Årsredovisning 2013

A350 XWB

Boeing 787

A380

BUsiness overvieW 2013

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CTT in briefCTT Systems AB is a Swedish technology group active in the aviation industry, specialising in humidity control systems for commercial aircraft. Customers include both aircraft manufacturers and airlines. The parent company is headquartered in Nyköping, Sweden. It is listed on the Nasdaq OMX Nordic Exhange Stockholm, Small Cap, since 1999.

Prestigious technology awardATW Aviation Technology Achievement Award 2013 awarded to CTT

On March 26th 2013, CTT received the prestigious Aviation Tech-nology Achievement Award from leading trade journal Air Trans-port World. The selection panel, made up by well-known represen-tatives from the aviation industry, unanimously voted CTT winner in the ”Airline Technology Leadership” category. ”This award adds to our credibility and strengthens our market position,” commented CTT’s CEO Torbjörn Johansson.

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Contents

CTT in brief 2

Five-year summary 5

Chief Executive’s Review 6

A350: What’s on a project manager’s mind 8 The advantages of A350 10

Report from the marketing manager 12

Cair™ 14

Zonal Drying™ System 18

Cair™ VIP 20

Crew Humidifiers 22

Competition 24

R&D at CTT Systems 25

Organisation and personnel/ Quality System 26

Manufacturing at CTT Systems 28

History 29

Bribo Mekaniska 30

Catron Elektronik 31

The CTT share 32

Five-year summary – The Group 34

Senior executives 36

Board of directors 38

Glossary 39

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Our mission is to create a better climate both inside and outside the aircraft and thereby provide economic and environmental benefits to the airline. The key is to balance humidity levels on board. Our concept in-creases passenger well-being, contributes to a better environment and improves airline economy, simultan-eously. We call it ”humidity in balance”.

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Business IdeaCTT’s business concept is to develop, certify, manufactu-re and market products that actively control air humidity inside aircraft. The purpose is to prevent condensation and subsequent accumulation of water in the body of an aircraft, as well as to prevent air humidity from falling to extremely low and unhealthy levels inside the cabin. The balanced humidity level cuts operational and main-tenance costs and reduces staff absence.

Maintaining a comfortable level of relative air humidity in the premium class (first/business) reinforces the sense of well-being during and after the f light and improves the overall experience of the service. It also enables operators to differentiate their service offering with, for instance, wine and food in ways that are not normally possible in the very dry air of the aircraft cabin. This enables airlines to provide a competitive and f lexible service offering, att-racting premium passengers and strengthening the brand with a full service offering.

Overall strategyCTT’s overall strategy is to reinforce and develop its po-sition as the leading supplier of systems for active control of air humidity to commercial aircraft manufacturers as well as to airlines, directly or indirectly. This will be achieved through leadership in technology, focusing on innovation, high reliability, operational security and per-formance, as well as capability to deliver.

Five year summary

Order intake Net turnover Profit/loss

09 10 11 12

20

MSEK

-20

-40

40

60

80

100

120

140

160

Strategic goalsThe company’s strong market position, as provider of the de facto standard for anti-condensation equipment and the sole supplier of humidity systems to Airbus and Boeing, offers significant opportunities for growth in an industry characterised by high barriers to entry.

To deliver sustainable value to shareholders, the company intends to:

• Use the window of opportunity provided by its domina-ting market position to maximise the number of systems installed

• Use the position as market and technology leader to de-velop the OEM relationship with Boeing and Airbus

• Reinforce the position as dominating aftermarket supp-lier by strengthening initial provisioning and by continu-ous product innovation

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Dear shareholder, 2013 turned out to be an intermediate year from a finan-cial perspective. Turnover increased slightly but overall profits were reduced. This was primarily due to the weak performance of Catron and a less favourable product mix for the parent company than previously, with lower sales of spares, compared to the previous year. Nevertheless, the company made significant progress in many areas.

The Boeing 787 programme continues to grow for CTT Despite the grounding of the 787 aircraft in early 2013, Boeing continued producing aircraft as planned. This resulted in CTT increasing its deliveries to Boeing dur-ing the year by nearly 50%. However, the lucrative spares business slowed down, due to overstocking by CTT’s dis-tribution partner Satair in the previous year.

During 2014, CTT will deliver systems for ten aircraft per month, which means that the delivery rate for the entire year will be as high as for the last quarter of 2013. In ad-dition, sales of spares will return to growth, while after-market sales will also grow as a result of more 787 aircraft in operation. In total, this will mean a considerable rise in turnover for the Boeing 787 programme during 2014.

Airbus A350XWB now airborne Early June 2013 saw the maiden f light for the new Airbus aircraft A350XWB, a direct competitor to Boeing’s 787 aircraft. In March 2014, f lights with test aircraft 2, which has our systems installed, began. Airbus expects to deliver the first A350XWB to its initial customer, Qatar Airways, by the end of 2014.

To CTT, the A350 programme has so far turned out to be a disappointment, as it has not resulted in any orders for our system so far, though this is available as an option for the aircraft. A350XWB is an excellent long-distance airliner. Unfortunately for CTT, the initial airline cus-tomers for model A350-900 will use the f irst aircraft for medium distance routes, which have less need for humidi-fication than long haul. Some airlines will have different versions of the same model and may have several models, such as -900 and -1000, with some dedicated to medium range and others to long range. Another explanation to the low uptake so far is that Airbus, with a challenging time schedule and initial problems with weight, has been reluctant to promote any of the options. However, the A350 will remain in production for 20 to 30 years and increasing numbers will be used on long-distance routes, so we remain optimistic that sales of the humidif ication

system will pick up in the future. In the short term, A350 has meant increased interest and greater credibility for our system. Several of the airlines that do not intend to equip their f irst A350 with a f irst class cabin have shown inter-est in f itting their existing long-distance f leet with our humidification system.

CTT launches first class humidification for Boeing 777-300During the autumn of 2013, CTT launched a new system for humidification of the first class cabin in Boeing’s 777-300 aircraft. The system, consisting of a humidifier and a Zonal Dryer, has attracted considerable attention from a number of high-profile airlines. The launch of this system is aimed at the high number of 777 aircraft f itted with first-class cabin and used mainly on long-distance routes. A further reason for the launch is that Boeing started de-velopment of the improved 777 aircraft, Boeing 777X, in November. CTT has great hopes that Boeing, for the f irst time, will offer humidif ication of f irst and business class with this project. With the launch of the new system, CTT aims to demonstrate to Boeing and to the airlines that it is possible to offer premium passengers the same comfortable cabin climate as we have successfully deliv-ered to large VIP aircraft for more than 10 years.

Increasing interest in VIP segmentDuring 2013, CTT focused on delivering Cair™ for the six Boeing 747-8 VIP aircraft that the company received orders for during 2012. All systems have now been deliv-ered and we expect that the aircraft fitted with the systems will start f lying at the end of 2014. As these aircraft near completion, we expect that VIP orders will pick up again. CTT has received several requests for information about the system and has more tenders out than at the same time last year. The most promising is that deliveries of the first

Torbjörn Johansson, CEO

Chief executive’s review

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787 VIP aircraft have started. In total, Boeing has sold twelve 787 VIP aircraft and as these are already fitted with Zonal Drying™ System, CTT now has a great opportu-nity to sell cabin humidification systems for many of these aircraft.

Zonal Drying™ System tendered in increas-ing volumesMarket interest in the Zonal Drying™ System is increasing steadily. Airlines are becoming more efficient and fuel costs is by far the largest post, with a rising share of operational costs (30-40%). Most have appointed fuel efficiency special-ist groups that continuously look for weight reductions. The marketing effort aimed at airlines with large f leets means more extensive offers being tendered to customers but also longer lead times. Only a small number of orders was re-ceived during the year, but CTT has advanced its market position. EasyJet provides a good example of a clear trend indicating the airlines’ increasing awareness of condensation problems and the significant cost that surplus weight incurs. Besides the retrofit market, CTT has customers taking de-livery direct from the production line of new 737 aircraft, such as f lydubai and Transavia. CTT has never before seen such great interest from airlines (not just low-cost opera-tions) with large f leets. Several of our customers have placed or are about to place orders for the next generation of short distance aircraft, A320neo and Boeing 737 MAX. CTT’s long-term goal is for both Airbus and Boeing to offer Zonal Drying™ System.

CTT subsidiaries The subsidiaries of CTT have developed in different di-rections during 2013. Bribo increased its turnover by 25% and doubled its earnings before interest and taxes. This is partly due to the company now manufacturing humidifi-cation pads for CTT’s humidifiers. The sales of pads will continue to rise for as long as the number of aircraft in operation with CTT humidifiers increases.

Catron has had a significantly more challenging year. The development project for the Swedish Air Force has been delayed several times and during the month of March, the Swedish Defence Materiel Administration announced that it wanted to cancel the project. Negotiations are under-way as to whether the project should be brought to an end, and if so, how. While awaiting a decision, Catron’s cost base has been significantly reduced and a third of the staff has been made redundant. Based on the outcome of the negotiations with the Swedish Defence Materiel Ad-ministration, Catron’s future business plan will be adjusted accordingly.

2014Even if the outlook for Catron is unsure at the moment, the CTT parent company and Bribo will have a positive development this year. Both the turnover direct to Boeing and sales in the after-market will increase considerably. In the VIP market, we will receive more orders than during 2013 and I anticipate the first orders for Boeing 787 VIP. During 2014 I expect that some of the outstanding tenders for Zonal Drying™ turn into orders or test evaluation. The same goes for Cair™.

In the OEM market, we will focus on Boeing 777X, 737MAX and Airbus A320neo.

We see an exciting year ahead of us with plenty of op-portunities.

Nyköping April 2014

Torbjörn Johansson Chief Executive Officer

CTTs ledningsgrupp 2013 »» Finally, I would like to thank the staff of the entire CTT Group for all the dedicated work in

2013, particularly during the more challenging parts of the year. I expect that you are just as excited as I am to meet the opportunities that we have ahead of us in 2014.

Torbjörn Johansson, CEO

CTT management team 2013

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In the months running up to Henrik Enoks-son’s arrival at CTT, the company was sign-ing a contract with Boeing. The young grad-uate engineer saw potential to develop in a company promising interesting technology and challenging work combined with a good camaraderie and a strong belief in the fu-ture. But he had no idea quite how far this relationship with the company would develop.

“With the Boeing 787 project in the bag, we had hopes to also get involved with the A350. But a complete Cair™ system with humidification in the cabin was more than we had dared to hope for,” says the now 40-year old A350 pro-ject manager.

FromAirbus A380 ...But let’s rewind. When Henrik arrived on the scene, Luft-hansa had, as the f irst airline in the world, just ordered humidif ication for the f irst class cabin in its new Super-jumbos from Airbus. Henrik was recruited as systems en-gineer and project manager for theA380, which is the of-ficial designation for this aircraft type.

This was a limited project, aiming to adapt CTT’s humid-ification system Cair™ for a completely new aircraft type.

Via Boeing 787… A few years later, American aircraft manufacturer Boeing wanted to use CTT’s dehumidifying system Zonal Dry-ing™ as standard in its new Dreamliner, designated 787. With his experience from the A380, Henrik was drafted in for the project. At the time, CTT’s development team only consisted of a handful of people, so Henrik became involved in everything from new product development, performance verification and supplier contacts to testing and certifying.

…to A350When Airbus in France decided to offer humidification as an option for the future competitor of the 787, the A350, Henrik became involved as a matter of course. With in-creasing volumes, the department has grown to its present size of 16 staff, so the leadership role here is more clearly defined.

While Henrik plans the operation, discusses specifications with customers and suppliers and is ultimately responsible of certification and testing, others are more hands-on.

“We have a number of design reviews, or gates, where we need to have completed certain sections by a particular date. The first step was the design. Then it was about f i-nalising certification. This is where we are at the moment. We have concluded a “f irst f light article review” which means the system is approved for test f lights.

“The serial units were delivered to Airbus by the end of the summer of 2013. Now the last verification tests are un-derway. We are also looking to get the documentation or-ganised before the next checkpoint. All certification needs to be done during the spring of 2014.”

Since the first test f light in June 2013, regular f light tests are now carried out, twice a day, six days a week. Febru-ary 2014 saw the take-off of test aircraft no. 2, which has CTT’s equipment onboard.

CTT’s complete range onboardOnboard this test aircraft is a prototype of the equipment which is part of CTT’s scope of supply, and which, in prac-tice, ref lects CTT’s complete product range:

• Cockpit humidifier for the pilots

• Crew rest bunk humidifier for the crew rest areas

• Cabin humidifier for the three forward-most zones in the aircraft (normally first and business class)

• Dehumidifier to prevent condensation

On site in ToulouseHenrik had the opportunity to pay a personal visit to the large Airbus facility in Toulouse, France. The mission was to replace a valve, which CTT had re-developed in cooperation with subsidiary Catron and valve manufac-turer Asco.

“This was extremely interesting! I got to look inside the test aircraft as it was being assembled. There was this person sitting at one end of a bunch of cables, communicating over two-way radio with someone at the other end. It was a rev-elation to see how prototypes of large aircraft are built.”

What’s on a project manager’s mind

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Prototyping at the work bench at CTT, bolting parts together, is one thing, but out there in the real world, it’s something completely different.

“Those cable bunches! They aren’t always that easy to get to. One thing I learned was, even if they say something is impossible, they can always find a way to do it at the fac-tory if it really is necessary.”

Both CTT and Airbus follow their schedules well.

“From what I know there have been no problems with test aircraft no. 3 (which was airborne before test aircraft no. 2, somewhat illogically). First feedback on how our systems perform in the air will get to us by the beginning of 2014. Completion of test aircraft no. 5 is planned by the end of the summer 2014. This is where our first serial units will be installed.”

Useful lessons learned

“The main thing we have learned along the way is the im-portance of expending the energy early on in the project; to carry out early pre-studies and tests before the design work has proceeded too far and there is still time to make modifications.

“We have also learned a lot more about Airbus’ design processes and what they require from their suppliers. This is good preparation if in the future we were to get a new large project from one of the major aircraft manufacturers.”

Cooperation a top priorityBeing a systems supplier to the large aircraft manufactur-ers of the world has its pros and cons.

“In the A350 project we work closely with a German company, Nord Micro, which in turn is supplier to American company Honeywell, but we also deal directly with Airbus.”

Honeywell supplies the complete climate and pressuri-sation system in the A350. Nord Micro manufactures some key components for this system, such as valves and control units for CTT’s dehumidifier. As for humidifiers and dehumidifiers, CTT delivers nearly complete systems direct to Airbus.

“We have weekly telephone conferences with all four parties represented, where everybody can join the discus-sion.”

Challenges give valuable lessonsOne particular challenge that the project group has wres-tled with is the issue of valves.

“Rather than using a regular valve certified for aircraft use, we decided to use products from a manufacturer of

valves for industrial use and got this certified for use in aircraft. We used a valve that was half the weight, took a quarter of the space and cost a tenth of the price com-pared to an ‘ordinary’ aircraft valve.”

Credit to Asco

The valve assembly was developed in cooperation with CTT’s subsidiary Catron (which manufactures all the safe-ty electronics) and Asco, one of the world’s leading manu-facturers of industrial valves.

“We owe a great deal of the success to Asco. The coopera-tion worked very well. The process gave us some valuable insight into how valves work and how environmental cer-tification is carried out.”

“While there weren’t that many parts left from the stand-ard valve by the time we were f inished, we managed to put together a valve with the same size and weight as the original industrial valve. We now also know in detail how the valves work. Operational tests are proceeding very well.”

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In a few years, there is a fair chance that we will be flying non-stop when going to the other side of the world. Counted in hours, the journey will be shorter. It will probably also cost less. In addition, we will get more room to move and better air quality on-board. Airbus’ new flagship A350 is one of the aircraft making this possible.

A350, like its competitor Boeing 787, is part of the twin-aisle class of medium sized passenger aircraft. The interme-diate model, the best seller, can take up to 315 passengers and has a range of 14,350 km. It could for instance f ly from Stockholm to Perth without stopping.

Passenger comfort = hard currencyAirbus emphasises the wide seats in its marketing – 18” in economy class, compared to the 17” that has been the norm since the 1950s. On a 10-12 hour f light, the extra space can make a big difference to how you sleep, according to a Brit-ish study that Airbus refers to.

“Airbus is going to great lengths to make this aircraft com-fortable for passengers on long-haul f lights. They talk about comfort all the time – larger windows, more luggage space,

improved cabin lights and more room for the passengers. They also offer humidification, not just in the cockpit and crew rest areas, but also in the cabin, which is a first,” says CTT CEO Torbjörn Johansson.

During the early spring of 2014 Airbus will, according to the schedule, start f lying the second of f ive test aircraft, where all equipment, including CTT’s humidification sys-tem Cair™, will undergo rigorous testing. Assuming the delivery schedule is held, the aircraft will start commercial service during 2014. First customer is Qatar Airlines.

Energy efficient – cheaper to fly farWhat drives airlines to renew their f leets more than any-thing else is the requirement for energy efficient solutions. Boeing and Airbus tackle the challenges in roughly the same way. With new and lighter materials, combined with new technology, it is possible to f ly as far as a jumbo jet us-ing 20% less fuel.

The low weight is due to the A350 being built to 53% from carbon fibre composite, which also results in less frequent and less expensive service. Other benefits include reduced emissions and lower noise when starting and landing.

Advantages of A350 – more flexibility, improv ed comfort and cost-effective on long-haul

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More city pairs in the future

Today there are 42 mega cities in the world that operate as hubs for commercial aviation. In 20 years time, they will be at least twice as many. More direct routes means we get to our destination quicker, without unnecessary stops, making it simpler, cheaper and more comfortable to f ly long haul. This is good news for airline passengers, as well as for air-craft manufacturers.

According to forecasts, 28,000 new airliners are needed worldwide before 2030. The greatest demand is expected for medium sized aircraft, such as the A350 and the Boeing 787. Both of these are enormous commercial success stories and are expected to share the world market in this class. Boeing, with its head start, has orders for more than a thou-sand 787. A350, currently in its test f light stage, has reached eight hundred orders.

A win-win situationAs it is in everybody’s interest that the scales are evenly bal-anced, both major manufacturers are expected to emerge as winners from this development. Regardless of which one has the edge in the competition, CTT has its bets hedged, as the company’s systems are part of both manufacturers’ offers.

“On the 787, some of our systems are standard. On the A350, everything is available as an option, including cabin humidification, which is not available on the 787 at all. Not just in the cockpit and in the crew rest areas but also in the cabin,” says Torbjörn Johansson.

“This is a favourable position for us to be in. Today we get more revenues from Boeing 787. When cabin humidifica-tion makes its breakthrough in earnest, Airbus and A350 has more potential as those systems are more comprehensive. The significance to us of this development depends on the choices airlines make.”

Advantages of A350 – more flexibility, improv ed comfort and cost-effective on long-haul

“On the 787, some of our systems are standard. On the A350, everything is available as an op-tion, including cabin humidification, which is not

available on the 787 at all.”Torbjörn Johansson

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The market gathers pace

A large number of tenders are currently out with cus-tomers and one very important trial is in progress. However, only a small number of substantial orders were signed during the recent 12-month period. 2013 can be seen as an intermediate year, but against the backdrop of 2012 and the boom in sales at the time, particularly in the VIP market, the outcome is still sat-isfactory. Marketing manager Peter Landquist is par-ticularly pleased with EasyJet’s ongoing trials.

“The EasyJet project is completely in line with our strategy; to work with large airlines operating substantial f leets. If the positive indications stand firm, we expect that other potential customers will follow,” Landquist says.

Zonal Drying™ – for low cost carriers with large fleets“When the agreement EasyJet was signed, the airline issued a press release. It is unusual for the customer to do this and normally we tend to keep a low profile until we know how things develop. But EasyJet wants to come across as a proactive airline, continuously investigating new ways to improve fuel economy, cut running costs and reduce environmental impact. This made waves in the aviation world. Many potential customers got in touch, particularly airlines with large f leets, so this is a very positive development for us.

“The most positive aspect is that low cost carrier EasyJet (based in Luton, UK) is very respected in the world of aviation. The com-pany only invests when it expects a payback and a positive con-tribution for the environment. EasyJet operates over 200 aircraft (A319 and A320) and is testing our system over a 12-month period to ensure it works in all weather conditions.”

Market leading with Cair™ VIP On the VIP side, Peter Landqvist also expects developments dur-ing 2014.

“2013 was a year when many end customers made inquiries with the completion centers. They, in turn, made inquiries to us. How-ever, customers were unable to come to a decision. At the moment we have a large number of tenders out, waiting for acceptance.

“The VIP market can be divided into two segments. One part

Peter Landquist, VP Sales, Marketing & Support, CTT Systems

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is large aircraft, such as Airbus A330/A340 and Boeing 777/747-8, where CTT has 95% of the market, with Lieb-herr being the only competitor. The greatest challenge at the moment is to design a cabin humidification system for Boeing’s newly launched 787 VIP.

“The other segment is small business jets, such as Bombar-dier, Challenger/Global, GulfStream and Embraer. This is a segment we work hard to get into. The challenge is to design the systems to fit in the restricted spaces available. The market for small business jets is very interesting as the potential sales volumes are much greater than for large VIP aircraft.”

Landqvist wants to tone down the problems that Boeing has experienced with its Dreamliner (787).

“There have been problems with the launches of other new aircraft types, too. Bear in mind that the Boeing 787, as well as the A350, is built according to a completely new concept with advanced materials and control systems. You can com-pare this to the conversion from propeller to jet engines, the step is equally large.”

The new composite aircraft are actually cheaper to operate, with fuel consumption about 20% lower than for conven-tional aircraft.

“Unless airlines invest in aircraft like the Boeing 787 and A350, they will find it difficult to stay competitive. This is good news both for CTT and for the aircraft industry as a whole,” says Landqvist.

Cair™ - first class humidification“Marketing humidification systems for the first-class cabin means persuading the airlines about the benefits of soft val-ues. We are convinced that the next great innovation in the field of passenger comfort is cabin humidification. This will be of great benefit to the highest paying passengers,” says Landqvist.

But it also means a new way of thinking for the airlines. It is easier for airlines to invest in improvements that can be seen and touched. So far, airlines have invested in f lat beds, in-f light entertainment (IFE), and attractive interior design. All the large improvements of a tangible nature have been made. The next step ought to be improvements to the cabin atmosphere where the passengers spend their travel time. It is actually drier in the first class cabin than it is in Death Valley, California, the driest place on earth.

“We have noticed a trend that large, well-known airlines put an enormous effort into selecting and adapting food and wine to the dry environment. They have invested large

MarKET OVErVIEW frOM PETEr LandquIsT

sums of money in kitchens where you can control pressure, temperature and humidity to enable the head chefs to pro-duce the best food. In the dry air, the food needs more salt and seasoning to taste the same as it does on the ground. It is also difficult to find wine that tastes good in a dry envi-ronment.

“A higher humidity level in the cabin automatically im-proves the taste of food and wine. But more importantly, the passengers will feel better, sleep better and arrive re-freshed, which is enormously important for today’s premi-um class passengers.

“We are marketing our first class system Cair™ for retro-fit installation in Boeing 777 and A380 to leading airlines worldwide, operating long distance. In this context, we also market Cair™ for the A350.”

The reason that sales for theA350 have not quite got off the ground yet is that the first aircraft do not meet the re-quired weight specifications. Also, the A350-800/900 will be used mostly for medium distance, which has less need for humidification. However there is every possibility that the airlines will opt for humidification for their A350-1000 air-craft, which will be used for long distance. The airlines will start specifying their their A350-1000 in about a year’s time.

Media monitoring and marketing activitiesCTT will be exhibiting at Hamburg Aircraft Interiors Ex-po, as usually. This show normally generates a large number of contacts, some of which lead to orders in the end. CTT is also considering exhibiting at a small MRO show in Lon-don. In addition, the company will also attend a number of VIP shows: EBACE in Geneva; NBAA in Orlando; and MEBA in Dubai.

“We continuously work with our industry and media con-tacts to maximise our media attention and to bring our Cair™ message direct to the passengers,” Landqvist con-cludes.

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The journey starts in the cabin.

Cair™

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CTT Humidifier

Since CTT started designing its first humidifier, the objective has been to offer passengers improved air quality during long-haul flights. Now, 10 years later, this has been achieved with Airbus new aircraft types A350 and A380.

svart = 85%PMS 7545

turkos C 93M 0Y 24 K 0PMS 313

ljus-blå, 40% av:C 100M 28Y 24K 0PMS 277

A typical 1st class installation – Boeing 777 with one Humidifier and one Zonal Dryer.

TechnologyNormal indoor air has between 30 and 60 percent humidity. In a long-haul aircraft, this drops to between 5 and 15 percent. This is because the fresh air drawn in at high altitude is extremely dry. The driest air is expe-rienced in f irst and business class as these areas have the lowest passenger density.

CTT’s Cair™ humidif ies the air in f irst and busi-ness class at the same time as it dehumidif ies the space between the cabin ceiling and the aircraft body. This creates a relative humidity of approximately 25 percent in the cabin without causing condensation. The passengers in tourist class also benefit to some extent as the air is recirculated in the cabin.

It has been scientifically proven that passengers feel better with higher air humidity onboard. In addition, it reduces sleeping problems as well as dryness of eyes, skin and mu-cous membranes. The risk of catching a cold or a virus is reduced, along with problems with dry skin and allergies.

MarketCTT’s Cair™ is aimed at al l the world’s long-dis-tance carriers that offer f irst and business class travel. As humidif icat ion of VIP aircraft is becoming stand-ard practice and new aircraft are delivered with cabin humidification, premium passengers will expect improved

air quality also in older long-haul aircraft. This will cre-ate favourable market conditions when selling direct to the airlines. The installation of Cair™ in the first class of Lufthansa’s A380 highlights the connection between VIP aircraft and the first class offer provided by the airlines. Air-lines like Emirates, Qatar and Etihad lead the way regarding premium class comfort and are also likely to lead when it comes to air quality.

”Airbus’ decision to offer cabin humidification as an option for the A350 was a major breakthrough for CTT.”

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OEMAirbus’ decision to offer cabin humidif ication as an option for the A350 was a major breakthrough for CTT. The airlines can select to humidify up to three temperature zones, i.e. half the aircraft.

The Cair™ system in Lufthansa’s A380 aircraft has worked well and the passengers appreciate the im-proved comfort. This should mean that Airbus will offer more A380 customers the possibility to install the system even if it is not yet on the off icial list of options.

Future opportunitiesIn November 2013, Boeing started the 777X pro-gramme to meet the competition from the A350-1000 aircraft. At the Dubai Air Show, Boeing received a total of 259 orders for this aircraft type. CTT stands a good chance to be selected as a supplier of systems for this aircraft. CTT has already supplied humidi-f ication systems for three 777 VIP aircraft. During the autumn of 2013, CTT launched a humidification system for retrofitting the first-class cabin of existing Boeing 777.

OEMA350 (option) A380 (Lufthansa option)

Cair™ Customers

Aircraft ElectricalInterface28VDC

CAIR ControlUnit - CAN

AircraftInterface

Cabin ControlPanel

Air Out Air In

Zonal DryerControl Unit

Potable WaterSupply

WaterPulseValve

Air Vent Valve Water Shut off Valve

WaterBypassValve

Trim airDrain to bilgeor drain mast

Overflow to bilge

Relative HumiditySensor

Duct tempsensor

First Class Business Class Economy

Average Cabin Humidity with Cair™

Rel

ativ

e H

umid

ity%

First Class Business Class Economy

Average Cabin Humidity without Cair™

25,0

15,0

5,0

Rel

ativ

e H

umid

ity%

25,0

15,0

5,0

12 %7 %5 %

22 % 22 %16 %

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inside an aircraft, rain should bethe last thing to worry about.

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Technology The outside skin of the aircraft is extremely cold and when the cabin air meets this cold surface, condensation forms as frost and ice. When the exterior of the plane warms up during landing, the frost and ice melt into water. Most of the water drains through the drainage vents of the aircraft while the plane is on the ground, but some stays in the insulation or accumulates in cavities inside the body of the aircraft.

Zonal Drying™ System draws air f rom the cabin, dehumidif ies the air and circulates it between the cabin and the outside skin of the aircraft. The airf low dries the insulation and reduces the relative humidity of the air that comes into contact with cold surfaces, resulting in less condensation.

The technology is based on Munters’ wel l-known dehumidif ication technology used in military aviation. In this application, the equipment is used on the ground. CTT has developed this technology further by designing small, lightweight driers installed for permanent operation onboard commercial aircraft.

Zonal Drying™ System is now available for practically all Airbus and Boeing aircraft types.

MarketAirlines that have high passenger density and use the aircraft for long hours benef it most from the system. Not surprisingly, most customers are charter and low-cost carr iers. The arguments for investing in Zon-al Drying™ System are lower fuel consumption and reduced maintenance costs. With higher fuel costs and the

The Boeing 787 Zonal Dryer

airlines’ focus on cutting costs, there are great opportuni-ties to increase sales also outside Europe. CTT’s largest air-line customers are: KLM, Transavia, Air Berlin, Monarch, Continental, Jet2.com, Air New Zealand and f lydubai.

OEMThe system for Boeing’s 737-700/800 aircraft was de-veloped in 2003. Boeing installs the systems at the cus-tomer’s request when assembling the aircraft. In 2005, CTT signed a contract with Boeing to develop the system for the new 787 aircraft. The system is now in-stalled as standard in all aircraft of this type. Design of a system for Airbus A350 was started in 2008. Here, the system is offered as an option aimed particularly at airlines with high passenger density. If the airlines select humidification of first or business class, dehumidifica-tion with Zonal Drying™ System is also installed.

Future opportunitiesThe ideal scenario for CTT would be if Airbus and Boeing chose to actively combat condensation inside their new nar-row-body aircraft. Airbus is developing its A320 range fur-ther, into a model designated A320NEO. Boeing’s equivalent aircraft type is 737MAX. Sales into these two programmes would mean substantially increased volumes for CTT. The two aircraft types are estimated to be built at a rate of at least 30 aircraft per month.

For wide body aircraft, the greatest potential lies in the pos-sibility that airlines in the future may invest in cabin humidi-fication, which would make Zonal Drying™ a more or less compulsory installation in these aircraft.

The dry air is being distributed thorughout the crown area using a piccolo ducting system.

svart = 85%PMS 7545

turkos C 93M 0Y 24 K 0PMS 313

ljus-blå, 40% av:C 100M 28Y 24K 0PMS 277

Zonal drying™ system

The dry air is being distributed throughout the crown area using a piccolo ducting system

Wide Body Installationin Crown Area

Regenaration (humid) air outletclose to the recirculation filter or

outflow valve

Narrow Body InstallationBelow Floor

The first product developed by CTT was Zonal Drying™ System. The idea was conceived in the early 1990s and the first commercial system was installed by Martinair in 1996.

19

OEM

787 (standard) 737 (option)

A350 (option)

Zonal drying™ system

Zonal Drying™ System Customers

20

The first Cair™ VIP system was installed in a BBJ aircraft for Lufthansa Technik in 2001. Since then, CTT has delivered Cair™ to a further 49 aircraft.

TechnologyThe air in a VIP aircraft becomes extremely dry during long-distance f lights. The reason is that the air drawn in by the engines at an altitude of 10,000 metres is very dry. Although the air is partially recirculated inside the aircraft, air humidity does not increase substantially as there are so few passengers on a VIP aircraft.

The Cair™ system for a VIP aircraft is made up by anything from one to eight humidif iers. The sys-tem also has between one and four Zonal Dryers. So far,

CTT’s Cair™ system has been controlled by an ana-logue control unit, but for the new Boeing 747-8, a new digital control unit is being developed by German com-pany Nord-Micro. The new control unit will primarily improve the possibility to adjust the system as well as the built-in diagnostic function.

Cair™ viP

21

Cair™ VIP Customers

A318, A319, A320, A321

767-200, 767-300

737-BBJ1, 737-BBJ2, 737-BBJ3

A330-200, A330-300

A340-200, A340-300, A340-500, A340-600

777-200, 777-300

747-8

757-200

svart = 85%PMS 7545

turkos C 93M 0Y 24 K 0PMS 313

ljus-blå, 40% av:C 100M 28Y 24K 0PMS 277

A typical Cair™ installation in a Boeing 747-8.

MarketCTT’s Cair™ VIP is market leading in the large VIP aircraft market and has developed systems for practically all large VIP aircraft models. Demand for humidif ication in VIP aircraft increases steadily as the customers experience a great improvement in personal comfort when travelling with humidified aircraft.

The global demand for large VIP aircraft depends on the world economy.

Completion CentersCTT has delivered Cair™ to 14 different completion centres and very good business relationships have been established. Thanks to these good relations, the end customer is recommended to opt for cabin air humidification at an early stage. This way, CTT receives the best possible help in its marketing of Cair™ VIP.

Future opportunitiesThe first Boeing 787 VIP aircraft will be delivered to various completion centres during 2014. Twelve 787 VIP aircraft have been sold in total. As these aircraft are already fitted with CTT’s Zonal Drying™ System, CTT is in a very good position to also supply Cair™ VIP here.

CTT Systems has delivered Cair™ for the following aircraft:

Feel the difference

22

TechnologyThe humidifier, which works according to the principle of evaporative humidification, has been developed in coope-ration with Munters. The main component in the humidi-fier is a pad of fibre glass structure with specially designed air channels that are humidified by a spreader system.

When the dry air passes the moist surface of the pad, the water evaporates as moisture is absorbed by the air, while the air is also being cooled. By regulating the f low of water to the pad, the output can be controlled. Minerals and other

CTT started designing its first humidifier in 2000. As early as 2003, CTT won a contract, together with AOA Gauting, to develop humidifiers for the A380 aircraft.

impurities in the water are precipitated and stay in the pad, which is replaced at regular intervals, the length of which vary with the mineral content of the water.

There is no risk that bacteria will spread through the humi-difier as the water evaporates when transferred to the air and thus cannot carry any bacteria. The humidifier is installed in the air supply ducts for the areas that are to be humidi-fied and the water is drawn from the regular water supply in the aircraft.

Handle with cair.svart 85 % PMS 7545 (=mörkgrå)

Röd TurkosC 0 93M 83 0Y 100 24K 16 0

PMS 173 PMS 313

typsnitt helvetica neue light italic 19 p

23

787 (option)787 (option)A350 (option)A380 (option)

A350 (option)

deck has been selected in approximately 90 percent of orders. If the airlines choose to purchase crew rest bunks, CTT’s humidifiers are included in this option.

In the A350, Airbus offers f light deck humidification as an option for the first time. CTT supplies humidifiers for the f light deck and for the two crew rest bunks in the aircraft. All these humidifiers are optional. .

Future opportunitiesCTT hopes to supply f light deck and crew rest humidi-f iers for Boeing’s long distance aircraft 777X and 747-8. Should this be successful, CTT will have practically all of the OEM market.

As the new long distance aircraft enter service and the hu-midifiers prove their reliability, opportunities will emerge to sell humidif iers for the existing f leets operated by the airlines. Cooperation with a company delivering crew rest bunks for retrofit may increase sales further.

A ”Crew Rest Bunk”– rest area for pilots and cabin crew during long haul flights.

MarketThe f light deck is the driest area in an aircraft and a reliable humidification system is high on the wish-list for all pilots f lying long-haul.

Many long range aircraft have crew rest bunks. Normally, there is one for the pilots and one for the cabin crew. As the crew suffers from the dry air on long-distance f lights, it would seem reasonable that the airlines will increasingly want to meet their crews’ requests for humidifiers in these crew rest bunks.

The market for humidif iers to the crew rest areas will grow in conjunction with long distance f lying.

OEMCTT supplies humidif iers for the crew rest areas in the Airbus A380. Airlines like Emirates and Singapore Air-lines has ordered humidif iers for their crew rest bunks. Singapore Airl ines have operated these humidif iers reliably since 2007.

For Boeing 787, CTT supplies humidif iers both for the f light deck and for the two crew rest areas of the aircraft as an option. CTT estimates that humidification of the f light

Crew Humidifiers

For installation in the crew rest compartments (Crew Rest Humidifiers)

For installation in the cockpit(Flight Deck Humidifiers)

Crew Humidifiers Customers - OEM

Air Out Air In

Potable WaterSupply

PulseValve

Air Vent Valve Water Shut off Valve

BypassValve

Trim airDrain to bilgeor drain mast

Overflow to bilge

Duct tempsensor

24

Dehumidifier systemsCTT is currently the sole supplier of active dehumidifier systems to the aviation industry. Up until now, aircraft manufacturers have tackled the problem of condensation in aircraft using the following passive measures:

• Covering the cabin with fibreglass blankets

• Installing gutters to divert the water

• Fastening pieces of rubber foam to rods etc. to catch running water

• Attaching felt to roof panels and other parts, to catch water which should then evaporate

• Installing ‘bilge trays’ to raise insulation in the hold of the aircraft enabling condensation water to trickle underneath

• The ‘SPUD system’ that blows additional ECS air into a number of selected locations in the crown area in order to dry these.

These methods do not prevent condensation. In the short-term, they stop water from entering the cabin, but water will still be present in the fuselage with the problems this entails: increased weight, corrosion, mould and mildew in the insulation, and the risk of disturbance to the electrical system and components.

Humidifier systemsThere are currently two other companies supplying humi-difier systems for aircraft:

Hamilton SundstrandHamilton Sundstrand (USA) has developed a humidif ier in which water diffuses through a membrane system. This humidif ier is available as an option for the f light deck in Boeing 777 and 747 aircraft. This is an older system, no longer favored by the customers.

Liebherr-AerospaceLiebherr-Aerospace (Germany/France) provides a humi-dif ier that uses a heat exchanger to generate steam with the help of hot air emitted from the engines. This system is available as an option for the Bombardier Global Express business jet. The company also uses the Le Bozec system. This system uses a humidif ier that generates steam using electricity. This product competes with CTT in the VIP market for large aircraft. We estimate that it has approx-imately 5% of the market.

Competition

25

Baptism of fire for Boeing 747-8 and A350 systems

Boeing 747-8 – a high-profile projectBoeing 747-8 is CTT’s largest Cair™ installation so far. During 2013, CTT delivered most of the hardware and the systems are currently being installed.

During the year, four completion centres around North America and Europe have started onboard installation of Cair™ on half a dozen 747. The calendar will probably have switched to 2015 before the last of the six aircraft are delivered to the end customer.

CTT engineers have carried out installation support at the completion centers and have been able to observe how the systems are integrated into the aircraft. In the crown area, which is the area above the ceiling lining in the cabin, some 130 metres of additional ECS piping, with a diam-eter between 200 and 300 mm, has to be fitted.

“These are the pipes supplying the cabin with comfortable humidified air. The area is fairly full of equipment as it is, which gives an idea of the challenges facing the CTT and VIP installers,” says R&D manager Torleif Nilsson.

At the same time, the newly developed control system for Boeing 747-8 has been completed and qualified.

“We look forward with anticipation to power-up of the first 747-8, where the control system will undergo its bap-tism of fire,” says Nilsson.

Sales support “As usual, developers have to support the sales department with engineering backup. We are also pleased that we have been able to dedicate more resources to long-term devel-opment work during 2013.

“In addition, we have invested in new software that ena-bles us to analyse f luid mechanics early on in the develop-ment work, improving the efficiency of development and qualification work for new products,” says Nilsson.

Test flights with A350

The work with the A350 is moving along as planned. In February 2014, we saw the system airborne in one of Air-bus’ test aircraft.

Delivery rate ramped up

In general, 2013 was a year of volume growth for CTT. Manufacturing and delivery rates increased markedly.

“One of the most tangible effects is that we have to adjust our processes accordingly.

Nilsson talks about it as a problem he doesn’t mind hav-ing. In practice this means that the R&D department has to divert more time and resources to supporting the qual-ity department, the manufacturing department and the customer support department. This involves work with inquiries, reports, analyses and corrective actions regard-ing modif ications and warranty issues with CTT and its component suppliers.

“We are making good progress at implementing a compa-ny-wide system to make these processes more eff icient,” says the R&D manager.

Focus on testingRebuilding and improving the test areas and test rigs is high on the agenda for 2014.

“This is particularly urgent as the building suffered water damage during the autumn of 2013, forcing us to evacu-ate the regular test area and start using temporary facilities instead.

“As well as completing current projects and continuing to improve products and processes, we expect new exciting development and installation work. The future can only tell what will be ordered and started during 2014,” Nils-son concludes.

TOrLEIf nILssOn fOr ThE r&d dEParTMEnT

The R&D department has been working under pressure during the year, as usual. Boeing and Airbus projects overlap each other, only to be broken up by emergency calls from customer support and manufacturing. The top priority at the moment is to ensure that the presti-gious Boeing 747-8 project runs smoothly and that A350 makes its test flight with CTT’s equipment onboard.

Torleif Nilsson, Engineering Manager, CTT Systems

26

Quality

CTT complies with Swedish Transport Agency rules and regulations applying to Quality Assu-rance in the aviation industry. Quality control is applied at every level, from design through production to delivery, with subsequent follow-up checks and customer support.

Third-party approvalToday, CTT is certif ied by the Swedish Transport Agency in accordance with the common European standards issued by the EASA (European Aviation Safety Agency), Part 21 subpart G and Part 145. These authorisations together mean that CTT is qua-lif ied to manufacture and maintain airworthy material. CTT is also certified in accordance with ISO9001 and EN9100.

CertificationAn aircraft’s basic configuration has a type certif icate (TC). All retrofit equipment installed must be approved with a Supplement Type Certificate (STC). An STC means that the certifying civil aviation authority has approved both the system and its installa-tion from an airworthiness viewpoint. Within the EU, STCs are often issued by the EASA. An STC issued by the FAA (Federal Aviation Authority in the USA) is in reality the same as global certification.

CTT and Lufthansa Technik have a cooperation agreement regar-ding certification. This agreement means that Lufthansa Technik acts as CTT’s formal design organisation and maintains STCs for CTT products in return for royalties on systems sold. This agre-ement is very useful in the sales process as Lufthansa Technik has an excellent reputation for certif ication and can maintain STCs from both the EASA and FAA.

ProductionCTT’s production strategy is to perform the f inal assembly and maintenance of its own products. A large portion of the pro-ducts comprise standard components from the aviation industry that are purchased from reputable suppliers. In the case of key components, long-term agreements have been signed to ensure competitive prices even for short production runs. Manufac-

Maria Wester, Quality Manager, CTT Systems

CTT Systems AB (publ.)

GrOuP OrGanIsaTIOn

Bribo Mekaniska AB

Catron Elektronik AB

CTT Systems Inc (dormant)

100%

100%

100%

27

turing and assembly are contracted to carefully selected suppliers, including our subsidiary Bribo Mekaniska AB, enabling CTT to increase turnover rapidly without inves-ting heavily in machinery or personnel.

InstallationFor sales of systems for retrof itting to aircraft already in service, installation is undertaken by airline personnel in accordance with CTT’s drawings and instructions. To facilitate the installation process, CTT instructors

quaLITY and hr ManaGEr MarIa WEsTEr

Torbjörn Johansson President

Stefan Hammar Production Manager

Procurement

Assembly

Maintenance & Overhaul

Maria Wester Quality Manager

Mikael Brate CFO

Finance & IT

Quality Assurance & HR

Torleif Nilsson Engineering Manager

Design Engineering

System Engineering

Development Test

Peter Landquist VP Sales, Marketing

Customer Support

Organisation and personnelThe parent company CTT Systems AB is head-quarted in Nyköping, Sweden. Bribo Mekaniska AB in Nybro became a wholly owned subsidiary within the Group on 1 November 2007, as did Catron Elektronik AB in Gustavsberg on 1 December 2009.

CTT has recruited strategically important key individuals with core competencies within the areas of engineering, mechanics, air systems, avionics and airworthiness administration, as well as financial

(supervisors) participate in the first installation of systems. Installation of a Zonal Drying™ System requires 70-150 man-hours, whereas installation of a complete Cair™ system requires some 200-250 man-hours. The formal responsibility for the installation rests with the airlines.

By way of agreements with Airbus and Boeing, installa-tion is undertaken during production of new aircraft at the manufacturer’s premises. If installation takes place as part of initial construction, manufacturers assume responsibility for the installation.

matters and administration of listed companies. Several employees have long experience within the Swedish and international aviation industries. Production personnel plan and administer manu-facturing, which is for the most part subcontracted. There are a total of 79 employees, 14 of whom are women. There is an even distribution in the age of employees from 20 to 62. Absence through illness is low within the Group.

28

“Can you hold the line for 30 seconds,” asks manufacturing manger Stefan Hammar. “I’m in the middle of a delivery. More products for Boeing!”

Symptomatic, you could say, as the Boeing 787 has kept the department busy since its f irst take-off in 2009. The fact that the Dreamliner, as it is called, has touched down for an intermediate landing due to battery problems is nothing that affects the rate of deliveries. It only means that deliver-ies are occasionally redirected. Not a day goes by without team leader Henrik Granath having Boeing on the line.

Short notice the order of the day

“You could says that Boeing’s problems are ref lected in CTT’s delivery situation,” says Hammar diplomatically. “We work with short notice, sometimes extremely short. Things we thought were set in stone can suddenly change from one day to the next.”

Continuous improvement is part of everyday working life at CTT. As part of the effort to streamline processes and do things more efficiently, a new access control and time management system is being introduced.

Upward trend for output with no let-up in sight

ManufacTurInG sITuaTIOn accOrdInG TO sTEfan haMMar

Stefan Hammar, Production Manager,

CTT Systems

A proper take-off, is how manufacturing manager Stefan Hammar describes 2013. The volume in-creased by 55% and staff levels rose by nearly the same rate, from 12 assembly workers to 18. This was expected, as the deliveries to largest customer Boe-ing picked up in earnest during the year. Now, the department prepares for continued expansion.

Known sender

“At the moment we are installing a new access control se-curity system so that we can apply for something called ‘known sender’. When delivering to the aviation industry, you are required to keep track of the products you build and ensure that no unauthorised persons can get into the manufacturing plant.

“As a side effect, customs clearance will also become much simplif ied. If you cannot prove the goods have not been tampered with, you may be required to X-ray the shipment, which is expensive as well as time-consuming. To avoid this, we need to provide a full track record.”

An audit of the new access control and security system is due during the first quarter of 2014. At the same time, the manufacturing department will introduce a new time re-porting system that logs time automatically. An act of lib-eration for Hammar, who spends a lot of his time going through spreadsheets.

“This way, both management and staff will be able to bet-ter control the time they have actually worked,” he says before hurrying along to deal with the next delivery to be shipped out.

29

Retrofit = airlines Initially, CTT aimed its sales effort almost exclusively at operators (normally airlines) that wished to fit dehumidifiers (Zonal Dryers) in existing aircraft to combat the problem of condensation. This retrofit market encompasses all imaginable aircraft types. Each installation is bespoke. Before CTT’s system can be designed, the indi-vidual aircraft has to be inspected, free areas have to be found and space allocated for dehumidifiers and cabling.

VIP segment = private jetsOver time it became clear that dry cabin air causes almost as many problems as con-densation. CTT’s answer was to develop a humidification system, Cair™, primarily aimed at owners of private jets. To achieve greater impact in the market, CTT also approached a number of completions centres around the world, i.e. workshops that modify and equip aircraft.

OEM market = major aircraft manufacturersThe success in the VIP market proved to the major aircraft manufacturers that CTT’s systems were effective for dehumidifica-tion and humidification of large passenger aircraft. Airbus and Boeing were both in the process of designing new aircraft types that aimed to satisfy high demands for fuel economy and passenger comfort. Both com-panies saw the advantages and CTT was trusted with the development of systems de-signed for the new aircraft types Boeing 787 and Airbus A350 and A380.

This is where we are now, with two prod-uct segments accepted by the most impor-tant players in the market and which, each in its way, help further the long term goals of the aviation industry: Zonal Drying™ by reducing fuel consumption, emissions and maintenance; Cair™ by benefiting the passengers’ wellbeing and making long-distance f lying more pleasurable.

CTT traces its origins to the concept “Dehumidifiers for aircraft” presented in 1988 by the company’s founders, Christer Nordström, Thomas White and Tomas Axelsson. In military aviation, aircraft had for a long time been dehu-midified using ground-based equipment but this was not a viable solution for passenger aircraft with long f lying hours.

Having spent a number of years designing prototypes and presenting the idea to the Swedish Civil Avia-tion Administration as well as various airlines, CTT Systems AB was established in May 1991 to patent and com-mercialise the concept. The first global certif ication was received in 1997, relating to a system for Boeing 767. Later the same year, the company’s stock was listed on the SBI list that existed at the time. In 1999, the com-pany was listed on the O-list at the Stockholm Stock Exchange, today’s Small Cap at Nasdaq OMX Stockholm AB. Until 2004, sales were aimed at airlines and aircraft in operation. Through the signing of a number of agree-ments, the company has achieved its strategic goal of becoming an OEM manufacturer with aircraft manufactur-ers as its customers. The most significant agreements are:

With Boeing:

• Zonal Drying™ System as an option for Boeing 737NG

• Zonal Drying™ System as standard for Boeing 787 Dreamliner

• Humidification of crew rest areas and flight deck as an option for Boeing 787

With Airbus:

• Humidification as option for crew rest areas for Airbus A380

• Zonal Drying™ System as an option for Airbus A350

• Humidification of crew rest areas and flight deck as an option for Airbus A350

• Cair™ humidification of the cabin air as an option for Airbus A350

During the autumn of 1999, development started on a humidif ication system, which aimed to offer improved cabin comfort for passengers and crew. To avoid problems with condensation when humidifying the cabin air, the humidification system is combined with CTT’s dehumidi-f ication system Zonal Drying™ System. This integrated concept is marketed as a protected trade mark with the brand Cair™.

How one customer group leads to another

History

30

Subsidiary Bribo supplies CTT with stamped metal com-ponents. The single largest product is evaporation pads for the humidif iers, a consumable requiring annual replace-ment during service.

“We can clearly see that improved logistics and a better working environment has yielded results. The investment in a deburring machine has also improved eff iciency and quality and has substantially improved the eff iciency of our working processes. As a result, we have been trusted with the task of assembling evaporation pads not just for the two Boeing models (787 and 747) but also for Airbus A380,” says Rosendahl.

2014Ahead of 2014, one of the f irst activities has been inves-tigating the possibility of expanding the operation with the introduction of machining processes. In addition, the management team plans to participate at a subcontractors’ trade show. Bribo also aims to reap the benef its of the work done in 2013 to introduce a new enterprise resource planning (ERP) system.

steady increase for Bribo

BrIBO Md TOnY rOsEndahL

“We continue our work to introduce instructions and templates to make the organisation still more efficient and prepare for future growth,” says Rosendahl who, after his f irst f ive years as MD, has just introduced his next f ive-year plan.

The plan shows how Bribo continues to implement its ERP system. It also outlines plans for further staff training, as well as drawings for next phase of the expansion plan.

With a clear eye on the future, there seems to be little standing in the way of the aspirations of Rosendahl and his team.

Tony Rosendahl, MD, Bribo Mekaniska

A new building resulted in more than a facelift for the the organisation, it even gave a noticeable lift in pro-ductivity! A year and a half after the move, the organi-sation and the production processes have become firm-ly established at the new plant. The turnover is rising for the fourth year running and the future looks bright. In the next five-year plan, Bribo’s MD Tony Rosendahl is planning still further expansion.

Bribo specialises in precision manufactured sheet metal parts. These are generally complex products requiring several operations. CTT’s humidi-fier is a typical example, but the company also has many customers outside the Group, for instance in the furniture industry

31

Catron cuts its overheadsWith the announcement by the Swedish Defence Materiel Administration at the beginning of March 2014, that it wished to cancel the project to develop a communications system for the Gripen aircraft, Catron began reducing its overheads to a size relevant to delivering systems to Saab and to the CTT parent company.

In May 2013, the Swedish Defence Materiels Administra-tion ordered a new communications system for ground clearance of the Gripen aircraft. This would result in a wireless system enabling ground staff to communicate with air traffic control, pilots and other involved for a fast turnaround on the ground. The project has been delayed in several stages and at the beginning of March 2014, the Swedish Defence Material Administration announced it wished to cancel the contract due to these delays. Negotia-tions are underway to establish whether to discontinue the project, and if so, the terms of the termination. Pending the decision of the Swedish Defence Materiel Administra-tion, Catron’s cost base has been substantially reduced and a third of the workforce has been made redundant.

During 2013, Catron completed its order from Saab, for development and manufacture of communications equip-ment for a surveillance version of the Saab 2000 aircraft. The system has been in use with the end customer since the summer of 2013 and the end user is very satisfied with its performance.

Catron is hopeful that Saab will receive more orders for the surveillance aircraft, generating further orders for Ca-tron’s communications system.

Catron also supplies the pilot’s microphone for the Gripen aircraft and an audio panel for the SK60 trainer aircraft used by the Swedish Air Force.

In addition, Catron develops and manufactures the ana-logue control system used in CTT’s Zonal Drying Sys-tem sold in the retrofit market. Catron’s also supplies CTT with control systems for use in small VIP aircraft, as well as electrical components for CTT’s systems for both Boe-ing 787 and the A350.

If the Swedish Defence Materiel Administration does de-cide to discontinue the development of the communica-tions system, Catron’s cost base will be adjusted to supply-ing the systems required by Saab and CTT.

CATRON

160

140

120

100

80

60

40

20

01999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

5

10

15

0

CTT Systems AB (publ.) 1999-2013

No. of shares traded in thousandsShare

OMX SPl

Share price development and turnover per month 2013.

060120

240180

20

25

30

35

40

45

50

300

JulyFeb.Jan. Mar. Apr. May June Aug. Sept. Oct. Nov. Dec.

CTT Systems AB (publ.) 2013

No. of shares traded in thousandsShareOMX SPl

Share price development and turnover since listing in 1999.

32

The CTT share

Share capital Share capital in CTT amounts to SEK 11 391 438 distributed among 11 391 438 shares with a quota value of SEK 1 each. All shares give the same entitlement to the company’s assets and income. Each share entitles the holder to one vote. At the AGM, each person entitled to vote may vote for the full number of shares he owns and/or represents without limitation of voting rights.

Growth in share capital Since the company was formed in 1991, the share capital has developed as illustrated on the next page.

Ownership structureThe tables on the next page illustrate the ownership structure of CTT based on infor-mation from Euroclear AB as at 31 December 2013. The number of shareholders has de-creased since 2012-12-31 from 2 633 to 2 514.

Share listings Shares in CTT were first listed on the SBI list in 1997, but were transferred in 1999 to the O-list of the Stockholm Stock Exchange, now the Small Cap listing of Nasdaq OMX Stock-holm AB. Listing means, among other things, that CTT follows rules regarding stock mar-ket information. The company thus publishes financial reports and other stock market infor-mation, and follows other rules and practices that apply to a listed company.

Share price developmentThe highest closing price for the share dur-ing the last financial year of SEK 41.90 was noted on February 14th while the low-est closing price of SEK 29.70 was noted on December 30th 2013. The final closing price on December 30th 2013 was SEK 30.30 (39.90).

Information policyThe Board of CTT has established an informa-tion policy that takes into account the rules set out by the Stock Exchange in the listing agree-ment. Apart from the Chairman and Presi-

dent, the CFO is also authorised to make statements on the company’s reports and officially communicated business. The company distributes all its reports, including the year-end report and press bulletins, via Cision AB. The company’s website, www.ctt.se, is updated simultaneously with the same information, and also contains the information policy, as well as the annual report and interim reports for download.

Dividend policyTo date, CTT has not distributed any dividends. The standpoint of the Board is that the dividend should, in the long-term, be well balanced between the company’s need for capital in order to grow (with regard to its financial goals) and the desire for a good direct return on

33

NO. OF SHARES/ No. of No. of No. of SHAREHOlDERS owners shares shares as a % 1-1000 1 904 575 567 5,1%1 001-10 000 514 1 540 854 13,5%10 001-50 000 62 1 352 433 11,9%50 001-100 000 13 865 963 7,6%100 001- 21 7 056 621 61,9%Total 2 514 11 391 438 100,0%

THE LARGEST SHAREHoLdERS No. of Capital andAS AT 2013-12-31 shares shares as a %VOlITO AB 1 761 427 15,5

TRUlSCOM FÖRVAlTNING AB 848 500 7,4

CATRON DESIGN AB 544 724 4,8

IF SKADEFORSAKRING AB 511 200 4,5

NYA JORAME HOlDING AB 368 235 3,2

AMF AKTIEFOND SMÅBOlAG 356 909 3,1

lÄNSFÖRSÄKRINGAR SMÅBOlAGSFOND 308 325 2,7

lAND & BERG AB 303 100 2,7

SEB PRIVATE BANK S.A., NQI 275 312 2,4

ROBUR FÖRSÄKRING 261 270 2,3

Total 5 539 002 48,6Other shareholders 5 852 436 51,4Total no. of shares 11 391 438 100,0 Total no. of shareholders 2 514

ClASSIFICATION OF SHAREHOlDERS

Swedish individuals 35,3%

Swedish organisations 56,0%

Overseas individuals 0,1%

Overseas organisations 8,6%

investment. At the present time, it is not considered meaningful to quantify the size of dividends in relation to future profits. In view of the Board’s future expansion plans for CTT, it is considered that the dividend policy will continue to be restrictive in the coming years.

Shareholders’ agreementTo the Board’s knowledge, no shareholders’ agreement exists between shareholders in CTT.

SHARE CAp. Transaction Change Total no. Increase in Total NominaldEvELopmENT of shares of shares share capital share capital amount in no. SEK SEK SEK1991/92 New issue 2 670 2 670 267 000 267 000 100 1994/95 New issue 2 670 5 340 267 000 534 000 100 1995/96 New issue 594 5 934 59 400 593 400 100 1996/97 New issue 5 934 11 868 593 400 1 186 800 100 1997/98 New issue 11 868 23 736 1 186 800 2 373 600 100 1997/98 Split 100:1 2 349 864 2 373 600 - 2 373 600 1 1997/98 New issue 690 000 3 063 600 690 000 3 063 600 1 1998/99 New issue 1 021 200 4 084 800 1 021 200 4 084 800 1 2000/01 New issue 1 021 200 5 106 000 1 021 200 5 106 000 1 2003/04 New issue 1 276 500 6 382 500 1 276 500 6 382 500 1 2004/05 New issue 2 127 500 8 510 000 2 127 500 8 510 000 1 2005/06 New issue 28 929 8 538 929 28 929 8 538 929 1 2006/07 New issue 230 001 8 768 930 230 001 8 768 930 1 2007 New issue 269 999 9 038 929 269 999 9 038 929 1 2007 New issue 1 807 785 10 846 714 1 807 785 10 846 714 1 2009 New issue 544 724 11 391 438 544 724 11 391 438 1

34

Five year summary - The Group

(MSEK) 2013 2012 20111) 20101)) 20091)

INCOME STATEMENTIncome 159,9 156,8 103,7 71,8 62,5Expenses -143,7 -135,6 -100,5 -77,2 -64,0Depreciation -9,9 -7,8 -8,0 -13,0 -10,2Profit/loss after depreciation 6,3 13,4 -4,8 -18,4 -11,6 Financial income 0,4 1,5 1,5 4,1 5,7Financial expenses -2,3 -1,9 -1,7 -0,9 -1,0Earnings before tax 4,4 13,0 -5,0 -15,2 -6,9 Tax -1,1 -10,3 28,1 12,6 7,9Profil/loss for the year 3,4 2,7 23,1 -2,7 1,0 13-12-31 12-12-31 11-12-31 10-12-31 09-12-31BALANCESHEETAssets Intangible fixed assets 36,5 22,7 21,7 25,5 33,8Tangible fixed assets 30,4 30,1 15,0 9,9 12,0Financial fixed assets 32,8 34,5 43,8 15,8 3,4Cash and bank balances 3,1 1,6 6,4 0,9 12,8Total assets 200,5 173,4 170,6 105,7 105,4 Shareholders’ equity and liabilities Shareholders’ equity 64,6 66,2 63,4 40,2 42,9Provision for warranty commitments 2,5 2,9 2,1 2,1 2,0long-term liabilities, interest-bearing 46,4 26,5 34,9 19,4 20,0long-term liabilities 3,2 3,2 4,3 4,3 4,3Short-term liabilities, interest-bearing 38,6 25,3 16,5 17,7 17,2Short-term liabilities 45,3 49,4 49,3 22,0 19,0Total shareholders’ equity and liabilities 200,5 173,4 170,6 105,7 105,4 Key ratios Share of risk capital % 32 38 37 38 41Return on sharholders’ equity % 5 4 44 -6 3Return on total assets % 4 9 -2 -13 -6Return on capital employed % 5 12 -5 -23 -15liquidity ratio % 67 75 90 66 91Interest coverage ratio 3 8 -2 -15 -6Operating margin % 4 9 -5 -26 -19Debt ratio 1,3 0,8 0,8 0,9 0,9Equity/assets ratio % 32 38 37 38 41Profit margin % 3 9 -5 -22 -11 Personnel No. of personnel, average 79 72 61 54 51Income per employee 2,1 2,2 1,7 1,8 1,2Salaries 34,8 30,9 25,0 21,8 18,6 Share data Earnings per share, SEK 0,30 0,24 2,04 -0,22 0,09Earnings per share after dilution, SEK 0,30 0,24 2,04 -0,22 0,09Equity per share, SEK 5,67 5,81 5,58 3,53 3,77Equity per share after dilution, SEK 5,67 5,81 5,58 3,53 3,77Cash flow from current operations per share, SEK 0,40 1,75 -0,28 -1,12 0,62No. of shares 11 391 438 11 391 438 11 391 438 11 391 438 11 391 434No. of shares after dilution 11 391 438 11 391 438 11 391 438 11 391 438 11 391 438Average no. of shares 11 391 438 11 391 438 11 391 438 11 391 438 10 872 224during the period Share price on balance sheet date, SEK 30,30 39,90 29,20 25,70 24,60Dividend per share, SEK 0 0 0 0 0Dividend per shareafter dilution, SEK 0 0 0 0 0

1) Adjusted for revised additional payment for Catron Elektronik AB

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35

senior executives

Torbjörn Johansson CEO, born 1958. Master of Science in mechanical engineering, Linköping Institute of Technology. Engineer’s apprenticeship at SAAB aircraft division 1982–83. Design engineer on JAS39 Gripen, SAAB 1983–88. Design engineer/manager, EPI GmbH (now Telair), Germany 1988–91. Engineering Director, Elektrometall GmbH, Germany 1991–96. Technical Director, CTT Systems AB 1996–1997. CEO of CTT Systems AB since 1997. Holds 35,000 shares in CTT.

Maria Wester

Quality Manager and Personnel Manager, born 1966. Professional engineer, electrical and telecoms engineering. Diploma in business administration at Örebro University. Studies in quality engineering at Mälardalen University, Västerås. Postgraduate Programme Personnel Administration. Project management/sales, Trade Motion 1988–89. Technical/financial assistant, Burndy AB/FCI 1990–95. Quality and Personnel Manager, Framatome Connectors Sweden AB 1995–99. Quality Manager, CTT Systems AB since 1999. Holds 4,243 shares in CTT.

Stefan Hammar Production Manager, born 1959. Mechanical engineer. Konstruktion Studsvik Energiteknik AB 1984-1990. Group Manager design, manufacturing, elec-tricity and electronics at Studsvik Nuclear AB 1990-2001. Design Manager at Studsvik Nuclear AB 2001-2005. Design and Laboratory Manager at Studsvik Nuclear AB 2005. Production, maintenance- and purchasing Manager at CTT Systems AB since 2006. Holds 0 shares in CTT.

Mikael Brate CFO, born 1960. Master of Science in Industrial Engineering and Management Economics, Linköping Institute of Technology 1988. Graduate engineer Measurement and Control technology at Falun/Borlänge 1984. Project and Marketing Controller at CelsiusTech Electronics AB 1988–1993. Financial Director at Mälardiagnostik AB 1993–1996. Financial Director at Camfil Components 1996-1997. Business and Management consultant at Cap Gemini 1997–2004. Financial Director at Catech AB (publ.) 2004–2006, CFO at CTT Systems AB since 2006. Holds 25,000 shares in CTT.

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Supplementary information in accordance with NBK’s recommendations

There are no further agreements regarding pension age, or future pension, for the CEO or other senior executives. The company subscribes to a pension plan for the individual where the company’s commitment is limited to paying the agreed premium during the period of employment.

Notice and severance pay

Managing directors of CTT and its subsidiaries are entitled to severance pay according to contract if the individual is requested by the company to leave the position. Severance pay, including pay during any notice period, amounts to two years’ salary for the MD of the parent company and one year’s salary for the MDs of the subsidia-ries. All other senior staff enjoy severance benefits according to standard contract.

The holdings reported are accurate as at 2013-12-31. Includes the holdings of spouses, minors and private companies.

Torleif Nilsson

Director of Engineering, born 1960. Professional engineer, mechanical engi-neering. Institute Engineer – Mechanical Engineering 1980. Stress Engineer on JAS39 Gripen, Saab 1982–1998, Appointed Senior Stress Engineer Air-craft Systems 1990. Manager Stress Aircraft Systems in Weapons Integra-tion & Structural Technology Department, Saab Aerosystems 1999-2007. Head of Development at CTT Systems AB from 2007. Holds 9,830 shares in CTT.

Peter Landquist

VP Sales, Marketing and Customer Support, born 1958. Graduate industrial technology high school, 1976. Production and design AB Nyge Aero 1986–1993. Head of Design at CTT Systems AB 1993–1998. Technical Director 1998-2004. Technical Sales 2004–2006. Aftermarket Manager 2006-2011. VP Sales, Marketing and Customer Support from 2011. Holds 2,500 shares in CTT.

Tony Rosendahl

MD Bribo Mekaniska AB, born 1967. Professional Engineer, mechanical engineering, 1987. Planning, procurement and production manager at Ogo AB 1989-2000. Production manager at Mönsterås Metall AB 2000–2009. MD Bribo Mekaniska AB since 2009. Holds 6,557 shares in CTT.

Jörgen Bruhn

MD Catron Elektronik AB, born 1959. BA Public Administration, Linköpings Universitet 1986. Buyer, Saab Aircraft 1986-1995, Sales Manager, Spares and Logistical Services Saab Aircraft 1995-1999, Business Development Manager, Spares, Saab Aircraft 1999-2002, Manager, Supplier Management, Saab Air-craft 2002-2003, Director, Supplier Management, Saab Aircraft Services 2003-2010. MD Catron Elektronik AB from 2010. Holds 0 shares in CTT.

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OrdINAry BOArd MEMBErS

Annika DalsvallBorn 1958. Bachelor of Science in Economics, Uppsala University. Member of CTT’s board since 2013. Holds 0 shares in CTT.

Tomas TorlöfBorn 1967. Master of Science in engineering. Board member of Trulscom Förvaltning AB, M2J Holding AB and others. Member of CTT’s board since 2013. Holds 848,500 shares in CTT (via Trulscom Förvaltning AB).

Björn Rönnqvist Born 1963. Bachelor of Science in Economics, Uppsala University. President of Icecapital Securities AB. Member of CTT’s board since 2009. Holds 1,800 shares in CTT.

Henrik Ossborn Born 1969. Candidate of Law, University of Lund. Lawyer, equity partner of law firm Vinge. Member of CTT’s board since 2012. Holds 0 shares in CTT.

Anders Helmner Born 1953, Master of Science, Lund. President of Telair Inter-national AB. Member of CTT’s board since 1996. Holds 3,663 shares in CTT.

Johan Lundsgård Born 1953. Chairman of CTT Systems since 2010. Economist. CEO of Volito Group AB. Board member of Finnveden Bulten AB (publ.) Member of CTT’s board since 2009. Holds 0 shares in CTT.

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BOARD OF DIRECTORS

ACJC Airbus Corporate Jet Centre

ATP Acceptance Test Procedure

BBJ Boeing Business Jet, originally based on Boeing 737 but now also other models

Business class Cabin for business travellers

Business Jet Jet designed exclusively for business travel

C-check Annual maintenance check of an aircraft. Checking time approximately one week, 12 to 18 months apart.

Completions Centre ”Workshop” for aircraft that modifies and equips VIP aircraft

Crew rest areas/bunks Space for the crew, a very small room with beds

CRJ Canadair Regional Jet

D-check A thorough inspection, maintenance and repair of the aircraft body, onboard systems and structural components. Checking time approximately one month, four to eight years apart depending on aircraft type

EASA European Aviation Safety Agency

EB Engineering Bulletin

FAA Federal Aviation Administration in the United States

Flag carrier National airline e.g. Scandinavian Airlines or Lufthansa

Flight deck Cockpit, the work area of the pilots

Hub Major airport with feeder traffic to and from smaller airports

IP Initial Provisioning, delivery to customers (airlines) of spare parts for e.g. B787 before delivery of the plane.

IR Investor relations

Launch Customer First customer for new aircraft type

MPS Master production schedule

Narrow-body Aircraft with a single aisle, e.g. Boeing 737

OEM Original Equipment Manufacturer. A manufacturer of parts sold on to another manufacturer before delivery to end customer.

Pad Disposable humidification pad for CTT’s humidifiers, made from fibre glass structure and featuring specially designed air channels.

Pax Passenger

Pax Density Passenger density, share of spaces used as a proportion of spaces available

Regional Jet Jet engined aircraft that take 30 to 100 passengers over short distances.

Retrofit Fitting equipment in an aircraft after it has been delivered to the airline

STC Supplement Type Certificate – certificate proving that equipment is approved from an air worthiness point of view by the relevant authority (EASA, FAA)

TC Type certificate that shows the approved basic configuration of an aircraft

Test rig Equipment for testing of systems in a laboratory environment

Wide-body Aircraft with more than one aisle (eg. A350, A380 ad Boeing 787)

VIP Aircraft Private or corporate jet with bespoke luxury interior

GLOSSARY

39

CTT Systems AB (publ.) Box 1042 SE-611 29 Nyköpingphone: +46 (0) 155-20 59 00 Fax: +46 (0)155-20 59 25 E-mail: ctt@ctt.se www.ctt.se

vAT no: SE556430774101

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