Annual Report 2021
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Content 04 Sector Alarm in brief
06 History
08 Purpose and strategy
10 Message from the CEO
12 Group Stucture
14 Our employees
16 Board of Directors
18 Group Management
20 Message from the Board of Directors
26 Sector Alarm ESG Strategy and Report
Sector Alarm / Annual Report 2021
Annual Accounts / 2021 Sector Alarm Holding AS Consolidated (IFRS)
46
52
Directors Report
Cash Flow statement
50
53
Income statement
Statement of changes in equity
50
54
Statement of comprehensive income
Notes
51 Balance sheet
Sector Alarm Holding AS (NGAAP)
81
84
Income statement
Cash Flow Statement
82
85
Balance sheet
Notes
Audit opinion
Appendix
96
99
Audit opinion
Alternative performance measures
4/5
Sector Alarm in brief Sector Alarm is a leading provider of professionally monitored alarms for residential households and small businesses in Europe. Sector Alarm supply state of the art solutions when it comes to security and provide high quality and userfriendly products. Sector Alarm is constantly developing the alarm products, services and Alarm Receiving Centres to give the customers the best and fastest service imaginable.
Sector Alarm / Annual Report 2021
600,000
More than 600,000 customer across Europe
95% Over 95% customer satisfaction
25
Over 25 years’ experience
Countries
#2
8
Sector Alarm - 2nd largest in security and safety in Europe
3,000 Nearly 3,000 employees across Europe
6.1%
Market leading attrition
1.7
Billion NOK EBITDA Portfolio
2.9
Billion NOK Revenue
6/7
Founded in Norway by Jørgen Dahl
100,000 customers reached
Entered Ireland through acquisition of PhoneWatch
Entered Finland through the acquisition of Turvatiimi and G4S small systems
1995
2009
2013
2016
History so far Entered Sweden
Awarded the best customer service in Norway and acquired 50,000 customers from NOKAS in Norway
300,000 customers reached
Entered Spain through the acquisition of Alarma Universal, LIP and Alartec
2000
2011
2013
2017
Sector Alarm / Annual Report 2021
Entered France through the acquisition of Afone Sécurité
Sale of 30% minority stake to KKR
Entered Portugal through the acquisition of Seguranca 24
2018
2019
2022
Reached 500,000 customers
Entered Italy Reached 600,000 customers
2018
2021
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Purpose and strategy “Home of Safety” The purpose of Sector Alarm is to provide safety for our customers and as the old saying goes, there is no place like home. It reflects the true feeling of being safe in a place surrounded by the people we care about. Our homes and our workplaces are where our lives happen, where our relationships grow and where we keep what we cherish the most. Sector Alarm will always be there for our customers, keeping their homes, businesses and loved ones safe. In that sense, Sector Alarm is truly a Home of Safety.
Mission
Core Values
Vision
We are the safety experts, delivering solutions to homeowners and small businesses across Europe. We empower people to stay safe through our excellent customer service.
Customer-focused Goal-focused Willing to improve Reliable.
Safe customers with happy smiles – every time.
Sector Alarm / Annual Report 2021
Sector Alarm is the second largest provider of professionally monitored alarms for residential households and small businesses in Europe and is well positioned to take advantage of the attractive market dynamics and growth opportunities in this space. Sector Alarm has a clear strategy that aims to develop the portfolio and improve financial performance through growth in existing markets and expansion into new markets. The strategy consists of three main targets and objectives: 1) Maximize the value of the Northern European operations 2) A ccelerate growth and scale in Southern Europe 3) Expand into new European markets The penetration for monitored alarms in Europe is about 5%
and there are significant growth potential across all European countries. The foundation for Sector Alarm’s success is built around employing the right people, “Highways” and nurturing a unique Sales DNA and culture. We only work with people that share our values, live by them and make both our colleagues and customers feel empowered to succeed. As a consequence, our culture reinforces our capability to reach our business goals. We do invest a lot in our people, as we never fail to recognize how much our people invest in us. When it comes to staff motivation, loyalty and satisfaction, Sector Alarm is above the industry benchmark in Europe. Sector Alarm has perfected well defined processes to best serve our customers and we measure and benchmark the quality of all
activities continuously. For Sector Alarm this means that we stick to best practices – all the time. Combined with our relentless focus on improvement, this ensures efficiency and outstanding customer satisfaction. The Sector Alarm Culture is unique. As we hire for attitude and train for skill, talents grow into new positions, internal career paths are developed and our culture benefits from dedicated ambassadors in all corners of the company. Sector Alarm has over time created an industrialized salesforce framework with a strong and unique culture that is very hard to replicate. Decades of learning ensure that the best talent is recruited and trained continuously so that we are always serving our customers at the highest levels.
The Right People
The Highway
The Sales ’DNA’
We have the right attitude and we are focused on achieving our goals.
Staying on the highway means that we stick to best practices – all the time.
A unique sales culture where each part of our sales organization follows a specific framework to ensure top performance
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Message from the CEO In Sector Alarm we believe that everyone should have the right to feel safe at home and at work. We are constantly improving our products and services to give our customers the best and fastest service imaginable. Guided by our vision, “Safe customers, with happy smiles - every time”, and living by our values we currently deliver peace of mind to more than 600,000 customers across Europe.
2021 was an extraordinary year for everyone, including us at Sector Alarm. Notwithstanding the short-term challenges, we were able to navigate the year solidly and the business continued to be very resilient. Customer acquisition activities continued at a satisfactory level throughout 2021 despite Sector Alarm clearly faced certain challenges related to Covid-19, including various government
restrictions, a tight labor market and high sick-leave (quarantines) for parts of the year. The performance in Northern Europe below the targets we set at the beginning of the year. On the other side the activity level in Southern Europe increased significantly throughout the year. In total, Sector Alarm added close to 70,000 new customers organically during 2021, an increase of more than 20% compared to 2020.
Sector Alarm continued to provide an excellent service to our customer portfolio throughout the year, as demonstrated by our customer satisfaction, which has been stable at industry leading levels. The attrition rate improved from 6.6% to a record low of 6.1%, with improved attrition rates across all markets. Like last year I am proud to report that Sector Alarm was able to extend the track record
Sector Alarm / Annual Report 2021
of positive net customer growth across all markets. Sector Alarm recorded a net organic customer growth of more than 25,000 in 2021, nearly 2x compared to 2020. Furthermore, Sector Alarm acquired HomeSecure in Ireland in March 2021 which added another 19,000 customers to the portfolio. Consequently, the customer base increased with approximately 45,000 and reached more than 600,000 customers, a new major milestone for Sector Alarm. In line with our growth and expansion strategy, Sector Alarm entered the Italian market in April 2021 and in the start of 2022 Sector Alarm entered the Portuguese market through the acquisition of Seguranca 24. Sector Alarm considers both markets to be highly attractive and are looking forward to helping keep Italian and Portuguese households and small businesses safe in many years to come. Furthermore, the geographical expansion in Spain and France continued at full force with record high customer growth, and the size of the sales organizations increased significantly during the year. The performance improvement program was also a key focus area in 2021 with initiatives centered around customer relationship management, digitalization of the sales journey, digital marketing capabilities and the development of a new state of the art proprietary technology platform. The new technology platform will be
launched across all Sector Alarm Markets in 2022. New features will include a state-of-the art gateway, portable two-way voice module, opportunities for smart home integration over time (Zigbee 3.0) and a new easy-to-use App. In addition, we strengthened the focus on sustainability during the year by establishing a dedicated ESG task force and developed the first Sector Alarm ESG Strategy and Report. From a financial perspective, 2021 was yet another strong year and new records were set for the main financial KPIs. Total revenues ended at NOK 2,851 million, up by 6% (up 8% in constant currency) compared to last year driven by positive net customer growth and ARPU increases. Adjusted Portfolio EBITDA reached NOK 1,698 million, up 14% (up 16% in constant currency) compared to last year. The Portfolio EBITDA improvement was driven by underlying positive development across all markets and reallocation of cost from portfolio to new installs partly offset by higher headquarter cost and ramp up cost for Italy, our new market. Adjusted EBITDA ended at NOK 1,094 million, down 6% (down 5% in constant currency) compared to 2020 due to significantly increased investments in our customers and future growth. What we achieved in 2021 would not have been possible without the dedicated and talented employees. I strongly believe that the uniqueness of our culture with
“Right People” following “Highways” proved crucial in successfully navigating this extraordinary year for Sector Alarm. The safety of employees, customers and other members of the public has been, and will always be our primary concern. Sector Alarm has thus followed and will continue to strictly follow all health and safety recommendations provided by national authorities, while continuing to do our best to deliver for our current and new customers. Looking back on the development over the last two years, with KKR as a partner, there is a lot that has happened. First and foremost, I believe that our capabilities have been significantly strengthened and that we are well-positioned for the growth journey ahead of us. Furthermore, we have managed to deliver very solid results in an extraordinary situation. As such, I remain excited about the future and expect 2022 to be an amazing year for Sector Alarm and our customers!
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Group Structure
Sector Alarm / Annual Report 2021
Jørgen Dahl 62.87%
KKR 29.89%
Other 7.23%
Sector Alarm Holding AS 100%
Sector Alarm AB [Sweden]
Sector Alarm AS [Norway]
PhoneWatch Ltd [Ireland]
HomeSecure Ltd [Ireland]
Sector Alarm OY [Finland]
Sector Alarm Spain S.A.U. [Spain]
Sector Alarm S.A.S. [France]
Sector Alarm Italy SRL [Italy]
Seguranca 24 Ltd [Portugal]
General Services Sector Alarm SLU [Spain]
Sector Alarm IT AS [Norway]
Sector Alarm B.V. [Holland]
Operational companies Support function (Group internal services) Note: Sector Alarm Holding AS is fully owned by Sector Alarm Midco AS, which is owned by Sector Alarm TopCo AS and Sector Alarm Manco AS (special purpose vehicle for a Management Investment Program)
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Our employees
446 359 25
708 General services 299
Sector Alarm / Annual Report 2021
218
508
452 28
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Board of Directors Sector Alarm Topco AS
Nicolas Brun Lie Chairman of the Board
Jenny Hermanson Board member
Amund Skarholt Board member
Sector Alarm / Annual Report 2021
Hans Arstad Board member
Børge Johansen Board member
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Group Management
Jørgen Dahl
Leif Motrø
Bjørnar Bukholm
CEO / Chief Executive Officer Founder
CTO / Chief Technical Officer CO-founder
CFO / Chief Financial Officer
Staffan Andersson CCO / Chief Commercial Officer
Sector Alarm / Annual Report 2021
Viggo Skeisvoll COO / Chief Operating Officer
Begoña González-Alemán Calleja CMO / Chief Marketing Officer
Siv Farstad CHRO / Chief Human Resource Officer
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Message from the Board of Directors 2021 has been one of the most challenging, exciting and rewarding years in the history of Sector Alarm. The financial and operational performance continued to be solid with record high revenues and new customers added. Furthermore, Sector Alarm took important steps to strengthen the capabilities and to position the company for future growth and success.
Highlights 2021 Sector Alarm continued to navigate the Covid-19 challenges with high customer satisfaction, improved attrition rates, positive net customer growth and solid financial performance. In addition, Sector Alarm expanded geographically in Spain and France, acquired HomeSecure in Ireland, entered Italy in April and in the beginning of 2022 Portugal through the acquisition of Seguranca 24. All in all – a very busy and rewarding year for Sector Alarm. Customer satisfaction is at the heart of everything we do. In Sector Alarm, we know that without happy and satisfied custom-
ers we will not succeed nor live up to our vision “Safe customers, with happy smiles - every time”. Sector Alarm continued to provide an excellent customer service throughout 2021 with customer satisfaction at industry leading levels. The attrition rate improved from 6.6% at year end 2020 to 6.1% at year end 2021. Customer acquisition activities were impacted by the Covid-19 situation and associated government restrictions throughout the year. Despite these challenges Sector Alarm were able to add nearly 70,000 new customers to the portfolio, up about 20% compared to 2020. Sector Alarm ended the year with 603.000
customers, up from about 560.000 customers due to net customer growth of nearly 45,000 of which about 25,000 organically and 19,000 through the acquisition of HomeSecure in Ireland. The performance improvement program launched in late 2019 remains a key focus area for Sector Alarm. During the year, Sector Alarm focused on strengthening customer relationship management, digitialization of the sales journey, digital marketing capabilities and developed a new proprietory technology and hardware platform which will be launched across all markets in 2022.
Sector Alarm / Annual Report 2021
Financial performance was solid in 2021 with record high revenues and portfolio EBITDA. In 2021, total revenues increased by 5,4% (8% in constant currency) compared to previous year to reach NOK 2,851 million, and the adjusted portfolio EBITDA increased 14% to NOK 1,699 million (up 16% in constant currency).
Sector Alarm is well positioned for future growth and can look back at a strong and rewarding 2021.
Countries
8
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Financial review 2021 Consolidated financial results The customer base reached 603,026 customers at the end of 2021, up 8% compared to end of 2020. Sector Alarm recorded an organic net customer growth in 2021 of 26,222 which was 2x compared the same period last year (which were significantly impacted by the first phase of Covid-19 lock-downs). Furthermore, Sector Alarm added about 19,000 customers to the portfolio through the acquisition of HomeSecure in Ireland which was concluded in mid-March 2021.
Revenues for 2021 ended at NOK 2,851 million, up 6% compared to the same period last year due to underlying ARPU improvement and increased customer base. In constant currency, revenues were up 8% and ARPU was up 2% compared to the same period last year. Adjusted Portfolio EBITDA was NOK 1,698 million for 2021, up 14% (16% in constant currency)
2021
2020
Revenues
2 851
2 704
Portfolio revenue
2 706
2 570
EBITDA
1 064
1 114
Adjusted EBITDA
1 094
1 167
Portfolio EBITDA
1 668
1 437
Adjusted Portfolio EBITDA
1 698
1 490
EBIT
297
735
Earnings for the period
265
107
Capital expenditure1
368
70
603 026
558 106
66 294
55 286
6,1%
6,6%
26 222
14 038
388
389
Net installs Attrition rate2 Net customer growth ARPU
2)
Furthermore, customer satisfaction and attrition rates remained at an industry leading level. The attrition rate declined from 6.6% to 6.1% during the period (which is at an all-time low level) despite slightly more terminations than
in the same period last year (explained by the material increase in the customer portfolio)
NOK million
Total customers
1)
New customers added in 2021 were 66,294, up 20% compared to 2020. At the same time the performance was below target due to continued challenges related to Covid-19 in several of the Northern European markets. The customer acqusition activity for Southern Europe strengthened materially during the year.
EPC
244
225
CPA
15 346
12 065
Includes purchase of HomeSecure of MNOK 269 in Q1 2021 Attrtion rate for Q4 2021 and prior periods adjusted to reflect harmonization of methodology for calculation of net terminations across all Sector Alarm countries
Sector Alarm / Annual Report 2021
compared to the same period last year due to underlying positive development across all markets and reallocation of cost from portfolio to new installs Adjusted for the changes in methodology for allocation of cost between portfolio and new installs, adjusted Portfolio EBITDA was up about 5% (up 7% in constant currency).
Capital and financing
Adjusted EBITDA was NOK 1,094 million for 2021, down 6% (5% in constant currency) compared to 2020 due to significantly higher activity and cost for customer acquisition. CPA was NOK 15,346, up 27% compared to the same period last year due to changes in accounting methodology and country mix. CPA was up by 7% compared to last year when adjusting for the cost allocation changes.
Consolidated net interest-bearing debt was NOK 5,982 million and the Net Debt Cover was 5.5x at the end of 2021 compared to 5.3x at the end of 2020. The increase for the Net Debt Cover is explained by a reduction in Adjusted EBITDA driven by a significant increase in customer acqustion cost due to increased activity level. The EUR 100 million Revolving Credit facility remains undrawn by Sector Alarm.
The financials for 2021 included adjustments to EBITDA and Portfolio EBITDA of about NOK 31 million. The adjustments were mainly related to the acquisition of HomeSecure and the performance improvement program. Net financial items were postive with NOK 94 million for 2021 and consisted mainly of a net currency gain of NOK 316 million mainly related to the Term Loan B due to the appreciation of NOK against EUR and Interest expenses of NOK 182 million.
Consolidated Interest-Bearing debt was NOK 6,267 million at the end of 2021 and consisted mainly of the EUR 590 million Term Loan B (NOK 5,893 billion) and NOK 373 million in financial leases. Cash and cash equivalents at the end of 2021 was NOK 308 million, down from NOK 610 million at the end of 2021.
Adjusted Portfolio EBITDA
1,699 [NOK Million]
New installs
66,294
Attrition rate
6.1%
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Risk and risk management A deliberate strategy and procedure for risk mitigation will, over time, impact profitability in a positive way. The responsibility of governing bodies, management and employees is to be aware of the current environment in which they operate, implement measures to mitigate risks, prepare to act upon unusual observations, threats or incidents, and proactively try to reduce potential negative consequences. Financial risks The main financial risk exposures for Sector Alarm are currency and interest rate risks. The main currency exposure and risk for Sector Alarm relates to a mismatch between currencies for positive cash flows and outstanding debt. Currently the main sources for positive cash flows are NOK and SEK while outstanding debt is largely in EUR following the refinancing in the Term Loan B market in June 2019. Sector Alarm is therefore exposed to EUR appreciation that would imply higher NOK and/or SEK payments in the future to manage the debt (interest cost and refinancing/ repayment). Over time it’s expected that that the currency exposure will be reduced as cash flows in EUR will increase over time due to continued growth and expansion outside Norway and Sweden. Sector Alarm has decided not to hedge the exposure for the time being, but
to rather monitor the development. In addition, Sector Alarm is exposed to a strengthening of the USD against EUR, NOK and SEK as the prices for hardware is in USD. The primary source of interest rate risk in Sector Alarm is the EUR 590 million Term Loan B and EUR 100 million credit facility with floating interest rate. As a general principle, Sector Alarm should aim to reduce a portion of the floating rate exposure through interest rate swaps. However, Sector Alarm has decided not to hedge the exposure for the time being due to the negative EURIBOR rates. The Term Loan B loan has a 0% interest rate floor which means that if we enter into a EURIBOR Interest Rate Swap Sector Alarm would need to eliminate the negative 3M EURIBOR fixing by buying a floor with a cost of about 50 bps. As a consequence, the hedging becomes costly and less attractive.
tively as consumer spending are likely to decrease which in turn may impact our attrition rates and ability to attract new customers. On the other hand, during economic downturns there may also be increased unrest and as a consequence increased interest in our products.
Market and commercial risk Sector Alarm is faced with market and commercial risk related to economic downturns, pandemics, changes in the competitive environment, new technology and consumer trends. Furthermore, the ongoing European expansion requires significant investment and management time.
The residential home and small business segment in Europe is fragmented and subject to significant competition and pricing pressures. The competitive environment has for most of our markets been relatively stable during the last few years. Intensified competition either from existing competition or new entrants could impact our attrition rate, ability to grow and pricing which could have a material adverse effect on our business and financial performance. With respect to competition from potential new entrants, we believe that players operating in the connected home market and telecommunications market are best situated to move into the alarm industry. Competition from do-it-yourself (‘‘DIY’’) providers enabled by improved technology and changes in consumer preferences solutions may also increase in the future, but it may also expand the market and serve as an entry point for new customers. Currently, Sector Alarm experience very limited attrition to DIY providers or solutions.
An economic downturn in Europe may impact our business nega-
Sector Alarms growth plan includes expansion into new or re-
Sector Alarm / Annual Report 2021
cently entered regions in Europe. Expanding into these geographies involves significant rampup investments to build a new organization and to introduce the brand to the new geography. Sector Alarm may not accurately predict such costs or accurately anticipate operational difficulties caused by local conditions, and therefore may not achieve the financial and strategic objectives for the operations in the new geographies short term. Supply chain risk The global supply chains have become increasingly volatile during the last year due to component / raw material and logistical challenges. For Sector Alarm this has materialized into delays with respect to shipments from our main hardware suppliers. Sector Alarm took decisive action in early 2021 to mitigate the potential impact and continues to closely monitor and address the challenges. To date, Sector Alarms ability to sell and install monitored alarms has not been impacted. The uncertain supply chain situation is expected to continue for some time before
starting to normalize in the beginning of 2023. Based on our current knowledge we expect to be able to navigate through these challenges also going forward. Regulatory risk Sector Alarm operates in a regulated industry that govern our operations, from the sales and installation process through to the monitoring and alarm verification process. Noncompliance with regulations could expose the company to fines, penalties and other liabilities and negative consequences. Sector Alarm Group maintain a strong focus on compliance and perform regular trainings and updates for employees to ensure that we comply with EU and national laws, as well as rules and regulations in the geographic region where we operate.
sanction issued by the Norwegian Competition Authority in 2019 for alleged infringements by Verisure and Sector Alarm of the Norwegian Competition Act. As announced in 2019, Sector Alarm decided to pay the sanction in order to focus on delivering alarm monitoring services although the company disagreed with the assessment and conclusion of the Norwegian Competition Authority. The Class-action case is still ongoing as per 27 April 2022. The Oslo District court ruled in favour of Sector Alarm and Verisure on 22 December 2021. Alarmkundeforeningen submitted an appeal on 2 February 2022.
Class-action lawsuit in Norway On 27 April 2021, Sector Alarm AS received a notice of class action from “Alarmkundeforeningen” pursuant to the Norwegian Dispute Act § 5-2. The class action refers to the administrative Oslo, April 27, 2022
The Board of Directors of Sector Alarm Holding AS
Bjørnar Heiaas Bukholm
Nils Viggo Skeisvoll
Chairman of the board
Director
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Sector Alarm ESG Strategy and Report Sector Alarm’s ESG Strategy and report covers key focus areas for driving sustainable development and long-term value creation. This report is based on a thorough analysis of Sector Alarm’s value chain and stakeholders and provides insight into the most important activities that define Sector Alarm’s ESG strategy and focus areas. Sector Alarm ESG Strategy and focus areas Sustainability has always been a top priority for Sector Alarm, providing safe homes and societies is the backbone of the business. Furthermore, Sector Alarm has an impact on the environment and climate, as well as the wellbeing of its employees. Sector Alarm’s role in driving positive change in these areas defines the ESG strategy and focus areas. Based on a structured assessment of the environmental, social and governance (ESG) impacts throughout Sector Alarm’s value chain and related risks and opportunities, the following five strategic focus areas have been defined: 1) Safe societies 2) Resource efficiency 3) Great place to work 4) Business integrity 5) Smart home solutions
The first and last area concerns Sector Alarm’s customers, while the three in the middle are linked to operations and supply chain management.
reviewed and revised regularly in close dialogue with the Board of Directors and the Group Executive Management Team.
ESG impact and risk Sector Alarm is committed to the assessments 17 UN Sustainable Development Goals. The goals guide Sector Alarm’s ESG strategy and five of them are closely linked to the focus areas prioritized by Sector Alarm. Sector Alarm is committed to continuously monitoring its main impacts on sustainability, as well as the sustainability concerns of key stakeholder groups. Sector Alarm has established an ESG taskforce, led by the Group CFO, consisting of senior representatives across all functional areas, to ensure that ESG is embedded in daily operations across all areas of the business. This ESG strategy and report will be
Transparency is at the center of Sector Alarm’s reporting principles and a holistic approach on ESG is the foundation for establishing the identified focus areas. In accordance with international best practice and recommendations from the EU on non-financial reporting, Sector Alarm has conducted a double materiality assessment of ESG as a starting point for the ESG strategy and report. The double materiality assessment consisted of (1) a value chain impact assessment and (2) a financial materiality assessment of sustainability-related matters.
Sector Alarm / ESG Strategy and Report
“In Sector Alarm, there is no contradiction between managing the impact on sustainable development and delivering financial results. In fact, addressing sustainability throughout the business is the premise for long-term value creation.”
ESG focus areas Safe societies
– Jørgen Dahl, Founder and CEO Value chain impact assessment The value chain impact assessment identified the adverse impacts of Sector Alarm’s business activities on sustainable development. The most important impact points through the value chain include: • Environmental footprint of the products throughout the product lifetime • Greenhouse gas emissions from the car fleet • Social impact on the safety of the customer portfolio and society at large • Employee wellbeing and career opportunities • Human and labour rights throughout the supply chain • Business integrity and ethical business behavior • Security and privacy of employee and customer data • Business travel Financial materiality assessment of sustainability-related matters The financial materiality assessment considers risks and opportunities arising from stakeholder expectations and megatrends. Sector Alarm has investigated the sustainability concerns of investors, regulators, employees, customers, suppliers, and NGOs.
Relevant megatrends include climate change, circular economy, biodiversity, transparency, and demographics. Below is a list of the sustainability risks and opportunities most relevant to Sector Alarm: • Opportunity to become a leading provider of safe and smart homes, supporting increased quality of life for all customers • Opportunity to promote a strong ESG profile to attract and retain talent • Risk of supply chain being exposed to climate change as extreme weather events may disrupt production and logistics • Risk of operations being exposed to climate change as prolonged heat waves, particularly in Southern Europe, may impact the health and safety of staff • Regulatory risk as several cities impose zero-emission zones in city centers, requiring Sector Alarm to invest in zero-emission vehicles to continue to provide high-quality services • Reputational and financial risk in case of data security and privacy breaches, requiring Sector Alarm to pay significant attention to the issue
Resource efficiency
Great place to work
Business integrity
Smart home solutions
* The appendix includes the complete value chain assessment, main risks and opportunities, as well as a short note on climate risks.
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Safe societies At the very core of Sector Alarm’s business is the safety of customers and their homes. Sector Alarm provides more than 600,000 customers across Europe with safety solutions, including protection against burglaries, fires, and water leakage. The sales force and marketing campaigns inform potential and existing customers of how to manage safety hazards. As such, Sector Alarm contributes to a safer society by protecting and educating customers. Saving lives Sector Alarm’s Alarm Receiving Centrals (ARCs) are best-in-class and respond within seconds of an alarm signal being received. In case of emergency, the ARC contacts and ensures dispatch of security guards and/or emergency services. In this way,
Sector Alarm contribute to saving a high number of lives every year. In 2021, the average response time was 13.4 seconds, and 3,700 real incidents were responded to reducing impact on human life and economical loss. Sector Alarm’s ARCs are certified according to industry standards, the EN 50518:2019 standard representing the majority. Sector Alarm’s ARCs are continuously well within the requirement of a 60 second response time for 98.5% of alarms. To ensure the safety of customers, the alarm systems functionality is continuously checked through several automated tests to ensure alarm reliability. To improve alarm quality, Sector Alarm assess root causes of false alarms and assists customers in maintenance and proper installation. Moreover, Sector Alarm works to increase the use of camera
verification of alarms to avoid unnecessary dispatch of emergency services. This improves the customer experience and reduces emissions while reducing costs. Lastly, Sector Alarm promotes safety awareness and is pleased to observe a downward trend in incidents in the areas where Sector Alarm is present, even among neighboring households which have not installed alarm systems. In 2022 Sector Alarm will launch a new state of the art proprietary technology platform that will introduce new features such as portable two voice modules, integrated contact and shock detector and ARC connection for existing portfolio of video products which could enable even better alarm handling.
Safe societies KPI description
Unit of measurement
2020
2021
2025 target
Class 1 alarms handled
Number of alarms
3 360
3 700
n/a
Average response time
Seconds
14
13,4
15
Customer satisfaction
Maximum score 100
95.8
95.7
Potential life-saving incidents
Number of incidents
100
n/a
Sector Alarm / ESG Strategy and Report
Customer Satisfaction Sector Alarm’s vision, “Safe customers, with happy smiles – every time”, guides all customer interaction. Customer satisfaction is continuously measured, and Sector Alarm consistently scores above the internal benchmark of 95/100. As an example, Sector Alarm in Norway has been awarded approximately 20 prizes for outstanding customer service, three of which were in 2021: • Norwegian Customer Service Award (industry winner, 12th time in a row) • Norwegian Sustainability Barometer (industry winner, second year in a row) • Norwegian Customer Barometer (industry winner) Sector Alarm’s core values are embedded in the company culture and training programmes which helps ensure that customer care stays at top-of-mind
across all business units. The success of Sector Alarm’s customer centric focus is evident in an attrition rate of only 6.1% in 2021, which is best in class in the industry. In the future, the customer journey will become increasingly digitalized, and Sector Alarm is currently exploring how to provide even better customer experiences and services on new platforms.
UN Sustainable Development Goals
Relevant areas in the value chain • Customers and product use
Supporting policies and guidelines • Emergency response guidelines • Product maintenance guidelines • Customer survey guidelines
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Resource efficiency The main source of Sector Alarm’s emissions stems from driving in the communities we serve, related to sales, maintenance services, and emergency responses. Furthermore, the alarm hardware impacts the climate and environment throughout its lifecycle, particularly during production and at end-of-life. Managing greenhouse gas emissions and increasing circular product attributes are important steps for Sector Alarm to reduce its environ mental footprint and to support a sustainable future. In 2021, Sector Alarm introduced full scope 1, 2 and 3 greenhouse gas emission reporting to improve the visibility around environmental impact throughout the value chain.
Reducing emissions Sector Alarm’s direct environmental impact is a result of five main factors: 1) The car fleet 2) Callouts (dispatch of security guards and/or emergency services to customers) 3) Offices (electricity) 4) Business travel 5) Hardware In 2020 and 2021, Sector Alarm has taken significant steps towards reducing the impact of all these factors going forward. Company Car Purchasing Guidelines , stating zero-emission or hybrid vehicles are the preferred option in any purchase if feasible, was rolled out in 2021. As per year-end 2021, 24% of Sector Alarm’s car fleet is aligned with these requirements, a massive improvement compared to only
4% in 2020. The share is targeted to continue to increase rapidly during the next few years and a 2025 target of 75% has been set. Sector Alarm works diligently to reduce the emissions from callouts while maintaining the excellent service level valued by the customers. Additionally, Sector Alarm always plans and optimises routes and partners with professional companies who have defined goals and actions to reduce emissions from their car fleets. These efforts help reduce the number of callouts, kilometers driven and associated emissions. Furthermore, a Green Travel Policy was implemented in Sector Alarm in 2021. All employees and temporary staff are required to reduce travel to an absolute minimum, book several
Resource efficiency 2020
2021
2025 target
% of fleet
4%
24 %
>75%
Average emissions per car
gCO2e/km
117
110
<100
GHG emissions, scope 1
tCO2e
2 087
2 750
n/a
GHG emissions, scope 2
tCO2e
181
n/a
GHG emissions, scope 3
tCO2e
4 079
n/a
tCO2e/installations (000)
61,5
TBD
tCO2e/revenues (millions)
1,4
TBD
% of product reusage
89 %
>90%
# of products reused
18 230
KPI description
Unit of measurement
Electric and hybrid cars
GHG intensity
Product re-usage Recycling of alarm components
% of alarm components reused / recycled
> 95%
> 95%
>99%
Recycling of batteries
% of alarm batteries recycled
> 95%
> 95%
>99%
Sector Alarm / ESG Strategy and Report
meetings for the same journey, utilize public transport, rail, and zero-emission vehicles whenever possible, as well as fly economy class. Increasing circularity Home safety products and hardware impact the environment throughout the lifecycle and increasing the circular attributes of alarm components is central to reducing Sector Alarm’s overall footprint. When feasible, Sector Alarm seeks to refurbish and reuse alarm components while following strict quality requirements to ensure the safety of customers (smoke detectors are never reused). In 2021, Sector Alarm successfully enhanced the process for termination services to enable increased refurbishment and reusage of alarm components to reduce the impact on the environment. Sector Alarm has zero-tolerance for not recycling alarm components and batteries. Therefore, close to 100% of alarm systems (that are not refurbished/ re-used) and batteries collected from customers are recycled at local service stations. Regular quality controls are conducted to ensure full compliance with this policy.
Product lifetime requirements are included in relevant supplier contracts. Sector Alarm’s work wear are sent back to the supplier at end-of-life for repair and recycling.
UN Sustainable Development Goals
Relevant areas in the value chain • Sales and installation
• Marketing and management
• Suppliers and raw materials
Supporting policies and guidelines • Company Car Purchasing guidelines • Green Travel Policy • Product maintenance guidelines
32 / 33
Great place to work Sector Alarm employs nearly 3,000 people across eight countries with the majority working in sales or other customer facing roles. To succeed with the longterm ambitions and to make societies safer, Sector Alarm is dependent on dedicated and customer-focused employees. Therefore, Sector Alarm has a strong focus on training and development, motivation, and building a strong and unique culture that enables employees to perform their very best.
Diversity In Sector Alarm, anyone can build a career, irrespective of their background. Sector Alarm is an equal opportunity employer and works to ensure an environment free of discrimination where everyone is treated equally regardless of gender, sexual orientation, disability, ethnicity, skin color, religion, or political opinion. 69% of the employees in Sector Alarm are men due to the fact that a large share of the roles is within sales and operations where the vast majority of applicants are men. However, Sector Alarm continuously strives to increase the
percentage of women in these areas. For the wider management population, women represent 27 % as per year end 2021. Sector Alarm strongly believes that gender balance strengthens the company and actively seeks to increase diversity across the business. Consequently, a long-term target has been set to increase the female percentage to 35% across all levels of the organization. Satisfaction and loyalty Sector Alarm’s growth ambition is dependent on the wellbeing of the employees. Sector Alarm
Great place to work KPI description
Unit of measurement
2020
2021
2025 target
Employees
Number of employees
2 363
2 757
n/a
Gender diversity
% of all employees % of managers % of directors
31% women, 69% men 26% women, 74% men 27% women, 73% men
30% women, 70% men 26 % women, 74 % men 27% women, 73% men
>35% women >35% women >35% women
Gender paygap
% of all employees (excluding field employees)
25 %
27%
n/a
% of managers
1%
9%
n/a
% of directors
23%
15%
n/a
Employee satisfaction and motivation
Maximum score 100
76
72
>75 (top in class)
Employee loyalty
Maximum score 100
85
82
>85 (top in class)
Quality of leadersip
% of managers rated as sterling manager
71%
65%
>65%
Turnover rate
All employees excluding field employees
34%
35%
n/a
Sick leave
%, total
4.3%
3,8%
<4%
Reported incidents
Number of incidents
60
88
n/a
Lost time incidents
Lost time injuries per million hours worked
13,8
17,3
<15
Leaders promoted from within
% total leaders
35%
52%
>50%
Organic job creation recruitements
Number of hires
5 082
6 067
n/a
Sector Alarm / ESG Strategy and Report
regularly conducts employee satisfaction surveys to monitor the satisfaction, motivation and loyalty of employees with the aim to continuously improve. In the most recent survey Sector Alarm scored better than the industry benchmark for both employee satisfaction and motivation and employee loyalty. At the same time results were lower than in 2019 with the main explanatory factor being Covid-19 which has negatively impacted the satisfaction and motivation in certain areas. Sector Alarm has a clear target to be top in class (defined as top quartile) for both employee satisfaction and motivation and loyalty. Additionally, the survey concludes that Sector Alarm employees value the peoplecentered culture and that they are given responsibility at an early stage. Employees also value the leadership culture. In 2021, 65% of Sector Alarm’s managers were rated “sterling” by their subordinates, the strongest rating for a manager. This leaves Sector Alarm well above the average score of 37% across other companies participating in the ENNOVA framework. Sector Alarm continuously works to strengthen its culture to make everyone feel welcome. For example, a Sector Alarm Culture Day is usually arranged every six months for all new employees, however the event has not taken place during the Covid-19 pandemic.
Training and development Continuous development of the workforce is important for Sector Alarm’s growth and productivity. Guided by the slogan “hire for attitude and train for skills”, Sector Alarm seeks talent that has sales in their DNA and willingness to improve. All sales representatives are enrolled in a unique training program combining on-the-job training with classroom courses provided by the in-house learning center, Sector Way Academy. The 5-step classroom programme focuses on relationship building, sales skills, and self-leadership, followed by field-training. As their careers progress, sales employees are enrolled in ongoing mentorship and future leadership programmes to support them throughout their careers. Sector Way Academy is a proven success as more than 50% of new leaders in 2021 where promoted from within Sector Alarm. In 2020 and 2021, Sector Alarm digitalized most of the standard training material to make sure all employees could access relevant training despite Covid-19 restrictions. Sector Alarm will continue to adapt and digitalize the learning portfolio to meet the needs of current and future talent.
UN Sustainable Development Goals
Relevant areas in the value chain • Sales and installation
• Marketing and management
Supporting policies and guidelines • Group HR policy • Group Recruitment & Selection Policy • Code of Conduct
34 / 35
Business Integrity To maintain integrity as a home safety provider, ethical business behavior throughout Sector Alarm’s operations is a must. Sector Alarm manages sensitive data and provides advice to a vast number of customers. These topics should always be managed according to best practice. At Sector Alarm there is no compromise to ethical business conduct. Integrity Managing an increasing workforce across eight countries requires Sector Alarm to clearly communicate values and high ethical standards. During onboarding, new employees are introduced to “The Sector Way” and Sector Alarm’s core values. Moreover, all employees should sign the Code of Conduct and complete complementary training. The Code of Conduct is publicly available on Sector Alarm’s website and includes a wide range of topics, including,
but not limited to: • Antitrust and competition • Anti-money laundering • Anti-corruption and antibribery • Gifts, entertainment, and hospitality • Conflicts of interest • Health and safety • Human rights • Equal employment opportunities and diversity Employees are encouraged to raise concerns internally; however, Sector Alarm also has a publicly available, anonymous whistleblower channel to make sure anyone can feel safe speaking up against Code of Conduct breaches or other unethical behavior. Nine incidents were reported in 2021 of which all has been handled with care according to internal guidelines. Sector Alarm will continue to monitor the whistleblower channel and, according to best practice, ensure transparency should any serious incidents be reported.
Data protection and privacy Sector Alarm handles sensitive employee and customer data. The Privacy Policy is publicly available, and all employees are required to complete digital GDPR training. From 2021 onwards, all employees are also required to complete data security training. Moreover, each country has a dedicated Data Protection Officer to ensure that business activities adhere to data protection best practice. In late 2020, a seasoned General Counsel was appointed and relevant internal procedures and policies, including GDPR, have been audited and strengthened during the first half of 2021. The current approach is considered efficient in managing risks and handling breaches. Cyber Security Tasked with ensuring its customers’ safety, Sector Alarm takes the security of critical systems
Business integrity 2020
2021
2025 target
90 %
82 %
>95%
Number of cases
0
9
n/a
Data breaches reported to the national authorities
Number of cases reported
3
6
n/a
Completed IT security training
Number of employees who have completed traning
54%
>95%
Cyber security spend
% of revenues
0,4%
n/a
KPI description
Unit of measurement
Code of Conduct signed
Percentage of employees who have signed the Code of Coduct
Whistleblower cases reported to the Board of Directors
Sector Alarm / ESG Strategy and Report
and sensitive information very seriously. Cybersecurity is high on the company agenda and the Board of Directors is regularly updated. Furthermore, all employees are required to complete annual security awareness training. In late 2020, a Head of Cybersecurity was appointed. In 2021, a detailed assessment of Sector Alarm’s software security and overall cybersecurity maturity was assessed. Based on the assessment, a prioritized list of strategic initiatives was created. The work to further strengthen Sector Alarm’s overall cybersecurity posture is well on the way. Considerable effort has already been taken to enhance existing policies, processes and procedures. Additionally, there is an increased focus on aligning with modern security best practices. particularly with regards to application security. In 2021, six personal data breaches were detected and reported to national authorities, all of which were handled in line with established routines.
Supply chain management Most of Sector Alarm’s hardware components are delivered by one supplier, providing an opportunity to closely monitor and engage in dialogue about Sector Alarm’s ethical standards. However, to manage the wider supplier group an ESG and GDPR self-assessment was launched in 2021 and will be distributed and followed up with all relevant suppliers. Among other things, the self-assessment includes questions on ESG governance and reporting, fundamental labor rights, and environmental impact. The next step is to collect and review the responses, and to follow up on those that do not meet Sector Alarm’s expectations. Furthermore, Sector Alarm introduced mandatory supplier screening against sanctions & anti-terror financing lists and adverse media reports in late 2021.
UN Sustainable Development Goals
Relevant areas in the value chain • Sales and installation
• Marketing and management
• Suppliers and raw materials
Supporting policies and guidelines • Code of Conduct • Whistleblower channel • Privacy policy for customers and other third parties • Privacy policy for employees • Data Protection Policy • Supplier ESG and GDPR questionnaire
36 / 37
Managing energy consumption Sector Alarm already offers smart home solutions that enable customers to reduce energy consumption and costs. For example, smart plugs allow customers to control lights and indoor temperatures remotely using the Sector Alarm app. In 2021, 17% of the customer portfolio had smart plugs, up from 15% in 2020, and this number is expected to increase in the coming years. The smart home segment is a focus area for Sector Alarm and there are ongoing initiatives to launch functionalities that should enable customers to further reduce their environmental footprint.
UN Sustainable Development Goals
KPI description
Unit of measurement
2020
2021
Customers with Smart Home-enabled Sector Alarm products
Number of customers with smart home enabled products
87 577
98 382
15%
17%
Smart home solutions Smart home solutions are revolutionizing the ways people are managing and protecting homes, their health and environmental impacts. Already present in more than 600,000 homes and small businesses, Sector Alarm is in a unique position to help monitor and manage activities not only related to safety, but also to the environmental footprint of customers’ everyday life through smart home solutions and devices. Sector Alarm has noticed a shift in the market as more and more customers are seeking smart home solutions and Sector Alarm is currently working on initiatives to capture opportunities in this space.
Relevant areas in the value chain • Customers and product use
Supporting policies and guidelines • n/a
Smart home solutions
% of portfolio with smart-home enabled products
Summary of main achievements in 2021. During the year Sector Alarm took several important steps to strengthen the ESG focus and efforts. First and foremost, we developed our first ESG strategy and report and put in place an ESG taskforce to drive the ESG agenda. In addition, several specific projects and improvements were implemented and introduced in 2021 - New Company Car Purchasing Guidelines, stating zero-emission or hybrid vehicles are the
preferred option in any purchase if feasible. As per yearend 2021, 24% of the car fleet is aligned with these requirements (up from only 4% in 2020) - New process for termination services to enable increased recycling or reusage /refurbishment of alarm components allowing for reduced waste and environmental footprint - New Green Travel Policy to reduce climate impact on travel activities - Strengthened the compliance and security focus in Sector
2025 target
>30%
Alarm, especially around data privacy, cyber security, supplier screening and sales conduct - Full scope 1, 2 and 3 greenhouse gas emission reporting to improve the visibility around environmental impact throughout the value chain - Medium- and long-term targets set for several of the KPIs We will continue to strengthen our efforts to ensure that Sector Alarm remains in forefront of ensuring sustainable development within our industry.
Sector Alarm / ESG Strategy and Report
Sector Alarm’s impact on sustainability throughout the value chain The table below illustrates Sector Alarm’s impact on sustainability throughout the value chain. The assessment is based on dialogue with employees, as well as external inputs from reporting standards (e.g. SASB) and sustainability experts. The list is not exhaustive. However, it serves the purpose of identifying the issues on which Sector Alarm has a higher impact and thus where efforts should be focused.
Environment HG emissions from G production of fossil-based materials (plastic)
Energy use in offices Data processing and storage at own data centers
I mpact of raw material extraction and mining activities on local biodiversity
End-of life management of employee hardware
ransportation of goods / T products
usiness travel and employee B commuting
-waste from hardware and E battery production
Cafeteria operations and food waste
ocal pollution in clothing L production
Recycling of office waste
Travel related to sales and maintenance activities
nergy use of product in E user phase
Environmental impact of commercial merchandise
roduct recycling and P end-of-life management (hardware, batteries, plastic)
Energy use of digital advertisement material
Product packaging
End-of-life management of uniforms
roduct life time and P longevity nergy efficiency at E customer’s home
nergy consumption of data E center services
Social uman and labour rights in H the supply chain
Labour rights and working conditions
Labour rights and working conditions
S afety of customer’s home and in civil society
ealth and safety in the H supply chain
Employee skills and training
Employee skills and training
Product reliability
Diversity and equality
Diversity and equality
thical use of surveillance E and security products
Health and safety
Health and safety
S ocioeconomic impacts of conflict mineral extraction and trade
Governance Corruption in the supply chain
Corruption and bribery
S upply chain transparency (quality, cyber security and data privacy)
Anti-competitive behaviour
Integrity and honest advice
Customer data privacy
Responsible marketing Cyber security breaches
High impact
Medium impact
Low impact
38 / 39
KPI index Safe societies KPI description
Unit of measurement
Class 1 alarms handled
Number of alarms
Average response time
Seconds
Customer satisfaction
Maximum score 100
Potential life-saving incidents
Number of incidents
2019
2020 3 360 14 95.8
Resource efficiency KPI description
Unit of measurement
Electric and hybrid cars
% of fleet
Average emissions per car
gCO2e/km
GHG emissions, scope 1
tCO2e
GHG emissions, scope 2
tCO2e
GHG emissions, scope 3*
tCO2e
GHG intensity
tCO2e/installations (000)
2019
2020 4% 117 2 087
tCO2e/revenues (millions) Product re-usage
% of product reusage # of products reused
Recycling of alarm components
% of alarm components reused / recycled
> 95%
Recycling of batteries
% of alarm batteries recycled
> 95%
* S cope 3 emissions include purchased goods and services (Electronic equipment/hardware, work-wear and batteries), Capital goods (IT equipment), upstream transportation and distribution (logistics and call-outs), waste (Electronic equipment/hardware and batteries), Business travel (mileage, flights and hotel nights)
Sector Alarm / ESG Strategy and Report
2021
2025 target
2030 target
Comments
3 700
n/a
n/a
Callouts to real incidents
13,4
15
15
20 seconds is the certification requirement
95.7
95
95 Based on customer ratings on 1-6 scale where 6 = 100 and 1 = -50
100
n/a
n/a # of customers woken up by the alarm, ARC or fire department
2021
2025 target
2030 target
24%
>75%
>90%
110
<100
<90
2 750
n/a
n/a
181
n/a
n/a Elecricity usage in Sector Alarm offices
4 079
n/a
n/a
61,5
TBD
TBD
1,4
TBD
TBD
89%
>90%
n/a
18 230
n/a
> 95%
>99%
>99%
> 95%
>99%
>99%
Comments
Sector Alarm car fleet
Other indirect emissions*
Measured based on central unit for latest hardware and technology platform
40 / 41
Great place to work KPI description
Unit of measurement
2019
2020
Employees
Number of employees
Gender diversity
% of all employees % of managers % of directors
Gender paygap
% of all employees (excluding field sales and service engineers) % of managers % of directors
Employee satisfaction and motivation
Maximum score 100
75
76
Employee loyalty
Maximum score 100
85
85
Quality of leadersip
% of managers rated sterling manager
67%
71%
Turnover rate
All employees excluding Field Sales and service engineers
Sick leave
%, total
Reported incidents
Number of incidents
Lost time incidents
Lost time injuries per million hours worked
13,8
Leaders promoted from within
% total leaders
35%
Organic job creation recruitements
Number of hires
2 363 31% women, 69% men 26% women, 74% men 27% women, 73% men 25% 1% 23 %
34% 4.4%
4.3%
74
60
5 082
Smart home solutions KPI description
Customers with Smart Home-enabled Sector Alarm products
Unit of measurement Number of customers with smart home enabled products % of portfolio with smart-home enabled products
2019
2020 87 577 15%
Sector Alarm / ESG Strategy and Report
2021
2025 target
2030 target
2 757
n/a
n/a
30% women, 70% men 26 % women, 74 % men 27% women, 73% men
>35% women >35% women >35% women
>35% women >35% women >35% women
27% 9% 15%
n/a n/a n/a
n/a n/a n/a
(Average pay men - average pay female) / average pay men
72
>75 (top in class)
>75 (top in class)
Survey will now be conducted every 18th months
82
>85 (top in class)
>85 (top in class)
Survey will now be conducted every 18th months
65%
>65%
>65%
Survey will now be conducted every 18th months
35%
n/a
n/a
Does not include contingent worker
3,8%
<4%
<4%
Excluding field sales
88
n/a
n/a
2021 figures coming from the HSE feedback system, in prior years it was input from each country’s HR Director
17,3
<15
<15
52%
>50%
>50%
6 067
n/a
n/a
2021
2025 target
2030 target
98 382 17%
n/a >30%
>50%
Comments
Comments
42 / 43
Business integrity KPI description
Unit of measurement
2019
2020
Code of Conduct signed
Percentage of employees who have signed the Code of Coduct
Whistleblower cases reported to the Board of Directors
Number of cases
0
Data breaches reported to the national authorities
Number of cases reported
3
Completed IT security training
Number of employees who have completed traning
Cyber security spend
% of revenues
New supplier contracts with new Supplier Code of Conduct integrated
% of new supplier contracts
Key material suppliers completed ESG and GDPR questionnaire
% of suppliers in scope who have completed questionnaire
Supplier screening against sanctions & anti-terrorfinancing lists and adverse media reports
% of new suppliers screened
90%
Sector Alarm / ESG Strategy and Report
2021
2025 target
2030 target
82%
>95%
>95%
9
n/a
n/a
6
n/a
n/a
54%
>95%
>95%
0,4%
n/a
n/a
>85%
>85%
Will be reported from 2022
>85%
>85%
Implemented in late 2021. Will be reported from 2022
>95%
>95%
Implemented in late 2021. Will be reported from 2022
Comments
Mandatory from 2022 for all office based employees
44 / 45
Sector Alarm / Annual Report 2021
Annual Accounts / 2021 Sector Alarm Holding AS Consolidated (IFRS)
46 / 47
Directors Report 2021
Sector Alarm Holding AS, headquartered in Oslo, provide professionally monitored alarm services for more than 600,000 residential households and small businesses through its subsidiaries in Norway, Sweden, Finland, Ireland, Spain, France, Italy and Portugal.
2021 has been one of the most challenging, exciting and rewarding years in the history of Sector Alarm. Firstly, Sector Alarm continued to navigate the Covid-19 challenges with high customer satisfaction, improved attrition rates, positive net customer growth and solid financial performance. In addition, Sector Alarm expanded geographically in Spain and France, acquired HomeSecure in Ireland, entered Italy in April and Portugal in the
beginning of 2022 through the acquisition of Seguranca 24. All in all – a very busy and rewarding year for Sector Alarm. Customer satisfaction is at the heart of everything we do. In Sector Alarm, we know that without happy and satisfied customers we will not succeed nor live up to our vision “Safe customers, with happy smiles - every time”. Sector Alarm continued to provide an excellent customer
service throughout 2021 with customer satisfaction at industry leading levels. The attrition rate improved from 6.6% at year-end 2020 to 6.1% at year-end 2021. Customer acquisition activities were impacted by the Covid-19 situation and associated government restrictions throughout the year. Despite these challenges Sector Alarm were able to add nearly 70,000 new customers to the portfolio, about 20%
Sector Alarm / Annual Report 2021
compared to 2020. Sector Alarm ended the year with 603. 000 customers, up from about 560.000 customers due to net customer growth of nearly 45,000 of which about 25,000 organically and 19,000 through the acquisition of HomeSecure in Ireland. The performance improvement program launched in late 2019 remains a key focus area for Sector Alarm. During the year, Sector Alarm focused on strengthening customer relationship management, digitalization of the sales journey, digital marketing capabilities and developed a new proprietary technology and hardware platform which will be launched across all markets in 2022. For the Group, revenues for 2021 were NOK 2.851 million. The earnings before tax were NOK 391 million. The annual profit was NOK 265 million. The Equity was NOK -1.711 million for 2021, but the value adjusted equity would be positive and considered
sound. The consolidated interest-bearing debt was NOK 5,976 million at the end of 2021 and consisted mainly of the EUR 590 million Term Loan B and financial leases. The liquidity position is solid, but the cashflow was negative NOK 288 million in 2021, down from NOK 323 million in 2020 mainly driven by increased investment in organic growth and the acquisition of HomeSecure in Ireland. For Sector Alarm Holding AS (the parent), revenues were NOK 111 million in 2021. The earnings before tax were NOK 538 million and the annual profit was NOK 424 million. The Equity was NOK 4,068 million. The parent company’s profits of NOK 424 million will be allocated to other equity. The main financial risk for Sector Alarm is currency exposure and relate to a mismatch between currencies for positive cash flows and outstanding debt. Currently the main sources for positive
cash flows are NOK and SEK while outstanding debt is largely in EUR following the refinancing in the Term Loan B market in June 2019. Sector Alarm is therefore exposed to EUR appreciation that would imply higher NOK and/or SEK payments in the future to manage the debt. Reference is also made to the discussion of financial risk management in note 3. In Sector Alarm Holding AS there was 34 employees at year end 2021, of which 32% were women. The Group had 2.581 employees (not including consultants) of which 30% women. In Sector Alarm Holding AS all employees have full-time positions. The average parental leave for women were 32 weeks and 12 weeks for men. In Norway, women represented 25% of the workforce, in Sweden 28%, in Ireland 30%, in Finland 29%, in Spain 39%, France 28% and in Italy 21%. In the Group there were 1% of the workforce that had chosen not to declare gender. Sector Alarm
48 / 49
endeavor equal gender distribution and has female employees in management positions in all countries. Total sick leave in Sector Alarm was 3,8% in 2021 compared to 4,3% in 2020. The Group had 88 reported incidents in 2021 compared to 60 incidents in 2020. Sector Alarm works on an ongoing basis to prevent discrimination that may be an obstacle to equality. Gender equality is part of the systematic HSE activities and takes place in collaboration with the employees, represented by the safety service and the working environment committee (AMU). Sector Alarm’s Code of Conduct states that efforts shall be made to ensure that all employees have a working environment that is free from discrimination, harassment and bullying. Sector Alarm strives for equal employment opportunities and diversity in the workplace. This requirement applies in relation to all unequal treatment, exclusion, or preference of an
individual or group, for example based on gender, race, disability, age, religion, sexual orientation, political views, national, ethnic or social origin. Sector Alarm follows these principles in all areas of employment, including when we recruit, hire, train, promote and reward our employees. Please see the document “Likestillingsredegjørelse for Sector Alarm 2021” for further infor mation and a detailed analysis of remuneration between genders. The work environment in Sector Alarm is good and the most recent Employee Survey confirms that Sector Alarm is better than the industry benchmark when it comes to staff motivation, loyalty and satisfaction. The Employee Survey is also the basis for continuous improvements. The monitored alarm services that Sector Alarm provide pollute the external environment to a limited degree. All countries participate in recycling schemes for the handling of old and broken alarm hardware and strive to have a
new and modern environmentally friendly fleet of vehicles. In 2021, Sector Alarm has not conducted any research activities, but is engaged in the continues development of products and services for the home security space. All entities in the Group are covered by a Director and Officers liability insurance of NOK 100 million annually. The Board of Directors makes continues assessments of the market outlook in the countries that the Group operates in. The penetration for monitored alarms in Europe is about 5% and the Board of Directors sees significant growth potential across all European countries, also in the Nordics. Sector Alarm is the second largest provider of professionally monitored alarms for Small Systems in Europe and is well positioned to take advantage of the attractive market dynamics and growth opportunities in this space. Sector Alarm has a solid foundation in Northern Europe and the operations
Sector Alarm / Annual Report 2021
in Norway, Sweden and Ireland deliver solid financial results. The Finnish, Spanish and French operation continues to show positive development and has become an important contributor to the growth. The newly established Italian market is still in a ramp up phase. In line with the expansion strategy, Sector Alarm entered the Portuguese market through the acquisition of Seguranca 24 in January 2022. The Board of Directors considers the outlook for Sector Alarm to be positive.
The Board of Directors are not aware of any matters after the end of the financial year that will have a material bearing on the company’s position and earnings for 2021. Both the war on Ukraine and Covid-19 is expected to have a limited impact Sector Alarm in 2022.
the Norwegian Accounting Act, the Board of Directors confirms that the prerequisites for the going concern assumption exist and that the financial statements have been prepared based on a going concern basis.
The Board of Directors considers the presented Annual Accounts to give an accurate view of Sector Alarms financial position at year end and operations throughout the year. In accordance with section 3-3a of
Oslo, 27 April 2022
Bjørnar Heiaas Bukholm
Jørgen Dahl
Chairman of the Board
CEO
Nils Viggo Skeisvoll Board member
50 / 51
Income statement Amounts in TNOK
Note
Revenue from contracts with customers
5
Other revenue
25
Total revenue Personnel costs
15, 25
Other operating costs
16, 20
Total operating costs Operating profit before D&A (EBITDA) Depreciation and amortization
6, 7,19
Operating profit
2021
2020
2 849 618
2 704 074
1 161 2 850 779
2 704 074
-1 214 478
-1 084 682
-572 411
-504 971
-1 786 889
-1 589 653
1 063 889
1 114 420
-767 075
-379 149
296 814
735 271
Finance income
14, 17
107 560
142 876
Finance cost
14, 17
-13 064
-757 660
Net finance cost
94 496
-614 784
Profit before tax
391 310
120 486
-126 430
-13 881
264 880
106 605
264 880
106 605
0
0
Income tax expense
13
PROFIT FOR THE PERIOD Profit is attributable to: Owners of Sector Alarm Holding AS Non-controlling interests
Statement of comprehensive income Amounts in TNOK Profit for the period
Note
2021
2020
264 880
106 605
Items that subsequently may be reclassified to profit or loss Remeasurement gain (loss) from net defined benefit liability
22 593
-26 597
Currency translation differences
-213 031
236 943
Other comprehensive income
-190 437
210 345
Total comprehensive income for the year attributable to parent company shareholders
74 442
316 951
Total comprehensive income for the period
74 442
316 951
Sector Alarm / Annual Report 2021
Balance sheet 31.12.2021
31.12.2020
13
117 866
121 361
Intangible assets and goodwill
7
3 976 947
4 137 006
Property, plant and equipment
6, 19
898 690
681 240
4 993 504
4 939 607
56
59
8, 22, 25
206 585
196 533
8, 22
106 083
94 162
9
307 686
610 256
Note
Amounts in TNOK ASSETS NON CURRENT ASSETS Deferred tax asset
TOTAL NON CURRENT ASSETS CURRENT ASSETS Derivative financial instruments
22
Trade and other receivables Prepayments Cash and cash equivalents TOTAL CURRENT ASSETS TOTAL ASSETS
620 410
901 010
5 613 914
5 840 617
EQUITY Share capital
10, 18
1 605
1 605
Share premium
10, 18
589 872
589 872
Other equity
-2 302 919
-2 376 139
TOTAL EQUITY
-1 711 442
-1 784 661
NON CURRENT LIABILITIES Deferred tax
13
Loans and borrowings
12, 22
300 899
283 271
5 827 442
6 108 518
Leasing liabilities
12, 19, 22
298 313
289 255
Employee benefits
15
70 271
98 748
Other non current liabilities
22, 25
SUM NON CURRENT LIABILITIES
10 482
4 489
6 507 408
6 784 282
CURRENT LIABILITIES Loans and borrowings
22
Leasing liabilities
2 277
12, 19, 22
69 392
65 343
13
60 702
101 722
Trade and other payables
11, 22
434 233
421 658
Contract liabilities
5, 11
Current tax liabilities
253 621
249 996
SUM CURRENT LIABILITIES
817 948
840 996
SUM EQUITY & LIABILITIES
5 613 914
5 840 617
Oslo, 27 April 2022
Nils Viggo Skeisvoll
Jørgen Dahl
Bjørnar Heiaas Bukholm
Board member
CEO
Chairman of the board
52 / 53
Cash flow statement 2021
2020
Earnings before tax
391 310
120 485
Adjustments for net finance cost
-94 496
614 784
Adjustments for depreciation and amortization
767 075
379 151
-8 438
9 684
7 111
18 975
Change in other operating receivables/payables
-21 313
40 217
Change in net pension assets/liabilities
-28 477
0
Amounts in TNOK
Change in accounts receivable Change in accounts payable
Income taxes (refund) paid CASH FLOW OPERATING ACTIVITIES Proceeds from sales of investment in subsidiaries
-164 161
-113 830
848 611
1 069 466
0
2 122
Payment for acquisition of subsidiary
-259 927
0
Increase in investment in subsidiaries
0
52
Proceeds from sales of property, plant and equipment
402
-252
-578 036
-475 217
11 887
13 299
-604
-2 491
-826 279
-462 486
-20 166
3 583
Change in long term loans from related parties
0
-6 671
Proceeds from loans and borrowings
0
-52
Acquisition of property, plant and equipment Interests received Other adjustments to investing activities CASH FLOW INVESTING ACTIVITIES Change in other long term receivables and payables
Repayment of loans and borrowings
-13 753
-9 982
Payment of lease liabilites
-70 476
-59 268
-195 667
-200 133
-10 033
-11 634
CASH FLOW FINANCING ACTIVITIES
-310 095
-284 156
CASH FLOW TOTAL
-287 763
322 824
610 256
270 298
Interests paid Other adjustments to financing activities
Cash and cash equivalents at the beginning of the financial year Effects of exchange rate changes on cash and cash equivalents
-14 807
17 134
CASH AND CASH EQUIVALENTS AT END OF YEAR
307 686
610 256
Sector Alarm / Annual Report 2021
Statement of changes in equity Amounts in TNOK
Balance at 1 January 2020
Share capital
Other Translation equity reserve
TOTAL
Non controlling interests
TOTAL EQUITY
1 605
-2 245 652
139 554
-2 104 493
0
-2 104 493
Profit for the period
0
106 605
0
106 605
0
106 605
Other comprehensive income
0
-26 597
236 943
210 345
0
210 345
Dividends
0
0
0
0
0
0
Other changes
2 881
0
2 881
0
2 881
Balance at 31 December 2020
1 605
-2 162 763
376 496
-1 784 662
0
-1 784 662
Balance at 1 January 2021
1 605
-2 162 763
376 496
-1 784 662
0
-1 784 662
Profit for the period
0
264 880
0
264 880
0
264 880
Other comprehensive income
0
22 593
-213 031
-190 437
0
-190 437
Dividends
0
0
0
0
0
0
Other changes Balance at 31 December 2021
0
0
-1 223
0
-1 223
0
-1 223
1 605
-1 876 513
163 466
-1 711 442
0
-1 711 442
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Notes Amounts in TNOK
Note 1 / General information Sector Alarm Holding AS (the Company) and its subsidiaries (the Group) provide professionally monitored alarms for residential households and small businesses in Europe. The Group operates in Norway, Sweden, Ireland, Finland, Spain, France and Italy. Sector Alarm Holding AS is the parent company of the Group and provides centralized services and corporate governance on behalf of the Group. The principal activities of the Company and its subsidiaries are described in note 5 Revenue. The registered headquarter of Sector Alarm Holding AS is located at Vitaminveien 1A, Oslo in Norway. These consolidated financial statements were approved by the Board of Directors on 27 April 2022 for adoption by the Annual General Meeting on 27 April 2022.
Note 2 / Significant accounting principles The following section describes the significant accounting principles applied when preparing these consolidated financial statements. These principles are consistently applied for all periods presented, unless otherwise stated. 2.1 Framework for presentation of the financial statement The consolidated financial statements for 2021 has been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by The European Union (EU). The consolidated financial statements are based on a historical cost principle, except for derivatives measured at fair value through profit or loss. Preparation of financial statements in accordance with IFRS requires use of estimates. Furthermore, the application of the company’s accounting principles requires management to exercise judgements. Significant estimates and judgements, are described in note 4. 2.2 Consolidation principles Subsidiaries are entities controlled by the Group. The Group ‘controls’ an entity when it is exposed to, or has the rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The financial statements of subsidiaries are included in the consolidated financial statements from the date on which control commences until the date on which control ceases. Business combinations are accounted for using the acquisition method when control is transferred to the Group. The consideration transferred is measured at fair value, as are the identifiable net assets acquired. Included in the consideration is also the fair value of all assets or liabilities arising from an agreement of contingent consideration. Expenses related to the business combination are expensed as incurred. Any non-controlling interests are measured at their proportionate share of the acquired entity’s net identifiable assets at the date of acquisition. If the sum of the consideration, the carrying amount of non-controlling interests and the fair value at the acquisition date of previous ownership interests exceeds the fair value of net identifiable assets in the acquired company, the difference is recognized in the balance sheet as goodwill, cf. note 2.5. If the sum is lower than the company’s net assets, the difference is recognized immediately in the consolidated income statement. Intra-group transactions, balances and unrealized profits and losses between group companies are eliminated. The financial statements of the subsidiaries are restated when necessary to achieve compliance with the Group’s accounting principles.
Sector Alarm / Annual Report 2021
2.3 Foreign currency translation Functional currency and presentation currency Transactions in foreign currencies are translated into the respective functional currencies of the respective Group companies. The consolidated financial statements are presented in NOK, which is both the functional currency and the presentation currency of the parent company. Transactions and balance sheet items Transactions in foreign currency are translated into the functional currency using the exchange rates at the dates of the transactions. Currency gains and losses from translating monetary items (assets and liabilities) in foreign currency, are recognised in the consolidated income statement using the exchange rates at the reporting date. Translation differences related to working capital are presented as other gains and losses. Translation differences related to loans are presented as a financial item. Group companies Income statements and balance sheets for Group entities (none with hyperinflation) with operational currencies that differ from the presentation currency are translated as follows: a. the balance sheet is translated at the final exchange rate on the balance sheet date b. the income statement is translated at the average exchange rate (if the average does not provide a reasonable estimate of the accumulated effects of using the transaction exchange rate, the transaction exchange rate is used) c. translation differences are recognized in other comprehensive income and appear in the item currency translation differences. On consolidation, the difference between translation of net investment in foreign companies is recognized in other comprehensive income and as a separate item in equity. When selling parts of foreign companies, the translation difference recognized in other comprehensive income is recognized in the profit and loss as a part of the gain or loss on the sale. Assets and liabilities arising from business combinations are regarded as assets and liabilities in the acquired unit and are translated at the exchange rate on the balance sheet date. 2.4 Property, plant and equipment Property, plant and equipment are recognised at cost, less any accumulated depreciation or impairment losses. The costs include costs that are directly associated with the acquisition of the asset. Subsequent expenditures are added to the asset’s carrying amount or are recognised separately in the balance sheet when it is probable that future financial benefits from the expense will flow to the Group and the expense can be measured reliably. The carrying amount of replaced parts are recognised on the income statement. Other repair and maintenance costs are recognized in the income statement during the period in which the expenses are incurred. Depreciation is calculated to write off the cost of items of property, plant and equipment less their estimated residual values using the straight-line method over their estimated useful lives, and is generally recognised in profit or loss. The useful lifetime of the assets, and their residual value, is assessed on each balance sheet date and are amended if necessary. When the carrying amount of an asset is higher than the estimated recoverable amount, the value is written down to the recoverable amount. Any gain or loss on disposal of an item of property, plant and equipment is recognised in profit or loss. 2.5 Intangible assets Goodwill Goodwill arising from the acquisition of subsidiaries is measured at cost less accumulated impairment losses. Licenses Licenses that are acquired by the Group and have finite useful lives are measured at cost less accumulated amortisation and any accumulated impairment losses.
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Customer contracts Customer contracts that arises from business combinations or acquisition of alarm portfolios are recognized at fair value or cost at the time of acquisition. Acquired customer contracts are amortized and impairment tested using the same principles as for capitalised contract cost as presented in note 2.14. See also note 2.8 regarding impairment. Customer contracts presented in the balance sheet and in note 7 consists of customer contracts arising from business combinations or acquisition of alarm portfolios, and customer contracts arising from organic sales. For the latter this consists of the capitalised cost to obtain and to fulfil contracts with customers. Principles for capitalising cost from organic sales are presented in note 2.14. The amortisation period covers the expected useful life, which is based on churn per customer portfolio. Brand Brands that are acquired by the Group and have finite useful lives are measured at cost less accumulated amortisation and any accumulated impairment losses. 2.6 Assets held for sale Non-current assets, or disposal groups comprising assets and liabilities, are classified as held for sale if it is highly probable that they will be recovered primarily through sale rather than through continuing use. Such assets, or disposal groups, are generally measured at the lower of their carrying amount and fair value less costs to sell. Any impairment loss on a disposal group is allocated first to goodwill, and then to the remaining assets and liabilities on a pro rata basis, except that no loss is allocated to inventories, financial assets, deferred tax assets, employee benefit assets, investment property or biological assets, which continue to be measured in accordance with the Group’s other accounting policies. Impairment losses on initial classification as held-for-sale or held-for distribution and subsequent gains and losses on remeasurement are recognised in profit or loss. Once classified as held-for-sale, intangible assets and property, plant and equipment are no longer amortised or depreciated, and any equity-accounted investee is no longer equity accounted. 2.7 Financial instruments Trade receivables and debt securities issued are initially recognised when they are originated. All other financial assets and financial liabilities are initially recognised when the Group becomes a party to the contractual provisions of the instrument. A trade receivable without a significant financing component is initially measured at the transaction price. Financial assets On initial recognition, a financial asset is classified and measured at amortised cost, Fair Value Over Comprehensive Income (FVOCI) – debt investment, FVOCI – equity investment or Fair Value Through Profit or Loss (FVTPL). Financial assets at FVTPL are subsequently measured at fair value. Net gains and losses, including any interest or dividend income, are recognised in profit or loss. Financial assets at amortised cost are subsequently measured at amortised cost using the effective interest method. The amortised cost is reduced by impairment losses. Interest income, foreign exchange gains and losses and impairment are recognised in profit or loss. Any gain or loss on derecognition is recognised in profit or loss. Financial liabilities Financial liabilities are classified as measured at amortised cost or FVTPL. The Group currently holds derivatives that are classified as FVTPL, all other financial liabilitites are classified as is a financial liabilities at FVTPL are measured at fair value and net gains and losses, including any interest expense, are recognised in profit or loss. Other financial liabilities are subsequently measured at amortised cost using the effective interest method. Interest expense and foreign exchange gains and losses are recognised in profit or loss. Any gain or loss on derecognition is also recognised in profit or loss. The Group derecognises a financial asset or financial liability when the contractual rights to the cash flows from the financial asset expire, or it transfers the rights to receive the contractual cash flows in a transaction in which substantially all of the risks and rewards of ownership of the financial asset are transferred or in which the Group neither transfers nor retains substantially all of the risks and rewards of ownership and it does not retain control of the financial asset. Derivative financial instruments and hedge accounting The Group have in certain periods designated certain non-derivative financial liabilities as hedges of foreign exchange risk on a net investment in a foreign operation.
Sector Alarm / Annual Report 2021
At inception of designated hedging relationships, the Group documents the risk management objective and strategy for undertaking the hedge. The Group also documents the economic relationship between the hedged item and the hedging instrument, including whether the changes in cash flows of the hedged item and hedging instrument are expected to offset each other. When a non-derivative financial liability is designated as the hedging instrument in a hedge of a net investment in a foreign operation, the effective portion of foreign exchange gains and losses is recognised in OCI and presented in the translation reserve within equity. Any ineffective portion of the changes in the fair value of the derivative or foreign exchange gains and losses on the non-derivative is recognised immediately in profit or loss. The amount recognised in OCI is reclassified to profit or loss as a reclassification adjustment on disposal of the foreign operation. 2.8 Impairment Non-derivative financial assets The Group recognises loss allowances for Expected Credit Losses (ECL) on: – financial assets measured at amortised cost – debt investments measured at FVOCI – contract assets The Group measures loss allowances at an amount equal to lifetime ECLs for all financial assets, which includes loss allowances for trade receivables (including lease receivables) and contract assets. Lifetime ECLs are the ECLs that result from all possible default events over the expected life of a financial instrument. When determining whether the credit risk of a financial asset has increased significantly since initial recognition and when estimating ECLs, the Group considers reasonable and supportable information that is relevant and available without undue cost or effort. This includes both quantitative and qualitative information and analysis, based on the Group’s historical experience and informed credit assessment, that includes forward-looking information. Loss allowances for financial assets measured at amortised cost are deducted from the gross carrying amount of the assets. The gross carrying amount of a financial asset is written off when the Group has no reasonable expectations of recovering a financial asset in its entirety or a portion thereof. For individual customers, the Group has a policy of writing off the gross carrying amount based on historical experience of recoveries of similar assets. For corporate customers, the Group individually makes an assessment with respect to the timing and amount of write-off based on whether there is a reasonable expectation of recovery. The Group expects no significant recovery from the amount written off. However, financial assets that are written off could still be subject to enforcement activities in order to comply with the Group’s procedures for recovery of amounts due. Non-financial assets At each reporting date, the Group reviews the carrying amounts of its non-financial assets (other than inventories, contract assets and deferred tax assets) to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. Goodwill is tested annually for impairment. For impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or CGUs. Goodwill arising from a business combination is allocated to CGUs or groups of CGUs that are expected to benefit from the synergies of the combination. The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs to sell. Value in use is based on the estimated future cash flows, discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or CGU. An impairment loss is recognised if the carrying amount of an asset or CGU exceeds its recoverable amount. Impairment losses are recognised in profit or loss. They are allocated first to reduce the carrying amount of any goodwill allocated to the CGU, and then to reduce the carrying amounts of the other assets in the CGU on a pro rata basis. An impairment loss in respect of goodwill is not reversed. For other assets, an impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.
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2.9 Cash and cash equivalents Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. 2.10 Share capital and share premium Incremental costs directly attributable to the issue of ordinary shares are recognised as a deduction from equity. Income tax relating to transaction costs of an equity transaction is accounted for in accordance with IAS 12. When shares recognised as equity are repurchased, the amount of the consideration paid, which includes directly attributable costs, is recognised as a deduction from equity. Repurchased shares are classified as treasury shares and are presented in the treasury share reserve. When treasury shares are sold or reissued subsequently, the amount received is recognised as an increase in equity and the resulting surplus or deficit on the transaction is presented within share premium. 2.11 Income tax Income tax expense comprises current and deferred tax. It is recognised in profit or loss except to the extent that it relates to a business combination, or items recognised directly in equity or in OCI. The Group has determined that interest and penalties related to income taxes, including uncertain tax treatments, do not meet the definition of income taxes, and therefore accounted for them under IAS 37 Provisions, Contingent Liabilities and Contingent Assets. Current tax Current tax comprises the expected tax payable or receivable on the taxable income or loss for the year and any adjustment to the tax payable or receivable in respect of previous years. The amount of current tax payable or receivable is the best estimate of the tax amount expected to be paid or received that reflects uncertainty related to income taxes, if any. It is measured using tax rates enacted or substantively enacted at the reporting date. Current tax also includes any tax arising from dividends. Deferred tax Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for: – temporary differences on the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss – temporary differences related to investments in subsidiaries, associates and joint arrangements to the extent that the Group is able to control the timing of the reversal of the temporary differences and it is probable that they will not reverse in the foreseeable future – taxable temporary differences arising on the initial recognition of goodwill. Deferred tax assets are recognised for unused tax losses, unused tax credits and deductible temporary differences to the extent that it is probable that future taxable profits will be available against which they can be used. Future taxable profits are determined based on the reversal of relevant taxable temporary differences. If the amount of taxable temporary differences is insufficient to recognise a deferred tax asset in full, then future taxable profits, adjusted for reversals of existing temporary differences, are considered, based on the business plans for individual subsidiaries in the Group. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised; such reductions are reversed when the probability of future taxable profits improves. Unrecognised deferred tax assets are reassessed at each reporting date and recognised to the extent that it has become probable that future taxable profits will be available against which they can be used. Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, using tax rates enacted or substantively enacted at the reporting date, and reflects uncertainty related to income taxes, if any. The measurement of deferred tax reflects the tax consequences that would follow from the manner in which the Group expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities. For this purpose, the carrying amount of investment property measured at fair value is presumed to be recovered through sale, and the Group has not rebutted this presumption. Deferred tax assets and liabilities are offset only if certain criteria are met.
Sector Alarm / Annual Report 2021
2.12 Pension obligations, bonus schemes and other compensation schemes for employees Pension obligations The employees of the companies in the Group have defined contribution pension schemes or pension insurance policies in accordance with current collective agreements that correspond to defined contribution pensions depending on where they are employed. Employees in Ireland have a closed benefit scheme and a defined contribution scheme for new employees. For defined contribution plans, the Group pays deposits to public or privately managed insurance plans for pensions on a mandatory, contractual or voluntary basis. The Group has no further payment obligations after the deposits have been paid. Deposits are accounted for as labor costs when they fall due. Prepaid deposits are recognized as an asset to the extent that the deposit can be reimbursed or reduce future payments. A defined benefit plan will typically define an amount that an employee will receive from the time of retirement, usually depending on age, number of years in work and salary. The obligation for the defined benefit plans is the present value of the liability at the balance sheet date, less the the fair value of the pension assets. The gross liability is calculated by independent actuaries using the linear method by the calculation. Gross liability is discounted to present value by using the interest rate on high-quality corporate bonds issued in the currency to which the obligation is to be paid, and with approximately the same maturity as the payment horizon of the obligation. In countries that do not have a liquid market in their bonds, the market interest rate is applied to government bonds. Gains and losses arising from the recalculation of the liability as a result of estimate deviations and changes in actuarial assumptions are recognized in the equity through other comprehensive income in the period in which they arise. Effect of changes in the scheme benefits are recognized in the income statement immediately. Severance pay Severance pay is paid when the employment contract is terminated by the Group before the normal retirement date or when an employee voluntarily accepts to terminate such remuneration. The Group recognizes severance pay when it is demonstrably obliged to either terminate the employment contract with current employees in accordance with a formal, detailed plan that the Group cannot withdraw, or to provide severance pay as a result of an offer made to encourage voluntary departure. Final payments due more than 12 months after the balance sheet date are discounted to present value. Final remuneration is recognized in the income statement over the notice period. Profit sharing and bonus schemes The Group recognizes a provision where there are contractual obligations or where there is a past practice that creates a self-imposed obligation. 2.13 Provisions The Group recognizes provisions on legal requirements when there is a legal or self-imposed obligation as a result of past events and there is a probability that the obligation will be settled in the form of a transfer of financial resources and the amount of the obligation can be estimated with a sufficient degree of reliability. In cases where there are several obligations of the same nature, the probability that the obligation will be settled is determined by assessing the group as a whole. Provisions for the group are recognized even though the likelihood of settlement related to the group’s individual elements may be low. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The unwinding of the discount is recognised as finance cost. 2.14 Revenue from contracts with customers Revenues from contracts with customers primarily comprise sale of – Revenue recognised over time: Subscription revenue – Revenue recognised at a point in time: Upgrades, Services, Installation fees and other revenue Recognition and measurement When the Group enters into an agreement with a customer, the goods and services promised in the contract are identified as separate performance obligations to the extent that the customer can benefit from the goods or services either on their own or together with other resources that are readily available to the customer, and that the goods and services are separately identifiable from other promises in the contract. Goods and services that do not meet the criteria to be identified as separate performance obligations are aggregated with
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other goods and/or services in the agreement, until a separate performance obligation is identified. Example of a service which is normally considered to be a distinct performance obligations within the Group is installation service of additional hardware to subscribers of alarm monitoring services. The Group determines the transaction price to be the amount of consideration which it expects to be entitled in exchange for transferring the promised goods and services to the customer, net of discounts and sales related taxes. Sales related taxes are regarded as collected on behalf of the authorities. For corporate customers the Group adjusts the transaction price for a significant financing component if, at contract inception, the expected period between the transfer of a good or service to the customer and when the customer pays for that good or service is more than one year, unless the timing of the transfer of those goods or services is at the discretion of the customer (i.e. prepaid services). For contracts with corporate customers the consideration promised in a contract can include a variable amount, if so the Group estimates the amount of consideration which it expects to be entitled. An amount of variable consideration is included in the transaction price to the extent that it is highly probable that a significant reversal in the amount of cumulative revenue recognised will not occur when the uncertainty associated with the variable consideration is subsequently resolved. The transaction price is allocated to each performance obligation in the contract on a relative stand-alone selling price basis. The standalone selling price for each performance obligation is determined according to the prices that the Group would achieve by selling the same goods or services to a similar customer on a stand-alone basis. Except when the Group has observable evidence that the entire discount included in a contract relates to only one or more, but not all, performance obligations in a contract, the Group allocates the discount proportionately to all performance obligations in the contract. Revenue is recognised when the respective performance obligations in the contract are satisfied and payment remains probable. Revenue from alarm monitoring services is generally recognised over time during the period to which the service relates. The effects of significant financing components are recognised over the payment period. Revenue from installation service of additional hardware to subscribers of alarm monitoring, is normally recognised at the point in time when the installation service is completed. Capitalised contract cost Costs incurred that are incremental to obtaining a contract with a customer, and are expected to be recovered, are recognised as contract acquisition cost. Contract acquisition costs include, for example, certain commissions or bonuses to employees or dealers, directly related to the contracts obtained on behalf of the Group. Costs directly related to fulfilling a specified contract with a customer, which generate or enhance resources that will be used in fulfilling the performance obligations in the contract, are recognised as contract fulfilment cost assets to the extent they are expected to be recovered. The costs are expensed in the period in which the related revenue is recognised. Contract fulfilment costs include equipment and costs incurred for connection and installation of equipment on customer premises, including direct labour and material costs. Capitalised contract cost is presented as customer contracts in the consolidated balance sheet and in note 7. The transfer of goods and services is considered to be in accordance with the expected customer life, and amortisation is performed according to historical churn data consistent with the principle for customer contracts obtained through business combinations and portfolio acquistions. In addition the capitalised contract cost is tested annually for impairment as part of the impairment testing of goodwill as presented in note 2.5. Presentation and impairment If recognised revenue exceeds amounts received or receivable from a customer, a contract asset is recognised. If amounts received or receivable from a customer exceed revenue recognised for a contract, for example if the Group receives an advance payment from a customer, a contract liability is recognised. Contract assets and contract liabilities are expected to be realised within in the Group’s normal operating cycle, and are classified as current within trade and other receivables and trade and other payables respectively. Contract assets are adjusted for provision for impairment in accordance with the expected credit loss model. The Group applies the simplified approach for contract assets, measuring the loss allowance at an amount equal to lifetime expected credit losses. Impairment for expected credit losses is recognised in the income statement and updated at each reporting date. The impairment is calculated by taking into account the historic evidence of the level of bad debt experienced for customer types. Contract assets are transferred to receivables when rights become unconditional. Receivables from contracts with customers are presented separately from contract assets. The effects of significant financing components are presented as interest income, separately from revenue from contracts with customers in the statement of comprehensive income.
Sector Alarm / Annual Report 2021
The internal reporting of the Group does not differentiate customer contracts arising from business combinations or portfolio acquisitions and customer contracts arising from capitalised contract cost, and as a result, the two elements are presented aggregated in the consolidated balance sheet and note 7. 2.15 Interest and dividend income Interest income is accrued on a time proportionate basis that reflects an effective yield on the asset and is included in financial income in the income statement. Dividend income from investments is recognised when the Group’s rights to receive payment have been established (declared by the General Meeting or otherwise) and classified as financial income. 2.16 Leases The Group has applied IFRS 16 using the modified retrospective approach from 1 January 2018 without restating previous periods. At inception of a contract, the Group assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To assess whether a contract conveys the right to control the use of an identified asset, the Group uses the definition of a lease in IFRS 16. At commencement or on modification of a contract that contains a lease component, the Group allocates the consideration in the contract to each lease component on the basis of its relative stand-alone prices. However, for the lease of property the Group has elected not to separate non-lease components and account for the lease and non-lease components as a single lease component. The Group recognises a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct cost incurred and an estimate of costs to dismantle or remove the underlying asset or to restore the underlying asset or the site on which it is located, less any lease initiatives received. The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the end of the lease term, unless the lease transfers ownership of the underlying asset to the Group by the end of the lease term or the cost of the right-ofuse asset reflects that the Group will exercise a purchase option. In that case the right-of-use asset will be depreciated over the useful life of the underlying asset, which is determined on the same basis as those of property and equipment. In addition, the right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability. The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Group’s incremental borrowing rate. Generally, the Group uses its incremental borrowing rate as the discount rate. Lease payments included in the measurement of the lease liability comprise the following: - fixed payments, including in-substance fixed payments - variable lease payments that depends on an index or rate, initially measured using the index or rate as at the commencement date - amounts expected to be payable under a residual value guarantee - the exercise price under a purchase option that the Group reasonably certain to exercise, lease payments in an option renewal period if the Group is reasonably certain to exercise an extension option, and penalties for early termination of a lease unless the Group is reasonably certain not to terminate early. The lease liability is measured at amortised cost using the effective interest method. It is remeasured when there is a change in future lease payments arising from a change in an index or rate, if there is a change in the Group’s estimate of the amount expected to be payable under a residual value guarantee, if the Group changes its assessment of whether it will exercise a purchase, extension or termination option or if there is a revised in-substance fixed asset lease payment. When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use asset, or is recorded in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero. The Group has elected not to recognise right-of-use assets and liabilities for leases of low-value assets and short-term leases, including IT-equipment. The Group recognises the lease payments associated with these leases as an expence on a straight-line basis over the lease term.
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2.17 Governmental Grants The Group has during the financial year received governmental grant (SkatteFunn) of TNOK 4 750 related to research and development project in Sector Alarm IT. The Grant is accounted for in accordance with IAS 20 so that the grant is recognized in profit and loss over the period in which expenses that the grant is intended to compensate are recognized.
Note 3 / Financial risk management 3.1 Credit risk The Group manages credit risk by assessing the creditworthiness of customers at the time of sale. There are local variations in the countries in which the Group operates. The individual subsidiaries have established procedures for following-up credit with the various customer groups. Pre-billing and increased use of direct debits contribute to increased security for timely payments. The Group has outsourced parts of billing management in Norway, Sweden and Finland, including issue of reminders and debt collection follow-up, which also contributes to minimising the credit risk. Historically, the Group has had very limited losses on accounts receivable and this trend seems to be continuing. The Group also performs ongoing assessment of new payment systems, such as payment using debit/payment/credit cards, which will also result in further reduction of credit risk. 3.2 Liquidity risk The Group’s approach to managing liquidity risk is to secure access to sufficient liquidity to meet liabilities under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Groups relationships. The Groups liquidity risk is considered as a low due to the resilient business model with strong cash flow from the existing customer portfolio combined with flexible growth for new customer acquisition. At 31.12.2021 the Group has NOK 308 million in cash and cash equivalents and the EUR 100 million RCF was undrawn. 3.3 Currency risk The main currency exposure and risk relate to a mismatch between currencies for positive cash flows and outstanding debt. Currently the main sources for positive cash flows are NOK and SEK while outstanding debt is largely in EUR following the refinancing in the Term Loan B market in June 2019. Sector Alarm Holding AS is therefore exposed to EUR appreciation that would imply higher NOK and/or SEK payments in the future to manage the debt (interest cost and refinancing/repayment). Over time it’s expected that the currency exposure will be reduced as cash flows in EUR will increase over time due to continued growth and expansion outside Norway and Sweden. Sector Alarm has decided not to hedge the exposure for the time being, but to rather monitor the development. In addition, Sector Alarm Holding AS is exposed to a strengthening of the USD against EUR, NOK and SEK as the prices for Hardware is in USD. 3.4 Financial risk The primary source of interest rate risk is the EUR 590 million Term Loan B and EUR 100 million credit facility (“TLB”) with floating interest rate. As a general principle, Sector Alarm Holding AS should aim to reduce a portion of the floating rate exposure through interest rate swaps. However, Sector Alarm Holding AS has decided not to hedge the exposure for the time being due to the negative EURIBOR in combination with the 0% interest rate floor in the TLB loan agreement which means that to eliminate the negative EURIBOR Sector Alarm Holding AS would need to buy a floor with a cost of about 50 bps. 3.5 Risk related to capital management The goal of the Group with regard to capital management is to protect continued operations to ensure return for owners and other stakeholders, and maintain an optimal capital structure to reduce capital costs. The capital in Sector Alarm consists mainly of the customer portfolio which is managed with the intention of long-term return for the company’s shareholders. 3.6 Information on fair value Financial assets measured at fair value are divided into the following levels: - Listed price in active market (level 1) - Valuation based on other observable factors (price) either directly or indirectly for the financial asset or liability (level 2) - Valuation based on factors not derived from observable markets (level 3). The fair value of financial instruments that are not traded in an active market is determined using valuation methods. These methods use observable data where available. If all the essential data required to fix the fair value of an instrument is observable data, the instrument is included in level 2.
Sector Alarm / Annual Report 2021
As of December 31, 2021, the Group has no financial assets or liabilities at level 1 or 3 that are measured at fair value in the balance sheet. The only instrument in level 2 is the interest derivative as specified in note 22. The same applies for 2020.
Note 4 / Important accounting estimates and judgmental items Estimates and discretionary assessments are evaluated on an ongoing basis and are based on historical experience and other factors, including expectations of future events that are considered likely under current circumstances. The Group prepares estimates and makes assumptions related to the future. The accounting estimates that result from this will per definition rarely be fully consistent with the final outcome. Estimates and assumptions that represent a significant risk of material changes in the carrying amount of assets and liabilities during the next financial year are discussed below. Impairment of goodwill, other intangible assets and contract cost The Group’s recognised goodwill and other intangible assets are testet annually for impairment based on an estimation of value in use. See further details regarding impairment of goodwill and intangible assets in note 2.8 and note 7.
Note 5 / Revenue recognition In the following tables revenue from contracts with customers is disaggregated by major products and service lines and timing of revenue recognition.
2021
Revenue from contracts with customers comprise of Amounts in TNOK
Revenue from subscriptions
Revenue per product/ service line
Point in time
2 604 480
0
Revenue from Upgrades
17 059
17 059
Revenue from Services
84 864
84 864
142 232
142 232
983
983
2 849 618
245 138
Revenue from Installation service Other revenues Total Revenue from contracts with customers Movement in contract liability Contract liability opening balance
2020 Over time Revenue per product/ service line 2 604 480
Point in Over time time
2 470 340
0
2 470 340
0
23 564
23 564
0
0
75 880
75 880
0
0
126 346
126 346
0
0
7 944
7 944
0
2 604 480
2 704 074
233 733
2 470 340
2021
2020
249 996
248 284
-900 741
-248 284
Increase due to cash received and revenue deferred
904 365
249 996
Contract liability closing balance
253 621
249 996
Reduction due to revenue being recognized
Contract liabilities consists of prepayments from customers.
64 / 65
Note 6 / Property, plant and equipment Amounts in TNOK
Balance at 31 December 2019 Translation differences Acquisitions
Buildings
Computer equipment
Furnishing and fittings
Vehicles
Alarm systems not in use
Total
97 043
38 547
87 302
1 545
102 723
327 160
5 707
1 680
3 461
147
5 070
16 065
13 301
17 290
31 089
208
25 564
87 451
Acquisitions through business combinations
0
0
0
0
0
0
Disposals
0
-523
-465
0
0
-988
Depreciation for the year
-2 169
-21 854
-28 127
-777
0
-52 927
Balance at 31 December 2020
113 881
35 141
93 260
1 123
133 357
376 762
Acquisition cost
129 047
186 921
247 191
6 232
138 493
707 884
Accumulated depreciation and impairment
-15 165
-151 780
-153 931
-5 110
-5 136
-331 122
Carrying amounts at 31 December 2020
113 881
35 141
93 260
1 123
133 357
376 762
Depreciation and impairment for the year
-2 169
-21 854
-28 127
-777
30 years
3-5 years
3-5 years
3-5 years
Useful life
Amounts in TNOK
Balance at 31 December 2020 Translation differences Acquisitions Acquisitions through business combinations Disposals Depreciation for the year
Buildings
Computer Furnishing equipment and fittings
Vehicles
-52 927
Alarm Customer systems contracts not in use
Total
113 881
35 141
93 260
1 123
133 357
0
376 762
-5 133
-894
-3 023
-76
-5 304
-9 027
-23 457
-279
23 289
15 718
930
25 968
225 807
291 433
494
0
0
0
5 029
5 523
-212
0
-190
0
0
-402
-5 517
-23 940
-22 609
-868
0
-21 594
-74 528
Balance at 31 December 2021
103 235
33 596
83 156
1 109
159 050
195 186
575 331
Acquisition cost
123 171
205 156
254 884
6 949
164 139
225 807
980 106
Accumulated depreciation and impairment
-19 937
-171 560
-171 728
-5 840
-5 090
-30 621
-404 775
Carrying amounts at 31 December 2021
103 235
33 596
83 156
1 109
159 050
195 186
575 331
Depreciation and impairment for the year
-5 517
-23 940
-22 609
-868
0
-21 594
-74 528
30 years
3-5 years
3-5 years
3-5 years
Useful life
8 years
Alarm systems not in use applies to alarm systems purchased for installation. These are not depreciated until they are installed and then classified as capitalised customer contracts.
Sector Alarm / Annual Report 2021
Note 7 / Intangible assets and goodwill Licenses, software, etc.
Brand
Customer contracts
Total
1 138 870
52 223
88 774
2 501 264
3 781 132
77 282
699
5 459
147 140
230 580
Acquisitions
0
9 406
0
374 709
384 115
Acquisitions through business combinations
0
0
0
0
0
Disposals
0
0
0
-180
-180
Amortization for the year
0
-20 754
0
-237 887
-258 641
Balance at 31 December 2020
1 216 153
41 575
94 233
2 785 046
4 137 007
Acquisition cost
1 216 153
132 013
94 233
4 005 426
5 447 824
0
-90 438
0
-1 220 380
-1 310 818
Carrying amounts at 31 December 2020
1 216 153
41 575
94 233
2 785 046
4 137 007
Amortization and impairment for the year
0
-20 754
0
-237 887
-258 641
Useful life
Indefinite
3-5 years
Indefinite
17 years
Amounts in TNOK
Goodwill
Licenses, software, etc.
Brand
Customer contracts
Total
41 575
94 233
2 785 046
4 137 007
-57 682
-510
-4 375
-102 305
-164 872
0
59 859
0
232 456
292 315
19 037
0
62 132
258 264
339 433
Amounts in TNOK Balance at 31 December 2019 Translation differences
Accumulated amortization
Balance at 31 December 2020 Translation differences Acquisitions Acquisitions through business combinations
Goodwill
1 216 153
Disposals
0
0
0
Amortization for the year
0
-20 177
0
-606 758
-626 935
Balance at 31 December 2021
1 177 508
80 746
151 990
2 566 703
3 976 948
Acquisition cost
1 177 508
191 098
151 990
4 496 146
6 016 742
0
-110 352
0
-1 929 443
-2 039 795
1 177 508
80 746
151 990
2 566 703
3 976 947 -626 935
Accumulated amortization Carrying amounts at 31 December 2021 Amortization and impairment for the year Useful life
0
0
-20 177
0
-606 758
Indefinite
3-5 years
Indefinite
17 years
Customer contracts is amortised according churn data per customer portfolio. The customer portfolios varies in historical churn and between countries, but the average useful life for the Group was 17 years in 2021. Customer contracts as presented in the table above comprise of both customer contracts arising from business combinations or portfolio acquisitons and contracts arising from organic sales, where the latter comprise of the capitalised contract cost in accordance with cost to obtain and cost to fulfil contracts with customers. For further details see note 2.5 regarding business combinations and 2.14 regarding revenue from contracts with customers. Impairment test goodwill and intangible assets All goodwill is acquired through purchases and has been of strategic importance in retaining and strengthening the market positions of the Group. The goodwill is linked to cost savings and economies of scale as a result of coordination with the Group’s operations in the relevant markets and utilization of the Group’s experience and industry knowledge.The goodwill is allocated to the portfolios in Norway, Sweden, Finland, Ireland, Spain and France.
66 / 67
Goodwill is not amortised. However, goodwill is tested for impairment at least annually, or when there are identified impairment indicators. An impairment assessment was performed at 31 December 2021. The group use the estimated recoverable value of the customer portfolio as an indicator for the total value of the customer portfolio and goodwill combined. The recoverable value were calculated using a value in use approach were using recurring annual revenue and a multiple based on comparable market transactions adjusted for key assumptions on size and quality of the portofolio. The impairment tests results in a headroom of minimum 170% on all material portfolios. As such the impairment test did not reveal an indication of impairment. Amounts in TNOK 2021
Opening balance
Acquisition
Disposals
Translation differences
Closing balance
Norwegian portfolio
133 420
0
0
0
133 420
Swedish portfolio
391 186
0
0
-25 867
365 319
Irish portfolio
544 914
19 025
0
-25 059
538 880
Finnish portfolio
122 086
0
0
-5 614
116 472
Spanish portfolio
4 345
0
0
-200
4 145
French portfolio
20 199
0
0
-929
19 270
1 216 150
19 025
0
-57 669
1 177 506
Acquisition
Disposals
Translation differences
Closing balance
Total Amounts in TNOK 2020
Opening balance
Norwegian portfolio
133 420
0
0
0
133 420
Swedish portfolio
353 961
0
0
37 225
391 186
Irish portfolio
513 349
0
0
31 565
544 914
Finnish portfolio
115 014
0
0
7 072
122 086
Spanish portfolio
4 093
0
0
252
4 345
19 029
0
0
1 170
20 199
1 138 866
0
0
77 284
1 216 150
French portfolio Total
Note 8 / Trade receivables and other receivables Amounts in TNOK
2021
2020
Trade receivables
202 268
197 657
Allowance for impairment of trade receivables
-15 208
-19 139
Trade receivables net
187 059
178 518
Advance payments
106 083
94 162
Other receivables Total accounts receivable and other receivables
19 526
18 015
312 668
290 695
For short-term receivables, the carrying amount is considered to be a reasonable approximation of fair value. Total overdue accounts receivable in the Group are associated with a large number of independent customers. The age distribution of these receivables is:
Sector Alarm / Annual Report 2021
2021
2019
Up to 60 days
23 853
23 618
More than 60 days
19 567
25 452
Total overdue trade receivables
43 420
49 070
Carrying amount of overdue trade receivables
28 212
29 932
2021
2020
-19 139
-14 690
-3 827
-13 501
7 758
9 052
-15 208
-19 139
Amounts in TNOK
Movement in bad debt allowance: Balance at 1 January Net remeasurement of loss allowance Amounts written off Balance at 31 December
Write down and reversal of write down on trade receivable are included in other operating costs. The maximum exposure to credit risk at time of reporting is the fair value of each class of trade receivable stated above. Receivables consist of a large number of receivables from individual customers with no credit rating. The company uses external partners to recover the receivables and there are, historically, low levels of losses on receivables. All new customers undergo a credit check before installation.
Note 9 / Cash and cash equivalents In the cash flow statement, cash and cash equivalents encompasses the following:
2021
2020
Cash and cash equivalents
307 686
610 563
Of which restricted funds
22 946
11 556
Amounts in TNOK
Note 10 / Share capital and share premium Share capital
Treasury shares
Share premium
Total
4 863
1 605
0
589 872
591 477
Capital increase
0
0
0
0
0
Treasury shares acquired
0
0
0
0
0
0
0
0
0
0
4 863
1 605
0
589 872
591 477
Amounts in TNOK
Balance at 1 January 2021
Treasury shares cancelled Balance at 31 December 2021
Number of shares (000)
See note 18 for list of the Company’s shareholders.
68 / 69
Note 11 / Other short-term liabilities 2021
2020
Trade payables
126 044
111 401
Payable to authorities
138 289
123 778
Other short-term liabilities
169 900
186 478
Prepaid from customers / deferred revenue
253 621
249 996
Total
687 854
671 653
Amounts in TNOK
Other short term liabilities consists largely of accrued vacation pay in line with governmental requirements and accruals for vendor invoices not yet processed and little or no risk is associated. No liabilities above mature past 12 months.The carrying amount is considered to be a reasonable approximation of fair value.
Note 12 / Loans and borrowings The external financing in the group is mainly obtained by Sector Alarm Holding AS, which provides funding to the companies throughout the Group. Until the refinancing of the Group in the TLB market in June 2019 the external financing was accordingly arranged by Sector Alarm Group AS.
Amounts in TNOK Non current liabilities
2021
2020
Loans and borrowings
5 827 442
6 108 518
298 313
289 255
6 125 756
6 397 773
0
2 277
Leasing liabilities
69 392
65 343
Total current liabilities
69 392
67 620
0
0
69 392
67 620
Leasing liabilities Total non current liabilities Current liabilities Loans and borrowings
Bank overdraft Facility Total current loans including overdraft
In June 2019, Sector Alarm refinanced existing debt by successfully issuing a EUR 590 million 7-year senior secured Term Loan B and a EUR 100 million 6-year senior secured credit facility (unused). The Term Loan B was issued at EURIBOR +350 bps with a 0% floor at par. In February 2020, Sector Alarm successfully concluded a repricing of the EUR 590 million Term Loan B with the margin being reduced from 350 bps to 300 bps and was issued at par with a 0% floor. The new loan agreement has a dividend limitation of 22,5 MEUR per year. The 100 EUR million revolving credit facility has a gearing covenant of 9,2x Enterprise value/EBITDA if the facility is drawn 40% or more . There are no fixed annual instalments for the EUR 590 million Term Loan B. However, Sector Alarm is required to prepay 50% of Excess Cash Flow (as defined in the Term Loan B Facility Agreement) if Net Debt Cover (as defined in the Term Loan B Facility Agreement) greater than 5.00:1 and 25% of Excess cash flow if Net Debt Cover is greater than 4.50:1 but less than or equal to 5.00:1 within 20 Business Days of delivery of Annual Financial Statements. The conditions regarding Excess Cash Flow and Net Debt Cover is applicable from the Annual Financial Statements for the financial year 2021.
Sector Alarm / Annual Report 2021
No breaches of covenants have occured in 2021 or 2020. Amounts in TNOK Term loan B Other minor bank loans
2021
2020
5 893 392
6 177 477
0
14 167
-65 950
-80 848
5 827 442
6 110 796
2021
2020
Between 1 and 2 years
176 802
186 727
Between 2 and 5 years
6 446 249
745 645
0
6 195 430
6 623 050
7 127 802
2021
2020
5 827 442
6 110 796
Fixed assets
0
95 930
Total
0
95 930
Amendment fee Total The maturities for the long-term bank loans and interests are as follows:
More than 5 years Total
Security Carrying amount of assets pledged as security
Office building in General Services Sector Alarm SLU was in 2020 pledged to secure borrowings in General Services Sector Alarm SLU. In addition shares in companies mentioned below, including intercompany loans and bank accounts in the companies have been pledged to secure borrowings of the Group at 31.12.2021: Sector Alarm Holding AS Sector Alarm Ireland AS PhoneWatch Ltd Sector Alarm AB Sector Alarm AS A payment guarantee of TNOK 24 681 has been provided by Sector alarm Holding AS to Group hardware supplier at 31.12.2021.
70 / 71
Note 13 / Income tax Amounts in TNOK Tax expense Current tax expense Change in deferred tax - origination and reversal of temporary differences Change in deferred tax - reduction in tax rate Change in deferred tax - other Changes in estimates related to prior years Other Tax expense continuing operations
2021
2020
42 663
109 954
-33 583
-104 837
0
-12 191
112 499
35 150
1 077
-215
3 774
-13 981
126 430
13 881
In other comprehensive income the remeasurement gain (loss) from the net defined benefit liability has a tax effect included in tax expenses.
2021
2020
Profit before tax from continuing operations
391 310
120 485
Income tax using Norwegian tax rate (22%)
86 088
26 507
Reconciliation of effective tax rate
Effect of tax rates in foregin jurisdictions
-23 354
-27 734
Tax effect non deductible expenses
7 628
-19 618
Tax effect current-year losses for which no deferred tax asset is reconised
9 708
50 681
Utilized loss carried forward
0
-168
Effect of changes in tax rate on deferred tax items
0
-12 191
Changes in estimates related to prior years
1 077
-215
Other effects
45 282
-3 382
Income tax
126 430
13 881
32%
12%
Effective tax rate
The Group’s reconciliation of the effective tax rate is based on its domestic tax rate, with a reconciling item in respect of tax rates applied by Group companies in other jurisdictions.
Tax payable Current tax of tax base before contribution Prepaid taxes
2021
2020
127 294
133 247
-118 724
-85 469
Other including previous years tax payable
52 131
53 945
Total tax payable
60 702
101 722
Deferred tax Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis. The following is the analysis of the the Group intends to settle its current tax assets and liabilities on a net basis. The following is the analysis of the deferred tax balances (after offset) for financial reporting purposes:
Sector Alarm / Annual Report 2021
Deferred tax asset Deferred tax liabilities Net deferred benefit/liability (-) in the balance sheet
2021
2020
117 866
121 361
300 899
283 271
-183 033
-161 910
The following information presents how deferred tax liability and deferred tax asset are before netting in the balance sheet. Changes in deferred tax/deferred tax asset in the balance sheet: Balance at 1 January Currency translation Recognised in the period Changes in tax rate Other Balance at 31 December
2021
2020
-161 909
-259 797
12 466
-19 413
-33 583
104 837
0
12 191
-7
272
-183 033
-161 910
Specification of the tax effect of temporary differences and losses carried forward:
2021 Deferred tax assets Property, plant and equipment Accounts receivables Other provisions and accruals Losses carried forward Limitations of tax deductability of interest expense Other Total recognised deferred tax assets Unrecognised deferred tax assets Net deferred benefit/liability
2020 Deferred tax liabilities
Deferred tax assets
Deferred tax liabilities
3 202
214 901
1 077
229 963
872
0
859
0
17 306
0
79 431
0
175 198
0
137 590
0
32 651
0
25 825
0
1 668
89 575
1 100
73 108
230 898
304 476
245 883
303 071
-109 455
0
-104 722
0
121 443
304 476
141 161
303 071
Net deferred benefit/liability(-) in the balance sheet -183 033 -161 910 The deferred tax benefit is included in the balance sheet on the basis of future income. The Group has losses carried forward of NOK 109 million in France, Spain and Finland was not recognized at 31 December 2021. A deferred tax asset is recognised for the carryforward of unused tax losses and unused tax credits to the extent that it is probable that future taxable profit will be available against which the unused tax losses and unused tax credits can be utilised. At the reporting date, the Group has unused tax losses of NOK 782,8 million (2020: NOK 625,5 million) available for offset against future profits. A deferred tax asset has been recognised in respect of NOK 66,2 million (2020: NOK 32,9 million) of such losses. No deferred tax asset has been recognised in respect of the remaining NOK 108,9 million (2020: NOK 104,7 million) as it is not considered probable that there will be future taxable profits available. Included in unrecognised tax losses are losses of NOK 28 million that will expire in 2022, NOK 7 million in 2023, NOK 20 million in 2024, NOK 13 million in 2025, NOK 36 million in 2026 and NOK 307 million above 5 years. Other losses may be carried forward indefinitely.
72 / 73
Note 14 / Other gains and losses 2021
2020
0
0
Net currency gains and losses
315 654
-367 389
Other gains and losses
315 654
-367 389
2021
2020
Wages and salaries
946 727
844 922
Social security contributions
196 743
171 755
32 510
32 180
Amounts in TNOK Realised currency derivatives in the year
Note 15 / Personell costs Amounts in TNOK
Pension costs - defined contribution pension plans Pension costs - defined benefit plans
5 946
5 135
32 552
30 690
1 214 478
1 084 682
Number of FTEs excluding discontinued operations
2 354
2 050
Pension costs - defined benefit plans
2021
2020
Current value of the year’s pension payments
5 255
4 149
Other benefits Total
Interest costs from pension commitment
691
986
Net pension costs including employers’ contributions
5 946
5 135
Changes to the present value of the defined benefit obligation during the period under review
2021
2020
224 630
170 784
Current service cost
5 164
4 052
Interest cost
1 638
2 502
Opening defined benefit obligation
Employee contributions Net benefit paid out Actuarial (gains)/losses – experience Other Actuarial (gains)/losses – assumptions
489
482
-999
-806
3 656
-1 246
-6 155
6 290
-6 443
42 572
221 981
224 630
2021
2020
125 882
102 250
Employer contributions
3 426
2 241
Employee contributions
489
482
Closing defined benefit obligation Changes to the fair value of assets during the period under review Opening fair value of assets
Net benefits paid out
-999
-806
959
1 539
Actuarial gains/(losses) on assets
23 034
20 176
Other
-1 082
0
151 710
125 882
Interest Income on Plan Assets
Closing fair value of assets
Sector Alarm / Annual Report 2021
Financial assumptions:
2021
2020
Discount rate
1,35%
0,75%
Expected wage regulation
2,25%
1,75%
Expected pension increase
2,00%
1,50%
The actuarial assumptions are based on the commonly used assumptions within insurance with regard to demographic factors.
2021 Employee benefit expenses Wages and salaries Bonuses Pension benefits Other benefits
2020
CEO
Board
CEO
Board
2 643
1 100
2 600
1 100
358
0
358
0
23
0
22
0
0
0
0
0
No loans or securities have been provided to the CEO, Chairman of the Board or other related parties. There are not any agreements on severance salaries to the Board or senior executives.
Note 16 / Other operating costs Amounts in TNOK Other operating costs
2021
2020
568 099
501 216
4 312
3 755
572 411
504 971
Auditor’s fees
2021
2020
Statutory audit
3 304
2 194
Other operating costs Auditors fees Total
Other attestation services
838
128
Technical assistance and tax advice
128
1 401
Remuneration for other services Total
42
32
4 312
3 755
74 / 75
Note 17 / Financial income and costs Amounts in TNOK Interest income Other finance revenues Interest costs
2021
2020
11 878
16 579
365
1 469
-195 065
-214 800
Other finance costs
-38 336
-50 643
Net currency gains/losses
315 654
-367 389
94 496
-614 784
332 760
123 180
Currency losses
-17 106
-490 569
Sum net currency gains/losses
315 654
-367 389
Net financial costs Currency gains
Net currency gain/loss due to operations
213
-6 644
Net currency gain/loss due to finance items (i.e. loans)
315 441
-360 745
Sum net currency finance/operations split
315 654
-367 389
Net currency gain/loss on external balances
307 024
-362 689
8 630
-4 700
315 654
-367 389
Net currency gain/loss on intercompany balances Sum net currency ext/IC split
Note 18 / Shareholders and shareholder information The Company’s share capital at 31.12.2021 consists of 4 863 354 shares at NOK 0,33 per share. Each share has one vote. There was one shareholder as at 31 December 2021. Amounts in TNOK Shareholders
Number
Share
Sector Alarm Midco AS
4 863 354
100%
Dividends recognised as distributions to owners during the period
0
Dividends per share
0
Sector Alarm / Annual Report 2021
Note 19 / Leasing Amounts in TNOK Amounts recognized in profit and loss Expenses related to contracts with exception for short term leases Expenses related to contracts with exception for low value assets
2021
2020
883
573
454
10
Variable lease payments based on index or a rate
37 676
38 294
Total
39 012
38 877
Short term lease liabilities
69 392
65 343
Long term lease liabilities
298 313
289 255
Total lease liabilities
367 705
354 598
Potential lease payments not included in lease liabilities.
28 918
35 283
Interest cost
10 406
10 406
Total cash outflow
70 476
59 268
Incremental borrowing rate
3,00%
3,00%
The maturities for the long-term leasing liabilities are as follows:
2021
2020
Between 1 and 2 years
45 047
47 191
Between 2 and 5 years
119 644
119 512
More than 5 years
133 621
122 552
Total
298 313
289 255
Cars Right of use assets Balance at 01 January 2020 Translation differences Acquisitions Disposals Depreciation and impairment for the year Balance at 31 December 2020
43 550
Office machines
Buildings
Total
991
256 467
301 008
2 925
39
8 940
11 904
15 042
1 307
59 473
75 822
-9 928
-561
-6 186
-16 675
-24 323
-275
-42 984
-67 582
27 267
1 502
275 709
304 478
Office machines
Buildings
Total
Cars Right of use assets Balance at 01 January 2021
27 267
1 502
275 709
304 478
Translation differences
-1 443
-35
-7 934
-9 413
Acquisitions
32 933
515
62 187
95 635
-87
0
-1 642
-1 729
-22 245
-823
-42 544
-65 612
2 639
-7
-2 632
0
36 424
1 159
285 777
323 360
Disposals Depreciation and impairment for the year Reclassification Balance at 31 December 2021
76 / 77
Note 20 / Related parties Sector Alarm Holding AS is controlled by Isanor AS (registered in Norway) which owns 62,99% of the Company’s shares directly or indirectly. The shares in Isanor AS are owned by Jørgen Dahl (CEO). The Group has been involved in transactions with the following associated parties: : Amounts in TNOK a) Sales of products and services There have been no sales of products or services to associated parties in 2020 or 2021. Employees are offered alarm subscriptions at discounted rates. b) Loans to associated parties
2021
2020
Sector Alarm Manco AS
164
0
Sector Alarm Midco AS
1 177
0
819
808
2021
2020
Sector SPV AS No other loans were provided by shareholders or their companies in 2020 or 2021. c) Interests on loans from associated parties
Sum 24 39 No other loans were provided by shareholders or their companies in 2020 or 2021. d) Loans to senior employees No loans have been given to senior employees or Board members.
Sector Alarm / Annual Report 2021
Note 21 / Subsidiaries The Group comprises the parent company, Sector Alarm Holding AS, and the following directly and indirectly owned subsidiaries:
Company
Country
Area of business
Ownership Share of Annual profit share votes (‘000)
Equity (‘000)
Sector Alarm AS
Norway
Monitored alarm services
100%
100%
NOK 233 598
NOK 26 646
Sector Alarm Drift AS
Norway
Monitored alarm services
100%
100%
NOK 3 377
NOK 144
Sector Alarm ALS AS
Norway
Monitored alarm services
100%
100%
NOK 913
NOK 229
SA Salg AS
Norway
Monitored alarm services
10 %
100%
NOK 3 308
NOK 21 742
Sector Alarm IT AS
Norway
Group services
100%
100%
NOK 4 987
NOK 46 168
Sector Alarm AB
Sweden
Monitored alarm services
100%
100%
SEK 72 573 SEK 1 037 941
SA Bevakning AB
Sweden
Monitored alarm services
100%
100%
-SEK 31
SEK 1 328
SA Forsäljning AB
Sweden
Monitored alarm services
100%
100%
-SEK 283
SEK 2 647
Sector Alarm Service AB
Sweden
Monitored alarm services
100%
100%
-SEK 38
SEK 42 723
Sector Alarm Ireland AS
Norway
Monitored alarm services
100%
100%
-NOK 7
NOK 998 144
PhoneWatch Ltd
Ireland
Monitored alarm services
100%
100%
EUR 16 008
EUR 93 831
HomeSecure Ltd
Ireland
Monitored alarm services
100%
100%
-EUR 443
-EUR 1 233
Sector Alarm Europe AB
Sweden
Monitored alarm services
100%
100%
SEK 103 708 SEK 2 486 788
Sector Alarm Spain S.A.U
Spain
Monitored alarm services
100%
100%
-EUR 13 263
EUR 13 065
Sector Alarm SAS
France
Monitored alarm services
100%
100%
-EUR 10 723
EUR 13 736
Sector Alarm Oy
Finland
Monitored alarm services
100%
100%
-EUR 6 699
EUR 19 369
Sector Alarm Spain AS
Norway
Monitored alarm services
100%
100%
-NOK 6
NOK 13 313
General Services Sector Alarm SLU
Spain
Group services
100%
100%
EUR 487
EUR 5 052
Sector Alarm Real Estate SLU
Spain
Property
100%
100%
EUR 105
EUR 4 221
Sector Alarm Holland B.V.
Netherlands Group services
100%
100%
EUR 22
EUR 2 109
Sector Alarm Italy SRL
Italy
100%
100%
-EUR 1 988
EUR 1 022
Monitored alarm services
Effective 01.01.2020 Sector Alarm Holding AS merged with fully owned subsidiaries Sector Alarm Group Holding AS, Sector Alarm Group AS and Sector Alarm Sverige AS. At 15.10.2020 The Group founded Sector Alarm Italy SRL in 2020. The company is fully owned by Sector Alarm Europe AB and was not operational for the financial year 2020. Sector Alarm France SARL merged with fully owned subsidiary Sector Alarm SAS at 01.01.2021. See also note 24 regarding acquisition of subsidiary
Note 22 / Financial instruments The Group has the following financial instruments: Financial assets/liabilities at amortised cost: Financial assets: Accounts receivables, other current receivables and cash and cash equivalents. Financial liabilities: Includes most of the Group’s financial liabilities including debt to credit institutions, trade payables and other current and non-current financial liabilities. Financial assets/liabilities at fair value through profit and loss (FVTPL): The Group measures fair values using the following fair value hierarchy that reflects the significance of the inputs used in fair value Level 1: Quoted prices (unadjusted) in active markets for identical financial instruments Level 2: Inputs other than quoted prices included withhin Level 1 that are observable for assets or liabilities, wither directly or indriectly Level 3: Inputs for asstes or liabilities that are not based on observable inputs. “ The Groups subscription rights are valued based on level 2 inputs received from Nokas related to the companys financial performane and shareholder transactions. Equity Securities are valued based on level 1 inputs at year-end. Derivative instruments – Interest swap
78 / 79
The table below shows the various financial assets and liabilities, grouped in the different categories of financial instruments according to IFRS 9. Amounts in TNOK 31.12.2021
Amortised cost
Fair value Fair value through through profit or other comprehensive loss (FVTPL) income (FVOCI)
Total
Financial assets Trade receivables
187 059
0
0
187 059
Other receivables
125 609
0
0
125 609
Cash and cash equivalents
307 686
0
0
307 686
Derivative financial instruments
0
56
0
56
620 354
56
0
620 410
5 827 442
0
5 827 442
Leasing liability
367 705
0
367 705
Accounts payable
126 044
0
126 044
622 512
0
622 512
6 943 703
0
6 943 703
Total financial assets Financial liabilities (short and long term) Loans external
Other liabilities Total financial liabilities 31.12.2020
Amortised cost
Fair value Fair value through through profit or other comprehensive loss (FVTPL) income (FVOCI)
Total
Financial assets Accounts receivable
178 518
0
0
178 518
Other receivables
112 177
0
0
112 177
Cash and cash equivalents
610 256
0
0
610 256
Derivative financial instruments Total financial assets
0
59
0
59
900 951
59
0
901 010
Financial liabilities (current and non current) Loans external
6 110 796
0
0
6 110 796
Leasing liability
354 598
0
0
354 598
Accounts payable
111 401
0
0
111 401
Other liabilities
661 975
0
0
661 975
7 238 769
0
0
7 238 769
Total financial liabilities
Note 23 / Contingent assets and liabilities Sector Alarm Spain S.A.U is involved in a despute regarding the settlement for purchase of customers from two Spanish companies. The parties do agree on the amount to be settled, but the dispute is for when the settlement is to take place. Sector Alarm Spain S.A.U has filed a law suit to get a settlement for the total receivable of MEUR 5,6 (incl VAT). The probability of winning our case is considered by our advisors to be good.
Note 24 / Acquisition of subsidiary HomeSecure On March 17, 2021, the Group purchased 100% of the shares in HomeSecure Limited, an alarm company incorporated in Ireland. The acquired business’s result has been consolidated into the Group’s profit from 1 April, and the balance sheet has been consolidated into the Group’s balance sheet as of 31 March 2021. HomeSecure Limited has in 2021 contributed to the Group’s revenues of NOK 54 million and NOK -4,5 million to the Group’s result before tax. Goodwill originating from the business combination is primarily related to anticipated synergies from ongoing operations and the benefit of integrating the entire business into the Group. Goodwill that has arisen as part of the business acquisition is not tax deductible. The fair value of trade receivables in HomeSecure at the acquisition date is NOK 103 thousand. The table below shows the fair value of acquired assets and liabilities on the acquisition of HomeSecure (figures in NOK thousand at acuisition exchange rate)
Sector Alarm / Annual Report 2021
HomeSecure Intangible assets Tangible fixed assets Customer contracts Goodwill Stock Sum non current assets Accounts receivable Other receivables Bank and cash Sum current assets
62 132 494 258 264 19 037 5 029 344 956 103 3 159 8 633 11 895
Sum assets
356 852
Other equity
268 561
Sum equity
268 561
Deferred tax
36 776
Other non current liabilities
12 807
Sum non current liabilities
49 583
Accounts payable Accounts payable - inter-company Current liabilities, inter-company Authorities etc Pre-paid from customers
7 532 13 351 0 6 937 0
Other current liabilities
10 888
Sum current liabilities
38 708
Sum liabilities
88 291
Sum equity & liabilities
356 852
Consideration transferred
268 561
Fair value of net identifiable assets
249 523
Goodwill
19 037
Note 25 / Governmental grant The Group has during the financial year received governmental grant (SkatteFunn) of TNOK 4 750 related to research and development project in Sector Alarm IT. The Grant is accounted for in accordance with IAS 20 so that the grant is recognized in profit and loss over the period in which expenses that the grant is intended to compensate are recognized. Share of the grant related to capitalized external consultancy fees on the project of TNOK 3 482 are recognized in profit and loss over the lifetime of the project while the share of the grant related to internal hours incurred (TNOK 1 268) are recognized in profit and loss as credit to payroll costs. The Grant is contingend by final approval by The Norwegian Directorate of Tax.
Note 26 / Events after the reporting date
There are no known events after the balance sheet date that would have significant effect of the financial statement for 2021.
80 / 81
Annual Accounts / 2021 Sector Alarm Holding AS (NGAAP)
Sector Alarm / Annual Report 2021
Income statement Amounts in TNOK
Note
2021
2020
Revenues
15, 16
111 074
128 062
8
55 937
55 830
1,2
14 634
13 055
9
59 636
91 797
-19 134
-32 621
Personell costs Depreciations and write-downs Other costs EBIT Income from investments in subsidiaries
14
388 405
1 410 499
Finance revenues
17
328 783
100 901
Finance revenues from group companies
17
60 425
74 722
7, 17
-211 467
-703 688
17
-9 085
-84 326
Finance costs Finance costs from group companies Net finance costs
557 061
798 108
Profit before tax
537 927
765 487
-114 107
50 149
423 820
815 637
423 820
815 637
423 820
815 637
Tax expense
4
Profit for the period Allocations Allocated to other equity Total allocated
12
82 / 83
Balance sheet Note
2021
2020
1
10 488
15 373
Brand and software
2
15 301
15 603
Deferred tax asset
4
49 926
104 799
14
7 761 178
9 602 787
3
2 284 930
231 121
10 121 824
9 969 683
1 065
0
53 311
66 759
132
132
805 339
544 242
1 573
1 900
Amounts in TNOK ASSETS Non-current assets Equipment, movables and inventory
Investments in group companies Long-term receivables from group companies Total non-current assets Current assets Stock Accounts receivable, group companies
3
Other short-term receivables Other short-term receivables from group companies
3
Prepayments Cash and cash equivalents Total current assets TOTAL ASSETS
5
72 937
2 684
934 357
615 718
11 056 181
10 585 401
Sector Alarm / Annual Report 2021
Amounts in TNOK
Note
2021
2020
12, 13
1 605
1 605
12
589 839
589 839
591 444
591 444
EQUITY Contributed equity Shareholders equity Share premium Total contributed equity Earned equity Other equity
3 476 473
3 052 653
Total earned equity
12
3 476 473
3 052 653
TOTAL EQUITY
4 067 917
3 644 097
LIABILITIES Long term liabilities Other long term liabilities
7
7 997
5 473
Liabilities to financial institutions
7
5 827 442
6 096 629
5 835 440
6 102 102
Total non current liabilities Accounts payable
12 485
1 822
Accounts payable, group companies
3
16 182
7 082
Tax payable
4
56 878
54 312
Accrued costs
6
38 664
49 138
Other short-term liabilities to group companies
3
1 028 615
726 848
1 152 825
839 202
Total current liabilities TOTAL LIABILITIES TOTAL EQUITY AND LIABILITIES
6 988 264
6 941 304
11 056 181
10 585 401
Oslo, 27 April 2022
Nils Viggo Skeisvoll
Jørgen Dahl
Board member
CEO
Bjørnar Heiaas Bukholm Chairman of the board
84 / 85
Cash flow statement Amounts in TNOK
2021
2020
537 927
765 487
Cash flow from operating activities Profit/Loss before tax Taxes paid Net financial items Depreciations Change in receivables on Group companies Change in accounts payables Change in liabilities to Group companies Change in other accrual items Net cash flows from operating activities
-55 076
0
-168 953
-798 334
14 634
13 055
-247 649
-269 883
10 663
-635
-260 536
519 033
37 379
19 826
-131 610
248 550
-10 512
-14 673
-212 200
-304 723
0
-190 577
Cash flow from investing activities Acquisition of equipment and stock Payment of capital increase in subsidiaries Cash from merger Payment of group contribution Net cash from investing activeties
0
200 000
-222 712
-309 974
-185 583
-186 792
Cash flow from financing activities Interest paid Interest received
11 959
6 234
Currency effect on cash in foreign currency
26 796
-8 216
Change group cash pool
571 403
250 859
Net cash flows from financing activities
424 575
62 086
Net change in cash and cash equivalents
70 253
662
Cash and cash equivalents at the start of the period
2 684
2 022
Cash and cash equivalents at end of period
72 937
2 684
Cash and cash equivalents
72 937
2 684
0
0
Overdraft facility
Sector Alarm / Annual Report 2021
Notes Amounts in TNOK
Accounting principles The financial statement is prepared in accordance with the Norwegian Accounting Act and generally accepted accounting practice in Norway. Revenue recognition Revenues from sale of services is recognised when delivered. All revenues are related to sale of services to subsidiaries. Balance sheet items Current assets and current liabilities comprise items related to purchase and sale of goods. For items other than accounts receivable, items that fall due within one year of the transaction date are included. Fixed assets are assets intended for permanent ownership and use. Longterm debt is debt that matures later than one year after the transaction date. Current assets are valued at the lower of cost and fair value. Short-term debt is capitalized at the nominal amount at the time of establishment. Fixed assets are valued at cost. Fixed assets are depreciated according to a reasonable depreciation plan. Fixed assets are written down to fair value in the event of impairment that is not expected to be temporary. Long-term debt with the exception of other provisions is capitalized at nominal amount at the time of establishment. Receivable Accounts receivables and other receivables are recognised at denominated value. Intangible assets Intangible assets (brand names and licenses / software) are capitalized at cost and amortized on a straight- line basis over their expected useful lives. Fixed assets Tangible fixed assets are capitalized and depreciated over the useful life of the fixed assets if they have assumed a useful life of more than 3 years and have a cost price exceeding NOK 15,000. Maintenance of fixed assets is expensed as operating costs on an ongoing basis, while costs or improvements are added to the acquisition cost of the fixed asset and depreciated in line with the fixed asset. Pension The employees of the company have a defined contribution pension schemes that meet the requirements for compulsory occupational pension (OTP) according to Norwegian law. Currency items Foreign currency items are valued at the exchange rate at the end of the financial year. Financial market risk The company has only intra-group customers and has historically not had any losses on claims. Investments in subsidiaries are monitored on an ongoing basis, and corrective measures are implemented if operations deviate from the plan. As of 31.12.2021, the company has cash and unused credit facilities that are sufficient in relation to expected payments and expected organic growth. Cash flow The cash flow statement has been prepared using the indirect method. Bank accounts that is part of the Group’s cash pool scheme are classified as receivables and liabilities to Group companies. Income tax The tax expense in the income statement includes both the tax payable for the period and the change in deferred tax. Deferred tax is calculated at 22 % on the basis of the temporary differences that exist between accounting and tax values, as well as tax loss carryforwards at the end of the financial year. Tax-increasing and tax-reducing temporary differences that reverse or can reverse in the same period are offset and the tax effect is calculated on the net basis.
86 / 87
Subsidiaries Subsidiaries are assessed according to the cost method in the financial statement. The investment is valued at the acquisition cost of the shares unless an impairment has occured. Group contributions to subsidiaries, less tax deductions, are recognized as an increased cost price for the shares. Dividends / group contributions are recognized in the same year as they are allocated in the subsidiary. When dividends / group contributions significantly exceed the share of retained earnings after the acquisition, the excess part is considered repayment of invested capital, and the value of the investment is deducted from the balance sheet.
Note 1 / Fixed assets Amounts in TNOK Expected lifetime Acquisition cost 01.01 Additions
Computer equipment 3 years
Fixtures 5 years
Total
9 815
15 077
24 892
712
21
733
0
0
15 098
25 625
Disposals Acquisition cost 31.12
10 527
Accumulated depreciations 01.01
-2 362
-7 156
-9 518
Depreciation and impairment for the year
-3 245
-2 373
-5 618
Depreciations on disposals
0
0
0
-5 607
-9 529
-15 136
Net book value 01.01
7 452
7 921
15 373
Net book value 31.12
4 920
5 569
10 488
The year’s depreciation
-3 245
-2 373
-5 618
Impairment for the year
0
0
0
Accumulated depreciations 31.12
Leasing This year's rental / leasing costs machines This year’s rental costs for premises
42
42
741
741
Sector Alarm / Annual Report 2021
Note 2 / Intangible assets Software 5 years
Total
42 436
42 436
Additions
8 714
8 714
Disposals
0
0
51 150
51 150
-26 832
-26 832
-9 016
-9 016
Amounts in TNOK Expected lifetime Acquisition cost 01.01
Acquisition cost 31.12 Accumulated depreciations 01.01 Depreciation and impairment for the year Depreciations on disposals
0
0
-35 848
-35 848
Net book value 01.01
15 603
15 603
Net book value 31.12
15 301
15 301
Depreciations for the year
-9 016
-9 016
0
0
Accumulated depreciations 31.12
Impairment for the year
Note 3 / Intercompany balances Amounts in TNOK
Liabilities 2021 2020
Receivables 2021 2020
Short-term items Liabilities and receivables on group companies Group Contribution made/received Total
950 197
733 930
469 660
202 856
94 600
0
388 990
408 146
1 044 797
733 930
858 650
611 002
Long-term items Liabilities and receivables on group companies
0
0
2 284 930
231 121
Total
0
0
2 284 930
231 121
Liabilities and Receivables on group companies include draw of the group cashpool amounting to TNOK -777 972 for 31.12.2021.
88 / 89
Note 4 / Income tax expense and deferred tax Amounts in TNOK Calculation of the tax base for the year
2021
2020
537 927
765 487
Permanent differences
-404 366
-1 407 405
Changes in temporary differences
-283 269
355 961
Group contribution received
388 405
408 146
Provided intra-group contribution
-11 808
0
Result before tax
Interest limitation on tax deduction
31 647
117 841
This year's tax base
258 537
240 030
Basis for tax payable
258 537
240 030
Taxes payable on this year's tax base
56 878
52 807
Change in temporary differences
62 319
-78 311
-726
1 280
This year's tax expense divides into:
Too much/little allocated previous years Taxes on group contribution not in P&L
2 598
0
Deferred taxes on cut interest deduction
-6 962
-25 925
114 107
-50 149
-25 973
-35 480
85 449
89 792
Total tax charge Payable tax in the balance: Payable tax on this year's result Payable tax on received Group contribution Payable tax on provided Group contribution
-2 598
0
Total payable tax in the balance
56 878
54 312
Temporary differences
2021
2020
Change
Tangible assets
-1 835
-1 109
726
362
453
91
Long term liabilities
-73 750
-357 835
-284 085
Net temporary differences
-75 222
-358 491
-283 269
Cut interest deduction
-151 716
-120 069
31 647
Basis for net deferred benefit/liability
-226 938
-478 560
-251 622
-49 926
-105 283
-55 357
-49 926
-104 236
Gains and losses account
22% deferred tax Deferred tax benefit/liability not recgonized in balance sheet Net deferred benefit/liability in the balance sheet
-1 047 -54 310
Sector Alarm / Annual Report 2021
2021
2020
Result before tax
537 927
765 487
Estimated income tax according to nominal tax rate (22%)"
118 344
168 407
Other non-deductible expenses
-88 961
-309 629
85 449
89 792
-726
1 280
114 107
-50 149
2021
2020
72 937
2 684
2 498
2 684
Amounts in TNOK
2021
2020
Public taxes
3 341
3 432
Other provisions
35 323
45 706
Total
38 664
49 138
2021
2020
5 893 392
6 177 477
Explanation as to why the tax charge for the year does not amount to 22 % of the result before tax:
Tax on received (recognized) group contribution Correction tax payable previous years Calculated tax charge
Note 5 / Cash and cash equivalents Amounts in TNOK Cash and bank deposits Of which restricted funds (Tax withholding account):
Note 6 / Other current liabilities
Note 7 / Loan Amounts in TNOK Long-term loan Term Loan B Amendment fee
-65 950
-80 848
5 827 442
6 096 629
Term Loan B
0
0
Total long-term loan
0
0
Total long-term loan Short-term loan
Bank Overdraft facility Total loans including overdraft facility
0
0
5 827 442
6 096 629
90 / 91
In June 2019, Sector Alarm refinanced existing debt by successfully issuing a EUR 590 million 7-year senior secured Term Loan B and a EUR 100 million 6-year senior secured credit facility (unused). The Term Loan B was issued at EURIBOR +350 bps with a 0% floor at par. In February 2020, Sector Alarm successfully concluded a repricing of the EUR 590 million Term Loan B with the margin being reduced from 350 bps to 300 bps and was issued at par with a 0% floor. The new loan agreement has a dividend limitation of 22,5 MEUR pr year and also a gearing covenant of 9,2x Enterprise value/EBITDA if the Revolving Credit Facility is drawn 40% or more . There are no fixed annual instalments for the EUR 590 million Term Loan B. However, Sector Alarm is required to prepay 50% of Excess Cash Flow (as defined in the Term Loan B Facility Agreement) if Net Debt Cover (as defined in the Term Loan B Facility Agreement) greater than 5.00:1 and 25% of Excess cash flow if Net Debt Cover is greater than 4.50:1 but less than or equal to 5.00:1 within 20 Business Days of delivery of Annual Financial Statements. The conditions regarding Excess Cash Flow and Net Debt Cover is applicable from the Annual Financial Statements for the financial year commencing on 1 January 2020. Amounts in TNOK The maturity of long-term loans is as follows:
2021
2020
3–5 years
5 827 442
6 096 629
Total long-term loan
5 827 442
6 096 629
2021
2020
Other long-term debt
7 997
5 473
Total other long-term liabilities
7 997
5 473
2021
2020
50 258
47 656
7 055
6 557
729
606
Note 8 / Personell costs Amounts in TNOK Salary costs Salaries Employment tax Pension costs Other benefits
-2 105
1 010
Total
55 937
55 830
34
35
Number of fulltime employees
Employee benefit expenses
CEO 2021
2020
Salaries
2 643
2 600
1 100
1 100
Bonuses
358
358
0
0
Pension
23
22
0
0
0
0
0
0
Other benefits
No loans or securities have been provided to the CEO, Chairman of the Board or other related parties. There are no agreements on severance salaries to the Board or senior executives.
Board of directors 2021 2020
Sector Alarm / Annual Report 2021
Note 9 / Auditors fees Amounts in TNOK Expensed fees to auditors (excl VAT)
2021
2020
Statutory audit
808
409
Other attestation services
838
1 029
Technical assistance and tax advice
0
0
Remuneration for other services
0
0
1 645
1 438
2021
2020
Total
Note 10 / Pledges Amounts in TNOK Bank overdraft facility Term loan B
0
0
5 827 442
6 096 629
Shares in companies mentioned below, including intercompany loans and bank accounts in the companies have been pledged to secure borrowings of the Group at 31.12.2021. Sector Alarm Ireland AS PhoneWatch Ltd Sector Alarm AB Sector Alarm AS In addition a payment guarantee of TNOK 24 681 has been provided to Group hardware supplier.
Note 11 / Commitments Amounts in TNOK Operational lease
2021
Maturity within 1 year
2020
4 725
5 340
Maturity within 1 and 5 years
20 366
20 850
Maturity beyond 5 years
26 529
34 798
Total
51 620
60 988
Note 12 / Equity Amounts in TNOK Pr. 01.01.2021
Share capital
Own shares
Share premium
Retained earnings
Total
1 605
0
589 839
3 052 653
3 644 097
423 820
423 820
1 605
0
589 839
3 476 473
4 067 917
Result of the year Equity as of 31.12.2021 See note 14 for further information.
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Note 13 / Share capital and shareholder information
The company’s share capital as of 31.12.2021 consists of 4 863 354 shares of NOK 0.33 each. Each share has one vote. The company is controlled by Isanor AS (registered in Norway), which controls 62.99% of the company’s shares. The shares in Isanor AS are owned by Jørgen Dahl (CEO). Shareholder overview as at 31.12.2021: Sector Alarm Midco AS
Number
Share
4 863 354
100,00%
Total 4 863 354 100,00% Own shares The sale and purchase of own shares in Sector Alarm Holding AS takes place at market prices. Sector Alarm Holding AS does not own any own shares per 31.12.2021.
Note 14 / Subsidiaries Amounts in TNOK
Subsidiary
Business office
Share
Percentage of votes
Profit after tax 2021
Equity 2021
Net book value NOK
Sector Alarm IT AS
Oslo, Norway
100%
100%
NOK 5 021
NOK 47 379
44 671
Sector Alarm AS
Oslo, Norway
100%
100%
NOK 221 924
NOK 27 531
3 168 218
Sector Alarm Spain AS
Oslo, Norway
100%
100%
NOK -6
NOK 13 314
43 517
Sector Alarm Holland B.V.
Rotterdam, Netherlands
100%
100%
EUR 22
EUR 2 109
40 660
Sector Alarm Ireland AS
Oslo, Norway
100%
100%
NOK -7
NOK 998 114
1 425 071
Helsinki, Finland
100%
100%
EUR -6 699
EUR 19 369
487 298
Oslo, Norway
100%
100%
SEK 103 708
SEK 2 486 788
2 551 743
Sector Alarm Oy Sector Alarm Europe AB Total
7 761 178
Investments in subsidiaries are recognised according to the cost method in the company’s financial statements. For changes in ownership in subsidiaries please see note 18.
Sector Alarm / Annual Report 2021
Note 15 / Related party transactions Amounts in TNOK
2021
2020
Sale of HR-services
19 521
24 794
Sale of management services
91 553
103 268
Interest income
60 425
74 722
Interest costs
-9 085
-84 326
The company has had the following transactions with Group companies:
b) Remuneration to senior executives See note 8. c) Loans to related parties
2021
2020
Sector Alarm Manco AS
164
0
Sector Alarm Midco AS
1 177
0
891
808
Sector SPV AS
No loans have been granted to senior executives or board members. There have been no sales of products or services to associated parties in 2020 or 2021. Employees are offered alarm subscriptions at discounted rates.
Note 16 / Revenues Amounts in TNOK Income specified by business area
2021
2020
HR services
19 521
24 794
Management fee
91 553
103 268
111 074
128 062
Total
2021
2020
Norway
23 751
36 662
Sweden
39 510
44 072
Ireland
22 976
23 290
France
6 944
5 116
Spain
8 109
9 092
Finland
9 676
9 830
Geographical breakdown of income
Italy Total
108
0
111 074
128 062
94 / 95
Note 17 / Financial income and financial expenses Amounts in TNOK Interest income Other financial income Interest expense
2021
2020
11 959
6 234
0
0
-182 903
-199 504
Other financial costs
-28 564
-40 512
Foreign exchange gain
316 469
94 666
Foreign exchange loss
0
-463 671
60 425
74 722
Financial income from group companies Financial expenses from group companies
-9 085
-84 326
Income from investment in subsidiaries
388 761
1 410 499
Net finance costs
557 061
798 108
Note 18 / Merger, aquisitions and divestments Effective 01.01.2020 Sector Alarm Holding AS merged with fully owned subsidiaries Sector Alarm Group Holding AS, Sector Alarm Group AS and Sector Alarm Sverige AS. The transaction has been booked using continuity method as all where controlled and owned by Sector Alarm Holding. Tax positions in the merged companies are transferred in their entirety to Sector Alarm Holding AS. 100% of the shares in Sector Alarm AB where sold to Sector Alarm Europe AB subsequent of the merger. The transaction resulted in recognition of a MNOK 1 002 gain in Sector Alarm Holding AS and was financed with a loan from Sector Alarm Holding AS to Sector Alarm Europe AB. Amounts in TNOK
2021
Sales price shares in Sector Alarm AB
3 920 986
Book value of shares in Sector Alarm AB
2 918 633
Gain on sale of shares
1 002 353
Note 19 / Events following the balance sheet date There are no known events after the balance sheet date that would have significant effect of the financial effect for 2021.
Sector Alarm / Annual Report 2021
Annual Accounts / 2021 – Audit Opinion
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KPMG AS Sørkedalsveien 6 Postboks 7000 Majorstuen 0306 Oslo
Telephone +47 45 40 40 63 Fax Internet www.kpmg.no Enterprise 935 174 627 MVA
To the General Meeting of Sector Alarm Holding AS
Independent Auditor’s Report Opinion
•
The financial statements of the parent company Sector Alarm Holding AS (the Company), which comprise the balance sheet as at 31 December 2021, the income statement and cash flow statement for the year then ended, and notes to the financial statements, including a summary of significant accounting policies, and
•
The consolidated financial statements of Sector Alarm Holding AS and its subsidiaries (the Group), which comprise the balance sheet as at 31 December 2021, the income statement, statement of changes in equity and statement of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies.
In our opinion: •
the financial statements comply with applicable statutory requirements,
•
the financial statements give a true and fair view of the financial position of the Company as at 31 December 2021, and its financial performance and its cash flows for the year then ended in accordance with the Norwegian Accounting Act and accounting standards and practices generally accepted in Norway, and
•
the financial statements give a true and fair view of the financial position of the Group as at 31 December 2021, and its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards as adopted by the EU.
Basis for Opinion We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Company and the Group as required by laws and regulations and the International Ethics Standards Board for Accountants’ International Code of Ethics for Professional Accountants (including International Independence Standards) (IESBA Code), and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Other Information The Board of Directors and the Managing Director (management) are responsible for the information in the Board of Directors’ report and the other information accompanying the financial statements. The other information comprises information in the annual report, but does not include the financial statements and our auditor’s report thereon. Our opinion on the financial statements does not cover the information in the Board of Directors’ report nor the other information accompanying the financial statements. In connection with our audit of the financial statements, our responsibility is to read the Board of Directors’ report and the other information accompanying the financial statements. The purpose is to consider if there is material inconsistency between the Board of Directors’ report and the other information accompanying the financial statements and the financial statements or our knowledge
Penneo Dokumentnøkkel: L6655-TJI0O-FTNJ6-U8J0J-OI8Y7-VE45I
We have audited the financial statements of Sector Alarm Holding AS, which comprise:
Sector Alarm / Annual Report 2021
Independent Auditor's Report - Sector Alarm Holding AS
obtained in the audit, or whether the Board of Directors’ report and the other accompanying information otherwise appears to be materially misstated. We are required to report if there is a material misstatement in the Board of Directors’ report or the other information accompanying the financial statements. We have nothing to report in this regard. Based on our knowledge obtained in the audit, it is our opinion that the Board of Directors’ report •
is consistent with the financial statements and
•
contains the information required by applicable legal requirements.
Responsibilities of Management for the Financial Statements
In preparing the financial statements, management is responsible for assessing the Company’s and the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern. The financial statements of the Company use the going concern basis of accounting insofar as it is not likely that the enterprise will cease operations. The consolidated financial statements of the Group use the going concern basis of accounting unless management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so. Auditor’s Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional scepticism throughout the audit. We also: •
identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error. We design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
•
obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's or the Group's internal control.
•
evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
•
conclude on the appropriateness of management’s use of the going concern basis of accounting, and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company and the Group's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report.
2
Penneo Dokumentnøkkel: L6655-TJI0O-FTNJ6-U8J0J-OI8Y7-VE45I
Management is responsible for the preparation of financial statements that give a true and fair view in accordance with the Norwegian Accounting Act and accounting standards and practices generally accepted in Norway, and for the preparation and true and fair view of the consolidated financial statements of the Group in accordance with International Financial Reporting Standards as adopted by the EU, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
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Independent Auditor's Report - Sector Alarm Holding AS
However, future events or conditions may cause the Company and the Group to cease to continue as a going concern. •
evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves a true and fair view.
•
obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.
We communicate with the Board of Directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
Penneo Dokumentnøkkel: L6655-TJI0O-FTNJ6-U8J0J-OI8Y7-VE45I
Oslo, 27 April 2022 KPMG AS
Kjetil Kristoffersen State Authorised Public Accountant (This document is signed electronically)
3
Sector Alarm / Annual Report 2021
Appendix Alternative performance measures This section describes the non-GAAP financial alternative performance measures (APM) that are used in the annual report.
Adjusted EBITDA and Adjusted Portfolio EBITDA EBITDA is defined as Total income (Operating revenue and gain/ (loss) on sale of assets) adjusted for Operating expenses excluding other gain/(loss). EBITDA Small system is used as an additional measure of the group’s operational profitability, excluding the impact from financial items, taxes, depreciation and amortization related to the Small system business segment. Adjusted EBITDA is defined as EBITDA excluding items not regarded as part of the underlying operational performance for the period
Attrition rate The attrition rate is the number of terminations (adjusted for moves when the customers signs a new contract) in the last 12 months, divided by the average number of customers for the last 12 months.
Average Revenue per user Average monthly revenue per user (“ARPU”) is the portfolio services segment revenue, consisting of monthly average subscription fees, upselling and service visits divided by the monthly average number of subscribers during the relevant period.
Terminations
installation fees charged to the customer.
Monthly adjusted EBITDA per subscriber Monthly adjusted EBITDA per subscriber (“EPC”) is calculated by dividing the total Portfolio EBITDA by the monthly average number of customers.
New customers added
Terminations is the total number of terminated contracts during the period. Customers that terminate their contract within the second 6 months are not counted as a termination.
Total number of organic new customers adjusted for customers that have terminated their contract within the second 6 months after installation.
Cash acquisition cost per new customers
The net customer growth is the change in the customer base from one period to the next.
Cash acquisition cost per new customer (“CPA”) is the net investment required to acquire a customer, including costs related to the sales and marketing process, installation of the alarm and hardware costs adjusted for
Net customer growth
Investor Relations contacts
Bjørnar Heiaas Bukholm Group CFO bjornar.bukholm@sectoralarm.com +47 98 07 27 78
Sectoralarm.com