1 Software Innovation Annual Report 2011 Annual Report
2 Software Innovation Annual Report 2011 Table of Contents Annual Report 4 Consolidated statement of comprehensive income 8 Consolidated statement of financial position 9 Consolidated statement of cash flows 11 Consolidated statement of changes in equity 12 Notes to the financial statements 13 Auditors Report 22 2
3 Software Innovation Annual Report 2011 CEO s perspectives 2011 A year of market growth and positive results I am pleased to report that Software Innovation had another strong year in The company continued to grow and perform well, both in our industry and the market at a large. The growth is driven by a strong market position with focused product offerings and associated professional services. The result is profitable products and services, translating a NOK 300 million turnover into profits of NOK 36 million. We delivered market-leading products to more than 400 clients in 12 countries. With a substantial part of the turnover deriving from international markets, we are well positioned for future growth in Scandinavia and Europe. The results from 2011 were made possible due to close collaboration with partners and clients in all of our markets. Our initiative to deliver customer-based innovation is appreciated by all our clients, for both our product lines. Large, new international clients including well-known private brands, join a growing number of Nordic municipalities and public businesses on our client list. Increasing numbers of contracts with Norwegian, Swedish and Danish municipalities Large client growth in public markets in Sweden and Denmark, as well as Norway Positive growth in private markets, with strategically vital contracts in different industries Strong growth in the Finnish market, with important contracts in both public and private sector Important new customers and up sales on solutions for technical document control, collaboration and process control in industries such as engineering, infrastructure, operation and maintenance Pro Arc continues to be a high demand product with a large international potential the objective of strengthening company growth, streamlining operations and improving quality and efficiency in product development and customer projects. The company workforce totaled 250 people at the end of 2011, with both an increased number of new appointments and strengthened competency levels across the business. We introduced the HiPo (High Potential) program, offering personal and professional development for company talents, as well as building the next generation of managers through our trainee program. The market for ECM solutions such as document and case management, document control, collaboration and mobile applications is in rapid growth. IT research and advisory companies such as Gartner and IDC note that following last year s financial instability there is an increased demand for IT systems that are able to contribute to increased efficiency and reduced operational costs. This includes businesses looking to commit to mobile systems and apps. ProArc has a very strong market position and is a well recognized solution for owners, operators and engineering. ProArc had a strong year in 2011 and added a number of new names to the client list. The product is going through a technical upgrade that has limited further expansion, however as we close 2011 and look ahead, we see several market opportunities both in Scandinavia and worldwide. On average, an employee will spend 15 % of their time searching for information or work on a mobile device. We look positively towards the future, as we continue to develop systems that improve and increase the efficiency of daily activity. Other achievements in 2011 include recognition as Microsoft ISV of the Year in Norway and Denmark, as well as the Microsoft global Government Partner of the Year award. Software Innovation was also included in Gartner s Magic Quadrant for Enterprise Content Management for the first time. During 2011 Software Innovation made some important structural and managerial changes in the organization, with Torstein Harildstad GROUP CEO SOFTWARE INNOVATION 3
4 Software Innovation Annual Report 2011 Board of Directors annual report SOI Holding AS (Software Innovation) business and owners Software Innovation is a leader in Scandinavia within information management and document management. Further development of the position in Scandinavia, and also to establish the company as an international supplier of software within the same segment, is the 's ambition. The comprises the parent company, SOI Holding AS, and four subsidiaries, one in Norway, two in Sweden and one in Denmark. SOI Holding AS is headquartered at Fornebu in Bærum, Norway. The was established at the beginning of 2009 when SOI Holding AS bought Software Innovation ASA and its subsidiaries. The owner of SOI Holding AS is Borea Opportunity II ("Borea"). As of 12/31/2011 Borea owned 91.4% of the company. Other shareholders as of 12/31/2011 were members of the management of the companies owning shares through SOI Ansatte AS and SOI Ansatte II AS. The restructuring process that was initiated in 2007 regarding structural streamlining of Software Innovations business as a software provider of information management and document management was completed in Companies not incorporated into the new strategy were all sold in The year 2011 has thus been the first full year with a pure core business. Development in 2011 After the restructuring, the company has in 2011 had a significantly better profitability. Streamlining of Software Innovation as a software company has increased the competitiveness in the marketplace. Through the measures undertaken, the Board believes that the is well positioned for further growth and development. Annual Accounts The Board confirms that the accounts are prepared on the going concern basis. The 's equity and liquidity position is the basis for this assessment. The Board considers the annual accounts a fair presentation of financial position at year-end. Income Statement, Cash Flow and Balance The 's total revenue in 2011 was NOK million, while in 2010 it was NOK million. operating profit before depreciation and amortization (EBITDA) was NOK 36.9 million in 2011, while the year before it was NOK 26.2 million. The has in 2011 spent a significant amount on R&D, whereas part of this is capitalized through the established principles and processes for the capitalization of development costs related to proprietary software. Total cash flow from operations in the amounted to NOK 27.2 million, while operating profit for the amounted to NOK 21.2 million. The difference is mainly explained by depreciation and changes in working capital. The has recognized a deferred tax asset of NOK million. The had total assets of NOK million as of 12/31/2011. Total assets amounted to NOK million, with cash totalled to NOK 12.2 million. Total assets amounted to NOK million at year end. Board of Directors of Software Innovation has considered the 's goodwill. Capitalized goodwill amounts to NOK 58.6 million as of 12/31/2011. The recorded goodwill is entirely related to business acquisitions. The Board assesses the 's goodwill to defend its value as of 12/31/2011. The 's interest-bearing debt was NOK 44.0 million as of 12/31/2011. The 's financial strength, as measured by book equity ratio, was as of 12/31/2011at 48.8%. Software Innovation s liquidity consists of cash equivalents and bank overdrafts. The 's investments in fixed tangible assets amounted to NOK 4.1 million in Distributable reserves of SOI Holding AS are NOK 45.0 million as of 12/31/2011. Financial market risk The 's financial market risk is mainly related to the company's interest-bearing liabilities to credit institutions and Borea, as well as long-term foreign currency loans from its subsidiary, Software Innovation AS to foreign subsidiaries. The 's debt to Borea is classified as current. The 's budget and forecasts for liquidity shows a sound picture for Any capital requirements will be sought covered by issuance of new debt. Loans in foreign currency from Software Innovation AS to foreign subsidiaries are not hedged against currency fluctuations, but the market risk is considered to be limited since the majority of its revenues generated in the Nordic countries. At the same time there is a high degree of correlation between where the income is generated and the associated costs incurred. 4
5 Software Innovation Annual Report 2011 Credit risk is assessed as a whole to be low in that company's customers primarily operate in the public sector, or are medium and large private companies. This is also supported by historically very low bad debts in the. The liquidity of the company is considered to be sufficient and it is agreed upon redemption of the 's loans to Borea during the first half of It is not decided measures to change the liquidity risk. Organization and personnel The had 250 employees at year end. Competence level is very high in terms of formal education and experience. Majority of employees have 3-7 years of university or college education and have an average of 8-9 years relevant experience. Employee surveys are conducted among employees and managers in the, and the results are followed up with concrete improvement activities in all units. The works continuously to raise the level of quality and delivery capability. It is a primary goal to be a learning organization with a controlled process of knowledge development and management, so that customers perceive the company as a professional, long-term and increasingly proficient partner. The places great emphasis on monitoring and facilitating the employees' needs for skills and career development. We have a holistic knowledge management model for the company. In addition to describing the competency requirements of the business, the framework will clarify the various career opportunities for each employee. Equality and discrimination The aims to provide a workplace where there is full equality between women and men. The has established its policy related to equal opportunities aimed at no discrimination based on gender in matters such as salary, promotion and recruitment. Of the company's 250 employees at the end of 2011, 76 were women, a ratio of 30%. The Board consists of 3 men. Working time arrangements in the Company may vary from various positions and are independent of gender. The also aims to provide a workplace where there is no discrimination on the basis of disability. The work actively and purposefully in order to design and facilitate the physical conditions so that the company's various functions can be used by as many as possible. For employees or job applicants with disabilities individual adaptation of workplaces and tasks will be made. Health, environment and safety The sickness absence rate in the was 3.2% in the year Adjusted for long-term sickness absence, the percentage was 2.2%. The Board considers the working environment as good. The has a creative, dynamic and informal working environment. It has throughout the year been conducted an employee survey across the entire showing results indicating clear strengths in the work environment and culture, but also showing distinct areas for improvement. In sum, the results are in line with similar businesses. There have been no injuries or accidents in the Company in The Company does not pollute the environment beyond the requirements of normal business operations. Allocation of profit and loss The Norwegian parent company has a total result of NOK million. The Board proposes that loss for the year of NOK million in the parent company in its entirety is covered by retained earnings. 5
6 Software Innovation Annual Report 2011 Future development The need for solutions that are developed by Software Innovation is increasing. In 2011 the company has, to a greater degree than previously, delivered solutions for several major solution providers to both government institutions and enterprises. Furthermore, several new customers in the energy sector and the private sector was won in strong competition with both local and global providers. Software Innovation is well positioned in both the product, service and customer structure to meet the continuing challenging market. Our solutions are important tools for improving the efficiency of case processing and document management processes. The fundamental drivers in the ECM market, increased volume of information, the need for effective collaboration and control requirements are still strong. This gives the investments in this type of solution still a high priority. The company has, over the last years of investment in new sectors, several legs to stand on. The public sector is still where the company has its primary customer base. The public sector is less affected by financial and real economic cycles in terms of willingness and ability to invest. There is a strong underlying performance in the public sector in the direction of rationalization and standardization of work processes, a trend that will continue. The main goals for Software Innovation in 2012 are continued growth, profitability, satisfied customers and satisfied employees. Fornebu, 28 March
7 Software Innovation Annual Report
8 Consolidated statement of comprehensive income 1 January - 31 December Parent company Note NOK000 Note , 15 Total revenue Cost of sales , 18 Salaries etc Other operating expenses Total operating expenses Operating profit/(-loss) before depreciation and impairment Depreciation and impairment Operating profit/(-loss) Finance income Finance costs Net financial items Profit/(-loss) before tax Income tax expense Profit/(-loss) after tax from continuing operations Profit after tax from discontinued operations Profit/(-loss) for the year Foreign exchange differences Total comprehensive profit/(-loss) for the year Attributable to: Retained earnings Total
9 Consolidated statement of financial position as at 31 December Parent company Note NOK000 Note NON-CURRENT ASSETS Intangible assets Intangible assets Goodwill Total intangible assets 0 0 Deferred tax assets Deferred tax assets Total deferred tax assets 0 0 Tangible assets Office equipment and machinery Total tangible assets 0 0 Financial assets Investments in subsidiaries Other assets Total financial assets Total non-current assets CURRENT ASSETS Receivables Trade receivables Earned, not billed income Receivables on group companies Other receivables Total receivables Cash and short-term deposits Total current assets Total assets
10 Consolidated statement of financial position as at 31 December Parent company Note NOK000 Note EQUITY Share capital Treasury shares Other paid-in capital Retained earnings Total equity LIABILITIES Provisions for obligations Pension obligations Provision for obligations Total provisions for obligations 0 0 Other long-term debt Debt to financial institutions Other long-term debt Total other long-term debt Short-term debt Debt to financial institutions Trade payables Public duties payable Other short-term debt Total short-term debt Total liabilities Total equity and liabilities Fornebu, 28 March 2012 The Board of SOI Holding AS
11 Consolidated statement of changes in equity 1 January - 31 December Share capital Treasury shares Share premium fund Other paid-in capital Other equity Total Equity at 1 Januar Capital reduction at 25 October Total comprehensive income Equity at 31 December Purchase of treasury shares at 31 March Total comprehensive income Equity at 31 December Parent company Share capital Treasury shares Share premium fund Other paidincapital Other equity Total Equity at 1 Januar Capital reduction at 25 October Total comprehensive income Equity at 31 December Purchase of treasury shares at 31 March Total comprehensive income Equity at 31 December On 31 March 2011, SOI Holding AS acquired of its own shares at TNOK The nominal value of the shares is disclosed as treasury shares in the balance sheet, whereas the difference between the fair value and nominal value is recognised as other paid-in capital.
12 Consolidated statement of cash flows 1 January - 31 December Parent company NOK Cash flows from operating activities Loss before tax Profit from discontinued operations Income tax paid Ordinary depreciation Gain on disposal of property, plant and equipment Option costs Change in working capital Foreign exchange difference effect Pensions Tax relief recognised in income statement Change in other accruals Net cash flows from operating activities Cash flows from investing activities Proceeds from sale of property, plant and equipment Purchase of property, plant and equipment/intangible assets Proceeds from sale of shares Net cash flows from investing activities 0 0 Cash flows from financing activities Proceeds from new short-term debt Repayment of long-term debt Repayment of short-term debt Net change in bank overdraft Payment of treasury shares Net cash flows from financing activities Net change in cash and cash equivalents Cash and cash equivalents at 1 January Cash and cash equivalents at 31 December Including restricted funds: Change in restricted funds in the period Restricted funds at 31 December 0 0
13 Notes to the 2011 financial statements NOTE 1 - GENERAL INFORMATION SOI Holding AS is a limited liability company incorporated and domiciled in Norway, with the head office in Rolfsbuktveien 4 at Fornebu in Bærum municipality. The Company has subsidiaries in Norway, Sweden and Denmark. SOI Holding AS was established on 19 September The financial statements were approved by the Board of SOI Holding on 28 March 2012for adoption at the General Meeting on 28 March NOTE 2 - SUMMARY OF ACCOUNTING PRINCIPLES The most significant accounting principles applied in the preparation of SOI Holding AS and SOIl Holding are described below. The 2011 financial statements for the and Parent Company have been prepared in accordance with the regulation on simplified application of the international financial accounting standards, ref. the Accouningt Act section 3-9 fifth paragraph. Basis of preparation The consolidated financial statements have been prepared in Norwegian kroner and on a historical cost basis. If not otherwise indicated, all amounts are in NOK000 (TNOK). Basis of consolidation The consolidated financial statements comprise SOI Holding AS and subsidiaries when the Parent Company or other subsidiaries have controlling influence. The accounts have been prepared as if the was one financial unit. Transactions and balances between the companies have been eliminated, and consistent accounting policies have been applied. Subsidiaries in the accounts are accounted for on the basis of the Parent Company's acquisition cost. Values in excess of book values have been analysed and allocated to the relevant balance sheet items. Excess values that cannot be attributed to individual assets or liabilities, are classified as goodwill. Subsidiaries are consolidated from the date when the obtained control, and continue to be consolidated until such control ceases. The subsidiaries are recognised at cost in the financial statements of the Parent Company. Translation of foreign subsidiaries The financial statements of the various units are measured using the functional currency of the area where they operate. The consolidated financial statements are presented in Norwegian kroner, being the functional as well as the presentation currency of the Parent Company. In the translation of foreign currency to Norwegian kroner, balance sheet items are translated to Norwegian kroner at the currency rate of exchange at the balance sheet date. Income statement balances are translated at quarterly average exchange rates. Any currency differencies are set-off against equity. Foreign exchange adjustments of long-term receivables on foreign subsidiaries are taken directly to equity when they should be considered as part of the net investment in the company. Estimates In order to prepare financial statements in accordance with the IFRS, management is required to make judgements, estimates and assumptions affecting the accounting principles and the recognised assets and liabilities, revenue and costs. Estimates and relevant assumptions are based on historical experience and other factors considered reasonable in the circumstances. These calculations are the basis for assessments of the balance sheet recorded values of assets and liabilities that are not evident from other sources. Estimates and the underlying assumptions are assessed on a regular basis. Changes in accounting estimates are recognised in the period they occur if they apply only to that period. In the event that changes also concern future periods, the effect is proportioned on the current and future periods. Estimates and assumptions representing a risk for changes in recognised values on assets and liabilities in the course of the next accounting year, concern the following balance sheet items, and are described in more detail in the notes stated: Goodwill and other intangible assets (note 5), deferred tax assets (note 7) and provisions for project income (note 11). Property, plant and equipment Property, plant and equipment is recognised in the balance sheet and depreciated over the expected useful life. Investments related to rented premises are depreciated over the remaining lease period. Goodwill The difference between the cost on acquisition and fair value of net identifyable assets at the time of acquisition is classified as goodwill. Goodwill is recognised at cost less any accumulated impairment losses. Goodwill is not depreciated, but is tested at least once a year for impairment at the balance sheet date or more often should there be any indication of a fall in value. Goodwill is allocated to the relevant cash-generating units. Other intangible assets Other intangible assets comprise identifyable assets and are related to in-house developed property, plant and equipment and allocated value from the acquisition of businesses. Intangible assets are depreciated over their expected useful life when this period is considered to be limited. Intangible assets with an indefinite economic life are not depreciated, but tested for impairmen teach year. Development costs are classified as intangible assets if it is probable that the company will profit from the expected future economic benefit attributable to the asset, if the acquisition cost can be reliably measured and possible to separate. Capitalised costs comprise material costs, direct salary costs and a share of directly attributable joint expenses. Capitalised development costs are recognised in the balance sheet at cost less accumulated depreciation and impairment losses. Such costs are depreciated over the asset's estimated time of use. Intangible assets in progress are not depreciated, but tested once a year for impairment or more often shouldthere be any indication of a fall in value. Other research and development costs are expensed when incurred. Impairment of non-financial assets Property, plant and equipment and intangible assets with an indefinite economic life are not depreciated, but are assessed for impairment each year. Property, plant and equipment and intangible assets that are depreciated are assessed for impairment when there are indications to the effect that future earnings cannot justify the balance sheet value. In the event that the recoverable amount is lower than the balance sheet value, the difference is taken to the income statement. The recoverable amount is the higher of fair value less sales costs and value in use. Main principle for the assessment and classification of assets and liabilities Assets for permanent ownership or use are classified as non-current assets. Other assets are non-current assets. The same criteria apply for liabilities. Non-current assets are valued at the lower of cost and fair value. The same principle applies for short-term debt. Non-current assets are valued at cost, but written down to fair value when the declining value is not expected to be temporary. Non-current assets with a limited economic life are written down according to plan. Long-term debt is recognised at its nominal value.
14 Financial assets The classifies financial assets in the balance sheet under the categories assets available-for-sale, loans and receivables. They are classified as non-current assets unless due later than 12 months after the balance sheet date. Loans and receivables are classified as "trade receivables", "other receivables" and "cash and cash equivalents" in the balance sheet. Financial assets are recognised at fair value. Financial assets available-for-sale are included in non-current assets unless management plans to sell the investment within 12 months from the balance sheet date. Trade receivables are initially recognised at fair value and then at amortised cost less a provision for incurred losses considered to equal fair value. The provision for losses is made on the basis of an individual assessment of each receivable. Leasing Leasing agreements are classified as finance or operating leases depending on the real content of the agreements. When the lessee assumes most of the risk and return associated with the ownership of the asset, it is considered to be a finance lease, and the relevant asset and liability are recognised in the balance sheet. Other leasing agreements are classified as operating leases, and the annual leasing fee is expensed as leasing costs. Inventories Finished goods are valued at the lower of cost according to the FIFO principle og net realisable value. Net realisable value is the estimated sales price less sales costs. Cash and cash equivalents Cash and cash equivalents comprise cash, bank deposits and other short-term, easily realisable investments with an original term of three months, and drawings on bank overdrafts. Share capital and share premium Ordinary shares are classified as equity. At the acquisition of treasury shares, the proceeds, including any transaction costs, reduce equity. Income taxes Income taxes in the income statement comprise both the period's payable tax and the change in deferred tax. Deferred tax benefits are calculated at 28 % on the basis of the temporary differences between book and tax values, and any tax related loss to carry forward at the closing of the accounting year. Tax increasing and tax reducing temporary differences that reverse or can reverse in the same period, are netted. Deferred tax assets are recognised in the balance sheet when future taxable profit is probable, and that the temporary differences can be deducted from taxible profit. Pensions The has collective (secured) pension schemes for some of its employees. The schemes are defined benefit plans, i.e., the Company has the financial responsibility for the pension. The net obligation concerning the defined benefit plans is calculated separately for each scheme by estimating the size of the future benefit earned by the employee through his/her work contribution during the accounting year and former periods. These future benefits are discounted in order to calculate the present calue, and the fair value of the pension funds are deducted to arrive at the net obligation. The discount interest rate applied is the interest rate on Norwegian government securities at the balance sheet date with approximately the same term as the 's obligations. Linear earnings and the expected terminal pay constitute the basis for the earnings. Plan changes are amortised over the expected remaining earning time, being 15 years. The same applies for estimate deviations to the extent that theyexceed 10 % of the larger of pension obligations and pension funds (corridor). In the recognition of pension funds and pension obligations, estimated values have been applied at the closing of the accounts. The estimated values are adjusted each year in accordance with calculations performed by an independent actuary. Provisions The makes provisions for environmental improvements, restructurings and legal claims when (1) a legal or self-imposed obligation as aconsequence of previous event exists,(2) it is more probable than not that the obligation will have to be settled by a transfer of financial resources (3) and the size of the obligation can be estimated with sufficient reliability. Provisions for restructuring costs comprise termination fees on leasing contracts and severance pay to employees. Provisions for fixed-price projects expected to generate a loss are based on individual assessments. Recognition of income /expense Income from the sale of licences is recognised in the income statement when the delivery has taken place and most of the risk and return is assumed by the purchaser. This normally happens when the purchase contract is signed. If the risk is not considered to be transferred at the signing of the purchase contract, the income is not recognised until this is the case. Consultancy income is recognised when earned. Work related to fixed-price contracts is valued according to the percentage of completion method. The level of completion is determined by incurred hours as a percentage of the expected total hours on the project. The level of completion is assessed on a regular basis. For projects expected to generate a loss,the entire expected loss is expensed. Income from support and maintenance contracts is recognised linearly over the contract period. Earned income in the period is classified as operating income, and the related costs as operating costs. In the balance sheet, earned, not billed income, is disclosed together with trade receivables. Government grants Government grants are accounted for when it is reasonably certain that the Company will meet the conditions for the grants, and the grants will be received. Operating contribution is recognised in a systematic manner over the grant period. The grant is deducted from the cost it is meant to cover. Contributions covering balance sheet recorded costs, are recognised in the balance sheet as deferred negative costs and as a negative cost over the lifetime of the asset.
15 NOTE 3- FINANCIAL RISK MANAGEMENT The s' activities entail various types of financial risks: market risk (including currency risk, interest rate risk and price risk), credit risk og liquidity risk. The 's risk management is focused on minimizing the potential negative effects on the 's financial results. Risk management for the is basically decentralised at a country level. Management in each country is responsible for identifying, evaluating and securing financial risk. Should significant risk areas be identified, they are brought to management's attention for evaluation and consideration of further action. Market risk The 's financial market risk mainly concerns the Company's interest-bearing debt to credit institutions and Borea, together with long-term currency loans from Software Innovation AS to foreign subsidiaries. The 's budget and liquidity prognoses for 2012 are considered to be reliable. Any capital needs will be covered by using established credit facilities and, if required, new loans. Currency risk: The operates on an international basis and is exposed to currency risk in several currencies. This risk is particularly relevant for SEK and DKK. Currency risk arises as a consequence of future trading transactions, assets recognised in the balance sheet and liabilities in foreign currencies. Foreign currency loans in the have not been secured against currency fluctuations, but the market risk is considered to be limited due to the size of the loans and the historical level of fluctuations in these currencies. There is also a high degree of correlation between where the income is earned and the corresponding costs arise. The has the following receivables and debt in foreign currencies at 31 December: Receivables Debt SEK DKK EUR USD GBP SOI Holding AS has no receivables or debt in foreign currencies at 31 December Interest rate risk: The 's interest rate risk concerns a short-term loan from the 's majority owner. The 's interest rate risk is considered to be low, as the loan has a fixed annual interest. During 2011, the 's loan at a fixed interest rate has been in NOK. In addition, the has facility rights amounting to 50 MNOK in SEK. The 's finance leasing agreements have variable interest rates. Note 6 has more details on loans and note 13 additional information about leasing. Considering the extent and risk, the has not considered it required to secure loans at variable interest rates. Credit risk Credit risk in the Goup relates mainly to transactions with end customers in the form of trade receivables. The credit risk concerning end customers is considered to be low, as the 's customers on the whole are within the public sector or medium-sized/large private companies. Losses on trade receivables have historically been low. Management is following up the age distribution of external trade receivables on a regular basis. Liquidity risk Management of liquidity risk implies to maintain adequate funds of liquids and realisable securities in order to meet the 's obligations when due and ensure the ability to perform strategic investments. Management is montoring the 's liquidity reserve and cash through a 12 months liquidity budget and rolling weekly prognoses based on expected cash flows. NOTE 4 - SALES INCOME Sales income Licence income Consultancy turnover Support and maintenance income Total sales income Sales income Norway Sweden Denmark Total sales income
16 NOTE 5 - PROPERTY, PLANT AND EQUIPMENT AND INTANGIBLE ASSETS Property, plant and equipment Hardware og Office equipment software Total Balance sheet value 1 January Additions Disposals Translation differences Depreciation and impairment of the year Balance sheet value 31 December Acquisition cost Accumulated depreciation and impairment Balance sheet value 31 December Economic life 10 years 3-4 years Straight-line Straight-line Depreciation plan method method Annual lease of property, plant and equipment not recognised in the balance sheet Intangible assets In-house developed Other Goodwill Brands software intangible assets Total Balance sheet value 1 January Additions Disposals 0 Translation differences 0 Depreciation and impairment of the year Balance sheet value 31 December Acquisition cost Accumulated depreciation and impairment Balance sheet value 31 December Economic life 3 years years Annual Annual Straight-line method Straight-line method Depreciation plan impairment testing impairment testing Impairment testing of goodwill and brands The is testing goodwill and brands for impairment annually or if there are indications of declining values. The testing is made per cash-generating unit with significant values of goodwill and brands, and is based on recoverable amounts. The recoverable amount is the higher of sales value and value in use. The comprises three cash-generating units. The recoverable amount is calculated from discounted estimated cash flows for the five first years after the balance sheet date, and a residual value. In those instances where the plans to dispose of parts of operations, the sales value less sales costs is applied as the estimate of the recoverable amount, as this is considered to be a more exact estimate than the calculated present value. The brand Software Innovation is considered to have an indefinite useful lifetime. The calculation of the value in use applies estimates for future cash flows based on next year's budget. Management has prepared budgets based on historical experience together with expected market expectations. Cash flows beyond the budget period are derived by estimated growth rates. The growth rates are determined on the basis of an assessment of market growth, profit in comparable companies, risk profile, historical development and other circumstances considered to be relevant for the development. Assumptions applied in calculating value in use: Budgeted cash flows for 2012 and expected growth rate for the period The discount interest rate before tax is 11,30 %, based on a required rate of return of 12,46 % on equity and 4,40 % on debt. The has applied the CAPM model in deciding the required return on equity. The required return on equity together with the debt return is used as a basis for the discount interest rate (WACC). Assumptions for future growth: Goodwill in local currency Income (Sweden ) Costs (Sweden ) Income and costs after 2015 Income Sweden 2012 Costs Sweden 2013 Cash-generating unit Software Innovation Norway NOK ,0 % 4,0 % 1,0 % SI Denmark DKK ,5 % 3,8 % 1,0 % SI Sweden SEK ,0 % 5,0 % 1,0 % 10 % 8 % On the basis of these considerations, goodwill in the has not been written down. Other intangible assets Other intangible assets comprise customer relations and software identified in connection with the acquisition of the Software Innovation. The fair value of customer relations is calculated by applying a "multi-period-excess-earnings" method and is depreciated by the straight-line method over an estimated life of 20 years. The fair value of software is estimated by applying a "relief from royalty" method. Software is depreciated by the straight-line method over an expected life of 10 years. The carrying values of software and customer relations are tested for impairment when there are indications of declining values. At 31 December 2011, there are no such indications.
17 NOTE 6 - SUBSIDIARIES/RELATED PARTIES The 's related parties comprise subsidiaries and the Parent Company together with members of the Board and management. Subsidiaries at 31 December 2011: Company name Head office Stake/voting rights Date of acquisition Software Innovation AS Bærum 100 % 5 January 2009 Software Innovation Sweden AB Stockholm 100 % 5 January 2009 Software Innovation Sweden AB Stockholm 100 % 5 January 2009 Software Innovaiton A/S Copenhagen 100 % 5 January 2009 Visiti AS and Esito AS were disposed of on 1 September The companies were sold with a profit: Consideration Misc. sales costs Net sales proceeds Tangible assets in Visiti/ as at August 2010 (excl. goodwill and customer relations) Total debt in Visiti/ as at August Allocated goodwill in belonging to Visiti gain at the sale of Visiti Result Esito 1 Jan Aug (excl. depreciation of intangible assets) -732 Result Visiti 1 Jan Aug (excl. depreciation of intangible assets) Net effect of the sale In 2009, the Board and administration decided to start a process for disposing of the "Open Text disivion". The reason for the sale was that the activities are outside the 's core operations. The sale was carried out in June In the first half year of 2010, it was also decided that Visiti and Esito should be disposed of. The sale was carried out in August As a consequence, Open Text, Visiti and Esito were classified as operations held-for-sale in 2010 and are not part of the in The results for the sold units in 2010 are presented below: Visiti/Esito Open Text Total 2010 Operating income Operating costs Operating profit Finance costs Gain on sale of business Result before tax Income tax Profit for the year for non-continued operations SOI Holding AS: Subsidiary Software Innovation AS Loan to subsidiary Software Innovation AS Interest on loan to subsidiary Software Innovation AS The transactions between SOI Holding and its subsidiaries constitute financial services. The services are rendered at market prices. In addition, SOI Holding has a short-term loan of TNOK (32 712) from its parent company Borea Opportunity II at 31 December Expensed interest on the loan to Borea Opportunity II in 2011 amounts to TNOK (2 467).
18 NOTE 7 - INCOME TAX EXPENSE Tax expense of the year: Income tax payable Change in deferred tax/deferred tax assets Write-down of deferred tax assets Previous year's adjustment Total income tax expense Income tax payable in balance sheet SOI Holding Specification of basis for deferred tax Current assets/short-term debt Non-current assets/long-term debt Losses to carry forward Net nettable temporary differences Deferred tas/(deferred tax assets) Deferred tax assets in balance sheet Deferred tax assets not recognised in balance sheet Deferred tax assets are reversed in their entirety if more than 12 months elapse before future profit is set-off. SOI Holding Reconciliation of tax expense with the tax rate of the parent company: Result before tax expense Tax calculated at the various countries' tax rates on their respective results Tax effect of non-deductible expenses Tax effect of adjusted tax assessment Change in not recognised deferred tax assets Foreign currency effect on deferred tax assets Total income tax expense of the year Deferred tax assets related to negative temporary differences and losses to carry forward are recognised in the balance sheet to the extent that it is probable that they can be utilised by future taxable profits. The has not recognised deferred tax assets amounting to MNOK 65 concerning Norway, Denmark and Sweden in the balance sheet. The amount includes MNOK 25 for Swerden, MNOK 40,5 for Denmark and MNOK 0,5 for SOI Holding. Balance sheet recorded deferred tax assets in the amount to TNOK In SOI Holding AS, the deferred tax assets not recognised in the balance sheet amount to TNOK 529, and no such assets are recognised at 31 December In the assessment of deferred tax assets recognised in the balance sheet, it has been considered that the losses to carry forward in Norway mainly are related to the realisation of shares in subsidiaries and other one-off impacts. Norway has made taxable profits in 2010 and 2011, but had losses in the previous years. In this period, the carried out considerable internal restructuring incurring large costs connected with the modernisation of the product family together with the skills upgrading of personnel. These investments were expensed as incurred in the period. According to IAS 12, it is correct to consider one-off expenses when evaluating whether future taxable profit will be generated. In the assessment of the deferred tax assets recognised in the balance sheet, the has used estimated future results based on historical experience and expectations to the market development. There is no time limit related to the utilisation of losses to be carried forward in the. Future balance sheet recognition of deferred tax assets will be considered on a regular basis. Based on the above, deferred tax assets in the has been evaluated at TNOK The entire amount relates to the Norwegian operations. Concerning Denmark and Sweden, it has been considered correct not to recognise any deferred tax assets in the balance sheet before the countries demonstrate stable positive earnings. SOI Holding Calculation of the tax basis of the year: Ordinary result before tax Permanent differences 0-1 Basis for tax payable Income tax payable 0 0
19 NOTE 8 - TRADE RECEIVABLES Trade receivables Trade receivables Earned, not billed income, on projects in progress Total trade receivables The fair value of trade receivable is considered to equal the carrying value. Provision for losses on receivables January New provision Recorded losses Reversals December Age distribution of trade receivables at 31 December: Not due 1-15 days days days days Over 90 days SOI Holding has no trade receivables at 31 December NOTE 9 - CASH AND CASH EQUIVALENTS The 's bank deposits of TNOK (23 298) at 31 December 2011 include restricted funds to cover employees' withheld taxes amounting to TNOK (5 526). SOI Holding AS has no restricted funds at 31 December NOTE 10 - SHARE CAPITAL AND SHAREHOLDER INFORMATION The Company's share capital at 31 December 2011 amounts to TNOK distributed on shares at a nominal value of NOK 1,0. All issued shares are ordinary and fully paid. The Company's shareholders at 31 December 2011 are: No. of shares Stake in % Stake without treasury shares Borea Opportunity II AS ,7 % 90,7 % SOI Ansatte AS ,2 % 5,6 % SOI Ansatte II AS ,4 % 3,7 % SOI Holding AS ,7 % 0,0 % Total issued shares ,0 % 100,0 % On 31 March 2011, SOI Holding AS purchased of its own shares at TNOK NOTE 11 - PROVISIONS FOR OBLIGATIONS Salary Projects Rent Total 1 January This year's provision Provisions utilised during the year Provisions reversed during the year December SOI Holding AS has no provisions for obligations at 31 December Salary In connection with the reorganisation in Software InnovationAS, provisions have been made for salary and severance pay for employees who left. Almost the entire obligation was paid during Projects The provision mainly concerns costs related to the closing of projects in Norway. The change in the provision is classified as other operating expenses in the income statement. Rent The provision for rent covers a calculated loss related to a lease contract in Norway due to a rent exceeding the market rent. NOTE 12 - ASSETS PLEDGED AS SECURITY The has a bank overdraft limit in SEB of MNOK 50. At 31 December 2011, MNOK of the drawing rights have been utilised. In addition, the has a loan of MNOK 10 in SEB. Shares, trade receivables, property, plant and equipment and factoring are pledged as security.
20 NOTE 13 - LEASING / LEASING OBLIGATIONS The is leasing some property, plant and equipment. Contracts for such leases where the principally has all risk and control are classified as finance leases. Other leasing contracts are classified as opeating leases. Operating leases Non-terminable operating leasing contracts are due as follows: Less than one year Between one and five years More than five years Expense recognised in the income statement for operating leases The amounts mainly concern the leasing of office premises in Norway, Sweden and Denmark. All amounts are nominal. In 2010, the had a sublease income of TNOK from letting out vacant office premises. The sublease income is recorded as a reduction of the cost for operating leases in the table above. In 2011, the had a sublease income of TNOK 161, all of it relating to the Danish business. Finance leases Property, plant and equipment acquired by a finance leasing ageement are depreciated over the expected leasing period. Each payment comprises an element of instalment and one interest element. The interest is recorded as a finance cost. The present value of the leasing obligation due later than 12 months from the balance sheet date is classified as other long-term debt. Instalments due within 12 months from the balance sheet date are classified as short-term debt. The Company's finance leasing agreements include buy-out options at the end of the leasing period. The price for such buyouts is related to the market value of the equipment at the time of the buy-out. Obligations related to finance leasing agreements have the following terms: Less than one year Between one and five years All amounts are nominal. Specifications of book values per unit are stated in note 5. NOTE 14 - PENSION COSTS, FUNDS AND OBLIGATIONS The has collective defined benefit pension schemes in a life insurance company. The obligation comprises 20 individuals, of which two had retired at 31 December These pension schemes refer to acquired businesses from previous years. The Company also has a defined contribution pension scheme for all employees not being part of the collective plans. The Company's pension schemes meet the requirements of the compulsory occupational pension plan. The total cost of the year for the defined contribution scheme is TNOK Total pension costs for 2011 amount to NOK The basis for the calculation is the following financial assumptions Discount interest rate 3,30 % 4,00 % - Return on pension funds 4,80 % 5,40 % - Salary regulation 4,00 % 4,00 % - Annual G regulation 3,80 % 3,75 % - Pension regulation 0,70 % 1,30 % The demographic assumptions are based on those usually applied in insurance. Pension cost Pension earning of the year Interest expense on the pension obligations Gross pension cost Expected return on pension funds Administration cost Estimate change and deviation recognised in the income statement One-off effect recognised in the income statement Accrued social security tax Net pension cost on benefit schemes Pension cost on contribution schemes Change in obligation recognised in balance sheet Value in balance sheet 1 January Expense in income statement during the year Pension payments and payments of pension premiums Balance sheet value 31 December