Wilh. Wilhelmsen Holding ASA Annual Report 2019

Plain-text annual report

Key figures – consolidated accounts 2017 2019 2016 2018 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) Liquidy ratio (3) Equity ratio (4) YIELD Return on equity (5) 850 149 78 144 130 114 871 78 36 (86) (75) (69) 793 198 176 253 (2) (64) 930 116 94 151 251 201 2015 2014 3 173 3 693 398 165 48 57 54 566 381 273 292 241 2 638 2 467 2 637 3 781 655 612 636 914 3 566 1 120 3 687 1 152 2 082 2 017 2 188 583 533 601 2 492 1 533 2 206 1 660 2 329 1 693 USD mill USD mill USD mill USD mill USD mill USD mill USD mill USD mill USD mill USD mill USD mill 3 293 3 079 3 273 4 695 4 686 4 839 USD mill USD mill % % 98 255 1.2 63% 62 227 1.1 66% 70 268 1.4 67% 420 580 1.9 53% 258 638 1.7 47% 241 688 2.1 48% 6% (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 2.46 3.24 (1.48) 1.68 (1.38) 4.26 4.34 2.51 1.16 8.55 5.20 12.18 Thousand 45 948 46 404 46 404 46 404 46 404 46 404 NOK 5.00 5.50 5.00 5.00 5.00 5.00 Definition (1) Net cash flow from operating activities (2) Cash, bank deposits and current 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 proportinate method. ** Figures for 2019 including leasing debt of USD 181 mill. Highlights for 2019 Positive development in operating result Developing new marine products and services Strong increase in vessels on full technical management Net gain on financial assets Share buy back and dividend of NOK 5.00 per share 6% shareholder return Content 10 12 16 18 19 21 24 25 26 27 28 29 29 38 40 40 40 41 42 43 44 50 1 – Group CEO’s statement Despite black swans and market corrections, our long-term ambition is unchanged 2 – 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 3 – Accounts and notes Wilh. Wilhelmsen Holding ASA group Income statement Comprehensive income Balance sheet Cash flow statement Equity Accounting policies Notes 92 94 94 94 95 96 97 114 4 – Accounts and notes parent company Wilh. Wilhelmsen Holding ASA parent company Income statement Comprehensive income Balance sheet Cash flow statement Notes Statement on the remuneration for senior executives 116 Auditor’s report 121 Responsibility statement 124 126 5 – Corporate governance Corporate governance report 134 138 138 139 140 6 – Corporate structure Wilh. Wilhelmsen Holding group main structure Holding and investments segment Supply services segment Maritime services segment Enabling sustainable global trade Back in 2005, we developed the Orcelle concept – a zero emissions vessel. At the time, we said this could become a reality by 2025, which quite frankly seemed very far away. It seemed far not just in time, but in terms of both technology and the industry’s ability and willingness to invest in the changes required. Orcelle was a drastic step in a sustainable future, especially in 2005 terms. Fast forward to 2020 and not only is 2025 right on our doorstep, but so are the elements of the vessel and the industry, which is ripe for change. For us, enabling sustainable global trade is not just about managing what is right in front of us, it’s also about shaping what could come next. 1 Group CEO’s statement Group CEO’s statement Despite black swans and market corrections, our long- term ambition is unchanged We believe in the positive benefits global trade can have for society – and we believe global trade will grow. At the same time, continued economic growth and increased global trade cannot happen at the expense of the environment or our future generations’ needs. My ambition is for the Wilhelmsen group to be at the forefront, enabling sustainable global trade. I don’t believe in any app or a technology that will substantially reduce the need for, or replace, global trade in the decades to come. We must therefore look at how we can contribute to making global trade truly sustainable through other means. Long-term goals drive actions now We support the Paris agreement and a net zero greenhouse gas emission target for society. With expectations and requirements set by governments, international organisations, other players in our industry, employees and not least our customers, we need to be able to step up and play our part. I don’t believe we will reach our ambitions by hoping for the best. Change will require substantial investments, dedication, and hard work. Through our offshore wind investments, 3D printing, Massterly project with autonomous ships, smart ropes, and zero emission terminals to mention just a few examples, we have shown that we are able to deliver sustainable products and services here and now. By 2030, I envision that we will have further developed these solutions and that a substantial part of our group portfolio will be related to safer, smarter and greener offerings. With our expertise, resources, and ambitions we have the best foundation to take the lead, or be active in contributing to reaching many of the ambitious, global targets set for the next decades. These include a 50% reduction of greenhouse gas emissions from shipping as a whole and a substantial increase in the use of renewable energy. We also see ourselves continuing to play an active role in reducing marine litter and pollution. And last, but not least, we are well-positioned to contribute to search for new potential in the unexplored areas of the ocean. We will utilise technology, legal requirements, and changing customer and supplier behaviour to ensure we continue to deliver operational excellence to our customers. At the same time, we need to accelerate the transformation of our businesses to meet tomorrow’s expectations. We will also continue to take advantage of our global presence and network, competence, brand, and culture, and retain, attract and develop the people necessary to take us into the future. A global team effort The UN Sustainable Development Goals help us to imagine where we need to be heading and kick-start a healthy and much needed discussion on the challenges we need to begin to tackle, hurdles we need to overcome. The goals also help us see and explore new business opportunities. Our long-term strategy is securely aligned with the goals. However, the challenges we are facing will not be solved by any single person, company or government alone, this requires a global effort. In addition to cross-company collaboration within the group, I foresee a stronger cooperation within the maritime industry and even across industries to truly make a significant impact. My commitment We believe the potential for creating value in the ocean-based industries will increase in the coming decades. That is why we want the world to see the oceans and the sustainable players in the ocean industry as part of the solution to tackle some of our times biggest challenges. I am committed to ensuring that we, together with our customers and business partners, take our share of the responsibility. We already have 159 years of experience in changing and adapting to requirements from the society, our customers, and our employees. With the current momentum from customers, employees, financial institutions, shareholders and other industry players, I see a stronger commitment than ever to explore and invest in tomorrow’s solutions. Together we will enable sustainable global trade and shape the maritime industry. 12 Wilh. Wilhelmsen Holding ASA Annual Report 2019 GroupWhen I started writing this statement, the COVID-19 outbreak was already present in parts of the world. However, I don’t think any of us could have foreseen the seismic impact the virus would have on the world. Now, at the beginning of April 2020, it is impossible to predict what its final and long-term effects will be. I have decided to still share my original thoughts about the future, but also recognise the need to add one reflection. The corona virus can be seen as the ultimate ‘acid test’ for just how we want to do business when things are better and back to ‘normal’. Who is – in spite of the current situation – still committed to contributing to the Sustainable Development Goals and will continue to walk the talk? Time will tell. Despite the consequences of COVID-19, we have a long- term outlook. We will do what we can to get through with as limited an impact on our employees, customers, and shareholders as possible. Our and my commitment is still to shape the maritime industry and enable sustainable global trade. Stay safe. Thomas Wilhelmsen, group CEO The decarbonisation of shipping By 2050, the International Maritime Organization’s (IMO) future emissions strategy calls for a reduction in total greenhouse gas (GHG) emissions by at least 50%, compared with 2008 – while simultaneously pursuing efforts to eliminate them entirely. The decarbonisation challenge for shipping is disruptive and transformational. It will require massive investments and will affect every part of the industry and value chain. We have a proactive approach, seeking out opportunities for new ventures and partnering with other serious actors to develop and advance new technologies and energy solutions. In addition to enabling modal shifts from road to sea and exploring opportunities linked to autonomous shipping, we are accelerating digitalization, connectivity and energy efficiency for the maritime industry. 2 Directors’ report Directors’ report for 2019 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 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, and related infrastructure through active ownership. The markets in which Wilhelmsen operates had mixed development in 2019. Global trade faced headwind, effected by geopolitical tension and the need to adjust to a more sustainable future. While reduced volumes hit car carriers and other operators, the general shipping market improved on the back of a tighter tonnage situation. Environmental related measures such as IMO 2020 created both operational challenges and new business opportunities. The maritime services subsidiaries deliver value creating solutions to the global merchant fleet, focusing on marine products, ships agency and ship management. In 2019, further progress was made on spare parts 3D printing, cargo hold cleaning chemicals, rope technology, and vessel performance systems. The gradual improvement in underlying operating margin continued in 2019, supported by an increase in sale of marine products and in vessels on full technical management. For supply services, the offshore oil and gas industry remains the largest customer base, but with a gradual shift into other areas such as governmental services and offshore wind. In 2019, further expansion was made in offshore wind and a pilot was initiated to develop liquid hydrogen supply chain for maritime applications in Norway. Underlying operating profit was some down for the year. In this market environment, the Wilhelmsen operating companies continued to do what they do best: delivering premium services and new sustainable solutions to its customers, while at the same time tightly managing the cost base. This resulted in an improved operating profit for the year, both in reported figures and when adjusting for non-recurring items. The group’s investment activities, including ownership in Wallenius Wilhelmsen ASA, Hyundai Glovis and Qube, made a strong contribution to the group’s results in 2019. While the uplift in share price for the two largest investments was modest, cash flow improved strongly through introduction of dividend in Wallenius Wilhelmsen and a solid gain from sale of some of the Qube shares. Highlights for 2019 • Drive to enable sustainable global trade • Positive development in operating result • Net gain on financial asset • Developing new marine products and services • Strong increase in vessels on full technical management • Share-buy back • Paid dividend of NOK 5.00 per share • 6% shareholder return 18 GroupDirectors’ reportWilh. Wilhelmsen Holding ASA Annual Report 2019The Wilhelmsen group maintains a strong equity base. In 2019, total equity was up 3% and equity to holders of parent reached USD 1 880 million. A strong cash flow from operation and an increase in financial assets value supported a total USD 56 million pay- out to Wilhelmsen shareholders in form of dividend and buy-back of shares. Total assets were up 7% for the year partly due to IFRS 16 accounting, reducing the group equity ratio to a still strong 63%. Liquidity also remains strong. Cash and cash equivalents totalled USD 153 million by end of 2019, increasing to USD 930 million if including financial investments. The debt repayment profile for the group remains healthy. Wilhelmsen’s goal is to provide shareholders with a high return over time through a combination of rising value for the company’s shares and payment of dividend. The objective is to have consistent yearly dividend paid twice annually. The long-term incentive plan for the executive management is based on a positive development in the group’s value adjusted equity above set thresholds. This aligns the long-term interests of shareholders and management. The same measures have also been introduced as part of the short- term incentive plan for holding company employees. After a fall in 2018, the WWI/WWIB share price recovered some lost ground in 2019. Total return (including dividends reinvested on ex-dates) was 5.8% for the WWI share and 7.2% for the WWIB share, trailing the 16.5% increase in the Oslo Børs Benchmark index (source Oslo Børs Exchange Annual statistics). A total dividend of NOK 5.00 per share was paid in 2019. A first dividend of NOK 2.50 was paid in May, followed by a second dividend of NOK 2.50 paid in November. This represented a dividend yield of 3.1% based on the average WWI/WWIB share price by the end of 2018. 2019 was the year when the global maritime industry fully embraced the challenges faced by a changing climate. Wilhelmsen has for years been in the front of this development, with present projects including energy efficient vessel design and operation, and modal shift from land to shipping. The board believes sound corporate governance is the foundation for profitable growth and a healthy company culture. Good governance contributes to reduced risk and creates 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 2019, employee engagement, ethics and anti-corruption, health and safety, responsible procurement, cyber security and data protection, climate risk, and partnerships for sustainable innovations received particular attentions. Financial results Income statement Wilhelmsen group (USD mill) Total income – of wich operating revenue – of wich gain/on sale of assets EBITDA EBITDA adjusted for IFRS 16 Operating profit/EBIT Share of profit from associates Change in fair value financial assets Other financial income/(expenses) Profit/(loss) before tax/EBT Tax income/(expenses) Profit/(loss) for the period Profit/(loss) to owners of the parent 2019 2018 850 836 14 149 112 78 49 34 (17) 144 (15) 130 114 871 867 4 78 78 36 36 (116) (41) (86) 12 (75) (69) EPS (USD) 2.46 (1.48) Other comprehensive income Total comprehensive income Tot. comprehensive income owners of parent (3) 127 111 (53) (128) (119) Total assets Equity parent Total equity Equity ratio 3 293 1 880 2 082 3 079 1 821 2 017 63% 66% Total income for Wilhelmsen was USD 850 million in 2019, down 2% from 2018. The reduction was due to lower operating revenue from supply services, partly offset by higher income from maritime services. EBITDA (USD mill) Reported 1H’18 M&A cost related to Drew Q1’19 sales gain Maritime services1 Total material non-recurring items Adjusted IFRS 16 effect 2019 2018 149 78 (27) (27) 6 6 143 105 37 Adjust including IFRS 16 effect 106 105 1) Sale of property is a core activity for supply services, with any gain/loss not adjusted for. 19 GroupDirectors’ reportWilh. Wilhelmsen Holding ASA Annual Report 2019 Group EBITDA came in at USD 149 million for the year, up 91%. Adjusting for non- recurring items and IFRS 16, EBITDA was stable. Adjusted EBITDA was up for maritime services, offsetting a reduction for supply services and holding and investments. Share of profit from associates was USD 49 million for the year. Of this, Wallenius Wilhelmsen ASA contributed with USD 39 million, up 66% from last year. Change in fair value financial assets was positive with USD 34 million for the year. An uplift in value of the investments in Hyundai Glovis and Qube was partly offset by a full write down of the Survitec investment in the second quarter. Other financials were a net expense of USD 17 million in 2019. A gain on current financial investments and dividend income contributed positively but was more than offset by interest expenses and a net loss on financial instruments and currencies. Tax was included with an expense of USD 15 million, mainly related to maritime services. Net profit after tax and minority interests was USD 114 million in 2019 compared with a USD 69 million net loss in 2018. Other comprehensive income for the year was a loss of USD 3 million, compared with a loss of USD 53 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 2019 was USD 127 million, of which USD 111 million was attributable to owners of the parent. The corresponding figures for 2018 was a loss of USD 128 million and a loss of USD 119 million respectively. operating cash flow remained below EBITDA level partly due to an increase in working capital and inventory. Cash flow (USD mill) 2019 2018 Cash and cash equivalents 1.1 140 167 From operating activities Maritime services Supply services Other operating 98 83 32 (17) 62 21 44 (3) From investing activities 81 40 From financing activities Dividend and share buy back parent Net debt Other financing Net cash flow (165) (56) (68) (42) (128) (31) (59) (39) 14 (26) Cash and cash equivalents 31.12 153 140 Cash flow from investing activities was positive with USD 81 million for the year. Dividend from joint ventures and associates and net proceeds from sale of financial investments continued to exceed net investment in fixed assets. Cash flow from financing activities was negative with USD 165 million in 2019. Net debt repayment counted for the largest share of net cash outflow, followed by share buy backs and dividend to shareholders, and ordinary interest payments. Liquid assets (USD mill) Cash and cash equivalents of which maritime services of which Supply services of which holding and investments Current financial investments Financial assets to fair value Total 2019 2018 153 116 7 31 102 675 140 110 12 18 88 650 930 877 Cash flow, liquidity and debt The group had cash and cash equivalents of USD 153 million by the end 2019, up from USD 140 million by the end of 2018. The net increase in cash and cash equivalents of USD 14 million for the year followed a strong contribution from operating and investing activities partly offset by financing activities. Cash flow from operating activities was positive with USD 98 million in 2019, up from USD 62 million the previous year. The By the end of 2019, the group had liquid financial assets of USD 930 million. In addition to cash, this included current financial investments and non-current financial assets reported as financial assets to fair value. The parent company carries out active financial asset management of part of the group’s liquidity. The current financial investment portfolio includes listed equities and investment grade bonds. The value of the portfolio amounted to USD 102 million at the 20 GroupDirectors’ reportWilh. Wilhelmsen Holding ASA Annual Report 2019Maritime services • Ships service • Ship management • Insurance services end of 2019, up from USD 88 million one year earlier. by increased sale of marine products in the second half, a steady growth of new vessels on management, and a strong USD. The group’s investments classified as financial assets to fair value had a combined value of USD 675 million by the end of the year, up from USD 650 million at the end of 2018. The largest investments were the ~12% shareholding in Hyundai Glovis (held through Treasure ASA) and the ~2.5% shareholding in Qube. The ~20% shareholding in Survitec was valued at nil by the end of the year. 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 mill) Maritime services Supply services Holding and investments Elimination Total Leasing debt Total excluding leasing debt 2019 2018 247 401 48 (21) 675 181 494 197 330 23 (17) 533 533 As of 31 December 2019, the group’s total interest-bearing debt was USD 675 million, compared with USD 533 million by end 2018. The increase followed reporting of leasing debt as interest bearing debt from 1 January 2019 in accordance with IFRS 16. When excluding leasing debt, interest bearing debt was down in 2019. 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. Maritime services The maritime services segment includes ships service, ship management and other maritime services activities. Total income for maritime services was USD 591 million in 2019, up from USD 582 million in 2018. EBITDA for the year was USD 103 million, up from USD 42 million. When adjusting for material non-recurring items and IFRS 16, EBITDA was up 23% for the year. The underlying improvement was supported The maritime services EBITDA margin was 17.4% in 2019. When adjusting for a sales gain, the EBITDA margin was 16.6%. Maritime services (USD mill) Total income – Ships services – Ship management – Other/eliminations EBITDA – EBITDA margin (%) EBITDA adjusted for IFRS 16 – Adjusted EBITDA margin (%) Operating profit/EBIT – EBIT margin (%) Share of profit from associates Change in fair value financial assets Other financial incom/(expenses) Tax income/(expense) Profit/(loss) – Profit margin (%) – Non controlling interest Operating profit/EBIT 2019 2018 591 534 56 0 103 17% 90 15% 73 12% 4 (27) (24) (12) 15 3% 1 14 582 540 41 0 42 7% 42 7% 26 4% 4 (61) (37) 13 (55) 9% 2 (56) Share of profit from associates was stable at USD 4 million. Change in fair value financial assets was a loss of USD 27 million in 2019, which followed a loss of USD 61 million in 2018. The losses for both years related to the investment in Survitec Group, which was valued at nil by the end of 2019. Other financial income/expenses for maritime services amounted to an expense of USD 24 million, compared with an expense of USD 37 million in 2018. The improvement followed reduced losses on currency and financial instruments, included with an expense of USD 7 million in 2019 compared with an expense of USD 23 million the previous year. Tax was an expense of USD 12 million in 2019, compared with an income of USD 13 million the previous year. Tax in 2019 was up partly due to withholding tax and a negative adjustment in tax accruals, while tax in 2018 benefitted from a positive adjustment in deferred tax assets. Net result after tax and non-controlling interests was a profit of USD 14 million in 2019 compared with a loss of USD 56 million in the previous year. 21 GroupDirectors’ reportWilh. Wilhelmsen Holding ASA Annual Report 2019Supply services • NorSea Group (owned ~75.2%) • WilNor Governmental Services 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. Supply services (USD mill) Total income – NorSea Group – Other/eliminations EBITDA – EBITDA margin (%) 2019 2018 255 251 4 59 23% 41 16% 22 9% 6 (19) (3) 5 2% 1 4 285 275 11 51 18% 51 18% 25 9% 9 (15) (4) 15 5% 4 11 EBITDA adjusted for IFRS 16 – Adjusted EBITDA margin (%) Operating profit/EBIT – EBIT margin (%) Share of profit from associates Other financial incom/(expenses) Tax income/(expense) Profit/(loss) – Profit margin (%) – Non controlling interest Profit/(loss) to owners of the parent Share of profit from associates was USD 6 million, down from USD 9 million. Net financial items were an expense of USD 19 million, and tax was an expense of USD 4 million in 2019. Net profit after minority interests was USD 4 million for the year, down from USD 11 million in 2018. NorSea Group AS NorSea Group provides supply bases and integrated logistics solution to the offshore industry. Wilhelmsen owns ~75,2% of NorSea Group. Total income for NorSea Group was USD 251 million in 2019, a 9% reduction from the previous year mainly due to a depreciation of NOK versus USD. Income from offshore supply base activities was up, while income from project related activities was down. EBITDA was up for the year, but down if adjusting for IFRS 16. 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 4 million in 2019, down from USD 11 million in the previous year which included activities related to the NATO exercise Trident Juncture 2018. EBITDA was down for the year. Total income from ships service was USD 534 million in 2019, down 1% from the previous year. Income from marine products increased, offsetting a reduction in non-marine income. Income from agency services was stable. EBITDA was up for the year, also when adjusting for IFRS 16. Ship management Wilhelmsen Ship Management provides full technical management, crewing and related services for all major vessel types, and includes 50% of NorSea Wind. Ship management is fully owned by Wilhelmsen. Total income for ship management was USD 56 million in 2019, up 37%. Excluding sales gains, income was up 22%. The increase in income followed a steady growth in vessels on full technical management and upstart of new offshore wind activities. EBITDA was up for the year, also when excluding sales gains and adjusting for IFRS 16. 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 2019, up 2% 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. Total income for supply services was USD 255 million in 2019. This was down from 285 million in 2018 which included services provided for the NATO exercise Trident Juncture. EBITDA came in at USD 59 million, up from USD 51 million. When adjusting for IFRS 16, EBITDA was down 19%. Contribution from offshore supply base activities improved, while new offshore wind activities had a negative impact on results. 22 GroupDirectors’ reportWilh. Wilhelmsen Holding ASA Annual Report 2019Holding and investments The holding and investments segment include investments in Wallenius Wilhelmsen ASA and Treasure ASA, financial assets, and other holding and investments activities. Holding and investments (USD mill) Total income – Operating revenue – Gain on sale of assets EBITDA EBITDA adjusted for IFRS 16 Operating profit/EBIT Share of profit from associates – Wallenius Wilhelmsen ASA – Other/eliminations Change in fair value financial assets – Hyundai Glovis – Qube Holdings/other financial assets Other financial income/(expenses) – Investment management (Holding) – Hyundai Glovis – Qube Holdings/other financial assets – Other financial income Tax income/(expense) Profit/(loss) for the period – Non controlling interest Profit/(loss) to owners of the parent 2019 2018 11 11 0 (12) (18) (17) 39 39 0 61 37 24 26 12 13 3 (1) 1 109 13 96 11 11 0 (14) (14) (15) 23 23 (1) (56) (53) (3) 10 (6) 12 5 (1) 3 (35) (12) (23) Total income for the holding and investments segment was USD 11 million in 2019, on par with the previous year. EBITDA was a loss of USD 12 million, compared with a loss of USD 14 million in 2018. Adjusting for IFRS 16, EBITDA was down. Share of profit from associates was USD 39 million for the year, up from USD 23 million. This mainly related to the 37.8% ownership in Wallenius Wilhelmsen ASA. Change in fair value financial assets was a gain of USD 61 million in 2019, mainly related to the shareholdings in Hyundai Glovis and Qube. This compares with a net loss of USD 56 million in 2018. Net financials were an income of USD 26 million, up from USD 10 million. The improvement followed a gain on investment management versus a previous year loss, while dividend income was fairly stable. Net profit/(loss) after tax and minorities was a profit of USD 96 million compared with a loss of USD 23 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 Oslo Børs. Wilhelmsen owns ~37,8% of the company, which is reported as associate in Wilhelmsen’s accounts. Total income for Wallenius Wilhelmsen ASA was USD 3 909 million in 2019, a 4% reduction. Income was down for both the ocean and landbased segments. Ocean income was down driven by 6% lower volumes, but positively impacted by higher net freight per CBM and increased fuel compensation. Landbased income was down 1%. EBITDA ended at USD 805 million in 2019. Adjusted for IFRS 16, EBITDA was USD 639 million, up from USD 601 million in 2018. The results were positively impacted by the performance improvement initiatives within the ocean segment leading to more efficient operations. Underlying results in the landbased segment were down compared to 2018, driven by higher costs. Wilhelmsen’s share of profit from Wallenius Wilhelmsen ASA was USD 39 million in 2019, up from USD 23 million in 2018. The Wallenius Wilhelmsen ASA share price was down 26.5% in 2019, closing at NOK 21.82. As of 31 December 2019, the market value of Wilhelmsen’s investment was USD 398 million, while the book value of the shareholding was USD 864 million. Wallenius Wilhelmsen ASA paid USD 0.12 per share in dividends in 2019, with Wilhelmsen receiving USD 19 million. Treasure ASA Treasure ASA holds a 12.04% ownership interest in Hyundai Glovis and is listed on Oslo Børs. Wilhelmsen owns ~73,5% of Treasure ASA. Treasure ASA’s main source of income is the dividend received from Hyundai Glovis. This is reported as financial income in Wilhelmsen’s accounts. Dividend received in 2019 was USD 13 million, in line with the previous year. The value of Treasure ASA’s investment in Hyundai Glovis was USD 560 million by the end of 2019, up from USD 523 million by the end of the previous year. The USD 37 million increase in value in 2019 was accounted for as change in fair value financial assets. In 2018, the value was down with USD 53 million. Holding and investments • Wallenius Wilhelmsen ASA (owned ~37.8%) • Treasure ASA (owned ~73.5%) • Financial assets 23 GroupDirectors’ reportWilh. Wilhelmsen Holding ASA Annual Report 2019The Treasure ASA share price was up 17.7% for the year, closing at NOK 13.65. As of 31 December 2019, the market value of Wilhelmsen’s shareholding in Treasure ASA was USD 249 million. In 2019, Treasure ASA paid total dividend of NOK 0.30 per share. This was unchanged from the previous year. Total cash proceeds to Wilhelmsen was USD 6 million. During the third quarter, Treasure ASA bought 0.465 million own shares in the market at NOK 13.50 per share. Wilhelmsen maintained a holding of 160 million shares in Treasure ASA. 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 102 million by the end of the year, compared with USD 88 million one year earlier. The portfolio primarily included listed equities and investment-grade bonds. Net income from investment management was a gain of USD 12 million in 2019, compared with a loss of USD 6 million in 2018. Change in fair value of the shareholdings in Qube Holdings Ltd and other non-current financial assets was a gain of USD 13 million in 2019, compared with a gain of USD 12 million in 2018. Other financial income from the investments were USD 3 million, down from USD 5 million. Financial assets to fair value reported under the holding and investments segment was USD 109 million at the end of 2019 (excluding shareholding in Hyundai Glovis), up from USD 100 million one year earlier. During the year, Wilhelmsen reduced its shareholding in Qube from 50 million to 40 million shares. Other holding and investments activities Holding/other activities include general holding activities and certain non-financial investments, including Raa Labs AS (100% owned), Massterly AS (50%) and Dolittle AS (46%). Net cost of other holding and investment activities remained stable. In 2019, Wilhelmsen increased the ownership in RaaLabs from 50% to 100%. companies and investments exposed to the global economy and world merchandised trade. From an operating perspective, ships service and ship management (both maritime services) and NorSea Group (supply services) are the most significant activities and exposures. From an investment perspective, Wallenius Wilhelmsen ASA and Hyundai Glovis are the most significant exposures. The changes in the Wilhelmsen group undertaken during recent years has created a more balanced portfolio. 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 monitoring process based on identification of risks for each business unit, and with a group risk matrix 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. Due to measures implemented to contain spread of covid-19, global economic development is presently very uncertain. Maritime services’ exposure is to the general shipping market. In 2019, the shipping market improved from previous low levels, but differences in sentiment between the various market segments remains. Slower trade, low newbuild orderbooks and new environmental regulations will continue to impact the shipping market over the next years. Short term, measures to contain covid-19 will have a significant impact on several shipping segments. Risk review The Wilhelmsen group consists of operating Supply services’ exposure is mainly to the Norwegian offshore sector, and indirectly 24 GroupDirectors’ reportWilh. Wilhelmsen Holding ASA Annual Report 2019towards the global oil and gas market. After a downturn in 2016/17, the market sentiment gradually improved until recent turmoils. Investment exposure is skewed towards the global automotive and high and heavy markets, through the investment in Wallenius Wilhelmsen ASA and, indirectly, Hyundai Glovis. During 2019, global automotive sales stalled, and market uncertainty increased. The automotive industry is sensitive to present disruptions to the global supply chain. 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. autumn. After a fall back, the USD has again strengthened in the first quarter of 2020. In 2019, the oil price continued to fluctuate mainly within a USD 55-75 band, ending close to where it started. During the first quarter of 2020, the oil price has fallen significantly. Interest rates remains at historic low levels in most markets, and with rate movements in US and certain other markets shifting from upwards to downwards during 2019. Further reduction has taken place in 2020. The global equity market had a strong performance in 2019, supported by low interest rates. The start of 2020 has seen a reversal with a sharp fall in global market values. 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. The group’s exposure to and management of financial risk are further described in Note 19 to the 2019 group accounts. This includes foreign exchange rate risk, interest rate risk, investment portfolio risk, credit risk and liquidity risk. 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, a cyber attack or other disruption of IT systems, a pandemic, 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. In 2019, activity within the offshore wind sector has increased. The group has established a range of measures in order to avoid and, potentially, mitigate the consequences of operational risk incidents. In 2019, cyber risk has received special attention. 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, as well as credit risk and liquidity risk. In the currency markets, the USD continued to strengthen against among others EUR and NOK in 2019, reaching a peak during the All group companies were compliant with their loan covenant requirements in 2019. Climate risk In 2019, a mapping has been initiated of climate risk management within main group operating companies and for the holding company. The mapping is made in accordance with the recommendations of the Task force on Climate-related Financial Disclosures (TCFD). The initial findings are that climate risk is not systematically managed, and that future cost may be underestimated. The work to identify, measure and manage climate risk will continue. 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. Exposure hours In 2019, there were around 38.8 million exposure hours (work hours) in the group. Vessel based operations accounted for 77% of total exposure hours and onshore operations accounted for 23%. 25 GroupDirectors’ reportWilh. Wilhelmsen Holding ASA Annual Report 2019Sickness absence and occupational disease The group has a variety of ongoing 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 1.68%, in line with previous year. There were no occupational disease cases recorded in 2019. Turnover The turnover rate for employees in the parent company and fully owned subsidiaries was 12.71% in 2019, in line with previous years. The turnover rate varies from segment to segment. Lost time injuries and total recordable cases There were zero work related fatalities in 2019. For vessel-based operations, several safety campaigns aimed at creating safer and healthier working conditions on board the vessels continued during the year. Mental health wellbeing was one of the campaigns focusing on stress, sleep and overall psychological health of the seafarers. In 2019, the lost-time injury frequency (LTIF) rate was 0.32, within the target not to exceed 0.50. The total recordable case frequency (TRCF) rate was 1.46 within the target not to exceed 2.60. The LTIF rate target for 2020 is not to exceed 0.50 and the TRCF rate is not to exceed 2.80. For onshore operations, there was a continued focus on developing knowledge and understanding of the importance of personal safety and risk assessment. Management visibility, Take5 program, audits, safety talks and active safety delegates have been important actions to follow up employees most exposed to hazardous risk. The focus will continue in 2020 on risk assessment, increasing the number of auditors and audits, site assessment programs, and supplier audits. The LTIF rate onshore was 0.18 in 2019, within target not to exceed 0.5. The TRCF rate result of 0.33 was within target not to exceed 1.0. Both targets will remain in place for 2020. Near miss incidents and safety observations Safety observation reporting on vessel operations remains consistent with 9 782 observations reported for the year compared to 9126 in 2018. Safety observation and risk assessment reporting onshore improved in 2019, mainly due to recording of the Take5 safety assessments conducted by Ships Agency employees. 5 414 observations were reported versus 3 597 in 2018. All reported near misses were investigated to avoid similar incidents in the future, improve necessary training and awareness measures, and improve control measures. Sharing of safety moments and lessons learned was increased. Reporting and utilization 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. This cooperation gives 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 considers general business, financial and governance issues of importance to the company and the workforce. In 2019, both committees held official meetings according to plan. Organisation and people development Workforce The group’s head office is in Norway, and the group has 241 offices in 62 countries within its controlled structure. The group employed 10 230 seafarers and 4835 land- based employees at the end of 2019. Equal opportunities Wilhelmsen has a clear policy stating that employees 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. All reported incidents were investigated to avoid similar incidents in the future, improve necessary training and awareness measures. Females represent 35% of the land-based work force, 25% of senior management positions, and 1% of the seafarer work force. 26 GroupDirectors’ reportWilh. Wilhelmsen Holding ASA Annual Report 2019One of the four members of the company’s group management is female and during 2019, two of the five directors on the board of directors of Wilhelmsen were female. Driving performance Wilhelmsen strives to create a performance culture where engaged employees deliver desired results and are rewarded accordingly. Employee performance and engagement is measured through annual surveys, performance appraisals and annual activity plans. In the fourth quarter of 2019, 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. Whilst the results point to consistent and positive high engagement, there is always room for improvement. Senior management and individual managers in all locations were required to conduct follow up discussions with their teams. Where results were less than the expected benchmark, managers were required to implement specific actions to improve results. 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 regulations and competition into account, as well as the responsibility and complexity of the position. 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 statement on the remuneration 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. In 2019, emphasis was placed on continuous learning through on-the-job experiences, tasks and problem solving (70%); feedback, coaching (formal and informal) and networks (20%); and formal classroom courses, e-learning, seminars, videos etc. (10%). Personal development plans are integrated in the performance appraisal and review process. In 2019, the average hours of formal training recorded per employee was 8 hours. Developing leaders for the future To meet challenging and changing environments, Wilhelmsen is dependent on highly qualified leaders. In 2019, eight females and 21 males, from nine different nationalities participated in a three module Leadership Potential programme held in Oslo and Bangkok. The programme focused on design thinking methodology, leadership toolboxes, and an agile mindset. Whistle blowing and anti-corruption In 2019, we had 19 whistles regarding allegations of fraud/corruption, pollution/ environmental, health and safety and more HR related matters. Almost half of the whistles originated from an anonymous source. All reports being forwarded through our whistleblowing channel are investigated and followed up according to our internal guidelines. A thorough investigation was conducted during the year on an alleged major internal fraud/corruption case that was reported through the whistleblowing channel. This resulted in proceedings being initiated against two employees and funds being retrieved. At year end, we have two whistles that are pending a conclusion. We will continue to make employees aware of the whistleblowing opportunity, should they see or experience behaviour that is not in line with our policies and expectations. Our business standards and compliance training include the areas of anti- corruption, theft and fraud, whistleblowing, competition law and personal data protection. Corporate governance The board believes sound corporate governance is a foundation for profitable growth and that it provides a healthy company culture. A good governance contributes to reducing risk and creating long-term value for shareholders and other stakeholders. Wilhelmsen observes the Norwegian Code of Practice for corporate governance, in 27 GroupDirectors’ reportWilh. Wilhelmsen Holding ASA Annual Report 2019addition to requirements as specified in the Norwegian Public Companies Act and the Norwegian Accounting Act. The board’s corporate governance report for 2019 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 29 April 2020. 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 environmental responsibility. UN Global Compact (UNGC) engagement Wilhelmsen works actively within the UNGC Sustainable ocean business action platform to partner with other serious actors in contributing to the achievement of the Sustainable Development Goals. In 2019, the action platform delivered a report on ocean opportunities describing five tipping points for ocean health and productivity; a set of sustainable ocean principles; and started work on a governance framework report due for release 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 environmental, social and governance (ESG) factors. Materiality assessment The company conducted an extensive materiality assessment in 2018 to ensure attention is on material aspects 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 • Cyber security and data protection These aspects are addressed in the sustainability report. The full report is available on www.wilhelmsen.com and will be reviewed by the annual general meeting on 29 April 2020. Focus areas and achievements in 2019 In 2019, the following areas received particular attention: • Employee engagement • Ethics and anti-corruption • Health and safety • Responsible procurement • Cyber security and data protection • Climate risk • Partnerships for sustainable innovations The company’s achievements included: • Positive and consistent employee engagement score • Obtained TRACE certification in eight new countries (31 in total since 2016) • Improved H&S risk assessments in the Take5 program • Increased sustainability criteria in supplier assessments and requirements • Increased cyber security detection and response capabilities • Completed an initial climate risk management assessment • Established partnership in liquid hydrogen supply chain project Focus areas for 2020 The company will continue to focus its efforts on high materiality areas: • Ethics and anti-corruption • Health and safety • Responsible procurement: • Cyber security In addition, the company will intensify focus on strategic areas of: • Decarbonisation of shipping and maritime services • Renewable energy transition • Reducing marine litter and pollution 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 2019, Wilhelmsen was engaged in dialogues with governments, investors, non-governmental organisations and other 28 GroupDirectors’ reportWilh. Wilhelmsen Holding ASA Annual Report 2019stakeholders discussing topics related to the group or industry at large. Topics covered included financial issues, compliance, innovation, decarbonisation of shipping, renewable energy and sustainability in general. Management also initiated a dialogue with main shareholders and other stakeholders related to the statement on remuneration for senior executives. Allocation of profit, dividend and buy back The board’s proposal for allocation of the net profit for the year is as follows: The board is proposing a NOK 2.00 dividend per share payable during the second quarter of 2020, representing a total payment of NOK 89 million (excluding shares owned by the company). Parent company accounts (NOK thousand) Profit for the year To equity Proposed dividend Interim dividend paid Total allocations 473 268 272 658 89 160 111 450 473 268 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 2020, but no longer than to 30 June 2020. In line with the authorisation, the company announced a share buyback in September 2019. Following completion of the program, Wilh. Wilhelmsen Holding ASA owns a total of 1 823 824 own shares, split on 537 092 A-shares and 1 286 732 B-shares. This is equivalent to 3.93% of total shares in the company. Outlook Events after the balance sheet date The recent outbreak of covid-19 has since the start of 2020 had significant impact on the world and on Wilhelmsen. An update related to the impact on Wilhelmsen is included in note 24 of the group accounts and in note 16 of the parent company accounts for 2019. 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. Due to measures implemented to contain spread of covid-19, global economic development is presently very uncertain. Long term, annual growth in the vicinity of 3% remains a likely scenario. Outlook for maritime services General shipping markets improved in 2019, supported by continued global growth and low newbuilding activity. While most markets will in 2020 be affected by measures to contain the corona virus, many of the underlying positive factors remain. Wilhelmsen’s focus is maintaining a leading position within marine products, ships agency and ship management globally. For marine products, the steady work to improve products, services, and capabilities, will continue. For ships agency, a review is initiated to adjust the product to a more globally connected world. For ship management, the effort to expand the fleet on management will continue, with a need to increase the organisational capacity. Increased activity level and a strong USD have supported an improved operating margin in 2019. The year also had its fair share of investment in new products and operating systems, reducing profit short term but necessary to remain competitive in the long term. All these factors will continue to have effect on the operating margin moving forward. The measures taken to contain spread of covid-19 will have a significant impact on the maritime services activities in 2020 and potentially beyond. Operationally, travel restrictions impact crew changes and disruption in the global supply chain impacts product deliveries. Financially, reduced activity in cruise and other shipping segments impacts purchasing of among other marine products, port services and crewing services. Outlook for supply services NorSea Group, where Wilhelmsen has a ~75,2% shareholding, remains strongly exposed to the Norwegian oil and gas industry, but is gradually expanding into other activities. The sharp fall in oil prices combined with measures taken to contain covid-19 will have a negative impact on activity level. Income from supply base real estate properties will continue to be an important contributor, while offshore wind activities are expected to 29 GroupDirectors’ reportWilh. Wilhelmsen Holding ASA Annual Report 2019The board of Wilh. Wilhelmsen Holding ASA From left: Carl Erik Steen Irene Waage Basili Diderik Schnitler (chair) Trond Ø. Westlie 30 GroupDirectors’ reportWilh. Wilhelmsen Holding ASA Annual Report 201931 GroupDirectors’ reportWilh. Wilhelmsen Holding ASA Annual Report 2019gradually increase but with some delay due to covid-19 measures. chain, the Hyundai Share price has fallen significantly during first quarter of 2020. For governmental services, no major change in activity level and income is projected in the short term. Outlook for other activities Wallenius Wilhelmsen ASA, where Wilhelmsen has a 37.8% stake, is a market leader in shipping and logistics services to the global automotive, rolling equipment, and breakbulk industries. Short term, measures to contain the corona virus will have a significant negative impact, with an expected 20% drop in ocean volumes in the first quarter. Wallenius Wilhelmsen ASA is taking decisive steps to prepare for this situation, including cancellation of dividend, recycling and layup of ships, and temporary layoffs of production workers. Treasure ASA, where Wilhelmsen has a ~73.5% shareholding, is an investment company with currently one main asset. The prospects correlate strongly with the financial and share price performance of Hyundai Glovis. With its high exposure to the automotive supply Qube Holdings, where Wilhelmsen has a ~2.5% equity stake, remains exposed to the general Australian economy and trade, and to the successful development of new logistics infrastructure. The investment is mainly of a financial nature. Outlook for the Wilhelmsen group Wilhelmsen holds leading positions in several maritime industry segments. The combined forces of extensive business knowledge, global network, innovative organisation, and strong solidity will continue to support development of the group Wilhelmsen is exposed towards global trade. Uncertainty remains on future development of global trade, including global economic growth, trade restrictions and the environment. In the short term, measures to stop the spread of the coronavirus will have a negative impact on most business activities. Wilhelmsen retains its robustness and capacity to meet such eventualities. Lysaker, 31 March 2020 The board of directors of Wilh. Wilhelmsen Holding ASA Diderik Schnitler chair Trond Westlie Carl Erik Steen Irene Waage Basili Thomas Wilhelmsen group CEO 32 GroupDirectors’ reportWilh. Wilhelmsen Holding ASA Annual Report 2019Wilhelm Wilhelmsen 1937–2020 Wilhelm Wilhelmsen passed away on 22 February 2020. He represented the fourth-generation family owner of the Wilhelmsen group, a maritime industry group established by his great grandfather in Tønsberg, Norway in 1861. Wilhelm Wilhelmsen was instrumental in developing the Wilhelmsen group from a traditional liner company with trades all over the world to one of the largest maritime industry groups with almost 15 000 employees in more than 70 countries. His extensive network and business relationships in Norway and internationally have been essential in building the company the past almost 60 years. In addition to steering through many important and difficult situations in the company’s history, including the offshore crisis in the 1980s and the Partnair and Tampa incidents, he will be remembered as a very well-respected business leader and spokesperson for Norwegian shipping and the maritime industry at large. Rest in peace. From the board and thousands of employees at sea and all around the world Responsible employer People are the foundation of our global business and have been for our last 159 years. Our approach as a responsible employer is to build a culture where all of our employees can come to work, do their best and go home safely. Whether it is investing in developing our employees, setting high standards regarding health and safety measures, or enhancing a culture where high ethical business standards always apply, our aim is to do the right things, the right way in every part of our business. The Take5 program for our ships agency division is just one example of how we act responsibility as an employer, building best in class practices for identifying and managing risks to keep employees engaged, healthy and safe. 3 Accounts and notes – group Income statement Wilh. Wilhelmsen Holding group USD mill Operating revenue Other income Gain on sale of assets Total income Operating expenses Cost of goods and change in inventory Employee benefits Other expenses Depreciation and impairments 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) for the period Of which: Profit attributable to non-controlling interests Profit/(loss) attributable to owners of the parent Basic / diluted earnings per share (USD) Note 1/3/21 1 15 6 1/21 7/8 4 14 1 1 9 10 Comprehensive income Wilh. Wilhelmsen Holding group Profit/(loss) for the year Items that may be reclassified to the income statement Cash flow hedges (net after tax) Comprehensive income from associates Currency translation differences 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 Total comprehensive income attributable to: Owners of the parent Non-controlling interests Total comprehensive income for the year 19 11 Notes 1 to 24 on the next pages are an integral part of these consolidated financial statements. 40 2019 836 14 850 (247) (306) (148) (71) (772) 78 49 34 33 (49) 144 (15) 130 16 114 2.46 130 1 (2) (2) (1) (3) 127 111 16 127 2018 867 4 871 (267) (320) (206) (42) (835) 36 36 (116) 16 (57) (86) 12 (75) (6) (69) (1.48) (75) 2 (57) 1 (53) (128) (119) (9) (128) GroupAccounts and notesWilh. Wilhelmsen Holding ASA Annual Report 2019Balance sheet Wilh. Wilhelmsen Holding group USD mill Note 31.12.2019 31.12.2018 ASSETS Non current assets Deferred tax asset Goodwill and other intangible assets Vessel, property and other tangible assets Right-of-use 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 Non current lease liabilities Other non current liabilities Total non current liabilities Current liabilities Current income tax Public duties payable Current interest-bearing debt Current lease liabilities Other current liabilities Total current liabilities Total equity and liabilities 9 7 7 8 4 14/19 12 15 16/19 12/17 17 11 9 18/19 8/18 12 9 18/19 8/18 12 57 151 555 173 1 003 675 25 2 638 82 102 317 153 655 3 293 118 1 762 1 880 202 2 082 20 11 429 154 28 643 9 12 65 27 455 568 3 293 Lysaker, 31 March 2020 The board of directors of Wilh. Wilhelmsen Holding ASA Diderik Schnitler chair Trond Westlie Carl Erik Steen Irene Waage Basili Thomas Wilhelmsen group CEO Notes 1 to 24 on the next pages are an integral part of these consolidated financial statements. 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 23 503 13 9 85 452 559 3 079 41 GroupAccounts and notesWilh. Wilhelmsen Holding ASA Annual Report 2019Cash flow statement Wilh. Wilhelmsen Holding group USD mill Note 2019 2018 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 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 inventories 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 Net proceeds from sale of joint ventures and associates Investments in subsidiaries Loan repayments received from sale of subsidiaries Proceeds from dividend and 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 Repayment of leasing debt Interest paid including interest derivatives Interest paid leasing debt Dividend to shareholders/purchase of own shares 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 4 14 1 7/8 1 1/4 4 7 1 18 18 8 1 1/8 144 (49) (34) 17 71 (8) (6) (9) (19) (8) 98 33 17 (40) 3 34 (3) 6 65 (38) 4 81 93 (136) (24) (25) (11) (62) (165) 14 140 153 (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 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 24 on the next pages are an integral part of these consolidated financial statements. 42 GroupAccounts and notesWilh. Wilhelmsen Holding ASA Annual Report 2019 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 122 0 1 853 1 975 212 2 188 Balance 31.12.2018 Implementation of IFRS 16 leasing Comprehensive income for the period: Profit for the period Other comprehensive income Total comprehensive income for the period 0 0 Transactions with owners: Change in non-controlling interests* Own shares** Dividends Balance 31.12.2019 (4) (4) 122 114 (3) 111 5 (27) (26) 114 (3) 111 5 (31) (26) 1 761 1 880 16 16 (5) (5) 202 130 (3) 127 (31) (31) 2 082 *Liquidation of 2.200.000 own shares in Treasure ASA. **WWH acquired own shares 30 September 2019 for USD 30.4 million, represented 537.092 A-shares and 1.286.732 B-shares. Average cost per shares was NOK 144.00. 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 Put option in associate Total comprehensive income for the period 0 0 (69) (50) (5) (124) (69) (50) (5) (124) Transactions with owners: Change in non-controlling interests Dividends Balance 31.12.2018 122 0 (31) 1 698 (31) 1 820 (6) (3) (9) (1) (6) 196 (75) (53) (5) (133) (1) (37) 2 017 Dividend for fiscal year 2018 was NOK 5.00 per share, where NOK 2.50 per share was paid in May 2019 and NOK 2.50 per share was paid in November 2019. The proposed dividend for fiscal year 2019 is NOK 2.00 per share, payable in the second quarter of 2020. 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. A decision on this proposal will be taken by the annual general meeting on 29 April 2020. The proposed dividend is not accrued in the year-end balance sheet. The dividend will have effect on retained earnings in second quarter of 2020. Notes 1 to 24 on the next pages are an integral part of these consolidated financial statements. 43 GroupAccounts and notesWilh. Wilhelmsen Holding ASA Annual Report 2019Accounting 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 2019 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 31 March 2020. STATEMENT OF COMPLIANCE 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 10 December 2019. 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. Wilhelmsen also provides additional disclosures in accordance with requirements in the Norwegian Accounting Act related to remuneration to the board and the management. The company is a public limited liability company, listed on the Oslo Stock Exchange. BASIC OF CONSOLIDATION The consolidated financial statements comprise the financial statements of Wilh. Wilhelmsen Holding ASA and its subsidiaries (Wilhelmsen group or the group) as at 31 December 2019. Control is achieved when the group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. The group re-assesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control. Consolidation of a subsidiary begins when the group obtains control over the subsidiary and ceases when the group loses control of the subsidiary. Assets, liabilities, income and expenses of a subsidiary acquired or disposed of during the year are included in the consolidated financial statements from the date the group gains control until the date the group ceases to control the subsidiary. A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction. If the group loses control over a subsidiary, it derecognises the related assets (including goodwill), liabilities, non-controlling interest and other components of equity, while any resultant gain or loss is recognised in income statement. Any investment retained is recognised at fair value. Non-controlling interests in the results and equity of subsidiaries are shown separately in the consolidated statement of profit or loss, statement of comprehensive income, statement of changes in equity and balance sheet respectively. When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies in line with the group’s accounting policies. All intra-group assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the group are eliminated in full on consolidation. The accounts for the group and the parent company are referred to collectively as the 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. 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. 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. BASIC OF PREPARATION The group accounts are presented in US dollars (USD), rounded off to the nearest whole million. The presentation currency of the separate statements of the parent is NOK which is also its functional currency. The accounts are rounded off to the nearest whole thousand. 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 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 group accounts. When items are reclassified in the segment reporting, the comparative figures are included from the beginning of the earliest comparative period. New and revised standards – adopted The following new or amendments to standards and interpretations have been issued and become effective during the current period. Standards, amendments and interpretations The group has adopted IFRS 16 Leases from 1 January 2019 which resulted in material changes to the group’s financial statement. The income statements and balance sheets for group companies with a Under the new standard, a lessee is required to recognise all contracts that qualify under its definition of a lease as right-of-use assets and lease liabilities 44 GroupAccounts and notesWilh. Wilhelmsen Holding ASA Annual Report 2019Accounting policies Wilh. Wilhelmsen Holding group and Wilh. Wilhelmsen Holding ASA Accounting policies Wilh. Wilhelmsen Holding group and Wilh. Wilhelmsen Holding ASA 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 previously defined as operating leases under IAS 17, both as regards impact on the balance period of time in exchange of consideration. The group implemented 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 was not reassessed. The opening balance related to the transition and grouping of leased assets can be found in note 8, in the group accounts and note 4 in the parent accounts. Amended standards early adopted The group has elected to early adopt the ‘Amendments to IFRS 9, IAS 39 and IFRS 7 Interest Rate Benchmark Reform’ issued in September 2019. In accordance with the transition provisions, the amendments have been adopted retrospectively to hedging relationships that existed at the start of the reporting period or were designated thereafter. The amendments provide temporary relief from applying specific hedge accounting requirements to hedging relationships directly affected by IBOR reform. The reliefs have the effect that IBOR reform should not generally cause hedge accounting to terminate. However, any hedge ineffectiveness should continue to be recorded in the income statement. Furthermore, the amendments set out triggers for when the reliefs will end, which include the uncertainty arising from interest rate benchmark reform no longer being present. There are no other new or amended standards adopted by the group or parent company from 1 January 2019 or later. New and revised standards – not yet effective Amendment to IAS 1 Classification of Liabilities as Current or Non-current applicable for annual periods beginning on or after 1 January 2022. The amendment changes the guidance for the classification of liabilities as current or non-current depending on the rights that exist at the end of the reporting period. The amendments are not expected to have a material effect compared to the group’s current application of IAS 1. 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. 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. 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. 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. 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 or the parent company. Acquisition-related costs are expensed as incurred. 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 share holdings 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 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. 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 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 except for IFRS 16 effects. Significant influence generally accompanies investments where the group or The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been 45 GroupAccounts and notesWilh. Wilhelmsen Holding ASA Annual Report 2019Accounting policies Wilh. Wilhelmsen Holding group and Wilh. Wilhelmsen Holding ASA identified as the board and Group Management Team, consisting of the group chief executive officer (group CEO) and three executive managers. they arise. Borrowing costs are capitalised to the extent that they are directly related to the acquisition of the asset. 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. Land is not depreciated. Other tangible assets are depreciated over the following expected useful lives: Property Other tangible assets 10-50 years 3-10 years See note 12 and 21 to the group accounts for transactions with joint ventures and associates and note 7 and 15 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. 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 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 The group earns revenue from both sale of goods, rendering of services and rental activities. Information about the revenue streams and associated accounting principles are disclosed in note 3. 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. Sales costs include all remaining sales, administrative and storage costs. 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. See note 6 to the group accounts and note 2 and 17 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 46 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 going forward. LEASES The group has applied IFRS 16 using the modified retrospective approach. The impact of changes in accounting policies and impact of the initial application is disclosed in note 8 in the group accounts and note 4 in the parent accounts. Identifying a lease At the inception of a contract, the group assesses whether the contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To determine whether a contract conveys the right to control the use of an identified asset, the group assesses whether: • The agreement creates enforceable rights of payment and obligations • The identified asset is physically distinct • It has the right to obtain substantially all of the economic benefits from use of the asset • It has the right to direct the use of the asset • The supplier does not have a substantive right to substitute the asset throughout the period of use Lessee Separating components in the lease contract: For contracts that constitutes, or contains a lease, the group separates lease components if it benefits from the use of each underlying asset either on its own or together with other resources that are readily available, and the underlying asset is neither highly dependent on, nor highly interrelated with, the other underlying assets in the contract. The group then accounts for each lease component within the contract as a lease separately from non-lease components of the contract. The group allocates the consideration in the contract to each lease component on the basis of the relative stand-alone price of the lease component and the aggregate stand-alone price of the non-lease components. If an observable stand-alone price is not readily available, the group estimates this price by maximising the use of observable information. Recognition of leases and exemptions: At the lease commencement date, the group recognizes a lease liability and corresponding right-of-use asset for all lease agreements in which it is the lessee, except for the following exemptions applied: • Short-term leases (defined as 12 months or less) • Low value assets For these leases, the group recognizes the lease payments as other operating expenses in the statement of profit or loss when they incur. Measuring the lease liability: The lease liability is initially measured at the present value of the lease payments for the right to use the underlying asset during the lease term that are not paid at the commencement date. The lease term represents the non- cancellable period of the lease, together with periods covered by an option to extend the lease when the group is reasonably certain to exercise this option, and period’s covered by an option to terminate the lease if the group is reasonably certain not to exercise that option. GroupAccounts and notesWilh. Wilhelmsen Holding ASA Annual Report 2019 Accounting policies Wilh. Wilhelmsen Holding group and Wilh. Wilhelmsen Holding ASA Accounting policies Wilh. Wilhelmsen Holding group and Wilh. Wilhelmsen Holding ASA The lease payments included in the measurement comprise of: reversed. Gain or loss on the sale of a business includes the carried amount of goodwill related to the sold business. • Fixed lease payments (including in-substance fixed payments), less any lease incentives receivable • Variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the commencement date • Amount expected to be payable by the group under residual value guarantees • The exercise price of a purchase option, if the group is reasonably certain to exercise that option • Payments of penalties for terminating the lease, if the lease term reflects the group exercising an option to terminate the lease. The group do not include variable lease payments in the lease liability arising from contracted index regulations subject to future events, such as inflation. Instead, the group recognizes these costs in profit or loss in the period in which the event or condition that triggers those payments occurs. The lease liability is subsequently measured by increasing the carrying amount to reflect interest on the lease liability, reducing the carrying amount to reflect the lease payments made and remeasuring the carrying amount to reflect any reassessment or lease modifications, or to reflect adjustments in lease payments due to an adjustment in an index or rate. Group presents its lease liabilities as separate line items in the statement of financial position. Measuring the right-of-use asset: The right-of-use asset is initially measured at cost. The cost of the right-of-use asset comprise: • The amount of the initial measurement of the lease liability • Any lease payments made at or before the commencement date, less any lease incentives received • Any initial direct costs incurred by the group • An estimate of costs to be incurred by the group in dismantling and removing the underlying asset, restoring the site on which it is located or restoring the underlying asset to the condition required by the terms and conditions of the lease, unless those costs are incurred to produce inventories. The right-of-use asset is subsequently measured at cost less accumulated depreciation and impairment losses. The group applies the depreciation requirements in IAS 16 Property, Plant and Equipment in depreciating the right-of-use asset, except that the right-of-use asset is depreciated from the commencement date to the earlier of the lease term and the remaining useful life of the right-of-use asset. The group has not applied the revaluation model for its right of use asset for leased buildings. The group applies IAS 36 Impairment of Assets to determine whether the right- of-use asset is impaired and to account for any impairment loss identified. Group presents it’s right-of-use assets as separate line items in the consolidated statement of financial position. 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 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. 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; • 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. 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. FINANCIAL ASSETS From 1 January 2018, the group classifies its financial assets in the following measurement categories: 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 when impairment indicators is present. • those to be measured subsequently at fair value through profit or loss (FVPL) • those to be measured at amortised cost Management determines the classification of financial assets at their initial recognition. Goodwill from acquisition of businesses is tested annually for impairment and carried at cost less impairment losses. Impairment losses on goodwill are not Financial assets subsequently carried at fair value are initially recognised at fair value, and transaction costs are expensed in the income statement. 47 GroupAccounts and notesWilh. Wilhelmsen Holding ASA Annual Report 2019 Accounting policies Wilh. Wilhelmsen Holding group and Wilh. Wilhelmsen Holding ASA The group and the parent company classified financial assets under IAS 39 into the following categories: trading financial assets at fair value through profit or loss, loans and receivables, and available-for-sale financial assets. The classification depended on the purpose of the asset. Operating leases For operating leases, the group recognises lease payments as other income, mainly on a straight-line basis, unless another systematic basis is more representative of the pattern in which benefit from the use of the underlying asset is diminished. The group recognise costs incurred in earning the lease income in other operating expenses. The group adds initial direct costs incurred in obtaining an operating lease to the carrying amount of the underlying asset and recognise those costs as an expense over the lease term on the same basis as the rental income. Current financial 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. Current financial 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. 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 19 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 in the income statement. 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 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). 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. 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 2019. 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. 48 GroupAccounts and notesWilh. Wilhelmsen Holding ASA Annual Report 2019Accounting policies Wilh. Wilhelmsen Holding group and Wilh. Wilhelmsen Holding ASA 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. 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. Sensitivity of the lease liability The group cannot always determine the interest rate implicit in the lease, therefore, it uses its incremental borrowing rate to measure lease liabilities. The incremental borrowing rate reflects what the group ‘would have to pay’, which requires estimation when no observable rates are available (such as for subsidiaries that do not enter into financing transactions) or when the rates need to be adjusted to reflect the term and currency of the lease. In determining the lease term, management considers all facts and circumstances that create an economic incentive to exercise an extension option, or not exercise a termination option. Extension options (or periods after termination options) are only included in the lease term if the lease is reasonably certain to be extended (or not terminated). The assessment is reviewed if a significant event or a significant change in circumstances occurs which affects this assessment and that is within the control of the lessee. See note 8 in the group accounts for additional information. 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. Impairment of goodwill Assets that have an indefinite useful life, for example goodwill, are not subject to amortisation and are tested annually for impairment. 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. 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. 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 liquidated 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 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. 49 GroupAccounts and notesWilh. Wilhelmsen Holding ASA Annual Report 2019Note 1 Combined items, income statement USD mill OPERATING REVENUE Ships service revenue Supply services revenue Ship management and crewing revenue Revenue from services Total operating revenue GAIN ON SALE OF ASSETS Gain on sale of assets Total gain on sale of assets OTHER EXPENSES Office expenses Communication and IT expenses External services Travel and meeting expenses Marketing expenses Lease expenses* Other operating expenses Total other expenses * Included in other operating expenses in 2018. FINANCIAL INCOME AND EXPENSES Financial items Investment management Interest income Dividend from financial assets Other financial items Net financial items Financial – interest expenses Interest expenses Interest expenses – finance lease Other financial expenses Net financial – interest expenses Financial – currency gain/(loss) 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 gain/(loss) Financial income/(expenses) Spesification of financial income and expenses Net financial items Financial income Net financial – interest expenses Net financial currency loss Financial expenses See note 19 on financial risk and the section of the accounting policies concerning financial derivatives. 50 Note 2019 2018 2/3 2/3 2/3 2/3 21 8 21 528 249 45 13 836 14 14 (16) (26) (20) (9) (3) (10) (64) (148) 12 4 16 1 33 (25) (11) (5) (41) 7 (10) (10) 4 (8) (17) 33 33 (41) (8) (49) 535 283 41 8 867 4 4 (58) (27) (31) (8) (4) (78) (206) (6) 4 13 5 16 (29) (5) (34) (4) (3) (2) (15) (23) (41) 16 16 (34) (23) (57) GroupAccounts and notesWilh. Wilhelmsen Holding ASA Annual Report 2019Note 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 241 offices in some 62 countries. 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. 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. 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 2019 is as follows: USD mill Maritime Services Supply Services Holding and Investments Eliminations Total 2019 2018 2019 2018 2019 2018 2019 2018 2019 2018 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) Non-controlling interests Profit/(loss) to the owners of the parent 582 9 591 (181) (204) (103) (29) (517) 73 4 (27) (24) 27 (12) 15 1 14 580 2 582 (198) (212) (130) (16) (556) 26 4 (61) (37) (68) 13 (55) 2 (56) 249 6 255 (65) (89) (42) (37) (233) 22 283 3 285 (68) (96) (71) (26) (260) 25 6 9 (19) 8 (3) 5 1 4 (15) 20 (4) 15 4 11 11 11 11 11 (1) (14) (9) (5) (28) (17) 39 61 26 109 1 109 13 96 (1) (13) (12) (1) (26) (15) 23 (56) 10 (38) 3 (35) (12) (23) (7) (7) 5 1 7 0 0 0 0 (7) (7) 6 7 0 0 0 (0) 836 14 850 (247) (306) (148) (71) (772) 78 49 34 (17) 144 (15) 130 16 114 867 4 871 (267) (320) (206) (42) (835) 36 36 (116) (41) (86) 12 (75) (6) (69) Supply Services; one customer represent about 20% of the total revenue. 51 GroupAccounts and notesWilh. Wilhelmsen Holding ASA Annual Report 2019 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 31.12.19 31.12.18 31.12.19 31.12.18 31.12.19 31.12.18 31.12.19 31.12.18 31.12.19 31.12.18 10 27 867 675 15 102 27 31 7 2 848 623 24 88 14 18 (6) (16) (20) (35) (30) 57 151 728 54 156 567 1 003 1 018 675 25 102 400 153 650 23 88 385 140 1 753 1 624 (57) (50) 3 293 3 079 1 523 1 431 149 144 48 6 27 23 9 17 1 753 1 624 1 880 1 821 202 11 675 49 476 196 12 533 120 397 3 293 3 079 36 48 (17) (3) (30) (50) 173 181 (21) (1) (35) (57) (6) (6) 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 42 145 228 11 19 327 116 887 204 (1) 11 247 22 404 887 42 149 188 11 27 13 294 110 834 237 (1) 12 197 97 292 834 5 5 5 6 478 377 126 159 7 6 82 7 710 154 54 401 22 80 710 107 12 671 152 54 330 18 117 671 Investments in tangible assets 14 19 20 29 1 IFRS16 leasing *Right-of-use (included in tangible assets) **Leasing debt (included in interest-bearing debt) 46 49 108 113 24 25 52 GroupAccounts and notesWilh. Wilhelmsen Holding ASA Annual Report 2019 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 in 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 2019 2018 2019 2018 2019 2018 27 27 (4) 24 29 (21) 1 83 3 (8) (3) 3 (5) (9) (15) (48) (73) 6 110 116 (68) 61 (4) 37 16 (20) (2) 20 3 (13) 18 (2) 7 1 (15) (47) (61) (34) 144 110 8 (6) 19 37 (18) (8) 32 10 (20) 39 1 29 (48) (12) (5) (66) (5) 12 7 20 (9) 15 26 (6) (3) 42 17 (24) 6 1 1 (0) (17) (14) (6) (38) 4 8 12 109 (61) (39) (26) 5 3 (8) 19 (1) 3 (3) 23 42 (22) (22) 12 18 31 (38) 56 (23) (10) 1 5 (9) (3) 40 36 (27) (3) 7 (23) 3 15 18 USD mill Europe Americas Asia & Africa Oceania Total 2019 2018 2019 2018 2019 2018 2019 2018 2019 2018 Total income Total assets Investment in tangible assets Russia is defined as Europe. 479 513 2 940 2 367 25 38 70 25 1 66 34 273 297 9 262 562 10 27 31 1 30 115 850 871 3 293 3 079 36 48 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. 53 GroupAccounts and notesWilh. Wilhelmsen Holding ASA Annual Report 2019 Note 3 Revenue from contracts with customers OPERATING REVENUE USD mill Revenue segments Maritime services Supply services 2019 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 366 366 129 129 366 366 129 129 358 358 126 126 358 358 126 126 45 45 45 45 41 41 41 41 42 42 39 3 42 55 55 55 55 216 216 24 24 216 216 24 24 9 9 9 9 238 238 26 26 18 18 238 238 26 26 18 18 11 11 11 11 11 11 11 11 (7) (7) (7) (7) (7) (7) (7) (7) 836 836 405 431 836 2018 867 867 413 454 867 MARITIME SERVICES Marine Products – Sale of goods The group offers a wide range of products to the maritime industry. The products are delivered to the customer at vessel or warehouse, which is also the point in time where control transfers to the customer and revenue is recognized net of any discounts. Some customers are entitled to retrospective volume discounts based on aggregate sales over a defined period. Revenue from these sales is recognized based on the price specified in the contract, net of the estimated volume discounts. Accumulated experience is used to estimate and provide for the discounts, using the expected value method, and revenue is only recognized to the extent that it is highly probable that a significant reversal will not occur. A refund liability (included in other current liabilities) is recongized for expected volume discounts payable to customers in relations to sales made until the end of the reporting period. The contracts typically has payment terms of 30 days after delivery, and no significant financing component is identified. Other revenue in the Maritime services segment These revenues mainly consist of sale of ropes to non-maritime customers and chemicals for the consumer markets. Most of the sales are to wholesale customers. Revenue is recognised net of any discounts at delivery. Time and place of delivery, and transfer of control, depend on agreed delivery terms but usually when the customer receives the goods. The group is acting as an agent, and is entitled to a defined commission of the insurance premium. The comission is per year and recognised on a straight line basis thorugh the year. SUPPLY SERVICES Operations NorSea Group provides supply bases and integrated logistics solution to the offshore industry. 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). Ships Agency – Sale of services The group offers ships agency services coverering 2 200 port locations world wide. The agents facilitates efficent port calls for vessels, by procuring goods and services on behalf of the customers and to assist with required permits and custom declaration assocuated with the port call. Prior to the port call, the customer is required to make available funds for the expected disbursements (pre funding). Following the completion of the services the group prepare a final disbursement account to the customer documenting all disbusement for the port call. The group is only acting as an agent, and control of goods and services transfers directly from the relevant suppliers to the customer. The group does not have inventory risk or the discretion on establishing prices. For the services rendered, the group is entitled to a fee that consist of a payment based on services delivered to customer. Technical / crewing management Wilhelmsen Ship Management (WSM) offers technical management and crew management for all vessel segments. Ususally the contracts will include an annual compensation payable in monthly arreas, in addition the ship owner is charged a monthly fee per crew onboard the vessel. The ship owner simultaniously receives and consumes the benefits provided by the entity, and hence revenenue is recognised over time. Since WSM has the right to invoice the services delivered at the end of each month, this is also the basis for revenue recognition. The invoices are payable 30 days after the end of each month. Property The group is a lessor for parts of the properties located on or near the bases. This is typically warehouses and some office facilities. This is ordinary operational lease contracts with a typical duration of 2-10 years. For contracts with a duration of more than one year the rent is adjusted annually based on commonly used indexes. Lease revenue is recognised on a straight line basis over the lease term. HOLDING AND INVESTMENTS The operation revenue is related to inhouse services to external customers as house rent, canteen services, HR services and salary services. INFORMATION ABOUT TRANSACTION PRICE ALLOCATED TO UNSATISFIED PERFORMANCE OBLIGATIONS In general the contracts with customers are of a short term nature, except for the framework agreements described under Supply Services and Ship Management. For Supply Services the framework agreements can be for a period of up to 10 years, but do not define any minimum volume. For Ship Management contracts the customer can terminate the contract without cause on a 3 months basis. Because of this there is no significant unsatisfied performance obligations as of year end. 54 GroupAccounts and notesWilh. Wilhelmsen Holding ASA Annual Report 2019 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 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 Vietnam Tananger, Norway Tananger, Norway Hammerfest, Norway Hammerfest, Norway Hammerfest, Norway Stord, Noway Stavanger, Norway An overview of actual equity holdings can be found in the presentation of company structure on page 138. 2019 2018 Voting share/ownership 37.8% 40.0% 45.9% 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% 25.0% 25.0% 25.0% 50.0% 50.0% 50.0% 50.0% 49.0% 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% 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% 25.0% 25.0% 25.0% 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% 55 GroupAccounts and notesWilh. Wilhelmsen Holding ASA Annual Report 2019Cont. note 4 Investments in associates USD mill Share of profit/(loss) from associates WalWil group Other associates Holding and Investments Other associates Maritime Services Other associates Supply Services Share of profit 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 Associates in Supply Services Dividend Disposals associates Financial derivatives in associates Other comprehensive income Share of equity 31.12 There are no contingent liabilities relating to the group’s interest in the associates. 2019 2018 39 4 (2) 41 23 (1) 4 27 864 847 900 41 3 (29) (31) (2) 883 900 27 (16) (5) (6) 900 Set out below are the summarised financial information, 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%). WalWil Other 2019 2018 2019 2018 3 909 4 065 (3 821) 244 (152) (15) 78 (20) 52 (16) 36 (3 551) 358 (190) (56) 112 (10) 93 (2) 90 19 57 (52) 4 5 (1) 4 3 10 75 (60) 16 (6) 10 (2) 8 (1) 7 16 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 56 GroupAccounts and notesWilh. Wilhelmsen Holding ASA Annual Report 2019 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 Non-controlling interest Total liabilities Net assets WalWil Other 31.12.2019 31.12.2018 31.12.2019 31.12.2018 6 747 650 399 7 796 1 729 2 108 175 863 239 6 110 818 485 7 414 3 055 361 530 588 228 5 114 4 767 2 682 2 647 22 45 39 105 4 14 52 1 71 34 174 34 77 285 68 5 66 35 174 112 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. The effects of IFRS 16 lease are included in the balance 31 December 2019. USD mill RECONCILIATION OF SUMMARISED FINANCIAL INFORMATION Net assets 01.01 Profit for the period Other comprehensive income Currency translation differences Disposal 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 31.12.2019 31.12.2018 31.12.2019 31.12.2018 2 647 93 (12) 6 (51) 2 682 1 014 (2) (148) 864 2 563 52 (16) 48 2 647 1 001 (3) (151) 847 112 4 (1) (66) (15) 34 15 5 20 127 8 (1) (1) (20) 112 53 53 *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 2019 was USD 398 million (2018: USD 547 million). WalWil is a separately listed company on Oslo Stock Exchange. The market capitalisation of its shares at year end is 49% 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 2019 2018 8 41 49 121 883 1 003 9 27 36 117 901 1 018 The group’s share of profit, after tax from joint ventures and associates is recognised in the income statement as financial income. All joint ventures and associates are equity consolidated. 57 GroupAccounts and notesWilh. Wilhelmsen Holding ASA Annual Report 2019 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 2019 2018 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, 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. However, see note 23. 58 GroupAccounts and notesWilh. Wilhelmsen Holding ASA Annual Report 2019Cont. 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) Investments in joint ventures 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 2019 2018 96 (75) (8) (4) (1) 8 76 44 121 75 (59) (5) (1) (1) 9 69 48 117 2019 2018 167 27 16 209 68 8 (4) 3 76 98 7 28 133 209 153 21 6 180 69 9 (4) (5) 68 86 3 22 111 180 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 2019 2018 2019 2018 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 139 (117) (7) 15 16 (2) 14 14 182 (149) (15) 19 (5) 13 (1) 12 12 3 10 11 (1) (1) 8 (2) 6 (1) 4 4 1 (1) (3) 7 (3) 5 (1) 3 3 59 GroupAccounts and notesWilh. Wilhelmsen Holding ASA Annual Report 2019 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 31.12.2019 31.12.2018 31.12.2019 31.12.2018 209 50 30 289 118 12 50 179 110 179 39 11 229 92 3 38 132 96 124 3 3 130 78 2 7 88 43 128 3 1 132 81 2 7 90 42 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 2019 2018 2019 2018 Opening net assets 31.12 Profit for the period Other comprehensive income Currency translation differences Dividend to shareholder Closing net assets 31.12 WWH share Goodwill/ Surplus value / Reversal of internal gain 96 12 6 (4) 110 55 48 93 14 (11) 96 48 52 Carrying value 31.12 102 100 42 4 (3) 43 21 (3) 18 46 3 (7) 42 21 (4) 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% 73.46% 100% 100% 100% 75.15% 100% 73.46% 100% The group’s principal subsidiaries at 31 December 2019 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. *At 31.12.2019 Treasure ASA had 465 000 own shares. 60 GroupAccounts and notesWilh. Wilhelmsen Holding ASA Annual Report 2019Note 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 2019 Group CEO Group CFO President and CEO Wilhelmsen Ships Service President and CEO Wilhelmsen Ship Management CEO NorSea Group 2018 Group CEO Group CFO President and CEO Wilhelmsen Ships Service President and CEO Wilhelmsen Ship Management CEO NorSea Group Note 2019 2018 11 Pay Bonus Pension premium *Other remuneration 569 401 358 234 254 598 416 376 272 267 231 49 112 31 9 226 55 109 51 9 216 50 24 122 20 208 57 24 102 21 93 38 105 243 116 122 56 65 243 23 10 31 306 255 24 10 31 320 2019 2018 1 028 3 807 10 230 15 065 872 3 879 9 334 14 085 14 575 14 357 Total 1 016 501 588 425 388 Total in NOK thousand 8 939 4 404 5 170 3 741 3 410 1 276 10 385 642 630 482 362 5 228 5 130 3 923 2 946 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. 61 GroupAccounts and notesWilh. Wilhelmsen Holding ASA Annual Report 2019Cont. 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 2019 2018 80 48 48 48 48 80 46 46 46 46 The board’s remuneration for fiscal year 2019 will be approved by the general meeting 29 April 2020. Remuneration of the nomination committee, for both Wilh. Wilhelmsen Holding ASA and Treasure ASA, totalled USD 21 thousand for 2019 (2018: 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 21 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 2019, a provision has been made related to the four-year LTI programme ending on 31 December 2020. Potential payment will be done in March 2021. The provision has been calculated based on the gap between value adjusted equity per 31 December 2019 and target for 31 December 2020, risk free return, and standard deviation of historic annual value creation. No provision has been made for the LTI programme expiring on 31 December 2022. For further details, see note 17 Statement on the remuneration for senior executives in the parent company accounts. 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. 2019 2018 2.5 0.4 1.4 0.1 4.4 2.9 0.4 1.0 0.3 4.6 62 GroupAccounts and notesWilh. Wilhelmsen Holding ASA Annual Report 2019 Note 7 Property, vessels and other tangible assets USD mill TANGIBLE ASSETS 2019 Cost 1.1 Acquisition Reclass/disposal Currency translation differences Cost 31.12 Accumulated depreciation and impairment losses 1.1 Depreciation/amortisation Reclass/disposal Impairment Currency translation differences Accumulated depreciation and impairment losses 31.12 Carrying amounts 31.12 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 Economic lifetime Depreciation schedule Property Vessels Other tangible assets Total tangible assets 550 19 (5) (5) 560 (162) (17) 4 (1) 1 (175) 384 575 28 (18) (34) 550 (159) (19) 7 9 (162) 388 35 35 (18) (1) (19) 16 36 1 (2) 35 (17) (1) 1 (17) 18 251 17 (24) 1 244 (89) (11) 10 1 (90) 154 269 24 (32) (10) 251 (114) (11) 32 5 (89) 162 10-50 years Straight-line 25 years Straight-line 3-10 years Straight-line 836 36 (29) (4) 839 (269) (29) 13 (1) 2 (284) 555 880 53 (50) (46) 836 (290) (31) 39 15 (269) 567 63 GroupAccounts and notesWilh. Wilhelmsen Holding ASA Annual Report 2019Cont. note 7 Goodwill and other intangible assets USD mill INTANGIBLE ASSETS 2019 Cost 01.01 Acquisition Reclass/disposal Currency translation differences Cost 31.12 Accumulated amortisation and impairment losses 01.01 Amortisation/impairment Currency translation differences Accumulated amortisation and impairment losses 31.12 Carrying amounts 31.12 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 Segment-level summary of the goodwill allocation: Maritime Services Total goodwill allocation The group conducted no material acquisition in 2019 or 2018. Goodwill Other intangible assets Software and licences Total intangible assets 124 (2) (1) 121 (1) (1) (2) 119 133 (3) (6) 124 (2) 1 (1) 123 34 1 35 (15) (4) (19) 16 16 2 16 1 34 (7) (7) (2) 1 (15) 20 67 5 (1) 71 (53) (4) (56) 16 95 1 (26) (4) 67 (63) (4) 11 3 (53) 14 2019 119 119 225 6 (2) (2) 227 (68) (9) 1 (77) 151 244 3 (12) (10) 225 (72) (11) 11 4 (68) 156 2018 123 123 64 GroupAccounts and notesWilh. Wilhelmsen Holding ASA Annual Report 2019 Cont. note 7 Goodwill and other intangible assets Impairment testing of goodwill In the Maritime Services segment, USD 119 million relate to business area Ships Service Service (all activities in the Maritime Services segment except for technical /crewing management) mainly to the acquisition of Unitor ASA and Kemetyl. The goodwill figures are originally calculated in NOK and USD (2018: 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 2019 (analogus for 2018). USD/NOK Discount rate Growth rate Increase in material cost Increase in pay and other remuneration Increase in other expenses 2019 2018 8.77 7.4% 1-5% 1-5% 1-3% 2-4% 8.30 7.6% 1-5% 1-5% 0-3% 0-3% 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. 65 GroupAccounts and notesWilh. Wilhelmsen Holding ASA Annual Report 2019Note 8 Leases The IFRS 16 Leasing standard was effective from 1 January 2019. The standard significantly changed how the group accounts for its lease contracts for land, buildings and equipment previously accounted for as operating leases. All leases are brought into the balance sheet increasing the groups assets and liabilities, in addition to affecting income statement figures. This note summarizes the impact on the financial reporting of Wilhelmsen group from implementing the new standard. The Lease Contracts The group 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 are presented for these contracts which previously were reported as operating leases. Recognition and Measurement Approach on Transition The group applied 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. In calculating the present value of lease payments, the group uses the incremental borrowing rate at the lease commencement date if the interest rate implicit in the lease is not readily determinable. To arrive at the incremental borrowing rate the group applies the respective country’s (economic environment) risk free rate for the term corresponding to the lease term, adjusted for own credit risk. The right-of-use assets are 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. • 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. • 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 The net effect of implementation of IFRS 16 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 Prepayments and currency translation Differences explained USD mill Reconciliation of lease commitment and lease liability 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 at 1 January 2019 220 222 2 2 2 204 16 (1) 15 234 (14) 220 66 GroupAccounts and notesWilh. Wilhelmsen Holding ASA Annual Report 2019Cont. note 8 Leases RIGHT-OF-USE-ASSETS The group leases several assets such as buildings, machinery, equipment and vehicles. The group’s right-of-use assets are categorised and presented in the table below: USD mill 2019 Acquisition cost 1.1 Change of estimates Currency exchange differences Acquisition cost 31.12 Accumulated depreciation and impairment 1.1 Depreciation Currency exchange differences Accumulated depreciation and impairment 31.12 Carrying amount of right-of-use assets 31.12 Lower of remaining lease term or economic life Depreciation method Lease liabilities 2019 Undiscounted lease liabilities and maturity of cash outflows Less than 1 year 1-2 years 2-3 years 3-4 years 4-5 years More than 5 years Total undiscounted lease liabilities at 31.12 2019 Summary of the lease liabilities in the financial statements At initial application 01.01.2019 Cash payments for the principal portion of the lease liability Cash payments for the interest portion of the lease liability Interest expense on lease liabilities Change of estimates Currency exchange differences Total lease liabilities at 31.12 Current lease liabilities Non-current lease liabilities Buildings and land Machinery, equipment and vehicles Total intangible assets 210 (11) (8) 192 (26) (1) (28) 164 12 12 (4) (4) 8 5-12 years Linear 3-8 years Linear 222 (11) (8) 204 (30) (1) (31) 173 Total (36) (33) (30) (29) (27) (63) (217) Total 220 (24) (11) 11 (20) 5 181 27 154 The leases do not contain any restrictions on the group’s dividend policy or financing. The group does not have significant residual value guarantees related to its leases to disclose. Summary of other lease expenses recognised in income statement Variable lease payments expensed in the period Operating expenses related to short-term leases (including short-term low value assets) Operating expenses period related to low value assets (excluding short-term leases included above) Total lease expenses included in other operating expenses Total 1 6 3 10 67 GroupAccounts and notesWilh. Wilhelmsen Holding ASA Annual Report 2019 Cont. note 8 Leases Practical expedients applied The group leases personal computers, IT equipment and machinery with contract terms of 1 to 3 years. The group has elected to apply the practical expedient of low value assets and does not recognise lease liabilities or right- of-use assets. The leases are instead expensed when they incur. The group has also applied the practical expedient to not recognise lease liabilities and right- of-use assets for short-term leases, presented in the table above. Further, the group has lease commitments, not yet commenced and therefore not included in the lease liabilities of approximately USD 4 million as of 31 December 2019. exercised during the last period of the lease terms. The group assesses at the commencement whether it is reasonably certain to exercise the renewal right. The option related to headquarter, at Lysaker is removed from right-of-use assets at 31 December 2019. Purchase options The group leases machinery, equipment and vehicles with lease terms of 3 to 5 years. Some of these contracts includes a right to purchase the assets at the end of the contract term. The group assesses at the commencement whether it is reasonably certain to exercise the purchase right. All the options are based on market value. Extension options The group’s lease of buildings have lease terms that varies from 5 years to 25 years, and several agreements involve a right of renewal which may be Subleases The group has subleased an immaterial part of its redundant office buildings, classified as an operating lease. Note 9 Tax Ordinary taxation The ordinary rate of corporation tax in Norway is 22% of net profit for 2019 (2018: 23%). 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% (2018: 22%). 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 2019 2018 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 22% Profit/(loss) before tax 22% tax (2018: 23%) Tax effect from: Permanent differences Non-taxable income Share of profit 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 (8) (12) 5 (15) 144 32 7 (19) (11) 6 15 (10) (10) 32 12 (86) (20) 14 (4) (8) 1 5 (12) Effective tax rate for the group 10.2% 13.4% 68 GroupAccounts and notesWilh. Wilhelmsen Holding ASA Annual Report 2019 Cont. note 9 Tax USD mill Net deferred tax assets at 01.01 Currency translation differences Tax charged to equity 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 2019 2018 42 (1) 5 46 57 (11) 46 12 (2) 1 32 42 54 (12) 42 Deferred tax asset and liabilities has been netted in the balance sheet with USD 1 million (2018: USD 6 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 31.12.2018 Through income statement Charged directly to equity Currency translations Deferred tax liabilities at 31.12.2019 At 31.12.2017 Through income statement Charged directly to equity Currency translations Deferred tax liabilities at 31.12.2018 Fixed assets Other Total (13) 1 1 (11) (16) 3 (13) (5) 4 (1) (3) (2) (5) (18) 5 1 (12) (19) 1 (18) 69 GroupAccounts and notesWilh. Wilhelmsen Holding ASA Annual Report 2019 Cont. note 9 Tax USD mill Deferred tax assets At 31.12.2018 Through income statement Charged directly to equity Currency translations Deferred tax assets at 31.12.2019 At 31.12.2017 Through income statement Discontinued operations Currency translations Deferred tax assets at 31.12.2018 Non current assets and liabilities Current assets and liabilities Tax losses carried forward 19 (14) 1 6 14 4 1 19 25 (12) (2) 11 (1) 26 25 17 25 42 18 1 (2) 17 Total 60 1 (2) 59 31 31 1 (2) 60 The mainly part of tax loss carry forward is related to entities in Norway and USA, without expiration of the tax loss carry forward. 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. There are currently no plans to dispose of such companies. Note 10 Earnings per shares Earnings per share taking into consideration the number of outstanding shares in the period. WWH conducted a share buyback program in September 2019. At 31 December 2019 WWH owns a total of 1 823 824 own shares, split on 537 092 A-shares and 1 286 732 B-shares. 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 an average of 45 947 868 shares for 2019 and 46 403 824 shares for 2018. See note 10 in the parent accounts, for an overview of the largest shareholders at 31 December 2019. 70 GroupAccounts and notesWilh. Wilhelmsen Holding ASA Annual Report 2019 Note 11 Pension Description of the pension scheme The group’s defined contribution pension schemes for Norwegian employees are with financial institutions providing solutions based on investment funds. 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. 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. 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 a few countries without deep markets in such bonds, the market rates on government bonds are used. In addition, the group has agreements on early retirement. These obligations are mainly financed from operations. 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. The group has obligation towards one employee in the group’s senior executive management. The obligation is mainly covered throgh group annuity policies in Storebrand. Number of people covered by pension schemes at 31.12 2019 2018 2019 2018 Funded Unfunded In employment On retirement (inclusive disability pensions) Total number of people covered by pension schemes 16 140 156 18 146 164 4 26 30 3 27 30 Financial assumptions for the pension calculations: 2019 2018 31.12.2019 31.12.2018 Expenses Commitments Discount rate Anticipated pay regulation Anticipated increase in National Insurance base amount (G) Anticipated regulation of pensions 2.70% 2.50% 2.50% 0.10% 2.30% 2.00% 2.00% 0.10% 2.30% 2.00% 2.00% 0.10% 2.70% 2.50% 2.50% 0.10% USD mill Pension expenses Service cost Net interest cost 2019 2018 Funded Unfunded Total Funded Unfunded Total Cost of defined contribution plan Net pension expenses 9 9 0 9 10 9 10 1 1 9 10 USD mill Remeasurements – Other comprehensive income Total remeasurements included in OCI 2019 2018 (1) 1 71 GroupAccounts and notesWilh. Wilhelmsen Holding ASA Annual Report 2019 Cont. note 11 Pension USD mill Pension obligations Defined benefit obligation at end of prior year Effect of changes in foreign exchange rates Service cost 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 Interest income Benefit payments from plan Settlement payments from plan assets Return on plan assets (excluding interest income) Gross pension assets 31.12 USD mill Total pension obligations Defined benefit obligation Fair value of plan assets Net liability (asset) USD mill Historical developments 2019 2018 40 1 1 (5) 36 20 1 (1) (4) 16 45 (2) 1 2 (2) (2) (2) 40 22 (1) (1) 20 2019 2018 Funded Unfunded Total Funded Unfunded Total 17 16 1 19 19 36 16 20 20 19 1 19 19 39 19 20 31.12.2019 31.12.2018 31.12.2017 31.12.2016** 31.12.2015 31.12.2014 Gross pension obligations, including payroll tax Gross pension assets Net recorded pension obligations (36) 16 (20) (40) 20 (20) (45) 22 (23) (71) 7 (63) (73) 6 (67) (109) 17 (92) **Net liability at 31.12.2016 and years before includes discontinued operations. 72 GroupAccounts and notesWilh. Wilhelmsen Holding ASA Annual Report 2019 Note 12 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* Related party 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 2019 2018 19 19 19 17 19 19 1 23 25 233 1 1 82 317 3 25 28 223 16 216 455 4 19 23 229 2 80 311 23 23 222 21 209 452 *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 and the earn out was paid in 2019. ***Maritime Services has 612 738 (2018: 611 683) cylinders booked as other tangible asset in the balance sheet, see note 7. The cylinders are valued at USD 112 million (2018: USD 114 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 85 million (2018: USD 77 million). 73 GroupAccounts and notesWilh. Wilhelmsen Holding ASA Annual Report 2019 Note 13 Receivables 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. The expected loss rates are based on the payment profiles of sales over a period of 36 month before 31 December 2019 respectively and the 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. USD mill 31 December 2019 Expected loss rate Gross carrying amount – trade receivables Loss allowance 31 December 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% 216 0 0% 208 0 1% 7 (0) 1% 3 0 3% 7 (0) 20% 10 (2) 57% 7 (4) 21% 12 (2) ACCOUNT RECEIVABLES At 31 December 2019, USD 21 million (2018: USD 20 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 2019 2018 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 19 on credit risk. ACCOUNT PAYABLES USD mill Account payables per segment Maritime Services Supply Services Holding and Investments Total account payables See note 19 on credit risk. 74 7 7 7 4 4 176 53 3 233 3 8 9 6 (1) 4 159 70 229 2019 2018 197 23 3 223 181 40 1 222 GroupAccounts and notesWilh. Wilhelmsen Holding ASA Annual Report 2019 Note 14 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. USD mill Financial assets to fair value At 1 January Acquisition Reclassified 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) Survitec UK Ltd. Hyundai Glovis Other Total financial assets to fair value 2019 2018 650 9 2 (20) 34 675 92 18 560 6 675 801 6 (27) (1) (13) (116) 650 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, and listed on the Australian Securities Exchange (ASX). Following sale of 10 million shares in 2019, Wilhelmsen held 40 million shares in Qube per 31 December 2019 (2.5% of total). The shares in Qube serve as collateral for a credit facility. See note 18. Survitec Group holds market-leading positions worldwide in marine, offshore, defence and aerospace survival technology. Changes in fair value of the investment in Survitec has been recognised through the income statement. While Wilhelmsen retains a 20% ownership in Survitec, the investment is recognised with a fair value of nil end of December 2019. 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 2019, Treasure ASA group held 4.5 million shares in Glovis (12.04% of total). Treasure ASA is listed on the Oslo Stock Exchange. 75 GroupAccounts and notesWilh. Wilhelmsen Holding ASA Annual Report 2019Note 15 Inventories USD mill Inventories Raw materials Goods/projects in process Finished goods/products for onward sale Others Total inventories Obsolescence allowance, deducted above Note 16 Current financial investments USD mill Market value current financial investments Equities Bonds Total current financial investments 2019 2018 7 2 73 1 82 2 7 2 65 74 3 2019 2018 57 44 102 42 45 88 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 at 31.12 10 4 The parent company’s portfolio of financial investments USD 102 million is held as collateral within a securities’ finance facility. See note 18. Note 17 Cash, restricted bank deposits and undrawn credit facilities USD mill Payroll tax withholding account 2019 2018 1 1 Companies that do not have payroll tax withholding account use bank guarantees. As per 31.12.2019 total guarantees amounted to USD 6.3 million (2018: USD 2.6 million). Committed undrawn credit facilities 299 364 Committed undrawn credit facilities are key part of the liquidity reserve, amounting to USD 299 million at 31.12.2019 (2018: USD 364 million). Cash and cash equivalents Banks Total cash and cash equivalents 153 153 140 140 The group has cash pool arrangements within each segments and this is presented as cash and cash equivalents. WWH ASA (Holding and Investment segment) owns and operates a multicurrency cash pool with a header-account in NOK, comprising of subsidiaries registered in Norway. WMS AS (Maritime Services segment) owns and operates a multicurrency cash pool with a header-account in USD, comprising of subsidiaries in Europe, Asia-Pacific and North America. NorSea Group AS (Supply Services segment) owns and operates a multicurrency cash pool with a header-account in NOK, comprising of subsidiaries in Norway, Denmark, Germany and U.K. 76 GroupAccounts and notesWilh. Wilhelmsen Holding ASA Annual Report 2019Note 18 Interest-bearing debt USD mill Interest-bearing debt Bank and mortgages loan Leasing debt Total interest-bearing debt Book value of collateral, mortgaged and leased assets: Financial assets to fair value, current financial investments Assets Supply Services 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 2019 2018 19 14/16 19 494 181 675 193 411 605 92 40 40 251 252 675 533 533 175 461 636 85 27 22 217 182 533 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 2019. USD mill The group net interest-bearing debt Non current interest-bearing debt Non current lease liabilities Current interest-bearing debt Current lease liabilities 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 2019 2018 429 154 65 27 675 153 102 419 98 98 27 71 16 4 4 448 85 533 140 88 306 86 86 21 65 77 GroupAccounts and notesWilh. Wilhelmsen Holding ASA Annual Report 2019Cont. note 18 Interest-bearing debt USD mill Guarantee commitments Guarantees for group companies Total The carrying amounts of the group’s bank loan are denominated in the following currencies USD NOK DKK Total See otherwise note 19 for information on financial derivatives (currency hedges) relating to interest-bearing debt. 2019 2018 55 55 198 285 10 494 34 34 197 322 14 533 USD mill Net debt Cash and cash equivalents Liquid investments* Borrowings – repayable within one year** Borrowings – repayable after one year** Net debt Note 2019 2018 153 102 (92) (583) (419) 140 88 (85) (448) (306) *Liquid investments are investment grade bonds and liquid equities traded in active markets. These assets are held at fair value recognized through the income statement. **Interest-bearing debt is exposed to movements in floating interest rates in USD and NOK. Material parts of the interest rate risk in the NOK-denominated debt is hedged within the Supply Services segment. Other assets Liabilites from financing activities Cash/ bank overdrafts Liquid invest- ments Finance leases due within 1 year Finance leases due after 1 year Borrow. due within 1 year Borrow. due after 1 year Total financing activities 140 140 13 1 (1) 153 167 2 (29) 140 88 88 27 (4) (10) 102 101 2 (8) (6) 88 1 27 28 (1) 27 2 (1) 10 193 203 (10) (24) (15) 154 9 1 85 437 85 119 (136) (3) 65 106 8 (26) (2) 437 (109) 93 8 429 483 (5) (31) (10) 534 220 754 (68) 6 (18) 675 601 2 (58) (12) 1 10 85 437 534 (306) Total (306) (220) (526) 108 (9) 7 (419) (333) 30 3 (6) USD mill Net debt 31.12.2018 Implementation of IFRS 16 Net debt 01.01.2019 Reclass Cash flows Foreign exchange adjustments Other non-cash movements Net debt 31.12.2019 Net debt 01.01.2018 Reclass Cash flows Foreign exchange adjustments Other non-cash movements Net debt 31.12.2018 78 GroupAccounts and notesWilh. Wilhelmsen Holding ASA Annual Report 2019 Note 19 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 gain/(loss) Net currency gain/(loss) – Operating currency Net currency gain/(loss) – Financial currency Currency derivatives – realised Currency derivatives – unrealised Net financial – currency gain/(loss) Through other comprehensive income Currency translation differences through other comprehensive income Total net currency effect Note 2019 2018 1 7 (10) (10) 4 (8) (2) (11) (4) (3) (2) (15) (23) (57) (79) 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. 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: 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 22% that equals the Norwegian tax rate) (10%) (5%) 0% 5% 10% 7.90 21 1.01 (12) 1.22 8 8.33 11 1.07 (5) 1.29 3 8.77 1.12 1.36 9.21 (12) 1.18 5 1.43 (3) 9.65 (25) 1.23 9 1.50 (7) 79 GroupAccounts and notesWilh. Wilhelmsen Holding ASA Annual Report 2019 Cont. note 19 Financial risk 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. 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 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 2019. 2019 2018 23 12 46 67 148 12 23 125 161 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. 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 2019, the group has no material exposure subject to interest rate risk. 2019 2018 Assets Liabilities Assets Liabilities 6 6 10 10 16 0 1 1 1 7 7 12 2 14 21 0 0 0 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 80 GroupAccounts and notesWilh. Wilhelmsen Holding ASA Annual Report 2019 Cont. note 19 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 22% that equals the Norwegian tax rate) Below table summarizes the equity market sensitivity towards the market value of all listed equities held: (20%) (91) (10%) (46) 0% 10% 46 20% 91 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 13. 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 2019 (analogous for 2018). 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 18 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 2019 2018 12 12 16 12 12 17 1 233 44 25 82 153 537 229 45 23 80 140 516 81 GroupAccounts and notesWilh. Wilhelmsen Holding ASA Annual Report 2019 Cont. note 19 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. At 31 December 2019, the group had in excess of USD 347 million (2018: USD 317 million) in cash, investment grade bonds and listed equities (cash and cash equivalents, current financial investments and investment in Qube Holding Limited), in addition to USD 299 million (2018: USD 364 million) in committed undrawn credit facilities. USD mill Undiscounted cash flows financial liabilities 2019 Mortgages Finance lease liabilities Bank loan Financial derivatives Interest due Total undiscounted cash flow financial liabilities Current liabilities (excluding next year's instalment on interest-bearing debt) Total gross undiscounted cash flows financial liabilities 31.12.2019 Undiscounted cash flows financial liabilities 2018 Mortgages Finance lease liabilities Bank loan Financial derivatives Interest due 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 Less than 1 year Between 1 and 2 years Between 2 and 5 years Later than 5 years 42 27 23 16 27 134 374 508 59 3 23 21 21 127 271 399 25 25 25 75 75 23 3 21 47 47 48 23 198 62 332 332 37 5 197 63 302 302 157 106 3 266 266 182 182 182 82 GroupAccounts and notesWilh. Wilhelmsen Holding ASA Annual Report 2019 Cont. note 19 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. 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. CAPITAL RISK MANAGEMENT The group’s overall policy is to maintain a strong capital base to maintain investor, creditor and market confidence and to sustain future business development. 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 are revised by the board of directors. • 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 31.12.2019 Mortgages Finance lease liabilities Bank loan Total interest-bearing debt 31.12.2018 Note Fair value Book value 273 181 224 677 302 11 223 536 273 181 221 675 302 11 220 533 18 18 83 GroupAccounts and notesWilh. Wilhelmsen Holding ASA Annual Report 2019Cont. note 19 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 derivatives Financial assets to fair value Total financial assets 31.12.2019 Financial liabilities at fair value Financial derivatives Total financial liabilities 31.12.2019 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 USD mill Changes in level 3 instruments Opening balance 01.01 Acquisition Transfer to level 3 Return of capital Gains and losses recognised through income statement Closing balance 31.12 Level 1 Level 2 Level 3 Total 58 44 655 757 (1) 0 42 45 611 699 0 1 1 (16) (16) 0 21 21 20 20 0 38 38 0 58 44 1 675 778 (16) (16) 42 45 650 737 21 21 2019 2018 38 6 1 (25) 20 94 6 (1) (60) 38 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 2019 are liquid investment grade bonds and listed equities (analogous for 2018). 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. 84 GroupAccounts and notesWilh. Wilhelmsen Holding ASA Annual Report 2019 Cont. note 19 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 31.12.2019 Liabilities Non current interest-bearing debt Current interest bearing liabilities Current financial derivatives Other non current liabilities Other current liabilities Liabilities 31.12.2019 Assets Other non current assets Financial asset to fair value Current financial investments 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 Note 12 14 16 12 12 17 Note 18 18 12 12 12 Note 12 14 16 12 17 Note 18 18 12 12 12 Financial assets at amortised cost Fair value through the income statement Other Total 315 153 468 7 675 102 1 785 17 1 18 Liabilites at fair value throug the income statement Other financial liabilites at amortised cost 583 92 439 1 114 16 25 41 25 675 102 1 316 153 1 272 Total 583 92 16 25 439 1 155 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 85 432 965 21 23 44 23 650 88 311 140 1 211 Total 448 85 21 23 432 1 009 85 GroupAccounts and notesWilh. Wilhelmsen Holding ASA Annual Report 2019 Note 20 Operating lease commitments IFRS 16 was implemented 1 January 2019. Operating lease commitments related to Strandveien 20 including storage and parking, are a part of right-of- use assets 1 January 2019. See Note 8. 31 December 2018 In the Supply Services segment the group has lease agreements for variuos properties on operating leases. The rental agreements are subject to varying lifespan with the longest agreement ending on 1 July 2064. In addition the group had: 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 21 21 21 21 121 204 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. 86 GroupAccounts and notesWilh. Wilhelmsen Holding ASA Annual Report 2019Note 21 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 at 31 December 2019. Remuneration to Mr Wilhelm Wilhelmsen for 2019 totalled USD 93 thousand (2018: USD 101 thousand) whereof USD 85 thousand (2018: USD 92 thousand) was consulting fee and USD 9 thousand (2018: USD 9 thousand) in nomination committee for Wilh. Wilhelmsen Holding ASA and Treasure ASA. 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 parties in WalWil ASA group, Maritime Services, Supply Services and Holding and Investments segment in 2019 and 2018. All transactions are entered into market terms. The services are: • Ship management including crewing, technical and management service • Agency services • Freight and liner services • Marine products • Shared services 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 Lysaker, Norway Fjell, Norway 37.80% 50.00% Wallenius Wilhelmsen ASA, through its operating companies, is the market leader in the finished vechicle logistics segment, offering ocean transportation and landbased vechicle logistics solutions. Coast Center Base AS in the Supply Services segment delivers IT project, administration and handling services and the transactions are based on market terms. USD mill Note 2019 2018 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 Maritime Services Non current assets to related party 18 7 1 26 2 2 2 2 6 1 7 14 14 16 6 22 2 2 1 1 4 8 12 19 19 87 GroupAccounts and notesWilh. Wilhelmsen Holding ASA Annual Report 2019 Note 22 Subsidiaries with material non-controlling interests NorSea Group AS Treasure ASA* Business office/country Voting/control share 2019 Tananger, Norway Lysaker, Norway 75.15% 73.46% *During 2019, Treasure ASA liquidated 2.200.000 own shares and had 465.000 own shares at 31 December 2019. 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. NorSea Group AS Treasure ASA 2019 2018 2019 2018 497 69 565 362 120 482 84 246 4 1 6 4 1 21 15 (45) (9) 552 119 671 286 180 466 206 285 15 2 17 4 1 46 (30) 7 23 560 4 563 0 563 14 48 48 13 2 11 (9) 1 523 2 525 525 13 (43) (43) (12) 2 11 (10) (0) 2019 2018 17 (1) 16 (7) 2 (6) 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 for the period to NCIs 88 GroupAccounts and notesWilh. Wilhelmsen Holding ASA Annual Report 2019 Note 23 Contingencies Coast Center Base AS (CCB), 50% owned by NorSea Group, lost a floating dock 26 November 2018. The dock is considered lost and the fair value was nil by 31 December 2019. CCB has made an accrual to cover costs related to a salvage operation. Local authorities have issued their conclusion, implicating lower accruals. However, as the matter has been appealed by other authorities, the company has decided to keep the accrual untill a final decision has been made. 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 24 Events after the balance sheet date The recent outbreak of Coronavirus has already and will continue to affect economic conditions and the demand for Maritime and Supply services regionally as well as globally and otherwise impact the group’s operations and the operations of the group’s customers, suppliers and other stakeholders. Governments in affected countries are imposing travel bans, quarantines and other emergency public health measures. Those measures, though temporary in nature, may continue and increase depending on developments in the virus’ outbreak. As a result of these measures, the group operations located in regions affected by Coronavirus may be negatively affected. Hyundai Glovis and Qube Holding have declined significantly compared to year end 2019 and the parent liquid portfolio investments has declined in line with the nordic stock market. The ultimate severity of the Coronavirus outbreak is uncertain at this time and therefore we cannot predict the impact it may have on the group’s future operations and the health of our employees, which could be material and adverse. Investments in the Holding and Investment segment are adversely impacted. The share price of WalWil has dropped significantly and this is considered to be an impairment indicator for the investment in the company. The share price of No other 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. 89 GroupAccounts and notesWilh. Wilhelmsen Holding ASA Annual Report 2019Responsible partner Doing the right things the right way is the foundation of our governing elements and culture, and we have the same expectation of our partners and suppliers. To encourage this, our approach is to work consistently on business standards; actively managing and encouraging suppliers on their working conditions and business standards; and partnering with other serious actors to lift the standards in the industry. Our work in the Maritime Anti-corruption network (MACN) is one of the ways how we amplify our impact on the fight against corruption. 4 Accounts and notes – parent company Income statement Wilh. Wilhelmsen Holding ASA NOK thousand Operating income Operating expenses Employee benefits Operating expenses Depreciation Total operating expenses Operating loss Financial income/(expenses) Net financial income Net financial expenses Financial income/(expenses) Profit before tax Tax income Profit for the year Transfers and allocations To equity Proposed dividend Interim dividend paid Total transfers and allocations Note 2019 2018 1 2 1 3 1 1 5 10 10 10 21 957 23 899 (84 060) (39 938) (6 052) (75 446) (45 375) (2 266) (130 049) (123 086) (108 093) (99 187) 641 059 (86 618) 554 441 428 285 (8 231) 420 054 446 348 320 866 26 919 473 268 38 265 359 131 272 658 89 160 111 450 473 268 150 464 116 010 92 658 359 131 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 2019 2018 473 268 359 131 10/11 (5 977) 467 290 3 200 362 332 Notes 1 to 17 on the next pages are an integral part of these financial statements. 94 Parent companyAccounts and notesWilh. Wilhelmsen Holding ASA Annual Report 2019 Balance sheet Wilh. Wilhelmsen Holding ASA NOK thousand ASSETS Non current assets Deferred tax asset Intangible assets Tangible assets Property lease assets Investments in subsidiaries and associates Sub lease receivable Other non current assets Total non current assets Current assets Current financial investments Trade and other receivables Sub lease receivable 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 Property lease liabilities Other non current liabilities Total non current liabilities Current liabilities Public duties payable Trade and other payables Current portion of property lease liabilities Other current liabilities Total current liabilities Total equity and liabilities Note 31.12.2019 31.12.2018 5 3 3 4 6 4/15 7 8/9 7 4/15 7/9/15 9 10 10 10 11 4 7 7 4 7/12/15 68 198 3 884 10 549 20 871 42 398 2 486 11 402 4 859 064 4 872 004 166 833 27 000 5 129 397 4 955 291 896 979 7 984 33 650 234 805 205 737 1 379 155 6 508 552 761 231 11 924 399 768 81 190 1 254 112 6 209 403 928 076 (36 476) 928 076 4 904 330 4 845 902 5 795 930 5 773 979 50 038 184 901 1 548 236 487 5 309 4 852 37 292 428 682 476 135 40 856 34 350 75 206 6 756 5 273 348 190 360 219 6 508 552 6 209 403 Lysaker 31 March 2020 The board of directors of Wilh. Wilhelmsen Holding ASA Diderik Schnitler chair Trond Westlie Carl Erik Steen Notes 1 to 17 on the next pages are an integral part of these financial statements. Irene Waage Basili Thomas Wilhelmsen group CEO 95 Parent companyAccounts and notesWilh. Wilhelmsen Holding ASA Annual Report 2019Cash flow statement Wilh. Wilhelmsen Holding ASA NOK thousand Note 2019 2018 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 Repayment of financial sub lease Loans from subsidiaries, cash pool Loans granted to subsidiaries Proceeds from sale of financial investments Current financial investments Dividend/ group contribution from group companies Dividend received from financial assets Paid witholding tax dividend portfolio management Interest received Net cash flow from investing activities Cash flow from financing activities Proceeds from issue of debt Repayment of financial lease debt Interest paid Purchase of own shares 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 3/4 3 3 6 7/15 4 9 1 4 10 10 446 348 (554 441) 6 052 1 519 (6 898) 320 866 (420 054) 2 266 (274) 64 4 467 (20 561) (107 420) (113 226) (2 421) (13 060) 78 760 30 802 98 729 198 574 (263 774) 619 094 16 535 (2 651) 13 616 774 205 (34 136) (16 567) (264 075) (227 460) (542 237) 124 547 81 190 205 737 296 (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 The company has several bank accounts in different currencies. Unrealised currency effects are included in net cash provided by operating activities. Notes 1 to 17 on the next pages are an integral part of these financial statements. 96 Parent companyAccounts and notesWilh. Wilhelmsen Holding ASA Annual Report 2019 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 Interest income financial sublease Dividend/group contribution from associates and subsidiaries Net currency gain Net financial income Financial expenses Interest expenses Interest expenses financial lease Impairment investment in subsidiaries Other financial items Net currency (loss) Net financial expenses Net financial income Note 2019 2018 15 15 2 8 15 15 346 21 611 21 957 (13 457) (5 915) (8 380) (2 491) (2 917) (6 778) 1 817 21 809 274 23 899 (18 262) (4 356) (12 379) (5 033) (2 977) (2 368) (39 938) (45 375) 108 092 3 410 10 462 519 094 641 059 (5 920) (11 485) (60 000) (1 996) (7 217) (86 618) (60 198) 2 609 473 000 12 874 428 285 (6 166) (2 066) (8 231) 554 441 420 054 97 Parent companyAccounts and notesWilh. Wilhelmsen Holding ASA Annual Report 2019Note 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 2019 Group CEO Group CFO 2018 Group CEO Group CFO *Mainly related to gross up pension expenses and company car. Board of directors Remuneration of the five directors totalled NOK 2 500 thousand for 2019 (2018: NOK 2 150 thousand). The board’s remuneration for the fiscal year 2019 will be approved by the general assembly 29 April 2020. Remuneration of the nomination committee totalled NOK 100 thousand for 2019 (2018: NOK 85 thousand). Senior executives Thomas Wilhelmsen – group CEO Christian Berg – group CFO 2019 2018 58 501 9 552 11 720 4 287 84 060 47 578 10 856 11 105 5 908 75 446 34 35 Pay Bonus Pension premium *Other remuneration 5 003 3 529 4 870 3 381 1 977 940 2 032 431 1 842 446 1 903 444 1 696 460 Total 8 939 4 404 10 385 5 228 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 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. Loans and guarantees employees There were no loan or guarantees to employees per 31.12.2019. 98 Parent companyAccounts and notesWilh. Wilhelmsen Holding ASA Annual Report 2019 Cont. note 2 Employee benefits SHARES OWNED OR CONTROLLED BY REPRESENTATIVES OF WILH. WILHELMSEN HOLDING ASA AT 31 DECEMBER 2019 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 22 100 301 750 22 850 301 20 880 114 2 302 444 23 182 558 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% 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 2019, a provision has been made related to the LTI programme ending on 31 December 2020. Potential payment will be done in March 2021, pending approval from the board of directors. The provision has been calculated based on value adjusted equity per 31 December 2019, risk free return and standard deviation of historic annual value creation. EXPENSED AUDIT FEE (excluding VAT) NOK thousand Statutory audit Other service fees Total expensed audit fee 2019 2018 545 74 619 535 277 811 99 Parent companyAccounts and notesWilh. Wilhelmsen Holding ASA Annual Report 2019 Note 3 Intangible and tangible assets NOK thousand 2019 Cost 01.01 Additions Cost 31.12 Accumulated depreciation 01.01 Depreciation/amortisation Accumulated depreciation 31.12 Intangible assets Buildings Other tangible assets Total 6 180 2 421 8 601 (3 693) (1 024) (4 717) 10 582 9 084 10 582 9 084 (3 021) (423) (3 444) (5 243) (430) (5 674) 25 846 2 421 28 267 (11 957) (1 878) (13 835) Carrying amounts 31.12 3 884 7 138 3 411 14 432 Depreciation/amortisation intangible and tangible assets Depreciation of finance lease assets Total depreciation 2019 2018 Cost 01.01 Additions Disposals Cost 31.12 Accumulated depreciation 01.01 Depreciation/amortisation Disposals Accumulated depreciation 31.12 (1 878) (4 174) (6 052) 25 577 719 (450) 25 846 (10 119) (2 266) 428 (11 957) 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) Carrying amounts 31.12 2 486 7 562 3 841 13 889 Useful life Amortisation/depreciation schedule Up to 3 years Up to 25 years 3-10 years Straight-line Straight-line Straight-line 100 Parent companyAccounts and notesWilh. Wilhelmsen Holding ASA Annual Report 2019 Note 4 Lease The new IFRS 16 Leasing standard was effective from 1 January 2019. The standard will significantly change how the company accounts for its lease contracts for land and building 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. THE LEASE CONTRACTS The company has leases related to property and land. The main part of the leasing liability refer to headquarter and parkingplaces. The external lease of headquarter is subleased to group company. The right-of-use assets related to internal lease of the company’s location in Strandveien 20. All lease contracts previously were reported as operating leases. 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. 1 January 2019, the lease liabilities were measured at the present value of remaining lease payments, discounted using the incremental borrowing rate at such date. The right-of-use assets were 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. • 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. • Non-lease components shall be separated from the lease agreements, the company applied a materiality threshold when evaluating separation. IMPLEMENTAION EFFECT Impact on equity The net effect on implementation of IFRS 16 as at January 1, 2019 is presented below. NOK thousand Note Total Lease liability at 1 January 2019 Deferred income related to house agreement (net after tax) Right-of-use asset at 1 January 2019 Sub lease group companies 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 NOK thousand Material operating lease commitment as at 31 December 2018 Operating lease commitment as at 31 December 2018 (not included in material operating lease committment) Option periods previously reported as lease commitments Undiscounted lease liabililty Effect of discounting lease commitment to net present value Lease liability at 1 January 2019 Summary of the lease liabilities in the financial statements At initial application 01.01.2019 Cash payments for the principal portion of the lease liability Cash payments for the interest portion of the lease liability Cash repayments for the interest portion of the sublease receivable Interest income on sublease receivable Interest expense on lease liabilities Lease liability at 31. December 2019 Movement schedule for lease liability 2019 Financial lease debt Repayment current year Total financial lease debt 31.12 Non current lease debt Current lease debt Total financial lease debt 31.12 The property and parking places are sub leased to the subsidiary WilService 10 Note 13 External 256 329 (34 136) 222 193 184 901 37 292 222 193 (256 329) (19 345) 25 045 231 284 (19 345) (19 345) (19 345) Total 385 429 2 663 (103 608) 284 484 (28 155) 256 329 256 329 (34 136) (11 485) 10 462 (10 462) 11 485 222 193 Total 256 329 (34 136) 222 193 184 901 37 292 222 193 101 Parent companyAccounts and notesWilh. Wilhelmsen Holding ASA Annual Report 2019 Note Total 231 284 (30 802) 200 482 166 833 33 650 200 482 Note Property 25 045 25 045 (4 174) (4 174) 20 871 3 Cont. note 4 Lease NOK thousand Sub lease receivable 1.1. Repayment of sub lease receivable Sub lease receivable 31.12 Non current sub lease receivable Current sub lease receivable Total financial sub lease receivable 31.12 NOK thousand 2019 Right of use assets 1.1. Right of use assets cost 31.12 Depreciation Accumulated depreciation 31.12 Carrying amounts 31.12 The company has no other lease contracts. 102 Parent companyAccounts and notesWilh. Wilhelmsen Holding ASA Annual Report 2019Note 5 Tax NOK thousand Allocation of tax income Payable tax/withholding tax Change in deferred tax Total tax income Basis for tax computation Profit before tax 22% tax (2018: 22%) Tax effect from Net permanent differences Withholding tax Change in different tax rate 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 (IFRS16 implementation) Charge to equity (tax of OCI) Change of deferred tax through income statement Deferred tax asset/(liability) 31.12 2019 2018 (2 651) 29 570 26 919 (2 436) 40 702 38 265 446 348 98 197 320 866 73 799 (127 766) (115 409) 2 651 2 436 907 (26 919) (38 265) 820 (5 560) 8 041 64 897 68 198 42 398 (5 456) 1 686 29 570 68 198 713 (337) 4 363 37 659 42 398 2 653 (956) 40 702 42 398 Note 6 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 2019 Book value 2018 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 73.5% 1 043 967 1 043 967 100% 100% 100% 100% 51% 100% 1 264 440 1 264 440 1 550 17 550 1 405 014 1 405 014 3 622 9 499 8 3 622 6 439 8 4 859 064 4 872 004 *At 31.12.2019 Treasure ASA had 465 000 own shares (31.12.2018: 1 450 000 own shares). **Wilservice AS: Issue of new share capital with NOK 44 000 thousand and impairment of NOK 60 000 thousand due to accumulated loss. ***WilNor Governmental Services AS: Capital increase of NOK 3 060 thousand. 103 Parent companyAccounts and notesWilh. Wilhelmsen Holding ASA Annual Report 2019Note 7 Combined items, balance sheet NOK thousand OTHER NON CURRENT ASSETS Sub lease to group company 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/ sublease to subsidiary and associates Total other non current assets due after one year OTHER CURRENT ASSETS Group Contribution Cash pool intercompany receivables 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 OTHER CURRENT LIABILITIES Next year's instalment on interest-bearing debt Proposed dividend Cash pool intercompany payables Other current liabilities Total other current liabilities Note 2019 2018 4 14/15 166 833 166 833 27 000 27 000 4/14/15 166 833 166 833 27 000 27 000 15 9/15 14/15 12 10 9/15 200 000 300 000 26 053 8 752 14 007 85 760 234 805 399 768 1 548 1 548 34 350 34 350 200 000 89 160 119 548 19 974 428 682 200 000 116 010 32 181 348 190 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 14. Note 8 Current financial investments NOK thousand Market value asset management portfolio Equities Bonds Other financial derivatives Total current financial investments 2019 2018 505 379 388 108 3 491 896 979 366 707 393 522 1 002 761 231 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 at 31.12 83 988 32 714 The portfolio of financial investments is held as collateral within a securities’ finance facility. See note 12. 104 Parent companyAccounts and notesWilh. Wilhelmsen Holding ASA Annual Report 2019Note 9 Restricted bank deposits and undrawn committed drawing rights NOK thousand Restricted bank deposits Payroll tax withholding account 2019 2018 4 331 The parent company has a bank guarantee for the payroll tax. Per 31 December 2019 the guarantee amounted to NOK 7 000 thousand. NOK thousand Undrawn committed drawing rights 2019 2018 Undrawn committed drawing rights for 31 December 1 118 318 1 000 149 NOK thousand Cash and cash equivalents Banks Total Cash and cash equivalents 2019 205 737 205 737 2018 81 190 81 190 WWH ASA has during 2019 established a cash pool with the Norwegian subsidiaries. WWH ASA is the owner of the cash pool. Bank balances in subsidiaries are presented as intercompany receivable/ payable in the parent financial statements. The cash pool covers following currencies; NOK, USD, EUR, SEK, GBP, JPY, AUD and DKK. No credit line related to the cash pool. Note 10 Equity NOK thousand Current year's change in equity Equity 31.12.2018 Implementation of IFRS16 Interim dividend paid Proposed dividend Profit for the year Comprehensive income for the year Purchase of own shares Equity 31.12.2019 NOK thousand 2018 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 Note Share capital Own shares Retained earnings Total 928 076 4 845 902 5 773 979 4 19 345 (111 450) (89 160) 473 268 (5 977) (227 599) 4 904 330 19 345 (111 450) (89 160) 473 268 (5 977) (264 075) 5 795 930 928 076 (36 476) (36 476) Share capital Own shares Retained earnings Total 930 076 (2 000) 4 692 238 5 620 314 (92 658) (116 010) 359 131 3 200 (92 658) (116 010) 359 131 3 200 4 845 902 5 773 979 (2 000) 928 076 2 000 0 At 31 December 2019 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 company conducted a share buyback program in September 2019. At 31 December 2019 the company owns a total of 1 823 824 own shares, split on 537 092 A-shares and 1.286.732 B-shares. The total purchase price of these shares was NOK 264 075 125. Dividend The proposed dividend for fiscal year 2019 is NOK 2.00 per share, payable in the second quarter 2020. A decision on this proposal will be taken by the annual general meeting on 29 April 2020. Dividend for fiscal year 2018 was NOK 5.00 per share, where NOK 2.50 per share was paid in May 2019 and NOK 2.50 per share was paid in November 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. 105 Parent companyAccounts and notesWilh. Wilhelmsen Holding ASA Annual Report 2019 Cont. note 10 Equity The largest shareholders at 31 December 2019 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% 1 228 081 733 146 268 394 537 092 1 084 140 563 125 363 010 389 620 370 400 593 349 126 875 512 436 478 064 464 800 79 965 253 604 326 424 319 329 108 461 1 558 818 1 286 732 642 349 598 049 387 330 285 227 236 000 415 630 5 190 193 276 636 101 000 2 920 312 281 181 978 1 961 227 1 827 212 1 823 824 1 726 489 1 161 174 750 340 674 847 606 400 593 349 542 505 517 626 478 257 464 800 356 601 354 604 329 344 319 329 312 281 290 439 4.23% 3.94% 3.93% 3.72% 2.50% 1.62% 1.45% 1.31% 1.28% 1.17% 1.12% 1.03% 1.00% 0.77% 0.76% 0.71% 0.69% 0.67% 0.63% 3.56% 0.78% 1.56% 3.14% 1.63% 1.05% 1.13% 1.07% 1.72% 0.37% 1.48% 1.38% 1.35% 0.23% 0.73% 0.95% 0.92% 0.00% 0.31% 5 685 193 2 562 209 8 247 402 34 537 092 11 866 732 46 403 824 17.77% 100.00% 16.46% 100.00% Shares on foreigners hands At 31 December 2019 - 4 692 307 (13.59%) A shares and 2 749 662 (23.17%) B shares. Corresponding figures at 31 December 2018 - 5 150 032 (14.11%) A shares and 2 838 453 (23.92%) B shares. 106 Parent companyAccounts and notesWilh. Wilhelmsen Holding ASA Annual Report 2019 Note 11 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. The company has obligation towards one employee in the company’s senior executive management. The obligation is mainly covered via group annuity policies in Storebrand. Pension costs and obligations includes 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 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. 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 2019 2018 2019 2018 Funded Unfunded In employment On retirement (inclusive disability pensions) Total number of people covered by pension schemes 1 1 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 2019 2018 31.12.2019 31.12.2018 2.70% 2.50% 2.50% 0.10% 2.30% 2.00% 2.00% 0.10% 2.30% 2.00% 2.00% 0.10% 2.70% 2.50% 2.50% 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. 107 Parent companyAccounts and notesWilh. Wilhelmsen Holding ASA Annual Report 2019 2019 2018 Funded Unfunded Total Funded Unfunded Total 1 637 69 7 364 9 070 1 756 894 3 393 963 7 364 1 643 141 8 506 54 761 1 697 902 8 506 2 650 11 720 10 290 815 11 105 2019 2018 2 336 4 718 609 7 663 1 686 5 977 (4 647) 2 492 (2 001) (4 156) (956) (3 200) 2019 2018 89 256 3 393 2 258 (3 962) (34 039) 2 336 4 718 63 960 48 400 1 294 2 022 (2 526) (34 039) (620) (609) 13 922 7 663 (1 686) 5 977 91 698 1 697 1 978 (3 962) (4 647) 2 492 89 256 46 750 1 076 1 699 (2 526) (548) 1 949 48 400 (4 103) 903 (3 200) Cont. note 11 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 Settlement payments from plan assets 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 Settlement payments from plan assets Administrative expenses paid from plan assets Return on plan assets (excluding interest income) Gross pension assets 31.12 Other comprehensive income Gross pension other comprehensive income Tax effect Net equity effect 108 Parent companyAccounts and notesWilh. Wilhelmsen Holding ASA Annual Report 2019Cont. note 11 Pension NOK thousand Funded Unfunded Total Funded Unfunded Total 2019 2018 Specification of funded and unfunded obligation Service cost Defined benefit obligation Fair value of plan assets Net liability 1 637 23 644 13 922 9 722 1 756 40 316 40 316 3 393 63 960 13 922 50 038 1 643 51 730 48 400 3 330 54 37 526 37 526 1 697 89 256 48 400 40 856 Premium payments in 2020 are expected to be NOK 8.1 million (2019: NOK 5.1 million). Payments from operations are estimated at NOK 2.4 million (2019: NOK 2.2 million). NOK thousand Historical developments Gross pension obligations, including payroll tax Gross pension assets Net recorded pension obligations Note 12 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 31.12.2019 31.12.2018 63 960 13 922 50 038 89 256 48 400 40 856 2019 2018 200 000 200 000 200 000 200 000 200 000 200 000 200 000 200 000 893 488 761 352 The parent company had in addition undrawn revolving facilities at 31 December 2019. 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 2019 (analougue for 31 December 2018). FINANCIAL RISK See note 14 to the parent accounts and note 19 to the group accounts for further information on financial risk, and note 18 to the group accounts concerning the fair value of interest-bearing debt. Note 13 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. The operating lease commitments are from 1 January a part of IFRS 16 implementation. See Note 4. 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 47 511 202 224 385 429 109 Parent companyAccounts and notesWilh. Wilhelmsen Holding ASA Annual Report 2019 Note 14 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 2019 Interest-bearing debt Bank loan Total interest-bearing debt 31.12 2018 Interest-bearing debt Bank loan Total interest-bearing debt 31.12 Fair value Carrying amount 200 000 200 000 200 000 200 000 200 000 200 000 200 000 200 000 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 2019 and 2018 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 2019 – Bonds – Equities – Financial derivatives Total assets 31.12 Financial liabilities fair value through income statement 2019 – Financial derivatives Total liabilities 31.12 388 108 505 379 893 488 3 491 3 491 0 0 388 108 505 379 3 491 896 979 0 0 0 110 Parent companyAccounts and notesWilh. Wilhelmsen Holding ASA Annual Report 2019 Cont. note 14 Financial risk 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 31.12 393 522 366 707 760 229 0 1 002 1 002 (13 113) (13 113) 0 0 Financial instruments by category Assets Sub lease receivable non current Current financial investments Financial derivatives Sub lease receivable Other current assets Cash and cash equivalent Assets at 31.12.2019 Liabilities Property lease liabilities non current Financial derivatives Current interest-bearing debt Current portion of property lease liabilities Other current liabilities Liabilities 31.12.2019 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 See note 19 to the group financial statement for further information about the group risk factors. 393 522 367 709 761 231 (13 113) (13 113) Total 166 833 893 488 3 491 33 650 234 805 205 737 Total 184 901 200 000 37 292 228 682 650 875 Total 27 000 761 352 399 768 81 190 4 8 8 4 7 Note 4 8 7 4 7 Note 7 8 7 Note 7 7 7 896 979 1 538 003 Note Financial assets at amortised cost Fair value through income statement 893 488 3 491 166 833 33 650 234 805 205 737 641 024 Other financial liabilities at amortised cost Fair value through income statement 184 901 200 000 37 292 228 682 650 875 0 Loans and receivables Assets at fair value through the income statement 27 000 399 768 81 190 507 958 761 352 761 352 1 269 309 Other financial liabilities at amortised cost Assets at fair value through the income statement 200 000 143 775 343 775 13 113 13 113 Total 13 113 200 000 143 775 356 888 111 Parent companyAccounts and notesWilh. Wilhelmsen Holding ASA Annual Report 2019Note 15 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 at 31 December 2019. Shares owned or controlled by related party of Wilh. Wilhelmsen Holding ASA at 31 December 2019 Name A shares B shares Total Part of total shares Part of voting stock Family Wilhelm Wilhelmsen 20 880 114 2 302 444 23 182 558 49.96% 60.46% Wilhelm Wilhelmsen has in 2019 received remuneration of NOK 750 thousand (2018: NOK 750 thousand) in consulting fee and NOK 75 thousand (2018: NOK 70 thousand) in nomination committee for Wilh. Wilhelmsen Holding ASA and Treasure ASA. 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 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 2019 2018 OPERATING REVENUE FROM GROUP COMPANIES WalWil group Maritime Services Holding and Investments 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 FINANCIAL EXPENSES TO GROUP COMPANIES Maritime Services Holding and Investments Financial expenses to 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 112 3 283 13 681 4 499 147 21 611 (4 070) (9 387) (13 457) 4 912 13 083 3 814 21 809 (3 547) (14 715) (18 262) 300 002 243 673 543 674 425 000 49 860 474 860 (19) (2 498) (2 517) 4 132 3 603 222 7 958 (196) (94) (290) 0 9 406 1 333 272 11 010 (1 844) (1 844) 1 1 1 1 7 7 Parent companyAccounts and notesWilh. Wilhelmsen Holding ASA Annual Report 2019Cont. note 15 Related party transaction NOK thousand Cash pool receivables Maritime Services Holding and Investments Cash pool receivables from group company Cash pool payables Maritime Services Holding and Investments Cash pool payables to group company NON CURRENT LOAN TO GROUP COMPANIES Holding and Investments Non current loan to group companies CURRENT LOAN TO GROUP COMPANIES Holding and Investments Current loan to group companies NON CURRENT SUBLEASE TO GROUP COMPANIES Holding & Investment - Wilservice AS Non current sublease to group companies CURRENT SUBLEASE TO GROUP COMPANIES Holding and Investments - Wilservice AS Current sublease to group companies Note 2019 2018 9 9 7 7 4 4 18 836 7 217 26 053 (119 548) (119 548) 0 0 166 833 166 833 33 650 33 650 0 0 27 000 27 000 85 760 85 760 0 0 Note 16 Events after the balance sheet date The recent outbreak of Coronavirus has already and will continue to affect economic conditions and the demand for the groups activities, regionally as well as globally and otherwise impact the group’s operations and the operations of the group’s customers, suppliers and other stakeholders of the Coronavirus outbreak is uncertain at this time and the impact it may have on the group’s future operations and the health of our employees, which could be material and adverse. The investments int the parent company are adversely impacted since the market value of financial assets are dropped significantly. The ultimate severity No other 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. 113 Parent companyAccounts and notesWilh. Wilhelmsen Holding ASA Annual Report 2019Note 17 Statement on the remuneration for senior executives FRAMEWORK The statement on senior executives’ remuneration has been prepared in accordance with the Norwegian Public Limited Liability Companies Act, the Norwegian Accounting Act, and the Norwegian Code of Practice and is adopted by the board. It includes the company’s remuneration policy, an assessment of how this was implemented in 2019 and guidelines for 2020. The policy is aligned with the company’s strategic ambitions, people policy, and performance-based incentive philosophy. For the fiscal year 2019, the group management team was measured on return on capital employed and ability to facilitate and generate cross-company business development. The discretionary element was individual and linked to how each person actively contributed to cross company collaboration and how the employee’s performance and contribution affected the group’s ability to reach short- and long-term targets. The group management team did not receive full payment for achievements in 2019 (payable in 2020). For the other senior executives, pay-out was according to achieved results. DEFINITION OF SENIOR EXECUTIVES 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 NorSea Group). Erik Nyheim (senior vice president industrial investments) was part of the senior executives until May 2019, when he left the group. GENERAL PRINCIPLES The board sets the framework for remuneration of senior executives and believes it to be a tool to retain and attract required leadership. While the board sets the compensation and benefits for the group CEO, remuneration of other senior executives is determined administratively based on a framework specified by the board. Remuneration shall be competitive, but not market leading, in the relevant labour market(s). The remuneration level should be fair and reflect the complexity and responsibilities of each role. The total remuneration package consists of: 1) a fixed remuneration (basic salary), 2) a variable, performance-based remuneration (short- and long-term incentive schemes), and 3) benefits in kind (newspapers, mobile phone, broadband, insurance, and car salary). Variable payment normally requires that the senior executive has not given or been given notice. Pending reason for leaving the company before a bonus pay-out, a proportionate share of the bonus may be paid out. FIXED REMUNERATION The main element of the remuneration package is the annual base salary. Fixed salary 2019 For details regarding benefits paid in 2019, see note 6 to group accounts and notes on page 61 and note 2 to parent company accounts and notes on page 98, which also includes comparable figures from 2018. The salary adjustments for 2019 where within the frame of a 3% increase set by the board. Short-term bonus schemes for 2020 Given the group structure, the board has decided that the group management team will be measure again development in value adjusted equity (VAE) for the fiscal year 2020. In addition, the board has decided that the bonus will depend on the team’s ability to identify business opportunities related to ESG and identify new business opportunities for the group. The discretionary element is linked to the ability to support group companies in their value creation, engagement survey results and how each team members acts according to group values. There are not changes in the KPIs for other senior executives. LONG-TERM VARIABLE REMUNERATION The senior executives (less one) participate in a long-term incentive scheme. The scheme, which starts every second year and lasts for four years, aims to increase alignment with the shareholders’ interests and how senior executives execute strategy and create value for the group and the company’s shareholders over time. The board sets criteria for each programme before it starts, and they last for the whole period unless significant changes happen which deems it necessary to adjust. In case, changes will be disclosed. The long-term variable remuneration is based on the development of the group’s VAE, determined using a sum-of-the-parts method: non-listed entities are valued using earnings multiples less debt and minorities or at net asset value, while listed entities are valued at market price. The board has also reserved the right to look at economic value added when assessing performance. Even though the criteria and requirements under this programme are fulfilled, the board can, if WWH has severe financial constraints, decide that no payments will be made. For the group CEO, maximum payment is 100% of base salary. For the remaining, the maximum payment is 50% of base salary. Long-term bonus pay-out in 2019 The long-term bonus scheme, which ran from 2015-2018, did not result in any pay-out (payable in 2019). The board conducted a salary review of senior executives in 2019. The review showed that most positions were at acceptable levels. The group currently has two four-year programmes running, one from 2017- 2020, with potential pay-out in 2021, and one from 2019-2022, with potential pay-out in 2023. SHORT-TERM VARIABLE REMUNERATION The total reward package includes an annual variable pay scheme which intends to emphasise the link between pay and performance. It aligns the senior executives with relevant, clear targets derived from the group’s long- term strategy. The variable pay scheme includes financial targets, and/or individual and team targets and/or discretionary elements linked to ability to live the group’s values, create cross-company collaboration and/or delivered on value creation plan developed for each group entity. Maximum opportunity for short-term bonus is capped at four to six months’ salary, depending on role. A prerequisite for paying out any bonus is that WWH group has positive total comprehensive income (net profit plus other compressive income less minorities). To receive full bonus, the achievement needs to exceed set targets. In addition, each KPI includes a threshold for payment. If the company has severe financial constraints, the board can decide that no payments will be made. Short-term bonus pay-out for 2019 There was no short-term bonus pay-out for the group management team (Wilhelmsen, Berg, Wang, and Teigen Gude) in 2019, based on performance in 2018. The other senior executives (Grimholt, Schou, and Stangeland) received bonus based on their agreements. PENSION SCHEME The company offers pension benefits for senior executives aligned with local markets. The scheme includes coverage for old age, disability, spouse and children, and supplement payments from the Norwegian National Insurance system. Senior executives are part of a collective agreement, which includes a contribution of 7% for salary up to 7.1G and 22% for salary between 7.1-12G. Senior executives (less one) have an extra pension for salary above 12G. Pension obligations related to salary above 12G and the option to take early retirement are insured in the case of group CEO. The group CEO has the right to a life-long contribution constituting 50% of his annual salary retirement above 12G. The group CFO has an agreement to retire at the age of 67, with a gross compensation equal to 60% of base salary to the age of 70. The presidents for Ships Service and Ship Management have a defined benefit plan for salary exceeding 12G financed through operations. SEVERANCE PACKAGE SCHEME The group CEO has a severance pay guarantee including 100% of his annual salary for 24 months after leaving the company because of mergers, substantial changes in ownership, or if deemed necessary by the board. After six months’ notice period, possible income during the severance pay period will be deducted by up to 50%. 114 Parent companyAccounts and notesWilh. Wilhelmsen Holding ASA Annual Report 2019Cont. note 17 Statement on the remuneration for senior executives The other senior executives (less one) also have arrangements for severance payment beyond the redundancy period (in total 18 months). After six months’ notice period, possible income during the severance pay period will be deducted by up to 50%. The last senior executive has a six months’ notice period but is not entitled to a severance package. triggering their own notice, being guilty of gross misconduct, gross negligence, disloyalty or other material breach of his/her duties. SENIOR EXECUTIVES ON INTERNAL AND EXTERNAL BOARDS Any board compensation from company boards or boards where the group has an ownership stake will be deducted from short-term variable pay from the group. Entitlement to severance payment is conditional on the senior executive not 115 Parent companyAccounts and notesWilh. Wilhelmsen Holding ASA Annual Report 2019Auditor’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 2019, 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 2019, 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. In our opinion: • The financial statements are prepared in accordance with the law and regulations. • The accompanying financial statements give a true and fair view of the financial position of the Company as at 31 December 2019, and its financial performance and its cash flows for the year then ended in accordance with 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 2019, and its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards as adopted by the EU. 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. PricewaterhouseCoopers AS, Dronning Eufemias gate 71, 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 116 Parent companyAccounts and notesWilh. Wilhelmsen Holding ASA Annual Report 2019 Auditor’s report Independent Auditor's Report - Wilh. Wilhelmsen Holding ASA 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. The Groups business operations, who continue to evolve due to ongoing improvement projects, are largely the same as last year. We have not identified regulatory changes, transactions or other events that qualified as new Key Audit Matters for this year’s audit. The area Revenue from contracts with customers contained the same characteristics and risks as last year, and have consequently been in our focus also in 2019. 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 579 million and USD 251 million respectively for the year ended December 31, 2019. 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 increases from the complexity that sometimes accompany the requirements for management to use judgement, particularly to determine the transaction price and to decide when performance obligations are satisfied. Furthermore, we focused on management’s assessment of certain contracts where judgements were 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, where management explain the various revenue streams and how they are accounted for under IFRS 15 - Revenue from contracts with customers and IFRS 16 - Leases. Here, management also explains the 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. We found that we were able to agree with management about their accounting policies and that their assessments 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 were 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 management assessed to decide on when the performance obligations were satisfied. We concluded that management’s assumptions were reasonable. (2) 117 Parent companyAccounts and notesWilh. Wilhelmsen Holding ASA Annual Report 2019 Auditor’s report Independent Auditor's Report - Wilh. Wilhelmsen Holding ASA different performance obligations, measurement of the transaction price and whether income should be recognized net or gross. 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 judgements to be appropriate. We compared the related disclosures in 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 and lease revenue. 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. (3) 118 Parent companyAccounts and notesWilh. Wilhelmsen Holding ASA Annual Report 2019 Auditor’s report Independent Auditor's Report - Wilh. Wilhelmsen Holding ASA Auditor’s Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with laws, regulations, and auditing standards and practices generally accepted in Norway, including ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. As part of an audit in accordance with laws, regulations, and auditing standards and practices generally accepted in Norway, including ISAs, we exercise professional judgment and maintain professional scepticism throughout the audit. We also: • identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error. We design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. • obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's or the Group's internal control. • • evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company and the Group's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Company and the Group to cease to continue as a going concern. • evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. • obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial 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. (4) 119 Parent companyAccounts and notesWilh. Wilhelmsen Holding ASA Annual Report 2019 Auditor’s report Independent Auditor's Report - Wilh. Wilhelmsen Holding ASA 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. 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, 31 March 2020 PricewaterhouseCoopers AS Thomas Fraurud State Authorised Public Accountant (5) 120 Parent companyAccounts and notesWilh. Wilhelmsen Holding ASA Annual Report 2019 Responsibility statement We confirm, to the best of our knowledge, that the financial statements for the period 1 January to 31 December 2019 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, 31 March 2020 The board of directors of Wilh. Wilhelmsen Holding ASA Diderik Schnitler chair Trond Westlie Carl Erik Steen Irene Waage Basili Thomas Wilhelmsen group CEO 121 Parent companyAccounts and notesWilh. Wilhelmsen Holding ASA Annual Report 2019Renewable energy The global energy transition offers significant challenges to the established energy sector and considerable growth opportunities in the renewable energy market. Our approach is to support our customers and partners in their energy transition, growing our presence in the offshore wind sector, and supporting the growth of renewable fuels including at our own sites. Our work to have zero emission terminals for the offshore industry combined with our technical services for the offshore wind sector through NorSea Wind, are indications of our growing presence in the renewable energy sector. We are also working with partners on the Topeka project to bring hydrogen fuel to market for shipping. 5 Corporate governance Corporate governance A summary of the corporate governance report for 2019 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 127 Page 127 Page 127 Page 128 Page 128 Page 128 Page 129 Page 129 Page 130 Page 130 Page 131 Page 131 Page 131 Page 131 Page 131 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 2019 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 31 March 2020. All the directors were present at the meeting. Diderik Schnitler Chair of the board 126 GroupCorporate governanceWilh. Wilhelmsen Holding ASA Annual Report 2019The board’s corporate governance report for 2019 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. The corporate governance 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 the 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. risk review is included in the directors’ report for 2019. 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 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. The report, which also describes how the company actively contributes to reaching the Sustainable Development Goals, is available on the company’s website. 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”. A summary of the strategic direction and a Wilhelmsen has a history of paying dividend 127 GroupCorporate governanceWilh. Wilhelmsen Holding ASA Annual Report 2019twice a year, with total consideration varying between NOK 5.00 and NOK 5.50 per share for the five-year period 2015-19. The first dividend has varied been NOK 2.50 and NOK 3.50 per share, while the second dividend has been between NOK 1.50 and NOK 2.50 per share. In 2019, the company paid a total dividend of NOK 5.00 per share, evenly split with NOK 2.50 as both first and second dividend. The board is proposing to the annual shareholder meeting scheduled for 29 April 2020 a dividend of NOK 2.00. Mandate to increase share capital or purchase own shares At the 30 April 2019 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. In line with the authorisation granted by the annual general meeting, the company conducted a share buyback program during the period 24-26 September 2019. Following completion of the program, Wilh. Wilhelmsen Holding ASA owns a total of 1 823 829 own shares, split on 537 097 A-shares and 1 286 732 B-shares. This is equivalent to 3.93% of the total number of shares in the company. The board has made a proposal to the next annual general meeting to be held on 29 April 2020 for a new mandate to buy up to 10% of the company’s shares, valid for 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 8 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 128 GroupCorporate governanceWilh. Wilhelmsen Holding ASA Annual Report 2019each individual matter, including individual candidates nominated for election. The board chair, nomination committee chair, group CEO, group CFO, and auditor will 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 8 of the Articles of association. 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. The minutes of general meetings are published on the Oslo Børs news service and available on the company’s website. During 2019, the board consisted of the following members: 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 nomination committee” approved by the general meeting on 30 April 2019. During 2019, the nomination committee consisted of the following members: Nomination committee member Wilhelm Wilhelmsen (chair) Elected Period Elected to 26.04.2018 2 years 2020 Jan Gunnar Hartvig 26.04.2018 2 years 2020 Frederik Selvaag 26.04.2018 2 years 2020 Wilhelm Wilhelmsen served as chair of the committee until he passed away on 22 February 2020. He was related to the group CEO and also acted as an advisor to the board. As part of the nomination process, the committee has contact with relevant stakeholders. Input and proposals to the nomination committee may also be sent to the nomination committee secretary, with contact details available on the company website. The nomination committee provides its recommendation to the annual general meeting in form of a report, which among other includes justification of individual candidates. Deviations from the Code of Practice: None Board member Last time elected Period Elected to Diderik Schnitler (chair) 30.04.2019* 2 years 2019/21 Irene Waage Basili 26.04.2018 2 years 2020 Carl Erik Steen 30.04.2019* 2 years 2019/21 Trond Westli 26.04.2018 2 years 2020 Cathrine Løvenskiold Wilhelmsen** 30.04.2019* 2 years 2019/21 * Re-elected at the 30.04.2019 annual general meeting ** Resigned from the board 07.02.2020 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 through Tallyman AS 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 board instruction encourages board members to own shares in the company. Following Cathrine L Wilhelmsen’s resignation from the board on 7 February 2020, the board does not have the minimum required members as stated in the Articles of association and does not have the minimum required gender composition. After consultation with legal advisors and Oslo Børs, it has been concluded that the remaining board will be able to conduct its duties until 129 GroupCorporate governanceWilh. Wilhelmsen Holding ASA Annual Report 2019election of new board members can take place at the annual general meeting scheduled for 29 April. Deviations from the Code of Practice: The board chooses its own chair 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. An evaluation of the board performance and expertise is conducted on an annual basis. A summary of the evaluation is provided as input to the nomination committee. During 2019, the board held eight meetings, in addition to a full day strategy session and a two-day board tour. 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 2019, one member and one deputy member left the group with one deputy member position remaining vacant by end of 2019. During 2019, the committee held four 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 serve 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. 130 GroupCorporate governanceWilh. Wilhelmsen Holding ASA Annual Report 2019The board performs an internal financial audit review prior to the release of quarterly results, and when otherwise deemed required. including among other financial information, governing elements and company news. Deviations from the Code of Practice: None Deviations from the Code of Practice: None 14. Takeovers The board has established a guideline for how it will act in the event of a take-over bid. The guidelines follow in all material aspects the recommendations outlined in the Code of Practice. 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 deals 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 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 its work and the complexity of the company’s businesses. No director holds share options in the company. In 2019, 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 company owned or controlled 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 of the annual 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 2019, 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, 131 GroupCorporate governanceWilh. Wilhelmsen Holding ASA Annual Report 2019Reduce marine litter and pollution At the World Economic Forum in 2016, it was argued that there will be more plastic than fish in the sea by 2050. The oceans are our business, and we want to secure healthy and productive oceans for generations to come. Our ship management division has already implemented strict requirements for suppliers to vessels, regarding plastics and also initiated an industry-wide roundtable on reducing plastics in vessel operations. We have, however, a lot more work to do in this area. We continue to systematically go through our products and services and partner with other stakeholders to actively reduce marine litter and pollution across both our own and our customer’s value chains. Reduce marine litter and pollution 6 Corporate structure Group management team From left: Benedicte Teigen Gude (SVP HR and communications) Thomas Wilhelmsen (group CEO) Jan Eyvin Wang (SVP Industrial investments) Christian Berg (group CFO) 136 GroupCorporate governanceWilh. Wilhelmsen Holding ASA Annual Report 2019137 GroupCorporate governanceWilh. Wilhelmsen Holding ASA Annual Report 2019Corporate structure As of 31 December 2019 WWH group Wilh. Wilhelmsen Holding ASA, Norway Wallenius Wilhelmsen ASA, Norway 37.82% Treasure ASA, Norway 73.46% Wilhelmsen Maritime Services AS, Norway Unless otherwise stated, the company is wholly-owned. 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 73.46% 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 100% Massterly AS 50% Denholm Port Services Ltd. 40% Dolittle AS 45.98% Unless otherwise stated, the company is wholly-owned. 138 GroupCorporate structureWilh. Wilhelmsen Holding ASA Annual Report 2019Supply 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 NorSea Group Australia PTY Ltd NorSea Denmark A/S NorSea Wind A/S NorSea Wind GmBH NorSea Wind Holding AS NorSea Property AS NorSea Operations AS Wilnor Governmental Services AS NorSea Wind Holding AS NorSea Vestbase AS Vestbase Eiendom AS Averøy Eiendom AS Orvikan Eiendom AS Mid-Nor Yard Service AS NorSea Stordbase AS NorSea Stavanger AS Maritime Logistic Services AS NorSea Fighter AS NorSea Eiendom Dusavik AS NorSea Eiendom Tananger AS NorSea Tananger 107 AS Tananger Eiendom AS Nsg Digital As Polarbase Eiendom AS NorSea Polarbase AS Maritime Waste Management AS* NorSea Norbase AS Country Australia Denmark Denmark Germany Norway Norway Norway Norway Norway Norway Norway Norway Norway Norway Norway Norway Norway Norway Norway Norway Norway Norway Norway Norway Norway Norway Norway Ownership % 100.00% 100.00% 50.00% 50.00% 50.00% 100.00% 100.00% 49.00% 50.00% 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% 66.00% 95.62% 95.14% 75.00% 75.00% 139 GroupCorporate structureWilh. Wilhelmsen Holding ASA Annual Report 2019cont. Supply services segment Company name NSG Maritime AS Westport AS Dusavik Utvikling AS*** Coast Center Base AS SørSea AS Polarlift AS KS Coast Center Base 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 Norsea 123 Ltd. NorSea UK Ltd NorSea Wind Ltd Country Norway Norway Norway Norway Norway Norway Norway Norway Norway Norway Norway Norway Norway Norway Norway Scotland Scotland United Kingdom Ownership % 78.00% 66.66% 50.00% 50.00% 50.00% 50.00% 49.75% 42.00% 41.00% 37.97% 33.33% 33.07% 17.00% 17.00% 32.26% 100.00% 100.00% 50.00% * 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. ** 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. *** 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 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. 140 GroupCorporate structureWilh. Wilhelmsen Holding ASA Annual Report 2019 cont. Maritime services segment Company name Wilhelmsen Maritime Services Wilhelmsen Insurance Services AS Wilhelmsen Ship Management Wilhelmsen Ship Management Serviços Marítimos do Brasil Ltda NSG Wind A/S NorSea Wind A/S Wilhelmsen Marine Personnel d.o.o. Diana Wilhelmsen Management Limited NorSea Wind GmBH BWW LPG Limited (formerly known as Aurora Wilhelmsen Management 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 (formerly known as Aurora Wilhelmsen Management Limited) Wilhelmsen Ship Management Sdn Bhd Wilhelmsen Ship Management Services Sdn Bhd NorSea Wind Holding AS 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 (USA) Inc NorSea Wind Ltd Wilhelmsen Ship Management UK Limited 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 Country Norway Brazil Denmark Denmark Croatia Cyprus Germany Hong Kong Hong Kong Hong Kong Hong Kong Hong Kong Hong Kong India Malaysia Malaysia Malaysia Norway Norway Norway Norway Panama Philippines Poland Republic of Korea Romania Russia Singapore Ukraine United States United Kingdom United Kingdom Algeria Argentina Australia Australia Australia Australia Bahrain Belgium Brazil Bulgaria Canada Chile Chile China China China Colombia Cote d'Ivoire Cyprus Denmark Ecuador Ownership % 100.00% 100.00% 50.00% 50.00% 100.00% 50.00% 50.00% 49.00% 50.00% 100.00% 100.00% 100.00% 100.00% 100.00% 49.00% 100.00% 100.00% 50.00% 100.00% 100.00% 100.00% 100.00% 25.00% * 100.00% 100.00% 50.00% 100.00% 100.00% 100.00% 100.00% 50.00% 100.00% 49.00% * 100.00% 100.00% 100.00% 100.00% 100.00% 40.00% * 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% 100.00% 141 GroupCorporate structureWilh. Wilhelmsen Holding ASA Annual Report 2019cont. Maritime services segment Company name Wilhelmsen Ships Service Barwil Arabia Shipping Agencies SAE Barwil Egytrans Shipping Agencies SAE Scan Arabia Shipping Agencies SAE Wilhelmsen Ships Service LLC (Egypt) 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 - Legal Branch Wilhelmsen Ships Service Co Ltd Wilhelmsen Ships Service Ltd Alghanim Barwil Shipping Co-Kutayba Yusuf Ahmed & Partners WLL Wilhelmsen Ships Service Lebanon SAL 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 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 Services Center Sp. z.o.o. Argomar-Navegcao e Transportes SA 142 Country Egypt Egypt Egypt Egypt 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 Norway Norway Norway Norway Oman Pakistan Panama Panama Panama Panama Panama Panama Philippines Philippines Philippines Poland Poland Portugal Ownership % 35.00% 49.00% * 49.00% * 100.00% 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% 60.00% 49.00% * 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 50.00% 40.00% * 100.00% 100.00% 100.00% 100.00% GroupCorporate structureWilh. Wilhelmsen Holding ASA Annual Report 2019cont. Maritime services segment Company name Wilhelmsen Ships Service Wilhelmsen Ships Service Portugal, S.A Perez Torres Portugal Lda Wilhelmsen Ship Services Qatar Ltd Wilhelmsen Hyopwoon Ships Service Ltd Wilhelmsen Ship Services Co Ltd Barwil Star Agencies SRL Wilhelmsen Ships Service OOO Limited Liability Company “Wilhelmsen Marine Products” Ocean Shipping Co. Ltd Barwil Agencies Ltd For Shipping Binzagr Barwil Maritime Transport Co Ltd Nagliyat Al-Saudia 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 SAU 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 Dubai LLC Wilhelmsen Ship Services LLC Triangle Shipping Agencies LLC Wilhelmsen Ships Service AS (Dubai Branch) Wilhelmsen Maritime Services JAFZA Wilhelmsen Ships Service (LLC) Denholm Wilhelmsen Ltd Wilhelmsen Ships Service Limited Wilhelmsen Ships Service Inc Unitor Holding Inc. Wilhelmsen Sunnytrans Co Ltd (formerly known as Barwil-Sunnytrans Co Ltd) International Shipping Co Ltd * Additional profit share agreement Country Portugal Portugal Qatar Republic of Korea Republic of Korea Romania Russia Russia Sudan Saudi Arabia Saudi Arabia Saudi Arabia Senegal Singapore Singapore Singapore Singapore Slovakia South Africa South Africa South Africa South Africa Spain Spain 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 Kingdom United Kingdom United States United States Vietnam Yemen Ownership % 100.00% 50.00% 0.00% * 50.00% 100.00% 100.00% 100.00% 100.00% 0.00% * 70.00% 50.00% 0.00% * 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 49.00% 100.00% 70.00% 100.00% 100.00% 100.00% 100.00% 100.00% 49.00% * 100.00% 100.00% 100.00% 49.00% * 42.50% 49.00% * 100.00% 100.00% 49.00% * 40.00% 100.00% 100.00% 100.00% 49.00% * 0.00% * 143 GroupCorporate structureWilh. Wilhelmsen Holding ASA Annual Report 2019wilhelmsen.com E b e r l i n 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 ( E x c e p t p a g e s 1 4 – 1 5 L M G M a r i n a n d p a g e 3 5 W h e m s e n g r o u p a r c h v e i l i l ) 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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