Annual Report • Apr 24, 2018
Annual Report
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– Value people
| Letter to the Shareholders. 4 | |
|---|---|
| The Year in Review. 6 | |
| Business Highlights.7 | |
| Zalaris Offerings & Strategy. 8 | |
| Presentation of the Market.10 | |
| Zalaris Management Team.15 | |
| Report from the Board of Directors.16 | |
| Financial Statement: Consolidated Group. 22 | |
| Financial Statement: Parent Company. 54 | |
| Auditor's Report.76 | |
| Corporate Governance. 80 | |
| Executive Remuneration Policy. 88 | |
| Shareholder Information. 94 | |
| Letter to the Shareholders. 4 | |
|---|---|
| The Year in Review. 6 | |
| Business Highlights.7 | |
| Zalaris Offerings & Strategy. 8 | |
| Presentation of the Market.10 | |
| Zalaris Management Team.15 | |
| Report from the Board of Directors.16 | |
| Financial Statement: Consolidated Group. 22 | |
| Financial Statement: Parent Company. 54 | |
| Auditor's Report.76 | |
| Corporate Governance. 80 | |
| Executive Remuneration Policy. 88 | |
| Shareholder Information. 94 | |
| About Zalaris. 97 | |
Building on the company's strong position in the Nordics, Zalaris advanced to become a leading provider of consulting, outsourced human capital management and payroll services across northern and central Europe, the UK and Ireland.
The year 2017 was marked by several important milestones for Zalaris. We entered the year as a predominantly Nordic player with activity in Poland and the Baltics, along with an offshoring operation in India. We ended the year as a European player, with activities stretching across northern and central Europe, the UK and Ireland, India, and Thailand.
Since the company was listed on the Oslo Stock Exchange in 2014, we have seen our markets gradually develop and customer expectations change. Whereas outsourcing of basic HR services used to be a key driver for growth, new technology and cloud solutions that can be offered across country borders have emerged as a great opportunity.
As a response, we changed our strategy and decided it was time for Zalaris to look outside our traditional home markets for attractive acquisition opportunities. With sumarum and ROC becoming part of Zalaris, we have positioned the company as a leading provider of consulting and outsourced human capital management and payroll services with a scalable platform in regions characterised by significant growth.
In 2014, when the company was listed, group revenues were NOK 326 million. In the fourth quarter of 2017, annualized group revenues were nearly NOK 800 million. Revenues have more than doubled in the period. The company has grown, and so has shareholder value. In the initial public offering in June 2014, the price of one Zalaris share was set at NOK 23. The average closing price in the first three months of 2018 was NOK 50.37 per share.
The company has not only grown; it has changed. While we remain customer-oriented, technology-driven and entrepreneurial at heart, we see that the business of providing HR services is changing, and we are transforming ourselves to reflect that change.
In 2015, our HR outsourcing business represented 93 percent of our revenue. In the fourth quarter of 2017, the corresponding number was 55 percent. Our other business segments, consulting and cloud, are becoming increasingly important, with 28 and 18 percent of revenues, respectively. Our extensive insight and proven capabilities in SAP Human Capital Solutions and SAP SuccessFactors are key in this respect.
5 – Value people
Our transformation mirrors the way that our customers are adapting to new realities. Talent management is becoming increasingly important to them, and we see that enterprises are preferring strategic partners with the capabilities and expertise required to build the next generation multi-process HR model on a digital platform. When you read about current market trends in the insights section prepared by Everest Group elsewhere in this report, you will learn that tomorrow's HR services are likely to be highly automated. They will offer a seamless and integrated employee experience, be delivered through the cloud and give deep strategic insight through high-end analytics.
We firmly believe that Zalaris is well-positioned to gain from these industry trends. We have already received encouraging feedback and increased business from existing customers while expanding our offering and capabilities to new geographies. We have also been challenged by industry leaders to help them design, develop and implement sophisticated new integrated solutions that will significantly alter their talent management processes.
Our main focus going forward is growing our customer base and business organically, though we may still be looking for new ways to expand our business through acquisitions. We will continue to strengthen our talent strategy advisory capability. Our ultimate objective is to keep our customers satisfied and offer them even better, broader and more valuable services.
We will continue streamlining our own operations, improving with digital technologies such as AI and expanding our margin, not only by reducing cost but by ensuring that all of Zalaris is running at an optimal speed. While some further integration activities are planned in the first half of 2018, we expect profit margins towards the end of the year to gradually climb towards our double-digit ambition for the long term.
I am deeply inspired by what we have achieved, encouraged with the opportunities that lie before us, and grateful to all of you for your efforts and support.
Hans-Petter Mellerud Chief Executive Officer
Revenue Million NOK
Operating Profit Before other non-recurring costs in Million NOK
Total Equity Million NOK
6
• AKTIV Against Cancer and Zalaris enter into a new agreement
In a world that is more globalized and technologically developed than ever before, businesses and people are experiencing a digital transformation in most areas. This transformation requires people and companies to rapidly adapt and develop to ensure they are among the winners in the market .
The human resources (HR) function and its processes are becoming increasingly important in companies to help them change with speed and remain agile. An increased focus on the temporary workforce and the advent of many new HR tools requires new insights and focus from HR. With the traditional way of doing HR, businesses are having a hard time staying competitive. Businesses are about people, and the digital transformation empowers people – if the right solutions are implemented. New HR solutions foster effectiveness, mobility and quality, as leaders and HR directors are empowered to become more strategic-minded and employees to become more task-focused. Today, some HR departments are bottlenecks maintaining old systems. They need new tools to become strategic, innovative and part of delivering business results.
Zalaris' response to the digital transformation is to create better solutions, through digitalized and mobilized services, high-end consultants, and safe handling of business-critical data and services. We always pursue the most suitable and effective solutions while striving to provide the best services to our customers.
With its historic growth in the last year, Zalaris has now positioned itself to meet higher demand through its European reach and increase of consultants available for European and global customers. Our scalable platform will help us continue to expand our European scope going forward.
Our strategic efforts are focused on four priorities: local support, technological advantage, best-practice solutions and certified expertise.
Zalaris offers unique technological advantages, knowledge and guidance, specific to the companies we support, anywhere and everywhere they do business. This includes applying technologies such as RPA (Robot Process Automation) and AI for insights and improvement.
Zalaris offers proven best practices and change transformation insights associated with today's most sophisticated web- and mobile-based cloud solutions, powered by SAP and SAP SuccessFactors.
Zalaris is all about maximizing the value of human capital through excellence in HR processes. Our job is to focus all HR directors and leaders on their core business and strategic development instead of being prevented by ineffective demands.
Our way of doing that is by handling all transactional HR tasks for HR directors and leaders. We address all aspects of the employee experience, from the time of hiring through the full tenure of employment as well as in the alumni phase of this paradigm.
We serve more than one million employees each month with our solutions, across multiple industries and with many of the region's most reputable employers. These are companies that rank among the largest and most diverse when it comes to costeffectively harmonizing processes for personnel administration, payroll and talent management across borders.
Zalaris knows the critical importance and value of advancing HR beyond traditional roles and into a position to make a stronger overall contribution to core business objectives and a successful strategic direction.
Zalaris' business is organised in three operating segments: HR Outsourcing, Cloud Services and Consulting. We offer a wide range of cloud-based services, including personnel administration and payroll, benefits management, pension administration, travel management, time management, talent management and personnel controlling (HR Analytics). This is a response to enterprises taking a more holistic approach to HR tasks.
The cloud segment is the segment where we are experiencing the strongest growth. We offer complete SAP HCM and SAP SuccessFactors outsourcing services directly from the cloud. We serve as "a single source" for a comprehensive range of proven HR solutions that are secure, reliable and configured to unique customer requirements.
Through our extensive expertise and experience, we can provide timely, reliable and agreed-upon budgets, even for complex projects. With more than 80 experienced consultants spread out across Europe, we can ensure that our solutions are optimally implemented into our customers' companies.
Our consultants provide advice and solutions while guiding customers through both short- and long-term projects. While customers focus on daily tasks, Zalaris consultants manage implementation as well as HR transformation, including the challenge of integrating an increasing amount of new HR tools. The result is an effective process and quality implementation while business continues as usual. We currently offer our consulting services in Sweden, Norway, Denmark, Finland, Latvia, Lithuania, Poland, Germany, Switzerland, Austria, the UK and Ireland.
The first step of any HR transformation journey should begin with a knowledgeable, trusted partner that can help achieve unique, long-term goals. Together with our customers we create the functional concepts and deliver individual solutions tailored to their specific requirements.
The talent world is no longer on the cusp of change, but well in the midst of it. Enterprises and their HR service providers need to navigate this evolution skillfully and effectively to create differentiation and gain a competitive advantage. The two most critical levers of this evolution are the Emergence of Digital and the Changing Nature of Talent. These are not isolated developments. They are closely interlinked.
The desires and preferences of the global workforce have undergone a sea change in the last few years. Some important trends include:
The advent of digital has caused the composition of the workforce to change in other significant ways as well.
"Digital" is a loosely and variably defined term, but in the context of HR and talent, the following digital levers assume the utmost importance: Cloud/SaaS/ BPaaS, Analytics, Mobility, Robotic Process Automation (RPA), and Artificial Intelligence (especially Natural Language Processing and Machine Learning). Digitalization is obviously already upon us and is having a multi-dimensional impact on talent and how it is managed and leveraged.
• Better experience: The digital experience as customers has led to the demand for a better experience as employees. Now, the same technologies are helping fulfill that demand. Digital levers such as mobility, SaaS, AI and analytics help enhance the employee experience significantly.
This interplay between the various digital levers and changing nature of talent is transforming the traditional "pyramid" HR model to a leaner, more employee-focused "diamond" model (see Figure 2).
As enterprises and their HR organisations try to navigate this change, they will increasingly be challenged in terms of the expertise, time, and investment required to do so. HR service providers with sharp focus on this domain will emerge as natural partners to enterprises. Everest Group's research on the HR services market shows this is already happening through clear, visible signs.
Digital continues to impact the HR and HR services market in various ways. In addition to the traditional HR outsourcing market segment growing faster, relatively newer segments have also emerged in response to strong enterprise demand.
Multi-Process HR Outsourcing (MPHRO), where multiple HR processes are outsourced to a single provider, has been the traditional HR outsourcing construct. This market has grown at low single-digit rates in the last few years, but as the digital puzzle unfolds and emphasis on employee experience rises, enterprises are partnering more with HR outsourcing providers. This has led to a sharp upturn in growth globally and especially in Europe (see Figure 3 on next page). This has been driven not only by the demand from more enterprises wanting to outsource but also by the broader scope of services in such arrangements, including analytics and employee experience services. As demand for these services continues to increase, growth of the MPHRO market is expected to accelerate.
SaaS-based systems are among the biggest recent disruptors in the HR universe. Workday and SuccessFactors have upended the tech landscape for many reasons. These systems are less expensive than traditional, on-premise ERPs, in terms of license costs as well as implementation and application management. The SaaS systems are also easier to use, enhancing employee and manager experience.
Contingent Workforce Management Services Growth Rates (2016-2017)
High Low
In addition, they integrate more easily with other cloud-based point solutions, leading to better availability of data and more advanced analytics.
These SaaS systems have given rise to a newer genre of services that enterprises require from providers. Providing Business Process Services (BPS) or HR services on top of SaaS systems, which is better known as Business Process as a Service (BPaaS), is a fast-growing market segment globally, and more so in Europe (see Figure 4). SaaS implementation & management services are also witnessing a huge increase in demand, which is reflected in the rapid market growth rates of over 20%. With the continued adoption of SaaS systems, both the BPaaS market as well as the SaaS implementation & management services market will continue to grow at a rapid clip in the near future.
HR analytics, with the ability to provide better insights, is also becoming increasingly important. Optimal leverage of HR analytics has the potential to affect every piece of the hire-to-retire value chain. The insights gleaned can have a positive impact on efficiency and cost savings while providing more strategic benefits such as improving quality of hire, reducing attrition, and enhancing employee engagement & experience. Aside from the technology layer, human intervention will be required to bring it into the HR domain context for problem identification and solving as well as data interpretation – an area where enterprises are increasingly looking towards service providers for assistance through advisory services.
Mobile access is a critical component to improving employee satisfaction and is fast becoming a bare necessity. A number of functionalities, especially those related to self-service, are now commonly available through mobile. Mobile usage analytics can add a layer of personalization and improve the overall experience while aiding an organisation's understanding of its employees.
Chatbot usage in employee contact centers is starting to move beyond the experimental phase. Leveraging Natural Language Processing (NLP) to interact with clients and Machine Learning (ML) to improve its efficiency is a natural way forward. Chatbots have an obvious impact on increasing cost savings. But having an optimal mix between chatbot and human interaction can also significantly enhance employee experience through improved response time and increased accuracy. In addition, ML combined with other digital levers (such as analytics) can appreciably elevate the effectiveness of all of them.
There are a number of chatbot tools in the market, and service providers are investing here as well. Bringing in the most relevant chatbot platform and training it requires expertise that many enterprises lack – providing an obvious area for HRO providers to step in.
RPA has had a massive impact on the BPS world in terms of efficiency, accuracy and cost savings by replacing humans engaged in repetitive and
transactional tasks with bots. While its effect has been sweeping for Finance & Accounting (F&A) processes such as accounts receivables, its impact on HR processes has been rather muted. This has partially to do with the high amount of technology already leveraged in HR. However, though not sweeping, RPA has the potential to be an efficiency multiplier in HR through calibrated application in multiple areas, such as:
The level of effectiveness of RPA depends on the unique situation of an enterprise. With RPA application in HR being piecemeal and often requiring investigation and experimentation to identify the most optimal situations, an HR service provider is often better suited than the enterprise to provide the RPA implementation and maintenance services as an extension of HRO services. Thus, the next-generation digital levers not only offer varying benefits (see Figure 5), they are also mutually inclusive of each other. This means a second digital lever at least is needed to bring out the maximum potential impact of a digital lever. As a result, it is important to take a holistic approach when investing in these technologies.
As the digital era comes upon us and employee experience assumes importance, many enterprises do not have the money or bandwidth to invest
Source: Everest Group 2018
Chief Executive Officer
Balakrishnan Narayanan Executive Vice President
APAC
Halvor Leirvåg
Chief Technology Officer
Richard E. Schiørn Executive Vice President
Strategy
Executive Vice President Northern Europe
Jörg John Executive Vice President People and Change
Executive Vice President Central Europe
Jan Erik Nessmo Vice President PMO and Transformation
14
Executive Vice President UK/IRL
Vice President Alliances and Partners
Global Market Size (2017) = US\$2.0 - 2.1 Billion
internally in these initiatives. In addition, compliance with new and tougher regulations, such as GDPR, greatly depends on digital technologies and related best practices. In this context, the role of HR service providers becomes even more critical. The service provider moves beyond being just a "vendor" to a "partner."
The services provided by HR outsourcing providers also need to move beyond the relatively narrow outsourcing construct to a broader "orchestration" construct. HR orchestration implies broader and deeper provider visibility and involvement across the HR value chain, while not necessarily owning the entire chain. This includes SaaS implementation, ongoing system maintenance & execution of HR processes, re-imagining HR in a digital world, and advising the client on workforce strategy to make HR more efficient, provide better employee experience, and ultimately make them next-gen ready.
Zalaris' recent investments and acquisitions significantly enhance its portfolio in terms of:
This is likely to positively impact all of Zalaris' business and give it much better access to the single-country payroll markets growing at a moderate pace of 6-8%. It can have a particularly positive impact on the Multi-Country Payroll Outsourcing (MCPO) business, which is a highgrowth market, including in Europe (see Figure 6).
Going forward, it will be key for Zalaris to integrate the complementary capabilities across its various units to unlock the full potential of the acquisitions. Continued investments related to digital, especially in development of talent strategy advisory capabilities, will be critical to standing out from the competition and emerging as the next-gen partner for its clients.
This market update is commissioned by Zalaris. All forward-looking statements contained in this update are based upon Everest Group's assumptions; there can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements.
Everest Group is a consulting and research firm focused on strategic IT, business services, and sourcing, and acts as trusted advisors to senior executives of leading enterprises, providers, and investors. The firm helps clients improve operational and financial performance through a hands-on process that supports them in making well-informed decisions that deliver high-impact results and achieve sustained value. Everest Group's insight and guidance empower clients to improve organisational efficiency, effectiveness, agility, and responsiveness. What sets Everest Group apart is the integration of deep sourcing knowledge, problem-solving skills and original research. Details and in-
depth content are available at www.everestgrp.com.
Email: [email protected]
19-21%
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Zalaris ASA's mission is to help clients maximize the value of their human capital through excellence in people processes.
Zalaris delivers a full range of services, organised as three business units: HR Outsourcing, Cloud Services and Consulting.
The company meets the increasing demand for services, which enables human resources departments to focus on strategic processes. A stronger platform for continued growth has been established as a result of significant expansion through acquisitions and new deals in the last year. The full effect of the acquisitions is expected by mid-2018, as ROC Group and sumarum AG will be fully integrated. This will broaden the company's range of services and make markets in new geographies accessible.
With more than ten years of experience and 829 employees, Zalaris provides people (HR) services to customers for more than 270,000 people each month.
The Oslo-headquartered company delivers services out of local-language centers covering northern and central Europe, the UK and Ireland, India, and Thailand.
Through the acquisitions of ROC Group and sumarum AG in the second half of 2017, Zalaris has positioned the company as a leading provider of consulting and outsourced human capital management and payroll services in Europe. Zalaris now has a scalable platform in regions characterised by significant growth and is able to offer existing and new customers services and expertise all over Europe.
In 2017, Zalaris signed contracts with new customers, such as DNB ASA, Statkraft AS and China Euro Vehicle Technology AB, while expanding its
Lars Henriksen Chairman of the Board
Liselotte Hägertz Engstam Board Member
Jan Koivurinta Board Member
Tina Steinsvik Sund
Karl-Christian Agerup
Board Member Board Member
agreements with existing customers, such as Siemens AB and Norsk Hydro ASA.
Cloud services have increasingly become a part of the company's activities over the past year, driven by the customer need to move HR services to the cloud. In the last year, Zalaris has strengthened the organisation to support this growth, also through the latest acquisitions.
The historical growth of the company has an immediate impact on customers, as Zalaris has more local service centers and consultants available in north and central Europe, Asia and the Pacific. Existing customers will be able to utilize more support and custom-made solutions for industrial needs through specialist consultants with a wider geographical distribution than before.
Integration of the new businesses is progressing according to plan and is expected to be concluded by mid-2018. Zalaris has received positive feedback and increased business from existing and new customers as offerings and capabilities have expanded to new geographies.
Zalaris' Group turnover in 2017 was NOK 577.3 million, an increase of 45.6% compared to 2016 (NOK 396.7 million). This increase is mainly attributable to the acquired companies, with the majority of their business within the consulting and cloud segments.
Zalaris' Group 2017 operating profit was NOK 34.0 million, or 5.9% of turnover, when excluding extraordinary costs (NOK 38.0 million, or 9.6% of turnover in 2016). Zalaris' Group 2017 ordinary profit before tax was a loss of NOK 9.5 million (NOK 33.3 million in 2016). Profit for the period in 2017 was a loss of NOK 12.2 million (NOK 26.0 million in 2016).
Cash flow in 2017 shows net cash from operating activities of NOK 52.6 million (NOK 14.3 million in 2016). Net cash flow from investing activities was NOK 301,503 (NOK 14.1 million in 2016).
Net cash flow from financing activities was NOK 306.0 million in 2017. Zalaris has solid liquidity with cash and cash equivalent amounting to NOK 37.7 at the end of 2017 (NOK 43.5 million at the end of 2016).
The Board's view is that Zalaris has sufficient cash to internally finance the Group's liabilities, investment needs and operations.
The Group's equity amounted to NOK 119.7 million, as of 31.12.2017. The Board and management expect the equity ratio to remain strong based on further improvements in Group results.
As of 31.12.2017, the Group's current assets exceeded short-term debt by NOK 35.3 million (NOK 58.9 million, as of 31.12.2016).
Total assets at the end of FY 2017 were NOK 567.4 million (NOK 192 million in 2016). The main changes in assets from the previous year are related to the acquisitions of sumarum and ROC, which have resulted in increased intangible assets as goodwill and customer contracts, and increased trade accounts receivables. Net costs for implementation projects of new outsourcing contracts decreased from NOK 23.1 million in 2016 to 21.8 million in 2017.
Total liabilities were NOK 447.7 million at the end of fiscal year 2017 (NOK 91.4 million in 2016). The increase in liabilities is mainly due to increased interest-bearing debt related to the acquisitions and increased trade accounts payables related to the new business.
The financial statements of the parent company, Zalaris ASA, are prepared and presented in accordance with the Norwegian Accounting Act and generally accepted accounting principles in Norway ("NGAAP").
Zalaris ASA is a holding company offering centralized management group services to its subsidiaries, such as IT, accounting and controlling, HR, and marketing. The parent company is invoicing its subsidiaries for some of its management services.
For Zalaris ASA, the 2017 turnover was NOK 101.4 million, which is an increase of 8.6% compared to
Total shareholders' equity in Zalaris ASA, as of 31 December 2017, was NOK 54.7 million, corresponding to 12.8% of total assets. Share premium and other equity, as of 31 December 2017, amounted to NOK 45.3 million and NOK 6.5 million, respectively.
The Board proposes allocating the net loss of NOK 24.0 million to other equity.
According to Zalaris' dividend policy and the solid cash and equity position of the Group at the end of fiscal year 2017, the Board proposes to pay a dividend to shareholders from the share premium in the total amount of NOK 13.0 million, equaling a dividend payment of NOK 0.65 per share for 2017.
With reference to the Norwegian Accounting Act § 3-3a, the Board confirms its belief that conditions exist for continuing operations and that these financial statements have been prepared in accordance with the going concern principle. This confirmation is based on an estimated long-term profitable growth and the company's solid cash and equity standing.
Zalaris is reporting in three business segments: HR Outsourcing, Consulting and Cloud Services.
The HR Outsourcing segment revenues grew by 8.1% when comparing FY 17 with FY 16, reaching NOK 383.9 million (NOK 355.1 million). Zalaris' pre-acquisition business contributed to this growth with 1.5%, while the rest is attributable to sumarum business. 2017 operating profit was NOK 36.8 million, an increase from NOK 29.4 million in 2016.
The revenue for 2017 amounted to NOK 101.4 million, an increase compared to previous year (NOK 11.5 million), explained by the acquisition of sumarum and ROC. 2017 operating loss was NOK 1.5 million (NOK 3.9 million in 2016).
The revenue for 2017 amounted to NOK 92.1 million, a decrease from the previous year's revenue of NOK 30.0 million. 2016 operating profit was NOK 3.6 million (NOK 4.7 million, or 3.6% of turnover, in 2016).
The Group is exposed to various risks and uncertainties of operational, market-based and financial character. Internal controls and risk management are integrated into all Zalaris organisational business processes to achieve the company's strategic and financial objectives.
Zalaris' client portfolio consists mainly of large financially stable companies with high credit ratings, and, therefore, the company has no significant credit risk. The Group invoices customers monthly and continuously monitors incoming payments.
Liquidity risk is the risk that the Group will be unable to meet its financial liabilities as it matures. The company continuously estimates the need of cash to pay its liabilities as it matures to ensure cash is available at all times, both for operational and capitalised expenditures.
At the end of the 2017, the Group had interest-bearing debt amounting to NOK 220.2 million mainly floating interest rates. The increase from the previous year is related to Zalaris' acquisitions, as it went into a Euro loan agreement as part of the financing. Thus, the company is exposed to EURNOK fluctuations related to this loan agreement. The Group had an unrealised foreign currency loss amounting to NOK 12.1 million related to this loan. The cash and cash equivalents amounted to NOK 37.7 million and an unused credit facility of NOK 24.4 million.
The Group provides services in countries with different currencies and is consequently exposed to currency fluctuations in these nations. The Group also has variable interest rate borrowings and is subject to corresponding interest rate fluctuations. The Group settles internal transactions on an ongoing basis to reduce the risk associated with movement in currencies and interest rates.
Despite the Group's focus on reducing risks through internal controls and risk management, there will still be risk factors that cannot be adequately handled through preventative measures. The company therefore seeks, as much as possible, to cover these types of risks through the purchase of insurances.
Zalaris Group had 829 employees at the end of 2017. The aggregated offshore and nearshore presence was 40% of Zalaris' workforce, excluding employees in acquired companies. The workplace environment is positive, with motivated employees working together towards common goals. Absence due to sick leave averaged 3.4% in 2017. Zalaris ASA averaged a 1.3% absence rate due to sick leave in 2017.
No incidents of injury or accidents in the workplace were reported during 2017.
Women are well-represented in the Group's companies and units, comprising 65% of the workforce. The Group's leadership, including managers for all the separate business units, consists of 27 people, of which 9 (33.3%) are female.
Zalaris has identified the Company's material sustainability issues and their potential impact on our business. With reference to the Norwegian Accounting Act section 3-3c, the following chapters present how Zalaris integrates the most material sustainability issues into its business strategies and processes.
Zalaris shall be a professional workplace with an inclusive working environment and respect the International Labor Organisation's fundamental conventions.
Zalaris aims to be a workplace free from discrimination. No direct or indirect negative discrimination shall take place based on race, color, gender, sexual orientation, age, disability, language, religion, employee representation, political or other opinions, national or social origin, property, birth or other status.
Zalaris' personnel policy is based on equal pay for the same work. This means that women and men receive the same pay for the same position, given all other applicable circumstances are the same. Zalaris ASA will continue to strive for gender balance in the Group's management and Board of Directors.
Zalaris aims to provide the physical environment necessary to not exclude the participation of persons with physical disability from performing the company's various functions.
Zalaris strives to make it possible for employees of either gender to balance their work and private life, and, therefore, offers leave arrangements, home office solutions, part-time positions and other flexible work arrangements to support this objective.
The company organises programmes to motivate its employees to stay physically active while ensuring the availability of healthy food, such as fresh salads, in our canteens.
The long-term business success of Zalaris depends on our ability to live our values of "Service Excellence, Quality-Focused Processes and Employees – our key assets". The company wants to continually improve the quality of its services while contributing to a positive working environment for its people.
Zalaris requires active commitment and accountability to health and safety from all employees and contractors. Line management has a leadership role in the communication and implementation of these policies and standards, as well as ensuring their compliance.
We are committed to:
Pollution of the external environment because of Zalaris' operations is limited. Zalaris' environmental impact is primarily linked to energy consumption, travel and waste from office activities. One of Zalaris' environmental measures is to provide all customer-facing IT Operations in a centralized infrastructure concept hosted in several energyefficient data centers, powered by green renewable hydro-powered energy.
Zalaris has limited paper consumption through the introduction to customers of web- and mobile-based solutions for viewing of pay slips and reports, thus reducing paper printing. At the same time, Zalaris has implemented printer systems where documents are not printed unless the user logs in to pick up the printed document.
The Group's environmental initiatives focus on using organised recycling schemes for obsolete IT equipment, reducing travel activities through the increased use of teleconferencing and web meetings such as Lync, and overseeing responsible waste management.
All employees have a mandatory obligation to consciously observe the environmental impact of work-related activities and to select solutions, products and methods that minimize environmental impact. This is described in our Code of Conduct.
Zalaris' Code of Conduct is an integral part of the company's formal governance. The Code defines the core principles and ethical standards that form the basis of how the company creates value. The Code applies to Zalaris ASA and any subsidiary in which Zalaris, directly or indirectly, owns more than 50% of the voting shares. It also applies to members of the Board of Directors, managers and other employees, as well as those acting on behalf of the company.
The Code of Conduct does not apply directly to the company's business partners. However, Zalaris does not want to be associated with business partners that do not have appropriate ethical standards. Everyone associated with Zalaris shall comply with the rules and guidelines. Although failure to perform can be excused, we can never compromise on our integrity. This is the way we shall conduct business in Zalaris – and the way we shall create value for our customers, investors, staff or anyone benefiting from the services we provide. The Code of Conduct is available on the company's web site.
Zalaris' corporate governance policy is based on, and complies with, the Norwegian Corporate Governance Code.
Zalaris ASA is incorporated and registered in Norway and is subject to Norwegian law. According to the Accounting Act § 3-3b, the company is obliged to report on the principles and practices of corporate governance. In addition, the Oslo Stock Exchange requires an annual statement on compliance with the company's corporate governance policy in accordance with NUES and 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 statement for fiscal year 2017 is based on the disposal in the Accounting Act § 3-3b, as well as the disposal for Corporate Governance Policy for Zalaris ASA, and was adopted by the Board of Directors on 23 April 2018. It is available on page 78 in this annual report.
There have been no additional events after the balance sheet date significantly affecting the Group's financial position.
With ROC Group and sumarum AG integrated into the greater Zalaris group, the company has established a stronger platform for continued growth. The transactions have been formally concluded, and Zalaris is already offering its broader range of services in new geographies. The full effect of the integration is expected by mid-2018.
Margin improvement will continue to be a priority throughout the year. A structured programme is being implemented for this purpose, as the company expects to gain additional synergies and efficiency improvements. Zalaris seeks to maintain or increase historic organic growth rates and profit margins.
The business of HR and human capital management is changing. Enterprises seek the advantages and cost savings of outsourcing as well as the digitization of respective functions. Driven by advances in digital technology, the European market for multiprocess human resources outsourcing is strong, and cloud solutions and mobile innovations are key focus areas. Together with existing clients, Zalaris continuously develops new solutions, often custommade for the specific needs in the industry.
The pipeline of business opportunities is strong with growth opportunities, both in the form of new contracts with new clients and increased scope with existing clients.
We hereby confirm that the consolidated financial statements and the financial statements for the parent company for the period 1 January 2017 to 31 December 2017, are, to the best of our knowledge, prepared in accordance with applicable accounting standards and the information in the financial statements provides a true and fair view of the Group's and the parent company's assets, liabilities, financial position, and results as a whole.
We also hereby declare that the annual report provides a true and fair view of the financial performance and position of the Group and the parent company, as well as a description of the principal risks and uncertainties facing the Group and the parent company.
Oslo, 23 April 2018
_______________________ _______________________ _______________________
Lars Laier Henriksen Liselotte Hägertz Engstam Tina Steinsvik Sund Chairman of the Board Member of the Board Member of the Board
_______________________ _______________________
Jan Mikael Koivurinta Karl-Christian Agerup Hans-Petter Mellerud
Member of the Board Member of the Board Chief Executive Officer
Oslo, 23 April 2018
_______________________ _______________________ _______________________
Lars Laier Henriksen Liselotte Hägertz Engstam Tina Steinsvik Sund Chairman of the Board Member of the Board Member of the Board
_______________________ _______________________
Jan Mikael Koivurinta Karl-Christian Agerup Hans-Petter Mellerud Member of the Board Member of the Board Chief Executive Officer
The consolidated group annual accounts report for Zalaris ASA contains the following documents:
The consolidated financial statements, which have been drawn up by the Board and management, should be read in relation to the Annual Report and the independent auditor's opinion.
Consolidated statement of profit or loss
for the period ended 31 December
| (NOK 1000) | Notes | 2017 | 2016 |
|---|---|---|---|
| Revenue | 2 | 577,338 | 396,646 |
| Operating expenses | |||
| License costs | 48,002 | 29,353 | |
| Personnel expenses | 3 | 308,935 | 213,193 |
| Other operating expenses | 4 | 131,311 | 80,189 |
| Depreciations and impairments | 9 | 2,217 | 1,835 |
| Amortisation intangible assets | 8 | 14,963 | 9,434 |
| Amortisation implementation costs customer projects | 11 | 37,918 | 24,661 |
| Other costs | 22 | 23,398 | 1,558 |
| Total operating expenses | 566,744 | 360,224 | |
| Operating profit | 10,594 | 36,422 | |
| Financial items | |||
| Financial income | 5 | 1,498 | 2,125 |
| Financial expense | 5, 15, 18 | -9,560 | -5,287 |
| Unrealised foreign currency loss | 5 | -12,057 | - |
| Net financial items | -20,120 | -3,162 | |
| Profit before tax | -9,526 | 33,260 | |
| Income tax expense | |||
| Tax expense on ordinary profit | 6 | 2,661 | 7,693 |
| Total tax expense | 2,661 | 7,693 | |
| Profit for the period | -12,187 | 25,567 | |
| Profit attributable to: | |||
| - Owners of the parent | -12,187 | 25,567 | |
| - Non-controlling interests | - | - | |
| Earnings per share: | |||
| Basic earnings per share (NOK) | 7 | -0.61 | 1.34 |
| Diluted earnings per share (NOK) | 7 | -0.62 | 1.34 |
| Note | 2017 | 2016 |
|---|---|---|
| -12,187 | 25,567 | |
| -3,944 | ||
| -3,944 | ||
| 1,815 | 21,623 | |
| 21,623 | ||
| - | - | |
| 14,003 14,003 1,815 |
Oslo, 23 April 2018
_______________________ _______________________ _______________________
Lars Laier Henriksen Liselotte Hägertz Engstam Tina Steinsvik Sund
Chairman of the Board Member of the Board Member of the Board
_______________________ _______________________
Jan Mikael Koivurinta Karl-Christian Agerup Hans-Petter Mellerud
Member of the Board Member of the Board Chief Executive Officer
as of 31 December
| (NOK 1000) | Note | 2017 | 2016 |
|---|---|---|---|
| ASSETS | |||
| Non-current assets | |||
| Intangible assets Goodwill Total intangible assets |
8, 22 22 |
145,747 151,075 296,822 |
39,054 39,054 |
| Deferred tax asset | 6 | 848 | 2,028 |
| Fixed assets Office equipment Property, plant and equipment Total fixed assets Total non-current assets |
9 9 |
1,546 34,926 36,472 334,143 |
1,120 4,282 5,402 46,484 |
| Current assets Trade accounts receivable Customer projects Other short-term receivables Cash and cash equivalents Total current assets TOTAL ASSETS |
10 11 12 13 |
157,493 21,798 16,290 37,657 233,237 567,380 |
70,887 23,112 8,021 43,509 145,528 192,012 |
Consolidated statement of financial position for the year ended 31 December
| (NOK 1000) | Note | 2017 | 2016 |
|---|---|---|---|
| EQUITY AND LIABILITIES | |||
| Equity | |||
| Paid-in capital | |||
| Share capital | 14 | 2,012 | 1,912 |
| Own shares - nominal value | -6 | -6 | |
| Other paid in equity | 1,116 | 122 | |
| Share premium | 58,217 | 37,048 | |
| Total paid-in capital | 61,339 | 39,076 | |
| Other equity | -2,114 | ||
| Retained earnings | 60,461 | 61,548 | |
| Equity attributable to equity holders of the parent | 119,686 | 100,624 | |
| Non-controlling interests | - | - | |
| Total equity | 119,686 | 100,624 | |
| Liabilities | |||
| Non-current liabilities | |||
| Deferred tax | 6, 22 | 29,482 | 2,792 |
| Interest-bearing loans and borrowings | 15, 22 | 220,225 | 1,436 |
| Employee defined benefit liabilities | - | 103 | |
| Total long-term debt | 249,707 | 4,331 | |
| Current liabilities | |||
| Trade accounts payable | 24,211 | 10,792 | |
| Interest-bearing loan from shareholders | 15 | 7,775 | - |
| Interest-bearing loans | 15 | 41,782 | 691 |
| Income tax payable | 4,773 | 5,003 | |
| Public duties payable | 36,418 | 24,853 | |
| Other short-term debt | 17 | 82,773 | 45,719 |
| Derivatives | 255 | ||
| Total short-term debt | 197,987 | 87,057 | |
| Total liabilities | 447,694 | 91,388 | |
| TOTAL EQUITY AND LIABILITIES | 567,380 | 192,012 | |
for the period ended 31 December
| (NOK 1000) | Note | 2017 | 2016 |
|---|---|---|---|
| Cash flow from operating activities | |||
| Profit (Loss) before tax | -9,526 | 33,260 | |
| Financial income | 5 | -1,169 | -1,108 |
| Financial costs | 5 | 18,546 | 3,280 |
| Depreciation and impairments | 9 | 2,217 | 1,835 |
| Amortisation intangible assets | 8 | 14,963 | 9,434 |
| Amortisation implementation costs customer projects | 11 | 37,918 | 24,661 |
| Customer projects | 11 | -36,603 | -21,450 |
| Taxes paid | 6 | -1,711 | -6,009 |
| Changes in accounts receivable and accounts payable | 10.17 | -73,188 | -15,359 |
| Changes in other short term debt and disposals | 17 | 106,222 | -12,808 |
| Interest received | 5 | 129 | 20 |
| Interest paid | 5 | -5,155 | -1,490 |
| Net cash flow from operating activities | 52,644 | 14,266 | |
| Cash flows from investing activities | |||
| Purchase of fixed and intangible assets | 8, 9 | -24,755 | -14,078 |
| Acquisition of fixed and intangible assets, including goodwill | |||
| in connection with business combinations | 8, 9, 22 | -276,748 | - |
| Net cash flow from investing activities | -301,503 | -14,078 | |
| Cash flows from financing activities | |||
| Buyback of shares from minorities | - | -5,983 | |
| Stock purchase programme | 14 | 992 | 122 |
| Issuance of new shares | 35,713 | - | |
| Transaction costs related to issuance of new shares | 22 | -3,411 | - |
| Proceeds from issue of new borrowings | 15 | 258,327 | - |
| Repayment of longterm loan | 18 | -31,507 | -690 |
| Dividend payments to owners of the parent | 14 | -16,557 | -16,177 |
| Dividend payments to non-controlling interest | 14 | -990 | |
| Net cash flow from financing activities | 243,556 | -23,717 | |
| Net changes in cash and cash equivalents | -5,303 | -23,529 | |
| Net foreign exchange difference | -550 | -702 | |
| Cash and cash equivalents at the beginning of the period | 43,509 | 67,740 | |
| Cash and cash equivalents at the end of the period | 37,656 | 43,509 | |
| Unused credit facilities | 24,439 | 15,000 |
for the year ended 31 December (NOK 1000) capital shares premium equity equity differences equity interests equity Equity at 01.01.2017 1,912 -6 37,048 122 39,076 -2,661 64,209 - 100,624 Profit of the year - - - - - - -12,187 - -12,187 Other comprehensive income - - - 2 2 14,001 - - 14,003 Share based payments - - - 992 992 - - - 992 Issue of Share Capital 100 - 37,727 - 37,827 - -2,114 - 35,713 Transaction costs related to issue of new shares - - - - -3,411 - -3,411 - - Other changes - - - - - -570 1,080 - 510 Dividend - - -16,557 - -16,557 - - - -16,557 Equity at 31.12.2017 2,012 -6 58,217 1,116 61,339 10,769 47,576 - 119,686 Equity at 01.01.2016 1,912 -6 53,224 - 55,131 1,852 41,585 4,601 103,168 Profit of the year - - - - - - 25,567 - 25,567 Other comprehensive income - - - - - -3,944 - - -3,944 Buyback of shares - - - - - - -1,383 -4,601 -5,983 Share based payments - - - 122 122 - - - 122 Other changes - - - - - -569 -570 - -1,139
| (NOK 1000) | Share | Own | Share capital shares premium |
Other paid in equity |
Total paid in equity |
Cumulative translation differences |
equity | Non Other controlling interests |
Total equity |
|---|---|---|---|---|---|---|---|---|---|
| Equity at 01.01.2017 | 1,912 | -6 | 37,048 | 122 | 39,076 | -2,661 | 64,209 | - | 100,624 |
| Profit of the year | - | - | - | - | - | - | -12,187 | - | -12,187 |
| Other comprehensive | |||||||||
| income | - | - | - | 2 | 2 | 14,001 | - | - | 14,003 |
| Share based payments | - | - | - | 992 | 992 | - | - | - | 992 |
| Issue of Share Capital | 100 | - | 37,727 | - | 37,827 | - | -2,114 | - | 35,713 |
| Transaction costs related | |||||||||
| to issue of new shares | - | - | - | - | -3,411 | - | -3,411 | - | - |
| Other changes | - | - | - | - | - | -570 | 1,080 | - | 510 |
| Dividend | - | - -16,557 | - | -16,557 | - | - | - | -16,557 | |
| Equity at 31.12.2017 | 2,012 | -6 58,217 | 1,116 | 61,339 | 10,769 | 47,576 | - | 119,686 | |
| Equity at 01.01.2016 | 1,912 | -6 53,224 | - | 55,131 | 1,852 | 41,585 | 4,601 | 103,168 | |
| Profit of the year | - | - | - | - | - | - | 25,567 | - | 25,567 |
| Other comprehensive | |||||||||
| income | - | - | - | - | - | -3,944 | - | - | -3,944 |
| Buyback of shares | - | - | - | - | - | - | -1,383 | -4,601 | -5,983 |
| Share based payments | - | - | - | 122 | 122 | - | - | - | 122 |
| Other changes | - | - | - | - | - | -569 | -570 | - | -1,139 |
| Dividend | - | - | -16,177 | - | -16,177 | - | -990 | -17,167 | |
| Equity at 31.12.2016 | 1,912 | -6 37,048 | 122 | 39,076 | -2,662 | 64,209 | - | 100,624 |
Zalaris ASA is a limited company incorporated in Norway. The Group's main office is located in Hovfaret 4, Oslo, Norway. The Group delivers full-service outsourced personnel and payroll services.
The Group financial statements of Zalaris ASA for the period ending on 31 December 2017 were approved in a board meeting on 23 April 2018.
The Group's financial statements of Zalaris ASA for the accounting year 2017 have been prepared in accordance with international accounting standards ("IFRS") as adopted by the European Union (EU), in effect as of 31 December 2017.
The financial statements are based on the principles of historic cost.
The consolidated financial statements comprise the financial statements of Zalaris ASA and its subsidiaries (together referred to as "the Group"). Subsidiaries are all entities controlled by the company. Control is achieved where the company has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. The results of subsidiaries acquired or disposed during the year are included in the consolidated financial statement from the effective date of acquisition or up to the effective date of disposal, as appropriate.
The financial statements of the subsidiaries are prepared for the same reporting period as the parent company, using consistent accounting policies. All intercompany balances and transactions have been eliminated upon consolidation.
The acquisition of a subsidiary is considered on a case-by-case basis to determine whether the acquisition should be deemed as a business combination or as an asset acquisition.
Business combinations are accounted for using the acquisition method of accounting. The consideration transferred for the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred and the equity interests issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Transaction costs are expensed as incurred. The excess of the consideration transferred over the fair value of the identifiable net assets of the subsidiary acquired is recorded as goodwill. When acquisitions are deemed as asset acquisitions no deferred tax on initial differences between carrying values and tax bases are recorded, nor is any goodwill recorded at the date of acquisition.
The Group's presentation currency is NOK. The functional currency of the parent company is NOK.
For consolidation purposes, the balance sheet figures for subsidiaries with a different functional currency than NOK are translated into the presentation currency (NOK) at the rate applicable at the balance sheet date. Income statements are translated at the exchange rate that approximates the prevailing rate at the date of transaction. Exchange differences from translating subsidiaries are recognised in other comprehensive income.
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.
The Group's revenue consists of revenue from providing services, consulting services related to customer specific adaptions for new HR outsourcing customers and basic consulting services. Revenue is, in general, recognised when it is probable that transactions will generate future financial benefits for the Group and the size of the amount can be reliably estimated. Sales revenue is presented net of value-added tax and potential discounts.
Revenues from outsourcing agreements and cloud services are recognised over the term of the contract as the services are rendered. When the services are made up of different components which are not separately identifiable, the related revenues are recognised on a straight-line basis over the term of the contract. The related costs are recognised as they are incurred. However, a portion of costs incurred in the initial phase of outsourcing contracts (transition and/or transformation costs) may be deferred when they are specific to a given contract, relate to future activity on the contract and/or will generate future economic benefits, and are recoverable. These costs are allocated to work-in-progress, and prepaid revenue by the client is recorded as a deduction from the costs incurred. The deferred costs are expensed, and the deferred revenue recognised, evenly over the period the outsourcing services are provided. The expense of deferred cost is presented in the income statement in the line item "amortisation implementation costs customer projects.
The service revenue and the revenue from basic consulting services are recognised according to the rendering of the service. Smaller projects and change orders beyond the terms of the main contract with the customer service delivery are recognised according to the rendering of the services.
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. Items of the other comprehensive income presented net of related tax effects in the Statement of Other Comprehensive Income.
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. 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.
Costs related to internally developed software are capitalised to the extent that a future economic benefit associated with the development of identifiable intangible assets and costs can be reliably measured. Otherwise, the costs are expensed as incurred. Capitalised development is amortised over their useful lives. Research costs are expensed as incurred.
Fixed assets are valued at cost less accumulated depreciation and impairment losses. When assets are sold or disposed of, the gross carrying amount and depreciation are derecognised, and any gain or loss on the sale or disposal is recognised in the income statement.
The gross carrying amount of fixed assets is the purchase price, including duties/taxes and direct acquisition costs related to making the fixed asset ready for use.
The depreciation periods and methods are assessed each year. The residual value is estimated every yearend, and changes in the estimate for residual value is accounted for as an estimation change. The residual value of the Group's fixed assets is estimated to be nil.
Leases where the group assumes most of the risk and rewards of ownership are classified as financial leases. Financial leasing contracts are recognised on the balance sheet and depreciated on a linear basis over the expected useful life of the assets. The leasing debt is classified as a long-term debt, and the leasing debt is reduced by the payments according to the leasing contract deducted by an interest element which is expensed.
Leases in which most of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases are charged to the income statement on a straightline basis over the period of the lease.
Trade and other receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. After initial measurement, such financial assets are subsequently measured at amortised cost using the effective interest rate method, less impairment. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the effective interest rate. The effective interest rate amortisation is included in finance income in the statement of profit or loss. The losses arising from impairment are recognised in the statement of profit or loss in finance costs for loans and in cost of sales or other operating expenses for receivables.
Revenues and expenses related to service delivery, and which are incurred in advance of the contract's validity period, are accrued, and income and expenses are recognised over the contract period. Such deferred expense is included in the line item amortisation implementation cost customers. Net assets/liabilities are classified as customer projects/other liabilities.
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.
After initial recognition, interest bearing loans and borrowings are subsequently measured at amortised cost using the effective interest rate method.
The Group has only defined contributions plans. Contributions are paid to pension insurance plans and charged to the income statement in the corresponding period. Once the contributions have been paid, there are no further payment obligations.
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.:
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.
Transaction costs directly attributable to an equity transaction are recognised directly in equity, net after deducting tax.
Contingent assets are not recognised in the annual accounts but are disclosed if it's probable that a benefit will be added to the Group.
New information on the Group's position at the balance sheet date is taken into account in the financial statements. Events after the balance sheet date that do not affect the Group's position at the balance sheet date, but will affect the Group's position in the future, are stated if significant.
There were no new standards and amendments to standards adopted by the company for the financial year beginning 1 January 2017.
Standards, amendments and interpretations to existing standards that are not yet effective, and for which early adoption has not been applied by the Group, are listed below.
In July 2014, the IASB issued the final version of IFRS 9 Financial Instruments that replaces IAS 39 Financial Instruments: Recognition and Measurement and all previous versions of IFRS 9. IFRS 9 brings together all three aspects of the accounting for financial instruments project: classification and measurement, impairment and hedge accounting. Except for hedge accounting, retrospective application is required but providing comparative information is not compulsory. For hedge accounting, the requirements are generally applied prospectively, with some limited exceptions.
The Group has performed an impact assessment of all three aspects of IFRS 9. The assessment is based on currently available information and may be subject to changes arising from further reasonable and supportable information being made available to the Group in 2018, when the Group will adopt IFRS 9. Overall, the Group expects no significant impact on its balance sheet and equity except for the effect of applying the impairment requirements of IFRS 9.
IFRS 15 was issued in May 2014 and establishes a five-step model to account for revenue arising from contracts with customers. Under IFRS 15, revenue is recognised at an amount that reflects the consideration to which an entity expects to be entitled in exchange for transferring goods or services to a customer. The new revenue standard will supersede all current revenue recognition requirements under IFRS.
The Group has performed an assessment of IFRS 15 and found that the implementation of the new standard will not have any impact on the income statement or the balance sheet of the Group. The Group will implement the new standard on 1 January 2018 and will apply the modified retrospective method which requires the recognition of the cumulative effect of initially applying IFRS 15, as of 1 January 2018, to retained earnings and not restate prior years. However, since the results of the Group's impact assessment indicated that IFRS 15 is not expected to significantly change the amount or timing or revenue recognition in 2017 or prior periods, there will not be any cumulative adjustments to retained earnings as of 1 January 2018.
IFRS 16 sets out the principles for the recognition, measurement, presentation and disclosure of leases and requires lessees to account for all leases under a single on-balance sheet model similar to the accounting for finance leases under IAS 17. As a consequence of this change, the lease payments will no longer be included in the operating expenses and thus has a positive impact on EBITDA in the Group's consolidated income statement. Depreciation expense will increase due to the capitalisation of the leased assets. In addition the net finance expense will increase. The Group will implement the new standard on 1 January 2019.
As of 31 December 2017, the Group has identified certain property leases eligible for capitalisation. A preliminary estimate, based on existing lease contracts, indicates around NOK 30 million in additional lease liabilities as of 1 January 2019.
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 ongoing basis. The management does not assess that there is any specific areas for which there has been much estimation uncertainty.
Revenues from outsourcing agreements are recognised over the term of the contract as the services are rendered. The related costs are recognised as they are incurred. However, a portion of costs incurred in the initial phase of outsourcing contracts may be deferred when they are specific to a given contract, relate to future activity on the contract, will generate future economic benefits and are recoverable. These costs are capitalised as "customer projects" and any prepaid revenues by the client are recorded as a deduction from the costs incurred in the balance for customer projects. When calculating cost, the hourly rates applied are based on estimates.
The deferred costs are expensed evenly over the period the outsourcing services are provided and included in the line item "Amortisation implementation cost customer projects". Deferred revenue is recognised over the corresponding period.
The principle requires management to ensure routines for correct and complete allocation of cost and prepaid revenues to the individual customer project, and updated and accurate rates to be applied in the cost estimation.
Development costs of software have been capitalised as intangible assets to the extent it is assessed that future benefits can be substantiated. Judgement has to be applied in determining which amount of expenses can be capitalised.
At the end of a reporting period, the Group is required to assess whether there is any indication that the capitalised assets may be impaired. If such indications exist, the Group must test if carrying amounts exceed its recoverable amount (higher of fair value less cost to sell and its value in use). Determining recoverable amount requires that the management makes several assumptions related to future cash flows from these assets which may involve high degree of uncertainty. As of 31 December, no indication of impairment was identified.
Business combinations are accounted for using the acquisition method. Acquisition-related costs are expenses in the periods in which the costs are incurred and the services are received.
When acquiring a business, all financial assets and liabilities are assumed for appropriate classification and designation in accordance with contractual terms, economic circumstances and pertinent conditions at the acquisition date. The acquired assets and liabilities are accounted for by using fair value in the opening group balance sheet (unless other measurement principles should be applied in accordance to IFRS 3).
Goodwill is recognised as the aggregate of the consideration transferred and the amount of any noncontrolling interest and deducted by the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed.
Goodwill is not depreciated but is tested at least annually for impairments. In connection with this, goodwill is allocated to cash-generating units or groups of cash-generating units that are expected to benefit from synergies from the business combination. See note 8 for further information on impairment testing.
The company has three operating segments, which are Outsourcing, Cloud Services and Consulting.
Outsourcing offers a full range of payroll and HR outsourcing services including payroll, time and attendance and travel expenses.
Consulting delivers turnkey projects based on Zalaris template or implementation of customer-specific functionality. They also assist customers with cost-effective maintenance and support of customers own on-premise solution.
The Cloud services unit is offering additional cloud based HR functionality to existing outsourcing customers as talent management, digital personnel archive, HR analytics, mobile solutions, etc., and was divided into an own reporting segment in 2014.
Information is organised by business area and geography. The reporting format is based on the Group's management and internal reporting structure. Items that are not allocated are mainly intercompany sales, interest-bearing loans and other associated expenses and assets related to administration of the Group. The Group key management is the chief decision maker in the Group. The investing activities comprise total expenses in the period for the acquisition of assets that have an expected useful life of more than one year.
Assets and liabilities are not allocated to segments.
| (NOK 1.000) | Outsourcing | Cloud | Consulting Non-allocated | Total | |
|---|---|---|---|---|---|
| Other operating revenue, external | 383,924 | 92,062 | 101,352 | - | 577,338 |
| Other operating expenses | -306,439 | -80,054 | -101,754 | - | -488,247 |
| Depreciation and amortisation | -40,671 | -8,390 | -1,076 | -4,962 | -55,098 |
| Other Costs (transaction related) | - | - | - | -23,398 | -23,398 |
| Operating profit/(loss) | 36,814 | 3,618 | -1,478 | -28,360 | 10,594 |
| Net financial items | - | - | - | -20,120 | -20,120 |
| Income tax | - | - | - | -2,661 | -2,661 |
| Profit for the period | 36,814 | 3,618 | -1,478 | -51,142 | -12,187 |
| (NOK 1.000) | Outsourcing | Cloud | Consulting Non-allocated | Total | |
|---|---|---|---|---|---|
| Other operating revenue, external | 383,924 | 92,062 | 101,352 | - | 577,338 |
| Other operating expenses | -306,439 | -80,054 | -101,754 | - | -488,247 |
| Depreciation and amortisation | -40,671 | -8,390 | -1,076 | -4,962 | -55,098 |
| Other Costs (transaction related) | - | - | - | -23,398 | -23,398 |
| Operating profit/(loss) | 36,814 | 3,618 | -1,478 | -28,360 | 10,594 |
| Net financial items | - | - | - | -20,120 | -20,120 |
| Income tax | - | - | - | -2,661 | -2,661 |
| Profit for the period | 36,814 | 3,618 | -1,478 | -51,142 | -12,187 |
| Cash flow from investing activities | - | - | - | -9,526 | -9,526 |
| (NOK 1.000) | Outsourcing | Cloud | Consulting Non-allocated | Total | |
|---|---|---|---|---|---|
| Other operating revenue, external | 355,123 | 29,996 | 11,527 | - | 396,646 |
| Other operating expenses | -289,950 | -25,235 | -7,550 | - | -322,736 |
| Depreciation and amortisation | -35,797 | -48 | -85 | - | -35,930 |
| Other Costs (transaction related) | - | - | - | -1,558 | -1,558 |
| Operating profit/(loss) | 29,376 | 4,713 | 3,891 | -1,558 | 36,422 |
| Net financial items | - | - | - | -3,162 | -3,162 |
| Income tax | - | - | - | -7,693 | -7,693 |
| Profit for the period | 29,376 | 4,713 | 3,891 | -12,413 | 25,567 |
| (NOK 1.000) | Outsourcing | Cloud | Consulting Non-allocated | Total | ||
|---|---|---|---|---|---|---|
| Other operating revenue, external | 355,123 | 29,996 | 11,527 | - | 396,646 | |
| Other operating expenses | -289,950 | -25,235 | -7,550 | - | -322,736 | |
| Depreciation and amortisation | -35,797 | -48 | -85 | - | -35,930 | |
| Other Costs (transaction related) | - | - | - | -1,558 | -1,558 | |
| Operating profit/(loss) | 29,376 | 4,713 | 3,891 | -1,558 | 36,422 | |
| Net financial items | - | - | - | -3,162 | -3,162 | |
| Income tax | - | - | - | -7,693 | -7,693 | |
| Profit for the period | 29,376 | 4,713 | 3,891 | -12,413 | 25,567 | |
| Cash flow from investing activities | - | - | - | -154,887 | -154,887 |
Non-allocated costs includes general administrative costs including group management, business development, marketing, finance and controlling and certain group centralized IT costs.
The Group's operations are carried in several countries, and information regarding revenue based on geography is provided below. Information is based on location of the entity generating the revenue, which to a large extent correspond to the geographical location of the customers.
| (NOK 1000) | as % of total | 2017 | as % of total | 2016 | |
|---|---|---|---|---|---|
| Norway | 32% | 185,310 | 43% | 169,374 | |
| Sweden | 17% | 98,070 | 25% | 98,721 | |
| DACH* | 24% | 138,909 | - | - | |
| Denmark | 11% | 64,352 | 15% | 60,406 | |
| Finland | 10% | 56,711 | 13% | 52,095 | |
| UK | 1% | 6,436 | - | - | |
| Other | 5% | 27,549 | 4% | 16,050 | |
| Total | 100% | 577,338 | 100% | 396,646 | |
| * DACH = Germany, Austria and Switzerland | |||||
| Information about major customers | |||||
| (NOK 1000) | as % of total | 2017 | as % of total | 2016 | |
| 5 largest customers | 36% | 208,328 | 48% | 191,760 | |
| 10 largest customers | 51% | 291,821 | 68% | 269,383 | |
| 20 largest customers | 64% | 370,349 | 82% | 326,253 |
| (NOK 1000) | as % of total | 2017 | as % of total | 2016 | |
|---|---|---|---|---|---|
| Norway | 32% | 185,310 | 43% | 169,374 | |
| Sweden | 17% | 98,070 | 25% | 98,721 | |
| DACH* | 24% | 138,909 | - | - | |
| Denmark | 11% | 64,352 | 15% | 60,406 | |
| Finland | 10% | 56,711 | 13% | 52,095 | |
| UK | 1% | 6,436 | - | - | |
| Other | 5% | 27,549 | 4% | 16,050 | |
| Total | 100% | 577,338 | 100% | 396,646 | |
| * DACH = Germany, Austria and Switzerland | |||||
| Information about major customers | |||||
| (NOK 1000) | as % of total | 2017 | as % of total | 2016 | |
| 5 largest customers 10 largest customers 20 largest customers |
36% 51% 64% |
208,328 291,821 370,349 |
48% 68% 82% |
191,760 269,383 326,253 |
1 of our customers are representing more than 10% of total revenue.
| (NOK 1000) | 2017 | 2016 |
|---|---|---|
| Salary Bonus Social security tax Pension costs (see note 16) Other expenses Capitalised development expenses Capitalised implementation costs customer projects Total personnel expenses |
276,540 8,692 41,286 19,619 13,426 -10,360 -40,269 308,935 |
191,826 4,678 27,343 18,472 9,773 -8,009 -30,890 213,193 |
| Average number of employees: | 2017 | 2016 |
| Administration, sales and management Other employees Total |
87 564 651 |
59 395 454 |
| Average FTEs: | 2017 | 2016 |
See note 19 for transactions with related parties.
| (NOK 1000) | 2017 | 2016 | |
|---|---|---|---|
| External services IT services and telecom Office premises Travel and transport Postage and freight |
44,039 32,317 19,867 17,913 3,152 |
18,814 28,358 15,685 5,983 3,721 |
|
| Other expenses Total other operating expenses Auditors fee |
14,022 131,311 |
7,627 80,189 |
|
| (NOK 1000) | 2017 | 2016 | |
| Audit fee Other attestation services Fee for tax services Other fees Total, excl VAT |
2,721 2,801 274 10,058 15,854 |
1,660 1,920 35 1,546 5,161 |
Other fees in the table above mainly relates to financial due diligence services. Other attestation fees mainly relates to ISEA 3402 attestation and other audit attestations.
| (NOK 1000) | 2017 | 2016 |
|---|---|---|
| Interest income on bank accounts and receivables | 129 | 20 |
| Currency gain | 1,040 | 1,088 |
| Other financial income | 329 | 1,018 |
| Finance income | 1,498 | 2,125 |
| Interest expense on financial liabilities measured at amortised cost | 5,155 | 1,490 |
| Currency loss | 1,589 | 1,790 |
| Unrealised foreign currency loss1 | 12,057 | - |
| Other financial expenses | 2,816 | 2,007 |
| Finance expenses | 21,618 | 5,287 |
| Net financial items | -20,120 | -3,162 |
| (NOK 1000) | 2017 | 2016 | |
|---|---|---|---|
| Tax paid / payable Changes in deferred taxes Tax expense |
1,387 1,275 2,661 |
6,079 1,614 7,693 |
|
| Tax payable in balance sheet: | |||
| (NOK 1000) | 2017 | 2016 | |
| Calculated tax payable Total income tax payable |
4,773 4,773 |
5,003 5,003 |
|
| Income tax payable: | |||
| (NOK 1000) | 2017 | 2016 | |
| Reconciliation of effective tax rate Ordinary profit before tax Tax at Zalaris ASA's statutory tax rate of 24% (25% 2016) Non tax deductible costs Non taxable income Effect of change in deferred taxes Other permanent differences Tax expense Effective tax rate Specification of tax effects of temporary differences: |
-9,526 -2,286 6,043 - -25 -1,070 2,661 -27.9% |
33,260 8,315 -6 254 -1,260 390 7,693 23.1% |
|
| (NOK 1000) | 2017 | 2016 | |
| Property, plant and equipment Other differences Tax losses carry forward Total temporary differences |
99,440 15,509 -7,146 107,803 |
953 12,691 -10,951 2,694 |
|
| Total deferred tax assets Total deferred tax Net recognised deferred tax/ deferred tax asset |
848 29,482 -28,633 |
2,028 2,792 -764 |
|
The Group offsets tax assets and liabilities if and only if it has a legally enforceable right to set off current tax assets and current tax liabilities and the deferred tax assets and deferred tax liabilities relate to income taxes levied by the same tax authority. The main permanent difference relates to non-deductable transaction costs in connection with acquisitions.
The Group has tax losses which have arisen in Denmark, TNOK 683, Latvia, TNOK 3,673, Norway, TNOK 744 and Poland, TNOK 2,045, which are available to be applied within 3-5 years against future taxable profits in each company. Based on an assessment of future profitability of the entities the deferred tax assets related to these tax losses have been recognised.
The calculation of basic earnings per share is based on the net income attributable to the shareholders of the parent company and a weighted average number of shares outstanding during the years ending 31 December 2017 and 2016 respectively. Shares issued during the periods are included in the calculations of weighted average number of shares from the date the shares issue was approved by the general meeting. Diluted equity instruments outstanding are related to employee share purchase programme entered into in FY 2016.
| (NOK 1000) | 2017 | 2016 | |
|---|---|---|---|
| Net profit/(loss) attributable to ordinary equity holders of the parent Weighted average number of shares Weighted average diluted number of shares Basic earnings per share (NOK) Diluted earnings per share (NOK) |
-12,187 19,840,940 19,747,990 -0.61 -0.62 |
25,567 19,056,305 19,056,305 1.34 1.34 |
| Licenses | Internally | Internally developed |
Customer | |||
|---|---|---|---|---|---|---|
| and | developed software under relationships | |||||
| (NOK 1000) | software | software | construction | contracts | Goodwill | Total |
| Acquisition cost | ||||||
| Accumulated 1 January 2016 | 36,547 | 53,434 | 4,117 | - | - | 94,097 |
| Additions of the year | 594 | 6,380 | 11,851 | 18,825 | ||
| Disposals of the year | - | - | -6,380 | - | - | -6,380 |
| Currency effects | -264 | -267 | - | - | - | -530 |
| Accumulated 31 December 2016 | 36,877 | 59,547 | 9,589 | - | - | 106,012 |
| Additions through acquisition1 | 6,776 | 7,017 | - | 95,535 | 144,337 | 253,665 |
| Additions of the year | 3,337 | - | 17,121 | - | - | 20,458 |
| Reclassifications | - | 16,210 | -16,210 | - | - | - |
| Currency effects | 361 | 681 | 56 | 4,459 | 6,738 | 12,295 |
| Accumulated 31 December 2017 | 47,351 | 83,455 | 10,555 | 99,994 | 151,075 | 392,430 |
| Amortisation | ||||||
| Accumulated 1 January 2016 | 28,407 | 29,460 | - | - | - | 57,867 |
| Disposals of ordinary amortisation | - | - | - | - | - | - |
| Disposals of amortisation and currency effects -227 | -115 | - | - | - | -342 | |
| This year's ordinary amortisation | 2,085 | 7,349 | - | - | - | 9,434 |
| Accumulated 31 December 2016 | 30,265 | 36,694 | - | - | - | 66,958 |
| Accumulated depreciation at closing | ||||||
| on additions through acquisitions1 | 5,935 | 6,601 | - | - | - | 12,536 |
| Disposals of amortisation and currency effects | 218 | 694 | - | 238 | - | 1,150 |
| This year's ordinary amortisation | 1,993 | 8,008 | - | 4,962 | - | 14,963 |
| Accumulated 31 December 2017 | 38,411 | 51,997 | - | 5,200 | - | 95,608 |
| Book value | ||||||
| Book value at 31 December 2016 | 6,613 | 22,853 | 9,589 | - | - | 39,054 |
| Book value at 31 December 2017 | 8,940 | 31,458 | 10,555 | 94,794 | 151,075 | 296,822 |
| Useful life | 3-10 years | 5 years | ||||
| Depreciation method | linear | linear |
1 For description of the acquisitions, see note 22.
The addition of goodwill and customer relationships in 2017 relates to the acquisitions of sumarum AG (sumarum) and ROC Global Solution Ltd. (ROC). The acquisitions were made in line with the Group's growth strategy and are expected to benefit all business segments.
Refer to note 22 for further information regarding the acquisition of sumarum and ROC.
As of 31 December 2017, the market capitalisation of the group was 10 times the book value of its equity, indicating no impairment of the Group's assets. The Group's annual impairment test of intangible assets with indefinite useful lives performed as of year-end 2017 confirmed this.
Although the current book values of goodwill and customer relationships and contracts were recognized as part of the aforementioned business acquisitions, the recoverable amount has been calculated based on one CGU for the Group as a whole. The close integration and synergies within the Group's geographical and operating segments make this a shared asset for the entire Group. Provision of seamless multinational HR outsourcing services is a core value proposition for the Group, hence expanding the geographical coverage improves the value proposition. This results in higher win rates and the ability to capture more of the profits from multinational customer contracts. Cross-selling of services between the segments and geographies is and will continue to be an important part of the business and is essential to driving growth throughout the Group.
38 39
The recoverable amount is based on a value in use calculation, using cash flow projections for the next 5 years whereof the first year is approved by the board. The projections are based on existing business model without non-organic growth. The expected cash flow is based on company estimates for the period 2018 to 2022. Terminal value is included in the calculations. Estimates and pertaining assumptions are made to the best of the management's knowledge of historical and current events, experience and other factors that are deemed reasonable in the circumstances.
The value in use calculation is most sensitive to the following assumptions:
Discount rates represent the current market assessment of the risks, taking into consideration the time value of money and individual risks of the underlying assets that have not been incorporated in the cash flow estimates. The discount rate calculation is based on the specific circumstances of the group and its operating segments and is derived from its weighted average cost of capital (WACC). The WACC takes into account both debt and equity. The cost of equity is derived from the expected return on investment by the group's investors. The cost of debt is based on the interest-bearing borrowings the group is obliged to service. The beta factor is evaluated annually based on publicly available market data and is the same for all segments.
A conservative growth assumption of 1.5% is applied in the terminal value, which is slightly below the inflation targets for the markets in which the Group operates.
A headroom sensitivity analysis has been carried out, which indicates sensitivity to changes in WACC and operating profit. The range is +/-20% in EBIT and +/-2% in WACC.
| Weighted average cost of capital | ||||||
|---|---|---|---|---|---|---|
| Percentage change in EBIT | -20.0% -10.0% 0.0% 10.0% 20.0% |
11.2% 557 676 796 915 1,034 |
12.2% 467 574 681 788 896 |
13.2% 392 489 587 684 782 |
14.2% 329 418 507 597 686 |
15.2% 276 358 440 522 604 |
Positive numbers in the table indicates positive headroom, and negative numbers in the table indicates impairment.
| (NOK 1000) | Land | Buildings | Vehicles | Furniture and fixtures equipment |
IT- | Total |
|---|---|---|---|---|---|---|
| Acquisition cost | ||||||
| Accumulated 31 December 2015 Additions of the year |
- - |
- - |
- - |
11,673 777 |
4,374 855 |
16,047 1,633 |
| Disposals of the year Currency effects |
- | - | - | -475 | -230 | - -706 |
| Accumulated 31 December 2016 | - | - | - | 11,975 | 4,999 | 16,973 |
| Additions through acquisition | 3,694 | 23,726 | 475 | 3,696 | 3,285 | 34,877 |
| Additions of the year | - | - | - | 4,052 | 245 | 4,297 |
| Disposals of the year Currency effects |
- - |
- - |
- - |
- 365 |
- -129 |
- 236 |
| Accumulated 31 December 2017 | 3,694 | 23,726 | 475 | 20,088 | 8,400 | 56,383 |
| Depreciation | ||||||
| Accumulated 31 December 2015 | - | - | - | 6,683 | 8,490 | 15,173 |
| Disposals of ordinary depreciation | - | - | - | - | - | - |
| Currency effects | - | - | - | -387 | -196 | -583 |
| This year's ordinary depreciation Accumulated 31 December 2016 |
- | - | - | 1,396 7,693 |
438 8,732 |
1,835 16,425 |
| Accumulated depreciation at closing | ||||||
| on additions through acquisitions | - | - | 199 | 3,372 | 2,423 | 5,995 |
| Disposals of ordinary depreciation | - | - | - | - | - | - |
| Currency effects | - | 2 | - | 303 | -177 | 128 |
| This year's ordinary depreciation Accumulated 31 December 2017 |
- - |
38 40 |
25 224 |
1,425 12,793 |
730 11,708 |
2,217 24,765 |
| Book value | ||||||
| Book value at 31 December 2016 | - | - | - | 4,282 | 1,120 | 5,402 |
| Accumulated 31 December 2017 | 3,694 | 23,686 | 251 | 7,294 | 1,546 | 36,472 |
| Economic life | Indefinite | 50 years | 3 years | 5 years | 3 years | |
| Depreciation method | none | linear | linear | linear | linear |
| (NOK 1000) | 2017 | 2016 |
|---|---|---|
| Gross trade accounts receivable Provisions for losses |
157,912 -419 |
70,887 - |
| Trade accounts receivable | 157,493 | 70,887 |
Losses on trade accounts receivable are classified as other operating expenses in the income statement. See note 18 for assessment of credit risk.
| Movements in the provision for loss are as follows: | 2017 | 2016 | |
|---|---|---|---|
| Opening balance | -419 | - | |
| Provision of the year | -190 | - | |
| Realised loss this year | 190 | - | |
| Reversal of previous provision | - | ||
| Closing balance | -419 | - | |
Details on the credit risk concerning trade accounts receivable are given in note 18.
The Group had the following trade accounts receivable due, but not paid or written off:
| NOK 1000 | Total | Not due | <30 d | 30-60d | 60-90d | >90d |
|---|---|---|---|---|---|---|
| 31 December 2017 | 157,493 | 115,314 | 32,330 | 6,913 | 985 | 1,950 |
| 31 December 2016 | 70,887 | 60,922 | 9,245 | 453 | 93 | 173 |
| (NOK 1000) | 2017 | 2016 |
|---|---|---|
| Deferred costs related to customer projects | 95,284 | 83,440 |
| Deferred revenue related to customer projects | -73,487 | -60,328 |
| Net customer implementation costs | 21,798 | 23,112 |
Costs related to delivering outsourcing contracts are recognised as they are incurred. However, a portion of costs incurred in the initial phase of outsourcing contracts may be deferred when they are specific to a given contract, relate to future activity on the contract, will generate future economic benefits and are recoverable. These costs are capitalised as "customer projects" and any prepaid revenues by the client are recorded as a deduction from the costs incurred in the balance for customer projects. The deferred costs are expensed evenly over the period the outsourcing services are provided and included in the line item "Amortisation implementation cost customer projects". Deferred revenue is recognised over the corresponding period.
| (NOK 1000) | 2017 | 2016 | |
|---|---|---|---|
| Advances to employees | 445 | 1 | |
| Prepaid rent | 688 | 1,357 | |
| Prepaid software | 3,817 | 3,497 | |
| Prepaid insurance | 620 | 275 | |
| Prepaid other expenses | 1,949 | 184 | |
| Prepaid Maintenance and Service | 2,293 | 696 | |
| Prepaid Travel/entertainment cost | 29 | 90 | |
| Other receivables | 6,450 | 1,921 | |
| Total other short-term receivables | 16,290 | 8,021 |
| (NOK 1000) | 2017 | 2016 |
|---|---|---|
| Cash in hand and at bank - unrestricted funds Deposit accounts - guarantee rent obligations - restricted funds Employee withheld taxes - restricted funds |
13,297 19,834 4,525 |
32,577 6,538 4,394 |
| Cash and cash equivalents in the balance sheet | 37,657 | 43,509 |
The group has unused credit facilities of NOK 24 million as of 31.12.2017 (NOK 15 million 31.12.2016). There are no restrictions on the use of these funds.
The Group pays salaries on behalf of its customers. For this purpose separate deposit accounts are established. These deposits accounts are not recognised in the Groups balance sheets. The table below provides information about amounts on these deposit accounts.
| (NOK 1000) | 2017 | 2016 | |
|---|---|---|---|
| Customer deposits Short term deposits |
6,248 - |
6,459 - |
| ٠ | ||
|---|---|---|
| Shares | 2017 | 2016 |
|---|---|---|
| Shares - nominal value NOK 0,10 | 20,122,979 | 19,124,263 |
| Total number of shares | 20,122,979 | 19,124,263 |
The nominal value of the share is NOK 0,10. All the shares in the company have equal voting rights and are entitled to dividend. The computation of earnings per share is shown in note 7.
| Shareholder | Number of shares: | % of total | Equal Voting | |
|---|---|---|---|---|
| NORWEGIAN RETAIL AS | 2,941,482 | 14.6% | 14.6% | |
| SKANDINAVISKA ENSKILDA BANKEN AB | 1,806,411 | 9.0% | 9.0% | |
| STATE STREET BANK AND TRUST COMP | 1,691,228 | 8.4% | 8.4% | |
| FIDELITY NORDIC FUND | 1,688,300 | 8.4% | 8.4% | |
| STRAWBERRY CAPITAL AS | 1,039,887 | 5.2% | 5.2% | |
| COMMERZBANK AKTIENGESELLSCHAFT | 768,027 | 3.8% | 3.8% | |
| JPMORGAN CHASE BANK, N.A., LONDON | 765,339 | 3.8% | 3.8% | |
| VPF NORDEA KAPITAL | 748,604 | 3.7% | 3.7% | |
| TREDJE AP-FONDEN | 703,881 | 3.5% | 3.5% | |
| STATE STREET BANK AND TRUST COMP | 695,000 | 3.5% | 3.5% | |
| DANSKE BANK A/S | 562,230 | 2.8% | 2.8% | |
| VPF NORDEA AVKASTNING | 505,705 | 2.5% | 2.5% | |
| METZLER EURO SMALL + MICRO CAP | 460,750 | 2.3% | 2.3% | |
| NORDEA 1 SICAV | 368,603 | 1.8% | 1.8% | |
| RBC INVESTOR SERVICES TRUST | 351,293 | 1.8% | 1.8% | |
| VERDIPAPIRFONDET NORDEA NORGE PLUS | 326,520 | 1.6% | 1.6% | |
| TACONIC AS | 285,212 | 1.4% | 1.4% | |
| AVANZA BANK AB | 275,758 | 1.4% | 1.4% | |
| NHO - P665AK | 259,259 | 1.3% | 1.3% | |
| A/S SKARV | 225,000 | 1.1% | 1.1% | |
| Total number owned by top 20 | 16,468,489 | 81.8% | 81.8% | |
| Shares owned by the company | 92,950 | 0.5% | 0.5% | |
| Others | 3,561,540 | 17.7% | 17.7% | |
| Total | 20,122,979 | 100.0% | 100.0% |
Shares held by related parties are disclosed in note 19.
Dividend paid to the shareholders of the parent company in 2017 amounted to 16.6 MNOK or NOK 0.87 dividend per share. In 2016 a dividend amounting to NOK 16.3 million or 0.85 dividend per share, was paid to the shareholders of the parent company. A dividend of NOK 0.9 million was paid to non-controlling interests in 2016.
Proposed dividend to be approved at the annual general meeting amounts to NOK 0.65 per share.
The company went into a loan facility agreement with Nordea Bank AB as part of the financing of the acquisitions of sumarum AG and ROC Global Solutions Ltd. in 2017 amounting to EUR 25.8 million.
As of 31 December the Euro term loan facility amounts to NOK 236.2 million which includes a currency effect of NOK 12.1 million increasing the balance of the loan. Relates to currency effects.
Interest rate to be paid, depends on the net debt to EBITDA ratio and the Euribor interest rate. In FY 2017 the company has paid NOK 3.0 million interest rates on the loan.
| NOK 1000 | 2017 | 2016 | |||||||
|---|---|---|---|---|---|---|---|---|---|
| Financial institution |
Agreement | Maturity | Duration | Interest rate |
Non- current Current |
Total | Non | current Current Total | |
| SG Finans | Financial leasing | Mar 2019 | 5 years | 9.0% | 43 | 145 | 188 | 188 | 136 324 |
| SG Finans | Financial leasing | Dec 2019 | 5 years | 6.0% | 506 | 466 | 972 | 972 | 447 1,419 |
| SG Finans | Financial leasing | Apr 2020 | 5 years | 5.5% | 163 | 112 | 275 | 275 | 108 383 |
| Nordea Bank AB, Branch Norway* Deutsche Bank, |
Bank loan | May 2022 | 5 years see below | 204,424 31,740 236,164 | - | - - |
|||
| Germany | Bank loan | Sep 2018 | 6 years | 3.5% | - | 216 | 216 | - | - - |
| Sparkasse Südholstein, Germany KfW Bank, Germany |
Bank loan Bank loan |
Mar 2019 | 5 years | 2.3% | 134 - |
522 7,431 |
656 7,431 |
- - |
- - - - |
| Commerzbank, Bank** Bank loan | Dec 2031 | 14 years | 1.3% | 14,955 | 1,150 16,105 | - | - - |
||
| Interest-bearing debt and borrowings |
220,225 41,782 262,007 | 1,436 | 691 2,126 |
The company has entered into a swap arrangement to hedge its interest exposures arising from this debt obligations.
The company shall repay 6.25% of the aggregated loan each 6 months. Termination date is 31.05.2022, and any loan outstanding on this date shall then be repaid. In FY 2017 the company has repaid NOK 15.7 million on the loan in addition to the arrangement fees amounting to NOK 2.2 million.
sumarum AG went into a loan agreement with Commerzbank in March 2017 related to the financing of the new office building in Leipzig.
For the loans to SG Finans and Nordea Bank AB, the Group has pledged trade receivables up to NOK 54 million as guarantee. Property, plant and equipment has been pledged as guarantee up to NOK 22 million for loans from Nordea Bank Norge.
Carrying amounts of pledged assets are; Trade receivables NOK 90.3 million, and fixed assets NOK 5.2 million.
| Shareholder loan | Agreement | Maturity | Duration | Int | 2017 | 2016 |
|---|---|---|---|---|---|---|
| MBG MBG MBG MBG Total |
Shareholder loan Shareholder loan Shareholder loan Shareholder loan |
Dec 2023 Dec 2023 Aug 2026 Dec 2020 |
10 years 10 years 10 years 10 years |
6.5% 7.0% 5.5% 5.0% |
2,460 1,476 1,378 2,460 7,775 |
- - - - - |
The company is a certified SAP BPO partner. SAP BPO Partners offer the full stack of business process outsourcing services based on SAP HCM business applications. Certified providers undergo a rigorous assessment of their delivery and support capabilities every two years by SAP's outsourcing partner certification group. The agreement involves commitments for future purchases of licenses and maintenance fees amounting to NOK 3.3 million.
The Group is required to have an occupational pension scheme in accordance with the Norwegian law on mandatory occupational pension ("lov om obligatorisk tjenestepensjon"). The Group's pension schemes satisfy the requirements of this law, and represent a defined contribution plan, with disability coverage. At the end of the year there were 136 participants in this defined contribution plan, including the AFP-scheme.
The pension expenses equals the calculated contribution for the year and is NOK 5.2 million (2016 NOK 5.3 million). The scheme is administered by Storebrand.
In FY 2016 a new AFP-scheme was established. The new AFP-scheme is not an early retirement plan, but a plan that gives a lifelong contribution to the ordinary pension. The employees can choose to exercise the new AFP-scheme starting at the age of 62 years, also in combination with continued work, and the annual regular post-employment benefits increases in the new scheme if early AFP retirement is rejected. The new AFPscheme is a defined benefit multi-employer plan which is financed through contributions that are determined by a percentage of the employee's earnings. There is currently no reliable measure and allocation of liabilities and assets in the plan. The plan is accounted for as a defined contribution plan which means that the contributions are recognised as expenses with no provisions.
The premium paid during 2017 was 2.5% of salary between 1 G and 7.1 G. 1 G equals NOK 0.1 million as of 31.12.2017.
The AFP-scheme does not publish any estimates on future rate of premiums, but it is expected that the premiums will be increased over time to meet the expectations of increased pension payments.
Employees in Group companies outside Norway have pension plans in accordance with local practice and local legislation. The Group has only defined contribution plans. Contributions are paid to pension insurance plans and charged to the income statement in the corresponding period. Once the contributions have been paid, there are no further payment obligations.
Denmark has a defined contribution plan for all employees, a total of 42 people at the end of the year. Finland has a defined contribution plan for all of its employees, a total of 37 employees. Sweden has a defined contribution plan for all employees, a total of 64 employees end of the year. UK has a defined contribution plan for all employees, a total of 32 employees end of the year. Germany has a defined contribution plan for executive employees.
Total expenses recognised related to pension in 2017 amounts to NOK 19.6 million (2016 NOK 18.5 million).
| (NOK 1000) 2017 2016 Prepayments from customers* 11,581 12,050 |
|
|---|---|
| Wages, holiday pay and bonus 25,228 21,753 Accrued expenses and other current liabilities 45,964 11,916 |
|
| Total 82,773 45,719 |
* Prepayments from customers both relate to prepayments of fixed service fees for the first month starting outsourcing deliveries, and prepayments related to liabilities for transferred personnel.
44 45
| receivables | Fair value Loans and through profit |
Liabilities at or loss amortised cost |
Total book value |
|
|---|---|---|---|---|
| Financial assets Trade accounts receivable Other short-term receivables Cash and cash equivalents Total |
157,493 16,290 37,657 211,440 |
- - - - |
- - - - |
157,493 16,290 37,657 211,440 |
| Financial liabilities Derivatives, Interest rate swaps Borrowings, long term Trade accounts payables Other short-term debt Total |
- - - - |
255 - - 255 |
- 220,225 24,211 82,773 327,209 |
255 220,225 24,211 82,773 327,464 |
| receivables | Fair value Loans and through profit |
Liabilities at or loss amortised cost |
Total book value |
|
|---|---|---|---|---|
| Financial assets | ||||
| Trade accounts receivable | 70,887 | - | - | 70,887 |
| Other short-term receivables | 8,021 | - | - | 8,021 |
| Cash and cash equivalents | 43,509 | - | - | 43,509 |
| Total | 122,416 | - | - | 122,416 |
| Financial liabilities | ||||
| Borrowings, long term | - | - | 1,436 | 1,436 |
| Trade accounts payables | - | - | 10,792 | 10,792 |
| Other short-term debt | - | - | 46,410 | 46,410 |
| Total | - | - | 58,638 | 58,638 |
The Group classifies fair value measurements by using a fair value hierarchy which reflects the importance of the input used in the preparation of the measurements. The fair value hierarchy has the following levels:
Level 1: Non-adjusted quoted prices in active markets.
Level 2: Other data than the quoted prices included in Level 1, which are observable for assets or liabilities either directly, i.e. as prices, or indirectly, as derived from prices.
Level 3: Data for the asset or liability which is based on unobservable market data.
The fair value of the interest rate swap is determined by discounting expected future cash flows to present value through the use of observed market interest rates from Nordea. The fair value measurement for interest swap at period-end 2017 using Level 2 is NOK 255 thousand.
It is assessed that the carrying amounts of financial instruments recognised at amortised cost in the financial statements approximate their fair values. The assessment is based on a judgement that difference between interest rate at year-end compared to draw down. Value assessment is Level 3 in the fair value hierarchy.
Per 31.12. 2016 the Group had a placement of NOK 15.0 million in a fund (Nordea Plan Konservativ). Typically, 95% of the fund's investments were placed in the money market and 5% of the fund's investments are placed in listed shares or share funds. This was a low-risk fund containing readily redeemable cash-equivalent assets. The assessed value of the placement per 31.12.2016 was based on its realisable value (investment including earnings). As of 31.12.2017 this placement is NOK 0.
The Group has some exposure to risks from its use of financial instruments, including credit risk, liquidity risk, interest rate risk and currency risk. This note presents information about the Group's exposure to each of the above mentioned risks, and the Group's objectives, policies and processes for managing such risks. At the end of this note, information regarding the Group's capital management is provided.
Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. Market prices comprise three types of risk: market risk (e.g. interest rate risk and currency risk), commodity price risk and other price risk. The company's financial instruments are mainly exposed to interest rate and currency risks.
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The company's exposure to the risk of changes in market interest is managed by the mix of fixed and variable rate loans. As described above, the company has entered into swap arrangements to hedge its interest exposures arising from its debt obligations (ref. Note 15). The company has an overdraft facility in place which has a floating interest rate condition. At 31 December 2017, the company had drawn on this facility amounting to NOK 25,561 thousand. The company had not drawn on this facility at 31 December 2016.
Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The company is primarily exposed to foreign exchange risk arising from various currency exposures with respect to the USD, EUR and GBP in relation to its debt obligations as well as from certain commercial transactions. As described above, the company has entered into swap arrangements to hedge its currency exposures arising from its debt obligations (ref. Note 12).
For operational transactions denominated in foreign currencies, the company's policy is to exchange into foreign currency as required on a spot basis.
As of 31 December 2017 the company has a Euro based loan related to the acquisition of sumarum and ROC in FY 2017. Per 31 December the Company had an unrealized currency loss amounting to NOK 12 million related to this loan. Otherwise the Group has limited exposure to currency risk from assets and liabilities recognised as at 31 December 2017 that are denominated in currencies other than the functional currency of the Group entities.
As of 31 December 2017 the Group has currency exposure from EUR, DKK, INR, SEK, GBP, CHF and PLN. It is mainly Euro exchange rates constituting a currency risk for the company. A 10% negative change in the exchange rate of Euro would have resulted in a finance loss pretax of NOK 273 thousand.
The carrying amounts of financial assets represents the Group's maximum credit exposure. The counterparty to the cash and cash equivalents and deposits banks which are assessed to be solid.
Regarding trade receivables, the credit exposure are evaluated continuously. The company has a customer portfolio of well-known companies and has had low credit losses (Note 10).
Liquidity risk is the risk of being unable to pay financial liabilities as they fall due. The Group'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 Group's reputation. Prudent liquidity risk management implies maintaining sufficient cash and the availability of appropriate funding.
| 995 | 995 |
|---|---|
| 166 | 166 |
| 166 | 166 |
| 166 | 166 |
The following table details the contractual maturities for the Group's financial liabilities. The tables do not include interest payments. The contractual amounts were estimated based on closing exchange rate at balance sheet date.
| (Amounts in NOK) | Less than 3 months |
3 to 12 months |
1 to 5 years |
Total |
|---|---|---|---|---|
| Borrowings, long term | - | - | 220,225 | 220,225 |
| Borrowings, short term | 180 | 41,603 | - | 41,782 |
| Trade creditors and other short term liabilities | 24,211 | 71,192 | 11,581 | 106,984 |
| Total liabilities | 24,390 | 112,795 | 231,806 | 368,991 |
| (Amounts in NOK) | Less than 3 months |
3 to 12 months |
1 to 5 years |
Total |
|---|---|---|---|---|
| Borrowings, long term Borrowings, short term Trade creditors and other short term liabilities |
- 169 10,792 |
- 522 33,669 |
1,435 - 12,050 |
1,435 691 56,511 |
| Total liabilities | 10,961 | 34,191 | 13,485 | 58,638 |
A key objective in relation to capital management is to ensure that the company maintains a sufficient capital structure in order to support its business development and to maintain a strong credit rating. The company evaluates its capital structure in light of current and projected cash flows, potential new business opportunities and the Group's financial commitments. In order to maintain or adjust the capital structure, the company may issue new shares or obtain new loans.
| Related party | Transaction | 2017 | 2016 |
|---|---|---|---|
| Rayon Design AS1) | Management Services | 902 | 162 |
| Total | 902 | 162 |
1) Hans-Petter Mellerud, CEO, is director of the board and Norwegian Retail AS, a company 100% owned by Hans-Petter Mellerud, owns 40% of the shares in Rayon Design AS.
| Management | Title | Salary incl. bonuses | Pensions | Other benefits | Total | |
|---|---|---|---|---|---|---|
| Hans-Petter Mellerud | CEO | 2,282 | 70 | 36 | 2,387 | |
| Nina Stemshaug | CFO | 1,606 | 70 | 9 | 1,685 | |
| Halvor Leirvåg | CTO | 1,460 | 70 | 8 | 1,537 | |
| Richard Schiørn | VP Strategic | 1,522 | 70 | 6 | 1,597 | |
| Peter T. Gogstad | VP Quality and Compliance | 1,807 | 70 | 26 | 1,903 | |
| Øyvind Reiten | Executive VP Northern Europe | 1,595 | 70 | 30 | 1,695 | |
| Jerry Chilvers | Executive VP UK and Ireland | |||||
| (from 26 September 2017) | 350 | 35 | 2 | 387 | ||
| Harald Götsch | Executive VP Central Europe | |||||
| (from 18 May 2017) | 1,214 | 28 | 86 | 1,328 | ||
| Balakrishnan Narayanan | Executive VP Asia Pacific | 508 | - | - | 508 | |
| Jörg John | CHRO | 1,381 | - | - | 1,381 | |
| Jan Erik Nessmo | VP PMO and Transformation | 1,630 | 70 | - | 1,699 | |
| Ismet Muratspahic Otto Leppiko |
VP Alliances and Partners COO (01.01.-31.05) |
1,327 1,121 |
225 157 |
4 28 |
1,556 1,306 |
|
| Total | 17,802 | 932 | 234 | 18,968 | ||
| Board of Directors | Title | Remuneration | Total | |||
| Lars Laier Henriksen | Chairman of the Board | 340 | 340 | |||
| Liselotte Hägertz Engstam | Board Member | 170 | 170 | |||
| Jan Koivurinta | Board Member | 170 | 170 | |||
| Tina Steinsvik Sund | Board Member | 170 | 170 | |||
| Karl Christian Agerup Total |
Board Member | 170 1,020 |
170 1,020 |
|||
| 2016 | ||||||
| Management | Title | Salary | Pensions | Other benefits | Total | |
| Hans-Petter Mellerud | CEO | 2,282 | 51 | 35 | 2,367 | |
| Nina Stemshaug | CFO | 1,854 | 51 | 7 | 1,913 | |
| Halvor Leirvåg | CTO | 1,331 | 51 | 7 | 1,389 | |
| Peter T. Gogstad | VP Quality and Compliance | 1,645 | 51 | 28 | 1,724 | |
| Richard Schiørn | VP Strategic | 1,370 | 51 | 7 | 1,428 | |
| Øyvind Reiten | VP Business development | 1,418 | 51 | 28 | 1,497 | |
| Jan Erik Nessmo | VP Consulting | 1,501 | 51 | 7 | 1,560 | |
| Saara Somersalmi | Group HR Director | 1,102 | 63 | 2 | 1,167 | |
| Otto Lepikkö | COO | 1,562 | 89 | 2 | 1,654 | |
| Ismet Muratspahic | VP Strategic products | 1,256 | 206 | 3 | 1,465 | |
| Total | 15,322 | 718 | 125 | 16,165 | ||
| Board of Directors | Title | Remuneration | Total | |||
| Lars Laier Henriksen | Chairman of the board | 332 | 332 | |||
| Liselotte Hägertz Engstam | Board Member | 166 | 166 |
Jan Koivurinta Board Member 166 166 Tina Steinsvik Sund Board Member 166 166 Karl Christian Agerup Board Member 166 166 Total 995 995
The CEO is entitled to six months severance pay in case of dismissal from the company or if terminating at own will due to a position change resulting in no longer solely managing the Zalaris Group.
| Name | Role | No. of shares |
|---|---|---|
| Norwegian Retail AS | CEO (Hans-Petter Mellerud) | 2,941,482 |
| Harald Götsch | Executive VP Central Europe (from 18 May 2017) | 506,292 |
| Jerry Chilvers | Executive VP UK and Ireland (from 26 September 2017) | 103,448 |
| Lars Laier Henriksen | Chairman of the board | 36,112 |
| Ismet Muratspahic | VP Alliances and Partners | 4,000 |
| Halvor Leirvåg | CTO | 3,260 |
| Øyvind Reiten | Executive VP Northern Europe | 3,200 |
| Nina Stemshaug | CFO | 2,375 |
| Jan Erik Nessmo | VP PMO and Transformation | 1,600 |
| Richard Schiørn | VP Strategic Projects | 1,514 |
| Total | 3,603,283 |
The group has entered into operating leases for vehicles and office equipment. The agreements related to office equipment contain an option to extend.
| (NOK 1000) | 2017 | 2016 |
|---|---|---|
| Ordinary lease payments | 8,728 | 1,727 |
| Future payments related to non-cancellable leases fall due for payment as follows: Within 1 year |
6,769 | 1,304 |
| 1 to 5 years Future lease commitment |
8,157 14,927 |
1,580 2,884 |
The group has the following lease commitments connected with office premises. End of period is the same as termination of contract.
| End of period | Annual lease | 2017 | 2016 | |||
|---|---|---|---|---|---|---|
| 1,153 | ||||||
| - | ||||||
| - | ||||||
| 194 | ||||||
| - | ||||||
| - | ||||||
| - | ||||||
| - | ||||||
| - | ||||||
| - | ||||||
| - | ||||||
| - | ||||||
| - | ||||||
| - | ||||||
| - | ||||||
| - | ||||||
| - | ||||||
| - | ||||||
| 1,780 | ||||||
| 971 | ||||||
| - | ||||||
| 902 | ||||||
| 231 | ||||||
| - | ||||||
| 40 | ||||||
| 1,260 | ||||||
| 2018 | 319 | 315 | 296 | |||
| 2021 | 1,715 | 1,666 | 1,524 | |||
| 2018 | 917 | 917 | 895 | |||
| 2018 | 47 | 16 | - | |||
| 2018 | 59 | 20 | - | |||
| 2021 | 415 | 401 | 509 | |||
| 3 months' Notice | 74 | 25 | - | |||
| 2018 | 31 | 10 | - | |||
| Dec. 2018 | 108 | - | - | |||
| Dec. 2019 | 229 | 212 | 209 | |||
| Dec. 2022 | 1,710 | 1,695 | 1,045 | |||
| Dec. 2018 | 107 | 93 | 90 | |||
| 18,266 | 14,509 | |||||
| 6 months' Notice Aug. 2018 6 months' Notice 2021 Apr. 2018 Jun. 2018 Jul. 2018 2019 1 month's Notice 2019 2018 1 month's Notice 1 month's Notice 2021 2021 2019 Oct. 2017 1 month's Notice 2021 2018 2019 Oct. 2018 Nov 2021 Jan. 2018 6 months' Notice 3 months' Notice |
911 377 133 236 106 626 500 402 171 234 104 89 92 1,372 994 207 604 30 1,273 1,018 96 1,104 295 204 42 1,317 |
885 126 44 147 35 209 167 251 107 146 65 55 57 858 621 129 252 10 1,101 1,018 - 1,064 246 201 42 1,302 |
The following subsidiaries are included in the consolidated accounts:
| Company | Note | Country | Main business line | Ownership | Voting share |
|---|---|---|---|---|---|
| Zalaris HR Services Denmark A/S | 1 | Denmark | - | 100% | 100% |
| Zalaris Consulting Denmark A/S | 2 | Denmark | - | 100% | 100% |
| Zalaris HR Services Sverige AB | 3 | Sweden | - | 100% | 100% |
| Zalaris HR Services Finland OY | 4 | Finland | - | 100% | 100% |
| Zalaris Consulting Finland OY | 5 | Finland | - | 100% | 100% |
| Zalaris HR Services Norway AS | 6 | Norway | - | 100% | 100% |
| Zalaris HR Services Latvia SIA | 7 | Latvia | - | 100% | 100% |
| Zalaris HR Services Lithuania UAB | 8 | Lithuania | - | 100% | 100% |
| Zalaris HR Services Poland Sp Z.o.o | 9 | Poland | - | 100% | 100% |
| Zalaris HR Services Estonia | 10 | Estonia | - | 100% | 100% |
| Zalaris Consulting AB | 11 | Sweden | - | 100% | 100% |
| Zalaris Consulting AS | 12 | Norway | - | 100% | 100% |
| Zalaris HR Services India Pvt Ltd | 13 | India | - | 100% | 100% |
| sumarum AG | 14 | Germany | - | 100% | 100% |
| MediaTrain Gmbh | 15 | Germany | - | 100% | 100% |
| LBU Personal Complete GmbH | 16 | Germany | - | 100% | 100% |
| Zalaris Switzerland AG | 17 | Switzerland | - | 100% | 100% |
| ROC Global Solutions Ltd | 18 | UK | - | 100% | 100% |
| ROC System Consulting Ltd | 19 | UK | - | 100% | 100% |
| ROC Deutschland Gmbh | 20 | Germany | - | 100% | 100% |
| ROC Polsky Sp Z.o.o | 21 | Poland | - | 100% | 100% |
| Zalaris HR Services Ireland Ltd. | 22 | Ireland | - | 100% | 100% |
| Consolidated from 15.07.2000 | 1 | ||||
| Consolidated from 20.12.2007 | 2 | ||||
| Consolidated from 19.04.2001 | 3 | ||||
| Consolidated from 29.08.2003 | 4 | ||||
| Consolidated from 29.08.2003 | 5 | ||||
| Consolidated from 30.11.2006 | 6 | ||||
| Consolidated from 27.12.2006 | 7 | ||||
| Consolidated from 08.05.2013 | 8 | ||||
| Consolidated from 26.04.2013 | 9 | ||||
| Consolidated from 04.06.2013 | 10 | ||||
| Consolidated from 19.04.2001 | 11 | Held by Zalaris Services Sverige AB | |||
| Consolidated from 01.08.2002 | 12 | Held by Zalaris Services Norway AS | |||
| Consolidated from 01.10.2015 | 13 | ||||
| Consolidated from 18.05.2017 | 14 | ||||
| Consolidated from 18.05.2017 | 15 | Held by sumarum AG | |||
| Consolidated from 18.05.2017 | 16 | Held by sumarum AG | |||
| Consolidated from 18.05.2017 | 17 | Held by sumarum AG | |||
| Consolidated from 26.09.2017 | 18 | ||||
| Consolidated from 26.09.2017 | 19 | Held by ROC Global Solutions Ltd | |||
| Consolidated from 26.09.2017 | 20 | Held by ROC Global Solutions Ltd | |||
| Consolidated from 26.09.2017 | 21 | Held by ROC Global Solutions Ltd | |||
| Consolidated from 01.02.2018 | 22 |
Zalaris ASA acquired 97.32% of the total share capital and 98.64% of the voting shares in sumarum AG with its directly and indirectly owned subsidiaries (sumarum Group). The closing date for the transaction was 18 May 2017. On 10 October 2017, Zalaris ASA signed and closed a share purchase agreement to acquire the remaining 2.68% of the shares, in total 1,602 shares, in sumarum AG from the minority shareholders.
Total consideration of the acquisition was NOK 175.6 million (EUR 18.7 million), including a cash consideration of NOK 153.2 million (EUR 16.3 million), financed by new long term borrowings, and the issuance of 734,703 shares in Zalaris with a value of NOK 22.4 million (EUR 2.4 million).
sumarum Group provides cloud-based payroll and HR solutions on SAP's platform and a wide range of SAP HCM and SuccessFactors consulting services for entities in Germany, Austria and Switzerland. Today, the company has seven locations in Germany, and all specialize in different areas of the sumarum portfolio. sumarum has a broad spectrum of customers within public services, service providers, large industry players, energy companies and companies and trusts within the healthcare sector. At the end of June, sumarum Group had 183 employees. Total revenue from acquisition date until year end amounts to NOK 126,2 million and operating profit amounts to NOK 5.6 million.
As of the acquisition date, the fair values of the acquired assets and liabilities of the consolidated sumarum Group can be broken down as follows:
| Cost of business combination | Shares acquired | Amount | |
|---|---|---|---|
| Agreed purchase price | 100% | 175,619 | |
| Book value of equity Excess value to be allocated |
27,317 148,302 |
||
| Fixed assets | |||
| Office building | 816 | ||
| Intangible assets | |||
| Customer contracts | 19,159 | ||
| Customer relationships | 49,463 | ||
| Deferred tax | -20,632 | ||
| Total allocated to identifiable intangible assets: | 48,806 | ||
| Goodwill1 | 99,496 |
1 The acquired goodwill is not tax deductible and mainly relates to human relations. The excess values allocated as of 31 December 2017 are preliminary.
Zalaris ASA has acquired 100% of the voting shares and share capital in ROC Global Solution Consulting Ltd. with its directly and indirectly owned subsidiaries (ROC Group). The closing date for the transaction was 25 September 2017. Total consideration for 100% of the shares in ROC is NOK 89.1 million (GBP 8.5 million) and was settled through cash payments in the total aggregate amount of up to NOK 80.1 million (GBP 7.6 million), financed by a new long term borrowings, and the issuance of 264,006 new shares in Zalaris with a value of NOK 9.9 million (GBP 0.9 million). The consideration shares were issued on 8 December 2017, registered on the Oslo Stock Exchange on 12 December 2017 and are subject to lock-up for a period of 24 months from completion.
ROC Group is a human capital management consultancy that specialises in SAP and SuccessFactors HCMrelated services. SuccessFactors is SAP's strategic HR solution in the cloud, covering the entire value chain of HR tasks from recruiting to exit. ROC Group has five offices in UK, Germany and Poland and serves blue chip customers in the following sectors: banks, automotive, utilities, hospitality and professional services. At the end of September, ROC Group had 120 employees. Total revenue from acquisition date until year end amounts to NOK 30.2 million and operating loss amounts to NOK 0.4 million.
As of the acquisition date, the fair values of the acquired assets and liabilities of the consolidated sumarum Group can be broken down as follows:
| Cost of business combination | Shares acquired | Amount |
|---|---|---|
| Agreed purchase price Book value of equity Excess value to be allocated |
100% | 89,121 32,028 57,092 |
| Intangible assets Customer relationships Deferred tax |
26,626 (6,657) |
|
| Total allocated to identifiable intangible assets: Goodwill1 |
19,970 37,122 |
1 The acquired goodwill is not tax deductible and mainly relates to human relations. The excess values allocated as of 31 December 2017 are preliminary.
Transaction costs relating to the acquisition of sumarum AG and ROC Global Solution Consulting Ltd. of TNOK 23,398 were expensed and are included in Other Costs. The attributable costs of the issuance of the shares of TNOK 3,411 have been charged directly to equity as a reduction in Other Equity.
Zalaris ASA (the company) adopted ESPP to reward certain key employees of the company and its subsidiaries by enabling them to receive shares of the company. The plan is effective as of 13th of May 2016.
The purpose of the ESPP is to further align the interests of the company, its subsidiaries and its shareholders by providing long-term incentives in the form of an own investment in the company done by the participant and matching awards, in the form of Restricted Stock Units (RSUs), based on the initial investment measured in number of shares. Any matching awards shall be granted based on amongst the considerations of position in the company and a review on the individual participant's performance prior to award. The matching awards are free of charge for the participants. The maximum number of shares covered by or subject to matching awards under this plan is 300,000 whereof 171,519 shares were granted at the end of December 2017.
The granted RSUs per end of FY 2017, vest 30.05. 2021 conditioned by that the purchased shares (initial investment) are not sold and that the participant has not resigned or the participants employment is terminated (non-market condition). If for some reason the company is not holding a sufficient number of shares at the relevant settlement date, any RSUs awarded and settled under the plan shall be settled by a cash bonus payments equal to the Fair Market Value per share on the date of settlement multiplied by the number of shares subject to the Matching Award. The company will do its utmost to settle the granted awards as shares, and thus accounts the ESPP as an equity-settled plan.
The fair value of the RSUs is estimated at the grant date using Black&Scholes Merton pricing model, taking into account the terms and conditions on which the RSUs were granted.
| (NOK 1000) | 2017 | 2016 |
|---|---|---|
| Restricted Share Units Costs Accrued social security costs Total recognised costs for the ESPP |
990 307 1,296 |
122 22 143 |
| Unamortised fair value per end of: | ||
| (NOK 1000) | 2017 | 2016 |
| RSU plan granted | 4,314 | 6,136 |
There have been no other events after the balance sheet date significantly affecting the Group's financial position.
Income Statement 1 January - 31 December
| (NOK 1000) | Note | 2017 | 2016 |
|---|---|---|---|
| Revenue | 572 | 530 | |
| Other revenue | 100,831 | 92,883 | |
| Total Revenue | 101,403 | 93,413 | |
| Operating expenses | |||
| License costs | 30,064 | 23,763 | |
| Personnel expenses | 3 | 22,888 | 19,497 |
| Other operating expenses | 4 | 75,560 | 72,094 |
| Amortisation intangible assets | 5 | 8,799 | 8,645 |
| Depreciations and impairments | 6 | 371 | 270 |
| Other costs | - | 1,558 | |
| Total operating costs | 137,682 | 125,828 | |
| Operating profit | -36,279 | -32,415 | |
| Financial items | |||
| Financial income | 15 | 30,169 | 43,153 |
| Financial expenses | 15 | -5,365 | -1,745 |
| Unrealised foreign currency loss | 14, 15, 16 | -12,057 | - |
| Net financial items | 12,746 | 41,408 | |
| Ordinary profit before tax | -23,533 | 8,993 | |
| Income tax expense | |||
| Tax expense on ordinary profit | 7 | 511 | 3,405 |
| Total tax expense | 511 | 3,405 | |
| Profit for the year | -24,043 | 5,587 | |
| Attributable to: | |||
| Proposed dividend | -12,965 | -16,557 | |
| Share premium | 12,965 | 16,557 | |
| Other Equity | -24,043 | 5,587 | |
The parent company annual accounts report for Zalaris ASA contains the following documents:
The financial statements, which have been drawn up by the Board and management, should be read in relation to the Annual Report and the independent auditor's opinion.
at 31 December
| (NOK 1000) | Note | 2017 | 2016 |
|---|---|---|---|
| ASSETS | |||
| Non-current assets Intangible assets |
|||
| Deferred tax asset | 7 | ||
| Other intangible assets Total intangible assets |
5 | 42,861 42,861 |
34,817 34,817 |
| Fixed assets | |||
| Property, plant and equipment | 6 | 627 | 741 |
| Total fixed assets | 627 | 741 | |
| Financial non-current assets | |||
| Shares in subsidiaries | 8 | 338,283 | 42,003 |
| Total financial non-current assets | 338,283 | 42,003 | |
| Total non-current assets | 381,771 | 77,562 | |
| Current assets Trade accounts receivable |
45 | 103 | |
| Prepayments | 4,510 | 3,668 | |
| Other short-term receivables | 9 | 869 | 1,623 |
| Other short-term receivables to group company | 9 | 14,400 | 61,522 |
| Cash and cash equivalents | 10 | 26,904 | 6,475 |
| Total current assets | 46,728 | 73,391 | |
| TOTAL ASSETS | 428,498 | 150,953 |
at 31 December
| (NOK 1000) | Note | 2017 | 2016 |
|---|---|---|---|
| EQUITY AND LIABILITIES | |||
| Equity Paid-in capital Share capital Own shares - nominal value Other paid in equity Share premium Total paid-in capital |
2,012 -6 905 45,253 48,164 |
1,912 -6 94 20,491 22,491 |
|
| Other equity Total earned equity |
6,532 6,532 |
33,986 33,986 |
|
| Total equity Non-current liabilities Interest-bearing loans and borrowings Deferred tax Employee defined benefit liabilities Total long-term debt |
16 7 |
54,696 205,136 1,019 - 206,155 |
56,477 1,436 509 - 1,945 |
| Current liabilities Trade accounts payable Interest-bearing loans Short term debt to group company Derivatives Income tax payable Public duties payable Other short-term debt Total short-term debt |
16 18 7 17 |
8,040 118,510 3,056 255 - 415 37,371 176,747 |
6,762 49,778 6,951 - 2,025 2,135 24,880 92,531 |
| Total liabilities | 373,803 | 94,476 | |
| TOTAL EQUITY AND LIABILITIES | 428,498 | 150,953 |
1 January - 31 December
| (NOK 1000) | Note | 2017 | 2016 |
|---|---|---|---|
| Cash flows from operating activities | |||
| Ordinary profit before tax | -23,533 | 8,993 | |
| Income taxes paid | -2,025 | - | |
| Finance income | -30,169 | -43,153 | |
| Financial costs | 16,409 | 1,173 | |
| Amortisation and depreciation | 9,170 | 8,915 | |
| Changes in trade accounts receivable and payables | 1,337 | -1,424 | |
| Changes in other accruals | 50,754 | 4,846 | |
| Interest received | - | - | |
| Interest paid | -3,545 | -553 | |
| Net cash flows from operating activities | 18,398 | -21,202 | |
| Cash flows from investing activities | |||
| Purchases of Intangible assets and property, plant and equipment | -17,100 | -12,157 | |
| Purchase and investment in subsidiary | 8 | -296,279 | -9,234 |
| Net cash flows from investing activities | -313,379 | -21,392 | |
| Cash flows from financing activities | |||
| Group contribution and dividends from daughters | 29,860 | 42,815 | |
| Purchase of own shares | 10 | - | - |
| Issuance of new shares | 37,827 | - | |
| Stock purchase programme | 811 | 94 | |
| IPO related costs | - | - | |
| New debt | - | - | |
| Repayment of borrowings | 203,700 | -690 | |
| Revolving credit | 68,732 | 17,399 | |
| Proposed dividend payment | -12,965 | -16,557 | |
| Net cash flows from financing activities | 327,965 | 43,061 | |
| Net changes in cash and cash equivalents | 32,984 | 468 | |
| Net foreign exchange difference | -12,555 | -283 | |
| Cash and cash equivalents at the beginning of the year | 6,475 | 6,290 | |
| Cash and cash equivalents at the end of the year | 26,904 | 6,475 | |
Oslo, 23 April 2018
_______________________ _______________________ _______________________
Lars Laier Henriksen Liselotte Hägertz Engstam Tina Steinsvik Sund Chairman of the Board Member of the Board Member of the Board
_______________________ _______________________
Jan Mikael Koivurinta Karl-Christian Agerup Hans-Petter Mellerud Member of the Board Member of the Board Chief Executive Officer
| (NOK 1000) | Share Capital |
Own Shares |
Share Premium |
Other Paid in Equity |
Total Paid in Equity |
Other Equity |
Total Equity |
|---|---|---|---|---|---|---|---|
| Equity at 01.01.2016 Income for the year |
1,912 - |
-6 - |
37,048 - |
- - |
38,954 - |
28,399 5,587 |
67,353 5,587 |
| Proposed Dividend | -16,557 | -16,557 | -16,557 | ||||
| Share based payments (Note 18) | - | - | - | 94 | 94 | - | 94 |
| Other changes in equity Equity at 31.12.2016 |
- 1,912 |
- -6 |
- 20,491 |
94 | - 22,491 |
- 33,986 |
- 56,477 |
| Equity at 01.01.2017 | 1,912 | -6 | 20,491 | 94 | 22,491 | 33,986 | 56,477 |
| Income for the year | - | - | - | - | - | -24,043 | -24,043 |
| Proposed Dividend | - | - | -12,965 | - | -12,965 | - | -12,965 |
| Issue of new shares (18.05.2017) | 72 | - | 25,821 | - | 25,893 | - | 25,893 |
| Issue of new shares (10.10.2017) | 1 | - | 520 | - | 521 | - | 521 |
| Issue of new shares (08.12.2017) | 26 | - | 11,386 | - | 11,413 | - | 11,413 |
| Stock purchase programme | - | - | - | 811 | 811 | - | 811 |
| Other changes in equity | - | - | - | - | - | -3,411 | -3,411 |
| Equity at 31.12.2017 | 2,012 | -6 | 45,253 | 905 | 48,164 | 6,532 | 54,695 |
Zalaris ASA ("the company") is a limited liability company incorporated and domiciled in Norway. The company's main office is located in Hovfaret 4, Oslo, Norway. The company delivers full-service outsourced personnel and payroll services.
The financial statements of Zalaris ASA for the period ending on 31 December 2017 were approved in a board meeting on 23 April 2018.
The financial statements of Zalaris ASA for the accounting year 2017 have been prepared in accordance with the Norwegian Accounting Act and generally accepted accounting principles in Norway ("NGAAP").
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.
The company's revenue consists of revenue from providing services to subsidiaries and basic consulting services. Revenue is in general recognised when it is probable that transactions will generate future financial benefits for the company and the size of the amount can be reliably estimated. Sales revenue is presented net of value added tax and potential discounts.
The service revenue and the revenue from basic consulting services are recognised according to the rendering of the service. Small projects and change orders beyond the terms of the main contract with the customer service delivery are recognised according to the rendering of the services.
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 utilized. Deferred tax assets and liabilities are not discounted.
Costs related to internally developed software are capitalised to the extent that a future economic benefit associated with the development of identifiable intangible assets and costs can be reliably measured. Otherwise, the costs are expensed as incurred. Capitalised development is amortised over their useful lives. Research costs are expensed as incurred.
Fixed assets are valued at cost less accumulated depreciation and impairment losses. When assets are sold or disposed of, the gross carrying amount and depreciation are derecognised, and any gain or loss on the sale or disposal is recognised in the income statement.
The gross carrying amount of fixed assets is the purchase price, including duties/taxes and direct acquisition costs related to making the fixed asset ready for use.
The depreciation periods and methods are assessed each year. The residual value is estimated every year-end and changes in the estimate for residual value is accounted for as an estimation change.
Leases where the group assumes most of the risk and rewards of ownership are classified as financial leases. Financial leasing contracts are recognised on the balance sheet and depreciated on a linear basis over the expected useful life of the assets. The leasing debt is classified as a long-term debt and the leasing debt is reduced by the payments according to the leasing contract deducted by an interest element which is expensed.
Leases in which most of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases are charged to the income statement on a straightline basis over the period of the lease.
Shares in subsidiaries are measured using the cost method of accounting in the parent company accounts. Investments are valued at the acquisition cost of the shares unless impairment losses have been made.
Shares in subsidiaries are impaired to fair value when the decrease in value is not considered as temporary. Impairment losses are reversed when the reason for the impairment no longer applies.
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. After initial measurement, such financial assets are subsequently measured at amortised cost using the effective interest rate (EIR) method (if the amortisation effect is material), less impairment.
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.
After initial recognition, interest bearing loans and borrowings are subsequently measured at amortised cost using the effective interest rate method.
The company has a defined contribution pension plan. Contributions are paid to pension insurance plans and charged to the income statement in the corresponding period. Once the contributions have been paid, there are no further payment obligations.
Transaction costs directly attributable to an equity transaction are recognised directly in equity, net after deducting tax.
New information on the company's position at the balance sheet date is taken into account in the financial statements. Events after the balance sheet date that do not affect the company's position at the balance sheet date, but will affect the company's position in the future, are stated if significant.
The management has used estimates and assumptions that have affected assets, liabilities, incomes, expenses and information on potential liabilities in accordance with generally accepted accounting principles in Norway.
The cash flow statement is presented using the indirect method. Cash and cash equivalents includes cash, bank deposits and other short term, highly liquid investments.
The company has two operating segments, which is Cloud Services to external customers and Group Services to subsidiaries.
The Cloud services unit is offering additional cloud-based HR functionality to existing outsourcing customers as talent management, digital personnel archive, HR analytics, mobile solutions etc..
The company is providing shared services to its subsidiaries within accounting, IT solutions both for internal use and customer deliveries, and consulting services. Items that are not allocated are mainly sales activities, executive management, HR, interest-bearing loans and other associated expenses and assets related to administration of the Group. The key management in the company is the chief decision maker in the Group. The investing activities comprise total expenses in the period for the acquisition of assets that have an expected useful life of more than one year.
Assets and liabilities are not allocated to segments.
| (NOK 1,000) | Cloud | Group Services | Non-allocated | Total | |
|---|---|---|---|---|---|
| Other operating income, external | 572 | 100,831 | - | 101,403 | |
| Other operating expenses | -153 | -91,661 | -36,698 | -152,624 | |
| Depreciation and amortisation | - | -9,170 | - | -9,170 | |
| Operating profit/(loss) | 419 | - | -36,698 | -60,391 | |
| Net financial income/(expenses) | - | - | 12,291 | 12,291 | |
| Income tax | - | - | -511 | -511 | |
| Profit for the period | 419 | - | -24,462 | -48,610 | |
| Cash flow from investing activities | - | - | -313,379 | -313,379 |
| (NOK 1,000) | Cloud | Group Services | Non-allocated | Total | |
|---|---|---|---|---|---|
| Other operating income, external | 530 | 92,883 | - | 93,413 | |
| Other operating expenses | -177 | -87,460 | -29,276 | -116,913 | |
| Depreciation and amortisation | - | -5,423 | -3,492 | -8,915 | |
| Operating profit/(loss) | 353 | - | -32,768 | -32,415 | |
| Net financial income/(expenses) | - | - | 41,408 | 41,408 | |
| Income tax | - | - | -3,405 | -3,405 | |
| Profit for the period | 353 | - | 5,234 | 5,587 | |
| Cash flow from investing activities | - | - | -21,392 | -21,392 |
Non-allocated costs includes general administrative costs including group management, business development, marketing, finance and controlling and certain group centralized IT costs.
The company is delivering services to its subsidiaries in different countries in the Nordic, Baltic and Poland in addition to external customers in Norway, and information regarding revenue based on geography is provided below.
| (NOK 1,000) | as % of total | 2017 | as % of total | 2016 | |
|---|---|---|---|---|---|
| Norway | 44% | 44,643 | 47% | 44,293 | |
| Sweden | 22% | 22,657 | 21% | 19,151 | |
| Denmark | 13% | 12,687 | 11% | 10,262 | |
| Finland | 12% | 12,583 | 13% | 11,864 | |
| Other | 9% | 8,834 | 8% | 7,843 | |
| Total | 100% | 101,403 | 100% | 93,413 | |
| (NOK 1,000) | 2017 | 2016 | |
|---|---|---|---|
| Salary Social security tax Pension costs (see note 12) Capitalised development expenses Other expenses Total personnel costs |
22,896 3,880 1,431 -10,071 4,752 22,888 |
17,871 3,137 1,313 -7,050 4,227 19,497 |
|
| 2017 | 2016 | ||
| Average number of employees Average number of FTE |
21 20 |
20 19 |
See note 13 for transactions with related parties.
| (NOK 1,000) | 2017 | 2016 | |
|---|---|---|---|
| External services IT services and telecom Office premises Travel and transport Postage and freight Other expenses Total other operating expenses |
42,597 24,038 2,007 1,267 29 5,623 75,560 |
42,067 24,423 1,570 1,005 88 2,939 72,094 |
|
| Auditors fee | |||
| (NOK 1000) | 2017 | 2016 | |
| Auditor fee | 1,980 | 1,035 |
Other fees in the table above mainly relates to financial due diligence services. Other attestation fees mainly relates to ISEA 3402 attestation and other audit attestations.
| (NOK 1,000) | Licenses and software |
Internally developed |
Internally developed software software under construction |
Total |
|---|---|---|---|---|
| Acquisition cost Accumulated 1 January 2016 Additions of the year Disposals and currency effects Internal AUC reclassified Accumulated 31 December 2016 |
31,230 594 - - 31,824 |
48,245 - - 5,931 54,177 |
3,475 10,897 - -5,931 8,441 |
82,950 11,492 - - 94,441 |
| Accumulated 1 January 2017 Additions of the year Disposals and currency effects Internal AUC reclassified Accumulated 31 December 2017 |
31,824 - - - 31,824 |
54,177 - - 15,262 69,439 |
8,441 16,843 - -15,262 10,022 |
94,441 16,843 - - 111,284 |
| Depreciation Accumulated 1 January 2016 This year's ordinary amortisation Disposals of amortisation and currency effects Accumulated 31 December 2016 |
23,868 1,825 25,693 |
27,112 6,820 33,931 |
- - - |
50,979 8,645 - 59,624 |
| Accumulated 1 January 2017 This year's ordinary amortisation Disposals of amortisation and currency effects Accumulated 31 December 2017 |
25,693 1,530 - 27,223 |
33,931 7,268 - 41,200 |
- - - |
59,624 8,799 - 68,423 |
| Book value at 31 December 2016 Book value at 31 December 2017 |
6,131 4,601 |
20,245 28,239 |
8,441 10,022 |
34,817 42,861 |
| Useful life Depreciation method |
5-10 years linear |
5 years linear |
5 years linear |
| (NOK 1,000) | Furniture and fixtures |
IT equipment |
Total | |
|---|---|---|---|---|
| Acquisition cost Accumulated 1 January 2016 Additions of the year |
2,730 142 |
449 524 |
3,179 666 |
|
| Disposals of the year Accumulated 31 December 2016 |
- 2,872 |
- 973 |
- 3,845 |
|
| Accumulated 1 January 2017 Additions of the year Disposals of the year |
2,872 41 - |
973 216 - |
3,845 257 - |
|
| Accumulated 31 December 2017 | 2,913 | 1,189 | 4,102 | |
| Depreciations Accumulated 1 January 2016 This year's ordinary depreciation Disposals of the year Accumulated 31 December 2016 |
2,462 112 - 2,574 |
372 158 - 531 |
2,835 270 - 3,105 |
|
| Accumulated 1 January 2017 This year's ordinary depreciation Disposals of the year Accumulated 31 December 2017 |
2,574 125 - 2,699 |
531 246 - 777 |
3,105 371 - 3,476 |
|
| Book value at 31 December 2016 Book value at 31 December 2017 |
298 213 |
442 413 |
741 627 |
|
| Useful life Depreciation method |
5 year linear |
3-6 years linear |
| (NOK 1,000) | 2017 | 2016 | |
|---|---|---|---|
| Tax paid & payable Changes in deferred taxes Tax expense/income |
- 511 511 |
3,102 304 3,405 |
|
| Tax payable in balance sheet: | |||
| (NOK 1,000) | 2017 | 2016 | |
| Ordinary profit before tax Permanent differences Change in temporary differences Group contribution Tax losses carry forward Basis for tax payable Tax payable |
-23,533 -29,586 -3,056 55,430 -744 -179 |
8,993 22 -913 - 8,101 1,944 |
|
| Reconciliation of effective tax rate: Ordinary profit before tax Calculated tax Other permanent differences Group contribution Effect change in tax rate Tax expense Effective tax rate |
-23,533 -5,648 -7,101 13,303 -44 511 -2% |
8,993 2,248 1,165 - -8 3,405 38% |
|
| Specification of tax effects of temporary differences: | |||
| (NOK 1,000) | 2017 | 2016 |
|---|---|---|
| Property, plant and equipment | 3,402 | 2,120 |
| IFRS amortisation loan | 1,774 | - |
| Other differences | ||
| Tax losses carry forward | -744 | - |
| Total temporary differences | 4,432 | 2,120 |
| Total deferred tax assets | -171 | - |
| Total deferred tax | 1,191 | 509 |
| Net deferred tax | 1,019 | 509 |
Deferred tax 2017 - 23% in 2018. Deferred tax 2016 - 24% in 2017.
Amounts in NOK 1,000
| Company | Consolidated | Location | Ownership |
|---|---|---|---|
| Zalaris HR Services Denmark A/S | 15/07/00 | Copenhagen | 100% |
| Zalaris HR Services Sverige AB | 19/04/01 | Stockholm | 100% |
| Zalaris HR Services Finland OY | 26/09/03 | Helsinki | 100% |
| Zalaris Consulting Finland OY | 29/08/03 | Helsinki | 100% |
| Zalaris HR Services Norway AS | 30/11/06 | Lødingen | 100% |
| Zalaris HR Services Latvia AS | 27/12/06 | Riga | 100% |
| Zalaris HR Services Lithuania UAB | 08/05/13 | Vilnius | 100% |
| Zalaris HR Services Poland Sp Z.o.o | 26/04/13 | Warsawa | 100% |
| Zalaris HR Services Estonia | 04/06/13 | Tallinn | 100% |
| Zalaris HR Services India | 01/10/15 | Chennai | 100% |
| sumarum AG | 18/05/17 | Henstedt-Ulzberg | 100% |
| ROC Global Solutions Ltd | 26/09/17 | London | 100% |
| Indirect owned subsidiaries | |||
| Zalaris Consulting AB | 19/04/01 | Stockholm | 100% |
| Zalaris Consulting AS | 01/08/02 | Oslo | 100% |
| Zalaris Consulting Denmark A/S | 20/12/07 | København | 100% |
| MediaTrain Gmbh | 18/05/17 | Frankfurt | 100% |
| LBU Personal Complete GmbH | 18/05/17 | Amtzell | 100% |
| Zalaris Switzerland AG | 18/05/17 | Zürich | 100% |
| ROC System Consulting Ltd | 26/09/17 | London | 100% |
| ROC Deutschland Gmbh | 26/09/17 | Taufkirchen | 100% |
| Company | Consolidated | Location | Ownership | |
|---|---|---|---|---|
| Zalaris HR Services Denmark A/S | 15/07/00 | Copenhagen | 100% | |
| Zalaris HR Services Sverige AB | 19/04/01 | Stockholm | 100% | |
| Zalaris HR Services Finland OY | 26/09/03 | Helsinki | 100% | |
| Zalaris Consulting Finland OY | 29/08/03 | Helsinki | 100% | |
| Zalaris HR Services Norway AS | 30/11/06 | Lødingen | 100% | |
| Zalaris HR Services Latvia AS | 27/12/06 | Riga | 100% | |
| Zalaris HR Services Lithuania UAB | 08/05/13 | Vilnius | 100% | |
| Zalaris HR Services Poland Sp Z.o.o | 26/04/13 | Warsawa | 100% | |
| Zalaris HR Services Estonia | 04/06/13 | Tallinn | 100% | |
| Zalaris HR Services India | 01/10/15 | Chennai | 100% | |
| sumarum AG | 18/05/17 | Henstedt-Ulzberg | 100% | |
| ROC Global Solutions Ltd | 26/09/17 | London | 100% | |
| Indirect owned subsidiaries | ||||
| Zalaris Consulting AB | 19/04/01 | Stockholm | 100% | |
| Zalaris Consulting AS | 01/08/02 | Oslo | 100% | |
| Zalaris Consulting Denmark A/S | 20/12/07 | København | 100% | |
| MediaTrain Gmbh | 18/05/17 | Frankfurt | 100% | |
| LBU Personal Complete GmbH | 18/05/17 | Amtzell | 100% | |
| Zalaris Switzerland AG | 18/05/17 | Zürich | 100% | |
| ROC System Consulting Ltd | 26/09/17 | London | 100% | |
| ROC Deutschland Gmbh | 26/09/17 | Taufkirchen | 100% | |
| ROC Polsky Sp Z.o.o | 26/09/17 | Gdynia | 100% |
| Other equity* |
Share capital in local currency |
currency | Local Number of shares |
Nominal value per share |
Carrying value |
|
|---|---|---|---|---|---|---|
| Zalaris HR Services Denmark A/S | 500.0 | DKK | 5,000 | 100.0 | 5,484 | |
| Zalaris HR Services Sverige AB | 100.0 | SEK | 1,000 | 100.0 | 9,716 | |
| Zalaris HR Services Finland OY | 8.0 | EUR | 1,000 | 8.0 | 67 | |
| Zalaris HR Services Finland OY | 2,450 | - | EUR | - | - | 21,393 |
| Zalaris Consulting Finland OY | 10.0 | EUR | 100,000 | 0.1 | 84 | |
| Zalaris HR Services Norway AS | 100.0 | NOK | 1,000,000 | 0.1 | 110 | |
| Zalaris HR Services Latvia AS | 2.8 | EUR | 2,000 | 1.4 | 23 | |
| Zalaris HR Services Lithuania UAB | 10.0 | EUR | 1,000 | 10.0 | 22 | |
| Zalaris HR Services Poland Sp Z.o.o | 5.0 | PLN | 100 | 50.0 | 28 | |
| Zalaris HR Services Estonia | 2.5 | EUR | 2,500 | 1.0 | 776 | |
| Zalaris HR Services India | 40,000.0 | INR 4,000,000 | 10.0 | 5,058 | ||
| sumarum AG | 54.6 | EUR | 54,552 | 1.0 | 197,893 | |
| ROC Global Solutions Ltd | 376.5 | GBP | 372,193 | 1.0 | 97,629 | |
| Total | 338,283 |
* Other Equity is converted subordinated loan to subsidiary to equity.
Zalaris ASA acquired 97.32% of the total share capital and 98.64% of the voting shares in sumarum AG with its directly and indirectly owned subsidiaries (sumarum Group). The closing date for the transaction was 18 May 2017. On 10 October 2017, Zalaris ASA signed and closed a share purchase agreement to acquire the remaining 2.68 % of the shares, in total 1,602 shares, in sumarum AG from the minority shareholders. Total consideration of the acquisition was NOK 175.6 million (EUR 18.7 million), including a cash consideration of NOK 153.2 million (EUR 16.3 million), financed by new long term borrowings, and the issuance of 734,703 shares in Zalaris with a value of NOK 22.4 million (EUR 2.4 million).
sumarum Group provides cloud-based payroll and HR solutions on SAP's platform and a wide range of SAP HCM and SuccessFactors consulting services for entities in Germany, Austria and Switzerland. Today, the company has seven locations in Germany, and all specialize in different areas of the sumarum portfolio.
sumarum Group provides cloud-based payroll and HR solutions on SAP's platform and a wide range of SAP HCM and SuccessFactors consulting services for entities in Germany, Austria and Switzerland. Today, the company has seven locations in Germany, and all specialize in different areas of the sumarum portfolio. sumarum has a broad spectrum of customers within public services, service providers, large industry players, energy companies and companies and trusts within the healthcare sector. End of June sumarum Group had 183 number of employees.
Zalaris ASA has acquired 100% of the voting shares and share capital in ROC Global Solution Consulting Ltd. with its directly and indirectly owned subsidiaries (ROC Group). The closing date for the transaction was 25 September 2017. Total consideration for 100% of the shares in ROC is NOK 89.1 million (GBP 8.5 million) and was settled through cash payments in the total aggregate amount of up to NOK 80.1 million (GBP 7.6 million), financed by a new long term borrowings, and the issuance of 264,006 new shares in Zalaris with a value of NOK 9.9 million (GBP 0.9 million). The consideration shares were issued on 8 December 2017, registered on the Oslo Stock Exchange on 12 December 2017 and are subject to lock-up for a period of 24 months from completion.
ROC Group is a human capital management consultancy that specialises in SAP and SuccessFactors HCMrelated services. SuccessFactors is SAP's strategic HR solution in the cloud, covering the entire value chain of HR tasks from recruiting to exit. ROC Group has five offices in UK, Germany and Poland and serves blue chip customers in the following sectors: Banks, Automotive, Utilities, Hospitality and Professional Services. At the end of September, ROC Group had 120 employees.
Transaction costs relating to the acquisition of sumarum AG and ROC Global Solution Consulting Ltd. (see Note 22) of TNOK 23,398 were expensed and are included in Other Costs. The attributable costs of the issuance of the shares of TNOK 3,411 have been charged directly to equity as a reduction in Other Equity.
| (NOK 1,000) | 2017 | 2016 |
|---|---|---|
| Receivables group companies Other receivables Total other short-term receivables |
14,400 869 15,269 |
61,522 1,623 63,145 |
| (NOK 1,000) | 2017 | 2016 |
|---|---|---|
| Cash in hand and at bank - unrestricted funds Deposit accounts - guarantee rent obligations Employee withheld taxes - restricted funds Cash and cash equivalents in the balance sheet |
7,687 17,955 1,263 26,904 |
- 5,257 1,218 6,475 |
| mar | |||
|---|---|---|---|
| Shares | 2017 | 2016 | |
|---|---|---|---|
| Shares - nominal value NOK 0,10 | 20,122,979 | 19,124,263 | |
| Total number of shares | 20,122,979 | 19,124,263 |
The nominal value of the share is NOK 0,10. All the shares in the company have equal voting rights and are entitled to dividend. The computation of earnings per share is shown in note 7 in the consolidated financial statement.
| Shareholder | Number of shares |
% of total |
Equal voting |
|
|---|---|---|---|---|
| NORWEGIAN RETAIL AS | 2,941,482 | 14.62% | 14.62% | |
| SKANDINAVISKA ENSKILDA BANKEN AB | 1,806,411 | 8.98% | 8.98% | |
| STATE STREET BANK AND TRUST COMP | 1,691,228 | 8.40% | 8.40% | |
| FIDELITY NORDIC FUND | 1,688,300 | 8.39% | 8.39% | |
| STRAWBERRY CAPITAL AS | 1,039,887 | 5.17% | 5.17% | |
| COMMERZBANK AKTIENGESELLSCHAFT | 768,027 | 3.82% | 3.82% | |
| JPMORGAN CHASE BANK, N.A., LONDON | 765,339 | 3.80% | 3.80% | |
| VPF NORDEA KAPITAL | 748,604 | 3.72% | 3.72% | |
| TREDJE AP-FONDEN | 703,881 | 3.50% | 3.50% | |
| STATE STREET BANK AND TRUST COMP | 695,000 | 3.45% | 3.45% | |
| DANSKE BANK A/S | 562,230 | 2.79% | 2.79% | |
| VPF NORDEA AVKASTNING | 505,705 | 2.51% | 2.51% | |
| METZLER EURO SMALL + MICRO CAP | 460,750 | 2.29% | 2.29% | |
| NORDEA 1 SICAV | 368,603 | 1.83% | 1.83% | |
| RBC INVESTOR SERVICES TRUST | 351,293 | 1.75% | 1.75% | |
| VERDIPAPIRFONDET NORDEA NORGE PLUS | 326,520 | 1.62% | 1.62% | |
| TACONIC AS | 285,212 | 1.42% | 1.42% | |
| AVANZA BANK AB | 275,758 | 1.37% | 1.37% | |
| NHO - P665AK | 259,259 | 1.29% | 1.29% | |
| A/S SKARV | 225,000 | 1.12% | 1.12% | |
| Total number owned by top 20 | 16,468,489 | 81.84% | 81.84% | |
| Shares owned by the company | 92,950 | 0.46% | 0.46% | |
| Others | 3,561,540 | 17.70% | 17.70% | |
| Total | 20,122,979 | 100.00% | 100.00 |
Dividend paid to the shareholders of the parent company in 2017 amounted to 16.7 MNOK equaling NOK 0.87 dividend per share. Dividend paid to the shareholders of the parent company in 2016 amounted to 16.6 MNOK equaling NOK 0.85 dividend per share. The Board of Directors has proposed a dividend payment of 0.65 per share in 2018.
| Salary 1 Pensions Other benefits | Total | ||
|---|---|---|---|
| 2,282 | 51 | 35 2,367 | |
| 1,854 | 51 | 1,913 | |
| 1,331 | 51 | 1,389 | |
| 1,645 | 51 | 28 | 1,724 |
| 1,370 | 51 | 7 | 1,428 |
| 1,418 | 51 | 28 | 1,497 |
| 1,501 | 51 | 1,560 | |
| 11,402 | 360 | 118 | 11,879 |
The company is required to have an occupational pension scheme in accordance with the Norwegian law on required occupational pension ("lov om obligatorisk tjenestepensjon"). The Group's pension schemes satisfy the requirements of this law, and represents a defined contribution plan, with disability coverage. At the end of the year there were 19 participants (2016, 23 participants) in this defined contribution plan.
Expenses equals this years calculated contribution and amounts to NOK 1,431 thousand (2016 NOK 1,313 thousand). The scheme is administered by Storebrand.
The company's employees participated in the LO / NHO scheme whereby employees could choose to take early retirement from the age of 62. Total expense related to the early retirement scheme is NOK 0 (NOK 0 in 2016). The company's obligation in respect of this scheme per 31.12.2017 is NOK 0 (31.12.2016 NOK 0).
| Related party | Transaction | 2017 | 2016 |
|---|---|---|---|
| Rayon Design AS1 | Management Services | 902 | 162 |
| Total | 902 | 162 |
1 Hans-Petter Mellerud, CEO, is director of the board and Norwegian Retail AS, a company 100% owned by Hans-Petter Mellerud, owns 40% of the shares in Rayon Design AS.
There were no loans with related parties in 2017 or 2016.
There were no receivables with related parties in 2017 or 2016.
2017
| Management (NOK 1,000) |
Title | Salary1 Pensions Other benefits Total | |||
|---|---|---|---|---|---|
| Hans-Petter Mellerud Nina Stemshaug Halvor Leirvåg Richard Schiørn Peter T. Gogstad Øyvind Reiten Jörg John Jan Erik Nessmo Total 1 Including bonuses. |
CEO CFO CTO VP Strategic VP Quality and Compliance Executive VP Northern Europe CHRO VP PMO and Transformation |
2,282 1,606 1,460 1,522 1,807 1,595 1,381 1,630 13,282 |
70 70 70 70 70 70 - 70 488 |
36 2,387 9 1,685 8 1,537 6 1,597 26 1,903 30 1,695 - 1,381 7 1,707 122 13,891 |
|
| Board of Directors (NOK 1,000) |
Title | Remuneration Total | |||
| Lars Laier Henriksen Liselotte Hägertz Engstam Jan Koivurinta Tina Steinsvik Sund Karl Christian Agerup Total |
Chairman of the Board Board Member Board Member Board Member Board Member |
340 170 170 170 170 |
340 170 170 170 170 1,020 1,020 |
| Management (NOK 1,000) |
Title | Salary1 Pensions Other benefits Total | |||
|---|---|---|---|---|---|
| Hans-Petter Mellerud Nina Stemshaug Halvor Leirvåg Peter T. Gogstad Richard Schiørn Øyvind Reiten Jan Erik Nessmo Total 1 Including bonuses. |
CEO CFO CTO VP Quality and Compliance VP Strategic VP Business development VP Consulting |
2,282 1,854 1,331 1,645 1,370 1,418 1,501 11,402 |
51 51 51 51 51 51 51 360 |
35 2,367 7 1,913 7 1,389 28 1,724 7 1,428 28 1,497 7 1,560 118 11,879 |
|
| Board of Directors (NOK 1,000) |
Title | Remuneration Total |
| (NOK 1,000) | Title | Remuneration Total | |
|---|---|---|---|
| Lars Laier Henriksen | Chairman of the board | 332 | 332 |
| Liselotte Hägertz Engstam | Board Member | 166 | 166 |
| Jan Koivurinta | Board Member | 166 | 166 |
| Tina Steinsvik Sund | Board Member | 166 | 166 |
| Karl Christian Agerup | Board Member | 166 | 166 |
| Total | 995 | 995 | |
The CEO is entitled to six months severance pay in case of dismissal from the company or if terminating at own will due to a position change resulting in no longer solely managing the Zalaris Group.
| Name | Role | No. of shares |
|---|---|---|
| Norwegian Retail AS | CEO (Hans-Petter Mellerud) | 2,941,482 |
| Harald Götsch | VP Business Development | 506,292 |
| Jerry Chilvers | VP Strategic | 103,448 |
| Lars Laier Henriksen | Chairman of the Board | 36,112 |
| Ismet Muratspahic | VP Strategic Products | 4,000 |
| Halvor Leirvåg | CTO | 3,260 |
| Øyvind Reiten | VP Quality and Compliance | 3,200 |
| Nina Stemshaug | CFO | 2,375 |
| Jan Erik Nessmo | COO | 1,600 |
| Richard Schiørn | VP Strategic Projects | 1,514 |
| Total | 3,603,283 | |
70 71
Financial instruments by category
| Loans and receivables |
through profit or loss |
Fair value Liabilities at amortised cost |
Total book value |
|
|---|---|---|---|---|
| Financial assets | ||||
| Trade accounts receivable | 45 | - | - | 45 |
| Other short-term receivables to group company | 14,400 | - | - | 14,400 |
| Other short-term receivables | 869 | - | - | 869 |
| Cash and cash equivalents | 26,904 | - | - | 26,904 |
| Total | 42,217 | - | - | 42,217 |
| Financial liabilities | ||||
| Derivatives, Interest rate swaps | - | 255 | - | 255 |
| Borrowings, long term | - | - | 205,136 | 205,136 |
| Borrowings, short term, revolving credit | - | - | 118,510 | 118,510 |
| Other short-term debt to group company | - | - | 3,056 | 3,056 |
| Trade accounts payables | - | - | 8,040 | 8,040 |
| Other short-term debt | - | - | 24,821 | 24,821 |
| Total | - | 255 | 359,563 | 359,818 |
| (NOK 1,000) | Loans and receivables |
through profit or loss |
Fair value Liabilities at amortised cost |
Total book value |
|---|---|---|---|---|
| Financial assets | ||||
| Trade accounts receivable | 103 | - | - | 103 |
| Other short-term receivables to group company | 61,522 | - | - | 61,522 |
| Other short-term receivables | 1,623 | - | - | 1,623 |
| Cash and cash equivalents | 6,475 | - | - | 6,475 |
| Total | 69,723 | - | - | 69,723 |
| Financial liabilities | ||||
| Borrowings, long term | - | - | 1,436 | 1,436 |
| Borrowings, short term, revolving credit | - | - | 49,778 | 49,778 |
| Other short-term debt to group company | - | - | 6,951 | 6,951 |
| Trade accounts payables | - | - | 6,762 | 6,762 |
| Other short-term debt | - | - | 27,014 | 27,014 |
| Total | - | - | 91,942 | 91,942 |
The company classifies fair value measurements by using a fair value hierarchy which reflects the importance of the input used in the preparation of the measurements. The fair value hierarchy has the following levels:
Level 1: Non-adjusted quoted prices in active markets.
Level 2: Other data than the quoted prices included in Level 1, which are observable for assets or liabilities either directly, i.e. as prices, or indirectly, as derived from prices.
Level 3: Data for the asset or liability which is based on unobservable market data.
The fair value of the interest rate swap is determined by discounting expected future cash flows to present value through the use of observed market interest rates from Nordea. The fair value measurement for interest swap at period-end 2017 using Level 2 is NOK 255 thousand.
It is assessed that the carrying amounts of financial instruments recognised at amortised cost in the financial statements approximate their fair values. The assessment is based on a judgement that difference between interest rate at year-end compared to draw down. Value assessment is level 3 in the fair value hierarchy.
The company has some exposure to risks from its use of financial instruments, including credit risk, liquidity risk, interest rate risk and currency risk. This note presents information about the company's exposure to each of the above mentioned risks, and the company's objectives, policies and processes for managing such risks. At the end of this note, information regarding the company's capital management is provided.
Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. Market prices comprise three types of risk: market risk (e.g. interest rate risk and currency risk), commodity price risk and other price risk. The company's financial instruments are mainly exposed to interest rate and currency risks.
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The company's exposure to the risk of changes in market interest is managed by the mix of fixed and variable rate loans. As described above, the company has entered into swap arrangements to hedge its interest exposures arising from its debt obligations (ref. Note 15). The company has an overdraft facility in place which has a floating interest rate condition. As of 31 December 2017, the company had drawn on this facility amounting to NOK 86,047 thousand. As of 31 December 2016 the company had drawn on this facility amounting to NOK 49,778 thousand.
Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The company is primarily exposed to foreign exchange risk arising from various currency exposures with respect to the USD, EUR and GBP in relation to its debt obligations as well as from certain commercial transactions.
For operational transactions denominated in foreign currencies, the company's policy is to exchange into foreign currency as required on a spot basis.
As of 31 December 2017 the company has a Euro based loan related to the acquisition of sumarum and ROC in FY 2017 amounting to EUR 24 million. Per 31 December the company had an unrealized currency loss amounting to NOK 12 million related to this loan. Otherwise the Group has limited exposure to currency risk from assets and liabilities recognized as at 31 December 2017 that are denominated in currencies.
72 73
The carrying amounts of financial assets represents the company's maximum credit exposure. The counterparty to the cash and cash equivalents and deposits banks which are assessed to be solid.
Regarding trade receivables, the credit exposure is evaluated continuously. The company has a customer portfolio of well-known companies and has had low credit losses.
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. Prudent liquidity risk management implies maintaining sufficient cash and the availability of appropriate funding.
The following table details the contractual maturities for the company's financial liabilities. The tables do not include interest payments. The contractual amounts were estimated based on closing exchange rate at balance sheet date.
| (Amounts in NOK 1,000) | Less than 3 months |
3 to 12 months |
1 to 5 years |
Total |
|---|---|---|---|---|
| Borrowings, long term | 205,136 | 205,136 | - | - |
| Borrowings, short term | 180 | 118,331 | - | 118,510 |
| Trade creditors and other short term liabilities | 8,040 | 27,877 | - | 35,918 |
| Total liabilities | 8,220 | 146,208 | 205,136 | 359,563 |
| (Amounts in NOK 1,000) | Less than 3 months |
3 to 12 months |
1 to 5 years |
Total |
|---|---|---|---|---|
| Borrowings, long term | - | - | 1,436 | 1,436 |
| Borrowings, short term | 169 | 522 | - | 691 |
| Trade creditors and other short term liabilities | 13,713 | 28,349 | - | 42,062 |
| Total liabilities | 13,882 | 28,871 | 1,436 | 44,189 |
A key objective in relation to capital management is to ensure that the company maintains a sufficient capital structure in order to support its business development and to maintain a strong credit rating. The company evaluates its capital structure in light of current and projected cash flows, potential new business opportunities and the Group's financial commitments. In order to maintain or adjust the capital structure, the company may issue new shares or obtain new loans.
| (NOK 1,000) | 2017 | 2016 |
|---|---|---|
| Interest income on bank accounts and receivables | ||
| Group contribution | - | 42,815 |
| Dividend | 29,860 | - |
| Foreign exchange gains | 309 | 338 |
| Other financial income | - | - |
| Finance income | 30,169 | 43,153 |
| Interest expenses | 3,545 | 553 |
| Foreign exchange loss | 807 | 621 |
| Unrealised foreign exchange loss | 12,057 | - |
| Other financial expenses | 1,014 | 571 |
| Finance expenses | 17,423 | 1,745 |
| Net financial items | 12,749 | 41,408 |
| (NOK 1,000) | Balance Sheet | ||||||
|---|---|---|---|---|---|---|---|
| Financial institution | Agreement | Maturity | Duration Interest rate Non-current | Current | Total | ||
| SG Finans SG Finans SG Finans Nordea Bank AB, Branch Norway* Bank loan Nordea Bank Norge ASA Interest-bearing debt and borrowings |
Financial leasing Mar 2019 Financial leasing Dec 2019 Financial leasing Apr 2020 Revolving credit |
May 2022 5 years see below | 5 years 9.0% 5 years 6.0% 5 years 5.5% |
43 506 163 204,424 - 205,136 |
145 466 112 86,047 |
188 972 275 31,740 236,164 86,047 118,510 323,646 |
| (NOK 1,000) | Balance Sheet | ||||||
|---|---|---|---|---|---|---|---|
| Financial institution | Agreement | Maturity | Duration Interest rate Non-current | Current | Total | ||
| SG Finans | Financial leasing Mar 2019 | 5 years | 9.0% | 188 | 136 | 324 | |
| SG Finans | Financial leasing Dec 2019 | 5 years | 6.0% | 972 | 447 | 1,419 | |
| SG Finans | Financial leasing Apr 2020 | 5 years | 5.5% | 275 | 108 | 383 | |
| Nordea Bank Norge ASA | Revolving credit | - | 49,087 | 49,087 | |||
| Interest-bearing debt and borrowings | 1,436 | 49,778 | 51,214 |
The company went into a loan facility agreement with Nordea Bank AB as part of the financing of the acquisitions of sumarum AG and ROC Global Solutions Ltd. in 2017.
As of 31 December the Euro term loan facility amounts to EUR 24 million. Interest rate to be paid, depends on the net debt to EBITDA ratio and the Euribor interest rate. The company has entered into a swap arrangement to hedge its interest exposures arising from this debt obligations. The company shall repay 6.25 percent of the aggregated loan each 6 months. Termination date is 31.05.2022, and any loan outstanding on this date shall then be repaid.
| (NOK 1000) | 2017 | 2016 |
|---|---|---|
| Restricted Share Units Costs Accrued social security costs Total recognised costs for the ESPP |
811 214 1,025 |
94 14 108 |
| Unamortised fair value per end of: | ||
| (NOK 1000) | 2017 | 2016 |
| RSU plan granted | 2,838 | 4,740 |
There have been no events after the balance sheet date significantly affecting the company's financial position.
For the loans to SG Finans and Nordea Bank AB, the Group has pledged trade receivables up to NOK 54.0 million as guarantee. Property, plant and equipment has been pledged as guarantee up to NOK 22.0 million for loans from Nordea Bank Norge. Carrying amounts of pledged assets are; Trade receivables NOK 90.3 million and property, plant and equipment NOK 5.2 million.
There are not issued any guarantees from the parent company on behalf of the company against third parties.
The company is a certified SAP BPO partner. SAP BPO Partners offer the full stack of business process outsourcing services based on SAP HCM business applications. Certified providers undergo a rigorous assessment of their delivery and support capabilities every two years by SAP's outsourcing partner certification group. The agreement involves commitments for future purchases of licenses and maintenance fees amounting to NOK 3.3 million.
| (NOK 1000) | 2017 | 2016 |
|---|---|---|
| Wages, holiday pay and bonus Accrued expenses and other current liabilities Proposed dividend Total |
2,821 21,586 12,965 37,371 |
2,429 5,894 16,557 24,880 |
Zalaris ASA (the company) adopted ESPP to reward certain key employees of the company and its subsidiaries by enabling them to receive shares of the company. The plan is effective as of 13th of May 2016.
The purpose of the ESPP is to further align the interests of the company, its Subsidiaries and its shareholders by providing long term incentives in the form of an own investment in the company done by the participant and matching awards, in the form of Restricted Stock Units (RSUs), based on the initial investment measured in number of shares. Any matching awards shall be granted based on amongst the considerations of position in the company and a review on the individual participant's performance prior to award. The maximum number of shares covered by or subject to matching awards under this plan is 300,000 whereof 171,519 shares were allocated end of December 2017.
The granted RSUs per end of FY 2017 vest 30.05. 2021 conditioned by that the purchased shares (initial investment) are not sold and that the participant has not resigned or the participants employment is terminated (non-market condition). If for some reason the company is not holding a sufficient number of shares at the relevant settlement date, any RSUs awarded and settled under the plan shall be settled by a cash bonus payments equal to the Fair Market Value per share on the date of settlement multiplied by the number of shares subject to the Matching Award. The company will do its utmost to settle the granted awards as shares, and thus accounts the ESPP as an equity-settled plan.
The fair value of the RSUs is estimated at the grant date using Black&Scholes Merton pricing model, taking into account the terms and conditions on which the RSUs were granted.
Zalaris' corporate governance policy is based on, and complies with, the Norwegian Code of Practice for Corporate Governance (the "Code of Practice"). Good corporate governance will strengthen confidence in Zalaris and help ensure the greatest possible value creation over time in the best interests of shareholders, employees and other stakeholders. The objective of the Code of Practice is that companies listed on Norwegian-regulated markets shall practice corporate governance that regulates the division of roles between shareholders, the Board of Directors and Executive Management more comprehensively than is required by legislation.
Zalaris ASA is incorporated and registered in Norway and is subject to Norwegian law. According to the Accounting Act § 3-3b, the company is obliged to report on the principles and practices of corporate governance. In addition, the Oslo Stock Exchange requires an annual statement on compliance with the company's corporate governance policy, in accordance with 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 statement for fiscal year 2017 is based on the disposal in the Accounting Act § 3-3b as well as the disposal for Corporate Governance Policy for Zalaris ASA, and was adopted by the Board of Directors on 23 April 2018:
Shareholder decisions and Board of Directors authorisations for issue of new shares or purchase of own shares are described in Chapter 3.
Zalaris complies with the Code of Practice. There are no significant differences between the code and how it is complied with at Zalaris ASA. The Board shall ensure that the company always has sound corporate governance. Zalaris provides an overall review of the company's corporate governance in its annual report. In addition, a description of the most important corporate governance principles of the company shall also be made available for external interest groups on the company's website.
The annual review of the company's compliance with the Code of Practice was adopted on 23 April 2018.
Corporate ethics are about how we behave towards each other and the world around us. Everyone associated with Zalaris shall comply with the rules and guidelines that build on Zalaris' basic values. At Zalaris, we want everyone to contribute to a sound corporate culture. Zalaris has defined a Code of Conduct, which is the foundation of our corporate culture and defines the core principles and ethical standards by which we create value in our company. The Code of Conduct valid for the company and its subsidiaries is available on our website.
Zalaris ASA and its subsidiaries are providing full service outsourcing and consulting services related to advisory, sales, implementation and operation of processes for the HR (Human Resources) function as payroll, payroll accounting, personnel administration, travel expenses, statutory leave, recruiting, talent management, learning process administration and the sale of related software, and to own shares in other companies and activities related to this.
Zalaris is focused on high efficiency, high customer satisfaction and a close relationship with its customers, which includes local service centers in all countries in which we operate, complemented with offshoring, automation of processes, and utilization of cloud and AI. Local personnel with high competence within HR function processes ensure long-term relationships with our customers.
A more detailed description of our services is available on Zalaris' website, www.zalaris.com.
Zalaris has experienced a strong revenue growth and believes in further profitable growth in the years to come. To reach this, it is essential that the company has a solid equity and liquidity.
Zalaris' equity, per 31 December 2017, was NOK 119.7 million, which is equal to 21.1% equity ratio.
The cash and cash equivalent, per 31 December 2017, was NOK 37.6 million.
The Board of Directors considers the company's capital structure as solid.
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 shall be disclosed on the company's IR website.
Dividend per share is proposed at NOK 0.65 per share for 2017.
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, each authorisation shall be considered separately by the general meeting. Authorisations granted to the Board shall be limited to no longer than the time until the next annual general meeting.
In Zalaris' annual general meeting on 16 May 2017, pursuant to Section 10-14 of the Norwegian Public Limited Companies Act, the Board of Directors was granted an authorisation to increase the company's share capital with up to NOK 100,000. The shareholders' preferential rights, pursuant to Section 10-4 of the Norwegian Public Limited Companies Act, can be deviated from.
The authorisation can be used at the Board's discretion, including and without limitation, in connection with incentive programmes, increases against contribution in kind, etc., pursuant to Section 10-2 of the Norwegian Public Limited Companies Act, and increases in connection with mergers, pursuant to Section 13-5 of the Norwegian Public Limited Companies Act.
The authorisation was limited until the earliest occurring date of either the ordinary general meeting in 2018 or 30 June 2018.
The Board of Directors' recommendation is that its authority to buy back its own shares shall be granted for a period limited to the next annual general meeting.
In Zalaris' annual general meeting on 16 May 2017, the Board of Directors was granted an authorisation to acquire up to 10% of the company's shares with a total nominal value of up to NOK 191,243. The maximum amount that can be paid per share is NOK 160, and the minimum amount that can be paid per share is NOK 1. The Board of Directors is authorised to acquire and sell shares as the Board finds it appropriate. Acquisition can nevertheless not be done by subscription for shares.
The authorisation was limited until the earliest occurring date of either the ordinary general meeting in 2018 or 30 June 2018.
Zalaris has one class of share. Each share carries one vote, and all shares carry equal rights, including the right to participate in general meetings. All shareholders shall be treated on an equal basis, unless there is just cause for treating them differently.
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.
Any transactions the company carries out in its own shares shall be carried out either through the Oslo Stock Exchange or at prevailing stock exchange prices if carried out in another way. If there is limited liquidity in the company's shares, the company shall consider other ways to ensure equal treatment of all shareholders.
In the event of material 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. Independent valuations shall also be arranged in respect of transactions between companies in the same group where any of the companies involved have minority shareholders.
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.
Zalaris shares are freely negotiable and there are no limitations of the negotiability in Zalaris' Articles of Association.
Zalaris facilitates that as many shareholders as possible may participate in the company's general meetings and that the general meetings are an effective forum for the views of shareholders and the Board.
The notice and the supporting documents and information on the resolutions to be considered at the general meeting shall be available on the company's website no later than 21 days prior to the date of the general meeting. The notice and agenda for the meeting will be sent per post to all shareholders with a known address in Verdipapirsentralen (VPS) no later than 21 days prior to the date of the general meeting. According to the Zalaris Articles of Association, it is sufficient that the supporting documents and information on the resolutions to be considered are available on the company's website. A shareholder may, nevertheless, demand to receive the documents concerning matters that are to be discussed in the general meeting.
The resolutions and supporting documentation, if any, shall be sufficiently detailed and comprehensive to allow shareholders to understand and form a view on matters that are to be considered at the meeting.
The deadline for shareholders to give notice of their attendance at the general meeting will be set as close to the date of the general meeting as possible. The Board and the person who chairs the general meeting shall ensure that the shareholders have the opportunity to vote separately on each candidate nominated for election to the company's Board and committees.
Shareholders who cannot be present at the general meeting must be given the opportunity to vote by proxy or to participate using electronic means. The company will provide information on the procedure for attending by proxy and nominate a person who will be available to vote on behalf of shareholders as their proxy. In addition, a proxy form will be prepared which shall, insofar as this is possible, be formulated in such a manner that the shareholder can vote on each item that is to be addressed and vote for each of the candidates that are nominated for election.
The general meeting should be attended by representatives from the Board, the nomination committee, the remuneration committee and the audit committee. In addition, at minimum the CEO and CFO from the Zalaris management team will attend the general meeting.
The Board of Directors decides the agenda of the general meeting. The main issues of the agenda follow the requirements in the law. Each general meeting appoints a chairman to ensure an independent chairman in accordance with the recommendation.
The minutes from the annual general meeting will be published on the company's websites and on the website of the Oslo Stock Exchange.
The company shall have a nomination committee comprising such number of persons as determined by the general meeting of the company from time to time, and which members shall be appointed by a resolution of the general meeting, including the chairman of the committee. The general meeting shall determine the remuneration of the nomination committee and shall stipulate guidelines for the duties of the nomination committee.
The nomination committee's duties are to propose candidates for election to the Board and to propose remuneration to be paid to such members. The nomination committee shall justify its recommendations. The company shall provide information of the nomination committee and any deadlines for submitting proposals to the committee.
The general meeting on 16 May 2017 elected Bård Brath Ingerø (Chairman), Ragnar Horn and Marius Therkelsen to the nominating committee for a period until the annual general meeting in 2018.
According to the Articles of Association for Zalaris ASA, the Board of Directors shall consist of three to ten members.
At the end of 2017, the Zalaris Board of Directors consisted of five members, whereof two women and three men. The Chief Executive Officer of Zalaris is not part of the Board.
The Board of Directors in Zalaris has broad representation from countries in the Nordic region and experience from different industries like IT, Finance, Industrial, Consulting with competencies in organisation, management, finance, HR and marketing.
A presentation of the Board of Directors is available on Zalaris' website.
The composition of the Board is such that it can attend to the common interests of all shareholders and meet Zalaris' need for expertise, capacity and diversity while acting independently of the company's executive management and material business connections. All members of the Board of Zalaris are independent of the company's major shareholders, defined as a shareholder that controls 10% or more of Zalaris' shares or votes.
An overview of the shares owned by related parties as of 31 December 2017, including board members, is available in the financial statement note 19.
The Board of Directors is responsible for the management of the company, including the appointment of a Chief Executive Officer to assume the daily management of the company. Board members shall perform their duties in a loyal manner, attending to the interests of the company and ensuring that its activities are organised in a prudent manner. The Board of Directors shall adopt plans, budgets and guidelines applicable to the activities of the company. The Board of Directors
shall keep itself informed of the financial position of the company and has a duty to ensure that its corporate accounts and asset management are subject to satisfactory controls.
The duties and responsibilities of the Board of Directors are defined by applicable law, Zalaris' Articles of Association, and the authorisations and instructions given by the General Assembly.
The Board of Directors has adopted a yearly plan focusing on its work of developing the strategy of the company and overseeing the implementation of this. In addition, the Board of Directors executes supervision to ensure that the company reaches its defined targets and that the company has satisfactory risk management.
The Board of Directors discusses all relevant matters related to Zalaris' activities of significance or of special nature. In 2017, the Board of Directors held 14 board meetings.
In accordance with the Norwegian Public Limited Companies Act § 6-13, rules of procedure were adopted on 25 April 2014 to set out more detailed provisions regarding the duties and working procedures of the Board of Directors and Chief Executive Officer of Zalaris ASA.
The Chairman is responsible for ensuring that the Board's work is performed in an efficient and proper manner and in accordance with applicable law.
The Board of Directors is responsible for the appointment of the CEO of Zalaris. The Board of Directors also defines instructions, authorisations and conditions for CEO.
The Board of Directors receives periodic reports in which the company's financial status is commented. The company is following instructions from the Oslo Stock Exchange related to regular reporting.
The Committee shall consist of two to four members of the Board. The Committee shall be composed within the rules set out in the Norwegian Public Limited Companies Act. Any Committee member may be replaced by the Board at any time.
The function of the Committee is to assist the Board in overseeing the integrity of the company's financial statements, the company's compliance with legal and regulatory requirements, the independent auditor's qualifications and independence, and the performance of the company's internal accounting function and independent auditor.
The Committee shall meet as often as it shall determine, but not less frequently than four times per year. The Committee may request any officer or employee of the company or the company's outside counsel or independent auditor to attend a meeting of the Committee or to meet with any members of, or any advisor or consultant to, the Committee.
The Committee may, at its discretion, request management, the independent auditor, or other persons with specific competence, including outside counsel and other outside advisors, to undertake special projects or investigations which it deems necessary to fulfill its responsibilities, especially when potential conflicts of interest with management may be apparent.
The auditor shall annually present a plan for the auditing work to the audit committee and have at least one annual meeting with the committee to go through the company's internal control systems and to identify possible weaknesses and potential areas of improvement.
Members of the Audit Committee for 2017/18 are Tina Steinsvik Sund (Chairwoman) and Karl Christian Agerup.
The Remuneration Committee shall consist of at least two members of the Board, both of whom shall be independent of the management of the company.
The Remuneration Committee's primary responsibilities include:
Members of the Remuneration Committee for 2017/18 are Liselotte Hägertz Engstam (Chairwoman) and Lars Laier Henriksen.
In April 2018, the Board has conducted an evaluation of its performance and expertise in 2017.
The Board and the management of Zalaris emphasise the importance of establishing and maintaining routines for internal control and risk management that are appropriate in relation to the extent and nature of the company's activities. Internal controls and the systems for risk management should also encompass the company's corporate values, ethical guidelines, and guidelines for corporate social responsibility.
The Board carries out an annual review of the company's most important areas of exposure to risk and its internal control arrangements. The most important areas are:
One of Zalaris' focus areas is ensuring high-quality services to our customers. This is only possible through efficient processes and tools combined with highly competent and engaged employees. Thus, Zalaris has implemented a talent management programme to ensure good development of highly qualified personnel in all departments and functions of the company. In order to maintain a focus on employee engagement, Zalaris performs regular employee surveys to uncover improvements needed to achieve a healthy social environment for its employees. High employee engagement and satisfaction are important to achieving the company's overall targets.
In addition to the instructions which follow each employment contract, Zalaris has established internal procedure manuals for employees to be followed to ensure quality, efficiency and transparency in our internal processes. The company focuses on the understanding, training and execution of these defined internal procedures.
Zalaris has developed internal procedures for monthly, quarterly and annual financial reporting, including routines for internal controls. The audit committee reviews the quarterly reporting in separate meetings with the CFO of the company. The consolidated financial statement is prepared in accordance with IAS/IFRS. The monthly and quarterly reporting is complemented with a balanced scorecard following the improvement of key strategic priorities decided by the board.
The Board receives a monthly report of the consolidated financial results with comments on deviation to adopted forecast numbers for the year per business unit. At mid-year, the company updates its forecasted numbers for the actual financial year, which are presented to the Board. Any discrepancies are explained, and planned actions to reach financial targets are presented.
The company has monthly business reviews with each responsible business unit, in which financial results for the unit, status on key performance indicators in the customer deliveries, personnel statistics and risk areas are presented and commented by each manager. The target of these business reviews is to identify risks of deviation in all these areas, which can help detect financial discrepancies to adopted targets and allow the company to initiate actions to reduce potential risks as early as possible. The unit managers and the CFO participate in these reviews.
Each Group unit manager presents financial achievements for their respective business unit in 1:1 meetings with the CEO on a monthly basis.
Zalaris' mission is to enable our clients to maximize the value of human capital through excellence in HR processes, and thus, customer satisfaction is a main focus area for Zalaris. The company undertakes customer satisfaction surveys on a regular basis to collect information on customer satisfaction and improvement areas to achieve a high level of customer satisfaction and ensure further profitable growth for Zalaris.
The remuneration of the Board is to be decided by the shareholders at the annual general meeting of the company. The nomination committee is to propose remuneration to be paid to such members.
The level of remuneration of the Board shall reflect the responsibility of the Board, its expertise and the level of activity in both the Board and any Board
committees. 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.
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.
An overview of the remuneration for the Board for fiscal year 2017 is available in the financial statement note 19.
The Board establishes 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 are communicated at the annual general meeting.
The main principle for determining salaries and other remuneration to the CEO and other executive personnel in Zalaris is that they should be competitive. Further, Zalaris should offer terms that encourage value creation for Zalaris and its shareholders and that promote loyalty to the company.
In Zalaris, the performance-based remuneration for executive personnel is at a maximum 30% of the annual fixed salary.
The CEO has six months terms of termination. The other executive personnel in Zalaris have terms of termination between three to six months. The termination time is valid from end of the calendar month in which the notice of termination is communicated in written form.
The CEO is entitled to six months' severance pay in case of dismissal from the company or if terminating at own will due to a position change, resulting in no longer solely managing the Zalaris Group.
An overview of salaries and other remunerations to the executive personnel in Zalaris is available in the financial statement note 19.
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The communication policy of Zalaris is based on the approach that objective, detailed and relevant information to the market is essential for a proper valuation of the company's shares, thus the company has continuous dialog with analysts and investors.
All periodic financial reporting and information about important events is published according to the adopted guidelines for companies listed on the Oslo Stock Exchange. Zalaris strives at all times to publish all relevant information in a timely, correct, nondiscriminatory and efficient manner to the market. All relevant information will be published on the company's websites and on the website of the Oslo Stock Exchange.
Zalaris shall give all shareholders the same information at the same time. In contact with analysts and investors, the Board of Directors and the management of the company shall only communicate information that has already been published. The company has established a communication channel for the shareholders on its website. All published information is available on Zalaris' website. It is also possible for shareholders to send inquiries through the website.
Zalaris holds quarterly web-based presentations in which the financial results of the closed quarter and focus areas of the company are commented, in addition to market outlooks and special events that the company considers relevant information for its shareholders. The presentation is held by the CEO and CFO of the company. Both the quarterly reporting and the presentations will be published on Zalaris' website.
The financial calendar valid for Zalaris is adopted by the Board of Directors and determines the date and time for publishing interim reports, the annual financial statement and holding of the annual general meeting. The financial calendar is published on Zalaris' website and on the website of the Oslo Stock Exchange.
In the event of a takeover process, the Board shall ensure that the company's shareholders are treated equally and that the company's activities are not unnecessarily interrupted. The Board shall also ensure that the shareholders have sufficient information and time to assess the offer.
The Board shall not attempt to prevent or impede the takeover 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 in Section 8 herein). Any such valuation should either be enclosed with the Board's statement, or reproduced or referred to in the statement.
Zalaris does not use the auditor for other purposes other than auditing without an approval from the Board. The auditor submits the main features of the plan for the audit of the company to the board on an annual basis.
The auditor participates in board meetings dealing with the annual accounts, accounting principles, assessment of any important accounting estimates, and matters of importance on which there has been disagreement between the auditor and the executive management of the company.
The auditor shall, at least once a year, present to the Board a review of the company's internal control procedures, including identified weaknesses and proposals for improvement. In addition, the Board shall hold a meeting with the auditor at least once a year at which no representative of the executive management is present.
The Board will report the remuneration paid to the auditor to the shareholders at the annual general meeting, including details of the fee paid for audit work and any fees paid for other specific assignments. An overview of the remuneration paid to the auditor is available in the financial statement note 4.
In accordance with the Public Limited Companies Act § 6-16a, the Board of Directors has prepared the following declaration on guidelines and main principles for the stipulation of salaries and other remuneration for the CEO and other senior management. The declaration was approved by the Board of Directors on 23 April 2018 and will be presented to the Annual General Meeting of Zalaris ASA on 15 May 2018 for an advisory vote.
The Group's development is closely linked to its ability to recruit and retain senior executives. Executives are remunerated at market terms. Remuneration varies over time both in level and methodology.
In addition to salary, the Group uses performancerelated and personal bonus that typically vary from 10% to 30% of annual salary, lump-sum payments, leave arrangements, education opportunities and option agreements.
The Board represented by the remuneration committee shall conduct an annual evaluation of the agreement terms with the Group CEO. Remuneration to other members of the Group executive management is evaluated and settled by the CEO and reviewed by the remuneration committee. Remuneration is reviewed annually but is assessed over several years to maintain continuity.
The decision-making process for implementing or changing remuneration policies and concepts for the executive management is in accordance with the Norwegian Public Limited Liability Companies Act sections 5-6 and 6-16 a and the instructions of the Board of Directors of Zalaris adopted on 5th of May 2014.
Management salaries shall be competitive, fair and reflect local market conditions as Zalaris wants to attract and retain attractive leaders.
The basic salary shall normally be the main element of managers' salaries and thus differentiate based on the scope of work, responsibility and performance.
A limitation of the total salary level to management has not been defined. However significant and structural changes shall be approved by the remuneration committee.
Management positions are not paid overtime as compensation for overtime is included in the fixed salary.
The bonus programme in Zalaris has been designed to motivate managers to strive for continuous improvement of the business and its results and to align with the interest of shareholders.
The bonus scheme for management positions is based on reaching two main categories of targets:
1) Reaching overall company EBIT % target and;
2) Reaching individual goals that have been defined and documented. Typically, up to five individual goals are defined with weighting decided in a mutual discussion between the CEO and each group manager. Typical individual goals include reaching target contribution margin for own business units, meeting customer satisfaction targets, improving employee satisfaction etc. Goals are defined and followed up in Zalaris' SuccessFactors solution.
Zalaris encourages employees to own shares in Zalaris. The company shall aim at offering annual share purchase programmes that will offer employees and management to purchase discounted shares within the parameters of the tax-free limits.
As of 31.12.2017 Zalaris has a share purchase programme for executive management in
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accordance with the share programme approved by the Board of Directors on 9 March 2016 and by the General Assembly on 16 May 2017. The key parameters of the approved and implemented share purchase programme for executives including a matching with restricted stock units are as follows:
The Board of Directors decided on 23 April to recommend to the Ordinary 2018 General Assembly to approve the following three equity-based programmes that will affect executives and key personnel.
The size of the proposed programmes shall be seen as maximum values. Distribution will be sized to fit geographic market conditions, compensation levels and strategic importance in cooperation with the Remuneration Committee.
| Eligibility | Executive Management | ||
|---|---|---|---|
| Frequency: | Two allocations of shares subject to be matched by executive's own purchase of shares: |
||
| • Allocation 1: November 2016 | |||
| • Allocation 2: During first six months of 2017 |
|||
| Principle for allocation: | Allocation to be made on the basis of tenure, perceived value for company and reaching of individual targets: |
||
| Allocation of Restricted Stock Units (RSU) subject to Executive still employed at vesting date and holding required number of shares |
Allocation 1: 199,935 shares | ||
| Allocation 2: 100,065 shares Total: 300 000 shares |
|||
| Matching requirement (i.e.) the number of shares needed to be |
Allocation 1: 1/12 x of allocation (8,3%) – i.e. a total of 16,661 shares |
||
| held by the executive at the vesting date to receive the matching shares. |
Allocation 2: 1 x of allocation (100%) – i.e. a total of 100,000 shares |
||
| Vesting: | Allocation 1: 60 months from 30 May 2016 |
||
| Allocation 2: 60 months from date of allocation |
| Eligibility: | All employees |
|---|---|
| Rationale: | Incentivise employees to own Zalaris shares to create additional engagement, focus on company goals and long-term focus. |
| Frequency: | Once per year – to be completed in Q3 2018 |
| Principle for allocation: |
All permanent employees that have been employed at least 6 months with the company are eligible to purchase up to NOK 15,000 of shares with 20% discount based on average market price 2 weeks before offering date. The programme is in accordance with the Norwegian Tax regulation for tax free discounts. |
| Restrictions: | The employee shall not be allowed to sell the shares within 12 months from the purchase date. |
| Impact: | If all (approx. 810) employees decided to participate in the programme, the total number of shares that would be issued would be valued at NOK 12.15 million and at a share price of NOK 50 would equal to 277,165 shares or 1.21 % of the current outstanding total number of shares. |
| The total value of the discount would be approx. NOK 2.43 million which is approximately 0.8% of the Zalaris Group's total personnel expenses. |
|
| The discount is tax free for Norwegian employees and does not trigger employer/ social security tax. |
| Eligibility: | Executive Management and Key Employees | Eligibility: | |||
|---|---|---|---|---|---|
| Rationale: | Incentivise management and key employees to invest part of performance-based bonus to Zalaris share ownership with the goal to create additional engagement and long-term focus on company goals |
Rationale: | |||
| Frequency: | Q4 each year. | ||||
| Frequency: | Three-year programme to be completed in Q3 each year. |
Principle for allocation: |
|||
| Principle for allocation: |
Executive Management and Key Employees eligible to purchase up to 50% of Net Bonus after Tax of shares with 20% discount based on average market price 2 weeks before offering date. |
||||
| Restrictions: | The Manager shall not be allowed to sell the shares within 36 months from the purchase date. |
||||
| Impact: | If all eligible managers decide to participate in the programme in full, the maximum value of shares to be issued is estimated at NOK 8.5 |
would be NOK 70.8) | |||
| million and at a share price of NOK 50 would equal to 170,823 shares or 0.85% of the current outstanding total number of shares. |
three-year programme. | ||||
| The total value of the discount would be approx. NOK 1.7 million which is estimated at 2.8% of the eligible groups total fixed salary. |
|||||
| The discount is taxable as income tax and will trigger employer/social security tax of 14.1% in Norway. |
Restrictions: | ||||
| Note: Eligibility is performance-based as performance-based bonus (company and |
|||||
| individual targets) will be the basis for maximum amount that can be purchased. |
Impact: |
| Eligibility: | Executive Management and Key Employees |
|---|---|
| Rationale: | Incentivise management and key employees to stay with company and focus on long-term shareholder value creation |
| Frequency: | Three-year programme to be completed in Q4 each year. |
| Principle for allocation: |
Executive Management and Key Employees granted options on the basis own performance-based gross bonus as % of total group gross bonus for eligible managers and key employees for the year (allocation %). Number of options to be granted equal to allocation% * total number of options to be granted for the Zalaris Group that year |
| Strike price for options to be set at on average market price 2 weeks before offering date to be increased with 1% monthly. ( i.e. strike price for an option with shares valued at NOK 50 at the offering date would be NOK 70.8) |
|
| Max number of options of the programme to be limited to 400,000 options per year (approx. 2% of outstanding shares) with a total number of options equal to 1,200,000 (approx. 6% of the outstanding shares) for the three-year programme. |
|
| Restrictions: | Options to vest 60% after 36 months and 100% after 60 months and be subject to good leaver/bad leaver clause. Change of control not to affect vesting. |
| Impact: | Examples below are based on a base share price of NOK 50 at offering date. |
| The IFRS 2 cost for the company has been estimated at NOK 5.5 per option per year. (i.e. a total of NOK 2.2 million per trance of NOK 400,000 options per year.) |
|
| The options will trigger income tax for the receiver and social security tax for the company. |
|
| Scenarios: Worst case: Share price development < 1% per month – i.e. share price less than NOK 70.83 after 36 months – no payout. Not cost and no gain. |
|
| Medium: Share price doubles in 36 months. NOK 29 value per Option equals NOK 14.1 million value for the receiver with approximately NOK 2 mill social security tax for the company. The total value of the |
receiver equals approximately 25% of gross fixed salary. High: Share price quadruples in 36 months. NOK 129 value per Option equals NOK 64.5 million value for the receiver with approximately NOK 9.1 mill social security tax for the company. The total value of the receiver equals approximately 100% of gross fixed salary.
Note: Eligibility is performance-based as performance based bonus (company and individual tar-ets) will be the basis for the % share of the total allocation.
The Group has limited use of severance payments. However, it does not preclude the use of this if it seems appropriate. No current agreements include allowance for more than six months base salary. Any use of severance payments is restricted and requires approval. Severance payments to employees are approved by the CEO. Severance payments to management are approved by the CEO and reviewed by board via remuneration committee. Severance payments to the CEO are approved by board via remuneration committee.
Managers will receive benefits that are common for similar positions. Normal benefits include mobile phone and broadband. Zalaris actively works to avoid benefits that have a residual cost in the event an employee leaves – such as company cars.
There are no particular limitations on the type of benefits that can be agreed upon. However, Zalaris seeks to limit the number of benefits to simplify our internal processes and visualize total compensation through the fixed salary.
The Group is required to have an occupational pension scheme in accordance with the Norwegian law on mandatory occupational pension ("lov om obligatorisk tjenestepensjon"). The Group's pension schemes satisfy the requirements of this law and represent a defined contribution plan, with disability coverage.
Pension levels and arrangements for managers outside of Norway must be seen in the context of the individual's total wage and employment conditions, and shall be comparable to the total compensation package offered executive management in Norway. Local rules related to pension legislation, social security rights, tax etc. is taken into account when deciding the individual pension schemes.
7. Procedures for Determination of Remuneration to Executive Management
Remuneration to the CEO is determined annually by the Remuneration Committee authorised by the board.
The CEO does not participate in a stock option programme or a share purchase programme per end of FY 2017.
Remuneration to the individual members of the executive management group is determined by the CEO.
Prior to settlement, the CEO shall discuss proposed changes with the Remuneration Committee. The Board will be informed about agreed changes in remuneration.
Arrangements that include allocation of shares, options and other forms of remuneration linked to the Groups shares shall be approved by the General Assembly. Within the framework of resolution set by the General Assembly, the Board shall decide on the process of implementing the new remuneration scheme. The Board may also delegate such authority to the CEO.
The increase in the base salaries to the Group Executive Management is expected to be moderate but fair.
Remuneration to the Board of Directors is not performance-based.
Board members are not a part of a stock option programme or a share purchase programme in Zalaris.
Remuneration of the Board for the coming year is determined by the General Assembly, based on a proposal from the Nominating Committee.
All subsidiaries of Zalaris ASA shall follow the main principles of the Groups executive remuneration policy for executive management in each company as described in the preceding sections of this executive remuneration policy.
The increase in the base salaries to executive management in subsidiaries is expected to be moderate.
The board's statement regarding remuneration including information about remuneration paid to members of the executive management shall be presented in Zalaris' consolidated financial statements, note 19. (Nina will check when FS is finalized).
The company's remuneration of the CEO and senior management is conducted in accordance with the guidelines presented above. There are no significant new agreements or changes in remuneration agreements that have been signed in 2017 other than the addition of new senior management members from the acquired companies and the share purchase programme and option schemes as described in section 3.2.2 above.
For 2018, the Board of Directors proposes to continue the existing remuneration policy.
Zalaris ASA is listed on Oslo Børs with ticker ZAL. The share price increased 70.7% during 2017 (73.4% dividend adjusted) and ended on NOK 56.0 on 29 December, the last trading day of 2017. The market capitalisation end of 2017 was NOK 1,126.9 million.
Zalaris has one class of share. Each share carries one vote and all shares carry equal rights, including the right to participate in general meetings. All shareholders shall be treated on an equal basis, unless there is just cause for treating them differently.
Zalaris shares are freely negotiable, and there are no limitations of the negotiability in Zalaris' Articles of Association.
Key Figures 2017 (all numbers in NOK)
Market capitalisation 31 December 2017 1,126,886,824
Share price per 31 December 2017 56.0
Total number of shares 20,122,979
Proposed dividend per share 0.65
Earnings per share -0.61
Event Name Date Results Q1 03 May 2018 Annual General Meeting 15 May 2018 Results Q2 16 August 2018 Results Q3 25 October 2018
At the end of the year 2017, Zalaris ASA had 560 shareholders. Per 31 March 2018, the number of shareholders was 524 whereof 92% were in the Nordics; 59% of the shares were owned by investors in the Nordics.
The 20 largest shareholders hold 81.4% of the total shares outstanding. The list below is updated as of 31 March 2018.
| Investor | Country | # of shares | Ownership | |
|---|---|---|---|---|
| 1 | NORWEGIAN RETAIL AS | NORWAY | 2,841,482 | 14.1 % |
| 2 | SKANDINAVISKA ENSKILDA BANKEN AB | SWEDEN | 1,811,411 | 9.0 % |
| 3 | STATE STREET BANK AND TRUST COMP | US | 1,691,228 | 8.4 % |
| 4 | FIDELITY NORDIC FUND | US | 1,688,300 | 8.4 % |
| 5 | STRAWBERRY CAPITAL AS | NORWAY | 1,039,887 | 5.2 % |
| 6 | COMMERZBANK AKTIENGESELLSCHAFT | GERMANY | 768,027 | 3.8 % |
| 7 | JPMORGAN CHASE BANK, N.A., LONDON | UK | 765,339 | 3.8 % |
| 8 | VPF NORDEA KAPITAL | NORWAY | 749,508 | 3.7 % |
| 9 | TREDJE AP-FONDEN | NORWAY | 703,881 | 3.5 % |
| 10 | STATE STREET BANK AND TRUST COMP | US | 695,000 | 3.5 % |
| 11 | DANSKE BANK A/S | DENMARK | 562,230 | 2.8 % |
| 12 | VPF NORDEA AVKASTNING | NORWAY | 505,705 | 2.5 % |
| 13 | METZLER EURO SMALL + MICRO CAP | US | 460,750 | 2.3 % |
| 14 | NORDEA 1 SICAV | UK | 368,603 | 1.8 % |
| 15 | VERDIPAPIRFONDET NORDEA NORGE PLUS | NORWAY | 326,520 | 1.6 % |
| 16 | NHO - P665AK | UK | 309,259 | 1.5 % |
| 17 | RBC INVESTOR SERVICES TRUST | UK | 308,994 | 1.5 % |
| 18 | TACONIC AS | NORWAY | 285,212 | 1.4 % |
| 19 | AVANZA BANK AB | SWEDEN | 276,752 | 1.4 % |
| 20 A/S SKARV | NORWAY | 225,000 | 1.1 % | |
| Total | 16,383,088 | 81.4 % |
The Zalaris investor relations policy is based on the approach that objective, detailed and relevant market information is essential for a proper valuation of the company's shares. Thus, the company maintains a continuous dialog with analysts and investors.
Zalaris shall give all shareholders the same information at the same time. During contact with analysts and investors, the Board of Directors and management of Zalaris shall only communicate already published information.
Zalaris has established a communication channel for its shareholders on the company website, and all published information is made available on this website. General investor relations inquiries should be addressed to the following email address: [email protected]
Zalaris strives at all times to publish all relevant information to the market in a timely, correct, nondiscriminatory and efficient manner. All relevant information will be published on the Zalaris website and on the website of the Oslo Stock Exchange. Shareholders can register to Zalaris' Investor Relations distribution list if they would like to receive investor information directly via email.
Zalaris holds quarterly web-based presentations highlighting the financial results of the closed quarter and focus areas going forward. In addition, market outlooks and special events considered relevant for its shareholders are addressed. The presentation is held by the CEO and CFO of the company. Both the quarterly reporting and the presentations will be published on Zalaris' website.
Zalaris is a leading business process outsourcing (BPO) specialist for human resources and a provider of technology and services for human capital management (HCM) and payroll services. The company enables human resources departments at mid-sized and large companies to focus on strategic processes through outsourcing of transactional HR functions, such as payroll and employee data maintenance.
From its early days as a Norwegian company in the year 2000, Zalaris has grown to become a leading European player with activities stretching across northern and central Europe, the UK and Ireland, India, and Thailand. The company's headquarters are in Oslo, and the company was listed on the Oslo Stock Exchange in 2014 (ZAL). Through local-language centers covering these geographical areas, Zalaris' more than 800
Zalaris' overall objective is to create value for its shareholders by providing an attractive and competitive return in the form of increased share value and through the distribution of dividends. The dividends paid should reflect the company's growth and profitability.
Zalaris will aim to make annual dividend payments in the region of 50% of the net profits before tax, provided that this will not influence target growth negatively and that the capital structure is sound and at a satisfactory level. When deciding the final dividend amount to be proposed for the General Meeting, the Board of Directors will also take into consideration Zalaris' capital requirements, including legal restrictions, capital expenditure requirements and potential investment plans.
The Board of Directors proposes a dividend payment of NOK 0.65 per share for the fiscal year 2017. Please note that historical dividends are not an assurance of future dividends.
The CFO in Zalaris ASA is the main contact person for matters related to financial information, such as quarterly reporting and financial statements.
For all other matters, such as new customer contracts or other share price sensitive information, the CEO of Zalaris ASA is the contact person.
CEO and founder: Hans-Petter Mellerud [email protected]
CFO: Nina Stemshaug [email protected]
Analyst Coverage
ABG Sundal Collier: Aksel Øverland Engebakken [email protected] ABG Sundal Collier: Daniel Thorsson [email protected] Nordea Markets: Erik Aspen Fosså [email protected] Beringer Finance: Nicoleta Rosu [email protected]
Nordea Bank Norway ASA Wholesale Banking | Securities Services P.O. Box 1166 Sentrum N-0107 Oslo, Norway
employees deliver services to more than 250,000 employees across the businesses they serve.
Zalaris' business is organised in three operating segments: HR Outsourcing, Cloud Services and Consulting. Zalaris offers a wide range of cloud-based services, including personnel administration and payroll, benefits management, pension administration, travel management, time management, talent management and personnel controlling (HR analytics).
Zalaris is one of a small number of European HR specialists licensed to offer complete SAP HCM and SAP® SuccessFactors® outsourcing services directly from the cloud. Zalaris serves as a "single source" for a comprehensive range of proven HR solutions that are secure, reliable and configured to unique customer requirements.
Postal Address PO Box 1053 Hoff • NO-0218 Oslo • Norway Visiting Address Hovfaret 4b • NO-0275 Oslo
Telephone +47 4000 3300 Telefax +47 2202 6001 Website www.zalaris.com eMail [email protected]
Zalaris and Zalaris products and services mentioned herein, as well as respective logos and trademarks, are registered trademarks of the company. All other product and service names mentioned are acknowledged as trademarks (or subject to being trademarks) of their respective companies. © 2018 Zalaris
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