The board of directors’ report 2021 for Avarn Security Group Holding AS

Avarn Security is a strategic and responsible security partner for corporate customers and public sector organizations. We secure people and values, and our mission is to help our customers succeed by creating smooth and secure operational environments. We provide security services and solutions in the Nordic market, with main operations in Norway, Sweden, Denmark and Finland. The head office is in Oslo, Norway, and it is headed by Group CEO Vidar Berg.

Avarn Security Group delivers an important part of the infrastructure of a modern society. We have the responsibility for safety across many customers and at airports, nuclear power plants, shopping malls, train and subway stations. Through our services in Nokas Cash Handling, we also ensure that money can be used as a legal, accessible and alternative means of payment. The business is run according to the company values and has an ongoing focus on the work of quality assurance throughout all parts of the business. Our vision is to be a full-service security provider and to deliver first-class security solutions. Our three core values are rooted in our daily work: Commitment, Compassion and Collaboration.

These values are important guiding principles in our business and form the basis of all our decisions, services and products. Internally, these core values help us maintain a steady course, as we work to uphold our commitment to our customers.

Avarn Security has been an important player in the consolidation of the Nordic security and cash handling market. The latest significant consolidation in the market is the merger between ‘old’ Nokas and ‘old’ Avarn in 2019. With solid operations and footprints in the Nordic market, together with a strong common culture, we are prepared for further growth. This will primarily be achieved through profitable organic growth, efficiencies, automation and digitalization.

As a result of the merger in 2019, Avarn Security was chosen to be the new brand for all security services and companies within the Group. The rebranding process was finalized in 2021. Employees, customers and partners are all positive to the Avarn Security brand and has given the Group some compelling advantages in tender processes both in Sweden and Norway.

In 2021, we have changed the company structure and established holding companies in each country. The legal structure now coincides with how we measure, report and follow up our operation in each country and within the Group. According to the new legal structure Avarn Security Group Holding AS is now the new holding company in the Group.

Avarn Security delivers strong underlying results in 2021, and increase both revenues and EBITDA, despite a significant drop in revenue in the Aviation business and exceptionally high sick leave.

Major acquisitions in recent years have affected the consolidated financial statements with significant values of intangible assets, such as goodwill and customer contracts. The consolidated financial statements comply with IFRS accounting principles where customer contracts are depreciated over a period of up to 13 years, which is based on experiences from previous acquisitions and individual assessments. Over the last three years, the customer portfolio has been depreciated by a total of NOK 176 million. Depreciations do not reflect the value of the company, as the depreciation are replaced with organic growth, however the depreciations have negative effect on the result and equity during the period. Avarn Security has the last couple of years invested heavily in mergers and rebranding, which in the short term have affected the results negatively, with a large amount of restructuring costs. However, Avarn Security delivers strong underlying results in 2021, and increased both revenues and EBITDA, despite a significantly drop in revenue in the Aviation business in both Norway and Sweden, and exceptionally high sick leave in all countries, both due to Covid-19 and highly intrusive measures by the authorities. The results in 2021 were according to plan, and significantly better than 2020 and contribute to a positive development in the cash flow. The Margin Improvement Program (MIP) (strategy 2019-2021) is replaced with Best in Class program (BIC 2025). New improvement initiatives are identified and implemented for the next period, to ensure further development in accordance with the long-term plan.

Nokas Cash Handling has during 2021 experienced a major volume drop, and hence a significant decline in revenues, as a result of Covid-19. Mitigating actions to increase both volume and margins are identified and implemented to secure profitability in the coming periods.

The Group’s revenues decreased from TNOK 8 041 928 last year to TNOK 7 872 393 in 2021. Net income

in 2021 was TNOK -44 145.

Net income (in NOK) is explained by the following:

EBITDA from operations in Avarn Security: EBITDA from operations in Nokas Cash Handling: EBITDA effect IFRS 16: Other IFRS adjustments: Net proceeds from sales NV AB: Restructuring costs (one off costs): Earnings before interests, taxes, depreciation and amortization

Depreciations and amortization: Depreciations IFRS 16 adjustments: Earnings before interests and taxes

Net interest: Other currency effects: Net finance IFRS 16: Gain from derecognition of lease in Denmark: Impairment seller credit AmSafe: Earnings before taxes

Income tax expense: Net income 2021

2020 NOK 310 mill NOK 257 mill

NOK 3 mill NOK 34 mill NOK 269 mill NOK 305 mill NOK -17 mill

NOK 46 mill NOK –53 mill NOK –106 mill NOK 512 mill NOK 536 mill

NOK –166 mill NOK –205 mill NOK –233 mill NOK –263 mill

NOK 113 mill NOK 68 mill

NOK –65 mill NOK –67 mill NOK –21 mill NOK –28 mill NOK –41 mill NOK –49 mill

NOK 31 mill NOK –17 mill

NOK 0 mill NOK –75 mill

NOK –44 mill

NOK–3 mill NOK –44 mill NOK –78 mill

Increased efficiency in operations and cost-effective initiatives realized in both 2020 and 2021 contributed to a significant improvement for Avarn Security in all countries, and overall satisfactory financial results from the operations in 2021.

During 2021 research and development costs amounted to TNOK 30 600. The cost has been capitalized as incurred, as the requirements for a balance sheet disclosure are considered to have been met. The research and development have a long-term perspective and is anticipated to result in positive changes in the product portfolio in the coming year.

Total cash flow from operating activities was TNOK 601 536 in 2021, and EBITDA constituted TNOK 512 483. The difference is related to working capital items.

Total assets at yearend amounted to TNOK 5 100 616, compared to TNOK 5 439 767 last year. The equity ratio was 19.1 % as of 31.12.2021, compared to 15.0 % the year before.

Overall view on objectives and strategy The Group is moderately exposed to changes in exchange rates, however, trading in local currency where the agent takes the greatest risk of negative changes in currency, reduces the overall risk to Avarn Security. Nokas’ sale of currency is hedged against exchange rate changes.

The company is partially exposed to changes in interest rates, since the company’s debt has a floating interest rate. Significant changes in interest rates will be able to influence the investment opportunities and profitability within some business areas. In 2021 the exchange rate risk was primarily reduced by ensuring that 30.3 % of the company’s debt was in foreign currencies (SEK and EUR).

We have liability insurance that applies to all companies within the Group and to its board members and general managers for the possible responsibility they have towards the company and third parties. The insurers are Zurich Insurance PLC and W.R. Berkley Insurance AG (S).

The Group is exposed to exchange rate risk, especially SEK and EUR, as a substantial part of the Group’s revenue is in foreign currency. The company’s current strategy does not include extensive use of financial instruments. This is, however, continuously being assessed by the Board of Directors.

The risk for losses on receivables is low. The Group has not yet experienced significant losses on receivables and turnover in the Group is distributed on a large number of customers. Public enterprises represent approx. 40% of the Group total turnover. Gross credit risk exposure per 31.12.2021 is TNOK 995 785 for the Group, which is a decreased from 2020 when the exposure was TNOK 1 053 335.

The Group’s liquidity is improving according to the growth on top and bottom line and is now considered good. We have a constant focus on overdue receivables, as well of payment terms on both incoming and outgoing invoices.

In accordance with the Accounting Act § 3-3a, we confirm that the financial statements have been prepared under the assumption of going concern. This assumption is based on profit forecasts for the year 2021 and the Group’s long-term strategic forecasts. The Group’s economic and financial position is sound.

In general, the Security market is growing in all Nordic countries. Avarn Security is experiencing increasing revenues in all countries; however, we are experiencing increased competition by medium sized competitors in the Swedish market.

The Board of Directors has proposed the net income of Avarn Security Group Holding AS to be attributed to:

Retained Earnings TNOK –2 415 Net income allocated TNOK –2 415

Number of employees in Avarn Security Group is 14 796 in 2021.

Avarn Security Group had short term sick leave of 3.86 % (1.88 % in 2020), and long term sick leave of 3.14 % (5.72 % in 2020) in 2021. We estimate that 1.72 % (1 % in 2020) was related to Covid-19.

2021 has been a particularly testing year with many employees affected by Covid-19 with all time high sick leave as a result of highly intrusive measures by the authorities. There are no incidences or reporting of work related accidents resulting in significant material damage or personal injury occurred during the year.

The working environment is considered good. The HR strategies were evaluated and revised in 2020, such that our efforts towards becoming the preferred employer in the security & safety industry will continue and improvements are ongoing. Avarn Security Group works actively to curb gender inequality and prevent discrimination of any kind, such as gender, disability, ethnicity, national origin, skin colour, religion or outlook on life. We work actively as a company to promote equality and prevent discrimination in our workplace, both within recruitment, pay and working conditions, promotion, development opportunities, facilitation and the opportunity to combine work and family life. Several activities have been implemented to increase our active and including work profile. This is based on our approach to employees and their connection to the workplace – “The whole person, all of the time”.

Avarn Security is a collective bargaining company and the guardianship agreement has equal pay for women and men. Our commission schemes are gender-neutral and the wage level is the same for women and men in management and commercial functions on same level. In Avarn Security Group the proportion of women is approx. 28.2 % and 22.4 % women in leading positions. The Group has three executive vice presidents, one of whom is a woman. In the land-based management the proportion of women is in average 25 %.

Avarn Security Group has set clear ambitions regarding environmental goals, with the following targets: reducing our footprint with 30 % by 2030, 50 % by 2040 and close to 0 by 2050. We have several areas with clear actions, such as optimizing our operations; using new technology to help us achieve our targets; digitalization; have our offices located close to public transport; and follow strict environmental criteria to achieve zero emission buildings. We also continuously focus on replacing fossil fuel cars with electric cars, where this is economical and practical. For example, we have close to 25 % electrical cars in the Oslo area. Avarn Security Group also has the same environmental demands for our partners and sub-contractors. During the last year we have implemented common KPIs for measuring and reporting, where business units on country level are reporting quarterly on agreed targets.

Vidar Berg CEO

Stein Egil Valderhaug Board member Amund Skarholt Chairman

Mikael Aro Board member Bjørnar Olsen Board member

Gunnar Bentehaugen Board member/ Employee representative