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ECIT AS
Annual Report • Mar 14, 2023
3584_10-k_2023-03-14_190cd0d1-7c71-45f8-ab6c-45b2c68ba162.pdf
Annual Report
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Annual Report 2022
Table of contents
Management report
| Letter to our stakeholders | 1 |
|---|---|
| Financial highlights | 3 |
| ECIT in short | 4 |
| Geographical footprint | 5 |
| Unique One-stop-shop concept | 6 |
| F&A offerings | 7 |
| IT offerings | 9 |
| Tech offerings | 11 |
Performance, Financial targets and growth strategy
| Performance highlights | 14 |
|---|---|
| M&A acquisitions in 2022 | 15 |
| Key Financial targets | 16 |
| Growth strategy | 17 |
| Buy and build | 18 |
02 | ECIT Annual Report 2022
Board of Directors Report
| Result of the year | 20 |
|---|---|
| Capital structure and allocation | 21 |
| Investment activities | 23 |
| Sustainability / Corporate governance | 24 |
| Expectations to 2023 | 24 |
Divisional highlights
| F&A Division | 27 |
|---|---|
| IT Division | 28 |
| Tech Division | 29 |
ESG and shareholder information
| ESG and sustainability | 31 |
|---|---|
| Shareholder information | 35 |
| Governance model | 37 |
| Quarterly financial overview | 38 |
| Definition of financial highlights | |
| and ratios | 39 |
Group consolidated financial statements
| Income statement and OCI |
42 |
|---|---|
| Cash flow statement | 43 |
| Balance sheet | 44 |
| Statement of Changes in Equity | 45 |
| Financial statements board approval |
46 |
| Notes to the consolidated financial Statements |
48 |
| Independent Auditor's report | 88 |
| Statements | |
| Parent company | 90 |
| Annual Report for the year ending 31 December 2022 |
|---|
| Published 14 March 2023 |
| Rolfsbuktveien 4A 1364 Fornebu Norway |
| Email. [email protected] Org. no. 912 040 801 |
Letter to our stakeholders
2022 has been a reasonable good year in ECIT, although a year affected by macroeconomic and other challenges. ECIT has delivered revenue of NOK 2.8 billion, with 21.9% revenue growth, including 10.0% organic growth and a 2022 EBITDA of NOK 418 million with a 14.8% margin, slightly above last year's 14.6%.
In 2022 further steps have been taken to build ECIT.
Integration & consolidation – "Building a group – not a group of companies" is an ECIT key priority. Four large units were formed through mergers (late 2021/early 2022), comprehending more than a third of the business. The integration process progressed in 2022 and although not completed, the affected parts of the organisation gradually absorb the effects to form stronger core ECIT units.
Strengthening the organization - Investing in our employees, organisational structure, and management team is another key ECIT priority. 2022 focus areas have been: Group support functions (Group Services = GS). The internal education programme; ECIT Academy, ECIT Talent, and ECIT Associate. A new divisional management team has been appointed to strengthen the operational management of the three divisions (F&A, IT, and Tech) and supported by GS. All appointed in this team of managing directors come from and have a long history with the ECIT organisation.
Tech development – The software division ('Tech') is aimed for ECIT to take part in the digital transformation within the Accounting- (IT-) industries. During 2022 we have acquired and built software products that enable ECIT to offer almost a complete suite of products to our customers within our three
key product lines: Payroll, Accounting, and Office support. As well ECIT provides a few other support products. It is very positive that several of our products are gaining traction, providing revenue growth, and gradually building profitability as well. In the long term, the Tech division is to secure that ECIT is taking an active role in the digital development that is transforming the accounting industry these years.
Financial review
2022 full-year revenue at NOK 2,826 million (2021: 2,318), with revenue growth at 21.9% (2021: 30.1%), including 10.0% organic growth (2021: 5.5%). Currency affected growth by minus 1.1% (2021: minus 3.2%).
Based on a revised decision from the IFRS interpretations committee, ECIT has changed its IFRS accounting policy from 1 January 2022 to recognize revenue from software vendors with specific characteristics on a net income basis.
The 2022 revenue impact to the IT division was minus NOK 78 million (2021: -58), representing ~3% (2021: ~3%) of the total revenue. EBITDA, gross profit, profit after tax, balance sheet, and cash flow statement are unchanged.
Revenue recognition in a certain part of the tech division was also changed from gross to net with a 2022 revenue impact of minus NOK 25 million (NOK -7 million), representing ~1% (2021: ~0,3%) of the total revenue.
More information regarding the impact of the accounting policy change can be found in note 1.4.
2022 full-year EBITDA at NOK 418 million (2021: 339) with a margin of 14.8% (2021: 14.6%) and an EBIT of NOK 217 million (2021: 164), plus 32.2% compared to last year. Considering the investments in integration & consolidation, organisational development and other ECIT projects in 2022, management considers the EBITDA margin improvement reasonable.
Free cash flow was NOK 221 million compared to NOK 154 million. However, figures would have been NOK 222 million in 2022 and NOK 187 million last year if adjusted for Covid-19 prolonged payments.
F&A division: Full-year revenue was NOK 1.543 million (2021: 1.298) and an EBITDA of NOK 263 million (2021: 225). The F&A division had improved organic revenue growth compared to last year despite Q1 2022 Covid-19 effects.
IT division: Full-year revenue was NOK 1.260 million (2021: 1.047) and an EBITDA of NOK 164 million (2021: 140). The fourth quarter of 2022 was affected by the delivery of a significant part of the postponed IT equipment, enabling delayed customer projects to move on. As well this affected organic growth in the IT division as it affected Group figures. Across all IT segments, there has been a stable demand for services and solutions in 2022 from existing and new customers, which has supported good revenue growth in the IT division.
Tech division: Full-year revenue was NOK 143 million (2021: 97). The Tech division delivered revenue growth at 46.9%
(2021: 37.1%). Whereas ARR growth (core software revenue) was realised at 20.5%. Demand is coming from the F&A division and from external customers.
Profit for the year 2022 ended at NOK 177 million (2021: 115).
EPS for 2022 ended at NOK 0.23 (2021: 0.12) – a combination of improved profit and a higher share of ownership in our subsidiaries explains the development.
Our net interest-bearing debt ('NIBD'), excluding IFRS16 lease accounting, ended the year at NOK 124 million (2021: net cash of 99), and the financial leverage ratio (NIBD/EBITDA) was at 0.8x (2021: 0.4x) – below the ratio limit at 2.5x NIBD/EBITDA.
Low net interest-bearing debt position in combination with good cash flow, gives ECIT a strong financial position and the ability to invest in business development, organic growth, margin improvement and continued M&A activity.
Acquisitions
ECIT has a record of acquiring and integrating companies, with more than +130 completed transactions. Acquisitions are an integrated part of the business model, adding volume, capacity, competence, products & services, technology and geography to ECIT.
Ten acquisitions were completed in 2022, representing NOK +300 million in annualized revenue. Across the three divisions, the new companies have strengthened our position and added new software systems. The addition of CataCloud AS (ERP) and Verismo AB (HR) has enabled ECIT to offer our customers a full range of software products.
F&A and IT markets remain fragmented, with many potential acquisition targets. The acquisition pipeline for 2023 is as good as ever and we expect to continue the acquisition pace.
We will continue to focus on delivering high-quality services to support our customer's business development enabling ECIT to grow with our customers.
Sustainability in ECIT
In 2022 important steps have been made to gain data and knowledge to be able to track our own environmental impact. Tracking and reporting on electricity and power usage in general and energy effectiveness in our datacentres (own and colocations) has started and will continue in 2023.
The work to improve our social and governance areas has continued. In 2022 a Code of Conduct was established. ECIT has become a member of the United Nations Global Compact and we have continued our emphasis on people development and learning through our internal education programme ECIT Academy, ECIT Talent and ECIT associate.
Although we have work to improve, including setting targets for the environmental impact, we have started to measure in certain areas, as mentioned, to benchmark our development year over year – to gradually reduce our environmental impact.
2023
Inflation did not have a material impact on ECIT figures in 2022. However, inflation will affect our cost-base in 2023, hence prices have been adjusted as of 1st January 2023 in order to
mitigate inflation effects. We expect to closely monitor cost inflation and adjust our prices accordingly throughout 2023.
As 2022 has been challenging to navigate, 2023 as well could be a year with effects coming from the geopolitical situation in Eastern Europe, inflation, volatile energy prices and perhaps starting signs of a recession.
However, as the fundament of ECIT is to support the two most important administrative areas for most companies, Accounting and IT, we expect our business to be less exposed to effects coming from macroeconomic changes including inflation.
Based on that and based on the investments in business development we continuously do, in order to mitigate the challenge from the on-going digital transformation and other changes, we are optimistic about the future for ECIT also for 2023.
ECIT will continue to deliver high-quality services, solutions and systems in order to support the business of our customers.
Peter Lauring, CEO
Financial Highlights 2022
| (NOKm) | 2022 | 2021 | 2020 | (NOKm) | 2022 | 2021 | 2020 |
|---|---|---|---|---|---|---|---|
| Condensed Income Statement | Cash Flow | ||||||
| Revenue | 2,826 | 2,318 | 1,782 | Operating activities | 327 | 249 | 259 |
| EBITDA | 418 | 339 | 256 | Free cash flow | 221 | 154 | 173 |
| EBIT | 217 | 164 | 121 | Investing activities | -315 | -319 | -109 |
| Transaction and restructuring costs | -13 | -9 | -1 | Financing activities | -94 | 95 | -64 |
| Financial items, net | 11 | -14 | 44 | Cash flow for the period | -83 | 25 | 86 |
| Profit for the year | 177 | 115 | 121 | CAPEX in % of revenue | 0.7% | 0.8% | 1.1% |
| Adjusted profit for the year | 159 | 118 | 80 | Software development in % of revenue | 2.0% | 1.1% | 1.5% |
| Profit for the year attributable to | Key figures | ||||||
| ECIT AS' shareholders, NOKm | 105 | 49 | 67 | Total revenue growth, % | 21.9% | 30.1% | 32.3% |
| Non-controlling interests, NOKm | 72 | 66 | 54 | Total organic revenue growth, % | 10.0% | 5.5% | 4.6% |
| ECIT AS' shareholders, % | 59.2% | 42.6% | 55.3% | Total M&A revenue growth, % | 13.0% | 27.8% | 25.7% |
| Non-controlling interests, % | 40.8% | 57.4% | 44.7% | EBITDA margin, % | 14.8% | 14.6% | 14.4% |
| EBIT margin, % | 7.7% | 7.1% | 6.8% | ||||
| Financial position | Effective tax rate, % | 23.0% | 23.6% | 26.1% | |||
| Total assets | 3,045 | 2,576 | 2,108 | Avg. majority share, % | 68.2% | 68.2% | 55.3% |
| ECIT shareholdes' share of equity | 1,288 | 1,217 | 876 | ||||
| Non-controlling interest | 364 | 223 | 230 | Other financial ratios | |||
| Net working capital | -23 | -53 | -85 | Recurring & repeat revenue share | 77.0% | 71.0% | n/a |
| Net Interest-bearing debt ex. IFRS 16 | 124 | -99 | -156 | Proforma revenue | 3,026 | 2,493 | 2,009 |
| Net interest-bearing debt (NIBD) | 350 | 137 | 45 | Proforma EBITDA, last 12 months | 467 | 359 | 290 |
| Net debt to EBITDA (Leverage ratio) | 0.8x | 0.4x | 0.2x | Proforma EBITDA-% | 15.4% | 14.4% | 14.4% |
| Solvency ratio, % | 39.7% | 46.9% | 46.1% | Full-time workforce (FTEs) | 2,371 | 2,221 | 1,515 |
| Stock-related key figures | |||||||
| Diluted EPS, NOK | 0.23 | 0.12 | 0.18 | ||||
| Adjusted diluted EPS, NOK | 0.21 | 0.13 | 0.07 | ||||
| Total number of shares issued ('000) | 452,050 | 445,455 | 388,224 | ||||
| Total number of treasury shares ('000) | 2,737 | 1,179 | 7,971 |
Notes:
EBITDA is shown before transaction and restructuring costs
Recognized income/expenses related to earn-out assessment is excluded in the adjusted profit for the year, see the definition segment for further details. For definitions of APM's and other ratios, please refer to the section "Definition of Financial Highlights and Ratios"
ECIT in short
Services
ECIT provides services within key business areas of IT, Finance & Accounting and Tech across sectors and industries.
Knowledge-based services
Our knowledge-based services assist our customers in realizing their business potential.
Market position
We improve our market position through organic growth, selected acquisitions and partnerships.
Efficiency unlocked
Efficiency is unlocked by integrating acquisitions in multi-competence centers to leverage scale and synergies.
Leading provider
of business process outsourcing in the Nordics within IT, Finance & Accounting and Tech across sectors and industries.
+130 acquisitions
and +50 mergers of subsidiaries have been completed since the establishment of ECIT in 2013, making ECIT a M&A compounder.
Our values
describe what drives us as an organization. Integrity, courage, entrepreneurship and open communication.
~ 250 partners
with minority ownership of local subsidiary. The ownership is reflected in the consideration, care and pride attached to everything we do.
+100 locations
across 9 countries give ECIT the benefit of being a local partner to customers while developing as an international group.
+2,300 employees
who contribute with knowledge and important insights from a variety of sectors and industries to our customers' service.
04 | ECIT Annual Report 2022
Geographical footprint
Since the beginning in 2013, ECIT has grown in numbers and in size, now being present in:
9 countries* +100 locations
The focus in 2022 has been on consolidating the business and acquiring new companies to strengthen our position within the countries where we are present.
In 2021 we expanded the business to several new countries with the Norian acquisitions. Norian has nearshoring centers in Poland and Lithuania.
F&A division 76 local offices · 1,700 FTEs
Revenue of NOK 2022: 1,543m (2021: 1,298m)
Unique One-stop-shop concept
ECIT offers a wide range of services within key business areas of:
IT-services
Software solutions ( Tech )
As most companies need these key business functions, these divisions complement each other and ECIT serves as a strategic partner for the customer.
Through knowledge-based services we assist our customers to adapt to change and to grow stronger, and to realize their business potential.
Business & Tech Solutions Modern workplace ERP & Payroll Other systems
IT Operations Intelligent Automations IT Security Cloud
Finance & Accounting Debt Collection Payroll & HR
Finance & Accounting offerings
Case study F&A: Jagger
Jagger about ECIT:" ECIT is a champion within administration and bookkeeping"
The modern and quality-conscious fast-food chain in Denmark, Jagger, has been collaborating with ECIT since its foundation back in 2015. The partnership is based on an outsourcing solution, where ECIT is responsible for handling Jagger's finance function. Read this article where CEO at Jagger, Christian Brandt, elaborates on the choice of ECIT as their outsourcing partner, and explains the importance of the partnership.
Facts about Jagger
- •Establishment: 2015
- Employees: +350
- Location: Area of Copenhagen
- Industry: Hospitality
Full story at www.ecit.com
This is an extract from a case story made in collaboration with Jagger. You can read the full story on our website www.ecit.com!
A partnership based on acquaintance and knowledge
"ECIT has been our partner right from the beginning. I knew ECIT and their services from former employment and I had no doubt that I wanted them to be part of this project as well. So, from the very first day we opened our doors in April 2016, ECIT has been part of the team." – Christian Brandt, CEO at Jagger.
"ECIT is a champion within administration and bookkeeping, which I am not." - Christian Brandt, Jagger
The foundation of a good partnership often relies on open dialogue between the respective parties and, most important, mutual business understanding. Two factors that definitely apply to the partnership between Jagger and ECIT.
"I would like to emphasize the daily collaboration-routine we have with ECIT. The consultants who are connected with Jagger are really skilled people, who I can always call and ask questions, and they are proactive when they encounter something that stands out. It is great to be backed by such helpful and competent consultants, who are ready to respond to whatever need we have." – Christian Brandt, CEO at Jagger.
Christian Brandt, CEO at Jagger
IT service offerings
End-to-end coverage, simplifying IT operations and outsourcing for customers
Case study IT: Active Brands
Active Brands about ECIT: "It has been a great success outsourcing both IT operations and IT security to ECIT"
The partnership between ECIT and Active Brands started in 2020, when Active Brands was looking for a partner that could deliver and operate their network. Since then, they have deepened their relationship and increased IT outsourcing in several years. The two parties have established a solid foundation in their partnership, based on good communication and understanding.
Facts about Active Brands
- Establishment: 2009 in Norway
- Employees: 300
- Location: Norway, Sweden, Finland, Denmark, USA, and China
- Industry: Retail of clothing and equipment
Full story at www.ecit.com
This is an extract from a case story made in collaboration with Active Brands. You can read the full story on our website www.ecit.com!
From capital expenditure to a flexible IT solution
"At Active Brands, we quickly became aware that we had challenges with our IT operations. It was an old setup that was built for operation based on on-premise servers, where the interaction between the systems were not efficient enough. This meant that IT operations became more and more unstabile and costly to maintain. We had already moved some of our data to cloud services, but we needed an IT partner that could help us to quickly move and integrate the rest of our platforms."
Active Brands was looking for a partner that could manage their IT-setup with a SDWAN-solution, and they decided to put their trust in ECIT.
Throughout the years the partnership has changed its foundation and it is now to a greater extent focused on IT and Cloud operations in a broader context.
"It has been a great success outsourcing both IT operations and IT security to ECIT" - Gøran Langgård, Active Brands
"As we have developed our business and faced new challenges, we have expanded our collaboration with ECIT. They delivered a good and secure network solution, and therefore it was a natural choice for us to hand over the responsibility of our IT-security to them as well. Today, ECIT are responsible for our network operation and security, in addition to assisting us with patch management, server monitoring and backup"
Gøran Langgård, IT Infrastructure and Operations Manager at Active Brands
Tech offerings
The ECIT portfolio offers product portfolios for customers needs
Case study Tech: Mercell
Mercell about ECIT: "It is a pleasure cooperating with ECIT Digital to retrieve structured data from invoices, as well as simplifying the support and integration of our work"
ECIT Digital provides solutions that use artificial intelligence to automate incoming invoices. ECIT Digital is built on a scalable cloud-platform where machine learning contributes to handle and automate processes. Through utilizing innovative and modern technology, customers can extract the essential parts of an invoice to be entered directly into the accounting system.
Facts about Mercell
- Establishment: 1999
- Employees: 600
- Location: Denmark, Eesti, Latvia, Lithuania, Netherlands, Norway, Finland, Sweden, UK & Ireland
- Industry: Source to Pay (S2P)
Full story at www.ecit.com
This is an extract from a case story made in collaboration with Mercell. You can read the full story on our website www.ecit.com!
12 | ECIT Annual Report 2022
A competent and experienced service
For more than 20 years quality and reliability have been key factors to the delivery of Mercell services. Mecell have decided to continue with the excelling experience embodied in the ECIT delivery of invoice and document interpretation and data capture services.
"Mercell receives close to one million invoices a year that flows through ECIT Digital. Mercell has first line support, so that basically every error is a burden on our support team and increases our cost base. Therefore, it is essential that the data quality of the delivery lives up to the agreed level of 99,8 %, and that the cooperation including corrections work smoothly. Apart from reasonable pricing, those two factors have been essential for us choosing ECIT as a supplier of these services"
"With Mercell as a customer, we are constantly challenged to be innovative and develop our services even further" - Rune Skåren, ECIT Digital
ECIT Digitals technology largely includes machine learning. We have a dedicated team in Romania that continuously are developing and training the technology to improve the reading of documents. This contributes to improve automation in the workflow for customers. When invoices are received in paper or PDF-format, the service automatically captures the structured information together with the PDF-presentation of the invoices. This is a solution that Mercell supplies for its customers in collaboration with ECIT.
Oddvar Lone, Customer Success Manager at Mercell
Performance, Financial Targets and Growth strategy
Performance Highlights 2022
| 2,826 NOK million | 418 NOK million | 222 NOK million |
|---|---|---|
| Net revenue | EBITDA | Free cash flow incl. Covid-19 |
| 21.9% | 14.8% | 124 NOK million |
| Total revenue growth | EBITDA-margin | Net interest bearing debt ex. leases |
| ECIT continues with high revenue growth exceeding | Margin development is in line with expectations | Low net-interest-bearing debt, in combination with |
| our financial target of 15%. | since a large part of the business has been through | a solid cash flow, gives ECIT an good financial |
| High organic growth of 10% came from strong | a merger process during 2022. | position to continue the M&A activity in the future. |
2022 was also a year where important investments were made to strengthen ECIT's organisation further. Cash flow in 2022 was positively affected by higher EBITDA and offset by an increase in net working capital, explained by high revenue growth in the fourth quarter of 2022.
demand from existing as well as new customers.
M&A – Acquisitions in 2022
| Q1 2022 | Q2 2022 | Q3 2022 | Q4 2022 | |
|---|---|---|---|---|
| Revenue: NOK 50m |
Revenue: NOK 12m |
Revenue: NOK 69m |
Revenue: NOK 171m |
|
| EBITDA: NOK 9m |
EBITDA: NOK 2m |
EBITDA: NOK 10m |
EBITDA: NOK 25m |
|
| Employees: ~39 |
Employees: ~6 |
Employees: ~54 |
Employees: ~136 |
|
| XACCT | Isonor IT | Tandem | Argus Kreditt | |
| Catacloud | Prosys | Intunor | ||
| AutoFlow | Agidon | |||
| Verismo | ||||
| Note: Verismo Systems AB is an associated company and is not consolidated in the group annual accounts. | ||||
| 15 ECIT Annual Report 2022 |
Key financial targets
Mid-to-long-term targets were introduced in connection with the listing of ECIT on Euronext Growth. In 2022, we took significant steps to strengthen the business of ECIT through consolidation and investments. Such steps are essential for the continuing development of ECIT and key prerequisites for our ability to meet the mid-to-long-term targets.
Our financial targets in connection to the mid-to-long-term ambitions remain unchanged in 2022.
To illustrate the impact of changed accounting principles reducing the revenue of NOK 103 million (2021: 65), an overview has been made showing the impact of the adjustments to the reported financials for 2022.
Since software license resale only represents a small part of our Group revenue and neither is expected going forward, we have decided not to change our mid-to-long-term targets for revenue growth and EBITDA margin.
The strategic objectives of ECIT are translated into the following targets and are based on the assumption of stable global economic development during the period.
Revenue growth
The mid-to-long-term revenue growth targets include organic growth of a minimum of 5.5% and total growth of minimum 15.0%. Total growth comprises organic growth and growth from acquisitions.
Price increases will impact organic revenue growth in 2023 to offset the effect of cost inflation. Thus, since financial targets
cover mid-to-long-term periods, we have not changed organic revenue growth targets.
Although we did not meet the M&A target of NOK 350 million in 2022 in annualised acquired revenue, the revenue growth targets are based on the principal assumption that we will execute the M&A target of NOK 350 million in annualised revenue.
Combined recurring/repeatable revenue
A large part of ECIT's total revenue comes from recurring or repeatable revenue. Our IT and Tech division has a high share of recurring revenue, whereas the F&A division, to a great extent, has repeatable revenue due to the nature of its business (long and stable customer relationship).
In 2022 we increased the share of combined recurring and repeatable revenue to 77% (2021: 71%) due to changed price models and acquisitions.
EBITDA margin
We target 17.0% margin on adjusted EBITDA (excluding the impact of large acquisitions). As we further develop the business through consolidation, cost efficiency initiatives, and operating leverage from higher revenue, we expect that margins will improve over time, meeting the financial target.
Leverage ratio (NIBD / EBITDA)
As of December 2022, the gearing rate was 0.8x NIBD/EBITDA, well below the ratio limit at 2.5x NIBD/EBITDA.
ECIT has a revolving credit facility with its primary bank of NOK 800 million. On 31 December 2022, the undrawn amount totalled NOK 423 million.
| Key Financial targets | FY 2022 ex. Adj. |
FY 2022 incl. Adj. |
Mid-to long term targets |
|---|---|---|---|
| Growth | |||
| Total revenue growth | 22,9% | 21,9% | > 15.0% |
| Organic revenue growth | 11,2% | 10,0% | > 5.5% |
| Recurring & repeatable revenue | 77,0% | 77,0% | > 75.0% |
| Earnings EBITDA-margin |
14,3% | 14,8% | > 17.0% |
| Leverage Leverage ratio (NIBD / EBITDA) |
0.8x | 0.8x | < 2.5x |
| Mergers & acquisitions M&A acq. revenue, NOKm |
302 | 302 | 350 |
Growth strategy
Growth strategy
ECIT has a growth strategy where the combination of acquisitions and organic growth will secure our future progress.
This is a well-known territory to ECIT and has been the strategy since our inception in 2013.
Organic and acquisition growth supports the ambition of achieving a minimum of 15.0% revenue growth every year.
Organic growth
Core of the ECIT growth strategy is growth in the existing business.
What makes ECIT unique is the de-centralized business model, where the day-to-day decision-making and commercial agenda are anchored locally within each subsidiary, whereas the strategic direction and cooperation across subsidiaries are supported centrally.
ECIT has several organic growth opportunities, including
- Cross-sell / upsell
- Attract new customers
- Medium to larger customer segments
Acquisition growth
Acquisitions are a key part of ECIT's growth strategy as they add volume, competence, capacity, products & services, technology and geographical presence – and accelerate growth.
ECIT benefits from a fragmented market with many potential acquisition candidates covering the F&A and IT business segments.
ECIT applies a dual ownership model where it acquires companies and has a call option to acquire the remaining noncontrolling stake.
Therefore, ECIT is an attractive platform for entrepreneurs that want to grow and develop their businesses.
Through the dual ownership model, founders can leverage their business on the benefits of being part of the platform. Being acquired by ECIT entails many attractive opportunities.
Subject to a range of criteria being fulfilled, we may consider low-performing candidates that can be merged with existing subsidiaries in geographies with sizeable and well-performing operations.
Acquisitions remain high on the strategic agenda in 2023.
Acquired annualised revenue (NOKm)
Organic revenue growth
ECIT has a buy & build strategy referred to as the 'ECIT way'.
Integration of companies and later merging these into larger units to enable and strengthen profitable growth is a key part of the ECIT way.
The acquisition targets are typically low-complexity deals following a dual ownership model where ECIT acquires the majority part of the company with an option on the remaining share.
This tailored acquisition structure (dual ownership)reduces M&A risk since it incentivises entrepreneurs to stay with ECIT and make a strong commitment to continue to run the business and realise synergies within ECIT.
Common synergies include cross-sale opportunities and scale benefits enabling cost reductions and efficiency improvements and building organisational strength.
Phased-in synergies are handled through a clear plan that includes the pooling of targets to form multicompetence centres.
The ambition is to build a group, not a group of companies.
Buy & Build Straight forward process to create multicompetence centers
Acquisition
1
2
3
4
Partnership between ECIT and owner(s) through dual ownership.
Relocation
Co-location (if located in same area) to realize revenue and cost synergies.
Integration (mergers)
As the acquired entity pulls on more ECIT group resources, it becomes natural to merge with other entities.
Multicompetence center
Accounting + Payroll + Consulting + Development + Solutions
Operational scale
Pooling competencies Organizational strength
Board of Directors Report
Board of Directors Report
Results for the year
2022 was an eventful year with unforeseen external changes and challenging market conditions.
Despite the challenges, ECIT delivered revenue growth at 21.9% (2021: 30.1%) with a group revenue of NOK 2,826 million (2021: 2,318). Organic growth at 10.0% (2021: 5.5%) and acquired growth at 13.0% (2021: 27.8%). Currency effects affected revenue growth by minus 1.1% (2021: minus 3.2%).
Most of the 10.0% organic growth came from the IT and Tech divisions. Both divisions had a high demand for services and solutions from existing and new customers in 2022.
Despite being negatively impacted by Covid-19 during the first quarter of the year, the business climate within the F&A division normalised, and 2022 ended with improved organic revenue growth compared to last year.
Acquired growth of 13.0% comes partly from last year's acquisitions (full-year impact in 2022) and partly from the ten acquisitions completed during 2022, adding NOK 302 million in annualised revenue.
The largest division in ECIT, the F&A division, delivered revenue of NOK 1,543 million (2021: 1,298), corresponding to a revenue growth of 19.3%. Four acquisitions were completed in the F&A division, adding skilled professionals and delivery capabilities to the F&A organization.
Revenue in the IT division came out at NOK 1,260 million (2021: 1,047), representing revenue growth of 20.4%. Despite supply-chain challenges in the first half year of 2022, the IT division delivered solid organic growth.
The Tech division continues the high revenue growth in 2022, delivering 46.9% and revenue of NOK 143 million (2021: 97). In 2022, the focus in the Tech division has been two-fold. Focus has been on the development of current and new products as well as investments in the organisation.
ECIT operates in 9 countries, whereas Norway was the most significant contributor to revenue representing approx. 67% (2021: 65%). The second largest country was Sweden representing approx. 15% (2021: 17%).
EBITDA before transaction and restructuring costs came out at NOK 418 million in 2022 compared to NOK 339 million last year, representing an increase of 23.1%.
Approximately a third of the total business measured in revenue was through mergers in 2022. Substantial consolidation processes affect the profitable growth as large mergers require time and cost before integration is completed.
EBIT came out at NOK 217 million in 2022 compared to NOK 164 million last year, representing an increase of 32.2%.
The financial items totaled a net income of NOK 11 million for 2022 compared to a net financial expense of NOK 14 million last year. Net income comprises mainly a gain of NOK 24 million related to the divestment of the associated company, 'Cloud Connection AS', and the F&A subsidiary, 'ECIT Invent AS'.
Revenue
EBITDA & Margin
Profit for the year is NOK 177 million compared to NOK 115 million last year.
Excluded the one-off items specified in the table, profit for the year amounts to NOK 159 million compared to NOK 118 million last year, corresponding to an increase of 35.1%.
| (NOKm) | 2022 | 2021 |
|---|---|---|
| Profit for the year | 177 | 115 |
| Transaction & restructuring costs IPO costs Earn out adjustment Divestment profit One-off items, total |
13 0 -7 -24 -18 |
9 6 -12 0 3 |
| Adjusted profit for the year | 159 | 118 |
| Attributeable to: Shareholders in ECIT AS, NOKm Non-controlling interests, NOKm Shareholders in ECIT AS, % Non-controlling interests, % |
94 66 58.8% 41.2% |
52 66 43.7% 56.3% |
| Diluted EPS, NOK 1 Adj. diluted EPS, NOK 1 |
0.23 0.21 |
0.12 0.13 |
The shareholders of ECIT's adjusted profit share have increased to 58.8% (2021: 43.7%) due to the increase in the average ownership in the subsidiaries.
The improved profit and increased subsidiary ownership positively impact adjusted diluted earnings per share. The adjusted diluted earnings per share, where one-off items have been excluded, represent NOK 0.21 compared to NOK 0.13 last year, corresponding to an increase of 66.3%.
Cash flow statement
Cash flow from operating activities in 2022 came out at NOK 327 million compared to NOK 249 million in 2021 representing an increase of 31.3%.
Cash flow was positively affected by higher EBITDA before transaction & restructuring costs but offset by an increase in net working capital.
The increase in net working capital can mainly be explained by high revenue growth in Q4 2022 (particularly in December) compared to last year, explaining the increase in trade receivables as of December 2022.
The amount of overdue trade receivables has not changed compared to last year.
Cash flow from investing activities was negative by NOK 315 million compared to negative NOK 319 million in 2021.
Acquired subsidiaries are the most significant components of cash flow from investing activities, amounting to negative NOK 251 million in 2022 (2021: negative 279). The acquisition of Norian in 2021 impacted the cash flow investing activities of the previous year.
Free cash flow (adjusted for transaction & restructuring costs, net investments, tangible assets, and IFRS16) represents NOK 221 million compared to NOK 154 million last year. Thus, last year's figures would have been at NOK 187 million if adjusted for prolonged COVID-19 payments, which were paid in 2021.
Cash from financing activities was negative by NOK 94 million compared to positive 95 million last year. Cash flow from financing activities in 2022 consists mainly of debt financing (acquisitions) and repayment of lease liabilities.
The capital increase explains last year's positive cash flow as part of the listing of ECIT on Euronext Growth.
| (NOKm) | 2022 | 2021 |
|---|---|---|
| Cash flow from operations | 327 | 249 |
| Cash flow from investing | -315 | -319 |
| Cash flow from financing | -94 | 95 |
| Cash flow for the year | -83 | 25 |
| Cash flow from operations | 327 | 249 |
| Transaction & restructuring costs | 13 | 9 |
| Net investments, tangible assets | -20 | -20 |
| Repayment of lease liabilities | -98 | -84 |
| Free cash flow | 221 | 154 |
| Covid-19 impact on NWC | 1 | 33 |
| Free cash flow incl. Covid-19 | 222 | 187 |
Capital structure and allocation
As of 31 December 2022, ECIT AS shareholders' equity share was NOK 1,288 million (2021: 1,217).
ECIT's portfolio of treasury shares was 2,737,168 shares on 31 December 2022 (1,178,842 shares as of 31 December 2021).
The net interest-bearing debt amounts to NOK 350 million in 2022 compared to NOK 137 million last year.
The financial gearing ratio (NIBD/EBITDA) was 0.8x as of 31 December 2022, compared to 0.4x last year.
Leasing liabilities (IFRS16 lease accounting) have a material impact on the interest-bearing debt of ECIT, which consists mainly of office rentals. Excluding IFRS16 lease accounting, net
interest-bearing debt will represent NOK 124 million compared to net cash of NOK 99 million last year.
ECIT has the option to acquire the minority shares in the partly owned subsidiaries within an agreed period. Most options can be utilised at a price based on last year's EBITDA multiplied by a fixed factor. The minority option obligation (i.e., the price to exercise all options to 100%) as of 31st December 2022 is estimated to be NOK ~463 million compared to NOK ~458 million as of 31st December 2021. The option obligation is not part of the NIBD statement.
Share buy-back
In 2022 ECIT initiated two share buy-back programs. The share buy-backs were made in accordance with the authorization granted to the Board of Directors by the Company's annual general meeting held on 8th April 2022. Under the programs, 1,748,352 shares were acquired at an average price of NOK 6.86.
The share buy-back program's purpose was to acquire shares that can be used as a settlement in the ECIT's incentive plan for employees, management, and board members. Furthermore, shares acquired under the program may be applied as part of settlement measures in ECITs acquisitions of companies and to other general corporate purposes.
Incentive plan
In August 2022, ECIT decided to implement an incentive plan for employees, management, and board members of ECIT and its subsidiaries. The overall purpose of the incentive plan is to ensure an aligned interest with shareholders and to reward long-term and dedicated work deemed valuable to ECIT and its shareholders.
The incentive plan comprises a maximum of 5,500,000 incentive units and consists of a warrants plan and a share purchase plan. The incentive plan is expected to be covered partly by using the Board's authorization to increase the share capital and partly by treasury shares.
The value of the incentive plan to be recognized based on International Financial Reporting Standards (IFRS) accounting principles is approximately NOK 3 million per full vesting year.
The 2022 financials have not been impacted since the incentive units were granted in 2023.
Disposition of the profit for the year
In 2022, ECIT AS posted a comprehensive income of NOK 121 million. The Board of Directors proposes the following allocation:
- Proposed dividend NOK 18 million
- Transferred from equity NOK 103 million
As of 31 December 2022, ECIT AS had total equity of NOK 1,480 million (2021: 1,341). The Board of Directors has determined that ECIT AS had adequate equity and liquidity at the end of 2022. The Board of Directors proposes to pay an ordinary dividend of NOK 0.04 per share for the 2022 financial year.
Capital allocation policy
Executive Management and the Board of Directors monitor the capital structure to ensure that ECIT's capital resources support the strategic goals and maximize shareholder returns.
The capital allocation policy below outlines the priority for the allocation of free cash flow:
-
Repayment of NIBD in periods when the financial gearing is above the limit range,
-
- Value-adding investments, acquisitions, or development of existing business,
-
- Distribution to shareholders, including dividends and share buy-backs.
Risk factors
ECIT is exposed to risks and uncertainty factors that may affect some or all group activities. The company is exposed to financial, market & operational risks, as well as liquidity & credit risks.
The Board of Directors is careful to secure systematic and concerted management risk in all parts of the business and regards this as critical for long-term value creation.
Financial risks
ECIT is exposed to financial risk in different areas, especially interest and exchange rate risk.
Although ECIT has limited interest-bearing debt as of December 2022, ECIT is exposed to interest risks mainly from a long-term floating-rate loan (credit facility). To hedge against interest rate risks, ECIT has an interest rate swap contract representing NOK 100 million, corresponding to ~30% of its interest exposure, excluding IFRS16 lease accounting. ECIT continuously evaluates the interest risk and its hedging.
ECIT has subsidiaries in Norway, Denmark, Sweden, the UK, Poland, Finland, Germany, Lithuania and Romania and is exposed to currency fluctuations against DKK, SEK, EUR, PLN, and GBP. Approximately 33% of the ECIT's revenue in 2022 came from countries outside Norway. ECIT does not hedge net currency positions but conducts ongoing assessments of currency risk.
Market & operational risk
ECIT operates in a competitive market subject to changing technologies and shifting customer needs and expectations. Like all companies, ECIT is exposed to the general economic climate in the countries where the company operates.
ECIT's exposure to market & operational risks is limited by the following:
Resilient business model - since accounting and IT capabilities are vital parts of ECIT's customers' underlying operations, ECIT is less exposed to economic downturns.
The number of customers – ECIT has more than 50,000 customers across different countries and business segments, lowering the exposure to events affecting individual countries or segments.
Large product suite – across the three divisions, ECIT offers customers a wide range of products, providing up-selling and cross-selling opportunities that lower the risk of churn.
Investment in technology – significant investments are made in the Tech division to develop further the solutions offered to external and internal customers within the F&A business segment.
'Net promoter Score' – customer satisfaction through "Net Promoter Score" research is an integrated part of customer follow-up procedures in ECIT.
Liquidity & credit risk
ECIT is exposed to liquidity risk in relation to meeting future obligations associated with its financial liabilities, which mainly include trade payables, other payables, and the credit facility.
ECIT ensures adequate liquidity by managing cash flow forecasts and close monitoring of cash inflows and outflows. In addition to cash flow from operations, the ECIT's liquidity position is secured through committed credit facilities with ECITs primary bank. On 31st December 2022, the undrawn amount of committed credit facilities totalled NOK 423 million.
ECIT's credit risk mainly relates to trade receivables and is not dependent on customer segments or specific customers. The Board of Directors deems credit risk to be at an acceptable level.
Insurance for the Executive Board and Board of Directors
ECIT AS has liability insurance for the Board and executive management covering any indemnity for financial loss arising from personal managerial liability, including personal liability for the company's debts arising from any claim first made against the company.
Going concern
Following the Accounting Act § 3-3a, the Board of Directors confirms that the annual financial statements for 2022 are presented according to the going concern principle. As a result, the conditions for operation as a going concern exist.
Investment activities
Acquisitions
In 2022 ECIT completed ten acquisitions of new subsidiaries, representing annualised revenue of NOK 302 million.
Of the ten acquisitions completed, four were F&A companies, four were IT companies, and two were in the Tech division.
The acquisitions completed across the three divisions have strengthened ECIT's competence base, industry position, and geographical presence.
ECIT will continue to look for suitable M&A candidates subsequent to ensure a focus on delivering high-quality services to customers.
Mergers
Mergers are an important element of ECIT's strategy of forming a Group – as opposed to a group of companies – since the consolidation of the Group will provide synergies and enable ECIT to attract skilled employees as well as a larger customer segment.
In late 2021 and the beginning of 2022, four large mergers within the IT and F&A division was completed. Altogether, 20 companies have been merged into four, representing approximately NOK 1 billion in revenue combined and 422 FTEs.
Other investments
Other investment comprises companies acquired with ownership of less than 50%.
In 2022 ECIT acquired a minor part of the shares in Verismo Systems AB, which is a Swedish HR-software specialist with an own developed HR system supporting and automating processes within recruitment, onboarding, employee development, pay roll and employee benefits.
A well, minor part of the shares in ZTL Payment Systems AS was acquired in 2022. ZTL provides an API payments platform to build better customer payment products.
ZTL can support several platforms within the Tech division with an effective payment platform for existing customers.
Investments in software development
ECIT has software development activities primarily in the Tech division, which covers software solutions within Payroll, Accounting, and Office Support.
ECIT will continue to improve and invest in software to ensure all solutions are aligned with the current market trends to provide the best customer experience.
A total of NOK 147 million (2021: NOK 113 million) has been capitalized as software in the balance sheet on 31st December 2022. There have not been any research and development costs charged through the income statement.
Sustainability / Corporate governance
Our approach to sustainability is first and foremost social (S) oriented, considering our business's nature. However, Environmental (E) and Governance (G) aspects are becoming increasingly important, and ECIT is committed to support the development– together with customers and suppliers.
In 2022, The Transparency Act entered into force, making it mandatory for certain Norwegian companies to conduct a due diligence assessment on human rights in value chains. The assessment results will be published on www.ECIT.com no later than 30th June 2023.
Healthy work environment
Providing safe and healthy working conditions for its employees is a priority for ECIT. The Group has a direct and indirect ability and responsibility to minimize the risks for health issues etc.
ECIT's newly established Code of Conduct covers various areas such as human rights, gender equality, business ethics, supplier relationships, labor standards, and environmental responsibility.
In 2021 ECIT started to monitor employee satisfaction through employee engagement score (EES) surveys and reached a score of 83. In 2022 the same survey was completed with the same result as in 2021.
Diversity, inclusion, and equal opportunities
Society is increasing its expectations of companies' corporate actions and transparency about diversity and equal employment opportunities. ECIT is, by its Code of Conduct, committed to build a highly skilled workforce and ensuring that recruitment processes actively foster equal opportunities and diversity. The company prohibits discrimination in any form, whether based on political views, union membership, sexual orientation, disability, or age.
ECIT has net employed 150 new employees during 2022, and the total workforce is 2,371. The gender composition in ECIT is made of approx. 59% women and 41% men. The share of women in managerial positions is 55% and men 45%.
Business ethics and integrity
ECIT has zero tolerance for corruption. The Group does not operate in any countries with a higher perceived corruption risk according to the Corruption Perception Index (CPI).
Climate
ECIT supports the United Nations Global Compact principle of a precautionary approach to environmental challenges. ECIT started in 2022 to monitor the energy consumption from the different locations and Power Usage Effectiveness from data centres, allowing comparison across companies. This is an important step in improving sustainability management. For
further information, refer to the sustainability report 2022 on page 31. In 2023 ECIT will continue building on the data fundament collected for 2022. Additional steps will be taken to enhance data validation, allowing us to use data for decisionmaking processes and set future ESG targets.
Expectations to 2023
In 2023, ECIT will continue to focus on delivering profitable growth through organic and acquisition growth. Although 2023 – like 2022 – seems to be a challenging year with uncertainties related to macroeconomic conditions, the Board of Directors is optimistic about the future and expects growth in revenue and earnings according to our mid-to-long-term targets,
Events after the balance sheet date
In August 2022, a new share-based incentive scheme was announced. The program's purpose is to reward long-time performance and loyalty to ECIT. The incentive was launched in January 2023, and a total of 5.5 million shares will be part of the program.
For further information related to events after the balance sheet date, please refer to note 7.5.
ECIT AS – Parent company
ECIT AS is the parent company of the ECIT Group and supplies and performs services for the Group's other companies. In 2022, ECIT AS delivered a profit after tax of NOK 121 million (2021: 76). At year-end, ECIT AS had total assets of NOK 1,716 million (2021: 1,491). The equity ratio was 86.2% (2021: 89.9%). The gender composition in ECIT AS is approx. 23% women and 77% men (4 FTE in total)
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Divisional overview
F&A Division Highlights
M&A activity during 2022, including the acquisition of Xacct Accounting AS, Tandem AS, Argus Kreditt AS and Intunor Services AS, representing NOK 229 million in annual revenue.
Although 2022 started with a high sick leave-% due to Covid-19, the business climate changed during the year and ended with improved organic revenue growth.
EBITDA margin at 17.0% (17.4%) is in line with management expectations. Margin development compared to previous periods will fluctuate because of acquisitions and investments in consolidation. Even though the margins of Norian Group improved compared to last year, the Norian business operates in 2022 with lower margins than the average of other F&A businesses.
During 2022 several subsidiaries have started projects implementing nearshoring in their production set-up. It is an area that will continue to grow over the coming years.
Consolidation of businesses acquired remains high on our agenda. Implementation of the late 2021 merger of seven Norwegian F&A entities has continued in 2022 and is gradually showing results through organic growth and margin improvement.
| (NOKm) | Q4 | 2022 | Q4 | 2021 | FY | 2022 | FY | 2021 |
|---|---|---|---|---|---|---|---|---|
| 2022 | % | 2021 | % | 2022 | % | 2021 | % | |
| Revenue growth | 29.2% | 22% | 19.3% | 32.2% | ||||
| EBITDA growth | 22.9% | 14.5% | 16.8% | 28.6% | ||||
| Revenue | 410 | 100% | 316 | 100% | 1,543 | 100% | 1,298 | 100% |
| COGS | -33 | 8.7% | -12 | 3.0% | -114 | 7.4% | -81 | 6.2% |
| Gross Profit | 382 | 99.3% | 304 | 97.4% | 1,429 | 92.6% | 1,217 | 93.8% |
| Personnel expenses | -254 | 66.1% | -200 | 67.1% | -948 | 61.4% | -828 | 63.8% |
| Other operating costs | -51 | 13.1% | -41 | 12.2% | -218 | 14.1% | -164 | 12.6% |
| EBITDA | 77 | 18.6% | 63 | 19.9% | 263 | 17.0% | 225 | 17.4% |
| EBITDA-% | 18.6% | 19.9% | 17.0% | 17.4% |
IT Division Highlights
The revenue growth came from upselling additional services and products to existing customers as well as gaining new customers in the IT division, manifesting good demand for services that enable further innovation and digitalization across sectors and industries.
The revenue growth in the IT division stems from three focus areas. First, keeping customers satisfied to ensure low churn. Secondly, continuously developing and improving services to match customers changing demands and needs. Finally, ECIT continues to alter the market and sales efforts with IT, resulting in further revenue growth.
Consolidation of the IT division in both Norway and Denmark was focus areas in 2022. Total revenue of approx. NOK 700 million and more than 200 FTEs were involved in mergers where 13 companies became three. Although the consolidation process has progressed as planned, the EBITDA margin in 2022 has been affected as large mergers require time before integration is fully done and affect business focus.
In our main Nordic markets, there is a high level of M&A activities, meaning fewer IT providers remain to serve the important customers in ECITs main customer segment, which again equals fewer competitors striving for the same clients. This is a market opportunity for ECIT, providing some room and possibility to continue growth within our IT Division in 2023.
| (NOKm) | Q4 2022 |
2022 % |
Q4 2021 |
2021 % |
FY 2022 |
2022 % |
FY 2021 |
2021 % |
|---|---|---|---|---|---|---|---|---|
| Revenue growth | 18.8% | 13.8% | 20.4% | 23.0% | ||||
| EBITDA growth | -6.6% | 19.1% | 17.1% | 23.9% | ||||
| Revenue | 365 | 100% | 307 | 100% | 1,260 | 100% | 1,047 | 100% |
| COGS | -120 | 32.9% | -100 | 32.7% | -406 | 32.2% | -368 | 35.1% |
| Gross Profit | 245 | 67.1% | 207 | 67.3% | 854 | 67.8% | 679 | 64.9% |
| Personnel expenses | -170 | 46.5% | -133 | 43.3% | -601 | 47.7% | -467 | 44.6% |
| Other operating costs | -23 | 6.3% | -18 | 5.8% | -89 | 7.1% | -72 | 6.9% |
| EBITDA | 52 | 14.3% | 56 | 18.2% | 164 | 13.0% | 140 | 13.4% |
| EBITDA-% | 14.3% | 18.2% | 13.0% | 13.4% |
Note: Personnel expenses include cost to external consultants
XX | ECIT Annual Report 2022 28 ECIT Annual Report 2022
Tech Division Highlights
The growth in the Tech division is a result of the gradual implementation of ECIT-owned software and increased the various solutions and services offered by the division.
The annual recurring revenue (ARR) represents a lower growth rate compared to the total division since non-recurring revenue has increased at a higher rate. Non-recurring revenue covers consulting and services in connection with use of our software.
We continue to make progress in developing and inventing products and services utilizing machine learning and robotic process automation. ECIT Digital, our invoicing machine learning solution introduced in 2021, has proven to be a successful offering in this space.
During 2022 continued investments in the division have been made, increasing the number of employees and further strengthening the IT development expertise as well as the areas of business support and sales.
The amount of capitalized software has increased as we further develop our software solutions within the product lines of Payroll, Accounting, and Office support.
The focus in 2023 will remain to develop the products and solutions within our three product lines. Implement the products on the existing customers and to gain new customers.
| (NOKm) | Q4 2022 |
2022 % |
Q4 2021 |
2021 % |
FY 2022 |
2022 % |
FY 2021 |
2021 % |
|---|---|---|---|---|---|---|---|---|
| Revenue growth | 33.3% | 39.6% | 46.9% | 37.1% | ||||
| Revenue | 46 | 100% | 34 | 100% | 143 | 100% | 97 | 100% |
| COGS | -14 | 30.0% | -12 | 35.9% | -39 | 26.9% | -21 | 21.6% |
| Gross Profit | 32 | 70.0% | 23 | 67.0% | 105 | 73.1% | 76 | 78.9% |
| Personnel expenses | -10 | 21.9% | -12 | 35.0% | -66 | 45.8% | -55 | 56.8% |
| Other operating costs | -16 | 35.0% | -7 | 20.4% | -33 | 23.0% | -23 | 23.5% |
| EBITDA | 6 | 13.4% | 4 | 11.7% | 6 | 4.0% | -2 | -2.1% |
| Capitalized software | -18 | 39.4% | -8 | 23.3% | -50 | 34.9% | -21 | 21.7% |
| EBITDA-% | 13.4% | 11.7% | 4.0% | -2.1% |
Note: ARR = Annual recurring revenue (ARR) refers to revenue, normalised on an annual basis
XX | ECIT Annual Report 2022 29ECIT
ESG & Shareholder information
ESG and sustainability in ECIT
ECIT furthered its sustainability agenda in 2022. Our approach to sustainability includes environmental, social, and governance (ESG) impacts and the chosen UN Sustainability Development Goals (SDGs) important to ECIT and to where ECIT will have an effect.
Focus areas through 2022 have been to improve our sustainability reporting, through reporting on our environmental impact, in the form of electricity usage across Group and Power Usage Effectiveness from our datacentres (own and co-locations).
We continue to work on improving our social and governance areas, and during 2022 established a Code of Conduct, became members of the United Nations Global Compact, and continued our emphasis on development and learning.
Although we have yet to set targets for sustainability results, we have started to measure areas of importance to benchmark development year over year, as a recognition of that you cannot manage what is not measured.
The first ESG scorecard shows performance in 2022 in environmental, social, and governance areas.
ECIT will continue to improve the sustainability approach in the future and continue to create value for shareholders, employees, and society.
31 | ECIT Annual Report 2022
| Environmental data | Unit | 2022 | 2021 | 2020 |
|---|---|---|---|---|
| Scope 2, direct emissions | ||||
| Location based approach | ||||
| Electricity, KWh consumption* | KWh | 4,532 | × | × |
| Electricity, tCo2 consumption | tCo2 | 197 | × | × |
| Electricity, KWh consumption/FTE** | KWh/FTE | 1,9 | × | × |
| Electricity, tCo2 consumption/FTE | tCo2/FTE | 0,08 | × | × |
| Energy effciency of data centers*** | PUE (range) | 1,16-2,00 | × | × |
| Social data | ||||
| Full time workforce | FTE | 2,371 | 2,221 | 1,515 |
| Gender diversity (female/male) | % | 59% / 41% | 59% / 41% | 56% / 44% |
| Gender diversity, Management (female/male) | % | 54% /46% | 50% / 50% | 42% / 58% |
| Employer Engagement Score measure | EES | 83 | 83 | × |
| Governance data | ||||
| Whistle-blower-number of incidents reported Gender diversity, BoD ( female/male) |
Times % |
0 17%/83% |
0 0%/100% |
× 0%/100% |
| * KWh in thousand ** KWh per FTE in thousand |
*** PUE range from lowest to highest for own and co-located
Environmental aspects ('E')
ECIT supports the United Nations Global Compact principle of a precautionary approach to environmental challenges.
Environmental data, such as emission equivalents and Power Usage Effectiveness from data centers, allow comparisons across companies, which is important in improving sustainability management.
The first ESG scorecard of ECIT includes energy usage (kWh), emissions in the form of CO2 equivalents, and data center efficiencies in the form of Power Usage Effectiveness.
Energy
ECIT is reporting according to Scope 2 Greenhouse Gas (GHG) emissions. Scope 2 represents one of the largest sources of GHG emissions globally.
A large part of the energy consumption in ECIT comes from the many office locations across countries (including heating and electricity usage).
The data input covers the majority of our locations. Some of our subsidiaries have electricity usage included in their rental agreements and have no electricity usage that can be reported separately. However, the share of the companies not being able to report represent a small percentage of the total amount. Consequently, we have concluded that the data is representative and can be reported.
Energy usage measures our total kWh consumption (in
thousand) and kWh per FTE. Further, input has been calculated into GHG emissions using the GHG protocol emissions calculation tool (location-based).
The total amount of kWh consumption in 2022 amounts to 4,532 thousand and 1,9 thousand per FTE.
Total emissions of 197 kg CO2 equivalents were identified for 2022, representing 0,08 per FTE.
PUE-efficiency Datacenters
A metric widely used to measure the energy efficiency of a data center is Power Usage Efficiency- PUE.
The PUE is a way to describe our environmental footprint and is an accepted method for comparing environmental footprint using data centers.
PUE is determined by dividing the amount of power entering a data center by the energy used to run the computer infrastructure.
PUE is expressed as a ratio, with overall efficiency improving as the quotient decreases toward 1.
PUE numbers for ECIT, including owned and rented facilities, vary from 1.16 to 2.00 in 2022.
Environmental – 2023 focus
ECIT's goal is to create higher transparency on the Group's level of Carbon Emissions.
In 2023 we will continue building on the data fundament achieved for 2022 concerning our energy consumption.
Further steps will be taken to enhance data quality, allowing us to use data for decision-making processes and set future targets.
Relevant Certifications
Several of our subsidiaries are certified in The Eco-Lighthouse and certified according to ISO 14001:2015 Environmental management systems.
Also, the subsidiary ECIT Solutions One AS has complete HP and Lenovo sustainability certifications and dedicated personnel certified in sustainability.
Certificates are available upon request.
Social aspects ('S')
ECIT is a people's business, and our employees are central to everything we do, and their dedication and talent are the main assets of the Group.
Our business model is rooted in an entrepreneurial mindset, decentralization of operations, and cooperation across entities.
ECIT is committed to securing a safe workplace, ensuring employee engagement, limiting employee turnover, and providing talent-based advancement opportunities for all employees on an equal basis.
Learning and development
Suitable and structured training and development are key to attracting and retaining skilled employees, and in ECIT, unlocking personal potential is a key focus area.
Through 2022 we have continued developing our internal training programs, including ECIT Academy, ECIT Talent, and ECIT Associate.
ECIT Academy operates across countries and divisions and is a combination of courses and case-solving, including personal development plans in close cooperation with managers.
ECIT Associate is specialized for our accounting division. The first Group of 17 Associates is graduating in spring 2023, and a new group of 42 Associates will graduate later, covering employees from over 20 local offices.
ECIT Talent is a program for employees who have worked in ECIT for some years, and the first group graduated by the end of 2022.
ECIT Leadership is a program designed for our managers, with a planned start in spring 2023. The program is held over four courses in six months.
Gender Equality
The gender composition in ECIT comprises 59% women (59%) and 41% men (41%). The total number of employees is 2.371. In managerial positions, the share of women is 54% (50%), and the share of men is 46% (50%).
Gender composition in ECIT
Gender composition in ECIT managers
EES score
In 2021 we started to monitor employee satisfaction through employee engagement score (EES) surveys and reached a score of 83. In 2022 we completed the same survey and were happy to note that we have reached the same high level as in 2021.
One of our values in ECIT is 'open communication'. We openly present and discuss the results with our employees to find improvement areas and identify means of addressing them.
In the health, environment, and safety area, zero reported accidents occurred in 2022.
Governance aspects ('G')
Responsible behavior is part of ECIT's core values, and customers and other stakeholders expect ECIT to conduct business responsibly.
ECIT's new Codes of Conduct towards employees and subcontractors form the basis of all actions and activities in ECIT's name.
Code of Conduct
In 2022, ECIT established a Code of Conduct which covers various areas such as human rights, gender equality, supplier relationships, labor standards, and environmental responsibility.
The Code of Conduct is our foundation and is an essential part of our work to ensure responsible business practices following the Ten Principles of the United Nations Global Compact and OECD`s guidelines for responsible business conduct. The Code is incorporated into onboarding and our management training.
We consider compliance training of our employees as an important step in minimizing the risk of violating various rules, including rules on corruption and human rights. ECIT will continue this work in 2023 and further integrate our Codes of Conduct into our operations. That will happen through additional training and awareness measures in the organization through online training.
The Transparency Act (Åpenhetsloven)
In 2022, The Transparency Act entered into force, making it mandatory for certain Norwegian companies to conduct due diligence on human rights in value chains.
ECIT supports the new legislation and has carried out several measures to ensure Group and relevant subsidiaries are compliant.
Appointing Group responsibilities, establishing systems for Information requests from the public, performing due diligence of suppliers, and embedding responsible business conduct into policies and management systems, are part of the measures implemented.
Board representation
The Board of Directors comprises six members, one female director, and five male directors. In April 2022, ECIT appointed the first woman to the board of ECIT, Linda Forberg.
Whistle-blower system
In 2021, ECIT implemented a whistle-blower system, which allows people to anonymously report serious or suspected offenses that might impact either an individual or the ECIT Group.
Similar to last year, no incidents through our whistle-blower system were reported during 2022.
Governance – 2023 focus
During 2022, a number of steps were taken to enhance the ECIT governance model.
Focus on governance will continue in 2023 to secure continuing compliance with regulatory requirements across countries.
Having high governance on our agenda enables our employees to conduct business in a respectable manner that benefits our customers and business partners
ECIT partners:
Shareholder information
Share price development
The ECIT share started the year at a price of NOK 8.00 and closed the year at NOK 7.36, which equals a development of minus 8.0%.
During the same period, the Euronext Growth index decreased by 24.8%.
The lowest closing price in 2022 was NOK 5.76 on 16th June 2022, and the highest closing price was NOK 7.93 on 19th January 2022.
At the year-end of 2022, the market capitalization of ECIT was NOK 3.3 billion.
According to data from Euronext Oslo, the average daily trading volume of ECIT was 143,126 shares in 2022, corresponding to an average daily turnover of NOK 0.9 million.
Share capital
The total share capital on 31 December 2022 consists of 452,050,494 shares of nominal NOK 1 each.
There are three share classes, whereas the B-shares are subject to trade on the Euronext Growth stock exchange.
A-shares are not subject to listing but carry ten votes per share and are all owned by Peter Lauring through holding companies. A-shares are to be converted to B-shares when Peter Lauring is no longer a part of ECIT or in case of a sale to a third party or listing of the A-shares. C-shares are not subject to listing and carry one vote per share.
Number of shares in three classes per December 2022:
- A-shares: 41,336,068
- B-shares: 343,031,470
- C-shares: 67,682,956
Shareholders
Our shareholders are mainly located in the Nordic countries in Europe, with two-thirds of our shareholders being in Norway.
More than 62% of the shares are still owned by employees and management, with the top management representing 19% and employees and partners within the group representing more than 43% of the shares.
ECIT AS has no majority shareholders at the time of publication of this annual report. Peter Lauring holds 49.9% of the voting shares of the Group.
Share-buy-backs and treasury shares
ECIT initiated two share buyback programs during 2022.
The first was initiated on the 23rd of August 2022 and ended on the 16th of November 2022. A total of 1,204,672 shares have been bought at an average price of NOK 6.64.
The second share buyback program was initiated on the 17th November 2022, and ended on the 13th December 2022. A total of 543,680 shares have been bought at an average price of 7.36.
The purpose of the share buyback programs is to acquire shares that could be used as a settlement in the ECITs incentive plan.
Furthermore, shares acquired under the program may be applied as a partial settlement measure in ECITs acquisitions of companies and for general corporate purposes.
On 31 December 2022, ECIT held 2.7 million shares as treasury shares corresponding to 0.6% of the share capital.
Dividend
Proposed dividend for 2022 amounts to NOK 0.04 per share. A similar level was paid out as an ordinary dividend last year.
Shares with lock-up
The lock-up period for active shareholders expired in May 2022. Remaining B-shares subject to a lock-up period represents 8 million (1.8% of total shares)
Investor relations
We aim to maintain an open and active dialogue with shareholders, investors, analysts, media, and the general public to contribute to ensuring equal and timely dissemination of information to all market participants and fair pricing of the shares.
This includes hosting quarterly investor presentations and participation in investor conferences and one-on-one and group meetings with analysts and investors. Our investor relations policy stipulates a 30 calendar silent period before the publication of any full-year or interim financial report.
Geographical distribution of our shareholders
Financial calendar
The financial calendar for 2023 is as follows:
| Annual report 2022 | 14 Mar 23 |
|---|---|
| Annual General Meeting 2023 | 28 Mar 23 |
| Interim financial report Q1 2023 | 10 May 23 |
| Interim financial report H1 2023 | 24 Aug 23 |
| Interim financial report Q3 2023 | 09 Nov 23 |
Governance model
Management structure
Together, the Board of Directors and the Executive management team form the governing body of ECIT.
A division management team was established in 2022 with the responsibility of the three divisions of ECIT; F&A, IT, and Tech.
All the appointed division responsible managing directors come from and have a long history with the ECIT organization.
Board of directors
Responsible for the overall management and strategic direction of the Group, including:
- Strategy plan and annual budget
- Supervising the activities of the Group
- Reviewing the financial position and capital resources to ensure that these are adequate
- Risk management and internal controls
The Board receives financial reports and is briefed on important matters in between board meetings.
Executive management
Responsible for the day-to-day management of the Group, including:
- Strategic initiatives and Group policies
- Organisational structure
- Group performance
- Mergers & acquisitions
- Assessing on an ongoing basis whether the Group has adequate capital resources and liquidity to meet its existing and future liabilities
- Risk management and internal controls
Divisional management team
Responsible for the day-to-day management of the operational activities of the three divisions in ECIT, supported by the centralised group functions
- Implementation of the ECIT strategy and business model on a division level
- Business performance of the divisions
- Run business in accordance with Group policies and procedures as well as local legislation and practice of each country
- Risk management and internal controls
•
Quarterly financial overview
| TOTAL | FULL | Q4 | Q3 | Q2 | Q1 | FULL | Q4 | Q3 | Q2 | Q1 |
|---|---|---|---|---|---|---|---|---|---|---|
| (NOKm) | YEAR | 2022 | 2022 | 2022 | 2022 | YEAR | 2021 | 2021 | 2021 | 2021 |
| Revenue | 2,826 | 792 | 645 | 704 | 685 | 2,318 | 629 | 541 | 607 | 541 |
| EBITDA | 418 | 135 | 99 | 97 | 87 | 339 | 113 | 80 | 80 | 66 |
| Total revenue growth | 21.9% | 25.9% | 19.2% | 16.1% | 26.6% | 30.1% | 22.7% | 35.4% | 40.3% | 23.8% |
| EBITDA-% | 14.8% | 17.0% | 15.3% | 13.7% | 12.8% | 14.6% | 18.0% | 14.9% | 13.1% | 12.3% |
| F&A DIVISION | FULL | Q4 | Q3 | Q2 | Q1 | FULL | Q4 | Q3 | Q2 | Q1 |
| (NOKm) | YEAR | 2022 | 2022 | 2022 | 2022 | YEAR | 2021 | 2021 | 2021 | 2021 |
| Revenue | 1,543 | 410 | 340 | 403 | 390 | 1,298 | 316 | 313 | 369 | 300 |
| EBITDA | 263 | 77 | 53 | 71 | 61 | 225 | 63 | 52 | 59 | 51 |
| Total revenue growth | 19.3% | 29.2% | 9.5% | 9.2% | 30.0% | 32.2% | 22.0% | 42.5% | 47.4% | 20.0% |
| EBITDA-% | 17.0% | 18.6% | 15.5% | 17.6% | 15.7% | 17.4% | 19.9% | 16.7% | 16.1% | 17.0% |
| IT DIVISION | FULL | Q4 | Q3 | Q2 | Q1 | FULL | Q4 | Q3 | Q2 | Q1 |
| (NOKm) | YEAR | 2022 | 2022 | 2022 | 2022 | YEAR | 2021 | 2021 | 2021 | 2021 |
| Revenue | 1,260 | 365 | 302 | 293 | 299 | 1,047 | 307 | 233 | 252 | 255 |
| EBITDA | 164 | 52 | 48 | 31 | 33 | 140 | 56 | 35 | 28 | 21 |
| Total revenue growth | 20.4% | 18.8% | 29.5% | 16.6% | 17.6% | 23.0% | 13.9% | 19.1% | 30.1% | 32.7% |
| EBITDA-% | 13.0% | 14.3% | 15.9% | 10.6% | 11.0% | 13.4% | 18.2% | 15.0% | 11.1% | 8.3% |
| TECH DIVISION | FULL | Q4 | Q3 | Q2 | Q1 | FULL | Q4 | Q3 | Q2 | Q1 |
| (NOKm) | YEAR | 2022 | 2022 | 2022 | 2022 | YEAR | 2021 | 2021 | 2021 | 2021 |
| Revenue EBITDA |
143 6 |
46 6 |
33 2 |
39 0 |
25 -2 |
97 34 -2 4 |
22 0 |
21 -4 |
20 -2 |
Definition of Financial Highlights and Ratios
The Management provides selected financial ratios and key figures in the report to allow the reader to understand the Group's underlying performance better. The alternative performance measures provided may be defined or calculated differently than for other companies.
Key figures for financial performance
Net investments in subsidiaries = The comparative figures have been amended to reflect that acquisition and sale of subsidiaries must be reported based on net cash payment. Net cash payment corresponds to the cash payment for the shares, less cash holdings in the subsidiaries at the time of acquisition or sale. The effect of the new subsidiary's balance sheet is therefore eliminated.
Net working capital = Receivables and other current operating assets less trade payables and other current operating liabilities. Tax payable and earn-out obligation are not included.
Net working capital is not comparable to the change in net working capital in the cash flow statement since the entry values of acquired companies are eliminated in the cash flow statement.
Net-interest-bearing-debt = consists of interest-bearing debt less interest-bearing assets. Interest-bearing debt consists mainly of bank loans (credit facility) and lease liabilities, whereas interest-bearing assets mainly consist of cash and outstanding loans to minority shareholders.
Organic revenue growth = Growth in companies where ECIT Group legally had control in both the actual period and the comparison period. The organic growth is calculated on a monthly basis.
Acquisitions impact = The impact on the total growth, which relies on new acquisitions during the period.
Currency translation = The impact on the total growth due to exchange rate changes.
Total revenue growth = Organic growth, acquisitions impact and currency translation in total.
Free Cash Flow = Cash flow from operating activities less repayment of lease liabilities and before transaction and restructuring costs and net investments in tangible assets. Adjusted free cash flow, as presented, is a key performance measurement for the Management of ECIT Group.
Proforma revenue = Proforma revenue equals revenue in the Group, as all companies acquired within the year had been owned as of 1 January.
Recurring revenue = Recurring revenue is where the revenue is predictable, stable, contractual and likely to continue. In general, it involves less risk but maximum revenue predictability.
Repeatable revenue = Repeatable revenue is defined as somewhat predictable revenue (but can vary) and likely to continue due to the long customer relationships. Revenue is somewhat derived from a per payslip or per invoice charge.
Transaction and restructuring costs = items of income or expense which by nature are not related to the Group's ordinary operation or investments in future activities. See note 2.7 for additional details on the items included.
PAT = Profit after tax or net income.
FTE = Calculated full-time employees.
Leverage ratio = operating profit before amortizations and depreciations (EBITDA) are calculated on proforma figures to match the full impact of new acquisitions on net interestbearing debt.
The majority share of revenue and operating profit before amortization and depreciation and transaction and restructuring costs (EBITDA) = Shareholders of ECIT AS' share of revenue and operating profit before amortizations and depreciations (EBITDA) and transaction and restructuring costs. The percentage is calculated on legal figures for the last twelve months (LTM) and with the ownership as of the balance sheet date.
Adjusted profit for the year = Adjusted profit for the year equals profit for the year before transaction & restructuring costs, earnout assessment, IPO costs and gain on portfolio investments. The Management uses adjusted profit for the year to measure the performance of the Group, excluding one-off items.
Adjusted diluted earnings per share = Adjusted diluted earnings per share equals diluted earnings per share calculated at adjusted profit for the year. The Management uses adjusted diluted earnings per share to measure the performance of the Group, excluding one-off items.
Gender diversity = Gender diversity is measured be-tween male, female and non-binary. Non-binary is not shown in the overview since the share of non-binary people in the Group is less than 1%. Gender diversity, managerial = Managerial level is defined by people within ECIT Group responsible for employees or tasks considered as management level.
Financial ratios and key figures provided are essential for ECIT and stakeholders as it illustrates the underlying performance of ECIT.
Consolidated Financial statements
41 | ECIT Annual Report 2022 - Consolidated Financial Statements
| 2022 | 2021 | ||
|---|---|---|---|
| Revenue | 2.1, 2.2 | 2,826 | 2,318 |
| COGS | 2.1, 2.3 | -529 | -441 |
| Gross Profit | 2,297 | 1,877 | |
| Personnel expenses | 2.4, 4.7, 7.1 | -1,677 | -1,384 |
| Other operating costs | 2.5, 7.3 | -203 | -154 |
| Operating profit before amortisation, depreciation | |||
| and restructuring & transaction costs (EBITDA) | 418 | 339 | |
| Restructuring & transaction costs | 2.7 | -13 | -9 |
| Operating profit before amortisation, depreciation | 405 | 330 | |
| Amortizations and depreciations | 2.6 | -188 | -166 |
| Operating profit (EBIT) | 217 | 164 | |
| Share of profit or loss of associates accounted for | |||
| using the equity method | 7.6 | 1 | 0 |
| Financial income | 2.8 | 49 | 27 |
| Financial expenses | 2.8 | -38 | -41 |
| Profit before tax | 229 | 150 | |
| Tax on profit for the period | 2.9 | -52 | -35 |
| Profit for the year | 177 | 115 | |
| Attributeable to: | |||
| Shareholders in ECIT AS | 105 | 49 | |
| Non-controlling interests | 72 | 66 | |
Income statement Statement of Other comprehensive income (NOKm) Note
| (NOKm) | Note | 2022 | 2021 |
|---|---|---|---|
| Profit for the year | 177 | 115 | |
| Items that may be reclassified to the income statement: | |||
| Foreign exchange adjustments of subsidiaries | 5 | -24 | |
| Value adjustments of hedging instruments | 0 | 0 | |
| Other comprehensive income | 5 | -24 | |
| Total comprehensive income | 182 | 91 | |
| Attributable to: | |||
| Shareholders in ECIT AS | 108 | 34 | |
| Non-controlling interests | 74 | 57 |
| (NOKm) | Note | 2022 | 2021 |
|---|---|---|---|
| Earnings per share | |||
| Earnings per share (NOK) Diluted earnings per share (NOK) |
5.2 5.2 |
0.23 0.23 |
0.12 0.12 |
Cash Flow Statement
| (NOKm) | Note | 2022 | 2021 | (NOKm) | Note | 2022 | 2021 |
|---|---|---|---|---|---|---|---|
| Profit before tax | 229 | 150 | Cash flow from operating and investing | ||||
| activities (A+B) | 12 | -70 | |||||
| Amortizations & Depreciations | 2.6 | 188 | 166 | ||||
| Restructuring & transaction costs | 2.7 | 13 | 9 | Repayment of lease liabilities | 4.5 | -98 | -84 |
| Fair value adjustment of a contigent consideration | 2.8 | -7 | -12 | Loans and credit facilities | 124 | 35 | |
| Financial income | 2.8 | -43 | -15 | Interest received | 6 | 30 | |
| Financial expenses | 2.8 | 38 | 41 | Interest paid | -27 | -51 | |
| Capital increase | 5.1 | 0 | 382 | ||||
| Operating profit before amortisation, depreciation | Sale and purchase of treasury shares | -12 | 3 | ||||
| and restructuring & transaction costs (EBITDA) | 418 | 339 | Transactions with minorities | 4 | -75 | ||
| Dividends distributed | -92 | -144 | |||||
| Restructuring & transaction costs | 2.7 | -13 | -9 | Cash flow from financing activities | -94 | 95 | |
| Corporation tax, paid | -58 | -40 | |||||
| Change in net working capital (NWC) | -20 | -42 | Cash flow for the period | -83 | 25 | ||
| Cash flow from operating activities (A) | 327 | 249 | |||||
| Cash and cash equivalents 1 January | 265 | 246 | |||||
| Investments in tangible assets | 4.3 | -20 | -20 | Cash flow for the period | -83 | 25 | |
| Investments in software | 4.2 | -55 | -27 | Currency translation adjustments | 1 | -6 | |
| Investments in subsidairies | 6.2, 7.6 | -251 | -279 | Cash and cash equivalents end of period | 183 | 265 | |
| Proceeds from sale of subsidiaries | 14 | 3 | |||||
| Investments in other activities | -29 | -23 | |||||
| Proceeds from sale of other financial intstruments | 25 | 20 | |||||
| Change in other financial assets | 2 | 7 |
Cash flow from investing activities (B) -315 -319
Balance Sheet
| (NOKm) | Note | 31 DEC 2022 |
31 DEC 2021 |
1 JAN 2021 |
(NOKm) | Note | 31 DEC 2022 |
31 DEC 2021 |
1 JAN 2021 |
|---|---|---|---|---|---|---|---|---|---|
| Goodwill | 4.1, 4.2 | 1,279 | 955 | 728 | Share capital | 5.1. 5.3 | 452 | 445 | 388 |
| Customer contracts | 3.2. 4.2 | 386 | 335 | 276 | Treasury shares | 5.1. 5.3 | -3 | -1 | -8 |
| Software | 4.2 | 147 | 113 | 83 | Reserves and retained earnings | 5.1. 5.3 | 839 | 773 | 496 |
| Total non-current intangible assets | 1,811 | 1,403 | 1,087 | ECIT AS shareholders share of equity | 1,288 | 1,217 | 876 | ||
| Land, buildings and equipment | 4.1, 4.3 | 48 | 50 | 71 | Non-controlling interest | 5.1. 5.3 | 364 | 223 | 230 |
| Right-of-use assets | 4.1. 4.5 | 217 | 226 | 194 | Total equity | 1,652 | 1,440 | 1,106 | |
| Total non-current tangible assest | 266 | 276 | 264 | ||||||
| Lease liabilities | 3.7, 5.4 | 145 | 160 | 139 | |||||
| Other financial assets | 3.4 | 45 | 27 | 14 | Borrowings | 3.7, 5.4 | 350 | 181 | 124 |
| Investments in associates | 7.6 | 51 | 37 | 1 | Provisions | 4.6 | 39 | 26 | 40 |
| Other receivables, interest bearing | 3.3 | 50 | 34 | 49 | Other non-current liabilites | 3.7 | 4 | 7 | 0 |
| Other receivables | 3.3 | 7 | 14 | 11 | Deferred tax liabilities | 2.9 | 84 | 78 | 60 |
| Deferred tax assets | 2.9 | 38 | 31 | 15 | Total non-current liabilities | 623 | 451 | 363 | |
| Total non-current financial assets | 191 | 143 | 90 | ||||||
| Total non-current assets | 2,268 | 1,822 | 1,440 | Lease liabilities | 3.7, 5.4 | 80 | 76 | 62 | |
| Borrowings | 3.7, 5.4 | 17 | 36 | 36 | |||||
| Inventories | 4.4 | 12 | 12 | 10 | Provisions | 4.6 | 23 | 5 | 17 |
| Trade receivables | 3.1. 5.4 | 407 | 325 | 288 | Tax payables | 2.9 | 68 | 59 | 38 |
| Tax receivables | 2.9 | 24 | 18 | 1 | Trade payables | 3.6. 5.5 | 142 | 111 | 98 |
| Other receivables, interest bearing | 3.3 | 11 | 16 | 21 | Contract liabilities | 3.2 | 49 | 40 | 35 |
| Other receivables | 3.3 | 141 | 119 | 102 | Other current liabilites | 3.7 | 392 | 358 | 353 |
| Cash and cash equivalents | 3.5 | 183 | 265 | 246 | Total current liabilities | 770 | 685 | 639 | |
| Total current assets | 778 | 754 | 668 | ||||||
| Total assets | 3,045 | 2,576 | 2,108 | Total equity and liabilities | 3,045 | 2,576 | 2,108 |
Statement of Changes in Equity 2022
2022:
| Not reg. | Non | |||||||
|---|---|---|---|---|---|---|---|---|
| (NOKm) | Share Capital | Capital increase |
Share premium |
Other reseves |
Retained earnings |
Total | controlling interests |
Total equity |
| Equity at 1 January | 445 | 12 | 723 | 4 | 33 | 1,217 | 223 | 1,440 |
| Profit for the year | 0 | 0 | 0 | 0 | 105 | 105 | 72 | 177 |
| Net exchange differences recognized in OCI | 0 | 0 | 0 | 3 | 0 | 3 | 2 | 5 |
| Value adjustments of hedging instruments | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| Other comprehensive income | 0 | 0 | 0 | 3 | 0 | 3 | 2 | 5 |
| Total comprehensive income | 0 | 0 | 0 | 3 | 105 | 108 | 74 | 182 |
| Transactions with shareholders: | ||||||||
| Capital increase registered | 7 | -6 | 46 | 0 | 0 | 47 | 0 | 47 |
| Dividends distributed (note 5.1) | 0 | 0 | 0 | 0 | -18 | -18 | -77 | -95 |
| Sale and purchase of treasury shares (note 5.1) | 0 | 0 | 0 | -2 | -9 | -12 | 0 | -11 |
| Addition of non-controlling interests | 0 | 0 | 0 | 0 | 0 | 0 | 131 | 131 |
| Transactions of shares with non-controlling interests | 0 | 0 | 0 | 0 | -56 | -56 | 19 | -38 |
| Other adjustments | 0 | 0 | 0 | 0 | 2 | 2 | -6 | -4 |
| Total transactions with shareholders | 7 | -6 | 46 | -2 | -81 | -37 | 67 | 30 |
| Equity end of period | 452 | 6 | 769 | 5 | 57 | 1,288 | 364 | 1,652 |
Statement of Changes in Equity 2021
| (NOKm) | Share Capital | Not reg. Capital increase |
Share premium |
Other reserves |
Retained earnings |
Total | Non controlling interests |
Total equity |
|---|---|---|---|---|---|---|---|---|
| Equity at 1 January | 388 | 4 | 371 | 13 | 100 | 876 | 230 | 1,106 |
| Profit for the year | 0 | 0 | 0 | 0 | 49 | 49 | 66 | 115 |
| Net exchange differences recognized in OCI | 0 | 0 | 0 | -16 | 0 | -16 | -9 | -24 |
| Other comprehensive income Total comprehensive income |
0 0 |
0 0 |
0 0 |
-16 -16 |
0 49 |
-16 34 |
-9 57 |
-24 91 |
| Transactions with shareholders: | ||||||||
| Capital increase registered | 57 | 8 | 378 | 0 | 0 | 443 | 0 | 443 |
| Dividends distributed (note 5.1) | 0 | 0 | 0 | 0 | -65 | -65 | -76 | -142 |
| Sale and purchase of treasury shares (note 5.1) | 0 | 0 | 0 | 7 | 32 | 39 | 0 | 39 |
| Addition of non-controlling interests | 0 | 0 | 0 | 0 | 0 | 0 | 39 | 39 |
| Transactions of shares with non-controlling interests | 0 | 0 | 0 | 0 | -83 | -83 | -26 | -109 |
| IPO expenses | 0 | 0 | -26 | 0 | 0 | -26 | 0 | -26 |
| Other adjustments | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| Total transactions with shareholders | 57 | 8 | 352 | 7 | -116 | 308 | -64 | 244 |
| Equity end of period | 445 | 12 | 723 | 4 | 33 | 1,217 | 223 | 1,440 |
| Osl 13 Ma rch 20 23 o, |
Osl 13 Ma rch 20 23 o, |
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Notes to the consolidated financial statements
1. Basis for preparation
This section provides an overview of the financial accounting policies and key accounting estimates applied in the preparation of the Group's consolidated financial statements.
The annual consolidated financial statements for the Group are prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB) and as adopted by the European Union (EU) and represent the first financial statements of the Group in accordance with the IFRS. See note 1.2 for information related to the first-time adoption of IFRS.
The Annual Report for 2022 was approved by the executive Management and the board of directors on 13 March 2023. It will be presented for approval at the subsequent Annual General Meeting on 28 March 2023.
1.1 Accounting policies, estimates, and judgments
The Annual Report for the period 1 January – 31 December 2022 comprises the consolidated financial statements of the parent company ECIT AS and subsidiaries controlled by the parent company (the Group).
ECIT AS is a limited liability company registered in Norway. The Group's head office is located at Rolfsbuktveien 4 A, NO-1364 Fornebu, Norway. The Group's activities are accounting, payroll services, financial advisory services, IT and Tech sales and services, and debt collection services (other).
The financial statements apply principles based on historical cost, with the exception of liabilities related to contingent consideration for acquisitions that are measured at fair value. If specific valuation techniques and inputs are used, these are disclosed under each relevant chapter and sub-chapter.
The consolidated financial statements are prepared based on uniform accounting policies for equivalent transactions and events in otherwise similar circumstances.
Consolidation principles
The consolidated financial statements present the overall financial result and the overall financial position when the parent company ECIT AS and its controlling ownership interests in other companies are presented as one financial entity. Entities in which the Group directly or indirectly controls at least 20%, but not more than 50%, of the voting power are accounted for as associates and measured using the equity method. Investments with negative net asset values are recognised at NOK 0. The financial statements are prepared according to uniform principles in all group companies. All internal relations between the companies are eliminated.
Ownership interests in companies in which the Group alone has a controlling influence (subsidiaries) are consolidated 100 per cent line-by-line in the consolidated financial statements from the date on which the Group has control and are consolidated until the date on which such control lapses. The only exception is goodwill that is carried to the majority's interest. A company in which investment has been made is assessed to be controlled by the Group if the Group:
- exerts authority over the company,
- is exposed to or has rights to variable returns from its involvement in the company,
- has the opportunity to use its authority over the company to influence its return.
If the Group holds the majority of voting rights in a company, the company in question can be presumed to be a subsidiary of the Group. Suppose the Group does not hold the majority of voting rights. All relevant facts and circumstances are assessed to evaluate whether the Group controls the company in which investment has been made. It includes an assessment of ownership interests, voting shares, ownership structure, strength factors, options and shareholder agreements. These assessments are made for each investment.
If the Group has control but owns less than 100 per cent of the subsidiary, the other owners' interests are stated as noncontrolling interests under the Group's equity.
Acquisitions and business mergers (consolidated financial statements)
The acquisition method is applied to the accounting of business mergers. Acquired assets and liabilities in connection with business mergers are measured at fair value at the time of acquisition. Companies are consolidated from the date on which the Group achieves control and are excluded from consolidation on the control lapse. In the Group, costs related to acquisitions are expensed as they are incurred.
Non-controlling interests are calculated as the non-controlling interests' share of identifiable assets and liabilities or at fair
value. The choice of method is made for each business merger depending on the type of merger.
Goodwill is calculated at cost being the aggregate of the consideration transferred and the amount recognised of noncontrolling interests, and the fair value of ownership interests previously held, with deduction of the net value of identifiable assets and liabilities calculated at the acquisition date. Goodwill is not amortised but is tested at least annually for impairment. Goodwill is allocated to the cash-flow-generating units expected to achieve synergies from the acquisition, irrespective of whether other assets and liabilities as part of the acquisition are attributable to these cash-flow-generating units.
Foreign currency translation
Functional and presentation currency
Items in the financial statements of each reporting entity of the Group are measured in the currency of the primary economic environment in which the entity operates (the functional currency).
The functional currency of the parent company, ECIT AS, is NOK.
The financial statements are presented in Norwegian kroner (NOK), and all amounts have been rounded to the nearest million.
Transactions and balances
Transactions in foreign currency are translated at the exchange rate on the transaction date. Monetary items in foreign currency are translated to NOK using the exchange rate on the balance sheet date. Exchange rate movements are recognised in the income statement on an ongoing basis during the accounting period within other financial items.
Foreign Group Entities
The results and financial position of all Group entities that have a functional currency different from the presentation currency are translated into the presentation currency as follows:
- Assets and liabilities for each entity's balance sheet are translated at the closing rate at the date of that balance sheet;
- Income and expenses for each entity's income statement are translated at average ex-change rates; and
- All resulting exchange differences are recognised directly in other comprehensive income.
Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate. Exchange differences arising are recognised in other comprehensive income.
Cash and cash flow statement
Cash and cash equivalents include cash, bank deposits and other short-term liquid positions. The cash flow statement is prepared according to the indirect method.
Changes in the Group structure on the acquisition and sale of subsidiaries are part of the investment activities. Concerning the acquisition and sale of subsidiaries, net cash payment is reported. Net cash payment corresponds to the cash payment for the shares, less cash holdings in the subsidiary, at the time of acquisition or sale.
The cash flow effect at the time of acquisition or sale is presented on a separate line under "Acquisition and sale of subsidiaries" and corresponds to net cash payment. The effect of the new subsidiary's balance sheet items is eliminated and has no impact on the cash flow items at acquisition.
Materiality
The financial statements separately present items which are considered individually material. Individually immaterial items are aggregated with other items of similar nature in the statements or the notes. All required disclosures by IFRS are presented unless the information is considered immaterial to the economic decision-making of the users of the financial statements.
Management judgements, estimates, and assumptions
In the preparation of the annual financial statements, the Management has applied judgements, estimates and assumptions that have affected assets, liabilities, income and costs, as well as unsecured assets and liabilities on the balance sheet date.
Judgements, estimates and assumptions are based on historical experience and other factors that Management considers reliable, but by their very nature, they are associated with uncertainty and unpredictability. These assumptions may prove incomplete or incorrect, and unexpected events or circumstances may arise. The estimates and assumptions deemed most significant to the preparation of the consolidated financial statements are addressed below:
- Intangible assets, note 4.1 and 4.2
- Leases, note 4.5
- Earn out obligations, note 4.6
- Acquisitions of enterprises, note 6
Estimates may change as a consequence of future events. Changes in accounting estimates are recognised in the period in which the changes occur. If the changes also apply to future periods, the effect will be distributed in the current and future periods. Reference is made to the separate note for further
details of estimates and assumptions included in this year's consolidated financial statements.
Key assumptions about the future and other sources of key estimation uncertainty at the end of the reporting period are disclosed and quantified if material. There are no such assumptions in 2022.
1.2 First-time Adoption of International Financial Reporting Standards
All amendments to the International Financial Reporting Standards (IFRS) effective for the financial year 2022 have been implemented as a basis for preparing the consolidated financial statements. Accordingly, these financial statements for the period ended 31 December 2022 are the first that ECIT has prepared in accordance with the IFRS adopted by the EU. The Group has prepared financial statements that comply with IFRS applicable 31 December 2021, together with the comparative period ended 31 December 2020. In preparing the financial statements, the Group's opening statement of financial position was prepared on 1 January 2021, the Group's date of transition to IFRS.
None of the implementations has had any material impact on the income statement, statement of other comprehensive income, cash flow statement and balance sheet presented. When converting to IFRS from its previous reporting framework, Section 3-9 of the Norwegian Accounting Act and the Regulation on Simplified IFRS (2020) were adopted by the Norwegian Ministry of Finance on 28 February 2020. Generally Accepted Accounting Principles in Norway ("IFRS Light") on 1 January 2021, as well as for the period ending 31 December 2021. The notes have been amended to reflect the increased disclosure requirement due to converting to IFRS.
1.3 Changes in accounting policies and disclosures
The Group has not early adopted any standard, interpretation or amendment that has been issued but is not yet effective. The new and amended standards and interpretations that are issued but not yet effective up to the date of issuance of the Group's financial statements are disclosed below. The Group intend to implement the changes from their effective date. Adopting the standards not yet effective is not expected to have any material impact on the Group's financial performance or financial position.
Amendments to IAS 1 – Classification of liabilities as Current or Non-current
The amendments are effective for annual periods beginning or after 1 January 2023. ECIT specify the requirements for classifying liabilities as current or non-current.
Amendments to IAS 1 – Disclosure of Accounting Policies
The amendments are effective for annual periods beginning or after 1 January 2023. ECIT provides guidance and examples to help entities apply material judgements to disclosures of accounting policies.
Amendments to IAS 8 - Definition of Accounting Estimates
The amendments are effective for annual periods beginning or after 1 January 2023. ECIT clarify the distinction between changes in accounting estimates and changes in accounting policies and the correction of errors. Also, ECIT clarifies how entities use measurement techniques and input to develop accounting estimates.
IFRS 17 Insurance Contracts
IFRS 17 will be effective for annual periods beginning or after 1 January 2023. It covers recognition, measurement, presentation and disclosure for insurance contracts. Once effective, IFRS 17 will replace IFRS 4 Insurance contracts.
Amendments to IAS 12 – Deferred tax related to Assets and Liabilities arising from a Single Transaction
The amendments are effective for annual periods beginning or after 1 January 2023. The main change is an exemption from the initial recognition exemption provided in IAS 12.15(b) and IAS 12.24. Accordingly, this change narrows the scope of the initial recognition exemption, which no longer will apply to transactions in which equal amounts of deductible and temporary taxable differences arise on initial recognition.
1.4 Change in accounting policy due to Agenda Decision from IFRS Interpretations Committee: Application of principal/agent criteria in IFRS 15 revenue from contracts with a customer
On 20 April, the IFRS Interpretations Committee approved an Agenda Decision, which provides guidance on how a software reseller might apply the principal/agent criteria in IFRS 15, "Revenue from Contracts with Customers", to the resale of standard software to a customer.
The decision has implications for whether revenue from the resale of standard software is recognised on a gross or net basis under IFRS 15. The decision can also be applied to resale standard vendor services such as extended warranties.
In its historical accounts, ECIT has determined that it acts as a principal in the resale of standard software and vendor services. Revenue was recognised from these products and services on a gross basis (with gross invoiced sales reported as revenue and costs of the resold products reported as cost of goods).
Under the new guidance from the IFRS interpretations committee, ECIT has determined that it acts as an agent in the resale of selected standard software and vendor services under the principal/agent criteria in IFRS 15 "Revenue from Contracts with Customers". For this reason, ECIT has implemented a change to its accounting policy and recognised revenue from these products and services on a net basis (with gross invoiced sales, less costs of the resold products reported as revenue).
Notes:
EBITDA = Operating profit before amortisation, depreciation and restructuring & transaction costs
The timing of revenue recognition in connection with new guidance have been concluded immaterial.
The change regarding resale of software has an impact to the IT division only.
In addition to reclassifying selected software licenses, ECIT has changed the recognition criteria related to specific activities within the Tech division where ECIT acts as an agent in the resale of certain event activities. For this reason, ECIT has implemented a change to its accounting policy and recognised revenue from these services on a net basis (with gross invoiced sales, less costs of the resold products reported as revenue).
The decision to change its accounting policy to conform with the Agenda Decision of the IFRS Interpretations Committee requires a restatement of prior years' accounts under IAS 8.
The change in accounting principles has been adjusted in our quarterly figures and the changes have been applied retrospectively.
The impact on ECIT's financial statements is:
- Revenue is reduced by NOK 103 million
- Cost of goods sold is reduced by NOK 103 million
- Gross profit, operating profit, profit for the year, balance sheet and cash flow statement are unchanged
| 2022 | 2021 | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| Before | Reported | Before | Reported | ||||||
| IFRS 15 | IFRS | income | IFRS 15 | IFRS | income | ||||
| Change in accounting policies (NOKm) | assesment | assesment | statement | assesment | assesment | statement | |||
| Group Level: | |||||||||
| Revenue | 2,929 | -103 | 2,826 | 2,383 | -65 | 2,318 | |||
| COGS | -632 | 103 | -529 | -506 | 65 | -441 | |||
| Gross Profit | 2,297 | 0 | 2,297 | 1,877 | 0 | 1,877 | |||
| EBITDA | 418 | 0 | 418 | 339 | 0 | 339 | |||
| EBITDA-% | 14.3% | 0.5% | 14.8% | 14.2% | 0.4% | 14.6% | |||
| IT Division: | |||||||||
| Revenue | 1,338 | -78 | 1,260 | 1,105 | -58 | 1,047 | |||
| EBITDA | 164 | 0 | 164 | 140 | 0 | 140 | |||
| EBITDA-% | 12.3% | 0.8% | 13.0% | 12.7% | 0.7% | 13.4% | |||
| Tech Division: | |||||||||
| Revenue | 168 | -25 | 143 | 104 | -7 | 97 | |||
| EBITDA | 6 | 0 | 6 | -2 | 0 | -2 | |||
| EBITDA-% | 3.6% | 0.4% | 4.0% | -1.9% | -0.1% | -2.1% |
52 | ECIT Annual Report 2022 - Consolidated Financial Statements
2. Profit for the year
This section includes disclosures on components of consolidated profit for the year. The consolidated profit is based on the combined results of our three operating divisions Finance & Accounting, IT and Tech.
2.1 Segments information
Operating segments are defined by the operational and Management structure of ECIT, which is derived from the type of services we deliver. Our operating segments reflect our division and Group reporting used for management decisionmaking. The Executive management is considered the Chief Operating Decision Maker (CODM) in accordance with the International Financial Reporting Standards and monitors the operating results of its business units separately for the purpose of making decisions about resource allocation and performance assessment.
There have been no changes to the reported segments compared to last year.
No customers during the year or during the previous year accounted for 10% or more of the Group's revenues.
Operating divisions
Our business operations are carried out by three divisions, forming our segment reporting.
IT
Within IT services, ECIT provides full-stack solutions comprising managed services, hosting & hybrid cloud, IT consulting, and digitization (BI/AI/ML and Robotics) for SMEs and larger companies. ECIT's broad range of services allows for one point of contact for all customer IT needs and flexibility to meet a wide range of customer demands.
Finance & Accounting
ECIT's F&A segment provides end-to-end coverage of solutions within F&A services to SMEs and larger companies, offering basic accounting, F&A management support, payroll & HR, and debt collection. This broad service offering gives customers flexibility, expertise, and one point of contact.
Tech
ECIT's Technology division was founded in 2017 to provide customers with actionable financial insight into their business. ECIT eases customers' administrative processes through a customer-facing portal with user-friendly applications and automated workflows. The Technology division is also working to increase ECIT's F&A division's operational efficiency, allowing it to take full ownership of the customer experience and relationship.
Measurement of earnings by segment
Our business segments are measured and reported down to operating profit before amortisation, depreciation and restructuring & transaction costs. Segment results are accounted for in the same way as in the consolidated financial statements.
Segment income/expenses comprise the items directly attributable to the individual segment as well as the items that may be allocated to the individual segment on a reliable basis.
Internal transactions between the operating segments are not eliminated, and there are no material differences in accounting policies between the operating segments and the group annual accounts.
Income and expenses relating to Group functions and investing activities are managed at Group level. These items are not included in the statement of segment information but are presented under' Group & Elim.'.
Non-current assets for this purpose consist of property, plant and equipment, right-of-use assets, investment properties and intangible assets.
Geographical information
ECIT operates throughout the northern part of Europe and has activities in 9 countries. Our geographical information is presented as follows:
- Norway
- Sweden
- Denmark
- Other
Other includes the United Kingdom, Germany, Finland, Poland, Lithuania and Romania.
Income/expenses are allocated to the geographical areas according to the country in which the individual entity is based.
Intercompany transactions are made on an arm's length basis and excluded in the tables on the next page.
| 2022 | 2021 | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| F&A | IT | Tech | Group | F&A | IT | Tech | Group | ||||
| (NOKm) | Division | Division | Division | & Elim. | Total | Division | Division | Division | & Elim. | Total | |
| Revenue | 1,543 | 1,260 | 143 | -120 | 2,826 | 1,298 | 1,047 | 97 | -124 | 2,318 | |
| COGS | -114 | -406 | -39 | 30 | -529 | -81 | -368 | -21 | -2 | -441 | |
| Gross Profit | 1,429 | 854 | 105 | -91 | 2,297 | 1,217 | 679 | 76 | -126 | 1,877 | |
| Personnel expenses | -948 | -601 | -66 | -62 | -1,677 | -828 | -467 | -55 | -4 | -1,384 | |
| Other operating costs | -218 | -89 | -33 | 138 | -203 | -164 | -72 | -23 | 105 | -154 | |
| Operating profit before amortisation, depreciation and | |||||||||||
| restructuring & transaction costs (EBITDA) | 263 | 164 | 6 | -15 | 418 | 225 | 140 | -2 | -24 | 339 | |
| Total revenue growth | 19.3% | 20.4% | 46.9% | -0.4% | 21.9% | 32.2% | 23.0% | 37.1% | -4.3% | 30.1% | |
| EBITDA-% | 17.0% | 13.0% | 4.0% | 12.8% | 14.8% | 17.4% | 13.4% | -2.1% | 19.6% | 14.6% | |
| Non-current assets | 1,042 | 590 | 252 | 384 | 2,268 | 761 | 535 | 173 | 352 | 1,822 |
| 2022 | 2021 | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| (NOKm) | Norway | Sweden | Denmark | Other | Total | Norway | Sweden | Denmark | Other | Total |
| Revenue Operating profit before amortisation, depreciation and |
1,897 | 436 | 377 | 115 | 2,826 | 1,495 | 402 | 337 | 84 | 2,318 |
| restructuring & transaction costs (EBITDA) | 259 | 69 | 69 | 21 | 418 | 197 | 66 | 61 | 15 | 339 |
| Non-current assets | 1,658 | 203 | 319 | 88 | 2,268 | 1,270 | 220 | 235 | 97 | 1,822 |
2.2 Revenue
Revenue is recognised when it is likely that transactions will generate future financial benefits that will accrue to the Group, and the size of the amount can be reliably estimated. Revenue from services delivered is recognised based on the price specified in the contract with the customer. Revenue is measured excluding VAT and other tax collected on behalf of third parties, and any discounts are offset against the revenue. As a result of the lack of data availability, ECIT has not disclosed the timing of revenue recognition or quantitative amounts on each revenue stream. Revenues are disclosed per segment as described in note 2.1.
Revenue from the sale of services
ECIT mainly sells services. The Group calculates revenue from the sale of services over time, as the customer simultaneously receives and consumes benefits as these are offered by the Group. The Group recognises revenue over time on the basis of the degree of completion of the project, using an input or output data method. The method used is the one that best reflects the transfer of control.
Revenue from goods and services
The Group offers services that are either sold separately or as a package together with the sale of goods.
Contracts for the sale of packages of goods and services consisting of two delivery obligations, each of which comprises the sale of either goods or services, are recognised according to the principles described above. The transaction price is distributed on the two delivery obligations based on the relatively separate sales prices for the underlying goods and services.
Revenue from the sale of goods is usually recognised at the time of delivery of the goods, and services are recognised over time on the basis of the degree of completion.
Revenue from license fee
License fee consists of subscription fees for both external and internally developed systems. The material part of the Group's performance obligation is satisfied over time (as "right to access" licenses). The customer receives the right to access the system's intellectual property throughout the license period, for which revenue is recognised over the license period. The customer may only access the software through a network (cloud). The customer cannot take possession of the software/code and is not able to run the software on its own server. Revenue is recognised over the subscription period.
Under the new guidance from the IFRS interpretations committee, ECIT has determined that it acts as an agent in the resale of selected standard software and vendor services under the principal/agent criteria in IFRS 15 "Revenue from Contracts with Customers". For this reason, ECIT has implemented a change to its accounting policy and recognised revenue from these products and services on a net basis (with gross invoiced sales, less costs of the resold products reported as revenue).
Implementation fee
At the time of delivery ECIT often provides certain services to the customer to allow the customer to access the license, including customisation to the relevant customer. These services are separated into pure setup services and implementation services.
Setup services consist of activities related to "activating" the software to enable the customer to access the software from its IT platform. These services do not provide any incremental benefit to the customer beyond permitting the customer to
access and use the application and, therefore, are generally not considered to be distinct performance obligations. Implementation services that are used to significantly modify and customise the software for the customer's own use would also comprise one combined performance obligation together with the license.
These setup and implementation services are recognised over time together with the SaaS license. In addition, the Group provides implementation services related to solutions that are considered distinct performance obligations (i.e., accounted for separately) as these implementation services add value to the customer independently of the arrangements. These implementation services do not involve changing the software code and are, typically, "non-complex" services such as training of customer personnel, data conversion or migration, and similar, provided on-premise.
Contract balances
Contract assets are recognised for revenue earned from the delivery of services where the receipt of consideration is not yet invoiced, and the receipt of consideration is conditional on the successful completion of the services, and these are presented as other receivables in the balance sheet. Accounting policies for trade receivables and other receivables are presented in note 3.1.
Contract liabilities relate to remuneration received in advance for the license. The license is normally prepaid by the customer for 12 months or less. As such, the balance of the account at the end of the year represents the Group's deferred revenue related to performance obligations that will be satisfied within 12 months. The Group contract liabilities are disclosed in note 3.2.
2.3 COGS
Cost of goods sold (COGS) comprises costs incurred to achieve the financial year's revenue and primarily includes costs for IT hardware and software licenses.
2.4 Personnel expenses
Staff costs include salaries, bonuses, pensions, social security costs, vacation pay and other benefits.
Staff costs are recognised in the financial year in which the associated services are rendered by the employees. Costs related to long-term employee benefits, e.g., defined benefit pension plans, are recognised in the periods in which they are earned.
| Wages and salaries | 1,395 | 1,138 |
|---|---|---|
| Pension costs | 71 | 61 |
| Other social security costs | 171 | 150 |
| Other personnel expenses | 39 | 35 |
| Total | 1,677 | 1,384 |
| Average full time employees | 2,371 | 2,221 |
Public subsidies
Public subsidies are recognised when there is reasonable assurance that the company will fulfil the conditions related to the subsidies and that the subsidies will be received. Subsidies are presented either as revenue on a separate line or as a cost reduction for comparison with the costs for which they are intended to compensate. Subsidies related to capitalised development costs are recognised as a reduction in book value. Accounting of operating subsidies is recognised on a systematic basis over the subsidy period. ECIT did not receive any material public subsidies in 2022, as well as in 2021.
2.5 Other operating expenses
Other operating expenses include expenses related to renting (utilities), IT, training and education, travelling and other costs of operations and maintenance.
2.6 Amortisation and depreciation
Amortisation and depreciation related to the following fixed assets in the balance sheet:
| (NOKm) | 2022 | 2021 | |||
|---|---|---|---|---|---|
| (NOKm) | 2022 | 2021 | Research & Development | 25 | 21 |
| Customer contracts | 52 | 42 | |||
| Wages and salaries | 1,395 | 1,138 | Fixed tangible assets | 24 | 24 |
| Pension costs | 71 | 61 | Right-of-use assets | 88 | 78 |
| Other social security costs | 171 | 150 | Total | 188 | 166 |
Amortisation and depreciation profiles depend on the underlying assets; refer to:
- Intangible assets, note 4.2
- Property, plant and equipment, note 4.3
- Right-of-use assets, note 4.5
2.7 Restructuring & transaction costs
Restructuring and transaction costs are used in connection with the presentation of profit or loss for the year to distinguish consolidated operating profit from items, which by their nature are not related to the Group's ordinary operations or investment in future activities.
| (NOKm) | 2022 | 2021 |
|---|---|---|
| Transactions costs | 8 | 7 |
| Restructuring costs | 5 | 2 |
| Total | 13 | 9 |
Restructuring & transaction costs comprise:
- Transactions costs relating to the acquisition and divestment of enterprises
- Restructuring costs. Relating to fundamental structural, procedural and managerial reorganisations as well as any related gains or losses on disposals
Transaction costs are costs relating to the acquisition of companies that cannot be capitalized together with the shares. This applies to both completed and uncompleted acquisitions.
Restructuring costs consist mainly of one-time expenses relating to employee termination.
Management judgements and estimates
In the classification of restructuring and transaction costs, judgement is applied to ensure only items not associated with the ordinary operations of the Group are included.
| 2022 | 2021 | ||||||
|---|---|---|---|---|---|---|---|
| Restruc | Restruc | ||||||
| Reported | turing & | Adjusted | Reported | turing & | Adjusted | ||
| Restructuring & transaction costs Bridge | income | transaction | income | income | transaction | income | |
| (NOKm) | statement | costs | statement | statement | costs | statement | |
| Revenue | 2,826 | 0 | 2,826 | 2,318 | 0 | 2,318 | |
| COGS | -529 | 0 | -529 | -441 | 0 | -441 | |
| Gross Profit | 2,297 | 0 | 2,297 | 1,877 | 0 | 1,877 | |
| Personnel expenses | -1,677 | -5 | -1,682 | -1,384 | -2 | -1,386 | |
| Other operating costs | -203 | -8 | -211 | -154 | -7 | -161 | |
| Operating profit before amortisation, | |||||||
| depreciation and restructuring & transaction costs |
418 | -13 | 405 | 339 | -9 | 331 | |
| Restructuring & transaction costs | -13 | 13 | 0 | -9 | 9 | 0 | |
| Operating profit before amortisation, | |||||||
| depreciation | 405 | 0 | 405 | 330 | 0 | 330 | |
| Amortizations and depreciations | -188 | 0 | -188 | -166 | 0 | -166 | |
| Operating profit | 217 | 0 | 217 | 164 | 0 | 164 | |
| Share of profit or loss of associates accounted for using the equity method |
1 | 0 | 1 | 0 | 0 | 0 | |
| Financial income | 49 | 0 | 49 | 27 | 0 | 27 | |
| Financial expenses | -38 | 0 | -38 | -41 | 0 | -41 | |
| Profit before tax | 229 | 0 | 229 | 150 | 0 | 150 | |
2.8 Financial items
Financial income and expenses comprise interest income and expenses, realised and non-realised capital gains/losses on transactions in foreign currency, amortisation of financial assets and liabilities etc.
| (NOKm) | 2022 | 2021 |
|---|---|---|
| Financial income: Interest income Exchange rate income Earn out assessment Gain on divestments Profit from associates Other financial income Total |
10 5 7 24 1 2 49 |
4 6 12 0 0 5 27 |
| Financial expenses: Interest expense Exchange rate expense IPO cost Other financial expenses Total |
-29 -9 0 0 -38 |
-18 -16 -6 -1 -41 |
2.9 Tax
Current tax
Current tax payable and receivable is recognised in the balance sheet as tax calculated on the taxable income for the year adjusted for tax on taxable income for previous years and for prepaid tax.
| (NOKm) | 2022 | 2021 |
|---|---|---|
| Profit before tax | 229 | 150 |
| Calculated tax on profit for the year | 50 | 33 |
| Tax effect of: Adjustment of calculated tax in foreign group enterprises relative to |
||
| 22.0% | 0 | -1 |
| Non-deductible expenses/non taxable income Non-deductible losses/non-taxable |
5 | 2 |
| gain on shares | 0 | 0 |
| Temporary differences, net | -3 | 1 |
| Other tax adjustments | 0 | 0 |
| Tax of the year | 52 | 35 |
| Effective tax rate | 23.0% | 23.6% |
Tax for the year
Tax for the year comprises current and deferred tax on profit or loss for the year, interest expenses related to pending tax disputes and adjustments to previous years, including adjustments due to tax rulings.
Tax for the year is recognised in the income statement unless the tax expense relates directly to items included in other comprehensive income or equity.
| (NOKm) | 2022 | 2021 |
|---|---|---|
| Tax for the year is disaggregated as follows: |
||
| Tax on profit for the year | 52 | 35 |
| Tax on other changes in equity | 0 | 0 |
| Tax on OCI | 0 | 0 |
| Total tax of the year | 52 | 35 |
| Tax on profit for the year is calculated as follows: |
||
| Current tax | 68 | 55 |
| Deferred tax | -17 | -21 |
| Tax adjustments prior years | 0 | 2 |
| Total tax on profit for the year | 52 | 35 |
| Tax on OCI specifies as follows: | ||
| Fair value, interest hedge | 0 | 0 |
| Total | 0 | 0 |
Deferred tax
Deferred tax is recognised based on temporary differences between the carrying amount and the tax value of assets and liabilities. No recognition is made of deferred tax on temporary differences relating to amortisation or depreciation of goodwill, properties and other items if disallowed for tax purposes, except at the acquisition of enterprises, if such temporary differences arose on the date of acquisition without affecting the results or the taxable income. In cases where it is possible to calculate the tax value according to different taxation rules, deferred tax is measured on the basis of the planned use of the asset or the settlement of the liability.
Deferred tax assets, including the tax base of tax loss carry forwards, are recognised as other non-current assets at the expected value of their utilisation, either by elimination in tax on future earnings or by offsetting deferred tax liabilities within the same legal tax entity and jurisdiction.
Deferred tax assets and tax liabilities are offset if the enterprise has a legally enforceable right to set off current tax liabilities and tax assets or intends either to settle current tax liabilities and tax assets on a net basis or to realise the assets and liabilities simultaneously.
Deferred tax is adjusted for the elimination of unrealised intragroup gains and losses. Deferred tax is measured on the basis of the tax rules and tax rates of the relevant countries that will be effective under current legislation at the reporting date on which the deferred tax is expected to materialise as current tax.
Management judgements and estimates
Management applies significant estimates when recognising and measuring deferred tax assets.
Deferred tax assets, including the tax base of tax loss carry forwards, are recognised if it is assessed that there will be sufficient future taxable income against which the temporary differences and unutilised tax losses can be utilised. This assessment is based on budgets and business plans for the following years, including planned business initiatives. Deferred tax assets are tested annually and are only recognised if likely to be utilised.
When considering tax and duties disputes, Management applies significant estimates of the likely outcome based on the knowledge available of the actual substance of the disputes, including opinions and estimates by external tax experts and case law, if available. The resolution of disputes may take several years, and the outcome is subject to considerable uncertainty.
Deferred tax not recognised in the balance sheet equals NOK 28 million (2021: 25). The amount corresponds tax loss carried forward.
| (NOKm) | 2022 | 2021 |
|---|---|---|
| Intangible assets | 350 | 327 |
| Tangible assets | 38 | 8 |
| Other receivables | -9 | -5 |
| Other liabilities | -2 | -16 |
| Loss carry forwards | -169 | -102 |
| Total | 208 | 212 |
| Classifications: | ||
| Deferred tax assets | 38 | 31 |
| Deferred tax liabilities | 84 | 78 |
| Reflected in the statement of financial position as follows: |
||
| Deferred tax assets Deferred tax liabilities: |
38 | 31 |
| Continuing operations | 84 | 78 |
| Discontinued operations | 0 | 0 |
| Deferred tax liabilities, net | 46 | 47 |
3. Financial assets and liabilities
This section provides information regarding the Group's financial instruments, including trade receivables and payables, other receivables and financial liabilities. Each category of financial asset and liability is disclosed with the method of measurement in their respective sections below.
The Group holds the following financial instruments:
| (NOKm) | 2022 | 2021 |
|---|---|---|
| Financial assets: Trade receivables Other financial assets Other receivables Cash and cash equivalents |
407 45 271 183 |
325 27 232 265 |
| Financial liabilities Borrowings Lease liabilities Trade and other payables |
367 225 739 |
217 236 653 |
The Group's exposure to various risks associated with the financial instruments is presented in note 5.5. The maximum exposure to credit risk at the end of the reporting period is the carrying amount of each class of financial assets mentioned above.
3.1 Trade Receivables
A receivable is the Group's unconditional right to consideration and is accounted for in accordance with IFRS 9. Receivables are initially recognised at fair value adjusted for any transaction costs. Subsequently, receivables are measured at amortised cost, which usually corresponds to the nominal value.
Trade receivables are amounts due from customers for services performed in the ordinary course of business. They are generally due for settlement on a short-term basis and therefore are classified as current.
Due to the short-term nature of the current receivables, their carrying amounts are considered to be the same as their fair value.
Expected credit losses
The Group recognises an allowance for expected credit losses (ECLs) for its financial assets. ECLs are based on the cash flows that the Group expects to receive. For trade receivables, the Group applies a simplified approach to calculating ECLs. Therefore, the Group does not track changes in credit risk but instead recognises a loss allowance based on lifetime ECLs at each reporting date. The Group bases the allowance of its historical credit loss experience, adjusted for forward-looking factors specific to the debtors and the economic environment.
| (NOKm) | 2022 | 2021 | |
|---|---|---|---|
| Trade receivables Write-downs |
423 -15 |
337 -12 |
|
| Trade receivables net | 407 | 325 |
3.2 Contract assets and liabilities
Contract assets
A contract asset is initially recognised for revenue earned from the rendering of services because the receipt of consideration is conditional on the successful completion of the services. Upon completion of the services and acceptance by the customer, the amount recognised as contract assets are reclassified to trade receivables.
All of the Group's contracts with customers are generally prepaid 12 months or less in advance. Hence, the Group has no significant contract assets for the period presented, and the amount is presented in trade and other receivables, note 3.1.
Contract liabilities
A contract liability is recognised if a payment is received or a payment is due (whichever is earlier) from a customer before the Group transfers the related goods or services. Contract liabilities are recognised as revenue when the Group performs under the contract (i.e., transfers control of the related goods or services to the customer).
Contract liabilities have a carrying amount of NOK 49 million (2021: 40).
The Group does not have any performance obligations with an original expected duration of more than 12 months recognised in the balance sheet.
3.3 Other receivables
Other receivables consist of receivables other than trade receivables. These other receivables generally arise from transactions outside the usual operating activities of the Group. The material part of the non-current part of other receivables consists of interest-bearing receivables and rental deposits, which are measured at costless repayments and impairment (amortised cost). Reference is made to note 5.6 regarding interest rate derivatives.
3.4 Other financial assets
Other financial assets comprise other equity investments than group companies.
Financial assets at fair value through profit or loss include investments in listed equity shares. Fair values of these equity shares are determined by reference to published price quotations in an active market.
Financial assets not listed on the stock exchange are measured at cost price; hence the fair value of the equity shares is not to be valid determined.
For investments in associated companies, please refer to note 7.6.
3.5 Cash and cash equivalents
A minor part of cash and cash equivalents consists of employees' tax deduction accounts. On 31 December 2022, cash in employees' tax deduction accounts equals NOK 14 million (2021: 14).
Cash Pool account
The Group has established a Cash Pool account system in Nordea and DnB Bank ASA, which is administrated by the parent company and ECIT Midco Holding AS. The participants in the Cash Pool are jointly liable to the bank for the fulfilment of any obligations that might arise under the Group account agreement.
In the consolidated financial statements, the net Group account is presented as bank deposits.
3.6 Trade and other payables
Trade payables represent liabilities for services provided to the Group prior to the end of the financial year, which are unpaid at the balance sheet date. The amounts are unsecured and are usually paid on a short-term basis. Trade and other payables are presented as current liabilities unless payment is due more than 12 months after the reporting period. They are recognised initially at their fair value and subsequently measured at amortised cost using the effective interest method. Carrying amounts of trade and other payables are considered to be the same as their fair values due to their short-term nature. Trade and other payables are not pledged through third-party credit enhancements.
| 2022 | 2021 | |||
|---|---|---|---|---|
| (NOKm) | Carrying amount |
Owner ship in % |
Carrying amount |
Owner ship in % |
| Wint Group AB | 8 | 6.4% | 8 | 6.4% |
| Visual Information Systems A/S | 5 | 9.4% | 3 | 6.9% |
| Siffer System AS | 3 | 12.6% | 1 | 6.1% |
| Luca Labs AS | 1 | 3.1% | 1 | 3.1% |
| Club United AS | 0 | n/a | 9 | 20.5% |
| Adline Professional AS | 3 | 5.0% | 0 | n/a |
| ZTL Payment Solutions AS | 10 | 4.2% | 0 | n/a |
| Ofinda ApS | 2 | 20.0% | 0 | n/a |
| Verismo AB | 6 | 18.0% | 0 | n/a |
| Investments in listed securities | 7 | n/a | 5 | n/a |
| Total | 45 | 27 |
3.7 Other financial liabilities
Other financial liabilities are measured at amortised cost, which, in all essentials, corresponds to the net realisable value.
Other financial liabilities are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the reporting period.
The Group is exposed to certain risks relating to its ongoing business operations. On 31 December 2022, the Group had an interest rate swap agreement in place with a notional amount of NOK 0 million rounded (2021: 0). For further information, see note 5.5.
Other financial liabilities are, to some extent, pledged. Further information hereby is presented in note 7.4.
Lease liabilities are initially measured at the present value of future leasing payments under the contract, discounted using either the interest rate implicit in the contract or (if the implicit interest rate is not available) an incremental borrowing rate appropriate for the Group.
Subsequent to recognition, the amount of lease liabilities are increased to reflect the accretion of interest and reduced for the lease payments made. In addition, the lease liability is adjusted for any remeasurements or contract modifications. Lease payments are allocated between the reduction of liability and interest expenses. Interest expenses are charged to the income
statement over the lease period to produce a constant periodic rate of interest on the remaining balance of the liability for each period. For a description of accounting policies and details related to right-of-use assets, including further disclosures in accordance with IFRS 16, refer to note 4.5.
Certain lease contracts include extension options with the intention of ensuring operational flexibility. The expected term of each lease contract is reflected in the recognised lease liability.
| (NOKm) | Carrying amount |
Interest rate |
Duration (years) |
Undrawn facility |
|---|---|---|---|---|
| Credit facility | 328 | n/a | 3 | 423 |
| Long-term loan I | 7 | Nibor 6m +2% |
4 | 0 |
| Long-term loan II | 14 | 3.9% | 4 | 0 |
| Long-term loan III | 1 | 0.0% | 2 | 0 |
| Total | 350 | 423 | ||
| 2022 | ||||||||
|---|---|---|---|---|---|---|---|---|
| Carrying | Carrying | 2021 | ||||||
| (NOKm) | amount | 0-1 year | 1-5 years | >5 years | amount | 0-1 year | 1-5 years | >5 years |
| Borrowings | 368 | 17 | 350 | 0 | 217 | 36 | 180 | 1 |
| Lease liabilities | 225 | 80 | 139 | 6 | 236 | 76 | 148 | 12 |
| Trade and other payables | 739 | 651 | 88 | 0 | 653 | 568 | 85 | 0 |
| Total financial liabilities | 1,332 | 748 | 577 | 6 | 1,183 | 757 | 413 | 13 |
Notes:
The interest rate for the credit facility is a product of NIBOR 3 months and a margin
| Non-cash change | ||||||||
|---|---|---|---|---|---|---|---|---|
| Financing activities 2022 (NOKm) | 1 January 2022 |
New loans |
Down payment |
Interests | Additions business combination |
Currency effects |
Other | 31 December 2022 |
| Loans and credit facilities | 217 | 215 | -89 | 14 | 11 | 0 | 0 | 368 |
| Lease liabilities (current and non-current) | 236 | 0 | -98 | 7 | 79 | 2 | -1 | 225 |
| Total liabilities from financing activities | 453 | 215 | -187 | 21 | 90 | 2 | -1 | 593 |
| Other non-current liabilities Total financial liabilities |
0 453 |
0 215 |
0 -187 |
0 21 |
0 90 |
0 2 |
0 -1 |
0 593 |
| Non-cash change | ||||||||
|---|---|---|---|---|---|---|---|---|
| Financing activities 2021 (NOKm) | 1 January 2021 |
New loans |
Down payment |
Interests | Additions business combination |
Currency effects |
Other | 31 December 2021 |
| Loans and credit facilities | 160 | 212 | -171 | 6 | 20 | -3 | -7 | 217 |
| Lease liabilities (current and non-current) | 201 | 0 | -84 | 7 | 115 | -4 | 1 | 236 |
| Total liabilities from financing activities | 361 | 212 | -255 | 13 | 135 | -7 | -6 | 453 |
| Other non-current liabilities Total financial liabilities |
0 361 |
0 212 |
0 -255 |
0 13 |
0 135 |
0 -7 |
0 -6 |
0 453 |
Notes:
Other includes additions and remeasurement of financial liabilities.
4. Non-financial assets and liabilities
This section provides information related to the Group's invested capital that forms the basis of the business activities. Invested capital represents the Group's property and equipment, intangible assets and provisions.
The Group considers assets and liabilities to be current in the event they are expected to be fulfilled or is due within one year and non-current otherwise.
4.1 Impairment testing
Goodwill
The carrying amount of goodwill is tested for impairment at least annually, together with other non-current assets of the Group.
Impairment testing is performed for each cash-generating unit (CGU) to which consolidated goodwill is allocated, as defined by Group Management. The CGUs follow our divisional structure and are divided into three CGUs, Finance & Accounting (F&A), IT and Tech.
Goodwill is written down to its recoverable amount through the income statement if lower than the carrying amount. The recoverable amount is determined as the present value of the discounted future net cash flow from the cash-generating unit to which the goodwill relates. In calculating the present value, discount rates are applied, reflecting the risk-free interest rate with the addition of risks relating to the individual cashgenerating units, such as geographical and financial exposure.
The sensitivity analysis shows the lowest possible growth rate or highest possible discount rate in percentage points by which the assumptions used can change before goodwill becomes impaired.
| 2022 | 2021 | |||||||
|---|---|---|---|---|---|---|---|---|
| (NOKm) | F&A | IT | Tech | Total | F&A | IT | Tech | Total |
| Carrying amount of goodwill at 31 December | 788 | 377 | 114 | 1,279 | 568 | 312 | 75 | 955 |
| Budget period Annual revenue growth Operating margin |
7.6% 16.1% |
7.6% 11.0% |
14.1% 13.6% |
8.1% 13.6% |
5.5% 12.9% |
6.5% 11.3% |
24.3% 10.8% |
6.4% 12.1% |
| Terminal period Growth Pre-tax discount rate |
0.0% 7.0% |
0.0% 9.5% |
0.2% 7.0% |
0.0% 8.5% |
0.0% 9.7% |
0.0% 9.7% |
0.0% 9.7% |
0.0% 9.7% |
| Sensitivity analysis Growth in budget period - allowed decline (percentage points) Discount rate - allowed increase (percentage points) |
22.5% 8.5% |
27.0% 11.5% |
n/a 7.0% |
26.3% 8.0% |
14.3% 5.3% |
36.5% 11.8% |
n/a 4.5% |
28.0% 9.6% |
Other non-current intangible assets, property, plant and equipment
The carrying amount of other non-current assets are tested for impairment at least once a year. If the tests show evidence of impairment, the asset is written down to the recoverable amount through the income statement if lower than the carrying amount. The recoverable amount is the higher of the fair value of the asset, less the expected costs to sell and its value in use.
The value in use is calculated as the present value of expected future cash flows from the asset or the division of which the asset forms part.
Management judgements and estimates
For goodwill impairment testing, several estimates are made on the development in revenues, gross profits, operating margins, future capital expenditures, discount rates and growth expectations in the terminal period.
These are based on an assessment of current and future developments in the three cash-generating units and on historical data and assumptions of future expected market developments, including expected long-term average market growth rates.
No write-downs of intangible or tangible assets have been carried out during 2022. No write-downs of intangible or tangible assets were carried out during the year prior either.
In the event of impairment losses or reversal of impairment losses, this will affect the goodwill and other non-current intangible assets, property plant and equipment. No impairment losses or reversal of impairment losses have been performed during 2022.
The Group constantly monitors the latest government legislation in relation to climate-related matters. At the current time, no legislation has been passed that will impact the Group. The Group will adjust the key assumptions used in value-in-use calculations and sensitivity to changes in assumptions should a change be required.
4.2 Intangible assets
Goodwill – accounting policies
Goodwill acquired in business combinations is recognised and measured as the difference between the total fair value of the consideration transferred and the fair value of the identifiable net assets, including customer contracts, on the date of acquisition. Goodwill is not amortised but tested at least annually for impairment.
Customer Contracts – accounting policies
On initial recognition, customer relationships identified from business combinations are recognised in the balance sheet at fair value. Subsequently, customer relationships are measured at fair value less accumulated amortisation and impairment
Customer relationships related to price purchase allocation are amortised over a period of ten years using the straight-line basis method. Other customer relationships are amortised on a straight-line basis over the asset's estimated useful life.
Software – accounting policies
Expenses related to software development activities are capitalised to the extent that the product or process is technically and commercially feasible and;
- the Group has sufficient resources and has the objective of completing the development,
- it is probable that future financial benefits will accrue to the Group, and
- the software costs can be measured reliably.
Capitalised software development costs are related to customer-oriented applications. Total earnings from ongoing development are expected to correspond to the total expenses involved. All software development expenses have been capitalised during the year, and no material software research expenses were incurred as expenses through the income statement in 2022.
Expenses capitalised in the balance sheet include costs of materials, direct payroll costs and a share of directly attributable joint expenses. Capitalised development costs are recognised in the balance sheet at acquisition cost less accumulated amortisation and impairment losses.
Capitalised software development costs are amortised on a straight-line basis over the asset's estimated useful life, which equals 5 to 10 years.
| losses. | 2022 | 2021 | |||||||
|---|---|---|---|---|---|---|---|---|---|
| Intangible assets (NOKm) | Goodwill | Customer Contracts |
Software | Total | Goodwill | Customer Contracts |
Software | Total | |
| Cost at 1 January | 973 | 462 | 192 | 1,627 | 745 | 365 | 153 | 1,262 | |
| Additions for the year | 0 | 0 | 55 | 55 | 0 | 0 | 27 | 27 | |
| Additions through business combinations | 316 | 100 | 4 | 420 | 243 | 110 | 28 | 381 | |
| Remeasurement of price purchase allocation | 0 | 0 | 0 | 0 | 3 | 0 | 0 | 3 | |
| Disposals at cost | 0 | 1 | -2 | -1 | -3 | -3 | -10 | -17 | |
| Currency translation adjustments | 7 | 2 | 3 | 12 | -14 | -10 | -5 | -29 | |
| Cost at 31 December | 1,296 | 564 | 252 | 2,113 | 973 | 462 | 192 | 1,628 | |
| Amotizations at 1 January | 0 | -128 | -79 | 207 | 0 | -89 | -70 | -158 | |
| Amortizations for the year | 0 | -52 | -25 | -79 | 0 | -42 | -21 | -63 | |
| Disposals during the year | 0 | 3 | 0 | 3 | 0 | 1 | 10 | 11 | |
| Currency translation adjustments | 0 | -1 | -2 | -3 | 0 | 2 | 1 | 3 | |
| Amotizations at 31 December | 0 | -178 | -105 | -283 | 0 | -128 | -79 | -207 | |
| Impairment at 1 January | -18 | 0 | 0 | -18 | -18 | 0 | 0 | -18 | |
| Impairments for the year | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |
| Currency translation adjustments | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |
| Impairment at 31 December | -18 | 0 | 0 | -18 | -18 | 0 | 0 | -18 | |
| Carrying amount at 31 December | 1,279 | 386 | 147 | 1,811 | 955 | 335 | 113 | 1,403 |
4.3 Land, buildings and equipment
Property, plant and equipment are measured at acquisition cost, less accumulated depreciation and write-downs. When assets are sold or disposed of, the book value is deducted, and any loss or gain is recognised in the income statement.
The cost comprises the acquisition price and other directly attributable expenses of preparing the asset for its intended use. The present value of estimated expenses for dismantling and disposing of the asset as well as restoration expenses, are added to the cost of such expenses and are recognised as a provision.
Material borrowing costs directly attributable to the construction of the individual asset are also capitalised.
If an individual component of an asset has different useful lives, each component will be depreciated separately.
Depreciation is carried out on a straight-line basis over the expected useful lives of the assets, as follows:
- Land and buildings 20-50 years
- Equipment etc. 3-15 years
The basis of depreciation considers the residual value of assets and is reduced by any impairment losses. The residual value is
calculated on the date of acquisition and reassessed once a year. Depreciation will be halted if the residual value exceeds the carrying amount of the asset.
Management judgements and estimates
Judgement is applied in determining the depreciation period and a future residual value of the assets recognised and is generally based on historical experience. Reassessment is done annually to ascertain that the depreciation basis applied is still representative and reflects the expected life and future residual value of the assets.
| (NOKm) | 2022 | 2021 | ||||
|---|---|---|---|---|---|---|
| Land and buildings |
Equip ment, etc. |
Total | Land and buildings |
Equip ment, etc. |
Total | |
| Cost at 1 January | 15 | 182 | 197 | 34 | 174 | 208 |
| Additions for the year | 1 | 18 | 20 | 1 | 19 | 20 |
| Additions through business combinations | 5 | 1 | 6 | 0 | 3 | 3 |
| Disposals at cost | 0 | -5 | -4 | -20 | -10 | -30 |
| Currency translation adjustments | 0 | 2 | 2 | 0 | -4 | -4 |
| Cost at 31 December | 21 | 199 | 220 | 15 | 182 | 197 |
| Depreciations at 1 January | -9 | -138 | -147 | -14 | -124 | -137 |
| Depreciations for the year | -3 | -21 | -24 | -2 | -22 | -24 |
| Disposals during the year | 0 | 2 | 2 | 8 | 5 | 12 |
| Currency translation adjustments | 0 | -3 | -2 | 0 | 2 | 3 |
| Depreciations at 31 December | -12 | -160 | -172 | -9 | -138 | -147 |
| Impairment at 1 January | 0 | 0 | 0 | 0 | 0 | 0 |
| Impairments for the year | 0 | 0 | 0 | 0 | 0 | 0 |
| Impairment at 31 December | 0 | 0 | 0 | 0 | 0 | 0 |
| Carrying amount at 31 December | 9 | 39 | 48 | 6 | 44 | 50 |
4.4 Inventories
Inventories are measured at the lowest of acquisition cost and net realisation value. Net realisation value is the estimated sales price on ordinary operations, less sales costs. Acquisition cost is allocated using the FIFO method and includes expenses incurred on the acquisition of the items and costs to bring the items to their current state and location. Inventories consist only of finished goods.
4.5 Leases
Whether a contract contains a lease is assessed at contract inception. For identified leases, a right-of-use asset and corresponding lease liability are recognised on the lease commencement date.
Upon initial recognition, the right-of-use asset is measured at cost corresponding to the lease liability recognised, adjusted for any lease prepayments or directly related costs, including dismantling and restoration costs. Lease liabilities are measured at the present value of future lease payments, discounted by the Group's alternative borrowing rate if an interest is not implicit within the contract.
When determining the lease period, options are only included if it is reasonable; they will be utilised. At subsequent measurement, the right-of-use asset is measured less accumulated depreciation and impairment losses and adjusted for any remeasurements of the lease liability.
Right-of-use assets are depreciated on a straight-line base over the expected lease period or the useful life of the right-of-use asset, whichever is shortest. The lease liability is measured at amortised cost using the effective interest method and adjusted for any re-measurements or modifications made to the contract.
The Group has chosen to exclude the recognition of right-of-use assets of low value (below USD 5,000) and lease agreements with a lease period of 12 months or less. For these lease agreements, the Group recognises the lease payments as other operating costs in the income statement as they accrue. The Group has no lease contracts with variable payments at 31 December 2022.
Management judgements and estimates
In accounting for lease contracts, various judgements are applied in determining right-of-use assets and lease liabilities.
Extension options are not included when measuring the IFRS 16 leases. The consolidation process of our companies entails extension options not being utilised. On 31 December 2022, the total amount of extension options was 36 MNOK (2021: 44).
The Group has used 3.0% as an appropriate incremental borrowing rate in cases where the interest rate is not stated in the leasing agreement. This reflects well the current borrowing rate for ECIT. This principle has not changed from the previous year.
| Lease effects in profit or loss and | ||
|---|---|---|
| cash flow (NOKm) | 2022 | 2021 |
| Profit and loss: | ||
| Interest expenses | -7 | -7 |
| Short-term contracts | 0 | 0 |
| Low-value contracts | 0 | 0 |
| Income from subleasing | 8 | 9 |
| Cash flow items: | ||
| Cash outflow lease principal | -91 | -77 |
| Cash outflow lease interests | -7 | -7 |
| 2022 | 2021 | |||||||
|---|---|---|---|---|---|---|---|---|
| Equipment, | Equipment, | |||||||
| (NOKm) | Buildings | etc. | Total Buildings |
etc. | Total | |||
| Carrying amount at 1 January | 210 | 16 | 226 | 181 | 13 | 194 | ||
| Additions for the year | 30 | 11 | 41 | 26 | 9 | 35 | ||
| Additions from business combinations | 38 | 0 | 38 | 77 | 2 | 79 | ||
| Disposals during the year | -3 | 0 | -3 | 0 | 0 | 0 | ||
| Depreciations for the year | -76 | -12 | -88 | -71 | -7 | -78 | ||
| Currency translation adjustments | 2 | 0 | 2 | -3 | -1 | -4 | ||
| Carrying amount at 31 December | 201 | 16 | 217 | 210 | 16 | 226 | ||
Lease categories
Right-of-use assets classified as Land & Buildings mainly relate to office buildings, whereas assets recognised as equipment etc., mainly relate to IT hardware, company cars and other office equipment.
Building leases normally have a lease term of up to seven years, whereas leases of equipment, plant etc., normally have a lease term of up to five years.
| Contractual maturity of lease | ||
|---|---|---|
| liabilities (MNOK) | 2022 | 2021 |
| 0-1 years | 85 | 66 |
| 1-5 years | 155 | 165 |
| > 5 years | 6 | 11 |
| Total undiscounted lease | ||
| liabilities at 31 December | 246 | 242 |
| Current/non-current classification | ||
| (discounted): | ||
| Current | 80 | 76 |
| Non-current | 145 | 160 |
4.6 Provisions
Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events. It is probable that an outflow of resources will be required to settle the obligation, and the amount can be reliably estimated. Provisions are not recognised for future operating losses.
Where there are several similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations. A provision is recognised even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small.
Provisions are measured at the present value of Management's best estimate of the expenditure required to settle the present obligation at the end of the reporting period. Provisions are in all material aspects long term, and no interest expense due to the passage of time is recognised as an interest expense.
The Group's provisions are divided into two categories:
- Earn out obligation
- Pension provisions
The Group calculates contingent payments on the acquisition of subsidiaries. Contingent payments on the acquisition of subsidiaries must be settled by the issue of shares in ECIT AS or in cash.
The recognition of contingent payments (earn out) and annual assessment of expected payments are made based on the companies' earnings, specific earnings-influencing initiatives and historical experience.
In the preparation of the annual financial statements, the Group's Management has applied discretionary estimates that are assessed to be realistic. Situations or changes in market conditions may arise that might result in changes to estimates, thereby affecting the Group's assets, liabilities, equity and results. Earn-out provisions contain inherent uncertainty of outflows of economic benefit. The liability is due in accordance with the underlying agreement entered upon the acquisition of the individual subsidiary.
| 2022 | 2021 | |||||||
|---|---|---|---|---|---|---|---|---|
| Earn Out | Pension | Earn Out | Pension | |||||
| (NOKm) | obligation | provisions | Total | obligation | provisions | Total | ||
| Carrying amount at 1 January | 28 | 3 | 31 | 57 | 0 | 57 | ||
| Acquired through business combinations | 42 | 0 | 42 | 0 | 3 | 3 | ||
| Additional provisions recognized | 0 | 1 | 1 | 3 | 0 | 3 | ||
| Earn out assessment | -7 | 0 | -7 | -12 | 0 | -12 | ||
| Amounts used during the year | -5 | 0 | -5 | -20 | 0 | -20 | ||
| Carrying amount at 31 December | 58 | 4 | 62 | 28 | 3 | 31 | ||
| Non-current | 35 | 4 | 39 | 23 | 3 | 26 | ||
| Current | 23 | 0 | 23 | 5 | 0 | 5 | ||
4.7 Pensions obligations
Pension obligations relating to defined contribution plans, under which the Group pays regular pension contributions to independent pension funds, are recognised in the income statement for the period in which they are earned. Contributions payable are recognised in the balance sheet under other current liabilities.
The Group has a defined contribution pension plan for its Norwegian employees that satisfies the statutory requirements in the Norwegian law on required occupational pensions.
Regarding defined benefit plans, an actuarial valuation of the present value of future benefits payable under the plan is made once a year. The present value is calculated based on various assumptions, including the future development in wage/salary levels, interest rates, inflation and mortality. The present value is only calculated for benefits to which the employees have become entitled during their employment with the Group. The actuarial calculation of the present value less the fair value of assets under the plan is recognised in the balance sheet under pension obligations. Pension costs for the year are recognised in the income statement based on actuarial estimates and the financial outlook at the beginning of the year.
Two subsidiaries hold employees with defined benefit plans. On 31 December 2022 total booked value of benefit plans equals NOK 4 million (2021: 3). In determining the pension obligations, Management makes use of external and independent actuaries as the basis for the estimates applied in measuring the obligation.
We continuously work to change our defined benefit plans in ECIT into defined contribution plans for the benefit of the Group and the employees.
5. Capital and financial risk
The section describes the shareholders' equity composition and capital management, including risks related to the financing structure of the Group.
5.1 Equity
Share Capital
On 31 December 2022, the share capital of ECIT AS equals NOK 452 million with a nominal value of NOK 1. The corresponding value the previous year was NOK 445 million with a nominal value of NOK 1.
During the year, minor capital increases were made in connection with new acquisitions with a total value of NOK 7 million.
In May 2021, ECIT AS was listed at the Euronext Growth Oslo Stock Exchange. The primary contained a capital increase of 50 million shares with a nominal value of NOK 1 each.
Shares consist of three share classes A, B and C-shares. As of 31 December 2022, total shares comprise:
- A shares: 41,336,068 (2021: 41,336,068)
- B- shares: 343,031,470 (2021: 339,178,000)
- C: Shares: 67,682,956 (2021: 64,941,000)
A-shares are not subject to listing but entail ten votes per share in accordance with the company's articles of association. The voting rights for A-shares are limited to 49,9% of the total voting rights.
B-shares entail voting rights equivalent to one vote per share. The B-shares a listed at Euronext Growth Oslo.
C-shares are not subject to listing and carry one vote per share. They are established to accommodate Danish shareholders owning ECIT shares through a holding company. All C-shares are subject to lock up for a period of 36 months after listing, except for 15%, which may be converted to B-shares and sold after 12 months. 25% of each holder's C-shares may be converted to B-shares in December of each year upon the board's consent. After 36 months, C-shares may be converted to B-shares in connection with the annual general meeting each year.
| 2022 | 2021 | |||||||
|---|---|---|---|---|---|---|---|---|
| Trans | Trans | |||||||
| Treasury | Hedging | lation | Treasury | Hedging | lation | |||
| Other reserves specification (NOKm) | shares | reserve | reserve | Total | shares | reserve | reserve | Total |
| Other reserves at 1 January | -1 | 0 | 5 | 4 | -8 | 0 | 21 | 13 |
| Other comprehensive income net Total comprehensive income |
0 0 |
0 0 |
3 3 |
3 3 |
0 0 |
0 0 |
-16 -16 |
-16 -16 |
| Transactions with owners: Purchase of treasury shares Sale of treasury shares Transfer of treasury shares as business combination consideration Other reserves at 31 December |
-3 1 0 -3 |
0 0 0 0 |
0 0 0 8 |
-3 1 0 5 |
-1 6 2 -1 |
0 0 0 0 |
0 0 0 5 |
-1 6 2 4 |
Share premium
The share premium represents positive differences between the nominal share capital and the amount paid by shareholders for newly issued shares.
The share premium is a distributable reserve.
Treasury shares
The reserve contains the nominal value of treasury shares, where any difference to the market price is recognised directly in retained earnings in equity.
A total of 878,539 treasury shares were sold in 2022. A total of 2,549,365 treasury shares were acquired in 2022.
On 31 December 2022, 2,737,168 shares were held as treasury shares (2021: 1,178,842). The reserve is a distributable reserve.
Hedging reserve
The hedging reserve comprises the fair value of hedging instruments qualifying for hedge accounting. The hedging instrument relates to interest rate instruments.
Translation reserve
Exchange differences arising on translation of foreigncontrolled entities are recognised in other comprehensive income and accumulated in a separate reserve within equity. The cumulative amount is reclassified to profit or loss when the net investment is disposed of.
Dividends
Dividends are recognised as a liability when the dividend is approved by the Annual General meeting.
The dividend proposed for the fiscal year 2022 is NOK 0.04 per share (2021: 0.04), equal to a total dividend of NOK 18 million (2021: 18).
The dividend is paid out to all shareholders of ECIT AS, and no shares have special rights in connection with the dividend payout.
5.2 Earning per share
Earnings per share (EPS) is calculated according to IAS33.
| Earnings per share (NOKm) | 2022 | 2021 |
|---|---|---|
| Profit of the year | 177 | 115 |
| Non-controlling interests' share of consolidated profit for the year |
72 | 66 |
| ECIT AS shareholders' share of profit for the year |
105 | 49 |
| ('000 shares) Total average number of shares Average number of treasury |
448,753 -1,958 |
416,840 -4,575 |
| Diluted average number of shares in circulation |
446,795 | 412,264 |
| Earnings per share, NOK 1 Diluted earnings per share, NOK 1 |
0.23 0.23 |
0.12 0.12 |
| 2022 | 2021 | ||||||
|---|---|---|---|---|---|---|---|
| Market | % of share | Nominal | Market | % of share | Nominal | ||
| Treasury share reserves specification (NOKm) | Value | capital | Value | Value | capital | Value | |
| Portfolio 1 January | 8 | 0.2% | 1 | 17 | 2.1% | 8 | |
| Purchase of treasury shares Sale of treasury shares |
13 -1 |
0.6% -0.2% |
3 -1 |
4 -27 |
0.2% -1.3% |
1 -6 |
|
| Transfer of treasury shares as business combination consideration Value adjustment Portfolio 31 December |
-1 1 20 |
0.0% 0.0% 0.6% |
0 0 3 |
16 30 8 |
-0.4% 0.0% 0.2% |
-2 0 1 |
5.3 Top 20 shareholders of ECIT AS
ECIT AS is owned through a multiple-share class structure. Peter Lauring, the CEO and Founder, is the largest owner holding 9.4% of the economic interest and 49.9% of the voting rights through CGL Holding AS and CGL Holding II AS. Management and employees hold approximately 62% of the shares in ECIT AS.
| Owner | ||||||
|---|---|---|---|---|---|---|
| Total | ship | Voting | ||||
| ('000) | A-shares | B-shares | C-shares | shares | in % | share |
| CGL Holding AS & CGL Holding II AS | 41,336 | 1,112 | 0 | 42,448 | 9.4% | 49.9% |
| Varner Kapital AS | 25,000 | 25,000 | 5.5% | 3.0% | ||
| IC Services 2 AS | 24,423 | 24,423 | 5.4% | 3.0% | ||
| Paradigm Capital Value Fund | 16,953 | 16,953 | 3.8% | 2.1% | ||
| Bras Kapital AS | 16,000 | 16,000 | 3.5% | 1.9% | ||
| Mikkel Walde Holding ApS | 280 | 15,525 | 15,805 | 3.5% | 1.9% | |
| Y-Not ApS | 175 | 14,840 | 15,015 | 3.3% | 1.8% | |
| Long Path Partners LP | 11,959 | 11,959 | 2.6% | 1.5% | ||
| Mp Pensjon Pk | 10,622 | 10,622 | 2.3% | 1.3% | ||
| Deka Investment GmbH | 10,300 | 10,300 | 2.3% | 1.2% | ||
| Anglo Supply AS | 9,994 | 9,994 | 2.2% | 1.2% | ||
| Paradigm Capital Value LP | 7,861 | 7,861 | 1.7% | 1.0% | ||
| Veiby Invest AS | 6,566 | 6,566 | 1.5% | 0.8% | ||
| Pa Kompetens Lön Sverige AB | 5,217 | 5,217 | 1.2% | 0.6% | ||
| Loe Equity AS | 4,714 | 4,714 | 1.0% | 0.6% | ||
| Infolink Holding AS | 4,503 | 4,503 | 1.0% | 0.5% | ||
| Litu AS | 4,261 | 4,261 | 0.9% | 0.5% | ||
| Sewell AS | 3,812 | 3,812 | 0.8% | 0.5% | ||
| P H Mathiesen Holding af 2018 ApS | 3,724 | 3,724 | 0.8% | 0.5% | ||
| UBS AG (Private Banking) | 3,659 | 3,659 | 0.8% | 0.4% | ||
| Top 20 shareholder total | 41,336 | 171,135 | 30,365 | 242,836 | 53.7% | 74.2% |
| Other shareholders | 0 | 171,897 | 37,318 | 209,215 | 46.3% | 25.8% |
| Total number of shares | 41,336 | 343,031 | 67,683 | 452,050 | 100.0% | 100.0% |
Notes:
CGL Holding AS & CGL Holding II AS consists of all shares held by Peter Lauring, companies he has the majority of shares in, and his relatives. Peter Lauring's maximum voting right of 49.9% according to ECIT's articles of association regardless of ownership.
Y-Not ApS consists of all shares held by Klaus Jensen, companies he has the majority of shares in and his relatives.
UBS AG is a nominee and comprises more than one shareholder.
5.4 Capital Management
The Group's objectives when managing capital are to safeguard the Group's ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce costs of capital.
Executive Management and the Board of Directors monitor the share- and capital structure to ensure that the Group's capital resources support the strategic goals.
The debt leverage is monitored closely by the Management in connection with the facility agreement with Nordea. For further information, please refer to note 7.5.
| (NOKm) | 2022 | 2021 | |
|---|---|---|---|
| Borrowings | 368 | 217 | |
| Lease liabilities | 225 | 236 | |
| Total interest bearing liabilities | 593 | 453 | |
| Interest bearing receivables | 60 | 50 | |
| Cash and cash equivalents | 183 | 265 | |
| Total interest bearing assets | 243 | 316 | |
| Net debt / Net cash (-) | 350 | 137 |
Capital allocation policy
Executive Management and the Board of Directors monitor the capital structure to ensure that the Group's capital resources support the strategic goals and maximise shareholder returns.
The capital allocation policy below outlines the priority for the allocation of free cash flow:
-
- Repayment of NIBD in periods when the financial gearing is above the limit range,
-
- Value-adding investments, acquisitions, or development of existing business,
-
- Distribution to shareholders, including dividends and share buybacks.
5.5 Financial risks
The Group's finance functions manage financial risk at a centralised level. Thus, the Group's financial Management is aimed solely at managing and reducing the financial risks directly associated with the Group's operations and financing.
Market risk
Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk includes interest rate risk and foreign currency risk.
Interest rate risk
Interest rate risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Group's interest rate risk relates to the long-term floating-rate loans raised by the Parent. These loans are partly converted to fixed-rate loans by using interestrate swaps with a duration of up to 120 months. The Group's loans and credit facilities break down as shown in note 3.7.
Interest rate sensitivity
ECIT has limited interest-bearing debt as of December 2022 but is, to some extent, still exposed to interest rate risks, mainly from a long-term floating-rate loan (credit facility).
The sensitivity to a possible change in interest rates, with all other variables held constant, on the Group's profit before tax, is illustrated below. In calculating the sensitivity analyses, the Group assumes that the sensitivity of the relevant statement of profit or loss item is the effect of the assumed changes in respective financial risks.
On 31 December 2022, 27% (2021: 0%) of Group borrowings were partly secured through an interest rate swap contract. The duration of hedges relating to net borrowings of the Group was 114 months (2021: 0 months).
The weighted average interest rate on the Group's loans, credit facilities and interest rate hedging was 4.9% at the end of 2022.
A 1 percentage point increase in interest rates would increase profit for the year by NOK 2 million (2021: 1 million loss) and increase other comprehensive income by NOK 0 million (2021: 0), based on average net interest-bearing debt for 2022.
Foreign currency risk
Foreign currency risk is the risk that the fair value or future cash flows of exposure will fluctuate because of changes in foreign exchange rates.
The Group's cross border business activities expose it to foreign exchange transaction risk and translation risk. The Group's risk of changes in foreign exchange rates relates primarily to the Group's operating activities (revenues and expenses denominated in a foreign currency), external financing through interest bearing liabilities and the Group's net investment in foreign subsidiaries.
The Group's presentation currency is NOK. Accordingly, changes in the value of the currencies in which it generated revenues and incurs costs in relation to NOK affect the Group's overall revenue, profit or loss and financial position.
Transactional risk arises when the Group's entities enter into transactions in currencies different than the entities' functional currencies. A significant part of revenues is denominated in NOK, with a smaller portion in EUR, SEK, DKK, PLN, GBP and RON. 33% of the Group's revenue in 2022 came from countries outside Norway, as opposed to 36% in 2021.
A large portion of the Group's operations are conducted in Norway, where transactions to a large extent is made in NOK and as such the Group has significant costs in NOK.
In case of unfavourable exchange rate fluctuations, such as a strong currency in the country of a supplier, and the Group due to competitive pressure being unable to raise its prices, the Group may face reduced gross margins leading to a decline in net results and a competitive disadvantage. Products and services provided and invoiced to the Group in markets with weaker local currencies may also lead to lower profit margins
which could have an adverse effect on the Group's business, results of operations, financial condition and cash flow.
The Group does not hedge currency exposure with the use of financial instruments at the current time but monitors the net exposure over time.
Foreign currency sensitivity
The following table illustrates the sensitivity of the Group's financial instruments denominated in a foreign currency to a hypothetical increase or decrease in the foreign exchange rates in the period, holding all other variables constant.
Credit risk
Credit risk is the risk that a counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Group is mainly exposed to credit risk from its operating activities.
An impairment analysis is performed at each reporting date to measure expected credit losses. The provision rates are based on days past due, product type, customer type and rating, and coverage by letters of credit or other forms of credit insurances. For an over-view of the expected credit losses recognised for trade receivables, refer to note 3.1.
Liquidity risk
Liquidity risk is the risk that the Group will encounter difficulty in meeting obligations associated with financial liabilities that are settled by delivering cash or another financial assets. The Group monitors its risk to a shortage of funds by monitoring its working capital, overdue trade receivables and establishing credit facilities.
| 2022 | 2021 | |||||||
|---|---|---|---|---|---|---|---|---|
| Change in | Impact on profit |
Impact on | Change in | Impact on profit |
Impact on | |||
| Foreign currency sensitivity (NOKm) | fx rate | before tax | OCI | fx rate | before tax | OCI | ||
| Increase in EUR/NOK | +10% | 0 | 8 | +10% | -1 | 10 | ||
| Increase in SEK/NOK | +10% | 4 | 36 | +10% | 4 | 28 | ||
| Increase in DKK/NOK | +10% | 4 | 31 | +10% | 4 | 20 | ||
| Increase in PLN/NOK | +10% | 0 | 1 | +10% | 0 | 0 | ||
| Increase in GBP/NOK | +10% | 1 | 1 | +10% | 0 | 1 | ||
| Increase in RON/NOK | +10% | 0 | 0 | +10% | 0 | 0 | ||
The Group's objective is to maintain a balance between continuity of funding and flexibility through the use of credit facilities agreement to finance working capital and investments. The Group has flexible debt financing through a Revolving Credit Facility and may further draw funds or establish additional incremental revolving facilities if deemed necessary (see note 3.7). Additionally, the Group has a significant positive cash flow from operating activities which limits its liquidity risk.
An overview of the maturity profile of the Group's financial liabilities with corresponding cash flow effect is presented in note 4.5.
5.6 Derivative financial instruments
Derivative financial instruments are recognised on the trade date and are measured at fair value. Positive and negative fair values are included in other current receivables or other current payables in the balance sheet. Positive and negative fair values are only offset if the Group has a right and an intention to settle several financial instruments net (by means of settlement of differences). Fair value is determined based on generally accepted valuation methods using available observable market data.
When entering into contracts for financial instruments, an assessment is made of whether the instrument qualifies for hedge accounting, including whether the instrument hedges recognised assets and liabilities or net investments in foreign entities. The effectiveness of recognised financial instruments is assessed on a monthly basis, and any ineffectiveness is recognised in the income statement.
Fair value changes which are classified as and fulfil the criteria for recognition as a fair value hedge are recognised in the
income statement together with changes in the value of the part of the asset or liability that has been hedged.
Fair value changes in the part of the derivative which is classified as and qualifies for recognition as a future cash flow hedge and which effectively hedges against changes in the value of the hedged item are recognised in other comprehensive income as a separate hedging reserve.
When the underlying hedged item is realised, any gain or loss on the hedging transaction is transferred from equity and recognised together with the hedged item.
Fair value changes that do not meet the criteria for treatment as hedging instruments are recognised on an ongoing basis in the income statement under financials.
The Group has in 2022 entered a contract for interest rate hedging.
The Group has obtained long-term loans on a floating rate basis, implying that the Group is exposed to interest rate fluctuations.
The Group mainly uses interest rate swaps to hedge future cash flows relating to interest rate risks. Thereby, floating-rate loans are converted to fixed-rate financing.
The weighted average effective interest rate for existing interest rate instruments used as hedges of long-term loans was 3.1% at the reporting date (2021: none).
Fair value adjustment is low and rounding to nearest million results in a value of NOK 0 million in 2022 (2021: 0)
| External hedging instruments (NOKm) |
2022 | 2021 |
|---|---|---|
| Contractual value Maturity (year) |
100 2032 |
0 n/a |
| Fair value Of which recognised in income statement |
0 | 0 |
| Of which recognised in other coprehensive income |
0 | 0 |
5.7 Financial instruments – fair value hierarchy
ECIT Group has financial instruments measured at fair value based on all three levels in the fair value hierarchy:
- Level 1 Quoted active market prices
- Level 2 Significant observable inputs
- Level 3 Significant unobservable inputs
Classification of the Group's financial instruments is presented in the matrix below.
There have been no transfers between levels in the fair value hierarchy in either 2022 or 2021.
In determining fair value measurement, the impact of potential climate-related matters, including legislation, which may affect the fair value measurement of assets and liabilities in the financial statements has been considered. These risks in respect of climate-related matters are included as key assumptions where they materially impact the measure of recoverable amount.
| 2022 | 2021 | |||||||
|---|---|---|---|---|---|---|---|---|
| Financial intruments by category (NOKm) | Level 1 | Level 2 | Level 3 | Total | Level 1 | Level 2 | Level 3 | Total |
| Assets measured at fair value: | ||||||||
| Interest rate derivatives | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| Listed equity investments | 7 | 0 | 0 | 7 | 5 | 0 | 0 | 5 |
| Investments in associates | 0 | 0 | 51 | 51 | 0 | 0 | 37 | 37 |
| Non-listed equity investments | 0 | 0 | 38 | 38 | 0 | 0 | 22 | 22 |
| Total financial assets measured at fair value | 7 | 0 | 89 | 96 | 5 | 0 | 59 | 64 |
| Assets measured at amortised cost: | ||||||||
| Trade receivables | 0 | 407 | 0 | 407 | 0 | 325 | 0 | 325 |
| Other receivables | 0 | 271 | 0 | 271 | 0 | 183 | 0 | 183 |
| Cash and cash equivalents | 0 | 183 | 0 | 183 | 0 | 265 | 0 | 265 |
| Total financial assets measured at amortised cost | 0 | 861 | 0 | 861 | 0 | 773 | 0 | 773 |
| Financial liabilities measured at fair value: | ||||||||
| Contingent consideration liability | 0 | 0 | 62 | 62 | 0 | 0 | 31 | 31 |
| Total financial liabilities measured at fair value | 0 | 0 | 62 | 62 | 0 | 0 | 31 | 31 |
| Financial liabilities measured at amortised cost: | ||||||||
| Borrowings | 0 | 368 | 0 | 368 | 0 | 217 | 0 | 217 |
| Lease liabilities | 0 | 225 | 0 | 225 | 0 | 236 | 0 | 236 |
| Trade payables | 0 | 142 | 0 | 142 | 0 | 111 | 0 | 111 |
| Other liabilities | 0 | 509 | 0 | 509 | 0 | 457 | 0 | 457 |
| Total financial liabilities measured at amortised cost | 0 | 1 243 | 0 | 1 243 | 0 | 1 021 | 0 | 1 021 |
6. Composition of the group
This section provides information on how the composition of the Group affects the financial position and performance for the year.
6.1 Acquisition and disposal of entities
When accounting for business combinations, the acquisition method is applied in accordance with IFRS 3.
Enterprises acquired or formed during the year are recognised in the consolidated financial statements from the date of acquisition or formation. Enterprises disposed of are recognised in the consolidated financial statements up to the date of disposal. Discontinued operations and assets held for sale are presented separately.
The acquisition method of accounting is used to account for all business combinations, regardless of whether equity instruments or other assets are acquired. The consideration transferred for the acquisition of a subsidiary comprises:
- Fair value of the assets transferred
- Liabilities incurred to the former owners of the acquired business
- Equity interest issued by the Group
Identifiable assets, liabilities and contingent liabilities of the acquire are measured at fair value at the date of acquisition by applying relevant valuation methods. Identifiable intangible assets are recognised if they are separable or arise from a contractual right. Deferred tax is recognised for identifiable tax benefits existing at the date of acquisition and from the perspective of the new combined Group in compliance with local tax legislation.
If measurement of the identifiable net assets is uncertain at the date of acquisition, initial recognition is done based on provisional amounts. Measurement period adjustments to the provisional amounts may be done for up to 12 months following the date of acquisition. The effects of cross-period measurement period adjustments are recognised in equity at the beginning of the financial year, and comparative figures are restated.
After the end of the measurement period, goodwill is no longer adjusted. Transaction costs inherent from the acquisition are recognised in the income statement when incurred.
Goodwill and fair value adjustments arising from the acquisition of an acquire whose functional currency differs from the presentation currency of the Group are translated into the functional currency of the foreign entity using the exchange rate ruling at the date of acquisition.
Other than cross-period measurement period adjustments, comparative figures are not adjusted when acquiring or disposing of entities.
In 2022 the Group sold all shares in ECIT Invent AS and TodAi A/S. The divestments have no material effect on the group annual accounts. There have been no other losses of control in subsidiaries.
Management judgement and estimates
In applying the acquisition method of accounting, estimates are an integral part of assessing fair values of several identifiable assets acquired and liabilities assumed, as observable market prices are typically not available.
Valuation techniques where estimates are applied typically relate to determining the present value of future uncertain cash flows or assessing other events in which the outcome is uncertain at the date of acquisition.
More significant estimates are typically applied in accounting for property, plant and equipment, customer relationships, trade receivables, deferred tax, debt and contingent liabilities. As a result of the uncertainties inherent in fair value estimation, measurement period adjustments may be applied.
6.2 Acquisitions during the year
During 2022, ECIT has made ten acquisitions, four in the F&A division, two in the Tech division, and four in the IT division.
Catacloud AS
Catacloud is a Norwegian software company offering a modern ERP system for business administration and accounting. The platform enables integration through APIs to other systems. The acquisition strengthens ECIT's position within accounting software in Norway and is a good fit within ECIT's digital development.
50.1% of the shares in Catacloud AS were acquired on 25 March 2022.
Xacct Accounting AS
XACCT provides Accounting and Payroll services based on Xledger ERP, Microsoft ERP and other cloud-based ERP solutions. XACCT offers a portfolio of high-end solutions to a wide range of customers within technology, banking, finance, insurance and retail, including national companies and international subsidiaries.
100.0% of the shares in Xacct Accounting AS were acquired on 31 March 2022.
Isonor IT AS
Isonor is a Norwegian ERP consultancy company offering modern ERP systems for business administration and specialised industry solutions. The acquisition strengthens ECIT's position within process industry solutions regarding retail, food, and construction and will support the digital support capacity and competence within ECIT.
65.0% of the shares in Isonor IT AS were acquired on 25 May 2022.
Tandem AS
Tandem AS, located in Høvik, Norway, is a Norwegian finance and accounting company offering modern ERP systems for business administration and specialised industry solutions and advisory within real estate. The acquisition, including experienced employees and an attractive base of customers, strengthens ECIT's position in the greater Oslo area.
100.0% of the shares in Tandem AS were acquired on 5 July
| Auto-Flow ApS | |
|---|---|
| --------------- | -- |
Auto-Flow ApS, located in Aarhus, Denmark, provides support and automates business processes using RPA software. The acquisition strengthens ECIT competence and customer deliveries within business process automation.
50.1% of the shares in Auto-Flow ApS were acquired on 8 July 2022.
Verismo Systems AB
Verismo Systems AB, located in Stockholm, Sweden, is a Swedish HR software specialist supporting and automating processes within recruitment, onboarding, employee development, payroll and employee benefits. The acquisition strengthens ECIT product portfolio with an HR system.
18% of the shares in Verismo Systems AB were acquired on 11 July 2022. The company is not consolidated in the Group financial accounts.
| 2022. | Revenue | Revenue | PAT | |
|---|---|---|---|---|
| Acquired companies (NOKm) | 2021 | 2022 | 2022 | FTE |
| Catacloud, Norway, Tech | 0 | 0 | -1 | 2 |
| Xacct Accounting, Norway, F&A | 50 | 64 | 8 | 37 |
| Isonor IT, Norway, IT | 12 | 12 | 1 | 6 |
| Tandem AS, Norway F&A | 49 | 50 | 6 | 32 |
| Auto-Flow ApS, Denmark IT | 4 | 4 | -3 | 11 |
| Verismo Systems AB, Sweden Tech | 6 | n/a | n/a | 7 |
| Prosys ApS, Denmark IT | 10 | n/a | n/a | 4 |
| Argus Kreditt AS, Norway F&A | 7 | 7 | 1 | 4 |
| Intunor Group, Norway F&A | 123 | 134 | -35 | 110 |
| Agidon, Denmark IT | 40 | 39 | 5 | 22 |
| Total | 302 | 310 | -18 | 235 |
Notes:
Revenue and profit after tax figures is equal to figures presented in local annual report
Verismo Systems AB is an other equity investment and is not consolidated in the group financial accounts.
Prosys ApS merged with other ECIT companies within the year and the full year revenue and profit after tax are therefore not showed
Prosys ApS
Prosys ApS, located in the Greater Copenhagen area, Den-mark, is a Danish Managed IT Services Provider supporting medium to large customers and their digital transformation through managed IT-services, and cloud- and network operations. The acquisition strengthens ECIT's IT and Cloud services portfolio and our position within managed services and IT advisory. Prosys ApS was in December 2022 merged with the ECIT subsidiary ECIT Solutions A/S.
100% of the shares in Prosys ApS were acquired on 15 August 2022.
Argus Kreditt AS
Argus Kreditt AS is a Norwegian debt collection company offering services within debt collection, invoice administration and credit management advisory. Argus Kreditt is a good addon to ECIT's existing services within debt collection, invoicing services and credit management advisory, adding a new office location in Southern Norway.
90.0% of the shares in Argus Kreditt AS were acquired on 19 October 2022.
Intunor Group
Intunor is a Norwegian finance and accounting company offering services based on modern ERP systems for business administration, services for specialised industry solutions and advisory services. Intunor, with an experienced staff and an attractive portfolio of customers, will strengthen the geographical presence, industry position and competence base in ECIT.
The acquisition of Intunor Group was paid partly with cash and partly through a capital increase in the company, Intunor Services AS. The capital increase was used as a settlement of
financial liabilities. The financial liabilities have subsequently been paid in December 2022 and are presented as part of the net investment in the company.
50.1% of the shares in Intunor Services AS was acquired on the 11 November 2022. Intunor Services AS own 100% of the shares in Intunor Finans AS, Intunor People AS, Intunor Software AS and Intunor Services Saltdal AS.
Agidon A/S
Agidon A/S is a Danish Consulting and digitalization company with a strong footprint within the fashion and production industry. The acquisition strengthens ECIT's presence in western Denmark with competence and customer deliveries within digitalization and consulting division.
69.9% of the shares in Agidon were acquired on 15 December 2022
Earnings impact
The acquisitions made by the Group contributed NOK 112 million to the Group's YTD revenue and NOK 18 million to the Group's EBITDA, corresponding to an EBITDA margin of 16%.
Transaction costs
Total transaction costs related to the acquisition amount to NOK 8 million. Transaction costs are accounted for in the income statement as transaction & restructuring costs as presented in note 2.7.
Net investments in subsidiaries
The acquisitions have been paid partly with cash and partly with shares through treasury shares or a capital increase.
Adjusted for the fair value of acquired cash, cash equivalents, and paid-out earn-out for prior acquisitions of NOK 5 million, the cash outflow for new subsidiaries amounted to NOK 258 million in 2022.
Cash amount paid in new subsidiaries includes cash payment in connection with capital increases in the subsidiary at closing. In the cash flow statement, those payments are eliminated.
Paid earn-out obligations are subject to prior acquisitions. The earn-out obligation for the new subsidiaries is due within the next 12 months.
| (NOKm) | 2022 | 2021 | |
|---|---|---|---|
| Cash payment Sales of subsidiaries Paid earn out obligation Majority share of cash Net investment in subsidairies |
269 -14 5 -24 237 |
296 -3 20 -37 276 |
|
| New subsidiaries: Share payment Cash payment Earn out obligation Investment in new subsidiaries |
8 269 42 319 |
48 296 0 344 |
The fair value of acquired net assets and recognised goodwill
The table below gives the principal fair values of acquired assets and liabilities at the acquisition date.
The intangible assets mainly consist of goodwill and are primarily related to synergy effects from integration with ECIT's existing business. Goodwill is non-deductible for tax purposes.
Integration of the acquired companies is still ongoing. Consequently, net assets, including goodwill and other intangible assets, may be adjusted. Off-balance sheet items may be recognised for up to 12 months after the acquisition date in accordance with IFRS 3.
Xacct Accounting AS, Tandem AS and Intunor Group is shown separately since the acquisitions are significant compared to the total acquisitions of 2022.
Other acquisitions include Catacloud, Isonor, Auto-Flow, Prosys, Argus Kreditt, Agidon, companies ECIT group acquired during 2022 and presented aggregated as they individually are not considered significant.
| Intunor | Total | ||||
|---|---|---|---|---|---|
| (NOKm) | Xacct | Tandem | Group | Other | 2022 |
| Research & Development | 0 | 0 | 0 | 3 | 4 |
| Property, plant and equipment | 0 | 0 | 5 | 1 | 5 |
| Financial fixed assets | 0 | 0 | 8 | 0 | 8 |
| Right-of-use assets | 4 | 7 | 24 | 3 | 38 |
| Deferred tax | 0 | 0 | 0 | 0 | 0 |
| Inventories | 0 | 0 | 1 | 0 | 1 |
| Trade receivables | 4 | 7 | 16 | 10 | 38 |
| Other receivables | 15 | 2 | 4 | 56 | 77 |
| Cash and cash equivalents | 3 | 9 | 10 | -2 | 20 |
| Total Assets | 28 | 25 | 68 | 70 | 191 |
| Lease libilities | 4 | 7 | 24 | 3 | 38 |
| Provisions | 0 | 0 | 0 | 0 | 0 |
| Long-term debt | 0 | 0 | 10 | 8 | 18 |
| Trade payables | 1 | 1 | 3 | 5 | 9 |
| Other payables | 20 | 11 | 11 | 40 | 82 |
| Total Liabilities | 25 | 19 | 48 | 56 | 147 |
| Non-controlling interest' share of acquired net assets | 0 | 0 | 10 | 5 | 15 |
| Acquired net assets | 3 | 7 | 10 | 10 | 29 |
| Cash payments | 269 | ||||
| Share payments | 8 | ||||
| Earn Out obligation | 42 | ||||
| Goodwill and intangible assets arising from the acquisition | 290 |
6.3 Acquisitions prior year
During 2021 ECIT has made nine acquisitions, whereas six are within the F&A division and three are within the IT Division.
ASK Outsourcing AB
Ask Outsourcing AB is a Swedish outsourcing company that manages and develops companies' operations within finance, Management, and IT. The company will strengthen the ECIT F&A business on the Swedish market.
60.0% of the shares in ASK Outsourcing AB were acquired on 15 February 2021.
Aktiv Kontroll AS
Aktiv Kontroll AS is a Norwegian company that specialises in debt collection, invoice management and credit services. Aktiv Kontroll is extending the debt collection business in ECIT and has merged with other debt collection companies within the Group after the acquisition.
100.0% of the shares in Aktiv Kontroll AS were acquired on 26 March 2021.
Norian Group
Norian Group is an international F&A company providing accounting, payroll, and automation services (robot technology) in six countries (Norway, Sweden, Finland, Germany, Poland, and Lithuania). Norian Group has established nearshoring centres in Lithuania and Poland, which will be in cooperated in the ECIT structure.
82.9% of the shares in Norian Group were acquired on 13 April 2021.
Notes:
Revenue and profit after tax figures is equal to figures presented in local annual report
Aktiv Kontroll AS merged with other ECIT companies within the year and the full year revenue and profit after tax are therefore not showed Value Group is recognised as associated company
PC-System Senteret AS
PCSS is a co-owner of two other companies, Cloud Connection AS (50%) and Connect HRM AS (34%), which operate within the same technology areas as PCSS, but with a higher degree of specialisation. Cloud Connection AS also owns a part of Cloud Controller AS (40%), delivering qualified accounting and payroll services.
70.0% of the shares in PC-System Senteret AS were acquired on 1 June 2021.
Wlcom AS
Wlcom AS is a software and consulting company that develops and distributes on-premises and cloud-based software solutions, including industry verticals and specialized solutions based on modern technology and solid industry knowledge. The acquisition of Wlcom will strengthen the IT division in ECIT with its competent people with more than 25 years of experience within systems and processes.
70% of shares in Wlcom AS were acquired on 16 September 2021
Peritus AS
Peritus as a company is holding strong knowledge about adaption, implementation and training in business-critical software solutions. Peritus as a part of ECIT, will strengthen our expertise within implementation of ERP, CRM, and BI solutions.
50.1% of the shares in Peritus AS were acquired on 18 October 2021.
Credité Consulting AB
Credité Consulting AB is an accounting company which focuses on 24SevenOffice as an ERP platform. This acquisition represents a further strengthening of the 24SevenOffice expertise within ECIT and is further an important step being the first 24SevenOffice acquisition in Sweden.
80.0% of the shares in Credité Consulting AB were acquired on 25 November 2021.
| Acquired companies (NOKm) | Revenue 2020 |
Revenue 2021 |
PAT 2021 |
FTE |
|---|---|---|---|---|
| ASK Outsourcing AB, Sweden, F&A | 10 12 |
1 | 12 | |
| Aktiv Kontroll AS, Norway, F&A | 7 n/a |
n/a | 10 | |
| Norian Group, International, F&A | 265 273 |
0 | 550 | |
| PC-System Senteret AS, Norway, IT | 18 21 |
3 | 15 | |
| WLCOM AS, Norway, IT | 53 55 |
5 | 34 | |
| Value Group, Norway, F&A | 77 86 |
10 | 83 | |
| Peritus AS, IT | 25 28 |
4 | 10 | |
| Credité Consulting AB, F&A | 13 13 |
0 | 15 | |
| Partner Regnskap AS, F&A | 30 32 |
2 | 24 | |
| Total | 498 520 |
25 | 753 | |
Partner Regnskap AS
Partner Regnskap operates within the same service areas and systems as many of the existing accounting companies in ECIT. Partner Regnskap will strengthen ECIT's presence in the Stavanger area. 50.1% of the shares in Partner Regnskap AS were acquired on 22 December 2022
Earnings impact
During 2021 the acquisitions made by the Group contributed NOK 261 million to the Group's revenue and NOK 31 million to the Group's EBITDA, corresponding to an EBITDA margin of 11.9%.
Transaction costs
Total transaction costs related to the acquisitions amount to NOK 7 million, whereas NOK 6 million is related to the acquisition of Norian Group. Transaction costs are accounted for in the income statement as transaction & restructuring costs.
Payments of acquisitions
The acquisitions have been paid partly with cash and partly with shares through treasury shares or a capital increase.
Adjusted for the fair value of acquired cash, cash equivalents and paid-out earn-out for prior acquisitions of NOK 20 million, the net cash flow for new subsidiaries amounted to NOK 276 million (outflow) during 2021.
No deferred payments were recognised as part of the acquisitions during the year. Paid earn-out obligations are subject to prior acquisitions.
Fair value of acquired net assets and recognised goodwill
The table below gives the provisional fair values of acquired assets and liabilities at the acquisition date.
The intangible assets mainly consist of goodwill and are primarily related to synergy effects from integration with ECIT's existing business. Goodwill is non-deductible for tax purposes.
Integration of the acquired companies is still ongoing. Consequently, net assets, including goodwill and other intangible assets, may be adjusted. Off-balance sheet items may be recognised for up to 12 months after the acquisition date in accordance with IFRS 3.
Norian Group and WLCOM AS are shown separately since the acquisitions are significant compared to the total acquisitions of 2021.
| (NOKm) | Norian Group |
WLCOM AS |
Other 2021 |
Total 2021 |
|---|---|---|---|---|
| Research & Development | 7 | 21 | 0 | 28 |
| Property, plant and equipment Financial fixed assets |
2 0 |
0 0 |
1 8 |
3 8 |
| Right-of-use assets | 56 | 6 | 17 | 79 |
| Deferred tax | 2 | 0 | 0 | 2 |
| Inventories | 0 | 1 | 0 | 1 |
| Trade receivables | 34 | 3 | 12 | 49 |
| Other receivables | 160 | 1 | 5 | 166 |
| Cash and cash equivalents | 33 | 1 | 15 | 49 |
| Total Assets | 295 | 33 | 57 | 386 |
| Lease libilities | 56 | 6 | 17 | 79 |
| Provisions | 6 | 0 | 2 | 8 |
| Long-term debt | 0 | 3 | 0 | 3 |
| Trade payables | 28 | 0 | 4 | 32 |
| Other payables | 184 | 10 | 17 | 211 |
| Total Liabilities | 274 | 19 | 40 | 333 |
| Non-controlling interest' share of acquired net assets | 6 | 4 | 6 | 16 |
| Acquired net assets | 16 | 10 | 11 | 37 |
| Cash payments | 296 | |||
| Share payments | 48 | |||
| Earn Out obligation | 0 | |||
| Goodwill and intangible assets arising from the acquisition* | 308 |
7. Other disclosures
This section of the notes includes other information that must be disclosed to comply with the accounting standards and other pronouncements.
7.1 Remuneration of the Executive management and the Board of directors
Benefits for senior executives concern the Chief Executive Officer (CEO).
No additional remuneration or bonus has been paid for services beyond the normal functions of a manager. The executive management does not have any pension plans besides the ones required by law.
In January 2023, the CEO received share warrants of 550,000 shares with a strike price of NOK 7.01. The share warrants received after the reporting period are not included in 2022.
| Excecutive management(NOKm) | 2022 | 2021 |
|---|---|---|
| Base salary | 4.7 | 3.8 |
| Cash bonus | 0.0 | 0.7 |
| Pensions and Benefits | 0.1 | 0.1 |
| Other salary costs | 0.1 | 0.1 |
| Total | 4.9 | 4.6 |
Members of the Board of Directors receive a fixed fee for their participation as a member of the board in ECIT.
Board of directors members holds 9.8% of the share capital (2021: 8.5%).
In January 2023, the Board of Directors received share warrants of 150,000 with a strike price of NOK 7.01 and share warrants of 771,250 with a strike price of NOK 6.95. The share warrants are received after the reporting period and are not included in 2022.
The Group has no obligations to the Board Member or the management team of termination or changes in employment/positions.
| Board of directors (NOKm) | 2022 | 2021 |
|---|---|---|
| Fixed fees | 1.1 | 0.0 |
| Total | 1.1 | 0.0 |
7.2 Fees to the auditor appointed at the Annual general meeting
Statutory audit fee includes fees to other auditors and the Group auditor.
Other specifications of auditor fee is only fees paid to the Group auditor.
| (NOKm) | 2022 | 2021 |
|---|---|---|
| Statutory audit | 7 | 7 |
| Other assurance services | 1 | 1 |
| Tax advisory services | 0 | 0 |
| Other non-audit services | 0 | 1 |
| Total | 8 | 9 |
7.3 Related party transactions
The Group's related parties include the Group's Board of Directors, Executive Board and close family members of these persons. Related parties also include companies where this circle of persons has significant interests. The Group has no related parties with control of the Group.
There have been no material transactions with the Group's Board of Directors, Executive Board and close family members other than remuneration.
Management remuneration is disclosed in note 7.1.
The Group has no material transactions or balances on 31 December with associates.
Members of the Executive Management hold 9.4% of the share capital (2021: 9.5%).
7.4 Commitments and contingent liabilities
A contingent liability is a potential liability that may occur depending on the outcome of an uncertain future event. A contingent liability is recognised in the balance sheet if the contingency is probable and the amount of the liability can be reasonably estimated.
Pledges
On 31 December 2022, participation in group companies, buildings, stock, equipment and accounts receivables with a carrying value of NOK 36 million (2021: 58) were pledged as security for long-term loans. NOK 2 million is related to property, plant and equipment.
On 31 December 2022, participation in group companies, equipment and accounts receivables with a carrying value of NOK 1.410 (2021: 657) million were pledged as security for credit facilities. NOK 1 million is related to property, plant and equipment.
Bank financing facility
The Group has a credit facility at a total amount of NOK 800 million together with Nordea Bank, consisting of a revolving credit facility of NOK 750 million and a leasing facility of NOK 50 million. On 31 December 2022, NOK 459 million of this was undrawn. The revolving credit facility agreement covers a period of three years with an extension option of one year.
For this credit facility, security has been pledged against shares in ECIT Midco Holding AS, ECIT Norway Holding AS and ECIT Int Holding AS. ECIT AS also provides a surety guarantee to the bank for the entire credit facility.
A subsidiary has a bank overdraft facility of NOK 16 million (16). On 31 December 2022, the total facility was utilised with NOK 10 million (9).
ECIT Midco Holding AS has obligations (financial covenants) related to the leverage ratio for ECIT Midco Group, which must be below 3.0x at all times. On 31 December 2022, the company fulfilled these requirements.
Leasing financing facility
The ECIT Group has a leasing facility of NOK 50 million (2021: 50). On 31 December 2022, the facility was utilised with NOK 14 million (2021: 12).
7.5 Events after the balance sheet date
In August 2022 a new share-based incentive scheme was announced. The program's purpose is to reward long-time performance and loyalty to ECIT. The incentive was launched in January 2023 and a total of 5.5 million shares will be part of the program.
With reference to company announcement No. 127, Progresso AS has become part of ECIT as of the 24th of January 2023. ECIT has acquired 60% of the shares in Progresso AS, including an option agreement to acquire the remaining 40% of the shares.
As we are a company with operations and sales in countries around Europe, geopolitical conflicts, including the current situation involving Russia and Ukraine, can impact the operations. Offices and employees geographically close to the conflict between Russia and Ukraine are, as in 2022, closely monitored by the group in case of escalation in the current situation.
7.6 Investments in associates
Investments in associates is accounted for using the equity method.
| 2022 | 2021 | |||||
|---|---|---|---|---|---|---|
| Investments in associates (NOKm) | Carrying amount |
Owner ship in % |
Carrying amount |
Owner ship in % |
||
| Connect HRM AS Cloud Connection AS Value Group AS Club United AS Total |
3 0 29 18 51 |
34.0% 0.0% 40.0% 26.8% |
3 5 29 0 37 |
34.0% 50.0% 40.0% 0.0% |
7.7 Group Structure
| Ownership | Votingshare | Ownership | Votingshare | ||||||
|---|---|---|---|---|---|---|---|---|---|
| in % by | in % by | in % by | in % by | ||||||
| Name of entity | Division | Country | ECIT AS | ECIT AS | Name of entity | Division | Country | ECIT AS | ECIT AS |
| Parrent: | ECIT Consulta AS | F&A | Norway | 81.5 % | 81.5 % | ||||
| ECIT AS | Group | Norway | n/a | n/a | Intergest UK Ltd** | F&A | England | 37.6 % | 37.6 % |
| Intunor Finance AS | F&A | Norway | 50.1 % | 50.1 % | |||||
| Subsidiaries: | Intunor People AS | F&A | Norway | 50.1 % | 50.1 % | ||||
| 24SEVEN Office Accounting Holding AS | Group | Norway | 50.1 % | 50.1 % | Intunor Services AS | F&A | Norway | 50.1 % | 50.1 % |
| Global Control Center Design AS* | IT | Norway | 30.5 % | 30.5 % | Intunor Software AS | F&A | Norway | 50.1 % | 50.1 % |
| 3C Technology AS | IT | Norway | 50.1 % | 50.1 % | Intunor Services Saltdal AS | F&A | Norway | 50.1 % | 50.1 % |
| Abaci AS | F&A | Norway | 50.1 % | 50.1 % | Intect AB | F&A | Sweden | 66.5 % | 66.5 % |
| ECIT Capstone AS | IT | Norway | 70.0 % | 70.0 % | Ecit Int Holding AS | Group | Norway | 100.0 % | 100.0 % |
| ECIT Account A/S ECIT Advice AS* |
F&A F&A |
Denmark Norway |
70.0 % 44.4 % |
70.0 % 44.4 % |
ECIT Interim AB Isonor IT AS |
F&A IT |
Sweden Norway |
69.9 % 61.5 % |
69.9 % 61.5 % |
| Agidon A/S | IT | Denmark | 49.0 % | 49.0 % | It Consult AS | IT | Norway | 70.0 % | 70.0 % |
| Ecit Aktivapluss AS | F&A | Norway | 70.1 % | 70.1 % | Itc Holding AS | Group | Norway | 70.0 % | 70.0 % |
| ECIT Stord AS | F&A | Norway | 70.0 % | 70.0 % | ECIT Solutions Pro AB | IT | Sweden | 87.0 % | 87.0 % |
| ECIT Lillehammer AS | F&A | Norway | 70.0 % | 70.0 % | Interpalm Group Ltd** | Group | England | 39.6 % | 39.6 % |
| Argus Kreditt AS | F&A | Norway | 90.0 % | 90.0 % | ECIT Solutions ITS AS | IT | Norway | 70.0 % | 70.0 % |
| ECIT Aros A/S | F&A | Denmark | 59.5 % | 59.5 % | ECIT Labs AS | Tech | Norway | 50.1 % | 50.1 % |
| ASK Outsourcing Group AB | F&A | Sweden | 70.0 % | 70.0 % | Unilei ApS* | Tech | Denmark | 33.9 % | 33.9 % |
| Auto-Flow ApS | IT | Denmark | 32.8 % | 32.8 % | ECIT IT Managed Services Holding AS | IT | Norway | 100.0 % | 100.0 % |
| ECIT Autogear AS | Tech | Norway | 82.6 % | 82.6 % | Modern Ekonomi Sverige AB | F&A | Sweden | 89.0 % | 89.0 % |
| ECIT Group Services AS | Group | Norway | 100.0 % | 100.0 % | Modern Avveckling Sverige AB | F&A | Sweden | 89.0 % | 89.0 % |
| ENKLERESTART.NO AS | Tech | Norway | 96.6 % | 96.6 % | Modern Bolagsservice Sverige AB | F&A | Sweden | 89.0 % | 89.0 % |
| ECIT Services AS | F&A | Norway | 71.0 % | 71.0 % | ME Finans AB | F&A | Sweden | 89.0 % | 89.0 % |
| ECIT OS AS* | F&A | Norway | 48.7 % | 48.7 % | Modern Ekonomi Sverige Holding AB | F&A | Sweden | 89.0 % | 89.0 % |
| Catacloud AS | Tech | Norway | 50.1 % | 50.1 % | Modern Tellos Sverige AB | F&A | Sweden | 89.0 % | 89.0 % |
| ECIT NewCo 2 AS | Group | Norway | 100.0 % | 100.0 % | ECIT Solutions A/S (DK) | IT | Denmark | 65.4 % | 65.4 % |
| ECIT Advisory AB | F&A | Sweden | 70.0 % | 70.0 % | ECIT Midco Holding AS | Group | Norway | 100.0 % | 100.0 % |
| Centrum Regnskap AS | F&A | Norway | 50.1 % | 50.1 % | ECIT Moss AS | F&A | Norway | 50.1 % | 50.1 % |
| Credité Consulting AB* | F&A | Sweden | 66.5 % | 66.5 % | ECIT Merkur AS | Group | Norway | 70.0 % | 70.0 % |
| ECPay AS | F&A | Norway | 77.0 % | 77.0 % | My Salary Nordic AB** | Tech | Sweden | 49.9 % | 49.9 % |
| Dalby Ekonomiservice AB | F&A | Sweden | 59.9 % | 59.9 % | ECIT NewCo 1 AS | Group | Norway | 100.0 % | 100.0 % |
| ECIT Solutions DI AS | IT | Norway | 72.6 % | 72.6 % | ECIT Net AS | Tech | Norway | 100.0 % | 100.0 % |
| ECIT Solutions One AS | IT | Norway | 73.7 % | 73.7 % | ECIT Services A/S (DK) | F&A | Denmark | 70.3 % | 70.3 % |
| ECIT Labs A/S | Tech | Denmark | 50.1 % | 50.1 % | Adato AS | Tech | Norway | 70.0 % | 70.0 % |
| ECIT Consulting A/S | IT | Denmark | 70.0 % | 70.0 % | Norian Accounting GmbH | F&A | Germany | 83.6 % | 83.6 % |
| EG Økonomi AS | Group | Norway | 50.1 % | 50.1 % | Norian Accounting Oy | F&A | Finland | 83.6 % | 83.6 % |
| Ecit Services Holding AS | Group | Norway | 100.0 % | 100.0 % | Norian Accounting UAB | F&A | Lithuania | 83.6 % | 83.6 % |
| ECIT Software A/S | Tech | Denmark | 70.0 % | 70.0 % | Norian Regnskap AS | F&A | Norway | 83.6 % | 83.6 % |
| ECIT Services Göteborg AB* | F&A | Sweden | 39.8 % | 39.8 % | Norian Accounting Sp. z o.o. | F&A | Poland | 83.6 % | 83.6 % |
| Intect ApS | Tech | Denmark | 70.0 % | 70.0 % | Norian Accounting AB | F&A | Sweden | 83.6 % | 83.6 % |
| ECIT Group Services ApS | Group | Denmark | 100.0 % | 100.0 % | ECIT Normann & Øygarden AS | F&A | Norway | 60.0 % | 60.0 % |
| Ownership in % by |
Votingshare in % by |
|||
|---|---|---|---|---|
| Name of entity | Division | Country | ECIT AS | ECIT AS |
| Norian FAS Holding Oy | Group | Finland | 83.6 % | 83.6 % |
| Norian ManCo AS | Group | Norway | 59.2 % | 100.0 % |
| ECIT Norge Holding AS | Group | Norway | 100.0 % | 100.0 % |
| Norian TopCo AS | Group | Norway | 83.6 % | 83.6 % |
| InterGest Sweden AB | F&A | Sweden | 70.0 % | 70.0 % |
| ECIT Sale & Customer Service AS | F&A | Norway | 60.0 % | 60.0 % |
| ECIT Harestua AS* | F&A | Norway | 51.5 % | 51.5 % |
| Økonomispecialisten AS | F&A | Norway | 50.1 % | 50.1 % |
| ECIT Services AB (SE) | F&A | Sweden | 66.5 % | 66.5 % |
| PA Kompetens Lön AB** | F&A | Sweden | 50.0 % | 50.0 % |
| ECIT Accountants Limited** | F&A | England | 39.6 % | 39.6 % |
| ECIT Peritus AS | IT | Norway | 50.1 % | 50.1 % |
| Pilen Holding AS*** | Group | Norway | 0.0 % | 100.0 % |
| Partner Regnskap AS | F&A | Norway | 50.1 % | 50.1 % |
| Pramo Ekonomi & Data AB | F&A | Sweden | 65.8 % | 65.8 % |
| Pramo ApS* | F&A | Denmark | 39.5 % | 39.5 % |
| Proviso AS* | Tech | Norway | 35.1 % | 35.1 % |
| Prosys ApS | IT | Denmark | 65.4 % | 65.4 % |
| RaceIT Digital SRL | Tech | Romania | 50.1 % | 50.1 % |
| ECIT Digital AS | Tech | Norway | 50.1 % | 50.1 % |
| ECIT Råd & Regnskap AS | F&A | Norway | 70.0 % | 70.0 % |
| Råd & Regnskap Eiendom AS | Group | Norway | 70.0 % | 70.0 % |
| Sarec Lønn AS*** | F&A | Norway | 35.4 % | 35.4 % |
| ECIT RSBL doo Beograd | F&A | Serbia | 100.0 % | 100.0 % |
| ECIT Marketing AS | Tech | Norway | 50.1 % | 50.1 % |
| SecBase AS** | Group | Norway | 34.0 % | 34.0 % |
| ECIT Holding DOO | Group | Serbia | 100.0 % | 100.0 % |
| ECIT Trondheim AS | F&A | Norway | 67.6 % | 67.6 % |
| ECIT Software Holding AS | Group | Norway | 50.1 % | 50.1 % |
| Tandem AS | F&A | Norway | 100.0 % | 100.0 % |
| TICE Invest AB* | Group | Sweden | 9.8 % | 9.8 % |
| ECIT Traconet AS* | F&A | Norway | 48.4 % | 48.4 % |
| Travis AS | Tech | Norway | 98.2 % | 98.2 % |
| ECIT Labs AB | Tech | Sweden | 100.0 % | 100.0 % |
| ECIT Valdres AS | F&A | Norway | 74.0 % | 74.0 % |
| ECIT Veny AS | Tech | Norway | 100.0 % | 100.0 % |
| ECIT Veiby Akonto AS | F&A | Norway | 74.0 % | 74.0 % |
| ECIT WLCOM AS | IT | Norway | 70.0 % | 70.0 % |
| XACCT Accounting AS | F&A | Norway | 82.0 % | 82.0 % |
| Xtracon A/S | IT | Denmark | 70.0 % | 70.0 % |
*) The companies are consolidated as a result of the Group being considered to have control over the companies through ownership in other companies.
**) The companies are consolidated as a result of the Group being considered to have control over the companies through a shareholder agreement and an option agreement.
***) By virtue of the governance structure, the Group has the power to govern the financial and operating policies of the company. Consequently, the company is consolidated as a subsidiary.
Independent Auditors Report
Opinion
We have audited the financial statements of ECIT AS (the Company) which comprise the financial statements of the Company and the consolidated financial statements of the Company and its subsidiaries (the Group). The financial statements of the Company comprise the balance sheet as at 31 December 2022 and the income statement and statement of cash flows for the year then ended and notes to the financial statements, including a summary of significant accounting policies. The consolidated financial statements of the Group comprise the balance sheet as at 31 December 2022, the income statement, statement of comprehensive income, statement of cash flows and statement of changes in equity for the year then ended and notes to the financial statements, including a summary of significant accounting policies.
In our opinion
- the financial statements comply with applicable legal requirements,
- the financial statements give a true and fair view of the financial position of the Company as at 31 December 2022 and its financial performance and cash flows for the year then ended in accordance with the Norwegian Accounting Act and accounting standards and practices generally accepted in Norway,,
- the consolidated financial statements give a true and fair view of the financial position of the Group as at 31 December 2022 and its financial performance and cash flows for the year then ended in accordance with
International Financial Reporting Standards as adopted by the EU.
Basis for our opinion
We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report. We are independent of the Company and the Group in accordance with the requirements of the relevant laws and regulations in Norway and the International Ethics Standards Board for Accountants' International Code of Ethics for Professional Accountants (including International Independence Standards) (IESBA Code), and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Other information
Other information consists of the information included in the annual report other than the financial statements and our auditor's report thereon. Management (the board of directors and the general manager) is responsible for the other information. Our opinion on the financial statements does not cover the other information, and we do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information, and, in doing so,
Statsautoriserte revisorer Ernst & Young AS
Thormøhlens gate 53 D, NO-5006 Bergen Postboks 6163, NO-5892 Bergen
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consider whether the board of directors' report contains the information required by applicable legal requirements and whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information or that the information required by applicable legal requirements is not included, we are required to report that fact.
We have nothing to report in this regard, and in our opinion, the board of directors' report is consistent with the financial statements and contain the information required by applicable legal requirements.
Responsibilities of management for the financial statements
Management is responsible for the preparation and fair presentation of the financial statements of the Company in accordance with the Norwegian Accounting Act and accounting standards and practices generally accepted in Norway and of the consolidated financial statements of the Group in accordance with International Financial Reporting Standards as adopted by the EU, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, management is responsible for assessing the Company's and the Group's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or the Group, or to cease operations, or has no realistic alternative but to do so.
Auditor's responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional scepticism throughout the audit. We also:
• Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
Postboks 6163, NO-5892 Bergen • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose
Statsautoriserte revisorer Ernst & Young AS
Thormøhlens gate 53 D, NO-5006 Bergen
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
of expressing an opinion on the effectiveness of the Company's and the Group's internal control.
- Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company's and the Group's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Company and the Group to cease to continue as a going concern.
- Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
- Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.
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We communicate with the board of directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
Bergen, 13 March 2023 ERNST & YOUNG AS
Kjetil Håvardstun State Authorised Public Accountant (Norway)
Parent Company Financial statements
90 | ECIT Annual Report 2022 – Parent Company Financial Statements
Income statement
Cash Flow Statement
| (NOKm) | Note | ||
|---|---|---|---|
| Revenue | 2.1 | 33 | 16 |
| Personnel expenses | 2.2 | -13 | -11 |
| Other operating costs | 2.3 | -42 | -33 |
| EBITDA | -22 | -28 | |
| Amortizations and depreciations | 0 | 0 | |
| EBIT | -23 | -28 | |
| Financial items, net | 2.4 | 144 | 98 |
| Profit before tax | 121 | 70 | |
| Tax on profit for the period | 2.5 | 0 | 7 |
| Profit for the year | 121 | 76 | |
| Proposed distribution of result | |||
| Proposed dividend per share is NOK 0.04 | 18 | 18 | |
| Transferred to equity reserves | 103 | 59 | |
| Total distribution | 121 | 76 | |
| 2022 | 2021 | (NOKm) | Note | 2022 | 2021 |
|---|---|---|---|---|---|
| Profit before tax | 121 | 70 | |||
| Amoritizations & depreciations | 0 | 0 | |||
| Financial items | -144 | -98 | |||
| Operating profit before amortizations, | |||||
| depreciations and financial items (EBITDA) | -22 | -28 | |||
| Change in net working capital (NWC) | 6 | 9 | |||
| Cash flow from operating activities (A) | -17 | -19 | |||
| Change in other financial assets | 3.3 | -40 | 21 | ||
| Cash flow from investing activities (B) | -40 | 21 | |||
| Cash flow from operating and investing activities (A+B) |
-57 | 2 | |||
| Loans and credit facilities | 14 | -290 | |||
| Financial items | 30 | 0 | |||
| Capital increase | 3.7 | 0 | 382 | ||
| Sale and purchase of treasury shares | -12 | 3 | |||
| Dividends distributed | -18 | -65 | |||
| Cash flow from financing activities | 15 | 29 | |||
| Cash flow for the period | -42 | 31 | |||
| Cash and cash equivalents 1 January | 119 | 88 | |||
| Cash flow for the period | -42 | 31 | |||
| Currency translation adjustments | 0 | 0 | |||
| Cash and cash equivalents end of period | 77 | 119 |
Balance Sheet
| (NOKm) | Note | 31 DEC 2022 |
31 DEC 2021 |
(NOKm) | Note | 31 DEC 2022 |
31 DEC 2021 |
|---|---|---|---|---|---|---|---|
| Deferred tax assets | 2.5 | 7 | 7 | Share capital | 452 | 445 | |
| Intangible assets | 7 | 7 | Treasury shares | -3 | -1 | ||
| Land, buildings and equipment | 3.1 | 1 | 1 | Reserves and retained earnings | 1,031 | 897 | |
| Tangible assets | 1 | 1 | Total equity | 3.7 | 1,480 | 1,341 | |
| Investment in subsidiaries | 3.2 | 1.368 | 629 | Provisions | 3.8 | 16 | 0 |
| Trade payables | 2 | 1 | |||||
| Loan to subsidiaries | 16 | 576 | Trade payables, subsidiaries | 3 | 2 | ||
| Other financial assets | 3.3 | 27 | 13 | Dividend | 18 | 18 | |
| Other receivables (interest bearing) | 3.4 | 23 | 22 | Loan from subsidiaries | 190 | 116 | |
| Other receivables | 3.4 | 0 | 0 | Other current liabilities | 3.9,3.11 | 7 | 13 |
| Total non-current assets | 1.434 | 1,240 | Total current liabilities | 236 | 150 | ||
| Trade receivables | 0 | 0 | |||||
| Trade receivables, subsidiaries | 4 | 4 | Equity and liabilities | 1,716 | 1,491 | ||
| Other receivables (interest bearing) | 6 | 12 | |||||
| Other receivables | 5 | 10 | |||||
| Other receivables, subsidiaries | 182 | 97 | |||||
| Cash and cash equivalents | 3.5 | 77 | 119 | ||||
| Total current assets | 275 | 243 | |||||
| Total assets | 1,716 | 1,491 |
Statement of Changes in Equity 2021 and 2022
| Not reg. | ||||||
|---|---|---|---|---|---|---|
| Capital | Share | Treasury | Retained | |||
| (NOKm) | Share Capital | increase | premium | shares | earnings | Total |
| Equity at 1 January 2022 | 445 | 12 | 722 | -1 | 162 | 1,341 |
| Profit for the year | 0 | 0 | 0 | 0 | 121 | 121 |
| Transactions with shareholders: | ||||||
| Capital increase* | 7 | -6 | 46 | 0 | 0 | 47 |
| Dividends distributed | 0 | 0 | 0 | 0 | -18 | -18 |
| Sale and purchase of treasury shares | 0 | 0 | 0 | -2 | -9 | -11 |
| Other adjustments | 0 | 0 | 0 | 0 | 0 | 0 |
| Total transactions with shareholders | 7 | -6 | 46 | -2 | -27 | 18 |
| Equity end of period 2022 | 452 | 6 | 768 | -3 | 256 | 1,480 |
| Not reg. | ||||||
|---|---|---|---|---|---|---|
| (NOKm) | Share Capital | Capital increase |
Share premium |
Treasury shares |
Retained earnings |
Total |
| Equity at 1 January 2021 | 388 | 4 | 371 | -8 | 72 | 827 |
| Profit for the year | 0 | 0 | 0 | 0 | 76 | 76 |
| Transactions with shareholders: | ||||||
| Capital increase* | 57 | 8 | 378 | 0 | 0 | 443 |
| Dividends distributed | 0 | 0 | 0 | 0 | -18 | -18 |
| Sale and purchase of treasury shares | 0 | 0 | 0 | 7 | 32 | 39 |
| IPO expenses | 0 | 0 | -26 | 0 | 0 | -26 |
| Other adjustments | 0 | 0 | 0 | 0 | 0 | 0 |
| Total transactions with shareholders | 57 | 8 | 352 | 7 | 14 | 438 |
| Equity end of period 2021 | 445 | 12 | 722 | -1 | 162 | 1,341 |
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1. Basis for preparation
This section provides an overview of the financial accounting policies and key accounting estimates applied in the preparation of the financial statements.
ECIT AS' parent company financial statements are disclosed as separate financial statements as required by the Norwegian Financial Statements Act.
The Annual Report of ECIT AS for 2022 has been prepared in accordance with the provisions of the Norwegian Financial Statements Act.
The company's Financial Statements for 2022 are presented in NOK million and rounded to the nearest million.
The annual report is prepared according to the same accounting policies as last year.
1.1 Translation policies
Transactions in foreign currency are translated at the exchange rate on the transaction date. Monetary items in foreign currency are translated to NOK using the exchange rate on the balance sheet date. Exchange rate movements are recognised in the income statement on an ongoing basis during the accounting period within other financial items.
1.2 Estimates and assumptions
In the preparation of the annual financial statements, the management has applied estimates and assumptions that have affected assets, liabilities, income, and costs, as well as unsecured assets and liabilities on the balance sheet date.
Estimates and assumptions are based on historical experience and other factors that management considers reliable but which, by their very nature, are associated with uncertainty and unpredictability. These assumptions may prove incomplete or incorrect, and unexpected events or circumstances may arise. The estimates and assumptions deemed most significant to the preparation of the consolidated financial statements are addressed below:
- Deferred tax, note 2.5
- Investments in subsidiaries, note 3.2
- Earn out obligations, note 3.8
An estimate may change as a consequence of future events. Changes in accounting estimates are recognised in the period in which the changes occur. If the changes also apply to future periods, the effect will be distributed in the current and future periods. Reference is made to the separate note for further details of estimates and assumptions included in this year's consolidated financial statements.
1.3 Cash flow statement
The cash flow statement is prepared according to the indirect method
2. Profit for the year
This section includes disclosures on components of profit for the year.
2.1 Revenue
Revenue from the sale of services etc., is recognised in the income statement provided that delivery and transfer of risk have been made to the purchaser by year-end and provided that the revenue can be measured reliably, and it is probable that the economic benefits relating to the sale will flow to the Company.
Revenue is measured at the consideration received and is recognised exclusive of VAT and net discounts relating to sales.
| Revenue (NOKm) | 2022 | 2021 |
|---|---|---|
| Management fee | 33 | 16 |
| Total | 33 | 16 |
2.2 Personnel expenses
Personnel costs include salaries, bonuses, pensions, social security costs, vacation pay, and other benefits.
| (NOKm) | 2022 | 2021 |
|---|---|---|
| Wages and salaries | 11 | 8 |
| Pension costs | 0 | 0 |
| Other social security costs | 2 | 2 |
| Other personnel expenses | 1 | 1 |
| Total | 13 | 11 |
| Average full time employees | 4 | 4 |
| Excecutive management (NOKm) | 2022 | 2021 |
| Base salary | 4.7 | 3.8 |
2.3 Other operating costs
Other operating costs include expenses related to sales, marketing as well as administration.
| (NOKm) | 2022 | 2021 |
|---|---|---|
| Statutory audit Other assurance services Total ex. VAT |
2 2 4 |
1 1 2 |
The company is obliged to have an occupational pension scheme in accordance with the mandatory Act of occupational pension scheme act. The company has established a pension scheme that satisfies the requirements in this Act.
Cash bonus 0.0 0.7 Pensions and Benefits 0.1 0.1 Other salary costs 0.1 0.1 Total 4.9 4.6
2.4 Financial income and costs
Financial income and costs comprise interests, realized and unrealized gains from exchange rates as well as other financial income and expenses.
| (NOKm) | 2022 | 2021 |
|---|---|---|
| Financial income: Interest income Interest income, group Dividend. Group Total |
2 29 115 146 |
3 10 97 109 |
| Financial expenses: Interest expense Exchange rate expense IPO cost Other financial expenses Total |
-1 -1 0 0 -2 |
-1 -2 -6 -3 -11 |
Income from investments in subsidiaries
Income from investments in subsidiaries consists of dividends from investments in subsidiaries.
Dividends from investments in subsidiaries are measured at cost and are recognized as income in the parent company's income statement in the financial year in which the dividend is declared.
Dividends from investment in subsidiaries are recognised as income in the Company's income statement under financial income.
2.5 Tax for the year
Current tax payable and receivable is recognised in the balance sheet as tax calculated on the taxable income for the year adjusted for tax on taxable income for previous years and for prepaid tax.
The effective tax rate of 0% is due to loss carried forward from previous years. Last year the company had tax income from changes in deferred tax due to negative taxable income.
| (NOKm) | 2022 | 2021 | |
|---|---|---|---|
| Profit before tax | 121 | 76 | |
| Permanent differences | -107 | -98 | liabilities simultaneously. |
| Change in temporary differences | 0 | -2 | |
| Loss carry forwards | -14 | 0 | |
| Taxable income | 0 | -23 | |
| Effective tax % | 0% | n/a | Temporary differences |
| Tax on profit of the year | 0 | 0 | |
| Change in deferred tax | 0 | 7 | |
| Tax adjustment, prior years | 0 | 0 | |
| Total tax on profit for the year | 0 | 7 | |
Deferred tax
Deferred tax is recognised based on temporary differences between the carrying amount and the tax value of assets and liabilities. No recognition is made of deferred tax on temporary differences relating to amortization or depreciation of goodwill, properties, and other items if disallowed for tax purposes, except at the acquisition of enterprises, if such temporary differences arose on the date of acquisition without affecting the results or the taxable income. In cases where it is possible to calculate the tax value according to different taxation rules, deferred tax is measured on the basis of the planned use of the asset or the settlement of the liability.
Deferred tax assets, including the tax base of tax loss carry forwards, are recognised as other non-current assets at the expected value of their utilization, either by elimination in tax on future earnings or by offsetting deferred tax liabilities within the same legal tax entity and jurisdiction.
Deferred tax assets and tax liabilities are offset if the enterprise has a legally enforceable right to set off current tax liabilities and tax assets or intends either to settle current tax liabilities and tax assets on a net basis or to realise the assets and
| (NOKm) | 2022 | 2021 |
|---|---|---|
| Temporary differences | ||
| Land, buildings & equipment | 0 | 0 |
| Receivables | 0 | 0 |
| Loss carried forward | -57 | -71 |
| Taxable income | -57 | -71 |
| Deferred tax assets | 7 | 7 |
| Deferred tax | 0 | 0 |
| Loss carried forward | ||
| 2019 | 31 | 31 |
| 2020 | 17 | 17 |
| 2021 | 23 | 23 |
| Changes for 2022 | -14 | 0 |
| Total loss carried forward | 57 | 71 |
3. Assets and liabilities
This section provides information regarding the companies assets and liabilities.
3.1 Tangible assets
Tangible assets are measured at acquisition cost, less accumulated depreciation and write-downs. When assets are sold or disposed of, the book value is deducted, and any loss or gain is recognised in the income statement.
The cost comprises the acquisition price and other directly attributable expenses of preparing the asset for its intended use. The present value of estimated expenses for dismantling and disposing of the asset as well as restoration expenses, are added to the cost if such expenses are recognised as a provision. Material borrowing costs directly attributable to the construction of the individual asset are also added to cost.
If an individual component of an asset has different useful lives, each component will be depreciated separately.
Depreciation is carried out on a straight-line basis over the expected useful lives of the assets, as follows:
- Buildings and other property 3-50 years
- Other plant and operating equipment 3-15 years
The basis of depreciation considers the residual value of assets and is reduced by any impairment losses. The residual value is calculated on the date of acquisition and reassessed once a year. Depreciation will be halted if the residual value exceeds the carrying amount of the asset.
| (NOKm) | 2022 | 2021 | |
|---|---|---|---|
| Land, buildings & equipment | 1 | 1 | |
| Total | 1 | 1 |
3.2 Investments in subsidiaries
Investments in subsidiaries are measured at cost. If the cost exceeds the recoverable amount, this is written down to a lower value. Any impairment is recognized in the Company's income statement under financial items, net.
Dividends from investments in subsidiaries are recognized in the income statement as financial income. Dividends distributed from the subsidiary to the parent company are generally recognized in the income statement of the parent company.
Name of entity ECIT AS, parent Norway n/a Subsidiaries: ECIT Midco Holding AS Norway 100.0% 100.0% 294.0 1.663 TICE Invest AB* Sweden 9.8% 52.1% 0.0 0.5 SecBase AS** Norway 34.0% 34.0% 0.0 0.5 Moss Partners AS* Norway 0.0% 100.0% 0.0 0.0 Pilen Holding AS Norway 0.0% 100.0% 2.1 3.3 Votes in % Result Country 2022 Equity Ownership in %
Notes:
TICE Invest AB & Moss Partners AS are subsidiaries as a result of the Group holding the majority of the voting rights despite the minor ownership in the company. Moss Partners AS is closed in 2023. SecBase AS is a subsidiary as a result of the group being considered to have control over the company through a shareholder agreement and an option agreement.
3.3 Other Investments
| (NOKm) | 2022 | Owner ship in % |
||
|---|---|---|---|---|
| Siffer System AS Adline Professional AS Visual Information System A/S Wint Group AB Ztl Payment Solution AS Luca Labs AS Total |
3 1 3 8 10 1 27 |
12.6% 10.0% 9.4% 6.4% 4.2% 3.1% |
||
| (NOKm) | 2021 | Owner ship in % |
||
| Wint Group AB Visual Information System A/S Siffer System AS Luca Labs AS Total |
8 3 1 1 13 |
6.4% 6.9% 6.1% 3.1% |
||
| Country | Owner ship in % |
Votes in % | Result 2022 |
Equity |
3.4 Other non-current assets
Other non-current assets consist of receivables other than trade receivables. These other receivables generally arise from transactions outside the usual operating activities. The noncurrent part of other receivables mainly consists of interestbearing receivables, which are measured at cost less repayments and impairment (amortized cost).
3.5 Cash and cash equivalents
Cash and cash equivalents comprise cash at the bank, inclusive of restricted holdings.
A minor part of cash and cash equivalents consists of employees' tax deduction accounts. 31 December 2022 cash in employees' tax deduction accounts equals NOK 0 million (2021: NOK 0,5 million).
The company has a cash pool arrangement with DnB Bank ASA. 31 December 2022; the cash pool system showed a net balance of NOK 72 million. The company's net borrowings in the cash pool system were NOK 98 million the 31 December 2022. The participants in the Cash Pool are jointly liable to the bank for the fulfilment of any obligations that might arise under the Group account agreement.
In the financial statements, the net Group account is presented as bank deposits.
3.6 Current tax receivables and liabilities
Current tax liabilities and receivables are recognised in the balance sheet as the expected taxable income for the year adjusted for tax on taxable incomes for prior years and tax paid on account
3.7 Share capital, shares and shareholders
Composition and movement of the company's share capital, treasury share reserve, shares and shareholders are stated in note 5.1 of the consolidated financial statements.
3.8 Provisions
Provisions are recognised when the company has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation and the amount can be reliably estimated. Provisions are not recognised for future operating losses.
Provisions are measured at the present value of Management's best estimate of the expenditure required to settle the present obligation at the end of the reporting period. Provisions are in all material aspects short term and no interest expense due to the passage of time is recognized as an interest expense.
| (NOKm) | 2022 | 2021 |
|---|---|---|
| Carrying amount 1 January | 0 | 1 |
| New Earn out provisions | 16 | 0 |
| Earn out assestment | 0 | 0 |
| Amounts used during the year | 0 | -1 |
| Earn out provisions | 16 | 0 |
3.9 Financial liabilities
Financial liabilities are recognised at the date of borrowing at the net proceeds received less transaction costs paid. On subsequent recognition, financial liabilities are measured at
amortized cost, corresponding to the capitalised value, using the effective interest rate.
Other liabilities are measured at amortized cost, substantially corresponding to nominal value.
3.10 Related party transactions
For transactions with related parties, please refer to note 7.3 in the consolidated financial statements. The company has no related parties with control of the company.
The company had the following material transactions with related parties during the financial year:
Management fee invoiced subsidiaries NOK 33 million (2021: NOK 16 million)
Accounting services, IT services and other services received from subsidiaries NOK 26 million (2021: NOK 22 million)
All transactions with related parties during the period were carried out at market terms. All transactions with other Group companies carried out in the year are reflected in the income statement and notes.
3.11 Securities
The company has provided bank guarantees to authorities related to employees' tax deductions and rental agreements.
31 December 2022 all liabilities related to bank guarantees amounted NOK 52 million (2021: NOK 52 million). The company also provides a surety guarantee to the bank for the entire credit facility in the subsidiary, ECIT Midco Holding AS, refer to note 7.4 in the consolidated financial statements.
Underskriftssider.pdf
Name Date
Pedro Fasting 2023-03-13
Timestamp
2023-03-13T18:07:05.440+01:00
Name Date
Cato Holmsen 2023-03-13
Timestamp
2023-03-13T20:13:06.697+01:00
Name Date
peter lauring 2023-03-13
Timestamp
2023-03-13T20:31:53.485+01:00
Name Date
Espen Karlsen 2023-03-13
Timestamp
2023-03-13T18:26:24.558+01:00
This document contains electronic signatures using EU-compliant PAdES - PDF Advanced Electronic Signatures (Regulation (EU) No 910/2014 (eIDAS))
Name Date
Thomas Plenborg 2023-03-13
Timestamp
2023-03-13T18:08:30.381+01:00
Name Date
Klaus Jensen 2023-03-13
Timestamp
2023-03-13T18:30:25.419+01:00
Name Date
Linda Forberg 2023-03-13
Timestamp
2023-03-13T19:34:04.943+01:00
This document contains electronic signatures using EU-compliant PAdES - PDF Advanced Electronic Signatures (Regulation (EU) No 910/2014 (eIDAS))