REVENUE

20 601

NOK million

PROFIT BEFORE TAX

671

NOK million

EQUITY

2 324

NOK million

EQUITY RATIO

42,2 %

Highlights 2014

  • New record in turnover - for the first time over 20 billion Norwegian kroners
  • Very good economic results
  • Good market achievements
              Volkswagen clearly the largest brand in Norway, Latvia and Lithuania
              In front at chargeable cars in Norway
              Volkswagen Commercial vehicles in Norway - best in Europe
              Solid Audi- and SKODA-performances in an "electric car dominated market"
  • Still a high score at customer satisfactory survey's
  • Satisfactory turnaround at the workshops
               Almost one billion in parts/accessories turnaround in Harald A. Møller
               Growth in all five countries
  • Still growth for Volkswagen Møller Bilfinans
               Assets at 10,7 billions (9,5 billions in 2013)

MøllerGruppen Annual Report 2014

MøllerGruppen Corporate Social Responsibility Report

 

Key figures

Here are the key figures for MøllerGruppen.

Amounts in NOK millions 2014 2013 2012 
Operating revenues      
Operating revenues 20,601 18 842 18 726
Profit      
Operating profit 606 636 747
EBITDA 1) 934 848 971
Profit/loss before tax 671 701 795
Profit for the year 511 511 575
Capital      
Equity at 31.12 2 324 2 373 2 190
Total assets at 31.12 5 507 5 346 5 038
Equity ratio 42,2 44,4 43,5
Profitability      
Return on equity in %2) 21,8 22,4 26,3
Return on total capital in %3) 12,4 16,9 16,9
Number of employees      
Number of employees 3 926 3 771 3 664
Total pay roll and other personnel costs 2 310 1 998 1 882

1) Including results in associated companies (AC)
2) Return on equity: Year's profit as a percentage of average equity.
3) Return on total capital: The result before tax plus financial costs as a percentage of average total capital.

 

CEO's statement

Our best year! 2014 was our best year ever if measured by customer satisfaction alone, and it has reached a high level. Financially speaking, it was our second best year. It was also a very good year measured by market performances in nearly all units and for all brands.

Our four foreign markets saw good or very good progress, and Car Finance enjoyed both good growth and a record result. We set a strong record in Norway with 50,007 contracts for sold new cars. All in all there is little doubt that the organisation has delivered the best year ever, even though it did not break records for every parameter. Good market conditions helped, but it was the efforts made at all levels that were crucial in enabling us to achieve our potential.

"The car industry is entering a period of major changes"
The car industry is entering a period of major changes that are being pushed forward by technology and general conditions. The next few years will see the digitalisation of customer processes, new technology for drivelines, and the utilisation of a car's ability to communicate with its surroundings via the internet.

When it comes to drivelines, Norway is right at the cutting edge due to its highly favourable tax rules for electric cars and a tax regime that favours chargeable cars in general. The proportion of chargeable cars just continued to climb throughout 2014 and will continue to do so in 2015. Volkswagen became the leader in chargeable cars in Norway in 2014, despite the fact that its most important model was only on sale in the second half of the year. There will be a large volume of chargeable hybrids in 2015 as well, which will further reinforce this trend. We will receive a number of chargeable products throughout 2015 that will be extremely competitive. We are therefore confident that Volkswagen and Audi will set solid milestones in reducing CO2 emissions in 2015.

The focus on driverless cars and driver assistance systems increased heavily in 2014, although the practical consequences of these are largely unknown at the moment. These communication possibilities present many opportunities, and some problems associated with data security.
How quickly these opportunities will become of practical significance is uncertain.

Customer behaviour has already changed greatly thanks to the digital world. In-person visits to our premises are falling even while sales are rising. This is quite simply due to the fact that most of the information gathering process now takes place online. Customers are eager to save time and want to serve themselves as much as possible in our trade as well.

Great opportunities, but also great challenges
We believe there are great opportunities here, but also many challenges. Our efforts to create digital capacity throughout the organisation were therefore significantly reinforced in 2014. This will continue over the next few years. One challenge is that in the short-term we will be investing and increasing costs, but we also have to adapt the organisation in order to exploit the resulting opportunities for increasing efficiency. At the same time, we are absolutely certain that given the products and services we deliver, the current distribution network will still be needed for the foreseeable future.

Another long-term trend that is continuing is that many cus-tomers are choosing lease products instead of buying cars. Favourable interest rates are one important reason for this, but it is also clear that the convenience that results from leasing is more important for many customers than owning the actual car. Our own focus on lease products has been successful and has contributed to both increased market shares and good earnings in financing.

Our opportunities for further growth are not immediately obvious. We acquired two dealers in Sweden in 2014 and could grow somewhat larger here. It would be difficult to grow larger in Norway and the Baltic States, and we also want to help create strong, privately owned groups of dealers who can assume responsibility for larger regions. Further growth in the car dealer area therefore requires us to look at new markets. At the same time, there are many opportunities to expand the range of services in the authorised brand value chain within which we have traditionally operated. There are also many opportunities outside our traditional value chain. These are opportunities we will spend a lot of time considering in 2015. Sustainable growth will remain an important focus area.

Pål Syversen
CEO 

Board of Directors' Report 2014

THE NATURE, SCOPE AND LOCATION OF THE GROUP

MøllerGruppen's core business involves the import, sale, servicing, financing and repair of Volkswagen, Audi and ŠKODA cars, and Volkswagen Commercial Vehicles. The Group's strategy is to grow with the Volkswagen Group's brands. MøllerGruppen's objective is to create value for its customers, employees, owners and partners. Ever since Harald Aars Møller started his own car company in 1936, the core values, Honest and Trustworthy, Clear, Proactive, and Open-minded and Caring, have played a central role. The business is based in Norway, Sweden, Estonia, Latvia and Lithuania.

MøllerGruppen has a common executive management team and consists of the business areas Car Imports Norway, Car Dealers Norway, Car Dealers Sweden, Cars Baltics and Car Finance. Each business area is cultivated with an emphasis on independent responsibility and authority within the agreed framework of strategies and targets, to achieve long-term value development. The common functions are utilised where appropriate to safeguard economies of scale across the business areas.

MøllerGruppen is owned by Aars AS. Aars AS is a pure holding company that focuses on asset management and capital allocation. Aars AS also owns MøllerGruppen Eiendom AS. MøllerGruppen Eiendom was previously a business area in MøllerGruppen, but was spun off as a separate subsidiary in April 2014. The real estate business was spun off as a separate company all due to a desire to cultivate the car business under the name MøllerGruppen AS and the real estate business under MøllerGruppen Eiendom AS. MøllerGruppen Eiendom AS has investments in car facilities associated with the business in MøllerGruppen AS and intends to accumulate a substantial portfolio of commercial property.

The Group's administration that was previously performed by the holding company Aars AS, was moved down to the parent companies of the car and real estate business areas, Møller-Gruppen AS and MøllerGruppen Eiendom AS, respectively, from 1 January 2014, together with the associated assets.

Import
Harald A. Møller AS is Norway's largest car importer and has since its establishment imported more than one million cars for Norwegian customers. The four brands, Volkswagen cars, Volkswagen Commercial Vehicles, Audi and ŠKODA, all hold very robust market positions in the Norwegian market.

MøllerGruppen is a significant player in the Baltic car market and imports Audi and Volkswagen into the Baltic States.

Car dealers
The car dealers in Norway and Sweden operate under the chain name Møller Bil, while dealers in the Baltic States operate under the chain name Møller Auto. The dealerships in Norway, Sweden and the Baltic States are run as separate, independent units. There is coordination where appropriate and any lessons that have been learned are shared. The long-term strategy is to build a single international dealer chain.

The dealers and car import in the Baltic States have been gathered under a single business area with a common management structure. The business in the Baltic States is in a phase where there is a great need to coordinate activities and focus areas across importers and dealers.

Car Finance
Car Finance operates in Norway and is run by the company Volkswagen Møller Bilfinans. This is a jointly controlled company with Volkswagen Financial Services AG.

MACROECONOMICS AND GENERAL CONDITIONS
The global macroeconomy experienced moderate growth throughout 2014, which was somewhat higher than in the preceding couple of years. While both Europe and the US are contributing to this, the emerging markets are primarily respon-sible for this growth. Oil prices dropped significantly in 2014 and the already low interest rates fell even further. On their own, this is positive for the global economy. So although unemployment is generally high in many countries, there are positive signs of continued global growth. The drop in oil prices has so far not had significantly negative consequences for Norway, but somewhat weaker growth and a slight rise in unemployment are expected going forward. Sweden experienced a positive economic trend last year due to the improvement in the economies of Sweden's nearest trade partners. The Baltic States have enjoyed stable growth in the last few years. The economies in these countries have stabilised, but are still at relatively low levels compared with before the financial crisis. Estonia has seen the best economic development after the financial crisis, although all three Baltic States experienced GDP growth of around 2 per cent in 2014. Growth in these countries is being hampered by the fact that so many skilled people emigrated during the financial crisis. So far these people have yet to be seen returning to their native countries.

There were no substantial changes in the tax systems or framework conditions in our markets. Sales of diesel cars in Norway continue to fall relative to petrol cars. Part of the reason for this is that the world's car manufacturers have improved the efficiency of today's petrol engines and thus significantly reduced fuel consumption. However, it is also clear that tax policy, including the focus on local NOx emissions, is contributing to this sales trend. Despite this, 2014 still saw the sale of more diesel cars than petrol cars.

Our brands are well positioned with both petrol and diesel engine products, meaning that we do not expect further changes to significantly affect our market position.

Norway has Europe's most favourable tax system for electric cars. It has now been decided that this will be continued until at least 2017 or until 50,000 electric cars have been sold. A very large number of electric cars have been sold thanks to the tax system in Norway. Sales more than doubled in 2014 in relation to 2013, with electric car sales accounting for 12.5 per cent of total car sales in 2014.

The national budget for 2015 introduced some tax relief for chargeable hybrids and a full review of the tax regime for cars in the revised national budget in the spring of 2015 was announced. The emphasis on new technology and environmentally friendly cars is expected to increase. The Volkswagen Group's main strategy for new technology is to focus on chargeable hybrids that have a greater range of applications than current pure electric cars. Both the Golf GTE and Audi A3 e-tron were introduced with this technology towards the end of 2014. We know that the group intends to launch several new products in this segment in the next few years. In our opinion, sales of chargeable hybrids will be decisive with regard to whether or not Norway achieves its targets for greenhouse gas emissions. Norwegian importers are actively lobbying politicians to adapt the tax system so that chargeable hybrids can compete on price with other technologies. We are optimistic that our brands will continue to capture a significant share of this market.

The car market
144,202 new cars were registered in Norway in 2014, an increase of 1.4 per cent compared with 2013. The total number of new commercial vehicles under 3.5 tonnes ended up at 29,611 vehicles, down 4.0 per cent on 2013. However, this was still a relatively normal market for commercial vehicles. 303,866 new cars were sold in Sweden, compared with 269,363 cars in 2013, a rise of 12.8 per cent. The market for commercial vehicles also improved and ended up at 41,922 cars, a slight increase on 2013. The vehicle market in the three Baltic States enjoyed good growth in 2014 and ended up at 48,048 cars and 8,193 commercial vehicles, a combined rise of 12.9 per cent.

Annual financial statements
MøllerGruppen's profit before tax amounted to NOK 671 million in 2014 compared with NOK 701 million in 2013. The result was charged a total of NOK 173 million in non-recurring write-downs and other non-recurring costs not validated to 2014. Corrected for this, the profit before tax was NOK 844 million, which is one of the Group's best results ever. The year's tax amounted to NOK 159 million, meaning that the net profit for the year ended up at NOK 511 million, the same as in 2013.

The Group achieved a milestone by earning NOK 20 billion in operating revenue for the first time.

Operating revenue increased by 9.3 per cent compared with 2013. The primary reason for this was the high sales volumes in Norway and Sweden due to good markets and very good market performances. However, operating revenue grew satisfactorily in the Baltic States as well in 2014.
The very good result before tax of NOK 844 million, corrected for non-recurring items, was primarily attributable to the high sales volumes for new cars in both Norway and Sweden. However, the margins for used cars also improved in all markets in 2014. All five business areas demonstrated solid progress in operations in relation to 2013.

The non-recurring items of NOK 173 million were primarily attributable to two factors. NOK 100 million was due to write-downs of fixed assets in the new car facilities in Oslo Vest. On 5 January 2015, Møller Bil opened new facilities for Volkswagen and Audi respectively in Lilleaker in Oslo Vest. Møller Bil had to move from Skøyen due to a demand for brand separation of Audi and Volkswagen from the manufacturer, and the fact that the businesses also needed more space. These are prestigious facilities for their respective brands and the ultra modern car facilities are packed with new technology. The cash flow generated from these car facilities does not in itself justify these investments and the fixed assets have therefore been written down by NOK 100 million.

In connection with the Norwegian companies in the Group winding up their defined-benefit based pension schemes and all employees switching to defined-contribution based schemes, the financial statements have been charged with a non-recurring effect of NOK 67 million. This was associated with unamortised actuarial gains or losses from previous years, which now, in line with good accounting practice, must be recognised as a cost in their entirety in connection with the winding up of the schemes. Financially speaking the Group expects to save NOK 10-15 million a year from this change.

Total cash flow measured in terms of EBITDA amounted to NOK 934 million compared with NOK 848 million in 2013. Net cash flow from operations amounted to NOK 672 million compared with NOK 555 million in 2013. The cash flow from operations is significantly lower than EBITDA because it includes payable taxes, financial costs and changes in working capital. The primary reason for the improvement was better operative cash flow and lower payable tax in 2014. The Board is very pleased with the result and market performances the Group delivered in 2014.

Capital expenditures, liquidity and funding
The Group's investments amounted to NOK 453 million in 2014, an increase of NOK 167 million on the previous year. The investments primarily concern car facilities, acquisitions of dealers and IT systems. NOK 37 million of business assets were sold during the period. The stock as per 31 December 2014 was valued at NOK 2,716 million. This is an increase of 3.7 per cent from 2013.

In November 2014, the Group issued a 5-year, NOK 400 million bond. This ensures the Group good, long-term financing and at the same time the Group gains an alternative source of financing to bank financing. The bond is listed on the Nordic ABM exchange to ensure liquidity for investors. The Group's financing also consists of short-term overdraft facilities and a multi-currency loan agreement with a limit of NOK 1,000 million, which expires in July 2016. At 31 December 2014, NOK 150 million had been drawn on the facility. The Group had net interest-bearing liabilities totalling NOK 572 million at 31 December 2014. At 31 December 2014, the Group's share capital amounted to NOK 2,324 million, corresponding to 42 per cent of the total capital. This gives MøllerGruppen a very strong financial position.

The Group's dealers have obligations totalling NOK 4,739 million linked to the repurchase of cars from financing compa-nies. This is an increase of 20 per cent from 2013. The Group is exposed to market-based risk in that the market price for these cars could fall below the guaranteed repurchase value. Provisions have been made for estimated losses in the portfolio. The Board is of the opinion that this risk is under satisfactory control based on the current financial position and market conditions.

When importing cars and parts the transaction currency used is the euro, except for imports of ŠKODA, where payment is made in Norwegian kroner. Prices in euro are regulated according to currency agreements with the individual suppliers, which involve most of the risk being covered by the supplier. MøllerGruppen bears the transaction risk within one month, as well as a long-term strategic risk associated with the eurozone's competitiveness. Forward contracts and options are used to reduce short-term risk. The Group's investments in Sweden and the Baltic States are also subject to currency fluctuations. At the end of 2014, these investments were not hedged beyond the debt financing of activities being recorded in local currency.

Events after the balance sheet date
In January 2015, an agreement was entered into on the sale of the dealer company Møller Bil Fredrikstad AS. The sale was completed on 2 March 2015. The sale will therefore be recognised in the financial statements in 2015.

BUSINESS AREAS
Car Imports Norway: Harald A. Møller AS, the importer of Volkswagen, Audi, ŠKODA and Volkswagen Commercial Vehicles, achieved total operating revenue of NOK 10,017 million, a rise of 5.6 per cent on 2013. Profit before tax amounted to NOK 503 million in 2014 compared with NOK 455 million in 2013. The improvement in the result was due to higher revenue, especially from electric cars where the margins have also been good. Stable costs also made an important contribution. The result is, historically, one of the company's best. Harald A. Møller AS retained its position as the largest car importer, and our car brands had a total market share of 26.5 per cent of the Norwegian car and commercial vehicle market, compared with 25.7 per cent in 2013.

The rise was due to higher market shares for Volkswagen cars due to very strong sales of electric cars. Volkswagen became the market leader in the chargeable cars segment with its e-Golf and e-Up, despite the e-Golf not being launched until July 2014. Volkswagen was also the most sold brand for the ninth year in a row and the Volkswagen Golf the most popular car model for the eighth year in a row in 2014.

ŠKODA had a good year, greatly helped by the new Octavia estate. Its market share increased from 4.9 per cent to 5.2 per cent, which represents a strong performance given the fact that ŠKODA has no electric models. Audi had a slightly slower year due to its portfolio of older models. Its market share fell from 5.3 per cent to 4.9 per cent. Audi does not have any electric models either, so given this it also performed well in the market. Volkswagen Commercial Vehicles had another fantastic year with a market share of 34.3 per cent, slightly down from the record of 35.3 per cent the year before. In 2014, sales of parts and accessories increased by 4.9 per cent to revenue of NOK 992 million. Operating costs comprised 9.9 percent of operating revenue, which is 2.2 percent lower than in 2013. Net financial costs are low, as a result of strong cash flow and low interest rates on operational credits.

Car Dealers Norway: MøllerGruppen owns a significant part of the dealer network through Møller Bil AS. The Møller Bil chain covers around 60 per cent of the Norwegian market for Volkswagen and Audi, with a primary focus on the biggest cities. For ŠKODA the share is around 45 per cent. The car dealers saw a total increase in operating revenue of 6.5 per cent in 2014 to NOK 11,645 million, resulting in a profit before tax of NOK 125 million, compared with the previous year's NOK 145 million. Corrected for the non-recurring effects associated with the write-down of the car facilities in Oslo West and winding up of the defined-benefit pensions, the profit before tax was NOK 230 million. This result is the second highest in Møller Bil's history. The good result was due to high volumes and somewhat improved margins for new cars, especially due to the sale of electric cars. However, used cars and the aftersales market also made positive contributions with higher volumes and improved margins.

The profit margin for the dealer chain overall was 2.3 per cent, up from 1.6 per cent in 2013. The profit margin for 2014 was good, but there is still a large spread in the results between the strongest and weakest dealers, and there will be a general focus on improving the earnings of the weakest dealers in 2015.

Møller Bil continued to enjoy a positive trend in customer satisfaction in 2014 with regard to both sales and the aftersales market. The Board is satisfied with this positive development, which is a result of several years of hard work and focus on this area. Customer satisfaction is crucial for the chain's success and there is still room for improvement. This work will continue in 2015.

Car Dealers Sweden: MøllerGruppen owns around 9 per cent of the dealer network that sells Volkswagen brands in Sweden. In the fourth quarter of 2014, MøllerGruppen took over two new dealers in Enköping and Bro. The business in Mälardalen therefore now comprises 12 dealers. The dealer business in Sweden achieved operating revenue totalling NOK 2,839 million in 2014, a strong increase of 25 per cent compared with 2013. The acquisition of the two new dealers accounted for 3 per cent. The increase was due to higher sales of new cars, due to both a better overall market in Sweden and better market performances by our dealers. The turnover from used cars and the aftersales market also increased nicely in 2014. The result before tax was a profit of NOK 29 million compared with a loss of NOK 38 million in 2013. The results for both years were charged with non-recurring write-downs linked to brand separation and the restructuring of the car facilities in Sweden. This amounted to NOK 7 million in 2014, while NOK 60 million was written down in 2013. Underlying operations therefore improved by NOK 14 million. This was due in particular to improved market performances for new cars, although improvements in both the aftersales market and used cars also contributed.

The dealers in Sweden have demonstrated good progress in customer satisfaction in both sales and the aftersales market. However, the Swedish dealers are still lagging slightly behind the levels we have achieved in Norway. Therefore, active steps are being taken to improve this further, including by comparing and coordinating measures with Møller Bil Norway. The Board is very satisfied with the positive trend in Sweden.

Cars Baltics: MøllerGruppen imports Volkswagen in all the Baltic countries and Audi in Latvia and Lithuania. The Group is also represented by Volkswagen dealers in all three Baltic States and Audi dealers in Latvia and Lithuania. The operations are organised as a single business unit since this relatively young organisation needs strong coordination between importers and dealers. We have seen positive effects of this.

The Baltic States saw continued moderate but stable economic growth in 2014. However, the car market grew by 13 per cent in 2014, although it is still at a low level compared with before the financial crisis in 2008. Overall revenues from the car business were NOK 1,915 million, an increase of 21 per cent from 2013. This was due to better market performances for new cars and used cars, as well as the aftersales market.

Volkswagen passenger cars have a market share of 12.3 per cent, while Audi has a market share of 2.8 per cent. Volkswagen Commercial Vehicles have a market share of 14.9 per cent. The market shares for cars are on a par with the levels in 2013, while commercial vehicles increased from 13.3 per cent in 2013. Estonia in particular still has great potential for improvement in terms of both cars and commercial vehicles.

The profit before tax was NOK 31 million compared with NOK 33 million in 2013. Dealer results demonstrate stable progress, while importer results were affected by some non-recurring items and low margins on new cars due to very strong competition.

MøllerGruppen's companies in Latvia have been fined a total of EUR 7.3 million because of alleged illegal price fixing. MøllerGruppen strongly disagrees with the basis for the fine and believes the fine is completely disproportional in relation to the alleged irregularities. The case will be brought before the Latvian judicial system. No provisions have been made for this in the financial statements for 2014.
MøllerGruppen holds a very strong strategic position in the Baltic States, but some work still remains to be done in relation to developing the chain in line with what has been achieved in Norway and Sweden.

Car Finance: Since 2009, the business has been run through Volkswagen Møller Bilfinans AS, a joint venture between Volkswagen Financial Services and MøllerGruppen. The company sells car finance and insurance products in Norway. MøllerGruppen's stake is 49 per cent. The Group's share of the profit after tax was NOK 77 million in 2014, compared with NOK 66 million the year before. This result is the highest ever and is due to high volume growth, continued relatively good interest rate margins, and low losses. The company is also run very cost-effectively. Confirmed losses and loss write-downs corresponded to 0.45 per cent of the year's average total assets, down from 0.65 per cent in 2013.

The high volume of new car sales has resulted in significantly greater demand for financing services. We have also achieved a higher degree of financing, especially due to an increase in private leasing. Therefore, compared with 2013, total assets increased by 14.2 per cent to NOK 10,615 million at
31. December 2014.

PERSONNEL, WORKING ENVIRONMENT, THE ENVIRONMENT AND CORPORATE SOCIAL RESPONSIBILITY
At year-end 2014, MøllerGruppen had 3,929 employees, an increase of 144 from the year before.
There were 614 in Sweden, a total of 607 in the three Baltic States, and 2,708 in Norway.
The proportion of women in the Group is relatively stable. The proportion of women in Norway at year-end 2014 was around 17 per cent, and we are always looking to increase this. We have four female general managers in Norway, two in Sweden, two in Latvia, and one in Lithuania. We want to increase this number, which is reflected by the fact that we always encourage women to take part in our internal management programmes.

MøllerGruppen has produced a specific report for corporate social responsibility in 2014. This deals with personnel, the working environment, the external environment and corporate social responsibility. A more detailed description of these areas is provided in this report.

MØLLERGRUPPEN AS
The parent company, MøllerGruppen AS, is in a solid financial position. The financial statements for 2014 have been prepared on the assumption that the parent company and the Group are going concerns and the Board confirms that the basis for this assumption exists. It is the Board's opinion that the annual financial statements and accompanying notes provide comprehensive information about the company's operations and financial position at 31 December 2014. There have been no events following the end of the year that would affect an assessment of the company.
In 2014 MøllerGruppen AS had a net profit of NOK 437 million, which the Board proposes to distribute as follows: 

Dividends and group contributions                                  NOK 55 million
Transferred to other equity                                 NOK 382 million
Total allocated                                 NOK 437 million

In addition to this, an additional dividend was distributed in November 2014 totalling NOK 300 million, which was approved at the extraordinary general meeting on 31 October 2014. The company had a book equity of NOK 1,858 million. The company had 21 employees at 31 December 2014. The working environment is good and the company does not pollute the external environment. The company's head office is in Oslo.

PROSPECTS FOR 2015 AND BEYOND
2014 was a very good year for sales of new cars in Norway with the highest total market since the 1980s. The market in the Baltic States grew significantly, but it is still a relatively small market. The overall market in Sweden also grew significantly in 2014 and ended up at a very good level. Sales of used cars were good in all markets and the aftersales market also saw a small improvement in all markets.It looks like the good market for new cars in Norway will continue into 2015, although a slight drop is anticipated in relation to last year. In Sweden the market is expected to drop slightly from the high level in 2014, while in the Baltic States slight growth is expected based on the fact that the macroeconomy appears to have stabilised. Used car imports slowed in 2014 due to the weak NOK exchange rate. The NOK exchange rate strengthened somewhat against the EUR at the start of 2015, which could result in used imports increasing again going forward. Internationally, car markets are still showing signs of positive growth. Among other things, Europe saw weak month-on-month growth relative in 2014 for the first time in several years. This is expected to continue in 2015.

Online shopping has strongly increased the last couple of years in a number of sectors. It is still very limited in the car industry. However, there is no doubt that technological developments and the customers' associated expectations will result in the car industry also being more strongly affected by this trend in the next few years. 2014 was also the year when electric cars really became a significant factor in the overall market. Now that a number of brands are also launching plug-in hybrids, chargeable cars are expected to continue to increase their share in relation to total sales. Volkswagen and, to some extent, Audi are well positioned in relation to this development. There is uncertainty about the future development of the world economy. There appears to be broad consensus that the sovereign debt crisis in a number of large countries will put a damper on global growth, but there are positive signs that indicate some improvement in growth going forward. Political unrest associated with the oil market is an important factor that could affect the world economy negatively in the next few years.

The Board is moderately optimistic about the car markets in our geographical areas. The prospects of continued low interest rates and low unemployment in our most important markets will contribute to the continued positive development of the economic situation in these countries.

There will still be investments in upgrades to the car facilities in 2015 to adapt them to the manufacturers' requirements, especially in Sweden. Significant investments will also be made in IT systems and in adapting the business to a more digital world. A slight drop is expected in the market in 2015, but it will remain a relatively good market. This, combined with the expected positive development in market shares for our brands, means the Board expects a good result in 2015 as well. In general, the Board is of the opinion that uncertainty about important framework conditions outside the company's control will continue.

This applies to the economic picture, but also to some extent the car manufacturer's arrangements and the authorities' influence through laws, taxes and duties, especially with respect to the tax regime for cars in Norway.

The Group's financing is split into two, in operating capital for the car business and long-term mortgage loans for the property business.

Oslo, 26 March 2015