Business Radar | Wilhelmsen Ships Service B.V.

Page 1

Enable. Enhance.Simplify. Annualreport 2019

Page 2

Page 3

Page 4

Key figures – consolidated accounts 2019 2018 2017 2016 2015 2014 INCOME STATEMENT Total income * USD mill 850 871 793 930 3 173 3 693 Operating profit before amortisation and impairment (EBITDA)* USD mill 149 78 198 116 398 566 Operating profit * USD mill 78 36 176 94 165 381 Profit/(loss) before tax * USD mill 144 (86) 253 151 48 273 Net profit/(loss) * USD mill 130 (75) (2) 251 57 292 Net profit/(loss) after non-controlling interests * USD mill 114 (69) (64) 201 54 241 BALANCE SHEET Non current assets USD mill 2 638 2 467 2 637 3 781 3 566 3 687 Current assets USD mill 655 612 636 914 1 120 1 152 Equity USD mill 2 082 2 017 2 188 2 492 2 206 2 329 Interest-bearing debt ** USD mill 583 533 601 1 533 1 660 1 693 Total assets USD mill 3 293 3 079 3 273 4 695 4 686 4 839 KEY FINANCIAL FIGURES Cash flow from operation (1) USD mill 98 62 70 420 258 241 Liquid funds at 31 December (2) USD mill 255 227 268 580 638 688 Liquidy ratio (3) 1.2 1.1 1.4 1.9 1.7 2.1 Equity ratio (4) % 63% 66% 67% 53% 47% 48% YIELD Return on equity (5) % 6% (4%) (3%) 11% 2% 13% KEY FIGURES PER SHARE Earnings per share (6) USD 2.46 (1.48) (1.38) 4.34 1.16 5.20 Operating profit before amortisation and impairment (EBITDA) per share (7)* USD 3.24 1.68 4.26 2.51 8.55 12.18 Average number of shares outstanding Thousand 45 948 46 404 46 404 46 404 46 404 46 404 Dividend per share NOK 5.00 5.50 5.00 5.00 5.00 5.00 Definition (1) Net cash flow from operating activities (2) Cash, bank deposits and current financial investments (3) Current assets divided by current liabilities (4) Equity in percent of total assets (5) Profit after tax divided by average equity (6) Profit for the period after non-controlling interests, divided by average number of shares Earnings per share taking into consideration the number of shares reduced for own shares (7) Operating profit for the period adjusted for depreciation and impairments of assets, divided by average number of shares outstanding * Figures for 2016 are restated with Wilh. Wilhelmsen ASA reported as discontinued operation. Figures for 2015, and 2014 are according to the proportinate method. ** Figures for 2019 including leasing debt of USD 181 mill.

Page 5

Highlights for 2019 Positive Developing new Strong increase in development in marine products vessels on full operating result and services technical management Net gain Share buy back and 6% on financial dividend of NOK 5.00 shareholder assets per share return

Page 6

a ES oe A .. ci "ri i...è CSS "i dA ani . A Ee a: y a ES 7 nn Nu

Page 7

Content 10 1 – Group CEO’s statement 12 Despite black swans and market corrections, our long-term ambition is unchanged 16 2 – Directors’ report 18 Main development and strategic direction 19 Financial results 21 Business segments Maritime services Supply services Holding and investments 24 Risk review 25 Health, working environment and safety 26 Organisation and people development 27 Corporate governance 28 Sustainability 29 Allocation of profit, dividend and shares 29 Outlook 38 3 – Accounts and notes 40 Wilh. Wilhelmsen Holding ASA group 40 Income statement 40 Comprehensive income 41 Balance sheet 42 Cash flow statement 43 Equity 44 Accounting policies 50 Notes 92 4 – Accounts and notes parent company 94 Wilh. Wilhelmsen Holding ASA parent company 94 Income statement 94 Comprehensive income 95 Balance sheet 96 Cash flow statement 97 Notes 114 Statement on the remuneration for senior executives 116 Auditor’s report 121 Responsibility statement 124 5 – Corporate governance 126 Corporate governance report 134 6 – Corporate structure 138 Wilh. Wilhelmsen Holding group main structure 138 Holding and investments segment 139 Supply services segment 140 Maritime services segment

Page 8

Enabling sustainable global trade

Page 9

Back in 2005, we developed the Orcelle concept – a zero emissions vessel. At the time, we said this could become a reality by 2025, which quite frankly seemed very far away. It seemed far not just in time, but in terms of both technology and the industry’s ability and willingness to invest in the changes required. Orcelle was a drastic step in a sustainable future, especially in 2005 terms. Fast forward to 2020 and not only is 2025 right on our doorstep, but so are the elements of the vessel and the industry, which is ripe for change. For us, enabling sustainable global trade is not just about managing what is right in front of us, it’s also about shaping what could come next.

Page 10

Page 11

1 Group CEO’s statement

Page 12

Group Group CEO’s statement Despite black swans and market corrections, our long- term ambition is unchanged We believe in the positive benefits global trade can have for society – and we believe global trade will grow. At the same time, continued economic growth and increased global trade cannot happen at the expense of the environment or our future generations’ needs. My ambition is for the Wilhelmsen group to be at the forefront, enabling sustainable global trade. I don’t believe in any app or a technology that will substantially reduce the need for, or replace, global trade in the decades to come. We must therefore look at how we can contribute to making global trade truly sustainable through other means. Long-term goals drive actions now We support the Paris agreement and a net zero greenhouse gas emission target for society. With expectations and requirements set by governments, international organisations, other players in our industry, and not least our customers, we need to be able to step up and play our part. I don’t believe we will reach our ambitions by hoping for the best. Change will require substantial investments, dedication, and hard work. Through our offshore wind investments, 3D printing, Massterly project with autonomous ships, smart ropes, and zero emission terminals to mention just a few examples, we have shown that we are able to deliver sustainable products and services here and now. By 2030, I envision that we will have further developed these solutions and that a substantial part of our group portfolio will be related to safer, smarter and greener offerings. With our expertise, resources, and ambitions we have the best foundation to take the lead, or be active in contributing to reaching many of the ambitious, global targets set for the next decades. These include a 50% reduction of greenhouse gas emissions from shipping as a whole and a substantial increase in the use of renewable energy. We also see ourselves continuing to play an active role in reducing marine litter and pollution. And last, but 12 Wilh. Wilhelmsen Holding not least, we are well-positioned to contribute to search for new potential in the unexplored areas of the ocean. We will utilise technology, legal requirements, and changing customer and supplier behaviour to ensure we continue to deliver operational excellence to our customers. At the same time, we need to accelerate the transformation of our businesses to meet tomorrow’s expectations. We will also continue to take advantage of our global presence and network, competence, brand, and culture, and retain, attract and develop the people necessary to take us into the future. A global team effort The UN Sustainable Development Goals help us to imagine where we need to be heading and kick-start a healthy and much needed discussion on the challenges we need to begin to tackle, hurdles we need to overcome. The goals also help us see and explore new business opportunities. employees Our long-term strategy is securely aligned with the goals. However, the challenges we are facing will not be solved by any single person, company or government alone, this requires a global effort. In addition to cross-company collaboration within the group, I foresee a stronger cooperation within the maritime industry and even across industries to truly make a significant impact. My commitment We believe the potential for creating value in the ocean-based industries will increase in the coming decades. That is why we want the world to see the oceans and the sustainable players in the ocean industry as part of the solution to tackle some of our times biggest challenges. I am committed to ensuring that we, together with our customers and business partners, take our share of the responsibility. We already have 159 years of experience in changing and adapting to requirements from the society, our customers, and our employees. With the current momentum from customers, employees, financial institutions, shareholders and other industry players, I see a stronger commitment than ever to explore and invest in tomorrow’s solutions. Together we will enable sustainable global trade and shape the maritime industry. ASA Annual Report 2019

Page 13

When I started writing this statement, the COVID-19 outbreak was already present in parts of the world. However, I don’t think any of us could have foreseen the seismic impact the virus would have on the world. Now, at the beginning of April 2020, it is impossible to predict what its final and long-term effects will be. I have decided to still share my original thoughts about the future, but also recognise the need to add one reflection. The corona virus can be seen as the ultimate ‘acid test’ for just how we want to do business when things are better and back to ‘normal’. Who is – in spite of the current situation – still committed to contributing to the Sustainable Development Goals and will continue to walk the talk? Time will tell. Despite the consequences of COVID-19, we have a long- term outlook. We will do what we can to get through with as limited an impact on our employees, customers, and shareholders as possible. Our and my commitment is still to shape the maritime industry and enable sustainable global trade. Stay safe. Thomas Wilhelmsen, group CEO

Page 14

The decarbonisation of shipping

Page 15

By 2050, the International Maritime Organization’s (IMO) future emissions strategy calls for a reduction in total greenhouse gas (GHG) emissions by at least 50%, compared with 2008 – while simultaneously pursuing efforts to eliminate them entirely. The decarbonisation challenge for shipping is disruptive and transformational. It will require massive investments and will affect every part of the industry and value chain. We have a proactive approach, seeking out opportunities for new ventures and partnering with other serious actors to develop and advance new technologies and energy solutions. In addition to enabling modal shifts from road to sea and exploring opportunities linked to autonomous shipping, we are accelerating digitalization, connectivity and energy efficiency for the maritime industry.

Page 16

Page 17

2 Directors’ report

Page 18

Group Directors’ report Directors’ report for 2019 Wilh. Wilhelmsen Holding ASA Highlights Main development and strategic direction The maritime services subsidiaries deliver The Wilh. Wilhelmsen Holding group value creating solutions to the global for 2019 (Wilhelmsen or group) is an industrial holding merchant fleet, focusing on marine products, company within the maritime industry. The ships agency and ship management. In 2019, • Drive to enable sustainable global trade group activities are carried out through fully further progress was made on spare parts 3D • Positive development and partly owned entities, most of which printing, cargo hold cleaning chemicals, rope in operating result are among the market leaders within their technology, and vessel performance systems. • Net gain on financial asset • Developing new marine segments. Wilhelmsen’s ambition is to develop The gradual improvement in underlying products and services companies within maritime services, shipping, operating margin continued in 2019, • Strong increase in logistics, and related infrastructure through supported by an increase in sale of marine vessels on full technical active ownership. products and in vessels on full technical management • Share-buy back management. • Paid dividend of The markets in which Wilhelmsen operates had NOK 5.00 per share mixed development in 2019. Global trade faced For supply services, the offshore oil and gas • 6% shareholder return headwind, effected by geopolitical tension and industry remains the largest customer base, the need to adjust to a more sustainable future. but with a gradual shift into other areas While reduced volumes hit car carriers and such as governmental services and offshore other operators, the general shipping market wind. In 2019, further expansion was made improved on the back of a tighter tonnage in offshore wind and a pilot was initiated to situation. Environmental related measures develop liquid hydrogen supply chain for such as IMO 2020 created both operational maritime applications in Norway. Underlying challenges and new business opportunities. operating profit was some down for the year. In this market environment, the Wilhelmsen The group’s investment activities, including operating companies continued to do what ownership in Wallenius Wilhelmsen ASA, they do best: delivering premium services and Hyundai Glovis and Qube, made a strong new sustainable solutions to its customers, contribution to the group’s results in 2019. while at the same time tightly managing the While the uplift in share price for the two cost base. This resulted in an improved largest investments was modest, cash flow operating profit for the year, both in reported improved strongly through introduction of figures and when adjusting for non-recurring dividend in Wallenius Wilhelmsen and a solid items. gain from sale of some of the Qube shares. 18 Wilh. Wilhelmsen Holding ASA Annual Report 2019

Page 19

Directors’ report Group The Wilhelmsen group maintains a strong growth and a healthy company culture. Good equity base. In 2019, total equity was up 3% governance contributes to reduced risk and and equity to holders of parent reached creates value over time for shareholders USD 1 880 million. A strong cash flow from and other stakeholders. The board further operation and an increase in financial assets acknowledges that sustainability is a vital value supported a total USD 56 million pay- prerequisite for Wilhelmsen to be a profitable out to Wilhelmsen shareholders in form of and responsible player in the industry and dividend and buy-back of shares. Total assets society. In 2019, employee engagement, were up 7% for the year partly due to IFRS 16 ethics and anti-corruption, health and safety, accounting, reducing the group equity ratio responsible procurement, cyber security and to a still strong 63%. data protection, climate risk, and partnerships for sustainable innovations received particular Liquidity also remains strong. Cash and attentions. cash equivalents totalled USD 153 million by end of 2019, increasing to USD 930 million Financial results if including financial investments. The debt Income statement repayment profile for the group remains healthy. Wilhelmsen group 2019 2018 (USD mill) Wilhelmsen’s goal is to provide shareholders Total income 850 871 with a high return over time through a – of wich operating revenue 836 867 combination of rising value for the company’s – of wich gain/on sale of assets 14 4 shares and payment of dividend. The objective EBITDA 149 78 is to have consistent yearly dividend paid EBITDA adjusted for IFRS 16 112 78 twice annually. Operating profit/EBIT 78 36 Share of profit from associates 49 36 The long-term incentive plan for the Change in fair value financial assets 34 (116) executive management is based on a positive Other financial income/(expenses) (17) (41) development in the group’s value adjusted Profit/(loss) before tax/EBT 144 (86) equity above set thresholds. This aligns the Tax income/(expenses) (15) 12 long-term interests of shareholders and Profit/(loss) for the period 130 (75) management. The same measures have Profit/(loss) to owners of the parent 114 (69) also been introduced as part of the short- EPS (USD) 2.46 (1.48) term incentive plan for holding company Other comprehensive income (3) (53) employees. Total comprehensive income 127 (128) Tot. comprehensive income owners of parent 111 (119) After a fall in 2018, the WWI/WWIB share price Total assets 3 293 3 079 recovered some lost ground in 2019. Total Equity parent 1 880 1 821 return (including dividends reinvested on Total equity 2 082 2 017 ex-dates) was 5.8% for the WWI share and 7.2% Equity ratio 63% 66% for the WWIB share, trailing the 16.5% increase in the Oslo Børs Benchmark index (source Oslo Børs Exchange Annual statistics). Total income for Wilhelmsen was USD 850 million in 2019, down 2% from 2018. The A total dividend of NOK 5.00 per share was reduction was due to lower operating revenue paid in 2019. A first dividend of NOK 2.50 was from supply services, partly offset by higher paid in May, followed by a second dividend of income from maritime services. NOK 2.50 paid in November. This represented a dividend yield of 3.1% based on the average EBITDA WWI/WWIB share price by the end of 2018. (USD mill) 2019 2018 Reported 149 78 2019 was the year when the global maritime industry fully embraced the challenges faced 1H’18 M&A cost related to Drew (27) by a changing climate. Wilhelmsen has for Q1’19 sales gain Maritime services1 6 years been in the front of this development, Total material non-recurring items 6 (27) with present projects including energy Adjusted 143 105 efficient vessel design and operation, and IFRS 16 effect 37 modal shift from land to shipping. Adjust including IFRS 16 effect 106 105 The board believes sound corporate 1) Sale of property is a core activity for supply services, with any governance is the foundation for profitable gain/loss not adjusted for. Wilh. Wilhelmsen Holding ASA Annual Report 2019 19

Page 20

Group Directors’ report Group EBITDA came in at USD 149 million operating cash flow remained below EBITDA for the year, up 91%. Adjusting for non- level partly due to an increase in working recurring items and IFRS 16, EBITDA was capital and inventory. stable. Adjusted EBITDA was up for maritime services, offsetting a reduction for supply Cash flow services and holding and investments. (USD mill) 2019 2018 Share of profit from associates was USD Cash and cash equivalents 1.1 140 167 49 million for the year. Of this, Wallenius Wilhelmsen ASA contributed with USD From operating activities 98 62 39 million, up 66% from last year. Maritime services 83 21 Supply services 32 44 Other operating (17) (3) Change in fair value financial assets was positive with USD 34 million for the year. From investing activities 81 40 An uplift in value of the investments in Hyundai Glovis and Qube was partly offset From financing activities (165) (128) by a full write down of the Survitec Dividend and share buy back parent (56) (31) Net debt (68) (59) investment in the second quarter. Other financing (42) (39) Other financials were a net expense of USD Net cash flow 14 (26) 17 million in 2019. A gain on current financial Cash and cash equivalents 31.12 153 140 investments and dividend income contributed positively but was more than offset by interest expenses and a net loss on financial Cash flow from investing activities was instruments and currencies. positive with USD 81 million for the year. Dividend from joint ventures and associates Tax was included with an expense of USD and net proceeds from sale of financial 15 million, mainly related to maritime investments continued to exceed net services. investment in fixed assets. Net profit after tax and minority interests was Cash flow from financing activities was USD 114 million in 2019 compared with a USD negative with USD 165 million in 2019. Net 69 million net loss in 2018. debt repayment counted for the largest share of net cash outflow, followed by share buy Other comprehensive income for the year backs and dividend to shareholders, and was a loss of USD 3 million, compared with ordinary interest payments. a loss of USD 53 million in the previous year. This mainly reflected currency translation Liquid assets differences on non-USD assets and liabilities (USD mill) 2019 2018 when converting into USD. Cash and cash equivalents 153 140 Total comprehensive income for 2019 was of which maritime services 116 110 USD 127 million, of which USD 111 million of which Supply services 7 12 was attributable to owners of the parent. The of which holding and investments 31 18 Current financial investments 102 88 corresponding figures for 2018 was a loss of Financial assets to fair value 675 650 USD 128 million and a loss of USD 119 million respectively. Total 930 877 Cash flow, liquidity and debt The group had cash and cash equivalents of By the end of 2019, the group had liquid USD 153 million by the end 2019, up from USD financial assets of USD 930 million. In 140 million by the end of 2018. addition to cash, this included current financial investments and non-current The net increase in cash and cash equivalents financial assets reported as financial assets of USD 14 million for the year followed a to fair value. strong contribution from operating and investing activities partly offset by financing The parent company carries out active activities. financial asset management of part of the group’s liquidity. The current financial Cash flow from operating activities was investment portfolio includes listed equities positive with USD 98 million in 2019, up and investment grade bonds. The value of the from USD 62 million the previous year. The portfolio amounted to USD 102 million at the 20 Wilh. Wilhelmsen Holding ASA Annual Report 2019

Page 21

Directors’ report Group end of 2019, up from USD 88 million one year by increased sale of marine products in the Maritime earlier. second half, a steady growth of new vessels on management, and a strong USD. services The group’s investments classified as financial • Ships service assets to fair value had a combined value The maritime services EBITDA margin was • Ship management • Insurance services of USD 675 million by the end of the year, 17.4% in 2019. When adjusting for a sales gain, up from USD 650 million at the end of 2018. the EBITDA margin was 16.6%. The largest investments were the ~12% shareholding in Hyundai Glovis (held through Maritime services Treasure ASA) and the ~2.5% shareholding in (USD mill) 2019 2018 Qube. The ~20% shareholding in Survitec was valued at nil by the end of the year. Total income 591 582 – Ships services 534 540 – Ship management 56 41 The main group companies fund their – Other/eliminations 0 0 investments and operations on a standalone EBITDA 103 42 basis, with no recourse to the parent company. – EBITDA margin (%) 17% 7% The primary funding source is the commercial EBITDA adjusted for IFRS 16 90 42 bank loan market. – Adjusted EBITDA margin (%) 15% 7% Operating profit/EBIT 73 26 Interest-bearing debt – EBIT margin (%) 12% 4% 2019 2018 (USD mill) Share of profit from associates 4 4 Maritime services 247 197 Change in fair value financial assets (27) (61) Supply services 401 330 Other financial incom/(expenses) (24) (37) Holding and investments 48 23 Tax income/(expense) (12) 13 Elimination (21) (17) Profit/(loss) 15 (55) Total 675 533 – Profit margin (%) 3% 9% Leasing debt 181 – Non controlling interest 1 2 Total excluding leasing debt 494 533 Operating profit/EBIT 14 (56) As of 31 December 2019, the group’s total Share of profit from associates was stable at interest-bearing debt was USD 675 million, USD 4 million. compared with USD 533 million by end 2018. The increase followed reporting of leasing Change in fair value financial assets was a debt as interest bearing debt from 1 January loss of USD 27 million in 2019, which followed 2019 in accordance with IFRS 16. When a loss of USD 61 million in 2018. The losses excluding leasing debt, interest bearing debt for both years related to the investment in was down in 2019. Survitec Group, which was valued at nil by the end of 2019. Going concern assumption Pursuant to section 4, sub-section 5, confer Other financial income/expenses for maritime section 3, sub-section 3a of the Norwegian services amounted to an expense of USD Accounting Act, it is confirmed that the 24 million, compared with an expense of USD annual accounts have been prepared under 37 million in 2018. The improvement followed the assumption that the enterprise is a going reduced losses on currency and financial concern and that the conditions are present. instruments, included with an expense of USD 7 million in 2019 compared with an Maritime services expense of USD 23 million the previous year. The maritime services segment includes ships service, ship management and other maritime Tax was an expense of USD 12 million in services activities. 2019, compared with an income of USD 13 million the previous year. Tax in 2019 was up Total income for maritime services was USD partly due to withholding tax and a negative 591 million in 2019, up from USD 582 million adjustment in tax accruals, while tax in 2018 in 2018. benefitted from a positive adjustment in deferred tax assets. EBITDA for the year was USD 103 million, up from USD 42 million. When adjusting Net result after tax and non-controlling for material non-recurring items and IFRS interests was a profit of USD 14 million in 2019 16, EBITDA was up 23% for the year. The compared with a loss of USD 56 million in the underlying improvement was supported previous year. Wilh. Wilhelmsen Holding ASA Annual Report 2019 21

Page 22

Group Directors’ report Supply Ships service Supply services 2019 2018 (USD mill) Wilhelmsen Ships Service is a global provider services of standardised product brands and service Total income 255 285 – NorSea Group 251 275 • NorSea Group solutions to the maritime industry, focusing on – Other/eliminations 4 11 (owned ~75.2%) marine products, marine chemicals, maritime • WilNor Governmental EBITDA 59 51 logistics and ships agency. Ships service is fully Services – EBITDA margin (%) 23% 18% owned by Wilhelmsen. EBITDA adjusted for IFRS 16 41 51 Total income from ships service was USD – Adjusted EBITDA margin (%) 16% 18% 534 million in 2019, down 1% from the previous Operating profit/EBIT 22 25 year. Income from marine products increased, – EBIT margin (%) 9% 9% offsetting a reduction in non-marine income. Share of profit from associates 6 9 Income from agency services was stable. Other financial incom/(expenses) (19) (15) Tax income/(expense) (3) (4) EBITDA was up for the year, also when Profit/(loss) 5 15 adjusting for IFRS 16. – Profit margin (%) 2% 5% – Non controlling interest 1 4 Ship management Profit/(loss) to owners of the parent 4 11 Wilhelmsen Ship Management provides full technical management, crewing and related services for all major vessel types, and includes Share of profit from associates was USD 50% of NorSea Wind. Ship management is 6 million, down from USD 9 million. fully owned by Wilhelmsen. Net financial items were an expense of Total income for ship management was USD USD 19 million, and tax was an expense of 56 million in 2019, up 37%. Excluding sales USD 4 million in 2019. gains, income was up 22%. The increase in income followed a steady growth in vessels Net profit after minority interests was on full technical management and upstart of USD 4 million for the year, down from USD new offshore wind activities. 11 million in 2018. EBITDA was up for the year, also when NorSea Group AS excluding sales gains and adjusting for IFRS 16. NorSea Group provides supply bases and integrated logistics solution to the offshore Wilhelmsen Insurance Services industry. Wilhelmsen owns ~75,2% of NorSea Wilhelmsen Insurance Services provides Group. marine and non-marine insurance solutions for internal and external clients. Insurance Total income for NorSea Group was USD services is fully owned by Wilhelmsen. 251 million in 2019, a 9% reduction from the previous year mainly due to a depreciation of Total income for insurance services was USD NOK versus USD. Income from offshore supply 3 million in 2019, up 2% from the previous year. base activities was up, while income from project related activities was down. EBITDA also improved for the year. EBITDA was up for the year, but down if Supply services adjusting for IFRS 16. The supply services segment includes NorSea Group, WilNor Governmental Services and WilNor Governmental Services other supply services activities. WilNor Governmental Services provides military logistics services in Norway and Total income for supply services was USD 255 internationally. Wilhelmsen owns 51% of the million in 2019. This was down from 285 million company directly, with the remaining 49% in 2018 which included services provided for owned through NorSea Group. the NATO exercise Trident Juncture. Total income for WilNor Governmental EBITDA came in at USD 59 million, up from Services was USD 4 million in 2019, down USD 51 million. When adjusting for IFRS 16, from USD 11 million in the previous year EBITDA was down 19%. Contribution from which included activities related to the offshore supply base activities improved, NATO exercise Trident Juncture 2018. while new offshore wind activities had a negative impact on results. EBITDA was down for the year. 22 Wilh. Wilhelmsen Holding ASA Annual Report 2019

Page 23

Directors’ report Group Holding and investments Wallenius Wilhelmsen ASA Holding and The holding and investments segment include Wallenius Wilhelmsen ASA is a global provider investments in Wallenius Wilhelmsen ASA of ocean and land-based logistics services investments and Treasure ASA, financial assets, and other towards car and ro-ro customers and is listed • Wallenius Wilhelmsen ASA holding and investments activities. on Oslo Børs. Wilhelmsen owns ~37,8% of the (owned ~37.8%) • Treasure ASA company, which is reported as associate in (owned ~73.5%) Wilhelmsen’s accounts. • Financial assets Holding and investments 2019 2018 (USD mill) Total income for Wallenius Wilhelmsen ASA Total income 11 11 was USD 3 909 million in 2019, a 4% reduction. – Operating revenue 11 11 – Gain on sale of assets 0 0 Income was down for both the ocean and landbased segments. Ocean income was down EBITDA (12) (14) driven by 6% lower volumes, but positively EBITDA adjusted for IFRS 16 (18) (14) impacted by higher net freight per CBM and Operating profit/EBIT (17) (15) increased fuel compensation. Landbased Share of profit from associates 39 23 income was down 1%. – Wallenius Wilhelmsen ASA 39 23 – Other/eliminations 0 (1) EBITDA ended at USD 805 million in 2019. Change in fair value financial assets 61 (56) Adjusted for IFRS 16, EBITDA was USD – Hyundai Glovis 37 (53) 639 million, up from USD 601 million in – Qube Holdings/other financial assets 24 (3) 2018. The results were positively impacted Other financial income/(expenses) 26 10 by the performance improvement initiatives – Investment management (Holding) 12 (6) within the ocean segment leading to more – Hyundai Glovis 13 12 efficient operations. Underlying results in the – Qube Holdings/other financial assets 3 5 – Other financial income (1) (1) landbased segment were down compared to 2018, driven by higher costs. Tax income/(expense) 1 3 Profit/(loss) for the period 109 (35) Wilhelmsen’s share of profit from Wallenius Wilhelmsen ASA was USD 39 million in 2019, – Non controlling interest 13 (12) Profit/(loss) to owners of the parent 96 (23) up from USD 23 million in 2018. The Wallenius Wilhelmsen ASA share price Total income for the holding and investments was down 26.5% in 2019, closing at NOK segment was USD 11 million in 2019, on par 21.82. As of 31 December 2019, the market with the previous year. value of Wilhelmsen’s investment was USD 398 million, while the book value of the EBITDA was a loss of USD 12 million, shareholding was USD 864 million. compared with a loss of USD 14 million in 2018. Adjusting for IFRS 16, EBITDA was Wallenius Wilhelmsen ASA paid USD 0.12 per down. share in dividends in 2019, with Wilhelmsen receiving USD 19 million. Share of profit from associates was USD 39 million for the year, up from USD Treasure ASA 23 million. This mainly related to the 37.8% Treasure ASA holds a 12.04% ownership interest ownership in Wallenius Wilhelmsen ASA. in Hyundai Glovis and is listed on Oslo Børs. Wilhelmsen owns ~73,5% of Treasure ASA. Change in fair value financial assets was a gain of USD 61 million in 2019, mainly related Treasure ASA’s main source of income is to the shareholdings in Hyundai Glovis and the dividend received from Hyundai Glovis. Qube. This compares with a net loss of USD This is reported as financial income in 56 million in 2018. Wilhelmsen’s accounts. Dividend received in 2019 was USD 13 million, in line with the Net financials were an income of USD previous year. 26 million, up from USD 10 million. The improvement followed a gain on investment The value of Treasure ASA’s investment in management versus a previous year loss, Hyundai Glovis was USD 560 million by the while dividend income was fairly stable. end of 2019, up from USD 523 million by the end of the previous year. The USD 37 million Net profit/(loss) after tax and minorities was a increase in value in 2019 was accounted for as profit of USD 96 million compared with a loss change in fair value financial assets. In 2018, of USD 23 million in the previous year. the value was down with USD 53 million. Wilh. Wilhelmsen Holding ASA Annual Report 2019 23

Page 24

Group Directors’ report The Treasure ASA share price was up 17.7% companies and investments exposed to the for the year, closing at NOK 13.65. As of global economy and world merchandised 31 December 2019, the market value of trade. Wilhelmsen’s shareholding in Treasure ASA was USD 249 million. From an operating perspective, ships service and ship management (both maritime In 2019, Treasure ASA paid total dividend services) and NorSea Group (supply services) of NOK 0.30 per share. This was unchanged are the most significant activities and from the previous year. Total cash proceeds to exposures. Wilhelmsen was USD 6 million. From an investment perspective, Wallenius During the third quarter, Treasure ASA bought Wilhelmsen ASA and Hyundai Glovis are the 0.465 million own shares in the market at NOK most significant exposures. 13.50 per share. Wilhelmsen maintained a holding of 160 million shares in Treasure ASA. The changes in the Wilhelmsen group undertaken during recent years has created Financial investments a more balanced portfolio. Financial investments include cash and cash equivalents, current financial investments and Internal control and risk management other financial assets held by the parent and The group is committed to manage risks in fully owned subsidiaries. a sound manner related to its businesses and operations. To accomplish this, the The value of the current financial investment governing concept of conscious strategy and portfolio held by the holding company was controllable procedures for risk mitigation USD 102 million by the end of the year, ultimately provides a positive impact to compared with USD 88 million one year earlier. profitability. The responsibility of governing The portfolio primarily included listed equities boards, management and all employees are and investment-grade bonds. Net income from to be aware of the current environment in investment management was a gain of USD which they operate, implement measures to 12 million in 2019, compared with a loss of mitigate risks, prepare to act upon unusual USD 6 million in 2018. observations, threats or incidents, and respond to risks to mitigate consequences. Change in fair value of the shareholdings in The group has put in place a risk monitoring Qube Holdings Ltd and other non-current process based on identification of risks for financial assets was a gain of USD 13 million in each business unit, and with a group risk 2019, compared with a gain of USD 12 million matrix presented to the board on a quarterly in 2018. Other financial income from the basis for review and necessary actions. investments were USD 3 million, down from USD 5 million. Financial assets to fair value Market risk reported under the holding and investments Demand for the group’s service offerings are, segment was USD 109 million at the end of to various degree, correlated with the general 2019 (excluding shareholding in Hyundai global economic activity and in particular Glovis), up from USD 100 million one year trade in commodities and manufactured earlier. During the year, Wilhelmsen reduced goods. Due to measures implemented to its shareholding in Qube from 50 million to contain spread of covid-19, global economic 40 million shares. development is presently very uncertain. Other holding and investments activities Maritime services’ exposure is to the general Holding/other activities include general shipping market. In 2019, the shipping market holding activities and certain non-financial improved from previous low levels, but investments, including Raa Labs AS (100% differences in sentiment between the various owned), Massterly AS (50%) and Dolittle AS market segments remains. Slower trade, low (46%). newbuild orderbooks and new environmental regulations will continue to impact the Net cost of other holding and investment shipping market over the next years. Short activities remained stable. In 2019, Wilhelmsen term, measures to contain covid-19 will have increased the ownership in RaaLabs from 50% a significant impact on several shipping to 100%. segments. Risk review Supply services’ exposure is mainly to the The Wilhelmsen group consists of operating Norwegian offshore sector, and indirectly 24 Wilh. Wilhelmsen Holding ASA Annual Report 2019

Page 25

Directors’ report Group towards the global oil and gas market. After autumn. After a fall back, the USD has again a downturn in 2016/17, the market sentiment strengthened in the first quarter of 2020. gradually improved until recent turmoils. In 2019, the oil price continued to fluctuate Investment exposure is skewed towards mainly within a USD 55-75 band, ending close the global automotive and high and heavy to where it started. During the first quarter of markets, through the investment in Wallenius 2020, the oil price has fallen significantly. Wilhelmsen ASA and, indirectly, Hyundai Glovis. During 2019, global automotive sales Interest rates remains at historic low levels stalled, and market uncertainty increased. The in most markets, and with rate movements in automotive industry is sensitive to present US and certain other markets shifting from disruptions to the global supply chain. From upwards to downwards during 2019. Further a geographical perspective, Wilhelmsen’s reduction has taken place in 2020. exposure towards Korea and Oceania exceeds a neutral position due to the significant The global equity market had a strong reliance on these markets of Wallenius performance in 2019, supported by low interest Wilhelmsen ASA, Hyundai Glovis and Qube rates. The start of 2020 has seen a reversal with Holdings. a sharp fall in global market values. Operational risk The group’s exposure to and management of The various operating entities of the group financial risk are further described in Note are exposed to and manage risk specific to the 19 to the 2019 group accounts. This includes markets in which they operate. The general foreign exchange rate risk, interest rate risk, risk picture broadly remains unchanged from investment portfolio risk, credit risk and previous years. liquidity risk. Through its global reach and broad product All group companies were compliant with their spectre, maritime services operations are loan covenant requirements in 2019. exposed to a wide range of operational risk factors. These are, however, mainly related to Climate risk local markets and specific product offerings. In 2019, a mapping has been initiated of While any such incident will normally have climate risk management within main group limited global consequences, a major accident, operating companies and for the holding turbulence within a key geographical market, company. The mapping is made in accordance product quality issues, a cyber attack or other with the recommendations of the Task force on disruption of IT systems, a pandemic, or Climate-related Financial Disclosures (TCFD). loss of main customers may affect the wider The initial findings are that climate risk is not financial and operational performance. systematically managed, and that future cost may be underestimated. Supply services operations will have a similar risk exposure as maritime services, though The work to identify, measure and manage mainly related to the offshore industry and the climate risk will continue. northern European region. In 2019, activity within the offshore wind sector has increased. Health, working environment, and safety Working environment and occupational health The group has established a range of measures The company conducts its business with in order to avoid and, potentially, mitigate the respect for human rights and labour standards, consequences of operational risk incidents. In including conventions and guidelines related 2019, cyber risk has received special attention. to the prevention of child or forced labour, minimum wage and salary, working conditions Financial risk and freedom of association. Employees and Wilhelmsen remains exposed to a wide range external stakeholders are encouraged to report of financial risk, either on a general basis or on non-compliant behaviour through the related to specific group companies. This group’s global whistleblowing system. includes exposure to currencies, oil prices, equity markets and interest rates, as well as Exposure hours credit risk and liquidity risk. In 2019, there were around 38.8 million exposure hours (work hours) in the group. In the currency markets, the USD continued Vessel based operations accounted for 77% of to strengthen against among others EUR total exposure hours and onshore operations and NOK in 2019, reaching a peak during the accounted for 23%. Wilh. Wilhelmsen Holding ASA Annual Report 2019 25

Page 26

Group Directors’ report Sickness absence and occupational disease Near miss incidents and safety observations The group has a variety of ongoing initiatives Safety observation reporting on vessel to maintain a healthy work environment, operations remains consistent with 9 782 for example focusing on monitoring and observations reported for the year compared reporting absence cases, health and wellness to 9126 in 2018. awareness events, annual health checks, employee assistance program, adapted Safety observation and risk assessment working hours, social activities, employee reporting onshore improved in 2019, engagement surveys and opportunities for mainly due to recording of the Take5 safety personal development. assessments conducted by Ships Agency employees. 5 414 observations were reported The sickness absence rate for onshore versus 3 597 in 2018. operations was 1.68%, in line with previous year. There were no occupational disease All reported near misses were investigated to cases recorded in 2019. avoid similar incidents in the future, improve necessary training and awareness measures, Turnover and improve control measures. The turnover rate for employees in the parent company and fully owned subsidiaries was Sharing of safety moments and lessons 12.71% in 2019, in line with previous years. The learned was increased. Reporting and turnover rate varies from segment to segment. utilization of analytics to identify key potential improvement areas continues to Lost time injuries and total recordable cases be in focus. There were zero work related fatalities in 2019. Working committee and executive committee For vessel-based operations, several safety The management cooperates closely with campaigns aimed at creating safer and employees through several bodies, including healthier working conditions on board the the joint working committee and the executive vessels continued during the year. Mental committee for industrial democracy in health wellbeing was one of the campaigns foreign trade shipping. This cooperation gives focusing on stress, sleep and overall valuable input to solve company related issues psychological health of the seafarers. in a constructive way. In 2019, the lost-time injury frequency (LTIF) The joint working committee discusses issues rate was 0.32, within the target not to exceed related to health, work environment and 0.50. The total recordable case frequency safety. The executive committee for industrial (TRCF) rate was 1.46 within the target not to democracy in foreign trade shipping considers exceed 2.60. The LTIF rate target for 2020 is general business, financial and governance not to exceed 0.50 and the TRCF rate is not to issues of importance to the company and the exceed 2.80. workforce. In 2019, both committees held official meetings according to plan. For onshore operations, there was a continued focus on developing knowledge and Organisation and people development understanding of the importance of personal Workforce safety and risk assessment. Management The group’s head office is in Norway, and visibility, Take5 program, audits, safety the group has 241 offices in 62 countries talks and active safety delegates have been within its controlled structure. The group important actions to follow up employees employed 10 230 seafarers and 4835 land- most exposed to hazardous risk. The focus based employees at the end of 2019. will continue in 2020 on risk assessment, increasing the number of auditors and audits, Equal opportunities site assessment programs, and supplier audits. Wilhelmsen has a clear policy stating that employees have the right to equal The LTIF rate onshore was 0.18 in 2019, within opportunities. Harassment and discrimination target not to exceed 0.5. The TRCF rate result based on race, gender or similar grounds, of 0.33 was within target not to exceed 1.0. or other behaviour that may be perceived as Both targets will remain in place for 2020. threatening or degrading, is not acceptable. All reported incidents were investigated to Females represent 35% of the land-based avoid similar incidents in the future, improve work force, 25% of senior management necessary training and awareness measures. positions, and 1% of the seafarer work force. 26 Wilh. Wilhelmsen Holding ASA Annual Report 2019

Page 27

Directors’ report Group One of the four members of the company’s In 2019, emphasis was placed on continuous group management is female and during learning through on-the-job experiences, 2019, two of the five directors on the board of tasks and problem solving (70%); feedback, directors of Wilhelmsen were female. coaching (formal and informal) and networks (20%); and formal classroom courses, Driving performance e-learning, seminars, videos etc. (10%). Wilhelmsen strives to create a performance culture where engaged employees deliver Personal development plans are integrated in desired results and are rewarded accordingly. the performance appraisal and review process. Employee performance and engagement In 2019, the average hours of formal training is measured through annual surveys, recorded per employee was 8 hours. performance appraisals and annual activity plans. Developing leaders for the future To meet challenging and changing In the fourth quarter of 2019, Wilhelmsen environments, Wilhelmsen is dependent conducted an employee engagement survey on highly qualified leaders. to measure the group’s ability to provide an engaging and safe work environment where In 2019, eight females and 21 males, from nine employees are motivated to work and achieve different nationalities participated in a three their full potential. module Leadership Potential programme held in Oslo and Bangkok. The programme focused Whilst the results point to consistent and on design thinking methodology, leadership positive high engagement, there is always toolboxes, and an agile mindset. room for improvement. Senior management and individual managers in all locations were Whistle blowing and anti-corruption required to conduct follow up discussions In 2019, we had 19 whistles regarding with their teams. Where results were less than allegations of fraud/corruption, pollution/ the expected benchmark, managers were environmental, health and safety and more required to implement specific actions to HR related matters. Almost half of the improve results. whistles originated from an anonymous source. All reports being forwarded through Compensation and benefits our whistleblowing channel are investigated The purpose of Wilhelmsen’s compensation and followed up according to our internal and benefit framework is to drive performance guidelines. A thorough investigation was and to attract and retain employees with the conducted during the year on an alleged right experience and knowledge deemed major internal fraud/corruption case that was necessary to achieve the company’s strategic reported through the whistleblowing channel. ambitions. The framework takes local This resulted in proceedings being initiated regulations and competition into account, as against two employees and funds being well as the responsibility and complexity of retrieved. the position. At year end, we have two whistles that are The bonus schemes are one of several pending a conclusion. We will continue to instruments to drive performance. Bonus make employees aware of the whistleblowing is paid if set bonus targets are reached. opportunity, should they see or experience Compensation to executives is described in behaviour that is not in line with our policies the notes 6 and 2 to the group and parent and expectations. Our business standards and accounts respectively. Wilhelmsen also issues compliance training include the areas of anti- a statement on the remuneration for senior corruption, theft and fraud, whistleblowing, executives, note 16 to the parent company competition law and personal data protection. accounts. Corporate governance Investing in competence The board believes sound corporate “Learning and innovation” is one of the governance is a foundation for profitable group’s core values, and Wilhelmsen growth and that it provides a healthy company pays particular attention to competence culture. A good governance contributes to and knowledge development. A learning reducing risk and creating long-term value for organisation with motivated employees shareholders and other stakeholders. contributes to efficient operations and has a positive impact on revenue and Wilhelmsen observes the Norwegian Code earnings. of Practice for corporate governance, in Wilh. Wilhelmsen Holding ASA Annual Report 2019 27

Page 28

Group Directors’ report addition to requirements as specified in the available on www.wilhelmsen.com and will Norwegian Public Companies Act and the be reviewed by the annual general meeting Norwegian Accounting Act. The board’s on 29 April 2020. corporate governance report for 2019 can be found in the group annual report for the year Focus areas and achievements in 2019 and on www.wilhelmsen.com. It is the board’s In 2019, the following areas received particular view that the company has an appropriate attention: governance structure and that it is managed in • Employee engagement a satisfactory way. The corporate governance • Ethics and anti-corruption report is to be considered by the annual • Health and safety general meeting on 29 April 2020. • Responsible procurement • Cyber security and data protection Sustainability • Climate risk Wilhelmsen assesses environmental, social • Partnerships for sustainable innovations and corporate governance issues in its investment analysis, business decisions, The company’s achievements included: ownership practises and financial reporting. • Positive and consistent employee The company has a sustainability policy that engagement score includes human rights, labour standards and • Obtained TRACE certification in eight new a commitment to promote environmental countries (31 in total since 2016) responsibility. • Improved H&S risk assessments in the Take5 program UN Global Compact (UNGC) engagement • Increased sustainability criteria in supplier Wilhelmsen works actively within the assessments and requirements UNGC Sustainable ocean business action • Increased cyber security detection and platform to partner with other serious actors response capabilities in contributing to the achievement of the • Completed an initial climate risk Sustainable Development Goals. In 2019, the management assessment action platform delivered a report on ocean • Established partnership in liquid hydrogen opportunities describing five tipping points supply chain project for ocean health and productivity; a set of sustainable ocean principles; and started Focus areas for 2020 work on a governance framework report The company will continue to focus its efforts due for release in 2020. on high materiality areas: • Ethics and anti-corruption Sustainability governance • Health and safety The board acknowledges that sustainability • Responsible procurement: is a vital prerequisite for Wilhelmsen to be • Cyber security a profitable and responsible player in the industry and society at large. With an aim to In addition, the company will intensify focus increase transparency, the board therefore on strategic areas of: issues a sustainability report following the • Decarbonisation of shipping and guidelines set forward in the GRI Sustainability maritime services reporting standards. The report describes how • Renewable energy transition Wilhelmsen combines long-term profitability • Reducing marine litter and pollution with emphasis environmental, social and governance (ESG) factors. Stakeholder engagement The company is regularly in dialogue with key Materiality assessment stakeholders who engage with issues relating The company conducted an extensive to the maritime industry and the activities materiality assessment in 2018 to ensure of the Wilhelmsen group. The dialogue attention is on material aspects of the group’s contributes to understanding the expectations business. The assessment concluded that the of the community and transferring them following topics are of most importance: to the group. It also enables the company • Ethics and anti-corruption to communicate decisions to stakeholders • Health and safety and provide them with explanations for our • Responsible procurement underlying motives. • Cyber security and data protection In 2019, Wilhelmsen was engaged in These aspects are addressed in the dialogues with governments, investors, sustainability report. The full report is non-governmental organisations and other 28 Wilh. Wilhelmsen Holding ASA Annual Report 2019

Page 29

Directors’ report Group stakeholders discussing topics related to the correlated with general development in world group or industry at large. Topics covered economy and trade. included financial issues, compliance, innovation, decarbonisation of shipping, Due to measures implemented to contain renewable energy and sustainability in spread of covid-19, global economic general. development is presently very uncertain. Long term, annual growth in the vicinity of 3% Management also initiated a dialogue with remains a likely scenario. main shareholders and other stakeholders related to the statement on remuneration for Outlook for maritime services senior executives. General shipping markets improved in 2019, supported by continued global growth and low Allocation of profit, dividend and buy back newbuilding activity. While most markets will The board’s proposal for allocation of the net in 2020 be affected by measures to contain the profit for the year is as follows: corona virus, many of the underlying positive factors remain. The board is proposing a NOK 2.00 dividend per share payable during the second quarter Wilhelmsen’s focus is maintaining a leading of 2020, representing a total payment of position within marine products, ships NOK 89 million (excluding shares owned by agency and ship management globally. the company). For marine products, the steady work to improve products, services, and capabilities, will continue. For ships agency, a review Parent company accounts (NOK thousand) is initiated to adjust the product to a more globally connected world. For ship Profit for the year 473 268 management, the effort to expand the fleet on management will continue, with a need to To equity 272 658 increase the organisational capacity. Proposed dividend 89 160 Interim dividend paid 111 450 Increased activity level and a strong USD Total allocations 473 268 have supported an improved operating margin in 2019. The year also had its fair share of investment in new products and The board is granted an authorisation to, on operating systems, reducing profit short term behalf of the company, acquire up to 10% but necessary to remain competitive in the of the company’s own issued shares. The long term. All these factors will continue to authorisation is valid until the annual general have effect on the operating margin moving meeting in 2020, but no longer than to 30 forward. June 2020. In line with the authorisation, the company announced a share buyback The measures taken to contain spread of in September 2019. Following completion of covid-19 will have a significant impact on the program, Wilh. Wilhelmsen Holding ASA the maritime services activities in 2020 owns a total of 1 823 824 own shares, split on and potentially beyond. Operationally, 537 092 A-shares and 1 286 732 B-shares. This travel restrictions impact crew changes and is equivalent to 3.93% of total shares in the disruption in the global supply chain impacts company. product deliveries. Financially, reduced activity in cruise and other shipping segments Outlook impacts purchasing of among other marine Events after the balance sheet date products, port services and crewing services. The recent outbreak of covid-19 has since the start of 2020 had significant impact on the Outlook for supply services world and on Wilhelmsen. An update related NorSea Group, where Wilhelmsen has a ~75,2% to the impact on Wilhelmsen is included in shareholding, remains strongly exposed to note 24 of the group accounts and in note 16 of the Norwegian oil and gas industry, but is the parent company accounts for 2019. gradually expanding into other activities. The sharp fall in oil prices combined with Group business drivers measures taken to contain covid-19 will have Wilhelmsen is a global provider of maritime a negative impact on activity level. Income related services, transportation and logistics from supply base real estate properties will solutions. The prospects for the group and continue to be an important contributor, its business segments are, to various degree, while offshore wind activities are expected to Wilh. Wilhelmsen Holding ASA Annual Report 2019 29

Page 30

The board of Group Directors’ report Wilh. Wilhelmsen Holding ASA From left: Carl Erik Steen Irene Waage Basili Diderik Schnitler (chair) Trond Ø. Westlie 30 Wilh. Wilhelmsen Holding ASA Annual Report 2019

Page 31

Directors’ report Group Wilh. Wilhelmsen Holding ASA Annual Report 2019 31

Page 32

Group Directors’ report gradually increase but with some delay due to chain, the Hyundai Share price has fallen covid-19 measures. significantly during first quarter of 2020. For governmental services, no major change Qube Holdings, where Wilhelmsen has a in activity level and income is projected in the ~2.5% equity stake, remains exposed to the short term. general Australian economy and trade, and to the successful development of new logistics Outlook for other activities infrastructure. The investment is mainly of a Wallenius Wilhelmsen ASA, where Wilhelmsen financial nature. has a 37.8% stake, is a market leader in shipping and logistics services to the global automotive, Outlook for the Wilhelmsen group rolling equipment, and breakbulk industries. Wilhelmsen holds leading positions in several Short term, measures to contain the corona maritime industry segments. The combined virus will have a significant negative impact, forces of extensive business knowledge, global with an expected 20% drop in ocean volumes network, innovative organisation, and strong in the first quarter. Wallenius Wilhelmsen solidity will continue to support development ASA is taking decisive steps to prepare for this of the group situation, including cancellation of dividend, recycling and layup of ships, and temporary Wilhelmsen is exposed towards global trade. layoffs of production workers. Uncertainty remains on future development of global trade, including global economic Treasure ASA, where Wilhelmsen has a ~73.5% growth, trade restrictions and the shareholding, is an investment company environment. In the short term, measures with currently one main asset. The prospects to stop the spread of the coronavirus will correlate strongly with the financial and share have a negative impact on most business price performance of Hyundai Glovis. With activities. Wilhelmsen retains its robustness its high exposure to the automotive supply and capacity to meet such eventualities. Lysaker, 31 March 2020 The board of directors of Wilh. Wilhelmsen Holding ASA Diderik Schnitler Trond Westlie Carl Erik Steen chair Irene Waage Basili Thomas Wilhelmsen group CEO 32 Wilh. Wilhelmsen Holding ASA Annual Report 2019

Page 33

Page 34

Wilhelm Wilhelmsen 1937–2020 Wilhelm Wilhelmsen passed away on 22 February 2020. He represented the fourth-generation family owner of the Wilhelmsen group, a maritime industry group established by his great grandfather in Tønsberg, Norway in 1861. Wilhelm Wilhelmsen was instrumental in developing the Wilhelmsen group from a traditional liner company with trades all over the world to one of the largest maritime industry groups with almost 15 000 employees in more than 70 countries. His extensive network and business relationships in Norway and internationally have been essential in building the company the past almost 60 years. In addition to steering through many important and difficult situations in the company’s history, including the offshore crisis in the 1980s and the Partnair and Tampa incidents, he will be remembered as a very well-respected business leader and spokesperson for Norwegian shipping and the maritime industry at large. Rest in peace. From the board and thousands of employees at sea and all around the world

Page 35

Page 36

Responsible employer People are the foundation of our global business and have been for our last 159 years. Our approach as a responsible employer is to build a culture where all of our employees can come to work, do their best and go home safely. Whether it is investing in developing our employees, setting high standards regarding health and safety measures, or enhancing a culture where high ethical business standards always apply, our aim is to do the right things, the right way in every part of our business. The Take5 program for our ships agency division is just one example of how we act responsibility as an employer, building best in class practices for identifying and managing risks to keep employees engaged, healthy and safe.

Page 37

Page 38

Page 39

3 Accounts and notes – group

Page 40

Group Accounts and notes Income statement Wilh. Wilhelmsen Holding group USD mill Note 2019 2018 Operating revenue 1/3/21 836 867 Other income Gain on sale of assets 1 14 4 Total income 850 871 Operating expenses Cost of goods and change in inventory 15 (247) (267) Employee benefits 6 (306) (320) Other expenses 1/21 (148) (206) Depreciation and impairments 7/8 (71) (42) Total operating expenses (772) (835) Operating profit 78 36 Share of profits from joint ventures and associates 4 49 36 Change in fair value financial assets 14 34 (116) Financial income 1 33 16 Financial expenses 1 (49) (57) Profit/(loss) before tax 144 (86) Tax income/(expenses) 9 (15) 12 Profit/(loss) for the period 130 (75) Of which: Profit attributable to non-controlling interests 16 (6) Profit/(loss) attributable to owners of the parent 114 (69) Basic / diluted earnings per share (USD) 10 2.46 (1.48) Comprehensive income Wilh. Wilhelmsen Holding group Profit/(loss) for the year 130 (75) Items that may be reclassified to the income statement Cash flow hedges (net after tax) 1 2 Comprehensive income from associates (2) Currency translation differences 19 (2) (57) Items that will not be reclassified to the income statement Remeasurement postemployment benefits, net of tax 11 (1) 1 Other comprehensive income, net of tax (3) (53) Total comprehensive income for the year 127 (128) Total comprehensive income attributable to: Owners of the parent 111 (119) Non-controlling interests 16 (9) Total comprehensive income for the year 127 (128) Notes 1 to 24 on the next pages are an integral part of these consolidated financial statements. 40 Wilh. Wilhelmsen Holding ASA Annual Report 2019

Page 41

Accounts and notes Group Balance sheet Wilh. Wilhelmsen Holding group USD mill Note 31.12.2019 31.12.2018 ASSETS Non current assets Deferred tax asset 9 57 54 Goodwill and other intangible assets 7 151 156 Vessel, property and other tangible assets 7 555 567 Right-of-use assets 8 173 Investments in joint ventures and associates 4 1 003 1 018 Financial assets to fair value 14/19 675 650 Other non current assets 12 25 23 Total non current assets 2 638 2 467 Current assets Inventories 15 82 74 Current financial investments 16/19 102 88 Other current assets 12/17 317 311 Cash and cash equivalents 17 153 140 Total current assets 655 612 Total assets 3 293 3 079 EQUITY AND LIABILITIES Equity Paid-in capital 118 122 Retained earnings and other reserves 1 762 1 699 Attributable to equity holders of the parent 1 880 1 821 Non-controlling interests 202 196 Total equity 2 082 2 017 Non current liabilities Pension liabilities 11 20 20 Deferred tax 9 11 12 Non current interest-bearing debt 18/19 429 448 Non current lease liabilities 8/18 154 Other non current liabilities 12 28 23 Total non current liabilities 643 503 Current liabilities Current income tax 9 9 13 Public duties payable 12 9 Current interest-bearing debt 18/19 65 85 Current lease liabilities 8/18 27 Other current liabilities 12 455 452 Total current liabilities 568 559 Total equity and liabilities 3 293 3 079 Lysaker, 31 March 2020 The board of directors of Wilh. Wilhelmsen Holding ASA Diderik Schnitler Trond Westlie Carl Erik Steen chair Irene Waage Basili Thomas Wilhelmsen group CEO Notes 1 to 24 on the next pages are an integral part of these consolidated financial statements. Wilh. Wilhelmsen Holding ASA Annual Report 2019 41

Page 42

Group Accounts and notes Cash flow statement Wilh. Wilhelmsen Holding group USD mill Note 2019 2018 Cash flow from operating activities Profit/(loss) before tax 144 (86) Share of (profit)/loss from joint ventures and associates 4 (49) (36) Changes in fair value financial assets 14 (34) 116 Financial (income)/expenses 1 17 41 Depreciation/impairment 7/8 71 42 (Gain)/loss on sale of fixed assets 1 (8) (4) Gain from sale of subsidiaries, joint ventures and associates 1/4 (6) Change in net pension asset/liability (1) Change in inventories (9) 7 Change in working capital (19) (6) Tax paid (company income tax, withholding tax) (8) (12) Net cash provided by operating activities 98 62 Cash flow from investing activities Dividend received from joint ventures and associates 4 33 20 Proceeds from sale of fixed assets 17 14 Investments in tangible and intangible assets 7 (40) (54) Net proceeds from sale of subsidiaries 3 7 Net proceeds from sale of joint ventures and associates 34 Investments in subsidiaries (3) (1) Loan repayments received from sale of subsidiaries 6 17 Proceeds from dividend and sale of financial investments 65 71 Current financial investments (38) (38) Interest received 1 4 4 Net cash flow from investing activities 81 40 Cash flow from financing activities Net proceeds from issue of debt after debt expenses 18 93 153 Repayment of debt 18 (136) (211) Repayment of leasing debt 8 (24) Interest paid including interest derivatives 1 (25) (29) Interest paid leasing debt 1/8 (11) Dividend to shareholders/purchase of own shares (62) (40) Net cash flow from financing activities (165) (128) Net increase in cash and cash equivalents 14 (26) Cash and cash equivalents at the beginning of the period 140 167 Cash and cash equivalents at 31.12 153 140 The group is located and operating world wide and every entity has several bank accounts in different currencies. The cash flow effect from revaluation of cash and cash equivalents is included in net cash flow provided by operating activities. Notes 1 to 24 on the next pages are an integral part of these consolidated financial statements. 42 Wilh. Wilhelmsen Holding ASA Annual Report 2019

Page 43

Accounts and notes Group Equity Wilh. Wilhelmsen Holding group CONSOLIDATED STATEMENT OF CHANGES IN EQUITY Non- Retained controlling USD mill Share capital Own shares earnings Total interests Total equity Balance 31.12.2018 122 0 1 853 1 975 212 2 188 Implementation of IFRS 16 leasing Comprehensive income for the period: Profit for the period 114 114 16 130 Other comprehensive income (3) (3) (3) Total comprehensive income for the period 0 0 111 111 16 127 Transactions with owners: Change in non-controlling interests* 5 5 (5) Own shares** (4) (27) (31) (31) Dividends (26) (26) (5) (31) Balance 31.12.2019 122 (4) 1 761 1 880 202 2 082 *Liquidation of 2.200.000 own shares in Treasure ASA. **WWH acquired own shares 30 September 2019 for USD 30.4 million, represented 537.092 A-shares and 1.286.732 B-shares. Average cost per shares was NOK 144.00. Non- Own Retained controlling USD mill Share capital shares earnings Total interests Total equity Balance 31.12.2017 122 0 1 853 1 975 212 2 188 Comprehensive income for the period: Profit/(loss) for the period (69) (69) (6) (75) Other comprehensive income (50) (50) (3) (53) Put option in associate (5) (5) (5) Total comprehensive income for the period 0 0 (124) (124) (9) (133) Transactions with owners: Change in non-controlling interests (1) (1) Dividends (31) (31) (6) (37) Balance 31.12.2018 122 0 1 698 1 820 196 2 017 Dividend for fiscal year 2018 was NOK 5.00 per share, where NOK 2.50 per share The proposed dividend for fiscal year 2019 is NOK 2.00 per share, payable in was paid in May 2019 and NOK 2.50 per share was paid in November 2019. the second quarter of 2020. Dividend for fiscal year 2017 was NOK 5.50 per share, where NOK 3.50 per share A decision on this proposal will be taken by the annual general meeting on 29 was paid in May 2018 and NOK 2.00 per share was paid in November 2018. April 2020. The proposed dividend is not accrued in the year-end balance sheet. The dividend will have effect on retained earnings in second quarter of 2020. Notes 1 to 24 on the next pages are an integral part of these consolidated financial statements. Wilh. Wilhelmsen Holding ASA Annual Report 2019 43

Page 44

Group Accounts and notes Accounting policies Wilh. Wilhelmsen Holding group and Wilh. Wilhelmsen Holding ASA GENERAL INFORMATION functional currency which differs from the presentation currency (USD) are Wilh. Wilhelmsen Holding ASA (referred to as the parent company) is domiciled translated as follows: in Norway. The consolidated accounts for fiscal year 2019 include the parent company and its subsidiaries (referred to collectively as the group) and the • the balance sheet is translated at the closing exchange rate on the balance group’s share of joint ventures and associated companies. sheet date The annual accounts for the group and the parent company were issued by the • income and expense items are translated at a rate that is representative as board of directors on 31 March 2020. an average exchange rate for the period, unless the exchange rates fluctuate significantly for that period, in which case the exchange rates at the dates of STATEMENT OF COMPLIANCE the transactions are used The consolidated accounts have been prepared in accordance with the International Financial Reporting Standards (IFRS), as endorsed by the European • the translation difference is recognised in other comprehensive income and Union. The separate financial statements for the parent company have been split between controlling and non-controlling interests prepared and presented in accordance with simplified IFRS as approved by Ministry of Finance 10 December 2019. In the separate statements the Goodwill and fair value adjustments of assets and liabilities related to exception from IFRS for recognition of dividends and group contributions is acquisition of entities which have a functional currency other than USD are applied. Otherwise, the explanations of the accounting policy for the group also attributed to the acquired entity’s functional currency and translated at the apply to the separate statements, and the notes to the consolidated financial exchange rate prevailing on the balance sheet date. statements will to a large degree also cover the separate statements. Non-controlling interests Wilhelmsen also provides additional disclosures in accordance with The group treats transactions with non-controlling interests as transactions requirements in the Norwegian Accounting Act related to remuneration to the with equity owners of the group. board and the management. For purchases from non-controlling interests, the difference between any The company is a public limited liability company, listed on the Oslo Stock consideration paid and relevant share acquired of the carrying value of net Exchange. assets of the subsidiary is recorded in equity. BASIC OF CONSOLIDATION Gains or losses on disposals to non-controlling interests are also recorded in The consolidated financial statements comprise the financial statements of equity. Wilh. Wilhelmsen Holding ASA and its subsidiaries (Wilhelmsen group or the group) as at 31 December 2019. BASIC OF PREPARATION The group accounts are presented in US dollars (USD), rounded off to the Control is achieved when the group is exposed, or has rights, to variable returns nearest whole million. from its involvement with the investee and has the ability to affect those returns through its power over the investee. The presentation currency of the separate statements of the parent is NOK which is also its functional currency. The accounts are rounded off to the The group re-assesses whether or not it controls an investee if facts and nearest whole thousand. circumstances indicate that there are changes to one or more of the three elements of control. Consolidation of a subsidiary begins when the group The accounts have been prepared under the historical cost convention as obtains control over the subsidiary and ceases when the group loses control of modified by the revaluation of some financial assets and liabilities (including the subsidiary. Assets, liabilities, income and expenses of a subsidiary acquired financial derivatives) at fair value through the income statement. or disposed of during the year are included in the consolidated financial statements from the date the group gains control until the date the group Preparing financial statements in conformity with IFRS and simplified IFRS ceases to control the subsidiary. requires the management to make use of estimates and assumptions which affect the application of the accounting policies and the reported amounts of A change in the ownership interest of a subsidiary, without a loss of control, is assets and liabilities, revenues and expenses. accounted for as an equity transaction. Estimates and associated assumptions are based on historical experience If the group loses control over a subsidiary, it derecognises the related assets and other factors regarded as reasonable under the circumstances. The actual (including goodwill), liabilities, non-controlling interest and other components of result may vary from these estimates. equity, while any resultant gain or loss is recognised in income statement. Any investment retained is recognised at fair value. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial Non-controlling interests in the results and equity of subsidiaries are shown statements are described in more detail in the section on critical accounting separately in the consolidated statement of profit or loss, statement of estimates and assumptions. comprehensive income, statement of changes in equity and balance sheet respectively. The accounting policies outlined have been applied consistently for all periods presented in the group accounts. When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies in line with the group’s When items are reclassified in the segment reporting, the comparative figures accounting policies. All intra-group assets and liabilities, equity, income, are included from the beginning of the earliest comparative period. expenses and cash flows relating to transactions between members of the group are eliminated in full on consolidation. The accounts for the group and New and revised standards – adopted the parent company are referred to collectively as the accounts. The following new or amendments to standards and interpretations have been issued and become effective during the current period. Entities in Maritime Services, Supply Services and Holding and Investments are measured using currency of primary economic location in which the entity Standards, amendments and interpretations operates. The exceptions are investments activity in Malta, where AUD is the The group has adopted IFRS 16 Leases from 1 January 2019 which resulted in functional currency and the parent company Wilhelmsen Maritime Services material changes to the group’s financial statement. (WMS AS) has USD. Under the new standard, a lessee is required to recognise all contracts that The income statements and balance sheets for group companies with a qualify under its definition of a lease as right-of-use assets and lease liabilities 44 Wilh. Wilhelmsen Holding ASA Annual Report 2019

Page 45

Accounts and notes Group Accounting policies Wilh. Wilhelmsen Holding group and Wilh. Wilhelmsen Holding ASA in the balance sheet, while lease payments should be split in interest expense the parent company has 20-50% of the voting rights. The group’s investments and reduction of lease liabilities. The right-of-use assets are to be depreciated in joint ventures and associates are accounted for by the equity method. Such in accordance with IAS 16 “Property, Plant and Equipment” over the shorter investments are recognised at the date of acquisition at cost, including excess of each contract’s term and the assets useful life. The standard consequently values and possible goodwill. implies a significant change in lessees’ accounting for leases previously defined as operating leases under IAS 17, both as regards impact on the The group’s share of profit after tax from joint ventures and associates, are balance period of time in exchange of consideration. recognised in the income statement as an investing and financial activity. The share of profit after tax from joint ventures and associates is added to The group implemented IFRS 16 retrospectively with recognition of the the carrying amount of the investments together with its share of equity cumulative implementation effect recognised at the date of initial application movements not recognised in the income statement. Sale and dilution of the 1 January 2019. By doing this, comparative financial information shall not be share of associate companies is recognised in the income statement when the restated, but the cumulative effect of initially applying this standard shall be transactions occur for the group. Unrealised gains on transactions are partially reflected as an adjustment to the opening balance. eliminated under the equity method. At the time of transition, leases entered under IAS 17 was not reassessed. The When an investment ceases to be an associate, the difference between (1) the opening balance related to the transition and grouping of leased assets can be fair value of any retained investment and proceeds from disposing of the part found in note 8, in the group accounts and note 4 in the parent accounts. interest in the associate and (2) the carrying amount of the investment at the date when significant influence is lost, is recognised in the income statement. Amended standards early adopted If the ownership interest in a joint venture or an associate is reduced, but the The group has elected to early adopt the ‘Amendments to IFRS 9, IAS 39 investment continues to be a joint venture or an associate, a gain or loss is and IFRS 7 Interest Rate Benchmark Reform’ issued in September 2019. recognised in the income statement corresponding to the difference between In accordance with the transition provisions, the amendments have been the proportionate book value of the investment sold and the proceeds from adopted retrospectively to hedging relationships that existed at the start of disposing of the part interest in the joint venture or associate. the reporting period or were designated thereafter. The amendments provide temporary relief from applying specific hedge accounting requirements to Business combination hedging relationships directly affected by IBOR reform. The reliefs have the The acquisition method of accounting is used to account for all business effect that IBOR reform should not generally cause hedge accounting to combinations, regardless of whether equity instruments or other assets are terminate. However, any hedge ineffectiveness should continue to be recorded acquired. The consideration transferred for the acquisition comprises the: in the income statement. Furthermore, the amendments set out triggers for when the reliefs will end, which include the uncertainty arising from interest rate • fair value of the asset transferred benchmark reform no longer being present. • liabilities incurred to the former owners of the acquired business • equity interests issued by the group There are no other new or amended standards adopted by the group or parent • fair value of any assets or liability resulting from a contingent consideration company from 1 January 2019 or later. arrangement, and • fair value of any pre-existing equity interest in the subsidiary. New and revised standards – not yet effective Amendment to IAS 1 Classification of Liabilities as Current or Non-current Identifiable assets acquired and liabilities and contingent liabilities assumed in applicable for annual periods beginning on or after 1 January 2022. The a business combination are, with limited exceptions, measured initially at their amendment changes the guidance for the classification of liabilities as current fair values at the acquisition date. The group recognises any non-controlling or non-current depending on the rights that exist at the end of the reporting interest in the acquired entity on an acquisition-by-acquisition basis either at period. The amendments are not expected to have a material effect compared fair value or at non-controlling interest’s proportionate share of the acquired to the group’s current application of IAS 1. entity’s net identifiable assets. There are no other IFRSs or IFRIC interpretations that are not yet effective that Acquisition-related costs are expensed as incurred. would be expected to have a material impact on the group or the parent company. The excess of the SHARES IN SUBSIDIARIES, JOINT VENTURES AND ASSOCIATES • consideration transferred, (PARENT COMPANY) • amount of any non-controlling interest in the acquired entity, and Shares in subsidiaries, joint ventures and associates are presented according • acquisition-date fair value of any previous equity interests in the acquired to the cost method. Group contribution received is included in dividends entity over the fair value of the net identifiable assets acquired is recorded from subsidiaries. Group contributions and dividends from subsidiaries are as goodwill. If those amounts are less than the fair value of the net identifiable recognised in the year for which they are proposed by the subsidiary to the assets of the business acquired, the difference is recognised directly in profit extent the parent company can control the decision of the subsidiary through or loss as a bargain purchase. its share holdings on the balance sheet date. Shares in subsidiaries, joint ventures and associates are reviewed for impairment whenever events or Contingent consideration is classified either as equity or a financial liability. changes in circumstances indicate that the carrying amount may exceed the Amounts classified as a financial liability are subsequently remeasured to fair recoverable amount of the investment. An impairment loss is reversed if the value with changes in fair value recognised in the income statement. impairment situation is deemed to no longer exist. If the business combination is achieved in stages, the acquisition date CONSOLIDATION POLICIES carrying value of the acquirer’s previously held equity interest in the acquire is Joint arrangements and associates remeasured to fair value at the acquisition date. Any gain or losses arising from Joint arrangements and associates are entities over which the group or parent such remeasurement are recognised in income statement. company has joint control or significant influence respectively but does not control alone. SEGMENT REPORTING The operating segments are reported in a manner consistent with the internal Investments in joint arrangements are classified as either joint operations or financial reporting provided to the chief operating decision-maker. joint ventures depending on the contractual rights and obligations to each investor. The group has assessed the nature of its joint arrangements and Comparative figures have been reclassified in the segment’s figures from the determined them to be joint ventures. Joint ventures are accounted for using beginning of earliest comparative period except for IFRS 16 effects. the equity method. The chief operating decision-maker, who is responsible for allocating Significant influence generally accompanies investments where the group or resources and assessing performance of the operating segments, has been Wilh. Wilhelmsen Holding ASA Annual Report 2019 45

Page 46

Group Accounts and notes Accounting policies Wilh. Wilhelmsen Holding group and Wilh. Wilhelmsen Holding ASA identified as the board and Group Management Team, consisting of the group they arise. Borrowing costs are capitalised to the extent that they are directly chief executive officer (group CEO) and three executive managers. related to the acquisition of the asset. RELATED PARTIES TRANSACTIONS Land is not depreciated. Other tangible assets are depreciated over the The group and the parent company have transactions with joint ventures and following expected useful lives: associated companies. These contracts are based on commercial market terms. Property 10-50 years Other tangible assets 3-10 years See note 12 and 21 to the group accounts for transactions with joint ventures and associates and note 7 and 15 to the parent company accounts. Each component of a tangible asset which is significant for the total cost of the item will be depreciated separately. Components with similar useful lives will be See note 6 to the group accounts concerning remuneration of senior included in a single component. executives in the group and note 2 to the parent company accounts for information concerning loans and guarantees for employees in the parent The estimated residual value and expected useful life of long-lived assets are company. reviewed at each balance sheet date, and where they differ significantly from previous estimates, depreciation charges will be changed accordingly going FOREIGN CURRENCY TRANSACTION AND TRANSLATION forward. Transactions Individual companies’ transactions in foreign currencies are initially recorded LEASES in the functional currency by applying the rate of exchange as of the date The group has applied IFRS 16 using the modified retrospective approach. The of the transaction. Monetary assets and liabilities denominated in foreign impact of changes in accounting policies and impact of the initial application is currencies are translated into the respective functional currency at the rate of disclosed in note 8 in the group accounts and note 4 in the parent accounts. the exchange at the balance sheet date. The realised and unrealised currency gains or losses are included in financial income or expense. For qualified cash Identifying a lease flow hedging derivatives, qualifying net investment hedges, gains and losses At the inception of a contract, the group assesses whether the contract is, or are recognised in other comprehensive income, and reclassified when the contains, a lease. A contract is, or contains, a lease if the contract conveys the hedged object affects profit or loss. right to control the use of an identified asset for a period of time in exchange for consideration. To determine whether a contract conveys the right to control Translations the use of an identified asset, the group assesses whether: In the consolidated financial statements, the assets and liabilities of the parent company (NOK functional) as well as all non USD functional currency • The agreement creates enforceable rights of payment and obligations subsidiaries, joint ventures and associates, including related goodwill, are • The identified asset is physically distinct translated into USD using the rate of exchange as of the balance sheet date. • It has the right to obtain substantially all of the economic benefits from use of The results and cash flow of non USD functional currency subsidiaries, joint the asset ventures and associates are translated into USD using average exchange rate • It has the right to direct the use of the asset for the period reported (unless this average is not a reasonable approximation • The supplier does not have a substantive right to substitute the asset of the cumulative effect of the rates prevailing on the transaction dates, in throughout the period of use which case income and expenses are translated at the rate on the dates of the transactions). Exchange adjustments arising when the opening net assets and Lessee the net income for the year retained by non USD operation are translated into Separating components in the lease contract: USD are recognised in other comprehensive income. On disposals of a non For contracts that constitutes, or contains a lease, the group separates lease USD functional currency subsidiary, joint ventures or associates, the deferred components if it benefits from the use of each underlying asset either on cumulative amount recognised in equity relating to that particular entity is its own or together with other resources that are readily available, and the recognised in the income statement. underlying asset is neither highly dependent on, nor highly interrelated with, the other underlying assets in the contract. The group then accounts for each REVENUE RECOGNITION lease component within the contract as a lease separately from non-lease The group earns revenue from both sale of goods, rendering of services components of the contract. The group allocates the consideration in the and rental activities. Information about the revenue streams and associated contract to each lease component on the basis of the relative stand-alone accounting principles are disclosed in note 3. price of the lease component and the aggregate stand-alone price of the non-lease components. If an observable stand-alone price is not readily INVENTORIES available, the group estimates this price by maximising the use of observable Inventories of purchased goods and work in progress, are valued at cost in information. accordance with the weighted average cost method. Impairment losses are recognised if the net realisable value is lower than the cost price. Sales costs Recognition of leases and exemptions: include all remaining sales, administrative and storage costs. At the lease commencement date, the group recognizes a lease liability and corresponding right-of-use asset for all lease agreements in which it is the lessee, except for the following exemptions applied: EMPLOYEE BENEFITS - CASH-SETTLED ARRANGEMENTS Cash–settled payments / bonus plans • Short-term leases (defined as 12 months or less) For cash-settled payments, a liability equal to the portion services received is • Low value assets recognised at fair value determined at each balance sheet date. For these leases, the group recognizes the lease payments as other operating See note 6 to the group accounts and note 2 and 17 to the parent accounts expenses in the statement of profit or loss when they incur. concerning remuneration of senior executives Measuring the lease liability: TANGIBLE ASSETS The lease liability is initially measured at the present value of the lease Vessel, property and other tangible assets acquired by group companies are payments for the right to use the underlying asset during the lease term that stated at historical cost. Depreciation is calculated on a straight-line basis. are not paid at the commencement date. The lease term represents the non- cancellable period of the lease, together with periods covered by an option The carrying value of tangible assets equals the historical cost less to extend the lease when the group is reasonably certain to exercise this accumulated depreciation and any impairment charges. option, and period’s covered by an option to terminate the lease if the group is reasonably certain not to exercise that option. The group’s borrowing costs are recognised in the income statement when 46 Wilh. Wilhelmsen Holding ASA Annual Report 2019

Page 47

Accounts and notes Group Accounting policies Wilh. Wilhelmsen Holding group and Wilh. Wilhelmsen Holding ASA The lease payments included in the measurement comprise of: reversed. Gain or loss on the sale of a business includes the carried amount of goodwill related to the sold business. • Fixed lease payments (including in-substance fixed payments), less any lease incentives receivable For impairment testing goodwill is allocated to relevant cash-generating units • Variable lease payments that depend on an index or a rate, initially measured (“CGU”). The allocation is made to those CGU or groups of CGU which are using the index or rate as at the commencement date expected to benefit from the acquisition. • Amount expected to be payable by the group under residual value guarantees • The exercise price of a purchase option, if the group is reasonably certain to Details concerning the accounting treatment of goodwill are provided in the exercise that option section on consolidation policies above. • Payments of penalties for terminating the lease, if the lease term reflects the group exercising an option to terminate the lease. Other intangible assets Costs associated with maintaining computer software programmes are The group do not include variable lease payments in the lease liability arising recognised as an expense as incurred. Development costs that are directly from contracted index regulations subject to future events, such as inflation. attributable to the design and testing of identifiable and unique software Instead, the group recognizes these costs in profit or loss in the period in products controlled by the group are recognised as intangible assets when the which the event or condition that triggers those payments occurs. The lease following criteria are met: liability is subsequently measured by increasing the carrying amount to reflect interest on the lease liability, reducing the carrying amount to reflect • it is technically feasible to complete the software product so that it will be the lease payments made and remeasuring the carrying amount to reflect available for use; any reassessment or lease modifications, or to reflect adjustments in lease • management intends to complete the software product and use or sell it; payments due to an adjustment in an index or rate. Group presents its lease • it can be demonstrated how the software product will generate probable liabilities as separate line items in the statement of financial position. future economic benefits; • adequate technical, financial and other resources to complete the Measuring the right-of-use asset: development and to use or sell the software product are available; and The right-of-use asset is initially measured at cost. The cost of the right-of-use • the expenditure attributable to the software product during its development asset comprise: can be reliably measured. • The amount of the initial measurement of the lease liability Trademark, technology/licenses and customer relationship have a finite life and • Any lease payments made at or before the commencement date, less any are recognised at historical cost less accumulated amortisation. Amortisation lease incentives received is calculated using the straight-line method to allocate the cost of trademarks • Any initial direct costs incurred by the group and licenses over their estimated useful life. • An estimate of costs to be incurred by the group in dismantling and removing the underlying asset, restoring the site on which it is located or restoring the Capitalised expenses related to other intangible assets are amortised over the underlying asset to the condition required by the terms and conditions of the expected useful lives in accordance with the straight-line method. lease, unless those costs are incurred to produce inventories. IMPAIRMENT OF GOODWILL AND OTHER NON- FINANCIAL ASSETS The right-of-use asset is subsequently measured at cost less accumulated Non-financial assets depreciation and impairment losses. The group applies the depreciation At each reporting date the accounts are assessed whether there is an requirements in IAS 16 Property, Plant and Equipment in depreciating the indication that an asset may be impaired. If any such indication exists, or when right-of-use asset, except that the right-of-use asset is depreciated from the annual impairment testing for an asset is required, estimates of the asset’s commencement date to the earlier of the lease term and the remaining useful recoverable amount are done. The recoverable amount is the highest of the fair life of the right-of-use asset. The group has not applied the revaluation model market value of the asset, less cost to sell, and the net present value (NPV) of for its right of use asset for leased buildings. future estimated cash flow from the employment of the asset (“value in use”). The NPV is based on a discount rate according to a weighted average cost of The group applies IAS 36 Impairment of Assets to determine whether the right- capital (“WACC”) reflecting the company’s required rate of return. The WACC is of-use asset is impaired and to account for any impairment loss identified. calculated based on the company’s long-term borrowing rate and a risk-free Group presents it’s right-of-use assets as separate line items in the rate plus a risk premium for the equity. If the recoverable amount is lower than consolidated statement of financial position. the book value, impairment has occurred, and the asset shall be revalued. Impairment losses are recognised in profit or loss. Assets are grouped at the GOODWILL AND OTHER INTANGIBLE ASSETS lowest level where there are separately identifiable independent cash flows. Amortisation of intangible fixed assets is based on the following expected useful lives: Goodwill Goodwill acquired through business combinations has been allocated to the Goodwill Indefinite life relevant CGU. An assessment is made as to whether the carrying amount Software and licenses 3-5 years of the goodwill can be justified by future earnings from the CGU to which Other intangible assets 5-10 years the goodwill relates. If the ”value in use” of the CGU is less than the carrying amount of the CGU, including goodwill, goodwill will be written down first. Goodwill Thereafter the carrying amount of the CGU will be written down. Impairment Goodwill represents the excess of the consideration transferred, the amount losses related to goodwill cannot be reversed. of any non-controlling interests in the acquiree and the acquisition date fair value of any previous equity interests in the acquiree over the fair value of the FINANCIAL ASSETS identifiable net assets of the acquired subsidiary, joint venture or associate. From 1 January 2018, the group classifies its financial assets in the following Goodwill arising from the acquisition of subsidiaries is classified as an measurement categories: intangible asset. • those to be measured subsequently at fair value through profit or loss (FVPL) Goodwill arising from the acquisition of an interest in an associated company is • those to be measured at amortised cost included under investment in associated companies and tested for impairment as part of the carried amount of the investment when impairment indicators is Management determines the classification of financial assets at their initial present. recognition. Goodwill from acquisition of businesses is tested annually for impairment and Financial assets subsequently carried at fair value are initially recognised at fair carried at cost less impairment losses. Impairment losses on goodwill are not value, and transaction costs are expensed in the income statement. Wilh. Wilhelmsen Holding ASA Annual Report 2019 47

Page 48

Group Accounts and notes Accounting policies Wilh. Wilhelmsen Holding group and Wilh. Wilhelmsen Holding ASA The group and the parent company classified financial assets under IAS 39 At the date of the hedging transaction, the group documents the relationship into the following categories: trading financial assets at fair value through profit between hedging instruments and hedged items, as well as the objective of its or loss, loans and receivables, and available-for-sale financial assets. The risk management and the strategy underlying the various hedge transactions. classification depended on the purpose of the asset. The group also documents the extent to which the applied derivatives are effective in offsetting changes in fair value or cash flow associated with the Operating leases hedge items. Such assessments are documented both initially and on an For operating leases, the group recognises lease payments as other income, ongoing basis. mainly on a straight-line basis, unless another systematic basis is more representative of the pattern in which benefit from the use of the underlying The fair value of derivatives used for hedging is shown in note 19 to the group asset is diminished. The group recognise costs incurred in earning the accounts. Changes in the valuation of qualified hedges are recognised directly lease income in other operating expenses. The group adds initial direct in other comprehensive income until the hedged transactions are realised. costs incurred in obtaining an operating lease to the carrying amount of the underlying asset and recognise those costs as an expense over the lease term The fair value of financial derivatives traded in active markets is based on on the same basis as the rental income. quoted market prices at the balance sheet date. The fair value of financial derivatives not traded in an active market is determined using valuation Current financial investments methodology, such as the discounted value of future cash flows. Independent This category consists of financial assets held for trading. A financial asset is experts verify the value determination for instruments which are considered classified in this category if acquired principally for the purpose of profit from material. short term price gains. Current financial investments are measured at fair value. The resulting unrealised gains and losses are included in financial income and Cash flow hedge expense. Derivatives are also placed in this category unless designated as The effective portion of changes in the fair value of derivatives designated hedges. Assets in this category are classified as current. as cash flow hedges are recognised in other comprehensive income together with the deferred tax effect. Gain and loss on the ineffective portion Loans and receivables at amortised cost is recognised in the income statement. Amounts recognised in other Loans and receivables are non-derivative financial assets with fixed or comprehensive income are recognised as income or expense in the income determinable payments, which are not traded in an active market. They are statement in the period when the hedged liability or planned transaction will included in current assets, except for maturities greater than 12 months after affect the income statement. the balance sheet date. These are classified as non-current assets. Loans and receivable are classified as other current assets or other non-current assets in Net investment hedge the balance sheet. Gain and losses arising from the hedging instruments relating to the effective portions of the net investment hedges are recognised in other comprehensive Loans and receivables are recognised initially at their fair value plus transaction income. These translation reserves are reclassified to the income statement costs. Financial assets are derecognised when the contractual rights to the upon loss of control of the hedged net investments, offsetting the translation cash flows from the financial assets expire or are transferred, and the group has differences from these net investments. Any ineffective portion is recognised transferred by and large all risk and return from the financial asset. immediately in the income statement as financial income/(expenses). Realised gains and losses are recognised in the income statement in the DEFERRED TAX / DEFERRED TAX ASSET period they arise. Deferred tax is calculated using the liability method on all temporary differences arising between the tax bases of assets and liabilities and their Financial assets to fair value carrying amounts in the consolidated financial statements. Deferred income The group continued measuring at fair value all financial assets previously held tax is determined using tax rates and laws which have been enacted by the at fair value under IAS 39. The following are the changes in the classification of balance sheet date and are expected to apply when the related deferred the group’s financial assets income tax asset is realised, or the deferred income tax liability settled. Equity investments in listed companies: Deferred income tax assets are recognised to the extent that it is probable that These financial assets were previously classified as “available-for-sale” financial future taxable profit will be available, and that the temporary differences can be assets are now classified and measured as equity instruments designated at deducted from this profit. fair value through the income statement. Deferred income tax is calculated on temporary differences arising on Changes in fair value during the period, is recognised in the income statement. investments in subsidiaries and associates, except where the timing of the reversal of the temporary difference is controlled by the group. Financial assets to fair value are included in non-current assets unless the investment matures or management intends to dispose of it within 12 months PENSION OBLIGATIONS of the end of the reporting period. Group companies have various pension schemes, and the employees are covered by pension plans which comply with local laws and regulations. These FINANCIAL DERIVATIVES schemes are generally funded through payments to insurance companies or Derivatives are included in current assets or current liabilities, except for maturities pension funds on the basis of periodic actuarial calculations. The group and greater than 12 months after the balance sheet date. These are classified as the parent company have both defined contribution and defined benefit plans non-current assets or other non-current liabilities as they form part of the group’s up to 31 December 2019. long-term economic hedging strategy and are not classified as held for trading. The group has “Ekstrapensjon”, a contribution plan for all Norwegian Derivatives are recognised at fair value on the date a derivative contract is employees with salaries exceeding 12 times the Norwegian National Insurance entered into and are revalued on a continuous basis at their fair value. base amount (G). The contribution plan replaced the group obligations mainly financed from operation. However, the group still has obligations for some Derivatives which do not qualify for hedge accounting employees related to salaries exceeding 12 times the Norwegian National Most derivative instruments do not qualify for hedge accounting. Changes in Insurance base amount (G) mainly financed from operations. the fair value of any derivative instruments which do not qualify for hedge accounting are presented in the income statement as financial income/expense. A defined contribution plan is one under which the group and the parent company pay fixed contributions to a separate legal entity. The group and Derivatives which do qualify for hedge accounting the parent company have no legal or constructive obligations to pay further The group designates certain derivatives as hedges of highly probable forecast contributions if the fund does not hold sufficient assets to pay all employees transactions (cash flow hedges). the benefits relating to employee service in the current and prior periods. 48 Wilh. Wilhelmsen Holding ASA Annual Report 2019

Page 49

Accounts and notes Group Accounting policies Wilh. Wilhelmsen Holding group and Wilh. Wilhelmsen Holding ASA A defined benefit plan is one which is not a defined contribution plan. This type CRITICAL ACCOUNTING ESTIMATES AND ASSUMPTIONS of plan typically defines an amount of pension benefit an employee will receive When preparing the financial statements, the group and the parent company on retirement, normally dependent on one or more factors such as age, years must make assumptions and estimates. These estimates are based on the of service and pay. actual underlying business, its present and forecast profitability over time, and expectations about external factors such as interest rates, foreign exchange The liability recognised in the balance sheet in respect of defined benefit rates and oil prices which are outside the group’s and parent company’s pension plans is the present value of the defined benefit obligation at the end control. This presents a substantial risk that actual conditions will vary from the of the reporting period less the fair value of plan assets. The defined benefit estimates. obligation is calculated annually by independent actuaries using the projected unit credit method. The present value of the defined benefit obligation is Sensitivity of the lease liability determined by discounting the estimated future cash outflows using interest The group cannot always determine the interest rate implicit in the lease, rates of high-quality corporate bonds that are denominated in the currency in therefore, it uses its incremental borrowing rate to measure lease liabilities. which the benefits will be paid, and that have terms to maturity approximating The incremental borrowing rate reflects what the group ‘would have to pay’, to the terms of the related pension obligation. which requires estimation when no observable rates are available (such as for subsidiaries that do not enter into financing transactions) or when the rates The pension obligation is calculated annually by independent actuaries need to be adjusted to reflect the term and currency of the lease. using a straight-line earnings method. Actuarial gains and losses arising from In determining the lease term, management considers all facts and experience adjustments and changes in actuarial assumptions are charged or circumstances that create an economic incentive to exercise an extension credited to equity in other comprehensive income in the period in which they option, or not exercise a termination option. Extension options (or periods arise. Past-service costs are recognised immediately in the income statement. after termination options) are only included in the lease term if the lease is reasonably certain to be extended (or not terminated). The assessment is RECEIVABLES reviewed if a significant event or a significant change in circumstances occurs Account receivables and other receivables, that have fixed or determinable which affects this assessment and that is within the control of the lessee. payments that are not quoted in an active market are classified as receivables. See note 8 in the group accounts for additional information. The group applies the IFRS 9 simplified approach to measure expected credit losses which uses a lifetime expected loss allowance for all trade receivables Impairment of goodwill and contract assets. To measure the expected credit losses, trade receivables Assets that have an indefinite useful life, for example goodwill, are not subject has been grouped based on shared credit risk characteristics and days past due. to amortisation and are tested annually for impairment. CASH AND CASH EQUIVALENTS The main risks are: Cash and cash equivalents include cash in hand, deposits held at call with • Growth banks and other liquid investments with maturities of three months or less. • Net profit Bank overdrafts are presented under borrowings in current liabilities on the • Cash flow balance sheet. Assets that are subject to amortisation or depreciation are reviewed for SHARE CAPITAL AND TREASURY SHARES impairment whenever events or changes in circumstances indicate that the When the parent company purchases its own shares (treasury shares), carrying amount may not be recoverable. An impairment loss is recognised the consideration paid, including any attributable transaction costs net of for the amount by which the asset’s carrying amount exceeds its recoverable income tax, is deducted from the equity attributable to the parent company’s amount. shareholders until the shares are liquidated or sold. Should such shares subsequently be sold or reissued, any consideration received is included in The recoverable amount is the higher of an asset’s fair value less costs to share capital. sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash DIVIDEND IN THE GROUP ACCOUNTS flows (cash-generating units). Non-financial assets other than goodwill that Dividend payments to the parent company’s shareholders are recognised as a suffered impairment are reviewed for possible reversal of the impairment liability in the group’s financial statements from the date when the dividend is at each reporting date. The group has financial models which calculate and approved by the general meeting. determine the value in use through a combination of actual and expected cash flow generation discounted to present value. The expected future cash flow DIVIDEND AND GROUP CONTRIBUTION IN PARENT ACCOUNTS generation and models are based on assumptions and estimate. Proposed dividend for the parent company’s shareholders is shown in the parent company account as a liability at 31 December current year. Group See note 7 in the group accounts for additional information. contribution to the parent company is recognised as a financial income and current asset in the financial statement at 31 December current year. LOANS Loans are recognised at fair value when the proceeds are received, net of transaction costs. In subsequent periods, loans are stated at amortised cost using the effective yield method. Any difference between proceeds (net of transaction costs) and the redemption value is recognised in the income statement over the term of the loan. Loans are classified as current liabilities unless the group or the parent company has an unconditional right to defer settlement of the liability for at least 12 months after the balance sheet date. PROVISIONS The group and the parent company make provisions for legal claims when a legal or constructive obligation exists as a result of past events, it is more likely than not that an outflow of resources will be required to settle the obligation, and the amount can be estimated with a sufficient degree of reliability. Provisions are not made for future operating losses. Wilh. Wilhelmsen Holding ASA Annual Report 2019 49

Page 50

Group Accounts and notes Note 1 Combined items, income statement USD mill Note 2019 2018 OPERATING REVENUE Ships service revenue 2/3 528 535 Supply services revenue 2/3 249 283 Ship management and crewing revenue 2/3 45 41 Revenue from services 2/3 13 8 Total operating revenue 21 836 867 GAIN ON SALE OF ASSETS Gain on sale of assets 14 4 Total gain on sale of assets 14 4 OTHER EXPENSES Office expenses (16) (58) Communication and IT expenses (26) (27) External services (20) (31) Travel and meeting expenses (9) (8) Marketing expenses (3) (4) Lease expenses* 8 (10) Other operating expenses (64) (78) Total other expenses 21 (148) (206) * Included in other operating expenses in 2018. FINANCIAL INCOME AND EXPENSES Financial items Investment management 12 (6) Interest income 4 4 Dividend from financial assets 16 13 Other financial items 1 5 Net financial items 33 16 Financial – interest expenses Interest expenses (25) (29) Interest expenses – finance lease (11) Other financial expenses (5) (5) Net financial – interest expenses (41) (34) Financial – currency gain/(loss) Net currency gain/(loss) – non financial currency 7 (4) Net currency gain/(loss) – financial currency (10) (3) Derivatives for hedging of cash flow risk – realised (10) (2) Derivatives for hedging of cash flow risk – unrealised 4 (15) Net financial – currency gain/(loss) (8) (23) Financial income/(expenses) (17) (41) Spesification of financial income and expenses Net financial items 33 16 Financial income 33 16 Net financial – interest expenses (41) (34) Net financial currency loss (8) (23) Financial expenses (49) (57) See note 19 on financial risk and the section of the accounting policies concerning financial derivatives. 50 Wilh. Wilhelmsen Holding ASA Annual Report 2019

By industry

By Role

Comprehensive

Relevant

Easy to use

Pages