1000 | 2018 | 2 017 |
| NOK 1000 | 2018 | 2017 |
|---|---|---|
| Gross accounts receivable at Dec. 31 | 52 449 | 54 197 |
| Provision for bad debts | (182) | (150) |
| Net accounts receivable at Dec. 31 | 52 267 | 54 047 |
| Aging of receivables | Total | Not due | < 30 days | 30-60 days | 60-90 days | > 90 days |
|---|---|---|---|---|---|---|
| Accounts receivable 2018 | 52 267 | 44 329 | 7 570 | 230 | 110 | 29 |
| Accounts receivable 2017 | 70 364 | 52 410 | 17 307 | 192 | 89 | 367 |
| 2018 | % | 2017 | % | |
|---|---|---|---|---|
| NOK | 39 773 | 76 % | 43 002 | 84 % |
| SEK | 0 | 0 % | 406 | 1 % |
| DKK | 12 494 | 24 % | 10 639 | 15 % |
| Sum | 52 267 | 100 % | 54 047 | 100 % |
Losses on accounts receivable are classified as operating expenses in the Consolidated Income Statement. A loss of NOK 32k was recognised in 2018, NOK 8k in 2017. Maximum credit risk is equivalent to the figure for net accounts receivable shown in the table above.
Intangible assets (capitalised development costs) are primarily related to the development of new concepts. These concepts are primarily related to contracts entered into with fixed future income.
In 2018, costs of NOK 7.9 million (NOK 13.4 million) incurred in connection with the development of products were capitalised. Expenditure incurred in connection with development work relates principally to the salaries and personnel costs of the employees involved in developing the concepts.
| 2018 | |||
|---|---|---|---|
| Development | |||
| NOK 1000 | costs | Software | Sum |
| Acquisition cost | |||
| Accumulated at 1 January | 74 082 | 4 423 | 78 505 |
| Additions | 7 871 | 1 418 | 9 289 |
| Disposals | (8 814) | (3 062) | (11 876) |
| Accumulated at 31 December | 73 140 | 2 778 | 75 918 |
| Amortisation | |||
| Accumulated at 1 January | 52 178 | 4 055 | 56 233 |
| Amortisation for the year | 8 079 | 567 | 8 645 |
| Amortisation on disposals in the year | (8 814) | (3 101) | (11 915) |
| Accumulated at 31 December | 51 443 | 1 521 | 52 964 |
| Book value | |||
| Book value at 1 January | 21 905 | 367 | 22 272 |
| Book value at 31 December | 21 697 | 1 257 | 22 954 |
| Estimated useful life | 3-5 Years | 3-5 Years | |
| Amortisation plan | Linear | Linear | |
| 2017 | |||
| Development |
| NOK 1000 | Development costs |
Software | Sum | ||
|---|---|---|---|---|---|
| Acquisition cost | |||||
| Accumulated at 1 January | 65 395 | 4 263 | 69 657 | ||
| Additions | 13 418 | 306 | 13 724 | ||
| Disposals | (4 730) | (146) | (4 876) | ||
| Accumulated at 31 December | 74 082 | 4 423 | 78 505 | ||
| Amortisation | |||||
| Accumulated at 1 January | 49 788 | 3 746 | 53 534 | ||
| Amortisation for the year | 7 120 | 449 | 7 568 | ||
| Amortisation on dispoals in the year | (4 730) | (139) | (4 869) | ||
| Accumulated at 31 December | 52 178 | 4 055 | 56 233 | ||
| Book value | |||||
| Book value at 1 January | 15 607 | 517 | 16 124 | ||
| Book value at 31 December | 21 905 | 367 | 22 272 | ||
| Estimated useful life | 3-5 Years | 3-5 Years | |||
| Amortisation plan | Linear | Linear | |||
| 2018 | ||||
|---|---|---|---|---|
| Office machinery | Fixtures and | Leased IT | ||
| NOK 1000 | & equipment | fittings | equipment | Sum |
| Acquisition cost | ||||
| Accumulated at 1 January | 14 208 | 8 317 | 55 082 | 77 607 |
| Additions | 3 779 | 7 224 | 3 689 | 14 693 |
| Disposals | 908 | (3 950) | (31 395) | (34 437) |
| Translation differences | (5) | - | - | (5) |
| Accumulated at 31 December | 18 891 | 11 592 | 27 376 | 57 858 |
| Depreciation | ||||
| Accumulated at 1 January | 8 919 | 4 696 | 42 756 | 56 371 |
| Depreciation | 4 262 | 617 | 7 617 | 12 496 |
| Depreciation on disposals | (106) | (2 840) | (31 395) | (34 340) |
| Translation differences | (146) | - | - | (146) |
| Accumulated at 31 December | 12 929 | 2 473 | 18 978 | 34 381 |
| Book value | ||||
| Book value at 1 January | 5 289 | 3 621 | 12 325 | 21 235 |
| Book value at 31 December | 5 961 | 9 119 | 8 398 | 23 477 |
| Estimated useful life | 3 years | 5-10 years | 3 years | |
| Depreciation plan | linear | linear | linear | |
| 2017 | ||||
| NOK 1000 | Office machinery & equipment |
Fixtures and fittings |
Leased IT equipment |
Sum |
| Acquisition cost | ||||
| Accumulated at 1 January | 13 320 | 8 060 | 53 516 | 74 896 |
| Additions | 5 478 | 257 | 1 566 | 7 300 |
| Disposals | (4 615) | 1 | - | (4 614) |
| Translation differences | 25 | - | - | 25 |
| Accumulated at 31 December | 14 208 | 8 317 | 55 082 | 77 607 |
| Depreciation | ||||
| Accumulated at 1 January | 9 849 | 4 081 | 34 239 | 48 169 |
| Depreciation | 3 635 | 615 | 8 517 | 12 766 |
| Depreciation on disposals | (4 564) | - | - | (4 564) |
| Accumulated at 31 December | 8 919 | 4 696 | 42 756 | 56 372 |
| Book value | ||||
|---|---|---|---|---|
| Book value at 1 January | 3 471 | 3 978 | 19 276 | 26 726 |
| Book value at 31 December | 5 289 | 3 621 | 12 326 | 21 235 |
| Estimated useful life | 3 years | 5-10 years | 3 years | |
| Depreciation plan | linear | linear | linear |
The Group has entered into leasing contracts in connection with investments in IT equipment related to its major IT hosting contracts.
15
TAXES
The Group has entered into leasing contracts in connection with investments in IT equipment related to its major IT hosting contracts.
| NOK 1000 | 2018 | 2017 |
|---|---|---|
| IT equipment | 27 376 | 55 082 |
| Accumulated depreciation | (18 978) | (42 756) |
| Book value at 31 December | 8 398 | 12 326 |
| Future minimum lease payments are as follows | 2018 | 2 017 |
| Up to 1 year | 4 205 | 7 337 |
| 1 to 5 years | 4 871 | 7 038 |
| Over 5 years | - | - |
| Future minimum lease payments | 9 076 | 14 374 |
| Interest | 334 | 600 |
| Discounted present value of future minimum lease payments | 8 742 | 13 774 |
| Of which | ||
| - current liabilities | 4 001 | 6 975 |
| - non-current liabilities | 4 741 | 6 799 |
| Changes in discounted present value of future lease payments | 2018 | 2017 |
| Discounted present value of future lease payments 01.01 | 13 774 | 20 311 |
| New finance lease liabilities | 3 689 | 1 577 |
| Payments of lease liabilities | (8 721) | (8 114) |
| Discounted present value of future minimum lease payments 31.12 | 8 742 | 13 774 |
| NOK 1000 | 2018 | 2017 |
| Tax expense | ||
| Tax payable | 9 652 | 8 839 |
| Change in deferred tax | 90 | (148) |
| Total tax expense | 9 742 | 8 691 |
| Tax payable in the balance sheet: | ||
| Profit before tax | 41 419 | 38 325 |
| Permanent tax differences | 3 378 | (2 500) |
| Changes in temporary differences | 2 782 | 1 575 |
| Implementation of IFRS 15 | (643) | - |
| Tax losses carried forward | (298) | (439) |
| Total basis for tax payable | 46 639 | 36 961 |
| Tax payable in the balance sheet | 9 536 | 8 531 |
| Tax paid in advance | (2 120) | (925) |
| Net tax payable Dec. 31 | 7 416 | 7 606 |
Taxes paid in advance is included in other current receivables.
| NOK 1000 | 2018 | 2017 |
|---|---|---|
| Specification of the basis for deferred tax | ||
| Fixed assets | (13 060) | (12 014) |
| Current assets | (150) | (150) |
| Other temporary differences | (124) | 113 |
| Implementation of IFRS 15 | (3 168) | - |
| Tax losses carried forward | - | - |
| Total | (16 502) | (12 051) |
| Deferred tax | (3 630) | (3 023) |
| Deferred tax recognised in the balance sheet | (3 630) | (3 023) |
| NOK 1000 | 2018 | 2017 |
|---|---|---|
| Reconciliation of tax rate | ||
| Profit before tax | 41 419 | 38 325 |
| Tax calculated at the nominal corporation tax rate of 23% (24%) | 9 526 | 9 198 |
| Effect of change in the tax rate | 128 | 133 |
| Effect of tax from previous year | (69) | (105) |
| Effect of differing tax rates for foreign subsidiaries | (473) | 65 |
| Effect of permanent differences | 777 | (600) |
| Effect of implementation of IFRS 15 | (148) | - |
| Tax expense in profit and loss | 9 742 | 8 691 |
| Effective tax rate | (23,5%) | (22,7%) |
Information on the exchange rates applied by the Itera Group in 2018.
| Jan 1 | Average | Dec 31 | |
|---|---|---|---|
| SEK | 0,9996 | 0,9363 | 0,9701 |
| DKK | 1,3218 | 1,2892 | 1,3322 |
| EUR | 9,8403 | 9,5996 | 9,9483 |
| USD | 8,2050 | 8,1338 | 8,6885 |
| UAH | 0.2946 | 0,2987 | 0,3145 |
| 25 000 | 25 000 |
|---|---|
| 46 455 | 51 323 |
| (8 824) | (8 531) |
| 55 279 | 59 854 |
| 2018 | 2017 |
Restricted cash include the employees' tax withholdings.
The Group has a multi-currency cash-pool agreement with Danske Bank.
17 CASH AND CASH EQUIVALENTS
The overdraft facility agreement with Danske Bank has the following financial covenant:
* NIBD / EBITDA (net interest-bearing debt ratio) shall not be more than 2.25.
This key ratio is assessed as at December 31st each year and at the latest 120 days after year-end.
The Group temporarily drew upon the overdraft facility in Q3 of 2018 but had no borrowings from Danske Bank as at 31 December 2018.
As collateral for the line of credit, the bank has a pledge on the customer receivables of the Norwegian subsidiaries.
The Group had a liability for rent of premises totalling NOK 57.4 million at 31 December 2018. This amount includes rental agreement for Itera's head office premises at Nydalen in Oslo that runs until 30 June 2023, as well as rental agreement for office premises in Kiev (Ukraine) that runs until 5 December 2022.
NOK 1000
| Analysis of minimum future leasing payments: | 31.12.2018 | 31.12.2017 |
|---|---|---|
| Up to 1 year | 16 436 | 12 105 |
| 1 to 5 years | 40 951 | 46 064 |
| Over 5 years | - | 3 862 |
| Total payments | 57 388 | 62 030 |
Reconciliation of the operating lease expenses to the implementation effect of IFRS 16.
| Operating lease commitments disclosed as at 31 December 2018 | 57 388 |
|---|---|
| Discounted using the Group's incremental borrowing rate | (3 369) |
| Finance lease liabilities recognised as at 31 December 2018 | 57 343 |
| Short term leases recognised on a straight-line basis as expense | 45 |
| Low-value leases recognised on a straight-line basis as expense | - |
| Contracts reassessed as service agreements | - |
| Adjustments as a result of a different treatment of extension and termination options | - |
| Adjustments relating to changes in the index or rate affecting variable payments | - |
| Lease liability recognised as at 1 January 2019 | 54 019 |
The new standard IFRS 15 Revenue from Contracts with Customers is based on the principle of recognising revenue when control of goods or services transfers to a customer. The notion of control replaces the existing notion of risks and rewards. The most important change to earlier practice is that revenue from consulting services rendered that relate to subscription contracts in some cases will be recognised over the contract period for the subscription contract and not at point in time when the services are delivered as was previously the case. Under IFRS 15, control is considered to have been transferred when the subscription contracts are fulfilled, not when the services are rendered. The costs of fulfilling a contract, such as costs related to delivering the services mentioned, were under the previous accounting policy expensed as incurred. IFRS 15 requires such costs to be capitalised as contract costs if the amortisation period is more than 12 months. The amortisation period is the expected contract period, including renewals. Payments from customers for delivering these services are under IFRS considered prepayments and classified as contract
60 ITERA ANNUAL REPORT 2018
liabilities under current liabilities. Itera is applying the prospective approach in adopting the standard, which means that the cumulative impact of adopting the standard has been recognised in retained earnings at 1 January 2018. In addition, certain line items in the statement of financial position have changed, mainly in relation to contract costs and liabilities.
The tables below show the impact of IFRS 15 on the statement of consolidated income for 2018 and on the statement of financial position as at 31 December 2018.
| Old | Effect | New | |
|---|---|---|---|
| NOK 1000 | Principles 31 Dec 2018 |
of IFRS 15 |
Principles 31 Dec 2018 |
| ASSETS | |||
| Deferred tax assets | 2 981 | 650 | 3 630 |
| Other intangible assets | 22 954 | - | 22 954 |
| Fixed assets | 23 477 | - | 23 477 |
| Total non-current assets | 49 411 | 650 | 50 061 |
| Work in progress | 13 428 | (9 240) | 4 188 |
| Accounts receivable | 52 267 | - | 52 267 |
| Contract costs | - | 16 407 | 16 407 |
| Other receivables | 16 665 | - | 16 665 |
| Bank deposits | 55 279 | - | 55 279 |
| Total current assets | 137 640 | 7 167 | 144 807 |
| TOTAL ASSETS | 187 052 | 7 816 | 194 868 |
| EQUITY AND LIABILITIES | |||
| Equity | |||
| Share capital | 24 656 | - | 24 656 |
| Other equity | 11 546 | (20 437) | (8 890) |
| Net income for the period | 13 416 | 18 261 | 31 677 |
| Total equity | 49 618 | (2 175) | 47 443 |
| Other provisions and liabilities | 871 | - | 871 |
| Non-current interest-bearing liabilities | 4 741 | - | 4 741 |
| Total non-current liabilities | 5 613 | - | 5 613 |
| Accounts payable | 23 941 | - | 23 941 |
| Tax payable | 9 537 | - | 9 537 |
| Public duties payable | 33 130 | - | 33 130 |
| Contract liabilities | 14 443 | 9 703 | 24 146 |
| Other current liabilities | 50 769 | 288 | 51 058 |
| Total current liabilities | 131 821 | 9 991 | 141 812 |
| Total liabilities | 137 433 | 9 991 | 147 425 |
| TOTAL EQUITY AND LIABILITIES | 187 052 | 7 816 | 194 868 |
| Old | Effect | New | |
|---|---|---|---|
| Principles | of | Principles | |
| NOK 1000 | 2018 | IFRS 15 | 2018 |
| Revenues | 528 658 | 2 665 | 531 323 |
| Cost of goods and services | 87 768 | (493) | 87 275 |
| Salaries and personnell expenses | 325 955 | 1 814 | 327 769 |
| Depreciation and amortisation | 21 141 | - | 21 141 |
| Other operating and administrative expenses | 52 322 | - | 52 322 |
| Total operating expenses | 487 186 | 1 321 | 488 507 |
| Operating profit | 41 472 | 1 343 | 42 816 |
| Financial income | 1 234 | - | 1 234 |
| Financial expenses | 2 365 | 265 | 2 631 |
| Net financial income (expenses) | (1 131) | (265) | (1 397) |
| Profit before taxes | 40 341 | 1 078 | 41 419 |
| Income taxes | 9 494 | 248 | 9 742 |
| Net income | 30 847 | 830 | 31 677 |
Itera ASA's share capital on 31 December 2018 was NOK 24,655,987 made up of 82,186,624 fully paid shares each with nominal value of NOK 0.30.
At the close of 2018, Itera ASA had 1,870 shareholders. Of these, 5% were foreign shareholders. The company's 20 largest shareholders owned 71 % of the company's shares at year end.
The Itera ASA held 213,935 own shares at the start of 2018. The Group purchased 2,500,000 own shares in 2018 and sold 1,471,770 own shares in connection with share option and employee share purchase programmes. The Itera Group held 1,242,165 own shares at the end of 2018.
A dividend of NOK 0.25 per share is proposed, totalling NOK 20.5 million.
| 20 largest shareholders in Itera ASA at 31 December 2018 | Shares | % |
|---|---|---|
| ARNE MJØS INVEST AS* | 21 853 977 | 26,6 % |
| OP CAPITAL AS | 4 358 001 | 5,3 % |
| EIKESTAD AS | 4 000 000 | 4,9 % |
| GIP AS | 3 570 000 | 4,3 % |
| DnB NOR Bank ASA EGENHANDELSKONTO DnB NOR Markets | 3 327 360 | 4,0 % |
| SEPTIM CONSTULTING A | 2 755 000 | 3,4 % |
| BOINVESTERING AS | 2 620 000 | 3,2 % |
| GAMST INVEST AS | 2 200 000 | 2,7 % |
| JØSYRA INVEST AS | 2 200 000 | 2,7 % |
| STOREBRAND VEKST VER JPMORGAN EUROPE LTD, | 2 179 855 | 2,7 % |
| MARXPIST INVEST AS c/o Børre Gammelsrud | 2 031 588 | 2,5 % |
| ITERA ASA | 1 242 165 | 1,5 % |
| FRAMAR INVEST AS | 1 000 000 | 1,2 % |
| AANESTAD PANAGRI AS | 900 000 | 1,1 % |
| ALTEA PROPERTY DEVEL | 658 477 | 0,8 % |
| SÆTRANG MORTEN | 605 814 | 0,7 % |
| HØGBERG JON ERIK | 637 551 | 0,8 % |
| NYVANG JETMUND GUNNAR | 655 000 | 0,8 % |
| JENSEN LARS PETER | 619 900 | 0,8 % |
| BNP Paribas Securiti BPSS PAR/NO TREATY/U | 605 814 | 0,7 % |
| Total 20 largest | 58 020 502 | 70,6 % |
| Other shareholders | 24 166 122 | 29,4 % |
| Total all issued | 82 186 624 | 100,0 % |
* Arne Mjøs Invest AS holds a future contract expiring 21 June 2019 on 3,350,000 shares at an average price of NOK 9.4689 per share. The total controlling interest of Arne Mjøs is thus 25,203,977 shares (30.7%) of which 3,350,000 shares on future contracts.
There were no other transactions between the Group and related parties in the period from 1 January to 31 December 2018 other than those described in note 9.
After the reporting period ended on 31 December 2018 and up to the date these consolidated financial statements have been approved for issue, no events have been identified that require disclosure.
22 SUBSEQUENT EVENTS
| STORIES | CEO COMMENT | HIGHLIGHTS | BOARD OF DIRECTORS | C O R P O R AT E G OV E R N A N C E | F I N A N C I A L STAT E M E N T S | |||
|---|---|---|---|---|---|---|---|---|
| CONTENT | 65 | Income statement | ||||||
| PARENT | 66 | Statement of financial position | ||||||
| 68 | Statement of cash flows | |||||||
| 69 | General information and significant accounting policies | |||||||
| 71 | Note 1. | Salaries, personnel expenses and other remuneration | ||||||
| 71 | Note 2. | Pensions | ||||||
| 71 | Note 3. | Share-based remuneration | ||||||
| 72 | Note 4. | Non-current assets | ||||||
| 72 | Note 5. | Shares in subsidiaries | ||||||
| 73 | Note 6. | Additional equity information | ||||||
| 74 | Note 7. | Income taxes | ||||||
| 74 | Note 8. | Income from investments in subsidiaries | ||||||
| 75 | Note 9. | Balances between companies in the same group, including cash pool | ||||||
| 75 | Note 10. | Restricted deposits | ||||||
| 75 | Note 11. | Transactions with related parties | ||||||
| 75 | Note 12. | Official taxes and duties payable | ||||||
| 76 | Note 13. | Financial risk management | ||||||
| 77 | Statement by the Board of Directors and the CEO | |||||||
| 78 | Auditor's Report |
| NOK 1 000 | Note | 2018 | 2017 |
|---|---|---|---|
| Sales revenue | 31 343 | 27 126 | |
| Operating revenue | 11 | 31 343 | 27 126 |
| Salaries and personnel expenses | 1,2,3 | 20 540 | 19 471 |
| Depreciation and amortisation | 4 | 1 345 | 1 197 |
| Other operating expenses | 1 | 14 752 | 13 361 |
| Total operating expenses | 36 637 | 34 029 | |
| Operating profit (loss) | (5 295) | (6 904) | |
| Income from investments in subsidiaries | 8 | 44 596 | 52 805 |
| Interest income from companies in the same group | 80 | 50 | |
| Other financial income | 5 | 122 | 513 |
| Interest expense to companies in the same group | 5 577 | 548 | |
| Other financial expense | 353 | 101 | |
| Net financial income | 38 868 | 52 717 | |
| Profit before income tax | 33 573 | 45 813 | |
| Income taxes | 7 | 4 | 702 |
| Net profit for the year | 33 570 | 45 111 | |
| Allocation of profit/loss: | |||
| To supplemental dividend | 6 | - | 20 319 |
| To ordinary dividend | 6 | 20 547 | 20 547 |
| To/from other equity | 6 | 13 023 | 4 245 |
| Total allocation | 33 570 | 45 111 | |
| NOK 1 000 | Note | 2018 | 2017 |
|---|---|---|---|
| ASSETS | |||
| Deferred tax assets | 7 | 245 | 249 |
| Intangible assets | 4 | 1 524 | 1 486 |
| Property, plant and equipment | 4 | 2 664 | 2 584 |
| Investment in subsidiaries | 5 | 107 881 | 109 953 |
| Total non-current assets | 112 314 | 114 272 | |
| Receivables from group companies | 9 | 60 433 | 66 977 |
| Other receivables | 2 822 | 2 227 | |
| Total receivables | 63 255 | 69 203 | |
| Cash and cash equivalents | 9, 10 | 45 535 | 50 078 |
| Total current assets | 108 790 | 119 282 | |
| TOTAL ASSETS | 221 103 | 233 553 |
| NOK 1 000 | Note | 2018 | 2017 |
|---|---|---|---|
| EQUITY AND LIABILITIES | |||
| Share capital | 6 | 24 656 | 24 656 |
| Other paid-in capital | 6 | (8 544) | 2 191 |
| Own shares | 6 | (373) | (64) |
| Total paid-in capital | 15 739 | 26 783 | |
| Other equity | 6 | 55 851 | 42 774 |
| Total retained earnings | 55 851 | 42 774 | |
| Total equity | 71 590 | 69 557 | |
| Accounts payable | 3 437 | 1 501 | |
| Tax payable | 7 | - | 483 |
| Public fees payable | 12 | 14 737 | 15 073 |
| Liabilities to group companies | 9 | 104 968 | 118 051 |
| Proposed dividend | 6 | 20 547 | 20 547 |
| Other current liabilities | 5 824 | 8 342 | |
| Total current liabilities | 149 513 | 163 997 | |
| Total liabilities | 149 513 | 163 997 | |
| TOTAL EQUITY AND LIABILITIES | 221 103 | 233 553 |
Oslo, April 25, 2019 The Board of Directors of Itera ASA
Morten Thorkildsen Chairman of the board
Gyrid Skalleberg Ingerø Board member
Mimi K. Berdal Board member
Charlotte Bech Blindheim Board member
Jan-Erik Karlsson Board member
Erik Berg Solheim Board member
| NOK 1000 | NOTE | 2018 | 2017 |
|---|---|---|---|
| Cash flow from operating activities | |||
| Profit before tax | 33 573 | 45 813 | |
| Dividend and group contribution recognised but not paid | 8 | (44 596) | (52 805) |
| Share option costs | 6 | 126 | (1 072) |
| Depreciation and amortisation | 4 | 1 345 | 1 197 |
| Change in accounts payable | 1 918 | (1 482) | |
| Change in other accruals | (1 987) | 3 183 | |
| Net cash flow from operating activities | (9 622) | (5 165) | |
| Cash flow from investment activities | |||
| Purchases of property, plant and equipment and intangible assets |
4 | (1 463) | (286) |
| Payments from group contributions and dividends from subsidiaries |
52 805 | 13 946 | |
| Payments of liabilities to group companies | (707) | (972) | |
| Payments of receivables from group companies | 1 356 | 187 | |
| Net cash flow from investment activities | 51 990 | 12 876 | |
| Cash flow from financing activities | |||
| Net change in group cash pool | (14 937) | 11 613 | |
| Payments of purchases of own shares | 6 | (22 556) | (1 590) |
| Proceeds from sales of own shares | 6 | 11 075 | 3 643 |
| Dividend paid | 6 | (20 493) | (35 113) |
| Net cash flow from financing activities | (46 911) | (21 446) | |
| Net change in cash and cash equivalents | (4 543) | (13 736) | |
| Cash and cash equivalents as at 1 January | 50 078 | 63 814 | |
| Cash and cash equivalents as at 31 December | 45 535 | 50 078 |
The accounts for Itera ASA have been prepared in accordance with the Accounting Act of 1998 and the generally accepted accounting principles in Norway (NGAAP). In cases where the notes for the parent company are significantly different from the notes for the Group, these are provided below. Reference is otherwise made to the information in the notes for the Group.
Preparing accounts in accordance with Norwegian Generally Accepted Accounting Principles involves management making judgments, estimates and assumptions that influence the accounting principles that are applied and the amounts that are reported for assets, liabilities, revenue and costs. Actual amounts may vary from the estimated amounts. The estimates and underlying assumptions used are evaluated continuously. Changes in accounting estimates are recognised in the period in which the estimates are changed and in all future periods that are affected by the changes.
Investments in subsidiaries are valued at acquisition cost less any write downs. Investments are written down when impaired unless the impairment is regarded as temporary. Impairment losses are reversed if the basis for the impairment loss is no longer present. Dividends, group contributions and other distributions from subsidiaries are recognised in profit and loss on the same date as they are recognised in the accounts of subsidiaries. If the distributions paid by a subsidiary exceed the profit earned by the company during any given ownership period, these are regarded as repayments of the investment and the carrying value of the investment is reduced.
Transactions involving foreign currencies are translated into functional currency using the exchange rates that are in effect at the time of the transactions. Gains and losses that arise from the payment of such transactions and the translation of monetary items in foreign currencies at the rates in effect on the date of the balance sheet are recognised in the income statement. The Company uses the Norwegian kroner (NOK) as both its functional and presentation currency.
Ordinary shares are classified as equity. Costs directly attributable to the issuance of ordinary shares and share options are recognized as a deduction from equity, net of any tax effects.
Where the Company purchases its own shares, the consideration paid, including any directly attributable costs, is recognised as a change in equity. Own shares are presented as a reduction in equity, net of any tax effects. When the Company sells or reissues it own shares, the consideration received is recognised as an increase in equity, and gains or losses arising from such transactions are applied to retained earnings.
Intangible assets are recognised on the balance sheet if it can be shown to be probable that there will be future economic benefits attributable to the assets and their cost price can be estimated reliably. Intangible assets are carried at cost price.
Tangible fixed assets are carried at acquisition cost less accumulated depreciation and accumulated impairment losses. If the fair value of a tangible fixed asset is lower than its carrying value and the impairment is not temporary, the asset is written down to fair value.
At each balance sheet date, the Company assesses whether there are objective indications that assets may be impaired. Assets that are individually significant are tested for impairment on an individual basis. The remaining assets are assessed collectively or in groups of assets that share similar credit risk characteristics. All impairment losses are charged to profit and loss. Impairment losses are reversed if the reversal can be objectively linked to an event that occurs after the loss was recognised.
The Company has a defined contribution pension plan. The contributions are recognised as salaries and personnel cost in the income statements as they incur.
Employee share options at Itera give employees the right to subscribe to shares in Itera ASA at a future point at a predetermined price (exercise right). This right as a rule is dependent on the employee achieving concrete targets and still being employed at the time of exercise. The value of share options is calculated at grant date and expensed as a personnel cost over the vesting period. Options are normally granted with a subscription price equal to the average share price over the thirty days prior to the grant date. The social security tax costs associated with employees' taxable benefits are expensed as incurred over the accrual periods on the basis of the accrual rates and values at the balance sheet date.
The parent company's operating revenue arises from the shared services it delivers through its Group Functions in the accounting/finance, HR, IT and information/communication areas. Its revenue is based on a cost-plus model and is recognised when the services are delivered.
Financial income comprises interest income from financial investments and group contributions or dividends from subsidiaries. Group contributions and dividends are recognised in profit and loss on the same date that they are recognised by the company from which they are received. Financial expense comprises interest expense on borrowings.
Tax expense comprises both tax payable and changes in deferred tax. Tax expense is recognised in the profit and loss account. Deferred tax assets and liabilities are calculated using the liability method on a nondiscounted basis, and are calculated for all differences arising between accounting values and tax values of assets and liabilities as well as for losses carried forward. Deferred tax assets on net tax-reducing differences that have not been eliminated and tax losses that are to be carried forward are recognised on the basis of expected future earnings.
| NOK 1000 | 2018 | 2017 |
|---|---|---|
| Salaries | 16 545 | 15 680 |
| Share option costs | 344 | 344 |
| Social security tax | 2 733 | 2 323 |
| Pension costs | 661 | 642 |
| Other personnel costs | 257 | 482 |
| Total salaries and personnel expenses | 20 540 | 19 471 |
| Average number of employees | 17 | 16 |
For information on salaries and other remuneration of the executive management, see note 9 to the consolidated accounts.
| Analysis of remuneration paid to the auditor: | 2018 | 2 017 |
|---|---|---|
| Statutory audit | 148 | 174 |
| Tax advice | - | - |
| Other services | 265 | 355 |
| Total fees paid to the auditor | 413 | 530 |
Itera ASA operates a defined contribution pension scheme. The Company's pension expense is represented by the premiums paid, and totalled NOK 661k in 2018 (NOK 642k). The Company's pension scheme complies with the Norwegian Mandatory Occupational Pension Act (OTP).
Share option costs (including employer's social security contributions) of NOK 277k were expensed in 2018 (NOK 344k in 2017). See note 8 in the consolidated financial statements for further information on sharebased remuneration.
| Outstanding | Issued | Expired in | Exercised in | Outstanding | Fair value when |
Exercise | Share price | Date | Exercise | |
|---|---|---|---|---|---|---|---|---|---|---|
| Programme | 31.12.2017 | 2018 | 2018 | 2018 | 31.12.2018 | issued | price 1) | when issued 2) | of issue | period |
| 2015 | 86 000 | - | - | - | 86 000 | NOK 0.25 | NOK 2.58 | NOK 2.58 | 07.09.2015 | 2016-2019 |
| 2016 | 620 000 | - | - | 100 000 | 520 000 | NOK 0.26 | NOK 3.89 | NOK 3.89 | 08.07.2016 | 2017-2020 |
| 2017 | 282 240 | - | - | 15 240 | 267 000 | NOK 0.60 | NOK 6.42 | NOK 6.42 | 28.06.2017 | 2018-2021 |
any intrinsic value on this date.
1) The exercise price is the average share price over the 30 days prior to the date the option is granted. 2) The exercise price is set at fair value on the date the option is granted. The company works on the basis that the exercise price is the same as the share price on the date the option is granted and that the options do not have
Programme Number Interest rate Volatility Lifetime 2015 86 000 0,77 % 30.0% 3.77 years 2016 520 000 0,49 % 25.0% 3.94 YEARS 2017 267 000 0,90 % 28.9% 3.96 years Total 873 000
3 SHARE-BASED REMUNERATION
| 2018 | |||||||
|---|---|---|---|---|---|---|---|
| NOK 1000 | Research and development |
Software | Total intangible assets |
Office machinery & equipment |
Fixtures and fittings |
Total property, plant and equipment |
Total non current assets |
| Acquisition cost | |||||||
| Accumulated at 1 January | 1 918 | 3 317 | 5 235 | 479 | 3 123 | 3 602 | 8 837 |
| Additions | - | 681 | 681 | 102 | 680 | 782 | 1 463 |
| Disposals | - | (2 927) | (2 927) | (238) | (35) | (272) | (3 199) |
| Accumulated at 31 December | 1 918 | 1 071 | 2 989 | 344 | 3 768 | 4 112 | 7 101 |
| Depreciation and amortisation | |||||||
| Accumulated at 1 January | 575 | 3 174 | 3 749 | 323 | 695 | 1 018 | 4 767 |
| Depreciation and amortisation | 384 | 259 | 643 | 105 | 597 | 703 | 1 345 |
| Depreciation and amortisation on disposals |
- | (2 927) | (2 927) | (238) | (35) | (272) | (3 199) |
| Accumulated at 31 December | 959 | 506 | 1 465 | 191 | 1 258 | 1 448 | 2 913 |
| Book value | |||||||
| Book value at 1 January | 1 343 | 143 | 1 486 | 156 | 2 428 | 2 584 | 4 070 |
| Book value at 31 December | 959 | 565 | 1 524 | 153 | 2 511 | 2 664 | 4 188 |
| Estimated useful life | 3-5 years | 3-5 years | 3-5 years | 3-5 years | |||
| Depreciation plan | linear | linear | linear | linear |
| Registered office |
Share capital* |
Shareholding | Book value 1 Jan. |
Change | Book value 31 Dec. |
Profit/loss 2018 |
Equity 2018 |
|---|---|---|---|---|---|---|---|
| Oslo | 1 000 | 100 % | 49 730 | 886 | 50 616 | 22 307 | 30 376 |
| Oslo | 200 | 100 % | 7 500 | - | 7 500 | 2 521 | 4 823 |
| Oslo | 200 | 100 % | 21 438 | (4 987) | 16 451 | (789) | 13 597 |
| Bryne | 182 | 100 % | 14 237 | 127 | 14 364 | 5 353 | 9 384 |
| Stockholm | 100 | 100 % | - | - | - | 298 | 1 649 |
| Copenhagen | 1 424 | 100 % | 16 559 | - | 16 559 | 6 647 | 3 630 |
| Kiev | 7125 | 100 % | 489 | 1 901 | 2 390 | (31) | 1 500 |
| 109 953 | (2 073) | 107 880 | 36 306 | 64 961 | |||
* Share capital is reported in the local currency (1,000).
1) Due to uncertainty in connection with the duration of contracts with customers, investment in Cicero has been impaired by NOK 5 milllion.
2) Itera Sverige AB is owned by Itera Norge AS, with book value of NOK 1.3 million.
| Share | Own | Other | Other | Total | |
|---|---|---|---|---|---|
| NOK 1 000 | capital | shares | paid-in capital | equity | equity |
| Equity at 01 January 2017 | 24 656 | (290) | 2 097 | 38 180 | 64 643 |
| Net income for the period | - | - | - | 45 111 | 45 111 |
| Share option costs | - | - | 62 | (1 134) | (1 072) |
| Employee share purchase programme |
- | - | 32 | - | 32 |
| Purchase of own shares | - | (75) | - | (1 515) | (1 590) |
| Sale of own shares | - | 300 | - | 2 998 | 3 298 |
| Dividends | - | - | (40 866) | (40 866) | |
| Equity at 31 December 2017 | 24 656 | (65) | 2 191 | 42 774 | 69 557 |
| Net income for the period | - | - | - | 33 570 | 33 570 |
| Share option costs | - | - | 126 | - | 126 |
| Employee share purchase programme |
- | - | 312 | - | 312 |
| Purchase of own shares | - | (750) | (21 806) | - | (22 556) |
| Sale of own shares | - | 442 | 10 634 | - | 11 076 |
| Dividends | - | - | - | (20 493) | (20 493) |
| Equity at 31 December 2018 | 24 656 | (373) | (8 544) | 55 851 | 71 590 |
See note 8 in the consolidated financial statements for further information on share-based remuneration.
| DRI. C |
|---|
| ----------- |
7 INCOME TAXES
| NOK 1 000 | 2018 | 2017 |
|---|---|---|
| Tax expense for the year | ||
| Current tax on profit for the year | - | 483 |
| Change in deferred tax | 4 | 219 |
| Total tax expense for the year | 4 | 702 |
| Tax payable | ||
| Profit before tax | 33 573 | 45 813 |
| Permanent differences | (33 606) | (42 934) |
| Change in temporary differences | 32 | (427) |
| Utilisation of losses carried forward | - | (439) |
| Basis for current tax, taxable revenue | - | 2 013 |
| Tax payable in the balance sheet | - | 483 |
| Specification of the basis for deferred tax | ||
| Fixed assets | (759) | (907) |
| Other temporary differences | (355) | (175) |
| Total temporary differences | (1 114) | (1 082) |
| Losses carried forward | - | - |
| Basis for deferred tax | (1 114) | (1 082) |
| Deferred tax asset (-) / Deferred tax liability (+) | (245) | (249) |
| Reconciliation from nominal to effective tax rate | ||
| Expected tax at nominal corporation tax rate of 23% (24%) | 7 722 | 10 995 |
| Effect of permanent differences | (7 729) | (10 304) |
| Expected tax at nominal corporation tax rate of 23% (24%) | 7 722 | 10 995 |
|---|---|---|
| Effect of permanent differences | (7 729) | (10 304) |
| Effect of change in the tax rate on calculation of deferred tax asset | 11 | 11 |
| Tax charge in the income statement | 4 | 702 |
| Effective tax rate | 0,0 % | 1,5 % |
Itera ASA has recognised the following income in its annual accounts from its investment in its subsidiaries:
| NOK 1000 | Group | ||
|---|---|---|---|
| Company name | Dividend | contribution | TOTAL |
| Itera Norge AS | 24 000 | 5 869 | 29 869 |
| Itera Offshoring Services AS | 2 500 | - | 2 500 |
| Compendia AS | 5 300 | - | 5 300 |
| Itera Aps | 6 927 | - | 6 927 |
| Total income from investment in subsidiaries | 38 727 | 5 869 | 44 596 |
| NOK 1000 | ||
|---|---|---|
| Receivables from Group companies Company name |
2018 | 2017 |
| Itera Norge AS | 40 286 | 49 817 |
| Itera Consulting ApS | 6 927 | 3 310 |
| Cicero Consulting AS | 1 854 | 1 753 |
| Compendia AS | 7 819 | 7 097 |
| Itera Offshoring Services AS | 3 546 | 5 000 |
| Total | 60 433 | 66 977 |
Receivables from group companies consist of group accounts receivables, receivables from group companies relating to the group's joint value added tax registration (see Note 12) and receivables in relation to group contributions and dividends.
| NOK 1000 Liabilities to Group companies |
||
|---|---|---|
| Company name | 2018 | 2017 |
| Itera Norge AS | 78 900 | 91 970 |
| Compendia AS | 16 212 | 15 196 |
| Cicero Consulting AS | - | 3 813 |
| Itera Consulting ApS | 9 554 | 5 633 |
| Itera Offshoring Services AS | 302 | 1 438 |
| Total | 104 968 | 118 051 |
In the group's cash pool, Itera ASA is responsible both for its own deposits/drawings and for deposits/drawings made by the subsidiaries. The figures reported for bank deposits held by Itera ASA in the balance sheet include deposits paid into the cash pool by the subsidiaries, which are netted against the parent company's drawings. The bank deposits held by the subsidiaries in the cash pool are reported in the parent company accounts as liabilities to group companies.
Itera ASA holds NOK 45.5 million (50.0 million) in cash and bank deposits, of which NOK 1.0 million (NOK 1.0 million) is on restricted accounts for payment of payroll tax deductions.
Itera has structured internal support processes in the areas of accounting/finance, HR, internal IT, and information and communication as Group Functions. These functions are part of Itera ASA and work with the subsidiaries. The parent company invoices these subsidiaries on a cost-plus model. In 2018, Itera invoiced NOK 31.3 million (NOK 27.0 million in 2017) in respect of these services.
The Norwegian companies in the group are jointly registered for value added tax and other taxes and duties, and accordingly the figures reported for official taxes and duties payable include value added tax payable by the other Norwegian companies in the group. The total VAT liability is included in the parent company accounts but is offset by intragroup receivables due from subsidiaries.
RESTRICTED DEPOSITS
TRANSACTIONS WITH RELATED PARTIES
OFFICIAL TAXES AND DUTIES PAYABLE
The Group is exposed to various financial risks, such as credit risk, liquidity risk, currency risk and interest rate risk. These risks are regarded as low. The Group has established procedures for managing these risks. The main principle is to minimise the level of financial risk, and the Group on this basis holds no assets or liabilities for speculative purposes. See note 6 in the consolidated financial statements for further information on financial risk management.
The Board of Directors and the CEO have today approved the annual report and annual accounts of the Itera ASA group and the parent company for the 2018 calendar year and as at 31 December 2018 (2018 Annual Report).
To the best of our knowledge:
Oslo, April 25, 2019 The Board of Directors and the CEO of Itera
Morten Thorkildsen Chairman of the board
Mimi K. Berdal Board member
Gyrid Skalleberg Ingerø Board member
Charlotte Bech Blindheim Board member
Arne Mjøs Chief Executive Officer
Jan-Erik Karlsson
Board member
Erik Berg Solheim Board member
The objective of Itera ASA (the Company) is to ensure its shareholders a competitive return in the form of dividends and higher share price in comparison with alternative investments.
Itera endeavours to ensure shareholders a competitive return on their investment in the form of a higher share price and dividends. The share price shall reflect the Company's earnings and underlying values. Open communication and equally treatment of the shareholders shall contribute to increased shareholder values and trust among investors.
Itera ASA was listed on the Oslo Stock Exchange (OSE) on 27 January 1999 under the ticker code ITE. The Company shall treat all shareholders equally concerning information which may affect the market value of the shares. All information of relevance for the share price is published via the notification system of the Oslo Stock Exchange as well as on the Company's website www.itera.no, to ensure such information is made available to all stakeholders simultaneously. The quarterly reports are also made available on Itera's website in the form of online webcasts. The shares have been assigned the ISIN NO 0010001118, and the Company's organisation number at the Norwegian Brønnøysund Register Centre is NO 980 250 547.
Itera ASA's share capital at 31 December 2018 was NOK 24,655,987 made up of 82,186,624 fully paid shares each with nominal value of NOK 0.30.
All shares have the same voting rights at the General Meeting.
As of 31 December 2018, Itera had 1 870 (1 700) shareholders. At year-end, 5% (11%) of the Company's shares were owned by foreign investors. The Company's twenty largest investors owned 71% (70%) of the Company's shares.
During 2018, dividends of NOK 0.25 (0.43) per share were paid, for a total of NOK 20.5 (35.1) million.
The Itera share price opened the year at NOK 7.14 and closed at NOK 8.40, corresponding to a change of 18% (37%). The highest share price during the year was NOK 13.20 and the lowest price was NOK 6.60. Itera had a market value corresponding to MNOK 679 (585) million at 31 December 2018.
The Company has established option programmes for key personnel. An option programme was implemented in 2013, 2015, 2016 and 2017. There were 2,618,080 outstanding stock options at year-end. Reference is also made to Note 8 to the Consolidated Financial Statements.
For major shareholders, see note 20 in the consolidated accounts.
(after adjustment for non-recurring costs)
Number
EBITDA-MARGIN
ITERA ANNUAL REPORT 2018
(after adjustment for non-recurring costs)
NOK million
EBIT
Q1 Q2 Q3 Q4
Nydalsveien 28 P. O. Box 4814 Nydalen 0422 Oslo, Norway www.itera.no
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