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Vow ASA — Annual Report 2014
Apr 21, 2015
3785_rns_2015-04-21_d3220a41-84fb-4a8d-ba52-2069c9d59a4f.pdf
Annual Report
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Annual Report 2014 Scanship Holding ASA
About the company 4 CEO's letter 5 Corporate Governance Policy 6 Corporate Social Responsibility Guidelines 10 Board of Directors Report 13 Consolidated Financial Statement 2014 16 Financial Statement 2014 – Parent Company 49 Directors´Responsibility Statement 2014 61 Auditors report 62 Contact details 64 Scanship Holding ASA with its subsidiary Scanship AS is listed on the Oslo Axess.
Scanship is supplying systems for environmental compliance and sustainable shipboard operations. By combining innovation with shipowners operational experience, the company has obtained a market leading position within the cruise industry.
Scanship is strategically located around ship-owners and yards facilitating a group of 51 employees, headquartered in Norway with branches in US, Canada and Poland. The business unit in Tønsberg conducts project sales and execution involving engineering, procurement and project managment. Group management and finance is located at Lysaker. The subsidiaries Scanship Americas and Scanship Canada provides ship-owners with spares, consumables and services in the aftermarket. Scanship Poland is conducting its business by surveying outsourced production in Eastern Europe. A commercial team is located in Italy and Sweden, and a team of service technicians provides technical supervision and service worldwide.
Scanship technology portfolio includes systems for wastewater purification, water logistics, foodwaste processing, dewatering, drying, incineration and waste recycling. The systems comes with advanced PLC and software for monitoring and control to ensure reliable and compliant operations.
The company deliver its technology for newbuild projects where shipyards are installing or for retrofit projects where Scanship delivers turnkey projects for ships in operations. On retrofit projects, Scanship is subcontracting an installation company as part of the scope. Systems can be delivered fully integrated as a Scanship Total Clean Ship solution or standalone interfaced with systems supplied by others.
Scanship has over the years successfully supplied 50 newbuilds and 30 turnkey retrofits for the major ship owners in the cruise industry. The company has supplied waste management technology to ship yards for multiple ship classes belonging to the major operators; Holland America Line's Vista, Carnival Cruise Line's Destiny, Costa's Concordia, Norwegian Cruise Line's Jewel, RCCL's Freedom, MSC's Musica and Fantasia classes.
Between 2002 and 2005, Scanship installed advanced wastewater purification systems on eleven Norwegian Cruise line vessels to meet regulations enforced in Alaska, adopted as an industry standard at the time. Subsequently, in 2010 Scanship began retrofits for nine vessels for Royal Caribbean Cruise Line to meet the new standard MEPC 227(64) for Baltic Sea. This standard is now replacing the previous Alaskan as a new standard for the industry.
The Scanship system is the first in the industry to be compliant with the new IMO Marpol MEPC 227(67) regulations for larger vessels. NCL's Norwegian Breakaway, Norwegian Getaway and RCCL's Quantum of the Seas are today producing treated effluent in compliance with this new industry standard.
Scanship's five-year newbuild contract portfolio includes supplies to NCL's Breakaway class, RCCL' Quantum and Oasis classes, the TUI Blue Motion series, Viking Ocean Cruises, Carnival Cruise Lines Vista, the Genting World series for Star Cruises, Silversea and MSC's Vista class; in total more than 20 new builds to be launched the next years.
Scanship's growth strategy include to maintain a large market share in a growing cruise newbuild market, to obtain a substantial share of a future retrofit market and to increase its offering by developing new technologies to recover energy, reuse water and to meet future environmental standards for emissions to air and discharge to sea. The company is also currently exploring revenue opportunities in other niches of the maritime space.
With the strike of the opening bell at Oslo Stock Exchange on April 11 2014, we marked a new chapter in Scanship's history. For later, we will remember this sound as a sign of change and a company in transition. With a great team effort, a private limited entity became a public listed company.
New investors are aboard and with this, new capital was raised to fuel growth and to leverage debt. Tools and methods have been implemented to comply with our new operating "format". As a company and as a team we are moving forward stronger and in a more professional way than ever before.
When we closed our books for the year, it was with an all-time high market share within supplies to cruise newbuilds. Two of every three vessels being built the next years will be equipped with Scanship technology in a forward industry orderbook of more than 30 vessels. Even though we did not meet our revenue targets, order intake nearly doubled from previous year, ending the period with an order backlog of NOK 185 million.
Moreover, we are increasing our supplies of Scanship Total Clean Ship systems including our Waste Management solutions. All the biggest players having placed orders the last three to four years have selected Scanship – Carnival, Norwegian Cruise Line, Royal Caribbean Cruise Line, MSC, Star Cruises, TUI and Viking Ocean – we have become a preferred partner whenever new ships are being planned and built.
We have "compliantly" launched Scanship AWP on the biggest environmental sustainable ships during the year. Norwegian Getaway, Quantum of the Sea and Mein Schiff III have entered service with the most advanced wastewater system in our industry, meeting the highest environmental standard to date. This, a "proof of performance" leading to our new IMO Marpol certificate according to MEPC 227(64) Special Area with Nutrient Removal. We are today the only supplier equipped with this "recognition" in our industry space.
Our Polish entity is up and running, ensuring high quality and cost efficiency in production. Procurement secures our delivery schedules. Our branches in US and Canada is building our aftersales volumes, and the commercial team are providing offers to meet a growing demand for our systems. Engineering and project development has never been as good, a strong statement received back from Fincantieri, Meyer Werft and STX France. The project team is strengthened to manage an increased project portfolio.
Scanship is well positioned in a continuously growing cruise market. The ships are being filled and occupancy rates are exceeding 100%. All the macros are in place; increased cruise passenger demand, strong development in the Chinese market, low fuel prices, improved operating profits at the liners and banks willing to finance. The global market for cruise passengers passed 22.1 million in 2014, and forward expectations are driving in an upward direction. Ships will be built and the fleets will be maintained to accommodate.
With more stringent environmental legislations entering into force and sustainable policies being implemented by all liners, there will be an increased demand for Scanship technology. A demand that will apply for both existing ships as well as for the future newbuilds in this industry.
Scanship will continue to supply systems and service to ensure shipowners compliance with environmental standard, being committed to launch even better and more efficient systems in the years to come. And to always be responding to our customers' needs whether it is from the operators aboard or if it is from the builders ashore.
I would like to take this opportunity to thank our customers for the interest you have shown in our systems and services, our owners for the confidence you have in our future development and the entire Scanship team for your dedication.
Corporate Governance in Scanship Holding ASA
Scanship Holding ASA ("Scanship" or the "Company") is a Norwegian public limited company. The company is listed on Oslo Axess and is subject to Norwegian corporate, securities and stock exchange law. The Company seeks to comply with the applicable legal framework, and endorses the Norwegian Code of Practice for Corporate Governance (Norwegian: "Norsk anbefaling for eierstyring og selskapsledelse"), issued by the Norwegian Corporate Governance Board, most recently revised on 30 October 2014, (the "Code").
This Corporate Governance Policy for the Company is reviewed and revised by the board of directors of the Company (the "Board") on 26 March 2015 and is based on the Code.
The Board shall ensure that the Company at all times has sound corporate governance. The Company emphasizes independence and integrity in all matters between the Company and members of the Board, management and shareholders. The Company is required to report annually on the principles and practices related to corporate governance. The report will be published as a part of the annual report and will also be available at the Company's website. The report is built on a «comply or explain» principle, pursuant to which deviations from the Code will be explained.
Main objectives for corporate governance in Scanship
This Corporate Governance Policy is based on the Code, and shall establish a basis for good corporate governance, profitability and longterm value creation for the shareholders of the Company. The manner in which the Company is managed is vital to the development of the Company's value over time.
Through good governance of its business, the Company intends to create profitability and increased shareholder value. This Corporate Governance Policy contains measures that are, and will be, implemented to ensure effective management and control over the Company's activities. The primary objective is to have systems for communication, monitoring and allocation of responsibility, as well as appropriate incentives, which contribute to increasing the Company's financial results, longterm success and returns to shareholders on their investments in the Company. The Company aims to have good control and governance procedures to ensure equal treatment of all shareholders, thereby providing a foundation for trust.
The development of, and improvements in, this Corporate Governance Policy is an on-going and important process that the Board will focus on.
The Business
Scanship is a maritime industry leader in advanced technologies for processing and purifying waste water, food waste, solid waste and bio sludge. Scanship is a supplier to most major cruise liners, and the products are increasingly being requested from the merchant fleet and off-shore industry. Modern cruise ships generate substantial amount of wet and dry waste which should be properly treated. Scanship's technology processes this into recyclables, clean flue gas and treated waste water which meets the highest international effluent discharge standards. Scanship has main office at Lysaker (Norway) as well as offices in Tønsberg (Norway), Gdynia (Poland), Miami (USA) and Victoria (Canada).
Equity and dividend
The Board and the management of Scanship shall at all times aim at keeping the Company's equity capital suitable for the Company's objectives, strategy and risk profile. The Board shall immediately take adequate steps should it be apparent at any time that the Company's equity or liquidity is less than adequate.
The Board shall establish a clear and predictable dividend policy as the basis for the proposals on dividend payments that it makes to the General Meeting. The dividend policy approved by the Board states that the Company's goal is to provide shareholders with a high return over time through a combination of increasing value of the Company's shares and payment of dividends. The Board will not propose any payment of dividend if the Company is not in a sufficient financial position. The background for any proposal to authorise the Board to resolve distribution of dividends should be explained.
Authorisations granted to the Board to increase the Company's share capital shall be restricted to defined purposes. If the General Meeting is to consider authorisations to the Board for the issue of shares for different purposes, the General Meeting shall consider each authorisation separately. Authorisations granted to the Board shall be limited in time to no longer than until the next Annual General Meeting. Authorisations granted to the Board to purchase of the Company's own shares shall be valid until the next Annual General Meeting.
Equal treatments of shareholders and transactions with related parties
The Company has one share class. All shares carry equal rights. One share gives one vote at the General Meeting. The Board puts emphasis on disclosing and describing the topics on the agenda and the proposed resolutions in the notice of the General Meeting to allow the shareholders adequate time to prepare for the meeting.
Any decision to deviate from the pre-emption rights of existing shareholders to subscribe for shares in the event of an increase in share capital shall be justified. Where the Board resolves to carry out an increase in share capital and deviate from the pre-emption rights of existing shareholders on the basis of an authorisation granted to the Board, the justification shall be publicly disclosed in a stock exchange announcement issued in connection with the increase in share capital. If such transactions will find place, they will be carried out at market prices. In the event of not immaterial transactions between the Company and its shareholders, a shareholder's parent company, members of the Board, executive personnel or close associates of any such parties, the Board shall arrange for a valuation to be obtained from an independent third party. This will not apply if the transaction requires the approval of the General Meeting pursuant to the requirements of the Norwegian Public Limited Liability Companies Act (the "PLC Act"). Independent valuations shall also be arranged in respect of transactions between companies in the same group where any of the companies involved have minority shareholder. Members of the Board and executive personnel must notify the Board if they have any significant, direct or indirect, interest in a transaction carried out by the Company.
Any transactions with related parties shall be conducted on market terms. Transactions with related parties will be disclosed in note to the Financial Statements.
Freely Negotiable Shares
All shares in the Company carry equal rights and are freely negotiable. No restriction on negotiability is included in the Articles of Association.
General Meetings
The General Meeting is the Company's ultimate corporate body. The Board shall facilitate that the General Meeting shall be an effective forum for communication between the Board and the Shareholders. The Chairman of the Board, the Chief Executive Officer and the External Auditor shall be present at the Annual General Meeting.
The notice calling the Annual General Meeting and Extraordinary General Meetings and all supporting documentation shall be made available on the Company's website. (www.scanship.no). Notice and supporting documentation shall include the information necessary for shareholders to form a view of matters to be considered.
Each General Meeting appoints a chairperson for the meeting. If significant and unusual topics is on the agenda an independent chairperson will be appointed.
The General Meeting is open for all shareholders, and all shareholders not in attendance can give proxy to vote on his/her behalf. Forms of proxy are sent to the shareholders together with the notice of the meeting. The proceeding in the meeting follow the agenda outlined in the notice. Shareholders can raise a topic in the General Meeting, but must notify the Board of this in writing and in reasonable time before the notice of the General Meeting is dispatched. The General Meeting cannot decide for a higher dividend than the Board has proposed.
The Annual General Meeting is required to decide on the annual Financial Statement, the Board's report and the distribution of dividends. The Annual Meeting should also deal with the Board's declaration regarding compensation to executive personnel.
Nomination Committee
Pursuant to the Company's Article of Association, the Nomination Committee is responsible for the nomination of members to the Board, members of the Nomination Committee and for proposing remuneration to the Board members. The nomination committee shall justify its recommendations. The Annual General Meeting stipulates guidelines for the Nomination Committee in a code of conduct. The Nomination Committee consists of a chairman and one or two additional member(s) elected by the General Meeting. The General Meeting shall also determine the Nomination Committee's remuneration. The members of the Nomination Committee serve for a period of two years unless otherwise determined by the General Meeting. All members of the Nomination Committee shall be independent of Board and executive personnel. The Company shall provide information of the Nomination Committee and any deadlines for submitting proposals to the committee. The Nomination Committee shall have contact with shareholders, the Board and the Company's executive personnel as part of its work on proposing candidates for election to the Board.
Board of Directors
The composition of the Board shall ensure that the Board can attend to the common interests of all shareholders and meets Scanship's need for expertise, capacity and diversity. Attention shall be paid to ensuring that the Board can function effectively as a collegiate body.
The composition of the Board shall ensure that it can act independently of any special interests. The majority of the shareholder elected members of the Board shall be independent of the Company's executive personnel and material business connections. In addition, at least two of the members of the Board must be independent of the Company's major shareholder(s). For the purposes of this Corporate Governance Policy, a major shareholder shall mean a shareholder that controls 10% or more of the Company's shares or votes, and independence shall entail that there are no circumstances or relations that may be expected to be able to influence independent assessments of the person in question. The Board currently consists of four members of which three are independent.
The Board members are elected by the General Meeting for a term of two years unless otherwise determined by the General Meeting. The members of the Board are proposed by the Nomination Committee and elected by the General Meeting. The Chairman of the Board is appointed by the General Meeting.
The work of the Board
The Board's tasks include the overall management and supervision of the Company. The Board prepares an annual plan for its work, emphasising goals, strategies and execution.
The Board normally schedules at least five regular meetings each year, but typically holds additional meetings as circumstances dictate. Two of the scheduled board meetings deals with strategic Company issues and four of the scheduled meetings are dealing with quarterly financial statement. The Board operates according to applicable Norwegian law, and adopts guidelines for the CEO's work and duties to the Board.
The Board shall provide details in the annual report of any Board committees appointed .The Board has not appointed an Audit Committee as smaller companies are exempted from the Audit Committee requirements of the PLC Act, and the Company fulfils the requirements to be exempted.
Risk Management and Internal Control
The Board monitors the Company's risk exposure and the Company constantly strives to maintain and improve its internal control processes. The executive management will make an annual risk evaluation process to evaluate a number of strategic, operational and financial risk factors. The key risk factors and action plans are part of the annual Board presentation on risk management and internal control by the CEO and CFO. The Board shall carry out an annual review of the Company's most important areas of exposure to risk and its internal control arrangements
Remuneration of Board
The remuneration payable to the members of the Board is proposed by the Nomination Committee and determined by the shareholders at the Annual General Meeting. The remuneration to the Board should be designed to attract and retain an optimal Board structure in a competitive environment. The remuneration of the Board shall not be linked to the Company's performance. The Company shall not grant share options to members of the Board. Details of the remuneration are disclosed in the Notes to the Financial Statement.
Members of the Board and/or companies with whom the members are associated shall not take on specific assignments for the Company in addition to their appointments as members of the Board. If they, nonetheless, do take on such assignments this must be reported to the Board and the remuneration for such additional duties must be approved by the Board.
Any remuneration in addition to normal fees to the members of the Board shall be specifically identified in the annual report.
Remuneration of Executive Personnel
It is critical for Scanship to attract and retain engaged executives with highly experience and strong drive for results. A competitive compensation package is primary tool to attract and retain the Executive Personnel as Scanship needs to succeed. The Board shall establish guidelines for the remuneration of the executive personnel setting out the main principles applied in determining the salary and other remuneration of the executive personnel. These guidelines shall be communicated to the
Annual General Meeting.
Scanship has a base salary today, but will consider a compensation package also consisting of a limited amount of share options. Share options will be issued each year upon approval of an authorisation by the Annual General Meeting. The number of options granted will be linked to Company's and the individual's performance. As a general policy, share options are granted with a strike price equal to the market price at the time of grant, vest over a three year period starting on first anniversary of the grant and expire after five years after the grant. The Company may issue warrants that secure the rights of the option holders.
Information and Communications
The Board shall establish guidelines for the Company's reporting of financial and other information, based on openness and taking into account the requirement for equal treatment of all participants in the securities market. The Company's information and communication policy is designed to inform the stock market and all shareholders of the Company's activities and status in a timely and accurate manner. A financial calendar displaying the dates for the coming years' interim reports and General Meetings for shareholders is posted at http://www. scanship.no. The Company submits quarterly and annual financial reports to Oslo Axess. In addition, significant information will be distributed at www.newsweb.no and the Company's web site.
The Company places great emphasis on complying with applicable stock exchange rules by providing the same information to all investors. All press releases and news are published in English. The Company has been granted exemption from the Norwegian Tax Authority to publish its Annual Report in English only.
The Company shall ensure that the management becomes aware of important information without undue delay. Information which shall be published on Oslo Børs Newsweb shall with undue delay be communicated to the management who shall publish such information pursuant to the Oslo Børs Continuing Obligations.
Take-overs
The Board has established guiding principles for how it will act in the event of a take-over bid received: During the course of a take-over process, the Board and the management of both the party making offer and the target company are held responsible to ensure that the shareholders in the target company are treated equally, the target company's business activities are not disrupted unnecessarily and that shareholders are given sufficient information and time to form a view of the offer.
The Board shall not attempt to prevent or impede the take-over bid unless this has been decided by the General Meeting in accordance with applicable laws. The main underlying principles shall be that the Company's shares shall be kept freely transferable and that the Company shall not establish any mechanisms which can prevent or deter takeover offers unless this has been decided by the General Meeting in accordance with applicable law.
If an offer is made for the Company's shares, the Board shall issue a statement evaluating the offer and making a recommendation as to whether shareholders should or should not accept the offer. If the Board finds itself unable to give a recommendation to the shareholders on whether or not to accept the offer, it should explain the reasons for this. The Board's statement on a bid shall make it clear whether the views expressed are unanimous, and if this is not the case, it shall explain the reasons why specific members of the Board have excluded themselves from the statement.
The Board shall consider whether to arrange a valuation from an independent expert. If any member of the Board, or close associates of such member, or anyone who has recently held a position but has ceased to hold such a position as a member of the Board, is either the bidder or has a particular personal interest in the bid, the Board shall arrange an independent valuation. This shall also apply if the bidder is a major shareholder (as defined as shareholder that controls 10% or more of the Company's shares or votes). Any such valuation should either be enclosed with the Board's statement, or reproduced or referred to in the statement.
Auditor
The auditor shall annually submit the main features of the plan for the audit of the Company to the Board.
The Board has determined the procedures for the external auditor regular reporting to the Board. The Auditor attends at least one meeting each year with the Board which the Company's management is not represented. The Auditor will present to the Board any significant internal control weaknesses and improvement opportunities. Scanship has established guidelines for the right of the management to use the external auditor for services other than auditing. According to the procedure, all assignments shall be approved by the CEO and all significant assignments shall in addition be subject to approval by two board members in advance. The Board of Directors shall receive an annual statement from the external auditor of services other than auditing provided to Scanship. The Auditors fee is determined at the Annual General Meeting and disclosed in the Financial Statement.
OBJECTIVE
Scanship defines corporate responsibility as achieving commercial profitability in a way that is consistent with fundamental ethical values and with respect for individuals, the environment and society. The Scanship group shall respect human and labour rights, establish good environmental, health and safety (EHS) standards, facilitate good dialogue with stakeholders and generally operate in accordance with applicable regulatory frameworks and good business practice.
The Group's business depends on the trust of consumers, contractual parties, the authorities, shareholders, employees and society in general. In order to gain trust, the Group is dependent upon professionalism, expertise and high ethical standards in all aspects of the Company's work. These ethical and corporate social responsibility rules (the CSR Guidelines") set forth the basic principles for business practices and personal behaviour for Scanship, apply to all employees of the Group, as well as persons/entities holding a position of trust with the Company, and hired consultants acting on behalf of the Company. The Company has developed separate conduct principles that apply to the Company's suppliers.
These CSR Guidelines do not give customers, suppliers, competitors, shareholders or other persons or entities any legal rights beyond those that follow from applicable legal regulatory frameworks.
MAIN PRINCIPLES OF CORPORATE RESPONSIBILITY
Scanship has identified nine main corporate responsibility topics. The general principles underlying the Group's approach to these topics are described below. Priorities shall be based on an assessment of the needs of both the business and its stakeholders, and as an integral part of dayto-day operations.
STRONG CORPORATE CULTURE
Scanship shall strive to promote an open corporate culture that fosters interaction and is based on Scanship's values. In promoting Scanship's principles for good business operations, we shall respect local values and norms, and achieve success by bridging the divide between different cultures and interests. Scanship companies shall always comply with local regulatory requirements in the countries in which we operate.
Responsible operations require vigilance and the exercise of good judgement on the part of management and employees.
RESPECT FOR HUMAN AND LABOUR RIGHTS
Scanship companies shall promote corporate conduct that reflects respect and consideration for others. In its operations, the Company shall respect fundamental human rights as described in international human rights conventions such as the UN Convention on Human Rights and the labour rights conventions of the International Labour Organization (ILO). Scanship is committed to respecting fundamental human and labour rights, both in our own internal business and in our relations with business partners, suppliers, customers and others who are directly affected by the Company's activities. The Group shall work systematically with important issues as non-discrimination, the right to privacy, the right to negotiate, employment contracts, protection against harassment and management-employee collaboration.
ENVIRONMENT, HEALTH AND SAFETY (EHS)
Scanship shall strive to achieve a vision of zero harm to people, the environment and society, and work purposefully and systematically to reduce the environmental impact. The Group's products and services shall always be subject to strict requirements in terms of quality, product safety and impacts on personal health and the environment.
ANTI-CORRUPTION
Corruption is the abuse of a position of trust to acquire personal or business benefits. Scanship does not tolerate corruption, and expects that all managers and procurement officers promote a strong anticorruption culture in their department.
The companies shall make active efforts to prevent undesirable conduct, and ensure that their employees are capable of dealing with difficult situations.
RESPONSIBLE MARKETING PRACTICES
Scanship gains business and builds long-term customer relationships by providing the best technical solutions at competitive prices as well as by demonstrating honesty and integrity in all our interactions. Our marketing and advertising materials and other representations we make to current or prospective customers must be accurate, truthful and in compliance with applicable laws.
Scanship does not tolerate any agreement on price fixing, market sharing or other activities that limit free competition.
Scanship attaches great importance to product safety, good customer service and responsible marketing, and is committed to exercising due diligence with regard to consumer interests.
RESPONSIBLE SOURCING
Scanship shall actively promote good work and standards in the supply chains. This means setting ethical standards for its suppliers, assessing the risk of potential supplier violations of these standards, and engaging in dialogue with risk suppliers concerning necessary improvements. Efforts to influence suppliers should be based on an ambition of continuous improvement, and should focus on the suppliers and product categories where the risk is deemed greatest.
MONEY LAUNDERING
Money laundering is the process of creating the appearance that assets obtained from criminal activity, originate from a legitimate source. Scanship shall avoid any involvement with assets resulting from criminal activity.
WHISTLEBLOWING
Notification or whistleblowing is to pass information about a censurable or possible censurable incident to someone who is in a position to initiate corrective measures. A censurable incident is an illegal, dangerous or any other act in breach of company regulations. Anyone who becomes aware of an incident/situation that appears to contravene rules and guidelines that apply to the Company's operations is encouraged to report this.
Every employee has the right to report possible censurable incidents. Each employee is encouraged to report on possible censurable incidents but is not normally obliged to do so. However, every employee has an obligation to report on criminal activity and on incidents that could endanger life or health, or the assets of the Company.
Notification is beneficiary for each employee, for the Company and the society as a whole because it offers an opportunity to implement corrective action. A colleague willing to make a report is an important resource to the Company.
COMPLIANCE WITH LEGISLATION AND REGULATION
The Company is subject to Norwegian and international legislation and regulations.
Some Norwegian legislation also applies outside the country's boarder, e.g. the provisions of the penal code that refer to corruption.
The Company's employees, representatives and anyone who acts on behalf of the Company must comply with all legislation and regulations that apply, directly or indirectly, to the work performed for the Company.
EXTERNAL RESOURCES AND REFERANCES
International Labour Organization: www.ilo.org UN Convention on Human Rights: www.un.org
The operation
Scanship is a maritime industry leader in advanced technologies for processing and purifying waste water, food waste, solid waste and bio sludge. Scanship is a supplier to most major cruise liners. Modern cruise ships generate substantial amount of wet and dry waste which needs to be properly treated. Scanship's technology processes this into recyclables, clean flue gas and treated waste water which meets the highest international effluent discharge standards. Scanship Holding has its main office at Lysaker, Norway as well as offices in Tønsberg (Norway), Miami (USA), Victoria (Canada) and Gdynia (Poland). Scanship has warehouse facilities in Tønsberg and Miami. The office in Gdynia was established in 2nd Quarter 2014 to follow up local production.
Scanship's main activities within the System Sales segment consists of Sales, Engineering, Production planning and Procurement. Production and Installation Services are outsourced to subcontractors, mainly in Norway and Europe. The activities within the Aftersales segment are focused on Sales, Service and Logistics.
During 1st Quarter 2014 Scanship was awarded two contracts at Meyer Werft for delivery of advanced waste water purification systems for Star Cruises. The systems will be delivered to two cruise vessels ordered by Star Cruises with equipment delivery in 2015 and 2016 respectively. The vessels will carry 6 500 people.
During 2nd Quarter 2014, Scanship was awarded, by Fincantieri S.p.A, a contract for delivery of a Total Clean Ship Solution to Viking Sea, the third vessel in the series. Equipment deliveries took place in the 4th Quarter 2014 and 1st Quarter 2015. The contract included options for equipment deliveries in 2015, 2016 and 2017.
During 3rd Quarter 2014 Scanship was awarded contracts for delivery of two Advanced Wastewater Purification (AWP) systems to Meyer Turku (previously STX Finland) for the TUI Cruises newbuilds Mein Schiff 5 and Mein Schiff 6. The contracts are for vessel three and four in a series of up to six vessels, where Scanship has delivered AWP systems for two previous vessels. In addition, the customer has secured options for AWP systems for two more vessels. Equipment deliveries for the two signed vessels will take place in the 1st and 2nd quarter of 2015, for the first vessel, and in 2016 for the second vessel. If the options are called, the equipment will be delivered in 2017 and 2018.
During 4th Quarter2014 Scanship was awarded contracts at STX France for a new series of newbuilds for MSC Cruises. The contracts include the delivery of total clean ship systems for project E34 and F34, with options for G34 and H34. The E34 newbuild is scheduled to enter service in 2017, while F34 will be delivered in 2019. The optional vessels are planned for 2020 and 2022. The contracts represent the largest to date for Scanship AS, and are large Scanship Total Clean Ship systems with advanced wastewater purification (AWP), vacuum
foodwaste processing, garbage handling and bio residue treatment.
In addition, Scanship received the orders for AWP systems on the B34 at STX France, the second Oasis newbuild to enter service in 2018, and on the fourth Viking Ocean Cruises newbuild, to enter service in 2016. Both contracts were originally options in earlier contracts.
The market for retrofit-projects has in 2014 been virtually non-existent. Scanship has not secured any retrofit-contracts during 2014. Scanship expects that the cruise companies will start with retrofitting activity and expects to claim its share of the market. The timing is however uncertain, both due to legislative timing and customer priority.
Scanship has in 1st Quarter 2015 been awarded a contract for delivery of a Total Clean Ship System on a newbuild at Fincantieri. The vessel, which will service the ultra-luxury market with worldwide itinerary, will enter the market in 2016.
Going concern
At the end of 2014 the group had an order backlog of NOK 185.0m up from NOK 94,7m at the beginning of the year. The order backlog consists of remaining revenue on ongoing projects and projects signed but not started. The Newbuild market has increased from 5 cruise vessels delivered world-wide in 2014 to 7 to be delivered in 2015 to 12 vessels expected to be delivered in 2016. The Group has historically had a market share of above 60% for the AWP-equipment on newbuilds.
Based on the Group's financial status, order backlog and the market position for the Group for the years to come, we, pursuant to the Norwegian Accounting Act § 3-3a, confirm the assumption of going concern.
The financial statements
The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union (EU) and in accordance with the additional requirements following the Norwegian Accounting Act.
The Group's income in 2014 (2013) amounted to NOK 145.6m (NOK 170.0m). The reduction is mainly related to reduced turnover on Retrofit projects. EBITDA (operating profit before depreciation) before nonrecurring items for the Group constituted NOK 4.4m (NOK 21.0m). The Gross Margin has increased from 31% to 32% from 2013 to 2014. The reduction in EBITDA is mainly due to higher OPEX. The Projects segment had an income of NOK 106.8m (NOK 137.5m). The EBITDA for the segment was NOK 0.6m (NOK 13.6m). The reduction relates to reduced turnover and increased OPEX as described above. The Aftersales segment had an income of NOK 49.0m, (NOK 39.5m). The EBITDA for the segment was TNOK 4.7m (NOK 7.5m).
Operating profit for the Group in 2014 (2013) was NOK 0.9m (NOK 19.9m). The parent company had an operating result of NOK -3.6m (NOK -0.1m).
Profit after tax in the Group in 2014 (2013) amounted to NOK -9.3m (NOK 5.1m), and NOK -3.7m (NOK -2.6m) for the parent company.
The Group's net cash flow for 2014 (2013) was positive with NOK 2.6m (NOK -1.4m).
The parent company had in 2014 (2013) total assets of NOK 247.0m (NOK 223.0), mainly consisting of shares in subsidiary.
Financing
Scanship Holding ASA, had per 31.12.2014 a bank overdraft facility of NOK 29.1m with DNB. NOK 27.7m of the bank overdraft facility was used at year end.
The overdraft facility is subject to annual renewal.
Scanship Holding ASA's shares were listed on Oslo Access in 2nd Quarter 2014 after an IPO that raised approx. NOK 70.0m in equity for Scanship. The IPO secured adequate funds in order to meet the company's financing needs for further growth in the next 12 months.
Financial risk
The Group is exposed to financial risks in various areas. Among these being market, credit and liquidity risks.
Market risk
The Group has earnings mainly in NOK, EUR and USD. The operating- and administration expenses are mainly in NOK, EUR and USD. The Group is reducing the currency exposure by applying instruments for hedging foreign currency in connection with major projects. The Group has bank deposits, receivables and short-term liabilities in foreign currencies.
Credit risk
There is a risk that counterparties are not able to meet their financial obligations, the losses on receivables have historically been small. The Group's customers are large operators within the cruise industry. No agreements have been made on counter-claims or other financial instruments to minimize the credit risk.
Liquidity risk
Liquidity risk is the risk of being unable to pay financial liabilities as they fall due. The company's approach to managing liquidity risk is to ensure that it will always have sufficient liquidity to meet its financial liabilities as they fall due, under normal as well as extraordinary circumstances, without incurring unacceptable losses or risking damage to the company's reputation. If the level of income from the subsidiaries is not sufficient, loans from group companies can be used to enable the Company to pay financial liabilities as they fall due. Please also see the paragraph Financing regarding additional efforts to secure adequate funding.
The payment plan on Newbuild-projects require more working capital than Retrofit-projects. The Newbuild-activity has increased in 2014 while the Retrofit-activity has decreased. This has increased the need for working capital and thus increased the liquidity risk for the Group.
Scanship AS has liquidity risk on Newbuild projects as the company receives payments late in the projects. As per 31.12.2014 the group had accumulated net Contracts in Progress (CIP) of NOK 39.7m (30.1m). The net CIP corresponds to the amount of profit accrued, but not invoiced to the customer, and shows the group's net financing of ongoing projects.
In Retrofit projects, the company receives payments after meeting certain milestones. Although the milestones are setup to enable a positive net cash flow on the projects, a delay in the projects can strain liquidity.
Estimation risk
The preparation of the financial statements in accordance with IFRS requires management to make judgements, use estimates and assumptions that affect the reported amounts of assets and liabilities, income and expenses.
The uncertainty is highest to these factors:
- Total hours estimated
- Total estimated costs
- Technical complexity that may impact on the total costs
These estimates have a direct influence over the amount of revenue recognized.
Working environment and personnel
The level of short-term absence in the group is insignificant, and were less than 2% in 2014.
The Group has a strong focus on HSE (Health, Security and Environment) and is subject to strict HSE-routines from its customers. No injuries or accidents causing material damages or personal injuries were reported during the year.
Research and development activities
The Group is constantly working with activities to optimize the total waste management systems we offer in the market. The Group has in 2014 continued several product development projects which will have a significant contribution to the line of products the group offers. The cost related to the project will, where applicable, be capitalized on the balance sheet. The cost capitalized in 2014 is NOK 7.8m (NOK 3.3m).
Human resources, diversity and corporate responsibility
Scanship Holding ASA has a Board consisting of 4 persons, of which two are women and two are men.
The Group with subsidiaries has 51 employees whereas 9 are women and 42 are men.
The group is an organization with a diversified working environment in which employment, promotions, responsibility and job enrichment are based on qualifications and abilities, and not on gender, age, race and political or religious views. The Company believes in equal opportunity for men and women in the workplace. Please see the separate guidelines for Corporate Social Responsibility that appears as a section of the Annual Report. The guidelines can also be found on the Group's website www. scanship.no.
Please see the separate statement of Corporate Governance that appears as a section of the Annual Report. The statement can also be found on the Group's website www.scanship.no.
Environmental issues
The Group's activities are causing a minimum of pollution or waste that
can be harmful to the environment. The Group's products are rather contributing in increased recycling and reduced pollution on a global scale.
Future development
The Group is developing future-oriented technology among the best in the world regarding complete waste solutions, and is a leading supplier. The increased focus on environment from both new regulations and conscious consumers are helping to increase the demand for the Group's products.
The Group's substantial increase in its order backlog during 2014 indicates an expected increase in activity going forward. The Board of Directors believes that the Company will deliver better results than in 2014. Scanship AS has received several new orders at the end of 2014 and beginning of 2015, and is in the offering process for further vessels which will secure a considerable order backlog for the years to come.
Allocation of the profit for the year
The Board recommends the following allocation of the loss of the year in Scanship Holding ASA:
Retained Earnings NOK -3.7m.
Tore Enger Chairman of the Board
Susanne L. R. Schneider Member of the Board
Lysaker, 26. March, 2015
Henrik Badin CEO
Herman Marcussen Member of the Board
Brita Eilertsen Member of the Board
| Consolidated income statement | |||
|---|---|---|---|
| (NOK 1 000) | Note | 2014 | 2013 |
| Sales | 4 | 145 631 | 169 974 |
| Total operating revenue | 145 631 | 169 974 | |
| Cost of goods sold | 4 | -99 309 | -116 979 |
| Employee expenses | 5, 23 | -23 201 | -16 278 |
| Other operating expenses | 6 | -18 713 | -15 735 |
| EBITDA before non-recurring items | 4 409 | 20 982 | |
| Non-recurring Items – Cost related to IPO | -2 363 | - | |
| EBITDA | 2 046 | 20 982 | |
| Depreciation and amortisation | 17 | -1 179 | -1 092 |
| Operating profit (EBIT) | 867 | 19 890 | |
| Finance income | 19 | 9 666 | 3 042 |
| Finance costs | 19 | -23 151 | -15 744 |
| Net financial items | -13 484 | -12 702 | |
| Result before tax | -12 617 | 7 188 | |
| Income tax expenses | 16 | 3 338 | -2 043 |
| Result for the year | -9 279 | 5 145 | |
| Attributable to: | |||
| Owners of the parent | -9 279 | 5 145 | |
| Non-controling interest | 0 | 0 | |
| -9 279 | 5 145 | ||
| Earnings per share (NOK per share) | |||
| - Basic | 14 | -0,13 | 2 146,75 |
| - Diluted | 5, 14 | -0,13 | 2 146,75 |
| Consolidated statement of comprehensive income | ||||||
|---|---|---|---|---|---|---|
| (NOK 1 000) | Note | 2014 | 2013 | |||
| Result for the year | -9 279 | 5 145 | ||||
| Other comprehensive income: | ||||||
| Exchange differences on translation of foreign operations | 563 | 19 | ||||
| Total other comprehensive income, net of tax | 563 | 19 | ||||
| Total comprehensive income for the year | -8 716 | 5 165 | ||||
| Attributable to: | ||||||
| Owners of the parent | -8 716 | 5 165 | ||||
| Non-controling interest | ||||||
| -8 716 | 5 165 | |||||
| Consolidated statement of finalcial position | |||
|---|---|---|---|
| (NOK 1 000) | Note | 31.12.14 | 31.12.13 |
| ASSETS | |||
| Non-current assets | |||
| Property, plant and equipment | 17 | 1 957 | 1 574 |
| Intangible assets | 18 | 18 889 | 12 503 |
| Total non-current assets | 20 845 | 14 076 | |
| Current assets | |||
| Inventories | 7 | 5 684 | 5 109 |
| Trade receivables | 8,12,15 | 32 577 | 23 809 |
| Contracts in progress | 4 | 75 064 | 52 195 |
| Other receivables | 9 | 5 258 | 5 035 |
| Cash and cash equivalents | 10 | 3 821 | 1 177 |
| Total current assets | 122 404 | 87 325 | |
| Total assets | 143 248 | 101 401 |
| EQUITY AND LIABILITIES Equity |
|||
|---|---|---|---|
| Share capital | 11 | 9 551 | 202 |
| Share premium | 77 450 | 0 | |
| Translation differences | 129 | -434 | |
| Retained earnings | -42 016 | -21 127 | |
| Equity attributable to owners of the parent | 45 112 | -21 360 | |
| Total equity | 26 | 45 112 | -21 360 |
| Liabilities | |||
| Non-current liabilities | |||
| Deferred tax liability | 16 | 1 695 | 6 817 |
| Long term borrowings | 12 | - | 19 967 |
| Total non-current liabilities | 1 694 | 26 783 | |
| Current liabilities | |||
| Current borrowings | 12 | 0 | 10 000 |
| Trade creditors | 16 669 | 30 931 | |
| Contract accruals | 4 | 35 379 | 22 058 |
| 19, 20, 21 | 10 536 | 7 114 | |
| Income tax payable | 16 | 5 | 823 |
| Bank overdraft | 12 | 27 674 | 14 290 |
| Other current liabilities | 13, 15 | 6 179 | 10 762 |
| Total current liabilities | 96 441 | 95 978 | |
| Total liabilities | 98 135 | 122 761 | |
| Total equity and liabilities | 143 248 | 101 401 |
Tore Enger Chairman of the Board
Susanne L. R. Schneider Member of the Board
Lysaker, 26. March, 2015
Henrik Badin CEO
Herman Marcussen Member of the Board
Brita Eilertsen Member of the Board
Consolidated statement of changes in equity
| 31.12.2014 | Share | Share | Translation | Retained | Non | Total | |
|---|---|---|---|---|---|---|---|
| (NOK 1 000) | capital | premium | differences | earnings | Total | "controlling | |
| interest" | Equity | ||||||
| Equity at 1 January 2014 | 202 | 0 | -434 | -21 127 | -21 360 | 0 | -21 360 |
| Result for the year | -9 279 | -9 279 | -9 279 | ||||
| Other comprehensive income | 563 | 563 | 563 | ||||
| Total comprehensive income | 0 | 0 | 563 | -9 279 | -8 716 | 0 | -8 716 |
| Share capital increase from | |||||||
| retained earnings, 14.3.14 | 6 798 | -6 798 | 0 | 0 | |||
| Increase share capital paid in | |||||||
| cash, 10.4.14 | 2 551 | 77 450 | 80 001 | 80 001 | |||
| Transaction costs net tax | -4 814 | -4 814 | -4 814 | ||||
| Equity at 31 December 2014 | 9 551 | 77 450 | 129 | -42 016 | 45 111 | 0 | 45 111 |
| 31.12.2013 | Share | Share | Translation | Retained | Non | Total | |
|---|---|---|---|---|---|---|---|
| (NOK 1 000) | capital | premium | differences | earnings | Total | "controlling | |
| interest" | Equity | ||||||
| Equity at 1 January 2013 | 202 | 0 | -453 | -26 273 | -26 524 | 0 | -26 524 |
| Result for the year | 5 146 | 5 146 | 5 146 | ||||
| Other comprehensive income | 19 | 19 | 19 | ||||
| Total comprehensive income | 202 | 0 | 19 | 5 146 | 5 165 | 0 | 5 165 |
| Equity at 31 December 2013 | 202 | 0 | -434 | -21 127 | -21 360 | 0 | -21 360 |
| Consolidated cash flow statement | |||
|---|---|---|---|
| (NOK 1 000) | Note | 2014 | 2013 |
| Cash flow from operating activities | |||
| Result before income tax | -12 617 | 7 188 | |
| Adjustments: | |||
| Income tax paid | 16 | -667 | -1 714 |
| Change in work in progress | 4 | -9 548 | -8 561 |
| Depreciation | 17 | 1 179 | 1 092 |
| Interest expense accruals | - | ||
| Financial instruments | 19, 21 | 3 422 | 8 204 |
| Changes in inventories, trade receivables and trade creditors | -23 605 | -10 036 | |
| Changes in other accruals | -2 525 | 8 198 | |
| Net cash flow from operating activities | -44 362 | 4 371 | |
| Cash flow from investing activities | |||
| Investment/sale of subsidiaries | 0 | 0 | |
| Purchase of property, plant and equipment | 17 | -1 164 | -321 |
| Investment in intangible assets | 18 | -8 724 | -3 394 |
| Net cash flow from investing activities | -9 888 | -3 715 | |
| Cash flow from financing activities | |||
| Proceeds from issuing stock | 12 | 73 410 | 0 |
| Proceeds from borrowings | 11 | 0 | 0 |
| Bank Overdraft facility | 11 | 13 384 | -2 083 |
| Repayment of loans | 11 | -29 900 | 0 |
| Dividends paid | 0 | 0 | |
| Net cash flow from financing activities | 56 894 | -2 083 | |
| Net change in cash and cash equivalents | 2 644 | -1 427 | |
| Cash and cash equivalents at 1 January | 1 177 | 2 604 | |
| Cash and cash equivalents at 31 December | 3 821 | 1 177 | |
| Non restricted cash, 31.12 | 2 689 | 217 | |
| Restricted cash, 31.12 | 1 132 | 960 | |
| Cash 31.12 | 10 | 3 821 | 1 177 |
Note 1 General information
Scanship Holding AS which is the parent company of the Scanship group (the Group) is a limited liability company incorporated and domiciled in Norway, with its Head Office at Lysaker. Scanship Holding AS was incorporated as a new parent company of the Group during 2011. This reorganisation is further described in paragraph 2.2 below. The Group's business is manufacturing and supplying advanced systems for processing and cleaning drainage water, food waste, residual waste and biological mud to the maritime industry throughout the world. In addition the Group offers chemical products used in the waste management systems, and provides service and operational assistance related to these products.
The financial statements were approved by the company's board on 26 March 2015.
Note 2 Summary of significant accounting policies
The principal accounting policies applied in the preparation of these consolidated financial statements are set out below.
2.1 Basis for preparation
The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union (EU) and in accordance with the additional requirements following the Norwegian Accounting Act.
The financial statements have been prepared on a historical cost basis, except for derivative financial instruments that have been measured at fair value.
2.2 Basis of consolidation
The Group's consolidated financial statements comprise Scanship Holding AS and its subsidiaries. Subsidiaries are fully consolidated from the date of acquisition, being the date on which the Group obtains control, and continue to be consolidated until the date that such control ceases. The financial statements of the subsidiaries are prepared for the same reporting period as the parent company, using consistent accounting policies. All intra-group balances, income and expenses, unrealised gains and losses and dividends resulting from intra-group transactions are eliminated in full. A change in the ownership interest of a subsidiary, without a change of control, is accounted for as an equity transaction.
Group reorganisation in 2011
Scanship Holding AS has been incorporated as the new parent company in the Group in 2011. This restructuring was accomplished to two transactions. First the shareholders in Scanship AS (the previous parent company in the Group) transferred approx. 82% of their shares in Scanship AS to Scanship Holding trough a contribution in kind. Secondly, Scanship Holding acquired the remaining approx. 18% of the shares in Scanship AS by cash consideration. For the consolidated financial statement, this reorganisation is not assessed as a transaction, and the carrying amount of assets in liabilities that existed before this transaction has not been affected. The cash contribution for the shares in Scanship AS is treated as a distribution to shareholders.
2.3 Foreign currency
Functional currency, presentation currency and consolidation:
The Group's presentation currency is Norwegian kroner (NOK). This is also the Parent company's functional currency. The functional currency for the subsidiaries are; Scanship AS: NOK, Scanship Americas Inc.: USD and Scanship Canada Inc.: CAD For consolidation purposes, the balance sheet figures for subsidiaries with a different functional currency, are translated into the presentation currency (NOK) at the rate applicable at the balance sheet date and their income statements are translated at the exchange rate prevailing at the date of transaction. As an approximation, average exchange rates for each month are applied in translating the income statements. If the exchange rates do not change much, an average rate for the year is used. A shorter period is used if the exchange rate fluctuates much. Exchange differences are recognised in other comprehensive income.
Transactions in foreign currency
Foreign currency transactions are translated into the functional currency using the exchange rates at the transaction date. Monetary balances in foreign currencies are translated into the functional currency at the exchange rates on the date of the balance sheet. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement.
2.4 Property, plant and equipment
Property, plant and equipment are stated at historical cost less accumulated depreciation and any impairment charges. Depreciations are calculated on a straight line basis over the assets expected useful life and adjusted for any impairment charges. Expected useful lives of longlived assets are reviewed annually and where they differ significantly from previous estimates, depreciation periods are changed accordingly. Ordinary repairs and maintenance costs are charged to the income statement during the financial period in which they are incurred. Gains and losses on disposals are determined by comparing the disposal proceeds with the carrying amount and are included in operating profit.
Property, plant and equipment are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset exceeds its recoverable amount. Assessment is made at least once a year. The difference between the assets carrying amount and its recoverable amount is recognised in the in income statement as impairment.
2.5 Intangible assets
Intangible assets acquired separately that have a finite useful life are carried at cost less accumulated amortisation and any impairment charges. Amortisation is calculated on a straight line basis over the assets expected useful life and adjusted for any impairment charges.
Internally generated intangible assets
Expenditures on research activities, undertaken with the prospects of gaining new technical knowledge and understanding, are recognised in profit or loss as incurred.
The Group is constantly working with activities to optimize the total cleaning systems. The Group started in 2010 a product development project which will have a significant contribution to the line of products the group offers. Development projects involve a plan or design for the production of new or substantially improved products and processes. The cost related to the project will be capitalised if the criteria for capitalisation is met. If costs for development shall be capitalised the Group must demonstrate, amongst others, that the technical feasibility is available, that the Group has the intention to complete the asset and its ability to sell it. Capitalised development expenditure is measured at cost less accumulated amortization and accumulated impairment losses. The intangible assets are amortised from the time it is available for use.
At each year end the Group assess whether there is any indication that the asset may be impaired. If there is any indication of impairment an impairment test is performed, and the assets or the cash generating unit's recoverable amount is calculated. Before the intangible asset is available for use, an impairment is be performed each year. When the recoverable amount is less than the carrying amount an impairment loss is recognised in the income statement.
The company has in 2013 and 2014 received refundable tax credits ("Skattefunn"). This is recognized in the financial statement as a reduction of book value in the intangible assets and as a current receivables.
2.6 Inventories
Inventories are stated at the lower of cost and net realisable value. Cost is determined using the first-in, first-out (FIFO) method and includes the costs incurred in acquiring the goods and the costs of bringing the goods to their current location. Net realisable value is the estimated selling price in the ordinary course of business, less applicable variable selling expenses.
2.7 Trade receivables and other current receivables
Trade receivables and other current receivables are initially recognised at fair value plus any transaction costs. The receivables are subsequently measured at amortised cost using the effective interest method, if the amortisation effect is material, less provision for impairment. Other current receivables include prepayments, and receivables from related parties.
2.8 Cash and cash equivalents
Cash and the equivalents include cash on hand, deposits with banks and other short-term highly liquid investments with original maturities of three months or less.
2.9 Trade creditors
Trade creditors are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, if the amortisation effect is material.
2.10 Taxes
Income tax expense for the period comprises current tax expense and deferred tax expense
Tax is recognised in the income statement, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case the tax is also recognised in other comprehensive income or directly in equity.
Deferred tax assets and liabilities are calculated on the basis of existing temporary differences between the carrying amounts of assets and liabilities in the financial statement and their tax bases, together with tax losses carried forward at the balance sheet date. Deferred tax assets and liabilities are calculated based on the tax rates and tax legislation that are expected to apply when the assets are realised or the liabilities are settled, based on the tax rates and tax legislation that have been enacted or substantially enacted on the balance sheet date. Deferred tax assets are recognised only to the extent that it is probable that future taxable profits will be available against which the assets can be utilised. The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that is no longer probable that the deferred tax asset can be utilised. Deferred tax assets and liabilities are not discounted. Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred taxes assets and liabilities relate to income taxes levied by the same taxation authority on the same taxable entity.
The companies included in the consolidated financial statement are subject to income tax in the countries where they are domiciled.
2.11 Revenue recognition
Revenue comprises the fair value of the consideration received or receivable for the sale of goods and services in the ordinary course of the Group's activities. Revenue is shown net of value-added tax, returns, rebates and discounts and after eliminating sales within the Group. The group recognises revenue when the amount of revenues are be reliably measured, it is probable that future economic benefits will flow to the entity and when specific criteria have been met for each of the Group's activities as described below.
Sale of goods
Revenue from the sale of goods is recognised in the income statement when the significant risk and rewards of ownership has been transferred to the buyer, usually once delivery has taken place. Sales of goods are not long term constructions contracts.
Sale of services
Revenue from a contract to provide services is recognised by reference to the labour hours delivered and direct expenses are incurred.
System sale (Construction contract)
Revenue from the sale of services and long-term manufacturing projects is recognised under the percentage-of-completion method. The Group divides the construction contracts in two different types; New-Buildings and Retrofit.
The New-building contracts are deliverables to cruise vessels that are being built at ship yards. The new-buildings will typically have project duration from one to three years. The company estimates the progress of these contracts with of hours spent on the projects. A new building contract consists of a design – phase (2-6 months), a procurement-phase (2-6 months), installation phase (1-2 months) and a commission phase (1-2 months)- The revenues will "typically" be recognized mainly in the procurement -and the installation phase.
The Retrofit contracts are deliverables to already built vessels either while the vessel is in dock or during normal voyage. The retrofits will typically have project duration from three to six months. The Group estimates the progress of these contracts from the cost accrued on equipment and installation.
When the outcome cannot be reliably estimated, only revenues equalling the project costs incurred can be recognised as revenue.
Contract costs include costs that relate directly to the specific contract such as direct wages and direct materials. Pre-contract costs are expensed unless it is probable that the Group receives a contract. Costs that cannot be attributed to contract activity are expensed. Contract revenue includes the agreed amount under the contract, adjusted for any changes or additional work related to the contract. For most of its contracts, the Group provides a guarantee for a specific period, and the customers are not required to pay a certain percentage of the total contract amount until the end of the guarantee period. The Group does not recognise the revenue from the guarantee before the expiration of the guarantee period.
If circumstances arise that may change the original estimates of revenues, costs or extent of progress toward completion, estimates are revised. These revisions may result in increases or decreases in estimated revenues or costs and are reflected in income in the period in which the circumstances that give rise to the revision become known by management. An expected loss on a construction contract will be recognized as an expense as soon as such loss is probable.
"Contracts in progress" reported in the balance sheet represents the value of construction work performed less payment by customers. If payments from customers exceed the net amount earned, this is presented under "Contract accruals".
2.12 Derivative financial instruments that are not hedging instruments
Derivative financial instruments that are not classified as hedging instruments are categorised as held for trading, i.e. they are classified in category at fair value through profit or loss. These instruments are measured at fair value with changes in fair value charged to the income statement.The group does not apply hedge accounting. All derivates are measured at fair value with changes in fair value charged to the income statement.
2.13 Pension plans
The Group has a defined contribution plan for its employees. The Group's payments are recognised in the income statement as employee benefits expense for the year to which the contribution applies.
2.14 Provisions
A provision is recognised when the Group has a present legal or constructive obligation as a result of past events, it is probable (i.e. more likely than not) that an outflow of resources will be required to settle the obligation, and the amount can be reliably estimated. Provisions are reviewed at each balance sheet date and adjusted to reflect the current best estimate. Provisions are measured at the present value of the expenditures expected to be required to settle the obligation. The increase in the provision due to passage of time is recognised as finance cost.
2.15 Leases (as lessee)
Financial leases
Finance leases which transfer to the Group substantially all the risks and benefits incidental to ownership of the leased item, are capitalised at the commencement of the lease at the fair value of the leased property or, if lower, at the present value of the minimum lease payments. Lease payments are apportioned between finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are recognised in finance costs in the income statement.
Operating leases
All leases that are not classified as financial leases are classified as operating leases. Operating lease payments are recognised as an operating expense in the income statement on a straight-line basis over the lease term.
2.16 Contingent liabilities
Contingent liabilities are not recognised in the financial statements. Significant contingent liabilities are disclosed, with the exception of contingent liabilities where the probability of the liability occurring is remote.
2.17 Earnings per Share
The calculation of basic earnings per share is based on the profit attributable to ordinary shares using the weighted average number of ordinary shares outstanding during the year after deduction of the average number of treasury shares held over the period.
The calculation of diluted earnings per share is consistent with the calculation of the basic earnings per share, but gives at the same time effect to all dilutive potential ordinary shares that were outstanding during the period, by adjusting the profit/loss and the weighted average number of shares outstanding for the effects of all dilutive potential shares, i.e.:
-
The profit/loss for the period attributable to ordinary shares is adjusted for changes in profit/loss that would result from the conversion of the dilutive potential ordinary shares.
-
The weighted average number of ordinary shares is increased by the weighted average number of additional ordinary shares that would have been outstanding assuming the conversion of all dilutive potential ordinary.
2.18 Reserves
Exchange differences relating to the translation of the net assets of the Group's foreign operations from their functional currency to the Group's presentation currency is recognised directly in other comprehensive income and presented as "translation differences" in the statement of financial position and statement of changes in equity.
2.19 Cost of equity transactions
Transaction costs directly attributable to an equity transaction are recognised directly in equity, net after deducting tax.
2.20 Cash flow statement
The cash flow statement is prepared by using the indirect method.
2.21 Events after the balance sheet date
The financial statements are adjusted to reflect events after the balance sheet date that provides evidence of conditions that existed at the date of the balance sheet (adjusting events). The financial statements are not adjusted to reflect events after the balance sheet date that are indicative of conditions that arose after the date of the balance sheet (non-adjusting events). Non-adjusting events are disclosed if significant.
2.22 Changes in accounting policy and disclosures
New and amended standards and interpretations that has been effective for accounting periods starting on 1 January 2014 has not have any impact on the Group's financial statements.
2.23 IFRS and IFRIC issued but not adopted by the Company
Standards and interpretations that are issued up to the date of issuance of the consolidated financial statements, but not yet effective, are disclosed below. The Group's intention is to adopt the relevant new and amended standards and interpretations when they become effective, subject to EU approval before the consolidated financial statements are issued.
IFRS 9 Financial Instruments
IFRS 9 will eventually replace IAS 39 Financial Instruments: Recognition and Measurement. In order to expedite the replacement of IAS 39, the IASB divided the project into phases: classification and measurement, hedge accounting and impairment. New principles for impairment were published in July 2014 and the standard is now completed. The parts of IAS 39 that have not been amended as part of this project have been transferred into IFRS 9.
IFRS 10 Consolidated Financial Statements, IFRS 12 Disclosure of Interests in Other Entities and IAS 28 Investments in Associates and Joint Ventures The amendments to IFRS 10, IFRS 12 and IAS 28 address three issues arising in practice in the application of the investment entities consolidation exception, and also provide relief in particular circumstances.
The changes in IAS 36 will only have impact on the notes to the Financial Statement.
IFRS 15 Revenue from Contracts with Customers
The IASB and the FASB have issued their joint revenue recognition standard, IFRS 15. The standard replaces existing IFRS and US GAAP revenue requirements. The core principle of IFRS 15 is that revenue is recognised to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The standard applies to all revenue contracts and provides a model for the recognition and measurement of sales of some non-financial assets (e.g., disposals of property, plant and equipment).
The Company will evaluate potential effects of IFRS 15 as soon as the final standard, including all phases, is issued.
IAS 16 Property, Plant and Equipment and IAS 38 Intangible Assets
The amendments clarifies that the use of revenue-based methods to calculate the depreciation of an asset is not appropriate because revenue generated by an activity that includes the use of an asset generally reflects factors other than the consumption of the economic benefits embodied in the asset. The amendments also clarifies that revenue is generally presumed to be an inappropriate basis for measuring the consumption of the economic benefits embodied in an intangible asset. This presumption, however, can be rebutted in certain limited circumstances.
The changes in IAS 16 will only have impact on the notes to the Financial Statement.
IAS 19 Employee Benefits
The amendments introduce the option to recognise contributions from employees or third parties as a reduction in the service cost in the same period in which they are payable if, and only if, they are linked solely to the employee's service rendered in that period. Within the EU/EEA, the amendments are effective for annual periods beginning on or after 1 January 2016.
IAS 27 Separate Financial Statements
The amendments restore the option to use the equity method to account for investments in subsidiaries, joint ventures and associates in an entity's separate financial statements. The entity must apply the same accounting for each category of investments.
IFRIC Interpretation 21 Levies
IFRIC 21 is an interpretation of IAS 37 Provisions, Contingent Liabilities and Contingent Assets. IAS 37 sets out criteria for the recognition of a liability, one of which is the requirement for the entity to have a present obligation as a result of a past event (known as an obligating event). The Interpretation clarifies that the obligating event that gives rise to a liability to pay a levy is the activity described in the relevant legislation that triggers the payment of the levy. The Interpretation includes guidance illustrating how the Interpretation should be applied. Within the EU/EEA, the Interpretation is effective for annual periods beginning on or after 1 January 2015.
Other approved IFRSs and IFRICs with future effective dates have been assessed and not found to have material effect.
There are no other changes in accounting policy and disclosures as is actual for the Company
Note 3 Critical accounting estimates and assumptions
The preparation of the financial statements in accordance with IFRS requires management to make judgements, use estimates and assumptions that affect the reported amounts of assets and liabilities, income and expenses.
The estimates and associated assumptions are based on historical experience and various other factors that are considered reasonable under the circumstances. The estimates and underlying assumptions are reviewed on an on-going basis.
Estimates and assumptions which represent a significant risk of resulting in material adjustments to the carrying amounts of assets and liabilities within the next financial year are presented below.
Revenue recognition for contracts under the percentage-of-completion method: Revenue is recognised based on estimated progress under the contracts. Several estimates have to be made to calculate the stage of completion. This estimates has a direct influence over the amount of revenue as has been recognized. The uncertainty is highest to these factors:
New-building contracts:
- Total hours estimated
- Total estimated costs
- Percentage of completion estimates
Retrofit contracts:
- Total estimated costs
- Technical complexity that may impact on the total costs
- Percentage of completion estimates
Projects are reviewed periodically to reduce the risk of material deviations in the estimates.
Intangible assets
At each year end the Group assess whether there is any indication that the asset may be impaired. To estimate the recoverable the CTO prepare a discounted cash flow analysis for each intangible assets as are under development. The cash flow analysis contains the expected increase in revenue and expected cost to develop the asset. This cash flow is discounted and the discounted value is compared with the booked value.
The uncertainty is highest to the following estimates:
- Expected increase in revenue
- Expected total cost to complete the development of the intangible assets
- Expected date of completion of the intangible assets
As of 31.12.2014 the CTO found that one of the intangible assets indicated no future positive value, and subsequently was impaired.
Deferred tax assets
Deferred tax assets are recognised when it is likely that the company will have sufficient profit for tax purposes in subsequent periods that will enable the company to utilize the tax asset. Similarly, the company will reduce the deferred tax assets to the extent the company no longer regards it as being likely that it can utilize the deferred tax asset. At each year end the Group assess whether there is any indication that the asset may be impaired. To estimate the recoverable the CFO prepare a discounted cash flow analysis for taxable revenue.
The uncertainty is highest to the following estimates:
- Expected taxable revenue
Note 3 Segments information
All amounts in TNOK 1 000
The main part of the revenues is from system sales and after sales that is delivered to vessels. Retrofit and new building are two separate operating segments as is aggregated to one reporting segment named projects sales. Transactions between units is based on market terms. The company's management uses each segments operating profit when assessing earnings in he segment's.
The figures for each segment include transactions between segments. Transactions within the various segments are eliminated. All transactions between business units are based on market terms.
| Audited | Admin & | ||||
|---|---|---|---|---|---|
| 1. January - 31. December 2014 | Projects | Aftersales | other | Elimination | Total |
| Revenue 1) | 106 768 | 49 039 | 123 | -10 299 | 145 631 |
| Total revenue | 106 767 | 49 040 | 123 | -10 299 | 145 631 |
| Cost of sales | -75 489 | -33 508 | - | 9 689 | -99 309 |
| Employee expenses | -18 093 | -4 536 | -573 | - | -23 201 |
| Other Operating expenses | -13 266 | -5 375 | -676 | 603 | -18 714 |
| EBITDA before non-recurring items | 559 | 4 659 | -1 160 | 4 407 | |
| Non- recurring items | - | - | -2 363 | - | -2 363 |
| EBITDA | 559 | 4 659 | -3 521 | - | 2 044 |
| Depriciation and amortisation | -1 016 | -174 | - | - | -1 179 |
| OPERATING PROFIT | -457 | 4 485 | -3 521 | - | 865 |
| Net Contracts in progress | 39 685 | - | - | - | 39 685 |
| Total assets 2) | 128 799 | 11 660 | 246 965 | -244 339 | 143 085 |
| Investments in non-current assets | 7 754 | - | - | - | 7 754 |
1) In the segment of "Project sales" the revenue is basically from five approximately equal- sized customers. There is no significant customers in the segment of "Aftersale".
2) Elimination includes -222 094 as value of the shares in the subsidaries.
The revenue from new building activities is TNOK 103 825 and is delivered on yards in Europe. The other revenues are from projectssales and aftersales. Geographic area can not be determined as deliveries are made to vessels in international trade.
Note 3 Segments information - Continued
| Projects | Admin & | ||||
|---|---|---|---|---|---|
| 1. January - 31. December 2013 | sales | Aftersales | other | Elimination | Total |
| Revenue 1) | 130 477 | 45 791 | - | -6 294 | 169 974 |
| Total revenue | 130 477 | 45 791 | - | -6 294 | 169 974 |
| Cost of sales | -93 514 | -28 626 | -107 | 5 268 | -116 979 |
| Employee expenses | -10 964 | -5 314 | - | - | -16 278 |
| Other Operating expenses | -12 388 | -4 373 | - | 1 026 | -15 735 |
| EBITDA before non-recurring items | 13 611 | 7 478 | -107 | - | 20 982 |
| Non- recurring items | - | - | - | - | - |
| EBITDA | 13 611 | 7 478 | -107 | - | 20 982 |
| Depriciation and amortisation | -975 | -117 | - | - | -1 092 |
| OPERATING PROFIT | 12 636 | 7 361 | -107 | - | 19 890 |
| Net Contracts in progress | 30 137 | - | - | - | 30 137 |
| Total assets 2) | 111 110 | 7 264 | 222 950 | -239 922 | 101 402 |
| Investments in non-current assets | 3 349 | - | 321 | - | 3 349 |
1) In the segment of "System Sale" the revenue is basically from five approximately equal-sized customers. There is no significant customers in the segment of "After sale".
2) Elimination includes -221 256 as value of the shares in the subsidaries
The revenue from new building activities is TNOK 94 129 and is delivered on yards in Europe.The other revenues are from system sales and after sales. Geographic area can not be determined as deliveries are made to vessels in international trade.
| Note 4 Sales and contracts in progress | ||
|---|---|---|
| Amounts in NOK 1 000 | 2014 | 2013 |
| Project revenues | 106 768 | 130 477 |
| Aftersales | 38 863 | 39 498 |
| Sales | 145 631 | 169 974 |
| Projectssales All contracts: |
||
| The table below views revenue from ongoing projects as is recognized in the "Consolidated Income Statement" in 2014 and 2013. |
||
| Amounts in NOK 1 000 | 2014 | 2013 |
| 106 768 | ||
| Total construction contract revenue recognised as revenue Contracts in progress: |
130 477 | |
| The table below views total accumulated revenue and costs incurred from the ongoing contracts recognized in the Consolidated Financial Statement since the contracts were started. |
||
| Amounts in NOK 1 000 | 2014 | 2013 |
| 277 384 | 173 451 | |
| 190 640 | 116 918 | |
| Acc. Construction contract revenue recognised as revenue Acc. Related costs incurred Acc. Recognised profit or loss on contracts in progress |
86 744 | 56 533 |
| Recognised and included in the financial statements as amount due: | ||
| Amounts in NOK 1 000 | 2014 | 2013 |
| Due from customers for contract work Due to customers for contract work |
75 064 -35 379 |
52 195 -22 058 |
None of the ongoing contracts are onerous contracts.
| Note 5 - Employee expense, remuneration to management and board of directors | |||||
|---|---|---|---|---|---|
| Amounts in NOK 1 000 | 2014 | 2013 | |||
| Salaries | 29 184 | 25 149 | |||
| Social security tax | 3 594 | 2 785 | |||
| Pension costs | 1 346 | 461 | |||
| Other benefits | 580 | 377 | |||
| Total employee expenses | 34 705 | 28 772 | |||
| Employee expenses recognized within cost of goods sold | -11 504 | -12 494 | |||
| Total costs recognized as employee expenses | 23 201 | 16 278 | |||
| Average number of employees | 50 | 43 | |||
| Remuneration to management and board of directors in 2014: | |||||
| Amounts in NOK 1 000 | Salaries | Pension | Other 3) | Total | |
| CEO | 1 752 | 66 | 302 | 2 120 | |
| CFO 1) | 375 | 16 | 63 | 454 | |
| CFO (former, 1.1-30.09) | 1 244 | 49 | 146 | 1 439 | |
| CTO | 1 346 | 66 | 114 | 1 526 | |
| Board of directors 2) | 573 | 0 | 0 | 573 | |
| Total | 5 290 | 197 | 625 | 6 112 |
1) New CFO was appointed in Oct. 2014. The remuneration to the CFO is for the period Oct. to Dec.
2) Management and board of directors have no agreements covering severance payment, share based payments or bonus. No loans have been granted or guarantees pledged to management or Board of Directors.
3) Includes: company car if applicable, insurances, electronic communication, etc.
Remuneration to management and board of directors in 2013:
| Amounts in NOK 1 000 | Salaries | Pension | Other | Total |
|---|---|---|---|---|
| CEO | 1 342 | 18 | 249 | 1 609 |
| CFO | 1 135 | 18 | 197 | 1 350 |
| CTO | 1 135 | 18 | 104 | 1 257 |
| Total | 3 612 | 54 | 550 | 4 216 |
No fee to Board of Directors was paid in 2013.
Note 5 - Employee expense, remuneration to management and board of directors - Continued
Option programme
The company has a share option programme covering certain employees in senior positions. As at 31.12.2014, 6 employees were included in the option programme. The option vests yearly over 3 years.
The fair value of options granted in 2014 was NOK 0,69 per option. The share option programme liability is NOK 0,6m as of 31.12.14
Overview of outstanding options:
| 2014 | |
|---|---|
| Outstanding options 1.1 | 0 |
| Options granted | 1 470 000 |
| Options forfeited | -600 000 |
| Options exercised | 0 |
| Options expired | 0 |
| Outstanding options 31.12 | 870 000 |
| Of which exercisable | 0 |
The outstanding options are subject to the following conditions:
| Expiry date | Average strike price | Number of share options |
|---|---|---|
| 2019 | 3,20 | 870 000 |
| 870 000 |
The fair value of the options has been calculated using Black & Scholes option-pricing model. The average fair value of the options granted in 2014 is NOK 0,69.
The calculations are based on the following assumptions:
Share price on the grant date: The share price is set to the stock exchange price on the grant date.
The strike price per option: The strike price is the share price on the grant date.
Volatility: It is assumed that historic volatility of comparable shares is an indication of future volatility. The expected volatility is therefore stipulated to be the same as the historic volatility, which equals a volatility of 37,54 %.
The term of the option: It is assumed that 100 % of the employees will exercise the options once they are exercisable. The options are expected to have a term of 1-3 years.
Dividend: The estimated dividend per share is NOK 0 per annum.
Risk-free interest rate: The risk-free interest rate is set equal to the interest rate on government bonds during the term of the option.
Note 6 - Other operating expenses and remuneration to auditor
| Other operating expenses include: | ||
|---|---|---|
| Amounts in NOK 1 000 | 2014 | 2013 |
| Travelling expenses | 3 436 | 2 030 |
| Lease expenses | 4 329 | 4 629 1) |
| Consultant's and other fees | 3 499 | 1 830 |
| Other office expenses | 3 637 | 1 493 |
| Other expenses | 3 812 | 5 753 |
| Total | 18 713 | 15 735 |
1) Services purchased from related parties, ref. note 15.
Remuneration to auditor is allocated as specified below:
| Amounts in NOK 1 000 | 2014 | 2013 |
|---|---|---|
| Statutory audits | 530 | 500 |
| Other assurance services | 0 | 0 |
| Tax consultancy | 117 | 0 |
| Other services | 0 | 0 |
| Total, excl. VAT | 647 | 500 |
Note 7 - Inventories
Inventories include:
| Amounts in NOK 1 000 | 31. Dec 2014 | 31. Dec 2013 |
|---|---|---|
| Cost of goods (at cost)1) | 5 684 | 5 109 |
| Total inventories at the lower of cost and net realizable value | 5 684 | 5 109 |
1) Inventory is used both for input in construction contracts (raw materials) and for separate sales.
Note 8 - Trade receivables
Amounts in NOK 1 000 31. Dec 2014 31. Dec 2013 Gross trade receivables 32 577 23 809
Trade receivables are non-interest bearing debt and are generally on 30-90 day terms.The Group has no loss on trade receivables either in 2013 or 2014. It is considered that there is no impairment on trade receivables in 2013 or 2014. The management has close contact and good knowledge of all the customers. They have gone through all the trade receivables and made an individual judgement of impairment needed.
As of 31 December, the aging analysis of trade receivables is as follows:
| Amounts in NOK 1 000 | Past due but not impaired | |||||
|---|---|---|---|---|---|---|
| Neither past due nor |
||||||
| Total | impaired | <30 days | 30-60 days | 61-90 days | > 90 days | |
| 31. Dec 2014 | 32 577 | 14 853 | 9 914 | 4 088 | 3 030 | 693 |
| 31. Dec 2013 | 23 809 | 12 898 | 6 239 | 1 415 | 420 | 2 838 |
There are no disputes of the total amounts past due 60 days. NOK 3,4m has been paid in after closing date.
Note 9 - Other receivables
| Other receivables include: | ||
|---|---|---|
| Amounts in NOK 1 000 | 31. Dec 2014 | 31. Dec 2013 |
| VAT receivable | 2 312 | 1 196 |
| Prepaid expenses and other items | 1 567 | 1 675 |
| Receivables "Skattefunn" | 970 | 590 |
| Receivable on related party | 220 | 1 010 |
| Other items | 188 | 564 |
| Total | 5 258 | 5 035 |
Note 10 - Cash and cash equivalents
| Amounts in NOK 1 000 | 31. Dec 2014 | 31. Dec 2013 |
|---|---|---|
| Bank deposits | 3 821 | 1 177 |
| Total cash and cash equivalents | 3 821 | 1 177 |
| Of this: | ||
| Restricted cash for withheld taxes from employees salaries | 1 132 | 961 |
| Note 11 - Share capital and shareholder information |
|---|
| ----------------------------------------------------- |
| 31. Dec 2014 | 31. Dec 2013 | |
|---|---|---|
| Number of outstanding shares at 1 January | 2 400 | 2 400 |
| Number of outstanding shares at 31 December | 95 505 525 | 2 400 |
| Nominal value NOK per share at 31 December | 0,10 | 84 |
| Share capital NOK at 31 December | 9 550 552 | 201 600 |
Scanship Holding ASA has one class of shares with equal rights of all shares.
In Q2 2014 the Board decided to raise share capital by approx. 6.8 MNOK, transferred from other equity. The stock issue in relation to the conducted IPO and listing on Oslo Stock Exchange (Axess) in April 2014, raised share capital with another 2.5MOK. Following the share capital increases the share capital with 9.55 MNOK. The total cost amounts to approx. TNOK 8 810, whereas TNOK 2 361 has been identified, according to IAS32, as listing cost on existing shares, and therefore recorded as a non-recurring item in Q2. The remaining TNOK 6 449 (net of taxes) has been recorded against equity.
20 largest shareholders of Scanship Holding ASA > 1% : 31.12.14
| Name | Number | % Share |
|---|---|---|
| TECO GROUP AS | 35 000 000 | 36,6 % |
| BADIN INVEST LIMITED | 10 500 000 | 11,0 % |
| DALER INN LIMITED | 10 500 000 | 11,0 % |
| EXPROCO LIMITED | 10 500 000 | 11,0 % |
| JPMORGAN CHASE BANK, N.A | 4 387 000 | 4,6 % |
| PERSHING LLC | 3 500 000 | 3,7 % |
| MONTAGUE PLACE CUSTODY SERVICES | 3 133 666 | 3,3 % |
| SKANDINAVISKA ENSKILDA BANKEN AB | 2 772 500 | 2,9 % |
| BERGEN KOMMUNALE PENSJONSKASSE | 2 000 000 | 2,1 % |
| FONDSAVANSE AS | 1 562 500 | 1,6 % |
| MP PENSJON PK | 1 000 000 | 1,0 % |
| AS FLU | 1 000 000 | 1,0 % |
| Total | 85 855 666 | 89,9 % |
Number of shares owned by management and Board of directors:
| Name | Number of shares in | % Share |
|---|---|---|
| Henrik Badin (CEO) | 10 500 000 | 11,0 % |
| Asgeir Wien (CTO ) | 10 500 000 | 11,0 % |
| Bettina Nowak (MD Scanship Americas Inc) | 3 500 000 | 3,7 % |
| Christian Fr. Thyholdt (CFO) 1) | 3 430 000 | 3,6 % |
| Tore Enger (Chairman) 2) | 27 440 000 | 28,7 % |
| Total | 55 370 000 | 58,0 % |
1) Christian Fr. Thyholdt has indirect ownership through his 9,8% ownership in Teco Group AS.
2) Tore Enger has indirect ownership in Scanship through his 78,4 % ownership in Teco Group AS.
Note 12 - Borrowings
| Amounts in NOK 1 000 | 31. Dec 2014 | 31. Dec 2013 |
|---|---|---|
| Current portion of long-term debt | - | 10 000 |
| Bank overdraft facility | 27 674 | 14 290 |
| Long term debt - non-current | - | 19 967 |
| Shareholder loans | - | 5 018 |
| Balance 31 December | 27 674 | 49 275 |
2014
The Group has paid the loan to DnB and to the shareholders. They have a bank overdraft facility with a limit tnok 30 000 consists of a bank overdraft facility of tnok 29 100 and security for rent. tnok 900 It is a floating interest currently NIBOR + 1,95 % p.a.
Covenants
The overdraft facility have the following financial covenants:
- Currently there is a covenant demanding minimum equity ratio of Scanship AS to be 8 % of the yearly gross sales in Scanship AS.
- Minimum equity and/or subordinate loan in Scanship AS to be NOK 20 million.
- Pursuant to the loan agreements any additional borrowing has to be approved by DnB ASA.
- The Bank overdraft facility can not be higher than 50 % of the total of receivables and contracts in progress.
The Group is not in breach of the covenants 31.12.2014.
Mortgages
Book value of assets securing the bank loan and overdraft facility:
| Amounts in NOK 1 000 | 31. Dec 2014 | 31. Dec 2013 |
|---|---|---|
| Property plant and equipment | 1 957 | 1 574 |
| Inventory | 5 684 | 5 109 |
| Trade receivables | 32 577 | 23 809 |
| Total value of assets pledged: | 40 218 | 30 492 |
Note 13 Other current liabilities
| Amounts in NOK 1 000 | 31. Dec 2014 | 31. Dec 2013 |
|---|---|---|
| Public duties payable | 2 079 | 1 757 |
| Short term loan from shareholders | - | 5 018 |
| Other payables and accruals for incurred costs | 4 100 | 3 987 |
| Total | 6 179 | 10 762 |
Note 14 - Earnings per share
| 2014 | 2013 | |
|---|---|---|
| Profit for the year (NOK 1 000) | -9 279 | 5 145 |
| Weighted average number of shares outstanding | 71 260 245 | 2 400 |
| Earnings per share (NOK per share) : | ||
| - Basic | -0,13 | 2 143,75 |
| - Diluted | -0,13 | 2 143,75 |
Note 15 - Related party disclosures
| (a) Purchases of services | ||||
|---|---|---|---|---|
| Amounts in NOK 1 000 | ||||
| By | Purchase of services from | Description of services | 2014 | 2013 |
| Scanship AS | TECO Management AS 1) | Management/ Consultancy | - | 0 |
| Scanship AS | TECO Solutions AS | Management/ Consultancy | 22 | 0 |
| Scanship AS | TECO Maritime Group AS 1) | Management/consultancy | 859 | 1 382 |
| Scanship AS | TECO Maritime Poland | Management/conultancy | 112 | 182 |
| Scanship AS | TECO Coating Poland sp.z o.o | Management/conultancy | 166 | 0 |
| Scanship AS | TECO Maritime Far East | Goods | - | 266 |
| Scanship AS | Nordic Made AS | Project Services | 1 533 | 8 646 |
| Scanship AS | Nordic Made Inc. | Goods | 40 | 439 |
| Scanship AS | Nedre Langgate 19 AS | Office Rental | 979 | 1 276 |
| Scanship Americas Inc | Nordic Made Inc, | - | 512 | |
1) The services purchased from Teco Management includes working chairman and services related to financial advisory.
The Consolidated Financial Statement is prepared for Scanship Holding ASA as is the ultimate parent. Scanship Holding ASA is the owner, direct or indirect, of the 100 % shares of Scanship AS, Scanship Americas Inc. og Scanship Canada. The other companies in the table above are owned by TECO Group AS, as is the owner of 36,6 % of the shares in Scanship Holding ASA.
(b) Balance with related parties: Amounts in NOK 1 000
| 31. Dec 2014 | 31. Dec 2013 | ||
|---|---|---|---|
| Assets in | Assets | ||
| Scanship Holding ASA | Short term receivable from M.Rassmussen (CEO in Nordic Made) | 24 | 24 |
| Scanship AS | Receivables TECO Management AS | 90 | 123 |
| Scanship AS | Receivables TECO Maritime Group AS | 46 | 105 |
| Scanship AS | Receivables TECO Solutions AS | 164 | 133 |
| Scanship AS | Receivables TECO Middle East LLC | 10 | 10 |
| Scanship AS | Receivables TECO Electronics AS | 89 | 0 |
| Scanship AS | Receivables TECO Maritime Benelux BV | 5 | 0 |
| Scanship AS | Receivables TECO Group AS | 51 | 0 |
|---|---|---|---|
| Scanship AS | Receivable 3D Scanning AS | 70 | 0 |
| Scanship AS | Reveivables Nordic Made AS | 61 | |
| Scanship AS | Reveivables Nedre Langgate 19 AS | 55 | |
| Scanship Americas Inc. | Receivables Nordic Made Inc. | 204 | 657 |
| Scanship Americas Inc. | Receivables Nordic Made AS | - | 353 |
| Scanship Canada Inc. | Receivables Nordic Made AS | 16 | - |
| Total receivables from related parties | 886 | 1 405 | |
| Liabilities in | Liabilities | ||
| Scanship Holding ASA | Loan from shareholders 1) | - | 2 898 |
| Scanship AS | Loan from shareholders 1) | - | 2 120 |
| Scanship AS | TECO Maritime Group AS | 61 | 34 |
| Scanship AS | TECO Maritime Poland Sp.z.o.o. | - | 33 |
| Scanship AS | Nedre Langgate 19 AS | - | 163 |
| Scanship Americas Inc. | Nordic Made Inc, | 101 | - |
| Total liabilities to related parties | 163 | 5 248 |
1) For the Loan from the shareholders there is signed a loan agreement and the interest rate is set to 15 % p.a. The loans are paid back in 2014.
No of the other balances with related parties are interest bearing receivables or liabilities.
(c) Overview of subsidiaries
The following subsidiaries are included in the consolidated financial statements:
| Company | Date of acquisition/ | Country of | % equity and |
|---|---|---|---|
| Incorporation | incorporation | voting share | |
| Scanship Americas Inc. | 01.12.08 | USA | 100 % |
| Scanship Canada Inc. | 14.07.11 | Victoria, BC, Canada | 100 % |
| Scanship AS 1) | 01.03.07 | Tønsberg, Norway | 100 % |
| Scanship Poland Sp z o.o. | 12.08.14 | Gdynia, Poland | 100 % |
1) As further described in note 2.2, Scanship AS was the parent company in the Scanship Group
-before Scanship Holding ASA in 2011 was established as the new parent company of the Group.
(d) Remuneration to management and Board of directors Refer to note 5.
Note 16 - Tax
| Specification of income tax: | ||
|---|---|---|
| Amounts in NOK 1 000 | 2014 | 2013 |
| Income tax payable | 5 | 823 |
| Change in deferred tax | -3 343 | 1 220 |
| Total income tax expenses | -3 338 | 2 043 |
| Specification of temporary differences and deferred tax: | 31. Dec | 31. Dec |
| Amounts in NOK 1 000 | 2014 | 2013 |
| Property, plant and equipment | -2 274 | -2 155 |
| Construction contracts | 57 793 | 56 533 |
| Financial instruments and other receivables | -10 536 | -7 118 |
| Tax loss carryforward | -26 280 | -7 085 |
| Prepaid taxes "Korreksjonsskatt" | -14 927 | -14 927 |
| Not recognized tax loss carry forward Canada | 2 502 | 0 |
| Total basis for deferred tax | 6 278 | 25 248 |
| Net deferred tax liability 27 % | 1 695 | 6 817 |
| Reconciliation of effective tax rate: | ||
| Amounts in NOK 1 000 | 2014 | 2013 |
| Profit before income tax | -12 617 | 7 188 |
| Expected income tax assessed at the tax rate for the parent company (27%) | 3 407 | 2 013 |
| Adjusted for tax effect of the following items: | ||
| Permanent differences | -289 | 55 |
| Effect of other tax rate in subsidaries in the U.S and Canada | 220 | 227 |
| Effect of change of tax rate from 28 % to 27 % | 0 | -252 |
| Total income tax expenses | 3 338 | 2 043 |
Note 17 - Property, plant and equipment
| Amounts in NOK 1 000 | |
|---|---|
| Office furniture and equipment | |
| 2014: Cost: At 1.1.2014 Additions Disposals Effect of exchange differences |
4 752 1 562 |
| At 31.12.2014 | 6 314 |
| Depreciation and impairment: At 1.1.2014 Depreciation this year Impairment this year Disposals Effect of exchange differences |
-3 178 -1 179 |
| At 31.12.2014 | -4 357 |
| Carrying amount at 31.12.2014 | 1 957 |
| Useful life Depreciation method |
3-5 years linear |
| 2013: Cost: At 1.1.2013 Additions Disposals Effect of exchange differences |
4 431 321 |
| At 31.12.2013 | 4 752 |
| Depreciation and impairment: At 1.1.2013 Depreciation this year Impairment this year Disposals |
-2 086 -1 092 |
| Effect of exchange differences | |
| At 31.12.2013 Carrying amount at 31.12.2013 |
-3 178 1 574 |
| Useful life Depreciation method |
3-5 years linear |
Note 18 Intangible assets
| Amounts in NOK 1 000 | Development |
|---|---|
| 2014 | |
| Cost: | |
| At 1.1.2014 1) | 12 503 |
| Additions 2) | 6 784 |
| Disposals | |
| At 31.12.2014 | 19 287 |
| Depreciation and impairment: | |
| At 1.1.2014 | 0 |
| Amortisation this year 2) | -202 |
| Impairment this year | -196 |
| Disposals | 0 |
| At 31.12.2014 | -398 |
| Carrying amount at 31.12.2014 | 18 889 |
1) This consists of 22 different projects developing waste to energy. Nine _.projects is finalized in 2014. Funding from "Skattefunn" has reduced the total cost with 2 502.
2) Useful life is expected to be 15 to 20 years.
Additions consist of internally developed intangible assets and purchase of goods and services related to the internally developed intangibly assets. No intangible assets are acquired through business combinations.
| 2013: | |
|---|---|
| Cost: | |
| At 1.1.2013 1) | 9 154 |
| Additions 2) | 3 349 |
| Disposals | 0 |
| At 01.01.13 | 12 503 |
| Depreciation and impairment: | |
| At 1.1.2013 | 0 |
| Amortisation this year | 0 |
| Impairment this year | 0 |
| Disposals | 0 |
| At 31.12.2013 | 0 |
| Carrying amount at 31.12.2013 | 12 503 |
1) This consists of nine different projects developing waste to energy. One project is finalized in December 2013, the eight other are still under development and depriciation will start at completion of each project. Funding from "Skattefunn" has reduced the total cost with 1 532. 2) Additions consist of internally developed intangible assets and purchase of goods and services related to the internally developed intangibly assets. No intangible assets are acquired through business combinations.
Note 19 - Finance income and costs
Finance income:
| Amounts in NOK 1 000 | 2014 | 2013 |
|---|---|---|
| Interest income | 392 | 67 |
| Foreign exchange gain | 9 274 | 2 975 |
| Total finance income | 9 666 | 3 042 |
| Finance costs: | ||
| Amounts in NOK 1 000 | 2014 | 2013 |
| Interest expense | 2 893 | 4 405 |
| Foreign exchange loss | 2 269 | 2 036 |
| Unrealized decrease in fair value of derivates | 10 141 | 8 203 |
| Loss on derivates | 7 767 | 1 100 |
| Other financial cost | 80 | 0 |
| Total finance costs | 23 744 | 15 744 |
Note 20 - Financial instruments
(a) Categories of financial instruments
| 31. Dec | 31. Dec | ||
|---|---|---|---|
| Amounts in NOK 1 000 | Category | 2014 | 2013 |
| Financial assets: | |||
| Financial instruments (derivates) | Financial assets at fair value through P&L | - | - |
| Trade receivables | Loans and receivables | 32 577 | 23 809 |
| Other receivables 1) | Loans and receivables | 1 600 | - |
| Cash and cash equivalents | Loans and receivables | 3 821 | 1 177 |
| Total financial assets | 37 998 | 24 986 | |
| Financial liabilities: | |||
| Non-current borrowings | Financial liabilities measured at amortised cost | - | 19 967 |
| Current borrowings | Financial liabilities measured at amortised cost | - | 10 000 |
| Financial instruments (derivates) | Financial liabilities measured at amortised cost | 10 536 | 7 114 |
| Trade creditors | Financial liabilities measured at amortised cost | 16 669 | 30 931 |
| Other current liabilities 2) | Financial liabilities measured at amortised cost | - | 5 018 |
| Total financial liabilities | 27 205 | 73 030 |
1) VAT receivable and prepaid expenses are excluded since they are not defined as financial instruments.
2) Accruals for incurred costs and Public duties payable are excluded since they are not defined as financial instruments. Refer also to note 13.
All amounts in the table are booked values.
(b) Fair value of financial instruments
The carrying amount of trade receivables, other receivables and cash and cash equivalents is approximately equal to fair value since these instruments have a short term to maturity. Similarly, the carrying amount of trade creditors and other current liabilities is approximately equal to fair value since the effect of discounting is not significant. Fair value of the loan with DNB ASA is equal to the book value since a floating interest is agreed.
(c) Financial risk
The most significant financial risks which affect the Group are listed below. The management performs a continuous evaluation of these risks and determines policies related to how these risks are to be handled within the Group.
Credit risk:
Carrying amounts of financial assets presented above represents the maximum credit exposure. The Group is mainly exposed to credit risk related to trade receivables. The customers are basically large cruise ship owners and shipyards in Europe with satisfactory credit history. The credit risk is mainly related to new building contracts where a few yards are counterpart. This is increasing the credit risk. However due to nature of new building financing the management consideres the overall risk of loss on receivables to be relatively low. The Group has not provided any guarantees for third parties' liabilities.
See note 8 for information about the aging analysis of trade receivables.
Note 20 Financial instruments - Continued
Liquidity risk:
Liquidity risk is the risk of being unable to pay financial liabilities as they fall due. The company's approach to managing liquidity risk is to ensure that it will always have sufficient liquidity to meet its financial liabilities as they fall due, under normal as well as extraordinary circumstances, without incurring unacceptable losses or risking damage to the company's reputation. If the level of income from the subsidiaries is not sufficient, loans from group companies can be used to enable the Company to pay financial liabilities as they fall due.
The Group has increased liquidity risk on Newbuild projects as the company receives payments late in the projects. In Retrofit projects, the company receives payments after meeting certain milestones. Allthough the milestones are setup to enable a positive net cashflow on the projects, a delay in the projects can increase the liquidity risk.
| Amounts in NOK 1 000 | 0-6 | 6 - 12 | 1-5 |
|---|---|---|---|
| 31. Dec 2014 | months | months | years |
| Payments on long term borrowings 1) | - | - | |
| Trade creditors | 16 669 | - | - |
| Other current liabilities | - | - | |
| Total | 16 669 | - | - |
Foreign exchange rate risk:
The company is exposed to foreign exchange rate risk related to the value of NOK relative to other currencies, mainly due to sales in different currencies. The Company entered both in 2013 and in 2014 into several derivative instruments to reduce the exchange rate risk in cash flows nominated in EUR, associated with the sale in EUR in connection with several construction contracts. Refer to note 23 for information about these option contracts.
The cost are mainly in NOK, hence not secured. Change in the foreign exchange rate risk will
have no material impact on the Financial Statement.
Interest rate risk:
The interest rate on the long term bank loan and the overdraft facilities are floating. Hence, the Group has an exposure to interest rate fluctuations. The company does not have any interest rate derivatives.
Note 21 - Derivative financial instruments
| 31. Dec | 31. Dec | |
|---|---|---|
| Amounts in NOK 1 000 | 2014 | 2013 |
| Forward exchange option contracts | -10 536 | -7 113 |
| Total | -10 536 | -7 113 |
To some extent, the company uses derivative contracts to reduce the currency exposure on sales in EUR. Refer to note 20 for discussion of currency risk. The derivatives are not classified as hedging instruments, and are recognised at fair value through profit and loss.
The Group has entered into several EUR FX European single barrier knock-in options to reduce currency risk as described above. An FX European single barrier knock-in option is an agreement giving the buyer (the holder) the right, but not the obligation, to buy (call) or sell (put) a given amount of one currency against another currency at a specified price (strike price) on a specified future date (expiry date), if and only if the underlying FX spot rate is trading at or beyond a specified barrier at the exact time of expiration of the option.
There are no initial transaction costs. At expiery the Group receives the fair value in cash if exercised. Contracts has a maturity until 2017. In total these contracts have a nominal amount of EUR 17.6m.
Fair value measurements recognised in the statement of financial position:
The following table provides an analysis of financial instruments that are measured subsequent to initial recognition at fair value, grouped into Levels 1 to 3 based on the degree to which the fair value is observable.
-
Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities.
-
Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1, that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
-
Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs).
| Amounts in NOK 1 000 | |||
|---|---|---|---|
| Level 1 | Level 2 | Level 3 | |
| Derivative financial assets/(liabilities)31.12.14 | 0 | -10 536 | 0 |
The company has signed derivates of EUR 17.6m, where EUR 10.8m are due in 2015, EUR 2.9m are due in 2016 and EUR 3.9m in 2017.
22 - Leases
The Group has no finance leases.
The Group has entered into different operating leases for cars, office premises and other facilities, office furniture and office equipment. One of the office lease contracts is with a related party. This contract is further described in note 15.
The leases do not contain any restrictions on the company's dividend policy or financing opportunities.
The lease costs consist of ordinary lease payments and include:
| Amounts in NOK 1 000 | 2014 | 2013 |
|---|---|---|
| Lease cars | 851 | 883 |
| Lease office premises and other facilities (inclusive joint costs) | 3 143 | 3 062 |
| Lease office furniture and equipment | 293 | 684 |
| Total lease costs | 4 287 | 4 629 |
The future minimum rents related to non-cancellable leases fall due as follows:
| Amounts in NOK 1 000 | 2014 | 2013 |
|---|---|---|
| Within 1 year | 3 295 | 2 568 |
| 1 to 5 years | 5 631 | 4 596 |
| After 5 years | 820 | 2 400 |
| Total | 9 747 | 9 564 |
Note 23 - Pension
The company in the Group domiciled in Norway is required to have an occupational pension scheme in accordance with the Norwegian law of mandatory occupational pension (lov om obligatorisk tjenestepensjon). The Group's pension scheme fulfils the requirements of that law.
The Group's pension scheme covers all employees which are subject to these requirements. The scheme is based on a contribution plan.
The Group has no other pension arrangements in place.
| Amounts in NOK 1 000 | 2014 | 2013 |
|---|---|---|
| Service cost | 914 | 461 |
| Social security tax | 61 | 57 |
| Net pension costs | 975 | 518 |
Note 24 Contingent liabilities
Contingent liabilities: The company has not received any claims nor is it involved in any disputes.
Guarantees: For late delivieres the customers can give Scanship penalties according to contract.
Note 25 Events after the reporting period
Scanship has in 1Q15 been awarded a contract for delivery of a Total Clean Ship System on a newbuild at Fincantieri.
Note 26 Going concern
Equity The consolidated Annual Accounts for 2014 show a positive equity of NOK 45.1 million. The board assess the equity to be sufficient.
Liquidity The Group has a positive working capital and the liquidity situation is sufficient to meet the growth for ongoing projects.
Outlook The market outlook for the industry is good and the company has a good position in the market.
Financial Statement 2014 – Parent Company
| Incomestatement | |
|---|---|
| (NOK 1 000) | Note | 2014 | 2013 |
|---|---|---|---|
| Sales | 0 | 0 | |
| Total operating revenue | 0 | 0 | |
| Employee expenses | 4 | -573 | 0 |
| Other operating expenses | 4 | -677 | -108 |
| Operating profit (EBIT) before non-recurring items | -1 250 | -108 | |
| Non-recurring Items – Cost related to IPO | -2 361 | 0 | |
| Operating profit (EBIT) | -3 611 | -108 | |
| Interest income | 377 | 1 | |
| Interest expenses | -1 846 | -3 432 | |
| Net financial items | -1 470 | -3 431 | |
| Result before tax | -5 081 | -3 539 | |
| Income tax (expense)/ income | 5 | 1 372 | 919 |
| Result for the year | -3 709 | -2 619 | |
| Earnings per share (NOK per share) | |||
| - Basic | 12 | -0,05 | -1 091,25 |
| - Diluted | 4, 12 | -0,05 | -1 091,25 |
Statement of comprehensive income
| (NOK 1 000) | 2014 | 2013 |
|---|---|---|
| Result for the year | -3 709 | -2 619 |
| Other comprehensive income: | 0 | 0 |
| Total other comprehensive income | 0 | 0 |
| Total comprehensive income for the year | -3 709 | -2 619 |
| Statement of financial position | |||
|---|---|---|---|
| (NOK 1 000) | Note | 31.12.14 | 31.12.13 |
| ASSETS | |||
| Non-current assets | |||
| Deferred tax asset | 5 | 5 059 | 1 908 |
| Investment in subsidiaries | 6 | 221 000 | 221 000 |
| Total non-current assets | 226 059 | 222 908 | |
| Current assets | |||
| Other receivables | 7 | 76 | 40 |
| Receivables intercompany | 13 | 20 424 | 0 |
| Cash and cash equivalents | 8 | 405 | 2 |
| Total current assets | 20 905 | 42 | |
| Total assets | 246 965 | 222 950 | |
| EQUITY AND LIABILITIES Equity |
|||
|---|---|---|---|
| Share capital | 9 | 9 551 | 202 |
| Share premium | 177 912 | 100 462 | |
| Retained earnings | 59 440 | 74 759 | |
| Total equity | 246 902 | 175 422 | |
| Liabilities | |||
| Non-current liabilities | |||
| Long term borrowing | 10 | 0 | 19 900 |
| Total non-current liabilities | 0 | 19 900 | |
| Current liabilities | |||
| Current portion of long term borrowing | 10, 13 | 0 | 24 221 |
| Trade payables | 2 | 245 | |
| Other short term liabilities | 11 | 61 | 3 162 |
| Total current liabilities | 62 | 27 628 | |
| Total liabilities | 62 | 47 528 | |
| Total equity and liabilities | 246 965 | 222 950 |
Tore Enger Chairman of the Board
Susanne L. R. Schneider Member of the Board
Lysaker, 26. March, 2015
Henrik Badin CEO
Herman Marcussen Member of the Board
Brita Eilertsen Member of the Board
| Cash flow statement | |||
|---|---|---|---|
| (NOK 1 000) | Note | 2014 | 2013 |
| Cash flow from operating activities | |||
| Result before income tax | -5 081 | -3 539 | |
| Adjustments: | |||
| Change in trade payables | -243 | 82 | |
| Changes in other accruals | -3 137 | 3 452 | |
| Net cash flow from operating activities | -8 461 | -5 | |
| Cash flow from investing activities | |||
| Purchase of shares in subsidiaries | |||
| Net cash flow from investing activities | 0 | 0 | |
| Cash flow from financing activities | |||
| Proceeds from issuing stock | 73 410 | ||
| Long term borrowing | 10 | -44 121 | |
| Proceeds from borrowings | -20 424 | ||
| Repayments | |||
| Net cash flow from financing activities | 8 865 | 0 | |
| Net change in cash and cash equivalents | 403 | -5 | |
| Cash and cash equivalents at 1 January | 2 | 7 | |
| Cash and cash equivalents at 31 December | 8 | 405 | 2 |
| Non restricted cash, 31.12 | 377 | 2 | |
| Restricted cash, 31.12 | 29 | 0 | |
| Cash 31.12 | 405 | 2 |
| 2014 | ||
|---|---|---|
| (NOK 1 000) | Share capital | Share premium | Other paid | Retained | Total equity |
|---|---|---|---|---|---|
| in capital | earnings | ||||
| Equity at 1.1.2014 | 202 | 100 462 | 0 | 74 759 | 175 422 |
| Result for the year | -3 709 | -3 709 | |||
| Other comprehensive income | 0 | ||||
| Total comprehensive income | 0 | 0 | 0 | -3 709 | -3 709 |
| Share capital increase from retained | |||||
| earnings, 14.3.14 | 6 798 | -6 798 | 0 | ||
| Increase share capital paid in cash, 10.4.14.2014 | 2 551 | 77 450 | 80 001 | ||
| Transaction costs | -4 812 | -4 812 | |||
| Equity at 31 December 2014 | 9 551 | 177 912 | 0 | 59 440 | 246 902 |
| 2013 | |||||
|---|---|---|---|---|---|
| (NOK 1 000) | Share capital | Share premium | Other paid | Retained | Total equity |
| in capital | earnings | ||||
| Equity at 1.1.2013 | 202 | 100 462 | 0 | 77 378 | 178 041 |
| Result for the year | -2 619 | -2 619 | |||
| Other comprehensive income | |||||
| Total comprehensive income | 0 | 0 | 0 | -2 619 | -2 619 |
| Equity at 31 December 2013 | 202 | 100 462 | 0 | 74 759 | 175 422 |
Note 1 General information
Scanship Holding AS is a limited company incorporated 11 April 2011 and is domiciled in Norway, with its Head Office at Lysaker. The Company was established as a part of a restructuring in the Scanship Group in 2011, and currently the Company's only business is ownership of shares in Scanship AS.
The company's board approved the financial statements on 26th March 2015.
Note 2 Summary of significant accounting policies
The principal accounting policies applied in the preparation of these consolidated financial statements are set out below.
2.1 Basis for preparation
The financial statements of Scanship Holding ASA have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union (EU) and in accordance with the additional requirements following the Norwegian Accounting Act.
The financial statements have been prepared on a historical cost basis.
2.2 Investment in subsidiaries
Investment in subsidiaries is recognised at cost, less any necessary impairment. Impairment to fair value will be carried out if the reduction in value is caused by circumstances which may not be regarded as incidental, and deemed necessary by generally accepted accounting principles. Impairments are reversed when the cause and basis of the initial impairment is no longer present.
2.3 Transactions in foreign currency
The functional currency and the presentation of the Company is Norske Kroner (NOK). Foreign currency transactions are translated into the functional currency using the exchange rates at the transaction date. Monetary balances in foreign currencies are translated into the functional currency at the exchange rates on the date of the balance sheet. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement.
2.4 Cash and cash equivalents
Cash and the equivalents include cash on hand, deposits with banks and other short-term highly liquid investments with original maturities of three months or less.
2.5 Trade receivables and trade creditors
Trade receivables and trade creditors are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, if the amortisation effect is material.
2.6 Borrowings
All loans and borrowings are initially recognised at cost, being the fair value of the consideration received net of transaction/issue costs associated with the borrowing. After initial recognition, interestsbearing loans and borrowings are subsequently measured at amortised cost using the effective interest method. Any difference between the consideration received net of transaction/issue costs associated with the borrowing and the redemption value, is recognised in the income statement over the term of the loan.
2.7 Taxes
Income tax expense for the period comprises current tax expense and deferred tax expense. The company i subject to 27% income tax in accordance with the Norwegian company tax.
Tax is recognised in the income statement, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case the tax is also recognised in other comprehensive income or directly in equity. Deferred tax assets and liabilities are calculated on the basis of existing temporary differences between the carrying amounts of assets and liabilities in the financial statement and their tax bases, together with tax losses carried forward at the balance sheet date. Deferred tax assets and liabilities are calculated based on the tax rates and tax legislation that are expected to apply when the assets are realised or the liabilities are settled, based on the tax rates and tax legislation that have been enacted or substantially enacted on the balance sheet date. Deferred tax assets are recognised only to the extent that it is probable that future taxable profits will be available against which the assets can be utilised. The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that is no longer probable that the deferred tax asset can be utilised. Deferred tax assets and liabilities are not discounted. Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred taxes assets and liabilities relate to income taxes levied by the same taxation authority on the same taxable entity.
2.8 Cost of equity transactions
Transaction costs directly attributable to an equity transaction are recognised directly in equity, net after deducting tax.
2.9 Cash flow statement
The cash flow statement is prepared by using the indirect method.
2.10 Events after the balance sheet date
The financial statements are adjusted to reflect events after the balance sheet date that provide evidence of conditions that existed at the balance sheet date (adjusting events). The financial statements are not adjusted to reflect events after the balance sheet date that are indicative of conditions that arose after the balance sheet date (non-adjusting events). Non-adjusting events are disclosed if significant.
are not adjusted to reflect events after the balance sheet date that are indicative of conditions that arose after the balance sheet date (nonadjusting events). Non-adjusting events are disclosed if significant.
2.11 Changes in accounting policy and disclosures
New and amended standards and interpretations that has been effective for accounting periods starting on 1st January 2015 has not have any impact on the Company's financial statements.
Information regarding new and amended standards and interpretations are provided in note 3 of the consolidated financial statements.
Note 3 Critical accounting estimates and assumptions
The preparation of the financial statements in accordance with IFRS requires management to make judgements, use estimates and assumptions that affect the reported amounts of assets and liabilities, income and expenses.
The estimates and associated assumptions are based on historical experience and various other factors that are considered to be reasonable under the circumstances. The estimates and underlying assumptions are reviewed on an on-going basis.
Estimates and assumptions which represent a significant risk of resulting in material adjustments to the carrying amounts of assets and liabilities relates mainly to the Company's investments in subsidiaries. The investment in subsidiaries is recognised at cost, less any necessary impairment. Each year the management apply judgement to assess it there are any indication that the carrying amount is higher than its recoverable amount. If there are any indications of impairment, the management calculate the recoverable amount which implies assessments regarding future cash flows from its subsidiaries. These assessments require substantial judgements.
Discretionary valuation of shares in subsidiaries
Shares in subsidiaries are valued based on a discounted cash flow analysis. The inputs to the analysis are based on assumptions for future contracts as well as current contracts on hand. The valuation subject to judgement is based on several assumptions; discount rate, expected future contracts and profits.
| Note 4 other operating expenses and remuneration Board remuneration: Amounts in NOK 1 000 2014 2013 Board remuneration 502 0 Social tax, expenses 71 0 Total 573 0 Other operating expenses include: Amounts in NOK 1 000 2014 2013 Auditor remuneration 125 65 Other operating expenses 552 43 Total 677 108 Remuneration to auditor is allocated as specified below: Amounts in NOK 1 000 2014 2013 Statutory audits 125 65 Other assurance services 0 0 Tax consultancy 0 0 |
|||
|---|---|---|---|
| Other services | 0 | 0 | |
| Total, excl. VAT 125 65 |
|||
Note 4 continued share option plan
Option programme
The company has a share option programme covering certain employees in senior positions. As at 31.12.2014, 6 employees were included in the option programme. The option vests yearly over 3 years.
The fair value of options granted in 2014 was NOK 0,69 per option. The share option programme liability is NOK 0,6m as of 31.12.14
Overview of outstanding options:
| 2014 | |
|---|---|
| Outstanding options 1.1 | 0 |
| Options granted | 1 470 000 |
| Options forfeited | -600 000 |
| Options exercised | 0 |
| Options expired | 0 |
| Outstanding options 31.12 | 870 000 |
| Of which exercisable | 0 |
The outstanding options are subject to the following conditions:
| Expiry date | Average strike price | Number of share options |
|---|---|---|
| 2019 | 3,20 | 870 000 |
| 870 000 |
The fair value of the options has been calculated using Black & Scholes option-pricing model. The average fair value of the options granted in 2014 is NOK 0,69.
The calculations are based on the following assumptions:
Share price on the grant date
The share price is set to the stock exchange price on the grant date.
The strike price per option
The strike price is the share price on the grant date.
Volatility
It is assumed that historic volatility of comparable shares is an indication of future volatility.
The expected volatility is therefore stipulated to be the same as the historic volatility,
which equals a volatility of 37,54 %.
The term of the option
It is assumed that 100 % of the employees will exercise the options once they are exercisable.
The options are expected to have a term of 1-3 years.
Dividend
The estimated dividend per share is NOK 0 per annum.
Risk-free interest rate
The risk-free interest rate is set equal to the interest rate on government bonds during the term of the option.
Note 5 Tax
| Specification of income tax: | ||
|---|---|---|
| Amounts in NOK 1 000 | 2014 | 2013 |
| Income tax payable | 0 | 0 |
| Change in deferred tax | -1 372 | -919 |
| Total income tax expense/(income) | -1 372 *1) |
-919 |
*1) Change in deffered tax consists of loss of the year 5 081 x 27 % = 1 372. Tax effect of the transaction costs is recognized as retained earnings.
Specification of temporary differences and deferred tax:
| Amounts in NOK 1 000 | 2014 | 2013 |
|---|---|---|
| Tax loss carry forward | -18 737 *1) |
-7 066 |
| Total basis for deferred tax | -18 737 | -7 066 |
| Deferred tax asset (27%) | -5 059 | -1 908 |
*1) Change in tax carry forward consists of result before income tax tnok -5 081 and transaction costs tnok 6 591 recognized as retained earnings.
Specification of temporary differences and deferred tax:
There are no temporary differences as of 31 December 2014 and as of 31 December 2013:
Reconciliation of effective tax rate:
| Amounts in NOK 1 000 | 2014 | 2013 |
|---|---|---|
| Result before income tax | -5 081 | -3 539 |
| Expected income tax | -1 372 | -991 |
| Adjusted for tax effect of the following items: | ||
| Effect of change in tax rate from 28 % to 27 % | 0 | 71 |
| Permanent differences | 0 | 1 |
| Total income tax expense/(income) | -1 372 | -919 |
| Note 6 Investment in subsidiaries | ||||
|---|---|---|---|---|
| Amounts in NOK 1 000 | ||||
| Company | Country of | % equity and | Equity at | Result for |
| incorporation | voting share | 31. Dec. 2014 | the year 2014 | |
| Scanship AS 1) | Tønsberg, Norway | 100 % | 22 425 | (5 720) |
| Amounts in NOK 1 000 | ||||
| Company | Country of | % equity and | Equity at | Result for |
| incorporation | voting share | 31. Dec. 2013 | the year 2013 | |
| Scanship AS 1) | Tønsberg, Norway | 100 % | 23 190 | 6 406 |
1) Scanship AS was incorporated in 2007, and was the parent company in the Scanship Group before Scanship Holding AS in 2011 was established as the new Holding company.
Note 7 Other receivables
Other receivables include:
| Amounts in NOK 1 000 | 31 Dec 2014 | 31 Dec 2013 |
|---|---|---|
| Receivables on M. Rasmussen1) | 24 | 24 |
| Prepaid expenses and other items | 52 | 16 |
| Total | 76 | 40 |
| 1) M. Rasmussen owns 20% of the shares in Nordic Made AS |
| 31 Dec 2013 | |
|---|---|
| Bank deposits 405 |
2 |
| Total cash and cash equivalents 405 |
2 |
Note 9 Share capital and shareholder information
See note 11 in the consolidated financial statements.
Note 10 - Borrowings
| Amounts in NOK 1 000 | 2014 | 2013 |
|---|---|---|
| Non current - borrowing consists of liabilities to Scanship AS1) | 0 | 14 221 |
| Loan agreement to DnB | 0 | 29 900 |
| Total | 0 | 44 121 |
1) Scanship AS is a 100% owned subsidiary.
Total loan to DnB, TNOK 29 900, was paid in 2014.
| Note 11 Other current liabilities | ||
|---|---|---|
| 31. Dec | 31. Dec | |
| Amounts in NOK 1 000 | 2014 | 2013 |
| Short term loan from shareholders | 0 | 2 898 |
| Other payables and accruals for incurred costs | 61 | 264 |
| Total | 61 | 3 162 |
| Note 12 - Earnings per share | ||
|---|---|---|
| 2014 | 2013 | |
| Profit for the year (NOK 1 000) | -3 709 | -2 619 |
| Weighted average number of shares outstanding | 71 260 245 | 2 400 |
| Earnings per share (NOK per share) : | ||
| - Basic | -0,05 | -1,09 |
| - Diluted | -0,05 | -1,09 |
Note 13 Financial instruments
(a) Categories of financial instruments
| 31 Dec | 31 Dec | ||
|---|---|---|---|
| Amounts in NOK 1 000 | Category | 2014 | 2013 |
| Financial assets: | |||
| Other receivables | Loans and receivables | 76 | 40 |
| Receivables intercompany | Loans and receivables | 20 424 | |
| Cash and cash equivalents | Loans and receivables | 405 | 2 |
| Total financial assets | 20 905 | 42 | |
| Financial liabilities: | |||
| Current liabilities | Financial liabilities at amortised cost | 0 | 24 221 |
| Long term borrowings | Financial liabilities at amortised cost | 0 | 19 900 |
| Other current liabilities | Financial liabilities at amortised cost | 61 | 2 898 |
| Total financial liabilities | 61 | 47 019 |
2) Accruals for incurred costs are excluded since they are not defined as financial instruments.
(b) Fair value of financial instruments
The carrying amount of other receivables and cash and cash equivalents is approximately equal to fair value since these instruments have a short term to maturity. Similarly, the carrying amount of other current liabilities is approximately equal to fair value since the effect of discounting is not significant. Regarding long term borrowings and current liabilities, the fair value is assumed to be equal to the nominal amount. This is based on the fact that a) it is assessed no change in credit risk since the loan was issued, and b) the market interest rate level at 31.12.2014 was in substance equal to the interest rate at the date of issue of the loan.
(c) Financial risk
The most significant financial risks which affect the company are listed below. The management performs a continuous evaluation of these risks and determines policies related to how these risks are to be handled.
Credit risk:
Carrying amounts of financial assets presented above represents the maximum credit exposure. The credit risk related to cash and cash equivalents and other receivables is considered to be immaterial.
Liquidity risk:
Liquidity risk is the risk of being unable to pay financial liabilities as they fall due. The company's approach to managing liquidity risk is to ensure that it will always have sufficient liquidity to meet its financial liabilities as they fall due, under normal as well as extraordinary circumstances, without incurring unacceptable losses or risking damage to the company's reputation. If the level of income from the subsidiaries is not sufficient, loans from group companies can be used to enable the Company to pay financial liabilities as they fall due.
Note 13 Financial instruments - Continued
| Amounts in NOK 1 000 | 0-6 | 6 - 12 | 1-5 |
|---|---|---|---|
| 31. Dec 2014 | months | months | years |
| Payments on long term borrowings Other current liabilities | 61 | ||
| Total | 61 | - | - |
See note 20 in the Consolidated Financial Statement for further information of the liquidity risk.
Foreign exchange rate risk:
The Company has no currency risk since all income and all major expenses are nominated in NOK.
Note 14 Contingent liabilities
Contingent liabilities: The Company has not been involved in any legal or financial disputes in 2014. Guarantees: There are no guarantees issued at December 31, 2014.
Note 15 Events after the reporting period
There are no events after the reporting period that is assessed to have a material impact on the Company's financial situation.
We confirm to the best of our knowledge that the financial statements for the group and for the parent company for 2014 have been prepared in accordance with the applicable accounting standards, and that the information presented in the financial statements give a true and fair view of the company's and the Group's assets, liabilities, financial position and result for the period viewed in their entirety, and that the Board of Directors' report gives a true and fair view of the development, performance and financial position of the company and Group, and includes a description of the principle risks and uncertainties.
Tore Enger Chairman of the Board
Susanne L. R. Schneider Member of the Board
Lysaker, 20. April, 2015
Henrik Badin CEO
Herman Marcussen Member of the Board
Brita Eilertsen Member of the Board
Auditors report
Remuneration report
Scanship Holding ASA NORWAY
NORWAY
201 Davie, FL 33314 USA
P: +1 250 590 3503 F: +1 250 590 3593
www.scanship.no