Årsrapport 30700228 Ernst & Young Godkendt Revisionspartnerselskab Værkmestergade 25 Postboks 330, 8100 Aarhus C 2016-01-01 2016-12-31 2015-01-01 2015-12-31 2017-05-17 21330248 LOGSTOR A/S Danmarksvej 11 9670 Løgstør 1998-12-01 Vesthimmerlands Kommune 99661000 www.logstor.com Ernst & Young Godkendt Revisionspartnerselskab 30700228 Værkmestergade 25 8100 Aarhus C 2017-05-17 Line Dissing Mønster Regnskabsklasse C, stor virksomhed Revisionspåtegning 2017-05-17 2017-05-17 Løgstør, Rafal Zdislaw Wyszomirski CEO Henning Bejer Beck Chairman Line Dissing Mønster Kristian Haldrup Overgaard Christian Svanhede John Nielsen Aarhus, Steen Skorstengaard Hans Peter Roug State Authorised Public Accountant State Authorised Public Accountant 932805 772996 1052707 203956 165593 188659 19614 -22605 -59724 5760 -23909 -47141 190881 206536 219889 225292 233894 Fixed assets Fixed assets Fixed assets Fixed assets Fixed assets 299111 294678 246146 238006 262859 Non-fixed assets Non-fixed assets Non-fixed assets Non-fixed assets Non-fixed assets 466035 463298 496753 41000 41000 41000 41000 41000 Share capital Share capital Share capital Share capital Share capital 127866 133634 157582 36185 57327 71931 80200 70547 Provisions Provisions Provisions Provisions Provisions 47288 52628 58172 63468 71785 Non-current liabilities other than provisions Non-current liabilities other than provisions Non-current liabilities other than provisions Non-current liabilities other than provisions Non-current liabilities other than provisions 304987 233734 294433 280698 275665 Current liabilities other than provisions Current liabilities other than provisions Current liabilities other than provisions Current liabilities other than provisions Current liabilities other than provisions 3.6 9.3 5.1 0.5 -1.6 EBITDA-margin EBITDA-margin EBITDA-margin EBITDA-margin EBITDA-margin -1.6 11.1 4.2 -4.7 -10.9 98.1 126.1 83.6 84.8 95.4 Current ratio Current ratio Current ratio Current ratio Current ratio -11.7 20.9 4.4 -16.4 -25.9 352 342 423 725582000 939338000 507948000 628987000 -1520000 -7064000 456000 103000 48168000 50753000 168402000 252637000 142462000 165087000 33887000 34029000 -7947000 53521000 1106000 1523000 5000 26000 11264000 15451000 -18100000 39619000 -2970000 9784000 -15130000 29835000 20027000 15892000 4394000 5746000 24257000 28448000 3842000 4082000 52520000 54168000 71329000 75822000 62700000 71589000 4332000 4957000 138361000 152368000 190881000 206536000 35676000 37783000 5828000 7830000 38093000 37611000 79597000 83224000 55020000 39914000 7712000 25988000 135347000 125817000 8436000 5104000 5272000 3581000 4816000 7222000 2880000 2965000 219483000 210591000 31000 863000 299111000 294678000 489992000 501214000 41000000 41000000 7124000 0 53408000 76525000 0 40000000 101532000 157525000 19335000 19957000 16850000 37370000 36185000 57327000 47288000 52628000 47288000 52628000 5434000 5505000 120751000 63104000 57244000 63631000 88168000 65902000 33390000 35592000 304987000 233734000 352275000 286362000 489992000 501214000 41000000 0 76525000 40000000 7124000 -22144000 0 -1248000 -275000 0 40000000 41000000 7124000 53408000 0 -15130000 29835000 9941000 20108000 15141000 -5853000 9952000 44090000 1691000 8350000 -1928000 0 6333000 35740000 7693000 6088000 12176000 16638000 2174000 2152000 -17695000 -20574000 40000000 0 5411000 5393000 1706000 -4815000 -47117000 -578000 -58479000 14588000 -62241000 -76829000 -120720000 -62241000 0 -83000 456000 186000 129244000 149645000 10057000 11986000 2283000 2594000 878000 862000 142462000 165087000 294000 329000 2579000 4985000 186000 150000 2765000 5135000 9244000 10550000 24643000 23479000 33887000 34029000 -4618000 6203000 1757000 3719000 -109000 -138000 -2970000 9784000 41974000 21821000 66858000 4793000 0 0 0 7693000 0 0 0 97000 8547000 0 0 -8547000 50521000 21821000 66858000 3842000 26082000 16075000 38410000 711000 3701000 1352000 4191000 0 711000 0 0 -711000 30494000 17427000 42601000 0 20027000 4394000 24257000 3842000 134368000 235305000 4957000 818000 7588000 3770000 0 9428000 0 358000 4037000 -4395000 135544000 237502000 4332000 0 0 0 0 58546000 163716000 0 5669000 18974000 0 0 -7888000 0 64215000 174802000 0 71329000 62700000 4332000 255499000 252286000 247787000 226298000 7712000 25988000 52722000 5434000 47288000 26024000 11492000 11834000 7226000 7220000 617000 903000 -2051000 -3969000 -33000 -36000 -6352000 -1099000 260000 400000 0 8000 0 1299000 50000 368000 7014000 0 -22144000 29835000 33887000 34029000 456000 103000 -2970000 9784000 -3627000 -3143000 21199000 16506000 9685000 25502000 Today, the Board of Directors and the Executive Board have discussed and approved the annual report of LOGSTOR A/S for the financial year 1 January - 31 December 2016. The annual report is prepared in accordance with the Danish Financial Statements Act. In our opinion, the financial statements give a true and fair view of the financial position of the Company at 31 December 2016 and of the results of the Company's operations and cash flows for the financial year 1 January - 31 December 2016. Further, in our opinion, the Management's review gives a fair review of the development in the Company's operations and financial matters and the results of the Company's operations and financial position. We recommend that the annual report be approved at the annual general meeting. To the shareholders of LOGSTOR A/S We have audited the financial statements of LOGSTOR A/S for the financial year 1 January - 31 December 2016, which comprise an income statement, balance sheet, statement of changes in equity, cash flow statement and notes, including accounting policies. The financial statements are prepared in accordance with the Danish Financial Statements Act. In our opinion, the financial statements give a true and fair view of the financial position of the Company at 31 December 2016 and of the results of the Company's operations as well as the cash flows for the financial year 1 January - 31 December 2016 in accordance with the Danish Financial Statements Act. We conducted our audit in accordance with International Standards on Auditing (ISAs) and the additional requirements applicable in Denmark. Our responsibilities under those standards and requirements are further described in the "Auditor's responsibilities for the audit of the financial statements" section of our report. We are independent of the Company in accordance with the International Ethics Standards Board for Accountants' Code of Ethics for Professional Accountants (IESBA Code) and the additional requirements applicable in Denmark, and we have fulfilled our other ethical responsibilities in accordance with these rules and requirements. 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 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 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 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 the financial statements. As part of an audit conducted in accordance with ISAs and the additional requirements applicable in Denmark, we exercise professional judgement and maintain professional skepticism 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 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 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 conclusion is based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Company to cease to continue as a going concern. Evaluate the overall presentation, structure and contents of the financial statements, including the note disclosures, and whether the financial statements represent the underlying transactions and events in a manner that gives a true and fair view. We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. Management is responsible for the Management's review. Our opinion on the financial statements does not cover the Management's review, and we do not express any form of assurance conclusion thereon. In connection with our audit of the financial statements, our responsibility is to read the Management's review and, in doing so, consider whether the Management's review is materially inconsistent with the financial statements or our knowledge obtained during the audit, or otherwise appears to be materially misstated. Moreover, it is our responsibility to consider whether the Management's review provides the information required under the Danish Financial Statements Act. Based on our procedures, we conclude that the Management's review is in accordance with the financial statements and has been prepared in accordance with the requirements of the Danish Financial Statement Act. We did not identify any material misstatement of the Management's review. Financial ratios are calculated in accordance with the Danish Finance Society's recommendations on the calculation of financial ratios "Recommendations and Financial Ratios 2015". For terms and definitions, please see the accounting policies. The Group’s primary activity is to develop, manufacture and sell high-quality pre-insulated pipe systems for transportation of liquids and gases. LOGSTOR is the world’s leading supplier of pre-insulated pipe systems, not only for district heating, but also for district cooling, the chemical industry, the oil and gas sector, and the marine industry. LOGSTOR is an international enterprise with sales and production companies in Denmark, Sweden, Finland, Poland and Romania as well as sales to more than 50 markets through resellers and own sales companies in Germany, the Netherlands, Switzerland, Austria, France, Lithuania and Italy. Revenue for the year amounted to DKK 725,6 million against DKK 939,3 million prior year. Operating totalled DKK -7,9 million compared to 53,5 million the year before. The profit for the year after tax amounted to DKK -15,1 million compared to DKK 29,8 million last year. The result for 2016 is disappointing and lower as expected due to the sluggish DE market in 2016 and very low activity in the Oil/Gas business. Cash flows The Company’s cash flows from operating activities amounted to DKK -15,1 million, cash flows from investing activities amounted to DKK -17,7 million, and cash flows from financing activities amounted to DKK -47,1 million. The total net change in cash and cash equivalents as well as short-term bank debt is DKK -58,5 million. In 2016, LOGSTOR successfully introduced the Flextra ® product to Germany via the distribution centre in Augsburg. The Company maintained its research and developments efforts within District Energy. For the Oil and Gas market we continued to develop the product range further to meet market demands in all segments. We successfully secured the order for the pipe bends for the Husky Project in Canada and prepared a mobile site for the production 2016/2017. LOGSTOR finished the design manual and launched online design tools to ease the static design of buried district heating pipe lines. The results, cash flows and equity are affected by the exchange rate development of several currencies as a consequence of the Company’s international activities. The Parent manages the financial risks of the Company and coordinates the cash management of the Group, including funding and investment of surplus liquidity. The Company’s currency policy aims at hedging against commercial currency risks. LOGSTOR Group has production on mobile plants in Indonesia and Canada to ensure delivery on major projects and both Indonesia and Canada are established as branches. LOGSTOR recognises the UN and ILO declarations regarding human rights, labour rights, environment and anti-corruption. LOGSTOR has therefore chosen to structure the CSR work, including the policies, in accordance with the UN Global Compact guidelines. LOGSTOR works systematically with CSR, and operate plants, which are certified in accordance with ISO 9001 (Quality Management), ISO 14.001 (Environmental Management) and compliant with OHSAS 18.001 (Occupational Health and Safety Standard). The management systems use a risk based approach to ensure that the efforts are concentrated in the areas with the greatest risk. The CSR policy is supported by LOGSTOR’s Code of Conduct, which contains the company’s demands to suppliers within the CSR area. Through the Code of Conduct LOGSTOR require suppliers to comply with the CSR demands in their own Supply Chain. External audits of the suppliers, as well as their sub suppliers, are carried out when there is a concrete suspicion of breach of the Code of Conduct. No audits have been carried out in 2016. LOGSTOR procurement department has prepared a set of guidelines: “Code of Conduct for suppliers”, which includes internal anti-corruption guidelines for e.g. gift exchange, negotiation principles and handling of conflicts of interest. The internal anti-corruption guidelines have been extended to include the sales organisation, which is especially relevant for new markets where LOGSTOR is currently expanding the business. To support the guidelines, LOGSTOR sat up a whistle-blower function in 2016, which is an externally administered hotline where the employees can report unethical behaviour anonymously. Our corporate social responsibility policies currently comprise human rights, social and environmental issues, anti-bribery and gender representation. Management continuously follows up on compliance with these policies in practice. Human rights In our code of conduct, which has been circulated to our suppliers, we have published our zero-tolerance regarding forced labour, child labour, discrimination, freedom of association, workplace health and safety and conditions of employment. Since 2015, we started to obtain direct compliance confirmations from our suppliers and/or perform independent compliance reviews, if there is a concrete suspicion of breach of the Code of Conduct. Social and working conditions With expanding government regulations and increasing societal expectations, the Management team continued their increased focus on health, safety and environmental issues in 2016. This included an update of the HSE Policy, which reaffirmed the organizations commitment to an Incident and Injury Free (IIF) workplace. In 2016 significant HSEQ organizational changes were implemented. This included transforming the HSEQ function into a true business partner in support of operations versus a separate silo function. The changes more closely integrated the site based HSEQ resources through reporting and accountability relationships with the respective Plant Management, from which they receive their day-to-day direction. Functional direction is provided by Group HSEQ with a dotted line reporting relationships. A Group Safety Leadership Team (GSLT) was initiated in 2016. The GSLT meets monthly and membership includes the CEO and other key members of the management team. The GSLT is chartered to provide the leadership and commitment necessary for the organization’s IIF journey. A key initiative in 2016 was Hazardous Awareness Training. All Blue Collar employees were trained. Training consisted of both classroom instruction and a practical application. Environment and climate We produce pre-insulated pipes which are energy-efficient solutions and therefore reduce the world’s emission of greenhouse gases and work as a company on being as energy-efficient as possible in what we do every day. Inside our organisation, we wish to document and reduce emissions by optimising our own production and logistics as well as demanding that our suppliers do their best to reduce the emission of greenhouse gases in cooperation with LOGSTOR. Outside our organisation, we want to contribute to efficiency improvements of the world’s energy supply, and reduce the global energy loss by using pre-insulated pipes and thereby help reducing the world’s emission of greenhouse gases. As part of the EU Energy Efficiency Directive (EED), LOGSTOR A/S were audited in 2016 with recommendations to improve energy management. In conjunction with the EU efforts, LOGSTOR A/S achieved ISO 50001 (Energy Management) certification in 2016. It is important for LOGSTOR to: Contribute to the limitation and reduction of our environmental impact, encourage cooperation with authorities, and communicate openly about our environmental conditions Observe the requirements of the international Business Charter for Sustainable Development (ICC) Minimise the consumption of resources and waste during production Prioritise both optimization of production and the use of cleaner technology during product development Every year, we prepare CO2 accounts in which we present our resource- and energy consumption as well as our direct environmental impact. We map our consumption of electricity, district heating, fuels, and process emissions. Since 2004, LOGSTOR’s total energy consumption has been decreasing. Anti-bribery A zero-tolerance policy regarding any kind of bribery has been adopted and implemented. All relevant staff with market-orientated activities has been trained in our new policies. Management has no knowledge of any actual bribery including facility payments or other irregularities. It is Management’s intention to update the policy as adequate and to add more detailed policies and instructions as required by external as well as internal development. During 2016, a training program, which included basic knowledge and understanding of the Group’s “Anti-Corruption Policy” has been completed. Similar sessions will be conducted in 2017. On a current basis, the LOGSTOR Group board of directors assess the composition of its members as well as how their internal processes work, including an appraisal of the cooperation between board and CEO. Further, a part of this assessment is a consideration of multitude and the need for specific competencies. The boards are generally composed by business people, possessing a combination of professional competencies and practical experience, deemed to match the needs of LOGSTOR Group. A gender representation policy was implemented in 2015 and going forward. It is the intention to include at least one female candidate in the selection process for recruitment of managers and members of the LOGSTOR Group board of directors. Currently, it is the target that by the end of 2020, 20% of the managers and board members shall be female. In comparison, the realized ratio was 15% female managers, whereas no shareholder elected board members are female. LOGSTOR’s Board of Directors has appointed Søren Eskildsen as new President and Chief Executive Officer of LOGSTOR effective as of 16 January 2017. Søren Eskildsen succeeds Yves Paletta who will remain an investor in LOGSTOR and an advisor to the Board and Management. Besides the events mentioned above, no events have occurred after year-end, which would influence the evaluation of this annual report. 2017 has started well, and results develop as expected. Due to the macro-economic situation prevailing in our main markets in Europe it is not possible to give an accurate forecast of the financial performance for 2017. However, as a result of performance enhancements in 2016, profitability is expected to improve in 2017 compared to 2016. The annual report of LOGSTOR A/S for 2016 has been prepared in accordance with the provisions in the Danish Financial Statements Act applying to large reporting class C entities. Assets are recognised in the balance sheet when it is probable as a result of a prior event that future economic benefits will flow to the Entity, and the value of the asset can be measured reliably. Liabilities are recognised in the balance sheet when the Entity has a legal or constructive obligation as a result of a prior event, and it is probable that future economic benefits will flow out of the Entity, and the value of the liability can be measured reliably. On initial recognition, assets and liabilities are measured at cost. Measurement subsequent to initial recognition is effected as described below for each financial statement item. Anticipated risks and losses that arise before the time of presentation of the annual report and that confirm or invalidate affairs and conditions existing at the balance sheet date are considered at recognition and measurement. Income is recognised in the income statement when earned, whereas costs are recognised by the amounts atributable to this financial year. On initial recognition, foreign currency transactions are translated applying the exhcange rate at the transaction date. Receivables, payables and other monetary items denominated in foreign currencies that have not been settled at the balance sheet date are transalted using the exchange rate at the balance sheet date. Exchange rate differences that arise between the rate at the transaction date and the one in effect at the payment date, or the rate at the balance sheet date are recognised in the income statement as financial income or financial expenses. On initial recognition in the balance sheet, derivative financial instruments are measried at cost and subsequently at fair value. Derivative financial instruments are recognised under other receivables or other payables. Changes in fair value of derivative financial instruments classified as and complying with the requirements for hedging the fair value of a recognised asset or a recognised liability are recorded in the income statement together with changes in the value of hedged asset or the hedged liability. Changes in the fair value of derivative financial instruments classified as and complying with the requirements for hedging future transactions aare recognised directly in equity. When the hedged transactions are realised, the accumulated changes are recognised as part of costs of the relevant financial statement items. For derivative financial instruments that do not comply with the requirements for being treated as hedging instruments, changes in fair value are recognised currently in the income statement as financial income or financial expenses. Revenue from the sale of manufactured goods and goods for resale is recognised in the income statement when delivery is made and risk has passed to the buyer. Revenue is recognised net of VAT, duties and sales discounts and is measured at fair value of the consideration fixed. Contract work in progress is included in revenue based on the stage of completion so that revenue corresponds to the selling price of the work performed in the financial year (the percentage-of-completion method). Costs of raw materials and consumables comprise the consumption of raw materials and consumables for the financial year after adjustment for changes in inventories of these goods from the beginning to the end of the year. This item includes shrinkage, if any, and ordinary write-downs of the relevant inventories. Changes in inventories of finished goods and work in progress comprise decreases or increases for the financial year in inventories of finished goods and work in progress. This item includes ordinary write-downs of such inventories. Changes in inventories of raw materials are included in costs of raw materials and consumables. Other external expenses include expenses relating to the Entity's ordinary activities, including expenses for premises, stationery and office supplies, marketing costs, etc. This item also includes write-downs of receivables recognised in current assets. Other external expenses also include research costs and costs of development projects that do not meet the criteria for recognition in the balance sheet. Staff costs comprise salaries and wages as well as social security contributions, pension contributions, etc for entire staff. Amortisation, depreciation and impairment losses relating to intangible assets and property, plant and equipment comprise amortisation, depreciation and impairment losses for the financial year, calculated on the basis of the residual values and useful lives of the individual assets and impairment testing as well as gains and losses from the sale of intangible assets as well as property, plant and equipment. The basis of amortisation, which is calculated as cost less any residual value, is amortised on a straight line basis over the expected useful life. The expected useful lives of the assets are as follows: Completed development projects 7 years Acquired intangible assets 15 years Goodwill 10-20 years Land and buildings 25 years Operating equipment 5-10 years Transport vehicles 5 years IT equipment 3 years Property, plant and equipment are written down to the lower of recoverable amount and carrying amount. Financial Income comprises interest income, including interest income on receivalbes from group enterprises, net capital gains on financial statement items in foreign currencies as well as tax relief under the Danish Tax Prepayment Scheme etc. Financial expenses comprise interest expenses, net capital loss on financial statement items in foreign currencies as well as tax surcharge under the Danish Tax Prepayment Scheme etc. Tax for the year, which consists of current tax for the year and changes in deferred tax, is recognised in the income statement by the portion attributable to the profit for the year and recognised directly in equity by the portion attributable to entries in equity. The Entity is jointly taxed with LOGSTOR Denmark Holding ApS and all its Danish subsidiaries. The current Danish income tax is allocated among the jointly taxed entities proportionally to their taxable income (full allocation with a refund concerning tax losses). Tax for the year relates to income in the Danish company as wekk as in foreign permanent establishments. Goodwill is amortised straight-line over its estimated useful life which is fixed based on the experience gained by Management for each business area. In certain cases, the amortization period is up to 10-20 years for strategically acquired enterprises with a strong market position and a long-term earnings profile if the longer amortisation period is considered to give a better reflection of the benefit from the relevant sources. Goodwill is amortised over 10-20 years. Goodwill is written down to the lower of recoverable amount and carrying amount Intellectual property rights etc comprise acquired licenses and patent and development projects relating to products intended to be produced and sold. Acquired licenses and patents are measured at cost less accumulated amortisation. Acquired licenses and patent rights are amortised over 15 years as the investments made are expected to contribute to earnings during this period. Development projects relating to products intended to be produced and sold are recognised as intangible assets. Other development costs are recognised as costs in the income statement as incurred. Development costs comprise costs that are directly or indirectly attributable to the development projects. Straight-line amortisation is provided on the basis of the useful life of the product, up to 7 years as the development costs are xpected to contribute to earnings during this period. Development costs comprise expenses, salaries and amortisation charges directly attributable to the Company's development activities. Development projects that are clearly defined and identifiable and where the technical feasibility, sufficient resources and a potential future market or development potential are evidenced, and where the Company intends to produce, market or use the project, are recognised as intangible assets provided that the cost can be measured reliably and that there is sufficient assurance that future earnings can cover production costs, selling costs and administrative expenses and development costs. Other development costs are recognised in the income statement as incurred. Development costs that are recognised in the balance sheet are measured at cost less accumulated amortisation and impairment losses. On completion of a development project, development costs are amortised on a straight-line basis over the estimated useful life. The amortisation period is usually 5-7 years. Gains and losses on the disposal of development projects, patents and licences are determined as the difference between the selling price less costs to sell and the carrying amount at the date of disposal. Gains or losses are recognised in the income statement as other operating income or other operating expenses, respectively. Property, plant and equipment Land and buildings are measured at cost and less accumulated depreciation. Plant and machinery as well as operating equipment are measured at cist and less accumulated depreciation. Cost comprises the acquisition cost and costs related to the preparation of the asset. For companymanufactured assets, cost comprises direct and indirect costs. The carrying amount of intangible assets, property, plant and equipment and investments in subsidiaries and associates is assessed for impairment on an annual basis. Impairment tests are conducted on assets or groups of assets when there is evidence of impairment. The carrying amount of impaired assets is reduced to the higher of the net selling price and the value in use (recoverable amount). The recoverable amount is the higher of the net selling price of an asset and its value in use. The value in use is calculated as the present value of the expected net cash flows from the use of the asset or the group of assets and the expected net cash flows from the disposal of the asset or the group of assets after the end of the useful life. Previously recognised impairment losses are reversed when the reason for recognition no longer exists. Impairment losses on goodwill are not reversed. Inventories are measured in the lower of the acquisition costs or cost using the FIFO method and net realisable value. Cost of raw materials, consumables and goods for resale comprises the invoiced price plus landing costs. Cost of manufactured goods and work in progress consists of acquisition costs of materials and direct labour costs plus indirect production costs. Obsolete and slow-moving items are written down to expected net realisable value. Receivables are measured at amortised cost, usually equalling nominal value less write-downs for bad and doubtful debts. Contract work in progress is measured at the selling price of the work carried out at the balance sheet date. The selling prices is measrued based on the stage of completion and the total estimated income from the individual contracts in progress. Usually, the state of completion is determined as the ratio of actual to total budgeted consumption of resources. Each contract in progress is recognised in the balance sheet under receivables or liabilities other than provisions, depending on whether the net value, calculated as the selling price less prepayments received, is positive of negative. Prepayments comprise incurred costs relating to subsequent financial years. Prepayments are measured at cost. Cash comprises cash in hand and bank deposits. Proposed dividends Dividend is recognised as a liability at the time op adoption at the general meeting. The proposed dividend for the financial year is disclosed as a seperate item in equity. Dividend is recognised as a liability at the time op adoption at the general meeting. The proposed dividend for the financial year is disclosed as a seperate item in equity. Provisions comprise anticipated costs of non-recourse guarantee commitments and restructing provisions. Provisions for guarantee commitments are provided on the basis of the Company's sales conditions and delivery terms an dthe Company' sexperience. Restructuring provisions comprise expected costs relating to decided and published restructuring. Restructuring provisions are measured as the best estimate of the costs necessary to settle the liabilities at the balance sheet date. Restructuring provisions with an expected time of maturity of more than one year from the balance sheet date are measured at the discounted value. Current tax payables and receivables are recognised in the balance sheet as tax computed on the taxable income for the year, adjusted for tax on prior-year taxable income and tax paid on account in the Danish company and the foreign branches. Deferred tax is measured using the balance sheet liability method on all temporary differences between the carrying amount and the tax base of assets and liabilities. However, deferred tax is not recognised on temporary differences relating to goodwill which is not deductible for tax purposes or on office premises and other items where temporary differences arise at the date of acquisition without affecting neither the profit/loss for the year nor the taxable income. Where alternative tax rules can be applied to determine the tax base, deferred tax is measured based on Management's intended use of the asset or settlement of the liability, respectively. Deferred tax assets, including the tax value of tax loss carry-forwards, are recognised at the expected value of their utilisation; either as a set-off against tax on future income or as a set-off against deferred tax liabilities in the same legal tax entity and jurisdiction. Payables to credit institutions At the time of borrowing, mortgage debt to mortgage credit institutions is measured at cost which corresponds to the proceeds received less transaction costs incurred. Mortgage debt is subsequently measured at amortised cost. This means that the difference between the proceeds at the time of borrowing and the nominal repayable amount of the loan is recognised in the income statement as a financial expense over the term of the loan applying the effective interest method. Other payables Other financial liabilities are measured at amortised cost, which usually corresponds to nominal value. The cash flow statement shows cash flows from operating, investing and financing activities as well as cash and cash equivalents at the beginning and the end of the financial year. Cash flows from operating activitites are presented using the indirect methiod and calculated as the operating profit/loss adjusted for non-cash operating items, working capital changes and income taxes paid. Cash flows from investing activities comprise purchases and sale of fixed assets. Cash flows from financing activities comprise incurrence and repayments of long-term debt and distributed dividends. Cash and cash equivalents comprise cash and securities with an insignificant price risk less short-term bank debt. Financial ratios are calculated in accordance with the Danish Finance Society's guidelines on the calculation of financial ratios "Recommendations and Financial Ratios 2015". The financial ratios stated under "Financial highlights" have been calculated as follows: EBITDA-margin EBITDA Revenue x 100 Return on assets Profit/loss from operating activites x 100 Average assets Current ratio Current assets x 100 Current liabilities Return on equity Profit/loss for the year after tax x 100 Average equity Prepayments comprise incurred costs relating to subsequent financial years. Prepayments are measured at costs. The share capital consists of shares of DKK 100 or multiples thereof. The shares are not divided into classes. The Company's share capital has remained DKK 41,000 thousand over the past 5 years. Other provisions are DKK 16,850 thousand at 31 December 2016 (2015: DKK 37,370 thousand) and comprise anticipated costs of non-recourse guarantee commitments and restructing provisions. The carrying amount of non-recourse guarantees is DKK 7,525 thousand at 31 December 2016 and DKK 19,329 thousand at 31 December 2015. The carrying amount of restructing provisions is DKK 9,325 thousand at 31 December 2016 and DKK 18,041 thousand at 31 December 2015. Contingent liabilities LOGSTOR Group has through its subsidiary, LOGSTOR Deutschland GmbH been claimed for EUR 2.6 million in a lawsuit from a customer for losses in a project where the customer was responsible for construction of a steam pipeline. Based on facts and circumstances in the case Management in LOGSTOR Group expects to win the case and no provisions have been made. The Company is jointly and severally liable with LOGSTOR Holding A/S for the total VAT liability in the companies. The Company participates in a Danish joint taxation arrangement in which LOGSTOR Denmark Holding A/S serves as the administration company. According to the joint taxation provisions of the Danish Corporation Tax Act, the Company is therefore liable from the financial year 2013 for income taxes etc. for the jointly taxed companies and from 1 July 2012 also for obligations, if any, relating to the withholding of tax on interest, royalties and dividend for the jointly taxed companies. The mortgage debt is secured by way of a deposited mortgage deed of a nominal value of DKK 131,497 thousand at 31 December 2016 (2015: 131,497k) over real property and plant, machinery, etc. The carrying amount of real property is DKK 71,329 thousnd at 31 December 2016 (2015: DKK 75,822 thousand). The carrying amount of plant, machinery, etc. is DKK 67,032 thousand at 31 December 2016 (2015: DKK 76,546 thousand). Guarantee for fulfilment of any obligation incurred by the Group towards banks, a maximum of DKK 726.1m at 31 December 2016 (2015: DKK 726.1m). Of this amount debt in the other companies which have signed this guarantee amounts to DKK 549,117 thousand at 31 December 2016 (2015: DKK 517,603 thousand). Guarantee provided to third party for subsidiaries's guarantees is DKK 25,195 thousand at 31 December 2016 (2015: DKK 38,263 thousand). Guarantee provided to affiliated company's financing sources. Mortgage deed of DKK 131,497 thousand (2015: 131,497 thousand) nominal on properties also constitutes security. Parties exercising control Related party Domicile Basis for control LOGSTOR Holding A/S Danmarksvej 11, DK-9670 Løgstør Capital possession Information about consolidated financial statements Parent Domicile Requisitioning of the parent company's consolidated financial statements LOGSTOR International Holding S.á.r.l Luxembourg www.cvr.dk Related party transactions LOGSTOR A/S was engaged in the below related party transactions: DKK'000 2016 2015 Sales of goods to group enterprises 246,089 240,339 Sales of goods to associated enterprises 8,104 1,896 Interest income from group enterprises 2,095 1,707 Interest expenses to group enterprises 5,520 6,255 Intercompany fee from group enterprises 28,424 29,114 Intercompany fee to group enterprises 19,193 14,995 Receivables at group enterprises 124,187 125,497 Receivables at associated enterprises 5,299 320 Payables to group enterprises 88,168 65,902 Ownership The following shareholders are registered in the Company's register of shareholders as 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