2018
ANNUAL
REPORT
2
KEY FIGURES (CONTINUING OPERATIONS)
2018
2017
Results and orders (NOK million)
Revenue and other income
EBITDA
EBITDA margin (percent)
Net profit (loss)
Net profit (loss) incl discontinued operations
Net debt
Equity ratio (percent)
Order intake
Order backlog
Share (NOK)
Share price December 31
Basic/ Diluted earnings per share
Employees (Full time equivalents)
Employees including hired-ins
Health and Safety
Lost time incident frequency (per million worked hours)
Total recordable incident frequency (per million worked hours)
Sick leave rate (percent of worked hours)
3 800
290
7.6
(194)
(322)
403
48
4 481
2 692
3 606
116
3.2
(706)
(58)
2 364
51
3 818
1 948
13.1
(1.19)
16.4
(0.21)
1 775
1 835
1.6
2.2
2.6
0.8
1.1
3.2
Net capital employed
NOK million
Revenue
NOK million
EBITDA
NOK million
Other
1 357
AKOFS
Offshore
1 086
MHWirth
2 113
1200
1000
895
881
873
1 090
955
800
600
400
200
0
87
78
63
63
100
96
80
60
40
20
0
Q4 17
Q1 18
Q2 18
Q3 18
Q4 18
Q4 17
Q1 18
Q2 18
Q3 18
Q4 18
Annual Report 2018 3
TABLE OF CONTENTS
01. BOARD OF DIRECTORS' REPORT
02. DECLARATION BY THE BOARD
OF DIRECTORS AND CEO
03. CORPORATE GOVERNANCE STATEMENT
04. FINANCIALS AND NOTES
a. Akastor Group
b. Akastor ASA
05. AUDITOR'S REPORT
4
11
12
21
21
84
96
06. ALTERNATIVE PERFORMANCE MEASURES
101
07. BOARD OF DIRECTORS
08. MANAGEMENT
09. COMPANY INFORMATION
103
106
107
Annual Report 2018
4
01. BOARD OF DIRECTORS' REPORT
Akastor ASA (hereinafter referred to as Akastor) is an
investment company based in Norway with a portfolio of
companies in the oilfield services sector, with a flexible
mandate for active ownership and long-term value creation.
The shares of Akastor are traded on the Oslo Stock Exchange
under the ticker AKA. The Akastor portfolio of companies had
a total net capital employed of NOK 4.6 billion at the end of
2018.
Highlights 2018
due to a slow recovery of the oil service market, and thus
stronger order intake for all of the portfolio companies.
Company Overview
The largest shareholder of Akastor is Aker Kværner Holding
AS with a shareholding of 40.27 percent, which is 70 percent
owned by Aker ASA and 30 percent by the Norwegian
government. Aker ASA also has a direct shareholding in
Akastor of 8.52 percent.
important operational milestones were
In 2018, several
achieved and the portfolio of investments was strengthened
through strategic transactions.
Akastor is primarily focused on the oilfield services sector. The
portfolio in 2018 covers a range of industrial holdings in this
sector, including:
On January 1, the vessel Aker Wayfarer started operations
under the 5+5 year contract with Petrobras. The vessel will
provide subsea well installation and other types of offshore
installation work offshore Brazil.
In April, MHWirth signed the first contract in more than three
years for a complete drilling equipment package to a newbuild
drilling rig. The contract was signed with Keppel Fels for a
harsh environment midwater semi-submersible rig, with
Awilco Drilling as the ultimate client.
In May, an investment of USD 75 million was made in a preferred
equity instrument in Odfjell Drilling, yielding 10 percent annual
interest plus a warrant structure for up to 5,925,000 shares in
Odfjell Drilling.
In June, an agreement to sell 50 percent of the shares in
AKOFS Offshore for USD 142.5 million to Mitsui & Co. Ltd
(Mitsui) and Mitsui O.S.K. Lines Ltd (MOL) was signed. The
transaction was completed in September.
Later in June, a five year contract was signed with Equinor, for
provision of year-round light well intervention (LWI) services
on
shelf, with planned
the Norwegian continental
commencement in the first half of 2020.
Finally, in December Akastor entered into an agreement with
Silverfleet Capital and two banks to merge AGR Bidco AS
(AGR) with First Geo. Akastor will hold 100 percent of the
shares and 55 percent of the economic interest in the
combined company. The merged company will be a world
leading provider of well management-, reservoir- and
subsurface services, ranging from consultancy services to fully
outsourced well and rig management projects. The merger is
expected to be completed in the first half of 2019.
Akastor’s total revenue from continuing operations was NOK
3.8 billion in 2018, an increase of 22 percent from 2017
(adjusted for certain special items in 2017). The increase was
MHWirth, which provides drilling systems and lifecycle
services. Ownership interest 100 percent.
AKOFS Offshore, a subsea well installation and inter-
vention services provider. Ownership interest 50 per-
cent.
Step Oiltools, a drilling waste management company.
Ownership interest 100 percent
First Geo, which delivers subsurface advice and prod-
ucts to E&P companies. Ownership interest 100 per-
cent. Expecting to merge First Geo with AGR in 2019.
Cool Sorption, a supplier of vapour recovery units and
systems. Ownership interest 100 percent.
DOF Deepwater, owns and operates five offshore ves-
sels. Ownership interest 50 percent.
NES Global Talent, a technical and engineering staffing
company. Economic interest 17.7 percent.
Each Akastor portfolio company is organized as an independent
business with its own dedicated management team, which
together with the company’s board, is fully responsible for all
aspects of its operations. All portfolio companies have separate
boards of directors, which consist of dedicated Akastor
investment managers, and in some of the boards, external
board representatives and employee representatives. This lays
the foundation for close cooperation between Akastor, the
portfolio companies and their employees.
In addition, Akastor has several financial investments, including:
Preferred equity instrument of USD 77.2 million in Odfjell
Drilling plus a warrant structure of up to 5.9 million shares.
Shares in Awilco Drilling. Ownership interest 5.5 percent.
Annual Report 2018 | Board of Directors' ReportBoard of Directors’ Report 5
The Akastor corporate organization is based in Norway, at
Fornebu, with a team of 17 employees, working closely with
the boards and management of its portfolio companies.
position them for growth in current and new markets, and
ensure financial capacity for potential business opportunities.
Akastor has a total of 1 775 employees with presence in
approximately 20 countries at year end 2018.
Strategy
Akastor is an investment company, advocating an independent
approach for each portfolio company to optimize
its
development potential. Akastor aims to create long-term value
for its shareholders through active development of its portfolio
companies as stand-alone businesses, while maintaining the
flexibility to be opportunistic. Akastor works closely with each
portfolio company’s management to make decisions on
business development, acquisitions and divestments to
maximize the value of the company. Each portfolio company
develops and executes independent value creation plans in
close cooperation with the Akastor investment team. As an
owner, Akastor emphasizes understanding the portfolio
companies’ markets and challenges in depth, in order to
evaluate current valuation versus future potential.
Akastor seeks to maximize value by combining strategic,
operational and financial measures.
The business models of the portfolio companies are
decentralized, but as part of the Akastor portfolio, all
companies share a common foundation based on Akastor’s
values, governing documents and compliance structure.
With regards to the financial holdings, focus is to generate an
acceptable return on the investments as such. In addition,
financial investments may be made in assets or companies in
order to strengthen the portfolio companies of the group.
Market Outlook
Akastor’s portfolio companies operate mainly in the oilfield
services industry. During 2018, the market fundamentals have
improved somewhat, based on stronger cash generation and
higher investment levels of the oil companies. However, there
is still high over-capacity in certain market segments, such as
offshore drilling, offshore vessels, and subsea well intervention.
This is expected to continue to impact the activities of several
of the portfolio companies in 2019, with regards to both new
orders for equipment and service activities.
Since the downturn started in 2014, a lot of focus has been on
reducing costs and developing more efficient technological
solutions. In 2018, MHWirth has successfully installed its digital
solutions on several drilling rigs, optimizing the operations of
the drilling equipment. Further, new business models for
services have been implemented, aligning incentives for
MHWirth and its clients. As an active owner, Akastor will
continue to work closely with the portfolio companies to
Group Financial Performance
Akastor presents its consolidated financial statements in
accordance with
International Financial Reporting
Standards (IFRS) as adopted by the European Union. All
amounts below refer to the consolidated financial statements
for the group, unless otherwise stated.
the
Income Statement
Revenue and other income for 2018 increased by 5 percent to
NOK 3 800 million. Adjusted by NOK 500 million from a
settlement agreement in MHWirth in 2017, the revenue has
increased by 22 percent. Operating profit before interest, tax,
depreciation and amortization (EBITDA) increased by NOK 175
million to NOK 290 million, while EBITDA in 2017 was impacted
by several negative special items.
Depreciation and amortization was NOK 181 million in 2018,
compared to NOK 278 million in the previous year. There has
been no impairment recognized on fixed assets for continuing
operations in 2018.
Net financial expenses were NOK 200 million in 2018
compared to NOK 406 million in the previous year. The net
financial expenses include Akastor’s share of net loss of NOK
157 million from the equity-accounted
investees DOF
Deepwater and AKOFS Offshore, dividend income of NOK 71
million from equity investment, as well as unrealized loss of
NOK 71 million in fair value changes of financial investments.
The pre-tax loss for the year was NOK 91 million, compared to
a loss of NOK 686 million the previous year.
The income tax expenses for 2018 were NOK 103 million,
compared to a tax expense of NOK 20 million in 2017. The
effective tax rate is negatively impacted by several items, such
as impairment of deferred tax assets, non-tax deductible
items, mix of revenue generated in various jurisdictions, as well
as change in tax rate in Norway.
Net loss from continuing operations was NOK 194 million,
while net loss from discontinued operations was NOK 128
million. The net loss from discontinued operations was mainly
related to operating losses from AKOFS Offshore, gain from
the divestment of AKOFS Offshore and provision as a result of
negative arbitration award related to previously divested
Managed Pressure Operations Ltd (MPO). The group had an
operating loss of NOK 322 million for the year. Earnings per
share were negative NOK 1.19 in 2018, compared with negative
NOK 0.21 a year earlier.
The board of directors has resolved to propose to the annual
general meeting that no dividend is distributed for 2018.
Annual Report 2018 | Board of Directors' Report 6
Financial Position
Total assets of Akastor amounted to NOK 9.0 billion as of
December 31, 2018, compared with NOK 10.3 billion at year-
end 2017. The decrease reflects reductions in non-current
assets of NOK 2.1 billion mainly related to divestment of 50
percent shares in AKOFS Offshore, offset by equity investment
in Odfjell Drilling and Awilco Drilling.
Gross debt decreased by NOK 1.9 billion as a result of the
divestment of 50 percent shares of AKOFS Offshore as well
increased cash flows from operating activities.
Total equity amounted to NOK 4.3 billion at year-end 2018,
compared to NOK 5.3 billion the year before. The equity ratio
was 48 percent as of December 31, 2018, decreased from 51
percent in 2017.
Cash Flow
As of December 31, 2018, Akastor had cash of NOK 198 million,
compared to NOK 168 million in 2017. The net cash flow from
operating activities was positive NOK 315 million, compared to
negative operating cash flow of NOK 673 million in the
previous year. The positive cash flow from operating activities
comprises of net cash inflow from operating activities of NOK
625 million offset by payments of NOK 311 million for income
tax and interest costs including finance leases before the
divestment of AKOFS Offshore.
Net cash flow from investing activities was NOK 247 million
compared to NOK 737 million in 2017. The cash flow from
investing activities was mainly related to the proceeds from
the divestment of 50 percent shares in AKOFS Offshore as
well as payment for investment in Odfjell Drilling and Awilco
Drilling. Capex investments were NOK 131 million compared to
NOK 97 million in 2017.
Net cash flow from financing activities amounted to negative
NOK 481 million and reflected reduced borrowings in 2018.
The net cash flow from financing activities in 2017 was negative
NOK 391 million.
Going Concern
The board of directors confirms that the going concern
assumption, on which the consolidated financial statements
have been prepared, is appropriate.
The Akastor Portfolio
MHWirth
MHWirth is a global provider of drilling solutions, engineering,
projects, equipment and services. MHWirth has activities on
five continents with presence in 14 countries. At year-end
2018, the company employs 1 424 people; 54 percent of the
workforce is employed in Norway. The company’s business is
divided in four core areas: Large Projects, Drilling Equipment,
Drilling Lifecycle Services and Engineering Services. MHWirth
is the largest portfolio company by both sales and employees.
Key Figures
Amounts in NOK million
Revenue and other income
EBITDA
EBIT
CAPEX and R&D capitalization
NCOA
Net capital employed
Order intake
Order backlog
Employees (FTE)
2018
3 055
281
156
58
405
2 113
3 544
2 282
1 424
2017
3 030
118
(189)
46
995
2 783
3 212
1 718
1 456
The revenue for 2018 of NOK 3 055 million was up 1 percent
from 2017. Adjusted for revenues from a settlement agreement
in 2017 of NOK 500 million, revenues were up 21 percent from
2017 to 2018. The Drilling Lifecycle Services business had
revenues of NOK 1 699 million, an increase of 1 percent from
2017. The number of active rigs with complete drilling package
from MHWirth increased slightly to 52 rigs in 2018. The EBITDA
increased from NOK 118 million in 2017 to NOK 281 million in
2018, however the 2017 EBITDA included several negative
special items.
The offshore drilling market has improved somewhat during
2018, but is still suffering from over capacity of offshore drilling
rigs. In April, MHWirth signed the first contract for a complete
drilling package to an offshore floater in several years. The
equipment will be delivered to Keppel Fels, for construction of a
midwater semi-submersible with Awilco Drilling as the ultimate
client. The order intake from single equipment contract
improved somewhat in 2018, both from oil and non-oil segments.
Total order intake in MHWirth ended on NOK 3.5 billion,
compared with NOK 3.2 billion in 2017. The order backlog
increased from NOK 1.7 billion to NOK 2.3 billion during 2018.
After several years with cost reductions adjusting the cost
base to a new activity level, the situation stabilized in 2018.
During the year, the workforce decreased slightly from 1 456
to 1 424 employees. Focus will still be to reduce the costs of
the products, more lean operations, and more cost efficient
service models.
Since the downturn started in 2014, there has been a lot of
focus from the customers on making the drilling equipment
more efficient, reducing the costs of drilling a well, as well as
reducing the service costs of the equipment. Condition-based
rather than time-based lifecycle service is an example of this.
An important response to this market trend has been the
development of digital technologies, in order to automate the
operations of the drilling equipment. Currently, six clients have
signed contracts for ten rigs, to implement the DEAL (Drilling
Equipment Automation Layer) interface and several software
solutions for automation of several of the operations onboard
the rigs.
Akastor aims to develop MHWirth business going forward
both through organic growth and M&A adapted to the
Annual Report 2018 | Board of Directors' Report 7
development of the company’s core market, the offshore
drilling market.
AKOFS Offshore
AKOFS Offshore is a provider of vessel-based subsea well
installation and intervention services to the oil and gas industry.
The company operates three specialized offshore vessels,
Skandi Santos, Aker Wayfarer and AKOFS Seafarer, and
employs 202 people at the end of 2018.
Other Holdings
Other Holdings mainly include 100 percent ownership of First
Geo, 100 percent ownership of Cool Sorption, 100 percent
ownership of Step Oiltools, 50 percent ownership of DOF
Deepwater AS which is a joint venture with DOF ASA, 17.7
percent economic interest of NES Global Talent, 5.5 percent
shareholding
in Awilco Drilling, and a preferred equity
instrument of USD 77.2 million in Odfjell Drilling. In addition,
this segment includes corporate functions and several long-
term office lease contracts that remained in Akastor after the
demerger from Aker Solutions in 2014.
Key Figures 1)
Amounts in NOK million
Revenue and other income
EBITDA
EBIT
CAPEX and R&D capitalization
NCOA
Net capital employed
Order intake
Order backlog
Employees (FTE)
2018
1 107
471
(127)
188
180
4 915
2 949
6 244
202
Key Figures
2017
Amounts in NOK million
2018
2017
778
213
(121)
40
186
Revenue and other income
EBITDA
EBIT
CAPEX and R&D capitalization
NCOA
4 154
Net capital employed
22
Order intake
4 917
180
Order backlog
Employees (FTE)
749
(18)
(74)
8
(30)
1 357
943
408
351
596
(38)
(127)
9
(138)
628
626
231
379
1) The figures are presented at 100 percent basis.
The company’s revenue increased 42 percent to NOK 1 107
million, and EBITDA increased by NOK 258 million to NOK 471
million in 2018. The increase is due to the commencement of
the five-year contract for the vessel Aker Wayfarer with
Petrobras in Brazil.
Both of the vessels Skandi Santos and Aker Wayfarer operate
on contracts with Petrobras in Brazil for subsea equipment
installation work. The vessels have operated at close to full
utilization and continue to build on its strong track record in
Brazil.
In June, AKOFS Offshore signed a five-year contract with
Equinor for Light Well Intervention services in the North Sea,
which will be performed from the AKOFS Seafarer vessel. The
vessel and the subsea workover system will be upgraded
during 2019, with expected commencement of the contract in
the first half of 2020. An impairment loss of NOK 322 million
was recognized on AKOFS Seafarer due to changes in cash
flows projections.
In September, 50 percent of the shares of AKOFS Offshore
were sold to Mitsui and MOL. Following the transaction,
AKOFS Offshore was restructured to consolidate 100 percent
ownership interest in Avium Subsea AS, an existing joint
venture between Akastor, Mitsui and MOL.
Akastor, Mitsui and MOL hold 50 percent, 25 percent and 25
percent of the shares in AKOFS Offshore, respectively. AKOFS
Offshore is classified as a joint venture and consolidated using
the equity method in the consolidated financial statements.
EBITDA for Other Holdings for the year was a loss of NOK 18
million. The three businesses Step Oiltools, First Geo and Cool
Sorption delivered an EBITDA of NOK 47 million in 2018, up
from negative NOK 1 million in 2017. The remaining negative
EBITDA in this segment is mainly related to corporate overhead
costs, as well as some legacy costs.
Parent Company and Allocation of Net Loss
The parent company Akastor ASA is the ultimate parent
company in the Akastor group and its business is the ownership
and management of all subsidiaries. Akastor ASA has
outsourced all management functions to other companies
within the group, mainly Akastor AS. However, assets and
liabilities related to the Akastor Treasury function are held by
Akastor ASA. Akastor ASA has a net loss of NOK 300 million in
2018, including impairment of shares in subsidiaries of NOK
276 million.
The parent company’s dividend policy states that Akastor's
shareholders shall receive a competitive return on their
investment either through cash dividends or increases in the
share price, or both. The company does not intend to distribute
regular or annual dividends, but will consider dividends on an
ongoing basis taking into consideration the company’s M&A
activities, expected cash flow, capital expenditure plans,
financing requirements and appropriate financial flexibility.
The board thereby proposes the following allocation of net
loss (amounts in NOK million):
Dividends:
From other equity:
Total allocated:
0
300
300
Annual Report 2018 | Board of Directors' Report 8
Risk Management
Akastor and its portfolio companies are exposed to various
forms of market, operational and financial risks that may affect
the companies’ performance, their ability to meet strategic
goals and the companies’ reputations.
its shareholders’
Akastor’s risk management model is designed on the basis
that Akastor is an investment company with an overall
objective of securing
investments and
developing the group’s assets
in order to provide the
shareholders with a solid return. Akastor’s current investment
portfolio is focused on the oilfield services industry. This focus
is mainly driven by the company’s experience, expertise and
track-record within this industry. Although Akastor has a
flexible mandate, it has traditionally not sought to spread risk
by investing in different industries. Instead, Akastor has
focused on mitigating its vulnerability to the risk environment
inherent to the oilfield services industry through sound risk
management systems.
It has been a volatile year in the oil market, as the oil price has
fluctuated throughout the year, with high average prices mid-
year, however ending lower than in the beginning of the year.
The market situation for the oilfield services industry has
remained challenging, with modest level of activity and capital
spending, but market statistics reflect that oil companies’
capacity to spend is growing, and there has been some
increased activity in the subsea market and increased rig
demand. Akastor will continue to watch the fundamental
drivers in the market. If the market developments continue to
remain challenging, it may lead to further cost adjustments
and changes in the valuation of the Akastor portfolio’s assets
and liabilities (which could include further restructuring costs,
onerous leases, impairments etc. and increased credit risk
impacting the valuation of trade and
interest-bearing
receivables). Akastor’s main strategy for mitigating adverse
effects of potential challenging market conditions is continuous
monitoring and focus on rightsizing with a view to maintaining
a robust balance sheet with headroom for contingencies (see
also the description of financial risks below).
On the operational side, sound project execution by the
portfolio companies without cost overruns as well as securing
new orders are key factors affecting the companies’ financial
performance. Results also depend on costs, both the portfolio
companies’ own costs and those charged by suppliers. Akastor
and its portfolio companies are also exposed to financial risk
under performance guarantees and financial guarantees
issued, and financial market risks as further detailed below.
In addition, the portfolio companies, through their business
activities within their respective sectors and countries, are also
exposed to legal/compliance and regulatory/political risks, e.g.
political decisions on international sanctions that impact
supply and demand of the services offered by the portfolio
companies, as well as environmental regulations. As an
investment company, Akastor and its portfolio companies
from time to time engage in mergers and acquisitions and
other transactions that could expose the companies to
financial and other non-operational risks, such as warranty and
indemnity claims and price adjustment mechanisms.
To manage and mitigate risks within Akastor, risk evaluation is
an integral part of all business activities. As an owner, Akastor
actively supervises risk management in its portfolio companies
through participation on the board of directors of each
portfolio company, and by defining a clear set of risk
management and mitigation processes and procedures that all
portfolio companies must adhere to. The current and revised
governing documents defined by Akastor were rolled out
during the first half of 2016 and are reviewed annually. The
overall responsibility for ensuring sound internal control and an
appropriate framework for risk management in Akastor lies
with its board of directors. A risk review is presented to and
reviewed by the audit committee and the board of directors of
Akastor on an annual basis.
Financial Risks
Akastor is exposed to a variety of financial market risks such as
currency risk, interest rate risk, tax risk, price risk, credit and
counterparty risk, liquidity risk and capital risk as well as risks
associated with access to and terms of financing. The financial
risks affect the group’s income and the value of any financial
instruments held. The objective of financial risk management
is to manage and control financial risk exposures and thereby
increase the predictability of earnings and minimize potential
adverse effects on Akastor’s financial performance. Akastor
and its portfolio companies use financial derivative instruments
to hedge certain risk exposures and aim to apply hedge
accounting whenever possible in order to reduce the volatility
resulting from the periodic market-to-market revaluation of
income statement. Risk
financial
the
management
is the
responsibility of the project managers, in cooperation with
Akastor Treasury, to identify, evaluate and hedge financial risks
under policies approved by the board of directors. Akastor has
well-established principles for overall risk management, as well
as policies for the use of derivatives and financial instruments.
in every project.
is performed
instruments
in
It
Integrity Risks
All Akastor portfolio companies use education and awareness
training to manage and mitigate integrity risks. All employees
must complete a yearly Code of Conduct training program. In
addition, all Akastor managers and office-based staff are
required to conduct integrity e-learning training and participate
in classroom courses. For employees in specific functions,
where chance of facing integrity risk is considered higher than
normal, additional training has been tailored for their role and
responsibilities. Hired-ins in high risk roles are also required to
undertake integrity training, just as third party representatives
receive integrity training specially prepared for them. The
requirement for all portfolio companies is to complete and
report on the training within six months from employment or
publication of a new training session.
Annual Report 2018 | Board of Directors' Report Akastor has established a whistleblowing system in line with
the company’s Governance Policy. The whistleblowing channel
is open for all external and internal stakeholders who wish to
report a breach of the Code of Conduct, other internal
guidelines or governing policies. Akastor employees are
required to report breaches of the Code of Conduct, and
Akastor encourages reporting of any concerns pertaining to
compliance with law or ethical standards.
Corporate Responsibility
responsibility
risks and expectations
Akastor’s operating model reflects the fact that the portfolio
companies are
independent companies which operate
different business models and therefore face different
corporate
from
stakeholders. As a holding company, Akastor is responsible for
setting the overall corporate responsibility priorities and
providing the appropriate risk management framework and
policies applicable for the portfolio. In turn, each portfolio
company is responsible for defining their own corporate
responsibility strategy with relevant activities and, where
necessary, supporting policies.
Akastor also focuses on maintenance and development of
industrial relations and collaboration with unions. Historically,
good industrial relations have played an important role, and
maintaining these strong relations have proven to be one of
the success criteria in developing the company over the years.
Within the corporate responsibility efforts, Akastor is focused
on the environmental, social and governance areas that build
financial and non-financial value in the portfolio companies.
Akastor’s corporate responsibility strategy is based on four
main priorities: working against corruption, respecting human
rights, caring for health and safety and minimizing adverse
impact on the environment. All the portfolio companies are
responsible for working systematically with these priorities
and defining their own corporate responsibility strategies
encompassing these priorities. Akastor
is continuously
monitoring the implementation and integration of the priorities
of the corporate responsibility strategy, Code of Conduct and
Integrity Policy across all the portfolio companies. For in-depth
reporting on each portfolio company’s corporate responsibility
work, including their HSE work, refer to the Akastor Corporate
Responsibility Report for 2018. The full report is available on
our website www.akastor.com.
9
People and Teams
is committed to equal opportunity and non-
Akastor
discrimination. This commitment is described in Akastor’s
Code of Conduct, as well as Akastor’s policies and agreements,
and builds on a frame agreement signed with national and
international trade unions in 2008. This agreement was
renewed in 2012 and sets out fundamental labour rights and
standards for general employment terms and employee
relations, with specific focus on non-discrimination. Equal
opportunities are fundamental for Akastor and its portfolio
companies.
Akastor and the portfolio companies had a total of 1 775
employees (FTE) as of December 31, 2018. The male/female
ratio (excluding hired-ins) in the major portfolio company and
Akastor Group were as follows:
Female
Male
MHWirth
Akastor Group
18%
82%
19%
81%
All portfolio companies regularly assess whether they live up
to the principle of equal pay for equal work and no significant
differences have been identified. Each portfolio company
promotes equal opportunities by setting specific requirements
for diversity in recruitment and people development, and by
supporting programs dedicated to equal opportunity. Akastor
ASA fulfils the requirements of the Norwegian Companies Act
with regards to gender representation on the board of
directors, as three out of five shareholder elected directors are
women.
Aggregated sick leave in Akastor was 2.6 percent in 2018.
There were no fatal injuries in any of the portfolio companies.
The total recordable incident frequency was low, and Akastor
has thoroughly analyzed all incidents and taken actions to
avoid similar situations going forward. Caring for employee’s
health and safety is an integrated part of the group’s culture.
See figures below for details.
Lost time incident Frequency
(LTIF) *
Total Recordable Incident
Frequency *
Fatalities incl subcontractors
MHWirth
Akastor
Group
2.0
2.7
-
3.1
1.6
2.2
-
2.6
Research, Innovation and Technology Development
Sick leave (percent)
* Per million hours worked. Includes subcontractors
NOK 36 million was capitalized in 2018, compared to NOK 27
million in 2017, related to development activities. In addition,
research and development costs of NOK 32 million were
expensed during the year because the criteria for capitalization
were not met (NOK 16 million in 2017).
All research,
initiatives are
innovation and development
performed by the Akastor portfolio companies. Akastor ASA
and Akastor AS performed no such activity in 2018.
Annual Report 2018 | Board of Directors' Report 10
Corporate governance
Corporate governance is a framework of values, responsibilities
and governing documents to control the business and ensure
sustainable value creation for shareholders over time. It is the
responsibility of the board of directors of Akastor to ensure
that the company implements sound corporate governance.
The audit committee supports the board in safeguarding that
the company has internal procedures and systems in place to
ensure that corporate governance processes are effective.
Akastor’s corporate governance principles are based on the
Norwegian Code of Practice for Corporate Governance and
are designed to secure the shareholders’ investment through
value creation and to ensure good control with the portfolio
companies. The corporate governance principles are included
in this annual report and available on the company’s website
www.akastor.com.
Fornebu, March 14, 2019 I Board of Directors of Akastor ASA
Kristian Røkke | Chairman
Lone Fønss Schrøder | Deputy Chairman
Øyvind Eriksen | Director
Kathryn M. Baker | Director
Sarah Ryan | Director
Henning Jensen | Director
Asle Christian Halvorsen | Director
Stian Sjølund | Director
Karl Erik Kjelstad | CEO
Annual Report 2018 | Board of Directors' Report 11
02. DECLARATION BY THE BOARD
OF DIRECTORS AND CEO
The board and CEO have today considered and approved the annual report and financial statements for the Akastor group and
its parent company Akastor ASA for the year ended on December 31, 2018. The board has based this declaration on reports and
statements from the group’s CEO and/or on the results of the group’s activities, as well as other information that is essential to
assess the group’s position which has been provided to the board of directors.
To the best of our knowledge:
The financial statements for 2018 for Akastor group and its parent company have been prepared in accordance with all
applicable accounting standards.
The information provided in the financial statements gives a true and fair portrayal of the group and its parent company’s
assets, liabilities, profit and overall financial position as of December 31, 2018.
The annual report provides a true and fair overview of the development, profit and financial position of Akastor group
and its parent company, as well as the most significant risks and uncertainties facing the group and the parent company.
Fornebu, March 14, 2019 I Board of Directors of Akastor ASA
Kristian Røkke | Chairman
Lone Fønss Schrøder | Deputy Chairman
Øyvind Eriksen | Director
Kathryn M. Baker | Director
Sarah Ryan | Director
Henning Jensen | Director
Asle Christian Halvorsen | Director
Stian Sjølund | Director
Karl Erik Kjelstad | CEO
Annual Report 2018 | Declaration by the Board of Directors and CEODeclaration by the Board of Directors and CEO 12
03. CORPORATE GOVERNANCE STATEMENT
– AKASTOR ASA
Corporate governance is a framework of values, responsibilities
and governing documents to control the business and ensure
sustainable value creation for shareholders over time. Sound
corporate governance shall ensure that appropriate goals and
strategies are adopted, that the strategies are implemented in
a good manner and that the results achieved are subject to
measurement and follow-up.
1. The Corporate Governance Report
Basis for this Report
The corporate governance principles of the group are laid down
by the board of directors of Akastor ASA. The principles are
based on the Norwegian Code of Practice for Corporate
Governance dated October 17, 2018 (the «Code of Practice»),
the regulations set out in the Continuing Obligations of stock
exchange listed companies from Oslo Børs (the stock exchange
in Oslo) and the relevant Norwegian background law such as the
Norwegian Accounting Act and the Norwegian Public Limited
Liability Companies Act. The Code of Practice may be found at
www.nues.no and the Continuing Obligations of stock exchange
listed companies may be found at www.oslobors.no. Norwegian
laws and regulations are available at www.lovdata.no.
This report outlines how Akastor has implemented the Code
of Practice. Deviations from the Code of Practice are addressed
under the relevant sections. In general, the Akastor board only
approves deviations that the board believes contributes to
value creation for its stakeholders.
In addition to the Code of Practice, the Norwegian Accounting
Act section 3-3b stipulates that companies must provide a
report on their policies and practices for corporate governance
either in the annual report or in a document referred to in the
annual report. Such report is integrated in the below corporate
governance statement.1)
Governance Structure
Akastor is an oilfield services investment company with a
portfolio of industrial holdings and other investments. The
company has a flexible mandate for active ownership and long-
term value creation. Completed transactions in 2018 include
the sale of 50 percent of the shares in AKOFS Offshore to
Mitsui & Co. Ltd, and Mitsui O.S.K Lines, increased ownership
in STEP Oiltools to become fully owned by Akastor, and
investments of USD 75 million in preferred equity in Odfjell
Drilling and USD 10 million for 5.5 percent ownership of Awilco
Drilling.
Akastor currently has an active investment portfolio within the
oilfield services industry consisting of MHWirth, STEP Oiltools,
Cool Sorption, First Geo, 50 percent of the shares in AKOFS
Offshore, 50 percent of the shares in DOF Deepwater, a 17.7
percent economic ownership in NES Global Talent, in addition
to other holdings and investments (see below), with a total net
capital employed of approximately NOK 4.6 billion.
MHWirth is a global provider of drilling solutions, engineering,
projects, equipment and services. AKOFS Offshore is a provider
of subsea well installation and intervention services. NES
Global Talent is a global technical and engineering staff
provider. STEP Oiltools is a global provider of solids control
and drilling waste management services. First Geo is an
operation and wellsite geology services company. Cool
1) Below, the items in respect of which information must be disclosed according to section 3-3b of the Norwegian Accounting Act are specified, together with references to
where such required information may be found:
1. “A statement of the recommendations and regulations concerning corporate governance that the enterprise is subject to or otherwise chooses to comply with” can be
found in the introduction section of this corporate governance statement.
2. “Information on where the recommendations and regulations mentioned in no. 1 are available to the public” can be found in the introduction section of this corporate
governance statement.
3. “The reason for any non-conformance with recommendations and regulations mentioned in no. 1”. The non-conformances are described in the relevant section where
there are non-conformances, which are sections 6 and 14 respectively.
4. “A description of the main elements in the enterprise’s, and for entities that prepare consolidated financial statements, if relevant also the Group’s internal control and
risk management systems linked to the financial reporting process” can be found in Section 10 of this corporate governance statement.
5. “Articles of Association which entirely or partly expand or depart from provisions of Chapter 5 of the Public Limited Liability Companies Act” can be found in Section 6 of
this corporate governance statement.
6. “The composition of the board of directors, the corporate assembly, the committee of shareholders’ representatives and the control committee and any working
committees related to these bodies, as well as a description of the main instructions and guidelines that apply to the work of the bodies and any committees” can be
found in Section 8 and 9 of this corporate governance statement.
7. “Articles of Association governing the appointment and replacement of directors” can be found in Section 8 of this corporate governance statement.
8. “Articles of Association and authorizations empowering the board of directors to decide that the enterprise is to buy back or issue its own shares or equity certificates”
can be found in Section 3 of this corporate governance statement.
Annual Report 2018 | Corporate Governance StatementCorporate Governance Statement
13
Sorption is a provider of vapour recovery units and systems.
DOF Deepwater operates five offshore vessels. Other
investments mainly include investments in Odfjell Drilling and
Awilco Drilling, a subletting portfolio through Akastor Real
Estate and an investment in Aker Pensjonskasse.
It is the responsibility of the board of directors of Akastor ASA
to ensure that Akastor and its portfolio of companies
implement sound corporate governance. The board of
directors evaluates this corporate governance statement on
an annual basis. The board’s audit committee also evaluates
the corporate governance statement as well as other key
policies and procedures pertaining to compliance and
governance. Compliance with, and implementation of these
corporate governance guidelines are continuously evaluated
by the board and said committee; inter alia by way of the board
being the decisive body for the company’s defined management
and reporting structure, which include regular reporting.
Policies and Procedures
Akastor has a total of ten corporate policies providing business
practice guidance within a number of key areas, all of which
were revised and re-issued during the first half of 2015 and
updated on an annual basis. These policy documents express
the overall position of the group with regard to for instance
compliance, integrity and governance. The policies provide
instructions and guidelines that apply to the portfolio
companies and to individual employees in order to ensure that
the group’s operations are in compliance with internal and
external regulatory framework. In addition, the portfolio
companies are requested to implement their own policies
specific to their business within areas like project execution,
HSE and tendering.
Values and Code of Conduct
Akastor aims to develop and refine its portfolio of companies
as stand-alone enterprises, with the goal of maximizing the
value potential of each entity. The company works to develop
the business models of the portfolio companies, capitalize on
their market positions and promote aftersales services for the
equipment and systems delivered. The current investments are
within the oilfield services sector, but the company has a flexible
mandate for active ownership and long-term value creation.
Akastor has an opportunistic approach and will continue to
own the portfolio companies as long as Akastor creates more
value than alternative owners.
Akastor wishes to contribute to sustainable social development
through responsible business practices. The company’s Code
of Conduct is a handbook that applies to all employees and
provides guiding on what Akastor considers to be responsible
ethical conduct. The Code of Conduct provides a framework
of core corporate values which reflects Akastor’s prudent
business practice and shall be reflected in every aspect of our
operations. The ethical guidelines and other governing
documents of the group have been drafted on the basis of
these core corporate values.
2. Business
The objectives of the company, as defined in its articles of
association, are «to own or carry out industrial and other
associated businesses, management of capital, and other
functions for the group, and to participate in or acquire other
businesses». The articles of association are available at www.
akastor.com.
The principal strategies of the group are presented in the
annual report. To ensure value creation for its shareholders,
the board of directors annually performs a designated strategy
process where it sets objectives and targets for the company,
assesses risk, evaluates the existing strategy and approves any
significant changes.
Information concerning the financial
position and principal strategies of the company, and any
changes thereto is disclosed to the market in the context of
the company’s quarterly reporting and in designated market
presentations as well as at www.akastor.com.
Corporate Responsibility
Akastor takes an active approach to corporate responsibility.
Corporate responsibility in Akastor is about making prudent
business decisions, with minimum risk to reputation, brand and
the future sustainability of our business. The main focus of
corporate responsibility activities in Akastor, defined in our
group-wide integrity policy, is to work against corruption, to
respect human rights and to care for health, safety and the
environment. Akastor’s primary stakeholders are
the
shareholders (existing and potential), customers of its portfolio
companies and employees of the Akastor group. All our
portfolio companies are expected to ensure integration of
stakeholder engagement, a strong corporate responsibility in
their operations and we believe our approach to corporate
responsibility supports several of the UN Sustainable
Development Goals.
Akastor
is committed to follow the Global Framework
Agreement (GFA) entered into by Aker with the trade unions
Fellesforbundet, IndustriALL Global Union, NITO and Tekna on
December 17, 2012. The GFA builds on and continues the
commitment from the previous framework agreements signed
in 2008 and 2010, and outlines key responsibilities in relation
to human and trade union rights. The parties commit
themselves to achieving continuous improvements within the
areas of working conditions, industrial relations with the
employees of the Aker group of companies, health and safety
standards at the workplace and environmental performance.
Akastor also aligns with the principles of the UN Global
Compact, the United Nations Convention against Corruption,
the Universal Declaration of Human Rights, the UN Guiding
Principles for Business and Human Rights and the ILO
Declaration on Fundamental Principles and Rights at Work.
These international principles guide our Code of Conduct and
Integrity Policy and provide the overall framework for the
corporate responsibility efforts in the Akastor group.
Annual Report 2018 | Corporate Governance Statement 14
information
Further
in respect of the corporate social
responsibility work of Akastor and its portfolio of companies
can be found in the separate Corporate Responsibility report
published simultaneously as the company’s annual report for
2018.
3. Equity and Dividends
Equity
The management and the board regularly monitor that the
group’s equity and liquidity are appropriate for its objectives,
strategy and risk profile. The book equity of the group as per
December 31, 2018 is NOK 4 317 million, which represents an
equity ratio of 48 percent. The management of financial risk is
further described in the annual report.
Dividend Policy
The board proposes the level of dividend payment to the
general meeting who in turn is the decisive corporate body for
dividend decisions.
Over time, the aim is that Akastor’s shareholders shall receive
a competitive return on their investment either through cash
dividends or increase in the share price, or both. The company
does not intend to distribute regular or annual dividends, but
will consider dividends on an ongoing basis taking into
consideration the company’s M&A activities, expected cash
flow, capital expenditure plans, financing requirements and
appropriate financial flexibility.
Authorizations for the Board of Directors
Proposals from the board of directors for future authorizations
for share capital increases, share buy-backs or similar shall be
for defined purposes, such as share purchase programs and
acquisitions of companies, and shall remain in effect until the
next annual general meeting.
The company’s annual general meeting on April 6, 2018
resolved to authorize the board to purchase treasury shares
for three purposes for utilization, all of which were subject to
separate voting under the general meeting: (i) purchase of
treasury shares to be used as transaction currency
in
connection with acquisitions, mergers, demergers and other
transactions, (ii) purchase of treasury shares to be sold and/or
transferred to employees and directors under share purchase
programs and (iii) purchase of treasury shares for the purpose
of investment or for subsequent sale or deletion of such
shares. The authorizations were all limited to ten percent of
the share capital. The board’s authorizations to purchase
treasury shares are valid for the period until the date of the
annual general meeting of 2019. No shares were bought by the
company in 2018 pursuant to the authorizations to the board
of directors. As of December 31, 2018, the company holds 2
776 376 own shares.
set out in the Public Limited Liability Companies Act § 8-2,
second paragraph. The mandate is valid for the period until
the date of the annual general meeting of 2019.
There are no current provisions in the articles of association of
the company or power of attorney from the general meeting
which grant the board of directors the mandate to issue or buy
back of shares in the company for the purposes of capital
increases.
Share Purchase Programs
Share purchase programs in Akastor include Akastor ASA and
Akastor AS (and not the portfolio companies). The company
has not carried out any share purchase programs for employees
of Akastor ASA or Akastor AS in 2018. In December 2018, the
board of directors of Akastor ASA made use of its authorization
mandate to approve a share purchase program, which is to be
carried out in 2019.
4. Equal Treatment of Shareholders and Transactions
with Related Parties
The company has only one class of shares, and all shares carry
equal rights. Existing shareholders shall have pre-emptive
rights to subscribe for shares in the event of share capital
increases, unless otherwise indicated by special circumstances.
If the pre-emptive rights of existing shareholders are waived in
respect of a share capital increase, the reasons for such waiver
shall be explained by the board of directors. Transactions in
own shares are effected via Oslo Børs.
As of December 31, 2018, Aker ASA holds 70 percent of the
shares of Aker Kværner Holding AS which holds 40.27 percent
of the shares of Akastor. As of the same date, Aker ASA directly
held 23 331 762 shares of Akastor, equivalent to ~8.5 percent
of the shares. Proposition No. 88 (2006–2007) to Stortinget
(the Norwegian Parliament) contains more detailed
information concerning the establishment of Aker Kværner
Holding AS and the agreement between Aker ASA and the
other shareholder of Aker Kværner Holding AS.
The board of directors is of the view that it is positive for
Akastor that Aker ASA assumes the role of an active owner
and is actively involved in matters of importance to Akastor
and to all shareholders. The cooperation with Aker ASA offers
Akastor access to special know-how and resources within
strategy, transactions and funding. Moreover, Aker ASA offers
network and negotiation resources from which Akastor
benefits in various contexts. This complements and strengthens
Akastor without curtailing the autonomy of the group. It may
be necessary to offer Aker ASA special access to commercial
information
in connection with such cooperation. Any
information disclosed to Aker ASA’s representatives in such a
context is subject to confidentiality undertakings and disclosure
regulations in compliance with applicable laws.
In addition, the annual general meeting in 2018 granted the
board of directors the mandate to approve the distribution of
dividends based on the company’s annual accounts for 2017 as
Applicable accounting standards and regulations require Aker
ASA to prepare its consolidated financial statements to include
Annual Report 2018 | Corporate Governance Statement 15
IFRS 10. Akastor
accounting information of Akastor. As of January 1, 2014, Aker
ASA is deemed to have control of Akastor pursuant to the
is thus
revised accounting standard
consolidated as a subsidiary in Aker ASA’s accounts from this
date. Subsequently, Aker Solutions ASA and Kværner ASA are
deemed as related parties to Akastor for accounting purposes.
In order to comply with these accounting standards, Aker ASA
has in the past received, and will going forward receive,
information of Akastor. Such
unpublished accounting
distribution of unpublished accounting
information from
Akastor to Aker ASA is executed under strict confidentiality
and in accordance with applicable regulations on handling of
inside information.
Aker ASA, Kværner ASA and Aker Solutions ASA (or their
subsidiaries) are however not deemed, within the meaning of
the Public Limited Liability Companies Act, to be a related
party of Akastor. The board of directors and the executive
management team of Akastor are nevertheless conscious that
all relations with these companies shall be premised on
commercial terms and structured in line with arm’s length
principles.
In the event of any material transactions between the company
and shareholders, directors, senior executives, or related
parties thereof, which do not form part of the ordinary course
of the company’s business, the board of directors shall arrange
for an independent assessment. The same shall, generally
speaking, apply to the relationship between Akastor and Aker
ASA related companies.
In respect of the above, the «Related parties» note to the
consolidated financial statements contains information on the
most significant transactions between Akastor and companies
within the Aker ASA group.
5. Freely Negotiable Shares
The shares are listed on the Oslo Børs and are freely
transferable. No transferability restrictions are laid down in the
articles of association. There are no restrictions on the party’s
ability to own, trade or vote for shares in the company.
6. General Meetings
Attendance, Agenda and Voting
The company encourages shareholders to attend the general
meetings. It is also the intention to have representatives of the
board of directors as well as the chairman of the nomination
committee and the company’s auditor to attend the general
meetings. Notices convening general meetings, including
comprehensive documentation relating to the items on the
agenda, including the recommendation of the nomination
committee, shall be sought made available on the company’s
website no later than 21 days prior to the general meeting. The
articles of association of the company stipulate that documents
pertaining to matters to be deliberated by the general meeting
shall only be made available on the company’s website, and not
normally be sent physically by post to the shareholders unless
required by statute.
The following matters are typically decided at the annual
general meeting, in accordance with the articles of association
of Akastor ASA and Norwegian background law:
Election of the nomination committee and stipulation
of the nomination committee's fees;
election of shareholder representatives to the board of
directors as well as stipulation of fees to the board of
directors;
election of the external auditor and approval of the
auditor’s fee;
approval of the annual accounts and the board of
directors’ report, including distribution of dividend; and
other matters which, by law or under the articles of
association, are the business of the annual general
meeting.
The deadline for registering intended attendance is as close to
the general meeting as possible, but not shorter than two days
before the meeting. Shareholders who are unable to attend
may vote by proxy. Moreover, information concerning both the
registration procedure and the filing of proxies is included in
the notice convening the general meeting and on the
registration form. The company also aims to structure, to the
extent practicable, the proxy form such as to enable the
shareholders to vote on each individual item on the agenda.
Chairman
The articles of association stipulate that the general meetings
shall be chaired by the chairman of the board of directors or a
person appointed by said chairman. According to the Code of
Practice the board should however «make arrangements to
ensure an independent chairman for the general meeting».
Thus, the articles of Akastor ASA deviate from the Code of
Practice in this respect. This has its background in a long-
lasting tradition in Akastor. Having the chairman of the board
chairing the general meeting also simplifies the preparations
for the general meetings significantly.
Election of Directors
It is a priority for the nomination committee that the board of
directors shall work in the best possible manner as a team, and
that the background and competence of the directors shall
complement each other. As a consequence, the nomination
committee will propose that the shareholders are invited to
vote on the full board composition proposed by the nomination
committee as a group, and not on each director separately.
Hence, Akastor deviates from the Code of Practice stipulating
that one should make «appropriate arrangements for the
general meeting to vote separately on each candidate
nominated for election to the company’s corporate bodies».
Annual Report 2018 | Corporate Governance Statement 16
Physical Attendance and Electronic Voting
It is a priority for the general meeting to be conducted in a
sound manner, with all shareholder votes to be cast, to the
extent possible, on the basis of the same information. The
company has thus far not deemed it advisable to recommend
the introduction of an electronic attendance, i.e. arranging for
general meetings to be held as physical meetings with online
coverage allowing for shareholders to participate via web. The
company will contemplate the introduction of such arrangements
on an on-going basis in view of, inter alia, the security and ease of
use offered by available systems. Shareholders will have the
opportunity to cast votes electronically in advance of general
meetings (however, not during the meeting).
Minutes
Minutes of general meetings will be published as soon as
practicable on the announcement system of Oslo Børs,
www.newsweb.no (ticker: AKA), and at www.akastor.com.
7. Nomination Committee
The articles of association stipulate that the company shall
have a nomination committee. The nomination committee
shall have no less than three members, who shall normally
serve for a term of two years. The current members of the
nomination committee are Leif-Arne Langøy (chairman),
Gerhard Heiberg, Arild S. Frick and Georg Fr. Rabl. Gerhard
Heiberg is elected up until the annual general meeting 2020,
while Leif-Arne Langøy, Arild S. Frick and Georg Fr. Rabl are up
for electionat the annual general meeting 2019. Langøy is
deputy chairman of the board in TRG Holding AS and The
Resource Group TRG AS, as well as chairman of the board of
Kværner ASA. Arild S. Frick is General Counsel of Aker ASA
and managing director of Aker Kværner Holding AS. No
members of the nomination committee are employed by, or
directors of, Akastor. The majority of the members of the
nomination committee are independent of both Akastor’s
board of directors and the executive management of the
company.
The committee’s recommendations (relating to particularly
the board of directors and their remuneration) shall address
how the new board candidates will attend to the interests of
the shareholders in general and fill the requirements of the
company, including with respect to competence, capacity and
independence.
The composition of the nomination committee shall reflect
the interests of all shareholders and ensure independence
from the board of directors and the executive management.
The members and the chairman of the nomination committee
are appointed by the general meeting, which also determines
the remuneration of the committee.
The annual general meeting in 2010 adopted guidelines
governing the duties of the nomination committee. According
to these guidelines, the committee shall emphasize that
candidates for the board have the necessary experience,
competence, and capacity to perform their duties in a
satisfactory manner. A reasonable representation with regard
to gender and background should also be emphasized.
The chairman of the nomination committee has the overall
responsibility for the work of the committee. In the exercise of
its duties, the nomination committee may contact, among
others, shareholders, the board, management, and external
advisors. The nomination committee shall also ensure that its
recommendations are endorsed by the largest shareholders.
Information concerning the nomination committee and
deadlines for making suggestions or proposing candidates for
directorships will be made available on the company’s website,
www.akastor.com when there are candidates up for election.
8. Composition and Independence of the Board of
Directors
Composition
It has been agreed with the employees that the company shall
have no corporate assembly. Hence, the board appoints its
own chairman, cf. the Public Limited Liability Companies Act
section 6-1(2), unless the chairman is appointed by the general
meeting. The proposal of the nomination committee will
normally include a proposed candidate for appointment as
chairman of the board of directors. The board of directors
appoints its own deputy chairman. According to the Public
Limited Liability Companies Act, the directors are appointed
for a term of two years at a time unless otherwise stated in the
company’s articles of association. The articles of association of
Akastor ASA stipulate that directors may be elected for a
period of one to three years.
The right of the employees to be represented and participate
in decision making is safeguarded through expanded employee
representation on the board of directors of both Akastor ASA
and in a number of the group’s portfolio companies.
The articles of association stipulate that the board of directors
shall comprise six to twelve persons, one third of whom shall
be elected by and amongst the employees of the group. In
addition, up to three shareholder-appointed alternates may be
appointed. As per December 31, 2018, the board of directors
comprised eight directors, five of whom were elected by the
shareholders and three of whom were elected by and amongst
the employees. The company encourages the directors to hold
shares in the company. The shareholdings of the directors as
of December 31, 2018 will be set out in the «Management
remunerations» note to the consolidated financial statements
in the annual report for 2018. In addition to Øyvind Eriksen’s
indirect ownership of shares in the company through Aker
ASA, also the chairman Kristian Monsen Røkke and the
directors Lone Fønss Schrøder, Kathryn M. Baker and Sarah
Ryan are currently shareholders in Akastor ASA. The board
information about the directors’
composition,
including
Annual Report 2018 | Corporate Governance Statement 17
background and expertise will be detailed in the annual report
for 2018.
step down from participating in the discussion of the matter at
hand.
The appointment of employee representatives to the board of
directors is conducted as prescribed by the Public Limited
Liability Companies Act and the Representation Regulations.
The board of directors has appointed a designated election
committee charged with implementing the appointment of
such employee representatives.
Independence
A majority of the directors elected by the shareholders are
independent of the executive personnel and important business
associates of Akastor ASA. None of the executive personnel of
the company are members of the board of directors.
The composition of the board of directors aims to ensure that
the interests of all shareholders are attended to, and that the
company has the know-how, resources, and diversity it needs
at its disposal. Among the five shareholder-elected directors,
the majority are deemed independent from the company’s
largest indirect shareholder, Aker ASA.
9. The Work of the Board of Directors
Procedures
For each calendar year, the board plans for its work and
meetings. Furthermore, there are rules of procedure for the
board of directors and Chief Executive Officer, which govern
areas of responsibility, duties and the distribution of roles
between the board of directors, the chairman of the board of
directors and the Chief Executive Officer. The rules of
procedure for the board of directors also include provisions on
convening and chairing board meetings, decision making, the
duty and right of the Chief Executive Officer to disclose
information to the board of directors, the duty of confidentiality,
etc. According to the company’s articles of association, each of
the directors elected by the shareholders will serve for a period
of one to three years pursuant to further decision by the
general meeting. This to provide the nomination committee
with the flexibility to propose varying terms of service for the
candidates.
Akastor has prepared guidelines as part of its rules of procedure
for the Chief Executive Officer and board of directors ensuring
that directors and the Chief Executive Officer notify the board
of directors if they have any material direct or indirect personal
interest in any agreement concluded by the group. The
guidelines stipulate that the directors and the Chief Executive
Officer shall not participate in the preparation, deliberation, or
resolution of any matters that are of such special importance
to themselves, or any of their related parties, so that the
person in question must be deemed to have a prominent
personal or financial interest in such matters. The relevant
board member or the Chief Executive Officer shall raise the
issue of his or her competence whenever there may be cause
to question it, and each director is the primary responsible for
adopting the correct decision as to whether he or she should
In general, as further stipulated in Akastor’s principles for
related party transactions, directors of Akastor should be
cautious in participating in the consideration of issues where a
potential conflict of interest or conflict of role may arise,
undermining the confidence in the decision process. Such
person may not participate in board discussions of more than
one company that is part of the same agreement, unless the
companies have common interests. These assessments will be
carried out on a case-by-case basis; in most events, and as a
starting point, by the relevant directors themselves, but often
also in cooperation with internal and/or external legal counsel.
The above principles will normally also be applied if Akastor
contracts with other companies in which said board members
hold direct or indirect ownership interests that exceed, in
relative terms, their ownership interests in Akastor.
If grounds for legal incapacity are established, the relevant
board member will, as a ground rule, not be granted access to
any documentation prepared to the board of directors for the
deliberation of the agenda item in question.
In general, Akastor applies a strict norm as far as competence
assessments are concerned. In cases where the chairman of
the board of directors does not participate in the deliberations,
the deputy chairman of the board of directors chairs the
meeting.
As far as the other officers and employees of Akastor are
concerned, transactions with related parties and conflicts of
interest are comprehensively addressed and regulated in the
group’s Code of Conduct.
Meetings
The board of directors will hold board meetings whenever
needed, but normally six to twelve times a year. The need for
extraordinary board meetings may typically arise because the
internal authorization structure of the company requires the
board of directors to deliberate and approve material tenders
to be submitted by the company or in relation to M&A
transactions. Whilst the deadlines for such submission often
change, it is difficult to fit this into the calendar of ordinary
board meetings.
The board of directors held eight ordinary board meetings in
2018. The aggregate attendance rate at the board meetings
was 90.6 percent.
The Matters Discussed by the Board of Directors
The Chief Executive Officer prepares cases for deliberation by
the board of directors in cooperation with the chairman of the
board. Endeavours are made to prepare and present matters in
such a way that the board of directors is provided with an
adequate basis for its deliberations. The board of directors has
overall responsibility for the management of Akastor and shall,
Annual Report 2018 | Corporate Governance Statement 18
through the Chief Executive Officer, ensure that its activities
are organized in a sound manner. The board of directors shall
adopt plans and budgets for the business, and keep itself
informed of the financial position of, and development within,
the company. This encompasses the annual planning process
of Akastor, with the adoption of overall goals and strategic
choices for the group, as well as financial plans, budgets, and
forecasts for the group and the portfolio companies. The
board of directors performs annual evaluations of its work and
its know-how.
Audit Committee
Akastor will have an audit committee comprising two to four
of the directors. The audit committee currently comprises the
directors Lone Fønss Schrøder (chairman), Kathryn M. Baker
and Henning Jensen. The audit committee is independent
from the management.
At least one of the members of the audit committee shall have
either formal qualifications within accounting or auditing, or
relevant experience and skills within the same. Both members
Fønss Schrøder and Baker have such relevant experience and
skills. The audit committee has a mandate and a working
method that complies with statutory requirements. The audit
committee mandate forms an integrated part of the rules of
procedures for the board of directors. The committee will
participate, on behalf of the board of directors, in the quality
assurance of guidelines, policies, and other governing
instruments in Akastor. The audit committee performs a
qualitative review of the quarterly and annual reports of
Akastor. Significant judgment calls (uncertain estimates) made
in the financial statements in the quarter are reviewed by the
audit committee. The audit committee further supports the
board of directors in safeguarding that the company has sound
risk management and internal controls. The audit committee
reviews the status on internal controls on an annual basis. In
order to safeguard appropriate processes and assessments,
the board’s audit committee shall also review major M&A
transactions as well as related party transactions which are not
part of the company’s ordinary course of business, unless such
related party transactions are immaterial.
Akastor currently has no remuneration committee as the
experiences from having such showed more merit in discussing
matters comprised by this committee’s mandate with all
directors present. As of December 31, 2018, there are no other
board committees than the audit committee. The board does
not envisage appointing any further board committees in 2019.
The board evaluate its performance and qualification annually.
A summary of the evaluation was made available to the
nomination committee.
10. Risk Management and Internal Control
appropriate in relation to the extent and nature of the
company’s activities. The audit committee supports the board
of directors in safeguarding that the company has internal
procedures and systems that ensure good corporate
governance, stakeholder engagement, effective
internal
controls and proper risk management, particularly in relation
to financial reporting. The Chief Financial Officer reports
directly to the audit committee on matters relating to financial
reporting, financial risks and internal controls.
Akastor has implemented an internal system for reporting
serious matters such as breaches of ethical guidelines and
violations of the law, which is also available to external parties
at www.akastor.com.
Risk Management
Akastor and its portfolio companies are exposed to a variety of
market, operational and financial risks. The board of directors
carries out an annual review of the company’s most important
areas of exposure to risk and its internal control arrangements.
Being an investment company, the main objective of Akastor is
to create value for its shareholders. Potential impacts on the
net asset value, share price or predictability of earnings are
therefore key parameters in the board’s risk evaluation. Sound
risk management throughout the organization is recognized
by Akastor as an invaluable tool in the process of achieving
strategic, financial and operational goals while at the same
time ensuring compliance with regulatory requirements and
adherence to high integrity standards.
Risk evaluation is an integral part of all business activities and
Akastor employs a decentralized model for allocating
managerial responsibility under which the portfolio companies
are required to establish their own risk management and
internal control systems. Akastor’s representatives on boards
of directors in the portfolio companies seek to ensure that the
portfolio companies follow the principles of sound corporate
governance.
Akastor manages risk through an internal framework both on a
corporate and portfolio company level comprising guidelines,
policies and procedures intended to ensure good business
operations and provide unified and reliable financial reporting.
The board of directors has adopted an authorization matrix
that forms part of its governing documents where authority is
delegated to the Akastor Chief Executive Officer. Furthermore,
authorization matrices are adopted for each of the portfolio
companies, pursuant to which the Akastor Chief Executive
Officer delegates authority to the boards and Chief Executive
Officers of the respective portfolio companies, which again
adopts authorization matrices for the portfolio organizations.
Special expenditure approval procedures have also been
developed.
Governing Principles
The board of directors shall ensure that Akastor has sound
internal control and systems for risk management that are
The board receives and reviews risk reports prepared by the
management. The management’s risk reporting is based on
the total level of insight obtained through regular reporting
Annual Report 2018 | Corporate Governance Statement 19
and the close cooperation that Akastor has with the portfolio
companies, including from Akastor’s investment directors and
board representatives. Management of operational risk
primarily rests with the underlying portfolio companies,
although Akastor acts as an active driver through
its
involvement on the boards and through support and follow-up
by the various Akastor corporate functions towards relevant
functions in the portfolio companies.
Akastor’s management holds review meetings with the
management of the different portfolio companies. The
purpose of the meetings is to conduct an in-depth review of
the development of each portfolio company, focusing on
operations,
the
competitive situation and strategic issues. These meetings
provide a solid foundation for Akastor’s assessment of its
overall financial and operational risk.
risk management, market conditions,
A key risk in one of the smaller portfolio companies may still be
negligible on the group level, whereas important risks in the
largest portfolio companies may have a serious impact on the
group as a whole. Akastor’s decentralized approach to
operational risk management, as described above, raises a
need for management to process and calibrate the insight
obtained through various
interfaces with the portfolio
companies prior to the board’s annual risk review. The objective
of such exercise is to ensure that risks are reported in a format
that allows the board to acquire a true and fair view of the
overall risk environment of the Akastor group in an efficient
manner and to focus its attention on risks that are material on
an aggregated group level.
Prior to the board’s review of risk reporting, the audit
committee reviews the reported risks and associated risk-
reducing measures. The audit committee also reviews the
company’s in-house reporting systems and internal control and
risk management, and prepares the board’s review of financial
reporting.
Financial Reporting
The Akastor financial reporting division reports to the Chief
Financial Officer and is responsible for the external reporting
process and the internal management financial reporting
process. This also includes assessing financial reporting risks
and internal controls over financial reporting in the group.
The consolidated external financial statements are prepared in
accordance with IFRS and IAS standards as approved by the
EU. The existing policies and standards governing the annual
and quarterly financial reporting in the group, including the
Akastor accounting principles, are available on the Akastor
intranet for Akastor employees.
Clearing meetings are held with the management teams of the
portfolio companies in connection with the annual closing of
accounts and may also be held in connection with quarterly
financial reporting. For the 2018 financial year, clearing
meetings with the portfolio companies were held in October
2018 and January 2019. The main purpose is to ensure high-
quality financial reporting. Such meetings focus on important
items involving estimation and judgment, non-balance-sheet
items, accounting for significant transactions, new or modified
accounting principles and other topics relevant to the
respective portfolio companies. The external auditor is present
in the clearing meetings.
Other Reporting
In addition to the abovementioned financial reporting, there
are regular business review and board meetings in the portfolio
companies which ensure timely and high-quality reporting
from the portfolio companies to the corporate management.
Regular reports for Akastor ASA and the portfolio companies
are submitted to the board of directors. The quarterly business
update contains key financial numbers, M&A updates, financing,
status of value creation plans, compliance, risk management
and share price information for the Akastor group. Further, it
contains key financial numbers, key operational topics, status
on value drivers as well as key market information for the main
portfolio companies. The monthly business update contains
high level financial and operational information for the Akastor
group, as well as key highlights for the main portfolio
companies.
11. Remuneration of the Board of Directors
The remuneration of the board of directors will reflect its
responsibilities, know-how and time commitment, as well as
the complexity of the business. The remuneration will be
proposed by the nomination committee, and
is not
performance-related or linked to options in Akastor. More
detailed information about the remuneration of individual
directors will be provided in the «Management remunerations»
note to the consolidated financial statements for the group in
the annual report for 2018. Neither the directors, nor
companies with whom they are affiliated, should accept
specific paid duties for Akastor beyond their directorships. If
they nevertheless do so, the board of directors shall be
informed and the remuneration shall be approved by the board
of directors. No remuneration shall be accepted from anyone
other than the company or the relevant group company in
connection with such duties.
12. Remuneration of Executive Personnel
The board of directors has adopted designated guidelines for
the remuneration of executive management pursuant to the
provisions of Section 6-16a of the Public Limited Liability
Companies Act. The guidelines were adopted by the general
meeting April 6, 2018. The board of directors’ statement on
the remuneration of executive personnel for 2019 will be a
separate item on the agenda for the annual general meeting
on April 9, 2019.
Akastor has no option schemes or option programs for the
allotment of shares to employees. The Chief Executive Officer
Annual Report 2018 | Corporate Governance Statement 20
determines the remuneration of executive management on
the basis of the guidelines laid down by the board of directors.
All performance-related remuneration within the group will be
made subject to a cap.
13. Information and Communication
The company has adopted a designated communications and
investor relations policy which covers, among other things,
guidelines for the company’s contact with shareholders other
than through general meetings.
The company’s reporting of financial and other information is
based on openness and the equal treatment of all securities
market players. The long-term purpose of the investor
relations function is to ensure access for the company to
capital on competitive terms, whilst at the same time ensuring
that the shareholders are provided with the most correct
pricing of the shares that can be achieved. This shall take place
through correct and timely distribution of price-sensitive
information, whilst ensuring, at the same time, that the
company is in compliance with applicable rules and market
practices. Reference is also made to the above discussion
concerning the flow of information between Akastor and Aker
ASA in connection with their cooperation within, inter alia,
strategy, transactions, and funding.
All stock exchange announcements and press releases are
made available on the company’s website, and stock exchange
announcements are also available at www.newsweb.no. The
company holds open presentations in connection with the
reporting of financial performance, either by a physical meeting
or by a conference call and webcast, and these presentations
are broadcasted on the internet. The financial calendar of the
company is available at www.akastor.com.
14. Take-overs
The overriding principle for Akastor is equal treatment of
shareholders. In a bid situation, the board of directors and
management have an independent responsibility to help
ensure that shareholders are treated equally, and that the
company’s business activities are not disrupted unnecessarily.
In a take-over situation, the board will have a particular
responsibility to ensure that shareholders are given sufficient
information and time to form a view of the offer.
The board of directors has not deemed it appropriate to adopt
specific guidelines for take-over situations as long as the
ownership cooperation context within Aker Kværner Holding
AS remains intact and this company continues to be the
dominant shareholder of Akastor ASA. This represents a
deviation from the Code of Practice.
15. Auditors
The external auditor presents a plan for the performance of
the audit work to the audit committee annually. In addition, the
auditor provides the audit committee with an annual written
confirmation to the effect that the independence requirement
is met. The auditor attends all audit committee meetings, and
the auditor has reviewed any material changes to the
accounting principles of the company, or to the internal
controls of the company, with the audit committee. The
external auditor also attends the board meeting where the
annual financial statements are reviewed and approved,
normally in March. The board of directors holds a minimum of
one annual meeting with the auditor without any executive
personnel being in attendance.
The board’s audit committee stipulates guidelines on the
scope for using the auditor for services other than auditing,
and makes recommendations to the board of directors
concerning the appointment of the external auditor and the
approval of the auditor’s fees. Fees payable to the auditor,
separated into those relating to auditing and those relating to
other services, are specified in the «Other operating expenses»
note to the consolidated financial statements for the group
and are also reported to the general meeting. The auditor’s
fees relating to auditing are subject to approval by the general
meeting.
Annual Report 2018 | Corporate Governance Statement 21
a.04. FINANCIALS AND NOTES
AKASTOR GROUP
Akastor Group | Consolidated income statement
Akastor Group | Consolidated statement of comprehensive income
Akastor Group | Consolidated statement of financial position
Akastor Group | Consolidated statement of changes in equity
Akastor Group | Consolidated statement of cash flow
General
Note 1
Note 2
Note 3
Note 4
| Corporate information
| Basis for preparation
| Significant accounting principles
| Significant accounting estimates and judgements
Performance of the year
| Discontinued operations
| Operating segments
| Revenue and other income
| Salaries, wages and social security costs
| Other operating expenses
Note 5
Note 6
Note 7
Note 8
Note 9
Note 10 | Net finance expenses
| Income tax
Note 11
Note 12 | Earnings per share
Assets
Note 13 | Property, plant and equipment
Note 14 | Intangible assets
Note 15 | Impairment testing of goodwill
Note 16 | Equity-accounted investees
Note 17 | Other non-current assets
Note 18 | Other investments
Note 19 | Current interest-bearing receivables
Note 20 | Inventories
Note 21 | Trade and other receivables
Note 22 | Cash and cash equivalents
Equity and liabilities
Note 23 | Capital and reserves
Note 24 | Borrowings
Note 25 | Other non-current liabilities
Note 26 | Employee benefits - pension
Note 27 | Provisions
Note 28 | Trade and other payables
Financial risk management
Note 29 | Capital management
Note 30 | Financial risk management and exposures
Note 31 | Derivative financial instruments
Note 32 | Financial instruments
Other
Note 33 | Operating leases
Note 34 | Group companies
Note 35 | Related parties
Note 36 | Management remunerations
Annual Report 2018 | Financials and Notes | Akastor GroupFinancials and Notes | Akastor Group
22
Akastor Group | Consolidated income statement
For the year ended December 31
Amounts in NOK million
Revenue and other income
Materials, goods and services
Salaries, wages and social security costs
Other operating expenses
Operating expenses
Operating profit before depreciation, amortization and impairment
Depreciation and amortization
Impairment
Operating profit (loss)
Finance income
Finance expenses
Profit (loss) on foreign currency forward contracts
Profit (loss) from equity-accounted investees
Impairment loss on external receivables
Net finance expenses
Profit (loss) before tax
Income tax benefit (expense)
Profit (loss) from continuing operations
Profit (loss) from discontinued operations (net of income tax)
Profit (loss) for the period
Profit (loss) for the period attributable to:
Equity holders of the parent company
Basic / diluted earnings (loss) per share (NOK)
Basic / diluted earnings (loss) per share continuing operations (NOK)
1) See note 5 Discontinued operations
Note
6,7
8
9
13,14
13,14
16
10
11
5
12
12
2018
2017
Restated 1)
3 800
3 606
(1 513)
(1 424)
(572)
(3 509)
290
(181)
-
109
185
(202)
(2)
(157)
(24)
(200)
(1 461)
(1 561)
(468)
(3 490)
116
(278)
(118)
(280)
115
(179)
(121)
(212)
(9)
(406)
(91)
(686)
(103)
(194)
(128)
(322)
(20)
(706)
648
(58)
(322)
(58)
(1.19)
(0.71)
(0.21)
(2.60)
Annual Report 2018 | Financials and Notes | Akastor Group
Akastor Group | Consolidated statement of comprehensive income
For the year ended December 31
Amounts in NOK million
Profit (loss) for the period
Other comprehensive income
Cash flow hedges, effective portion of changes in fair value
Deferred tax of cash flow hedges, effective portion of changes in fair value
Cash flow hedges, reclassification to income statement
Deferred tax of cash flow hedges, reclassification to income statement
Total change in hedging reserve, net of tax
Total change in fair value reserve, net of tax
Currency translation differences - foreign operations
Currency translation differences, reclassification to income statement upon disposal
Deferred tax of currency translation differences – foreign operations
Share of OCI from equity-accounted investees
Total change in currency translation reserve, net of tax
Total items that may be reclassified subsequently to profit or loss, net of tax
Remeasurement gain (loss) net defined benefit liability
Deferred tax of remeasurement gain (loss) net defined benefit liability
Total items that will not be reclassified to profit or loss, net of tax
Total other comprehensive income, net of tax
Total comprehensive income (loss) for the period, net of tax
Attributable to:
Equity holders of the parent company
Note
5
26
23
2018
(322)
(80)
15
(43)
7
(101)
(37)
51
(442)
7
(44)
(428)
(565)
(4)
-
(4)
2017
(58)
71
(17)
15
(5)
64
9
(60)
(227)
(13)
-
(300)
(228)
(7)
(11)
(17)
(569)
(245)
(891)
(303)
(891)
(303)
Annual Report 2018 | Financials and Notes | Akastor Group
24
Akastor Group | Consolidated statement of financial position
For the year ended December 31
Amounts in NOK million
Assets
Deferred tax assets
Property, plant and equipment
Intangible assets
Other non-current assets
Equity-accounted investees
Other investments
Non-current interest-bearing receivables
Total non-current assets
Current tax assets
Inventories
Trade and other receivables
Derivative financial instruments
Current interest-bearing receivables
Other current assets
Cash and cash equivalents
Total current assets
Total assets
Equity and liabilities
Issued capital
Treasury shares
Other capital paid in
Reserves
Retained earnings
Total equity attributable to the equity holders of the parent company
Total equity
Non-current borrowings
Employee benefit obligations
Deferred tax liabilities
Other non-current liabilities
Provisions, non-current
Total non-current liabilities
Current borrowings
Current tax liabilities
Provisions, current
Trade and other payables
Derivative financial instruments
Total current liabilities
Total liabilities
Total equity and liabilities
Note
2018
2017
11
13
14
17
16
18
20
21
31
19
22
23
23
24
26
11
25
27
24
27
28
31
374
825
1 260
62
1 088
1 469
-
5 077
4
548
2 801
117
257
-
198
3 927
9 005
162
(2)
1 534
253
2 369
4 317
4 317
588
332
9
390
166
1 485
14
8
236
2 734
210
3 203
4 687
9 005
661
4 419
1 435
100
10
536
1
7 163
21
569
2 263
94
-
51
168
3 165
10 328
162
(2)
1 534
862
2 271
5 277
5 277
2 133
349
10
110
221
2 823
399
23
293
1 493
20
2 228
5 051
10 328
Fornebu, March 14, 2019 | Board of Directors of Akastor ASA
Kristian Røkke I Chairman
Lone Fønss Schrøder I Deputy Chairman
Øyvind Eriksen I Director
Kathryn M. Baker I Director
Sarah Ryan I Director
Henning Jensen I Director
Asle Christian Halvorsen I Director
Stian Sjølund I Director
Karl Erik Kjelstad I CEO
Annual Report 2018 | Financials and Notes | Akastor Group
25
Akastor Group | Consolidated statement of changes in equity
Share
capital
Treasury
shares
Other
capital
paid in
Hedging
reserve 1)
Fair value
reserve 1)
Currency
translation
reserve 1)
Retained
earnings
Total
parent
company
equity
holders
Total
equity
Amounts in NOK million
2017
Equity as of January 1, 2017
162
(2)
1 534
Profit (loss) for the period
Other comprehensive income
Total comprehensive income
-
-
-
-
-
-
-
-
-
Equity as of December 31, 2017
162
(2)
1 534
2018
Adjustment on initial application of
IFRS 9 and IFRS 15, net of tax 2)
Equity as of January 1, 2018
Profit (loss) for the period
Other comprehensive income
Total comprehensive income
-
162
-
-
-
-
-
(2)
1 534
-
-
-
-
-
-
Equity as of December 31, 2018
162
(2)
1 534
15
-
64
64
79
(43)
36
-
(101)
(101)
(65)
-
-
9
9
9
-
9
-
(37)
(37)
(28)
1 075
-
(300)
(300)
775
-
775
-
(428)
(428)
346
2 796
5 580
5 580
(58)
(17)
(75)
(58)
(245)
(303)
(58)
(245)
(303)
2 721
5 277
5 277
(26)
(69)
(69)
2 695
(322)
5 208
5 208
(322)
(322)
(4)
(569)
(569)
(326)
2 369
(891)
(891)
4 317
4 317
1) See Note 23 Capital and reserves.
2) See Note 2 Basis for preparation.
Annual Report 2018 | Financials and Notes | Akastor Group 26
Akastor Group | Consolidated statement of cash flow
For the year ended December 31
Amounts in NOK million
Note
2018
2017
Cash flow from operating activities
Profit (loss) for the period - continuing operations
Profit (loss) for the period - discontinued operations
Profit (loss) for the period
Adjustments for:
Income tax expense (benefit)
Net interest cost and unrealized currency (income) loss
(Profit) loss on foreign currency forward contracts
Depreciation, amortization and impairment
(Gain) loss on disposal of subsidiaries
(Gain) loss on disposal of assets
(Profit) loss from equity-accounted investees
Other non-cash effects
Profit (loss) for the period after adjustments
Changes in operating assets
Cash generated from operating activities
Interest paid
Interest received
Income taxes paid
Net cash from operating activities
Cash flow from investing activities
Acquisition of property, plant and equipment
Payments for capitalized development
Proceeds from sale of subsidiaries, net of cash
Proceeds from sale of property, plant and equipment
Increase in receivables from/capital contribution to equity-accounted investees
Acquisition of other investments
Net cash from investing activities
Cash flow from financing activities
Proceeds from borrowings
Repayment of borrowings
Payment of finance lease liabilities
Net cash from financing activities
Effect of exchange rate changes on cash and bank deposits
Net increase (decrease) in cash and bank deposits
Cash and cash equivalents at the beginning of the period
Cash and cash equivalents at the end of the period
Of which is restricted cash
The statement included cash flows from discontinued operations prior to the disposal.
5
(194)
(128)
(706)
648
(322)
(58)
136
(74)
295
394
2
111
13, 14
665
752
5
16
13
14
5
(280)
(1 088)
(60)
(11)
130
176
(86)
(69)
479
134
146
(376)
625
(242)
(299)
(410)
34
38
(45)
(59)
315
(673)
(95)
(70)
(36)
(27)
1 103
868
94
4
(177)
(28)
(642)
(9)
247
737
924
647
(1 335)
(942)
(70)
(481)
(95)
(391)
24
(50)
(45)
30
(371)
168
540
22
198
-
168
8
Annual Report 2018 | Financials and Notes | Akastor Group
27
Note 1 | Corporate information
Akastor ASA is a limited liability company incorporated and domiciled in
Functional and presentation currency
Norway and whose shares are publicly traded. The registered office is
The consolidated financial statements are presented in NOK, which is
located at Oksenøyveien 10, Bærum, Norway. The largest shareholder
Akastor ASA’s functional currency. All financial information presented in
is Aker Kværner Holding AS and the ultimate parent company is The
NOK has been rounded to the nearest million (NOK million), except when
Resource Group TRG AS.
otherwise stated. The subtotals and totals in some of the tables in these
consolidated financial statements may not equal the sum of the amounts
The consolidated financial statements of Akastor ASA and its subsidiaries
shown due to rounding.
(collectively referred as Akastor or the group, and separately as group
companies) for the year ended December 31, 2018 were approved by the
When the functional currency in a reporting unit is changed, the effect of
board of directors and CEO on March 14, 2019. The consolidated financial
the change is accounted for prospectively.
statements will be authorized by the Annual General Meeting on April 9,
2019.
Use of estimates and judgements
The group is an oilfield services investment company with a portfolio
management to make judgements, estimates and assumptions that affect
of industrial holdings and other investments. Akastor is listed on the
the application of policies and reported amounts of assets and liabilities,
Oslo Stock Exchange under the ticker AKA. Information on the group’s
income and expenses. Although management believes these assumptions
structure is provided in Note 34 Group companies. Information on other
to be reasonable, given historical experience, actual amounts and results
related party relationships of the group is provided in Note 35 Related
could differ from these estimates. The items involving a higher degree of
The preparation of financial statements in conformity with IFRS requires
parties.
Note 2 | Basis for preparation
Basis of accounting
judgement or complexity, and items where assumptions and estimates are
material to the consolidated financial statements, are disclosed in Note 4
Significant accounting estimates and judgements.
The estimates and underlying assumptions are reviewed on an ongoing
basis. Revisions to accounting estimates are recognized in the period in
The consolidated financial statements have been prepared in accordance
which the estimate is revised and in any future periods affected.
with International Financial Reporting Standards as adopted by the
European Union (IFRS), their interpretations adopted by the International
Changes in significant accounting policies
Accounting Standards Board (IASB) and the additional requirements of
Akastor has initially adopted IFRS 15 Revenue from Contracts with
the Norwegian Accounting Act as of December 31, 2018.
Customers and IFRS 9 Financial Instruments from January 1, 2018. The
effects of initially applying these standards are described below.
Going concern basis of accounting
The consolidated financial statements have been prepared on a going
IFRS 15 Revenue from Contracts with Customers
concern basis, which assumes that the group will be able to meet the
mandatory terms and conditions of the banking facilities as disclosed in
IFRS 15 replaces IAS 18 Revenue, IAS 11 Construction contracts and the
Note 29 Capital management.
related interpretations. The standard introduces a new five-step model
that applies to revenue arising from contracts with customers.
Basis of measurement
The consolidated financial statements have been prepared on the historical
On transition to IFRS 15, the group has applied the new standard
cost basis except for the following material items, which are measured on
retrospectively with the cumulative effect of initial application recognized
an alternative basis on each reporting date:
as an adjustment to the opening balance of retained earnings as of January
Derivative financial instruments are measured at fair value
retrospectively only to contracts that were not completed by January 1,
1, 2018. Under this transition method, the standard has been applied
2018, and the comparable information presented for 2017 has not been
Non-derivative financial instruments at Fair Value through Profit
restated.
or Loss (FVTPL) are measured at fair value.
Debt instrument at Fair Value through Other Comprehensive
Income (FVOCI) are measured at fair value.
Contingent considerations assumed in business disposals are
measured at fair value.
Net defined benefit (asset) liability is recognized at fair value
of plan assets less the present value of the defined benefit
obligation.
Annual Report 2018 | Financials and Notes | Akastor Group 28
The following table summarizes the impact of transition to IFRS 15 on the group's retained earnings as of January 1, 2018.
Amounts in NOK million
Deferred tax assets
Trade and other receivables
Total assets
Retained earnings
Total equity
Impact of adopting IFRS 15 at January 1, 2018
8
(34)
(26)
(26)
(26)
The following tables summarize the impact of adopting IFRS 15 on the group's financial statements as of December 31, 2018. There was no material
impact on the group's statement of cash flows.
Impact on the consolidated statement of profit or loss and OCI
Amounts in NOK million
Revenue
Operating expenses
Profit (loss) before tax
Profit (loss) from continuing operations
Profit (loss) for the period
Total comprehensive income for the period
Impact on the consolidated statement of financial position
Amounts in NOK million
Deferred tax assets
Trade and other receivables
Others
Total assets
Total equity
Trade and other payables
Others
Total equity and liabilities
As reported
Adjustments
Amounts without
adoption of IFRS 15
3 800
(3 509)
109
(194)
(322)
(891)
(14)
13
(1)
(1)
(1)
(1)
3 786
(3 496)
108
(195)
(323)
(892)
As reported
Adjustments
Amounts without
adoption of IFRS 15
374
2 801
5 830
9 005
4 317
2 734
1 954
9 005
(8)
(593)
-
(601)
25
(626)
-
(601)
366
2 208
5 830
8 404
4 342
2 108
1 954
8 404
Annual Report 2018 | Financials and Notes | Akastor Group 29
The details of the new significant accounting policies and the nature of significant changes to previous accounting policies for each of the major customer
contract and revenue types are set out below.
Type of contract/revenue
Nature of performance obligations
Significant accounting policies
Construction revenue
Under construction contracts, specialized products
are built to a customer's specifications and the assets
have no alternative use to the group. If a construction
contract is terminated by the customer, the group has
an enforceable right to payment for the work complet-
ed to date. The contracts usually establish a milestone
payment schedule. The group has assessed that these
performance obligations are satisfied over time.
Each of the construction contracts normally includes
a single, combined output for the customer, such as
an integrated drilling equipment package. One single
performance obligation is usually identified in each
contract.
Assurance-type warranty for a period of 12-30 months
is normally included in construction contracts.
Under IFRS 15, revenue from these construction
performance obligations is recognized according to
progress. The progress is measured using an input
method that best depicts the group's performance.
The input method used to measure progress is
determined by reference to the costs incurred to date
relative to the total estimated contract costs. Revenue
in excess of costs is not recognized until the outcome
of the performance obligation can be measured reliably,
usually at 15-20 percent of completion.
Variable considerations, such as incentive bonus or
penalties, are included in construction revenue when
it is highly probable that a significant revenue reversal
will not occur. Potential penalty for Liquidated Damages
is recognized as a reduction of the transaction price
unless it is highly probable that it will not be incurred.
Disputed amounts and claims are only recognized when
negotiations have reached an advanced stage, customer
acceptance is highly likely and the amounts can be
measured reliably.
Contract modifications, usually in form of variation
orders, are only accounted for when they are approved
by the customers.
Changes in progress measurement from IAS 11 were
identified for some construction contracts due to the
implementation of input method under IFRS 15. The
implementation impacts of these changes are shown in
the tables above.
Sale of standard products
This revenue type involves sale of products or equip-
ment that are of a standard nature, not made to the
customer's specifications. Customers obtain control of
these products usually when the goods are delivered to
the customers according to the contract terms. Invoices
are usually generated when the products are delivered.
The group has assessed that these performance obliga-
tions are satisfied at a point of time.
Under IFRS 15, revenue from these performance
obligations is recognized when the customers obtain
control of the goods, which is essentially similar to the
timing when the goods are delivered to the customers.
The group has not identified any implementation effect
or significant impact on accounting policies related to
these revenues.
Service revenue
Assurance-type warranty for a period of 12-18 months is
normally included in these contracts.
Service revenue is generated from rendering of services
to customers. The customers simultaneously receive
and consume the benefits provided by these services.
The invoicing is usually based on the service provided
at regular basis. Under some service contracts, the in-
voices are based on hours or days performed at agreed
rates. The group has assessed that these performance
obligations are satisfied over time.
Under IFRS 15, service revenue is recognized over time
as the services are provided.
The revenue is recognized according to progress, or
using the invoiced amounts when the invoiced amounts
directly correspond with the value of the services that
are transferred to the customers. The progress is
normally measured using an input method, by the
reference of costs incurred to date relative to the total
estimated costs.
The group has not identified any implementation effect
or significant impact on accounting policies related to
these revenues.
IFRS 9 Financial Instruments
IFRS 9 replaces IAS 39 Financial Instruments Recognition and Measurement. The standard includes revised guidance on classification and measurement
of financial instruments, including a new expected credit loss model for calculating impairment on financial assets, and new general hedge accounting
requirements.
Annual Report 2018 | Financials and Notes | Akastor Group 30
The following table summarizes the impact of transition to IFRS 9 on the group's retained earnings as of January 1, 2018.
Amounts in NOK million
Deferred tax assets
Derivative financial assets
Total assets
Hedge reserves
Total equity
Impact of adopting IFRS 9 at January 1, 2018
14
(58)
(43)
(43)
(43)
The details of the new significant accounting policies and the nature of
categories: measured at Amortized cost, Fair value to Other Comprehensive
significant changes to previous accounting policies are set out below.
Income (FVOCI) and Fair value to Profit and Loss (FVTPL).
Classification and measurement of financial assets
The following table explains the original classification categories under IAS
39 and the new classification and measurement categories under IFRS 9
IFRS 9 largely retains the requirements in IAS 39 for the classification
for each class of the group's financial assets as of January 1, 2018. The
and measurement of financial liabilities. However, the standard contains
effect of adopting IFRS 9 on the carrying amounts of financial assets at
a new classification and measurement approach for financial assets that
January 1, 2018 relates solely to the new hedging accounting requirements,
reflects the business model in which assets are managed and their cash
as described further below. Please refer to Note 32 Financial instruments
flow characteristics. The standard contains three principal classification
for more description of these financial assets.
Original classification
under IAS 39
New classification
under IFRS 9
Original carrying
amount under IAS 39
New carrying
amount
under IFRS 9
Amounts in NOK million
Cash and cash equivalents
Trade and other receivables
Loans and receivables
Amortized cost
Loans and receivables
Amortized cost
Non-current interest-bearing receivables
Loans and receivables
Amortized cost
Other investments – equity instrument
Other investments - debt instrument
Mutual fund
Derivative financial instruments
Available for sale
Available for sale
Available for sale
FVTPL
FVOCI
FVTPL
Fair value - hedging
instruments
Fair value - hedging
instruments
Deferred and contingent considerations
Fair value through P&L FVTPL
168
1 451
1
144
392
12
94
105
168
1 451
1
144
392
12
36
105
Total financial assets
2 368
2 310
The following accounting policies apply to the initial and subsequent measurement of financial assets in the group.
Financial assets at amortized cost
Financial assets at FVTPL
Financial assets at FVOCI
These financial assets are initially recognized at fair value plus attributable transaction
costs, except for trade and other receivables that are measured at the transaction price.
Subsequently are these financial assets measured at amortized cost using the effective
interest method less any impairment losses. Interest income, foreign exchange gains and
losses and impairment losses are recognized in profit or loss.
These financial assets are initially and subsequently measured at fair value. Net gains and
losses, including any interest or dividend income, are recognized in profit or loss.
These financial assets are initially and subsequently measured at fair value. Interest income
calculated using the effective interest method, foreign exchange gains and losses and im-
pairment losses are recognized in profit or loss. Other net gains and losses are recognized
in OCI. On derecognition, gains and losses accumulated in OCI are reclassified to profit or
loss.
Impairment – Financial assets and contract assets
- 12-month ECLs: these are ECLs that result from possible default
IFRS 9 replaces the “incurred loss” model in IAS 39 with a forward-
events within the 12 months after the reporting dates;
looking “expected credit loss” (ECL) model. The new impairment
model applies to financial assets measured at amortized cost,
- life time ECLs: these are ECLs that result from all possible
FVOCI and contract assets.
default events over the expected life of a financial instrument. "
Under IFRS 9, loss allowance is measured based on either
ECLs are a probability-weighted estimate of credit losses. Credit
“12-month ECLs” or “lifetime ECLs”:
losses are measured as the present value of all cash shortfalls,
Annual Report 2018 | Financials and Notes | Akastor Group 31
discounted at the effective interest rate of the financial asset.
Standards issued but not yet effective
The group has elected to apply the simplified approach and apply
At the date of authorization of the group’s consolidated financial
"lifetime ECLs" for all trade receivables and contract assets.
statements, a number of new standards and interpretations were issued
Based on its assessment, the group has not identified significant
amended standards for the financial statements as of December 31, 2018.
impact on the consolidated financial statements from the
Of those standards that are not yet effective, IFRS 16 is expected to have a
adoption of the new impairment model.
material impact on the group’s financial statements in the period of initial
but not yet effective. The group has not early adopted any new or
Hedge accounting
application.
The group has elected to adopt the new general hedge
IFRS 16 Leases (effective from January 1, 2019)
accounting model in IFRS 9. The new hedge accounting rules
The standard replaces IAS 17 Leases and the related interpretations. The
will align the accounting for hedging instruments more closely
new standard introduces a single, on-balance sheet lease accounting model
with the group’s risk management practices. The group has
for lessees, with optional exemptions for short-term leases and leases of
concluded that all hedge relationships designated under IAS 39
low value items. A lessee recognizes a right-of-use asset representing
as of December 31, 2017 met the criteria for hedge accounting
its right to use the underlying asset and a lease liability representing its
under IFRS 9 as of January 1, 2018 and therefore regarded as
obligation to make lease payments. With regards to lessor accounting, the
continuing hedging relationships.
requirements remain similar to the current standard.
The group uses forward foreign exchange contracts to hedge the
The group has assessed the estimated impact that initial application of
variability in cash flows arising from changes in foreign exchange
IFRS 16 will have on its consolidated financial statements, as described
rates relating to foreign currency borrowings, receivables, sales
below. The actual implementation effects may differ from the estimate.
and inventory purchases. Under IAS 39, for all cash flow hedges,
the amounts accumulated in the cash flow hedge reserve are
Leases in which the group is a lessee
reclassified to profit or loss as a reclassification adjustment in
Currently, the group recognizes operating lease expense on
the same period as the hedged transaction occurs and affects
a straight-line basis over the term of the lease, mainly related
profit or loss. Under IFRS 9, for cash flow hedges associated
to office property leases, see Note 33 Operating leases. Upon
with forecast transactions that subsequently result in recognition
initial application of IFRS 16, the group will recognize right-of-
of a non-financial asset, the amounts accumulated in the cash
use (ROU) assets and lease liabilities for its operating leases.
flow hedge reserve and the cost of hedging reserve are instead
The nature of expenses related to those leases will change from
included directly in the initial cost of the non-financial asset when
operating expenses to depreciation charge for right-of-use
recognized.
assets and interest expense on lease liabilities.
This change has resulted in a reduction of the carrying amounts
In addition, the group will no longer recognize provisions for
of Hedge reserve and Derivative financial assets related to these
operating leases that it assesses to be onerous as described in
cash flow hedges, as shown in the table above.
Note 27 Provisions. Instead, the group will include the payments
due under the lease in its lease liability.
Transition
The group has adopted the exemption allowing it not to restate
Based on the information currently available, the group estimates
comparative information for prior periods with respect to
that it will recognize additional lease liabilities of NOK 674 million
classification and measurement changes, including impairment
as of January 1, 2019. The adoption of IFRS 16 will not impact
measurement. Therefore, comparative periods are not restated
loan covenants as described in Note 29 Capital management.
and accordingly, the information presented for 2017 reflects the
requirements of IAS 39. IFRS 9 is not applied to financial assets
Leases in which the group is a lessor
or financial liabilities that have been derecognized at the initial
The group has reassessed the classification of sub-leases in
application on January 1, 2018.
which the group is a lessor. Based on the information currently
available, the group expects that it will reclassify several sub-
The new hedge accounting
requirements are applied
leases as finance leases, resulting in recognition of a finance lease
prospectively. The impacts from the adoption of IFRS 9 are
receivable of NOK 55 million as of January 1, 2019.
recognized as an adjustment to the opening balance of the equity
as of January 1, 2018.
No significant impact is expected for other leases in which the
group is a lessor.
Transition
The group plans to apply IFRS 16 initially on January 1, 2019, using
the modified retrospective approach. Therefore, the cumulative
effect of adopting IFRS 16 will be recognized as an adjustment to
the opening balance of retained earnings at January 1, 2019, with
no restatement of comparative information.
Annual Report 2018 | Financials and Notes | Akastor Group 32
The group plans to apply the following practical expedients on
Other standards
transition to IFRS 16:
The following amended standards and interpretations are not expected to
have a significant impact on the group’s consolidated financial statements.
- Rely on assessment of whether leases are onerous applying
IAS 37 on December 31, 2018 as an alternative to performing
an impairment review of right-of-use assets for all its leases on
January 1, 2019. The group expects to reduce the right-of-use
IFRIC 23 Uncertainty over Tax Treatments.
Prepayment Features with Negative Compensation (Amendments
assets at January 1, 2019 by NOK 113 million of the onerous lease
to IFRS 9).
provisions recognized as of December 31, 2018.
Long-term
Interests
in Associates and Joint Ventures
- Apply the short term lease practical expedient to leases ending
(Amendments to IAS 28).
within 2019.
Plan Amendment, Curtailment or Settlement (Amendments to
- Exclude initial direct costs from measurement of right-of-use
IAS 19).
assets at the date of initial application.
The summary of estimated impact of adopting IFRS 16 as of January 1, 2019
various standards.
is as follows:
Amounts in NOK million
January 1, 2019
Standards.
Amendments to References to Conceptual Framework in IFRS
Annual Improvements to IFRS Standards 2015–2017 Cycle –
Right of Use assets
Finance lease receivables
Prepaid expenses
Total assets
Equity
Lease liabilities
Onerous lease provision
Total equity and liabilities
IFRS 17 Insurance Contracts.
520
55
(21)
554
(7)
674
(113)
554
Annual Report 2018 | Financials and Notes | Akastor Group 33
Note 3 | Significant accounting policies
Summary of significant accounting policies
A joint venture is an arrangement in which the group has joint control,
The principal accounting policies applied in the preparation of these
whereby the group has rights to the net assets of the arrangement, rather
consolidated financial statements are set out below. These policies have
to its assets and obligations for its liabilities. Joint control is established
been consistently applied to all the years presented, unless otherwise
by contractual agreement requiring unanimous consent of the ventures
stated.
Basis of consolidation
Subsidiaries
for strategic, financial and operating decisions. An associate is an entity in
which the group has significant influence, but not control or joint control,
over the financial and operating policies.
Subsidiaries are entities controlled by the group. The group controls
Interests in joint ventures and associates are accounted for using the
an entity when it is exposed to, or has rights to, variable returns from
equity method. They are initially recognized at cost, which includes
its involvement with the entity and has the ability affect those returns
transaction costs. Subsequent to initial recognition, the consolidated
through its power over the entity. The financial statements of subsidiaries
financial statements include the group’s share of the profit and loss and
are included in the consolidated financial statements from the date on
other comprehensive income of the equity-accounted investees. The
which control commences until the date of which control ceases.
group’s investment includes goodwill identified on acquisition, net of
Business combinations
any accumulated impairment losses. When the group’s share of losses
exceeds its interest in an equity-accounted investee, the carrying amount
Business combinations are accounted for using the acquisition method
of that interest, including any long-term investments, is reduced to zero,
as of the acquisition date, which is the date when control is transferred
and further losses are not recognized except to the extent that the group
to the group. The consideration transferred in the acquisition is generally
incurs legal or constructive obligations or has made payments on behalf
measured at fair value, as are the identifiable net assets acquired. Any
of the investee.
goodwill that arises is tested annually for impairment.
Transaction costs, other than those associated with the issue of debt or
share of profit and loss of the equity-accounted investee in the income
equity securities incurred in connection with a business combination are
statement. When the entity is established to share risk in executing a
The purpose of the investment determines the presentation of the group’s
expensed as incurred.
project or is closely related to Akastor’s operating activities, the share of
profit or loss is reported as part of Other income in Operating Profit. Share
Any contingent consideration payable is measured at fair value at the
of the profit or loss of a financial investment is reported as part of Net
acquisition date. Changes in the fair value of the contingent consideration
finance expenses.
from acquisition of a subsidiary or non-controlling interest for transactions
will be recognized in Other income as gain or loss, except for the obligation
Transactions eliminated on consolidation
that is classified as equity.
Intra-group balances and transactions, and any unrealized gains and
losses or income and expenses arising from intra-group transactions, are
When the group has entered into put options with non-controlling
eliminated in preparing the consolidated financial statements. Unrealized
shareholders on their shares in that subsidiary, the anticipated acquisition
gains arising from transactions with associates and joint ventures are
method is used. The agreement is accounted for as if the put option had
eliminated to the extent of the group’s interest in the entity. Unrealized
already been exercised. If the put option expires unexercised, then the
losses are eliminated in the same way as unrealized gains, but only to the
liability is derecognized and the non-controlling interest is recognized.
extent that there is no evidence of impairment.
Loss of control
Assets held for sale
On the loss of control, the group derecognizes the assets and liabilities of
Non-current assets, or disposal groups comprising assets and liabilities,
the subsidiary, any non-controlling interests and the other components of
that are expected to be recovered primarily through sale rather than
equity. Any resulting gain or loss is recognized in the income statement.
through continuing use, are classified as held for sale. This condition is
Any interest retained in the former subsidiary is measured at fair value
regarded as met only when the sale is highly probable and the asset or
when control is lost. Subsequently it is accounted for as an equity-
disposal group is available for immediate sale in its present condition.
accounted investee or as an available-for-sale financial asset depending
Management must be committed to the sale, which should be expected to
on the level of influence retained.
qualify for recognition as a completed sale within one year from the date
Any contingent consideration receivable is measured at fair value at the
of classification.
disposal date. Changes in the fair value of the contingent consideration
Non-current assets and disposal groups classified as held for sale are
from divestment of a subsidiary for transactions will be recognized in
measured at the lower of their carrying amount and fair value less costs to
Other income as gain or loss.
sell. Property, plant and equipment and intangible assets once classified as
held for sale are not depreciated or amortized, but are considered in the
Investments in joint ventures and associates
overall impairment testing of the disposal group.
The group’s interests in equity-accounted investees comprise interests in
joint ventures and associates.
No reclassifications are made for years prior to the year when non-current
assets or disposal groups are classified as a held for sale.
Annual Report 2018 | Financials and Notes | Akastor Group 34
Discontinued operations
Current/non-current classification
A discontinued operation is a component of the group’s business that
An asset is classified as current when it is expected to be realized or is
represents a separate major line of business or geographical area of
intended for sale or consumption in the group’s normal operating cycle, it
operations that has been disposed of or is held for sale, or is a subsidiary
is held primarily for the purpose of being traded, or it is expected/due to
acquired exclusively with a view to resale. Classification as a discontinued
be realized or settled within twelve months after the reporting date. Other
operation occurs upon disposal or when the operation meets the criteria
assets are classified as non-current.
to be classified as held for sale, if earlier.
In the consolidated income statement, income and expenses from
group’s normal operating cycle, is held primarily for the purpose of being
discontinued operations are reported separately from income and
traded, the liability is due to be settled within twelve months after the
expenses from continuing operations, down to the level of profit after
reporting period, or if the group does not have an unconditional right
taxes. When an operation is classified as a discontinued operation, the
to defer settlement of the liability for at least twelve months after the
comparative income statement is restated as if the operation had been
reporting period. All other liabilities are classified as non-current.
A liability is classified as current when it is expected to be settled in the
discontinued from the start of the comparative year.
Financial assets, financial liabilities and equity
The statement of cash flow includes the cash flow from discontinued
The group has initially adopted IFRS 9 from January 1, 2018. Significant
operations prior to the disposal. Cash flows attributable to the operating,
changes in the group’s accounting policies relating to financial instruments
investing and financing activities of discontinued operations are presented
are described in Note 2 Basis for preparation.
in the notes to the extent these represent cash flows with third parties.
Foreign currency
On initial recognition, a financial asset is classified as measured at amortized
costs, FVOCI or FVTPL. The classification depends on the group’s business
Foreign currency transactions and balances
model for managing the financial assets and the contractual terms of the
Transactions in foreign currencies are translated at the exchange rate at
cash flows.
the date of the transaction. Monetary assets and liabilities denominated
in foreign currencies at the reporting date are translated to the functional
A financial asset is measured at amortized costs if the business
currency at the exchange rate on that date. Foreign exchange differences
model is to hold the asset to collect contractual cash flows, and
arising on translation are recognized in the income statement. Non-
the contractual cash flows are solely payments of principal and
monetary assets and liabilities measured in terms of historical cost in a
interests (SPPI criterion).
foreign currency are translated using the exchange rate on the date of the
transaction. Non-monetary assets and liabilities denominated in foreign
A debt instrument is classified at FVOCI if the business model
currencies that are measured at fair value are translated to the functional
is both collecting contractual cash flows and selling the financial
currency at the exchange rates on the date the fair value is determined.
asset, and it meets the SPPI criterion.
Investments in foreign operations
All financial assets not classified as measured at amortized cost
Items included in the financial statements of each of the group’s entities
or FVOCI are measured at FVTPL.
are measured using the currency of the primary economic environment
in which the entity operates. The results and financial positions of all the
Financial assets are not reclassified subsequent to their initial recognition
group entities that have a functional currency different from the group’s
unless the group changes its business model for managing financial assets.
presentation currency are translated into the presentation currency as
follows:
Other investments
Assets and liabilities, including goodwill and fair value adjustments,
where the group has neither control nor significant influence, usually
are translated at the closing exchange rate at the reporting date.
represented by less than 20 percent of the voting power. The investments
Income statements are translated at average exchange rate for
recognized at fair value at the reporting date. Subsequent to initial
the year, calculated on the basis of 12 monthly end rates.
recognition, changes in financial assets measured at FVOCI, other than
are categorized as financial assets measured at FVTPL or FVOCI and
Other investments include equity and debt investments in companies
Exchange differences arising from the translation of the net investment
presented as part of fair value reserve. When financial assets measured
in foreign operations, and of related hedges, are included in other
at FVOCI is derecognized, the gain or loss accumulated in other
comprehensive income as currency translation reserve. These translation
comprehensive income is reclassified to profit and loss.
impairment losses, are recognized in other comprehensive income and
differences are reclassified to the income statement upon disposal of the
related operations or when settlement is likely to occur in the near future.
Trade and other receivables
Monetary items that are receivable from or payable to a foreign operation
less loss allowance made for credit losses. Trade and other receivables
are considered as part of the net investment in that foreign operation,
are valued at amortized cost using the effective interest rate method. The
when the settlement is neither planned nor likely to occur in the
interest rate element is disregarded if insignificant, which is the case for
foreseeable future. Exchange differences arising from these monetary
the majority of the group’s trade receivables.
Trade and other receivables are recognized at the original invoiced amount,
items are recognized in other comprehensive income.
Annual Report 2018 | Financials and Notes | Akastor Group 35
Interest-bearing receivables
other comprehensive income until the hedged cash flow is recognized
Interest-bearing receivables include loans to related parties. Such financial
in income statement. For cash flow hedges associated with forecast
assets are recognized initially at fair value and subsequent measurement
transactions that subsequently result in recognition of a non-financial
at amortized cost using the effective interest method, less any impairment
asset, the amounts accumulated in the cash flow hedge reserve and the
losses.
cost of hedging reserve are included directly in the initial cost of the non-
Cash and cash equivalents
Cash and cash equivalents include cash on hand, demand deposits held
Net investment hedge
financial asset when recognized.
at banks and other short-term highly liquid investments with original
Hedge of net investment in a foreign operation is accounted for similarly
maturity of three months or less.
Trade and other payables
to cash flow hedges. Gains or losses arising from the hedging instruments
relating to the effective portions of the net investment hedge are
recognized in other comprehensive income as currency translation
Trade payables are recognized at the original invoiced amount. Other
reserves. These translation reserves are reclassified to the income
payables are recognized initially at fair value. Trade and other payables
statement upon disposal of the hedged net investments, offsetting the
are valued at amortized cost using the effective interest rate method. The
translation differences from these net investments. Any ineffective portion
interest rate element is disregarded if it is insignificant, which is the case
is recognized immediately in the income statement as finance income or
for the majority of the group’s trade payables.
expenses. Gains and losses accumulated in other comprehensive income
are reclassified to the income statement when the foreign operation is
Interest-bearing borrowings
partially disposed of or sold.
Interest-bearing borrowings are recognized initially at fair value less
attributable transaction costs. Subsequent to initial recognition, interest-
Embedded derivatives
bearing borrowings are measured at amortized cost with any difference
Embedded derivatives are derivatives that are embedded in other
between cost and redemption value being recognized in the income
financial instruments or other non-financial host contracts. Under certain
statement over the period of the borrowings on an effective interest basis.
conditions, the embedded derivative must be separated from its host
Share capital
contract and the derivative is then to be recognized and measured as
any other derivative in the financial statements. Embedded derivatives
Ordinary shares are classified as equity. Repurchase of share capital is
must be separated when the settlement for a commercial contract is
recognized as a reduction in equity and is classified as treasury shares.
denominated in a currency different from any of the major contract
Derivative financial instruments
considered to be commonly used for the relevant economic environment
The group uses derivative financial instruments such as currency forward
defined as the countries involved in the cross-border transaction. Changes
contracts and currency swaps to hedge its exposure to foreign exchange
in the fair value of separated embedded derivatives are recognized
risks arising from operational, financial and investment activities. These
immediately in the income statement. All foreign currency exposure is
derivative financial instruments are accounted for as cash flow hedges
hedged, so the hedging instrument to the embedded derivative will also
since highly probable future cash flows are hedged (rather than committed
have corresponding opposite fair value changes in the income statement.
parties’ own functional currency, or that the contract currency is not
revenues and expenses). The group also has embedded foreign exchange
derivatives which have been separated from their ordinary commercial
Finance income and expense
contracts. Derivative financial instruments are recognized initially at fair
Finance income and expense include interest income and expense,
value. Derivatives are subsequently measured at fair value, and changes in
foreign exchange gains and losses, dividend income, gains and losses on
fair value are accounted for as described below.
derivatives, as well as change in fair value of financial assets measured
Cash flow hedge
at FVTPL. Interest income and expenses include calculated interest using
the effective interest method, in addition to discounting effects from
Hedging of the exposure to variability in cash flows that is attributable to
assets and liabilities measured at fair value. Gains and losses on derivatives
a particular risk or a highly probable future cash flow is defined as a cash
include effects from derivatives that do not qualify for hedge accounting
flow hedge. The effective portion of changes in the fair value is recognized
and embedded derivatives, in addition to the ineffective portion of
in other comprehensive income as a hedge reserve. All foreign exchange
qualifying hedges.
exposure is hedged. Any gain or loss relating to the ineffective portion of
derivative hedging instruments is recognized immediately in the income
Revenue recognition
statement as finance income or expense.
Revenue from contract with customers
Hedge accounting is discontinued when the hedge no longer qualifies for
implementation effects and the group’s significant accounting policies
hedge accounting. Disqualification occurs when the hedging instrument
relating to contracts with customers are decribed in Note 2 Basis for
The group has initially adopted IFRS 15 from January 1, 2018. The
expires, is sold, terminated or exercised, or when a forecast transaction
preparation.
is no longer expected or the hedge is no longer effective. When a hedge
is disqualified, the cumulative gain or loss that was recognized in the
Lease revenue
hedge reserve is recognized immediately in the income statement unless
Lease revenue from operating leases, mainly related to office leases, is
it relates to a future cash flow that is likely to occur, but don’t qualify for
recognized on a straight-line basis over the term of the relevant lease.
hedge accounting, in which the accumulated hedge reserve remains in
Annual Report 2018 | Financials and Notes | Akastor Group 36
Other income
Deferred tax assets are recognized for unused tax losses, tax credits and
Gains and losses resulting from acquisition and disposal of businesses
deductible temporary differences, to the extent that it is probable that
which do not represent discontinued operations are included in Other
future taxable profits will be available against which they can be utilized.
income. Such gains may result from the remeasurement of a previously
Measurement of deferred tax assets are reviewed at each reporting date.
held interest in the acquired entity. Changes in the fair value of the
contingent consideration from acquisition or disposal of a subsidiary are
Inventories
recognized as part of Other income.
Inventories are stated at the lower of cost or net realizable value. Net
Expenses
Construction contracts
realizable value is the estimated selling price in the ordinary course of
business, less the estimated costs of completion and selling expenses.
Contract costs include costs that relate directly to the specific contract
The cost of inventories is based on the first-in first-out principle and
and allocated costs that are attributable to general contract activity.
includes expenditures incurred in acquiring the inventories and bringing
Contract costs are generally expensed as incurred. See Note 4 Significant
them to their present location and condition. In the case of manufactured
accounting estimates and judgements for further description of cost
inventories and work in progress, cost includes an appropriate share of
estimate in a construction contract.
overheads based on normal operating capacity.
Lease payments
Impairment
Lease payments made under operating leases are recognized in the
Trade receivables and contract assets
income statement on a straight-line basis over the lease term. Any lease
Loss allowance is recognized in profit or loss and measured at life time
incentives received are recognized as an integral part of the total lease
ECLs. ECLs are a probability-weighted estimate of credit losses. Life time
expense, over the lease term.
Income tax
ECLs are the ECLs that result from all possible default events over the
expected life of a financial asset. The group considers a financial asset
to be in default when the group is unlikely to receive its outstanding
Income tax recognized in the income statement comprises current and
contractual amount in full, or the contractual payments are more than 90
deferred tax. Income tax is recognized in the income statement except
days past due. When estimating ECLs, the group considers reasonable and
to the extent that it relates to items recognized directly in equity or other
supportable information that is relevant and available without undue cost
comprehensive income.
or effort, based on the group’s historical experience including forward-
looking information. The loss allowance is recognized in financial items to
Current tax is the expected tax payable or receivable on the taxable income
the extent that impairment is caused by the insolvency of the customer.
or loss for the year, using tax rates enacted or substantially enacted at the
reporting date, and any adjustment to tax payable in respect of previous
The gross carrying amount of trade receivable is written off when the
years. Current tax payable also includes any tax liability arising from the
group has no reasonable expectations of recovering a trade receivable
declaration of dividends, recognized at the same time as the liability to pay
in its entirety or a portion thereof. The group individually makes an
the related dividend.
assessment with respect to the timing and amount of write-off based on
whether there is a reasonable expectation of recovery. Trade receivables
Deferred tax is recognized in respect of temporary differences between
that are written off could still be subject to enforcement activities in order
the carrying amounts of assets and liabilities for financial reporting and the
to comply with the group’s procedures for recovery of amounts due.
amounts used for taxation purposes. Deferred tax is not recognized for:
Goodwill not deductible for tax purposes
Debt instruments measured at amortized cost or at FVOCI are considered
The initial recognition of assets or liabilities that affects neither
borrower or it is probable that the borrower will enter bankruptcy or other
accounting nor taxable profit
financial reorganization. The loss allowance is charged to profit and loss.
to be “credit-impaired” when there is significant financial difficulty of the
Debt instruments measured at amortized cost or at FVOCI
Temporary differences relating to investments in subsidiaries to
Non-financial assets
the extent that they will not reverse in the foreseeable future.
The carrying amounts of the group’s non-financial assets (other than
employee benefit assets, inventories and deferred tax assets) are reviewed
Deferred tax is measured at the tax rates that are expected to be applied
at the end of each reporting period to determine whether there is any
to temporary differences when they reverse, based on the tax rates that
indication of impairment. If an indication of impairment exists, the asset’s
have been enacted or substantively enacted at the reporting date.
recoverable amount is estimated. Cash-generating units (CGU) containing
goodwill, intangible assets with an indefinite useful life and intangible
Deferred tax assets and liabilities are offset if there is a legally enforceable
assets that are not yet available for use are tested for impairment annually.
right to offset current tax liabilities and assets, and they relate to income
taxes levied by the same tax authority on the same taxable entity, or on
The recoverable amount is the greater of fair value less costs to sell and
different taxable entities which intend either to settle current tax liabilities
value in use. In assessing value in use, the estimated future cash flows
and assets on a net basis, or to realize the tax assets and settle the
are discounted to their present value using a pre-tax discount rate that
liabilities simultaneously.
reflects current market assessments of the time value of money and the
risks specific to the asset. For an asset that does not generate largely
Annual Report 2018 | Financials and Notes | Akastor Group 37
independent cash inflows, the recoverable amount is determined for the
and removing the assets and restoring the site on which they are
CGU to which the asset belongs.
located.
An impairment loss is recognized whenever the carrying amount of an
If the components of property, plant and equipment have different useful
asset or a CGU exceeds its recoverable amount. Impairment losses are
lives, they are accounted for as separate components.
recognized in the income statement.
Subsequent costs
An impairment loss recognized in respect of a CGU (or a group of CGUs)
The group capitalizes the cost of a replacement part or a component of
containing goodwill is allocated first to goodwill and then to the other
property, plant and equipment when that cost is incurred if it is probable
assets in the CGU(s) on a pro rata basis.
that the future economic benefits embodied with the item will flow to the
group and the cost of the item can be measured reliably. All other costs
An impairment loss on goodwill is not reversed. An impairment loss on
are expensed as incurred.
other assets is reversed if there has been a change in the estimates used
to determine the recoverable amount, and the change can be objectively
Depreciation
related to an event occurring after the impairment is recognized. An
Depreciation is normally recognized on a straight-line basis over the
impairment loss is reversed only to the extent that the asset’s carrying
estimated useful lives of property, plant and equipment.
amount does not exceed the carrying amount that would have been
determined, net of depreciation or amortization, if no impairment loss had
Intangible assets
been recognized.
Provisions
Goodwill
Goodwill that arises from the acquisition of subsidiaries is presented as
intangible asset. For the measurement of goodwill at initial recognition,
A provision is recognized when the group has a present obligation as a
see Business combinations.
result of a past event that can be estimated reliably and it is probable that
the group will be required to settle the obligation. If the effect is material,
Goodwill is measured at cost less accumulated impairment losses. In
provisions are determined by discounting the expected future cash flows
respect of equity-accounted investees, the carrying amount of goodwill
at a market based pre-tax rate that reflects current market assessments of
is included in the carrying amount of the investment, and any impairment
the time value of money and, where appropriate, the liability-specific risks.
loss is allocated to the carrying amount of the equity-accounted investee
The unwinding of the discount is recognized as finance expense.
as a whole.
Warranties
When the group disposes of an operation within a CGU or group of CGUs
Provision for warranties is recognized when the underlying products or
to which goodwill has been allocated, a portion of the goodwill is included
services are sold. The provision is based on historical warranty data and a
in the carrying amount of the operation when determining the gain or loss
weighting of all possible outcomes against their associated probabilities.
on disposal. The portion of the goodwill allocated is measured based on
Onerous contracts
the relative values of the operation disposed of and the portion of the
CGU retained at the date of partial disposal, unless it can be demonstrated
Provision for onerous contracts is recognized when the expected benefits
that another method better reflects the goodwill associated with the
to be derived by the group from a contract are lower than the unavoidable
operation disposed of. The same principle is used for allocation of goodwill
costs of meeting the obligations under the contract. The provision is
when the group reorganizes its businesses.
measured at the lower of the expected cost of terminating the contract
and the expected net cost of continuing with the contract. Before a
Research and development
provision is recognized, the group recognizes any impairment loss on the
Expenditures on research activities undertaken with the prospect of
assets associated with the contract.
obtaining new scientific or technical knowledge and understanding is
recognized in the income statement as incurred.
Restructuring
A restructuring provision is recognized when the group has developed a
Development activities involve a plan or design for the production of
detailed formal plan for the restructuring and has raised a valid expectation
new or substantially improved products or processes. Development
in those affected that the entity will carry out the restructuring by starting
expenditure is capitalized only if development costs can be measured
to implement the plan or announcing its main features to those affected by
reliably, the product or process is technically and commercially feasible,
it. The measurement of a restructuring provision includes only the direct
future economic benefits are probable and the group intends to and
expenditures arising from the restructuring, which are those amounts that
has sufficient resources to complete development and to use or sell
are both necessarily entailed by the restructuring and not associated with
the asset. The capitalized expenditure includes cost of materials, direct
the ongoing activities of the entity.
labour overhead costs that are directly attributable to preparing the asset
Property, plant and equipment
for it intended use and capitalized interest on qualifying assets. Other
development expenditures are recognized in the income statement as an
Property, plant and equipment are measured at cost less accumulated
expense as incurred.
depreciation and impairment losses. The cost of self-constructed assets
includes the cost of materials, direct labour, borrowing costs on qualifying
Capitalized development expenditure is measured at cost less accumulated
assets, production overheads and the estimated costs of dismantling
amortization and accumulated impairment losses.
Annual Report 2018 | Financials and Notes | Akastor Group 38
Other intangible assets
immediately in other comprehensive income. The group determines the
Acquired intangible assets are measured at cost less accumulated
net interest expense (income) on the net defined benefit liability (asset)
amortization and impairment losses.
for the period by applying the discount rate used to measure the defined
Subsequent expenditures
benefit obligation at the beginning of the annual period to the then-net
defined benefit liability (asset), taking into account any changes in the net
Subsequent expenditures on intangible assets are capitalized only when
defined benefit liability (asset) during the period as a result of contributions
they increase the future economic benefits embodied in the specific asset
and benefit payments. Net interest expense and other expenses related to
to which they relate. All other expenditures are expensed as incurred.
defined benefit plans are recognized in the income statement.
Amortization
When the benefits of a plan are changed or when a plan is curtailed, the
Amortization is recognized in the income statement on a straight-line
resulting change in benefit that relates to past service or the gain or loss
basis over the estimated useful lives of intangible assets unless such useful
on curtailment is recognized immediately in the income statement. The
lives are indefinite. Intangible assets are amortized from the date they are
group recognizes gains and losses on the settlement of a defined benefit
available for use.
plan when the settlement occurs.
Employee benefits
Defined contribution plans
Fair value measurement
When available, the group measures the fair value of a financial instrument
Obligations for contributions to defined contribution pension plans are
using the quoted price in an active market for that instrument. If there is no
recognized as an expense in the income statement as incurred.
quoted price in an active market, then the group uses valuation techniques
Defined benefit plans
that maximize the use of relevant observable inputs and minimize the use
of unobservable inputs. The chosen valuation technique incorporates all
The group’s net obligation in respect of defined benefit pension plans is
of the factors that market participants would take into account in pricing
calculated separately for each plan by estimating the amount of future
a transaction.
benefit that employees have earned in the current and prior periods;
discounting that amount and deducting the fair value of any plan assets.
The best evidence of the fair value of a financial instrument on initial
recognition is normally the transaction price. If the group determines that
The calculation of defined benefit obligations is performed annually by
the fair value on initial recognition differs from the transaction price and
a qualified actuary using the projected unit credit method. The discount
the fair value is evidenced neither by a quoted price in an active market
rate is the yield at the reporting date on government bonds or high-
for an identical asset or liability nor based on a valuation technique that
quality corporate bonds with maturities consistent with the terms of the
uses only data from observable markets, the financial instrument is initially
obligations.
measured at fair value, and the difference between the fair value on initial
recognition and the transaction price is recognized as a deferred gain or
Remeasurement of the net defined benefit liability, which comprises
loss. Subsequently, the deferred gain or loss is recognized in profit or loss
actuarial gains and losses, the return on plan assets (excluding interest)
on an appropriate basis over the life of the instrument.
and the effect of the asset ceiling (if any, excluding interest), are recognized
Annual Report 2018 | Financials and Notes | Akastor Group 39
Note 4 | Significant accounting estimates and judgements
Estimates and judgements are continually reviewed and are based on
Warranties
historical experiences and expectations of future events. The resulting
A provision is made for expected warranty expenditures. The warranty
accounting estimates will, by definition, seldom accurately match actual
period is normally 12-30 months as one operating cycle. Based on
results, but are based on the best estimate at the time. Estimates and
experience, the provision is often estimated at one percent of the contract
assumptions that have a significant risk of causing material adjustments to
value, but can also be a higher or lower amount following a specific
the carrying amounts of assets and liabilities within the next financial year
evaluation of the actual circumstances for each contract. Both the general
are discussed below.
Revenue recognition
one percent provision and the evaluation of project specific circumstances
are based on experience from earlier projects. Factors that could affect the
estimated warranty cost include the group’s quality initiatives and project
Revenue from performance obligations satisfied over time, typically in
execution model. Reference is made to Note 27 Provisions for further
construction contracts and service contracts, are recognized according
information about provisions for warranty expenditures on delivered
to progress. This requires estimates of the final revenue and costs of the
projects.
performance obligations, as well as measurement of progress achieved to
date as a proportion of the total work to be performed.
Deferred and contingent considerations
The main uncertainty when assessing contract revenue is related to
combinations and disposals are measured at fair value at transaction date.
recoverable amounts from variation orders, claims and incentive payments
When a deferred and contingent consideration meets the definition of a
which are recognized when, in the group’s judgement, it is highly probable
financial asset or liability, it is subsequently remeasured at fair value at the
that they will not result in a significant reversal of revenue. This assessment
reporting date. The determination of fair value is based on discounted cash
is adjusted by management’s evaluation of liquidated damages to be
flows. Key assumptions made by the management include the probability
imposed by customers, typically relating to contractual delivery terms. In
of meeting each performance target and the discount factor.
Deferred and contingent considerations resulting
from business
many contracts, there are frequent changes in scope of work resulting
in a number of variation orders. The contracts with customers normally
Impairment of non-financial assets
include procedures for issuing and approval of variation orders. There
Property, plant and equipment and intangible assets
can be unapproved variation orders and claims included in the contract
The group has significant non-current assets recognized
in the
revenue where recovery is assessed as highly probable and other criteria
consolidated statement of financial position related to Property, plant and
are met. Even though management has extensive experience in assessing
equipment and intangible assts. The value in use of some of these assets
the outcome of such negotiations, uncertainties exist.
can be significantly impacted by changes of market conditions. The group
considers whether there are indications of impairment on the carrying
One of the key uncertainties related to revenue recognition arises in the
amounts of such non-current assets. If such indications exist, an impairment
final stages of the completion of long term contracts which can involve
test is performed to assess whether or not the assets should be impaired.
renegotiations with customers. The estimates of the likely outcome of
The valuations, often determined by value in use calculations, will often
these renegotiations are based on management’s assessments subject to
be performed based on estimates of future cash flows discounted by an
complex interpretations of contractual, engineering, design and project
appropriate discount rate. Significant estimates and judgments are made
execution issues. There can be a wide range of reasonably possible
by the management, including determining appropriated cash-generating
outcomes from such renegotiations and the estimates made require a high
units and discount rate, projections for future cash flows and assumptions
degree of judgment.
of future market conditions. References are made to Note 13 Property,
plant and equipment and Note 14 Intangible assets.
Estimate of the remaining contract costs depends on productivity
factors and the cost of inputs. Weather conditions, the performance of
Goodwill
subcontractors and others with an impact on schedules, commodity prices
The group performs impairment testing of goodwill annually or more
and currency rates can affect cost estimates. Experience, systematic use
frequently if any impairment indicators are identified. The recoverable
of the project execution model and focus on core competencies reduce,
amounts of cash-generating units to which goodwill is allocated have
but do not eliminate, the risk that estimates may change significantly. A
been determined based on value-in-use calculations. These calculations
risk contingency is included in estimated contract costs based on the risk
require management to estimate future cash flows expected to arise from
register for identified significant risks.
these cash-generating units and an appropriate discount rate to reflect
the time value of the money. Key assumptions made by the management
Progress measurement based on costs incurred has an inherent risk related
include also assumptions for future market conditions, which require a
to the cost estimate as described above. The estimation uncertainty
high degree of judgment. Further details about goodwill allocation and
during the early stages of a contract is mitigated by a policy of normally
impairment testing are included in Note 15 Impairment testing of goodwill.
not recognizing revenue in excess of costs on large lump sum projects
before the contract reaches 20 percent of completion. Earlier recognition
Income taxes
can be made on a project-by-project basis if cost estimates are certain,
The group is subject to income taxes in numerous jurisdictions. Significant
typically in situations of repeat projects, proven technology or proven
judgement is required to determine the worldwide provision for income
execution model.
taxes. There are many transactions and calculations for which the ultimate
tax determination is uncertain during the ordinary course of business.
Annual Report 2018 | Financials and Notes | Akastor Group 40
Provisions for anticipated tax audit issues are based on estimates of
Pension benefits
eventual additional taxes.
The present value of the pension obligations depends on a number
of factors determined on the basis of actuarial assumptions. These
Income tax expense is calculated based on reported income in the different
assumptions include financial factors such as the discount rate, expected
legal entities. Deferred income tax expense is calculated based on the
salary growth, inflation and return on assets as well as demographical
temporary differences between the assets’ carrying amount for financial
factors concerning mortality, employee turnover, disability and early
reporting purposes and their respective tax basis. The total amount
retirement. Assumptions about all these factors are based on the
of income tax expense and allocation between current and deferred
situation at the time the assessment is made. However, it is reasonably
income tax requires management’s interpretation of complex tax laws and
certain that such factors will change over the very long periods for which
regulations in the many tax jurisdictions where the group operates.
pension calculations are made. Any changes in these assumptions will
Valuation of deferred tax assets is dependent on management’s assessment
other comprehensive income. Further information about the pension
of future recoverability of the deferred tax benefit. Expected recoverability
obligations and the assumptions used are included in Note 26 Employee
affect the calculated pension obligations with immediate recognition in
may result from expected taxable income in the near future, planned
benefits - pension.
transactions or planned tax optimizing measures. Economic conditions
may change and lead to a different conclusion regarding recoverability,
Fair value measurement
and such change may affect the results for each future reporting period.
The group has invested in significant financial assets that require the
measurement of fair value. If there is no quoted price in an active market,
Tax authorities in different jurisdictions may challenge calculation of
then the group uses valuation techniques that maximize the use of
income taxes from prior periods. Such processes may lead to changes to
relevant observable inputs and minimize the use of unobservable inputs.
prior periods’ taxable income, resulting in changes to income tax expense.
The chosen valuation technique incorporates all of the factors that market
When tax authorities challenge income tax calculations, management is
participants would take into account in pricing a transaction. The fair value
required to make estimates of the probability and amount of possible
measurement requires a high degree of judgment. Judgements include
tax adjustments. Such estimates may change as additional information
considerations of inputs such as cash flow projection, discount rate and
becomes known. Further details about income taxes are included in Note
volatility. Further information about the fair value measurement using level
11 Income tax.
Onerous contracts
3 inputs is included in Note 32 Financial Instruments.
Legal disputes and contingent liabilities
The group has entered into several non-cancellable lease contracts
Given the scope of the group’s worldwide operations, group companies
for office premises which may result in vacant leased space. The group
are inevitably involved in legal disputes in the course of their business
recognizes a provision for such lease contracts when the leased property
activities. In addition, as an investment company, Akastor and its portfolio
is or will be vacant during the non-cancellable lease period. The provision
companies from time to time engage in mergers, acquisitions and other
is made for the discounted future lease payments, net of expected
transactions that could expose the companies to financial and other
sublease income, if any. Key assumptions in determining the provisions are
non-operational risks, such as indemnity claims and price adjustment
primarily related to expected sublease income, length of vacancy periods
mechanisms resulting in recognition of deferred settlement obligations.
and appropriate discount rates. Further information about provision for
onerous contracts is included in Note 27 Provisions.
Provisions have been made to cover the expected outcome of the legal
claims and disputes to the extent negative outcomes are likely and reliable
estimates can be made. However, the final outcomes of these cases are
subject to uncertainties, and resulting liabilities may exceed provisions
recognized. The group follows the development of these disputes on
case-by-case basis and makes assessment based on all available evidence
as at the reporting date.
Annual Report 2018 | Financials and Notes | Akastor Group 41
Note 5 | Discontinued operations
Disposal of AKOFS Offshore
Following the transaction, AKOFS Offshore was restructured to
On September 26, 2018, Akastor completed the transaction to divest 50
consolidate 100 percent ownership interest in Avium Subsea AS. Akastor,
percent of its shares in AKOFS Offshore to MITSUI & CO., Ltd. ("Mitsui")
Mitsui and MOL hold 50%, 25% and 25% of the shares in AKOFS Offshore,
and Mitsui O.S.K. Lines, Ltd. ("MOL") for a total consideration of USD 142.5
respectively. AKOFS Offshore is classified as a joint venture to the group
million with interest 4% from the locked box date on December 31, 2017. In
and consolidated using the equity method. See Note 16 Equity-accounted
addition, there are certain preferential rights in respect of the operations
investees for more information.
of AKOFS Seafarer, including guaranteed return to Mitsui and MOL and
earn-out payments to Akastor in the first six years of operations. The
The AKOFS Offshore operations, exclusive Avium Subsea AS, are
transaction does not include the existing joint venture, Avium Subsea AS,
classified as discontinued operations and the comparative consolidated
between Akastor, Mitsui and MOL,.
income statement has been restated to show the discontinued operations
separately from continuing operations.
Results of discontinued operations
Amounts in NOK million
Revenue
Expenses
Net financial items
Profit (loss) before tax
Income tax
Profit (loss) from operating activities, net of tax
Gain (loss) on sale of discontinued operations 1)
Income tax on gain (loss) on sale of discontinued operations
Net profit (loss) from discontinued operations
Basic/diluted earnings (loss) per share from discontinued operations (NOK)
2018
2017
821
(1 021)
(176)
(376)
(33)
(409)
280
-
(128)
(0.47)
957
(1 122)
(368)
(533)
112
(420)
1 088
(19)
648
2.39
1)
Includes currency translation differences of NOK 442 million that were reclassified from Other Comprehensive Income to the income statement as part of gain from the
disposal in 2018 (NOK 227 million in 2017).
Gain before tax from the disposal in 2018 includes gain of NOK 471 million
In 2017, gain before tax from the disposal included NOK 383 million for
for AKOFS Offshore and provision of NOK 224 million for potential loss as
Frontica Advantage and NOK 728 million for KOP Surface Products. In
a result of negative arbitration award for Managed Pressure Operations
addition, the net gain before tax was negatively affected by lower earn-out
Ltd.(MPO), which was sold in 2016. See Note 28 Trade and other payables
expectations on divestments from prior years.
for more information about the deferred settlement obligation related to
MPO.
Cash flows from (used in) discontinued operations
Amounts in NOK million
Net cash from operating activities
Net cash from investing activities
Net cash flow from discontinued operations
2018
8
1 043
1 051
2017
(365)
876
512
Annual Report 2018 | Financials and Notes | Akastor Group 42
Effect of disposal on the financial position of the group
Amounts in NOK million
Deferred tax assets
Property, plant and equipment
Intangible assets
Other investments
Inventories
Trade and other receivables
Cash and cash equivalents
Other current assets
Deferred tax liabilities
Pension liabilities
Finance lease liability,non-current
Finance lease liability, current
Trade and other payables
Current interest-bearing liabilities
Other current liabilities
Currency translation reserve
Net assets and liabilities 1)
Total consideration at fair value 2)
Portion of consideration received in cash, net of transaction costs 3)
Cash and cash equivalents disposed of
Cash inflows from disposal, net of cash disposed of 4)
2018
2017
(247)
(2 984)
(164)
(2)
-
(296)
(68)
-
18
4
1 083
324
29
104
53
442
(1 704)
2 175
1 201
(68)
1 133
(54)
(90)
(193)
-
(103)
(165)
(86)
(46)
29
23
-
-
62
-
148
227
(250)
1 362
984
(86)
898
1) After the disposal of 50 percent shares of AKOFS Offshore, the company is classified as a joint venture to the group and consolidated using the equity method. Net assets
and liabilities in AKOFS Offshore are derecognized at 100% basis upon disposal.
2) Total consideration at fair value from disposal of AKOFS Offshore is measured at 100% basis based on the cash consideration received for 50% shares of AKOFS Offshore,
reduced by provision for contingent considerations for guaranteed return to Mitsui and MOL. Accordingly, gain from the divestment is calculated at 100 percent basis.
3) Represents the cash consideration received for the 50 percent shares of AKOFS Offshore.
4) Net cash flows from disposal in 2018 excluded the net cash outflow of NOK 30 million related to divestments made in prior years (NOK 30 million in 2017).
Annual Report 2018 | Financials and Notes | Akastor Group 43
Note 6 | Operating segments
Basis for segmentation
Measurement of segment performance
As of December 31, 2018, Akastor has two reportable segments which
Segment performance is measured by operating profit before depreciation,
are the strategic business units of the group. The strategic business units
amortization and impairment (EBITDA) which is reviewed by the group’s
are managed separately and offer different products and services due
Executive Management Group (the chief operating decision maker).
to different market segments and different strategies for their projects,
Segment profit, together with key financial information as described below,
products and services:
gives the Executive Management Group relevant information in evaluating
the results of the operating segments and is relevant in evaluating the
MHWirth is a supplier of drilling systems and drilling lifecycle
results of the segments relative to other entities operating within these
services globally. The company offers a full range of drilling
industries. Inter-segment pricing is determined on an arm’s length basis.
equipment, drilling riser solutions and related products and
services for the drilling market, primarily the offshore sector.
The accounting policies of the reportable segments are the same as
AKOFS Offshore is a global provider of vessel-based subsea well
principles, except for hedge accounting. When contract revenues and
construction and intervention services to the oil and gas industry,
contract costs are denominated in a foreign currency, the subsidiary may
covering all phases from conceptual development to project
hedge the exposure against the central treasury department (Akastor
execution and offshore operations.
Treasury) and hedge accounting is applied independently of whether
described in Note 2 Basis of preparation and Note 3 Significant accounting
As a result of divestment of 50 percent ownership in AKOFS Offshore
correction of the non-qualifying hedges to secure that the consolidated
in September 2018, AKOFS Offshore is classified as a joint venture and
financial statements are in accordance with IFRS is made as an adjustment
consolidated using the equity method. See Note 5 Discontinued operations
at corporate level. This means that the group’s segment reporting reflects
for more information about the transaction and Note 16 Equity-accounted
all hedges as qualifying even though they may not qualify in accordance
investees.
with IFRS.
the hedge qualify for hedge accounting in accordance with IFRS. The
Further, Akastor holds 100 percent ownership in Step Oiltools, 50 percent
Hedge transactions not qualifying for hedge accounting represent an
in DOF Deepwater AS, 100 percent in First Geo AS and Cool Sorption, 17.7
accounting loss of NOK 0 million to EBITDA (loss of NOK 5 million in 2017)
percent economic interest in NES Global Talent and 93 percent of Aker
and a loss under financial items of NOK 2 million (loss of NOK 121 million
Pensjonskasse, as well as equity instruments in Odfjell Drilling and Awilco
in 2017). This is recognized as group adjustment under Other holdings.
Drilling. These are included in “Other holdings”.
Annual Report 2018 | Financials and Notes | Akastor Group 44
Information about reportable segments
Amounts in NOK million
Note
MHWirth
AKOFS
Offshore
Other
holdings
Total
operating
segments
Adjust-
ment of
AKOFS
Offshore
Elimina-
tions
Total
Akastor
2018
Income statement
External revenue and other income
Inter-segment revenue
Total revenue and other income
Operating profit before depreciation,
amortization and impairment (EBITDA)
Depreciation and amortization
Impairment
Operating profit (loss) (EBIT)
13,14
13,14
3 031
24
3 055
281
(125)
-
156
1 107
-
1 107
471
(275)
(322)
(127)
741
8
749
(18)
(56)
-
(74)
4 879
(1 080)
32
-
4 911
(1 080)
-
(32)
(32)
3 800
-
3 800
733
(456)
(322)
(45)
(443)
275
322
154
Assets
Current operating assets
Non-current operating assets
Segment assets
Liabilities
Current operating liabilities
Non-current operating liabilities
Segment liabilities
Net current operating assets
Net capital employed
Capital expenditure and R&D capitalization
3 008
1 972
4 979
282
4 741
5 023
347
2 020
2 367
3 636
8 733
12 369
(282)
(3 655)
(3 937)
2 602
264
2 866
405
2 113
58
102
377
6
633
108
1 010
180
4 915
188
(30)
1 357
8
3 081
903
3 984
555
8 385
255
(102)
(6)
(108)
(180)
(3 829)
(124)
-
-
-
-
-
-
-
-
-
-
-
-
-
290
(181)
-
109
3 354
5 078
8 432
2 979
897
3 876
375
4 556
131
Amounts in NOK million
Note
MHWirth
AKOFS
Offshore
Other
holdings
Total
operating
segments
Adjust-
ment of
AKOFS
Offshore
Elimina-
tions
Total
Akastor
2017
Income statement
External revenue and other income
Inter-segment revenue
Total revenue and other income
Operating profit before depreciation,
amortization and impairment (EBITDA)
Depreciation and amortization
Impairment
Operating profit (loss) (EBIT)
13, 14
13, 14
Assets
Current operating assets
Non-current operating assets
Segment assets
Liabilities
Current operating liabilities
Non-current operating liabilities
Segment liabilities
Net current operating assets (continuing operations)
Net capital employed
Capital expenditure and R&D capitalization
3 000
30
3 030
118
(189)
(118)
(189)
2 238
2 093
4 332
1 244
304
1 548
995
2 783
46
778
-
778
213
(334)
-
(121)
301
3 986
4 287
115
18
133
186
4 154
40
570
26
596
(38)
(89)
-
(127)
4 348
56
4 348
293
(612)
(118)
(438)
315
1 133
1 448
2 854
7 213
10 067
452
367
819
(138)
628
9
1 811
690
2 501
1 043
7 566
95
(742)
-
(742)
(177)
334
-
158
-
-
-
-
-
-
(186)
-
-
-
(56)
(56)
-
-
-
-
-
-
-
-
-
-
-
-
-
3 606
-
3 606
116
(278)
(118)
(280)
2 854
7 213
10 067
1 811
690
2 501
857
7 566
95
Annual Report 2018 | Financials and Notes | Akastor Group
Reconciliations of information on reportable segments to IFRS measures
Amounts in NOK million
Assets
Total segment assets
Derivative financial instruments
Cash and cash equivalents
Current interest-bearing receivables
Non-current interest-bearing receivables
Elimination of intra-group assets
Consolidated assets
Liabilities
Total segment liabilities
Derivative financial instruments
Current borrowings
Non-current borrowings
Elimination of intra-group liabilities
Consolidated liabilities
Geographical information
45
Note
2018
2017
31
22
19
31
24
24
8 432
10 067
117
198
257
-
-
94
168
-
1
(2)
9 005
10 328
3 876
210
14
588
-
4 687
2 501
20
399
2 133
(2)
5 051
Geographical revenue is presented on the basis of geographical location
assets and capital expenditures are based on the geographical location of
of the group companies selling to the customers. Non-current segment
the assets.
Amounts in NOK million
Norway
Germany
United States
Brazil
Singapore
Other Asia
Other Europe
Middle East
Other countries
Total
Revenue
and other income
Non-current assets excluding
deferred tax assets and
financial instruments
2018
1 980
492
215
108
106
359
282
158
100
2017
Restated
1 855
299
263
137
316
330
188
110
107
2018
1 647
719
255
323
45
83
68
18
17
2017
4 195
751
289
366
61
84
64
25
31
3 800
3 606
3 174
5 865
Annual Report 2018 | Financials and Notes | Akastor Group
46
Note 7 | Revenue and other income
The effect of initially applying IFRS 15 on the group’s revenue from
Due to the transition method chosen in applying IFRS 15, comparative
contracts with customers is described in Note 2 Basis for preparation.
information has not been restated to reflect the new requirements.
Revenue types
Amounts in NOK million
Revenue from contracts with customers
Other revenue and income
Lease revenue
Other revenue
Gain (loss) on disposal of subsidiaries
Profit (loss) from equity-accounted investees
Gain on disposals of assets
Total revenue and other income
Note
16
2018
3 464
233
20
(1)
28
56
2017
Restated
3 281
277
45
5
36
11
3 800
3 606
Disaggregation of revenue from contracts with customers
and timing of revenue recognition. The table also includes a reconciliation
Revenue from contracts with customer in the scope of IFRS 15 is
of the disaggregated revenue with revenue information as shown in Note
disaggregated in the following table by major contract and revenue types
6 Operating segments.
MHWirth
AKOFS
Offshore
Other
holdings
Adjustment
of AKOFS
Offshore
Total
Akastor
Amounts in NOK million
2018
Major contract/revenue types
Construction revenue
Sale of standard products
Service revenue
Total Revenue from contracts with customers
Timing of revenue recognition
Transferred over time
Transferred at point in time
Total Revenue from contracts with customers
Other revenue and income
Total external revenue and other income in segment reporting
2017
Major contract/revenue types
Construction revenue
Sale of standard products
Service revenue
942
812
1 195
2 950
2 137
812
2 950
81
3 031
1 158
666
1 111
-
-
343
343
343
-
343
764
1 107
-
-
45
169
300
514
345
169
514
227
741
18
107
208
221
Total Revenue from contracts with customers
2 936
208
346
Timing of revenue recognition
Transferred over time
Transferred at point in time
2 269
666
208
-
239
107
Total Revenue from contracts with customers
2 936
208
346
Other revenue and income
64
Total external revenue and other income in segment reporting
3 000
570
778
224
570
-
-
(343)
(343)
(343)
-
(343)
(737)
(1 080)
-
-
(208)
(208)
(208)
-
(208)
(534)
(742)
987
981
1 495
3 464
2 482
981
3 464
336
3 800
1 176
773
1 332
3 281
2 508
773
3 281
324
3 606
Annual Report 2018 | Financials and Notes | Akastor Group
47
Contract balances
The following table provides information about receivables, contract assets and contract liabilities from contracts with customers.
Amounts in NOK million
Receivables, which are included in “trade and other receivables”
Contract assets
Contract liabilities
Note
21
28
2018
1 365
824
632
January 1,
2018
1 248
736
425
Contract assets relate to the group’s rights to consideration for work
Contract liabilities relate to advance consideration received from customer
completed, but not yet invoiced at the reporting date. The contract
for work not yet performed. Revenue recognized in 2018 that was included
assets are transferred to receivables when the rights to payment become
in contract liabilities in the beginning of the year is NOK 41 million.
unconditional, which usually occurs when invoices are issued to the
customers. There was a reduction of NOK 51 million of the contract assets
The amount of revenue recognized in 2018 from performance obligation
as of January 1, 2018 due to disposal of subsidiaries. No impairment has
satisfied (or partially satisfied) in previous period is NOK 85 million. This
been recognized on contract assets in 2018.
is mainly due to changes in the estimates of progress measurement for
performance obligations satisfied over time and changes in estimates
relating to the constraining of revenues.
Transaction price allocated to the remaining performance obligations
The following table includes revenue expected to be recognized in the future related to performance obligations that are unsatisfied (or partially satisfied)
as of December 31, 2018.
Amounts in NOK million
Transaction price allocated
2019
1 271
Later
1 611
Total
2 882
The amounts disclosed above do not include variable consideration
obligation when revenue is recognized in the amount to which the group
which is constrained. The group applies the practical expedient under
has right to invoice.
IFRS 15 and does not disclose information about remaining performance
Note 8 | Salaries, wages and social security costs
Amounts in NOK million
Salaries and wages including holiday allowance
Social security tax/ national insurance contribution
Pension cost
Other employee costs
Salaries, wages and social security costs
Note
26
2018
1 163
150
63
48
1 424
2017
Restated
1 280
164
70
47
1 561
Annual Report 2018 | Financials and Notes | Akastor Group
48
Note 9 | Other operating expenses
Amounts in NOK million
Rental and other costs for buildings and premises
External consultants and hired-ins inclusive audit fees
Office supplies
Travel expenses
Insurance
Other
Total other operating expenses
Fees to the auditors
2018
2017
Restated
217
158
209
167
36
32
50
53
11
13
49
44
572
468
The table below summarizes audit fees, as well as fees for audit related services, tax services and other services incurred by the group during 2018 and
2017.
Amounts in NOK million
2018
2017
2018
2017
2018
2017
Akastor ASA
Subsidiaries
Total
Audit
Other assurance services
Total
3
-
3
3
-
3
7
2
10
7
4
11
10
2
12
10
4
14
Note 10 | Net finance expenses
Amounts in NOK million
Profit (loss) on foreign currency forward contracts
Profit (loss) from equity-accounted investees
Interest income on bank deposits measured at amortized cost
Interest income on debt instruments at FVOCI
Net foreign exchange gain
Dividend income from equity instrument
Gain on sale of financial assets
Other finance income
Finance income
Interest expense on financial liabilities measured at amortized cost
Interest expense on financial liabilities measured at fair value
Net foreign exchange loss
Net change in fair value of financial assets at FVTPL
Impairment loss on external receivables 1)
Other financial expenses
Financial expenses
Net finance expenses recognized in profit and loss
1) Impairment loss on external receivables was triggered by insolvency of certain customers.
See Note 32 Financial instruments for information of the finance income and expense generating items.
Note
2018
2017
Restated
16
(2)
(157)
6
61
-
71
-
47
185
(81)
(9)
(2)
(71)
(24)
(39)
(225)
(200)
(121)
(212)
15
48
23
8
21
1
115
(122)
(22)
-
-
(9)
(35)
(188)
(406)
Annual Report 2018 | Financials and Notes | Akastor Group 49
Foreign currency forward contracts
Profit (loss) on foreign currency forward contracts reflects fair value on
Some foreign exchange hedge transactions do not qualify for hedge
hedge contracts that don't qualify for hedge accounting. The losses in
accounting under IFRS, primarily because a large number of internal hedge
2018 and 2017 were mainly related to hedge contracts in MHWirth.
transactions are grouped and netted before external hedge transactions
are established. These derivatives are mainly foreign exchange forward
The exposure from foreign currency embedded derivatives is economically
contracts. The corresponding contracts to the derivatives are calculated
hedged, but cannot qualify for hedge accounting and is therefore included
to have an equal, but opposite effect, and both the derivatives and the
in net foreign exchange gain/loss. Hedge accounting and embedded
hedged items are reported as financial items. The net amount therefore
derivatives are explained in Note 31 Derivative financial instruments.
reflects the difference in timing between the non-qualifying hedging
instrument and the future transaction (economically hedged item).
Note 11 | Income tax
Income tax expense
Amounts in NOK million
Current tax expense
Current year
Adjustments for prior years
Total current tax expense
Deferred tax expense
Origination and reversal of temporary differences
Change in tax rate
Write down of tax loss and deferred tax assets
Total deferred tax income (expense)
Total tax income (expense)
Effective tax rate
2018
2017
Restated
(27)
1
(26)
8
(10)
(75)
(77)
(103)
(56)
13
(43)
176
(6)
(148)
23
(20)
The table below reconciles the reported income tax expense to the expected income tax expense according to the corporate income tax rate in Norway.
Amounts in NOK million
2018
Profit (loss) before tax, continuing operations
Tax income (expense) using the company's domestic tax rate
Tax effects of:
Difference between local tax rate and Norwegian tax rate
Permanent differences 1)
Prior year adjustments (current tax)
Prior year adjustments (deferred tax)
Write down of tax loss or deferred tax assets 2)
Change in tax rates 3)
Other
Total tax income (expenses)
(91)
21
10
(22)
1
2
(75)
(10)
(30)
23.0 %
10.7%
(24.0%)
0.6%
2.3%
(82.4%)
(11.0%)
(32.6%)
(103)
(113.5%)
2017
Restated
(686)
165
36
(54)
13
2
(148)
(6)
(28)
(20)
24.0 %
5.3%
(7.8%)
1.9%
0.2%
(21.5%)
(0.9%)
(4.1%)
(2.9%)
1) Relates mainly to net profit and loss after tax from equity-accounted investees and profit and loss recognized on various tax-exempted investments..
2) The impairment relates mainly to tax losses in the MHWirth entities in USA and Brazil, Step Oiltools as well as deferred tax assets related to deferred gain in Avium Subsea AS.
3) Relates mainly to changes in corporate income tax rate in Norway. The tax rate is changed from 23 percent to 22 percent effective as of January 1, 2019. In 2017, the tax
rate was changed from 24 percent to 23 percent effective as of January 1, 2018.
Annual Report 2018 | Financials and Notes | Akastor Group 50
Recognized deferred tax assets and liabilities
Amounts in NOK million
2018
2017
2018
2017
2018
2017
Assets
Liabilities
Net
Property, plant and equipment
Intangible assets
Projects under construction
Pensions
Provisions
Derivatives
Other items
Tax loss carry-forwards
Total before set offs
Set-off of tax
Total deferred tax assets(liabilities)
46
1
-
72
56
18
131
352
677
(303)
374
55
1
-
76
73
10
182
672
1 070
(409)
661
(6)
(12)
(248)
-
-
(38)
(9)
-
(312)
303
(9)
(109)
(19)
(212)
-
-
(64)
(16)
-
(421)
409
(10)
40
(10)
(248)
72
56
(19)
122
352
365
-
365
(54)
(17)
(212)
76
73
(54)
166
672
650
-
650
Deferred tax assets are recognized to the extent that it is probable that future taxable profit will be available, against which the deductible temporary
difference can be utilized. The deferred tax assets recognized for tax loss carry-forward are mainly related to the entities in Norway and Germany where
tax losses can be carried forward without expiration. The group has made an evaluation of taxable profit in these entities for the next five years based on
management’s projection. The estimates indicate that it is probable that future tax profit will be available for which such tax losses can be utilized. The
amount of deferred tax assets recognized in these Norwegian and German entities is NOK 353 million as of December 31, 2018.
Change in net recognized deferred tax assets (liabilities)
Amounts in NOK million
Property,
plant and
equipment
Intan-
gible
assets
Projects
under
construction
Pensions
Provisions
Derivatives
Other
items
Tax loss
carry-
forwards
Total
Balance as of January 1, 2017
(72)
(41)
(326)
Disposal of subsidiaries as of
January 1, 2017
Recognized in profit and loss
(restated)
Recognized in other comprehen-
sive income
Discontinued operations
Effect of group contribution
Currency translation differences
Balance as of December 31, 2017
Disposal of subsidiaries as of
January 1, 2018
Recognized in profit and loss
Recognized in other comprehen-
sive income
Recognized in equity
Currency translation differences
9
-
(77)
20
-
80
-
5
(54)
100
(7)
-
-
1
-
4
-
(1)
(17)
3
4
-
-
-
-
115
-
-
-
(1)
(212)
-
(47)
-
8
3
Balance as of December 31, 2018
40
(10)
(248)
95
(4)
(5)
(11)
-
-
2
76
(1)
(4)
-
-
1
72
158
(6)
(83)
-
4
-
-
73
(4)
(13)
-
-
(1)
56
(70)
-
61
-
782
586
(21)
(22)
43
54
(45)
23
(36)
10
-
(1)
-
2
53
(4)
-
28
(53)
(19)
(46)
128
-
(19)
(54)
166
672
650
(10)
2
2
(45)
(345)
(254)
34
(77)
30
13
-
-
-
-
(9)
30
21
(5)
(19)
122
352
365
Annual Report 2018 | Financials and Notes | Akastor Group 51
Tax loss carry-forwards and deductible temporary differences for which no deferred tax assets are recognized
Deferred tax assets have not been recognized in respect of tax loss carry-forwards or deductible temporary differences when the group evaluates that it
is not probable that future taxable profit will be available against which the group can utilize these benefits based on forecasts and realistic expectations.
Expiry date of unrecognized tax loss carry-forwards
Amounts in NOK million
Expiry in 2021
Expiry in 2022 and later
Indefinite
Total
2018
74
481
1 856
2 411
2017
-
541
1 228
1 768
Unrecognized other deductible temporary differences are NOK 459 million in 2018 (NOK 338 million in 2017).
Note 12 | Earnings per share
Akastor ASA holds 2 776 376 treasury shares at year end 2018 (2 776 376 in 2017). Treasury shares are not included in the weighted average number
of ordinary shares.
Amounts in NOK million
Profit (loss) attributable to ordinary shares
Profit (loss) attributable to ordinary shares from continuing operations
2018
(322)
(194)
2017
Restated
(58)
(706)
Basic/ diluted earnings per share
The calculation of basic/diluted earnings per share is based on the profit (loss) attributable to ordinary shareholders and a weighted average number of
ordinary shares outstanding
Issued ordinary shares as of January 1
Weighted average number of issued ordinary shares for the year adjusted for treasury shares
Basic/ diluted earnings (loss) per share (NOK)
Basic/ diluted earnings (loss) per share for continuing operations (NOK)
2018
2017
274 000 000
274 000 000
271 223 624
271 223 624
(1.19)
(0.71)
(0.21)
(2.60)
Annual Report 2018 | Financials and Notes | Akastor Group 52
Note 13 | Property, plant and equipment
The table below includes discontinued operations until these met the criteria to be classified as held for sale.
Amounts in NOK million
Balance as of January 1, 2017
Additions 1)
Reclassifications
Transfer from assets under construction
Disposals and scrapping
Disposal of subsidiaries
Currency translation differences
Balance as of December 31, 2017
Additions 1)
Transfer from assets under construction
Disposals and scrapping
Disposal of subsidiaries
Currency translation differences
Balance as of December 31, 2018
Accumulated depreciation and impairment
Balance as of January 1, 2017
Reclassifications
Depreciation for the year 2)
Impairment
Disposals and scrapping
Disposal of subsidiaries
Currency translation differences
Balance as of December 31, 2017
Depreciation for the year 2)
Impairment 3)
Disposals and scrapping
Disposal of subsidiaries
Currency translation differences
Balance as of December 31, 2018
Book value as of December 31, 2017
Book value as of December 31, 2018
Of which finance lease as of December 31, 2017
Of which finance lease as of December 31, 2018
Note
Buildings
and land
Vessels
Machinery,
equipment, software
Under
construction
Total
1 042
7 384
2 202
105
10 733
1
-
12
57
70
20
(62)
4
40
41
-
-
39
(83)
-
(57)
(427)
(396)
(3)
-
(48)
(5)
(77)
-
(350)
-
(36)
(321)
(35)
(3)
951
7 040
-
-
-
38
(148)
85
1 861
70
9 922
26
69
95
3
(440)
(42)
-
-
(503)
5
(4)
(7 063)
(103)
(63)
(7 233)
(57)
(101)
30
(1)
743
-
1 377
33
(128)
2 153
5
5
(494)
(3 562)
(1 463)
(16)
(5 535)
-
43
(43)
-
-
(27)
(303)
(174)
-
(505)
-
-
2
-
40
-
(47)
-
(47)
46
5
298
-
54
337
21
155
17
-
194
(458)
(3 668)
(1 366)
(11)
(5 502)
(22)
(142)
-
(322)
124
(85)
4
4 164
25
(328)
53
-
493
3 373
416
-
-
-
1 448
-
(114)
-
(278)
-
-
(322)
431
81
-
-
(22)
-
470
4 249
56
(990)
(11)
(1 328)
495
387
59
4 419
22 825
-
-
-
1 448
-
-
1)
Includes additions of NOK 63 million related to discontinued operations in 2018 (NOK 36 million in 2017).
2) Includes depreciation of NOK 153 million from discontinued operations in 2018 (NOK 335 million in 2017).
3) Includes impairment of NOK 322 million from discontinued operations in 2018.
Depreciation
generating unit AKOFS Seafarer in the discontinued operations of AKOFS
Estimates for useful life, depreciation method and residual values are
Offshore. AKOFS Seafarer was impaired to its recoverable amount of NOK
reviewed annually. Assets are mainly depreciated on a straight-line basis
1.4 billion based on value in use (discount rate of 9.7%). The recoverable
over their expected economic lives as follows:
amount analysis was made on the assumption that the vessel is employed
Machinery, equipment and software
Vessels
Buildings
Land
Impairment
3–15 years
20–25 years
8–30 years
No depreciation
on the specific rates until the expiry of the current firm contract including
options, and that rate and utilization levels thereafter are based on
expected market levels.
In 2017, an impairment loss of NOK 47 million was recognized mainly
related to the testing facilities in Germany that is not expected to be
utilized in full capacity. The recoverable amount of NOK 11 million was
The impairment loss of NOK 332 million in 2018 was related to the cash-
determined based on value in use.
Annual Report 2018 | Financials and Notes | Akastor Group
Note 14 | Intangible assets
Amounts in NOK million
Note
Development costs
Goodwill
Other
Total
53
Historical cost
Balance as of January 1, 2017
Reclassification
Capitalized development 1)
Disposal and scrapping
Disposal of subsidiaries
Currency translation differences
Balance as of December 31, 2017
Reclassification
Capitalized development 1)
Disposal and scrapping
Disposal of subsidiaries
Currency translation differences
Balance as of December 31, 2018
Accumulated amortization and impairment
Balance as of January 1, 2017
Amortization for the year 2)
Impairment for the year
Disposal and scrapping
Disposal of subsidiaries
Currency translation differences
Balance as of December 31, 2017
Amortization for the year 2)
Disposal and scrapping
Disposal of subsidiaries
Currency translation differences
Balance as of December 31, 2018
5
5
618
1 718
(7)
27
(64)
(117)
-
-
-
(100)
235
7
-
-
-
-
29
6
456
1 646
(5)
35
(47)
(2)
1
-
-
-
(452)
1
36
248
5
(17)
(113)
18
1
437
1 211
127
(304)
(388)
(147)
(100)
-
(29)
(62)
-
(8)
64
73
(2)
-
-
-
-
(6)
(6)
2 570
-
27
(64)
(218)
35
2 351
-
(64)
(567)
20
1 775
(839)
(129)
(70)
64
73
(14)
(331)
(394)
(190)
(915)
(41)
47
-
(1)
-
-
307
(24)
16
96
(64)
64
403
-
(2)
(3)
(325)
(87)
(104)
(515)
Book value as of December 31, 2017
Book value as of December 31, 2018
125
1 252
112
1 125
58
22
1 435
1 260
1)
Includes capitalized development costs of NOK 1 million from discontinued operations (NOK 6 million in 2017).
2) Includes amortization of NOK 9 million from discontinued operations in 2018 (NOK 21 million in 2017).
Impairment loss of other intangible assets than goodwill
related to development activities. In addition, research and development
In 2017, an impairment loss of NOK 70 million was recognized mainly
costs of NOK 32 million were expensed during the year because the
related to intangible assets that were no longer expected to be utilized
criteria for capitalization are not met (NOK 16 million in 2017).
in MHWirth.
Amortization
Research and development costs
Intangible assets all have finite useful lives and are amortized over the
NOK 36 million has been capitalized in 2018 (NOK 27 million in 2017)
expected economic life, ranging between 5-10 years.
Annual Report 2018 | Financials and Notes | Akastor Group 54
Note 15 | Impairment testing of goodwill
Goodwill originates from a number of acquisitions. For the purpose of impairment testing, goodwill has been allocated to the group’s cash-generating
units (portfolio companies) as shown in the table below, which represents the lowest level at which goodwill is monitored in management reporting.
Amounts in NOK million
MHWirth
First Geo 1)
AKOFS Offshore 2)
Total goodwill
1) The portfolio company is included in Other Holdings in segment reporting.
2) The portfolio company is deconsolidated and becomes a joint venture in 2018.
2018
2017
1 107
1 089
18
18
-
145
1 125
1 252
Impairment testing for cash-generating units containing significant
main markets. Assumptions are made regarding revenue growth, gross
goodwill
margins and other cost components based on historical experience as
The recoverable amounts of cash-generating units (portfolio companies)
well as assessment of future market development and conditions. These
are determined based on value-in-use calculations. Discounted cash
assumptions require a high degree of judgement, given the significant
flow models are applied to determine the value in use for the portfolio
degree of uncertainty regarding oilfield service activities in the forecast
companies with goodwill. The management has made cash flow
period.
projections based on budget and strategic forecast for the periods 2019-
2023. Beyond the explicit forecast period of five years, the cash flows are
Terminal value growth rate The group uses a constant growth rate not
extrapolated using a constant growth rate.
exceeding 2% (including inflation) for periods beyond the management’s
forecast period of five years. The growth rates used do not exceed the
Key assumptions used in the calculation of value in use are discussed
growth rates for the industry in which the portfolio company operates.
below. The values assigned to the key assumptions represent
management's assessment of future trends in the relevant industries
Discount rates are estimated based on Weighted Average Cost of Capital
as well as management’s expectations regarding margin, and have been
(WACC) for the industry in which the portfolio company operates. The
based on historical data from both external and internal sources.
risk-free interest rates used in the discount rates are based on the 10 year
EBITDA used in the value-in-use calculations represents the operating
debt leverage is estimated for each portfolio company. The discount rates
earnings before depreciation and amortization and is estimated based
are further adjusted to reflect any additional short to medium term market
on the expected future performance of the existing businesses in their
risk considering current industry conditions.
state treasury bond rate at the time of the impairment testing. Optimal
Discount rate assumptions used in impairment testing
MHWirth
Discount rate after tax
Discount rate pre tax
2018
10.0%
2017
9.3%
2018
12.2%
2017
11.2%
Sensitivity to changes in assumptions
possible change in key assumptions that could cause the carrying amount
For the portfolio companies containing goodwill, the recoverable amounts
to exceed the recoverable amount. In MHWirth, the group believes that
are higher than the carrying amounts based on the value in use analysis
no reasonably possible change in any of the key assumptions used for
and consequently no impairment loss of goodwill was recognized in 2018.
impairment testing would cause the carrying amount of the portfolio
The group has performed sensitivity calculations to identify any reasonably
company to exceed its recoverable amount.
Annual Report 2018 | Financials and Notes | Akastor Group 55
Note 16 | Equity-accounted investees
Equity-accounted investees include joint ventures and associates. Such investments are defined as related parties to Akastor. See Note 35 Related parties
for overview of transactions and balances with joint ventures and associates, and any guarantees provided on behalf of or from such entities.
Amounts in NOK million
DOF Deepwater AS
AKOFS Offshore
Electrical Subsea &
Drilling AS
Total
2018
Business office
Percentage of voting rights and ownership
Share of profit (loss) reported in Other income
Share of profit (loss) reported in Financial items
Carrying amount of investments
Storebø, Norway
Oslo, Norway
Straume, Norway
50%
-
(102)
-
50%
28
(48)
1 086
20%
-
(8)
2
Amounts in NOK million
DOF Deepwater AS
Avium Subsea AS
Electrical Subsea &
Drilling AS
2017
Business office
Percentage of voting rights and ownership
Share of profit (loss) reported in Other income
Share of profit (loss) reported in Financial items
Carrying amount of investments
Storebø, Norway
Oslo, Norway
Straume, Norway
50%
-
(212)
-
50%
36
-
-
20%
-
-
10
28
(157)
1 088
Total
36
(212)
10
DOF Deepwater AS
classified as a joint venture to the group and consolidated using the equity
DOF Deepwater AS is a joint venture with DOF ASA, which owns and
method. See note 5 Discontinued operations for more information about
operates five anchor handling tug supply (AHTS) vessels.
the transaction.
AKOFS Offshore (Avium Subsea AS)
Electrical Subsea & Drilling AS
In September 26, 2018, Akastor completed the transaction to divest 50
In September 2017, MHWirth became a shareholder in Electrical Subsea
percent of its shares in AKOFS Offshore to MITSUI & CO., Ltd. ("Mitsui")
& Drilling AS (ESD) with 20% ownership by transferring certain work-in-
and Mitsui O.S.K. Lines, Ltd. ("MOL"). Following the transaction, Avium
progress technologies for new well barrier for BOP. ESD is a privately
Subsea AS, the existing joint venture between Akastor, Mitsui and MOL,
owned Norwegian company and working on the development and
became a wholly owned subsidiary of AKOFS Offshore. Akastor, Mitsui
qualification of two drilling technologies; all electric control of Blow Out
and MOL hold 50%, 25% and 25% of the shares in AKOFS Offshore,
Preventers (BOP) and a Rotating Control Device for Managed Pressure
respectively, and have joint control over the company. AKOFS Offshore is
Drilling.
Annual Report 2018 | Financials and Notes | Akastor Group 56
Summary of financial information for significant equity-accounted investee (100 percent basis)
Amounts in NOK million
Current assets
– Cash and cash equivalents
Non-current assets
Current liabilities
– Current financial liabilities (excluding trade and other payables and provisions)
Non-current liabilities
– Non-current financial liabilities (excluding trade and other payables and provisions)
Net assets (100%)
Akastor's share of net assets (50%)
Recognized against non-current receivables and liabilities 2)
Goodwill
Elimination of unrealized gain on downstream sales 3)
Akastor's carrying amount of the investment
Revenue
Depreciation, amortization and impairment
Interest expense
Income tax expense
Profit (loss) for the year
Other comprehensive income (loss)
Total comprehensive income (loss) (100%)
Total comprehensive income (loss) (50%)
Elimination of unrealized gain on downstream sales
Akastor's share of total comprehensive income (loss)
DOF Deepwater AS
2018
2017
128
38
719
(104)
(30)
(1 046)
(1 046)
(303)
(152)
152
-
-
-
146
(142)
(51)
-
(203)
-
(203)
(102)
-
(102)
147
47
857
(117)
(29)
(987)
(987)
(100)
(50)
50
-
-
-
149
(403)
(49)
3
(424)
-
(424)
(212)
-
(212)
AKOFS
Offshore1)
Avium
Subsea AS
2018
2017
447
52
160
49
4 741
1 475
(861)
(163)
(760)
(141)
(2 098)
(1 060)
(2 092)
(1 060)
2 229
1 115
-
125
(154)
1 086
304
152
-
-
(152)
-
448
241
(144)
(83)
(150)
(91)
(96)
(5)
(62)
55
(88)
-
(150)
55
(75)
11
(64)
28
8
36
1)
Includes the results from Avium Subsea AS for the period from January 1 to September 26, 2018 and from AKOFS Offshore for the period from September 27
to December 31, 2018.
2) Akastor’s share of losses from DOF Deepwater AS is recognized against the carrying amount of its interest including non-current receivables. Further losses are recognized
as a liability as the group has provided guarantees for the funding of the vessels in the company. See also Note 25 Other non-current liabilities and Note 35 Related parties.
3)
In 2016, Akastor sold the Skandi Santos topside equipment to Avium Subsea AS. 50% of the accounting gain from the sale was eliminated upon consolidation, reducing
Akastor’s carrying amount of the investment. The gain elimination in excess of Akastor’s share of net assets was recognized as a liability, see also Note 25 Other non-
current liabilities.
For information about guarantees provided on behalf of equity-accounted investees, see note 35 Related parties.
Note 17 | Other non-current assets
Amounts in NOK million
Deferred and contingent considerations
Other assets
Total other non-current assets
Note
2018
2017
32
59
99
3
1
62
100
Deferred and contingent considerations relate to contingent considerations arising from divestments of subsidiaries and are measured at fair value.
Annual Report 2018 | Financials and Notes | Akastor Group Note 18 | Other investments
Amounts in NOK million
Aker Pensjonskasse
NES Talent investment 1)
Awilco Drilling investment 2)
Odfjell Drilling investment 3)
Other equity securities
Total other investments
57
Note
2018
2017
158
128
530
76
705
405
-
-
-
2
32
1 469
536
1) Akastor holds 17.7% economic ownership interest in NES Global Talent, a global oil and gas manpower provider.
2) Akastor holds 5.5% of the common shares in Awilco Drilling, which is listed on the Oslo Stock Exchange.
3) In May 2018, Akastor made an investment of USD 75 million in preferred equity in Odfjell Drilling, which generates 5% p.a. cash dividend and 5% p.a. payment-in-kind (PIK)
dividend for the first six years, with step-up cash dividend after 6 years. In addition, Akastor has acquired warrants for 5 925 000 common shares in Odfjell Drilling, divided
by six exercisable tranches until May 30, 2024. Odfjell Drilling is listed on the Oslo Stock Exchange.
Other investments are measured at fair value.
Note 19 | Current interest-bearing receivables
Amounts in NOK million
Receivable from AKOFS Offshore
Total current interest-bearing receivables
Note 20 | Inventories
Amounts in NOK million
Stock of raw materials
Goods under production
Finished goods
Total inventories
Inventories expensed in the period
Write-down of inventories in the period
Reversal of write-down in the period
The reversal of write down of inventory is due to change in estimate of the net realizable value.
Note
2018
2017
35
257
257
-
-
2018
2017
103
104
342
548
(1 416)
(33)
23
178
95
296
569
(1 347)
(336)
-
Annual Report 2018 | Financials and Notes | Akastor Group
58
Note 21 | Trade and other receivables
Amounts in NOK million
Trade receivables 1)
Less provision for impairment
Trade receivables, net of provision
Other receivables
Trade and other receivables
Advances to suppliers
Contract assets
Amount due from customers for construction work
Accrued revenue
Prepaid expenses
Public duty and tax refund
Contingent considerations
Total
Note
32
7
32
2018
1 459
(49)
1 410
64
1 474
74
824
-
-
347
76
7
2017
1 319
(71)
1 248
204
1 451
81
-
246
147
218
113
6
2 801
2 263
1) Trade receivables are financial instruments and an impairment loss of NOK 32 million was recognized in the income statement in 2018 (NOK 5 million in 2017).
Book value of trade and other receivables is approximately equal to fair value.
Aging of trade receivables
Amounts in NOK million
Not overdue
Past due 0-30 days
Past due 31-90 days
Past due more than 90 days
Total trade receivables
2018
2017
698
97
99
565
485
79
54
700
1 459
1 319
A majority of the trade receivables past due is related to major customers. These outstanding receivables are monitored regularly and impairment
analysis is performed on an individual basis for major customers. As of December 31, 2018, trade receivables of an initial value of NOK 49 million
(NOK 71 million in 2017) were impaired. See below for the movements in the provision for impairment of receivables.
Amounts in NOK million
Balance as of January 1
New provisions
Utilized
Unused amounts reversed
Disposal of subsidiaries
Currency translation differences
Balance as of December 31
2018
2017
71
32
(43)
(10)
-
(2)
49
107
5
(3)
(3)
(33)
(2)
71
Annual Report 2018 | Financials and Notes | Akastor Group Note 22 | Cash and cash equivalents
Amounts in NOK million
Restricted cash
Interest-bearing deposits
Total cash and cash equivalents
59
2018
2017
-
198
198
8
160
168
Additional undrawn committed current bank revolving credit facilities amount to NOK 2.0 billion, that together with cash and cash equivalents gives a
total liquidity reserve of NOK 2.2 billion as of December 31, 2018. See also Note 24 Borrowings.
Note 23 | Capital and reserves
Share capital
Fair value reserve
Akastor ASA has one class of shares, ordinary shares, with equal rights
The fair value reserve comprises the cumulative net changes in the fair
for all shares. The holders of ordinary shares are entitled to receive
value of financial assets classified as Fair Value to OCI (FVOCI) until these
dividends and are entitled to one vote per share at General Meetings. Total
assets are impaired or derecognized.
outstanding shares are 274 000 000 at par value NOK 0.592 per share
(NOK 0.592 in 2017). All issued shares are fully paid.
Currency translation reserve
Treasury shares
The translation reserve comprises all foreign currency differences arising
from the translation of the financial statements of foreign operations,
At the Annual General Meeting in 2014, authorization was given to
as well as the effective portion of any foreign currency differences from
repurchase up to 27.4 million shares, representing 10 percent of the share
hedges of net investments in foreign operations.
capital of Akastor ASA. The group purchases treasury shares to meet the
obligation under employee share purchase programs. No programs were
The currency translation reserve includes exchange differences arising
initiated in 2018 or 2017 and there is no purchase or sale of treasury shares
from the translation of the net investments in foreign operations, and
in 2018 or 2017. As of December 31, 2018, Akastor ASA holds 2 776 376
foreign exchange gain or loss on loans defined as net investment hedge
treasury shares (2 776 376 treasury shares in 2017), representing 1.01
or part of net investments in foreign operations. Upon the disposal of
percent of total outstanding shares.
investments in foreign operations during 2018 and 2017, the accumulated
The Board of Directors has proposed no dividends for 2018 or 2017.
reclassified from the currency translation reserve to the income statement
currency translation differences related to the disposed entities were
in profit (loss) from discontinued operations.
Hedging reserve
The hedging reserve relates to cash flow hedges of future revenues and
Net investments in foreign operations have been hedged with a loss of
expenses against exchange rate fluctuations. The income statement
NOK 16 million in 2018 (NOK 0 million in 2017). Accumulated gain on net
effects of such instruments are recognized in accordance with the
investment hedges as of 2018 is a loss of NOK 5 million (gain of NOK
progress of the underlying construction contract as part of revenues or
11 million in 2017). The net investment hedge as of December 31, 2018
expenses as appropriate. The hedging reserve represents the value of such
relates to investments in the United States, Netherlands and Cyprus.
hedging instruments that is not yet recognized in the income statement.
The underlying nature of a hedge is that a positive value on a hedging
instrument exists to cover a negative value on the hedged position, see
Note 10 Net finance expenses and Note 31 Derivative financial instruments.
Annual Report 2018 | Financials and Notes | Akastor Group
60
Note 24 | Borrowings
Below are contractual terms of the group’s interest-bearing loans and borrowings which are measured at amortized cost. For more information about the
group’s exposure to interest rates, foreign currency and liquidity risk, see Note 30 Financial risk management and exposures.
Amounts in million
Currency
Nominal
currency
value
Carrying
amount
(NOK)
Interest
rate
Interest
margin
Interest
coupon
Maturity
Interest terms
2018
Revolving credit facility
(NOK 1 250 million)
Revolving credit facility
(USD 155 million)
Overdraft facility
Total borrowings
Current borrowings
Non-current borrowings
Total borrowings
2017
Revolving credit facility
(NOK 1 005 million)
Revolving credit facility
(USD 147 million)
BNDES loan (Brazil)
Finance lease obligation
Overdraft facility
Total borrowings
Current borrowings
Non-current borrowings
Total borrowings
NOK
600
588
1.18%
2.25%
3.43%
Dec 2021
NIBOR + margin
2,25%
Dec 2021
USD LIBOR + margin
USD
-
-
13
601
14
588
601
NOK
350
348
0.76%
2.25%
3.01% July 20192)
NIBOR + margin 1)
1.49%
6.75%
2.25%
1.40%
3.74% July 20192)
8.15%
May 2022
USD LIBOR + margin 1)
TJLP + fixed margin 3)
USD
BRL
USD
58
74
478
183
1 494
30
2 533
399
2 133
2 533
1) The margin applicable to the facilities is decided by a price grid based on the leverage ratio and level of utilization. Commitment fee is 35 percent of the margin (2017: 40
percent).
2) The maturity date reflects maturity date as defined in the loan agreements
3) The loan in Brazil is allocated into three sub-credits. Interest terms disclosed above is for the sub-credit representing more than 90 percent of the total loan in Brazil. TJLP
is the Brazilian Federal long term interest rate.
Bank debt (Norway)
All facilities are provided by a bank syndicate consisting of high quality
Nordic and international banks. The terms and conditions include
restrictions which are customary for these kinds of facilities, including inter
alia negative pledge provisions and restrictions on acquisitions, disposals
and mergers, dividend distribution and change of control provisions. For
information about financial covenants, see Note 29 Capital management.
Annual Report 2018 | Financials and Notes | Akastor Group
61
Reconciliation of liabilities arising from financing activities
Amounts in NOK million
Revolving credit facilities
BNDES loan (Brazil)
Finance lease obligation
Overdraft facility
Total liabilities arising from
financing activities
Balance as
of December
31, 2017
Foreign
exchange
movements
Capitalized
borrowing
costs
Cash flows
Accrued
interest
Disposal of
business
Balance
as of
December 31,
2018
826
183
1 494
30
2 533
(230)
(166)
(70)
(15)
(481)
2
(17)
(15)
2
(32)
(9)
-
-
(9)
(1)
-
-
-
-
-
(1 409)
(1)
(1 409)
588
-
-
14
601
Note 25 | Other non-current liabilities
Amounts in NOK million
Note
2018
2017
Deferred gain
Deferred settlement obligations
Guarantee obligation related to joint venture
Other liabilities
Total other non-current liabilities
32
16, 32
32
112
129
117
32
390
14
9
39
48
110
Deferred gain
Deferred settlement obligations
In May 2018, Akastor invested in preferred equity and warrants in Odfjell
Deferred settlement obligations represent contingent considerations
Drilling. On initial recognition, the investment in the financial assets is
resulting from disposal of subsidiaries. The obligations in 2018 are mainly
recognized at fair value and the difference between the fair value and the
related to provision for guaranteed preferred return to Mitsui and MOL in
transaction price, NOK 117 million, was recognized as “Deferred gain”. The
connection with the divestment of 50 percent shares in AKOFS Offshore.
deferred gain is subsequently amortized and recognized to profit and loss
See also Note 35 Related parties for more information.
at straight-line basis over six years. See also Note 18 Other investments for
more information about the investment.
Guarantee obligation related to joint venture
Akastor’s share of losses from DOF Deepwater AS in excess of the carrying
In 2016, Akastor sold the Skandi Santos topside equipment to Avium
amount of Akastor’s investment interest in the joint venture is recognized
Subsea AS, a joint venture with 50 percent ownership. The sale resulted
as a liability as the group has provided guarantees for the funding of the
in an accounting gain of NOK 172 million, after elimination of 50% of the
vessels in the company. See also Note 16 Equity-accounted investees and
total gain on sale. The elimination of the gain in excess of the carrying
Note 35 Related parties for more information.
amount of the joint venture was presented as “Deferred gain” in 2017. The
deferred gain was reduced to zero by Akastor’s share of net profit from
Other liabilities
Avium Subsea AS in 2018.
Other liabilities relate mainly to liabilities related to leasehold improvements
and welfare fund.
Annual Report 2018 | Financials and Notes | Akastor Group 62
Note 26 | Employee benefits – pension
Akastor’s pension costs represent the future pension entitlement earned
Compensation plan
by employees in the financial year. In a defined contribution plan the
To ensure that the employees were treated fairly on the change over
company is responsible for paying an agreed contribution to the employee’s
to the new plan, the company has introduced a compensation plan. The
pension assets. In such a plan this annual contribution is also the cost.
basis for deciding the compensation amount is the difference between
In a defined benefit plan it is the company’s responsibility to provide a
calculated pension capital in the defined benefit plan and the value of the
certain pension. The measurement of the cost and the pension liability
defined benefit plan at the age of 67 years. The compensation amount will
for such arrangements is subject to actuarial valuations. Akastor has over
be adjusted annually in accordance with the adjustment of the employees’
a long time period gradually moved from defined benefit arrangements
pensionable income, and accrued interest according to market interest. If
to defined contribution plans. Consequently, the impact of the remaining
the employee leaves the company voluntarily before the age of 67 years,
defined benefit plans is gradually reduced.
the compensation amount will be reduced.
Pension plans in Norway
AFP – early retirement arrangement
The main pension arrangement in Norway is a general pension plan
AFP
is an early retirement arrangement organized by Norwegian
organized by the Norwegian Government. This arrangement provides
employers, the main Labor Union organization in Norway (LO) and the
the main general pension entitlement of all Norwegians. All pension
Norwegian Government. The AFP plan is providing additional lifelong
arrangements by employers consequently represent limited additional
pensions to employees that retire before the general retirement age, to
pension entitlements.
compensate for the reduction of the ordinary pension entitlements. The
employees are given a choice of retirement age, with lower pension at
Norwegian employers are obliged to provide an employment pension
earlier retirement.
plan, which can be organized as a defined benefit plan or as a defined
contribution plan. The Norwegian companies in Akastor have closed
The Norwegian Accounting Standards Board has issued a comment
the earlier defined benefit plans in 2008 and are now providing defined
concluding that the AFP plan is a multi-employer defined benefit plan. The
contribution plans for all of their employees under 61 years of age.
AFP plan exposes the participating entities to actuarial risk associated
Defined contribution plan
with employees of other entities with the result that there is no consistent
and reliable basis for allocating the obligation, plan assets and costs to
The annual contribution expensed for the new defined contribution plan
individual participating entities. Sufficient information is not available to
for continuing operations was NOK 39 million (NOK 42 million in 2017).
use defined benefit accounting and the AFP plan is accounted for as a
The estimated contributions expected to be paid in 2019 amount to NOK
defined contribution plan.
41 million.
Defined benefit plan
The annual contribution expensed for the AFP plan was NOK 11 million
(2017: NOK 14 million). The estimated contributions expected to be paid
Employees who were 58 years or older in 2008, when the change took
in 2019 amount to NOK 12 million.
place, are still in the defined benefit plan. This is a funded plan and
represents most of the funded pension liability reported in the tables
Pension plans outside Norway
below. The estimated contributions expected to be paid to the Norwegian
Pension plans outside Norway are predominately defined contribution
plan during 2019 amount to NOK 7 million.
plans.
Pension cost
Amounts in NOK million
Defined benefit plans
Defined contribution plans including AFP
Total pension cost
Net employee defined benefit obligations
Amounts in NOK million
Defined benefit plans Norway
Defined benefit plans Germany
Defined benefit plans US
Defined benefit plans other countries
Total employee benefit obligations
Note
2018
9
54
63
8
2017
Restated
11
59
70
2018
2017
179
106
45
2
332
187
113
47
2
349
Annual Report 2018 | Financials and Notes | Akastor Group 63
Movement in net defined benefit (asset) liability
Amounts in NOK million
Balance as of January 1
Adjustment for discontinued operations as of January 1
Pension obligation
2018
2017
Pension asset
Net pension obligation
2018
2017
2018
2017
623
(4)
669
(18)
(275)
-
(288)
-
349
(4)
380
(18)
Included in profit or loss
Service cost
Interest cost (income)
Included in OCI
Remeasurements (loss) gain:
Actuarial loss (gain) arising from:
- demographic assumptions
- financial assumptions
- experience adjustments
Return on plan assets excluding interest income
Changes in asset ceiling
Effect of movements in exchange rates
Other
Benefits paid by the plan
Contributions paid into the plan
Balance as of December 31
Plan assets
Amounts in NOK million
Plan assets at fair value Norwegian plan
Equity securities
Government
Finance
Private and Government enterprise
Municipalities
Bonds
Fund/private equity
Total plan assets Norway at fair value
Equity securities
Debt securities
Total plan assets US at fair value
Total plan assets Germany at fair value
Total plan assets at fair value
9
10
19
6
(16)
(5)
-
-
11
(4)
(48)
-
(48)
587
11
10
22
5
12
(3)
-
-
5
20
(69)
-
(69)
623
-
(3)
(3)
-
(3)
-
19
3
(6)
13
-
(3)
(3)
-
(2)
-
(7)
2
3
(5)
28
(18)
10
(255)
45
(23)
22
(275)
9
6
16
6
(19)
(5)
19
3
6
9
(20)
(18)
(38)
332
11
7
19
5
10
(3)
(7)
2
8
15
(24)
(23)
(47)
349
2018
2017
-
1
18
29
51
99
37
136
38
54
92
27
255
4
1
19
33
73
127
20
150
42
56
98
27
275
The equity portfolio is invested globally. The fair value of the equities is
The investment in fund/private equity is mainly funds that invests in listed
based on their quoted prices at the reporting date without any deduction
securities and where the fund value is based on quoted prices.
for estimated future selling cost.
The investments in bonds are done in the Norwegian market and most of
The group’s most significant defined benefit plans are in Norway, Germany
the bonds are not listed on any exchange. The market value as at year end
and USA. The followings are the principal actuarial assumptions at the
is based on official prices provided by the Norwegian Securities Dealers
reporting date for the plans in these countries.
Defined benefit obligation – actuarial assumptions
Association. The Bond investments have on average a high credit rating.
Most of the investments are in Norwegian municipalities with a credit
rating of AA.
Annual Report 2018 | Financials and Notes | Akastor Group
64
Norway
Germany
USA
Discount rate
Asset return
Salary progression
Pension indexation
2018
2017
2018
2017
2.80%
2.80%
2.75%
2.40%
2.40%
2.50%
0 -2.25%
0-2.25%
3.21%
3.21%
n/a
1.75%
3.68%
3.68%
n/a
1.75%
Mortality table
K2013
K2013
RT 2018 G RT 2005 G
2018
3.90%
3.90%
n/a
n/a
2017
3.29%
3.29%
n/a
n/a
RP-2014 Adjusted
to 2006 Total
Dataset with
Scale MP-2018
RP-2014 Adjusted
to 2006 Total
Dataset with
Scale MP-2017
The information below relates only to Norwegian plans as these represent
Assumptions regarding future mortality have been based on published
the majority of the plans.
statistics and mortality tables. The current life expectancy underlying the
values of the defined benefit obligation at the reporting date is shown
The discount rates and other assumptions in 2018 and 2017 are based
below.
on the Norwegian high quality corporate bond rate and recommendations
from the Norwegian Accounting Standards Board. It should be expected
that fluctuations in the discount rates would also lead to fluctuations
in the pension indexations. The total effect of fluctuations in economic
assumptions is consequently unlikely to be very significant.
Years
Life expectancy of male pensioners
Life expectancy of female pensioners
2018
2017
22.2
25.5
22.2
25.5
As of December 31, 2018, the weighted-average duration of the defined benefit obligation was 10.4 years.
Sensitivity analysis
Reasonably possible changes at the reporting date to one of the relevant actuarial assumptions, holding other assumptions constant, would have affected
the defined benefit obligation as of December 31, 2018 by the amounts shown below.
Amounts in NOK million
Discount rate (1% movement)
Future salary growth (1% movement)
Future pension growth (1% movement)
Increase
Decrease
(12)
1
10
10
(1)
(12)
The change in discount rate assumptions would affect plan assets in the income statement in next period as it would change the estimated asset return,
but have no effect on pension assets as of year-end.
Annual Report 2018 | Financials and Notes | Akastor Group Note 27 | Provisions
Amounts in NOK million
Provision, current
Provision, non-current
Total provisions
Development of significant provisions
Amounts in NOK million
Balance as of January 1, 2018
New provisions
Provisions utilized
Provisions reversed
Unwind of discount
Currency translation differences
Balance as of December 31, 2018
Expected timing of payment
Within the next twelve months
After the next twelve months
Total
65
2018
2017
236
166
403
293
221
514
Warranties Restructuring
Onerous lease
provision
Other
Total
86
8
(6)
(5)
-
(1)
82
82
-
82
77
-
(33)
(2)
-
(1)
41
19
22
41
269
-
(67)
(2)
11
-
212
78
134
212
81
13
(23)
(3)
-
-
68
57
11
68
514
22
(130)
(13)
11
(1)
403
236
166
403
Warranties
reorganization in MHWirth due to the challenging rig market. The
The provision for warranties relates mainly to the possibility that Akastor,
provision includes provision for vacant office premises after the workforce
based on contractual agreements, needs to perform guarantee work
reduction and is estimated based on the detailed restructuring plans for
related to products and services delivered to customers. Warranty
the businesses and locations affected.
provision is presented as current as it is expected to be settled in the
group’s normal operating cycle. See Note 4 Significant accounting
Onerous lease provision
estimates and judgments for further descriptions.
Provision for onerous leases represents provision for vacant properties
where the group has committed to future lease payments under operating
Restructuring
lease contracts.
Restructuring mainly relates to significant workforce reduction and
Note 28 | Trade and other payables
Amounts in NOK million
Trade creditors 1)
Accrued expenses
Trade and other payables
Public duty and tax payables
Contract liabilities
Amount due to customers for construction work and advances
Deferred settlement obligations
Other
Total trade and other payables
1) Trade creditors are due within one year.
Note
32
7
32
2018
236
1 502
1 738
86
632
-
279
-
2017
239
334
573
77
-
738
75
30
2 734
1 493
Deferred settlement obligations in 2018 include provision of NOK 250
place in 2014. In 2016, MPO was sold to AFGlobal Corporation (AFGlobal),
million for potential loss as a result of negative arbitration award for
pursuant to which Akastor remains responsible towards AFGlobal in
Managed Pressure Operations Ltd.(MPO). MPO, a former Akastor owned
respect of the financial outcome resulting from the arbitration matter.
company, has received an arbitration award from the London Court of
International Arbitration (LCIA) whereby MPO is found liable under a
Book value of trade creditors and other current liabilities is approximately
project originally initiated in 2012 and where delivery was agreed to take
equal to fair value.
Annual Report 2018 | Financials and Notes | Akastor Group 66
Note 29 | Capital management
Akastor’s capital management is designed to ensure that the group
Funding cost
has sufficient financial flexibility, short-term and long-term. One main
Akastor aims to have a diversified selection of funding sources in order
objective is to maintain a financial structure that, through solidity and cash
to reach the lowest possible cost of capital. These funding sources might
flow, secures the group’s strong long-term creditworthiness, as well as
include:
maximize value creation for its shareholders through:
Investing in projects and business areas which will increase the
company’s Return On Capital Employed (ROCE) over time.
Optimizing the company’s capital structure to ensure both
sufficient and timely funding over time to finance its activities at
the lowest cost.
Investment policy
The use of banks based on syndicated credit facilities.
The issue of debt instruments in the Norwegian capital market.
The issue of debt instruments in foreign capital markets.
Ratios used in monitoring of capital/Covenants
Akastor monitors capital on the basis of a gearing ratio (net debt/equity)
and interest coverage ratio (ICR) based on EBITDA/net interest costs.
Akastor’s capital management is based on a rigorous investment selection
These ratios are similar to covenants as defined in loan agreements for the
process which considers not only Akastor’s weighted average cost of
revolving credit facilities which are shown below. See Note 24 Borrowings
capital and strategic orientation but also external factors such as market
for details about these loans.
expectations.
Funding policy
Liquidity planning
The company’s gearing ratio shall not exceed 1.0 times and
is calculated from the consolidated total borrowings to the
consolidated Equity.
Akastor has a strong focus on its liquidity situation in order to meet its
short term working capital needs and to ensure solvency for its financial
The ICR shall not be lower than 3.0, calculated from the
obligations. Akastor had a liquidity reserve per year end 2018 of NOK 2.2
consolidated EBITDA to consolidated Net Finance Cost when
billion, composed of an undrawn committed credit facility of NOK 2.0
gearing ratio is below 0.5
billion and cash and cash equivalents of NOK 0.2 billion.
Funding of operations
The ICR shall not be lower than 4.0, calculated from the
consolidated EBITDA to consolidated Net Finance Cost when
Akastor’s group funding policy is that all operations shall meet their
gearing ratio exceeds 0.5
funding needs directly via the central treasury department (Akastor
Treasury). This ensures optimal availability and transfer of cash within the
Minimum liquidity amount shall exceed NOK 500 million on
group and better control of the company’s overall debt as well as cheaper
consolidated level.
funding for its operations.
Funding duration
The ratios are calculated based on net debt including cash and borrowings
as shown in Note 32 Financial instruments, adjusted EBITDA (earnings
Akastor emphasizes financial flexibility and steers its capital structure
before interest, tax, depreciation, amortization and adjusted for certain
accordingly to limit its liquidity and refinancing risks. In this perspective,
items as defined in the loan agreement) and net interest costs. Covenants
loans and other external borrowings are to be renegotiated well in advance
ratios are based on accounting principles as of December 31, 2018.
of their due date and generally for periods of 3 to 5 years.
The covenants are monitored on a regular basis by the Akastor Treasury
department to ensure compliance with the loan agreements, and are
tested and reported on a quarterly basis. Akastor was in compliance with
its covenants as of December 31, 2018, and on the basis of the covenants
and its forecasts, management believes that the risk of covenant being
breached is low and that the group will continue as a going concern for
the foreseeable future.
Annual Report 2018 | Financials and Notes | Akastor Group 67
Note 30 | Financial risk management and exposures
The group is exposed to a variety of financial risks: currency risk, interest
derivative designated in each hedging relationship is expected to be and
rate risk, price risk, credit risk, liquidity risk and capital risk. The capital
has been effective in offsetting changes in cash flows of the hedged item
market risk affects the value of financial instruments held. The objective of
using the hypothetical derivative method. In these hedge relationships, the
financial risk management is to manage and control financial risk exposures
main sources of ineffectiveness can arise from:
and thereby increase the predictability of earnings and minimize potential
adverse effects on the group’s financial performance. Akastor group
Changes to the forecasted amount of cash flows of hedged items
uses financial derivative instruments to hedge certain risk exposures and
and hedging instruments
applies hedge accounting in order to reduce the profit or loss volatility.
Risk management is present in every project. It is the responsibility of
movements of the hedging instruments and hedged items
the project managers, in cooperation with Akastor Treasury, to identify,
evaluate and hedge financial risks under policies approved by the Board
Currency exposures from investments in foreign currencies are only
of Directors. The group has well-established principles for overall risk
hedged when specifically instructed by management. As of December
management, as well as policies for the use of derivatives and financial
31, 2018, Akastor has one net investment hedge related to its subsidiary
investments. There have not been any changes in these policies during
Zoetermeer Process BV.
The counterparties’ credit risk differently impacting the fair value
the year.
Currency risk
The change in hedge reserve in 2018 is related to hedges of forecast sales
and purchases, except negative NOK 7 million net of tax that relates to a
The group operates internationally and is exposed to currency risk
net investment hedge.
on commercial transactions, recognized assets and liabilities and net
investments in foreign operations. Commercial transactions and recognized
Exposure to currency risk
assets and liabilities are subject to currency risk when payments are
Estimated forecasted receipts and payments in the table below are
denominated in a currency other than the respective functional currency
calculated based on the group’s hedge transactions, adjusted for hedged
of the group company. The group’s exposure to currency risk is primarily
balance sheet items. These are considered to be the best estimate of
to USD, EUR and BRL, but also other currencies.
the currency exposure, given that all currency exposure is hedged in
accordance with the group’s policy. The net exposure is managed by
Akastor’s policy requires business units to mitigate currency exposure
Akastor Treasury.
in any project. Akastor manages exposures by entering into forward
contracts or currency options with the financial market place. Akastor has
Changes in currency rates change the values of hedging derivatives,
a large number of contracts involving foreign currency exposures and the
embedded derivatives, borrowings, receivables and cash balances. Hedges
currency risk policy has been well-established for many years.
that qualify for hedge accounting are reported in the profit and loss
according to progress of projects, and deferred value of cash flow hedges
The group determines the existence of an economic relationship between
is reported as hedging reserve in equity. Any changes to currency rates will
the hedging instrument and hedged item based on the currency and
therefore affect equity.
amount of their respective cash flows. The group assesses whether the
Amounts in million
Bank
Intercompany loans
External loans
Deferred settlement assets and obligations
Balance sheet exposure
Estimated forecast receipts from customers
Estimated forecast payments to vendors
Cash flow exposure
Forward exchange contracts
Net exposure
USD
(128)
17
176
(39)
26
198
(28)
170
(252)
(57)
2018
EUR
(20)
31
(1)
-
10
-
(22)
(22)
(25)
(36)
BRL
-
-
86
-
86
-
-
-
-
86
USD
(151)
200
-
(3)
46
177
(126)
51
(108)
(11)
2017
EUR
BRL
(35)
33
(6)
-
(8)
(6)
-
(6)
15
2
-
114
86
-
200
-
-
-
-
200
Annual Report 2018 | Financials and Notes | Akastor Group 68
Sensitivity analysis
to be reasonably possible at the end of the reporting period. The analysis
A strengthening of EUR, USD and BRL against NOK as of December
assumes that all other variables, in particular interest rates, remain
31 would have affected the measurement of financial instruments
constant and ignores any impact of forecast sales and purchases. Figures
denominated in a foreign currency and increased (decreased) equity and
in the table below only include the effect in income statement and equity
income statement by the amounts shown below. This analysis is based
for change in currency regarding financial instruments and do not include
on foreign currency exchange rate variances that the group considered
effect from operating cost and revenue.
Effect of weakening of NOK against significant currencies:
Amounts in NOK million
USD (10%)
EUR (7%)
BRL (15%)
2018
Profit (loss)
after tax
Equity
Increase
(decrease)
(38)
15
22
(165)
30
22
USD (15%)
EUR (15%)
BRL (15%)
2017
Profit (loss)
before tax
Equity
Increase
(decrease)
(17)
2
57
(16)
16
57
A strengthening of the NOK against the above currencies as of December
borrowings and interest-bearing receivables. Borrowings and receivables
31 would have had the equal but opposite effect on the above amounts, on
issued at variable rates as well as cash expose the group to cash flow
the basis that all other variables remain constant. The sensitivity analysis
interest rate risk. Borrowings and receivables issued at fixed rates expose
does not include effects on the consolidated result and equity from
the group to fair value interest rate risk. However, as these borrowings are
changed exchange rates used for consolidation of foreign subsidiaries.
measured at amortized cost, interest rate variations do not affect profit
and loss when held to maturity.
The primary currency-related risk is the risk of reduced competitiveness
abroad in the case of a strengthened NOK. This risk relates to future
An increase of 100 basis points in interest rates during 2018 would have
commercial contracts and is not included in the sensitivity analysis above.
increased (decreased) equity and profit and loss by the amounts shown on
Interest rate risk
the table below. This analysis assumes that all other variables, in particular
foreign currency rates, remain constant. The analysis is performed on the
The group’s interest rate risk arises from cash balances, interest-bearing
same basis as for 2017.
Effect of increase of 100 basis points in interest rates on profit (loss) before tax
Amounts in NOK million
Cash and cash equivalents
Current interest-bearing receivables
Borrowings
Net
2018
2017
2
1
(10)
(7)
3
-
(15)
(12)
A decrease of 100 basis points in interest rates during 2018 would have
Financial guarantees including counter guarantees for bank/
had the equal but opposite effect on the above amounts, on the basis that
surety bonds and guarantees for pension obligations to
all other variables remain constant. There are no effects on equity as there
employees are NOK 1 billion (NOK 1 billion in 2017).
are no interest swaps.
Guarantee obligations
Although guarantees are financial instruments, they are considered
contingent obligations and the notional amounts are not included in the
The group has provided the following guarantees on behalf of subsidiaries
financial statements. See more information about guarantees for related
and related parties as of December 31, 2018 (all obligations are per date
parties in Note 35 Related parties.
of issue):
Price risk
Performance guarantees on behalf of group companies are NOK
The group is exposed to fluctuations in market prices in the operational
50 million (NOK 0 million in 2017).
areas related to contracts, including changes in market prices for raw
materials, equipment and development in wages. These risks are to the
Parent company indemnity guarantees for fulfillment of lease
extent possible managed in bid processes by locking in committed prices
obligations and finance obligations are NOK 4.7 billion (NOK 4.7
from vendors as a basis for offers to customer or through escalation
billion in 2017).
clauses with customers.
Annual Report 2018 | Financials and Notes | Akastor Group 69
Credit risk
The group evaluates that significant credit risk concentrations are related
Credit risk is the risk of financial losses to the group if customer
to trade receivables from major corporate customers. The maximum
or counterparty to financial investments/instruments fails to meet
exposure to credit risk at the reporting date equals the carrying amounts
contractual obligations, and arise principally from investment securities
of financial assets (see Note 32 Financial instruments) and contract
and receivables.
assets (see Note 7 Revenue and other income). The group does not hold
Derivatives are only traded against approved banks. All approved banks
have investment grade ratings. Credit risk related to investment securities
Liquidity risk
collateral as security.
and derivatives is therefore considered to be insignificant.
Liquidity risk is the risk that the group will encounter difficulty in meeting
Assessment of credit risk related to customers and subcontractors is
its liquidity to ensure that it will always have sufficient liquidity reserves to
the obligations associated with its financial liabilities. The group manages
an important requirement in the bid phase and throughout the contract
meet its liabilities when due.
period. Such assessments are based on credit ratings, income statement
and balance sheet reviews and using credit assessment tools available (e.g.
Prudent liquidity risk management includes maintaining sufficient cash,
Dun & Bradstreet and Credit Watch). Sales to customers are settled in
the availability of funding from an adequate amount of committed credit
cash.
facilities and the ability to close out market positions. Due to the dynamic
nature of the underlying businesses, Akastor Treasury maintains flexibility
Revenues are mainly related to large and long term projects closely
in funding by maintaining availability under committed credit lines.
followed up in terms of payments up front and in accordance with agreed
milestones. Normally, lack of payments is due to disagreements related to
The group policy for the purpose of optimizing availability and flexibility
project deliveries and is solved together with the customer or escalated
of cash within the group is to operate a centrally managed cash pooling
to the local authority.
arrangement. An important condition for the participants (business units)
in such cash pooling arrangements is that the group as an owner of such
Based on estimates of incurred losses in respect of trade receivables
pools is financially viable and is able to prove its capability to service its
and contract assets, the group establishes a provision for impairment
obligations concerning repayment of any net deposits made by business
losses. Provisions for loss on debtors are based on individual assessments.
units. Management monitors rolling weekly and monthly forecasts of the
Provisions for loss on receivables were NOK 49 million in 2018 (NOK 71
group’s liquidity reserve on the basis of expected cash flow.
million in 2017).
Financial liabilities and the period in which they mature
The following is the remaining contractual maturities of financial liabilities at the reporting date. The amounts are gross and undiscounted, and include
contractual interest payments and exclude the impact of netting agreements.
Amounts in NOK million
2018
Borrowings excl financial lease 2)
Other non-current liabilities
Derivative financial instruments
Deferred settlement obligations
Trade and other payables
Total financial liabilities
Financial guarantees 3 )
2017
Borrowings excl. finance lease
Finance lease
Other non-current liabilities
Derivative financial instruments
Deferred settlement obligations
Trade and other payables
Total financial liabilities
Financial guarantees 3)
Note
24
25
31
25, 28
28
24
24
25
31
25, 28
28
Book
value
Total cash
flow 1)
6 months
and less
6–12
months
1–2 years
2–5 years
More than
5 years
601
149
210
408
1 738
3 106
1 039
1 494
87
20
84
573
3 296
675
149
210
408
1 738
3 180
5 815
1 112
3 072
87
20
84
573
4 947
5 626
24
16
200
257
1 363
1 858
287
73
163
12
17
61
489
815
244
10
17
5
4
376
412
418
40
163
12
3
-
84
302
52
21
37
5
88
-
151
497
890
328
37
-
23
-
1 278
403
621
74
-
58
-
753
66
109
793
20
-
-
-
922
1 141
-
6
-
-
-
6
4 548
-
1 625
7
-
-
-
1 631
3 786
1) Nominal currency value including interest.
2) The interest costs are calculated using the last fixing rate known by year end (plus applicable margin).
3) Financial guarantees are not recognized on the consolidated balance sheet. The undiscounted cash flows potentially payable under financial guarantees are classified on
the basis of expiry date
Annual Report 2018 | Financials and Notes | Akastor Group 70
Note 31 | Derivative financial instruments
The group uses derivative financial instruments such as currency forward
from ordinary commercial contracts. Further information regarding risk
contracts and currency options to hedge its exposure to foreign exchange
management policies in the group is available in Note 30 Financial risk
arising from operational, financial and investment activities. In addition,
management and exposures. Derivative financial instruments are classified
there are embedded foreign exchange forward derivatives separated
as current assets or liabilities as they are a part of the operating cycle.
The group is holding the following foreign exchange forward contracts:
Amounts in NOK million
2018
Foreign exchange forward contracts (highly probable forecast sales)
Notional amounts USD
Average forward rate (USD/NOK)
Average forward rate (EUR/USD)
Foreign exchange forward contracts (highly probable forecast purchases)
Notional amounts USD
Average forward rate (USD/NOK)
Notional amounts EUR
Average forward rate (EUR/NOK)
2017
Foreign exchange forward contracts (highly probable forecast sales)
Notional amounts USD
Average forward rate (USD/NOK)
Average forward rate (EUR/USD)
Foreign exchange forward contracts (highly probable forecast purchases)
Notional amounts USD
Average forward rate (USD/NOK)
Notional amounts EUR
Average forward rate (EUR/NOK)
Maturity
Total
6 months
and less
6-12 months
1-2 years
286
34
28
51
109
11
248
7.92
1.15
34
8.01
27
9.71
51
7.93
1.18
99
8.10
11
9.58
14
8.24
1.20
-
-
1
9.73
-
-
-
10
6.12
-
-
24
8.30
-
-
-
-
-
-
-
-
-
-
-
-
Annual Report 2018 | Financials and Notes | Akastor Group 71
Fair value of derivative instruments with maturity
The table below presents the fair value of the derivative financial instruments and a maturity analysis of the derivatives cash flows.
Amounts in NOK million
Assets
Cash flow hedges
Fair value adjustments to hedged assets
Total forward foreign exchange contracts, assets
Liabilities
Cash flow hedges
Net investment hedge
Embedded derivatives in ordinary commercial contracts
Fair value adjustments to hedged liabilities
Total forward foreign exchange contracts, liabilities
2017
Assets
Cash flow hedges
Embedded derivatives in ordinary commercial contracts
Not hedge accounted
Fair value adjustments to hedged assets
Total forward foreign exchange contracts, assets
Liabilities
Cash flow hedges
Not hedge accounted
Fair value adjustments to hedged liabilities
Total forward foreign exchange contracts, liabilities
Instruments
at fair value
Total
cash flow 1)
6 months
or less
6–12 months
1–2 years 2)
69
48
117
(151)
(9)
(40)
(10)
(210)
12
29
19
35
94
(7)
(20)
6
(20)
69
48
117
(151)
(9)
(40)
(10)
(210)
12
29
19
35
94
(7)
(20)
6
(20)
69
48
117
(141)
(9)
(40)
(10)
(200)
12
6
19
35
71
(7)
(17)
6
(17)
-
-
-
(5)
-
-
-
(5)
-
23
-
-
23
-
(3)
-
(3)
-
-
-
(5)
-
-
-
(5)
-
-
-
-
-
-
-
-
1) Cash flows from matured derivatives are translated to NOK using the exchange rates on the balance sheet date.
2) No derivatives with maturity later than 2 years.
Foreign exchange derivatives
classified in the same way as their hedging derivatives, they will have an
Akastor entities hedge the group’s future transactions in foreign currencies
almost equal, opposite effect to profit and loss. In the table above, the
with external banks. The exposure to foreign exchange variations in future
derivatives hedging the embedded derivatives are included in Forward
cash flows is hedged back-to-back in order to meet the requirements for
foreign exchange contracts - not hedge accounted.
hedge accounting. The foreign exchange derivatives are either subject to
hedge accounting or separated embedded derivatives. Hedges qualifying
The hedged transactions in foreign currency that are subject to cash flow
for hedge accounting are classified as cash flow hedges (hedges of highly
hedge accounting are highly probable future transactions expected to
probable future revenues and/or expenses).
occur at various dates during the next one to four years, depending on
Embedded derivatives are foreign exchange derivatives separated from
contracts are recognized in other comprehensive income and reported
construction contracts. The reason for separation is that the agreed
as hedging reserve in equity until they are recognized in the income
payment is in a currency different from any of the major contract parties’
statement in the period or periods during which the hedged transactions
own functional currency, or that the contract currency is not considered
affect the income statement. If the forward foreign exchange contract is
to be commonly used for the relevant economic environment defined as
rolled due to change in timing of the forecasted cash flow, the settlement
the countries involved in the cross-border transaction. The embedded
effect is included in Contract assets or Contract liabilities.
progress in the projects. Gains and losses on forward foreign exchange
derivatives represent currency exposures, which is hedged against
external banks. Since the embedded derivatives are measured and
Annual Report 2018 | Financials and Notes | Akastor Group
72
Unsettled cash flow hedges’ impact on profit and loss and equity (not adjusted for tax)
Amounts in NOK million
Fair value of all hedging instruments
Recognized in profit and loss
Deferred in equity (the hedge reserve)
2018
(82)
(17)
(65)
2017
5
2
3
The purpose of the hedging instrument is to secure a situation where
of the forward contracts have already affected the income statement
the hedged item and the hedging instrument together represent a
indirectly as revenues and expenses are recognized based on updated
predetermined value independent of fluctuations of exchange rates.
forecasts and progress. The negative NOK 65 million (NOK 3 million in
Revenue and expense on the underlying construction contracts are
2017) that are currently recorded directly in the hedging reserve, will be
recognized in the income statement in accordance with progress.
reclassified to income statement over the next years.
Consequently, negative NOK 17 million (NOK 2 million in 2017) of the value
Annual Report 2018 | Financials and Notes | Akastor Group 73
Note 32 | Financial instruments
The effect of initially applying IFRS 9 on the group’s financial instruments
Level 1 - fair values are based on prices quoted in an active market for
is described in Note 2 Basis for preparation. Due to the transition method
identical assets or liabilities.
chosen, comparative information has not been restated to reflect the new
requirements.
Level 2 - fair values are based on price inputs other than quoted prices
derived from observable market transactions in an active market for
Accounting classifications and fair values
identical assets or liabilities. Level 2 includes currency or interest
The table below lists the group’s financial instruments, both assets and
derivatives and interest bonds, typically when the group uses forward
liabilities. Financial instruments measured at fair value are classified by
prices on foreign exchange rates or interest rates as inputs to valuation
the levels in the fair value hierarchy. All other financial instruments are
models.
classified by the main group of instruments as defined in IFRS 9. It does
not include fair value information for financial assets and financial liabilities
Level 3 - Fair values are based on unobservable inputs, mainly based on
not measured at fair value if the carrying amounts are a reasonable
internal assumptions used in the absence of quoted prices from an active
approximation of fair value. For financial instruments measured at fair
market or other observable price inputs.
value, the levels in the fair value hierarchy are as shown below.
Amounts in NOK million
2018
Financial assets measured at fair value
Fair value – hedging instruments
Derivative financial instruments
Fair value through P&L (mandatorily at FVTPL)
Equity securities
Equity securities 1)
Warrants
Contingent considerations
Fair value through Other comprehensive income
Debt instruments 1)
Financial assets not measured at fair value
Financial assets at amortized cost
Cash and cash equivalents
Current interest-bearing receivables
Trade and other receivables
Financial assets
Financial liabilities not measured at fair value
Financial liabilities at amortized cost
Borrowings 2)
Other financial liabilities
Other non-current liabilities
Trade and other payables
Financial liabilities measured at fair value
Fair value – hedging instruments
Derivative financial instruments
Fair value to profit & loss
Deferred settlement obligations
Financial liabilities
Note
Book value
Financial instruments
measured at fair value
Level in fair
value hierarchy
31
18
18
18
17, 21
18
22
19
21
24
25
28
117
Level 2
76
849
33
65
Level 1
Level 3
Level 3
Level 3
512
Level 3
117
76
849
33
65
512
198
257
1 474
3 581
(601)
(613)
Level 2
(149)
(1 738)
31
(210)
(210)
Level 2
25, 28
(408)
(3 106)
(408)
Level 3
Annual Report 2018 | Financials and Notes | Akastor Group 74
Amounts in NOK million
2017
Loans and receivables
Cash and cash equivalents
Trade and other receivables
Non-current interest-bearing receivables
Available for sale
Other investments 1)
Mutual fund
Fair value - hedging instruments
Derivative financial instruments
Fair value through P&L
Financial assets
Other financial liabilities
Borrowings 2)
Other non-current liabilities
Trade and other payables
Fair value - hedging instruments
Derivative financial instruments
Fair value through P&L
Deferred settlement obligations
Financial liabilities
Deferred and contingent considerations
17, 21
Note
Book value
Financial instruments
measured at fair value
Level in fair
value hierarchy
22
21
18
31
24
25
28
31
168
1 451
1
536
12
94
105
2 368
(2 533)
(87)
(573)
536
12
Level 3
Level 1
94
Level 2
105
Level 3
(2 537)
Level 2
(20)
(20)
Level 2
25, 28
(84)
(3 296)
(84)
Level 3
1) Investments in level 3 in the hierarchy relate to equity securities and debt securities with no active market. These investments are measured at the best estimate of fair
value.
2) For credit facilities and other loans with floating interest, notional amounts are used as approximation of fair values.
Annual Report 2018 | Financials and Notes | Akastor Group
Reconciliation of Level 3 financial assets and financial liabilities
Amounts in NOK million
Balance as of January 1, 2017
Additions
Settlements
Net gain (loss) in the income statement 1)
Fair value through OCI
Currency translation difference
Balance as of December 31, 2017
Additions
Settlements
Sale of business
Net gain (loss) in the income statement 1)
Fair value to OCI
Currency translation difference
Balance as of December 31, 2018
75
Assets
Liabilities
229
411
-
9
6
(14)
641
756
(19)
(2)
45
(34)
72
1 458
(116)
(30)
60
-
2
(84)
(120)
31
-
(224)
-
(10)
(408)
1) Negative NOK 224 million in discontinued operations and NOK 45 million in financial items (2017: negative NOK 50 NOK 59 million, respectively).
Measurement of fair values at level 3
Debt instruments at FVOCI
model assumed to follow a Geometric Brownian Motion. The key
Financial assets measured at FVOCI are related to debt instruments in
inputs to the valuation model consist of the stock price of Odfjell
NES Global Talent. The valuation model considers the present value of
Drilling (listed on the Oslo Stock Exchange under ticket ODL) at
the expected cash flows from the ultimate disposal of the investments
the valuation date, as well as assumption of future volatility based
weighted with different probabilities. The expected disposal value is
on the share’s historical prices. The estimated fair value is mostly
determined by forecast EBITDA at the time of disposal and market
sensitive to the ODL share price and would increase (decrease) if
multiples, adjusted by forecast net debt of the investee. The estimated fair
the ODL share price were higher (lower).
value would increase (decrease) if:
The forecast EBITDA were higher (lower);
These assets and liabilities relate to contingent considerations and
obligations from business acquisitions and disposals. Final amounts
The market multiples applied were higher (lower); or
to be paid or received depend on future earnings in the acquired and
disposed companies or outcome of indemnity claims and price adjustment
The net debt of the investees at the date of disposal were lower
mechanisms.
Contingent considerations and deferred settlement obligations
(higher).
Financial assets at FVTPL
Assets and
liabilities depending on future earnings: The
recognized amounts are determined based on recent forecasts
Financial assets measured using Level 3 inputs relate mainly to preferred
and strategy figures for these entities, thus the final realized
equity and warrant investment in Odfjell Drilling.
values are sensitive to the above inputs as driven by market
Preferred equity: The valuation model considers the present
conditions.
value of the expected future payments, discounted using a risk-
Assets and liabilities depending of outcome of indemnity claims
adjusted discount rate of 10%. The estimated fair value would
and price adjustment mechanisms: Provisions are made based on
increase (decrease) if the risk-adjusted discount rate were lower
all available evidence as at the reporting date.
(higher).
Warrants: The valuation is obtained from external valuation
recognized and the credit risk is not considered to be significant due to
The credit exposure on the Level 3 asset is limited to the amount
experts, using a Monte Carlo simulation model where the
the nature of the arrangement.
simulated stock prices are based on a lognormal stock price
Annual Report 2018 | Financials and Notes | Akastor Group 76
Note 33 | Operating leases
Group as lessee
Future minimum commitments under non-cancellable operating leases
Amounts in NOK million
Due within one year
Due in one to five years
Due in more than five years
Total
2018
240
445
253
937
2017
516
892
324
1 732
Minimum sublease income to be received in the future amounts to NOK 37 million (NOK 6 million in 2017) and relates mainly to sublease of office
buildings.
Lease and sublease payments recognized in the income statement
Amounts in NOK million
Minimum lease payments
Sublease income
Total
2018
258
(10)
248
2017
Restated
246
(9)
236
The group has operating lease costs for buildings on a number of locations
costs related to cars and machinery. These leases have an average lease
worldwide. The leases typically run for a period of 3-10 years, with an
period of 2-3 years with no renewal options included in the contracts.
option to renew at market conditions. The group has also operating lease
Group as lessor
Future minimum lease income commitments under non-cancellable operating leases
Amounts in NOK million
Due within one year
Due in one to five years
Due in more than five years
Total
2018
2017
116
54
15
185
902
3 862
36
4 801
The lease income commitment in 2017 included lease revenue related
joint venture for the group. See Note 5 Discontinued operations for more
to the vessels in AKOFS Offshore. In 2018, Akastor divested 50 percent
information about the divestment.
of the ownership in AKOFS Offshore and the company is classified as a
Annual Report 2018 | Financials and Notes | Akastor Group 77
Note 34 | Group companies
This note gives an overview of subsidiaries of Akastor ASA. For information about other investments in the group, refer to note 16 Equity-accounted
investees and note 18 Other investments. If not stated otherwise, ownership equals share of voting rights.
Group companies as of December 31
Company
Akastor ASA
MHWirth
Location
Country
2018
2017
Ownership (%)
Fornebu
Norway
MHWirth Pty Ltd
MHWirth do Brasil Equipamentos Ltda
MHWirth Canada Inc
Argenton
Rio de Janeiro
Newfoundland
MHWirth Offshore Petroleum Engineering (Shanghai) Co Ltd
Shanghai
MHWirth GmbH
MHWirth (India) Pvt Ltd
MHWirth Sdn Bhd
Drilltech AS
Maritime Promeco AS
MHWirth AS
MHWirth 1 AS
MHWirth Singapore Engineering Management Pte Ltd
MHWirth (Singapore) Pte Ltd
MHWirth UK Ltd
MHWirth Inc
MHWirth FZE
MHWirth Gas & Oil- Field Equipment & Services LLC
Step Oiltools
Step Oiltools (Australia) Pty Ltd
Step Oiltools GmbH
PT Step Oiltools
Step Oiltools LLP
Step Oiltools (M) Sdn Bhd
Step Oiltools (Myanmar) Ltd 1)
Step Oiltools BV
Step Oiltools AS
Step Oiltools Services LLC
Step Oiltools LLC
Step Oiltools Pte Ltd
Step Oiltools (Thailand) Ltd
Step Oiltools (UK) Ltd 4)
Step Oiltools FZE
Australia
Brazil
Canada
China
Germany
India
Erkelenz
Mumbai
Kuala Lumpur
Malaysia
Kristiansand
Kristiansand
Kristiansand
Kristiansand
Singapore
Singapore
Aberdeen
Houston
Dubai
Abu Dhabi
Norway
Norway
Norway
Norway
Singapore
Singapore
UK
USA
UAE
UAE
Perth
Australia
Bad Fallingbostel
Germany
Jakarta
Aktau
Kuala Lumpur
Yangon
Amsterdam
Stavanger
Muscat
Moscow
Singapore
Bangkok
Aberdeen
Dubai
Indonesia
Kazakhstan
Malaysia
Myanmar
Netherlands
Norway
Oman
Russia
Singapore
Thailand
UK
UAE
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
-
100
100
51
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
76
76
76
76
76
76
76
76
51
76
76
76
76
76
Annual Report 2018 | Financials and Notes | Akastor Group 78
Other companies
Zoetermeer Process Belgium NV/SA
Aker Cool Sorption (Beijing) Technology Co Ltd
Frontica Global Employment Ltd
Cool Sorption A/S
Zoetermeer Process BV
Well Systems Servicing Ltd
AKA SPH AS
Akastor AS
Akastor Real Estate AS
BTA Technology AS 2)
First Geo AS
Fjords Processing AS
Frontica Group AS 2)
KOP Surface Products Singapore Pte Ltd
Aker Cool Sorption Siam Ltd
Frontica Business Solutions Ltd 4)
AK Pharmaceuticals LLC
AK Wilfab Inc
AKOFS 2 Services AS 2)
AKOFS Offshore AS 2)
AKOFS 4 AS 2)
AKOFS Angola Limited
Disposed Entities 3)
AK Operações do Brasil Ltda
AKOFS Brazil Operations AS
AKOFS 1 AS
AKOFS 2 AS
AKOFS 3 AS
AKOFS Offshore Operations AS
1) Liquidated in 2018
2) Merged into Akastor AS in 2018
Antwerp
Beijing
Limassol
Glostrup
Zoetermeer
Ikoyi - Lagos
Fornebu
Fornebu
Fornebu
Fornebu
Stavanger
Fornebu
Fornebu
Singapore
Rayong
London
Houston
Williamsport
Oslo
Oslo
Oslo
Luanda
Belgium
China
Cyprus
Denmark
Netherlands
Nigeria
Norway
Norway
Norway
Norway
Norway
Norway
Norway
Singapore
Thailand
UK
USA
USA
Norway
Norway
Norway
Angola
Rio de Janeiro
Oslo
Oslo
Oslo
Oslo
Oslo
Brazil
Norway
Norway
Norway
Norway
Norway
100
100
100
100
100
100
100
100
100
-
100
100
-
100
100
100
100
100
-
-
-
100
-
-
-
-
-
-
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
3) Entities are referred to by company names before the disposals
4) STEP Oiltools (UK) Ltd. (registered number SC412738) and Frontica Business Solutions Ltd (registered number 4962691) are exempted from the
requirements of the Companies Act 2006 relating to the audit of individual accounts by virtue of section 479A of the Companies Act 2006, UK.
Annual Report 2018 | Financials and Notes | Akastor Group 79
Note 35 | Related parties
Related party relationships are those involving control (either direct or
Remunerations and transactions with directors and executive officers are
indirect), joint control or significant influence. Related parties are in a
summarized in Note 36 Management remunerations.
position to enter into transactions with the company that would not be
undertaken between unrelated parties. All transactions with related parties
The largest shareholder of Akastor, Aker Kværner Holding AS, is controlled
to Akastor have been based on arm’s length terms.
by Aker ASA (70 percent) which in turn is controlled by Kjell Inge Røkke
through TRG Holding AS and The Resource Group TRG AS. Aker ASA also
Akastor ASA is a parent company with control of around 45 companies
holds 8.5 percent of the shares in Akastor ASA directly. All subsidiaries and
around the world. These subsidiaries are listed in Note 34 Group companies.
associates of Aker ASA, including Kvaerner, Aker Solutions and Aker BP,
Any transactions between the parent company and the subsidiaries are
are considered related parties to Akastor, referred as “Aker entities” in the
shown line by line in the separate financial statements of the parent
table below. The entities controlled directly by Kjell Inge Røkke through
company, and are eliminated in the consolidated financial statements.
TRG Holding AS and The Resource Group TRG AS, are referred as “Related
parties to Aker ASA”.
Joint ventures and associates are consolidated using the equity method,
see Note 16 Equity-accounted investees. Transactions between the group
and these entities are shown in the table below.
Summary of transactions and balances with significant related parties
Amounts in NOK million
Income statement
Operating revenues
Operating costs
Net financial items
Included in Net profit from discontinued operations 1)
– Operating revenues
– Operating costs
– Net financial items
Assets (liabilities)
Trade receivables
Prepaid expenses
Current Interest-bearing receivables
PPE under finance lease ( Aker Wayfarer)
Trade payables
Finance lease liability (Aker Wayfarer)
1) See Note 5 for information about discontinued operations
2018
2017
Aker
entities
Joint
ventures
Total
Aker
entities
Joint
ventures
Total
163
(41)
-
-
-
(171)
28
-
-
-
-
-
-
-
2
2
-
-
6
-
257
-
-
-
163
(41)
2
2
-
(171)
33
-
257
-
-
-
136
(50)
-
4
(5)
(265)
29
-
-
1 448
(45)
(1 494)
-
-
2
3
(241)
-
1
21
-
-
-
-
136
(50)
2
7
(246)
(265)
29
21
-
1 448
(45)
(1 494)
Below are descriptions of significant related party agreements.
Solutions in 2014. Aker Solutions is liable to indemnity Akastor for
any rightful claim such parent company guarantees and to pay a
Related party transactions with Aker entities
guarantee commission to Akastor.
Aker Solutions
Akastor has entered into a number of agreements and arrangements with
Several of the agreements addressing various separation issues
Aker Solutions, including:
between Akastor and Aker Solutions are still valid after the
demerger in 2014, including secondary joint liability for obligations
Various lease agreements from Akastor Real Estate AS and other
existing in Aker Solutions at the time of the demerger, yet limited
Akastor companies to subsidiaries of Aker Solutions.
in amount to the net value allocated to Akastor in the demerger.
Some parent company guarantees issued on behalf of Aker
Aker BP
Solutions entities by Akastor (as their previous parent company)
In 2017, Akastor Real Estate AS entered into agreement to sublease offices
were not transferred in connection with the demerger of Aker
in Stavanger, Norway, to Aker BP.
Annual Report 2018 | Financials and Notes | Akastor Group 80
Kværner
4.6%/6.1% p.a.), with maturity in September 2019. Akastor is obliged to
Akastor Real Estate AS and Kvaerner have entered into lease agreement
provide financing to AKOFS Offshore until an external bank financing
related to offices in Trondheim, Norway.
agreement is in place, no later than September 2019.
Agreements with related parties to Aker ASA
As part of the joint venture shareholders agreement, the other two
The Resource Group TRG AS
investors, Mitsui and MOL, are entitled to a guaranteed preferred equity
MHWirth AS, a wholly owned subsidiary of Akastor, entered into long-term
return, in respect of the operations of AKOFS Seafarer, amounting to a
lease agreements in 2015 with subsidiaries of The Resource Group TRG
total of USD 46 million over a 6 year’s period. The payment of preferred
AS, for properties in Kristiansand in Norway. The annual lease payment
return will be settled firstly by ordinary dividend from AKOFS Offshore,
is approximately NOK 22 million for a lease period of 19 years starting
yet any shortfall is guaranteed by Akastor. Akastor ASA has issued a bank
October 1, 2015, with options for renewal.
guarantee for payment of preferred return for a total amount of NOK 333
AK Wilfab Inc, a wholly owned subsidiary of Akastor, is together with Aker
million.
Solutions Inc and The Resource Group TRG AS sponsoring the US pension
Akastor AS has issued a financial parent company indemnity guarantee
plan named the Kvaerner Consolidated Retirement Plan. Akastor holds
of NOK 296 million and a financial guarantee of NOK 134 million in favor
one third of the liability of the sponsors for the underfunded element of
of finance institutions for fulfillment of lease obligations related to Avium
the plan and The Resource Group TRG AS holds two thirds of the ultimate
Subsea AS. In addition, a financial parent company indemnity guarantee of
liability. Aker ASA guarantees for The Resource Group TRG AS’ liability
NOK 2.4 billion is issued in favor of OCY Wayfarer Limited for fulfillment
and covers for all its expenses related to the pension plan.
of lease obligations related to AKOFS 3 AS. Both Avium Subsea AS and
AKOFS 3 AS are wholly owned subsidiaries of AKOFS Offshore.
Fornebuporten Næring 3 AS
Akastor leases its headquarter offices at Fornebu from Fornebuporten
Other related parties
Næring 3 AS, an associated company of The Resource Group TRG AS. The
Aker Pensjonskasse
contract term is 10 years starting August 31, 2015, with two additional five-
Aker Pensjonskasse was established by Aker ASA to manage the
year options.
retirement plan for employees and retirees in Akastor as well as related
Aker companies. Akastor holds 93.4 percent of the paid-in capital in Aker
Related party transactions with joint ventures
Pensjonskasse and Akastor’s share of paid-in equity was NOK 158 million
DOF Deepwater AS
at the end of 2018 (NOK 128 million in 2017). Akastor’s premium paid to
During 2018, the shareholder's loan to DOF Deepwater AS was increased
Aker Pensjonskasse amounts to NOK 8 million in 2018 (NOK 8 million in
by NOK 24 million. As of December 31, 2018, the balance of the
2017).
shareholder’s loan from Akastor to DOF Deepwater AS is NOK 35 million
(NIBOR 6 months+ 3.6 percent). The carrying amount of the receivable is
Even though Akastor owns 93.4 percent in Aker Pensjonskasse, the
reduced to zero due to recognition of Akastor’s share of losses in 2018.
ownership does not constitute control since Akastor does not have the
power to govern the financial and operating policies so as to obtain
Akastor ASA has issued financial guarantees in favor of banks related to
benefits from the activities in this entity.
financing of the five vessels in DOF Deepwater. The liability is capped
at 50 percent of drawn amount. The guarantee is NOK 507 million as of
Grants to employee representative’s collective fund
December 31, 2018 (NOK 502 million in 2017).
Aker ASA has signed an agreement with employee representatives
AKOFS Offshore
that regulate use of grants from Akastor ASA for activities related
to professional development. The grant in 2018 was NOK 510 000 (NOK
As of December 31, 2018, Akastor ASA has interest-bearing receivables
510 000 in 2017).
against AKOFS Offshore amounting to NOK 257 million (interest rate at
Annual Report 2018 | Financials and Notes | Akastor Group 81
Note 36 | Management remunerations
Board of directors
The board of directors did not receive any other fees than those listed
The fees in the table below represent expenses recognized in the income
in the table below, except for employee representatives who has market
statement based on assumptions about fees to be approved at the general
based salaries. The members of the board of directors have no agreements
assembly rather than actual payments made in the year.
that entitle them to any extraordinary remuneration.
Amounts in NOK
Frank Ove Reite
Kristian Monsen Røkke
Øyvind Eriksen
Lone Fønss Schrøder
Kathryn Baker
Sarah Ryan 1)
Stian Sjølund
Henning Jensen
Asle Christian Halvorsen
Jannicke Sommer-Ekelund
Asbjørn Michailoff Pettersen
Total
2018
2017
Audit Committee
Board fees
Audit Committee
Board fees
-
-
-
205 000
115 000
-
-
115 000
-
-
-
-
600 000
340 000
527 500
340 000
421 426
170 000
170 000
170 000
-
-
435 000
2 738 926
-
-
-
205 000
115 000
-
-
57 500
-
-
57 500
435 000
600 000
-
340 000
440 000
340 000
432 536
170 000
85 000
85 000
85 000
85 000
2 662 536
1) Board fees include an allowance of NOK 12 500 per meeting per physical attendance for board members residing outside the Nordic countries
According to policy in Aker, fees to directors employed in Aker companies
contracts and standard terms and conditions regarding notice period and
are paid to the Aker companies, not to the directors in person. Therefore,
severance pay for the Akastor management. Karl Erik Kjelstad and Leif
board fees for Frank O. Reite, Kristian Monsen Røkke and Øyvind Eriksen
Borge both have a six months’ notice period as part of their employment
were paid to Aker ASA.
contracts, while Paal E. Johnsen has a three months’ notice period.
Audit Committee
The main purpose of the executive remuneration is to encourage a strong
Akastor has an audit committee comprising three of the directors, which
and sustainable performance-based culture, which supports growth
held 7 meetings in 2018. As of December 31, 2018, the audit committee
in shareholder value. Compensation to the executive management
comprises Lone Fønss Schrøder (chairperson), Kathryn M. Baker and
has a fixed element which includes a base salary which pursuant to the
Henning Jensen.
company’s benchmarking is competitive with other investment companies.
In addition, the executive management has variable remuneration, as
Guidelines for remuneration to the members of the executive
further described below. All variable pay shall be subject to a cap.
management of Akastor
As of December 31, 2018, the executive management of Akastor comprised
The salary figures for the remuneration for the executive management
the company’s CEO Karl Erik Kjelstad, CFO Leif Borge and Investment
represent what has been expensed in the year.
Director Paal E. Johnsen. The company practices standard employment
Annual Report 2018 | Financials and Notes | Akastor Group
82
Amounts in NOK
2018
Karl Erik Kjelstad
Leif Borge
Paal E. Johnsen
Total
2017
Kristian Monsen Røkke
Leif Borge
Karl Erik Kjelstad
Paal E. Johnsen
Total
Job title
Base salary
Variable pay 1)
Other
benefits 2)
Total taxable
remuneration
Pension benefit earned/
cost to company 3)
CEO
CFO
3 664 895
4 649 849
2 040 378
1 642 653
1 350 117
Investment director
3 007 080
23 236
17 997
17 213
6 713 463
5 325 544
4 374 410
11 321 824
5 033 148
58 446
16 413 418
CEO
CFO
3 715 309
2 669 856
9 625
6 394 790
3 617 375
3 151 128
32 191
6 800 694
Investment director
3 757 822
3 273 929
40 541
7 072 293
Investment director
2 971 861
2 595 046
17 922
5 584 829
14 062 368
11 689 959
100 279
25 852 605
247 849
257 006
179 791
684 646
88 280
149 515
142 411
89 489
469 695
1) See below for further description of principles for performance based remuneration.
2) Other benefits include insurance agreements, such as membership in the standard employee scheme and an additional executive group life and disability insurance.
3) Pension benefits include the standard employee pension scheme, a disability pension scheme and certain management pension rights related to the wound up schemes
and early retirement schemes.
Benefits
Since the variable pay program for the executive management is partly
The executive management participates in the standard employee,
linked to the development of the Akastor ASA share price, it requires
pension and insurance plan applicable to all employees in the company.
approval by the general meeting and the guidelines will thereafter be
No executive personnel in Akastor has performance based pension plans
binding.
and there are no current loans, prepayments or other forms of credit from
the company to its executive management. No members of the executive
Further, the executive management may be offered additional variable pay
management are part of any option- or incentive programs other than
arrangements going forward which differs from the ordinary variable pay
what is described in this statement.
program described above. The variable pay arrangements offered to the
executive management may in its entirety be linked to the development
Performance based remuneration
of the company’s share price. The executive management may from time
In addition to the fixed compensation set out above, the executive
to time be granted a discretionary variable pay. There was no discretionary
management (as well as other members of the corporate organization)
pay paid out for 2017 or 2018.
participates in a variable pay program. The objective of the program is to
incentivize the management to contribute to sound financial results for the
The CEO and CFO also participate in a long-term incentive bonus plan,
company, recruit and retain key personnel as well as executing leadership
under which the maximum bonus amount is capped at two times of
in accordance with the company’s values and business ethics. The potential
annual salary. Payments under the bonus scheme are determined based
payment under the variable pay program is set individually, with 100
on delivery of certain key strategic targets for the company and/or
percent of the annual base salary as the maximum.
development of Akastor ASA’s share price for a time period of four years.
The payments under the variable pay program are determined based on
Share purchase program for Akastor’s executive management team
three components:
The company had no regular share purchase program in 2018. Should the
board of directors decide to launch a share purchase program in 2019, the
Development of Akastor ASA’s share price
executive management will be invited to participate. Shares purchased
under any such programs will be subject to a three year lock-up period
Delivery of certain key financial, operational and strategic targets
during which the acquired shares may not be sold or otherwise disposed of.
for Akastor
Delivery of personal performance objectives during the year
Annual Report 2018 | Financials and Notes | Akastor Group
83
Directors’ and executive management’s shareholding
The following number of shares is owned by the directors and the members of the executive management (and their related parties) as of December 31:
Karl Erik Kjelstad
Leif Borge
Kristian Monsen Røkke
Frank O. Reite
Lone Fønss Schrøder
Kathryn Baker
Sarah Ryan
Job title
CEO
CFO
Chairman
Chairman (2017)
Deputy chairman
Director
Director
2018
2017
123 074
250 000
200 000
200 000
4 400
45 683
5 000
123 074
250 000
200 000
200 000
4 400
45 683
5 000
The overview includes only direct ownership of Akastor shares and does not include Frank O. Reite and Øyvind Eriksen’s indirect ownership through
ownership in Aker ASA.
Annual Report 2018 | Financials and Notes | Akastor Group 84
04.b. FINANCIALS AND NOTES
AKASTOR ASA
Akastor ASA | Income statement
Akastor ASA | Statement of financial position
Akastor ASA | Statement of cash flow
| Accounting principles
| Operating revenue and expenses
| Net financial items
Note 1
Note 2
Note 3
Note 4 | Tax
Note 5
Note 6
Note 7
Note 8
Note 9
Note 10 | Financial risk management and financial instruments
Note 11 | Related parties
Note 12 | Shareholders
| Investments in group companies
| Shareholders’ equity
| Receivables and borrowings from group companies
| Borrowings
| Guarantees
78
79
80
81
82
82
83
83
83
84
85
86
86
87
88
Annual Report 2018 | Financials and Notes | Akastor ASAFinancials and Notes | Akastor ASA
Akastor ASA | Income statement
For the year ended December 31
Amounts in NOK million
Operating revenue
Operating expenses
Operating profit (loss)
Net financial items
Profit (loss) before tax
Income tax benefit (expense)
Profit (loss) for the period
Profit (loss) for the period distributed as follows
Other equity
Profit (loss) for the period
85
Note
2018
2017
2
2
3
4
8
27
(37)
(47)
(29)
(21)
(277)
726
(306)
706
6
(42)
(300)
664
(300)
664
(300)
664
Annual Report 2018 | Financials and Notes | Akastor ASA
86
Akastor ASA | Statement of financial position
For the year ended December 31
Amounts in NOK million
Assets
Investments in group companies
Non-current interest-bearing receivables on group companies
Other non-current interest-bearing receivables
Total non-current assets
Current interest-bearing receivables on group companies
Current interest-bearing receivables on related parties
Other receivables on group companies
Derivative financial instruments, assets
Other current receivables
Total current assets
Total assets
Equity and liabilities
Issued capital
Treasury shares
Share premium
Other paid in capital
Other equity
Total equity
Non-current borrowings, external
Deferred tax liability
Total non-current liabilities
Current borrowings, external
Current borrowings from group companies
Current tax liabilities
Other liabilities to group companies
Derivative financial instruments
Other current liabilities
Total current liabilities
Total liabilities
Total equity and liabilities
Note
2018
2017
5
7
7
7
5 022
5 298
830
3 156
2
2
5 855
8 456
-
81
257
-
243
800
10
9
76
-
14
510
971
6 365
9 427
162
162
(2)
(2)
2 000
2 000
2 003
2 003
231
531
4 395
4 695
588
824
14
19
602
843
14
32
1 306
3 698
1
18
6
8
4
8
7
7
10
-
45
9
68
39
28
1 368
3 889
1 970
4 733
6 365
9 427
Fornebu, March 14, 2019 I Board of Directors of Akastor ASA
Kristian Røkke | Chairman
Lone Fønss Schrøder | Deputy Chairman
Øyvind Eriksen | Director
Kathryn M. Baker | Director
Sarah Ryan | Director
Henning Jensen | Director
Asle Christian Halvorsen | Director
Stian Sjølund | Director
Karl Erik Kjelstad | CEO
Annual Report 2018 | Financials and Notes | Akastor ASA
Akastor ASA | Statement of cash flow
For the year ended December 31
Amounts in NOK million
Profit (loss) before tax
Adjustments for non-cash effects
Impairment of receivables and shares
Group contribution
Changes in other net operating assets
Net cash from operating activities
Payment related to increase in interest-bearing receivables
Net cash from investing activities
Proceeds from borrowings
Repayment of borrowings
Changes in borrowings from group companies
Changes in borrowings to group companies
Change in overdraft cash pool
Payment of group contribution
Net cash from financing activities
Effect of exchange rate changes on cash and cash deposits
Net increase (decrease) in cash and bank deposits
Cash in cash pool system at the beginning of the period
Cash in cash pool system at the end of the period 1)
1) Unused credit facilities amounted to NOK 2.0 billion as of December 31, 2018 (NOK 1.4 billion in 2017).
87
Note
2018
(306)
2017
706
3
301
195
-
(800)
37
31
-
101
(154)
-
(154)
-
924
620
(1 154)
(901)
(106)
(1 899)
1 999
52
(2 303)
931
800
1 000
160
(197)
(38)
(40)
-
(135)
-
135
7
-
-
Annual Report 2018 | Financials and Notes | Akastor ASA
88
Note 1 | Accounting principles
Akastor ASA (the parent company) is a company domiciled in Norway.
Cash in cash pool system
The financial statements are presented in conformity with Norwegian
Akastor ASA has a cash pool that includes the parent company’s cash as
Accounting Act and Norwegian generally accepted accounting principles
well as net deposits from subsidiaries in the group cash pooling system
(NGAAP).
owned by the parent company. Correspondingly, Akastor ASA’s current
debt to group companies will include their net deposit in the group’s cash
Revenue recognition
pool system.
Operating revenue mainly comprise parent company guarantees (PCG)
recharged to entities within the group. The revenue is recognized over the
Share capital
guarantee period.
Investments in subsidiaries
Costs for purchase of own shares including transaction costs are accounted
for directly against equity. Sales of own shares are performed according
to stock-exchange quotations at the time of award and accounted for as
Investments in subsidiaries are measured at cost in the parent company
increase in equity.
accounts, less any impairment losses. The investments are impaired to fair
value if the impairment is not considered temporary. Impairment losses
Cash flow statement
are reversed if the basis for the impairment loss is no longer present.
The statement of cash flow is prepared according to the indirect method.
Investments in subsidiaries and associates are reviewed for impairment
Cash and cash equivalents include cash, bank deposits and other short-
whenever events or changes in circumstances indicate that the carrying
term liquid investments.
amount may exceed the fair value of the investment.
Dividends, group contributions and other distributions from subsidiaries
The parent company’s financial statements are presented in NOK, which
are recognized as income the same year as they are recognized in the
is Akastor ASA’s functional currency. All financial information presented in
financial statement of the provider. If the dividends or group contributions
NOK has been rounded to the nearest million (NOK million), except when
exceeds withheld profits after the acquisition date, the excess amount
otherwise stated. The subtotals and totals in some of the tables in these
represents repayment of invested capital, and is recognized as a reduction
financial statements may not equal the sum of the amounts shown due
of carrying value of the investment.
to rounding.
Functional currency and presentation currency
Classification
Foreign currency
Current assets and current liabilities include items due within one year or
Transactions in foreign currencies are translated at the exchange rate
items that are part of the operating cycle. Other balance sheet items are
applicable at the date of the transaction. Monetary items in a foreign
classified as non-current assets/debts.
currency are translated to NOK using the exchange rate applicable on the
balance sheet date. Foreign exchange differences arising on translation are
Non-current borrowings are presented as current if a loan covenant
recognized in the income statement as they occur.
breach exists at balance date. If a covenant waiver is approved subsequent
to year-end and before the approval of the financial statements, the
Derivative financial instruments
liability is presented as non-current debt to the extent maturity date is
All financial assets and liabilities related to foreign exchange contracts are
beyond one year.
remeasured at fair value in respect to exchange rates at reporting date.
Measurement of borrowings and receivables
Tax
Financial assets and liabilities consist of investments in other companies,
Tax income (expense) in the income statement comprises current tax,
trade and other receivables, interest-bearing receivables, cash and cash
withholding tax and changes in deferred tax. Deferred tax is calculated as
equivalents, trade and other payables and interest-bearing borrowing.
22 percent of temporary differences between accounting and tax values
Trade receivables and other receivables are recognized in the balance
assets are recognized only to the extent it is probable that they will be
sheet at nominal value less provision for expected losses.
utilized against future taxable profits.
as well as any tax losses carry-forward at the year end. Net deferred tax
Interest-bearing borrowings are initially recorded at transaction value less
attributable transaction costs. Subsequent to initial recognition, these
borrowings are measured at amortized cost with any difference between
cost and redemption value being recognized in the income statement over
the period of the borrowings on an effective interest basis.
Annual Report 2018 | Financials and Notes | Akastor ASA 89
Note 2 | Operating revenue and expenses
Operating revenue comprises NOK 8 million in income from parent
NOK 3.2 million has been allocated to payable fees to the Board of
company guarantees (NOK 25 million in 2017), of which NOK 5 million
Directors for 2018 (2017: 3.1 million). Remuneration to and shareholding
from related parties (NOK 12 million in 2017).
of the Board of directors and CEO is described in note 36 Management
remunerations in Akastor’s consolidated financial statements.
There are no employees in Akastor ASA and hence no salary or pension
related costs and also no loan or guarantees related to the executive
Fees to the auditors
management team. Group management and corporate staff are employed
Fees to KPMG for statutory audit amounted to NOK 2.9 million
by other Akastor companies and costs for their services as well as other
(2017: 2.5 million).
parent company costs are recharged to Akastor ASA.
Note 3 | Net financial items
Amounts in NOK million
Interest income from group companies
Interest expense to group companies
Net interest group companies
Interest income from related parties
Net interest related parties
Interest income
Interest expense
Net interest external
Income on investment in subsidiary (group contribution)
Impairment on receivables to group companies
7
Impairment of shares
Other financial expense
Foreign exchange gain (loss)
Net other financial items
Net financial items
Note
2018
2017
162
-
162
2
2
12
(96)
(84)
-
(25)
(276)
(1)
(55)
(357)
(277)
223
(4)
219
-
-
12
(117)
(105)
800
(98)
(98)
-
8
612
726
Annual Report 2018 | Financials and Notes | Akastor ASA 90
Note 4 | Tax
Amounts in NOK million
Calculation of taxable income
Profit (loss) before tax
Write down internal shares
Loss on receivables
Permanent differences
Changes in timing differences
Group contribution without tax effect
Generated (utilized) tax loss
Taxable income
Taxable (deductible) temporary differences
Unrealized gain (loss) on forward exchange contracts
Other temporary differences
Tax loss carry-forward 1)
Basis for deferred tax
Tax rate
Deferred tax assets (liability)
Tax expense
Origination and reversal of temporary differences in income statement
Withholding tax
Income tax benefit (expense)
2018
2017
(306)
276
(395)
(16)
7
-
435
-
-
(19)
82
63
22%
(14)
6
1
6
706
98
98
(1)
8
(800)
(107)
-
8
(20)
96
84
23%
(19)
(23)
(19)
(42)
1) Akastor ASA has unrecognized tax loss carry forwards of NOK 1.4 billion. A significant part of these tax loss carry forwards (NOK 951 million) originates from 2016 and is
currently being subject to inquiries from Norwegian Tax Authorities.
Note 5 | Investments in group companies
Amounts in NOK million
Akastor AS
AKOFS Offshore AS 1)
Total
Registered
office
Share
capital
Number of
shares held
Percentage
owner- /
voting share
2018
2017
Fornebu,
Norway
Oslo, Norway
1 004
1
100%
-
5 022
-
5 022
4 191
1 107
5 298
1) The shareholding of 55.49 percent in AKOFS Offshore AS was transferred to Akastor AS as contribution-in-kind in 2018. An accounting loss of NOK 276 million was
recognized in the accounts.
Akastor AS financial information 2018
Amounts in NOK million
Profit (loss) for the period
Equity as of December 31
2018
(239)
5 401
Annual Report 2018 | Financials and Notes | Akastor ASA
91
Note 6 | Shareholders’ equity
Amounts in NOK million
Equity as of January 1, 2017
Profit (loss) for the period
Share
capital
Treasury
shares
Share
premium
Other paid
in capital
Retained
earnings
Total
162
(2)
2 000
2 003
(133)
4 031
-
-
-
-
664
664
Equity as of December 31, 2017
162
(2)
2 000
2 003
531
4 695
Profit (loss) for the period
-
-
-
-
(300)
(300)
Equity as of December 31, 2018
162
(2)
2 000
2 003
231
4 395
The share capital of Akastor ASA is divided into 274 000 000 shares
The number of treasury shares held by the end of 2018 are 2 776 376
with a nominal value of NOK 0.592. The shares can be freely traded. An
and are held for the purpose of being used for future awards under any
overview of the company's largest shareholders is to be found in note 12
share purchase program for employees, as settlement in future corporate
Shareholders.
acquisitions or for other purpose as decided by the board of directors.
Note 7 | Receivables and borrowings from group companies
Amounts in NOK million
Group companies deposits in the cash pool system
Akastor ASA's net borrowings in the cash pool system
Cash in cash pool system
Current interest-bearing receivables on group companies
Non-current interest-bearing receivables on group companies
Current borrowings from group companies 1)
Net interest-bearing receivables on group companies
Group contribution receivable
Other receivables on group companies
Other payables to group companies
Total other receivables on group companies
Current interest-bearing receivables on related parties
Total interest-bearing receivables on related parties
1)
Include Akastor ASA’s net borrowings in the cash pool system
2018
2017
1 306
(1 306)
-
3 592
(3 592)
-
-
830
81
3 156
(1 306)
(3 698)
(475)
(461)
-
800
243
-
-
(45)
243
755
257
257
-
-
Interest-bearing receivables on and borrowings from group
Cash pool arrangement
companies
Akastor ASA is the owner of the cash pool system arrangements with DNB.
Akastor ASA is the group’s central treasury function (Akastor Treasury) and
The cash pool systems cover a majority of the group geographically and
enters into borrowings and deposit agreements with group companies.
assure good control and access to the group’s cash. Participation in the
Deposits and borrowings are done at market terms and are dependent
cash pool is vested in the group’s policy and decided by each company’s
of the group companies’ credit rating and the duration of the borrowings.
board of directors and confirmed by a statement of participation. The
In 2018, interest-bearing receivables on MHWirth Do Brasil Equipamentos
is therefore important that Akastor as a group is financially viable and can
Ltda and Step Oiltools BV were sold to Akastor AS for BRL 96 million and
repay deposits and carry out transactions. Any debit balance on a sub
USD 32 million respectively related to recapitalization of these entities.
account can be set-off against any credit balance. Hence, a debit balance
participants in the cash pool system are jointly and severally liable and it
represents a claim on Akastor ASA and a credit balance a borrowing from
An impairment of NOK 25 million has been recognized related to interest-
Akastor ASA.
bearing receivables in 2018, mainly related to impairment of the receivable
on Step Oiltools BV (NOK 98 million in 2017).
The cash pool system has a net overdraft of NOK 13 million as of December
31, 2018 (net overdraft of NOK 30 million in 2017). The amount is reported
in Akastor ASA’s accounts as external borrowings.
Annual Report 2018 | Financials and Notes | Akastor ASA
92
Note 8 | Borrowings
Amounts in million
Currency
Nominal
currency
value
Carrying
amount
(NOK)
Interest
rate
Interest
margin
Interest
coupon
Maturity
Interest terms
2018
Revolving credit facility
(NOK 1 250 million)
Revolving credit facility
(USD 155 million)
Overdraft facility
Total borrowings
Current borrowings
Non-current borrowings
Total
2017
Revolving credit facility
(NOK 1 005 million)
Revolving credit facility
(USD 147 million)
Overdraft facility
Total borrowings
Current borrowings
Non-current borrowings
Total
NOK
588
588
1.18%
2.25%
3.43%
Dec 2021
NIBOR + margin
2.25%
Dec 2021
USD LIBOR + margin
USD
-
-
13
601
14
588
601
NOK
350
348
0.76%
2.25%
3.01% July 2019 2)
NIBOR + margin 1)
1.49%
2.25%
3.74% July 2019 2)
USD LIBOR + margin 1)
USD
58
478
30
856
32
824
856
1) The margin applicable to the facility is decided by a price grid based on the leverage ratio and level of utilization. Commitment fee is 35 percent of the margin (2017: 40
percent).
2) The maturity date reflects maturity date as defined in the loan agreements.
All facilities are provided by a bank syndicate consisting of high quality
The ICR shall not be lower than 4.0 when gearing ratio exceeds
Nordic and international banks. The terms and conditions include
0.5, calculated from the consolidated EBITDA to consolidated
restrictions which are customary for these kinds of facilities, including inter
Net Finance Cost.
alia negative pledge provisions and restrictions on acquisitions, disposals
and mergers and change of control provisions. The facilities include no
Minimum liquidity amount shall exceed NOK 500 million on
dividend restrictions.
consolidated level
The financial covenants are a gearing ratio based on net debt/equity, an
The covenants are monitored on a regular basis by the Akastor Treasury
interest coverage ratio (ICR) based on EBITDA/net interest costs and
department to ensure compliance with the loan agreements, and are
a minimum liquidity amount. The financial covenants are tested on a
tested and reported on a quarterly basis. Akastor was not in breach with
quarterly basis.
any covenants as of December 31, 2018, and on the basis of the covenants
and its forecasts, management believes that the risk of covenant being
The company’s gearing ratio shall not exceed 1.0 times and is
breached is low and that the group will continue as a going concern for the
calculated from the consolidated net total borrowings to the
foreseeable future. See more information in note 29 Capital management
consolidated equity.
in the Akastor Group consolidated accounts.
The ICR shall not be lower than 3.0 when gearing ratio is below
0.5, calculated from the consolidated EBITDA to consolidated
Net Finance Cost.
Annual Report 2018 | Financials and Notes | Akastor ASA
93
Financial liabilities and the period in which they mature
Amounts in NOK million
2018
Carrying
amount
Total
undiscounted
cash flow 1)
6 months
and less
6–12 months
1–2 years
2–5 years 2)
Revolving credit facility (NOK 1 250 million)
588
662
11
-
13
-
13
-
13
10
-
-
21
621
-
-
-
-
601
675
24
10
21
621
Revolving credit facility (USD 155 million)
Overdraft facility
Total borrowings
2017
Revolving credit facility (NOK 1 005 million)
348
365
7
5
353
-
Revolving credit facility (USD 147 million)
478
Overdraft facility
Total borrowings
30
505
30
9
30
9
-
487
-
856
900
46
14
840
-
-
-
1) The interest costs are calculated using the last fixing rate known by year end (plus applicable margin).
2) Repayment of the loan in the table is according to maturity date of the facility in the loan agreement.
Note 9 | Guarantees
Akastor has provided the following guarantees on behalf of wholly owned subsidiaries and related parties as of December 31 (all obligations are per date
of issue):
Amounts in NOK million
Parent Company Guarantees to group companies 1)
Parent Company Guarantees to related companies 2)
Counter guarantees for bank/surety bonds, group companies 3)
Counter guarantees for bank/surety bonds, related parties 3)
Total guarantee liabilities
Maturity of guarantee liabilities:
6 months and less
6–12 months
1–2 years
2–5 years
5 years and more
2018
2017
1 422
3 438
2 894
1 055
5
502
973
-
5 376
4 913
237
418
66
107
4 548
244
52
403
428
3 786
1) Parent Company Guarantees to support subsidiaries in contractual obligations towards clients.
2) Parent Company Guarantees to support related parties in contractual obligations towards clients, mainly AKOFS 1 AS, AKOFS 3 AS and DOF Deepwater AS.
3) Bank guarantees and surety bonds are issued on behalf of Akastor subsidiaries, and counter indemnified by Akastor ASA.
Although guarantees are financial instruments, they are considered contingent obligations and the notional amounts are not included in the financial
statements.
US pension plan
AK Wilfab Inc, a wholly owned subsidiary of Akastor, is together The Resource Group TRG AS and Akastor ASA sponsoring the US pension plan named
the Kvaerner Consolidated Retirement Plan. Akastor Group holds one third of the liability of the sponsors for the underfunded element of the plan and
The Resource Group TRG AS holds two thirds of the ultimate liability. Aker ASA guarantees for The Resource Group TRG AS’ liability and covers for all
its expenses related to the pension plan.
Annual Report 2018 | Financials and Notes | Akastor ASA 94
Note 10 | Financial risk management and financial instruments
Currency risk
assets and liabilities. Akastor ASA may enter into financial derivative
Subsidiaries may enter into financial derivative agreements with the
agreements to hedge these potential cash flow exposures.
parent company to hedge their foreign exchange exposure. Accordingly,
derivatives from external banks are used to mitigate the foreign exchange
As of 31 December 2018, Akastor ASA had entered into a limited number
exposure from the financial derivative agreements with the subsidiaries. In
of forward exchange contracts with subsidiaries, and these are hedged
addition, Akastor ASA may have cash flow exposure towards its financial
back-to-back with external banks.
Amounts in NOK million
Forward exchange contracts with group companies
Forward exchange contracts with external counterparts
Total
2018
2017
Assets
Liabilities
Assets
Liabilities
9
-
-
(9)
9
(9)
57
(20)
19
(48)
76
(68)
Interest rate risk
according to a list of approved banks and primarily with banks where the
The company is exposed to changes in interest rates because of floating
company also have a borrowing relationship.
interest rate on loan receivables and loan payables. The company does
not hedge transactions exposure in financial markets, and does not have
Loss provisions for interest-bearing receivables are made in situations of
any fixed interest rate loan receivables nor loan payables. The company is
negative equity if the company is not expected to be able to fulfil its loan
therefore not exposed to fair value risk on its outstanding loan receivables
obligations from future earnings. NOK 25 million was impaired in 2018
or loan payables. Interest bearing loan receivables and loan payables
(NOK 98 million in 2017). See note 7 Receivables and borrowings from
expose the company to income statement and cash flow interest risk.
group companies for more information about receivables.
Interest-bearing borrowings to group companies reflect the cost of
Liquidity risk
external borrowing, reducing the interest risk exposure for Akastor ASA.
Liquidity risk relates to the risk that the company will not be able to meet
Credit risk
its debt and guarantee obligations and is managed through maintaining
sufficient cash and available credit facilities. Due to the dynamic nature of
Credit risk is the risk of financial losses to the company if a customer
the underlying businesses, Akastor Treasury maintains flexibility in funding
or counterparty fails to meet contractual obligations. Credit risk relates
by maintaining availability under committed credit lines. Development in
to loans to subsidiaries and associated companies, hedging contracts,
the group’s and thereby Akastor ASA’s available liquidity is continuously
guarantees to subsidiaries and associated companies and deposits
monitored through weekly and monthly cash flow forecasts, annual
with external banks. External deposits and hedging contracts are done
budgets and long term planning.
Note 11 | Related parties
Transactions with subsidiaries and related parties are described in the following notes:
Transactions
Other services
Financial items
Cash pool, receivables and borrowings
Guarantees
Foreign exchange contracts
All transactions with related parties are carried out at market terms and in accordance with the arm’s lengths principle
Info in note
Note 2
Note 3
Note 7
Note 9
Note 10
Annual Report 2018 | Financials and Notes | Akastor ASA Note 12 | Shareholders
Shareholders with more than 1 percent shareholding
Company
2018
Aker Kværner Holding AS
Goldman Sachs & Co
Aker ASA
Morgan Stanley & Co. LLC
Euroclear Bank S.A./N.V.('BA')
Jefferies LLC SP. RES. A/C FBO CUS
ODIN Norge
Skandinaviska Enskil SEB STO, SFMA1
Fond Finans Norge
Akastor ASA
Company
2017
Aker Kværner Holding AS
Goldman Sachs & Co
Aker ASA
Morgan Stanley & Co. LLC
Euroclear Bank S.A./N.V.('BA')
Jefferies LLC SP. RES. A/C FBO CUS
ODIN Norge
Skandinaviska Enskil SEB STO, SFMA1
Akastor ASA
95
Note
Nominee
Number of shares held
Ownership
110 333 615
Nominee
39 600 376
Nominee
Nominee
Nominee
23 331 762
19 535 505
11 444 917
8 765 881
7 840 060
3 115 302
3 000 000
2 776 376
40.27%
14.45%
8.52%
7.13%
4.18%
3.20%
2.86%
1.14%
1.09%
1.01%
6
Note
Nominee
Number of shares held
Ownership
110 333 615
Nominee
44 283 961
Nominee
Nominee
Nominee
23 331 762
12 000 000
11 685 711
9 693 000
7 840 060
3 227 697
2 776 376
40.27%
16.16%
8.52%
4.38%
4.26%
3.54%
2.86%
1.18%
1.01%
6
Annual Report 2018 | Financials and Notes | Akastor ASA 96
05. AUDITOR'S REPORT
Annual Report 2018 | Auditor's ReportAuditor's ReportKPMG ASSørkedalsveien 6 Postboks 7000 Majorstuen 0306 Oslo Telephone +47 04063Fax +47 22 60 96 01Internet www.kpmg.noEnterprise 935 174627 MVA To the Annual Shareholders' Meetingof Akastor ASAIndependent auditor’s reportReport on the Audit of the Financial StatementsOpinionWe have audited the financial statements of Akastor ASA. The financial statements comprise:•The financial statements of the parent company Akastor ASA (the "Company"), which comprise the statement of financial position as at 31 December 2018, and the income statement and statement of cash flow for the year then ended, and notes to the financial statements, including a summary of significant accounting policies, and•The consolidated financial statements of Akastor ASA and its subsidiaries (the "Group"), which comprise the statement of financial positionas at 31 December 2018, and income statement, statement of comprehensive income,statement of changes in equity and statement ofcash flow for the year then ended, and notes to the financial statements, including a summary of significant accounting policies.In our opinion:•The financial statements are prepared in accordance with the law and regulations.•The accompanying financial statements give a true and fair view of the financial position of the Company as at 31 December 2018, and its financial performance and its cash flows for the year then ended in accordance with the Norwegian Accounting Act and accounting standards and practices generally accepted in Norway("NGAAP").•The accompanying consolidated financial statements give a true and fair view ofthe financial position of the Group as at 31 December 2018, and its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards as adopted by the EU("IFRS").Basis for OpinionWe conducted our audit in accordance with laws, regulations, and auditing standards and practices generally accepted in Norway, including International Standards on Auditing ("ISAs). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statementssection of our report. We are independent of the Company and the Groupas required by laws and regulations, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.Key Audit Matters Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. 97
Auditor's Report - 2018
Akastor ASA
1. Valuation of investments
Reference is made to Note 3 Significant accounting policies, Note 4 Significant accounting estimates
and judgements, Note 18 Other investments, Note 25 Other non-current liabilities, Note 32 Financial
instruments, and the Board of Directors Report.
The key audit matter
In May, the Group made an investment in
preferred equity in Odfjell Drilling, yielding 10%
annual interest plus a warrant structure for up to
5,925,000 common shares in Odfjell Drilling. At
year-end the valuation of the preference shares
and warrants, with carrying values of NOK 672
million and NOK 33 million respectively, is
considered to be a risk area due to the
complexity involved in applying judgements and
valuation techniques in determining their fair
value.
Owing to the unquoted and illiquid nature of the
warrants, the valuation has been determined
through a Monte Carlo simulation using level 3
inputs, including expected share volatility. The
valuation of the warrants is judgmental and
dependent on the input variables.
How the matter was addressed in our audit
Our audit procedures in this area included,
among others:
• We read the contracts for these transactions
and analysed the rights and obligations of
the Group in these transaction;
• We used KPMG valuation specialists to
verify the mathematical and methodological
integrity of management's valuation models
and to evaluate the valuation technique
methodology applied regarding the warrants;
• We tested the underlying valuation model of
the preference shares and the assumptions
used in those models, including verification
to observable market inputs, and assessed
this model in relation to the terms of contract
for this asset; and
• We evaluated the adequacy and
appropriateness of the disclosures related to
these financial instruments.
From the audit evidence obtained, we consider
management's assessment of the carrying value
of the investment in financial instruments issued
by Odfjell Drilling Ltd. to be in accordance with
the requirements under the relevant accounting
standards.
2. Construction contract accounting estimates
Reference is made to Note 2 Basis for preparation, Note 3 Significant accounting policies, Note 4
Significant accounting estimates and judgements, and Note 7 Revenue and other income.
The key audit matter
The majority of the Group's revenues and profits
are derived from long-term construction and
service contracts.
Accounting for such contracts, where revenue
from performance obligations are satisfied over
time, is considered to be a risk area due to the
significant judgement and estimation applied by
management as well as the degree of
complexity of the contracts currently in the
portfolio.
How the matter was addressed in our audit
For financially significant contracts and any
contracts with a reasonable possibility of being
in a significant loss-making position, we applied
professional scepticism and critically assessed
the accounting estimates and judgments against
the requirements of IFRS 15. Our audit
procedures in this area included, among others:
• We assessed the implementation of IFRS
15, including the Group's updated
accounting policies, transition impact
assessment, application to construction and
service contract accounting and disclosures
IFRS 15 Revenue from contracts with customers
('IFRS 15') was implemented by the Group on 1
January 2018. This new accounting standard
• We challenged management's measure of
progress estimate and evaluated
management's process for assessing the
Annual Report 2018 | Auditor's Report
98
introduces a 'five step model' for revenue
recognition and new requirements and guidance
relevant to project accounting estimates and
judgements.
Furthermore, estimating the outcome of disputes
and renegotiations on long-term projects is
considered to be a risk area due to the
significant judgment and estimation applied by
management as well as the degree of
complexity of the contracts, current market
environment and challenges faced by
customers.
These management estimates and judgments
are often complex and involve assumptions
regarding future events for which there may be
little or no external corroborative evidence
available. There are typically a wide range of
reasonably possible outcomes, and a high
degree of uncertainty on the outcomes of
negotiations and disputes linked to complex
contract interpretations.
As such, these contract accounting estimates
also require significant attention during the audit
and are subject to a high degree of auditor
judgment.
Auditor's Report - 2018
Akastor ASA
measurement of progress and the method
applied;
• We updated our understanding of the project
performance, changes compared to previous
forecasts, sensitivities and risks by reviewing
management's project reporting and
discussing with relevant management;
• We assessed contractual revenue forecasts
including corroborating those forecasts with
reference to signed contracts and variation
orders to assess the contractual basis of
estimated future revenues;
• We evaluated the calculation of project
revenue and cost and contract assets and
contract liabilities in relation to the stage of
completion and forecasts;
• We analysed preliminary rulings or other
relevant pronouncements for items in
arbitration and historical outcomes of
negotiations with customers and other
proceedings;
• We challenged management on their
assessment of probable settlement
negotiations regarding liquidated damages
and disputes;
• We challenged management on the
estimate of cost to complete, timing of the
cost and the risk assessment related to
forecast cost;
• We read a selection of correspondence
between the Group and the customer and
the Group's legal advisors; and
• We considered events subsequent to
reporting date and challenged management
on their impact to the estimates made at
year-end.
From the audit evidence obtained, we consider
construction contract accounting estimates to be
consistent with the requirements under the
relevant accounting standards.
Other information
Management is responsible for the other information. The other information comprises information in
the Annual Report, except the financial statements and our auditor's report thereon.
Our opinion on the financial statements does not cover the other information and we do not express
any form of assurance conclusion thereon, with the exception of our report on Other Legal and
Regulatory Requirements below.
In connection with our audit of the financial statements, our responsibility is to read the other
information and, in doing so, consider whether the other information is materially inconsistent with the
financial statements or our knowledge obtained in the audit or otherwise appears to be materially
misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this
other information, we are required to report that fact. We have nothing to report in this regard.
Annual Report 2018 | Auditor's Report
99
Auditor's Report - 2018
Akastor ASA
Responsibilities of the Board of Directors and the Managing Director for the Financial Statements
The Board of Directors and the Managing Director ("management") are responsible for the preparation
in accordance with law and regulations, including fair presentation of the financial statements of the
Company in accordance with the NGAAP, and for the preparation and fair presentation of the
consolidated financial statements of the Group in accordance with IFRS, and for such internal control
as management determines is necessary to enable the preparation of financial statements that are
free from material misstatement, whether due to fraud or error.
In preparing the financial statements, management is responsible for assessing the Company’s and
the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going
concern. The financial statements of the Company use the going concern basis of accounting insofar
as it is not likely that the enterprise will cease operations. The consolidated financial statements of the
Group use the going concern basis of accounting unless management either intends to liquidate the
Group or to cease operations, or has no realistic alternative but to do so.
Auditor’s Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole
are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that
an audit conducted in accordance with laws, regulations, and auditing standards and practices
generally accepted in Norway, including ISAs will always detect a material misstatement when it
exists. Misstatements can arise from fraud or error and are considered material if, individually or in
aggregate, they could reasonably be expected to influence the economic decisions of users taken on
the basis of these financial statements.
As part of an audit in accordance with laws, regulations, and auditing standards and practices
generally accepted in Norway, including ISAs, we exercise professional judgment and maintain
professional scepticism throughout the audit. We also:
•
•
•
•
•
•
identify and assess the risks of material misstatement of the financial statements, whether due
to fraud or error. We design and perform audit procedures responsive to those risks, and
obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The
risk of not detecting a material misstatement resulting from fraud is higher than for one
resulting from error, as fraud may involve collusion, forgery, intentional omissions,
misrepresentations, or the override of internal control.
obtain an understanding of internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company's or the Group's internal control.
evaluate the appropriateness of accounting policies used and the reasonableness of
accounting estimates and related disclosures made by management.
conclude on the appropriateness of management’s use of the going concern basis of
accounting and, based on the audit evidence obtained, whether a material uncertainty exists
related to events or conditions that may cast significant doubt on the Company and the
Group's ability to continue as a going concern. If we conclude that a material uncertainty
exists, we are required to draw attention in our auditor’s report to the related disclosures in the
financial statements or, if such disclosures are inadequate, to modify our opinion. Our
conclusions are based on the audit evidence obtained up to the date of our auditor’s report.
However, future events or conditions may cause the Company and the Group to cease to
continue as a going concern.
evaluate the overall presentation, structure and content of the financial statements, including
the disclosures, and whether the financial statements represent the underlying transactions
and events in a manner that achieves fair presentation.
obtain sufficient appropriate audit evidence regarding the financial information of the entities
or business activities within the Group to express an opinion on the consolidated financial
Annual Report 2018 | Auditor's Report
100
Annual Report 2018 | Auditor's Report 101
06. ALTERNATIVE PERFORMANCE
MEASURES
Akastor discloses alternative performance measures as a supplement to
Net capital employed - a measure of all assets employed in the
the consolidated financial statements prepared in accordance with IFRS.
operation of a business. It is calculated by non-current assets (excluding
Such performance measures are used to provide an enhanced insight
non-current interest bearing receivables) added by net current operating
into the operating performance, financing abilities and future prospects
assets minus non-current operating liabilities (deferred tax liabilities,
of the group. These measures are calculated in a consistent and
employee benefit obligations and other non-current liabilities).
transparent manner and are intended to provide enhanced comparability
of the performance from period to period. It is Akastor's experience that
Gross debt - sum of current and non-current borrowings.
these measures are frequently used by securities analysts, investors and
other interested parties.
Net debt - gross interest-bearing debt minus cash and cash equivalents.
The definitions of these measures are as follows:
Net interest-bearing debt (NIBD) – net debt minus non-current and
EBITDA - earnings before interest, tax, depreciation and amortization,
corresponding to "Operating profit before depreciation, amortization and
Equity ratio - a measure of investment leverage, calculated as total
impairment" in the consolidated income statement.
equity divided by total assets at the reporting date.
current interest bearing receivables.
EBIT - earnings before interest and tax, corresponding to "Operating
Liquidity reserve - comprises cash and cash equivalents and undrawn
profit (loss)" in the consolidated income statement.
committed credit facilities.
Capex and R&D capitalization - a measure of expenditure on PPE or
Order intake – represents the estimated contract value from the
intangible assets that qualify for capitalization.
contracts or orders that are entered into or committed in the reporting
Net current operating assets (NCOA) - a measure of working capital.
period.
It is calculated by current operating assets minus current operating
Order backlog - represents the remaining unearned contract value from
liabilities, excluding financial assets or financial liabilities related to
the contracts or orders that are already entered into or committed at the
hedging activities.
reporting date.
The tables below show reconciliation of alternative performance measures to the line items in the financial statements according to IFRS.
Net current operating assets (NCOA)
Amounts in NOK million
Current tax assets
Inventories
Trade and other receivables
Current operating assets
Current tax liabilities
Provisions, current
Trade and other payables
Current operating liabilities
Adjusted by NCOA related to discontinued operations
Net current operating assets (NCOA) (Continuing operations)
2018
2017
4
548
2 801
3 354
(8)
(236)
(2 734)
(2 979)
-
375
21
569
2 263
2 853
(23)
(293)
(1 493)
(1 809)
(186)
857
Annual Report 2018 | Alternative Performance MeasuresAlternative Performance Measures 102
Net capital employed (NCE)
Amounts in NOK million
Total non-current assets
Net current operating assets (NCOA)
Other current assets
Non-current interest-bearing receivables
Deferred tax liabilities
Employee benefit obligations
Other non-current liabilities
Non-current provisions
Adjusted by NCE related to discontinued operations
Net capital employed (NCE)
Gross debt/Net debt/NIBD
Amounts in NOK million
Non-current borrowings
Current borrowings
Gross debt
Cash and cash equivalents
Net debt
Non-current interest-bearing receivables
Current interest-bearing receivables
Net interest-bearing debt (NIBD)
Equity ratio
Amounts in NOK million
Total equity
Divided by Total assets
Equity ratio
Liquidity reserve
Amounts in NOK million
Cash and cash equivalents
Undrawn committed credit facilities
Liquidity reserve
2018
5 077
375
-
-
(9)
(332)
(390)
(166)
-
4 556
2018
588
14
601
(198)
403
-
(257)
146
2018
4 317
9 005
48%
2017
7 163
857
51
1
(10)
(349)
(110)
(221)
184
7 566
2017
2 133
399
2 533
(168)
2 364
(1)
-
2 363
2017
5 277
10 328
51%
2018
2017
198
2 000
2 198
168
1 400
1 568
Annual Report 2018 | Alternative Performance Measures 103
07. BOARD OF DIRECTORS
Kristian M. Røkke | Chairman
Kristian Røkke is currently the Chief Investment Officer of Aker ASA and has extensive experience
from offshore oil services, shipbuilding and M&A. Mr. Røkke was CEO of Akastor ASA from
August 2015 to December 2017. He is a board member of TRG Holding AS, Aker Capital AS and
Aker Solutions ASA. Mr. Røkke holds an MBA from The Wharton School, University of
Pennsylvania.
As of December 31, 2018, Mr. Røkke holds, through a privately owned company, 200 000 shares
in Akastor ASA and has no stock options. Mr. Røkke is both a Norwegian and American citizen
and has been elected for the period 2018-2020.
Lone Fønss Schrøder | Deputy Chairman
Lone Fønss Schrøder has experience from CEO and Senior Management positions at the Danish
shipping and oil group A.P. Møller-Maersk A/S. She is Executive Director of Geely Financials
Denmark, Director and Chairperson for the audit committee at Volvo Cars and Valmet Oy, and
Director of Ikea Group. Ms. Fønss Schrøder has a fintech portfolio of her own.
Ms. Fønss Schrøder has a law degree from the University of Copenhagen and of economics from
Copenhagen Business School. As of December 31, 2018, she holds 4 400 shares in the company
and has no stock options. She is a Danish citizen and has been elected for the period 2018-2020.
Øyvind Eriksen | Director
Øyvind Eriksen joined Aker ASA in January 2009. Mr. Eriksen holds a law degree from the
University of Oslo. He joined Norwegian law firm BA-HR in 1990, where he became a partner in
1996 and a director/chairman from 2003. At BA-HR, Mr. Eriksen worked closely with Aker and
Aker’s main shareholder, Kjell Inge Røkke. Mr. Eriksen is chairman of Aker BP ASA, Aker Solutions
ASA, Cognite AS, Aker Capital AS and Aker Kværner Holding AS, and a director of several
companies, including Aker Energy AS, The Resource Group TRG AS, TRG Holding AS and
Reitangruppen AS.
As of December 31, 2018, Mr. Eriksen holds no shares or stock options in Akastor directly; he has
an ownership interest through his holding of 219 027 shares in Aker ASA. He also holds, through
a privately owned company, 0.2 percent of the B-shares in TRG Holding AS, the largest
shareholder in Aker ASA. Mr. Eriksen is a Norwegian citizen and has been elected for the period
2018-2020.
Annual Report 2018 | Board of DirectorsBoard of Directors 104
Kathryn M. Baker | Director
Kathryn M. Baker has 30 over years of business experience in a broad range of industries and
roles. She currently serves on the Executive Board of the Central Bank of Norway (Norges Bank),
where she is also a member of the audit and the risk and investment committees. Other current
board positions include Chairman of Catena Media Plc, board member of DOF ASA as well as a
member of the Investment Committee of Norfund. Ms. Baker also serves on the European
Advisory Board of the Tuck School of Business and leads the Ethics Committee of the Norwegian
Private Equity and Venture Capital Association (NVCA), where she previously served as Chairman.
Ms. Baker was a partner at the Norwegian private equity firm Reiten & Co for 15 years. Prior to
that, she was a management consultant at McKinsey & Company in Oslo and a financial analyst
at Morgan Stanley in New York.
Ms. Baker holds a bachelor degree in Economics from Wellesley College and an MBA from the
Amos Tuck School of Business at Dartmouth College. She holds 45 683 shares in the company.
Ms. Baker is an American citizen and has been elected for the period 2018-2020.
Sarah Ryan | Director
Dr. Sarah Ryan has 30 years of experience in the global oil&gas and oilfield services industries.
She currently serves as Non-Executive Director of Woodside Petroleum, where she is also a
member of the audit and risk and sustainability committees. Other current board positions
include Central Petroleum and Kinetic Energy Services, and previous board positions include
Aker Solutions and Vautron. Dr Ryan also serves as chair of the Advisory Board of Unearthed
Solutions and is a Fellow of the Australian Academy of Technological Sciences and Engineering.
Dr. Ryan was energy advisor, Investment director and equity analyst at Earnest Partners, a US-
based investment management firm. Prior to that, she held various senior management, technical
and operational roles during her 15 years with Schlumberger.
Dr. Ryan holds a BSc in Geology from the University of Melbourne, a BSc (Hons) in Geophysics
and a PhD in Petroleum Geology and Geophysics from the University of Adelaide. As of December
31, 2018, she held 5 000 shares in the company and had no stock options. Ms. Ryan is an
Australian citizen. She has been elected for the period 2018-2020.
Henning Jensen | Director
Henning Jensen currently works as a specialist engineer in project control department at
MHWirth AS. Mr. Jensen joined MHWirth in 2005. He has since then held various positions in the
company.
Mr. Jensen holds a bachelor degree in Marine Technology and a Master in Industrial Economy
and Technology from Agder University College in Grimstad,
As of December 31, 2018, Mr. Jensen holds no shares or stock options in the company. Mr.
Jensen is a Norwegian citizen and has been elected for the period 2017-2019.
Annual Report 2018 | Board of Directors 105
Asle Christian Halvorsen | Director
Asle Christian Halvorsen currently works as Senior Engineer in Mud Products dept at MHWirth
AS. He began his career with the Aker group in 2011 when he joined STEP Offshore. Mr. Halvorsen
holds a BS c in mechanical engineering from Sør-Trøndelag University College. As of December
31, 2018, he holds no shares or stock options in the company.
Mr. Halvorsen is a Norwegian citizen. He has been elected for the period 2017-2019.
Stian Sjølund| Director
Stian Sjølund currently works as Performance Optimization Engineer at MHWirth AS. Mr. Sjølund
joined the Company in 1998 as an Engineer in Drilling Lifecycle Services department. He has
since then held various positions in the company in Norway and abroad.
Mr. Sjølund holds a technical college degree in electrical engineering from Grimstad Technical
College. As of December 31, 2018, Mr. Sjølund holds no shares or stock options in the company.
Mr. Sjølund is a Norwegian citizen and has been elected for the period 2017-2019.
Annual Report 2018 | Board of Directors 106
08. MANAGEMENT
Karl Erik Kjelstad | Chief Executive Officer
Karl Erik Kjelstad joined the Aker group in 1998 and has held various CEO and executive positions
throughout the Aker group, including EVP of Aker Solutions, Aker ASA and CEO of Aker Yards.
Mr. Kjelstad holds an MSc in Marine Engineering from the Norwegian University of Science and
Technology (NTNU) and an AMP from Harvard Business School. As of March 14, 2019, he holds,
through a privately-owned company, 300 000 shares in the company and had no stock options.
Mr. Kjelstad is a Norwegian citizen.
Leif Borge | Chief Financial Officer
Before joining Akastor, Leif Borge served as CFO of Aker Solutions in 2008-2014. He was CFO
of Aker Yards in 2002-2008, CFO of Stento ASA/ Zenitel NV in 1998-2001, CFO of Vitana
(a subsidiary of Rieber & Søn ASA in the Czech Republic) in 1994-1997, and prior to that Financial
Manager in Union Bank of Norway.
Mr. Borge holds an MBA from Pacific Lutheran University in Washington State, and is a Norwegian
citizen. As of March 14, 2019, Mr. Borge holds, directly and through a privately owned company,
300 000 shares in the company, and had no stock options.
Paal E. Johnsen | Executive Vice President – Investment Director
Paal E. Johnsen joined Akastor from a senior position within Investment Banking at DNB Bank
ASA. From 2009 to 2014, he was CEO of an investment company and held several board
positions in both public and private companies across several industries. From 1996 to 2008,
Paal E. Johnsen held several executive positions in Carnegie Investment Banking, both on equity
research and investment banking.
Mr. Johnsen holds a Master of Science (MSc) in Economics and Business Administration from
Norwegian School of Economics. As of March 14, 2019, he holds no shares in the company and
had no stock options. Mr. Johnsen is a Norwegian citizen.
Annual Report 2018 | ManagementManagement 107
09. COMPANY INFORMATION
Reports on the Internet
Copyright and Legal Notice
The half-year and annual reports of Akastor are available on
the internet. Akastor encourages its shareholders to subscribe
to the company’s annual reports via the electronic delivery
system of the Norwegian Central securities Depository (VPS).
Please note that VPS services (VPS Investortjenester) are
designed primarily for Norwegian shareholders. Subscribers to
this service receive annual reports in PDF format by email. VPS
distribution takes place at the same time as distribution of the
printed version of Akastor’s annual report to shareholders who
have requested it. Half-year reports, which are generally only
distributed electronically, are available on the company’s
website and other sources. Shareholders who are unable to
receive the electronic version of interim reports may subscribe
to the printed version by contacting Akastor’s investor relations
staff.
Copyright in all published material including photographs,
drawings and images in this publication remains vested in
Akastor and third party contributors to this publication as
appropriate. Accordingly, neither the whole nor any part of this
publication can be reproduced in any form without express
prior permission. Articles and opinions appearing in this
publication do not necessarily represent the views of
Akastor. While all steps have been taken to ensure the accuracy
of the published contents, Akastor does not accept any
responsibility for any errors or resulting loss or damage
whatsoever caused and readers have the responsibility to
thoroughly check these aspects for themselves. Enquiries
about reproduction of content from this publication should be
directed to Akastor ASA.
Contact details
Akastor ASA
Oksenøyveien 10, 1366 Lysaker, Norway
PO Box 124, 1325 Lysaker, Norway
+47 21 52 58 00
akastor.com
First Geo
Fjordpiren, Laberget 22, 4020 Stavanger, Norway
PO Box 289, 4066 Stavanger, Norway
+47 51 81 23 50
first-geo.com
MHWirth
Butangen 20, 4639 Kristiansand, Norway
PO Box 413 Lundsiden, 4604 Kristiansand, Norway
+47 38 05 70 00
mhwirth.com
Step Oiltools
7500A Beach Road # 16-307/312
The Plaza, Singapore, 199591, Singapore
+65 6396 3872
stepoiltools.com
AKOFS Offshore
Karenslyst Allé 57, 0277 Oslo, Norway
PO Box 244, 0213 Oslo, Norway
+47 23 08 44 00
akofsoffshore.com
Cool Sorption
Smedeland 6, DK2600 Glostrup, Denmark
+45 43 45 47 45
Coolsorption.com
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