Årsrapport 30700228 Ernst & Young Godkendt Revisionspartnerselskab Englandsgade 25 Postboks 200, 5100 Odense C 2017-01-01 2017-12-31 2016-01-01 2016-12-31 2018-04-30 25642708 FairWind Holding ApS Hjulmagervej 6 7100 Vejle 2013-12-18 Vejle 75117620 www.fairwind.dk Sydbank Store Torv 12 8000 Aarhus C Ernst & Young Godkendt Revisionspartnerselskab 30700228 Englandsgade 25 5100 Odense C, Denmark Danmark +45 73 23 30 00 2018-05-25 René Kildsgaard Regnskabsklasse C, stor virksomhed Revisionspåtegning 2018-04-30 2018-04-30 Vejle, John Jørgen Funch Hans Steffen Steffensen Chairman Thomas Bechmann Hans Christian Gabelgaard Odense, Søren Smedegaard Hvid Morten Østergaard Koch State Authorised Public Accountant mne31450 State Authorised Public Accountant mne35420 315256000 0 73258000 40770000 43470000 24365000 25250000 17260000 Earnings before interest, taxes, depreciation and amortisation (EBITDA) Earnings before interest, taxes, depreciation and amortisation (EBITDA) Earnings before interest, taxes, depreciation and amortisation (EBITDA) Earnings before interest, taxes, depreciation and amortisation (EBITDA) Earnings before interest, taxes, depreciation and amortisation (EBITDA) 18235000 8747000 -9138000 -6136000 -4560000 -2542000 5153000 3690000 249843000 184727000 51409000 41816000 -16501000 -16472000 -12858000 -113174000 25223000 67463000 -13183000 -24816000 -4136000 -62183000 Total cash flows Total cash flows Total cash flows Total cash flows Total cash flows 7 2.6 8.4 7.9 18.9 17.3 20.3 22.4 14.6 1.9 0 0 147 127 684200000 448058000 0 0 583826000 376006000 0 0 100374000 72052000 0 0 6623000 4185000 0 0 69801000 60128000 25000 30000 228000 1665000 0 0 0 150000 0 0 24178000 9254000 -25000 -30000 0 0 10421000 2824000 1304000 177000 0 0 10442000 6313000 1732000 2286000 15040000 3118000 8664000 508000 5683000 2092000 -457000 -510000 9357000 1026000 9121000 1018000 -236000 -8000 1026000 74472000 81037000 0 0 74472000 81037000 0 0 27451000 22069000 0 0 27451000 22069000 0 0 0 0 120779000 112941000 685000 551000 0 0 685000 551000 120779000 112941000 102608000 103657000 120779000 112941000 132000 2563000 0 0 132000 2563000 0 0 148188000 134222000 0 0 32683000 51911000 0 0 0 0 989000 2201000 1959000 4976000 589000 879000 0 69000 0 0 18235000 7326000 0 0 15962000 9592000 0 0 217027000 208096000 1578000 3080000 26785000 27217000 2000 0 243944000 237876000 1580000 3080000 346552000 341533000 122359000 116021000 220000 220000 220000 220000 0 0 19449000 11610000 65417000 58876000 45968000 47266000 0 -30000 0 0 65637000 59066000 65637000 59096000 4513000 3167000 0 0 4513000 3167000 0 0 9434000 14350000 6634000 9950000 255000 1169000 0 0 51411000 43531000 44933000 43531000 0 4377000 0 0 61100000 63427000 51567000 53481000 16357000 18414000 3317000 3317000 93103000 80352000 0 78000 86783000 79519000 0 0 0 0 1833000 0 3475000 3158000 0 0 0 3577000 0 0 15584000 30853000 5000 49000 215302000 215873000 5155000 3444000 276402000 279300000 56722000 56925000 346552000 341533000 122359000 116021000 220000 58876000 -30000 9121000 236000 0 1650000 0 0 -930000 -206000 220000 65417000 65637000 0 220000 11610000 47266000 10419000 -1298000 0 1650000 0 0 -930000 0 220000 19449000 45968000 9357000 1026000 33885000 23403000 3442000 -22598000 46684000 1831000 1304000 177000 10442000 8185000 934000 2396000 -22778000 6727000 13834000 -1846000 0 65000 18063000 13995000 174000 775000 0 20986000 1166000 744000 -19055000 -35015000 6375000 0 7880000 26000000 18639000 5830000 3578000 35000000 0 9875000 0 17000000 -7962000 12045000 -13183000 -24816000 -53135000 -28319000 -66318000 -53135000 6565000 5791000 0 0 12727000 9320000 0 0 19292000 15111000 0 0 19292000 15111000 0 0 1304000 177000 0 0 1304000 177000 0 0 1063000 1516000 1063000 1516000 9379000 4797000 669000 770000 10442000 6313000 1732000 2286000 97303000 97303000 16266000 6565000 22831000 74472000 42925000 -126000 18063000 570000 60292000 20856000 -118000 12727000 624000 32841000 27451000 551000 188000 54000 685000 685000 120779000 Fairwind A/S Denmark 100 Fairwind GmbH Germany 100 Fairwind Ukraine ApS Denmark 100 Fairwind Offshore ApS Denmark 100 Fairwind Installation Ltd. United Kingdom 100 Fairwind Installation Ltd. South Africa 100 Fairwind Sp. Z.o.o Poland 100 Fairwind Poland Sp. Z.o.o Poland 100 Wind Service Sweden AB Sweden 100 Sweden Wind Service AB Sweden 100 Fairwind Finland Oy. Finland 100 Fairwind Rüzgar Enerji Hizmetteri Anonim Sikerti Turkey 100 Geos Construction LLC Ukraine 100 Fairwind Ukraine LLC Ukraine 100 FairWind Inc. United States 100 FairWind Canada Inc. Canada 100 Fairwind Holland B.V. Holland 100 European Wind Academy Sp. Z.o.o Poland 100 256464000 196873000 0 0 223781000 144962000 0 0 32683000 51911000 0 0 220000 220000 200000 200000 80000 0 20000 0 120000 80000 220000 200000 200000 80000 -1809000 976000 -879000 -1010000 2554000 -1809000 -589000 -879000 Parent company 34110000 Other 17301000 Parent company 27632000 Other 17301000 188342000 96133000 0 0 9035000 4492000 0 0 1701000 1340000 0 0 6575000 4659000 0 0 205653000 106624000 0 0 205653000 106624000 0 0 493 233 0 0 2238000 1971000 320000 316000 20000 0 876000 802000 1022000 853000 10419000 2824000 -1298000 -1806000 19292000 15175000 228000 0 -1304000 -177000 -10442000 -6313000 5683000 2092000 -2431000 -280000 -6249000 -44824000 -7260000 -21946000 0 -687000 0 -9971000 0 986000 0 -127000 0 1601000 0 -1233000 0 -2300000 0 -12387000 0 986000 26785000 27217000 93103000 80352000 Today, the Board of Directors and the Executive Board have discussed and approved the annual report of FairWind Holding ApS for the financial year 1 January - 31 December 2017. The annual report is prepared in accordance with the Danish Financial Statements Act. In our opinion, the consolidated financial statements and the parent company financial statements give a true and fair view of the financial position of the Group and the Company at 31 December 2017 and of the results of the Group's and the Company's operations and of the consolidated cash flows for the financial year 1 January - 31 December 2017. Further, in our opinion, the Management's review gives a fair review of the development in the Group's and the Company's operations and financial matters and the results of the Group's and the Company's operations and financial position. We recommend that the annual report be approved at the annual general meeting. To the shareholders of FairWind Holding ApS We have audited the consolidated financial statements and the parent company financial statements of FairWind Holding ApS for the financial year 1 January - 31 December 2017, which comprise income statement, balance sheet, statement of changes in equity and notes, including accounting policies, for the Group and the Parent Company, and a consolidated cash flow statement. The consolidated financial statements and the parent company financial statements are prepared in accordance with the Danish Financial Statements Act. In our opinion, the consolidated financial statements and the parent company financial statements give a true and fair view of the financial position of the Group and the Parent Company at 31 December 2017, and of the results of the Group's and Parent Company's operations as well as the consolidated cash flows for the financial year 1 January - 31 December 2017 in accordance with the Danish Financial Statements Act. We conducted our audit in accordance with International Standards on Auditing (ISAs) and the additional requirements applicable in Denmark. Our responsibilities under those standards and requirements are further described in the "Auditor's responsibilities for the audit of the consolidated financial statements and the parent Company financial statements" (herinafter collectively referred to as "the financial statements") section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Independence We are independent of the Group in accordance with the International Ethics Standards Board for Accountants' Code of Ethics for Professional Accountants (IESBA Code) and the additional requirements applicable in Denmark, and we have fulfilled our other ethical responsibilities in accordance with these rules and requirements. Management is responsible for the preparation of consolidated financial statements and parent company financial statements that give a true and fair view in accordance with the Danish Financial Statements Act 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 Group's and the Parent Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting in preparing the financial statements unless Management either intends to liquidate the Group or the Parent Company or to cease operations, or has no realistic alternative but to do so. Our objectives are to obtain reasonable assurance as to 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 ISAs and the additional requirements applicable in Denmark will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements. As part of an audit conducted in accordance with ISAs and the additional requirements applicable in Denmark, we exercise professional judgement 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, 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 Group's and the Parent Company'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 in preparing the financial statements and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group's and the Parent Company'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 Group and the Parent Company to cease to continue as a going concern. Evaluate the overall presentation, structure and contents of the financial statements, including the note disclosures, and whether the financial statements represent the underlying transactions and events in a manner that gives a true and fair view. 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 those charged with governance 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. Management is responsible for the Management's review. Our opinion on the financial statements does not cover the Management's review, 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 Management's review and, in doing so, consider whether the Management's review is materially inconsistent with the financial statements or our knowledge obtained during the audit, or otherwise appears to be materially misstated. Moreover, it is our responsibility to consider whether the Management's review provides the information required under the Danish Financial Statements Act. Based on the work we have performed, we conclude that the Management's review is in accordance with the financial statements and has been prepared in accordance with the requirements of the Danish Financial Statements Act. We did not identify any material misstatement of the Management's review. Financial ratios are calculated in accordance with the Danish Finance Society's recommendations on the calculation of financial ratios. For terms and definitions, please see the accounting policies. The group’s principal activities are installation of wind turbines and other related services. The profit for the year amounts to DKK 9,357 thousand (2016: DKK 1,026 thousand) and total equity amounts to DKK 65,637 thousand (2016: DKK 59,066 thousand), which is close in line with the expectations set forth in the annual report 2016. Management considers the development in turnover, activity and profit for the year as satisfactory. In December 2016 FairWind acquired EUM US Inc. and EU Montage Canada Inc. Following the original purchase price allocation management has identified a need for an adjustment of deferred tax assets of DKK 1,552 thousands. The total purchase price remains unchanged hence the reduction of deferred tax assets are offset against an increase in goodwill. Comparison figures has been updated accordingly. General risks The group is not exposed to specific risks which are not common for the type of business activities performed by the group except for currency risks mentioned below. Currency risks The group has activities in a variety of countries around the world. Some countries have volatile currencies, which expose the group to currency risks due to increase or decrease in local currencies compared to DKK. The group has no significant research and development activities. FairWind’s CSR policy and responsibility is valid for all employees in FairWind. We have displayed social responsibility since 2008 In FairWind we are conscious of the fact that we have a community responsibility and we wish to run a business that shows consideration for people and the environment we are a part of. FairWind supports and respects the UN’s Global Compact – 10 principles for social responsibility. FairWind has chosen several focus areas including employees and their work environment as well as environment and climate. With our CSR policy, we will account for our goals, how to achieve our goals and the results hereof. Every year we will attempt to expand our focus areas to constantly force ourselves to develop and improve our results. FairWind is open for a dialogue and cooperation with customers and business partners. Since 2008 we have been a guarantor for high quality and technical development. FairWind has from the beginning been based on strong ties to business partners and customers. The quality that comes from our way of working is non-negotiable. We exert ourselves on what we do. FairWind’s values are: Flexible: FairWind is always flexible and adaptable in order to suit the needs of our clients in the best way possible. Agile: FairWind is capable of rapid response to unexpected challenges, events, and opportunities. Built on polices and processes that facilitate speed of change, we aim to achieve continuous competitive advantages in serving our customers. Initiative: FairWind prefers to be first mover within many different areas. This is done by fostering a culture where people take initiatives on their own due to a problem that needs to be solved or a customer who has special needs. Responsible: FairWind believes that a responsible business = a profitable business. Profitability should never override all other considerations. How our profits are made is extremely important to us and therein lies the key to all other areas of responsibility that we try to improve continuously. We seek the dialogue Dialogue is a basic tool for management to run operations smoothly and to achieve the best result in cooperation with partners. FairWind has years of experience in taking responsibility and working towards all parties engaging in a constructive dialogue throughout the entire course of any project. Dialogue means that we achieve our goals to the satisfaction of both customers and other business partners. We want cooperation between all parties in our operations – customers, FairWind and other business partners. FairWind wants to find solutions – not just for FairWind but for the whole supply chain. This requires close collaboration with the customer and detailed insight into our projects. With our strong culture and good work environment we can carry out cooperation every day. We are a natural center point for the cooperation because we are always closely connected. UN GLOBAL COMPACT – FairWind's commitment to the 10 principles The relationship to our suppliers and subcontractors is a natural extension of the Global Compact principles. FairWind’s contracts with suppliers and subcontractors are governed by various guidelines from the company, that will help ensure a high quality as well as orderly conditions going backwards in the supply chain. FairWind commits its subcontractors to contractually live up to the applicable national collective agreements. If this is not complied with, it is considered a significant breach of contract. FairWind supports and respects the protection of internally proclaimed human rights within the boundaries of what is influenced by the company. FairWind ensures that the company does not contribute to the violation of human rights. FairWind maintains the freedom of assembly and acknowledges the right of collective bargaining. FairWind supports the elimination of all forms of forced labor. FairWind supports the elimination of child labor. FairWind supports the elimination of discrimination related to work and employment conditions. FairWind supports a precautionary approach to environmental challenges. FairWind takes initiatives to promote greater environmental responsibility. FairWind encourages development and dispersion of environmental technologies. FairWind opposes all forms of corruption, extortion and bribery. Code of Conduct FairWind’s Code of Conduct is a set of principles for ethical behaviour. It defines what we believe is a responsible ethical, social and environmental practice. It sets out clearly what is expected from our personnel. As a global company, FairWind has personnel of many different nationalities, religious beliefs, cultures and political views. FairWind personnel are subject to various local laws and regulations. Although the Code of Conduct is applicable and enforceable in any country where FairWind performs its activities, personnel are also subject to the national laws and regulations in their respective countries of activity and to any laws in their own countries. FairWind will comply with the laws of every jurisdiction in which it operates. Where a local law sets higher standards than those set out in our Code of Conduct, the local law takes precedence. The Code of Conduct proposes a set of minimum standards. FairWind business units may set stricter standards, as long as these do not conflict with the Code of Conduct. The Code of Conduct applies to all FairWind personnel. Moreover, all FairWind managers and supervisors must act as role models for staff by adhering to the principles set out in the Code of Conduct. Managers and supervisors have a duty to inform, encourage and monitor personnel who report to them in relation to the Code of Conduct. All managers must support personnel who raise questions or concerns in the conduct of their professional activities. The full version of FairWind’s Code of Conduct is available online at www.fairwind.com. Target In 2017 FairWind's target has been to inform all new employees, technicians, contractors and suppliers of FairWind's Code of Conduct. Furthermore FairWind have had a target of 0 breaches of the Code of Conduct. The target for 2018 will remain 0 breaches of the Code of Conduct. Achieving the target All new employees, technicians, contractors and suppliers will receive the Code of Conduct. New employees and technicians are trained in the Code of Conduct at beginner's day. Result In 2017 all new employees, technicians, contractors and suppliers received the Code of Conduct. FairWind have counted 0 breaches of the Code of Conduct in 2017. Employees and work environment The target FairWind wants to bring down the number of work related incidents and near misses in operations as well as secure a low rate of absence due to illness. FairWind’s goal for work environment is that the accident frequency rate in 2018 can be no higher than 2.9. The accident frequency rate is measured as the number of incidents multiplied by 200,000 and divided by the amounts of working hours in a year. Another goal is to strengthen the instruction on the individual work place so we can bring down the number of work related incidents through targeted efforts. Achieving the target At FairWind a good and healthy work environment is everything. This both in terms of the physical and psychological work environment. Our QHSE and HR departments are continuously measuring the number of work related incidents. Quality, environment and the target for our work environment is deeply anchored in both our company profile as well as operations. Thus, we continuously achieve to secure a good work environment, that is being supported by a strong HSE organization. FairWind carries out the mandatory workplace evaluations and is continuously working on improving the conditions that do not live up to the requirements. With all new employments, all internal policies and safety procedures are presented and handed out, and the company’s QHSE department monitors that all policies and regulations are up to date and being followed. The result With the increased focus on reporting internally FairWind counted 17 work related incidents in 2017. In 2016 FairWind had 6 work related incidents. The incident frequency rate in FairWind in 2017 was 2.6 compared to 1.6 in 2016. Environment and climate The target Environment and climate is a high priority in FairWind. The target for FairWind is that the company is perceived by customers, employees and authorities as a climate and environment conscious company. We wish to protect the environment and support society’s interests in environmental improvements through a responsible attention to the internal and external environment. In 2017 FairWind's target was to start collecting and measure environmental and climate data for electricity and heating energy consumption in our offices in Poland and Denmark. In 2017 FairWind's target was to start collecting data for spills to the environment. For 2018 the target is to have a full year of data, analyze the consumption and derive concrete and measurable targets on electricity and heating energy consumption. The target for 2018 is a 3% reduction of consumption. Our target for 2018 is to reduce the number of spill of chemical substances with at least 15 % compared to 2017. Awareness of site personnel and contractors has been raised during 2017 by conducting toolbox meetings on each site on a frequent basis. Achieving the target FairWind secures the company’s environmental arrangements through detailed internal control systems. In relation to the internal environment we strive to arrange work processes with consideration of the environmental impact. In relation to the external environment we strive to comply with relevant environmental legislation and we continuously work with resource and energy optimization. All policies are aligned and responsibility is distributed at all management levels. After this all policies are communicated to all employees and are supported continuously with training and education. We also carry out environmental controls. FairWind continuously works on minimizing the energy consumption of our company. Additionally, FairWind is certified according to ISO 14001. FairWind have been measuring the electricity and heating energy consumption throughout most of, but not the whole 2017 for our offices in Denmark and Poland. The result There have not been issued any enforcement notices from the environmental authorities in 2017 and our own self-regulation has not revealed any violations of the environmental law either. In 2017 we have changed the office in Poland to a more environmental and climate friendly facilities. In 2017 FairWind counted 11 small chemical spillages to the environment. All of them was remediated on the spot without further consequences to the environment. The target FairWind sees it as a corporate responsibility to contribute to solving the task of gender equality. We believe that diversity among our employees, including even gender distribution, contributes positively to the work environment, the company’s performance and our competitiveness. FairWind has a target of having 15 % of board members in FairWind being female before 2021. FairWind has a target of having an increased percentage of managers and middle managers being female. In 2018 FairWind will be looking for competent female candidates for the board. Achieving the target In 2017 the board have not found any competent females for the board. On the level for manager and middle manager FairWind have been successful in attracting females. The success was due to a continuous focus on attracting females in these positions. In 2017 FairWind did focus on the recruiting process where all candidates are treated equal. Also FairWind held one-on-one conversations with female employees to discuss their development and opportunities in FairWind. The result In FairWind the Board consists of a Chairman and two members. As per 31/12-2017 the status is that there are no female board members. We have 13 female managers or middle managers equivalent to 25 % of the total group of managers and middle managers, meaning the share of females in these positions has increased from 21.5 % in 2016 to 25 % in 2017. Closing Statement FairWind’s CSR policy is long-term and future-oriented but also an important point of orientation in the daily operations for FairWind’s managers and employees. The CSR policy will secure progress and results. At FairWind we will continuously work on expanding our CSR policy as more relevant areas are included. It is our belief, that a sound CSR policy changes as our surroundings change. Our wish is to always be closely connected to, and in close dialogue with, both our global and local environments. No subsequent events have occurred post the balance sheet date which has a significant impact on the Group’s financial position. Management expects the group to continue the positive development. In 2018, Management will continue improving the group’s IT systems and better the group's procedures. Management expects a profit for 2018 equal to that of 2017. The annual report of FairWind Holding ApS for 2017 has been prepared in accordance with the provisions in the Danish Financial Statements Act applying to large reporting class C entities. The accounting policies used in the preparation of the financial statements are consistent with those of last year. In 2017 the income statement is prepared using the income statement classified by function. In previous years the income statement was prepared using the income statement classified by nature. Management has assessed that an adjustment of the purchase price allocation related to the acquisition of EUM US Inc. and EU Montage Canada Inc. in December 2016 is needed. It has become clear that deferred tax assets in the purchase price allocation was overstated by DKK 1,552 thousand. Management has assessed that the total value of the acquisition remain unchanged and therefore the adjustment of deferred tax assets is offset towards goodwill. The adjustment has no effect on the parent company financial statements but has been incorporated in the comparison figures with the following effect on the consolidated financial statements: - Profit for the year 2016 remain unchanged - Total assets as of 31 December 2016 remain unchanged but goodwill has been increased by DKK 1,552 thousand and deferred tax assets has been reduced by DKK 1,552 thousand - Equity as of 31 December 2016 reamin unchanged The consolidated financial statements are prepared as a consolidation of the parent company's and the individual subsidiaries' financial statements, which are prepared according to the group's accounting policies. On consolidation, intra-group income and expenses, shareholdings, intra-group balances and dividends, and realised and unrealised gains on intra-group transactions are eliminated. Unrealised gains on transactions with associates are eliminated in proportion to the group's interest in the entity. Unrealised losses are eliminated in the same way as unrealised gains if they do not reflect impairment. In the consolidated financial statements, the accounting items of subsidiaries are recognised in full. Non-controlling interests' share of the profit/loss for the year and of the equity of subsidiaries which are not wholly-owned are included in the group's profit/loss and equity, respectively, but are disclosed separately. Acquisitions and disposals of non-controlling interests which are still controlled are recognised directly in equity as a transaction between shareholders. Investments in associates and joint ventures are recognised in the consolidated financial statements using the equity method. The group's activities in joint operations are recognised on a line-by-line basis. On initial recognition, non-controlling interests are measured at the fair value of the non-controlling interests' equity interest or at the non-controlling interests' proportionate share of the fair value of the acquiree’s identifiable assets, liabilities and contingent liabilities. In the former scenario, goodwill relating to the non-controlling interests' share of the acquiree is thus recognised, whereas, in the latter scenario, goodwill relating to the non-controlling interests' share is not recognised. The measurement scenario is decided transaction by transaction. On initial recognition, transactions denominated in foreign currencies are translated at the exchange rate at the transaction date. Foreign exchange differences arising between the exchange rates at the transaction date and the date of payment are recognised in the income statement as financial income or financial expenses. Receivables and payables and other monetary items denominated in foreign currencies are translated at the exchange rate at the balance sheet date. The difference between the exchange rates at the balance sheet date and the date at which the receivable or payable arose or was recognised in the most recent financial statements is recognised in the income statement as financial income or financial expenses. On initial recognition, derivative financial instruments are recognised at cost in the balance sheet and are subsequently measured at fair value. Positive and negative fair values of derivative financial instruments are included in "Other receivables" and "Other payables", respectively. Fair value adjustments of derivative financial instruments designated as and qualifying for recognition as a hedge of the fair value of a recognised asset or liability are recognised in the income statement along with changes in the fair value of the hedged asset or liability. Fair value adjustments of derivative financial instruments designated as and qualifying for hedging of future assets or liabilities are recognised in other receivables or other payables, respectively, and in equity. If the hedged forecast transaction results in the recognition of assets or liabilities, amounts previously recognised in equity are transferred to the cost of the asset or liability, respectively. If the hedged forecast transaction results in income or expenses, amounts previously deferred in equity are transferred to the income statement in the period in which the hedged item affects the profit/loss for the year. On initial recognition, leases for assets that transfer substantially all the risks and rewards incident to the ownership to the Company (finance leases) are measured in the balance sheet at the lower of fair value and the present value of the future lease payments. In calculating the net present value, the interest rate implicit in the lease or the incremental borrowing rate is used as the discount factor. Assets held under finance leases are subsequently accounted for in the same way as the Company's other assets. The capitalised residual lease liability is recognised in the balance sheet as a liability, and the interest element of the lease payment is recognised in the income statement over the term of the lease. Leases that do not transfer substantially all the risks and rewards incident to the ownership to the Company are classified as operating leases. Payments relating to operating leases and any other rent agreements are recognised in the income statement over the term of the lease. The Company's aggregate liabilities relating to operating leases and other rent agreements are disclosed under "Contingent liabilities". Income from the rendering of services is recognised as revenue as the services are rendered. Accordingly, revenue corresponds to the market value of the services rendered during the year (percentage-of-completion method). Income from construction contracts involving a high degree of customisation is recognised as revenue by reference to the stage of completion. Accordingly, revenue corresponds to the market value of the contract work performed during the year (percentage-of-completion method). This method is used where the total income and expenses and the degree of completion of the contract can be measured reliably. Where income from a construction contract cannot be estimated reliably, contract revenue corresponding to the expenses incurred is recognised only in so far as it is probable that such expenses will be recoverable from the counterparty. Revenue is measured at the fair value of the agreed consideration excluding VAT and taxes charged on behalf of third parties. All discounts and rebates granted are recognised in revenue. Production costs comprise costs incurred in generating the revenue for the year. Such costs include direct and indirect costs of raw materials, consumables and production staff, rent and leases, as well as depreciation on production plant. Production costs also comprise research and development costs that do not qualify for capitalisation and amortisation of capitalised development costs. Also, provision for losses on construction contracts is recognised. Distribution costs comprise costs related to the distribution of goods sold in the year and to sales campaigns, etc. carried out in the year, including costs related to sales staff, advertising, exhibitions and amortisation/depreciation. Administrative expenses include expenses incurred in the year for company management and administration, including expenses relating to administrative staff, Management, office premises and expenses as well as amortisation/depreciation of assets used for administrative purposes. Other operating income and operating expenses comprise items of a secondary nature relative to the Company's core activities, including gains or losses on the sale of fixed assets. The item comprises amortisation/depreciation of intangible assets and property, plant and equipment. Goodwill is amortised over its estimated useful life determined on the bases of Management's experience of the specific business areas, longest for strategically acquired enterprises with strong market positions and long-term earnings profiles. The basis of amortisation, which is calculated as cost less any residual value, is amortised on a straight line basis over the expected useful life. The expected useful lives of the assets are as follows: Goodwill (maximum useful life) 15 years The period is 15 years due to strategically acquired group entities with strong markets positions and long-term earning profiles. Where individual components of an item of property, plant and equipment have different useful lives, they are accounted for as separate items, which are depreciated separately. Fixtures and fittings, tools and equipment 2-10 years The residual value is determined at the time of acquisition and are reassessed every year. Where the residual value exceeds the carrying amount of the asset, no further depreciation charges are recognised. In case of changes in the residual value, the effect on the depreciation charges is recognised prospectively as a change in accounting estimates. A proportionate share of the underlying entities' profit/loss after tax is recognised in the income statement according to the equity method. Shares of profit/loss after tax in subsidiaries are presented as separate line items in the income statement. Full elimination of intra-group gains/losses is made for equity investments in subsidiaries. Financial income and expenses are recognised in the income statement at the amounts that relate to the financial reporting period. The items comprise interest income and expenses, e.g. from group entities and associates, declared dividends from other securities and investments, financial expenses relating to finance leases, realised and unrealised capital gains and losses relating to other securities and investments, exchange gains and losses and amortisation of financial assets and liabilities. The parent company is covered by the Danish rules on mandatory joint taxation of the Group's Danish subsidiaries. Subsidiaries are included in the joint taxation arrangement from the date at which they are included in the consolidated financial statements and up to the date when they are no longer consolidated. The parent company acts as management company for the joint taxation arrangement and consequently settles all corporate income tax payments with the tax authorities. On payment of joint taxation contributions, the Danish corporate income tax charge is allocated between the jointly taxed entities in proportion to their taxable income. Entities with tax losses receive joint taxation contributions from entities that have been able to use the tax losses to reduce their own taxable income. Tax for the year, which comprises the current income tax charge, joint taxation contributions and deferred tax adjustments, including adjustments arising from changes in tax rates, is recognised in the income statement as regards the portion that relates to the profit/loss for the year and directly in equity as regards the portion that relates to entries directly in equity. Goodwill is measured at cost less accumulated amortisation and impairment losses. Property, plant and equipment Items of property, plant and equipment are measured at cost less accumulated depreciation and impairment losses. Cost includes the acquisition price and costs directly related to the acquisition until the time at which the asset is ready for use. Gains or losses are calculated as the difference between the selling price less selling costs and the carrying amount at the date of disposal. Gains and losses from the disposal of property, plant and equipment are recognised in the income statement as other operating income or other operating expenses. Equity investments in subsidiaries are measured according to the equity method. Equity investments in joint ventures are also measured according to the equity method in the consolidated financial statements. On initial recognition, equity investments in subsidiaries are measured at cost, i.e. plus transaction costs. The cost is allocated in accordance with the acquisition method; see the accounting policies regarding business combinations. The cost is adjusted by shares of profit/loss after tax calculated in accordance with the Group's accounting policies less or plus unrealised intra-group gains/losses. Identified increases in value and goodwill, if any, compared to the underlying entity's net asset value are amortised in accordance with the accounting policies for the assets and liabilities to which they can be attributed. Negative goodwill is recognised in the income statement. Dividend received is deduced from the carrying amount. Equity investments in subsidiaries measured at net asset value are subject to impairment test requirements if there is any indication of impairment. The carrying amount of intangible assets, property, plant and equipment and investments in subsidiaries and associates is assessed for impairment on an annual basis. Impairment tests are conducted on assets or groups of assets when there is evidence of impairment. The carrying amount of impaired assets is reduced to the higher of the net selling price and the value in use (recoverable amount). The recoverable amount is the higher of the net selling price of an asset and its value in use. The value in use is calculated as the present value of the expected net cash flows from the use of the asset or the group of assets and the expected net cash flows from the disposal of the asset or the group of assets after the end of the useful life. Previously recognised impairment losses are reversed when the reason for recognition no longer exists. Impairment losses on goodwill are not reversed. Inventories are measured at cost in accordance with the FIFO method. Where the net realisable value is lower than cost, inventories are written down to this lower value. The net realisable value of inventories is calculated as the sales amount less costs of completion and expenses required to effect the sale and is determined taking into account marketability, obsolescence and development in the expected selling price. Goods for resale are measured at cost, which comprises the cost of acquisition plus delivery costs as well as other expenses directly attributable to the acquisition. Receivables are measured at amortised cost. An impairment loss is recognised if there is objective evidence that a receivable is impaired. If there is objective evidence that an individual receivable has been impaired, an impairment loss is recognised on an individual basis. Impairment losses are calculated as the difference between the carrying amount of the receivables and the present value of the expected cash flows, including the realisable value of any collateral received. The effective interest rate for the individual receivable is used as discount rate. Other receivables consists of VAT, withholding taxes etc. Service supplies and contract work in progress for third parties are measured at the market value of the work performed less progress billings. The market value is calculated based on the stage of completion at the balance sheet date and the total expected income from the relevant contract. The stage of completion is calculated based on the expenses incurred relative to the expected total expenses relating to the relevant contract. Where the outcome of contract work in progress cannot be estimated reliably, the market value is measured at the expenses incurred in so far as they are expected to be paid by the purchaser. Where the total expenses relating to the work in progress are expected to exceed the total market value, the expected loss is recognised as a loss-making agreement under "Provisions" and is expensed in the income statement. The value of work in progress less progress billings is classified as assets when the selling price exceeds progress billings and as liabilities when progress billings exceed the market value. Prepayments recognised under "Assets" comprise prepaid expenses regarding subsequent financial reporting years. Reserve for net revaluation according to the equity method The net revaluation reserve according to the equity method includes net revaluations of investments in subsidiaries and associates relative to cost. The reserve can be eliminated in case of losses, realisation of investments or a change in accounting estimates. The reserve cannot be recognised at a negative amount. Proposed dividends Dividend proposed for the year is recognised as a liability once adopted at the annual general meeting (declaration date). Dividends expected to be distributed for the financial year are presented as a separate item under "Equity". Dividend proposed for the year is recognised as a liability once adopted at the annual general meeting (declaration date). Dividends expected to be distributed for the financial year are presented as a separate item under "Equity". Current tax payables and receivables are recognised in the balance sheet as the estimated income tax charge for the year, adjusted for prior-year taxes and tax paid on account. Deferred tax is measured according to the liability method on all temporary differences between the carrying amount and the tax base of assets and liabilities. However, deferred tax is not recognised on temporary differences relating to goodwill which is not deductible for tax purposes and on office premises and other items where temporary differences, apart from business combinations, arise at the date of acquisition without affecting either profit/loss for the year or taxable income. Where alternative tax rules can be applied to determine the tax base, deferred tax is measured based on Management's intended use of the asset or settlement of the liability, respectively. Deferred tax is measured according to the tax rules and at the tax rates applicable at the balance sheet date when the deferred tax is expected to crystallise as current tax. Deferred tax assets are recognised at the expected value of their utilisation; either as a set-off against tax on future income or as a set-off against deferred tax liabilities in the same legal tax entity. Changes in deferred tax due to changes in the tax rate are recognised in the income statement. As management company for all the entities in the joint taxation arrangement, the parent company is liable for payment of the subsidiaries' income taxes vis à vis the tax authorities as the subsidiaries pay their joint taxation contributions. Joint taxation contributions payable or receivable are recognised in the balance sheet as income tax receivables or payables. Financial liabilities are recognised at the date of borrowing at the net proceeds received less transaction costs paid. On subsequent recognition, financial liabilities are measured at amortised cost, corresponding to the capitalised value, using the effective interest rate. Accordingly, the difference between the proceeds and the nominal value is recognised in the income statement over the term of the loan. Financial liabilities also include the capitalised residual lease liability in respect of finance leases. Other liabilities are measured at net realisable value. Lease liabilities Lease liabilities are measured at the net present value of the remaining lease payments including any guaranteed residual value based on the interest rate implicit in the lease. Subordinate loan capital Liabilities where the creditors have stated they are willing to subordinate their claim to rank after all the entity's other creditors are presented as subordinate loan capital. Subordinate loan capital is recognised using the same method as applies to liabilities. The cash flow statement shows the Company's net cash flows broken down according to operating, investing and financing activities, the year's changes in cash and cash equivalents as well as the cash and cash equivalents at the beginning and the end of the year. Cash flows from operating activities are calculated as the profit/loss for the year adjusted for non cash operating items, changes in working capital and paid corporate income tax. Cash flows from investing activities comprise payments in connection with acquisitions and disposals of entities and activities and of intangible assets, property, plant and equipment and investments. Cash flows from financing activities comprise changes in the size or composition of the Company's share capital and related expenses as well as raising of loans, repayment of interest bearing debt and payment of dividends to shareholders. Cash and cash equivalents comprise cash, short term bank loans and short term securities which are readily convertible into cash and which are subject only to insignificant risks of changes in value. The allocation of revenue to activities and geographical markets is disclosed where these activities and markets differ significantly in the organisation of sales of goods and services. Financial ratios are calculated in accordance with the Danish Finance Society's guidelines on the calculation of financial ratios. The financial ratios stated under "Financial highlights" have been calculated as follows: Return on assets Profit/loss from operating activites x 100 Average assets Equity ratio Equity excl. non-controlling interests, year-end x 100 Total equity and liabilities, year-end Return on equity Profit/loss for the year excl. non-controlling interests x 100 Average equity excl. non-controlling interests Breakdown of revenue by geographical segment: Europe 349,480 275,608 0 0 Scandinavia 170,499 93,660 0 0 North and South America 110,376 9,069 0 0 Rest of the world 53,845 69,721 0 0 684,200 448,058 0 0 Amortisation/depreciation of intangible assets and property, plant and equipment is recognised in the income statement under the following items: Production costs 12,727 9,320 0 0 Administrative expenses 6,565 5,791 0 0 19,292 15,111 0 0 Of the long-term liabilities, DKK 51,412 falls due for payment after more than 5 years after the balance sheet date. Of the long-term liabilities, DKK 44,933 falls due for payment after more than 5 years after the balance sheet date. Subordinate loan capital has been granted by current and former owners and is subordinated in relation to all other creditors. Parent company subordinate loan capital will mature in 2026 or in the event of an exit. Other subordinate loan capital will mature in 2024 or in the event of an exit. The interest is added to the principal and does not fall due for payment until the principal does. Remuneration of the Executive Board and Board of Directors in the group and in the parent company amounts to DKK 4,004 thousand (2016: DKK 1,741 thousand). The remuneration is to two members of the Executive Board in 2017 and also includes severance pay. Other contingent liabilities Group Operating lease obligations: The Group have entered into operating leasing agreements with a combined lease payment of DKK 6,451 thousand. The remaining term of the leases is 6 to 45 months. Guarantees: The Group has issued work guarantees of DKK 10,346 thousand for services delivered. 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