Merit annual report 2012 (English)

ANNUAL REPORT 2012

We make our customers stronger

1.0

About Merit Globe AS 1.1

Merit’s History 1.1

Merit Globe’s growth and progression 2.1

Locally & Globally 2.1

Market Penetration 2.2

Market Development 2.3

Partnership 2.4

We Want Our Clients To Excel 3.0

Yearly Report 4.0

Business Results 4.1

Market Conditions 4.2

Economy and Finances 4.3

Organization 4.4

Competence Building 4.5

Research and Development 4.6

Job Satisfaction 4.7

Anti-Discrimination Policies 4.8

Equality Policies 4.9

Environmental impact 4.10

Income statement 5.0

Balance sheet 6.0

Cash flow statement 7.0

Notes 8.0

ANNUAL REPORT | MERIT GLOBE | 2012 1.0

Organization is the soul of our business.We focus each day in working together with our customers to implement Merit’s slogan and guiding principle - “turning knowledge into value.” Our future direction is set.

SWEDEN GÖTEBORG KALMAR LINKÖPING MALMÖ STOCKHOLM

NORWAY BERGEN GJØVIK MOLDE OSLO SANDNES TRONDHEIM ÅLESUND

FINLAND HELSINKI TURKU TAMPERE

DENMARKODENSE

GERMANYLANDSHUT CZECH

BRNO

ITALY

UK MANCHESTER

SWITZERLAND BASEL ZUG

About Merit Globe AS

Merit was established in 2004 with offices in Ålesund, Molde and in Trondheim. For the first years we focused on securing a posi-tion in our chosen core market, while simultaneously developing in-house solutions for Infor M3, in which transaction reports, busi-ness intelligence and processing via mobile devices were used as key elements to foster competitive advantage for our customers.

These solutions, together with our own support concept, led to a rapid expansion nationally and, at a later stage, internationally. Since its creation in 2004 until 2012, Merit has experienced an annual organic growth of 20%. In addition, through strategic acquisitions Merit secured a presence in nine countries and has more than 260 employees in 22 offices. In the period 2008 - 2010 Merit established itself in the UK, Finland, Sweden, Denmark, Switzerland and Germany through strategic acquisitions. In 2012 a merger with Capesso, increased our market share in Norway in a considerable way. In late 2012, we established ourselves in the Czech Republic, hiring new colleagues in Czech Republic through our subsidiary in Switzerland. We have opened offices in Brno, where we currently have 6 employees. Since our start in 2004, we have increased our sales from NOK 24 million to NOK 317 million.

We are projecting that Merit will continue to fulfill its objective: To create value for its shareholders and customers. With that in mind, we foresee the recruitment and training of additional con-sultants, and a strengthening of our position in our target markets.

Merit wishes to be a driving force for its customers. We aim to increase our client’s competetivness through our know-how, our products and our services, always keeping in mind the value-creating processes of our clients.

1.1

Merit’s History

2004

27

2012

107

NORWAY FINLAND

2009

29

50

2012

SWEDEN

2009

3644

914

2012

DENMARK

2010 2012

GERMANY

2010

3 3

12

25

2012

SWITZERLAND

2010 2012

CHECH REP.

2010

06

18

2012

GREAT BRITAIN

2010 2012

Erik Outzen, MoldeCEO

“2012 has been a great year and it is with great pleasure we see all the enthusiasm, creativity, commitment and expertise of our employees in the effort to make Merit a key driving force for our customers.”

From the beginning of our operations in 2004, until 2012, Merit had seen a steady growth in the workforce; we presently focus on the recruitment and development of talented advisors.

ANNUAL REPORT | MERIT GLOBE | 2012

SWEDEN GÖTEBORG KALMAR LINKÖPING MALMÖ STOCKHOLM

NORWAY BERGEN GJØVIK MOLDE OSLO SANDNES TRONDHEIM ÅLESUND

FINLAND HELSINKI TURKU TAMPERE

DENMARKODENSE

GERMANYLANDSHUT CZECH

BRNO

ITALY

UK MANCHESTER

SWITZERLAND BASEL ZUG

1.1ANNUAL REPORT | MERIT GLOBE | 2012

Merit Globe’s growth and progression

Merit AppSuite has risen to a new level, and besides new and significant function-al improvements, we launched Merit App-Suite and Merit Portal for Smartphones and tablets, both in IOS and Android. The first deliveries and implementations are being carried out and we see a large and growing demand.

We should also underline our new service and product dedicated to operations and monitoring - Merit Operations - which has seen great success this year. Merit Operations will be fine-tuned and will become available to all our customers in 2013. All good news to our clients, who stand to gain by our efforts.

2.1 Locally & GloballyBesides the increasing number of instal-lations implemented by our European offices, we have seen – in recent years - thousands of new users relying on systems supplied by Merit. Infor M3 has become an important platform for many of our customers, and along with the delivery Infor M3, we usually deliver one or more of our own products. Merit’s products are also delivered as standalone and increasingly as part of both small and large upgrading projects for our customers.

Our geographical scope is also increasing, both at home and abroad. In 2012, we have implemented the first installation of our Merit Portal in Asia, where we simul-taneously have created partnerships that grant us access to full-time product developers in this region of the globe. Infor M3 has seen an increased growth both in all of our national markets as well

as outside. We’ve also implemented our first upgrade in South America while seeing an increase in the number and dimension of ongoing global projects.

2.2 Market PenetrationMerit’s products have set new landmarks every day, with a continuous growth of our services. In 2012 we reached a new record in terms of size, number and inter-national scope of our projects. Presently, more than 50 customers and over 30 000 users have chosen Merit as a supplier of new solutions. We are very proud of our accomplishments and very grateful for the confidence our customers show in us.

2.3 Market DevelopmentWe expect, in 2013, to pick up where 2012 has left us. Merit will remain focused in our customers’ needs and expects to grow further as a company. We have seen the truth of this expecta-tion in the way we have continuously managed to create new business units with competent and motivated resources. We expect to sell our products in new countries, and in local languages. The year of 2013 may be the year we will widen the geographic scope of Merit to the outside of Europe. Based on exist-ing and upcoming markets, this market access will provide an outlook of 20% growth in 2013.

2.4 PartnershipOver 2012 we also got to know our most important partner, Infor, which is the new owner of Infor M3. This new relationship has been shown to be a very positive ex-

perience. Infor is developing and investing in M3 in the best possible way we could wish for. Infor has paid attention to the demands of the market and – therefore - our product portfolio is seeing greater functionality and higher quality. We have seen already significant improvements, and we know there will be more to come.

It is also with pride that we see our common efforts – Merit’s and Infor’s – being recognized in the market. This recognition was highlighted dur-ing Infor’s Partner Conference, in 2012, where Merit’s efforts in the M3 market were clearly recognized; Merit attained:

- Highest Infor M3 revenue in 2012- Highest Infor M3 service partner

revenue in 2012- Strongest Infor M3 contributor

in 2012

The year of 2012 was a highly rewarding, fast-paced and positively challenging period for Merit, amounting to the best year ever for our company. We have focused on continuous improvement of the planning and delivery processes, and we have increased sales of our portfolio.

2.1 - 2.4 ANNUAL REPORT | MERIT GLOBE | 2012

2004

50

100

150

200

250

300

350

400

2005 2006 2007 2008 2009 2010 2011 2012 2013

Revenue:3,3 MEUREBITDA:

0,5 MEUR


0,7 MEUR


0,8 MEUR


0,8 MEUR

Revenue:8,3 MEUREBITDA:1 MEUR

Revenue:14 MEUREBITDA:

0,4 MEUR


0,5 MEUR


1,7 MEUR


4,5 MEUR


7,8 MEUR

2.1 - 2.4

Based on existing and upcoming markets, our market access will provide an outlook of 20% growth in 2013.


3.0

Merit relies on the employees focused on improving our clients business. Our true value lies in our knowledge.


We Want Our Clients To Excel

Our clients are typically market leaders in their respective industries, and Merit will ensure that their relevance will be main-tained and strengthened. Merit is known for its holistic approach to the customers, developing and implementing solutions based on knowledge of the industry and client-specific business framework and expectations. We have established long-

term partnership agreements with our customers to ensure that they will always have access to the solutions that will give them the best possible conditions to cope with the changes in this competitive market’s landscape.

This will also remain the driving force and inspiration behind the development of our

own in-house applications and concepts. Merit’s AppSuite ensures the seam-less execution and reporting of business processes, with improved efficiency and increased security – these are the charac-teristics that have made Merit’s AppSuite a “must-have” in the eyes of our clients.

Our vision is to be a key force in our customer’s effort to become better, stronger and more profit-able. We will help ensure that our customers will have the adaptability needed to respond quickly to changing market conditions.

3.0

Meet some of Merit’s staff:

Stian Sundsbø, MoldeSenior Application’s Engineer

Merit develops and sells mobile solutions that inte-grate with Merit Portal and Infor M3. Oskar Sylte Mineral Water Factory, as well as cosmetics wholesaler Sæther Nordic, are examples of clients who rely daily on these solutions, both on Android and iOS platforms. Stian is a key resource in the development of our apps.

Jon Kåre Aarskog, TrondheimSenior Business Consultant

Whenever Info-Team - Infor M3 users association in Norway - is looking for presenters on the topic of integration, they look to Trondheim, to our own Jon Kåre Aarskog. Jon Kåre has been a key player in several advanced integration projects between Infor M3 and associated solutions.

Outi Paavola, HelsinkiSenior Business Consultant

Advising clients in the use of Infor M3 is a fundamental part of our process to “improve our customers.” Outi presently works in cooperation with our major clients, aiming to find the best and most effective solutions

Lars Lindell, MalmöSenior Project Manager

Good project management is essential to the improve-ment of our customers. Lars has extensive experience from several project imple-mentations both in Sweden and other countries where Merit operates.


Best of Breed Applications

Industry Suites

Infor M3

Merit AppSuite | Interfaces

Projects | Operations

World-Class Services

Industry/Vertical

Merit Customer

ProjectSolutionManager

OperationsService

Manager

SalesAccountManager

CUSTOMERTEAM

Industry competence within a few selected industries

Best of Breed apps gets the best of the Industry Suite – optimized workflow using the suitable devices

Secure efficient implementation with

minimized risk and long-term operation of solutions

Leading Industry suites �– covering your business

requirements

4.1 - 4.2

Merit’s Unique Offering:We aim to improve our clients competitivenessby streamlining business processes and implementingmodern integrated software.


Annual Report

4.1 Business ResultsMerit Globe AS (MGAS) is the parent company of Merit Group. Merit Globe is a leading provider of business solutions, Enterprise Management Solutions, in specific fields. In addition to being the parent and holding company, MGAS supports - as an organization - common functions such as corporate manage-ment, business strategy, economics and finance, IT, marketing and business development.

Merit has seen a major expansion to reinforce its leading position in the mar-ket, and is presently in a strong position to lead market consolidation efforts. We believe that there are still several interesting opportunities both in our present area of influence and in emerg-ing markets. We are a leading supplier of selected industries of primary business solutions (ERP), namely Infor M3. This has secured Merit a unique position among our competitors, through our own software in the Merit AppSuite.

In addition to the traditional ERP solu-tions, we have also seen a high level of success with our new CRM initiative,

Merit Event Management Solution. This solution is already being presently provided to several large global clients.

4.2 Market ConditionsAs with other key players in the mar-ket, we have witnessed a reduction of investment during the recent financial crisis. The decline in market volume in Norway has been, nevertheless, signifi-cantly smaller than in other Nordic and European countries. Our applications and service-based concepts (Merit Opera-tions & Merit Partnership) have thus contributed to Merit’s organic growth, even during the financial crisis.

From 2012 on, we have seen a rein-forcement of investment which created an increased demand in all our markets. As a response to the financial crisis we have aimed to recruit experienced consultants, and consider we are presently in a position to take advantage of this increased demand.

We have seen a significant increase in demand for different types of hosting services, which helps to differentiate our

product and our unique solution con-cepts. We have also seen an increase on sales of specifically targeted sales mobile solutions for tablet and smart-phone. This market seems to have an enormous capacity to quickly apply new technologies, which allow a faster development of the interfaces of our ERP solution, and constant involvement of new user groups, both internally and externally.

We have developed a partnership agreement with Infor for the markets in Central Europe, Western Europe and Scandinavia. This agreement provides an excellent framework for further growth. Infor is a leading global software company, with an impressive develop-ment plan for the M3 and other applica-tions. With Infor as our partner, we will continue to offer the best solutions for our target markets.

In 2012, Merit saw a strengthening of its market position – Merit is now the preferred vendor of business solutions within our industry.

4.1 - 4.2ANNUAL REPORT | MERIT GLOBE | 2012

4.3

Operating RevenuesMerit had operating revenues of NOK 317,401,010 in 2012, which constitutes an increase of 18 percent from NOK 268,938,848 in 2011.

Merit has hired 43 employees in 2012, which has partially explained this increase in operating revenues. In addition, the hiring rate of the Group’s consultants has seen a 3 percent increase when compared to 2011. Group’s services priced per hour increased by 5% percent due to a favorable develop-ment in demand for Merit’s services.

Sales of own products have increased to NOK 7,000,000, which constitutes an increase of 20% when compared to 2011. Sales of own products are an increasingly important part of Merit’s present profit.

The positive trend seen through 2012 proves that Merit is following the right business model and is providing a good range of services tailored to client needs, while selling products and concepts that help our clients improve their business.

Operating ExpensesMerit’s total costs grew by 17% percent in 2012 and the total expenses amounted to NOK 320,892,727. The Group reported thus a smaller growth in costs versus rev-enues, which consequently strengthened its operating margins in 2012.

This increase in operating expenses is mainly related to the increase in labor costs and other operating expenses, resulting from the number of employees hired over the year.

In 2012, depreciation (write-off) amount-ed to 6% of operating costs. This value corresponds to the depreciation of assets in software and had no cash-flow effect on the company. This is a reduction in the balance value for our software assets and for holdings we have in companies and

should force us to reflect the appropriate future value of these investments on our balance sheet.

ProfitIn 2012, our operating profit (EBITDA) amounted to NOK 14,980,172 versus NOK 12,510,166 for the same period last year. This represents an increase of 20 percent with an EBITDA margin of 5 per-cent. Our long-term target EBITDA margin is 15 percent.

The Group will continue to focus strongly on improving operational efficiency.

Profit after tax was NOK -7,270,524 in 2012, up from NOK -8,549,186 in 2011, which corresponds to an increase of NOK 1,278,662.

Results from parent companyAfter the splitting in 2010, the parent company only had internal turnover, financial income and financial expenses, which produced a deficit of NOK 370 838 in 2012.

Balance Sheet and Financial RatiosAt the close of the fiscal year, Merit had a total balance of NOK 149,872,049. The trade debt balance in 2012 was NOK 59,539,740. The Group has conducted a review of the unpaid invoicing and it is their opinion that the situation can be perceived as solid.

Consolidated shareholders’ equity at the close of fiscal year was NOK 50,185,459. Merit has been focused in reinforcing the solvency of the company. The Group’s financial solidity as measured by the equity ratio at the end of the fiscal year was 33%, versus 5% in the previous year. Merit aims to maintain an equity ratio of 30% for the future. In 2012 we made clear investments which will provide future positive cash flow for the Group.

The increase in earnings was primarily due to the structuring of ownership in sub-sidiaries which was implemented in 2012. Merit Globe AS has gone from part-own-ership to full-ownership of subsidiaries.

The values which have been demonstrated in the financial statements are based on future earnings from these holdings. The holdings are reflected in the com-pany’s goodwill and equity. The Group’s goodwill will be amortized over 5 years.

At the end of fiscal year, the Group had a debt of NOK 99,686,590, of which 24,435,870 corresponded to bank debt. The Group has a liquid inventory of NOK 13,697,126 invested in the bank.

Merit has a corporate account (cash pool) with a corresponding credit facility in the bank. This solution allows the use of any excess liquidity in the Group. Merit has seen improved liquidity in the year of 2012.

The Board expects that Merit commands enough capital to finance the Group’s obligations, investment requirements and operations through own funding.In accordance with the Accounting Act § 3-3a, the Board confirms that the pre-sumption of viability is true, and the finan-cial statements for 2012 have been based on this presumption. The Board bases this position on the long-term forecasts, and on the Group’s capital and liquidity.

The parent company had an equity ratio of 50% on 31/12/2012.

Financial RisksIn terms of financial risks, the Group is mainly exposed to foreign exchange risk, liquidity risk and credit risk. The Group’s management is continuously assessing these risks and establishes guidelines for their management. Merit’s financial strategy resides in maintaining sufficient cash or credit resources at any given time, to be able to finance operations and in-vestments according to the Group’s strat-egy. Excess liquidity is to be invested in the bank. The Group’s client base includes mainly large, solid enterprises and organi-zations, with high credit ratings. All new accounts that require credit are subject to an assessment of their creditworthiness.

Allocation of Annual ResultsAnnual results NOK - 370.838, transferred to uncovered losses of Merit Globe AS.

4.3 Economy and Finances

The positive trend seen through 2012 proves that Merit is follow-ing the right business model and is providing a good range of services tailored to client needs.


4.4 - 4.7

Merit’s business covers a good geo-graphical area both in Scandinavia and in Central Europe and is present through 22 offices in 9 countries in 2012.

Over the year, Merit has expanded geographically as well as in terms of new service and product areas. One of the examples of service and product expan-sion was the creation of Merit Operations. These were established because we have seen more and more customers request-ing an improvement of monitoring and follow-up of their company’s value-added processes. Merit Operations is an integral part of Merit’s existing business, developed to help improve our customer’s position in the market.

Merit will continue to reinforce the established strategy in Europe. We have now gained new customers in many countries and will now focus on sales and implementation of the products and services we have developed.

4.5 Competence BuildingSolution Consulting is established as a group at the corporate level with

participants from all Merit companies. This group is responsible for acquiring expertise in new product areas and new functionalities and is involved in the definition of which areas Merit should focus and build expertise.

Merit Project and Merit Operations safeguard the implementation of projects and the operational status of the imple-mented solutions. The whole consultant staff of Merit in these areas is, in princi-ple, included.

Professional GroupsMerit has been working on the develop-ment of groups for different areas of expertise. These areas may be related to specific industries, solutions or process areas. Competence groups are organ-ized by countries with contact points and coordination efforts between countries.

4.6 CertificationMerit has been focusing extensively on competence building. This applies both for its products and for the products of our partners. As an example, we have always been very focused on building expertise in

the new product versions of our biggest partner, Infor - when the latest version of Infor M3 was launched we, at Merit, were the first in the world to implement it with our customers. Merit strives to be ahead of the certification of Infor’s programs. We have, additionally, established internal standards and competence certificates to characterize expertise and experience on several different areas.

4.7 Research and DevelopmentOne of the important parts of Merit’s business model resides in the sale and implementation of our proprietary products, Merit AppSuite. More than one hundred of our customers use our products on their daily activities. The objective of Merit AppSuite is to offer to our customer products that increase efficiency and user-friendliness of work processes; through our AppSuite, the companies have access to data that is critical to their business in a simple and intuitive way.

Our products currently have a strong representation in the areas of data

4.4 Organization

Services

Projects OperationsProven implementation methodologyDeep industry knowledge for the focused verticalsComplete resource teams Scalable from small local projects to large and international projects

Application MonitoringProcess ControlApplication SupportMerit’s “Emergency Ward” (24/7 costumer support service)

Competence BuildingMerit’s service organization focuses on the following areas: -->


4.7 - 4.11

storage and analysis as well as in transac-tion reporting in the client’s value-chain. Our solutions can be used via the web interface on PCs and via mobile devices, in which bar-codes are used extensively.

During 2012, our product development focused specifically on advancing our portal concepts, namely our sales portals and supplier portals. We have also devel-oped and implemented our first solutions on mobile platforms like iOS and Android. This solution focuses on exploring the opportunities of new technologies while integrated tightly with our corporate ERP solution. The demand for these solutions is growing very rapidly, as reflected in our continuing product development.

We have built our product development with product specialists with extensive business knowledge, and developers with broad and in-depth technical expertise. We wish to provide our employees an engaging and stimulating workplace, by providing the opportunity to work closely with our clients and business consult-ants. We therefore invest a significant percentage of our licensing and business revenues in innovation and research. We motivate our employees to continuously develop their skills. That focus on self-im-provement, along with the opportunities they have to influence the functionality and the technology our future products, has made the product development department a workplace that is attractive both for present and future employees.

In 2012 we have added an offshore development team, in Asia, to expand our development organization. This addition to our capacity was established through our partner, Serenergy in Singapore, whom besides being responsible for our

new team of developers is also distributor for our products in Asia. This increased capacity follows an increased market share for our products in this well established and growing market.

4.8 Job SatisfactionThe mother company Merit Globe AS has three employees in 2012. The group has 265 employees as of 31.12.2012.The Board considers that Merit’s working environment is satisfactory. Absences due to illness are considered to be at a normal level. There were no serious pro-fessionally-related injuries in the Group.

At Merit, we are very focused on creating a good working environment with high job satisfaction. An environment in which employees are committed and motivated will increase the chances of a good delivery and satisfied customers.

Merit wishes to also facilitate healthy, shared experiences, beyond our work environment. Engaging in sports, and other extra-professional activities, may provide another way of socializing which complements the professional environ-ment. Many of our employees have found the simple pleasure of socializing with colleagues while skiing, cycling, jogging and being involved in other recreational activities. Some of these activities have been managed by the company, while others have been initiated by enterprising colleagues.

4.9 Anti-Discrimination PoliciesAll employees of Merit are committed to contribute to a positive and highly professional working environment. All employees handle each other respect-

fully and all forms of discrimination are considered unacceptable. This includes all types of discrimination based on religion, skin color, sex, sexual orientation, age, nationality, race and level of disabil-ity. Both the Company and the Group are working actively to promote equality, to ensure an environment with equal rights and opportunities, and devoid of any discrimination.

4.10 Equality PoliciesMerit has a long-term policy targeted at the increase of the percentage of women in its workforce, while always focused on securing the appropriate expertise in all recruitment efforts.

4.11 Environmental impactMerit has implemented a number of measures to minimize environmental pollution. Whenever possible, we opt for video and web conferencing in order to reduce the frequency of air-travel. At Merit, we have implemented efforts to minimize printing; also printers are set - by default - to print on both sides of paper.


5.0 Income statement

Revenue

0 0 Sales revenue 6 311 690 311 265 809 245

9 142 406 6 400 904 Other operating income 5 710 699 3 129 603

9 142 406 6 400 904 Total revenue 317 401 010 268 938 848

Operating expenses

0 0 Cost of sales 29 014 349 50 845 153

7 449 362 4 935 211 Payroll expenses 5 204 143 794 162 473 572

187 001 0 Depreciation and amortization 7, 8 18 471 889 8 874 641

0 0 Write-downs 7, 8 0 7 983 675

4 074 990 2 475 218 Other operating expenses 5 69 262 695 43 109 957

11 711 353 7 410 429 Total operating expenses 320 892 727 273 286 998

-2 381 946 -1 009 525 EBITDA 14 980 172 12.510.166

-2 568 947 -1 009 525 EBIT -3 491 717 -4 348 150

Financial income and expenses

6 612 898 2 554 808 Income from investments in subsidiaries 0 0

803 724 0 Interest income from group companies 0 0

187 764 420 105 Other financial income 749 115 860 895

2 405 200 14 125 902 Write-down on financial assets 2 0 0

636 076 0 Interest expenses to group companies 0 0

1 956 690 538 926 Other financial expenses 2 411 885 1 475 900

2 606 420 -11 689 915 Net finance -1 662 770 -615 005

37 473 -12 699 440 Profit/(loss) before income tax -5 154 487 -4 963 155

408 311 -257 131 Income tax expenses 13 2 116 037 3 586 032

-370 838 -12 442 309 Net profit/(loss) -7 270 524 -8 549 186

Distribution

Majority interests -8 052 919 -12 432 161

Minority interests 782 395 3 882 975

Attributable to:

0 -10 510 424 Other equity 14

-370 838 -1 931 885 Uncovered losses 14

-370 838 -12 442 309 Total

PARENT COMPANY GROUP 2012 2011 Note 2012 2011

ANNUAL REPORT | MERIT GLOBE | 2012 5.0

6.0 Balance sheet as of December 31

Fixed assets

Intangible assets

0 0 Research and development 8, 9 11 570 557 6 775 672

0 394 174 Deferred tax asset 13 334 425 729 106

0 0 Goodwill 8 47 372 893 19 509 901

0 394 174 Total intangible assets 59 277 875 27 014 679

Tangible assets

604 640 0 Fixtures and fittings, tools, office machinery etc. 7 3 253 705 3 159 051

604 640 0 Total tangible assets 3 253 705 3 159 051

Financial assets

79 196 836 31 594 401 Investments in subsidiaries 2 0 0

77 391 0 Other receivables 11 241 191 163 800

79 274 227 31 594 401 Total financial assets 241 191 163 800

79 878 867 31 988 575 Total fixed assets 62 772 771 30 337 530

Current assets

Receivables

10 859 807 3 084 164 Accounts receivables 12 59 539 740 65 324 942

25 085 150 16 891 995 Other receivables 12, 13 13 862 412 16 578 034

35 944 957 19 976 159 Total receivables 73 402 152 81 902 976

1 252 823 1 510 637 Cash and cash equivalents 10 13 697 126 25 084 134

37 197 780 21 486 796 Total current assets 87 099 278 106 987 110

117 076 647 53 475 371 Total assets 149 872 049 137 324 640


6.0 ANNUAL REPORT | MERIT GLOBE | 2012

6.0

Equity

Paid-in capital

1 739 286 1 008 000 Share capital 14, 15 1 739 286 1 008 000

59 799 867 3 893 400 Share premium 14 59 799 867 3 893 400

61 539 153 4 901 400 Total paid-in capital 61 539 153 4 901 400

Retained earnings

-2 302 723 -1 931 885 Other equity 14 -12 017 115 -6 335 294

-2 302 723 -1 931 885 Total retained earnings -12 017 115 -6 335 294

0 0 Minority interests 663 421 8 684 149

59 236 430 2 969 515 Total equity 50 185 459 7 250 255

Liabilities

Provisions

14 137 0 Deferred tax 13 0 0

14 137 0 Total provisions 0 0

Current liabilities

0 0 Dividend 0 990 600

24 435 870 24 134 685 Liabilities to financial institutions 10, 11 24 435 870 24 916 117

917 783 870 120 Accounts payable 12 6 823 188 7 570 525

0 0 Income tax payable 13 632 252 1 827 565

107 124 68 676 Public duties payable 10 17 463 607 15 629 452

32 365 303 25 432 375 Other current liabilities 2, 12 50 331 673 79 140 126

57 826 080 50 505 856 Total current liabilities 99 686 590 130 074 385

57 840 217 50 505 856 Total liabilities 99 686 590 130 074 385

117 076 647 53 475 371 Total equity and liabilities 149 872 049 137 324 640

6.0 Balance sheet as of December 31PARENT COMPANY GROUP

2012 2011 Note 2012 2011


Cash flow from operating activities

37 473 -12 699 440 Profit/(loss) before taxes -5 154 487 -4 963 155

-6 612 898 -2 554 808 Share of the (profit)/loss of associates 0 0

0 -2 430 Income tax paid -1 827 565 -2 430

0 0 Profit on sale of financial assets 0 -185 689

187 001 0 Depreciation and amortization expenses 18 471 889 8 874 641

2 405 200 14 125 902 Impairment of fixed assets 0 7 983 675

-7 727 980 -2 214 044 Changes in inventories, accounts receivables and accounts payable 5 037 865 -33 400 478

21 251 113 14 459 147 Changes in other accruals -9 479 923 42 963 769

9 539 909 11 114 327 Net cash flow from operating activities 7 047 779 21 270 333

Cash flow from investing activities

-791 642 0 Purchase of tangible fixed assets -1 609 292 -30 662 156

0 555 741 Proceeds from sale of shares 0 555 741

-9 229 875 -32 813 675 Purchase of shares 9 229 875 0

0 0 Payments in relation with capitalized proprietary R & D -9 183 232 -9 732 116

0 0 Proceeds from sale of Goodwill 2 148 250 0

-77 391 0 Changes in long term receivable -77 391 0

0 1 359 739 Proceeds from dividends from subsidiaries 0 0

-10 098 908 -30 898 195 Net cash flow from investing activities -17 951 540 -39 838 531

Cash flow from financing activities

0 24 134 685 Proceeds from short term borrowings 0 24 916 117

0 -3 733 332 Repayment of borrowings 0 -3 733 332

301 185 0 Changes in short term borrowings -480 247 0

0 0 Dividends 0 -683 375

0 -489 439 Share issue expenses 0 -489 439

0 69 498 Proceeds from sale of own shares 0 69 498

301 185 19 981 412 Net cash flow from financing activities -480 247 20 079 469

-257 814 197 544 Net change in cash and cash equivalents -11 384 008 1 511 271

1 510 637 1 313 093 Cash and cash equivalents at 01.01 25 081 134 23 569 863

1 252 823 1 510 637 Cash and cash equivalents at 31.12 13 697 126 25 081 134

7.0 Cash flow statementPARENT COMPANY GROUP

2012 2011 Note 2012 2011

7.0 ANNUAL REPORT | MERIT GLOBE | 2012


8.0 Notes to the accounts for 2012

The annual report is prepared according to the Norwegian Accounting Act 1998 and to the generally accepted accounting principles.

Basis for consolidationThe consolidated financial statements comprise the parent company Merit Globe AS and the subsidiaries as described in Note 2. Subsidiaries are companies in which the Group has a controlling interest. A controlling interest is normally achieved when the Group owns more than 50% of the shares in the company and is also in the position to exercise control over same company. The minority share of the equity is included in the consolidated equity. The consolidated accounts are prepared in such way that the group of companies is presented as a single economic entity. Intercompany transactions have been eliminated from the consolidated accounts. The consolidated accounts are prepared according to the same accounting princi-ples for both parent and subsidiaries. Acquired subsidiaries are reported in the annual accounts on the basis of the parent company’s acquisition cost. Subsidiaries are consolidated in the accounts when a controlling interest is achieved until it no longer applies. SubsidiariesSubsidiaries are valued by the cost method in the company accounts. The investment is valued as cost of acquiring shares in the subsidiary, providing that write-downs are not required. Write down to fair value will be carried out if the reduction in value is caused by circumstances which may not be regarded as incidental, and deemed neces-sary by generally accepted accounting principles. Write-downs are reversed when the causes of the initial write-down are no longer present. Dividends and other distributions are recognized in the same year as appropriat-ed in the subsidiary accounts. If dividends exceed withheld profits after acquisition,

the exceeding amount represents reim-bursement of invested capital, and the dis-tribution will be subtracted from the value of the acquisition in the balance sheet.

Sales revenueSales revenues are recognized at the time of delivery. Revenues from services are recognized at execution. The share of sales revenue associated with future services are recorded in the balance sheet as de-ferred sales revenue, and are recognized at the time of execution. Revenue from projects on fixed price terms that run over a longer period of time are recognized according to the degree of completion. The degree of completion is estimated based on time consumed in relation with estimated total time on the project. Balance sheet classification Net current assets comprise creditors due within one year, and entries related to goods circulation. Other entries are classified as fixed assets and/or long term liabilities. Current assets are valued at the lower of acquisition cost and fair value. Short term creditors are recognized at nominal value. Fixed assets are valued by the cost of acquisition, in the case of non incidental reduction in value the asset will be written down to the fair value amount. Long term creditors are recognized at nominal value. Trade and other receivables Trade receivables and other current receivables are recorded in the balance sheet at nominal value less provisions for bad debts. Provisions for bad debts are calculated on the basis of individual as-sessments. In addition, for the remainder of accounts receivables outstanding balances, a general provision is carried out based on expected loss Foreign currency translationForeign currency transactions are trans-lated using the year end exchange rates.

Property, plant and equipmentProperty, plant and equipment is capital-ized and depreciated over the estimated useful economic life. Direct maintenance costs are expensed as incurred, whereas improvements and upgrading are assigned to the acquisition cost and depreciated along with the asset. If carrying value of a non current asset exceeds the estimated recoverable amount, the asset is written down to the recoverable amount. The re-coverable amount is the greater of the net selling price and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value. Research and developmentResearch and development costs are capitalized providing that a future econom-ic benefit associated with development of the intangible asset can be identified. Otherwise, the costs are expensed as incurred. Capitalized research and development are amortized linearly over the economic lifetime.

Government grantsGovernment grants for development projects are recognized when it is probable that the Company will receive the grant. The grant is recognized as a reduction of expensed or capitalized development costs. Income taxTax expenses in the profit and loss account comprise both tax payable for the account-ing period and changes in deferred tax. Deferred tax is calculated at 28 percent rate on the basis of existing temporary differences between accounting profit and taxable profit together with tax deduct-ible deficits at the year end. Temporary differences, both positive and negative, are balance out within the same period. Deferred tax assets are recorded in the balance sheet to the extent it is more likely than not that the tax assets will be utilized. Tax payable and deferred tax is recorded directly against the equity to the extent that the tax positions relate to equity transactions.

Note 1 - Accounting Principles

8.0NOTES | MERIT GLOBE | 2012

Note 2 - Investment in subsidiaries

Cash flow statement The cash flow statement is presented using the indirect method. Cash and cash equivalents includes cash, bank deposits and other short term highly liquid place-ment with original maturities of three months or less.

Use of estimates The preparation of the financial state-ments requires management to make estimates and assumptions that affect the reported amounts in the profit and loss statement, the measurement of assets and liabilities and the disclosure of contin-

gent assets and liabilities on the balance sheet date. The estimates are related to capitalization of R&D, provision for bad debts and evaluation of projects. Actual results can differ from these estimates.

* Axcentro Solutions LLC and Capesso Provider AS is included in the Group, but are owned by subsidiaries.** The investment in Tirem Invest AB is written down to NOK 0 by NOK 2 405 200 in 2012 and NOK 14 125 902 in 2011.

In connection with the acquisition of subsidiaries, the company entered into agreements of investment credit, with settlement in 2012 partially in shares and cash. Total amount is NOK 16 422 481 and is classified as current liabilities in 2011. The investment credit was settled in 2012.

Company Acquisition year Location Share owners Voting rights Book value 31.12

Merit Consulting AS 2010 Ålesund 100 % 100 % 19 219 030

Merit Platform Partner AS 2009 Ålesund 51 % 51 % 576 500

Merit Consulting OY 2008 Finland 100 % 100 % 25 882 782

Merit Consulting AB 2009 Sweden 100 % 100 % 5 469 839

Tirem Invest AB** 2010 Sweden 100 % 100 % 0

Merit Consulting AS 2009 Denmark 100 % 100 % 5 638 311

Merit Consulting GmBH 2010 Germany 100 % 100 % 4 937 847

Merit Central Europte AG 2010 Switzerland 100 % 100 % 15 893 768

Merit Consulting UK 2008 England 100 % 100 % 1 578 759

Axcentro Solutions LLC* 2010 Switzerland 0

Capesso Provider AS* 2011 Gjøvik 0

Sum 79 196 836

PARENT COMPANYMerger between Merit Consulting I AS and Merit Consulting AS:The wholly owned subsidiary Merit Con-sulting I AS merged with the subsidiary Merit Consulting AS in 2012. The merger was completed at continuity in booked val-ues with effect from 1.1.2012. The share-holders in Merit Consulting AS got shares in Merit Globe AS as settlement. In relation to the settlement there was a capital increase in Merit Globe AS of NOK 376 978 and a share premium of NOK 3 305 529.

Merger between Merit Consulting AS and Merit Consulting Øst AS:Merit Consulting AS merged with the

subsidiary Merit Consulting Øst AS in 2012. The merger was completed at continuity in booked values with effect from 1.1.2012. The shareholders in Merit Consulting Øst AS got shares in Merit Globe AS as settlement. In relation to the settlement there was a capital increase in Merit Globe AS of NOK 48 230 and a share premium of NOK 5 409 831.

Reorganization of ownership through buyout of minority shareholders in foreign subsidiaries:The minority shareholders in the foreign subsidiaries of the group were bought out in 2012 by Merit Globe AS, with the purpose of achieving 100 % ownership

in all subsidiaries. The minority share-holders got shares in Merit Globe AS as settlement. In relation to the settlement there was a capital increase in Merit Globe AS of NOK 306 078 and a share premium of NOK 47 191 107.

After completion of the mergers and reorganization in 2012, Merit Globe AS now has 100 % ownership in all subsidiar-ies except of Merit Platform Partner AS. For a list of subsidiaries we refer to note 2. Changes in equity in 2012 are shown in note 14.

Note 3 - Merger and reorganization

PARENT COMPANY

8.0 NOTES | MERIT GLOBE | 2012

PARENT COMPANYThe company and the Group are exposed to interest- and exchange rate risk. The Group has no formal hedging strategy. Interest riskThe company has overdraft facilities with

a financial institution at floating interest rates. The company has not entered into any fixed rate contracts.

Exchange rate riskThe company and the Group have trans-actions in different currencies. It is not

entered into any hedging transactions to reduce this risk. The risk is however reduced by the fact that income and expenses in each company in the group to a great extent is in the same currency.

PARENT COMPANYThe managing director is an employee of Merit Consulting AS and gets his salary paid by this company. Other payments include administrative expenses for group management with NOK 2 569 271. Compensation to the board of directors is NOK 112 200 in 2012. Bonus to management is expensed by NOK 875 902 incl. social security tax in 2012. Bonus to the CEO amounts to NOK 250 000 excl. social security tax.Management remuneration Salary Other remunerationChief Executive Officer 1 277 704 174 121 The parent company and some subsidiaries are obliged to establish a pension plan according to Norwegian pension regulations. The companies have a pension plan that meets the criteria in the regulations.The company has not given loans or security to anyone in the management or shareholders, or any of their affiliates.

Note 5 - Wage costs, number of employees, remuneration, loans to employees and auditor’s fee

Note 4 - Financial market risk

3 230 392 1 792 415 Salaries 158 716 979 125 178 135

382 430 248 469 Social security tax 25 752 069 13 640 693

112 057 62 751 Pension costs 16 441 134 12 001 742

3 724 483 2 831 577 Other payments 11 764 254 18 091 512

0 0 Refunds -530 642 -1 181 296

0 0 Capitalized costs -8 000 000 -5 257 214

7 449 362 4 935 212 Total 204 143 794 162 473 572

3 3 Average number of employees 265 222

48 000 Statutory audit fee 355 987

0 Assurance services 20 082

0 Tax advisory fee 31 127

182 523 Other services 293 500

VAT is not included in the figures of auditor’s fee.

PARENT COMPANY GROUP 2012 2011 Wage costs 2012 2011

PARENT COMPANY GROUP 2012 Auditor fee has been divided as follows 2012


PARENT COMPANY GROUP 2012 2011 2012 2011

Geographical distribution

0 0 Norway 171 667 353 112 265 607

0 0 Nordic countries 94 720 164 115 597 170

0 0 Europe 45 302 794 37 946 468

0 0 311 690 311 265 809 245

Fixture and fittings, tools, office machinery, etc. Total

Additions 791 642 791 642

Acquisition cost 31.12. 791 642 791 642

Acc.depreciation 31.12. -187 001 -187 001

Net carrying amount at 31.12. 604 641 604 641

Depreciation for the year 187 001 187 001

Useful economic life 3 years

Amortization plan Linear

Fixture and fittings, tools, office machinery, etc. Total

Acquisition cost 01.01. 7 386 318 7 386 318

Additions 1 609 292 1 609 292

Disposals -77 736 -77 736

Conversion differences -135 066 -135 066

Acquisition cost 31.12. 8 782 808 8 782 808

Acc.depreciation 31.12. -5 529 103 -5 529 103

Net carrying amount at 31.12. 3 253 705 3 253 705

Depreciation for the year 1 397 084 1 397 084

Useful economic life 3-10 years

Amortization plan Linear

Note 6 - Revenues

Note 7 - Tangible assetsPARENT COMPANY

GROUP


PARENT COMPANY GROUP 2012 2011 2012 2011

2012 2012

136 804 Restricted bank deposits 4 282 598

Goodwill R & D Total

Acquisition cost at 01.01. 34 048 782 8 264 161 42 312 943

Addition purchased intangibles 44 287 272 0 44 287 272

Addition proprietary intangibles 0 9 183 232 9 183 232

Disposal GW/SkatteFUNN/IFU (Norway) -13 293 695 -1 563 045 -14 856 740

Acquisition cost 31.12. 65 042 359 15 884 348 80 926 707

Acc. amortization at 31.12. -17 669 466 -4 313 791 -21 983 257

Net carrying amount at 31.12. 47 372 893 11 570 557 58 943 450

Amortization for the year 14 279 035 2 795 770 17 074 805

Useful economic life 5 years 5 years

Amortization plan Linear Linear

Note 8 - Intangible assets

Merit Consulting AS and Merit Platform Partner AS have ongoing development projects that are approved as SkatteFUNN-projects in Norway. The SkatteFUNN government grant for 2012 is in total NOK 1 980 000. NOK 1 394 964 is recognized as a reduction in capitalized development expenses in 2012, while NOK 585 036 is recognized as a reduction in payroll expenses in 2012. In 2012 the company also has applied for a government grant from Innovasjon Norge amounting to NOK 415 052. This grant is recognized as a reduction in capitalized development expenses by NOK 168 081 and a reduction of payroll expenses by NOK 246 971.

The Merit Globe group has established a multi-account system where Merit Globe AS is the holder, while the other group companies are sub-account holders or participants. The bank can offset any balance against one another so that the net position represents the balance between Handelsbanken and Merit Globe AS. Each participants deposit or liability on the sub-account represents an intercom-pany balance with Merit Globe AS. These intercompany balances are classified as other current liabilities or other current receivables.

Note 9 - Government grants

Note 10 - Bank deposit

GROUP

GROUP

PARENT COMPANY

PARENT COMPANY GROUP


Note 11 - Debts and receivables

Note 12 - Intercompany balance group companies and associates

10 859 807 3 084 164 Accounts receivables 59 539 740 65 324 942

604 640 0 Property, plant and equipment 3 253 705 3 159 051

11 464 447 3 084 164 Total 62 793 445 68 483 993

Accounts receivables 10 859 807 3 084 164

Other receivables 23 016 582 16 684 592

Total 33 876 389 19 768 756

Payables 2012 2011

Accounts payables 406 017 0

Other short term payables 31 325 206 6 525 250

Total 31 731 223 6 525 250

PARENT COMPANYThe parent company and the group have an overdraft facility agreement of NOK 25 million and an additional credit of NOK 5 million in 2012. As of 31.12.2012 it is drawn NOK 24 435 870 on this facility. The assets in the table above are pledged as collateral. There are financial covenants related to the agreement. The company meets all requirements as of 31.12.2012.

Interest is calculated on intercompany balances in 2012.

PARENT COMPANY GROUP 2012 2011 Pledged assets 2012 2011

PARENT COMPANY GROUP Receivables 2012 2011


PARENT COMPANY GROUP 2012 2011 Pledged assets 2012 2011

PARENT COMPANY GROUP Receivables 2012 2011

Note 13 - Income taxes

0 0 Tax payable 1 831 283 3 084 164

0 0 Too much/little allocated in previous year(s) 56 753 415 059

408 311 -394 174 Change in deferred tax 228 001 106 365

0 137 043 Deferred tax on equity transactions 0 137 043

408 311 -257 131 Total income tax expense 2 116 037 3 586 032

Morselskap

2012 2011 Tax base estimation

37 473 -12 699 440 Ordinary result before tax

6 183 -1 299 Permanent differences

2 405 200 14 125 902 Write-down on shares

0 -489 439 Share issue expenses

-990 600 -2 369 139 Income from investment in subsidiaries

-5 622 298 0 Group contribution

-50 491 0 Changes in temporary differences

-4 214 533 -1 407 765

-1 407 765 0 Applied loss carried forward

5 622 298 0 Group contibution

0 -1 407 765 Tax base

50 491 0 Fixed assets -313 163 798 242

0 0 Non-current receivables and debt in foreign currencies -313 317 72 897

0 0 Accounting provisions -650 000 -650 000

50 491 0 Total -1 276 480 - 1 375 345

-1 407 765 Loss carried forward -26 048 866 - 7 903 769

50 491 -1 407 765 Net temp differences as of 31.12 -27 325 346 -9 279 114

14 137 -394 174 Deferred tax/deferred tax asset (-) -7 651 097 -2 598 152

0 0 Deferred tax asset in subsidiaries not in balance sheet 7 302 535 1 869 046

Deferred tax asset -348 562 -729 106

GROUPIt is expected to receive NOK 1 980 000 (NOK 2 200 000 in 2011) in SkatteFUNN (Norwegian R&D refund plan) in Norwegian subsidiaries. NOK 990 000 (NOK 1 100 000 in 2011) is classified as a reduction of tax payable in the balance sheet, and NOK 990 000 (NOK 1 100 000 in 2011) is classified as other current receivables.

PARENT COMPANY GROUP 2012 2011 Income tax expenses 2012 2011

PARENT COMPANY GROUP 2012 2011 Temporary differences outlined 2012 2011


Note 14 - Owners equity

Share capital Share premium reserve Other equity Sum

Owner’s equity 01.01. 1 008 000 3 893 400 -1 931 885 2 969 515

Profit for the year 0 0 -370 838 -370 838

Capital increase shareholders MC AS 376 978 3 305 529 0 3 682 507

Capital increase foreign shareholders 306 078 47 191 107 0 47 497 185

Capital increase shareholders MC Øst AS 48 230 5 409 831 0 5 458 061

Owner’s equity 31.12. 1 739 286 59 799 867 -2 302 723 59 236 430

Share capital Share premium reserve Other equity Minority int. Total

Owner’s equity 01.01. 1 008 000 3 893 400 -6 335 294 8 684 149 7 250 255

Profit for the year 0 0 -8 052 919 782 395 -7 270 524

Change in minority interests 0 0 8 803 123 -8 803 123 0

Loss from changes in minority interests 0 0 -5 788 757 0 -5 788 757

Capital increase 731 286 55 906 467 0 0 56 637 753

Conversion differences 0 0 -643 268 0 -643 268

Owner’s equity 31.12. 1 739 286 59 799 867 -12 017 115 663 421 50 185 459

There have been three capital increases in 2012, ref note 3. In total the share capital has increased with NOK 731 286 with a share premium increase of NOK 55 906 467.

There have been three capital increases in 2012, ref note 3. In total the share capital has increased with NOK 731 286 with a share premium increase of NOK 55 906 467.

GROUPChanges in the group’s capital:

PARENT COMPANY


Note 15 - Share capital and shareholder information

Share capital:

Number of shares Face value Book value

Ordinary shares 1 739 286 1 kr 1 739 286

Ordinary shares Ownership share Voting rights

Kjell Harald Danielsen 128 764 7,40 % 7,40 %

Erik Outzen, Daglig leder 114 907 6,61 % 6,61 %

Jon Jåre Aarskog, Board member 98 283 5,65 % 5,65 %

Arnfinn Hjellen 89 715 5,16 % 5,16 %

Frank Skorgen 76 195 4,38 % 4,38 %

Markus Tronich 69 856 4,02 % 4,02 %

Kjetil Hjellegjerde 62 341 3,58 % 3,58 %

Håvard Valderhaug 55 424 3,19 % 3,19 %

Hallgeir Øvrebust 52 650 3,03 % 3,03 %

Lars Sæther 52 297 3,01 % 3,01 %

Audun Krutvik 48 488 2,79 % 2,79 %

Bjørn Vanebo 48 488 2,79 % 2,79 %

Trond Langørgen 45 024 2,59 % 2,59 %

Ragnhild Sunde 43 992 2,53 % 2,53 %

John Andre Tran 43 605 2,51 % 2,51 %

Bjørn Vidar Remme 41 907 2,41 % 2,41 %

Morten Bremseth 41 561 2,39 % 2,39 %

Egil Gussiås, Board member 36 366 2,09 % 2,09 %

Eirik Nesje 31 171 1,79 % 1,79 %

Halvard Aarønes 25 975 1,49 % 1,49 %

Total 1 207 009 69,41 % 69,41 %

Other 532 277 30,60 % 30,59 %

Total number of shares 1 739 286 100,00 % 100,00 %

Shareholders per 31.12:

PARENT COMPANY


www.meritglobe.com

NORWAY BERGEN GJØVIKMOLDEOSLOSANDNESTRONDHEIMÅLESUND

Phone: +47 400 03 650E-mail: [email protected]

SWEDENGÖTEBORGKALMARLINKÖPINGMALMÖSTOCKHOLM

Tel.: +46 8 410 234 00Phone: [email protected]

FINLAND HELSINKITURKU TAMPERE Phone: +358 290 091 040E-mail: [email protected]

DENMARKODENSE

Phone: +45 42 14 91 20E-mail: [email protected]

GERMANYLANDSHUT

Phone: +49 176 832 799 44E-Mail: [email protected]

SWITZERLANDBASELZUG


CZECHBRNO


ITALY

Phone: +41 78 688 9912E-Mail: [email protected]

UK MANCHESTER

Phone: +44 78 94 414026E-mail: [email protected] Infor Business partner covering Great Britain, Ireland, the Netherlands, Belgium and Luxemburg.

Merit annual report 2012 (English)

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Transcript of Merit annual report 2012 (English)