Wilh. Wilhelmsen Holding ASA
Annual Report 2018

Plain-text annual report

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Annual report 2018 Key figures – consolidated accounts INCOME STATEMENT Total income * Operating profit before amortisation and impairment (EBITDA)* Operating profit * Profit/(loss) before tax * Net profit/(loss) * Net profit/(loss) after non-controlling interests * BALANCE SHEET Non current assets Current assets Equity Interest-bearing debt Total assets KEY FINANCIAL FIGURES Cash flow from operation (1) Liquid funds at 31 December (2) Liquidity ratio (3) Equity ratio (4) YIELD Return on equity (5) 2018 2017 2016 2015 2014 USD mill USD mill USD mill USD mill USD mill USD mill USD mill USD mill USD mill USD mill 871 78 36 (86) (75) (69) 2 467 612 2 017 533 793 198 176 253 (2) (64) 2 637 636 2 188 601 930 116 94 151 251 201 3 781 914 2 492 1 533 3 173 3 693 398 165 48 57 54 3 566 1 120 2 206 1 660 566 381 273 292 241 3 687 1 152 2 329 1 693 USD mill 3 079 3 273 4 695 4 686 4 839 USD mill USD mill % % 62 227 1.3 66% 70 268 1.4 67% 420 580 1.9 53% 258 638 1.7 47% 241 688 2.1 48% (4%) (3%) 11% 2% 13% KEY FIGURES PER SHARE Earnings per share (6) Operating profit before amortisation and impairment (EBITDA) per share (7)* Average number of shares outstanding Dividend per share USD USD Thousand NOK (1.48) 1.68 46 404 5.50 (1.38) 4.26 46 404 5.00 4.34 2.51 46 404 5.00 1.16 8.55 46 404 5.00 5.20 12.18 46 404 5.00 Definition (1) Net cash flow from operating activities (2) Cash, bank deposits and short term financial investments (3) Current assets divided by current liabilities (4) Equity in percent of total assets (5) Profit after tax divided by average equity (6) Profit for the period after non-controlling interests, divided by average number of shares Earnings per share taking into consideration the number of shares reduced for own shares (7) Operating profit for the period adjusted for depreciation and impairments of assets, divided by average number of shares outstanding * Figures for 2016 are restated with Wilh. Wilhelmsen ASA reported as discontinued operation. Figures for 2015, and 2014 are according to the proportionate method. Highlights for 2018 Positive development in underlying operating result Logistics support to NATO exercise Trident Juncture Entering offshore wind supply market Continued development of new digital solutions, including three new joint ventures Paid dividend of NOK 5.50 per share Net loss for the year due to fall in asset values 9 500 seafarers employed by Ship management 75 000 port calls handled by Ships service’s port agents per year 1 000 000 tonnes of equipment handled for offshore installations by NorSea Group 370 vessels serviced by Ship management 50% Ships service delivers products and solutions to more than 50% of the merchant fleet 217 000 products delivered by Ships service to the merchant fleet every year. A delivery every three minutes every day Sustainability report summary 2018 The oceans are our business and we see opportunities ahead 1 3 We operate in markets exposed to the world economic growth and general geopolitical environments. We know that our current business models are challenged by multiple factors including rapid technology development, changing customer and supplier behaviour, new competitors, and a changing workforce. 2 Our operating environment offers a vast number of opportunities which we intend on capturing in a sustainable way by being agile, innovative, and disrupting ourselves. We are committed to contributing to the Sustainable Development Goals and we can make a significant impact in our field of operations on land and at sea. 4 We enable sustainable global trade and thrive on the opportunities in front of us. 2018 was a solid and exciting year and we see some significant leaps ahead with the support of technology just around the corner. The level of engagement amongst our employees working in this dynamic environment and the attention we place on providing safe and healthy working conditions are high. Our portfolio of innovations and partnerships are growing and will help us take on the future. Sustainability achievements 2018 Defined four high impact sustainability focus areas where the group will intensify efforts Positive 72 point score and 89% completion rate in employee engagement survey Lost time injury (LTI) frequency rate on vessels and onshore within targets Established world’s first autonomous shipping company with partners Appropriate risk reduction methods and tools implemented for cyber security Implementation of policy and practises to address EU General Data Protection Regulation (GDPR) 1 2 3 4 5 6 Find more on wilhelmsen.com/sustainability2018 Materiality assessment 2018 More l s r e d o h e k a t s o t e c n a t r o p m I High materiality • Focus areas for activity • Detailed disclosure Health and safety Ethics and anti-corruption Responsible procurement Emissions Cyber security and data protection Employment conditions Medium materiality • Important areas for activity • Disclosure Transparency Responsible ownership Diversity and inclusion Innovation Waste & recycling Competence development Tax transparency Limited materiality • Watch list • Discretionary disclosure Lobbying Energy use Local communities Colour code: alignment with the Sustainable Development Goals Less Importance to Wilhelmsen More Focus 2019 Health and safety 1 2 Continuous improvement of health and safety management systems Increase employee competence in health and safety behaviour Ethics and anti-corruption Responsible procurement Cyber security 1 2 3 Improve identification and follow up of compliance deviations Increase employee competence in responsible business practice with rollout of new business standard programme and awareness of whistleblowing channel Optimise organisational resources internally to improve experience sharing and knowledge transfer 1 2 3 Improve supplier selection and assessment process Improve supplier engagement in responsible practices through risk-based audits Optimise organisational resources internally to improve experience sharing and knowledge transfer 1 2 3 Implement a cyber security framework with continuous assessment of the group’s cyber maturity Increase employee competence in cyber security and data protection risk prevention behaviour Strengthen operational measures in cyber security Content 08 10 12 14 15 17 20 21 22 23 23 24 25 Group CEO’s statement The new business currency starts with “together” Directors’ report Main development and strategic direction Financial results Business segments Maritime services Supply services Holding and investments Risk review Health, working environment and safety Organisation and people development Corporate governance Sustainability Allocation of profit, dividend and shares Outlook 30 Accounts and notes 32 32 32 33 34 35 36 41 84 86 86 87 88 89 Wilh. Wilhelmsen Holding ASA group Income statement Comprehensive income Balance sheet Cash flow statement Equity Accounting policies Notes Wilh. Wilhelmsen Holding ASA parent company Income statement Comprehensive income Balance sheet Cash flow statement Notes 105 Auditor’s report 110 Responsibility statement 112 114 Corporate governance Corporate governance report 122 124 124 125 126 Corporate structure Wilh. Wilhelmsen Holding group main structure Holding and investments segment Supply services segment Maritime services segment 7 Wilh. Wilhelmsen Holding ASA Annual Report 2018GroupContentHealth and safety With thousands of employees all over the world, our most important job as an employer is to make sure our people have a healthy and safe working environment. We want our employees to come home every day after work. Through standards and practises focusing on safety, worker welfare and accident prevention, we maintain a sustainable and profitable business. The best indicator we have is our annual engagement survey that says our employees are happy and safe while working for Wilhelmsen. ’ G r o u p C E O s s t a t e m e n t Group CEO’s statement The new business currency starts with “together” Are the challenging times behind us? 2018 did not turn out quite as I had hoped. We failed in buying Drew Marine. Markets continued to be volatile, and our listed entities had a rough time along with the stock markets at large. Despite headwind, our people continued to shape the maritime industry. We saw fleet growth for ship management and increased sales for marine products. We are redefining port agency. We delivered the most comprehensive logistics support to a military exercise arguably ever delivered by a public company. And we continued to develop new digital solutions, including establishing three new digital joint ventures. Dedicated employees, a solid product offering, and loyal customers gave us a 10% increase in top line, a creditable achievement in challenging times. As much of this is already history, we need to look up and ahead. A new business currency No, it is not crypto currency, but “teaming and collaboration”, one of our core values that is the new business currency. Without teaming and collaboration internally as well as externally, we will just not reach our ambitious targets. It is demanding and exciting to be heading up the Wilhelmsen group in 2019. Trade war. Rapid technology changes. Generation Z. New competitors. These are some of the things we constantly pay attention to and that challenge us to continuously improve. Turning these challenges into opportunities require us to team up with customers, tech savvy companies, and other competencies that can propose new products and business models to ensure we stay in the forefront. Operating in silos – internally or externally – is not sustainable. We have teamed up in the past, but the need to do so is even more important now than ever in history. The challenges we face are big and complex and we need to build value creating partnerships. This is not straight forward. It starts with a sense of “together”. It requires high level of trust to share your core competencies and business data. Some recent examples from our group underline the potential in combining competencies and technology in new ways. • Massterly, the world’s first autonomous shipping company combining Kongsberg’s technology and our expertise in managing vessels. • RaaLabs, a joint venture with Wallenius Wilhelmsen, enabling us, and potentially the entire industry, to leverage technology efficiently, improving performance, reducing cost and meeting regulatory requirements through developing new products and solutions. • TenneT, a German based electricity supplier, awarded us a five-year contract based on our ability to combine NorSea’s wind- and offshore competence with our manning and maintenance know-how from ship management. The world’s most important “to do” list The 17 Sustainability Goals are adopted by many companies as a compass for their business decisions, us included. We can be profitable and grow our top line while we also contribute to achieving a better future for the next generations. Sustainable solutions simply make good business sense. Real impact requires scalable solutions. Not to underestimate the work done by governments, NGOs, individuals or businesses, but by joining forces focusing on high impact changes we can make substantial impact. This is our reason for joining Global Compact’s Ocean Action Platform, to create a larger platform with the potential power to change the world for the better. My challenge to you Setting out the course for our group of companies starts with a clear strategy. Our ambition is to grow profitably. We wish to build on our competencies and global network, challenge ourselves to create new growth and value, and invest in new business. My challenge to you is therefore: Challenge us – challenge and help us to deliver beyond our imagination, challenge our existing business models, propose new opportunities to us. Together we will create the future and shape the maritime industry. Together we will enable sustainable global trade. 10 Wilh. Wilhelmsen Holding ASA Annual Report 2018 GroupGroup CEO’s statement Thomas Wilhelmsen, group CEO Wilh. Wilhelmsen Holding ASA Annual Report 2018 11 GroupCompetence development Our customers demand the best and smartest solutions. Through healthy challenges like this, we continually seek to renew ourselves, to work smarter and improve everything we do. As a result, we can recognise opportunities and develop new and innovative solutions. By renewing ourselves, by training and always developing our methods, we meet tomorrow’s demands. Our people make up the commercial power of Wilhelmsen and smart people simply perform to our vision of Shaping the maritime industry. D i r e c t o r s ’ r e p o r t Directors’ report for 2018 Wilh. Wilhelmsen Holding ASA Main development and strategic direction The Wilh. Wilhelmsen Holding group (Wilhelmsen or group) is an industrial holding company within the maritime and logistics industry. The group activities are carried out through fully and partly owned entities, most of which are among the market leaders within their segments. Wilhelmsen’s ambition is to develop companies within maritime services, shipping, logistics or infrastructure to grow at or above the market through active ownership. 2018 was marked by a positive underlying development for operating activities, but with a net loss for the year following a significant fall in the asset value of main investments. 2018 was also the first full year after completion of the Wallenius Wilhelmsen ASA merger, and after securing majority ownership of NorSea Group. Both transactions have proved to be a success, creating long term value to Wilhelmsen’s shareholders and other stakeholders. Wilhelmsen has continued the development of new digital solutions, including establishing three new digital joint ventures. These will support new solutions to Wilhelmsen and to other customers. The maritime services subsidiaries continue to deliver value creating solutions to the global merchant fleet, focusing on marine products, ships agency and ship management. The new structure implemented in 2016 laid the foundation for a more effective organisation, with a gradual improvement in underlying operating margin continuing throughout 2018. Following a negative US court ruling on 21 July, Wilhelmsen abandoned the previously announced acquisition of Drew Marines. Suritec, where Wilhelmsen has a 20% ownership, delivered lower than expected results for the year. For supply services, the first full year of majority ownership of NorSea Group benefited from improved performance and new business development. The gradual uptick in offshore oil and gas services markets has continued, supporting an increase in activity level. During the year, several new offshore wind service contracts were secured, some of which were in co-operation with Wilhelmsen Ship Management. WilNor Governmental Services successfully provided a range of services to the NATO exercise, Trident Juncture 2018, which took place during the second half of the year. NorSea Group and several other Wilhelmsen companies contributed to the exercise. For the investment activities, Wilhelmsen’s focus in 2018 was on supporting value enhancing activities where the group has a material ownership. The Wallenius Wilhelmsen ASA merger has unlocked USD 120 million in annual synergies, largely offsetting reduced rates and increased fuel cost. A more effective structure has created further potentials, with a new USD 100 million improvement program initiated during the second half of 2018. Wallenius Wilhelmsen ASA has also undertaken several new strategic investments within automotive and high and heavy logistics. Margin pressure remains, and market uncertainties has increased. The Wallenius Wilhelmsen ASA share has traded down since reaching a peak early 2018. Wilhelmsen has been a long-term investor in Hyundai Glovis since 2004, first directly and later through Wilh. Wilhelmsen ASA and Treasure ASA. In 2018, a proposal was put forward for a restructuring of the Hyundai Motor Group, including Hyundai Glovis. The proposal was later withdrawn, and any future proposals remain uncertain. Highlights for 2018 • Positive development in underlying operating result • Net loss due to fall in asset values • Drew deal abandoned • Logistics support to NATO exercise Trident Juncture • Entering offshore wind supply market • Continued to develop new digital solutions • Restructuring proposal for Hyundai Glovis in April, which was later withdrawn • Further Wallenius Wilhelmsen improvement initiatives, to offset increased fuel cost and rate pressure. • 33% fall in share price • Paid dividend of NOK 5.50 per share 14 GroupDirectors’ reportWilh. Wilhelmsen Holding ASA Annual Report 2018 Despite a fall in asset values during the year, Wilhelmsen retains a strong equity and capital base. At the end of the year, the group equity ratio was 65%, down from 67% one year earlier. Equity excluding minority interests was down 8%, to USD 1 821 million. Cash and cash equivalents totalled USD 140 million by end of 2018, increasing to USD 877 million if including financial investments and assets. The debt repayment profile for the group remains healthy. After two positive years, the WWI/WWIB share price was down in 2018. Total return (including dividends reinvested on ex-dates) was negative with 33.2% for the WWI share and 33.5% for the WWIB share, both substantially below the 1.8% fall in the Oslo Børs Benchmark index (source Oslo Børs Exchange Annual statistics). A total dividend of NOK 5.50 per share was paid in 2018. A first dividend of NOK 3.50 was paid 8 May, followed by a second dividend of NOK 2.00 paid 22 November. This represented a dividend yield of 2.2% based on the average WWI/WWIB share price by the end of 2017. The board believes sound corporate governance is the foundation for profitable growth and a healthy company culture. Good governance contributes to reduced risk and create value over time for shareholders and other stakeholders. The board further acknowledges that sustainability is a vital prerequisite for Wilhelmsen to be a profitable and responsible player in the industry and society. In 2018, anti-corruption and ethics, cyber security, responsible procurement, and health and safety, received particular attention. In addition, the group has implemented policies and practises to address EU General Data Protection Regulation (GDPR). Financial results Income statement Total income for Wilhelmsen was USD 871 million in 2018, an increase of 10% from the previous year. The increase was due to full year consolidation of NorSea Group, while income for the maritime services segment was stable. 2017 included a material change of accounting principle gain, reducing the year-over-year increase in total income. Group EBITDA came in at USD 78 million for the year, down 60%. The accounts for 2018 included non-recurring cost of USD 27 million related to the abandoned Drew acquisition, while 2017 included material non-recurring items with a net gain of USD 141 million. Adjusting for these non-recurring items, EBITDA was up, mainly due to full year consolidation of NorSea Group. Year 2018 – Mill. USD EBITDA Reported M&A cost related to Drew Total material non-recurring items Adjusted 78 -27 -27 105 Year 2017 – Mill. USD EBITDA Reported Reclassification of Hyundai Glovis Reclassification of NorSea group M&A cost related to Drew Total material non-recurring items Adjusted 198 195 -40 -14 141 57 Maritime services EBITDA was USD 42 million in 2018. When adjusting for M&A expenses related to the abandoned Drew acquisition, EBITDA was up 6% for the year. A weak first quarter was followed by a gradual improvement in underlying performance. This was supported by increased sale of marine products, new vessels on management, and positive effects from ongoing improvement initiatives. The new supply services segment contributed with EBITDA of USD 51 million for the year. An increase in Norwegian offshore activities and a business restructuring had a positive effect on results, as well as logistics services for the NATO exercise Trident Juncture which took place during the second half of the year. The holding and investments segment had a negative EBITDA of USD 14 million, mainly due to net corporate cost. This was an improvement from previous year when adjusting for net change of accounting principle gain in 2017. Share of profit from associates was USD 36 million for the year, of which Wallenius Wilhelmsen ASA contributed with USD 23 million. For Wallenius Wilhelmsen ASA, realised synergies and a positive development 15 GroupDirectors’ reportWilh. Wilhelmsen Holding ASA Annual Report 2018in underlying volumes were offset by reduced contractual volumes, higher bunker cost and lower rates. Change in fair value financial assets was negative with USD 116 million for the year. This included a USD 61 million reduction in the fair value of the Survitec investment and a USD 53 million reduction in the market value of the investment in Hyundai Glovis. Other financials were a net expense of USD 41 million. Interest and dividend income contributed positively but was more than offset by interest expenses and a net loss on current financial investments, financial instruments and currencies. Tax was included with an income of USD 12 million, mainly related to maritime services. Net profit after tax and non-controlling interests was a loss of USD 69 million in 2018 compared with a loss of USD 64 million in 2017. Comprehensive income Other comprehensive income for the year was a loss of USD 53 million, compared with a gain of USD 77 million in the previous year. This mainly reflected currency translation differences on non-USD assets and liabilities when converting into USD. Total comprehensive income for 2018 was a loss of USD 128 million, of which a loss of USD 119 million was attributable to owners of the parent. The corresponding figures for 2017 was a profit of USD 75 million and a profit of USD 14 million respectively. Cash flow, liquidity and debt The group had cash and cash equivalents of USD 140 million by the end 2018, compared with USD 167 million by the end of 2017. The net reduction in cash and cash equivalents of USD 26 million for the year follows a positive contribution from operating and investing activities offset by a negative cash flow from financing activities. In 2017, cash and cash equivalents were down USD 130 million, mainly as an effect of discontinued operation of Wilh. Wilhelmsen ASA. In addition, the consolidation of NorSea Group had a material impact. Cash flow for the years 2017 and 2018 are as such not fully comparable. Cash flow from operating activities was positive with USD 62 million in 2018, which was USD 16 million below reported EBITDA for the year. Cash flow from investing activities was positive with USD 40 million for the year. Dividend from joint ventures and associates and net proceeds from sale of financial investments exceeded net investments in fixed assets. Cash flow from financing activities was negative with USD 128 million in 2018. Net debt repayment counted for the largest share of net cash outflow, followed by dividend to shareholders and ordinary interest payments. The parent company carries out active financial asset management of part of the group’s liquidity, with investments in various asset classes including listed equities and investment grade bonds. The value of the investment portfolio amounted to USD 88 million at the end of 2018, down from USD 101 million one year earlier. The group’s investments classified as financial assets to fair value had a combined value of USD 650 million by the end of the year, down from USD 801 million at the end of 2017. The largest investments were the ~12% shareholding in Hyundai Glovis (held through Treasure ASA), the ~3% shareholding in Qube Liquid assets (USD million) 2018 2017 Cash and cash equivalent 140 167 Current financial investments 88 101 Financial assets to fair value 650 801 Total 877 1069 and the ~20% shareholding in Survitec. The main group companies fund their investments and operations on a standalone basis, with no recourse to the parent company. The primary funding source is the commercial bank loan market. Interest-bearing debt (USD million) 2018 2017 Maritime services 197 196 Supply services 330 369 Holding and investments 23 54 Eliminations (17) (16) Total 533 601 16 GroupDirectors’ reportWilh. Wilhelmsen Holding ASA Annual Report 2018Maritime services • Ships Service • Ship Management • Insurance Services • Survitec Group (owned ~20%) As of 31 December 2018, the group’s total interest-bearing debt was USD 533 million, compared with USD 601 million by end 2017. Net result after tax and non-controlling interests was a net loss of USD 56 million in 2018 compared with a net profit of USD 29 million in the previous year. Going concern assumption Pursuant to section 4, sub-section 5, confer section 3, sub-section 3a of the Norwegian Accounting Act, it is confirmed that the annual accounts have been prepared under the assumption that the enterprise is a going concern and that the conditions are present. Business segments Maritime services The maritime services segment includes ships service, ship management and other maritime services activities. Total income for maritime services was USD 582 million in 2018, up from USD 580 million in the previous year. EBITDA for the year was USD 42 million compared with USD 51 million in 2017. Non- recurring cost related to the abandoned Drew acquisition was included with USD 27 million in 2018 and USD 14 million in 2017. When adjusting for this cost, EBITDA was up 6% for the year. The maritime services EBITDA margin was 7.2% in 2018. When adjusting for non-recurring M&A cost related to Drew, the EBITDA margin was 11.8%. This was an improvement from the previous year, and above average for the last five years. Share of profit from associates was USD 4 million for the year, and in line with the previous year. Change in fair value financial assets was a loss of USD 61 million in 2018. This was related to the investment in Survitec Group. Net financial income/expenses for maritime services amounted to an expense of USD 37 million, compared with an income of USD 6 million in 2017. The reduction followed a net USD 23 million expense from currency and financial instruments in 2018, compared with a USD 13 million net income the previous year. Interest expenses was also up, following an increase in the USD interest rates. Tax was an income of USD 13 million in 2018, compared with a USD 15 million expense in the previous year. The tax income for the year followed positive adjustment in deferred tax assets. Ships service Wilhelmsen Ships Service is a global provider of standardised product brands and service solutions to the maritime industry, focusing on marine products, marine chemicals, maritime logistics and ships agency. Ships service is fully owned by Wilhelmsen. Total income from ships service was USD 540 million in 2018, up 1% from the previous year. Income from marine products increased, offsetting a reduction in income from agency services. EBITDA was some down for the year. On 27 April 2017, Wilhelmsen signed an agreement to acquire the technical solutions business from Drew Marine, subject regulatory approval. On 21 July, 2018, the United States’ District Court for the District of Columbia announced that it would grant the US Federal Trade Commission motion for an injunction to block the acquisition. Consequently, Wilhelmsen and Drew agreed to abandon the transaction. Ship management Wilhelmsen Ship Management provides full technical management, crewing and related services for all major vessel types. Ship management is fully owned by Wilhelmsen. Total income for ship management was USD 41 million in 2018, a reduction of 8%. Vessels on management fell during the first half of the year, before improving in the second half. By the end of the year, ship management served approximately 370 ships worldwide, of which 40% were on full technical management and 5% were on layup management. The remaining contracts were related to crewing services. During the year, ship management relocated its global head office from Kuala Lumpur, Malaysia, to Singapore, entered the wind offshore market, and opened a new office in Southampton, UK. EBITDA was down for the year, partly due to ramp up cost related to new contracts. Survitec Group Survitec Group holds market-leading positions 17 GroupDirectors’ reportWilh. Wilhelmsen Holding ASA Annual Report 2018worldwide in marine, offshore, defence and aerospace survival technology. The company is majority owned by Onex Corporation, a private equity firm. Wilhelmsen owns ~20% of the company, which is reported as fair value financial asset. The investment in Survitec, denominated in GBP, was valued at USD 27 million by the end of 2018. This is down from USD 83 million one year earlier. The USD 56 million reduction in fair value is the net effect of a USD 5 million equity injection and a USD 61 million fair value loss. The loss follows lower than expected results in 2018 and related downward adjustments in future earnings estimates. Wilhelmsen Insurance Services Wilhelmsen Insurance Services provides marine and non-marine insurance solutions for internal and external clients. Insurance services is fully owned by Wilhelmsen. Total income for insurance services was USD 3 million in 2018, a 25% increase from the previous year. EBITDA also improved for the year. Supply services The supply services segment includes NorSea Group, WilNor Governmental Services and other supply services activities. This is a relatively new segment in the Wilhelmsen group accounts and reporting, and follows the increased ownership and consolidation of NorSea Group from 26 September 2017. Total income from supply services was USD 285 million in 2018, up from 57 million in 2017. The increase is due to full year consolidation of NorSea Group, compared with only one quarter in 2017. EBITDA came in at USD 51 million, while share of profit from associates was USD 9 million. Both were significantly up from the previous year. Net financial items were an expense of USD 15 million, and tax was an expense of USD 4 million in 2018. Net profit after minority interests was USD 11 million for the year, up from 3 million in 2017. NorSea Group AS NorSea Group provides supply bases and integrated logistics solution to the offshore industry. Wilhelmsen owns 75.2% of NorSea Group (40% ownership until September 2017 and 74.2% as per 31 December 2017). NorSea Group is fully consolidated in Wilhelmsen’s accounts from end of third quarter 2017. Total income for NorSea Group was USD 275 million in 2018, significantly up from the previous year. Income was supported by increased offshore activities, and services for the NATO exercise Trident Juncture which took place during the second half of the year. During the year, NorSea Group entered the offshore wind market. EBITDA was up for the year, supported by an increase in total income and improved performance in non-Norwegian activities towards the end of the year. WilNor Governmental Services WilNor Governmental Services provides military logistics services in Norway and internationally. Wilhelmsen owns 51% of the company directly, with the remaining 49% owned through NorSea Group. Total income for WilNor Governmental Services was USD 11 million in 2018, up from USD 5 million in 2017. The increase partly reflects activities related to the NATO exercise, Trident Juncture 2018. In connection with the exercise, WilNor Governmental Services purchased goods and services on behalf of the Norwegian defence authorities equal to USD 129 million. This has been accounted for on a net basis in the income statement. EBITDA was stable for the year. Holding and investments The holding and investments segment includes investments in Wallenius Wilhelmsen ASA and Treasure ASA, financial assets, and other holding and investments activities. Total income for the holding and investments segment was USD 11 million in 2018, compared with USD 171 million in 2017. The income for 2017 included USD 155 million in net gain from change of accounting principles, as well as income from activities now reported as part of the supply services segment. Adjusting for these items, income was stable. EBITDA was a loss of USD 14 million in 2018, compared with a profit of USD 138 million in 2017. Share of profit from associates was USD 23 million for the year, compared with USD 49 million one year earlier. The income mainly Supply services • NorSea Group (owned ~75.2%) • WilNor Governmental Services 18 GroupDirectors’ reportWilh. Wilhelmsen Holding ASA Annual Report 2018came from the 37.8% ownership in Wallenius Wilhelmsen ASA. Change in fair value financial assets was a loss of USD 56 million in 2018, mainly related to the shareholding in Hyundai Glovis. Net financials were an income of USD 10 million, down from USD 16 million in 2017. Dividend income from financial assets compensated for loss on investment management. Net profit/(loss) after tax and minorities was a net loss of USD 23 million compared with a profit of USD 150 million in the previous year. Wallenius Wilhelmsen ASA Wallenius Wilhelmsen ASA is a global provider of ocean and land-based logistics services towards car and ro-ro customers and is listed on the Oslo Børs. Wilhelmsen owns 37.8% of the company, which is reported as associate in Wilhelmsen’s accounts. The merger between Wilh. Wilhelmsen ASA and WallRoll AB in April 2017 materially impacted the consolidated historical financial statements for 2017. Therefore, the financial information for 2017 used for comparison with 2018 figures is based on the unaudited proforma income statement for first quarter 2017, as well as actual figures for the last three quarters of 2017. Total income for Wallenius Wilhelmsen ASA was USD 4 065 million for the full year of 2018, up 6% compared to 2017 (proforma revenue). The increase in total income was driven by stable net freight and increased surcharges related to bunker adjustment clauses for the ocean segment and growth in the landbased segment. Wilhelmsen’s share of profit from Wallenius Wilhelmsen ASA was USD 23 million in 2018, down from USD 44 million in 2017. After a strong increase in 2017, the Wallenius Wilhelmsen ASA share price was equally down in 2018, closing at NOK 29.70. As of 31 December 2018, the market value of Wilhelmsen’s investment was USD 547 million, while the book value of the shareholding was USD 847 million. Wallenius Wilhelmsen ASA did not pay any dividend in 2018. Treasure ASA Treasure ASA holds a 12.04% ownership interest in Hyundai Glovis, and is listed on the Oslo Børs. Wilhelmsen owns ~72.7% of Treasure ASA. Hyundai Glovis is from 4 April 2017 reported as financial assets to fair value in the Wilhelmsen accounts. Treasure ASA’s main source of income is the dividend paid to the shareholders of Hyundai Glovis. This is reported as financial income in Wilhelmsen’s accounts. Dividend received in 2018 was USD 13 million, while the dividend income received in 2017 was USD 12 million. The value of Treasure ASA’s investment in Hyundai Glovis was USD 523 million by the end of 2018, down from USD 575 million by the end of the previous year. The USD 53 million in value reduction for 2018 was accounted for as change in fair value financial assets. The corresponding USD 5 million reduction in value in 2017 was reported as part of mark-to-market revaluation of available for sale financial assets reported under comprehensive income. For 2018, EBITDA ended at USD 601 million which included costs of about USD 5 million related to the restructuring and realisation of synergies. EBITDA adjusted for these items, came in at USD 606 million, a decline of 14% compared to last year’s adjusted EBITDA of USD 706 million (based on proforma figures). The performance shortfall was largely driven by the ocean segment, which was negatively impacted by bunker prices, a planned reduction in contracted Hyundai Motor Group volumes, lower rates, and unfavourable currency movements in the first part of the year. The negative development was partly balanced by underlying positive volume development, especially for high & heavy, and increased realisation of synergies. The Treasure ASA share price was down 19% for the year, closing at NOK 11.60. As of 31 December 2018, the market value of Wilhelmsen’s shareholding in Treasure ASA was USD 214 million. In 2018, Treasure ASA paid total dividend of NOK 0.30 per share. Total cash proceeds to Wilhelmsen was USD 6 million. The corresponding figures for 2017 were NOK 0.95 dividend per share, with a total cash proceed to Wilhelmsen of USD 18 million. During the fourth quarter, Treasure ASA bought 1.45 million own shares in the market. Wilhelmsen maintained a holding of 160 million shares in Treasure ASA. Holding and investments • Wallenius Wilhelmsen ASA (owned ~37.8%) • Treasure ASA (owned ~72.7%) • Financial assets 19 GroupDirectors’ reportWilh. Wilhelmsen Holding ASA Annual Report 2018Financial investments Financial investments include cash and cash equivalents, current financial investments and other financial assets held by the parent and fully owned subsidiaries. The value of the current financial investment portfolio held by the holding company was USD 88 million by the end of the year, compared with USD 101 million one year earlier. The portfolio primarily included listed equities and investment-grade bonds. Net income from investment management was a loss of USD 6 million in 2018, compared with a gain of USD 6 million in 2017. The value of other financial assets was USD 100 million by the end of 2018, compared with USD 142 million by the end of 2017. The largest single investment was the shareholding in Qube Holdings Limited, an Australian based logistics and infrastructure company listed on the Australian Securities Exchange. During 2018, Wilhelmsen reduced its shareholding in Qube Holdings Limited from 65 million to 50 million, representing an ownership of ~3%. Net financial income from other financial assets were a gain of USD 1 million in 2018, with dividend income of USD 4 million offsetting a loss from change in fair value financial assets of USD 3 million. Risk review The Wilhelmsen group consists of operating companies and investments exposed to the global economy and world merchandised trade. From an operating perspective, ships service and ship management (maritime services) and NorSea Group (supply services) are the most significant activities and exposures. From an investment perspective, Wallenius Wilhelmsen ASA and Treasure ASA are the most significant exposures. The restructuring of the Wilhelmsen group undertaken during recent years has created a more balanced portfolio and reduced the exposure to individual activities and investments. Internal control and risk management The group is committed to manage risks in a sound manner related to its businesses and operations. To accomplish this, the governing concept of conscious strategy and controllable procedures for risk mitigation ultimately provides a positive impact to profitability. The responsibility of governing boards, management and all employees are to be aware of the current environment in which they operate, implement measures to mitigate risks, prepare to act upon unusual observations, threats or incidents, and respond to risks to mitigate consequences. The group has put in place a risk monitor process based on identification of risks for each business unit, with a consolidated report presented to the board on a quarterly basis for review and necessary actions. Market risk Demand for the group’s service offerings are, to various degree, correlated with the general global economic activity and in particular trade in commodities and manufactured goods. Projections for 2019 provided by the International Monetary Fund and other institutions indicates that global expansion has weakened, but that growth will remain at a fairly high level. An escalation of global trade tensions remains a key source of risk to the outlook. Maritime services’ exposure is to the general shipping market. The market has gradually improved from low levels, but differences in sentiment between the various market segments remains. Slower trade growth, low newbuild orderbooks and new IMO 2020 bunker regulations will impact the shipping market over the next couple of years. Supply services’ exposure is mainly to the North Sea offshore sector, and indirectly towards the oil and gas market in Europe and globally. After a downturn in 2016/17, the market sentiment has improved. Investment exposure is skewed towards the global automotive and high and heavy markets, through the investments in Wallenius Wilhelmsen ASA and, indirectly, Hyundai Glovis. While medium term growth prospects remain positive for the automotive and high and heavy sectors, market uncertainty has increased. From a geographical perspective, Wilhelmsen’s exposure towards Korea and Oceania exceeds a neutral position due to the significant reliance on these markets of Wallenius Wilhelmsen ASA, Hyundai Glovis and Qube Holdings. Operational risk The various operating entities of the group are exposed to and manage risk specific to the markets in which they operate. The general risk picture broadly remains unchanged from previous years. 20 GroupDirectors’ reportWilh. Wilhelmsen Holding ASA Annual Report 2018Through its global reach and broad product spectre, maritime services operations are exposed to a wide range of operational risk factors. These are, however, mainly related to local markets and specific product offerings. While any such incident will normally have limited global consequences, a major accident, turbulence within a key geographical market, product quality issues, disruption of IT systems or loss of main customers may affect the wider financial and operational performance. Supply services operations will have a similar risk exposure as maritime services, though mainly related to the offshore industry and the northern European region. The group has established a range of measure in order to avoid and, potentially, mitigate the consequences of operational risk incidents. Financial risk Wilhelmsen remains exposed to a wide range of financial risk, either on a general basis or related to specific group companies. This includes exposure to currencies, oil prices, equity markets and interest rates. In the currency markets, the USD strengthened against among others EUR and NOK in 2018. The oil price also went upwards during most of the year, but ended down after reaching a peak in October. The general equity market followed a similar trend in many markets, with a positive trend during the first nine months turning negative in the last quarter. Wilhelmsen’s three largest investments subject external market pricing are Wallenius Wilhelmsen ASA, Treasure ASA and Qube Holdings. Interest rates remain at historic low levels in most markets, but with a cautious upward trend in several markets lead by the US. The group’s exposure to and management of financial risk are further described in Note 17 to the 2018 group accounts. This includes foreign exchange rate risk, interest rate risk, investment portfolio risk, credit risk and liquidity risk. All group companies were compliant with their loan covenant requirements in 2018. Health, working environment, and safety Working environment and occupational health The company conducts its business with respect for human rights and labour standards, including conventions and guidelines related to the prevention of child or forced labour, minimum wage and salary, working conditions and freedom of association. Employees and external stakeholders are encouraged to report on non-compliant behaviour through the group’s global whistleblowing system. Lost-time injury frequency below set targets. Exposure hours In 2018, there were around 40.5 million exposure hours (work hours) in the group. Vessel based operations accounted for 75% of total exposure hours and onshore operations accounted for 25%. Sickness absence and occupational disease The group has implemented a variety of initiatives to maintain a healthy work environment, for example focusing on monitoring and reporting absence cases, health and wellness awareness events, annual health checks, employee assistance program, adapted working hours, social activities, employee engagement surveys and opportunities for personal development. The sickness absence rate for onshore operations was 2.23%, compared with base year 2015 result of 1.67%. The occupational disease case rate result of 0.07 was in line with the 2016 base year result of 0.29. Turnover The turnover rate for employees in the parent company and fully owned subsidiaries was 14.93% in 2018, in line with previous year rate of 13.50% (change of reporting principles from 2017). The turnover rate varies from segment to segment. As an example, the turnover rate was higher during the year in ship management compared to ships service. Lost time injuries and total recordable cases There were zero work related fatalities in 2018. For vessel-based operations, several safety campaigns aimed at creating safer and healthier working conditions on board the vessels were conducted during the year with focus on analysing results and measuring the effectiveness of the action taken. In 2018, the lost-time injury frequency (LTIF) rate was 0.28, within the target not to exceed 0.50. The total recordable case frequency (TRCF) rate was 1.40 within the target not to exceed 2.80. The LTIF rate target for 2019 is not to exceed 0.50 and the TRCF rate is not to exceed 2.60. For onshore operations, there was a focus on developing knowledge and understanding 21 GroupDirectors’ reportWilh. Wilhelmsen Holding ASA Annual Report 2018of the importance of personal safety and risk assessment. Management visibility, safety talks and active safety delegates have been important actions to follow up employees most exposed to hazardous risk. The focus will continue in 2019 on risk assessment, audits, site assessment programs, and the implementation of better internal support tools for reporting. The LTIF rate onshore was 0.20, within target not to exceed 0.5. The TRCF rate result of 0.52 was within target not to exceed 1.5. The LTIF target will remain in place for 2019, and the TRCF rate will be reduced to 1.0. All reported incidents were investigated to avoid similar incidents in the future, improve necessary training and awareness measures. group has 255 offices in 67 countries within its controlled structure. The group employs 9 334 seafarers and 5 252 land-based employees. Equal opportunities Wilhelmsen has a clear policy stating that males and females have the right to equal opportunities. Harassment and discrimination based on race, gender or similar grounds, or other behaviour that may be perceived as threatening or degrading, is not acceptable. The industry’s unequal recruitment base makes it difficult to achieve an equal mix of gender in the company. Females represent 33% of the land-based population, and 1% of the seafarer population. Near miss incidents and safety observations Safety observation reporting on vessel operations remains consistent with 9 126 observations reported for the year compared to 8 064 cases in 2017. Two of the five directors on the board of directors of Wilhelmsen are female, and one of the four members of the company’s group management team. Safety observation reporting onshore improved in 2018, mainly due to the inclusion of NorSea Group in the reporting boundary. 3 597 observations were reported versus 224 in 2017. All reported near misses were investigated to avoid similar incidents in the future, improve necessary training and awareness measures, and improve control measures. Reporting and utilisation of analytics to identify key potential improvement areas continues to be in focus. Working committee and executive committee The management cooperates closely with employees through several bodies, including the joint working committee and the executive committee for industrial democracy in foreign trade shipping. The bodies give valuable input to solve company related issues in a constructive way. The joint working committee discusses issues related to health, work environment and safety. The executive committee for industrial democracy in foreign trade shipping consider drafts of the accounts and budget, as well as matters of major financial significance for the company or of special importance for the workforce. In 2018, both committees held official meetings according to plan. Organisation and people development Workforce The group’s head office is in Norway, and the Driving performance Wilhelmsen strives to create a performance culture where engaged employees deliver desired results and are rewarded accordingly. Employee performance is measured through engagement surveys, performance appraisals and annual activity plans. In the fourth quarter of 2018, Wilhelmsen conducted an employee engagement survey to measure the group’s ability to provide an engaging and safe work environment where employees are motivated to work and achieve their full potential. The survey results were positive and consistent with previous year. NorSea Group and Wilhelmsen Chemicals were included in the survey for the first time. The overall engagement score was 72 points, and a completion rate of 89%. The performance appraisal is a formal dialogue between manager and employee. In 2018, 91% of the population completed the performance appraisal, above our target of 85%. 90% also completed a new mid-year review that was introduced during 2018. Compensation and benefits The purpose of Wilhelmsen’s compensation and benefit framework is to drive performance and to attract and retain employees with the right experience and knowledge deemed necessary to achieve the company’s strategic ambitions. The framework takes local 22 GroupDirectors’ reportWilh. Wilhelmsen Holding ASA Annual Report 2018regulations and competition into account, as well as the responsibility and complexity of the position. culture. Good governance contributes to reducing risk and creating long-term value for shareholders and other stakeholder. The bonus schemes are one of several instruments to drive performance. Bonus is paid if set bonus targets are reached. Compensation to executives is described in the notes 6 and 2 to the group and parent accounts respectively. Wilhelmsen also issues a declaration on the determination of employee benefits for senior executives, note 16 to the parent company accounts. Investing in competence “Learning and innovation” is one of the group’s core values, and Wilhelmsen pays particular attention to competence and knowledge development. A learning organisation with motivated employees contributes to efficient operations and has a positive impact on revenue and earnings. Personal development plans are integrated in the performance appraisal and review process. In 2018, the average hours of training recorded per employee was 38 hours. Developing leaders for the future To meet challenging and changing environments, Wilhelmsen is dependent on highly qualified leaders. In 2018, eight females and 14 males, from nine different nationalities participated in a three module Leadership Potential programme held in Oslo and Singapore. The programme focused on design thinking methodology, leadership toolboxes, and an agile mindset. Digital trainees To increase the digital competence in the group and challenge existing mindsets, Wilhelmsen recruited three digital trainees (two female and one male) in 2018, all graduates from Norwegian University of Science and Technology (NTNU). The trainees are assigned to digital projects in the group companies over an 18-month period. Maritime trainees As part of an ongoing commitment to developing maritime competence, ship management recruited two maritime trainees (two females) in 2018 to embark on a 20-month maritime trainee program. Wilhelmsen observes the Norwegian Code of Practice for corporate governance, in addition to requirements as specified in the Norwegian Public Companies Act and the Norwegian Accounting Act. The board’s corporate governance report for 2018 can be found in the group annual report for the year and on www.wilhelmsen.com. It is the board’s view that the company has an appropriate governance structure and that it is managed in a satisfactory way. The corporate governance report is to be considered by the annual general meeting on 30 April 2019. Sustainability Wilhelmsen assesses environmental, social and corporate governance issues in its investment analysis, business decisions, ownership practises and financial reporting. The company has a sustainability policy that includes human rights, labour standards and a commitment to promote greater environmental responsibility. UN Global Compact (UNGC) engagement In 2018, Wilhelmsen committed to implementing the ten principles of the UN Global Compact throughout its operations. The company has included requirements related directly to this commitment in relevant policies. Wilhelmsen also joined the UNGC Sustainable ocean business action platform to partner with other serious actors in contributing to the achievement of the Sustainable Development Goals. The platform will conclude in 2020. Sustainability governance The board acknowledges that sustainability is a vital prerequisite for Wilhelmsen to be a profitable and responsible player in the industry and society at large. With an aim to increase transparency, the board therefore issues a sustainability report following the guidelines set forward in the GRI Sustainability reporting standards. The report describes how Wilhelmsen combines long- term profitability with emphasis on ethical business conduct, sustainable solutions and with respect for human beings, the environment and society. Corporate governance The board believes sound corporate governance is a foundation for profitable growth and that it provides a healthy company Materiality assessment In 2018, the company conducted an extensive materiality assessment supported by DNV GL to ensure attention is on material aspects Investing in competence development to ensure employees are ready to take on the future. 23 GroupDirectors’ reportWilh. Wilhelmsen Holding ASA Annual Report 2018of the group’s business. The assessment concluded that the following topics are of most importance: • ethics and anti-corruption, • health and safety, • responsible procurement, and • cyber security and data protection. These aspects are addressed in the sustainability report. The full report is available on www.wilhelmsen.com. Significant changes to sustainability reporting boundary in 2018 In 2018, the supply service and solutions segment have been included in the boundary of the sustainability report. Focus areas and achievements in 2018 In 2018, the following areas received particular attention: • Employee engagement • Partnerships for sustainable innovations • Materiality assessment • Anti-corruption, competition law, fraud and theft as well as whistleblowing • Cyber security • EU General Data Protection Regulation (GDPR) The company’s achievements included: • Positive 72 point score and 89% completion rate in employee engagement survey • Established world’s first autonomous shipping company with partners • Defined four high impact sustainability focus areas where the group will intensify efforts • Appropriate risk reduction methods and tools implemented for cyber security • Implementation of policy and practises to address EU General Data Protection Regulation (GDPR). Focus areas for 2019 Focus areas have been defined for the group to intensify efforts on the most material topics: Ethics and anti-corruption: • Improve identification and follow up of compliance deviations • Increase employee competence in responsible business practice with rollout of new business standard program and awareness of our whistleblowing channel • Optimise organisational resources internally to improve experience sharing and knowledge transfer Health and safety: • continuous improvement of health and safety management systems • increase employee competence in health and safety behaviour Responsible procurement: • improve supplier selection and assessment process • improve supplier engagement in responsible practices through risk-based audits • optimize organisational resources internally to improve experience sharing and knowledge transfer Cyber security: • implement a cyber security framework with continuous assessment on both where we are and where we need to be when it comes to cyber maturity • increase employee competence in cyber security and data protection risk prevention behaviour • Strengthen operational measures in cyber security Stakeholder engagement The company is regularly in dialogue with key stakeholders who engage with issues relating to the maritime industry and the activities of the Wilhelmsen group. The dialogue contributes to understanding the expectations of the community and transferring them to the group. It also enables the company to communicate decisions to stakeholders and provide them with explanations for our underlying motives. In 2018, Wilhelmsen was engaged in dialogues with governments, investors, non-governmental organisations and other stakeholders discussing topics related to the group or industry at large. The main questions were related to financial, compliance, innovation and sustainability in general. Allocation of profit, dividend and shares The board’s proposal for allocation of the net profit for the year is as follows: Parent company accounts (NOK thousand) Profit for the year NOK 359 131 To equity NOK 150 464 Proposed dividend NOK 116 010 Interim dividend paid NOK 92 658 Total allocations NOK 359 131 Sustainability key focus areas in 2019: • Ethics and anti-corruption • Health and safety • Responsible procurement • Cyber security and data protection 24 GroupDirectors’ reportWilh. Wilhelmsen Holding ASA Annual Report 2018Dividend The board is proposing a NOK 2.50 dividend per share payable during the second quarter of 2019, representing a total payment of NOK 116 million. The board also proposes that the annual general meeting gives the board authority to approve further dividend of up to NOK 2.50 per share for a period limited in time up to the annual general meeting in 2020, but no longer than to 30 June 2020. Shares As of 31 December 2018, the company had 3 053 shareholders. 92% of the shareholders were domiciled in Norway, while 8% of the shareholders were domiciled outside Norway. Shareholders domiciled outside Norway owned 17% of the company’s shares. The board is granted an authorisation to, on behalf of the company, acquire up to 10% of the company’s own issued shares. The authorisation is valid until the annual general meeting in 2019, but no longer than to 30 June 2019. In 2018, Wilhelmsen liquidated 100 000 own Class A shares, reducing the share capital to NOK 928 076 480. After the liquidation, the company has a total of 46 403 824 shares, split on 34 537 092 Class A shares and 11 866 732 Class B shares. Outlook Group business drivers Wilhelmsen is a global provider of maritime related services, transportation and logistics solutions. The prospects for the group and its business segments are, to various degree, correlated with general development in world economy and trade. Projections for 2019 provided by the International Monetary Fund and other institutions indicates that global expansion has weakened, but that growth remains at a fairly high level. An escalation of global trade tensions remains a key source of risk to the outlook. Outlook for maritime services Continued global growth and low newbuilding activity support further recovery of the general shipping market. A slowdown in global trade will have the opposite effect. Following sale of some business activities in 2016, Wilhelmsen has focused on building leading positions within marine products, ships agency and ship management globally. The targeted acquisition of Drew Marine did not materialise, and as a consequence the marine products business will be developed primarily organically. Focus on improving the operating margin, strengthening profitability and growing the business will remain. Continued performance improvement initiatives are expected to have a positive impact on operating margin. Outlook 2019: Stable development of underlying operating performance. The ~20% ownership stake in Survitec Group is not expected to generate any revenue or cash contribution in the short to medium term. While Wilhelmsen has made a substantial write down of the asset value in 2018, the investment continue to have a long- term value potential. Outlook for supply services NorSea Group, where Wilhelmsen has a 75.2% shareholding, is mainly exposed to the Norwegian and Danish oil and gas industry. Oil prices have recovered from lows experienced early 2016, supporting some uplift in activity level. Income from supply base real estate properties will continue to be an important contributor, while activity within offshore wind is expected to gradually increase. For governmental services, 2018 was marked by significant income from the NATO exercise Trident Juncture. This implies a reduction in activity level and income in the short term. Outlook for other activities Wallenius Wilhelmsen ASA, where Wilhelmsen has a ~37.8% shareholding, maintains a balanced view on prospects. There is increased uncertainty around the volume outlook and market rates remain at a low level, but tonnage balance is gradually improving. A new two-year performance improvement program will support underlying profitability going forward. Treasure ASA, where Wilhelmsen has a ~72.7% shareholding, is an investment company with currently one main asset. The prospects for the group correlates strongly with the general development of the Hyundai Glovis financial and share price performance. Qube Holdings, where Wilhelmsen has a ~3.0% equity stake, remains exposed to the general Australian economy and trade. Long-term value creation is also sensitive to successful development of Qube’s logistics infrastructure. 25 GroupDirectors’ reportWilh. Wilhelmsen Holding ASA Annual Report 201826 GroupDirectors’ reportWilh. Wilhelmsen Holding ASA Annual Report 2018The board of Wilh. Wilhelmsen Holding ASA From left: Carl Erik Steen Irene Waage Basili Diderik Schnitler (chair) Cathrine Løvenskiold Wilhelmsen Trond Ø. Westlie 27 GroupDirectors’ reportWilh. Wilhelmsen Holding ASA Annual Report 2018Outlook for the Wilhelmsen group 2018 marked the first full year with the new group structure. While financial performance last year was hit by falling asset prices, the operating performance has improved. Wilhelmsen continues to hold leading positions in main business segments, and the board expects a stable development of underlying operating performance. Wilhelmsen’s exposure towards global trade, and potential introduction of further tariffs and restrictions, continues to create uncertainties. Wilhelmsen retains its robustness to meet such eventualities. Lysaker, 14 March 2019 The board of directors of Wilh. Wilhelmsen Holding ASA Diderik Schnitler chair Trond Ø. Westlie Carl Erik Steen Irene Waage Basili Cathrine Løvenskiold Wilhelmsen Thomas Wilhelmsen group CEO 28 GroupDirectors’ reportWilh. Wilhelmsen Holding ASA Annual Report 2018Responsible procurement Since thousands of suppliers and products make up vital pieces of the Wilhelmsen machinery, we need to make sure that our sustainable expectations are clearly communicated to and understood by all our suppliers and product manufacturers. We simply require everyone we partner up with to do business the right way. Together we can enable sustainable global trade. Together we can make sure our industry contributes to the 17 Sustainable Development Goals. A c c o u n t s a n d n o t e s – g r o u p Income statement Wilh. Wilhelmsen Holding group USD mill Operating revenue Other income Gain/(loss) on sale of assets Total income Operating expenses Cost of goods and change in inventory Employee benefits Other expenses Depreciation Total operating expenses Operating profit Share of profits from joint ventures and associates Change in fair value financial assets Financial income Financial expenses Profit/(loss) before tax Tax income/(expenses) Profit/(loss) from continued operations Discontinued operations Net profit/(loss) from discontinued operations (net after tax) Profit/(loss) for the period Of which: Profit attributable to non-controlling interests continued operations Profit/(loss) attributable to non-controlling interests discontinued operations Profit/(loss) attributable to owners of the parent Note 1/3/20 1/23 13 6 1/20 7 4 12 1 1 8 22 2018 867 4 871 (267) (320) (206) (42) (835) 36 36 (116) 16 (57) (86) 12 (75) (75) (6) (69) 2017 632 161 793 (194) (252) (150) (22) (617) 176 55 36 (14) 253 (16) 236 (239) (2) 55 7 (64) Basic / diluted earnings per share (USD) 9 (1.48) (1.38) Comprehensive income Wilh. Wilhelmsen Holding group Profit/(loss) for the year (75) (2) Items that may be reclassified to the income statement Cash flow hedges (net after tax) Revaluation mark to market value available-for-sale financial assets Comprehensive income from associates Currency translation differences Currency translation differences recycled to income statement as part of loss of sale of assets Comprehensive income discontinued operations Items that will not be reclassified to the income statement Remeasurement postemployment benefits, net of tax Other comprehensive income, net of tax Total comprehensive income for the year 12 17 10 Total comprehensive income attributable to: Owners of the parent continued operations Owners of the parent discontinued operations Non-controlling interests Total comprehensive income for the year 2 (57) 1 (53) (128) (119) (9) (128) 3 (1) 47 28 (1) 77 75 253 (239) 62 75 Notes 1 to 25 on the next pages are an integral part of these consolidated financial statements. 32 GroupAccounts and notesWilh. Wilhelmsen Holding ASA Annual Report 2018 Balance sheet Wilh. Wilhelmsen Holding group USD mill Note 31.12.2018 31.12.2017 ASSETS Non current assets Deferred tax asset Goodwill and other intangible assets Vessel, property and other tangible assets Investments in joint ventures and associates Financial assets to fair value Other non current assets Total non current assets Current assets Inventories Current financial investments Other current assets Cash and cash equivalents Total current assets Total assets EQUITY AND LIABILITIES Equity Paid-in capital Retained earnings and other reserves Attributable to equity holders of the parent Non-controlling interests Total equity Non current liabilities Pension liabilities Deferred tax Non current interest-bearing debt Other non current liabilities Total non current liabilities Current liabilities Current income tax Public duties payable Current interest-bearing debt Other current liabilities Total current liabilities Total equity and liabilities 8 7 7 4 12/17 11 13 14/17 11/15 15 10 8 16/17 11 8 16/17 11 54 156 567 1 018 650 23 2 467 74 88 311 140 612 3 079 122 1 699 1 821 196 2 017 20 12 448 100 580 13 9 85 375 483 3 079 Lysaker, 14 March 2019 The board of directors of Wilh. Wilhelmsen Holding ASA Diderik Schnitler chair Trond Ø. Westlie Carl Erik Steen Irene Waage Basili Cathrine Løvenskiold Wilhelmsen Thomas Wilhelmsen group CEO Notes 1 to 25 on the next pages are an integral part of these consolidated financial statements. 18 171 590 1 019 801 37 2 637 81 101 287 167 636 3 273 122 1 853 1 975 212 2 188 23 6 493 97 619 11 7 108 341 466 3 273 33 GroupAccounts and notesWilh. Wilhelmsen Holding ASA Annual Report 2018Cash flow statement Wilh. Wilhelmsen Holding group USD mill Note 2018 2017* Cash flow from operating activities Profit/(loss) before tax Share of (profit)/loss from joint ventures and associates Changes in fair value financial assets Financial (income)/expenses Financial derivatives unrealised Depreciation/impairment (Gain)/loss on sale of fixed assets Gain from sale of subsidiaries, joint ventures and associates Change in net pension asset/liability Change in inventory Change in working capital Tax paid (company income tax, withholding tax) Net cash provided by operating activities Cash flow from investing activities Dividend received from joint ventures and associates Proceeds from sale of fixed assets Investments in tangible and intangible assets Net proceeds from sale of subsidiaries Cash discontinued operations Investments in subsidiaries Loan repayments received from sale of subsidiaries Proceeds from sale of financial investments Current financial investments Interest received Net cash flow from investing activities Cash flow from financing activities Net proceeds from issue of debt after debt expenses Repayment of debt Interest paid including interest derivatives Dividend to shareholders Net cash flow from financing activities Net increase in cash and cash equivalents Cash and cash equivalents at the beginning of the period Cash and cash equivalents at 31.12 * 2017 including discontinued operations. 4 12 1 1 7 1 4/22 4 7 22 23 1 16 16 1 (86) (36) 116 41 42 (4) (1) 7 (6) (12) 62 20 14 (54) 7 (1) 17 71 (38) 4 40 153 (211) (29) (40) (128) (26) 167 140 14 (69) (6) (8) 42 (11) 107 (5) (21) 38 (11) 70 18 63 (29) 14 (121) (89) 111 (58) 5 (87) 230 (271) (37) (36) (114) (130) 296 167 The group is located and operating world wide and every entity has several bank accounts in different currencies. The cash flow effect from revaluation of cash and cash equivalents is included in net cash flow provided by operating activities. Notes 1 to 25 on the next pages are an integral part of these consolidated financial statements. 34 GroupAccounts and notesWilh. Wilhelmsen Holding ASA Annual Report 2018 Equity Wilh. Wilhelmsen Holding group CONSOLIDATED STATEMENT OF CHANGES IN EQUITY USD mill Share capital Own shares Retained earnings Total Non- controlling interests Total equity Balance 31.12.2017 122 0 1 853 1 975 212 2 188 Comprehensive income for the period: Profit/(loss) for the period Other comprehensive income Change in non-controlling interests Put option in associate Total comprehensive income for the period 0 Transactions with owners: Dividends Balance 31.12.2018 122 (69) (50) (5) (124) (31) 1 699 (69) (50) (5) (124) (31) 1 821 0 0 (6) (3) (1) (10) (6) 196 (75) (53) (1) (5) (134) (37) 2 017 Owned shares, 100.000 class A, were liquidated in 2018. The share capital is reduced from NOK 930 076 480 by NOK 2 000 000 to NOK 928 076 480. USD mill Share capital Own shares Retained earnings Total Non- controlling interests Total equity Balance 31.12.2016 122 1 868 1 990 502 2 492 Comprehensive income for the period: Profit/(loss) for the period Other comprehensive income* Incoming non-controlling interests Outgoing non-controlling interests Total comprehensive income for the period 0 Transactions with owners: Dividends Balance 31.12.2017 122 (64) 77 (64) 77 11 11 (28) 1 853 (28) 1 975 0 0 62 (1) 56 (398) (278) (8) 212 (2) 77 56 (398) (267) (36) 2 188 *Other comprehensive income in statement of equity is not restated in discontinued and continued operations. The proposed dividend for fiscal year 2018 is NOK 2.50 per share, payable in the second quarter of 2019. Dividend for fiscal year 2017 was NOK 5.50 per share, where NOK 3.50 per share was paid in May 2018 and NOK 2.00 per share was paid in November 2018. Dividend for fiscal year 2016 was NOK 5.00 per share, where NOK 3.50 per share was paid in May 2017 and NOK 1.50 per share was paid in November 2017. A decision on this proposal will be taken by the annual general meeting on 30 April 2019. The proposed dividend is not accrued in the year-end balance sheet. The dividend will have effect on retained earnings in second quarter of 2019. Notes 1 to 25 on the next pages are an integral part of these consolidated financial statements. 35 GroupAccounts and notesWilh. Wilhelmsen Holding ASA Annual Report 2018 Accounting policies Wilh. Wilhelmsen Holding group and Wilh. Wilhelmsen Holding ASA GENERAL INFORMATION Wilh. Wilhelmsen Holding ASA (referred to as the parent company) is domiciled in Norway. The consolidated accounts for fiscal year 2018 include the parent company and its subsidiaries (referred to collectively as the group) and the group’s share of joint ventures and associated companies. The annual accounts for the group and the parent company were issued by the board of directors on 14 March 2019. The company is a public limited liability company, listed on the Oslo Stock Exchange. BASIC POLICIES The consolidated accounts have been prepared in accordance with the International Financial Reporting Standards (IFRS), as endorsed by the European Union. The separate financial statements for the parent company have been prepared and presented in accordance with simplified IFRS as approved by Ministry of Finance 3 November 2014. In the separate statements the exception from IFRS for recognition of dividends and group contributions is applied. Otherwise, the explanations of the accounting policy for the group also apply to the separate statements, and the notes to the consolidated financial statements will to a large degree also cover the separate statements. where assumptions and estimates are significant to the consolidated financial statements are described in more detail in the section on critical accounting estimates and assumptions. The accounting policies outlined have been applied consistently for all periods presented in the accounts. Standards, amendments and interpretations IFRS 9 Financial Instruments replaces IAS 39 Financial Instruments: Recognition and Measurement for annual periods beginning on or after 1 January 2018, bringing together all three aspects of the accounting for financial instruments: classification and measurement; impairment; and hedge accounting. The Group has applied IFRS 9 retrospectively, with the initial application date of 1 January 2018. The Group has not adjusted the comparative information for the period beginning 1 January 2017. Classification and measurement The Group continued measuring at fair value all financial assets previously held at fair value under IAS 39. The changes in the classification of the Group’s financial assets are described in: The accounts for the group and the parent company are referred to collectively as the accounts. Note 12 “Financial assets at fair value” for evaluation of IFRS 9’s presentation options, for assets accounted for as “Available-for-sale” under IAS 39, available from the effective date of 01.01.2018. The group accounts are presented in US dollars (USD), rounded off to the nearest whole million. The group has evaluated the impact of IFRS 15. The implementation of the standard has no material impact on the consolidated and parent accounts. Entities in Maritime Services, Supply Services and Holding and Investments are measured using currency of primary economic location in which the entity operates. The exceptions are investments activity in Malta, where AUD is the functional currency and the parent company Wilhelmsen Maritime Services (WMS AS) has USD. The presentation currency of the separate statements of the parent is NOK which is also its functional currency. The income statements and balance sheets for group companies with a functional currency which differs from the presentation currency (USD) are translated as follows: • the balance sheet is translated at the closing exchange rate on the balance sheet date • income and expense items are translated at a rate that is representative as an average exchange rate for the period, unless the exchange rates fluctuate significantly for that period, in which case the exchange rates at the dates of the transactions are used • the translation difference is recognised in other comprehensive income and split between controlling and non-controlling interests Goodwill and fair value adjustments of assets and liabilities related to acquisition of entities which have a functional currency other than USD are attributed to the acquired entity’s functional currency and translated at the exchange rate prevailing on the balance sheet date. The accounts have been prepared under the historical cost convention as modified by the revaluation of some financial assets and liabilities (including financial derivatives) at fair value through the income statement. Preparing financial statements in conformity with IFRS and simplified IFRS requires the management to make use of estimates and assumptions which affect the application of the accounting policies and the reported amounts of assets and liabilities, revenues and expenses. Estimates and associated assumptions are based on historical experience and other factors regarded as reasonable under the circumstances. The actual result may vary from these estimates. The areas involving a higher degree of judgement or complexity, or areas There are no other new or amended standards adopted by the group or parent company in 2018. New standards, amendments and interpretations to existing standards that are not yet effective and have not been early adopted by the group; IFRS 16, ‘Leases’, issued in January 2016 and effective from 1 January 2019 covers the recognition of leases and related disclosure in the financial statements, and will replace IAS 17 ‘Leases’. In the financial statement of lessees, the new standard requires recognition of all contracts that qualify under its definition of a lease as right-of-use assets and lease liabilities in the balance sheet, while lease payments should be split in interest expense and reduction of lease liabilities. The right-of-use assets are to be depreciated in accordance with IAS 16 “Property, Plant and Equipment” over the shorter of each contract’s term and the assets useful life. The standard consequently implies a significant change in lessees’ accounting for leases currently defined as operating leases under IAS 17. While this definition is similar to that of IAS 17, it would have required further evaluation of each contract to determine whether all lease contracts in the group currently not defined as financial lease, would qualify as leases under new standard. The group has evaluated the impact of IFRS 16. The current material lease contracts are related to land and properties (see group account note 19). There are no other IFRSs or IFRIC interpretations that are not yet effective that would be expected to have a material impact on the group and the parent company. COMPARATIVE FIGURES When items are reclassified in the segment reporting, the comparative figures are included from the beginning of the earliest comparative period. SHARES IN SUBSIDIARIES, JOINT VENTURES AND ASSOCIATES (PARENT COMPANY) Shares in subsidiaries, joint ventures and associates are presented according to the cost method. Group contribution received is included in dividends from subsidiaries. Group contributions and dividends from subsidiaries are recognised in the year for which they are proposed by the subsidiary to the extent the parent company can control the decision of the subsidiary through its shareholdings on the balance sheet date. Shares in subsidiaries, joint ventures and associates are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may exceed the recoverable amount of the investment. An impairment loss is reversed if the impairment situation is deemed to no longer exist. CONSOLIDATION POLICIES Subsidiaries Subsidiaries are all entities over which the group has the power to govern the 36 GroupAccounts and notesWilh. Wilhelmsen Holding ASA Annual Report 2018Accounting policies Wilh. Wilhelmsen Holding group and Wilh. Wilhelmsen Holding ASA Accounting policies Wilh. Wilhelmsen Holding group and Wilh. Wilhelmsen Holding ASA financial and operating policies, generally accompanying a shareholding of more than half of the voting rights. Subsidiaries are consolidated from the date on which control is transferred to the group. They are deconsolidated from the date that control ceases. Intercompany transactions, balances and unrealised gains and losses on transactions between group companies are eliminated. Business combination The acquisition method of accounting is used to account for all business combinations, regardless of whether equity instruments or other assets are acquired. The consideration transferred for the acquisition comprises the: • fair value of the asset transferred • liabilities incurred to the former owners of the acquired business • equity interests issued by the group • fair value of any assets or liability resulting from a contingent consideration arrangement, and • fair value of any pre-existing equity interest in the subsidiary Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are, with limited exceptions, measured initially at their fair values at the acquisition date. The group recognises any non-controlling interest in the acquired entity on an acquisition-by-acquisition basis either at fair value or at non-controlling interest’s proportionate share of the acquired entity’s net identifiable assets. Acquisition-related costs are expensed as incurred. The excess of the • consideration transferred, • amount of any non-controlling interest in the acquired entity, and • acquisition-date fair value of any previous equity interests in the acquired entity over the fair value of the net identifiable assets acquired is recorded as goodwill. If those amounts are less than the fair value of the net identifiable assets of the business acquired, the difference is recognised directly in profit or loss as a bargain purchase Contingent consideration is classified either as equity or a financial liability. Amounts classified as a financial liability are subsequently remeasured to fair value with changes in fair value recognised in the income statement. If the business combination is achieved in stages, the acquisition date carrying value of the acquirer’s previously held equity interest in the acquire is remeasured to fair value at the acquisition date. Any gain or losses arising from such remeasurement are recognised in profit and loss. Joint arrangements and associates Joint arrangements and associates are entities over which the group or parent company has joint control or significant influence respectively but does not control alone. Investments in joint arrangements are classified as either joint operations or joint ventures depending on the contractual rights and obligations to each investor. The group has assessed the nature of its joint arrangements and determined them to be joint ventures. Joint ventures are accounted for using the equity method. Significant influence generally accompanies investments where the group or the parent company has 20-50% of the voting rights. The group’s investments in joint ventures and associates are accounted for by the equity method. Such investments are recognised at the date of acquisition at cost, including excess values and possible goodwill. When an investment ceases to be an associate, the difference between (1) the fair value of any retained investment and proceeds from disposing of the part interest in the associate and (2) the carrying amount of the investment at the date when significant influence is lost, is recognised in the income statement. If the ownership interest in a joint venture or an associate is reduced, but the investment continues to be a joint venture or an associate, a gain or loss is recognised in the income statement corresponding to the difference between the proportionate book value of the investment sold and the proceeds from disposing of the part interest in the joint venture or associate. Non-controlling interests The group treats transactions with non-controlling interests as transactions with equity owners of the group. For purchases from non-controlling interests, the difference between any consideration paid and relevant share acquired of the carrying value of net assets of the subsidiary is recorded in equity. Gains or losses on disposals to non-controlling interests are also recorded in equity. Discontinued operations A discontinued operation is a component of the entity that has been disposed of or is classified as held for sale and that represents a separate major line of business or geographical area or operations, is part of a single co-ordinated plan to dispose of such a line of business or area of operations, or is a subsidiary acquired exclusively with a view to resale. The result of discontinued operations is presented separately in the income statement. SEGMENT REPORTING The operating segments are reported in a manner consistent with the internal financial reporting provided to the chief operating decision-maker. Comparative figures have been reclassified in the segment’s figures from the beginning of earliest comparative period. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the board and Group Management Team, consisting of the group chief executive officer (group CEO) and five executive managers. RELATED PARTIES TRANSACTIONS The group and the parent company have transactions with joint ventures and associated companies. These contracts are based on commercial market terms. See note 11 and 20 to the group accounts for transactions with joint ventures and associates and note 6 and 14 to the parent company accounts. See note 6 to the group accounts concerning remuneration of senior executives in the group and note 2 to the parent company accounts for information concerning loans and guarantees for employees in the parent company. FOREIGN CURRENCY TRANSACTION AND TRANSLATION Transactions Individual companies’ transactions in foreign currencies are initially recorded in the functional currency by applying the rate of exchange as of the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated into the respective functional currency at the rate of the exchange at the balance sheet date. The realised and unrealised currency gains or losses are included in financial income or expense. For qualified cash flow hedging derivatives, qualifying net investment hedges, gains and losses are recognised in other comprehensive income, and reclassified when the hedged object affects profit or loss. The group’s share of profit after tax from joint ventures and associates, are recognised in the income statement as an investing and financial activity. The share of profit after tax from joint ventures and associates is added to the carrying amount of the investments together with its share of equity movements not recognised in the income statement. Sale and dilution of the share of associate companies is recognised in the income statement when the transactions occur for the group. Unrealised gains on transactions are partially eliminated under the equity method. Translations In the consolidated financial statements, the assets and liabilities of the parent company (NOK functional) as well as all non USD functional currency subsidiaries, joint ventures and associates, including related goodwill, are translated into USD using the rate of exchange as of the balance sheet date. The results and cash flow of non USD functional currency subsidiaries, joint ventures and associates are translated into USD using average exchange rate for the period reported (unless this average is not a reasonable approximation 37 GroupAccounts and notesWilh. Wilhelmsen Holding ASA Annual Report 2018Accounting policies Wilh. Wilhelmsen Holding group and Wilh. Wilhelmsen Holding ASA of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the rate on the dates of the transactions). Exchange adjustments arising when the opening net assets and the net income for the year retained by non USD operation are translated into USD are recognised in other comprehensive income. On disposals of a non USD functional currency subsidiary, joint ventures or associates, the deferred cumulative amount recognised in equity relating to that particular entity is recognised in the income statement. REVENUE RECOGNITION Revenue from sale of goods and services is recognised when the group entity sells a product or service to customer. Revenues are recognised at fair value of the consideration and presented net of value added tax and discounts. Maritime Services Revenue from the sale of goods and services is measured at fair value of the consideration, net of VAT, returns and discounts. Revenue from the sale of goods is recognised when ownership passes to the customers. Generally, this is when products are delivered. Rebates and incentive allowance are deferred and recognised in income upon the realisation or the closing of the rebate period. Services are recognised as they are rendered. Supply Services Recognition of revenue is when it is earned, i.e. when the main risk and control has been transferred to the customer. This will normally be when the goods are delivered to the customer. Revenue is measured at the fair value of the consideration on the time of the transaction. INVENTORIES Inventories of purchased goods and work in progress, are valued at cost in accordance with the weighted average cost method. Impairment losses are recognised if the net realisable value is lower than the cost price. Goodwill Goodwill represents the excess of the consideration transferred, the amount of any non-controlling interests in the acquiree and the acquisition date fair value of any previous equity interests in the acquiree over the fair value of the identifiable net assets of the acquired subsidiary, joint venture or associate. Goodwill arising from the acquisition of subsidiaries is classified as an intangible asset. Goodwill arising from the acquisition of an interest in an associated company is included under investment in associated companies and tested for impairment as part of the carried amount of the investment annually. Goodwill from acquisition of businesses is tested annually for impairment and carried at cost less impairment losses. Impairment losses on goodwill are not reversed. Gain or loss on the sale of a business includes the carried amount of goodwill related to the sold business. For impairment testing goodwill is allocated to relevant cash-generating units (“CGU”). The allocation is made to those CGU or groups of CGU which are expected to benefit from the acquisition. Details concerning the accounting treatment of goodwill are provided in the section on consolidation policies above. Other intangible assets Costs associated with maintaining computer software programmes are recognised as an expense as incurred. Development costs that are directly attributable to the design and testing of identifiable and unique software products controlled by the group are recognised as intangible assets when the following criteria are met: • it is technically feasible to complete the software product so that it will be available for use; • management intends to complete the software product and use or sell it; • it can be demonstrated how the software product will generate probable future economic benefits; EMPLOYEE BENEFITS - CASH-SETTLED ARRANGEMENTS Cash–settled payments / bonus plans For cash-settled payments, a liability equal to the portion services received is recognised at fair value determined at each balance sheet date. • adequate technical, financial and other resources to complete the development and to use or sell the software product are available; and • the expenditure attributable to the software product during its development can be reliably measured See note 6 to the group accounts and note 2 and 16 to the parent accounts concerning remuneration of senior executives. TANGIBLE ASSETS Vessel, property and other tangible assets acquired by group companies are stated at historical cost. Depreciation is calculated on a straight-line basis. The carrying value of tangible assets equals the historical cost less accumulated depreciation and any impairment charges. The group’s borrowing costs are recognised in the income statement when they arise. Borrowing costs are capitalised to the extent that they are directly related to the acquisition of the asset. Land is not depreciated. Other tangible assets are depreciated over the following expected useful lives: Property Vessel Other tangible assets 10-50 years 25 years 3-10 years Each component of a tangible asset which is significant for the total cost of the item will be depreciated separately. Components with similar useful lives will be included in a single component. The estimated residual value and expected useful life of long-lived assets are reviewed at each balance sheet date, and where they differ significantly from previous estimates, depreciation charges will be changed accordingly. GOODWILL AND OTHER INTANGIBLE ASSETS Amortisation of intangible fixed assets is based on the following expected useful lives: Goodwill Software and licenses Other intangible assets Indefinite life 3-5 years 5-10 years Trademark, technology/licenses and customer relationship have a finite life and are recognised at historical cost less accumulated amortisation. Amortisation is calculated using the straight-line method to allocate the cost of trademarks and licenses over their estimated useful life. Capitalised expenses related to other intangible assets are amortised over the expected useful lives in accordance with the straight-line method. IMPAIRMENT OF GOODWILL AND OTHER NON- FINANCIAL ASSETS Non-financial assets At each reporting date the accounts are assessed whether there is an indication that an asset may be impaired. If any such indication exists, or when annual impairment testing for an asset is required, estimates of the asset’s recoverable amount are done. The recoverable amount is the highest of the fair market value of the asset, less cost to sell, and the net present value (NPV) of future estimated cash flow from the employment of the asset (“value in use”). The NPV is based on a discount rate according to a weighted average cost of capital (“WACC”) reflecting the company’s required rate of return. The WACC is calculated based on the company’s long-term borrowing rate and a risk-free rate plus a risk premium for the equity. If the recoverable amount is lower than the book value, impairment has occurred, and the asset shall be revalued. Impairment losses are recognised in profit or loss. Assets are grouped at the lowest level where there are separately identifiable independent cash flows. Goodwill Goodwill acquired through business combinations has been allocated to the relevant CGU. An assessment is made as to whether the carrying amount of the goodwill can be justified by future earnings from the CGU to which the goodwill relates. If the ”value in use” of the CGU is less than the carrying amount of the CGU, including goodwill, goodwill will be written down first. Thereafter the carrying amount of the CGU will be written down. Impairment losses related to goodwill cannot be reversed. 38 GroupAccounts and notesWilh. Wilhelmsen Holding ASA Annual Report 2018 Accounting policies Wilh. Wilhelmsen Holding group and Wilh. Wilhelmsen Holding ASA Accounting policies Wilh. Wilhelmsen Holding group and Wilh. Wilhelmsen Holding ASA LEASES Leases for property and equipment where the group carries substantially all the risks and rewards of ownership are classified as financial leases. Financial assets to fair value are included in non-current assets unless the investment matures or management intends to dispose of it within 12 months of the end of the reporting period. Financial leases are capitalised at the commencement of the lease at the lower of fair value of the leased item or the present value of agreed lease payments. Each lease payment is allocated between liability and finance charges. The corresponding rental obligations are included in other non-current liabilities. The associated interest element is charged to the income statement over the lease period so as to produce a periodic rate of interest on the remaining balance of the liability for each period. Financial leases are depreciated over the shorter of the useful life of the asset or the lease term. Leases where a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases, net of any financial incentives from the lessor, are charged to the income statement on a straight-line basis over the period of the lease. FINANCIAL ASSETS From 1 January 2018, the group classifies its financial assets in the following measurement categories: • those to be measured subsequently at fair value through income statement • those to be measured at amortised cost Management determines the classification of financial assets at their initial recognition. Financial assets subsequently carried at fair value are initially recognised at fair value, and transaction costs are expensed in the income statement. The group and the parent company classified financial assets under IAS 39 into the following categories: trading financial assets at fair value through income statement, loans and receivables. The classification depended on the purpose of the asset. Short term investments This category consists of financial assets held for trading. A financial asset is classified in this category if acquired principally for the purpose of profit from short term price gains. Short term investments are measured at fair value. The resulting unrealised gains and losses are included in financial income and expense. Derivatives are also placed in this category unless designated as hedges. Assets in this category are classified as current. Loans and receivables at amortised cost Loans and receivables are non derivative financial assets with fixed or determinable payments, which are not traded in an active market. They are included in current assets, except for maturities greater than 12 months after the balance sheet date. These are classified as non-current assets. Loans and receivable are classified as other current assets or other non-current assets in the balance sheet. Loans and receivables are recognised initially at their fair value plus transaction costs. Financial assets are derecognised when the contractual rights to the cash flows from the financial assets expire or are transferred, and the group has transferred by and large all risk and return from the financial asset. FINANCIAL DERIVATIVES Derivatives are included in current assets or current liabilities, except for maturities greater than 12 months after the balance sheet date. These are classified as non-current assets or other non-current liabilities as they form part of the group’s long-term economic hedging strategy and are not classified as held for trading. Derivatives are recognised at fair value on the date a derivative contract is entered into and are revalued on a continuous basis at their fair value. Derivatives which do not qualify for hedge accounting Most derivative instruments do not qualify for hedge accounting. Changes in the fair value of any derivative instruments which do not qualify for hedge accounting are presented in the income statement as financial income/expense. Derivatives which do qualify for hedge accounting The group designates certain derivatives as hedges of highly probable forecast transactions (cash flow hedges). At the date of the hedging transaction, the group documents the relationship between hedging instruments and hedged items, as well as the objective of its risk management and the strategy underlying the various hedge transactions. The group also documents the extent to which the applied derivatives are effective in offsetting changes in fair value or cash flow associated with the hedge items. Such assessments are documented both initially and on an ongoing basis. The fair value of derivatives used for hedging is shown in note 17 to the group accounts. Changes in the valuation of qualified hedges are recognised directly in other comprehensive income until the hedged transactions are realised. The fair value of financial derivatives traded in active markets is based on quoted market prices at the balance sheet date. The fair value of financial derivatives not traded in an active market is determined using valuation methodology, such as the discounted value of future cash flows. Independent experts verify the value determination for instruments which are considered material. Cash flow hedge The effective portion of changes in the fair value of derivatives designated as cash flow hedges are recognised in other comprehensive income together with the deferred tax effect. Gain and loss on the ineffective portion is recognised in the income statement. Amounts recognised in other comprehensive income are recognised as income or expense in the income statement in the period when the hedged liability or planned transaction will affect the income statement. Net investment hedge Gain and losses arising from the hedging instruments relating to the effective portions of the net investment hedges are recognised in other comprehensive income. These translation reserves are reclassified to the income statement upon loss of control of the hedged net investments, offsetting the translation differences from these net investments. Any ineffective portion is recognised immediately in the income statement as financial income/(expenses). Realised gains and losses are recognised in the income statement in the period they arise. Financial assets to fair value The Group continued measuring at fair value all financial assets previously held at fair value under IAS 39. The following are the changes in the classification of the Group’s financial assets. DEFERRED TAX / DEFERRED TAX ASSET Deferred tax is calculated using the liability method on all temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. Deferred income tax is determined using tax rates and laws which have been enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability settled. Equity investments in listed companies: These financial assets were previously classified as “available-for-sale” financial assets are now classified and measured as equity instruments designated at fair value through the income statement. Deferred income tax assets are recognised to the extent that it is probable that future taxable profit will be available, and that the temporary differences can be deducted from this profit. Changes in fair value during the period, is recognised through the income statement. Deferred income tax is calculated on temporary differences arising on investments in subsidiaries and associates, except where the timing of the reversal of the temporary difference is controlled by the group. 39 GroupAccounts and notesWilh. Wilhelmsen Holding ASA Annual Report 2018Accounting policies Wilh. Wilhelmsen Holding group and Wilh. Wilhelmsen Holding ASA parent company account as a liability at 31 December current year. Group contribution to the parent company is recognised as a financial income and current asset in the financial statement at 31 December current year. LOANS Loans are recognised at fair value when the proceeds are received, net of transaction costs. In subsequent periods, loans are stated at amortised cost using the effective yield method. Any difference between proceeds (net of transaction costs) and the redemption value is recognised in the income statement over the term of the loan. Loans are classified as current liabilities unless the group or the parent company has an unconditional right to defer settlement of the liability for at least 12 months after the balance sheet date. PROVISIONS The group and the parent company make provisions for legal claims when a legal or constructive obligation exists as a result of past events, it is more likely than not that an outflow of resources will be required to settle the obligation, and the amount can be estimated with a sufficient degree of reliability. Provisions are not made for future operating losses. CRITICAL ACCOUNTING ESTIMATES AND ASSUMPTIONS When preparing the financial statements, the group and the parent company must make assumptions and estimates. These estimates are based on the actual underlying business, its present and forecast profitability over time, and expectations about external factors such as interest rates, foreign exchange rates and oil prices which are outside the group’s and parent company’s control. This presents a substantial risk that actual conditions will vary from the estimates. Impairment of goodwill Assets that have an indefinite useful life, for example goodwill, are not subject to amortisation and are tested annually for impairment. The main risks are: • Growth • Net profit • Cash flow Assets that are subject to amortisation or depreciation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). Non-financial assets other than goodwill that suffered impairment are reviewed for possible reversal of the impairment at each reporting date. The group has financial models which calculate and determine the value in use through a combination of actual and expected cash flow generation discounted to present value. The expected future cash flow generation and models are based on assumptions and estimate. See note 7 in the group accounts for additional information. PENSION OBLIGATIONS Group companies have various pension schemes, and the employees are covered by pension plans which comply with local laws and regulations. These schemes are generally funded through payments to insurance companies or pension funds on the basis of periodic actuarial calculations. The group and the parent company have both defined contribution and defined benefit plans up to 31 December 2018. The group has “Ekstrapensjon”, a contribution plan for all Norwegian employees with salaries exceeding 12 times the Norwegian National Insurance base amount (G). The contribution plan replaced the group obligations mainly financed from operation. However, the group still has obligations for some employees’ related to salaries exceeding 12 times the Norwegian National Insurance base amount (G) mainly financed from operations. A defined contribution plan is one under which the group and the parent company pay fixed contributions to a separate legal entity. The group and the parent company have no legal or constructive obligations to pay further contributions if the fund does not hold sufficient assets to pay all employees the benefits relating to employee service in the current and prior periods. A defined benefit plan is one which is not a defined contribution plan. This type of plan typically defines an amount of pension benefit an employee will receive on retirement, normally dependent on one or more factors such as age, years of service and pay. The liability recognised in the balance sheet in respect of defined benefit pension plans is the present value of the defined benefit obligation at the end of the reporting period less the fair value of plan assets. The defined benefit obligation is calculated annually by independent actuaries using the projected unit credit method. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of high-quality corporate bonds that are denominated in the currency in which the benefits will be paid, and that have terms to maturity approximating to the terms of the related pension obligation. The pension obligation is calculated annually by independent actuaries using a straight-line earnings method. Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or credited to equity in other comprehensive income in the period in which they arise. Past-service costs are recognised immediately in the income statement. RECEIVABLES Account receivables and other receivables, that have fixed or determinable payments that are not quoted in an active market are classified as receivables. The group applies the IFRS 9 simplified approach to measure expected credit losses which uses a lifetime expected loss allowance for all trade receivables and contract assets. To measure the expected credit losses, trade receivables has been grouped based on shared credit risk characteristics and days past due. CASH AND CASH EQUIVALENTS Cash and cash equivalents include cash in hand, deposits held at call with banks and other liquid investments with maturities of three months or less. Bank overdrafts are presented under borrowings in current liabilities on the balance sheet. SHARE CAPITAL AND TREASURY SHARES When the parent company purchases its own shares (treasury shares), the consideration paid, including any attributable transaction costs net of income tax, is deducted from the equity attributable to the parent company’s shareholders until the shares are cancelled or sold. Should such shares subsequently be sold or reissued, any consideration received is included in share capital. DIVIDEND IN THE GROUP ACCOUNTS Dividend payments to the parent company’s shareholders are recognised as a liability in the group’s financial statements from the date when the dividend is approved by the general meeting. DIVIDEND AND GROUP CONTRIBUTION IN PARENT ACCOUNTS Proposed dividend for the parent company’s shareholders is shown in the 40 GroupAccounts and notesWilh. Wilhelmsen Holding ASA Annual Report 2018Note 1 Combined items, income statement USD mill OPERATING REVENUE Ships service revenue Supply services revenue Ship management and crewing revenue Other revenue Total operating revenue GAIN ON SALE OF ASSETS Gain on sale of assets Disposal of associate (step up loss) Gain from change in measurement of Hyundai Glovis Total gain on sale of assets OTHER EXPENSES Loss on sale of assets Office expenses Communication and IT expenses External services Travel and meeting expenses Marketing expenses Other operating expenses Total other expenses FINANCIAL INCOME AND EXPENSES Financial items Investment management Interest income Other financial items Net financial items Financial – interest expenses Interest expenses Other financial expenses Net financial – interest expenses Financial currency Net currency gain/(loss) – non financial currency Net currency gain/(loss) – financial currency Derivatives for hedging of cash flow risk – realised Derivatives for hedging of cash flow risk – unrealised Net financial currency Financial income/(expenses) Spesification of financial income and expenses Net financial items Net financial currency gain Financial income Net financial – interest expenses Net financial currency loss Financial expenses See note 17 on financial risk and the section of the accounting policies concerning financial derivatives. Note 2018 2017 20 23 12 20 535 283 41 8 867 4 4 (58) (27) (31) (8) (4) (78) (206) (6) 4 18 16 (29) (5) (34) (4) (3) (2) (15) (23) (41) 16 16 (34) (23) (57) 525 43 63 632 6 (40) 195 161 (1) (39) (30) (35) (8) (4) (32) (150) 5 5 12 22 (14) (14) 7 (2) 9 14 22 22 14 36 (14) (14) 41 GroupAccounts and notesWilh. Wilhelmsen Holding ASA Annual Report 2018 Note 2 Segment reporting SEGMENTS The chief operating decision-maker monitors the business by combining entities with similar operational characteristics such as product services, market and underlying asset base, into operating segments. The Maritime Services segment offers marine products, ship agency services and logistics to the merchant fleet and ship management including manning for all major vessel types, through a worldwide network of more than 255 offices in some 67 countries. The Holding and Investments segment includes the parent company, Wilh. Wilhelmsen Holding ASA, Treasure ASA group, Wilh. Wilhelmsen Holding Invest AS group and other minor activities (WilService AS, Wilhelmsen Accounting Services AS and corporate group activities like operational management, legal, finance, portfolio management, communication and human relations) which fail to meet the definition for other core activities. The groups investment in WalWil is presented as part of Holding and Investments as an investment in associates. The Supply Services segment is mainly related to the operation of supply bases for the oil industry in Norway, as well as real estate development and operation of properties both on and off the supply bases. In addition to the activity in Norway, the segment offers its services in both Denmark and in the UK. The international activity consists of both operation of supply bases, maintenance of rigs and handling of logistics related to international pipeline projects and windmill parks. Eliminations are between the group’s three segments mentioned above. The segment income statement are measured in the same way as in the financial statements. The segment information provided to the chief operating decision-maker for the reportable segments for the year ended 31 December 2018 is as follows: USD mill Maritime Services Supply Services Holding and Investments Eliminations/ discontinued operations (2017)* Total 2018 2017 2018 2017 2018 2017 2018 2017 2018 2017 INCOME STATEMENT Operating revenue Gain on disposals of assets Total income Cost of goods and change in inventory Employee benefits Other expenses Depreciation and impairments Total operating expenses Operating profit/(loss) Share of profit from associates Changes in fair value financial assets Net financial income / expenses Profit/(loss) before tax Tax income/(expense) Profit/(loss) Result of discontinued operations Non-controlling interests Profit/(loss) to the owners of parent *Discontinued operations, see note 22. 580 2 582 (198) (212) (130) (16) (556) 26 4 (61) (37) (68) 13 (55) 2 (56) 574 6 580 (182) (214) (133) (15) (544) 36 283 3 285 (68) (96) (71) (26) (260) 25 4 9 6 46 (15) 30 1 29 (15) 20 (4) 15 4 11 57 11 57 11 (10) (20) (18) (6) (54) 2 1 (1) 3 1 4 1 3 (1) (13) (12) (1) (26) (15) 23 (56) 10 (38) 3 (35) (12) (23) 16 155 171 (1) (19) (13) (34) 138 49 16 204 (2) 202 52 150 (7) (7) 6 7 0 0 0 (14) (14) 14 14 (0) (0) 0 (239) 7 (0) (246) 867 4 871 (267) (320) (206) (42) (835) 36 36 (116) (41) (86) 12 (75) (6) (69) 632 161 793 (194) (252) (150) (22) (617) 176 55 22 253 (16) 236 (239) 62 (64) Supply Services; One customer represent about 13% of the total revenue. 42 GroupAccounts and notesWilh. Wilhelmsen Holding ASA Annual Report 2018 Cont. note 2 Segment reporting The amounts provided to the chief operating decision-maker with respect to total assets, liabilities and equity are measured in the same way as in the financial statements. USD mill Maritme Services Supply Services Holding and Investments Eliminations Total 31.12.18 31.12.17 31.12.18 31.12.17 31.12.18 31.12.17 31.12.18 31.12.17 31.12.18 31.12.17 BALANCE SHEET Assets Deferred tax asset Intangible assets Tangible assets Investments in joint ventures and associates Financial assets to fair value Other non current assets Current financial investments Other current assets Cash and cash equivalents Total assets Equity and liabilities Equity majority Equity non-controlling interests Deferred tax Interest-bearing debt Other non current liabilities Other current liabilities Total equity and liabilities 42 149 188 11 27 13 294 110 834 237 (1) 12 197 97 292 834 11 163 187 12 83 29 305 144 934 329 (1) 6 196 94 310 934 6 107 12 671 152 54 330 18 117 671 Investments in tangible assets 19 21 29 4 5 6 4 8 377 401 159 176 5 62 8 7 2 848 623 24 88 14 18 2 2 832 718 22 101 38 15 54 156 567 18 171 590 1 018 1 019 650 23 88 385 140 801 37 101 368 167 (20) (19) (30) (37) 664 1 624 1 730 (50) (56) 3 079 3 273 150 55 369 18 71 1 431 1 497 144 158 23 9 17 54 9 14 664 1 624 1 730 (17) (3) (30) (50) (18) (1) (37) (56) 1 821 1 975 196 12 533 120 397 212 6 601 120 358 3 079 3 273 48 26 43 GroupAccounts and notesWilh. Wilhelmsen Holding ASA Annual Report 2018 Cont. note 2 Segment reporting The amounts provided to the chief operating decision-maker with respect to cash flows are measured in a manner consistent with that of the balance sheet. USD mill CASH FLOW Profit/(loss) before tax Changes in fair value financial assets Share of profit from joint ventures and associates Net financial (income)/expenses Depreciation/impairment Change in working capital Net gain from sale of assets/change of accounting principle Net cash provided by operating activities Dividend received from joint ventures and associates Net sale/(investments) in fixed assets Net sale/(investments) in entities and segments Net investments in financial investments Net changes in other investments Net cash flow from investing activities Net change of debt Net change in other financial items Net dividend from other segments/ to shareholders Net cash flow from financing activities Net increase in cash and cash equivalents Cash and cash equivalents at the beginning of the period Cash and cash equivalents at the end of period GEOGRAPHICAL AREAS Maritime Services Supply Services Holding and Investments 2018 2017 2018 2017 2018 2017 (68) 61 (4) 37 16 (20) (2) 20 3 (13) 18 (2) 7 1 (15) (47) (61) (34) 144 110 46 (4) (6) 15 (10) (3) 38 5 (15) (21) 1 (30) 20 (12) (34) (25) (17) 161 144 20 (9) 15 26 (6) (3) 42 17 (24) 6 1 1 (0) (17) (14) (6) (38) 4 8 12 3 (1) 1 6 6 14 (5) 3 (2) (6) (4) (10) 2 6 8 (38) 56 (23) (10) 1 5 (9) (3) 40 36 (27) (3) 7 (23) 3 15 18 204 (49) (16) 9 (155) (8) 13 (54) (41) 19 (2) (7) 10 (38) 54 15 USD mill Europe Americas Asia & Africa Oceania Other Total 2018 2017 2018 2017 2018 2017 2018 2017 2018 2017 2018 2017 Total income Total assets 513 429 2 367 2 474 66 34 Investment in tangible assets 38 16 63 36 1 262 562 10 271 622 9 30 115 30 141 871 793 3 079 3 273 48 26 Russia is defined as Europe. Total income Area income is based on the geographical location of the company and includes sales gains. Total assets Area assets are based on the geographical location of the assets. Investments in tangible assets Area capital expenditure is based on the geographical location of the assets. 44 GroupAccounts and notesWilh. Wilhelmsen Holding ASA Annual Report 2018 Note 3 Revenue from contracts with customers OPERATING REVENUE USD mill Revenue segments Maritime services Supply services 2018 Holding and Investments Elimination Total Marine Products Ships Agency Technical/ crewing management Other Operation Property Other Other Revenue from external customers Total Timing of revenue recognition At a point in time Over time Total Revenue segments Revenue from external customers Total Timing of revenue recognition At a point in time Over time Total 358 358 126 126 358 358 126 126 341 341 130 130 341 341 130 130 41 41 41 41 43 43 43 43 55 55 55 55 60 60 60 60 238 238 26 26 18 18 238 238 26 26 18 18 47 47 47 47 7 7 7 7 3 3 3 3 11 11 11 11 16 16 16 16 (7) (7) (7) (7) (14) (14) (14) (14) 867 867 417 450 867 2017 632 632 402 230 632 SUPPLY SERVICES Revenues from external customers come from sale of services to the oil and gas industry (Operations), from the rental of properties (Property) and from the sale of services to other industries (Other). Sale of services (Operations and Other) The performance obligation is satisfied when the services are rendered. Revenue is recognised with the tranaction value at the time of the transaction. Rental (Property) The group is the lessor in operating leases on property. Revenue is recognised when the revenue is earned. MARITIME SERVICES Sale of goods (Marine Products) The performance obligation is satisifed upon delivery of Marine Products to the customer at vessel or warehouse. Recognition of revenue at the point of delivery is recognized net of discounts and customer bonus. Customer bonuses are regarded as a variable consideration estimated on monthly basis. At end of reporting period the variable consideration is re-assessed and recognized as the uncertainty is subsequently resolved. Sale of services (Ships Agency) The performance obligation is satisfied when the services are rendered. WSS acts as an agent by providing the customer with services from other parties. It is the other party that is responsible for fulfilling the performance obligation. WSS does not have inventory risk or the discretion in establishing prices for the specified goods and services provided by these other parties. Net revenue (agency fees and commissions) arriving from ships agency and maritime logistics services are recognized as incurred. Technical / crewing management The revenue from technical management and crew management services is based on a fixed fee per year negotiated between the parties and charged with 1/12 to the vessel owning companies monthly. Furthermore, Wilhelmsen Ship Management (WSM) invoice the vessel owning companies a fixed negotiated “manning fee” per crew on board the vessel on a monthly basis. The revenue arriving from Technical management and crew management services is recognized within the same month as the service have been provided to the vessel owner. The benefit of service rendered as per agreed in the Shipman is considered to be delivered to the vessel owner simultaneously as the service is being provided. Revenue from manning fee is based on crew on board the vessels and is recognised within the same month the seafarer has delivered his/her service on board the vessel. Sale of goods (Other) The performance obligation is satisifed upon delivery of ropes to non-maritime customers and chemicals to the consumer market. Recognition of revenue at the point of delivery is recognized net of discounts. The revenue from insurance broker activity is based on commission of the insurance premium. The fee is per year and charged 1/12 to the account monthly. HOLDING & INVESTMENTS The operation revenue is related inhouse services to external customers as house rent, canteen services, HR services and salary services. 45 GroupAccounts and notesWilh. Wilhelmsen Holding ASA Annual Report 2018 Note 4 Investments in associates Holding and Investments Wallenius Wilhelmsen ASA Denholm Port Services Limited Raa Labs AS Dolittle AS Massterly AS Business office/country Lysaker, Norway Grangemouth, United Kingdom Lysaker, Norway Lysaker, Norway Lysaker, Norway Maritime Services - companies with significant shares of profits Almoayed Wilhelmsen Ltd Wilhelmsen Huayang Ships Services (Shanghai) Co Ltd Wilhelmsen Huayang Ships Services (Beijing) Co Ltd Diana Wilhelmsen Management Limited Barwil Arabia Shipping Agencies SAE Wilhelmsen Ships Service Georgia Ltd Barwil Georgia Ltd. Barklav (Hong Kong) Ltd BWW LPG Limited Alghanim Barwil Shipping Co-Kutayba Yusuf Ahmed & Partner WLL Wilhelmsen Ships Service Lebanon S.A.L. BWW LPG Sdn. Bhd. Wilhelmsen Ships Service (Private) Limited Wilhelmsen-Smith Bell Shipping Inc Wilhelmsen-Smith Bell (Subic) Inc. Wilhelmsen-Smith Bell Manning, Inc. Perez Torres - Portugal Lda Bahrain China China Cyprus Egypt Georgia Georgia Hong Kong Hong Kong Kuwait Lebanon Malayisia Pakistan Philippines Philippines Philippines Portugal Wilhelmsen Hyopwoon Ships Services Ltd Republic of Korea Barklav S.R.L. Binzagr Barwil Maritime Transport Co Ltd Krew-Barwil (Pty) Ltd Wilhelmsen Meridian Navigation Ltd, Sri Lanka Baasher Barwil Agencies Ltd Triangle Shipping Agencies LLC Wilhelmsen Ships Service LLC Barwil Abu Dhabi Ruwais LLC Barwil Dubai LLC Denholm Port Services Limited Wilhelmsen Sunnytrans Co Ltd Supply Services - companies with significant shares of profits Risavika Havn AS Risavika Eiendom AS Hammerfest Næringsinvest AS Bring Polarbase AS Strandparken Holding AS Eldøyane Næringspark AS Risavika Havnering 14 AS Romania Saudi Arabia South Africa Sri Lanka Sudan United Arab Emirates United Arab Emirates United Arab Emirates United Arab Emirates Grangemouth, United Kingdom Vietnam Tananger, Norway Tananger, Norway Hammerfest, Norway Hammerfest, Norway Hammerfest, Norway Stord, Noway Stavanger, Norway 2018 2017 Voting share/ownership 37.8% 40.0% 50.0% 50.0% 50.0% 50.0% 50.0% 50.0% 50.0% 35.0% 50.0% 50.0% 50.0% 49.0% 49.0% 49.0% 49.0% 50.0% 49.0% 50.0% 50.0% 50.0% 50.0% 50.0% 50.0% 49.0% 40.0% 50.0% 50.0% 43.0% 50.0% 50.0% 50.0% 42.8% 42.0% 32.3% 41.0% 33.1% 37.9% 33.3% 37.8% 50.0% 50.0% 50.0% 50.0% 50.0% 35.0% 50.0% 50.0% 50.0% 49.0% 49.0% 49.0% 49.0% 50.0% 49.0% 50.0% 50.0% 50.0% 50.0% 50.0% 50.0% 49.0% 40.0% 50.0% 50.0% 43.0% 50.0% 50.0% 40.0% 50.0% 42.8% 42.0% 32.3% 41.0% 33.1% 37.9% 33.3% An overview of actual equity holdings can be found in the presentation of company structure on page 124. With effect from 1 April, 2017 the group changed the accounting for Hyundai Glovis from Investment in associate to financial assets to fair value. See note 12. automotive, agricultural, mining and construction equipment industries and its services consist of supply chain management, ocean transportation, terminal services, inland distribution and technical services. WalWil is the contracting party in customer contracts with industrial manufacturers for cars, agricultural machinery etc. On 4 April 2017, the subsidiary WWASA was merged with Wall Roll AB creating Wallenius Wilhelmsen ASA (WalWil). After the merger the group own 37.8% of WalWil. WalWil is an operating company within both shipping segment and logistics segment. The company provides global transportation services for the With effect from 26 September 2017, the group increased its shareholding in NorSea Group from 40% to 72%. Following this transaction, the group has further acquired a minor portion of management controlled shares of 3.15% bringing the total shareholding to 75.15%. See note 22 for further information. 46 GroupAccounts and notesWilh. Wilhelmsen Holding ASA Annual Report 2018Cont. note 4 Investments in associates USD mill 2018 2017 Share of profit/(loss) from associates WalWil group NorSea Group AS Other associates Holding and Investments Other associates Maritime Services Other associates Supply Services Share of profit/(loss) from associates Book value of material associates WalWil group Specification of share of equity and profit/loss: Share of equity 01.01 Share of profit for the year Merger WalWil Business combination NorSea Group Associates in Supply Services Transfer to Available-for-sale Hyundai Glovis Dividend Financial derivatives in associates Other comprehensive income Share of equity 31.12 23 (1) 4 27 44 5 4 54 847 831 900 27 (16) (5) (6) 900 491 54 790 (100) 60 (378) (18) 1 900 There are no contingent liabilities relating to the group’s interest in the associates. Set out below are the summarised financial information for, based on 100%, for WalWil group, which, in the opinion of the directors, is the material associates to the group. Associates not considered to be material is defined under ”other” (based on 100%). USD mill SUMMARISED STATEMENT OF COMPREHENSIVE INCOME Total income Operating expenses Net operating profit Finance income & expenses Other financial expenses Profit before tax Tax Profit/(loss) after non-controlling interests Other comprehensive income Total comprehensive income WWH share of dividend from associates WalWil Other 2018 2017 2018 2017 4 065 2 992 (3 821) 244 (152) (15) 78 (20) 52 (16) 36 (2 739) 253 (105) 1 148 (3) 134 (3) 132 75 (60) 16 (6) 10 (2) 8 (1) 7 3 91 (78) 13 12 (2) 10 10 5 47 GroupAccounts and notesWilh. Wilhelmsen Holding ASA Annual Report 2018 Cont. note 4 Investments in associates USD mill SUMMARISED BALANCE SHEET Non current assets Other current assets Cash and cash equivalents Total assets Non current financial liabilities Other non current liabilities Current financial liabilities Other current liabilities Total liabilities Net assets WalWil Other 31.12.2018 31.12.2017 31.12.2018 31.12.2017 6 110 818 485 7 414 6 272 690 797 7 759 3 055 3 103 361 530 588 389 661 810 4 533 4 963 2 880 2 796 174 34 77 285 68 5 66 35 174 112 186 56 79 321 72 6 6 108 193 128 The information above reflects the 100% amount presented in the financial statements of the associates, adjusted for differences in accounting policies between the group and the associates. USD mill RECONCILIATION OF SUMMARISED FINANCIAL INFORMATION Net asset 01.01 Increased capital Profit for the period Other comprehensive income Currency translation differences Transaction with non-controlling interests Dividend Net assets 31.12 WWH share Currency Fair value adjustment vessel and goodwill* Carrying value 31.12 WalWil Other 31.12.2018 31.12.2017 31.12.2018 31.12.2017 2 796 52 (16) 48 2 664 134 (3) 2 880 2 796 1 088 (3) (239) 847 1 057 (226) 831 127 8 (1) (1) (20) 112 53 25 105 10 (2) (11) 127 69 53 69 *The share price of Wallenius Wilhelmsen ASA at the merger (April 2017) was lower than booked equity in Wallenius Wilhelmsen group. The group market value of the investment in Wallenius Wilhelmsen ASA at 31 December 2018 was USD 547 million (2017: USD 1 155 million). WalWil is a separately listed company on Oslo Stock Exchange. The market capitalisation of its shares at year end is 35% lower than the carrying amount of the investment, as accounted for under the equity method. The market price is an objective indicator of impairment. In spite of this, the value in use calculation based on projections prepared by management of WalWil, indicates that the recoverable amount is higher than WalWils carrying amounts for the key assets of WalWil. This impairment test has been reviewed by the management of WWH, and adjusted for factors related to the financing and working capital of WalWil in order to assess a reasonable value in use for the investment in the shares of WalWil. Based on this assessment, the recoverable amount attributable to the shares is higher than the carrying amount. The recoverable amount is particularly sensitive to volume and/or prices, and interest rate levels for the financing within WalWil. Reconciliations of the group's income statement and balance sheet USD mill Share of profit from joint ventures Share of profit from associates Share of profit from joint ventures and associates Share of equity from joint ventures Share of equity from associates Share of equity from joint ventures and associates 2018 2017 9 27 36 117 900 1 018 1 54 55 119 900 1 019 The group’s share of profit, after tax from joint ventures and associates is recognised in the income statement as an financial income. All joint ventures and associates are equity consolidated. 48 GroupAccounts and notesWilh. Wilhelmsen Holding ASA Annual Report 2018 Note 4 Investments in joint ventures NorSea Group Coast Center Base AS (CCB) KS Coast Center Base (CCB) Vikan Næringspark AS SørSea AS Polar Lift AS Business office, country Voting share/ownership 2018 2017 Fjell, Norway Fjell, Norway Kristiansund, Norway Tananger, Norway Hammerfest, Norway 50.0% 50.0% 50.0% 50.0% 50.0% 50.0% 50.0% 50.0% 50.0% 50.0% Coast Center Base AS is a joint venture between NorSea Group and Bernh. Larsen Holding AS and was established in 1998. It delivers services related to logistics, quay, project and maintenance to the oil & gas industry in addition to maritime industry. SørSea AS is a joint venture between NorSea Group and Røsi AS/Stangeland Gruppen AS. It owns land in Risavika in Norway. Polar Lift AS is a joint venture between NorSea Group and Havator AS. It rents out cranes and other equipment and is located in Hammerfest in Norway. KS Coast Center Base AS is a joint venture between NorSea Group and Bernh. Larsen Holding AS and was established in 1973. It is mainly a property company owning infrastructure rented out to Coast Center Base AS. All companies are private companies and there are no quoted market price available for the shares. Vikan Næringspark AS is a joint venture between NorSea Group and Kristiansund Baseselskap AS. It owns property that is rented out to Vestbase AS, a subsidiary of NorSea Group, in Kristiansund. There are no other contingent liabilities relating to the group’s interest in the joint ventures. 49 GroupAccounts and notesWilh. Wilhelmsen Holding ASA Annual Report 2018Cont. note 4 Investments in joint ventures USD mill Summarised financial information – according to the group's ownership Share of total income Share of operating expenses Share of depreciation Share of net financial items Share of tax expense Share of profit/(loss) for the year Share of equity (equity method) Book value Excess value (goodwill) USD mill Joint ventures' assets, equity and liabilities (group's share of investments) Share of non current assets Share of cash and cash equivalents Share of current assets Total share of assets Share of equity Share of profit for the period Dividend received/repayments of share capital Currency translation differences Share of equity 31.12 Share of non current financial liabilities Share of other non current liabilities Share of other current liabilities Total share of liabilities Total share of equity and liabilities 2018 2017 75 (59) (5) (1) (1) 9 69 48 21 (17) (1) (1) 1 69 50 2018 2017 153 21 6 180 69 9 (4) (5) 68 86 3 22 111 180 169 19 13 201 70 1 (2) 69 104 3 25 132 201 Set out below are the summarised financial information, based on 100%, for Coast Center Base (CCB), which, in the opinion of the directors, is a material joint venture to the group. Joint venture not considered to be material, is defined under ”other” (based on 100%). USD mill SUMMARISED STATEMENT OF COMPREHENSIVE INCOME CCB Other 2018 2017 2018 2017 139 (117) (7) 15 16 (2) 14 14 38 (33) (2) 4 (2) 2 2 2 11 (1) (3) 7 (3) 5 (1) 3 3 4 (1) (1) 2 (1) 1 0 0 Total income Operating expenses Depreciation / amortisation Net operating profit Financial income/(expenses) Profit before tax Tax income/(expense) Profit after non-controlling interests Other comprehensive income Total comprehensive income WWH share of dividend from joint ventures 50 GroupAccounts and notesWilh. Wilhelmsen Holding ASA Annual Report 2018 Cont. note 4 Investments in joint ventures USD mill SUMMARISED BALANCE SHEET Non current assets Other current assets Cash and cash equivalents Total assets Non current financial liabilities Other non current liabilities Other current liabilities Total liabilities Net assets CCB Other 31.12.2018 31.12.2017 31.12.2018 31.12.2017 179 39 11 229 92 3 38 132 96 200 37 22 260 119 3 45 167 93 128 3 1 132 81 2 7 90 42 138 4 142 89 3 5 97 45 The information above reflects the 100% amount presented in the financial statements of the joint ventures, adjusted for differences in accounting policies between the group and the joint ventures. USD mill RECONCILIATION OF SUMMARISED FINANCIAL INFORMATION CCB Other 2018 2017 2018 2017 Opening net asset 31.12 Profit for the period Other comprehensive income Cash flow hedges, net of tax Currency translation differences Remeasurement postemployment benefits, net of tax Dividend to shareholder Reclassification Closing net assets 31.12 WWH share Goodwill/ Surplus value / Reversal of internal gain 93 14 (11) 96 48 52 93 2 (3) 93 47 56 Carrying value 31.12 100 102 46 3 (7) 42 21 (4) 17 46 (1) 45 22 (5) 17 Note 5 Principal subsidiaries Maritime Services Business office/country Nature of business Proportion of ordinary shares directly held by parent (%) Proportion of ordinary shares held by the group (%) Wilhelmsen Maritime Services AS Wilhelmsen Ships Service AS Lysaker, Norway Lysaker, Norway Maritime products and services Maritime products and services 100% Wilhelmsen Ship Management Ltd Hong Kong Ship management Supply Services NorSea Group AS Holding and Investments Tananger, Norway Supply Services Wilh. Wilhelmsen Holding Invest AS Lysaker, Norway Treasure ASA* Lysaker, Norway Wilh. Wilhelmsen Holding Invest Malta Ltd Valletta, Malta Investment Investment Investment 100% 72.73% 100% 100% 100% 75.15% 100% 72.73% 100% The group’s principal subsidiaries at 31 December 2018 are set out above. Unless otherwise stated, they have share capital consisting solely of ordinary shares that are held directly by the group, and the proportion of ownership interests held equals the voting rights held by the group. The country of incorporation or registration is also their principal place of business. *Treasure ASA acquired during 2018 1.450.000 own shares (0.66%). 51 GroupAccounts and notesWilh. Wilhelmsen Holding ASA Annual Report 2018 Note 6 Employee benefits USD mill Pay Payroll tax Pension cost Other remuneration Total employee benefits Number of employees: Group companies in Norway Group companies abroad Seagoing personnel Ship Management Total employees Average number of employees REMUNERATION OF SENIOR EXECUTIVES USD thousand 2018 Group CEO Group CFO President and CEO Wilhelmsen Ships Service President and CEO Wilhelmsen Ship Management CEO NorSea Group 2017 Group CEO Group CFO President and CEO Wilhelmsen Maritime Services AS** President and CEO Wilhelmsen Ships Service President and CEO Wilhelmsen Ship Management CEO NorSea Group Note 2018 2017 10 255 24 10 31 320 193 26 10 22 252 2018 2017 872 3 879 9 334 1 053 4 115 9 460 14 085 14 628 14 357 14 194 Pay Bonus Pension premium *Other remuneration Total Total in NOK thousand 598 416 376 272 267 575 398 204 360 252 257 243 116 122 56 65 841 329 395 39 49 63 226 55 109 51 9 215 46 153 102 35 9 208 57 24 102 21 1 276 10 385 642 630 482 362 5 228 5 130 3 923 2 946 205 1 837 15 186 51 53 23 54 21 825 805 524 390 350 6 818 6 656 4 333 3 228 2 896 Remuneration is paid in NOK, which means that the USD amounts are not comparable from year to year. Rates of remuneration can be compared by taking account of changes in the USD exchange rate. *Mainly related to gross up pension expenses and company car. **Until 30.06.2017. 52 GroupAccounts and notesWilh. Wilhelmsen Holding ASA Annual Report 2018Cont. note 6 Employee benefits Remuneration of the board of directors USD thousand Diderik Schnitler (chair) Trond Westlie Carl E. Steen Irene Waage Basili Cathrine Løvenskiold Wilhelmsen Odd Rune Austgulen Helen Juell 2018 2017 80 46 46 46 46 79 45 45 45 45 The board’s remuneration for fiscal year 2018 will be approved by the general meeting 30 April 2019. Remuneration of the nomination committee, for both Wilh. Wilhelmsen Holding ASA and Treasure ASA, totalled USD 21 thousand for 2018 (2017: USD 21 thousand). Senior executives Thomas Wilhelmsen – group CEO Christian Berg – group CFO Bjoerge Grimholt – President and CEO Wilhelmsen Ships Service Carl Schou – President and CEO Wilhelmsen Ship Management John Stangeland – CEO NorSea Group See note 2 Employee benefits in the parent company accounts, and note 20 Related party transaction. LONG-TERM INCENTIVE SCHEME The long term incentive scheme (LTI) was introduced in 2015. Participants are members of the group management team and the presidents for Wilhelmsen Ships Service and Wilhelmsen Ship Management. For the group CEO, maximum annual payment is 100% of base salary. For the remaining participants, the maximum annual payment is 50% of base salary. The LTI focuses on long term shareholder value creation and is based on positive development of the Wilhelmsen group’s value adjusted equity. The ambitions set for the programme are to increase alignment with value creation for shareholders, to attract, retain and motivate participants and drive long- term group performance. Settlement is based on return on value adjusted equity the last four years leading up to the settlement. The value adjusted equity is determined by using a “sum-of-the-parts” principle. For listed companies, value adjusted equity is based on market price, while earnings multiples or net asset value are used for non-listed entities. The board sets value adjusted equity targets at the beginning of each four year measurement period. Without consultation or agreement with the individual, the board has the right to change or terminate the incentive programme after each year. Per 31 December 2018, a provision has been made related to the LTI programme ending on 31 December 2018. Potential payment will be done in March 2019, pending approval from the board of directors. The provision has been calculated based on value adjusted equity per 31 December 2018, risk free return and standard deviation of historic annual value creation. No provision has been made for the LTI programme expiring on 31 December 2020. EXPENSED AUDIT FEE USD mill Statutory audit Other assurance services Tax advisory fee Other assistance Total expensed audit fee The fees above cover the group expenses to all external auditors and tax advisors. 2018 2017 2.9 0.4 1.0 0.3 4.6 2.2 0.3 0.5 0.3 3.3 53 GroupAccounts and notesWilh. Wilhelmsen Holding ASA Annual Report 2018 Note 7 Property, vessels and other tangible assets USD mill TANGIBLE ASSETS 2018 Cost 1.1 Acquisition Reclass/disposal Currency translation differences Cost 31.12 Accumulated depreciation and impairment losses 1.1 Depreciation/amortisation Reclass/disposal Currency translation differences Accumulated depreciation and impairment losses 31.12 Carrying amounts 31.12 2017 Cost 1.1 Acquisition Business combination Discontinued operations Reclass/disposal Currency translation differences Cost 31.12 Accumulated depreciation and impairment losses 1.1 Depreciation/amortisation Depreciation discontinued operations Business combination Discontinued operations Reclass/disposal Currency translation differences Accumulated depreciation and impairment losses 31.12 Carrying amounts 31.12 Economic lifetime Depreciation schedule Property Vessels Other tangible assets Total tangible assets 575 28 (18) (34) 550 (159) (19) 7 9 (162) 388 90 4 479 13 (11) 575 (38) (6) (100) (15) 1 (159) 416 36 1 (2) 35 (17) (1) 1 (17) 18 2 457 38 (2 404) (54) (1) 36 (579) (20) (17) 582 17 1 (17) 19 269 24 (32) (10) 251 (114) (11) 32 5 (89) 162 189 21 57 (2) (8) 12 269 (72) (9) (37) 1 5 (3) (114) 155 880 53 (50) (46) 836 (290) (31) 39 15 (269) 567 2 736 26 574 (2 405) (49) (1) 880 (689) (16) (20) (155) 584 7 (1) (290) 590 10-50 years Straight-line 25 years Straight-line 3-10 years Straight-line 54 GroupAccounts and notesWilh. Wilhelmsen Holding ASA Annual Report 2018 Cont. note 7 Goodwill and other intangible assets USD mill INTANGIBLE ASSETS 2018 Cost 01.01 Acquisition Reclass/disposal Currency translation differences Cost 31.12 Accumulated amortisation and impairment losses 01.01 Amortisation/impairment Reclass/disposal Currency translation differences Accumulated amortisation and impairment losses 31.12 Carrying amounts 31.12 2017 Cost 01.01 Acquisition Business combination Discontinued operations Reclass/disposal Currency translation differences Cost 31.12 Accumulated amortisation and impairment losses 01.01 Business combination Discontinued operations Currency translation differences Accumulated amortisation and impairment losses 31.12 Carrying amounts 31.12 Segment-level summary of the goodwill allocation: Maritime Services Total goodwill allocation Goodwill Other intangible assets Software and licences Total intangible assets 133 (3) (6) 124 (2) 1 (1) 123 118 14 (6) 6 133 (2) (2) 131 16 2 16 1 34 (7) (7) (2) 1 (15) 20 16 16 (7) (7) 9 95 1 (26) (4) 67 (63) (4) 11 3 (53) 14 91 3 (1) (1) 4 95 (62) 1 (2) (63) 32 2018 123 123 244 3 (12) (10) 225 (72) (11) 11 4 (68) 156 209 3 30 (7) (1) 10 244 (64) (7) 1 (2) (72) 171 2017 131 131 In 2018 the group conducted no material aquisition. In 2017 the group increased its ownership in NorSea Group from 40% to 74.11%. Following the transaction, Wilhelmsen acquired a portion of management controlled shares, 3.15%, bringing the total Wilhelmsen shareholding to 75.15%. The purchase did not generate goodwill. In 2017 Wilhelmsen Chemical (Maritime Services segment) aquired Kemetyl Konsument AS for USD 20 million. The excess value (nominated in NOK) was split into intangible assets of USD 5 million and goodwill of USD 14 million. 55 GroupAccounts and notesWilh. Wilhelmsen Holding ASA Annual Report 2018 Cont. note 7 Goodwill and other intangible assets Impairment testing of goodwill In the Maritime Services segment, USD 123 million relate to business area Ships Service mainly to the acquisition of Unitor ASA and Kemetyl. The goodwill figures are originally calculated in NOK and USD (2017: NOK and USD). Value in use was determined by discounting the future cash flows generated from the continuing operation of the units. Cash flows were projected based on actual operating results and next year’s forecast. Cash flows is based on a 5-year strategy plan period with terminal value (terminal growth rate 1%) were extrapolated using the following key assumptions: For the purpose of impairment testing, goodwill is allocated to the respective cash generating unit which are Ships Service. No impairment was conducted in 2018 (analogus for 2017). USD/NOK Discount rate Growth rate Increase in material cost Increase in pay and other remuneration Increase in other expenses 2018 8.30 7.6% 1-5% 1-5% 0-3% 0-3% 2017 7.80 9.0% 1-4% 1-4% 1-4% 1-4% The values assigned to the key assumptions represent management’s assessment of future trends in the maritime industry and are based on both external sources and internal sources. No reasonably possible change in any of the key assumptions on which management has based its determination of the recoverable amount would cause the carrying amount to exceed its recoverable amount. Had the WACC been 0.5 percentage point higher, the estimated value would be reduced by USD 8 million for Ships Service net value. Had the WACC been 0.5 percentage point lower, the estimated value would be increased by USD 8 million for Ships Service. Had the multiple, enterprise value / EBITDA been 1 point lower, the estimated value would be reduced by USD 22 million for Ships Service net value. Had the multiple, enterprise value / EBITDA been 1 point higher, the estimated value would be increased by USD 23 million for Ships Service. 56 GroupAccounts and notesWilh. Wilhelmsen Holding ASA Annual Report 2018Note 8 Tax Ordinary taxation The ordinary rate of corporation tax in Norway is 23% of net profit for 2018 (2017: 24%). Norwegian limited liability companies are encompassed by the participation exemption method for share income. Thus, share dividends and gains are tax free for the receiving company. Corresponding losses on shares are not deductible. The participation exemption method does not apply to share income from companies considered low taxed and that are located outside the European Economic Area (EEA), and on share income from companies owned by less than 10% resident outside the EEA. For group companies located in the same country and within the same tax regime, taxable profits in one company can be offset against tax losses and tax loss carry forwards in other group companies. Deferred tax/deferred tax asset has been calculated on temporary differences to the extent that it is likely that these can be utilised in each country and for Norwegian entities the group has applied a rate of 22% (2017: 23%). The effective tax rate for the group will, from period to period, change dependent on the group gains and losses from investments inside the exemption method and tax exempt revenues from tonnage tax regimes. Foreign taxes Companies domiciled outside Norway will be subject to local taxation, either on ordinary terms or under special tonnage tax rules. When dividends are paid, local withholding taxes may be applicable. This generally applies to dividends paid by companies domiciled outside the EEA.  USD mill 2018 2017 Allocation of tax income/(expense) for the year Payable tax in Norway Payable tax foreign Change in deferred tax Total tax income/(expense) Reconciliation of actual tax cost against expected tax cost in accordance with the ordinary Norwegian income tax rate of 23% Profit/(loss) before tax 23% tax (2017: 24%) Tax effect from: Permanent differences Non-taxable income Share of profits from joint ventures and associates Change in difference tax rate and currency translation Withholding tax and payable tax previous year Calculated tax (income)/expense for the group (10) (10) 32 12 (86) (20) 14 (4) (8) 1 5 (12) (4) (16) 4 (16) 253 61 16 (50) (17) 5 2 16 Effective tax rate for the group 13.4% 6.4% 57 GroupAccounts and notesWilh. Wilhelmsen Holding ASA Annual Report 2018      Cont. note 8 Tax USD mill Net deferred tax assets at 01.01 Decrease due to discontinued operations Increase due to business combinations Currency translation differences Tax charged to equity / acquisition Income statement charge Net deferred tax assets at 31.12 Deferred tax assets in balance sheet Deferred tax liabilities in balance sheet Net deferred tax assets at 31.12 2018 2017 12 (2) 1 32 42 54 (12) 42 63 (55) 2 (2) 4 12 18 (6) 12 Deferred tax asset and liabilities has been netted in the balance sheet with USD 6 million (2017: USD 1 million) The movement in deferred income tax assets and liabilities during the year, without taking into consideration the offsetting of balances within the same tax jurisdiction, is as follows: USD mill Deferred tax liabilities At 31.12.2017 Through income statement Charged directly to equity Currency translations Deferred tax liabilities at 31.12.2018 At 31.12.2016 Through income statement Discontinued operations Business combination Deferred tax liabilities at 31.12.2017 Fixed assets Tonnage tax regime Other Total (16) 3 (13) (52) (1) 37 (16) (0) (0) (15) 15 (0) (3) (2) (5) (4) 3 (2) (2) (3) (19) 1 (18) (71) 3 50 (2) (19) 58 GroupAccounts and notesWilh. Wilhelmsen Holding ASA Annual Report 2018 Cont. note 8 Tax USD mill Deferred tax assets At 31.12.2017 Through income statement Charged directly to equity Currency translations Deferred tax assets at 31.12.2018 At 31.12.2016 Through income statement Discontinued operations Business combination Currency translations Deferred tax assets at 31.12.2017 Non current assets and liabilities Current assets and liabilities Tax losses carried forward 14 4 1 19 60 7 (57) 3 (1) 14 (1) 26 25 2 (4) 1 1 (1) 18 1 (2) 17 72 (3) (51) 1 (1) 18 Total 31 31 1 (2) 60 134 (106) 4 (2) 31 Temporary differences related to joint ventures and associates are USD 0 for the group, since all the units are regarded as located within the area in which the exemption method applies, and no plans exist to sell any of these companies. The Maritime Services segment will have shares in subsidiaries not subject to the exemption method which could give rise to a tax charge in the event of a sale, where no provision has been made for deferred tax associated with a possible sale or dividend. No plans exist at present to dispose of such companies. Note 9 Earnings per shares Earnings per share taking into consideration the number of outstanding shares in the period. Owned shares, 100.000 class A, were liquidated in 2018. Basic / diluted earnings per share is calculated by dividing profit for the period after non-controlling interests, by average number of total outstanding shares. Earnings per share is calculated based on 46 403 824 shares for 2018 and 2017. 59 GroupAccounts and notesWilh. Wilhelmsen Holding ASA Annual Report 2018Note 10 Pension The group’s defined contribution pension schemes for Norwegian employees are with financial institutions providing solutions based on investment funds. Subsidiaries outside Norway have separate schemes for their employees in accordance with local rules, and the pension schemes are for the material part defined contribution plans. The group has “Ekstrapensjon”, a contribution plan for all Norwegian employees with salaries exceeding 12 times the Norwegian National Insurance base amount (G). The contribution plan replaced the group obligations, mainly financed from operation. However, the group still has obligations for some employees’ related to salaries exceeding 12 times the Norwegian National Insurance base amount (G) mainly financed from operations. Pension costs and obligations include payroll taxes. No provision has been made for payroll tax in pension plans where the plan assets exceed the plan obligations. The liability recognised in the balance sheet in respect of the remaining defined benefit pension plans is the present value of the defined benefit obligation at the end of the reporting period less the fair value of plan assets. The defined benefit obligations are calculated annually by independent actuaries using the projected unit credit method. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of corporate bonds that are denominated in the currency in which the benefits will be paid, and that have terms to maturity approximating to the terms of the related pension obligation. In addition, the group has agreements on early retirement. These obligations are mainly financed from operations. In a few countries without deep markets in such bonds, the market rates on government bonds are used. The group has obligations towards some employees in the group’s senior executive management. These obligations are mainly covered via group annuity policies in Storebrand. Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or credited to equity in other comprehensive income in the period in which they arise. Number of people covered by pension schemes at 31.12 2018 2017 2018 2017 Funded Unfunded In employment On retirement (inclusive disability pensions) Total number of people covered by pension schemes 18 146 164 23 139 162 3 27 30 4 27 31 Financial assumptions for the pension calculations: 2018 2017 31.12.2018 31.12.2017 Expenses Commitments Discount rate Anticipated pay regulation Anticipated increase in National Insurance base amount (G) Anticipated regulation of pensions 2.30% 2.00% 2.00% 0.10% 2.40% 2.25% 2.25% 0.40% 2.70% 2.50% 2.50% 0.10% 2.30% 2.00% 2.00% 0.10% USD mill Pension expenses 2018 2017 Funded Unfunded Total Funded Unfunded Total Service cost Termination gain defined benefit plan Net interest cost Cost of defined contribution plan Net pension expenses 9 10 1 1 9 10 (4) 13 10 1 1 1 (4) 13 10 USD mill Remeasurements – Other comprehensive income Total remeasurements included in OCI 2018 2017 1 0 60 GroupAccounts and notesWilh. Wilhelmsen Holding ASA Annual Report 2018 Cont. note 10 Pension USD mill Pension obligations Defined benefit obligation at end of prior year Decrease due to discontinued operations Increase due to business combination Effect of changes in foreign exchange rates Service cost Termination gain defined benefit plan Interest expense Benefit payments from plan Benefit payments from employer Remeasurements – change in assumptions Pension obligations 31.12 Fair value of plan assets Fair value of plan assets at end of prior year Decrease due to discontinued operations Increase due to business combination Effect of changes in foreign exchange rates Employer contributions Benefit payments from plan Return on plan assets (excluding interest income) Gross pension assets 31.12 2018 2017 45 (2) 1 2 (2) (2) (2) 40 22 (1) (1) 20 71 (43) 19 2 1 (4) 1 (1) 45 7 (3) 16 1 1 (1) 22 USD mill Total pension obligations Service cost Defined benefit obligation Fair value of plan assets Net liability (asset) USD mill Historical developments 2018 2017 Funded Unfunded Total Funded Unfunded Total 20 19 1 19 19 1 39 19 20 1 25 22 3 2 19 19 3 45 22 23 31.12.2018 31.12.2017 31.12.2016** 31.12.2015 31.12.2014 31.12.2013 Gross pension obligations, including payroll tax Gross pension assets Net recorded pension obligations (40) 20 (20) (45) 22 (23) (71) 7 (63) (73) 6 (67) (109) 17 (92) (213) 105 (108) **Net liability at 31.12.2016 and years before includes discontinued operations. 61 GroupAccounts and notesWilh. Wilhelmsen Holding ASA Annual Report 2018Note 11 Combined items, balance sheet USD mill OTHER NON CURRENT ASSETS* Non current share investments Other non current assets** Total other non current assets OTHER CURRENT ASSETS* Account receivables Financial derivatives Restricted cash Other current assets Total other current assets OTHER NON CURRENT LIABILITIES* Other non current liabilities*** Total other non current liabilities OTHER CURRENT LIABILITIES* Account payables Financial derivatives Other current liabilities Total other current liabilities Note 2018 2017 17 17 17 15 17 17 4 19 23 229 2 80 311 100 100 222 21 132 375 3 34 37 217 2 1 66 287 97 97 206 13 122 341 *Current assets and current liabilities are due within 12 months. Non current assets and non current liabilities are due in more than 12 months. **As part of the settlement of the sale of Callenberg group, Maritime Services agreed a vendor note and an earn out of USD 16.5 million and USD 6 million, respectively. The vendor note was paid in 2018. The earn out is accounted for as long term receivable. See note 19. ***Maritime Services has 611 683 (2017: 609 623) cylinders booked as other tangible asset in the balance sheet, see note 7. The cylinders are valued at USD 114 million (2017: USD 107 million). These cylinders are partly in the group’s own possession and partly on board customers vessels. Most customers have paid a deposit for the cylinders they have onboard their vessels. The total deposit liability booked is USD 77 million (2017: USD 71 million). If cylinders are not returned within 48 months statistics show that the cylinders will not be returned and the net between deposit value and booked value is booked to the income statement. 62 GroupAccounts and notesWilh. Wilhelmsen Holding ASA Annual Report 2018 Cont. note 11 Combined items, balance sheet The group applies the IFRS 9 simplified approach to measuring expected credit losses which uses a lifetime expected loss allowance for all trade receivables and contract assets. To measure the expected credit losses, trade receivables and contract assets have been grouped based on shared credit risk charateristics and the days past due. corresponding historical credit losses experienced within this period. The historical loss rates are adjusted to reflect current and forward looking information on macroeconomic factors affecting the ability of the customers to settle the receivables. The group has identified the GDP and the unemployment rate of the countries in which it sells its goods and services to be the most relevant factors, and accordingly adjusts the historical loss rates based on expected changes in these factors. The expected loss rates are based on the payment profiles of sales over a period of 36 month before 31 December 2018 respectively and the On that basis, the loss allowance as at 31 December 2018 and 1 January 2018 (on adoption of IFRS 9) was determined as follows for both trade receivables. USD mill 31 December 2018 Expected loss rate Gross carrying amount – trade receivables Loss allowance 1 January 2018 Expected loss rate Gross carrying amount – trade receivables Loss allowance Current Less than 90 days past due Between 90 and 180 days past due More than 180 days past due 0% 208 0 0% 200 1% 3 0 0% 9 0 20% 10 (2) 30% 9 (3) 21% 12 (2) 58% 6 (3) ACCOUNT RECEIVABLES At 31 December 2018, USD 20 million (2017: USD 17 million) in account receivables had fallen due but not been subject to impairment. These receivables are related to a number of separate customers. Historically, the percentage of bad debts has been low and the group expects the customers to settle outstanding receivables. Receivables fallen due but not subject to impairment have the following age composition: USD mill 2018 2017 Aging of account receivables past due but not impaired Up to 90 days 90-180 days Over 180 days Movements in group provision for impairment of account receivables are as follows Balance at 01.01 Net provision for receivables impairment Balance 31.12 Account receivables per segment Maritime Services Supply Services Holding and Investments Total account receivables See note 17 on credit risk. 3 8 9 6 (1) 4 159 70 229 9 6 2 8 (2) 6 170 47 217 ACCOUNT PAYABLES At 31 December 2018, USD 17 million (2017: USD 17 million) in account payables had fallen due. These payables refer to a number of separate suppliers and are related to general business. The group expects to settle outstanding payables. USD mill Account payables per segment Maritime Services Supply Services Holding and Investments Total account payables See note 17 on credit risk. 2018 2017 181 40 1 222 183 22 1 206 63 GroupAccounts and notesWilh. Wilhelmsen Holding ASA Annual Report 2018 Note 12 Financial assets to fair value Effective from 1 January 2018 the financial assets to fair value are measured at fair value through the income statement in accordance with IFRS 9. Accumulated unrealised gain of USD USD 2.8 mill at 31.12.2017 included in equity will not be recycled through income statement. The unrealised gain has been transferred from the available-for-sale financial assets reserve to retained earnings on 1 January 2018. USD mill Financial assets to fair value At 1 January 2018 Acquisition Sale during the year Return of capital Currency translation adjustment through other comprehensive income Change in fair value through income statement Total financial assets to fair value Financial assets to fair value Qube Holdings Limited Kaplan Equity Limited/KEL Property Fund Survitec UK Ltd. Hyundai Glovis Total financial assets to fair value 2018 801 6 (27) (1) (13) (116) 650 2018 89 11 27 523 650 Financial assets to fair value are held in subsidiaries with different reporting currency and thereby creating translation adjustments. Qube Holdings Limited is Australia’s largest integrated provider of import and export logistics services. Qube is listed on the Australian Securities Exchange (ASX). As per 31 December 2018, Wilhelmsen held 50 million shares in Qube (approximately 3% of total). During the year the group sold 15 million shares, giving net proceeds of USD 27 millions. The shares serve as collateral for a credit facility. See note 16. Survitec Group holds market-leading positions worldwide in marine, offshore, defence and aerospace survival technology. The company is majority owned by Onex Corporation, a private equity firm. Changes in fair value of the investment in Survitec has been recognised through the income statement. Hyundai Glovis Co., Ltd., is a global Korean based general logistics and distribution company, providing business service such as logistics, marine transportation, KD, used cars and trading. Glovis is listed on the Korean Stock Exchange. As per 31 December 2018, Treasure ASA held 4.5 million shares in Glovis (12.04% of total). Treasure ASA is listed on the Oslo Stock Exchange. 2017 209 12 (11) 573 18 801 132 11 83 575 801 USD mill Available-for-sale financial assets At 1 January 2017 Acquisition Sale during the year Transfer from equity method measurement – Hyundai Glovis Currency translation adjustment Total available-for-sale financial assets Available-for-sale financial assets Qube Holdings Limited Kaplan Equity Limited (KEL) Survitec UK Ltd. Hyundai Glovis Total available-for-sale financial assets 64 GroupAccounts and notesWilh. Wilhelmsen Holding ASA Annual Report 2018 Note 13 Inventories USD mill Inventories Raw materials Goods/projects in process Finished goods/products for onward sale Total inventories Obsolescence allowance, deducted above Note 14 Current financial investments USD mill Market value current financial investments Equities Bonds Total current financial investments 2018 2017 7 2 65 74 3 8 1 72 81 2 2018 2017 42 45 88 53 48 101 The fair value of all equity securities, bonds and other financial assets is based on their closing prices in an active market. The net unrealised gain/(loss) at 31.12 4 15 The parent company's portfolio of financial investments USD 88 million is held as collateral within a securities’ finance facility. See note 16. Note 15 Cash, restricted bank deposits and undrawn credit facilities USD mill Payroll tax withholding account 2018 2017 1 1 Companies that do not have payroll tax withholding account use bank guarantees. As per 31.12.2018 total guarantees amounted to USD 2.6 million (2017: USD 6.8 million). Undrawn credit facilities 364 600 Undrawn credit facilities are key part of the liquidity reserve, amounting to USD 364 million at 31.12.2018 (2017: USD 600 million). Cash and cash equivalents Banks Total cash and cash equivalents 140 140 167 167 The group has cash pool arrangements within the Maritime Services and the Supply Services segment. The cash pool arrangements are presented within cash and cash equivalents. 65 GroupAccounts and notesWilh. Wilhelmsen Holding ASA Annual Report 2018Note 16 Interest-bearing debt USD mill Interest-bearing debt Bank loan Total interest-bearing debt Book value of collateral, mortgaged and leased assets: Financial assets to fair value, current financial investments Investment in NorSea Group AS Assets NorSea Group AS Total book value of collateral, mortgaged and leased assets The parent company’s portfolio of financial investments is held as collateral within a securities’ finance facility. Repayment schedule for interest-bearing debt Due in year 1 Due in year 2 Due in year 3 Due in year 4 Due in year 5 and later Total interest-bearing debt Note 2018 2017 17 14 17 533 533 175 461 636 85 27 22 217 182 533 601 601 171 112 693 976 108 25 22 22 425 601 The overview above shows the actual maturity structure, with the amount due in year one as the first year’s instalment classified under other current liabilities. Loan agreements entered into by the group contain financial covenants relating to liquidity, leverage and value-adjusted equity. The group was in compliance with all covenants at 31 December 2018. 2018 2017 448 85 533 140 88 306 86 86 21 65 493 108 601 167 101 333 104 104 19 85 14 4 4 USD mill The group net interest-bearing debt Non current interest-bearing debt Current interest-bearing debt Total interest-bearing debt Cash and cash equivalents Current financial investments Net interest-bearing debt Net interest-bearing debt in joint ventures Non current interest-bearing debt Total interest-bearing debt in joint ventures Cash and cash equivalents Net interest-bearing debt in joint ventures 66 GroupAccounts and notesWilh. Wilhelmsen Holding ASA Annual Report 2018 Cont. note 16 Interest-bearing debt USD mill Guarantee commitments Guarantees for group companies Total The carrying amounts of the group’s borrowings are denominated in the following currencies USD NOK DKK Total See otherwise note 17 for information on financial derivatives (currency hedges) relating to interest-bearing debt. 2018 2017 34 34 197 322 14 533 70 70 196 372 33 601 USD mill Net debt Cash and cash equivalents Liquid investments* Borrowings – repayable within one year Borrowings – repayable after one year Net debt Cash and cash equivalents and liquid investments Gross debt – variable interest rates Net debt Note 2018 2017 140 88 (85) (448) (306) 227 (533) (306) 167 101 (108) (493) (333) 268 (601) (333) *Liquid investments comprise current investments that are traded in an acive market, being the group’s financial assets held at fair value through the income statement. Other assets Liabilites from financing activities Finance leases due within 1 year Finance leases due after 1 year Borrow. due within 1 year Borrow. due after 1 year Total (2) 1 (9) (1) (106) (483) (333) (8) 26 2 5 31 10 30 3 (6) (1) (10) (86) (437) (306) USD mill Net debt 01.01.2018 Reclass Cash flows Foreign exchange adjustments Other non-cash movements Net debt 31.12.2018 Net debt 01.01.2017 Decrease by discontinued operations Increase by business combination NorSea Group Reclass Cash flows Foreign exchange adjustments Net debt 31.12.2017 Liquid invest- ments 101 2 (8) (6) 88 83 Cash/ bank overdrafts 167 2 (29) 140 497 (121) 5 (215) 18 (2) (11) 2 (115) 112 (106) 3 (1 418) 1 155 (341) 106 16 (1) 167 101 (2) (9) (106) (483) (953) 1 146 (347) (178) (1) (333) 67 GroupAccounts and notesWilh. Wilhelmsen Holding ASA Annual Report 2018 Note 17 Financial risk The group has exposure to the following financial risks from its operations: • Market risk - Foreign exchange rate risk - Interest rate risk - Equity market risk • Credit risk • Liquidity risk MARKET RISK The group has established hedging strategies to mitigate risks on material exposures originating from movements in currencies and interest rates. This is compliant with the financial strategy approved by the board of directors. Changes in the market value of financial derivatives are recognised through the income statement with the exception of the Supply Service segment, where derivatives are recognised in Other Comprehensive Income. Associates hedge their own exposures. The group records the effects of realised and unrealised changes in financial derivatives held in these entities in accordance with the equity method under “share of profit from joint ventures and associates”. The material associates are Wallenius Wilhelmsen ASA group in Holding and Investment segment and Coast Center Base group in Supply Service segment. Foreign exchange rate risk The group is exposed to currency risk on revenues and costs in non-functional currencies (transaction risk), and balance sheet items denominated in currencies other than non-functional currencies (translation risk). The group’s largest foreign exchange exposures are NOK, EUR, SGD and KRW – all against USD. TRANSACTION RISK HEDGING (CASH FLOW) The group’s operating segments are responsible for hedging their own material transaction risk. Within Maritime Services, USDNOK, EURUSD and USDSGD exposures are subject to a systematic 3-year rolling hedge program, utilizing a portfolio of currency options and currency forwards. Remaining exposures are non-material and not hedged. TRANSLATION RISK HEDGING (BALANCE SHEET) The group’s policy for mitigating translation risk is to match the denomination currency of assets and liabilities to as large extent as possible. FX SENSITIVITES (TRANSLATION RISK) The group monitors the net exposure and calculates sensitivities on a regular basis, based on average market volatility per currency cross. Sensitivities showing a potential accounting effect below USD 5 million on group level are considered non-material. USD mill Through income statement Financial currency Net currency gain/(loss) – Operating currency Net currency gain/(loss) – Financial currency Currency derivatives – realised Currency derivatives – unrealised Net financial currency Through other comprehensive income Currency translation differences through other comprehensive income Total net currency effect Note 2018 2017 1 (4) (3) (2) (15) (23) (57) (79) 7 (2) 9 14 47 61 68 GroupAccounts and notesWilh. Wilhelmsen Holding ASA Annual Report 2018 Cont. note 17 Financial risk For Maritime Services, Supply Services and Holding and Investments, material translation risks are booked to other comprehensive income due to the functional currency for most of the entities being different from the reporting currency USD. USD mill Sensitivity Income statement sensitivities of economic hedge program Transaction risk USD/NOK spot rate Income statement effect (post tax) EUR/USD spot rate Income statement effect (post tax) USD/SGD spot rate Income statement effect (post tax) (Tax rate used is 23% that equals the Norwegian tax rate) The group’s segments perform sensitivity analyses on the unhedged part of the transaction risk on a regular basis. The portfolio of derivatives used to hedge the group’s transaction risk (described above), exhibit the following income statement sensitivity: (10%) (5%) 0% 5% 10% 7.83 13 1.03 (6) 1.23 5 8.26 6 1.09 (2) 1.29 2 8.70 1.14 1.36 9.13 (7) 1.20 3 1.43 (2) 9.57 (13) 1.26 6 1.50 (4) Interest rate risk The group’s strategy is to hedge material parts of the interest-bearing debt against rising interest rates. As the capital intensity varies across the group’s business segments, which have their own policies on hedging of interest rate risk, hedge ratios vary. Within Holding and Investments and Maritime Services respectively, no interest rate hedging is implemented due to low net interest-bearing debt (NIBD), whereas Supply Services have hedged about 50% of its NIBD as of 31 December 2018. USD mill Maturity schedule interest rate hedges (nominal amounts) Due in year 1 Due in year 2 Due in year 3 Due in year 4 Due in year 5 and later Total interest rate hedges 2018 2017 12 23 125 161 25 13 25 81 144 The Supply Services segment has entered swaption contracts with a notional value of about USD 16 million, with expiry date in 2022. Depending on interest rate levels on the expiry date, exercising the swaptions by the counterparties will extend the maturity of expiring swaps until 2032. The average remaining term of the existing total debt portfolio is approximately 5 years. The hedges have an average remaining term of approximately 6 years. 69 GroupAccounts and notesWilh. Wilhelmsen Holding ASA Annual Report 2018 Cont. note 17 Financial risk Interest rate sensitivity The group’s interest rate risk originates from differences in duration between assets and liabilities. On the asset side, bank deposits and investments in interest-bearing instruments are subject to risk from changes in the general level of interest rates, primarily in USD. The group uses the weighted average duration of interest-bearing assets, liabilities and financial interest rate derivatives to compute the group’s sensitivity towards changes in interest rates. Sensitivities resulting in a potential accounting effect below USD 5 million on group level are considered non-material. On 31 December 2018, the group has no material exposure subject to interest rate risk. USD mill Interest rate derivatives Maritime Services Supply Services Holding and Investments Total interest rate derivatives Currency derivatives Maritime Services Supply Services Holding and Investments Total currency derivatives Total market value of financial derivatives Book value equals market value. 2018 2017 Assets Liabilities Assets Liabilities 7 7 12 2 14 21 0 0 0 11 11 1 1 1 13 0 2 2 2 70 GroupAccounts and notesWilh. Wilhelmsen Holding ASA Annual Report 2018 Cont. note 17 Financial risk Equity market risk The group holds several assets listed on equity markets as well as a defined portfolio of financial assets for a proportion of the group’s short-term liquidity. Income statement sensitivities of equity market risk USD mill Change in equity prices Change in market value Income statement effect (Tax rate used is 23% that equals the Norwegian tax rate) Below table summarizes the equity market sensitivity towards the market value of all listed equities held: (20%) (77) (10%) (38) 0% 10% 38 20% 77 CREDIT RISK Credit risk is the risk of financial loss to the group if a customer or counterparty to a financial derivative fails to meet its contractual obligations The group’s credit risk originates primarily from the account receivables, financial derivatives used to hedge interest rate risk or foreign exchange risk, as well as investments, including bank deposits. Loans and receivables Trade receivables The group’s exposure to credit risk on its receivables varies across segments and subsidiaries. Within the Maritime Services and Supply Services, the global customer base provides diversification with respect to credit risk on receivables. The segments monitor and manage their respective credit risk on a regular basis. Reference is made to note 11. Given the negative market sentiment in several shipping and offshore segments, some customers are currently facing increased financial difficulties relative to previous years, implying that the group’s credit risk has increased somewhat, but is still regarded as moderate. Bank deposits and financial derivatives The group maintains cash management operations and trades financial derivatives with a selection of financially solid banks (as determined by their official credit ratings), limiting the corresponding credit risk. Other credit exposures No material loans or receivables were past due or impaired at 31 December 2018 (analogous for 2017). Guarantees The group’s policy is that no financial guarantees are provided by the parent company. However, financial guarantees are provided within Maritime Services and Supply Services. See note 16 for further details. Credit risk exposure The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at the reporting date was as per below table. USD mill Exposure to credit risk Financial derivatives Account receivables Financial investments Other non current assets Other current assets Cash and bank deposits Total exposure to credit risk Note 2018 2017 11 11 14 11 11 15 229 45 23 80 140 516 2 217 48 37 81 167 553 71 GroupAccounts and notesWilh. Wilhelmsen Holding ASA Annual Report 2018Cont. note 17 Financial risk LIQUIDITY RISK The group’s approach to managing liquidity is to ensure that the group meets its liabilities, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the group’s reputation. The group’s liquidity risk is low in that it holds significant liquid assets in addition to credit facilities with the banks. USD mill Undiscounted cash flows financial liabilities 2018 Mortgages Finance lease liabilities Bank loan Interest due Financial derivatives Total undiscounted cash flow financial liabilities Current liabilities (excluding next year's instalment on interest-bearing debt) Total gross undiscounted cash flows financial liabilities 31.12.2018 Undiscounted cash flows financial liabilities 2017 Mortgages Finance lease liabilities Bank loan Financial derivatives Total undiscounted cash flow financial liabilities Current liabilities (excluding next year's instalment on interest-bearing debt) Total gross undiscounted cash flows financial liabilities 31.12.2017 At 31 December 2018, the group had in excess of USD 227 million (2017: USD 268 million) in liquid assets, in addition to USD 364 million (2017: USD 600 million) in undrawn credit facilities. The reduction in undrawn credit facility is mainly due to no acquisition of Drew Marine. Less than 1 year Between 1 and 2 years Between 2 and 5 years Later than 5 years 59 3 23 21 21 127 271 399 43 11 54 13 121 274 395 23 3 21 47 47 37 5 197 63 302 302 25 43 25 25 43 43 182 182 182 229 196 425 425 72 GroupAccounts and notesWilh. Wilhelmsen Holding ASA Annual Report 2018 Cont. note 17 Financial risk COVENANTS The group’s bank and lease financing are subject to financial or non-financial covenant clauses related to one or several of the following: • Limitation on the ability to pledge assets • Change of control • Minimum liquidity • NIBD / EBITDA or equivalent Debt-Service Coverage-Ratios • Loan-to-Value As of the balance date, the group is not in breach of any financial or non- financial covenants. CAPITAL RISK MANAGEMENT The group’s overall policy is to maintain a strong capital base to maintain inves- tor, creditor and market confidence and to sustain future business develop- ment. The board of directors monitors various return metrics, where Return on Equity and dividend levels are predominant. The group seeks to maintain a balance between the potential higher returns stemming from higher levels of financial gearing and the advantages of a strong balance sheet. The financial strategy and setting of thresholds for capital structure, return requirements and risk (and corresponding metrics) will be revised by the board of directors during 2019, following the significant structural changes taking place in 2018. FAIR VALUE ESTIMATION The fair value of financial instruments traded in an active market is based on quoted market prices at the balance sheet date. The fair value of financial instruments not traded in an active market (over-the-counter contracts) is based on third party quotes. These quotes use observable market rates for price discovery. Specific valuation techniques used by financial counterparties (banks) to value financial derivatives include: • Quoted market prices or dealer quotes for similar derivatives • The fair value of interest rate swaps is calculated as the net present value of the estimated future cash flows based on observable yield curves • The fair value of interest rate swap option (swaption) contracts is determined using observable volatility, yield curve and time-to-maturity parameters at the balance sheet date, resulting in a swaption premium. Options are typically valued by applying the Black-Scholes model • The fair value of forward foreign exchange contracts is determined using forward exchange rates at the balance sheet date, with the resulting value discounted back to net present value • The fair value of foreign exchange option contracts is determined using observable forward exchange rates, volatility, yield curves and time-to-maturity parameters at the balance sheet date, resulting in an option premium. Options are typically valued by applying the Black-Scholes model The carrying value less impairment provision of receivables and payables are assumed to approximate their fair values. The group estimates the fair value of financial liabilities for disclosure purposes by discounting the future contractual cash flows at current market interest rates available to the group for similar financial derivatives. USD mill Interest-bearing debt Mortgages Finance lease liabilities Bank loan Total interest-bearing debt 31.12.2018 Mortgages Finance lease liabilities Bank loan Total interest-bearing debt 31.12.2017 Note Fair value Book value 302 11 223 536 340 11 246 597 302 11 220 533 340 11 250 601 16 16 73 GroupAccounts and notesWilh. Wilhelmsen Holding ASA Annual Report 2018Cont. note 17 Financial risk The fair values are based on cash flows discounted using a rate based on market rates including margins and are within level 2 of the fair value hierarchy. USD mill Financial assets at fair value Equities Bonds Financial assets to fair value Total financial assets 31.12.2018 Financial liabilities at fair value Financial derivatives Total financial liabilities 31.12.2018 Financial assets at fair value Equities Bonds Financial derivatives Financial assets to fair value Total financial assets 31.12.2017 Financial liabilities at fair value Financial derivatives Total financial liabilities 31.12.2017 USD mill Changes in level 3 instruments Opening balance 01.01 Acquisition Return of capital Gains and losses recognised through other comprehensive income Gains and losses recognised through income statement Closing balance 31.12 The fair value of financial instruments traded in active markets is based on quoted market prices at the balance sheet date. A market is regarded as active if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service, or regulatory agency, and those prices represent actual and regularly occurring market transactions on an arm’s length basis. The quoted market price used for financial assets held by the group is the current close price. These instruments are included in level 1. Instruments included in level 1 at the end of 2018 are liquid investment grade bonds and listed equities (analogous for 2017). Level 1 Level 2 Level 3 Total 42 45 611 699 0 52 48 707 807 0 0 21 21 2 2 13 13 38 38 0 1 93 94 0 42 45 650 737 21 21 52 48 2 801 904 13 13 2018 2017 94 6 (1) (60) 38 86 4 1 3 94 The fair value of financial instruments not traded in an active market (over- the-counter contracts) are based on third party quotes (Mark-to-Market). These quotes use observable market rates for price discovery. The different techniques typically applied by financial counterparties (banks) were described above. These instruments - FX and IR derivatives - are included in level 2. If one or more of the significant inputs is not based on observable market data, the derivatives is in level 3. This is the case for unlisted equity securities. 74 GroupAccounts and notesWilh. Wilhelmsen Holding ASA Annual Report 2018Cont. note 17 Financial risk Financial instruments by category USD mill Assets Other non current assets Financial asset to fair value Current financial investments Current financial derivatives Other current assets Cash and cash equivalent Assets at 31.12.2018 Liabilities Non current interest-bearing debt Current interest-bearing liabilities Current financial derivatives Other non current liabilities Other current liabilities Liabilities 31.12.2018 Assets Other non current assets Financial asset to fair value Current financial investments Current financial derivatives Other current assets Cash and cash equivalent Assets at 31.12.2017 Liabilities Non current interest-bearing debt Current interest-bearing liabilities Current financial derivatives Other non current liabilities Other current liabilities Liabilities 31.12.2017 Note 11 12 14 11 11 15 Note 16 16 11 11 11 Note 11 12 14 11 11 15 Note 16 16 11 11 11 Financial assets at amortised cost Fair value through the income statement Other Total 308 140 449 4 650 88 741 19 2 21 Liabilites at fair value throug the income statement Other financial liabilites at amortised cost 448 85 77 354 887 21 23 121 23 650 88 311 140 1 211 Total 448 85 21 100 354 1 009 Financial assets at amortised cost Fair value through the income statement Other Total 23 298 167 488 3 801 101 2 906 15 1 16 Liabilites at fair value throug the income statement Other financial liabilites at amortised cost 493 108 328 929 13 112 125 40 801 101 2 300 167 1 410 Total 493 108 13 112 328 1 054 75 GroupAccounts and notesWilh. Wilhelmsen Holding ASA Annual Report 2018 Note 18 Operating lease commitments In the Supply Services segment the group has lease agreements for variuos properties on operating leases. The rental agreements are subject to various lifespan with the longest agreement ending on 1 July 2064. In addition the group has: Sale and leaseback agreement for the office building, Strandveien 20 for 15 years from 1 October 2009, with an option to extend for additional 5 years + 5 years. The lease agreement for the office building (including storage and parking) at Strandveien 12 was terminated in February 2019. The commitment related to this is as set out below (nominal amounts): USD mill Due in year 1 Due in year 2 Due in year 3 Due in year 4 Due in year 5 and later Nominal amount of operating lease commitments 2018 2017 21 21 21 21 121 204 22 22 23 22 124 214 In connection to the daily operation the group has additional lease agreements for office rental, office equipment and other fixed assets. The additional lease agreements are not material for the group. 76 GroupAccounts and notesWilh. Wilhelmsen Holding ASA Annual Report 2018 Note 19 Leasing IFRS 16 The new IFRS 16 Leasing standard is effective from 1 January 2019. The standard will significantly change how the company accounts for its lease contracts for land, buildings and equipment currently accounted for as operating leases. Virtually all leases will be brought into the balance sheet increasing the groups assets and liabilities, in addition to affecting income statement figures. This note summarizes the expected impact on the financial reporting of Wilhelmsen group from implementing the new standard. According to the company’s existing loan agreements, the new standard will not result in breach of debt covenants. As of 1 January 2019, the lease liabilities will be measured at the present value of remaining lease payments, discounted using the incremental borrowing rate at such date. The right-of-use assets will be measured at an amount equal to the lease liability. The standard has provided options on scope and exemptions and below the group’s policy choices are described: • The standard will not be applied to leases of intangible assets and these will continue to be recognized in accordance with IAS 38 Intangible assets The Lease Contracts The company has a number of leases related to property and land that account for the significant part of the lease liability. The group also leases vechicle and equipment. A lease liability and right-of-use asset will be presented for these contracts which previously were reported as operating leases. • All leases deemed short-term by the standard are exempt from reporting • All leases deemed to be of low value by the standard are exempt from reporting Recognition and Measurement Approach on Transition Wilhelmsen group will apply IFRS 16 retrospectively with recognition of the cumulative implementation effect recognised at the date of initial application 1 January 2019. By doing this, comparative financial information shall not be restated, but the cumulative effect of initially applying this standard shall be reflected as an adjustment to the opening balance. At the time of transition, leases entered under IAS 17 will not be reassessed. • Non-lease components shall be separated from the lease component in all vessel leases. For other lease agreements, the group will apply a materiality threshold when evaluating separation Implementation effect Impact on equity The net effect on equity as at January 1, 2019 is presented below. USD mill Lease liability at 1 January 2019 Right-of-use asset at 1 January 2019 Difference between lease liability and right-of-use asset per January 1, 2019 Effect from prepayments and currency translation Equity at 1 January 2019 Reconciliation of lease commitment and lease liability USD mill Material operating lease commitment as at 31 December 2018 Operating lease commitment as at 31 December 2018 (not included in material operating lease committment) Relief option for leases of low-value assets Option periods not previously reported as lease commitments Undiscounted lease liabililty Effect of discounting lease commitment to net present value Lease liability as at 1 January 2019 228 231 3 3 3 204 16 (1) 23 242 (14) 228 Expected future impact on the income and cash flow statement IFRS 16 Leasing will have a significant impact on the income statement when implemented in 2019. The estimated reduction of annual lease expense gives an improvement of EBITDA in the range of approximately USD 40 million. Annual depreciation expense of leased assets will increase approximately USD 35 million. Annual net interest expense will increase approximately USD 12 million. In the cash flow statement, operating cash flows will increase and financing cash flows will decrease as the lease payments will be classified as financial rather than operational. It is expected that IFRS 16 will be implemented in the reporting from the operating segments. The actual impact upon implementation may change as a result of changed interest rates, signing of new lease contracts, re-assessment of renewal options and re-assessment of onerous leases. The impact may also change if new information and guidance becomes known before the group presents its first consolidated financial statements using the new standard. 77 GroupAccounts and notesWilh. Wilhelmsen Holding ASA Annual Report 2018 Note 20 Related party transaction The ultimate owner of the group is Tallyman AS, which controls about 60% of voting shares of the group. The beneficial owners of Tallyman AS are the Wilhelmsen family and Mr Wilhelm Wilhelmsen controls Tallyman AS. parties in WalWil ASA group, Maritime Services, Supply Services and Holding and Investments segment in 2018 and 2017. All transactions are entered into market terms. Remuneration to Mr Wilhelm Wilhelmsen for 2018 totalled USD 334 thousand (2017: USD 323 thousand) whereof USD 92 thousand (2017: USD 93 thousand) was consulting fee, USD 9 thousand (2017: USD 8 thousand) in nomination committee for Wilh. Wilhelmsen Holding ASA and Treasure ASA and USD 233 thousand (2017: USD 221 thousand) in ordinary paid pension and other remuneration paid from Wallenius Wilhelmsen ASA. The services are: • Ship management including crewing, technical and management service • Agency services • Freight and liner services • Marine products • Shared services See note 6 regarding fees to board of directors, and note 2 and note 9 in the parent company regarding ownership. The group has undertaken several agreements and transactions with related Generally, Shared Services are priced using a cost plus 5% margin calculation, in accordance with the principles set out in the OECD Transfer Pricing Guidelines and are delivered according to agreements that are renewed annually. Material related parties in the group are: Business office, country Ownership Wallenius Wilhelmsen ASA Coast Center Base AS/KS Coast Center Base Risavika Havn AS Lysaker, Norway Fjell, Norway Tananger, Norway 37.80% 50.00% 42.82% Wallenius Wilhelmsen ASA is a result of the merger between Wilh. Wilhelmsen ASA and Wall Roll AB on 4 April 2017. The company brings together the jointly owned shipping activities and relevant assets of Wilh. Wilhelmsen ASA and Wallenius Lines. It unites their ownership of the shipping and logistics businesses of EUKOR Car Carriers, WWL AS and American RoRo Carriers. Coast Center Base and Risavika Havn AS in the Supply Services segment delivers IT project, administration and handling services and the transactions are based on market terms. USD mill Note 2018 2017 OPERATING REVENUE FROM RELATED PARTY Sale of goods and services to joint ventures and associates from: WalWil group Maritime Services Supply Services Operating revenue from related party OPERATING EXPENSES FROM RELATED PARTY Purchase of goods and services from joint ventures and associates to: Maritime Services Supply Services Operating expenses to related party ACCOUNT RECEIVABLES FROM RELATED PARTY Maritime Services Account receivables from related party ACCOUNT PAYABLES TO RELATED PARTY Maritime Services Supply Services Account payables to related party NON CURRENT ASSETS TO RELATED PARTY Holding and Investments Non current assets to related party 78 16 6 22 31 31 19 19 4 8 12 13 7 1 21 7 7 19 19 5 7 11 0 0 GroupAccounts and notesWilh. Wilhelmsen Holding ASA Annual Report 2018 Note 21 Subsidiaries with material non-controlling interests NorSea Group AS Treasure ASA* * Treasure ASA acquired during 2018 1 450 000 own shares (0.66%). Business office/country Voting/control share 2018 Tananger, Norway Lysaker, Norway 75.15% 72.73% Set out below is the summarised financial information for the subsidiary that has non-controlling interests (NCI) material to the group. The amounts disclosed are 100% and before inter-company eliminations. USD mill Summarised balance sheet Non current assets Current assets Total assets Non current liabilities Current liabilities Total liabilities Net assets Summarised income statement/OCI Total income Profit/(loss) for the year Other comprehensive income Total comprehensive income Profit allocated to NCIs Dividends paid to NCIs Summarised cash flows Net cash flow provided by/(used in) operating activities Net cash flow provided by/(used in) investing activities Net cash flow provided by/(used in) financing activities Net increase/(decrease) in cash and cash equivalents USD mill Total allocation to NCIs Profit/(loss) for the period to material NCIs Profit/(loss) for the period to other immaterial NCIs Profit to NCI in Treasure ASA related to change of investment from equity asset to Available-for-sale Profit for the period to NCIs NorSea Group AS Treasure ASA 2018 2017 2018 2017 552 119 671 286 180 466 206 285 15 2 17 4 1 46 (30) 7 23 594 66 660 333 123 456 204 53 1 1 15 (4) (10) 2 523 2 525 576 2 578 525 578 13 (43) (30) (12) 2 11 (10) (0) 12 (128) 134 18 2 7 11 (25) (14) 2018 2017 (7) 2 (6) 2 7 53 62 79 GroupAccounts and notesWilh. Wilhelmsen Holding ASA Annual Report 2018 Note 22 Discontinued operations On 4. April, 2017 the subsidiary WWASA was merged with Wall Roll AB. After the merger the group own 37.8% of WalWil. The profit in WWASA previous periods is presented as discontinued operations in WWH in 2017. Financial information (income statement and net assets) relating to the discontinued operations for each period to the date of disposal is set out below. Prior to the merger, WWH held 160 000 000 shares in WWASA (renamed to Wallenuis Wilhelmsen ASA). Number of shares remains unchanged after the merger. The financial performance and cash flow information presented are for the Q1 2017. USD mill Operating revenue Other income Share of profits from associates Gain/(loss) on sale of assets Total income Operating expenses Vessel expenses Employee benefits Other expenses Depreciation and impairments Total operating expenses Operating profit Financial income/(expenses) Profit before tax Tax income/(expense) Profit from discontinued operations Non-controlling interests Changes in fair value cash flow hedge Exchange differences on translation of discontinued operations Other comprehensive income from discontinued operations Cash flow from discontinued operations Net cash flow from operating activities Net cash flow from investing activities Net cash flow from financing activities Net increase in cash generated by the discontinued operations Details of the merger between WWASA and Wall Roll AB Cash received Shares in WalWil ASA (market value) Total disposals consideration Carrying amount of net assets disposal Currency translation differences in WWASA group Accounting loss (discontinued operations) majority Net profit before non-controlling interests Loss from discontinued operations 80 2017 59 14 9 82 (15) (11) (3) (20) (49) 33 (8) 25 1 26 7 2 1 7 107 (74) 40 14 789 804 1 062 (5) (264) 26 (239) GroupAccounts and notesWilh. Wilhelmsen Holding ASA Annual Report 2018 Note 23 Business combinations There were no material acquisitions in the group in 2018. With effect from 26 September 2017, the group increased its shareholding in NorSea Group from 40% to approximately 72%. Eidesvik Eiendomsinvest AS and Simon Møkster Eiendom AS will hold approximately 12% each, while management in NorSea Group controls the remaining 4%. Following the transaction in 2017 and in 2018, Wilhelmsen acquired a portion of management controlled shares, 3.15%, bringing the total Wilhelmsen shareholding to 75.15%. group originally acquired 35.4% of the shares in NorSea Group in July 2012, and increased to 40% ownership in April 2014. In addition, the group has USD 18 million in shareholder loans to NorSea Group. The acquistion balance from NorSea Group is consolidated at the end of September 2017 and a part of the segment ”Supply Services”. With effect from the 26 September 2017, NorSea Group will be reported as a subsidiary in the group accounts. Total income, cost and balance sheet items of NorSea Group will then be consolidated on a 100% basis, with non-controlling interests deducted on a net basis. Total consideration for the Wilhelmsen’s additional 32% investment in NorSea Group is NOK 545 million (USD 70 million). The acquistion from management increased the total consideration with USD 6 million. (USD 4 million in 2017 and USD 2 million i 2018) NorSea Group has previously been reported as associate in the group accounts. Accounting loss of the disposal of associate is USD 40 million, mainly due to change in NOK/USD from 2012 to 2017. The investment is financed through existing liquidity and funding reserves. The The Purchase Price Allocation is: Details of net assets acquired and goodwill are as follows: USD mill Cash Option fair value* Non-controlling interests Fair value of previously held equity interest Total purchase consideration Fair value of net identifiable assets acquired (see below) Goodwill *The option is related to remaining part of the shares, currently held by non-controlling interests. The preliminary purchase price allocation are as follows: USD mill Intangible assets Property, fixtures and vessel Other long-term assets/ associate and joint arrangements Other current assets Cash and cash equivalents Non current interest-bearing debt Other non-current liabilities Other current liabilities Net identifiable assets acquired 74 2 56 80 211 211 0 Fair value 10 417 185 67 5 (352) (4) (118) 211 Summary of acquisition The group recognises non-controlling interests in an acquired entity at fair value. This decision is made on an acquisition-by-acquisition basis. For the non-controlling interests in NorSea group, the group elected to recognise the non-controlling interests in at its proportionate share of the acquired net identifiable assets. 81 GroupAccounts and notesWilh. Wilhelmsen Holding ASA Annual Report 2018 Cont. Note 23 Business combinations Revenue and profit contribution The acquired business contributed revenues of USD 53 million and net profit before non-controlling interests of USD 3.9 million to the group for the period from 26 September to 31 December 2017. If the acquisition had occurred on 1 January 2017, consolidated pro-forma revenue and profit before non-controlling interests for the period from 1 January to 26 September 2017 would have been USD 186 million and USD 12 million respectively. USD mill Purchase consideration – cash outflow Cash consideration September 2017 Less balance acquired – Cash – Net Net outflow of cash => investing activities during 2017 74 5 5 (69) Acquisition-related costs Acquisition-related costs of USD 1 million that were not directly attributable to the issue of shares are included in other expenses in income statement and in operating cash flows in the statement of cash flows. Reported net profit from NorSea group as an associate up to consolidation 26 September 2017 are: USD mill Net profit from NorSea group as an associate a part of segment Holding and Investments Loss upon consolidation of the former NorSea Group 26.09.2017 5 (40) There were no material acquisitions in the group in 2018. Kemetyl Konsument Norge AS On 1 April 2017 the group acquired Kemetyl Konsument Norge AS. The investment cost was approximately USD 20 mill. SIGNIFICANT DISPOSALS Merger WW ASA On 4 April 2017, the subsidiary Wilh. Wilhelmsen ASA (WWASA) was merged with Wall Roll AB. After the merger the group own 37.8% of the Wallenius Wilhelmsen ASA. 82 GroupAccounts and notesWilh. Wilhelmsen Holding ASA Annual Report 2018 Note 24 Contingencies The size and global activities of the group dictate that companies in the group will be involved from time to time in disputes and legal actions. The group is not aware of any financial risk associated with disputes and legal actions which are not largely covered through insurance arrangements. Nevertheless, any such disputes/actions which might exist are of such a nature that they will not significantly affect the group’s financial position. Note 25 Events after the balance sheet date No material events occurred between the balance sheet date and the date when the accounts were presented which provide new information about conditions prevailing on the balance sheet date. 83 GroupAccounts and notesWilh. Wilhelmsen Holding ASA Annual Report 2018A c c o u n t s a n d n o t e s – p a r e n t c o m p a n y Cyber security Beyond building a common-sense culture in our company, making sure employees exercise good practise in handling data, navigating in a digital world is a hot topic in our industry. We need to protect a wide range of data and ensure our systems, whether on board a vessel or onshore, operate efficiently and without interruptions. To be able to operate and not least deserve the trust of all our stakeholders, we need to professionally manage cyber security threats, handle the consequences of connectivity and digitalisation, and respond to increasing legal and customer requirements. Income statement Wilh. Wilhelmsen Holding ASA NOK thousand Operating income Operating expenses Employee benefits Operating expenses Depreciation Total operating expenses Operating profit/(loss) Financial income/(expenses) Net financial income Net financial expenses Financial income/(expenses) Profit before tax Tax income/(expense) Profit for the year Transfers and allocations To equity Proposed dividend Interim dividend paid Total transfers and allocations Note 2018 2017 1 2 1 3 1 1 4 9 9 9 23 899 66 971 (75 446) (45 375) (2 266) (130 537) (65 533) (2 190) (123 086) (198 260) (99 187) (131 289) 428 285 (8 231) 420 054 397 395 (10 147) 387 248 320 866 255 960 38 265 359 131 7 023 262 982 150 464 116 010 92 658 359 131 30 813 162 413 69 756 262 982 Comprehensive income Wilh. Wilhelmsen Holding ASA NOK thousand Profit for the year Items that will not be reclassified to the income statement Remeasurement postemployment benefits, net of tax Total comprehensive income Note 2018 2017 359 131 262 982 9/10 3 200 362 332 1 156 264 138 Notes 1 to 16 on the next pages are an integral part of these financial statements. 86 Parent companyAccounts and notesWilh. Wilhelmsen Holding ASA Annual Report 2018 Balance sheet Wilh. Wilhelmsen Holding ASA NOK thousand ASSETS Non current assets Deferred tax asset Intangible assets Tangible assets Investments in subsidiaries and associates Other non current assets Total non current assets Current assets Current financial investments Trade and other receivables Other current assets Cash and cash equivalents Total current assets Total assets EQUITY AND LIABILITIES Equity Paid-in capital Own shares Retained earnings Total equity Non current liabilities Pension liabilities Other non current liabilities Total non current liabilities Current liabilities Public duties payable Trade and other payables Other current liabilities Total current liabilities Total equity and liabilities Note 31.12.2018 31.12.2017 4 3 3 5 6 7/8 6 6/8/13 8 9 9 9 10 6 6 6/11/13 42 398 2 486 11 402 2 653 3 764 11 693 4 872 004 4 872 004 27 000 7 613 4 955 291 4 897 727 761 231 11 924 399 768 81 190 1 254 112 6 209 403 824 661 16 171 265 206 78 624 1 184 663 6 082 390 928 076 4 845 902 5 773 979 930 076 (2 000) 4 692 238 5 620 314 40 856 34 350 75 206 6 756 5 273 348 190 360 219 44 948 42 671 87 619 7 105 10 017 357 334 374 456 6 209 403 6 082 390 Lysaker, 14 March 2019 The board of directors of Wilh. Wilhelmsen Holding ASA Diderik Schnitler chair Trond Ø. Westlie Carl Erik Steen Irene Waage Basili Cathrine Løvenskiold Wilhelmsen Thomas Wilhelmsen group CEO Notes 1 to 16 on the next pages are an integral part of these financial statements. 87 Parent companyAccounts and notesWilh. Wilhelmsen Holding ASA Annual Report 2018Cash flow statement Wilh. Wilhelmsen Holding ASA NOK thousand Note 2018 2017 Cash flow from operating activities Profit before tax Financial (income)/expenses Depreciation Gain on sale of fixed asset Change in net pension liability Change in other current assets Change in working capital Net cash provided by operating activities Cash flow from investing activities Proceeds from sale of fixed assets Investments in fixed assets Investments in subsidaries Loan repayments received from subsidiaries Loans granted to subsidiaries Proceeds from sale of financial investments Current financial investments Dividend/ group contribution from subsidiaries Dividend received from financial assets Paid witholding tax dividend portfolio management Interest received Cash from financial derivatives Net cash flow from investing activities Cash flow from financing activities Proceeds from issue of debt Interest paid Dividend to shareholders Net cash flow from financing activities Net increase in cash and cash equivalents Cash and cash equivalents, at the beginning of the period Cash and cash equivalents at 31.12 3 3 3 1 11 9 320 866 (420 054) 2 266 (274) 64 4 467 (20 561) 255 960 (402 710) 2 190 (233) (3 587) 1 996 1 137 (113 226) (145 247) 296 (719) (105 148) 252 467 (261 335) 423 000 14 713 (2 436) 2 609 323 446 50 000 (2 584) (255 071) (207 656) 2 565 78 624 81 190 1 132 (1 871) (506 027) 3 500 (2 500) 265 255 (336 166) 477 000 12 769 (2 005) 1 573 119 657 32 316 150 000 (520) (232 169) (82 689) (195 620) 274 244 78 624 The company has several bank accounts in different currencies. Unrealised currency effects are included in net cash provided by operating activities. Notes 1 to 16 on the next pages are an integral part of these financial statements. 88 Parent companyAccounts and notesWilh. Wilhelmsen Holding ASA Annual Report 2018 Note 1 Combined items, income statement NOK thousand OPERATING INCOME Other income Income from group companies Gain on sale of assets Total operating income OTHER OPERATING EXPENSES Expenses to group companies Communication and IT expenses External services Travel and meeting expenses Marketing expenses Other administration expenses Total other operating expenses FINANCIAL INCOME/(EXPENSES) Financial income Investment management Interest income Dividend/group contribution from subsidiaries Other financial income Net currency gain Net financial income Financial expenses Interest expenses Other financial items Net financial expenses Net financial income Note 2018 2017 14 14 2 7 14 14 1 817 21 809 274 23 899 (18 262) (4 356) (12 379) (5 033) (2 977) (2 368) (45 375) (60 198) 2 609 473 000 12 874 428 285 3 976 62 762 233 66 971 (23 044) (4 382) (11 769) (6 354) (6 141) (13 842) (65 533) 21 840 1 573 227 000 119 657 27 326 397 395 (6 166) (2 066) (8 231) (8 271) (1 876) (10 147) 420 054 387 248 89 Parent companyAccounts and notesWilh. Wilhelmsen Holding ASA Annual Report 2018Note 2 Employee benefits NOK thousand Pay Payroll tax Pension cost Other remuneration Total employee benefits Average number of employees REMUNERATION OF SENIOR EXECUTIVES NOK thousand 2018 Group CEO Group CFO 2017 Group CEO Group CFO *Mainly related to gross up pension expenses and company car. 2018 2017 47 578 10 856 11 105 5 908 75 446 99 156 14 107 9 025 8 250 130 537 35 45 Total 10 385 5 228 1 696 460 1 696 425 15 186 6 818 Pay Bonus Pension premium *Other remuneration 4 870 3 381 4 753 3 293 1 977 940 6 957 2 717 1 842 446 1 779 383 Board of directors Remuneration of the five directors totalled NOK 2 150 thousand for 2018 (2017: NOK 2 150 thousand). The board’s remuneration for the fiscal year 2018 will be approved by the general assembly 30 April 2019. Remuneration of the nomination committee totalled NOK 85 thousand for 2018 (2017: NOK 85 thousand). Senior executives Thomas Wilhelmsen – group CEO Christian Berg – group CFO right to receive up to 100% of his annual salary for 24 months after leaving the company as a result of mergers, substantial changes in ownership, or a decision by the board of directors. Possible income during the period is deducted up to 50%, which comes into force after six months’ notice period. Group CEO has the right to a life-long pension constituting 50% of his annual salary ritirement above 12G. The group CFO is following the company pension policy for salary below and above 12G (defined contribution plan). His retirement age is 67. In additional, he has a right to receive 60% of his annual salary between 67 and 70 year. The group CEO has a severance pay guarantee under which he has the Loans and guarantees employees There were no loan or guarantees to employees per 31.12.2018. 90 Parent companyAccounts and notesWilh. Wilhelmsen Holding ASA Annual Report 2018 Cont. note 2 Employee benefits SHARES OWNED OR CONTROLLED BY REPRESENTATIVES OF WILH. WILHELMSEN HOLDING ASA AT 31 DECEMBER 2018 Name Board of directors Diderik Schnitler (chair) Trond Ø. Westlie Carl E. Steen Irene Waage Basili Cathrine Løvenskiold Wilhelmsen Senior executives Thomas Wilhelmsen – group CEO Christian Berg – group CFO Nomination committee Wilhelm Wilhelmsen* Gunnar Fredrik Selvaag Jan Gunnar Hartvig A shares B shares Total Part of total shares Part of voting stock 2 000 25 000 27 000 8 000 730 8 000 730 22 100 188 750 22 850 188 20 881 114 2 302 444 23 183 558 0.06% 0.00% 0.02% 0.00% 0.00% 0.05% 0.00% 0.01% 0.00% 0.02% 0.00% 0.00% 0.06% 0.00% 49.96% 0.00% 0.00% 60.46% 0.00% 0.00% *Following a gift in kind the shares owned and controlled by Wilhelm Wilhelmsen was reduced with 1 000 A-shares in December 2018. This transaction has not yet been registered in the Norwegian CSD OPTION PROGRAM FOR EMPLOYEES AT A SPECIFIED LEVEL OF MANAGEMENT Long term incentive scheme The long term incentive scheme (LTI) was introduced in 2015. Participants are members of the group management team and the presidents for Wilhelmsen Ships Service and Wilhelmsen Ship Management. For the group CEO, maximum annual payment is 100% of base salary. For the remaining participants, the maximum annual payment is 50% of base salary. The LTI focuses on long term shareholder value creation and is based on positive development of the Wilhelmsen group’s value adjusted equity. The ambitions set for the programme are to increase alignment with value creation for shareholders, to attract, retain and motivate participants and drive long- term group performance. Settlement is based on return on value adjusted equity the last four years leading up to the settlement. The value adjusted equity is determined by using a “sum-of-the-parts” principle. For listed companies, value adjusted equity is based on market price, while earnings multiples or net asset value are used for non-listed entities. The board sets value adjusted equity targets at the beginning of each four year measurement period. Without consultation or agreement with the individual, the board has the right to change or terminate the incentive programme after each year. Per 31 December 2018, a provision has been made related to the LTI programme ending on 31 December 2018. Potential payment will be done in March 2019, pending approval from the board of directors. The provision has been calculated based on value adjusted equity per 31 December 2018, risk free return and standard deviation of historic annual value creation. No provision has been made for the LTI programme expiring on 31 December 2020. EXPENSED AUDIT FEE (excluding VAT) NOK thousand Statutory audit Other service fees Total expensed audit fee 2018 2017 535 277 811 540 708 1 248 91 Parent companyAccounts and notesWilh. Wilhelmsen Holding ASA Annual Report 2018 Note 3 Intangible and tangible assets NOK thousand 2018 Cost 01.01 Additions Disposals Cost 31.12 Accumulated depreciation 01.01 Depreciation/amortisation Disposals Accumulated depreciation 31.12 Intangible assets Buildings Other tangible assets Total 6 180 10 582 6 180 10 582 (2 415) (1 278) (2 597) (423) (3 693) (3 021) 8 815 719 (450) 9 084 (5 107) (564) 428 (5 243) 25 577 719 (450) 25 846 (10 119) (2 266) 428 (11 957) Carrying amounts 31.12 2 486 7 562 3 841 13 889 2017 Cost 01.01 Additions Disposals Cost 31.12 Accumulated depreciation 01.01 Depreciation/amortisation Disposals Accumulated depreciation 31.12 5 309 871 10 582 6 180 10 582 (1 242) (1 173) (2 174) (423) (2 415) (2 597) 9 842 1 000 (2 027) 8 815 (5 579) (594) 1 066 (5 107) 25 733 1 871 (2 027) 25 577 (8 995) (2 190) 1 066 (10 119) Carrying amounts 31.12 3 764 7 985 3 708 15 458 Useful life Amortisation/depreciation schedule Up to 3 years Up to 25 years 3-10 years Straight-line Straight-line Straight-line 92 Parent companyAccounts and notesWilh. Wilhelmsen Holding ASA Annual Report 2018 Note 4 Tax NOK thousand Allocation of tax income Payable tax/withholding tax Change in deferred tax Total tax income/(expense) Basis for tax computation Profit before tax 23% tax (2017: 24%) Tax effect from Permanent differences Withholding tax Change in different tax rate Adjustment group contribution Current year calculated tax Effective tax rate Deferred tax asset/(liability) Tax effect of temporary differences Fixtures Current assets and liabilities Non current liabilities and provisions for liabilities Tax losses carried forward Deferred tax asset/(liability) Deferred tax asset/(liability) 01.01 Charge to equity (tax of OCI) Change of deferred tax through income statement Tax effect of group contribution Deferred tax asset/(liability) 31.12 2018 2017 (2 436) 40 702 38 265 (2 005) 9 028 7 023 320 866 73 799 255 960 61 430 (115 409) (62 830) 2 436 907 (38 265) 713 (337) 4 363 37 659 42 398 2 653 (956) 40 702 42 398 2 005 284 (7 913) (7 023) (2.7%) 643 (6 221) 8 230 2 653 1 488 (365) 9 028 (7 500) 2 653 Note 5 Investments in subsidiaries and associates Investments in subsidiaries and associates are recorded at cost. Where a reduction in the value of shares in subsidiaries or associates is considered to be permanent and significant, a impairment to net realisable value is recorded. NOK thousand Associate Business office country Voting share/ ownership share 2018 Book value 2017 Book value Wallenius Wilhelmsen ASA Lysaker, Norway 37.8% 1 130 964 1 130 964 Subsidiaries Treasure ASA* Wilhelmsen Maritime Services AS WilService AS Wilh. Wilhelmsen Holding Invest AS Wilhelmsen Accounting Services AS WilNor Governmental Services AS Lysaker, Norway Lysaker, Norway Lysaker, Norway Lysaker, Norway Lysaker, Norway Lysaker, Norway Wilhelmsen GRC Sdn Bhd Kuala Lumpur, Malaysia Total investments in subsidiaries and associates *At 31.12.2018 Treasure ASA had own shares of 1 450 000 shares. 72.7% 1 043 967 1 043 967 100% 100% 100% 100% 51% 100% 1 264 440 1 264 440 17 550 17 550 1 405 014 1 405 014 3 622 6 439 8 3 622 6 439 8 4 872 004 4 872 004 93 Parent companyAccounts and notesWilh. Wilhelmsen Holding ASA Annual Report 2018 Note 6 Combined items, balance sheet NOK thousand Note 2018 2017 OTHER NON CURRENT ASSETS Non current loan group companies (subsidiary and associates) Total other non current assets Of which non current debitors falling due for payment later than one year: Loans to subsidiary and associates Total other non current assets due after one year OTHER CURRENT ASSETS Group contribution Other current assets Current loan to group companies (subsidiary and associates) Total other current assets OTHER NON CURRENT LIABILITIES Allocation of commitment Total other non current liabilities 13/14 13/14 14 13 13/14 27 000 27 000 27 000 27 000 300 000 14 007 85 760 399 768 7 613 7 613 7 613 7 613 250 000 15 206 265 206 34 350 34 350 42 671 42 671 Allocation of commitment relates to a sale leaseback contract for house rental, including both deferred revenue and provision for loss contract. Net change of NOK 7 955 thousand (current and non current liability) has been reversed through income statment in 2018. Per 31 December 2018 NOK 3 641 thousand was reclassed to short term liability (2017: NOK 3 275 thousand). OTHER CURRENT LIABILITIES Next year's instalment on interest-bearing debt Proposed dividend Other current liabilities Total other current liabilities 11/13 9 13 200 000 116 010 32 181 348 190 150 000 162 413 44 920 357 334 The fair value of current receivables and payables is virtually the same as the carried amount, since the effect of discounting is insignificant. Lending is at floating rates of interest. Fair value is virtually identical with the carried amount. See note 13. Note 7 Current financial investments NOK thousand Market value asset management portfolio Equities Bonds Other financial derivatives Total current financial investments 2018 2017 367 709 393 642 (13 113) 748 239 430 114 394 183 (5 961) 818 336 The fair value of all equity securities, bonds and other financial assets is based on their closing prices in an active market. Other financial derivatives are classified as other current liabilities. The net unrealised gain at 31.12 32 714 123 915 The portfolio of financial investments is held as collateral within a securities’ finance facility. See note 11. 94 Parent companyAccounts and notesWilh. Wilhelmsen Holding ASA Annual Report 2018 Note 8 Restricted bank deposits and undrawn committed drawing rights NOK thousand Restricted bank deposits Payroll tax withholding account NOK thousand Undrawn committed drawing rights 2018 4 331 2017 3 781 2018 2017 Undrawn committed drawing rights for 31 December 1 000 149 1 019 630 NOK thousand Cash and cash equivalents Banks Total Cash and cash equivalents Note 9 Equity NOK thousand Current year's change in equity Equity 31.12.2017 Interim dividend paid Proposed dividend Profit for the year Comprehensive income for the year Disposal of own shares Equity 31.12.2018 NOK thousand 2017 change in equity Equity 31.12.2016 Interim dividend paid Proposed dividend Profit for the year Comprehensive income for the year Equity 31.12.2017 2018 81 190 81 190 2017 78 624 78 624 Share capital Own shares Retained earnings Total 930 076 (2 000) 4 692 238 (92 658) (116 010) 359 131 3 200 5 620 314 (92 658) (116 010) 359 131 3 200 (2 000) 928 076 2 000 0 4 845 902 5 773 979 Share capital Own shares Retained earnings Total 930 076 (2 000) 930 076 (2 000) 4 660 268 (69 756) (162 413) 262 982 1 156 4 692 238 5 588 344 (69 756) (162 413) 262 982 1 156 5 620 314 At 31 December 2018 the company’s share capital comprises 34 657 092 Class A shares and 11 866 732 Class B shares, totalling 46 403 824 shares with a nominal value of NOK 20 each. Class B shares do not carry a vote at the general meeting. Otherwise, each share confers the same rights in the company. The annual general meeting on 26 April 2018 approved liquidation of 100 000 own class A shares, denominated NOK 20 per share. The share capital is reduced from NOK 930 076 480 by NOK 2 000 000 to NOK 928 076 480. Dividend The proposed dividend for fiscal year 2018 is NOK 2.50 per share, payable in the second quarter 2019. A decision on this proposal will be taken by the annual general meeting on 30 April 2019. Dividend for fiscal year 2017 was NOK 5.50 per share, where NOK 3.50 per share was paid in May 2018 and NOK 2.00 per share was paid in November 2018. Dividend for fiscal year 2016 was NOK 5.00 per share, where NOK 3.50 per share was paid in May 2017 and NOK 1.50 per share was paid in November 2017. 95 Parent companyAccounts and notesWilh. Wilhelmsen Holding ASA Annual Report 2018 Cont. note 9 Equity The largest shareholders at 31 December 2018 Shareholders Tallyman AS Folketrygdfondet VPF Nordea Norge Verdi Citibank Europe plc Pareto Aksje Norge Verdipapirfond J. P. Morgan Bank Luxembourg S.A. Stiftelsen Tom Wilhelmsen Nordea Nordic Small Cap Fund UBS Switzerland AG Skagen Vekst State Street Bank and Trust Comp Clearsteam Banking S.A. Forsvarets Personellservice MP Pensjon PK Euroclear Bank S.A./N.V. VPF Eika Spar VPF Nordea Kapital Eika Norge Oslo Pensjonsforsikring AS PM VPF Nordea Avkastning Other Total number of shares A shares B shares Total number of shares % of total shares % of voting stock 20 784 730 2 281 044 23 065 774 49.71% 60.18% 1 231 880 267 695 886 187 971 815 638 658 370 400 126 875 511 435 512 647 475 722 189 071 375 400 79 965 251 610 115 161 112 359 1 008 832 1 555 724 809 650 617 576 236 000 415 630 6 791 191 369 276 636 104 656 321 038 193 278 287 325 270 187 157 119 2 240 712 1 823 419 1 695 837 1 589 391 638 658 606 400 542 505 518 226 512 647 475 722 380 440 375 400 356 601 356 266 321 038 308 439 287 325 270 187 269 478 4.83% 3.93% 3.65% 3.43% 1.38% 1.31% 1.17% 1.12% 1.10% 1.03% 0.82% 0.81% 0.77% 0.77% 0.69% 0.66% 0.62% 0.58% 0.58% 3.57% 0.78% 2.57% 2.81% 1.85% 1.07% 0.37% 1.48% 1.48% 1.38% 0.55% 1.09% 0.23% 0.73% 0.00% 0.33% 0.00% 0.00% 0.33% 6 635 482 3 133 877 9 769 359 34 537 092 11 866 732 46 403 824 21.05% 100.00% 19.21% 100.00% Shares on foreigners hands At 31. December 2018 – 5 150 032 (14.11%) A shares and 2 838 453 (23.92%) B shares. Corresponding figures at 31. December 2017 – 5 200 373 (15.01%) A shares and 2 448 814 (20.64%) B shares. 96 Parent companyAccounts and notesWilh. Wilhelmsen Holding ASA Annual Report 2018 Note 10 Pension Description of the pension scheme The company’s defined contribution pension schemes for Norwegian employees are with financial institute, similar solutions with different investment funds. The company has “Ekstrapensjon”, a contribution plan for all Norwegian employees with salaries exceeding12 times the Norwegian National Insurance base amount (G). The contribution plan replaced the company obligations mainly financed from operation. In addition the company has agreements on early retirement. This obligations are mainly financed from operations. made for payroll tax in pension plans where the plan assets exceed the plan obligations. The liability recognised in the balance sheet in respect of the remaining defined benefit pension plans is the present value of the defined benefit obligation at the end of the reporting period less the fair value of plan assets. The defined benefit obligations are calculated annually by independent actuaries using the projected unit credit method. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of high-quality corporate bonds that are denominated in the currency in which the benefits will be paid, and that have terms to maturity approximating to the terms of the related pension obligation. The company has obligations towards some employees in the company’s senior executive management. These obligations are mainly covered via group annuity policies in Storebrand. Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or credited to equity in other comprehensive income in the period in which they arise. Pension costs and obligations includes payroll taxes. No provision has been Number of people covered by pension schemes at 31.12 2018 2017 2018 2017 Funded Unfunded In employment On retirement (inclusive disability pensions) Total number of people covered by pension schemes 1 2 3 1 2 3 4 4 4 4 Financial assumptions for the pension calculations: Discount rate Anticipated pay regulation Anticipated increase in National Insurance base amount (G) Anticipated regulation of pensions Expenses Commitments 2018 2017 31.12.2018 31.12.2017 2.30% 2.00% 2.00% 0.10% 2.40% 2.25% 2.25% 0.40% 2.70% 2.50% 2.50% 0.10% 2.30% 2.00% 2.00% 0.10% Anticipated pay regulation are business sector specific, influenced by composition of employees under the plans. Anticipated increase in G is tied up to the anticipated pay regulations. Anticipated regulation of pensions is determined by the difference between return on assets and the hurdle rate. Actuarial assumptions: all calculations are calculated on the basis of the K2013 mortality tariff. The disability tariff is based on the KU table. 97 Parent companyAccounts and notesWilh. Wilhelmsen Holding ASA Annual Report 2018 2018 2017 Funded Unfunded Total Funded Unfunded Total 1 643 141 8 506 10 290 54 761 1 697 902 8 506 815 11 105 2 440 162 5 597 8 199 52 774 826 2 492 936 5 597 9 025 2018 2017 (4 647) 2 492 (2 001) (4 156) (956) (3 200) (171) (1 350) (1 521) (365) (1 156) 2018 2017 91 698 1 697 1 978 (3 962) (4 647) 2 492 89 256 91 344 2 492 1 988 (3 955) (171) 91 698 46 750 43 600 1 076 1 699 (2 526) (548) 1 949 1 052 3 274 (2 526) (597) 1 947 48 400 46 750 Cont. note 10 Pension NOK thousand Pension expenses Service cost Net interest cost Cost of defined contribution plan Net pension expenses NOK thousand Remeasurements – Other comprehensive income Effect of changes in financial assumptions Effect of experience adjustments (Return) on plan assets (excluding interest income) Gross remeasurement (gain) loss included in OCI Tax effect Remeasurement (gain) loss recognised in OCI – net of tax NOK thousand Pension obligations Defined benefit obligation at end of prior year Service cost Interest expense Benefit payments from plan Effect of changes in financial assumptions Effect of experience adjustments Pension obligations 31.12 Fair value of plan assets Fair value of plan assets at end of prior year Interest income Employer contributions Benefit payments from plan Administrative expenses paid from plan assets Return on plan assets (excluding interest income) Gross pension assets 31.12 98 Parent companyAccounts and notesWilh. Wilhelmsen Holding ASA Annual Report 2018Cont. note 10 Pension NOK thousand Funded Unfunded Total Funded Unfunded Total 2018 2017 Specification of funded and unfunded obligation Service cost Defined benefit obligation Fair value of plan assets Net liability 1 643 51 730 48 400 3 330 54 37 526 37 526 1 697 89 256 48 400 40 856 2 440 54 187 46 750 7 437 52 37 511 37 511 2 492 91 698 46 750 44 948 Premium payments in 2019 are expected to be NOK 5.1 million (2018: NOK 4.9 million). Payments from operations are estimated at NOK 2.2 million (2018: NOK 2.3 million). NOK thousand Historical developments Gross pension obligations, including payroll tax Gross pension assets Net recorded pension obligations Note 11 Interest-bearing debt NOK thousand Interest-bearing debt Bank loan Total interest-bearing debt Repayment schedule for interest-bearing debt Due in year 1 Total interest-bearing debt Held as collateral within a securities’ finance facility The portfolio of financial investments 31.12.2018 31.12.2017 89 256 48 400 40 856 91 698 46 750 44 948 2018 2017 200 000 200 000 150 000 150 000 200 000 200 000 150 000 150 000 761 352 824 297 The parent company had in addition undrawn revolving facilities at 31 December 2018. The parent company’s financing arrangement provides for customary financial covenants related to minimum liquidity, and minimum value adjusted equity ratio. The company was in compliance with these covenants at 31 December 2018 (analougue for 31 December 2017). FINANCIAL RISK See note 13 to the parent accounts and note 17 to the group accounts for further information on financial risk, and note 16 to the group accounts concerning the fair value of interest-bearing debt. Note 12 Operating lease commitments The company has a sale and leaseback agreement for the office building, Strandveien 20. The lease run over 15 years from 1 October 2009, with an option to extend for additional 5 years + 5 years. The lease agreement for the office building (including storage and parking) at Strandveien 12, was terminated in February 2019. NOK thousand Due in year 1 Due in year 2 Due in year 3 Due in year 4 Due in year 5 and later Total expense related to operating leasing commitments 2018 44 119 45 222 46 353 47 511 202 224 385 429 2017 51 365 52 392 53 440 49 131 141 377 347 705 99 Parent companyAccounts and notesWilh. Wilhelmsen Holding ASA Annual Report 2018 Note 13 Financial risk CREDIT RISK Guarantees The group’s policy is that the parent company will not provide any financial guarantees. Quoted market prices or dealer quotes for similar instruments. The fair value of interest rate swaps is calculated as the present value of the estimated future cash flows based on observable yield curves. Cash and bank deposits The parent’s exposure to credit risk on cash and bank deposits is considered to be very limited as the parent maintain banking relationships with a selection of banks with strong credit ratings. The fair value of interest rate swap option (swaption) contracts is determined using observable yield curve, volatility and time-to-maturity parameters at the balance sheet date, resulting in a swaption premium. LIQUIDITY RISK The parent’s approach to managing liquidity is to ensure sufficient liquidity to meet its liabilities, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the parent and group’s reputation. The parent’s liquidity risk is considered to be low in the sense that it holds significant liquid assets in addition to undrawn credit facilities. FAIR VALUE ESTIMATION The fair value of financial instruments traded in an active market is based on quoted market prices on the balance sheet date. The fair value of financial instruments not traded in an active market (over-the-counter contracts) are based on third party quotes. Specific valuation techniques used to value financial instruments include: The fair value of forward foreign exchange contracts is determined using forward exchange rates at the balance sheet date, with the resulting value discounted back to present value. The fair value of foreign exchange option contracts is determined using observable forward exchange rates, volatility, yield curves and time-to-maturity parameters at the balance sheet date, resulting in an option premium. The carrying value less impairment provision of receivables and payables are assumed to approximate their fair values. The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the company for similar financial instruments. NOK thousand 2018 Interest-bearing debt Bank loan Total interest-bearing debt 31.12 2017 Interest-bearing debt Bank loan Total interest-bearing debt 31.12 Fair value Carrying amount 200 000 200 000 150 000 150 000 200 000 200 000 150 000 150 000 The fair value of financial instruments traded in active markets is based on closing prices at the balance sheet date. A market is regarded as active if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service, or regulatory agency, and those prices represent actual and regularly occurring market transactions on an arm’s length basis. The price used for valuation of financial assets held by the group is the closing price. These instruments are included in level 1. Instruments included in level 1 at the end of 2018 and 2017 are investment grade bonds, equities and listed financial derivatives. The fair value of financial instruments not traded in an active market is determined by using valuation techniques. These valuation techniques use observable market data where available and rely as little as possible on entity specific estimates. These instruments are included in level 2. Instruments included in level 2 are FX and IR derivatives. If one or more of significant valuation inputs is not based on observable market data, the instruments are included in level 3. Total financial instruments and short term financial investments NOK thousand Level 1 Level 2 Level 3 Total balance Financial assets at fair value through income statement 2018 – Bonds – Equities Total assets 31.12 Financial liabilities fair value through income statement 2018 – Financial derivatives Total liabilities 31.12 393 642 366 707 760 350 1 002 1 002 0 (13 113) (13 113) 393 642 367 709 761 352 (13 113) (13 113) 0 0 100 Parent companyAccounts and notesWilh. Wilhelmsen Holding ASA Annual Report 2018 Cont. note 13 Financial risk NOK thousand Level 1 Level 2 Level 3 Total balance Financial assets at fair value through income statement 2017 – Bonds – Equities Total assets 31.12 Financial liabilities fair value through income statement 2017 – Financial derivatives Total liabilities 31.12 394 183 423 522 817 705 (270) (270) 1 828 (5 691) (5 691) 6 593 6 593 0 Financial instruments by category Note Financial assets at amortised cost Fair value through income statement Assets Other non current assets Current financial investments Other current assets Cash and cash equivalent Assets at 31.12.2018 Liabilities Financial derivatives Current interest-bearing debt Other current liabilities Liabilities 31.12.2018 Assets Other non current assets Current financial investments Other current assets Cash and cash equivalent Assets at 31.12.2017 Liabilities Financial derivatives Current interest-bearing debt Other current liabilities Liabilities 31.12.2017 6 7 6 Note 6 6 6 Note 6 7 6 Note 6 6 6 See note 17 to the group financial statement for further information about the group risk factors. 394 183 430 114 824 297 (5 961) (5 961) Total 27 000 761 352 399 768 81 190 Total 13 113 200 000 143 775 348 190 Total 7 613 824 297 279 549 78 624 27 000 399 768 81 190 507 958 761 352 761 352 1 269 309 Other financial liabilities at amortised cost Fair value through income statement 200 000 143 775 343 775 13 113 13 113 Loans and receivables Assets at fair value through the income statement 7 613 279 549 78 624 365 786 824 297 824 297 1 190 083 Other financial liabilities at amortised cost Assets at fair value through the income statement 150 000 209 562 359 562 5 961 5 961 Total 5 961 150 000 209 562 365 523 101 Parent companyAccounts and notesWilh. Wilhelmsen Holding ASA Annual Report 2018Note 14 Related party transaction The ultimate owner of the group Wilh.Wilhelmsen Holding ASA is Tallyman AS, which control about 60% of voting shares of the group. The ulimate owners of Tallyman AS are the Wilhelmsen family and Mr Wilhelm Wilhelmsen controls Tallyman AS. Shares owned or controlled by related party of Wilh. Wilhelmsen Holding ASA at 31 December 2018 Name A shares B shares Total Part of total shares Part of voting stock Family Wilhelm Wilhelmsen 20 881 114 2 302 444 23 183 558 49.96% 60.46% Wilhelm Wilhelmsen has in 2018 received remuneration of NOK 750 thousand (2017: NOK 750 thousand) in consulting fee, NOK 70 thousand (2017: NOK 70 thousand) in nomination committee for Wilh. Wilhelmsen Holding ASA and Treasure ASA and NOK 1 894 thousand (2017: NOK 1 846 thousand) in ordinary paid pension and other remunerations. WWH ASA delivers services to other group companies, primarily human resources, communication, treasury (“Shared Services”). In accordance with service level agreements, WilService AS delivers in-house services such as canteen, post, switchboard and rent of office facilities, Wilhelmsen Accounting Services delivers accounting services and Maritime Services delivers IT services to WWH. Generally, Shared Services are priced using a cost plus 5% margin calculation, in accordance with the principles set out in the OECD Transfer Pricing Guidelines and are delivered according to agreements that are renewed annually. NOK thousand Note 2018 2017 OPERATING REVENUE FROM GROUP COMPANIES WalWil group Maritime Services Holding and Investments Operating revenue from group companies OPERATING EXPENSES TO GROUP COMPANIES Maritime Services Holding and Investments Operating expenses to group companies FINANCIAL INCOME FROM GROUP COMPANIES Maritime Services Holding and Investments Financial income from group companies ACCOUNT RECEIVABLES AND ACCOUNT PAYABLES WITH GROUP COMPANIES Account receivables Maritime Services Holding and Investments Supply Services Account receivables from group companies Account payables Maritime Services Holding and Investments Account payables to group companies 4 912 13 083 3 814 21 809 (3 547) (14 715) (18 262) 425 000 49 860 474 860 9 406 1 333 272 4 130 54 312 4 320 62 762 (5 801) (17 243) (23 044) 227 279 227 279 264 346 922 11 010 265 269 (1 844) (1 844) (1 455) (1 012) (2 467) 1 1 1 6 6 102 Parent companyAccounts and notesWilh. Wilhelmsen Holding ASA Annual Report 2018 Cont. note 14 Related party transaction NOK thousand Note 2018 2017 NON CURRENT LOAN TO GROUP COMPANIES Holding and Investments* Non current loan to group companies 6 27 000 27 000 7 613 7 613 *Loan to WilService (Holding and Investments segment) was provided at commercially reasonable market terms (average margins 3%). Interest rates are based on floating LIBOR-rates. CURRENT LOAN TO GROUP COMPANIES Holding and Investments* Current loan to group companies 6 85 760 85 760 0 *Loan to Wilh.Wilhelmsen Holding Invest AS (Holding and Investments segment) was provided at commercially reasonable market terms (average margins 3%). Interest rates are based on floating LIBOR-rates. Note 15 Events after the balance sheet date No material events occurred between the balance sheet date and the date when the accounts were presented which provide new information about conditions prevailing on the balance sheet date. 103 Parent companyAccounts and notesWilh. Wilhelmsen Holding ASA Annual Report 2018 Note 16 Statement on the remuneration for senior executives The statement on senior executives’ remuneration has been prepared in accordance with the Norwegian Public Limited Companies Act, the Norwegian Accounting Act and the Norwegian Code of Practice and is adopted by the board of directors. a long-term incentive scheme running over a four-year period, based on the development of the group’s value adjusted equity. The scheme aims to increase alignment with the shareholders’ interests and how senior executives executes strategy and develop value for the group and its shareholders. For the purpose of this statement, senior executives include Thomas Wilhelmsen (group CEO), Christian Berg (group CFO), Jan Eyvin Wang (senior vice president industrial investments), Benedicte Teigen Gude (senior vice president HR and communications), Bjørge Grimholt (CEO and president Ships Service), Carl Schou (CEO and president Ship Management), and John Stangeland (CEO of NorSea Group). The following guidelines are applicable for 2019. General principles for the remuneration of senior executives The remuneration of the group CEO is determined by the board. Remuneration of other senior executives is determined administratively based on frameworks specified by the board. Remuneration shall be at a competitive level in the relevant labour market(s). It should be a tool for the board to retain and attract required leadership and motivational for the individual executive. The total remuneration package shall therefore consist of fixed remuneration (basic salary and benefits in kind) and variable, performance-based remuneration (short- and long-term incentive schemes). The remuneration system should be flexible and understandable. The remuneration level shall reflect the complexity and responsibilities of each role and shall consider the group’s breadth of international operations. With most of the positions based in Norway, the board primarily looks to other Norwegian companies operating in an international environment to ensure that remuneration levels are competitive. Fixed salary The main element of the remuneration package shall be the annual base salary. This is normally evaluated once a year in June based on individual performance, achieved results, how the results are achieved, market competitiveness, and local labour market trends. Benefits in kind The senior executives receive benefits in kind that are common for comparable positions. These include newspapers, mobile phone, broadband, insurance, and car salary. Short-term variable remuneration An annual variable pay scheme is a key component in the total reward package and is meant to emphasises the link between performance and pay. It aligns the senior executives with relevant, clear targets derived from the group’s long-term strategy. The variable pay scheme includes a financial target (return of capital employed), a discretionary element and/or an individual/team target. Maximum opportunities for annual payments for senior executives are capped at four to six months’ salary, depending on role. Long-term variable remuneration The senior executives (less the CEO of NorSea Group) also participate in The value adjusted equity is determined using a sum-of-the-parts method: non-listed entities are valued using earnings multiples, earnings multiples less debt and minorities or at net asset value, while listed entities are valued at market price. For the group CEO, maximum annual payment is 100% of base salary. For the remaining, the maximum payment is 50% of base salary. For further details, see note 6 page 52 and note 2 page 90. Pension scheme Pension benefits for senior executives include coverage for old age, disability, spouse and children, and supplement payments by the Norwegian National Insurance system. Pension obligations related to salaries above 12G (NOK 1 161 996) and the option to take early retirement, are insured in the case of group CEO. Group CEO has the right to a life-long pension constituting 50% of his annual salary retirement above 12G. The group CFO has a special agreement to retire at the age of 67, with a gross compensation equal to 60% of base salary to the age of 70 The agreement includes pensions. The presidents for Ships Service and Ship Management have a defined benefit plan for salary exceeding 12G financed through operations. The remaining executives have a defined contribution plan for salary above 12G. For salary below 12G, they are all a part of the collective agreement. Severance package scheme The group CEO has a severance pay guarantee under which he has the right to receive up to 100% of his annual salary for 24 months after leaving the company because of mergers, substantial changes in ownership, or a decision by the board. After six months’ notice period, possible income during the severance pay period will be deducted by up to 50%. The other senior executives also have arrangements for severance payment beyond redundancy period following departure from the group. Statement on senior executive remuneration in the previous fiscal year Remuneration policy and development for the senior executives in the previous fiscal year built upon the same policies as those described above. For further details regarding the individual remuneration elements, see note 2 concerning pay and other remuneration for senior executives of the parent company and note 6 of the group accounts concerning senior executives of the group. 104 Parent companyAccounts and notesWilh. Wilhelmsen Holding ASA Annual Report 2018 Auditor’s report To the General Meeting of Wilh. Wilhelmsen Holding ASA Independent auditor’s report Report on the Audit of the Financial Statements Opinion We have audited the financial statements of Wilh. Wilhelmsen Holding ASA, which comprise: • The financial statements of the parent company Wilh. Wilhelmsen Holding ASA (the Company), which comprise the balance sheet as at 31 December 2018, the income statement, comprehensive income 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 Wilh. Wilhelmsen Holding ASA and its subsidiaries (the Group), which comprise the balance sheet as at 31 December 2018, the income statement, comprehensive income, consolidated statement of changes in equity and cash flow statement for the year then ended, and notes to the financial statements, including a summary of significant accounting policies. In our opinion: • The financial statements are prepared in accordance with the law and regulations. • The accompanying financial statements give a true and fair view of the financial position of the Company as at 31 December 2018, and its financial performance and its cash flows for the year then ended in accordance with simplified application of international accounting standards according to section 3-9 of the Norwegian Accounting Act. • The accompanying consolidated financial statements give a true and fair view of the financial position of the Group as at 31 December 2018, and its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards as adopted by the EU. 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 Auditor’s Responsibilities for 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. In 2017, we focused on Discontinuing of the operations in the shipping and logistics segment and Completion of a material business combination. These two issues are now resolved and consequently no longer a focus area for our audit. In 2018, an area of focus for the audit has been Revenue from contracts with customers in the Maritime Services and Supply Services segments. We focused on this PricewaterhouseCoopers AS, Postboks 748 Sentrum, NO-0106 Oslo T: 02316, org. no.: 987 009 713 VAT, www.pwc.no State authorised public accountants, members of The Norwegian Institute of Public Accountants, and authorised accounting firm 105 Parent companyAccounts and notesWilh. Wilhelmsen Holding ASA Annual Report 2018 Auditor’s report Auditors Report - Wilh. Wilhelmsen Holding ASA issue due to material amounts, the inherent complexity in handling many revenue streams, and the use of judgement in some of the areas within revenue. Key Audit Matter How our audit addressed the Key Audit Matter Revenue from contracts with customers This has been an area of focus for the audit due to the amounts involved. Revenue from contracts with customers in the Maritime Services and Supply Services segments was USD 581 million and USD 283 million respectively for the year ended December 31, 2018. Further, there is an inherent risk of errors when a business handles multiple revenue streams, where each of them consists of large numbers of transactions that adds up to material amounts. The inherent risk of errors increase from the complexity that sometimes accompany the implementation of a new accounting standard; in this case IFRS 15 – Revenue from contracts with customers. The implementation of IFRS 15 required management to use judgement, particularly to determine the transaction price and to decide when performance obligations is satisfied. Furthermore, we focused on management’s assessment of certain contracts where judgements was an integral part of the assessment of whether Wilh. Wilhelmsen Holding ASA acts as the agent or the principal. We refer to note 3 Revenue from contracts with customers, where management explain the various revenue streams and how they are accounted for under IFRS 15 - Revenue from contracts with customers. Here, management also explain the different performance obligations, measurement of the transaction price and whether income should be recognized net or gross. We obtained and studied managements’ accounting policy to assess it against relevant IFRSs. We discussed with management how the specific requirements of the standards, in particular IFRS 15 – Revenue from contracts with customers, were met. Our discussions included the impact the implementation and adoption of IFRS 15 had on accounting practices and policies within the Maritime Services and Supply Services Segments. We found that we were able to agree with management about their accounting policies and that their assessment of implementations effects were reasonable. To assess the accuracy of their practices, we tested, on a sample basis, each revenue stream towards information such as contract terms, invoices and bank payments. We found that the revenue was recorded accurate and in accordance with the underlying documentation. Further, to assess the determined transaction prices, we obtained an understanding of the price for services and products, including discounts and customer bonus through interviews with management, walkthroughs and review of process descriptions. In addition, we obtained and read a selection of customer contracts to understand whether the determined prices was in accordance with the contract terms. We found no significant deviations in management's assessments. Through interviews with management and review of a selection of sales documentation such as customer contracts and invoices; we obtained an understanding of the assumptions managements assessed to decide on when the performance obligations was satisfied. We concluded that management’s assumptions were reasonable. To assess whether the accounting should reflect whether the company acted as an agent or a principal, we obtained and read a selection of contracts. We considered the specific contract terms, and held them up against the requirements in IFRS 15 and discussed with management and challenged their assessment. The accounting is arranged to reflect that Wilh. Wilhelmsen Holding ASA is an agent. We found management’s (2) 106 Parent companyAccounts and notesWilh. Wilhelmsen Holding ASA Annual Report 2018 Auditor’s report Auditors Report - Wilh. Wilhelmsen Holding ASA assessment to be appropriate. We evaluated the appropriateness of the related disclosures in the accounting policies and note 3 to the financial statements for the Group to the requirements of the applicable financial reporting framework, IFRS. We found that the disclosure appropriately explained the revenue from contracts with customers. 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. 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 simplified application of international accounting standards according to the Norwegian Accounting Act section 3-9, 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. In preparing the financial statements, management is responsible for assessing the Company’s and the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so. Auditor’s Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with laws, regulations, and auditing standards and practices generally accepted in Norway, including ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. (3) 107 Parent companyAccounts and notesWilh. Wilhelmsen Holding ASA Annual Report 2018 Auditor’s report Auditors Report - Wilh. Wilhelmsen Holding ASA As part of an audit in accordance with laws, regulations, and auditing standards and practices generally accepted in Norway, including ISAs, we exercise professional judgment and maintain professional scepticism throughout the audit. We also: • identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error. We design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. • obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's or the Group's internal control. • • evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company and the Group's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Company and the Group to cease to continue as a going concern. • evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. • obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial 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 key audit matters. We describe these matters in our auditor’s report unless law 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. (4) 108 Parent companyAccounts and notesWilh. Wilhelmsen Holding ASA Annual Report 2018 Auditor’s report Auditors Report - Wilh. Wilhelmsen Holding ASA Report on Other Legal and Regulatory Requirements Opinion on the Board of Directors’ report Based on our audit of the financial statements as described above, it is our opinion that the information presented in the Board of Directors’ report and in the reports on Corporate Governance and Sustainability 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 registration and documentation of the Company’s accounting information in accordance with the law and bookkeeping standards and practices generally accepted in Norway. Oslo, 14 March 2019 PricewaterhouseCoopers AS Thomas Fraurud State Authorised Public Accountant (5) 109 Parent companyAccounts and notesWilh. Wilhelmsen Holding ASA Annual Report 2018 Responsibility statement We confirm, to the best of our knowledge, that the financial statements for the period 1 January to 31 December 2018 have been prepared in accordance with current applicable accounting standards and give a true and fair view of the assets, liabilities, financial position and profit for the entity and the group taken as a whole. We also confirm that the Board of Directors’ Report includes a true and fair review of the development and performance of the business and the position of the entity and the group, together with a description of the principal risks and uncertainties facing the entity and the group. Lysaker, 14 March 2019 The board of directors of Wilh. Wilhelmsen Holding ASA Diderik Schnitler chair Trond Ø. Westlie Carl Erik Steen Irene Waage Basili Cathrine Løvenskiold Wilhelmsen Thomas Wilhelmsen group CEO 110 Parent companyAccounts and notesWilh. Wilhelmsen Holding ASA Annual Report 2018Ethics and anti-corruption Our various stakeholders depend on us being transparent and compliant. Nothing less, nothing more. We do the right things, the right way. It is simply how we do business. We expect the same of our employees as we do of our customers, suppliers and other business partners. C o r p o r a t e g o v e r n a n c e Corporate governance A summary of the corporate governance report for 2018 Corporate governance comply or explain overview Section Topic Deviation Reference in this report 01. 02. 03. 04. 05. Implementation and reporting on corporate governance Business Equity and dividends Equal treatment of shareholders and transactions with close associates Shares and negotiability None None None None None 06. General meetings There is no requirement for the full board to attend the general meeting, and the board chair opens and directs the meeting 07. 08. 09. 10. 11. 12. 13. 14. 15. Nomination committee None Board of directors: composition and independence The board chooses its own chair The work of the board of directors The full board serves as audit committee Risk management and internal control Remuneration of the board of directors Remuneration of executive personnel Information and communications Take-overs Auditor None None None None None None Page 115 Page 115 Page 115 Page 116 Page 116 Page 116 Page 117 Page 117 Page 118 Page 118 Page 118 Page 119 Page 119 Page 119 Page 119 Reducing risk and improving accountability We, as the board of Wilh. Wilhelmsen Holding ASA, are responsible for ensuring that the company is directed and controlled in an appropriate and satisfactory manner according to existing laws and regulations. The Corporate governance report for 2018 is, amongst others, based on the requirements of the Norwegian Accounting Act and the recommendations of the Norwegian Code of Practice for Corporate Governance. We believe sound corporate governance is important because it: • reduces risk • contributes to the greatest possible value creation over time in the best interests of the company’s shareholders, employees and other stakeholders • ensures fair treatment of all our stakeholders • ensures easy access to timely, accurate and relevant information about the company’s business • strengthens the confidence in the company and increases the company’s attractiveness. We, as the board, assess the company’s corporate governance to be of high standard, and discussed and approved the report on 14 March 2019. All the directors were present at the meeting. Diderik Schnitler Chair of the board 114 GroupCorporate governanceWilh. Wilhelmsen Holding ASA Annual Report 2018The board’s corporate governance report for 2018 1. Implementation and reporting on corporate governance Wilh. Wilhelmsen Holding ASA (Wilhelmsen) is a public limited company organised under Norwegian law. Listed on a regulated market (Oslo Børs), the company is subject to general Norwegian securities’ legislation and Oslo Børs’ regulations. This corporate governance report follows the requirements of the Norwegian Accounting Act (§3-3b) and the recommendations in the Norwegian Code of Practice for Corporate Governance (Code of Practice, dated 17 October 2018). The Code of Practice includes provisions and guidance that in part elaborate on existing legislation and in part cover areas not addressed by legislation. The structure of this report is aligned with the structure of the Code of Practice. This report is published as part of the company’s annual report and available on the company’s website. Comply or explain principle The corporate governance report follows the “comply and explain” principles. Where Wilhelmsen does not fully comply with the Code of Practice, an explanation of the reason for the deviation and what solution the company has selected has been included. Deviations from the Code of Practice: None 2. Business Business activities According to Wilhelmsen’s Articles of association, the company’s objective is to engage in shipping, maritime services, aviation, industry, commerce, finance business, brokerage, agencies and forwarding, to own or manage real estate, and to run business related thereto or associated therewith. While present business activities mainly are within maritime services, shipping and related logistics services, the board finds it appropriate to maintain a broad objective to allow for a wider range of activities and investments. Strategy and risk The board has a yearly strategy review of the business portfolio and ownership strategy for main activities and investments, supplemented by selective business reviews on a regular basis. The board further evaluate the risk profile on a quarterly basis. A summary of the company’s strategic direction and a risk review is included in the directors’ report for 2018. Stakeholder interests Wilhelmsen is in regular dialogue with key stakeholders engaged in issues relating to the maritime industry and the corporate activities of the group. A description of various stakeholder interests and how this may impact Wilhelmsen is described in the group’s sustainability report available on the company’s website. Sustainable business model A responsible business model is necessary to be sustainable. Acknowledging that the company’s activities affect its surroundings, the company issues an annual Sustainability report. The report is based on the requirements stated in the GRI Sustainability Reporting Standards (GRI Standards) and the ten principles of the UN Global Compact. The report, which also describes how the company actively contributes to reaching the Sustainable Development Goals, is available on the company’s website. The Sustainability report describes how Wilhelmsen combines long-term profitability with emphasis on ethical business conduct including respect for human rights, the natural environment and the societies in which the company operates. The report includes how the company addresses employee rights and working environment, human rights, health and safety issues, the external environment, prevention of corruption and how the company contributes to communities in which it operates. Deviations from the Code of Practice: None 3. Equity and dividends Capital structure The board considers it appropriate for the parent company to maintain a low debt profile, with group business activities primarily financed on a non-recourse basis by the relevant subsidiary. This is consistent with the holding nature of the parent company. Dividend The dividend policy states that “the goal is to provide shareholders with a high return over time through a combination of value creation for the company’s shares and payment of dividend. The objective is to have consistent yearly dividend paid twice annually”. Wilhelmsen has a history of paying dividend twice a year, with total consideration varying 115 GroupCorporate governanceWilh. Wilhelmsen Holding ASA Annual Report 2018between NOK 5.00 and NOK 5.50 per share for the five-year period 2014-18. The first dividend has varied been NOK 3.00 and NOK 3.50 per share while the second dividend has been between NOK 1.50 and NOK 2.00 per share. In 2018, the company paid a total dividend of NOK 5.50 per share, split on NOK 3.50 and NOK 2.00 as first and second dividend respectively. To be able to continue the practice of dividend paid twice annually, the board is proposing to the annual shareholder meeting scheduled for 30 April 2019 a first dividend of NOK 2.50, and that the board is authorised to pay additional dividend of up to NOK 2.50 per share. Mandate to increase share capital or purchase own shares At the 26 April 2018 annual general meeting, the board proposed and was granted an authorisation to acquire shares in the company with a nominal value of up to NOK 92 807 648, equivalent to 10% of the current share capital. The reason for the proposal was that it enables the adjustment of capital structure and balance to the company’s needs, as framework conditions for the industry change. The board has not used the authority during the period up to date of this report, and has made a proposal to the next annual general meeting to be held on 30 April 2019 for a renewal of the mandate for a period of one year. The board has not requested, and the general meeting has as such not granted, any board mandate to increase the company’s share capital. Deviations from the code: None 4. Equal treatment of shareholders and transactions with close associates Transactions in own shares Any transactions the company carries out in its own shares are carried out through the stock exchange and at prevailing stock exchange prices, or in such other ways which will ensure equal treatment of all shareholders. Transaction with close associates Any transactions taking place between a principal shareholder or close associates and the company will apply prices and other terms and conditions common for such agreements. A similar principle is used for transactions between companies within the group. In the event of material transactions, the company will seek independent valuation. Relevant transactions will be publicly disclosed to seek transparency. The board instruction includes procedures for how to handle any situations where a board member has a personal or financial interest related to a board matter. Deviations from the Code of Practice: None 5. Freely negotiable shares Listed on the Oslo børs with the tickers “WWI” and “WWIB” for the Class A and Class B shares respectively, all shares are freely negotiable. There are no restrictions on negotiability in the company’s Articles of associations. Deviations from the Code of Practice: None 6. General meetings Matters to be dealt with and decided by the annual general meeting and procedures related to general meetings are outlined in article 7 of the Articles of associations. The annual general meeting is normally held late April or early May. In addition, extraordinary general meetings may be convened if required. Shareholders with Norwegian VPS accounts or known addresses are notified electronically through the Norwegian VPS system or by mail no later than 21 days prior to a general meeting. Proposed resolutions, together with relevant supporting documents are published on the Wilhelmsen website no later than 21 days prior to the general meeting. For annual general meetings, this include the annual report (including directors report, annual accounts and the auditor’s report), statement on the remuneration for senior executives, statement on corporate governance, and the nomination committee report. Shareholders may, upon request, receive hard copies of the material. Shareholders may attend the general meeting in person, nominate a proxy, or vote in advance. The vote may be through electronic communication. The attendance form, proxy nomination, or advance vote must be received by the company’s registrar no later than two working days before the meeting takes place. As a general rule, shareholders may vote on each individual matter, including individual candidates nominated for election. The board chair, nomination committee chair, group CEO, group CFO, and auditor will 116 GroupCorporate governanceWilh. Wilhelmsen Holding ASA Annual Report 2018normally attend the annual general meeting, together with other members of the board and management if available. There is no requirement for the full board to attend a general meeting. The board chair opens and directs the general meeting in accordance with Article 7 of the Articles of association. The minutes of general meetings are published on the Oslo Børs news service and available on the company’s website. Deviations from the Code of Practice: There is no requirement for the full board to attend the general meeting, and the board chair opens and directs the meeting 7. Nomination committee The work of the Wilhelmsen nomination committee follows the “Guidelines for the duties of the nomination committee” approved by the general meeting on 28 April 2011. A revised guideline has been proposed for approval by the general meeting scheduled for 30 April 2019, together with a proposal to amend the Articles of association to include the role of the nomination committee. The nomination committee consists of the following members: Deviations from the Code of Practice: None (subject approval of proposed changes to the Articles of association by the annual general meeting) 8. Board of directors: composition and independence According to article 5 of the Articles of association, the company’s board is made up of five to seven members and up to three deputy members. It chooses its own chair. The composition of the board is made to ensure it meets the company’s need for expertise, capacity and diversity. Focus is also on ensuring that the board can function effectively as a collegiate body. Information on the background and experience of the individual board members are available on the company’s website. During 2018, the board consisted of the following members: Board member Last time elected Period Elected to Diderik Schnitler (chair) 27.04.2017 2 years 2019 Carl Erik Steen 27.04.2017 2 years 2019 Cathrine Løvenskiold Wilhelmsen 27.04.2017 2 years 2019 Irene Waage Basili* 26.04.2018 2 years 2018/20 Nomination committee member Wilhelm Wilhelmsen (chair) Elected Period Elected to Trond Westli** 26.04.2018 2 years 2020 26.04.2018 2 years 2020 Odd Rune Austgulen*** 03.05.2016 2 years 2018 Frederik Selvaag 26.04.2018 2 years 2020 Jan Gunnar Hartvig 26.04.2018 2 years 2020 * Re-elected at the 26.04.2018 Annual general meeting ** Elected at the 26.04.2018 Annual general meeting *** Resigned from the board at the 26.04.2018 annual general meeting Wilhelm Wilhelmsen is related to the group CEO and acts as an advisor to the board. The other nomination committee members are independent of the board and executive employees. As part of the nomination process, the committee has contact with relevant stakeholders. A revised procedure has been established and published on the company website, whereby shareholders may propose candidates for election. The board does not include executive employees, and all board members are independent of the executive management. Cathrine Løvenskiold Wilhelmsen is related to the Wilhelmsen family, which is the main shareholder group of the company. All other board members are independent of the main shareholder group. The group CEO and group CFO are normally present at board meetings, as is other executives depending on agenda and issues to be discussed. The nomination committee provides its recommendation to the annual general meeting in form of a report, which among other includes justification of individual candidates. The board instruction encourages board members to own shares in the company. Deviations from the Code of Practice: The board chooses its own chair 117 GroupCorporate governanceWilh. Wilhelmsen Holding ASA Annual Report 20189. The work of the board of directors Board instruction and work of the board The board has issued instructions for its own work. The instruction reflects the role, responsibilities, and work procedures of the board as laid down in the Norwegian Public Companies Act. This includes procedures for how to handle any situations where a board member has a personal or financial interest related to a board matter. The board evaluates its performance and expertise on an annual basis. A summary of the evaluation is provided as input to the nomination committee. During 2018, the board held eight meetings, in addition to a full day strategy session. According to article 5 of the Articles of association, “the full board shall jointly serve as the company’s audit committee.” As the Wilhelmsen board consists of five members, this is regarded the most effective solution. For the same reason, the board has not deemed it desirable to have a separate remuneration committee, nor other separate committees to follow up on specific issues. Executive committee for industrial democracy Wilhelmsen maintains an executive committee for industrial democracy in foreign trade shipping (“Rederistyret”), securing the interest of the employees related to the board. The committee meet prior to a corresponding board meeting. The present committee consists of seven members, elected for a period of four years from 2018. Five members were elected by and among the employees and two were appointed by the management. Each employee representative has a personal deputy, and the management representatives have a joint deputy. One of the management representatives is the group CEO. During 2018, the committee held three meetings. Executive management instructions The duties, responsibilities and authority of the group CEO follows instructions made by the board and the Norwegian Public Companies Act. The instructions made by the board also include authorities given to other executive employees. The executive management of the Wilhelmsen group includes a group management team and the board and management of subsidiaries. Members of the group management team chairs or sits on the board of main subsidiaries and companies where Wilhelmsen has material ownership interests and/or a shareholder agreement which defines board composition. Management of subsidiaries are based on the Wilhelmsen group policies and governance principles. Deviations from the Code of Practice: The full board serves as audit committee. 10. Risk management and internal control The board believes that the company’s internal control and risk management are sound and appropriate given the extent and nature of the company’s activities. The system contributes to sound control characterised by integrity and ethical attitudes throughout the organisation. Governing documents, the code of conduct, policies, policy descriptions and procedures are documented and electronically available to the company’s employees through the company’s global integrated management system. Various internal control activities give management assurance that the internal control of financial systems, group policies and subsidiary boards are working adequately and according to management’s expectations. The group has a global whistleblowing system including procedures and channels for giving notice to the company about potential non- compliance. The whistleblowing channel is available for internal and external parties. The board reviews the company’s risk matrix on a quarterly basis and the internal control arrangements at least once a year. Financial reporting Financial reporting is covered by the company’s policies, policy descriptions, and procedures. Financial statements are prepared monthly, and Wilhelmsen reports to the market on a quarterly basis. The board performs an internal financial audit review prior to the release of quarterly results, and when otherwise deemed required. Deviations from the Code of Practice: None 11. Remuneration of the board of directors Remuneration of directors is determined by the annual general meeting and is not dependent upon the company’s results. The fee reflects the responsibilities of the board, its expertise, the amount of time devoted to 118 GroupCorporate governanceWilh. Wilhelmsen Holding ASA Annual Report 2018over bid for the company’s shares, the board will undertake an evaluation of the proposed bid terms and provide a recommendation as to whether shareholders should or should not accept the bid. The recommendation will state whether the boards’ evaluation is unanimous and the reasons for any dissent. Deviations from the Code of Practice: None 15. Auditor The auditor for Wilhelmsen is PricewaterhouseCoopers AS. The key features of the external audit plan are reviewed by the board on an annual basis, with the auditor being present if deemed required. The auditor is also invited to attend the meeting where the board deal with the annual accounts (preliminary and/or final accounts), and at other occasions where the board so requests. Finally, the board has a yearly meeting with the auditor without the presence of management. The board has established the principle that use of the auditor for services other than audit shall be limited. The fee to external auditors, broken down by statutory work, other assurance services, tax services, and other assistance, is specified in note 6 to the Wilhelmsen group accounts and note 2 to the parent company accounts. Deviations from the Code of Practice: None its work and the complexity of the company’s businesses. No director holds share options in the company. In 2018, none of the directors performed assignments for the company other than serving on the board of the company. An overview of the directors’ remuneration is specified in note 6 to Wilhelmsen group accounts and note 2 to the parent company accounts, of which the latter includes an overview of shares in Wilhelmsen held by the individual director. Deviations from the Code of Practice: None 12. Remuneration of executive personnel A statement on the remuneration for senior executives is provided in note 16 to the Wilhelmsen parent company accounts. An advisory vote is to be held at the annual general meeting concerning the statement. The remuneration of senior executives is further detailed in note 6 to the group accounts and note 2 to the parent company accounts. Deviations from the Code of Practice: None 13. Information and communication The board has established an investor relations policy which is published on the company’s website. The policy complies with the Oslo Børs Code of Practice for IR of 1 March 2017. According to the policy, Wilhelmsen will publish interim reports each quarter in addition to half-year and annual reports. In 2018, two of the quarterly reports were covered through webcast presentations which included a Q&A session. The investor relations policy further states that the main source of information about the Wilhelmsen group is the Wilhelmsen website, including financial information, governing elements and company news. Deviations from the Code of Practice: None 14. Takeovers The board will handle any possible take-over bid in accordance with Norwegian corporate law. There are no defence mechanisms against take-over bids in the Articles of association, and the company has not implements any measures to limit the opportunity to acquire shares in the company. In the event of a take- 119 GroupCorporate governanceWilh. Wilhelmsen Holding ASA Annual Report 2018Group mangement team From left: Benedicte Teigen Gude (SVP HR and communications) Thomas Wilhelmsen (group CEO) Jan Eyvin Wang (SVP Industrial investments) Christian Berg (group CFO) 120 GroupCorporate governanceWilh. Wilhelmsen Holding ASA Annual Report 2018121 GroupCorporate governanceWilh. Wilhelmsen Holding ASA Annual Report 2018Innovation We need to pursue initiatives aimed at building and meeting our stakeholders’ ever-changing needs. The maritime industry finds itself amid a perfect storm of economic stresses, regulatory changes and technological disruption. The changes needed to meet the challenges will not come from what worked yesterday, but rather from cleverly leveraging the potential of technology and digitalisation. We shape the maritime industry. C o r p o r a t e s t r u c t u r e Corporate structure As of 31 December 2018 WWH group* Wilh. Wilhelmsen Holding ASA, Norway Wallenius Wilhelmsen ASA, Norway 37.82% Treasure ASA, Norway 72.73% Wilhelmsen Maritime Services AS, Norway * See note 2, group accounts on page 42, for addition information Holding and investments segment Wilh. Wilhelmsen Holding ASA, Norway Wilh. Wilhelmsen Holding Invest AS, Norway WilService AS, Norway Wilhelmsen Accounting Services AS, Norway Wilhelmsen GRC Sdn.Bhd. WilNor Governmental Services AS, Norway 51% Wallenius Wilhelmsen ASA 37.82% Treasure ASA 72.73% Wilh. Wilhelmsen Holding Invest AS Wilhelmsen GRC Sdn.Bhd. WilService AS, Norway Wilhelmsen Accounting Services AS, Norway Den Norske Amerikalinje AS Hyundai Glovis Ltd 12.04% Wilh. Wilhelmsen Holding Invest Malta Ltd Raa LabsAS 50% Massterly AS 50% Denholm Port Services Ltd. 40% Dolittle AS 50% Unless otherwise stated, the company is wholly-owned. 124 GroupCorporate structureWilh. Wilhelmsen Holding ASA Annual Report 2018Supply services segment Wilh. Wilhelmsen Holding ASA, Norway WilNor Governmental Services AS 51% Wilh. Wilhelmsen Holding Invest AS NorSea Group AS 75.15% For group company list sorted by business area see below list. cont. Supply services segment Company name Norsea Group AS Companies owned by NorSea Group AS Country Business office Share NorSea Group Property AS NorSea Group Operations AS NorSea Group DENMARK A/S NorSea Group UK Ltd NorSea Group Australia PTY Ltd Wilnor Governmental Services AS NSG Wind A/S Norsea 123 Ltd. Companies owned through subsidiaries Vestbase AS Vestbase Eiendom AS Averøy Eiendom AS Orvikan Eiendom AS Stordbase AS NorSea AS Maritime Logistic Services AS Viking Fighter AS NorSea Eiendom Dusavik AS NorSea Eiendom Tananger AS NorSea Tananger 107 AS Tananger Eiendom AS Nsg Digital As Øer Energy Ltd Øer GMBH Øer A/S Øer BV Norway Norway Denmark Scotland Australia Norway Denmark Scotland Norway Norway Norway Norway Norway Norway Norway Norway Norway Norway Norway Norway Norway Germany Denmark Netherland Tananger Tananger Esbjerg Aberdeen Perth Lysaker Aarhus Aberdeen Kristiansund Kristiansund Kristiansund Kristiansund Stord Stavanger Stavanger Tananger Stavanger Tananger Tananger Tananger Stavanger UK Germany Denmark Netherland 100.00% 100.00% 100.00% 100.00% 100.00% 49.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 125 GroupCorporate structureWilh. Wilhelmsen Holding ASA Annual Report 2018cont. Supply services segment Company name Country Business office Companies owned through subsidiaries Polarbase Eiendom AS Polarbase AS Maritime Waste Management AS * Norbase AS Mid-Nor Yard Service AS *** NSG Maritime AS Westport AS Dusavik Utvikling AS ***** Coast Center Base AS SørSea AS Polarlift AS KS Coast Center Base Risavika Havn AS ** Risavika Eiendom AS Bring Logistics Polarbase AS Eldøyane Næringspark AS Risavika Havnering 14 AS Strandparken Holding AS *** Logiteam AS****** CCB Subsea AS******* Hammerfest Næringsinvest AS Norway Norway Norway Norway Norway Norway Norway Norway Norway Norway Norway Norway Norway Norway Norway Norway Norway Norway Norway Norway Norway Hammerfest Hammerfest Kristiansund Harstad Kristiansund Stavanger Tananger Stavanger Fjell Tananger Hammerfest Fjell Tananger Tananger Hammerfest Stord Stavanger Hammerfest Kokstad Aagotnes Hammerfest Share 95.62% 94.96% 75.00% 75.00% 75.00% 73.00% 66.66% 50.10% 50.00% 50.00% 50.00% 49.75% 42.82% 42.00% 41.00% 37.91% 33.33% 33.07% 17.00% 17.00% 32.26% * NorSea Group Operations AS owns 50% of Maritime Waste Management AS, remaining 50% is owned by Coast Center Base AS. NorSea Group Operations AS owns 50% of Coast Center Base AS. Total direct and indirect NorSea Group AS owns 75% of Maritime Waste Management AS. ** NorSea Eiendom Tananger AS owns 34% of Risavika Havn AS. NorSea Eiendom Tananger AS owns 42% of Risavika Eiendom AS which owns 21% of Risavika Havn AS. Total direct and indirect NorSea Group AS owns 42.82% of Risavika Havn AS. *** Polarbase Eiendom AS owns 25% of Strandparken Holding AS. Polarbase Eiendom AS owns 32.26% of Hammerfest Næringsinvest AS. Hammerfest Næringsinvest AS owns 25% of Strandparken Holding AS. Total direct and indirect NorSea Group AS owns 33.07% of Strandparken Holding AS. **** Vestbase Eiendom AS owns 50% of Mid-Nor Yard Services AS, remaining 50% is owned by Coast Center Base AS. NorSea Group Operations owns 50% of Coast Center Base AS. Total direct and indirect NorSea Group AS owns 75% of Mid-Nor Yard Services AS. ***** NSG own 40% of Dusavik Utvikling AS. K2 owns 60% of Dusavik Utvikling. NorSea Eiendom dusavik owns 16.83% of K2. ****** NSG Operation 17%, CCB 51%. ******* NSG Operation 17%, CCB 18%, Logiteam 51%. Investments in subsidiaries and associates are measured according to cost method in the financial statements. In the consolidated accounts associated companies are measured according to the equity method. Maritime services segment Wilhelmsen Maritime Services AS, Norway Wilhelmsen Ships Service Wilhelmsen Ships Service AS, Norway Wilhelmsen Ship Management Wilhelmsen Ship Management Holding Ltd, Hong Kong For group company list sorted by business areas see below list. Wilhelmsen Insurance Services AS Business area Legal entity Unless otherwise stated, the company is wholly-owned. 126 GroupCorporate structureWilh. Wilhelmsen Holding ASA Annual Report 2018 cont. Maritime services segment Company name Wilhelmsen Maritime Services Wilhelmsen Insurance Services AS Wilhelmsen Ship Management Wilhelmsen Ship Management Serviços Marítimos do Brasil Ltda Wilhelmsen Marine Personnel d.o.o. BWW LPG Limited Barklav (Hong Kong) Limited Wilhelmsen Marine Personnel (Hong Kong) Ltd Wilhelmsen Ship Management Holding Limited Wilhelmsen Ship Management Limited WSM Global Services Limited Wilhelmsen Ship Management (India) Private Limited BWW LPG Sdn Bhd Wilhelmsen Ship Management Sdn Bhd Wilhelmsen Ship Management Services Sdn Bhd Diana Wilhelmsen Management Limited Unicorn Shipping Services Limited Barber Moss Ship Management AS Wilhelmsen Marine Personnel (Norway) AS Wilhelmsen Ship Management (Norway) AS OOPS (Panama) SA Wilhelmsen-Smith Bell Manning Inc Wilhelmsen Marine Personnel Sp z.o.o. Wilhelmsen Ship Management Korea Ltd Barklav SRL Wilhelmsen Marine Personnel Novorossiysk Ltd Wilhelmsen Ship Management Singapore Pte Ltd Wilhelmsen Marine Personnel (Ukraine) Ltd Wilhelmsen Ship Management UK Limited Wilhelmsen Ship Management (USA) Inc Wilhelmsen Ships Service Wilhelmsen Ships Service Algeria SPA Wilhelmsen Ships Service Argentina SA New Wave Maritime Services Pty Ltd Wilhelmsen Ships Service Pty Limited WLB Shipping Pty Ltd WWHI Property Australia Pty Ltd Almoayed Wilhelmsen Ltd Wilhelmsen Ships Service NV Wilhelmsen Ships Service do Brasil Ltda Wilhelmsen Ships Service Ltd Wilhelmsen Ships Service Inc Wilhelmsen Ships Service Agencia Maritima SA Wilhelmsen Ships Service (Chile) S.A. Wilhelmsen Huayang Ships Service (Beijing) Co Ltd Wilhelmsen Huayang Ships Service (Shanghai) Co Ltd Wilhelmsen Ships Service Co Ltd Wilhelmsen Ships Service Colombia SAS Wilhelmsen Ships Service Cote d'Ivoire SARL Wilhelmsen Ships Service Cyprus Ltd Wilhelmsen Ships Service A/S Wilhelmsen Ships Service Ecuador SA Barwil Arabia Shipping Agencies SAE Barwil Egytrans Shipping Agencies SAE Scan Arabia Shipping Agencies SAE Wilhelmsen Ships Services LLC (Egypt) Country Norway Brazil Croatia Hong Kong Hong Kong Hong Kong Hong Kong Hong Kong Hong Kong India Malaysia Malaysia Malaysia Marshall Islands Mauritius Norway Norway Norway Panama Philippines Poland Republic of Korea Romania Russia Singapore Ukraine United Kingdom United States Algeria Argentina Australia Australia Australia Australia Bahrain Belgium Brazil Bulgaria Canada Chile Chile China China China Colombia Cote d'Ivoire Cyprus Denmark Ecuador Egypt Egypt Egypt Egypt Ownership % 100.00% 100.00% 100.00% 49.00% 50.00% 100.00% 100.00% 100.00% 100.00% 100.00% 49.00% 100.00% 100.00% 50.00% 79.00% 100.00% 100.00% 100.00% 100.00% 50.00% * 100.00% 100.00% 50.00% 100.00% 100.00% 100.00% 100.00% 100.00% 75.00% 100.00% 100.00% 100.00% 100.00% 100.00% 50.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 50.00% 50.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 35.00% 70.00% 70.00% 100.00% 127 GroupCorporate structureWilh. Wilhelmsen Holding ASA Annual Report 2018cont. Maritime services segment Company name Wilhelmsen Ships Service Wilhelmsen Ships Service Oy Ab Auxiliaire Maritime SAS Wilhelmsen Ships Service France SAS Barwil Georgia Ltd Wilhelmsen Ships Service Georgia Ltd Barwil Agencies GmbH Wilhelmsen Ships Service GmbH Wilhelmsen Ships Service (Gibraltar) Limited Wiltrans (Gilbraltar) Limited Barwil Hellas Ltd Uniref SA Wilhelmsen Ships Service Hellas SA Wilhelmsen Ships Service Limited Wilhelmsen Maritime Services Private Limited Barwil For Maritime Services Co Ltd Iraqi-Norwegian Company For Marine Navigation and Maritime Services Ltd Wilhelmsen Ships Service SpA Wilhelmsen Ships Service (Japan) Pte Ltd - Japan Branch Wilhelmsen Ships Service Co Ltd Wilhelmsen Ships Service Ltd Alghanim Barwil Shipping Co-Kutayaba Yusuf Ahmed & Partners WLL Wilhelmsen Ships Services Lebanon S.A.L. Wilhelmsen Freight & Logistics Sdn Bhd Wilhelmsen IT Services Sdn Bhd Wilhelmsen Ships Service Holdings Sdn Bhd Wilhelmsen Ships Service Malaysia Sdn Bhd Wilhelmsen Ships Service Trading Sdn Bhd WSS Global Business Services Sdn Bhd Wilhelmsen Ships Service Malta Limited Unitor de Mexico, SA de CV Wilhelmsen Ships Service (Mozambique), Limitada Wilhelmsen Ships Service (Myanmar) Limited Wilhelmsen Ships Service BV Unitor Ships Service NV Netherland Anthilles Wilh. Wilhelmsen (New Zealand) Limited Wilhelmsen Ships Service Limited Barwil Agencies AS Wilhelmsen Chemicals AS Wilhelmsen IT Services AS Wilhelmsen Ships Service AS Wilhelmsen Towell Co LLC Wilhelmsen Ships Service (Private) Limited Barwil Agencies SA Intertransport Air Logistics SA Lowill SA Scan Cargo Services SA Transcanal Agency SA Wilhelmsen Ships Service SA Wilhelmsen-Smith Bell (Subic) Inc Wilhelmsen-Smith Bell Shipping Inc Wilhelmsen Ships Service Philippines Inc Wilhelmsen Ships Service Polska Sp z.o.o. Wilhelmsen Business Service Center sp. Z.o.o. Argomar-Navegcao e Transportes SA Wilhelmsen Ships Service Portugal, S.A Perez Torres Portugal Lda Wilhelmsen Ship Services Qatar Ltd 128 Country Finland France France Georgia Georgia Germany Germany Gibraltar Gibraltar Greece Greece Greece Hong Kong India Iraq Iraq Italy Japan Japan Kenya Kuwait Lebanon Malaysia Malaysia Malaysia Malaysia Malaysia Malaysia Malta Mexico Mozambique Myanmar Netherlands Netherlands Antilles New Zealand New Zealand Norway Norway Norway Norway Oman Pakistan Panama Panama Panama Panama Panama Panama Philippines Philippines Philippines Poland Poland Portugal Portugal Portugal Qatar Ownership % 100.00% 100.00% 100.00% 50.00% 50.00% 100.00% 100.00% 100.00% 100.00% 60.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 49.00% 49.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 60.00% 49.00% * 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 50.00% 49.00% * 100.00% 100.00% 100.00% 100.00% 100.00% 50.00% 100.00% GroupCorporate structureWilh. Wilhelmsen Holding ASA Annual Report 2018cont. Maritime services segment Company name Country Ownership % Wilhelmsen Ships Service Wilhelmsen Hyopwoon Ships Service Ltd Wilhelmsen Ship Services Co Ltd Barwil Star Agencies SRL Wilhelmsen Ships Service OOO Limited Liability Company "Wilhelmsen Marine Products" Binzagr Barwil Maritime Transport Co Ltd Wilhelmsen Ships Service Senegal SUARL Unitor Cylinder Pte Ltd Wilhelmsen Ships Service (Japan) Pte Ltd Wilhelmsen Ships Service (S) Pte Ltd Wilhelmsen Global Husbandry Services Pte. Ltd. Timm Slovakia s.r.o Barwil (South Africa) Pty Ltd Krew-Barwil (Pty) Ltd Wilhelmsen Ships Services (Pty) Ltd Wilhelmsen Ships Services South Africa (Pty) Ltd Wilhelmsen Ships Service Canarias SA Wilhelmsen Ships Service Spain SA Wilhelmsen Meridian Navigation Ltd Ocean Shipping Co. Ltd. Alarbab For Shipping Co. Ltd Wilhelmsen Ships Service AB Wilhelmsen Ships Service Inc Wilhelmsen Ship Services Ltd Wilhelmsen Ships Service (Thailand) Ltd Wilhelmsen Denizcilik Hizmetleri Ltd Sirketi Wilhelmsen Lojistick Hizmetleri Ltd Sirketi Wilhelmsen Ships Service Ukraine Ltd Barwil Abu Dhabi Ruwais LLC Barwil Dubai LLC Wilhelmsen Ship Services LLC Triangle Shipping Agencies LLC Wilhelmsen Ships Service AS (Dubai Branch) Wilhelmsen Maritime Services JAFZA Wilhelmsen Ships Service (LLC) Wilhelmsen Ships Service Limited Wilhelmsen Ships Service Inc Unitor Holding Inc. Wilhelmsen Sunnytrans Co Ltd International Shipping Co Ltd * Additional profit share agreement Republic of Korea Republic of Korea Romania Russia Russia Saudi Arabia Senegal Singapore Singapore Singapore Singapore Slovakia South Africa South Africa South Africa South Africa Spain Spain Sri Lanka Sudan Sudan Sweden Taiwan Tanzania Thailand Turkey Turkey Ukraine United Arab Emirates United Arab Emirates United Arab Emirates United Arab Emirates United Arab Emirates United Arab Emirates United Arab Emirates United Kingdom United States United States Vietnam Yemen 50.00% 100.00% 100.00% 100.00% 100.00% 50.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 49.00% 100.00% 70.00% 100.00% 100.00% 40.00% 80.00% 80.00% 100.00% 100.00% 100.00% 51.00% 100.00% 100.00% 100.00% 50.00% 50.00% 42.50% 50.00% 100.00% 100.00% 49.00% * 100.00% 100.00% 100.00% 50.00% 55.00% 129 GroupCorporate structureWilh. Wilhelmsen Holding ASA Annual Report 2018wilhelmsen.com S e m w a y P h o t o s b y H a n s F r e d r i k A s b ø r n s e n j Wilh. Wilhelmsen Holding ASA Phone: (+47) 67 58 40 00 Postal address: PO Box 33, NO-1324 Lysaker, Norway Visiting address: Strandveien 20, NO-1366 Lysaker, Norway Follow us on Twitter | Facebook | LinkedIn | Instagram 

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