Board of Directors' report

DNV GL strengthened its market position as a leading classification and assurance company during the year. The company recorded operating revenues of NOK 19,639 million in 2018.


Business Assurance, with a growth of 11%, has been the main engine for growth in 2018, whereas Maritime had a relatively strong performance the two last quarters.

Because of cost savings and efficiency improvements, earnings before interest, taxes, depreciation and amortization (EBITDA) for the year improved by NOK 630 million from last year. However, due to a significant deterioration in the market conditions for high-power laboratory testing, an impairment loss related to Energy laboratories of NOK 552 million was recorded. 
The net result for the year ended at NOK 116 million. 
A recent brand survey conducted in 2018 showed that trust in DNV GL is very high. Customers and stakeholders value DNV GL’s technical expertise when selecting a service provider like DNV GL. The DNV GL Group employs 12,100 people, has operations in more than 80 countries and its headquarters are located at Høvik, just outside Oslo, Norway. DNV GL is organized in a group structure with five business areas: Maritime, Oil & Gas, Energy, Business Assurance and Digital Solutions. Common support services within IT, finance, HR and procurement are provided through a global shared services organization. 
The Board sincerely thanks the management and employees for the hard work and commitment they have displayed throughout 2018.


DNV GL’s strategy sets ambitious goals for further developing the company as a world leading assurance and risk management company within maritime as the leading classification society in contracted tonnage, within oil & gas as the provider of technical verification and assessment services, within the power and renewables industries as the leading provider of testing, certification and technical advisory services, as well as the leading provider of management system certification services, assurance and digital solutions across industries. As the corporate parent, DNV GL will contribute to the best possible ownership of each business unit through active ownership. 

The 2015–2020 strategic plan is to develop DNV GL as a leading company in a digital, agile and efficient future. The ambition is to develop DNV GL into a data smart company using digital solutions to develop new revenue streams and market positions across all business areas. The newest business area, Digital Solutions, completed its first full year of operations. Digital Solutions combines digital capabilities with DNV GL’s well-established domain expertise. DNV GL’s industry data platform, Veracity, was made public and open for external users during 2018. 

The company is upholding its commitment to invest 5% of its annual revenues in research and innovation activities. 60% of the research and innovation activities are dedicated to digitalization. DNV GL is active in pursuing joint innovation projects and partnerships with academia and business in areas such as artificial intelligence, machine learning and autonomous systems. 

DNV GL will continue to invest in R&D and develop the skills and knowledge of its employees to stay at the forefront of technology and innovation and to fulfil its purpose and vision.


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Health and safety

DNV GL’s overall goal is to ensure zero harm to, and a healthy working environment for, its workforce. Expectations for suppliers include compliance with equivalent health and safety requirements for services rendered on the DNV GL premises and subcontracted survey-type work outside normal office locations.

In 2018, there were no fatalities (work-related deaths) involving DNV GL employees. Sadly, there were two cases where employees were taken ill in the field and subsequently died. While work related factors were not a cause, DNV GL are continuously looking for ways to improve the health of employees and encourage a healthy lifestyle. To this end, DNV GL is working on initiatives to ensure that employees are resilient and fit for work and will introduce global requirements for medical health checks to support this. 

The company’s commitments to customers, employees and business partners are guided by DNV GL’s purpose of safeguarding life, property and the environment.

From January 2018, lost time injury cases and occupational disease cases involving other workers (non-DNV GL employees) have been reported and investigated but they are no longer included in the reported figures below. 

The long-term trend for injuries and occupational diseases was stable, with a slight improvement. At year-end, the 12-month rolling average (2017 in parenthesis) was 23.5 (36.2) for the Lost Day Rate, 0.9 (1.0) for the Injury Rate, 0.6 (1.0) for the Occupational Disease Rate and 2.4 (2.4) for the Absentee Rate. The number of injuries leading to lost days was 19 (23), while the number of occupational disease cases resulting in lost days was 14 (24). 

The number of occupational diseases with lost time reported for 2017 is corrected from 22 to 24 due to one new case recorded after the deadline for external reporting, and one case not correctly reported in 2018. Both cases have been investigated, and corrective actions have been implemented. 

Employee health and safety performance is reviewed by the board twice a year. All in all, DNV GL’s health and safety performance is on par with industry benchmarks, and a programme is in place to continuously strengthen the resilience of our employees and foster a learning health and safety culture.

Financial performance

DNV GL Group AS recorded operating revenues of NOK 19,639 million in 2018, NOK 164 million higher than 2017. The overall revenue growth reflects a strong growth in Business Assurance, whereas a decline in business volume from the maritime and oil & gas markets continued in 2018. The overall revenue contraction from services was 0.4%, while the relative weakening of the NOK contributed with a positive currency effect of 0.1%. 
The Maritime business area recorded revenues of NOK 6,702 million, corresponding to a contraction of 4.6% compared to 2017. The Oil & Gas business area reported revenues of NOK 4,455 million, representing a contraction of 3.0%. The decline in these two business areas’ volumes abated in the second half of the year, and the company recorded a slight growth in Maritime and a reduced contraction in Oil & Gas.
The Energy business area achieved revenues of NOK 3,620 million, reflecting a contraction of 1.1%. Business Assurance ended the year with growth of 11.2% and revenues of NOK 3,645 million, driven by transition activities coinciding with re-certification activities, both adding volumes to the Management System Certification portfolio. Digital Solutions experienced a growth of 4.9% in 2018 and delivered external revenues of NOK 912 million. 
With retroactive effect 1 January 2018, the shares in the real estate company Det Norske Veritas Eiendom AS were transferred from Det Norske Veritas Holding AS to DNV GL Group AS through a combined merger-demerger transaction. Det Norske Veritas Eiendom AS has consequently been consolidated into DNV GL Group in 2018 and the external revenue of NOK 206 million represents a revenue growth of 1.1%. 
The continued business volume contractions in Maritime and Oil & Gas in 2018 were offset by cost and capacity reductions in these two business areas, as well as continuous cost reductions in group-wide support functions and a positive contribution from Det Norske Veritas Eiendom AS. Overall, this led to a significant improvement in the earnings before interest, taxes, depreciation and amortization (EBITDA), from NOK 1,342 million in 2017 to NOK 1,972 million in 2018.
Due to a significant deterioration in the market conditions for high-power laboratory testing, an impairment loss related to Energy laboratories of NOK 552 million has been reflected. Together with depreciation and amortization of intangible assets of NOK 871 million, this resulted in operating profit (EBIT) of NOK 549 million, up from NOK 474 million in 2017. 
The net financial expenses were NOK 273 million in 2018, compared to NOK 110 million in 2017. The change from 2017 is primarily due to negative currency effects incurred in 2018 with a weaker NOK. The other main financial items were net interest costs from defined benefit pension plans (NOK 22 million), write down of bank accounts in Iran following closure of the Iran Branch (NOK 30 million) and other interest costs and financial expenses. 
The 2018 tax expense was NOK 160 million. The high tax level is partly due to non-tax-deductible items, withholding taxes on remitted earnings and losses from operation without recognition of tax assets. The net profit for the year was NOK 116 million, compared to last year’s net profit of NOK 61 million. 
Cash flow from operations ended at NOK 1,091 million in 2018, compared with NOK 656 million in 2017. The improvement comes primarily from a strong EBITDA and reduced working capital. 
The cash flow from investments was negative NOK 425 million in 2018, of which investment in intangible assets of NOK 359 million relates to the development of commercial software within Digital Solutions, in-house Oracle ERP implementation and system integration in the Business Areas. The NOK 306 million investments in tangible fixed assets are primarily related to Energy laboratories and investments related to real estate. Of the NOK 288 million sale of tangible fixed assets, the sale of properties in Det Norske Veritas Eiendom AS amounted to NOK 225 million.
Financing activities of NOK 1,698 million, of which NOK 1,900 million pertain to payment of dividend to Det Norske Veritas Holding AS, led to a net cash flow for the year of negative NOK 1,032 million. 
At year-end, the DNV GL Group had liquidity reserves of NOK 2,631 million plus an unused credit line of NOK 1,000 million. The Group has a strong balance sheet, with an equity ratio of 56.7% of total assets. NOK 4,000 million dividend to the parent company Det Norske Veritas Holding AS has been declared in 2018 as well as Group contributions after tax of NOK 161 million, reducing the equity accordingly. The merger of Det Norske Veritas Eiendom AS into DNV GL Group led to a positive merger difference of NOK 1,082 million reflected in the equity in 2018. 
Due to a weaker NOK against currencies where the Group has its major balance sheet exposure, foreign currency gains of NOK 133 million relating to net investments in foreign subsidiaries were reflected in equity in 2018. 
Net actuarial losses of NOK 21 million from defined benefit pension plans were reflected in equity at the year-end. 
The accounts of the parent company, DNV GL Group AS, show a profit for the year of NOK 1,906 million. The profit is mainly generated from dividend from subsidiaries. The Board proposes to transfer the profit for the year to other equity. 
The Board confirms that the going concern assumption applies and that the financial statements have been prepared on this basis. Although the Board regards DNV GL’s net result for 2018 as weak, the equity ratio remains strong and constitutes a robust platform to achieve our strategic targets and maintain our independence as a financially strong and trusted company. The Board also confirms that, to the best of its knowledge, the information presented in the financial statements gives a true and fair view of the assets, liabilities, financial position and results of the DNV GL Group for the period, and that there are no other material events after the balance sheet date affecting the 2018 financial statements.

Corporate risk management

The Board underlines the importance of continuously having a comprehensive understanding of the risks facing DNV GL that could affect corporate values, reputation and key business objectives. DNV GL has processes in place to proactively identify such risks at an early stage and initiate adequate mitigating measures and actions. 
DNV GL’s risk management policy is part of the management system and ensures that the risk management processes and culture are an integral part of everything the company does. The policy is aligned with the ISO 31000 framework. 
The Board formally reviews the risk management status and outlook twice a year. The review of risks and opportunities is conducted as part of both the strategy revision process and annual plan process.
DNV GL calculates its risk-adjusted equity on an annual basis, taking into consideration the most important risk factors.
Based on value-at-risk methodology, the analysis includes potential losses from operations, foreign-exchange exposure, financial investments and pension plan assets and liabilities. The book equity less the maximum calculated loss illustrates DNV GL’s total risk exposure and the amount that can be lost in a worst-case scenario. This exercise gives the Board a measurable overview of the key quantified risks and DNV GL’s capacity to take on additional risk.
With increasing digitalization comes an increased risk relating to cyber security. DNV GL will pay due attention to cyber security risks related to our business. Its guideline for IT security describes the requirements for ensuring business continuity, responsiveness and maintaining the integrity of DNV GL’s digital services. DNV GL has achieved ISO 27001 certification of its IT operations, and the Board will continue to review the cyber security risk annually.
Severe quality, safety and integrity risks in the company represent another focus area. Numerous barriers exist to minimize the chance of such events occurring, and DNV GL’s management system is constantly being scrutinized to ensure that the company is managing this risk satisfactorily.
DNV GL’s main financial risks are its market risk (interest rate and foreign currency risk), credit risk, liquidity risk and political risk related to trade sanctions.

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Corporate governance

DNV GL considers sound corporate governance to be fundamental in securing trust in the company and a cornerstone for achieving sustainable value creation in the best interests of DNV GL’s customers, employees, owner and other stakeholders.
DNV GL issues an annual Corporate Governance Report where it reports on corporate governance in accordance with the Norwegian Code of Practice for Corporate Governance (“Code of Practice”) and applies these principles to the extent relevant for the DNV GL Group as a private limited company. The Code of Practice relates to 15 topics, and DNV GL’s Corporate Governance report covers each of these topics and describes DNV GL’s adherence to the Code of Practice. The Corporate Governance report also describes the legal basis and principles for DNV GL’s corporate governance structure.
The management company of the DNV GL companies is DNV GL Group AS, registered in Norway and governed by the Norwegian Private Limited Liability Companies Act. DNV GL Group is owned 100% by Det Norske Veritas Holding AS (“DNV Holding”). DNV Holding is a private limited company registered in Norway and is fully owned by Stiftelsen Det Norske Veritas. Stiftelsen Det Norske Veritas issues a separate annual corporate governance report available on The Board of Directors of DNV GL Group AS consists of ten Board members and one observer. Of the ten Board members, six are elected by the shareholder and four are elected by and among the DNV GL employees worldwide. The Board consists of six men and four women from four nationalities with an average age of 53. The Board’s combined expertise represents a range of stakeholders, markets and disciplines.
The only change in the composition of the Board during 2018 was that Jon Eivind Thrane as of 1 August 2018 replaced Liv Aune Hagen as a Board member elected by and amongst the employees in the constituency of Norway. The Board would like to thank Liv Aune Hagen for her contribution as board member.
The Board held six ordinary board meetings and one extraordinary meeting in 2018. The average attendance at these board meetings was close to 100%. The Board’s Audit Committee held four ordinary meetings and one extraordinary meeting in 2018 and the attendance at these was 100%. The Board’s Compensation Committee held three ordinary meetings and one extraordinary meeting in 2018 and the attendance at these was 100%.
Further information related to the corporate governance of DNV GL can be found in the company’s Corporate Governance Report for 2018 published on DNV GL’s website.

Corporate sustainability

DNV GL’s vision of having a global impact for a safe and sustainable future sets the direction of the business. The company’s commitments to customers, employees and business partners are guided by DNV GL’s purpose of safeguarding life, property and the environment.
DNV GL pursues continuous improvement in its sustainability performance and its management systems are certified to the ISO 9001, ISO 14001 and OHSAS 18001 standards.
DNV GL has been a signatory to the United Nations Global Compact since 2003, and the Board sees the integration of the 10 principles on human rights, labour standards, environmental performance and anti-corruption as critical for capturing long-term value.
In 2018, DNV GL continued its partnerships with the World Business Council for Sustainable Development, the Red Cross and the Global Opportunity Explorer with our founding partners UN Global Compact and Sustainia. DNV GL supports the UN Sustainable Development Goals and aims to use this framework to create customer value through meeting societal needs. The Board considers the UN Sustainable Development Goals to be a framework for strengthening the company’s market positions. DNV GL provides strong business solutions for many of these global goals, including 7) Affordable and Clean Energy; 9) Industry, Innovation and Infrastructure; and 13) Climate Action. The Group strategy also reflects relevant market opportunities for the goals 3) Good Health and Well-being, 12) Responsible Consumption and Production and 14) Life below Water.
In 2018, DNV GL conducted a broad stakeholder survey to identify the most important sustainability topics. More than 1,000 responses were received from customers, owners, suppliers, partners, media and employees. In addition, a global brand survey was conducted which sought to identify what stakeholders value when selecting assurance and advisory services. The replies were used to guide the priorities for reporting in 2018. DNV GL reports in accordance with the GRI Standards. In 2018, DNV GL changed reporting level from Comprehensive to Core Level. KPMG has conducted limited assurance of the sustainability reporting on material topics.
The Board refers to the Annual Report for a complete account of corporate sustainability, including information on the priorities, management approach, targets and performance within the topics of sustainable leadership, health and safety, business ethics and anti-corruption, people, environment and climate, sustainable procurement as well as partnerships for sustainability.

Organization and people

The total number of employees at year-end 2018 was 12,101 (12,715 at year-end 2017), of which 98% are permanent employees.
In addition, 8,074 qualified subcontractors and expert personnel were engaged. Employee turnover was 11.6%, with voluntary turnover at 7.0%. The continuous decline in the number of employees reflects that DNV GL still had to adjust to the contraction in some markets. Consequently, headcount reductions were carried out in some business and support units. Enhancements in digital systems for financial and HR processes were implemented.
A career in DNV GL should not be hindered by nationality, gender or age if the employee has the competence, attitude and values needed for the role. The Board considers the company’s purpose, vision and values to be instrumental in attracting and retaining the diverse workforce necessary in global markets. The Board also emphasizes the importance of sound management of human and labour rights. The DNV GL statement pursuant to the UK Modern Slavery Act is signed by the Board and published on the company website.
The employees represent 111 nationalities, and DNV GL has 100 or more employees in 22 countries. 
It is important for the future of the company to further develop diversity in terms of technical and business competence, nationalities and gender. Of the permanent employees, 86% have higher education.
The proportion of female employees is 32% and the proportion of female managers is 26%.
The focus on stronger diversity in the top levels of our organization continues. As of 31 December 2018, the Executive Committee included four women and six men, from five different nationalities. Two of the five operational CEOs were women at the end of 2018. At Senior Vice President and Vice President level, the female proportion is currently 10.7%. At Senior Principal level diversity is increasing, strengthening the talent pool for future top executives.

Business ethics and anti-corruption

DNV GL’s business model and success are based upon trust at all levels and in all business environments. Building trust is enshrined in the company’s values. The Board emphasizes the necessity of reflecting the DNV GL values and demonstrating ethical leadership in society.
The DNV GL Group has a zero-tolerance policy for corruption and unethical behaviour that applies to all employees, subcontractors, agents and suppliers. DNV GL’s compliance programme and related instructions are based on the Code of Conduct for which the Board is responsible.
The Code of Conduct covers anti-corruption, antitrust, export controls, sanctions and personal data protection, and definitions and processes to handle cases are in place. Information on how to report occurrences or suspicions of misconduct is published on the company website and the intranet, and from 2019 a mandatory e-learning on reporting of misconduct is available to all employees. There is also an ethical helpline and anonymous whistleblowing channel.
Compliance risks are regularly assessed as part of the corporate risk management process and measures are taken accordingly. The Group Compliance Officer reports on performance to the Board’s Audit Committee quarterly, as well as to the Executive Committee when relevant.
In 2018, 58 (62) potential compliance cases were reported and handled. No legal action regarding anti-competitive behaviour or violations of antitrust or monopoly legislation in which DNV GL was identified as a participant has occurred during the reporting period. No significant fines or non-monetary sanctions or non-compliance with laws and/or regulations in the environmental, social or economic areas were identified.
Measures implemented in 2018 to sustain a high level of integrity include training, communication and updates to governing documents following legal changes. The company finalized risk assessments with regard to suppliers and implemented corresponding actions in the business areas, as well as improvements on export control law. Around 1,800 employees received individual training on compliance programme topics.

Environment and climate

Safeguarding the environment is part of DNV GL’s purpose. The Group is committed to taking a precautionary approach, managing and continually improving its environmental and climate performance. Assessments, improvement actions, incident reporting and performance monitoring of material topics such as energy consumption, emissions to air and waste management are followed up annually. Internal and external audits are undertaken to assure performance. The company is certified to ISO 14001 which is monitored continuously across all locations. Performance is reported to the board twice a year.
Climate change mitigation and adaptation initiatives are prioritized, and the Board is monitoring this. DNV GL aims to be carbon neutral in relation to energy use in office buildings, laboratories and transportation and travel. Carbon emissions in 2018 has been offset to ensure carbon neutral status.
DNV GL prefers suppliers and subcontractors that provide services in compliance with the Group’s environmental and climate policies. 
In 2018, zero cases of non-compliance with environmental regulations and zero fines related to environmental aspects were registered.
For further details about DNV GL’s environmental and climate performance, please see the sustainability section in DNV GL’s annual report.


There are signs of weakening trade, manufacturing, and investment. The global GDP outlook has been adjusted down, and trade tensions between the world’s largest economies may harm the economic prospects of both. There is a risk of slower economic growth in the US and in China. The political uncertainty in Europe could slow down the global economy further.
The Board detects however, modest signs of growth in both seaborne trade and energy demand and thereby a more stable development in the company’s revenue overall. The effects of the cost restructuring initiatives being implemented over the past three years across all business areas and the shared services and support organization, have started to take effect and put DNV GL in a better position to face the prevailing market conditions. Despite the cost cuts made – DNV GL has been able to invest in and build each of the three cornerstones of its strategy.
A modest increase in seaborne trade, coupled with a higher level of scrapping, is expected to continue in 2019. The growth in the global ship newbuilding market slowed down in Q4-2018 after a strong first half of the year. Market fundamentals give signs of cautious optimism for 2019, but uncertainties around the 2020 global sulphur cap requirements, global trade, protectionism, Brexit and political risks in major economies are causing many investors to be cautious. Competition continues to be fierce, but DNV GL has managed to increase its market share in the growing newbuilding market. The company will work to minimize transfer of class to other classification societies and to win 25% of global new-building contracts measured in gross tonnes.
In the oil and gas market, oil prices are still volatile. The price passed USD 80 per barrel for a period in early October but remains uncertain with a forecast of USD 60-90 per barrel towards 2021. Oil companies are slowly increasing their investment levels, but price pressures remain strong as there is still over capacity in parts of the service and equipment value chain. The offshore upstream oil and gas developments are expected to be less capital intensive and with shorter payback time. The existing extensive infrastructure across the value chain, including pipelines and refineries, will continue to demand operations support services. For 2019, we therefore expect to see a modest revenue growth for DNV GL’s oil and gas activities.
There is an overall trend of continued decarbonization of the world’s energy systems which should drive demand for the company’s renewables, power grid and energy efficiency services. The energy transition, with planned grid integration and increased transition to renewable energy sources, is expected to continue in many countries. The market for high-power laboratory testing changed significantly in 2018, and DNV GL revenue for these services declined. We expect it will take some time to recover this position.
The extraordinary growth in 2018 for DNV GL management system certification services, driven by the implementation of new ISO standards, will not repeat itself in 2019. On the other hand, the demand for supply chain assurance and product assurance is expected to continue. DNV GL services in the food and beverage, healthcare and automotive & aerospace sectors are very attractive and will continue to grow.
Digital Solutions completed its first year of operation in 2018. The portfolio of software products will continue to be renewed from a traditional software-on-premise platform to a software-as-a-service platform. The investment in the Veracity platform continues. The focus is to build an ecosystem for the ocean industries as well as the industries prioritized by the other four Business Areas. In 2019, Veracity will focus on adding more datasets, encouraging more developers to build applications and increasing the number of registered users to amplify the beneficial network effects of scale.
The Board of Directors believes that DNV GL’s performance in 2018, against a backdrop of difficult markets, demonstrates that the company has responded well to the challenges posed throughout the year. The company will continue to develop a broad competence and resource base to provide guidance and support to customers in a business environment where trust comes at a premium and where the need for technical expertise and risk management will be in increasing demand.