2019
ANNUAL
REPORT
2
KEY FIGURES
Results and orders (NOK million)
Revenue and other income
EBITDA
EBITDA margin (percent)
Net profit (loss) from continuing operations
Net profit (loss)
NIBD
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)
2019
2018
5 361
492
9.2
147
93
692
41
5 250
3 166
3 800
290
7.6
(194)
(322)
146
48
4 481
2 692
9.94
0.37
13.1
(1.19)
2 272
1 775
0.8
1.5
2.4
1.6
2.2
2.6
Net capital employed
NOK million
Revenue
NOK million
EBITDA
NOK million
Other
1 257
AGR
170
AKOFS
Offshore
1 050
MHWirth
2 608
2000
1500
1000
500
0
1 557
1 430
1 304
1 090
1 070
153
133
114
92
63
200
150
100
50
0
Q4 18
Q1 19
Q2 19
Q3 19
Q4 19
Q4 18
Q1 19
Q2 19
Q3 19
Q4 19
Annual Report 2019 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
12
13
22
22
85
97
06. ALTERNATIVE PERFORMANCE MEASURES
101
07. BOARD OF DIRECTORS
08. MANAGEMENT
09. COMPANY INFORMATION
103
106
107
Annual Report 2019
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 5.1 billion at the end of 2019.
Highlights 2019
MHWirth, reflecting the competitive strength of this company
in a market which continues to be challenging.
Company Overview
The largest shareholder of Akastor is Aker Kværner Holding
AS with a shareholding of 40.3 percent, which is 70 percent
owned by Aker ASA and 30 percent by the State of Norway
government. Aker ASA also has a direct shareholding in
Akastor of 8.5 percent.
2019 has been a year of transition where decisions and
transactions have been taken with a strategic focus on
positioning Akastor’s companies and assets for value creation
in the years to come.
Akastor is primarily focused on the oilfield services sector. The
portfolio in 2019 covers a range of industrial holdings in this
sector, including:
In February, management of MHWirth was strengthened by
the appointment of Eirik Bergsvik as new CEO and Merrill A.
“Pete” Miller Jr. as new Chairman of the board. This represents
a change in strategy for MHWirth with an ambition to expand
the company through a combination of organic growth and
M&A, which in turn will expand its portfolio of services and
position the company to increase its market shares in a
continuing competitive market for an eventual market recovery.
In April, the merger between First Geo and AGR was completed.
As announced in December 2018, the ambition with this
merger is to create a leading provider of well-, reservoir- and
software services for the offshore drilling market.
In February, Darrel Krieger was appointed as new CEO of Step
Oiltools and in May, Tine Høj Andersen was appointed new
CEO of Cool Sorption.
In June, following the growth strategy announced earlier in the
year, MHWirth announced its first acquisition in several years.
Bronco Manufacturing LLC (Bronco), a leading provider of
critical aftermarket solutions and products to the global
onshore and offshore drilling market, was acquired for a total
consideration of USD 31.5 million.
In October, AKOFS Offshore completed a NOK 890 million
non-recourse financing agreement for the upgrading of the
AKOFS Seafarer vessel, which is required to prepare the vessel
for the five-year light well intervention service (LWI) contract
with Equinor that will commence during first half 2020.
In November, Øyvind Paaske was appointed as Chief Financial
Officer in Akastor effective from March 1, 2020.
Akastor’s total revenue increased from NOK 3.8 billion in 2018
to NOK 5.4 billion in 2019, an increase of 41 percent.
Approximately NOK 600 million of the revenue growth came
from the acquisitions of AGR and Bronco. The remaining
revenue growth was organically driven, most of it through
MHWirth, which provides drilling systems and lifecycle
services. Ownership interest is 100 percent.
AKOFS Offshore, a subsea well installation and interven-
tion services provider. Ownership interest is 50 percent.
AGR, which delivers well-, reservoir- and software ser-
vices to the offshore drilling industry. Economic inter-
est is 55 percent.
Step Oiltools, a drilling waste management company.
Ownership interest is 100 percent.
Cool Sorption, a supplier of vapour recovery units and
systems. Ownership interest is 100 percent.
Each Akastor portfolio company is organized as an independent
business which is self-sufficient and with its own dedicated
management team fully responsible for all aspects of its
operational activities. All portfolio companies have separate
boards of directors, consisting of appointed Akastor investment
managers, including, for some companies, external board
members and employee representatives. This governance
model provides for strong management of operational
activities and a good foundation for close cooperation between
Akastor, the portfolio companies and their employees.
In addition to its portfolio of industrial holdings, Akastor has
several financial investments, including:
DOF Deepwater, owns and operates five offshore ves-
sels. Ownership interest is 50 percent.
NES Global Talent, a technical and engineering staffing
company. Economic interest is 17.7 percent.
Odfjell Drilling, preferred equity instrument with carry-
ing amount of USD 81.1 million plus a warrant structure
of up to 5.9 million shares.
Annual Report 2019 | Board of Directors' ReportBoard of Directors’ Report 5
Awilco Drilling, ownership interest is 5.6 percent.
The Akastor corporate organization is based at Fornebu, just
out side of Oslo in Norway, with a team of 16 employees,
working closely with the boards and management of its
portfolio companies.
Akastor has a total of 2 272 employees (inclusive hired-ins)
with presence in approximately 20 countries at year-end 2019.
Strategy
Akastor is an investment company, employing 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 operational activity, 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
investment team. As an owner, Akastor
the Akastor
emphasizes understanding the portfolio companies’ markets
and challenges in depth, in order to evaluate current valuation
versus future potential.
The business models of the portfolio companies are
decentralized with each entity being self-sufficient, but as
part of the Akastor portfolio, all companies share a common
foundation based on Akastor’s values, governing documents
and compliance structure.
Akastor seeks to maximize value by combining strategic,
operational and financial measures. Akastor’s strategy as an
investment company is to generate an acceptable return on
existing investments. Further investments may be made in
the existing portfolio companies in order to strengthen the
companies and prepare for a future exit. The ultimate goal is
to return the capital to the shareholders of Akastor upon
divestments of assets, but at the same time ensure that
Akastor has a solid capital structure.
Market Outlook
Akastor’s portfolio companies operate mainly in the oilfield
services industry. During 2019, the market fundamentals
improved somewhat due to increased activity and investment
levels of the oil companies which in turn led to a higher activity
level for Akastor. In addition to a higher level of activity in
general, implementation of new technological solutions also
impacted several of the companies positively. However, the
market
for oilfield services remains competitive and
challenging with continued over-capacity in certain market
segments, such as offshore drilling, offshore vessels and
subsea well intervention.
Since the downturn started in 2014, Akastor has focused on
reducing costs and developing more efficient technological
solutions. Over the last two years, 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 with
positive effects both for the clients and MHWirth. As an active
owner, Akastor will continue to work closely with its portfolio
companies to increase competitiveness, through focusing on
maintaining a flexible and lean cost base while at the same
time continuing development of new technology and solutions
for clients. Akastor aims to position its companies for growth
in both current and new markets through providing financial
capacity for potential business opportunities.
Through the first months of 2020, the global financial markets
and in particular the global energy sector have experienced
significant turmoil. The outbreak of the COVID-19 virus,
declared as a global pandemic by World Health Organization,
has caused significant disruption to the global economy
through reduced industrial activity, extensive travel restrictions
and mandatory quarantines. Akastor has
implemented
measures to minimize the spread of the virus and mitigate
substantial disruptions to operations throughout its portfolio.
Further, oil prices fell sharply in the beginning of March 2020
adding additional pressure on the global economy. It is
expected that the outbreak of the COVID-19 virus will have
significant negative impact on the global economy and the
operational activities in Akastor’s portfolio companies in 2020.
The financial impact as a result of these events is currently
uncertain as it is difficult to predict the duration of the virus
outbreak and the long-term impact on the financial markets
level. From an accounting
and the
perspective, these factors could impact future assessments of
recoverable amounts of Akastor’s assets if the current
volatility results in a negative long-term market outlook.
industrial activity
Group Financial Performance
Akastor presents its consolidated financial statements in
International Financial Reporting
accordance with
Standards (IFRS) as adopted by the European Union. The new
lease standard IFRS 16 was implemented as of January 1, 2019,
while the comparable financial information was not restated.
the
All amounts below refer to the consolidated financial
statements for the group, unless otherwise stated.
Income Statement
Revenue and other income for 2019 increased by 41 percent to
NOK 5 361 million. The acquisitions of AGR and Bronco
contributed revenue growth of NOK 601 million. Operating
profit before interest, tax, depreciation and amortization
(EBITDA) increased by NOK 201 million to NOK 492 million.
The new lease standard IFRS 16 had a positive impact on
EBITDA of NOK 124 million for 2019.
Annual Report 2019 | Board of Directors' Report 6
Depreciation, amortization and impairment was NOK 270
million in 2019, compared to NOK 181 million in the previous
year. This includes depreciation and impairment of right-of-
use assets (IFRS 16 impact) of NOK 104 million in 2019.
Net financial expenses were NOK 30 million in 2019 compared
to NOK 200 million in the previous year. The net financial
expenses included Akastor’s share of net loss of NOK 160
million from the equity-accounted investees DOF Deepwater
and AKOFS Offshore, dividend income of NOK 69 million from
equity investment, unrealized gain of NOK 37 million in fair
value changes of financial investments, as well as accounting
gain of NOK 99 million related to currency translation
differences of liquidated foreign entity. In addition, net financial
items in 2019 included net financial charges on leases of NOK
34 million.
The pre-tax profit for the year was NOK 191 million, compared
to a loss of NOK 91 million the previous year.
The income tax expenses for 2019 were NOK 44 million,
compared to a tax expense of NOK 103 million in 2018. The
effective tax rate is impacted by several items, such as
impairment of deferred tax assets, non-tax-deductible items
as well as mix of revenue generated in various jurisdictions.
Net profit from continuing operations was NOK 147 million,
while net loss from discontinued operations was NOK 54
million. The net loss from discontinued operations was mainly
related to negative effect on re-assessment of the provision
for guaranteed preferred return to our joint venture partners
in AKOFS Offshore, offset by a positive effect from a settlement
related to the MPO arbitration award. The group had an
operating profit of NOK 93 million for the year.
The board of directors has resolved to propose to the annual
general meeting that no dividend is distributed for 2019.
Financial Position
Total assets of Akastor amounted to NOK 10.6 billion as of
December 31, 2019, compared with NOK 9.0 billion at year-
end 2018. The increase is mainly related to acquisition of AGR
and Bronco, as well as the recognition of right-of-use assets of
NOK 537 million due to implementation of IFRS 16.
Net debt (excluding lease liabilities from IFRS 16) was NOK
893 million at the end of the period, while net interesting-
bearing debt (NIBD) was NOK 692 million. NIBD was increased
in the year, partially explained by financing of acquisition of
Bronco Manufacturing and AGR’s bank debt (non-recourse to
Akastor) of NOK 161 million.
Total equity amounted to NOK 4.4 billion at year-end 2019, of
which non-controlling interests were NOK 18 million. The
equity ratio was 41 percent as of December 31, 2019, decreased
from 48 percent in 2018.
Cash Flow
As of December 31, 2019, Akastor had cash of NOK 555 million,
compared to NOK 198 million in 2018. The net cash flow from
operating activities was positive NOK 406 million, compared
to operating cash flow of NOK 315 million in the previous year.
The positive cash flow from operating activities comprises of
net cash inflow from operating activities of NOK 541 million
offset by net payments of NOK 135 million for interest costs
and income tax. Net payments related to leases of NOK 121
million were not included in the operating cash flow after
implementation of IFRS 16.
Net cash flow from investing activities was negative NOK 555
million, compared to positive cash flow of NOK 247 million in
2018. The cash flow from
included
acquisition consideration for Bronco and payments related to
contingent considerations from divestments in previous years.
Capex investments were NOK 127 million compared to NOK
131 million in 2018.
investing activities
Net cash flow from financing activities amounted to positive
NOK 517 million and included payment of lease liabilities of
NOK 151 million.
Going Concern
The world is currently in the middle of the COVID-19 outbreak,
and how this will unfold remains uncertain. Akastor is continuously
monitoring the development and will continue to take measures
to mitigate the negative impacts for the company, including
measures required to meet restrictions from governmental
authorities. However, there is a risk that the COVID-19 outbreak
may have substantial negative effects on the global economy
which are worse than current estimates, in which case this will
also have increased negative effects on Akastor.
The COVID-19 outbreak gives higher uncertainty for the going
concern assumption for most companies. This is also the case
for Akastor. Although the uncertainty has increased, the
current assessment is that the entity has the ability to meet
the mandatory terms and conditions of its banking facilities.
Therefore, in accordance with the Norwegian Accounting Act,
the board of directors confirms that the going concern
assumption, on which the consolidated financial statements
have been prepared, is appropriate.
Subsequent events
In March 2020, the outbreak of the COVID-19 virus was
declared as a global pandemic by the World Health
Organization. Norway, together with many other countries,
have taken national emergency measures in attempt to contain
including extensive mandatory
the spread of the virus,
quarantines and travel restrictions. MHWirth sent out warning
notice of temporary layoffs to all employees in Norway, as
reduced industry activity level is expected in the coming
periods. The detailed plan for temporary layoffs is currently
under preparation.
Annual Report 2019 | Board of Directors' Report 7
Total order intake in MHWirth ended at NOK 4.3 billion,
compared with NOK 3.5 billion in 2018. The order backlog was
NOK 2.4 billion at the end of 2019.
Since the downturn started in 2014, the number of employees
has been reduced substantially and other cost cuts have also
been made in order to adjust capacity and costs to a new
activity level. In 2019, the workforce increased from 1 424 to 1
543 employees, partially as a result of the Bronco acquisition
and partially reflecting an increased activity level. The focus
from customers on making the drilling equipment more
in 2019, thereby reducing energy
efficient continued
consumption and the costs of drilling a well, as well as reducing
the service costs of the equipment. Several new orders were
placed for digital solutions including the DEAL (Drilling
Equipment Automation Layer) interface and several software
solutions for automation of operations onboard the rigs. As
per end of 2019, eight rigs were equipped with the DEAL
system, with another six systems to be installed.
In March 2020, MHWirth sent out warning notice of temporary
layoffs to all employees in Norway as activity level is expected
to be reduced due to the outbreak of the COVID-19 virus. The
company is monitoring the situation closely and taking
necessary measures to mitigate business disruptions and risks.
Akastor aims to develop MHWirth business going forward
both through organic growth and M&A, and with focus both on
the offshore and onshore drilling markets globally.
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 311 people at the end of 2019.
Akastor owns 50 percent of the shares in AKOFS Offshore,
with the remaining shares owned by Mitsui & Co and Mitsui
O.S.K. Lines, each with 25 percent. AKOFS Offshore is classified
as a joint venture and consolidated using equity method in the
consolidated financial statements.
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)
1) The figures are presented at 100 percent basis.
2019
1 093
560
237
618
49
3 734
-
5 013
311
2018
1 107
471
(127)
188
180
3 441
2 949
6 244
202
The outbreak of COVID-19 virus is expected to have significant
negative impact on the global economy and the group’s
operational activities in 2020. The financial impact to the
group is currently uncertain as the duration of pandemic
cannot be estimated reliably.
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 2019,
the company employed 1 543 people; 55 percent of the
workforce is employed in Norway. The company’s operations
are divided in five main business areas: Projects, Drilling
Equipment, Drilling Lifecycle Services, Digital Technologies and
Engineering Services. MHWirth is Akastor’s largest portfolio
company both in terms of sales revenue 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)
2019
4 187
476
315
115
629
2 608
4 276
2 367
1 543
2018
3 055
281
156
58
655
2 363
3 544
2 282
1 424
The revenue for 2019 of NOK 4 187 million was up 37 percent
from 2018. NOK 123 million of the revenue growth came from
the acquisition of Bronco while the remaining was organic
growth. Revenues from Projects and Drilling Equipment
increased with around 40 percent to NOK 1 829 million in
2019, largely due to strong order intake from single equipment
sales to offshore, onshore and non-oil market segments.
Revenues from Drilling Lifecycle Services, Digital Technologies
and Engineering Services increased with 39 percent to NOK 2
358 million, explained by strong growth in digital technologies,
acquisition of Bronco as well as increased service activity of
the clients in general. The number of active rigs with complete
drilling packages from MHWirth increased slightly to 53 rigs on
average through 2019. EBITDA increased from NOK 281
million in 2018 to NOK 476 million in 2019, including
improvement of NOK 69 million due to implementation of
IFRS 16. The EBITDA margin ended at 11.4% for 2019.
The offshore drilling market improved somewhat during 2019,
but remains challenging and is still suffering from overcapacity
of offshore drilling rigs. In April, MHWirth signed the second
contract for a complete drilling package to be delivered to
Keppel Fels, for construction of a midwater semi-submersible
with Awilco Drilling as the ultimate client. This was the first out
of three options that were included in the contract for the first
unit signed in 2018. The order intake from Drilling Equipment
improved in 2019, driven both by oil and non-oil segments.
Annual Report 2019 | Board of Directors' Report 8
The company’s revenue was NOK 1 093 million in 2019,
approximately same level as the previous year. The EBITDA
increased by NOK 89 million to NOK 560 million in 2019.
Both of the vessels Skandi Santos and Aker Wayfarer operate
on contracts with Petrobras in Brazil for subsea equipment
installation work. In the first half of the year, Skandi Santos had
low revenue utilization caused by several operational issues.
This improved in the second half of the year when both vessels
operated on close to full utilization.
Other Holdings
Other Holdings mainly include 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,
5.6 percent shareholding in Awilco Drilling, and a preferred
equity instrument of USD 81.1 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.
During 2019, the AKOFS Seafarer vessel has been prepared
for the five-year contract with Equinor for Light Well
Intervention services in the North Sea. The vessel and the
subsea workover system have been upgraded through
substantial investments, financed by a separate non-recourse
bank loan that was established in October 2019. Due to the
outbreak of the COVID-19 virus, there is a risk for delayed
commencement of Equinor contract. The company is taking
necessary measures to minimize the risk.
AGR
AGR is the result of the merger of First GEO AS (previously
owned 100 percent by Akastor) and AGR AS. The transaction
was completed in April 2019. At year-end 2019, Akastor held
100 percent of the shares and 55 percent of the economic
interest in the company, while Nordea, DNB and Silverfleet
held the remaining 45 percent economic interest. In February
2020, Akastor increased its economic interest in AGR to 64
percent after acquiring the equity interest held by Silverfleet.
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)
2019
573
14
(1)
6
12
170
434
502
438
2018
168
27
27
-
(1)
14
176
52
65
1) Prior to the acquisition of AGR in April 2019, the figures include First Geo only.
AGR had total revenues of NOK 573 million and EBITDA of
NOK 14 million for the year. During 2019 the two companies,
First Geo and AGR, have been fully integrated, and some cost
synergies have been realized.
During 2019, the activity level in the Norwegian market
improved, especially within the consultancy business segment
and reservoir services. Some of the international markets have
been more challenging with negative results in 2019. Going
forward, the focus is to make all geographical segments
profitable.
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)
2019
609
2
(92)
6
(31)
1 257
544
294
291
2018
581
(45)
(101)
8
(279)
1 094
767
356
286
1) First Geo, previously part of “Other holdings”, is included in “AGR”. Comparable
figures in 2018 have been restated.
Total EBITDA for Other Holdings for the year was NOK 2
million. The two businesses Step Oiltools and Cool Sorption
delivered an EBITDA of NOK 40 million in 2019, up from NOK
21 million in 2018. The remaining negative EBITDA in this
segment is mainly related to corporate overhead costs, as well
as some legacy costs.
In 2020, Step Oiltools will be consolidated as part of MHWirth.
Akastor sees potentials for cost synergies from the integration
and expects that it will strengthen MHWirth’s Solids Control
offering in the offshore, onshore and non-oil markets.
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 67 million in
2019.
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):
Annual Report 2019 | Board of Directors' Report Dividends:
From other equity:
Total allocated:
Risk Management
0
67
67
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.
Akastor’s risk management model is designed on the basis that
Akastor is an investment company with an overall objective of
securing its shareholders’ 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.
2019 was a volatile year in the oil market, with an oil price that
fluctuated throughout the year, with high average prices mid-
year, however ending lower than in the beginning of the year.
As a result of the recent outbreak of the COVID-19 virus
combined with the substantial reduction in oil price, the year of
2020 will be even more challenging for the entire global
industry. We expect that activity will be reduced and that the
oil service industry will need to reduce its cost base to reflect
the reduced activity level and remain competitive. Currently, at
the time of issuing this report, the duration of the market
downturn caused by the COVID-19 is uncertain, but we expect
that the market will remain challenging and volatile throughout
most of 2020.
Another important trend that the industry has seen throughout
2019, is increased demand from customers and regulators to
develop energy efficient products and services which will
enable the industry to become more sustainable. In order to
remain competitive, Akastor will continue to seek to take part
in the industry’s transition towards more climate-friendly and
energy-efficient operations.
On the operational side, risks are primarily mitigated by a
combination of technology development that supports a
transition towards more sustainable operations as well as
securing new orders and sound project execution by the
portfolio companies. 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.
9
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.
in
its portfolio companies
To manage and mitigate risks within Akastor, risk evaluation is
an integral part of all business activities, including when making
decisions regarding mergers and acquisitions and other
investment matters. As an owner, Akastor actively supervises
risk management
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
is the
management
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 an annual 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,
Annual Report 2019 | Board of Directors' Report 10
where chance of facing integrity risk is considered higher than
normal, additional training has been tailored for their role and
responsibilities. Hired-in personnel 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.
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.
COVID-19 impacts
A key element of Akastor’s risk management in 2020 will be to
closely monitor the development of the COVID-19 outbreak
and continuously seek to implement necessary mitigating
measures, which 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).
Current assessments of the duration and operational impacts
from the COVID-19 situation are uncertain. In the event the
COVID-19 situation is prolonged and causes a full suspension
of operations for an extended period, this will most likely give
a liquidity constraint for Akastor as revenue and EBITDA from
MHWirth will be reduced whilst further cash injections to
companies such as AKOFS Offshore and DOF Deepwater will
likely be required. In a case with prolonged hardship due to
COVID-19, there is also the risk that clients invoke force
majeure provisions to terminate existing contracts, which in
turn would open-up for exposure for Akastor arising from its
subsidiary’s default. As an example, in the case of AKOFS
Offshore and the vessel AKOFS Seafarer there are termination
rights for the client in the event of prolonged force majeure
and for material default. In the event of termination for force
majeure, leaving AKOFS Offshore unable to meet its financial
commitments, this would also mean that Akastor would be
unable to recover its shareholders’ loan from the company. In
the event of termination for default, Akastor could also be
losses under the
exposed for recovery of the client’s
performance guarantee issued. In the case of the vessel Aker
Wayfarer, should the client opt to terminate the contract for
prolonged force majeure, AKOFS Offshore will likely be unable
to meet its payment obligations under the bareboat lease and
Akastor will in turn likely be held responsible for these
obligations under the performance guarantee issued to the
vessel owner.
Environmental, Social and Governance
Akastor’s operating model reflects the fact that the portfolio
companies are
independent companies which operate
different business models and therefore face different
Environmental, Social and Governance (ESG) risks and
expectations from stakeholders. As a holding company,
Akastor is responsible for setting the overall ESG 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 ESG 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 ESG efforts, Akastor is focused on areas that build
financial and non-financial value in the portfolio companies.
Akastor’s ESG 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.
Particularly the latter priority has seen an increased focus in
2019, where Akastor wants to take part in the industry’s
transition towards more sustainable operations. All the
portfolio companies are responsible for working systematically
with these priorities and defining their own ESG strategies
encompassing these priorities. Akastor
is continuously
monitoring the implementation and integration of the priorities
of the ESG strategy, Code of Conduct and Integrity Policy
across all the portfolio companies. For in-depth reporting on
each portfolio company’s approach to ESG, including their
Health, Safety and Environment work, refer to the Akastor ESG
Report for 2019. The full report is available on our website
www.akastor.com.
Research, Innovation and Technology Development
NOK 71 million was capitalized in 2019, compared to NOK 36
million in 2018, related to development activities. In addition,
research and development costs of NOK 31 million were
expensed during the year because the criteria for capitalization
were not met (NOK 32 million in 2018).
All research,
initiatives are
innovation and development
performed by the Akastor portfolio companies. Akastor ASA
and Akastor AS performed no such activity in 2019.
People and Teams
Akastor
is committed to equal opportunity and non-
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
Annual Report 2019 | Board of Directors' Report 11
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. In 2019, as in previous years, no events violating
these agreements were reported.
Akastor and the portfolio companies had a total of 2 272
employees (FTE) as of December 31, 2019. The male/female
ratio (excluding hired ins) in the major portfolio company and
Akastor Group were as follows:
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 (TRIF)*
Fatalities incl. subcontractors
Sick leave (percent)
* Per million hours worked. Includes subcontractors
MHWirth
Akastor
Group
1.1
1.8
-
2.8
0.8
1.5
-
2.4
Female
Male
MHWirth
Akastor Group
17%
83%
20%
80%
Corporate governance
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 2.4 percent in 2019.
There were no fatal injuries in any of the portfolio companies.
The total recordable incident frequency was low, and Akastor
has thoroughly analysed all incidents and taken actions to
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 18, 2020 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 2019 | Board of Directors' Report 12
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, 2019. 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 2019 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, 2019.
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 18, 2020 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 2019 | Declaration by the Board of Directors and CEODeclaration by the Board of Directors and CEO 13
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 17 October 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 statement1)
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 2019 include
the merger between First Geo AS and AGR AS, which was
in April, MHWirth’s purchase of Bronco
completed
Manufacturing Inc in June and completion of a NOK 890
million non-recourse financing for the conversion of the
AKOFS Offshore owned vessel “AKOFS Seafarer”, which was
closed in October. Akastor currently has an active investment
portfolio within the oilfield services industry consisting of
MHWirth, AGR, STEP Oiltools, Cool Sorption, 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 NOK 5.1
billion. MHWirth is a global provider of drilling solutions,
engineering, projects, equipment and services. AKOFS
installation and
Offshore
intervention services. AGR is a leading provider of well and
reservoir consultancy services as well as software and technical
manpower for its clients. STEP Oiltools is a global provider of
solids control and drilling waste management services. Cool
is a provider of subsea well
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 2019 | Corporate Governance StatementCorporate Governance Statement
14
Sorption is a provider of vapour recovery units and systems.
DOF Deepwater operates five offshore vessels. NES Global
Talent is a global technical and engineering staff provider.
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
are reviewed 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 2019 | Corporate Governance Statement 15
information
Further
in respect of the corporate social
responsibility work of Akastor and its portfolio of companies
can be found in the separate Environmental, Social and
Governance (ESG) report published simultaneously as the
company’s annual report for 2019.
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, 2019 is NOK 4 371 million, which represents an
equity ratio of 41 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.
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 2020.
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). In February
2019, the company sold 386 161 own shares in relation with a
share purchase program offered to its corporate employees
and managers, which was approved by the board of directors
of Akastor ASA in December 2018.
4. Equal Treatment of Shareholders and Transactions
with Related Parties
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.
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.
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 9 April 2019
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 2020. No shares were bought by
the company in 2019 pursuant to the authorizations to the
board of directors. As of December 31, 2019, the company
holds 2 390 215 own shares.
As of December 31, 2019, Aker ASA holds 70 percent of the
shares of Aker Kværner Holding AS which holds ~40 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 2019 granted the
board of directors the mandate to approve the distribution of
dividends based on the company’s annual accounts for 2018 as
Applicable accounting standards and regulations require Aker
ASA to prepare its consolidated financial statements to include
accounting information of Akastor. As from January 1, 2014,
Annual Report 2019 | Corporate Governance Statement 16
Aker ASA is deemed to have control of Akastor pursuant to
the revised accounting standard IFRS 10. Akastor is thus
consolidated as a subsidiary in Aker ASA’s accounts from this
date. Subsequently, all subsidiaries and associates of Aker
ASA, including 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 normally encourages shareholders to attend the
general meetings. However, due to the public health
requirements following the ongoing COVID-19 outbreak, the
company will this year urge its shareholders to not meet and
rather use the available means of voting by proxy. For the same
reason, it is also the intention for this year’s general meeting
that only the minimum representatives required by law will
attend the general meeting. 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. As mentioned above, shareholders are this
year urged to 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
Annual Report 2019 | Corporate Governance Statement 17
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».
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.
However, as already mentioned above, due to the COVID-19
outbreak and in order to meet public health recommendations,
the company will this year consider the possibility of introducing
such arrangements, but will in any event urge its shareholders
to cast votes electronically in advance of general meetings
(however, not during the meeting) or by proxy.
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 and Arild S.
Frick have requested to resign from the nomination committee
and will be proposed replaced by Ingebret Hisdal and Ove A.
Taklo, respectively. The remaining two members, Leif-Arne
Langøy and Georg Fr. Rabl, are up for election at the annual
general meeting 2021. 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. Ove A. Taklo is Group
Corporate Controller of Aker ASA. 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, 2019, 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, 2019 will be set out in the «Management
remunerations» note to the consolidated financial statements
in the annual report for 2019. In addition to Øyvind Eriksen’s
indirect ownership of shares in the company through Aker
ASA, also the chairman Kristian M. Røkke and the directors
Lone Fønss Schrøder, Kathryn M. Baker and Sarah Ryan are
Annual Report 2019 | Corporate Governance Statement 18
currently shareholders in Akastor ASA. The board composition,
including information about the directors’ background and
expertise will be detailed in the annual report for 2019.
to question it, and each director is the primary responsible for
adopting the correct decision as to whether he or she should
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
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 seven ordinary board meetings in
2019. The aggregate attendance rate at the board meetings
was 91 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
Annual Report 2019 | Corporate Governance Statement adequate basis for its deliberations. The board of directors has
overall responsibility for the management of Akastor and shall,
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, 2019, there are no other
board committees than the audit committee. The board does
not envisage appointing any further board committees in
2020.
The board evaluate its performance and qualification annually.
A summary of the evaluation was made available to the
nomination committee.
19
10. Risk Management and Internal Control
Governing Principles
The board of directors shall ensure that Akastor has sound
internal control and systems for risk management that are
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.
Annual Report 2019 | Corporate Governance Statement 20
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
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,
its
although Akastor acts as an active driver through
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
interfaces with the portfolio
obtained through various
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 2019 financial year, clearing
meetings with the portfolio companies were held in October
2019 and January 2020. 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 2019. 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 2020 will be a
separate item on the agenda for the annual general meeting
on April 15, 2020.
Annual Report 2019 | Corporate Governance Statement Akastor has no option schemes or option programs for the
allotment of shares to employees. The Chief Executive Officer
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.
21
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 2019 | Corporate Governance Statement 22
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
| Business combinations
| 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
Note 11
| Income tax
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 | 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 | Leases
Note 34 | Group companies
Note 35 | Related parties
Note 36 | Management remunerations
Note 37 | Events after the reporting date
Annual Report 2019 | Financials and Notes | Akastor GroupFinancials and Notes | Akastor Group
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, amortization and impairment
Operating profit (loss)
Finance income
Finance expenses
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
Non-controlling interests
Basic / diluted earnings (loss) per share (NOK)
Basic / diluted earnings (loss) per share continuing operations (NOK)
Basic / diluted earnings (loss) per share discontinued operations (NOK)
23
2019
2018
5 361
3 800
(2 586)
(1 719)
(564)
(4 870)
492
(270)
222
321
(192)
(160)
-
(30)
(1 513)
(1 424)
(572)
(3 509)
290
(181)
109
185
(205)
(157)
(24)
(200)
191
(91)
(44)
147
(54)
93
100
(7)
0.37
0.57
(0.20)
(103)
(194)
(128)
(322)
(322)
-
(1.19)
(0.71)
(0.47)
Note
6, 7
8
9
13, 14, 33
16
10
11
5
12
12
12
Annual Report 2019 | Financials and Notes | Akastor Group
24
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
Note
2019
93
2018
(322)
(80)
15
(43)
7
(101)
(37)
51
(442)
7
(44)
(428)
(565)
(4)
-
(4)
20
(4)
41
(9)
48
17
34
(99)
(2)
(11)
(78)
(13)
(46)
9
(36)
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
26
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
Non-controlling interests
(49)
(569)
44
51
(7)
(891)
(891)
-
Annual Report 2019 | Financials and Notes | Akastor Group
Akastor Group | Consolidated statement of financial position
For the year ended December 31
Amounts in NOK million
Deferred tax assets
Property, plant and equipment
Intangible assets
Right-of-use assets
Equity-accounted investees
Other investments
Non-current interest-bearing receivables
Non-current finance lease receivables
Other non-current assets
Total non-current assets
Current tax assets
Inventories
Trade and other receivables
Derivative financial instruments
Current interest-bearing receivables
Current finance lease receivables
Cash and cash equivalents
Total current assets
Total assets
Issued capital incl. treasury shares
Other capital paid in
Reserves
Retained earnings
Equity attributable to equity holders of the parent company
Non-controlling interests
Total equity
Non-current borrowings
Non-current lease liabilities
Employee benefit obligations
Deferred tax liabilities
Other non-current liabilities
Provisions, non-current
Total non-current liabilities
Current borrowings
Current lease liabilities
Current tax liabilities
Provisions, current
Trade and other payables
Derivative financial instruments
Total current liabilities
Total liabilities
Total equity and liabilities
25
2019
388
760
1 593
537
1 051
1 643
201
16
65
2018
374
825
1 260
-
1 088
1 469
-
-
62
6 256
5 077
10
528
3 177
43
-
9
555
4 322
10 578
161
1 538
240
2 415
4 353
18
4 371
1 444
516
359
11
491
51
4
548
2 801
117
257
-
198
3 927
9 005
160
1 534
253
2 369
4 317
-
4 317
588
-
332
9
390
166
2 873
1 485
3
160
11
119
2 974
65
3 333
6 206
10 578
14
-
8
236
2 734
210
3 203
4 687
9 005
Note
11
13
14
33
16
18
19
33
17
20
21
31
19
33
22
23
24
33
26
11
25
27
24
33
27
28
31
Fornebu, March 18, 2020 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 2019 | Financials and Notes | Akastor Group
26
Akastor Group | Consolidated statement of changes in equity
Share
capital
Treasury
shares
Other
capital
paid in
Hedging
reserve1)
Fair
value
reserve1)
Currency
translation
reserve1)
Retained
earnings
Equity
attributable
to equity
holders of
the parent
company
Non-
controlling
interests
(NCI)
Total
equity
162
(2)
1 534
-
-
-
-
-
-
-
-
-
36
-
9
-
775
-
2 695
(322)
5 208
(322)
(101)
(37)
(428)
(4)
(569)
(101)
(37)
(428)
(326)
(891)
162
(2)
1 534
(65)
(28)
346
2 369
4 317
-
-
-
-
-
-
(7)
(7)
(28)
346
2 362
-
100
4 310
100
-
-
-
-
-
-
-
(7)
5 208
(322)
(569)
(891)
4 317
(7)
4 310
93
162
(2)
1 534
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
4
-
-
(65)
-
48
48
-
-
-
-
17
17
-
-
-
(78)
(36)
(49)
-
(49)
(78)
-
-
-
64
-
(11)
-
51
4
(11)
-
(7)
-
27
(3)
44
4
16
(3)
162
(2)
1 538
(17)
(10)
268
2 415
4 353
18
4 371
Amounts in NOK million
2018
Equity as of
January 1, 2018
Profit (loss) for the period
Other comprehensive
income
Total comprehensive
income
Equity as of December
31, 2018
2019
Adjustment on initial
application of and IFRS 16,
net of tax2)
Equity as of
January 1, 2019
Profit (loss) for the period
Other comprehensive
income
Total comprehensive
income
Sale of treasury shares
Acquisition of subsidiaries
with NCI3)
Acquisition of NCI
Equity as of
December 31, 2019
1) See Note 23 Capital and reserves
2) See Note 2 Basis for preparation
3) See Note 5 Business combinations
Annual Report 2019 | Financials and Notes | Akastor Group Akastor Group | Consolidated statement of cash flow
For the year ended December 31
Amounts in NOK million
Note
2019
2018
27
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
Depreciation, amortization and impairment
(Gain) loss on disposal of subsidiaries (discontinued operations)
(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
Net Interest paid for leases
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 property, plant and equipment
Acquisition of subsidiaries, net of cash acquired
(Payments of contingent considerations) Proceeds from sale of subsidiaries
Acquisition of other investments
Repayments of receivables from equity-accounted investees
Increase in receivables from equity-accounted investees
Other changes in interest-bearing receivables
Net cash from investing activities
Cash flow from financing activities
Proceeds from borrowings
Repayment of borrowings
Payment of finance lease liabilities
Proceeds from sale of treasury shares
Acquisition of non-controlling interests
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.
147
(54)
93
44
141
270
54
(2)
160
(244)
516
24
541
(131)
76
(34)
(47)
406
(56)
(71)
3
(236)
(209)
(11)
560
(556)
20
(555)
1 135
(469)
(151)
4
(3)
517
(11)
357
198
555
11
(194)
(128)
(322)
136
295
665
(280)
(60)
130
(84)
479
146
625
(299)
34
-
(45)
315
(95)
(36)
94
-
1 103
(642)
-
(177)
-
247
924
(1 335)
(70)
-
-
(481)
(50)
30
168
198
-
13, 14, 33
16
13
14
24
24
33
23
22
Annual Report 2019 | Financials and Notes | Akastor Group
28
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, 2019 were approved by the
When the functional currency in a reporting unit is changed, the effect of
board of directors and CEO on March 18, 2020. The consolidated financial
the change is accounted for prospectively.
statements will be authorized by the Annual General Meeting on April 15,
2020.
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 16 Leases from January 1, 2019. A
the Norwegian Accounting Act as of December 31, 2019.
number of other new standards are also effective from January 1, 2019,
but they do not have a material effect on the group’s financial statements.
Going concern basis of accounting
The consolidated financial statements have been prepared on a going
IFRS 16 Leases
concern basis, which assumes that the group will be able to meet the
The new standard replaces IAS 17 Leases and the related interpretations.
mandatory terms and conditions of the banking facilities as disclosed in
The standard introduces a single, on-balance sheet lease accounting model
Note 29 Capital management.
Basis of measurement
for lessees, with optional exemptions for short-term leases and leases of
low value assets. A lessee recognizes a right- of-use asset representing
its right to use the underlying asset and a lease liability representing its
The consolidated financial statements have been prepared on the historical
obligation to make lease payments. With regards to lessor accounting, the
cost basis except for the following material items, which are measured on
requirements remain similar to IAS 17.
an alternative basis on each reporting date:
Leases in which the group is a lessee
Derivative financial instruments are measured at fair value.
As a lessee, the group leases office properties, cars, machinery, IT
equipment and office equipment. Under IAS 17, the group classified all
Non-derivative financial instruments at Fair Value through Profit
leases as operating lease and recognized lease expense on a straight-
or Loss (FVTPL) are measured at fair value.
line basis over the term of the lease. Upon initial application of IFRS 16,
the group recognized right-of-use (ROU) assets and lease liabilities for
Debt instrument at Fair Value through Other Comprehensive
its leases. The lease liabilities were measured at the present value of
Income (FVOCI) are measured at fair value.
the remaining lease payments, discounted at the group’s incremental
borrowing rate as of January 1, 2019. Right-of-use assets were measured
Contingent considerations assumed in business disposals are
at an amount equal to the lease liability, adjusted by the amount of any
measured at fair value.
prepaid lease payments.
Net defined benefit (asset) liability is recognized at fair value
of plan assets less the present value of the defined benefit
obligation.
Annual Report 2019 | Financials and Notes | Akastor Group 29
The group used a number of practical expedients when applying IFRS 16
Transition
to leases previously classified as operating leases under IAS 17:
On transition to IFRS 16, the group has applied the new standard using
Did not recognize right-of-use assets and lease liabilities for
application was recognized as an adjustment to the opening balance of
leases for which the term ends within 12 months
retained earnings as of January 1, 2019. Under this transition method, the
the modified retrospective approach. The cumulative effect of initial
comparable information presented for 2018 has not been restated.
Did not recognize right-of-use assets and lease liabilities for leases
of low value assets (e.g. IT equipment and office equipment)
The group has elected to apply the following practical expedients on
In addition, the group no longer recognizes provisions for lease expenses
that it assesses to be onerous lease contracts as described in Note 27
Relied on assessment of whether leases were onerous applying
Provisions. Instead, the group includes the payments due under the lease
IAS 37 on December 31, 20 18 as an alternative to performing
in its lease liability.
an impairment review of right-of-use assets for all its leases on
transition to IFRS 16:
January 1, 2019
Leases in which the group is a lessor
The group sub-leases some of its office properties. Under IAS 17, the head
Applied the short term lease practical expedient to leases ending
lease and the sub-lease contracts were classified as operating leases.
within 2019
Upon initial application of IFRS 16, some of the sub-leases were classified
as financial leases with reference to the right-of-use assets arising from
Excluded initial direct costs from measurement of right- of-use
the head leases. Finance lease receivables are recognized for the sub-
assets at the date of initial application
leases classified as finance lease under IFRS 16.
The other leases where the group is a lessor are classified as operating leases.
Impact on transition to IFRS 16
The following table summarizes the impact of transition to IFRS 16 on the group's consolidated statement of financial position as of January 1, 2019.
Amounts in NOK million
Right-of-use assets
Finance lease receivables
Trade and other receivables
Total assets
Equity
Lease liabilities
Provisions
Total equity and liabilities
January 1, 2019
522
55
(2)
575
(7)
707
(125)
575
The table below represents a reconciliation of the group's operating lease commitment as reported under IAS 17 as of December 31, 2018, and the lease
liabilities recognized as of January 1, 2019. The weighted-average discount rate applied was 5.3%.
Amounts in NOK million
Operating lease commitments at December 31, 2018
Recognition exemption for short-term leases
Effect of discounting
Lease liability recognized at January 1, 2019
January 1, 2019
937
(81)
(149)
707
Standards issued but not yet effective
Amendments to References to Conceptual Framework in IFRS
The following amended standards and interpretations are effective for
Standards.
annual periods beginning after January 1, 2019. The group has not early
adopted any new or amended standards and they are not expected to
have a significant impact on the group’s consolidated financial statements.
Definition of a Business (Amendments to IFRS 3)
Definition of Material (Amendments to IAS 1 and IAS 8)
IFRS 17 Insurance Contracts.
Annual Report 2019 | Financials and Notes | Akastor Group 30
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 stated.
by contractual agreement requiring unanimous consent of the ventures
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 an
entity when it is exposed to, or has rights to, variable returns from its
Interests in joint ventures and associates are accounted for using the
involvement with the entity and has the ability to affect those returns
equity method. They are initially recognized at cost, which includes
through its power over the entity. The financial statements of subsidiaries
transaction costs. Subsequent to initial recognition, the consolidated
are included in the consolidated financial statements from the date on
financial statements include the group’s share of the profit and loss and
which control commences until the date of which control ceases.
other comprehensive income of the equity-accounted investees. The
Business combinations
group’s investment includes goodwill identified on acquisition, net of
any accumulated impairment losses. When the group’s share of losses
Business combinations are accounted for using the acquisition method
exceeds its interest in an equity-accounted investee, the carrying amount
as of the acquisition date, which is the date when control is transferred
of that interest, including any long-term investments, is reduced to zero,
to the group. The consideration transferred in the acquisition is generally
and further losses are not recognized except to the extent that the group
measured at fair value, as are the identifiable net assets acquired. Any
incurs legal or constructive obligations or has made payments on behalf
goodwill that arises is tested annually for impairment.
of the investee.
Transaction costs, other than those associated with the issue of debt or
The purpose of the investment determines the presentation of the group’s
equity securities incurred in connection with a business combination are
share of profit and loss of the equity-accounted investee in the income
expensed as incurred.
statement. When the entity is established to share risk in executing a
project or is closely related to Akastor’s operating activities, the share
Any contingent consideration payable is measured at fair value at the
of profit or loss is reported as part of Other income in Operating Profit.
acquisition date. Changes in the fair value of the contingent consideration
Share of the profit or loss of a financial investment is reported as part of
from acquisition of a subsidiary or non-controlling interest for transactions
Net finance expenses.
will be recognized in Other income as gain or loss, except for the obligation
that is classified as equity.
Transactions eliminated on consolidation
Non-controlling interests
Intra-group balances and transactions, and any unrealized gains and
losses or income and expenses arising from intra-group transactions, are
Non-controlling interests are measured initially at their fair value at
eliminated in preparing the consolidated financial statements. Unrealized
the date of acquisition. Changes in the group’s ownership interest in a
gains arising from transactions with associates and joint ventures are
subsidiary that do not result in a loss of control are accounted for as equity
eliminated to the extent of the group’s interest in the entity. Unrealized
transactions.
Loss of control
losses are eliminated in the same way as unrealized gains, but only to the
extent that there is no evidence of impairment.
On the loss of control, the group derecognizes the assets and liabilities of
Assets held for sale
the subsidiary, any non-controlling interests and the other components of
Non-current assets, or disposal groups comprising assets and liabilities,
equity. Any resulting gain or loss is recognized in the income statement.
that are expected to be recovered primarily through sale rather than
Any interest retained in the former subsidiary is measured at fair value
through continuing use, are classified as held for sale. This condition is
when control is lost. Subsequently it is accounted for as an equity-
regarded as met only when the sale is highly probable and the asset or
accounted investee or as an available-for-sale financial asset depending
disposal group is available for immediate sale in its present condition.
on the level of influence retained.
Management must be committed to the sale, which should be expected
to qualify for recognition as a completed sale within one year from the
Any contingent consideration receivable is measured at fair value at the
date of classification.
disposal date. Changes in the fair value of the contingent consideration
from divestment of a subsidiary for transactions will be recognized in
Non-current assets and disposal groups classified as held for sale are
Other income as gain or loss.
measured at the lower of their carrying amount and fair value less costs to
sell. Property, plant and equipment and intangible assets once classified as
Investments in joint ventures and associates
held for sale are not depreciated or amortized, but are considered in the
The group’s interests in equity-accounted investees comprise interests in
overall impairment testing of the disposal group.
joint ventures and associates.
Annual Report 2019 | Financials and Notes | Akastor Group
31
No reclassifications are made for years prior to the year when non-current
related operations or when settlement is likely to occur in the near future.
assets or disposal groups are classified as a held for sale.
Discontinued operations
Monetary items that are receivable from or payable to a foreign operation
are considered as part of the net investment in that foreign operation,
A discontinued operation is a component of the group’s business that
when the settlement is neither planned nor likely to occur in the
represents a separate major line of business or geographical area of
foreseeable future. Exchange differences arising from these monetary
operations that has been disposed of or is held for sale, or is a subsidiary
items are recognized in other comprehensive income.
acquired exclusively with a view to resale. Classification as a discontinued
operation occurs upon disposal or when the operation meets the criteria
Current/non-current classification
to be classified as held for sale, if earlier.
An asset is classified as current when it is expected to be realized or is
intended for sale or consumption in the group’s normal operating cycle,
In the consolidated income statement, income and expenses from
it is held primarily for the purpose of being traded, or it is expected/due
discontinued operations are reported separately from income and
to be realized or settled within twelve months after the reporting date.
expenses from continuing operations, down to the level of profit after
Other assets are classified as non-current.
taxes. When an operation is classified as a discontinued operation, the
comparative income statement is restated as if the operation had been
A liability is classified as current when it is expected to be settled in the
discontinued from the start of the comparative year.
group’s normal operating cycle, is held primarily for the purpose of being
traded, the liability is due to be settled within twelve months after the
The statement of cash flow includes the cash flow from discontinued
reporting period, or if the group does not have an unconditional right
operations prior to the disposal. Cash flows attributable to the
to defer settlement of the liability for at least twelve months after the
operating, investing and financing activities of discontinued operations
reporting period. All other liabilities are classified as non-current.
are presented in the notes to the extent these represent cash flows
with third parties.
Foreign currency
Financial assets, financial liabilities and equity
On initial recognition, a financial asset is classified as measured at
amortized costs, FVOCI or FVTPL. The classification depends on
Foreign currency transactions and balances
the group’s business model for managing the financial assets and
Transactions in foreign currencies are translated at the exchange
the contractual terms of the cash flows.
rate at the date of the transaction. Monetary assets and liabilities
denominated in foreign currencies at the reporting date are translated
A financial asset is measured at amortized costs if the business
to the functional currency at the exchange rate on that date. Foreign
model is to hold the asset to collect contractual cash flows, and
exchange differences arising on translation are recognized in the
the contractual cash flows are solely payments of principal and
income statement. Non-monetary assets and liabilities measured in
interests (SPPI criterion).
terms of historical cost in a foreign currency are translated using the
exchange rate on the date of the transaction. Non-monetary assets and
A debt instrument is classified at FVOCI if the business model is
liabilities denominated in foreign currencies that are measured at fair
both collecting contractual cash flows and selling the financial
value are translated to the functional currency at the exchange rates on
asset, and it meets the SPPI criterion.
the date the fair value is determined.
Investments in foreign operations
or FVOCI are measured at FVTPL.
Items included in the financial statements of each of the group’s entities
are measured using the currency of the primary economic environment
Financial assets are not reclassified subsequent to their initial recognition
in which the entity operates. The results and financial positions of all the
unless the group changes its business model for managing financial
All financial assets not classified as measured at amortized cost
group entities that have a functional currency different from the group’s
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
Income statements are translated at average exchange rate for
FVOCI and recognized at fair value at the reporting date. Subsequent
the year, calculated on the basis of 12 monthly end rates.
to initial recognition, changes in financial assets measured at FVTPL are
investments are categorized as financial assets measured at FVTPL or
Other investments include equity and debt investments in companies
Exchange differences arising from the translation of the net investment
in foreign operations, and of related hedges, are included in other
When a debt instrument is classified as financial asset measured at
comprehensive income as currency translation reserve. These translation
FVOCI, interest income calculated using the effective interest method,
differences are reclassified to the income statement upon disposal of the
foreign exchange gains and losses and impairment losses are recognized
recognized in profit and loss.
Annual Report 2019 | Financials and Notes | Akastor Group 32
in profit and loss. Other changes in fair value are recognized in other
Cash flow hedge
comprehensive income and presented as part of fair value reserve.
Hedging of the exposure to variability in cash flows that is attributable
When financial asset measured at FVOCI is derecognized, the gain or
to a particular risk or a highly probable future cash flow is defined as a
loss accumulated in other comprehensive income is reclassified to profit
cash flow hedge. The effective portion of changes in the fair value is
and loss.
Trade and other receivables
recognized in other comprehensive income as a hedge reserve. All foreign
exchange exposure is hedged. Any gain or loss relating to the ineffective
portion of derivative hedging instruments is recognized immediately in
Trade and other receivables are generally classified as financial assets
the income statement as finance income or expense.
measured at amortized costs. They are recognized at the original invoiced
amount, less loss allowance made for credit losses. The interest rate
Hedge accounting is discontinued when the hedge no longer qualifies for
element is disregarded if insignificant, which is the case for the majority of
hedge accounting. Disqualification occurs when the hedging instrument
the group’s trade receivables.
Interest-bearing receivables
expires, is sold, terminated or exercised, or when a forecast transaction
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
Interest-bearing receivables include loans to related parties and are
hedge reserve is recognized immediately in the income statement unless
generally classified as financial assets measured at amortized costs.
it relates to a future cash flow that is likely to occur, but don’t qualify for
Such financial assets are recognized initially at fair value and subsequent
hedge accounting, in which the accumulated hedge reserve remains in
measurement at amortized cost using the effective interest method, less
other comprehensive income until the hedged cash flow is recognized
any impairment losses.
Cash and cash equivalents
in income statement. For cash flow hedges associated with forecast
transactions that subsequently result in recognition of a non-financial
asset, the amounts accumulated in the cash flow hedge reserve and the
Cash and cash equivalents include cash on hand, demand deposits held
cost of hedging reserve are included directly in the initial cost of the non-
at banks and other short-term highly liquid investments with original
financial asset when recognized.
maturity of three months or less.
Net investment hedge
Trade and other payables
Hedge of net investment in a foreign operation is accounted for
Trade payables are recognized at the original invoiced amount. Other
similarly to cash flow hedges. Gains or losses arising from the hedging
payables are recognized initially at fair value. Trade and other payables
instruments relating to the effective portions of the net investment
are valued at amortized cost using the effective interest rate method. The
hedge are recognized in other comprehensive income as currency
interest rate element is disregarded if it is insignificant, which is the case
translation reserves. These translation reserves are reclassified to
for the majority of the group’s trade payables.
the income statement upon disposal of the hedged net investments,
Interest-bearing borrowings
offsetting the translation differences from these net investments. Any
ineffective portion is recognized immediately in the income statement
Interest-bearing borrowings are recognized initially at fair value less
as finance income or expenses. Gains and losses accumulated in other
attributable transaction costs. Subsequent to
initial recognition,
comprehensive income are reclassified to the income statement when
interest-bearing borrowings are measured at amortized cost with any
the foreign operation is partially disposed of or sold.
difference between cost and redemption value being recognized in the
income statement over the period of the borrowings on an effective
Embedded derivatives
interest basis.
Share capital
Embedded derivatives are derivatives that are embedded in other
financial instruments or other non-financial host contracts. Under certain
conditions, the embedded derivative must be separated from its host
Ordinary shares are classified as equity. Repurchase of share capital is
contract and the derivative is then to be recognized and measured as
recognized as a reduction in equity and is classified as treasury shares.
any other derivative in the financial statements. Embedded derivatives
must be separated when the settlement for a commercial contract is
Derivative financial instruments
denominated in a currency different from any of the major contract
The group uses derivative financial instruments such as currency
parties’ own functional currency, or that the contract currency is not
forward contracts and currency swaps to hedge its exposure to foreign
considered to be commonly used for the relevant economic environment
exchange risks arising from operational, financial and investment
defined as the countries involved in the cross-border transaction.
activities. These derivative financial
instruments are accounted
Changes in the fair value of separated embedded derivatives are
for as cash flow hedges since highly probable future cash flows are
recognized immediately in the income statement. All foreign currency
hedged (rather than committed revenues and expenses). The group
exposure is hedged, so the hedging instrument to the embedded
also has embedded foreign exchange derivatives which have been
derivative will also have corresponding opposite fair value changes in the
separated from their ordinary commercial contracts. Derivative
income statement.
financial instruments are recognized initially at fair value. Derivatives
are subsequently measured at fair value, and changes in fair value are
accounted for as described below.
Annual Report 2019 | Financials and Notes | Akastor Group 33
Finance income and expense
Inventories
Finance income and expense include interest income and expense,
Inventories are stated at the lower of cost or net realizable value. Net
foreign exchange gains and losses, dividend income, gains and losses on
realizable value is the estimated selling price in the ordinary course of
derivatives, as well as change in fair value of financial assets measured
business, less the estimated costs of completion and selling expenses.
at FVTPL. Interest income and expenses include calculated interest using
the effective interest method, in addition to discounting effects from
The cost of inventories is based on the first-in first-out principle and
assets and liabilities measured at fair value. Gains and losses on derivatives
includes expenditures incurred in acquiring the inventories and bringing
include effects from derivatives that do not qualify for hedge accounting
them to their present location and condition. In the case of manufactured
and embedded derivatives, in addition to the ineffective portion of
inventories and work in progress, cost includes an appropriate share of
qualifying hedges.
overheads based on normal operating capacity.
Revenue from contract with customers
Impairment
The significant accounting policies relating to revenue recognition from
Trade receivables and contract assets
contracts with customers are described in Note 7 Revenue and other
Loss allowance is recognized in profit or loss and measured at lifetime
income.
Income tax
ECLs. ECLs are a probability-weighted estimate of credit losses.
Lifetime ECLs are the ECLs that result from all possible default events
over the expected life of a financial asset. The group considers a
Income tax recognized in the income statement comprises current and
financial asset to be in default when the group is unlikely to receive
deferred tax. Income tax is recognized in the income statement except
its outstanding contractual amount in full, or the contractual payments
to the extent that it relates to items recognized directly in equity or other
are more than 90 days past due. When estimating ECLs, the group
comprehensive income.
considers reasonable and supportable information that is relevant and
available without undue cost or effort, based on the group’s historical
Current tax is the expected tax payable or receivable on the taxable income
experience including forward-looking information. The loss allowance
or loss for the year, using tax rates enacted or substantially enacted at the
is recognized in financial items to the extent that impairment is caused
reporting date, and any adjustment to tax payable in respect of previous
by the insolvency of the customer.
years. Current tax payable also includes any tax liability arising from the
declaration of dividends, recognized at the same time as the liability to pay
The gross carrying amount of trade receivable is written off when the
the related dividend.
group has no reasonable expectations of recovering a trade receivable
in its entirety or a portion thereof. The group individually makes an
Deferred tax is recognized in respect of temporary differences between
assessment with respect to the timing and amount of write-off based
the carrying amounts of assets and liabilities for financial reporting and the
on whether there is a reasonable expectation of recovery. Trade
amounts used for taxation purposes. Deferred tax is not recognized for:
receivables that are written off could still be subject to enforcement
activities in order to comply with the group’s procedures for recovery
Goodwill not deductible for tax purposes
of amounts due.
The initial recognition of assets or liabilities that affects neither
Debt instruments measured at amortized cost or at FVOCI
accounting nor taxable profit
Debt instruments measured at amortized cost or at FVOCI are
considered to be “credit-impaired” when there is significant financial
Temporary differences relating to investments in subsidiaries to
difficulty of the borrower or it is probable that the borrower will enter
the extent that they will not reverse in the foreseeable future
bankruptcy or other financial reorganization. The loss allowance is charged
Deferred tax is measured at the tax rates that are expected to be applied
to temporary differences when they reverse, based on the tax rates that
Non-financial assets
to profit and loss.
have been enacted or substantively enacted at the reporting date.
The carrying amounts of the group’s non-financial assets (other than
Deferred tax assets and liabilities are offset if there is a legally enforceable
at the end of each reporting period to determine whether there is any
right to offset current tax liabilities and assets, and they relate to income
indication of impairment. If an indication of impairment exists, the asset’s
taxes levied by the same tax authority on the same taxable entity, or on
recoverable amount is estimated. Cash-generating units (CGU) containing
different taxable entities which intend either to settle current tax liabilities
goodwill, intangible assets with an indefinite useful life and intangible
and assets on a net basis, or to realize the tax assets and settle the
assets that are not yet available for use are tested for impairment annually.
employee benefit assets, inventories and deferred tax assets) are reviewed
liabilities simultaneously.
Deferred tax assets are recognized for unused tax losses, tax credits and
value in use. In assessing value in use, the estimated future cash flows
deductible temporary differences, to the extent that it is probable that
are discounted to their present value using a pre-tax discount rate that
future taxable profits will be available against which they can be utilized.
reflects current market assessments of the time value of money and the
Measurement of deferred tax assets are reviewed at each reporting date.
risks specific to the asset. For an asset that does not generate largely
The recoverable amount is the greater of fair value less costs to sell and
Annual Report 2019 | Financials and Notes | Akastor Group 34
independent cash inflows, the recoverable amount is determined for the
Leases
CGU to which the asset belongs.
The group has applied IFRS 16 using the modified retrospective
approach and therefore the comparative information has not been
An impairment loss is recognized whenever the carrying amount of an
restated and continues to be reported under IAS 17 and IFRIC 4. The
asset or a CGU exceeds its recoverable amount. Impairment losses are
accounting policies below are policies application from January 1, 2019
recognized in the income statement.
unless otherwise stated.
An impairment loss recognized in respect of a CGU (or a group of CGUs)
As a lessee
containing goodwill is allocated first to goodwill and then to the other
Right-of-use assets
assets in the CGU(s) on a pro rata basis.
The group recognizes right-of-use asset at the lease commencement
date. The right-of-use asset is initially measured at cost, which comprises
An impairment loss on goodwill is not reversed. An impairment loss on
the initial amount of the lease liability adjusted for any prepaid lease
other assets is reversed if there has been a change in the estimates used
payments made at or before the commencement date, plus any initial
to determine the recoverable amount, and the change can be objectively
direct costs. Subsequently, the right-of-use asset is depreciated on a
related to an event occurring after the impairment is recognized. An
straight-line basis over the shorter of its estimated useful life and the lease
impairment loss is reversed only to the extent that the asset’s carrying
term. In addition, the right-of-asset is subject to impairment assessment
amount does not exceed the carrying amount that would have been
of non-financial assets and adjusted for certain remeasurement of the
determined, net of depreciation or amortization, if no impairment loss had
lease liability.
been recognized.
Provisions
Lease liabilities
At the lease commencement date, the group recognizes lease liability
A provision is recognized when the group has a present obligation as a
measured at the present value of the lease payments over the lease term,
result of a past event that can be estimated reliably and it is probable
discounted using the group's incremental interest rate. Generally, the
that the group will be required to settle the obligation. If the effect is
lease payments include fixed payments and variable lease payments that
material, provisions are determined by discounting the expected future
depend on an index or rate.
cash flows at a market based pre-tax rate that reflects current market
assessments of the time value of money and, where appropriate, the
The lease liability is subsequently increased by the interest cost on the
liability-specific risks. The unwinding of the discount is recognized as
lease liability and decreased by lease payment made. It is remeasured
finance expense.
Warranties
when there is a change in future lease payments arising from a change in
an index or rate, or as appropriate, changes in the assessment of whether
an extension option is reasonably certain to be exercised or a termination
Provision for warranties is recognized when the underlying products
option is reasonably certain not to be exercised.
or services are sold. The provision is based on historical warranty
data and a weighting of all possible outcomes against their associated
Short term leases and leases of low-value assets
probabilities.
Onerous contracts
The group applies the recognition exemption to its leases that have
a lease term of 12 months or less from the commencement date and
do not contain a purchase option (short-term leases). The group
Provision for onerous contracts is recognized when the expected benefits
also applies recognition exemption to leases that are considered of
to be derived by the group from a contract are lower than the unavoidable
low-value assets, mainly IT equipment and office equipment. Lease
costs of meeting the obligations under the contract. The provision is
payments associated with the short -term leases and leases of low
measured at the lower of the expected cost of terminating the contract
-value assets are recognized as expenses on a straight -line basis over
and the expected net cost of continuing with the contract. Before a
the lease term.
provision is recognized, the group recognizes any impairment loss on the
assets associated with the contract.
Lease term
Restructuring
The group determines the lease term as the non-cancellable term of the
lease, together with any periods covered by an option to extend the lease
A restructuring provision is recognized when the group has developed a
if it is reasonably certain to be exercised, or any period covered by an
detailed formal plan for the restructuring and has raised a valid expectation
option to terminate the lease if it is reasonably certain not to be exercised.
in those affected that the entity will carry out the restructuring by starting
The group applies judgment in evaluating whether it is reasonably certain
to implement the plan or announcing its main features to those affected by
to exercise extension option, considering all relevant factors that create
it. The measurement of a restructuring provision includes only the direct
economic incentive to exercise the extension option.
expenditures arising from the restructuring, which are those amounts that
are both necessarily entailed by the restructuring and not associated with
As a lessor
the ongoing activities of the entity.
When the group acts as a lessor, it determines at lease inception whether
each lease is a finance lease or an operating lease. To classify each lease,
the group makes an overall assessment of whether the lease transfers
Annual Report 2019 | Financials and Notes | Akastor Group 35
substantially all of the risks and rewards incidental to ownership of the
Goodwill is measured at cost less accumulated impairment losses. In
underlying asset. If this is the case, then the lease is a finance lease; if
respect of equity-accounted investees, the carrying amount of goodwill
not, then it is an operating lease. As part of this assessment, the group
is included in the carrying amount of the investment, and any impairment
considers certain indicators such as whether the lease is for the major part
loss is allocated to the carrying amount of the equity-accounted investee
of the economic life of the asset.
as a whole.
When the group is an intermediate lessor, it accounts for its interests in the
When the group disposes of an operation within a CGU or group of CGUs
head lease and the sub-lease separately. It assesses the lease classification
to which goodwill has been allocated, a portion of the goodwill is included
of a sub-lease with reference to the right-of-use asset arising from the
in the carrying amount of the operation when determining the gain or loss
head lease, not with reference to the underlying asset.
on disposal. The portion of the goodwill allocated is measured based on
The group recognizes lease payments received under operating leases
CGU retained at the date of partial disposal, unless it can be demonstrated
as income on a straight line basis over the lease term as part of “Lease
that another method better reflects the goodwill associated with the
revenue”.
operation disposed of. The same principle is used for allocation of goodwill
the relative values of the operation disposed of and the portion of the
Generally, the accounting policies applicable to the group as a lessor
in the comparative period were not different from IFRS 16 except for
Research and development
when the group reorganizes its businesses.
the classification of some sub-leases that resulted in a finance lease
Expenditures on research activities undertaken with the prospect of
classification.
obtaining new scientific or technical knowledge and understanding is
recognized in the income statement as incurred.
Policy applicable before January 1, 2019
In the comparable period, the operating leases classified under IAS
Development activities involve a plan or design for the production of
17 were not recognized in the group’s statement of financial position.
new or substantially improved products or processes. Development
Payments made under operating
leases were recognized as
expenditure is capitalized only if development costs can be measured
operating expenses in profit or loss on a straight-line basis over the
reliably, the product or process is technically and commercially feasible,
term of the lease.
Property, plant and equipment
future economic benefits are probable and the group intends to and
has sufficient resources to complete development and to use or sell
the asset. The capitalized expenditure includes cost of materials, direct
Property, plant and equipment are measured at cost less accumulated
labour overhead costs that are directly attributable to preparing the asset
depreciation and impairment losses. The cost of self-constructed
for it intended use and capitalized interest on qualifying assets. Other
assets includes the cost of materials, direct labour, borrowing costs
development expenditures are recognized in the income statement as an
on qualifying assets, production overheads and the estimated costs of
expense as incurred.
dismantling and removing the assets and restoring the site on which
they are located.
Capitalized development expenditure is measured at cost less accumulated
amortization and accumulated impairment losses.
If the components of property, plant and equipment have different useful
lives, they are accounted for as separate components.
Other intangible assets
Acquired intangible assets are measured at cost less accumulated
Subsequent costs
amortization and impairment losses.
The group capitalizes the cost of a replacement part or a component of
property, plant and equipment when that cost is incurred if it is probable
Subsequent expenditures
that the future economic benefits embodied with the item will flow to the
Subsequent expenditures on intangible assets are capitalized only when
group and the cost of the item can be measured reliably. All other costs
they increase the future economic benefits embodied in the specific asset
are expensed as incurred.
to which they relate. All other expenditures are expensed as incurred.
Depreciation
Amortization
Depreciation is normally recognized on a straight-line basis over the
Amortization is recognized in the income statement on a straight-line
estimated useful lives of property, plant and equipment.
basis over the estimated useful lives of intangible assets unless such useful
Intangible assets
Goodwill
lives are indefinite. Intangible assets are amortized from the date they are
available for use.
Goodwill that arises from the acquisition of subsidiaries is presented as
Employee benefits
intangible asset. For the measurement of goodwill at initial recognition,
Defined contribution plans
see Business combinations.
Obligations for contributions to defined contribution pension plans are
recognized as an expense in the income statement as incurred.
Annual Report 2019 | Financials and Notes | Akastor Group 36
Defined benefit plans
Fair value measurement
The group’s net obligation in respect of defined benefit pension plans
When available, the group measures the fair value of a financial
is calculated separately for each plan by estimating the amount of
instrument using the quoted price in an active market for that
future benefit that employees have earned in the current and prior
instrument. If there is no quoted price in an active market, then the
periods; discounting that amount and deducting the fair value of any
group uses valuation techniques that maximize the use of relevant
plan assets.
observable inputs and minimize the use of unobservable inputs. The
chosen valuation technique incorporates all of the factors that market
The calculation of defined benefit obligations is performed annually by
participants would take into account in pricing a transaction.
a qualified actuary using the projected unit credit method. The discount
rate is the yield at the reporting date on government bonds or high-
The best evidence of the fair value of a financial instrument on initial
quality corporate bonds with maturities consistent with the terms of the
recognition is normally the transaction price. If the group determines
obligations.
that the fair value on initial recognition differs from the transaction
price and the fair value is evidenced neither by a quoted price in an
Remeasurement of the net defined benefit liability, which comprises
active market for an identical asset or liability nor based on a valuation
actuarial gains and losses, the return on plan assets (excluding interest)
technique that uses only data from observable markets, the financial
and the effect of the asset ceiling (if any, excluding interest), are
instrument is initially measured at fair value, and the difference
recognized immediately in other comprehensive income. The group
between the fair value on initial recognition and the transaction price is
determines the net interest expense (income) on the net defined benefit
recognized as a deferred gain or loss. Subsequently, the deferred gain
liability (asset) for the period by applying the discount rate used to
or loss is recognized in profit or loss on an appropriate basis over the
measure the defined benefit obligation at the beginning of the annual
life of the instrument.
period to the then-net defined benefit liability (asset), taking into account
any changes in the net defined benefit liability (asset) during the period
as a result of contributions and benefit payments. Net interest expense
and other expenses related to defined benefit plans are recognized in the
income statement.
When the benefits of a plan are changed or when a plan is curtailed, the
resulting change in benefit that relates to past service or the gain or loss
on curtailment is recognized immediately in the income statement. The
group recognizes gains and losses on the settlement of a defined benefit
plan when the settlement occurs.
Annual Report 2019 | Financials and Notes | Akastor Group 37
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 assets. 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
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.
the time value of the money. Key assumptions made by the management
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
Annual Report 2019 | Financials and Notes | Akastor Group 38
tax determination is uncertain during the ordinary course of business.
Lease terms
Provisions for anticipated tax audit issues are based on estimates of
Some of the property leases, in which the group is a lessee, contain
eventual additional taxes.
extension or termination options exercisable before the end of the non-
cancellable period. These options are used to provide operational flexibility
Income tax expense is calculated based on reported income in the different
for the group. In determining the lease term, the group considers all facts
legal entities. Deferred income tax expense is calculated based on the
and circumstances that create an economic incentive to exercise an
temporary differences between the assets’ carrying amount for financial
extension option, or not exercise a termination option. Extension options
reporting purposes and their respective tax basis. The total amount
(or periods after termination options) are only included in the lease term
of income tax expense and allocation between current and deferred
if the lease is reasonably certain to be extended (or not terminated). The
income tax requires management’s interpretation of complex tax laws and
most relevant factors to be considered as “creating economic incentive”
regulations in the many tax jurisdictions where the group operates.
include significant leasehold improvement, alternatives for the leased
Valuation of deferred tax assets is dependent on management’s assessment
leased assets. Most extension options in offices leases have not been
of future recoverability of the deferred tax benefit. Expected recoverability
included in the lease term, because the group expects to be able to
may result from expected taxable income in the near future, planned
replace the assets without significant cost or business disruption. Most of
transactions or planned tax optimizing measures. Economic conditions
the early termination options are not considered in the lease term either
may change and lead to a different conclusion regarding recoverability,
as the group assesses it as reasonably certain that the leases will not be
and such change may affect the results for each future reporting period.
terminated early.
property and the costs and business disruption required to replace the
Tax authorities in different jurisdictions may challenge calculation of
The lease term assessment requires management’s judgment and is made
income taxes from prior periods. Such processes may lead to changes to
at the commencement of the leases. The lease term is reassessed if an
prior periods’ taxable income, resulting in changes to income tax expense.
option is actually exercised or the group becomes obliged to exercise
When tax authorities challenge income tax calculations, management is
it. The assessment of reasonable certainty is only revised if a significant
required to make estimates of the probability and amount of possible
event or a significant change in circumstances occurs, which affects this
tax adjustments. Such estimates may change as additional information
assessment, and that is within the group’s control. Please see Note 33
becomes known. Further details about income taxes are included in Note
Leases for more information about the leases where the group is a lessee.
11 Income tax.
Pension benefits
Legal disputes and contingent liabilities
Given the scope of the group’s worldwide operations, group companies
The present value of the pension obligations depends on a number
are inevitably involved in legal disputes in the course of their business
of factors determined on the basis of actuarial assumptions. These
activities. In addition, as an investment company, Akastor and its portfolio
assumptions include financial factors such as the discount rate, expected
companies from time to time engage in mergers, acquisitions and other
salary growth, inflation and return on assets as well as demographical
transactions that could expose the companies to financial and other
factors concerning mortality, employee turnover, disability and early
non-operational risks, such as indemnity claims and price adjustment
retirement. Assumptions about all these factors are based on the
mechanisms resulting in recognition of deferred settlement obligations.
situation at the time the assessment is made. However, it is reasonably
certain that such factors will change over the very long periods for which
Provisions have been made to cover the expected outcome of the legal
pension calculations are made. Any changes in these assumptions will
claims and disputes to the extent negative outcomes are likely and reliable
affect the calculated pension obligations with immediate recognition in
estimates can be made. However, the final outcomes of these cases are
other comprehensive income. Further information about the pension
subject to uncertainties, and resulting liabilities may exceed provisions
obligations and the assumptions used are included in Note 26 Employee
recognized. The group follows the development of these disputes on
benefits - pension.
case-by-case basis and makes assessment based on all available evidence
as at the reporting date.
Fair value measurement
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,
then the group uses valuation techniques that maximize the use of
relevant observable inputs and minimize the use of unobservable inputs.
The chosen valuation technique incorporates all of the factors that market
participants would take into account in pricing a transaction. The fair value
measurement requires a high degree of judgment. Judgements include
considerations of inputs such as cash flow projection, discount rate and
volatility. Further information about the fair value measurement using level
3 inputs is included in Note 32 Financial Instruments.
Annual Report 2019 | Financials and Notes | Akastor Group 39
Note 5 | Business combinations
Acquisition of AGR
management has assumed that the fair value adjustments, determined
On April 2, 2019 , Akastor completed the transaction to merge First Geo AS
provisionally, that arose on the date of acquisition would have been the
(First Geo) and AGR AS (AGR). The transaction was carried out primarily
same if the acquisition had occurred on January 1, 2019.
as an asset deal, whereby assets in the old AGR legal structure and three
legal entities were transferred to a new legal structure AGR AS. Akastor
Acquisition of Bronco
contributed 100 percent of its shares in First Geo AS to AGR AS to form
On June 7, 2019, Akastor, through its portfolio company MHWirth, acquired
the combined AGR/ First Geo group (referred as a new portfolio company
100 percent ownership interest in Bronco Manufacturing LLC (Bronco) for
AGR). After the transaction, Akastor holds 100 percent of the shares and
a cash consideration of USD 31.5 million at a cash-free and debt-free basis.
55 percent of the economic interest in the merged company AGR. Silver
Bronco is consolidated as part of MHWirth. By utilizing the competencies
fleet Capital, DNB Bank ASA and Nordea Bank Abp, filial i Norge, hold the
and supply chain of Bronco, Akastor sees potential on current MHWirth
remaining 45 percent economic interest. In addition, AGR AS has rolled
equipment, as well as the potential to re-engineer relevant equipment
over NOK 180 million of the debt, of which DNB and Nordea holds NOK
to make it more suitable for onshore applications. In addition, Akastor
90 million each.
expects that Bronco will strengthen MHWirth's presence in North America
and increase local manufacturing capabilities in the Houston region.
The group expects that the merged company AGR will be a world leading
provider of well management-, reservoir- and subsurface services, ranging
The acquired Bronco business contributed revenues of NOK 123 million
from consultancy services to fully outsourced well and rig management
and net profit of NOK 8 million for the period from the acquisition date to
projects. The company’s service offering replicates that of major oil
December 31, 2019. If the acquisition of Bronco had occurred on January
companies and covers the entire value chain from qualifications to
1, 2019, the group estimates that consolidated revenue and profit after
plugging and abandonment.
tax for the year ended December 31, 2019 would have been NOK 5 472
million and NOK 105 million respectively. In determining these amounts,
The acquired AGR business contributed revenues of NOK 478 million
management has assumed that the fair value adjustments, determined
and net loss of NOK 15 million for the period from the acquisition date
provisionally, that arose on the date of acquisition would have been the
to December 31, 2019. If the acquisition of AGR had occurred on January
same if the acquisition had occurred on January 1, 2019.
1, 2019, the group estimates that consolidated revenue and profit after
tax for the year ended December 31, 2019 would have been NOK 5 493
Details of the net asset acquired, purchase consideration and goodwill are
million and NOK 86 million respectively. In determining these amounts,
as follows.
Identifiable assets and liabilities acquired
Amounts in NOK million
Property, plant and equipment
Intangible assets
Right-of-use assets
Deferred tax assets
Inventories
Trade and other receivables
Cash and cash equivalents
Other assets
External borrowings
Lease liabilities
Deferred tax liabilities
Trade and other payables
Other liabilities
Total net identifiable assets acquired
AGR
Bronco
2
38
43
12
2
101
33
2
(152)
(43)
(8)
(111)
(1)
(82)
4
111
9
15
59
44
2
-
(5)
(9)
-
(23)
-
207
Annual Report 2019 | Financials and Notes | Akastor Group 40
Acquisition-related costs of NOK 5 million are included in "other operating
of the remaining lease payments at the date of acquisition. The right-of-
expenses" in the consolidated income statement.
use assets were measured at an amount equal to the lease liabilities.
Trade and other receivables comprise gross contractual amounts due of
If new information obtained within one year of the date of acquisition
NOK 104 million and NOK 48 million in AGR and Bronco, respectively, of
about facts and circumstances that existed at the date of acquisition
which NOK 3 million in AGR and NOK 4 million in Bronco was expected to
identifies adjustments to the above amounts, the accounting for the
be uncollectable at the date of acquisition.
acquisition will be revised.
The group measured the acquired lease liabilities using the present value
Consideration transferred and goodwill
Amounts in NOK million
Cash consideration
Fair value of non-cash consideration
Total consideration transferred
Non-controlling interests (NCI) measured at fair value
Fair value of net identifiable assets
Goodwill
AGR
Bronco
-
6
6
10
82
98
270
-
270
-
(207)
63
The goodwill resulting from the acquisitions is mainly attributable to the
that are not observable in the market:
value of the assembled workforce in AGR and Bronco as well as expected
synergies arising from the acquisitions. NOK 43 million of the goodwill
An assumed discount rate of 12%
recognized in AGR is expected to be tax deductible for tax purposes.
Explicit forecast period of 10 years
The fair value of the non-controlling interests in AGR, a non-listed company,
has been estimated by applying a discounted cash flow analysis, an income
Terminal growth rate of 1.0%
based approach. The fair value measurement is based on significant inputs
Acquisition of subsidiaries with NCI
In April 2019, Akastor contributed 100 percent of its shares in First Geo AS to AGR AS to form the combined AGR/ First Geo group (AGR). After the
transaction, Akastor holds 55 percent of the economic interest in AGR, and non-controlling interests (NCI) in AGR were recognized. As a result of the
transaction, the ownership interest in First Geo has decreased from 100 percent to 55 percent without a loss of control. The change in ownership interest
in First Geo was treated as equity transaction and resulted in a loss directly to equity.
Amounts in NOK million
NCI in acquired AGR business
NCI in First Geo
Total NCI in AGR
Fair value of consideration received
Carrying amount of NCI in First Geo
Loss in equity attributable to equity holders of the parent company
2019
10
17
27
6
(17)
(11)
Annual Report 2019 | Financials and Notes | Akastor Group 41
Note 6 | Operating segments
Basis for segmentation
As a result of divestment of 50 percent ownership in AKOFS Offshore
In 2019, Akastor acquired 55 percent economic interests in AGR and
in September 2018, AKOFS Offshore is classified as a joint venture and
merged it with the portfolio company First Geo. The merged portfolio
consolidated using the equity method, see Note 16 Equity-accounted
company AGR is identified as a reportable segment. First Geo, previously
investees.
included in the segment "Other holdings", has been included in the
segment "AGR" as of December 31, 2019. Historical information has been
Further, Akastor holds 100 percent ownership in Step Oiltools and Cool
restated.
Sorption, 50 percent in DOF Deepwater AS, 17.7 percent economic
interest in NES Global Talent and 93 percent of Aker Pensjonskasse, as
As of December 31, 2019, Akastor has three reportable segments which
well as equity instruments in Odfjell Drilling and Awilco Drilling. These are
are the strategic business units of the group. The strategic business units
included in “Other holdings”.
are managed separately and offer different products and services due
to different market segments and different strategies for their projects,
Measurement of segment performance
products and services:
Segment performance is measured by operating profit before depreciation,
amortization and impairment (EBITDA) which is reviewed by the group’s
MHWirth is a supplier of drilling systems and drilling lifecycle
Executive Management Group (the chief operating decision maker).
services globally. The company offers a full range of drilling
Segment profit, together with key financial information as described below,
equipment, drilling riser solutions and related products and
gives the Executive Management Group relevant information in evaluating
services for the drilling market, primarily the offshore sector.
the results of the operating segments and is relevant in evaluating the
AKOFS Offshore is a global provider of vessel-based subsea well
industries. Inter-segment pricing is determined on an arm’s length basis.
results of the segments relative to other entities operating within these
construction and intervention services to the oil and gas industry,
covering all phases from conceptual development to project
The accounting policies of the reportable segments are the same as
execution and offshore operations.
described in Note 2 Basis of preparation and Note 3 Significant accounting
principles.
AGR is a well design and drilling project management, HSEQ,
reservoir and field management service company delivering
solutions for the entire field life cycle. The company also provides
rig procurement, tailored training, software and technical
manpower for clients globally.
Annual Report 2019 | Financials and Notes | Akastor Group 42
Information about reportable segments
Amounts in NOK million
Note
MHWirth
AKOFS
Offshore
AGR
Other
holdings
Total
operating
segments
Adjust-
ment of
AKOFS
Offshore
Elimina-
tions
Total
Akastor
2019
Income statement
External revenue and other
income
Inter-segment revenue
Total revenue and other
income
Operating profit before de-
preciation, amortization and
impairment (EBITDA)
Depreciation and amortization
Impairment
Operating profit (loss) (EBIT)
4 186
1
1 093
-
4 187
1 093
13, 14,
33
33
476
560
(161)
-
315
(323)
-
237
Assets
Current operating assets
Non-current operating assets
Finance lease receivables
33
3 238
2 648
3
360
5 076
-
Segment assets
5 889
5 437
Liabilities
Current operating liabilities
Non-current operating liabilities
Lease liabilities
Segment liabilities
33
Net current operating assets
Net capital employed
Capital expenditure and R&D
capitalization
2 609
275
397
3 281
629
2 608
312
6
1 385
1 703
49
3 734
115
618
573
-
573
14
(15)
-
(1)
191
191
-
382
178
16
17
211
12
170
6
602
7
6 454
(1 093)
8
-
609
6 462
(1 093)
-
(8)
(8)
2
1 052
(560)
(85)
(9)
(92)
(584)
(9)
459
323
-
(237)
288
2 150
22
2 460
4 078
10 065
25
(362)
(4 026)
-
14 168
(4 389)
319
621
263
1 203
(31)
1 257
3 418
918
2 062
6 399
660
7 769
(314)
(6)
(1 385)
(1 705)
(49)
(2 684)
6
745
(618)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
5 361
-
5 361
492
(261)
(9)
222
3 716
6 039
25
9 779
3 105
912
677
4 694
611
5 085
127
Annual Report 2019 | Financials and Notes | Akastor Group Amounts in NOK million
Note
MHWirth
AKOFS
Offshore
AGR
Other
holdings
Total
operating
segments
Adjust-
ment of
AKOFS
Offshore
Elimina-
tions
Total
Akastor
43
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
13,14
13,14
Operating profit (loss) (EBIT)
Assets
Current operating assets
Non-current operating assets
Segment assets
Liabilities
Current operating liabilities
Non-current operating liabilities
Finance lease liabilities
Segment liabilities
Net current operating assets
Net capital employed
Capital expenditure and R&D
capitalization
3 031
24
1 107
-
3 055
1 107
281
(125)
-
156
3 008
1 972
4 979
2 353
264
-
2 617
655
2 363
471
(275)
(322)
(127)
282
4 741
5 023
102
6
1 475
1 583
180
3 441
58
188
168
-
168
27
-
-
27
22
21
43
22
7
-
29
(1)
14
-
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
Consolidated assets
Liabilities
Total segment liabilities
Derivative financial instruments
Current borrowings
Non-current borrowings
Consolidated liabilities
4 879
32
(1 080)
-
-
(32)
3 800
-
4 911
(1 080)
(32)
3 800
573
8
581
(45)
(56)
-
(101)
733
(456)
(322)
(45)
(443)
275
322
154
326
1 999
2 325
3 636
8 733
12 369
(282)
(3 655)
(3 937)
605
626
-
1 231
(279)
1 094
3 081
903
1 475
5 459
555
6 910
(102)
(6)
(1 475)
(1 583)
(180)
(2 354)
-
-
-
-
-
-
-
-
-
-
-
-
-
290
(181)
-
109
3 354
5 078
8 432
2 979
897
-
3 876
375
4 556
8
255
(124)
-
131
Note
2019
2018
31
22
19
19
31
24
24
9 779
8 432
43
555
-
201
117
198
257
-
10 578
9 005
4 694
65
3
1 444
6 206
3 876
210
14
588
4 687
Annual Report 2019 | Financials and Notes | Akastor Group
44
Geographical information
Geographical revenue is presented on the basis of geographical location of the group companies selling to the customers. Non-current segment assets
and capital expenditures are based on the geographical location of the assets.
Amounts in NOK million
Norway
Germany
United States
Brazil
Asia
Other Europe
Middle East
Other countries
Total
Major customer
Revenue and other income
2019
2018
2 755
1 980
745
316
135
464
475
253
218
492
215
108
465
282
158
100
Non-current assets excluding
deferred tax assets and
financial instruments
2019
2 179
762
441
306
122
87
5
41
2018
1 647
719
255
323
128
68
18
17
5 361
3 800
3 944
3 174
Revenues from one customer of MHWirth represents approximately NOK 580 million (NOK 170 million in 2018) of the group’s total revenue.
Note 7 | Revenue and other income
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
33
16
2019
5 184
148
28
-
-
2
2018
3 464
233
20
(1)
28
56
5 361
3 800
Annual Report 2019 | Financials and Notes | Akastor Group
45
Disaggregation of revenue from contracts with customers
Revenue from contracts with customer is disaggregated in the following table by major contract and revenue types and timing of revenue recognition.
The table also includes a reconciliation of the disaggregated revenue with revenue information as shown in Note 6 Operating segments.
Amounts in NOK million
2019
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
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
MHWirth
AKOFS
Offshore
AGR
Other
holdings
Adjustment
of AKOFS
Offshore
Total
Akastor
1 338
1 301
1 513
4 153
2 851
1 301
4 153
33
4 186
-
-
335
335
335
-
335
757
1 093
-
36
537
573
537
36
573
-
573
217
128
112
458
329
128
458
144
602
MHWirth
AKOFS
Offshore
AGR
Other
holdings
-
-
(335)
(335)
(335)
-
(335)
(757)
(1 093)
1 555
1 466
2 162
5 184
3 717
1 466
5 184
178
5 361
Adjust-
ment of
AKOFS
Offshore
Total
Akastor
942
812
1 195
2 950
2 137
812
2 950
81
3 031
-
-
343
343
343
-
343
764
1 107
-
9
159
168
159
9
168
-
168
45
160
141
346
186
160
346
227
573
-
-
(343)
(343)
(343)
-
(343)
(737)
(1 080)
987
981
1 495
3 464
2 482
981
3 464
336
3 800
Annual Report 2019 | Financials and Notes | Akastor Group 46
Contract balances
Amounts in NOK million
Receivables, which are included in “trade and other receivables”
Contract assets
Contract liabilities
Note
21
28
2019
1 136
1 468
609
2018
1 365
824
632
Contract assets relate to the group’s rights to consideration for work
in contract liabilities in the beginning of the year is NOK 354 million (NOK
completed, but not yet invoiced at the reporting date. The contract
41 million in 2018). There was an increase of NOK 15 million of the contract
assets are transferred to receivables when the rights to payment become
liability due to acquisition of subsidiaries in 2019.
unconditional, which usually occurs when invoices are issued to the
customers. No impairment has been recognized on contract assets in 2019
The amount of revenue recognized in 2019 from performance obligation
or 2018.
satisfied (or partially satisfied) in previous period is NOK 66 million (NOK
85 million in 2018). This is mainly due to changes in the estimates of
Contract liabilities relate to advance consideration received from customer
progress measurement for performance obligations satisfied over time
for work not yet performed. Revenue recognized in 2019 that was included
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, 2019.
Amounts in NOK million
Transaction price allocated
2020
2 419
Later
Total
1 067
3 486
The amounts disclosed above do not include variable consideration which
The group applies the practical expedient and does not adjust the
is constrained. The group applies the practical expedient under IFRS 15
transaction price allocated to performance obligations for the effects of a
and does not disclose information about remaining performance obligation
significant financing component if the group expects, at contract inception,
when revenue is recognized in the amount to which the group has right to
that the period between when the group transfers a promised good or
invoice.
service to a customer and when the customer pays for that good or service
will be one year or less.
The following provides information about nature of performance obligations, including significant payment terms, and related significant revenue
recognition policies.
Annual Report 2019 | Financials and Notes | Akastor Group Type of contract/revenue
Nature of performance obligations, including
significant payment terms
Significant revenue recognition policies
47
Construction contracts
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.
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 perfor-
mance obligations are satisfied at a point of time.
Assurance-type warranty for a period of 12-18 months
is normally included in these contracts.
Revenue from the construction performance obliga-
tions 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 recog-
nized 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 Damag-
es 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.
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.
Service revenue
Service revenue is generated from rendering of
services to customers. The customers simultane-
ously 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 invoices are based on hours or days per-
formed at agreed rates. The group has assessed that
these performance obligations are satisfied over time.
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.
Annual Report 2019 | Financials and Notes | Akastor Group 48
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 9 | Other operating expenses
Note
26
2019
1 411
175
66
68
1 719
2018
1 163
150
63
48
1 424
Amounts in NOK million
2019
2018
External consultants and hired-ins inclusive audit fees
Rental and other costs for premises and equipment
Office supplies
Travel expenses
Insurance
Other
Total other operating expenses
Fees to the auditors
235
178
25
47
16
62
564
209
217
36
50
11
49
572
The table below summarizes audit fees, as well as fees for audit related services, tax services and other services incurred by the group during 2019 and
2018.
Amounts in NOK million
2019
2018
2019
2018
2019
2018
Akastor ASA
Subsidiaries
Total
Audit
Other assurance services
Total
3
-
3
3
-
3
7
1
9
7
2
10
10
1
11
10
2
12
Annual Report 2019 | Financials and Notes | Akastor Group Note 10 | Net finance expenses
Amounts in NOK million
Profit (loss) from equity-accounted investees
Interest income on bank deposits measured at amortized cost
Interest income on debt instruments at FVOCI
Interest income on finance lease receivables
Dividend income from equity instrument
Net changes in fair value of financial assets at FVTPL
Liquidation of foreign entity1)
Other finance income
Finance income
Interest expense on financial liabilities measured at amortized cost
Interest expense on financial liabilities measured at fair value
Interest expense on lease liabilities
Net foreign exchange loss
Net changes in fair value of financial assets at FVTPL
Impairment loss on external receivables2)
Loss on foreign currency forward contracts
Other financial expenses
Financial expenses
Net finance expenses recognized in profit and loss
Note
16
33
33
49
2019
(160)
34
77
3
69
37
99
2
321
(101)
(10)
(37)
(30)
-
-
-
(13)
(192)
(30)
2018
(157)
6
61
-
71
-
-
47
185
(81)
(9)
-
(2)
(71)
(24)
(2)
(39)
(228)
(200)
1) Relates to currency translation differences that were reclassified from Other Comprehensive Income to the income statement as result of liquidation
2) 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 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
Recognition of previously unrecognized deferred tax assets
Total deferred tax income (expense)
Total tax income (expense)
2019
2018
(45)
2
(44)
6
-
(22)
16
-
(44)
(27)
1
(26)
8
(10)
(75)
-
(77)
(103)
Annual Report 2019 | Financials and Notes | Akastor Group 50
Effective tax rate
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
2019
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 differences1)
Prior year adjustments (current tax)
Prior year adjustments (deferred tax)
Recognition of previously unrecognized deferred tax assets2)
Write down of tax loss or deferred tax assets3)
Change in tax rates4)
Other
Total tax income (expenses)
191
(42)
13
(9)
2
2
16
(22)
-
(2)
(44)
22.0%
(6.5%)
4.5%
(0.8%)
(0.9%)
(8.3%)
11.7%
-
1.2%
23.0%
(91)
21
10
(22)
1
2
-
(75)
(10)
(30)
(103)
23.0%
10.7%
(24.0%)
0.6%
2.3%
-
(82.4%)
(11.0%)
(32.6%)
(113.5%)
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) Relates mainly to deferred tax assets on unused tax credit carry-forward in Norway.
3) The impairment relates mainly to tax losses in the MHWirth entities in USA and Brazil as well as Step Oiltools.
4) Relates mainly to changes in corporate income tax rate in Norway.
Recognized deferred tax assets and liabilities
Amounts in NOK million
2019
2018
2019
2018
2019
2018
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
2
-
80
50
5
241
160
584
(196)
388
46
1
-
72
56
18
131
352
677
(303)
374
(7)
(10)
(102)
-
(8)
(70)
(10)
-
(207)
196
(11)
(6)
(12)
(248)
-
-
(38)
(9)
-
(312)
303
(9)
39
(8)
(102)
80
42
(65)
231
160
377
-
377
40
(10)
(248)
72
56
(19)
122
352
365
-
365
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 the Norwegian and German entities is NOK 360 million as of December 31, 2019.
Annual Report 2019 | Financials and Notes | Akastor Group Change in net recognized deferred tax assets (liabilities)
51
Amounts in NOK million
Balance as of December 31, 2017
Disposal of subsidiaries as of January 1, 2018
Recognized in profit and loss
Recognized in other comprehensive income
Recognized in equity
Currency translation differences
Balance as of December 31, 2018
Acquisition of subsidiaries
Recognized in profit and loss
Recognized in other comprehensive income
Currency translation differences
Property,
plant and
equip-
ment
Intan-
gible
assets
Projects
under
construc-
tion
Pen-
sions
Provi-
sions
Deriva-
tives
Other
items
Tax loss
carry-for-
wards
(54)
100
(7)
-
-
1
40
-
(1)
-
-
(17)
3
4
-
-
-
(10)
(2)
4
-
-
(212)
-
(47)
-
8
3
(248)
-
147
-
(1)
76
(1)
(4)
-
-
1
72
-
(1)
9
-
80
73
(4)
(13)
-
-
(1)
56
-
(14)
-
-
42
(54)
(10)
2
30
13
-
(19)
(6)
(25)
(15)
-
166
2
(45)
-
-
-
122
15
94
-
-
672
(345)
34
-
-
(9)
352
12
(205)
-
1
Total
650
(254)
(77)
30
21
(5)
365
20
-
(6)
(1)
Balance as of December 31, 2019
39
(8)
(102)
(65)
231
160
377
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
2019
42
448
2 182
2 671
2018
74
481
1 856
2 411
Unrecognized other deductible temporary differences are NOK 489 million in 2019 (NOK 459 million in 2018).
Annual Report 2019 | Financials and Notes | Akastor Group 52
Note 12 | Earnings per share
Akastor ASA holds 2 390 215 treasury shares at year end 2019 (2 776 376 in 2018). Treasury shares are not included in the weighted average number
of ordinary shares.
Amounts in NOK million
Profit (loss) from continuing operations
Non-controlling interests
Profit (loss) attributable to ordinary shares from continuing operations
Profit (loss) from discontinued operations
Profit (loss) attributable to ordinary shares
Basic/ diluted earnings per share
2019
147
7
154
(54)
100
2018
(194)
-
(194)
(128)
(322)
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)
Basic/ diluted earnings (loss) per share for discontinued operations (NOK)
2019
2018
274 000 000
274 000 000
271 548 422
271 223 624
0.37
0.57
(0.20)
(1.19)
(0.71)
(0.47)
Annual Report 2019 | Financials and Notes | Akastor Group Note 13 | Property, plant and equipment
The table below includes discontinued operations until these met the criteria to be classified as held for sale.
53
Note
Buildings
and land
Vessels
Machinery,
equipment, software
Under
construction
Total
Amounts in NOK million
Historical cost
Balance as of January 1, 2018
Additions 1)
Transfer from assets under construction
Disposals and scrapping
Disposal of subsidiaries
Currency translation differences
Balance as of December 31, 2018
Additions
Additions through business combinations
5
Reclassifications
Transfer from assets under construction
Disposals and scrapping
Currency translation differences
Balance as of December 31, 2019
Accumulated depreciation and impairment
Balance as of January 1, 2018
Depreciation for the year 2)
Impairment 3)
Disposals and scrapping
Disposal of subsidiaries
Currency translation differences
Balance as of December 31, 2018
Depreciation for the year
Reclassifications
Disposals and scrapping
Currency translation differences
Balance as of December 31, 2019
Book value as of December 31, 2018
Book value as of December 31, 2019
951
7 040
-
-
(148)
(4)
(57)
743
-
-
-
12
-
(14)
741
(458)
(22)
-
124
4
25
(328)
(16)
-
-
6
(338)
416
403
-
38
85
(7 063)
(101)
-
-
-
-
-
-
-
-
(3 668)
(142)
(322)
(85)
4 164
53
-
-
-
-
-
-
-
-
1 861
26
3
(440)
(103)
30
1 377
49
6
(19)
-
(10)
3
1 407
70
69
(42)
-
(63)
(1)
33
7
-
-
(12)
-
-
28
9 922
95
-
(503)
(7 233)
(128)
2 153
56
6
(19)
-
(10)
(11)
2 175
(1 366)
(11)
(5 502)
(114)
-
431
81
(22)
(990)
(96)
13
8
(2)
-
-
-
-
-
(278)
(322)
470
4 249
56
(11)
(1 328)
-
-
-
-
(112)
13
8
4
(1 067)
(11)
(1 415)
387
340
22
17
825
760
1)
Includes additions of NOK 63 million related to discontinued operations in 2018
2) Includes depreciation of NOK 153 million from discontinued operations in 2018
3) Includes impairment of NOK 322 million from discontinued operations in 2018
Depreciation
Impairment
Estimates for useful life, depreciation method and residual values are
The impairment loss of NOK 322 million in 2018 was related to the cash-
reviewed annually. Assets are mainly depreciated on a straight-line basis
generating unit AKOFS Seafarer in the discontinued operations of AKOFS
over their expected economic lives as follows:
Offshore. AKOFS Seafarer was impaired to its recoverable amount of NOK 1.4
Machinery, equipment and software
Vessels
Buildings
Land
3–15 years
20–25 years
8–30 years
No depreciation
billion based on value in use (discount rate of 9.7%). The recoverable amount
analysis was made on the assumption that the vessel is employed 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.
Annual Report 2019 | Financials and Notes | Akastor Group
54
Note 14 | Intangible assets
Amounts in NOK million
Note
Development costs
Goodwill
Other
Total
Historical cost
Balance as of January 1, 2018
Reclassification
Capitalized development 1)
Disposal and scrapping
Disposal of subsidiaries
Currency translation differences
Balance as of December 31, 2018
Reclassification
Capitalized development
Additions through business combinations
5
Currency translation differences
Balance as of December 31, 2019
Accumulated amortization and impairment
Balance as of January 1, 2018
Amortization for the year 2)
Disposal and scrapping
Disposal of subsidiaries
Currency translation differences
Balance as of December 31, 2018
Amortization for the year
Reclassifications
Currency translation differences
Balance as of December 31, 2019
Book value as of December 31, 2018
Book value as of December 31, 2019
1)
Includes capitalized development costs of NOK 1 million from discontinued operations
2) Includes amortization of NOK 9 million from discontinued operations
456
(5)
35
(47)
(2)
1
437
19
70
14
(1)
539
(331)
(41)
47
-
(1)
(325)
(33)
(13)
1
(370)
112
169
1 646
-
-
-
(452)
18
1 211
-
-
162
(1)
1 372
(394)
-
-
307
-
(87)
-
-
(1)
(88)
1 125
1 284
248
5
1
(17)
(113)
1
127
-
1
137
(1)
263
(190)
(24)
16
96
(2)
(104)
(21)
-
2
(123)
22
140
2 351
-
36
(64)
(567)
20
1 775
19
71
312
(3)
2 174
(915)
(64)
64
403
(3)
(515)
(53)
(13)
2
(581)
1 260
1 593
Research and development costs
Amortization
NOK 71 million has been capitalized in 2019 (NOK 36 million in 2018)
Intangible assets all have finite useful lives and are amortized over the
related to development activities. In addition, research and development
expected economic life, ranging between 5-10 years.
costs of NOK 31 million were expensed during the year because the
criteria for capitalization are not met (NOK 32 million in 2018).
Annual Report 2019 | Financials and Notes | Akastor Group 55
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.
Please see Note 5 Business combinations for information about the goodwill acquired in MHWirth and AGR during 2019.
Amounts in NOK million
MHWirth
AGR
Total goodwill
2019
1 168
116
1 284
2018
1 107
18
1 125
Impairment testing for cash-generating units containing significant
margins and other cost components based on historical experience as
goodwill
well as assessment of future market development and conditions. These
The recoverable amounts of cash-generating units (portfolio companies)
assumptions require a high degree of judgement, given the significant
are determined based on value-in-use calculations. Discounted cash
degree of uncertainty regarding oilfield service activities in the forecast
flow models are applied to determine the value in use for the portfolio
period.
companies with goodwill. The management has made cash flow
projections based on budget and strategic forecast for the periods 2020-
Terminal value growth rate The group uses a constant growth rate not
2024. Beyond the explicit forecast period of five years, the cash flows are
exceeding 2% (including inflation) for periods beyond the management’s
extrapolated using a constant growth rate.
forecast period of five years. The growth rates used do not exceed the
growth rates for the industry in which the portfolio company operates.
Key assumptions used in the calculation of value in use are discussed
below. The values assigned to the key assumptions represent
Discount rates are estimated based on Weighted Average Cost of Capital
management's assessment of future trends in the relevant industries
(WACC) for the industry in which the portfolio company operates. The
as well as management’s expectations regarding margin, and have been
risk-free interest rates used in the discount rates are based on the 10 year
based on historical data from both external and internal sources.
state treasury bond rate at the time of the impairment testing. Optimal
EBITDA used in the value-in-use calculations represents the operating
are further adjusted to reflect any additional short to medium term market
earnings before depreciation and amortization and is estimated based
risk considering current industry conditions.
debt leverage is estimated for each portfolio company. The discount rates
on the expected future performance of the existing businesses in their
main markets. Assumptions are made regarding revenue growth, gross
Discount rate assumptions used in impairment testing
MHWirth
AGR
Discount rate after tax
Discount rate pre tax
2019
10.4%
12.5%
2018
10.0%
N.A.
2019
12.4%
15.0%
2018
12.2%
N.A.
Sensitivity to changes in assumptions
growth in the forecast period were reduced by more than 12%, or the
For the portfolio companies containing goodwill, the recoverable amounts
average EBITDA margin in the forecast period were reduced by more than
are higher than the carrying amounts based on the value in use analysis
6%, the estimated recoverable amount would be lower than the carrying
and consequently no impairment loss of goodwill was recognized in 2019
amount and it would result in impairment in MHWirth. In AGR, if the
or 2018.
average revenue growth in the forecast period were reduced by more than
10%, or if the average EBITDA margin in the forecast period were reduced
The group has performed sensitivity calculations to identify any reasonably
by more than 2%, the estimated recoverable amount would be lower than
possible change in key assumptions that could cause the carrying amount
the carrying amount and it would result in impairment in AGR.
to exceed the recoverable amount. In MHWirth, if the average revenue
Annual Report 2019 | Financials and Notes | Akastor Group 56
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
Business office
2019
Percentage of voting rights and ownership
Share of profit (loss) reported in Financial items
Carrying amount of investments
2018
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%
(124)
-
-
(102)
-
50%
(35)
1 050
28
(48)
1 086
20%
(1)
1
-
(8)
2
(160)
1 051
28
(157)
1 088
DOF Deepwater AS
Electrical Subsea & Drilling AS
DOF Deepwater AS is a joint venture with DOF ASA, which owns and
In September 2017, MHWirth became a shareholder in Electrical Subsea
operates five anchor handling tug supply (AHTS) vessels.
& Drilling AS (ESD) with 20% ownership by transferring certain work-in-
AKOFS Offshore
progress technologies for new well barrier for BOP. ESD is a privately
owned Norwegian company and working on the development and
In September 26, 2018, Akastor completed the transaction to divest 50
qualification of two drilling technologies; all electric control of Blow Out
percent of its shares in AKOFS Offshore to MITSUI & CO., Ltd. ("Mitsui")
Preventers (BOP) and a Rotating Control Device for Managed Pressure
and Mitsui O.S.K. Lines, Ltd. ("MOL"). Akastor, Mitsui and MOL hold 50%,
Drilling.
25% and 25% of the shares in AKOFS Offshore, respectively, and have joint
control over the company. AKOFS Offshore is classified as a joint venture.
Annual Report 2019 | Financials and Notes | Akastor Group 57
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
2019
2018
AKOFS Offshore1)
2019
2018
142
32
592
(139)
(30)
(1 146)
(1 146)
(551)
(275)
275
-
-
-
163
(148)
(68)
-
(248)
-
(248)
(124)
-
128
38
719
(104)
(30)
(1 046)
(1 046)
(303)
(152)
152
-
-
-
146
(142)
(51)
-
(203)
-
(203)
(102)
-
(124)
(102)
638
272
5 076
(1 373)
(1 061)
(2 207)
(2 201)
2 134
1 067
-
126
(143)
447
160
4 741
(861)
(760)
(2 098)
(2 092)
2 229
1 115
-
125
(154)
1 050
1 086
1 093
(323)
(343)
(7)
(94)
(22)
(117)
(58)
12
(46)
448
(144)
(150)
(96)
(62)
(88)
(150)
(75)
11
(64)
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, a wholly owned subsidiary to AKOFS Offshore. 50% of the accounting gain from the sale
was eliminated upon consolidation, reducing Akastor’s carrying amount of the investment.
Note 17 | Other non-current assets
Amounts in NOK million
Deferred and contingent considerations
Other assets
Total other non-current assets
Note
32
2019
2018
62
3
65
59
3
62
Deferred and contingent considerations relate to contingent considerations arising from divestments of subsidiaries and are measured at fair value.
Annual Report 2019 | Financials and Notes | Akastor Group 58
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
Note
2019
2018
158
644
47
792
2
158
530
75
705
-
32
1 643
1 469
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 | Interest-bearing receivables
Amounts in NOK million
Note
2019
2018
Receivable from AKOFS Offshore
Total current interest-bearing receivables
Receivable from AKOFS Offshore
Receivable from Aker Pensjonskasse
Total non- current interest-bearing receivables
-
-
191
10
201
257
257
-
-
-
35
35
In 2018, Akastor provided short-term financing to AKOFS Offshore until an external bank financing agreement was in place in 2019. Akastor’s financing
to AKOFS Offshore was restructured to non-current receivables in 2019.
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.
2019
2018
140
91
297
528
(1 604)
(102)
14
103
104
342
548
(1 416)
(33)
23
Annual Report 2019 | Financials and Notes | Akastor Group 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
Prepaid expenses
Public duty and tax refund
Contingent considerations
Total
59
Note
32
7
32
2019
1 231
(49)
1 182
42
1 224
98
1 468
297
83
7
3 177
1) Trade receivables are financial instruments and an impairment loss of NOK 11 million was recognized in the income statement in 2019 (NOK 32 million in 2018).
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
2019
426
168
39
597
1 231
2018
1 459
(49)
1 410
64
1 474
74
824
347
76
7
2 801
2018
698
97
99
565
1 459
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, 2019, trade receivables of an initial value of NOK 49 million (NOK
49 million in 2018) 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
Acquisition of subsidiaries
Currency translation differences
Balance as of December 31
2019
2018
49
11
(7)
(11)
7
-
49
71
32
(43)
(10)
-
(2)
49
Annual Report 2019 | Financials and Notes | Akastor Group
60
Note 22 | Cash and cash equivalents
Amounts in NOK million
Restricted cash
Interest-bearing deposits
Total cash and cash equivalents
2019
2018
11
544
555
-
198
198
Additional undrawn committed current bank revolving credit facilities amount to NOK 1.3 billion, that together with cash and cash equivalents gives a total
liquidity reserve of NOK 1.9 billion as of December 31, 2019. 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 2018). 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. Sale of 386 161
The currency translation reserve includes exchange differences arising
treasury shares were carried out in connection with the employee share
from the translation of the net investments in foreign operations, and
purchase program in 2019. As of December 31, 2019, Akastor ASA holds 2
foreign exchange gain or loss on loans defined as net investment hedge
390 215 treasury shares (2 776 376 treasury shares in 2018), representing
or part of net investments in foreign operations. Upon the disposal
0.87 percent of total outstanding shares.
of investments in foreign operations or liquidation of such entities, the
accumulated currency translation differences related to these entities are
The Board of Directors has proposed no dividends for 2019 or 2018.
reclassified from the currency translation reserve to the income statement.
Hedging reserve
Net investments in foreign operations have been hedged with a loss of
The hedging reserve relates to cash flow hedges of future revenues and
NOK 9 million in 2019 (gain NOK 16 million in 2018). Accumulated gain
expenses against exchange rate fluctuations. The income statement
in equity on net investment hedges as of 2019 is a gain of NOK 11 million
effects of such instruments are recognized in accordance with the
(loss of NOK 5 million in 2018) and relate to investments in the United
progress of the underlying construction contract as part of revenues or
States and Cyprus.
expenses as appropriate. The hedging reserve represents the value of such
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 2019 | Financials and Notes | Akastor Group
61
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 2)
Interest terms
2019
Revolving credit facility
(NOK 1 250 million)
Revolving credit facility
(USD 155 million)
Term loan facility AGR
Total borrowings
Current borrowings
Non-current borrowings
Total borrowings
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
NOK
800
794
1.65%
3.25% 1)
4.90%
Dec 2021
NIBOR + margin 1)
1.71%
1.88%
3.25% 1)
2.12%
4.96%
4.00%
Dec 2021
USD LIBOR + margin
Apr 2027
Fixed rate
USD
NOK
56
180
494
161
1 448
3
1 444
1 448
NOK
600
588
1.18%
2.25% 1)
3.43%
Dec 2021
NIBOR + margin
2.25% 1)
Dec 2021
USD LIBOR + margin
USD
-
-
13
601
14
588
601
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
(2018: 35 percent).
2) The maturity date reflects maturity date as defined in the loan agreements. For information about contractual maturities of borrowings including interest payments and
the period in which they mature, see Note 30 Financial risk management and exposures.
Bank debt (Norway)
The revolving credit 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.
The term loan facility of NOK 180 million term loan to AGR is provided by Nordea and DNB. The lenders have no recourse to Akastor ASA. This facility
includes restrictions which are customary for these kinds of facilities.
Annual Report 2019 | Financials and Notes | Akastor Group
62
Reconciliation of liabilities arising from financing activities
Amounts in NOK million
Revolving credit facilities
Term loan facility - AGR
Overdraft facility
Total liabilities arising from
financing activities
Balance as
of December
31, 2018
Foreign
exchange
movements
Capitalized
borrowing
costs
Accrued
interest
Acquisition
of business
Balance as
of December
31, 2019
Cash flows
588
-
14
601
685
-
(19)
667
7
-
-
7
4
-
-
4
3
9
-
12
-
152
5
157
1 287
161
-
1 448
Note 25 | Other non-current liabilities
Amounts in NOK million
Note
2019
2018
Deferred gain
Deferred settlement obligations
Guarantee obligation related to joint venture
Other liabilities
Total other non-current liabilities
29, 32
16, 29
29
93
195
177
26
491
112
129
117
32
390
Deferred gain
Guarantee obligation related to joint venture
In May 2018, Akastor invested in preferred equity and warrants in Odfjell
Akastor’s share of losses from DOF Deepwater AS in excess of the carrying
Drilling. On initial recognition, the investment in the financial assets is
amount of Akastor’s investment interest in the joint venture is recognized
recognized at fair value and the difference between the fair value and the
as a liability as the group has provided guarantees for the funding of the
transaction price, NOK 117 million, was recognized as “Deferred gain”. The
vessels in the company. See Note 16 Equity-accounted investees and Note
deferred gain is subsequently amortized and recognized to profit and loss
35 Related parties for more information.
at straight-line basis over six years. See Note 18 Other investments for
more information about the investment.
Other liabilities
Other liabilities are mainly related to welfare fund.
Deferred settlement obligations
Deferred settlement obligations represent contingent considerations
resulting from disposal of subsidiaries. The obligations are mainly related
to provision for guaranteed preferred return to Mitsui and MOL in
connection with the divestment of 50 percent shares in AKOFS Offshore.
See Note 35 Related parties for more information.
Annual Report 2019 | Financials and Notes | Akastor Group 63
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 to
company is responsible for paying an agreed contribution to the employee’s
the contribution plan in 2008, the company introduced a compensation
pension assets. In such a plan, this annual contribution is also the cost.
plan. The basis for deciding the compensation amount is the difference
In a defined benefit plan, it is the company’s responsibility to provide a
between calculated pension capital in the defined benefit plan and the
certain pension. The measurement of the cost and the pension liability
value of the defined benefit plan at the age of 67 years. The compensation
for such arrangements is subject to actuarial valuations. Akastor has over
amount will be adjusted annually in accordance with the adjustment of the
a long time period gradually moved from defined benefit arrangements
employees’ pensionable income, and accrued interest according to market
to defined contribution plans. Consequently, the impact of the remaining
interest. If the employee leaves the company voluntarily before the age of
defined benefit plans is gradually reduced.
67 years, 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 employees.
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 41 million (NOK 39 million in 2018).
use defined benefit accounting and the AFP plan is accounted for as a
The estimated contributions expected to be paid in 2020 amount to NOK
defined contribution plan.
48 million.
Defined benefit plan
The annual contribution expensed for the AFP plan was NOK 11 million
(2018: NOK 11 million). The estimated contributions expected to be paid in
Employees who were 58 years or older in 2008, when the change took
2020 amount to NOK 15 million.
place, are still in the defined benefit plan, which is a funded plan. There are
no longer any active employees in this plan. The estimated contributions
Pension plans outside Norway
expected to be paid to the Norwegian plan during 2020 amount to NOK
Pension plans outside Norway are predominately defined contribution
plans.
7 million.
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 USA
Defined benefit plans other countries
Total employee benefit obligations
Note
2019
2018
9
57
66
9
54
63
8
2019
2018
199
122
35
3
359
179
106
45
2
332
Annual Report 2019 | Financials and Notes | Akastor Group 64
Movement in net defined benefit (asset) liability
Amounts in NOK million
Balance as of January 1
Adjustment for discontinued operations as of January 1
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
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 USA at fair value
Total plan assets Germany at fair value
Total plan assets at fair value
Pension obligation
2019
2018
Pension asset
Net pension obligation
2019
2018
2019
2018
587
-
9
11
20
5
40
9
1
55
623
(4)
9
10
19
6
(16)
(5)
11
(4)
(43)
(48)
(43)
619
(48)
587
(255)
-
(275)
-
332
-
349
(4)
-
(3)
(3)
(1)
(1)
(5)
(1)
(8)
26
(20)
6
-
(3)
(3)
(3)
19
3
(6)
13
28
(18)
10
(260)
(255)
9
7
16
5
39
9
(1)
(5)
48
(16)
(20)
(37)
359
9
6
16
6
(19)
(5)
19
3
6
9
(20)
(18)
(38)
332
2019
2018
1
12
24
42
79
55
134
43
59
101
24
260
1
18
29
51
99
37
136
38
54
92
27
255
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 2019 | Financials and Notes | Akastor Group
65
Norway
Germany
USA
Discount rate
Asset return
Salary progression
Pension indexation
2019
2018
2019
2018
2.20%
2.20%
2.75%
2.80%
2.80%
2.75%
0 -2.25%
0 -2.25%
2.71%
2.71%
n/a
1.75%
3.21%
3.21%
n/a
1.75%
Mortality table
K2013
K2013
RT 2018 G
RT 2018 G
2019
2.89%
2.89%
n/a
n/a
2018
3.90%
3.90%
n/a
n/a
Pri-2012 Total
Dataset Mortality
with Scale
MP-2019
RP-2014 Adjusted
to 2006 Total
Dataset with
Scale MP-2018
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 2019 and 2018 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
2019
2018
22.4
25.7
22.2
25.5
As of December 31, 2019, the weighted-average duration of the defined benefit obligation was 9.5 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, 2019 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
(11)
1
12
13
(1)
(4)
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 2019 | Financials and Notes | Akastor Group 66
Note 27 | Provisions
Amounts in NOK million
Provision, current
Provision, non-current
Total provisions
2019
2018
119
51
170
236
166
403
Total
403
(125)
278
(24)
18
(86)
(20)
4
(1)
170
111
59
170
Development of significant provisions
Amounts in NOK million
Warranties Restructuring
Onerous
contracts
Other
Balance as of December 31, 2018
Implementation of IFRS 16 1)
Balance as of January 1, 2019
Reclassification
New provisions
Provisions utilized
Provisions reversed
Unwind of discount
Currency translation differences
Balance as of December 31, 2019
Expected timing of payment
Within the next twelve months
After the next twelve months
Total
1) See Note 2 Basis for preparation
Warranties
82
-
82
-
15
(25)
(6)
-
-
65
58
8
65
41
(12)
30
-
-
(14)
-
-
-
16
5
10
16
212
(113)
99
-
-
(42)
(4)
4
-
57
19
38
57
68
-
68
(24)
3
(5)
(10)
-
(1)
32
29
3
32
The provision for warranties relates mainly to the possibility that Akastor,
reorganization in MHWirth due to the challenging rig market. The
based on contractual agreements, needs to perform guarantee work
provision includes provision for vacant office premises after the workforce
related to products and services delivered to customers. Warranty
reduction and is estimated based on the detailed restructuring plans for
provision is presented as current as it is expected to be settled in the
the businesses and locations affected.
group’s normal operating cycle. See Note 4 Significant accounting
estimates and judgments for further descriptions.
Onerous contracts
Restructuring
Provision for onerous contracts relates mainly to unavoidable operational
costs for vacant properties where the group has committed to under lease
Restructuring mainly relates to significant workforce reduction and
contracts.
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
Deferred settlement obligations
Total trade and other payables
1) Trade creditors are due within one year.
Note
29, 32
7
29, 32
2019
451
1 725
2 176
112
609
77
2 974
2018
236
1 502
1 738
86
632
279
2 734
Deferred settlement obligations in 2018 included provision of NOK 250
Book value of trade creditors and other current liabilities is approximately
million for potential loss as a result of negative arbitration award for
equal to fair value.
Managed Pressure Operations Ltd.(MPO). The arbitration matter was
settled in 2019.
Annual Report 2019 | Financials and Notes | Akastor Group 67
Note 29 | Capital management
Akastor’s capital management is designed to ensure that the group
Ratios used in monitoring of capital/Covenants
has sufficient financial flexibility, short-term and long-term. One main
Akastor monitors capital on the basis of a gearing ratio (net debt/equity)
objective is to maintain a financial structure that, through solidity and cash
and interest coverage ratio (ICR) based on EBITDA/net interest costs.
flow, secures the group’s strong long-term creditworthiness, as well as
These ratios are similar to covenants as defined in loan agreements for the
maximize value creation for its shareholders through:
revolving credit facilities which are shown below. See Note 24 Borrowings
Investing in projects and business areas which will increase the
company’s Return On Capital Employed (ROCE) over time.
The company’s gearing ratio shall not exceed 1.0 times and
is calculated from the consolidated total borrowings to the
for details about these loans.
Optimizing the company’s capital structure to ensure both
consolidated Equity.
sufficient and timely funding over time to finance its activities at
the lowest cost.
Investment policy
The ICR shall not be lower than 3.0, calculated from the
consolidated EBITDA to consolidated Net Finance Cost when
gearing ratio is below 0.5
Akastor’s capital management is based on a rigorous investment selection
process which considers not only Akastor’s weighted average cost of
The ICR shall not be lower than 4.0, calculated from the
capital and strategic orientation but also external factors such as market
consolidated EBITDA to consolidated Net Finance Cost when
expectations.
Funding policy
Liquidity planning
gearing ratio exceeds 0.5
Minimum liquidity amount shall exceed NOK 500 million on
consolidated level.
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 ratios are calculated based on net debt including cash and borrowings
obligations. Akastor had a liquidity reserve per year end 2019 of NOK
as shown in Note 32 Financial instruments, EBITDA (earnings before
1.9 billion, composed of an undrawn committed credit facility of NOK 1.3
interest, tax, depreciation, amortization) and net interest costs, however
billion and cash and cash equivalents of NOK 0.6 billion.
adjusted for certain items as defined in the loan agreement. Covenants
ratios are based on accounting principles as of December 31, 2019.
Funding of operations
Akastor’s group funding policy is that subsidiaries should finance their
The covenants are monitored on a regular basis by the Akastor Treasury
operations with the treasury department (Akastor Treasury). This ensures
department to ensure compliance with the loan agreements and are
optimal availability and transfer of cash within the group and better control
tested and reported on a quarterly basis. Akastor was in compliance with
of the company’s overall debt as well as cheaper funding for its operations.
its covenants as of December 31, 2019, and on the basis of the covenants
However, AGR is financed directly through a NOK 180 million Term Loan
and its forecasts, management believes that the risk of covenant being
maturing in 2027.
Funding duration
breached is low and that the group will continue as a going concern for
the foreseeable future.
Akastor emphasizes financial flexibility and steers its capital structure
AGR’s external financing has one financial covenant the Liquidity shall be
accordingly to limit its liquidity and refinancing risks. In this perspective,
not less than NOK 20 million, applicable from 1 January 2021.
loans and other external borrowings are to be renegotiated well in advance
of their due date and generally for periods of 3 to 5 years.
Funding cost
Akastor aims to have a diversified funding sources in order to reach the
lowest possible cost of capital. These funding sources might include:
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.
Annual Report 2019 | Financials and Notes | Akastor Group 68
Note 30 | Financial risk management and exposures
The group is exposed to a variety of financial risks: currency risk, interest
amount of their respective cash flows. The group assesses whether the
rate risk, price risk, credit risk, liquidity risk and capital risk. The capital
derivative designated in each hedging relationship is expected to be and
market risk affects the value of financial instruments held. The objective of
has been effective in offsetting changes in cash flows of the hedged item
financial risk management is to manage and control financial risk exposures
using the hypothetical derivative method. In these hedge relationships, the
and thereby increase the predictability of earnings and minimize potential
main sources of ineffectiveness can arise from:
adverse effects on the group’s financial performance. Akastor group
uses financial derivative instruments to hedge certain risk exposures and
Changes to the forecasted amount of cash flows of hedged items
applies hedge accounting in order to reduce the profit or loss volatility.
and hedging instruments
Risk management is present in every project. It is the responsibility of
The counterparties’ credit risk differently impacting the fair value
the project managers, with the support of Akastor Treasury, to identify,
movements of the hedging instruments and hedged items
evaluate and hedge financial risks under policies approved by the Board
of Directors. The group has well-established principles for overall risk
Currency exposures from investments in foreign currencies are only
management, as well as policies for the use of derivatives and financial
hedged when specifically instructed by management. As of December 31,
investments. There have not been any changes in these policies during
2019, Akastor had no net investment hedges.
the year.
Currency risk
The change in hedge reserve in 2019 is related to hedges of forecast sales
and purchases.
The group operates internationally and is exposed to currency risk
on commercial transactions, recognized assets and liabilities and net
Exposure to currency risk
investments in foreign operations. Commercial transactions and recognized
Estimated forecasted receipts and payments in the table below are
assets and liabilities are subject to currency risk when payments are
calculated based on the group’s hedge transactions, adjusted for hedged
denominated in a currency other than the respective functional currency
balance sheet items. These are considered to be the best estimate of
of the group company. The group’s exposure to currency risk is primarily
the currency exposure, given that all currency exposure is hedged in
to USD, EUR and BRL, but also other currencies.
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
Changes in currency rates change the values of hedging derivatives,
contracts or currency options with the financial marketplace. Akastor has
embedded derivatives, borrowings, receivables and cash balances. Hedges
a large number of contracts involving foreign currency exposures and the
that qualify for hedge accounting are reported in the profit and loss
currency risk policy has been well-established for many years.
according to progress of projects, and deferred value of cash flow hedges
is reported as hedging reserve in equity. Any changes to currency rates will
The group determines the existence of an economic relationship between
therefore affect equity.
the hedging instrument and hedged item based on the currency and
Amounts in million
Bank
Intercompany loans
Loans and receivables
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
2019
2018
USD
(124)
40
98
(23)
(8)
185
(39)
146
(198)
(60)
EUR
(29)
31
(9)
-
(7)
-
(17)
(17)
28
4
BRL
-
-
96
-
96
-
-
-
-
96
USD
(128)
17
176
(39)
26
198
(28)
170
(252)
(57)
EUR
(20)
31
(1)
-
10
-
(22)
(22)
(25)
(36)
BRL
-
-
86
-
86
-
-
-
-
86
Annual Report 2019 | Financials and Notes | Akastor Group 69
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 (5%)
BRL (7%)
2019
Profit (loss)
after tax
Equity
Increase
(decrease)
(41)
2
11
(126)
USD (10%)
15
11
EUR (7%)
BRL (15%)
2018
Profit (loss)
before tax
Equity
Increase
(decrease)
(38)
15
22
(165)
30
22
A strengthening of the NOK against the above currencies as of December
Interest rate risk
31 would have had the equal but opposite effect on the above amounts, on
The group’s interest rate risk arises from cash balances, interest-bearing
the basis that all other variables remain constant. The sensitivity analysis
borrowings and interest-bearing receivables. Borrowings and receivables
does not include effects on the consolidated result and equity from
issued at variable rates as well as cash expose the group to cash flow
changed exchange rates used for consolidation of foreign subsidiaries.
interest rate risk. Borrowings and receivables issued at fixed rates expose
the group to fair value interest rate risk. However, as these borrowings are
The primary currency-related risk is the risk of reduced competitiveness
measured at amortized cost, interest rate variations do not affect profit
abroad in the case of a strengthened NOK. This risk relates to future
and loss when held to maturity.
commercial contracts and is not included in the sensitivity analysis above.
An increase of 100 basis points in interest rates during 2019 would have
increased (decreased) equity and profit and loss by the amounts shown on
the table below. This analysis assumes that all other variables, in particular
foreign currency rates, remain constant. The analysis is performed on the
same basis as for 2018.
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
2019
2018
3
4
(14)
(7)
2
1
(10)
(7)
A decrease of 100 basis points in interest rates during 2019 would have had the equal but opposite effect on the above amounts, on the basis that all
other variables remain constant. There are no effects on equity as there are no interest swaps.
Annual Report 2019 | Financials and Notes | Akastor Group 70
Guarantee obligations
Revenues are mainly related to large and long term projects closely
The group has provided the following guarantees on behalf of subsidiaries
followed up in terms of payments up front and in accordance with agreed
and related parties as of December 31, 2019 (estimated remaining
milestones. Normally, lack of payments is due to disagreements related to
exposure as of December 31, 2019):
project deliveries and is solved together with the customer or escalated
Performance guarantees on behalf of group companies are NOK
to the local authority.
0.6 billion (NOK 50 million in 2018)
Based on estimates of incurred losses in respect of trade receivables and
Performance guarantees on behalf of related parties NOK 3.4
Provisions for loss on debtors are based on individual assessments.
billion (NOK 0 million in 2018)
Provisions for loss on receivables were NOK 49 million in 2019 (NOK 49
contract assets, the group establishes a provision for impairmentlosses.
Parent company indemnity guarantees for fulfillment of lease
million in 2018).
obligations and finance obligations are NOK 4.0 billion (NOK 4.7
The group evaluates that significant credit risk concentrations are related
billion in 2018).
to trade receivables from major corporate customers. The maximum
exposure to credit risk at the reporting date equals the carrying amounts
Financial guarantees including counter guarantees for bank/
of financial assets (see Note 32 Financial instruments) and contract
surety bonds and guarantees for pension obligations to
assets (see Note 7 Revenue and other income). The group does not hold
employees are NOK 0.7 billion (NOK 1 billion in 2018) of which
collateral as security.
NOK 5 million is on behalf of related parties.
Liquidity risk
Although guarantees are financial instruments, they are considered
Liquidity risk is the risk that the group will encounter difficulty in meeting
contingent obligations and the notional amounts are not included in the
the obligations associated with its financial liabilities. The group manages
financial statements. See more information about guarantees for related
its liquidity to ensure that it will always have sufficient liquidity reserves to
parties in Note 35 Related parties.
meet its liabilities when due.
Price risk
Prudent liquidity risk management includes maintaining sufficient cash,
The group is exposed to fluctuations in market prices in the operational
the availability of funding from an adequate amount of committed credit
areas related to contracts, including changes in market prices for raw
facilities and the ability to close out market positions. Due to the dynamic
materials, equipment and development in wages. These risks are to the
nature of the underlying businesses, Akastor Treasury maintains flexibility
extent possible managed in bid processes by locking in committed prices
in funding by maintaining availability under committed credit lines.
from vendors as a basis for offers to customer or through escalation
clauses with customers.
Credit risk
The group policy for the purpose of optimizing availability and flexibility
of cash within the group is to operate a centrally managed cash pooling
arrangement. An important condition for the participants (business units)
Credit risk is the risk of financial losses to the group if customer
in such cash pooling arrangements is that the group as an owner of such
or counterparty to financial investments/instruments fails to meet
pools is financially viable and is able to prove its capability to service its
contractual obligations and arise principally from investment securities
obligations concerning repayment of any net deposits made by business
and receivables.
units. Management monitors rolling weekly and monthly forecasts of the
group’s liquidity reserve on the basis of expected cash flow.
Derivatives are only traded against approved banks. All approved banks
have investment grade ratings. Credit risk related to investment securities
and derivatives is therefore considered to be insignificant.
Assessment of credit risk related to customers and subcontractors is
an important requirement in the bid phase and throughout the contract
period. Such assessments are based on credit ratings, income statement
and balance sheet reviews and using credit assessment tools available
(e.g. Dun & Bradstreet and Credit Watch). Sales to customers are settled
in cash.
Annual Report 2019 | Financials and Notes | Akastor Group 71
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
Note
Book
value
Total cash
flow 1)
6 months
and less
6–12
months
1–2 years
2–5 years
More than
5 years
2019
Borrowings 2)
Lease liabilities
Other non-current liabilities
Derivative financial instruments
Deferred settlement obligations
Trade and other payables
Total financial liabilities
Financial guarantees 3)
2018
Borrowings 2)
Other non-current liabilities
Derivative financial instruments
Deferred settlement obligations
Trade and other payables
Total financial liabilities
Financial guarantees 3)
24
33
25
31
25, 28
28
24
25
31
25, 28
28
1 448
1 639
677
203
22
272
2 176
4 798
601
149
210
408
1 738
3 106
847
203
22
272
2 176
5 159
8 538
675
149
210
408
1 738
3 180
5 815
39
84
23
(19)
-
1 745
1 871
585
24
16
200
257
1 363
1 858
287
35
78
23
23
69
431
659
226
10
17
5
4
376
412
418
1 380
136
50
18
81
-
1 666
7
21
37
5
88
-
151
497
70
275
103
-
121
-
115
274
5
-
-
-
569
1 239
394
6 480
621
74
-
58
-
753
66
-
6
-
-
-
6
4 548
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 2019 | Financials and Notes | Akastor Group 72
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
2019
Foreign exchanges forward contracts to hedge highly probable
forecasted sales
Notional amounts USD
Average forward rate (USD/NOK)
Average forward rate (EUR/USD)
Foreign exchanges forward contracts to hedge highly probable
forecasted purchases
Notional amounts USD
Average forward rate (USD/NOK)
Notional amounts EUR
Average forward rate (EUR/NOK)
2018
Foreign exchanges forward contracts to hedge highly probable
forecasted sales
Notional amounts USD
Average forward rate (USD/NOK)
Average forward rate (EUR/USD)
Foreign exchanges forward contracts to hedge highly probable forecasted
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
243
46
28
286
34
28
124
9.05
1.54
41
8.85
15
9.95
248
7.92
1.15
34
8.01
27
9.71
75
8.43
1.12
4
8.45
8
9.96
14
8.24
1.20
-
-
1
9.73
45
8.37
-
-
-
4
10.05
24
8.30
-
-
-
-
-
Annual Report 2019 | Financials and Notes | Akastor Group 73
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
2019
Assets
Cash flow hedges
Embedded derivatives in ordinary commercial contracts
Fair value adjustments to hedged assets
Total forward foreign exchange contracts, assets
Liabilities
Cash flow hedges
Embedded derivatives in ordinary commercial contracts
Fair value adjustments to hedged liabilities
Total forward foreign exchange contracts, liabilities
2018
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
Instruments
at fair value
Total
cash flow 1)
6 months
or less
6–12 months
1–2 years 2)
48
4
(10)
43
(55)
(7)
(3)
(65)
69
48
117
(151)
(9)
(40)
(10)
(210)
48
4
(10)
43
(55)
(7)
(3)
(65)
69
48
117
(151)
(9)
(40)
(10)
(210)
43
4
(10)
37
(9)
(7)
(3)
(19)
69
48
117
(141)
(9)
(40)
(10)
(200)
4
-
-
4
(27)
-
-
(27)
-
-
-
(5)
-
-
-
(5)
1
-
-
1
(19)
-
-
(19)
-
-
-
(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 2019 | Financials and Notes | Akastor Group
74
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)
2019
(6)
11
(17)
2018
(82)
(17)
(65)
The purpose of the hedging instrument is to secure a situation where
value 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 17 million (NOK 65 million in
Revenue and expense on the underlying construction contracts are
2018) 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, NOK 11 million (negative NOK 17 million in 2018) of the
Note 32 | Financial instruments
Accounting classifications and fair values
Level 2 - fair values are based on price inputs other than quoted prices
The following table shows the carrying amounts and fair values of financial
derived from observable market transactions in an active market for
assets and financial liabilities, including their levels in the fair value
identical assets or liabilities. Level 2 includes currency or interest
hierarchy. It does not include fair value information for financial assets and
derivatives and interest bonds, typically when the group uses forward
financial liabilities not measured at fair value if the carrying amount is a
prices on foreign exchange rates or interest rates as inputs to valuation
reasonable approximation of fair value. For financial instruments measured
models.
at fair value, the levels in the fair value hierarchy are as shown below.
Level 1 - fair values are based on prices quoted in an active market for
internal assumptions used in the absence of quoted prices from an active
identical assets or liabilities.
market or other observable price inputs.
Level 3 - Fair values are based on unobservable inputs, mainly based on
Amounts in NOK million
2019
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
Non-current interest-bearing receivables
Trade and other receivables
Financial assets
Note
Carrying
amount
Financial instruments
measured at fair value
Level in fair
value hierarchy
31
18
18
18
17, 21
18
22
19
19
21
43
47
904
79
69
43
Level 2
47
904
79
69
Level 1
Level 3
Level 3
Level 3
613
613
Level 3
555
9
201
1 223
3 743
Annual Report 2019 | Financials and Notes | Akastor Group 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 through profit & loss
Deferred settlement obligations
Financial liabilities
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 thorugh profit & loss
Deferred settlement obligations
Financial liabilities
75
24
25
28
31
(1 448)
(1,456)
Level 2
(203)
(2 176)
(65)
(65)
Level 2
25, 28
(272)
(4 164)
(272)
Level 3
Note
Carrying
amount
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
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 2019 | Financials and Notes | Akastor Group
76
Reconciliation of Level 3 financial assets and financial liabilities
Amounts in NOK million
Balance as of December 31, 2017
Additions
Settlements
Sale of business
Net gain (loss) in the income statement1)
Fair value through OCI
Currency translation difference
Balance as of December 31, 2018
Additions
Settlements
Net gain (loss) in the income statement1)
Fair value through OCI
Currency translation difference
Balance as of December 31, 2019
Assets
Liabilities
641
756
(19)
(2)
45
(34)
72
1 458
2
(18)
207
17
(2)
1 665
(84)
(120)
31
-
(224)
-
(10)
(408)
-
204
(65)
-
(3)
(271)
1) Negative NOK 56 million in discontinued operations and NOK 9 million in financial items (2018: negative NOK 224 million and negative NOK 45 million, respectively).
Measurement of fair values at level 3
Debt instruments at FVOCI
Drilling (listed on the Oslo Stock Exchange under ticket ODL) at
Financial assets measured at FVOCI are related to debt instruments in
the valuation date, as well as assumption of future volatility based
NES Global Talent. The valuation model considers the present value of
on the share’s historical prices. The estimated fair value is mostly
the expected cash flows from the ultimate disposal of the investments
sensitive to the ODL share price and would increase (decrease) if
weighted with different probabilities. The expected disposal value is
the ODL share price were higher (lower).
determined by forecast EBITDA at the time of disposal and market
multiples, adjusted by forecast net debt of the investee. The estimated fair
Contingent considerations and deferred settlement obligations
value would increase (decrease) if:
These assets and liabilities relate to contingent considerations and
The forecast EBITDA were higher (lower);
to be paid or received depend on future earnings in the acquired and
disposed companies or outcome of indemnity claims and price adjustment
The market multiples applied were higher (lower); or
mechanisms.
obligations from business acquisitions and disposals. Final amounts
The net debt of the investees at the date of disposal were lower
Assets and
liabilities depending on future earnings: The
(higher).
Financial assets at FVTPL
recognized amounts are determined based on recent forecasts
and strategy figures for these entities, thus the final realized
values are sensitive to the above inputs as driven by market
Financial assets measured using Level 3 inputs relate mainly to preferred
conditions.
equity and warrant investment in Odfjell Drilling.
Preferred equity: The valuation model considers the present
and price adjustment mechanisms: Provisions are made based on
value of the expected future payments, discounted using a risk-
all available evidence as at the reporting date.
Assets and liabilities depending of outcome of indemnity claims
adjusted discount rate of 10%. The estimated fair value would
increase (decrease) if the risk-adjusted discount rate were lower
The credit exposure on the Level 3 asset is limited to the amount
(higher).
recognized and the credit risk is not considered to be significant due to
the nature of the arrangement.
Warrants: The valuation is obtained from external valuation
experts, using a Monte Carlo simulation model where the
simulated stock prices are based on a lognormal stock price
model assumed to follow a Geometric Brownian Motion. The key
inputs to the valuation model consist of the stock price of Odfjell
Annual Report 2019 | Financials and Notes | Akastor Group 77
Note 33 | Leases
The group has initially applied IFRS 16 Leases from January 1, 2019, while
an average lease period of 2-3 years, generally with no renewal options
the comparative information for 2018 is presented under IAS 17 and
included. In 2018, these leases were classified as operating leases under
related interpretations. Please refer to Note 2 Basis for preparation and
IAS 17.
Note 3 Significant accounting policies for more information about the
implementation effect of IFRS 16 and accounting policies for leases.
The group applies the short-term lease recognition exemptions for leases
Group as lessee
of property or machinery with lease term of 12 months or less. Leases of
IT equipment and office equipment are considered as leases of low-value
The group has property leases on a number of locations worldwide. The
assets. The right-of-use assets and lease liabilities are not recognized for
leases typically run for a period of 3-10 years and some of the leases
short-term leases or leases of low-value assets.
have extension options. The group has also lease agreements related to
cars, machinery, IT equipment and office equipment. These leases have
The lease agreements do not impose any covenants or restrictions.
Right-of-use assets
Amounts in NOK million
Balance as of January 1 (at implementation of IFRS 16)
Additions
Additions through acquisition of subsidiaries
Depreciation
Impairment
Remeasurement
Currency translation differences
Total Right-of-use assets
The right-of-assets are mainly related to leases of properties.
Lease liabilities
Amounts in NOK million
Balance as of January 1 (at implementation of IFRS 16)
Cash payments
Additions
Remeasurement
Additions through business combinations
Currency translation differences
Total lease liabilities
Current lease liabilities
Non-current lease liabilities
Lease and sublease payments recognized in the income statement
Amounts in NOK million
2019 – leases under IFRS 16
Expenses related to short term leases
Expenses related to leases of low-value assets
Total
2018 – Operating leases under IAS 17
Minimum lease payments
Sublease income
Total
The total net cash outflow for leases in 2019 was NOK 339 million.
Note
2
Note
2
29
2019
522
121
51
(96)
(9)
(53)
1
537
2019
707
(151)
121
(53)
51
1
677
160
516
81
103
184
258
(10)
248
Annual Report 2019 | Financials and Notes | Akastor Group 78
Some property leases contain extension or termination options exercisable
Group as lessor
before the end of the non-cancellable period. They are used to maximize
The group subleases out some of the property leases which are presented
operational flexibility in terms of managing the assets used in the group’s
as part of the right-of-use assets. In 2019, the group has lease income only
operations. The extension and termination options held are exercisable
from subleasing of right-of-use assets.
only by the group and not by the respective lessor. The group assesses at
lease commencement date whether it is reasonably certain to exercise the
Finance leases
extension or termination options.
In 2019, some of the subleases of right-of-use assets are classified as
finance lease under IFRS 16, with reference to the right-of-use assets
Most extension options in offices leases have not been included in the lease
arising from the head leases. In 2018, the group did not have any finance
liability, because the group expects to be able to replace the assets without
lease as a lessor under IAS 17.
significant cost or business disruption. Most of the early termination
options are not considered in the lease term either as the group assesses
The following table sets out a maturity analysis of finance lease receivables,
it as reasonably certain that the leases will not be terminated early. If the
showing the undiscounted lease payments to be received after the
group had exercised the extension options in significant property leases
reporting date.
as of December 31, 2019, the group estimates potential future lease
payments (undiscounted) of approximately NOK 460 million, which are
not included in the lease liabilities.
As of December 31, 2019, the group has committed to leases which will be
commenced in 2020. The expected future lease payments (undiscounted)
for the committed leases are NOK 41 million.
Amounts in NOK million
Due within one year
Due in one to two years
Due in two to three years
Due in three to four years
Due in four to five years
Due in more than five years
Total undiscounted lease receivable
Unearned interest income
Total finance lease receivables
Current finance lease receivables
Non-current finance lease receivables
Operating leases
2019
9
5
5
5
5
-
28
4
25
9
16
In 2019, most of the subleases are classified as operating leases except for the finance leases identified above. The lease income from subleasing right-
of-use assets in 2019 was NOK 148 million. All subleases were classified as operating leases in 2018.
The following table sets out future undiscounted sublease income under the non-cancellable lease periods.
Amounts in NOK million
2019 – Operating leases under IFRS 16
Due within one year
Due in one to two years
Due in two to three years
Due in three to four years
Due in four to five years
Due in more than five years
Total
2018 – Operating leases under IAS 17
Due within one year
Due in one to five years
Due in more than five years
Total
38
14
3
3
3
10
70
116
54
15
185
Annual Report 2019 | Financials and Notes | Akastor Group 79
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.
Location
Country
2019
2018
Ownership (%)
Fornebu
Norway
Group companies as of December 31
Company
Akastor ASA
MHWirth
MHWirth Pty Ltd
MHWirth do Brasil Equipamentos Ltda
MHWirth Canada Inc
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 1)
MHWirth Singapore Engineering Management Pte Ltd
MHWirth (Singapore) Pte Ltd
MHWirth UK Ltd
Bronco Manufacturing LLC
MHWirth Inc
MHWirth FZE
Kuala Lumpur
Malaysia
Argenton
Rio de Janeiro
Newfoundland
Erkelenz
Mumbai
Kristiansand
Kristiansand
Kristiansand
Kristiansand
Singapore
Singapore
Aberdeen
Houston
Houston
Dubai
Australia
Brazil
Canada
China
Germany
India
Norway
Norway
Norway
Norway
Singapore
Singapore
UK
USA
USA
UAE
UAE
MHWirth Gas & Oil- Field Equipment & Services LLC
Abu Dhabi
Step Oiltools
Step Oiltools (Australia) Pty Ltd
Step Oiltools GmbH
PT Step Oiltools
Step Oiltools LLP
Step Oiltools (M) Sdn Bhd
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
AGR 2)
AGR (Australia) Pty Ltd
AGR AS
AGR Petroleum Services AS
AGR Software AS
AGR Consultancy Services AS
First Geo AS
AGR Mexico Well Management S.de R.L de C.V
AGR Well Management Ltd
Perth
Australia
Bad Fallingbostel
Germany
Jakarta
Aktau
Indonesia
Kazakhstan
Kuala Lumpur
Malaysia
Amsterdam
Stavanger
Muscat
Moscow
Singapore
Bangkok
Aberdeen
Dubai
Oslo
Oslo
Oslo
Oslo
Stavanger
Mexico City
Aberdeen
Netherlands
Norway
Oman
Russia
Singapore
Thailand
UK
UAE
Australia
Norway
Norway
Norway
Norway
Norway
Mexico
UK
100
100
100
100
100
100
100
100
100
100
-
100
100
100
100
100
100
100
100
100
100
100
100
100
100
67
100
100
100
100
100
100
100
100
91
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
51
100
100
100
100
100
-
-
-
-
-
100
-
-
Annual Report 2019 | Financials and Notes | Akastor Group 80
AGR Consultancy Solutions Ltd
AGR Group Americas Inc
Other companies
Zoetermeer Process Belgium NV/SA
Aker Cool Sorption (Beijing) Technology Co Ltd 1)
Frontica Global Employment Ltd
Cool Sorption A/S
Zoetermeer Process BV 1)
Well Systems Servicing Ltd
AKA SPH AS
Akastor AS
Akastor Real Estate AS
Fjords Processing AS 3)
KOP Surface Products Singapore Pte Ltd
Aker Cool Sorption Siam Ltd
Frontica Business Solutions Ltd 4)
AK Pharmaceuticals LLC
AK Wilfab Inc
AKOFS Angola Limited
Aberdeen
Houston
UK
USA
Antwerp
Beijing
Limassol
Glostrup
Zoetermeer
Ikoyi - Lagos
Fornebu
Fornebu
Fornebu
Fornebu
Singapore
Rayong
London
Houston
Williamsport
Luanda
Belgium
China
Cyprus
Denmark
Netherlands
Nigeria
Norway
Norway
Norway
Norway
Singapore
Thailand
UK
USA
USA
Angola
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
1) Liquidated in 2019
2) Akastor holds 100 percent of the shares, and 55 percent of the economic interests
3) Merged into Akastor AS in 2019
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 2019 | Financials and Notes | Akastor Group 81
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
The largest shareholder of Akastor, Aker Kværner Holding AS, is controlled
parties 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 50 companies
holds 8.5 percent of the shares in Akastor ASA directly. All subsidiaries
around the world. These subsidiaries are listed in Note 34 Group
and associates of Aker ASA, including Kvaerner, Aker Solutions and Aker
companies. Any transactions between the parent company and the
BP, are considered related parties to Akastor, referred as “Aker entities”
subsidiaries are shown line by line in the separate financial statements
in the table below. The entities controlled directly by Kjell Inge Røkke
of the parent company, and are eliminated in the consolidated financial
through TRG Holding AS and The Resource Group TRG AS, are referred as
statements.
“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
Revenue
Operating expenses
Depreciation and impairment (ROU assets)
Net financial items
Included in Net profit from discontinued operations
Assets (liabilities)
Right-of-use assets
Finance lease receivables
Interest-bearing receivables
Trade receivables
Trade payables
Lease liabilities
2019
2018
Aker
entities
Joint
ventures
Total
Aker
entities
Joint
ventures
Total
210
(16)
(26)
(4)
-
49
22
-
32
(11)
(87)
14
-
-
29
-
-
-
191
2
-
-
224
(16)
(26)
25
-
49
22
191
34
(11)
(87)
163
(41)
-
-
(171)
-
-
-
28
-
-
-
-
-
2
2
-
-
257
6
-
-
163
(41)
-
2
(169)
-
-
257
33
-
-
Below are descriptions of significant related party agreements.
Several of the agreements addressing various separation issues
between Akastor and Aker Solutions are still valid after the
Related party transactions with Aker entities
demerger in 2014, including secondary joint liability for obligations
Aker Solutions
existing in Aker Solutions at the time of the demerger, yet limited
Akastor has entered into a number of agreements and arrangements with
in amount to the net value allocated to Akastor in the demerger.
Aker Solutions, including:
Aker BP
Various lease agreements from Akastor Real Estate AS and other
In 2017, Akastor Real Estate AS entered into agreement to sublease offices
Akastor companies to subsidiaries of Aker Solutions.
in Stavanger, Norway, to Aker BP.
Some parent company guarantees issued on behalf of Aker
Kværner
Solutions entities by Akastor (as their previous parent company)
Akastor Real Estate AS and Kvaerner have entered into lease agreement
were not transferred in connection with the demerger of Aker
related to offices in Trondheim, Norway.
Solutions in 2014. Aker Solutions is liable to indemnity Akastor
for any rightful claim such parent company guarantees and to pay
a guarantee commission to Akastor.
Annual Report 2019 | Financials and Notes | Akastor Group 82
Agreements with related parties to Aker ASA
Akastor has issued a financial parent company indemnity guarantee of NOK
The Resource Group TRG AS
43 million and a financial guarantee of NOK 136 million in favour of finance
MHWirth AS, a wholly owned subsidiary of Akastor, entered into long-term
institutions for fulfilment of lease obligations related to Avium Subsea AS.
lease agreements in 2015 with subsidiaries of The Resource Group TRG
Akastor has issued a financial parent company indemnity guarantee of
AS, for properties in Kristiansand in Norway. The annual lease payment
NOK 2.1 billion in favour of OCY Wayfarer Limited for fulfilment of lease
is approximately NOK 22 million for a lease period of 19 years starting
obligations related to AKOFS 3 AS. In addition, Akastor is guaranteeing
October 1, 2015, with options for renewal.
the performance of AKOFS Norway Operations AS (operating AKOFS
AK Wilfab Inc, a wholly owned subsidiary of Akastor, is together with Aker
contract value of this charter agreement is NOK 3.3 billion. Avium Subsea
Solutions Inc and The Resource Group TRG AS sponsoring the US pension
AS, AKOFS 3 AS and AKOFS Seafarer AS are wholly owned subsidiaries
Seafarer) under the 5 year charter agreement with Equinor. The total
plan named the Kvaerner Consolidated Retirement Plan. Akastor holds
of AKOFS Offshore.
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
Other related parties
liability. Aker ASA guarantees for The Resource Group TRG AS’ liability
Aker Pensjonskasse
and covers for all its expenses related to the pension plan.
Aker Pensjonskasse was established by Aker ASA to manage the
Fornebuporten Næring 3 AS
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
Akastor leases its headquarter offices at Fornebu from Fornebuporten
Pensjonskasse and Akastor’s share of paid-in equity was NOK 158 million
Næring 3 AS, an associated company of The Resource Group TRG AS.
at the end of 2019 (NOK 158 million in 2018). Akastor’s premium paid to
The contract term is 10 years starting August 31, 2015, with two additional
Aker Pensjonskasse amounts to NOK 8 million in 2019 (NOK 8 million
five-year options.
in 2018). Akastor also has an interest-bearing receivable against Aker
Pensjonskasse of NOK 10 million and an additional financing commitment
Related party transactions with joint ventures
NOK 10 million (3% interest of drawn amount and 1% interest of committed
DOF Deepwater AS
amount).
During 2019, the shareholder's
loan to DOF Deepwater AS was
increased by NOK 60 million. As of December 31, 2019, the balance of
Even though Akastor owns 93.4 percent in Aker Pensjonskasse, the
the shareholder’s loan from Akastor to DOF Deepwater AS is NOK 97
ownership does not constitute control since Akastor does not have the
million (NIBOR 6 months + margin 3.6 percent). The carrying amount of
power to govern the financial and operating policies so as to obtain
the receivable is reduced to zero due to recognition of Akastor’s share of
benefits from the activities in this entity.
losses in 2019.
Akastor ASA has issued financial guarantees in favor of banks related to
Aker ASA has signed an agreement with employee representatives
financing of the five vessels in DOF Deepwater. The liability is capped at
that regulate use of grants from Akastor ASA for activities related to
50 percent of drawn amount. The guarantee is NOK 495 million as of
professional development. The grant in 2019 was NOK 521 250 (NOK 510
December 31, 2019 (NOK 507 million in 2018).
000 in 2018).
Grants to employee representative’s collective fund
AKOFS Offshore
As of December 31, 2019, Akastor has interest-bearing receivables of
NOK 191 million against AKOFS Offshore (LIBOR 1.9 percent + margin 5.5
percent). Further, Akastor has made available a NOK 100 million revolving
facility to AKOFS Seafarer AS from contract commencement with Equinor.
As part of the joint venture shareholders agreement, the other two
investors, Mitsui and MOL, are entitled to a guaranteed preferred equity
return, in respect of the operations of AKOFS Seafarer, amounting to a
total of USD 46 million over a 6 year’s period. The payment of preferred
return will be settled firstly by ordinary dividend from AKOFS Offshore,
yet any shortfall is guaranteed by Akastor. Akastor ASA has issued a bank
guarantee for payment of preferred return for a total amount of NOK 319
million.
Annual Report 2019 | Financials and Notes | Akastor Group 83
Note 36 | Management remunerations
Board of directors
The board of directors did not receive any other fees than those listed in the table below, except for employee representatives who has market based
salaries. The members of the board of directors have no agreements that entitle them to any extraordinary remuneration.
The fees in the table below represent expenses recognized in the income statement based on assumptions about fees to be approved at the general
assembly rather than actual payments made in the year.
Amounts in NOK
Kristian Monsen Røkke
Øyvind Eriksen
Lone Fønss Schrøder 1)
Kathryn Baker
Sarah Ryan 1)
Stian Sjølund
Henning Jensen
Asle Christian Halvorsen
Total
2019
Audit Committee
fees
-
-
205 000
115 000
-
-
115 000
-
Board fees
600 000
340 000
490 000
340 000
395 600
170 000
170 000
170 000
2018
Audit Committee
fees
-
-
205 000
115 000
-
-
115 000
-
Board fees
600 000
340 000
527 500
340 000
421 426
170 000
170 000
170 000
435 000
2 675 600
435 000
2 738 926
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 are
and conditions regarding notice period and severance pay for the Akastor
paid to the Aker companies, not to the directors in person. Therefore, board
management. Karl Erik Kjelstad and Leif Borge both have a six months’
fees for Kristian Monsen Røkke and Øyvind Eriksen were paid to Aker ASA.
notice period as part of their employment contracts.
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 in
held 6 meetings in 2019. As of December 31, 2019, the audit committee
shareholder value. Compensation to the executive management has a fixed
comprises Lone Fønss Schrøder (chairperson), Kathryn M. Baker and
element which includes a base salary which pursuant to the company’s
Henning Jensen.
benchmarking is competitive with other investment companies. In
addition, the executive management has variable remuneration, as further
Guidelines for remuneration to the members of the executive
described below. All variable pay shall be subject to a cap.
management of Akastor
As of December 31, 2019, the executive management of Akastor
The salary figures for the remuneration for the executive management
comprised the company’s CEO Karl Erik Kjelstad and CFO Leif Borge. The
represent what has been expensed in the year.
company practices standard employment contracts and standard terms
Amounts in NOK
2019
Karl Erik Kjelstad
Leif Borge
Total
2018
Karl Erik Kjelstad
Leif Borge
Total
Job title
Base salary
Variable pay 1)
Other
benefits 2)
Total taxable
remuneration
Pension benefit earned/
cost to company 3)
CEO
CFO
4 631 731
3 719 523
2 336 040
1 667 764
30 164
31 748
6 997 935
5 419 035
8 351 254
4 003 804
61 912
12 416 970
CEO
CFO
4 649 849
2 040 378
3 664 895
1 642 653
8 314 744
3 683 031
23 236
17 997
41 233
6 713 463
5 325 544
12 039 008
248 892
257 965
506 857
247 849
257 006
504 855
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.
Annual Report 2019 | Financials and Notes | Akastor Group
84
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
Performance based remuneration
the company’s share price. The executive management may from time to
In addition to the fixed compensation set out above, the executive
time be granted a discretionary variable pay. There was no discretionary
executive management may in its entirety be linked to the development of
management (as well as other members of the corporate organization)
pay paid out for 2018 or 2019.
participates in a variable pay program. The objective of the program is
to incentivize the management to contribute to sound financial results
The CEO and CFO also participate in a long-term incentive bonus plan,
for the company, recruit and retain key personnel as well as executing
under which the maximum bonus amount is capped at two times of
leadership in accordance with the company’s values and business ethics.
annual salary. Payments under the bonus scheme are determined based
The potential payment under the variable pay program is set individually,
on delivery of certain key strategic targets for the company and/or
with 100 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 executive management were invited to participate in Akastor’s share
purchase programs in 2019. The ordinary employee share purchase
Development of Akastor ASA’s share price
program gave the executive management the opportunity to purchase
maximum 250 000 shares for CEO and CFO with a reduction of 25 percent
Delivery of certain key financial, operational and strategic targets
in addition to NOK 3 000. Shares purchased under the programs is subject
for Akastor
to a three year lock-up period during which the acquired shares may not be
Delivery of personal performance objectives during the year
sold or otherwise disposed of.
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
Lone Fønss Schrøder
Kathryn Baker
Sarah Ryan
Asle Christian Halvorsen
Stian Sjølund
Job title
CEO
CFO
Chairman
Deputy chairman
Director
Director
Director
Director
2019
2018
300 000
340 000
200 000
4 400
45 683
5 000
10 000
10 000
123 074
250 000
200 000
4 400
45 683
5 000
-
-
The overview includes only direct ownership of Akastor shares and does not include Øyvind Eriksen’s indirect ownership through ownership in Aker ASA.
Note 37 | Events after the reporting date
In March 2020, the outbreak of COVID-19 virus was declared as a global
The outbreak of COVID-19 virus is expected to have significant negative
pandemic by World Health Organization. Norway, together with many
impact on the global economy and the group’s operational activities
other countries, have taken national emergency measures in attempt to
in 2020. The financial impact to the group is currently uncertain as the
contain the spread of the virus, including extensive mandatory quarantines
duration of pandemic cannot be estimated reliably.
and travel restrictions. MHWirth sent out warning notice of temporary
layoffs to all employees in Norway, as reduced industry activity level is
expected in the coming periods. The detailed plan for temporary layoffs is
currently under preparation.
Annual Report 2019 | Financials and Notes | Akastor Group 04.b. FINANCIALS AND NOTES
AKASTOR ASA
Income statement
Akastor ASA |
Akastor ASA | Statement of financial position
Akastor ASA | Statement of cash flow
| Accounting principles
Note 1
Note 2 | Operating revenue and expenses
Note 3 | Net financial items
Note 4 | Tax
Note 5 | Investments in group companies
Note 6 | Shareholders’ equity
Note 7 | Receivables and borrowings from group companies
Note 8 | Borrowings
Note 9 | Guarantees
Note 10 | Financial risk management and financial instruments
Note 11 | Related parties
Note 12 | Shareholders
Note 13 | Subsequent events
85
86
87
88
89
90
90
91
91
92
92
93
94
95
95
96
96
Annual Report 2019 | Financials and Notes | Akastor ASAFinancials and Notes | Akastor ASA
86
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
Note
2019
2018
2
2
3
4
1
(31)
(30)
(37)
(67)
(1)
(67)
8
(37)
(29)
(277)
(306)
6
(300)
(67)
(67)
(300)
(300)
Annual Report 2019 | Financials and Notes | Akastor ASA
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
Non-current interest-bearing receivables on related parties
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
Cash in cash pool system
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
87
Note
2019
2018
5
7
7
7
7
10
7
6
8
4
8
7
7
10
5 310
819
115
2
5 022
830
-
2
6 246
5 855
5
-
-
-
316
321
6 567
162
(1)
2 000
2 003
168
4 331
1 284
14
1 298
3
882
1
30
-
21
937
2 235
6 567
-
257
243
9
-
510
6 365
162
(2)
2 000
2 003
231
4 395
588
14
602
14
1 306
1
-
9
39
1 368
1 970
6 365
Fornebu, March 18, 2020 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 2019 | Financials and Notes | Akastor ASA
88
Akastor ASA | Statement of cash flow
For the year ended December 31
Amounts in NOK million
Profit (loss) before tax
Adjustments:
Impairment of receivables and shares
Net interest cost and unrealized currency (income) loss
Profit (loss), net of adjustments
Changes in net operating assets
Net interest paid
Income taxes paid
Net cash from operating activities
Change in borrowings to related parties
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
Proceeds from employees share purchase programme
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 1.6 billion as of December 31, 2019 (NOK 2.0 billion in 2018).
Note
2019
2018
(67)
(306)
3
7
-
82
15
(24)
(54)
-
(63)
142
142
1 135
(450)
-
(2)
(436)
4
-
251
(14)
316
-
316
301
122
117
23
(92)
(16)
31
(154)
(154)
924
(1 154)
(106)
1 999
(2 303)
-
800
(160)
(38)
-
-
-
Annual Report 2019 | Financials and Notes | Akastor ASA
89
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
exceed 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
as well as any tax losses carry-forward at the year end. Net deferred tax
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.
Interest-bearing borrowings are initially recorded at transaction value less
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 2019 | Financials and Notes | Akastor ASA 90
Note 2 | Operating revenue and expenses
Operating revenue comprises NOK 1 million in income from parent
NOK 3.2 million has been allocated to payable fees to the Board of
company guarantees (NOK 8 million in 2018, of which NOK 5 million from
Directors for 2019 (2018: 3.2 million). Remuneration to and shareholding
related parties).
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 2.5 million (2018: 2.9
by other Akastor companies and costs for their services as well as other
million).
parent company costs are recharged to Akastor ASA.
Note 3 | Net financial items
Amounts in NOK million
Interest income from group companies
Interest income from related parties
Interest income, external
Interest expense, external
Impairment on receivables to group companies
7
Impairment of shares
Other financial expenses
Foreign exchange gain (loss)
Net financial items
Note
2019
2018
44
24
31
(117)
-
-
(2)
(17)
(37)
162
2
12
(96)
(25)
(276)
(1)
(55)
(277)
Annual Report 2019 | Financials and Notes | Akastor ASA Note 4 | Tax
Amounts in NOK million
Calculation of taxable income
Profit (loss) before tax
Write down internal shares
Loss on receivables
Other permanent differences
Changes in timing differences
Generated (utilized) tax loss
Taxable income
Taxable (deductible) temporary differences
Other temporary differences
Tax loss carry-forward1)
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)
91
2019
2018
(67)
(306)
-
-
5
-
61
-
(7)
72
66
22%
(14)
(1)
-
(1)
276
(395)
(16)
7
435
-
(19)
82
63
22%
(14)
6
1
6
1) Akastor ASA has unrecognized tax loss carry forwards of NOK 1.5 billion. A significant part of these tax loss carryforwards (NOK 1 015 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 1)
Total
Registered
office
Share
capital
Number of
shares held
Percentage
owner- /
voting share
Fornebu,
Norway
1 004
1
100%
2019
2018
5 310
5 310
5 022
5 022
1) Shareholding in Akastor AS was increased in 2019 by a contribution-in-kind of NOK 288 million.
Akastor AS financial information
Amounts in NOK million
Profit (loss) for the period
Equity as of December 31
See note 13 Subsequent events for information about dividends.
2019
324
6 077
Annual Report 2019 | Financials and Notes | Akastor ASA
92
Note 6 | Shareholders’ equity
Amounts in NOK million
Share capital
Treasury
shares
Share
premium
Other paid in
capital
Retained
earnings
Equity as of January 1, 2018
Profit (loss) for the period
Equity as of December 31, 2018
Employee share purchase programme
Profit (loss) for the period
Equity as of December 31, 2019
162
-
162
-
162
(2)
-
(2)
-
-
2 000
2 003
-
-
2 000
2 003
-
-
(1)
2 000
2 003
531
(300)
231
4
(67)
168
Total
4 695
(300)
4 395
4
(67)
4 331
The share capital of Akastor ASA is divided into 274 000 000 shares with
The number of treasury shares held by the end of 2019 are 2 390 215
a nominal value of NOK 0.592. The shares can be freely traded. See note
and are held for the purpose of being used for future awards under any
12 Shareholders for an overview of the company's largest shareholders.
share purchase program for employees, as settlement in future corporate
acquisitions or for other purpose as decided by the board of directors.
386 161 treasury shares were sold during 2019 in relation to the Employee
share purchase programme.
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
Non-current interest-bearing receivables on group companies
Current interest-bearing receivables on group companies
Current borrowings from group companies 1)
Net interest-bearing receivables on group companies
Other receivables on group companies
Other liabilities to group companies
Total other receivables on group companies
Non-current interest-bearing receivables on related parties
Current interest-bearing receivables on related parties
Total interest-bearing receivables on related parties
1)
Includes Akastor ASA’s net borrowings in the cash pool system
2019
882
(566)
316
819
5
(882)
(58)
-
(30)
(30)
115
-
115
2018
1 306
(1 306)
-
830
-
(1 306)
(475)
243
-
243
-
257
257
Interest-bearing receivables on and borrowings from group
board of directors and confirmed by a statement of participation. The
companies
participants in the cash pool system are jointly and severally liable and
Akastor ASA is the group’s central treasury function (Akastor Treasury) and
it is therefore important that Akastor as a group is financially viable and
enters into borrowings and deposit agreements with group companies.
can repay deposits and carry out transactions. Any debit balance on a sub
Deposits and borrowings are done at market terms and are dependent
account can be set-off against any credit balance. Hence, a debit balance
of the group companies’ credit rating and the duration of the borrowings.
represents a claim on Akastor ASA and a credit balance a borrowing from
Cash pool arrangement
Akastor ASA.
Akastor ASA is the owner of the cash pool system arrangements with DNB.
The cash pool system has a net cash of NOK 316 million as of December
The cash pool systems cover a majority of the group geographically and
31, 2019 (net overdraft of NOK 13 million in 2018), reported as cash in the
assure good control and access to the group’s cash. Participation in the
cash pool system (2018: reported as external borrowings).
cash pool is vested in the group’s policy and decided by each company’s
Annual Report 2019 | Financials and Notes | Akastor ASA
93
Note 8 | Borrowings
Amounts in million
Currency
Nominal
currency
value
Carrying
amount
(NOK)
Interest
rate
Interest
margin 1)
Interest
coupon Maturity 2)
Interest terms
2019
Revolving credit facility
(NOK 1 250 million)
Revolving credit facility
(USD 155 million)
Total borrowings
Current borrowings
Non-current borrowings
Total
2018
Revolving credit facility
(NOK 1 005 million)
Revolving credit facility
(USD 147 million)
Overdraft facility
Total borrowings
Current borrowings
Non-current borrowings
Total
NOK
800
794
1.65%
3.25%
4.90%
Dec 2021
NIBOR + margin
1.71%
3.25%
4.96%
Dec 2021
USD LIBOR + margin
USD
56
494
1 287
3
1 284
1 287
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
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 (2018: 35
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 covenants are monitored on a regular basis by the Akastor Treasury
Nordic and international banks. The terms and conditions include
department to ensure compliance with the loan agreements and are
restrictions which are customary for these kinds of facilities, including inter
tested and reported on a quarterly basis. Akastor was not in breach with
alia negative pledge provisions and restrictions on acquisitions, disposals
any covenants as of December 31, 2019, and on the basis of the covenants
and mergers and change of control provisions. The facilities include no
and its forecasts, management believes that the risk of covenant being
dividend restrictions.
breached is low and that the group will continue as a going concern for the
foreseeable future. See more information in note 29 Capital management
The financial covenants are a gearing ratio based on net debt/equity, an
in the Akastor Group consolidated accounts.
interest coverage ratio (ICR) based on EBITDA/net interest costs and
a minimum liquidity amount. The financial covenants are tested on a
quarterly basis.
The company’s gearing ratio shall not exceed 1.0 times and is
calculated from the consolidated net total borrowings to the
consolidated equity.
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.
The ICR shall not be lower than 4.0 when gearing ratio exceeds
0.5, calculated from the consolidated EBITDA to consolidated
Net Finance Cost.
Minimum liquidity amount shall exceed NOK 500 million on
consolidated level
Annual Report 2019 | Financials and Notes | Akastor ASA
94
Financial liabilities and the period in which they mature
Amounts in NOK million
2019
Revolving credit facility (NOK 1 250 million)
Revolving credit facility (USD 155 million)
Total borrowings
2018
Revolving credit facility (NOK 1 250 million)
Revolving credit facility (USD 155 million)
Overdraft facility
Total borrowings
Carrying
amount
Total
undiscounted
cash flow 1)
6 months
and less
6–12 months
1–2 years
2–5 years 2)
794
494
1 288
588
-
13
601
882
541
1 423
662
-
13
675
23
12
35
11
-
13
24
20
12
32
10
-
-
10
839
517
1 356
21
-
-
21
-
-
621
-
-
621
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
2019
1 510
5 806
730
5
8 052
99
226
7
2018
1 422
2 894
1 055
5
5 376
237
418
66
1 239
107
6 480
4 548
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, AKOFS Norway Operations AS and
DOF Deepwater AS.
3) Bank guarantees and surety bonds are issued on behalf of Akastor subsidiaries and related parties, 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 2019 | Financials and Notes | Akastor ASA
95
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 2019, Akastor ASA had not entered into any forward
exposure from the financial derivative agreements with the subsidiaries. In
exchange contracts with subsidiaries.
addition, Akastor ASA may have cash flow exposure towards its financial
Amounts in NOK million
Forward exchange contracts with group companies
Forward exchange contracts with external counterparts
Total
2019
2018
Assets
Liabilities
Assets
Liabilities
-
-
-
-
-
-
9
-
9
-
(9)
(9)
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 fulfill its loan
therefore not exposed to fair value risk on its outstanding loan receivables
obligations from future earnings. No impairment was booked in 2019 (NOK
or loan payables. Interest bearing loan receivables and loan payables
25 million was impaired in 2018). See note 7 Receivables and borrowings
expose the company to income statement and cash flow interest risk.
from 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 and balances 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
Note
Note 2
Note 3
Note 7
Note 9
Note 10
All transactions with related parties are carried out at market terms and in accordance with the arm’s lengths principle.
Annual Report 2019 | Financials and Notes | Akastor ASA 96
Note 12 | Shareholders
Shareholders with more than 1 percent shareholding
Company
2019
Aker Kværner Holding AS
Goldman Sachs & Co
Morgan Stanley & Co. LLC
Aker ASA
ODIN Norge
Jefferies LLC SP. RES. A/C FBO CUS
Fond Finans Norge
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
Note 13 | Subsequent events
Note
Nominee
Number of shares held
Ownership
Nominee
Nominee
Nominee
110 333 615
35 373 096
31 296 769
23 331 762
10 575 925
7 288 162
3 100 000
40.27%
12.91%
11.42%
8.52%
3.86%
2.66%
1.13%
Note
Nominee
Number of shares held
Ownership
Nominee
Nominee
Nominee
Nominee
6
110 333 615
39 600 376
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 %
On February 25, 2020, the subsidiary Akastor AS declared dividends of NOK 500 million based on Akastor AS financial statement for 2018. The dividends
will be recognized in the income statement of Akastor ASA in 2020.
Annual Report 2019 | Financials and Notes | Akastor ASA 05. AUDITOR'S REPORT
97
KPMG AS
Sørkedalsveien 6
Postboks 7000 Majorstuen
0306 Oslo
Telephone +47 04063
Fax +47 22 60 96 01
Internet www.kpmg.no
Enterprise 935 174 627 MVA
To the
Meeting of Akastor ASA
Report on the Audit of the Financial Statements
Opinion
We have audited the financial statements of Akastor ASA, which comprise:
The financial statements of the parent company Akastor ASA (the "Company"), which
comprise the statement of financial position as at 31 December 2019, the income statement
and cash flow statement 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 position as at 31 December 2019, the income
statement, statement of comprehensive income, statement of changes in equity and statement
of cash 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 2019, 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 of the financial
position of the Group as at 31 December 2019, 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 Opinion
We 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
Audit of the Financial Statements section of our report. We are independent of the Company and the
Group as 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.
Annual Report 2019 | Auditor's ReportAuditor's Report
98
Akastor ASA
Construction contract accounting estimates
Reference is made to 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.
In IFRS 15 Revenue from contracts with
customers there is a high degree of judgement
in determining the number of performance
obligations which can impact the timing and
amount of revenue recognition for certain
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.
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.
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:
Challenging management's measure of
progress estimate and evaluated
management's process for assessing the
measurement of progress and the method
applied;
Updating our understanding of the project
performance, comparing changes to
previous forecasts, sensitivities and risks by
reviewing management's project reporting
and discussing with relevant management;
Assessing contractual revenue forecasts
including corroborating those forecasts with
reference to signed contracts and variation
orders to assess the contractual basis of
estimated future revenues;
Evaluating the calculation of project revenue
and cost and contract assets and contract
liabilities in relation to the stage of
completion and forecasts;
Analysing preliminary rulings or other
relevant pronouncements for items in
arbitration and historical outcomes of
negotiations with customers and other
proceedings;
Challenging management on their
assessment of probable settlement
negotiations regarding liquidated damages
and disputes;
Challenging management on the estimate of
cost to complete, timing of the cost and the
risk assessment related to forecast cost;
Obtaining and reading a selection of
correspondence between the Group and the
customer and the Group's legal advisors;
and
Considering events subsequent to reporting
date and challenged management on their
impact to the estimates made at year-end.
Annual Report 2019 | Auditor's Report
99
Akastor ASA
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.
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 NGAAP, and for the preparation and fair presentation of the
consolidated financial statements of the Group in accordance with International Financial Reporting
Standards as adopted by the EU, and for such internal control as management determines is
necessary to enable the preparation of financial statements that are free from material misstatement,
whether due to fraud or error.
lity 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.
f the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole
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.
accounting and, based on the audit evidence obtained, whether a material uncertainty exists
Annual Report 2019 | Auditor's Report
100
Akastor ASA
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 a
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 audit
However, future events or conditions may cause the Company and the Group to cease to
continue as a going concern.
evaluate the overall presentation, structure and content of the financial statements, including
the disclosures, and whether the financial statements represent the underlying transactions
and events in a manner that achieves fair presentation.
obtain sufficient appropriate audit evidence regarding the financial information of the entities or
business activities within the Group to express an opinion on the consolidated financial
statements. We are responsible for the direction, supervision and performance of the group
audit. We remain solely responsible for our audit opinion.
We communicate with the Board of Directors regarding, among other matters, the planned scope and
timing of the audit and significant audit findings, including any significant deficiencies in internal control
that we identify during our audit.
We also provide the Board of Directors with a statement that we have complied with relevant ethical
requirements regarding independence, and to communicate with them all relationships and other
matters that may reasonably be thought to bear on our independence, and where applicable, related
safeguards.
From the matters communicated with the Board of Directors, we determine those matters that were of
most significance in the audit of the financial statements of the current period and are therefore the
aw or regulation precludes
public disclosure about the matter or when, in extremely rare circumstances, we determine that a
matter should not be communicated in our report because the adverse consequences of doing so
would reasonably be expected to outweigh the public interest benefits of such communication.
Report on Other Legal and Regulatory Requirements
Based on our audit of the financial statements as described above, it is our opinion that the
information pres
and in the statements on Corporate
Governance and Corporate Social Responsibility concerning the financial statements, the going
concern assumption and the proposed allocation of the result is consistent with the financial
statements and complies with the law and regulations.
Opinion on Registration and Documentation
Based on our audit of the financial statements as described above, and control procedures we have
considered necessary in accordance with the International Standard on Assurance Engagements
(ISAE) 3000, Assurance Engagements Other than Audits or Reviews of Historical Financial
Information, it is our opinion that management has fulfilled its duty to produce a proper and clearly set
out
law and bookkeeping standards and practices generally accepted in Norway.
Oslo, 18 March 2020
KPMG AS
Vegard Tangerud
State Authorised Public Accountant
Annual Report 2019 | Auditor's Report
101
06. ALTERNATIVE PERFORMANCE
MEASURES
Akastor discloses alternative performance measures as a supplement to
operation of a business. It is calculated by non-current assets and finance
the consolidated financial statements prepared in accordance with IFRS.
lease receivables (excluding non-current interest-bearing receivables)
Such performance measures are used to provide an enhanced insight
added by net current operating assets minus non-current operating
into the operating performance, financing abilities and future prospects
liabilities (deferred tax liabilities, employee benefit obligations, other non-
of the group. These measures are calculated in a consistent and
current liabilities and lease 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, excluding lease
these measures are frequently used by securities analysts, investors and
liabilities
other interested parties.
The definitions of these measures are as follows:
Net debt - gross debt minus cash and cash equivalents.
Net interest-bearing debt (NIBD) – net debt minus non-current and
EBITDA - earnings before interest, tax, depreciation and amortization,
current interest-bearing receivables..
corresponding to "Operating profit before depreciation, amortization and
impairment" in the consolidated income statement.
Equity ratio - a measure of investment leverage, calculated as total
equity divided by total assets at the reporting date.
EBIT - earnings before interest and tax, corresponding to "Operating
profit (loss)" in the consolidated income statement.
Liquidity reserve - comprises cash and cash equivalents and undrawn
committed credit facilities.
Capex and R&D capitalization - a measure of expenditure on PPE or
intangible assets that qualify for capitalization.
Order intake – represents the estimated contract value from the
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
liabilities, excluding financial assets or financial liabilities related to
Order backlog - represents the remaining unearned contract value
hedging activities.
from the contracts or orders that are entered into or committed at
the reporting date. The backlog does not include options on existing
Net capital employed - a measure of all assets employed in the
contracts, or contract value from short-cycled service orders.
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
Net current operating assets (NCOA)
2019
10
528
3 177
3 716
(11)
(119)
(2 974)
(3 105)
611
2018
4
548
2 801
3 354
(8)
(236)
(2 734)
(2 979)
375
Annual Report 2019 | Alternative Performance MeasuresAlternative Performance Measures 102
Net capital employed (NCE)
Amounts in NOK million
Total non-current assets
Net current operating assets (NCOA)
Current finance lease receivables
Non-current interest-bearing receivables
Deferred tax liabilities
Employee benefit obligations
Other non-current liabilities
Non-current provisions
Total lease liabilities
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
2019
2018
6 256
611
9
(201)
(11)
(359)
(491)
(51)
(677)
5 085
2019
1 444
3
1 448
(555)
893
(201)
-
692
2019
4 371
10 578
41%
2019
555
1 320
1 875
5 077
375
-
-
(9)
(332)
(390)
(166)
-
4 556
2018
588
14
601
(198)
403
-
(257)
146
2018
4 317
9 005
48%
2018
198
2 000
2 198
Annual Report 2019 | 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, 2019, 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, 2019, 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. As a corporate attorney, he among other things
worked with strategic and operational development, M&A and negotiations. Mr. Eriksen has held
several board positions in different industries, including shipping, finance, asset management,
offshore drilling, fisheries, media, trade and industry. Mr. Eriksen is chairman of the board in Aker
BP ASA, Aker Solutions ASA, Cognite AS, Aker Capital AS, Aker Kværner Holding AS and REV
Ocean Inc, and a director of several companies, including Aker Energy AS, The Resource Group
TRG AS, TRG Holding AS and The Norwegian Cancer Society (Kreftforeningen). He is also
member of the World Economic Forum's Centre for the Fourth Industrial Revolution Global
Network Advisory Board.
As of December 31, 2019, 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 2019 | Board of DirectorsBoard of Directors 104
Kathryn M. Baker | Director
Kathryn M. Baker has over 30 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. AS of December 31, 2019, 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, 2019, she holds 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, 2019, Mr. Jensen holds no shares or stock options in the company. Mr.
Jensen is a Norwegian citizen and has been elected for the period 2019-2021.
Annual Report 2019 | 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, 2019, he holds 10 000 shares in the company. Mr. Halvorsen is a Norwegian
citizen. He has been elected for the period 2019-2021.
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, 2019, Mr. Sjølund holds 10 000 shares in the company. Mr. Sjølund
is a Norwegian citizen and has been elected for the period 2019-2021.
Annual Report 2019 | 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 18, 2020, he holds,
through a privately-owned company, 300 000 shares in the company and has no stock options. Mr.
Kjelstad is a Norwegian citizen.
Øyvind Paaske | Chief Financial Officer
Øyvind Paaske joined the investment team of Akastor in 2014. Prior to this, he held the position
as Investment Manager in Aker ASA. Mr. Paaske holds an MSc in Financial Economics from the
Norwegian School of Economics and Business Administration (NHH) and UNC Kenan-Flagler
Business School. As of March 18, 2020, he holds 5 083 shares in the company and has no stock
options. Mr. Paaske is a Norwegian citizen.
Annual Report 2019 | ManagementManagement 107
09. COMPANY INFORMATION
Reports on the Internet
Copyright and Legal Notice
The quarterly 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. Quarterly 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
MHWirth
Butangen 20, 4639 Kristiansand, Norway
PO Box 413 Lundsiden, 4604 Kristiansand, Norway
+47 38 05 70 00
mhwirth.com
AKOFS Offshore
Karenslyst Allé 57, 0277 Oslo, Norway
PO Box 244, 0213 Oslo, Norway
+47 23 08 44 00
akofsoffshore.com
AGR
Karenslyst allé 4, 0278 Oslo, Norway
+47 24 06 10 00
agr.com
Step Oiltools
7500A Beach Road # 16-307/312
The Plaza, Singapore, 199591, Singapore
+65 6396 3872
stepoiltools.com
Cool Sorption
Smedeland 6, DK2600 Glostrup, Denmark
+45 43 45 47 45
coolsorption.com
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