Sagen & Hammer Contractors AS Facts about the business Sagen and Hammer Entreprenørbedrift A / S was established in Øvre Eiker in 1969 and for the first 30 years was owned by 50% each of the Sagen and Hammer families. At the end of the 1990s, the company changed its name to Sagen & Hammer Contractors AS, moved to Drammen and gradually acquired new owners after two share issues. The company now has a share capital of NOK 8,000,000, which is distributed to four shareholders, the French-owned construction product company Saint-Goblin Norge AS (30%), Sagen Holding AS (25%), Jørn Hammer (25%) and the pension fund of Vestenfjeldske Tankrederi AS (20%).

Sagen & Hammer Contractors AS
Facts about the business
Sagen and Hammer Entreprenørbedrift A / S was established in Øvre Eiker in 1969 and for the first 30 years was owned by 50% each of the
Sagen and Hammer families. At the end of the 1990s, the company changed its name to Sagen & Hammer Contractors AS, moved to
Drammen and gradually acquired new owners after two share issues. The company now has a share capital of NOK 8,000,000, which is
distributed to four shareholders, the French-owned construction product company Saint-Goblin Norge AS (30%), Sagen Holding AS (25%),
Jørn Hammer (25%) and the pension fund of Vestenfjeldske Tankrederi AS (20%).
Sagen & Hammer Contractors AS takes on the role of main contractor in connection with the construction of new commercial and residential
buildings, mainly in the Viken region. The company normally has 3-4 major projects under construction (contract value of more than NOK 100
million and construction time of more than one year) and 3-4 smaller projects (contract value normally NOK 20-50 million and construction time of
less than one year). The company’s own craftsmen include:
• 34 carpenters and carpenters
• 4 formwork screwdrivers
• 14 masons and tiles
• 4 apprentices (the company is an approved apprenticeship company) The
company hires subcontractors for the following jobs:
• Excavation / Blasting / earthworks
• Electrical work
• Water and sanitation
• Fire / sprinkling
• Ventilation and heating / cooling
• Elevators and other technical installation
The company places these subcontractors on tenders, and has a network of a total of about 25 preferred subcontractors who contribute
to the various projects. Up until the Annual General Meeting on April 8, 2019, the Company’s Board of Directors consisted of:
• Chairman Jean-Jacques Cloaque (elected by Saint-Goblin)
• Board member Leif Sagen (founded the company in 1969)
• Board member Jørn Hammer (son of Stein Hammer who founded the company in 1969)
• Board member Carl Fredrik Sohlstraale (lawyer, elected by Vestenfjeldske Tankrederi AS)
• Board member Ulrika Sträng (staff secretary, elected by the employees)
• Observer Marek Krystowski (the company’s safety representative) The company’s
top management consists of:
• General Manager Petter Sagen (son of Leif Sagen)
• Development Manager Jørn Hammer
• Finance and IT Director Unni Wersal
• Chief of Staff Nina Lønningen
• Accounting Manager Mario Del Credere In
addition, the administration consists of:
• Four senior project managers (two with engineering education and two with master’s letters)
• Three junior project managers (one with engineering degree and two with professional certificate)
• Staff secretary (also has HSE responsibility in the business)
• Operations manager (responsibility for machines, tools, cars and lifts)
• Two accountants
• Receptionist / Secretary
Accounting and finance
We can obtain the following figures from the company’s accounts for the last five years (figures in NOK million):
Income statement 2018 2017 2016 2015 2014
revenues 309.7 332.8 366.0 413.8 396.4
Cost of goods (1) 241.4 260.0 279.6 299.2 283.4
Salaries and other personnel costs. 55.8 57.6 60.8 83.2 78.9
depreciation 3.8 4.0 4.7 5.4 5.0
Other operating expenses 13.4 12.8 12.2 16.8 15.9
Operating profit -4.7 -1.6 8.7 9.2 13.2
Financial income 0.0 0.0 0.1 0.2 0.5
financial expenses 0.8 0.9 0.9 1.0 1.0
Profit before tax expense -5.5 -2.5 7.9 8.4 12.7
– Income tax expense + 1.2 + 0.6 2.0 2.0 3.6
Profit -4.3 -1.9 5.9 6.4 9.1
(1) Includes both materials and subcontractors
Assets as of 31.12. 2018 2017 2016 2015 2014
Deferred tax benefit 2.6 0.4 0.0 0.0 0.0
Property (2) 19.8 22.0 23.2 24.4 25.6
cars 3.8 4.2 4.0 4.4 5.0
Tools and Machines 1.5 2.0 1.6 1.9 2.2
Inventory (3) 0.8 2.2 0.4 2.9 1.7
Earned, not invoiced in. 12.7 8.4 19.8 14.0 3.6
Accounts receivable 49.0 48.5 43.1 59.8 66.2
Bank Deposits 6.6 9.3 13.0 11.8 10.9
Total Assets 96.8 97.0 105.1 119.2 115.2
Equity. and debt as of 31.12. 2018 2017 2016 2015 2014
Share capital 8.0 8.0 8.0 8.0 8.0
Other equity (4) 11.1 15.4 23.4 22.6 19.4
Long-term debt to bank 20.9 18.4 20.0 19.7 22.3
Deferred tax liability 0.0 0.0 0.2 1.7 2.8
Accounts payable 42.7 34.1 32.6 44.6 46.9
Payable tax 1.0 0.0 3.5 3.1 3.0
Guilty public debt 6.8 8.3 7.8 9.3 8.8
Other short-term debt 6.3 12.8 9.6 10.2 4.0
Total Assets 96.8 97.0 105.1 119.2 115.2
(2) An ownership interest of approx. 20% in Keizer Snitts gate 5A in Drammen municipality, used as offices (3) Materials purchased
for the projects that have not yet been used
(4) Dividends were allocated to the shareholders in the annual accounts for 2015, 2016 and 2017
The 2019 budget assumes an increase in operating revenues of NOK 350.0 million and a profit before tax of NOK +5.0 million. The
income statement as of March 31, 2009 shows a negative result of NOK -2.3 million, but this result is subject to considerable
uncertainty. Although the company follows the principle of ongoing settlement of projects in progress when the annual accounts are
presented, no assessments are made of the holdings in the projects during the year.
Additional Information
In June 2018, a board meeting was held in Sagen & Hammer Contractors AS, where CFO Unni Wersal and Development
Manager Jørn Hammer gave an account of the status of the seven different projects that were currently in progress. They
were given some questions they could not explain particularly well, such as:
• What expectations did we have for the various projects’ contribution before the start of the projects?
• What is the degree of completion in the projects as of today?
• How do we expect project costs to be for the seven projects under construction?
It was documented that the administration should create a monthly project reporting system, which received continuous
feedback on questions such as the three above. As of April 2019, this work had not yet begun.
In August 2018, Dagens Næringsliv wrote an article about Sagen & Hammer Contractors AS entitled “The sun or the train at the end of
the tunnel?”. The title has a reference to a wording in the company’s annual report for 2017 that one of the newspaper’s journalists had
looked into. “We have been through a tough period of declining operating revenues in recent years and declining profitability, but order
backlogs look satisfactory. We therefore believe that we are now seeing the light at the end of the tunnel and that it is unlikely to be the
train that is coming.” The article described the 20% decline in operating revenues from 2015 to 2017 and that a long growth curve was
broken two years ago. For the first time since the beginning of the 1990s, the company presented a negative annual result.
Managing director Petter Sagen was interviewed and he was a bit short in explaining the reason for the decline in revenue, but he
blamed “bad luck in connection with two projects”, where a settlement was made with the client to credit parts of the final invoice in
connection with that the projects had taken longer to complete than agreed. According to Sagen, competition for some of the
projects had also become tougher, so the company had lost more tenders “than they were used to”.
In December 2018, the Labor Inspectorate was on site supervision at one of the construction sites, Project 17012 Gjørmebakken
Næringspark. Here, a number of criticisms were revealed, the most serious of which were:
• At one of the subcontractors, Karolis Bygg AS, four out of six employees did not have a HSE card.
• Four of the company’s own employees had HSE cards that were no longer valid (expired on date)
• Two of the employees of Karolis Bygg AS and three of the employees of Hansen & Johansen Rør AS had an hourly wage that was
substantially below the generalized minimum wage for the construction industry. They also did not have a work contract with their
• Two employees of the subcontractor Ventilasjonspartner AS did not have a valid residence and work permit in the
country, and one of them was sent home to his home country the next day. Both of these employees and three other
employees of Ventilasjonspartner AS who had been involved in this project had worked more overtime than the
maximum limit in the period 1.8.2018-30.11.2018, since all these five employees had between 920 and 970 hours
registered work on their schedules in this four-month period.
• A work accident in which an employee of the electrical installer Wattusen and Volteng AS had fallen from an unsecured
mezzanine had resulted in a serious fracture. This accident had not been reported to the Labor Inspectorate.
In February 2019 a new board meeting was held in Sagen & Hammer Contractors AS, where Project 18004 Prosperity swing Terrace
was on the agenda. The project included the construction of 46 apartments between 48 and 118 m 2 for the developer Blokk-DattNed
AS. This project should have been handed over
1.12.2018, but two months later there was still so much work left that none of the apartments were ready to move in. Jørn
Hammer explained in the board meeting the main reasons for the delay:
• The project had been delayed from the start due to the fact that the subcontractor who was to do blasting and
excavation work, a smaller and local company that had won this tender because of its low prices, went bankrupt
shortly after the commission had begun.
• Some of the work had taken significantly longer than originally assumed, including the interior decoration
work, which was planned to last for approx. three months and as of February 2019 had not yet ended.
• During construction, it was discovered that incorrect materials were used in connection with the sealing of the roof
structures. This was pointed out by the builder and architect in one of the progress meetings as early as spring 2018, but
this was not rectified until after more than half a year. Blokk-DattNed AS already announced at the beginning of October
2018 that they would invoke the terms of a day fine clause for any delayed delivery. No costs were set for this in the
accounts as at 31.12.2018. The argument for this was that the CFO wanted to wait until 2019 to see how much this would
actually be. The CEO had asked her “the auditor would accept this” and then she had replied that “the auditor is not aware
of the terms of the contract and will never ask about this, we will take it as it comes”.
In early March 2019, accounting officer Magdalena K. joined the company. Shortly before leaving her employer, she
had written a statement of concern to the company’s chairman. Here it was stated that Sagen & Hammer
Contractors AS had on several occasions in the period 2015-2018 allowed the project managers of the company’s
clients to act on the company’s accounts with various material suppliers. Among other things, an employee of
Blokk-DattNed AS had in autumn 2018 taken goods for approx. 200,000 at Søstrene Dahl AS. These were materials
that had been delivered to this person’s private address, and the delivery included an expensive steam shower and
hot tub. The cost was paid by Sagen & Hammer Contractors AS and was posted on project 18004 Prosperity swing.
Many of the company’s 56 artisans have over the years complained about the routines for timelist writing. A weekly
report is used, which is completed by each employee, which reports which project they are working on, and when
the work begins and ends. There is also room to describe the activities performed and how long lunch breaks have
been taken, but this is usually information that is left out. The artisans have an hour-based agreement based on
fixed working hours from 10am. 07.00-15.00, where the lunch break is not included in the salary basis. Overtime is
paid according to the rules of the Working Environment Act, but is settled half-yearly against any dismissal. In
practice, many people choose to work ten hours a day from Monday to Thursday and take time off on Fridays.
Sagen &
Annual General Meeting Monday, April 8, 2019
On Monday, April 8, 2019, an ordinary general meeting of the company was held. Pending approval of the annual accounts, including the board’s
annual report, as well as the auditor’s report, were submitted for consideration. In addition, the shareholder Saint-Goblin Norge AS had proposed the
election of a new board of directors, where the chairman of the board would be replaced by the Norwegian experienced business consultant Steinar
Beider and the other board members should be re-elected. The proposal was unanimously adopted.
The day after the company elected a new chairman, he contacted you and wanted your help to shed light on what he himself
claimed was “Sagen and Hammer Contractor’s biggest problems for the time”. You knew Steinar Beider from earlier, in
connection with some other companies for which you had been an adviser and where he had served on the board. He asked if
you had the opportunity to “clear the desk for the next four weeks” and write some notes that he could use for the others
directors and other management. Even if you did not really have the time, you were not difficult to persuade, and already on
Wednesday, April 10, 2019, you had your first meeting with the company.
You then agreed that you should watch five areas all of which were within your specialized expertise in business management,
intercontrol and risk management. The assignment was defined as follows:
Problem 1 (30%)
Prepare a note on up to seven pages describing how the financial management routine in Sagen & Hammer Contractors AS’s
projects should be implemented, taking into account the need for relevant management information, meeting relevant regulatory
requirements and having a good basis for how the projects should be evaluated. in the annual accounts and the company’s tax
Problem 2 (25%)
Prepare a note of up to six pages describing what the monthly reporting to the company’s board of directors and
management should be like, to satisfy the requirements for appropriate, reliable and timely reporting. Suggest specific
performance indicators (KPIs) on which the report can be based, and arguments that these have a satisfactory degree of
validity and reliability.
Problem 3 (15%)
Make a note of up to four pages describing how Sagen & Hammer Contractors AS can try to reduce the risk of
fraud in the area of private procurement of materials and services. The goal of the routine must be to reduce the
risk that situations similar to those reported by Magdalena K. in the future concern statement will arise in the
Problem 4 (15%)
Compile a note on up to four pages where you explain how Sagen & Hammer Contractors AS can set up routines that
ensure the right of access and the duty to pay in connection with the hired and subcontractors’ salaries and working
conditions. Also explain how this routine can address various regulatory issues related to the processing of personal
Problem 5 (15%)
Sagen & Hammer Contractors AS wants to use an application for digital registration of the employees’ activities in the
projects, which forms the basis for the management of the various projects and which provides a basis for the monthly
wage settlement and the distribution of labor costs on the various projects. No supplier selection has been made for such a
new routine, nor has the company obtained any specific information from potential application providers that may have a
satisfactory solution to the company’s needs.
Make a note of up to four pages explaining how the work of selecting and implementing a digital hour
recording solution should be organized.
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