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annual report 2012
IN D E X
IN D E X
contents Management ’s re vie w 04 Financial highlights 05 Management interview 07 Strategy 08 Important events 09 Overview 2012 09 Outlook for 2013
Dantherm
c o n s o l i d at e d f i n a n c i a l s tat e m e n t s 31 Income statement 31 Statement of comprehensive income 32 Balance sheet – Assets 33 Balance sheets – Liabilities
10 HVAC
34 Statement of changes in equity
12 Telecom
35 Cash flow statement
14 Shareholder information
36 Notes
16 Corporate governance 18 Corporate social responsibility 20 Risk management 22 Financial review s tat e m e n t s 2 4 Statement by the Board of Directors and the Executive Board on the annual report 2 5 The independent auditor’s statements Management and Group chart
F i n a n c i a l s tat e m e n t s o f t h e pa r e n t
Dantherm was founded in 1958 by Ejlert Olsen. The company’s first product was a warm air heater for heating workshops and industrial buildings. In the 1970s, the product portfolio was extended to include dehumidifiers and ventilation products, and in the 1980s also to include mobile heating and cooling units for the armed forces and aid organisations. In the 1990s, climate control products for the Telecom industry were added.
Within the HVAC business area, Dantherm is an important European provider of products and solutions based on more than 50 years of experience within heating, ventilation, cooling and dehumidification of air.
Today, Dantherm is divided into two business areas: HVAC (Heating, Ventilation, Air Conditioning) and Telecom.
Dantherm was listed on NASDAQ OMX Copenhagen in 2002 and currently has approx. 3,600 shareholders
Within the Telecom business area, Dantherm is a leading global supplier of products for climate control in radio base stations.
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63 Income statement 63 Statement of comprehensive income 64 Balance sheet – Assets 65 Balance sheets – Liabilities 6 6 Statement of changes in equity
Dantherm AS
Skallestad, Norway
67 Cash flow statement 68 Notes
Dantherm AB
Söderköping, Sweden
2 6 Board of Directors and Executive Board
Dantherm Air Handling Co., Ltd.
Suzhou and Beijing, China Dantherm Ltd.
Clevedon, England
29 Group chart
Dantherm Inc.
Spartanburg, USA
Dantherm Air Handling Sp. z o.o.
Warszawa, Poland
Dantherm A/S
Skive, Denmark Dantherm Air Handling A/S
Skive, Denmark
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Dantherm Annual Report 2012
Annual Report 2012 Dantherm
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financial highlights
Management interview
DKK ’000 2012 2011 20101) 20091) 2008
Key figures Income statement: Revenue 482,057 550,312 464,626 431,185 2,027,364 Earnings before depreciation, amortisation etc. (EBITDA) 12,516 43,387 31,717 -12,023 97,196 Earnings before impairment of goodwill (EBITA) -6,172 22,528 6,854 -68,661 41,434 Goodwill impairment 0 0 0 -23,636 0 Operating profit/loss (EBIT) -6,172 22,528 6,854 -92,297 41,434 Net financials -11,747 -12,771 -20,701 -20,723 -36,031 Profit/loss from continuing operations before associates -17,919 9,757 -13,847 -113,020 5,403 Share of profit/loss after tax in associates 0 0 -30,686 0 0 Profit/loss before tax -17,919 9,757 -44,533 -113,020 5,403 Net profit/loss for the year from discontinued operations 0 -1,423 -1,945 -181,491 -18,774 The groups share of the profit/loss for the year -16,523 4,278 -43,850 -293,050 -17,903 Balance sheet at year-end: Working capital 61,755 92,267 87,622 191,223 336,307 Net interest-bearing debt 188,326 187,081 186,865 459,084 446,104 Balance sheet total 415,138 462,688 457,389 1,055,527 1,395,355 Equity 111,900 129,550 128,777 166,932 466,958 Invested capital including goodwill 300,226 316,631 315,642 626,016 913,062 Cash flows: Cash flow from operating activities 19,829 19,775 3,176 76,864 164,542 Cash flow from investing activities -20,434 -19,857 100,499 -26,784 -61,455 – Of which acquisitions/sales of subsidiaries and activities 0 -645 107,289 0 -1,426 – Of which acquisitions of property, plant and equipment -2,590 -2,499 -933 -13,607 -49,052 Cash flow from financing activities -10,845 -12,797 -68,618 -25,401 -7,815 Cash flow from discontinued operations 0 -1,005 60,350 -55,461 0
R at i o s Financial ratios: Growth rate -12.4% 18.4% 7.8% - -5.9% Profit margin -1.3% 4.1% 1.5% -21.4% 2.0% Return on invested capital -2.0% 7.1% 1.5% - 4.3% Equity interest 27.0% 28.0% 28.4% 16.8% 33.6% Average number of employees 548 585 537 578 2,266 Share-related ratios: Earnings per share (EPS), DKK -2.32 0.60 -6.17 -41.22 -2.51 Diluted earnings per share (EPS-D), DKK -2.32 0.60 -6.17 -41.22 -2.51 Cash flow per share, DKK 2.79 2.78 0.45 10.81 23.11 Dividend per share, DKK 0.00 0.00 0.00 0.00 0.00 Equity value at year-end, DKK 15.6 18.0 18.1 24.7 65.2 Share price at year-end, DKK 14.7 13.9 18.0 20.0 44.4 Price/equity value 0.94 0.77 1.00 0.81 0.68 Number of shares of DKK 10 each at year-end (’000) (2008-2010: DKK 50) 7,191 7,191 7,191 7,191 7,191 1) The key figures and ratios for 2009 and 2010 are presented in accordance with IFRS 5. The figures for 2008 have not been restated relating to the divestment of Dantherm Filtration in 2010. The ratios are prepared in accordance with the Danish Society of Financial Analysts’ ’Recommendations and Financial Ratios 2010’ and IAS 33. Reference is also made to the ratio definitions on page 61.
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Dantherm Annual Report 2012
Torben Duer President & CEO Jørgen Møller-Rasmussen Chairman of the Board of Directors
Why did the progress of 2011 not continue in 2012? Dantherm did not realise the expected growth in revenue or increased earnings in 2012 primarily because sales to Telecom network suppliers were lower than expected. This customer group consists of few important customers, who bought considerably less than in 2011. How did the other business areas develop? Revenue within HVAC increased by 18 % in 2012, which exceeded our expectations on a European market characterised by low growth. The increase is attributable to a focused effort within market and product development which has resulted in the capture of market shares. Within the business area of mobile heating and cooling, revenue nearly doubled relative to 2011. Within the business area of ventilation, Dantherm achieved growth of 18 % primarily driven by home ventilation products. Only within the business area of dehumidification did sales decrease slightly, primarily due to the fact that flooding in Copenhagen in 2011 increased sales to an extraordinary extent. Revenue within Telecom network operators also increased by 18 % in 2012 in consequence of our strategic efforts.
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Has the Dantherm business strategy changed as a result of developments in 2012? No, the overall growth strategy has not changed, but key focus areas within market presence, product development, costefficiency and capital structure have been adjusted. Furthermore, Dantherm expects the demand from network suppliers to normalise. Are there actual plans to enter new markets? Yes, as mentioned, strengthening Dantherm’s market presence is an important part of our growth strategy and we have actual plans of establishing local presence i.e. in Germany, Russia and Mexico in 2013. We need to bring ourselves closer to our customers and offer more local services. This will strengthen our competitiveness and increase market potential. In 2012, Dantherm opened an office in Beijing. What is the overall plan with this initiative? The Beijing-office serves as sales premises and features a showroom with selected Telecom and HVAC products. The purpose is to be closer to Telecom network
operators and decision-makers in China, thus increasing our market coverage on this large market. In connection with the establishment of the Beijing-office, the Chinese sales organisation was strengthened and we entered into a co-operation with a Chinese sales partner. In 2012, a new showroom was established in the factory in Suzhou and sales activities are meant to be expanded here as well in 2013. What does the improved branding with a new logo, website and control your climate mean for Dantherm? The business foundation of Dantherm is climate control and we have more than 50 years of experience at developing energy-efficient solutions within heating, ventilation, cooling and dehumidification of air. The idea behind an improved branding strategy is to communicate this story about Dantherm in a more purposeful manner. In 2012, we increased the visibility of the Dantherm name - the result of which shows in the form of increasing visitors to our new website. The new claim, CONTROL YOUR CLIMATE, describes what Dantherm stands for in short and precise terms.
Annual Report 2012 Dantherm
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What does the increased focus on energy-efficiency mean for Dantherm? It means that Dantherm expects a growing market for our products. Within climate control, energy consumption is an important factor. All over the world, the focus on energy-efficiency will intensify in the coming years, both as a result of official requirements as well as due to savings related to lower energy-consumption. Within Telecom, focus on reducing energy-consumption when cooling radio base stations is increasing. We also see potential for our HVAC ventilation products, which are developed to lower energyconsumption and are among the most energy-efficient solutions on the market. Product development is an important part of the Dantherm growth strategy. Which initiatives have been carried out in this respect in 2012? Over the years, Dantherm has delivered more than a million climate control solutions. The result of this is extensive experience within thermodynamic solutions – experience which we use in our product development. Within Telecom, developments of a global product range continued in 2012 including an intensification of the co-operation between the R&D departments in Denmark, China and the USA. New products for Free Cooling and Combo Cooling were launched in 2012 and we are currently working on a new Air Conditioner line. Within HVAC, developments focused on the dehumidification and home ventilation business areas, where several new products were launched in 2012.
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Dantherm Annual Report 2012
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Dantherm has extensive production facilities in Denmark. Are they able to compete? We continuously aim to ensure that products manufactured at any production facility of Dantherm are competitive. In Denmark, automation has been a major focus of investments over the years and we optimise processes continuously. Furthermore, a project for optimisation of administrative processes has been initiated, to make us best in class in handling orders, purchasing, logistics, production planning and shipment. Furthermore, reductions in the number of hourly and salaried employees in 2012 will reduce overheads in 2013. Does Dantherm have the right capital structure to realise the expected growth? In 2012, we continued improving the capital structure aiming to secure sufficient liquidity for the initiatives necessary to create growth. At the end of 2012, we reduced working capital to amount to just 13 % of revenue, which is an improvement of 4 percentage points relative to the end of 2011. This resulted in positive cash flow from operating activities of DKK 20m. Furthermore, against the background of the result for 2012, we renegotiated the agreement with our primary credit institutions and were granted unchanged credit lines until 1 May 2014. In addition, we continuously discuss possible partners and their ability to contribute to our business development and strengthen our capital foundation. How is Dantherm engaged with CSR-related activities? The basis of Dantherm’s work with corporate social responsibility is the UN Global Compact – the ten principles in the areas of human rights, labour, the environment
and anti-corruption. Environmental and social responsibilities are important issues at Dantherm integrated in our corporate culture. How did Dantherm Power develop in 2012? The activities in Dantherm Power comprise the development and sale of fuelcell-based backup power mainly for the Telecom industry and CHP units for private households. The business development within Dantherm Power remains positive and revenue increased by 28 % relative to 2011. In December 2012, in co-operation with Ballard Power Systems Inc., Canada, Dantherm took over Danfoss’ ownership interest of 10 % in Dantherm Power. Therefore, the ownership interest of Dantherm has increased from 38 % to 43 %. Cash flows in Dantherm Power are still negative, for which reason Dantherm and Ballard have granted convertible loans to the company. Dantherm’s share of the convertible loans granted to Dantherm Power in 2012 amounts to DKK 5m. How are the future prospects for Dantherm? Dantherm is an ambitious company with numerous possibilities of development. This means that the future looks promising for Dantherm. Dantherm aims to be among the market leaders within the business areas of Telecom and HVAC and given the increasing demand for energyefficient products, the growth potential is quite good. Considering developments in 2012, the strategic objective from 2010 of revenue of approx. DKK 900m in 2015 may be difficult to achieve. However, we still aim for considerable growth in the coming years.
What is the outlook for 2013? We expect the many initiatives carried out in the latest years within market and product development to result in progress within revenue and earnings in 2013. Within the business area of Telecom, we remain dependent on investments in new mobile networks and modernisation of existing networks in the form of investments in energy-efficient climate control units. Within the business area of HVAC,
we are dependent on general economic developments in Europe, where growth is still low. On the other hand, there is substantial growth potential for many of our products which allow our customers to save energy and improve the indoor climate.
thank you from the management
On behalf of the Board of Directors and the Executive Board, we would like to thank our customers, shareholders and other partners for their loyalty to Dantherm in 2012. We would also like to thank all Dantherm employees, who have shown tremendous commitment to the company.
s t r at e g y In 2012, the management continued their focus on strategic measures and established the focus areas which are to contribute to realising the objective of considerable growth in revenue and earnings. The strategy is focused on balancing revenue between the business areas to make Dantherm less dependant on large projects.
Growth Dantherm’s strategy focuses on considerable growth in revenue and earnings
Ambitions Dantherm aims to increase the company’s market value by continuously increasing earnings and strengthening our market position resulting in growth in revenue, the intention being to make Dantherm a more attractive company to shareholders, customers and employees.
Foundation The ambition is based on a strong foundation consisting in Dantherm’s sales and production setup in Europe, Asia and North America and a market of significant size and growth potential, where Dantherm is positioned well today. Focus areas Dantherm’s strategy is comprised of four focus areas: market presence, product development, cost-efficiency and capital structure. Market presence: The strategy for the coming years includes establishing offices in new, important markets in Europe, Asia and the Americas combined with a focused expansion of our distributor network and an increased effort in existing markets. This way, we will be closer to our customers and more able to support our partners. Product development: The strategy includes continuous development of Dantherm’s energy-efficient product lines to ensure that we offer the best products in the market and that we
live up to increasing official requirements and customer needs. Dantherm already devotes considerable resources to product development in Denmark, China and the USA, based on a global product range adapted to local needs and requirements. Cost-efficiency: The strategy includes continuous improvement of administrative processes and manufacturing productivity. In addition, the strategy includes a reduction in the use of materials and other operating expenses. Like in 2012, lean activities will be carried out both in the administration as well as in the production in the coming years. Capital structure: The strategy is focused on optimising the working capital and the invested capital. This is to be achieved by reducing working capital and improving trading conditions for customers and suppliers. Dantherm aims to continuously discuss possible partnerships and their ability to contribute to our business development and strengthen our capital foundation.
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i m p o r ta n t events
overview 2012 Earnings performance and business development Dantherm’s revenue and operating loss (EBIT) for 2012 were on a par with the outlook announced in the interim report for Q3 2012. However, the results did not correspond to the original outlook for growth in revenue and earnings relative to 2011.
Office opening in Beijing Dantherm’s Chinese subsidiary in Suzhou, China, was established more than 10 years ago and focuses on sales and production to customers within Telecom. The World’s largest Telecom network operators are domiciled in China. To support the strategic development of this business area, Dantherm established a Beijing office with a showroom in 2012 and entered into a co-operation with a Chinese sales partner. In 2012, Dantherm launched a new Chinese website and participated in a large Telecom trade show in China.
Product development A significant competition parameter is to be at the cutting edge of development and deliver energy-efficient products. In 2012, Dantherm launched new products i.e. within mobile dehumidification, home ventilation and climate control for radio base stations. The development takes place in Denmark, China and the USA and the products are adjusted to fit local needs and demands. Development costs amounted to 6 % of revenue in 2012.
Consolidated revenue was lower than that of 2011 by 12 % attributable to a decline in revenue within Telecom of 45 % and an increase in revenue within HVAC of 18 %. The decline in revenue within Telecom is entirely attributable to significantly lower sales to network suppliers - an area within which the general market situation lead to postponement of a number of investments in network capacity expansion. Dantherm was affected by the slowdown at the end of 2011 and it continued throughout the entire year of 2012. Dantherm maintained its market position
with the main customers. Therefore, the lower revenue is an expression of a temporary decline in investments in Telecom networks in 2012. The satisfactory growth within HVAC is attributable to increased sales of mobile heating and cooling solutions to the armed forces and growth within the ventilation business. In consequence of the financial development in 2012, Dantherm aligned capacity with market demand to reduce costs in 2013. Investments in increased market presence and product development were maintained, which resulted in higher costs than in 2011 in spite of the decline in revenue. Capital structure and cash flows In spite of the earnings performance, positive cash flows from operating activities amounting to DKK 20m were realised in
2012, on par with 2011. The positive cash flows are attributable to a reduction in working capital by DKK 31m since the end of 2011. Working capital constituted 13 % of revenue against 17 % of revenue at the end of 2011. As a result of the financial development in 2012, Dantherm re-negotiated the agreement with its primary credit institutions maintaining the current credit lines until expiration of the agreement on 1 May 2014. Dantherm Power In 2012, Dantherm increased its ownership share in the associate Dantherm Power from 38 % to 43 %. The company’s business development continued its positive course in 2012, with a growth in revenue of 28 % and a positive development in operations and cash flow. However, the activities in Dantherm Power are still lossmaking, for which reason the company received further funding from the shareholders in 2012.
o u t lo o k f o r 2 0 1 3
New website/CONTROL YOUR CLIMATE In 2012, Dantherm launched a new and more customer and product oriented website. The website is launched in several languages and directed at Dantherm’s principal markets. In the external communicating, the new claim, CONTROL YOUR CLIMATE, is used to define Dantherm’s core competences within climate control. Read more at www.dantherm.com
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Dantherm Annual Report 2012
Optimisation and lean projects Dantherm has production facilities in Europe, Asia and the USA and continuously focuses on ensuring competitiveness through automation and optimisation of manufacturing processes. In 2012, a project within the Danish operating company was initiated to ensure higher efficiency in administrative processes from receipt of the order to payment from the customer.
The market development within HVAC is still expected to be moderate and affected by the European economy. Within several of the product groups of HVAC, certain growth is expected due to increased focus on indoor climate and energy-savings. Within Telecom, the market development is expected to depend on developments within wireless communication globally and the extent of investments in new Te-
lecom networks or upgrading of existing networks. The underlying basis of growth within wireless communication is expected to continue in 2013 as a result of more mobile subscribers and increased data transmission. Increasing investments in Telecom networks relative to 2012 are expected in 2013. Since such investments are typically significant, the timing of their implementation may still lead to volatility of Dantherm’s revenue.
Dantherm’s strategic measures within increased market presence, product development and cost-efficiency continue to support the growth strategy. Dantherm expects revenue of DKK 525550m and an operating profit (EBIT) of DKK 15-20m in 2013, on par with the levels seen in 2011.
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h va c FActs 2012
2012 was a positive year for the HVAC business area with growth in revenue of 18 % relative to 2011.
Management MARKET DEVELOPMENT Within HVAC, Dantherm’s principal market is Europe. The markets are largely niche markets where Dantherm has a strong market position and a customer base of more than 4,000 customers in 55 countries. Jesper Holm Thorstensen CEO, HVAC since 2010 Born 1969 MSc in Engineering Joined Dantherm in 1995 COMPANIES Production takes place at the factory in Denmark. The products are sold from the Danish company to subsidiaries in Norway, England and Sweden and via a wide distributor network in Europe. EMPLOYEES
REVENUE DKKm 400 300 200 100
2010
Within mobile heating and cooling, market developments were generally affected by a low investment level within the armed forces. Market developments within ventilation are affected by activity levels within the construction sector in Europe. In 2012, increasing focus on energy savings and improved indoor climate in private homes resulted in continuing market growth. Market developments are also driven by energy consumption laws.
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Developments within mobile dehumidifiers were affected by decreasing demand from damage service professionals and lower activity levels within the construction sector in Europe, whereas market developments for fixed dehumidifiers are less cyclical.
2011
2012
DEVELOPMENTS IN 2012 Financial development Revenue within HVAC amounted to DKK 336m in 2012 against revenue of DKK 285m in 2011, which corresponds to satisfactory growth by 18 %. The growth in revenue can be attributed to positive developments within the business areas of mobile heating and cooling and ventilation.
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Dantherm Annual Report 2012
Within mobile heating and cooling, growth in revenue amounted to 94 % relative to 2011, which is primarily attributable to large-scale project orders to one single market.
18 % Revenue within HVAC increased by 18 % in 2012.
In 2012, revenue within ventilation grew by 18 % relative to the year before. The positive developments are primarily attributable to successful sales of home ventilation products to the German and Danish markets. Within the business area of dehumidification, revenue declined by 10 % relative to 2011, which is primarily attributable to extraordinary sales in 2011 in connection with flooding in Copenhagen. Profit before depreciation, amortisation, impairment losses and write-downs (EBITDA) in 2012 amounted to DKK 36m (11 % of revenue) against DKK 26m in 2011 (9 % of revenue). Business development In 2012, focus was still directed at increasing sales efforts by expanding the customer base and dealer cover. Furthermore, new websites for Denmark, Germany, Norway and France were launched in 2012.
As an important element in ensuring continuous growth and improved profitability within HVAC, a lean project to make administrative processes as efficient as possible was initiated in 2012. STRATEGY The strategic activities will continue within three focus areas: market presence, product development and cost-efficiency. In 2013, within the focus area of market presence, activities will focus on increasing market shares by intensifying sales efforts through Dantherm’s own sales organisation, partly by expanding the dealer
network in selected European countries and partly by concluding agreements with new private label customers. Continuous product development remains an important competition parameter for Dantherm within all business areas. The coming years will see the launch of new products in accordance with the development plans for the individual businesses. The project of making administrative processes more efficient will continue, just as focus will continue to be directed at optimising manufacturing processes.
case: VENTILATION SYSTEM GENERATES IMPRESSIVE SAVINGS
In 2012, the British health and fitness group David Lloyd Leisure (DLL) implemented a Dantherm DanX ventilation system and generated energy savings of 72 % after one year. The energy savings pay the investment. That is the idea behind an EPI contract (Energy Performance Investment contract), which provided a basis for the project financing. The EPI contract allowed financing of the energy saving DanX unit through a third party investor and the actual energy savings.
Dantherm and DLL agreed on a full service contract and so Dantherm maintains the ventilation unit from a service point of view twice a year. The system is strictly monitored to provide information of actual energy consumption for electricity and heating of water and air every 30 minutes. Running conditions are monitored remotely, making it possible to log on to a computer anywhere to see whether the unit is performing correctly.
FActs 2012 PRODUCTS The Dantherm business concentrates on three product areas: Mobile heating and cooling: Climate control in tents and containers. Dehumidification: Mobile dehumidifiers for drying of buildings and fixed dehumidifiers for wellness areas and private pool rooms. Ventilation: Ventilation with heat recovery for private homes, swimming pool halls, shopping centres, theatres etc. CUSTOMERS Mobile heating and cooling: Armed forces in NATO countries, international aid organisations, tent and container manufacturers and dealers. Dehumidification: Professional rental and damage services, dealers and private label customers. Ventilation: Contractors, fitters, public authorities, private label customers, dealers and fitness chains.
Furthermore, in order to maintain and expand Dantherm’s market position, a number of new ventilation and dehumidification products were launched in 2012.
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telecom FActs 2012 management
2012 was a disappointing year for the Telecom business. Following growth in revenue of 44 % from 2010 to 2011, revenue declined correspondingly from 2011 to 2012. MARKET DEVELOPMENT Within Telecom, market development depends on developments within wireless communication and the extent of investments in new Telecom networks or upgrading of existing networks.
Kristian Askegaard CEO, Telecom since 2010 Born 1958 MSc in Economics & Business Administration Joined Dantherm in 2007 COMPANIES Most Telecom products are manufactured in China with local production in Denmark and the USA. The products are sold globally through the companies in China, Denmark, the USA, Sweden, Norway and Poland and via dealerships. EMPLOYEES
237 revenue
In addition to an expansion of the infrastructure to allow handling of the growing number of mobile subscribers and the increasing data traffic, there is a growing market for replacement cooling solutions in existing radio base stations where new cooling units can reduce energy consumption.
DKKm 300
200
100
0
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2010
The extent of wireless communication increased in 2012 and is expected to increase further in the coming years. Growth is driven by more mobile subscribers and increasing data volumes. At the end of 2012, the number of mobile subscribers worldwide is expected to be around 6.6bn and increase to exceed 7bn at the end of 2013. In addition to the growing number of subscribers, data transmission is increasing. This includes a growing need for radio capacity to handle increasing data volumes created by smartphones and tablets. In the coming years, the growth is expected to be further strengthened by wireless communication for surveillance systems, tele medicin, smart grids, cars, road systems and white goods.
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Dantherm Annual Report 2012
In spite of the preconditions of growth, market developments in 2012 were weak as a result of postponed investments in Telecom networks. Since such investments are typically significant, the timing
of their implementation leads to volatility of Dantherm’s revenue. DEVELOPMENTS IN 2012 Financial development Revenue within Telecom amounted to DKK 146m in 2012 against revenue of DKK 265m in 2011, which corresponds to a decline of 45 %. The lower revenue is primarily attributable to the fact that sales to network suppliers were lower than in 2011 by 64 %, whereas revenue within the customer group of network operators grew by 18 %. After positive developments in 2011, the Telecom industry and thus Dantherm’s sales to network suppliers were affected by the general market situation leading to postponement of a number of investments in network capacity expansions. Dantherm was affected by the slowdown at the end of 2011 and it continued throughout the entire year of 2012. Dantherm maintained its market position with the primary customers and thus the declined revenue is an expression of lower investments. Sales within network operators spread over several customers and markets and the increased revenue within this customer group is attributable to Dantherm’s strategic measures which, among other things, lead to an expansion of the customer base. As a result of lower revenue, loss before depreciation, amortisation, impairment losses and write-downs (EBITDA) fell from a profit of DKK 21m in 2011 to a loss of DKK 19m in 2012.
Business development In 2012, Dantherm aligned capacity with market demand, but adhered to the strategic measures regarding market presence and product development in spite of the financial development. With a view to increasing market cover in China and to be closer to the Chinese network operators, Dantherm established a sales office in Beijing and entered into co-operation with a Chinese sales partner. Furthermore, a new and more customer and product focused website was launched. In 2012, Dantherm continued developments of a global product range, new energy-efficient products were launched i.e. within Free Cooling and Combo Cooling and more patents have been taken out.
STRATEGY The strategic activities will continue within the three focus areas: market presence, product development and costefficiency. In 2013, Dantherm will increase market presence by opening offices i.e. in Germany, Russia and Mexico. Continuous product development remains an important competition parameter for Dantherm, and developments of energyefficient solutions meeting the demands of the market continue in 2013. The strategic measures focus on increasing sales to network operators and retaining the leading market position for sales to network suppliers. In addition to increasing sales and earnings, these measures contribute to lowering volatility within the Dantherm Telecom business.
case: ENERGY SAVINGS CALCULATOR ON NEW WEBSITE
Up to 50 % of the energy consumption in radio base stations goes on cooling when using traditional air conditioners. The Free Cooling units from Dantherm generate huge energy savings in comparison.
The new, web-based energy savings calculator estimates the possible energy savings generated by a Dantherm climate control system at a given site based on the technical data of the radio base station and meteorological data of the location.
FActs 2012 PRODUCTS Dantherm’s products and solutions are applied for energy-efficient climate control of electronics and batteries in radio base stations and other Telecom infrastructure and industrial cooling. The product range comprises free cooling, heat exchange, thermosiphon passive cooling, air conditioning, peltier cooling and products combining these technologies to reduce energy consumption. CUSTOMERS Customers within Telecom include network suppliers and network operators. Network suppliers include few important customers who establish new Telecom networks globally. The products are typically customised to the individual customer, and the market is characterised by high entry barriers and rapid technological advances. Network operators run the Telecom networks and tend to operate locally. They buy new radio base systems from the network suppliers and replace existing equipment which they buy from the network suppliers, integrators or companies such as Dantherm. The products sold to this customer group tend to be standard products.
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Shareholder i n f o r m at i o n The Dantherm share In spite of the unsatisfactory developments within Dantherm, the price of Dantherm shares increased by 6 % in 2012 against a decrease in the Small Cap Index of 5 % in the same period. In 2012, the highest and lowest price of the Dantherm share were DKK 19.9 and DKK 13.8, respectively. At the end of the financial year, the share price was DKK 14.7 against DKK 13.9 in 2011. At the end of the financial year, the company’s market value was DKK 106m compared to DKK 100m at the end of 2011. Trading in the Dantherm shares amounted to DKK 11m in 2012 against DKK 16m in 2011..
Shareholder composition At the end of the financial year, Dantherm had approx. 3,600 registered shareholders. A total of 90 % of the share capital in Dantherm was held by registered shareholders at the end of 2012.
shares up to a total nominal value of 10 % of the share capital. The consideration paid must not deviate from the share price listed by more than 10 % at the time of purchase. This authorisation is valid until the annual general meeting in 2016.
The following shareholders are included in the company’s register under Section 55 of the Danish Companies Act (Selskabsloven). The stated ownership percentages are those registered by the company as at 31 December 2012.
The group held 80,526 treasury shares as at 31 December 2012, corresponding to 1.1 % of the share capital. The holding of treasury shares is unchanged relative to 31 December 2011. Website In 2012, the company website was updated and now features a section dedicated to investors. Dantherm encourages investors and other interested parties to visit the company’s website at www.dantherm.com. It is possible to request electronic information about the company from the website. This service is also available to interested parties who are not shareholders.
Share capital Dantherm’s share capital was DKK 71,905,740 at the end of 2012. 7,190,574 shares were listed with a nominal value of DKK 10, each carrying one vote. Dividend policy Dantherm’s dividend policy is to allocate approx. 30 % of the consolidated net profit for the year to the shareholders – with due account being taken of the group’s financial and cash position and investment and expansion plans. The company also aims to maintain an equity interest of at least 30 %. The Board of Directors proposes that no dividend be paid for 2012.
- D. F. Holding, Skive A/S, Denmark - 18%
The present annual report is available at www.dantherm.com, where company announcements published and further information about the group can also be found.
- Hans R. Olsen, UK - 11% - Nils R. Olsen, Denmark - 11% - Treasury shares - 1% - Other shareholders - 59%
Treasury shares The Board of Directors of the company has been authorised, by the general meeting, to let the company buy treasury
Dantherm
14
Dantherm Annual Report 2012
2 01 c2
Small Cap
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Index 100
Dantherm’s share price vs Small Cap
Internal regulations about insider knowledge and trading in the company’s shares In accordance with the Danish Securities Trading Act (Værdipapirhandelsloven), Dantherm maintains an insider register listing people who are considered to be privy to insider knowledge of the company by virtue of their position. The company has prepared a set of internal regulations for these people and their related parties.
of Directors and the Executive Board and employees of Dantherm A/S. The regulations also apply to people outside Dantherm who work for or represent the company and to employees in any Dantherm subsidiary whose positions are expected to entail access to insider knowledge covered by the regulations.
10 April The annual general meeting will be held on Wednesday 10 April 2013 at 3pm in the company’s offices at Marienlystvej 65, Skive, Denmark.
The people specified above are only permitted to buy and sell Dantherm shares for a period of four weeks after the publication of the company’s annual and interim financial reports. At its meetings, the Board of Directors considers whether there are any matters that would prohibit members and other insiders from buying or selling Dantherm shares in the prescribed period. Investor relations POLICY Dantherm aims to pursue an open information policy in relation to all external stakeholders. By providing information about the company’s activities, strategies, expectations and risk position, Dantherm
seeks to provide the share market with an objective foundation for pricing the company’s shares.
Investor relations contact
Torben Duer President & CEO Tel.: +45 99 14 90 00
To keep the company’s shareholders and stakeholders in the financial market informed, the management will as a minimum publish quarterly reports via NASDAQ OMX Copenhagen. In order to comply with these formal and informal commitments to the share market (including NASDAQ OMX Copenhagen), the management will also immediately publish information about important events which may be assumed to be material to the pricing of the Dantherm share.
financial calender for 2013
01.03.2013 Announcement of financial statements
The management is positive about participating in meetings with investors, stockbrokers, share analysts, financial journalists etc. in order to provide up-to-date information on the company’s strategy and activities. However, in order to comply with its information obligations, Dantherm does not wish to participate in investor meetings for a period of three weeks prior to the publication of financial statements. All registered shareholders in Dantherm will automatically receive invitations to general meetings.
10.04.2013 General meeting 01.05.2013 Interim report Q1 2013 21.08.2013 Interim report Q2 2013 30.10.2013 Interim report Q3 2013
The website www.dantherm.com is updated regularly and expanded to include relevant information to help present an up-to-date picture of the group.
Insider shareholdings
Dantherm shares held by insiders and their related parties as at 31 December 2012 are shown in the table to the right. D. F. Holding, Skive A/S is subject to the same trading restrictions as the company and its Board of Directors.
Insider group
Number of shares
Market value (DKK ’000)
911,107
13,393
Other insiders
2,338,742
34,380
Total
3,249,849
47,773
Board of Directors and Executive Board
The people covered by the internal regulations are members of the Board
Annual Report 2012 Dantherm
15
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C o r p o r at e governance The Board of Directors and the Executive Board of Dantherm A/S strive to ensure good corporate governance. Endeavours are made at all times to ensure that the group’s management structure and control systems are expedient and satisfactory. At the company’s website: (http://www.dantherm.com/gb/ investor-relations/corporate-governance/ corporate-governance) a statement can be found which, in accordance with the updated recommendations on corporate governance from NASDAQ OMX Copenhagen of August 2011, describes the company’s compliance with the individual recommendations as well as setting out the management’s comments on the individual recommendations. Additionally, the full description of the main elements can be found in the company’s internal control and risk management systems in connection with the financial reporting process and the description of the composition of the governing bodies of the company and their functions. In the opinion of the Board of Directors, the recommendations on corpo-
rate governance are complied with by Dantherm, with the exceptions in recommendations no. 4.1.4 and 5.10, see the overview below. Composition and duties of the Board of Directors The Board of Directors has seven members of whom four are elected for a period of one year at a time at the annual general meeting, while three members are elected by Dantherm’s employees in Denmark in accordance with Danish company legislation. The employee representatives have the same rights and obligations as the members elected by the annual general meeting and are elected for a period of four years. The most recent election among the employees was held in 2011. Three of the members of the Board of Directors elected at the annual general meeting are independent of the company. of the members of the Board of Directors elected at the annual general meeting are independent of the company. This includes evaluating the cooperation between
Recommendation
the Board of Directors and the Executive Board. The latest self-assessment was carried out in January 2013 with the assistance of a high-profile consultancy. The self-assessment was based on questionnaires and oral discussions and the results were discussed by the Board of Directors. As part of the Board of Directors’ self-assessment, an assessment is made of the composition of the Board of Directors, including for example a consideration of diversity and the need for special competencies. The Board of Directors is composed of experienced corporate sector individuals with a professional background and practical experience that match the challenges facing the group. Further information about the composition and competencies of the Board of Directors can be found in the annual report’s section on the Board of Directors.
The Board of Directors’ rules of procedure form the basis of its work. The rules of procedure are updated at least once a year. Remuneration policy The Board of Directors discusses and regularly assesses the principles of remuneration of the Board of Directors and the Executive Board to ensure that they comply with the common practice for comparable companies and reflect the efforts required. To ensure matching interests between the Executive Board, executive employees and the shareholders, an agreement has been made for bonus pay which may constitute up to 40 % of the basic pay. The payment of bonus is conditional upon the fulfilment of a number of agreed objectives. No extraordinary severance programmes have been agreed with the Board of Directors, the Executive Board or executive employees. The Board
of Directors receives a fixed remuneration. Remuneration may also be paid for tasks carried out by board members for and by request of the Board of Directors, which was not the case in 2011 and 2012. The remuneration paid to the management is described in further detail in note 3 to the annual report. Internal control and risk management systems in connection with financial reporting The Board of Directors and the Executive Board are overall responsible for the Dantherm group’s risk management and internal controls in connection with the financial reporting process. The Board of Directors and the Executive Board are also overall responsible for ensuring compliance with relevant legislation and other rules and regulations relating to financial reporting. The Board of Directors and
the Executive Board make a priority of continually ensuring good risk management and internal controls in connection with the financial reporting process. The group’s risk management and internal controls are designed to effectively manage and eliminate the risk of errors and omissions in connection with the financial reporting. The group’s risk management and internal control systems in relation to the financial reporting will provide reasonable, but not absolute, assurance that misappropriation of assets, losses and/ or significant errors and omissions in the financial reporting are avoided. The Board of Directors and the Executive Board regularly assess significant risks and internal controls in relation to the group’s operations and their potential impact on the financial reporting process.
The Board of Directors convenes at least eight times a year according to a fixed meeting schedule. The Board of Directors may also call extraordinary meetings if the circumstances demand it. Eight board meetings were held in 2012.
Dantherm’s practice
4.1.4 The Committee recommends that the supreme governing body an-
No specific diversity targets have been defined at management levels, but ef-
nually discuss the company’s activities to ensure diversity at manage-
forts are made to ensure equal opportunities for everyone. The management
ment levels, including equal opportunities for both sexes, and that the
of Dantherm plans to prepare policies in this respect in 2013 and establish
supreme governing body set measurable objectives and in the ma-
target figures in accordance with the legal requirements passed in 2012.
nagement commentary in the annual report and/or on the company’s website give an account of both the objectives and the progress made in achieving the objectives. 5.10.3 and 5.10.7: The Committee recommends that the supreme governing body estab-
Based on the current size of the group and the Board of Directors, it is asses-
lish an actual audit committee and a nomination committee.
sed by the Board of Directors that it is not expedient to appoint board committees. The joint Board of Directors is the natural place for discussions, and topics prescribed to be discussed in committees are discussed individually.
On 22 February 2013, Dantherm was awarded Company of the Year by the municipality of Skive. Dantherm in Skive and the company’s employees were chosen on account of their active efforts to demonstrate social responsibility. 16
Dantherm Annual Report 2012
Annual Report 2012 Dantherm
17
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C o r p o r at e s o c i a l responsibility CSR policy
Dantherm is a responsible company which recognises the group’s duty to contribute to sustainable development. Dantherm develops energyoptimising solutions and products for the benefit of our customers and the environment and finds that there is a good correlation between responsible conduct and improving the group’s growth and earnings. The corporate social responsibility activities are based on the United Nations Global Compact initiative – the ten principles in the areas of human rights, labour, environment and anticorruption. CSR-RELATED EFFORTS IN 2012 Dantherm’s CSR efforts in 2012 comprised the following four areas: •• Product development •• Environment and climate •• HR and social issues •• Anti-corruption PRODUCT DEVELOPMENT In 1959, the founder of Dantherm, Ejlert Olsen, was quoted in one of the largestselling newspapers in Denmark: ‘It is not necessary to heat water to heat the air. I think warm air heating will become much more common’. This quote expresses the innovation which for many years has defined Dantherm. The business foundation of Dantherm remains delivering energysaving solutions. Dantherm has R&D departments in Denmark, China and the USA and in 2012, re-
18
Dantherm Annual Report 2012
search and development costs amounted to 6 % of revenue. The customers’ demand for energy-efficient products is increasing and in 2012, among others, Dantherm developed the following products: DC Air Conditioner, designed for electronics cooling by means of batteries in radio base stations with no grid power. Combo Cooling, applying a combination of free cooling and air conditioning to cool large Telecom shelters. Home ventilation units, which live up to the EU’s climate and energy targets for 2020 and are among the most efficient in the market regarding heat recovery in private households. ENVIRONMENT AND CLIMATE The group’s primary production companies in Denmark and China are certified in accordance with the ISO 14001 environmental management standard. The noncertified companies are all subject to the group’s general environmental policy. Dantherm continuously implements environmental improvements with regard to heating, ventilation, waste management, water consumption and use of other processing aids. Furthermore, Dantherm aims to choose the most rational and environmentally friendly production methods which benefit both the internal and the external environments. In 2012, the efforts to reduce the consumption of electricity continued and resulted in reductions in the factories in Denmark and China. Furthermore, in 2012, Dantherm in Denmark worked to identify risks of cooling agent leakage. Consequently, cooling agent is now used in smaller preasurised
containers closer to the working process as opposed to large, external containers. Furthermore, the consumption is continuously monitored. environmental policy
Dantherm wishes to act responsibly in relation to both the internal and the external environments. In relation to the internal environment, the policy includes organising operations expediently and minimising/eliminating the use of health damaging substances. In relation to the external environment, the policy includes complying with all relevant environmental policies and continuously making an effort within resource and energy optimisation.
pected to be completed during 2013. Dantherm is still focusing on education, i.e. including an update of the employees’ computer skills. Dantherm carries out surveys among the Danish employees to determine their level of satisfaction with the initiatives, and the results are compared with the strategy to focus the work on the areas that need improvement. The individual departments prepare plans of action and the HR department plays an important role in the continuous follow-up on the implementation of the plans. With a view to acting responsibly and contributing to a positive co-operation with the local community, Dantherm in
Dantherm’s HR work is structured and focused to consistent with the growth strategy and support the company’s objectives. An example of this is Dantherm’s global Sales Academy, which was established in 2012 with a view to unifying the sales culture with an individual approach to the customer groups. The education is divided into four modules and is ex-
Code of Conduct is incorporated in staff policies and supplier contracts to a certain extent. In 2012, Dantherm commenced preparations of a group Code of Conduct.
ANTI-CORRUPTION As part of Dantherm’s efforts to comply with the United Nations Global Compact, the company act in accordance with the principle “Businesses should work against corruption in all its forms, including extortion and bribery”.
FURTHER CSR-RELATED EFFORTS In 2013, Dantherm will continue its CSRrelated efforts including creating a basis for collecting and standardising nonfinancial data. Furthermore, Dantherm aims to implement a common Code of Conduct for the employees of the group.
case: when a weakness becomes a strength
Efforts to improve the environmental impact of the group’s operations are made from an overall perspective with due consideration of technological and financial practicability.
HR AND SOCIAL ISSues Dantherm aims to ensure that all employees have good working conditions with a view to ensuring that the basic preconditions of making a good, committed effort are present.
In relation to our customers and suppliers, Dantherm will not be party to unlawful, anti-competitive practices and does not accept corruption or bribery.
Denmark has had an objective for many years to employ approx. 10 % on special terms, e.g. trainees, employees with flexible working hours or individuals with chronic illness. The 10%-policy is part of a general policy of Dantherm of retaining committed employees and being socially responsible. At the end of 2012, 11.8 % of Dantherm’s employees were employed on special terms.
Since 2004, Dantherm has had an objective that at least 10 % of the company’s employees shall be employed on special terms. HR Manager, Connie Jørgensen, explains that the objective has been set because it is important not just to talk about making a difference in the community, but also substantiating it. Claus Lund Jensen is an example of an employee who works for Dantherm on special terms. Claus is autistic - a disorder usually characterized by impaired social interaction and communication. Claus himself calls it a weakness, because he
is not like most people with autism. He is just very capable in some areas, but not that capable in others. Claus has been employed as a service assistant at Dantherm for more than a year. He was recently the main force behind a project of registering screws in the workshop with a view to helping the designers and developers at Dantherm save both time and money in their daily work.
According to Susanne, Claus has developed drastically since his first day at Dantherm, when he was initially an intern and later advanced to being employed as a service assistant. He is now making eye contact and addresses people on his own initiative. Claus feels the difference as well: ”I didn’t know how important my tasks were at first, but now I know that I’m really helping Susanne out”.
In co-operation with floor Manager Poul Erik Madsen, Claus invented a system of organising the screws, collected every single type, registered item numbers and their physical placement and collected everything on a well-arranged board. He kept track of the item numbers in his head, which makes his mentor, production supporter Susanne Jensen, remark that Claus’ weakness has become his strength. A small reception was held to mark the completion of the board, and Claus took everyone by surprise by suddenly presenting the project on his own.
Since he started working at Dantherm, Claus has started exercising, which has improved his physical shape significantly. As part of his contract, he visits the inhouse gym every week and according to both himself and Susanne, he doesn’t tire as much anymore. Claus is pleased to be working at Dantherm and adds that he would both like more hours and responsibilities. ”He is very responsible and finishes all his tasks, even if they require overtime”, remarks Susanne. ”He is a big help and I am so proud of him”. In 2012, Susanne Jensen was awarded Mentor of the Year by the municipality of Skive.
Annual Report 2012 Dantherm
19
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Risk management Dantherm’s activities involve a number of business related and financial risks which may impact the group’s activities and results. It is the management’s objective – via established policies and procedures – to counter and limit the risks which can be influenced by own actions. The risk management efforts are not based on a wish to eliminate all risks; the objective is rather to actively determine the risks which can be accepted and controlled and the risks which must be completely avoided. The Board of Directors discusses the group’s risks once a year as a minimum and reevaluate if the risks have changed and the established efforts need adapting. Business related risks Market condition With a 92 % revenue outside of Denmark, Dantherm depends on developments in the world economy. Within the HVAC segment, most products are sold in Europe and many business areas are influenced by investments within the building sector. Within the Telecom segment, products are sold globally. Sales are influenced by new investments and upgrading of telecommunication networks. Investments are usually of significant proportions and sales are therefore volatile and depend on the timing of the projects. Dantherm focuses on reducing the dependency and sales volatility by diversifying its activities to include more business
20
Dantherm Annual Report 2012
areas and customer groups and by increasing sales on existing and new markets. Customer relations Sales to network suppliers within Telecom are limited to a relatively small number of customers. Within the HVAC segment, sales within the business area of home ventilation are also limited to a small number of customers. This may result in fluctuations in sales. Dantherm is focusing on reducing the dependency on few individual customers by spreading its activities to more business areas and customer groups and by increasing sales in new and existing markets. Supplier relations Dantherm aims to create long-term supplier relations and depends on deliveries from certain suppliers. In the choice of suppliers of products and components of critical importance to the business, it is general group policy to have, whenever possible, at least two suppliers to ensure independence, competitiveness and not least reliability of supply. Technological development Dantherm operates in sectors characterised by ongoing technological product development where focus is directed at the products’ energy-efficiency, making this area an important parameter in securing competitiveness. Within all business areas, Dantherm works to define and develop the right solutions for its customers, to ensure that new products are available to replace products which are reaching the end of their product life cycle.
Insurance Dantherm is covered by an extensive insurance package continuously adjusted in co-operation with an independent insurance broker. The insurance package is based on Dantherm’s insurance policy, which is reviewed annually by the Board of Directors. It is aimed to insure against all risks, as far as possible.
tract and the volatility of the currency. Currency risks relating to the valuation of foreign net investments are generally not hedged. Interest rate risks Some of the group’s financing is in the form of floating-interest loans. This involves a risk of changes in interest payments, both in the short and in the long term, which may affect the group’s profit.
The company regularly assesses the expediency of entering into agreements to wholly or partly hedge such interest rate risk. An agreement has therefore been made which hedges the interest rate risk on the lease on the building in Skive, Denmark. At the end of 2012, the fixedrate portion amounted to 49 %, on par with the end of 2011.
Credit risks Dantherm assesses the financial situation of the company’s customers and collaborators on a regular basis, and considerable debtor insurance is taken out in the individual companies. Overall, approx. 55 % of the debtor balance as at 31 December 2012 was insured against 64 % at the end of 2011.
Financial risks The overall framework for managing the financial risks has been defined by the Board of Directors. It is group policy to identify and hedge all significant financial risks in an expedient way and not to engage in active speculation in financial risks. Reference is made to the description on the website of the group’s internal control and risk management systems in connection with the financial reporting process. Capital structure and financial resources One element in the group’s financial planning is to always ensure the presence of adequate financial resources, while at the same time minimising capital costs. The group seeks to organise its financing so as to have adequate credit facilities at its disposal to implement the growth strategy. Currency risks It is group policy to hedge significant currency risks arising from foreign currency contracts where the cash flow can be predicted with sufficient accuracy. The need for hedging is assessed based on an individual assessment of the con-
Annual Report 2012 Dantherm
21
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financial review group INCOME STATEMENT Revenue Dantherm posted revenue of DKK 482.1m in 2012, corresponding to the announced outlook for total revenue in the region of DKK 470m. Relative to 2011, revenue decreased by 12 % attributable to a drop within the Telecom segment of 45 %. Revenue within the segment of HVAC increased by 18 % relative to 2011. Other external expenses and staff costs Other external expenses and staff costs increased by 2 % in total from 2011 to 2012. The increase in costs can primarily be ascribed to an increase in staff within sales and development as a result of the strategic focus on market presence and product development. In consequence of the decrease in activity, a decrease in capacity was carried out, primarily in the second half of 2012, and the average number of employees was reduced from 585 in 2011 to 548 in 2012. Depreciation and amortisation Depreciation and amortisation for the year decreased from DKK 20.9m in 2011 to DKK 18.7m in 2012. Dantherm possesses modern production facilities, and the decline in depreciation and amortisation is primarily attributable to a low level of investment. Operating result (EBIT) An operating loss (EBIT) of DKK 6.2m was posted in 2012 against an operating profit of DKK 22.5m in 2011. The operating result is unsatisfactory, but slightly better than that of the latest outlook announced predicting an operating loss in the region of DKK 10m.
Net financials In 2012, net financials totalled a net expense of DKK 11.7m against DKK 12.8m in 2011. The decrease in net expenses are primarily the result of interest income from loans granted to associates. Tax on profit/loss from continuing operations for the year Tax on profit/loss from continuing operations for the year constituted an income of DKK 1.4m in 2012 against an expense of DKK 4.1m in 2011. The income comprises tax refunds on development projects in Denmark and recognition of deferred tax assets. At the end of 2012, the Dantherm group had unrecognised tax losses of DKK 139m (2011: DKK 172m). Net profit/loss for the year Overall, a net loss for the year of DKK 16.5m was posted against a profit of DKK 4.3m in 2011. Developments in 2012 were unsatisfactory following lower sales to network suppliers within the Telecom segment. GROUP BALANCE Goodwill Goodwill of DKK 69.5m was recognised in the balance sheet. This figure is unchanged relative to the end of 2011. Goodwill concerns the Telecom segment, and at the end of 2012 an impairment test was carried out which did not result in any impairment. Other intangible assets Other intangible assets primarily concern development projects relating to the development of new products. Product development is a strategic focus of Dantherm and development projects recognised in the balance sheet have therefore increased in 2012. The increase is primarily attributable to the release of
new products for Free Cooling and Combo Cooling and new products within the dehumidification and home ventilation business areas.
bearing debt/EBITDA” and “EBITDA/interest expenses” as at 30 September 2012 and anticipated not to be able to meet them as at 31 December 2012.
Property, plant and equipment The value of property, plant and equipment totalled DKK 122.8m against DKK 134.5m at the end of 2011 attributable to a low level of investment.
For that reason, Dantherm entered into negotiations with the credit institutions and new financial covenants have been agreed upon as from 31 March 2013 until expiration of the agreement in 2014. The new covenants have been determined against Dantherm’s budget for 2013, with a margin granting the group proper financial latitude.
Receivables from associates Non-current receivables from associates concern convertible loans granted to Dantherm Power with a view to financing the development within the company. Working capital At the end of the year, working capital amounted to DKK 61.8m, reduced by 30.5m since the end of 2011.
The credit lines of Dantherm remain unchanged and at the end of 2012, the group had unutilised cash resources of DKK 36m against DKK 47m at the end of 2011.
Equity and equity ratio Equity amounted to DKK 111.9m at the end of 2012 against 129.6m at the end of 2011. In 2012, equity was negatively affected by DKK 1.1m as a result of foreign currency translation adjustments and adjustment of an interest rate swap in respect of the building financing in Skive. The equity ratio amounted to 27 % at the end of 2012 against 28 % at the end of 2011. GROUP CASH FLOW STATEMENT In spite of the earnings performance, positive cash flows from operating activities amounting to DKK 19.8m were realised in 2012, on par with 2011. The increase is attributable to a reduction in the working capital which improved cash flows by DKK 28.4m primarily relating to a reduction in inventories and receivables.
Cash flows from investing activities amounted to DKK -20.4m, relatively on par with 2011. Cash flows from investing activities relating to product development increased in 2012, whereas cash flows from convertible loans granted to Dantherm Power are lower than those of 2011 by DKK 5.1m. Cash flows from financing activities amounted to DKK -10.8m in 2012, which is slightly lower than in 2011. The negative cash flows in both 2011 and 2012 are attributable to a reduction in interestbearing debt. Cash flows for the year amounted to DKK -11.5m against DKK -13.9m in 2011.
Relative to revenue, the working capital amounted to 12.8 % at the end of 2012 against 16.8% at the end of 2011. Dantherm aimed to reduce the working capital in 2012 and will continue to pursue this in 2013. Net interest-bearing debt and cash resources Net interest-bearing debt amounted to DKK 188.3m, relatively on par with the end of 2011. Of this net interest-bearing debt, finance lease commitments and bank debt relating to buildings amounted to DKK 103.1m (2011: DKK 107.3m). In April 2012, Dantherm concluded a committed facility agreement with its primary credit institutions which expires on 1 May 2014. The agreement comprised usual covenants. In consequence of the development within the Telecom business area in 2012, Dantherm could not meet covenants relating to “net interest-
Revenue and EBIT%
Assets
DKKm 600
EBIT% 5
equity, liabilities and equity ratio
DKKm
DKKm
1200
1200
30
Equity ratio
500
0
1000
1000
25
400
-5
800
800
20
300
-10
600
600
15
200
-15
400
400
10
100
-20
200
200
5
0
0
0
2009
2010
2011
2012
-25
2009
2010
2011
2012
EBIT%
Current assets
2010
2011
2012
0
Long-term payables
Non-current assets Revenue
2009
Short-term payables Equity
Other payables Equity ratio
22
Dantherm Annual Report 2012
Annual Report 2012 Dantherm
23
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S tat e m e n t b y t h e b o a r d o f direc tors and the executive board on the annual report Today, the Board of Directors and the Executive Board have discussed and approved the 2012 annual report of Dantherm A/S. The annual report has been prepared in accordance with International Financial Reporting Standards as adopted by the EU and additional Danish disclosure requirements for annual reports of listed companies.
In our opinion, the consolidated financial statements and financial statements give a true and fair view of the group’s and the parent’s assets, liabilities and financial position as at 31 December 2012 and of the results of the group’s and the parent’s operations and cash flows for the financial year 1 January - 31 December 2012.
ment in the group’s and the parent’s activities and financial affairs, the results for the year and the group’s and the parent’s financial position as well as a description of the main risks and uncertainties facing the group and the parent.. We recommend that the annual report be approved at the annual general meeting.
We also find that the management’s review contains a fair review of the develop-
Skive, Denmark, 1 March 2013
The independent au d i t o r ’ s s tat e m e n t s To the shareholders of Dantherm A/S Report on the consolidated financial statements and financial statements We have audited the consolidated financial statements and financial statements of Dantherm A/S for the financial year 1 January 2012 - 31 December 2012. The consolidated financial statements and financial statements comprise the income statement, statement of comprehensive income, balance sheet, statement of changes in equity, cash flow statement, accounting policies and notes for the group as well as for the company. The consolidated financial statements and financial statements have been prepared in accordance with International Financial Reporting Standards as adopted by the EU and additional Danish disclosure requirements for listed companies.
Executive Board
Torben Duer President & CEO
Board of Directors
Jørgen Møller-Rasmussen Chairman
Preben Tolstrup Deputy Chairman
Niels Kristian Agner
Søren Ø. Hansen
Conni-Dorthe Laursen
Nils R. Olsen
Per F. Pedersen
24
Dantherm Annual Report 2012
The management’s responsibility for the consolidated financial statements and financial statements The management is responsible for the preparation and fair presentation of these consolidated financial statements and financial statements in accordance with International Financial Reporting Standards as adopted by the EU and Danish disclosure requirements for listed companies. The management is also responsible for the internal control deemed necessary to prepare consolidated financial statements and financial statements that are free from material misstatement, whether due to fraud or error. Auditor’s responsibility Our responsibility is to express an opinion on these consolidated financial statements and financial statements based on our audit. We conducted our audit in accordance with international auditing standards and additional re-quirements laid down in the Danish Act on Approved
Auditors and Audit Firms (Revisorloven). This requires that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance that the consolidated financial statements and financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements and financial statements. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement in the consolidated financial statements and financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the group’s and the company’s preparation and fair presentation of the consolidated financial statements and financial statements. The purpose is to design audit procedures that are appropriate in the circumstances, but not to express an opinion on the effectiveness of the group’s and the company’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the management, as well as evaluating the overall presentation of the consolidated financial statements and financial statements
the parent’s assets, liabilities and financial position as at 31 December 2012 and of the results of the group’s and the parent’s operations and cash flows for the financial year 1 January 2012 - 31 December 2012 in accordance with International Financial Reporting Standards as adopted by the EU and additional Danish disclosure requirements for listed companies. Statement on the management’s review As required by the Danish Financial Statements Act (Årsregnskabsloven), we have read the management’s review. We have not performed any procedures other than the audit conducted of the consolidated financial statements and financial statements. Against this background, we believe that the information in the management’s review is in accordance with the consolidated financial statements and the financial statements.. Aarhus, 1 March 2013 KPMG Statsautoriseret Revisionspartnerselskab
Finn L. Meyer Jes Lauritzen State-Authorised State-Authorised Public Accountant Public Accountant
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Our audit has not resulted in any qualification. Opinion In our opinion, the consolidated financial statements and financial statements give a true and fair view of the group’s and
Annual Report 2012 Dantherm
25
IN D E X
IN D E X
Board of Direc tors
jørgen møller-rasmussen
preben tolstrup
Niels kristian agner
nils rosenkrands olsen
conni-dorthe laursen
Per Friis Pedersen
Chairman Born 1947 Elected for the first time in 1999 Elected until: the general meeting 2013
Deputy Chairman Born 1959 Elected for the first time in 2008 Elected until: the general meeting 2013
Board member Born 1943 Elected for the first time in 2002 Elected until: the general meeting 2013
Board member Born 1950 Elected for the first time in 2002 Elected until: the general meeting 2013
Employee representative Born 1956 Elected for the first time in 2007 Elected until 2015
Employee representative Born 1956 Elected for the first time in 2003 Elected until 2015
Position: Director of IPL Holding A/S
Chairman of the Board of Directors of: Adept Water Technologies A/S
Chairman of the Board of Directors of: SP Group A/S SP Moulding A/S
Position: Production Worker
Position: Process Manager
Chairman of the Board of Directors of: Intervare A/S Nemlig.com A/S
Deputy Chairman of the Board of Directors of: Pedax A/S
Position: Director of AC-Sun ApS Director of Blackwing Business Angels A/S
Competencies: Graduate Engineer, Graduate Diploma in Business Administration Former President & CEO of various large companies, most recently Dalhoff Larsen & Horneman, listed company with extensive international activities. Considerable experience within the construction sector. Now mainly engaged in board work.
Competencies: BSc in Engineering, MBA Former CEO of the Logstor group and Director of FLS Industries A/S and ABB Power Generation
Holding of Dantherm shares: 2012: 5,000 2011: 5,000
Holding of Dantherm shares: 2012: 25,070 2011: 25,070
Member of the Board of Directors of: Aktieselskabet Schouw & Co. Dantherm Foundation D.F. Holding, Skive A/S Direktør Hans Hornsyld og hustru Eva Hornsylds Legat Direktør Svend Hornsylds Legat G.E.C. Gads Forlag A/S G.E.C. Gads Fond (nominee) Competencies: BCom., BSc (Business Economics) Former member of the Executive Board of Gyldendal. Most recently CEO of Dansk Kapitalanlæg Aktieselskab. Now mainly engaged in board work. Holding of Dantherm shares: 2012: 49,000 2011: 32,000
Chairman of the Board of Directors of: ASA - Airline Software Applications ApS
Holding of Dantherm shares: 2012: 105 2011: 105
Member of the Board of Directors of: Blackwing Business Angels A/S Dantherm Foundation D. F. Holding, Skive A/S Grabow Maskinsystemer A/S Weissenborn A/S Competencies: MSc in Economics and Business Administration. Former CEO of Cimber Air Data A/S. Mainly engaged in entrepreneurial activities and board work. Holding of Dantherm shares: 2012: 777,324 2011: 777,324
søren østergaard hansen Employee representative Born 1971 Elected for the first time in 2011 Elected until 2015 Position: General Manager - Telecom EMEA Beholdning af Dantherm-aktier: 2012: 2,500 2011: 2,500
26
Dantherm Annual Report 2012
Annual Report 2012 Dantherm
27
IN D E X
IN D E X
Group chart
Ex e c u t i v e B o a r d Dantherm A/S
(DK)
100%
torben duer President & CEO Born 1963 Master of Business Economics, Aarhus University, 1987
bjarke brøns CFO Born 1975 MSc(Econ.), Aarhus School of Business, 1999, State-Authorised Public Accountant, 2004
43%
Dantherm Air Handling Holding A/S
Dantherm Power A/S
(DK)
100%
Dantherm Air Handling A/S
(DK)
100%
Dantherm AS
(NO)
100%
Dantherm AB
(SE)
100%
Dantherm Ltd.
(UK)
100%
Dantherm Air Handling Sp. z o.o.
(PL)
100%
Dantherm Inc.
(US)
100%
Dantherm Air Handling (Suzhou) Co. Ltd.
(CN)
(DK)
Dantherm also owns the company ERO A/S, which has no activities and is being liquidated.
Appointed in November 2009 Positions: 1987-1992 1993-2000 1997-2000 2001-2009
Management assistant, CFO at DISA companies Director at DISA companies in Germany and the UK CFO at Georg Fisher Disa Group in Switzerland CEO at Dantherm Filtration Group
Chairman of the Board of Directors at: Dantherm Power A/S Danish-Swiss Chamber of Commerce
Appointed in April 2011 Member of the Executive Board in March 2013 Positions: 1999-2006 2006-2011
Accountant, audit manager, Andersen and Deloitte Management assistant, CFO at Dantherm companies
Holding of Dantherm shares: 2012: 2,900 2011: 2,900
Member of the Board of Directors at: KREMPEL GmbH Member of the Supervisory Board of: Patria Genossenschaft Holding of Dantherm shares: 2012: 50,000 2011: 40,000
28
Dantherm Annual Report 2012
Annual Report 2012 Dantherm
29
IN D E X
IN D E X
i n c o m e s tat e m e n t DKK ’000
Note
2012
2011
Revenue 1 482,057 550,312
C o n s o l i d at e d f i n a n c i a l s tat e m e n t s
Other operating income Costs of raw materials and consumables Other external expenses Staff costs
2 3 3 3, 4
1,310 -245,985 -65,085 -159,781
4,813 -290,278 -64,498 -156,962
Profit before depreciation, amortisation, impairment losses and write-downs (EBITDA)
12,516
43,387
Depreciation, amortisation and impairment losses of property, plant and equipment and intangible assets
-18,688
-20,859
Operating profit/loss (EBIT) -6,172 22,528 Financial income Financial expenses
Income statement
31
9, 10
12. Inventories
43
13. Receivables
43
14. Equity
43
Tax on profit/loss from continuing operations for the year
15. Deferred tax (asset)
5 4,257 5,154 6 -16,004 -17,925 -17,919
9,757
7
1,396
-4,056
44
Net profit/loss for the year from continuing operations
-16,523
5,701
16. Provisions
44
Net profit/loss for the year from discontinued operations
0
-1,423
17. Payables to credit institutions
45
NET PROFIT/LOSS FOR THE YEAR -16,523 4,278
18. Other payables
46
19. Income tax payable and receivable
46
Distributed as follows: Shareholders of Dantherm A/S -16,523 4,278 -16,523 4,278
2. Other operating income 37
20. Contingent liabilities
46
3. Costs
37
21. Security furnished
46
4. Share-based remuneration
38
5. Financial income
39
6. Financial expenses
39
7. Tax
39
8. Earnings per share
40
9. Intangible assets
41
10. Property, plant and equipment
42
11. Equity investments in associates
43
Statement of comprehensive income
31
Assets 32 Equity and liabilities
33
Statement of changes in equity
34
Cash flow statement
35
Notes 36 1. Segment information
30
Dantherm Annual Report 2012
36
22. Contractual obligations 47 23. Cash and cash equivalents and short-term bank debt 47 24. Financial risks and instruments
47
25. Discontinued operations 51 26. Related parties
51
27. Events occurring after the balance sheet date 51 28. Accounting policies
52
29. Accounting estimates and assessments
60
Profit/loss from continuing operations before tax
Earnings per share Earnings per share (EPS) Diluted earnings per share (EPS-D) Earnings per share from continuing operations Diluted earnings per share from continuing operations
25
8 8 8 8
-2.3 -2.3 -2.3 -2.3
0.6 0.6 0.8 0.8
s tat e m e n t o f comprehensive income DKK ’000 2012 2011 Net profit/loss for the year -16,523 4,278 Other comprehensive income Foreign currency translation adjustments arising from the translation of foreign enterprises 929 4,092 Value adjustment of hedging instruments for the year -2,056 -7,197 Other comprehensive income after tax -1,127 -3,105 Total comprehensive income -17,650 1,173 Distributed as follows: Shareholders of Dantherm A/S -17,650 1,173 Total comprehensive income -17,650 1,173 Annual Report 2012 Dantherm
31
IN D E X
IN D E X
assets DKK ’000
equity and Liabilities Note
31.12.12
31.12.11
Non-current assets Intangible assets Goodwill 69,527 69,527 Completed development projects 7,018 6,216 Patents and licenses 1,491 358 Development projects in progress 13,745 4,353 Total intangible assets 9 91,781 80,454 Property, plant and equipment Land and buildings 97,664 102,613 Leasehold improvements 310 630 Plant and machinery 22,131 29,219 Other plant, fixtures and fittings, tools and equipment 2,697 2,013 Total property, plant and equipment 10 122,802 134,475 Other non-current assets Equity investments in associates
11
50
0
Deferred tax 15 10,299 7,049 Receivables from associates 16,656 9,120 Other receivables 0 1,000 Other non-current assets, total 27,005 17,169
DKK ’000 Equity Share capital
Note
14 71,906 71,906
Liabilities Non-current liabilities Provisions 16 616 638 Credit institutions 17 96,340 103,680 Total non-current liabilities 96,956 104,318 Current liabilities Provisions 16 2,501 7,096 Credit institutions 17 104,240 108,049 Trade payables and other payables 18 97,060 110,668 Income tax payable 19 1,079 1,024 Deferred income 1,402 1,983 Total current liabilities 206,282 228,820 Total liabilities 303,238 333,138 TOTAL EQUITY AND LIABILITIES
Current assets Inventories 12 87,343 111,842
Contingent liabilities 20 Security furnished 21 Contractual obligations 22 Notes without reference 24, 26, 27, 28, 29
13 69,602 89,084
Receivables from associates
13
561
1,551
Income tax receivable
19
1,437
877
31.12.11
Reserve for hedging transactions -16,671 -14,615 Reserve for foreign currency translation adjustment 4,572 3,643 Retained earnings 52,093 68,616 Total equity 111,900 129,550
Total non-current assets 241,588 232,098
Receivables
31.12.12
415,138
462,688
Deferred income 2,353 2,588 Cash 23 12,254 24,648 Total current assets 173,550 230,590 TOTAL ASSETS 415,138 462,688
32
Dantherm Annual Report 2012
Annual Report 2012 Dantherm
33
IN D E X
IN D E X
s tat e m e n t o f changes in equity
c a s h f lo w s tat e m e n t
Shareholders in Dantherm A/S
DKK ’000
Reserve for foreign Reserve for currency hedging translation DKK ’000 Share capital transactions adjustment
Retained earnings Total
Equity as at 1 January 2011
Minority interests
Total equity
359,528
-7,418
-449
-221,605
130,056
-1,279
128,777
0
0
0
4,278
4,278
0
4,278
Other comprehensive income Foreign currency translation adjustment, foreign enterprises 0 Value adjustment of hedging instruments 0 Other comprehensive income, total 0 Total comprehensive income in 2011 0
0 -7,197 -7,197 -7,197
4,092 0 4,092 4,092
0 0 0 4,278
4,092 -7,197 -3,105 1,173
0 0 0 0
4,092 -7,197 -3,105 1,173
Comprehensive income in 2011 Net profit for the year
Transactions with owners in 2011 Capital reduction Purchase of minority interests Reclassification of minority interests Total transactions with owners
-287,622 0 0 -287,622
0 0 0 0
0 287,622 0 0 0 0 -400 -400 0 -400 0 -1,279 -1,279 1,279 0 0 285,943 -1,679 1,279 -400
Equity as at 31 December 2011
71,906
-14,615
3,643
68,616
129,550
0
129,550
Equity as at 1 January 2012
71,906
-14,615
3,643
68,616
129,550
0
129,550
0
0
0
-16,523
-16,523
0
-16,523
Comprehensive income in 2012 Net loss for the year
Other comprehensive income Foreign currency translation adjustment, foreign enterprises 0 Value adjustment of hedging instruments 0 Other comprehensive income, total 0 Total comprehensive income in 2012 0 Equity as at 31 December 2012
71,906
0 -2,056 -2,056 -2,056
929 0 929 929
0 0 0 -16,523
929 -2,056 -1,127 -17,650
0 0 0 0
929 -2,056 -1,127 -17,650
-16,671
4,572
52,093
111,900
0
111,900
The capital reduction in 2011 was made to meet losses and was decided at the company’s general meeting in 2012.
Note
2012
2011
Profit/loss from continuing operations before tax
-17,919
9,757
Adjustment for non-cash operating items etc,: Depreciation, amortisation, impairment losses and write-downs 18,688 20,859 Other operating items, net 72 -4,393 Provisions -4,617 -249 Financial income -4,257 -5,154 Financial expenses 16,004 17,925 Cash flow from primary operations before changes in working capital 7,971 38,745 Change in inventories 24,499 -17,698 Change in receivables 20,177 -1,842 Change in trade payables etc, -16,245 19,118 Cash flow from primary operations 36,402 38,323 Interest income received 1,788 4,008 Interest expenses paid -16,004 -17,925 Cash flow from ordinary operations 22,186 24,406 Income tax paid -2,357 -4,631 Cash flow from operating activities 19,829 19,775 Purchase of intangible assets 9 -15,814 -6,939 Purchase of property, plant and equipment 10 -2,590 -2,499 Disposal of property, plant and equipment 10 247 346 Purchase of financial assets -50 0 Sales of financial assets 2,840 0 Financial loans -5,067 -10,120 Divestment of subsidiaries and activities 25 0 -645 Cash flow from investing activities -20,434 -19,857 Loan financing: : Lease payments in respect of assets held under finance leases Cash flow from financing activities Cash flow from discontinued operations
-10,845 -10,845
-12,797 -12,797
25 0 -1,005
Cash flow for the year
-11,450
-13,884
Cash and cash equivalents, beginning of year Market value adjustment of cash and cash equivalents Cash and cash equivalents, year-end
-73,562 -146 -85,158
-60,549 871 -73,562
Cash, year-end, comprises: Cash 23 12,254 24,648 Short-term bank debt 23 -97,412 -98,210 Cash and cash equivalents, year-end -85,158 -73,562
34
Dantherm Annual Report 2012
Annual Report 2012 Dantherm
35
IN D E X
IN D E X
notes 1 , s e g m e n t i n f o r m at i o n
DKK ’000 2012 2011
Reportable segments of Dantherm comprise the two strategic business areas HVAC and Telecom, which offer different products and services and are run by separate managements. An additional description of the business segments is included in Management’s review.
2 , O t h e r o p e r at i n g i n c o m e
Development within the business areas is assessed against the background of the profit/loss before depreciation, amortisation, impairment losses and write-downs (EBITDA). Internal financial reporting, which these assessments are based on, is consistent with the accounting policies of the group. 2012 DKK ’000 HVAC Telecom Revenue 336,174 Internal revenue 31,508 Total revenue 367,682 Profit/loss before depreciation, amortisation, impairment losses and write-downs (EBITDA) 35,798
145,883 3,522 149,405 -18,999
2011 DKK ’000 HVAC Telecom Revenue 285,133 Internal revenue 73,116 Total revenue 358,249 Profit/loss before depreciation, amortisation, impairment losses and write-downs (EBITDA) 26,266
265,179 3,575 268,754 21,297
Total reportable segments 482,057 35,030 517,087 16,799
Group items not allocated
Group in total
0 482,057 -35,030 0 -35,030 482,057 -4,283
12,516
Total reportable segments 550,312 76,691 627,003 47,563
Group items not allocated
Group in total
0 550,312 -76,691 0 -76,691 550,312 -4,176
Costs of raw materials and consumables Purchased supplies for the year 271,378 275,566 Change in inventories -24,499 17,698 Write-down of inventories for the year 4,169 4,129 Reversed write-downs of inventories -5,063 -7,115 Total costs of raw materials and consumables 245,985 290,278
Total fees for auditors appointed by the general meeting are specified as follows: Audit 642 839 Tax and VAT consultancy services 86 77 Consultancy services in connection with acquisitions and divestments 0 42 Other consultancy services 58 26 Total 786 984
43,387
Geographical information Within the segment of HVAC, products are primarily sold in Europe. Within the Telecom segment, products are sold globally. In presenting information on the basis of geography, segment revenue is based on the geographical location of customers and segment assets are based on the location of the assets. 2012 2011 Non-current Non-current DKK ’000 Revenue assets Revenue assets Denmark 39,881 222,874 45,732 219,091 Norway 62,892 4,904 61,920 4,615 Sweden 16,559 303 72,420 367 United Kingdom 27,361 710 26,433 27 Germany 118,053 0 61,048 0 France 29,309 0 49,848 0 Russia and the Baltics 64,936 0 60,944 0 China 12,720 9,975 48,090 5,717 USA 40,653 2,822 35,771 2,281 Other countries 69,693 0 88,105 0 Total 482,057 241,588 550,312 232,098 Major customers Total revenue from customers who individually constitute more than 10 % of the group’s revenue amounts to DKK 57m (2011: DKK 141m) corresponding to 12 % (2011: 26 %) of the group’s total revenue.
Dantherm Annual Report 2012
3 , COSTS
Reversed write-downs of inventories primarily concern goods which have either been scrapped, sold or used in production.
Transactions between segments are performed on market terms.
36
Reversed provision regarding expiry of guarantees furnished for business areas divested 0 2,111 Other income 1,310 2,702 Other operating income, total 1,310 4,813
Research and development costs recognised in the income statement Research and development costs incurred Development costs recognised under intangible assets, note 9 Total research and development costs recognised in the income statement
29,644 -15,814 13,830
20,185 -6,705 13,480
Research and development costs are recognised as staff costs by DKK 9,868k and as other external expenses by DKK 3,962k. Staff costs Remuneration of the Board of Directors of the parent 1,388 1,350 Wages and salaries 139,021 137,231 Defined contribution plans 12,616 12,761 Other social security expenses 6,756 5,620 Total staff costs 159,781 156,962 Average number of employees
548
2012 Board of Executive Directors of Board of DKK ’000 the parent the parent Salaries and renumeration 1,388 Pension contributions 0 Total 1,388
2,288 0 2,288
Other executive employees
Board of Directors of the parent
3,978 258 4,236
2011
Executive Board of the parent
1,350 0 1,350
585
3,093 26 3,119
Other executive employees 4,265 218 4,483
Annual Report 2012 Dantherm
37
IN D E X
IN D E X
3 . COSTS - CONTINUE D
4 . S h a r e - b a s e d r e m u n e r at i o n - c o n t i n u e d
The Board of Directors only receives a fixed remuneration. The total remuneration for the Board of Directors amounted to DKK 1,388k in 2012 against DKK 1,350k in 2011. Until the general meeting in 2011, the Board of Directors consisted of four members elected by the general meeting and two members elected by the employees. As from the general meeting in 2011, the Board of Directors has consisted of seven members, three of whom are employee representatives in accordance with Danish law. The increased total remuneration is solely attributable to this circumstance.
The fair values were measured based on the Black-Scholes formula used to determine the price of call options. The inputs used in the measurements of the fair values at grant date were as follows: 2008 2007
The remuneration for each member of the Board of Directors amounts to DKK 150k, which has not changed since 2007. The chairman and the deputy chairman receive additional remuneration of 150% and 75%, respectively, which has been reduced from 200% and 100%, respectively, in 2009. The remuneration of the Executive Board comprises a fixed salary and a bonus, which is conditional upon the fulfilment of a number of objectives defined in advance. The annual bonus cannot exceed 40% of the fixed salary. Up until March 2011, the Executive Board consisted of two members, after which it was reduced to one member. As of March 2013, the Executive Board will again consist of two members. In 2012, the total remuneration for the Executive Board amounted to DKK 2,288k (2011: DKK 3,119k) In 2011, remuneration amounting to DKK 334k was paid to the deceased CFO. Other executive employees are key staff in the parent or employees responsible for the group’s main business areas and who are not members of the Executive Board of the parent. Both in 2011 and 2012, this group consisted of three persons.
4 . SHARE - B ASE D REMUNERATION
Average share price (DKK) 133.61 106.13 Exercise price (DKK) 179.06 142.23 Expected volatility 30.0% 30.0% Expected term 6 years 6 years Risk-free interest rate 4.0% 4.0%
DKK ’000 2012 2011
5. Financial income Interest, cash etc. 241 196 Foreign exchange gains 1,526 2,941 Cancellation of debt from minority shareholder 0 1,146 Interest income from loans to associates 2,469 0 Other financial income 21 871 Total financial income 4,257 5,154 Interest on financial assets measured at amortised cost amounts to
2,731
1,067
In 2007, Dantherm A/S established a two-year share option programme for members of the Executive Board and executive employees, nine persons in all. The programme was not extended after 2009, for which reason no costs in this respect were recognised in 2011 and 2012. The share option programme comprised a total of 51,284 outstanding share options as at 31 December 2012, which is unchanged relative to the end of 2011. Each share option gives the holder the right to buy one existing Dantherm A/S share with a nominal value of DKK 10. As in 2011, the outstanding options constitute 0.7 % of the share capital. The share options may be exercised for a period from three to six years after granting. Options granted in 2007 may thus be exercised from the general meeting in 2010 and until the general meeting in 2013. The options can only be exercised for a period of four weeks after the publication of financial statements or interim financial statements. The exercise price was fixed at an average price for a period of ten days after the publication of the company’s annual report plus 5% per year. So far no share options have been exercised during the programme. The options can only be exercised in the form of shares. A portion of the company’s holding of treasury shares has been reserved for any settlement of options granted. Fair value Fair value Other average per option Total Executive Board executive exercise price at the time at the time of the parent employees per option of granting of granting
No. of options No. of options No. of options
DKK
DKK
DKK ’000
Outstanding options at the beginning of 2011 Reclassification Outstanding options at the end of 2011
16,875 34,409 51,284 163 33 1,672 -6,520 6,520 0 0 0 0 10.355 40,929 51,284 163 33 1,672
Outstanding options at the beginning of 2012
10,355
40,929
51,284
Number of options exercisable at the end of 2011
10,355
40,929
51,284
Number of options exercisable at the end of 2012
10,355
40,929
51,284
38
Dantherm Annual Report 2012
163
33
1,672
6. Financial expenses Interest, credit institutions etc. 12,380 13,683 Foreign currency translation adjustment and losses 2,013 3,365 Fees and other costs 1,611 877 Total financial expenses 16,004 17,925 Interest on financial liabilities measured at amortised cost amounts to
13,991
13,683
7 . ta x Tax for the year can be distributed as follows: Tax on profit/loss for the year 1,396 -4,056 Total 1,396 -4,056 Tax on profit/loss for the year comprises: Current tax 88 -3,456 Adjustment of deferred tax 1,584 -1,417 Adjustment of deferred tax due to changed assessment of tax assets 955 1,595 Adjustment of tax, previous years 680 0 Other taxes, including withholding tax -1,911 -778 Total 1,396 -4,056
Annual Report 2012 Dantherm
39
IN D E X
IN D E X
TDKK 2012 2011
9 . I n ta n g i b l e a s s e t s
7 . ta x - c o n t i n u e d
Prepayments Completed and development development Patents and projects in DKK ’000 Goodwill projects licenses progress
Tax on profit/loss for the year comprises:: Profit/loss before tax -17,919 9,757 Tax rate 25% 25%
Total
Adjustment of calculated tax in foreign group enterprises relative to current tax rate -1,269 -38 Income in companies with local losses 0 84 Losses in companies, for which the tax base is not recognised -2,069 -1,953 Other taxes, including withholding tax -1,911 -778 Tax effect of: Non-deductible expenses and non-taxable income, net 530 -527 Change in the valuation of tax losses in addition to earnings performance 955 1,595 Adjustment of tax, previous years 680 0 Total 1,396 -4,056
Cost as at 1 January 2011 Foreign currency translation adjustment Reclassification Additions Disposals Cost as at 31 December 2011
95,271 41,987 4,994 194 142,446 0 92 51 0 143 0 2,063 0 -2,063 0 0 483 234 6,222 6,939 0 -12,145 0 0 -12,145 95,271 32,480 5,279 4,353 137,383
Amortisation as at 1 January 2011 Foreign currency translation adjustment Amortisation Amortisation in respect of disposal Amortisation as at 31 December 2011
25,744 33,301 0 92 0 5,016 0 -12,145 25,744 26,264
Effective tax rate 8% 42%
Carrying amount as at 31 December 2011
69,527
The tax income is primarily attributable to an adjustment of deferred tax in the Chinese subsidiary. Recognition of tax assets in the consolidated companies is based on an assessment of earnings and taking account of the rules on limitation in the individual countries. Changes in tax assets resulted in income of DKK 955k in 2012. (2011: DKK 1,595k).
Cost as at 1 January 2012 Foreign currency translation adjustment Reclassification Additions Disposals Cost as at 31 December 2012
95,271 32,480 0 16 0 4,546 0 204 0 -4,354 95,271 32,892
5,279 4,353 137,383 -20 0 -4 905 -5,451 0 463 15,147 15,814 0 0 -4,354 6,627 14,049 148,839
Amortisation as at 1 January 2012 Foreign currency translation adjustment Amortisation Amortisation in respect of disposal Amortisation as at 31 December 2012
25,744 26,264 0 20 0 3,944 0 -4,354 25,744 25,874
4,921 -20 235 0 5,136
Carrying amount as at 31 December 2012
69,527
7,018
1,491
To be amortised over
3-6 years
3-6 years
Calculated tax on profit/loss before tax
4,480
-2,439
As at 31 December 2012, the group had unrecognised tax losses of DKK 46m (2011: DKK 53m) in foreign companies and DKK 93m (2011: DKK 119m) in the jointly taxed Danish companies, corresponding to a total tax value of DKK 39m (2011: DKK 44m). A part of the unrecognised tax losses is subject to restrictions in use just as periods of limitation sometimes apply.
DKK ’000 2012 2011
8. Earnings per share Net profit/loss for the year
-16,523
4,278
Average number of shares Average number of treasury shares Average number of shares in circulation Diluted average number of shares in circulation
7,190,574 -80,526 7,110,048 7,110,048
7,190,574 -80,526 7,110,048 7,110,048
Earnings per share (EPS) of DKK 10 Diluted earnings per share (EPS-D) of DKK 10
-2.3 -2.3
0.6 0.6
The calculation of earnings per share for continuing and discontinuing operations, respectively, is based on the same key figures as earnings per share. The Dantherm shareholders’ share of: Profit/loss from discontinued operations 0 -1,423 Profit/loss from continuing operations -16,523 5,701 Net profit/loss for the year -16,523 4,278 When calculating the diluted earnings per share in 2011 and 2012, 51,284 share options were excluded, being out-of-the-money but potentially dilutive in future.
6,216
4,355 51 515 0 4,921 358
0 63,400 0 143 0 5,531 0 -12,145 0 56,929 4,353
80,454
0 56,929 0 0 304 4,483 0 -4,354 304 57,058 13,745
91,781
Goodwill: As at 31 December 2012, the management carried out an impairment test of the carrying amount of goodwill. Goodwill is related to the Telecom business area. In connection with the impairment test, the recoverable amount, corresponding to the discounted value of expected future cash flows of the Telecom business area, is compared with the carrying amount of the goodwill and equity. The recoverable amount has been determined on the basis of a value in use calculation. Expected future cash flows are based on the budget for 2013 approved by the management, the strategy plan for 2014-2015 and a terminal value. The discount rate used to calculate the recoverable amount of all cash-generating units was 12 % before tax in 2011 and 2012 and reflects i.e. the risk-free interest rate plus market risks. The development within Telecom was unsatisfactory in 2012 in consequence of low sales to network suppliers. In 2013, revenue is expected to return to the levels seen in 2011. Until 2015, annual growth by 25 % is expected driven by a normalisation in sales to network suppliers and continued sales to network operators as a result of the strategic measures that have been and will be carried out. In consequence, considerable improvement of the net cash flows is expected on account of increased earnings. An annual growth factor of 1 % is recognised in the terminal period both in 2011 and 2012. The impairment test in 2011 was based on the same strategy plan for 2013-2015 and thus the same expectations to revenue and net cash flows. Based upon this, the recoverable amount is estimated to exceed the carrying amount by approx. DKK 225m (2011: DKK 250m). The assessment of the impairment need at the end of 2012 did not give rise to impairment.
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Dantherm Annual Report 2012
Annual Report 2012 Dantherm
41
IN D E X
IN D E X
9 . I n ta n g i b l e a s s e t s - c o n t i n u e d
1 1 . E q u i t y i n v e s t m e n t s i n a s s o c i at e s
Sensitivity analysis For the recoverable amount in 2011 and 2012 to correspond to the carrying amount of goodwill, the future cash flows, all else being equal, would have to be approximately on par with both the strategy and the terminal period of 2011.
Equity investments in associates comprise Dantherm Power A/S domiciled in Hobro, Denmark, in which Dantherm’s ownership interest amounts to 43 % (2011: 38 %). The key figures for Dantherm Power A/S are as follows: Dantherm’s share
Sensitivity analyses have been performed where the recoverable amount has been calculated to meet the expected EBIT included in the net cash flows for 2013-2015 and in the terminal period by 90 %, 80 % and 70 % respectively. In combination with an increase of the applied discount rate by 1-2 %, this will not give rise to impairment of goodwill.
DKK ’000 Revenue
Other intangible assets The management did not identify factors indicating a need for an impairment test of other intangible assets in 2012 nor in 2011.
2011 2012
Other plant, fixtures and fittings, Land and Leasehold Plant and tools and DKK ’000 buildings improvements machinery equipment
Total
160,124 9,170 130,910 21,950 322,154 54 461 714 182 1,411 101 161 1,321 916 2,499 -23 -1,590 -751 -1,378 -3,742 160,256 8,202 132,194 21,670 322,322
Depreciation as at 1 January 2011 Foreign currency translation adjustment Depreciation Depreciation in respect of disposal Depreciation as at 31 December 2011
52,500 7,794 94,934 19,506 174,734 38 446 547 154 1,185 5,128 922 8,245 1,195 15,490 -23 -1,590 -751 -1,198 -3,562 57,643 7,572 102,975 19,657 187,847 102,613
630
29,219
2,013
134,475
100,356
0
13,904
0
114,260
Cost as at 1 January 2012 Foreign currency translation adjustment Additions Disposals Cost as at 31 December 2012
160,256 8,202 132,194 21,670 322,322 586 -26 -62 269 767 0 41 814 1,735 2,590 0 -1,012 -1,283 -812 -3,107 160,842 7,205 131,663 22,862 322,572
Depreciation as at 1 January 2012 Foreign currency translation adjustment Depreciation Depreciation in respect of disposal Depreciation as at 31 December 2012
57,643 7,572 102,975 19,657 187,847 449 -27 -57 213 578 5,086 362 7,897 955 14,300 0 -1,012 -1,283 -660 -2,955 63,178 6,895 109,532 20,165 199,770
Carrying amount as at 31 December 2012
97,664
310
22,131
2,697
122,802
92,479
0
712
0
93,191
15-30 years
5 years
5-8 years
3-7 years
-
Of which assets held under finance leases To be depreciated over Selling price of disposed assets Carrying amount Gain/loss on sale
42
Dantherm Annual Report 2012
29,715 -37,293 49,171 49,331 -61 -14,171 37,881 -24,156 39,527 63,843 -10,456 -10,387
12. Inventories
Cost as at 1 January 2011 Foreign currency translation adjustment Additions Disposals Cost as at 31 December 2011
Of which assets held under finance leases
Net loss for the year
Equity investments in associates are recognised in the balance sheet as at 31 December 2012 by DKK 50k (2011: DKK 0k). In 2012, equity investments were impaired, for which reason Dantherm’s share of the net loss for the year is not recognised in the income statement.
1 0 . P r o p e r t y, p l a n t a n d e q u i p m e n t
Carrying amount as at 31 December 2011
Net loss for the year Assets Liabilities Equity
0 0 0 247 247 0 0 0 152 152 0 0 0 95 95
Raw materials and consumables 35,325 46,813 Work in progress 7,460 9,958 Manufactured goods and goods for resale 44,558 55,071 Total inventories 87,343 111,842
1 3 . R e c e i va b l e s Trade receivables 65,372 80,153 Receivables from associates 561 1.551 Other receivables 4,230 8,931 Total short-term receivables 70,163 90,635
14. equity Management of capital structure Dantherm’s dividend policy is to allocate approx. 30% of the consolidated net profit for the year to the shareholders – with due account being taken at all times of the group’s expansion plans and financial and cash position. The company also aims to maintain an equity interest of at least 30%. No. of shares Nominal value (DKK ’000) Share capital 2012 2011 2012 2011 1 January 7,190,574 7,190,574 71,906 359,528 Capital reduction 0 0 0 -287,622 31 December 7,190,574 7,190,574 71,906 71,906 Treasury shares No. of shares Nominal value (DKK ’000) 2012 2011 2012 2011 1 January 31 December
80,526 80,526
80,526 80,526
Treasury shares’ share of the share capital
1.1%
1.1%
4,026 4,026
4,026 4,026
The share capital comprises 7,190,574 shares with a nominal value of DKK 10 each. The shares are not divided into classes. At Dantherm’s general meeting in 2011, it was decided to reduce the share capital from a nominal amount of DKK 359,528k to DKK 71,906k. Dantherm has been authorised by the general meeting to let the company buy treasury shares up to a nominal value of 10 % of the share capital. The consideration paid must not deviate by more than 10 % from the currently listed share price at the time of the purchase. This authorisation is valid until the annual general meeting in 2016. No treasury shares were traded in 2011 and 2012. Annual Report 2012 Dantherm
43
IN D E X
IN D E X
DKK ’000 31.12.12 31.12.11
DKK ’000 31.12.12 31.12.11
1 5 . D e f e r r e d ta x ( a s s e t )
1 7 . Paya b l e s t o c r e d i t i n s t i t u t i o n s
Deferred tax as at 1 January Foreign currency translation adjustment Change in deferred tax, previous years Changed assessment of tax assets Deferred tax for the year included in the net profit/loss for the year Deferred tax as at 31 December, net
-7,049 -31 -680 -955 -1,584 -10,299
-6,725 -146 0 -1,595 1,417 -7,049
Deferred tax is recognised in the balance sheet as follows:: Deferred tax -10,299 -7,049 Deferred tax as at 31 December, net -10,299 -7,049 Deferred tax concerns: Non-current assets 150 -44 Current assets -1,632 -1,819 Liabilities -627 -591 Tax losses allowed for carry-forward -8,190 -4,595 Total deferred tax -10,299 -7,049 Deferred tax assets in Danish and foreign companies are recognised as tax loss carry-forwards and other differences offset against income likely to be realised in future. A recognition is made on the basis of earnings expectations and subject to the specific circumstances and rules on limitation in the relevant countries. The positive adjustment of deferred tax assets is primarily attributable to the companies in China, the USA and the UK. The group has unrecognised tax losses of DKK 139m (2011: DKK 172m), the tax value of which amounts to DKK 39m (2011: DKK 44m) which is not recognised in the balance sheet.
DKK ’000 31.12.12 31.12.11
16. Provisions Warranty commitments as at 1 January 7,734 5,931 Foreign currency translation adjustment 43 32 Used during the year -3,008 -1,388 Reversed provision -4,500 0 Provisions for the year 2,848 3,159 Warranty commitments as at 31 December 3,117 7,734 Other liabilities as at 1 January 0 2,052 Translation adjustments 0 1 Reversed provision 0 -2,052 Other liabilities as at 31 December 0 0 Provisions as at 31 December
3,117
7,734
Expected dates of maturity for provisions: 0-1 year 2,501 7,096 1-5 years 616 638 Provisions as at 31 December 3,117 7,734 Warranty commitments concern goods sold with a warranty. The liabilities have been calculated on the basis of previous years’ experience. The costs are expected to be incurred during the warranty period. Goods are normally sold with a warranty of 12-24 months. In a few cases, the warranty period is up to 60 months.
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Dantherm Annual Report 2012
Payables to credit institutions comprise the following: Finance lease debts 95,035 105,849 Bank debt 105,545 105,880 Total carrying amount 200,580 211,729 Payables to credit institutions are recognised as follows: Long-term payables 96,340 103,680 Short-term payables 104,240 108,049 Total carrying amount 200,580 211,729 Average effective interest rate Carrying amount Loan/maturity Currency Fixed/floating 31.12.12 31.12.11 31.12.12 31.12.11 Finance lease debt relating to property DKK Fixed, excluding supplement 4-5% 4-5% 94,047 99,723 Finance lease debt relating to machinery DKK Floating 4-6% 4-6% 988 6,125 Bank debt DKK Floating 3-7% 4-6% 83,686 80,486 Bank debt EUR Floating 3-5% 4-6% 693 670 Bank debt USD Floating 3-5% 4-6% 7,219 10,798 Bank debt GBP Floating 3-5% 4-6% 3,608 4,385 Bank debt SEK Floating 3-5% 4-6% 2,149 1,822 Bank debt NOK Fixed 4-5% 6-7% 8,134 7,670 Bank debt Other Floating 3-5% 4-6% 56 50 Total 200,580 211,729 Finance lease debt relating to property has been hedged by entering into an interest rate swap which runs until June 2020. The interest on floating debt corresponds to the spot interest rate. The interest on bank debt in NOK is fixed until mid-2017. Finance leases are included in the above-mentioned liabilities as follows: Finance leases have been recognised as follows: DKK ’000 Lease payment 0-1 year 10,996 1-5 years 39,403 > 5 years 68,945 31 December 2012 119,344
2012 Interest -4,168 -13,925 -6,216 -24,309
Carrying amount 6,828 25,478 62,729 95,035
Finance leases have been recognised as follows: DKK ’000 Lease payment 0-1 year 14,371 1-5 years 41,721 > 5 years 78,602 31 December 2011 134,694
2011 Interest -4,532 -15,100 -9,213 -28,845
Carrying amount 9,839 26,621 69,389 105,849
Lease commitments mainly concern a leasing agreement of buildings in Denmark which expires in June 2020. The agreement is a floating-rate lease commitment with a fixed-rate interest rate swap for hedging the floating interest rate. The term of the interest rate swap corresponds to the term of the loan, meaning that the interest rate is fixed throughout the term. The interest rate swap is adjusted in other comprehensive income and affected figures negatively in 2012 by DKK 2,056k (2011: DKK 7,197k). Reference is made to note 24. The floating payment on the lease commitment leads to a difference between the carrying amount and the fair value which amounted to DKK 2,732k at the end of 2012 (2011: DKK 2,930k).
Annual Report 2012 Dantherm
45
IN D E X
IN D E X
DKK ’000 31.12.12 31.12.11
DKK ’000 31.12.12 31.12.11
1 8 . o t h e r paya b l e s
2 2 . C o n t r a c t u a l o b l i g at i o n s
Trade payables 42,405 55,154 Other payables 54,655 55,514 Other payables, total 97,060 110,668
Leases comprise IT equipment, photocopying machines and cars on operating lease contracts. In addition to this, lease contracts are made for office buildings for the companies of the group. The contracts comprise standard terms and conditions for lease contracts. Operating lease payments and leases are as follows: 0-1 year 6,225 5,604 1-5 years 5,443 7,410 After 5 years 814 912 Total contractual obligations 12,482 13,926
1 9 . I n c o m e ta x paya b l e a n d r e c e i va b l e Income tax as at 1 January -147 -948 Foreign currency translation adjustment -29 -374 Current tax 88 -3,456 Tax paid 446 4,631 Income tax as at 31 December 358 -147 Recognised as follows: Income tax receivable 1,437 877 Income tax payable -1,079 -1,024 Total income tax 358 -147
Costs of operating lease contracts recognised in the income statement
6,923
6,317
Cash and cash equivalents Cash and cash equivalents as at 31 December
12,254 12,254
24,648 24,648
Short-term payables to credit institutions Of which short-term part of lease commitments and mortgage debt Short-term bank debt as at 31 December
104,240 -6,828 97,412
108,049 -9,839 98,210
2 3 . C a s h a n d c a s h e q u i va l e n t s a n d s h o r t - t e r m b a n k d e b t
2 0 . C o n t i n g e n t l i a b i l i t i e s As a result of the group’s ordinary operations, the group is regularly a party to pending warranty, complaints and product liability cases concerning the products supplied. The possible financial net liabilities are assessed on a regular basis, and separate provisions are made based on the management’s careful assessment of the financial liabilities attaching to the individual cases.
24. Financial risks and instruments
The group’s risk management policy As a result of its operational, investment and financing activities, Dantherm is exposed to financial risks including currency-, interest rate- and liquidity risks. Risks regarding raw materials are less important to the group, since actual raw materials form a small part of the finished products.
The financial position of the group is not expected to be affected apart from liabilities recognised in the balance sheet as at 31 December 2012. DKK ’000 31.12.12 31.12.11
21. Security furnished As security for a lease commitment of the following has been provided: Land and buildings with a carrying amount of Plant and machinery with a carrying amount of
95,035
105,849
92,479 712
100,356 13,904
As security for bank debt of the following has been provided: Land and buildings with a carrying amount of Current assets with a carrying amount of
8,134
7,670
2,344 20,563
2,257 21,058
In respect of payables to credit institutions of DKK 191,458 k (2011: DKK 197,934k), security has been provided in the form of floating charge in the assets in the subsidiary Dantherm Air Handling A/S of a maximum of DKK 75,000k in 2011 and 2012. The floating charge comprises intangible assets and property, plant and equipment of DKK 40,419k (2011: DKK 22,043k), inventories of DKK 50,672k (2011: DKK 66,257) and receivables of DKK 32,383k (2011: DKK 53,774k).
It is group policy to identify and hedge all significant financial risks in an expedient way and not to engage in active speculation in financial risks. The group’s financial management is thus only aimed at managing financial risks that are a direct consequence of the group’s operations and financing. Guidelines for handling financial risks are described in the Group Guidelines, which are updated annually. These guidelines follow the policies approved by management. The Board of Directors discusses the group’s financial risks once a year as a minimum. It is re-evaluated whether the situation has changed and if established policies and initiatives need adjusting. Currency risks The most essential currency risk of the group relates to sales, receivables and payables in USD and CNY. The Danish group enterprises’ EUR exposure is not hedged because of Denmark’s currency board with the euro. It is group policy to hedge significant currency risks arising from foreign currency transactions where the cash flow can be predicted with sufficient accuracy. The group’s currency risks are primarily hedged due to income and expenses being settled in the same currency. The group’s foreign enterprises are not materially influenced by exchange rate fluctuations as both income and expenses are settled in the local currencies. Currency risks relating to the valuation of foreign net investments are generally not hedged. Capitalisation of the foreign subsidiaries is targeted in order to reduce the translation risk. At regular intervals, the group’s management considers whether loans need to be arranged for balancing large net investments where the interest on the currency in question is lower than the interest on DKK. The total net position in currencies other than DKK and EUR amounted to DKK 8m at the end of 2012 relative to DKK 27m at the end of 2011. Net receivables in EUR amounted to DKK 12m as at 31 December 2012 against DKK 14m at the end of 2011. As a result of the group’s international activities, developments in exchange rates between DKK and the various reporting currencies of the consolidated companies impact the operating profit/ loss as measured in DKK. Exchange rate fluctuations in DKK/USD and DKK/CNY are estimated to have the highest potential effect on result and equity. If the exchange rates of DKK/USD were 10% lower, all else being equal, the group’s profit/loss and equity in 2012 would be affected by DKK 0.1m (2011: DKK 0.1m) and DKK 0.8m (2011: DKK 1.0m) respectively. If the exchange rates of DKK/CNY were 10% lower, all else being equal, the group’s profit/loss would be affected by DKK 1.1m (2011: DKK 0.2m) and equity by DKK 0.5m (2011: DKK 1.5m).
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Dantherm Annual Report 2012
Annual Report 2012 Dantherm
47
IN D E X
IN D E X
24. Financial risks and instruments - continued
24. Financial risks and instruments - continued
The group’s currency risks in the balance sheet 31 December 2012 Securities and cash and cash DKK ’000 equivalents Receivables Payables Net position
In April 2012, Dantherm concluded an agreement with its primary credit institutions about committed facilities which expires on 1 May 2014. The agreement comprised usual covenants. In consequence of the development within the Telecom business area in 2012, Dantherm has not been able to meet covenants relating to “net interest-bearing debt/EBITDA” and “EBITDA/interest expenses” as at 30 September 2012 and anticipated not to be able to meet them as at 31 December 2012, for which reason the obligation could be settled.
USD 173 19,091 -11,180 8,084 GBP 0 7,410 -6,289 1,121 SEK 36 1,540 -3,267 -1,691 NOK 996 8,791 -14,026 -4,239 EUR 2 22,113 -9,648 12,467 PLN 73 9 -10 72 CNY 10,938 3,911 -9,871 4,978 Other 3 0 0 3 Total 12,221 62,865 -54,291 20,795 31 December 2011 Securities and cash and cash DKK ’000 equivalents Receivables Payables Net position USD 10,506 15,367 -16,348 9,525 GBP 0 11,494 -7,954 3,540 SEK 7 1,424 -2,676 -1,245 NOK 284 11,767 -12,448 -397 EUR 13 28,532 -14,216 14,329 PLN 378 1,225 -1,052 551 CNY 13,026 15,716 -13,287 15,455 Total 24,214 85,525 -67,981 41,758 Interest rate risks As a result of its financing activities, the group is exposed to risks concerning fluctuating interest rates. The main interest rate risk concerns Danish loans related to CIBOR. It is group policy to hedge the interest rate risk of the group’s loans when it is assessed that interest payments can be secured satisfactorily. Hedging is done either by entering into interest rate swaps, where floating-rate loans are converted into fixed-rate loans, or by raising fixed-rate loans. The management regularly assesses the expediency of entering into agreements to wholly or partly hedge such interest rate risk.
For that reason, Dantherm entered into negotiations with the credit institutions and new financial covenants have been agreed upon as from 31 March 2013 until expiration of the agreement in 2014. The new covenants have been determined against Dantherm’s budget for 2013, with a margin granting the group proper financial latitude. Maturity dates for finance lease debts appear from note 17. The carrying amount of bank debt amounts to DKK 105,545k (2011: DKK 105,881k) and mature as follows: Contractual cash flows DKK ’000 relating to bank debt < 1 year 1-2 years 2-5 years 2012 2011
Carrying amount
112,999 0 97,411 8,134 105,545 107,440 105,881 0 0 105,881
Credit risks Cash and cash equivalents primarily concern a deposit in Chinese banks with which no significant risks are assessed to be connected. The group’s credit risks are connected with trade receivables and cash and cash equivalents. Receivables from associates comprise convertible loans granted to Dantherm Power A/S amounting to DKK 16,656k (2011: DKK 9,120k). The loans mature at the end of 2014. Securities have not been provided for these loans. The group does not have any significant risks relating to a single customer or partner. The group’s policy for taking on credit risks means that all major customers and partners are credit rated on a continuous basis and all partners above an internally established level are credit insured. Of the total debtor balance as at 31 December 2012, 55 % is insured against losses (2011: 64 %). The maximum credit risk for financial assets is reflected in the carrying amount recognised in the balance sheet without taking provided securities into account. Traditionally, the group has not generated significant loss on trade receivables. Against the background of the group’s relevant internal procedures including the extent of credit insurance, the credit quality threshold of non-impaired receivables not yet due is estimated to be high with a low risk of loss. The credit quality is not estimated to be considerably dependent on the debtor’s domiciles. Non-impaired trade receivables not yet due are distributed geographically as follows: DKK ’000 31.12.12 31.12.11
In order to limit the interest rate risk, the management has the objective that approximately half of the group’s interest-bearing debt should be fixed-rate loans. At the end of 2011 and 2012, the fixed-rate portion amounted to 49 %. All else being equal, an increase in the floating interest rate levels of 1 % per year relative to the interest rate levels at the balance sheet date would have a negative effect by approx. DKK 1m on the prodfit/loss and equity for 2011 and 2012. Similarly, a fall in interest rate levels would have had a positive effect. The subsidiary Dantherm Air Handling A/S has entered into a fixed-rate interest rate swap (level 2 of the fair value hierarchy) for hedging the floating interest rate on loans in the building in Skive at a total value of DKK 94,047k (2011: DKK 99,723k). The fair value of the interest rate swap outstanding at the balance sheet date for hedging the interest rate risk of floating-rate loans amounts to DKK -16,671k (2011: DKK -14,615k). The term of the interest rate swap corresponds to the term of the loan, which expires in June 2020. Liquidity risks In connection with the raising of loans, it is group policy to ensure maximum flexibility by spreading the borrowing in terms of maturities, renegotiation dates and counterparties, taking account of the price of the loans. The group’s cash resources comprise cash and cash equivalents as well as undrawn credit facilities. It is the group’s objective to have adequate cash resources to, also in future, be able to make expedient arrangements in case of unforeseen fluctuations in liquidity. At the end of 2012, the group had unutilised cash resources of DKK 36m against DKK 47m at the end of 2011.
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Dantherm Annual Report 2012
Denmark 4,307 3,792 EU countries 22,776 31,116 Asia 10,602 17,236 USA 6,222 6,413 Other countries 5,630 10,531 Total receivables 49,537 69,088 Impairment is typically registered to the individual receivable when customers are under suspension of payments or in liquidation. Securities have not been provided for these receivables.
Annual Report 2012 Dantherm
49
IN D E X
IN D E X
24. Financial risks and instruments - continued
2 5 . d i s c o n t i n u e d o p e r at i o n s
No separate conditions affect the credit quality of receivables. Impairments have developed as follows:
Discontinued operations in 2011 comprise Stelectric Ejendomme A/S, which Dantherm owned until 23 December 2011. The divestment was carried out with a view to finishing the process of divesting activities with T&O Stelectric, which were not core activities of Dantherm.
DKK ’000 31.12.12 31.12.11 Write-downs as at 1 January 964 1,158 Loss realised during the year 0 -258 Net change in provision 24 64 Write-downs as at 31 December 988 964 Trade receivables overdue but not impaired as at 31 December amount to: DKK ’000 31.12.12 31.12.11 Periods after maturity: 1-2 months 11,218 3,882 2-3 months 3,020 506 3 months or more 2,158 2,130 Total 16,396 6,518 No interest income regarding impaired receivables has been recorded as revenue in 2011 or 2012. Kategorier af finansielle instrumenter Financial assets and liabilities are all recognised at amortised cost, and the carrying amount corresponds to the fair value except for finance lease debts which represent a difference between the carrying amount and the fair value of DKK 2,732k (2011: DKK 2.930k). Methods and preconditions of measurement of fair values The applied methods and preconditions by measurement of the fair values of financial instruments are described per class of financial instruments. The applied methods are unchanged relative to 2011. Derivative financial instruments Interest rate swaps are carried out by recognised valuation methods. Externally measured fair values are applied based on the discounted expected future cash flows.
DKK ’000 2012 2011 Revenue 0 187 Costs 0 -1,499 Profit/loss before tax 0 -1,312 Tax on profit/loss for the year 0 0 Impairment after tax in connection with classification as discontinued operation 0 0 Net gain after tax from divestment 0 -111 Net profit/loss for the year from discontinued operations 0 -1,423 Cash flows from operating activities Cash flows from investing activities Cash flows from financing activities Cash flows from divestment, including payables to credit institutions and cash and cash equivalents Total cash flow from discontinued operations Cash sales proceeds received Cash and cash equivalents in divested companies Cash flow classified as investing activity Cash flow classified as discontinued operations
0 0 0 0 0 0 0 0 0
-2,542 2,122 -585 0 -1,005 0 -645 -645 -1,650
Earnings per share from discontinued operations in DKK Diluted earnings per share from discontinued operations in DKK
0 0
-0.2 -0.2
2 6 . r e l at e d pa r t i e s Dantherm A/S does not have any related parties with a controlling influence. Related parties with a significant influence comprise Dantherm A/S’ og D.F. Holding, Skive A/S’ members of the companies’ Boards of Directors and Executive Boards and their related family members. Furthermore, related parties comprise companies in which the above mentioned individuals may have significant interest.
Finance lease commitments (measured at amortised cost in the balance sheet) The fair value of finance lease commitments is based on externally measured fair values.
Finally, related parties comprise the group enterprises and associates included in the group chart on page 29.
Trade receivables and trade payables (measured at amortised cost in the balance sheet) Trade receivables and trade payables are estimated to have a fair value equal to the carrying amount.
Transactions between related parties comprise intercompany loans and interest thereon, purchase and sale of goods and services, management fees and remuneration of the Executive Board and the Board of Directors. The remuneration of the Executive Board and the Board of Directors appears from note 3. Transactions with group enterprises have been eliminated in the consolidated financial statements. Transactions with associates comprise: DKK ’000 2012 2011 Sale of goods and services 2,394 1,882 Purchased supplies 0 1 Receivable from associates appears from the balance sheet and interest thereof appears from note 5.
2 7 . E v e n t s o c c u r r i n g a f t e r t h e b a l a n c e s h e e t d at e No important events have occurred after the balance sheet date which are expected to have significant effect on the financial position or future prospects of the group.
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Dantherm Annual Report 2012
Annual Report 2012 Dantherm
51
IN D E X
IN D E X
28. accounting policies Dantherm A/S is a public limited company domiciled in Denmark. The financial part of the annual report for the period 1 January – 31 December 2012 comprises both the consolidated financial statements of Dantherm A/S and its subsidiaries (the group) as well as separate financial statements of the parent. The 2012 consolidated financial statements of Dantherm A/S have been prepared in accordance with International Financial Reporting Standards as adopted by the EU and additional Danish disclosure requirements for listed companies. Basis of preparation The annual report is presented in DKK rounded off to the nearest DKK ’000. The annual report has been prepared according to the historical cost principle, except for the following assets and liabilities which are measured at fair value: Derivatives and any financial instruments in the trading portfolio and any financial instruments classified as available for sale. Any non-current assets and disposal groups held for sale are measured at the lower of carrying amount before the changed classification and fair value less selling costs. The accounting policies, which are described below, have been applied consistently during the financial year and in relation to the comparative figures. The accounting policies have been applied consistently with last year. NEW ACCOUNTING REGULATION Dantherm has implemented the standards and interpretations which become effective in 2012. None of the new standards or interpretations have affected re-
52
Dantherm Annual Report 2012
cognition and measurement in 2012 and are not expected to affect the company. In addition to the above, IASB has issued a number of new or updated and changed standards and interpretations (IFRSs), which have been adopted by the EU, but which have not yet come into force. Dantherm does not expect the implementation of these standards to have a material impact on the consolidated financial statements. Description of accounting policies Consolidated financial statements The consolidated financial statements cover the parent, Dantherm A/S and subsidiaries in which Dantherm A/S has a controlling influence on the financial and operational policies of such enterprise with a view to obtaining a return or other advantages from its activities. A controlling influence is obtained by directly or indirectly owning or controlling more than 50% of the voting rights or in any other way controlling the enterprise in question. Enterprises in which the group has substantial influence, but not controlling, are considered to be associates. A substantial influence is typically obtained by directly or indirectly owning or controlling more than 20 % but less than 50 % of the voting rights. Potential voting rights which may be exercised at the balance sheet date are taken into account in the assessment of whether Dantherm A/S has a controlling or substantial influence. A group chart is shown on page 7. The consolidated financial statements are prepared as a summary of the parent’s and the individual subsidiaries’ financial statements determined according to the group’s accounting policies, eliminating
intercompany income and expenses, shareholdings, balances and dividend as well as realised and unrealised gains on transactions between the consolidated enterprises. Unrealised gains and transactions with associates are eliminated in proportion to the group’s ownership interest in the enterprise. Unrealised losses are eliminated in the same way as unrealised gains, in so far as no impairment has occurred. Equity investments in subsidiaries are set off against the proportionate share of the subsidiaries’ fair value of identifiable net assets and recognized contingent liabilities at the acquisition date. The financial items of the subsidiaries are recognised in full in the consolidated financial statements. The minority shareholders’ share of the net profit/loss for the year and of the equity in subsidiaries which are not wholly owned are recognised as part of the group’s results and equity, respectively, but are listed separately. Business combinations Newly acquired or newly founded companies are recognised in the consolidated financial statements as from the date of acquisition. Divested or discontinued enterprises are recognised in the consolidated income statement up until the time of divestment or discontinuation. Comparative figures are not restated for newly acquired enterprises. Discontinued operations are presented separately, cf. below. In the event of an acquisition of new enterprises in which the parent obtains a controlling influence, the purchase method is used. The identifiable assets, liabilities and contingent liabilities of the acquired enterprises are measured at fair
value at the date of acquisition. Identifiable intangible assets are recognised if they can be separated or arise out of a contractual right and the fair value can be measured reliably. Deferred tax on the reassessments is recognised. The date of acquisition is the date at which the parent actually gains control of the acquired enterprise. The positive difference (goodwill) between the consideration, the value of minority interests in the enterprise taken over and the fair value of any previously acquired equity investments on the one hand and the fair value of the identifiable assets, liabilities and contingent liabilities taken over on the other hand are recognised as goodwill under tangible assets. Goodwill is not amortised, but is tested for impairment at least once a year. The first impairment test is carried out before the end of the year of acquisition. At the time of acquisition, goodwill is transferred to the cash-generating units, which subsequently form the basis of an impairment test. Goodwill and fair value adjustments relating to the acquisition of a foreign entity using a functional currency other than the Dantherm group’s presentation currency are treated as assets and liabilities belonging to the foreign unit and translated upon initial recognition into the functional currency of the foreign unit at the exchange rate applicable at the transaction date. Negative differences (negative goodwill) are recognised in the income statement at the date of acquisition. The consideration paid for an enterprise consists of the fair value of the agreed consideration in the form of assets and liabilities taken over and equity instruments issued. If parts of the consideration are conditional upon future events or the
fulfilment of agreed conditions, this portion of the consideration is recognised at fair value at the time of acquisition. Costs attributable to business combinations are expensed in the income statement when incurred. If, at the date of acquisition, uncertainty exists with regard to the identification or measurement of acquired assets, liabilities or contingent liabilities or the determination of the consideration, initial recognition is based on a preliminary determination of values. If it is subsequently established that the identification or measurement of the consideration, the acquired assets, liabilities or contingent liabilities was incorrect upon initial recognition, the measurement is adjusted with retrospective effect, including goodwill until twelve months after the takeover, and the comparative figures are restated. After this time, goodwill is not adjusted. Changes in estimates of conditional consideration are generally recognised directly in the income statement. Changes in a parent’s ownership interest in a subsidiary which do not entail a loss of the controlling influence are treated as an equity transaction with owners. Presentation of discontinued operations Discontinued operations constitute a considerable part of the enterprise if activities and cash flows can be separated from the rest of the business in terms of operations and accounting, and if the unit has been either divested or separated as held for sale and the sale is expected to be realised within one year according to a formal plan. The net profit/loss from discontinued operations, value adjustments after tax of
related assets and liabilities and gains or losses from divestments are presented as a separate item in the income statement together with comparative figures. Revenue, costs, value adjustments and tax for the discontinued operation are stated in the notes. Assets and related liabilities of discontinued operations are stated as separate items in the balance sheet without restatement of comparative figures, while the main items are specified in the notes. Cash flows from operating, investing and financing activities for the discontinued operations are stated in a note. Assets held for sale Assets held for sale comprise non-current assets and disposal groups held for sale. Disposal groups are groups of assets which are to be disposed of collectively by sale etc. in one single transaction. Liabilities in respect of assets held for sale are liabilities which are directly related to such assets and which will be transferred as a result of the transaction. Assets are classified as ’held for sale’, when their carrying amounts are primarily recovered through disposal within twelve months according to a formal plan rather than through continued use. Assets or disposal groups held for sale are measured at the lower of carrying amount at the time of classifying the asset or disposal group as ’held for sale’ and the fair value less selling costs. Assets are not depreciated/amortised as from the time at which they are classified as ’held for sale’. Impairment losses arising upon initial classification as ’held for sale’ and gains or losses resulting from a subsequent measurement at the lower of carrying amount or fair value less selling costs are recognised in the income statement under the
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relevant items. Gains and losses are stated in the notes. Assets and related liabilities are stated as separate items in the balance sheet, while the main items are specified in the notes. Comparative figures in the balance sheet are not restated. Foreign currency translation A functional currency is determined for each of the reporting enterprises in the group. The functional currency is the currency used in the primary financial environment in which the individual reporting enterprise operates. Transactions in currencies other than the functional currency are foreign currency transactions. On initial recognition, transactions denominated in foreign currencies are translated to the functional currency using the exchange rate applicable at the transaction date. Exchange rate differences arising between the exchange rate applicable at the transaction date and the exchange rate applicable at the date of payment are recognised in the income statement under financial income or expenses. Receivables, payables and other monetary items denominated in foreign currencies are translated using the exchange rate applicable at the balance sheet date. The difference between the exchange rate applicable at the balance sheet date and the exchange rate applicable at the date at which the receivable or payable arose or the exchange rate applied in the latest annual report is recognised in the income statement under financial income or expenses. On recognition in the consolidated financial statements of foreign enterprises with a functional currency other than
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Dantherm A/S’s presentation currency, the income statements are translated using the exchange rate applicable at the transaction date, and the balance sheet items are translated using the exchange rates applicable at the balance sheet date. The average exchange rates for the individual months are used as the exchange rate applicable at the transaction date, in so far as this does not alter the picture significantly. Foreign exchange differences arising from the translation of the equity of foreign companies at the beginning of the year using the exchange rates applicable at the balance sheet date and the translation of income statements from the exchange rates applicable at the transaction date using the exchange rates applicable at the balance sheet date are recognised as other comprehensive income under a separate reserve for exchange rate regulations. Foreign currency translation adjustment of balances with foreign enterprises which are considered to be part of the total net investment in the enterprise concerned are recognised as other comprehensive income under a separate reserve for exchange rate regulations. Similarly, foreign exchange gains and losses are recognised as other comprehensive income under a separate reserve for exchange rate regulations in the consolidated financial statements for the parts of loans and derivative financial instruments which have been raised for hedging the net investment in such enterprises and which effectively hedge against similar foreign exchange gains and losses on the net investment in the enterprises. In the event of full or partial divestment of foreign entities or in the event of repayment of balances which are considered to be part of the net investment,
the share of the accumulated foreign currency translation adjustments which are recognised as other comprehensive income under a separate reserve for exchange rate regulations and which may be attributable thereto is recognised in the income statement along with any gains or losses resulting from the divestment.
Some contracts are subject to terms which correspond to derivative financial instruments. Such embedded financial instruments are recognised separately and measured continuously at fair value if they differ significantly from the contract in question unless the entire contract has been recognised and is continuously measured at fair value..
Derivative financial instruments Derivative financial instruments are recognised as from the trading day and are measured in the balance sheet at fair value. The fair value of derivative financial instruments is included in other receivables under current assets (positive fair values) and other payables under current liabilities (negative fair values), respectively, and a set-off of positive and negative values is only made when the company is entitled to and intends to settle several financial instruments net. The fair value of financial instruments is determined on the basis of current market data and recognised valuation methods.
Income statement Revenue Revenue from the sale of goods for resale and finished goods is recognised in the income statement, provided that the risk has passed to the buyer before the end of the year and provided that the income can be measured reliably and is expected to be received. Revenue concerning services, including the sale of service, is recognised according to invoicing at the time of the service visit. Revenue is measured at fair value excluding VAT and taxes levied on behalf of a third party less rebates and discounts. Generally, the Dantherm group does not accept return goods, so no provisions are made for return goods.
Changes in the fair value of derivative financial instruments which are classified as and meet the conditions for hedging future cash flows and which effectively hedge changes in the value of the hedged item are recognised in equity under a separate reserve for hedging transactions. When the hedged transaction is realised, gains and losses resulting from such hedging transactions are transferred from equity and recognised in the same item as the hedged item. For derivative financial instruments that do not meet the conditions for treatment as hedging instruments, changes in the fair value are recognised continuously in the income statement under net financials.
Other operating income Other operating income comprises items of a secondary nature in relation to the company’s primary activities including profit from sale of assets related to divested activities. Costs of raw materials and consumables Costs of raw materials and consumables comprise costs defrayed to secure revenue excluding direct and indirect payment of hourly workers which figures in staff charges. Other external expenses
Other external expenses comprise costs of distribution, sales, advertising, administration and premises as well as bad debts etc. Development costs which do not fulfil the criteria for capitalisation are also recognised under other external expenses. Staff costs Staff costs comprise wages and salaries as well as social security expenses and pensions etc. in respect of the employees. Share of profit/loss after tax in associates The proportionate share of the associates’ net profit/loss and minority interests is recognised in the consolidated income statement after elimination of the proportionate share of intercompany gains and losses. Financial income and expenses Financial income and expenses comprise interest, capital gains and losses as well as write-downs of securities, payables and foreign currency transactions, amortization of financial assets and liabilities as well as allowances and compensation under the tax prepayment scheme etc. Financial income and expenses also comprise realised and unrealised gains and losses concerning derivative financial instruments which cannot be classified as hedging agreements. Tax on profit/loss for the year The company is covered by the Danish rules on compulsory joint taxation of the Dantherm group’s Danish companies. Subsidiaries are included in the joint taxation from the time of their inclusion in the consolidated financial statements until the time of their exclusion from the consolidation. The company is an administration company for the joint taxation,
settling all payments of income tax with the tax authorities. The current Danish income tax is distributed among the jointly taxed companies through the payment of joint taxation contributions calculated in proportion to their taxable income. Companies using taxable losses in other companies pay a joint taxation contribution to the parent corresponding to the tax value of the utilised losses, while companies whose tax losses are used by other companies receive a joint taxation contribution from the parent corresponding to the tax value of the utilised losses (full allocation). Tax for the year which consists of the current income tax for the year, the joint taxation contribution for the year and changes in deferred tax – also as a result of a change in the tax rate – is included in the net profit/loss for the year or in other comprehensive income. ASSETS Intangible assets Goodwill Goodwill is recognised at cost on first recognition in the balance sheet as described under ’Business combinations’. Goodwill is subsequently measured at cost less accumulated impairment. Goodwill is not amortised. The carrying amount of goodwill is allocated to the group’s cash-generating units at the date of acquisition. The determination of cash-generating units follows the management structure and internal financial management. Development projects, patents and licences Clearly defined and identifiable development projects where the technical degree of utilisation, adequate resources
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and a potential future market or use in the company can be demonstrated, and where the intention is to produce, market or use the project, are recognised as intangible assets, provided that the cost can be calculated reliably and there is sufficient certainty that future earnings or the net selling price can cover the production and selling costs as well as administrative expenses and development costs. Other development costs are recognised in the income statement as incurred. Recognised development costs are measured at cost less accumulated amortization and impairment losses. Cost comprises salaries, amortisation and other costs which are attributable to the company’s development activities. Upon completion of the development work, development projects are amortised according to the straight-line method over their estimated useful lives. The amortisation period is three to six years. The basis of amortisation is also reduced by any impairment losses. Patents and licences are measured at cost less accumulated amortisation and impairment losses. Patents and licences are amortised according to the straight-line method over the shorter of the remaining patent or agreement period and their useful lives – however, the maximum being six years. The basis of amortisation is reduced by any impairment. Property, plant and equipment Land and buildings, leasehold improvements, plant and machinery as well as other plant, fixtures and fittings, tools and equipment are measured at cost less accumulated depreciation and impairment losses.
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Cost comprises the acquisition price and costs directly related to the acquisition until the time when the asset is ready for use. For assets of own manufacture, cost comprises direct and indirect costs of materials, components, subsuppliers and wages and salaries.
method over the assets’ expected useful lives which are: Building parts Leasehold improvements Plant and machinery
The lease of assets, where the group obtains actual benefits and risks associated with the ownership of an asset, is activated as financially leased assets. The cost is calculated at the lower value of the assets’ fair value and the present value of the future minimum lease payments. When calculating the present value, the internal rate of interest of the lease or an approximation of this value is used as the discount rate. The corresponding financial lease commitments are recognised under liabilities. Lease costs concerning operating leases are recognised continuously in the income statement over the lease period. Subsequent costs relating to, e.g., the replacement of components of property, plant and equipment are included in the carrying amount of the asset concerned when it is probable that the incurrence will bring future financial benefits to the group. The carrying amount of the replaced components ceases upon recognition in the balance sheet and is transferred to the income statement. All other costs of ordinary repair work and maintenance are recognised in the income statement as incurred. The cost of a total asset is split into separate components which are depreciated separately if the useful lives of the individual components differ. Property, plant and equipment are depreciated according to the straight-line
15-30 years 5 years
Any receivable from these companies is written down to the extent that the receivable is uncollectible. To the extent that the parent has a legal or actual obligation to cover any negative balance exceeding the receivable, the remaining amount is recognised under provisions.
3-8 years
Other plant, fixtures and fittings, tools and equipment 3-7 years Land is not depreciated. The basis of depreciation is determined taking into account the residual value of the asset and is reduced by any impairment. The residual value is determined at the date of acquisition and reassessed on an annual basis. If the residual value exceeds the carrying amount of the asset, depreciation ceases. In the event that the depreciation period or the residual value is changed, the depreciation effect is recognised prospectively as a change in the accounting estimate. Equity investments in associates Equity investments in associates are measured in the consolidated financial statements according to the equity method whereby the investments are measured in the balance sheet at the proportionate share of the companies’ equity value calculated according to the group’s accounting policies less or plus the proportionate share of unrealized intercompany gains and losses plus the carrying amount of goodwill. Equity investments in associates are tested for impairment when there is an indication of impairment. Equity investments in associates with a negative carrying amount are measured at DKK 0.
In cases where a loan is a supplement to the net investment, the loan is treated as a part of this. The recognition of losses on such loans continues according to the equity method until the receivable has been written down to DKK 0. Impairment of non-current assets Goodwill and intangible assets with undefinable useful lives are tested at least once a year for impairment. Development projects in progress are also tested for impairment once a year. The carrying amount of goodwill is tested for impairment together with the other non-current assets in the cash-generating unit to which goodwill has been allocated and is impaired to the recoverable amount in the income statement if the carrying amount is higher. The recoverable amount is usually calculated as the present value of the expected future cash flows from the company or activity (cash-generating unit) to which goodwill is attached. Deferred tax assets are assessed on an annual basis and are only recognised to the extent that it is probable that they will be utilised. The carrying amount of other non-current assets are assessed on an annual basis to determine whether there is any indication of impairment. If this is the case, the recoverable amount of the asset is calculated. The recoverable amount is the higher of the asset’s fair value less the expected costs of disposal and value in use. The
value in use is calculated as the present value of the expected future cash flows from the asset or the cash-generating unit of which the asset is a part. An impairment loss is recognised when the carrying amount of an asset or a cashgenerating unit exceeds the recoverable amount of the asset or the cash-generating unit. Impairment losses are recognised in the income statement under the item to which the impairment relates. Impairment of goodwill is not reversed. Impairment of other assets is reversed to the extent that there have been changes to the conditions and estimates leading to the impairment. Impairment is only reversed to the extent that the new carrying amount of the asset does not exceed the carrying amount which the asset would have had after depreciation or amortisation had it not been impaired. Inventories Inventories are measured at cost in accordance with the FIFO method. If the net realisable value is lower than the cost, this is impaired to the lower value. The cost of goods for resale and raw materials and auxiliary materials comprises the acquisition price plus delivery costs. The cost of manufactured goods and work in progress comprises the cost of raw materials, auxiliary materials, direct labour costs and indirect production costs. Indirect production costs comprise indirect materials and wages and salaries as well as the maintenance and depreciation of the machinery, factory buildings and equipment used in the production process as well as factory management and management costs.
The net realisable value of inventories is calculated as the selling price less completion costs and costs incurred to make the sale and is fixed with due regard to marketability, obsolescence and developments in the expected selling price. Receivables Receivables are measured at amortised cost. If there is indication of impairment, provisions for bad debts are made. Impairment is made at an individual level. Impairment is calculated as the difference between the carrying amount and the present value of the expected cash flows, including the realisable value of any security received. The effective interest rate is used as the discount rate for the individual receivable or portfolio. The recognition of interest on written down receivables is calculated for the written value using the effective interest rate for the individual receivable or portfolio. Prepaid costs Prepaid costs are measured at amortised cost. Equity Dividend Proposed dividend is recognised as a liability at the time of adoption at the annual general meeting (the time of declaration). Expected dividend payable for the year is shown as a separate item under equity. Treasury shares Acquisition prices and consideration as well as dividend on treasury shares are recognised directly in retained earnings in equity. Proceeds from the sale of treasury shares and the issue of shares in Dantherm A/S in connection with the
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exercise of share options or employee shares are recognised directly in equity. Reserve for hedging transactions Reserve for hedging transactions includes the accumulated net change in the fair value of hedging transactions which meet the criteria for hedging future cash flows and where the hedged transaction has not yet been realised. Reserve for foreign currency translation adjustment Reserve for foreign currency translation adjustment in the consolidated financial statements comprises currency translation differences arising from the translation of financial statements of foreign companies from their functional currencies to the Dantherm group’s presentation currency (Danish kroner). In the event of full or partial realisation of the net investment, the foreign currency translation adjustments are recognised in the income statement. Liabilities Pension obligations The group has concluded pension agreements and similar agreements with the majority of the group’s employees. Liabilities concerning defined contribution plans are recognised in the income statement in the period in which they are earned, and payments due are recognised in the balance sheet under other payables. Current tax and deferred tax According to the joint taxation rules, Dantherm A/S, being an administration company, assumes liability for the subsidiaries’ income taxes to the tax authorities as the subsidiaries pay their joint taxation contributions.
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Current tax liabilities and current tax receivable are recognised in the balance sheet as calculated tax on the taxable income for the year, adjusted for tax on previous years’ taxable income and for taxes paid on account. Joint taxation contributions payable and receivable are recognised in the balance sheet under balances with group enterprises. Deferred tax is measured using the balance sheet liability method on the basis of all temporary differences between the carrying amount and tax base of assets and liabilities. However, no recognition is made of deferred tax on temporary differences concerning non-amortisable goodwill and office properties for tax purposes and other items where temporary differences – except for acquisitions – have occurred at the date of acquisition without influencing the result or the taxable income. In cases where the tax value can be calculated according to several taxation rules, the deferred tax is measured on the basis of the use of the asset or the discontinuation of the obligation planned by the management. Deferred tax assets, including the tax value of tax losses allowed for carryforward, are recognised under other non-current assets at the value at which they are expected to be used, either by balancing against tax on future earnings or by offsetting against deferred tax liabilities within the same legal tax unit and jurisdiction. An adjustment is made of deferred tax concerning eliminations of unrealized intercompany gains and losses. Deferred tax is measured on the basis of the tax rules and tax rates in the respective countries which will be applicable under the legislation in force at the ba-
lance sheet date when the deferred tax is expected to become current tax. Changes in deferred tax as a result of changes in tax rates are recognised in the income statement. Provisions Provisions primarily comprise warranty commitments and restructuring obligations. Provisions are recognised when the group, following an event occurring before or on the balance sheet date, has a legal or actual obligation, the settlement of which is likely to result in an outflow from the company of economic benefits and the size of the amount can be estimated reliably. In this context, the Dantherm group prepares an estimate based on the most likely outcome of the matter. In the event that a reliable estimate cannot be prepared, such matters are recognised as a contingent liability. Warranty commitments are recognised in step with the sale of goods and services on the basis of warranty costs incurred in previous financial years. Restructuring costs are recognised as liabilities when a detailed, formal restructuring plan has been made available to the stakeholders affected by the plan no later than at the balance sheet date. A provision is recognised in respect of onerous contracts when the expected benefits of a contract for the group are smaller than the inevitable costs related to the contract (onerous contracts).
recognised in the income statement under financial costs over the term of the loan. Financial liabilities also comprise the capitalised remaining lease commitment concerning finance leases measured at amortised cost. Other liabilities are measured at amortised cost. Leases Lease commitments are divided into financial and operational lease commitments. A lease is classified as a finance lease when it essentially transfers the risks and benefits of owning the leased asset. Other leases are classified as operating leases. The accounting treatment of finance leases and the related commitment is described in the section on property, plant and equipment and financial liabilities, respectively. Lease payments concerning operating leases are recognised continuously in the income statement over the lease period. Deferred income Deferred income is measured at amortised cost. Cash flow statement The cash flow statement shows the cash flows for the year divided into cash flows from operating activities, investing activities and financing activities for the year, changes in cash and cash equivalents for the year and cash and cash equivalents at the beginning and end of the year.
The effect on cash flow from the divestment of enterprises is recognised separately under cash flows from investing activities. Cash flows from enterprises sold are recognised in the cash flow statement until the date of divestment. Cash flow from operating activities Cash flows from operating activities are calculated according to the indirect method as the profit/loss before tax adjusted for non-cash operating items, changes in working capital, interest paid and income tax paid. Cash flow from investing activities Cash flows from investing activities comprise payments in connection with the divestment of enterprises and activities, the purchase and sale of intangible assets, property, plant and equipment and other non-current assets as well as the purchase and sale of securities not recognised as cash and cash equivalents. Cash flow from financing activities Cash flows from financing activities comprise changes to the size and composition of share capital and costs incidental thereto as well as the arrangement of loans, the repayment of interest-bearing debt, the purchase and sale of treasury shares and the payment of dividend to shareholders. Cash flows from assets held under finance leases are recognised as payment of interest and repayment of debt.
Cash and cash equivalents Cash and cash equivalents comprise cash, short-term bank debt and securities with a term to maturity of less than three months which can easily be converted into cash and to which only an immaterial risk of value changes attaches. SEGMENT INFORMATION Segment information is prepared in accordance with the group’s accounting policies and follows the internal management reporting. Segment income, expenses, assets and liabilities comprise items which are directly attributable to the individual segment and items which can be reliably allocated to the individual segment. Items that are not allocated primarily comprise assets, liabilities, income and expenses relating to the group’s administrative functions, investing activities, income tax etc. Key figures Earnings per share (EPS) and diluted earnings per share (EPS-D) are balanced in accordance with IAS 33. Other financial ratios have been calculated in accordance with ’Recommendations and Financials Ratios 2010’ published by the Danish Society of Financial Analysts. Reference is also made to the ratio definitions on page 61
Financial liabilities Payables to credit institutions etc. are recognised at the date of borrowing at the net proceeds less transaction costs paid. In subsequent periods, the financial liabilities are measured at amortised cost, using the effective rate of interest method. Accordingly, the difference between the proceeds and the nominal value is
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r at i o s 2 9 . ACCOUNTING ESTIMATES AN D ASSESSMENTS When calculating the carrying amount of certain assets and liabilities, an estimate is required of how future events will affect the value of such assets and liabilities at the balance sheet date. The management bases its estimates on historical experience and other assumptions which are deemed to be reasonable under the given circumstances. These assumptions may be incomplete or inaccurate, and unexpected events or circumstances may occur. Moreover, the company is exposed to risks and uncertainties which may cause the actual results to deviate from these estimates. It may be necessary to change previous estimates as a result of changes in the circumstances on which the previous estimates are based or on account of new knowledge or subsequent events. As part of the accounting policies applied by the group, the management performs assessments, in addition to estimates, which may have a significant impact on the amounts recognised in the annual report. The management of Dantherm A/S considers the following estimates and assessments to be material to the financial reporting – also as part of the accounting policies applied by the group. Impairment test of goodwill The carrying amount of goodwill is, as a minimum, tested for impairment once a year together with the other non-current assets in the cash-generating unit to which goodwill has been allocated. The value is calculated as the present value of the expected future net cash flows from the enterprise to which goodwill is related and on the basis of the budget for 2013, the outlook for 2014-2015 and a terminal value. Naturally, the estimate of the expected cash flows for several years into the future is subject to some
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uncertainty. The uncertainty is reflected in the selected discount rate. See note 9 for a description of the impairment test of goodwill. development projects The carrying amount of development projects in progress is tested for impairment once a year, as a minimum, and impaired to the recoverable amount in the income statement if the carrying amount is higher than the present value of the expected future cash flows from the development project. The estimate of the expected cash flows is subject to some uncertainty. Recognition of deferred tax assets In connection with the recognition of deferred tax assets, a separate assessment is made of whether it is expected that the asset can be set off against tax on future earnings or against deferred tax liabilities. The assessment is based on the enterprises’ budget and strategy figures and is subject to the limitation rules for tax losses in the relevant country. Reference is made to note 15. Naturally, such assessment is subject to some uncertainty. Inventories As part of its ordinary business, the group purchases materials from subsuppliers for processing within the group with a view to meeting the expected customer demand. It may sometimes be difficult to purchase the right materials to meet future customer demands, for which reason situations may occur where demand for materials purchased or manufactured for the inventory is no longer expected. Consequently, write-downs for obsolescence in respect of the inventories are made. Write-downs of inventories are made on the basis of the impairment
ratios policies applied by the group, comprising assessment of inventories individually with regards to possible loss due to obsolescence and general economic developments. The value of future scrappings or losses on sales at net realisable value may deviate from the write-downs made, but the management assesses that the estimates made in respect of obsolescence are reasonable and expedient. Reference is made to note 12.
Working capital Net interest-bearing debt
Current assets - cash - trade payables and other payables income tax payable - deferred income Non-current and current liabilities to credit insitutions – cash
FINANCIAL RATIOS Growth rate
Profit margin (EBIT%)
Change in revenue x 100 Last year’s revenue Operating profit/loss (EBIT) x 100 Revenue
Receivables from associates In 2011 and 2012, the group extended a loan to the associate Dantherm Power. The activities in the company are still loss-making and dependent on continued funding from the shareholders. The obtainability of the receivable at the balance sheet date is conditional upon the company’s continued positive development. Provisions The group has warranty commitments in respect of goods and plant sold with a warranty of one to five years. The commitment has been calculated on the basis of historical warranty costs and is subject to some uncertainty due to the dependence on future events. Other provisions, contingent assets and contingent liabilities, including the likely outcome of pending and future lawsuits, are assessed on an ongoing basis. The outcome depends on future events which are, of course, uncertain. When assessing the likely outcome of lawsuits and tax matters etc., the management enlists the expertise of internal and external legal advisors and known case law. A specification of provisions appears from note 16.
Invested capital including goodwill
Equity + Minority interests + Net interest-bearing debt Equity investments in associates - Securities
Return on invested capital before tax (ROIC)
Operating profit/loss before amortisation of goodwill (EBITA) x 100 Average invested capital including goodwill
Equity interest
Equity excl. minority interests at year-end x 100 Total assets, year-end
Share-related ratios Earnings per share (EPS)
The group’s share of net profit/loss for the year Average number of outstanding shares
Diluted earnings per share (EPS-D)
The group’s share of the net profit/loss for the year Average number of outstanding diluted shares
Cash flow per share (CFPS)
Cash flow from operating activities Average number of shares
Dividend per share
Proposed dividend to shareholders Average number of shares
Equity value at year-end
Equity excl. minority interests at year-end Number of shares at year-end
Price/equity value at year-end
Share price at year-end Equity value at year-end
Financial and share-related ratios have been prepared in accordance with the Danish Society of Financial Analysts’ ’Recommendations and Financial Ratios 2010’ and IAS 33. Annual Report 2012 Dantherm
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I n c o m e s tat e m e n t DKK ’000
Note
2012
2011
Revenue 1 15,599 6,158
F i n a n c i a l s tat e m e n t s o f t h e pa r e n t
Other operating income 1,310 2,111 Other external expenses 2 -6,024 -8,155 Staff costs 2 -6,560 -7,562 Profit/loss before depreciation, amortisation, impairment losses and write-downs (EBITDA)
4,325
-7,448
Depreciation, amortisation, impairment losses and write-downs of property, plantand equipment and intangible assets 7, 8 -119 -1,532 Special items 3 0 -2,788 Operating profit/loss (EBIT) 4,206 -11,768
Income statement Statement of comprehensive income
63 63
8. Property, plant and equipment
Financial income 4 2,508 62 Financial expenses 5 -3,441 -3,145
69
9. Other non-current assets 70
Assets 64
10. Receivables
70
Equity and liabilities
65
11. Equity
71
Statement of changes in equity
66
12. Payables to credit institutions
71
Cash flow statement
67
13. Trade payables and other payables
72
14. Contingent liabilities
72
Notes 68 1. Revenue
68
2. Costs
68
3. Special items
68
4. Financial income
68
5. Financial expenses
68
6. Tax
69
7. Intangible assets
69
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Dantherm Annual Report 2012
15. Contractual obligations 72 16. Related parties
73
17. Events occurring after the balance sheet date 73 18. Accounting policies
74
19. Accounting estimates and assessments
75
Profit/loss before tax 3,273 -14,851 Tax on profit/loss for the year
6
-206
-175
Net profit/loss for the year 3,067 -15,026 Proposed appropriation account Retained earnings 3,067 -15,026 3,067 -15,026
s tat e m e n t o f comprehensive income DKK ’000 2012 2011 Net profit/loss for the year 3,067 -15,026 Total comprehensive income 3,067 -15,026
Annual Report 2012 Dantherm
63
IN D E X
IN D E X
Assets DKK ’000
Equity and liabilities Note
31.12.12
31.12.11
DKK ’000
Note
31.12.12
31.12.11
Non-current assets Intangible assets Patents and licenses 7 0 0 Total intangible assets 0 0
Equity Share capital 11 71,906 71,906 Retained earnings 129,522 126,455 Total equity 201,428 198,361
Property, plant and equipment Other plant, fixtures and fittings, tools and equipment 8 30 149 Leasehold improvements 8 0 0 Total property, plant and equipment 30 149
Current liabilities Credit institutions 12 68,286 68,145 Trade payables and other payables 13 20,861 17,996 Total current liabilities 89,147 86,141
Other non-current assets
Total liabilities 89,147 86,141
Equity investments in subsidiaries
9
269,527
269,527
Equity investments in associates 9 50 0 Receivables from associates 10 16,656 9,120 Other receivables 10 0 1.000 Other non-current assets, total 286,233 279,647
TOTAL EQUITY AND LIABILITIES
290,575
284,502
Contingent liabilities 14 Contractual obligations 15 Notes without reference 16-19
Total non-current assets 286,263 279,796 Current assets Receivables 10 1,738 4,705 Income tax receivable 1,250 0 Deferred income 1,324 0 Cash 0 1 Total current assets 4,312 4,706 TOTAL ASSETS 290,575 284,502
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Dantherm Annual Report 2012
Annual Report 2012 Dantherm
65
IN D E X
IN D E X
S tat e m e n t o f changes in equity
C a s h f lo w s tat e m e n t
Retained Total DKK ’000 Share capital earnings equity Equity as at 1 January 2011
359,528
-146,141
213,387
Comprehensive income in 2011 Net loss for the year
0
-15,026
-15,026
Transactions with owners in 2011 Capital reduction Total transactions with owners
-287,622 -287,622
287,622 287,622
0 0
Equity as at 31 December 2011
71,906
126,455
198,361
Equity as at 1 January 2012
71,906
126,455
198,361
Comprehensive income in 2012 Net profit for the year Total comprehensive income in 2012
0 0
3,067 3,067
3,067 3,067
Equity as at 31 December 2012
71,906
129,522
201,428
DKK ’000
Note
2012
2011
Profit/loss before tax 3,273 -14,851 Adjustment for non-cash operating items etc.: Depreciation, amortisation, impairment losses and write-downs 119 1,532 Special items 0 2,788 Other operating items, net -1,310 0 Financial income -2,508 -62 Financial expenses 3,441 3,145 Cash flow from primary operations before changes in working capital 3,015 -7,448 Change in receivables -2,544 -525 Change in trade payables etc. -3,504 -2,123 Cash flow from primary operations -3,033 -10,096 Interest income received 39 62 Interest expenses paid -3,441 -3,119 Cash flow from ordinary operations -6,435 -13,153 Income tax paid -206 -175 Cash flow from operating activities -6,641 -13,328 Purchase of intangible assets 0 -1,000 Purchase of financial assets -50 -1,000 Sales of financial assets 2,840 0 Contributions to subsidiaries 0 -2,788 Financial loans -5,067 -9,120 Cash flow from investing activities -2,277 -13,908 Loan financing:: Change in intercompany accounts with group enterprises 8,776 -1,526 Cash flow from financing activities 8,776 -1,526 Cash flow for the year Cash and cash equivalents, beginning of year Cash and cash equivalents, year-end
-142 -68,144 -68,286
-28,762 -39,382 -68,144
Cash, year-end, comprises: Cash 0 1 Short-term bank debt -68,286 -68,145 Cash and cash equivalents, year-end -68,286 -68,144
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Dantherm Annual Report 2012
Annual Report 2012 Dantherm
67
IN D E X
IN D E X
notes DKK ’000 2012 2011
DKK ’000 2012 2011
1. Revenue
6 . ta x
Dividend received 10,000 0 Management fee 5,599 6,158 Total revenue 15,599 6,158
Current tax for the year comprises: Other taxes, including withholding tax -206 -175 Total -206 -175
2. Costs
Tax on profit/loss for the year comprises: Profit/loss before tax 3,273 -14,851 Tax rate 25% 25%
Fees for auditors appointed by the general meeting Audit 189 205 Tax and VAT consultancy services 86 17 Services other than audits 58 84 Total fees for auditors appointed by the general meeting 333 306 Staff costs Wages and salaries 6,272 7,298 Defined contribution plans 249 253 Other social security expenses 39 11 Total staff costs 6,560 7,562 Average number of employees Remuneration of the Board of Directors and Executive Board Board of Directors of the parent Executive Board of the parent Total remuneration of the Board of Directors and the Executive Board
4
5
Calculated tax on profit/loss before tax
-818
3,713
Tax on non-taxable income 2,500 0 Tax losses which are not recognised -1,682 -3,713 Other taxes -206 -175 Total -206 -175 Effective tax rate
-6 %
1%
DKK ’000 31.12.12 31.12.11
7 . I n ta n g i b l e a s s e t s 1,388 2,288 3,676
1,350 3,119 4,469
A description of the remuneration of the Board of Directors and the Executive Board is given in note 3 in the consolidated financial statements.
Patents and licenses Cost as at 1 January 1,282 282 Additions 0 1,000 Cost as at 31 December 1,282 1,282 Amortisation as at 1 January 1,282 282 Amortisation 0 1,000 Amortisation as at 31 December 1,282 1,282
3. Special items Cancellation of debt of group enterprise 0 -2,788 Total special items 0 -2,788
Carrying amount as at 31 December
0
0
1,275 1,275
1,275 1,275
8 . p r o p e r t y, p l a n t a n d e q u i p m e n t 4. Financial income Interest income from group enterprises 0 59 Interest income from associates 2,469 0 Foreign exchange gains 39 3 Total financial income 2,508 62 Interest on financial assets measured at amortised cost amounts to
2,469
59
5. Financial expenses Interest expenses to group enterprises 529 310 Other interest expenses 2,905 2,803 Market value adjustments and losses on securities 7 32 Total financial expenses 3,441 3,145 Interest on financial liabilities measured at amortised cost amounts to
3,434
3,113
Other plant, fixtures and fittings, tools and equipment Cost as at 1 January Cost as at 31 December
Depreciation as at 1 January 1,126 1,007 Depreciation 119 119 Depreciation as at 31 December 1,245 1,126 Carrying amount as at 31 December
30
149
Leasehold improvements Cost as at 1 January Cost as at 31 December
1,590 1,590
1,590 1,590
Depreciation as at 1 January 1,590 1,177 Depreciation 0 413 Depreciation as at 31 December 1,590 1,590 Carrying amount as at 31 December
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Dantherm Annual Report 2012
0
Annual Report 2012 Dantherm
0
69
IN D E X
IN D E X
9 . O t h e r n o n - c u r r e n t a s s e t s
1 0 . R e c e i va b l e s - c o n t i n u e d
Equity investments in group DKK ’000 enterprises Cost as at 1 January 2011 504,008 Additions 2,788 Cost as at 31 December 2011 506,796
Credit risks The credit risks of the parent essentially concern receivables from an associate and subsidiaries, and the risk is therefore not hedged. No security has been provided for receivables. The maximum credit risk amounts to DKK 18,263k (2011: DKK 13,134k).
Value adjustments as at 1 January 2011 Value adjustment for the year Value adjustments as at 31 December 2011
-234,481 -2,788 -237,269
1 January 7,190,574 7,190,574 71,906 359,528 Capital reduction 0 0 0 -287,622 31 December 7,190,574 7,190,574 71,906 71,906
Carrying amount as at 31 December 2011
269,527
11. Equity
Number of shares Nominal value (DKK ’000) Share capital 2012 2011 2012 2011
The share capital comprises 7,190,574 shares with a nominal value of DKK 10 each. The shares are not divided into classes.
Cost as at 1 January 2012 506,796 Additions 0 Cost as at 31 December 2012 506,796
Treasury shares Number of shares Nominal value (DKK ’000) 2012 2011 2012 2011
Value adjustments as at 1 January 2012 Value adjustments as at 31 December 2012
-237,269 -237,269
1 January 31 December
80,526 80,526
80,526 80,526
Carrying amount as at 31 December 2012
269,527
Treasury shares’ share of the share capital
1.1%
1.1%
4,026 4,026
4,026 4,026
Name Ownership Ownership share share Subsidiaries: Domicile 2012 2011 Dantherm Air Handling Holding A/S Skive, Denmark 100% 100% ERO A/S (under liquidation) Skive, Denmark 100% 100% Associates: Dantherm Power A/S Hobro, Denmark 43% 38%
The share capital comprises 7,190,574 shares with a nominal value of DKK 10 each. The shares are not divided into classes. At Dantherm’s general meeting in 2011, it was decided to reduce the share capital from a nominal amount of DKK 359,528k to DKK 71,906k.
Accounting information relating to Dantherm Power appears from note 11 in the consolidated financial statements.
A description of the group’s management of capital structure is given in note 14 in the consolidated financial statements.
The carrying amount of equity investments in subsidiaries of the parent exceeds the valuation in the consolidated financial statements. As at 31 December 2012, the management carried out an impairment test of the carrying amount of equity investments.
DKK ’000 31.12.12 31.12.11
In connection with the impairment test, the recoverable amount, corresponding to the discounted value of expected future cash flows, is compared with the carrying amount. The recoverable amount has been determined on the basis of a value in use calculation. Expected future cash flows are based on the budget for 2013 approved by the management, the strategy plan for 2014-2017 and a terminal value. The discount rate used to calculate the recoverable amount of all cash-generating units was 12 % before tax in 2011 and 2012 and reflects i.e. the risk-free interest rate plus market risks. Both in 2011 and 2012, the impairment test was based on the approved strategy plan. Growth is expected for the period of 2013-2017 and the recoverable amount is estimated to exceed the carrying amount. The assessment of the impairment need at the end of 2012 did not give rise to impairment. DKK ’000 31.12.12 31.12.11
1 0 . R e c e i va b l e s Receivables from group enterprises 1,607 4,014 Convertible loans granted to associates 16,656 9,120 Other receivables 131 1,691 Total receivables 18,394 14,825 Receivables falling due after 12 months comprise
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Dantherm Annual Report 2012
16,656
10,120
Dantherm A/S has been authorised by the general meeting to let the company buy treasury shares up to a nominal value of 10 % of the share capital. The consideration paid must not deviate by more than 10 % from the share price listed at the time of the purchase. This authorisation is valid until the annual general meeting in 2016. No treasury shares were traded in 2011 and 2012.
1 2 . paya b l e s t o c r e d i t i n s t i t u t i o n s Payables to credit institutions are recognised as follows: Short-term payables 68,286 68,145 Total payables to credit institutions 68,286 68,145 The parent’s risk management policy As a result of its operations, investments and financing, the parent is exposed to changes in interest rate levels. It is group policy to identify and hedge all significant financial risks in an expedient way and not to engage in active speculation in financial risks. Currency risks The parent is not exposed to any currency risks in relation to loans as these are all arranged in DKK. Interest rate risks The parent’s bank financing carries a floating interest rate. This involves a risk of changes in interest payments, both in the short and in the long term. The company regularly assesses the expediency of entering into agreements to wholly or partly hedge such interest rate risk. All else being equal, an increase in interest rate levels of 1% per year in 2011 and 2012 relative to the interest rate levels at the balance sheet date would have had a negative effect by approx. DKK 0.7m on the results and equity. Similarly, a fall in interest rate levels would have had a positive effect.
Annual Report 2012 Dantherm
71
IN D E X
IN D E X
1 2 . paya b l e s t o c r e d i t i n s t i t u t i o n s - c o n t i n u e d
1 6 . r e l at e d pa r t i e s
Effective interest rate Carrying amount Loan/maturity Fixed/floating 31.12.12 31.12.11 31.12.12 31.12.11
See note 26 in the consolidated financial statements for a description of related parties.
DKK Floating 3-7% 4-6% 68,286 68,145 Total 68,286 68,145 The loan is included in the group’s agreement with its primary credit institutions which expires on 1 May 2014. Reference is made to note 24 in the consolidated financial statements.
The parent’s balances with group enterprises are stated in note 10 and note 13 and carry floating market interest rates. Transactions with associates comprise only loans, as can be seen from note 10. Interest on balances with group enterprises is stated in note 4 and note 5. A management fee of DKK 5,599k has been invoiced to the subsidiaries (2011: DKK 6,158k).
The carrying amount corresponds to the fair value of the loan. At the end of 2012, the group had unutilised liquidity reserves of DKK 36m under the agreement by which the parent is comprised. At the end of 2011, the unutilised liquidity reserves amounted to DKK 47m.
The parent company is jointly taxed with the consolidated Danish enterprises, which makes the company liable for Danish income tax and withholding tax on dividend, interest and royalties within the jointly taxed enterprises. Reference is made to note 14 for further information.
DKK ’000 31.12.12 31.12.11
1 7 . E v e n t s o c c u r r i n g a f t e r t h e b a l a n c e s h e e t d at e
1 3 . T r a d e paya b l e s a n d o t h e r paya b l e s
No important events have occurred after the balance sheet date which are expected to have significant effect on the financial position or future prospects of the group.
Payables to group enterprises 11,478 5,109 Trade payables 1,451 954 Other payables 7,932 11,933 Trade payables and other payables, total 20,861 17,996
14. Contingent liabilities The parent is jointly and severally liable with other consolidated companies for the group’s debt with the main banks which totals DKK 97,412k, including the company’s own debt. (2011: DKK 98,210k). The parent has guaranteed the subsidiaries’ balances with FIH which total DKK 94,047k (2011: DKK 99,723k). The parent company is jointly taxed with the consolidated Danish enterprises. As the administration company, the parent has joint and several unlimited liability with the jointly registered enterprises for Danish income tax and withholding tax on dividend, interest and royalties within the jointly taxed enterprises. There is no income tax or withholding tax payable. Any future corrections of the taxable jointly taxed income or withholding tax may result in a change of the parent’s liability. The parent is jointly and severally liable with the jointly registered consolidated enterprises Dantherm Air Handling A/S, Dantherm Air Handling Holding A/S and ERO A/S for the total VAT commitment of DKK 2,561k (2011: DKK 2,598k). The shares in Dantherm Air Handling Holding A/S have been pledged with the group’s banks.
DKK ’000 31.12.12 31.12.11
1 5 . C o n t r a c t u a l o b l i g at i o n s Contractual obligations include leases of cars and premises. Obligations in respect of lease and operating lease payments constitute: Next year 89 421 2-5 years 1,569 1,331 After 5 years 522 766 Total contractual obligations 2,180 2,518 Operating leases and leases recognised in the income statement
72
Dantherm Annual Report 2012
116
608
Annual Report 2012 Dantherm
73
IN D E X
IN D E X
18. accounting policies The financial statements of the parent have been prepared as a result of the Danish Financial Statements Act’s requirements on the preparation of a separate financial statement of parents. The 2012 annual report of the parent is presented in accordance with International Financial Reporting Standards as adopted by the EU and additional Danish disclosure requirements for the annual reports of listed companies. The accounting policies have been applied consistently with last year. NEW ACCOUNTING REGULATION Reference is made to note 28 in the consolidated financial statements. A new financial standard has been implemented to the extent relevant for the parent.
1 9 . A c c o u n t i n g e s t i m at e s a n d a s s e s s m e n t s also includes management fees collected from the subsidiaries of the parent. TAX ON PROFIT/LOSS FOR THE YEAR The company is covered by the Danish rules on compulsory joint taxation of the Dantherm group’s Danish companies. Subsidiaries are included in the joint taxation from the time of their inclusion in the consolidation in the consolidated financial statements until the time of their withdrawal from the consolidation. The company is an administration company for the joint taxation, settling all payments of income tax with the tax authorities.
DESCRIPTION OF ACCOUNTING POLICIES The accounting policies applied by the parent (see note 28 in the consolidated financial statements) deviate from those applied in the consolidated financial statements in the following respects:
The current Danish income tax is allocated by settling joint taxation contributions between the jointly taxed companies in relation to their taxable income. Companies utilising taxable losses in other companies pay a joint taxation contribution to the parent corresponding to the tax value of the utilised losses, while companies whose tax losses are utilised by other companies receive a joint taxation contribution from the parent corresponding to the tax value of the utilised losses (full allocation).
REVENUE Allocation of profit from equity investments in subsidiaries and associates is recognised in the income statement of the parent in the financial year in which the dividend is declared. If the allocated amount exceeds the accumulated earnings of the subsidiaries or associates for the period, an impairment test is carried out.
Tax for the year, which consists of the current income tax for the year, the joint taxation contribution for the year and changes in deferred tax – also as a result of a change in the tax rate – is recognised in the income statement with the portion attributable to the net profit/loss for the year and directly in equity with the portion attributable to amounts recognised directly in equity.
Furthermore, interest income from any equity-like loans granted to subsidiaries is included in revenue by the amount concerning the financial year. Revenue
SPECIAL ITEMS Special items comprise significant nonrecurring items that typically did not exist in previous years and are not expected to
74
Dantherm Annual Report 2012
exist in the coming financial years and/ or items of a special nature which are not part of the parent’s ordinary operations. EQUITY INVESTMENTS IN SUBSIDIARIES AND ASSOCIATES Equity investments in subsidiaries and associates are measured at cost. If there are any indications of impairment, an impairment test is carried out as described in the consolidated financial statements. Where the cost exceeds the recoverable amount, impairment is performed to this lower amount.
When calculating the carrying amount of certain assets and liabilities, an estimate is required of how future events will affect the value of such assets and liabilities at the balance sheet date. Estimates, which are important to the financial reporting of the parent, are for example made when determining the need for a write-down of equity investments in subsidiaries and investments in and loans to associates.
The estimates applied are based on assumptions which the management finds reasonable, but which are naturally uncertain and unpredictable. These assumptions may be incomplete or inaccurate, and unexpected events or circumstances may occur. Moreover, the company is exposed to risks and uncertainties which may cause the actual results to deviate from these estimates.
The management estimates that the application of the parent’s accounting policies does not entail any assessments in addition to estimates which may have a significant impact on the amounts recognised in the annual report.
Allocation of other reserves than accumulated earnings from subsidiaries and associates reduce the cost price of equity investments when the payment is in the nature of amortisation of a parent investment. RECEIVABLES Receivables are measured at amortised cost. If there is indication of impairment, provisions for bad debts are made. Impairment is made at an individual level. Impairment is calculated as the difference between the carrying amount and the present value of the expected cash flows, including the realisable value of any security received. The effective interest rate is used as the discount rate for the individual receivable or portfolio. The recognition of interest on receivables written down is calculated for the value written down using the effective interest rate for the individual receivable or portfolio..
Annual Report 2012 Dantherm
75
Dantherm’s 2012 Annual Report is published by Dantherm A/S, Marienlystvej 65, DK-7800 Skive, Denmark. CVR no. 30 21 43 15. Text and production: Dantherm A/S. Copyright: Dantherm A/S, March 2013. This Annual Report was published on 1 March 2013 in Danish and English via NASDAQ OMX Copenhagen. In questions of interpretation, the Danish text shall prevail. The Annual Report can also be found on www.dantherm.com.
Dantherm A/S Marienlystvej 65 7800 Skive Denmark
Dantherm Air Handling A/S Marienlystvej 65 7800 Skive Denmark
Dantherm Inc. 110 Corporate Drive, Suite K Spartanburg, SC 29303 4260 USA
Tel. +45 99 14 90 00 CVR. no. 30 21 43 15 www.dantherm.com
Tel. +45 96 14 37 00
Tel. +1 864 595 9800
Dantherm Ltd. 12 Windmill Business Park Windmill Road, Clevedon North Somerset BS21 6SR UK
Dantherm Air Handling (Suzhou) Co., Ltd. Bldg#9, No.855 Zhu Jiang Rd., Suzhou New District, Jiangsu 215219 Suzhou China
Tel. +44 1275 87 68 51 Tel. +86 512 6667 8500 Dantherm AB Virkesgatan 5 614 31 Söderköping Sweden Tel. +46 121 130 40 Dantherm AS Løkkesåsveien 26 3138 Skallestad Norway
Dantherm Power A/S Majsmarken1 9500 Hobro Denmark
Tel. +47 33 35 16 00
Tel. +45 88 43 55 00 www.dantherm-power.com
