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Skous Vej 1 8000 Aarhus C Denmark 89 32 00 00 aarhus@pwc.dk 2023-03-01 Kaare Bo Nielsen Regnskabsklasse C, stor virksomhed Revisionspåtegning The Executive Board and Board of Directors have today considered and adopted the Consolidated Financial Statements and Parent Company Financial Statements of DAFA Holding I ApS for the financial year 1 March- 31 December 2022. The Annual Report is prepared in accordance with the Danish Financial Statements Act. In our opinion the Financial Statements and the Consolidated Financial Statements give a true and fair view of the financial position at 31 December 2022 of the Company and the Group and of the results of the Company and Group operations and of consolidated cash flows for 2022. In our opinion, Management's Review includes a true and fair account of the matters addressed in the Review. We recommend that the Consolidated Financial Statements and Parent Company Financial Statements be adopted at the Annual General Meeting. 2023-03-01 Aarhus Steen Agerbo Bødtker CEO Eivind Drachmann Kolding Chairman Vilhelm Eigil Hahn-Petersen Vice chairman Frederik Oliver Busch To the shareholder of DAFA Holding I ApS Opinion 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 2022 and of the results of the Group’s and the Parent Company’s operations and of consolidated cash flows for the financial year 1 March - 31 December 2022 in accordance with the Danish Financial Statements Act. We have audited the Consolidated Financial Statements and the Parent Company Financial Statements of DAFA Holding I ApS for the financial year 1 March - 31 December 2022, which comprise income statement, balance sheet, statement of changes in equity and notes, including a summary of significant accounting policies, for both the Group and the Parent Company, as well as consolidated statement of cash flows (”the Financial Statements”). Basis for Opinion 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 Financial Statements” 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 (IESBA Code) and the additional ethical requirements applicable in Denmark, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the IESBA Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. 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 about whether the Financial Statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with 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 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 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 Management’s Review. Our opinion on the Financial Statements does not cover 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 Management’s Review and, in doing so, consider whether 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 Management’s Review provides the information required under the Danish Financial Statements Act. Based on the work we have performed, in our view, Management’s Review is in accordance with the Consolidated Financial Statements and the Parent Company Financial Statements and has been prepared in accordance with the requirements of the Danish Financial Statements Act. We did not identify any material misstatement in Management’s Review. Aarhus 2023-03-01 PricewaterhouseCoopers Statsautoriseret Revisionspartnerselskab Henrik Kragh State Authorised Public Accountant mne26783 Elife Savas State Authorised Public Accountant mne34453 29.4 -25.9 -7.5 23.4 -88.7 Earnings before interest, taxes, depreciation and amortization -8663000 EBITDA excl special items 13.2 As this Holding company was created this year, the key figures does only include 2022. Principal activitiesDAFA contributes sustainable, long-lasting foam and rubber solutions which seal, absorb and protect. The goal is that customers experience added value by collaborating with DAFA and that they choose DAFA as their preferred supplier. DAFA sells its products to the industrial segment and building segment. DAFA's business model is through a global footprint to follow our customers development and requirements by offering high service and quality in sustainable, long-lasting foam and rubber solutions which seal, absorb and protect. We want to grow together with our customers by focusing on close customer relations and development of innovative quality products and solutions. DAFA deliver World-class solutions driven by our passion for Innovation and Sustainability.The solutions are produced and distributed through divisions in Denmark, Poland, Italy and China. In addition, there are sales offices in USA, Sweden, Norway, Germany and India. Acquisition of the Company by Danish Private Equity Fund, CataCap II K/S (“CataCap”) and co-investorsIn May 2022, DAFA Group and all affiliated subsidiaries were indirectly acquired by CataCap and co-investors.The Company is controlled by the Private Equity Fund CataCap which has 51.94% of the shares and 100% of the voting shares.CataCap is member of “Active Owners” and complies with ethical guidelines, guidelines for responsible ownership. DAFA strives to fulfil the guidelines issued by Active Owners. More information about Active Owners is found on http://aktiveejere.dk Development in activities and financial position2022 did not develop as expected. High overseas freight rates which impacted specially our US business and increasing raw material prices during 2022, with turbulence and reduced demand in the Wind sector, impacted the 2022 result negatively. Lastly a long COVID-19 lock down in China also caused lower activity in DAFA China than expected. A general localisation strategy in the supply chain had on the other hand a positive impact in some part of our business. In DAFA Polska we have had an increase activity as more customers moved their supply chain from Asia to Europe, and this development we expect to continue the coming years.Revenue declined by xx.x% relative to 2021 and the profit margin was therefore also below budget expectation and last year. Revenue and results for the yearThe income statement of the Group for 2022 shows a profit of DKK xx.x million, which is a decrease of DKK xx.x million compared to 2021. Consolidated EBITDA before special items amounted to DKK xx.x million in 2022, which was DKK xx.x million lower compared to 2021. EBT was DKK xx.x million, which was a decrease of DKK xx.x million compared to 2022.Special items in 2022 amounted to DKK xx.x million. Special items relate primarily to acquisition of DAFA Group A/S, and secondly expenses relate to a full strategy update. DAFA conducts the business activities as described in the business model section with deep respect for all the stakeholders and constant focus on reducing our environmental impact. Since 2010 DAFA has been incorporating the 10 principles of UN Global Compact into strategies, policies and procedure establishing a culture of integrity upholding not only our basic responsibilities to people and planet, but also setting the platform for long term sustainable business operations. The 10 principles of Global Compact concerning respect for human rights, labour, environment and anti-corruption. A set of guidelines to ensure that DAFA's employees, in cooperation with customers, suppliers, authorities and other stakeholders, create a responsible development of DAFA's business and surroundings. DAFA has latest submitted Communication of Progress No. 13 for publication on our website. The statutory report “DAFA ESG/COP REPORT - FEB 2023” can be read or downloaded from the below link.https://dafa-group.com/en/sustainabilityThe statutory report is based on the principles for ESG reporting set out by CFA Society Denmark, FSR and NASDAQ for “ESG key figures in the annual report” and guidelines for UN Global Compact annual Communication of Progress.EnvironmentDAFA aims to live in harmony with our surroundings, neighbours as well as the environment. While maintaining and strengthening the company's competitiveness, we will actively work to reduce the environmental impact from our processes and products. In its decision making, management will consider environment and energy factors, via risk and opportunity management, so that no significant decisions are made before these factors have been assessed. We aim to refine our existing energy management in order to continually achieve better utilization. Changes in energy consumption are observed and monitored through records and measurements. Efforts will be made to reduce energy consumption every time plant or equipment is replaced, modernized or adapted. Wherever possible, xenobiotic substances will be replaced with environmentally neutral alternatives. We aim to expand collaboration with our suppliers to include environmental issues in relation to processes and products. Employees will be moved towards a high level of environmental awareness through training. We undertake to comply with all statutory environmental requirements, including pollution prevention. We are committed to contributing to sustainable development: "Development that meets the present needs without compromising the ability of future generations to meet their own". In practice, sustainability means that we will respect and balance environmental, economic and social aspects, thereby continually improving DAFA's local environment, business and organization. In 2016, the environmental system ISO 14001 was implemented, and once a year Management reviews the targets, actions and results. DAFA has set out an ambitious strategy: “DAFA Go Green” based on the most significant risks and impacts for climate, environment and CSR. The goals and the status of achievement are reported on DAFAs website on annual basis: “DAFA ESG/COP REPORT – FEB 2023”. In DAFA, we acknowledge that diversity in Management and employees is a strength and as a part of this, equality in gender contributes to the business development. DAFA's target regarding the underrepresented gender is that both genders are to be represented on the Board of Directors, and no one is underrepresented. The target at 25 % was met from 2006 to May 2022, but currently a representation of the underrepresented gender on the Board of Directors is 0 %. Following CataCap’s acquisition a new board of directors was elected consisting of three members. Currently, a recruitment of an additional two board members is ongoing with a target for the underrepresented gender of minimum 20% representation on the board to be realised in 2023. This is in line with the minimum requirements set by CataCapIn DAFA, we acknowledge that diversity in Management and employees is a strength and as a part of this, equality in gender contributes to the business development. DAFA's target regarding the underrepresented gender is that both genders are to be represented on the Board of Directors, and no one is underrepresented. The target at 25 % was met from 2006 to May 2022, but currently a representation of the underrepresented gender on the Board of Directors is 0 %. Following CataCap’s acquisition a new board of directors was elected consisting of three members. Currently, a recruitment of an additional two board members is ongoing with a target for the underrepresented gender of minimum 20% representation on the board to be realised in 2023. This is in line with the minimum requirements set by CataCap DAFA is also considering diversity at other management levels than the Board of Directors. The long-term aim is that the Company reflects the surrounding society and especially the Company's customers, not only in terms of gender, but also in terms of nationality and ethnicity. This reflection of the surrounding society is to contribute to the Company being an attractive choice for customers as well as present and future employees and in this way enabling the Company to achieve its long-term business goalsThe policy of the Company states that both genders are encouraged equally to apply for vacant positions in the Company. Both genders are also guaranteed the same rights and conditions during their employment. As DAFA strives for an equal gender representation in Management, we acknowledge that women are currently underrepresented. Therefore, we have placed special focus on ensuring that women are, where possible, included in the list of candidates for new hires and internal promotions. Moreover, we have in situations where more candidates are assessed to be equally qualified for a position selected the female candidate. In the Global Management the underrepresented gender is represented by 10 %. DAFA will in the future increase the work to equal the gender representation, and the expectation for 2023 is to improve the balance of gender compared with today. DAFA's data ethics are based on privacy for customer and employees as a fundamental value. The Company strives for a positive staff culture around errors where openness about mistakes and problems leads to improvements. Employees who access data have undergone an e-learning programme on how to process data. Our data ethics principles support ethical decision-making when using data across the value chain. We further strengthened the integration of data protection and human rights risks in management processes. 314098000 1000 165376000 0 56284000 31000 92438000 -30000 103909000 0 69796000 0 -81267000 -30000 0 -109703000 703000 2349000 31576000 2353000 -112140000 -109737000 397000 -7000 -112537000 -109730000 -109730000 62000 0 5969000 0 267661000 0 533673000 0 807365000 0 36473000 0 40519000 0 5460000 0 3335000 0 85787000 0 28789000 0 1832000 0 52045000 0 77881000 0 4197000 0 188652000 52858000 1085138000 308808000 0 255950000 3334000 0 3334000 255950000 896486000 255950000 82666000 0 0 52349000 990000 1000 4125000 6000 87193000 52356000 1000000 0 17793000 502000 3763000 3763000 63248000 0 1969000 0 65217000 0 4453000 0 50000000 52349000 54453000 52349000 624737000 0 1253000 0 11953000 0 3763181 3763182 249858000 252665000 253621000 256428000 56153000 0 17751000 31000 711847000 31000 766300000 52380000 1085138000 308808000 0 0 0 0 0 0 0 0 -5847000 0 0 -5847000 40000 0 0 40000 0 0 3723000 368242000 0 3723000 368242000 0 0 0 -112537000 0 0 -109730000 0 -368242000 368242000 0 -368242000 368242000 3763000 0 249858000 3763000 0 252665000 -112537000 101066000 19176000 7705000 703000 31576000 -23168000 1169000 -24337000 547000 9723000 942562000 -953832000 624737000 -780000 372005000 995962000 17793000 0 17793000 17793000 0 Current asset investments made 1000000 Additional subordinated loan capital and long-term financing:The acquisition of DAFA Group A/S was funded through equity injections and loan capital with DAFA Holding II ApS as the Borrower, where the loans are classified as short term loans as per 31 December 2022. In order to secure the long-term financing the Group has negotiated new loan terms in 2023 with its Senior Debt creditors contingent to the shareholders of DAFA Holding I ApS will provide DKK 110,000 thousand as fully subordinated loan capital to DAFA Holding II ApS, whereof DKK 90,000 thousand will be used as an extraordinary installment on Senior Debt and DKK 20,000 thousand will be used for further growth of the Group. The Company has obtained commitment from its shareholders to obtain the fully subordinated loan capital of DKK 110,000 thousand. On this background and the budget for 2023 it is Management's assessment that the Credit institutions exclusive of a revolving credit facility of max DKK 50 million will be continued and reclassified to long term debt in 2023 and the Company will be going concern. Geographical segments Scandinavia 154516000 0 Rest of Europe 113591000 0 Rest of the world 45991000 0 0 0 0 1000 314098000 1000 79295000 0 15231000 0 6568000 0 2815000 0 103909000 0 202 0 60056000 0 9740000 0 Transaction and strategy costs in connection with changed ownership of DAFA Group A/S 50228000 0 50228000 0 0 2349000 703000 0 0 2352000 30944000 1000 632000 0 31576000 2353000 1387000 -6000 -990000 -1000 397000 -7000 0 0 0 0 0 5540000 286693000 574614000 63000 346000 165000 0 0 -58000 0 0 63000 5828000 286858000 574614000 0 0 0 0 1000 -83000 19197000 40941000 0 -58000 0 0 1000 -141000 19197000 40941000 62000 5969000 267661000 533673000 Amortised over 10 years 3 years 10 years 3 years 0 0 0 0 37329000 42113000 3478000 3492000 0 6418000 3063000 242000 0 -1062000 -2807000 0 37329000 47469000 3734000 3734000 0 0 0 0 38000 843000 -44000 10000 818000 6940000 1111000 389000 0 0 -2793000 0 0 -833000 0 0 856000 6950000 -1726000 399000 0 5446000 74000 0 36473000 40519000 5460000 3335000 0 365653000 365653000 -109703000 -109703000 DAFA Holding II Denmark 100 0 3334000 3334000 Prepayments consist of payments of insurance, licenses and sponsorships. Deferred tax as a result of acquisition 61,268 0 Amounts recognised in the income statement for the year 990,000 0 Deferred tax liabilities at 31 December 62,258,000 0 Deferred tax as a result of acquisition 0 0 Amounts recognised in the income statement for the year -1,000 0 Deferred tax liabilities at 31 December -1,000 0 Other provisions of TDKK 1,969 (2021: TDKK 2,131) have been recognised for expected costs related to pension provisions for the employees. Other provisions 1969 0 1969 0 1969 0 1969 0 0 0 4453000 0 1253000 0 5706000 0 0 0 50000000 52349000 Payments due within 1 year are recognised in short-term debt. Other debt is recognised in long-term debt. The debt falls due for payment as specified below: -703000 31576000 69796000 397000 -123000 30846000 -5339000 -6208000 Charges and security The following assets have been placed as security with mortgage credit institutes: Rental and lease obligations Lease obligations under operating leases. Total future lease payments: Within 1 year 8,721,000 0 Between 1 and 5 years 31,019,000 0 39,740,000 0 0 0 Guarantee obligations The Group has issued a partially guarantee of payment between the Danish Group companies DAFA Holding I ApS, DAFA Holding II ApS, DAFA Group A/S, DAFA Building Solutions A/S and DAFA A/S and the Groups credit institutions. Other contingent liabilities The group companies are jointly and severally liable for tax on the jointly taxed incomes etc of the Group. The total amount of corporation tax payable is disclosed in the Annual Report of CC DAFA Invest ApS, which is the management company of the joint taxation purposes. Moreover, the group companies are jointly and severally liable for Danish withholding taxes by way of dividend tax, tax on royalty payments and tax on unearned income. Any subsequent adjustments of corporation taxes and withholding taxes may increase the Company's liability. Transactions The Company has chosen only to disclose transactions which have not been made on an arm's length basis in accordance with section 98(c)(7) of the Danish Financial Statements Act. Ownership The following shareholders are recorded in the Company's register of shareholders as holding at least 5% of the votes or at least 5% of the share capital: CC DAFA Invest ApS Schroder GAIA II Global Private EquitySchroders Capital Private Equity Europe Direct II S.C.S The Company is included in the Group Annual Report of the Parent Company: Name Place of registered office DAFA Holding I ApS Holmstrupgårdvej 12, 8220 Brabrand 355000 22000 206000 605000 60000 170000 The Annual Report of DAFA Holding I ApS for 2022 has been prepared in accordance with the provisions of the Danish Financial Statements Act applying to large enterprises of reporting class C. The Consolidated Financial Statements and the Parent Company Financial Statements for 2022 are presented in TDKK. 1 Revenues are recognised in the income statement as earned. Furthermore, value adjustments of financial assets and liabilities measured at fair value or amortised cost are recognised. Moreover, all expenses incurred to achieve the earnings for the year are recognised in the income statement, including depreciation, amortisation, impairment losses and provisions as well as reversals due to changed accounting estimates of amounts that have previously been recognised in the income statement. Assets are recognised in the balance sheet when it is probable that future economic benefits attributable to the asset will flow to the Company, and the value of the asset can be measured reliably. Liabilities are recognised in the balance sheet when it is probable that future economic benefits will flow out of the Company, and the value of the liability can be measured reliably. Assets and liabilities are initially measured at cost. Subsequently, assets and liabilities are measured as described for each item below. Basis of consolidation The Consolidated Financial Statements comprise the Parent Company, DAFA Holding I ApS, and subsidiaries in which the Parent Company directly or indirectly holds more than 50% of the votes or in which the Parent Company, through share ownership or otherwise, exercises control. Enterprises in which the Group holds between 20% and 50% of the votes and exercises significant influence but not control are classified as associates. On consolidation, items of a uniform nature are combined. Elimination is made of intercompany income and expenses, shareholdings, dividends and accounts as well as of realised and unrealised profits and losses on transactions between the consolidated enterprises. The Parent Company's investments in the consolidated subsidiaries are set off against the Parent Company's share of the net asset value of subsidiaries stated at the time of consolidation. Business combinations Business acquisitions carried through on or after 1 July 2018 Acquisitions of subsidiaries are accounted for using the purchase method under which the identifiable assets and liabilities of the entity acquired are measured at fair value at the time of acquisition. Acquired contingent liabilities are recognised at fair value in the Consolidated Financial Statements to the extent that the value can be measured reliably. The time of acquisition is the time when the Group obtains control of the entity acquired. The cost of the entity acquired is the fair value of the consideration agreed, including consideration contingent on future events. Transaction costs directly attributable to the acquisition of subsidiaries are recognised in the income statement as incurred. Positive differences between the cost of the entity acquired and identifiable assets and liabilities are recognised as goodwill in intangible assets in the balance sheet and are amortised in the income statement on a straight-line basis over their estimated useful lives. Where the differences are negative, they are recognised immediately in the income statement. Where the purchase price allocation is not final, positive and negative differences from acquired subsidiaries due to changes to the recognition and measurement of identifiable net assets may be adjusted for up to 12 months after the time of acquisition. These adjustments are also reflected in the value of goodwill or negative goodwill, including in amortisation already made. Where cost includes contingent consideration, this is measured at fair value at the time of acquisition. Contingent consideration is subsequently measured at fair value. Any value adjustments are recognised in the income statement. In respect of step acquisitions, any previously held investments in the entity acquired are remeasured at fair value at the time of acquisition. The difference between the carrying amount of the investment previously held and the fair value is recognised in the income statement. Leases in terms of which the Group assumes substantially all the risks and rewards of ownership (finance leases) are recognised in the balance sheet at the lower of the fair value of the leased asset and the net present value of the lease payments computed by applying the interest rate implicit in the lease or an alternative borrowing rate as the discount rate. Assets acquired under finance leases are depreciated and written down for impairment under the same policy as determined for the other fixed assets of the Group. The remaining lease obligation is capitalised and recognised in the balance sheet under debt, and the interest element on the lease payments is charged over the lease term to the income statement. All other leases are considered operating leases. Payments made under operating leases are recognised in the income statement on a straight-line basis over the lease term. Danish kroner is used as the presentation currency. All other currencies are regarded as foreign currencies. Transactions in foreign currencies are translated at the exchange rates at the dates of transaction. Gains and losses arising due to differences between the transaction date rates and the rates at the dates of payment are recognised in financial income and expenses in the income statement. Receivables, payables and other monetary items in foreign currencies that have not been settled at the balance sheet date are translated at the exchange rates at the balance sheet date. Any differences between the exchange rates at the balance sheet date and the transaction date rates are recognised in financial income and expenses in the income statement Income statements of foreign subsidiaries and associates that are separate legal entities are translated at transaction date rates or approximated average exchange rates. Balance sheet items are translated at the exchange rates at the balance sheet date. Exchange adjustments arising on the translation of the opening equity and exchange adjustments arising from the translation of the income statements at the exchange rates at the balance sheet date are recognised directly in equity. Income statements of enterprises that are integrated entities are translated at transaction date rates or approximated average exchange rates; however, items derived from non-monetary balance sheet items are translated at the transaction date rates of the underlying assets or liabilities. Monetary balance sheet items are translated at the exchange rates at the balance sheet date, whereas non-monetary items are translated at transaction date rates. Exchange adjustments arising on the translation are recognised in financial income and expenses in the income statement. Information on geographical segments is based on the Group´s risks and returns and its internal financial reporting system. Revenue from the sale of goods for resale and finished goods is recognised in the income statement when the sale is considered effected based on the following criteria:• delivery has been made before year end;• a binding sales agreement has been made;• the sales price has been determined; and• payment has been received or may with reasonable certainty be expected to be received. Contract work in progress (construction contracts) is recognised at the rate of completion, which means that revenue equals the selling price of the work completed for the year (percentage-of-completion method). This method is applied when total revenues and expenses in respect of the contract and the stage of completion at the balance sheet date can be measured reliably, and it is probable that the economic benefits, including payments, will flow to the Group. The stage of completion is determined on the basis of the ratio between the expenses incurred and the total expected expenses of the contract. Revenue is measured at the consideration received and is recognised exclusive of VAT and net of discounts relating to sales. Expenses for raw materials and consumables comprise the raw materials and consumables consumed to achieve the consolidated revenue for the year. Other external expenses comprise indirect production costs and expenses for premises, sales as well as office expenses, etc. Staff costs include wages and salaries including compensated absence and pensions as well as other social security contributions etc. made to the entity's employees. The item is net of refunds made by public authorities. Amortisation, depreciation and impairment losses comprise amortisation, depreciation and impairment of intangible assets and property, plant and equipment. The item “Income from investments in subsidiaries” in the income statement includes the proportionate share of the profit for the year. Financial income and expenses comprise interest, financial expenses in respect of finance leases, realised and unrealised exchange adjustments, price adjustment of securities, amortisation of mortgage loans as well as extra payments and repayment under the on-account taxation scheme. Tax for the year consists of current tax for the year and deferred tax for the year. The tax attributable to the profit for year is recognised in the income statement, whereas the tax attributable to equity transactions is recognised directly in equity. Any changes in deferred tax due to changes to tax rates are recognised in the income statement. The Company is jointly taxed with . The tax effect of the joint taxation with the subsidiaries is allocated to Danish enterprises showing profits or losses in proportion to their taxable incomes (full allocation with credit for tax losses). Customer relations, presented as "Acquired other similar rights", is amortised on a straight-line basis over the estimated useful life of 10 years, determined on the basis of Management’s experience with the individual business areas. Goodwill is amortised on a straight-line basis over the estimated useful life of 10 years, determined on the basis of Management’s experience with the individual business areas. Costs of development projects comprise salaries, amortisation and other expenses directly or indirectly attributable to the Company’s development activities. Development projects that are clearly defined and identifiable and in respect of which technical feasibility, sufficient resources and a potential future market or development opportunity in the enterprise can be demonstrated, and where it is the intention to manufacture, market or use the project, are recognised as intangible assets. This applies if sufficient certainty exists that the value in use of future earnings can cover cost of sales, distribution and administrative expenses involved as well as the development costs. Development projects that do not meet the criteria for recognition in the balance sheet are recognised as expenses in the income statement as incurred. Capitalised development costs are measured at cost less accumulated amortisation and impairment losses or at a lower recoverable amount. An amount corresponding to the recognised development costs is allocated to the equity item 'Reserve for development costs'. The reserve comprises only development costs recognised in financial years beginning on or after 1 January 2016. The reserve is reduced by amortisation of and impairment losses on the development projects on a continuing basis. As of the date of completion, capitalised development costs are amortised on a straight-line basis over the period of the expected economic benefit from the development work. The amortisation period is year. Patents, licences and rights are measured at cost less accumulated amortisation and less any accumulated impairment losses or at a lower value in use. Patents are amortised over the remaining patent period or a shorter useful life. The amortisation period is 3 years. Software licences and rights are amortised over the period of the agreements, which is 3 years and 3-5 years, respectively. Property, plant and equipment are measured at cost less accumulated depreciation and less any accumulated impairment losses. Cost comprises the cost of acquisition and expenses directly related to the acquisition up until the time when the asset is ready for use. Interest expenses on loans contracted directly for financing the construction of property, plant and equipment are recognised in cost over the construction period. Depreciation based on cost reduced by any residual value is calculated on a straight-line basis over the expected useful lives of the assets, which are: Land and buildings 40-50 years Plant and machinery years Leasehold improvements 10 year Plant and machinery 5-10 year Other fixtures and fittings, tools and equipment 3-10 year The fixed assets’ residual values are determined at nil. Depreciation period and residual value are reassessed annually. The carrying amounts of intangible assets and property, plant and equipment and investments are reviewed on an annual basis to determine whether there is any indication of impairment other than that expressed by amortisation and depreciation. The recoverable amount of the asset is calculated as the higher of net selling price and value in use. Where a recoverable amount cannot be determined for the individual asset, the assets are assessed in the smallest group of assets for which a reliable recoverable amount can be determined based on a total assessment. Goodwill, head office buildings and other assets for which a separate value in use cannot be determined as the asset does not on an individual basis generate future cash flows are reviewed for impairment together with the group of assets to which they are attributable. Investments in subsidiaries are recognised and measured under the equity method. The item “Investments in subsidiaries” in the balance sheet include the proportionate ownership share of the net asset value of the enterprises calculated on the basis of the fair values of identifiable net assets at the time of acquisition with deduction or addition of unrealised intercompany profits or losses and with addition of the remaining value of any increases in value and goodwill calculated at the time of acquisition of the enterprises. The total net revaluation of investments in subsidiaries is transferred upon distribution of profit to “Reserve for net revaluation under the equity method“ under equity. The reserve is reduced by dividend distributed to the Parent Company and adjusted for other equity movements in the subsidiaries. Subsidiaries with a negative net asset value are recognised at DKK 0. Any legal or constructive obligation of the Parent Company to cover the negative balance of the enterprise is recognised in provisions. Other fixed asset investments consist of deposits. Inventories are measured at the lower of cost under the FIFO method and net realisable value. The net realisable value of inventories is calculated at the amount expected to be generated by sale of the inventories in the process of normal operations with deduction of selling expenses and costs of completion. The net realisable value is determined allowing for marketability, obsolescence and development in expected selling price. The cost of goods for resale, raw materials and consumables equals landed cost. The cost of finished goods and work in progress comprises the cost of raw materials, consumables and direct labour with addition of indirect production costs. Indirect production costs comprise the cost of indirect materials and labour as well as maintenance and depreciation of the machinery, factory buildings and equipment used in the manufacturing process as well as costs of factory administration and management. Receivables are measured in the balance sheet at the lower of amortised cost and net realisable value, which corresponds to nominal value less provisions for bad debts. Prepayments comprise prepaid expenses concerning rent, insurance premiums, subscriptions and interest. Current Asset Investments, which consist of listed bonds and shares, are measured at their fair values at the balance sheet date. Fair value is determined on the basis of the latest quoted market price. Purchase and sales prices for treasury shares are recognised directly in retained earnings under equity. A reduction of capital by cancellation of treasury shares reduces the share capital by an amount equal to the nominal value of the shares and increases retained earnings. Dividend on treasury shares is recognised directly in equity under retained earnings. Provisions are recognised when - in consequence of an event occurred before or on the balance sheet date - the Group has a legal or constructive obligation and it is probable that economic benefits must be given up to settle the obligation. Other provisions include warranty obligations in respect of repair work within the warranty period of 1-5 years. Provisions are measured and recognised based on experience with guarantee work. Deferred tax is recognised in respect of all temporary differences between the carrying amount and the tax base of assets and liabilities. However, deferred tax is not recognised in respect of temporary differences concerning goodwill not deductible for tax purposes and other items - apart from business acquisitions - where temporary differences have arisen at the time of acquisition without affecting the profit for the year or the taxable income. Deferred tax is measured on the basis of the tax rules and tax rates that will be effective under the legislation at the balance sheet date when the deferred tax is expected to crystallise as current tax. In cases where the computation of the tax base may be made according to alternative tax rules, deferred tax is measured on the basis of the intended use of the asset and settlement of the liability, respectively. Deferred tax assets, including the tax base of tax loss carry-forwards, are measured at the value at which the asset is expected to be realised, either by elimination in tax on future earnings or by set-off against deferred tax liabilities. Deferred tax assets and liabilities are offset within the same legal tax entity. Current tax receivables and liabilities are recognised in the balance sheet at the amount calculated on the basis of the expected taxable income for the year adjusted for tax on taxable incomes for prior years. Tax receivables and liabilities are offset if there is a legally enforceable right of set-off and an intention to settle on a net basis or simultaneously. Loans, such as loans from credit institutions, are recognised initially at the proceeds received net of transaction expenses incurred. Subsequently, the loans are measured at amortised cost; the difference between the proceeds and the nominal value is recognised as an interest expense in the income statement over the loan period. Mortgage loans are measured at amortised cost, which for cash loans corresponds to the remaining loan. Amortised cost of debenture loans corresponds to the remaining loan calculated as the underlying cash value of the loan at the date of raising the loan adjusted for depreciation of the price adjustment of the loan made over the term of the loan at the date of raising the loan. Other debts are measured at amortised cost, substantially corresponding to nominal value. The cash flow statement shows the Group’s cash flows for the year broken down by operating, investing and financing activities, changes for the year in cash and cash equivalents as well as the Group’s cash and cash equivalents at the beginning and end of the year. Cash flows from operating activities are calculated as the net profit/loss for the year adjusted for changes in working capital and non-cash operating items such as depreciation, amortisation and impairment losses, and provisions. Working capital comprises current assets less short-term debt excluding items included in cash and cash equivalents. Cash flows from investing activities comprise cash flows from acquisitions and disposals of intangible assets, property, plant and equipment as well as fixed asset investments. Cash flows from financing activities comprise cash flows from the raising and repayment of long-term debt as well as payments to and from shareholders. Cash and cash equivalents comprise ”Cash at bank and in hand”. The cash flow statement cannot be immediately derived from the published financial records. Gross margin Gross profit x 100 / Revenue Profit margin Profit before financials x 100 / Revenue Return on assets Profit before financials x 100 / Total assets at year end Solvency ratio Equity at year end x 100 / Total assets at year end Return on equity Net profit for the year x 100 / Average equity EBITDA excl special items (Gross profit/loss + staff expenses - special items) x 100 / Revenue