Q2 2015 Interim Report January - June 2015 “Atea had strong growth in revenue during the second quarter of 2015, but with lower operating profits due to reduced profitability in the Norwegian and Danish business units. We are taking steps to restore profitability in these business areas.” Steinar Sønsteby CEO of ATEA Atea Interim Report Q2 2015 Highlights • • • • • Revenue of NOK 6,842 million, up 14.4% y-o-y EBITDA* of NOK 157 million, down 11.2% y-o-y EBITDA* margin of 2.3%, down from 3.0% last year Cash flow from operations of minus NOK 22 million, down from NOK 425 million last year Acquisition of Baltneta in Lithuania Revenue EBITDA* Cash flow from operations NOK in million NOK in million NOK in million 7,549 8,000 6,498 5,981 6,000 6,842 500 1100.0 396 900.0 400 5,173 700.0 300 4,000 200 786 177 205 202 157 500.0 425 300.0 2,000 100 25 100.0 0 0 Q2 14 Q3 14 Q4 14 Q1 15 Q2 15 Q2 14 Q3 14 Q4 14 Q1 15 Q2 15 -100.0 Q2 14 Q3 14 -103 Q4 14 Q1 15 Q2 15 -22 -300.0 -500.0 Key figures Q2 Q2 H1 H1 2015 2014 2015 2014 2014 6,842 5,981 13,340 11,866 24,588 Gross margin (%) 22.5 23.0 23.1 23.2 23.3 EBITDA (NOK in million) * 157 177 359 357 958 EBITDA margin (%) * 2.3 3.0 2.7 3.0 3.9 EBIT (NOK in million) 57 89 156 180 584 Group revenue (NOK in million) Full year Net profit (NOK in million) 24 55 93 125 429 Earnings per share (NOK) 0.23 0.53 0.89 1.21 4.14 Diluted earnings per share (NOK) 0.23 0.52 0.88 1.21 4.10 -22 425 3 275 959 -160 364 -194 141 617 30 Jun 2015 30 Jun 2014 31 Dec 2014 Cash flow from operations (NOK in million) Free cash flow (NOK in million) ** Net financial position (NOK in million) -1,508 -554 -829 Liquidity reserve (NOK in million) *** 907 1,389 1,628 Working capital (NOK in million) **** -486 -328 -497 Working capital in relation to annualized revenue (%) -1.8 -1.4 -1.9 Equity ratio (%) 25.2 30.4 28.1 Number of shares 105,170,711 103,966,535 104,168,164 Diluted number of shares (YTD) 106,525,402 104,107,443 104,739,264 6,818 6,155 6,504 Number of full-time employees * Before share-based compensation and expenses related to acquisitions ** Defined as cash flow from operations, less capital expenditures. Capital expenditures include assets acquired through cash purchases and through financial leasing agreements *** Limited by 2.5 debt bond covenant ratio (net debt/last twelve months pro forma EBITDA) **** Non-interest-bearing current assets less non-interest-bearing current liabilities 2 Atea Interim Report Q2 2015 Hardware revenue and growth NOK in million Financial review Q2 2015 and H1 2015 5000.0 +14.3% 4500.0 4000.0 +12.5% +17.1% 3500.0 +17.7% 3000.0 2500.0 2000.0 1500.0 Group 2,929 3,430 3,908 4,468 3,283 3,695 3,031 3,568 1000.0 500.0 Atea achieved strong growth in revenue during the second quarter of 2015. Operating margins fell from last year, due to lower profitability in the Norwegian and Danish business units. Q3 Q4 Q1 Comparable Quarter Group revenue was up 14.4% (up 12.3% in constant currency) from NOK 5,981 million in Q2 2014 to NOK 6,842 million in Q2 2015. Hardware revenue was up 17.7%, software revenue was up 8.2% and services revenue was up 14.8%. Currency effects had a positive impact of 2.1% in Q2 2015. On a pro forma basis**, revenue growth was 7.7% in constant currency. Q2 Latest Quarter Software revenue and growth NOK in million 2,000 +8.2% 1,800 +5.5% +11.1% 1,600 1,400 1,200 1,000 800 -1.6% 1,553 1,638 600 400 The increase in hardware revenue was driven by several factors, including growing demand for datacenter and communication products. The increase in software revenue was driven by strong sales in Denmark and Sweden. The increase in services revenue was based on growth in contracted services, which in Q2 constituted more than 42% of total services revenue. 661 1,347 1,497 1,729 1,871 651 200 Q3 Q4 Q1 Comparable Quarter Services revenue and growth NOK in million 1,600 EBITDA* in Q2 2015 decreased by 11.2% to NOK 157 million, from NOK 177 million in Q2 2014. Higher EBITDA* in Sweden, Finland and the Baltics was not enough to offset lower profitability in Denmark and Norway. The EBITDA* margin ended at 2.3%, down from 3.0% last year. +4.6% +4.2% 1,400 1,200 Q2 Latest Quarter +14.8% +1.8% 1,000 800 600 1,381 1,444 1,073 1,092 1,254 1,307 1,222 1,403 400 EBIT in Q2 2015 ended at NOK 57 million, compared with NOK 89 million in Q2 2014. Net financial items were an expense of NOK 25 million, compared with an expense of NOK 26 million last year. 200 Q3 Q4 Comparable Quarter Q1 Q2 Latest Quarter Year-to-date 2015 Group revenue in H1 2015 was NOK 13,340 million, up 12.4% (up 10.7% in constant currency) compared with the same period last year. Hardware revenue was up 15.0%, software revenue was up 9.5% and services revenue was up 9.4%. The currency effects had a positive impact of 1.7% in H1 2014. On a pro forma basis**, revenue growth was 6.4% in constant currency. Profit before tax was NOK 31 million, compared with NOK 63 million last year. Income tax expense was NOK 7 million, compared with NOK 8 million last year (see Note 5). Net profit after tax fell to NOK 24 million, compared with NOK 55 million last year. EBITDA* in H1 2015 ended at NOK 359 million, up 0.5% y-o-y, reflecting a strong performance in Q1 and a decline in Q2 based on lower profitability in Denmark and Norway. * Before share-based compensation and expenses related to acquisitions ** Pro forma revenue growth includes revenue from companies acquired during 2014 and 2015 in both the current and prior full year 3 Atea Interim Report Q2 2015 Norway* Atea Norway increased its revenue in Q2 2015, but had lower profitability due to a decline in gross margins and an increased cost level compared with last year. Revenue growth was driven by the hardware and services segments, as well as by the acquisition of two companies during 2014. Due to lower gross margin and higher operating expenses, EBITDA* was NOK 40 million in Q2 2015, down from NOK 66 million last year. EBITDA* margin ended at 2.3%, down from 4.1% last year. EBITDA* NOK in million Revenue in Q2 2015 was NOK 1,713 million, up 6.1% compared with Q2 2014. Hardware revenue was up 12.4%, software revenue was down 15.7%, and services revenue was up 8.8%. On a pro forma basis**, revenue was up 1.7% (adjusted for acquisitions of Datatech in Q3 2014 and Imento in Q4 2014). 100 80 57 1,622 Q1 15 Q2 15 0 Q2 14 Q3 14 Q4 14 Year-to-date 2015 For the first half of 2015, revenue was NOK 3,335 million, up 4.7% compared with the same period last year. Hardware revenue was up 7.0%, software revenue was down 4.1% and services revenue was up 5.9%. On a pro forma basis**, revenue growth was 0.3% (adjusted for acquisitions of Datatech in Q3 2014 and Imento in Q4 2014). EBITDA* in H1 2015 decreased to NOK 80 million, down from NOK 105 million last year. 2,108 1,514 40 20 2,500 1,615 40 40 Revenue 2,000 66 60 Hardware revenue growth was primarily driven by increased sales of clients, such as PC equipment. The decline in the software business is due to last year being positively affected by a few large one-off datacenter orders to public customers. Growth in services revenue was driven by increased sales of contracted services, including datacenter outsourcing agreements. NOK in million 113 120 1,713 1,500 1,000 500 0 Q2 14 Q3 14 Q4 14 Q1 15 Q2 15 Total gross margin decreased to 26.3%, down from 27.4% in Q2 2014. The product margin of 13.4% was down from 13.9% in Q2 2014, as a result of a change in the revenue mix towards more client business, which has lower margins. Services margin fell to 65.2% from 69.8% last year, due to increased expenses from subcontractors. Operating expenses grew by 9.0% to NOK 411 million, as the organization planned for a higher activity level than it achieved in Q2. On a pro forma basis, operating expenses increased by 5.7%, with the remaining growth coming from acquisitions. Towards the end of Q2 actions were taken to reduce the cost base. These actions have included the elimination of 50 positions (3% of employees) and reduction in marketing and overhead expenses. * Before share-based compensation and expenses related to acquisitions ** Pro forma revenue growth includes revenue from companies acquired during 2014 and 2015 in both the current and prior full year 4 Atea Interim Report Q2 2015 Sweden* Atea Sweden had rapid growth in product sales during the second quarter of 2015, resulting a large increase in EBITDA*. Revenue growth was strong across regions and within both private and public sectors. EBITDA* SEK in million 120 109 100 70 80 75 61 Revenue in Q2 2015 was SEK 3,010 million, up 17.3% compared with last year. Hardware revenue was up 26.4%, software revenue was up 13.6%, while services revenue was up 4.0%. On a pro forma basis**, revenue growth was the same as actual growth. 40 20 0 Q2 14 The strong growth in hardware revenue was driven by higher sales of school PC’s, as well as datacenter and communication products. The increase in software revenue was driven by increased activity from the public sector. Services revenue increased, mainly due to growth in contracted services. 3,500 3,000 Q4 14 Q1 15 Q2 15 EBITDA* in H1 2015 increased to SEK 145 million, up from SEK 124 million last year, reflecting strong growth in product revenue. 3,010 2,874 2,566 Q3 14 Year-to-date 2015 Revenue in H1 2015 was SEK 5,508 million, up 13.9% compared with the same period last year. Hardware revenue was up 21.5%, software revenue was up 11.7% and services revenue was flat. On a pro forma basis**, revenue growth was the same as actual growth. Growth was driven by strong products sales within both private and public sectors. Revenue SEK in million 51 60 2,498 2,500 1,972 2,000 1,500 1,000 500 0 Q2 14 Q3 14 Q4 14 Q1 15 Q2 15 Total gross margin fell to 19.2% for Q2 2015 from 20.3% in Q2 2014, mainly due to slightly lower products margin and the higher proportion of product sales within the revenue mix. Product margin decreased to 11.4% from 11.7% in Q2 2014, mainly due to new customer acquisitions. Services margin grew to 58.1% from 57.4% last year due to a lower percentage of revenue from subcontractors. Operating costs scaled relative to the strong revenue growth and increased by 9.5% to SEK 502 million, as an effect of 73 extra full time employees and higher bonus accruals. EBITDA* in Q2 2015 increased to SEK 75 million, up from SEK 61 million in Q2 2014, reflecting strong growth in product revenue. The EBITDA* margin increased to 2.5%, up from 2.4% last year. * Before share-based compensation and expenses related to acquisitions ** Pro forma revenue growth includes revenue from companies acquired during 2014 and 2015 in both the current and prior full year 5 Atea Interim Report Q2 2015 Denmark Atea Denmark increased its revenue and gross profit during the second quarter of 2015. However, EBITDA* fell from the prior year due to a large increase in operating expenses. EBITDA* DKK in million 160 138 140 120 Sales in the last month of the quarter were negatively affected by a bribery investigation, which led to a postponement of order volumes. This investigation is described in Note 8. 100 79 77 80 60 43 30 40 20 Despite the investigation, revenue in Q2 2015 was DKK 1,508 million, up 11.4% compared with last year. Revenue growth was driven by the acquisition of Axcess in Q4 2014. Hardware revenue was up 5.8%, software revenue was up 12.3%, and services revenue was up 24.0%. On a pro forma basis**, revenue growth was 0.2% (adjusted for Axcess acquisition). 0 Q2 14 Q4 14 Q1 15 Q2 15 Year-to-date 2015 Revenue in H1 2015 was DKK 3,065 million, up 12.0% compared with the same period last year. Hardware revenue was up 10.7%, software revenue was up 6.8% and services revenue was up 19.7%. On a pro forma basis**, revenue growth was 2.1% (adjusted for Axcess acquisition in Q4 2014). EBITDA* in H1 2015 decreased to DKK 109 million, down from DKK 111 million last year, reflecting solid performance in Q1 but a decline in Q2. The increase in hardware and software revenue was based on higher sales of networking and datacenter solutions, which offset lower sales of PC equipment. The increase in services revenue was based on growth in contracted services. Revenue DKK in million 2,000 1,800 1,600 1,400 1,200 1,000 Q3 14 1,783 1,353 1,557 1,508 Q1 15 Q2 15 1,283 800 600 400 200 0 Q2 14 Q3 14 Q4 14 Total gross margin increased to 23.0% for Q2 2015, up from 21.4% in Q2 2014. Product margin was 9.0%, up from 8.9% in Q2 2014 as the proportion of revenue from higher value added products grew. Services margin ended at 64.3%, up from 64.1% last year based on lower subcontractor expenses. Operating expenses grew significantly during the quarter, as the organization had planned for higher growth than it achieved in Q2 2015. In addition, the personnel costs were affected by retention bonuses issued to Atea Denmark employees. Operating expenses grew by 27.7% to DKK 316 million. On a pro forma basis, operating expenses increased by 10.8%, with the remaining growth coming from acquisitions. EBITDA* in Q2 2015 decreased to DKK 30 million, down from DKK 43 million in Q2 2014, reflecting the increase in the cost base. The EBITDA* margin ended at 2.0%, down from 3.1% last year. * Before share-based compensation and expenses related to acquisitions ** Pro forma revenue growth includes revenue from companies acquired in 2014 and 2015 in both the current and prior full year 6 Atea Interim Report Q2 2015 Finland† Atea Finland increased its revenue and EBITDA* during the second quarter of 2015. Growth was driven by higher hardware sales and improved services margin. 1.8 1.4 1.2 1.0 0.8 60 0.4 0.2 0.0 Q2 14 Q3 14 Q4 14 Q1 15 Q2 15 Year-to-date 2015 Revenue in H1 2015 was EUR 117.1 million, up 6.0% compared with the same period last year. On a pro forma basis**, revenue growth was the same as actual growth. Growth was driven by a large new public procurement contract within software and growth in the datacenter and mobility products within hardware. 65 52 0.7 0.6 0.4 Revenue 55 0.6 0.6 The increase in revenue was driven by some large mobile phones agreements and higher sales of datacenter products, which offset a decline in software and services revenue. Hardware revenue was up 12.9%, software revenue was down 10.2%, while services revenue was down 3.1%. 70 1.6 1.6 Revenue in Q2 2015 was EUR 52.3 million, up 1.5% compared with last year. On a pro forma basis**, revenue growth was the same as actual growth. EUR in million EBITDA* EUR in million 52 50 39 40 EBITDA* in H1 2015 ended at EUR 1.0 million, up from EUR 0.9 million last year, reflecting higher products sales. 30 20 10 0 Q2 14 Q3 14 Q4 14 Q1 15 Q2 15 Total gross margin was 15.7%, up from 15.5% last year, driven by improved services margin. EBITDA* in Q2 2015 increased to EUR 0.7 million, up 14.8% from EUR 0.6 million last year, reflecting higher revenue and a slightly improved gross margin. The EBITDA* margin ended at 1.3%, up from 1.1% last year. * Before share-based compensation and expenses related to acquisitions ** Pro forma revenue growth includes revenue from companies acquired in 2014 and 2015 in both the current and prior full year 7 Atea Interim Report Q2 2015 The Baltics On 8 April Atea completed the acquisition of Baltneta, which is the leading cloud and IT outsourcing provider in Lithuania. Baltneta has the highest certified datacenter in Lithuania, in which there is still significant vacant capacity. The company's 120 employees and the datacenter facilities are located in Vilnius. Since its establishment in 1996 the company has had a successful growth track record, and now has a solid contract base containing more than 3,000 customers. The company delivered revenue of EUR 7.2 million and EBITDA of EUR 1.9 million in the fiscal year ending 31 December 2014, and is expected to deliver revenue of EUR 8.3 million and EBITDA of EUR 2.2 million in 2015. Atea Baltics achieved strong growth in revenue and EBITDA* during the second quarter of 2015. Growth was driven by a general improvement in market conditions, which led to a multitude of small orders, and by the acquisition of Baltneta in April 2015. Revenue in Q2 2015 was EUR 24.5 million, up 25.7% compared with last year. On a pro forma basis**, revenue growth was 15.5% (adjusted for Baltneta acquisition in April 2015). The strong growth in revenue was driven by higher sales to the private sector. Hardware revenue was up 19.5%, software revenue was up 2.9%, while services revenue was up 61.9%. Cloud is a strategic business area for Atea, and it is therefore an important step in the development to be able to offer customers datacenter capacity as private, hybrid and public cloud solutions from the Baltics. Baltneta is today selling its solutions primarily to the SMB segment, and Atea therefore sees good cross-selling possibilities to the current customer base, which is primarily in the larger enterprise and public segments. Revenue EUR in million 40 34 35 30 25 20 23 21 25 20 15 10 Atea acquired 100% of the shares from the Kazickas family and management. All management team members and key employees will continue in Atea. The agreed enterprise value was EUR 10.4 million. 5 0 Q2 14 Q3 14 Q4 14 Q1 15 Q2 15 Total gross margin increased to 24.6% for Q2 2015, up from 21.8% last year, primarily due to a higher proportion of services in the revenue mix. Year-to-date 2015 Atea Baltics revenue in H1 2015 increased to EUR 47.7 million, up 20.4% compared with the same period last year. On a pro forma basis**, revenue growth was 10.9% (adjusted for Baltneta acquisition in Q2 2015). This growth was driven by higher hardware sales to the private sector. EBITDA* in Q2 2015 increased to EUR 1.3 million, up 72.2% from EUR 0.8 million in Q2 2014, reflecting strong revenue growth and acquisition of Baltneta in Q2 2015. The EBITDA* margin increased to 5.4%, up from 4.0% last year. EBITDA* in H1 2015 increased to EUR 2.2 million, up from EUR 1.6 million last year, reflecting strong revenue growth and acquisition of Baltneta in April 2015. EBITDA* 2.0 1.8 1.8 1.6 1.3 1.4 1.2 1.0 0.8 0.9 0.9 0.8 0.6 0.4 0.2 0.0 Q2 14 Q3 14 Q4 14 Q1 15 Q2 15 8 Atea Interim Report Q2 2015 Balance sheet and cash flow Cash flow from financing was NOK 5 million in Q2 2015. The Group drew NOK 396 million on its credit facilities, paid dividend of NOK 3.25 per share, amounting to a total of NOK 384 million, and issued 754,987 new shares related to the share option program together with a share buyback of 640,000 shares, amounting to a net total of NOK -7 million. At quarter end, the Group had a cash balance of NOK 292 million. As of 30 June 2015, Atea had total assets of NOK 11,525 million. Current assets such as cash, receivables and inventory represented NOK 6,372 million of this total. Non-current assets represented NOK 5,153 of this total, and primarily consisted of goodwill (NOK 3,575 million), deferred tax assets (NOK 545 million), and property, plant and equipment (NOK 671 million). Additional information on the deferred tax assets can be found in Note 5 to the financial statements. At the end of Q2 2015, the Group’s net financial position was NOK -1,508 million compared with NOK -554 million at the end of Q2 2014. The Group’s bond covenants require that the Group maintains a maximum net interest bearing debt of 2.5x pro forma EBITDA over the last twelve months. The Group is currently well within this limit, and maintains liquidity reserves, including unutilized credit facilities, of NOK 907 million at 30 June 2015. Atea had total liabilities of NOK 8,617 million as of 30 June 2015, of which NOK 7,243 million were current liabilities. Shareholders’ equity was NOK 2,908 million, corresponding to an equity ratio of 25.2%. This is down from a 30.4% equity ratio on 30 June 2014, due to payment of dividends and the buyback of own shares. Cash flow from operations was NOK -22 million in Q2 2015, compared with NOK 425 million in Q2 2014. Cash flow from operations was slightly positive with NOK 3 million in H1 2015, compared with NOK 275 million in H1 2014. Shares Atea ASA had 7,344 shareholders on 30 June 2015 compared with 7,212 shareholders on 30 June 2014. Changes in the accounts payable balance during H1 2015 vs. H1 2014 represent NOK 227 million of the NOK 272 million difference in cash flow from operations between the periods. During the first half of 2014, Atea benefited from an extention in payment terms from key vendors, which had a positive one-time effect on cash flow from operations. Atea expects healthy free cash flow for the full year 2015, in line with its overall profitability. The 10 largest shareholders as of 30 June 2015 were: Main Shareholders * Systemintegration APS ** Cash flow from investments was NOK -164 million in Q2 2015, compared with NOK -53 million in the corresponding quarter last year. Cash flow from investments included capital expenditures of NOK 99 million, compared with NOK 49 million in the corresponding quarter last year, related to facilities, internal systems and the development of Atea’s hosting centers. Investments within this area were somewhat higher in current quarter, following a relatively low investment level in Q1 2015. Capital expenditures in H1 2015 were NOK 135 million, compared with NOK 105 million in H1 2014. In addition to capital expenditures, Atea paid NOK 65 million in acquisition cost and earnout to acquisitions in prior years. The material part of this payment relates to the acquisition of Baltneta UAB in Lithuania on 8 April 2015. Additional information on Atea’s acquisitions can be found in Note 4 to the financial statements. Shares % 25,889,832 24.6% State Street Bank & Trust Co. *** 8,638,906 8.2% Folketrygdfondet 6,600,383 6.3% RBC Investor Services Trust *** 4,848,035 4.6% JP Morgan Chase Bank, NA *** 3,318,217 3.2% J.P. Morgan Chase Bank N.A. London *** 2,960,337 2.8% J.P. Morgan Chase Bank N.A. London *** 2,895,215 2.8% Skandinaviske Enskilda Banken AB *** 2,706,203 2.6% Odin Norge 2,283,071 2.2% State Street Bank and Trust Co. *** 2,017,544 1.9% 43,012,968 40.9% 105,170,711 100.0% Other Total number of shares * Source: Verdipapirsentralen ** Includes shares held by Ib Kunøe *** Includes client nominee accounts As of 30 June 2015, Chairman Ib Kunøe and close associates controlled a total of 24.9% of the shares, including the shares held by Systemintegration ApS. 9 Atea Interim Report Q2 2015 Business overview IT market trends The market for information technology is in the midst of revolutionary change, which is transforming society and the workplace. Background Atea is the leading provider of IT infrastructure and related services to organizations within the Nordic and Baltic regions. The company is the largest player by far in its local markets, with approximately 17% market share in 2014. Roughly half of Atea’s sales are to the public sector, with the remainder of sales to private companies. Across private enterprise and throughout the public sector, organizations are increasingly relying on new and innovative IT solutions to improve productivity and living standards. While the specific applications for information technology are unique for each organization, the changing demands on internal IT departments follow several common themes. The market for IT infrastructure in the Nordic and Baltic regions has grown steadily during the last several years, despite challenging conditions in the global economy. According to estimates from IDC*7, the market for IT infrastructure and related services has grown at an average rate of 3% per year from 2007 – 2014. Organizations require their IT infrastructure to efficiently and securely capture, process and store ever larger amounts of data from diverse sources. This information must be available wherever it may be required in a secure manner, within or outside the workplace. Finally, IT systems must allow individuals to communicate, collaborate and be productive across a broad range of technology platforms. Atea’s competence and leading market position in IT infrastructure has enabled the company to grow at a rate significantly higher than that of the market. Since 2007, the company has averaged an organic revenue growth rate of 4-5% per year. As a result of these trends, the number of unique devices for capturing or receiving data is rapidly increasing, and the amount of data which is transferred between them and the data center is growing exponentially. At the same time, the risk of security breaches becomes ever greater. All of this creates a level of complexity which IT departments struggle to support. In addition to organic growth, Atea has successfully pursued an M&A strategy to strengthen and consolidate its market position. Atea’s current organization structure is the result of the merger of the leading IT infrastructure companies in Denmark, Norway, Sweden, Finland and the Baltics in 2006 and 2007. Since 2007, Atea has acquired more than 50 companies, at valuation multiples significantly below the Group. This presents a significant opportunity for Atea, as a system integrator with expertise across multiple platforms. Through its breadth of competency and depth of system integration expertise, Atea supports IT departments in adapting to the growing complexity of today’s IT infrastructure and security. Atea helps its customers to design, implement and support IT solutions tailored for their organization. Atea’s market share in the Nordic and Baltic regions far exceeds that of other IT infrastructure providers. Today, the company has offices in 90 cities in the Nordic and Baltic region, with over 6,500 employees. This scale provides Atea with critical competitive advantages in purchasing, local market presence, breadth and depth of product offering, system integration competence, and efficient shared service and logistics functions. Based on its competitive advantages and leading market position in the Nordic and Baltic regions, Atea is well-positioned to maintain a long-term growth rate faster than the IT infrastructure market. At the same time, Management aims to improve Atea’s long-term operating margins through revenue growth and a strong focus on cost containment. To address the needs of the Nordic and Baltic markets, Atea works closely with leading international IT companies, such as Microsoft, Cisco, HP, IBM, Apple, Lenovo, VMWare, Citrix, Symantec and EMC. These companies view the Nordic region as a critical market for the early adoption of new technologies, and work closely with Atea to penetrate these markets. In recent years, Atea’s cooperation with its technology partners has intensified. This enables Atea to stay at the forefront of the latest IT trends, and to offer its customers new and innovative IT solutions. * International IT research company, International Data Corporation 10 Atea Interim Report Q2 2015 Business overview (cont’d) Denmark: Denmark is Atea’s second largest market, representing 27% of Group revenue in 1H 2015. The Danish business has the most developed operations within datacenter services across Atea. Since the acquisition of Axcess in December 2014, the company has also enhanced its leadership position within communications and network security. Business outlook – 2H 2015 (cont’d) While Atea’s competitive position is very favorable, the Group’s financial performance in any period is impacted by the overall growth in the IT infrastructure market and by Atea’s ability to execute its business strategy and manage costs on a country and local level. Atea Denmark has seen operating expenses increase significantly during 2015. This growth was mostly driven by the acquisition of Axcess (190 employees). In addition, the company has spent on increased staffing, post-merger integration activities, and retention programs to Atea Denmark employees during the last year. On a country level, the Group faced operational issues in its Norwegian and Danish businesses during the second quarter of 2015. These businesses are expected to show improved performance in the coming quarters, but will continue to have a negative impact on the Group’s year-over-year financial performance for the remainder of 2015. During Q2 2015, Atea Denmark has seen revenue growth slow, and flatten on a pro-forma basis (adjusted for the Axcess acquisition). Much of this slowdown was attributable to a bribery investigation involving current and former Atea employees which was announced in June 2015. The case resulted in postponed shipments and lower order intake for Atea during the end of Q2, which is normally a high demand period for the company. The matter is briefly summarized in Note 8 to the financial statements. The Outlook by country is as follows: Sweden: Sweden is Atea’s largest market, representing 38% of Group revenue in 1H 2015. It is also the business unit which currently has the strongest organic growth rates. The Swedish business has historically been skewed toward the public sector (66% of Swedish revenue last year). During 2015, growth in Sweden has been particularly strong across private sector customers, especially within the largest cities. The strongest growth has been in the product business driven by increased market shares within datacenter and communication solutions, as well as within PC’s. In addition, there has been solid growth in contracted services, driven by new IT-as-a-service contracts. Atea Denmark has already taken steps to manage operating costs relative to demand and will take further measures if necessary. At this point, the business appears to be recovering following the bribery investigation, and Atea recently announced on July 8 that it had won a large new frame agreement for delivery of PC equipment to SKI (Statens og Kommunernes Indkøbs Service A/S), the leading Danish public sector procurement agency. Atea expects continued strong performance from its Swedish business in the second half of 2015, with growth within datacenter and communication solutions, school PC’s and IT-asa-service contracts. At the same time, we expect operating expenses to scale relative to revenue growth in Sweden, driving an improvement in profit margins. 11 Atea Interim Report Q2 2015 Business overview (cont’d) Growth in Atea Finland is expected to pick up in the second half of 2015 due to higher demand from the public sector. Business outlook – 2H 2015 (cont’d) Norway: Norway represented 25% of Group revenue in 1H 2015. The Norwegian economy is heavily exposed to the oil and gas industries, and a decline in oil and gas prices has had an impact on the market for IT infrastructure within Norway. Baltics: The Baltic region represented 3% of Group revenue in 1H 2015. Atea Baltics has experienced strong organic revenue growth during the first half of 2015. In addition to weaker market performance, Atea has seen its growth premium relative to the market fall during the last few years. At the same time, the company has seen costs increase over the last year. Revenue growth was driven by private sector customers, offsetting lower demand from the public sector. Growth in private sector was driven by general pick-up in market conditions, which led to a multitude of small orders. Public sector demand has been temporarily impacted by fewer EU funded projects, as one 5-year funding program from the EU has recently terminated, and another has just commenced in 2015. The first large projects on the new EU funding program are expected to ship in 2016. In April 2015, the Country Manager of Atea Norway was replaced. Atea Group CEO Steinar Sønsteby has temporarily taken the role of Country Manager of Atea Norway, a position he previously held during a period of rapid growth. A recruitment process is underway with the intention of appointing a full-time Country Manager in early 2016. Atea has invested heavily in its Baltic organization as a result of demand growth, hiring 39 new employees (representing 7% of total employees) since the end of 2014. In addition, Atea acquired Baltneta in April 2015. Baltneta is a leading provider of IT outsourcing and cloud services in the Baltic markets. This acquisition is further described in the Financial Review section of this document. Since April, Atea Norway has restructured parts of its organization, in order to sharpen focus on major growth opportunities in the Oslo area and within the SMB segment. At the same time, the company has eliminated 50 positions (3% of employees). Furthermore, Atea Norway has cut spending on overhead items, including event marketing and promotional activity. Atea expects strong growth in the Baltic region for the remainder of 2015, driven by continued strong demand from private sector customers, and growth from the acquisition of Baltneta in April 2015. These actions will take time to see full P&L effect, but the company expects to see performance gradually improve during the remainder of 2015. By 2016, these cost reduction initiatives are expected to reduce operating expenses by approximately NOK 20 million per quarter. Finland: Finland represented 8% of Group revenue in 1H 2015. The Finnish economy has suffered from an economic downturn during the last few years, which has had a negative impact on demand for IT infrastructure. Sales growth within Atea Finland has slowed following a strong 2014. Sales of products have performed well, but have been offset by lower service revenue. Atea’s services business in Finland is presently underdeveloped (representing 9% of revenue in H1 2015). Atea reorganized its services business in Finland during the first half of 2015 and reduced staffing to improve utilization rates. 12 Atea Interim Report Q2 2015 Condensed financial information for the 6 months ended 30 June 2015 Consolidated income*statement Q2 Q2 H1 H1 Full year NOK in million Note 2015 2014 2015 2014 2014 Revenue 2, 6 6,842 5,981 13,340 11,866 24,588 Cost of goods sold 5,303 4,603 10,264 9,110 18,872 Personnel costs* 1,163 1,009 2,285 2,014 3,965 218 193 432 384 794 157 177 359 357 958 Other operating costs* EBITDA (adjusted)* 2 Share based compensation -1 7 9 14 28 1 0 2 -1 1 156 170 349 345 929 Depreciation and amortization 87 69 168 140 301 Amortization related to acquisitions 13 11 25 25 45 Expenses/income related to acquisitions EBITDA Operating profit/loss (EBIT) 2 57 89 156 180 584 -25 -26 -46 -36 -73 31 63 110 144 511 7 8 18 18 82 24 55 93 125 429 - earnings per share 0.23 0.53 0.89 1.21 4.14 - diluted earnings per share 0.23 0.52 0.88 1.21 4.10 Net financial items Profit/loss before tax Tax 5 Profit/loss for the period Earnings per share Consolidated statement of comprehensive income Q2 Q2 H1 H1 Full year 2015 2014 2015 2014 2014 Profit/loss for the period 24 55 93 125 429 Currency translation differences 40 29 -62 -23 164 5 -12 -4 -14 -18 NOK in million Forward contracts - cash flow hedging Income tax OCI relating to items that may be reclassified to profit or loss -5 1 4 10 -5 Items that may be reclassified subsequently to profit or loss 40 18 -62 -27 141 Other comprehensive income 40 18 -62 -27 141 Total comprehensive income for the period 64 73 31 98 570 * Before share-based compensation and expenses related to acquisitions 13 Atea Interim Report Q2 2015 Consolidated statement of financial position NOK in million Note 30 Jun 2015 30 Jun 2014 31 Dec 2014 671 513 613 545 558 546 3,575 3,112 3,588 350 296 369 Shares in associated companies 8 0 9 Other long-term receivables 3 0 0 5,153 4,479 5,125 772 600 632 Trade receivables 4,400 3,715 5,496 Other receivables 901 791 777 6 2 11 292 462 583 6,372 5,569 7,498 11,525 10,049 12,624 1,180 1,130 1,140 ASSETS Property, plant and equipment Deferred tax assets 5 Goodwill Other intangible assets Non-current assets Inventories Other financial assets Cash and cash equivalents Current assets Total assets EQUITY AND LIABILITIES Share capital and premium 3 Other unrecognised reserves 981 911 1,079 Retained earnings 747 1,017 1,330 Equity 2,908 3,058 3,549 Interest-bearing long-term liabilities 1,122 1,016 1,121 5 21 4 Other long-term liabilities Deferred tax liabilities 247 207 246 Non-current liabilities 1,374 1,244 1,371 Trade payables 3,853 3,258 4,681 Interest-bearing current liabilities 678 0 291 VAT, taxes and government fees 567 506 667 Provisions 127 121 212 1,999 1,848 1,838 Other current liabilities Other financial liabilities Current liabilities Total liabilities Total equity and liabilities 14 19 13 13 7,243 5,747 7,704 8,617 6,991 9,074 11,525 10,049 12,624 Atea Interim Report Q2 2015 Consolidated statement of changes in equity NOK in million 30 Jun 2015 30 Jun 2014 3,549 3,533 -59 -17 -3 -10 Equity at start of period Currency translation differences Forward contracts - cash flow hedging Other comprehensive income -62 -27 Profit/loss for the period 93 125 Total recognised income/expense for the year 31 98 7 11 -679 -622 Employee share-option schemes Dividends Changes related to own shares Issue of share capital Non-controlling interests from acquisitions Equity at end of period -42 0 45 38 -4 0 2,908 3,058 Consolidated statement of cash flow9 NOK in million Profit/loss before taxes Q2 Q2 H1 H1 2015 2014 2015 2014 144 31 63 110 Taxes paid -15 -10 -38 -22 Depreciation and amortisation 100 81 193 165 Share based compensation Cash earnings Change account receivables 2 5 7 11 118 138 272 297 -791 -504 1,009 969 Change inventory -57 -31 -143 -146 Change trade payables 539 629 -752 -525 Other changes in work. cap./accr. items 169 192 -382 -320 Cash flow from operations* -22 425 3 275 Capital expenditures -99 -49 -135 -105 Purch./sale of subs./assoc./investm. -65 -5 -68 -9 Cash flow from investments -164 -53 -203 -114 Payment of dividends -384 -310 -384 -310 Other equity transactions Change in debt Cash flow from financing Net cash flow Cash start of period Currency effects on cash Cash end of period -7 28 8 38 396 -141 312 -172 5 -423 -64 -444 -180 -52 -264 -283 461 509 583 746 11 6 -26 -0 292 462 292 462 * Cash flow from operations includes net interest expenses, in accordance with general accounting practice. In Atea financial reports for Q1 and Q2 last year, net interest expenses were included in cash flow from financing. Net interest expenses were NOK 13 million in both Q1 and Q2 2015. In Q1 and Q2 2014 net interest expenses were NOK 8 million and NOK 24 million respectively. Either treatment of net interest expenses in the cash flow statement is permitted under IFRS 15 Atea Interim Report Q2 2015 NOTES NOTE 1 – General information and accounting policies The condensed second quarter interim financial statements for the six months ending 30 June 2015 were approved for publication by the Board of Directors on July 14, 2015. These Group financial statements have not been subject to audit or review. Atea ASA is a public limited company incorporated and domiciled in Norway whose shares are listed on the Oslo Stock Exchange. Atea (the Group) consists of Atea ASA (the Company) and its subsidiaries. Atea is the leading provider of IT infrastructure and related services to organizations within the Nordic and Baltic region. The financial statements have been prepared in accordance with International Financial Reporting Standard (IFRS), IAS 34 “Interim Financial Reporting”. The condensed interim financial statements do not include all information and disclosures required in the annual financial statement, and should be read in accordance with the Group’s Annual Report for 2014, which has been prepared according to IFRS as adopted by EU. The accounting policies applied by the Group in these interim financial statements are the same as those applied by the Group in its consolidated financial statements for the year ended 31 December 2014. There are no changes in accounting policy effective from 1 January 2015 that have impact on the Group accounts. See Note 7 regarding possible effects of new proposed leasing standard. In the interim financial statements for 2015, judgements, estimates and assumptions have been applied that may affect the use of accounting principles, book values of assets and liabilities, revenues and expenses. Actual values may differ from these estimates. The major assumptions applied in the interim financial statements for 2015 and the major sources of uncertainty in the statements are similar to those found in the annual accounts for 2014. See Note 8 regarding possible bribery case in Atea Denmark. The Board confirms that these interim financial statements have been prepared on a going concern basis. As a result of rounding differences numbers or percentages may not add up to the total. The carrying amounts of Financial assets and Financial liabilities recognized in the Consolidated statement of financial position approximate their fair values, according to Management’s assessment. NOTE 2 – Operating segment information Atea is located in 90 cities in Norway, Sweden, Denmark, Finland, and the Baltic countries of Lithuania, Latvia and Estonia, with approximately 6,500 employees. For management and reporting purposes, the Group is organized within these geographical areas. The performance of these geographical areas are evaluated on a regular basis by Atea’s Senior Management Group. In addition to the geographical areas, the Group operates Shared Services functions (Atea Logistics and Atea Global Services) and central administration. These costs are reported separately as Group Shared Service and Group cost. Transfer prices between operating segments are on arm’s length basis in a manner similar to transactions with third parties. 16 Atea Interim Report Q2 2015 NOTE 2 – Operating segment information (cont’d) Operating segment information – NOK* Revenue NOK in million Norway Sweden Denmark Finland The Baltics Group Shared Services Eliminations* Atea Group Q2 2015 1,713 2,772 1,728 446 210 1,004 -1,031 6,842 Q2 2014 1,615 2,333 1,488 422 160 973 -1,009 5,981 % change 6.1% 18.8% 16.1% 5.6% 31.1% 3.1% EBITDA** NOK in million Norway Sweden Denmark Finland The Baltics Group Shared Services Group cost EBITDA** EBITDA** margin (%) Q2 2015 40 69 34 6 11 6 -9 157 2.3% Q2 2014 66 56 47 5 6 8 -10 177 3.0% EBIT NOK in million Norway Sweden Denmark Finland The Baltics Group Shared Services Group cost Operating profit/loss (EBIT) Net financial items Profit/loss before tax Q2 2015 25 55 -18 3 -1 3 -9 57 -25 31 Q2 2015 5,439 1,403 0 6,842 1,539 11.6% 64.6% 22.5% Quarterly revenue and gross margin NOK in million Product revenue Services revenue Other income Total revenue Gross contribution Product margin Services margin Gross margin Quarterly revenue and gross margin NOK in million Product revenue Services revenue Other income Total revenue Gross contribution Product margin Services margin Gross margin Q2 2015 5,439 1,403 0 6,842 1,539 11.6% 64.6% 22.5% H1 2015 3,335 5,097 3,553 1,012 412 1,943 -2,011 13,340 H1 2014 3,184 4,470 3,036 914 328 2,006 -2,073 11,866 % change 4.7% 14.0% 17.0% 10.6% 25.7% -3.1% % change -39.2% 24.4% -26.5% 19.9% 80.2% -27.0% 10.7% -11.2% H1 2015 80 135 126 9 19 10 -19 359 2.7% H1 2014 105 114 123 8 13 17 -23 357 3.0% % change -23.8% 17.7% 2.6% 14.7% 45.6% -45.3% 18.0% 0.5% Full year 2014 276 261 366 26 36 39 -45 958 3.9% Q2 2014 49 38 8 2 -1 6 -12 89 -26 63 % change -49.0% 43.3% n.a. 44.0% 5.2% -56.0% 25.7% -36.6% 4.1% -50.2% H1 2015 48 104 22 3 -1 3 -22 156 -46 110 H1 2014 70 78 43 3 -1 13 -27 180 -36 144 % change -31.4% 32.7% -50.2% 12.9% -23.8% -79.1% 18.4% -12.9% -27.5% -23.1% Full year 2014 204 190 193 15 7 29 -54 584 -73 511 Q2 2014 4,759 1,222 0 5,981 1,378 12.0% 66.1% 23.0% % change 14.3% 14.8% H1 2015 10,631 2,709 0 13,340 3,076 12.2% 65.8% 23.1% H1 2014 9,390 2,476 0 11,866 2,756 12.0% 65.9% 23.2% % change 13.2% 9.4% Full year 2014 19,576 5,012 1 24,588 5,717 12.4% 65.5% 23.3% 14.4% 14.4% 11.6% Q1 2015 5,191 1,307 0 6,498 1,538 12.7% 67.2% 23.7% Q4 2014 6,105 1,444 0 7,549 1,689 12.5% 64.0% 22.4% Q3 2014 4,081 1,092 0 5,173 1,273 13.4% 66.5% 24.6% 12.4% 12.4% 11.6% Q2 2014 4,759 1,222 0 5,981 1,378 12.0% 66.1% 23.0% Full year 2014 6,806 8,893 6,504 1,707 792 4,267 -4,381 24,588 Q1 2014 4,630 1,254 0 5,884 1,377 12.0% 65.7% 23.4% * Most of Atea’s internal sales are related to Group Shared Services, which consists of Atea Logistics and Atea Global Services **All EBITDA figures are before share-based compensation and expenses related to acquisitions 17 Atea Interim Report Q2 2015 NOTE 2 – Operating segment information (cont’d) Operating segment information – local currency11 Revenue Local currency in million Norway Sweden Denmark Finland The Baltics Group Shared Services Eliminations* Atea Group EBITDA** Local currency in million Norway Sweden Denmark Finland The Baltics Group Shared Services Group cost EBITDA** EBITDA** margin (%) EBIT Local currency in million Norway Sweden Denmark Finland The Baltics Group Shared Services Group cost Operating profit/loss (EBIT) Net financial items Profit/loss before tax NOK SEK DKK EUR EUR NOK NOK NOK NOK SEK DKK EUR EUR NOK NOK NOK NOK SEK DKK EUR EUR NOK NOK NOK NOK NOK Q2 2015 1,713 3,010 1,508 52 25 1,004 -1,031 6,842 Q2 2014 1,615 2,566 1,353 52 20 973 -1,009 5,981 % change 6.1% 17.3% 11.4% 1.5% 25.7% 3.1% H1 2015 3,335 5,508 3,065 117 48 1,943 -2,011 13,340 H1 2014 3,184 4,835 2,737 110 40 2,006 -2,073 11,866 % change 4.7% 13.9% 12.0% 6.0% 20.4% -3.1% Q2 2015 40 75 30 1 1 6 -9 157 2.3% Q2 2014 66 61 43 1 1 8 -10 177 3.0% % change -39.2% 22.5% -28.6% 14.8% 72.2% -27.0% 10.7% -11.2% H1 2015 80 145 109 1 2 10 -19 359 2.7% H1 2014 105 124 111 1 2 17 -23 357 3.0% % change -23.8% 17.6% -1.8% 9.8% 39.4% -45.3% 18.0% 0.5% Full year 2014 276 284 327 3 4 39 -45 958 3.9% Q2 2015 25 59 -15 0 0 3 -9 57 -25 31 Q2 2014 49 42 7 0 0 6 -12 89 -26 63 % change -49.0% 41.1% n.a. 37.6% 9.0% -56.0% 25.7% -36.6% 4.1% -50.2% H1 2015 48 113 19 0 -0 3 -22 156 -46 110 H1 2014 70 85 39 0 -0 13 -27 180 -36 144 % change -31.4% 32.6% -52.3% 8.1% -18.6% -79.1% 18.4% -12.9% -27.5% -23.1% Full year 2014 204 207 172 2 1 29 -54 584 -73 511 14.4% 12.4% Full year 2014 6,806 9,681 5,803 204 95 4,267 -4,381 24,588 NOTE 3 – Share capital and premium Number of shares Treasury shares Whole figures Issued Whole figures At 1 January 2015 Share capital Treasury shares NOK in million Issued NOK in million Share premium NOK in million Total paidin equity NOK in million 104,168,164 -73,601 1,042 -1 99 1,140 1,002,547 - 10 - 35 45 Sales of Treasury shares **** - 73,601 - 1 - 1 Purchase of Treasury shares ***** - -640,000 - -6 - -6 105,170,711 -640,000 1,052 -6 134 1,180 Issue of Share capital*** At 30 June 2015 * Most of Atea’s internal sales are related to Group Shared Services, which consists of Atea Logistics and Atea Global Services **All EBITDA figures are before share-based compensation and expenses related to acquisitions *** Issue of Share capital is related to Share options for the Management and selected employees **** Sales price for the Treasury shares was NOK 3 million (with remaining NOK 2 million affecting Other unrecognized reserves) and related to exercise of options ***** The cost price for the shares was NOK 45 million (with remaining NOK 39 million affecting Other unrecognized reserves) and related to share buyback program announced in June 2015 18 Atea Interim Report Q2 2015 NOTE 4 – Business combinations Acquisitions in 2015 Atea has acquired one company during the first half of 2015. The financial performance from the acquisition date to the end of the quarter for the acquired company is considered to be immaterial from a Group perspective. • UAB Baltnetos Komunikacijos (Baltneta): Atea acquired Baltneta in April 2015. Cloud is a strategic business area for Atea, and the acquisition of Baltneta enables Atea to offer its customers state-of-the-art cloud and IT outsourcing services from the Baltic region. Allocation of purchase price Due to the high knowledge and low capital requirements for operating an IT sales and consulting organization, acquisitions within this sector will typically result in a goodwill balance. This goodwill balance represents the surplus of the purchase price compared with the accounting value of the net fixed and intangible assets of the acquired company. The fair values have been determined on provisional basis because new information may occur. Breakdown of the acquired net assets and goodwill in 2015 is as follows: NOK in million Baltneta UAB Acquisition date 8 Apr 2015 Country Lithuania Voting rights/ownership interest 100% Acquisition cost: Consideration 1) 69 Adjustment of cost price 4 Liabilities assumed 2 Total acquisition cost 75 Net assets acquired at carrying value of equity (see table below) 30 Identification of excess value: Contracts and customer relationships 19 Deferred tax -3 Net excess value 16 Fair value of net assets acquired, excluding goodwill 46 Controlling ownership interests 46 Goodwill 29 1) Consideration that is dependent on future results is recognised as an obligation based on the fair value at the time of acquisition. 19 Atea Interim Report Q2 2015 NOTE 4 – Business combinations (cont’d) Assets and liabilities related to the acquisitions in 2015 are as follows: NOK in million Baltneta UAB Deferred tax assets 0 Goodwill 14 Computer software and rights 0 Property, plant and equipment 34 Other long-term receivables 0 Inventories 1 Trade receivables 8 Other receivables 0 Cash and cash equivalents 6 Total asset 65 Non-current liabilities -24 Current liabilities -9 Interest-bearing current liabilities -2 Total liabilities -35 Net assets acquired 30 Net cash payments in connection with the acquisitions are as follows: NOK in million Baltneta UAB Considerations and costs in cash and cash equivalents 69 Cash and cash equivalents in acquired companies -6 Net cash payments for the acquisitions 63 If all acquired entities had been consolidated from 1 January 2014, the consolidated pro forma income statements for 2015 would show revenue and profit as follows: H1 NOK in million Operating revenue Operating profit/loss (EBIT) H1 2015 2014 13,340 12,345 156 208 NOTE 5 – Taxes Income tax expense is recognized based on management’s estimate of its weighted average tax rate for the full year, less the value of additional tax loss carryforwards or other deferred tax items which are recognized on the balance sheet during the period. The estimated tax rate used during the first half of 2015 is 16%. As of the year end 2014, the tax value of the tax loss carried forward within the Group was NOK 671 million, of which NOK 518 million was recognized as Deferred Tax Assets on the balance sheet. The remaining value of NOK 153 million was not recognized on the balance sheet. At the end of each year, Management reassesses the value of tax loss carried forward which will be recognized on the balance sheet. This assessment is made based on financial estimates of tax payments for the next five years. This annual assessment may have a material effect on reported Deferred Tax Assets and Deferred tax expense in the fourth quarter and full year accounts. 20 Atea Interim Report Q2 2015 NOTE 6 – Seasonality of operations Atea’s revenue and cash flow are affected by the seasonality of demand for IT infrastructure investments. Demand for IT infrastructure among Atea’s customers peaks in the fourth quarter of the year, leading to higher revenue and cash flow for Atea in the fourth quarter. This demand seasonality is based on the procurement cycles of large organizations in the Nordic and Baltic regions, and is particularly strong within the public sector. NOTE 7 – Commitments With reference to Note 24 – Commitments in the Annual report for 2014, Atea ASA has issued guarantees in favour of financial institutions as security for the lending facilities provided to Atea ASA and subsidiaries. Part of these commitments concern sublease facilities. At the end of Q2 2015, the Group had sublease commitments of NOK 358 million to financial institutions which are not reported on-balance sheet. Existing IFRS does not include specific guidance on the accounting for sublease commitments. Under a new proposed leasing standard, the sublease commitments referred to above would be reflected as both an asset and liability on the balance sheet. IASB currently plans to approve the new leasing standard before the end of 2015, with implementation most likely by 2018 or 2019. NOTE 8 – Risks and uncertainties As described in the “Financial Summary” and “Business Outlook” sections of this report, Atea’s subsidiary in Denmark was impacted in Q2 by a possible bribery case. This had a negative consequence for both revenue and cost in Atea Denmark in Q2. Two current employees of Atea Denmark have been charged in this case. The possible bribery case also involves a competitor of Atea Denmark. Charges have been placed against three current executives of the competing company. These executives all held leading positions within Atea Denmark prior to establishing their own company. Since the charges were announced, the Atea management has cooperated fully with Danish law enforcement in the investigation. Atea has given transparent reports on the case to clients, suppliers, shareholders and governmental agencies. Atea has also intensified corporate communication activities on the basis of being a transparent company and with the purpose of protecting the Atea brand and company reputation. Atea has updated its internal Code of Conduct. All employees are obliged to take an examination on this code and agree to comply with it. Atea is also sharpening its control routines on expenses and on client events. Finally, Atea has enhanced its “whistleblower” scheme for employees to report violations of the Code of Conduct or relevant law. These reports can be given on an anonymous basis. It is too early to assess the potential long term impact for Atea Denmark. However, charges have only been placed against specific individuals and not against the company Atea Denmark. Atea continues to win new business in Denmark, as evidenced by the recent announcement on July 8 that SKI (Statens og Kommunernes Indkøbs Service A/S), the leading Danish public sector procurement agency, had awarded Atea a frame agreement worth DKK 500 million over 3 years. Atea was allowed to win the agreement only after SKI had reviewed the case and determined that there was no reason to withhold Atea from conducting business with the public sector. Other risk factors are described in the Board of Directors statement of the 2014 Annual Report. NOTE 9 – Events after the balance sheet date There were no significant events after the balance sheet date which could affect the evaluation of the reported accounts. 21 Atea Interim Report Q2 2015 Responsibility statement We confirm to the best of our knowledge that the condensed set of financial statements for the period 1 January to 30 June 2015, has been prepared in accordance with IAS 34 – Interim Financial Reporting, and gives a true and fair view of the Group’s assets, liabilities, financial position and result for the period viewed in their entirety, and that the interim management report, to the best of our knowledge, includes a fair review of any significant events that arose during the six-month period and their effect on the half-yearly financial report, any significant related parties’ transactions, and a description of the principal risks and uncertainties for the remaining six months of the year. Oslo, 14 July 2015 Sven Madsen Marthe Dyrud Morten Jurs Ib Kunøe Chairman of the Board Truls Berntsen Steinar Sønsteby CEO 22 Saloume Djoudat Stig Penne Lisbeth T. Kvan Holding Atea ASA Brynsalleen 2 Box 6472 Etterstad NO-0605 Oslo Tel: +47 22 09 50 00 Org.no 920 237 126 [email protected] atea.com Norway Atea AS Brynsalleen 2 Box 6472 Etterstad NO-0605 Oslo Tel: +47 22 09 50 00 Org.no 976 239 997 [email protected] atea.no Sweden Atea AB Kronborgsgränd 1 Box 18 SE-164 93 Kista Tel: +46 (0)8 477 47 00 Org.no 556448-0282 [email protected] atea.se Denmark Atea A/S Lautrupvang 6 DK-2750 Ballerup Tel:+45 70 25 25 50 Org.no 25511484 [email protected] atea.dk Finland Atea Oy Jaakonkatu 2 PL 39 FI-01621 Vantaa Tel: + 358 (0)10 613 611 Org.no 091 9156-0 [email protected] atea.fi Lithuania Atea UAB J. Rutkausko st. 6 LT-05132 Vilnius Tel: +370 5 239 7899 Org.no 122 588 443 [email protected] atea.lt Latvia Atea SIA Unijas iela 11a LV-1039 Riga Tel: +371 67 819050 Org.no 40003312822 [email protected] atea.lv Estonia Atea AS Pärnu mnt. 139C, 1 EE-1317 Tallinn Tel: +372 610 5920 Org.no 10088390 [email protected] atea.ee Group Logistics Atea Logistics AB Smedjegatan 12 Box 159 SE-351 04 Växjö Tel: +46 (0)470 77 16 00 Org.no 556354-4690 [email protected] atealogistics.com Group Shared Services Atea Global Services SIA Mukusalas Street 15 LV-1004 Riga Org.no 40003843899 [email protected] ateaglobal.com
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