BDO Statsautoriseret revisionsaktieselskabRoms Hule 4, 1. salDK-7100 Vejle20222670Årsrapport92022-06-29Jesper RoeWatermill ApSNordlundvej 17330 BrandeRevisionspåtegning+45 96 42 40 00www.btxgroup.dkinfo@btx.dk350242712013-01-01Ikast-Brande2021-01-012021-12-312020-01-012020-12-31BDO Statsautoriseret revisionsaktieselskabRoms Hule4, 1. sal7100VejleSydbankBrande2022-06-29Jesper RoeArvind Kumar VijChairmanJesper RoeTim Lund LarsenKonklusionGrundlag for konklusionVejle2022-06-29BDO Statsautoriseret revisionsaktieselskab20222670Allan LundRevisionspåtegningState Authorised Public Accountantmne100933350000003870000004180000008200000088000000102000000-6000000-1120000002000000-6000000-9000000-15000000-9000000-25000000-6000000-1120000001000000Operation profit before financial income and tax (EBIT)Operation profit before financial income and tax (EBIT)Operation profit before financial income and tax (EBIT)Operation profit before financial income and tax (EBIT)Operation profit before financial income and tax (EBIT)-10000000-119000000-14000000121000000179000000278000000-59000000-4600000062000000900000019000000330000003000000044000000Working capital*Working capital*Working capital*Working capital*Working capital*125000000132000000116000000111000000104000000Net interest-bearing debtNet interest-bearing debtNet interest-bearing debtNet interest-bearing debtNet interest-bearing debt0-1000-2000-5000-50002319252322-4-10-2-290-132-112-49-2622-9-23-4-491Return on invested capitalReturn on invested capitalReturn on invested capitalReturn on invested capitalReturn on invested capital2381550002628700000011790200013583500000319300041840007550000792000065392000767450001013000104600058054000544740006537000687400058896000694540006489000631500057080007357000001958000255900000-8508000-248960004800055900000-11240000-3875300040300035400026300028000010313000937100026820002856000-18418000-33913000-13611000-40770000-480700072260000369000-13611000-41139000-13611000-41139000663000372400000788000178600000145100055100000031700004754000003170000475400000000020000149000002000014900000464100010413000002448200032608000002448200032608000001406100015899000005456000339900000810300041300000020900054300000529700061340000033126000301050000023139000250780001580002200085388000982040001580002200080000800008000080000-114298000-100687000-112472000-110086000-112392000-110006000-112392000-11000600000653240006590100000653240006590100042695000409570004269500040957000280000003500000000452000659000005392000647600044900044900076539000830920004314400041406000768110007365100000207000207000002038300021704000161000700002630000023438000289520003685000247800040200034100023600023600012124100012511800040820002721000197780000208210000472260004412700085388000982040001580002200080000-9399000-100687000-1361100011225000800001826000-11429800080000-110086000-136110001122500080000-112472000-8508000-248960005708000735700004700000-110000812600012987000-1321000-1769900020520005461000403000354000-7226000-7461000-72000-120002135000-13281000-42000-75400035000172000-168000-2400029700015590000-354000122000599000035000000-207000-551000-35600038928000190100026246000-48573000-74819000-46672000-485730001321494452239000626100005938000580200042410004665000525000491000303000034270002600022000-614000-1248000005889600069454000648900063150000026300027900040300035400001000403000354000263000280000-52000011220001108000112200010833000824900015740001735000103130009371000268200028570003370004440000369000690004700000-521300067350000-369000-4807000722600000-13611000-41139000-13611000-411390001758400073420000178000175840007520000138600005556000015800030610001018000169210006732000663000788000289470003800042000290270002419300035000162900025857000317000061100014900016800029700020000200006934100069341000-157535000164000-112400008820900011061000-693410000Deferred tax is measured according to the tax rules and at the tax rates applicable in the respective countries at the balance sheet date when the deferred tax is expected to crystallise as current tax.5392449Regnskabsklasse C, mellemstor virksomhedtrueThe Board of Directors and the Executive Board have today discussed and approved the annual report of Watermill ApS for the financial year 1 January - 31 December 2021. The Annual Report is presented in accordance with the Danish Financial Statements Act. In our opinion, the consolidated and the parent company financial statements give a true and fair view of the Group's and the Company's financial position at 31 December 2019 and of the results of the Group's and the Company's operations and consolidated cash flows for the financial year 1 January - 31 December 2021. Furthermore, in our opinion, Management’s review includes a fair review of the development in the Group's and the Company's operations and financial circumstances, of the results for the year and of the financial position of the Group and the Company. We recommend the Annual Report be approved at the Annual General Meeting. To the Shareholder of Watermill ApS We have audited the Consolidated Financial Statements and the Annual Financial Statements of the Company of Watermill ApS for the financial year 1 January - 31 December 2021, which comprise income statement, Balance Sheet, statement of changes in equity, notes and a summary of significant accounting policies for both the Group and the Parent Company, as well as consolidated statement of cash flows for the Group. The Consolidated Financial Statements and the Annual Financial Statements of the Company are prepared in accordance with the Danish Financial Statements Act. In our opinion, the Consolidated Financial Statements and the Annual Financial Statements of the Company give a true and fair view of the assets, liabilities and financial position of the Group or the Company at 31 December 2021 and of the results of the Group and the Parent Company's operations as well as the consolidated cash flows of the Group for the financial year 1 January - 31 December 2021 in accordance with the Danish Financial Statements Act. Basis for Opinion Grundlag for konklusion 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 Annual Financial Statements of the Company” section of our report. We are independent of the Group in accordance with the International Ethics Standards Board for Accountants’ International Code of Ethics for Professional Accountants (including International Independence Standards) (IESBA Code), together with the ethical requirements that are relevant to our audit of the financial statements in Denmark, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the IESBA Code. We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our conclusion. Material uncertainty relating to Going Concern We point out that there is uncertainty that can raise doubts about the company's ability to continue operations. We refer to the note "Continuing operations" in the annual report, which states that Management expects another turbulent year. The potential impact on the Company’s activity and financial impact on the business is expressed with some uncertainty, as the global supply chains, inflation, increase in raw material, transportation costs, energy etc. continues. Management has chosen to present the accounts on the assumption of going concern. Our conclusion is not modified regarding this matter. Management's Responsibilities for the Consolidated Financial Statements and the Annual Financial Statements of the Company Management is responsible for the preparation of Consolidated Financial Statements and the Annual Financial Statements of the Company 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 Consolidated Financial Statements and the Annual Financial Statements of the Company that are free from material misstatement, whether due to fraud or error. In preparing the Consolidated Financial Statements and the Annual Financial Statements of the Company, 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 Consolidated Financial Statements and the Annual Financial Statements of the Company unless Management either intends to liquidate the Group or the Company or to cease operations, or has no realistic alternative but to do so. Our objectives are to obtain reasonable assurance about whether the Consolidated Financial Statements and the Annual Financial Statements of the Company 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 these Consolidated Financial Statements and the Annual Financial Statements of the Company. As part of an audit conducted in accordance with ISAs and the additional requirements applicable in Denmark, we exercise professional judgment and maintain professional scepticism throughout the audit. We also: Identify and assess the risks of material misstatement of the Consolidated Financial Statements and the Annual Financial Statements of the Company, 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 Consolidated Financial Statements and the Annual Financial Statements of the Com- pany 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 Consolidated Financial Statements and the Annual Financial Statements of the Company 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 Consolidated Financial Statements and the Annual Financial Statements of the Company, including the disclosures, and whether the Consolidated Financial Statements and the Annual Financial Statements of the Company 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. Statement on Management Commentary Management is responsible for Management Commentary. Our opinion on the Consolidated Financial Statements and the Annual Financial Statements of the Company does not cover Management Commentary, and we do not express any form of assurance conclusion thereon. In connection with our audit of the Consolidated Financial Statements and the Annual Financial Statements of the Company, our responsibility is to read Management Commentary and, in doing so, consider whether Management Commentary is materially inconsistent with the Consolidated Financial Statements and the Annual Financial Statements of the Company or our knowledge obtained during the audit, or otherwise appears to be materially misstated. Moreover, it is our responsibility to consider whether Management Commentary provides the information required under the Danish Financial Statements Act. Based on the work we have performed, we conclude that Management Commentary is in accordance with the Consolidated Financial Statements and the Annual Financial Statements of the Company and has been prepared in accordance with the requirements of the Danish Financial Statements Act. We did not identify any material misstatement of Management Commentary. * Hedging transactions are not included. The financial ratios are calculated in accordance with the Danish Society of Financial Analysts' guidelines. Net working capital (NWC): Principal activities The consolidated financial statements comprise the operating company Watermill ApS and its subsidiaries. The principal activities are design, purchase and sale of products in the apparel industry. Products are bought in the Far East as well as in Europe and they are sold primarily in the European markets. The Company sells fashion for women. Development in activities and financial and economic position Development in activities and financial position Year 2021 started on the same note as 2020 ended with COVID-19 taking headlines. Most of Europe was in lockdown and main markets continued to be in lockdown up until May 2021. The lockdown lead to reduced customer shipments, lower reorders and consequently inventory mark downs on spring/summer. As our sales period for autumn/winter is in first half of 2021, COVID also had an impact on this performance. Revenue ended at DKK 238 million compared to DKK 263 million in 2020. Towards second half of 2021 the aftermath of COVID-19 came into play with disrupted distribution chains, increased (freight) costs etc.. Positively a transformation plan to secure efficient processes and lean cost base was implemented during 2020, where the full impact in 2021 did benefit the earnings. In spite of a drop in revenue of DKK 25 million, operating profit improved by DKK 16m to DKK -8,5 million compared to DKK -24,9 million in 2020. The result for the year ended at DKK -14 million. Albeit we recognize the improvement in performance and we did expect a difficult year, a negative result is considered unsatisfactory. At the same time we are pleased that the business delivered positive cash flow for the year. The challenging market conditions in 2021 are expected to continue in 2022, as the global supply chains remains a negative factor, which together with inflation and a potential down turn in macroeconomics makes business environment difficult . We will continue to invest in market-oriented activities in 2022 and fortunately the focus on growth already started to pay off, where large accounts have been picked up in 2021, which capitalised in a strong order book for 2022. Action plans to benefit our long term business will still have highest priority together with continuously focus on lean processes. At the end of 2021, the Group had 132 employees which is a decrease of 17 compared to the end of 2020. Profit/loss for the year compared to expectations 2021 was another year with COVID and the result for the year was DKK -14 million, which is an improvement of DKK 27 million compared to 2020 (DKK -41 million). The development is in line with the expected improvement in earnings in 2021, as expressed in 2020 report. Important events after the end of the financial year There are no important events after the reporting period to be disclosed. Particular risks The Group is exposed to currency fluctuations with respect to both purchases and sales, particularly fluctuations in USD, NOK and SEK. To reduce the effect of currency risk and to ensure predictability in financial forecasts and avoid surprises on this account, the Group does hedging of the 3 currencies. Strategy and process is defined in a written company policy where the target is to eliminate 95% of the calculated risk for each of the 3 currencies. Particular risks It is management's opinion that the Group is not influenced by any particular risks apart from those characteristic for the industry. The Group operates in a segment that is sensitive to market fluctuations; the financial conditions caused by recession in the macro economies in Europe and changed purchasing conditions in the Far East are particularly hard to predict, which has been confirmed by latest and current challenges in the global supply chains and price increases. In past two years COVID has forced close down in our sales markets at our peak sales periods. Further more COVID can lead to close down in sourcing markets leading to an unstable delivery situation, hence COVID constitutes a risk to our business performance. Environmental situation The Group is developing its code of conduct and related follow-up processes, which are to ensure, among other things, that suppliers live up to the Group's requirements concerning human rights, social and environmental conditions, etc. The group's code of conduct can be downloaded at http://www.btx-group.com. Knowledge resources It is the objective of the Group to continue being an attractive place to work and thereby be able to attract and retain highly qualified employees. Through education, training, delegation of duties, clear distribution of responsibilities and targeted efforts, the Group intends to further develop the skills and competencies of its staff on a continuous basis. Outlook In spite of a good position for the 2022 order book, management expects another turbulent year. The potential impact on the Company’s activity and financial impact on the business is expressed with some uncertainty, as the global supply chains, inflation, increase in raw material, transportation costs, energy etc. continues. Based on the current strong 2022 orderbook, and despite the current business environment, management currently expects an improvement in earnings in 2022 of DKK 10-15 million. As of the date of the approval of the annual report a substantial part of the group’s total budgeted revenue in 2022 is secured. We expect to see further improvements in earnings in 2023, as strategic initiatives will deliver on their potential. The Company operates with a 12 month bank facility agreement that expires end December. The facility agreement is up for renewable once a year next time in December 2022. With the expected earnings in 2022, management feel comfortable to have sufficient liquidity throughout the year. The Company's foreign branches The Group has no foreign branch offices. Group Share capital Fair value-reserve, hedging Retained profit Total Equity at 1 January 2021 80 -9.399 -100.687 -110.006 Proposed profit allocation, Engelsk 6 -13.611 -13.611 Change fair value reserves Value adjustments in the year 11.225 11.225 Equity at 31 December 2021 80 1.826 -114.298 -112.392 Parent Company Share capital Retained profit Total Equity at 1 January 2021 80 -110.086 -110.006 Proposed profit allocation, jf. note 6 -13.611 -13.611 Transferred through distribution of profit/loss Other adjustments to equity value 11.225 11.225 Equity at 31 December 2021 80 -112.472 -112.392 Net revenue 1 Information on business segments and geographical markets has not been disclosed, as such information in Management's opinion may cause substantial damage to the Watermill ApS Group. Staff costs 2 Average number of employees 132 149 4 4 Wages and salaries 52.239 62.610 5.938 5.802 Pensions 4.241 4.665 525 491 Social security costs 3.030 3.427 26 22 Other staff costs -614 -1.248 0 0 58.896 69.454 6.489 6.315 Remuneration and fees for the Executiv Board and the Board of Directions are not disclosed with reference to Section 98b (3) of the Danish Financial Statements Act. Other financial income 3 Group enterprises 0 0 263 279 172.110 Other interest income 403 354 0 1 403 354 263 280 Other financial expenses 4 Group enterprises -520 1.122 1.108 1.122 173.107 Other interest expenses 10.833 8.249 1.574 1.735 10.313 9.371 2.682 2.857 Tax on profit/loss for the year 5 Calculated tax on taxable income of the year 337 444 0 369 Adjustment of tax for previous years 69 47 0 0 Adjustment of deferred tax -5.213 6.735 0 -369 -4.807 7.226 0 0 Proposed distribution of profit 6 Retained earnings -13.611 -41.139 -13.611 -41.139 -13.611 -41.139 -13.611 -41.139 Intangible assets 7 Group Intangible fixed assets acquired Goodwill Cost at 1 January 2021 17.584 7.342 Exchange rate adjustment 0 178 Cost at 31 December 2021 17.584 7.520 Amortisation and impairment at 1 January 2020 13.860 5.556 Exchange rate adjustment 0 158 Amortisation and impairment 3.061 1.018 Amortisation at 31 December 2021 16.921 6.732 Carrying amount at 31 December 2021 663 788 Property, plant and equipment 8 Group Other plants, machinery, tools and equipment Cost at 1 January 2021 28.947 Exchange rate adjustment 38 Additions during the year 42 Cost at 31 December 2021 29.027 Depreciation and impairment losses at 1 January 2021 24.193 Exchange rate adjustment 35 Depreciation and impairment for the year 1.629 Depreciation and impairment losses at 31 December 2021 25.857 Carrying amount at 31 December 2021 3.170 Carrying amount of leased assets 611 Financial non-current assets 9 Group Rent deposit and other receivables Cost at 1 January 2021 149 Additions during the year 168 Disposals during the year -297 Cost at 31 December 2021 20 Carrying amount at 31 December 2021 20 Parent Company Equity investments in group enterprises Cost at 1 January 2021 69.341 Cost at 31 December 2021 69.341 Revaluation at 1 January 2021 -157.535 Exchange adjustment 164 Profit/loss for the year -11.240 Revaluation and impairment losses for the year 88.209 Equity movements 11.061 Revaluation at 31 December 2021 -69.341 Carrying amount at 31 December 2021 0 Investments in subsidiaries (DKK '000) Name and domicil Equity Profit/loss for the year Ownership Holdingselskabet af 24. februar 2006 A/S, Brande -88.209 -11.240 100 % Deferred tax assets 10 Balance at 1 January 3.399 7.554 369 0 450.600.01 522.100.01 Adjustments beginning of the year -33 -25 0 0 450.600.02 522.100.02 Adjustments for the year over the income statement 5.213 -6.735 -369 369 450.600.03 522.100.03 Adjustments for the year over equity -3.123 2.605 0 0 450.600.04 522.100.04 Balance at 31 december 5.456 3.399 0 369 Deferred tax is measured according to the tax rules and at the tax rates applicable in the respective countries at the balance sheet date when the deferred tax is expected to crystallise as current tax. Other receivables 11 Group: The fair value of forward exchange contracts regarding hedging of future purchase and salein foreign currencies is included in other recievables at 31 December 2021 at an amountof DKK 4 million and at 31 December 2020 in other payables at an amount of DKK 8 million. Share capital Allocation of share capital: 12 A-Shares, 70.960 unit in the denomination of 1 DKK 71 71 B-Shares, 3.200 unit in the denomination of 1 DKK 3 3 C-Shares, 5.840 unit in the denomination of 1 DKK 6 6 80 80 Other provisions for liabilities 13 Provisions have been recognised for anticipated rent liabilities regarding termination of leases on one of the Group’s domicile properties. Long-term liabilities 14 Group 31/12 2021 Repayment Debt outstanding 31/12 2020 total liabilities next year after 5 years total liabilities Subordinate loan capital 42.695 0 0 40.957 532.300 532.300.01 Bank loan 35.000 7.000 0 35.000 533.100 533.100.01 Lease liabilities 659 207 0 866 533.200 533.200.01 Other liabilities 5.392 0 5.392 6.476 535.600 535.600.01 83.746 7.207 5.392 83.299 Parent Company 31/12 2021 Repayment Debt outstanding 31/12 2020 total liabilities next year after 5 years total liabilities Subordinate loan capital 42.695 0 0 40.957 532.300 532.300.01 Other liabilities 449 0 449 449 535.600 535.600.01 43.144 0 449 41.406 Contingent liabilities Group: liabilitiesThe Group's total commitments under letters of credit amount to DKK 14 millon (2020: DKK 11 million) Customs guarantees have been provided in the amount of DKK 3 million (2020: DKK 3 million). Contingent liabilities and warranties other than those above do not exceed DKK 2 million (2020: DKK 2 million). Operating lease commitmentsThe Group leases properties and operating equipment under operating leases. The Group's domicile properties are leased on contracts that are interminable both by the Group and the lessor for 1 to 5 years. The leasing periodfor other assets is typically between 1 and 4 years with the possibility of renewal. Total non-provided discounted rent liabilities of the Group amount to approx. DKK 13 million (2020: DKK 18 million) Total lease commitments of the Group regarding other operating leases amount to approx. DKK 2 million. (2020: approx. 4 million). Parent Company: The parent company has provided guarantees for the Group's overdraft.The parent company functions as administrative company for the jointly taxed group companies andhas joint and several liability for the taxes relating to the joint taxation. Joint liabilities The parent company functions as administrative company for the jointly taxed group companies andhas joint and several liability for the taxes relating to the joint taxation. Mortgages and security 16 Group: As security for the Company’s and the Group’s overdraft, a floating charge has been granted in receivables, fixturesand fixtures and fittings, tools and equipment, inventories and intellectural property rights of DKK 140 million. (2020: DKK 140 million). The carrying amount of assets used as security amounts to DKK 33 million (2020: DKK 52 million). Parent: The shares in Holdingselskabet af 24.februar 2006 A/S have been provided as security for the Group’s overdrafts. 0 0 0 Related party transactions 17 Watermill ApS has registered the following shareholders holding 5% or more of the share capital: Grow Capital Global Holdings Pte. Ltd., 17 Phillip Street # 05-01, Grand Building, 048695 Singapore JR Invest Holding 2019 ApS, Enggårdstoften 121, DK-7120 Vejle Øst Related parties with significant influence comprise group companies and the parent company’s Executive Board. Related party transactions are conducted under normal market conditions. Continued operations 18 In spite of a good position for the 2022 order book, management expects another turbulent year. The potentialimpact on the Company’s activity and financial impact on the business is expressed with some uncertainty, as the global supply chains, inflation, increase in raw material, transportation costs, energy etc. continues. Based on the current strong 2022 orderbook, and despite the current business environment, managementcurrently expects an improvement in earnings in 2022 of DKK 10-15 million. As of the date of the approval ofthe annual report a substantial part of the group’s total budgeted revenue in 2022 is secured. We expect to see further improvements in earnings in 2023, as strategic initiatives will deliver on their potential. The Company operates with a 12 month bank facility agreement that expires end December. The facility agreement is up for renewable once a year next time in December 2022. With the expected earnings in 2022 management feel comfortable to have sufficient liquidity throughout the year. Management has chosen to present the accounts on the assumption of going concern. Currency risks as well as use of derived financial instruments 19 The Group uses forward exchange contracts to cover the Group's risks related to variability in cash flows due tofluctuations in exchange rates. The Group has entered forward exchange contracts at 31 December 2021 to hedge future purchases of USD 14,6 million totalling DKK 90 million (2020: USD 14,8 millions totalling DKK 96 million) and sale of NOK 36,4 millions andSEK 30,2 million totalling DKK 48 millions.(2020: NOK 35,2 million and SEK 39,2 million totalling DKK 51 million) Cash Flow Statement 20 For information on cash flows please see the consolidated financial statements. The annual report of the BTX Group A/S for 2021 has been prepared in accordance with the provisions applying to reporting class C mid enterprises under the Danish Financial Statements Act. Regnskabsklasse C, mellemstor virksomhed true The accounting policies of BTX Group A/S are changed from C large to C mid with a few options from C large. There have been no changes to the methods of recognition, but only of the presentational nature and scope of the management report. Thus, the change has no monetary effect on the financial statement. The consolidated financial statements comprise the parent company, BTX Group A/S, and subsidiaries in which BTX Group A/S directly or indirectly holds more than 50% of the voting rights or which it, in some other way, controls. On consolidation, intra-group income and expenses, shareholdings, intra-group balances and dividends, and realised and unrealised gains on intra-group transactions are eliminated. Investments in subsidiaries are set off against the proportionate share of the subsidiaries' fair value of net assets or liabilities at the acquisition date. Business combinations Enterprises acquired or formed are recognised in the consolidated financial statements from the date of acquisition or formation. Enterprises disposed of are recognised in the consolidated income statement until the date of disposal. Comparative figures are not restated for acquisitions or disposals. Gains or losses on disposal of subsidiaries are stated as the difference between the sales amount and the carrying amount of net assets at the date of disposal including non-amortised goodwill and anticipated disposal costs. Acquisitions of enterprises are accounted for using the purchase method, according to which identifiable assets and liabilities of the acquired enterprises are measured at their fair values at the date of acquisition. Provision is made for costs related to adopted and announced plans to restructure the acquired enterprise in connection with the acquisition. Allowance is made for the tax effect of revaluations made. Any excess of the cost over the fair value of the identifiable assets and liabilities acquired (goodwill), including restructuring provisions, is recognised as intangible assets and amortised on a systematic basis in the income statement based on an individual assessment of the useful life of the asset, not exceeding 20 years. Any excess of the fair values of the identifiable assets and liabilities acquired over the cost of the acquisition (negative goodwill), representing an anticipated adverse development in the acquired enterprises, is recognised in the balance sheet as deferred income and recognised in the income statement as the adverse development is realised. Negative goodwill not related to any anticipated adverse development is recognised in the balance sheet at an amount corresponding to the fair value of non-monetary assets. The amount is subsequently recognised in the income statement over the average useful lives of the non-monetary assets. Goodwill and negative goodwill arising on acquisition can be adjusted until the end of the year after the acquisition. Net revenue Revenue from the sale of goods is recognised in the income statement provided that delivery and transfer of risk to the buyer have taken place before year end and that the income can be reliably measured and is expected to be received. Revenue is measured ex VAT less returned goods, bonuses and discounts in relation to the sale. Other operating income Other operating income comprises items secondary to the activities of the Company, including gains on sale of intangible assets and property, plant and equipment. Other operating expenses Other operating costs comprise items secondary to the activities of the Group and the Company, including loss on sale of intangible assets and property, plant and equipment. Cost of sales Cost of sales includes costs incurred in generating the revenue for the year. It also includes direct and indirect costs of raw materials and consumables. Other external costs Other external expenses comprise costs of sale, advertising, administration, premises, bad debts, costs of operating leases, etc. Staff costs Staff costs include wages and salaries, including holiday pay and pensions as well as other social security costs etc. for the Group's and the Company's employees. Staff costs are stated less reimbursements received from public authorities. Income from investments in subsidiaries The income statement of the parent company recognises the proportional share of the results of each subsidiary after full elimination of intercompany profits/losses and deduction of amortisation of goodwill. Financial income and expenses Financial income and expenses include interest income and expense, financial costs incurred on finance leases, realised and unrealised gains and losses on securities, debt and transactions denominated in foreign currencies, amortisation of financial assets and liabilities as well as surcharges and refunds under the on-account tax scheme, etc. Financial income and expense are recognised at the amounts relating to the financial year. Tax on profit/loss of the year BTX Group A/S is jointly taxed with all wholly-owned Danish subsidiaries. The current Danish corporation tax is allocated in connection with the settlement of joint tax contributions between the jointly taxed Danish companies in proportion to their taxable income (full distribution of tax with refunds for tax losses). The jointly taxed companies are taxed under the on-account tax scheme. Tax for the year comprises current tax and changes in deferred tax for the year. The tax expense relating to the profit/loss for the year is recognised in the income statement, and the tax expense relating to changes directly recognised in equity is recognised directly in equity. Intangible fixed assets Goodwill is amortised over its estimated useful life determined on the basis of Management's experience of the specific business areas. Goodwill is amortised over 3-20 years corresponding to the Company's time horizon for long-term investments. The carrying amount of goodwill is assessed regularly and written down over the income statement if the carrying amount exceeds the expected future net income from the company or activity to which the goodwill relates. Acquired intellectual property rights are measured at cost less accumulated amortisation and impairment. Cost comprises the purchase price and any costs directly attributable to the acquisition until the date when the asset is available for use. The cost of self-constructed assets comprises direct and indirect costs of materials, components, sub-suppliers, and wages and salaries. Intangible assets are amortised on a straight-line basis over the expected useful lives of the assets which is 3-5 years Tangible fixed assets Fixtures and fittings, other plant and equipment are measured at cost less accumulated depreciation and impairment. Cost comprises the purchase price and any costs directly attributable to the acquisition until the date when the asset is available for use. 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. Property, plant and equipment are depreciated on a straight-line basis over the expected useful lives of the assets. Useful life Fixtures and fittings, other plant and equipment 3-5 years Leases Leases for non-current assets that transfer substantially all the risks and rewards incident to ownership to the Group are initially recognised in the balance sheet at the lower of fair value and the net present value of future lease payments. For the calculation of the net present value, the interest rate implicit in the lease or the Group's alternative borrowing rate is used as discount rate. Assets held under finance leases are subsequently depreciated as the Group's other non-current assets. The capitalised residual lease obligation 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. All other leases are classified as operating leases. Services related to operating leases and other lease contracts are recognised in the income statement over the term of the contract. The Group's total liabilities regarding operating leases and lease agreements are disclosed as contingent liabilities, etc. Investments in subsidiaries Investments in subsidiaries are measured according to the equity method. Investments in subsidiaries are measured at the proportionate share of the enterprises' net asset values calculated in accordance with the Group's accounting policies minus or plus unrealised intra-group profits and losses plus or minus any residual value of positive or negative goodwill determined in accordance with the acquisition method. Investments in subsidiaries with negative net asset values are measured at DKK 0 (nil), and any amounts owed by such enterprises are written down if the amount owed is irrecoverable. If BTX Group A/S has a legal or constructive obligation to cover a deficit that exceeds the amount owed, the remaining amount is recognised under provisions. Net revaluation of investments in subsidiaries is recognised in the reserve for net revaluation in equity under the equity method to the extent that the carrying amount exceeds cost. Dividends from subsidiaries which are expected to be adopted before the approval of the annual report of BTX Group A/S are not recognised in the reserve for net revaluation. Impairment of non-current assets The carrying amount of intangible assets and property, plant and equipment as well as investments in subsidiaries is subject to an annual test for indications of impairment other than the decrease in value reflected by depreciation or amortisation. Impairment tests are conducted of individual assets or groups of assets when there is an indication that they may be impaired. Write-down is made to the recoverable amount if this is lower than the carrying amount. Inventories 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 cost of goods and goods for resale comprise the cost of raw materials, consumables, external production costs and delivery costs. Receivables Receivables are measured at amortised cost. Write-down is made for bad debt losses where there is an objective indication that a receivable or a receivable portfolio has been impaired. If there is objective indication that an individual receivable has been impaired, write-down is made on an individual basis. Receivables with no objective indication of individual impairment are assessed for objective indication of impairment on a portfolio basis. The portfolios are primarily based on the debtors' registered offices and credit rating in accordance with the Group's credit risk management policy. The objective indicators used in relation to portfolios are based on historical loss experience. Prepayments Prepayments comprise costs incurred concerning subsequent financial years. Provisions Provisions are measured at net realisable value or fair value. If the obligation is expected to be settled far into the future, the obligation is measured at fair value. Corporation tax and deferred tax Current tax payable and receivable is recognised in the balance sheet as tax computed on the taxable income for the year, adjusted for tax on the taxable income of prior years and for tax paid on account. Payable and receivable joint tax contributions are recognised in the balance sheet as ”Corporation tax receivable” or ”Corporation tax payable”. Deferred tax is measured using the balance sheet liability method on all temporary differences between the carrying amount and the tax value of assets and liabilities. Where alternative tax rules can be applied to determine the tax base, deferred tax is measured based on the planned use of the asset or settlement of the liability, respectively. Adjustment is made to deferred tax resulting from elimination of unrealised intra-group profits and losses. Deferred tax is measured according to the tax rules and at the tax rates applicable in the respective countries at the balance sheet date when the deferred tax is expected to crystallise as current tax. Liabilities Financial liabilities are recognised at the date of borrowing at the net proceeds received less transaction costs paid. During subsequent periods, financial liabilities are measured at amortised cost. Financial liabilities also include the capitalised residual obligation on finance leases. Other liabilities are measured at net realisable value. Deferred income Deferred income comprises payments received concerning income in subsequent years and is measured at amortised cost. Derivative financial instruments Derivative financial instruments are initially recognised in the balance sheet at cost and are subsequently measured at fair value. Positive and negative fair values of derivative financial instruments are included in other receivables and payables, respectively. Changes in the fair value 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 together with any changes in the fair value of the hedged asset or liability. Changes in the fair value of derivative financial instruments designated as and qualifying for recognition as a hedge of future assets or liabilities are recognised as other receivables or other payables and in equity until the hedged transaction is realised. If the hedged forecast transaction results in the recognition of assets or liabilities, amounts 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 recognised in equity are transferred to the income statement in the period in which the hedged item affects profit or loss. For derivative financial instruments that do not qualify for hedge accounting, changes in fair value are recognised in the income statement on a regular basis. Changes in the fair value of derivative financial instruments used to hedge net investments in independent foreign subsidiaries or associates are recognised directly in equity. Foreign currency translation On initial recognition, transactions denominated in foreign currencies are translated at the exchange rates at the transaction date. Foreign exchange differences arising between the exchange rates at the transaction date and at the date of payment are recognised in the income statement as financial income or financial expenses. Receivables, payables and other monetary items denominated in foreign currencies are translated at the exchange rates at the balance sheet date. The difference between the exchange rates at the balance sheet date and at the date at which the receivable or liability arose or was recognised in the latest annual report is recognised in the income statement as financial income or financial expenses. Foreign subsidiaries are considered separate entities. The income statements are translated at average exchange rates for the months, and the balance sheet items are translated at the exchange rates at the balance sheet date. Foreign exchange differences arising on translation of the opening equity of foreign subsidiaries at the exchange rates at the balance sheet date and on translation of the income statements from average exchange rates to the exchange rates at the balance sheet date are recognised directly in equity. Foreign exchange adjustments of intra-group balances with independent foreign subsidiaries which are considered part of the investment in the subsidiary are recognised directly in equity. Foreign exchange gains and losses on the portion of loans and derivative financial instruments designated as hedges of foreign subsidiaries are also recognised directly in equity. On recognition of foreign subsidiaries, which are integral entities, monetary items are translated at the exchange rates at the balance sheet date. Non-monetary items are translated at the exchange rates at the acquisition date or at the date of any subsequent revaluation or impairment of the asset. Income statement items are translated at the exchange rates at the transaction date, although items derived from non-monetary items are translated at the historical exchange rates applying to the non-monetary items. CASH FLOW STATEMENT The cash flow statement shows the Group's cash flows from operating, investing and financing activities for the year, the year's changes in cash and cash equivalents as well as cash and cash equivalents at the beginning and end of the year. The cash flow effect of acquisitions and disposals of enterprises is shown separately in cash flows from investing activities. Cash flows from acquisitions of enterprises are recognised in the cash flow statement from the date of acquisition. Cash flows from disposals of enterprises are recognised up until the date of disposal. Cash flows from operating activities are calculated using the indirect method as profit/loss before tax adjusted for non-cash operating items, changes in working capital, interest received and paid, dividends received as well as corporation tax paid. Cash flows from investing activities comprise payments in connection with acquisitions and disposals of enterprises and activities, intangible assets, property, plant and equipment and investments. Entering of finance leases are considered non-cash transactions. Cash flows from financing activities comprise changes in the size or composition of share capital and related costs as well as the raising of loans, repayment of interest-bearing debt, and payment of dividends to shareholders. Cash flows relating to assets held under finance lease are recognised as payment of interest and repayment of debt. 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