ANNUAL REPORT 2014
TABLE OF CONTENTS
Financial targets
2
Five-year summary
3
Significant events
4
Message from the president
6
IFS and IFS Applications
7
The IFS share
11
Table of contents of the annual report
12
Annual report
13
Board of directors
68
Executive management and auditors
69
Financial trend 2010–2014
70
Definitions and glossary
72
FINANCIAL TARGETS
Over the longer term, IFS aims to achieve an EBIT margin of 15 percent and maintain or exceed a return of 25 percent on
average operating capital. Furthermore, IFS has set the long-term objectives of:
•
Over time pay dividend equivalent to approximately 50 percent of earnings after tax.
•
Using additional surplus capital, which is not required for investments, expansion, and other needs relating to the financial
position of the group, to repurchase shares.
FINANCIAL REPORTS 2015
Interim report January–March
Interim report January–June
Interim report January–September
Year-end report
2
ANNUAL GENERAL MEETING
April 22, 2015
July 21, 2015
October 22, 2015
February 2016
The annual general meeting 2015 will be held on
Wednesday, March 25, 2015 in Stockholm, Sweden.
FIVE-YEAR SUMMARY
Net revenue
2010
2011
2012
2013
2014
SKr, million
2,585
2,576
2,676
2,704
3,034
of which license revenue
SKr, million
402
431
467
535
558
of which maintenance and support revenue
SKr, million
811
823
909
902
1,037
of which consulting revenue
SKr, million
1,357
1,311
1,283
1,256
1,427
%
81%
80%
82%
84%
85%
SKr, million
221
233
200
202
275
%
9%
9%
7%
7%
9%
Net revenue outside Sweden
EBIT
EBIT margin
Profit/loss before tax
SKr, million
189
218
190
184
258
Profit margin
%
7%
8%
7%
7%
9%
License margin
%
90%
94%
94%
93%
91%
Maintenance and support margin
%
62%
67%
69%
72%
75%
Consulting margin
%
23%
22%
18%
19%
20%
Product development expenditure/net revenue
%
8%
9%
10%
10%
10%
Administration expenses/net revenue
%
10%
10%
10%
11%
10%
Return on average operating capital
%
23%
26%
22%
19%
24%
Equity/assets ratio, after full conversion
Net debt
Interest coverage rate
Cash flow after investment operations
%
51%
51%
44%
46%
45%
SKr, million
-328
-273
50
-118
-191
times
12.2
37.3
24.7
19.4
33.2
SKr, million
234
94
-41
122
269
%
21%
20%
19%
19%
18%
Average number of employees
2,644
2,716
2,830
2,688
2,645
Number of employees at year-end
2,675
2,821
2,829
2,616
2,707
Acc rec (avg 12 month)/net revenue (rolling 12 month)
Net revenue
Maintenance and support revenue
3,100
2,900
EBIT
1,200
300
1,000
250
800
200
600
150
400
100
200
50
2,700
2,500
2,300
2,100
'10
'11
'12
'13
'14
0
'10
Cash flow after investments
'11
'12
'13
'14
0
Net liquidity
300
250
'10
'11
'12
'13
'14
Average number of employees
500
2,900
400
2,800
300
2,700
200
2,600
100
2,500
200
150
100
50
0
-50
'10
'11
'12
'13
'14
0
'10
'11
'12
'13
'14
2,400
'10
'11
'12
'13
'14
3
SIGNIFICANT EVENTS
Leading bus manufacturer Wrights Group chose IFS Applications
February 28. IFS announced that Wrights Group, one of Europe’s leading suppliers of public transport vehicles, had
chosen IFS Applications to assist in optimizing its expanding global operations. The agreement included licenses,
maintenance, and services worth approximately £1.2 million.
Oil & Gas drilling contractor Songa Offshore selected IFS
March 10. IFS announced that Songa Offshore, an International midwater drilling contractor active in the North
Atlantic basin, had chosen to deploy IFS Applications for Offshore Service to support its onshore and offshore
operations. The contract included licenses and services worth approximately NKr 40 million.
Port of Dover chose IFS Applications to integrate business processes
March 26. Port of Dover, operating Europe’s busiest international roll-on roll-off ferry port, chose IFS to integrate
and streamline key business processes such as asset and project management. When fully implemented, the solution
will be used by over 300 employees throughout the organization to help improve efficiency and control.
IFS partners with Telvent Global Services
During the first quarter, IFS signed a global partnership agreement with Telvent Global Services, part of Schneider
Electric. The partnership is aimed at delivering added value to new and existing IFS customers in the EMEA region
and Latin America, primarily targeting industries such as energy and utilities and telecommunications.
Leading paint manufacturer Jotun expands globally with IFS Applications
June 2. World-leading paint manufacturer Jotun has decided to expand its use of IFS Applications™ to additional sites
in Europe, Asia, and the Americas. To support its growth targets and to maximize process efficiency and transparency,
Jotun has decided to extend its central IFS ERP solution to include an additional 2,000 users.
IFS signs partnership agreement with Capgemini in Spain
June 20. IFS has signed an agreement with Capgemini Spain, making the consulting, technology, and outsourcing firm
its partner for the sale and implementation of IFS Applications in Spain. Through the agreement, IFS is expanding its
partner network, thereby acquiring greater commercial reach and additional implementation resources.
IFS is the leading supplier of EAM software for the oil and gas industry
August 26. IFS has been identified for the third year running as the number one vendor in market share in enterprise
asset management (EAM) and field service management (FSM) software for the oil and gas industry by ARC Advisory
Group, the leading information technology research and advisory firm for industry and infrastructure.
Launch of IFS-in-a-Box
September 29. Customers can implement Oracle Database Appliance into their existing rack of servers and configure
the set-up using one of the templates that are supplied ‘in-a-Box’. It is a compelling solution for companies wanting to
scale up capacity and users of IFS Applications, whilst keeping total cost of ownership low.
IFS launches global cloud solution on Microsoft Azure
September 29. The cloud-based offer enables customers to easily increase the breadth of their deployment and scale
the number of user seats in line with business growth, while avoiding many of the costs normally associated with onpremise solutions. Customers can leverage Azure as an Infrastructure as a Service (IaaS) and self-manage their
solution, or have it hosted and managed as a service (SaaS).
IFS named a ‘Leader’ in two Gartner Magic Quadrants
On November 26, Gartner released its Magic Quadrant for Single-Instance ERP for Product-Centric Midmarket Companies, in
which IFS was named as a leader for the second consecutive year, improving its position on the ‘completeness of
vision’ and ‘ability to execute’ axis. On December 22, IFS was again recognized as a leader, this time in the Gartner
Magic Quadrant for Field Service Management.
IFS partners with Deloitte Consulting in South Korea
December 3. IFS announced that it has signed an agreement with Deloitte Consulting, making the professional services
firm its strategic partner for the deployment of IFS Applications in the oil & gas, construction, EPC and project-based
manufacturing industries in South Korea.
4
SIGNIFICANT AGREEMENTS SIGNED DURING THE YEAR
Aerospace and Defense
Hafslund
Nova Werke
Prince Minerals
Advanced Integration
Jiangsu Ligang Power Station
PIPE Sistemas Tubulares
Probiotics International
Babcock Marine Division
Liberty Utilities (Canada) Corp.
Promag
Rovese
BAE Systems
Mørenett
Robertson Fuel System
Silvermill Holdings
BAE Systems – Saudi Arabia
Nanjing Metro
ROL
Sumi Agro Europe
Forsvaret / Norwegian Armed
OKG Aktiebolag
Roxtec International
Teknos Group
General Dynamics IT
Onesourcewater
Samson AG Meß- und
Vitacress
Lockheed Martin JSF
PGNIG Termika
Saueressig
Whitworths
Saab
Renova
Stolle Machinery Company
William Grant & Sons
Sporveien Oslo
SDIC BaiYin Power Co.
Survitec Group
Retail
Asset Intensive
SDIC Qinzhou Electric Power Co.
Tatsuno Engineering & Service
Assist Trend
Forest-Papír
Teollisuuden Voima Oyj
V-Zug
BYGGmax
Kangra Coal
TrønderEnergi Kraft
WNA
D Samson & Sons
Klondex Mines
Warsaw Water and Sewerage
Zeon Advanced Polymix Co.
Gina Tricot
Unimin Corporation
High Tech
Oil and Gas
Midcounties Co-operative
Automotive
Axis Communications
Apply Group
Oriflame Cosmetics
Agility Fuel Systems
Fr. Sauter
Archer Management
Shanghai Garnor Sealing
CalsonicKansei North America
Genesis Technology USA
British Engines
Swedish Orphan Biovitrum
Dan T. Moore Company
Habia Cable
BW Offshore Norway
Service Providers
FEV
Integrated Microwave
Ceona Services
Advanced Technology Services
Huf Hülsbeck & Fürst
Minco Products
Mermaid Marine Australia
Dataprev
Schlemmer
Mitutoyo
Odfjell Drilling
Dover Harbour Board
The Morgan Motor Company
NEC Corporation
PGS Geophysical
DSL
Toyota Lanka
Olympus KeyMed
Rosenberg WorleyParsons
Eltel Networks Infranet
Toyota Material Handling Europe
Renco Electronics
Shawcor
Landmark Information Group
Volvo Lastvagnar
SEAKR Engineering
Songa Offshore
Loomis Sverige
Volvohandelns Utvecklings AB
Teledyne Oil & Gas
Teledyne ODI
PHS Group
Wright Bus
Trüb
Thalassa Holdings
Polygon International
Construction and Contracting
Young Innovations
Trelleborg Offshore Norway
SSI Services
Baltic Yachts
Industrial Manufacturing
Wood Group Mustang Norway
Swarco Nordic
Eurofeu
ACS Industries
Process Manufacturing
Tatsuno Engineering & Service
Grandweld Shipyards
Advanced Integration
Al Rabie
Tibah Airport Operations Co.
IHC Merwede Holding
Allu Group
American Iron & Metal Company
United Subcontractors
IMI
Aluminum Precision Products
Benders Paper Cup Company
Veolia Water Solutions & Tech.
K-Híd
Avanco
Bronco Wine Company
Wilhelmsen Ships Service
Pindan Group
Baier + Köppel
Cisbio Bioassays
Miscellaneous
Serimax Holdings
Belvac Production Machinery
EP Minerals
ADP Ingénierie
Systra
Dankotuwa Porcelain
Fundação Butantan
Beijing Mass Transit Railway
VWS Westgarth
Dipex
Grecian Delight Foods
CD Projekt
Energy and Utilities
Eickhoff
Guangzhou Grain Group
City of Uppsala
Agder Energi
Estudio Cerámico
Guangzhou Taiqi Food Co.
Établissements Darty et Fils
BaiYin Power
Hymer-Leichtmetallbau
Jotun
Evry
Brookfield Renewable Power
Hypnos
Legacy Pharmaceuticals
SEFI Transmission
Central Nuclear Embalse
Jamestown Metal Marine Sales
Marabu
Shantou Zhongyeda
CYPC Jinsha River Hydropower
Moelven Industrier
Nature's Path Foods
Toronto Transit Commission
ENEA Wytwarzanie
Molins Tobacco Machinery
Omega Protein
GDF Suez Énergie Services
Nidec Minster Corporation
Omni Industries
5
MESSAGE FROM THE PRESIDENT
Significant improvement in earnings
Net revenue for the year increased by 9 percent, currency
adjusted, with license revenue being affected in the last
quarter by the timing of deals that moved into 2015. Even
though it meant we did not achieve the license-growth target
for the year, it points to the fact that we are targeting
increasingly larger deals, by their nature the timing of which is
harder to predict. To a limited degree there has also been an
impact resulting from the drop in oil price. This may reduce
future investment in a number of oil and gas related industries
but the overall impact is expected to be limited due to our
broad and strong presence in other sectors—infrastructure,
transportation, project-based industries, manufacturing, and
service management—most of which are likely to benefit
from a lower oil price. In particular, our execution in service
management has improved considerably, with Gartner now
rating us as a leader in its Magic Quadrant for Field Service
Management.
Maintenance revenue for the year increased by
11 percent, currency adjusted, resulting from license sales and
strong customer loyalty, the ongoing development of which
remains a priority. Customers extending their use of
IFS Applications within their global organizations will
continue to contribute to our future growth. The maintenance
margin increased to 75 percent ('13: 72 percent) resulting
from investments in improving efficiency within our global
support operation.
Consulting revenue for the year increased by 11 percent,
currency adjusted, with a steadily larger proportion of services
being delivered from our growing partner ecosystem. We
continue to invest in our ecosystem to offer customer choice,
create go-to-market alliances, and increase scalability within
our business. We added a number of new strategic partners in
2014 that have contributed to our global implementation
capability. Despite the higher proportion of services being
delivered by partners, the consulting margin increased to
20 percent ('13: 19 percent).
We continue to see a steady increase of interest in clouddeployed systems, especially where IFS Applications is
offered in partnership with Microsoft on their Azure Cloud.
We cater for all interests, whether off or on premise, and in
the latter choice we launched ‘IFS in a Box’ in co-operation
with Oracle to allow a simplified and even easier option to
deploy our solution.
During the year, companies in need of consolidating their
business solution or expanding its functionality moved
6
forward with their investments and the gradual improvement
of the buying environment seen over the last couple of years
continued. However, based on preliminary figures, the ERP
market as a whole did not perform in 2014 as well as
originally projected and grew by around 4 percent. Industry
analyst firms such as Gartner expect this trend of rather slight
overall growth to persist in 2015.
We expect 2015 will be a year when we will see further
benefit from our investment in sales and marketing, which is
continuing to gain us recognition as being the intelligent
alternative to the global giants for internationally-deployed
solutions delivered in our target markets. Also in 2015 we will
have our release to market of our latest version of IFS
Applications; in this release we have a number of exciting new
features and an enhanced architecture designed to better
enable our partners to work with our product. On the back of
our strong cash flow and finances we are actively searching
the market for acquisitions we believe will strengthen our
portfolio and create value. We expect to see good growth in
both license revenue and EBIT in 2015.
Alastair Sorbie
PRESIDENT & CEO
IFS AND IFS APPLICATIONS
IFS, one of the world’s leading suppliers of business software,
offers applications that enable companies to respond quickly
to market changes and use resources in a more agile way to
achieve better business performance and competitive
advantages.
IFS was founded in 1983 and has 2,700 employees
worldwide. With IFS Applications™, now in its eighth
generation, IFS has pioneered component-based ERP
software. The company now
has
nearly
30
years’
experience
in
the
implementation of ERP
systems, with consultants
with deep industry expertise
and who understand the
customer’s business and
needs.
The
component
architecture
provides
solutions that are easier to
implement, run, and upgrade.
IFS Applications business
software provides increased
ERP functionality, including
CRM, SCM, PLM, CPM,
enterprise asset management,
and MRO capabilities.
IFS is an organization with a truly global reach and is
today represented in approximately 50 countries through
wholly or jointly-owned subsidiaries, and partners. IFS has
more than 2,400 customers and over 900,000 users and its
solution is installed in over 60 countries in about
20 languages.
With its own resources and in cooperation with partners, IFS
develops, sells and implements the component-based ERP
software IFS Applications.
provides customers with competitive advantages in their own
markets and has made IFS the leader in several industries.
Within maintenance and logistics systems for aerospace and
defense, for example, IFS is the global market leader.
In addition to the processes supported by all business
systems, such as finances, inventories, customer management
and traditional manufacturing, IFS Applications is specialized
in a number of specific manufacturing processes and in
support for the entire life
cycle of products, from
construction to maintenance
and aftermarket services.
This provides substantial
advantages for customers,
the information created
during construction and
manufacturing
being
important when the products
are later maintained, possibly
during several decades.
In recent years, IFS has
seen increased demand for
IT support for projectoriented activities in several
of its targeted industries. IFS
has worked quickly to provide enhanced software
components to better manage challenges such as cost, time,
resources, liquidity, and risk in project-driven activities. The
optimization of these key areas results in better control and is
the key to enhanced efficiency and control. It also provides
increased opportunities to capitalize on new business
opportunities. The use of traditional organizational structures
and systems makes it difficult to handle operational situations
in real time and reduces flexibility, as it is necessary to balance
resources in relation to expected deliveries. It is expensive and
difficult to assess whether new business opportunities, but
also ongoing operations, will be profitable.
IFS APPLICATIONS
CREATIVITY AND INNOVATION
BUSINESS CONCEPT
IFS Applications is a comprehensive business system for midsized and large organizations, and is specialized in a number
of business processes. Experience from customers, user
groups, industry analysts and the company’s strong network
of partners has been combined to create leading industry
solutions to meet specific customer needs.
Structural changes such as globalization, market
transparency
through
the
Internet,
consolidation,
specialization, etc. are making it harder to label companies
based purely on their industrial belonging. As a matter of fact,
the landscape of processes in which a company is operating
often offers a better illustration of its actual business and
challenges than the industry under which it is labeled.
IFS focuses on agile businesses where any of four core
processes are strategic: service and asset management,
manufacturing, supply chain, and projects. This focus
IFS has two distinct advantages over competitors: the single
integrated product line in IFS Applications and the fact that it
has been component-based for more than a decade. This
means that IFS is uniquely placed to supply business
components that take advantage of today’s service-oriented
architectures (SOA).
The Group’s product development is primarily
conducted at IFS’s R&D centers in Sri Lanka, Poland, and
Sweden. During the year, product development focused on
IFS Applications 9, which is the next core release of IFS
Applications and will be officially released in 2015.
A beta version of IFS Applications 9 was delivered to
selected customers during 2014. The upcoming version offers
new and existing customers major enhancements in terms of
agility and usability, as well as powerful capabilities tailored to
support customers in IFS’s target industries.
7
In addition, new versions of IFS Field Service Management
and IFS Mobile Workforce Management have been released,
as well as a number of important improvements, aimed at
increasing the business benefits of existing versions.
STRATEGIES IN BRIEF
•
IFS will strengthen its profit, cash flow, and financial
position by focusing on increasing sales, reducing costs,
and increasing its market share in selected industries.
•
The company’s product development will focus on
maintaining IFS’s position as a technical leader in
component-based business software for a global market.
•
IFS Applications, will support the standards that are
important for the customers. IFS will supply integrated
Internet-based solutions that enable increased
cooperation among customers, suppliers, and partners.
•
The product, methods, support system, and infrastructure
will support customers with global operations.
•
To meet the market’s increased demands for solutions
with broad functionality combined with in-depth industry
knowledge, IFS will focus on a limited number of
industry segments.
•
The company will continue to develop global and local
cooperation with partners to enable continued
development of IFS’s competence and market presence
with lower risk and capital requirements.
•
IFS will maintain its own supplier capacity for consultant
services related to the implementation and use of
IFS Applications in important markets and to support its
partners.
•
The company’s ability to offer resources from IFS’s Sri
Lankan unit for customer projects and cooperation with
partners will increase its competitiveness.
8
•
IFS will stimulate increased mobility among all its
employees to increase competence and understanding of
various international markets.
PARTNERS
The development of the IFS’s partner ecosystem continues to
be a priority and remains a key part of the company’s global
strategy to expand its footprint in key markets and to give its
customers greater choice when choosing their service or
technology partner. During 2014 many new modules were
added to the IFS Academy content catalogue and IFS also
continued to develop and expand the IFS Partner Program to
extend its joint sales and marketing activities and improve
access to IFS resources. All regions were actively engaged
with their local partner ecosystem to identify and develop
sales opportunities, with strong incremental pipeline
development as a result.
In addition to the network of system integrator partners
(SIs), IFS also continued the development of its ecosystem of
technology partners. During 2014, the company successfully
launched the IFS on Microsoft Azure Cloud solution and
gained its first customers with this new offering. The
company also launched “IFS-in-a-Box,” which is a fullyintegrated, on premise, pre-configured, tested and optimized,
complete hardware and software solution developed in
partnership with Oracle. Both these solutions offer major
advantages to customers in IFS’s key markets wishing to
speed up deployment time and reduce project risk.
During 2015, the company will continue to develop its
relationships with its existing partner ecosystem and will also
enter into new partnerships with both service and technology
partners around the world.
SOCIAL RESPONSIBILITY AND ENVIRONMENT
IFS operates in a distinctly low-risk industry in terms of the
direct impact of its activities on people and the environment.
This applies to the entire value chain, including software
development, for which IFS’s largest unit is located in Sri
Lanka. In addition, the company distributes information
efficiently through its intranet, where all employees have
access to policies and guidelines pertaining to sustainability,
including environmental impact, gender equality, diversity,
and work environment.
Corporate social responsibility (CSR) is becoming
increasingly important in the global marketplace—both in
terms of mitigating risks associated with legal compliance as
well as enhancing business insight to boost profitability. IFS’s
unique ERP offering includes a broad variety of solutions for
efficient reporting and enhanced control in the field of CSR
and non-financial reporting. The solutions are fully integrated
with IFS Applications to promote user productivity and
reduce time spent on non-value-adding administration and
thereby cut costs. Through its Eco-footprint Management
component, IFS Applications can be used to manage much of
the information required for a company to monitor its
sustainability issues, report its environmental impact, and
comply with legislation and regulations governing
environmental issues. IFS is working actively on product
development to further improve functionality in this regard.
Implementation and monitoring of the Code of Conduct and
Environmental Policy
IFS attaches great importance to the issues of sustainability
and corporate responsibility, such as the environment, health
and safety, equal opportunities, diversity, anti-corruption
work and business ethics, and the company’s and employees’
values. IFS’s Code of Conduct is based on the UN Global
Compact’s ten principles and both the Code of Conduct and
the Environmental Policy are set down formally by the CEO.
Interest in these documents has increased from both the
stock market and customers and prospects. Questions about
IFS’s various policies and CSR work are increasingly common
in enterprise software procurements, which is why IFS has
intensified its efforts to communicate its commitment and
concrete initiatives.
Sustainability, education, and company employees
In 2014 and 2015, a project is underway to more clearly
visualize IFS’s commitment to the outside world. Within the
framework of this project, three areas have been identified in
which the Group is actively working and all major
commitments can be divided into. These three areas are the
local/global environment and society (sustainability), training
and support for future generations of workers (education),
and good treatment and job satisfaction among IFS’s staff
(company employees).
IFS has a low environmental risk. The Group’s most
significant environmental impact is energy consumption from
its premises, business travel, purchasing of office material and
9
handling of used hardware. In all these areas there are
initiatives to reduce the company’s environmental impact, e.g.
through technology that enables remote work and meetings
(thus minimizing travel), sensors that regulate power supply in
the offices, and smart solutions that minimize paper waste
from printers, for instance. IFS is also centralizing servers and
other computer equipment in a few locations managed by
suppliers that meet the Group’s environmental requirements,
thus reducing the emissions from cooling and power
consumption. All employees
are encouraged to respect the
environment and strive to
work with sustainability
issues such as recycling and
energy
efficiency
when
possible.
In many parts of the
world, education is not a
matter of course, and many
times
it
is
economic
conditions that determine
whether a person can receive
training or not. The company
has
therefore
made
significant investments in
helping financially vulnerable
people get training that leads
to work, which in turn
affects the wider community
in a positive way. IFS’s
efforts have mainly been
concentrated to Sri Lanka,
where the Group has a large
number of its employees and
where access to a highly
educated workforce with
good expertise in IT and
business
systems
has
previously not been a given.
IFS collaborates with the
country’s largest universities through various initiatives to
offer more people the opportunity to study at university level.
Through one of the programs, IFS covers tuition fees and
living costs during the time the student is studying for a
university degree. Stundents begin their education with a sixmonth study period at IFS: four days a week at IFS and two
days at the university. Following this, the student works as an
intern four days a week at IFS and continues to study two
days at the university. There is no obligation attached to the
10
scholarship to continue working within IFS; yet, as many as
90 percent choose to do so. To invest in scholarship
programs and support the universities in Sri Lanka benefit
society in the long term. IFS not only helps with scholarships
to economically disadvantaged students, but also sponsors a
professorship at the University of Moratuwa. IFS Sri Lanka
employees regularly give guest lectures at universities to offer
students insight into how global IT companies work and IFS
donates equipment to the computer labs on campus. Guest
lectures and the donation of
computer equipment are
initiatives taken in other
parts of the IFS Group as
well, for instance in Germany
and Sweden.
Although CSR is usually
associated
with
the
environment and helping
society’s weakest members, it
is equally important to
ensure that it contributes to
the positive development of
the company’s employees.
IFS
employees
are
ambassadors for the Group
and their value system is the
prerequisite for success in
CSR as well as in the
company’s daily operations.
IFS is working actively with
equality and wants to set a
good example to inspire the
entire IT industry to improve
equality and attract more
women to enter the industry.
The basis of this is a genderneutral
view
of
the
workplace,
including
discussions in workshops
and in conjunction with the
annual salary revision. IFS is sponsoring networks for women
in IT, such as Oda of Norway, and participates with many
other global companies in the Womentor initiative to support
female managers in the IT industry with the help of mentors.
Additionally, IFS wants to increase interest in technology
among younger women and participates in this year’s
NextUp, a Swedish competition for eighth-graders to which
IFS contributes both financially and with a case that the
contestants work on.
IFS SHARE
IFS B share is listed since April 28, 1998 on the Stockholm
stock exchange and is traded on the Nasdaq OMX Stockholm
Mid-Cap list (sector: information technology). The company’s
A share has been on the same list since June 18, 1998.
As of December 31, 2014, IFS’s capital stock amounted
to SKr 499,436,600, represented by 24,971,830 shares, before
dilution, with a nominal value of SKr 20 per share. These
comprised 1,084,103 A shares and 23,887,727 B shares. On
December 31, 2014, the Company held 200,000 B shares in
its own custody.
Each A share carries the right to one vote and each
B share carries the right to one tenth of a vote. All shares
carry equal rights to dividends.
During the year, a total of 0.0 million A shares and
5.3 million B shares were traded, corresponding to 21 percent
of the average total number of listed shares. The principal
owner is Gustaf Douglas with associated companies, who
controlled 21.5 percent of the capital and 21.2 percent of the
voting rights on December 31, 2014.
SHARE CATEGORIES
Number of
shares
Number of
voting rights
Share of
capital
Share of
votes
A shares
1,084,103
B shares
23,887,727
1,084,103
4.3%
31.2%
2,388,773
95.7%
Total
24,971,830
68.8%
3,472,876
100.0%
100.0%
Source: SIS Ägarservice, Dec. 30, 2014
DISTRIBUTION OF SHAREHOLDERS
Share of
capital
Share of
votes
Swedish individuals
30.1%
46.5%
Swedish mutual funds
41.2%
29.8%
Swedish institutional owners
12.5%
8.4%
Swedish owners
83.8%
84.7%
16.2%
15.3%
International owners
Total
100.0% 100.0%
Source: SIS Ägarservice, Dec. 30, 2014
SHAREHOLDER STATISTICS
Shareholders
Ownership
Number of shares held
Number
Proportion
1–1 000
93.6%
673,470
2.7%
2.2%
147
2.5%
218,897
0.9%
0.7%
2 001–5 000
85
1.6%
294,089
1.2%
1.1%
5 001–10 000
39
0.7%
283,092
1.1%
1.4%
10 001–50 000
49
0.8%
1,290,392
5.2%
5.6%
50 001–100 000
13
0.2%
976,856
3.9%
4.9%
100 001–
36
0.6%
21,235,034
85.0%
84.1%
5,778
100.0%
24,971,830
MAJOR SHAREHOLDERS
Shareholder
250,000
200,000
200
150,000
180
100,000
50,000
Q
1
Volume
Q
2
IFS B
Q
3
0
Q
4
All-share index
Number of
B shares
Share of
capital
Share of
votes
217,201
5,161,000
21.5%
21.2%
Anders Böös*
427,010
0
1.7%
12.4%
Lannebo funds
-
2,966,580
11.9%
8.6%
Catella funds
-
2,362,356
9.5%
6.8%
NEC Corporation
110,000
679,000
3.2%
5.2%
Bengt Nilsson*
150,000
0
0.6%
4.4%
Swedbank Robur funds
-
1,466,698
5.9%
4.3%
SEB funds
-
1,220,652
4.9%
3.5%
Skandia Liv
-
858,648
3.4%
2.5%
Unionen
-
807,196
3.2%
2.3%
78,932
12,500
0.4%
2.3%
Handelsbanken funds
-
801,402
3.2%
2.3%
Fourth Sw. Nat'l Pension Fund
-
734,238
2.9%
2.1%
100,960
6,617,457
26.9%
22.1%
1,084,103
23,687,727
-
200,000
1,084,103
23,887,727
Other shareholders
140
Number of
A shares
Gustaf Douglas*
Heinz Kopfinger
160
100.0% 100.0%
Source: SIS Ägarservice, Dec. 30, 2014
300,000
220
Voting
rights
5,409
PRICE DEVELOPMENT AND TRADE VOLUME 2014
240
Capital
1 001–2 000
Total
260
Number of
shares
External shareholders
IFS's own custody
Total
*and associated companies
99.2% 100.0%
0.8%
-
100.0% 100.0%
Source: SIS Ägarservice, Dec. 30, 2014
11
TABLE OF CONTENTS OF THE ANNUAL REPORT
BOARD OF DIRECTORS’ REPORT
13
Notes to the financial statements
Corporate governance report
20
Note
1
Accounting principles
FINANCIAL STATEMENTS
26
Note
2
Segment reporting
44
Consolidated income statement
26
Note
3
License revenue
46
Note
4
Maintenance and support revenue
46
Consolidated statement of comprehensive income
27
Note
5
Other revenue
46
Consolidated balance sheet—assets
28
Note
6
Development expenditure
47
Note
7
Sales and marketing expenses
47
35
Consolidated balance sheet—equity and liabilities
28
Consolidated capital account
29
Note
8
Other operating income
47
Note
9
Other operating expenses
47
Consolidated statement of cash flows
30
Note 10
Transactions between subsidiaries
47
Income statement of the parent company
31
Note 11
Operating expenses per type of cost
47
Statement of comprehensive income of the parent company
31
Note 12
Auditors’ fees
47
Balance sheet of the parent company—assets
32
Note 13
Salaries, other remunerations, and social costs
47
Note 14
Remunerations paid to the board and executive management 47
Balance sheet of the parent company—equity and liabilities
32
Note 15
Transactions with related parties
Capital account of the parent company
33
Note 16
Average number of employees per country
49
Statement of cash flows of the parent company
34
Note 17
Results from participations in subsidiaries
49
NOTES TO THE FINANCIAL STATEMENTS
35
Note 18
Results from participations in associated companies
49
Note 19
Other interest income and similar income
49
Note 20
Interest expenses and similar expenses
49
Note 21
Taxes
49
Note 22
Profit and dividend per share
50
Note 23
Intangible fixed assets
50
Note 24
Tangible fixed assets
52
AUDITOR’S REPORT
12
67
48
Note 25
Operating lease agreements
53
Note 26
Participations in subsidiaries
54
Note 27
Participations in associated companies and joint ventures
55
Note 28
Receivables in subsidiaries
55
Note 29
Deferred tax claims and tax liabilities
55
Note 30
Other long-term receivables
56
Note 31
Accounts receivable
56
Note 32
Other receivables
56
Note 33
Liquid assets
56
Note 34
Stockholders’ equity
56
Note 35
Liabilities to credit institutions
58
Note 36
Risk structure pertaining to interest and financing
58
Note 37
Pension commitments
59
Note 38
Other provisions and other liabilities
61
Note 39
Other liabilities
61
Note 40
Accrued expenses and prepaid income
61
Note 41
Pledged assets
61
Note 42
Contingent liabilities
61
Note 43
Adjustments for items not included in cash flow
61
Note 44
Business combinations
61
62
Note 45
Net acquisition of tangible fixed assets
Note 46
Financial risk management and derivatives
62
Note 47
Application of IFRS 11 ”Joint Arrangements”
64
Note 48
Conversion rates
65
Note 49
Information about the Parent company
65
BOARD OF DIRECTORS’ REPORT
GENERAL
The board of directors and the chief executive officer of
Industrial and Financial Systems, IFS AB (publ), corporate
identity number 556122-0996, herewith submit the annual
accounts and consolidated accounts for the fiscal year 2014.
Unless otherwise stated, all amounts are in SKr million.
Information in parentheses refers to the preceding fiscal year.
The terms “IFS”, “Group”, and “Company” all refer to the
Parent Company—Industrial and Financial Systems,
IFS AB—and its subsidiaries.
SUMMARY
The overall objective for 2014 was to achieve strong license
growth and a significant improvement in EBIT. IFS
continued its focus on project-oriented industry and markets
with a strong need for well-functioning processes within
logistics, maintenance, and service and the Company won
during 2014 highly-competitive contracts in its target sectors.
Net revenue for the year increased by 9 percent, currency
adjusted, with license revenue being affected in the last
quarter by the timing of deals that moved into 2015. Even
though it meant the company did not achieve the licensegrowth target for the year, it points to the fact that it is
targeting increasingly larger deals, by their nature the timing
of which is harder to predict. Maintenance revenue increased
by 11 percent, currency adjusted, resulting from license sales
and strong customer loyalty, the ongoing development of
which remains a priority. Consulting revenue increased by
11 percent, currency adjusted, with a steadily larger
proportion of services being delivered from a growing partner
ecosystem. Despite the higher proportion of services being
delivered by partners, the consulting margin increased to
20 percent. Net revenue amounted to SKr 3,034 million
('13: SKr 2,704 million). EBIT increased to SKr 275 million
('13: SKr 202 million) and cash flow after investments was
SKr 269 million ('13: SKr 122 million).
OPERATIONS
IFS is a leading provider of component-based business
software developed using open standards and based on
service-oriented architecture (SOA). The solutions enable
companies to respond quickly to market changes and use
resources in a more agile way to achieve better business
performance and competitive advantage.
Founded in 1983, IFS has more than 2,700 employees
worldwide. With IFS Applications™, now in its eighth
generation, IFS has pioneered component-based ERP
software. The component architecture provides solutions that
are easier to implement, run and upgrade. IFS Applications is
installed in more than 60 countries in about 20 languages.
IFS has some 2,400 customers and over 900,000 users
across seven key vertical sectors: aerospace and defense;
automotive; manufacturing; process industries; construction,
contracting, and service management; retail and wholesale
distribution; and utilities and telecom. IFS Applications
provide extended ERP functionality, including CRM, SCM,
PLM, CPM, enterprise asset management, and MRO
capabilities.
IFS is today represented in approximately 50 countries
through wholly and jointly owned subsidiaries, joint ventures,
and partners. Operations are divided into six operating
segments: Europe North; Europe West; Europe Central; Europe
East; Americas; and Africa, Asia, and Pacific. These segments
have the operational responsibility for sales and delivery to
customers. Product development and support are included in
corporate functions.
MARKET ANALYSIS
Globalization entails increased competition and more
complex supply chains. Companies are meeting these
challenges by investing in new, improved ERP solutions to
streamline operations and simplify collaboration with
suppliers, customers, and partners. Moreover, an increasing
number of companies are doing business internationally, in
part with new business models. Legislation and regulations
are becoming more comprehensive, mergers and acquisitions
are increasing as the economy strengthens, and many
companies
are
moving
from
traditional
manufacturing/distribution to more project-based and
service-oriented business models. These drivers led to a
successive recovery of the ERP market from the middle of
the first decade of this century to the end of 2008, when the
trend was broken and the market weakened in the wake of
events in the global economy. These drivers will, however,
continue to be a force in the long term.
Uncertainties surrounding the prospects for an upturn in
global economic growth remain the major retardants of IT
growth. This uncertainty has engendered the pessimistic
business and consumer sentiment in evidence throughout
much of the world. Despite caution among buyers due to the
prevailing macroeconomic environment, companies in need
of a business solution moved forward with their investment
plans in 2014 and the enterprise application market showed a
slow but steady rate of growth of approximately 4 percent.
The buying environment’s trajectory leads industry analyst
firms such as Gartner to expect that this trend of rather slight
overall growth will persist in 2015.
The competitive position has not changed during 2014
and is not expect to change over the coming years. After the
consolidations of recent years, SAP, Oracle, and Microsoft are
the principal global competitors in the industries and
processes in which IFS operates. In specific segments and
geographic markets, IFS also competes with a number of
niche vendors.
13
SKr, million
2014
actual
Translation
effect
Structural
changes
2014
adjusted
2013
actual
Organic
change
Reported
change
NET REVENUE
License revenue
558
-19
-10
529
535
-1%
4%
Maintenance and support revenue
1,037
-35
-22
980
902
9%
15%
Total product revenue
1,595
-54
-32
1,509
1,437
5%
11%
Consulting revenue
1,427
-35
-25
1,367
1,256
9%
14%
Net revenue (including other revenue)
3,034
-89
-58
2,887
2,704
7%
12%
2,759
-81
-48
2,630
2,502
5%
10%
-1
-1
-
-2
43
OPERATING EXPENSES
Operating expenses
Other operating income/costs net
Capital gains/losses
-
0
-
0
0
Exchange rate gains/losses
-24
-3
-
-27
-14
Restructuring costs/redundancy costs
-15
1
-
-14
-96
2
-
-
2
14
-175
-
-
-175
-153
Amortization of acquired intangibles
-38
2
-
-36
-31
Other amortization/depreciation
-29
1
-1
-29
-28
Capitalized product development
190
-
-
190
188
Adjusted operating expenses
2,669
-81
-49
2,539
2,425
5%
10%
Adjusted EBITDA
365
-8
-9
348
279
25%
31%
Adjusted EBITDA/net revenue
12%
12%
10%
Reversal of restructuring costs
Amortization of capitalized product development
NET REVENUE
PERSONNEL NUMBERS AND EFFICIENCY
License revenue for 2014 was 1 percent higher than in the
previous year, currency adjusted. During the year, the ten
largest license deals had a total value of SKr 107 million; the
corresponding figure for 2013 was SKr 128 million. A total of
28 license agreements exceeding US$ 0.5 million in value were
sold during the year. No single customer accounted for more
than 10 percent of net revenue. Maintenance and support
revenue continued to grow and consulting revenue was also
higher than in the previous year, currency adjusted. Net
revenue was SKr 330 million higher than in 2013, an increase
of 9 percent, currency adjusted.
The average number of employees decreased, amounting to
2,645 (2,688). The headcount for product development at the
end of the year was 593 (582), of whom 359 (340) worked at
the development center in Sri Lanka. Net revenue per
employee increased by 11 percent, currency adjusted, and by
14 percent non-currency adjusted to SKr 1,147 thousand
(1,006). Personnel-related expenses per employee amounted
to SKr 670 (605), an increase of 5 percent, currency adjusted.
The number of employees at year end was 2,707 (2,616).
COSTS AND EXPENSES
Operating expenses were SKr 257 million higher than in
2013, which represents an increase of 7 percent, currency
adjusted. Variable expenses such as costs related to thirdparty suppliers, partners, and subcontracted consultants
amounted to SKr 367 million (290), an increase of 23 percent,
currency adjusted. Other operating expenses amounted to
SKr 2,392 million (2,212), an increase of 5 percent, currency
adjusted. Payroll expenses amounted to SKr 1,771 million
(1,627), an increase of 6 percent, currency adjusted.
PRODUCT-DEVELOPMENT EXPENDITURE
Product development expenditure for the year amounted to
SKr 318 million (295). Capitalized product development
totaled SKr 190 million (188) and amortization of previously
capitalized
product
development
amounted
to
SKr 175 million (153).
14
EBIT
EBIT amounted to SKr 275 million (202), an increase of
36 percent compared with 2013. EBIT before amortization
and depreciation but after reversal of capitalized development
expenditure and adjusted for nonrecurring items consisting of
severance costs and capital gains and losses, i.e. adjusted
EBITDA, amounted to SKr 365 million (279), corresponding
to a margin of 12 percent.
PROFIT FOR THE YEAR
Net financial items were SKr -17 million (-18). Adjusted for
exchange rate effects, the net financial items, including bank
costs, were SKr -9 million (-19). Net interest income was
SKr -5 million (-7). Profit before tax increased to
SKr 258 million (184) while profit for the year increased to
SKr 211 million (143).
OPERATING AREAS
EUROPE CENTRAL
In the comments, comparisons with the previous year refer to currencyadjusted values unless otherwise stated.
SKr, million
License revenue
61
66
-8%
EUROPE NORTH
Maintenance and support revenue
98
87
13%
Consulting revenue
178
145
23%
Net revenue
375
341
10%
81
70
16%
229
197
16%
SKr, million
2014
2013
Δ*
License revenue
149
140
6%
Maintenance and support revenue
361
343
5%
Consulting revenue
649
579
12%
Net revenue
1,185
1,083
9%
EBIT, undistributed**
359
297
21%
Number of employees at the end of the period
465
437
6%
* Change between the years not adjusted for currency effects
** EBIT before allocation of corporate revenue and expenses
Europe North’s revenue increased by 9 percent, with licenses
growing by 8 percent and maintenance revenue by 5 percent.
Consulting revenue increased by 11 percent, to a large extent
as a result of the planned augmented usage of partners in
implementation, which also explains the growth of 36 percent
or SKr 55 million in variable expenses. Fixed expenses
increased by 3 percent, mainly due to inflation. Other
operating items net were SKr 40 million lower, due to the
restructuring costs in the first quarter 2013. The earnings
thereby improved by 21 percent, non-currency-adjusted.
Larger license deals included Jotun, Saab, and Songa.
Number of employees at the end of the period
2014
2013
Δ*
License revenue
124
104
19%
Maintenance and support revenue
224
174
29%
Consulting revenue
188
152
24%
Net revenue
628
487
29%
EBIT, undistributed*
163
192
-15%
Number of employees at the end of the period
327
323
1%
* Change between the years not adjusted for currency effects
** EBIT before allocation of corporate revenue and expenses
The numbers in 2014 were affected by the merge of the
segment Defense. Net revenue increased by 18 percent, mainly
due to a growth in product revenue. License revenue
increased by 18 percent, maintenance revenue by 19 percent,
and consulting by 22 percent. Operating expenses, excluding
other operating items, were 21 percent higher. Earnings
decreased by 15 percent, non-currency-adjusted, as 2013 was
positively affected by a one-off item of SKr 47 million
relating to the reorganization and acquisition of IFS Defence.
Larger license deals included Aspire Defence, IMI, and
Montupet.
2013
Δ*
* Change between the years not adjusted for currency effects
** EBIT before allocation of corporate revenue and expenses
Net revenue for Europe Central was 4 percent better than in
2013, mainly due to an increase in consulting but also
maintenance revenue increased. Earnings improved by
16 percent, non-currency-adjusted, as a result of the increased
revenue. Some of the larger license deals in Europe Central
were Huf, IHC Merwede, and Marabu.
EUROPE EAST
SKr, million
2014
2013
Δ*
License revenue
29
26
Maintenance and support revenue
66
63
5%
Consulting revenue
74
65
14%
192
171
12%
13
-21
n/a
208
228
-9%
Net revenue
EBIT, undistributed**
Number of employees at the end of the period
EUROPE WEST
SKr, million
EBIT, undistributed**
2014
12%
* Change between the years not adjusted for currency effects
** EBIT before allocation of corporate revenue and expenses
Net revenue increased by 9 percent, following increases in all
revenue streams. Costs, excluding other operating items, were
6 percent lower, mainly as a result of a restructuring program
carried out in the fourth quarter 2013. Earnings thereby
improved by SKr 34 million, non-currency-adjusted. Some of
the major license contracts were CD Projekt, ENEA, and
JSC Energo.
AMERICAS
SKr, million
2014
2013
Δ*
License revenue
129
120
8%
Maintenance and support revenue
205
172
19%
Consulting revenue
243
225
8%
Net revenue
636
575
11%
EBIT, undistributed**
179
168
7%
Number of employees at the end of the period
280
283
-1%
* Change between the years not adjusted for currency effects
** EBIT before allocation of corporate revenue and expenses
Americas increased its net revenue by 7 percent, mainly due to
higher maintenance but also growing consulting. Costs
increased, mainly due to higher variable costs as a result of the
planned increased usage of partners in implementation.
Earnings were 7 percent better than in 2013, non-currencyadjusted. Some of the largest deals during the year were
Advanced Technology Services, Calsonic, and Lockheed
Martin.
15
AFRICA, ASIA, AND PACIFIC
SKr, million
2014
2013
Δ*
License revenue
66
78
-15%
Maintenance and support revenue
83
61
36%
Consulting revenue
98
87
13%
274
245
12%
48
38
26%
264
255
4%
Net revenue
EBIT, undistributed**
Number of employees at the end of the period
* Change between the years not adjusted for currency effects
** EBIT before allocation of corporate revenue and expenses
Net revenue increased by 11 percent, due to improvements in
maintenance and consulting revenue. Costs were 9 percent
higher than in 2013, mainly due to reversed provisions for
bad debts in 2013. Earnings improved by 26 percent, noncurrency-adjusted. Larger license deals included DSI Samson,
Mermaid Marine, and Pindan Asset Management.
PRODUCT DEVELOPMENT
The Group’s product development is primarily conducted at
IFS’s R&D centers in Sri Lanka, Poland, and Sweden. During
the year, product development focused on IFS Applications
9, which is the next core release of IFS Applications and will
be officially released in 2015.
A beta version of IFS Applications 9 was delivered to
selected customers during 2014. The upcoming version offers
new and existing customers major enhancements in terms of
agility and usability, as well as powerful capabilities tailored to
support customers in IFS’s target industries.
In addition, new versions of IFS Field Service
Management and IFS Mobile Workforce Management have
been released, as well as a number of important
improvements, aimed at increasing the business benefits of
existing versions.
PARTNERS
The development of the IFS’s partner ecosystem continues to
be a priority and remains a key part of the company’s global
strategy to expand its footprint in key markets and to give its
customers greater choice when choosing their service or
technology partner. During 2014 many new modules were
added to the IFS Academy content catalogue and IFS also
continued to develop and expand the IFS Partner Program to
extend its joint sales and marketing activities and improve
access to IFS resources. All regions were actively engaged
with their local partner ecosystem to identify and develop
sales opportunities, with strong incremental pipeline
development as a result.
In addition to the network of system integrator partners
(SIs), IFS also continued the development of its ecosystem of
technology partners. During 2014, the company successfully
launched the IFS on Microsoft Azure Cloud solution and
gained its first customers with this new offering. The
company also launched “IFS-in-a-Box,” which is a fullyintegrated, on premise, pre-configured, tested and optimized,
complete hardware and software solution developed in
partnership with Oracle. Both these solutions offer major
16
advantages to customers in IFS’s key markets wishing to
speed up deployment time and reduce project risk.
During 2015, the company will continue to develop its
relationships with its existing partner ecosystem and will also
enter into new partnerships with both service and technology
partners around the world.
CASH FLOW, LIQUIDITY, AND FINANCIAL POSITION
Cash flow from current operations before change in working
capital amounted to SKr 450 million (336). Change in tied
working capital amounted to SKr 51 million (70). Days of
sales outstanding (DSO) at year-end was 76 days (79). DSO
calculated on the monthly receivables’ positions during the
year was 55 days (55).
Investments totaled SKr 232 (284) million. Product
development expenditure was capitalized in an amount of
SKr 190 million (188). Cash flow after investments totaled
SKr 269 million (122). Cash flow from financing operations
was SKr -164 million (-13). Loans from credit institutions
decreased by SKr 67 million during the year (increase by 18).
Cash and cash equivalents on December 31, 2014 totaled
SKr 489 million (354). The Group’s net liquidity position at
year end, excluding pension liabilities, amounted to SKr 359
million (157). Cash and unutilized credit totaled SKr 859
million (657). External financing amounted to SKr 130
million (197).
During the year, the Company distributed a dividend of
SKr 87 million (87). During the year, the Company bought
back warrants for an amount of SKr 11 million (2).
IFS SHARE
The Parent Company is listed on the Nasdaq OMX
Stockholm Mid-Cap list. The number of shareholders on
December 31, 2014 was 5,778. The number of shares on
December 31, 2014 was 24,971,830, of which 1,084,103 were
A shares, carrying the right to 1.0 vote per share, and
23,887,727 were B shares, carrying the right to 0.1 vote per
share. On December 31, 2014, the Company held 200,000
B shares in its own custody.
There is no limit to the number of votes a stockholder
may cast at the AGM. The Company is not aware of any
agreements between stockholders that limit the right to
transfer shares.
Two stockholders in the Company, through direct or
indirect holdings in the Company, represent at least one tenth
of the voting rights of the total number of shares. They are
Gustaf Douglas with family and associated companies, and
Anders Böös through associated companies. The Company’s
pension trust does not exercise direct ownership of company
stock. The Company is party to loan agreements that may be
affected if a change in the control of the Company occurs.
GUIDELINES FOR THE REMUNERATION OF MEMBERS OF THE BOARD
AND EXECUTIVE MANAGEMENT
Directors’ fees are paid to the chairman and the other
directors of the board as resolved by the AGM. For
2014/2015, director’s fees totaled SKr 3.05 million, of which
the chairman of the board received an amount of
SKr 1.4 million and each of the other directors received an
amount of SKr 375 000. The chief executive officer was not
remunerated for work on the board. Remuneration for work
on the audit committee was unchanged from the previous
year: the chairman received SKr 100,000 and another director
received SKr 50,000.
In accordance with the guidelines adopted by the AGM
of 2014, the remuneration of the CEO and other members of
executive management consists of basic salary, variable
remuneration, other benefits, and pension contributions. For
the CEO, the maximum variable remuneration shall not
exceed 50 percent of the basic salary, and for the other
members of executive management variable remuneration
shall be payable in the interval 25–60 percent of the basic
salary, based on achievement of 80–120 percent of individual
goals. The AGM of 2014 resolved to establish an incentive
program whereby the Company offered executive
management and other key personnel the opportunity to
acquire warrants in the Company. The acquisition of one
warrant at market price carried the right, subject to certain
terms and performance conditions, to receive up to three
additional warrants at no charge.
In 2014, the CEO received a basic annual salary of
£ 366,000 and a premium-based pension with a premium
corresponding to 20.0 percent of the basic salary. For 2014,
variable remuneration to the CEO has been linked to Group
EBIT and will be payable in the amount of £ 36,600. For
further information, see note 14.
INCENTIVE PROGRAM
In accordance with the resolution of the AGM of 2014, IFS
issued during the year warrants that were offered to, and
acquired by, executive management, other officers, and other
key employees of the Group. For each warrant acquired at
market price and subject to certain conditions, the
participants were entitled to receive a maximum of three
additional warrants free of charge.
The allotment of additional warrants free of charge has
been dependent on the outcome of a performance condition
linked to the company’s earnings-per-share (EPA) target for
2014 (SKr 8.32), under which a target completion rate of
85 percent would result in one (1), 100 percent in two (2), and
115 percent in three (3) additional warrants free of charge.
The outcome of the 2014 EPA has now been established to
SKr 8.45, corresponding to a target completion rate of 101.6
percent and meaning that the participants in the program will
be allotted two additional warrants free of charge for each
warrant they have acquired at market price.
The warrants can be exercised for subscription of
B shares no later than June 2019. The strike price is
SKr 206.80 per share. The warrants refer to a maximum of
179,430 B shares.
During the year, the Company bought back a number of
warrants from program TO9B.
RESOLUTION CONCERNING GUIDELINES FOR THE REMUNERATION OF
EXECUTIVE MANAGEMENT
The board proposes that the AGM of 2015 resolve that the
following guidelines for remuneration of the president and
other members of executive management be applied. The
Board strives for continuity and the proposals are thus
essentially in line with the current guidelines and
remuneration policy approved by the AGM 2014. The
guidelines deal with remuneration and other terms and
conditions of employment of the executive management of
the Group, including its chief executive officer (CEO).
The principles apply to employment contracts entered
into after the resolution is adopted by the AGM and to
changes made to existing terms and conditions after this point
in time.
Remuneration to the executive management in IFS shall
be aligned with market terms and conditions, shall be
individual and differentiated, and shall support the interests of
the stockholders. Remuneration principles shall be
predictable, both in terms of costs for the company and
benefits for the individual, and shall be based on factors such
as competence, experience, responsibility and performance.
Total remuneration paid to executive management shall
consist of a basic salary, variable remuneration, an incentive
program, pension contributions, and other benefits.
The total annual monetary remuneration paid to each
member of executive management, i.e., basic salary and
variable remuneration, shall correspond to a competitive level
of remuneration in the respective executive's country of
residence.
Variable remuneration shall be linked to predetermined
measurable criteria designed to promote long-term value
generation in the company. The relationship between basic
salary and variable remuneration shall be proportionate to the
executive’s responsibility and powers. Variable remuneration
varies according to position. For 2015, it is proposed that the
guidelines for the variable remuneration payable to the
executive management be unchanged from the previous year.
For the CEO this means that the maximum variable
remuneration shall not exceed 50 percent of the basic salary,
and for the other members of executive management variable
remuneration shall be payable in the interval 25–60 percent of
the basic salary, based on achievement of 80–120 percent of
individual goals.
The board proposes that the AGM resolves to adopt an
incentive program with a corresponding structure as last year,
which entails that executive management, other officers, and
key personnel in the IFS group are offered the opportunity to
subscribe for warrants in the company at market price. For
each warrant acquired at market price, on certain terms and
conditions a maximum of three additional warrants may be
received free of charge. The proposal entails the issue of not
more than 247,000 warrants which shall be exercisable to
subscribe for Series-B shares during an exercise period from
the day after the release of the first quarterly report 2018 until
17
and including June 30, 2020. For information on IFS’s other
equity-related incentive programs, see Note 34.
Pension benefits shall correspond to a competitive level
in the respective executive’s country of residence and shall, as
in previous years, consist of a premium-based pension plan.
The CEO is entitled to a premium-based pension plan with a
premium that is 20 percent of the basic salary. The retirement
age for the CEO and other members of executive
management is 65, but the CEO and the company are entitled
to invoke the right to early retirement for the CEO at the age
of 64. In such a case, the CEO shall receive the equivalent of
60 percent of the basic salary until he is 65. Furthermore, the
CEO’s retirement should not affect the warrants acquired by
him in the framework of the adopted incentive programs.
Other benefits are chiefly related to company cars and
telephones and shall, where they exist, constitute a limited
portion of the remuneration and be competitive in the local
market.
If the company terminates the employment, the period of
notice is normally 6–12 months; if the executive terminates
the employment, the period of notice is normally 3–6 months.
The basic salary during the period of notice, together with
severance pay, shall not exceed an amount corresponding to
two years’ basic salary.
The board of directors shall have the right to deviate
from the above guidelines in individual cases if there is good
reason to do so. In such an event, the board shall inform the
immediately following AGM and explain the reason for the
deviation.
STOCK MARKET INFORMATION, ETC.
IFS issues information in accordance with the information
policy established by the board. The annual and quarterly
reports and press releases are published in Swedish and
English. Press conferences for analysts, brokers, and
journalists are held in connection with the quarterly reports.
Information sessions and meetings are held regularly during
the year with the media and the financial market.
Corporate governance information, annual and quarterly
reports, and press releases are available at www.ifsworld.com,
where information can be ordered or subscribed for. The
annual report for 2014 will be distributed in a corresponding
manner, and not in printed form.
The board, executive management, and certain other
officers who are registered as insiders may trade in shares
according to applicable legislation and current market praxis.
No additional internal regulations exist.
FINANCIAL-RISK MANAGEMENT
In the course of its business, the Group is exposed to risk
related to currency, financing and interest rates. Such risks
and their management are described in note 46 and in the
section covering risks and uncertainties below.
18
ACCOUNTING PRINCIPLES
The Group applies the IFRS accounting principles approved
by the European Commission. The new standards,
recommendations, and interpretations that are adjudged to
affect the Group were applied when preparing the financial
statements for 2014.
SOCIAL RESPONSIBILITY
IFS operates in a distinctly low-risk industry in terms of the
direct impact of its activities on people and the environment.
This applies to the entire value chain, including product
development, for which IFS’s largest unit is located in Sri
Lanka. In addition, the Company has efficient information
distribution through its intranet, where all employees have
access to policies and guidelines pertaining to sustainability,
including environmental impact, gender equality, diversity,
work environment, and the values of the Company and
employees in relation to colleagues and customers.
Group management has adopted and published the IFS
Code of Conduct, which is based on the 10 principles of the
U.N. Global Compact embracing human rights, labor rights,
the environment and anti-corruption. In addition, corporate
management has adopted and published an environmental policy.
A number of Group-wide processes, tools, and guidelines
related to personnel were implemented during the year. For
Group-wide processes, targets are established and the
outcome is monitored on a regular basis.
Continuous actions are taken to improve the Company’s
psychosocial environment. In most countries, discussions are
held annually with all employees. Those who choose to leave
IFS are interviewed, and their reasons for departing are
compiled to increase employees’ job satisfaction and reduce
personnel turnover. Absence related to illness was 4.3 days
annually per Group employee and personnel turnover was
5.9 percent in 2014.
In 2014, the percentage of female employees was
31 percent. The percentage of female members on the
Company’s boards was 21 percent, and the percentage of
female senior managers was 22 percent. The share of female
members on the Parent Company’s board of directors was
33 percent. The lower percentage of women in the Company
is a frequently occurring phenomenon in the software
industry as a whole.
Diversity is encouraged through exchange programs that
contribute to exposure to other cultures. The Company
believes that an understanding of other cultures is necessary
to conduct business effectively, because both IFS and the
majority of its customers are active throughout the world.
IFS’s largest research and development center is located
in Sri Lanka. At the center, a comprehensive corporate social
responsibility project comprising support to schools and
universities has been operating for 10 years. Investments were
increased after the 2004 tsunami disaster, and since then,
more than 700 stipends have been distributed. IFS also strives
to attain leadership in Sri Lanka with respect to salaries and
other benefits. The Company actively works to promote
equality regardless of gender, ethnicity, religion, or sexual
orientation.
IFS has a low environmental risk. The Group’s most
extensive environmental impact is energy consumption from
its companies’ premises, business travel, purchasing of office
material and handling of used hardware. IFS’s goal is to
conduct business in an environmentally responsible manner.
All employees are encouraged to respect the environment and
strive to work with sustainability issues such as recycling and
energy efficiency when possible. The Company fulfills its
commitments by:
•
•
•
•
•
•
complying with environmental legislation,
conducting business in an environmentally sound
manner,
increasing the extent of recycling, using recycling deposit
systems and reducing the consumption of resources
when possible,
minimizing business travel by using online conferencing
and videoconferencing,
using an IT structure that allows employees to work from
home to minimize travel to work,
continuously pursuing efforts to reduce environmental
impact.
Corporate Social Responsibility (CSR) is becoming
increasingly important in the global marketplace—both in
terms of mitigating risks associated with legal compliance as
well as enhancing business insight to boost profitability. IFS’s
unique ERP offering includes a broad variety of solutions for
efficient reporting and enhanced control in the field of CSR
and non-financial reporting. The solutions are fully integrated
with IFS Applications to promote user productivity and
reduce time spent on non-value-adding administration and
thereby cut costs. Through its Eco-footprint Management
component, IFS Applications can be used to manage much of
the information required for a company to monitor its
sustainability issues, report its environmental impact, and
comply with legislation and regulations in respect of
environmental issues. IFS is working intensively on product
development to further improve functionality in this regard.
RISKS AND UNCERTAINTIES
In its operations, IFS is confronted with certain risk elements
that can to a greater or lesser extent have an impact on
operational outcome. One such risk is the rapid technological
development in the industry, which could create the need for
substantial technology changes. A further cause of uncertainty
is the ability to attract and retain critical personnel resources,
especially in a labor market in which the demand for and cost
of attractive personnel are increasing. In addition to the above
risks, IFS in its business is exposed to other operational and
legal risks and uncertainties, including in customer projects,
dependence on certain suppliers and partners, the outcome of
actual and possible disputes, and currency exposure.
IFS, through its use of component technology and by
establishing internal processes and procedures, considers that
it has addressed such risks and taken measures to reduce and
control them. As the Parent Company does not engage in
operational activities, its risk is limited to financing, foreign
currency, and liquidity.
OUTLOOK
Despite caution among buyers due to the prevailing
macroeconomic environment, companies in need of a
business solution moved forward with their investment plans
in 2014 and the enterprise application market showed a slow
but steady rate of growth of approximately 4 percent. The
buying environment’s positive trajectory leads industry analyst
firms such as Gartner to anticipate the ERP market to
maintain such growth rate in 2015. In 2015, IFS will continue
to build on its successes and strengthen its recognition as the
intelligent choice for global businesses. The Company will
continue to work on strengthening its brand, develop its
partner ecosystem, and grow its pipeline. For the year, IFS
expects good growth in both license revenue and EBIT.
ADDITIONAL INFORMATION
IFS is involved in a minor number of disputes and claims,
which can be considered normal given the nature of its
operation.
The Company assesses that no provisions are necessary,
but its result and liquidity may be affected by the outcome of
such disputes.
As reported previously, IFS has since 2002 been involved
in a legal dispute concerning the partly-owned company
IFS Sri Lanka. In October 2012, the counterparty in the
dispute initiated arbitration proceedings against IFS with the
Singapore International Arbitration Centre, on the basis of a
shareholders’ agreement between the parties.
In the arbitration proceedings, the counterparty initially
claimed compensation for damages in the amount of
US$ 76 million including interest. However, the claim was
later revised upwards. The revised claim was unspecified but
could be understood to mean that IFS’s half-owned company
IFS Sri Lanka be paid an amount in the range of
US$ 237–535 million including interest, and that an
unspecified amount be distributed as dividends to the owners.
Since the beginning of the legal dispute, IFS has deemed
the counterparty’s allegations as completely unsubstantiated
and without any merit and the claims raised in the arbitration
proceedings have been rejected by IFS in their entirety as
being frivolous and completely unmeritorious and unfounded.
The arbitral tribunal’s Final Award was received by IFS
on June 20, 2014. In the Final Award, the counterparty’s
claims have been completely rejected and it is declared that
IFS did not breach the shareholders’ agreement as alleged by
the counterparty. The counterparty has also been ordered to
pay for the main part of the fees of the arbitral tribunal and a
substantial portion of IFS’s legal costs in the proceedings.
With the information currently available, IFS is not able
to assess if a contingent asset exists.
PARENT COMPANY
Parent Company, Industrial and Financial Systems, IFS AB,
operations include certain corporate management and finance
functions as well as the management of stockholdings for
subsidiaries. In 2014, net revenue amounted to SKr 19 million
(22), with earnings before tax of SKr 124 million (17).
19
During the year, no net investments were made in stock and
shares as stockholders’ contribution or contingent
consideration pertaining to acquisitions made during the year.
The Parent Company has not made any investments in
equipment. On December 31, 2014, Parent Company
liquidity, including unutilized credit, amounted to
SKr 587 million (424), and Parent Company debt was
SKr 130 million (197), of which SKr 130 million (197) was
from credit institutions and SKr 0 million (0) was related to
intra-Group borrowing.
In 2014, stockholders’ equity in the Parent Company
increased by SKr 15 million to SKr 1,548 million, of which
unrestricted
stockholders’
equity
accounted
for
SKr 476 million (461). The change is mainly attributable to
the net earnings and distributed dividend. At year-end, the
Parent Company had 3 (3) employees.
PROPOSED DISPOSITION OF PROFITS
The board of directors and the president propose that the
following funds, SKr 476 million, which are available for
disposition, be allocated as follows:
Dividend of SKr 4.50 per share
to stockholders
Carried forward
Total
SKr 111,473 thousand
SKr 364,983 thousand
SKr 476,456 thousand
STATEMENT BY THE BOARD OF DIRECTORS CONCERNING THE
PROPOSED DIVIDEND
The proposed dividend reduces the Company’s equity ratio to
71 percent and the IFS Group’s equity ratio to 43 percent.
The proposed action is not considered to impact the
Company’s ability to promptly meet current and anticipated
payment obligations. The Company’s liquidity forecast entails
preparation to handle variations in the current payment
obligations. The Company’s financial position does not
indicate any assessment other than that the Company can
continue to do business and that it can be expected to fulfill
its short-term and long-term commitments.
The board’s assessment is that the extent of the equity as
reported in the most recently issued annual report is in
reasonable proportion to the extent of the Company’s
operations taking into account the proposed dividend and
acquisition of treasury shares.
In view of the above and based on what the board is
otherwise aware of, the board considers that a comprehensive
assessment of the financial position of the Company and
Group justifies a dividend in accordance with Chapter 17,
Section 3, paragraphs 2 and 3 of the Swedish Companies Act,
i.e. taking into consideration the requirements imposed by the
nature, extent and risks associated with doing business on the
equity of the Company and Group and considering the need
of the Company and Group to strengthen its balance sheet,
liquidity and financial position in general.
20
CORPORATE GOVERNANCE REPORT
Industrial and Financial Systems, IFS AB (publ) (hereafter
“IFS”) is a public Swedish stock corporation listed on the
Nasdaq OMX Stockholm. The Company is the parent
company of the IFS Group. IFS corporate governance is
based on legislation, where applicable, primarily the Swedish
Companies Act, the Swedish Code of Corporate Governance,
the regulations of the Nasdaq OMX Stockholm Nordic
Exchange for issuers, and other rules, ordinances, and
recommendations that might apply. IFS follows
developments in the field of corporate governance,
continuously adapting its corporate governance principles so
as to generate value for its owners and other interested parties
by providing timely information, real owner influence, and
efficient working procedures on the part of the management
and board of directors.
APPLICATION OF THE SWEDISH CODE OF CORPORATE GOVERNANCE
This report, which has been submitted in accordance with the
regulations for the Swedish Code of Corporate Governance,
is the IFS corporate governance report for fiscal 2014 and
reports on how corporate governance was conducted during
that year. The report has been subject to a statutory review by
the auditors.
Deviation from the Swedish Code of Corporate Governance and
infringements
IFS has followed the Swedish Code of Corporate Governance
in all respects apart from section 2.4 (concerning the
composition of the audit committee), see further details under
Nomination Committee. During 2014, IFS has not infringed
Nasdaq OMX Stockholm regulations for issuers or been in
breach of good practice on the securities market as resolved
by the disciplinary committee of exchange or reported by the
Swedish Securities Council.
STOCKHOLDER INFLUENCE—THE GENERAL MEETING OF
SHAREHOLDERS AND ITS RIGHT TO MAKE DECISIONS
Rules applying to the general meeting
According to the Swedish Companies Act, the general
meeting of shareholders is the highest decision-making body
in a company. At the general meeting, stockholders exercise
their right to vote. IFS has issued two categories of shares: A
shares, which according to the articles of association entitles
holders to one vote per share at the general meeting; and
B shares, which entitle holders to 0.1 votes per share. All
stockholders who are registered in the stock register on the
record day and who have registered their intent to participate
in time are entitled to attend the general meeting and vote in
accordance with their total stockholding. Stockholders who
are unable to attend in person may participate through a proxy.
Resolutions at the general meeting are usually adopted by
a simple majority vote, except in cases where the Swedish
Companies Act requires a higher proportion of the shares
represented and votes cast at the general meeting. Resolutions
adopted by the general meeting are published after the general
meeting in a press release, and the minutes of the general
meeting are published on the Company website.
The general meeting resolves, among other things, on the
adoption of the Company’s annual report, the disposition of
the Company’s profit or loss, and on discharge from liability
for the board of directors and the chief executive officer. The
general meeting also appoints board directors and auditors,
and resolves in respect of establishing a nomination
committee. It also determines the fees paid to board directors
and auditors in addition to guidelines for determining salary
and other remuneration for the CEO and other members of
executive management.
The Annual General Meeting (AGM) shall be held in
Linköping or Stockholm within six months after the close of
the fiscal year. Notice to attend the AGM reflects the
simplified general meeting notification procedure pursuant to
the rules of the Swedish Companies Act, through publication
in the Swedish Official Gazette and on the Company website. At
the same time, information to that effect is advertised in
Svenska Dagbladet.
Annual general meeting 2014
IFS’s Annual General Meeting (AGM) for 2014 was held at
Courtyard by Marriott hotel, Rålambshovsleden 50 in
Stockholm on March 26, 2014. A total of 84 stockholders,
including proxies, participated in the meeting, representing
66.0 percent of the votes and 59.6 percent of the capital. The
board of directors and management of IFS, and the
Company’s auditor, were present at the meeting.
Resolutions adopted at the AGM 2014 concerned, among
other things, the composition of the board of directors and
auditor, fees paid to board directors and auditors, principles
guiding the remuneration of executive management, the
incentive program, and the establishment of a nomination
committee. Moreover, a resolution to issue a dividend of SKr
3.50 per share was adopted. The AGM also resolved to reauthorize the board of directors to repurchase during the
period up to the coming AGM Series-B shares on the Nasdaq
OMX Stockholm in accordance with the rules of the stock
exchange in such an amount that does not exceed 10 percent
of the total number of shares in the Company, at a share price
within the registered share price interval on each occasion, i.e.
between the highest buying price and the lowest selling price.
The minutes of the AGM can be downloaded from the
Company website as can all proposals for resolution and
other documentation.
Annual general meeting 2015
The Annual General Meeting for 2015 will be held at
Courtyard by Marriott hotel, Rålambshovsleden 50 in
Stockholm on March 25, 2015 at 3:00 p.m. Notification of the
AGM has been published in the Swedish Official Gazette and
on the Company website on February 25, 2015. On the same
day information to that effect has also been advertised in
Svenska Dagbladet. Other information about the AGM will be
published on the Company website.
NOMINATION COMMITTEE
The election of the board of directors and auditors is
prepared by the IFS nomination committee, which is
appointed in accordance with guidelines resolved by the
AGM. The nomination committee also submits proposals for
the directors’ remuneration divided among the chairman and
other board members and any remuneration for committee
work, remuneration for auditors, decisions on principles for
the appointment of the nomination committee for the coming
term of office, and the election of a chairman at the AGM. In
addition to the chairman of the board, the nomination
committee shall comprise a representative of the principal
owner, one representative of each of the two largest
institutional owners, and a representative of other
stockholders, who is selected from the founders. The
representative of IFS’s principal owners convenes and is the
chairman of the nomination committee.
Nomination committee members for the AGM 2015
The nomination committee for the AGM 2015, whose
composition is based on the ownership position on
August 29, 2014, consists of the following members:
•
•
•
•
•
Gustaf Douglas, Chairman, representing the Company’s
principal owners, the Douglas family and Förvaltnings
AB Wasatornet
Lars Bergkvist, Lannebo Fonder
Ulf Strömsten, Catella Fonder
Bengt Nilsson, for the founders
Anders Böös, chairman of the board of IFS
The composition of the nomination committee was
announced on September 19, 2014. The nomination
committee represents approximately 52 percent of the votes
in IFS. Its proposals, explanatory statement, and additional
information about proposed members of the board were
published in connection with the AGM notification and will
be presented, with an account of the work of the committee,
at the 2015 AGM. The members are not remunerated for
their work on the nomination committee.
BOARD OF DIRECTORS
The board consists of six members, without deputies, elected
by the AGM. With the exception of Alastair Sorbie, the
president and CEO of IFS, none of the members of the
board is employed by IFS. The average age of the members is
57, and two are women. Information about the independence
of board members follows below.
The members of the board
At the 2014 AGM, all board members were re-elected. In
addition to the board members, other participants at the
board meetings are the Group’s CFO Paul Smith, Fredrik
vom Hofe, vice president Business Development, and Jesper
Alwall, general counsel and secretary of the board of
directors. Other salaried employees of the Group participate
in the board meetings as representatives of specific issues
when applicable.
For the AGM 2015, the nomination committee has proposed
the re-election of all directors and the election of Gunilla
Carlsson.
21
Independence of the board of directors
The assessment of the nomination committee, which is
shared by the board of directors, pertaining to the
independence of board members in relation to the Company,
executive management and stockholders, is indicated in the
table below. As shown in the table, IFS complies with the
regulations of the Swedish Code of Corporate Governance
that the majority of the board members elected by the AGM
shall be independent in relation to the Company and the
executive management, and that at least two of the members
shall be independent in relation to the Company’s major
stockholders.
Number of
series B shares
Total number
of shares
Name
Position
Elected
Independence
Audit
committee
Number of
series A shares
Anders Böös
Chairman
2003
No*
-
427,010
-
427,010
Bengt Nilsson
Vice-chairman
1983
Yes
-
150,000
-
150,000
Ulrika Hagdahl
Member
2003
Yes
Chairman
-
30,000
30,000
Birgitta Klasén
Member
2009
Yes
-
-
12,000
12,000
Neil Masom
Member
2009
Yes
Member
-
-
-
Alastair Sorbie
Member
2006
No*
-
-
8,526
8,526
* Anders Böös is considered independent in relation to the Company and executive management, but as dependent in relation to the Company’s major owner as he
controls more than 10 percent of the votes in the Company. Alastair Sorbie is dependent in relation to the Company as a result of his position as president and CEO of IFS.
The board of directors’ work
The work of the board of directors is conducted in
accordance with the requirements of the Swedish Companies
Act, the regulations of the Nasdaq OMX Stockholm, the
Swedish Code of Corporate Governance, other rules and
regulations relevant to the Company, and operating
procedures adopted by the board. Specific instructions
regulate the division of tasks between the board and its
committees, and between the board and the president, the
forms of financial reporting, instructions to board
committees, and the president's assignments and right to
make decisions. Furthermore, the board establishes a finance
policy that regulates risk related to financing, interest,
liquidity, credit, and currency. It also determines an
information policy that regulates the way in which IFS
disseminates information. The operating procedures of the
board, related instructions and the information policy are
reviewed annually. Other instructions and guidelines are
reviewed as required.
In accordance with the current operating procedures, the
board shall meet at least six times per year (in addition to the
statutory meeting held after the AGM). Each ordinary
meeting addresses issues related to business and market
development, adherence to the business plan and earnings,
cash flow and financing, the current outlook, and acquisitions,
divestment and pledged guarantees. One board meeting is
dedicated mainly to strategic issues, and one is dedicated to
the business plan and budget.
The chairman of the board leads the board’s work and is
responsible for ensuring that other board members receive
the necessary documentation for high- quality discussions and
decisions, and for continuously updating and deepening their
knowledge of the Company. In addition, the chairman
monitors operations in dialog with the CEO and ensures that
board decisions are executed. The chairman is also
responsible for evaluating the work of the board and ensuring
that the nominations committee gains access to this
evaluation. Furthermore, the chairman also participates in
assessment and development issues pertaining to the
executive management and other officers of the Group. The
chairman represents the Company in ownership issues.
22
In 2014, the board met 8 times (two of which were held
by phone) in addition to the statutory meeting after the AGM.
In addition to the ordinary items on its agenda, the work of
the board in 2013 focused on managing IFS’s growth,
profitability, strategic position, and development of the
Company’s partner ecosystem. During the year, regional
managers and other officers, according to a rolling schedule,
presented and discussed their areas of responsibility with the
board. Minutes are taken of each board meeting and are
normally made available to directors pursuant to the
stipulations of the Swedish Code of Corporate Governance.
In 2014, in accordance with the Swedish Code of
Corporate Governance, the board submitted the nine-month
report for review by the auditors, and on two occasions
during the year met the auditors when neither the CEO nor
any other member of executive management was present.
The work of the board in 2014 was evaluated both in
writing and orally within the board and has also been treated
at a plenary session of the board in December 2014 on the
basis of an agenda established in advance in accordance with a
structured, systematic process. Relevant parts of the result of
the evaluation have been reported to the nomination
committee. No external evaluation of the board was
conducted during the year. In addition, the work of the CEO
has been continuously evaluated, in particular at board
meetings at which no members of the executive management
were present.
The chairman of the board and other board members,
with the exception of the CEO, are remunerated for work on
the board in accordance with resolutions adopted by the
AGM. The AGM 2014 resolved that directors’ fees of
SKr 3.05 million be paid, of which SKr 1.4 million was paid
to the chairman of the board and SKr 375,000 was paid to
each of the remaining board members, with the exception of
the CEO. A fee of SKr 100 000 was paid to the chairman and
SKr 50 000 to other members of the audit committee. All
directors’ fees were unchanged from the previous year.
Board directors’ attendance during 2014
Name
Position
Board
meeting
Audit
committee
Anders Böös
Chairman
100%
Bengt Nilsson
Vice-chairman
100%
-
Ulrika Hagdahl
Member
90%
80%
Birgitta Klasén
Member
100%
-
Neil Masom
Member
100%
100%
Alastair Sorbie
Member
100%
-
-
COMMITTEE WORK
Audit committee
To increase the efficiency of, and intensify, the work of the
board, an audit committee was established in April 2008. The
audit committee is normally convened in conjunction with
ordinary board meetings. The primary task of the committee
is, in accordance with the instructions established by the
board, to ensure compliance with the established principles
with respect to the financial reporting, the review of the
annual and consolidated accounts, and efficiency of internal
control and risk management, and that appropriate relations
with the board’s auditors are maintained with proper
impartiality and independence, in particular with regard to
non-auditing services. The audit committee is also responsible
for managing the work of the internal audit function that the
board established during 2010, see below for details, and
assisting in preparation of proposal to the AGM for election
of auditors.
The audit committee is a preparatory entity. The outcome
of the audit committee’s work in the form of observations,
recommendations and proposals for decisions and actions is
reported continuously to the board, which takes any decisions
made necessary by the audit committee’s work. Minutes are
kept of audit committee meetings and are made available to
the board.
In 2014/15, the audit committee comprised board
members Ulrika Hagdahl, chairman, and Neil Masom.
Accordingly, the Company deviated from section 7.3 of the
Swedish Code of Corporate Governance, which states that
the Audit Committee shall comprise at least three board
members. However, the board, which appoints the committee
members, determined that these persons were the most suited
to constitute the Company’s Audit Committee for 2014/15,
taking into account experience, interest and competence. In
doing so, the board has taken into particular account the legal
requirements of independence and requisite competence in
matters of accounting or auditing. The Group’s CFO Paul
Smith and General Counsel Jesper Alwall, who is also the
secretary of the audit committee, participate in the audit
committee’s meetings. The Audit Committee met five times
in 2014, and all members were present at the meetings with
one exception. IFS’s external auditors participated in two of
the audit committee’s meetings.
reporting to the CEO. The CEO does not participate in
decisions
regarding
his/her
remuneration.
Other
remuneration of officers reporting to the CEO is determined
in consultation with the chairman of the board, and
information is subsequently provided to the other members
of the board.
The board continuously monitors and evaluates both the
execution of the guidelines determined by the AGM for
remuneration of executive management and prevailing
remuneration structures and remuneration levels in the
Company, and the ongoing and completed programs for
variable remuneration in the Company. In accordance with
the regulations of the Code of Corporate Governance, a
report on the findings of this evaluation is publicized on the
Company website no later than two weeks before the AGM.
The Company website also contains a more detailed
account of current guidelines for remuneration of executive
management and of the outstanding incentive programs
adopted by the board.
THE PRESIDENT AND EXECUTIVE MANAGEMENT
The president is appointed by the board and is responsible,
according to the Swedish Companies Act, the Operating
Procedures of the Board and the Instruction to the President
for the day-to-day management of the business of the
Company and Group. The president leads the work of
executive management and takes decisions in consultation
with other members of management. In addition to the
president, these comprise the Company’s CFO, the Vice
President of Business Development and the general counsel.
Executive management participates in regular operational
reviews under the leadership of the president.
AUDITORS
IFS’s auditing company, reelected at the 2014 AGM for a
statutory term of one year, is PricewaterhouseCoopers AB
(PwC). It is the responsibility of the auditors to appoint an
auditor in charge. Since fiscal 2012, PwC has appointed
Nicklas Kullberg as auditor in charge.
For the AGM 2015 the nomination committee has
proposed that PwC be re-elected for an additional term of
one year. Following the approval of the AGM, PwC has
appointed Nicklas Kullberg to remain as auditor in charge.
The task of the auditor is to scrutinize, on behalf of the
stockholders, the annual report and accounts, as well as the
administration of the board of directors and the CEO. The
auditor in charge also presents an audit report at the AGM.
Stockholders are invited to question the auditor at the AGM.
In addition to the audit, PwC, when required, undertake a
number of other assignments for IFS. These primarily pertain
to audit-related services such as a more detailed presentation
in connection with the audit as well as tax consultancy.
Remuneration committee
The board has decided not to appoint a separate
remuneration committee. Remuneration of the CEO is
determined by the board, as are the principles and earnings
targets for variable remuneration of the CEO and officers
23
GUIDELINES FOR REMUNERATION OF EXECUTIVE MANAGEMENT
For 2014, the following guidelines established by the AGM
concerning remuneration and other terms and conditions of
employment for the CEO and other members of the
executive management were applied.
Remuneration of executive management in IFS shall be
aligned with market terms and conditions, shall be individual
and differentiated, and shall support the interests of the
stockholders. Remuneration principles shall be predictable,
both in terms of costs to the Company and benefits for the
individual, and shall be based on factors such as competence,
experience, responsibility and performance.
Total remuneration paid to executive management shall
consist of a basic salary, variable remuneration, an incentive
program, pension contributions, and other benefits.
The total annual monetary remuneration paid to each
member of executive management, i.e., basic salary and
variable remuneration, shall correspond to a competitive level
of remuneration in the respective executive's country of
residence.
Variable remuneration shall be linked to predetermined
measurable criteria designed to promote long-term value
generation in the Company. The relationship between basic
salary variable remuneration shall be proportionate to the
executive’s responsibility and powers. Variable remuneration
varies according to position. For 2014, variable remuneration
for the CEO was not permitted to exceed 50 percent of the
basic salary, and for the other members of executive
management variable remuneration was payable in the interval
25–60 percent of the basic salary, based on achievement of
80–120 percent of individual goals.
The AGM of 2014 resolved to adopt an incentive
program for the executive management and key personnel
based on terms and conditions consistent with the previous
years’ programs.
The incentive program entails that the Company has
offered executive management and key personnel in the
Group the opportunity to subscribe for warrants in the
Company valued at market price. To stimulate participation in
the program, the participants will be allotted, subject to
certain terms and conditions, up to three warrants free of
charge for each warrant acquired at market price. The number
of warrants that participants can be allotted free of charge is
dependent on the outcome of a performance condition linked
to the Company’s earnings-per-share target during 2014 as
determined by the board. Each warrant carries the right to
acquire one Series-B share during the period from publishing
the interim report for the first quarter 2017 up to and
including June 28, 2019, at a subscription price corresponding
to 110 percent of the volume-weighted average price paid for
the Company’s share on the Nasdaq OMX Stockholm
Exchange between April 22, 2014 and April 28, 2014.
Pension benefits shall correspond to a competitive level
in the respective executive’s country of residence and shall, as
in previous years, consist of a premium-based pension plan.
The CEO is entitled to a premium-based pension plan with a
premium that is 20 percent of the basic salary. The retirement
age for the CEO and other members of executive
24
management is 65, but the CEO and the Company are
entitled to invoke the right to early retirement for the CEO at
the age of 64. In such a case, the CEO shall receive the
equivalent of 60 percent of the basic salary until he is 65.
Other benefits are chiefly related to company cars and
telephones and shall, where they exist, constitute a limited
portion of the remuneration and be competitive in the local
market.
If the Company terminates the employment, the period
of notice is normally 6–12 months; if the executive terminates
the employment, the period of notice is normally 3–6 months.
The basic salary during the period of notice, together with
severance pay, shall not exceed an amount corresponding to
two years’ basic salary.
The board of directors shall have the right to deviate
from the above guidelines in individual cases if there is good
reason to do so. In such an event, the board shall inform the
immediately following AGM and explain the reason for the
deviation.
The principles apply to employment contracts entered
into after the resolution is adopted by the AGM and to
changes made to existing terms and conditions after this point
in time.
INTERNAL CONTROL AND RISK MANAGEMENT PERTAINING TO
FINANCIAL REPORTING
A report on internal control pertaining to financial reporting
for fiscal 2014 was prepared and submitted by the board in
accordance with the Swedish Code of Corporate Governance,
the guidance developed by FAR SRS and the Confederation
of Swedish Enterprise, and the instruction for 2007 issued by
the Swedish Corporate Governance Board.
The report describes how IFS’ internal control pertaining
to financial reporting is organized. Internal control pertaining
to financial reporting is a process that involves the board of
directors, executive management and other employees, and is
designed to ensure reliability in the external financial
reporting. The internal control function can be divided into
five areas: the control environment, risk assessment, control
activities, information and communication, and monitoring.
This are further described below.
Control environment
IFS’s values form the basis for the control environment.
Simplicity, commitment, and a businesslike nature are the key
concepts that are the foundation for IFS’s work and
interaction with customers, partners, and employees.
Attitudes and values are at least as important as experience
and competence, and IFS places great emphasis on ensuring
that its operations are characterized by openness, for example
by working for a strong cohesion and encouraging honest,
open dialogue.
The internal control environment pertaining to financial
reporting is based on a clear division of roles and
responsibility in the organization, established and
communicated decision-making procedures, and instructions
pertaining to authorization and responsibility. These are
documented and communicated in the form of instructions to
the board, guidelines, manuals, codes, and accounting and
reporting instructions. At the Group level, a well-defined
Finance Manual is prepared and made available to ensure
correct, reconciled and standardized financial reporting in all
of the Group’s companies. Controls pertaining to correct
reporting occur first locally, then regionally and finally at the
Group level. Financial reporting is secured on these levels
through continuous analysis of detailed monthly accounts and
through a hard-close process that secures the quality of the
annual financial statements well before year-end.
external communication, guidelines have been established to
ensure that the Company meets strict requirements for
correct information.
Monitoring
Executive management prepares an annual combined risk
assessment pertaining to the financial reporting, which is
reviewed with the audit committee. In the risk assessment,
IFS has identified a number of processes in which the relative
risk of substantial errors is higher, depending on the
complexity in the process, or in which there is a risk that the
impacts of any errors will be significant because the value of
the transactions is high. These processes include, for example,
procedures for reporting license revenues and valuation of
deferred tax and disputes.
The board continuously evaluates information from executive
management and the audit committee. At each board
meeting, the Company’s financial position is reported. The
audit committee thoroughly reviews all interim and annual
reports before publication. The Company’s financial reporting
process is evaluated annually by executive management to
ensure that it includes all essential areas that affect financial
reporting. As part of their audit, the accountants elected by
the AGM, PwC, also review a selection of IFS’s controls.
Recommendations from the external accounting are
continuously monitored by executive management and the
audit committee. The subsidiaries reported on a number of
prioritized risk areas. The Company applies a process in
conjunction with the year-end financial statement in which
managing directors and financial managers of the subsidiaries
submit representation letters on essential information for the
accounting.
Control activities
Internal audit
Risk assessment
The risk assessment results in a number of control activities.
The purpose of these activities is to prevent, detect and
correct errors and discrepancies. The control activities include
analytical monitoring of decisions, comparisons between
income statement items, checklists and automatic controls
through IT systems. A differentiation of work tasks is
desirable so that different individuals carry out or check each
task. The essential control activities are documented and
updated continuously.
Information and communication
The Company has clear lines of communication and
reporting, which form the basis for internal monitoring and
external financial reporting. Manuals and guidelines that are
significant for financial reporting are updated and
communicated continuously to the affected employees.
Executive management and the audit committee report
regularly to the board based on established procedures. For
During 2010, the board established a separate internal audit
function to take responsibility for strengthening internal risk
management, monitoring and control, as well as processes.
The internal audit’s tasks include mapping and scrutinizing
essential areas of risk, and providing monitoring and specific
scrutinizing and support input in selected areas. The internal
audit plans its work in collaboration with the audit committee,
executive management and the Company’s external auditors;
the results of actions taken are reported continuously to the
audit committee. During 2014, in addition to the continuous
mapping of risk areas within the Group, the work of the
internal audit has primarily been focused on implementing
and following up minimum internal control requirements to
be observed locally by the IFS group companies. The internal
control requirements have been identified on the basis of
financial reporting and divided into separate processes
depending on materiality, risk for reporting errors,
complexity, and risk for fraud etc.
The financial reports were approved for issuance by the board of directors of the Parent Company on March 4, 2015. Additional information on Group
and Parent Company results and general position is available in the accompanying income statements, balance sheets, cash-flow statements, and
notes to the financial statements.
25
CONSOLIDATED INCOME STATEMENT
SKr, million
Note
2014
2013
License revenue
3
558
535
Maintenance and support revenue
4
1,037
902
1,427
1,256
Consulting revenue
Other revenue
5
12
11
Net revenue
2
3,034
2,704
License expenses
Maintenance and support expenses
Consulting expenses
Other expenses
-53
-40
-264
-254
-1,149
-1,015
-12
-7
Direct expenses
-1,478
-1,316
Gross earnings
1,556
1,388
Development expenditure
6
-303
-260
Sales and marketing expenses
7
-635
-591
-312
-289
Administration expenses
Other operating revenue
8
4
16
Other operating expenses
9
-35
-121
Result from joint venture
47
-
59
Indirect expenses, net
-1,281
-1,186
11, 12, 13, 14, 15, 16
275
202
Result from participation in associated companies
18
1
0
Other interest income and similar income
19
3
3
Interest costs and similar costs
20
EBIT
-21
-21
Financial net
-17
-18
Profit/loss before tax
258
184
Taxes
21
-47
-41
Profit/loss for the year
22
211
143
213
144
Profit/loss for the year is allocated as follows:
Parent Company stockholders (SKr million)
Non-controlling interests (SKr million)
-2
-1
Profit/loss per share pertaining to Parent Company stockholders, before dilution (SKr)
22
8.60
5.81
Profit/loss per share pertaining to Parent Company stockholders, after dilution (SKr)
22
8.45
5.72
On December 31
24,772
24,772
On December 31, after full dilution
25,177
25,192
Average for the period
24,772
24,772
Average for the period, after full dilution
25,202
25,196
Number of shares with deduction of shares in own custody (thousands)
26
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
SKr, million
Earnings for the year
Not
2014
2013
211
143
-100
44
-
5
106
-4
Other comprehensive income
Items that will not be reclassified to profit or loss
Revaluation of defined-benefit pension plans
Revaluation of defined-benefit pension plans related to joint venture
Items that may be subsequently reclassified to profit or loss
Exchange rate differences
Other comprehensive income for the year, net of tax
Total comprehensive income for the year
6
45
217
188
219
189
-2
-1
Total comprehensive income allocated as follows:
Parent Company shareholders
Non-controlling interests
27
CONSOLIDATED BALANCE SHEET—ASSETS
SKr, million
Note
Dec 31, 2014
Dec 31, 2013
Capitalized expenditure for product development
608
594
Goodwill
452
398
Other intangible fixed assets
Intangible fixed assets
Tangible fixed assets
84
111
23
1,144
1,103
24, 25
115
96
Participations in associated companies
27
4
3
Deferred tax receivables
29
146
132
Other long-term receivables
30
28
23
178
158
1,437
1,357
31
790
740
50
38
Other receivables
32
262
200
Liquid assets
33
489
354
Current assets
1,591
1,332
Assets
3,028
2,689
Financial fixed assets
Fixed assets
Accounts receivable
Current tax receivable
CONSOLIDATED BALANCE SHEET—EQUITY AND LIABILITIES
SKr, million
Note
Dec 31, 2014
Dec 31, 2013
Capital stock
499
499
Other capital contributed
694
701
Reserves
Accumulated earnings, including profit/loss for the year
Stockholders' equity pertaining to Parent Company stockholders
Non-controlling interests
Stockholders' equity
Liabilities to credit institutions
34
12
-94
157
131
1,362
1,237
-2
0
1,360
1,237
35, 36
0
0
Pension obligations
37
168
39
Deferred tax liabilities
29
10
46
Other provisions
38
4
6
Long-term liabilities
182
91
Accounts payable
127
111
51
14
Current tax liabilities
Liabilities to credit institutions
35, 36
130
197
Other provisions
38
2
22
Other liabilities
39
1,176
1,017
Current liabilities
1,486
1,361
Liabilities
1,668
1,452
Stockholders' equity and liabilities
3,028
2,689
MEMORANDUM ITEMS
Pledged assets
41
903
721
Contingent liabilities
42
17
21
28
CONSOLIDATED CAPITAL ACCOUNT
Accumulated
earnings, incl.
profit/loss for
the year
Equity
pertaining to
Total
shareholders
Non-controlling stockholders'
of the parent
interests
equity
company
Other
contributed
capital
Reserves
508
701
-90
17
1,136
1
1,137
Revaluation of defined-benefit pension plans
-
-
-
49
49
-
49
Change in translation difference
-
-
-4
-
-4
-
-4
Total changes in net wealth recognized in other
comprehensive income, excl. transactions with the
company's owners
-
-
-4
49
45
-
45
Profit/loss for the year
-
-
-
143
143
-1
142
Total changes in net wealth, excl. transactions with the
company's owners
-
-
-4
192
188
-1
187
Share-based payments
-
2
-
-
2
-
2
Repurchase of warrants
-
-2
-
-
-2
-
-2
-9
-
-
9
-
-
-
-
-
-
-87
-87
-
-87
499
701
-94
131
1,237
0
1,237
Revaluation of defined-benefit pension plans
-
-
-
-100
-100
-
-100
Change in translation difference
-
-
106
-
106
-
106
Total changes in net wealth recognized in other
comprehensive income, excl. transactions with the
company's owners
-
-
106
-100
6
-
6
Profit/loss for the year
-
-
-
213
213
-2
211
Total changes in net wealth, excl. transactions with the
company's owners
-
-
106
113
219
-2
217
Share-based payments
-
4
-
-
4
-
4
Repurchase of warrants
-
-11
-
-
-11
-
-11
Dividend
-
-
-
-87
-87
-
-87
499
694
12
157
1,362
-2
1,360
SKr, million
Note 34
Amount on January 1, 2013
Cancellation of repurchased shares
Dividend
Amount on December 31, 2013
Amount on December 31, 2014
Capital
stock
29
CONSOLIDATED STATEMENT OF CASH FLOWS
SKr, million
Note
2014
2013
CURRENT OPERATIONS
Profit/loss after net financial items
Adjustments for items not included in the cash flow, etc.
43
Interest paid
Interest received
Income tax paid
Cash flow from operations before change in working capital
258
184
264
184
-13
-21
3
3
-62
-14
450
336
-73
-25
124
95
CHANGE IN WORKING CAPITAL
Change in current receivables
Change in current non-interest-bearing liabilities
Change in working capital
Cash flow from current operations
51
70
501
406
-
-
INVESTMENT OPERATIONS
Acquisition of subsidiaries
44
Sale of subsidiaries
Acquisition of intangible fixed assets
Acquisition of tangible fixed assets
45
Change in long-term receivables
0
-3
-192
-242
-40
-32
0
-7
Cash flow from investment operations
-232
-284
Cash flow after investment operations
269
122
FINANCING OPERATIONS
Repurchase of warrants
-11
-2
Raising of loans from credit institutions
35
0
105
Amortization of liability to credit institutions
35
-78
-86
-87
-87
-
57
-1
-
Dividend distributed
Increase in other long-term liabilities
Decrease in other long-term liabilities
Increase in financial liabilities
Received premium fee for warrants
12
-
1
0
Cash flow from financing operations
-164
-13
Cash flow for the year
105
109
354
253
30
-8
489
354
LIQUID FUNDS
Liquid funds on January 1
Exchange rate differences in liquid funds
Liquid funds on December 31
30
33
INCOME STATEMENT OF THE PARENT COMPANY
SKr, million
Net revenue
Note
Result from participation in subsidiaries
2013
19
22
-33
-40
10, 12, 13, 14, 15, 16
-14
-18
5
Administration expenses
EBIT
2014
17
118
0
Other interest income and similar income
19
58
58
Interest costs and similar costs
20
-38
-23
124
17
Profit/loss before tax
Tax on profit/loss for the year
Profit/loss for the year
21
-14
-4
110
13
STATEMENT OF COMPREHENSIVE INCOME OF THE PARENT COMPANY
SKr, million
Earnings for the year
Other comprehensive income
2014
2013
110
13
-
-
Other comprehensive income for the year
-
-
Total comprehensive income for the year
110
13
31
BALANCE SHEET OF THE PARENT COMPANY—ASSETS
SKr, million
Note
Dec 31, 2014
Dec 31, 2013
FIXED ASSETS
Tangible fixed assets
24
0
0
Participations in subsidiaries
26
994
992
Receivables in subsidiaries
28
57
73
Deferred tax receivables
29
2
10
Other long-term receivables
30
2
2
Financial fixed assets
1,055
1,077
Fixed assets
1,055
1,077
851
867
4
4
CURRENT ASSETS
CURRENT RECEIVABLES
Receivables in subsidiaries
Other receivables
Prepaid expenses and accrued revenue
Current receivables
Cash and bank balances
33
2
6
857
877
217
121
Current assets
1,074
998
Assets
2,129
2,075
BALANCE SHEET OF THE PARENT COMPANY—EQUITY AND LIABILITIES
SKr, million
Note
Dec 31, 2014
Dec 31, 2013
STOCKHOLDERS' EQUITY
RESTRICTED STOCKHOLDERS' EQUITY
Capital stock
499
Restricted reserves
573
573
1,072
1,072
Share premium reserve
118
126
Retained earnings
248
322
Profit/loss for the year
110
13
Restricted stockholders' equity
499
UNRESTRICTED STOCKHOLDERS' EQUITY
Unrestricted stockholders' equity
Stockholders' equity
476
461
34
1,548
1,533
37
7
7
7
7
130
197
PROVISIONS
Provisions for pensions and similar commitments
Provisions
CURRENT LIABILITIES
Liabilities to credit institutions
35, 36
Accounts payable
Liabilities to subsidiaries
Other current liabilities
Accrued expenses and prepaid revenue
40
Current liabilities
Stockholders' equity, provisions, and liabilities
18
16
409
312
9
3
8
7
574
535
2,129
2,075
MEMORANDUM ITEMS
Pledged assets
41
983
981
Contingent liabilities
42
31
35
32
CAPITAL ACCOUNT OF THE PARENT COMPANY
RESTRICTED EQUITY
SKr, million
Note 34
Capital
stock
Reserve
fund
UNRESTRICTED EQUITY
Premium
fund
Total
508
573
1,081
Change in share premium reserve
-
-
Repurchase of warrants
-
-
-9
Dividend
Profit/loss for the year
Amount on January 1, 2013
Earnings
carried forward
Total
stockholders'
equity
Total
527
1,608
127
400
-
1
-
1
1
-
-2
-
-2
-2
-
-9
-
9
9
0
-
-
-
-
-87
-87
-87
-
-
-
-
13
13
13
499
573
1,072
126
335
461
1,533
Repurchase of warrants
-
-
-
-11
-
-11
-11
Share-based payments
-
-
-
3
-
3
3
Dividend
-
-
-
-
-87
-87
-87
Profit/loss for the year
-
-
-
-
110
110
110
499
573
1,072
118
358
476
1,548
Cancellation of own shares
Amount on December 31, 2013
Amount on December 31, 2014
33
STATEMENT OF CASH FLOWS OF THE PARENT COMPANY
SKr, million
Note
2014
2013
CURRENT OPERATIONS
Profit/loss after net financial items
Adjustments for items not included in the cash flow, etc.
124
17
29
23
Interest paid
-8
-14
Interest received
1
1
43
Revenue tax paid
0
0
146
27
Change in current receivables
6
3
Change in current non-interest-bearing liabilities
5
8
Cash flow from operations before change in working capital
CHANGES IN WORKING CAPITAL
Change in working capital
11
11
157
38
Change in receivables in subsidiaries
-447
-17
Change in liabilities to subsidiaries
530
69
30
14
Cash flow from current operations
INVESTMENT OPERATIONS
Increase in other long-term receivables
Decrease in other long-term receivables
-10
-14
Cash flow from investment operations
103
52
Cash flow after investment operations
260
90
-11
-2
FINANCING OPERATIONS
Repurchase of warrants
Raising of loans from credit institutions
35
-
105
Amortization of liability to credit institutions
35
-78
-86
-
0
-87
-87
-
0
Deposit
Dividend distributed
Repurchase of own shares
Increase in financial liabilities
Cash flow from financing operations
Cash flow for the year
12
-
-164
-70
96
20
121
101
217
121
LIQUID FUNDS
Liquid funds on January 1
Liquid funds on December 31
34
33
NOTES TO THE FINANCIAL STATEMENTS
NOTE 1. ACCOUNTING PRINCIPLES
GROUP ACCOUNTING PRINCIPLES
Registered office, etc.
Industrial and Financial Systems, IFS AB (publ), corporate
identity number 556122-0996, has its registered office in
Linköping, Sweden, which is also corporate headquarters. The
company’s address is Teknikringen 5, SE-583 30 Linköping,
Sweden.
IFS is a leading supplier of component-based enterprise
applications developed using open standards and serviceoriented architecture (SOA). By offering agile business
solutions IFS improves its customers’ ability to make correct
decisions and more efficiently manage their business.
Conformity with norms and legislation
The consolidated accounts have been prepared in accordance
with the International Financial Reporting Standards (IFRS)
issued by the International Accounting Standards Board
(IASB), and the interpretations issued by the International
Financial Reporting Interpretations Committee (IFRIC) as
approved by the European Commission for application
within the European Union. Moreover, the Swedish Annual
Accounts Act and the Swedish Financial Accounting
Standards Council recommendation RFR 1, Supplemental
Accounting Regulations for Groups, have been applied.
The Parent Company has prepared its annual report in
accordance with the Swedish Annual Accounts Act and the
Swedish
Financial
Accounting
Standards
Council
recommendation RFR 2, Reporting for Legal Entities. The
consolidated accounts have been prepared in accordance with
the acquisition cost method with the exception of financial
assets and liabilities valued at fair value.
The Parent Company applies the same accounting
principles as the Group, except in the cases detailed below in
the section entitled “Parent Company Accounting Principles.”
The variations existing between Parent Company and Group
accounting principles are due to the limitations to applying
IFRS in the Parent Company as a result of the Swedish
Annual Accounts Act and the Swedish Act on Safeguarding
of Pension Commitments, and in certain cases for tax
reasons.
The annual report and the consolidated accounts were
approved for release by the Board of Directors on March 4,
2015. The consolidated income statement and balance sheet
and the Parent Company income statement and balance sheet
will be presented for adoption by the annual general meeting
of stockholders on March 25, 2015. Unless otherwise stated
below, the Group accounting principles detailed below have
been consistently applied throughout the periods presented in
the Group’s financial statements. Group accounting
principles have been consistently applied to the financial
statements and consolidation of the Parent Company,
subsidiaries, associated companies, and joint venture
companies.
Functional currency and presentation currency
The functional currency is the currency in the primary
financial environments in which companies that are part of
the Group conduct their business. The companies included in
the Group are the Parent Company, subsidiaries, associated
companies, and joint ventures.
The Parent Company’s functional currency is the Swedish
krona (SKr), which is also the presentation currency for the
Parent Company and the Group. Therefore the financial
reports are presented in Swedish krona. All amounts, unless
otherwise stated, are rounded off to the nearest million.
Estimates and critical assumptions in the financial reports
To present the financial reports in accordance with the IFRS,
the management and board of IFS must make certain
estimates and assumptions that affect the application of the
accounting principles and the reported amounts pertaining to
assets and liabilities, revenue and expenses. Actuals may differ
from the estimates.
The estimates and assumptions are regularly reviewed.
Changes in estimates are reported in the period in which the
change is made if the change affects only that period, or in
the period in which the change is made and future periods if
the change affects both the current and future periods.
Assessments made by the management related to the
application of the IFRS that have a significant impact on the
financial reports and estimates that may entail significant
adjustments in the financial reports of subsequent years
pertain to the following areas:
•
Revenue recognition. The Group uses the percentage of
completion method of accounting for fixed-price
contracts for consulting projects. The percentage of
completion method requires the group to estimate how
much of the services already performed to date as a
proportion of the total services to be performed.
•
Valuation of bad debts. The Group applies a common
model for the valuation of bad debts. The model entails a
write-down of debt following a matrix in which the
percentage write-down is higher the older the debt is. If a
debt is so bad that it is deemed unlikely that it will ever
be paid, the debt is written down by 100 percent
regardless of its age.
•
Valuation of goodwill and capitalized expenditure for product
development. Each year the Group conducts an
impairment test to examine the need to write-down
goodwill, capitalized product development expenditure
and other intangible assets in accordance with Note 23.
The residual value for cash-generating entities has been
established by estimating value in use. To make such
estimations, certain assumptions must be made, see
Note 23.
•
Income tax. Management makes assessments to determine
current tax liabilities and tax receivables, as well as
provisions for deferred tax liabilities and deferred tax
35
receivables. This applies in particular to the valuation of
deferred tax receivables. This process requires that an
assessment be made of the tax outcome in each of the
countries in which the Group does business. The process
includes an assessment of exposure related to current tax
and to determine the temporary differences that arise
because certain assets and liabilities are valued differently
in the accounts and in the income tax returns.
Management is also required to assess the probability that
deferred tax receivables can be realized via future taxable
revenue. For further information on deferred tax
receivables and tax liabilities, see Note 29.
•
Restructuring measures. When major reorganization
programs are launched, provisions are made for
restructuring. For such provisions to be made, a number
of criteria must be fulfilled. Among other things, a
detailed formal plan of action must be made. When
provisions are made, the size of the cost of the program
must be assessed. Provisions for restructuring cover only
the direct costs arising from restructuring. The largest
and most common item is personnel-related expenses.
For information on changes in the restructuring reserve,
see Note 38.
•
Provisions for pensions.
•
Legal
•
In connection with business
combinations, senior management makes certain
assessments and estimates. Estimates include, among
other things, an assessment of the fair value of the
acquired assets and liabilities, and future cash flows.
Uncertainty implies for instance that actual cash flows
may differ from estimated future cash flows, which can
lead to impairment testing in later periods. After initial
recognition, the need for impairment is tested at least
annually, or whenever there are indications that the
asset’s value has decreased. For further information on
acquisitions during the fiscal year, see Note 44.
The current value of pension
obligations is dependent on a number of factors that are
established on an actuarial basis with the help of a
number of assumptions. Each change in such
assumptions will affect the reported value of the pension
obligations. See Note 37 for further information and a
sensitivity analysis.
The Group continuously monitors
substantial outstanding disputes top determine the need
to make provisions. Disputes can vary in character,
involving customers, suppliers etc. the estimates made,
however, do not necessarily reflect the outcome of legal
disputes, and the difference in outcomes and estimates
can substantially affect the company’s financial position.
For information on the disputes that IFS is involved in,
see the Board of director’s report and the section
“Additional information”.
disputes.
Business combinations.
Changes in accounting principles
Below are the standards that the Group has applied for the
first time for fiscal year beginning on January 1, 2014, and
which have affected the Group’s financial reports:
36
•
IFS 10 Consolidated Financial Statements
•
IFRS 11 Joint Arrangements.
•
covers
disclosure requirements for holdings in other companies,
such as subsidiaries, joint arrangements, associated
companies and unconsolidated structured entities. The
share of non-controlled interests in subsidiaries, the
Group's investments in associated companies and joint
ventures are insignificant. The application of IFRS12 has
thus had no effect on the financial statements compared
to previous years.
is based on
existing principles as it identifies control as the decisive
factor when determining whether a company shall be
included in the consolidated accounts. The standard
provides further guidance to help define control in cases
where this is difficult to assess. The application of the
new standard has not affected the financial statements.
A joint arrangement is defined
as an arrangement where two or more parties
contractually agree to share control. The purpose is to
focus on rights and obligations rather than on the legal
form of an arrangement. IFRS 11 classifies a joint
arrangement as either a joint operation or a joint venture.
In a joint operation parties to the arrangement have
direct rights to the assets and obligations for the
liabilities. In such an arrangement, assets, liabilities,
income and expenses shall be recognized in relation to
the party’s interest in the arrangement. A joint venture
gives parties rights to the net assets or earnings relating to
the arrangement. An interest in a joint venture is
recognized via the equity method as the proportionate
method is no longer permitted. For the Group, the new
standard entails a reduction in total assets as the various
items previously reported item by item according to the
proportionate method are accumulated on a single row
that reports the share of the net assets. The consolidated
income statement will also be impacted as the share of
earnings from joint ventures is reported on one row
instead of as a share of incomes and expenses. See Note
47 for its effect on the financial statement.
IFRS 12 Disclosures of Interests in Other Entities
New IFRS and interpretations not yet applied
A number of new standards and interpretations come into
force for fiscal years beginning after January 1, 2014 and have
not been pre-adopted by the Group. Of the standards and
interpretations that have been published but have not yet
come into force, the following have been deemed to affect
the Group:
•
IFRS 9 Financial Instruments treats the classification,
evaluation and reporting of financial liabilities and assets.
The complete version of IFRS 9 was issued in July 2014
for financial liabilities and replaces the parts of IAS 39
that relate to classifying and evaluating financial
instruments. According to IFRS 9 financial assets are
classified in three categories: accrued acquisition value,
fair value through other total earnings or fair value
through comprehensive income. The classification is
determined when the asset is first reported based on the
company’s business model and characteristic properties
in the contractual cash flows. Investments in own capital
instruments shall be recognized at fair value through
comprehensive income. It is, however, possible to
recognize the instrument at fair value through other total
earnings the first time it is recognized. The instrument
will not be reclassified to comprehensive income when it
is divested. IFSR 9 also introduces a new model for
estimating credit loss reserves based on expected credit
losses. For financial liabilities, there is no change in
classification and valuation except when a liability is
recognized at fair value through comprehensive income
based on the fair value alternative. Changes in valuation
pertaining to changes in own credit risk shall in such case
be recognized in other total earnings. IFRS 9 lowers the
restrictions to applying hedge accounting by replacing the
80-125 criterion with a requirement that there be a
financial relationship between the hedging instrument
and the item being hedged, and that the hedge ratio be
the same as that used in the economic hedge. Moreover,
hedging documentation is changed somewhat compared
with that required under IAS 39. The standard has not yet
been adopted by the EU. The standard shall be applied
for the fiscal year beginning on January 1, 2018. The
Group has not yet assessed the effects of implementing
the standard.
•
IFRS 15 Revenue from Contracts with Customers specifies
how revenue shall be recognized. The principles on
which IFRS is based aim to provide users of financial
reports more informative disclosures on a company’s
revenue. The expanded disclosure requirements entail
that information shall be provided about the nature,
timing, and uncertainties related to revenue recognition
and cash flow pertaining to a company’s customer
contracts. According to IFRS 15, revenue shall be
recognized when the customer takes control of a sold
good or service and is able to use or benefit from the
good or service. IFRS 15 enters into force on January 1,
2017. The Group has not yet assessed the effects of
implementing the standard.
Segment reporting
The Group applies segment reporting that concurs with
internal reporting and which is presented to the chief
operational decision-maker. The chief operational decisionmaker is the function responsible for allocating resources and
assessing the earnings of the operational segments. The chief
operational decision-maker in the Group is senior
management. The primary basis for division is geographical
region and the following-up of their earnings.
Classifications, etc.
Tangible assets and long-term liabilities in the Parent
Company and Group consist in essence of sums that are
expected to be recovered or paid later than 12 months after
the balance sheet date. Current assets and current liabilities in
the Parent Company and Group consist in essence of sums
that are expected to be recovered or paid within 12 months of
the balance sheet date.
Consolidated accounting principles
Subsidiaries
Subsidiaries are all companies (including structured entities) in
which the Group has a controlling interest. The Group
controls a company when it is exposed to or is entitled to a
variable dividend from its holding in the company and can
affect the dividend through its influence in the company.
The purchase method is used to report on Group
subsidiaries. The consideration paid for acquiring a subsidiary
consists of the fair value of the transferred assets, liabilities
and shares issued by the Group. The consideration also
includes the fair value of all assets or liabilities that result
from an agreement in respect of a contingent consideration.
Acquisition-related costs are expensed as they occur.
Identifiable acquired assets and assumed liabilities in a
business combination are initially valued at fair value on the
acquisition date. For each acquisition the Group determines
whether the non-controlling interest in an acquired company
is valued at fair value or at the non-controlling interest’s
proportional share of the acquired company’s net assets.
The amount by which the consideration, non-controlling
interests, and fair value on acquisition date of previous
holdings exceed the fair value of the Group’s proportion of
identifiable acquired assets is to be reported as goodwill. If
the amount is less than the fair value of the acquired
subsidiary’s assets, the difference is reported directly in the
comprehensive income.
The financial reports of subsidiaries are included in the
consolidated accounts as of the day the controlling interest is
transferred to the Group, i.e. on acquisition. They are
excluded from the consolidated accounts as of the day the
controlling interest no longer exists.
Transactions with non-controlling interests
The Group treats transactions with non-controlling interests
as transaction with stockholders. In acquisitions from noncontrolling interests, the difference between the consideration
paid and the actual acquired share of the reported value of the
subsidiary’s net assets is reported under stockholders’ equity.
Profit and loss on divestments to non-controlling interests is
also reported under stockholders’ equity.
When the Group no longer has a controlling interest,
each residual holding is revalued at fair value and the change
in reported value is shown in the income statement. Fair value
is used as the first reported value and constitutes the basis for
the continued reporting of the residual holding as an
associates company, joint venture or financial asset. All
amounts pertaining to the divested entity that were previously
reported under other comprehensive income are reported as
if the Group had directly divested the respective assets or
liabilities. As a result, amounts previously reported in other
comprehensive income may be reclassified as earnings.
If the interest in an associated company is reduced, but a
significant influence remains, only a proportional share of the
amount previously reported in other comprehensive income
is reclassified, where relevant, to earnings.
37
Associated companies
Associated companies are those in which the Group has a
significant, but not controlling, interest in the operational and
financial management, generally through a holding of
20–50 percent of the voting rights. From the point in time at
which the significant interest is acquired, the interest in the
associated company is reported in the consolidated accounts
pursuant to the equity method. In the Group income
statement, the Group’s share in the associated companies’ net
earnings after tax, and adjusted for depreciation, write-downs
and resolution of acquired fair value adjustments, is reported
under ‘Participations in associated companies’. Dividends
obtained from the associated company reduce the reported
value of the investment.
The Group’s reported valuation of its holding in
associated companies includes goodwill that is identified on
acquisition, net after write-downs that may be required.
When the Group’s share of reported losses in the
associated company exceeds the reported value of the shares
in the Group, the value of the shares is reduced to zero. The
equity method is applied until the significant interest ceases to
exist.
Joint ventures
For accounting purposes, joint ventures are companies in
which the Group has entered into collaboration agreements
with one or several parties to share a controlling interest in
their operational and financial management. Holdings in joint
ventures shall be recognized using the equity method as the
proportional consolidation principle is no longer permitted.
For the Group, the new standard means that recognition is
affected retroactively through a reduction in total assets as the
various items that were previously recognized item by item in
accordance with the proportional consolidation principle shall
now be combined on a single row in which the share of net
assets is reported. The income statement is also affected as
the share in earnings from joint ventures is recognized on one
row instead of as a share of earnings and expenses.
Transactions to be eliminated on consolidation
Intra-Group receivables and payables, revenue or expenses,
and unrealized profits or losses arising from intra-Group
transactions between subsidiaries are eliminated in their
entirety when the consolidated accounts are prepared.
Unrealized profits arising from transactions with
associated companies and jointly controlled companies are
eliminated to an extent corresponding to the Group’s share of
the ownership of the company. Unrealized losses are
eliminated in a similar fashion to unrealized profits, but only
if there is no indication that a write-down is required.
Foreign currency
Transactions in foreign currencies
Foreign currency transactions are translated to the functional
currency at the exchange rate applying on the transaction day.
Monetary assets and liabilities in foreign currency are
translated to the functional currency at the rate prevailing on
the balance sheet day. Exchange rate differences resulting
38
from translations are reported in the income statement.
Exchange rate gains/losses on current assets/liabilities are
reported under other revenue/expenses, and exchange rate
gains/losses on financial assets and liabilities are reported
under financial revenue/expenses. Non-monetary assets and
liabilities reported at their historical acquisition value are
translated at the exchange rate applying on the transaction
day.
Financial reports in foreign entities
Assets and liabilities in foreign entities, including goodwill and
other corporate fair value adjustments, are translated to
Swedish currency at the rate applying on the balance sheet
day. Revenue and expenses in foreign entities are translated to
Swedish currency at the average rate that constitutes an
approximation of the rates applying when the transaction
occurred. Differences that arise when translating currency in
foreign entities are reported immediately against other
comprehensive income. On disposal of a foreign entity, the
cumulative translation difference relating to the entity, after
deductions for currency hedges, where applicable, is realized
in the Group’s income statement.
Revenue accounting
All Group revenue is reported at fair value after deductions
for discounts, value-added tax (VAT), etc. License agreements
for standard IFS software and third-party licenses are
recognized as revenue when all of the following requirements
are fulfilled:
•
•
•
The license agreement, without termination clauses, has
been signed and delivery has been made.
Price and payment terms are established, and there are no
other commitments apart from the license delivery.
Payment is likely and is due within six months.
License agreements that include undelivered components that
are required for the functionality of the software are
recognized in their entirety when the components have been
delivered.
IFS software licenses sold via partners and distributors
are recognized as income when sold to the final customer.
The exception is sales to partners where IFS Applications is
included as part of the partner’s total product offering and
where IFS can be considered a supplier.
Maintenance revenue is the fees IFS customers pay for
the right to upgrade software to new versions of IFS
Applications and fees for customer support. These fees do
not include consulting expenses for installation of updated
software. Maintenance revenue is reported straight-line over
the lifetime of the contract.
Consulting services and training related to
implementation are reported separately from license revenue
and are recognized as income as the services are supplied. The
stage of completion of such services is determined by
calculating time consumed. If services, such as extensive
customization, are a requirement for the functionality of the
software, and if the services are part of the total delivery,
license revenue and revenue from services are recognized as
income successively as delivery is made.
Consulting services are mainly carried out on account,
whereby income is reported as the work is performed. Noninvoiced work is reported as a current asset under ‘Other
receivables’ in the balance sheet. Work at fixed price is also
reported as the work is performed, after reservation for loss
risks.
Revenue from hardware sales is reported on delivery.
Transfer pricing
Fees due from sales companies to the product development
company are based on a transfer pricing model applied for
most subsidiaries in the Group based on the principle that the
sales companies achieve a predetermined profit margin that is
normal for comparable companies in the market. The
method, called the Transactional Net Margin Method
(TNMM), is a generally accepted model for transfer pricing.
For 2014, a profit margin spanning 2–5 percent has been set
for all subsidiaries. This principle is based on the fact that the
product development company is the entrepreneur and has
the highest risk exposure in the company.
In addition to the product development company in
Sweden, there are several permanent product development
centers, in Poland and Sri Lanka, among others. The product
development company covers their actual expenses plus a
general supplement of 5 percent. In certain projects,
subsidiaries exchange consulting services with each other.
These services are usually priced at a level slightly below the
ordinary price a customer would pay the sales company. In
addition to the transfer pricing described, cost of capital and
treasury expenses are invoiced on intra-Group transactions.
Each subsidiary receives or pays interest based on the
respective country’s interest rate, with a supplement of
2.35 percent. Group costs related to treasury are distributed
by adding a supplement of 0.90 percent to the interest
expenses and by invoicing a fee of 0.10 percent of the
subsidiaries revenue.
Operating expenses, and financial revenue and expenses
Fees pertaining to operating leases
Fees pertaining to operating leases are reported in the income
statement on a straight-line basis over the period of the lease.
Benefits obtained on signing a lease are reported in the
income statement as a reduction of the leasing fees on a
straight-line basis over the term of the leasing agreement.
Fees pertaining to finance leases
Minimum lease payments are allocated to interest expenses
and amortization of the outstanding liability. Interest
expenses are distributed over the period of the lease so that
each accounting period is charged with an amount
corresponding to a fixed rate of interest for the liability
reported in the respective period.
Financial revenue and expenses
Financial revenue and expenses include interest revenue from
bank assets, receivables and interest-bearing securities, interest
expenses related to loans, expenses related to borrowing
requirements, exchange rate gains and losses on financial
assets and liabilities, unrealized and realized gains on financial
investments, and derivative instruments used in financial
operations.
Interest revenue from receivables and interest expenses
related to liabilities are estimated using the effective interest
method. The effective interest is the rate that ensures that the
present value of all future receipts or payments during the
fixed rate term is the same as the reported value of the
receivable or payable. The interest element of financial leasing
payments is reported in the income statement by using the
effective interest method. Interest revenue includes
annualized amounts of transaction expenses and discounts,
where applicable, premiums and other variations between the
original value of the receivable and the amount received on
maturity.
Issue expenses and similar direct transaction expenses
related to borrowing are annualized over the term of the loan.
If loans include an options element, transaction expenses are
reported against stockholders’ equity.
Taxes
Taxes consist of current tax and deferred tax. Taxes are
reported in the income statement except when the underlying
transaction is reported in other comprehensive income or
directly against stockholders’ equity, in which case the related
tax effect is reported against other comprehensive income or
directly against stockholders’ equity.
Current tax is tax that is to be paid or received for the
current year by applying the tax rates that are determined, or
in practice determined, on the balance sheet day. This also
includes adjustment of current tax pertaining to previous
periods.
Deferred tax is calculated according to the balance sheet
method based on temporary differences between reported
and taxable values of assets and liabilities. The following
temporary differences are not taken into account:
•
•
Temporary differences arising when goodwill is first
reported.
Temporary differences pertaining to shares in subsidiaries
and associated companies that are not expected to be
reversed in the foreseeable future and where the time at
which the temporary difference is reversed can be
controlled by the board.
The valuation of deferred tax is based on how reported values
of assets and liabilities are expected to be realized or paid.
Deferred tax is calculated by applying the tax rates and tax
legislation that has been determined, or in practice
determined, on the balance sheet day.
Deferred tax is reported with current tax in the Group’s
income statement. Deferred tax receivables are reported as
financial fixed assets, whereas deferred tax liabilities are
reported as long-term liabilities.
Deferred tax receivables that pertain to temporary
differences and deficit deduction are reported as an asset if it
is likely that the deficit deductions can be set off in coming
years.
39
The value of the deferred tax receivables is based on
assessments of future taxable gains and the related
expectations concerning future use of loss carry-forward.
A current tax rate of 22 percent has been applied on the
Swedish companies. The current tax rate in each country is
applied for the Group’s foreign entities.
Financial instruments
Financial instruments reported as assets in the balance sheet
include the following balance sheet items: shares in other
companies, other long-term receivables, accounts receivable,
other receivables, and liquid assets (including current
investments). Liabilities include the following balance sheet
items: liabilities to credit institutions, accounts payable, and
other liabilities.
Recognition and derecognition in the balance sheet
A financial asset or liability is recognized in the balance sheet
when the Company becomes a party to it in accordance with
the contractual terms of the instrument. Accounts receivable
are recognized in the balance sheet when an invoice is issued.
Liabilities are recognized when a counterpart has delivered
and a contractual obligation to pay exists, even if no invoice
has been received. Accounts payable are recognized when an
invoice has been received.
A financial asset is derecognized when the entitlements in
the contract are realized, mature, or fall outside the control of
the Company. A financial liability is derecognized when the
obligations in the contract are complied with or are
extinguished in another manner.
Financial assets and liabilities are set off and recognized
as the net amount in the balance sheet only when the legal
right exists to set off the amounts and if it is intended to settle
the items with the net amount or simultaneously realize the
asset and settle the liability.
The acquisition and divestment of financial assets are
reported on the trade date, which is the date on which the
company commits itself to acquiring or divesting the asset.
except when used for hedge accounting. Assets in this
category are valued continuously at fair value, with changes in
value being reported in the income statement.
Financial investments are either financial fixed assets or
current investments depending on why they are held. If the
term or the expected period for which they are held is longer
than one year, they are financial fixed assets; if they are to be
held for less than one year, they are current investments.
Financial investments consisting of shares belong either
to the category of financial assets valued at fair value through
the income statement. The change in value is reported in net
financial items.
Loans and receivables
Loans and receivable are non-derivative financial assets with
fixed payments or determinable payments, which are not
quoted on an active market. Receivables occur when
companies provide money, goods or services directly to the
borrower without intent to trade in receivables. The category
also includes acquired receivables. Assets in this category are
initially valued at fair value and subsequently at the accrued
acquisition value, which is determined based on the effective
rate of interest calculated on acquisition. Hence, fair value
adjustments and direct transaction costs are annualized over
the term of the instrument.
Long-term receivables and other receivables are valued at
the accrued acquisition value. If they are expected to be held
for longer than one year, they are deemed long-term
receivables.
Accounts receivable are reported when the risk has been
completed, whereby the benefit has been transferred to the
customer, and an invoice has been sent. Accounts receivable
are reported initially at fair value and subsequently at the
accrued acquisition value using the effective interest method.
As the term of customer receivables is short, their value is
reported at the nominal amount without discount as the
discount is not significant. Write-downs of accounts
receivable are conducted after individual testing of each
customer and are reported in operating expenses.
Classification and valuation
Financial instruments that are not derivatives are recognized
initially at the fair value of the instrument plus transaction
expenses for all financial instruments except those categorized
as financial assets recognized at fair value through the income
statement, which are recognized at fair value excluding
transaction expenses.
On initial recognition, a financial instrument is classified
according to the purpose for which the instrument was
acquired. The classification determines how the financial
instruments are valued after initial recognition as described
below.
Financial assets valued at fair value through the income statement
This category has two subgroups: financial assets held for
trading and other financial assets that the Company initially
chose to include in this category. A financial asset is classified
as being held for trading if it was acquired for the purpose of
being sold in the short term. Stand-alone derivatives, such as
embedded derivatives, are classified as being held for trading
40
Other financial liabilities
Loans (liabilities to credit institutions), accounts payable, and
other liabilities are included in this category. Accounts payable
have a short expected term and are valued without discount at
nominal value. Other liabilities are classified as other financial
liabilities, which means that they are initially reported at fair
value and subsequently at the accrued acquisition value using
the effective interest method.
Liquid assets
Liquid assets are cash, immediately available credit in banks
and similar institutions, and current liquid investments with a
term of less than three months from the time of acquisition
and which are subject to a low risk of fluctuations in value.
Derivative instruments and hedging measures
Derivative instruments are reported in the balance sheet as of
the contract day and are valued at their fair value, both
initially and on subsequent revaluation. The method of
recognizing profit or loss arising from revaluation is
dependent on whether the derivative instrument was
identified as a hedging instrument an, if so, the nature of the
hedged item.
Fair value hedging
To hedge the fair value of a recognized asset or liability, or a
binding commitment, currency futures and currency options
are used. Derivative instruments are recognized in the balance
sheet as of the contract day and valued at fair value, both
initially and on subsequent revaluation. Derivative
instruments held by the Group do not fulfill the criteria for
hedge reporting. Changes in their fair value, therefore, are
reported in the income statement.
All derivative instruments held by the Group are included
in the respective balance sheet items Other receivables and
Other liabilities. In the income statement, derivative
instruments are included in Other revenue, Other expenses,
and Financial items.
Hedge accounting
The Group designates certain external funding in foreign
currency as hedges of a net investment in a foreign operation
(net investment hedge). The Group documents at the
inception of the transaction the relationship between hedging
instruments and hedged items, as well as its risk management
objectives and strategy for undertaking various hedging
transactions. The Group also documents its assessment, both
at hedge inception and on an ongoing basis, of whether the
derivatives that are used in hedging transactions are highly
effective in offsetting changes in fair values or cash flows of
hedged items.
Net investment hedge
Any gain or loss on hedging instrument relating to the
effective portion of the hedge is recognized in other
comprehensive income. The gain or loss relating to the
ineffective portion is recognized in the income statement.
Gains and losses accumulated in equity are included in the
income statement when the foreign operation is partially
disposed of or sold.
Tangible fixed assets
Owned assets
Tangible fixed assets are reported as assets in the balance
sheet if it is likely that future financial benefits shall accrue to
the Company and the acquisition value of the asset can be
calculated in a reliable manner.
Properties in the Group are business premises used for
its own operations and are amortized over their period of use.
The acquisition value includes the purchase price and
expenses directly pertaining to the asset, such as the cost of
delivery and handling, installation, title deeds, consulting
services, and legal services.
Leased assets
Most of the lease agreements are considered to be operating
leasing as risks and benefits remain with the lessor, which
means that leasing fees are expensed straight-line during the
leasing period. When leasing contracts are considered to be
finance leases, they are reported as acquisition of tangible
fixed assets and as liabilities. Depreciation is applied in the
same manner as if the company owned the assets. In finance
leases, current leasing fees are divided into an interest portion,
which is expensed, and an amortization portion.
Principles for depreciation
Tangible fixed assets are reported at acquisition value after
deductions for accumulated depreciation and write-downs.
Assets are depreciated straight-line across the estimated
utilization period of the assets and based on the acquisition
value of the fixed assets. Leased assets are also depreciated
across the estimated utilization period or, if shorter, across
the leasing period.
The Group applies component depreciation, whereby the
estimated utilization period of the individual components
forms the basis for depreciation. The residual value of the
assets and the utilization are tested on each balance sheet day,
and assets are written down, when required, to their recovery
value. The estimated periods of depreciation are:
•
•
•
•
•
Buildings
Certain components for buildings
Equipment
Servers
Computers
50 years
5–10 years
5 years
5 years
3 years
Intangible fixed assets
Goodwill
Goodwill corresponds to that part of the cost related to an
acquisition that exceeds the fair value of the Group’s share of
identifiable net assets in the acquired subsidiary on
acquisition. Goodwill is valued at the acquisition value less
any accumulated write-downs.
Goodwill arising from acquiring associated companies is
included in the reported value of participations in associated
companies. In respect of business acquisitions in which the
acquisition expenses are less than the net value of the
acquired assets, assumed liabilities and contingent liabilities,
the difference is reported directly in the income statement.
Goodwill is reassessed annually and is amortized if the
recoverable value is less than the book value. Goodwill is
distributed across cash-generating entities when the need to
amortize is tested. Distribution is done across the cashgenerating entities or groups of cash-generating entities that
can be expected to benefit from the business combination in
which goodwill arose, identified as a business segment.
Research and development
The Group expenses research expenditure. IFS capitalizes
product development expenditure when the following criteria
are fulfilled:
•
•
It shall be technically feasible to turn the development
project into a marketable or internally usable product.
The resources required to complete the project are
available.
41
•
•
The project is likely to entail financial benefits for IFS,
either in the market where the product is to be sold or via
internal savings.
It is possible to calculate development expenditure in a
reliable manner.
It must also have been decided that the development project
is to be part of an IFS Applications release or will be used to
streamline internal processes. This means that expenses
related to research and support are not capitalized.
The Group works continuously with a number of
product development projects, most of which focus on
standard versions of IFS Applications. The acquisition value
of product development expenditure mainly consists of
personnel-related expenses. In addition, there are expenses
for premises, travel, and office overheads. Borrowing
expenses directly related to product development are included
in the asset’s acquisition value as the Group deems that the
asset requires a substantial amount of time to complete.
Capitalized development expenditure is amortized after
the estimated lifetime of each product. This may not exceed
five years. Continuous assessments are made to determine
whether previous expenditure was validly capitalized and if
required, a corresponding depreciation will be applied.
Other intangible fixed assets
Other intangible fixed assets mainly include customer
relations, and acquired product rights and software licenses.
These assets are reported at acquisition value less accumulated
depreciation.
Principles for depreciation
Intangible fixed assets are reported at acquisition value after
deductions for accumulated depreciation and write-downs.
Depreciation is reported in the income statement on a
straight-line basis across the estimated utilization period and
is based on the acquisition value of the fixed asset.
Depreciable intangible assets are depreciated as of the
date on which they become available for use on the market.
The estimated utilization periods are:
•
•
•
•
Capitalized development expenditure
5 years
Acquired product rights
5–10 years
Software
5 years
Customer relations and other intangible fixed assets 2–5 years
Write-downs
Impairment test for tangible and intangible assets
Assets such as goodwill and assets not yet in use, whose
utilization periods cannot be determined, are not written off.
Instead they subjected annually to an impairment test to
assess write-down requirements. The Group also applies an
annual impairment test to capitalized development
expenditure and other intangible fixed assets, despite the fact
that their period of use is determinable, as these items are
deemed to have considerable significance for the financial
position of the Group. The test is based on expected future
growth and margins and is mandatory even if there is no
indication that a write-down is indicated. If there is an
indication at the end of the fiscal year that a tangible or
42
intangible fixed asset has decreased in value, the residual value
of the asset is estimated, i.e. the higher of the net realizable
value of the asset and its value in use. When estimating value
in use, future cash flows are discounted using a discount
factor that considers the risk-free interest and the risk
associated with the specific asset. If the estimated residual
value is less than the reported value, the asset is written down
to its residual value.
Where goodwill pertains to a group of assets for which a
write-down is required, the amount to be written down is first
allocated to goodwill and subsequently to other assets in
proportion to their reported value. Depending on the asset
that is to be written down, the relevant item in the income
statement is charged.
A write-down of an asset is reversed when there is a
change in the assumptions used to establish the residual value
of the asset. The reversed amount increases the reported
value of the asset to a maximum of the value the asset would
have had (after deductions for normal write-downs) if no
write-downs had been made.
Write-down of goodwill, however, is never reversed.
On assessing the need to write down an asset, the
calculation is based on the affected cash-generating unit. A
cash-generating unit is the smallest group of assets for which
it is possible to establish regular payments that are largely
independent of other assets or groups of assets.
The primary purpose of Group assets and investments is
to provide and implement IFS Applications, which:
•
•
•
Is developed by a central product development
organization;
Is sold on the global market, through sales companies in
various countries that collaborate in sales to customers
with multinational operations;
Is supported by a central support organization.
Cash-generating entities in the Group consist of the business
segments as their payment flows are deemed to be essentially
independent of other assets. In the impairment test,
consolidated assets and expenses, apart from capitalized
product development expenditure, are distributed to the
segments in proportion to their share of revenue. Capitalized
product development expenditure is not distributed as it
occurs in a central product development organization and is
not directly related to sales of the product in the segments.
Capitalized product development expenditure is tested at
Group level.
Impairment testing of financial assets
On each reporting date, the Group evaluates whether there is
objective evidence of impairment for a financial asset.
Objective evidence consists of observable events that have
occurred and that have a negative impact on the ability to
recover the acquisition value.
Provisions
Group provisions consist primarily of pension obligations and
provisions for restructuring. Defined-benefits pension plans
are reported in the consolidated accounts according to
common principles and calculation methods. Provisions are
reported when the following criteria are fulfilled:
•
•
•
The Group has a legal or constructive obligation as a
result of a past event.
It is more likely than not that an outflow of resources will
be required to settle an obligation.
A reliable estimate can be made of the amount.
Provisions for restructuring are made when a detailed formal
plan for these exists and a valid expectation has been created on
the part of those affected. Provisions are not made for future
losses. Residual provisions for restructuring pertain primarily to
rental costs. All provisions are valued at present value.
Stockholders’ equity
Transaction expenses directly pertaining to the issuance of
new shares or options are reported net after tax in
stockholders’ equity as a deduction from the proceeds of the
issue. Share repurchase is reported against stockholders’
equity.
Stock-related benefits
The Group has a number of incentive programs regulated by
means of warrants. The programs are so constructed that
executives purchase warrants on market terms and receive a
maximum of three warrants free of charge, ‘free warrants’, per
warrant purchased. The number of free warrants received is
dependent of the company’s earnings per share. Free warrants
must be retained for a determined period of time—up to
three years—before they may be exercised. If the holder
ceases to be employed by IFS, the company retains the
preferential right to purchase any warrants that have been
acquired. Such warrants are repurchased at market price. In
addition, the company will repurchase free warrants received
by the executive for the market price. The total cost, including
the fair value of free warrants that have been distributed, is
reported distributed over the vesting period in such where
there is a vesting period. For programs that do not run with a
vesting period the total cost is reported, including the fair
value of the free warrants, distributed over the period until
one of the following occur: the warrants are exercised or the
warrants mature.
When the warrants are exercised, the company issues new
shares. Payments received, after deductions for directly
related transaction costs, are credited to the capital stock
(quota value) and Other capital contributed.
Employee benefits—pension obligations
Defined-benefit plans
In Sweden, Norway, and France, there are both definedbenefit and defined-contribution pension plans. In other
countries, the employees are covered by defined-contribution
pension plans only.
In defined-benefits plans, employees and former
employees receive benefits based on their salary on retirement
and years of service. The Group undertakes to ensure that
benefits are paid. The Group’s obligation in respect of
defined-benefit plans is calculated separately for each plan by
estimating the future payment accrued by employees though
their employment in both current and previous periods.
The defined-benefit pension plans are both funded and
unfunded. Where the plans are funded, the assets have been
placed primarily in pension funds. In the balance sheet, the
net sum of the estimated present value of the obligations and
the fair value of the plan assets, adjusted for possible
unreported actuarial profit/loss, is reported as a pension
liability.
Concerning defined-benefit plans, pension expenses and
pension obligations are estimated according to the Projected
Unit Credit Method. The method distributes the pension
expenses at the rate employees perform services for the
company that increase their entitlement to future benefits.
The estimates are made annually by independent actuaries.
The Company’s obligations are valued as the present value of
expected future payments using a discount rate corresponding
to the interest rate for first-class corporate bonds or
government bonds with a term corresponding to the
obligations in question. The most important actuarial
assumptions are given in Note 37.
When determining the present value of the obligations
and the fair value of the plan assets, actuarial profits and
losses may arise, either because the real outcome deviates
from the assumptions made (experience-based profits or
losses) or because the obligation changes. Actuarial profits
and losses are reported in Other comprehensive income over
the employee’s average in the period in which they occur.
Expenses pertaining to employment during previous periods
are reported directly in the income statement.
Interest expense less interest income from plan assets is
classified as a financial expense. Other expense items in
pension expenses are charged to operating earnings.
Cash flow analysis
Cash flow is analyzed according to the indirect method.
Reported cash flow comprises only transactions that entail
payments and receipts.
Defined-contribution plans
Defined-contribution plans are those to which the Company’s
obligations are limited to the contributions the Company has
committed itself to pay. In such cases, the size of an
employee’s pension is determined by the contributions made
by the Company to the plan and the return on capital
produced by the contributions. Consequently, the employee
carries the actuarial and investment risks. Group earnings are
charged with expenses as the benefits accrue.
PARENT COMPANY ACCOUNTING PRINCIPLES
The Parent Company accounting principles below have been
consistently applied in all periods presented in the Parent
Company’s financial reports.
Conformity with norms and legislation
The Parent Company has prepared its annual report in
accordance with the Swedish Annual Accounts Act and the
43
Swedish
Financial
Accounting
Standards
Council
recommendation RFR 2, Reporting for legal entities. The
Parent Company also applies Swedish Financial Accounting
Standards Council statements pertaining to listed companies.
RFR 2 entails that, in the annual accounts for the legal entity,
the Parent Company applies all IFRS and statements
approved by the EU as far as possible within the framework
of the Swedish Annual Accounts Act and taking into account
the relationship between reporting and taxation. The
recommendation states the exceptions and supplements that
shall be made with respect to the IFRS.
Differences between Group and Parent Company accounting principles
The differences between Group and Parent Company
accounting principles are outlined below. The Parent
Company accounting principles below have been consistently
applied in all periods presented in the Parent Company’s
financial reports.
Segment reporting
The Parent Company does not apply segment reporting as the
Parent Company is not part of any of the operational business
segments. The Parent Company is reported as part of the
corporate activities in the Group’s segment reporting.
Participations in subsidiaries
Participations in subsidiaries are reported in the Parent
Company according to the acquisition value method after
deduction for any write-downs. The acquisition value includes
acquisition-related
expenses
and
any
additional
considerations.
Financial instruments, derivatives, and hedge accounting
Financial assets are classified using a different method in the
Parent Company’s balance sheet than in the Group balance
sheet. The notes on financial assets describe how items in the
balance sheet are related to the classification used in the
Group’s balance sheet and in the Group’s accounting
principles. IFS applies valuation at fair value in accordance
with sections 4:14 a-d of the Swedish Annual Accounts Act.
Accordingly, the description of accounting principles for the
Group is also applicable for the Parent Company, except
pertaining to the reporting of impact on profit or loss.
Anticipated dividends
Anticipated dividends from subsidiaries are reported in cases
in which the Parent Company alone is entitled to determine
the size of the dividend and the Parent Company has
determined the size of the dividend before the Parent
Company publishes its financial reports.
Tangible fixed assets
Owned assets
The Parent Company reports tangible fixed assets at
acquisition value, less deductions for accumulated
depreciation and impairments, where applicable, in the same
manner as in the Group, but with the addition of revaluation,
where applicable.
44
Leased assets
The Parent Company reports all lease agreements as operating
lease agreements.
Borrowing expenses
Borrowing expenses are charged to earnings for the period to
which they pertain in the Parent Company.
Dividends from subsidiaries
The Parent Company reports dividends from subsidiaries as
financial revenue, regardless of whether they were earned
before or after acquisition.
Employee benefits—pension obligations
The Swedish Act on Safeguarding of Pension Commitments
includes provisions that result in different reporting than that
stated in IAS 19, and the application of the Act is required for
eligibility to make tax deductions. The Parent Company
complies with the Act, and its pension obligations are
reported in accordance with FAR RedR 4. The most
significant differences in IAS 19 compared with the
provisions of the Act are the way in which the discount
interest rate is determined, that the defined-benefit obligation
is estimated based on current salary levels with assumptions
of future salary increases, inflation and personnel turnover to
forecast the Company’s final pension costs, and that actuarial
gains and losses of the plan assets’ fair value or the
obligations’ present value are reported in the income
statement under other comprehensive income.
Group contributions and stockholder contribution
Group contributions made by the Parent Company to
subsidiaries are reported as an increase in Participations in
subsidiaries.
Group contributions received by the Parent Company
from subsidiaries are reported according to the same
principles as customary dividends from subsidiaries.
Therefore, the group contribution is reported as financial
income.
Stockholder contributions in the Parent Company are
reported as an increase in Participations in subsidiaries in the
balance sheet. To the extent that stockholder contributions
pertain to loss coverage, an assessment is made concerning
whether or not the value of the stock should be impaired.
NOTE 2. SEGMENT REPORTING
Group operations are divided into business segments that
coincide with reportable segments. The segments are
identified according to the way in which the Group’s internal
reporting is organized and presented to Group management.
The primary basis for division is geographical areas and the
following up of results from these. Currently, six geographical
segments are reported. The Group operates in various
countries either directly via its own sales companies or
indirectly via partners as follows:
Europe North:
Denmark, Estonia, Finland, Latvia, Norway, and
Europe West:
France, Spain, Portugal and the United Kingdom
Sweden
Europe Central: Germany, Italy, Netherlands, and Switzerland
Europe East: Cyprus, Czech Republic, Hungary, Kazakhstan,
Georgia, Poland, Romania, Russia, Slovakia, Turkey, and
Ukraine
Americas: Argentina, Brazil, Ecuador, Canada, Mexico and the
USA
Africa, Asia, and Pacific: Ethiopia, Kenya, Nigeria, South Africa,
Tanzania, Bangladesh, Botswana, Cameroon, Namibia,
Uganda, China, Hong Kong, India, Indonesia, Japan,
Malaysia, Pakistan, Singapore, Sri Lanka, Taiwan, Thailand,
the United Arab Emirates, Australia, and New Zealand
Segment performance is assessed by the management based
their EBIT. This consists of the segment’s operating
profit/loss, which includes among other things operational
revenue, direct and indirect expenses, and sales, marketing
and administration expenses. Restructuring expenses and
expenses related to writing down receivables are also charged
directly to the respective segment.
The segments receive most of their revenue from
external customers and refer to services related to IFS
Applications software. Revenue is reported as license revenue,
maintenance and support revenue, and consulting revenue.
Sales and other transactions take place between the
segments. Transfer pricing for services between the various
Group segments is market-based. Fees for most of the sales
companies are determined by applying a generally accepted
model for transfer pricing—the Transactional Net Margin
Method—which is based on the principle that the sales
companies achieve a predetermined profit margin. For further
information on transfer pricing, see note 1, Accounting
Principles.
Undistributed corporate revenue, expenses, assets and
liabilities include the Group’s product development
organization, and the corporate management, financial, and
marketing functions. Product development is carried out at
permanent development centers in Sri Lanka, Poland, and
Sweden. Corporate management, financial and marketing
functions are mainly located in Sweden.
Undistributed revenue and expenses include all the
corporate functions above, interest and dividend revenue,
gains from divesting financial investments, interest expenses,
losses on divesting financial investments, the Group’s portion
of earnings in associated companies and joint ventures
consolidated according to the equity method, and tax
liabilities.
Undistributed assets and liabilities include activated
product development expenditure, deferred tax receivables
and liabilities, corporate liquidity, corporate financing and all
corporate functions.
Income statement 2014
SKr, million
Europe
North
Europe
West
Europe
Central
Europe
East
Africa, Asia,
and Pacific
Americas
Total
segments
Group
items
GROUP
2014
License revenue
149
124
61
29
129
66
558
-
558
Maintenance and support revenue
361
224
98
66
205
83
1,037
-
1,037
Consulting revenue
649
188
178
74
243
98
1,430
-3
1,427
5
3
2
2
1
3
16
-4
12
1,164
539
339
171
578
250
3,041
-7
3,034
Other revenue
Total external revenue
21
89
36
21
58
24
249
-249
-
1,185
628
375
192
636
274
3,290
-256
3,034
External operating expenses
-719
-415
-269
-163
-435
-211
-2,212
-516
-2,728
Internal operating expenses
-105
-40
-24
-3
-29
-11
-212
212
-
-2
-10
-1
-13
7
-4
-23
-8
-31
Operating expenses
-826
-465
-294
-179
-457
-226
-2,447
-312
-2,759
EBIT
359
163
81
13
179
48
843
-568
275
Internal revenue
Total revenue
Other operating items, net
Result from participation in associated companies
1
Other interest income and similar income
3
Interest expenses and similar expenses
-21
Profit/loss before tax
258
Tax on profit/loss for the year
-47
Profit/loss for the year
211
Other information 2014
SKr, million
Europe
North
Europe
West
Europe
Central
Europe
East
Americas
Africa, Asia,
and Pacific
Total
segments
Group
items
GROUP
2014
492
381
125
65
412
136
1,611
1,413
-
-
-
-
-
-
-
4
4
Total assets
492
381
125
65
412
136
1,611
1,417
3,028
Liabilities
External assets
Participations in associated companies
3,024
481
242
79
46
213
101
1,162
506
1,668
Investments in fixed assets
1
2
4
1
3
3
14
218
232
Depreciation and write-downs
3
22
2
2
12
2
43
199
242
Average number of employees
452
327
212
215
281
257
1,744
901
2,645
Number of employees at year end
465
327
229
208
280
264
1,773
934
2,707
45
Income statement 2013
SKr, million
Europe
North
Europe
West
Europe
Central
Europe
East
Americas
Africa, Asia,
and Pacific
Total
segments
Group
items
GROUP
2013
License revenue
140
104
66
26
120
78
534
1
Maintenance and support revenue
343
174
87
63
172
61
900
2
902
Consulting revenue
579
152
145
65
225
87
1,253
3
1,256
1
6
1
0
0
2
10
1
11
1,063
436
299
154
517
228
2,697
7
2,704
Other revenue
Total external revenue
535
20
51
42
17
58
17
205
-205
-
1,083
487
341
171
575
245
2,902
-198
2,704
External operating expenses
-653
-318
-244
-171
-374
-183
-1,943
-513
-2,456
Internal operating expenses
-91
-34
-21
-1
-33
-18
-198
198
-
Other operating items, net
-42
57
-6
-20
0
-6
-17
-29
-46
Operating expenses
-786
-295
-271
-192
-407
-207
-2,158
-344
-2,502
EBIT
297
192
70
-21
168
38
744
-542
202
Internal revenue
Total revenue
Result from participation in associated companies
0
Other interest income and similar income
3
Interest expenses and similar expenses
-21
Profit/loss before tax
184
Tax on profit/loss for the year
-41
Profit/loss for the year
143
Other information 2013
SKr, million
Europe
North
Europe
West
Europe
Central
Europe
East
Americas
Africa, Asia,
and Pacific
Total
segments
Group
items
GROUP
2013
426
351
124
69
369
119
1,458
1,228
-
-
-
-
-
-
-
3
3
Total assets
426
351
124
69
369
119
1,458
1,231
2,689
Liabilities
External assets
Participations in associated companies
2,686
416
216
80
45
182
95
1,034
418
1,452
Investments in fixed assets
1
78
1
2
3
1
86
212
298
Depreciation and write-downs
4
14
2
2
12
2
36
176
212
Average number of employees
479
328
198
248
283
262
1,798
890
2,688
Number of employees at year end
437
323
197
228
283
255
1,723
893
2,616
Employees previously reported in the segment Defence are included in the financial statements in Europe West.
External net sales
NOTE 4. MAINTENANCE AND SUPPORT REVENUE
GROUP
SKr, million
Sweden
2014
GROUP
2013
455
425
Rest of the World
2,579
2,279
Total
3,034
2,704
Fixed assets
2014
2013
Sweden
730
764
Rest of the World
707
593
1,437
1,357
Total
GROUP
License revenue, IFS
Third-party license revenue
Total
2014
511
2013
518
47
17
558
535
Third-party license revenue includes revenue that accrues
when IFS sells software licenses from third-party suppliers
such as Oracle.
46
Maintenance and support revenue
1,005
Third-party maintenance and support revenue
Total
GROUP
SKr, million
Hardware
Parent Company services
Miscellaneous
Total
NOTE 3. LICENSE REVENUE
SKr, million
2014
2013
875
32
27
1,037
902
NOTE 5. OTHER REVENUE
GROUP
SKr, million
SKr, million
2014
PARENT COMPANY
2013
2014
2013
3
2
-
-
-
-
19
22
9
9
-
-
12
11
19
22
NOTE 6. DEVELOPMENT EXPENDITURE
NOTE 12. AUDITORS’ FEES
GROUP
SKr, million
2014
GROUP
2013
SKr, million
2014
PARENT COMPANY
2013
2014
2013
Product development expenditure
-304
-281
PricewaterhouseCoopers
Amortization of capitalized product development
-175
-153
Audit engagement
-14
-14
Capitalized expenditure for product development
190
188
Audit business in addition to the audit
engagement
0
0
0
0
Total
-303
-260
Tax consultancy
-4
-4
-1
-1
Other amortization
NOTE 7. SALES AND MARKETING EXPENSES
2014
-4
-1
-2
Other services
0
-2
-
-2
Total
-8
-10
-2
-5
-1
-1
-
-
Other auditors
GROUP
SKr, million
-4
Audit engagement
2013
Sales and marketing expenses
-96
-97
Audit business in addition to the audit
engagement
0
-1
-
-1
Corporate sales and marketing expenses
-28
-43
Tax consultancy
-1
-1
-
-
Local sales and marketing expenses
-511
-451
Other services
0
0
-
-
Total
-635
-591
Total
-2
-3
0
-1
-10
-13
-2
-6
Total fees
NOTE 8. OTHER OPERATING INCOME
GROUP
SKr, million
2014
2013
Reversal of unused restructuring reserve
2
14
Rental income
1
1
Miscellaneous
1
1
Total
4
16
NOTE 9. OTHER OPERATING EXPENSES
NOTE 13. SALARIES, OTHER REMUNERATIONS, AND SOCIAL COSTS
GROUP
SKr, million
Exchange rate losses, net
2014
“Audit engagement” refers to the examination of the annual
accounts, the accounting records, and the administration by
the Board of Directors and the President. It also includes
other duties that are incumbent on the company’s auditors, as
well as advisory services and other types of support as a result
of observations made through such an examination.
Everything else is considered to be audit business beyond the
audit engagement. This includes, for example, the review of
IFS’s interim report.
2013
GROUP
2013
-1,355
-1,236
-15
-11
-256
-243
-3
-3
Pension costs, defined benefit plans
(see Note 37)
-10
-11
-
-4
Pension costs, defined contribution
plans (see Note 37)
-71
-68
-1
-2
Other personnel costs
-79
-69
-2
-1
-1,771
-1,627
-21
-21
-24
-14
Restructuring costs
-8
-95
Salaries and other remunerations
Miscellaneous
-3
-12
Social costs
-35
-121
Total
NOTE10. TRANSACTIONS BETWEEN SUBSIDIARIES
In the Parent Company, SKr 19 million (22), or 100 percent
(100) of the sales for the year, and SKr 0 million (0), or
1 percent (0) of the purchases for the year, pertain to
subsidiaries in IFS Group.
GROUP
SKr, million
2014
2013
Direct costs of goods and services sold
-367
Capitalized development cost
190
188
Personnel costs
-1,771
-1,627
Travel expenses
-135
-119
Costs for rented premises and other property costs
-106
-108
External services
-102
-100
Marketing and selling expenses
Amortization, depreciation, and write-downs
Other indirect expenses
Total
Total
Pension expenses reported as financial
expenses
Total
NOTE 11. OPERATING EXPENSES PER TYPE OF COST
PARENT COMPANY
2014
SKr, million
2014
2013
-2
-4
-
-
-1,773
-1,631
-21
-21
Of the Parent Company’s pension expenses, SKr 198,000
(705,000) pertained to the board of directors and CEO. The
corresponding amount for the Group was SKr 3 (4) million.
-290
-90
-88
-242
-212
-105
-100
-2,728
-2,456
NOTE 14. REMUNERATIONS PAID TO THE BOARD AND EXECUTIVE
MANAGEMENT
Definitions
Since the AGM held on March 26, 2014, the board has
consisted of Anders Böös (chairman), Ulrika Hagdahl, Birgitta
Klasén, Neil Masom, Bengt Nilsson (deputy chairman), and
Alastair Sorbie (president and CEO). In addition to the CEO,
executive management comprises the Company’s CFO Paul
Smith, the vice president of Business Development Fredrik
vom Hofe, and the general counsel Jesper Alwall. Executive
management participates in regular operational reviews under
the leadership of the president. ’Other officers’ means
47
regional and country management as well as group-level
management positions in strategic functions.
Holdings in stock and financial instruments
Stockholdings
Series-A
shares, no.
Remuneration principles
According to the resolution adopted by the AGM, board
members received SKr 3,050,000 in fees during 2014/2015,
of which SKr 1,400,000 was paid to the chairman of the
board and SKr 375,000 to each member not employed by the
Company. Audit committee work was remunerated with
SKr 100,000 to the chairman and SKr 50,000 to other
member. The board has resolved not to appoint a separate
compensation committee. The president’s salary is
determined by the board. Remuneration of corporate
management and senior executives who report to the
president is determined in consultation with the chairman of
the board. The board is continuously informed about salary
levels. Remuneration consists of a basic salary, variable
remuneration, other benefits, and pension contributions.
The relationship between basic salary and variable salary
is proportionate to the executive’s responsibility and powers.
For 2014, variable remuneration shall not exceed 50 percent
of the basic salary. The basis for the variable salary of the CEO
and executive management is established by the board and is
based on profitability goals set by the board for each year.
Pension contributions and other benefits paid to the
CEO and executive management are part of their total
remuneration. Remuneration has been made in the form of
financial instruments.
Remuneration and other benefits during the year
Remuneration of the president and executive management
2014
SKr, thousand
Basic
salary
Variable
remun.
Other
benefits
Pension
benefits
President and CEO
4,680
413
0
197
5,291
Other group management
5,609
2,060
362
1,218
9,250
10,289
2,473
362
1,415 14,540
SKr, thousand
Basic
salary
Variable
remun.
Other
benefits
President and CEO
3,551
355
-
705
4,611
Other group management
5,126
1,998
95
1,517
8,736
Total
8,677
2,353
95
2,222 13,347
Total
Options
BOARD OF DIRECTORS
Anders Böös (Chairman)
427,010
-
-
Ulrika Hagdahl
-
30,000
-
Birgitta Klasén
-
12,000
-
Neil Masom
-
-
-
150,000
-
-
-
8,526
94,875
577,010
50,526
94,875
Jesper Alwall
-
-
1,929
Fredrik vom Hofe
-
-
10,015
Bengt Nilsson
Alastair Sorbie (CEO)
Total
EXECUTIVE MANAGEMENT
Paul Smith
-
-
63,250
Total
-
-
75,194
Comments on the table:
• Holdings of stock and options are reported net after
acquisitions and divestments for the year.
• Holdings including family and associated companies.
• Stock and options held as of December 31, 2014.
Period of notice and severance pay
If the company terminates the employment, the CEO is to
receive 12 months’ notice; if the CEO terminates the
employment, the company is to receive 12 months’ notice. In
addition, the CEO shall receive 12 months’ severance pay, as
well as variable remuneration in an amount corresponding to
the variable remuneration paid in the immediately preceding
year. For executive management, the notification period is
between 12 months from the company and 3 to 6 months
from the executive.
Total
2013
Pension
benefits
Series-B
shares, no.
Total
Comments on the table:
• Executive management consisted of four persons during
the year.
• Other benefits refer primarily to company cars and
options.
Pensions
The president is entitled to a premium-based pension, with a
premium corresponding to 20 percent of the basic salary. The
retirement age for the president is 65. Senior executives are
included in IFS’s premium-based special pension plan. The
retirement age for other senior executives is 65. Since the
pension contribution for the president has reached its
maximum allowed value in the UK, his pension payments are
treated for payroll purposes as salary.
NOTE 15. TRANSACTIONS WITH RELATED PARTIES
Separate notes contain information about:
•
•
•
•
•
•
•
•
remuneration of the board and executive mgmt
shares in subsidiaries
participations in associated companies
and joint ventures
receivables from subsidiaries
stockholders’ equity
other liabilities
pledged assets
contingent liabilities
Note 14
Note 26
Note 27
Note 28
Note 34
Note 39
Note 41
Note 42
Bengt Nilsson, member of the board of IFS, is part-owner of
Pagero AB, a partner company of IFS. The volume of
transactions with Pagero during the year amounted to
48
SKr 0 million (0). No important transactions occurred with
related parties during the year besides what is outlined above
and in the notes referred to.
NOTE 16. AVERAGE NUMBER OF EMPLOYEES PER COUNTRY
GROUP
2014
Sweden
PARENT COMPANY
2013
2014
2013
NOTE 17. RESULTS FROM PARTICIPATIONS IN SUBSIDIARIES
PARENT COMPANY
2014
SKr, million
2013
Anticipated dividend from subsidiaries
65
Group contribution received from subsidiaries
55
-
-2
0
118
0
Write-down of receivables in subsidiaries
Total
-
437
467
3
3
134
143
-
-
Australia
23
21
-
-
Brazil
55
55
-
-
Canada
10
12
-
-
China
40
41
-
-
Czech Republic
21
21
-
-
Share in profit, IFS Retail AB
0
-1
Share in profit, Unitec Kurumsal Bilgi Sistemleri Yazlim Ve
Danismanlika A.S
1
1
Total
1
0
of whom, women
Denmark
46
44
-
-
Finland
68
68
-
-
France
70
71
-
-
Germany
150
140
-
-
Hungary
20
20
-
-
India
53
66
-
-
Italy
4
5
-
-
11
9
-
-
2
2
-
-
Japan
Kazakhstan
Malaysia
9
9
-
-
48
44
-
-
Norway
144
155
-
-
Poland
140
160
-
-
Russia
Netherlands
24
37
-
-
Singapore
9
11
-
-
Slovakia
8
8
-
-
South Africa
21
18
-
-
Spain
26
26
-
-
715
685
-
-
Switzerland
10
9
-
-
Thailand
15
13
-
-
23
23
-
227
232
-
Sri Lanka
United Arab Emirates
United Kingdom*
United States
Total, subsidiaries abroad
of whom, women
Total
of whom, women
of whom, women
President and other senior executives
of whom, women
NOTE 19. OTHER INTEREST INCOME AND SIMILAR INCOME
GROUP
SKr, million
External interest
3
1
1
-
-
57
57
3
3
58
58
NOTE 20. INTEREST EXPENSES AND SIMILAR EXPENSES
GROUP
SKr, million
PARENT COMPANY
2013
2014
2013
-9
-5
Exchange rate losses, net
-8
-1
-18
-4
Capitalized interest costs for
development production
0
1
-
-
-
Interest costs for defined-benefit
pension plans
-2
-4
0
0
-
Other financial costs
-3
-7
-4
-5
Total
-21
-21
-38
-23
-
-
-
-
678
679
-
-
2,645
2,688
3
3
812
822
-
-
External interest costs
2014
-8
216
Interest costs to subsidiaries
NOTE 21. TAXES
GROUP
SKr, million
Current tax relating to previous years
PARENT COMPANY
2013
PARENT COMPANY
2013
2014
2013
-56
-21
-6
1
0
-
-
-55
-21
-6
-
-9
-5
-
-5
Deferred tax
62
56
6
6
Deferred tax relating to loss carry forward
13
12
2
2
96
83
3
3
Deferred tax relating to temporary
differences
21
16
0
0
‘Other senior executives’ are those who report to the president
and local managing directors.
2014
Current tax
Current tax
2014
2013
-8
2,221
2013
2014
3
Interest from subsidiaries
Total
PARENT COMPANY
2013
-
216
2014
2014
-10
2,208
GROUP
2013
-
Board members and other officers
Board members
GROUP
2014
SKr, million
-8
*United Kingdom includes those employees who were reported in 2013 in joint venture in the
United Kingdom.
On December 31
NOTE 18. RESULTS FROM PARTICIPATIONS IN ASSOCIATED
COMPANIES
Total tax income/expense
17
-15
-8
1
8
-20
-8
-4
-47
-41
-14
-4
49
GROUP
SKr, million
2014
PARENT COMPANY
2013
2014
2013
NOTE 22. PROFIT AND DIVIDEND PER SHARE
Earnings per share
DIFFERENCES BETWEEN REPORTED TAX
EXPENSES AND TAX EXPENSES BASED ON
PREVAILING TAX RATES
Profit/loss before tax
Tax according to prevailing rate (22.0
percent)
Not taxable dividend from subsidiaries
Other non-deductible expenses
GROUP
2014
258
184
124
17
-57
-40
-27
-4
-
-
14
-
-4
-9
-1
0
Not taxable income
2
13
0
0
Effect of foreign tax rates
-3
2
-
-
Tax relating to previous years
1
0
-
-
Capitalized loss carry forward
20
-
-
-
Utilized loss carry forward, not
previously accounted for
1
2
-
-
Losses for which deferred tax has not
been considered
-7
-9
-
-
-47
-41
-14
-4
Total
Profit for the year allocated to parent company
shareholders, SKr million
2013
213
144
24,772
24,772
430
424
Weighted average no. of outstanding shares after
full dilution, thousands
25,202
25,196
Profit/loss per share before full dilution, SKr
8.60
5.81
Profit/loss per share after full dilution, SKr
8.45
5.72
Average no. of shares during the period, thousands
Adjustments for options program
Dividends per share
GROUP
2014
SKr
2013
Dividend per share accounted for during the year
3.50
3.50
Coming years' proposed dividend per share
4.50
3.50
Dividends paid during the year amounted to SKr 86,701,405
(86,701,405) on outstanding shares less treasury shares. A
dividend totaling SKr 111,473,235 for fiscal 2014 will be
proposed at the AGM to be held on March 25, 2015.
NOTE 23. INTANGIBLE FIXED ASSETS
GROUP
SKr, million
INTERNAL DEVELOPMENT
PURCHASED
Total
Capitalized
capitalized
expenditure Capitalized expenditur
interest costs e for R&D
for R&D
Other
intangible
fixed assets
Goodwill
Total
ACCUMULATED ACQUISITION VALUE
2,211
8
2,219
397
292
-
-
-
35
35
70
Purchases
190
1
191
-
0
191
Sales/disposals
-382
-
-382
-26
-40
-448
2
-
2
-4
-2
-4
2,021
9
2,030
402
285
2,717
-1,808
Opening balance Jan 1, 2013
Acquisition of operations
Exchange differences during the year
Closing balance Dec 31, 2013
2,908
ACCUMULATED DEPRECIATION
-1,641
-5
-1,646
-
-162
Sales/disposals
380
-
380
-
40
420
Depreciation during the year
-154
-2
-156
-
-30
-186
Opening balance Jan 1, 2013
Exchange differences during the year
Closing balance Dec 31, 2013
Book value Dec 31, 2013
-1
-
-1
-
4
3
-1,416
-7
-1,423
-
-148
-1,571
605
2
607
402
137
1,146
-13
0
-13
-4
-22
-39
-
-
-
-
-4
-4
-13
0
-13
-4
-26
-43
592
2
594
398
111
1,103
ACCUMULATED WRITE-DOWNS
Opening balance Jan 1, 2013
Write-down for the year
Closing balance Dec 31, 2013
Book value Dec 31, 2013
50
GROUP
INTERNAL DEVELOPMENT
PURCHASED
Total
Capitalized
capitalized
expenditure Capitalized expenditure
for R&D
interest costs for R&D
SKr, million
Other
intangible
fixed assets
Goodwill
Total
ACCUMULATED ACQUISITION VALUE
2,021
9
2,030
402
285
2,717
192
0
192
-
0
192
0
-
0
-
-2
-2
-
-
0
-
2
2
1
-
1
54
18
73
2,214
9
2,223
456
303
2,982
-1,416
-7
-1,423
-
-148
-1,571
-12
-
-12
-
2
-10
-175
-1
-176
-
-37
-213
Opening balance Jan 1, 2014
Purchases
Sale/disposals
Re-classification
Exchange differences during the year
Closing balance Dec 31, 2014
ACCUMULATED DEPRECIATION
Opening balance Jan 1, 2014
Sale/disposals
Depreciation during the year
-3
-
-3
-
-10
-13
-1,606
-8
-1,614
-
-193
-1,807
608
1
609
456
110
1,175
Opening balance Jan 1, 2014
-13
0
-13
-4
-26
-43
Write-down for the year
12
-
12
-
-
12
-1
0
-1
-4
-26
-31
607
1
608
452
84
1,144
Exchange differences during the year
Closing balance Dec 31, 2014
Book value Dec 31, 2014
ACCUMULATED WRITE-DOWNS
Closing balance Dec 31, 2014
Book value Dec 31, 2014
•
The reported value of goodwill, other intangible fixed assets and capitalized development costs is tested annually via an
impairment test based on expected future growth and margins. Other intangible fixed assets consist of product rights,
software and customer relations. Amortization requirements are tested at Group level and for each cash-generating entity.
The cash-generating entities are the same as the business segments and are identified based on the structure of the Group’s
internal reporting. The basis for division is primarily by geographic area (see Note 2 for further information).
•
Goodwill and other intangible assets are allocated to the Group’s cash-generating entities (business segments). The recovery
value of the cash-generating entities has been estimated by discounting future cash flows up until the time of estimation.
Capitalized development costs are considered a common asset and are therefore tested at Group level by estimating the sum
of the recovery value of all cash-generating entities.
•
The cash flows that are forecast are based on budgets and future prognoses per business segment. Cash flow beyond the
coming five-year period has been extrapolated by adjusting revenue and expenses upward by 2 percent per annum.
Management has determined the budgeted gross margin based on previous earnings and its expectations for market growth.
The weighted average rate of growth that is used concurs with the growth-related expectations of external parties.
•
On testing the reported values, the discount rate was set at 10.5 percent (13.3) before tax, corresponding to 8 percent (10)
after tax.
•
Revenue growth in the forecast period has been presumed to be 4.0–6.1 percent (4.0–5.1) and the EBIT margin has been
presumed to be 11.8–19.8 percent (12.3–18.9).
Sensitivity analysis
•
A reasonable change in any of the assumptions pertaining to the test would not result in a need to write down goodwill, other
intangible fixed assets, or capitalized development costs.
•
For the impairment test the discount rate (after tax) has been increased by 1.5 percentage points as an endurance test for each
operating segment. Such an increase would not result in any impairment requirement in any of the operating segments.
Goodwill per operating segment
SKr, million
Europe
North
Europe
West
Europe
Central
Europe
East
Americas
Africa, Asia,
and Pacific
Group
items
GROUP
Booked value December 31, 2013
44
107
2
0
225
7
13
398
Booked value December 31, 2014
44
121
2
0
264
8
13
452
51
Depreciation included in the income statement, per function
GROUP
SKr, million
License costs
2014
2013
-26
-20
Maintenance and support costs
0
0
Consulting costs
0
0
-187
-165
Research and development expenditure
Administration costs
Total
0
-1
-213
-186
NOTE 24. TANGIBLE FIXED ASSETS
GROUP
SKr, million
Buildings
and land
Leasing,
inventories
Computers
Office
equipment
Other
inventories
Total
ACCUMULATED ACQUISITION VALUE
Opening balance Jan 1, 2013
349
65
14
153
112
5
Acquisition of subsidiary
0
-
0
-
-
0
Purchases
6
-
16
13
2
37
Sales/disposals
-2
-3
-9
-4
-1
-19
Reclassifications
-
-2
2
-1
-
-1
0
0
0
0
0
0
69
9
162
120
6
366
Opening balance Jan 1, 2013
-30
-10
-120
-96
-3
-259
Depreciation during the year
-3
-1
-15
-6
-1
-26
Sales/disposals
1
2
8
3
0
14
Reclassifications
0
1
-1
1
-
1
Exchange differences during the year
0
0
0
0
0
0
Closing balance Dec 31, 2013
-32
-8
-128
-98
-4
-270
Book value Dec 31, 2013
37
1
34
22
2
96
Leasing,
inventories
Computers
Office
equipment
Other
inventories
Exchange differences during the year
Closing balance Dec 31, 2013
ACCUMULATED DEPRECIATION
GROUP
SKr, million
Buildings
and land
Total
ACCUMULATED ACQUISITION VALUE
Opening balance Jan 1, 2014
366
69
9
162
120
6
Purchases
6
0
24
9
1
40
Sales/disposals
-1
0
-7
-3
0
-11
-
-1
-1
-
-
-2
8
0
15
10
1
34
82
8
193
136
8
427
Opening balance Jan 1, 2014
-32
-8
-128
-98
-4
-270
Depreciation during the year
-4
0
-16
-8
-1
-29
Sales/disposals
1
0
7
3
0
11
Reclassifications
-
1
0
-
-
1
-4
0
-13
-8
0
-25
Closing balance Dec 31, 2014
-39
-7
-150
-111
-5
-312
Book value Dec 31, 2014
43
1
43
25
3
115
Reclassifications
Exchange differences during the year
Closing balance Dec 31, 2014
ACCUMULATED DEPRECIATION
Exchange differences during the year
52
PARENT COMPANY
Buildings
and land
SKr, million
Leasing,
inventories
Computers
Office
equipment
Other
inventories
Total
ACCUMULATED ACQUISITION VALUE
Opening balance Jan 1, 2013
-
-
1
1
-
2
Closing balance Dec 31, 2013
-
-
1
1
-
2
ACCUMULATED DEPRECIATION
Opening balance Jan 1, 2013
-
-
-1
-1
-
-2
Closing balance Dec 31, 2013
-
-
-1
-1
-
-2
Book value Dec 31, 2013
-
-
0
0
-
0
ACCUMULATED ACQUISITION VALUE
Opening balance Jan 1, 2014
-
-
1
1
-
2
Closing balance Dec 31, 2014
-
-
1
1
-
2
ACCUMULATED DEPRECIATION
Opening balance Jan 1, 2014
-
-
-1
-1
-
-2
Closing balance Dec 31, 2014
-
-
-1
-1
-
-2
Book value Dec 31, 2014
-
-
0
0
-
0
* Category Computer includes computers with a depreciation period of 3 years and servers with a depreciation period of 5 years.
Depreciation in the income statement, per function
NOTE 25. OPERATING LEASE AGREEMENTS
GROUP
SKr, million
2014
2013
License costs
-1
-1
Maintenance and support costs
-2
-2
Consulting costs
-4
-4
Development expenditure
-2
-2
Administration costs
-20
-17
Total
-29
-26
Tangible fixed assets do not include any capitalized interest.
Financial-leasing agreements
The Group’s tangible assets include leased items held under
the terms of financial leasing agreements, but they are not of
significant value.
The Group’s operating lease agreements primarily include
rented premises as well as computers, office equipment, and
vehicles. No objects are subleased. The nominal value of
future minimum leasing agreements with respect to nonterminable leasing agreements is distributed as follows:
GROUP
SKr million
Due for payment within one year
Due for payment later than one year but within five years
Due for payment later than five years
Total
2014
2013
65
92
270
195
32
43
367
330
53
NOTE 26. PARTICIPATIONS IN SUBSIDIARIES
Organization no.
IFS Americas, Inc.
IFS North America, Inc.
IFS Industrial & Financial Systems Canada Inc.
Metrix LLC
IFS Europe AB
556139-5541
IFS Applications Iberica, S.A.U.
IFS Benelux B.V.
IFS Belgium BVBA (in liquidation)
IFS Netherlands B.V. ((in liquidation)
Industrial and Financial Systems Central and Eastern Europe Sp. z o.o
IFS Region RU
Industrial and Financial Systems KZ
IFS Czech s.r.o.
IFS Hungary Számítástechnikai Kft.
IFS Industrial and Financial Systems Poland Sp. z o.o
IFS Slovakia, spol. s r.o
IFS France
SCI Le Chateau
IFS Italia S.r.l.
Industrial and Financial Systems IFS Verwaltungsgesellschaft mbh
Industrial and Financial Systems IFS Beteiligungsgesellschaft mbh
Industrial and Financial Systems IFS Deutschland GmbH & Co. KG
Industrial and Financial Systems, IFS UK Ltd
360 Scheduling Ltd
360 Scheduling Inc
360 Scheduling s.a.r.l
Application Software IFS South Africa (Pty) Ltd
IFS Aerospace & Defence Ltd
Infiseruo, Serviços Informáticos, Lda. (in liquidation)
IFS Japan, Inc
IFS Middle East FZ-LLC
IFS Nordic AB
556248-4856
IFS Danmark A/S
IFS Norge AS
IFS Sverige AB
556211-7720
IFS Finland Oy AB
IFS R&D Asia Pacific Sdn. Bhd.
Industrial & Financial Systems R&D Ltd
IFS Research and Development (Private) Ltd
IFS Solutions (Singapore) Pte Ltd
IFS Solutions (Shanghai) Co. Ltd.
IFS Solutions Malaysia Sdn. Bhd.
IFS Solutions Thai Ltd
IFS Solutions Asia Pacific Pte Ltd
IFS Solution Beijing Co. Ltd.
IFS Australia Pty Ltd
IFS New Zealand Pty Ltd
Industrial & Financial Systems Philippines, Inc (in liquidation)
IFS Solution India Private Ltd
IFS Solutions (Thailand) Ltd
Industrial & Financial Systems Sri Lanka Ltd
IFS World Operations AB
556040-6042
IFS R & D International (Private) Ltd
IFS Retail AB
Torron System AB
556457-8960
Vendimo Business Solutions AB
556400-2946
IFS Schweiz AG
LatinIFS Tecnologia da Informação Ltda
Total book value in the Parent Company
54
Registered office
USA
USA
Canada
USA
Sweden
Spain
Netherlands
Belgium
Netherlands
Poland
Russia
Kazakhstan
Czech Republic
Hungary
Poland
Slovakia
France
France
Italy
Germany
Germany
Germany
United Kingdom
United Kingdom
USA
France
South Africa
United Kingdom
Portugal
Japan
United Arab Emirates
Sweden
Denmark
Norway
Sweden
Finland
Malaysia
Sri Lanka
Sri Lanka
Singapore
China
Malaysia
Thailand
Singapore
China
Australia
New Zealand
Philippines
India
Thailand
Sri Lanka
Sweden
Sri Lanka
Sweden
Sweden
Sweden
Switzerland
Brazil
Share of
capital/votes
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
90%
90%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
50%
100%
100%
100%
100%
100%
100%
100%
Number of
shares
100
7,500
16,200
100
1,000
2
300,000
1
15,753,417
149,998
2,400
20
1,754,383
Book value,
SKr million,
2014
Book value,
SKr million,
2013
105
142
0
0
144
0
0
0
0
0
588
0
15
994
104
141
0
0
144
0
0
0
0
0
588
0
15
992
PARENT COMPANY
SKr, million
2014
2013
2,258
2,258
2
0
2,260
2,258
NOTE 27. PARTICIPATIONS IN ASSOCIATED COMPANIES AND JOINT
VENTURES
GROUP
ACCUMULATED ACQUISITION VALUE
Opening balance
Incentive program for key personnel
Closing balance
ACCUMULATED WRITE-DOWNS
Opening balance
-1,266
-1,266
Closing balance
-1,266
-1,266
994
992
Book value
Registered office
2014
SKr, million
2013
Opening balance
3
3
Share in earnings of associated companies
1
0
Exchange differences
0
0
Closing balance
4
3
Net revenue
Earnings
before tax
Assets
Liabilities
Share of
capital/votes
Equity
2014
INDIRECTLY OWNED
Application Software IFS South Africa (Pty) Ltd
South Africa
0
0
0
0
0
49.00%
Unitec Kurumsal Bilgi Sistemleri Yazlim Ve Danismanlika A.S
Turkey
13
1
9
5
4
25.00%
IFS Retail AB *
Sweden
8
0
-
-
-
49.99%
2013
INDIRECTLY OWNED
IFS Defence (pty) Ltd.**
United Kingdom
54
60
-
-
-
50.00%
Unitec Kurumsal Bilgi Sistemleri Yazlim Ve Danismanlika A.S
Turkey
11
1
5
2
3
25.00%
IFS Retail AB
Sweden
5
-1
2
2
0
49.99%
* Starting October 1, the company is classified as a subsidiary.
** Accounted for according to the Proportional Method. See below.
The values in the table are the Group’s share of net sales, earnings before taxes, assets, liabilities, and equity.
Shares in joint ventures
On December 31, 2013, the group and BAE Systems plc completed the restructuring of their joint venture IFS Defence Ltd. As a
result of the restructuring, the trade, assets, and employees focused on IFS Applications were transferred into a new 100-percent
owned subsidiary to IFS UK Ltd, IFS Aerospace & Defence Ltd. The remaining business of IFS Defence was retained by BAE
Systems plc, which also became a 100-percent owner of the former joint venture.
NOTE 28. RECEIVABLES IN SUBSIDIARIES
Temporary differences
PARENT COMPANY
2014
SKr million
Subordinated receivables
2013
2
24
Other long-term receivables in subsidiaries
55
49
Total
57
73
Temporary differences arise when the reported value and tax
value of assets and liabilities differ. Temporary differences
with respect to the following items resulted in deferred tax
liabilities and deferred tax claims.
GROUP
SKr, million
NOTE 29. DEFERRED TAX ASSETS AND TAX LIABILITIES
GROUP
SKr, million
2014
2014
2013
DEFERRED TAX CLAIMS CONCERNING
Temporary differences
Deficit deduction
Total
83
PARENT COMPANY
2013
2014
2013
DEFERRED TAX LIABILITIES
PARENT COMPANY
2013
2014
76
2
1
63
56
0
9
146
132
2
10
DEFERRED TAX LIABILITIES CONCERNING
Temporary differences
10
46
-
-
Total
10
46
-
-
Deferred tax receipts and tax liabilities are set off when this is
legally possible for particular tax receivables and tax liabilities,
and when deferred taxes refer to the same tax authority. The
amounts above have resulted after such set-offs and are
reported in the balance sheet. The figures in the table below
are in gross amounts.
Fixed assets
7
27
-
Provisions
0
12
-
-
Current claims and liabilities
3
7
-
0
10
46
-
0
Total deferred tax liabilities
-
DEFERRED TAX CLAIMS
Fixed assets
5
14
-
1
Current claims and liabilities
40
44
1
-
Provisions
38
19
1
-
Fiscal deficit deduction
127
132
-
9
Total deferred tax claims
210
209
2
10
-64
-77
-
-
Unreported deferred tax claims
concerning deficit deductions and
temporary differences
Total unreported deferred tax
claims
-64
-77
-
-
Total deferred tax claims, net
146
132
2
10
Deferred tax claims, net
136
86
2
10
55
Deficit deduction
The total value of the deficit deductions on the balance sheet
day can be utilized no later than during the following years:
GROUP
SKr, million
2014
2015 (2014)
GROUP
2014
4
Receivables, associated companies
2013
-
2014
SKr, million
PARENT COMPANY
2013
7
NOTE 32. OTHER RECEIVABLES
Ongoing assignments
2013
9
8
57
49
-
Accrued license revenue
7
4
76
70
23
2016 (2015)
0
1
-
-
Other prepaid expenses
2017 (2016)
3
1
-
-
Other accrued income
75
2018 (2017)
3
0
-
-
Other receivables
38
46
2019 (2018)
15
6
-
-
Total
262
200
Later
74
84
-
-
No time limit
25
36
-
9
NOTE 33. LIQUID ASSETS
127
132
-
9
The effective interest rate for current investments during
2014 was 7.75 percent. The current investments, located in an
overseas territory, had an average duration of 60 days.
Investments have been classified as liquid assets based on the
assumption that:
Total
NOTE 30. OTHER LONG-TERM RECEIVABLES
SKr, million
Other
financial
assets
Deposits
Total
GROUP
Opening balance, Jan 1, 2013
2
-5
0
-5
21
2
23
Changes during the year
Closing balance, Dec 31, 2013
5
-
5
26
2
28
0
2
2
-
-
-
0
2
2
-
-
-
0
2
2
Changes during the year
Closing balance, Dec 31, 2014
28
26
PARENT COMPANY
Opening balance, Jan 1, 2013
Changes during the year
Closing balance, Dec 31, 2013
Changes during the year
Closing balance, Dec 31, 2014
NOTE 31. ACCOUNTS RECEIVABLE
GROUP
SKr, million
Accounts receivable, gross
Provision for doubtful receivables
2014
2013
848
796
-58
-56
790
740
Accounts receivable, not due
519
519
Due 1–30 days
Accounts receivable, net
AGE ANALYSIS
196
181
Due 31–90 days
55
20
Due >90 days
20
20
790
740
Total
Change in the reserve for doubtful receivables
GROUP
SKr, million
2014
2013
On January 1
56
Provision for doubtful receivables
20
26
-8
-12
Reversed unused amounts
-10
-17
On December 31
58
56
Receivables written off during the year
59
•
•
•
the risk of value fluctuation is negligible,
they can easily be converted to cash,
they have a duration of not more than three months from
the time of acquisition.
GROUP
2014
SKr, million
Cash and bank
Current investment
Total
PARENT COMPANY
2013
2014
2013
480
346
217
9
8
-
121
-
489
354
217
121
NOTE 34. STOCKHOLDERS’ EQUITY
Definition of items in the Group equity statement
GROUP
Capital stock.
Refers to the Parent Company’s capital stock.
Other directly contributed capital. Refers to stockholders’ equity
that is contributed by the owners. Provisions made to the
share premium reserve from January 1, 2006 and in the future
are reported as directly contributed capital.
This item consists solely of all exchange rate
differences arising on translating financial reports from
foreign entities that have prepared their financial reports in a
currency other than that used by the Group for its financial
reports. The Parent Company and Group present their
financial reports in Swedish krona.
Reserves.
Accumulated earnings including earnings for the year. The
accumulated earnings includes earnings for the year and
profits carried forward/accumulated losses in the Parent
Company and its subsidiaries, associated companies, and joint
ventures. Previous provisions made to statutory reserves,
excluding share premium reserve carried forward, are
included in this equity item.
PARENT COMPANY
Restricted stockholders’ equity
Capital stock.
Refers to the Parent Company’s capital stock.
Consists solely of amounts transferred to the
premium fund before January 1, 2006.
Reserve fund.
56
Unrestricted stockholders’ equity
When shares are issued at a premium, i.e. when
the price paid for shares exceeds their listed price, an amount
corresponding to the amount paid in excess of the listed price
shall be transferred to the premium fund. Amounts
transferred to the premium fund as of January 1, 2006, are
included in unrestricted capital.
Premium fund.
Consist of the previous year’s unrestricted
stockholders’ equity after dividends, if any, have been paid.
With earnings for the year and the premium fund, they
constitute the total amount of unrestricted stockholders’
equity, i.e. the amount available for dividends to stockholders.
Retained earnings.
Change in number of shares
Number
Shares on Jan 1, 2013
Conversion of shares from
Series A to Series B
Series B shares
1,368,913
24,012,009
25,380,922
-106,468
106,468
0
Cancellation of shares bought
back, in own custody
Shares on Dec 31, 2013
Total
Series A shares
-
-409,092
-409,092
1,262,445
23,709,385
24,971,830
Conversion of shares from
Series A to Series B
-178,342
178,342
0
Shares on Dec 31, 2014
1,084,103
23,887,727
24,971,830
20.00
Quota value per share, SKr
499,436,600
Stockholders' equity at end of period, SKr
During the year, 178,342 shares of series A have been
converted to series B. At year-end, the company had 200,000
shares in own custody. The shares were repurchased in 2012.
Number of shares minus treasury shares held by the company
Thousands
2014
2013
At end of period
24,772
24,772
At end of period, after full dilution
25,177
25,192
Average during the period
24,772
24,772
Average during the period, after full dilution
25,202
25,196
Share options
During 2011 the company established an incentive program
whereby senior executives and key personnel (see Note 14)
were invited to acquire, on market terms, warrants in the
company. Each warrant affords the employee the
opportunity, under certain conditions related to the
company’s earnings per share in 2011, to receive not more
than a further three warrants free of charge. Under the
conditions, one warrant may be received if 85 percent of
targets are achieved; two warrants if 100 percent of targets are
achieved, and three warrants if 115 percent of targets are
achieved.
Each warrant entitles the warrant holder to acquire Series
B shares in IFS during the period from the publication of the
first quarter earnings in 2014 up to and including June 29,
2016. The exercise price for the warrants amounts to
SKr 131.90. The price per warrant was SKr 17.87. The
warrants have been evaluated according to the Black &
Scholes method. On calculation, the parameters were a riskfree interest of 3.01 percent and volatility of 25 percent over
12 months, a period of maturity of 4.74 years and an assumed
dividend of SKr 3.55 in 2012, SKr 4.29 in 2013, SKr 4.90 in
2014, and SKr 5.64 in 2015. The Group has preferential rights
to repurchase the warrants should a holder wish to divest a
holding.
The outcome regarding earnings per share for the year
2011 meant that two warrants were granted.
During 2012 the company established an incentive
program whereby senior executives and key personnel (see
Note 14) were invited to acquire, on market terms, warrants
in the company. Each warrant affords the employee the
opportunity, under certain conditions related to the
company’s earnings per share in 2012, to receive not more
than a further three warrants free of charge. Under the
conditions, one warrant may be received if 85 percent of
targets are achieved; two warrants if 100 percent of targets are
achieved, and three warrants if 115 percent of targets are
achieved.
Each warrant entitles the warrant holder to acquire Series
B shares in IFS during the period from the publication of the
first quarter earnings in 2015 up to and including June 29,
2017. The exercise price for the warrants amounts to
SKr 122.20. The price per warrant was SKr 9.23. The
warrants have been evaluated according to the Black &
Scholes method. On calculation, the parameters were a riskfree interest of 1.41 percent and volatility of 21 percent over
12 months, a period of maturity of 4.74 years and an assumed
dividend of SKr 4.16 in 2012, SKr 4.87 in 2013, SKr 5.47 in
2014, and SKr 6.29 in 2015. The Group has preferential rights
to repurchase the warrants should a holder wish to divest a
holding. The outcome regarding earnings per share for the
year 2012 meant that no warrants were granted.
During 2013 the company established an incentive
program whereby senior executives and key personnel (see
Note 14) were invited to acquire, on market terms, warrants
in the company. Each warrant affords the employee the
opportunity, under certain conditions related to the
company’s earnings per share in 2013, to receive not more
than a further three warrants free of charge. Under the
conditions, one warrant may be received if 85 percent of
targets are achieved; two warrants if 100 percent of targets are
achieved, and three warrants if 115 percent of targets are
achieved.
Each warrant entitles the warrant holder to acquire Series
B shares in IFS during the period from the publication of the
first quarter earnings in 2016 up to and including June 29,
2018. The exercise price for the warrants amounts to
SKr 130.70. The price per warrant was SKr 8.23. The
warrants have been evaluated according to the Black &
Scholes method. On calculation, the parameters were a riskfree interest of 0.93 percent and volatility of 19 percent over
12 months, a period of maturity of 4.74 years and an assumed
dividend of SKr 3.88 in 2013, SKr 5.00 in 2014, SKr 5.69 in
2015, and SKr 6.29 in 2016. The Group has preferential rights
to repurchase the warrants should a holder wish to divest a
holding.
The outcome regarding earnings per share for the year
2013 meant that two warrants were granted.
During the year the company established an incentive
program whereby senior executives and key personnel (see
57
Note 14) were invited to acquire, on market terms, warrants
in the company. Each warrant affords the employee the
opportunity, under certain conditions related to the
company’s earnings per share in 2013, to receive not more
than a further three warrants free of charge. Under the
conditions, one warrant may be received if 85 percent of
targets are achieved; two warrants if 100 percent of targets are
achieved, and three warrants if 115 percent of targets are
achieved.
Each warrant entitles the warrant holder to acquire Series
B shares in IFS during the period from the publication of the
first quarter earnings in 2017 up to and including June 28,
2019. The exercise price for the warrants amounts to SKr
206.80. The price per warrant was SKr 16,60. The warrants
have been evaluated according to the Black & Scholes
method. On calculation, the parameters were a risk-free
interest of 1,26 percent and volatility of 18 percent over 12
months, a period of maturity of 4.8 years and an assumed
dividend of SKr 4,50 in 2014, SKr 5.00 in 2015, SKr 5.50 in
2016, SKr 6.05 in 2017, and SKr 6.66 in 2018. The Group has
preferential rights to repurchase the warrants should a holder
wish to divest a holding.
The cost of the program has been reported as personnelrelated expenses amounting to SKr 0 million.
In the beginning of 2014, the company issued a timelimited invitation to redeem outstanding warrants related to
program TO09B that was issued in 2010 for cash. The
company repurchased warrants corresponding to 194,087
shares.
2014
Average
strike price
2013
Options,
thousands
Average
Options,
strike price thousands
On January 1
130.01
420
118.32
466
Issued
206.80
239
130.70
213
-
-
-
-
Bought back
Indexation of strike price on
options issues in previous years
131.90
-194
-118.09
-206
-
-
8.00
206
Unallocated
206.08
-60
130.70
-53
On December 31
163.09
405
130.01
420
Exercised
Outstanding share options at year-end have the following year
of maturity and strike prices:
Options, thousands
Maturity, coming years
Strike price
2014
2013
2014–2016
131.90
4
2015–2017
122.20
62
62
2016–2018
130.70
160
160
2017–2019
206.80
179
-
405
420
Total
198
NOTE 35. LIABILITIES TO CREDIT INSTITUTIONS
GROUP
2014
SKr, million
PARENT COMPANY
2013
2014
2013
LONG-TERM LIABILITIES
Financial leasing liabilities
0
0
-
-
130
197
130
197
0
0
-
-
Total
Granted overdraft facility and line of
credit
Unused overdraft facility and line of
credit
130
197
130
197
500
500
500
500
370
303
370
303
Used overdraft facility and line of credit
130
197
130
197
CURRENT LIABILITIES
Bank loan
Financial leasing liabilities
Changes in the number of outstanding share options and their
weighted average strike price are as follows:
NOTE 36. RISK STRUCTURE PERTAINING TO INTEREST AND FINANCING
Change of interest in the interval
0–6 MONTHS
Nominal amount
Bank loan
2014
2013
2014
MORE THAN 60
MONTHS
2014
2013
13–60 MONTHS
2013
2014
2013
TOTAL
2014
2013
130
197
-
-
-
-
-
-
130
-
0
-
-
0
-
-
-
0
0
130
197
-
-
0
-
-
-
130
197
Financial leasing liabilities
Total
7–12 MONTHS
197
Loan and credit maturity in the interval
0–6 MONTHS
Nominal amount
2014
7–12 MONTHS
2013
2014
2013
13–60 MONTHS
MORE THAN 60
MONTHS
2014
2014
2013
TOTAL
2013
2014
2013
Bank loan
-
-
130
0
-
197
-
-
130
197
Financial leasing liabilities
-
0
-
0
0
0
-
-
0
0
3
3
-
-
-
-
-
-
3
3
Accounts payable and other loans
127
111
-
0
-
-
-
-
127
111
Total
130
114
130
0
0
197
-
-
260
311
Derivatives
58
Change in fair value of plan assets during the year is as
follows:
NOTE 37. PENSION COMMITMENTS
Commitments in the balance sheet
GROUP
2014
SKr, million
Defined-benefit pension plans
Other pension commitments
Total
GROUP
2013
166
37
2
2
168
39
Provisions for defined-benefit pension plans
The Group has a small number of defined-benefit pension
plans, according to which employees covered by the pension
plan are entitled to benefits in the form of a guaranteed level
of pension payments during their lifetime. The level of the
benefit is based on the employees’ final salary and years of
service. The largest plans are in Sweden and Norway Most
pension plans held by the Group are premium-based.
GROUP
2014
SKr, million
143
23
Norway
19
10
Total provisions for pensions
4
4
166
37
Defined-benefit pension plans, 2014
The amounts reported in the consolidated balance sheet have
been calculated according to the following:
Net value defined-benefit pension plans
SKr, million
Sweden
Norway
Other
countries
Total
Present value of funded obligations
497
95
-
592
Fair value of plan assets
-354
-76
-
-430
Total
143
19
-
162
-
-
4
4
143
19
4
166
Present value of unfunded obligations
Total
Change in the defined-benefit commitment during the year is
as follows:
GROUP
SKr, million
Defined Benefit Obligation (DBO), beginning of the year
2014
2013
408
454
Current Service Cost
10
11
Interest Cost
19
18
Expected benefit paid (pensions payment)
Fair value of plan assets, beginning of the year
-5
-7
Special employer's contribution
26
-23
Exchange rate differences
Experience gains / losses
Actuarial gain / loss due to change in demographic
assumptions
Actuarial gain / loss due to change in financial
assumptions
0
-14
-6
9
-
6
152
-54
Defined Benefit Obligation (DBO), end of the year
596
408
2013
371
346
Interest income
17
14
Employer contributions
35
25
Benefits paid (pensions payment)
-2
-3
Exchange rate differences
0
-7
Actuarial gain / loss during the period
9
-4
430
371
Fair value of plan assets, end of the year
Defined-benefit pension plans, 2014
Specification of the changes in net liabilities recognized in the
Group’s balance sheet:
Specification of change in net liability
SKr, million
2013
Sweden
Other countries
2014
SKr, million
Sweden
Norway
Other
countries
25
8
4
37
5
7
0
12
-27
-8
-
-35
Net liability at beginning of year
Net cost reported in income statement
Employer's contributions to funded
plans
Pension payments reduced with
compensation
Total
-3
-
-
-3
Special employer's contribution
Exchange rate differences in
international plans
26
-
-
26
-
0
-
0
Experience gains / losses
Actuarial gain / loss due to change in
financial assumptions
-12
-2
-
-14
129
14
-
143
Net liability at end of year
143
19
4
166
Key actuarial assumptions
Sweden
Norway
United Kingdom
2014
2013
2014
2013
2014
2013
Discount rate
3.4%
4.6%
2.3%
4.0%
-
4.6%
Future annual salary
increases
3.0%
2.2%
2.8%
3.8%
-
3.8%
Future annual pension
increases
2.0%
2.0%
0.0%
0.6%
-
3.3%
For 2014 and 2013, the discount rate is used as the basis for
establishing the total expected dividends from the plan assets
in accordance with the amended IAS 19. Payment of
fees/provisions to plans for remuneration after terminated
employment is expected to amount to SKr 24 million for
fiscal year 2015.
Sensitivity analysis
The current value of the commitment for the Swedish
defined-benefits pension plans amounts to SKr 474 million
excluding special payroll tax. If the discount rate had been one
percentage point higher, the liability would have decreased by
SKr 114 million; if it had been one percentage point lower, the
liability would have increased by SKr 151 million. If the
average life expectancy increases by 1 year, the liability will
increase by SKr 21 million; if it decreases by 1 year, the liability
will decrease by SKr 22 million.
The corresponding figures for Norway amount to a
present value of SKr 95 million for the commitment. If the
discount rate had been one percentage point higher, the liability
59
would have decreased by SKr 16 million; if it had been one
percentage point lower, the liability would have increased by
SKr 18 million.
Plan assets
Through its defined-benefit pension plans and healthcare
plans when employment is terminated, the Group is exposed
to a number of risks, the most essential of which are
described below.
Asset volatility
The plan’s liabilities are calculated using a discount rate based
on mortgage bonds. If the plan assets fail to return a
corresponding yield, a deficit is incurred. The plan includes
investment that over time are expected to exceed the interest
rate on mortgage bonds, but entail risk and volatility in the
short term.
Changes in bond yields
A reduction in yields from mortgage bonds will entail an
increase in plan liabilities, even if such will be outweighed in
part by an increase in the value of the bond holding.
framework, the Group aims to match assets with the
character of the pension payments. This means that the
Fund’s fixed income portfolio with a high proportion of
assets with expected hedges that follow the Swedish CPI in
the long-term to shield the company from some of the risk
that has arisen related to inflation and interest rates. At the
end of the year, 8 percent of the total fixed income portfolio
consisted of real interest bonds of long-term duration.
The weighted average term for pension commitments is
28 years.
The asset plans consist of the following:
2014
Quoted Unquoted
Most of the plan’s commitments are related to inflation;
higher inflation leads to higher liabilities.
Life expectancy assumptions
Most of the pension commitments assume that employees
covered by the plan will receive payments as long as they live,
which means that higher longevity results in higher pension
liabilities.
Funding policy
The pension liability is secured via IFS Pensionsstiftelse (IFS
Pension Fund), in which assets are managed according to the
Fund’s investment policy. The policy governs the strategic
allocation of assets that are to be managed in such a way as to
provide a buffer for the company’s pension expenses and
ensure an overall matching strategy in relation to pension
commitments. The long-term goals of the asset management
are intrinsic annual dividends of 2 percent over rolling fiveyear periods.
To avoid major negative results in asset management
during particular periods of time, the strategic allocation at
each given time shall be such that risk is limited to a
maximum of 10% of the opening value of the portfolio for
each year. If the assets in the portfolio develop negatively
such that risk has increased, the proportion of risky assets
shall, insofar as it is possible, be reduced so as not to
jeopardize the lowest safety level. If the assets develop
positively such that the Fund obtains a larger margin to the
lowest safety level, the proportion of risky assets can be
increased within the overall limitations of this policy.
When plans are refunded, the Group ensures that the
investments are also managed according to a strategy,
whereby assets and liabilities are matched, which has been
developed to achieve long-term investments that are in line
with the commitments of the pension plans. Within this
60
Quoted Unquoted
Total
21%
-
21%
18%
-
18%
Structured products
-
12%
12%
-
9%
9%
Real-interest based
investments
-
10%
10%
-
15%
15%
15%
6%
21%
12%
6%
18%
31%
-
31%
34%
-
34%
-
5%
5%
-
6%
6%
67%
33%
100%
64%
36%
100%
Share-based investments
Long-term interestbearing investments
Short-term investments,
cash, and cash
equivalents
Other assets
Risk of inflation
2013
Total
Total
Defined-contribution pension plans 2014
According to such plans, payments made to employees after
terminated employment, such as pensions, healthcare benefits
and other disbursements are made principally through
payments to insurance companies or institutions, who thereby
assume the liability for the employee. The definedcontribution plans in Sweden are administered by SPP and
Collectum.
In 2014, costs pertaining to defined-contribution plans
amounted to SKr 71 million (68).
Provisions for defined-benefit pension plans
PARENT COMPANY
SKr, million
Provisions according to the Swedish Act on Income
Security
2014
2013
0
5
NOTE 38. OTHER PROVISIONS AND OTHER LIABILITIES
GROUP
SKr, million
2014
2013
Restructuring reserve
2
4
Other provisions
2
2
Total
4
6
Restructuring reserve
NOTE 41. PLEDGED ASSETS
SKr, million
GROUP
Group
SKr, million
Opening balance Jan 1, 2013
10
Reversal, restructuring reserve
-17
Provision, restructuring reserve
95
Use of restructuring reserve
-62
Effects of exchange rate fluctuations
0
Closing balance Dec. 31, 2013
26
Less current portion
-22
Restructuring reserve, long term 2013
4
Reversal, restructuring reserve
-4
Provision, restructuring reserve
8
Use of restructuring reserve
-29
Effects of exchange rate fluctuations
3
Closing balance Dec. 31, 2014
4
Less current portion
-2
Restructuring reserve, long term 2014
2
GROUP
Deferred maintenance revenue
2014
2013
478
408
Deferred license- and consulting revenue
26
25
Accrued consulting expenses
39
7
Advances from customers
6
0
VAT liabilities
103
100
Accrued payroll expenses
240
212
Accrued pension cost, defined contribution plans
22
15
Accrued social security contributions
73
86
Retained preliminary tax for employees
33
33
Liabilities to employees
5
3
27
23
Accrued interest expenses
1
1
Liabilities to associated companies
1
2
Derivatives held for trading
3
3
Accrued expenses, third-party suppliers
Miscellaneous other liabilities
Other accrued expenses
Other prepaid revenue
Total
6
0
109
99
4
0
1,176
1,017
NOTE 40. ACCRUED EXPENSES AND PREPAID INCOME
PARENT COMPANY
SKr, million
2014
2013
Accrued interest expenses
1
1
Accrued social security contributions
2
2
Accrued payroll expenses
2
1
Other accrued expenses
3
3
Total
8
7
PARENT COMPANY
2013
2014
2013
141
141
4
Blocked bank accounts
7
7
-
-
Shares in subsidiaries
-
-
979
977
-
Net assets in subsidiaries
4
736
559
-
Other
19
14
-
-
Total
903
721
983
981
Mortgages, receivables and shares in subsidiaries have been
pledged as security for the revolving credit facility. Liabilities
to credit institutions are detailed in Note 35. Net assets in
subsidiaries pertain to the corporate net assets.
NOTE 42. CONTINGENT LIABILITIES
GROUP
SKr, million
Sureties, external
NOTE 39. OTHER LIABILITIES
SKr, million
Chattel mortgages
2014
2014
PARENT COMPANY
2013
2014
2013
17
21
15
19
General surety for subsidiaries
-
-
11
11
Parent Company guarantees
-
-
5
5
17
21
31
35
Total
NOTE 43. ADJUSTMENTS FOR ITEMS NOT INCLUDED IN CASH FLOW
GROUP
SKr, million
Depreciation
2014
PARENT COMPANY
2013
2014
2013
242
212
-
Restructuring costs, net
-22
16
-
-
Provisions for pensions
-12
-94
1
4
8
10
-
-
38
15
21
4
Bad debts
Exchange rate gains/losses, net
Write-down of financial assets
-
0
0
2
0
13
21
9
14
Interest income for the year
-3
-2
-1
-1
Other adjustments
0
6
-3
2
264
184
29
23
Interest costs for the year
Total
NOTE 44. BUSINESS COMBINATIONS
During the year, the remaining outstanding shares in
IFS Retail AB have been acquired. The acquisition had a
marginal effect on the financial statements.
On December 31, 2013, the group and BAE Systems plc
completed the restructuring of their joint venture IFS
Defence Ltd. As a result of the restructuring, the trade, assets,
and employees focused on IFS Applications were transferred
into a new 100-percent owned subsidiary to IFS UK Ltd, IFS
Aerospace & Defence Ltd. The remaining business of IFS
Defence was retained by BAE Systems plc, which also
became a 100-percent owner of the former joint venture. The
transaction resulted in a one-off gain of SKr 47 million and is
recognized as other operating revenue in the consolidated
earnings for the period.
The goodwill recognized for the acquisition corresponds
to the company’s market position in the aerospace & defense
market, the expertise and experience of the workforce in
serving this market, and anticipated future growth
opportunities. As a result of this transaction, IFS will now
address this market through its wholly-owned operations,
61
giving IFS greater flexibility to align and deploy its global
capabilities to best effect.
For further information, please see the annual report for
2013.
Acquisition analysis
Company
SKr, million
Fair value reported in
Group value
2014
2013
Intangible fixed assets
-
Tangible fixed assets
-
37
1
Accounts receivable
-
12
Liquid assets, net
-
18
Accounts payable and other liabilities
-
-24
Deferred tax liabilities
-
-8
Fair value of net assets
-
36
Group goodwill
-
39
Total purchase consideration
-
Transferred compensation: fair
value of share in joint venture
-
-75
-
-
-
-
-
-
Less liability to seller
Liquid assets in the acquired
companies
Effect of the year's acquisition on
liquid assets
NOTE 45. NET ACQUISITION OF TANGIBLE FIXED ASSETS
Exposure to exchange rate fluctuation arises when the Group
carries out a large number of business transactions in foreign
currency in connection with its business operations. Such
exposure derives among others from business transactions
between operational units within the Group that have
different currencies as their functional currency as well as
from sales in currencies other than the individual companies’
functional currency. Most of the costs are in the functional
currency of the business units. The most significant exposures
refer to Norwegian kroner (NOK), the euro (€), the pound
sterling (£), and the U.S. dollar ($), a reflection of the fact that
a considerable amount of Group revenue and payments is
carried out in these currencies. The Group hedges these
exchange rate risks, where possible by trading in currency
futures and currency options in a number of currencies,
including NOK, the euro, the pound sterling, and the Polish
zloty.
The Parent Company trades in currency futures and
currency option contracts to match expected cash flows that
derive from the Group’s international business units. On
December 31, 2014, the Group had outstanding foreign
exchange contracts in the following currencies (nominal
values):
Currency futures contracts, nominal values in SKr million
SKr, million
GROUP
SKr, million
Exchange rate risks
2014
2013
2014
2013
AED
-
22
Investments for the year, net
-40
-32
AUD
13
10
Total
-40
-32
BRL
5
-
CAD
-
7
CHF
10
6
CZK
7
7
DKK
11
8
EUR
69
67
GBP
41
7
JPY
12
8
NOK
21
42
PLN
76
59
SGD
38
31
USD
12
-
ZAR
3
10
318
284
NOTE 46. FINANCIAL RISK MANAGEMENT AND DERIVATIVES
Via its business operations, the Group is exposed to a number
of financial risks, including fluctuations in earnings, balance
sheet, and cash flow resulting from changes in exchange rates,
rates of interest, and risks related to refinancing and credit.
Group financial policy for risk management, determined by
the board, is a framework of guidelines and regulations in the
form of risk mandates and limits for financial operations.
The board of directors has the overall responsibility for
the management of financial risks, which is delegated to the
chief executive officer, the chief financial officer and a board
director.
The IFS Group has centralized financial management,
which means that the chief responsibility for financial
management resides with the Parent Company. The overall
objective for the finance department is to minimize the
negative effects of market fluctuations on Group earnings and
stockholders’ equity and to provide cost-effective financing.
Risk is managed by a central finance department (Group
Finances) according to principles approved by the board.
Group Finances shall identify, evaluate, and hedge against
financial risks in close collaboration with operational units
within the Group. The board establishes a financial policy for
overall risk management and for specific areas that include
risks related to exchange rates, interest rates, credit on
investment in financial instruments, financing, and liquidity.
62
Total
Moreover, the group uses option instruments that, depending
on the spot price on the date of expiry, enable the Group to
sell currencies. On December 31, 2014, the Group had
outstanding currency options for the sale of EUR 0.9 million,
GBP 1.25 million, and NOK 45 million.
Currency option contracts, nominal values in SKr million
2014
Maturity
SKr, million
EUR
GBP
NOK
within 3
months
0.5
-
0.4
Inflow (SEK)
4.4
-
3.6
Outflow (GBP)
0.5
0.3
0.5
Inflow (SEK)
5.4
2.8
5.7
Outflow (NOK)
45.0
-
-
Inflow (SEK)
47.0
-
-
within 3
months
Outflow (EUR)
3–6
months
6–12
months
1.2
0.7
1.5
10.4
5.5
13.0
Outflow (GBP)
0.7
0.9
0.7
Inflow (SEK)
7.3
8.9
6.6
Outflow (NOK)
30.0
-
-
Inflow (SEK)
33.5
-
-
Inflow (SEK)
NOK
Credit risk
Maturity
SKr, million
GBP
6–12
months
Outflow (EUR)
2013
EUR
3–6
months
All profits and losses on foreign exchange contracts constitute
financial hedging and have been reported in the income
statement. The Group has a number of investments in foreign
operations, whose net assets are exposed to foreign currency
translation risk. In isolated cases funding in matching
currency is identified as hedging instruments in formal hedge
relations. The effective portion of gains and losses on these
currency exposures are recognized in other comprehensive
income.
Foreign currency sensitivity analysis
A sensitivity analysis, considering the unhedged foreign
currency exposure on December 31, 2014, shows the effect
on earnings after tax of a 10 percent change in the exchange
rate between the U.S. dollar and the Swedish krona, the euro
and the Swedish krona, the Pound Sterling and the Swedish
krona, and the Norwegian krone and the Swedish krona
according to the table below. It presumes that all other
variables, including interest rates and other foreign currencies,
remain constant.
Currency exposure sensitivity analysis
SKr, million
USD
EUR
GBP
NOK
Interest rate risks
Increase/decrease
of rate on balance
sheet day
Profit/loss
2014
and in deposits of short duration. The Groups borrows at
floating interest rates that are normally set for periods to three
or six months. The interest rate risk is managed by using
interest rate instruments for interest rate hedging, such as
swaps, to replace floating interest rates with fixed rates, which
offers protection against large interest rate increases. On
December 31, 2014, the company held no interest rate swaps.
A sensitivity analysis shows that if the floating interest rate
had increased/decreased by 1 percentage point earnings
would have been SKr 1 million lower/higher.
2013
10%
-0.4
-7.8
-10%
0.4
7.8
10%
-0.1
4.1
-10%
-1.1
-3.6
10%
3.0
3.4
-10%
-3.0
-3.6
10%
1.7
3.8
-10%
-2.7
-1.8
The Group is exposed to interest rate risks in respect of liquid
assets on deposit and bank loans with floating interest rates.
The Group’s liquid assets are held in interest-bearing accounts
The Group’s principal financial assets are liquid assets,
accounts receivable, and other receivables. Counterparties for
liquid assets are governed by the finance policy, which limits
the size of the credit exposure in respect of financial
institutions. The Group deals only with recognized
creditworthy customers and offers normal credit terms and
conditions in its ordinary operations after preliminary credit
checks have been performed. The Group has no substantial
concentration of credit risks. Rather, exposure is distributed
over a number of counterparties and a large number of
customers in several different geographical regions. For the
valuation of doubtful receivables, the Group applies a model
where the provision of the trade receivables is calculated
according to a matrix, where the percentage used to calculate
the provision is higher the older the receivables are. If a
receivable is uncertain and the assessment is made that
payment is not going to occur it is written down by 100 per
cent regardless of age. Accounts receivable are reported net of
provisions in the consolidated balance sheet. See Note 31 for
additional information pertaining to accounts receivable and
related regulations for bad debts.
Financing risks
The Group shall avoid having too much credit due for
payment in the same 12-month period. The Group shall strive
to ensure that a maximum of 25 percent of contracted loans
and credit limits falls due in the same 12-month period.
During 2010, the Group entered into a new financing
agreement with a duration of 5 years. Under the terms of the
agreement, the company shall not take new local operating
capital facilities in subsidiaries. At year-end, the average term
of contracted loans and credit facilities was 6 months (18
months). 100 percent of the loan portfolio matures within 12
months. It is the intention to refinance the existing loan
facility during 2015.
Liquidity risk
The Group manages liquidity risks by retaining sufficient
liquidity to provide for the needs of the business. The process
is monitored via the Group’s short-term, 0–3 months, and
medium-term, up to 12 months, cash flow forecasts.
Moreover, the Group ensures that it always has access to
sufficient agreed credit facilities. See Note 36 for a maturity
analysis of the loan portfolio.
63
Fair value estimation
Financial assets and liabilities 2013
Accounts receivable, other receivables, accounts payable and other liabilities
For receivables and payables with a remaining term of less
than one year, the reported value constitutes the fair value.
Other receivables and payables are estimated at present value
with a discount rate corresponding to that used to estimate
interest-bearing liabilities. There are no significant differences
between fair value and reported value.
Currency forward contracts
The fair value of financial instruments not traded on an active
market is established with the help of a fair value hierarchy.
The fair value hierarchy consists of the following levels:
Quoted prices (not adjusted) on an active market for
similar instruments.
December 31,
2013
SKr, million
Investments
Other longterm
receivables
and other
interests
Financial assets and liabilities 2014
December 31,
2014
SKr, million
Fair value
hierarchy
Financial
assets
valued at fair
value on
balancesheet day
Accountsand other
receivables
Of which
current
Of which
non-current
Level 3
2
-
-
2
Other long-term
receivables and
other interests
-
26
-
26
Accounts receivable
-
790
790
-
Other receivables
-
310
310
-
2
-
2
-
-
489
489
-
4
1,615
1,591
28
Derivatives
Level 2
Cash and cash equivalents
Total
December 31,
2014
SKr, million
Fair value
hierarchy
Financial liabilities 2014
Liabilities to credit
institutions
Accounts payable
Derivatives
Total
64
Level 2
Level 3
2
-
-
2
21
-
21
740
740
-
Other receivables
-
235
235
-
3
-
3
-
-
354
354
-
5
1,350
1,332
23
Derivatives
Level 2
Cash and cash equivalents
Fair value
hierarchy
Financial
liabilities
valued at fair
value on
balancesheet day
Of which
current
Other
financial
liabilities
Of which
non-current
Financial liabilities 2013
Liabilities to credit
institutions
-
197
197
-
Accounts payable
-
111
111
-
3
-
3
-
3
308
311
-
Derivatives
Level 2
Total
Liabilities to credit institutions
The fair value is based on discounted future cash flows in
respect of the principal and interest. There are no significant
differences between fair value and reported value. See
Note 36 for maturity analysis.
Capital structure
Financial assets 2014
Investments
Of which
non-current
-
December 31,
2013
SKr, million
To this end, market information is used to the greatest
possible extent when this is available. The currency forward
contracts held by the Group are valued according to the
Level 2 classification by using the market prices that apply on
the balance sheet day.
Of which
current
-
Directly (e.g. prices) or indirectly (e.g. derived from
prices) observable market inputs for the instrument other
than the quoted price.
Inputs for financial instrument for which the asset or
liability is not based on observable market data.
Accountsand other
receivables
Accounts receivable
Total
Level 3:
Financial
assets
valued at fair
value on
balancesheet day
Financial assets 2013
Level 1:
Level 2:
Fair value
hierarchy
Financial
liabilities
valued at fair
value on
balancesheet day
Of which
current
Other
financial
liabilities
Of which
non-current
IFS defines capital as stockholders’ equity including noncontrolling interests in accordance with the information
presented in the balance sheet and the capital accounts.
Capital on December 31, 2014, amounted to
SKr 1,360 million (1,237). IFS aims to have a capital structure
that leads to an efficient, weighted cost of capital and a credit
score that takes into account the needs of the business and
enables future acquisitions.
IFS reviews its capital structure and amends it when
required. To maintain or amend the company’s capital
structure, the company can adjust the level of dividends to
stockholders, repurchase shares, issue shares, or sell assets.
NOTE 47. APPLICATION OF IFRS 11 ”JOINT ARRANGEMENTS”
-
130
130
-
-
127
127
3
-
3
-
3
257
260
-
As of January 1, 2014, IFRS 11, “Joint Arrangements” joint
ventures must be consolidated according to the equity
method. Previously, assets, liabilities, revenue, and expenses
were recognized on the basis of the party’s interest according
to the proportional method. As the new principles affect
reporting retrospectively, the new standard has an impact on
the consolidation of the joint venture, IFS Defence Ltd. The
holding was restructured on December 31, 2013. Thereafter,
neither shares in IFS Defence Ltd nor earnings from shares in
IFS Defence Ltd are included. This change of principle has
no impact on net income or equity.
The effect of the change in accounting principle on holdings
in joint ventures is detailed in the following tables.
2013
SKr million
Cash flow from operations before change in working capital
Consolidated income statement
SKr million
Consolidated statement of cash flows
2013
8
Change in working capital
18
Cash flow from current operations
26
Net revenue
-36
Cash flow after investment operations
Direct expenses
19
Cash flow for the period
63
Gross earnings
-17
Cash and cash equivalents at the beginning of the period
-63
Product development, sales, marketing, and administration
expenses
10
Other operating revenue/expenses, net
-54
Result from joint venture
59
EBIT
-2
Financing expenses and other financial items, net
2
Earnings before tax
0
Tax
Earnings for the period
0
Consolidated balance sheet
SKr million
Dec. 31
2013
Intangible fixed assets
-
Tangible fixed assets
-
Participation in joint venture
-
Deferred tax receivables
-
Non-current assets
-
Current assets
-
Assets
-
Shareholders' equity
-
Non-current liabilities
-
Current liabilities
-
Equity and liabilities
-
2
Exchange rate differences in cash and cash equivalents
0
Cash and cash equivalents at the end of the period
0
NOTE 48. CONVERSION RATES
Rate at year end
2014
2013
Average rate
2014
2013
EUR
9.52
8.94
9.10
8.65
GBP
12.14
10.73
11.29
10.19
NOK
1.05
1.06
1.09
1.11
PLN
2.21
2.15
2.17
2.06
USD
7.81
6.51
6.86
6.51
NOTE 49. INFORMATION ABOUT THE PARENT COMPANY
Industrial and Financial Systems, IFS AB, is a Swedish
registered company headquartered in Linköping, Sweden. The
company is listed on the Nasdaq OMX Stockholm Mid-Cap
list. The visiting address of the head office is Teknikringen 5,
Linköping, Sweden; its postal address is Box 1545, SE-581 15
Linköping, Sweden.
The consolidated accounts for 2014 are reported for the
Parent Company and its subsidiaries, which together comprise
the Group. The Group also includes shares owned in
associated companies and a joint venture company.
65
The consolidated accounts and the annual report have been prepared in accordance with the international accounting standards referred to in
Regulation (EC) No. 1606/2002 of the European Parliament and Council of July 19, 2002, on the application of international accounting standards
and generally accepted accounting principles. They give a true and fair view of the financial position and results of the Group and Parent Company.
The board of directors’ report for the Group and Parent Company gives a true and fair view of Group and Parent Company operations and financial
position, and describes the essential risks and uncertainties to which the Group and Parent Company are exposed.
Linköping, March 4, 2015
Anders Böös
CHAIRMAN OF THE BOARD
Neil Masom
BOARD MEMBER
Ulrika Hagdahl
BOARD MEMBER
Bengt Nilsson
BOARD MEMBER
VICE CHAIRMAN
Birgitta Klasén
BOARD MEMBER
Alastair Sorbie
BOARD MEMBER
PRESIDENT AND CEO
As indicated above, the annual report and the consolidated accounts were approved for publication by the board of directors on March 4, 2015. The
consolidated income statement and balance sheet and the income statement and balance sheet for the Parent Company will be the subject of
adoption at the Annual General Meeting on March 25, 2015.
Our audit report was submitted on March 4, 2015
PricewaterhouseCoopers AB
Nicklas Kullberg
AUTHORIZED PUBLIC ACCOUNTANT
66
AUDITOR’S REPORT
To the annual meeting of the shareholders of
Industrial and Financial Systems, IFS AB (publ)
Corporate identity number 556122-0996
REPORT ON THE ANNUAL ACCOUNTS AND CONSOLIDATED ACCOUNTS
REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS
Responsibilities of the Board of Directors and the Managing Director for the
annual accounts and consolidated accounts
Responsibilities of the Board of Directors and the Managing Director
We have audited the annual accounts and consolidated accounts
of Industrial and Financial Systems, IFS AB (publ) for the year
2014, except for the corporate governance statement on pages
20–25. The annual accounts and consolidated accounts of the
company are included in the printed version of this document on
pages 13–66.
The Board of Directors and the Managing Director are
responsible for the preparation and fair presentation of these
annual accounts in accordance with the Annual Accounts Act and
of the consolidated accounts in accordance with International
Financial Reporting Standards , as adopted by the EU, and the
Annual Accounts Act, and for such internal control as the Board
of Directors and the Managing Director determine is necessary to
enable the preparation of annual accounts and consolidated
accounts that are free from material misstatement, whether due to
fraud or error.
Auditor’s responsibility
Our responsibility is to express an opinion on these annual
accounts and consolidated accounts based on our audit. We
conducted our audit in accordance with International Standards
on Auditing and generally accepted auditing standards in Sweden.
Those standards require that we comply with ethical requirements
and plan and perform the audit to obtain reasonable assurance
about whether the annual accounts and consolidated accounts are
free from material misstatement.
An audit involves performing procedures to obtain audit
evidence about the amounts and disclosures in the annual
accounts and consolidated accounts. The procedures selected
depend on the auditor’s judgment, including the assessment of the
risks of material misstatement of the annual accounts and
consolidated accounts, whether due to fraud or error. In making
those risk assessments, the auditor considers internal control
relevant to the company’s preparation and fair presentation of the
annual accounts and consolidated accounts 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 internal control. An audit also includes evaluating
the appropriateness of accounting policies used and the
reasonableness of accounting estimates made by the Board of
Directors and the Managing Director, as well as evaluating the
overall presentation of the annual accounts and consolidated
accounts.
We believe that the audit evidence we have obtained is sufficient
and appropriate to provide a basis for our audit opinions.
Opinions
In our opinion, the annual accounts have been prepared in
accordance with the Annual Accounts Act and present fairly, in all
material respects, the financial position of the parent company as
of 31 December 2014 and of its financial performance and its cash
flows for the year then ended in accordance with the Annual
Accounts Act. The consolidated accounts have been prepared in
accordance with the Annual Accounts Act and present fairly, in all
material respects, the financial position of the group as of
31 December 2014 and of their financial performance and cash
flows for the year then ended in accordance with International
Financial Reporting Standards, as adopted by the EU, and the
Annual Accounts Act. Our opinions do not cover the corporate
governance statement on pages 20–25. The statutory
administration report is consistent with the other parts of the
annual accounts and consolidated accounts.
We therefore recommend that the annual meeting of
shareholders adopt the income statement and balance sheet for
the parent company and the group.
In addition to our audit of the annual accounts and consolidated
accounts, we have also audited the proposed appropriations of the
company’s profit or loss and the administration of the Board of
Directors and the Managing Director of Industrial and Financial
Systems, IFS AB (publ) for the year 2014. We have also conducted
a statutory examination of the corporate governance statement.
The Board of Directors is responsible for the proposal for
appropriations of the company’s profit or loss, and the Board of
Directors and the Managing Director are responsible for
administration under the Companies Act and that the corporate
governance statement on pages 20–25 has been prepared in
accordance with the Annual Accounts Act.
Auditor’s responsibility
Our responsibility is to express an opinion with reasonable
assurance on the proposed appropriations of the company’s profit
or loss and on the administration based on our audit. We
conducted the audit in accordance with generally accepted
auditing standards in Sweden.
As a basis for our opinion on the Board of Directors’
proposed appropriations of the company’s profit or loss, we
examined the Board of Directors’ reasoned statement and a
selection of supporting evidence in order to be able to assess
whether the proposal is in accordance with the Companies Act.
As a basis for our opinion concerning discharge from liability,
in addition to our audit of the annual accounts and consolidated
accounts, we examined significant decisions, actions taken and
circumstances of the company in order to determine whether any
member of the Board of Directors or the Managing Director is
liable to the company. We also examined whether any member of
the Board of Directors or the Managing Director has, in any other
way, acted in contravention of the Companies Act, the Annual
Accounts Act or the Articles of Association.
We believe that the audit evidence we have obtained is
sufficient and appropriate to provide a basis for our opinions.
Furthermore, we have read the corporate governance
statement and based on that reading and our knowledge of the
company and the group we believe that we have a sufficient basis
for our opinions. This means that our statutory examination of the
corporate governance statement is different and substantially less
in scope than an audit conducted in accordance with International
Standards on Auditing and generally accepted auditing standards
in Sweden.
Opinions
We recommend to the annual meeting of shareholders that the
profit be appropriated in accordance with the proposal in the
statutory administration report and that the members of the Board
of Directors and the Managing Director be discharged from
liability for the financial year.
A corporate governance statement has been prepared, and its
statutory content is consistent with the other parts of the annual
accounts and consolidated accounts.
Stockholm, March 4, 2015
PricewaterhouseCoopers AB
Nicklas Kullberg
AUTHORIZED PUBLIC ACCOUNTANT
67
BOARD OF DIRECTORS
ANDERS BÖÖS
BIRGITTA KLASÉN
Principal occupation: directorships.
Principal occupation: senior IT advisor for Swedish
and international corporate management.
Chairman of the board
Other assignments: member of the board of
Investment AB Latour, Stronghold Invest AB,
Newsec AB, and Tundra Fonder AB.
Work experience: chairman of the board of
Cision AB; CEO of Drott AB and H&Q AB.
Born 1964. Elected 2003.
Anders Böös is considered independent in relation to the
company and its management, but not independent in
relation to the major owners of the company.
BENGT NILSSON
Deputy chairman of the board
Principal occupation: member of the board,
president, and CEO of Pagero AB.
Other assignments: member of the board of
Greenfield AB, GreenTrade AB, GreenTrade
Aviation AB, Hikka Group AB, Hikkadua
Investments AB, Homes and Villas Ltd, Ides AB,
Leandev AB, Norelia AB, Payer AB, Pocket Mobile
AB, and Primelog AB.
Education: studies at Linköping Institute of
Technology.
Work experience: one of the founders of IFS, and of
European Flight Service & European Maintenance
Service; president and CEO of IFS.
Born 1955. Elected 1983.
Bengt Nilsson is considered independent in relation to
the company, its management, and its major
stockholders.
Board director
Other assignments: member of the board of AssaAbloy AB, Acando AB, and Avanza AB.
Education: M.Sc. in applied physics from the Royal
College of Technology, Stockholm, B.A. from
Stockholm University (business economics,
psychology, and sociology) and management
training courses (Ruter Dam, IFS, and IMD).
Work experience: member of the board of OMX AB
and Telelogic AB; CIO at EADS, Pharmacia &
Upjohn, and Telia. Prior to this, a long period that
included various management positions at IBM,
including deputy CEO of IBM’s wholly-owned
outsourcing subsidiary, Responsor AB.
Born 1949. Elected 2009.
Birgitta Klasén is considered independent in relation to
the company, its management, and its major
stockholders.
NEIL MASOM OBE
Board director
Principal occupation: directorships.
Other assignments: member of the board of High
Speed Two (HS2) Ltd, CQC Holdings Ltd, and
Solutions SK Ltd.
Education: B.Sc.(Eng) Hons. Imperial College,
London.
Work experience: chairman of the board of IFS
Defence Ltd and CEO for Logistics and
Information Systems in BAE Systems plc.
Born 1959. Elected 2009.
ULRIKA HAGDAHL
Board director
Neil Masom is considered independent in relation to the
company, its management, and its major stockholders.
Principal occupation: directorships.
Other assignments: member of the board of Beijer
Electronics AB and HiQ International AB.
ALASTAIR SORBIE
Education: M.Sc. in Engineering Physics from the
Royal Institute of Technology, Stockholm
Board director, president, and CEO
Principal occupation: president and CEO of IFS AB.
Work experience: founder of Orc Software AB; CEO
and member of the board of Orc Software AB;
member of the board of Strålfors AB and Protect
Data AB.
Education: B.Sc. (Hons), University of London.
Born 1962. Elected: 2003.
Ulrika Hagdahl is considered independent in relation to
the company, its management, and its major
stockholders.
Work experience: managing director of IFS EMEA,
sales director at Avalon Software UK, services
director application products at Computer
Associates, services director at Pansophic
Systems, and director of Insight Applications
division of Hoskyns Group.
Born: 1953. Elected: 2006.
Alastair Sorbie is not considered independent in relation
to the company and its management, but independent in
relation to the major stockholders in the company.
68
EXECUTIVE MANAGEMENT
AUDITORS
ALASTAIR SORBIE
PricewaterhouseCoopers AB
President and CEO
Auditors since 2001
Born 1953
NICKLAS KULLBERG
Employed by IFS since 1997
Authorized public accountant and Auditor in charge
Born 1970
PAUL SMITH
Chief financial officer
Born 1963
Employed by IFS since 2009
FREDRIK VOM HOFE
Vice president, Business Development
Born 1966
Employed by IFS since 2003
JESPER ALWALL
General counsel
Born 1969
Employed by IFS since 2009
Holdings in stock and financial instruments December 31, 2014
Stockholdings
Series-A
shares, no.
Series-B
shares, no.
Options
BOARD OF DIRECTORS
Anders Böös (Chairman)
427,010
-
-
Ulrika Hagdahl
-
30,000
-
Birgitta Klasén
-
12,000
-
Neil Masom
-
-
-
150,000
-
-
-
8,526
94,875
577,010
50,526
94,875
Jesper Alwall
-
-
1,929
Fredrik vom Hofe
-
-
10,015
Bengt Nilsson
Alastair Sorbie (CEO)
Total
EXECUTIVE MANAGEMENT
Paul Smith
-
-
63,250
Total
-
-
75,194
For information concerning stock and options held by members of the board and
executive management, see note 14.
69
FINANCIAL TREND
FROM THE INCOME STATEMENTS
2010
2011
2012
2013
2014
License revenue
Maintenance & support revenue
Consulting revenue
Other revenue
Net revenue
402
811
1,357
15
2,585
431
823
1,311
11
2,576
467
909
1,283
17
2,676
535
902
1,256
11
2,704
558
1,037
1,427
12
3,034
Capitalized work for own use
Operating expenses
EBITDA before other operating items
157
-2,328
414
164
-2,316
424
182
-2,478
380
188
-2,373
519
190
-2,676
548
3
-23
8
-27
42
-23
4
-35
SKr, million
Other operating revenue
Other operating expenses
Result from joint venture
EBITDA
394
405
399
16
-121
59
414
Depreciation, amortization, and write-downs
EBIT
-173
221
-172
233
-199
200
-212
202
-242
275
Financial revenue
Financial expenses
Profit/loss before tax
3
-35
189
6
-21
218
4
-14
190
3
-21
184
4
-21
258
Taxes
Profit/loss for the year
-55
134
-62
156
-52
138
-41
143
-47
211
FROM THE BALANCE SHEETS
-
SKr, million
-
-
517
Dec 31, 2010 Dec 31, 2011 Dec 31, 2012 Dec 31, 2013 Dec 31, 2014
Intangible fixed assets
Other fixed assets
Accounts receivable
Other current assets
Liquid assets
Total assets
868
312
664
227
445
2,516
953
286
701
245
374
2,559
1,061
269
718
242
316
2,606
1,103
254
740
238
354
2,689
1,144
293
790
312
489
3,028
Stockholders' equity including non-controlling interests
Long-term liabilities
Accounts payable
Current interest-bearing liabilities
Other current liabilities
Total stockholders' equity and liabilities
1,295
75
91
59
996
2,516
1,302
89
94
51
1,023
2,559
1,137
215
93
178
983
2,606
1,237
91
111
197
1,053
2,689
1,360
182
127
130
1,229
3,028
2010
2011
2012
2013
2014
FROM THE CASH FLOW STATEMENTS
SKr, million
Cash flow from operations before change in working capital
Change in working capital
Cash flow from current operations
373
93
466
406
-96
310
363
-80
283
336
70
406
450
51
501
Cash flow from investment operations
Cash flow after investment operations
-232
234
-216
94
-324
-41
-284
122
-232
269
Cash flow from financing operations
Cash flow for the year
-130
104
-163
-69
-7
-48
-13
109
-164
105
Liquid funds on January 1
Exchange rate differences in liquid funds
Liquid funds at end of period
355
-14
445
445
-2
374
374
-10
316
253
-8
354
354
30
489
70
KEY FIGURES1
2010
2011
2012
2013
2014
Revenue indicator
Net revenue growth
Net revenue outside Sweden
Net revenue per employee
%
%
SKr, '000
-1%
81%
978
0%
80%
948
4%
82%
946
1%
84%
1,006
12%
85%
1,147
236
157
9%
59%
8%
10%
605
257
164
10%
60%
9%
10%
600
290
182
11%
62%
10%
10%
607
295
188
11%
55%
10%
11%
605
318
190
10%
57%
10%
10%
670
46%
90%
62%
23%
9%
7%
23%
48%
94%
67%
22%
9%
8%
26%
49%
94%
69%
18%
7%
7%
22%
51%
93%
72%
19%
7%
7%
19%
51%
91%
75%
20%
9%
9%
24%
15%
10%
51%
12.2
-196
0.21
17%
12%
51%
37.3
-171
0.2
15%
11%
44%
24.7
-116
0.19
15%
12%
46%
19.4
-186
0.19
17%
16%
45%
33.2
-254
0.18
385
0.1
-328
322
0.1
-273
137
0.2
50
157
0.2
-118
359
0.2
-191
2,644
2,675
2,716
2,821
2,830
2,829
2,688
2,616
2,645
2,707
26,488
25,943
25,690
25,313
24,988
24,772
24,772
24,772
24,772
24,772
5.06
49.92
8.83
107.25
2.1
97.59
1.1
3.00
6.07
51.44
3.66
88.00
1.7
100.27
0.9
3.50
5.52
50.76
-1.66
103.25
2.0
108.24
1.0
3.50
5.81
49.94
4.84
154.00
3.1
110.61
1.4
3.50
8.60
54.90
10.86
239.09
4.4
122.48
2.0
4.50
Expense and expenditure indicator
Total product development
of which, capitalized
Development expenditure/net revenue
Development expenditure/license revenue
Product development expenses/net revenue
Administration expenses/net revenue
Personnel expenses per employee
SKr, million
SKr, million
%
%
%
%
SKr, '000
Margin indicators
Gross margin
License margin
Maintenance & support margin
Consulting margin
Operating margin
Profit margin
Return on average operating capital
%
%
%
%
%
%
%
Capital indicators
Return on capital employed
Return on stockholders' equity
Equity ratio
Interest coverage ratio
Working capital
Accounts receivable (avg 12 mth)/Net revenue (rolling 12 mth)
%
%
%
times
SKr, million
%
Liquidity indicators
Net liquidity
Debt/equity ratio
Net debt
SKr, million
times
SKr, million
Employees
Average number of employees
Number of employees at the end of the period
Stock
Average number of shares
Number of shares at the end of the period
million
million
Key data per share2
Profit/loss, before dilution
Stockholders' equity
Cash flow after investment operations
Market price at end of accounting period
Market price/stockholders' equity
Net turnover
Market price/net turnover
Dividend3
SKr
SKr
SKr
SKr
times
SKr
times
SKr
1 For definitions of key ratios see page 72.
2 In accordance with IAS 33, dilution is not estimated when it improves earnings.
3 Dividend for 2014 refers to proposal from the Board.
71
DEFINITIONS
return on average operating capital. EBIT in relation to average operating
capital.
adjusted EBITDA. EBIT before depreciation, net of capitalized product
development and adjusted for non-recurring items.
return on capital employed. Profit before tax plus financial expenses in
relation to average capital employed. Capital employed refers to total
assets less non-interest-bearing liabilities and deferred tax liability.
average number of shares. Average of the number of shares outstanding
during the year.
capital employed. Total assets less non-interest-bearing liabilities and
deferred tax liabilities.
cash flow per share. Cash flow after investment operations in relation to
the average number of shares.
consulting margin. Consulting revenue minus consulting expenses in
relation to consulting revenue.
return on stockholders’ equity. Profit/loss for the year in relation to
average stockholders’ equity.
stockholders’ equity per share. Stockholders’ equity, including minority
interest, in relation to the number of outstanding shares at year-end.
working capital. Accounts receivable and other current receivables,
excluding liquid assets, less accounts payable and other short-term,
non-interest-bearing liabilities.
days of Sales Outstanding (DSO). Accounts receivables, adjusted for value
added tax, in relation to net revenue.
debt/equity ratio. Interest-bearing provisions and liabilities at year-end in
relation to stockholders’ equity.
GLOSSARY
earnings per share. Net profit/loss for the year in relation to the average
number of shares.
application. A program that helps a user deal with a specific task, e.g.
purchasing, employee development or accounting.
equity/assets ratio. Stockholders’ equity and minority interest at yearend in relation to total assets.
architecture. Describes the manner in which the hardware, system
software, and applications software integrate to achieve a desired
result.
gross margin. Gross earnings in relation to net revenue.
interest coverage ratio. Profit/loss before tax adjusted for interest
expense in relation to interest expense.
license margin. License revenue minus license expenses, in relation to
license revenue.
maintenance and support margin. Maintenance and support revenue
minus maintenance and support expenses in relation to maintenance
and support revenue.
market price. The market price of the shares has been established in
relation to the number of outstanding Series A and Series B shares,
respectively, and the share price of these shares at year-end.
market price/net revenue per share. The market price in relation to net
revenue per share.
market price/stockholders’ equity per share. The market price in relation to
stockholders’ equity per share.
net debt. Interest-bearing provisions and liabilities at year-end, less
liquid assets.
business applications. A set of applications that covers all internal as well
as external business processes a company is involved in.
component-based architecture. Refers to the design of any system
composed of separate components that can be connected together.
The benefit of component-based architecture is that you can replace or
add any one component without affecting the rest of the system. The
opposite of a component-based architecture is an integrated
architecture, in which no clear divisions exist between components.
enterprise asset management (EAM). A concept in the software industry to
describe one or several applications designed to improve/optimize how
a company utilizes its business processes and facilities. The
designation is common in the asset-intensive industry.
enterprise resource planning (ERP). A method of planning that originally
comprised all internal business processes, such as financials,
manufacturing and distribution, but which has been extended to cover
a range of other functions from contact with suppliers to maintenance
of delivered products.
net liquidity. Liquid assets less liabilities to credit institutions at yearend.
maintenance, repair, and overhaul (MRO). A concept used in the software
industry to describe software used in the maintenance of a company’s
equipment and facilities so as to maximize availability and efficiency.
net revenue growth. Net revenue for the year minus net revenue for the
previous year in relation to net revenue for the previous year.
outsourcing. The procuring of services or products from an outside
supplier or manufacturer.
net revenue outside of Sweden. Net revenue minus net revenue in
Sweden, in relation to net revenue.
platform. Component-based products or services require a platform that
defines valid interfaces and common services to ensure maximum
flexibility and configurability for the product/service without sacrificing
economies of scale or recycling capabilities. This is necessary for
managing internal dependencies and complexity in the product
development of component-based products/services.
net revenue per share. Net revenue in relation to the average number of
shares.
net revenue per employee. Net revenue in relation to the average number
of employees.
operating margin. EBIT in relation to net revenue.
profit margin. Profit/loss before tax in relation to net revenue.
72
utility. An organization of company that provides some form of
infrastructure in a society, such as heating, electricity, or water.
73
74
75
ABOUT IFS
IFS™ is a globally recognized leader in developing and delivering business software
for enterprise resource planning (ERP), enterprise asset management (EAM), and
enterprise service management (ESM). IFS brings customers in targeted sectors
closer to their business, helps them be more agile, and enables them to profit from
change. IFS is a public company (XSTO: IFS) founded in 1983 and currently has
over 2,700 employees. IFS supports more than 2,400 customers worldwide from
its network of local offices and through a growing ecosystem of partners.
www.IFSWORLD.com
THIS DOCUMENT MAY CONTAIN STATEMENTS OF POSSIBLE FUTURE FUNCTIONALITY FOR IFS’S SOFTWARE
PRODUCTS AND TECHNOLOGY. SUCH STATEMENTS OF FUTURE FUNCTIONALITY ARE FOR INFORMATION
PURPOSES ONLY AND SHOULD NOT BE INTERPRETED AS ANY COMMITMENT OR REPRESENTATION. IFS
AND ALL IFS PRODUCT NAMES ARE TRADEMARKS OF IFS. THE NAMES OF ACTUAL COMPANIES AND
PRODUCTS MENTIONED HEREIN MAY BE THE TRADEMARKS OF THEIR RESPECTIVE OWNERS.
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