Corporate Presentation and Annual Report 2017

www.advania.com

Corporate Presentation

2 Making IT more human 4 Becoming the client’s first choice 6 Strategic overview 8 Markets and trends 10 Our business model 14 Our business segments 18 A sustainable approach to IT 20 People and culture 22 Management

Annual Report

24 Administration report 31 Financial information 40 Notes for the Group 78 Notes for the parent company 85 Auditor’s report Making IT more human

To make life easier for our clients and aid them in creating value – that’s what Advania aims to do every day. We do this by creating long-term relationships, mutual trust, common goals, and by embracing that IT is a people business. We know from experience that real value is always created by people, for people, and by adding a little bit of Advania in our client’s business, we help them to future success.

◼◼ Advania is a leading Nordic IT-provider serving thousands of corporate clients in the public and private sector.

◼◼ We provide a wide range of IT-services, platforms, cloud solutions and support to multinational enterprises, gov- Iceland ernments, big, small and medium-sized businesses. 6 Offices

◼◼ We focus on creating value for clients by spotting opportunities for clever and strategic use of IT, finding the right solution for each client and fitting it perfectly to the client’s needs.

Our business areas

Managed Services IT Infrastructure Business Solutions Professional Services & Integration Operating, administrating, Automate, streamline, Consulting services, monitoring and manag- Solutions for data centers, measure, document and software development, ing selected IT systems, IT platform projects, virtu- stimulate business and IT eBusiness services and services and funcions. alization solutions etc. processes. infrastructure solutions.

Significant events during 2017 ◼◼ Acquisition of Caperio in Sweden, Advanias largest ac- ◼◼ Divestment of Datacenters and Mobile Pay on Iceland quisition to date in terms of revenue ◼◼ Advania appointed Katrin Olga Jóhannesdóttir and Vesa ◼◼ Ranked as number one and two in Radars annual client Suurmunne as new Board members survey in the categories “Most user oriented IT”, and “Most organizational oriented IT” ◼◼ Advania carried out extensive refinancing in order to optimise Advania’s capital structure

2 Corporate Presentation 2017 / Advania AB SEK 2,803 MILLIONS 94 % NET REVENUE RECURRING CLIENTS

SEK 258 MILLIONS EBITDA 1,090 AVERAGE NUMBER OF EMPLOYEES 4,938 NUMBER OF ACTIVE CLIENTS

Advania market strengths ◼◼ Leading position in Iceland

◼◼ Challenger positions in Sweden and Norway

◼◼ Gained market shares during 2017

◼◼ Supplier agnostic – not tied to any of the large hard- or software suppliers, meaning that clients can get solutions tailored to their own preferences.

22 OFFICES ACROSS THE NORDIC MARKET

Norway 6 Offices

Sweden Norway 10 Offices

Iceland Sweden

Denmark REVENUE SHARE 2017

Annual Report 2017 / Advania AB 3 Becoming the client’s first choice

In a quickly transforming IT landscape, our customer approach gives Advania a competitive edge. During 2017 we made significant progress with our strategy, and we’re eager to develop even further in the coming years.

A good year! That’s how I would summarize Advania’s 2017. In tal for good customer relations. It strengthens our culture all, we increased our revenue to 2,803.5 SEK million, landed of trust, which enables Advania to become the client’s an EBITDA of 258 SEK million, and developed well across all first choice. our markets. We managed to grow in Iceland while also improving margins and increasing our market share. In Norway, we shifted our focus towards Microsoft 365, increased our sales and turned red figures to black. In Sweden, our largest Partners for life market, we also continued to grow and increase profitability. We want to partner with our clients more or less for life to create close and long-term relationships instead of focusing on specific projects. For us to succeed clients must believe How two plus two can become five that Advania will help them come to the best decisions and we’re on their side at all times. By having the client’s best in- Creating value for shareholders through mergers and ac- terest as a guiding principle, we can identify improvements quisitions is in our DNA. Since inception in 2009, we have they might not have spotted themselves. For example, if a successfully acquired or merged with 14 businesses, includ- client has budgeted one million SEK a year for a specific IT ing the Swedish IT giant Caperio in 2017. The Caperio ac- project, and we discover that an app can do the same job quisition is an excellent example of our M&A philosophy: To for 5,000 SEK – we recommend using the app! That’s not lost find a match where two companies are stronger together business; it’s us doing our jobs, helping the client to become than separately. Where something extra happens when they more efficient and find new business ideas. merge, and two-plus-two becomes five! We know from experience that the numbers only tell half the story and we In return, this fosters a unique relationship with clients focus on finding M&A targets with culture and values similar and Advania becomes their first choice as a permanent IT to ours. Companies that add to our offering and benefit our partner. Based on the value we create for clients, they are clients. Caperio had it all, and the merger was a success. willing to work long-term with Advania and pay a premium for our service. It’s a win-win, where everybody gains from This is important for several reasons. Right now, society is the relationship. This strategy has repeatedly proven itself transforming, and IT is increasingly becoming the core of as successful. Our churn rate is meager and in 2017 about business development for all companies, regardless of in- 94% of revenues came from recurring clients. dustry. Business managers are uncertain which solution to apply, testing and probing their way forward and increasingly relying on IT services with both breadth and depth. With strategic and thoughtful acquisitions, we can provide IT holds the key to sustainable future just that. Our industry has a significant impact on both environment Moreover, the cultural aspect of acquisition is essential. A and society. It consumes minerals, materials and energy. It cultural fit not only makes for a smoother merger, saving affects those working in the supply chain worldwide. But IT costs and ensuring peace of mind but is also fundamen- is also a crucial part of the solution, and with clever use of

4 Corporate Presentation 2017 / Advania AB ”The need for IT services will continue to rise among our existing clients, and we will continue to seek new customers and strategic acquisition opportunities. ”

IT, we can help clients minimize their environmental impact. Let’s get inspired We enable new sustainable business ideas, benefitting the society as a whole. We facilitate cost-savings, boost efficien- All of the above can only happen cy, and inspire our clients to discover new ways of doing with the right people on board. In our business with IT as starting point. line of work individuals and the teams they form is the real gold. They are the ones Going forward, I see plenty of exciting opportunities. We will who establish trust, cultivate relationships with focus on organic growth, and we will see marvelous devel- clients, reach deadlines and inspire our custom- opment in all industries. Artificial intelligence, big data, and ers. That’s the Advania way, and I’m proud of leading bandwidth evolution will accelerate business changes. The our impressive team. I sincerely thank every member for need for IT services will continue to rise among our existing their performance and for making our strategy possible. clients, and we will continue to seek new customers and strategic acquisition opportunities. We believe there are In the months ahead we will work even harder to improve plenty of those in the fragmented Nordic IT sector. our employer brand. We are committed to being a visionary and value-driven workplace for the best talent in our indus- As for our own business, we will walk the talk and do what we try. A workplace where professional men and women are ask of our clients – develop with the help of IT. We will look motivated, where they find meaningful progress while being for new, smart ways to work and improve our performance inspired by each other. across the board. One of our ambitions is to act as a listed company, regarding transparency and reporting. We see that Stockholm, Sweden, April 2018 as a matter of trust: Client’s and people, in general, should be Gestur Gestsson able to see what we do and how Advania is evolving. CEO

Corporate Presentation 2017 / Advania AB 5 Strategic overview

Over the last few years, Advania has evolved into a clear challenger in the Nordic IT market. With a solid strategic platform, a variety of clients and strong financial performance, we are ready for further growth.

Advania focuses mainly on organizations with 100 to 6000 when it comes to hardware and software, enables us to tai- employees. We have a number of competitive advantag- lor solutions fully to the client’s preferences. es: A focus on creating value for clients, an offering in line with the demands of the current digitalisation trends and a As platform for our growth, we use six strategic priorities proven team of experts. The fact that we are brand agnostic that guides us in our everyday operations.

Strategic priority Comment Progress 2017

Deep client relations We create value for Advania by creating value 94% recurring clients for the clients. A strong operational focus on client satisfaction, along with the strive to get to know the clients for the long-term, leads to a higher ratio of recurring business and opportunities to expand the offering.

Revenue predictability We constantly aim to strengthen revenue 23% of revenue from contract based agreements predictability and visibility, through an increased share of long-term contract- 76% of revenue from recurring clients based solutions and services.

Attractive employer brand Attracting, developing and keeping the best Start of trainee program in Sweden talent on the market is crucial to maintain client satisfaction. Hence, we work continuously to improve our position as an attractive employer.

Nordic expansion We aim for continued Nordic expansion Acquisition of Caperio in Sweden 2017 through organic growth and selected, strategic acquisitions, taking advantage of the ongoing market consolidation.

Focus on profitability A key factor for Advania’s profitable growth is a 258 million SEK in EBITDA strong focus on efficiency and scalability, and an ability to expand sales in the premium segment.

Shared expertise We leverage the expertise in our different Appointment of Group experts in particular markets, for example by sharing best segments, linking all geographies. practice, thus offering clients the best possible service across the markets.

6 Corporate Presentation 2017 / Advania AB The fact that we are brand agnostic when it comes to hardware and software, enables us to tailor solutions fully to the client’s preferences. Markets and trends

The Nordic IT-market is growing, fuelled by the global digitalization trend and its impact on both society and business models. As business needs for strategic IT services increase, new opportunities are opening for IT providers such as Advania.

The growing digitalization trend is rapidly transforming Services and CGI are included in this group, as well as large the market for IT-related services and products. Mobility, Indian and Asian companies like Cognizant, TCS and HCL. machine learning, cloud solutions, Internet of things, You can also find a few large European players in this group, 3D-printing, nanotechnology and big data are all examples such as Atos and Capgemini. of new tools with the potential to reshape both society and businesses, as well as individual people’s life. The second group consists of regional and Nordic-oriented companies, usually offering tailored services to small and This development pushes companies and organizations to medium sized clients. The companies often create a busi- re-evaluate both their existing business models and their ness advantage through their local understanding, for ex- operations. One effect of this is that an increasing number ample in-depth expertize regarding regional market drivers of companies are now beginning to considering IT as a core or languages. Advania is one of the players in this group, business function and value driver, rather than a support alongside competitors such as Evry, Tieto and Atea. function. Consequently, these companies are also reshaping and renewing The Nordic finance sector, Thirdly, there are a variety of smaller lo- their IT-architecture. cal IT-companies, usually focusing on the retail sector and the ed- particular business segments or solu- However, the quick development of ucation sector are all trans- tions for specific types of clients. Like new digital tools and the growing sig- forming digitally, adding to the second group, these companies nificance of IT as a business critical also have the advantage of deep local factor, also leads to a rising demand the demand for qualified market knowledge and being able to for support and advice regarding IT. IT services. deliver services in the local languages. For providers of IT-related services and products, this development opens new The Nordic IT market is fuelled by the opportunities as clients look for proac- global digitalisation trends in general, tive, expert partners that can enable but also by a couple of sector specif- innovation and competitive advantag- ic trends. For example, the Nordic fi- es, rather than reactive providers of IT nance sector, the retail sector and the support functions. education sector are all transforming digitally, adding to the demand for qualified IT services. Moreover, the Nordic public sectors are digitizing quickly, adding new IT initiatives for efficiency gains and cost sav- The Nordic market in brief ings. As the public sectors are still lagging in transforma- tional speed compared to the private sector, this is an area The Nordic market is relatively fragmented, particularly where there will be continued demand going forward. For Sweden and Denmark, and companies providing IT-services example, only 14 percent of the Swedish government bodies can be divided into three groups: Large and global IT- are outsourcing their IT services. companies, regional IT-companies and local IT-companies. In addition, professional services such as engineering, law, The first group focuses mainly on clients such as larger cor- architecture and medical services have an increased need porations, major municipalities and public departments. for IT solutions that can handle increasingly high demands North American companies such as Accenture, IBM, Global for digital security and compliance.

8 Corporate Presentation 2017 / Advania AB 322.4 328.8 315.1 306.9 298.1 250 288.6 67.4 280.0 69.3 70.5 70.9 70.5 71.0 250 69.9 67.0 65.3 63.4 200 61.4 57.0 59.2 55.0

150

100 155.1 161.1 167.9 174.6 181.2 187.8 194.4

0 2014 2015 2016E 2017E 2018E 2019E 2020E

IT services Soware products Hardware

Total IT market, Sweden, Norway and Denmark, SEK billion*

Six trends that fuel the market

1. A growing need of value-adding, innovative services 4. Higher penetration of cloud solutions IT is increasingly becoming a core business function, push- The trend towards using cloud solutions for business pur- ing the IT sector towards a new kind of industrialization. poses maintains strong, and is expected to keep growing. Today, digital innovation has the largest potential to gener- Initially, the trend mainly attracted small-scale businesses ate return of investment and disrupt businesses, according looking for flexible and affordable solutions. However, larg- to the Radar report “Industrialization of IT, 2017”. This opens er corporations and organizations are becoming increas- opportunities for IT-providers to develop and sell new val- ingly comfortable with cloud-based infrastructure from a ue-add services. security perspective, which is expected to drive demand going forward. 2. Continued digitalization When new digital processes are created and old analogue 5. Increased focus on security issues processes are digitized, this also continuously creates op- Cyber crime and other digital security issues are on the portunities for IT companies. Clients will, in the foreseeable rise. Simultaneously, the digital and connected services are future, need help in adapting to for example mobility, social becoming business critical. This increases the demand for platforms, big data and cloud solutions adapted to their spe- solid and secure IT solutions, opening opportunities for val- cific needs. ue-add IT services.

3. Growth of contract based services 6. Outsourcing of IT services More focus on the services, less on the products. That’s a Digital transformation is knowledge intense, and it can be major trend that creates a stronger demand for contract difficult and costly for businesses to develop the necessary based business relations, rather than stand-alone transac- IT skills internally. This makes outsourcing of IT services an tions or billing by the hour. Client’s wants IT partners that interesting option going forward, as it can both provide up- can become integrated in their operations, taking care of to-date expertize and lower costs. the whole IT process. Such longer relations fit well into a contract based solution.

* PAC (SITSI), Market Analysis, Market Figures, Software & IT Services, Sweden, Norway, Denmark, 2016.

Corporate Presentation 2017 / Advania AB 9 Our business model

Making life easier for our clients. That’s ultimately what Advania aim to do. The critical success factors are long-term relationships with clients, close collaboration and mutual trust.

Advania offers a full range of clever and strategic IT solutions, focusing on consulting, outsourcing and sales of hard-

ware and software. Since we are agnostic when it comes to Product Leadership suppliers within software and hardware, we can adapt to any brand preference the client might have. About 60 percent of our clients come from the private sector, and 40 percent from the public sector. Customer Intimacy Our sales model is flexible and adapted to our client’s different sizes and local needs. Aside from direct sales, we leverage from our vast network in the sector, and create indirect sales opportunities through hosting events and seminars promoting thought leadership in the sector.

Operational Excellence How we create value

We look to the lifetime value of the clients and partner for To make this client-oriented, value-adding model work, we the long-term. By getting to know the clients and thoroughly have to put great trust in our employees. They are the peo- understand their challenges over time, we can help them ple building relations with the clients, and they will be best create significant value. This leads to trust and loyalty, and suited to know what’s best over time. We expect them to thus recurring business opportunities that in turn create responsibly and efficiently make all necessary decisions to value for us too. help add value to the client’s business, thus creating value for Advania too. By collaborating closely with the clients, we can tailor everything in detail. The solutions carefully fit the client’s This customer intimacy oriented approach creates a mutual business environment and circumstances, and we strive for trust that helps us to become the client’s first choice for the exceptional service. long-term. As we also meet every industry standard regarding operational excellence and product leadership, the trust we create give us a competitive advantage over time.

Public sector 7% 2% 13% Technology (including tele & IT) 2% Professional services 28% 2% 38% Finance and insurance Retail Contract-based 4% Education (private sector) Billing per hour 4% Manufacturing Hardware sales 41% Transportation and storage Soware sales 5% 5% Electricity, gas and heating 23% Real estate 7% 10% 9% Travel and hospitality Other

Net revenue per sales segment, 20171,2 Net revenue per industry, 20171

1. Including Caperio from January 1, 2017. 2. Based on the company’s internal figures.

10 Corporate Presentation 2017 / Advania AB The Advania history

1939 2014 Entrepreneur Einar J Skúlason founds the Icelandic com- A group of Swedish and Finnish investors initiates togeth- pany EJS, that sells and repairs typewriters and cash regis- er with the Advania management a process to acquire ters. EJS will eventually through a number of mergers and Advania through Vianada AB. acquisitions become incorporated in Advania.

2015 2009 Advania integrates two more companies: Knowledge The four different companies Skýrr, Kögun, Landsteinar Factory Consulting AB, who specialises in IT infrastructure, Strengur and Eskill join forces under the Skýrr brand. The Tölvumiðlun ehf, specializing in HR-systems. The Vianada new company employs about 340 people and Gestur G acquisition of Advania is completed. Gestsson takes on the role as CEO.

2016 2010 The Norwegian operations are expanded to offer clients Skýrr increases its focus on premium solutions that create complete IT solutions. value for clients. EJS with its 160 employees is integrated in Skýrr. 2017 Advania acquires Caperio, a listed Swedish IT company 2011 with a large share of hardware sales and about 130 em- Data host Thor Data Center is integrated in Skýrr, along ployees, through a public-to-private bid. The acquisition is with three subsidiaries to Teymis: Kerfi AB in Sweden with the largest to date in terms of revenue and considered a 300 employees, Hands AS in Norway with 200 employees, strategic cornerstone for Advania to reach ists vision to be and HugurAx on Iceland with 100 employees. one of the leading IT companies in the Nordics.

2012 Skýrr changes name to Advania. The company now has approximately 1.000 employees across Iceland, Sweden and Norway.

Corporate Presentation 2017 / Advania AB 11 Four business areas

Managed services IT Infrastructure & Integration Advania offers a variety of managed services where clients Advania offers solutions for IT infrastructure integration pro- can offload specific IT operations. That means that Advania jects, consultancy and product support. Advania has data assumes responsibility for operating, administrating, mon- center solutions, IT platform projects, virtualization solu- itoring and managing of selected IT systems, services tions, solutions focused on identity and access, as well as and functions. In each case, Advania adjusts the service development, integration, and support of both software and level agreements to the customer needs. The business hardware. Highly experienced IT architects and consultants area include: make Advania the Nordic region’s most experienced provider of IT infrastructure and integration services. The business ◼◼ Communication Centers: Solutions for all kinds of cus- area include: tomer interaction, regardless of communication channel. ◼◼ Client Hardware: Sales of hardware and services relating ◼◼ Market place: A hybrid platform that simplifies IT infra- to hardware. structure, improves functionality and reduces costs. ◼◼ IT Infrastructure & Integration: Solutions for infrastruc- ◼◼ Core Managed Services: Solutions for IT-infrastructure, ture, integration, and products. integration projects, and operating and administrating complete IT environments. ◼◼ Hardware & IT Services: Infrastructure services regarding hardware, software, implementation and access to expertise.

Business solutions Professional Services Advania provides IT solutions to automate, streamline, Advania provides a broad array of consulting services, soft- measure, document and stimulate business and IT process- ware development, eBusiness services and infrastructure es. The key to success within process management is mak- solutions for private and public bodies, local and interna- ing three key components work together: The processes, tional customers. In the most demanding cases, Advania the organization and the software tools used. Advania has Professional Services delivers the results needed for suc- years of experience in supporting customers in improving cessful IT operations. The business area include: productivity and creating value with clever use of IT. The business area include: ◼◼ Knowledge Factory: Access to high-ranking, experienced experts within IT infrastructure, mobility and ◼◼ Process Management: Solutions for business- and productivity IT-processes ◼◼ Software Solutions: Software development and special- ◼◼ Business Solutions: Systems for handling for example ist consultations for example within the financial and web pages, e-commerce, business intelligence and HR retail sectors. processes.

◼◼ Dynamic 365: Services relating to the Microsoft platform in the cloud and locally.

12 Corporate Presentation 2017 / Advania AB Strategic partnerships

Advania is independent towards suppliers, but maintain strategic partnerships with the leading, global players, for example:

◾◾ Microsoft ◾◾ Dell ECM ◾◾ Oracle ◾◾ Hewlett Packard Enterprise (HPE) ◾◾ Genesys ◾◾ Google for Education ◾◾ Cisco ◾◾ SAP BusinessObjects

Corporate Presentation 2017 / Advania AB 13 Our business segments

Advania’s activities are organized in business segments Sweden, Iceland, Norway and New Markets. All segments are allowed the necessary local strategic flexibility. They share certain central support functions and are able to exchange particular expertize across borders.

Sweden

Advania Sweden offers a full range of IT-services, software handling demanding workflows from both an administrative and hardware. The ambition is to be the most flexible and and a compliance perspective. value-adding IT partner on the market. Advania Sweden is a mid-sized player on the market, with clients of all sizes from The expanding education sector is another Swedish strong- both the public and the private sector. hold, where Advania provides more than 90 000 students annually with digital units both in public and private schools, In 2017, Advania and Swedish company Caperio joined forc- and also educate teachers in digital tools, thus helping soci- es. This resulted in a new, strong offering to clients, and a ety to more efficient education. capacity to handle handling everything from maintaining and developing IT-services locally as well as internationally. Advania Sweden has a high ratio of recurring clients and a strong brand. When Radar, the largest client survey on the Among the Swedish Advania clients are Coor Service IT-market in Sweden, performed their survey during 2017, Management, Ramirent and Örebro municipality, to name Advania won the first place in the category “Most user ori- a few. The company has particularly strong positions in cer- ented IT” and second place in “Most operational oriented IT”. tain sectors, for example law, where Advania as solutions for

MSEK 1 585 1 500 RECURRING CLIENTS*

1 000

VÄSTERÅS 741 STOCKHOLM NUMBER OF ÖREBRO EMPLOYEES NORRKÖPING 500 LINKÖPING 416

GÖTEBORG 137,5 54 88 . 0 AVERAGE HALMSTAD 2015 2016 2017 EMPLOYEE KARLSHAMN SATISFACTION** KRISTIANSTAD Net Revenue EBITDA MALMÖ

* Share of 100 largest clients still active after three years. ** Average (of 5,0) in an employer survey performed by an independent company.

14 Corporate Presentation 2017 / Advania AB Iceland

Advania Iceland is according to a Gallup survey 2017 the com companies. The ten country’s most well-known IT company for the sixth consec- largest clients represent 31 utive year. Previously, Advania Iceland was mostly known for percent of Advania Iceland operating and servicing the most critical IT-systems for the revenue in 2017. Icelandic government, but has during the last years developed into a complete IT provider. Now, the company is a Every year, Advania Iceland performs large player also within managed services as well as enter- a client survey, asking how satisfied they prise systems. are with the work Advania do. In 2017, the share of clients responding “satisfied” and “very Among the clients are many prominent governmental bod- satisfied” increased to 77 percent. That represents ies, such as the tax authorities and the ministry of Finance, a strong trend since 2014, when the equivalent was but there are also clients like banks and insurance and tele- 54 percent.

MSEK SAUĐÁRKRÓKUR 1 500 AKUREYRI RECURRING CLIENTS* HÚSAVÍK 1 133

1 000 912 NUMBER OF REYKJAVÍK EMPLOYEES 500 434

85 123 GRINDAVÍK 38 0 CLIENT VESTMANNAEYJAR 2015 2016 2017 SATISFACTION**

Net Revenue EBITDA

* Share of 100 largest clients still active after three years. ** Share of clients responding “satisfied” or “very satisfied” in Advania’s survey.

Corporate Presentation 2017 / Advania AB 15 Norway

Advania Norway focuses historically to a higher extent on plan is to double the number of employees within the next large clients compared to the Swedish and Icelandic busi- 2-3 years. ness segments. However, during 2016 Advania Norway adjusted its strategy from mainly focusing on Dynamics AX Most Norwegian clients come from the private sector, and Microsoft 365, to offer a full range of Microsoft solu- ranging from retail to professional services. XXL, Securitas, tions. Now, Advania Norway is the largest Microsoft Partner Europris and Skibsrederförening, to name a few. The ten within Business Systems, and also offer services based on largest clients represent 38 percent of total revenue. Sharepoint, Exchange, SQL and PowerShell. The growth

MSEK

150 RECURRING 138 CLIENTS* TRONDHEIM 120

100 92 NUMBER OF EMPLOYEES 50

BERGEN

OSLO 2 3 4 0 EMPLOYER 2015 2016 2017 SATISFACTION** SANDEFJORD Net Revenue EBITDA ARENDAL

* Share of 100 largest clients still active after three years. ** Employer satisfaction survey performed 2017.

New markets

During 2016, Advania established an office for New markets, to prepare for future growth in the Nordics. The office has two employees and is located to Copenhagen,

supported by the Malmö office in Sweden. The activi- COPENHAGEN ties are focused on cross-border business opportunities within Communication Centers and Market place, which are also offered on the local Danish market.

16 Corporate Presentation 2017 / Advania AB Advania is independent towards suppliers, but maintain strategic partnerships with the leading, global players. A sustainable approach to IT

IT brings future business opportunities, but it also brings new sustainability opportunities. Advania aims to help clients become better at both.

As one of the largest Nordic IT players, we impact society Our ambition is to create a long-term sustainable Advania in several ways. On one hand, we affect the environment by taking responsibility for the risks and advantages of the through our consumption of materials and energy. We also opportunities that digitalisation brings. As guidelines in have an impact on the people working in the supply chain, this work, we have assumed the principles of the UN Global manufacturing products and offering services. Compact framework, where we will become members during 2018. We also adhere to the UN 17 global sustainable de- On the other hand, we have unique opportunities to con- velopment goals. We have policies to guide us and constant- tribute. The ongoing digital transformation is essential in ly work to develop ourselves from a sustainable perspective achieving a resource-efficient society. Advania’s model of and improve our performance, both regarding our services trust and long-term collaboration gives us the chance to and the products throughout their lifecycle. Every year, we help our clients to use the ongoing digitalisation to both measure progress on a group level. improve current operations and find new and sustainable business opportunities.

We have in close dialogue with our most important stakeholders identified three main focus areas for our sustainability efforts:

Sustainable Advania Sustainable offerings Sustainable supply chain We want to be a long-term profita- Our overall goal is to have the most To make sure we fulfil all the ten prin- ble company, because profitability satisfied customers in the IT indus- ciples in UN Global Compact, focus- will help us to contribute to socie- try. We always fulfil national legisla- ing on the risks in the supply chain ty by offering job opportunities and tions regarding personal integrity we co-operate with our business paying taxes. We also want to be an and information security, both in partners. To be able to take responsi- attractive employer, with healthy our own operations and in our ser- bility for the supply chain all the way employees, low staff turnover and vice to clients. down to where the production takes attractive career opportunities. We proactively help our clients place, we monitor the performance Moreover, we strive to be an equal to integrate IT in their sustainability to reduce the risks of violating hu- workplace without discrimination efforts and reduce their carbon foot- man rights, corruption and continu- and to be ethical and transparent. print through energy efficiency man- ously work to improve the environ- Everyone is trained in anti-corrup- agement and a life cycle perspective. ment and working conditions. tion and in the company guiding policies. Regarding the environment, we want to constantly improve and reduce carbon emissions. We focus particularly on energy consumption in our facilities and transportation.

18 Corporate Presentation 2017 / Advania AB Helena Nordin , Sustainability manager

“We need to take responsibility for the negative effects of IT before we can shift focus to the positive sustainability potential”

Giving IT equipment a second life, finding synergies between clients – and getting people to bike to work. Sustainability manager Helena Nordin explains how Advania Sweden keeps a sustainable mindset.

Let’s start with the “why”: Why is sustainability important This year, Advania Sweden reports on sustainability according to to Advania? GRI – why? – Let me first make clear that IT-equipment, like all other electronic – It is a way to be transparent towards society, not least clients. products, have a major impact on the environment and the socie- We want to be clear on how we work, for example, how we take ty during the life cycle and that we need to take responsibility for responsibility in the supply chain, asking that our partners respect reducing that footprint. Reducing the energy consumption or the international principles and conventions on human rights, child use of minerals and water while securing the working conditions labour etc. By reporting according to an international standard like during production, are just some examples of where a lot of efforts GRI, it will be easer for our stakeholders to see how we work and are made in the supply chain of IT production. follow our development. That said, we also have a firm belief that IT holds answers to how we can create a more sustainable society. I would say that IT How do you engage the employees in this work? and digitizing is sustainable in itself: If society is the body, IT is like – I think it is important to find personal engagement. One on-go- the bloodstream – it can be used to enable others to behave in a ing project here in Sweden is about getting people to commute to sustainable way. For example, you can use tools such as video con- work on bike, instead of using other transportation. This is good ferencing instead of travelling, and the travelling you actually need from both a health perspective and an environment perspective. to do can be planned more efficiently. Moreover, IT can help you to We offered everyone who didn’t already have a bike a chance to monitor for example energy consumption more carefully and open rent a really good one, and then sign up for two categories: Bike for new, sustainable ways of doing business in the digital economy. exercise, or bike for environment, measuring how much emissions you save. Every participant logs their activity through an app and Do clients see this the same way? can see immediate progress. So far, people are having really fun: – Definitely. We see a growing awareness of how IT is connected to They love to compete and compare results. But even more inter- sustainable business. On one side, particularly in the public sector, esting is that the project helps to keep sustainability top-of-mind, companies are forced to focus more on sustainability because of which is very good from a business perspective. increased scrutiny and demands from society. On the other side, we can also see a genuine ambition to improve. Our clients are not Where do you hope to see Advania in five years? just forced to change – they want to change, because it is good – By then, I hope that sustainability has become a natural part of for business. our business. We have so much more we can do to help our clients! Sustainability is becoming increasingly complex, with constantly How can you help them change? new aspects to be handled. For example, we are now looking at – By finding the most strategic use of IT. For example, clients can the GDPR regulation, which clearly has sustainability connec- save both money and natural resources by outsourcing their IT tions that needs to be considered. The clients are more and more operations to us. Advania’s data centers in Iceland are powered becoming aware that these are strategic issues, where we can with only renewable energy and can also be cooled just by opening guide them. the doors. Since we do this for several clients, we can also offer synergies through for example shared servicedesk, and so forth. Moreover, we encourage clients to give old IT equipment a second life instead of just recycling them. We help them to secure that all data is erased, and then one of our business partners can sell the re-conditioned equipment second hand.

Corporate Presentation 2017 / Advania AB 19 People and culture

IT is a people’s business. That’s why attracting, retaining and developing the best and most talented people in the business is a core part of our strategy. We keep a strong focus on the individual’s personal wishes and needs – our experi- Making IT more human is an important mindset for Advania. anyone is employed, we ence is that if you help We believe that IT is a people’s business, and that true busi- thoroughly evaluate and ness value is created when we partner with our clients and test every applicant to people to grow, they build a trusting atmosphere for the long-term. In this work, make sure that they are a tend to become more our Advania culture is key. It defines how we work with cli- fit both regarding compe- ents, and it is also an important part in our employer brand. tence and culture. loyal and stay for the long-term. We use a structured approach to attract, retain and develop To retain and develop the best people in the business. For talent acquisition, we our people, we strive to use primarily in-house resources with external partners as create interesting and re- complements. We value our current employees personal warding workplaces. We networks high, as we know from experience that it is a great keep a strong focus on source to find candidates. the individual’s personal wishes and needs – our experience is that if you help peo- Since we offer complex services, we are usually looking to ple to grow, they tend to become more loyal and stay for the employ highly educated and experienced co-workers, but long-term. There are plenty of great development opportu- we also use trainee programs to find younger talent. Before nities within the Advania sphere, such as working in another

Employees per geography and business segment, 2017*

1.118

1.000 95 101

800 302

603 600 67 50 435 292 400 151 56 51 127 136 200 79 286 208 163 13 2 15 29 49 1 0 Iceland Sweden Norway Denmark Total

Business Solutions Managed Services Professional Services IT Infrastructure & Integration Support Units/Other

* Internal figures from Advania.

20 Corporate Presentation 2017 / Advania AB Advania country. For example, every trainee works in ferent kinds of tools to make this Iceland for a period of time, to get an understanding of the happen. One example is that we par- company roots. ticularly encourage female applicants to our trainee programs, something we have When it comes to education, we have our own Advania seen is a good way to get more women into Academy, which we use to both tailor specific courses to our business. Securing equal wages between suit different competence needs, and as platform for “best women and men is another example. We constant- practice”-sharing across the organization. It is also one of the ly follow up on development by measuring how many tools we use to develop the leaders within the organization. women Advania employ as a whole, how many of them that work in operations, and how many of them that has Building a diverse company, where people have different leading management positions. backgrounds and different skills, is important to us. We cur- rently have an extra focus on improving the gender balance. On a bi-annual basis, we perform surveys among our em- During 2017, Advania had 245 female employees, compared ployees. We measure, among other things, commitment to 845 male employees. and engagement. The latest survey showed a high degree regarding both commitment and engagement – 4.26 and Our ambition is now to be the company with the fastest 4.24 respectively, out of 5. increase of female employees in the business. We use dif-

Corporate Presentation 2017 / Advania AB 21 Management

Gestur G. Gestsson Ola Maalsnes Mikael Noaksson Group CEO Group CFO Group COO

He was previously CMO and later CTO He has previously held similar posi- He was CEO of Advania Sweden, at Vodafone Iceland, CMO at Betware tions at several companies, including Director of Advania Sourcing and BU and CEO at Margmiðlun. Gestur has an Caperio Holding, AB, Telecomputing Manager of Advania Consulting extensive board experience, especially Sweden AB and Samport Payment in IT and telecommunication. Services AB.

Lilja Brynja Skúladóttir Tomas Wanselius Ægir Már Þórisson Group Controller CEO Advania Sweden CEO Advania Iceland

Previously she worked at KPMG and He was CEO and previously Sales & Previously he was Director of human re- Icelandic Group Ltd, which is listed on Marketing Director of Caperio and sources at the company and Managing the Icelandic stock exchange. CEO of OBH Nordica AB and CEO Director of consulting at Capacent. of Portal AB

22 Corporate Presentation 2017 / Advania AB Espen Hartz Göran Gustavsson CEO Advania Norway MD of Operations

He joined Advania as Director of Simultaneously he is head of Advania Sales and Marketing from Bluegarden Cloud Portal Services. He has held sev- AS, where held the same position. eral management positions with the Previously he was salesa manag- company. e.g as a Business Manager & er at Bluegarden and Key account Sales & Marketing Director. Manager at Atea.

Robert Schwartz Eva Sóley Guðbjörnsdóttir CFO Advania Sweden & Advania Norway CFO Advania Iceland

Previously he was CFO of Advania Previously she was a VP of Corperate Group. Prior responsibilities at Advania Finance at Össur, listed on NASDAQ include Business Controller and Copenhagen, the vice chairman of the Accounting Manager. board of Landsbankinn and the CFO of Kaupthing.

Corporate Presentation 2017 / Advania AB 23 Administration report

The Board of Directors and CEO of Advania AB (publ), company registration number 556963-8991, with its registered office in Stockholm, hereby submit the annual report and consolidated financial statements for the financial year 01/01/2017 to 31/12/2017.

Operations excluded from the financial accounts of the Advania Group as of 1 September 2017. The proceeds from the Advania is a customer-oriented IT company that has ex- sale were SEK 20.8 million. Data Centers was formed perienced strong growth in recent years through a clear in January 2016 when the company’s activities, which customer focus and through acquisitions, two fundamental were carried out by special operational services at a parts of Advania’s DNA. The company is one of the market data centre in Iceland for an individual customer, were leaders in Iceland, with a customer base that covers most of separated from Advania ehf. as they were not considered Iceland’s businesses and government authorities. Advania to be part of Advania’s core activity. In 2016, net revenue is a clear challenger on the Swedish market and is one of at Data Centers was the equivalent of SEK 90.2 million its highest-ranked integrators and outsourcing suppliers. In and operating loss was the equivalent of SEK -1.5 million. Norway, Advania is Microsoft’s largest partner in Business During the period 1 January 2017–31 August 2017, net rev- Systems and in 2016, Advania in Denmark was established in enue was the equivalent of SEK 123.2 million and oper- order to develop the business and provide customers with ating loss was the equivalent of SEK -3.1 million. Advania turnkey solutions throughout the Nordic region. buys certain operational services from Data Centers for around SEK 6 million per year on commercial terms. Advania offers a wide range of IT services, platforms, cloud There is no exclusivity in relation to the services which solutions and support for both large and small private com- Data Centers provides to Advania. panies, multinationals, government authorities and public-sector businesses, built around creating value for cus- ◼◼ On 30 September 2017, Advania also transferred the tomers. In order to create customer value, and ultimately companies Advania MobilePay ehf., MobilePay AB and satisfied customers, the Company’s strategy and customer MobilePay AS (together “MobilePay”) to Vianada AB for offering focuses on identifying opportunities for the smart a consideration of SEK 5.2 million. MobilePay is exclud- and strategic use of IT based on the individual needs of ed from the financial accounts of the Advania Group as each customer. of 1 September 2017. MobilePay is a joint venture with an Icelandic mobile phone operator and its activities were never considered part of Advania’s core business. In 2016, net revenue at MobilePay was the equivalent of Significant events during the year SEK 0.4 million and operating loss was the equivalent of SEK -2.5 million. During the period 1 January 2017–31 ◼◼ On 2 June 2017, Caperio Holding AB (publ) (and subsid- August 2017, net revenue was the equivalent of SEK 3.3 iaries) (“Caperio”), an IT company with 126 employees, million and operating loss was the equivalent of SEK -4.6 was acquired by Advania AB for a cash consideration of million. MobilePay buys certain services from Advania to SEK 158.4 million. Caperio is consolidated in the Advania a limited extent without any exclusivity. Group as of 2 June 2017. The acquisition of Caperio was financed through own funds and through new borrowing ◼◼ Advania appointed Katrin Olga Jóhannesdóttir and Vesa of SEK 80 million from Landsbankinn and SEK 60 million Suurmunne as new Board members at an extraordinary from Nordic Mezzanine fund III Ltd Partnership. During general meeting in October. the period 2 June–31 December 2017, net revenue at Caperio was SEK 766.7 million and operating profit be- ◼◼ In November 2017, Advania carried out extensive refi- fore depreciation and amortisation (EBITDA) was SEK nancing in order to optimise Advania’s capital structure 41.2 million. and borrowing terms. The new loan agreements were entered into on 17 November 2017 and the previous ◼◼ On 30 September 2017, Advania transferred the compa- loans were repaid on 22 November 2017. According to ny Advania Data Centers ehf and subsidiary ADC ehf. the Company’s estimates, this refinancing will provide an (together “Data Centers”) to Vianada AB. Data Centersis annual saving in interest expenses of SEK 15–16 million.

24 Annual Report 2017 / Advania AB Development of business, Profit/loss position and performance The Company’s total expenses in 2017 were SEK 2,723.3 million, compared with SEK 1,707.5 million in 2016. Goods for SEK million 2017 2016 2015 resale was the largest cost item, amounting to SEK 1,297.6 Net revenue 2,803.5 1,747.0 930.8 million in 2017, which is an increase of SEK 669.5 million Operating profit, EBITDA* 258.0 162.3 118.6 compared with 2016. This increase is primarily the result of the acquisition of Caperio, the primary income of which Operating profit, EBIT 93.7 55.5 60.8 originates from product sales, which generates costs in Earnings before tax, EBT 46.3 80.6 37.5 terms of goods for resale. Staff costs were SEK 1,015.5 million Total assets 2,028.7 1,367.1 1,194.7 in 2017, an increase of SEK 192.3 million compared with 2016. The increase in staff costs is the result of a rise in the num- Equity ratio* 10.9% 16.7% 5.0% ber of consultants employed. The Company was affected Return on equity* 10.2% 42.5% n.a. by non-recurring items totalling SEK 33.5 million during the Return on capital employed* 11.2% 15.4% n.a. period. These costs are particularly associated with costs relating to processes linked to legal restructuring in the Average no. of employees 1,090 940 554 amount of SEK 19.9 million and refinancing in the amount *For definitions of alternative key performance of SEK 6.3 million. These items also include restructuring indicators, see page 29. costs in relation to acquisitions and integrations of SEK 7.3 (7.9) million.

Operating profit before depreciation and amortisation Revenue (EBITDA) rose to SEK 258.0 (162.3) million, an increase of 103% compared with the previous year. In Sweden, operating Advania’s net revenue for 2017 was SEK 2,803.5 million, an in- profit (EBITDA) increased to SEK 137.5 (87.5) million. Iceland crease of SEK 1,056.5 million compared with 2016, when net reported an operating profit (EBITDA) of SEK 123.0 (84.9) mil- revenue was SEK 1,747.0 million. The increase in net revenue lion and Norway reported an operating profit (EBITDA) of is primarily the result of the acquisition of Caperio, which SEK 4.3 (3.2) million. There was an operating loss (EBITDA) took place in June 2017, as well as increased contract reve- for new markets of SEK -1.8(-1.4) million. nue, greater chargeability and higher average prices within service activities in terms of hours on a time and materi- Operating profit (EBIT) for 2017 was SEK 93.7 million, an in- als basis. In the Sweden operating segment, net revenue crease of SEK 38.2 million compared with 2016, when profit increased during 2017 by SEK 845.0 million, or 114%, from was SEK 55.5 million. SEK 740.7 million in 2016 to SEK 1,585.7 million in 2017. The increase in net revenue is primarily the result of the acqui- Net financial items for 2017 amounted to SEK -47.4 million, sition of Caperio, which took place in June 2017, as well compared with SEK 25.1 million in 2016. Financial expenses as increased contract revenue, greater chargeability and were SEK 61.8 million in 2017, compared with SEK 34.3 million higher average prices within service activities in terms of in 2016. Financial income was SEK 14.4 million in 2017, com- hours on a time and materials basis. In the Iceland operating pared with SEK 59.4 million in 2016. The difference between segment, net revenue increased during 2017 by SEK 220.5 the two periods is primarily the result of exchange rate ef- million, or 24%, from SEK 912.3 million in 2016 to SEK 1,132.8 fects, which amounted to SEK 8.6 million in 2017, compared million in 2017. The increase in revenue is the result of great- with SEK 53.0 million in 2016. The large exchange rate effects er chargeability and higher average prices within service ac- in 2016 are mainly the result of movements in the Icelandic tivities in terms of hours on a time and materials basis. In krona. Profit after tax for 2017 was SEK 23.0 million, a fall of the Norway operating segment, net revenue fell during 2017 SEK 38.0 million compared with 2016, when profit was SEK by SEK 17.3 million, or 13%, from SEK 137.5 million in 2016 to 61.0 million. The drop in profit is primarily attributable to low- SEK 120.2 million in 2017. The drop in revenue is the result of er financial income and higher financial expenses in 2017 a fall in the number of consultants employed. Revenue on compared with 2016. new markets increased to SEK 0.2 (0.0) million.

Annual Report 2017 / Advania AB 25 Investments Financial position

Advania’s investments mainly relate to the acquisition Total assets at 31 December 2017 amounted to SEK 2,028.7 of subsidiaries. Caperio was acquired in June 2017, while million, compared with SEK 1,367.1 million at 31 December MobilePay (formerly Pyngjan) was acquired during 2016. The 2016. Total non-current assets at 31 December 2017 amount- Company’s investments in intangible non-current assets re- ed to SEK 1,225.6 million, compared with SEK 934.1 million late mainly to computer software, licences, trademarks and at 31 December 2016. Total current assets increased by SEK customer relationships. Investments in property, plant and 370.2 million, from SEK 433.0 million at 31 December 2016 to equipment relate mainly to servers, computers and other SEK 803.2 million at 31 December 2017. The increase in total IT equipment, as well as other equipment. These invest- assets is primarily attributable to the acquisition of Caperio, ments are made primarily in conjunction with new custom- which was completed on 2 June 2017. Equity reduced by SEK er contracts or new assignments for existing customers. 5.8 million, from SEK 227.9 million at 31 December 2016 to The investments have been financed through own funds SEK 222.1 million at 31 December 2017. Non-current liabil- and cash flow from operating activities. The acquisition of ities amounted to SEK 923.1 million at 31 December 2017, Caperio was also financed with the help of new borrowing of compared with SEK 513.5 million at 31 December 2016. This SEK 80 million from Landsbankinn and SEK 60 million from increase is mainly the result of increased liabilities to credit Nordic Mezzanine fund III Ltd Partnership. The reported in- institutions. Current liabilities amounted to SEK 883.5 mil- vestments in property, plant and equipment and intangible lion at 31 December 2017, compared with SEK 513.5 million assets fell during the year, which is largely because Advania at 31 December 2016. This increase is mainly the result of has gradually moved to using finance leases as a means of higher trade payables. financing the hardware and software that in some cases forms part of the Company’s offering and supply to the customer. Ongoing investments, calculated as net investments in intangible assets and property, plant and equipment, as Employees well as changes in and repayment of leasing liabilities, have increased, largely driven by the Company’s investments The average number of employees was 1,090 (940), of which relating to new customers. These investments, which also 245 (220) were female. More information about initiatives re- include investments in the now-divested operations at Data lating to gender equality, work environment and continuing Centers and MobilePay, totalled SEK 159.3 (99.4) million. professional development can be found under Risk manage- Investments in remaining business amounted to SEK 122.7 ment, Operational risks and in Note 10. (81.1) million.

Corporate governance Financing and liquidity Corporate governance refers to the rules and structure es- Cash flow from operating activities before changes to work- tablished in order to direct and manage operations at a limit- ing capital totalled SEK 199.4 million in 2017. In 2016, cash ed company in an effective and controlled manner. Advania’s flow from operating activities before changes to working corporate governance is based on Swedish law, principal- capital totalled SEK 122.8 million. Cash flow from investing ly the Swedish Companies Act (2005:551), its Articles of activities in 2017 affected cash flow by SEK -381.0 million. Association, internal rules, regulations and policies. The corresponding figure for 2016 was SEK -42.1 million. The acquisition of subsidiaries represented the largest item in 2017 and totalled SEK -201.5 million, compared with SEK -14.9 million in 2016. During the year, a non-controlling interest in the Icelandic subsidiary was acquired, as well as 100% of the shares in Caperio. Cash flow from financing activities affected cash flow by SEK 357.1 million in 2017, as a result of new borrowing. The corresponding figure for 2016 was SEK -56.9 million. Overall, cash and cash equivalents increased by SEK 180.2 million in 2017, compared with an increase of SEK 5.5 million in 2016. Cash and cash equivalents at the end of the year were SEK 216.5 (36.3) million. An overdraft facility was utilised in the amount of 95.9 (44.4) as at 31 December 2017. The overdraft limit was 247.0 (117.8).

26 Annual Report 2017 / Advania AB Risks & risk management

Advania’s operations and market are subject to a number of risks, including external factors, which are events the company is unable to influence, such as economic trends, regulations, laws and political decisions. Risk management is based on Advania’s corporate culture, values, internal control, financial reporting and financial control.

Financial risks Risk management Advania is exposed to financing risk, liquidity risk, credit risk, in- Risk management for financial instruments can be found in Note 4. terest rate risk and currency risk. Advania is primarily exposed to changes in the exchange rates of ISK, NOK, DKK and USD in re- The Board of Directors adopted a risk policy and a financial policy, lation to SEK, and to currency risks arising on the translation of which were implemented in 2017. income statement and balance sheet items in foreign currency to SEK, which is Advania’s presentation currency. The reporting of risks in financial instruments can be found in Note 4.

Operational risksr Risk management Advania offers a wide range of IT services, platforms, cloud solu- Advania’s group-wide sustainability policy describes the focus ar- tions and support for both large and small private companies, mul- eas the company works with in all countries in order to take re- tinationals, government authorities and public-sector businesses, sponsibility for the impact of the company’s activities on people built around creating value for customers. Advania is subject to and the environment, how Advania must influence the company’s IT security risks, such as intrusion into Advania’s network securi- suppliers and business partners to take responsibility and how ty, where unauthorised persons obtain access to information for Advania proactively helps customers to become more sustain- which Advania is responsible. Furthermore, there is the risk that able through the company’s services. The sustainability policy is Advania’s products, software or solutions contain undetected based on the United Nations’ Global Compact initiative, which errors or deficiencies that reduce demand for Advania’s services. contains ten principles on human rights, the environment, labour If any IT-related risk occurs, it is possible that Advania’s relation- standards and corruption. The policy also describes a selection of ships with customers and stakeholders may be affected, the risk of the UN’s global development goals, Agenda 2030, where Advania Advania’s reputation and brand being damaged. In our business we has the greatest opportunity to influence social development in have sustainability risks in relation to the environment, social con- a positive direction. Ultimate responsibility for the sustainability ditions, employees, human rights and corruption. Advania’s own policy lies with the CEO and the results of the policy are followed activities have limited impact on the environment, but through up by the Board of Directors. The policy is implemented locally in the range we offer, we have a major opportunity to have a positive each country, where decisions are made on local goals, policies, influence on our customers’ environmental performance by digit- procedures and instructions based on standardised principles for ising their business. Advania is not engaged in any operations that management systems. A clear division of responsibility of areas require a licence under the Swedish Environmental Code. and risks is also determined locally in each country. The company complies with all relevant laws and ordinances applicable on the If we have shortcomings in our social conditions, this can affect local markets on which Advania operates, including regulations on our ability to recruit and retain employees. Demand for qualified systematic work environment management and national laws pro- employees is rising, which increases the pressure on us to be an hibiting discrimination on all grounds. The group-wide anti-corrup- attractive employer. Healthy and motivated staff with the right tion policy and sanctions policy describe the overall governance skills are vital if we are to achieve our goals. There is always a risk and the division of responsibility centrally and locally for system- that Advania may not succeed in recruiting and retaining senior atic work to fight corruption, for example. executives and other key personnel with the specialist expertise on which the company depends. The risk of human rights infringe- Policy documents that were revised and adopted by the Board of ments is greatest in Advania’s supply chain, often far removed from Directors in 2017: Risk policy, sustainability policy, sanctions policy the market where Advania operates and where Advania can have and anti-corruption policy. indirect influence by placing requirements on the company’s business partners to comply with basic principles. The Company could be held responsible for an employee’s failure to apply and comply with regulations and internal policy documents relating to corruption. Our business involves a risk of disputes, legal risks. Disputes can arise in contracts/delivery of products or services if we do not agree with the customer on the terms and conditions that apply. Disputes can also arise, for example, in agreements with business partners or on the acquisition of companies.

Strategic risks Risk management Strategic risks may affect Advania’s long-term financial and opera- Advania’s strategy relies on the responsibility and trust that is del- tional goals. Strategic risks include, for example, the risk of domes- egated to employees who work closest with the customer, in order tic and foreign competitors being able to sell services comparable to enable them to make decisions in an effective way that provide with Advania’s services and offering more favourable terms or com- the greatest benefit to the customer. This strategy involves con- peting on price in a way that Advania cannot do in the long term. tinuous work in an ongoing dialogue with the customer in order There are risks related to Advania being unable to improve and de- to ensure competitiveness in terms of range, pricing and techno- velop technology platforms in time to keep up with developments logical development. in technology, trends within the IT area and the technical needs of end users. There is a risk of Advania not being able to manage Advania has an extensive internal process for evaluating potential its growth effectively or of not achieving the anticipated growth acquisitions and avoids participating in formal auctions. Instead, on which Advania’s strategy is based. There is a risk of Advania Advania prefers to take time to identify the best candidates for not successfully identifying, acquiring or integrating companies acquisition and then initiate discussions at management level. In or technologies in line with its strategy. those cases where there appears to be a mutual understanding, there is the opportunity to take the process further.

Annual Report 2017 / Advania AB 27 Sustainability report Transactions with related parties

Advania is a comprehensive IT company with a focus on The reporting of transactions with related parties can be consultancy, outsourcing and the sale of hardware and found in Note 34. Advania did not carry out any transactions software. This means that the Company’s strategy is not to with related parties after 31 December 2017. All transactions develop its own products or to make itself dependent on with related parties took place on market terms. subcontractors. Advania’s business concept and strategy are to create value for customers through the smart and strategic use of IT. Advania creates customer value through well-established, long-term and sustainable relationships. Research and development A prerequisite for sustainable enterprise is profitable growth. Under the heading Risks and risk management in Advania does not carry out any research and development, the Operational risks section, Advania reports the Group’s but maintains a continuous dialogue with customers in or- sustainability risks, risk management and policy documents der to obtain their views on the development they would for sustainability, the environment, social conditions, em- like to see in terms of products, services and technology ployees, human rights and corruption. The Advania Group platforms and Advania’s range. reports quantitative performance indicators for employees in Note 10. In the areas of sustainability, the environment, social conditions, employees, human rights and corruption, the qualitative performance indicators form part of policy Trends documents, codes and management systems. In 2017, the Board of Directors decided to establish policy documents, IT service companies offer value-adding information tech- codes and management systems which the management nology solutions that aim to enhance the competitiveness was instructed to implement. and efficiency of customers, within both the public and the private sectors. Modern society’s growing trend for digitisation has resulted in several technological breakthroughs, which have increased demands on various IT services and Environment applications. Mobility, machine learning, cloud solutions, the “Internet of things” and analysis of large data volumes Advania is not engaged in any operations that require a li- are ground-breaking areas that are prompting companies, cence under the Swedish Environmental Code. organisations, municipalities and public authorities to re-examine how their IT architecture can contribute to growth, increased efficiency and competitiveness. IT suppliers are well positioned to benefit from the underlying digitisation Share and ownership details trend in society, a trend that involves an increasing degree of digital complexity and shifting expectations among Each share provides entitlement to one vote and all shares customers. have equal entitlement to dividends. At 31 December 2017, 90.42% of the company’s shares were owned by Vianada AB (co. reg. no. 556963-9031). Advania’s five largest direct shareholders (including indirect ownership) as at 31 December Outlook 2017 were Nordic IT Holding Limited with 33.97%, Advkap AB with 30.48%, Bull Hill Capital AB with 8.27%, Lombard Several technological trends are expected to have a pos- International Assurance S.A. with 7.84% and Vivain Limited itive impact on the demand for IT services, as customers with 3.40%. The remaining shares are controlled by man- within various sectors invest in improving their IT infra- agement, the Board, employees and private investors. The structure. These trends include: the growing importance of number of registered shares in Advania at 31 December 2017 value-creating innovative IT services, increased digitisation, was 27,649,407 and the weighted average number of shares the growth of contract-based services, higher penetration was 25,072,650. The weighted average number of shares, be- of cloud solutions and continued outsourcing of IT services. fore dilution, has been adjusted retroactively for a 50,000:1 share split that took place after the balance sheet date; see Note 15 Earnings per share. Proposed appropriation of profits

The following profits are at the disposal of the AGM: Parent company Retained earnings SEK 145,713,816 Profit/loss for the year SEK -10,490,433 The Group consists of the parent company Advania AB and Total SEK 135,223,383 the companies in which the parent company has a controlling interest; see Note 16. The parent company’s revenue The Board proposes that this profit was SEK 4.6 (0.0) million. The operating loss (EBIT) was SEK be appropriated as follows: -31.0 (-14.2) million. Earnings after tax were SEK -10.5 (-6.9) Dividend to shareholders SEK 0 per share: SEK 0 million. Total assets were SEK 1,059.3 (229.6) million and Carried forward: SEK 135,223,383 the equity ratio was 12.8% (61.5%). Equity at the end of 2017 Total SEK 135,223,383 amounted to SEK 135.8 (141.3) million.

28 Annual Report 2017 / Advania AB Definitions of alternative key performance indicators

Alternative key performance indicators Definition Explanation/use

Operating profit, EBITDA Operating profit before depreciation, amortisa- Indicates the profit generated by operations be- tion and impairment of property, plant and equip- fore financial items, tax, depreciation, amortisa- ment and intangible non-current assets. tion and impairment of property, plant and equipment and intangible non-current assets.

Equity ratio (%) Equity divided by total assets on the balance Indicates the extent to which assets are financed sheet date. by equity and is used as an indication of the financial stability of the Company

Return on equity (%) Profit after tax attributable to the shareholders of Indicates profitability by showing how much profit the parent company for the current period (an- a company generates in relation to the capital in- nualised for interim periods) divided by average vested in the Company by shareholders. equity excluding non-controlling interests during the current period (based on opening and closing balance).

Return on capital Operating profit plus financial income for the cur- Indicates the effectiveness of the use of the cap- employed (%) rent period (annualised for interim periods) divid- ital in the Company that requires a return. The re- ed by average capital employed during the current turn should be higher than the Company’s costs period (based on opening and closing balance). for capital.

Annual Report 2017 / Advania AB 29 ”There’s a piece of Advania in our clients’ operations.” Financial information

Consolidated income statement

(SEK million) Note 2017 2016 2015 Net revenue 5.6 2,803.5 1,747.0 930.8 Other operating income 7 13.6 16.1 41.5 2,817.1 1,763.1 972.4 Operating expenses Goods for resale -1,297.6 -628.1 -341.4 Other external expenses 8.9 -235.5 -142.6 -82.2 Staff costs 10 -1,015.5 -823.3 -415.5 Depreciation, amortisation and impairment of property, plant 17.18 -164.3 -106.8 -57.8 and equipment and intangible non-current assets Other operating expenses 11 -10.4 -6.8 -4.0 Profit/loss from shares in associates and joint ventures 20 0.0 0.0 -10.7 Operating profit/loss 93.7 55.5 60.8

Financial items Financial income 12 14.4 59.4 9.9 Financial expenses 13 -61.8 -34.3 -33.3 Pre-tax profit/loss 46.3 80.6 37.5

Tax 14 -23,3 -19,6 -6,3 PROFIT/LOSS FOR THE YEAR 23 61,0 31,2

Attributable to: Shareholders of the parent company 16.7 48.5 25.8 Non-controlling interests 6.3 12.5 5.4

Earnings per share, SEK 15 Before dilution 0.7 1.9 1.0 After dilution 0.7 1.9 1.0

Consolidated statement of comprehensive income

(SEK million) Note 2017 2016 2015 Profit/loss for the year 23.0 61.0 31.2

Other comprehensive income Items that can be reversed to profit and loss: Translation differences for the year -3.0 -12.2 1.2 Total items that can be reversed to profit and loss -3.0 -12.2 1.2 COMPREHENSIVE INCOME FOR THE YEAR 20.0 48.8 32.4

Attributable to: Shareholders of the parent company 13.1 38.6 30.3 Non-controlling interests 6.9 10.2 2.1

Annual Report 2017 / Advania AB 31 Consolidated balance sheet

(SEK million) Note 31/12/2017 31/12/2016 31/12/2015 ASSETS Non-current assets Intangible assets 17 Goodwill 475.4 404.7 378.0 Other intangible assets 336.4 306.2 260.2 811.9 710.9 638.2 Property, plant and equipment Equipment, tools, fixtures and fittings 18 139.6 144.3 112.2 139.6 144.3 112.2 Financial non-current assets Receivables from the parent company 19 239.0 17.1 0.0 Shares in associates and joint ventures 20 0.0 0.0 0.0 Other non-current receivables 21 3.9 19.4 14.4 242.9 36.5 14.4

Deferred tax assets 14 31.2 42.4 47.2

Total non-current assets 1,225.6 934.1 812.0

Current assets Inventories 27.4 28.3 20.3 27.4 28.3 20.3 Current receivables Trade receivables 22 425.5 253.1 213.5 Receivables from the parent company 0.0 0.0 0.3 Receivables from Group companies 3.7 0.0 0.0 Other receivables 14.7 31.6 30.3 Prepaid expenses and accrued income 23 115.4 83.7 87.3 559.3 368.4 331.5

Cash and cash equivalents 24 216.5 36.3 30.9

Total current assets 803.2 433.0 382.7

TOTAL ASSETS 2,028.7 1,367.1 1,194.7

32 Annual Report 2017 / Advania AB Consolidated balance sheet cont.

(SEK million) Note 31/12/2017 31/12/2016 31/12/2015 EQUITY AND LIABILITIES Equity Share capital 25 0.6 0.1 0.1 Other contributed capital 26 163.8 159.4 46.3 Translation reserve 27 -2.4 -3.6 6.3 Retained earnings including profit/loss for the year 12.9 28.6 -21.0

Equity attributable to shareholders of the parent company 174.9 184.5 31.7

Non-controlling interests 47.2 43.4 27.6

Total equity 222.1 227.9 59.3

Non-current liabilities 28, 29 Liabilities to credit institutions 844.9 582.1 517.5 Liabilities to the parent company 0.0 0.0 127.5 Other non-current liabilities 15.3 0.0 0.0 Deferred tax liabilities 14 62.9 43.6 32.1 923.1 625.7 677.1

Current liabilities Liabilities to credit institutions 29 111.5 54.1 38.2 Overdraft facility 95.9 44.4 37.7 Trade payables 270.6 119.9 114.2 Current tax liability 8.2 4.9 1.8 Other current liabilities 110.3 47.1 48.5 Accrued expenses and prepaid income 30 287.0 243.1 217.8 883.5 513.5 458.3

TOTAL EQUITY AND LIABILITIES 2,028.7 1,367.1 1,194.7

Annual Report 2017 / Advania AB 33 Consolidated statement of changes in equity

Total Retained earn- equity attributa- Other con- ings including ble to sharehold- Non-con- Share tributed Translation profit/loss ers of the parent trolling Total (SEK million) capital capital reserve for the year company interests equity Opening balance at 1 January 2015 0.1 43.8 1.8 -47.5 -1.9 0.0 -1.9 Profit/loss for the year 25.8 25.8 5.4 31.2 Other comprehensive income: Translation difference 4.5 0.0 4.5 -3.3 1.2 Total other comprehensive income 4.5 0.0 4.5 -3.3 1.2 Total comprehensive income 4.5 25.8 30.3 2.1 32.4 Transactions with shareholders: Non-controlling interests arising on 0.0 0.0 24.8 24.8 the acquisition of subsidiaries Premiums paid for subscription options 2.5 2.5 0.6 3.1 Share-based payments 0.8 0.8 0.1 0.9 Total transactions with shareholders 0.0 2.5 0.0 0.8 3.3 25.5 28.8 Closing balance at 31 December 2015 0.1 46.3 6.3 -21.0 31.7 27.6 59.3

Opening balance at 1 January 2016 0.1 46.3 6.3 -21.0 31.7 27.6 59.3 Profit/loss for the year 48.5 48.5 12.5 61.0 Other comprehensive income: Translation difference -9.9 0.0 -9.9 -2.4 -12.2 Total other comprehensive income -9.9 0.0 -9.9 -2.4 -12.2 Transactions with shareholders: Shareholder contribution 113.8 0.0 113.8 0.0 113.8 Repurchased subscription options -6.2 -6.2 -1.4 -7.6 Change in share of ownership of subsidiaries 0.4 0.4 5.6 6.0 Premiums paid for subscription options 5.4 5.4 1.2 6.7 Share-based payments 0.7 0.7 0.2 0.9 Total transactions with shareholders 0.0 113.1 0.0 1.1 114.2 5.6 119.8 Closing balance at 31 December 2016 0.1 159.4 -3.6 28.6 184.5 43.4 227.9

Closing balance at 31 December 2016 0.1 159.4 -3.6 28.6 184.5 43.4 227.9 Adjustment of opening balance attributable 5.9 -5.9 0.0 0.0 0.0 to change in translation reserve 2016 Opening balance at 1 January 2017 0.1 159.4 2.3 22.7 184.5 43.4 227.9 Profit/loss for the year 16.7 16.7 6.3 23.0 Other comprehensive income: Translation difference -3.7 0.0 -3.7 0.6 -3.0 Total other comprehensive income -3.7 0.0 -3.7 0.6 -3.0 Transactions with shareholders: Acquisition of non-controlling interests -2.4 -30.2 -32.5 -33.8 -66.3 and issue of shares in subsidiaries Sale of shares in subsidiaries 1.3 1.9 3.3 0.1 3.3 Non-cash issue 0.5 15.1 9.9 25.5 -9.9 15.6 Change in share of ownership of subsidiaries -10.7 -10.7 -2.1 -12.8 Acquisition of Caperio Finance AB 0.0 42.3 42.3 Share-based payments -8.3 -8.3 0.4 -7.9 Total transactions with shareholders 0.5 4.4 -1.0 -26.5 -22.7 -3.1 -25.7 Closing balance at 31 December 2017 0.6 163.8 -2.4 12.9 174.9 47.2 222.1

34 Annual Report 2017 / Advania AB Consolidated statement of cash flows

(SEK million) Note 2017 2016 2015 Cash flow from operating activities Profit/loss after financial items 46.3 80.6 37.5 Adjustments for non-cash items: Depreciation and amortisation 164.3 106.8 57.8 Unrealised foreign exchange differences -7.2 -55.0 0.2 Capital gain/loss on sale of non-current assets -0.1 0.9 0.0 Share of profit at associates 0.0 0.0 10.7 Costs relating to share-based payments 1.9 0.9 0.9 Revaluation on acquisition of controlling interest 0.0 0.0 -34.6 Net interest income/expense not settled in cash 4.7 -7.0 6.0 Income tax paid -10.6 -4.5 -6.0 Cash flow from operating activities before changes in working capital 199.4 122.8 72.5

Changes in working capital Decrease(+)/increase(-) in inventories 17.8 -2.7 4.6 Decrease(+)/increase(-) in operating assets -111.6 -30.8 -33.9 Decrease(-)/increase(+) in operating liabilities 100.9 11.0 12.6 Cash flow from changes in working capital 7.0 -22.5 -16.8

Cash flow from operating activities 206.4 100.2 55.6

Investing activities Acquisition of subsidiaries 33 -201.5 -14.9 -172.1 Sale of subsidiaries 33 26.0 0.0 0.0 Acquisition of intangible assets -4.2 -5.6 -1.5 Acquisition of property, plant and equipment -18.7 -10.1 -11.5 Sale of property, plant and equipment 1.0 4.9 1.1 Acquisition of financial assets -183.6 -16.5 0.0 Cash flow from investing activities -381.0 -42.1 -184.0

Financing activities 32 Premiums received for subscription options 6.1 0.0 3.1 Repurchased subscription options 0.0 -0.9 0.0 New share issue 8.2 3.8 0.0 Loans raised 986.1 20.6 479.9 Amortisation of loans 28 -574.3 -47.0 -299.2 Amortisation of leasing liabilities -69.0 -33.4 -22.5 Cash flow from financing activities 357.1 -56.9 161.4

Cash flow for the year 182.5 1.3 33.0 Cash and cash equivalents at beginning of year 36.3 30.9 0.1 Exchange difference in cash and cash equivalents -2.3 4.2 -2.2 Cash and cash equivalents at end of year 24 216.5 36.3 30.9

Interest paid and dividend received Interest received 3.5 5.2 1.3 Interest paid -45.7 -33.4 -25.1

Annual Report 2017 / Advania AB 35 Parent company income statement

(SEK million) Note 2017 2016 2015 Net revenue 3 4.6 0.0 0.0 Operating expenses Other external expenses 8,10 -35.5 -14.2 -1.5

Operating profit/loss -31.0 -14.2 -1.5

Financial items Earnings from shareholdings in Group companies 11 24.4 0.0 0.0 Other interest and similar income 12 7.4 7.9 8.1 Interest and similar expenses 13 -11.3 -0.6 -14.1

Profit/loss after financial items -10.5 -6.9 -7.5

Pre-tax profit/loss -10.5 -6.9 -7.5

Tax on profit/loss for the year 14 0.0 0.0 0.0

PROFIT/LOSS FOR THE YEAR -10.5 -6.9 -7.5

Parent company statement of comprehensive income

(SEK million) Note 2017 2016 2015

Årets resultat 0.0 0.0 0.0 Övrigt totalresultat - - -

COMPREHENSIVE INCOME FOR THE YEAR 0.0 0.0 0.0

36 Annual Report 2017 / Advania AB Parent company balance sheet

(SEK million) Note 31/12/2017 31/12/2016 31/12/2015 ASSETS Non-current assets Financial non-current assets Shares in Group companies 16 535.2 175.0 154.6 Receivables from Group companies 19 423.5 0.0 0.0 958.7 175.0 154.6

Total non-current assets 958.7 175.0 154.6

Current assets Current receivables Receivables from Group companies 92.6 50.2 42.5 Other current receivables 4.1 3.9 3.9 Prepaid expenses and accrued income 23 3.9 0.0 0.0 100.7 54.1 46.4

Cash at bank and in hand 0.0 0.5 0.3

Total current assets 100.7 54.6 46.7

TOTAL ASSETS 1 059.3 229.6 201.3

EQUITY AND LIABILITIES Equity Restricted equity Share capital 0.6 0.1 0.1 0.6 0.1 0.1 Non-restricted equity Retained earnings 145.7 148.1 41.7 Profit/loss for the year -10.5 -6.9 -7.5 135.2 141.2 34.2

Total equity 135.8 141.3 34.3

Non-current liabilities 28 Liabilities to credit institutions 773.4 0.0 0.0 Liabilities to Group companies 0.0 42.5 127.5 773.4 42.5 127.5 Current liabilities Liabilities to credit institutions 40.2 0.0 0.0 Overdraft facility 95.9 0.0 0.0 Trade payables 7.3 1.3 0.1 Liabilities to Group companies 6.4 44.5 39.4 Other current liabilities 0.3 0.0 0.0 Accrued expenses and prepaid income 30 0.2 0.0 0.0 150.2 45.8 39.5

TOTAL EQUITY AND LIABILITIES 1,059.3 229.6 201.3

Annual Report 2017 / Advania AB 37 Parent company statement of changes in equity

Restricted equity Unrestricted equity Share premi- Retained Profit/loss Total (SEK million) Share capital um account earnings for the year equity Opening balance at 1 January 2015 0.1 43.8 -2.1 41.8 Appropriation of previous year’s profit/loss -2.1 2.1 0.0 Profit/loss for the year -7.5 -7.5 Other comprehensive income 0.0 0.0 Total comprehensive income 0.0 0.0 -7.5 -7.5 Transactions with shareholders: Total transactions with shareholders 0.0 0.0 0.0 Closing balance at 31 December 2015 0.1 41.7 -7.5 34.3

Opening balance at 1 January 2016 0.1 41.7 -7.5 34.3 Appropriation of previous year’s profit/loss -7.5 7.5 0.0 Profit/loss for the year 0.0 -6.9 -6.9 Other comprehensive income 0.0 0.0 Total comprehensive income 0.0 0.0 -6.9 -6.9 Transactions with shareholders: 113.9 Shareholder contribution received 113.9 113.9 Total transactions with shareholders 0.0 113.9 0.0 113.9 Closing balance at 31 December 2016 0.1 148.1 -6.9 141.3

Opening balance at 1 January 2017 0.1 0.0 148.1 -6.9 141.3 Appropriation of previous year’s profit/loss -6.9 6.9 0.0 Profit/loss for the year -10.5 -10.5 Total comprehensive income 0.0 0.0 0.0 -10.5 -10.5 Transactions with shareholders: New share issue 0.5 0.5 Shareholder contributions paid 15.5 -11.0 4.5 Total transactions with shareholders 0.5 15.5 -11.0 0.0 5.0 Closing balance at 31 December 2017 0.6 15.5 130.2 -10.5 135.8

38 Annual Report 2017 / Advania AB Parent company statement of cash flows

(MSEK) Note 2017 2016 2015 Cash flow from operating activities Profit/loss after financial items -10.5 -6.9 -7.5 Adjustments for non-cash items: Depreciation and amortisation 0.0 0.0 0.2 Unrealised foreign exchange differences -2.4 0.0 0.0 Capital gain/loss on sale of non-current assets 3.9 0.0 0.0 Net interest income/expense not settled in cash 3.9 -7.3 5.9 Interest received -0.1 0.0 0.0 Interest paid -8.3 0.0 0.0 Cash flow from operating activities before changes in working capital -13.5 -14.2 -1.4

Changes in working capital Decrease(+)/increase(-) in operating assets -8.0 0.0 -3.9 Decrease(-)/increase(+) in operating liabilities 12.0 1.3 -43.9 Cash flow from changes in working capital 4.0 1.3 -47.8

Cash flow from operating activities -9.5 -12.9 -49.2

Investing activities Acquisition of subsidiaries -381.1 0.0 0.0 Sale of subsidiaries 16.6 0.0 0.0 Investments in other financial non-current assets -459.4 0.0 0.0 Cash flow from investing activities -823.9 0.0 0.0

Financing activities 32 Premiums received for subscription options 4.9 0.0 0.0 Loans raised 828.1 13.1 49.4 Cash flow from financing activities 833.0 13.1 49.4

Cash flow for the year -0.5 0.2 0.2 Cash and cash equivalents at beginning of year 0.5 0.3 0.1

Cash and cash equivalents at end of year 24 0.0 0.5 0.3

Annual Report 2017 / Advania AB 39 Notes for the Group

Note 1 General information IFRS 15 introduces a five-step model and also contains more guidance and extensive disclosure requirements. Advania will apply Advania AB, with the company registration number 556963-8991, is IFRS 15 from 1 January 2018 and has chosen not to convert the a limited company registered in Sweden with its registered office in comparison year. Stockholm that operates through subsidiaries in Sweden, Iceland, Norway and Denmark under the name Advania. The Advania Group In the company management’s assessment, IFRS 15 will not affect is a Nordic turnkey supplier within IT and has around 4,900 cus- the amounts reported in the financial statements. A detailed anal- tomers, including in the public sector as well as private companies. ysis using the five-step model has been carried out in relation to The Advania Group offers a wide range of IT services and solutions, the company’s major customer contracts. IFRS 15 will not result in hardware, eco-friendly hosting and global IT platforms, with a fo- any significant effects. cus on tailored solutions. The Advania Group works in strategically selected business areas, all of which focus on the customer’s re- IFRS 9 Financial Instruments replaces IAS 39 Financial Instruments: quirements, with long-term mutual loyalty as the ultimate goal. The Recognition and Measurement. IFRS 9 contains rules on recogni- composition of the Group is described in Note 16. tion, classification and measurement, impairment, derecognition and hedge accounting. Advania will apply IFRS 9 from 1 January The parent company in the largest group of which Advania AB forms 2018 and has chosen not to convert the comparison year. As before, a part is Vianada AB, company registration number 556963-9031, the Group does not apply any hedge accounting. which has its registered office in Stockholm. The address of the head office is Fredsborgsgatan 24. On initial recognition under IFRS 9, financial assets are to be classified as fair value through profit or loss, as amortised cost or as fair The consolidated financial statements for the year ending value through other comprehensive income. 31 December 2017 (including comparative figures) was approved for publication by the Board of Directors on 10 April 2018. ◼◼ The classification assessment is based on two criteria: (a) the company’s business model for managing the financial asset (b) the contractual cash flow of the instrument.

Note 2 Significant accounting policies ◼◼ The classification of equity instruments is as fair value through profit or loss, unless the company has chosen to present such This is Advania AB’s first set of financial statements in accordance instruments at fair value through other comprehensive income. with IFRS. The consolidated financial statements for Advania AB have been prepared in accordance with International Financial ◼◼ The rules for the classification and measurement of financial Reporting Standards (IFRS) as approved by the EU and the in- liabilities are largely unchanged compared with IAS 39. terpretations of the IFRS Interpretations Committee (IFRIC). The Group also applies the Swedish Annual Accounts Act and IFRS 9 removes the requirement to identify an incurred loss and Recommendation RFR 1 Supplementary Accounting Rules for introduces a model for expected credit losses. The model estab- Corporate Groups of the Swedish Financial Reporting Board. lishes a three-stage approach, based on whether there has been a significant increase in credit risk. For financial assets where there Items in the consolidated financial statements have been valued has been no significant increase in credit risk, a loss allowance is at cost, with the exception of certain financial instruments meas- made at an amount equal to the loss expected within 12 months. ured at fair value. The significant accounting policies applied are For financial assets where there has been a significant increase described below. in credit risk and for those which are doubtful, a loss allowance is made at an amount equal to the losses expected over the remain- New and amended standards and interpretations ing life of the asset. that have not yet come into effect The new and amended standards and interpretations that have Advania has reviewed its classification of financial assets in -ac been issued but only come into effect for financial years beginning cordance with IFRS 9 and prepared a new model for calculating on or after 1 January 2018 have not yet been applied by the Group. loss allowances for trade receivables. For trade receivables with a The new and amended standards and interpretations that are con- short term, where there are no significant financing components, sidered to have an impact on the consolidated financial statements the Group will use the simplified model with a lifetime approach, in the period in which they are applied for the first time are de- i.e. the loss allowance will correspond to the expected losses for scribed below. the full lifetime. The new calculation model is based on historical default rates adjusted for future expectations and the probability of IFRS 15 will replace IAS 18 Revenue, IAS 11 Construction Contracts default. The calculations made indicate an insignificant increase in and the related interpretations. The new standard involves a new the Group’s credit loss allowance for trade receivables. model for revenue recognition (five-step model) that is based on when control of a good or service is passed to the customer. The In the company management’s assessment, IFRS 9 will not involve core principle is that a company recognises revenue to depict the any significant effects on the amounts reported in the financial transfer of promised goods or services to customers in an amount statements when IFRS 9 is applied for the first time but IFRS 9 will that reflects the consideration to which the company expects to be lead to more extensive disclosures. entitled in exchange for those goods or services. IFRS 16 Leases will replace IAS 17 Leases. IFRS 16 is effective from 1 January 2019. IFRS 16 has a leasing model for lessees, which largely

40 Annual Report 2017 / Advania AB means that all leases must be reported in the statement of finan- Business combinations cial position. The right of use (leased asset) and liability are meas- Business combinations are reported in accordance with the acqui- ured at the present value of future lease payments. The right of use sition method. also includes direct costs attributable to the signing of the lease. Amortisation of the right of use and interest expenses are recog- The purchase price of the business combination is valued at fair val- nised in profit and loss. ue at the time of acquisition and is calculated as the total fair value at the time of acquisition of the assets acquired, liabilities arising The right of use is reported separately from other assets in the or assumed, as well as equity interests issued in exchange for con- statement of financial position or included in the item where the trol of the acquired business. Expenses relating to acquisitions are corresponding assets would be reported if they were owned. If this recognised in the income statement as they arise. is included in other assets, this is indicated, along with which items include right of use. In subsequent periods, the right of use is rec- The identifiable assets acquired and liabilities assumed are recognised at cost less amortisation and any impairment and adjusted ognised at fair value at the time of acquisition, with the following for any remeasurements of the lease liability. exceptions:

The lease liability is reported separately from other liabilities. If ◼◼ Deferred tax assets or tax liabilities and liabilities or assets the lease liability is not reported separately, the items that include attributable to the acquired company’s agreements on the re- these liabilities are indicated. In subsequent periods, the liability is muneration of employees are recognised and valued in accord- reported at amortised cost and reduced by lease payments made. ance with IAS 12 Income Taxes and IAS 19 Employee Benefits The lease liability is remeasured to reflect changes in the lease respectively. term, residual value guarantees and any changes in lease payments. ◼◼ Liabilities or equity instruments attributable to the share-based Short leases (12 months or less) and leases where the underlying allocations of the acquired company or to the exchange of the asset has a low value do not need to be reported in the statement share-based allocations of the acquired company for those of of financial position. These will be reported in profit and loss in the the acquirer are valued at the time of acquisition in accordance same way as current operating leases. with IFRS 2 Share-based Payment.

In the company management’s assessment, IFRS 16 will affect the ◼◼ Assets (or discontinued operations) classified as held for sale amounts reported in the financial statements. A detailed analysis in accordance with IFRS 5 Non-Current Assets Held for Sale of IFRS 16 has begun but not been concluded, therefore the effects and Discontinued Operations are valued in accordance with cannot yet be quantified. this standard.

The company management considers that other new and amended For business combinations where the sum of the consideration standards and interpretations that have not come into effect are paid, any non-controlling interests and the fair value at the time of not expected to have any significant impact on the consolidated acquisition of previous shareholdings exceeds the fair value at the financial statements when they are applied for the first time. time of acquisition of identifiable net assets acquired, the difference is recognised as goodwill in the statement of financial posi- Consolidated accounts tion. If the difference is negative, this is recognised directly in profit The consolidated accounts include the parent company Advania and loss as a bargain purchase gain after review of the difference. AB and the companies in which the parent company has a controlling interest. A controlling interest exists where the Group is With every business combination, previous non-controlling inter- exposed or entitled to a variable return on its investment in a com- ests in the acquired company are measured either at fair value or at pany and is able to affect the return through its influence over the the value of the proportion of the non-controlling interest in relation company. A controlling interest normally exists where the parent to the identifiable net assets of the acquired company. company directly or indirectly holds shares representing more than 50% of the votes. In the event of gradual acquisition, the previous equity interests in the acquired company are revalued to their fair value at the time of A subsidiary is included in the consolidated accounts from the acquisition (i.e. when a controlling interest was acquired). Any gains time of acquisition up to the point at which the parent company or losses are recognised in profit and loss. Any changes in the value no longer has a controlling interest in the subsidiary. The account- of previous equity interests which were recognised in other coming policies of subsidiaries have been modified where necessary in prehensive income before the time of acquisition are reclassified order to correspond to those of the Group. All intra-Group trans- in profit and loss on the same basis that would be required if these actions, balances and unrealised gains and losses relating to in- shares had been sold. tra-Group transactions have been eliminated in the preparation of the consolidated accounts. Shares in associates An associate is a company over which the Group exercises a signif- Transactions with non-controlling interests icant influence, through the ability to participate in the decisions Changes in the parent company’s shareholding in a subsidiary that that affect the company’s financial and operational strategies. This do not lead to a loss of controlling interest are recognised as equity is normally the case where the parent company directly or indirectly transactions (in other words transactions with the Group’s share- holds shares that represent 20–50% of the votes. holders). Any difference between the amount at which the non-controlling interest is adjusted and the fair value of the consideration The profit and loss, assets and liabilities of the associate are rec- paid or received is reported directly in equity and allocated to the ognised using the equity method. According to the equity method, shareholders of the parent company. shares in associates are recognised on the balance sheet at cost, adjusted for changes in the Group’s share of the associate’s net assets, less any reduction in the fair value of individual shares. If

Annual Report 2017 / Advania AB 41 the Group’s share of the losses at an associate is equal to or great- Leasing of hardware or licences er than its shareholding in the associate (including any long-term Revenue from the leasing of hardware or licences is recognised on shareholdings which, in their nature, form part of the Group’s share- a straight-line basis over the term of the agreement. holding in the associate), the Group does not report further losses, unless the Group has undertaken commitments or made payments Sale of goods on behalf of the associate. Revenue from the sale of hardware or licences is recognised on delivery. The difference between the cost of the acquired shareholdings and the Group’s share of the fair value of identifiable assets and liabili- Dividends and interest income ties acquired in the associate are recognised as goodwill. Goodwill Dividend income is recognised when the owner’s right to receive is included in the carrying amount of the shareholding in the asso- payment has been established. ciate and is tested for impairment as part of the shareholding. If, after revaluation, the fair value of the Group’s acquired share of the Interest income is recognised allocated over the term by applying identifiable assets and liabilities of the acquired associate exceed the effective interest method. the cost of the acquisition, the difference is reported directly in the income statement. Leases A finance lease is an agreement whereby the economic risks and In the event of transactions between Group companies and associ- benefits associated with the ownership of an asset are essentially ates, the portion of unrealised gains or losses that corresponds to transferred from the lessor to the lessee. Other leases are classified the Group’s share in the associate is eliminated. Dividends received as operating leases. from associates reduce the carrying amount of the investment. Group as lessee Segment reporting Assets held under finance leases are recognised as non-current An operating segment is a part of a company that operates business assets on the consolidated balance sheet at fair value at the begin- activities from which it can receive income and incur costs, whose ning of the lease term or at the present value of the minimum lease operating profit is regularly reviewed by the company’s chief operat- payments, where this is lower. The equivalent liability to the lessor ing decision-maker and for which independent financial information is recognised on the balance sheet as a finance lease liability. The is available. The company’s reporting of operating segments corre- lease payments are divided between interest and amortisation of sponds to the internal reporting to the chief operating decision-mak- the liability. Interest is distributed over the term of the lease so that er. The chief operating decision-maker is the function that assesses an amount corresponding to a fixed interest rate for the liability the results of the operating segment and decides on the allocation recognised in each period is charged to each accounting period. of resources. The CEO is the chief operating decision-maker. The Interest expense is recognised directly in the income statement. If accounting policies of the reportable segments correspond to the the interest expense is directly attributable to the acquisition of an policies applied by the Group as a whole. asset that necessarily takes a substantial period of time to prepare for the intended use or sale, the interest expense shall instead be Revenue included in the cost of the asset in accordance with the Group’s Revenue is recognised at the fair value of the remuneration that has policies for borrowing costs (see below). The non-current assets been received or is expected to be received, less value-added tax, are depreciated over the shorter of the asset’s useful life and the discounts, returns and similar deductions. The Group recognises rev- term of the lease. enue when the amount can be measured reliably, it is probable that future economic benefits will accrue to the company and specific Lease payments for operating leases are expensed on a straight- criteria have been met for each of the Group’s revenue types. line basis over the term of the lease, unless a different systematic method better reflects the economic benefit for the user over time. The Group’s revenue comes primarily from the sale of IT services and solutions, hardware, hosting and global IT platforms. Foreign currency Items included in the financial statements for the various units of Sale of IT services the Group are reported in the currency used in the primary eco- Revenue from the sale of services on a time and materials basis is nomic environment in which each unit mainly operates (functional recognised in the period in which the services are performed. currency). In the consolidated financial statements, all amounts are translated to Swedish kronor (SEK), which is the functional currency Revenue from the sale of fixed-price services is recognised using of the parent company and the presentation currency of the Group. percentage of completion accounting. This means that revenue and costs are recognised proportionate to the degree of completion of Transactions in foreign currencies are translated at the respective the contract on the balance sheet date. The degree of completion unit to the functional currency of the unit at the exchange rates pre- is determined by calculating the ratio between the contract costs vailing at the transaction date. Monetary items in foreign currency paid for work performed as at the balance sheet date and the esti- are translated on each balance sheet date at the exchange rate on mated total contract costs. An expected loss on a service contract the balance sheet date. Non-monetary items that are valued at fair is immediately recognised as an expense. If the outcome of a ser- value in a foreign currency are translated at the exchange rate on vice contract cannot be measured reliably, revenue is recognised the date the fair value was established. Non-monetary items that only at an amount equivalent to the contract costs incurred that it are valued at historical cost in a foreign currency are not translated. is probable will be recoverable from the customer. Contract costs are recognised as costs in the period in which they are incurred. Foreign exchange differences are recognised in the income statement for the period in which they arise, with the exception of trans- Revenue from the sale of services for a fixed monthly fee is recog- actions that constitute hedging and fulfil the requirements for the nised on a straight-line basis over the term of the contract. hedge accounting of cash flows or of net investments, where gains and losses are recognised in other comprehensive income.

42 Annual Report 2017 / Advania AB On the preparation of consolidated financial statements, the assets the time of the transaction, affects neither the recognised profit and liabilities of foreign subsidiaries are translated to SEK at the nor the taxable profit. exchange rate on the balance sheet date. Revenue items and cost items are translated at the average rate for the period, unless the Deferred tax liabilities are recognised for taxable temporary differ- exchange rate fluctuated considerably during the period in which ences attributable to investments in subsidiaries, except where the case the exchange rate on the transaction date is used instead. Group is able to control the time when the temporary differences Any translation differences arising are recognised in other compre- are reversed and it is unlikely that such a reversal will take place hensive income and transferred to the Group’s translation reserve. within the foreseeable future. The deferred tax assets that are attrib- On the sale of a foreign subsidiary, such translation differences are utable to tax-deductible temporary differences in relation to such recognised in the income statement as part of the capital gain/loss. investments are only recognised to the extent it is likely that the amounts can be offset against future taxable profit and it is likely Goodwill and fair value adjustments arising from the acquisition that this will take place within the foreseeable future. of a foreign operation are treated as assets and liabilities in this operation and are translated at the exchange rate on the balance The carrying amount of deferred tax assets is tested at each closing sheet date. date and is reduced to the extent it is no longer likely that sufficient taxable profit will be available for offsetting, in whole or in part, Borrowing costs against the deferred tax asset. Borrowing costs that are directly attributable to the acquisition, construction or production of an asset that necessarily takes a Deferred tax is calculated using the tax rates that are expected to substantial period of time to prepare for the intended use or sale apply for the period in which the asset is received or the liability are included in the cost of the asset until such time as the asset settled, based on the tax rates (and tax legislation) that apply or is completed for its intended use or sale. Interest income from the have been announced on the balance sheet date. temporary investment of borrowed funds for an asset as described above is deducted from the borrowing costs that can be included in Deferred tax assets and tax liabilities are offset if they are attributa- the cost of the asset. Other borrowing costs are recognised in profit ble to income tax that is charged by the same public authority and and loss in the period in which they are incurred. where the Group intends to settle the tax net.

Employee benefits Current and deferred tax for the period Employee benefits in the form of salaries, bonuses, paid holiday, Current and deferred tax are recognised as a cost or income in the paid sick leave, etc., as well as pensions, are recognised as they are income statement, except where the tax is attributable to transac- earned. Pensions and other remuneration after employment has tions that are recognised in other comprehensive income or direct- ended are classified as defined contribution or defined benefit- pen ly in equity. In such cases, the tax is also recognised in other com- sion plans. The Group only has defined contribution pension plans. prehensive income or directly in equity. The tax effect of current and deferred tax arising on the recognition of business combinations is Defined contribution pension plans recognised in the acquisition analysis. With defined contribution plans, the Group makes fixed contributions to a separate independent legal entity and has no obligation Property, plant and equipment to make any further contributions. Costs are charged to the Group’s Property, plant and equipment are recognised at cost less accumu- profit and loss when the benefits are earned, which is normally lated depreciation and any write-downs. when the premiums are paid. The cost comprises the purchase price, expenses directly attribut- Tax able to bringing the asset to the location and into the condition re- The tax expense comprises the sum of current tax and deferred tax. quired for use and estimated expenses for dismantling and remov- ing the asset and restoring the site where applicable. Additional Current tax expenses are only included in the asset or recognised as a separate Current tax is calculated on the taxable profit for the period. Taxable asset if it is likely that future economic benefits that may be attrib- profit differs from the profit reported in the income statement in uted to the item will accrue to the Group and the cost of the same that it has been adjusted for non-taxable income and non-deduct- can be calculated reliably. All other expenses for repairs and mainte- ible expenses, as well as for income and expenses that are taxable nance, as well as additional expenses, are recognised in the income or tax-deductible in other periods. The Group’s current tax is cal- statement in the period in which they are incurred. culated using the tax rates applicable on the balance sheet date. Depreciation of property, plant and equipment is expensed such Deferred tax that the asset’s cost, where applicable reduced by the estimated Deferred tax is recognised for temporary differences between the residual value at the end of the useful life, takes place on a straight- carrying amounts of assets and liabilities in the financial state- line basis over the estimated useful life. Depreciation begins when ments and the tax values applied in the calculation of taxable profit. the property, plant and equipment can be taken into use. The useful Deferred tax is recognised in accordance with the balance sheet life of equipment, tools, fixtures and fittings has been estimated at method. Deferred tax liabilities are recognised in principle for all 3–15 years. taxable temporary differences and deferred tax assets are recognised in principle for all tax-deductible temporary differences to the Estimated useful lives, residual values and depreciation methods extent it is likely that the amounts can be offset against future taxa- are tested at least at the end of each financial year, with the effect ble profit. Deferred tax assets and tax liabilities are not recognised of any changes in the assessments recognised with future effect. if the temporary difference is attributable to goodwill or if it is the result of a transaction that constitutes the initial recognition of an The reported value of any property, plant and equipment is removed asset or liability (other than a business combination) and which, at from the balance sheet on disposal or sale, or when no future economic benefit is expected from the use or disposal/sale of the asset.

Annual Report 2017 / Advania AB 43 Gains or losses arising from the sale or disposal of an asset, com- the recoverable amount of the cash-generating unit to which the prising the difference between any net income from its sale and the asset belongs. carrying amount of the asset, are recognised in profit and loss in the period when the asset is removed from the balance sheet. Goodwill, other intangible assets with an indefinite useful life and intangible assets which are not yet ready for use must be tested Intangible assets for impairment annually or when there is an indication of a reduc- Goodwill tion in value. Goodwill arising on the preparation of the consolidated accounts constitutes the amount by which the consideration paid, any The recoverable amount is the higher of the fair value, less sell- non-controlling interests in the acquired company and the fair ing expenses, and the value in use. When calculating the value in value on the date of acquisition of previous equity interests in the use, estimated future cash flows are discounted to present value acquired company exceeds the fair value on the date of acquisition using a discount rate before tax that reflects the current market of the identifiable net assets and liabilities acquired. Goodwill is assessment of the monetary time value and the risks associated recognised at cost at the time of acquisition and following initial with the asset. recognition it is valued at cost less any accumulated impairment. In testing for impairment, goodwill is allocated to the cash-generating Where the recoverable amount of an asset (or cash-generating unit) units that are expected to benefit from the acquisition. Any impair- is identified as being lower than the reported value, the reported ment is recognised immediately as an expense and is not reversed. value of the asset (or the cash-generating unit) is written down to the recoverable amount. Any write-down must be expensed imme- Acquired through separate acquisition diately in the income statement. Intangible assets with a definite useful life that have been acquired separately are recognised at cost less accumulated amortisation Where a write-down is subsequently reversed, the carrying amount and any accumulated impairment. Straight-line amortisation is ap- of the asset (the cash-generating unit) increases to the revalued plied over the estimated useful life of the asset, which is estimated recoverable amount, but the increased carrying amount may not at 2–15 years. Estimated useful lives and amortisation methods are exceed the carrying amount that would have been recognised if tested at least at the end of each financial year, with the effect of the asset (the cash-generating unit) had not been written down pre- any changes in the assessments recognised with future effect. viously. The reversal of a write-down is recognised directly in the income statement. Acquired as part of a business combination Intangible assets that have been acquired through a business com- Financial instruments bination are identified and reported separately from goodwill if they A financial asset or financial liability is recognised on the balance meet the definition of an intangible asset and their fair value can sheet when the Group becomes a party to the instrument pur- be calculated reliably. The cost of such intangible assets comprises suant to the instrument’s contractual terms and conditions. A their fair value at the time of acquisition. The intangible assets are financial asset is removed from the balance sheet when the con- amortised over their expected useful life, which is as follows: tractual right to the cash flow from the asset ceases or is settled or when the Group loses control over it. A financial liability, or part Customer relationships 3–20 years thereof, is removed from the balance sheet when the contractual Trademarks 1–3 years obligation is fulfilled or otherwise ceases.

Software On every balance sheet date, the company assesses whether Computer programs 3–15 years there are objective indications that a financial asset or group of Licences 2–6 years financial assets requires impairment as a result of events that have occurred. Examples of such events include a significant The normal useful life for customer relationships is 3–8 years, which worsening in the financial position of the counterparty or the covers the majority of assets; other useful lives relate to smaller ele- non-payment of amounts due. ments of customer relationships acquired through previous mergers. Financial assets and financial liabilities that are not recognised The normal useful life for computer programs is 3–5 years; other use- at fair value through profit or loss in the following report are ful lives relate to computer programs acquired through acquisitions initially recognised at fair value with the addition or deduction, as where the Group has considered the lifetime to be longer. appropriate, of transaction costs. Financial assets and financial liabilities that are recognised at fair value through profit or loss in Following initial recognition, intangible assets acquired through the following report are recognised at the initial recognition of fair a business combination are recognised at cost less accumulated value. Financial instruments are valued in the following report at amortisation and any accumulated impairment in the same way as amortised cost or at fair value, depending on the initial classifica- intangible assets acquired separately. tion in accordance with IAS 39.

Write-down of property, plant and equipment On initial recognition, a financial instrument is classified in one of and impairment of intangible assets the following categories: Every balance sheet date, the Group analyses the carrying amounts of property, plant and equipment and intangible assets in order Financial assets: to determine whether there is any indication of a loss in the val- a) Fair value through profit or loss ue of these assets. If this is found to be the case, the recoverable b) Loan receivables and trade receivables amount of the asset is calculated in order to determine the value c) Investments held to maturity of any write-down or impairment. Where the recoverable amount d) Available-for-sale financial assets of an individual asset cannot be calculated, the Group calculates

44 Annual Report 2017 / Advania AB Financial liabilities Liabilities to credit institutions and other borrowings a) Fair value through profit or loss Interest-bearing bank loans, overdraft facilities and other loans are b) Other financial liabilities measured at amortised cost classified as “Other financial liabilities” and are valued at amortised cost according to the effective interest method. Any differences be- Fair value of financial instruments tween the loan amount received (net of transaction costs) and the The fair values of financial assets and financial liabilities are calcu- repayment or amortisation of the loan are recognised over the term lated as follows: of the loan.

The fair value of financial assets and liabilities that are traded on an Inventories active market is determined using quoted market prices. Inventories are measured at the lower of cost and net realisable value. The cost is calculated using weighted average prices. The net re- The fair value of other financial assets and liabilities is determined alisable value is the estimated selling price less the estimated costs according to generally accepted valuation models, such as the dis- of completion and the estimated costs required to effect a sale. counting of future cash flows and the use of information obtained from current market transactions. Contingent liabilities A contingent liability is a possible obligation arising from past The carrying amount of all financial assets and liabilities is consid- events, the existence of which will be confirmed only by the occur- ered to be a good approximation of their fair value, unless specifically rence or non-occurrence of one or more uncertain future events, stated otherwise in the following notes. which are not completely within the control of the company, or an obligation arising from past events that is not recognised as a lia- Amortised cost bility or provision because: Amortised cost refers to the amount at which the asset or liability is initially recognised less amortisation, addition or deduction for i. it is unlikely that an outflow of resources will be required to settle accumulated accrual according to the effective interest method of the obligation, or the initial difference between the amount received/paid and the amount to be paid/received on the maturity date, as well as deduc- ii. the size of the obligation cannot be estimated with sufficient tions for impairment. reliability.

The effective interest rate is the interest rate which, when discounting all anticipated future cash flows over the expected terms, gives the value initially recognised for the financial asset or the financial liability. Note 3 Significant estimates and assessments

Offsetting of financial assets and liabilities Important sources of uncertainty in estimates Financial assets and financial liabilities are offset and recognised net The most important assumptions about the future, and other impor- on the balance sheet when there is a legal right to offset and the tant sources of uncertainty in estimates at the balance sheet date, intention is to settle the items as a net amount or simultaneously which involve a significant risk of essential adjustments to the carry- realise the asset and settle the liability. ing amounts of assets and liabilities over the next financial year are reported below. Cash and cash equivalents Cash and cash equivalents includes cash and bank balances, as Intangible assets well as other short-term liquid investments that can easily be con- The useful life of intangible assets, in other words goodwill, trade- verted to cash and which are subject to insignificant risk of value marks and customer relationships, is reviewed annually or more fluctuations. For classification as cash or cash equivalents, the -ma often if the need arises. Any impairment is applied at the amount turity period must not exceed three months from the date of acqui- by which the book value exceeds the recoverable amount. The sition. Cash and bank balances are classified as “Loan receivables recoverable amount for a cash-generating unit is established by and trade receivables”, which means they are valued at amortised calculating the value in use. These calculations contain estimates cost. As bank balances are payable on demand, the amortised cost relating to anticipated forecast growth, margin and discount rate. is the same as the nominal amount. Short-term investments are classified as “Held for trading” and are measured at fair value with For further information, see Note 17. value changes recognised in profit or loss. Deferred tax Trade receivables Changes to tax legislation in Sweden and in other countries in Trade receivables are classified as “Loan receivables and trade receiv- which the company operates may change the size of the tax lia- ables”, which means they are valued at amortised cost. The expected bilities and tax assets reported. The interpretation of current tax terms of the trade receivables are short, however, so they are recog- legislation may also affect the reported tax liability/tax asset. nised at nominal amount without discounting. A deduction is made for doubtful receivables. The need for impairment of the receivables is Assessments are made in order to determine both current and de- determined on the basis of an individual assessment, taking into ac- ferred tax liabilities/assets, particularly in relation to the value of de- count historical experience of customer losses for similar receivables. ferred tax assets. Assessment is made of whether the deferred tax Impairment of trade receivables is recognised in operating expenses. assets will be utilised against future taxable profits. The actual outcome may deviate from these assessments, for example because of Trade payables changes in the business climate, changes to tax regulations or the Trade payables are classified as “Other financial liabilities”, which outcome of the review of submitted tax returns being conducted means they are valued at amortised cost. The expected terms of the by the tax courts. trade payables are short, however, so the liability is recognised at nominal amount without discounting.

Annual Report 2017 / Advania AB 45 Note 4 Financial risk management and financial instruments

Through its operations the Group is exposed to various kinds of Translation exposure financial risks, such as market, liquidity and credit risks. Market Translation exposure involves a risk that the value of the Group’s risks consist primarily of interest rate risk and currency risk. The net investments in foreign currency will be negatively affected by company’s Board of Directors has ultimate responsibility for the ex- changes in exchange rates. The Group consolidates net assets in posure, management and monitoring of the Group’s financial risks. SEK on the balance sheet date. The framework for the exposure, management and monitoring of the financial risks is established in a finance policy. This policy is The table below shows the translation exposure for net investments reviewed annually and the Board of Directors can decide to deviate in foreign currency. The amounts below are stated in local currency. from it. The risks are reported to the CFO on a monthly basis and to the Board on a quarterly basis. The reports cover exposures to The effects of changes in exchange rates in relation to SEK for the currency and interest rate risks, available liquidity reserves and a most significant foreign currencies are presented under “Sensitivity liquidity forecast, the loan portfolio and covenant monitoring. analysis for market risks” below.

Market risks Interest rate risks Currency risks Interest rate risk refers to the risk of a fluctuation in fair value or Currency risk refers to the risk of a fluctuation in fair value or future future cash flows as a result of changes in market interest rates. cash flows as a result of changes in exchange rates. Exposure to The Group is primarily exposed to interest rate risk through its loan currency risk arises mainly from borrowing in foreign currency and financing. Loans are subject to variable interest rates, which means from payment flows in foreign currency, referred to as transaction that the Group’s future financial expenses are affected by changes exposure, and from the translation of the income statements and in market interest rates. balance sheets of foreign subsidiaries to the presentation currency of the Group, which is Swedish kronor (SEK), referred to as trans- The effects of changes in market interest rates are presented under lation exposure. “Sensitivity analysis for market risks” below.

Transaction exposure Sensitivity analysis for market risks Transaction exposure can be divided into commercial and finan- The sensitivity analysis for currency risk shows the Group’s sensitiv- cial. These involve a risk that earnings will be negatively affected ity in the event of an increase or a decrease of 10% in the value of by fluctuations in exchange rates for the cash flows that take place SEK compared with the most significant currencies. For transaction in foreign currency. The Group’s commercial inflows and outflows exposure, the effect on the Group’s profit after tax in the event of a consist mainly of EUR and USD, as well as limited flows in DKK, change in exchange rates is shown. This also includes outstanding GBP and NOK, which are included under Other in the table below. monetary receivables and liabilities in foreign currency at the balance sheet date, including loans between Group companies where Financial transaction exposure consists mainly of borrowing in the currency effect has an impact on the consolidated income USD and ISK, as well as limited bank balances in these curren- statement. For translation exposure, the effect on the Group’s prof- cies. The Group is therefore greatly affected by changes in these it after tax and on its equity in the event of a change in exchange exchange rates. rates is shown.

In addition to reporting, there is a policy for assets that are to be The sensitivity analysis for interest rate risk shows the invested in the unit’s reporting currency. Deviations from this are Group’s sensitivity in the event of an increase or a decrease permitted where this reduces exposure. of 1 % in the market interest rate. Interest rate sensitivity is based on the effect on profit after tax of a change in the The table below shows nominal net amounts for the significant market interest rate, in terms of both interest income and inflows that constitute transaction exposure. The exposure is stated terest expenses. As the Group does not report any changes on the basis of the Group’s payment flows in the most important in value in other comprehensive income or equity, a corre- currencies. sponding effect arises in equity.

Currency (SEK million) 31/12/2017 31/12/2016 31/12/2015 EUR -64.8 -26.3 -26.3 USD -92.7 -18.9 -7.1 Other 0.6 -20.4 -4.6

46 Annual Report 2017 / Advania AB 2017 31/12/2017 2016 31/12/2016 2015 31/12/2015 Effect on Effect on Effect on Effect on Effect on Effect on profit equity profit equity profit equity Transaction exposure EUR +10% -6.5 -2.6 -2.6 EUR -10% 6.5 2.6 2.6 DKK +10% -1.2 -2.0 -0.7 DKK-10% 1.2 2.0 0.7 USD +10% -9.3 -1.9 -0.7 USD -10% 9.3 1.9 0.7

Translation exposure ISK +10% 4.3 16.2 ISK -10% -4.3 -16.2

Interest Financial expenses +1% -8.2 -8.2 -5.4 -5.4 -4.6 -4.6 Financial expenses -1% 8.2 8.2 5.4 5.4 4.6 4.6

Liquidity and financing risk Liquidity risk refers to the risk that the Group will have problems meeting its obligations in relation to the Group’s financial liabilities. Financing risk refers to the risk that the Group will be unable to arrange adequate financing at a reasonable cost. In order to reduce liquidity risk and financing risk, the Group must, according to the finance policy, have a liquidity reserve covering 5% of the Group’s income, which means SEK 140.2 (87.3), (2015: 46.5) million. At the turn of the year, the reserve totalled SEK 311.4 (80.7), (2015: 68.6) million.

The maturity distribution of contractual payment obligations relating to the financial liabilities of the Group and the parent company, excluding derivatives, are shown in the tables below. The figures in these tables are not discounted values and they also include interest payments where applicable, meaning that these figures cannot be compared with the figures recognised on the balance sheets. Interest payments are determined on the basis of the conditions prevailing at the balance sheet date. Amounts in foreign currencies are translated to Swedish kronor (SEK) at the exchange rates on the balance sheet date.

Liquidity is tracked using forecasts and monitoring of available reserves and the maturity of the loan portfolio must be spread over time.

The Group’s loan agreements do not contain any special conditions, except for the covenants reported in Note 28.

Annual Report 2017 / Advania AB 47 Within 3 months 3–12 months 1–5 years Over 5 years Total 2017-12-31

Liabilities to credit institutions 31.4 120.5 915.8 0.0 1,067.7

Miscellaneous non-current liabilities 0.0 0.0 0.0 0.0 0.0

Other non-current liabilities 0.0 0.0 15.3 0.0 15.3

Overdraft facility 97.9 0.0 0.0 0.0 97.9

Current liabilities to credit institutions 0.0 0.0 0.0 0.0 0.0

Trade payables 270.0 0.0 0.0 0.0 270.0

Other current liabilities 132.4 0.0 0.0 0.0 132.4

Total 531.7 120.5 931.1 0.0 1,583.3

2016-12-31

Liabilities to credit institutions 14.0 41.8 700.7 0.0 756.5

Overdraft facility 44.4 0.0 0.0 0.0 44.4

Current liabilities to credit institutions 54.1 0.0 0.0 0.0 54.1

Trade payables 119.8 0.0 0.0 0.0 119.8

Other current liabilities 101.9 0.0 0.0 0.0 101.9

Total 334.2 41.8 700.7 0.0 1,076.7

2015-12-31

Liabilities to credit institutions 13.0 38.9 619.9 0.0 671.8

Overdraft facility 37.7 0.0 0.0 0.0 37.7

Current liabilities to credit institutions 38.2 0.0 0.0 0.0 38.2

Trade payables 114.2 0.0 0.0 0.0 114.2

Other current liabilities 98.5 0.0 0.0 0.0 98.5

Total 301.6 38.9 619.9 0.0 960.4

Credit and counterparty risk Credit risk refers to the risk that the counterparty in a transaction Trade receivables are spread across a large number of customers will cause a loss to the Group by failing to fulfil its contractual obli- and no single customer represents a significant portion of total gations. The Group’s exposure to credit risk relates primarily to trade trade receivables. Nor are the trade receivables concentrated in receivables (commercial risk) and cash and cash equivalents (finan- any particular geographical area. The Group therefore considers cial risk). The financial risk is limited by a requirement to use more the concentration risks to be limited. than one counterparty.

The Group’s maximum exposure to credit risk is considered to be equal to the carrying amounts of all financial assets and is shown in the table below.

31/12/2017 31/12/2016 31/12/2015 Financial non-current assets 242.9 36.5 14.4 Trade receivables 425.5 253.1 213.5 Other current receivables 14.7 31.6 30.3 Cash and cash equivalents 216.5 36.3 30.9 Maximum credit risk exposure 899.6 357.5 289.1

Classification of financial instruments The carrying amounts of financial assets and financial liabilities by valuation category in accordance with IAS 39 are shown in the table below.

Fair value through profit Loan receivables and or loss (Held for trading) trade receivables Other liabilities Carrying amount 2017-12-31 Financial assets Financial non-current assets 242.9 242.9 Trade receivables 425.5 425.5 Other receivables 14.7 14.7 Cash and cash equivalents 216.5 216.5 - 899.6 - 899.6

48 Annual Report 2017 / Advania AB Fair value through profit Loan receivables and or loss (Held for trading) trade receivables Other liabilities Carrying amount Financial liabilities Liabilities to credit 844.9 844.9 institutions, non-current Other non-current liabilities 15.3 15.3 Liabilities to credit institutions, current 111.5 111.5 Overdraft facility 95.9 95.9 Trade payables 270.6 270.6 Other current liabilities 110.3 110.3 - - 1 ,448.5 1 ,448.5

2016-12-31 Financial assets Financial non-current assets 36.5 36.5 Trade receivables 253.1 253.1 Other receivables 31.6 31.6 Cash and cash equivalents 36.3 36.3 - 357.5 - 357.5 Financial liabilities Liabilities to credit 582.1 582.1 institutions, non-current Miscellaneous non-current liabilities 0.0 0.0 Liabilities to credit institutions, current 54.1 54.1 Overdraft facility 44.4 44.4 Trade payables 119.8 119.8 Other current liabilities 47.1 47.1 - - 847.5 847.5

2015-12-31 Financial assets Financial non-current assets 14.4 14.4 Trade receivables 213.5 213.5 Other receivables 30.3 30.3 Cash and cash equivalents 30.9 30.9 - 289.1 - 289.1 Financial liabilities Liabilities to credit 517.5 517.5 institutions, non-current Other non-current liabilities 127.5 127.5 Liabilities to credit institutions, current 38.2 38.2 Overdraft facility 37.7 37.7 Trade payables 114.2 114.2 Other current liabilities 48.5 48.5 - - 883,6 883,6

The carrying amounts of all financial assets and financial liabilities, The credit margin for non-current liabilities is considered to have with the exception of non-current liabilities to credit institutions, been stable and therefore discounting of this has no signifi- are considered to be a good approximation of their fair values, as cant effect. the term and/or fixed-interest period is less than three months, which means that discounting based on prevailing market condi- Capital management tions is not considered to have any significant effect. The Group defines capital as reported equity.

Annual Report 2017 / Advania AB 49 Note 5 Segment information

The Group management evaluates the Group’s operations based on ◼◼ New market offers a global range of services, in other words geographical areas. The Group’s reportable operating segments are Communication Centers and Market place. Sweden, Iceland, Norway and New market. ◼◼ Group-wide consists mainly of the parent company’s operations. ◼◼ Sweden offers a comprehensive range of IT services, software and hardware. The accounting policies for the reportable segments correspond to those of the Group. There are no sales between segments. ◼◼ Iceland offers a comprehensive range of IT services, software and hardware, as well as expertise in the execution of com- The CEO monitors EBITDA. EBITDA is defined as the profit for the plex projects. year excluding depreciation, amortisation and impairment, financial income and expenses and tax. ◼◼ Norway offers a broad portfolio of Microsoft solutions.

Group-wide and Total Segment income and profit Sweden Iceland Norway New market eliminations Group 2017 Hardware 804.0 214.4 0.0 0.0 -0.9 1,017.6 Software 122.0 13.0 2.4 0.0 0.0 137.4 Chargeable work 262.4 427.6 81.3 0.2 -22.0 749.6 Contract 391.4 450.2 34.3 0.0 -0.9 875.0 Other 1.2 27.6 2.2 0.0 -7.0 24.0 Net revenue 1,581.0 1,132.8 120.2 0.2 -30.8 2,803.5 EBITDA 170.1 123.0 4.3 -1.8 -37.5 258.0 Depreciation, amortisation -164.3 -164.3 and impairment Financial income 14.4 14.4 Financial expenses -61.8 -61.8 Profit/loss before tax -211.7 46.3

2016 Hardware 159.4 176.3 0.0 0.0 -1.2 334.5 Software 51.0 18.7 3.4 0.0 -0.8 72.3 Chargeable work 220.1 352.0 103.0 0.0 -9.8 665.3 Contract 304.8 334.7 31.1 0.0 -6.7 663.9 Other 5.4 30.6 0.0 0.0 -25.0 11.0 Net revenue 740.7 912.3 137.5 0.0 -43.5 1,747.0 EBITDA 87.5 84.9 3.2 -1.4 -11.9 162.3 Depreciation, amortisation -106.8 -106.8 and impairment Financial income 59.4 59.4 Financial expenses -34.3 -34.3 Profit/loss before tax -81.7 80.6

2015 Net revenue 415.6 434.4 92.1 0 -11.3 930.8 Net revenue 415.6 434.4 92.1 0.0 -11.3 930.8 EBITDA 53.2 38.7 2.1 -0.9 25.5 118.6 Depreciation, amortisation -57.8 -57.8 and impairment Financial income 9.9 9.9 Financial expenses -33.3 -33.3 Profit/loss before tax -81.2 37.5

The segments’ revenue for 2015 is not divided into revenue types as the Group was formed during this year and the business structure of the Group did not provide relevant support for such division.

50 Annual Report 2017 / Advania AB Revenue from external Note 8 Auditors’ remuneration customers by country1 2017 2016 2015 Sweden 1,581.0 740.7 415.7 2017 2016 2015 Iceland 1,132.8 912.3 442.2 KPMG Norway 120.2 137.5 92.1 Audit assignment 2.3 2.1 1.0 Other 0.2 0.0 0.8 Tax advice 0.1 0.0 0.0 Group elimination -30.8 -43.5 -20.0 Other services 1.0 0.2 0.2 Total 2,803.4 1,747.0 930.8 Grant Thornton Sweden AB 1) Revenue from external customers by country is based on customer location. Audit assignment 1.0 0.0 0.0 Auditing activities in addition 1.2 0.0 0.0 Non-current assets2 2017 2016 2015 to the audit assignment Sweden 802.5 333.3 223.4 Tax advice 0.1 0.0 0.0 Iceland 375.2 545.5 526.1 Total 5.7 2.3 1.2 Denmark 0.0 0.0 0.0 Norway 16.7 12.9 15.3 Other 0.0 0.0 0.0 Audit assignment means the auditor’s remuneration for the statuto- Total 1,194.4 891.7 764.8 ry audit. This work includes reviewing the annual report and consol-

2) Non-current assets are stated excluding financial instruments and deferred idated financial statements, the accounts and the administration by tax assets the Board of Directors and the CEO, as well as fees for audit advice provided in connection with the audit assignment.

Information about larger customers The Group has no customer that alone accounts for 10% or more of the Group’s revenue. Note 9 Leases

Operating leases – lessee The Group is a lessee through operating leases relating to offic- Note 6 Distribution of revenues es, vehicles and IT equipment. The Group’s total expensed lease payments for operating leases during the year amount to SEK 67.7 (69.7), (2015: 35.9) million. Future minimum lease payments for 2017 2016 2015 non-terminable lease agreements fall due as follows: Product sales 1,243.5 543.0 255.6

Sales of services 1,540.7 1,192.9 669.0 Due date 2017 2016 2015 Other 19.4 11.0 6.2 Minimum lease payments Total 2,803.5 1,747.0 930.8 Within one year 61.8 71.0 57.7 Later than one year but 142.5 190.0 177.3 within five years Later than five years 81.7 162.1 177.5 Total 286.0 423.1 412.6 Note 7 Other operating income

2017 2016 2015 Foreign exchange gains 9.0 10.2 3.6 Revaluation of share 0.0 0.0 34.6 in associate, gradual business combination Other 4.6 5.9 3.4 Total 13.6 16.1 41.5

Annual Report 2017 / Advania AB 51 Note 10 Number of employees, staff costs and senior executives

Average number of employees 2017 Women Men Total Parent company Sweden 0 0 0 Total at parent company 0 0 0 Subsidiaries Sweden 65 360 425 Iceland 152 432 584 Norway 28 52 80 Denmark 0 1 1 Total at subsidiaries 245 845 1,090 Total for the Group 245 845 1,090

Average number of employees 2016 Women Men Total Parent company Sweden 0 0 0 Total at parent company 0 0 0 Subsidiaries Sweden 34 249 283 Iceland 153 413 566 Norway 34 57 91 Denmark 0 0 0 Total at subsidiaries 220 720 940 Total for the Group 220 720 940

Average number of employees 2015 Women Men Total Parent company Sweden 0 0 0 Total at parent company 0 0 0 Subsidiaries Sweden 19 139 158 Iceland 97 239 336 Norway 25 35 60 Denmark 0 0 0 Total at subsidiaries 141 413 554 Total for the Group 141 413 554

Board Members and other senior executives 31/12/2017 31/12/2016 31/12/2015 Parent company Women Board of Directors 2 0 0 Other senior executives, incl. CEO 0 0 0 Men Board of Directors 3 3 2 Other senior executives, incl. CEO 1 0 0 Total at parent company 6 3 2 Group Women Board of Directors 2 1 1 Other senior executives, incl. CEO 0 0 0 Men Board of Directors 8 2 2 Other senior executives, incl. CEO 8 6 6 Total for the Group 24 12 11

52 Annual Report 2017 / Advania AB Salaries and benefits

Cost of employee benefits 31/12/2017 31/12/2016 31/12/2015 Parent company Salaries and other benefits 1.3 1.4 0.0 Social security expenses 0.1 0.0 0.0 Pension costs 0.0 0.0 0.0 Subsidiaries Salaries and other benefits 778.0 622.4 315.7 Social security expenses 126.0 110.1 57.4 Pension costs 90.2 65.4 31.6 Total salaries and benefits in the Group 779.3 623.8 315.7 Total social security expenses in the Group 126.1 110.1 57.4 Total pension costs in the Group 90.2 65.4 31.6 Total for the Group 995.6 799.3 404.7

Of the parent company’s pension costs, SEK 0 (0) (2015: 0) million relates to the company’s CEO and Board of Directors. The company’s outstanding pension obligations to these total SEK 0 (0) (2015: 0) million. Remuneration of the Board of Directors amounts to SEK 0.1 (1.4) (2015: 0) million.

Of the Group’s pension costs, SEK 1.2 (0.5) (2015: 0.4) million relates to the company’s CEO and Board of Directors. The Group’s outstanding pension obligations to these total SEK 0 (0) (2015: 0) million.

Salaries and other benefits to the Board of Directors and CEO and to other employees Board and CEO Other employees 2017 Parent company 1.3 0.0 of which bonuses and similar benefits to the Board of Directors and CEO 0.0 0.0 Subsidiaries 18.7 850.8 of which bonuses and similar benefits to other employees 5.8 0.0 Total for the Group 20.0 850.8 of which bonuses and similar benefits 5.8 0.0

2016 Parent company 1.4 0.0 of which bonuses and similar benefits to the Board of Directors and CEO 0.0 0.0 Subsidiaries 11.9 610.6 of which bonuses and similar benefits to other employees 1.2 0.0 Total for the Group 13.2 610.6 of which bonuses and similar benefits 1.2 0.0

2015 Parent company 0.0 0.0 of which bonuses and similar benefits to the Board of Directors and CEO 0.0 0.0 Subsidiaries 6.5 309.2 of which bonuses and similar benefits to other employees 1.0 0.0 Total for the Group 6.5 309.2 of which bonuses and similar benefits 1.0 0.0

Annual Report 2017 / Advania AB 53 Basic salary/ Consul-tan- Variable Other Pension Benefits for senior executives Fee cy fee remuneration benefits costs Total 2017 Chairman of the Board, Thomas Ivarson 0.5 0.1 0 0 0 0.6 Board Member Birgitta Stymne Göransson 0.3 0.0 0 0 0 0.3 Board Member Bengt Engström 0.2 0.0 0 0 0 0.2 Board Member Katrin Olga Jóhannesdottír 0.1 0.0 0 0 0 0.1 Board Member Vesa Suurmune 0.0 0.0 0 0 0 0.0 Boards of subsidiaries 0.0 0.0 0 0 0 0.0 CEO Gestur G. Gestsson 4.1 0.0 1.6 0.0 1.2 6.9 Other senior executives (7 people) 12.3 0.0 4.0 0.8 3.7 20.8 Total benefits for senior executives 17.5 0.1 5.6 0.8 4.8 28.9

2016 Chairman of the Board, Thomas Ivarson 0.3 0.1 0 0 0 0.4 Board Member Birgitta Stymne Göransson 0.3 0.0 0 0 0 0.3 Board Member Bengt Engström 0.2 0.0 0 0 0 0.2 Board Member Vesa Suurmune 0 0.0 0 0 0 0.0 Boards of subsidiaries 0.9 0.0 0 0 0 0.9 CEO Gestur G. Gestsson 2.9 0.0 1.9 0.0 0.5 5.4 Other senior executives (5 people) 11.9 0.0 2.8 0.6 3.6 18.9 Total benefits for senior executives 16.5 0.1 4.8 0.6 4.1 26.1

2015 Chairman of the Board, Thomas Ivarson 0.4 0.0 0 0 0 0.4 Board Member Birgitta Stymne Göransson 0.2 0.0 0 0 0 0.2 Board Member Bengt Engström 0.1 0.0 0 0 0 0.1 Board Member Vesa Suurmune 0 0.0 0 0 0 0.0 Boards of subsidiaries 0.3 0.0 0 0 0 0.3 CEO Gestur G. Gestsson 1.9 0.0 0.0 0.1 0.4 2.4 Other senior executives (5 people) 6.8 0.0 1.2 0.3 1.2 9.4 Total benefits for senior executives 9.6 0.0 1.2 0.4 1.7 12.8

54 Annual Report 2017 / Advania AB Benefits for senior executives salary or other benefits may be made during this period, provided Fees are paid to the Chairman of the Board and the Board members that the CEO fulfils his/her obligations to the Company under his/ in accordance with the resolution of the General Meeting. Fees are her employment contract. If the CEO is permitted to commence paid for committee work. employment at or provide services for a non-competing third party during the first three months of the notice period, a deduction The Chairman of the Board has a consultancy contract with the for such income may nevertheless be made during the period company regarding the provision of advice on strategic issues to in question. the company management, which provides a maximum remuneration of SEK 132,000 per 12 months. For 2017, remuneration for Defined benefit pension plans through Alecta consultancy services is included in the reported fee at an amount For salaried employees in Sweden, the ITP 2 plan’s defined bene- of SEK 129,500 (SEK 108,000). The current contract expires on 31 fit pension obligations for old-age and family pension are secured August 2018. through an insurance policy at Alecta. According to a statement from the Swedish Financial Reporting Board, UFR 10 Reporting of The General Meeting has adopted the following guidelines in rela- ITP 2 pension plan financed through insurance at Alecta, this is a tion to employee benefits for the management. multi-employer defined benefit plan. For the 2017, 2016 and 2015 financial years, the company has not had sufficient access to the Benefits for the CEO and other senior executives comprise basic information required in order to report its proportional share of the salary, variable remuneration, other benefits, pension and financial plan obligation and of the plan assets and costs and has therefore instruments, etc. Other senior executives refers to the seven people been unable to report the plan as a defined benefit plan. The ITP who together with the CEO form the Group management. 2 pension plan, which is secured through an insurance policy at Alecta, is therefore reported as a defined contribution plan. The The distribution between basic salary and variable remuneration premium for the defined benefit old-age and family pension is in- must be in proportion to the responsibility and authority of the ex- dividually calculated and is dependent, among other things, on ecutive. The variable remuneration of the CEO is capped at 46% of salary, pension previously earned and expected remaining period the basic salary. For other senior executives, the variable remuner- of service. ation is capped at 25–50% of the basic salary. The variable remuneration is based on the outcome in relation to individual targets. The The anticipated fees for the next reporting period for ITP 2 insurance CEO’s benefits are specified in ISK. arranged at Alecta amount to SEK 11.5 (10.2) (2015: 10.2) million.

Pension benefits and other benefits for the CEO and other senior The Group’s share of the total fees for the plan and the Group’s share executives are paid as part of the total employee benefits. of the total number of active members in the plan are 0.04443% and 0.04295% respectively (0.04353% and 0.04321% respectively) (2015: Pensions 0.04400% and 0.03903% respectively). The retirement age for the CEO is 67. The pension premium will amount to 19.3% of the pensionable salary. Pensionable salary The collective funding level is the market value of Alecta’s assets as means the basic salary plus variable remuneration. The retirement a percentage of the insurance commitments, calculated in accord- age for other senior executives varies between 65 and 67. The pen- ance with Alecta’s actuarial methods and assumptions, which do sion agreement states that the pension premium will amount to not comply with IAS 19. The collective funding level is normally per- 20–35% of the pensionable salary if premium-based. Those senior mitted to vary between 125% and 155%. If Alecta’s collective funding executives with defined benefit pension agreements are covered level falls below 125% or exceeds 155%, measures must be taken in by the ITP 2 plan. order to create the conditions for the funding level to return within the normal range. If funding is too low, possible measures include Agreements on severance pay increasing the agreed price for new registrations and extending In the event of notice of termination given by the Company, a notice existing benefits. If funding is too high, possible measures include period of 18 months applies, the first three of which are subject to applying premium reductions. an obligation to work. If the CEO gives notice of termination, a notice period of 12 months applies, the first three of which are subject At the end of 2017, Alecta’s surplus in the form of the collective fund- to an obligation to work. From month four and for the remaining ing level was 154% (149%) (2015: 153%). notice period, the CEO is entitled to commence employment at or provide services for a non-competing third party. No deduction of income from such third party from the CEO’s

Annual Report 2017 / Advania AB 55 Share-based payments options in Sweden, but with the same underlying terms. The market The anticipated volatility in the share price is based on the historical value was calculated by an independent party using the Black & volatility (based on the remaining option period), adjusted for the Scholes valuation model. The employee share options were issued anticipated changes in future volatility as a result of available public free of charge, while the subscription options were paid in cash. information. The options have a period of three years from the date of allocation All employee share options and subscription options issued in and the options cannot be transferred. The options are earned at Advania Holding hf were exercised in December 2017, which meant a rate of 1/3 per year and entitlement to the options endures only that 194,725,592 class C shares in the same company were issued to the extent they are redeemable on cessation of employment. to option holders (“Option shareholders”). On 22 December 2017, Each option grants the right to acquire one share at a predeter- Advania AB (publ) made a share issue to the Option shareholders mined price. through which the Option shareholders contributed their shares in Advania Holding hf to Advania AB (publ) in exchange for 2,495,178 Following the changes to the Group company structure in 2015, the ordinary shares and 154,229 class D shares in Advania AB (publ). share option scheme in Advania Ísland ehf. was closed on 1 January 2016 and an equivalent share option scheme was issued instead in In December 2014, the Icelandic Group company Advania Ísland the Icelandic Group company Advania Holding hf., company regis- ehf., company registration no. 590269-7199, issued two share op- tration no. 670514-2340, after conversion to correspond to the same tion schemes for 20 key personnel at Advania Ísland ehf. and 17 key percentage share. personnel at the subsidiary Advania AB in Sweden. Employee share options were issued in Iceland and subscription The terms of the schemes are summarised below:

Outstanding share option schemes Option scheme Advania Ísland ehf Option scheme Advania Holding hf Scheme: Employees of Employees of Advania Employees of Employees of Advania Advania Ísland ehf. Sverige AB Advania Ísland ehf. Sverige AB Category: Employee opt. Subscription opt. Employee opt. Subscription opt. Max. number of options: 42,500,000 43,000,000 93,500,000 101,200,000 Max. number of shares: 42,500,000 43,000,000 93,500,000 101,200,000 Shares in company: Advania Ísland ehf. Advania Ísland ehf. Advania Holding hf. Advania Holding hf. Number of participants: 20 17 20 17 Redemption price per option, ISK: 4.4 4.4 0.58 0.58 Maturity date: Closed Closed Closed Closed

Change in number of outstanding options, thousands At beginning of year, 1 Jan 2017 - - 74,800 101,200 Issued - - 167 - Exercised - - -74,967 -101,059 Withdrawn - - - - Lapsed - - - -141 At end of year, 31 Dec 2017 - - - -

At beginning of year, 1 Jan 2016 42,500 43,000 - - Issued - - 93,500 101,200 Exercised - - -18,700 - Withdrawn -42,500 -43,000 - - Lapsed - - - - At end of year, 31 Dec 2016 - - 74,800 101,200

At beginning of year, 1 Jan 2015 42,500 43,000 - - Issued - - - - Exercised - - - - Withdrawn - - - - Lapsed - - - - At end of year, 31 Dec 2015 42,500 43,000 - -

56 Annual Report 2017 / Advania AB Staff costs for share-based payments (SEK million) 31/12/2017 31/12/2016 31/12/2015 Costs attributable to options settled through equity 1.4 1.5 0.7 Social security expenses 0.1 0.0 0.0 1.5 1.5 0.7

Liabilities for social security expenses for share- based payments (SEK million) 31/12/2017 31/12/2016 31/12/2015 Social security expenses 0.1 0.0 0.0 0.1 0.0 0.0

Employee share option scheme Input data in the model for options in Advania Holding hf.: The calculated fair value on the date of allocation in relation to the options allocated during 2016 was ISK 0.6 per option. The fair value a) the options are allocated free of charge and earned over on the date of allocation is calculated using an adapted version a three-year period. of the Black-Scholes valuation model. This includes a Monte Carlo b) redemption price: ISK 0.6 simulation model, which takes into account the redemption price, c) date of allocation: 31 December 2014 the term of the option, the share price on the date of allocation d) maturity date: 31 December 2017 and the anticipated volatility in the share price and the risk-free e) share price on date of allocation: ISK 0.6 interest rate for the term of the option. Each option grants the right f) anticipated volatility in the company’s share price: 31% to acquire one share at a predetermined price. g) risk-free interest rate: 5.3%

Following the changes to the Group company structure in 2015, the share option scheme in Advania Ísland ehf. was closed on 1 January 2016 and an equivalent share option scheme was issued instead in the Icelandic Group company Advania Holding hf., company registration no. 670514-2340, after conversion to correspond to the same percentage share.

Note 11 Other operating expenses Note 13 Financial expenses

2017 2016 2015 2017 2016 2015 Foreign exchange losses -10.4 -6.8 -3.3 Interest expenses, -3.2 0.0 -14.3 Group companies Other 0.0 0.0 -0.6 Interest expenses, other -42.6 -33.3 -17.2 Total -10.4 -6.8 -4.0 Foreign exchange differences -15.4 -0.8 -1.8 Other -0.5 -0.2 0.0 Total -61.8 -34.3 -33.3 Note 12 Financial income

2017 2016 2015 Interest income, 3.1 0.6 1.0 Group companies Interest income, other 2.8 5.9 3.6 Foreign exchange differences 8.6 53.0 5.4 Total 14.4 59.4 9.9

Annual Report 2017 / Advania AB 57 Note 14 Tax

2017 2016 2015 Current tax Current tax on profit/loss for the year -9.2 -7.3 -3.9 Deferred tax Deferred tax attributable to temporary differences -14.1 -12.3 -2.4 Total -23.3 -19.6 -6.3

Reconciliation of tax expense for the year 2017 2016 2015 Profit/loss before tax 46.3 80.6 37.5 Tax at applicable tax rate for parent company (22%) -10.2 -17.7 -8.3 Tax effect of different tax rates for foreign subsidiaries -0.8 1.2 0.1 Other non-deductible expenses -15.7 -3.9 -6.6 Non-taxable income 6.3 4.1 9.3 Increase in tax loss carry-forwards without 0.0 -2.6 -2.0 corresponding capitalisation of deferred tax Reversal of flat-rate tax -2.6 0.0 0.0 Adjustments recognised in the current year for current tax in previous years 0.1 0.0 0.7 Other -0.5 -0.7 0.3 Total -23.3 -19.6 -6.3 Recognised tax expense for the year -23.3 -19.6 -6.3

Deferred tax assets and deferred tax liabilities The Group’s deferred tax assets and deferred tax liabilities relate to the following items:

31/12/2017 31/12/2016 31/12/2015 Deferred tax asset Inventories 0.0 9.3 5.5 Trade receivables 0.9 2.6 1.1 Other temporary differences 2.8 0.9 1.5 Tax loss carry-forward 37.4 57.6 57.6 Deferred tax asset 41.1 70.4 65.7 Offsetting -9.9 -28.0 -18.6 Net deferred tax asset/liability 31.2 42.4 47.2

Deferred tax liability Intangible assets 64.6 55.9 46.6 Inventories 5.9 0.0 0.0 Tax allocation reserves 0.0 6.4 4.0 Financial liabilities 0.0 9.0 0.2 Other temporary differences 2.3 0.3 0.0 Deferred tax liability 72.8 71.6 50.7 Offsetting -9.9 -28.0 -18.6 Net deferred tax asset/liability 62.9 43.6 32.1

Deferred tax assets are valued depending on how the carrying other things, expectations of the future and the facts available at the amount of the corresponding asset or liability is expected to be time the assessment is made. received or settled respectively. The amounts are based on the tax rates and tax rules that have been adopted on the balance sheet date At 31/12/2017, the Group has estimated loss carry-forwards totalling and have not been discounted to present value. SEK 444.0 (515.0) (2015: 472.2) million, of which SEK 284.2 (257.2) (2015: 230.7) million relates to loss carry-forwards for which no deferred tax Deferred tax assets attributable to loss carry-forwards are valued no asset has been capitalised. These relate to the parent company higher than the amount that is likely to be recovered based on future Advania AB and the Norwegian subsidiary Advania Norge AS. taxable profits. The Group analyses and assesses each case of un- capitalised items separately. These decisions are based on, among The tax rate for the calculation of deferred tax is determined according to local tax rules.

58 Annual Report 2017 / Advania AB Note 15 Earnings per share Earnings per share after dilution For earnings per share after dilution, the amount per share after di- Earnings per share before and after dilution lution that is attributable to holders of ordinary shares in the parent The following profit and weighted average number of ordinary company must be calculated. At some of the Group’s subsidiaries in shares have been used in the calculation of earnings per share be- 2016 and 2015, there were employee share options and subscription fore and after dilution: options that could lead to new ordinary shares in these subsidiaries, which in this event could reduce the profit in the Group that is 2017 2016 2015 attributable to holders of ordinary shares in the parent company. Profit for the year attributable 16,719,423 48,493,000 25,759,000 As the data that is required in order to calculate this dilution effect to the shareholders of is not available, in particular the market price for ordinary shares the parent company in these subsidiaries, no quantitative information about any such Weighted average number of 25,072,164 25,000,000 25,000,000 dilution effect was provided in 2016 and 2015. ordinary shares outstanding, before dilution¹ As at 31 December 2017, there are no employee share options and/ Earnings per share 0.7 1.9 1.0 or subscription options issued. before dilution, SEK

1) The weighted average number of shares, before dilution, has been adjusted retroactively for a 50,000:1 share split that took place after the balance sheet date.

Note 16 Investments in subsidiaries

The names of several of the companies in the Group changed during 2017. For business combinations, see Note 33. Advania Norge AS and Advania AS merged on 1 January 2017.

The Group has the following subsidiaries as at 31 December 2017:

Name Co. reg. no. and country of operation Activities Shareholding (%)¹ Advania Holding hf. 670514-2340, Reykjavik Owns and manages shares in IT companies. 100.0% Advania Holding AB 556616-7598, Stockholm Owns and manages shares in IT companies. 100.0% Advania Sverige AB 556214-9996, Stockholm IT consultancy and trading in IT-related products. 100.0% Knowledge Factory Consulting AB 556713-6840, Stockholm IT consultancy. 100.0% Virtus AB 556496-7221, Stockholm No current activities – previously IT consultancy. 100.0% Caperio AB 556583-4875, Stockholm IT consultancy and trading in IT-related products. 100.0% Caperio Holding AB 556680-2673, Stockholm Owns and manages shares in IT companies. 100.0% Caperio Finance AB 556737-7840, Stockholm Provision of financing solutions and 51.0% handling of used IT equipment. Advania Ísland ehf. 590269-7199, Reykjavik IT consultancy and trading in IT-related products. 100.0% Advania Holding AS 916 156 146, Oslo Owns and manages shares in IT companies. 100.0% Advania Norge AS 967 372 668, Oslo IT consultancy. 100.0% Advania Holding A/S 371 44 282, Copenhagen Owns and manages shares in IT companies. 100.0% Advania Danmark A/S 367 15 103, Copenhagen Provision of turnkey solutions within IT. 100.0%

¹ Percentage shareholding refers to the share of ownership and share of votes held by the parent company. The share of votes in Caperio Finance AB is 51.9%.

Annual Report 2017 / Advania AB 59 The Group has the following subsidiaries as at 31 December 2016:

Co. reg. no. and coun- Name try of operation Activities Shareholding (%)¹ Advania Norden hf. 670514-2340, Reykjavik Owns and manages shares in IT companies. 81.0% Avania Holding AB 556616-7598, Stockholm Owns and manages shares in IT companies. 100.0% Advania AB 556214-9996, Stockholm IT consultancy and trading in IT-related products. 100.0% Knowledge Factory Consulting AB 556713-6840, Stockholm IT consultancy. 100.0% Virtus AB 556496-7221, Stockholm No current activities – previously IT consultancy 100.0% Advania ehf. 590269-7199, Reykjavik IT consultancy and trading in IT-related products. 100.0% Advania Data centers ehf 571115-0690, Reykjavik IT consultancy and trading in IT-related products. 100.0% ADC ehf. 410216-1160, Reykjavik Owns and manages shares in IT companies. 100.0% Advania Holding Norway AS 916 156 146, Oslo Owns and manages shares in IT companies. 100.0% Advania AS 913 332 962, Oslo IT consultancy. 100.0% Advania Holding Denmark A/S 371 44 282, Copenhagen Owns and manages shares in IT companies. 100.0% Advania A/S 367 15 103, Copenhagen Provision of turnkey solutions within IT. 100.0% Advania Ventures AB 559021-6031, Stockholm Owns and manages shares in IT companies. 100.0% Advania MobilePay ehf. 610600-2390, Reykjavik Trading in products and services within 57.9% mobile payment methods. Advania Mobilepay AB 559080-6690, Stockholm Trading in products and services within 100.0% mobile payment methods. Advania AX AS 967372668, Oslo IT consultancy. 100.0%

¹ Percentage shareholding refers to the share of ownership and share of votes held by the parent company.

The Group has the following subsidiaries as at 31 December 2015:

Name Co. reg. no. and country of operation Activities Shareholding (%)¹ Advania Norden hf. 670514-2340, Reykjavik Owns and manages shares in IT companies. 81.4% Advania AX AS 967372668, Oslo IT consultancy. 100.0%

¹ Percentage shareholding refers to the share of ownership and share of votes held by the parent company.

Non-controlling interests The table below provides information about subsidiaries in the Group that are not wholly owned, but in which there is a significant non-controlling interest (SEK million):

Profit attributable Country of registra- Non-controlling to non-controlling Accumulated non-con- Name tion and operation interest (%)1 interests trolling interests 2017-12-31 Caperio Finance AB Sweden 49.0% 4.9 47.2 Advania Holding hf. Iceland N/A 3.3 N/A Advania MobilePay ehf. Iceland N/A -1.9 N/A Total 6.3 47.2 Caperio Finance AB changed its name to Advania Finance AB on 25 January 2018.

2016-12-31 Advania Norden hf. Iceland 19.3% 13.2 40.1 Advania MobilePay ehf. Iceland 42.1% -0.7 3.3 Total 12.5 43.4

2015-12-31 Advania Norden hf. Iceland 18.6% 5.4 27.6 Advania MobilePay ehf. Iceland N/A N/A N/A Total 5.4 27.6

¹ Percentage shareholding refers to the share of ownership and share of votes

60 Annual Report 2017 / Advania AB Summarised financial information is provided below for each subsidiary with a non-controlling interest that is of significance to the Group. The amounts indicated for each subsidiary are before intra-Group eliminations.

Caperio Finance AB 31/12/2017 Current assets 48.7 Non-current assets 1.1 Current liabilities -24.0 Non-current liabilities 0.0 Equity attributable to the shareholders of the parent company -25.8 Non-controlling interests 0.0

2017 Income 252.7 Expenses -240.2 Financial income 0.3 Tax for the year -2.8 Profit/loss for the year 10.0

5.1 Profit attributable to the shareholders of the parent company 4.9 Profit attributable to non-controlling interests 10.0 Profit/loss for the year Dividend paid to non-controlling interests 1.9 Cash flow from operating activities 19.4 Cash flow from investing activities 0.0 Cash flow from financing activities 21.3 Increase/decrease in cash and cash equivalents

Advania Holding hf. 31/12/2017 31/12/2016 31/12/2015 Current assets 375.2 858.0 926.3 Non-current assets 229.8 427.4 456.5 Current liabilities -209.0 -520.5 -557.4 Non-current liabilities -147.3 -594.5 -646.3 Equity attributable to the shareholders of the parent company -248.7 -170.4 -179.2 Non-controlling interests 0.0 0.0 0.0

2017 2016 2015 Income 1,173.3 1,638.0 1,597.2 Expenses -1,191.7 -1,600.9 -1,586.8 Profit/loss for the year -18.4 37.0 10.4

Profit attributable to the shareholders of the parent company -21.7 37.4 13.2 Profit attributable to non-controlling interests 3.3 -0.4 -2.8 Profit/loss for the year -18.4 37.0 10.4

Other comprehensive income attributable to the 72.1 -46.4 -22.4 shareholders of the parent company Other comprehensive income attributable to non-controlling interests 1.0 0.0 0.0 Other comprehensive income for the year 73.1 -46.4 -22.4

50.4 -9.1 -9.1 Total comprehensive income attributable to the 4.3 -0.4 -2.8 shareholders of the parent company Total comprehensive income attributable to non-controlling interests 54.7 -9.4 -12.0 Total comprehensive income for the year Dividend paid to non-controlling interests 137.7 138.8 117.0

Annual Report 2017 / Advania AB 61 Advania Holding hf. 31/12/2017 31/12/2016 31/12/2015 Cash flow from operating activities 335.6 -98.5 -299.7 Cash flow from investing activities -397.6 -46.8 196.0 Cash flow from financing activities 75.7 -6.5 13.2 Increase/decrease in cash and cash equivalents

Advania MobilePay ehf. 31/12/2016 Current assets 8.9 Non-current assets 0.0 Current liabilities -1.0 Non-current liabilities -0.1 Equity attributable to the shareholders of the parent company -7.8 Non-controlling interests 0.0

2016 Income 1.7 Expenses -5.2 Profit/loss for the year -3.5

Transactions with non-controlling interests Advania Holding hf. purchased 59.9% of the shares in Advania Ísland ehf. in 2014 and the remaining 40.1% in 2015 and thus gained control over the company. Advania Holding hf. then owned all the operational companies in the Advania Group.

In 2016, the Group purchased 48.5% of the shares in Advania MobilePay ehf. Island and increased its shareholding to 60.5% in 2017. The shares in Advania MobilePay ehf. were sold in 2017.

The Group acquired 100% of the shares in Caperio Holding AB, which holds 51.0% of the shares in Caperio Finance AB, in 2017.

Advania Holding hf. 2017 2016 2015 Carrying amount of non-controlling interests 0.0 0.0 0.0 Consideration received from non-controlling interests 5.2 0.0 0.0 Transactions with non-controlling interests 5.2 0.0 0.0

62 Annual Report 2017 / Advania AB Note 17 – Intangible assets

Other Customer Trade- in-tangible Goodwill relations marks Software assets Total Opening cost at 1 January 2017 404.7 203.7 83.8 108.0 17.0 817.1 Purchases 0.0 0.0 1.3 18.7 0.0 19.9 Acquisitions 133.2 64.3 5.3 12.9 0.0 215.7 Sales/disposals -57.4 -1.9 0.0 -44.5 -5.8 -109.6 Translation differences for the year -5.1 -4.0 -3.3 -3.6 -0.3 -16.4 Closing accumulated cost at 31 December 2017 475.4 262.0 87.0 91.4 10.9 926.8 Opening amortisation at 1 January 2017 -43.3 0.0 -51.1 -11.8 -106.2 Sales/disposals 1.9 0.0 44.5 3.4 49.8 Amortisation for the year -24.4 -2.9 -34.7 -1.6 -63.6 Translation differences for the year 2.0 0.0 2.8 0.2 5.1 Closing accumulated amortisation at 31 December 2017 0.0 -63.8 -2.9 -38.5 -9.7 -114.9 Carrying amount at 31 December 2017 475.4 198.3 84.1 52.9 1.2 811.9

Opening cost at 1 January 2016 378.0 161.8 67.6 53.0 18.0 678.4 Purchases 1.9 0.0 0.0 0.0 0.0 1.9 Other investments 0.0 0.0 0.0 28.4 0.0 28.4 Sales/disposals 0.0 0.0 0.0 -2.6 -3.0 -5.6 Reclassifications -24.9 15.9 0.0 11.6 0.2 2.8 Translation differences for the year 49.8 26.0 16.1 17.6 1.8 111.3 Closing accumulated cost at 31 December 2016 404.7 203.7 83.8 108.0 17.0 817.1 Opening amortisation at 1 January 2016 -13.2 0.0 -15.8 -11.2 -40.2 Reversed amortisation 0.0 0.0 2.5 3.0 5.5 Reclassifications 0.0 0.0 2.2 0.0 2.2 Amortisation for the year -19.7 0.0 -28.6 -2.4 -50.6 Translation differences for the year -10.4 0.0 -11.5 -1.2 -23.2 Closing accumulated amortisation at 31 December 2016 0.0 -43.3 0.0 -51.1 -11.8 -106.2 Carrying amount at 31 December 2016 404.7 160.3 83.8 56.9 5.2 710.9

Opening cost at 1 January 2015 0.0 0.0 0.0 0.0 0.0 0.0 Purchases 0.0 0.0 0.0 0.0 0.0 0.0 Acquisitions 362.5 156.8 65.7 43.5 7.0 635.6 Other investments 0.0 0.0 0.0 8.6 0.4 9.0 Sales/disposals -0.6 0.0 0.0 0.0 0.0 -0.6 Translation differences for the year 16.2 5.0 2.0 0.8 0.6 24.6 Closing accumulated cost at 31 December 2015 378.0 161.8 67.6 53.0 8.1 668.5 Opening amortisation at 1 January 2015 0.0 0.0 0.0 0.0 0.0 0.0 Reclassifications 0.0 0.0 -2.7 0.0 -2.7 Amortisation for the year -11.7 0.0 -15.4 -0.9 -28.0 Translation differences for the year -1.6 0.0 2.3 -0.5 0.3 Closing accumulated amortisation at 31 December 2015 0.0 -13.2 0.0 -15.8 -1.4 -30.3 Carrying amount at 31 December 2015 378.0 148.6 67.6 37.2 6.7 638.2

Annual Report 2017 / Advania AB 63 Finance leases included in intangible assets, software: 31/12/2017 31/12/2016 31/12/2015 Software held through finance leases is included 29.9 22.1 10.3 at a carrying amount of (SEK million):

For further information about finance leases within the Group and the maturity dates of finance lease liabilities, see Note 29.

Impairment testing of goodwill Goodwill has been allocated to the following cash-generating units:

Goodwill by cash-generating unit: 31/12/2017 31/12/2016 31/12/2015 Iceland 180.6 187.3 216.8 Sweden 282.8 149.7 149.7 Norway 12.0 12.6 11.5 Advania Data Centers ehf. 0.0 55.1 0.0 Carrying amount 475.5 404.7 378.0

Goodwill is tested for impairment annually and when there are indi- The forecast period, discount rates (WACC), growth rate, EBITDA cations that impairment is necessary. The recoverable amount for a margin and inflation that are used to extrapolate the cash flows cash-generating unit is established by calculating the value in use. beyond the forecast period vary for the different cash-generating The calculations are made using estimated future cash flows based units in the manner shown below. on financial forecasts approved by the management that cover a five-year period. In the assessment of future cash flows, assump- The estimated growth rate is based on industry forecasts and the tions are initially made about sales growth, EBITDA margin and expectations of the company management. The forecast EBITDA weighted average cost of capital (WACC). Anticipated cash flows margin has been based on previous results and on the manage- are discounted using a weighted average cost of capital (WACC) for ment’s market expectations. The management considers that the the relevant cash-generating unit. WACC is derived from the risk- final values for growth and EBITDA margin will not in any case ex- free interest rate in local currency, the country’s risk premium, the ceed the average growth rates for the markets in which the com- business risk represented by estimated beta, the local stock market pany operates. The estimated inflation rate is based on the future risk premium and an estimated reasonable borrowing cost above expectations of the central bank in each country. the risk-free interest rate.

2017 2016 2015 Advania Data Year/Percentage Iceland Sweden Norway Iceland Sweden Norway Centers ehf. 1) Iceland Sweden Norway Forecast period (years) 5 5 5 5 5 5 5 5 5 5 WACC %, after tax 13.2 9.7 10.2 12.7 9.8 10.2 12.7 13.6 11.5 10.2 Growth rate after the 3.8 3.0 1.0 3.8 3.0 1.0 3.8 3.3 3.0 1.0 forecast period (%) EBITDA margin after the 10.3 8.8 13.0 8.7 11.7 11.7 16.8 9.2 11.6 9.0 forecast period (%) Inflation rate (%) 2.5 2 2.5 3.0 2.0 2.5 3.0 2.5 2.0 2.5 Tax rate (%) 20 22 28 20 22 28 20 20 22 28

1) Advania Data Centers ehf was in the Sweden cash-generating unit in 2015..

Based on the assumptions described above, the value in use exceeds the recognised value of goodwill for each cash-generating unit. Reasonable changes to the above assumptions would not result in any need for impairment with regard to goodwill for the respective cash-generating units for the years 2017, 2016 and 2015.

64 Annual Report 2017 / Advania AB Note 18 Equipment, tools, fixtures and fittings

Opening cost at 1 January 2017 225.8 Purchases 135.3 Business combinations 16.1 Sales/disposals -140.1 Translation differences for the year -10.5 Closing accumulated cost at 31 December 2017 226.6 Opening depreciation at 1 January 2017 -81.5 Sales/disposals 88.6 Depreciation for the year -100.7 Translation differences for the year 6.6 Closing accumulated depreciation at 31 December 2017 -87.0 Closing accumulated write-downs at 31 December 2017 0.0 Carrying amount at 31 December 2017 139.6

Opening cost at 1 January 2016 124.6 Purchases 75.0 Sales/disposals -16.5 Translation differences for the year 42.6 Closing accumulated cost at 31 December 2016 225.8 Opening depreciation at 1 January 2016 -12.5 Reversed depreciation on sales and disposals 12.0 Depreciation for the year -56.2 Translation differences for the year -24.8 Closing accumulated depreciation at 31 December 2016 -81.5 Carrying amount at 31 December 2016 144.3

Opening cost at 1 January 2015 0.0 Purchases 28.0 Business combinations 108.1 Sales/disposals -22.8 Translation differences for the year 11.3 Closing accumulated cost at 31 December 2015 124.6 Opening depreciation at 1 January 2015 0.0 Business combinations 0.0 Reversed depreciation on sales and disposals 22.3 Depreciation for the year -29.5 Translation differences for the year -5.2 Closing accumulated depreciation at 31 December 2015 -12.5 Carrying amount at 31 December 2015 112.2

Finance leases included in equipment, tools, fixtures and fittings 31/12/2017 31/12/2016 31/12/2015 Equipment held through finance leases is included 112.7 62.7 27.4 at a carrying amount of (SEK million):

For further information about finance leases within the Group and the maturity dates of finance lease liabilities, see Note 29.

Annual Report 2017 / Advania AB 65 Note 19 Receivables from the parent company

SEK million 31/12/2017 31/12/2016 31/12/2015 Accumulated cost At beginning of year 17.1 0.0 0.0 Lending 221.9 16.5 0.0 Additional receivables 0.0 0.6 0.0 Carrying amount at end of year 239.0 17.1 0.0

Note 20 Shares in associates and joint ventures

31/12/2017 31/12/2016 31/12/2015 Accumulated cost At beginning of year 0.0 0.0 113.3 Reclassifications 0.0 0.0 -108.7 Share in profit of associates 0.0 0.0 -10.7 Translation differences for the year 0.0 0.0 6.1 Carrying amount at end of year 0.0 0.0 0.0

See Note 33 for details of reclassification

Note 21 Other non-current receivables

31/12/2017 31/12/2016 31/12/2015 Opening cost 19.4 14.4 0.0 Additional receivables 2.1 23.0 23.6 Settled receivables -17.5 -14.2 -0.8 Reclassifications, short-term element 0.0 -4.4 -8.6 Translation differences for the year -0.1 0.5 0.3 Closing accumulated cost 3.9 19.4 14.4 Carrying amount 3.9 19.4 14.4

Note 22 Trade receivables

31/12/2017 31/12/2016 31/12/2015 Trade receivables, gross 432.6 260.1 219.8 Provisions for doubtful receivables -7.1 -7.0 -6.3 Trade receivables, net after provisions for doubtful receivables 425.5 253.1 213.5

The company management considers that the carrying amount for trade receivables, net after provisions for doubtful receivables, corresponds to the fair value.

31/12/2017 31/12/2016 31/12/2015 Provisions for doubtful receivables at beginning of year 7.0 6.3 5.7 Provisions for doubtful trade receivables for the year 2.3 0.7 0.6 Reversal of unused amounts -2.2 0.0 0.0 Total 7.1 7.0 6.3

66 Annual Report 2017 / Advania AB Age analysis of trade receivables (SEK million) 31/12/2017 31/12/2016 31/12/2015 Overdue by 0–30 days 418.0 226.5 165.9 Overdue by 31–60 days 7.0 14.1 16.3 Overdue by 61–90 days 1.6 4.4 1.9 Overdue by >90 days -1.0 8.1 29.4 Total 425.5 253.1 213.5

The company’s assessment is that payment will be received for trade receivables that are overdue but have not been written down, as the payment history of the customers is good.

Note 23 Prepaid expenses and accrued income

31/12/2017 31/12/2016 31/12/2015 Prepaid expenses 63.4 56.6 58.8 Accrued income 52.0 27.1 28.6 Carrying amount 115.4 83.7 87.3

Note 24 Cash and cash equivalents

31/12/2017 31/12/2016 31/12/2015 Available balances at banks and other credit institutions 171.4 29.8 30.9 Short-term liquid investments 45.0 6.6 - Total 216.5 36.3 30.9

Short-term investments on the balance sheet at the end of the year totalled SEK 45 (6.6) (2015: 0) million and comprised deposits with a term of up to three months.

Note 25 Share capital Note 27 Translation reserves

At the end of the 2017 financial year, the registered share capital Translation reserves relate to currency translation differences on was 27,649,407 shares at a par value of SEK 0.02, giving a total share the translation of foreign operations to SEK, which are recognised capital of SEK 552.988. in other comprehensive income.

In 2016 and 2015, the registered share capital was 500 shares at a par value of SEK 100.

Note 26 Other contributed capital

Other contributed capital in 2016 and 2015 consists of shareholder contributions and premiums for subscription options. In 2017, other contributed capital was affected by a new share issue amounting to SEK 15.1 million. The subscription options were closed on 1 December 2017 and after this date Other contributed capital consists solely of shareholder contributions and capital contributed in the new share issue.

Annual Report 2017 / Advania AB 67 Note 28 Non-current liabilities

SEK million 31/12/2017 31/12/2016 31/12/2015 Bank loans 813.6 555.5 517.7 Liabilities to the parent company 0.0 0.0 127.5 Leasing liabilities 142.8 80.7 38.0 Less short-term element -111.5 -54.1 -38.2 Deferred tax liability 62.9 43.6 32.1 Other non-current liabilities 15.3 0.0 0.0 Carrying amount 923.1 625.7 677.1

The Group’s utilised overdraft facility amounts to SEK 95.9 (44.4) non-current liabilities and short-term overdraft facilities for work- (2015: 37.7) million. The overdraft limit is SEK 247 (117.8) (2015: ing capital during 2017. A financing agreement was signed on 105.8) million. 17 November 2017 with a bank consortium comprising Skandinaviska Enskilda Banken AB (SEB) and Landsbankinn hf. The term of the The subsidiary Advania Sverige AB has an approved credit limit agreement is 3 +1+1 years. This long-term financing provides fund- relating to the leveraging of trade receivables of SEK 0 (30,000) ing of SEK 650 million and ISK 5,700 million. Of the SEK 650 million, (2015: 50,000) million, of which SEK 0 (0) (2015: 10,960) million was SEK 50 million and SEK 200 million represent scope for borrowing utilised at the end of the year and is included in the short-term el- to fund company acquisitions. The SEK 200 million is conditional on ement above. the company carrying out an IPO or rights issue before 31 August 2018. The overdraft facility amounts to SEK 150 million, plus a short- See Note 31 for details of pledged assets in relation to the above term overdraft facility of a further SEK 50 million until 17 May 2018. liabilities. Icelandic subsidiary Advania Island ehf. has further overdraft facilities of ISK 500 million and USD 0.95 million. The significant con- The financial liabilities of the Group are subject to special condi- ditions stipulated by the financing agreement relate to net debt/ tions, which are reported quarterly. As none of the special condi- EBITDA and the interest coverage ratio, which are reported quar- tions were fulfilled at 31/12/2016, exemption from the conditions terly. All conditions under the financing agreement were fulfilled as was granted prior to the balance sheet date and this applied for at the balance sheet date. the whole of 2017. The assessment of the Board at 31/12/2016 was that the conditions would be fulfilled at 31/12/2017. The financial Pledged assets for the Group’s borrowing are described in Note 31. liabilities of the Group have fulfilled the conditions since 22/11/2017. Advania AB refinanced the Group’s

Note 29 Finance leases

The Group has entered into finance leases in relation to intangible assets (software) and property, plant and equipment (equipment, tools, fixtures and fittings). The lease agreements are non-terminable and the lease terms vary from one to five years. Variable charges relate primarily to interest. The maturity dates of the finance lease liabilities are shown below:

Maturity date: 31/12/2017 31/12/2016 31/12/2015 Within one year 71.3 38.5 17.9 Later than one year but within five years 71.5 42.2 20.2 Later than five years 0.0 0.0 0.0 Total 142.8 80.7 38.0

Long-term element (included in balance sheet 71.5 42.2 20.2 item: Liabilities to credit institutions) Short-term element (included in balance sheet 71.3 38.5 17.9 item: Liabilities to credit institutions) Total 142.8 80.7 38.0

68 Annual Report 2017 / Advania AB Note 30 Accrued expenses and prepaid income

SEK million 31/12/2017 31/12/2016 31/12/2015 Accrued salaries 36.8 62.1 55.0 Accrued holiday pay 74.8 69.4 59.3 Accrued social security expenses 47.5 0.0 0.0 Prepaid income 100.0 61.8 55.3 Other items 27.9 49.9 48.2 Carrying amount 287.0 243.1 217.8

Note 31 Pledged assets and contingent liabilities

Pledged assets (SEK million) 31/12/2017 31/12/2016 31/12/2015 Floating charges 0.0 60.0 60.0 Assets with retention of title 142.6 72.2 37.7 Trade receivables/Inventories 113.7 252.9 215.9 Equipment 0.0 89.6 72.4 Total 256.3 474.6 386.0

In addition to the above pledged assets, the shares in Advania Holding hf., Advania Holding AB, Advania Ísland ehf., Advania Holding Norway AS and Advania Holding Denmark A/S have been pledged as collateral for liabilities to credit institutions.

Contingent liabilities (SEK million) 31/12/2017 31/12/2016 31/12/2015 Guarantee commitments 9.5 0.0 0.0 Public subsidies 0.0 0.0 0.0 Other contingent liabilities 42.3 15.8 15.8 Total 51.8 15.8 15.8

Contingent liabilities relate to the subsidiary Advania Finance AB made to one of the sellers, Framtakssjóður Íslands, when Advania (formerly Caperio Finance AB) and constitute a repurchase obliga- was acquired by its current owners. The undertaking is to effect tion (right and obligation) in relation to residual values for financed a listing in Iceland no later than the end of 2018 and to provide IT equipment issued to various funding partners for a total of SEK Framtakssjóður Íslands with the opportunity to acquire 20% of the 26.5 million. The repurchase obligation is given a low valuation in shares offered in such a listing. If this does not take place, an ad- relation to the anticipated actual value at the time of realisation, ditional consideration of ISK 200,000,000 (SEK 15.8 million) must which is why no provisions have been made for these rights/ob- be paid to Framtakssjóður Íslands. Advania AB is responsible for ligations. Historically, the repurchase obligation has been lower the liabilities to credit institutions of the parent company Vianada than the actual market value at the time of realisation, which is AB, as if they were its own, in the amount of SEK 0 (105) (2015: 112) why there is a contingent asset equivalent to at least the amount of million, to the extent this is not in contravention of the Swedish the contingent liability. A contingent liability, in the amount of SEK Companies Act. Unrestricted equity at Advania AB as at 31/12/2017 15.8 million, arose when an undertaking was was SEK 117.2 (141) (2015: 34) million.

Annual Report 2017 / Advania AB 69 Note 32 Statement of liabilities attributable to financing activities

Non-current liabilities Current liabilities Liabilities Other non- Liabilities to to credit current credit Overdraft Other current institutions iabilities institutions facilities liabilities Carrying amount 31/12/2016 582.1 0.0 54.1 44.4 47.1

Cash flow from financing activities Loans raised 936.7 0.0 0.0 46.5 0.0 Amortisation of loans -574.3 0.0 0.0 0.0 0.0 Finance leases entered into 3.1 0.0 0.0 0.0 0.0 Amortisation of finance leases -69.0 0.0 0.0 0.0 0.0

Changes not affecting cash flow Loans raised, finance leases 127.9 0.0 0.0 0.0 0.0 Acquisition of subsidiaries 18.8 15.3 0.0 0.0 0.0 Sale of subsidiaries -108.9 0.0 0.0 -2.4 0.0 Effect of changes in exchange rates -14.0 0.0 0.0 7.5 0.0

Other changes Reclassification between non-current liabilities and current -57.4 0.0 57.4 0.0 63.2 liabilities relating to the payments for the coming year

Closing carrying amount 31/12/2017 844.9 15.3 111.5 95.9 110.3

70 Annual Report 2017 / Advania AB Note 33 Business combinations

Business combinations in 2017 On 2 June 2017, the Group acquired 100% of the share capital in Caperio Holding AB for SEK 158.4 million. The acquisition of Caperio Holding AB is part of the Group’s strategic focus on being a turnkey supplier of IT services. Consideration transferred Caperio Holding AB Cash and cash equivalents 158.4 Total consideration transferred 158.4 Expenses relating to acquisitions amount to SEK 6.8 million and have been recognised as other expenses in the income statement.

Amounts recognised at the time of acquisition for net assets acquired (SEK million) Caperio Holding AB Non-current assets Intangible assets 74.8 Property, plant and equipment 16.1 Financial non-current assets 9.6 Current assets Inventories 17.4 Trade receivables 96.7 Other current receivables 6.9 Prepaid expenses and accrued income 28.3 Cash and cash equivalents 36.0 Non-current liabilities Interest-bearing non-current liabilities -8.8 Other non-current liabilities -6.7 Deferred tax liability -15.3 Contingent liabilities -17.1 Current liabilities Liabilities to credit institutions -10.0 Trade payables -105.1 Other current liabilities -9.0 Accrued expenses and prepaid income -46.3 Identifiable assets and liabilities, net 67.5

Consideration transferred 158.4 Non-controlling interests 42.3 No part of the goodwill that arose in connection with the acquisitions is expected to be tax-deductible.

Net cash flow from acquisitions Cash consideration paid 158 Less: Cash and cash equivalents acquired -36 Net cash flow 122

Of the Group’s revenues, SEK 754.1 million is attributable to Caperio Holding AB. Caperio Holding AB has contributed SEK 40.2 million to the Group’s EBIT. If the acquisition had taken place on 1 January 2017, the Group’s revenues would have been SEK 3,154.8 million and the Group’s EBIT would have been SEK 94.8 million.

Net cash flow from acquisitions in 2017 Acquisition of Caperio -122.0 Acquisition of non-controlling interest in Advania Holding hf -79.0 Net cash flow -201.0

Net cash flow on the sale of subsidiaries in 2017 Cash consideration received for Advania Data Centers ehf 21.0 Cash consideration received for Advania Mobile Pay 5.0 Less: cash and cash equivalents sold 0.0 Net cash flow 26.0

Annual Report 2017 / Advania AB 71 Business combinations in 2015 and 2016

In May 2015, the Group acquired a further 40.1% of the share capital in Advania ehf. for SEK 170.6 million. The acquisition meant that the Group owned 100% of the shares in the company and so obtained a controlling interest in Advania ehf. In 2015, Icelandic company Tolvumidlun ehf. was also acquired (and subsequently merged with Advania ehf in 2016) and there was an insignificant acquisition of Swedish company Knowledge Factory Consulting AB (goodwill of SEK 24.1 million arose in the latter acquisition). There were no significant business combinations in 2016.

Consideration transferred Advania ehf. Tolvmidlun ehf. Total consideration transferred 170.6 49.4

Amounts recognised at the time of acquisition for net assets acquired (SEK million) Non-current assets Intangible assets 261.5 31.1 Property, plant and equipment 111.5 0.4 Other non-current assets 19.9 0.0 Current assets Inventories 25.9 0.0 Trade receivables and other receivables 268.6 0.0 Other current assets 110.9 3.6 Cash and cash equivalents 27.8 5.1

Non-controlling interests 0.0 0.0

Non-current liabilities Provisions -0.9 -6.2 Interest-bearing non-current liabilities -286.6 0.0 Deferred tax liability -28.8 0.0 Current liabilities Interest-bearing current liabilities -60.3 0.0 Trade payables -235.3 0.0 Other current liabilities -163.9 -6.5 Identifiable assets and liabilities, net 50.3 27.5

Consideration transferred 170.60 49.4 Fair value of previous shareholdings in associates 196.10 0.0 Goodwill 316.4 21.9

No part of the goodwill that arose in connection with the acquisitions is expected to be tax-deductible.

Net cash flow from acquisitions in 2015 and 2016 Cash consideration paid 170.6 49.4 Less: Cash and cash equivalents acquired -27.8 -5.1 Net cash flow 142.8 44.3

72 Annual Report 2017 / Advania AB Note 34 Transactions with related parties

Transactions between the parent company and its subsidiaries, The parent company has purchased services from Beringer Finance which are related parties of the company, have been eliminated AB. Bull Hill Capital AB holds a non-controlling interest in Advania on consolidation, therefore no information is provided about these AB through Vianada AB and is the main shareholder in Beringer transactions in this note. Information about transactions between Finance AB. Vianada owns 90.4% of Advania AB. The transactions the Group and other related parties is provided below. took place on market terms.

Sales of goods and services 2017 2016 2015 Advania Data Centers ehf. 7.9 0.0 0.0 Advania MobilPay ehf. 1.1 0.0 0.0 Total 9.0 0.0 0.0

Purchases of goods and services 2017 2016 2015 Beringer Finance AB 13.8 7.9 0.0 Advania Data Centers ehf. 2.9 0.0 0.0 Advania MobilPay ehf. 0.1 0.0 0.0 3 Step IT AB 9.3 0.0 0.0 Simplex Bemanning AB 0.8 0.0 0.0 Total 26.9 7.9 0.0

Receivables from related parties 31/12/2017 31/12/2016 31/12/2015 Parent company 239.0 17.1 0.3 Advania Data Centers ehf. 2.3 0.0 0.0 Advania MobilePay ehf. 0.0 0.0 0.0 Other receivables from related parties 0.0 0.0 0.0 Carrying amount 241.4 17.1 0.3

Liabilities to related parties 31/12/2017 31/12/2016 31/12/2015 Parent company 0.0 0.0 127.5 Advania Data Centers ehf. 0.6 0.0 0.0 Carrying amount 0.6 0.0 127.5

Interest 31/12/2017 31/12/2016 31/12/2015 Vianada AB 3.1 0.6 -14.3 Total 3.1 0.6 -14.3

Details of benefits for senior executives are provided in Note 10. Advania AB. Advania AB has purchased financial advice services from Beringer Finance AB, primarily in relation to company acquisi- Related-party transactions took place with a number of different tion projects and refinancing. parties. Advania Data Centers ehf. was, until 31 August 2017, a wholly owned subsidiary and was sold to Vianada AB, which owns 90.4% 3 Step IT AB owns 49% of the share capital in Advania Finance AB of Advania AB as at 31/12/2017. Advania Data Centers ehf. is consid- (formerly Caperio Finance AB). As part of this joint venture, Advania ered a related party as of 1 September 2017. Advania AB has sold AB purchases administrative services and logistics services from 3 administrative services as well as products and related services Step IT AB. to Advania Data Centers ehf. Advania AB has also purchased data hall capacity and related services. Advania Mobilepay ehf. was a Simplex Bemanning AB is considered a related party as Tomas majority-owned subsidiary until 31 August 2017, the share in which Wanselius, CEO of Advania Sverige AB, is a Board member and was sold to Vianada AB. Advania Data Centers ehf. is considered a minority shareholder in the company. Advania AB has purchased related party as of 1 September 2017. Advania AB has sold adminis- consultancy services from Simplex Bemanning AB. trative services and products as well as related services to Advania Mobilepay ehf. Advania AB has also purchased consultancy servic- As at 31 December 2017, Vianada owns 90.4% of the share capital in es from Advania Mobile Pay ehf. Advania AB. As at 31 December 2017, Vianada has an interest-bearing liability to Advania AB that resulted in net interest income for Beringer Finance AB is a wholly owned subsidiary of Beringer Advania AB. Finance AS. Bull Hill Capital AB owns approximately 60% of the share capital in Beringer Finance AS. Adalsteinn Johansson is the Details of benefits for senior executives are provided in Note 10. CEO of Beringer Finance AB and the majority shareholder in Bull Hill Capital AB. Bull Hill Capital AB holds a non-controlling interest in All transactions with related parties take place on market terms. Vianada AB, which as at 31 December 2017 owns 90.4% of

Annual Report 2017 / Advania AB 73 Note 35 Events after the balance sheet date A) Previously, all foreign exchange gains/losses were classified as financial income or financial expenses. On transition to IFRS, foreign Advania’s subsidiary Caperio signed a framework agreement in exchange gains/losses attributable to operating assets and operat- February relating to the City of Stockholm’s schools, which is esti- ing liabilities have been reclassified as other operating income and mated to be worth around SEK 500 million over two years. Advania other operating expenses respectively. estimates that 20% of the delivery will take place during 2018 and the remainder during 2019. B) According to previous accounting policies, the amortisation of goodwill was reported. Under IFRS, goodwill is not amortised but is tested at least annually for impairment, therefore goodwill amortisation is reversed on transition to IFRS. This IFRS adjustment also Note 36 Transition to IFRS – Group involves the reversal of exchange rate effects attributable to the reversed amortisation recognised in other comprehensive income. As of 1 January 2016, Advania AB prepares its consolidated financial statements in accordance with International Financial Reporting C) According to previous accounting policies, the amortisation of Standards (IFRS) as approved by the EU and the interpretations of customer relationships and trademarks was reported with a useful the IFRS Interpretations Committee (IFRIC). This financial report life of 10 years. Under IFRS, the useful life of customer relationships is the first financial report prepared by Advania AB in accordance and trademarks has been extended. On transition to IFRS, previ- with IFRS. Advania AB previously applied the Swedish Annual ous amortisation is therefore reversed. This reversal also affects Accounts Act and the Swedish Accounting Standards Board’s gen- deferred tax liabilities, which increase as temporary differences at- eral guidance, K3. tributable to intangible assets increase. This IFRS adjustment also involves the reversal of exchange rate effects attributable to the The date of transition to IFRS has been set as 1 January 2015. The reversed amortisation recognised in other comprehensive income. transition to IFRS is reported in accordance with IFRS 1 First-time Adoption of IFRS. The general principle of IFRS 1 is that a company D) Losses from associates were previously classified as revenue. On applies all standards retrospectively on establishing the opening transition to IFRS, these are reclassified as an operating expense. balance in accordance with IFRS. This means that the comparative figures for 2015 are converted in accordance with IFRS. E) Premiums and the repurchase of subscription options were previously reported in retained earnings. Under IFRS, premiums and The tables below present and quantify the significant effects of the the repurchase of subscription options must be reported under transition to IFRS in the assessment of the company management. other contributed capital.

There are no differences between the previous accounting policies and IFRS as at 1 January 2015, as the Group only had shareholdings in associates at this time.

Reconciliation of previous accounting policies and IFRS Consolidated income statement 2016 Previous accounting policies Effect of IFRS adjustment Reference IFRS Net revenue 1,747.0 0.0 1,747.0 Profit/loss from shares in associates and joint ventures 0.0 0.0 0.0 Other operating income 5.9 10.2 A 16.1 1,752.9 10.2 1,763.1 Operating expenses Goods for resale -628.1 0.0 -628.1 Other external expenses -142.6 0.0 -142.6 Staff costs -823.3 0.0 -823.3 Depreciation, amortisation and impairment of property, -160.3 53.5 B.,C -106.8 plant and equipment and intangible assets Other operating expenses 0.0 -6.8 A -6.8 Profit/loss from shares in associates and joint ventures 0.0 0.0 0.0 Operating profit/loss -1.3 56.9 55.5

Financial items Earnings from securities and receivables held as non-current assets 0.6 0.0 0.6 Financial income 64.2 -5.3 A 58.8 Financial expenses -36.3 2.0 A -34.3 28.5 -3.4 25.1 Profit/loss before tax 27.1 53.5 80.6 Tax -16.6 -3.0 C -19.6 Profit/loss for the year 10.6 50.5 61.0 Attributable to: Shareholders of the parent company 4.6 43.9 48.5 Non-controlling interests 6,0 6,6 12,5

74 Annual Report 2017 / Advania AB Previous account- Effect of IFRS Consolidated statement of comprehensive income 2016 ing policies adjustment Reference IFRS Profit/loss for the year 10.6 50.5 61.0

Other comprehensive income Translation differences for the year -17.8 5.6 B, C -12.2 Other comprehensive income, net after tax -17.8 5.6 -12.2

Total comprehensive income -7.2 56.0 48.8

Attributable to: Shareholders of the parent company -10.8 49.5 38.6 Non-controlling interests 3.6 6.6 10.2

Tidigare Consolidated income statement 2015 redovisningsprinciper Effekt justering IFRS Referens IFRS Net revenue 930.8 0.0 930.8 Profit/loss from shares in associates and joint ventures -10.7 10.7 D 0.0 Other operating income 38.0 3.6 A 41.5 958.1 14.3 972.4 Operating expenses Goods for resale -341.4 0.0 -341.4 Other external expenses -82.2 0.0 -82.2 Staff costs -415.5 0.0 -415.5 Depreciation, amortisation and impairment of property, -84.4 26.6 B, C -57.8 plant and equipment and intangible assets Other operating expenses -0.6 -3.3 A -4.0 Profit/loss from shares in associates and joint ventures 0.0 -10.7 D -10.7 Operating profit/loss 33.9 26.8 60.8

Financial items Financial income 10.2 -0.2 A 9.9 Financial expenses -33.3 0.0 -33.3 -23.1 -0.2 -23.3 Profit/loss before tax 10.9 26.6 37.5 Tax -5.6 -0.7 C -6.3 Profit/loss for the year 5.2 25.9 31.2 Attributable to: Shareholders of the parent company -0.2 25.9 25.8 Non-controlling interests 5.4 0.0 5.4

Previous account- Effect of IFRS Consolidated statement of comprehensive income 2015 ing policies adjustment Reference IFRS Profit/loss for the year 5.2 25.9 31.2

Other comprehensive income Translation differences for the year -1.3 2.4 B. C 1.2 Other comprehensive income, net after tax -1.3 2.4 1.2

Total comprehensive income 4.0 28.4 32.4

Attributable to: Shareholders of the parent company 1.9 28.4 30.3 Non-controlling interests 2.1 0.0 2.1

Annual Report 2017 / Advania AB 75 Consolidated balance sheet 2016 Previous accounting policies Effect of IFRS adjustment Reference IFRS ASSETS Non-current assets Intangible assets Goodwill 336.9 67.8 B 404.7 Other intangible assets 285.9 20.3 C 306.2 622.8 88.1 710.9 Property, plant and equipment Equipment, tools, fixtures and fittings 144.3 0.0 144.3 144.3 0.0 144.3 Financial non-current assets Receivables from Group companies 17.1 0.0 17.1 Other non-current receivables 19.4 0.0 19.4 36.5 0.0 36.5 Deferred tax assets 42.4 0 42.4 Total non-current assets 846.0 88.1 934.1 Current assets Inventories 28.3 0.0 28.3 Current receivables Trade receivables 253.1 0.0 253.1 Receivables from Group companies 0.0 0.0 0.0 Other receivables 31.6 0.0 31.6 Prepaid expenses and accrued income 83.7 0.0 83.7 368.3 0.0 368.3 Cash and cash equivalents 36.3 0.0 36.3 Total current assets 433.0 0.0 433.0 TOTAL ASSETS 1,278.9 88.1 1,367.0

EQUITY AND LIABILITIES Equity Share capital 0.1 0.0 0.1 Other contributed capital 157.6 1.8 E 159.4 Translation reserve -11.6 8.0 B,C -3.6 Retained earnings including profit/loss for the year -39.4 68.0 B,C,E 28.6 Equity attributable to the shareholders 106.7 77.8 184.5 of the parent company Non-controlling interests 36.8 6.6 B,C 43.4 Total equity 143.5 84.4 227.9

Non-current liabilities Liabilities to credit institutions 582.1 0.0 582.1 Liabilities to the parent company 0.0 0.0 0.0 Deferred tax liabilities 39.9 3.7 C 43.6 622.1 3.7 625.7 Current liabilities Liabilities to credit institutions 54.1 0.0 54.1 Overdraft facility 44.4 0.0 44.4 Liabilities to Group companies 0.0 0.0 0.0 Trade payables 119.8 0.0 119.8 Other current liabilities 47.1 0.0 47.1 Accrued expenses and prepaid income 248.0 0.0 248.0 513.4 0.0 513.4 TOTAL EQUITY AND LIABILITIES 1,278.9 88.1 1,367.0

76 Annual Report 2017 / Advania AB Consolidated balance sheet 2015 Previous accounting policies Effect of IFRS adjustment Reference IFRS ASSETS Non-current assets Intangible assets Goodwill 353.6 24.4 B 378.0 Other intangible assets 255.6 4.6 C 260.2 609.2 29.0 638.2 Property, plant and equipment Equipment, tools, fixtures and fittings 112.2 0.0 112.2 112.2 0.0 112.2 Financial non-current assets Receivables from Group companies 0.0 0.0 0.0 Other non-current receivables 14.4 0.0 14.4 14.4 0.0 14.4 Deferred tax assets 47.2 0 47.2 Total non-current assets 782.9 29.0 812.0 Current assets Inventories 20.3 0.0 20.3 Current receivables Trade receivables 213.5 0.0 213.5 Receivables from Group companies 0.3 0.0 0.3 Other receivables 30.3 0.0 30.3 Prepaid expenses and accrued income 87.3 0.0 87.3 331.5 0.0 331.5 Cash and cash equivalents 30.9 0.0 30.9 Total current assets 382.7 0.0 382.7 TOTAL ASSETS 1,165.7 29.0 1,194.7

EQUITY AND LIABILITIES Equity Share capital 0.1 0.0 0.1 Other contributed capital 43.8 2.5 E 46.3 Translation reserve 3.9 2.4 B,C 6.3 Retained earnings including profit/loss for the year -44.4 23.4 B,C,E -21.0 Equity attributable to the shareholders 3.3 28.4 31.7 of the parent company Non-controlling interests 27.6 0.0 27.6 Total equity 30.9 28.4 59.3

Non-current liabilities Liabilities to credit institutions 517.5 0.0 517.5 Liabilities to the parent company 127.5 0.0 127.5 Deferred tax liabilities 31.5 0.7 C 32.1 676.4 0.7 677.1 Current liabilities Liabilities to credit institutions 38.2 0.0 38.2 Overdraft facility 37.7 0.0 37.7 Liabilities to Group companies 0.0 0.0 0.0 Trade payables 114.2 0.0 114.2 Other current liabilities 48.5 0.0 48.5 Accrued expenses and prepaid income 219.6 0.0 219.6 458.3 0.0 458.3 TOTAL EQUITY AND LIABILITIES 1,165.7 29.0 1,194.7

Description of significant effects on cash flow in 2016 and 2015. There were no significant effects on transition to IFRS. Annual Report 2017 / Advania AB 77 Notes for the parent company

Note 2 Significant accounting policies

The parent company, Advania AB, applies the Swedish Annual ◼◼ Interest income and interest expenses must be recognised ac- Accounts Act and Recommendation RFR 2 Accounting for Legal cording to the effective interest method. Dividend income must Entities of the Swedish Financial Reporting Board. The application be recognised when: of RFR 2 means that, as far as possible, the parent company ap- ◼◼ the company’s right to receive payment of the dividend has plies all IFRS standards and interpretations approved by the EU been established, within the framework of the Swedish Annual Accounts Act and the ◼◼ it is probable that the economic benefits related to the dividend Swedish Act on Safeguarding Pension Obligations and with due will accrue to the company, and consideration of the relationship between reporting and taxation. ◼◼ the dividend can be calculated reliably.

Transition to RFR 2 ◼◼ When applying hedge accounting, the company must draw As of 1 January 2016, the parent company applies RFR 2 Accounting up and follow internal instructions that fulfil the conditions of for Legal Entities and the Swedish Annual Accounts Act. The par- IFRS 9 in relation to when hedge accounting can be applied ent company previously applied the Swedish Accounting Standards and which financial instruments can be included in a hedge Board’s general guidance BFNAR 2012:1 Annual Accounts and relationship. Consolidated Accounts (“K3”) and the Swedish Annual Accounts Act. RFR 2 is being applied retroactively, which means that the ◼◼ The company must provide information about the policies that comparative figures for the 2015 financial year are converted in are applied for hedge accounting. accordance with RFR 2. The date of transition to RFR 2 has been set as 1 January 2015. The transition to RFR 2 has not entailed any IFRS 16 Leases mainly involves changes to the way in which leases significant effects on the financial position, earnings or cash flow are to be recognised by the lessee. A lessee must recognise all leas- of the parent company. es as assets and liabilities on the balance sheet, with the exception of short-term leases and leases where the underlying assets have Changes to accounting policies applicable for the 2017 financial year a low value. As a result of the relationship between reporting and Changes to RFR 2 have not had any significant impact on the parent taxation, the rules of IFRS 16 do not need to be applied at a legal en- company’s financial reports for the 2017 financial year. tity. For those companies that choose to apply the exemption, rules are instead introduced that cover the policies to be applied to the Changes to RFR 2 that have been announced recognition of leases by the lessee and the lessor, the recognition but have not yet come into effect of sale-and-leaseback transactions and disclosure requirements. The Swedish Financial Reporting Board has announced the follow- Changes to RFR 2 relating to IFRS 16 will begin to be applied to ing changes that have not yet come into effect. financial years beginning on or after 1 January 2019 (subject to EU approval). IFRS 9 Financial Instruments addresses the classification, measurement and recognition of financial assets and liabilities (cf. descrip- In the company management’s assessment, changes to RFR 2 that tion of IFRS 9 in the section for the Group above). Changes to RFR have not yet come into effect are not expected to have any signif- 2 relating to IFRS 9 must be applied to financial years beginning on icant impact on the parent company’s financial reports when they or after 1 January 2018. With due consideration of the relationship are applied for the first time. between reporting and taxation, companies do not need to apply IFRS 9 at a legal entity. If a company does not apply IFRS 9, the The differences between the accounting policies of the parent following must be applied: company and those of the Group are described below: Classification and presentation ◼◼ The principles in IFRS 9 concerning when financial instruments The parent company prepares its income statement and balance must be recognised on, and removed from, the balance sheet sheet in accordance with the format specified in the Swedish must be applied. Annual Accounts Act. The main difference between this and IAS 1 Presentation of Financial Statements, as applied to the prepara- ◼◼ Financial instruments must be valued based on cost. tion of the consolidated financial statements, is in the recognition of financial income and expenses, non-current assets and equity. ◼◼ On application of Chapter 4, Section 9 of the Swedish Annual Accounts Act, a securities portfolio may constitute an item if the Subsidiaries company has drawn up and documented a risk-spreading strat- Shares in subsidiaries are recognised at cost. Dividends from sub- egy and the financial instruments in the securities portfolio can sidiaries are recognised as revenue when the right to receive a be identified clearly. This principle must be applied consistently. dividend is considered certain and the dividend can be estimated reliably. ◼◼ When calculating the net realisable value of receivables recognised as current assets, the principles for impairment testing Financial instruments and loss allowance in IFRS 9 must be applied. The parent company does not apply IAS 39 Financial Instruments: Recognition and Measurement. The parent company applies a ◼◼ When assessing and calculating the need for impairment of fi- method based on cost in accordance with the Swedish Annual nancial assets that are recognised as non-current assets, the Accounts Act. principles for impairment testing and loss allowance in IFRS 9 must be applied wherever possible.

78 Annual Report 2017 / Advania AB Note 3 Information concerning intra-Group sales and purchases

2017 2016 2015 Purchases 0.0 0.0 0.0 Sales 4.6 0.0 0.0 4.6 0.0 0.0

Note 4 Financial instruments

Classification of financial instruments Loan receivables and trade receivables Other liabilities Carrying amount 31/12/2017 Financial assets Financial non-current assets 423.5 0.0 423.5 Receivables from Group companies 92.6 0.0 92.6 Other receivables 4.1 0.0 4.1 Cash and cash equivalents 0.0 0.0 0.0 Total 520.2 0.0 520.2

Financial liabilities Liabilities to credit institutions 0.0 773.4 773.4 Liabilities to credit institutions, current 0.0 40.2 40.2 Liabilities to Group companies 0.0 6.4 6.4 Overdraft facility 0.0 95.9 95.9 Trade payables 0.0 7.3 7.3 Other current liabilities 0.0 0.3 0.3 Total 0.0 923.5 923.5

31/12/2016 Financial assets Cash and cash equivalents 0.0 0.5 0.5 Total 0.0 0.5 0.5

Financial liabilities Liabilities to Group companies 0.0 42.5 42.5 Total 0.0 43.0 43.0

31/12/2015 Financial assets Cash and cash equivalents 0.0 0.3 0.3 Total 0.0 0.3 0.3

Financial liabilities Liabilities to Group companies 0.0 127.5 127.5 Total 0.0 127.5 127.8

Annual Report 2017 / Advania AB 79 Note 8 Auditors’ remuneration Note 14 Tax on profit/loss for the year

2017 2016 2015 2017 2016 2015 Grant Thornton Sweden AB Current tax 0.0 0.0 0.0 Audit assignment 0.3 0.0 0.0 Deferred tax 0.0 0.0 0.0 Auditing activities in addition 1.2 0.0 0.0 Tax on profit/loss for the year 0.0 0.0 0.0 to the audit assignment Tax advice 0.1 0.0 0.0 Reconciliation of tax expense for the year Total 1.6 0.0 0.0 2017 2016 2015 Recognised profit/loss before tax -10.5 -6.9 -7.5

Note 10 Number of employees, staff Tax calculated at Swedish 2.3 1.5 1.7 costs and senior executives tax rate (22%) Non-deductible expenses 0.0 -0.3 -0.2 Salaries and other benefits to Increase in tax loss carry- -2.3 -1.2 -1.4 the Board of Directors and 2017 2016 2015 forwards without corresponding Salaries and other benefits 1.3 1.4 0.0 capitalisation of deferred tax Social security expenses 0.0 0.0 0.0 Total 0.0 0.0 0.0 Pension costs 0.0 0.0 0.0 Recognised tax expense for the year 0.0 0.0 0.0 Total 1.3 1.4 0.0

See Note 10 for the Group for information about the average num- Note 16 Shares in Group companies ber of employees, salaries and benefits and the distribution of women and men on the Board of Directors and among senior executives. Opening cost at 1 January 2015 154.1 Acquisition of Advania AX AS 0.5 Note 11 Earnings from shareholdings Closing accumulated cost at 31 December 2015 154.6 in Group companies Opening write-downs at 1 January 2015 0.0 Closing accumulated write-downs at 31 December 2015 0.0 2017 2016 2015 Carrying amount at 31 December 2015 154.6 Dividend 28.3 0.0 0.0 Capital gains on the sale of shares -3.9 0.0 0.0 Opening cost at 1 January 2016 154.6 Total 24.4 0.0 0.0 Acquisition of Advania MobilePay ehf 7.8 Acquisition of Advania AX AS 12.6 Closing accumulated cost at 31 December 2016 175.0 Opening write-downs at 1 January 2016 0.0 Note 12 Financial income Closing accumulated write-downs at 31 December 2016 0.0 Carrying amount at 31 December 2016 175.0 2017 2016 2015 Interest income, Group companies 2.4 3.9 6.3 Opening cost at 1 January 2017 175.0 Exchange differences 5.0 0.0 0.0 Acquisition of Advania Holding hf. 96.6 Other 0.0 4.1 1.9 Acquisition of Advania Holding AB 284.0 Total 7.4 7.9 8.1 Acquisition of Advania Holding AS 0.5 Sale of Advania MobilePay ehf. -7.8 Sale of Advania Norge AS -13.1 Closing accumulated cost at 31 December 2017 535.2 Note 13 Financial expenses Opening write-downs at 1 January 2017 0.0 Closing accumulated write-downs at 31 December 2017 0.0 2017 2016 2015 Carrying amount at 31 December 2017 535.2 Interest expenses -4.1 0.0 0.0 Interest expenses, Group companies -7.2 -0.6 -14.1 Total -11.3 -0.6 -14.1

80 Annual Report 2017 / Advania AB Company’s shareholdings in Group companies The names of several of the companies changed during 2017. Advania Norge AS and Advania AS merged on 1 January 2017.

Specification of shareholdings of the parent company and the Group in Group companies as at 31 December 2017:

¹ Percentage shareholding refers to the share of ownership and share of votes held by the parent company. The share of votes in Caperio Finance AB is 51.9%.

Specification of shareholdings of the parent company and the Group in Group companies as at 31 December 2016:

Name Co. reg. no. and country of operation Activities Shareholding (%)¹ Advania Norden hf. 670514-2340, Reykjavik Owns and manages shares in IT companies. 81.0% Avania Holding AB 556616-7598, Stockholm Owns and manages shares in IT companies. 100.0% Advania AB 556214-9996, Stockholm IT consultancy and trading in IT-related products. 100.0% Knowledge Factory Consulting AB 556713-6840, Stockholm IT consultancy. 100.0% Virtus AB 556496-7221, Stockholm No current activities – previously IT consultancy 100.0% Advania ehf. 590269-7199, Reykjavik IT consultancy and trading in IT-related products. 100.0% Advania Data centers ehf 571115-0690, Reykjavik IT consultancy and trading in IT-related products. 100.0% ADC ehf. 410216-1160, Reykjavik Owns and manages shares in IT companies. 100.0% Advania Holding Norway AS 916 156 146, Oslo Owns and manages shares in IT companies. 100.0% Advania AS 913 332 962, Oslo IT consultancy. 100.0% Advania Holding Denmark A/S 371 44 282, Copenhagen Owns and manages shares in IT companies. 100.0% Advania A/S 367 15 103, Copenhagen Provision of turnkey solutions within IT. 100.0% Advania Ventures AB 559021-6031, Stockholm Owns and manages shares in IT companies. 100.0% Advania MobilePay ehf. 610600-2390, Reykjavik Trading in products and services 57.9% within mobile payment methods. Advania Mobilepay AB 559080-6690, Stockholm Trading in products and services 100.0% within mobile payment methods. Advania AX AS 967372668, Oslo IT consultancy. 100.0%

Specification of shareholdings of the parent company and the Group in Group companies as at 31 December 2015:

Annual Report 2017 / Advania AB 81 Note 19 Receivables from Group companies Note 30 Accrued expenses and prepaid income

31/12/2017 31/12/2016 31/12/2015 Opening cost at 1 January 2017 0.0 Other items 0.2 0.0 0.0 Additional receivables 423.5 Carrying amount 0.2 0.0 0.0 Closing accumulated cost at 31 December 2017 423.5 Opening write-downs at 1 January 2017 0.0 Closing accumulated write-downs at 31 December 2017 0.0 Carrying amount at 31 December 2017 423.5 Note 31 Pledged assets and contingent liabilities

31/12/2017 31/12/2016 31/12/2015 Note 23 Prepaid expenses and accrued income Pledged assets Shares in subsidiaries 535.2 154.1 154.1 31/12/2017 31/12/2016 31/12/2015 Total 535.2 154.1 154.1 Prepaid bank charges 2.6 0.0 0.0

Accrued interest income 1.3 0.0 0.0 Contingent liabilities Carrying amount 3.9 0.0 0.0 Parent company guarantee 15.8 15.8 15.8 Total 15.8 15.8 15.8

Note 24 Cash and cash equivalents in cash flow Advania AB is responsible for the liabilities to credit institutions of the parent company Vianada AB, as if they were its own, in the 31/12/2017 31/12/2016 31/12/2015 amount of SEK 0 (105) (2015: 112) million, to the extent this is not Cash 0.0 0.5 0.3 in contravention of the Swedish Companies Act. Unrestricted equity at Advania AB as at 31/12/2017 was SEK 135.2 (141.2) (2015: Available balances at banks 0.0 0.0 0.0 34.2) million. Advania AB (publ) is responsible for the liability to and other credit institutions Framtakssjóður Íslands, as if it were its own liability, in the amount Total 0.0 0.5 0.3 of SEK 15.8 (15.8 ) (2015: 15.8) million for the contingent liability which Advania Holding hf. has assumed.

Note 28 Non-current liabilities

31/12/2017 31/12/2016 31/12/2015 Liabilities to credit institutions 773.4 0.0 0.0 Liabilities to Group companies 0.0 42.5 127.5 Carrying amount 773.4 42.5 127.5

82 Annual Report 2017 / Advania AB Note 32 Statement of liabilities attributable to financing activities

Non-current liabilities Current liabilities Liabilities to Liabilities to credit Liabilities to credit Overdraft Liabilities to Group Other current Group companies institutions institutions facilities companies liabilities Carrying amount 31/12/2016 42.5 0.0 0.0 0.0 44.5 0.0

Cash flow from financing activities Loans raised 0.0 818.6 0.0 95.9 0.0 0.0 Amortisation of loans -42.5 0.0 0.0 0.0 -38.1 0.0 Finance leases entered into 0.0 0.0 0.0 0.0 0.0 0.0 Amortisation of finance leases 0.0 0.0 0.0 0.0 0.0 0.0

Changes not affecting cash flow Loans raised, finance leases 0.0 0.0 0.0 0.0 0.0 0.0 Acquisition of subsidiaries 0.0 0.0 0.0 0.0 0.0 0.0 Sale of subsidiaries 0.0 0.0 0.0 0.0 0.0 0.0 Effect of changes in exchange rates 0.0 -4.9 0.0 0.0 0.0 0.0

Other changes Reclassification between 0.0 -40.2 40.2 0.0 0.0 0.0 non-current liabilities and current liabilities relating to the 0.0 0.0 0.0 0.0 0.0 0.2 payments for the coming year

Closing carrying amount 31/12/2017 0.0 773.5 40.2 95.9 6.4 0.2

* Other changes includes accrued interest and payments

Note 34 Transactions with related parties

Transactions between the parent company and its subsidiaries, which Liabilities to related parties 31/12/2017 31/12/2016 31/12/2015 are related parties of the parent company, as well as information about transactions between other related parties are presented below. Parent company 0.0 0.0 127.5 Advania Data Centers ehf. 0.6 0.0 0.0

Purchases of goods Carrying amount 0.6 0.0 127.5 and services 2017 2016 2015 Beringer Finance AB 13.8 7.9 0.0 Interest 31/12/2017 31/12/2016 31/12/2015 Total 13.8 7.9 0.0 Vianada AB 3.1 0.6 -14.3 Total 3.1 0.6 -14.3 The parent company has purchased services from Beringer Finance AB. Bull Hill Capital AB holds a non-controlling interest in Advania AB through Vianada AB and is the main shareholder in Beringer As at 31 December 2017, Vianada owns 90.4% of the share capital in Finance AB. Vianada owns 90.4% of Advania AB. The transactions Advania AB. As at 31 December 2017, Vianada has an interest-bear- took place on market terms. ing liability to Advania AB that resulted in net interest income for Advania AB. Beringer Finance AB is a wholly owned subsidiary of Beringer Finance AS. Bull Hill Capital AB owns approximately 60% of the share capital Details of benefits for senior executives are provided in Note 10 for in Beringer Finance AS. Adalsteinn Johansson is the CEO of Beringer the Group. Finance AB and the majority shareholder in Bull Hill Capital AB. Bull Hill Capital AB holds a non-controlling interest in Vianada AB, which All transactions with related parties take place on market terms. as at 31 December 2017 owns 90.4% of Advania AB. Advania AB has purchased financial advice services from Beringer Finance AB, primarily in relation to company acquisition projects and refinancing. Note 35 Events after the balance sheet date Receivables from related parties 31/12/2017 31/12/2016 31/12/2015 There were no significant events after the end of the financial year. Parent company 239.0 17.1 0.0 Advania Data Centers ehf. 2.3 0.0 0.0 Carrying amount 241.4 17.1 0.3

Annual Report 2017 / Advania AB 83 The annual report and the consolidated financial statements were fair overview of the development of the business, financial posi- approved for publication by the Board on 10/04/2018. The consoli- tion and performance of the company, and describes the signifi- dated income statement and consolidated balance sheet and the cant risks and uncertainties faced by the company. The Board parent company’s income statement and balance sheet will be sub- of Directors and the CEO hereby certify that the consolidated mitted for adoption at the Annual General Meeting on 16 April 2018. accounts have been prepared in accordance with International Financial Reporting Standards (IFRS), as adopted by the EU, and The Board of Directors and the CEO hereby certify that the annu- present fairly the financial position and performance of the Group al accounts have been prepared in accordance with the Swedish and that the administration report for the Group provides a true and Annual Accounts Act and RFR 2 Accounting for Legal Entities and fair overview of the development of the business, financial position present fairly the financial position and performance of the compa- and performance of the Group, and describes the significant risks ny and that the administration report provides a true and and uncertainties faced by the constituent companies of the Group.

Stockholm, on 10/04/2018

Thomas Ivarson Bengt Engström Chairman of the Board

Birgitta Stymne Göransson Katrin Olga Johannesdottir

Vesa Suurmunne Gestur Gestsson Chief Executive Officer

Our audit report was submitted on 10/04/2018

Grant Thornton Sweden AB

Anders Meyer Jörgen Sandell Authorised Public Accountant Authorised Public Accountant

84 Annual Report 2017 / Advania AB Auditor’s report

To the general meeting of the shareholders of Advania AB Corporate identity number 556963-8991

Report on the annual accounts and Responsibilities of the Board of Directors consolidated accounts and the Managing Director Opinions The Board of Directors and the Managing Director are re- We have audited the annual accounts and consolidated ac- sponsible for the preparation of the annual accounts and counts of Advania AB for the year 2017. The annual accounts consolidated accounts and that they give a fair presentation and consolidated accounts of the company are included on in accordance with the Annual Accounts Act and, concern- pages 24-84 in this document. ing the consolidated accounts, in accordance with IFRS as adopted by the EU. The board of Directors and the Managing In our opinion, the annual accounts have been prepared Director are also responsible for such internal control as in accordance with the Annual Accounts Act and pres- they determine is necessary to enable the preparation of ent fairly, in all material respects, the financial position of annual accounts and consolidated accounts that are free parent company as of 31 December 2017 and its financial from material misstatement, whether due to fraud or error. performance and cash flow for the year then ended in accordance with the Annual Accounts Act. The consolidat- In preparing the annual accounts and consolidated ac- ed accounts have been prepared in accordance with the counts, the Board of Directors and the Managing Director Annual Accounts Act and present fairly, in all material re- are responsible for the assessment of the company’s and spects, the financial position of the group as of 31 December the group’s ability to continue as a going concern. They dis- 2017 and their financial performance and cash flow for the close, as applicable, matters related to going concern and year then ended in accordance with International Financial using the going concern basis of accounting. The going con- Reporting Standards (IFRS), as adopted by the EU, and the cern basis of accounting is however not applied if the Board Annual Accounts Act. The statutory administration report is of Directors and the Managing Director intends to liquidate consistent with the other parts of the annual accounts and the company, to cease operations, or has no realistic alter- consolidated accounts. native but to do so.

We therefore recommend that the general meeting of share- Auditor’s responsibility holders adopts the income statement and balance sheet for Our objectives are to obtain reasonable assurance about the parent company and the group. whether the annual accounts and consolidated accounts as a whole are free from material misstatement, whether Basis for Opinions due to fraud or error, and to issue an auditor’s report that We conducted our audit in accordance with International includes our opinions. Reasonable assurance is a high level Standards on Auditing (ISA) and generally accepted au- of assurance, but is not a guarantee that an audit conducted diting standards in Sweden. Our responsibilities under in accordance with ISAs and generally accepted auditing those standards are further described in the “Auditor’s standards in Sweden will always detect a material misstate- Responsibilities” section. We are independent of the parent ment when it exists. Misstatements can arise from fraud or company and the group in accordance with professional error and are considered material if, individually or in the ethics for accountants in Sweden and have otherwise ful- aggregate, they could reasonably be expected to influence filled our ethical responsibilities in accordance with these the economic decisions of users taken on the basis of these requirements. annual accounts and consolidated accounts.

We believe that the audit evidence we have obtained is suf- As part of an audit in accordance with ISAs, we exercise pro- ficient and appropriate to provide a basis for our opinions. fessional judgment and maintain professional scepticism throughout the audit. We also: Other matter The audit of the annual accounts and consolidated ac- ◼◼ Identify and assess the risks of material misstatement counts for the year 2016 was performed by another auditor of the annual accounts and consolidated accounts, who submitted an auditor’s report dated 24 Juli 2017, with whether due to fraud or error, design and perform audit unmodified opinions in the Report on the annual accounts procedures responsive to those risks, and obtain audit and consolidated accounts. evidence that is sufficient and appropriate to provide a basis for our opinions. The risk of not detecting a mate- The following documents are attached to the audit report: rial misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, ◼◼ Copy of the former auditor’s report according to Chapter forgery, intentional omissions, misrepresentations, or 9 § 23 of the Companies Act. the override of internal control.

◼◼ Copies of notifications according to Chapter 9. 23 a § of ◼◼ Obtain an understanding of the company’s internal con- the Companies Act. trol relevant to our audit in order to design audit proce-

Annual Report 2017 / Advania AB 85 dures that are appropriate in the circumstances, but not Report on other legal and regulatory requirements for the purpose of expressing an opinion on the effec- Opinions tiveness of the company’s internal control. In addition to our audit of the annual accounts and consolidated accounts, we have also audited the administra- ◼◼ Evaluate the appropriateness of accounting policies tion of the Board of Directors and the Managing Director of used and the reasonableness of accounting estimates Advania AB for the year 2017 and the proposed appropria- and related disclosures made by the Board of Directors tions of the company’s profit or loss. and the Managing Director. We recommend to the general meeting of shareholders that ◼◼ Conclude on the appropriateness of the Board of the profit be appropriated in accordance with the proposal Directors’ and the Managing Director’s use of the going in the statutory administration report and that the members concern basis of accounting in preparing the annual of the Board of Directors and the Managing Director be dis- accounts and consolidated accounts. We also draw a charged from liability for the financial year. conclusion, based on the audit evidence obtained, as to whether any material uncertainty exists related to Basis for Opinions events or conditions that may cast significant doubt We conducted the audit in accordance with generally ac- on the company’s and the group’s ability to continue as cepted auditing standards in Sweden. Our responsibilities a going concern. If we conclude that a material uncer- under those standards are further described in the “Auditor’s tainty exists, we are required to draw attention in our Responsibilities” section. We are independent of the parent auditor’s report to the related disclosures in the annu- company and the group in accordance with professional al accounts and consolidated accounts or, if such dis- ethics for accountants in Sweden and have otherwise ful- closures are inadequate, to modify our opinion about filled our ethical responsibilities in accordance with these the annual accounts and consolidated accounts. Our requirements. conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future We believe that the audit evidence we have obtained is suf- events or conditions may cause a company and a group ficient and appropriate to provide a basis for our opinions. to cease to continue as a going concern. Responsibilities of the Board of Directors ◼◼ Evaluate the overall presentation, structure and content and the Managing Director of the annual accounts and consolidated accounts, The Board of Directors is responsible for the proposal for including the disclosures, and whether the annual ac- appropriations of the company’s profit or loss. At the pro- counts and consolidated accounts represent the under- posal of a dividend, this includes an assessment of wheth- lying transactions and events in a manner that achieves er the dividend is justifiable considering the requirements fair presentation. which the company’s and the group’s type of operations, size and risks place on the size of the parent company’s and the ◼◼ Obtain sufficient and appropriate audit evidence regard- group’s equity, consolidation requirements, liquidity and po- ing the financial information of the entities or business sition in general. activities within the group to express an opinion on the consolidated accounts. We are responsible for the direc- The Board of Directors is responsible for the company’s or- tion, supervision and performance of the group audit. ganization and the administration of the company’s affairs. We remain solely responsible for our opinions. This includes among other things continuous assessment of the company’s and the group’s financial situation and en- We must inform the Board of Directors of, among other mat- suring that the company’s organization is designed so that ters, the planned scope and timing of the audit. We must the accounting, management of assets and the company’s also inform of significant audit findings during our audit, -in financial affairs otherwise are controlled in a reassuring cluding any significant deficiencies in internal control that manner. The Managing Director shall manage the ongoing we identified. administration according to the Board of Directors’ guidelines and instructions and among other matters take measures that are necessary to fulfill the company’s accounting in accordance with law and handle the management of assets in a reassuring manner.

86 Annual Report 2017 / Advania AB Auditor’s responsibility Our objective concerning the audit of the administration, and thereby our opinion about discharge from liability, is to obtain audit evidence to assess with a reasonable degree of assurance whether any member of the Board of Directors or the Managing Director in any material respect:

◼◼ has undertaken any action or been guilty of any omis- sion which can give rise to liability to the company, or

◼◼ in any other way has acted in contravention of the Companies Act, the Annual Accounts Act or the Articles of Association.

Our objective concerning the audit of the proposed appropriations of the company’s profit or loss, and thereby our opinion about this, is to assess with reasonable degree of assurance whether the proposal is in accordance with the Companies Act.

Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with generally accepted auditing standards in Sweden will always detect actions or omissions that can give rise to liability to the company, or that the proposed appropriations of the company’s profit or loss are not in accordance with the Companies Act.

As part of an audit in accordance with generally accepted auditing standards in Sweden, we exercise professional judgment and maintain professional scepticism throughout the audit. The examination of the administration and the proposed appropriations of the company’s profit or loss is based primarily on the audit of the accounts. Additional audit procedures performed are based on our professional judgment with starting point in risk and materiality. This means that we focus the examination on such actions, areas and relationships that are material for the operations and where deviations and violations would have particular importance for the company’s situation. We examine and test decisions undertaken, support for decisions, actions taken and other circumstances that are relevant to our opinion concerning discharge from liability. 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.

Stockholm 10 April 2018 Grant Thornton Sweden AB

Anders Meyer Authorized Public Accountant

Jörgen Sandell Authorized Public Accountant

Annual Report 2017 / Advania AB 87 www.advania.com

ORG.NR. 556963-8991