IFS Manufacturing customer´s experience of using IFS Applications
IFS | Annual Report 2015€¦ · 22/2/2016 · June 17. South African consultancy Fourier-E...
Transcript of IFS | Annual Report 2015€¦ · 22/2/2016 · June 17. South African consultancy Fourier-E...
ANNUAL REPORT 2015
TABLE OF CONTENTS
Five-year summary 3
Significant events 4
Message from the president 8
IFS and IFS Applications 9
The IFS share 12
Table of contents of the annual report 13
Annual report 14
Board of directors 66
Executive management and auditors 67
Financial trend 2011–2015 68
Definitions and glossary 70
FINANCIAL REPORTS 2016
Interim report January–March April 21, 2016
Interim report January–June July 21, 2016
Interim report January–September October 20, 2016
Year-end report February 2017
2
FIVE-YEAR SUMMARY
2011 2012 2013 2014 2015
Net revenue SKr, million 2,576 2,676 2,704 3,034 3,389
of which license revenue SKr, million 431 467 535 558 682
of which maintenance and support revenue SKr, million 823 909 902 1,037 1,174
of which consulting revenue SKr, million 1,311 1,283 1,256 1,427 1,524
Net revenue outside Sweden % 80% 82% 84% 85% 84%
EBIT SKr, million 233 200 261 275 314
EBIT margin % 9% 7% 7% 9% 9%
Profit/loss before tax SKr, million 218 190 243 258 306
Profit margin % 8% 7% 7% 9% 9%
License margin % 94% 94% 93% 91% 95%
Maintenance and support margin % 67% 69% 72% 75% 75%
Consulting margin % 22% 18% 19% 20% 21%
Product development expenditure/net revenue % 9% 10% 10% 10% 10%
Administration expenses/net revenue % 10% 10% 11% 10% 11%
Return on average operating capital % 26% 22% 19% 24% 29%
Equity/assets ratio, after full conversion % 51% 44% 46% 45% 45%
Net debt SKr, million -273 50 -118 -191 -252
Interest coverage rate times 37.3 24.7 19.4 33.2 39.2
Cash flow after investment operations SKr, million 94 -41 122 269 196
Accounts receivable (avg. 12 month)/net revenue (rolling 12 month) % 20% 19% 19% 18% 18%
Average number of employees 2,716 2,830 2,688 2,645 2,771
Number of employees at year-end 2,821 2,829 2,616 2,707 2,838
Net revenue Maintenance and support revenue EBIT
Cash flow after investments Net liquidity Average number of employees
2,000
2,250
2,500
2,750
3,000
3,250
3,500
'11 '12 '13 '14 '150
250
500
750
1,000
1,250
'11 '12 '13 '14 '15
0
100
200
300
400
500
'11 '12 '13 '14 '15
-50
0
50
100
150
200
250
300
'11 '12 '13 '14 '15 0
100
200
300
400
500
'11 '12 '13 '14 '15
2,500
2,600
2,700
2,800
2,900
3,000
'11 '12 '13 '14 '15
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SIGNIFICANT EVENTS
JAN. Finland’s largest electricity distributor chose IFS Applications
January 22. IFS announced that Finnish utility Caruna selected IFS Applications to support vital business processes including financials,
purchasing, invoicing and HR. The agreement included licenses and services worth in excess of € 1 million.
FEB. Launch of plug-and-play CPM solution for power generation
February 9. IFS presented a plug-and-play version of IFS CPM (corporate performance management), which comes preconfigured out-of-
the-box with cockpits and KPIs tailored for companies in the complex and highly regulated power generation industry to enable better
decision-making and minimal time to value.
MAR. Cooperation with Accenture in the Nordic market
March 3. IFS and Accenture will work together to grow IFS’s license sales and Accenture’s implementation and application management
services related to IFS Applications. Accenture will also strengthen its existing IFS practice with training and certification of 100 consultants
through the IFS Academy.
Swiss DOPAG Group to implement IFS Applications
March 20. IFS communicated that DOPAG Group, a leading manufacturer of polymer metering and mixing systems, chose to implement
IFS Applications to modernize and streamline the company’s operations by replacing its legacy ERP system. The order was valued in excess
of € 1.2 million.
Nordic manufacturer accelerating global growth with IFS
March 31. A Nordic manufacturer of packaging solutions chose IFS Applications as its comprehensive, single-instance ERP system to
support its mixed-mode manufacturing while enabling rapid, global growth. The agreement was won in competition with Microsoft and SAP
and is worth approximately SKr 11 million.
MAY Major company announcements at IFS World Conference
May 5–7. At IFS World Conference in Boston, IFS launched IFS Applications 9, the new core version of its enterprise applications suite.
During the conference, IFS also announced the global availability of the cloud offering IFS Managed Cloud on Microsoft Azure, its plans to
launch in-memory capabilities, as well as a host of updates of its enterprise service management suite. In addition, IFS was proud to
announce that it had reached the one million mark in terms of users.
Finnish L&T selects IFS Enterprise Service Management
May 11. L&T, a leading provider of property maintenance and recycling services, chose to implement IFS Applications 9 to support
processes including service management, mobile work order, and mobile workforce management. The IFS solution will be deployed for
more than 1,000 employees.
ARC Advisory Group identifies IFS as industry leader
May 28. Leading information technology research and advisory firm ARC Advisory Group identified IFS as the number one vendor in terms
of market share of enterprise asset management (EAM) and field service management (FSM) solutions for the aerospace & defense and
oil & gas industries.
Maersk Drilling and IFS strengthen partnership
May 29. IFS announced that Maersk Drilling is live on IFS Applications and that the companies will collaborate on the development of
advanced maintenance planning functionality. The agreement included additional licenses worth approximately US$ 1.8 million.
JUNE Engineering company signs £ 1 million contract with IFS
June 1. MWH is a global company providing technical engineering, construction services and consulting solutions to protect, enhance,
store and distribute water. MWH expanded its use of IFS Applications by purchasing additional user licenses to support its expansion
through a number of joint venture projects.
Capgemini joins IFS Partner Network
June 3. Through the partnership, Capgemini will train and certify consultants through IFS Academy to develop its IFS competence.
Capgemini’s IFS Solution Centers in France and India employ around 90 consultants providing implementation, rollout, support, and
maintenance services worldwide.
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Aluminum producer to optimize efficiency with IFS Applications
June 15. Aludium, a leading European producer of aluminum products, has chosen to deploy a comprehensive ERP solution from IFS at its
plants in Spain and France. The agreement is worth in excess of € 1 million and the solution is expected to be fully implemented during
Q1 2016.
Steel producer Açotubo Group invests in IFS Applications
June 15. São Paulo-based Açotubo, one of Brazil’s largest steel producers and distributors, invested US$ 1.3 million to deploy a
comprehensive cloud-based ERP solution from IFS to manage the company’s complex operations, including procurement, manufacturing,
planning, and maintenance.
IFS aims for African growth with Fourier-E
June 17. South African consultancy Fourier-E Consultation Services joined the IFS Partner Network as implementation partner to help
expand IFS’s African business. The companies will collaborate to support customers with ERP and EAM solutions in South Africa and Sub-
Saharan Africa.
Global telecom company expands use of IFS Applications
June 25. A telecom company chose to expand its use of IFS’s solutions to support a smart metering project. IFS Applications will be the
central engine for handling cases and assigning work orders to field service staff. The agreement is valued at approximately
SKr 12.5 million.
Elevator manufacturer OSMA selects IFS Applications 9
June 26. Germany’s second largest elevator manufacturer OSMA chose IFS Applications to replace a legacy ERP solution and streamline
work processes for 600 employees, including 180 service technicians. The agreement includes licenses and services valued at
approximately € 2.4 million.
High-tech manufacturer invests in IFS Applications 9
June 26. A global high-tech manufacturer based in Northern Europe has chosen to invest in IFS Applications 9 to help the company enhance
its core business processes, comprising high-tech manufacturing and service management. The agreement is valued at approximately SKr
11.5 million.
IFS signs US$ 2 million deal with oil and gas company
June 30. Norwegian Interwell, a leading provider of well solutions for oil and gas recovery, has chosen IFS Applications to enhance its
operational efficiency. The IFS solution will be used by some 400 Interwell staff in Norway, the UK, the US, and the United Arab Emirates.
The Swedish alcohol monopoly upgrades to IFS Applications 9
June 30. Systembolaget will upgrade and expand its current IFS solution to ensure increased user satisfaction and business value.
IFS Applications 9 will be used by 4,000 employees in more than 400 stores. The agreement includes licenses worth approximately
SKr 13 million.
JULY IFS acquires VisionWaves
July 6. IFS purchased Dutch company VisionWaves B.V., a leading provider of enterprise operational intelligence solutions, to help
customers accelerate their strategy realization and boost business performance. Its product helps companies map, monitor, and manage
end-to-end business processes across multiple business units, data sources, and applications.
IFS Partner Network continues to grow
July 22. RigServ joined the IFS Partner Network as a referral and services partner focusing on the North American oil and gas industry.
RigServ is a supply chain and technology consulting company that offers best-in-class solutions to leading offshore companies. In line with
IFS’s long-term growth strategy, RigServ will help IFS expand its footprint in the North American oil and gas industry.
AUG. Large U.S. defense contractor expands use of IFS Applications
August 26. A major contractor doing work for the U.S. Department of Defense chose to implement IFS Applications across another of the
company’s divisions. The total value of the agreement was estimated at US$ 30 million over the next ten years. This includes a total of
US$ 5 million in license revenue, which will be recognized over the next 2 years.
SEPT. German IT service company aims for global growth with IFS
September 3. Technogroup IT-Service GmbH, one of the leading IT service providers in Central Europe, chose to implement IFS Applications
9 to support its international growth. IFS will help Technogroup improve its data quality and combine all business processes in one
comprehensive solution. IFS Applications will enable Technogroup management to achieve better understanding and control of its
operations to improve the quality of its mission-critical services.
IFS named as the “Challenger” in Gartner’s Magic Quadrant
September 18. IFS was named as the only challenger in the Gartner Magic Quadrant for Energy and Utilities Enterprise Asset Management.
IFS attributes this position to its significant growth in energy and utilities sectors such as power generation and oil and gas.
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International service company extends its IFS investment
September 29. A Stockholm-based provider of environmental services chose to upgrade to IFS Applications 9 in a deal worth approximately
SKr 35 million. The company chose to extend and upgrade its IFS solution to continue to empower its service and back office staff with
leading ERP and field service management functionality.
OCT. German engineering company selects IFS Applications 9
October 2. Munich-based Maurer focuses on steel constructions such as buildings, bridges, roller coasters, Ferris wheels, and other
complex dynamic, stressed structures. Following an evaluation process involving several major ERP vendors, Maurer selected
IFS Applications to promote a unified way of working, enhance data quality, and promote business transparency at all levels of the
organization.
IFS Applications 9 update launched and new support model
October 26. Among the new and enhanced features of IFS Applications 9 update 1 are new in-memory capabilities, enhanced visualization
of manufacturing processes, extended support for rental management, and improved group consolidation functionality. IFS also launched
a new support model that lets customers benefit from the latest product enhancements faster and at a lower cost.
NOV. Sartorius implements IFS Field Service Management
November 11. German pharmaceutical and laboratory equipment supplier Sartorius will implement IFS Field Service Management at
50 sites worldwide. The solution will support the company’s growth plans and empower Sartorius staff with self-service tools, leading to
faster response times to customer inquiries.
Australian Service Stream selects IFS
November 13. Service Stream is an essential network service provider to the telecommunications and utility industries throughout
Australia. Service Stream will replace and consolidate multiple enterprise information systems with IFS Applications to promote operational
efficiencies in its infrastructure projects and optimize project execution.
German security specialist consolidates with IFS
November 16. Following a rigorous selection process involving several well-known ERP vendors, Telenot chose IFS Applications 9 based
on its comprehensive functional support. With IFS, the company will benefit from a modern, integrated ERP suite that will empower its
employees through an intuitive user interface.
DEC. Skanska UK to implement IFS Applications 9
December 7. Skanska UK will implement IFS Applications as its new works management system at its Infrastructure Services division. The
solution will provide Skanska with an advanced system to manage its infrastructure contracts, including work order planning, scheduling
and execution, purchasing, inventory, time and attendance, and mobile work orders.
New version of IFS Field Service Management released
December 9. IFS Field Service Management 5.6.3 includes major enhancements such as a next-generation mobile client for Windows 10,
several predefined IFS Lobbies, and the option to deploy in the IFS Managed Cloud on Microsoft Azure.
Finland’s biggest rail constructor selects IFS
December 10. VR Track, part of the state-owned VR Group, chose IFS Applications 9 to support its service and maintenance processes.
The IFS solution covers field service and maintenance management, B2B contracting, and powerful reporting capabilities through
IFS Lobby.
IFS named a ‘leader’ in Gartner Magic Quadrant
December 14. For the third consecutive year, IFS was recognized as a ‘leader’ in the 2015 Gartner Magic Quadrant for Single-Instance
ERP for Product Centric Midmarket Companies.
High-tech automotive manufacturer to deploy IFS Applications
December 21. A global provider of electromagnetic components chose to deploy to IFS Applications 9 at more than 20 sites worldwide.
The solution will enhance the company’s configure-to-order (CTO) processes, enhance quality, minimize waste, and reduce inventory by
optimizing demand planning.
WinGroup selects IFS Applications 9 in the cloud
December 21. WinGroup, a leading manufacturer of aluminum-framed glazing systems, has chosen to implement IFS Applications 9 as its
central ERP platform. The solution will be deployed in the IFS Managed Cloud on Microsoft Azure and will be used by some 200 users in
seven countries.
Saab to deploy IFS Applications 9
December 28. Saab has chosen to deploy IFS Applications 9 at its Aeronautics unit and South African operations. The agreement is valued
at approximately SKr 11 million in licenses. The company will leverage the layered application architecture of IFS Applications 9 to enable
more efficient applications development and configuration at a lower total cost of ownership.
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SIGNIFICANT AGREEMENTS SIGNED DURING THE YEAR
Aerospace and Defense
Babcock Marine Division
BAE Systems
General Dynamics -
Information Systems &
Technology General Dynamics -
Ordinance and Tactical
Systems (OTS) KVG Stade
Portsmouth Aviation
Saab
TAE
Thai Aviation Industries Co.
(TAI) Asset Intensive
BillerudKorsnäs
Hecla Mining Company
Holmen
SCA Graphic Sundsvall
SSAB Europa
Automotive
CalsonicKansei North
America Mianyang Fulin Precision
Machining Co. Öhlins Racing
Runner Group
Shiloh Industries
Toyota Lanka
Zakład Metalowy Plast-Met
Construction and Contracting
AIC Steel
Arkon Prima Indonesia
Barnhart Crane & Rigging
Co. CMC-TNRSP (Tamilnadu
Road Sector Projects) Heerema Fabrication Group
JK Williams Group
LKS Ingeniería
Mostostal Zabrze S.A.
MWH Treatment
NG Bailey Group
Skanska UK
VolkerWessels Telecom
VR Track
Energy and Utilities
Caruna
Chesapeake Utilities
Corporation Hafslund
Jacopa
Jönköping Energi
JSC Energo-Pro
Nordmøre Energiverk
PGNIG Termika
Ragn-Sells Group IT
Service Stream
Statnett
Svenska Kraftnät
Türksat Uydu Haberleşme
Kablo TV ve İşletme Umeå Energi
High Tech
Axis Communications
BHE Bonn Hungary
Elektronikai H2O Innovation
Jotron
Lab126 (A2Z Development
Center) Mafelec
Sartorius
Sierra Wireless
Sunbelt Transformer
Teledyne Oil & Gas
Telenot Electronic
Terumo Cardiovascular
Systems Corporation Tomra Sorting
Tomra Systems
Industrial Manufacturing
Aludium Transformación de
Productos Alyaf Industrial Co.
Andersen Steel
Anstee Ware Group
AOA Apparatebau Gauting
Bemis Manufacturing
Company BRC Industrial (Saudi)
CC Höganäs Byggkeramik
Circor International
CSIC Haizhuang Windpower
Equipment Co. Dopag Dosiertechnik und
Pneumatik Durham Manufacturing
Gislaved Gummi
Huber
IMI Critical Engineering
J & E Hall
Janoschka Kippenheim
Kaman RWG Germany
Lakeside Process Controls
Loram Maintenance of Way
Maurer
Munters Europe
Newag
Nordson Medical (formerly
Value Plastics) OSMA-Aufzüge
Polypipe
Robertson Fuel System
Roxtec International
Saueressig
Shapes Precision
Manufacturing Shawcor
South Asia Textile Industries
Lanka Superior Graphite Company
Tennsco Corporation
Vegum
Vítkovice Steel
Völkl Sports
Whirley Industries
Wingroup
Oil and Gas
Bibby Offshore
Dixie Electric
Floatel International
Interwell
Maersk Drilling Services
Maersk Supply Service
Songa Offshore
Wood Group Mustang
Norway Yinson Holdings Berhad
Process Manufacturing
Açotubo
Brugarolas
Diamond Pet Foods
Evotec (UK)
Instituto Butantan
Isofarma Industrial
Farmaceutica Kanes Foods
Marabu
Oxford Biomedica
PBI/Gordon Corporation
Prince Minerals
Pukka Herbs
Richardson International
Swedish Orphan Biovitrum
(SOBI) Synergy Health
The Binding Site Group
Volac International
Whitford
Whitworths
Willamette Valley Company
William Grant & Sons
Wolf Minerals (UK)
Retail and Wholesale
AG Thames Holdings
Gosiger Holdings
Ingram Micro Mobility
Sanitec Europe
Singer Sri Lanka
Systembolaget
UBM Group
Service Providers
APM Terminals
Management Associations (Homeside
Properties) Auto Windscreens
Avinor
Eltel Networks Infranet
Grey Matter
J Tomlinson
JEOL USA
Lassila & Tikanoja
Medical & Pharmaceutical
Services Orbotech
Reliance Comfort
Reliance Home Comfort
Sporveien Oslo
SSI Services (UK)
Turner & Co (Glasgow)
URB - Urbanismo de Recife
Wennstrom Fuel Systems
Wilhelmsen Ships Service
Other
Cumfin
Evry Norge
Foundation Garments
Q-TC
Savex Computers
SII - Société pour
l'informatique industrielle Technogroup IT-Service
Tiga Pilar Sejahtera Food
Tribunal de Justiça RJ
Vektis
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MESSAGE FROM THE PRESIDENT
Strong growth in license sales and earnings
License sales showed strong growth, currency adjusted, of 27 percent in
the final quarter of the year and 14 percent for the full year. This growth
was achieved despite the fact that throughout 2015 many of our target
sectors showed a significant decline, including all markets affected by
the fall in the price of oil and also those regions affected by the downturn
in the demand for commodities. This demonstrates that IFS is both a
resilient and an agile business with many new customers being added
in the last quarter.
In a market that remains very competitive IFS continues to be
selected because of our understanding and ability to deliver both
solutions to our target sectors and global projects with a lower cost of
ownership than our larger competitors The ongoing addition of new
customers and the low level of churn has resulted in the growth of our
maintenance and support revenue being, currency adjusted, 7 percent
for the quarter and 6 percent for the full year and being fully in line with
our expectations. Product revenue as a proportion of total revenue for
the quarter continues to move in the correct direction at 57 percent
(Q4 '14: 53). The maintenance and support margin for the quarter
improved to76 percent (72) and for the full year remained unchanged at
75 percent. The ongoing investment being made in the centralization of
our global support operation should continue to create margin
improvement.
The low growth in the consulting revenue at 3 percent in the quarter
and 2 percent for the year, currency adjusted, is in line with our strategic
direction, which is to grow our partner ecosystem as a complimentary
delivery resource. This, as previously stated, will provide reach and
scalability to IFS and provide our customers with choice. The partner
ecosystem grew during 2015 with a good number of new partners joining
each month and the Partner Academy coming on stream creating an
increasing global pool of IFS certified consultants. The consulting margin
increased to 24 percent (Q4 '14: 23).
The gradual improvement of the buying environment seen in recent
years continued. Based on preliminary figures, the ERP market as a
whole grew by around 7 percent in 2015. Demand in North America,
Western Europe, and Asia Pacific (excluding China) remains steady and
industry analyst firms such as Gartner expect this trend of rather
moderate overall growth to persist in 2016.
The acquisition of VisionWaves undertaken in July 2015 has been
successfully integrated into the IFS Group. We are seeing that the
acquired product is able to be packaged with other parts of the IFS
product set to provide new innovative solutions and so create new
market opportunities. Our acquisition strategy continues to be a high
priority as we seek to build a stronger solution for our target markets.
On December 7, following the acquisition of the shares held by the main
owner and other larger shareholders in IFS, EQT, through IGT Holding,
announced a mandatory cash offer to the shareholders to acquire all
outstanding shares. On December 17, the board of directors of IFS*
unanimously recommended the shareholders to accept this offer. On
February 9, 2016, IGT Holding owned 83.8 percent of the capital and
87.4 percent of the votes in the company. Over the five years preceding
the offer, shareholders have seen total returns including reinvested
dividends of 314 percent, or 33 percent per annum. This reflects the
steady improvement that we have achieved and the attractiveness of
our product for our ever-expanding group of customers. For 2016, we
expect to see continued positive development and further improvements
to our strengths.
Alastair Sorbie PRESIDENT & CEO
* Anders Böös, chairman of the board, and Bengt Nilsson, deputy chairman of the
board, did not participate in the recommendation and decision.
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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 2,800 employees worldwide. With
IFS Applications™, now in its ninth generation, IFS has pioneered
component-based ERP software.
The company now has some
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 one million users and its
solution is installed in over 60 countries in about 20 languages.
BUSINESS CONCEPT
With its own resources and in cooperation with partners, IFS develops,
sells and implements the component-based ERP software
IFS Applications.
IFS APPLICATIONS
IFS Applications is a comprehensive business system for mid-sized 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 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
project-oriented 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.
CREATIVITY AND INNOVATION
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, the United Kingdom, the United
States, and Sweden. This year’s biggest news was the launch of the
latest main version of IFS Applications. IFS Applications 9 provides new
and existing customers significant improvements in areas such as
flexibility and ease of use. It also contains powerful features designed to
support customers in IFS’s target sectors. In addition, new versions of
IFS Field Service Management and Mobile Workforce Management were
launched, as well as a number of important enhancements designed to
increase the business value 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.
9
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.
IFS will stimulate increased mobility among all its employees to
increase competence and understanding of various international
markets.
PARTNERS
IFS continues to prioritize investment in the development of its global
partner ecosystem. An emphasis on developing opportunities with the
several hundred existing partners already in the IFS partner network,
rather than adding new partners, has resulted in a strengthened partner
sales pipeline and an increase in closed opportunities. IFS continued to
add new modules and content to the IFS Academy as part of a program
designed to maintain and improve the quality of service delivered by
partners. The IFS Academy training content is now available globally
through all regions in multiple languages with both on-line and
classroom delivery options available.
In May 2015 at the IFS World Conference in Boston, USA, the
company launched the IFS Managed Cloud on Microsoft Azure and
successfully closed its first sales during the summer months. The first
customers went live later in 2015 and there are now customers running
IFS Managed Cloud on Microsoft Azure in Europe and North America.
During 2015 the company extended its existing relationships with both
Accenture and Cap Gemini to become global and also developed other
present relationships with systems integrators around the world. During
2016, the company will continue to develop its relationships with its
existing partner ecosystem and will develop several new programs with
both service and technology partners to accelerate partner sales growth.
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
Corporate social responsibility (CSR) has been an area of growing
interest for IFS over the last few years. In 2015, the Company spent time
conducting a thorough audit of its local and global initiatives, with the
purpose of communicating a consolidated view of all CSR activities to its
employees and external parties. 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).
10
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 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
six-month 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 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 gender-neutral 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 NextUp, a Swedish
competition for eighth-graders to which IFS contributes both financially
and with a case that the contestants work on.
The goal of IFS’s CSR program moving forward is to take the very
best of all the local initiatives and roll them out as global best practice
across the organization. The Company will also focus on improving
interest in and understanding of the IT industry as a whole among the
coming generation of IT workers, with the hope of increasing the
proportion of underrepresented groups in the IT sector. IFS believes that
a growing interest for IT within all social groups will benefit not only IFS
but also its customers and partners, through a future larger and broader
pool of potential co-workers. In 2016, IFS will focus on improving its
collaboration with universities around the world.
11
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, 2015, 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
1,029,341 A shares and 23,942,489 B shares. On December 31, 2015,
the Company held 426,600 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 1.0 million A shares and 26.4 million
B shares were traded, corresponding to 110 percent of the average total
number of listed shares. The principal owner is EQT, through IGT Holding,
which controlled 83.8 percent of the capital and 87.4 percent of the
voting rights on February 9, 2016.
Mandatory cash offer by EQT
On December 7, EQT, through IGT Holding, announced a mandatory cash
offer to the shareholders in IFS to acquire all outstanding A- and B-shares
in IFS at a price of SEK 362.50 per share, regardless of share class. On
December 17, the board of directors of IFS* unanimously recommended
the shareholders to accept this offer. On February 9, 2016, IGT Holding
owned 83.8 percent of the capital and 87.4 percent of the votes in the
company.
* Anders Böös, chairman of the board, and Bengt Nilsson, deputy chairman of the
board, did not participate in the recommendation and decision.
SHARE CATEGORIES
Number of
shares
Number of
voting rights
Share of
capital
Share of
voting
rights
A shares 1,029,341 1,029,341 4.1% 30.1%
B shares 23,942,489 2,394,249 95.9% 69.9%
Total 24,971,830 3,423,590 100.0% 100.0%
Dec. 31, 2015
PRICE DEVELOPMENT AND TRADE VOLUME 2015
0
100000
200000
300000
400000
500000
220
240
260
280
300
320
340
360
380
Q
1
Q
2
Q
3
Q
4
Volume IFS B All-share index
12
TABLE OF CONTENTS OF THE ANNUAL REPORT
BOARD OF DIRECTORS’ REPORT 14
Corporate governance report 20
FINANCIAL STATEMENTS 26
Consolidated income statement 26
Consolidated statement of comprehensive income 27
Consolidated balance sheet—assets 28
Consolidated balance sheet—equity and liabilities 28
Consolidated capital account 29
Consolidated statement of cash flows 30
Income statement of the parent company 31
Statement of comprehensive income of the parent company 31
Balance sheet of the parent company—assets 32
Balance sheet of the parent company—equity and liabilities 33
Capital account of the parent company 33
Statement of cash flows of the parent company 34
NOTES TO THE FINANCIAL STATEMENTS 35
AUDITOR’S REPORT 64
Notes to the financial statements
Note 1 Accounting principles 35
Note 2 Segment reporting 42
Note 3 License revenue 44
Note 4 Maintenance and support revenue 44
Note 5 Other revenue 44
Note 6 Development expenditure 45
Note 7 Sales and marketing expenses 45
Note 8 Other operating income 45
Note 9 Other operating expenses 45
Note 10 Transactions between subsidiaries 45
Note 11 Operating expenses per type of cost 45
Note 12 Auditors’ fees 45
Note 13 Salaries, other remunerations, and social costs 45
Note 14 Remunerations paid to the board and executive management 45
Note 15 Transactions with related parties 46
Note 16 Average number of employees per country 47
Note 17 Results from participations in subsidiaries 47
Note 18 Results from participations in associated companies 47
Note 19 Other interest income and similar income 47
Note 20 Interest expenses and similar expenses 47
Note 21 Taxes 47
Note 22 Profit and dividend per share 48
Note 23 Intangible fixed assets 48
Note 24 Tangible fixed assets 50
Note 25 Operating lease agreements 51
Note 26 Participations in subsidiaries 52
Note 27 Participations in associated companies and joint ventures 53
Note 28 Receivables in subsidiaries 53
Note 29 Deferred tax claims and tax liabilities 53
Note 30 Other long-term receivables 54
Note 31 Accounts receivable 54
Note 32 Other receivables 54
Note 33 Liquid assets 54
Note 34 Stockholders’ equity 54
Note 35 Liabilities to credit institutions 56
Note 36 Risk structure pertaining to interest and financing 56
Note 37 Pension commitments 57
Note 38 Other provisions and other liabilities 58
Note 39 Other liabilities 58
Note 40 Accrued expenses and prepaid income 59
Note 41 Pledged assets 59
Note 42 Contingent liabilities 59
Note 43 Adjustments for items not included in cash flow 59
Note 44 Business combinations 59
Note 45 Net acquisition of tangible fixed assets 59
Note 46 Financial risk management and derivatives 59
Note 47 Conversion rates 62
Note 48 Information about the Parent company 62
13
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 2015. 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 2015 was to achieve good growth in both
licenses and EBIT; both objectives were reached by far. 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 highly-competitive contracts in its target sectors
during the year. Net revenue increased by 5 percent, currency adjusted.
Licenses increased by 14 percent, currency adjusted, which underlines
that IFS’s strategy of focusing on targeted sectors is paying off.
Maintenance revenue increased by 6 percent, currency adjusted,
resulting from license sales and strong customer loyalty, the ongoing
development of which remains a priority. Consulting revenue increased
by 2 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 21 percent (20). Net revenue amounted to
SKr 3,389 million ('14: SKr 3,034 million). EBIT increased to
SKr 314 million ('14: SKr 275 million), and cash flow after investments
was SKr 196 million ('14: SKr 269 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 2,800 employees worldwide.
With IFS Applications™, now in its ninth 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 one million 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, the
gradual improvement of the buying environment seen in recent years
continued. Based on preliminary figures, the ERP market as a whole
grew by around 7 percent in 2015. Demand in North America, Western
Europe, and Asia Pacific (excluding China) remains steady and industry
analyst firms such as Gartner expect this trend of rather moderate
overall growth to persist in 2016.
The competitive position has not changed during 2015 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.
14
SKr, million 2015
actual
Translation
effect
Structural
changes
2015
adjusted
2014
actual
Organic
change
Reported
change
NET REVENUE
License revenue 682 -45 -8 629 558 13% 22%
Maintenance and support revenue 1,174 -77 -4 1,093 1,037 5% 13%
Total product revenue 1,856 -122 -12 1,722 1,595 8% 16%
Consulting revenue 1,524 -72 -8 1,444 1,427 1% 7%
Net revenue (including other revenue) 3,389 -195 -19 3,175 3,034 5% 12%
OPERATING EXPENSES
Operating expenses 3,075 -193 -23 2,859 2,759 4% 11%
Other operating income/costs net -33 0 - -33 -1
Capital gains/losses 0 0 - 0 -
Exchange rate gains/losses -26 -1 - -27 -24
Restructuring costs/redundancy costs -6 0 - -6 -15
Reversal of restructuring costs 0 - - 0 2
Amortization of capitalized product development -186 - - -186 -175
Amortization of acquired intangibles -37 3 - -34 -38
Other amortization/depreciation -36 2 - -34 -29
Capitalized product development 210 - - 210 190
Adjusted operating expenses 2,961 -189 -23 2,749 2,669 3% 11%
Adjusted EBITDA 428 -6 4 426 365 17% 17%
Adjusted EBITDA/net revenue 13% 13% 12%
NET REVENUE
License revenue for 2015 was 14 percent higher than in the previous
year, currency adjusted. During the year, the ten largest license deals
had a total value of SKr 132 million; the corresponding figure for 2014
was SKr 107 million. A total of 25 license agreements exceeding
US$ 0.5 million in value were sold during the year. Maintenance and
support revenue continued to grow and consulting revenue was also
higher than in the previous year, currency adjusted. Net revenue was
SKr 355 million higher than in 2014, an increase of 5 percent, currency
adjusted.
COSTS AND EXPENSES
Operating expenses were SKr 316 million higher than in 2014, which
represents an increase of 4 percent, currency adjusted. Variable
expenses such as costs related to third-party suppliers, partners, and
subcontracted consultants amounted to SKr 349 million (367), a
decrease of 11 percent, currency adjusted. Other operating expenses
amounted to SKr 1,528 million (1,281), an increase of 6 percent,
currency adjusted. Payroll expenses amounted to SKr 2,042 million
(1,771), an increase of 8 percent, currency adjusted.
PRODUCT-DEVELOPMENT EXPENDITURE
Product development expenditure for the year amounted to
SKr 357 million (318). Capitalized product development totaled
SKr 210 million (190) and amortization of previously capitalized product
development amounted to SKr 186 million (175).
PERSONNEL NUMBERS AND EFFICIENCY
The average number of employees increased, amounting to 2,771
(2,645). The headcount for product development at the end of the year
was 623 (593), of whom 383 (359) worked at the development center
in Sri Lanka. Net revenue per employee increased with 1 percent,
currency adjusted, and with 7 percent non-currency adjusted to
SKr 1,223 thousand (1,147). Personnel-related expenses per employee
amounted to SKr 737 thousand (670), an increase of 4 percent,
currency adjusted. The number of employees at year end was 2,838
(2,707).
EBIT
EBIT amounted to SKr 314 million (275), an increase of 13 percent
compared with 2014. 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 428 million (365),
corresponding to a margin of 13 percent.
PROFIT FOR THE YEAR
Net financial items were SKr -8 million (-17). Adjusted for exchange rate
effects, the net financial items, including bank costs, were
SKr -11 million (-9). Net interest income was SKr -4 million (-5). Profit
before tax increased to SKr 306 million (258) while profit for the year
increased to SKr 214 million (211).
OPERATING AREAS
Europe North
SKr, million 2015 2014 Δ
License revenue 183 149 23%
Maintenance and support revenue 384 361 6%
Consulting revenue 646 649 0%
Net revenue 1,235 1,185 4%
EBIT, undistributed* 408 359 14%
Number of employees at the end of the period 470 465 1%
* EBIT before allocation of corporate revenue and expenses
Europe North’s revenue increased with 6 percent, currency adjusted.
Licenses increased by 24 percent, currency adjusted, thanks to a
number of high-profile deals. Maintenance revenue grew by 8 percent,
currency adjusted, as a result of the improved license sales. Consulting
revenue increased by 1 percent, currency adjusted. The usage of
partners in implementation projects continue to increase. Operating
expenses increased with 3 percent, currency adjusted. EBIT thereby
improved by 14 percent. Larger license deals included Maersk Drilling
Services, Systembolaget, Saab, and Ericsson.
15
Europe West
SKr, million 2015 2014 Δ
License revenue 146 124 18%
Maintenance and support revenue 262 224 17%
Consulting revenue 219 188 16%
Net revenue 721 628 15%
EBIT, undistributed* 193 163 18%
Number of employees at the end of the period 340 327 4%
* EBIT before allocation of corporate revenue and expenses
Net revenue increased by 4 percent, currency adjusted. License grew by
7 percent, currency adjusted, and maintenance revenue grew by
5 percent, currency adjusted. Consulting improved by 6 percent,
currency adjusted. Operating expenses were 2 percent higher, currency
adjusted. EBIT thereby increased by 7 percent. Larger license deals
included MWH Treatment, SII, and Skanska UK.
Europe Central
SKr, million 2015 2014 Δ
License revenue 77 61 26%
Maintenance and support revenue 116 98 18%
Consulting revenue 186 178 4%
Net revenue 414 375 10%
EBIT, undistributed* 85 81 5%
Number of employees at the end of the period 252 229 10%
* EBIT before allocation of corporate revenue and expenses
Net revenue for Europe Central was 6 percent better than in 2014,
currency adjusted, mainly due to the acquisition of VisionWaves in July
2015. The acquisition of VisionWaves had an impact of SKr 19 million
in revenue and SKr 23 million in operating expenses. EBIT improved by
2 percent, currency adjusted. Some of the larger license deals in Europe
Central were OSMA-Aufzüge Albert Schenk, Janoscka Kippenheim, and
Maurer.
Europe East
SKr, million 2015 2014 Δ
License revenue 42 29 45%
Maintenance and support revenue 69 66 5%
Consulting revenue 76 74 3%
Net revenue 209 192 9%
EBIT, undistributed* 23 13 77%
Number of employees at the end of the period 204 208 -2%
* EBIT before allocation of corporate revenue and expenses
Net revenue increased by 6 percent, currency adjusted, mainly from an
increase in license revenue, which grew by 41 percent, currency
adjusted. Maintenance and consulting remained at approximately the
same level as in the previous year. Operating expenses decreased by
2 percent, currency adjusted. EBIT thereby more than doubled and
improved by SKr 16 million. Some of the major license contracts were
Unitec, Y Soft Corporation, and Vegum.
Americas
SKr, million 2015 2014 Δ
License revenue 159 129 23%
Maintenance and support revenue 259 205 26%
Consulting revenue 291 243 20%
Net revenue 767 636 21%
EBIT, undistributed* 209 179 17%
Number of employees at the end of the period 294 280 5%
* EBIT before allocation of corporate revenue and expenses
Americas increased its net revenue by 3 percent, currency adjusted,
mainly due to increased product revenue. Both license revenue and
maintenance revenue increased by 7 percent, currency adjusted.
Operating expenses increased by 5 percent, currency adjusted, to a large
part as a result of a one-off gain in ‘other operating income’ in 2014.
EBIT was thereby 2 percent lower than the previous year. Some of the
largest deals during the year were General Dynamics, Calsonic, and
Reliance Comfort.
Africa, Asia, and Pacific
SKr, million 2015 2014 Δ
License revenue 75 66 14%
Maintenance and support revenue 84 83 1%
Consulting revenue 106 98 8%
Net revenue 292 274 7%
EBIT, undistributed* 24 48 -50%
Number of employees at the end of the period 274 264 4%
* EBIT before allocation of corporate revenue and expenses
Net revenue decreased by 4 percent, currency adjusted, to a large extent
as a result of larger payments in 2014 of previously deferred
maintenance revenue. Operating expenses were 7 percent higher than
in 2014, currency adjusted, mainly due to an increased number of
employees. EBIT thereby decreased by SKr 27 million, currency
adjusted. Larger license revenue recognitions included Emirates Group,
Arabian International Company for Steel Structures and Elektromag
Makine.
PRODUCT DEVELOPMENT
The Group’s product development is primarily conducted at IFS’s R&D
centers in Sri Lanka, Poland, the United Kingdom, the United States, and
Sweden. This year’s biggest news was the launch of the latest main
version of IFS Applications. IFS Applications 9 provides new and existing
customers significant improvements in areas such as flexibility and ease
of use. It also contains powerful features designed to support customers
in IFS’s target sectors. In addition, new versions of IFS Field Service
Management and Mobile Workforce Management were launched, as
well as a number of important enhancements designed to increase the
business value of existing versions.
PARTNERS
IFS continues to prioritize investment in the development of its global
partner ecosystem. An emphasis on developing opportunities with the
several hundred existing partners already in the IFS partner network,
rather than adding new partners, has resulted in a strengthened partner
sales pipeline and an increase in closed opportunities. IFS continued to
add new modules and content to the IFS Academy as part of a program
designed to maintain and improve the quality of service delivered by
partners. The IFS Academy training content is now available globally
through all regions in multiple languages with both on-line and
classroom delivery options available.
16
In May 2015 at the IFS World Conference in Boston, USA, the company
launched the IFS Managed Cloud on Microsoft Azure and successfully
closed its first sales during the summer months. The first customers
went live later in 2015 and there are now customers running
IFS Managed Cloud on Microsoft Azure in Europe and North America.
During 2015 the company extended its existing relationships with both
Accenture and Cap Gemini to become global and also developed other
present relationships with systems integrators around the world. During
2016, the company will continue to develop its relationships with its
existing partner ecosystem and will develop several new programs with
both service and technology partners to accelerate partner sales growth.
CASH FLOW, LIQUIDITY, AND FINANCIAL POSITION
Cash flow from current operations before change in working capital
amounted to SKr 544 million (450). Change in tied working capital
amounted to SKr 2 million (51). Days of sales outstanding (DSO) at year-
end was 67 days (76). DSO calculated on the monthly receivables’
positions during the year was 57 days (55).
Investments totaled SKr 350 (232) million. Product development
expenditure was capitalized in an amount of SKr 210 million (190). Cash
flow after investments totaled SKr 196 million (269). Cash flow from
financing operations was SKr -151 million (-164). Loans from credit
institutions increased by SKr 36 million during the year (decreased by
67).
Cash and cash equivalents on December 31, 2015 totaled
SKr 533 million (489). The Group’s net liquidity position at year end,
excluding pension liabilities, amounted to SKr 361 million (359). Cash
and unutilized credit totaled SKr 936 million (859). External financing
amounted to SKr 172 million (130).
During the year, the Company distributed a dividend of
SKr 111 million (89). The Company bought back own shares for an
amount of SKr 69 million as well as warrants for an amount of
SKr 10 million (11).
IFS SHARE
The Parent Company is listed on the Nasdaq Stockholm Mid-Cap list. The
number of shareholders on December 31, 2015 was 4,252. The number
of shares on December 31, 2015 was 24,971,830, of which 1,029,341
were A shares, carrying the right to 1.0 vote per share, and 23,942,489
were B shares, carrying the right to 0.1 vote per share. On December 31,
2015, the Company held 426,600 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.
The Company’s pension trust does not exercise direct ownership of
company stock. One stockholder, through direct or indirect holdings in
the Company, represented at year end at least one tenth of the voting
rights of the total number of shares, namely EQT.
One of the company’s loan agreements may be affected if a change
in the control of the Company occurs. After the change in ownership
published November 30, 2015, the lender announced that it reserved
the right to cancel the facility with no less than five working days’ notice.
At year-end, the Company was party to an agreement entered into in
2015 with financial advisers, under which a fee was to be paid in the
event of changes in the control of the Company. In early 2016, IFS was
billed a final invoice of SKr 27 million as a result of this agreement. The
amount has been expensed in the 2015 financial statements.
Mandatory cash offer by EQT
On December 7, EQT, through IGT Holding, announced a mandatory cash
offer to the shareholders in IFS to acquire all outstanding A- and B-shares
in IFS at a price of SEK 362.50 per share, regardless of share class. On
December 17, the board of directors of IFS* unanimously recommended
the shareholders to accept this offer. On February 9, 2016, IGT Holding
owned 83.8 percent of the capital and 87.4 percent of the votes in the
company.
* Anders Böös, chairman of the board, and Bengt Nilsson, deputy chairman of the
board, did not participate in the recommendation and decision.
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 2015/2016, director’s fees totaled
SKr 3.425 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 2015, 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 2015
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 2015, the CEO received a basic annual salary of £ 373,320 and
a premium-based pension with a premium corresponding to
20.0 percent of the basic salary. For 2015, variable remuneration to the
CEO has been linked to Group adjusted EBITDA and will be payable in
the amount of £ 74,664. For further information, see Note 14.
INCENTIVE PROGRAM
In accordance with the resolution of the AGM of 2015, 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 (EPS) target for 2015 (SKr 10.16), 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 2015 EPS, adjusted for non-recurring
effects that have impacted the income statement in connection with the
new majority owner, has been established to SKr 10.91, corresponding
to a target completion rate of 107 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 2020. The strike price is SKr 309.40 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 programs TO9B and TO10B.
17
RESOLUTION CONCERNING GUIDELINES FOR THE REMUNERATION OF
EXECUTIVE MANAGEMENT
The board proposes that the AGM of 2016 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 2015. 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 2016, 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.
Regarding the issue of long-term incentive programs, in light of the
large ownership change that has taken place and the fact that a new
board will be appointed at the forthcoming AGM, the board has decided
not to propose any new incentive program to thereby give the new board
the freedom to design the company’s strategy in this question. 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 typically held in connection with
the quarterly reports, based on expected interest. 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
2015 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.
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 2015.
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 ten 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 4.9 percent in 2015.
In 2015, 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
18
23 percent. The share of female members on the Parent Company’s
board of directors was 43 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, believes that it has addressed such
risks and taken measures to reduce and control them as far as possible.
As the Parent Company does not engage in operational activities, its risk
is limited above all to financing, foreign currency, liquidity, guarantees,
and possible disputes.
OUTLOOK
Despite caution among buyers due to the prevailing macroeconomic
environment, the gradual improvement of the buying environment seen
in recent years continued. Based on preliminary figures, the ERP market
as a whole grew by around 7 percent in 2015. Demand in North America,
Western Europe, and Asia Pacific (excluding China) remains steady; the
buying environment’s positive trajectory leads industry analyst firms
such as Gartner to anticipate the ERP market to maintain this rather
moderate overall growth rate in 2016. During the year, 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 2016, IFS expects to see continued positive development
and further improvements to its strengths.
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 in addition been involved in a legal
dispute that was instituted in Sri Lankan courts in 2002 by the other
major shareholder of the partly-owned company IFS Sri Lanka. Following
dismissal of the case by the local court in 2008 and ensuing arbitration
proceedings in Singapore, the dispute was finally decided in a Final
Award issued in June 2014. Confirming IFS’s position that the
counterparty’s allegations were completely unfounded, the Final Award
rejected the counterparty’s claims, declared that IFS had not committed
any of the alleged contract breaches, and awarded IFS compensation
from the counterparty for legal costs. The Final Award has gained full
legal force.
During 2015, IFS received notice that the counterparty had
requested a leave for a legal action in Sri Lankan courts that entailed a
reexamination of the merits of the case. It is IFS’s unequivocal position
that the case has been finally settled by the Final Award and that there
are no grounds whatsoever for any leave to be granted by the court.
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 2015, net revenue
amounted to SKr 28 million (19), with earnings before tax of
SKr 206 million (124).
During the year, 226,600 B shares were bought back to a value of
SKr 69 million. At the end of the year, the Company held
426,600 B shares in own custody. The Parent Company did not make
any investments in equipment during the year. On December 31, 2015,
liquidity, including unutilized credit, amounted to SKr 628 million (587),
and Company debt was SKr 172 million (130), of which SKr 172 million
(130) was from credit institutions and SKr 0 million (0) was related to
intra-Group borrowing.
In 2015, stockholders’ equity in the Parent Company increased by
SKr 15 million to SKr 1,563 million, of which unrestricted stockholders’
equity accounted for SKr 491 million (476). The change is mainly
attributable to the net earnings, which were affected by a reversal of
SKr 200 million of previously recognized impairment of shares in the U.S.
subsidiary, and a distributed dividend of SKr 111 million. At year-end,
the Parent Company had 3 (3) employees.
19
PROPOSED DISPOSITION OF PROFITS
The board of directors and the president propose that the earnings of
the parent company available for disposition, SKr 491 million, be
allocated as follows:
Dividend to stockholders -
Carried forward SKr 490,836 thousand
Total SKr 490,836 thousand
STATEMENT BY THE BOARD OF DIRECTORS CONCERNING THE
PROPOSED DIVIDEND
In view of the recent major ownership change and as a new board will
be appointed at the forthcoming annual general meeting, the board has
decided not to propose any dividend for the fiscal year 2015 in order to
provide the new board with the freedom to outline the company’s
strategy and assess the company’s capital requirements. The board is
therefore of the opinion that a dividend under these circumstances
would not be justifiable in view of the requirements that may be imposed
by the nature, extent, and risks associated with doing business as
regards the size of the equity of the company and considering the need
of the company to strengthen its balance sheet, liquidity, and financial
position in general.
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
and the risks associated with conducting them.
Corporate Governance Report
Industrial and Financial Systems, IFS AB (publ.) (hereafter “IFS”) is a
public Swedish stock corporation listed on the Nasdaq 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 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 2015 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 7.2 (concerning the composition of the audit
committee), see further details under Nomination Committee. During
2015, IFS has not infringed Nasdaq 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
20
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 2015
IFS’s Annual General Meeting (AGM) for 2015 was held in the IFS office,
Lindhagensgatan 116, in Stockholm on March 25, 2015. A total of
106 stockholders, including proxies, participated in the meeting,
representing 68.1 percent of the votes and 66.1 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 2015 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 4.50 per share was adopted. The AGM also resolved to re-
authorize the board of directors to repurchase during the period up to
the coming AGM Series-B shares on the Nasdaq 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 2016
The Annual General Meeting for 2016 will be held in the IFS office,
Lindhagensgatan 116, in Stockholm on March 14, 2016 at 09:00 a.m.
Notification of the AGM has been published in the Swedish Official
Gazette and on the Company website on February 15, 2016. 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.
Ownership changes
On December 7, 2015, following the acquisition of the shares held by
the main owner and other larger shareholders in IFS, EQT, through IGT
Holding, announced a mandatory cash offer to the shareholders to
acquire all outstanding shares. At the time of writing, IGT Holding owned
83.8 percent of the capital and 87.4 percent of the votes in the
company. On December 17, 2015, the board of directors of IFS*
unanimously recommended the shareholders to accept this offer.
* Anders Böös, chairman of the board, and Bengt Nilsson, vice-chairman of the
board, did not participate in the recommendation and decision.
NOMINATION COMMITTEE
The election of the board of directors and auditors and related matters
is prepared by the IFS nomination committee, which is appointed in
accordance with guidelines resolved by the AGM. Pursuant to the
guidelines adopted by the AGM 2015 the nomination committee shall,
in addition to the chairman of the board, consist of 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 2016
The nomination committee for the AGM 2016, whose composition was
based on the ownership position on August 31, 2015, consisted 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
At the time the composition was announced, September 23, 2015, the
nomination committee represented approximately 55 percent of the
votes in IFS. As a result of the recent change in ownership, the conditions
for the nomination committee have substantially changed, meaning that
the new ownership structure cannot be meaningfully reflected in a
nomination committee composed according to the principles adopted by
the AGM. The company's new principal owner has therefore declared
that, for the forthcoming AGM, it intends to prepare the proposals that
would normally have been the mandate of the nomination committee.
The proposals are at the time of this Corporate Governance Report being
prepared and will be presented later when finalized, however no later
than at the AGM.
The members are not remunerated for their work on the nomination
committee.
BOARD OF DIRECTORS
The board consists of seven 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 three are women. Information about the
independence of board members follows below.
The members of the board
At the AGM 2015, all board members were re-elected, and Gunilla
Carlsson was elected, to the board. 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.
The proposals for election of board members and related matters
for the AGM 2016 are at the time of this Corporate Governance Report
being prepared and will be presented later when finalized, however no
later than at the AGM.
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
independency regulations of the Swedish Code of Corporate
Governance.
21
Name Position Elected Independence Audit
committee
Number of
series A shares*
Number of
series B shares*
Total number
of shares*
Anders Böös Chairman 2003 Yes** - - - -
Bengt Nilsson Vice-chairman 1983 Yes - - - -
Gunilla Carlsson Member 2015 Yes - - - -
Ulrika Hagdahl Member 2003 Yes Chairman - - -
Birgitta Klasén Member 2009 Yes - - 11,000 11,000
Neil Masom Member 2009 Yes Member - - -
Alastair Sorbie Member 2006 No** - - 8,526 8,526
* Ownership per December 31, 2015.
** Until his transfer of shares to EQT, Anders Böös controlled more than 10 percent of the votes in the Company and was thereby considered dependent in relation to the
Company’s major owner, but independent in relation to the Company and the executive management. Following the transfer, he is independent in relation to both the
Company and the major shareholders. 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 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 CEO, the forms of financial reporting, instructions to
board committees, and the CEO'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, an information policy that regulates the way in which IFS
disseminates information, and guidelines to govern the Company’s
conduct in society. 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.
In 2015, the board met 11 times (three of which were held by phone)
in addition to the statutory meeting after the AGM. In addition, two
meeting were held to handle the board’s recommendation regarding
EQT’s mandatory cash offer, at which Anders Böös, chairman of the
board, and Bengt Nilsson, vice-chairman of the board, did not
participate. In Anders Böös’ and Bengt Nilsson’s absence the board’s
work was led by Ulrika Hagdahl.
In addition to the ordinary items on its agenda, the work of the board
in 2015 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.
An important part of the board’s work relates to ensuring that the
Company has good internal controls and that the Company has
formalized routines to ensure that approved principles for financial
reporting and internal controls are applied, and that the Company’s
financial reports are produced in accordance with legislation, applicable
accounting standards and other requirements for listed companies. This
is further described below.
In 2015, 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 2015 was evaluated both in writing and
orally within the board and has also been treated at a plenary session of
the board in December 2015 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 2015
resolved that directors’ fees of SKr 3.425 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 who receives no board remuneration. 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 of directors’ attendance in 2015
Name Position Board
meeting
Audit
committee
Anders Böös Chairman 85% -
Bengt Nilsson Vice-chairman 85% -
Gunilla Carlsson Member 100% -
Ulrika Hagdahl Member 100% 100%
Birgitta Klasén Member 100% -
Neil Masom Member 100% 100%
Alastair Sorbie Member 100% -
* Anders Böös och Bengt Nilsson did not participate at the two meetings that dealt
with the board’s recommendation regarding EQT’s mandatory cash offer. In Anders
Böös’ and Bengt Nilsson’s absence the board’s work was led by Ulrika Hagdahl.
22
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 and follow-up 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 2015/16, the audit committee comprised board members Ulrika
Hagdahl, chairman, and Neil Masom. Accordingly, the Company deviated
from section 7.2 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 2015/16, 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 2015, and all members
were present at the meetings. IFS’s external auditors participated in two
of the audit committee’s meetings.
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 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 three 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 CEO AND EXECUTIVE MANAGEMENT
The CEO 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 CEO for the day-to-day management of the business of
the Company and Group. The CEO leads the work of executive
management and takes decisions in consultation with other members
of management. In addition to the CEO, 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 CEO. The CEO is also responsible for
providing the board with the necessary background information and
documentation for its work, both before and between board meetings.
AUDITORS
IFS’s auditing company, reelected at the 2015 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 2016 it is 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.
GUIDELINES FOR REMUNERATION OF EXECUTIVE MANAGEMENT
For 2015, 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 2015, 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 2015 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
23
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 2015 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 2018 up to and
including June 30, 2020, at a subscription price corresponding to
110 percent of the volume-weighted average price paid for the
Company’s share on the Nasdaq Stockholm Exchange between April 23,
2015 and April 29, 2015.
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.
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
2015 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.
Risk assessment
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.
Control activities
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 external communication,
guidelines have been established to ensure that the Company meets
strict requirements for correct information.
Monitoring
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.
Internal audit
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.
24
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 2015, 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.
25
CONSOLIDATED INCOME STATEMENT
SKr, million Note 2015 2014
License revenue 3 682 558
Maintenance and support revenue 4 1,174 1,037
Consulting revenue 1,524 1,427
Other net revenue 5 9 12
Net revenue 2 3,389 3,034
License expenses -36 -53
Maintenance and support expenses -299 -264
Consulting expenses -1,200 -1,149
Other net expenses -12 -12
Cost of revenue -1,547 -1,478
Gross earnings 1,842 1,556
Development expenditure 6 -333 -303
Sales and marketing expenses 7 -769 -635
Administration expenses -367 -312
Other revenue 8 3 4
Other expenses 9 -60 -35
Result from associated companies and joint venture 18 -2 -
Other operating expenses, net -1,528 -1,281
EBIT 11, 12, 13, 14, 15, 16 314 275
Other interest income and similar income 19 6 4
Interest costs and similar costs 20 -14 -21
Financial net -8 -17
Profit/loss before tax 306 258
Taxes 21 -92 -47
Profit/loss for the year 22 214 211
Profit/loss for the year is allocated as follows:
Parent Company stockholders (SKr million) 211 213
Non-controlling interests (SKr million) 3 -2
Profit/loss per share pertaining to Parent Company stockholders, before dilution
(SKr) 22 8.54 8.60
Profit/loss per share pertaining to Parent Company stockholders, after dilution (SKr) 22 8.37 8.45
Number of shares with deduction of shares in own custody (thousands)
On December 31 24,545 24,772
On December 31, after full dilution 25,071 25,177
Average for the period 24,706 24,772
Average for the period, after full dilution 25,207 25,202
26
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
SKr, million Not 2015 2014
Earnings for the year 214 211
Other comprehensive income
Items that will not be reclassified to profit or loss
Revaluation of defined-benefit pension plans 33 -100
Items that may be subsequently reclassified to profit or loss
Exchange rate differences -12 106
Other comprehensive income for the year, net of tax 21 6
Total comprehensive income for the year 235 217
Total comprehensive income allocated as follows:
Parent Company shareholders 232 219
Non-controlling interests 3 -2
27
CONSOLIDATED BALANCE SHEET—ASSETS
SKr, million Note Dec 31, 2015 Dec 31, 2014
Capitalized expenditure for product development 630 608
Goodwill 512 452
Other intangible fixed assets 99 84
Intangible fixed assets 23 1,241 1,144
Tangible fixed assets 24, 25 119 115
Participations in associated companies and joint venture 27 2 4
Deferred tax receivables 29 130 146
Other long-term receivables 30 25 28
Financial fixed assets 157 178
Fixed assets 1,517 1,437
Accounts receivable 31 777 790
Current tax receivable 47 50
Other receivables 32 259 262
Liquid assets 33 533 489
Current assets 1,616 1,591
Assets 3,133 3,028
CONSOLIDATED BALANCE SHEET—EQUITY AND LIABILITIES
SKr, million Note Dec 31, 2015 Dec 31, 2014
Capital stock 499 499
Other capital contributed 692 694
Reserves - 12
Accumulated earnings, including profit/loss for the year 221 157
Stockholders' equity pertaining to Parent Company stockholders 1,412 1,362
Non-controlling interests 1 -2
Stockholders' equity 34 1,413 1,360
Liabilities to credit institutions 35, 36 0 0
Pension obligations 37 109 168
Deferred tax liabilities 29 33 10
Other provisions 38 3 4
Long-term liabilities 145 182
Accounts payable 104 127
Current tax liabilities 77 51
Liabilities to credit institutions 35, 36 172 130
Other provisions 38 1 2
Other liabilities 39 1,221 1,176
Current liabilities 1,575 1,486
Liabilities 1,720 1,668
Stockholders' equity and liabilities 3,133 3,028
MEMORANDUM ITEMS
Pledged assets 41 23 903
Contingent liabilities 42 25 17
28
CONSOLIDATED CAPITAL ACCOUNT
SKr, million Note 34
Capital
stock
Other
contributed
capital
Reserves
Accumulated
earnings, incl.
profit/loss for
the year
Equity
pertaining to
shareholders
of the parent
company
Non-controlling
interests
Total
stockholders'
equity
Amount on January 1, 2014 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
Amount on December 31, 2014 499 694 12 157 1,362 -2 1,360
Revaluation of defined-benefit pension plans - - - 33 33 - 33
Change in translation difference - - -12 - -12 - -12
Total changes in net wealth recognized in other
comprehensive income, excl. transactions with the
company's owners - - -12 33 21 - 21
Profit/loss for the year - - - 211 211 3 214
Total changes in net wealth, excl. transactions with the
company's owners - - -12 244 232 3 235
Share-based payments - 8 - - 8 - 8
Repurchase of warrants - -10 - - -10 - -10
Repurchase of own shares - - - -69 -69 - -69
Dividend - - - -111 -111 - -111
Amount on December 31, 2015 499 692 0 221 1,412 1 1,413
29
CONSOLIDATED STATEMENT OF CASH FLOWS
SKr, million Note 2015 2014
CURRENT OPERATIONS
Profit/loss after net financial items 306 258
Adjustments for items not included in the cash flow, etc. 43 269 264
Interest paid -14 -13
Interest received 3 3
Income tax paid -20 -62
Cash flow from operations before change in working capital 544 450
CHANGE IN WORKING CAPITAL
Change in current receivables 15 -73
Change in current non-interest-bearing liabilities -13 124
Change in working capital 2 51
Cash flow from current operations 546 501
INVESTMENT OPERATIONS
Acquisition of subsidiaries 44 -111 -
Sale of subsidiaries - 0
Acquisition of intangible fixed assets -197 -192
Acquisition of tangible fixed assets 45 -40 -40
Change in long-term receivables -2 0
Cash flow from investment operations -350 -232
Cash flow after investment operations 196 269
FINANCING OPERATIONS
Repurchase of warrants -10 -11
Raising of loans from credit institutions 35 80 0
Amortization of liability to credit institutions 35 -44 -78
Dividend distributed -111 -87
Repurchase of own shares -69 -
Decrease in other long-term liabilities - -1
Increase in financial liabilities 2 12
Received premium fee for warrants 1 1
Cash flow from financing operations -151 -164
Cash flow for the year 45 105
LIQUID FUNDS
Liquid funds on January 1 489 354
Exchange rate differences in liquid funds -1 30
Liquid funds on December 31 33 533 489
30
INCOME STATEMENT OF THE PARENT COMPANY
SKr, million Note 2015 2014
Net revenue 5 28 19
Administration expenses -34 -33
Other costs -27 -
EBIT 10, 12, 13, 14, 15, 16 -33 -14
Result from participation in subsidiaries 17 199 118
Other interest income and similar income 19 50 58
Interest costs and similar costs 20 -10 -38
Profit/loss before tax 206 124
Tax on profit/loss for the year 21 -8 -14
Profit/loss for the year 198 110
STATEMENT OF COMPREHENSIVE INCOME OF THE PARENT COMPANY
SKr, million 2015 2014
Earnings for the year 198 110
Other comprehensive income - -
Other comprehensive income for the year - -
Total comprehensive income for the year 198 110
31
BALANCE SHEET OF THE PARENT COMPANY—ASSETS
SKr, million Note Dec 31, 2015 Dec 31, 2014
FIXED ASSETS
Tangible fixed assets 24 0 0
Participations in subsidiaries 26 1,197 994
Receivables in subsidiaries 28 1 57
Deferred tax receivables 29 2 2
Other long-term receivables 30 2 2
Financial fixed assets 1,202 1,055
Fixed assets 1,202 1,055
CURRENT ASSETS
CURRENT RECEIVABLES
Receivables in subsidiaries 790 851
Other receivables 9 4
Prepaid expenses and accrued revenue 4 2
Current receivables 803 857
Cash and bank balances 33 225 217
Current assets 1,028 1,074
Assets 2,230 2,129
32
BALANCE SHEET OF THE PARENT COMPANY—EQUITY AND LIABILITIES
SKr, million Note Dec 31, 2015 Dec 31, 2014
STOCKHOLDERS' EQUITY
RESTRICTED STOCKHOLDERS' EQUITY
Capital stock 499 499
Restricted reserves 573 573
Restricted stockholders' equity 1,072 1,072
UNRESTRICTED STOCKHOLDERS' EQUITY
Share premium reserve 115 118
Retained earnings 178 248
Profit/loss for the year 198 110
Unrestricted stockholders' equity 491 476
Stockholders' equity 34 1,563 1,548
PROVISIONS
Provisions for pensions and similar commitments 37 11 7
Provisions 11 7
CURRENT LIABILITIES
Liabilities to credit institutions 35, 36 172 130
Accounts payable 18 18
Liabilities to subsidiaries 418 409
Other current liabilities 17 9
Accrued expenses and prepaid revenue 40 31 8
Current liabilities 656 574
Stockholders' equity, provisions, and liabilities 2,230 2,129
MEMORANDUM ITEMS
Pledged assets 41 - 983
Contingent liabilities 42 38 31
CAPITAL ACCOUNT OF THE PARENT COMPANY
RESTRICTED EQUITY UNRESTRICTED EQUITY Total
stockholders'
equity
SKr, million Note 34 Capital
stock
Reserve
fund
Total
Premium
fund
Earnings carried
forward
Total
Amount on January 1, 2014 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
Amount on December 31, 2014 499 573 1,072 118 358 476 1,548
Repurchase of warrants - - 0 -10 - -10 -10
Share-based payments - - 0 7 - 7 7
Repurchase of own shares - - 0 - -69 -69 -69
Dividend - - 0 - -111 -111 -111
Profit/loss for the year - - 0 - 198 198 198
Amount on December 31, 2015 499 573 1,072 115 376 491 1,563
33
STATEMENT OF CASH FLOWS OF THE PARENT COMPANY
SKr, million Note 2015 2014
CURRENT OPERATIONS
Profit/loss after net financial items 206 124
Adjustments for items not included in the cash flow, etc. 43 -187 29
Interest paid -9 -8
Interest received 1 1
Revenue tax paid -1 0
Cash flow from operations before change in working capital 10 146
CHANGES IN WORKING CAPITAL
Change in current receivables -7 6
Change in current non-interest-bearing liabilities 24 5
Change in working capital 17 11
Cash flow from current operations 27 157
INVESTMENT OPERATIONS
Change in receivables in subsidiaries 127 -447
Change in liabilities to subsidiaries 9 530
Increase in other long-term receivables - 30
Decrease in other long-term receivables -1 -10
Cash flow from investment operations 135 103
Cash flow after investment operations 162 260
FINANCING OPERATIONS
Repurchase of warrants -10 -11
Raising of loans from credit institutions 35 80 -
Amortization of liability to credit institutions 35 -44 -78
Dividend distributed -111 -87
Repurchase of own shares -69 -
Increase in financial liabilities - 12
Cash flow from financing operations -154 -164
Cash flow for the year 8 96
LIQUID FUNDS
Liquid funds on January 1 217 121
Liquid funds on December 31 33 225 217
34
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 service-oriented
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 February 22, 2016. 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 14,
2016. 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, on the basis of an individual assessment.
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 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
35
personnel-related expenses. For information on changes in the
restructuring reserve, see Note 38.
Provisions for pensions. 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.
Legal disputes. 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”.
Business combinations. 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.
Changes in accounting principles
None of the standards applied by the Group for the first time for the fiscal
year beginning on January 1, 2015 have had any material impact on the
Group’s earnings or position.
New IFRS and interpretations not yet applied
A number of new standards and interpretations have come into force for
the fiscal years beginning after January 1, 2015 and have not been pre-
adopted by the Group. Among 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, 2018. The standard
has not been adopted by the EU. The Group has not yet assessed
the effects of implementing the standard.
IFRS 16 Leases, In January 2016, the IASB issued a new leasing
standard to replace IAS 17 Leases, and related interpretations,
IFRIC 4, SIC-15 and SIC-27. The standard required that assets and
liabilities pertaining to all leasing agreements, with a few
exemptions, be recognized in the balance sheet. Such recognition is
based on the view that the lessee obtains the right to use an asset
for a specific period of time and is liable to pay for this right. For the
lessor, recognition will remain essentially unchanged. The standard
is to be implemented for the fiscal year beginning on January 1,
2019 or later. Earlier implementation is permitted. The EU has not
yet adopted the standard. The Group has not yet assessed the
effects of implementing IFRS 16.
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 decision-maker 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
36
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 non-controlling
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.
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% 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 are recognized using the equity
method as the proportional consolidation principle is no longer
permitted.
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 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
37
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. Non-invoiced 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 2015, a
profit margin spanning 2 – 5% 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%. 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.
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.
38
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.
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 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.
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.
39
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 50 years
Certain components for buildings 5–10 years
Equipment 5 years
Servers 5 years
Computers 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 cash-generating 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.
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 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.
40
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-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.
Defined-benefit plans
Defined-contribution and defined-benefit pension plans exist within the
Group. In Sweden, Norway, and France, there are both defined-benefit
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.
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.
41
Conformity with norms and legislation
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 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.
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
simplification rules, in RFR 2 IAS 19. 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 according to IAS 19, 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 Sweden
Europe West: France, Spain, Portugal, and the United Kingdom
Europe Central: Germany, Italy, the 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.
42
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 2015
SKr, million Europe
North
Europe
West
Europe
Central
Europe
East
Americas
Africa, Asia,
and Pacific
Total
segments
Group
items
GROUP
2015
License revenue 183 146 77 42 159 75 682 - 682
Maintenance and support revenue 384 262 116 69 259 84 1,174 - 1,174
Consulting revenue 646 219 186 76 291 106 1,524 - 1,524
Other net revenue 1 3 1 0 0 4 9 0 9
Total external revenue 1,214 630 380 187 709 269 3,389 0 3,389
Internal revenue 21 91 34 22 58 23 249 -249 -
Total revenue 1,235 721 414 209 767 292 3,638 -249 3,389
External operating expenses -718 -475 -297 -172 -525 -245 -2,432 -584 -3,016
Internal operating expenses -108 -49 -31 -5 -32 -17 -242 242 -
Other operating items, net -1 -4 -1 -9 -1 -6 -22 -37 -59
Operating expenses -827 -528 -329 -186 -558 -268 -2,696 -379 -3,075
EBIT 408 193 85 23 209 24 942 -628 314
Other interest income and similar income 6
Interest expenses and similar expenses -14
Profit/loss before tax 306
Tax on profit/loss for the year -92
Profit/loss for the year 214
Other information 2015
SKr, million Europe
North
Europe
West
Europe
Central
Europe
East
Americas
Africa, Asia,
and Pacific
Total
segments
Group
items
GROUP
2015
External assets 416 369 197 63 425 158 1 628 1 503 3 131
Participations in associated companies - - - - - - - 2 2
Total assets 416 369 197 63 425 158 1,628 1,505 3,133
Liabilities 492 249 91 32 216 119 1,199 521 1,720
Investments in fixed assets 2 4 72 2 5 5 90 269 359
Depreciation and write-downs 1 21 2 2 13 2 41 218 259
Average number of employees 466 329 242 206 285 272 1,800 971 2,771
Number of employees at year end 470 340 252 204 294 274 1,834 1,004 2,838
43
Income statement 2014
SKr, million Europe
North
Europe
West
Europe
Central
Europe
East
Americas
Africa, Asia,
and Pacific
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
Other net revenue 5 3 2 2 1 3 16 -4 12
Total external revenue 1,164 539 339 171 578 250 3,041 -7 3,034
Internal revenue 21 89 36 21 58 24 249 -249 -
Total revenue 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 -
Other operating items, net -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
Other interest income and similar income 4
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
External assets 492 381 125 65 412 136 1 611 1 413 3 024
Participations in associated companies - - - - - - - 4 4
Total assets 492 381 125 65 412 136 1,611 1,417 3,028
Liabilities 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
External net sales
GROUP
SKr, million 2015 2014
Sweden 531 455
Rest of the World 2,858 2,579
Total 3,389 3,034
Fixed assets
GROUP
SKr, million 2015 2014
Sweden 803 730
Rest of the World 714 707
Total 1,517 1,437
NOTE 3. LICENSE REVENUE
GROUP
SKr, million 2015 2014
License revenue, IFS 657 511
Third-party license revenue 25 47
Total 682 558
Third-party license revenue includes revenue that accrues when IFS sells
software licenses from third-party suppliers such as Oracle.
NOTE 4. MAINTENANCE AND SUPPORT REVENUE
GROUP
SKr, million 2015 2014
Maintenance and support revenue 1,138 1,005
Third-party maintenance and support revenue 36 32
Total 1,174 1,037
NOTE 5. OTHER REVENUE
GROUP PARENT COMPANY
SKr, million 2015 2014 2015 2014
Hardware 2 3 - -
Parent Company services - - 28 19
Miscellaneous 7 9 - -
Total 9 12 28 19
44
NOTE 6. DEVELOPMENT EXPENDITURE
GROUP
SKr, million 2015 2014
Product development expenditure -339 -304
Amortization of capitalized product development -186 -175
Other amortization -18 -14
Capitalized expenditure for product development 210 190
Total -333 -303
NOTE 7. SALES AND MARKETING EXPENSES
GROUP
SKr, million 2015 2014
Corporate sales and marketing expenses -163 -124
Local sales and marketing expenses -606 -511
Total -769 -635
NOTE 8. OTHER OPERATING INCOME
GROUP
SKr, million 2015 2014
Reversal of unused restructuring reserve 0 2
Rental income 0 1
Miscellaneous 3 1
Total 3 4
NOTE 9. OTHER OPERATING EXPENSES
GROUP
SKr, million 2015 2014
Exchange rate losses, net -26 -24
Restructuring costs -1 -8
Miscellaneous -33 -3
Total -60 -35
NOTE10. TRANSACTIONS BETWEEN SUBSIDIARIES
In the Parent Company, SKr 28 million (19), or 100 percent (100) of the
sales for the year, and SKr 0 million (0), or 1 percent (1) of the purchases
for the year, pertain to subsidiaries in IFS Group.
NOTE 11. OPERATING EXPENSES PER TYPE OF COST
GROUP
SKr, million 2015 2014
Direct costs of goods and services sold -349 -367
Capitalized development cost 210 190
Personnel costs -2,042 -1,771
Travel expenses -147 -135
Costs for rented premises and other property costs -112 -106
External services -126 -102
Marketing and selling expenses -110 -90
Amortization, depreciation, and write-downs -259 -242
Other indirect expenses -81 -105
Total -3,016 -2,728
NOTE 12. AUDITORS’ FEES
GROUP PARENT COMPANY
SKr, million 2015 2014 2015 2014
PricewaterhouseCoopers
Audit engagement -4 -4 -1 -1
Audit business in addition to the audit
engagement -1 0 - 0
Tax consultancy -5 -4 -2 -1
Other services -1 0 - -
Total -11 -8 -3 -2
Other auditors
Audit engagement -1 -1 - -
Audit business in addition to the audit
engagement 0 0 - -
Tax consultancy -1 -1 0 -
Other services 0 0 - -
Total -2 -2 0 0
Total fees -13 -10 -3 -2
“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.
NOTE 13. SALARIES, OTHER REMUNERATIONS, AND SOCIAL COSTS
GROUP PARENT COMPANY
SKr, million 2015 2014 2015 2014
Salaries and other remunerations -1,546 -1,355 -14 -15
Social costs -305 -256 -6 -3
Pension costs, defined benefit plans
(see Note 37) -10 -10 -3 -
Pension costs, defined contribution
plans (see Note 37) -87 -71 -1 -1
Other personnel costs -94 -79 -5 -2
Total -2,042 -1,771 -29 -21
Pension expenses reported as financial
expenses -4 -2 - -
Total -2,046 -1,773 -29 -21
Of the Parent Company’s pension expenses, SKr 0 (198,000) pertained
to the board of directors and CEO. The corresponding amount for the
Group was SKr 3 (3) million.
NOTE 14. REMUNERATIONS PAID TO THE BOARD AND EXECUTIVE
MANAGEMENT
Definitions
Since the AGM held on March 25, 2015, the board has consisted of
Anders Böös (chairman), Gunilla Carlsson, 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.
45
Remuneration principles
According to the resolution adopted by the AGM, board members
received SKr 3,425,000 in fees during 2015/2016, 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 2015,
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 not been made in the form of financial instruments.
However, the company’s incentive program does include financial
instruments; see Note 34 for more information.
Remuneration and other benefits during the year
Remuneration of the president and executive management
2015
SKr, thousand
Basic
salary
Variable
remun.
Other
benefits
Pension
benefits
Total
President and CEO 5,767 905 284 - 6,956
Other group management 6,242 2,433 706 1,328 10,709
Total 12,009 3,338 990 1,328 17,665
2014
SKr, thousand
Basic
salary
Variable
remun.
Other
benefits
Pension
benefits
Total
President and CEO 4,680 413 0 198 5,291
Other group management 5,609 2,060 362 1,218 9,249
Total 10,289 2,473 362 1,416 14,540
Comments on the table:
Executive management consisted of four persons during the year.
Other benefits refer primarily to company cars and options.
Holdings in stock and financial instruments
Stockholdings
Series-A
shares, no.
Series-B
shares, no. Options
BOARD OF DIRECTORS
Anders Böös (Chairman) - - -
Gunilla Carlsson - - -
Ulrika Hagdahl - - -
Birgitta Klasén - 11,000 -
Neil Masom - - -
Bengt Nilsson - - -
Alastair Sorbie (CEO) - 8,526 131,025
Total - 19,526 131,025
EXECUTIVE MANAGEMENT
Jesper Alwall - - 7,716
Fredrik vom Hofe - - 13,644
Paul Smith - - 87,350
Total - 19,526 239,735
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, 2015.
Period of notice and severance pay
If the company terminates the employment, the CEO is to receive twelve
months’ notice; if the CEO terminates the employment, the company is
to receive twelve months’ notice. In addition, the CEO shall receive up to
twelve months’ severance pay if the company terminates the
employment. For executive management, the notification period is
between six to twelve months from the company and three to six months
from the executive.
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, CEO, and management Note 14
Shares in subsidiaries Note 26
Participations in associated companies and joint ventures Note 27
Receivables from subsidiaries Note 28
Stockholders’ equity Note 34
Other liabilities Note 39
Pledged assets Note 41
Contingent liabilities 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 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.
46
NOTE 16. AVERAGE NUMBER OF EMPLOYEES PER COUNTRY
GROUP PARENT COMPANY
2015 2014 2015 2014
Sweden 444 437 3 3
of whom, women 133 134 - -
Australia 28 23 - -
Brazil 54 55 - -
Canada 10 10 - -
China 41 40 - -
Czech Republic 21 21 - -
Denmark 49 46 - -
Finland 68 68 - -
France 72 70 - -
Germany 168 150 - -
Hungary 19 20 - -
India 56 53 - -
Italy 4 4 - -
Japan 11 11 - -
Kazakhstan 2 2 - -
Malaysia 11 9 - -
Netherlands 58 48 - -
Norway 150 144 - -
Poland 134 140 - -
Russia 22 24 - -
Singapore 10 9 - -
Slovakia 8 8 - -
South Africa 20 21 - -
Spain 30 26 - -
Sri Lanka 782 715 - -
Switzerland 12 10 - -
Thailand 16 15 - -
United Arab Emirates 23 23 - -
United Kingdom* 227 227 - -
United States 221 216 - -
Total, subsidiaries abroad 2,327 2,208 - -
of whom, women 715 678 - -
Total 2,771 2,645 3 3
of whom, women 848 812 - -
GROUP PARENT COMPANY
On December 31 2015 2014 2015 2014
Board members 63 62 7 6
of whom, women 13 13 3 2
President and other senior executives 101 96 3 3
of whom, women 23 21 0 0
Other senior executives are those who report to the president and local
managing directors.
NOTE 17. RESULTS FROM PARTICIPATIONS IN SUBSIDIARIES
PARENT COMPANY
SKr, million 2015 2014
Anticipated dividend from subsidiaries - 65
Group contribution received from subsidiaries - 55
Reversal of previous write-down of participation in
subsidiaries 200 -
Write-down of receivables in subsidiaries -1 -2
Total 199 118
NOTE 18. RESULTS FROM PARTICIPATIONS IN ASSOCIATED COMPANIES
GROUP
SKr, million 2015 2014
Share in profit, IFS Retail AB - 0
Share in profit, Application Software IFS South Africa (Pty)
Ltd -2 -
Share in profit, Unitec Kurumsal Bilgi Sistemleri Yazlim Ve
Danismanlika A.S 0 0
Total -2 0
NOTE 19. OTHER INTEREST INCOME AND SIMILAR INCOME
GROUP PARENT COMPANY
SKr, million 2015 2014 2015 2014
External interest 3 3 1 1
Interest from subsidiaries - - 46 57
Exchange rate gains, net 3 - 3 -
Other financial income - 1 - -
Total 6 4 50 58
NOTE 20. INTEREST EXPENSES AND SIMILAR EXPENSES
GROUP PARENT COMPANY
SKr, million 2015 2014 2015 2014
External interest costs -7 -8 -7 -8
Interest costs to subsidiaries - - -2 -8
Exchange rate losses, net - -8 - -18
Capitalized interest costs for
development production 0 0 - -
Interest costs for defined-benefit
pension plans -4 -2 0 0
Other financial costs -3 -3 -1 -4
Total -14 -21 -10 -38
NOTE 21. TAXES
GROUP PARENT COMPANY
SKr, million 2015 2014 2015 2014
Current tax
Current tax -65 -56 -7 -6
Current tax relating to previous years -2 1 - -
-67 -55 -7 -6
Deferred tax
Deferred tax relating to
loss carry forward -17 -9 - -
Deferred tax relating to
temporary differences -8 17 -1 -8
-25 8 -1 -8
Total tax income/expense -92 -47 -8 -14
47
GROUP PARENT COMPANY
SKr, million 2015 2014 2015 2014
DIFFERENCES BETWEEN REPORTED TAX
EXPENSES AND TAX EXPENSES BASED ON
PREVAILING TAX RATES
Profit/loss before tax 306 258 206 124
Tax according to prevailing rate (22
percent) -67 -57 -45 -27
Not taxable dividend from subsidiaries - - - 14
Non-taxable reversal of write-down of
shares in subsidiaries - - 44 -
Other non-deductible expenses -13 -4 -7 -1
Not taxable income 5 2 0 0
Effect of foreign tax rates -8 -3 - -
Tax relating to previous years -2 1 - -
Capitalized loss carry forward - 20 - -
Reversal of previously capitalized loss
carry forward -12 - - -
Utilized loss carry forward, not
previously accounted for 6 1 - -
Losses for which deferred tax has not
been considered -1 -7 - -
Total -92 -47 -8 -14
NOTE 22. PROFIT AND DIVIDEND PER SHARE
GROUP
2015 2014
Profit for the year allocated to parent company
shareholders, SKr million 211 213
Average no. of shares during the period, thousands 24,706 24,772
Adjustments for options program 501 430
Weighted average no. of outstanding shares after
full dilution, thousands 25,207 25,202
Profit/loss per share before full dilution, SKr 8.54 8.60
Profit/loss per share after full dilution, SKr 8.37 8.45
GROUP
SKr 2015 2014
Dividend per share accounted for during the year 4.50 3.50
Coming years' expected dividend per share - 4.50
Dividends paid during the year amounted to SKr 111,473,000
(86,701,405) on outstanding shares less treasury shares. A dividend
totaling SKr 0 for fiscal 2015 will be proposed at the AGM to be held on
March 14, 2016.
NOTE 23. INTANGIBLE FIXED ASSETS
GROUP INTERNAL DEVELOPMENT PURCHASED
SKr, million
Capitalized
expenditure
for R&D
Capitalized
interest costs
Total
capitalized
expenditure
for R&D
Goodwill
Other
intangible
fixed assets
Total
ACCUMULATED ACQUISITION VALUE
Opening balance Jan 1, 2014 2,021 9 2,030 402 285 2,717
Acquisition of operations - - - - - 0
Purchases 192 0 192 - 0 192
Sales/disposals 0 - 0 - -2 -2
Reclassification - - - - 2 2
Exchange differences during the year 1 - 1 54 18 73
Closing balance Dec 31, 2014 2,214 9 2,223 456 303 2,982
ACCUMULATED DEPRECIATION
Opening balance Jan 1, 2014 -1,416 -7 -1,423 - -148 -1,571
Sales/disposals -12 - -12 - 2 -10
Depreciation during the year -175 -1 -176 - -37 -213
Exchange differences during the year -3 - -3 - -10 -13
Closing balance Dec 31, 2014 -1,606 -8 -1,614 - -193 -1,807
Book value Dec 31, 2014 608 1 609 456 110 1,175
ACCUMULATED WRITE-DOWNS
Opening balance Jan 1, 2014 -13 0 -13 -4 -26 -43
Write-down for the year 12 - 12 - - 12
Closing balance Dec 31, 2014 -1 0 -1 -4 -26 -31
Book value Dec 31, 2014 607 1 608 452 84 1,144
48
GROUP INTERNAL DEVELOPMENT PURCHASED
SKr, million
Capitalized
expenditure
for R&D
Capitalized
interest costs
Total
capitalized
expenditure
for R&D
Goodwill
Other
intangible
fixed assets
Total
ACCUMULATED ACQUISITION VALUE
Opening balance Jan 1, 2015 2,214 9 2,223 456 303 2,982
Acquisition of operations - - - 56 15 71
Purchases 210 1 211 - 37 248
Sale/disposals -93 - -93 - -86 -179
Exchange differences during the year -1 - -1 4 -3 0
Closing balance Dec 31, 2015 2,330 10 2,340 516 266 3,122
ACCUMULATED DEPRECIATION
Opening balance Jan 1, 2015 -1,606 -8 -1,614 - -193 -1,807
Sale/disposals 92 - 92 - 65 157
Depreciation during the year -185 0 -185 - -38 -223
Exchange differences during the year -2 - -2 - 4 2
Closing balance Dec 31, 2015 -1,701 -8 -1,709 - -162 -1,871
Book value Dec 31, 2015 629 2 631 516 104 1,251
ACCUMULATED WRITE-DOWNS
Opening balance Jan 1, 2015 -1 0 -1 -4 -26 -31
Sale/disposals - - - - 21 21
Closing balance Dec 31, 2015 -1 0 -1 -4 -5 -10
Book value Dec 31, 2015 628 2 630 512 99 1,241
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 (10.5) before tax, corresponding to 8 percent (8) after
tax.
Revenue growth in the forecast period has been presumed to be
4.0–6.0 percent (4.0–6.1) and the EBIT margin has been presumed
to be 11.2–17.9 percent (11.8–19.8).
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 percent 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, 2014 44 121 2 0 264 8 13 452
Booked value December 31, 2015 42 123 56 0 270 8 13 512
49
Depreciation included in the income statement, per function
GROUP
SKr, million 2015 2014
License costs -19 -26
Maintenance and support costs 0 0
Consulting costs 0 0
Research and development expenditure -201 -187
Administration costs -3 0
Total -223 -213
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, 2014 69 9 162 120 6 366
Purchases 6 0 24 9 1 40
Sales/disposals -1 0 -7 -3 0 -11
Reclassifications - -1 -1 - - -2
Exchange differences during the year 8 0 15 10 1 34
Closing balance Dec 31, 2014 82 8 193 136 8 427
ACCUMULATED DEPRECIATION
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
Exchange differences during the year -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
GROUP
SKr, million Buildings
and land
Leasing,
inventories
Computers
Office
equipment
Other
inventories
Total
ACCUMULATED ACQUISITION VALUE
Opening balance Jan 1, 2015 82 8 193 136 8 427
Acquisition of subsidiary - - - - - 0
Purchases 5 - 26 9 1 41
Sales/disposals -4 -2 -31 -6 0 -43
Reclassifications - - - - 0 0
Exchange differences during the year -1 0 -1 -1 -1 -4
Closing balance Dec 31, 2015 82 6 187 138 8 421
ACCUMULATED DEPRECIATION
Opening balance Jan 1, 2015 -39 -7 -150 -111 -5 -312
Depreciation during the year -5 0 -21 -9 -1 -36
Sales/disposals 3 2 32 6 0 43
Reclassifications - - - - - 0
Exchange differences during the year 1 0 1 1 0 3
Closing balance Dec 31, 2015 -40 -5 -138 -113 -6 -302
Book value Dec 31, 2015 42 1 49 25 2 119
50
PARENT COMPANY
SKr, million Buildings
and land
Leasing,
inventories
Computers
Office
equipment
Other
inventories
Total
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
ACCUMULATED ACQUISITION VALUE
Opening balance Jan 1, 2015 - - 1 1 - 2
Closing balance Dec 31, 2015 - - 1 1 - 2
ACCUMULATED DEPRECIATION
Opening balance Jan 1, 2015 - - -1 -1 - -2
Closing balance Dec 31, 2015 - - -1 -1 - -2
Book value Dec 31, 2015 - - 0 0 - 0
Category Computers 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
GROUP
SKr, million 2015 2014
License costs -2 -1
Maintenance and support costs -2 -2
Consulting costs -5 -4
Development expenditure -3 -2
Administration costs -24 -20
Total -36 -29
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.
NOTE 25. OPERATING LEASE AGREEMENTS
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 non-terminable leasing agreements is
distributed as follows.
GROUP
SKr million 2015 2014
Due for payment within one year 61 65
Due for payment later than one year but within five years 243 270
Due for payment later than five years 32 32
Total 336 367
51
NOTE 26. PARTICIPATIONS IN SUBSIDIARIES
Organization no.
Registered office
Share of
capital/votes
Number of
shares
Book value,
SKr million,
2015
Book value,
SKr million,
2014
IFS Americas, Inc. USA 100% 100 305 105
IFS North America, Inc. USA 100% - -
IFS Industrial & Financial Systems Canada Inc. Canada 100% - -
Metrix LLC USA 100% - -
IFS Europe AB 556139-5541 Sweden 100% 7,500 144 142
IFS Applications Iberica, S.A.U. Spain 100% - -
IFS Benelux B.V. Netherlands 100% - -
IFS Belgium BVBA (in liquidation) Belgium 100% - -
IFS Netherlands B.V. ((in liquidation) Netherlands 100% - -
VisionWaves B.V. Netherlands 100% - -
VisionWaves Inc. United States 100% - -
Industrial and Financial Systems Central and Eastern Europe Sp. z o.o Poland 100% - -
IFS Region RU Russia 100% - -
Industrial and Financial Systems KZ Kazakhstan 100% - -
IFS Czech s.r.o. Czech Republic 100% - -
IFS Hungary Számítástechnikai Kft. Hungary 100% - -
IFS Industrial and Financial Systems Poland Sp. z o.o Poland 100% - -
IFS Slovakia, spol. s r.o Slovakia 100% - -
IFS France France 100% - -
SCI Le Chateau France 100% - -
IFS Italia S.r.l. Italy 100% - -
Industrial and Financial Systems IFS Verwaltungsgesellschaft mbh Germany 100% - -
Industrial and Financial Systems IFS Beteiligungsgesellschaft mbh Germany 100% - -
Industrial and Financial Systems IFS Deutschland GmbH & Co., KG Germany 100% - -
Industrial and Financial Systems, IFS UK Ltd United Kingdom 100% - -
360 Scheduling Ltd United Kingdom 100% - -
360 Scheduling Inc USA 100% - -
360 Scheduling s.a.r.l France 100% - -
Application Software IFS South Africa (Pty) Ltd South Africa 100% - -
IFS Aerospace & Defence Ltd United Kingdom 100% - -
Infiseruo, Serviços Informáticos, Lda. (in liquidation) Portugal 100% - -
IFS Japan, Inc Japan 100% 16,200 0 0
IFS Middle East FZ-LLC United Arab Emirates 100% 100 0 0
IFS Nordic AB 556248-4856 Sweden 100% 1,000 144 144
IFS Danmark A/S Denmark 100% - -
IFS Norge AS Norway 100% - -
IFS Sverige AB 556211-7720 Sweden 100% - -
IFS Finland Oy AB Finland 100% - -
IFS R&D Asia Pacific Sdn. Bhd. Malaysia 100% 2 0 0
Industrial & Financial Systems R&D Ltd Sri Lanka 100% 300,000 0 0
IFS Research and Development (Private) Ltd Sri Lanka 100% - -
IFS Solutions (Singapore) Pte Ltd Singapore 100% 1 0 0
IFS Solutions (Shanghai) Co. Ltd. China 100% - -
IFS Solutions Malaysia Sdn. Bhd. Malaysia 100% - -
IFS Solutions Thai Ltd Thailand 100% - -
IFS Solutions Asia Pacific Pte Ltd Singapore 100% 15,753,417 0 0
IFS Solution Beijing Co. Ltd. China 100% - -
IFS Australia Pty Ltd Australia 100% - -
IFS New Zealand Pty Ltd New Zealand 100% - -
Industrial & Financial Systems Philippines, Inc (in liquidation) Philippines 100% - -
IFS Solution India Private Ltd India 100% - -
IFS Solutions (Thailand) Ltd Thailand 100% - -
Industrial & Financial Systems Sri Lanka Ltd Sri Lanka 50% 149,998 0 0
IFS World Operations AB 556040-6042 Sweden 100% 2,400 589 588
IFS R & D International (Private) Ltd Sri Lanka 100% - -
IFS Retail AB Sweden 100% - -
Torron System AB 556457-8960 Sweden 100% 20 0 0
Vendimo Business Solutions AB 556400-2946 Sweden 100% 1,754,383 15 15
IFS Schweiz AG Switzerland 100% - -
LatinIFS Tecnologia da Informação Ltda Brazil 100% - -
Total book value in the Parent Company 1,197 994
52
PARENT
COMPANY
SKr, million 2015 2014
ACCUMULATED ACQUISITION VALUE
Opening balance 2,260 2,258
Incentive program for key personnel 3 2
Closing balance 2,263 2,260
ACCUMULATED WRITE-DOWNS
Opening balance -1,266 -1,266
Reversal 200 -
Closing balance -1,066 -1,266
Book value 1,197 994
NOTE 27. PARTICIPATIONS IN ASSOCIATED COMPANIES AND JOINT
VENTURES
GROUP
SKr, million 2015 2014
Opening balance 4 3
Share in earnings of associated companies -2 1
Exchange differences 0 0
Closing balance 2 4
Registered office
Net revenue
Earnings
before tax
Assets
Liabilities
Equity
Share of
capital/votes
2015
INDIRECTLY OWNED
IFS Applications Africa (Pty) Ltd South Africa 2 -4 2 6 -4 49.00%
Unitec Kurumsal Bilgi Sistemleri Yazlim Ve Danismanlika A.S Turkey 14 1 8 4 4 25.00%
2014
INDIRECTLY OWNED
IFS Applications Africa (Pty) Ltd United Kingdom 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%
* Starting October 1, 2014, the company is classified as a subsidiary.
The values in the table are the Group’s share of net sales, earnings before taxes, assets, liabilities, and equity.
NOTE 28. RECEIVABLES IN SUBSIDIARIES
PARENT COMPANY
SKr million 2015 2014
Subordinated receivables 1 2
Other long-term receivables in subsidiaries - 55
Total 1 57
NOTE 29. DEFERRED TAX ASSETS AND TAX LIABILITIES
GROUP PARENT COMPANY
SKr, million 2015 2014 2015 2014
DEFERRED TAX CLAIMS CONCERNING
Temporary differences 85 83 2 2
Deficit deduction 45 63 - 0
Total 130 146 2 2
DEFERRED TAX LIABILITIES CONCERNING
Temporary differences 33 10 - -
Total 33 10 - -
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.
Temporary differences
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 PARENT COMPANY
SKr, million 2015 2014 2015 2014
DEFERRED TAX LIABILITIES
Fixed assets 9 7 - -
Provisions 0 0 - -
Current claims and liabilities 3 3 - -
Total deferred tax liabilities 12 10 - -
DEFERRED TAX CLAIMS
Fixed assets 13 5 - -
Current claims and liabilities 39 40 1 1
Provisions 12 38 1 1
Fiscal deficit deduction 117 127 - -
Total deferred tax claims 181 210 2 2
Unreported deferred tax claims
concerning deficit deductions and
temporary differences -72 -64 - -
Total unreported deferred tax claims -72 -64 - -
Total deferred tax claims, net 109 146 2 2
Deferred tax claims, net 97 136 2 2
53
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 PARENT COMPANY
SKr, million 2015 2014 2015 2014
2016 (2015) 5 7 - -
2017 (2016) 3 0 - -
2018 (2017) 3 3 - -
2019 (2018) 13 3 - -
2020 (2019) 14 15 - -
Later 62 74 - -
No time limit 18 25 - -
Total 118 127 - -
NOTE 30. OTHER LONG-TERM RECEIVABLES
SKr, million
Deposits
Other
financial
assets
Total
GROUP
Opening balance, Jan 1, 2014 21 2 23
Changes during the year 5 - 5
Closing balance, Dec 31, 2014 26 2 28
Changes during the year -3 0 -3
Closing balance, Dec 31, 2015 23 2 25
PARENT COMPANY
Opening balance, Jan 1, 2014 0 2 2
Changes during the year - - -
Closing balance, Dec 31, 2014 0 2 2
Changes during the year - - -
Closing balance, Dec 31, 2015 0 2 2
NOTE 31. ACCOUNTS RECEIVABLE
GROUP
SKr, million 2015 2014
Accounts receivable, gross 822 848
Provision for doubtful receivables -45 -58
Accounts receivable, net 777 790
AGE ANALYSIS
Accounts receivable, not due 513 519
Due 1–30 days 199 196
Due 31–90 days 33 55
Due >90 days 32 20
Total 777 790
GROUP
SKr, million 2015 2014
On January 1 58 56
Provision for doubtful receivables 14 20
Receivables written off during the year -13 -8
Reversed unused amounts -14 -10
On December 31 45 58
NOTE 32. OTHER RECEIVABLES
GROUP
SKr, million 2015 2014
Receivables, associated companies 15 9
Ongoing assignments 65 57
Accrued license revenue 11 7
Other prepaid expenses 84 76
Other accrued income 46 75
Other receivables 38 38
Total 259 262
NOTE 33. LIQUID ASSETS
The effective interest rate for current investments during 2015 was
7.4 percent. The current investments, located in an overseas territory,
had an average duration of 30 days. Investments have been classified
as liquid assets based on the assumption that:
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 PARENT COMPANY
SKr, million 2015 2014 2015 2014
Cash and bank 526 480 225 217
Current investment 7 9 - -
Total 533 489 225 217
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.
Reserves. 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.
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.
Reserve fund. Consists solely of amounts transferred to the premium
fund before January 1, 2006.
Unrestricted stockholders’ equity
Premium fund. 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
54
premium fund. Amounts transferred to the premium fund as of January
1, 2006, are included in unrestricted capital.
Retained earnings. 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.
Change in number of shares
Number Series A shares Series B shares Total
Shares on Jan 1, 2014 1,262,445 23,709,385 24,971,830
Conversion of shares from
Series A to Series B -178,342 178,342 -
Shares on Dec 31, 2014 1,084,103 23,887,727 24,971,830
Conversion of shares from
Series A to Series B -54,762 54,762 -
Shares on Dec 31, 2015 1,029,341 23,942,489 24,971,830
Quota value per share, SKr 20.00
Stockholders' equity at end of period, SKr 499,436,600
During the year, 54,762 shares of series A have been converted to series
B. At year-end, the company had 426,600 shares in own custody. The
shares were repurchased in 2012 and 2015.
Number of shares minus treasury shares held by the company
Thousands 2015 2014
At end of period 24,545 24,772
At end of period, after full dilution 25,071 25,177
Average during the period 24,706 24,772
Average during the period, after full dilution 25,207 25,202
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 risk-free 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 risk-free 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 risk-free 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 2014 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 2014, 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 outcome regarding earnings per share for the year 2014 meant
that two warrants were granted.
During the year 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 2015, to receive not more than
55
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 2018 up to and including June 30, 2020. The exercise price for the
warrants amounts to SKr 309.40. The price per warrant was SKr 21.90.
The warrants have been evaluated according to the Black & Scholes
method. On calculation, the parameters were a risk-free interest of
0.02 percent and volatility of 17 percent over 12 months, a period of
maturity of 4.8 years, and an assumed dividend of SKr 5.00 in 2015,
SKr 5.50 in 2016, SKr 5.50 in 2017, SKr 5.50 in 2018, and SKr 5.50 in
2019. 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 personnel-related
expenses amounting to SKr 0 million.
In the beginning of 2015, the company issued a time-limited
invitation to redeem outstanding warrants related to programs TO09 and
TO10B that were issued in 2011 and 2012 for cash. The company
repurchased warrants corresponding to 59,481 shares.
Changes in the number of outstanding share options and their weighted
average strike price are as follows:
2015 2014
Average
strike price
Options,
thousands
Average
strike price
Options,
thousands
On January 1 163.09 405 130.01 420
Issued 309.40 239 206.80 239
Exercised - - - -
Bought back 122.85 -59 131.90 -194
Indexation of strike price on
options issues in previous years - - - -
Unallocated 309.40 -60 206.08 -60
On December 31 217.61 525 163.09 405
Outstanding share options at year-end have the following year of
maturity and strike prices:
Options, thousands
Maturity, coming years Strike price 2015 2014
2015–2016 131.90 - 4
2015–2017 122.20 7 62
2016–2018 130.70 160 160
2016–2019 206.80 179 179
2017–2019 309.40 179 -
Total 525 405
NOTE 35. LIABILITIES TO CREDIT INSTITUTIONS
GROUP PARENT COMPANY
SKr, million 2015 2014 2015 2014
LONG-TERM LIABILITIES
Financial leasing liabilities 0 0 - -
CURRENT LIABILITIES
Bank loan 172 130 172 130
Financial leasing liabilities - 0 - -
Total 172 130 172 130
Granted overdraft facility and line of
credit 575 500 575 500
Unused overdraft facility and line of
credit 403 370 403 370
Used overdraft facility and line of credit 172 130 172 130
During the year, the average rate of interest on liabilities to credit
institutions was 2 percent. For external funding, agreements exist with
respect to interest coverage ratio, net debt in relation to adjusted EBIT,
and the level of stockholders’ equity. For information on pledges to
creditors, see Note 41, Pledged assets.
NOTE 36. RISK STRUCTURE PERTAINING TO INTEREST AND FINANCING
Change of interest in the interval
0–6 MONTHS 7–12 MONTHS 13–60 MONTHS MORE THAN 60
MONTHS TOTAL
Nominal amount 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014
Bank loan 172 130 - - - - - - 172 130
Financial leasing liabilities - - - - 0 0 - - 0 0
Total 172 130 - - 0 0 - - 172 130
Loan and credit maturity in the interval
0–6 MONTHS 7–12 MONTHS 13–60 MONTHS MORE THAN 60
MONTHS TOTAL
Nominal amount 2015 2014 201
5 2014 2015
201
4 2015 2014 2015 2014
Bank loan* - - - 130 172 - - - 172 130
Financial leasing liabilities - - - - 0 0 - - 0 0
Derivatives 3 3 - - - - - - 3 3
Accounts payable and other loans 104 127 - - - - - - 104 127
Total 107 130 - 130 172 0 - - 279 260
* After the ownership change that was made public on November 30, 2015, the Company’s bank announced that it reserved the right to cancel its facility with no less than
five business days’ notice.
56
NOTE 37. PENSION COMMITMENTS
Commitments in the balance sheet
GROUP
SKr, million 2015 2014
Defined-benefit pension plans 106 166
Other pension commitments 3 2
Total 109 168
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
SKr, million 2015 2014
Sweden 90 143
Norway 11 19
Other countries 5 4
Total provisions for pensions 106 166
Defined-benefit pension plans, 2015
The amounts reported in the consolidated balance sheet have been
calculated according to the following:
SKr, million
Sweden
Norway
Other
countries
Total
Present value of funded obligations 466 80 - 546
Fair value of plan assets -376 -69 - -445
Total 90 11 - 101
Present value of unfunded obligations - - 5 5
Total 90 11 5 106
Change in the defined-benefit commitment during the year is as follows:
GROUP
SKr, million 2015 2014
Defined Benefit Obligation (DBO), beginning of the year 596 408
Current Service Cost 10 10
Interest Cost 18 19
Expected benefit paid (pensions payment) -4 -5
Special employer's contribution -1 26
Exchange rate differences -9 0
Experience gains / losses 1 -14
Actuarial gain / loss due to change in demographic
assumptions 24 -
Actuarial gain / loss due to change in financial assumptions -84 152
Defined Benefit Obligation (DBO), end of the year 551 596
Change in fair value of plan assets during the year is as follows:
GROUP
SKr, million 2015 2014
Fair value of plan assets, beginning of the year 430 371
Interest income 14 17
Employer contributions 26 35
Benefits paid (pensions payment) -2 -2
Exchange rate differences -7 0
Actuarial gain / loss during the period -16 9
Fair value of plan assets, end of the year 445 430
Defined-benefit pension plans, 2015
Specification of the changes in net liabilities recognized in the Group’s
balance sheet:
SKr, million
Sweden
Norway
Other
countries
Total
Net liability at beginning of year 142 19 5 166
Net cost reported in income statement 8 6 - 14
Employer's contributions to funded plans -20 -6 - -26
Pension payments reduced with
compensation -2 - - -2
Special employer's contribution -1 - - -1
Exchange rate differences in
international plans 7 -2 - 5
Experience gains / losses 24 -6 - 18
Actuarial gain / loss due to change in
financial assumptions -68 - - -68
Net liability at end of year 90 11 5 106
Key actuarial assumptions
Sweden Norway
2015 2014 2015 2014
Discount rate 4.0% 3.4% 2.5% 2.3%
Future annual salary increases 3.0% 3.0% 2.5% 2.8%
Future annual pension increases 2.0% 2.0% 0.0% 0.0%
For 2015 and 2014, 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 2016.
Sensitivity analysis
The current value of the commitment for the Swedish defined-benefits
pension plans amounts to SKr 432 million excluding special payroll tax.
If the discount rate had been one percentage point higher, the liability
would have decreased by SKr 104 million; if it had been one percentage
point lower, the liability would have increased by SKr 137 million. If the
average life expectancy increases by 1 year, the liability will increase by
SKr 18 million; if it decreases by 1 year, the liability would decrease by
SKr 15 million.
The corresponding figures for Norway amount to a present value of
SKr 79 million for the commitment. If the discount rate had been one
percentage point higher, the liability would have decreased by
SKr 6 million; if it had been one percentage point lower, the liability
would have increased by SKr 22 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.
Risk of inflation. 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
57
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 five-year 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 percent 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 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, 5 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:
2015 2014
Quoted Unquoted Total Quoted Unquoted Total
Share-based investments 22% - 22% 21% - 21%
Structured products - 6% 6% - 12% 12%
Real-interest based
investments - 5% 5% - 10% 10%
Long-term interest-bearing
investments 24% 5% 29% 15% 6% 21%
Short-term investments,
cash, and cash
equivalents 33% - 33% 31% - 31%
Other assets - 5% 5% - 5% 5%
Total 79% 21% 100% 67% 33% 100%
Defined-contribution pension plans 2015
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 defined-contribution plans in Sweden are administered
by SPP and Collectum.
In 2015, costs pertaining to defined-contribution plans amounted to
SKr 87 million (71).
Provisions for defined-benefit pension plans
PARENT COMPANY
SKr, million 2015 2014
Provisions according to the Swedish Act on Income Security -3 0
NOTE 38. OTHER PROVISIONS AND OTHER LIABILITIES
GROUP
SKr, million 2015 2014
Restructuring reserve 2 2
Other provisions 1 2
Total 3 4
Restructuring reserve
SKr, million Group
Opening balance Jan 1, 2014 26
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
Reversal, restructuring reserve 0
Provision, restructuring reserve 1
Use of restructuring reserve -2
Effects of exchange rate fluctuations 0
Closing balance Dec. 31, 2015 3
Less current portion -1
Restructuring reserve, long term 2015 2
NOTE 39. OTHER LIABILITIES
GROUP
SKr, million 2015 2014
Deferred maintenance revenue 502 478
Deferred license- and consulting revenue 27 26
Accrued consulting expenses 30 39
Advances from customers 1 6
VAT liabilities 88 103
Accrued payroll expenses 255 240
Accrued pension cost, defined contribution plans 25 22
Accrued social security contributions 82 73
Retained preliminary tax for employees 35 33
Liabilities to employees 4 5
Accrued expenses, third-party suppliers 26 27
Accrued interest expenses 1 1
Liabilities to associated companies 1 1
Derivatives held for trading 3 3
Miscellaneous other liabilities 12 6
Other accrued expenses 124 109
Other prepaid revenue 5 4
Total 1,221 1,176
58
NOTE 40. ACCRUED EXPENSES AND PREPAID INCOME
PARENT COMPANY
SKr, million 2015 2014
Accrued interest expenses 1 1
Accrued social security contributions 1 2
Accrued payroll expenses 1 2
Supplier invoices not yet received 27 -
Other accrued expenses 1 3
Total 31 8
NOTE 41. PLEDGED ASSETS
GROUP PARENT COMPANY
SKr, million 2015 2014 2015 2014
Chattel mortgages - 141 - 4
Blocked bank accounts 7 7 - -
Shares in subsidiaries - - - 979
Net assets in subsidiaries - 736 - -
Other 16 19 - -
Total 23 903 - 983
Mortgages and shares in subsidiaries have been pledged as security for
bank loans. During the year, a new loan agreement was signed by which
the former pledged assets were returned. Liabilities to credit institutions
are detailed in Note 35. Net assets in subsidiaries pertain to the
corporate net assets.
NOTE 42. CONTINGENT LIABILITIES
GROUP PARENT COMPANY
SKr, million 2015 2014 2015 2014
Sureties, external 25 17 23 15
General surety for subsidiaries - - 14 11
Parent Company guarantees - - 1 5
Total 25 17 38 31
NOTE 43. ADJUSTMENTS FOR ITEMS NOT INCLUDED IN CASH FLOW
GROUP PARENT COMPANY
SKr, million 2015 2014 2015 2014
Depreciation 258 242 - -
Restructuring costs, net -2 -22 - -
Provisions for pensions -26 -12 4 1
Bad debts 2 8 0 -
Exchange rate gains/losses, net 28 38 1 21
Write-down of financial assets 0 0 1 2
Reversal of write-down in participations
in subsidiaries
- - -200 -
Interest costs for the year 14 13 8 9
Interest income for the year -3 -3 -1 -1
Other adjustments -2 0 0 -3
Total 269 264 -187 29
NOTE 44. BUSINESS COMBINATIONS
During the year, the remaining outstanding shares in IFS Region RU have
been acquired. The acquisition had a marginal effect on the financial
statements.
On July 6, IFS acquired 100 percent of the capital stock in
VisionWaves B.V. (Netherlands, reg. no. 30165276) for a total
consideration of SKr 113 million. Of this, SKr 8 million is contingent on
achievement of license revenue targets in full-year 2015 and full-year
2016. All of the consideration is payable in cash. Excluding excess
working-capital, the equivalent enterprise value is SKr 107 million,
including SKr 8 million being the fair-value of the contingent
consideration.
The fair value of identified net assets and liabilities in VisionWaves
B.V. amounts to SKr 58 million, including SKr 37 million in software,
SKr 14 million in customer relationships, SKr 2 million in non-compete
and SKr 13 million in deferred tax liabilities. The remaining
SKr 55 million represents group goodwill. The goodwill recognized for the
acquisition corresponds to the company’s market position and technical
skills in enterprise operational intelligence.
The purpose of the acquisition of VisionWaves is to strengthen IFS
products, leveraging VisionWaves’ ability to map, monitor, and manage
end-to-end business processes across multiple business units, data
sources, and applications, to enable IFS customers globally, across all
IFS focus industries, to accelerate strategy realization and boost
business performance. Based in the Netherlands and with a subsidiary
in the United States, the company is recognized by key industry analysts
as a leader in enterprise operational intelligence.
The acquired businesses contributed revenue of SKr 19 million and
an EBIT of SKr -4 million to the Group during the year. Acquisition-related
expenditure amounts to SKr 2 million and is recognized as other
operating expenses in the consolidated earnings. The prepared
acquisition analysis is preliminary.
If the acquisition had been made on January 1, 2015, Group
revenue would have amounted to SKr 3,417 million, with EBIT for the
year of SKr 325 million.
Acquisition analysis
Company
SKr, million
Fair value reported in
Group value
2015 2014
Intangible fixed assets 53 -
Tangible fixed assets 0 -
Accounts receivable 26 -
Liquid assets, net 1 -
Accounts payable and other liabilities -9 -
Deferred tax liabilities -13 -
Fair value of net assets 58 -
Group goodwill 55 -
Total purchase consideration 113
Transferred compensation: fair
value of share in subsidiaries -113 -
Liquid assets in the acquired
companies 2 -
NOTE 45. NET ACQUISITION OF TANGIBLE FIXED ASSETS
GROUP
SKr, million 2015 2014
Investments for the year, net -40 -40
Total -40 -40
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
59
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.
Exchange rate risks
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, 2015, the Group had
outstanding foreign exchange contracts in the following currencies
(nominal values):
Currency futures contracts, nominal values in SKr million
SKr, million 2015 2014
AED 3 -
AUD 13 13
BRL 2 5
CAD 1 -
CHF 10 10
CZK 1 7
DKK 37 11
EUR 66 69
GBP 35 41
JPY 15 12
NOK 87 21
PLN 15 76
SGD 39 38
USD - 12
ZAR 0 3
Total 324 318
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, 2015, the Group had outstanding currency options for the
sale of £ 1.15 million and NKr 50 million.
Currency option contracts, nominal values in SKr million
2015 Maturity
SKr, million within 3
months
3–6
months
6–12
months
GBP Outflow (GBP) 0.3 0.3 0.6
Inflow (SEK) 3.3 3.8 7.6
NOK Outflow (NOK) 40.0 10.0 -
Inflow (SEK) 42.0 10.8 -
2014 Maturity
SKr, million within 3
months
3–6
months
6–12
months
EUR Outflow (EUR) 0.5 - 0.4
Inflow (SEK) 4.4 - 3.6
GBP Outflow (GBP) 0.5 0.3 0.5
Inflow (SEK) 5.4 2.8 5.7
NOK Outflow (NOK) 45.0 - -
Inflow (SEK) 47.0 - -
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, 2015, 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
Increase/decrease
of rate on balance
sheet day
Profit/loss
SKr, million 2015 2014
USD 10% -3.2 -0.4
-10% 3.2 0.4
EUR 10% 1.7 -0.1
-10% -1.7 -1.1
GBP 10% 1.4 3.0
-10% -0.5 -3.0
NOK 10% 1.6 1.7
-10% 3.2 -2.7
Interest rate risks
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 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, 2015,
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.
60
Credit risk
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 percent 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 2015, the Group entered into a new financing
agreement with a duration of 3 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 29 months (6 months). 100 percent of the loan
portfolio matures within 30 months.
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.
Fair value estimation
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:
Level 1: Quoted prices (not adjusted) on an active market for similar
instruments.
Level 2: Directly (e.g. prices) or indirectly (e.g. derived from prices)
observable market inputs for the instrument other than the quoted price.
Level 3: Inputs for financial instrument for which the asset or liability is
not based on observable market data.
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.
Financial assets and liabilities 2015
December 31,
2015
SKr, million
Fair value
hierarchy
Financial
assets valued
at fair value
on balance-
sheet day
Accounts- and
other
receivables
Of which
current
Of which
non-current
Financial assets 2015
Investments Level 3 2 - - 2
Other long-
term
receivables
and other
interests - 23 - 23
Accounts receivable - 777 777 -
Other receivables - 299 299 -
Derivatives Level 2 7 - 7 -
Cash and cash equivalents - 533 533 -
Total 9 1,632 1,616 25
December 31,
2015
SKr, million
Fair value
hierarchy
Financial
liabilities
valued at fair
value on
balance-sheet
day
Other financial
liabilities
Of which
current
Of which
non-current
Financial liabilities 2015 Liabilities to credit
institutions - 172 172 0
Accounts payable - 104 104 -
Derivatives Level 2 3 - 3 -
Total 3 276 279 0
Financial assets and liabilities 2014
December 31,
2014
SKr, million
Fair value
hierarchy
Financial
assets valued
at fair value
on balance-
sheet day
Accounts- and
other
receivables
Of which
current
Of which
non-current
Financial assets 2014
Investments Level 3 2 - - 2
Other long-
term
receivables
and other
interests - 26 - 26
Accounts receivable - 790 790 -
Other receivables - 310 310 -
Derivatives Level 2 2 - 2 -
Cash and cash equivalents - 489 489 -
Total 4 1,615 1,591 28
December 31,
2014
SKr, million
Fair value
hierarchy
Financial
liabilities
valued at fair
value on
balance-sheet
day
Other financial
liabilities
Of which
current
Of which
non-current
Financial liabilities 2014 Liabilities to credit
institutions - 130 130 -
Accounts payable - 127 127 -
Derivatives Level 2 3 - 3 -
Total 3 257 260 -
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
IFS defines capital as stockholders’ equity including non-controlling
interests in accordance with the information presented in the balance
sheet and the capital accounts. Capital on December 31, 2015,
amounted to SKr 1,413 million (1,360). IFS aims to have a capital
61
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. CONVERSION RATES
Rate at year end Average rate
2015 2014 2015 2014
EUR 9.14 9.52 9.36 9.10
GBP 12.38 12.14 12.90 11.29
NOK 0.96 1.05 1.05 1.09
PLN 2.15 2.21 2.24 2.17
USD 8.35 7.81 8.44 6.86
NOTE 48. 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 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 2015 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.
62
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, February 22, 2016
Anders Böös Gunilla Carlsson Ulrika Hagdahl Birgitta Klasén CHAIRMAN OF THE BOARD BOARD MEMBER BOARD MEMBER BOARD MEMBER
Neil Masom Bengt Nilsson Alastair Sorbie BOARD MEMBER BOARD MEMBER BOARD MEMBER
VICE CHAIRMAN 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 14, 2016.
Our audit report was submitted on February 22, 2016.
PricewaterhouseCoopers AB
Nicklas Kullberg AUTHORIZED PUBLIC ACCOUNTANT
63
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
We have audited the annual accounts and consolidated accounts of
Industrial and Financial Systems, IFS AB (publ.) for the year 2015,
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 14–63.
Responsibilities of the Board of Directors and the Managing Director
for the annual accounts and consolidated accounts 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 judgement, 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
December 31, 2015 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 December 31, 2015
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.
REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS
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 2015. We have also conducted a
statutory examination of the corporate governance statement.
Responsibilities of the Board of Directors and the Managing Director 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 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, February 22, 2016
PricewaterhouseCoopers AB
Nicklas Kullberg AUTHORIZED PUBLIC ACCOUNTANT
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BOARD OF DIRECTORS
ANDERS BÖÖS Chairman of the board
Principal occupation: directorships.
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, its management, and its major stockholders.
GUNILLA CARLSSON Board director
Principal occupation: international assignments
within global health, global development, and
policy reforms.
Other assignments: board director of NGS Group AB;
GAVI (Geneva); member of the advisory boards of
the Bill and Melinda Gates Foundation Europe
and Eurasia Foundation (Washington); member of
the European Center for Foreign Relations
(London).
Education: accounting and auditing courses,
studies in political science, Linköping University.
Work experience: Swedish minister for International
Development Cooperation (2006–2013); member
of the Swedish Parliament (2002–2013); member
of the European Parliament (1995–2002);
political advisor for the Swedish Moderate Party;
deputy party leader of the Swedish Moderate
Party; financial manager of New World
International AB / Sesam Production AB;
accountant, Wänström Revision AB.
Born 1963. Elected: 2015.
Gunilla Carlsson is considered independent in relation to
the company, its management, and its major
stockholders.
ULRIKA HAGDAHL Board director
Principal occupation: directorships.
Other assignments: member of the board of Beijer
Electronics AB and HiQ International AB.
Education: M.Sc. in Engineering Physics from the
Royal Institute of Technology, Stockholm
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.
Born 1962. Elected: 2003.
Ulrika Hagdahl is considered independent in relation to
the company, its management, and its major
stockholders.
BIRGITTA KLASÉN Board director
Principal occupation: senior IT advisor for Swedish
and international corporate management.
Other assignments: member of the board of Assa-
Abloy 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
WYG plc, UK Information Commissioner Office,
UK Foreign & Commonwealth Office Services
AgencyHigh 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.
Neil Masom is considered independent in relation to the
company, its management, and its major stockholders.
BENGT NILSSON Deputy chairman of the board
Principal occupation: president, and CEO of
Pagero AB.
Other assignments: member of the board of
GreenTrade AB, Greenfield AB, Pagero AB, Hikka
Group AB, Hikkadua Investments AB, Homes and
Villas Ltd, Ides AB, Norelia AB, Proxio AB, and
Pocket Mobile 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.
ALASTAIR SORBIE Board director, president, and CEO
Principal occupation: president and CEO of IFS AB.
Education: B.Sc. (Hons), University of London.
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.
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EXECUTIVE MANAGEMENT
ALASTAIR SORBIE
President and CEO
Born 1953
Employed by IFS since 1997
PAUL SMITH
Chief financial officer
Born 1963
Employed by IFS since 2009
FREDRIK VOM HOFE
Senior vice president, Business Development
Born 1966
Employed by IFS since 2003
AUDITORS
PricewaterhouseCoopers AB
Auditors since 2001
NICKLAS KULLBERG
Authorized public accountant and Auditor in charge
Born 1970
JESPER ALWALL
General counsel
Born 1969
Employed by IFS since 2009
Holdings in stock and financial instruments December 31, 2015
Stockholdings
Series-A
shares, no.
Series-B
shares, no. Options
BOARD OF DIRECTORS
Anders Böös (Chairman) - - -
Gunilla Carlsson - - -
Ulrika Hagdahl - - -
Birgitta Klasén - 11,000 -
Neil Masom - - -
Bengt Nilsson - - -
Alastair Sorbie (CEO) - 8,526 131,025
Total - 19,526 131,025
EXECUTIVE MANAGEMENT
Jesper Alwall - - 7,716
Fredrik vom Hofe - - 13,644
Paul Smith - - 87,350
Total - 19,526 239,735
For information concerning stock and options held by members of the board and
executive management, see note 14.
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FINANCIAL TREND
FROM THE INCOME STATEMENTS SKr, million 2011 2012 2013 2014 2015
License revenue 431 467 535 558 682
Maintenance & support revenue 823 909 902 1,037 1,174
Consulting revenue 1,311 1,283 1,256 1,427 1,524
Other net revenue 11 17 11 12 9
Net revenue 2,576 2,676 2,704 3,034 3,389
Capitalized work for own use 164 182 188 190 210
Operating expenses -2,316 -2,478 -2,373 -2,676 -2,967
EBITDA before other operating items 424 380 519 548 632
Other revenue 8 42 16 4 3
Other expenses -27 -23 -121 -35 -60
Result from associated companies and joint venture - - 59 - -2
EBITDA 405 399 473 517 573
Depreciation, amortization, and write-downs -172 -199 -212 -242 -259
EBIT 233 200 261 275 314
Financial revenue 6 4 3 4 6
Financial expenses -21 -14 -21 -21 -14
Profit/loss before tax 218 190 243 258 306
Taxes -62 -52 -41 -47 -92
Profit/loss for the year 156 138 202 211 214
FROM THE BALANCE SHEETS SKr, million Dec 31, 2011 Dec 31, 2012 Dec 31, 2013 Dec 31, 2014 Dec 31, 2015
Intangible fixed assets 953 1,061 1,103 1,144 1,241
Other fixed assets 286 269 254 293 276
Accounts receivable 701 718 740 790 777
Other current assets 245 242 238 312 306
Liquid assets 374 316 354 489 533
Total assets 2,559 2,606 2,689 3,028 3,133
Stockholders' equity including non-controlling interests 1,302 1,137 1,237 1,360 1,413
Long-term liabilities 89 215 91 182 145
Accounts payable 94 93 111 127 104
Current interest-bearing liabilities 51 178 197 130 172
Other current liabilities 1,023 983 1,053 1,229 1,299
Total stockholders' equity and liabilities 2,559 2,606 2,689 3,028 3,133
FROM THE CASH FLOW STATEMENTS SKr, million 2011 2012 2013 2014 2015
Cash flow from operations before change in working capital 406 363 336 450 544
Change in working capital -96 -80 70 51 2
Cash flow from current operations 310 283 406 501 546
Cash flow from investment operations -216 -324 -284 -232 -350
Cash flow after investment operations 94 -41 122 269 196
Cash flow from financing operations -163 -7 -13 -164 -151
Cash flow for the year -69 -48 109 105 45
Liquid funds on January 1 445 374 253 354 489
Exchange rate differences in liquid funds -2 -10 -8 30 -1
Liquid funds at end of period 374 316 354 489 533
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KEY FIGURES1 2011 2012 2013 2014 2015
Revenue indicator
Net revenue growth % 0% 4% 1% 12% 12%
Net revenue outside Sweden % 80% 82% 84% 85% 84%
Net revenue per employee SKr, '000 948 946 1,006 1,147 1,223
Expense and expenditure indicator
Total product development SKr, million 257 290 295 318 338
of which, capitalized SKr, million 164 182 188 190 210
Development expenditure/net revenue % 10% 11% 11% 10% 10%
Development expenditure/license revenue % 60% 62% 55% 57% 50%
Product development expenses/net revenue % 9% 10% 10% 10% 10%
Administration expenses/net revenue % 10% 10% 11% 10% 11%
Personnel expenses per employee SKr, '000 600 607 605 670 737
Margin indicators
Gross margin % 48% 49% 51% 51% 54%
License margin % 94% 94% 93% 91% 95%
Maintenance & support margin % 67% 69% 72% 75% 75%
Consulting margin % 22% 18% 19% 20% 21%
Operating margin % 9% 7% 7% 9% 9%
Profit margin % 8% 7% 7% 9% 9%
Return on average operating capital % 26% 22% 19% 24% 29%
Capital indicators
Return on capital employed % 17% 15% 15% 17% 13%
Return on stockholders' equity % 12% 11% 12% 16% 15%
Equity ratio % 51% 44% 46% 45% 45%
Interest coverage ratio times 37.3 24.7 19.4 33.2 39.2
Working capital SKr, million -171 -116 -186 -254 -320
Accounts receivable (avg 12 mth)/Net revenue (rolling 12 mth) % 20% 19% 19% 18% 18%
Liquidity indicators
Net liquidity SKr, million 322 137 157 359 361
Debt/equity ratio times 0.1 0.2 0.2 0.2 0.2
Net debt SKr, million -273 50 -118 -191 -252
Employees
Average number of employees 2,716 2,830 2,688 2,645 2,771
Number of employees at the end of the period 2,821 2,829 2,616 2,707 2,838
Stock
Average number of shares million 25,690 24,988 24,772 24,772 24,706
Number of shares at the end of the period million 25,313 24,772 24,772 24,772 24,545
Key data per share2
Profit/loss, before dilution SKr 6.07 5.52 5.81 8.60 8.54
Stockholders' equity SKr 51.44 50.76 49.94 54.90 57.55
Cash flow after investment operations SKr 3.66 -1.66 4.84 10.86 7.93
Market price at end of accounting period SKr 88.00 103.25 154.00 239.09 364.50
Market price/stockholders' equity times 1.7 2.0 3.1 4.4 6.3
Net turnover SKr 100.27 108.24 110.61 122.48 137.17
Market price/net turnover times 0.9 1.0 1.4 2.0 2.7
Dividend3 SKr 3.50 3.50 3.50 4.50 -
1 For definitions of key ratios see page 70.
2 In accordance with IAS 33, dilution is not estimated when it improves earnings.
3 Dividend for 2015 refers to proposal from the Board.
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DEFINITIONS
adjusted EBITDA. EBIT before depreciation, net of capitalized product
development and adjusted for non-recurring items.
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.
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.
earnings per share. Net profit/loss for the year in relation to the average
number of shares.
equity/assets ratio. Stockholders’ equity and minority interest at year-end
in relation to total assets.
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.
net liquidity. Liquid assets less liabilities to credit institutions at year-end.
net revenue growth. Net revenue for the year minus net revenue for the
previous year in relation to net revenue for the previous year.
net revenue outside of Sweden. Net revenue minus net revenue in Sweden,
in relation to net revenue.
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.
return on average operating capital. EBIT in relation to average operating
capital.
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.
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.
GLOSSARY
application. A program that helps a user deal with a specific task, e.g.
purchasing, employee development or accounting.
architecture. Describes the manner in which the hardware, system
software, and applications software integrate to achieve a desired result.
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.
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.
outsourcing. The procuring of services or products from an outside
supplier or manufacturer.
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.
utility. An organization of company that provides some form of
infrastructure in a society, such as heating, electricity, or water.
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ABOUT IFS
IFS™ is a globally recognized leader in developing and delivering enterprise 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
2,800 employees. IFS supports more than 1 million users 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.
©2016 IFS AB