Page 1

ANNUAL REPORT 2020


Revenue

7 150 M

8 042 M

2018

2019

2020

Equity

KEY FIGURES

4 790 M

332 M

861 M

817 M

2018

2019

2020

Our people At Avarn Security, we care about our

That is why finding, developing and

employees. Everyone who works for us

retaining the best people is a priority

helps to ensure that we supply high quality

for us. Great recruitment and training

products and services to our customers on

systems are a priority for Avarn Security,

a daily basis. Our employees are the key

and as a result we have some of the lowest

to our success.

employee turnover in the industry.


Contents

4 Delivering strong results in the face of a global pandemic 10 The board of directors’ report 2020 for Avarn Security AS 14 Consolidated statement of profit and loss 15 Consolidated statement of financial position 17 Consolidated statement of cash flows 18 Consolidated statement of changes in equity

19 Notes 45 Avarn Security AS – Financial Statements 2020 46 Statement of profit or loss 47 Statement of financial position 49 Statement of cash flows 50 Notes 68 Independent auditor’s report

AVARN SECURITY ANNUAL REPORT 2020

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AVARN SECURITY GROUP 2020 CEO STATEMENT

Delivering strong results in the face of a global pandemic — Avarn Security is a leading security group with operations in Norway, Sweden, Finland and Denmark, supplying first-class security solutions to our clients across the Nordic market.

We are pleased to have delivered solid

A solid year for all our

Operational performance

results in 2020, increasing both revenues

business streams in Norway

Along with the rest of the world, we were

and EBITDA. This success was achieved

Our Margin Improvement Program (MIP)

affected by the Covid-19 pandemic in

despite a significant drop in revenue in

is ongoing, with new initiatives having

2020, with our Aviation and Travel-related

the Aviation and Cash Handling business.

been implemented in a timely way, to the

business suffering the most.

Our results in 2020 are in line with our

benefit of our bottom line. The journey to

plans, represent a significant improvement

make Avarn Security a digitalized security

Norway saw at total topline reduction of

on 2019, and contributed to a positive

company has successfully begun and

approximately 10% as a result of Covid-19,

development in cash flow during the year.

continues across our business streams.

while volume decrease in Aviation was around NOK 200 million. Despite the

Throughout 2020 we continued our

significant reductions in volume, we

planned restructuring and merger

managed to deliver results according

programs, despite the unprecedented

to plan.

circumstances. The Guarding business was affected by Our rebranding process started in 2020 and

two major incidents in 2020 - Covid-19

will continue until July 2021. We’re confident

and a historically long-lasting strike. The

Avarn Security is a brand that is respected

first quarter of 2020 was progressing as

and appreciated by both our employees

planned, until the Covid-19 situation hit hard

and customers.

in March. Mitigating actions were taken and employees were temporarily laid off. We took

The last year has shown that the security

a number of actions to achieve our targets,

industry has the ability to manage

including a focus on internal organization

unexpected situations, such as the global

and maintaining a close dialogue with

Covid-19 pandemic.

our customers.

Vidar Berg 4

AVARN SECURITY ANNUAL REPORT 2020

GROUP CEO AVARN SECURITY GROUP


Photo: Avarn Security

The Systems business remained solid with

New services and opportunities

In the summer, employees who had

sales according to plan. However, results

in retail for Skan-kontroll

been temporarily laid off as part of our

were negatively affected by clean-up and

AS Skan-kontroll and Semac AS delivered

response to the pandemic, were taken

losses on three older projects.

solid results in 2020.

back into production. New Covid-19 related services have been offered and business

Our Monitoring business remained steady

Changing operations

opportunities in the retail industry have

but was negatively affected by a decrease

The period since mid-March 2020, when

secured revenue and margins.

in the call-out market, as a result of the

Covid-19 really started to have an impact on

pandemic and the strike.

global businesses, has been one of constant

Semac started 2020 in a very strong

change in operations.

condition, but from Q2 the background

Our Avarn Alarm business downscaled sales

check business was paralyzed, as a result

activity during the pandemic. This reduced

of Covid-19, with hiring being put on hold

costs and had a positive impact on EBTIDA

across markets.

in the short term, leading to a lower run rate for 2021 than planned. Market segments – largely stable In 2020 most of our market segments were stable, except our Travel and Aviationrelated businesses. Many contracts were renegotiated, and several new tenders have been launched. Even among small and

...2020 has been the most exciting year ever in the Swedish security market. Two of the largest security companies have successfully merged into one strong and agile player in the Swedish security market.

In mid Q3 the market was normalized, and by temporarily laying off employees and adjusting cost level, Semac managed to achieve its EBITDA target in 2020. A challenging market The Covid-19 pandemic and long-running strike action proved challenging in 2020.

medium size businesses the willingness to invest has been almost on a normal level

Constant changes in national and regional

and we expect this situation to continue.

regulations have had both positive and

AVARN SECURITY ANNUAL REPORT 2020

5


negative impacts on our business. While

Challenges faced by Guarding were mainly

The aviation industry stopped almost

long-term planning has proved difficult,

connected to three issues. Firstly, we had

completely due to the pandemic. Since

we have adapted to the ‘new normal’.

to move nearly 3,000 employees from one

March 2020 air traffic has been around

company to another, with all the associated

10-12% of normal activity level. This

regulatory approvals.

extreme drop in traffic volumes forced us

We are pleased to report that several new customers have been signed during the year

to completely change our organization and

in both Skan-kontroll and in Semac.

reduce employee numbers from about 1,000 to 250. However, with government initiatives

The retail industry has, of course, been challenging during the pandemic, but we are now ready to handle rapid changes in services to the market. Successful merger of Nokas and Avarn in Sweden

we were able to deliver services to our

Our Systems and Solutions business have been doing reasonably well in a turbulent environment.

customers and finalize the year according to plan. Monitoring had a challenging start in 2020 as old Avarn ARC was relocated to new Avarn Security. During 2020 our focus has

It’s true to say that 2020 has been the most

been on ensuring processes and systems

exciting year ever in the Swedish security

work together seamlessly.

market. Two of the largest security companies have successfully merged into one strong and agile player in the Swedish security market.

In Systems we have taken several positive Secondly, we needed to deliver good and

steps, based on the turnaround plan we

efficient schedules to promote productivity.

produced at the end of 2019. The progress

Adapting to change and challenges

In this area we encountered some

during the year has led to an EBITDA

We had a slow start in the first half of 2020,

challenges, as new Avarn Security quickly

improvement of 340%.

partly down to the merger which was, in

needed to be more automated in handling

some respects, more challenging than we

personnel and costumer invoicing.

expected, and Covid-19.

Successful merger Sales activity has been high during 2020 and

Thirdly, solid leadership had to be put in

we experienced a positive trend overall in the

During the summer we managed to stabilize

place and we had to adjust to working within

security market, although we can see a small

the situation. Significant steps were taken

the Avarn culture.

and short-term decline within Systems.

our technical systems were launched. These

In November we carried out our first

The successful merger of Nokas and Avarn

actions made it possible to start a positive

employee survey to get a baseline for

has given us compelling advantages in the

trend in second half of the year and, thanks

moving forward. As expected, we have

Swedish market, but we have experienced

to a strong result in December, we achieved

identified areas for improvement and set

increased local competition from small and

our goal.

a challenge and mission for 2021.

midsize competitors.

organizationally and some developments in

Dedicated people

Our people are our most important asset as they are the core component of our service offering. • We will be the most attractive employer through our open and honest culture

• Our people choose to stay with Avarn Security as we provide a great place to work

• We will be best in class in developing our people through structured and targeted competency and leadership development

• We care about our employees and our impact on the society

• We empower and involve our people to create true ownership and engagement throughout our organization

6

AVARN SECURITY ANNUAL REPORT 2020

• Our core values Compassion, Commitment and Collaboration are rooted in our daily work


Photo: Avarn Security

Stable operations in security

was the only place to have a drop in volume.

new customers through tenders. But we

services in Finland in 2020

We experienced Covid-19 related direct

welcomed some new, large customers, such

In 2020 we completed the first full fiscal

costs, such as the cost of safety equipment,

as Helsinki Harbour, and made significant

year after the merger of Prevent 360 and

including masks, more sick leave and

contract extensions, including the Terrafame

Avarn Security Finland.

overtime. However, at the same time

contract, which was extended by five years.

financial performance has been supported We were operating the same IT systems and

by the government initiative to temporarily

We re-negotiated a contract with Finavia

processes nationwide, which made it easier

reduce pension payments between May

to stop regular security check services

to respond to Covid-19 challenges. Overall,

and December 2020.

and continue on a project basis. While

the pandemic had a fairly limited impact on

other customer segments have been

business and our people. We are pleased

Living and working with the pandemic

more stable, there have been requests for

that the amount of infected personnel

In Security Services 2020 was more

changes in payment terms and reductions

remained low and Helsinki-Vantaa Airport

about contract extensions than obtaining

in service delivery.

Best-in-class solutions

• We are a full-service security solution provider

• We offer digital solutions in order to make customer interaction easy

• We create unique and innovative combinations of proven technology and manned services to exceed customer expectations

• We deliver excellent customer experience through our friendly, professional and competent people

• As your security expert advisor, we use data analytics to optimize solutions and increase insight for our customers

• We take responsibility for our customers’ concerns and help them succeed by creating smooth and secure operational environment

AVARN SECURITY ANNUAL REPORT 2020

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Commercial orientation

• Profitable growth is a prerequisite for our capacity to invest in our dedicated people and best-in-class solutions

• We have a relentless focus on continuous improvement and deploy leading practices across our business and operations

• We compete on quality and provide the best value for money

• We use modern IT platforms and digital solutions to ensure efficient operations

• We understand and act on the drivers of profitability at a customer and contract level

Overall, we have gradually learned to live

Nokas Cash Handling

business. The revenue for our ATM business

and work with the pandemic.

heavily impacted by Covid-19

declined approximately 45% on average and

The year started well for Nokas Cash

cash processing was down almost 15%.

Our Monitoring business has been stable,

Handling. After a solid result in 2019 we

but we are aware of the challenges facing

began 2020 with EBDITA up by almost

On a positive noted, in June we were

SMEs in Finland. The amount of small

25% on the previous year.

awarded the CIT/CP contract with Danske

business closures and bankruptcies are

Bank and in October the agreement was

increasing monthly, impacting some of our

During March we entered the first Covid-19

signed. Implementation planning and work

Monitoring customers. Our strong volume

lockdown. The impact – with supermarkets,

started immediately.

base in Monitoring means the financial

stores and restaurants either closing down

impact has been limited.

or encouraging customers not to use cash

The longest-lasting strike in Norwegian

– was significant.

history created operational challenges

Our Systems and Solutions business have

during Q4 and, eventually, we had to

been doing reasonably well in a turbulent

The second and third wave of the pandemic

environment. The exception is two large

saw severe restrictions introduced by

pre-merger projects, started in 2018 by

governments in Norway, Finland and Denmark

We decided to close a cash centre in Finland

Prevent 360, with operational and financial

and had an even greater impact on our

and the full effect of the savings from this

challenges. We have been working on

move will be felt in the second half of 2021.

process improvements and inventory levels

In total, Nokas Cash Handling has reduced

during 2020 and results became evident in

costs with an annual value of 48 MNOK.

operational and financial performance in Q4. Competition and opportunities in the market Market development differs across our businesses. We see intense and heavy competition in the security services and monitoring market. In systems and solutions, the total market has been increasing

8

stop almost all activities in that market.

This included the increased cost in Denmark

We are pleased to have delivered solid results in 2020, increasing both revenues and EBITDA. This success was achieved despite a significant drop in revenue in the Aviation and Cash Handling business.

related to higher activity in the Danish market. Challenges in 2020, and uncertainty about the use of cash in the ‘new normal’, have forced us to take mitigating action to ensure profitability. These actions have been identified and will be implemented and measured throughout 2021.

which has created opportunities. Market

To conclude, we are starting to see positive

development is expected to continue in

signs and we expect the market to recover

a similar vein in 2021.

during 2021.

AVARN SECURITY ANNUAL REPORT 2020


Sustainability

• We are ambitious and committed to reducing climate emissions to near zero by 2050 and set the same environmental requirements for our suppliers and subcontractors • We strive to become carbon neutral by applying a broad set of measures, including the use of new technology, reduction of travel, facility building/location optimization and replacement to fossil free vehicles

• We set the highest standards in how we conduct our business, relate to the society and treat our customers and employees • We foster a culture of diversity and inclusion

Photo: Avarn Security

AVARN SECURITY ANNUAL REPORT 2020

9


During 2020, we have invested further in our IT platform, which has been an important element in the integration process in Sweden.

The board of directors’ report 2020 for Avarn Security AS — Operations and locations

The business is run according to the

for further growth. This will primarily be

Avarn Security (formerly Nokas) is a

company values and has an ongoing focus

achieved through profitable organic growth,

strategic and responsible security partner

on the work of quality assurance throughout

efficiencies, automation and digitalization.

for corporate customers and public sector

all parts of the business. Our vision is to be

During 2020, we have invested further in

organizations. We secure people and values,

a full-service security provider and to deliver

our IT platform, which has been an important

and our mission is to help our customers

first-class security solutions. Our three

element in the integration process in Sweden.

succeed by creating smooth and secure

core values are rooted in our daily work:

operational environments. We provide

Commitment, Compassion and Collaboration.

security services and solutions in the Nordic

2019, Avarn Security was chosen to be

market, with main operations in Norway,

These values are important guiding principles

the new brand for all security services and

Sweden, Denmark and Finland. The head

in our business and form the basis of all our

companies within the group. During 2020

office is located in Oslo, Norway, and it is

decisions, services and products. Internally,

Avarn Security as a brand was implemented

headed by Group CEO Vidar Berg.

these core values help us maintain a

in Sweden, while Norway will finalize the

steady course, as we work to uphold our

rebranding process during 2021. Employees,

commitment to our customers.

customers and partners are all positive to

Avarn Security Group delivers an important part of the infrastructure of a modern

10

As a result of the Nokas-Avarn merger in

Avarn Security brand, and has given the

society. We have the responsibility for safety

Avarn has been an important player in the

group some compelling advantages in tender

across a large number of customers and

consolidation of the Nordic security and

processes both in Sweden and Norway.

at airports, nuclear power plants, shopping

cash handling market. The latest significant

malls, train and subway stations. Through

consolidation in the market is the merger

our services in Nokas Cash Handling, we

between ‘old’ Nokas and ‘old’ Avarn in

Comments related to the financial statements

also ensure that money can be used as

2019. With solid operations and footprints

Major acquisitions in recent years have

a legal, accessible and alternative means

in the Nordic market, together with a

affected the consolidated financial

of payment.

strong common culture, we are prepared

statements with significant values of

AVARN SECURITY ANNUAL REPORT 2020


The Group’s revenues increased from TNOK 7 150 569 last year to TNOK 8 041 928 in 2020.

intangible assets, such as goodwill and

restructuring costs. However, Avarn Security

to increase both volume and margins are

customer contracts. The consolidated

delivers strong underlying results in 2020,

identified, and will be implemented, to secure

financial statements comply with IFRS

and increased both revenues and EBITDA,

profitability in the coming periods.

accounting principles where customer

despite a significantly drop in revenue in the

contracts are depreciated over a period

Aviation business in both Norway, Sweden

The Group’s revenues increased from TNOK

of up to 13 years, which is based on

and Finland, due to Covid-19. The results in

7 150 569 last year to TNOK 8 041 928 in

experiences from previous acquisitions

2020 were according to plan and significantly

2020. Net income in 2020 was TNOK -78 080.

and individual assessments. Over the last

better than last year, and contribute to

three years, the customer portfolio has been

a positive development in the cash flow.

Increased efficiency in operations and

depreciated by a total of TNOK 156 million.

The Margin Improvement Program (MIP)

cost effective initiatives contributed to

continues as planned, and new improvement

a significant improvement from 2019 for

Depreciations do not reflect the value of the

initiatives are added for the next period, to

Avarn Security in all countries, and overall

company, as the depreciation are replaced

ensure further development in accordance

satisfactory financial results from the

with organic growth, but the depreciations

with the long-term plan.

operations in 2020.

Nokas Cash Handling has during 2020

During 2020 research and development

have negative effect on the result and equity during the period.

experienced a major volume drop, and hence

costs amounted to TNOK 36 001. The cost

Avarn Security has the last couple of years

a drop in revenues, as a result of Covid-19.

has been capitalized as incurred, as the

invested heavily in mergers and rebranding,

The strike in Norway had also negative

requirements for a balance sheet disclosure

which in the short term have affected the

impact on both revenue and EBITDA in

are considered to have been met. The

results negatively, with a large amount of

the last quarter of 2020. Mitigating actions

research and development have a long-term

Net income is explained by the following: 2020

2019

NOK 257 mill

NOK 82 mill

NOK 34 mill

NOK 99 mill

EBITDA effect IFRS 16

NOK 305 mill

NOK 230 mill

Net proceeds from sales NV AB Restructuring costs (one off costs)

NOK 46 mill NOK -106 mill

NOK -102 mill

Earnings before interests, taxes, depreciation and amortization

NOK 536 mill

NOK 309 mill

Depreciations assets

NOK -134 mill

NOK -127 mill

Depreciations customer portfolio Depreciations IFRS 16

NOK -71 mill NOK -263 mill

NOK -48 mill NOK -203 mill

NOK 68 mill

NOK -69 mill

NOK -90 mill

NOK -98 mill

EBITDA from operations in Avarn Security EBITDA from operations in Nokas Cash Handling

Earnings before interests and taxes Net finance from operations

NOK -4 mill

NOK 4 mill

Net finance IFRS 16 Income tax expense

NOK -49 mill NOK -3 mill

NOK -47 mill NOK 18 mill

Net income

NOK -78 mill

NOK -192 mill

Currency effects

AVARN SECURITY ANNUAL REPORT 2020

11


Total cash flow from operating activities was TNOK 289 756 in 2020, and the operating profit constituted TNOK 535 554.

perspective, and is anticipated to result in

does not include extensive use of financial

Going concern

positive changes in the product portfolio in

instruments. This is however, continuously

In accordance with the Accounting Act

the coming year.

being assessed by the Board of Directors.

§ 3-3a, we confirm that the financial statements have been prepared under

Total cash flow from operating activities was

Credit risk

the assumption of going concern. This

TNOK 289 756 in 2020, and the operating

The risk for losses on receivables is

assumption is based on profit forecasts for

profit constituted TNOK 535 554. The

considered to be low. The Group has not

the year 2021 and the Group’s long-term

difference mainly concerns depreciations

yet experienced significant losses on

strategic forecasts. The Group’s economic

on both tangible and intangible assets and

receivables and turnover in the group is

and financial position is sound.

changes in net working capital.

distributed on a large number of customers. Public enterprises represent approx. 40%

In general, the Security market is growing

Total assets at year end amounted to TNOK

of the group total turnover. Gross credit risk

in all Nordic countries. Avarn Security

5 439 767, compared to TNOK 5 407 273

exposure per 31.12.2020 is TNOK 1 053 335

experience increase in revenue in all

last year. The equity ratio was 15,0% as of

for the Group and TNOK 221 411 for the

countries, however we experience increased

31.12.2020, compared to 15,9% the year before.

parent company. This is increased from

competition by medium sized competitors in

2019 for the Group when the exposure

the Swedish market. Especially the Aviation

Financial risk

was TNOK 921 528 and a reduction for the

business and Cash Handling business will

Overall view on objectives and strategy

parent company when the exposure was

continue to be heavily affected until the

The Group is somewhat exposed to changes

TNOK 231 919.

pandemic is under control and the societal

in exchange rates, however trading in local

restrictions are removed in all countries.

currency where the agent takes the greatest

Liquidity risk

risk of negatives changes in currency

The Group’s liquidity is improving according

Allocation of net income

reduces the overall risk in Avarn Security.

to the growth on top and bottom line and is

The Board of Directors has proposed the

Nokas’ sale of currency is hedged against

now considered good. We have a constant

net income of Avarn Security AS to be

exchange rate changes.

focus on overdue receivables as well of

attributed to:

payment terms on both incoming and The company is partially exposed to

outgoing invoices.

changes in interest rates as part of the

Retained Earnings

TNOK -165 055

Net income allocated

TNOK -165 055

company’s debt has a floating interest rate. Significant changes in interest rates

Retained earnings in Avarn Security AS is

will be able to influence the investment opportunities and profitability within some business areas. In 2020 the exchange rate risk was primarily reduced by ensuring that 29% of the company’s debt was in foreign currencies (SEK and Euro).

Market risk The Group is exposed to exchange rate risk,

12

negatively affected by write-downs of shares

Avarn Security delivers strong underlying results in 2020, and increased both revenues and EBITDA, despite a significantly drop in revenue in the Aviation business in both Norway, Sweden and Finland, due to Covid-19.

in subsidiaries of TNOK 177 600 in 2020.

The working environment and the employees Number of employees in Avarn Security Group is 15.457 in 2020. Avarn Security Group had short term sick

especially SEK and EUR, as a substantial

leave of 1,88% (2,7% in 2019), and long term

part of the Group’s revenue is in foreign

sick leave of 5,72% (5,9% in 2019) in 2020.

currency. The company’s current strategy

We estimate that 1% was related to Covid-19.

AVARN SECURITY ANNUAL REPORT 2020


Total assets at year end amounted to TNOK 5 439 767, compared to TNOK 5 407 273 last year.

2020 has been a particularly testing year

Even though we experienced a historically

and men in management and mercantile

with many employees affected by Covid-19.

long strike amongst the security guards

functions on same level. In Avarn Security

There has been laid off personnel in all

in Norway the cooperation with employee

Group the proportion of women is approx.

countries, and personnel has been isolated

trade unions has been constructive and

25%. The group has three executive vice

or confined to working from home due to

contributed positively to operations

presidents, one of whom is a woman. In the

closed schools and nurseries/ safety &

throughout the year. We have implemented

land-based management the proportion of

infection demands.

a number of improvements to increase

women is in average 20%.

employee participation and empowerment. There are no incidences or reporting of work

Environmental report

related accidents resulting in significant

Avarn Security Group have set clear

material damage or personal injury occurred

ambitions regarding environment goals with

during the year. We have completed 5 audits

the following targets; reducing our footprint

In general, the Security market is growing in all Nordic countries.

from the labour inspection authorities with a clean bill of health being declared in all the cases.

with 30% by 2030, 50% by 2040 and close to zero by 2050. We have several areas with clear actions like optimizations of our operations, using new technology to help us

The working environment is considered

achieve our targets, digitalization, have our

to be good. The annual workers survey

offices close to public communications and

estimates that over 90% of our employees

follow strict environment criteria’s to get zero

are satisfied with their workplace. The

emission buildings. We also continuously

HR strategies are evaluated and revised

Avarn Security Group works actively to curb

focus on replacing fossilize cars with electric

in 2020, such that our efforts towards

gender equality and prevent discrimination of

cars where this is economical and practical,

becoming the preferred employer in the

any kind such as gender, disability, ethnicity,

as an example we have in the Oslo area close

security & safety industry will continue

national origin, skin colour, religion or outlook

to 25% electrical cars. Avarn Security Group

and improvements are ongoing. A number

on life.

also have the same environment demands for

of activities have been implemented to

our partners and sub-contractors. During the

increase our active and including work

Avarn Security is a collective bargaining

last year we have implemented common KPI’s

profile. This is based on our approach to

company, and the guardianship agreement

for measuring and reporting, where business

employees and their connection to the

has equal pay for women and men. Our

units on country level are reporting quarterly

work place – “The whole person, all of

commission schemes are gender neutral

on set targets.

the time”.

and the wage level is the same for women

Amund Skarholt Chairman

Vidar Berg CEO

Mikael Aro Board member

Stein Egil Valderhaug Board member

Bjørnar Olsen Board member

Ole Morten Karlsen Board member/ Employee representative

Gunnar Bentehaugen Board member/ Employee representative

Hege-Charlotte Jacobsen Board member/ Employee representative

Oslo, 28 May, 2021

AVARN SECURITY ANNUAL REPORT 2020

13


AVARN SECURITY AS

GROUP CONSOLIDATED STATEMENT FOR 2020

Consolidated statement of profit and loss Amounts in NOK thousands

Note

2020

2019

28,29

8 041 928

7 149 569

Consolidated statement of profit and loss Total revenue Cost of goods sold

28

-966 990

-827 663

Personnel expenses

6,13

-5 763 470

-5 221 656

6,10,17

-775 914

-790 801

535 554

309 449

-467 866

-378 020

67 688

-68 571

-142 588

-141 090

-74 900

-209 661

-3 180

18 132

Net income (loss)

-78 080

-191 528

Equity holders of the parent company

-82 214

-170 343

4 134

-21 186

-78 080

-191 528

85 775

25 149

-60 108

36 852

Tax effects

13 224

-8 107

Other comprehensive income

38 890

53 893

Total comprehensive income (loss)

-39 189

-137 635

Equity holders of the parent company

-47 052

-118 588

7 863

-19 047

Other operating expenses Earnings before interests, taxes, depreciation and amortisation Depreciation and amortisation

7,8,10

Earnings before interests and taxes Net Finance

18

Earnings before taxes Income tax expense

16

Non-controlling interests

Consolidated statement of comprehensive income Net income (loss)

Other comprehensive income to be reclassified to profit or loss in subsequent periods: Currency translation differences in foreign operations

Other comprehensive income not to be reclassified to profit or loss in subsequent periods: Actuarial gain/loss on defines benefit pension plans

Non-controlling interests

Photo: Avarn Security

14

AVARN SECURITY ANNUAL REPORT 2020

13


AVARN SECURITY AS

GROUP CONSOLIDATED STATEMENT FOR 2020

Consolidated statement of financial position Amounts in NOK thousands

Note

2020

2019

3,8,9

1 639 998

1 588 684

Brand

8

154 960

142 835

Other intangible assets

8

72 627

55 004

Customer portfolio

8

490 786

534 274

Deferred tax assets

16

40 885

4 547

2 399 257

2 325 343

Assets Non-current assets Intangible assets Goodwill

Total intangible assets Right-of-use assets Fixed assets

10

925 695

966 720

7,10,20

254 035

315 610

7 059

Financial assets 24

8 850

12,25

103

103

13

13 721

73 013

6,12,14

53 745

59 257

76 418

139 432

3 655 405

3 747 105

15,20

76 597

78 226

12,17,20,28

1 053 335

921 528

12

308 478

212 497

5,12,20

345 951

447 917

Total current assets

1 784 362

1 660 168

Total assets

5 439 767

5 407 273

Investments in associated companies Investments in shares Pension fund Other non-current receivables Total financial assets Total non-current assets

Current assets Inventory Accounts receivables Other receivables Cash and cash equivalents

Photo: Avarn Security

AVARN SECURITY ANNUAL REPORT 2020

15


AVARN SECURITY AS

GROUP CONSOLIDATED STATEMENT FOR 2020

Consolidated statement of financial position Amounts in NOK thousands

Note

2020

2019

19

768 614

768 614

-25 265

21 788

Equity and liabilities Equity Share capital and share premium capital Other equity Non-controlling interests Total equity

73 647

70 102

816 996

860 504

Non-current liabilities Deferred tax liabilities Pension liabilities Lease liabilities Interest bearing debt Other non-current liabilties

16

75 284

93 230

3,13

3 676

5 478

10

752 165

792 633

11,12,20

785 172

800 193

11,27

31 898

7 061

1 648 196

1 698 595

Total other non-current liabilities

Current liabilities 10

238 504

242 491

11,12,20

418 228

519 555

Trade payable

12

310 589

221 511

Tax payable

16

Lease liabilities Interest bearing debt

Public duties payable

23 788

7 650

378 425

445 954

1 605 041

1 411 013

Total current liabilities

2 974 575

2 848 174

Total equity and liabilities

5 439 767

5 407 273

Other current liabilities

28

Oslo, 28 May, 2021

16

Amund Skarholt Chairman

Vidar Berg CEO

Mikael Aro Board member

Stein Egil Valderhaug Board member

Bjørnar Olsen Board member

Ole Morten Karlsen Board member/ Employee representative

Gunnar Bentehaugen Board member/ Employee representative

Hege-Charlotte Jacobsen Board member/ Employee representative

AVARN SECURITY ANNUAL REPORT 2020


AVARN SECURITY AS

GROUP CONSOLIDATED STATEMENT FOR 2020

Consolidated statement of cash flows Amounts in NOK thousands

Note

2020

2019

-74 900

-209 661

Tax paid for the period

-7 650

-2 087

Loss / gain from sale of fixed assets

-5 966

-5 714

-50 199

-1 300

467 866

378 020

-41 102

-42 879

-2 618

-15 672

Cash flows from operating activities Earnings before taxes

Gain from sale of shares Depreciation and amortisation Change in inventory, acc. rec. and acc. pay

21

Change in pension fund and liabilities Profit share from the group's associated companies Change in other accruals

18,24

-1 813

1 924

21

6 137

191 154

289 756

293 784

3 935

16 008

-83 222

-98 848

Net cash used in operating activities Cash flow from investing activities Proceeds from sale of equipment "Acquisition of property, plant, and equipment

7,8

Net change in financial fixed assets

-1 791

2 424

Net change in other non-current receivables

5 512

10 221

Proceeds from sales of shares in subsidiary

29

Acquisition of shares Net cash used in investing activities

75 553

-

-

-684 375

-12

-754 570

Cash flows from financing activities Deposits from long-term loans

24 837

575 000

Disbursements for long-term loans

-15 021

-186 624

-248 103

-194 436

-101 327

-213 749

-4 319

-

Payment of financial leases

10

Disbursements of overdraft facilities Dividend

-47 776

-45 569

Capital increase

-

589 166

Capital reduction

-

-2 096

Net cash from financing activities

-391 708

521 691

Net increase / decrease (-) in cash and cash-equivalents

-101 964

60 906

Net changes in financing of cash cycle (Cash Handling)

Cash and cash equivalents 01.01

5

447 916

387 011

Cash and cash equivalents 31.12

5

345 951

447 916

Photo: Avarn Security

AVARN SECURITY ANNUAL REPORT 2020

17


AVARN SECURITY AS

GROUP CONSOLIDATED STATEMENT FOR 2020

Consolidated statement of changes in equity

Closing balance 31.12.2018

Share capital

Share premium

Additional paid-in capital

Retained earnings

Foreign currency translation differences

Total share­ holders' equity

Non-controlling interests

Total equity

6 290

173 473

-

153 901

-8 635

325 029

6 671

331 699

-170 343

-21 186

-191 528

51 754

2 139

53 893

Income (loss) for the period

-170 343

Other comprehensive income

28 744

23 010

Transactions with owners Equity issue Capital reduction

2 144

255 220

333 584

-2 096

Change in noncontrolling interests

(4 889)

590 948

590 948

-2 096

-2 096

-4 889

4 889

-

77 588

77 588

790 403

70 102

860 504

-82 214

4 134

-78 080

35 161

3 729

38 890

Acquisition of Avarn Closing balance 31.12.2019

6 338

428 693

333 584

7 413

Income (loss) for the period

(82 214)

Other comprehensive income

(46 885)

14 375

82 046

Transactions with owners Change in noncontrolling interests

-

Dividend

-

(4 319)

(4 319)

743 350

73 647

816 996

Closing balance 31.12.2020

6 338

Photo: Avarn Security

18

AVARN SECURITY ANNUAL REPORT 2020

428 693

333 583

-121 686

96 421

-


Notes NOTE 1 – GENERAL INFORMATION Avarn Security AS (“the company”) and its subsidiaries (together “the Group”) is a leading Nordic security provider with operations in Norway, Sweden, Denmark and Finland. The company is a limited liability company domiciled in Norway with headquarters in Alf Bjerckes vei 1, Oslo. An overview of which subsidiaries are included in the consolidated accounts is provided in note 23.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 2.1 Framework for financial reporting This note provides a list of the significant accounting policies adopted in the preparation of the consolidated financial statement. These policies have been consistently applied to all accounting periods presented, unless otherwise is stated. The consolidated financial statements of Avarn Security AS have been prepared in accordance with International Financial Reporting Standards (IFRS) and interpretations issued by the IFRS Interpretations Committee (IFRIC), as adopted by the European Union. The consolidated financial statements have been prepared on a historical cost basis. The discrepancies mainly relates to financial assets held for sale and financial assets and liabilities at fair value. The preparation of financial statements in compliance with the IFRS requires the use of estimates. The application of the group’s accounting principles also require management to use judgement. Areas significantly influenced by judgement, a high degree of complexity, or areas in which assumptions and estimates are significant for the financial statements, are described in note 3.

Amounts in NOK thousands

subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the group.

b) Change in ownership interests in subsidiaries without loss of control Transactions with non-controlling interests in subsidiaries that do not result in a loss of control are accounted for as an equity transaction. When the proportion of the equity held by non-controlling interests changes, the carrying amounts of the controlling and non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiary. Any difference between the amount by which the non-controlling interests are adjusted, and the fair value of the consideration is recognized directly in equity and attributed to the owners of the parent.

c) Associates Associates are all entities over which the group has significant influence but not control or joint control. This is generally the case where the group holds between 20% and 50% of the voting rights. Investments in associates are accounted for using the equity method. The investment is recognized at the time of purchase at acquisition cost, and adjusted thereafter to recognize the group’s share of the post-acquisition profits or losses of the investee in profit or loss. The carrying amount includes any implied goodwill identified at the time of purchase. The group’s share of profits or losses in associated companies is recognized in the income statement and added to the book value of the investment. The group’s share of retained earnings in the associated company is recognized in comprehensive income in the group and is also added to the capitalized amount for the investments. The group does not recognize a share of the loss in the income statement if this means that the capitalized amount of the investment becomes negative (including unsecured receivables from the unit), unless the group has incurred obligations or made payments on behalf of the associated company.

2.2 Changes in accounting policies and financial notes

At the end of each accounting period, the group decides whether there is a need for impairment of the investment in the associated company. In that case, the write-down amount is calculated as the difference between the recoverable amount of the investment and its book value, and the difference is recognized in the income statement under net finance.

There have been no changes in accounting policies with significant impact on 2020 figures.

Gains and losses on dilution of ownership interests in associated companies are recognized in the income statement under other income and expenses.

2.3 Principles of consolidation

2.4 Foreign currency translation

a) Subsidiaries Subsidiaries are all entities over which the group has control. The group controls an entity where the group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the activities of the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the group, and are deconsolidated from the date that control ceases.

a) Functional and presentation currency Items included in the financial statements of each of the group’s entities are measured using the currency of the primary economic environment in which the entity operates (‘the functional currency’). The consolidated financial statements are presented in Norwegian kroner (NOK), which is both the functional currency of the parent company and the presentation currency of the group.

The consolidated financial statements have been prepared under the going concern assumption.

When acquiring a business, the acquisition method is used. The consideration paid is measured at the fair value of transferred assets, incurred liabilities and issued equity instruments. Included in the consideration is also the fair value of all assets or liabilities as a result of an agreement on contingent consideration. Identifiable assets, liabilities and contingent liabilities are recognized at fair value at the time of acquisition. Non-controlling interests in the acquired company are measured from time to time either at fair value, or at their share of the acquired company’s net assets.

The currency effect on non-monetary items (both assets and liabilities) is included as part of the assessment of fair value. Currency differences on non‑monetary items, such as shares at fair value through profit or loss, are recognized in the income statement as part of total gains and losses.

Acquisition-related costs are expensed when they are incurred.

b) Transactions and balances Foreign currency transactions are translated into the functional currency using the exchange rates at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions, and from the translation of monetary assets and liabilities denominated in foreign currencies at year end exchange rates, are generally recognized in profit or loss.

When the acquisition takes place in several stages, the ownership from previous acquisitions shall be revalued to fair value at the time of control with recognition of the change in value in the income statement.

Currency gains and losses related to loans, cash and cash equivalents are presented in the statement of profit or loss as financial income or financial expenses.

Contingent consideration is measured at fair value at the time of acquisition. Subsequent changes in the fair value of the contingent consideration shall be recognized in the income statement in accordance with IAS 39 or as a change in other comprehensive income, in case the additional contingent consideration is classified as an asset or liability.

c) Group companies The results and financial position of foreign operations that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

Intercompany transactions, balances and unrealized gains on transactions between group companies are eliminated. Unrealized losses are also eliminated, but only after an impairment test for the relevant asset. Accounting policies of

• assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet • income and expenses for each statement of profit or are translated at average exchange rates, and • all resulting exchange differences are recognized in other comprehensive income.

AVARN SECURITY ANNUAL REPORT 2020

19


Goodwill and fair value adjustments arising on the acquisition of a foreign operation are treated as assets and liabilities of the foreign operation and translated at the closing rate.

2.5 Property, plant and equipment Property, plant and equipment are accounted for at acquisition cost less depreciation. Acquisition cost includes costs directly related to the acquisition of the fixed asset. Subsequent expenses are added to the assets’ carrying amount or recognized separately in the balance sheet, when it is probable that future economic benefits associated with the expense will flow to the group and the expense can be measured reliably. The carrying amount related to replaced parts is recognized in the income statement. Other repair and maintenance costs are recognized in the income statement in the period in which the expenses are incurred. • Cost of rented premises: Depreciated over the duration of the lease • Machines: up to 5 years • Operating assets: up to 5 years Expected useful life and residual value are reviewed on each balance sheet date and changed if necessary. When the carrying amount of an asset is higher than the estimated recoverable amount, the value is written down to the recoverable amount.

2.6 Intangible assets a) Goodwill Goodwill arises from acquisition of a business and constitutes the sum of consideration, amounts recognized for non-controlling interests and the fair value at the time of acquisition of previous ownership interest in the acquired company, which exceeds the fair value of net identifiable assets. In the case of purchases on favourable terms, where the sum of the consideration amounts recognized for non-controlling interest and the fair value of the previous ownership interest are lower than the fair value of net identifiable assets, the difference is recognized as income. Goodwill is allocated to cash-generating units for the purpose of impairment testing. The allocation is made to those cash-generating units or groups of cashgenerating units that are expected to benefit from the business combination in which the goodwill arises. The units or groups of units are identified at the lowest level at which goodwill is monitored for internal management purposes, being the operating segments. Impairment is assessed annually, or more often if there are events or changed circumstances that indicate a possible impairment. The book value of the cash‑generating unit that contains goodwill is compared with the recoverable amount, which is the higher of value in use and fair value less costs to sell. Any write-down will not be reversed in later periods. b) Brand Brand allocated as part of the purchase price allocation in 2019 is capitalized and has undefined useful life. c) Software Costs associated with maintaining software programs are recognized as an expense as incurred. Development costs that are directly attributable to the design and testing of identifiable and unique software products controlled by the group are recognized as intangible assets where the following criteria are met: • it is technically feasible to complete the software so that it will be available for use • management intends to complete the software and use or sell it • there is an ability to use or sell the software • it can be demonstrated how the software will generate probable future economic benefits • adequate technical, financial and other resources to complete the development for use or sell

20

Expenses recognized in the balance sheet as proprietary software are directly attributable expenses such as salaries to software developers and a proportionate share of relevant common expenses. Capitalized development costs are recorded as intangible assets and amortized from the point at which the asset is ready for use. Development expenses that are expensed cannot be recognized in the balance sheet later. Capitalized proprietary software is depreciated on a straight-line basis over its expected useful life (maximum over five years). d) Customer portfolio Customer portfolio allocated as part of the purchase price allocation is capitalized and has finite useful lives are measured at cost less accumulated amortization.

2.7 Investments and other financial assets Financial instruments A financial instrument is any contract that gives rise to a financial asset for one entity and a financial liability or an equity instrument for another entity. The group’s financial assets are unlisted equity investments, accounts receivable, and short-term and long-term interest-bearing receivables. The classification of financial assets on initial recognition depends on the characteristics of the contractual cash flows of the asset, and which business model the group uses as a basis for the management of its financial assets. With the exception of trade receivables that do not have a significant financing element, the group recognizes a financial asset at fair value plus transaction costs. The group classifies its financial assets into two categories: • those to be measured at amortized cost. • those to be measured subsequently at fair value through profit or loss. FINANCIAL ASSETS MEASURED AT AMORTIZED COST The group measures financial assets at amortized cost if both of the following conditions are met: • The financial asset is held in a business model where the purpose is to receive contractual cash flows, and • The contract terms for the financial asset give rise to cash flows which consist exclusively of payment of principal and interest on given dates. Subsequent measurement of financial assets measured at amortized cost is made using the effective interest method and is subject to loss provisions. Gains and losses are recognized in the income statement when the asset has been deducted, modified or written down. The group’s financial assets at amortized cost include long-term and shortterm interest-bearing receivables, accounts receivable and other short-term deposits. Accounts receivable that do not have a significant financing element are measured at the transaction price in accordance with IFRS 15 Revenues from contracts with customers. The group measures financial assets at fair value through profit or loss unless measured at amortized cost. FINANCIAL ASSETS MEASURED AT FAIR VALUE THROUGH PROFIT OR LOSS The group measures financial assets at fair value through profit or loss if they do not meet the SPPI criteria (the contractual terms for the financial asset give rise to cash flows that consist exclusively of payment of principal and interest on given dates). DERECOGNITION OF FINANCIAL ASSETS A financial asset is derecognized if: • The contractual right to receive cash flows from the financial asset expires, or • The group has transferred the contractual right to receive the cash flows from the financial asset or retains the right to receive the contractual rights to receive cash flows from a financial asset, but assumes a contractual obligation to pay cash flows to one or more; and either

• the software is available, and

a. The group has transferred most of the risk and benefits associated with the asset, or

• the expenditure attributable to the software during its development can be reliably measured.

b. The group has neither transferred nor retained most of the risk and benefits associated with the asset, but has transferred control of the asset.

AVARN SECURITY ANNUAL REPORT 2020


LOANS AND LIABILITIES After initial recognition, interest-bearing loans will be measured at amortized cost using the effective interest method. Gains and losses are recognized in profit or loss when the liability is derecognized. Financial loans are measured at their nominal amount if the effect of the discount is insignificant. DERECOGNITION OF FINANCIAL OBLIGATIONS A financial obligation is derecognized when the obligation has been settled, cancelled or expired. When an existing financial obligation is replaced by a new obligation from the same lender where the terms have been substantially changed, or the terms of an existing obligation have been substantially modified, the original obligation is derecognized, and a new obligation is recognized. The difference between carrying value of the original liability and the fair value of the new liability is recognized in profit or loss.

Loss provisions on financial assets The group uses the simplified method for calculating loss provisions for accounts receivable and contract assets. The group measures the provision for losses based on lifetime expected credit losses. The group has created a loss matrix based on historical credit losses, adjusted for forward-looking factors.

2.8 Raw materials and finished goods Raw materials and finished goods are stated at the lower of cost and net realizable value. Acquisition cost is assigned using the FIFO method. Net realizable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale.

comprehensive income or directly against equity. If this is the case, the tax is also recognized in the other comprehensive incomes statement or directly against equity. Tax payable for the period is calculated in accordance with the tax laws and tax rules that have been adopted, or substantially adopted on the balance sheet date in the countries where the entity and subsidiaries operate and generate taxable income. Deferred tax is calculated on temporary differences between taxable and consolidated carrying amounts of assets and liabilities. Deferred tax is not calculated on goodwill. If a temporary difference arises on initial recognition of assets or liabilities in a transaction which is not a business combination, and which at the time of the transaction affects neither accounting profit nor taxable profit, the deferred tax is not recognized in the balance sheet. Deferred tax is determined using tax rates and tax laws that have been adopted or are substantially adopted on the balance sheet date, and that are assumed to be used when the deferred tax asset is realized or when the deferred tax is settled. Deferred tax assets are recognized in the balance sheet to the extent that it is probable that future taxable profit will be available where the deductible temporary differences can be utilized. Deferred tax assets and deferred taxes shall be set off if there is a legally enforceable right to set off assets against tax payable against liabilities through tax payable, and deferred tax assets and deferred tax apply to income tax imposed by the same tax authority, for either the same taxable company or different taxable companies as intends to settle liabilities and assets by tax payable net.

2.15 Employee benefits

2.9 Accounts receivable

The group operates various post-employment schemes, both defined contribution plan and defined benefit plans

Accounts receivable arise from the sale of goods or services that are within the ordinary operating cycle. If settlement is expected within one year or less, the receivables are classified as current assets. If this is not the case, the receivables are classified as fixed assets. Accounts receivable are measured at fair value on initial recognition. In subsequent measurement, trade receivables are assessed at amortized cost using the effective interest rate, less expected credit losses. The group’s method and calculation of expected credit loss are described in more detail in note 17. Information on the group’s exposure to credit risk and currency risk is described in note 11.

a) Pension obligations For defined contribution plans, the group pays fixed contributions. The group has no further legal or self-imposed obligations to contribute additional funds if it turns out that there are insufficient funds to pay all employees the benefits associated with their earnings in this or previous periods. A defined benefit plan is defined as a plan that is not a defined contribution plan. Under defined benefit plans the entity’s obligation is to provide the agreed benefits to current and former employees.

2.10 Cash and cash equivalents Cash and cash equivalents include cash and bank deposits, including cash in ATM’s and customers’ money where the settlement is paid out the next working day. Bank overdrafts are recorded under current liabilities on the Balance Sheet.

2.11 Share capital and share price Ordinary shares are classified as equity.

2.12 Accounts payable Accounts payable represents the groups’ obligations to pay for goods or services provided by the suppliers to ordinary operations. Accounts payable are classified as short-term if they fall due within one year or less. If this is not the case, it is classified as long-term. Accounts payable are measured at fair value on initial recognition. In subsequent measurement, accounts payable are assessed at amortized cost using the effective interest rate.

2.13 Loan Loans are initially recognized at fair value when the loan is disbursed, less transaction costs. Loans are subsequently measured at amortized cost calculated using the effective interest rate. Any difference between the disbursed loan amount (net of transaction costs) and the redemption amount is recognized in profit or loss over the period of the loan using the effective interest method.

2.14 Payable and deferred tax Tax cost consists of tax payable and deferred tax. Tax is recognized in the income statement, except when it relates to items that are recognized in other

The recognized liability in respect of defined benefit plans is recognized in the balance sheet as the present value of the liability at the balance sheet date, less the fair value of the pension assets. The gross liability is calculated by independent actuaries using the “projected unit credit method” in the calculation. The gross liability is discounted to present value using the interest rate on highquality corporate bonds issued in the currency in which the liability is to be paid, and with approximately the same maturity as the payment horizon of the liability. Any effect on previously earned rights as a result of changes in the defined benefits is recognized in the income statement immediately. Net interest expense is calculated by using the discount rate on the net pension liability and fair value of pension assets. This cost are included in personnel expenses. Gains and losses that arise from the recalculation of the liability as a result of experience deviations and changes in actuarial assumptions are recognized in equity via other comprehensive income in the period which they arise. For defined contribution plans, the group pays contributions to publicly or privately administered pension insurance plans on a mandatory, contractual or voluntary basis. The group has no further payment obligations once the contributions have been paid. The contributions are recognized as employees benefit expenses when they are due. Prepaid contributions are recognized as an asset to the extent that a cash refund or a reduction in the future payments is available. b) Termination benefits Termination benefits are payable when a employment is terminated by the group before the normal retirement date, or when an employee accepts voluntary redundancy in exchange for these benefits. The group recognizes termination benefits at the earlier of the following dates: (a) when the group can no longer withdraw the offer of those benefits; and (b) when the entity recognizes costs for a restructuring that is within the scope of IAS 37 and involves the payment of terminations benefits. In the case of an offer made to encourage voluntary redundancy, the termination benefits are measured based on the number of

AVARN SECURITY ANNUAL REPORT 2020

21


employees expected to accept the offer. Benefits falling due more than 12 months after the end of the reporting period are discounted to present value. c) Profit-sharing and bonuses The group recognizes a provision where contractually obliged or where there is a past practice that has created a self-imposed obligation.

2.16 Provisions Provisions for restructuring and legal claims are recognized when the group has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation, and the amount can be reliably estimated. Provisions for restructuring include termination benefits to employees. Where there are a number of similar obligations, the likelihood that an outflow will require a settlement is determined by considering the class of obligations as a whole. A provision is recognized even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small. Provisions are measured at the present value of management’s best estimate of the expenditure required to settle the present obligation at the end of the reporting period. The discount rate used to determine the present value is a pre‑tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The increase in the provision due to the passage of time is recognized as an interest expense.

2.17 Revenue recognition Revenue is measured based on the consideration specified in a contract with a customer and excludes amount collected on behalf of third parties. IFRS 15 requires companies to apply professional judgment and take into account all relevant facts and circumstances when customer contracts are assessed in the various steps in the model. The standard also specifies the accounting related to the marginal expenses associated with the achievement of a contract and the expenses that the enterprise incurs in fulfilling this contract. The group implemented IFRS 15 using the full retrospective method. Recognition and measurement Revenue from the sale of goods is recognized at the time when control of the asset is transferred to the customer. Control over an asset involves the ability to control the use of and receive more or less all of the remaining benefits of the asset. Control also includes the ability to prevent others from controlling the use of and obtaining the benefits of the asset. Revenue is usually recognized upon delivery of the item. Revenue from the sale of goods is recognized based on the price of the individual goods in accordance with the contract with the customer. A trade receivable is booked when goods are delivered to the customer. There is no financing element related to the contracts with customers as the accounts receivable are normally settled within 30-60 days, which is consistent with industry practice. The group recognizes revenue from the sale of services in the period in which the service is provided. For ongoing contracts, the revenue is recognized over time, as the customer simultaneously receives and consumes benefits as the group offers these. Note 28 provides further information on the recognition and measurement of income from contracts with customers. Contract balances Contract asset: A contract asset is defined as the right to consideration in exchange for goods or services that the group has transferred to a customer. If the group transfers goods or services to a customer before the customer pays consideration or before the payment deadline expires, a contract asset is recognized for earned uninvoiced revenue that is contingent. Accounts receivable: A receivable represents the group’s right to consideration which is unconditional. The group has entered into an agreement with DNB Bank ASA which means that certain accounts receivable that the group earns are transferred to DNB Bank ASA at the time of invoicing. Accounts receivable that have been transferred to DNB Bank ASA are deducted at the time the group transfers the receivable to DNB Bank ASA as a result of the right to receive the cash flows that are being transferred to DNB. Contract liability: A Contract liability is a obligation to transfer goods or services to a customer for which the group has received consideration (or the amount is

22

AVARN SECURITY ANNUAL REPORT 2020

due) from the customer. If the customer pays a consideration before the group has transferred the goods or services to the customer, a contract liability will be recognized at the time of payment. The contract liability will be recognized as revenue when the group fulfils the delivery obligation as specified in the contract.

2.18 Leases At inception of a contract, the group assesses whether the contract is, or contains, a lease. A contract is, or contains, a lease agreement if the contract conveys the right to use an asset for a period of time in exchange of consideration. THE GROUP AS A LESSEE Separation of the components of a lease For contracts that constitute or contain a lease, the group use an underlying asset as a separate lease component if the group can benefit from use of the underlying asset either on its own or together with other resources that are readily available to the group, and the underlying asset is neither highly dependent on, nor highly interrelated with, the other underlying assets in the contract. The group then accounts for each individual lease component in the contract as a lease separately from non-lease components in the contract. Recognition of leases and exceptions At the time of implementation of a lease agreement, the group recognizes a lease liability and a corresponding right-of-use for all its leases, with the exception of the following exceptions applied: • Short-term leases (a lease term of 12 months or less) • Low value assets In these cases, the group recognizes the lease payments as other operating expenses in the income statement when they are incurred. Right-of-use asset The group measures the right-of-use assets at acquisition cost, minus accumulated depreciation and impairment losses, adjusted for any new measurements of the lease liability. Acquisition cost for the right-to-use assets includes: • The initial amount of the lease liability • Any lease payments made to the lessor at, or before, the commencement date of the lease, less any lease incentives received • All direct expenses for entering into agreements incurred by the group The Group applies IAS 16 “Property, plant and equipment” when depreciating the right-of-use asset, the right-of use asset is depreciated over the shorter of the assets useful life and the lease term on a straight-line basis. The Group applies IAS 36 “Impairment of assets” to ensure that the right-to-use assets are not carried at more than their recoverable amount, and to assess the possibility for future events or changes in circumstances that might indicate impairment losses. The group presents its right-to-use assets on as a separate line in the balance sheet. Lease liabilities At the commencement date, the group measures the lease liability at the present value of the lease payments that have not been yet paid at that date. The lease period represents the non-cancellable lease term, in addition to periods included by an option to either extend or terminate the lease, in case the group is reasonably certain to exercise that option. The lease payments that are used to measure the lease liability at commencement date include the following: • Fixed lease payments, less any lease incentives receivable • Variable lease payments that depend on an index or rate, initially included in the lease liability using the index or rate at the commencement date of the lease • Amounts expected to be payable by the group under residual value guarantees • The exercise price of a purchase option if the group is reasonably certain to exercise that option.


The lease liability is subsequently measured by increasing the carrying amount to reflect the interest on the lease liability, reducing the carrying amount to reflect leased payments and measuring the carrying amount again to reflect any revaluations or changes to the lease agreement, or to reflect adjustments in lease payments which follows from adjustments in indexes or rates. The group does not include variable lease payments in the lease liability. Instead, the group recognizes these variable lease payments in the income statement. The group presents its lease liabilities as a separate line in the balance sheet.

2.19 Dividends Dividend payments to the parent company’s shareholders are classified as liabilities from the date the dividend is determined by the general meeting.

NOTE 3 CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS The Group makes estimates and takes assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

3.1 Estimated impairment of goodwill and brand The Group tests annually whether goodwill and brand has suffered any impairment (see note 9). The recoverable amounts of all cash generating units have been determined based on value-in-use calculations reported in continuing operations. These calculations require the use of estimates. Value in use must in part be based on management’s evaluation, including determining the discount rate, estimates of future performance, revenue generating capacity of the assets, margins, required maintenance capex, overall costs and assumptions of the future market conditions.

3.2 Deferred tax asset Deferred tax assets are recognized in the balance sheet to the extent that it is probable that future taxable profit will be available where the deductible temporary differences can be utilized. Consequently, judgement is required in order to forecast for taxable earnings. Increase in deferred tax assets is not recognized in Denmark until they will deliver a positive taxable result.

3.3 Revenue recognition Revenue from fixed-price contracts is recognized over time to the stage of completion of the contract activity at the end of the reporting period. An expected loss on the fixed-price contract is recognized as an expense immediately. The recognition of revenue and expenses by reference to the stage of completion of a contract is referred to as the percentage of completion method. Under this method, contract revenue is matched with the contract costs incurred in reaching the stage of completion, resulting in the reporting of revenue, expenses and profit which can be attributed to the proportion of work completed. This method requires the management to make an estimate of the stage of completion for each fixed-price contract, the method is based on the proportion that contract costs incurred for work performed to date bear to the estimated total contract costs.

NOTE 4 INFORMATION ON NEW STANDARDS They have not identified other standards or interpretations that will take effect after January 1st, 2021 and will have a significant impact on Avarn Security’s consolidated financial statements.

Information is provided in note 13.

Photo: Avarn Security

AVARN SECURITY ANNUAL REPORT 2020

23


NOTE 5 – CASH AND CASH EQUIVALENTS Cash in hand

2020

2019

64 518

63 198

-

952

Bound tax deduction account Bank deposits

42 291 239 143

50 602 333 165

Total

345 951

447 917

2020

2019

Bound deposit account

Currency Statement of cash in hand: NOK

16 594

37

SEK

4 699

422

DKK

11 438

62 699

EUR

19 698

39

USD Other

6 357 5 733

-

Total

64 518

63 198

2020

2019

NOK

162 176

237 386

SEK

6 679

18 447

DKK EUR

103 409 9 170

74 180 54 705

Total

281 434

384 719

2020

2019

Unused overdrafts

238 876

271 936

Currency Statement bank deposits, deposit account and tax deduction account:

As of December 31th 2020 and December 31th 2019, there are no restrictions on the use of the group’s unused drawing facilities. Cash and cash equivalents in the group’s cash flow statements follow the corresponding division as presented above.

NOTE 6 – PERSONNEL EXPENSES Personnel expenses

2020

2019

4 503 324

4 078 916

846 630

764 255

Pension expense Other personnel expenses

327 167 83 312

292 188 86 298

Total personnel expenses

5 760 432

5 221 656

15 457

15 304

Salary and fees Payroll tax

Average number of employees Remuneration to the group CEO and Board Chairman

Group CEO

Chair

Salary

3 057

1 755

Bonus

651

Pension expense Other personnel expenses

354 273

Total The group CEO, Vidar Berg, is entitled to a salary for one year after resigning from his position. The group CEO has a result-oriented bonus contract.

24

AVARN SECURITY ANNUAL REPORT 2020

4 334

1 755


Loans to employees

2020

2019

1 236

7 328

The Interest rate for employee loans is calculated on the basis of market interest rate. Remuneration to external auditor

2020

2019

Statutory audit

5 607

4 829

Other attestation services

33

105

Tax advice Other non-audit services

154 619

35 505

6 412

5 475

Total

Pensions The group’s pension obligation in Norway satisfies the requirements of the Norwegian Act on Mandatory Occupational Pensions. In addition to the pension obligation in note 13, the group also has a contractual early retirement scheme (AFP). The AFP scheme, which applies from January 1, 2011, is regarded as a defined benefit multi-company scheme, but is accounted for as a defined contribution plan until reliable and sufficient information is available so that the group can account for its proportionate share of pension costs, pension obligations and pension assets in the scheme. The group’s liabilities / receivables in this scheme are thus not capitalized.

NOTE 7 – PROPERTY, PLANT AND EQUIPMENT

Acquisition cost 01.01.2019 Foreign currency translation adjustment Reclassifications Additions (acquired companies) Additions (fixed assets) Disposals Acquisition cost 31.12.2019 Foreign currency translation adjustment Reclassifications

Land, buildings and other real estate

Cost leased fixed assets

333 206

288 224

384 188

479 540

-2 960

-1 005

-

-14 916

-18 882

-320 116

-

-

-34 652

-354 768

Machinery, Furnishings, plant equipment, etc.

-

-

-

183 486

183 486

937 -250

8 172 -2 656

83 488 -122 807

93 822 -125 712

11 355

287 907 6 322

389 704 7 114

574 139 38 595

1 263 103 52 031

-11 355

-87 132

66 989

182 739

151 241 -

Additions (fixed assets) Disposals

Accumulated depreciation 01.01.2019 Foreign currency translation adjustment Reclassifications Accumulated depreciation of acquired companies

1 485 157

1 225 -

Additions (acquired companies)

Acquisition cost 31.12.2020

Total 31.12

4 206 -

9 542 -926

45 133 -184 813

58 881 -185 740

-

211 303

472 423

655 792

1 339 516

-35 811

-233 107

-331 224

-339 110

-939 253

-49

524

-245

8 340

8 570

43 794

-

-

14 788

58 582

-

-

-

-114 980

-114 980

-714 -

-3 463 63

-5 991 1 523

-65 664 113 832

-75 832 115 419

Accumulated depreciation 31.12.2019 Foreign currency translation adjustment

7 219

-235 982 -4 081

-335 937 -5 805

-382 794 -32 177

-947 494 -42 063

Reclassifications

-7 219

77 049

-84 858

-136 212

-151 241

-10 572

-15 559 561

-85 526 166 412

-111 657 166 973

-173 587

-441 598

-470 298

-1 085 482

Depreciation for the year Depreciation of acquired companies for the year

Accumulated depreciation of acquired companies

-

Depreciation for the year Disposals Accumulated depreciation 31.12.2020

-

Net book amount 31.12.2020

-

37 716

30 825

185 494

254 035

Net book amount 31.12.2019

18 574

51 925

53 766

191 345

315 609

Up to 25 years

Up to 25 years

Up to 5 years

Up to 5 years

Linear

Linear

Linear

Linear

Economic life Depreciation schedule

AVARN SECURITY ANNUAL REPORT 2020

25


NOTE 8 – INTANGIBLE ASSETS Development costs / software

Customer portfolio

Brand

Goodwill

Total 31.12 1 474 756

Acquisition cost 01.01.2019

243 662

411 843

-

819 250

Reclassifications

25 218

-

-

-

25 218

Foreign currency translation adjustment

-2 405

8 097

3 934

17 048

26 674

Additions (fixed assets)

10 175

-

-

-

10 175

-12 788

304 301 -

138 901 -

752 386 -

1 195 589 -12 788

263 862 7 761

724 241 -

142 835 -

1 588 684 -

2 719 623 7 761

Foreign currency translation adjustment

10 745

26 701

12 125

68 782

118 353

Additions (fixed assets)

23 214

1 127

-

-

24 341

Additions (acquired companies) Disposals

-97 122

-

-

-17 468

-114 591

Acquisition cost 31.12.2020

208 459

752 068

154 960

1 639 998

2 755 488

Accumulated depreciation 01.01.2019

-175 282

-135 977

-

-

-311 260

220

-201

-

-

19

Additions (acquired companies) Disposals Acquisition cost 31.12.2019 Reclassifications

Foreign currency translation adjustment Accumulated depreciation of acquired companies

-20 179

-

-

-

-20 179

Depreciation for the year Depreciation of fixed assets sold

-26 254 12 635

-53 788 -

-

-

-80 042 12 635

-208 859 18 335

-189 967 -

-

-

-398 827 -

-8 178

-347

-

-

-8 525

Accumulated depreciation 31.12.2019 Reclassifications Foreign currency translation adjustment Accumulated depreciation of acquired companies

-

-

-

-

-

-22 147 85 017

-70 969 -

-

-

-93 115 85 017

-135 832

-261 283

-

-

-415 450

Net book amount 31.12.2020

72 627

490 786

154 960

1 639 998

2 340 037

Net book amount 31.12.2019

55 004

534 274

142 835

1 588 684

2 320 796

Up to 5 years

Up to 13 years

Linear

Linear

Depreciation for the year Depreciation of fixed assets sold Accumulated depreciation 31.12.2020

Economic life Depreciation schedule

The customer portfolio is from previously acquired companies and is depreciated over 6-13 years as the group experienced from previous portfoliopurchases indicate a very high customer loyalty. With the level of operation and earnings that the group has today, it is expected that the acquisitions will lead to an increase in results and represent a significant value for the group during the depreciation period. Goodwill and brand has been tested for impairment, cf. note 9. Brand allocated as part of the purchase price allocation in 2019 (155 mNOK) is capitalized and has indefinite life. Following the acquisition of Avarn Security Holding AS in 2019, the entire security & systems part of the group has changed its name to Avarn Security. Brand is not amortized due to Avarn spending on commercials keeping the brand awareness growing.

Photo: Avarn Security

26

AVARN SECURITY ANNUAL REPORT 2020


NOTE 9 – GOODWILL AND BRAND IMPAIRMENT TEST 2020 Capitalized goodwill and brand in the group amounted to TNOK 1,794,958 as at December 31, 2020. The most significant share of goodwill is related to the acquisition of Avarn Security Holding AS in 2019, the acquisition of G4S Holdings (Norway) AS in 2014 and the acquisition of Svensk Bevakningstjänst AB in 2014. Brand is related to the acquisition of Avarn Security Holding AS in 2019. Goodwill and brand is monitored and tested for groups of cash-generating units (CGUs) that are similar to what is defined as CGUs in accordance with IAS 36 Impairment of Assets.

Book value for 2020:

Goodwill

Brand

Sum

Norway

428 440

Sweden

573 633

84 572

658 205

Finland

435 474

70 389

505 863

Skan-Kontroll Cash Handling

20 765 181 685

428 440

20 765 181 685 154 960

1 639 998

1 794 958

The group tests goodwill and brand for impairment at least annually, or when there are indications of impairment. The assessment was last performed as of 31.12.2020. Management’s conclusion is that there is no need for write-downs as of 31.12.20 as the recoverable amount exceeds the book value of goodwill. The recoverable amount is determined based on an assessment of the company’s value in use. The value in use is calculated by discounting expected future cash flows before tax, discounted with a relevant discount rate before tax that takes into account maturity and risk.

The following assumptions have been used when calculating the value in use as of 31.12.2020 2020

Norway

Sweden

Finland

Skan-Kontroll

Discount rate

8,0%

8,0%

8,0%

8,0%

Cash Handling 11,4%

Long-term growth rate

1,0%

1,0%

1,0%

1,0%

-2,6%

Risk-free interest rate

1,0%

1,0%

1,0%

1,0%

1,0%

Market premium

6,1%

6,1%

6,1%

6,1%

6,1%

The calculation of the value in use for the cash-generating units is calculated based on projections of budgets approved by the management and the board for the next three-year period. Management and the board of directors expect increase in both revenue and EBITDA margin next three years. The remaining period in the calculation is based on moderate growth corresponding to the long-term growth rate. EBIT and EBITDA used in the value-in-use calculation is based on management’s assumptions on the expected revenue developments, gross margin and operating margin, taking into account management’s expectation of market size and market share development.

Key assumptions when calculating value in use Discount rate

Discount rate is based on weighted average cost of capital (WACC). The discount rates reflect the market’s return requirements at the time of testing in the industry in which the cash flow generating unit is located. Risk-free interest rates and market premiums are both observable in the market.

Sensitivity analysis for the key assumptions As of the balance sheet date, a sensitivity analysis has been performed in which the assumptions in the impairment test have been changed with given assumptions. Management concludes that changes within a reasonable interval will not entail an obligation to write down.

2020 Reduction of EBITDA margin before any possible write-down occur

Norway

Sweden

Finland

Skan-Kontroll

Cash Handling

3,1%

0,3%

0,4%

3,6%

5,2%

AVARN SECURITY ANNUAL REPORT 2020

27


2019 Capitalized goodwill and brand in the group amounted to TNOK 1,731,519 as at December 31, 2020. The most significant share of goodwill is related to the acquisition of Avarn Security Holding AS in 2019, the acquisition of G4S Holdings (Norway) AS in 2014 and the acquisition of Svensk Bevakningstjänst AB in 2014. Brand is related to the acquisition of Avarn Security Holding AS in 2019. Goodwill and brand is monitored and tested for groups of cash-generating units (CGUs) that are similar to what is defined as CGUs in accordance with IAS 36 Impairment of Assets. Book value 2019:

Goodwill

Norway

428 440

Brand

Sum 428 440

Sweden

542 992

76 524

619 516

Finland

410 249

66 311

476 560

Skan-Kontroll Cash Handling

20 765 186 238

20 765 186 238 142 835

1 588 684

1 731 519

The group tests goodwill and brand for impairment at least annually, or when there are indications of impairment. The assessment was last performed as of 31.12.2019. Management’s conclusion is that there is no need for write-downs as of 31.12.19 as the recoverable amount exceeds the book value of goodwill. The recoverable amount is determined based on an assessment of the company’s value in use. The value in use is calculated by discounting expected future cash flows before tax, discounted with a relevant discount rate before tax that takes into account maturity and risk.

The following assumptions have been used when calculating the value in use as of 31.12.2019 2019

Norway

Sweden

Finland

Skan-Kontroll

Discount rate

8,9%

8,2%

8,2%

8,9%

Cash Handling 10,3%

Long-term growth rate

2,0%

2,0%

1,5%

2,0%

-4,0%

Risk-free interest rate

1,4%

0,0%

0,0%

1,4%

1,4%

Market premium

5,0%

5,0%

5,0%

5,0%

5,0%

The calculation of the value in use for the cash-generating units is calculated based on projections of budgets approved by the management and the board for the next four-year period. The remaining period in the calculation is based on moderate growth corresponding to the long-term growth rate.

Key assumptions when calculating value in use Discount rate

Discount rate is based on weighted average cost of capital (WACC). The discount rates reflect the market’s return requirements at the time of testing in the industry in which the cash flow generating unit is located. Risk-free interest rates and market premiums are both observable in the market.

Sensitivity analysis for the key assumptions As of the balance sheet date, a sensitivity analysis has been performed in which the assumptions in the impairment test have been changed with given assumptions. Management concludes that changes within a reasonable interval will not entail an obligation to write down.

2019 Reduction of EBITDA margin before any possible write-down occur

28

AVARN SECURITY ANNUAL REPORT 2020

Norway

Sweden

Finland

Skan-Kontroll

Cash Handling

1,9%

1,4%

2,2%

0,6%

2,6%


NOTE 10 – LEASES Right-of-use assets Book value of right-to-use assets 01.01.2020 Foreign currency translation adjustment Additions of right-of-use assets Change in provision for loss of lease agreements Disposals Adjustments Depreciation Book value of right-to-use assets 31.12.2020

Buildings 660 693 25 351 55 538 7 896 10 267 -116 851 642 894

Equipment 160 477 9 091 44 025 -63 154 150 438

Vehicles 145 550 7 200 66 616 -3 789 359 -83 572 132 363

Lowest of remaining rental period or economic life Depreciation method

1-25 years Linear

1-10 years Linear

1-5 years Linear

Total lease liabilities Total lease liabilities 01.01.2020 Foreign currency translation adjustment New lease liabilities recognized in the period Adjustments Principal payment Interest payment Disposals Total lease liabilities 31.12.2020

Total 966 720 41 641 166 179 7 896 -3 789 10 626 -263 577 925 695

Total 1 035 124 31 072 166 179 10 276 -296 969 48 866 -3 879 990 668

Short-term lease liabilities Long-term lease liabilities

238 504 752 165

Undiscounted lease liabilities and overdue payments Less than 1 year 1-2 year 2-3 year 3-4 year 4-5 year More than 5 years Total undiscounted lease liabilities 31.12.2020

258 619 208 806 140 209 108 070 68 443 394 069 1 178 216

Photo: Avarn Security

AVARN SECURITY ANNUAL REPORT 2020

29


Right-of-use assets

Buildings

Equipment

Vehicles

0

0

0

0

Implementation of IFRS 16

333 760

106 012

95 269

535 041

Reclassifications

320 116

34 652

Additions of right-of-use assets

179 645

79 744

114 992

374 381

Provision for loss of lease agreements

-23 622

-

-

-23 622

-

-

-

-

-2 633 -

-

-

-2 633 -

807 266

220 408

210 261

1 237 935

0

Acquisition cost 01.01.2019

Disposals Adjustments Foreign currency translation adjustment Acquisition cost 31.12.2019 Accumulated depreciation and write-downs 01.01.2019

0

0

Reclassifications

-43 794

-14787,5

Depreciation

-103 168

-45 394

Total

354 768

0 -58 581

-64 711

-213 272

Depreciation

-

Disposals

-

Transfers and reclassifications Foreign currency translation adjustment

638

389

249

Accumulated depreciation and write-downs 31.12.2019

-146 573

-59 932

-64 711

-271 215

Book value of right-to-use assets 31. 12.2019

660 693

160 477

145 550

966 720

1-25 years

1-10 years

1-5 years

Linear

Linear

Linear

Less than 1 year 1-2 year

136 913 123 266

62 853 45 665

79 629 51 513

279 395 220 444

2-3 year

100 947

39 235

24 661

164 843

3-4 year

80 369

24 083

6 592

111 044

4-5 year More than 5 years

75 051 490 152

12 876 8 899

1 066 -

88 993 499 051

1 006 697

193 611

163 461

1 363 769

Lowest of remaining rental period or economic life Depreciation method Undiscounted lease liabilities and overdue payments

Total undiscounted lease obligation 31.12.2019 Changes in lease liabilities First time use 01.01.2019 IFRS 16 Reclassifications New/changed lease obligations recognized in the period Principal payment

371 748 -242 021

Interest payment

47 585

Interest expense associated with the lease liabilities Foreign currency translation adjustment

-3 710

Total lease liabilities 31.12.2019

1 035 124

Short-term lease liabilities

242 491

Long-term lease liabilities

792 633

Other lease costs recognized in profit or loss statement Operating expenses in the period related to short-term leases, assets of low value and variable lease payments expensed in the period Weighted average discount rate on the assessment date

30

535 041 326 482

AVARN SECURITY ANNUAL REPORT 2020

Total 82 454 5,38%


NOTE 11 – FINANCIAL INSTRUMENTS Financial risk The group uses bank loans and overdrafts as financial instruments for financing. The purpose of these financial instruments is to ensure capital for investments that are necessary for the group’s operations. In addition, the group has financial instruments such as trade receivable, trade payable, etc. that are directly related to the group’s daily operations. Routines for risk management have been adopted at the board level and are implemented by the CFO. The most important financial risks the group is exposed to are related to interest rate risk, liquidity risk, currency risk and credit risk. The group’s management has an ongoing assessment of these risks and establishes guidelines for how these are to be managed.

(i) Credit risk The group is mainly exposed to credit risk related to trade receivables and other current receivables. The group reduces its exposure to credit risk by having all counterparties that receive credit from the group, for example customers, are subject to a creditworthiness assessment. The group has guidelines to ensure that sales are only made to customers who have not had significant issues with payments previously, and that outstanding amounts do not exceed the determined credit limits. The group’s main risk exposure arises by the carrying amount of the financial assets. The group considers its main risk exposure to be the carrying amount of trade receivables and other current assets. The group has entered into an agreement with DNB Bank ASA which means that certain trade receivables that the group earns are transferred to DNB Bank ASA at the time of invoicing. Consequently, the group is left with a limited credit risk on the trade receivable. The group’s assessment of expected credit losses on trade receivable is described in note 17.

(ii) Market risk – Interest rate risk The group’s exposure to interest rate risk arises from its financing activities (see note 12). The group’s interest bearing debt has a floating interest rate conditions, which means that the group is affected by changes in interest rates. As of December 31, 2020, the group has not entered into any interest rate swap agreement, but it is regularly assessed whether they should be entered into hedge relationships when fluctuations in earnings and liquidity issues arises as a result of interest rate changes. The following table shows the group’s sensitivity to potential changes in interest rates. The calculation includes all interest bearing financial instruments. That includes long-term financing and short-term financing through the group account scheme. Inventory Financing in the Cash Handling division is not included in the calculation below. The calculation presented in the table below shows the effect based on interest-bearing financial instruments at balance date.

2020

2019

Changes in interest rates +0,25% +0,50% +0,75% +0,25% +0,50% +0,75%

Effect on profit before tax (NOK 1000) -2 863 -5 725 -8 588 -3 031 -6 061 -9 092

(iii) Liquidity risk Liquidity risk is the risk that the group will not be able to meet its financial obligations when due. The group’s strategy for managing liquidity risk is to have sufficient cash at all times to be able to meet its financial obligations at maturity, either under normal or extraordinary circumstances, without risking unacceptable losses and harming the group’s reputation. For unused credit facilities see note 5. The following table gives an overview of the maturity structure for the group’s financial liabilities. For mortgages and financial leases, the stated amounts consist of booked amounts plus interest payments. Other items that appear in the table are represented by book amounts. In cases where the other party can demand earlier redemption, the amount is recalculated to the earliest period the payment can be demanded from the other party. 31.12.2020 Mortgages Facility A SEK Facility B NOK Facility A and B Finland EUR Total mortgage Financial leases Subordinated loan Finland Short-term bank financing Debt to credit institutions associated with cash cycle financing Accounts payable Total

Remaining period Less than 1 year 7 451 162 253 119 492 289 196 258 619 134 252 59 757 310 589 1 052 414

1-2 years 7 451 185 220 192 671 208 806 401 477

2-3 years More than 4 years 170 551 454 227 624 778 140 209 764 987

570 582 24 068 594 650

Total 185 453 801 699 119 492 1 106 645 1 178 216 24 068 134 252 59 757 310 589 2 813 527

AVARN SECURITY ANNUAL REPORT 2020

31


31.12.2019

Remaining period Less than 1 year

1-2 years

2-3 years More than 4 years

Total

7 120

7 120

7 120

154 642

176 002

203 470 48 086

193 166 71 358

182 862

293 676

873 174 119 444

258 676 279 395

271 644 220 444

189 982 164 843

448 318 699 087

1 168 621 1 363 769

Mortgages Facility A SEK Facility B NOK Facility A and B Finland EUR Total mortgage Financial leases Short-term bank financing

198 917

-

-

198 917

Debt to credit institutions associated with portfolio financing Accounts payable

107 532 221 511

-

-

-

107 532 221 511

1 066 031

492 088

354 825

1 147 405

3 060 350

Total

Financial liabilities related to cash cycle financing are met by bank deposits, foundations and etc. The group is measured by the following covenant requirements according to the loan agreement: free cash flow to debt services, gearing ratio, interest cover and capital expenditures.

(iv) Market risk – currency risk The group is exposed to currency fluctuations related to the value of Norwegian kroner relative to other currencies due to sales in several different countries with different functional currencies. Book value of net investments in foreign companies fluctuates with changes in Norwegian kroner compared with relevant currencies. Profit after tax for the group is also affected by changes in exchange rates, as the result from foreign companies is converted to Norwegian kroner by use of average exchange rate for the period. The group has entered into certain forward contracts to reduce currency risk for certain cash flows within the cash handling division. See also note 5 which shows the distribution in currency for the company’s cash holdings. The group uses financial instruments to hedge part of the turnover in foreign currency within the cash handling division to reduce the risk of exchange rate fluctuations. The positions are settled on the balance sheet date. As a result of the fact that a significant part of the group’s turnover is in SEK, the group has taken up a share of long-term debt in foreign currency (SEK) to reduce currency risk. The following table shows the group’s sensitivity to potential changes in exchange rates. The calculation takes into account exchange rate translation for all consolidated foreign subsidiaries. The calculation listed in the table below shows the effect on the consolidated annual result given the changes in the average currency rates. 2020

2019

Changes in currency rates +10% + 5% - 5% - 10% +10% + 5% - 5% - 10%

Photo: Avarn Security

32

AVARN SECURITY ANNUAL REPORT 2020

SEK -5 796 -2 898 2 898 5 796 -6 677 -3 339 3 339 6 677

DKK -3 928 -1 964 1 964 3 928 -1 836 -3 672 3 672 1 836

EUR 3 529 1 765 -1 765 -3 529 2 005 4 009 -4 009 -2 005


NOTE 12 – CLASSIFICATION OF FINANCIAL ASSETS AND LIABILITIES Financial instruments at fair value through profit or loss

Financial instruments at amortized cost"

Total

Other financial assets

44 648

44 648

Trade receivable Cash and cash equivalents

971 784 345 951

971 784 345 951

1 362 383

1 362 486

785 172

785 172

31.12.2020

Assets Equity instruments

TOTAL FINANCIAL ASSETS

103

103

103

Liabilities Long term debts to credit institutions Subordinated loan

24 068

24 068

Short term debts with credit institutions*

418 228

418 228

990 668 310 589

990 668 310 589

2 528 726

2 528 726

Financial instruments at amortized cost"

Total

46 697

46 697

820 342 447 917

820 342 447 917

1 314 956

1 315 059

Long term debts to credit institutions

800 193

800 193

Short term debts with credit institutions*

519 555

519 555

1 035 124 221 511

1 035 124 221 511

2 576 383

2 576 383

Lease liabilities Trade payable TOTAL FINANCIAL LIABILITIES

-

*) the group account scheme, which is an ongoing facility, amounts to nok 134,253 as of 31.12.2020..

31.12.2019

Financial instruments at fair value through profit or loss

Assets Equity instruments

103

Other financial assets Trade receivable Cash and cash equivalents TOTAL FINANCIAL ASSETS

103

103

Liabilities

Lease liabilities Trade payable TOTAL FINANCIAL LIABILITIES

-

*) the group account scheme, which is an ongoing facility, amounts to nok 170,638 as of 31.12.2019. The group’s exposure to financial risk related to the financial instruments is described in note 11. Maximum exposure to financial risk at the end of the period corresponds to the book value of the financial assets described above.

Definition of fair value The book value of cash and cash equivalents is fair value. Correspondingly, the book value of trade receivables, other financial assets and trade payable is approximately fair value as the effect of discounting is not significant. The fair value of financial lease is calculated as the present value of estimated future cash flows discounted at interest rates that apply to corresponding assets and liabilities on the balance sheet date. The fair value of long-term debt is equal to the par value plus accrued interest. The fair value of current receivables and loans corresponds to the book value as the effect of discounting is not significant.

The fair value hierarchy The table below shows financial instruments at fair value in accordance with the valuation method. The different levels are defined as follows: Level 1:

Quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2: Valuation based on observable factors other than listed price (used at level 1), either directly (price) or indirectly (derived from prices) for the asset or liability. Level 3:

Valuation based on factors that have not been retrieved is obtained from observable markets (non-observable assumptions).

AVARN SECURITY ANNUAL REPORT 2020

33


Assets and debt measured at fair value 31.12.2020 Assets at fair value through profit or loss - Equity instruments Total

Level 1

Level 2

Level 3

-

-

103 103

Assets and debt measured at fair value 31.12.2019 Assets at fair value through profit or loss - Equity instruments Total

Level 1

Level 2

Level 3

-

-

103 103

Recognized pension cost is calculated as follows: Current service cost at boy Net PSC/settlement Interest expense / income on pension Payroll tax Current service cost Recognized pension cost (Norway)

2020 1 013 7 361 -1 659 223 474 7 412

2019 1 208 0 -667 2 016 452 3 009

Other comprehensive income Remeasurements (loss) gain

60 108

-36 852

Pension liabilities and pension assets: DBO at the beginning of year Current service cost Interest cost Disposal Past service cost - curtailment/plan amendment Gain/loss on settlement of pension assets Remeasurements loss (gain) Payroll tax of employer contribution Benefits paid DBO at end of year

2020 451 987 1 203 10 278 0 7 361 0 34 904 -64 -23 890 481 779

2019 474 495 3 169 12 070 -1 925 0 0 -17 566 -1 882 -16 375 451 987

Fair value of assets at beginning of year Interest income Settlement Payroll tax of employer contribution Employer contribution Benefits paid Remeasurements (loss) gain Fair value of assets at end of year

525 000 11 416 0 -64 514 -16 161 -25 205 495 500

496 500 12 244 0 -1 882 15 226 -16 375 19 286 525 000

Net capitalized pension assets 31.12

13 721

73 013

Assumptions Discount rate Interest rate on assets Rate of compensation increase Rate of pension increase Increase of social security base amount (G)

2020 1,70% 1,70% 2,00% 1,25% 2,00%

2019 2,30% 2,30% 2,25% 1,25% 2,25%

14,10% K2013BE KU

14,10% K2013BE KU

2020 5 213

2019 5 213

NOTE 13 – PENSION

Payroll tax / social security tax Mortality table Disability table Number of people in the scheme Active Retirees

In addition, TNOK 3,676 has been recognized as a pension liability as of 31.12.2020 and TNOK 5,478 as of 31.12.2019 that applies to AFP obligations and pension gifts. The cost of defined contribution plan in the group amounts to TNOK 319 755 for 2020 and TNOK 289 179 for 2019.

34

AVARN SECURITY ANNUAL REPORT 2020


NOTE 14 – OTHER FINANCIAL ASSETS 31.12.2020

31.12.2019

-

6 291

Seller credit – sale Amsafe AS

31 372

29 051

Loans and receivables with associated companies Deposit

369 12 907

1 246 10 109

Total interest-bearing long-term receivables Prepaid costs

44 648 9 097

46 697 12 560

Total

53 745

59 257

2020

2019

Supplies inventory Purchased goods for resale

8 886 70 213

18 055 63 506

Total

79 099

81 561

2 502

3 335

76 597

78 226

2020

2019

Loans to employees

NOTE 15 – INVENTORY

Provision for obsolescence Total inventory after obsolescence

NOTE 16 – TAXES Income tax expense 23 788

7 650

-26 968

-25 782

-3 180

-18 132

Change in deferred tax

13 224

-8 107

Total tax on other comprehensive income

13 224

-8 107

Tax payable on the profit for the year

23 788

7 650

Total tax payable

23 788

7 650

-146 941

-92 589

Tax payable Change in deferred tax on profit and loss Change in deferred tax on profit and loss, changed tax rate Income tax expense

Tax on other comprehensive income:*

*)The tax on other comprehensive income is presented at net value

Tax payable in the balance sheet appears as follows:

Specification of the basis for deferred tax / deferred tax asset: Differences that are offset: Non-current assets Current assets

-11 413

-3 592

Pensions

10 045

67 633

Gain and loss account

764

942

Provision for liabilities

-17 550

-37 277

Leases

-45 275

-24 473

Deferred tax related to purchased customer portfolio Deferred tax ​​related to purchased brand

479 969 154 960

520 394 142 835

Total temporary differences

424 559

573 873

AVARN SECURITY ANNUAL REPORT 2020

35


Cont. note 16 – Taxes

2020

2019

Tax loss to carry forward Norway

-253 648

-186 407

Tax loss to carry forward Sweden

-11 414

-

Cut interest deduction for carry-over Unrecognised deferred tax assets related to Denmark

-28 148 50 224

-8 365 54 379

Total

181 573

433 480

Net deferred tax

34 398

88 683

Deferred tax asset Deferred tax

-40 885 75 284

-4 547 93 230

Net deferred tax

34 398

88 683

Sweden

-40 764

-242 008

Denmark

-214 196

-167 210

Finland

-87 758

-41 556

Gross presentation deferred tax benefit / deferred tax

Overview of unrecognised losses carried forward abroad (gross amount)

In 2020 and 2019, selected Avarn subsidiaries have achieved its planned profitability; therefore, management continues to consider it probable that future taxable profits would be available against which the tax losses can be recovered for most of the entities. For these companies there are also deferred tax liabilities that more than offset the deferred tax asset, and the temporary differences related to the deferred tax will reverse before the tax losses carried forwards expire. There are some foreign subsidiaries within the group with tax losses carried forward that do not have offsetting deferred tax liabilities, and it is not possible to utilise the tax loss carried forward by group contributions. There is not convincing evidence for probable future taxable profit sufficient to fully utilise the tax loss carried forward for these entities.

Tax rates:

2020

2019

Norway

22,0%

22,0%

Sweden

21,4%

21,4%

Denmark

22,0%

22,0%

Finland

20,0%

20,0%

The right to carry forward losses in Finland terminates after 10 years.

Deficit year

36

Remaining deficit to carry forward

Termination of the right to carry forward losses

2012

12

2021

2013

-

2022

2014

16

2023

2015

12 468

2024

2016

15 543

2025

2017

9

2026

2018

5 954

2027

2019

11 167

2028

2020

42 590

2029

AVARN SECURITY ANNUAL REPORT 2020


NOTE 17 – TRADE RECEIVABLE 2020

2019

Trade receivables from contracts with customers

995 916

831 140

Loss allowance Earned not invoiced revenue

-24 132 81 552

-10 799 101 186

1 053 335

921 528

Trade receivable 31.12

2020

2019

Loss allowance at 01.01 Change in loss allowance through the year

10 799 13 333

3 145 7 654

Loss allowance at 31.12

24 132

10 799

Analysis of accounts receivable per 31.12 Not overdue

2020

2019

898 640

639 818

49 894

139 994

30-60 days

10 581

18 365

60-90 days More than 90 days

8 022 28 777

8 104 24 859

995 916

831 140

Less than 30 days

Total

The group uses a simplified method for calculating of loss allowance for doubtful debts, where the expected loss is based on forward-looking factors for the individual customer and the general macroeconomic future prospects. The group measures expected losses for each reporting period. The group’s maximum credit risk related to trade receivable is represented by book value. All the group’s trade receivable are assessed on the balance sheet date and expected losses are recognized in sales and administrative expenses during the period. The group’s realized credit loss for doubtful debts in 2020 was TNOK 4,148 (2019: TNOK 2,375). Expected credit losses on trade receivables are based on assessment of aging, historical losses and individual level.

NOTE 18 – FINANCE INCOME AND COSTS 2020 3 048 1 813 4 861

2019 5 094 1 300 3 963 10 357

Interest costs Loss share associated with the group (note 27) Financing costs associates with acquisitions Amortized borrowing cost Currency loss Leasing interest costs Other finance costs Total finance costs

73 218 3 758 4 094 48 307 18 073 147 449

68 250 1 924 7 369 4 028 47 585 22 291 151 447

Net financial expenses

-142 588

-141 090

Interest income Profit share from the group's associated companies (note 24) Gain on sale of shares Currency gain Total finance income

AVARN SECURITY ANNUAL REPORT 2020

37


NOTE 19 – SHARE CAPITAL AND SHAREHOLDERS INFORMATION Share capital and shareholders information The share capital in Avarn Security AS pr. 31.12.2020 consists of: Shares

No. of shares 410 264

Nominal value (nok) 15,45

Total 6 339

410 264

15,45

6 339

Total Each share gives the same right in the company.

Ownership structure The largest shareholders in Avarn Security AS as of 31.12.2020 were as follows: Name of entity

Shares

Total

Ownership

Voting share

SANOK INVEST AS

81 722

81 722

19,92%

19,92%

STIFTELSEN FRITT ORD

76 968

76 968

18,76%

18,76%

WFW INVEST AS

41 265

41 265

10,06%

10,06% 8,95%

NOMAD HOLDING AS

36 713

36 713

8,95%

INAK 3 AS

27 700

27 700

6,75%

6,75%

RG HOLDING AS

23 789

23 789

5,80%

5,80%

TTC INVEST AS

18 000

18 000

4,39%

4,39%

DNB BANK ASA

8 759

8 759

2,13%

2,13%

ALDEN AS

7 786

7 786

1,90%

1,90%

SYNCRON AS

7 183

7 183

1,75%

1,75%

AREPO AS

5 263

5 263

1,28%

1,28%

MURI INVEST AS

4 953

4 953

1,21%

1,21%

TROVATOR AS

3 714

3 714

0,91%

0,91%

SINGCOMP AS

3 356

3 356

0,82%

0,82% 0,76%

TRIONOR AS

3 100

3 100

0,76%

GJERMUNDSEN CORPORATE AS

3 000

3 000

0,73%

0,73%

TSI AS

2 815

2 815

0,69%

0,69%

BJØRNAR OLSEN

2 800

2 800

0,68%

0,68%

JANINE AS BO-BO INVEST AS

2 770 2 500

2 770 2 500

0,68% 0,61%

0,68% 0,61%

Total shareholders

364 156

364 156

88,8%

88,8%

46 108

46 108

11,2%

11,2%

410 264

410 264

100,0%

100,0%

Sum others Total number of shares outstanding

Shares owned by members of the board and CEO Name

Position

No. of shares

Ownership

Vidar Berg

CEO

167

0,0%

Amund Skarholt

Chairman

550

0,1%

Bjørnar Olsen including Inak 3 AS

Board member

11 077

2,7%

Subscription rights As of December 31, 2020, the company has issued a total of 312,671 independent subscription rights. Each independent subscription right entitles the shareholder to subscribe a new share for Avarn Security AS at a subscription price, corresponding to the nominal value of the company’s shares (NOK 15,45). Number of independent subscription rights

Expiration date 135 661

10.04.2024

177 010

27.06.2024

All subscription rights that have not been exercised during the subscription period will lapse with no value, and the holder will not be entitled to any compensation.

38

AVARN SECURITY ANNUAL REPORT 2020


NOTE 20 – GUARANTEES AND PLEDGES Pledges:

2020

2019

785 172 418 228

800 193 519 555

1 203 400

1 319 748

76 597

78 226

1 053 335

921 528

345 951 254 035

447 917 320 110

1 729 919

1 767 781

130 854

82 140

Mortgage bond in outstanding receivables

1 650 000

1 650 000

Mortgage bond in operating accessories

1 150 000

1 150 000

Mortgage bond in inventory

1 650 000

1 650 000

60 000

424 934

Capitalized debt secured by a mortgage etc. Long term debts to credit institutions Short term debts with credit institutions Total

Book value of assets pledged as security for collateralised debt: Inventory Accounts receivables Cash at bank in NOK and other currencies Property, plant and equipment Total Guarantee liabilities

Nominal mortgage bonds:

Mortgage hedging for credit facilities related to intraday credit

NOTE 21 – MERGED ITEMS IN THE CASH FLOW STATEMENT Changes in inventories, trade receivable and trade payable

2020

2019

Change in inventory

1 628

-8 272

-131 807 89 077

10 854 -45 461

-41 102

-42 879

Change in trade receivable Change in trade payable

Changes in other time limit items

2020

2019

Change in other current receivables

-95 981

157 953

Change in employee benefit obligation

-67 528

18 383

Change in other current liabilities

172 076

-31 030

-

279

-7 896

-

Change in other long-term debt excluding financial leasing Provision for future liability to reduction in lease liability (IFRS 16) Change in net working capital from sale of company Net change in financing of cash cycle (Cash Handling)

-26 386 47 776

45 569

Total

22 060

191 154

The Acquisition of Avarn Security Holding AS have been completed with subsidiaries in 2019 and the changes presented in the note will not coincide with changes presented directly in the balance sheet.

Photo: Avarn Security

AVARN SECURITY ANNUAL REPORT 2020

39


NOTE 22 – TRANSACTIONS WITH RELATED PARTIES Ptw Holding AS, Wang Invest AS and Sundet invest AS, which are shareholders in Avarn Security AS, are also shareholders in the company WFB Eiendom AS, which owns 36.49% of the company Wi-Be Eiendom AS, which in turn owns 100% of the shares in Træleborgodden 6 AS. This company owns the building where Avarn Security AS has its premises in Tønsberg. Avarn Security AS has paid TNOK 5 388 in rent to Træleborgodden 6 AS in 2020. For a further information of remuneration to management and loans to employees, see note 6.

NOTE 23 – OVERVIEW OF SUBSIDIARIES Equity in foreign subsidiaries and associated companies is translated at the exchange rate on the balance sheet date, while the profit for the year is translated at the average exchange rate for the year.

Subsidiary: Company Avarn Security AB Avarn Teknik Sverige AB

Office

Ownership/ voting share

Equity

Profit

Stockholm

100%

67 600

25 068

Sweden

88%

35 396

-24 340

Avarn Security Aviation AS

Ullensaker

100%

17 697

3 286

Avarn Security Beredskap AS

Porsgrunn

100%

7 719

2 461

Dokka

51%

2 949

2 315

Avarn Security Service AS

Oslo

100%

1 909

6 819

Avarn Security Holding AS

Oslo

100%

278 472

-75 590

AS Skan-Kontroll

Oslo

100%

18 588

13 763

Nokas Verdihåndtering AS

Oslo

100%

133 440

41 675

Nokas Teknik Danmark AS

Denmark

100%

3 137

-8 342

Avarn Security Innlandet AS

The companies below are subsidiaries and associated companies of the subsidiaries of Avarn Security AS: Office

Ownership/ voting share

Avarn Lås-Aktuelt AB

Sweden

100%

360

0

Avarn Security Systems AB

Sweden

100%

54 612

5 526

Avarn Låsteknik i Göteborg AB

Sweden

62%

13 251

5 577

Avarn Teknik Öst AB

Sweden

100%

104

0

Avarn Alviks Lås AB

Sweden

100%

712

0

Avarn Security Solutions AB

Sweden

100%

2 431

-96 224

Avarn Security Services AB

Sweden

100%

236 995

36 812

Synenergy AB

Sweden

100%

3 019

-16

Semac As

Norway

60%

3 925

7 623

Avarn Holding OY (group)

Finland

56%

409 109

12 420

NOKAS Værdihåndtering A/S

Denmark

100%

58 677

-47 981

Nokas Kontantservice P/S

Denmark

100%

24 429

9 061

Nokas Komplementar A/S

Denmark

100%

366

0

Nokas CMS A/S

Denmark

100%

11 855

5 440

Finland

100%

24 470

11 799

Nokas CMS OY

Finland

100%

12 667

11 073

Nokas CMS AB

Sweden

100%

58 554

-5 753

NOKAS Optimering & Lager AB

Sweden

100%

676

-24

Company

Avarn Cash Solutions OY

Equity

NOTE 24 – INVESTMENTS IN ASSOCIATED COMPANIES The group’s associated companies as of December 31, 2020 are specified below. All associated companies have only ordinary shares. The investments are accounted by using the equity method. See note 18 for the recognized profit share in 2020.

40

AVARN SECURITY ANNUAL REPORT 2020

Profit


Company name

Resident

Ownership / voting share

Nokas Teknikk Sør AS

Norway

34%

Nokas Brannkonsult AS

Norway

37%

Security Norway AS

Norway

34%

Vadla Trygghetsbyrå AS

Norway

34%

Nokas Teknikk Sør AS

Nokas Brannkonsult AS

Security Norway AS

Vadla Trygghetsbyrå AS

34%

37%

34%

34%

Net assets January 1, 2020 Profit in the period

8 819 3 858

3 516 591

-1 077 705

1 239 182

12 496 5 337

Net assets December 31, 2020

12 677

4 107

-372

1 420

17 832

Ownership interests Surplus value

4 252 465

1 507 2 279

-

483 -135

6 242 2 608

Recognized amount

4 717

3 786

-

348

8 850

Nokas Teknikk Sør AS

Nokas Brannkonsult AS

Security Norway AS

Vadla Trygghetsbyrå AS

Total

34%

37%

34%

34%

7 892

103

-667

1 006

8 334

927 0

553 2 860

-410 -

234 -

1 303 2 860

Net assets December 31, 2019

8 819

3 516

-1 077

1 239

12 496

Ownership interests Surplus value

2 958 465

1 059 2 292

-

421 -135

4 438 2 621

Recognized amount

3 423

3 351

-

286

7 059

Ownership

Acquisition cost

31.12.2020

31.12.2019

1% 20%

103 150

103 0

103 0

253

103

103

Financial liabilities

Financial lease obligations

Total

1 319 748

1 035 124

2 354 871

-127 437

-248 103

-375 540

11 089

171 946 31 702

171 946 42 791

1 203 400

990 668

2 194 069

Account Reconciliation – 2020 Ownership

Account Reconciliation – 2019 Ownership Net assets January 1, 2019 Profit in the period Change in capital

Total

NOTE 25 – OTHER FINANCIAL INVESTMENTS

DS Kysten AS Trade Security AS Other financial assets

NOTE 26 – RECONCILIATION OF LIABILITIES FROM FINANCING ACTIVITIES

Liabilities at 31. 12.2019 Cash flows from financing activities Additions and adjustments, cf. note 10 Exchange rate changes Liabilities at 31. 12.2020

Financial liabilities include debt to credit institutions, even those that have counterpart in the portfolio within the Cash Handling division.

AVARN SECURITY ANNUAL REPORT 2020

41


NOTE 27 – OTHER LONG-TERM DEBT Subordinated loan

2020

2019

24 068

-

7 830

2 526 4 535

31 898

7 061

Provisions for restoration of leased premises Restructuring Total other long-term debt

Subordinated loan from Intera to Avarn Security in Finland. No repayment of this loans shall be made unless it is accepted by lender OP Bank in Finland.

NOTE 28 – REVENUE FROM CONTRACT WITH CUSTOMERS Revenue – 2020

Norway

Sweden

Denmark

Finland

Other

Total

Security & Systems Cash Handling

2 255 943 290 723

3 339 267 180 294

26 667 226 843

1 346 327 299 808

1 745 2 741

6 969 948 1 000 408

Total revenue from contract with customers

2 546 666

3 519 560

253 510

1 646 134

4 486

7 970 356

Rental income - subletting premises unrelated to the group

13 048

-

-

-

-

13 048

Gains from sale of fixed assets

2 427

-

6

9

-

2 442

Gains from sale of business Other operating revenues

1 347

50 199 1 967

-

2 568

-

50 199 5 882

16 822

52 166

6

2 578

-

71 571

2 563 489

3 571 726

253 515

1 648 712

4 486

8 041 928

Total other revenue Total revenue

Revenue – 2019

Norway

Sweden

Denmark

Finland

Other

Total

Security & Systems Cash Handling

2 183 990 359 801

2 788 375 268 028

35 867 191 962

1 138 148 156 142

3 929 1 207

6 150 308 977 140

Total revenue from contract with customers

2 543 791

3 056 402

227 830

1 294 290

5 136

7 127 449

11 069

-

-

50

-

11 119

2 538 -

3 118

-

40 5 305

-

2 578 8 424

13 607

3 118

-

5 395

-

22 120

2 557 398

3 059 521

227 830

1 299 685

5 136

7 149 569

Rental income - subletting premises unrelated to the group Gains from sale of fixed assets Other operating revenues Total other revenue Total revenue

Ongoing projects 2020

2019

Total income from ongoing contracts Total expense from ongoing contracts

540 704 -411 938

409 268 -308 260

Net result from ongoing projects

128 765

101 008

Accrued revenue on ongoing construction costs including trade receivables (Contract asset) Prepaid revenue included in other current liabilities (Contractual obligation)

79 014 19 346

81 228 25 914

Net result from ongoing projects

59 668

55 314

Contractual liabilities as of 31.12

19 346

25 914

Revenue-recognized amounts that were included in the contractual obligation at the beginning of the period

25 914

9 910

Amount recognized as revenue related to contractual liabilities

42

Contracts losse

2020

2019

Provision for estimated contracts losses as of 31.12

8 276

1 100

AVARN SECURITY ANNUAL REPORT 2020


The group’s Security business division consists of sales of services in the form of hours, emergency calls and mobile inspections. Invoicing of the services takes place in advance or in arrears as specified in the agreement. Revenues are recognized at the time of delivery of the service / hours as the group is entitled to the revenue at this time. The group’s System business division consists of sales of technical facilities, including installation / assembly, equipment, service assignments and monitoring of alarm signals. When delivering stand-alone goods, the delivery obligation is usually considered fulfilled at the time of delivery of the goods to the customer, and the income is recognized at this time. Surveillance services are usually provided as subscriptions and are recognized as income over time as specified in the agreement. Emergency response to alarm signals at the customer are recognized as income at the time the response is made. Some contracts with customers contain several delivery obligations, such as sales of materials and associated installation services, as well as ongoing monitoring service. However, the customer can not use the item without associated installation / assembly and ongoing monitoring. Ongoing monitoring is a distinct delivery obligation, however, this service can not be performed by anyone other than the group itself. The customer can therefore not use or obtain benefits from the individual delivery obligations separately, and such contracts are recognized and measured as one delivery obligation. The group delivers installation contracts that are treated as construction contracts. In construction contracts, the outcome can be estimated in a reliable manner, and the recognized amount is based on the degree of completion. Contract assets are recognized by calculating the degree of completion based on input factors in the contract, measured against the total expected income and costs agreed in the contract. If it is probable that the contract costs will exceed the contract revenues, the expected loss is recognized immediately. In cases where the outcome of the contract cannot be measured reliably, the contract revenue is set equal to the contract cost. The group’s Cash Handling business division consists of the services within cash handling, including cash management solutions, value transport and operation of the group’s or customers’ ATMs. Transaction income from ATMs, including currency margin income, is recognized as income at the time the transactions are completed. Fixed subscription revenues from, among others, autoCash machines and the operation of banks’ ATMs are invoiced as specified in the agreement and recognized over time (approximately linear distribution over the agreement period). Revenues from transport operations are recognized as income at the time of the completion of the operation. Income from cash counting and settlement, central bank deposits and sale of currency is recognized as income when the transactions have been completed. Other operating revenues in the group mainly consist of subletting premises and gains from disposal of fixed assets.

NOTE 29 – SALES OF BUSINESS In 2020 group has sold the subsidiaries Nokas Värdehandtering AB. 2020 Net proceeds from sale of Nokas Värdehandtering AB Cash and cash equivalents from sold business

117 773 42 220

Deposit from sales of business

75 553

Booked value of assets and liabilities from disposed business excluding cash and cash equivalents

25 354

Gain from sales of business

50 199

NOTE 30 – EVENTS AFTER BALANCE SHEET DAY 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. In particular, the Aviation business and Cash Handling business will continue to be heavily affected, until the pandemic is under control and the societal restrictions are removed in all countries.

Photo: Avarn Security

AVARN SECURITY ANNUAL REPORT 2020

43


Photo: Avarn Security

44

AVARN SECURITY ANNUAL REPORT 2020


Avarn Security AS – Financial Statements 2020

AVARN SECURITY ANNUAL REPORT 2020

45


AVARN SECURITY AS

FINANCIAL STATEMENTS 2020

Statement of profit or loss Amounts in NOK thousands

Note

2020

2019

Revenue from contract with customers

20,22

1 688 917

1 651 550

Other operating income

20,22

61 325

17 448

1 750 242

1 668 999

Total revenue Cost of goods sold Personnel expenses Depreciation and amortization Other operating expenses

4,20,22

-250 392

-269 851

5

-1 146 086

-1 159 990

6,8

-87 612

-83 378

5,20

-207 899

-187 303

58 253

-31 523

26 131

18 537

29 984

23 616

Operating income (loss) Income from investment in subsidiaries

11

Income from investment in associated companies

11

Interest received from group companies Other interest income

1 873

2 126

Other financial income

11 363

8 251

11

-177 628

-8 100

-70 367

-71 526

8

-55 745

-38 610

23

-234 388

-65 706

-176 135

-97 229

-11 081

-21 127

-165 055

-76 101

15

-165 055

-76 101

15

-165 055

-76 101

-165 055

-76 101

-165 055

-76 101

-

-

-

-

-

-

-165 055

-76 101

Impairment of financial assets Interest rate expenses Other financial expenses Finance costs – net Income (loss) before taxes Income tax expense

14

Net income (loss) Income (loss) for the period Attributable to: Other equity Total

Statement of comprehensive income Profit (loss) for the period

Items that can be reclassified over the result in subsequent periods Items that will not be reclassified over the result in subsequent periods Other comprehensive income Total comprehensive income (loss)

46

AVARN SECURITY ANNUAL REPORT 2020


AVARN SECURITY AS

FINANCIAL STATEMENTS 2020

Statement of financial position Amounts in NOK thousands

Note

31.12.2020

31.12.2019

Assets Non-current assets Intangible assets Deferred tax assets

14

50 201

39 120

Goodwill

6,7

353 733

353 733

Customer portfolio

6

Total intangible assets

1 415

325

405 350

393 179

3 974

4 053

Property, plant and equipment Land and buildings

6,16

Plant and machinery

6,16

820

1 440

Equipment and tools

6,16

121 377

143 200

8

211 814

241 194

337 984

389 887

Right-of-use assets Total property, plant and equipment

Financial assets Investments in subsidiaries

11

1 132 065

1 309 398

Investments in associated companies

11

5 051

5 051

10,12,17

292 741

355 172

10

103

103

5,10,12

40 289

47 124

Total financial assets

1 470 248

1 716 846

Total non-current assets

2 213 582

2 499 912

4,16

28 924

26 618

Trade receivable

9,10,16,20,22

221 411

231 919

Other receivable

5,16

17 101

23 479

Intercompany receivables

16,17

428 202

399 315

666 714

654 713

37 873

44 875

733 512

726 206

2 947 093

3 226 119

Intercompany loans Other financial assets Long-term loans

Current assets Inventory

Trade and other receivables

Total trade and other receivables Cash and cash equivalents Total current assets Total assets

10,19

Photo: Avarn Security

AVARN SECURITY ANNUAL REPORT 2020

47


AVARN SECURITY AS

FINANCIAL STATEMENTS 2020

Statement of financial position Amounts in NOK thousands

Note

31.12.2020

31.12.2019

Share capital

15

6 339

6 339

Share premium

15

428 692

428 692

Additional paid-in capital

15

333 584

333 584

768 614

768 614

-11 380

153 675

-11 380

153 675

757 235

922 289

1 778

1 814

1 778

1 814

761 912

732 809

Equity and liabilities Shareholders’ equity Paid-in capital

Total paid-in capital Retained earnings Other equity

15

Total retained earnings Total shareholders’ equity

Non-current liabilities Provision for liabilities Pension liabilities

5

Total provision for liabilities Other non-current liabilities Interest bearing debt

9,10,13,16

Other non-current liabilities 184 213

213 669

Total other non-current liabilities

946 124

946 478

Total non-current liabilities

947 903

948 292

Lease liabilities

8

Current liabilities 9,10,16

258 142

329 386

Intercompany debt

17

515 851

548 726

Trade payable

17

58 276

58 110

134 717

148 693

Interest bearing debt

Public duties payable 8

54 188

57 441

22

220 782

213 181

Total current liabilities

1 241 956

1 355 537

Total liabilities

2 189 859

2 303 829

Total equity and liabilities

2 947 093

3 226 119

Lease liabilities Other current liabilities

Oslo, 28 May, 2021

48

Amund Skarholt Chairman

Vidar Berg CEO

Mikael Aro Board member

Stein Egil Valderhaug Board member

Bjørnar Olsen Board member

Ole Morten Karlsen Board member/ Employee representative

Gunnar Bentehaugen Board member/ Employee representative

Hege-Charlotte Jacobsen Board member/ Employee representative

AVARN SECURITY ANNUAL REPORT 2020


AVARN SECURITY AS

FINANCIAL STATEMENTS 2020

Statement of cash flows Amounts in NOK thousands

Note

2020

2019

-176 135

-97 229

Cash flows from operating activities Income (loss) before taxes Loss / gain from sale of fixed assets Depreciation and amortisation

6

Impairment Change in inventory, acc. rec. and acc. pay

18

Differences in pension costs and net deposits/ disbursements for pension schemes

-673

-770

87 612

83 378

177 628

8 100

8 368

-44 579

36

-301

-70 105

55 758

26 731

3 056

Loss / gain on sale of shares Change in other accruals

-1 300 18

Net cash used in operating activities

Cash flow from investing activities Proceeds from sale of equipment Acquisition of property, plant, and equipment

6,8

866

1 903

-14 235

-64 033

Net change in financial fixed assets

-358

Acquisition of shares

-595 658

Net cash used in investing activities

-13 370

-658 146

69 265

-116 456

Cash flows from financing activities Deposits from long-term loans

-47 488

Payment of financial leases Deposits for raising long-term debt Disbursements for repaying long-term debt

29 103

Disbursements of overdraft facilities

-71 244

Capital increase Net cash from financing activities

-44 213 305 492 -88 216 587 070

-20 364

643 677

Net increase / decrease (-) in cash and cash-equivalents

-7 003

-11 413

Cash and cash equivalents 01.01

44 876

56 289

Cash and cash equivalents 31.12

37 873

44 876

21

Photo: Avarn Security

AVARN SECURITY ANNUAL REPORT 2020

49


Notes NOTE 1 – GENERAL INFORMATION Avarn Security AS is a leading Nordic security provider with operations in Norway, Sweden, Denmark and Finland. The company is a limited liability company domiciled in Norway with headquarters in Alf Bjerckes vei 1, Oslo. An overview of subsidiaries is provided in note 11.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 2.1 Framework for financial reporting The Financial statements have been prepared in accordance with the Norwegian Accounting Act § 3-9 and regulations regarding simplified application of IFRS issued by the Norwegian Ministry of Finance on 4 March 2008. This mainly means that measurement and recognition follow the international accounting standards (IFRS), while the presentation and note information are in accordance with the Norwegian Accounting Act and generally accepted accounting principles. Exceptions from measurement and recognition in accordance with full IFRS, are explained below. The financial statements have been prepared in accordance with the regulations on simplified IFRS issued by the Ministry of Finance on 4 March 2008 § 3-1 point 3, with the exception of the provisions of IAS 10 no. 12 and 13, IAS 18 no. 30 and IFRIC 17 no. 10, so that dividends and group contributions are accounted for in accordance with the provisions of the Accounting Act. The company also makes an exception regarding IAS 28, cf. the Regulations § 3-1.4, so that investments in associated companies are determined by the cost method in the company accounts.

2.2 Changes in accounting policies and financial notes There have been no changes in accounting policies with significant impact on 2020 figures. There have been made some reclassifications in relation to previous periods and comparative figures have be restated accordingly and will not be directly comparable with the annual accounts for 2019. REVENUE RECOGNITION Recognition and measurement Revenue from the sale of goods is recognized at the time when control of the asset is transferred to the customer. Control over an asset involves the ability to control the use of and receive virtually all of the remaining benefits of the asset. Control also includes the ability to prevent others from controlling the use of and obtaining the benefits of the asset. Income is usually recognized upon delivery of the item. Revenue from the sale of goods is recognized based on the price of the individual goods in accordance with the contract with the customer. A trade receivable is recognised when goods are delivered to the customer. There is no financing element related to the contracts with customers as the accounts receivable are normally settled after 30-60 days, which is consistent with industry practice The group recognizes income from the sale of services in the period in which the service is provided. For current contracts, the income is recognized over time, as the customer simultaneously receives and consumes benefits as the group offers these. Note 22 provides further information on the recognition and measurement of income from contracts with customers. In some cases, the company receives short-term advance payments from its customers. By using the practical solution in IFRS 15, the company does not need to adjust the agreed consideration for the effects of a significant financing element if at the conclusion of the contract it is expected that the period between the time the group transfers an agreed product or service to the customer and the time the customer pays for the good or service will be a year or less. Contract balances Contract asset: A contract asset is defined as the right to consideration in exchange for goods or services that the group has transferred to a customer. If the group transfers goods or services to a customer before the customer

50

AVARN SECURITY ANNUAL REPORT 2020

Amounts in NOK thousands

pays consideration or before the payment deadline expires, a contract asset is recognized for earned uninvoiced revenue that is contingent. Accounts receivable: A receivable represents the group’s right to consideration which is unconditional. The group has entered into an agreement with DNB Bank ASA which means that certain accounts receivable that the group earns are transferred to DNB Bank ASA at the time of invoicing. Accounts receivable that have been transferred to DNB Bank ASA are deducted at the time the group transfers the receivable to DNB Bank ASA as a result of the right to receive the cash flows that are being transferred to DNB. Contract liability: A Contract liability is a obligation to transfer goods or services to a customer for which the group has received consideration (or the amount is due) from the customer. If the customer pays a consideration before the group has transferred the goods or services to the customer, a contract liability will be recognized at the time of payment. The contract liability will be recognized as revenue on the date the group fulfils the delivery obligation as specified in the contract. Recognition of costs Expenses are compared with, and expensed at the same time as the income the expenses can be attributed to. Expenses that cannot be directly attributed to income are expensed when they are incurred. Other operating income and expenses Significant income and expenses that are not related to the ordinary activities are classified as other operating income and expenses. INTANGIBLE ASSETS AND FIXED ASSETS Intangible assets Intangible assets that are expected to provide future income are capitalized. Depreciation is calculated on a straight-line basis over the assets’ economic life. If the fair value of an intangible asset is lower than the balance sheet value, and this is due to reasons that are not assumed to be temporary, the intangible asset is written down to fair value. Goodwill arises on the acquisition of a business and constitutes the sum of consideration, amounts recognized for non-controlling interests and the fair value at the time of acquisition of previous ownership interest in the acquired company, which exceeds the fair value of net identifiable assets. Impairment is assessed annually, or more often if there are events or changed circumstances that indicate a possible impairment. The book value of the cashgenerating unit that contains goodwill is compared with the recoverable amount, which is the higher of value in use and fair value less costs to sell. Any write-down will not be reversed in later periods. Fixed assets Property, plant and equipment are recognized in the balance sheet at acquisition cost, less accumulated depreciation and write-downs. If the fair value of an asset is lower than the balance sheet value, the asset is written down to fair value. Costs associated with normal maintenance and repairs are expensed on an ongoing basis. Costs associated with for permanent improvements that increase the value of the property, restore its value or use, substantially prolong its useful life or adapt it to a new or different use, are capitalized and depreciated over the useful life of the property. LEASES Identification of a lease contract When entering into a contract, the company assesses whether the contract is, or contains, a lease. A contract is, or contains, a lease agreement if the contract conveys the right to control, direct and obtain all the economic benefits from the use of an identified asset for a period of time in exchange for a consideration. THE COMPANY AS A LESSEE Separation of the components of a lease For contracts that constitute or contain a lease, the company use an underlying asset as a separate lease component if the company can benefit from use of the underlying asset either on its own or together with other resources that are readily available to the company, and the underlying asset is neither highly dependent on, nor highly interrelated with, the other underlying assets in the contract. The company then accounts for each individual lease component in the contract as a lease separately from non-lease components in the contract.


Recognition of leases and exceptions At the time of implementation of a lease, the company recognizes a lease liability and a corresponding right-of-use for all its leases, with the exception of the following exceptions applied: • Short-term leases (a lease term of 12 months or less) • Low value assets In these cases, the company recognizes the lease payments as other operating expenses in the income statement when they are incurred. Lease liabilities At the commencement date, the company measures the lease liability at the present value of the lease payments that have not been yet paid at that date. The lease period represents the non-cancellable lease term, in addition to periods included by an option to either extend or terminate the lease, in case the group is reasonably certain to exercise that option. The lease payments that are used to measure the lease liability at commencement date include the following: • Fixed lease payments, less any lease incentives receivable • Variable lease payments that depend on an index or rate, (are initially included in the lease liability using the index or rate at the commencement date of the lease). • Amounts expected to be payable by the group under residual value guarantees. • The exercise price of a purchase option if the group is reasonably certain to exercise that option. The lease liability is subsequently measured by increasing the carrying amount to reflect the interest on the lease liability, reducing the carrying amount to reflect leased payments and measuring the carrying amount again to reflect any revaluations or changes to the lease agreement, or to reflect adjustments in lease payments which follows from adjustments in indexes or rates. The company does not include variable lease payments in the lease liability. Instead, the group recognizes these variable lease payments in the income statement. The company presents its lease liabilities as a separate line in the balance sheet. Right-of-use assets The company measures the right-of-use assets at acquisition cost, minus accumulated depreciation and impairment losses, adjusted for any new measurements of the lease liability. Acquisition cost for the right-to-use assets includes: • The initial amount of the lease liability

Financial assets measured at amortized cost The company measures financial assets at amortized cost if both of the following conditions are met: • The financial asset is held in a business model where the purpose is to receive contractual cash flows, and • The contract terms for the financial asset give rise to cash flows which consist exclusively of payment of principal and interest on given dates. Subsequent measurement of financial assets measured at amortized cost is made using the effective interest method and is subject to loss provisions. Gains and losses are recognized in the income statement when the asset has been deducted, modified or written down. The company’s financial assets at amortized cost include long-term and shortterm interest-bearing receivables, accounts receivable and other short-term deposits. Accounts receivable that do not have a significant financing element are measured at the transaction price in accordance with IFRS 15 Revenues from contracts with customers. The company measures financial assets at fair value through profit or loss unless measured at amortized cost. Loans and liabilities After initial recognition, interest-bearing loans will be measured at amortized cost using the effective interest method. Gains and losses are recognized in profit or loss when the liability is deducted. Financial loans are measured at their nominal amount if the effect of the discount is insignificant. A financial instrument is any contract that gives rise to a financial asset for one entity and a financial liability or an equity instrument for another entity. The company’s financial assets are unlisted equity investments, loans to associates, accounts receivable, and short-term and long-term interest-bearing receivables. The classification of financial assets on initial recognition depends on the characteristics of the contractual cash flows of the asset, and which business model the company uses as a basis for the management of its financial assets. With the exception of trade receivables that do not have a significant financing element, the group recognizes a financial asset at fair value plus transaction costs. The company classifies its financial assets into two categories: • those to be measured at amortized cost. • those to be measured subsequently at fair value (through profit or loss). Financial assets measured at amortized cost The company measures financial assets at amortized cost if both of the following conditions are met:

• Any lease payments made to the lessor at, or before, the commencement date of the lease, less any lease incentives received

• The financial asset is held in a business model where the purpose is to receive contractual cash flows, and

• All direct expenses for entering into agreements incurred by the group

• The contract terms for the financial asset give rise to cash flows which consist exclusively of payment of principal and interest on given dates.

The group applies IAS 16 “Property, plant and equipment” when depreciating the right-of-use asset, except that the right-of-use asset is depreciated from the date of implementation until the end of the lease period and the end of the useful life of the right-of-use asset. FINANCIAL INSTRUMENTS A financial instrument is any monetary contract that gives rise to a financial asset for an enterprise and a financial liability or an equity instrument for another enterprise. The company’s financial assets are unlisted equity investments, accounts receivable, short-term and long-term interest-bearing receivables. The classification of financial assets on initial recognition depends on the characteristics of the contractual cash flows of the asset, and which business model the company uses as a basis for the management of its financial assets. With the exception of trade receivables that do not have a significant financing element, the company recognizes a financial asset at fair value plus transaction costs. The company classifies its financial assets into two categories: • those to be measured at amortized cost. • those to be measured subsequently at fair value (either through OCI or through profit or loss).

Subsequent measurement of financial assets measured at amortized cost is made using the effective interest method and is subject to loss provisions. Gains and losses are recognized in the income statement when the asset has been deducted, modified or written down. The company’s financial assets at amortized cost include accounts receivable, loans to associate and other short-term deposits. The company measures financial assets at fair value through profit or loss unless measured at amortized cost. Financial assets measured at fair value through profit or loss The group measures financial assets at fair value through profit or loss if they do not meet the SPPI criteria (the contractual terms for the financial asset give rise to cash flows that consist exclusively of payment of principal and interest on given dates). Financial liabilities After initial recognition, interest-bearing loans will be measured at amortized cost using the effective interest method. Gains and losses are recognized in profit or loss when the liability is derecognized. Financial loans are measured at their nominal amount if the effect of the discount is insignificant.

AVARN SECURITY ANNUAL REPORT 2020

51


Loss provision on financial assets

Deferred tax and tax expense

The company use the simplified method for calculating loss provisions for accounts receivable and contract assets. The company thus measures the provision for losses based on expected credit loss over the life of each reporting period, and not based on 12-month expected loss. The company has created a sales matrix based on historical credit losses, adjusted for forward-looking factors for the specific customer and the general financial situation.

Deferred tax is calculated on the basis of temporary differences between accounting- and tax- values at ​​ the end of the financial year. The nominal tax rate is used in the calculation. Positive and negative differences are assessed against each other within the same time interval. Deferred tax assets arise if there are temporary differences that give rise to tax deductions in the future. The tax expense for the year consists of changes in deferred tax, together with tax payable for the income year.

Subsidiaries and Associated Companies Subsidiaries are companies in which the company normally has an ownership of more than 50%, the investment is of a long-term, has strategic nature and in which the company has a controlling influence. Subsidiaries are recognized in the financial statements according to the cost method. Associates are all entities over which the company has significant influence but not control or joint control. This is generally the case where the company holds between 20% and 50% of the voting rights. Investments in associates are accounted for using the cost method of accounting. Critical Accounting Estimates and Judgments Estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations on future events that are believed to be reasonable under the circumstances. Impairment The Company makes estimates and takes assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year. The Company tests annually whether goodwill has suffered any impairment, cf. note 7. The recoverable amounts of all cash generating units have been determined based on value-in-use calculations. These are calculations that require the use of estimates. Accounts receivable are presented net after deductions for provisions for losses that constitute an estimate. For further discussion on the Company’s credit risk, see in note 9.

Inventory Inventory of goods are valued at the lower of cost price according to the “first in – first out” principle and the estimated sales price. The inventory consists of merchandise for resale. For further information and specification see note 4.

Receivables Receivable are measured at fair value on initial recognition. In subsequent measurement, trade receivables are measured at amortized cost using the effective interest rate, less expected credit losses. Pension obligations and pension costs Avarn Security AS has defined contribution plans and an AFP-scheme. For defined contribution plans, the company pays fixed contributions. The company has no further legal or self-imposed obligations to contribute additional funds if it turns out that there are insufficient funds to pay all employees the benefits associated with their earnings in this or previous periods. A defined benefit plan is defined as a plan that is not a defined contribution plan. Typically, a pension payment that an employee will receive upon retirement. The pension payment is normally dependent on one or more factors such as age, number of years in the company and salary. The capitalized liability in respect of defined benefit pension plans is recognized in the balance sheet as the present value of the liability at the balance sheet date, less the fair value of the pension assets. The pension obligation is calculated annually by an independent actuary using a “projected unit credit” method. The present value of the defined benefits is determined by discounting estimated future payments with the interest rate on a bond issued by a company with a high credit rating and with a maturity that is approximately the same as the maturity of the related pension obligation. For defined contribution plans, the company pays contributions to publicly or privately administered pension insurance plans on a mandatory, contractual or voluntary basis. The company has no further payment obligations once the contributions have been paid. The contributions are recognized as employees benefit expenses when they are due. Prepaid contributions are recognized as an asset to the extent that a cash refund or a reduction in the future payments is available.

52

AVARN SECURITY ANNUAL REPORT 2020

Cash flow statement The cash flow statement has been prepared according to the indirect method. Cash and cash equivalents include cash, bank deposits and other short-term investments that can be immediately and with insignificant exchange rate risk converted into known cash amounts and with a remaining term of less than three months from the date of acquisition.

Foreign currency translation Balance sheet items in foreign currency are translated at the exchange rate on 31.12, while profit and loss items are translated at the transaction date exchange rate. Related parties Subsidiaries and associated companies have the same profile as the parent company, in order to strengthen their ability to compete in the market. To the customer, we appear as a one unit. All subsidiaries / associated companies report to Avarn Security AS, and all have equally high requirements for the quality and execution of the services.

NOTE 3 – EVENTS AFTER THE BALANCE DATE 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. In particular, the Aviation business and Cash Handling business will continue to be heavily affected, until the pandemic is under control and the societal restrictions are removed in all countries.


NOTE 4 – INVENTORY Supplies inventory Total

31.12.2020 28 924

31.12.2019 26 618

28 924

26 618

NOTE 5 – PERSONNEL EXPENSES Personnel expenses 01.01 - 31.12.

2020

2019

Salary and fees

972 319

979 059

Payroll tax of employer contribution

125 676

135 759

Pension expense Other personnel expenses

33 767 14 324

32 081 13 092

Total personnel expenses

1 146 086

1 159 990

1 929

1 992

CEO

Chair

3 057 651

1 755

Average number of employees Remuneration to the group CEO and Board Chairman Salary Bonus Pension expense

354

Other personnel expenses

273

The CEO is entitled to a salary for one year after resigning from his position. The CEO has a performance-based bonus agreement limited to 50% of annual salary Remuneration to external auditor

2020

2019

Statutory audit

1 329

1 012

Other attestation services Tax advice Other non-audit services Total

97 113 429

394

1 871

1 503

Loans to employees The interest rate for employee loans is calculated on the basis of market interest rate. The company has receivables against employees amounted to 0,9 mNOK in 2020 (7,15 mNOK in 2019).

Pensions The company’s pension obligation satisfies the requirements of the Norwegian Act on Mandatory Occupational Pensions.

Photo: Avarn Security

AVARN SECURITY ANNUAL REPORT 2020

53


NOTE 6 – FIXED ASSETS AND INTANGIBLE ASSETS Fixed assets Land, buildings and other real estate Acquisition cost 01.01.2020

Machinery, Furnishings, movable plant property etc.

Total 31.12

20 764

94 412

297 313

412 489

874

446 -690

28 814 -17 060

30 134 -17 750

21 638

94 168

309 067

424 873

16 711

92 973

154 114

263 798

17 664

-533 93 349

187 691

-533 298 704

3 974

820

121 377

126 171

954

909

33 576

35 439

Up to 10 years

Up to 5 years

Up to 5 years

Linear

Linear

Linear

Customer portfolio

Goodwill

Total 31.12

Acquisition cost 01.01.2020 Additions/disposals purchased intangible assets

361 1 127

353 733

354 094 1 127

Acquisition cost 31.12.2020

1 487

353 733

355 220

353 733

355 148

Additions (fixed assets) Disposals Acquisition cost 31.12.2020 Accumulated depreciation 01.01.2020 Depreciation of fixed assets sold Accumulated depreciation 31.12.2020 Balance 31.12.2020 Depreciation for the year Economic life Depreciation method

Intangible assets:

Accumulated depreciation 01.01.2020 Accumulated depreciation 31.12.2020 Balance 31.12.2020 Depreciation for the year Economic life Depreciation method

36 72 1 415 36 Up to 13 years Linear

Goodwill has been tested for impairment, cf. note 7 impairment test of goodwill.

NOTE 7 – IMPAIRMENT TEST OF GOODWILL Goodwill originates from the purchase of G4S Holdings (Norway) AS and other minor acquisitions. For the purpose of impairment testing goodwill is monitored at the level of Avarn Security AS. The impairment test is therefore performed for a group of CGUs defines as Avarn Security AS. Book value of goodwill for 2020 Norway

2020 353 733

Book value of goodwill for 2019 Norway

2019 353 733

Impairment test: Impairment is assessed at least annually, or when there are indications of impairment. The assessment was last performed as of 31.12.2020. The recoverable amount is determined based on an assessment of the company’s value in use. The value in use when discounting expected future cash flows before tax discounted with a relevant discount rate before tax that takes into account maturity and risk.

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AVARN SECURITY ANNUAL REPORT 2020


The following assumptions have been used when calculating the value in use as of 31.12.2020: 2020

2019

Discount rate (post-tax)

8,0%

8,9%

Long-term growth rate

1,0%

2,0%

The calculation of the value in use for the cash-generating units is calculated based on projections of budgets approved by the management and the board for the next three-year period. Management and the board of directors expect increase in both revenue and EBITDA margin next three years. The remaining period in the calculation is based on moderate growth corresponding to the long-term growth rate. EBIT and EBITDA used in the value-in-use calculation is based on management’s assumptions on the expected revenue developments, gross margin and operating margin, taking into account management’s expectation of market size and market share development.

Key assumptions when calculating value in use Discount rate Discount rate is based on weighted average cost of capital (WACC). The discount rates reflect the market’s return requirements at the time of testing in the industry in which the cash-generating unit is located. The risk-free interest rate used is 0,96% and the market premium is 6,12%, both of which are observable in the market.

Sensitivity analysis for key assumptions At the balance date a sensitivity analysis has been performed in which the assumptions in the impairment test have been changed with given assumptions. Management concludes that changes within a reasonable interval will not entail an obligation to write down.

Reduction of EBITDA margin before any possible write-down occur

2020

2019

3,1%

3,4%

NOTE 8 – LEASES Right-of-use assets Book value of right-to-use assets 01.01.2020

Buildings

Vehicles

Total

211 559

29 635

241 194

11 148

11 148

Additions of right-of-use assets Change in provision for loss of lease agreements

7 896

7 896

Adjustments Depreciation

3 713 -35 869

-16 268

3 713 -52 137

Book value of right-to-use assets 31.12.2020

187 298

24 515

211 814

2-10 years

1-3 years

Linear

Linear

Disposals

Lowest of remaining rental period or economic life Depreciation method Total lease liabilities Total lease liabilities 01.01.2020 New lease liabilities recognized in the period Adjustments Principal payment Interest payment Total lease liabilities 31.12.2020

-

Total 271 109 11 148 3 631 -60 831 13 343 238 400

Short-term lease liabilities

54 188

Long-term lease liabilities

184 213

AVARN SECURITY ANNUAL REPORT 2020

55


Undiscounted lease liabilities and overdue payments Less than 1 year 1-2 year 2-3 year 3-4 year 4-5 year More than 5 years Total undiscounted lease liabilities 31.12.2020 Right-of-use assets Acquisition cost 01.01.2019 Implementation of IFRS 16 Additions of right-of-use assets Provision for loss of lease agreements Disposals Adjustments Foreign currency translation adjustment Acquisition cost 31.12.2019

Total 55 627 50 099 35 579 32 262 24 430 91 341 289 338 Buildings

Vehicles

266 766 4 522 -23 622

30 149 13 817

67 247 734

43 967

Total 0 296 916 18 339 -23 622 67 0 291 700

Accumulated depreciation and write-downs 01.01.2019 Depreciation Write-downs for the year Disposals Transfers and reclassifications Foreign currency translation adjustment Accumulated depreciation and write-downs 31.12.2019

0 -36 175

0 -14 332

-36 175

-14 332

0 -50 506 0 0 0 0 -50 506

Book value of right-to-use assets 31. 12.2019

211 559

29 635

241 194

2-10 years Linear

1-3 years Linear

Buildings 44 576 43 501 41 879 30 958 30 895 114 349 306 158

Vehicles 14 743 8 967 5 157 1 700 186

Lowest of remaining rental period or economic life Depreciation method

Lease liabilities Undiscounted lease liabilities and overdue payments Less than 1 year 1-2 year 2-3 year 3-4 year 4-5 year More than 5 years Total undiscounted lease liabilities 31.12.2019 Changes in lease liabilities First time use 01.01.2019 IFRS 16 New/changed lease liabilities recognized in the period Principal payment Interest payment Interest expense associated with liabilities Foreign currency translation adjustment Total lease liabilities 31.12.2019 Short-term lease liabilities Long-term lease liabilities

56

30 753

Total 59 319 52 467 47 036 32 658 31 081 114 349 336 911

296 916 18 406 -58 966 14 753

271 109 57 441 213 669

Other lease costs recognized in profit or loss statement

Total

Operating expenses in the period related to short-term leases, assets of low value and variable lease payments expensed in the period.

8 237

Weighted average discount rate on the assessment date

5,38%

AVARN SECURITY ANNUAL REPORT 2020


NOTE 9 – FINANCIAL INSTRUMENTS Financial risk The company uses bank loans and overdrafts as financial instruments for financing. The purpose of these financial instruments is to ensure capital for investments that are necessary for the company’s operations. In addition, the company has financial instruments such as trade receivable, trade payable, etc. that are directly related to the company’s day-to-day operations. Routines for risk management have been adopted at the board level and are implemented by the CFO. The most important financial risks the company is exposed to are related to interest rate risk, liquidity risk, currency risk and credit risk. The company’s management has an ongoing assessment of these risks and establishes guidelines for how these are to be managed.

(i) Credit risk The company is mainly exposed to credit risk related to trade receivable and other current receivables. The company reduces its exposure to credit risk by having all counter parties that receive credit from the company, for example customers, are subject to a creditworthiness assessment. The company has entered into an agreement with DNB Bank ASA which means that certain trade receivable that the company earns are transferred to DNB Bank ASA at the time of invoicing. Consequently, the company is left with a limited credit risk on the trade receivable. The company has guidelines to ensure that sales are only made to customers who have not had significant issues with payments previously, and that outstanding amounts do not exceed the determined credit limits. The company’s main risk exposure arises by the carrying amount of the financial assets. The company considers its main risk exposure to be the carrying amount of trade receivables and other current assets. The company uses the simplified method for calculating provision for doubtful debts, where the expected loss is based on forward-looking factors for the individual customer and the general macroeconomic future prospects. The company measures expected credit losses for each reporting period. The company’s maximum credit risk related to accounts receivable is represented by book value. All the company’s trade receivable are assessed on the balance sheet date and expected losses are recognized in sales and administrative expenses during the period. The company’s expected credit loss in 2020 was TNOK 7 005 (2019: TNOK 1 285). Expected credit losses on trade receivables are based on assessment of aging, historical losses and individual level.

Trade receivable before expected credit loss Expected credit loss Trade receivables at 31.12

2020

2019

228 416 -7 005

233 204 -1 285

221 411

231 919

2020

2019

Expected credit loss at 01.01 Change in allowance through the year

1 285 5 721

1 418 -134

Expected credit loss at 31.12

7 005

1 285

2020

2019

Trade receivables from contracts with customers

187 451

184 208

Loss allowance Earned not invoiced revenue

-7 005 40 965

-1 285 48 996

Trade receivable 31.12

221 411

231 919

Analysis of accounts receivable per 31.12

2020

2019

165 688

108 404

Less than 30 days

11 250

60 131

30-60 days

3 038

8 032

60-90 days More than 90 days

1 333 6 143

3 074 4 567

187 451

184 208

Not overdue

Total

Photo: Avarn Security

AVARN SECURITY ANNUAL REPORT 2020

57


(ii) Market risk – Interest rate risk The company’s exposure to interest rate risk arises from its financing activities (see note 10). The company’s interest – bearing debt has a floating interest rate conditions, which means that the company is affected by changes in interest rates. As of December 31, 2020, the company has not entered into any interest rate swap agreement, but it is regularly assessed whether they should be entered into hedge relationships when fluctuations in earnings and liquidity issues arises as a result of interest rate changes. The following table shows the company’s sensitivity to potential changes in interest rates. The calculation includes all interest-bearing financial instruments. That includes long-term financing and short-term financing through the company account scheme. The calculation presented in the table below shows the effect based on interest-bearing financial instruments at balance date. Changes in interest rates 2020

2019

Effect on profit before tax (NOK 1000)

+ 0,25%

2 952

+ 0,50% + 0,75%

5 904 8 855

+ 0,25% + 0,50%

3 139 6 279

+ 0,75%

8 018

(iii) Liquidity risk Liquidity risk is the risk that the company will not be able to meet its financial obligations when due. The company’s strategy for managing liquidity risk is to have sufficient cash at all times to be able to meet its financial obligations at maturity, either under normal or extraordinary circumstances, without risking unacceptable losses and harming the company’s reputation. Unused credit facilities are discussed in note 19. The following table gives an overview of the maturity structure for the company’s financial liabilities. For mortgages and financial leases, the stated amounts consist of booked amounts plus interest payments. Other items that appear in the table are represented by book amounts. In cases where the other party can demand earlier redemption, the amount is recalculated to the earliest period the payment can be demanded from the other party.

31.12.2020

Remaining period Less than 1 year

1-2 years

2-3 years

More than 4 years

Total

Facility A SEK

7 451

7 451

170 551

-

185 453

Facility B NOK

162 253

185 220

454 227

-

801 699

Total mortgage Financial leases

169 704 55 627

192 671 50 099

624 778 35 579

0 148 033

987 153 289 338

Group account scheme

134 253

134 253

Trade payables Short-term debt to the group

58 276 515 851

58 276 515 851

Total

933 711

Mortgages

31.12.2019

242 770

660 356

148 033

1 984 870

1-2 years

2-3 years

More than 4 years

Total

Remaining period Less than 1 year

Mortgages Facility A SEK

7 120

7 120

7 120

154 642

176 002

Facility B NOK

203 470

193 166

182 862

293 676

873 174

Total mortgage Financial leases

210 590 59 319

200 286 52 467

189 982 47 036

448 318 178 089

1 049 176 336 911

Group account scheme

170 638

170 638

Trade payables Short-term debt to the group

58 110 548 726

58 110 548 726

Total

1 047 383

252 753

237 018

The company is exposed to currency risk as some loans are in SEK and balances with the group are in SEK. Any changes in exchange rates will have a limited effect on the income statement of Avarn Security AS.

58

AVARN SECURITY ANNUAL REPORT 2020

626 407

2 163 562


NOTE 10 – CLASSIFICATION OF FINANCIAL ASSETS AND LIABILITIES Financial instruments at fair value through profit or loss

Financial instruments at amortized cost

Total

Other financial assets

324 198

324 198

Intercompany loans

428 202

428 202

221 411 37 873

221 411 37 873

1 011 684

1 011 787

761 912

761 912

31.12.2020 Assets Equity investment

103

Trade receivables Cash and cash equivalents Total financial assets

103

103

Liabilities Long term debts to credit institutions Short term debts with credit institutions*

258 142

258 142

238 400

238 400

515 851 58 276

515 851 58 276

0

1 832 581

1 832 581

Financial instruments at fair value through profit or loss

Financial instruments at amortized cost

Total

Other financial assets

390 599

390 599

Intercompany loans

399 315

399 315

Trade receivables Cash and cash equivalents

231 919 44 875

231 919 44 875

1 066 708

1 066 811

Long term debts to credit institutions

732 809

732 809

Short term debts with credit institutions*

329 386

329 386

Lease liabilities

271 109

271 109

Debt to group companies Trade payable

548 726 58 110

548 726 58 110

Total financial liabilities

1 940 141

1 940 141

Lease liabilities Debt to group companies Trade payable Total financial liabilities

31.12.2019 Assets Equity investment

Total financial assets

103

103

103

Liabilities

The company’s exposure to financial risk related to the financial instruments is described in note 12. Maximum exposure to financial risk at the end of the period corresponds to the book value of the financial assets described above.

Definition of fair value The book value of cash and cash equivalents is fair value. Correspondingly, the book value of trade receivables, other financial assets and trade payables is approximately fair value as the effect of discounting is not significant. The fair value of financial lease is calculated as the present value of estimated future cash flows discounted at interest rates that apply to corresponding assets and liabilities on the balance sheet date. The fair value of long-term debt is equal to the par value plus accrued interest. The fair value of current receivables and loans corresponds to the book value as the effect of discounting is not significant.

The value hierarchy Level 1:

Quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2: Valuation based on observable factors other than listed price (used at level 1), either directly (price) or indirectly (derived from prices) for the asset or liability. Level 3:

Valuation based on factors that have not been retrieved is obtained from observable markets (non-observable assumptions).

AVARN SECURITY ANNUAL REPORT 2020

59


Assets and debt measured at fair value 31.12.2020 Assets at fair value through profit or loss - Equity investment Total

Level 1

Assets and debt measured at fair value 31.12.2019

Level 2

Level 3

-

-

103

-

-

103

Level 1

Level 2

Level 3

Assets at fair value through profit or loss - Equity investment

-

-

103

Total

-

-

103

NOTE 11 – SUBSIDIARIES AND ASSOCIATES Equity in foreign subsidiaries and associated companies is translated at the exchange rate on the balance sheet date, while the profit for the year is translated at the average exchange rate for the year.

Subsidiaries: Company Avarn Security AB Avarn Teknik Sverige AB

Office

Ownership / voting share

Equity

Profit

Booket value

Stockholm

100%

67 600

25 068

480 968

Sweden

70%

35 396

-24 340

44 312

Avarn Security Solutions AB

Stockholm

100%

2 431

-96 224

129 853

Avarn Security Aviation AS

Ullensaker

100%

17 697

3 286

51 000

Avarn Security Beredskap AS

Porsgrunn

100%

7 719

2 461

8 166

Dokka

51%

2 949

2 315

56

Avarn Security Service AS

Oslo

100%

1 909

6 819

2 015

Avarn Security Holding AS

Oslo

100%

278 472

-75 590

284 124

AS Skan-Kontroll

Oslo

100%

18 588

13 763

71 205

Nokas Verdihåndtering AS

Oslo

100%

133 440

41 675

60 000

Oslo

100%

30

0

30

Denmark

85%

3 137

-8 342

70

Avarn Security Innlandet AS

Nokas AS Nokas Teknik A/S

The investments in Avarn Security Holding AS, Nokas Verdihåndtering AS and Nokas Teknik A/S in 2020 has been written down with NOK 177,6 million in the account. The recoverable amount is fair value of the investments.

The companies below are subsidiaries and associated companies of the subsidiaries of Avarn Security Group Office

Ownership / voting share

Avarn Lås-Aktuelt AB

Sweden

100%

360

0

Avarn Security Systems AB

Sweden

100%

54 612

5 526

Avarn Låsteknik i Göteborg AB

Sweden

62%

13 251

5 577

Avarn Teknik Öst AB

Sweden

100%

104

0

Avarn Alviks Lås AB

Sweden

100%

712

0

Avarn Security Services AB

Sweden

100%

236 995

36 812

Synenergy AB

Sweden

100%

3 019

-16

Semac As

Norway

60%

3 925

7 623

Company

Avarn Holding OY (group)

60

Equity

Profit

Finland

56%

409 109

12 420

NOKAS Værdihåndtering A/S

Denmark

100%

58 677

-47 981

Nokas Kontantservice P/S

Denmark

100%

24 429

9 061

Nokas Komplementar A/S

Denmark

100%

366

0

Nokas CMS A/S

Denmark

100%

11 855

5 440

Avarn Cash Solutions OY

Finland

100%

24 470

11 799

Nokas CMS OY

Finland

100%

12 667

11 073

Nokas CMS AB

Sweden

100%

58 554

-5 753

NOKAS Optimering & Lager AB

Sweden

100%

676

-24

AVARN SECURITY ANNUAL REPORT 2020


Associated companies The company’s associated companies as of December 31, 2020 are specified below. All associated companies have only ordinary shares. The investments are accounted by using the cost method. Resident

Ownership / voting share

Acquisition cost

Equity 31.12.20

Nokas Teknikk Sør AS

Norway

34%

3 253

8 819

927

Nokas Brannkonsult AS

Norway

37%

1 798

3 516

553

Resident

Ownership / voting share

Acquisition cost

Equity 31.12.20

Profit 2020

Security Norway AS

Norway

34%

-453

624

Vadla Trygghetsbyrå AS

Norway

34%

1 255

15

31.12.2020

31.12.2019

292 741

355 172

Company name

Profit 2020

Associated companies owned by subsidiaries as of 31.12.2020 Company name

NOTE 12 – RECEIVABLES Book value of receivables that matures later than one year: Intercompany and associated loans Loans to employees (see note 5) Seller credit – sales Amsafe AS Other receivables

Intercompany loans

0

6 291

31 372 8 917

29 051 11 782

333 030

402 295 31.12.2020

Maturity date

Interest rate

Avarn Teknikk Sweden AB

31.12.2025

5,5% + nibor

44 385

Avarn Security Holding AS

31.12.2027

4,75% + nibor

151 742

Nokas Verdihåndtering AS

subordinated loan

5,5% + nibor

96 245

333 030

402 295

31.12.2020

31.12.2019

0

0

NOTE 13 – LIABILITIES Debt that matures in more than five years after the end of the financial year: Debt to credit institutions The company’s long - term debt is due no later than 2023. In the loan agreement, Avarn Security is measured on the following covenant requirements: free cash flow to debt services, leverage ratio, interest cover and capital expenditures.

NOTE 14 – TAXES 2020

2019

Profit before tax

-176 135

-97 229

Permanent differences

125 769

1 195

1 351

9 559

49 015 0

94 573 -8 098

Tax basis

0

-

Taxable income (basis for payable taxes in the balance sheet)

-

-

Change in deferred tax Issue costs that are recognized directly in equity

-11 081 0

-22 909 1 782

Income tax expense

-11 081

-21 127

Tax payable is as follows

Change in temporary differences Change in deficit to carry forward Issue costs that are recognized directly in equity

AVARN SECURITY ANNUAL REPORT 2020

61


2020

2019

Non-current assets

-31 727

-25 362

Leases (IFRS 16)

Specification of the basis for deferred tax / deferred tax asset Temporary differences: -10 860

-6 294

Current assets

-9 124

-3 024

Pensions

-1 778

-1 814

-20 944

-40 524

8 260 764

12 017 942

Total temporary differences Carry-forward deficit

-65 409 -162 776

-64 058 -113 761

Total

-228 185

-177 819

-50 201

-39 120

Provision for liabilities Loan establishment fees IFRS Gain and loss account

Deferred tax / - deferred tax asset

NOTE 15 – EQUITY, SHARE CAPITAL AND SHAREHOLDERS INFORMATION Equity Share capital Equity 31.12.2019

Share premium Additional paid-in capital

6 339

428 692

Retained earnings

Total

153 675

922 289

-165 055

-165 055

-11 380

757 235

No. of shares Nominal value (NOK)

Total equity

333 584

Change in equity for the year: Profit for the period Equity 31.12.2020

6 340

428 692

333 584

Share capital and shareholders information The share capital in Avarn Security AS pr. 31.12.2020 consists of: Shares

410 264

15,45

6 339

Total

410 264

15,45

6 339

Photo: Avarn Security

62

AVARN SECURITY ANNUAL REPORT 2020


Ownership structure The largest shareholders in Avarn Security AS as of 31.12.2020 were as follows: Name of entity

Shares

Total

Ownership

Voting share

SANOK INVEST AS

81 722

81 722

19,92%

19,92%

STIFTELSEN FRITT ORD

76 968

76 968

18,76%

18,76%

WFW INVEST AS

41 265

41 265

10,06%

10,06%

NOMAD HOLDING AS

36 713

36 713

8,95%

8,95%

INAK 3 AS

27 700

27 700

6,75%

6,75%

RG HOLDING AS

23 789

23 789

5,80%

5,80%

TTC INVEST AS

18 000

18 000

4,39%

4,39%

DNB BANK ASA

8 759

8 759

2,13%

2,13%

ALDEN AS

7 786

7 786

1,90%

1,90%

SYNCRON AS

7 183

7 183

1,75%

1,75%

AREPO AS

5 263

5 263

1,28%

1,28%

MURI INVEST AS

4 953

4 953

1,21%

1,21%

TROVATOR AS

3 714

3 714

0,91%

0,91%

SINGCOMP AS

3 356

3 356

0,82%

0,82% 0,76%

TRIONOR AS

3 100

3 100

0,76%

GJERMUNDSEN CORPORATE AS

3 000

3 000

0,73%

0,73%

TSI AS

2 815

2 815

0,69%

0,69%

OLSEN, BJØRNAR

2 800

2 800

0,68%

0,68%

JANINE AS BO-BO INVEST AS

2 770 2 500

2 770 2 500

0,68% 0,61%

0,68% 0,61%

Total shareholders

364 156

364 156

88,8%

88,8%

46 108

46 108

11,2%

11,2%

410 264

410 264

100,0%

100,0%

Sum others Total number of shares outstanding

Shares owned by members of the board and general manager Name

Position

No. of shares

Ownership

Vidar Berg

CEO

167

0,0%

Amund Skarholt

Chairman

550

0,1%

Bjørnar Olsen private including Inak 3 AS

Board member

11 077

2,7%

Subscription rights As of December 31, 2020, the company has issued a total of 312,671 independent subscription rights. Each independent subscription right entitles the shareholder to subscribe a new share for Avarn Security AS at a subscription price, corresponding to the nominal value of the company’s shares (NOK 15,45). Number of independent subscription rights

Expiration date 135 661

10.04.2024

177 010

27.06.2024

All subscription rights that have not been exercised during the subscription period will lapse with no value, and the holder will not be entitled to any compensation.

AVARN SECURITY ANNUAL REPORT 2020

63


NOTE 16 – GUARANTEES AND PLEDGES Pledges:

31.12.2020

31.12.2019

761 912 258 142

732 809 329 386

1 020 054

1 062 195

Capitalized debt secured by a mortgage etc. Long term debts to credit institutions Short term debts with credit institutions Total Book value of assets pledged as security for collateralised debt: Inventory

28 924

26 618

Trade receivables

221 411

231 919

720 943 122 196

754 486 144 640

1 093 475

1 157 663

Intercompany receivables Operating accessories and vehicles Total Guarantee liabilities:

32 716

71 518

65 000

65 000

Mortgage bond in operating accessories

1 150 000

1 150 000

Mortgage bonds in motor vehicles

1 150 000

1 150 000

Mortgage bond in inventory

1 150 000

1 150 000

Mortgage bond in receivables

1 150 000

1 150 000

Debt for the guarantor Nominal mortgage bonds

A mortgage bond has been issued to a credit institution on long-term receivables from the group and investment in the subsidiaries Nokas Verdihåndtering AS, Nokas Aviation Security AS, Avarn Security AB, Avarn Security Holding AS and AS Skan-Kontroll.

NOTE 17 – BALANCE WITH COMPANIES IN THE SAME GROUP Trade receivable Companies in the same group Companies in the same group

Current Non-current

Total

Other receivable

31.12.2020

31.12.2019

31.12.2020

31.12.2019

40 375

20 418

387 827 292 741

378 897 355 172

40 375

20 418

680 568

734 068

Trade payable Companies in the same group

Current

Total

Other debt

31.12.2020 6 844

31.12.2019 11 245

31.12.2020 509 007

31.12.2019 537 482

6 844

11 245

509 007

537 482

Other current liabilities to companies in the same group contain 509.0 million in cash-pool debt to subsidiaries.

NOTE 18 – MERGED ITEMS IN THE CASH FLOW STATEMENT Merged items 2020

2019

Change in inventory

-2 307

-4 332

Change in trade receivable Change in trade payable

10 508 166

-44 831 4 584

8 368

-44 579

Total Change in other current receivables Change in employee benefit obligation Change in other current liabilities Change in intercompany balances Provision for future liability to reduction in lease liability (IFRS 16) Total

64

AVARN SECURITY ANNUAL REPORT 2020

6 378

8 809

-13 976

16 985

7 152

4 162

-61 763

2 181

-7 896

23 622

-70 105

55 758


NOTE 19 – CASH AND CASH EQUIVALENTS 31.12.2020

31.12.2019

Unused overdrafts

190 747

229 362

Bound tax deduction account

29 495

36 482

5 839

5 838

2020

2019

229 940

125 544

2 114

880

80 748

108 419

2 714

3 938

Bank deposits

NOTE 20 – TRANSACTIONS WITH RELATED PARTIES Benefits to senior executives are discussed in note 5, and balances with group companies are discussed in note 17.

The company’s transactions with related parties: a) Sales of goods and services - Other companies in the same group - Associated companies b) Purchase of goods and services - Other companies in the same group - Associated companies

Transactions with subsidiaries and associated companies are mainly delivery of services within the respective companies’ usual business area, as well as some re-invoicing by the group services. Ptw Holding AS, Wang Invest AS and Sundet invest AS, which are shareholders in Avarn Security AS, are also shareholders in the company WFB Eiendom AS, which owns 36.49% of the company Wi-Be Eiendom AS, which in turn owns 100% of the shares in Træleborgodden 6 AS. This company owns the building where Avarn Security AS has its premises in Tønsberg. Avarn Security AS has paid tnok 5 388 in rent to Træleborgodden 6 AS in 2020.

NOTE 21 – RECONCILIATION OF LIABILITIES FROM FINANCING ACTIVITIES Financial lease liabilities

Net financial liabilities

Total

Liabilities 31. 12.2019

271 109

873 569

1 144 678

Cash flows from financing activities

-47 488

-1 665

-49 153

-667

14 779 -667

238 400

871 236

1 109 636

IFRS 16 implementation and additions Exchange rate changes Liabilities 31. 12.2020

14 779

NOTE 22 – REVENUE FROM CONTRACTS WITH CUSTOMERS Norway

Other countries

Total

Security & systems Group services

Turnover – 2020

1 535 492 153 425

0

1 535 492 153 425

Total turnover

1 688 917

-

1 688 917

Rental income- subletting premises unrelated to the group

13 487

13 487

Gains from sale of fixed assets Other operating revenues

688 47 151

688 47 151

Total other operating income

61 325

0

61 325

1 750 242

0

1 750 242

Total turnover

AVARN SECURITY ANNUAL REPORT 2020

65


Turnover – 2019

Norway

Other countries

Total

Security & systems Group services

1 574 253 77 297

104

1 574 357 77 297

Total turnover

1 651 550

104

1 651 654

15 686

15 686

Gains from sale of fixed assets Other operating revenues

859 903

859 903

Total other operating income

17 448

0

17 448

1 668 998

104

1 669 102

Rental income- subletting premises unrelated to the group

Total turnover

Ongoing projects 2020

2019

158 396 134 304

144 420 114 332

Net result from ongoing projects

24 092

30 088

Accrued revenue on ongoing construction costs including trade receivables (Contract asset) Prepaid revenue included in other current liabilities (Contractual obligation)

38 449 6 986

42 899 12 919

Net result from ongoing projects

31 463

29 980

Total income from ongoing contracts Total expense from ongoing contracts

Contracts loss

2020

2019

Provision for estimated contracts losses as of 31.12

2 735

1 100

Amount recognized as revenue related to contractual liabilities

2020

2019

Contractual liabilities as of 31.12

6 986

12 919

Revenue-recognized amounts that were included in the contractual obligation at the beginning of the period

12 919

4 831

The company’s Security business division consists of sales of services in the form of hours, emergency calls and mobile inspections. Invoicing of the services takes place in advance or in arrears as specified in the agreement. Revenues are recognized at the time of delivery of the service / hours as the group is entitled to the revenue at this time. The company’s System business division consists of sales of technical facilities, including installation / assembly, equipment, service assignments and monitoring of alarm signals. When delivering stand-alone goods, the delivery obligation is usually considered fulfilled at the time of delivery of the goods to the customer, and the income is recognized at this time. Surveillance services are usually provided as subscriptions and are recognized as income over time as specified in the agreement. Emergency response to alarm signals at the customer are recognized as income at the time the response is made. Some contracts with customers contain several delivery obligations, such as sales of materials and associated installation services, as well as ongoing monitoring service. However, the customer can not use the item without associated installation / assembly and ongoing monitoring. Ongoing monitoring is a distinct delivery obligation, however, this service can not be performed by anyone other than the group itself. The customer can therefore not use or obtain benefits from the individual delivery obligations separately, and such contracts are recognized and measured as one delivery obligation. The company delivers installation contracts that are treated as construction contracts. In construction contracts, the outcome can be estimated in a reliable manner, and the recognized amount is based on the degree of completion. Contract assets are recognized by calculating the degree of completion based on input factors in the contract, measured against the total expected income and costs agreed in the contract. If it is probable that the contract costs will exceed the contract revenues, the expected loss is recognized immediately. In cases where the outcome of the contract cannot be measured reliably, the contract revenue is set equal to the contract cost.

66

AVARN SECURITY ANNUAL REPORT 2020


NOTE 23 – FINANCE COST - NET Income from investment in subsidiaries (group contribution) Interest received from group companies

2020

2019

26 131

18 537

29 984

23 616

Other interest income

1 873

2 126

Agio Other financial income

11 026 337

5 677 2 574

Net financial income

69 351

52 530

177 628

8 100

70 367

71 526

Interest financial lease liabilities

13 343

14 753

Disagio Other financial expenses

26 725 15 676

947 22 910

Net financial expenses

303 739

118 236

-234 388

-65 706

Impairment of financial assets (note 11) Interest rate expenses

Finance cost - net

Photo: Avarn Security

AVARN SECURITY ANNUAL REPORT 2020

67


To the General Meeting of Avarn Security AS

Independent Auditor’s Report Report on the Audit of the Financial Statements Opinion We have audited the financial statements of Avarn Security AS, which comprise: •

The financial statements of the parent company Avarn Security AS (the Company), which comprise the statement of financial position as at 31 December 2020, the statement of profit and loss, statement of comprehensive income and statement of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies, and

The consolidated financial statements of Avarn Security AS and its subsidiaries (the Group), which comprise the consolidated statement of financial position as at 31 December 2020, the consolidated statement of profit and loss, consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies.

In our opinion: •

The financial statements are prepared in accordance with the law and regulations.

The accompanying financial statements give a true and fair view of the financial position of the Company as at 31 December 2020, and its financial performance and its cash flows for the year then ended in accordance with simplified application of international accounting standards according to section 3-9 of the Norwegian Accounting Act.

The accompanying consolidated financial statements give a true and fair view of the financial position of the Group as at 31 December 2020, and its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards as adopted by the EU.

Basis for Opinion We conducted our audit in accordance with laws, regulations, and auditing standards and practices generally accepted in Norway, including International Standards on Auditing (ISAs). Our responsibilities under those standards 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 and the

PricewaterhouseCoopers AS, Tassebekkveien 354, 3160 Stokke, Postboks 211 Sentrum, 0103 Oslo T: 02316, org. no.: 987 009 713 VAT, www.pwc.no State authorised public accountants, members of The Norwegian Institute of Public Accountants, and authorised accounting firm

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Independent Auditor's Report - Avarn Security AS

Group as required by laws and regulations, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Other information Management is responsible for the other information. The other information comprises information in the annual report, except the financial statements and our auditor's report thereon. Our opinion on the financial statements does not cover the other information 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 other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

Responsibilities of the Board of Directors and the Managing Director for the Financial Statements The Board of Directors and the Managing Director (Management) are responsible for the preparation in accordance with law and regulations, including a true and fair view of the financial statements of the Company in accordance with simplified application of international accounting standards according to the Norwegian Accounting Act section 3-9, and for the preparation and true and fair view of the consolidated financial statements of the Group in accordance with International Financial Reporting Standards as adopted by the EU, 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 and the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so.

Auditor’s Responsibilities for the Audit of the Financial Statements 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 laws, regulations, and auditing standards and practices generally accepted in Norway, including ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

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For further description of Auditor’s Responsibilities for the Audit of the Financial Statements reference is made to https://revisorforeningen.no/revisjonsberetninger

Report on Other Legal and Regulatory Requirements Opinion on the Board of Directors’ report Based on our audit of the financial statements as described above, it is our opinion that the information presented in the Board of Directors’ report concerning the financial statements, the going concern assumption and the proposed allocation of the result is consistent with the financial statements and complies with the law and regulations.

Opinion on Registration and Documentation Based on our audit of the financial statements as described above, and control procedures we have considered necessary in accordance with the International Standard on Assurance Engagements (ISAE) 3000, Assurance Engagements Other than Audits or Reviews of Historical Financial Information, it is our opinion that management has fulfilled its duty to produce a proper and clearly set out registration and documentation of the Company’s accounting information in accordance with the law and bookkeeping standards and practices generally accepted in Norway.

Vestfold, 28 May 2021 PricewaterhouseCoopers AS

Morten Ness State Authorised Public Accountant

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Photo: Avarn Security

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Consilio Kommunikasjon AS | Photo: Avarn Security

Avarn Security Group

T: +47 915 02580 | avarnsecurity.com