Annual Report 2006
www.cybercomgroup.com/2006
Cybercom Årsredovisning 2006 / Förvaltningsberättelse 1 Introduction
About Cybercom 1 The year in brief 2 CEO's report 3 Business concept, objectives and strategies 6
Management report
2006 operations 8 Market in 2006 10 Business divisions 13 Business processes 15 Employees 17 The share 19 Risk management 20 Outlook 21 Proposed appropriation of profit 22
Accounts and notes
Income statement 23 Income statement - parent company 24 Changes in equity 25 Changes in equity - parent company 26 Balance sheet 27 Balance sheet - parent company 28 Cash flow statements 29 Cash flow statements - parent company 30 Key data and ratios 31 Financial performance summary 32 Definitions 33 Accounting and valuation policies 35 Notes 41 Auditors' report 61
Code of corporate governance
Corporate governance report 62 Board 64 Group executives 66 Auditors 68
Information
Annual general meeting of shareholders (AGM)69 About the annual report 70
Annual Report 2006 www.cybercomgroup.com/2006
Cybercom Årsredovisning 2006 / Förvaltningsberättelse 2 Introduction About Cybercom
Cybercom is a high-tech consultancy that offers business-critical IT solutions and advising within telecom and selected technologies. In 1995, Cybercom was launched in Sweden; in 1999 it was listed on the OMX Nordic Exchange.
The Group has customers worldwide and offices in Denmark, Singapore, Sweden, and the UK - plus a joint venture in India (since 2006).
Telecom management and networks Cybercom offers expertise and consulting services in the telecom management and network areas. By using the latest technologies, Cybercom develops customers' business operations.
Portals and mobile solutions Cybercom's largest area of operation. Using its extensive experience, Cybercom helps customers create new services and offerings that are provided via the Internet or mobile devices.
E-commerce and billing Cybercom supplies the entire business process value chain for e- commerce. This is a market with strong growth in all segments.
Embedded systems Frame agreements are crucial for Cybercom creates technical solutions and develops software with Cybercom, because customers place a series of new functions. This area is very competitive and increasing volumes of work with fewer demands fast product development. consultancies. Cybercom has frame agreements for all large business relationships.
Frame agreement, 78% Other, 22%
Most of Cybercom's revenue comes Cybercom runs turnkey projects and from telecom, although its customer carries out specialist assignments in base continuously expands to enable leading technologies. Customer spin-off deals in areas in which propositions fall into these areas and Cybercom has specialist expertise. are spread as follows:
Telecom, 72% Banking & finance, Turnkey, 46% Consulting services, 10% 54% Other, 5% Industry, 5% Retail, 4% State & municipal, 4%
Cybercom Annual Report 2006 Introduction 8 1 Introduction The year in brief
During Cybercom's 11-year history, 2006 generated the best bottom line. With an operating margin of 9.5% from running operations, Cybercom almost* achieved its Operating margin 2006 financial objective of 10%. The company has expanded and broadened its % market through organic growth. Jan-Dec 2006 1) 10 Jan-Dec 2006 2) 9.5 * Cybercom achieved its target if special costs in conjunction with the take-over bid Jan-Dec 2005 7.4 from the principal shareholder are excluded and costs related to management changes Q4-06 1) 14.5 and recruitment. Q4-06 2) 12 Q4-05 9 Sales Operating profit SEK million SEK million 28% increase
Jan-Dec 2006 1) 544.8 Jan-Dec 2006 1) 54.3 Jan-Dec 2006 2) 535.8 Jan-Dec 2006 2) 50.9 Jan-Dec 2005 466.4 Jan-Dec 2005 34.7 Q4-06 1) 151.3 Q4-06 1) 21.9 Q4-06 2) 149.5 Q4-06 2) 17.9 Q4-05 131.0 Q4-05 11.8 Profit SEK million
15% increase 47% increase Jan-Dec 2006 1) 41.1 Jan-Dec 2006 2) 35.3 Jan-Dec 2005 24.5 Q4-06 1) 16.3 Q4-06 2) 10.5 1) Profit from running operations, excluding one-offs and divestment in Norway. Q4-05 8.9 2) Profit including one-offs and divestment in Norway.
International operation 44% increase The UK operation developed well in 2006 and reported good growth. The Singapore operation reported 100% growth. And the Norwegian operation was dissolved due to weak development and no critical mass.
Offshore capacity In 2006, Cybercom launched an operation in India - to offer competitive offshore No. employees services. Its first offshore project was for Sony Ericsson. Cybercom was responsible for At period's end application management, development, and testing of external web sites and Jan-Dec 2006 1) 489 associated functions. Jan-Dec 2006 2) 481 Jan-Dec 2005 414 Expansion in the Öresund region Q4-06 1) 489 Cybercom continued to expand in the Öresund region, where it employs 250 Q4-06 2) 481 consultants. At year-end, Cybercom bought Varchar, an IT consultancy. The contract Q4-05 414 specified a January 2007 take-over. Varchar brings key customers and new market segments into Cybercom. 16% increase CEO recruitment Mats Alders, Cybercom's former president and CEO, left the company for another industry. Cybercom recruited Patrik Boman to replace him; Patrik will start in May 2007. His most recent job was at HiQ, where he was MD for the Stockholm operation.
Cybercom Annual Report 2006 Introduction 9 2 Introduction CEO's report
Stockholm, March 2007
Cybercom is now among the top-ranking IT consultancies - thanks to the best earnings ever, in its 11-year history. I'm enormously proud of the fantastic performance of Cybercom's employees. Through experience, we know that cultivating new customers takes time and resources because customers rigorously assess After ending the year with a big bang (Cybercom's best-ever their suppliers. During the past three to five years, we cultivated quarter), we can say that we had the right strategy, i.e., to many long-term customer contacts, and interest in our services expand our market and offer our services offshore. We were parallels incidences of applications increasingly becoming mobile. able to validate this strategy, and we see that further We intend to identify new customer segments in which our opportunities continue to be great for expansion and offshore knowledge of portals, mobile services, and e-commerce can be projects. used - the same way that we achieved success with key customers in the financial services sector. During 2006, we achieved most of our objectives for the year. In the 2005 annual report, we stated that our objectives were to Excellent market situation in 2006 continue growing (organically and via acquisitions), to strengthen The market situation for IT consultancies and telecom was very our market position, and to expand our customer base. We also advantageous. High activity levels and strong growth generally stated that we'd achieve a 10% operating margin. characterise the market. Increasingly, executive management makes IT service procurement decisions - as part of customers' We strengthened our already strong market position. We grew overall strategies. IT projects also tend to be more complex. organically, and we expanded our customer based via several Increase demand was also noticed for specialist services within new key customer projects. At year-end, we signed a contract system architecture and integration - particularly service-oriented for the strategic acquisition of Varchar, an IT consultancy architecture and architecture that enables easy, dynamic services specialised in .Net technology. Sales increased 15%, and our integration. This trend greatly benefited the company; thanks to operations achieved a 10% operating margin for the full year Cybercom's expertise in leading technologies, it contributed to and a 14.5% margin for Q4 2006. company growth.
We also achieved most of our announced objectives, and I'm The pricing picture became somewhat better and was noticeable proud to say that today, we're a leading IT consultancy within in the new frame agreements (master contracts) that we signed. telecom and selected technologies, so we can do better. And There's a wide price range - particularly in specialised services now I'll tell you why! that constitute part of Cybercom's business. In 2006, demand increased for Cybercom's services, which positively affected the High ambition level company. The year ended on a very strong note, and we could We set our sights high in 2006: we were very active on the report the greatest profit ever. market, and we enhanced our position. But we didn't manage to do everything before year-end. I expected that we would have We expect the economic upswing in 2006 to continue in 2007. implemented a large acquisition, and I think that we could have And with our extensive experience and range of expertise, we're recruited more aggressively. Now it's time to get this done open to many new opportunities afforded by all the new players before another year passes. that create their businesses on the Internet or via mobile technologies. During 2007, we continue our search for acquisitions and new employees. But note that here, the most crucial factors are that Three billion users we employ only the best and that we acquire operations that The mobile phone celebrated its 50th birthday in 2006. Today, reinforce our strategy for the future; consequently we must sector analysts claim that there are more than 2.7 billion mobile carefully evaluate candidates. We must feel good about our service subscriptions and that this number will pass 3 billion in company - we must be proud of it. 2007. Soon every other person on earth will have a mobile device. Through experience, we know that cultivating new customers takes time and resources because customers rigorously assess More and more persons get access to mobile communication. their suppliers. During the past three to five years, we cultivated Continued expansion, better capacity, increased competition many long-term customer contacts, and interest in our services with lower prices, and many more mobile services drive mobile parallels incidences of applications increasingly becoming mobile. device usage. Last year was a key year for content-rich We intend to identify new customer segments in which our consumer services - thanks to launch and expansion of mobile knowledge of portals, mobile services, and e-commerce can be broadband. used - the same way that we achieved success with key customers in the financial services sector.
Cybercom Annual Report 2006 Introduction 10 3 So services traditionally delivered to the telecom sector are in demand on other markets. Today, companies in all sectors use Introduction functions and opportunities afforded by mobile solutions. So our CEO's report capabilities and capacities are attractive to customers outside the More and more persons get access to mobile communication. traditional telecom market, e.g., industry and retail, where we Continued expansion, better capacity, increased competition acquired several new customers during the year. At the same with lower prices, and many more mobile services drive mobile time, we were commissioned for many key projects within device usage. Last year was a key year for content-rich banking and financial services and insurance - thanks to our consumer services - thanks to launch and expansion of mobile consultants' technology expertise. broadband. Onshore and offshore combined to create When call prices quickly fall, operators broaden their propositions bestshore to compete for customers and to find new revenue sources. The trend for customers to stop running certain operations and Revenue streams from voice traffic and SMS still dominate to purchase these services continues to be a strong driver on the among operators. But these streams successively dry up as IT services market. Development and management of IT systems investments in new, sophisticated services flood the sector. And or testing operations are examples of areas that are outsourced. landline and mobile networks are expanding. Customers often keep overall responsibility and to procure subsystems or solutions for specific application areas. Offshore Word is out that the Internet is starting to reach full capacity, i.e., services are a key part of our customer proposition, and I believe services and content transmitted via the Internet are becoming that they will be even more significant. During large more sophisticated and demanding more space, while the procurements and in many frame agreements, offshore capacity number of users constantly increases. So even the Internet must is a requirements specification - even if it isn't immediate to the expand. Considering all these changes, the services that specific procurement. What's important here is that we're Cybercom can deliver are in demand. So going forward, we see prepared to deliver the optimal, long-term solution when many great opportunities for our business. customers request it, namely, what we call bestshore.
New opportunities In 2006, we established Cybercom Datamatics Information The telecom, Internet, and media (TIM) trend becomes clearer Solutions Pvt Ltd - a joint venture in India. So now we can fulfil because the same types of services are required and offered customers' requirements for global deliveries. The venture in within various areas. This trend creates new market segments India is aligned with Cybercom's strategy to grow internationally and opens new opportunities for our strong solutions within and to develop a strong offshore solution. By offering offshore portals, billing, and telecom management. New players in the capacity, we can still own the business on the local market. We operator segment e.g., content providers or other service expect that offshore operations will generate 15-20% of our providers, are appearing on the scene and expanding their revenue within a three-year period. businesses to cover and offer network services to existing and new customers. Here, Cybercom's experience is very attractive, Mature market so our customer base expands further. Standardisation and products characterise a mature market. But even if companies buy finished products, the products must often At the same time telecom players continue to demonstrate be integrated with their systems. So strategic partnerships investment and development appetite and to focus on expansion become business critical for IT consultancies. In the autumn, and increasing market shares. International operators' Cybercom signed a valuable partnership agreement with BEA, investment pace has not slowed when it comes to expanding which primarily works closely with our Danish operation. We networks worldwide, developing services, and entering new work closely with IBM on several e-commerce projects in the UK. areas. In 2006, consolidation characterised the Nordic market. And Cybercom has had partnerships with larger and smaller Operators' investments were mostly in support systems for players such as Microsoft, Oracle, Akamai, Quest, iCore, and broadband services and mobile services, e.g., mobile TV and Polopoly. Our partnerships are crucial, and we've noticed that other solutions for the entertainment sector. For example, we we get new business based on recommendations from them. see mobile music services increasing in popularity. In Japan, more music is downloaded into mobile phones than into PCs from the Awareness of and demand for open systems and software web. More than 120 operators worldwide have launched mobile increased among companies and public authorities. The software TV and video services. contains open source code, and in recent years it has become successful because it is so cost effective. Open source software So services traditionally delivered to the telecom sector are in releases resources for other tasks. So customers can afford more demand on other markets. Today, companies in all sectors use investments in customising for their specific needs. In the autumn, functions and opportunities afforded by mobile solutions. So our Cybercom invested in this area and signed a partnership capabilities and capacities are attractive to customers outside the agreement with JBoss, for leading open source middleware traditional telecom market, e.g., industry and retail, where we products. Integration of standardised services and a continued acquired several new customers during the year. At the same push toward offshoring are key parts of the offering. time, we were commissioned for many key projects within banking and financial services and insurance - thanks to our consultants' technology expertise.
Cybercom Annual Report 2006 Introduction 11 4 Introduction CEO's report
Bright future In 2006, our employees did a fantastic job. The executive team and I extend a big thank-you for everyone's valuable contributions. Cybercom's consultants help customers create profitable businesses using opportunities afforded by technology. Our work is strongly driven by sense, as is our company culture - our customers appreciate this, and it attracts new ones. During the year, we implemented key changes and large new initiatives that turned out very well. We passed the cross-road and started a new journey toward higher visions and new goals.
We're well positioned for 2007, and thanks to our leading position, we stand on a solid base from which we can take market shares and push the industry forward.
Stockholm, 28 March 2007
Peter Keller-Andreasen
Acting president and CEO
Cybercom Annual Report 2006 Introduction 12 5 Introduction Business concept, objectives and strategies
From a shareholder's perspective, Cybercom's main task is to form the foundation for value development in the company; from here, the company's business concept, vision, objectives, and strategies are formulated.
Business concept With customers and partners, Cybercom creates businesses on the leading edge of technology.
Vision Strategies By being the natural, obvious choice for deliveries of business- Cybercom will achieve its objectives by working from strategies critical solutions within telecom and leading technologies, that are focused on technologies, growth, and telecom. The Cybercom will take market shares in other sectors. strategies also cover expanded services to several market segments and geographic areas. Cybercom will be managed in General, overall objectives alignment with these main strategies: Cybercom's long-term operational objectives are to: z Strong positioning via expanded customer bases outside z Hold a leading telecom market position and to be one of the telecom and inside areas in which synergies exist with three top-of-mind choices among customers on those telecom deals, e.g., portals and embedded systems markets in which Cybercom chose to concentrate z Expanded telecom deals - so that Cybercom can z Hold an established position as a leading cross-industry differentiate itself from other, mid-sized IT service providers supplier of selected, cutting-edge skills and technologies; that operate on the same market consequently Cybercom's business will spread to sectors z Extension of the service portfolio with at least one new outside telecom customer proposition - either via development of cutting- z Be an established offshore supplier, with 15-20% of sales edge competence or via acquisitions of companies with from such contracts complementary service portfolios z Have a larger internationalised operation, particularly in the z Enhanced profile and attractive to customers, employees, Nordics and the UK, via locally established operations and the labour market - via brand-strengthening activities z Have a recognised brand among customers, employees, and z Strengthened delivery capabilities via development of the labour market - as a top-notch company - thanks to the Cybercom's offshore joint venture with Datamatics, its Driven by sense communications/message platform partner in India z Create conditions for deliveries of customer propositions in Financial objective several of our core areas within all prioritised regions: z Cybercom's long-term financial objective is to report a 15% Stockholm, Malmö, Copenhagen, London, and Mumbai operating margin. z Fewer operations in regions that do not provide critical mass
Objective fulfilment in 2006 In 2006, Cybercom established a joint venture with Datamatics in Mumbai, India. This is aligned with the company's objective to become an established offshore supplier.
Acquisition of Varchar, an IT consultancy in the Öresund region, gave Cybercom valuable .Net expertise and several new customer contacts in the region.
Cybercom delivers turnkey projects and consulting services. The percentage of turnkey projects reached 46% of sales and provided a stable revenue stream.
Cybercom reached its projected 10% operating margin, which was aligned with its objectives.
Cybercom Annual Report 2006 Introduction 13 6 Introduction Business concept, objectives and strategies
Cybercom's strategic position Cybercom's strategic position The model shows that the company can earn money by either dominating a sector, i.e., positions itself to the right of the curve - or by specialising in a limited niche - a position to the left of the curve.
The dangerous position, in which margins are often narrower, is when the company is a well-established niche player but is too small to be a sector leader. Today, Cybercom's core area positions the company either as a sector leader or as a strong niche player.
Cybercom Annual Report 2006 Introduction 14 7 Management report 2006 operations
A continued good market resulted in a very good 2006 for Operating margin Cybercom. The company has benefited from greater price scope, primarily in specialised IT and telecom services. Cybercom stands firm, and business has become even stronger during the year.
The past year brought management changes as president and CEO Mats Alders and executive vice president Bengt Levin left Cybercom after many years of service. Patrik Boman will assume the position of president and CEO in May 2007. Until then, Peter Keller-Andreasen is acting president and CEO. He joined Cybercom in 2001 and is managing director of the Danish operation. Cybercom has also signed frame agreements with new customers. One is the Swedish Civil Aviation Authority, which has Operational management continued to drive the company named Cybercom as its IT services partner. The agreement runs forward and, for the eighth consecutive quarter, Cybercom until October 2009 with opportunity for a two-year extension. shows strong operating margins: 9.5% for the year and 12.0% Other key customers with which Cybercom signed frame for Q4 2006. agreements are Ericsson, Tetra Pak, and SMHI.
The 10% operating margin objective for the year was missed at Frame agreements are crucial for Cybercom and for the industry the finish line; extraordinary costs from management changes as a whole, because customers place increasing volumes of work and a buyout bid from JCE Group made the difference. with fewer consulting companies. Cybercom now has frame agreements for all large business relationships. Together these Excluding these extra costs, the operating margin was 10% for amount to 78% of net sales. the full year and 14.5% for Q4 2006. This is a significant improvement compared to previous years - Cybercom's best Cybercom's major customers include: result ever. z Assa Abloy Joint venture in India z Ericsson Offering offshore opportunities is becoming an increasingly key z Millicom competitive factor because today's companies select outsourcing z Nokia to an ever increasing extent. When large companies contract for z PFA Pension consulting services, suppliers must be able to fulfil offshore z Regeringskansliet capacity requirements in tenders. z Reuters z SEB In April 2006, Cybercom started a joint venture in Mumbai z SKF (previously called Bombay) with Datamatics Ltd, an operation in z Sony Ericsson India. Already, Cybercom has 12% of its delivery capacity in India. z Tele 2 It is estimated that within three years, offshore operations will z TeliaSonera generate 15-20% of the company's revenues. z Teracom
Frame agreement Broadening the customer base In 2006, Cybercom retained and renewed a number of frame Most of Cybercom's revenue comes from the telecom sector, but agreements (master contracts). One is with Telia Sonera and the customer base has widened during the year. New sectors covers its entire Nordic operation during 2006 and 2007. include industry, banking and financial services, and more projects from state and local authorities. This closely follows Work on Sony Ericsson's external web sites also continues. The Cybercom's strategy to develop spin-off business in areas in agreement is valid until 31 December 2008. A large portion of which the company has specialist competence. this project is assigned to Cybercom's newly started offshore operations in India. This is Cybercom's first offshore project. New notable customers include:
Cybercom has also signed frame agreements with new customers. One is the Swedish Civil Aviation Authority, which has named Cybercom as its IT services partner. The agreement runs until October 2009 with opportunity for a two-year extension. Other key customers with which Cybercom signed frame agreements are Ericsson, Tetra Pak, and SMHI.
Cybercom Annual Report 2006 Management report 8 8 Management report 2006 operations
z E.ON Revenue by industry z Ica
z Lowe Tesch Telecom 72% Banking & finance 10% z Swedish Civil Aviation Authority Other 5% Industry 5% z SAS Institute Retail 4% State & municipal 4% z Sirius z Stokab z Svenska Spel Financial position Other events in 2006 Equity on 31 December 2006 was SEK 272.4 million (238.2), z Cybercom closed its Norwegian operation because of a yielding a 66.6% equity/assets ratio (67.7). Equity per share weak earnings trend and not enough critical mass. Costs for amounted to SEK 22.11 (19.33). this were taken in Q4 2006. The closure has no negative effect on EBIT for 2006. z The UK operation shows a very strong earnings trend, and operations in Singapore grew 100% since it was acquired in April 2005. z Testing and verification of Ericsson Mobile Platform (EMP).
Events after year-end 2006 z Acquisition of Varchar, an IT consultancy with operations in the Öresund region. The acquisition gives Cybercom access to valuable .Net expertise and new customer possibilities in the region.
Sales and income Operating profit for 2006 totalled SEK 50.9 million (34.7), a 47% increase and Cybercom's strongest result ever. This corresponds to a strong 9.5% operating margin (7.4).
In 2006, Cybercom simultaneously displayed growth and strong profitability. Sales for the entire year amounted to SEK 535.8 million (466.4), a 15% rise in revenue compared to 2005. Cybercom reported 10% organic growth.
Net financial items stood at SEK -0.8 million (4.4). Profit after net financial items totalled SEK 50.1 million (39.0), a 9.4% net margin (8.4).
Investments in 2006 Investments in property, plant, and equipment stood at SEK 5.0 million (6.2) on 31 December 2006. Net investments in intangible assets, excluding goodwill, totalled SEK 0.7 million (4.7).
Liquidity and cash flow The Group's cash and cash equivalents totalled SEK 88.9 million (55.5) on 31 December 2006. Cash flow before changes in working capital amounted to SEK 55.0 million (38.8) during 2006. Working capital fell by SEK 20.6 million during the same period. In total, cash flow from operating activities was SEK 34.4 million (26.5).
Cybercom Annual Report 2006 Management report 9 9 Management report Market in 2006
The IT and telecom consulting market has been very good and characterised by many activities and strong growth that generate high demand for Cybercom's services.
Cybercom's development has been strongest in the expanding Öresund region, where Cybercom has offices in Malmö, Lund, and Copenhagen. Cybercom has also held its own in Stockholm during the year, despite tough competition. Market development in the UK has also been very positive. Customers require offshore capacity Large investments in telecom Today's customers require suppliers with global capacity and Telecom industry players continue to invest with the purpose of preferably 24/7 availability. Service, efficiency, and particularly expanding and taking market share. The result? A good market competitive pricing are key issues. The trend shows that position for IT and telecom consultancies. International players companies primarily choose outsourcing, e.g., for mature, invest in network expansion and development of new areas and standardised development and maintenance processes. This services. In the Nordics, focus is more on optimising existing changes the role of Swedish and western European systems than on building new systems. consultancies. It is difficult for them to compete over prices for standard services. Instead, they focus on the profitable specialist A few large companies that sign frame agreements with several assignments and turnkey projects. selected consultancies now dominate the telecom market. Size, niche offerings, and an international presence are increasingly Cybercom has had offshore capacity since April 2006 via a joint key factors for consulting companies. venture in India, described in the Operations section.
Telecom, Internet and media convergence Cybercom's competitors Distinctions between IT and telecom - and who delivers what - Cybercom has several competitors in various market situations. are being redefined. Reduced calling costs force operators to find Competitors range from large, global companies such as . . . alternative revenue streams. z Accenture Together with more sophisticated technology, the result is z Cap Gemini convergence of telephony, broadband, and TV, and new types z Incode of content and services. For instance, music through mobile z Logica CMG phones has grown quickly. TV through the telephone is also advancing, assisted by development of the DVB-H technology . . . to local companies such as: that adapts digital TV for mobile telephones. z Connecta Development of content and technology parallels an increase z HiQ and diversification of the number of market players. Today, the z Sigma combination of telephony, broadband, and television are z Teleca delivered by traditional operators and by content-producing z Tieto Enator media companies such as MTG and net owners such as Teracom and Vattenfall. Competitors also include many specialised consulting companies that operate on the international telecom market. The key to a fast-growing, online market is the transformation of traditional media and communication channels into IP Skills shortage on shifting labour market technology. Players in the new media's value chain must quickly The IT and telecom labour market typically shifts a lot. And most snap up new technologies to handle increasing online activity. companies will tell you that there's a skills shortage. Consulting companies have difficulties finding and retaining competent Access capabilities for mobile Internet are global and seamless. employees. This has allowed for visions such as single sign on, always best connected, and 24/7 media consumption. For instance, the IT sector in Sweden now lacks almost 9,000 persons, according to IDC, a business intelligence agency. Fewer applications to IT education programmes, combined with upcoming retirements, will escalate the problem within the near term.
Cybercom Annual Report 2006 Management report 1010 Management report Market in 2006 For instance, the IT sector in Sweden now lacks almost 9,000 persons, according to IDC, a business intelligence agency. Fewer applications to IT education programmes, combined with upcoming retirements, will escalate the problem within the near Revenue by project type term.
Turnkey 46% Increased recruitment and professional development activities will Cybercom's Singapore office has become a central point for Asia Consulting services 54% occur in 2007 to fortify the company's position as an attractive and Africa, particularly when co-operating with Millicom. employer that's capable of competing on the labour market. International projects do operational audits to optimise the operators' businesses when setting up organisational models and 2007 and onward process models. Tele2 and Teracom are key customers in Technical paradigm shifts drove IT sector changes in recent Sweden. decades. The sector is now expected to enter a mature phase, and the service sector is expected to become more affected by Landline and mobile convergence parallels increased demand for economy-driven fluctuations. The good economic trend from consulting services. Operators want to offer the same or similar 2006 is expected to continue in 2007. services regardless of which technology the customer uses to connect. This creates demands for new types of architecture and Mobile communication represents the most growth in the solutions that support implementation of IP-based services. industry and is expected to increase by 10-14% annually through the end of 2010. Growth will primarily come through large Cybercom has several training projects within IP multimedia investments in the mobile networks of Asia, Africa, and Russia. subsystems (IMS). IMS simultaneously supports landline and The 3G network in Europe will also continue to expand gradually. mobile access that enables operators to easily develop and add new IP-based services. At Cybercom's facilities in Linköping, Operators' revenues will gradually move from voice traffic and network simulators are developed to simulate traffic in 2G and SMS to other sources; this is due to several factors: 3G networks.
z Quickly reduced calling costs, causing operators to expand Portals and mobile solutions their offerings. Cybercom's largest area of operation is in portals and mobile z More complex mobile phones with space for more services. solutions. Using its extensive experience, Cybercom helps z Content providers, such as the music industry and news customers create new digital services and customer propositions agencies, gain influence over operator's service offerings. that are delivered via the Internet or mobile devices. Customers include Sony Ericsson, Assa Abloy, and Reuters. The ongoing merger of telephony, broadband, and TV, called triple-play, will include mobile telephony. The combined offer of Many new players seek to supply content services for mobile communication, entertainment, and services will become phones, and a new market is now being created. These needs wireless, i.e., quadplay or quadruple play. So new media is benefit Cybercom with its solid experience and extensive creating a new market. expertise in the area.
Customer proposition Cybercom won its first offshore project in 2006 - an agreement Cybercom runs turnkey projects - providing solutions and between Cybercom and Sony Ericsson for application application management and it provides specialist services - management, development, and testing of Sony Ericsson's involving leading technologies. Cybercom delivers onshore or external web sites and corresponding functionality. The contract offshore; its offerings fall into four operation areas: runs until 31 December 2008. Cybercom's commitment includes daily administration and participation in key development and Telecom management and networks testing projects. Cybercom offers expertise and consulting services in the telecom management and network areas. Cybercom has strengthened During the year, Cybercom won several new portal development its international presence in 2006, primarily through its non- projects, including an internal purchasing portal for a UK European ventures. company in the fashion industry. Cybercom also has several ongoing portal projects that are spread across several years. Cybercom's Singapore office has become a central point for Asia and Africa, particularly when co-operating with Millicom. E-commerce and billing International projects do operational audits to optimise the Cybercom supplies the entire business process value chain for e- operators' businesses when setting up organisational models and commerce. This is a market with strong growth in all segments. process models. Tele2 and Teracom are key customers in Integration of new or improved solutions for e-commerce Sweden. parallels company's efforts to take market shares.
Cybercom Annual Report 2006 Management report 1111 Management report Market in 2006 Cybercom supplies the entire business process value chain for e- commerce. This is a market with strong growth in all segments. Integration of new or improved solutions for e-commerce parallels company's efforts to take market shares.
Cybercom partners with IBM and has sought-after competence in IBM's e-commerce suite. This partnership provides new, attractive customers primarily in the UK. Projects are for customers in industry, telecom, and retailing.
The areas of billing and business support systems (BSS) are becoming more standardised and module based, even if customer adaptations are always done. Within billing, Cybercom is a product partner with solutions that are integrated into other systems. Telia Sonera, Tele2, and Suntel in Sri Lanka are key customers. Cybercom is concentrating on widening its customer base for billing outside of telecom; in during 2006, it won a project to integrate billing solutions for e-invoicing systems.
Embedded systems New, better mobile telephone models require more sophisticated content functionality. Cybercom produces technical solutions and develops software with a series of new functions. This area is very competitive and demands fast product development. Cybercom has important projects with Nokia, Sony Ericsson, and Ericsson.
Cybercom develops applications for customers outside the telecom sector. Examples include transaction cards, electronic locks, and systems for rescue services and surveillance. Projects are with customers such as Saab Tech and Assa Abloy.
Cybercom has a co-ordinating roll in the standardising work of the Open Mobile Services Interface (OMSI) Forum within device management. The aim is to create a common standard for all mobile telephone manufacturers when updating mobile telephone software.
Cybercom Annual Report 2006 Management report 1212 Management report Business divisions
Cybercom's operation has two divisions: Sweden and Key data and ratios, Sweden division
International. The operative organisation, division of sales, and Q4 Q4 Q3 Q2 Q1 number of employees are described below: SEK MILLION 2006 2005 2006 2005 2006 2006 2006 Sales 469.5 422.2 127.1 114.2 101.8 123.4 117.2
Operating profit, EBIT 44.5 27.6 15.3 7.5 10.3 9.5 9.4 Cybercom Group Europe Acting CEO & president Operating margin, % 9.5 6.5 12.0 6.6 10.1 7.7 8.0 Peter Keller- No. of employees at year's 377 348 377 348 360 359 351 Andreasen end
Business Area Sweden Business Area International
Cybercom Nord Cybercom Denmark MD Henrik Gavelli Acting MD Karsten Adelmark The strongest growth comes from the operation in the booming Öresund region. In 2006, Cybercom opened another office in the
Cybercom Syd Cybercom UK region - in Lund. Around year-end, Cybercom signed an MD Thomas Barge MD Terry Hunter agreement to acquire Varchar, an IT company that specialises in .Net. The acquisition brings 24 employees and SEK 20 million in Cybercom Netcom Consultants Cybercom Datamatics annual sales - starting January 2007. Varchar contributes key Acting MD Johan 50 percent-owned joint customers from new market segments, for example, Glimskog venture Smittskyddsinstitutet, Wihlborgs Fastigheter, Cerdo Bankpartner, Alfa Laval, and Lunds Energi. Sales No. employees Cybercom paid a fixed purchase price of SEK 12.5 million. There may be an additional purchase payment if certain profit levels are reached within eight months. The acquisition was effective January 2007 and integration is planned to be completed during H1 2007. No structural costs are expected.
Sweden 86% Sweden 82% The operation in Singapore is a subsidiary to Netcom Consultants, a Stockholm-based acquisition from 2005, and is thus reported International 14% International 18% within the Sweden division. The operation in Singapore shows strong growth and generated SEK 25.6 million in net sales during the year. In the diagram, the two, top navy-blue boxes change this: Business Area International division This division includes operations in Denmark, the UK, and To this: Business division Cybercom's share in the joint venture in India. The division has 84 employees (44). The Norwegian operation was excluded from -- to match the title of the section (Business divisions) this report after a decision to close the operation was taken in Q4 2006. Sweden division In Sweden, operations focus on telecom and selected Because all losses from the Norwegian operation were excluded, technologies for e-commerce and billing, portals and mobile the division's operating profit stood at SEK 2.4 million (2.8). solutions, and embedded systems. The number of employees at the end of the period was 377 (348). The UK operation was very successful in 2006 with considerable growth and a substantial earnings trend. Its focus is on financial Sales for Sweden increased 11% during 2006 to SEK 469.5 information services, and Reuters is a key customer. The million (422.2). Organic growth in the division was 5%. Operating operation also offers e-commerce solutions and IT infrastructure profit for the division amounted to SEK 44.5 million (27.6), which advice. By concentrating on e-commerce in 2006, Cybercom won is a strong improvement of 61%. As a result, the operating several new customers within retail. New customers include margin increased to 9.5% (6.5). Pentland Brands, John Lewis, and Tomy.
Cybercom Annual Report 2006 Management report 1313 Management report Business divisions
Cybercom's Danish operation ended the year with a very strong Key data and ratios, International division quarter. A large part of the operation is focused on banking, Q4 Q4 Q3 Q2 Q1 financial services, and pension insurance companies. PFA Pension, SEK MILLION 2006 2005 2006 2005 2006 2006 2006 BRF Kredit, and Nordea are key customers. In 2006, the Danish Sales 76.4 63.2 23.1 18.7 19.6 16.4 17.3 operation focused on recruiting in the .Net area - with good Operating profit, EBIT 9.7 8.0 4.7 2.2 1.8 1.6 1.6 results. Strong demand for consultants within specialist services in Operating margin, % 12.7 12.7 20.3 11.8 9.2 9.8 9.2 Denmark enabled price hikes. Cybercom also signed a No. of employees at year's 84 44 84 44 69 46 50 end partnership agreement with BEA, which has J2EE and Weblogic products, and this resulted in new projects.
Cybercom's joint venture in Mumbai, India is reported using proportional consolidation. So Cybercom's share of assets, debts, revenues, and costs are reported with the corresponding items in the Group's income and balance sheet. The company had 56 employees at year-end. Of these, 50% are included in Cybercom's employee count.
Sales in 2006 for Cybercom's operations in Denmark, India, and the UK amounted to SEK 76.4 million (63.2), a 21% increase over 2005. The division's organic growth was 21%. Operating profit rose to SEK 9.7 million (8.0), corresponding to a 12.7% margin (12.7).
In Q4 2006, net sales were SEK 23.1 million (18.7). Operating profit was SEK 4.7 million (2.2), giving a 20.3% operating margin (11.8).
Cybercom Annual Report 2006 Management report 1414 Management report Business processes
A fast-moving market, on which customers have high expectations on delivery capacity and quality, puts heavy demands on organisation and leadership. This is why Cybercom has processes to strengthen its status as supplier and employer and to improve control and profitability.
Cybercom has three main processes in its operation, which are of central importance to the company's continued success: Recruitment is one of the critical factors for assuring continued z Business development - all activities surrounding Cybercom's growth. To fortify its recruitment base, Cybercom focuses on solutions, commitments, and services - from customer more systematic identification of future skill/capability needs. proposition to development. Cybercom developed a recruitment process to ensure that the z Sales - all activities, planning, and operative work with sales most suitable candidates emerge via professional, fundamental and customer relations. recruitment initiatives. z Delivery - all activities surrounding production and delivery of solutions, commitments, and services and follow-up and Increased recruitment and professional training and development evaluation together with the customer. will occur in 2007 - to strengthen Cybercom's position as an attractive employer and to compete on the labour market. The three main processes are supplemented by several support processes including marketing communication, personnel, IT, and Quality finance. Cybercom's quality initiatives comply with ISO 9001. One of the primary key objectives is delivery quality. Here, Cybercom aims to The business processes and operative systems were developed to always have 100% satisfied customers. To compete allow Cybercom to retain and use knowledge and experience internationally, it's business-critical that Cybercom fulfils continually developed in the organisation. The results are customer's requirements for service, quality, and precision. constantly documented. Environment Clear, user-friendly processes increase the quality of analysis and Cybercom's operation has low environmental impact. It mostly decision-making, and facilitate knowledge transfer. They also consists of use of office materials and disposal of old computers. reduce risk of losing important experiences and knowledge if key Suppliers are required to comply with the TCO 95 and TCO 99 personnel leave. environmental requirements, and all materials must be recyclable. Cybercom participates annually in Folksam's Climate Business development Index/Green Index for companies listed on the stock exchange. Development of new solutions can be a long process, taking 6-18 Cybercom's efforts in this area are aligned with good practices. months from concept to final solution. New or existing solutions and services development occurs in close partnership with IT customers - particularly embedded systems, portals, and billing To meet customers' demands for shorter lead times, and to solutions. While development is primarily customer specific, a support continued growth, a uniform business and support general solution for a larger market is occasionally developed. system was introduced in all subsidiaries. Operating procedures are well documented in the information security policy and in Key customers business support systems. Cybercom continually conducts Cybercom's account managers follow key customers regardless systematic security initiatives to protect data and systems against of geographic market, because most companies in telecom have perceived threats. The Group's goal is to continually improve use global or regional operations. Cybercom's account managers are of IT support in all processes. totally responsible for business relations with customers, which puts stringent demands on the position. Cybercom supports Branding account managers with assistance from other functions, e.g., Cybercom's branding is primarily based on three basic ongoing support from the executive team and from new documents: concepts. z The brand platform defines fundamental values of the Recruitment Cybercom brand. Recruitment is one of the critical factors for assuring continued z The communication platform defines how the brand is to be growth. To fortify its recruitment base, Cybercom focuses on communicated to its various target groups. more systematic identification of future skill/capability needs. z The graphic profile defines how the brand's visual identity Cybercom developed a recruitment process to ensure that the should be perceived and controlled. most suitable candidates emerge via professional, fundamental recruitment initiatives.
Cybercom Annual Report 2006 Management report 1515 Management report Business processes z The brand platform defines fundamental values of the Cybercom brand. z The communication platform defines how the brand is to be
communicated to its various target groups. The Cybercom model z The graphic profile defines how the brand's visual identity should be perceived and controlled. Stage 1 Stage 2 Stage 3 Stage 4 Sales Needs analysis Business case Strategy Implementation Management In 2005, the Cybercom - Driven by sense communication concept was produced - based on the company's values and culture. Evaluation and/or continued development Work with the concept continued in 2006.
Finance Cybercom continually works with financial reporting and profitability monitoring, with the purpose of insuring correct evaluation of planned and implemented measures. Financial reporting is based upon the annual budget and is followed up monthly. Continuous reporting provides a good basis for quarterly forecasts.
R&D Cybercom has no R&D operation.
The Cybercom model The Cybercom model provides a general overview of company methodology - from concept to implementation and customer delivery.
Cybercom Annual Report 2006 Management report 1616 Management report Employees
In today's mobile labour market, it's important to have a long- Employee statistics term perspective on skills provision. Keeping key employees and Years of employment Employee ages Gender distribution attracting new ones are strategic issues for Cybercom. Skills development is one of the most crucial prerequisites for Cybercom's future growth.
The labour market for IT and telecom was very mobile in 2006. < 1 year 33% < 25 years 6% Women 21% As a result, the Group has widened its recruiting to include other 1-3 years 33% 26-30 years 25% Men 79% sectors. Co-operation with universities through international 3-5 years 10% 31-35 years 24% In 2007,5-7 yearsCybercom 14% will continue36-40 years to 22%work with skills career fairs has also meant an increase in recruitment of new > 7 years 10% 41-45 years 14% enhancement, primarily through company-adapted courses. This graduates. > 45 years 9% is to ensure that courses are aligned with our consultants' high Employee statistics, 2006 skill levels. z Average number of employees: 414 persons (352). z Total number of employees on 31 December: 481 persons Company-adapted courses are often given internally by external (414). trainers. In addition, we purchase individual courses as needed z Of all employees, 21% were women and 79% men (22/78) and often work with communities. z Level of education: 91% have academic credentials (90) z Costs for external training: SEK 2,056,000 (1,587,000) Employees are Cybercom's primary source of profitability and z Average age: 35 (36) success. For employees to develop, and for Cybercom to always z Average number of years in the sector: 10 (10) be able to offer the best consultants on the market, Cybercom z Value-added per employee: SEK 851,000 (864,000) actively works to improve employee competence in leading z Personnel costs SEK 319.4 million (284.4) technologies and to strengthen company solidarity.
Skills enhancement Skill enhancement occurs in external courses, expert groups, and customer projects. Besides pure skills enhancement, a series of seminars is also held to promote company culture and the Group's technical interests.
In 2006, Cybercom initiated the Career Ladder development programme. A consulting company with a career path for consultants is more prepared to meet competition over projects and skills. Defining expectations for consultants - and measuring, communicating, and rewarding based on those expectations - results in top-notch consultants.
The purpose of Career Ladder is to have a tool in which leadership and employees can work in a structured way with professional development. Cybercom defines measurable skill requirements; fulfilment of requirements determines salary and other benefits.
Cybercom employees can see how their skills relate to their professional roles and how they can improve their skills to move up the career ladder. The primary goal is for consultants to grow in their consulting roles.
In 2007, Cybercom will continue to work with skills enhancement, primarily through company-adapted courses. This is to ensure that courses are aligned with our consultants' high skill levels.
Cybercom Annual Report 2006 Management report 1717 Management report Employees
Recruitment increasingly crucial Skills enhancement The excellent market situation generated increased labour Years of industry experience market activity, while an IT skills shortage is clearly visible. < 1 year 6% 1-5 years 25% Universities' IT programmes are not filled. It's difficult to find 5-10 years 30% 10-15 years 17% specialists in certain areas. And this will be even more obvious in a 15-20 years 12% >20 years 10% few years. Cybercom is known for its top-notch capabilities and strong drive among its consultants. Experts attract other experts, Education which benefits Cybercom's recruitment process. Ph.D. 1% Academic 16% System analyst 12% Other technical (academic) 22% These driving forces cause employees to become self-employed Engineering 40% Other post-secondary 9% when times are good. So as in the rest of the IT sector, smart employees left Cybercom in 2006. While in the short term this is a loss for the company, the right amount of HR turnover is good for Cybercom - it vitalises the company and creates space for new ideas.
In 2006, Cybercom hired 168 persons. They were particularly recruited for their combined skills in technologies and business. Increased recruitment and professional development activities will occur in 2007 - to fortify Cybercom's position as an attractive employer that's competitive on the labour market.
Recruitment in 2006 was fruitful. Recruitment is one of the most critical factors for continued success. Cybercom will further focus on it to assure continued growth.
Cybercom Annual Report 2006 Management report 1818 Management report The share
On 1 December 1999, Cybercom's share was listed on the Stock price trend and sales Stockholm Stock Exchange (now OMX Nordic Exchange). In 2006, Cybercom's share price rose 4% to SEK 41 at year-end. The share is traded under the CYBE designation. A round lot consists of 500 shares.
Share capital On 31 December 2006, Cybercom's share capital amounted to SEK 12.3 million, distributed on 12,321,757 shares. All shareholders have equal right to a share in the company's assets and profits. The share's quota value is 1.
At year-end, there were 115,000 warrants representing an equal number of shares. With fully subscribed shares, the dilution effect is 0.9% and the total number of shares would then amount to 12,436,757. On 31 December 2006, Cybercom held
85,000 warrants. Shareholder structure After the end of the financial year, 114,000 warrants have been Categories exercised. The remaining 86,000 warrants expired 16 January Foreign institutions 11,5% Private owners, foreign 0,2% 2007. At that time, the number of shares was 12,435,757. Swedish institutions 70,2% Private owners, Swedish 18,1%
Stock price trend and sales No. of In 2006, Cybercom's share price rose 4% - a much better Holdings, no. of shares shareholders No. of shares Holdings, (%) 1-500 2 041 337 351 2.70% outcome than OMX IT Services, which rose 0.7% during the 501-1000 347 315 580 2.60% 1001-5000 344 847 667 6.90% 5001-10000 58 463 993 3.80% same period (OMX IT Services includes Cybercom's share). OMX 10001-15000 21 275 700 2.20% 15001-20000 15 266 239 2.20% All-Share rose 23.6% (this is the exchange's general index). 20001- 37 9 815 227 79.70% Total 2 863 12 321 757 100.00%
Cybercom's share price was SEK 41 on 31 December 2006. The share's high stood at SEK 42.00 and low at SEK 25.20. At year- Name No. of shares Holdings, (%) JCE Group AB 5 144 957 41.76% end 2006, Cybercom's market capitalisation was SEK 505 million. Skandia Liv 1 669 000 13.55% Goldman Sachs International Ltd. 491 082 3.99% In 2006, 8,336,018 Cybercom shares were traded on the Praktikertjänst AB pensionsstiftelse 290 000 2.35% exchange at a value of SEK 300 million. On average, 33,613 Ålandsbanken AB 252 200 2.05% Handelsbankens småbolagsfond 200 000 1.62% shares were traded daily, equivalent to SEK 1.2 million per Natexis Bleichroeder Inc. W9 175 260 1.42% Didner & Gerge Aktiefond 161 500 1.31% trading day. During the year, there were 6,215 transactions for SIS Segaintersettle AG/Zürich 155 780 1.26% Cybercom shares on the exchange. The annual turnover rate Deutsche Bank, London Branch, W-8BEN 130 500 1.06% Total for the 10 major owners 8 670 279 70.37% amounted to 67.6%. Other 3 651 478 29.63% Total 12 321 757 100.00% Shareholders At year's end there were 2,863 (4,691) registered shareholders, Dividend policy of which 71% (72) owned 500 or fewer shares. The board set a goal of securing Cybercom's continued growth. Regard must always be paid to the Group's investment needs Swedish institutional shareholders owned 70.2% (50.1), Swedish and financial position before dividend-related decisions are made. private shareholders, 18.1% (33.1), and company executives, The board proposes to the AGM that no dividend be issued for 0.7% (0.7). the 2006 financial year.
Foreign shareholders owned 11.7% (16.1), of which 11.5% were institutional and 0.2% private shareholders.
Ownership structure on 29 December 2006:
Cybercom Annual Report 2006 Management report 1919 Management report Risk management
The Group is exposed to various operational and financial risks in +/-1% SEK million its operation. Operational risks include market changes and Price to customer 3.7 sensitivity to economic trends. Financial risks include effects from Debiting/charging level 2.2 changes in currency exchange rates and interest rates. In 2006, a Number of consultants 0.5 new business system for managing and following up risks was HR costs 3.0 implemented. It improves control over Cybercom's financial risks. Financial risks Operational risks Currency Market changes In 2006, sales in the foreign subsidiaries in Denmark, Norway, A few companies dominate the telecom market. This trend led Singapore, the UK, and Cybercom's joint venture in India to signing frame agreements with a few consultants and accounted for 16% of the Group's total sales. The Group's net suppliers. Cybercom now has frame agreements for all large assets are exposed to currency conversion risks in Danish and business relationships. Together these amount to 78% of net Norwegian krona, British pound, Singapore dollar, and Indian sales. rupee.
Sensitivity to economic downturn Receivables and cash and cash equivalents can be partly in Customers adapt their businesses and IT investments to market Swedish currency and partly in foreign. Foreign currency is valued conditions. Cybercom positioned itself so that market swings at the closing day rate as per stated accounting policies. have a limited effect on business and revenue. Cybercom offers Receivables are valued individually and requisite allowances are turnkey solutions in close co-operation with customers. made. Derivative instruments are used to manage large exposures to fluctuation risks in foreign currency exchange rates. Acquisitions Company acquisitions constitute part of Cybercom's growth Interest strategy. Cybercom has developed a strategic method to insure Group income and cash flow from operations do not depend on that integration occurs as quickly and efficiently as possible changes in the market's interest rate. The Group has interest- bearing assets in the form of a bank balance. Customers Cybercom's 10 largest customers account for 78% of its income. Credits Cybercom has maintained long-term relationships with many of The Group had no liabilities to credit institutions at the end of the its customers. accounting period.
Competitors Cash and cash equivalents Market fluidity means that the players, customer propositions, Caution is exercised when handling liquidity risks, which involves and pricing models constantly change. Establishing a niche and maintaining sufficient cash and cash equivalents and saleable positioning itself in relationship to other players enables a securities. Any excess liquidity is placed in low-risk, interest- company to create its own market sphere. Cybercom has a bearing funds clear, niched offering. Expenses Recruitment and skills HR cost is the largest cost item, representing 63% of total Skilled consultants are a prerequisite for successfully expenses. implementing customer projects and satisfying customers. When hiring personnel, Cybercom strongly emphasises skills and experience, and it actively works to ensure that it has access to the right skills and expertise.
Sensitivity analysis This summary shows effects on operating profit from a 1% change in certain factors, calculated on the 2006 outcome. Recognised effects should be seen independently of each other and presume that other factors have not changed.
Cybercom Annual Report 2006 Management report 2020 Management report Outlook
The 2007 market outlook is optimistic. Cybercom established a strong position as a consultancy in telecom and selected technologies, with an attractive proposition for technology- intensive sectors and global players.
Cybercom will continue to focus on growth in technology and telecom and to widen its service offerings to include more market segments and geographic areas. This will happen through organic growth complemented with high-quality acquisitions. The financial objective is to report a 15% operating margin in the long term.
Technical paradigm shifts drove changes in the IT sector in recent decades. The sector is now expected to enter a more mature phase and become more affected by economy-driven fluctuations.
The ongoing merger of telephony, broadband, and TV, called triple play, will include mobile telephony in the future and become wireless. The new media is creating a new market. Cybercom is now positioned to help all types of new media players with mobile solutions.
Cybercom Annual Report 2006 Management report 2121 Management report Proposed appropriation of profit
Parent company Stockholm mars 28 2007
These amounts are at the AGM's disposal:
Per-Eric Fylking Chairman
Accumulated profit: 23 215 763 Per Edlund Eva Gidlöf Loss for the year: - 4 348 442 Total: 18 867 321
Ulf Körner Per Norén The board and CEO propose that this profit is carried forward to a new account: SEK 18,867,321. Lars Persson Peter Keller-Andreasen Assurance Acting president and CEO The board assures that to the best of its knowledge:
z The annual report is prepared as per good accounting policies for stock exchange companies. z Submitted information agrees with the current circumstances. z No important information is missing that could affect Cybercom's image created by the annual report.
Cybercom Annual Report 2006 Management report 2222 Accounts and notes Income statement - group
SEK thousand Note 2006 2005 Sales Consolidated sales for the Group totalled SEK Net sales 1. 32 534 167 461 758 535.8 million (466.4) in 2006, representing an increase of 15%. Cybercom's organic growth was Capitalised staff costs for internal work - 2 636 10%. Other operating revenue 4 1 666 1 977 Operating expenses Employee benefits 2. 23. 32 -319 434 -284 424 The Group's operating expenses increased 12% to SEK 477.6 million (425.3). Personnel costs rose Other external expenses 3. 5. 32 -158 190 -140 915 12% to SEK 319.4 million (284.4), primarily Other operating expenses 4 -1 142 -242 because of more employees. The number of employees in the Group rose 16% to reach 481 Depreciation 12. 13 -6 168 -6 112 (414) at year-end. Operating profit/loss 50 899 34 678 Earnings before interest and taxes (EBIT) EBIT increased 47% to reach SEK 50.9 million Financial revenue 7 4 356 6 543 (34.7), corresponding to a 9.5% margin (7.4). Financial expenses 8 -5 136 -2 175 The operating margin from operating activities (excluding extraordinary items) amounted to Profit after financial items 50 119 39 046 10%.
Tax 10 -14 399 -11 794 Taxes Tax expenses rose SEK 2.6 million to SEK 14.4 Year's profit from remaining operation 35 720 27 252 million (11.8). The tax rate during the period was 28.7% (30.2). The tax expense is calculated from Year's loss from discontinued operation 11 -429 -2 761 the current tax rate for the parent company and Year's profit 35 291 24 491 its respective subsidiaries - accounting for temporary differences and existing deficit deductions. Share data in thousand
Before dilution The year's profit Profit for 2006 rose 44% to SEK 35.3 million Profit/share, SEK 2.86 2.08 (24.5). Equity/share, SEK 22.11 19.33
No. of shares at year’s start 12 322 11 196
New issue - 1 125
No. of shares at year’s end 12 322 12 322
Ave. no. of shares 12 322 11 759
After dilution
Profit/share, SEK 2.83 2.07
Equity/share, SEK 21.90 19.02
No. of shares at year’s end 12 436 12 522
Ave. no. of shares 12 479 11 859
Cybercom Annual Report 2006 Accounts and notes 823 Accounts and notes - Income statement Income statement - parent company
SEK thousand Note 2006 2005
Net sales 1. 32 46 100 34 557
Other operating revenue 4 5 884 266
Operating revenue 51 984 34 823
Other external expenses 3. 5. 32 -29 383 -20 453
Staff costs 2. 23. 32 -24 425 -16 754
Depreciation, amortisation and impairment of 12. 13 -1 807 -905 property, plant, and equipment and intangible assets
Other operating expenses 4 -57 -107
Operating expense -55 672 -38 219
Operating loss -3 688 -3 396
Profit from shares in Group companies 6 - 4 449
Interest revenue and similar income items 7 2 990 2 321
Interest expenses and similar expense items 8 -3 047 -448
Profit/loss from financial items -57 6 322
Profit/loss after financial items -3 745 2 926
Allocations 9 -1 980 -952
Tax on year’s profit/loss 10 1 377 307
Year’s profit/loss -4 348 2 281
Cybercom Annual Report 2006 Accounts and notes - Income statement 924 Accounts and notes Change in equity - group
Other capital Other Balanced Shares and share capital SEK thousand Share capital contributions reserves profit/loss Equity total On 31 December 2006, Cybercom's share capital Balance at year’s start, 1 January 2005 11 196 245 275 -4 153 -72 845 179 473 amounted to SEK 12.3 million, distributed on Change in translation difference - - 1 682 - 1 682 12,321,757 shares; 114,000 warrants were Year's profit - - - 24 491 24 491 exercised after the end of the financial year. The New issues 1 126 31 409 - - 32 535 total number of shares then amounts to Balance at year’s end, 31 December 12 322 276 684 -2 471 -48 354 238 181 12,435,757. 2005 Change in translation difference - - -1 081 - -1 081 Equity Year’s profit - - - 35 291 35 291 Cybercom's equity increased by SEK 34.2 million New issues - - - - - compared with 2005 to SEK 272.4 million (238.2). Balance at year’s end, 31 December 12 322 276 684 -3 552 -13 063 272 391 The increase is due to carrying forward the year's 2006 profit/loss, reduced by the year's translation difference.
Cybercom Annual Report 2006 Accounts and notes 1025 Accounts and notes - Change in equity Change in equity - parent company
Share premium Nonrestricted SEK thousand Share capital reserve Reserve fund capital Total equity
Balance at year’s start, 1 January 2005 11 196 248 271 1 698 -102 416 158 749
Appropriation of profit/loss - -103 694 - 103 694 -
New issues 1 126 31 409 - - 32 535
Received/paid Group contribution - - - 8 055 8 055
Tax consequences, received/paid Group - - - -2 255 -2 255 contribution
Adjustments between non- and restricted equity - 1 278 - -1 278 -
Reversal of share premium reserve to reserve fund - -177 264 177 264 - -
Year's profit - - - 2 281 2 281
Balance at year’s end, 31 December 2004 12 322 - 178 962 8 081 199 365
Received/paid Group contribution - - - 20 864 20 864
Tax consequences, received/paid Group - - - -5 842 -5 842 contribution
Consolidation profit - - - 113 113
Year’s loss - - - -4 348 -4 348
Balance at year’s end, 31 December 2006 12 322 - 178 962 18 868 210 152
Cybercom Annual Report 2006 Accounts and notes - Change in equity 1126 Accounts and notes Balance sheet - group
SEK thousand Note 2006 2005 Fixed assets Goodwill makes up a large portion of Cybercom's Assets balance sheet. The assets result from company acquisitions and are the difference between the Non-current assets 149 045 153 562 purchase sum and the acquired company's Goodwill 12 130 139 129 841 adjusted net assets. Acquisition of consulting operations often results in a large goodwill entry Other intangible assets 12 5 546 5 917 since the largest asset is structure capital, which can not be capitalised. Property, plant, and equipment 13 10 863 12 247
Other financial assets 14 688 358 Current assets Accounts receivable rose 27% to SEK 121.4 Deferred tax asset 20 1 809 5 199 million (95.8). Other receivables, primarily non- Total non-current assets 149 045 153 562 invoiced service assignments, rose 22% to SEK 43 million (35.2) and cash and cash equivalents Current assets 259 654 198 115 increased by SEK 33.5 million to SEK 88.9 million (55.5). Prepaid expenses amounted to SEK 6.3 Accounts receivable 15 121 410 95 764 million (6.8). Income tax recoverable - 4 869 Equity Other receivables 16 43 042 35 246 Equity on 31 December 2006 was SEK 272.4 Prepaid expenses 17 6 277 6 783 million (238.2), yielding a 66.6% equity/assets ratio (67.7). Equity per share amounted to SEK Cash and cash equivalents 31 88 925 55 453 22.11 (19.33).
Total current assets 259 654 198 115 Liabilities Total assets 408 699 351 677 Long-term liabilities stood at SEK 8.3 million (10.6) and primarily consisted of tax provisions. Equity and liabilities Current liabilities totalled SEK 128.0 million (102.9) and primarily consisted of accrued Equity 18 272 391 238 181 personnel costs for SEK 39.2 million (36.9) and of accounts payable (due primarily to Share capital 12 322 12 322 subcontractors) for SEK 38.0 million (21.4). Other capital contributions 276 684 276 684
Other reserves -3 552 -2 471
Balanced loss -13 063 -48 354
Total equity 272 391 238 181
Non-current liabilities 8 283 10 634
Tax provisions 20 7 785 7 091
Other non-current liabilities 21 498 3 543
Total non-current liabilities 8 283 10 634
Current liabilities 128 025 102 862
Advances from customers 12 344 8 828
Accounts payable 37 987 21 443
Tax liabilities 8 413 -
Other current liabilities 22 19 775 25 290
Accrued expenses and prepaid revenue 23 49 506 47 301
Total current liabilities 128 025 102 862
Total equity and liabilities 408 699 351 677
The Group’s contingencies and pledged assets 24
Cybercom Annual Report 2006 Accounts and notes 1227 Accounts and notes - Balance sheet Balance sheet - parent company
SEK thousand Note 2006 2005
Assets
Intangible assets 12 4 706 1 655
Property, plant, and equipment 13 2 481 2 814
Financial assets 14 153 869 177 280
Deferred tax asset 20 1 151 557
Total non-current assets 162 207 182 306
Accounts receivable 15 2 256 236
Receivables from Group companies 44 056 56 892
Income tax recoverable - 306
Other receivables 16 14 139 25
Prepaid expenses 17 3 004 2 633
Cash and bank deposits 31 68 165 37 046
Total current assets 131 620 97 138
Total assets 293 827 279 444
Equity and liabilities
Restricted equity 191 284 191 284
Share capital 12 322 12 322
Reserve fund 178 962 178 962
Total restricted equity 191 284 191 284
Non-restricted equity 18 868 8 081
Balanced profit/loss 23 216 5 800
Year’s profit/loss -4 348 2 281
Total non-restricted equity 18 868 8 081
Total equity 210 152 199 365
Untaxed reserves 19 19 211 8 611
Other non-current liabilities 21 498 325
Total non-current liabilities 498 325
Accounts payable 12 959 4 403
Liabilities to Group companies 35 896 57 615
Tax liabilities 5 185 1 044
Other current liabilities 22 634 2 833
Accrued expenses and prepaid revenue 23 9 292 5 248
Total current liabilities 63 966 71 143
Total equity and liabilities 293 827 279 444
Pledged assets and contingent liabilities
Pledged assets None None
Contingent liabilities None None
Cybercom Annual Report 2006 Accounts and notes - Balance sheet 1328 Accounts and notes Cash flow statement - group
SEK thousand Note 2006 2005 Cash flow Cash flow statements show changes in working Operating activities 25. 26 34 357 26 453 capital using the annual average currency exchange rate. Cash flow from operating Profit after financial items 25 50 119 39 046 activities improved to SEK 34.4 million (26.5), Adjustments for items not included in cash flow 26 7 898 3 802 primarily due to better operating profits.
Cash flow from operations 58 017 42 848 Investments and sales Income tax paid -3 034 -1 163 Investments in property, plant, and equipment amounted to SEK 5.0 million (6.2) in 2006. During Cash flow from operating activities before 54 983 41 685 the period, investments in intangible assets, change in working capital excluding goodwill, were SEK 0.7 million (4.7). The largest investments are primarily attributable Increase/decrease accounts receivable -27 040 -13 375 to property, plant, and equipment, such as computers and other equipment. Increase/decrease other current receivables -12 378 1 930
Increase/decrease accounts payable 16 654 -5 253 Cash flow from investing activities was SEK 0.5 million (-16.9). The difference is a result of no Increase/decrease other current operating liabilities 2 138 1 466 acquisitions in 2006. Cash flow from operating activities 34 357 26 453 The cash flow statement was prepared using the Investing activities 27. 28. 29. 30 464 -16 900 indirect method. Recognised cash flow only Investments in intangible assets 27 -696 -4 712 covers transactions that led to incoming or outgoing payments. Investments in property, plant, and equipment 27 -5 001 -6 244
Investments in financial non-current assets -688 -
Sale of property, plant and equipment 569 -
Acquisitions of subsidiaries 28 -760 -18 689
Divestment of subsidiaries 29 - 45
Divestment of assets and liabilities 30 6 682 12 700
Decrease in current financial investments 358 -
Cash flow from investing activities 464 -16 900
Cash flow from financing activities - -
Year’s cash flow from remaining operation 34 821 9 553
Change in cash and cash equivalents from 475 -277 discontinued operations
Change from inter-company transactions -1 127 -2 679
Year's cash flow from discontinued operations -652 -2 956
Cash and cash equivalents at year’s start 55 453 47 721
Translation difference -697 1 135
Cash and cash equivalents at year’s end 31 88 925 55 453
Cybercom Annual Report 2006 Accounts and notes 1429 Accounts and notes - Cash flow statement Cash flow statements - parent company
SEK thousand Note 2006 2005
Operating activities 25. 26 35 135 43 117
Profit/loss after financial items 25 -3 745 2 926
Adjusted for items not included in cash flow 26 32 907 1 870
Cash flow from operating activities 29 162 4 796
Income tax paid 97 -309
Cash flow from operating activities before 29 259 4 487 change in working capital
Increase/decrease accounts receivable -13 837 -236
Increase/decrease other current receivables -1 667 38 594
Increase/decrease accounts payable 8 972 3 077
Increase/decrease other current operating liabilities 12 408 -2 805
Cash flow from operating activities 35 135 43 117
Investing activities 27. 28. 32 -4 016 -23 825
Investments in intangible assets 27 -426 -1 655
Investments in property, plant, and equipment 27 -518 -2 847
Investments in financial assets -2 312 -
Acquisitions of subsidiaries 28 -760 -19 323
Cash flow from investing activities -4 016 -23 825
Cash flow from financing activities --
Change in cash and cash equivalents 31 119 19 292
Cash and cash equivalents at year’s start 37 046 17 754
Cash and cash equivalents at year’s end 31 68 165 37 046
Cybercom Annual Report 2006 Accounts and notes - Cash flow statement 1530 Accounts and notes Key data and ratios
Cybercom Group 2006 2005
Total capital, SEK million 408.7 351.7
Capital employed, SEK million 277.9 243.5
Equity, SEK million 272.4 238.2
Interest-bearing liabilities and provisions, SEK 5.5 5.3 million
Return on total capital, % 14.5 13.2
Return on capital employed, % 21.2 19.4
Return on equity, % 13.8 11.7
Operating margin, % 9.5 7.4
Net margin, % 9.4 8.4
Acid test ratio, times 2.0 1.9
Equity/assets ratio, % 66.6 67.7
Debt/equity ratio, times 0 0
Net debt/equity ratio, times Neg Neg
Share of risk-bearing capital, % 68.6 69.7
Interest-coverage ratio, times 10.8 19.6
Operating capital in relation to sales, % 8.0 8.5
Capital turnover rate, times 1.4 1.5
Investments, SEK million 6.5 70.5
No. of employees, average 414 352
No. of employees at year’s end 481 414
No. of consultants, average 357 298
Sales per employee, SEK thousand 1 294 1 325
Sales per consultant, SEK thousand 1 501 1 565
Value added per employee, SEK thousand 851 864
Salaries and reimbursements excl. social fees, SEK 223.3 199.6 million
Cybercom Annual Report 2006 Accounts and notes 1631 Accounts and notes Financial performance summary
Income statement, SEK million 2006 2005 2004 2003 2002 2001 2000 1999 Sales 535.8 466.4 391.1 309.7 344.8 396.2 357.6 191.9 Operating expenses -478.8 -425.6 -365.5 -401.01) -338.6 -368.9 324.7 -178.6 Amortisation as per plan -6.2 -6.1 -8.0 -7.0 -5.8 -6.2 -6.2 -3.8 Operating profit/loss before goodwill 50.9 34.7 17.6 -98.3 0.4 21.1 26.7 9.5 Goodwill amortisation - - - -13.6 -12.9 -8.9 -6.4 -0.7 Operating profit/loss 50.9 34.7 17.6 -111.9 -12.5 12.2 20.3 8.8 Financial revenue 4.4 6.5 4.1 2.6 5.4 4.8 3.3 6.2 Financial expenses -5.1 -2.1 -1.8 -0.9 -1.1 -5.2 -0.2 -0.5 Profit/loss after financial items 50.1 39.0 20.0 -110.2 -8.2 11.8 23.4 14.5 Tax -14.4 -11.7 -6.1 -0.5 -1.2 -6.9 -8.5 0 Loss from discontinued operations -0.4 -2.8 -2.7 - - - - - Year’s profit/loss 35.3 24.5 11.2 -110.7 -9.4 4.9 14.9 14.5
Balance sheet, SEK million 2006 2005 2004 2003 2002 2001 2000 1999 Assets Intangible assets 135.7 135.8 93.8 69.7 121.0 83.3 75.9 9.3 Property, plant, and equipment 10.9 12.2 10.7 10.8 9.9 11.3 11.3 10.3 Financial assets 0.7 0.4 - - 0.2 0.1 5.1 0.3 Deferred tax assets 1.8 5.2 11.8 14.4 3.5 2.8 0.5 1.5 Current assets, excl. cash and cash equivalents 170.7 142.6 108.7 107.3 70.7 91.2 89.9 50.0 Cash and cash equivalents 88.9 55.5 47.7 74.1 111.5 120.8 111.9 107.3 Total assets 408.7 351.7 272.7 276.3 316.8 309.5 294.6 178.7 Equity and liabilities Equity 272.4 238.2 180.1 149.5 231.5 223.5 195.4 137.4 Non-current liabilities 8.3 10.6 5.1 15.1 15.5 6.1 20.1 0.9 Current liabilities 128.0 102.9 87.5 111.7 69.8 79.9 79.1 40.4 Total equity and liabilities 408.7 351.7 272.7 276.3 316.8 309.5 294.6 178.7
Cash flow statement, SEK million 2006 2005 2004 2003 2002 2001 2000 1999
Cash flow from operating activities 34.4 26.5 12.8 5.2 7.0 31.4 28.7 7.0 Cash flow from investing activities 0.5 -16.9 -41.3 -24.4 -17.1 -23.4 -44.1 -13.2 Cash flow from financing activities - - 4.0 -16.0 1.4 0.9 20.0 107.6 Cash flow from remaining operations 34.8 9.6 -24.5 -35.2 -8.7 8.9 4.6 101.4 Cash flow from discontinued operations -0.7 -3.0 -1.7 - - - - - Cash and cash equivalents at year’s start 55.5 47.7 74.1 111.5 120.8 111.9 107.3 5.9 Translation difference -0.7 1.1 -0.2 -2.2 -0.6 - - - Cash and cash equivalents at year’s end 88.9 55.5 47.7 74.1 111.5 120.8 111.9 107.3
Key figures 2006 2005 2004 2003 2002 2001 2000 1999
Capital employed, SEK million 277.9 243.5 180.5 149.8 231.8 223.7 195.4 137.4 Interest-bearing liabilities and provisions, SEK million 5.5 5.3 0.4 0.3 0.3 0.2 - - Return on capital employed, % 21.2% 19.4% 13.2% Neg Neg 8.1% 14.2% 21.8% Return on equity, % 13.8% 11.7% 6.8% Neg Neg 2.3% 9.0% 19.3% Operating margin, % 9.5% 7.4% 4.5% Neg Neg 3.1% 5.7% 4.6% Net margin, % 9.4% 8.4% 5.1% Neg Neg 3.0% 6.5% 7.6% Equity/assets ratio, % 66.6% 67.7% 66.0% 54.1% 73.6% 72.2% 66.3% 76.9% No. of employees, average 414 352 309 263 289 312 310 185 No. of employees at year’s end 481 414 358 375 280 300 285 270 Sales per employee, SEK thousand 1 294 1 325 1 266 1 178 1 193 1 270 1 154 1 037 Sales per consultant, SEK thousand 1 501 1 565 1 565 1 440 1 461 1 572 1 360 1 222 Value added per employee, SEK thousand 851 864 834 3661) 737 742 722 755
Share data 2006 2005 2004 2003 2002 2001 2000 1999
No. of shares at year’s end 12 321 757 12 321 757 11 196 355 10 672 468 9 251 777 8 757 279 8 439 803 7 882 875 No. of shares at year’s end, full dilution 12 436 757 12 521 757 11 196 355 10 672 468 9 251 777 9 384 553 9 417 032 8 532 875 Equity per share, SEK 22.11 19.33 16.08 14.01 25.02 25.52 23.15 17.43 Equity per share with full dilution, SEK 21.90 19.02 16.08 14.01 25.02 23.82 20.75 16.10 Ave. no. of shares 12 321 757 11 759 056 10 716 125 9 470 197 9 169 361 8 696 703 8 212 315 5 991 208 Ave. no. of shares with full dilution 12 478 757 11 859 056 10 716 125 9 470 197 9 169 361 8 757 279 9 198 839 6 553 708 Profit/loss per share, SEK 2.86 2.08 1.05 -11.70 -1.03 0.56 1.82 2.42 Profit/loss per share with full dilution, SEK 2.83 2.07 1.05 -11.70 -1.03 0.56 1.63 2.21 Cash flow per share with full dilution, SEK 2.75 2.23 1.19 0.55 0.76 3.34 3.13 1.07 Dividend per share 0 0 0 0 0 0 0 0 1) Including one-time goodwill amortisation of SEK 96.1 million. 2004 to 2006 are recognised as per IFRS. Other years are recognised as per previously applied accounting policies.
Cybercom Annual Report 2006 Accounts and notes 1732 Accounts and notes Definitions Interest coverage ratio Profit/loss after financial items plus financial expenses divided by financial expenses. Acid test ratio Current assets excluding inventory divided by current liabilities. Investments Investments consist of purchased assets, including increases that Ave. no. of consultants result from acquisitions. Average number of consultants adjusted for part-time employment, long-term sick leave, and leave of absence. Net debt/equity ratio Net interest-bearing liabilities divided by shareholders' equity. Ave. no. of employees Average number of employees adjusted for part-time Net interest-bearing liabilities employment, long-term sick leave, and leave of absence. Interest-bearing liabilities minus interest-bearing assets.
Average number of shares Net margin Calculated as a weighted average for each year as per the Profit/loss after financial items as a percentage of sales. Swedish Society of Financial Analysts' recommendations. Number of employees at period's end Capital employed Number of persons with an employment contract on the last day Balance sheet total minus non-interest-bearing liabilities. [tabell: of the period. nyckeltal] Operating capital Capital turnover rate Current assets minus cash and cash equivalents and current Sales divided by the average balance sheet total. liabilities.
Cash flow per share Operating expenses Current cash flow divided by average number of shares after full Operating expenses including goodwill amortization. dilution. Operating margin Debt/equity ratio Operating profit/loss as a percentage of sales. Interest-bearing liabilities divided by shareholders' equity. Return on capital employed Earnings per share after full dilution Profit/loss after financial items plus financial expenses as a Earnings per share is calculated as though warrants had already percentage of the average capital employed. been exercised. Return on shareholders' equity Earnings per share Year's profit/loss as a percentage of average shareholders' Year's profit/loss divided by average number of shares. equity.
EBIT Return on total capital Earnings before interest and taxes (operating income). Profit/loss after financial items plus financial expenses as a percentage of the average balance sheet total. EBITA Earnings before interest, tax and amortization of goodwill. Sales per employee/consultant The period's sales divided by the average number of Employee turnover employees/consultants. Number of employees that terminated employment divided by the average number of employees for the period. Share of risk-bearing capital Shareholders' equity plus deferred tax (including minority) as a Equity/assets ratio percentage of the balance sheet total. Shareholders' equity as a percentage of the balance sheet total. Shareholders' equity per share Interest coverage ratio Shareholders' equity divided by the number of shares at the Profit/loss after financial items plus financial expenses divided by period's end. financial expenses.
Cybercom Annual Report 2006 Accounts and notes 1833 Accounts and notes Definitions
Shareholders' equity Shareholders' equity includes 72% of the untaxed reserves.
Turnkey projects Outsourcing and application management (AM) projects in which Cybercom has management and staffing responsibilities.
Value added per employee Operating profit/loss plus labour costs divided by the average number of employees. Labour costs are salary expenses and reimbursements plus a standard 35% for social security costs.
Cybercom Annual Report 2006 Accounts and notes 1934 Accounts and notes Accounting and valuation policies
The parent company and its subsidiaries are included in the The consolidated financial statement was prepared as per consolidated accounts. The financial reports for the parent Swedish law and the International Financial Reporting Standards company and subsidiaries included in the consolidated accounts (IFRS), published by the International Accounting Standards Board cover the same period and are prepared as per accounting (IASB), and interpretive statements from the International policies that pertain to the Group. All internal Group balances, Financial Reporting Interpretation Committee (IFRIC), which were revenue, expenses, profits or losses that arise in transactions approved by the European Community Commission for between companies that are included in the consolidated application within the EU as of 31 December 2005. Standards accounts are entirely eliminated. and interpretations published after this date were not implemented. The Swedish Financial Accounting Standards A subsidiary is included in the consolidated accounts from the Council's recommendation RR 30 (Additional accounting rules for date of acquisition, which is the day the parent company takes group companies) was also implemented. control, to the date that control is terminated.
The parent company's annual report is prepared as per Swedish Acquired subsidiaries are included in the consolidated accounts as law and applies the Swedish Financial Accounting Standards per the acquisition method. So acquisition cost is divided into Council's recommendation RR 32 for legal entities and the acquired assets, assumed commitments, and liabilities on the date Emerging Issues Task Force's pronouncements. So IFRS valuation of acquisition based on their actual value. and disclosure rules are generally implemented. Some exceptions and additions are made to these rules in RR 32 due to statutory When a subsidiary is sold during the year, profit/loss is included for provisions, mostly in the Annual Accounts Act, and in the the ownership period, and its income and expenses are relationship between accounting and taxation. recognised in the consolidated income statement. Capital gains and losses are calculated within the Group as the difference The parent company's functional currency is the Swedish krona, between the selling price and the consolidated value of the which is also the presentation currency for the parent company subsidiary's net assets. and Group. So financial presentations are in Swedish kronor, rounded to the nearest thousand unless otherwise specified. When translating income statements and balance sheets of foreign subsidiaries, all subsidiaries' assets and liabilities are Important estimates and assessments translated using the closing day rate, while income statements To prepare the financial reports, as per IFRS, requires that are translated using the average exchange rate. Equity was management and the board make assessments and assumptions translated at the historical rate. Translation differences had no that affect application of accounting policies and recognised impact on profit or loss; they are booked directly to equity. amounts of assets, liabilities, revenue and expenses, along with other submitted information. Joint ventures The Group's holdings in jointly-held businesses are reported using These assessments and assumptions are based on historical proportional consolidation. The Group merges their portion of experiences and several other factors that management and the sales and costs, assets and liabilities, and cash flow from the joint board determine to be probable under the prevailing venture with the corresponding entries in its own consolidated circumstances. Resulting conclusions form the basis for decisions accounts. on the recognised value of assets and liabilities that other sources would not otherwise reveal. The actual outcome can differ from The Group reports the portion of the profit/loss from its sale of these estimates and assessments. assets in a joint venture that corresponds to the other owners' holdings. The Group does not report its portion of profit/loss in a When implementing IFRS, management-made assessments can joint venture that are the result of the Group's purchase of have a key impact on financial presentations, and any estimates assets in the joint venture before the assets are resold to an made can lead to substantial adjustments to the following year's independent party. But the transaction is immediately reported financial presentations. These assessments can have a significant as a loss if the loss means that an asset is reported at an inflated effect on the Group's profit/loss and financial position, especially value. within revenue recognition and bad debts, measurement of intangible and other non-current assets, as well as taxes. See the Segment reporting applicable note. Business segments contain products or services that are subject to risks and returns that vary from other business segments. Consolidated accounts Geographic markets offer products or services within a specific The parent company and its subsidiaries are included in the economic environment that are subject to risks and returns, consolidated accounts. The financial reports for the parent which vary from the risks and returns that apply to units company and subsidiaries included in the consolidated accounts operating in other economic environments. The Group's cover the same period and are prepared as per accounting segments are divided as per the geographic market in which policies that pertain to the Group. All internal Group balances, they operate, so there is now only one segment in the Group: revenue, expenses, profits or losses that arise in transactions geographic markets. between companies that are included in the consolidated accounts are entirely eliminated. Cybercom Annual Report 2006 Accounts and notes 2035 Accounts and notes AccountingBusiness segments contain productsand or valuationservices that are subject policies to risks and returns that vary from other business segments. Geographic markets offer products or services within a specific The Group is financed by its own means and has no debts to economic environment that are subject to risks and returns, credit institutes. If debt is incurred, borrowing costs burden which vary from the risks and returns that apply to units profit/loss for the period they relate to. operating in other economic environments. The Group's segments are divided as per the geographic market in which Recognition of allocations and untaxed reserves they operate, so there is now only one segment in the Group: Tax legislation in Sweden and some other countries allows for geographic markets. deferment of tax payments through allocation of untaxed reserves in the balance sheet via the income statement's Revenue recognition allocations item. Consolidated accounts do not include The Group's revenue primarily comes from consulting services, appropriations and untaxed reserves. which account for 97% of sales. Other revenue makes up 3% of Group sales. Revenue consists of the actual value of sold goods After elimination, the untaxed reserves are split into deferred tax and services excluding VAT and discounts, and after elimination liabilities and balanced profit/loss. Deferred tax on untaxed of internal Group sales. reserves is estimated without discounting, based on actual tax expense for the next year. For 2006, 28% of untaxed reserves Revenue is recognised as: relate to deferred tax and 72% to equity.
Service assignments on running accounts Intangible assets Running account assignments are recognised as profit/loss at the Intangible assets are included in the balance sheet at acquisition rate that the assignments are performed, i.e., revenues and cost with deductions for estimated residual value (normally 0) and expenses are recognised for the period in which they were for scheduled, accumulated amortisation and impairment losses. earned or incurred. Non-invoiced revenue earned on the closing Scheduled amortisation is based on acquisition cost of non- day is recognised as accrued income under the heading for other current assets. Amortisation is linear and based on the assets' receivables. economic lifespan. These amortisation periods were applied:
Fixed price services License rights 4-5 years If a fixed price service assignment outcome can be reliably Goodwill (up to 2003) 5-10 years estimated, then the assignment's revenue and expenses are Capitalised expenses for software development 3 years recognised as revenue and expenses, respectively, regarding the Acquired trademarks 10 years assignment's degree of completion on the closing day (the Patents 5 years percentage of completion method). The number of utilised hours on the closing day, in relation to the assignment's estimated License rights total, mainly determines the percentage of completion. Acquired software licenses are capitalised based on expenses incurred when the software application was acquired and put If estimation difficulties occur (e.g., a project is in an early phase) into use. These expenses are amortised during the estimated and if the customer will cover accrued expenses, then income is economic lifespan. recognised on the closing day at an amount that corresponds to the assignment's accrued expenses, so no profit is recognised. Goodwill Goodwill represents the amount with which the acquisition cost If an assignment's profit and loss cannot be reliably estimated, exceeds the actual value of the Group's share of the acquired then only anticipated customer-defrayed expenses are reported subsidiary's net assets upon acquisition. Goodwill on acquisition of as income. If an assignment's profit and loss cannot be reliably subsidiaries is recognised as an intangible non-current asset. estimated, then only anticipated customer-defrayed expenses Goodwill that arises from acquisition of a foreign operation is are reported as income. Suspected loss is booked immediately as translated to the closing day rate, and the translation difference an expense, in as much as it can be estimated. is recognised in equity.
Assignments performed on a fixed-price basis now represent Goodwill is tested annually (or when there are signs of decline) to 46% (42) of Group sales. Fees on fixed-price assignment invoices identify possible impairment requirements. Goodwill is recognised for services not yet performed are recognised as advances from as a cost less accumulated write-downs. Goodwill amortisation customers. was discontinued on 31 December 2003.
Borrowing costs Capitalised software development expenses The Group is financed by its own means and has no debts to Ordinarily, expenses for software development and maintenance credit institutes. If debt is incurred, borrowing costs burden are booked immediately, but expenses directly related to profit/loss for the period they relate to. identifiable, unique software products that the Group controls and that probably provide financial benefit that exceeds cost after one year, are capitalised as intangible assets. Direct costs include personnel expenses for programme development staff and a reasonable share of relevant indirect costs.
Cybercom Annual Report 2006 Accounts and notes 2136 Accounts and notes Accounting and valuation policies
Ordinarily, expenses for software development and maintenance The deferred tax asset relating to tax deficits or other tax are booked immediately, but expenses directly related to deductions are recognised to the extent that it is probable that identifiable, unique software products that the Group controls deductions can be applied against future tax surpluses. Please and that probably provide financial benefit that exceeds cost see supplementary information in note 20. after one year, are capitalised as intangible assets. Direct costs include personnel expenses for programme development staff The parent company recognises deferred tax on untaxed and a reasonable share of relevant indirect costs. reserves as part of the untaxed reserves because of the connection between accounting and taxation. Expenses that increase performance or extend the software's lifespan beyond its original level are recognised as improvement Determining (1) current tax liabilities and prepaid taxes and (2) expenses, which increase the original acquisition cost. provisions for deferred tax liability and deferred tax assets - Development was financed with the Group's own assets, so no particularly the valuation of deferred tax assets - requires interest was capitalised. considerable management assessment. This process includes determining tax allocation in each of the jurisdictions where the There were no expenses for development, and no research is Group has operations. It also includes estimating exposure to done within the Group. current tax and determining temporary differences that occur due to certain assets and liabilities being valued differently in the Acquired trademarks accounting records and income tax returns. Management must A comparison, using an internal trademark valuation, determines also estimate the likelihood of realising deferred tax assets acquisition costs for acquired trademarks, which are amortised through future taxable revenue. The actual outcome could vary during the estimated useful life of 10 years. from these estimates due to (1) future business climate changes (2) currently unknown tax legislation changes or (3) tax Patents authority's or courts' final audit of submitted returns. Acquisition costs for patents are based on the cost of patent registration. Patents are amortised over a period of five years. Provisions Obligations are recognised as provisions if they are attributable to Property, plant, and equipment this financial year or earlier financial years and if on the closing Equipment is included in the balance sheet at historical cost with day, they are certain or likely to occur but are uncertain in terms deductions for scheduled, accumulated depreciation and any of amount or when they will be fulfilled. Provisions are impairment losses. Scheduled depreciation is based on the recognised as current or non-current depending on due date. historical cost of the non-current assets. Depreciation occurs based on the economic lifespan of the assets. Impairment When there is an indication that the value of an asset has This depreciation period was applied: diminished, an evaluation of the asset's recognised value occurs. In those cases when an asset's recognised value exceeds its Computers and other equipment, 3-5 years. calculated recovery value, the asset is immediately depreciated to its recovery value. Cybercom evaluated cash-generating units Income taxes as per IAS 36 (Impairment losses). Upon calculation of the Reported income taxes comprise tax that will be paid or remaining value in use for goodwill or shares in subsidiaries, an recovered for the current year, adjustments to the actual tax of 11% cost-of-capital rate before tax was applied. previous years, and changes in deferred tax. Receivables A valuation of all tax liabilities/prepaid taxes is calculated at a Receivables are valued individually and requisite allowances are nominal amount as per tax regulations and established tax rates made. or proposed tax rates that will probably be adopted. Receivables and liabilities in foreign currency The balance sheet method is used to calculate deferred tax on all Current receivables and liabilities were translated using the temporary differences that arise between the recognised and closing day rate. Exchange rate differences for financial fiscal values of assets and liabilities. The temporary differences receivables and liabilities are recognised in the income statement primarily arose through changes in untaxed reserves and tax under financial items; other exchange rate differences are under deficits. operating profit/loss and recognised under the other operating revenue or other operating expenses headings. See the Financial The deferred tax asset relating to tax deficits or other tax risk management section for a description of hedging. deductions are recognised to the extent that it is probable that deductions can be applied against future tax surpluses. Please see supplementary information in note 20.
Cybercom Annual Report 2006 Accounts and notes 2237 Accounts and notes Accounting and valuation policies
Financial assets assessed at fair value via the income statement Current investments Includes two subcategories: (1) financial assets held for trade and Current investments are recognised at market value on the (2) financial assets that are initially assigned to the assessed-at- balance sheet date. fair-value category via the income statement. A financial asset is classified in this category if it is acquired mainly to be sold rather Leasing contracts soon or if management determines this classification. All leasing contracts are based on individual evaluations and recognised as operational leasing agreements. The lessor and/or Derivative instruments are also categorised as trade holdings if the lessee decide on the classification of leasing contracts, based they are not identified as hedges. Assets in this category are on scope of financial risks and benefits that are associated with classified as current assets if they are held for trade or are ownership of the leased object. To guarantee this, individual expected to be sold within 12 months from the balance sheet examinations of all contracts are done during the year. In 2006, date. there were only the usual operational leasing contracts, such as for renting premises and copy machines. Payments made during As per the transition rules, earlier periods need not be the lease term are amortised in the income statement linearly recalculated. Instead, the application effect of IAS 39 is over the term of the lease. No significant leasing contracts were recognised directly in initial equity. Due to this, equity was entered into during the year. reduced by SEK 619 thousand as per 1 January 2005 for currency forward contracts held. Conversion to fair value is Group contributions recognised further in the income statement among the financial Cybercom follows the Swedish Financial Accounting Standards items. Derivative instruments are included in current assets or Council's Emerging Issues Task Force's statement on recognition current liabilities and recognised in the other receivables or other of Group contributions, so recognition of Group contributions is current liabilities items on the balance sheet. based on the contributions' financial implications and consequences. Group contributions paid and received, to Financial assets available for sale minimise the Group's tax, are recognised as a decrease or an Financial assets available for sale are non-derivative assets that increase in unrestricted equity. were assigned to this category or were not classified in any other category. They are included in non-current assets if management Cash flow statement does not intend to sell the asset within 12 months after the The indirect method is used to develop the cash flow statement. balance sheet day. Recognised cash flow covers only transactions that lead to incoming or outgoing payments. Accounts receivable Accounts receivables are non-derivative financial assets with Besides cash and bank balances, cash and cash equivalents fixed or ascertainable payments that are not listed on an active include short-term financial investments that: market. Characteristically, they arise when the Group provides goods or services directly to a customer without intending to z Are exposed to only an insignificant risk of value fluctuations trade with the accrued receivable. They are included in current z Are traded in an open market in which amounts are known, assets and recognised in the accounts receivable item in the or balance sheet. z Have a term shorter than three months from the time of acquisition. Purchases and sales of financial instruments are recognised on the trade date, i.e., the date the Group agrees to buy or sell the Financial instruments asset. Financial instruments are initially assessed at fair value plus The Group classifies financial instruments in these categories: (1) transaction charges, which apply to all financial assets that are financial assets assessed at fair value via the income statement not assessed at fair value via the income statement. (2) financial assets available for sale and (3) accounts receivable. Presentation (classification) depends on the purpose for which Financial instruments are removed from the balance sheet when the instrument was acquired. Management determines the the right to secure cash flow from the instrument has expired or presentation (classification) of the instrument at the first been carried forward and the Group has carried forward most accounting and re-examines this decision at each presentation of the risks and advantages associated with ownership. opportunity. Financial assets assessed at fair value via the income statement Financial assets assessed at fair value via the income and financial assets available for sale are recognised after the statement acquisition date at fair value. Accounts receivable are recognised at amortised cost when applying the effective interest method.
Cybercom Annual Report 2006 Accounts and notes 2338 Accounts and notes Accounting and valuation policiesThe Group recognises a liability and an expense for bonuses and Financial assets assessed at fair value via the income statement profit sharing based on a formula that accounts for profit related and financial assets available for sale are recognised after the to the parent company's shareholders after certain adjustments. acquisition date at fair value. Accounts receivable are recognised The Group recognises an allocation when a legal or informal at amortised cost when applying the effective interest method. obligation exists, due to previous practices.
Realised and unrealised gains and losses due to changes in fair Financial risks value for non-monetary instruments classified as instruments Through its operation, the Group is exposed to various financial available for sale are recognised in equity. When instruments risks, including effects of changes in exchange rates and interest classified as instruments available for sale are sold or when write- rates. The board establishes written principles for overall down requirements exist for them, accumulated adjustments to management of risks and for specific areas, such as currency fair value are carried over to the income statement as revenue risks, interest risks, credit risks, and use of derivative instruments from financial instruments. and placement of extra liquidity. The policy is subject to frequent revision and is revised at least once a year. The fair value for listed investments is based on current bid rates. If the market for a certain financial asset is not active (and for Currency unlisted securities), the Group determines the fair value by Sales in the foreign subsidiaries in Denmark, India, Norway, applying a valuation technique, such as using information Singapore, and the UK amount to about 16% of the Group's regarding newly made transactions in a similar context. Other total sales. The Group's net assets are exposed to currency valuation techniques that could be used are analysis of conversion risks in British pounds, Danish krone, Indian rupees, discounted cash flows and option valuation models that were Norwegian krone and Singapore dollars. Receivables and cash refined to reflect the issuer's special circumstances. and cash equivalents can be partially in Swedish currency and partially in foreign. Foreign currency is valued at the closing day On each balance sheet date, the Group assesses whether there rate as per stated accounting policies. Receivables are valued is objective evidence that a write-down requirement exists for a individually and requisite allowances are made. For managing financial asset or group of financial assets. larger exposures to fluctuation risks in foreign currency exchange rates, derivative instruments are used. Employee benefits Pension obligations Interest The Group has only defined contribution pension plans for which The Group's revenue and cash flow from operations are the Group pays fixed fees to publicly or privately administered essentially independent of changes in the market's interest rates. pension insurance plans on a mandatory, contractual, or The Group has interest-bearing assets in the form of bank voluntary basis. The Group has no further payment obligations securities. after the fees are paid. The fees are recognised as staff costs when they are due. Prepaid fees are recognised as an asset as Credits far as cash reimbursement or reduction of future payments is in The Group had no liabilities to credit institutions at the end of the the Group's favour. accounting period.
Other benefits after employment termination Cash and cash equivalents The Group offers no benefits after termination of employment. Caution is used when managing liquidity risks, which involves maintaining sufficient cash and cash equivalents and saleable Benefits compensation securities. Any excess liquidity is placed in risk-free interest- Benefits compensation ceases when an employee is terminated bearing funds. before normal pension age or when an employee accepts voluntary termination in exchange for such reimbursements. The Expenses Group recognises severance pay when it is unquestionably Staff costs are the company's largest cost item, which is about obligated either to (1) terminate employees as per a detailed 63% of total expenses. formal plan without possibility of revocation or to (2) grant compensation at termination due to an offer made to encourage Sensitivity analysis voluntary employment termination. This summary shows the effect on operating profit/loss of a 1% change in certain factors, calculated on the 2006 outcome: Profit-sharing and bonus plans The Group recognises a liability and an expense for bonuses and +/-1% SEK million profit sharing based on a formula that accounts for profit related Price to customer 3.7 to the parent company's shareholders after certain adjustments. Capacity utilisation 2.2 The Group recognises an allocation when a legal or informal No. of consultants 0.5 obligation exists, due to previous practices. Staff costs 3.0
Cybercom Annual Report 2006 Accounts and notes 2439 Accounts and notes Accounting+/-1% SEK million and valuation policies Price to customer 3.7 Capacity utilisation 2.2 No. of consultants 0.5 Staff costs 3.0
Recognised effects should be seen independently of each other and presume that other factors have not changed.
Cybercom Annual Report 2006 Accounts and notes 2540 Accounts and notes Note 1 - Segment reporting
2006 Financial year Sweden International Other Elimination Group During 2006 the Group was organised into two Revenue main business divisions. The Sweden division External sales 467 709 64 889 7 467 -4 232 535 833 focuses on telecom and selected technologies for Internal sales 1 748 11 499 44 517 -57 764 - e-commerce and billing, portals and mobile solutions, and embedded systems in Sweden. Operating revenues 469 457 76 388 51 984 -61 996 535 833 Operating profit/loss 44 469 9 698 -3 268 - 50 899 Operations are run through subsidiaries in Other disclosures Sweden and Singapore. International operations Assets excl. goodwill 201 053 61 631 171 680 -157 613 276 751 were grouped in the International business division. Operations are run through subsidiaries Goodwill 111 081 14 128 4 930 - 130 139 in Denmark, Singapore, and the UK plus a joint Non-allocated assets 1 809 venture in India. The Other column refers mainly Total assets 312 134 75 759 176 610 -157 613 408 699 to parent company activities. Liabilities 161 671 22 838 94 200 -158 599 120 110 Non-allocated liabilities 16 198 Business division assets mainly comprise property, Total liabilities 161 671 22 838 94 200 -158 599 136 308 plant, and equipment, intangible non-current Investments 2 635 2 876 946 - 6 457 assets, and receivables. Depreciation -3 553 -1 301 -1 314 - -6 168 Expenses, exceeding depreciation, not - - -845 -885 -1 730 corresponding to payments Business division liabilities consist of operating liabilities, excluding tax liabilities. 2005 Financial year Sweden International Other Elimination Group Revenue Investments refer to purchases of property, plant, External sales 419 264 48 098 2 031 -5 658 463 735 and equipment and intangible assets, including Internal sales 2 951 15 126 34 421 -52 498 - increases resulting from acquisitions. Capitalised staff costs for internal work - - 2 636 - 2 636 Operating revenue 422 215 63 224 39 088 -58 156 466 371 Non-allocated assets and liabilities comprise Operating profit/loss 27 565 8 025 -912 - 34 678 deferred tax assets, deferred tax liability, tax Other disclosures liabilities, and liabilities related to company Assets excl. goodwill 181 141 53 896 122 126 -140 526 216 637 acquisitions. Goodwill 115 251 14 590 - - 129 841 Non-allocated assets 5 199 Internal deliveries affected revenue, expenses, Total assets 296 392 68 486 122 126 -140 526 351 677 and profit/loss for the business divisions. Internal Liabilities 130 465 20 081 89 265 -141 535 98 276 prices are market-based. Non-allocated liabilities 15 220 Total liabilities 130 465 20 081 89 265 -141 535 113 496 Investments 51 558 11 537 7 384 - 70 479 Depreciation -2 972 -1 283 -1 857 - -6 112 Expenses, exceeding depreciation, not -583 -806 4 907 -1 208 2 310 corresponding to payments
Cybercom Annual Report 2006 Accounts and notes 2641 Accounts and notes Note 2 - Salaries, other remuneration and social costs
Group Parent company SEK thousand 2006 2005 2006 2005 Salaries and other reimbursements Board, CEO, and vice president 17 050 15 674 8 489 4 542 Other employees 206 242 183 955 7 689 6 771 Total 223 292 199 629 16 178 11 313
Social costs Pension costs, CEO and vice president 2 238 1 780 1 419 644 Pension costs, other personnel 18 433 17 368 775 699 Other social costs incl. employer’s contributions 63 062 58 087 5 466 3 960 Total 83 733 77 235 7660 5 303
Salaries and other reimbursements distributed per country and among board members, employees, and others: 2006 2005 Board. CEO & Other Other SEK thousand VP employees Board & CEO employees
Parent company 8 489 7 689 4 542 6 771 Subsidiaries in Sweden 4 148 160 309 7 202 144 143 Sweden total 12 637 167 998 11 744 150 914 Denmark 2 432 24 829 2 178 21 724 India - 659 - - UK 1 981 12 756 1 752 11 317 Group total 17 050 206 242 15 674 183 955
2006 2005 Ave. no. of employees No. Of which men* No. Of which men*
Sweden 355 79% 311 77% Denmark 36 88% 31 82% India 11 75% - - UK 12 86% 10 91% Group total 414 79% 352 78% of which parent company 18 45% 19 32% *Percentage of men at year’s end.
2006 2005 No. on No. on Board members and executives reporting date Of which men reporting date Of which men Group (incl. subsidiaries) Board members 15 73% 10 80% CEO and other executives 9 78% 10 90% Parent company Board members 6 83% 7 86% CEO and other executives 3 33% 3 33%
Group Parent company Sick leave, % 2006 2005 2006 2005
Total sick leave 2.5% 2.6% 7.1% 3.4% Long-term sick leave 1.0% 1.4% 5.4% 1.3% - Sick leave, men 1.6% 2.3% 0.8% 0.8% - Sick leave, women 5.8% 3.7% 12.5% 4.9% - Employees up to age 29 1.8% 1.5% 1.6% 1.1% - Employees ages 30-49 2.8% 2.6% 8.1% 3.6% - Employees ages 50+ 0.7% 10.2% 1.4% - Sick leave is only accounted for in Swedish companies.
Cybercom Annual Report 2006 Accounts and notes 2742 Accounts and notes Note 3 - Auditing fees
Group Parent company Besides customary auditing, auditing services Fees for auditing and consulting 2006 2005 2006 2005 include all necessary consultations, work related Audit to observations made in the audit or other tasks that are the duty of the auditor. Öhrlings PricewaterhouseCoopers 1 198 1 330 1 198 1 261 PricewaterhouseCoopers, Nordic countries 67 - - - Other auditing firms 179 83 - - Other consulting Öhrlings PricewaterhouseCoopers 277 321 277 304 PricewaterhouseCoopers, Nordic countries 14 - - - Other auditing firms 12 24 - - Total 1 747 1 758 1 475 1 565
Note 4 - Other operating revenue and expenses
Group Parent company Operating profit/loss includes exchange rate SEK thousand 2006 2005 2006 2005 differences for operating receivables and
Other operating revenue 83 1 867 - 163 liabilities as follows: Other operating expenses -1 036 -242 -20 -107 Total -953 1 625 -20 56
Note 5 - Operational leasing
The nominal value of future minimum leasing fees, which are related to non- cancellable leasing contracts, are distributed according to:
Group Parent company SEK thousand 2006 2005 2006 2005
Payable within 1 year 11 514 10 977 6 854 6 710 Payable within 1-5 years 16 108 29 308 13 320 19 824 Payable after 5 years - - - -
Leasing expenses and revenue related to operational leasing contracts amount to:
Leasing expenses 14 254 11 553 6 984 4 885 Leasing revenue for sub-leased items 832 348 6 811 5 350
Rental contracts that expire during the period were estimated under similar conditions. Leasing contracts consist mainly of rental contracts and a few office machines.
Cybercom Annual Report 2006 Accounts and notes 2843 Accounts and notes Note 6 - Profit/loss from shares in Group companies
Parent company SEK thousand 2006 2005
Anticipated dividend - 5 231 Write-downs - -782 Total - 4 449
Note 7 - Financial revenue
Group Parent company SEK thousand 2006 2005 2006 2005
Interest 1 879 1 424 1 216 1 899 Exchange rate differences 2 477 3 588 1 774 422 Fair value model gain for derivate instruments - 1 531 - - Total 4 356 6 543 2 990 2 321
Note 8 - Financial expenses
Group Parent company SEK thousand 2006 2005 2006 2005
Interest -10 -1 -212 -73 Exchange rate differences -4 304 -2 174 -2 835 -375 Fair value model losses for derivate instruments -822 - - - Total -5 136 -2 175 -3 047 -448
Note 9 - Appropriations
Parent company SEK thousand 2006 2005
Change in excess depreciation -1 680 -49 Change in tax allocation reserve -300 -903 Total -1 980 -952
Cybercom Annual Report 2006 Accounts and notes 2944 Accounts and notes Note 10 - Tax on year's profit/loss
Group Parent company SEK thousand 2006 2005 2006 2005
Year's tax -12 959 -4 035 1 482 1 497 Tax attributable to prior years 2 -2 10 - Deferred taxes attributable to prior years -36 -471 -33 -293 Year’s deferred taxes -1 406 -7 286 -82 -897 Total -14 399 -11 794 1 377 307
Group Parent company Year’s deferred tax expense or recoverable tax 2006 2005 2006 2005
Deferred tax expense regarding temporary differences -1 706 -7 710 -178 -1 019 Deferred recoverable tax regarding temporary 300 424 96 122 differences Deferred tax in the income statement -1 406 -7 286 -82 -897
Group Deferred tax expenses refer to changes in opening temporary differences, mainly for deductions regarding deficit deductions. Deferred recoverable tax refers primarily to capital insurance provisions. See temporary differences in note 20.
Parent company Deferred recoverable tax refers primarily to capital insurance provisions.
Parent company Tax regarding items directly recognised against equity 2006 2005
Tax effect from Group contributions 5 842 2 255 Total 5 842 2 255
Group Parent company Difference between tax expense in income statement and tax expense based on current tax rate 2006 2005 2006 2005
Profit/loss after financial items 50 119 39 046 -5 725 1 975 Tax as per current rate -14 033 -10 933 1 603 -553 Tax as per prior years -34 -473 -23 -293 Tax effect from non-deductible costs -604 -996 -51 -251 Tax effect from other revenue not subject to tax liability 11 15 5 1 465 Standard interest on tax allocation reserves -174 -142 -157 -61 Effect of non-incurred prepaid tax -10 -47 - - Effect of foreign tax rates 445 782 - - Taxes on year’s outcome as per income statement -14 399 -11 794 1377 307
Tax rate The Group and parent company’s tax rate amounts to 28%. The Group’s effective tax rate amounts to 28.7% (30.3%). The parent company’s effective tax rate amounts to -24.1% (-).
Cybercom Annual Report 2006 Accounts and notes 3045 Accounts and notes Note 11 - Discontinued operation
Group In December 2006, the board decided to phase Effects of discontinued operations 2006 2005 out Cybercom Norge A/S, the Norwegian
Operating revenue 9 005 9 862 operation; 8 employees are affected. The closure is expected to be completed during H1 2007. Operating expenses -10 882 -12 623 Depreciation, amortisation, and impairment -529 -112
Operating loss -2 406 -2 873 Financial items -298 112 Year's tax 4 835 - Deferred tax -2 560 - Loss from discontinued operations -429 -2 761
Cybercom Annual Report 2006 Accounts and notes 3146 Accounts and notes Note 12 - Intangible non-current assets
Group Parent company Along with goodwill impairment testing, estimates Goodwill 2006 2005 2006 2005 are made of the recoverable amount based on
Opening acquisition cost 129 841 81 421 - - the future cash flow that the asset is judged to be able to generate. Value of future cash flow Through consolidation of subsidiaries - - 4 930 - significantly depends on the applied interest rate. Year's purchases 760 48 345 - - Assumptions and assessments that were done Translation differences -462 75 - - with the impairment test in 2006 are described Closing accumulated acquisition costs 130 139 129 841 4 930 - below. Opening amortisation - - - - Through consolidation of subsidiaries - - -1 397 - When the operations' cash flows are forecasted Year's amortisation - - -493 - without accounting for financial items, the Closing accumulated amortisation - - -1 890 - applied interest rate for discounting cash flows Book value 130 139 129 841 3 040 - reflects the weighted capital cost for Goodwill distribution by business division 2006 2005 shareholders' equity with loan financing after tax, i.e., the weighted average cost of capital Sweden 111 081 115 251 (WACC). To determine the WACC, these factors International 14 128 14 590 must be estimated: Other 4 930 - Total 130 139 129 841 z Net debt/equity ratio (financing mix)
Group Parent company z Return on investment demands on License rights 2006 2005 2006 2005 shareholders' equity z Cost of long-term loan financing Opening acquisition cost 3 255 1 600 1 655 - Purchases 549 1 655 426 1 655 Cybercom decided to always finance with Sales - - - - shareholders' equity. Cybercom has few tangible Closing accumulated acquisition costs 3 804 3 255 2 081 1 655 assets. A comparison with other companies Opening amortisation -1 600 -1 600 - - supports 100% financing with shareholders' Year’s amortisation -426 - -415 - equity. Closing accumulated amortisation -2 026 -1 600 -415 - Closing scheduled residual value 1 778 1 655 1 666 1 655 The return-demand level on shareholders' equity Group is normally based on the capital asset pricing Capitalised expenses for software development 2006 2005 model (CAPM); so return demand is based on
Opening acquisition cost - 16 431 risk-free interest, with addition of a risk premium. Year’s capitalised expenses, internal development - 2 936 Sales - -19 367 The risk-free interest rate is equal to 10-year Closing accumulated acquisition costs - 0 government bonds, about 4% (3%). Opening amortisation - -4 045 Year’s amortisation - -568 The risk premium comprises: Sales - 4 613 Closing accumulated amortisation - 0 z General compensation for share-investment Closing scheduled residual value - 0 risks. This market risk premium was estimated to be about 4%, which is Group unchanged from last year. Trademarks 2006 2005 z A weighting up or down for current Opening acquisition cost 4 000 - investment risk, relative to the market Through acquisition of subsidiaries - 4 000 average. This factor was estimated to be Sales - - about 1.3. Closing accumulated acquisition costs 4 000 4 000 z A supplement considering the company's Opening amortisation -267 - size and a specific, risk-condition Sales - - supplement. In Cybercom's case (besides Year’s amortisation -400 -267 size-related supplement), this means, e.g., Closing accumulated amortisation -667 -267 an insufficient track record to support Closing scheduled residual value 3 333 3 733 positive future financial trends and special dependent relationships (primarily customers Group and key people). Together, these Patents 2006 2005 supplements were estimated to about 2% Opening acquisition cost 1 132 - (3.5 percentage points lower than previous Through acquisition of subsidiaries - 1 011 years, based on the company's performance Purchases 147 121 last year). Closing accumulated acquisition costs 1 279 1 132 Opening amortisation -603 - The total projected interest rate (median value in Through acquisition of subsidiaries - -458 the above interval) before tax was based on the Year’s amortisation -241 -145 above factors and estimated to be: Closing accumulated amortisation -844 -603 4% + 1.3 x 4% + 2% = 11% Closing scheduled residual value 435 529 Considering the above information, there is no impairment loss.
Cybercom Annual Report 2006 Accounts and notes 3247 Accounts and notes Note 13 - Property, plant, and equipment
Group Parent company Equipment 2006 2005 2006 2005
Opening acquisition cost 28 775 34 022 4 951 5 546 Purchases 5 001 6 263 518 2 879 Sales and disposals -6 001 -18 261 -167 -3 474 Through acquisition/merger of subsidiaries - 6 148 166 - Translation difference -345 603 - - Closing accumulated acquisition costs 27 430 28 775 5 468 4 951 Opening depreciation -16 528 -23 278 -2 137 -4 576 Sales and disposals 4 977 17 428 125 3 344 Through acquisition/merger of subsidiaries - -5 046 -76 - Year’s depreciation -5 101 -5 132 -899 -905 Depreciation from discontinued operations -97 -112 - - Translation difference 182 -388 - - Closing accumulated depreciation -16 567 -16 528 -2 987 -2 137 Closing scheduled residual value 10 863 12 247 2 481 2 814
Cybercom Annual Report 2006 Accounts and notes 3348 Accounts and notes Note 14 - Financial assets
Group Parent company These subsidiaries were merged with the parent Other financial assets 2006 2005 2006 2005 company Cybercom Group Europe AB during
Opening acquisition cost 358 182 - - 2006: Purchases 688 2 312 - Disposals - -182 - - z Cyber Com Consulting EC AB 556554-3161 Through acquisition of subsidiaries - 350 - - z Cyber Com Net Business Consulting AB Sales -358 - - - 556567-9445 Revaluation to fair value - 8 - - z Cyber Com Mobile Communication Closing accumulated acquisition costs 688 358 2 312 - Scandinavia AB Opening write-down - -182 - - 556577-1606 Disposals - 182 - - z Cyber Com Consulting Innovation Stockholm Closing accumulated write-down - 0 - - AB Fair value 688 358 2 312 - 556535-3389 z Cyber Com Consulting 603 AB Parent company 556538-0432 Shares in Group companies 2006 2005 z Cyber Com Consulting Business Uniware AB Opening acquisition cost 342 686 288 203 556542-2127 Acquisitions of subsidiaries - 53 701 z Cyber Com Consulting Business Solutions AB Additional purchase price 760 - 556544-6332 Shareholder contribution - 782 z Cyber Com Consulting ConcentIT AB Cosolidation of subsidiaries -26 483 - 556563-8359 Closing accumulated acquisition costs 316 963 342 686 z Cyber Com Consulting Communications i Opening write-down -165 406 -164 624 Stockholm AB Year’s write-down - -782 556566-1575 Closing accumulated write-down -165 406 -165 406 z Cyber Com Consulting CoreTech Stockholm Book value 151 557 177 280 AB 556566-0452 Corporate ID Site No. of shares Book value z Cyber Com Pir New World Media AB Cybercom Stockholm IT AB 556497-0787 Stockholm 1 001 120 556571-9845 Cyber Com Consulting Uppsala AB 556544-6225 Stockholm 1 000 120 z Cyber Com Consulting PM AB Cybercom Group Stockholm AB 556551-4493 Stockholm 1 000 120 556575-7589 z Cyber Com Consulting ProvideIT AB Cybercom Nord AB 556554-8673 Stockholm 1 000 120 556575-9783 Global Communication Solutions Nordic AB 556566-0445 Stockholm 1 000 120 z Cyber Com Consulting ConnectIT i Sverige Cyber Com IT Consulting GB Ltd * 3471825 London 45 000 0 AB Cybercom Mobility Stockholm AB 556578-2694 Stockholm 1 000 120 556579-4608 Cyber Com Consulting A/S 25795938 Copenhagen 5 549 14 806 z Cyber Com Consulting Electronic Business Cybercom Group UK Ltd 3064392 London 100 24 608 AB Cybercom CGSIT AB 556518-3455 Stockholm 1 114 350 68 636 556579-4582 Cybercom Syd AB 556591-8421 Stockholm 10 000 z Cyber Com Consulting AE BS AB Cybercom Norge AS 980981215 Asker 1 001 556576-8347 Cybercom Netcom Consultants AB 556359-1097 Stockholm 5 000 42 787 z Cyber Com Consulting I-Net Solutions AB Diator Netcom Consultants Asia Pacific PTE Ltd 199707629N Singapore 100 000 556577-4717 z Cyber Com Consulting Syd AB Total 151 557 * Share of capital and votes is 90%. Ownership in other Group companies is 100%. 556581-6674 z Cyber Com Intra-X AB 556498-6825 z Cyber Com StreamIT AB 556551-4568 z Mobility Partner Europe AB 556582-4421
The following subsidiary merged with the parent company Cybercom CG SIT AB during 2006: Cybercom Öst AB, corporate ID 556591-6524.
Most of the merged subsidiaries were inactive before consolidation. Together, the merged subsidiaries contribute net sales of SEK 799,000 and operating loss of SEK 653,000 to the parent company's statement.
Cybercom Annual Report 2006 Accounts and notes 3449 Accounts and notes Note 15 - Trade receivables
Group Parent company 2006 2005 2006 2005
Accounts receivable 122 479 95 764 2 256 236 Bad debts -1 069 - - - Net accounts receivable 121 410 95 764 2 256 236
Note 16 - Other receivables
Group Parent company 2006 2005 2006 2005
Non-invoiced revenue for service assignments 32 204 22 670 10 571 - Derivative - 672 - - Other items 10 838 11 904 3 568 25 Total 43 042 35 246 14 139 25
Note 17 - Prepayments
Group Parent company 2006 2005 2006 2005
Prepaid rent 3 178 3 048 1 792 1 708 Prepaid leasing fees 227 37 178 26 Prepaid insurance premiums 1 254 1 728 508 492 Prepaid services and fees 714 238 54 40 Prepaid license fees 397 215 369 148 Prepaid data communication 59 26 49 10 Other items 448 1 491 54 209 Total 6 277 6 783 3 004 2 633
Cybercom Annual Report 2006 Accounts and notes 3550 Accounts and notes Note 18 - Shareholders' equity
Share capital consists of 12,321,757 shares with a quota value of 1. All shares are One outstanding warrant programme remained on 31 December 2006. fully paid up. Warrant programme 9 was implemented in Group November 2003 as per these conditions: Translation difference in equity 2006 2005 Balance at year’s start -2 471 -4 153 No. of subscription rights 200,000 Year's change -1 081 1 682 issued Balance at year’s end -3 552 -2 471 Subscription period 16 August 2006 - 16 January 2007 Strike price SEK 32.92
Warrant programme 9 is intended for employees in the UK.
115,000 warrants were transferred; the remaining 85,000 were custodial on 31 December 2006.
No. of remaining warrants at year's 30,000 start Custodial warrants 170,000 Less custodial warrants -85,000 No. of remaining warrants at year's 115,000 end
Since year-end, 114,000 warrants were used for subscription for shares.
The remaining 86,000 warrants expired on 16 January 2007.
Cybercom Annual Report 2006 Accounts and notes 3651 Accounts and notes Note 19 - Untaxed reserves
Parent company SEK thousand 2006 2005
Tax allocation reserve, tax assessment 2001 - 332 Tax allocation reserve, tax assessment 2002 8 858 7 327 Tax allocation reserve, tax assessment 2003 326 - Tax allocation reserve, tax assessment 2004 515 - Tax allocation reserve, tax assessment 2005 1 026 903 Tax allocation reserve, tax assessment 2006 5 190 - Accumulated excess depreciation 3 296 49 Total 19 211 8 611
Differences between previous years assessment periods' tax allocation reserves is due to subsidiary merger.
Cybercom Annual Report 2006 Accounts and notes 3752 Accounts and notes Note 20 - Deferred tax
Group Parent company Deferred tax asset 2006 2005 2006 2005
Non-deductible depreciation on equipment 665 579 244 86 Capital insurance and employer’s contribution 819 840 819 467 Reserves 325 251 88 4 Deficit deduction - 3 529 - - Total deferred tax asset 1 809 5 199 1 151 557 Deferred tax liability Accumulated excess depreciation -939 -463 - - Tax allocation reserve -5 011 -4 926 - - Goodwill amortisation arising from assets transfer -701 -469 - - Fair value gain derivative - -188 - - Trademarks -933 -1 045 - - Other -201 - - - Total deferred tax liability -7 785 -7 091 - - Deferred tax, net -5 976 -1 892 1 151 557
Temporary differences exist in those cases where the recognised value or the fiscal value are different for assets or liabilities. Temporary differences relating to the items above resulted in deferred tax liabilities and deferred tax assets. There is a temporary difference relating to acquired trademarks for investments in subsidiaries. Deferred prepaid taxes and tax liabilities are offset when there is a legal offset right for current prepaid taxes and tax liabilities and when the same tax authority processes deferred taxes. After offsetting, these amounts were derived and recognised on the balance sheet.
Group Parent company Amounts on the balance sheet include: 2006 2005 2006 2005
Deferred prepaid taxes used after more than 12 months 1 139 3 914 869 536 Deferred tax liabilities payable after more than 12 -4 254 -4 878 - - months
Group Parent company Change in deferred prepaid taxes 2006 2005 2006 2005
Claims at period’s start 5 199 11 760 557 1 747 Acquired tax claims -36 -471 -33 -293 Discontinued/Merged operations -2 560 - 709 - Period change -712 -6 318 -82 -897 Translation difference -82 228 - - Book value 1 809 5 199 1 151 557
Group Allocation for deferred taxes 2006 2005
Allocation at period’s start 7 091 4 760 Via acquisition of subsidiaries - 484 Period allocation 994 2 246 Dissolution of allocation -300 -399 Book value 7 785 7 091
Cybercom Annual Report 2006 Accounts and notes 3853 Accounts and notes Note 21 - Other non-current liabilities
Group Parent company SEK thousand 2006 2005 2006 2005
Employer’s contribution on capital insurance 498 442 498 325 Debt to Netcom Consultants’ previous shareholders - 3 101 - - Total 498 3 543 498 325
Note 22 - Other current liabilities
Group Parent company SEK thousand 2006 2005 2006 2005
Tax related liabilities 11 302 17 027 484 990 Derivative 150 - 150 - Other current liabilities 8 323 8 263 - 1 843 Total 19 775 25 290 634 2 833
Note 23 - Accruals and deferred income
Group Parent company SEK thousand 2006 2005 2006 2005
Accrued salaries 11 732 10 641 4 030 2 344 Accrued holiday pay 13 780 13 655 849 612 Accrued social security fees 13 712 12 650 1 913 1 191 Accrued external services 2 651 4 323 - - Other items 7 631 6 032 2 500 1 101 Total 49 506 47 301 9 292 5 248
Note 24 - Contingent liabilities and commitments
The Group has no pledged assets or contingent liabilities - no changes from last year.
Cybercom Annual Report 2006 Accounts and notes 3954 Accounts and notes Note 25 - Interest
Group Parent company SEK thousand 2006 2005 2006 2005
Interest received 1 879 1 424 1 216 1 899 Interest paid -10 -1 -212 -73 Interest, net 1 869 1 423 1 004 1 826
Note 26 - Adjustments for items not included in cash flow
Group Parent company SEK thousand 2006 2005 2006 2005
Depreciation 6 168 6 112 1 807 905 Unrealised exchange rate differences - 732 - - Fair value gain derivative 822 -1 531 - - Profit at divestment of non-current assets - -3 082 - -1 Loss at divestment of non-current assets 23 1 285 42 99 Shareholder contribution - - - 782 Merger of subsidiaries - - 30 885 - Other 885 286 173 85 Total 7 898 3 802 32 907 1 870
Cybercom Annual Report 2006 Accounts and notes 4055 Accounts and notes Note 27 - Investments in property, plant and equipment and intangible non- current assets
The year’s total investments in tangible and intangible non-current assets are:
Group Parent company Intangible non-current assets 2006 2005 2006 2005
The year’s investments -1 456 -9 723 -426 -1 655 Group value of assets in new subsidiaries - 5 011 - - Effect on cash and cash equivalents in investing -1 456 -4 712 -426 -1 655 activities
Group Parent company Property, plant, and equipment 2006 2005 2006 2005
The year’s investments -5 001 -12 392 -518 -2 847 Group value of assets in new subsidiaries - 6 148 - - Effect on cash and cash equivalents in investing -5 001 -6 244 -518 -2 847 activities
Cybercom Annual Report 2006 Accounts and notes 4156 Accounts and notes Note 28 - Acquisition of subsidiaries
Total worth of the acquired assets and liabilities, purchase prices, and effect on the On 1 May 2005, Cybercom acquired 100% of the share capital in Netcom Consultants AB from Group’s cash and cash equivalents concerning Netcom Consultants was: Modern Holding. Netcom Consultants AB is an international telecom advisor specialised in
networks, billing, technology, and service Purchase price 2006 2005 development. The fixed purchase price was SEK 35.0 million, which was paid partly using newly Cash payment - 2 465 issued Cybercom shares and partly using SEK 2.5 Expenses directly linked to the acquisition - 5 185 million in cash payment. The 25 April 2005 AGM Fair value of shares issued - 32 535 decided on a share issue of SEK 1,125,402 Additional purchase price 760 1 843 shares directed at the former main owners Total purchase price 760 42 028 Modern Holding. The issue price was SEK 28.91 Fair value for acquired net assets - -4 504 based on the listed share price. An additional Goodwill 760 37 524 purchase price of SEK 1.8 million related to sales for 2005 was established in December. The 2006 2005 acquisition led to goodwill of SEK 37.5 million Acquired net assets Book value Book value Fair value that is attributable to the greater depth and Patent, intangible non-current asset - 553 553 breadth of experience to which the acquisition of Trademark, intangible non-current asset - - 4 000 Netcom Consultants contributes. Property, plant, and equipment - 1 102 1 102 Financial non-current assets - 350 350 Netcom Consultants belongs to the Sweden Other current assets - 18 486 18 486 business division. Deferred tax liability - -484 -1 604 Non-current liabilities - -4 646 -4 646 In 2006 the final additional purchase price was Current liabilities - -13 736 -13 736 paid, amounting to SEK 0.8 million. Acquired net assets - 1 625 4 505
Investment activities 2006 2005
Cash settled purchase price 760 7 650 Cash and cash equivalents in acquired subsidiaries - -634 Effect on Group cash and cash equivalents from 760 7 016 acquisitions The following table shows net sales, profit and profit per share for the Cybercom Group 2005 as if acquisition of Netcom Consultants had occurred on 1 January 2005: Group 2005
Net sales 552 751 Year's profit 23 435 Profit per share, SEK 1.99 Acquired company’s contribution to the Group’s recognised sales and profit:
2005
Netcom Consultant’s contribution to the Group’s 40 467 recognised sales Netcom Consultant’s contribution to the Group’s 3 647 recognised profit With warrant rights, three executives in Cyber Com Consulting A/S, the Danish subsidiary, have acquired 9.9% of the shares in the subsidiary at the nominal price per share for a total of SEK 67 thousand. The warrants gave management the right to acquire 3.3% of the shares during each of these periods: 20–30 March 2004, 20–30 March 2005, and 1–10 December 2005. Additionally, there was a call option that gave Cybercom the right to acquire subscribed shares (1) calculated on the company’s profit/loss after depreciation and (2) charged with 30% tax. During 2004, 3.3% of the shares were acquired. During 2005, management used the remaining warrants and acquired a total of 6.6% of the shares in the subsidiary, resulting in a consolidated capital loss of SEK 267 thousand and SEK 539 thousand, respectively. At the same time, Cybercom Group Europe AB exercised its right to repurchase these shares, some during Q2 2005 for SEK 3.7 million, which resulted in goodwill of SEK 3.4 million, and some during Q4 2005 for SEK 8.0 million, which resulted in goodwill of SEK 7.5 million. Cyber Com Consulting A/S belongs to the International business division.
Purchase price 2006 2005
Cash payment - 11 673 Fair value of acquired net assets - -851 Goodwill - 10 822 2005 Acquired net assets Book value Fair value
Minority share 851 851 Acquired net assets 851 851 Cash settled purchase price 11 673 Effect on Group cash and cash equivalents from 11 673 acquisitions
Cybercom Annual Report 2006 Accounts and notes 4257 Accounts and notes Note 29 - Sale of subsidiaries
See note 28. See note 28.
Effect on Group cash and cash equivalents were:
Cyber Com Consulting A/S 2006 2005
Purchase price - 45 Minority share - -851 Capital loss - -806 Effect on Group cash and cash equivalents from - 45 sales
Note 30 - Divestment of assets and liabilities
Total value of transferred assets, purchase prices, and effect on Group cash and On 15 April 2005, CyberMate PreHospital, Cybercom's electronic journal management cash equivalents was: system for emergency care, and its associated operations, were sold to Medtronic, a leading
Group medical technology group. This sale was part of 2006 2005 Cybercom's selected focus on telecom and selected technologies. Intangible non-current assets - 14 754 Property, plant, and equipment - 354 CyberMate, which was an internally developed Other current assets - 1 071 intangible non-current asset, was sold with Selling costs - 120 property, plant, and equipment and trade Profit on sale 1 569 3 082 receivables for SEK 19.4 million. The deal covered Total purchase price 1 569 19 381 the investments that Cybercom made in the Offset against liability to purchaser -1 569 - operation and resulted in a positive effect on Less purchase price financed via loan to the buyer 5 091 -5 091 Cybercom's cash account. In December 2005, an Deposit, one year 1 591 -1 591 additional purchase price of SEK 1 .6 million was Effect on Group cash and cash equivalents from 6 682 12 700 set. divestment
In 2006, a further additional purchase price of SEK 1.6 million was received.
Note 31 - Cash and cash equivalents
Group Parent company 2006 2005 2006 2005
Current investments 1 014 - - - Cash and bank deposits 87 911 55 453 68 165 37 046 Cash and cash equivalents 88 925 55 453 68 165 37 046
Cybercom Annual Report 2006 Accounts and notes 4358 Accounts and notes Note 32 - Transactions with affiliates If the company cancels the CEO's contract, an 18-month period of notice applies to the CEO without severance pay. For other executives, a 6-12-month period of notice applies if the company cancels their contracts; no severance pay is applicable. The parent company's purchases and sales with Group companies Board remuneration In 2006, the parent company sold internal services for Board fees total SEK 875,000, of which SEK 250,000 is payable administration, management, and rental of premises with to the chairperson and SEK 125,000 to the other five board applicable services for SEK 42,453 thousand to Group companies; members; 33% of the fees are payable in 2007. the figure for 2005 was SEK 31,821 thousand. Warrants During the year, the parent company bought services from There are 35,000 outstanding warrants for executives from Group companies for SEK 1,045 thousand. These purchases warrant programme 9. covered systems support for administrative systems in the Group. For 2005 equivalent purchases totalled SEK 1,391 thousand. Decision on remuneration and benefits for executives Purchases and sales with affiliates Each year, the annual general meeting sets the board's No purchases or sales with affiliates occurred in 2006. remuneration. The board sets the annual remuneration and benefits for the CEO and president (for which the chairperson is Salaries, remuneration, and benefits for ultimately responsible) and remuneration and benefits for other executives executives. In 2006, salary and remuneration to the CEO and deputy CEO in the parent company totalled SEK 7,614 thousand (3,847), of Other transactions which SEK 925 thousand (1,549) comprised variable bonuses. Separate notes contain data on:
Salary and remuneration paid to other executives amounted to z Salaries and remuneration to the CEO and board SEK 10,314 thousand (13,380), of which SEK 1,307 thousand z Transactions with Group companies (2,127) comprised variable bonuses. This refers to 9 people (10), of which 1 has worked part of the year. As per IAS 24, no other transactions with affiliates occurred in 2006. For persons mentioned above, compensation after employment termination is SEK 146 thousand (0), and compensation at termination is SEK 2,070 thousand (0).
Salary and remuneration paid to executives comprises two parts: one fixed and one variable. The fixed part is comparable to the person's basic salary; the variable part is based on achieved objectives during the year. One executive has no variable remuneration.
A medical insurance benefit is available to the executives.
The executives receive premium-based pension provisions, including previous CEOs and deputy CEOs. The current CEO receives no pension provisions. Other executives receive pension provisions according to the Group's premium plan, based on age and salary.
Apart from the above benefits for executives, there are no specific pension benefits.
Other agreements with executives If the company cancels the CEO's contract, an 18-month period of notice applies to the CEO without severance pay. For other executives, a 6-12-month period of notice applies if the company cancels their contracts; no severance pay is applicable.
Cybercom Annual Report 2006 Accounts and notes 4459 Accounts and notes Note 33 - Events after the end of the financial year
Purchase price Acquisition of subsidiary Cash payment 12 500 Expenses directly linked to the acquisition 297 On 2 January 2007, Cybercom Syd AB acquired Total purchase price 12 797 100% of the share capital in Varchar AB. Varchar Fair value of shares issued -1 689 is an IT consultancy with 20 employees; it Goodwill 11 108 specialises in .Net. The fixed purchase price is SEK 12.5 million, which was paid in full in cash. Acquired net assets Book value Fair value An additional, performance-based purchase price Property, plant, and equipment 215 215 of minimum SEK 1.1 million and maximum SEK 5.6 Other current assets 4 634 4 634 million may be payable in 2007. Deferred tax liability -141 -141 Current liabilities -3 019 -3 019 At acquisition, goodwill stood at SEK 11.1 million, Acquired net assets 1 689 1 689 which can be attributed to the diverse expertise and increased customer base that Varchar Investing activities contributes. Varchar belongs to the Sweden
Cash settled purchase price 12 797 business division. Cash and cash equivalents in acquired subsidiaries -685 Effect on Group cash and cash equivaents from 12 112 The total value of the acquired assets and acquisitions liabilities, purchase price and affect on the Group's cash and cash equivalents in respect to Varchar are shown in the table to the left.
Cybercom Annual Report 2006 Accounts and notes 4560 Accounts and notes Auditors' report
The auditor's report below is submitted for the original and Stockholm, 29 March 2007 endorsed annual report left by the company. A copy of the Öhrlings PricewaterhouseCoopers AB original may be requested from the Swedish Companies Registration Office. Ulf Pettersson, Authorised public accountant
To the AGM of Cybercom Group Europe AB (Swedish corporate ID 556544-6522)
We audited the 2006 annual accounts, consolidated accounts, and bookkeeping plus administration of the company by the board and CEO of Cybercom Group Europe AB. The board and CEO are responsible for the accounts, company administration, ensuring that the annual accounts comply with the Annual Accounts Act and the EU-adopted IFRS, and ensuring that the consolidated accounts comply with the Annual Accounts Act. We are responsible for expressing an opinion (based on our audit) on the annual accounts, consolidated accounts, and administration.
We conducted our audit according to generally accepted auditing standards in Sweden. These standards require us to plan and perform the audit to obtain reasonable assurance that the annual accounts and consolidated accounts are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the accounts; it also includes assessing the accounting policies used and their application by the board and the president, assessing significant estimates made by the board and the president, as well as evaluating overall presentation of information in the annual accounts and the consolidated accounts. As supporting evidence for our statement below on discharge from liability, we examined significant decisions, actions taken, and circumstances of the company - to be able to determine whether any board member or the president is liable to the company, and whether they have in any other way acted in contravention of the Swedish Companies Act, the Swedish Annual Accounts Act, or the Articles of Association.
The annual accounts were prepared as per the Swedish Annual Accounts Act and thus provide an accurate picture of the company's outcome and position, according to generally accepted auditing standards in Sweden. The consolidated accounts comply with the EU-adopted IFRS and thus provide an accurate picture of the Group's outcome and position. The board's report is consistent with the annual accounts and the consolidated accounts.
We recommend that the AGM adopt the income statement and balance sheet for the parent company and the Group, allocate the profit of the parent company as per the proposal in the board's report, and discharge the board members and the president from liability for the financial year.
Cybercom Annual Report 2006 Accounts and notes 4661 Code of corporate governance Corporate governance report
Cybercom's board and executives actively work with corporate Attendance and remuneration governance. The nomination committee puts stringent demands Attendance2) Holdings on the competence profiles of the board members. The Name B E A Remuneration3) Shares Warrants remuneration committee strives to create the best possible terms Per-Eric Fylking 1) 11 1/1 1/1 250 000 3 000 0 for reasonable remuneration and bonus levels. The audit chairman from 4/28 committee consists of all board members who work closely with Per Edlund 10 1/1 1/1 125 000 69 500 4) 0 1) Cybercom's auditors. Proposals from individual shareholders may Eva Gidlöf 11 1/1 1/1 125 000 0 0 Lars Persson 11 1/1 1/1 125 000 0 0 be sent to the committee by mail via Cybercom's main office in Per Norén 1) 10 0/1 1/1 125 000 0 0 Stockholm. Ulf Körner 10 1/1 1/1 125 000 0 0
Cybercom is not obliged to apply the Swedish code of corporate 1) Elected as new member at the 2006 AGM, after which 11 board meetings were held. 2) B = Board governance. But Cybercom's board decided to largely follow the R = Remunerations committee: The entire board has taken part of the Remunerations principal aspects of the code. The board believes that the committee's agenda during 2006 A = Audit committee company fulfils the code's requirements and that the code does 3) Sum relates to board members' fees. Some travel expense compensation has been not currently lead to any substantial changes. paid to attendants residing in cities other than Stockholm. 4) Through legal person Independent (as defined in the Swedish code for corporate governance) A complete description of the Cybercom Group's corporate Member considered independent of Cybercom and its management Member considered independent of Cybercom, its management, and its majority governance efforts is displayed at www.cybercomgroup.se. shareholders
Exceptions from application of the code Code items 2.3.1-2.3.4 - Auditor appointment It was resolved that no dividends would be distributed for 2005. Proposed auditor appointments are submitted to the board. The board is responsible for information on and presentation of the Authorising the board to issue shares proposed auditor, as per the code, when an auditor must be The board was authorised to decide on new share issues of a appointed. maximum of 1,000,000 shares, on one or more occasions to increase the company's share capital, during the period until the Code item 3.6.3 - Financial reporting next AGM. Cybercom's auditor did not fully review the company's interim reports. Authorising the board to buy back shares The board was authorised to buy back Cybercom shares - on one Code item 3.7.3 - Special review function or more occasions, corresponding to a maximum of 10% of Cybercom has no separate internal audit function. The board Cybercom's share capital - during the period until the next AGM, believes that there is no need for such a function in the as proposed by the board. operation and that it is not financially feasible in an organisation as small as Cybercom. Authorising the board to take out a participating loan or an equity loan Aside from these deviations, Cybercom largely follows the code. The board was authorised to take out a participating loan or an equity loan - on one or more occasions - during the period until Annual meeting 2006 the next AGM. Cybercom Group Europe AB (pub) held its annual meeting on Friday, 28 April 2006. The AGM's decisions are in agreement with Nomination committee the board's proposals presented in the AGM notification. Per Edlund, John Örtengren and Magnus S Eriksson were appointed nomination committee members These resolutions were made at the AGM; all were unanimous. Remuneration committee New board The AGM appointed Per-Eric Fylking, Per Edlund, and Eva Gidlöf Per Norén, Per-Eric Fylking, and Eva Gidlöf were newly elected remuneration committee members. as board members. Per Edlund, Lars Persson and Ulf Körner were re-elected. Per-Eric Fylking was elected as chairman. New articles of association The AGM accepted new articles of association as per the new No dividend Companies Act requirements. It was resolved that no dividends would be distributed for 2005. Nomination committee The AGM elected a nomination committee consisting on Per Edlund, John Örtengren, and Magnus S Eriksson. Before the next AGM, the committee must submit proposals for board members, auditors, remunerations, and other relevant issues. The nomination committee prepares requirement specifications and ensures that Cybercom's board members have expertise relevant Cybercomz Cybercom's Annual Report 2006 2006 AGM Coderesolved of corporate that the governance nomination 862 committee must develop and submit to the 2007 AGM to its operation. The nomination committee works closely with committee must develop and submit to the 2007 AGM proposals for: the shareholders and meets three times a year. z An AGM chairman z z Board members Cybercom's 2006 AGM resolved that the nomination z A board chairman committee must develop and submit to the 2007 AGM Code of corporate governance z Board remuneration, i.e., for the chairman and for other proposals for: members plus remuneration for possible committee work, z An AGM chairman Corporate governance report z z Auditors' fees Board members z z Nomination and remuneration committees for the 2007 A board chairman AGM. z Board remuneration, i.e., for the chairman and for other members plus remuneration for possible committee work, Management remuneration z Auditors' fees Board Base Variable Other Pension z Nomination and remuneration committees for the 2007 The board consists of six members. Three of the largest Year / Name salary Other compensation benefits costs Total AGM. shareholders are represented on the board. The board 2006 represents a wide range of expertise within sectors such as IT, CEO Peter Keller-Andreasen 212 - - - - 212 telecom, and business development. The board held 11 meetings CEO Mats Alders 2 184 278 655 32 655 3 804 in 2006. Activities included the recruitment of a CEO and Vice president Bengt Levin 1 800 2 183 270 0 764 5 017 Executive management 8 342 513 1 307 151 1 047 11 361 evaluation of a take-over offer made by the principal 2005 shareholder, JCE Group. CEO Mats Alders 2 112 - 1 549 186 644 4 491
Executive management 11 220 - 2 127 33 1 436 14 816 In the autumn of 2006, Mats Alders, president and CEO, informed the board of his decision to leave Cybercom after nine years in the company. Peter Keller-Andreasen is now acting president and CEO. Recruitment is completed, and Patrik Boman The AGM elected these members to the remuneration will be the new president and CEO (previously CEO of HiQ's committee: Stockholm operations). He will take up his new position in Q2 2007. z Per-Eric Fylking, board chairperson in Cybercom z Eva Gidlöf, board member and MD of Bankgirocentralen On 2 October 2006, Cybercom's shareholders received a public (BGC) AB offer from JCE Group, the company's principal shareholder, to z Per Edlund, board member and MD of Consafe IT AB and acquire all shares in the company for SEK 38 per share. The JCE Gruppen Fastighets AB board (with support from financial and legal advisors) evaluated the offer and decided to recommend shareholders to reject the The remuneration committee met once in 2006. All board offer. The board took the decision unanimously, accounting for members were invited to attend. Cybercom's strong market position and good growth potential. Board members Per Edlund and Ulf Körner did not participate in Internal control the decision in view of the prevailing conflict of interest. The board has the overall responsibility for Cybercom's internal controls. Management and internal controls follow the Group's Remuneration of the board in 2006 reporting structure, finance policy, and other policies prepared by As per the AGM resolution: board fees for 2006 total SEK the board of the parent company. 875,000, of which SEK 250,000 is payable to board chairperson and SEK 125,000 each to the other board members. No special The auditors examine internal reporting procedures each year in remuneration is paid to committee members: conjunction with the annual audit. The auditors also prepare an annual risk analysis for the Group. The auditors' review of z Total remuneration for the board: SEK 875,000 internal control and risks is presented in a report to the board. z Remuneration of board chairman: SEK 250,000 z Remuneration of other board members: SEK 125,000 each Group executives z No special remuneration has been paid to committee Cybercom's president and CEO manages, organises, and members develops business activities in such a way that board-established profitability and orientation goals are achieved. Written Audit committee instructions determine the distribution of tasks and responsibilities The audit committee is composed of all board members and is between the board and the CEO. Rules of procedure also charged with proposing auditors and approving their fees. regulate the CEO's financial framework. The CEO submits a monthly written report to the board. Remuneration committee Cybercom's remuneration committee prepares principles for the setting of salaries and other terms of employment for Cybercom's CEO, vice president, and other senior executives. The remuneration committee endeavours to create the best possible conditions to enable benefit issues to be treated carefully and comprehensively.
Cybercom Annual Report 2006 Code of corporate governance 963 Code of corporate governance Board
Per-Eric Fylking (year of birth: 1939) Eva Gidlöf (year of birth: 1957)
New board chairman since 2006. New board member since 2006. CEO of Bankgirocentralen (BGC) AB. Other board positions Board chairman of Overseas Telecom AB, Red Pill AB, and Turn Other board positions Around Holding AB; board member of Observer AB and Suntel in Intellecta AB (publ.), Cad-Q Holding AB (publ.) (up to April 2006 Sri Lanka. inclusive), BGC Holding AB, and Bankernas arbetsgivareorganisation BAO. Cybercom holdings 3,000 shares. Cybercom holdings No Cybercom holdings. Expertise Telecom sector and Swedish industry. Expertise Strategic advice and operational management, IT sector. Per Edlund (year of birth: 1958) Ulf Körner (year of birth: 1946)
Board member since 2003. CEO of Consafe IT AB and JCE Gruppen Fastighets AB. Board member since 2005. Professor of telecom traffic systems at Lund University's Faculty of Engineering (LTH). Other board positions Board chairman of Docteq AB and Captura ASA; board member Other board positions of MA-system AB, Smarteq AB, and Consafe Logistic AB. Board member of Cale Ticketing Gruppen AB and Consafe IT AB.
Cybercom holdings Cybercom holdings No Cybercom holdings; affiliated JCE Group AB is the largest No Cybercom holdings. Cybercom shareholder. Holding in Consafe IT: 69,500 shares. Expertise Expertise Telecom sector. Company acquisitions and business development
Cybercom Annual Report 2006 Code of corporate governance 1064 Code of corporate governance Board
Per Norén (year of birth: 1965)
New board member since 2006. President and CEO of Carmen Systems AB (publ.).
Other board positions Icomera AB, Vikom Väst AB, Center for Business Innovation, Chalmers University of Technology.
Cybercom holdings No Cybercom holdings.
Expertise Strategic management, growth companies in an international market, software and IT sector.
Lars Persson (year of birth: 1956)
Board member since 1998. CEO of Swedish Space Corporation.
Other board positions Repeatit AB and Turn to Törn AB.
Cybercom holdings No Cybercom holdings.
Expertise Telecom sector.
Cybercom Annual Report 2006 Code of corporate governance 1165 Code of corporate governance Group executives
Peter Keller-Andreasen (year of birth: 1956) Thomas Barge (year of birth: 1962)
Acting president and CEO of the Cybercom Group. Electrical Managing director of Cybercom Syd AB. M.Sc. from Lund engineer, Technical University of Denmark. University's Faculty of Engineering.
Employed at Cybercom since Employed at Cybercom since 2001 2003
Previous employment Previous employment TietoEnator A/S and Digital A/S. Consafe Infotech Syd AB, Consafe Infotech AB, and Exallon Systems AB. Cybercom holdings None. Cybercom holdings 10,030 shares Karsten Adelmark (year of birth: 1962) Henrik Gavelli (year of birth: 1960)
Acting managing director of Cybercom Danmark A/S. MBA from Copenhagen Business School. Managing director of Cybercom Nord AB. M.Sc. from the Royal Institute of Technology, Stockholm. Employed at Cybercom since 2001 Employed at Cybercom since 1999 Previous employment Ernst & Young, TietoEnator, and Netman (HP) Previous employment Ericsson, Devenator AB and own business. Cybercom holdings None Cybercom holdings None
Cybercom Annual Report 2006 Code of corporate governance 1266 Code of corporate governance Group executives
Johan Glimskog (year of birth: 1966) Per Jonsson (year of birth: 1966)
Manager of business development Cybercom Group. Acting CFO Cybercom Group. MBA, Stockholm University. managing director of Cybercom Netcom Consultants AB. Information technology at Stockholm University. Employed at Cybercom since 2007 Employed at Cybercom since 1996 Previous employment Metro International, Modern Holdings, Netcom Consultants, Ernst Previous employment & Young, and International Business Partner Advice SJ Data and Assisstor. Cybercom holdings Cybercom holdings 5,000 shares 18,400 shares. Kristina Svensson (year of birth: 1968) Terry Hunter (year of birth: 1962)
Marketing and communications director. M.A. from Uppsala Managing director of Cybercom Group UK. East Herts College in University. the UK. Employed at Cybercom since Employed at Cybercom since 1999 2003 Previous employment Previous employment Linköping University Hospital. CBI International and Reuters Cybercom holdings Cybercom holdings 3,400 shares. 35,000 warrants on 31 December 2006 and 8,000 shares in March 2007
Cybercom Annual Report 2006 Code of corporate governance 1367 Code of corporate governance Auditors
The AGM appoints auditors every fourth year. The most recent Auditors' remuneration occasion was in 2004. The task of the auditors is to audit the SEK thousand 2006 2005 2004 2003 2002 company's annual accounts, the accounting records, and the Remuneration for auditing 1 444 1 413 1 362 1 281 953 administration of the board of directors and the CEO. The Remuneration for other consulting 303 345 569 9 70 auditors report to the board on an ongoing basis.
Öhrlings PricewaterhouseCoopers, with Ulf Pettersson as principal auditor, were elected to serve as auditors up to 2008. During the year, the audit committee has met with the auditors to ensure that the company's internal and external accounts fulfil requirements placed on market-listed companies, as well as discussing the scope and focus of the auditing.
Auditors' report Each year, the auditors prepare a report that, among other things, describes the way in which the company's organisation is structured so that bookkeeping, asset management, and the company's financial circumstances in general can be controlled in a satisfactory way. Auditing occurs continuously throughout the year. In 2006, auditor Ulf Pettersson participated in meetings as specified above and on behalf of Öhrlings PricewaterhouseCoopers, he presented the audit of Cybercom's bookkeeping and financial situation.
Cybercom Annual Report 2006 Code of corporate governance 1468 Information Annual general meeting of shareholders (AGM)
The AGM of Cybercom Group Europe AB publ) will be held at 2 PM on Tuesday, 8 May at the company's head office at Fleminggatan 20, Stockholm. A notice convening the meeting will be issued via a press release, and published in the Post and Inrikes Tidningar, Dagens Industri and Svenska Dagbladet, as well as on Cybercom's web site.
Shareholders who wish to participate in the AGM must:
z Be entered in the VPC AB share database by Thursday, 3 May 2007; z Have enrolled themselves, and the number of assistants they wish to attend, to the company's head office by 12 noon on Friday, 4 May 2007 at the latest.
Notification Shareholders whose shares are registered in the names of nominees (through bank notaries or other administrators) must temporarily register the shares in their own name if they wish to exercise their voting rights at the AGM. Such registration must be done with VPC AB well before Thursday, 3 May.
Submit notification by:
z Phone: +46 8 578 646 00 z Fax: +46 8 578 646 10 z [email protected]
Or by normal mail (write AGM Notification on the envelope) to: Cybercom Group Europe AB Box 7574 103 93 Stockholm
In all cases, please specify your name, address, phone number, Swedish ID number (or corporate registration number), number of assistants, and number of shares.
Welcome!
Cybercom Annual Report 2006 Information 869 Information About the annual report
Cybercom is a high-tech consulting operation, with products and Content and production: Cybercom in co-operation with Hallvarsson & Halvarsson services designed to help people communicate. Technology and Translation: American Writing & Editing communication have been the catchwords for designing this Technical production: Hallvarsson & Halvarsson completely digital annual report. By using the Internet's Design: Hallvarsson & Halvarsson capabilities, the reader can extract more from the content. Online speach enabling: Readspeaker Film production: Palladium Photos: Cybercom Personal information policy Verification: ChamberSign Cybercom does not forward personal information collected through the annual report. Information collected from visitors is not used to track individuals who visited/displayed the annual report. Cybercom's annual report uses cookies. Their purpose is to simplify the visit, collect statistics on the number of visitors, and see which pages were visited.
Contact information
Cybercom Group Phone: +46 8 578 646 00 PO Box 7574 Fax: +46 8 578 646 10 103 93 Stockholm, Sweden [email protected] Visiting address: Fleminggatan 20 www.cybercomgroup.com
Cybercom Annual Report 2006 Information 970