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2007 annual report
www.cybercomgroup.com/2007 2007 annual report / Contents
Contents
Introduction Cybercom in brief 1 The year in brief 2 CEO's report 3 Business concept, goals, and strategies 4
Director’s report 2007 operations 7 Sales and profit 9 Market 10 Cybercom’s areas of operation 12 Organisation 14 Business processes 15 Employees 17 The share 19 Risk management 21 Outlook 23 Proposed appropriation of profit 24
Accounts and notes Income statement 25 Change in equity 27 Balance sheet 29 Cash flow statement 31 Key figures 33 Financial performance summary 34 Definitions 36 Summary of important accounting principles 37 Notes 44 Auditor's report 63
Corporate governance report Corporate governance report 64 Internal control 65 The board 66 Executive team 67 Auditors 68
Information Annual general meeting 69 Addresses 71 2007 annual report / Introduction
Cybercom in brief
The Cybercom Group is a high-tech consultancy that offers Cybercom was founded in Sweden in 1995 and has been listed on the global delivery for international business. The Group is an OMX Nordic Exchange, Stockholm since 1999. established world-class supplier in these segments: portals, mobile solutions, embedded systems, e-commerce, and busi- Cybercom's proposition? Global delivery capacity for: ness support systems (BSS). • Portals and mobile solutions • E-commerce and BSS Thanks to its extensive industry and operations experience, Cybercom • Embedded systems offers strategic and technological expertise to these markets: telecom, Internet, and media (TIM); banking and financial services; automotive; national defence; and the public sector.
As of December 2007, the Group has 1,300 employees and runs proj ects worldwide. The Group has offices in Denmark, Poland, Singapore, Sweden, and the UK – plus a joint venture in India. As of 1 January 2008, Cybercom has 1,850 employees after acquisition of Plenware, a Finnish IT consultancy, which has 550 employees and operations in China, Estonia, Finland, and Romania.
Cybercom's revenue by industry
TelecomTelekom 56% 58% Most of Cybercom’s revenue comes from telecom, although its O entlig sektor 11% customer base expands continuously to enable spin-off deals in its State & municipal 14% specialist expertise areas. Fordon 7% AutomotiveBank & nans 7% 4% BankingHandel & 6% finance 6% Industri 4% Retail 5% Försvar 3% IndustryÖvrigt 7%3% Defence 1%
Other 8% 42% 58% 64% turnkey consulting frame agreements projects services
Frame agreements are crucial for Cybercom and for the industry as Cybercom runs turnkey projects, carries out management assign- a whole, because customers place increasing volumes of work with ments, and offers expertise in consultancy, testing, and develop fewer consultants. Cybercom now has frame agreements for all major ment. It can deliver services globally – onshore, nearshore, or business relationships. offshore.
1 2007 annual report / Introduction
The year in brief
Powerful expansion characterised Cybercom in 2007 when the (starting 1 May 2007). Cybercom paid SEK 730 million in cash for the number of Group employees tripled to 1,850. Cybercom ex- debt-free companies. panded geographically and successively broadened its market scope. Today it has 27 offices in 11 countries. So the year was Plenware filled with key strategic initiatives via the Varchar, auSystems, On 18 December 2007, Cybercom signed an agreement to acquire and Plenware acquisitions plus continued focus on interna- Plenware, a Finnish IT consultancy, with about 550 employees and opera tional delivery capabilities and administrative undertakings tions in China, Estonia, Finland, and Romania (starting 1 January 2008). to keep pace with the continued globalisation trend. Cybercom paid EUR 32.7 million and assumed EUR 14.2 million in debts and liabilities in Plenware; the deal includes an additional pur Intensive expansion chase price of maximum EUR 8 million. Heavy expansion characterised Cybercom in 2007 – particularly via the Varchar, auSystems, and Plenware acquisitions. New CEO Patrik Boman assumed his position as new president and CEO in Varchar May 2007. From 2000–2006, he was MD of HiQ's Stockholm operation, On 22 December 2006, Cybercom signed an agreement to acquire which is the largest within that Group. Before HiQ, he held prominent Varchar, an IT consultancy with about 25 employees and operations in marketing- and sales-oriented positions at international businesses the Öresund region (starting 2 January 2007). The acquisition strengthens such as Telia and AT&T Unisource. Cybercom’s Java and .NET offerings, plus testing and verification. Peter Keller-Andreasen, acting president and CEO until May 2007, was auSystems appointed vice president. On 20 April 2007, Cybercom signed an agreement to acquire auSystems' Danish, Polish, and Swedish subsidiaries, including about 700 employees
Key figures for 2007
Sales Operating profit EBIT +117% +123% +3.2% SEK 1,165 m SEK 113.7 m 9.8%
Profit No. employees +90% +168% SEK 67.0 m 1,290
2 2007 annual report / Introduction
CEO's report
Patrik Boman interview The largest acquisition last year was auSystems operations in Denmark, Poland, and Sweden. How did integration go? Mr Boman, you're a new CEO at Cybercom with a hectic year behind I'm very satisfied with how auSystems was integrated into the you. For example, the company went from 400 to 1,850 employees. company. We began in June of last year and were finished in late How would you describe 2007? autumn – after implementing joint localisation of the larger op- A fantastic, exciting year for me and the entire company. We took erations in Stockholm, Malmö, and Linköping. We made cultural this company from being a medium-sized Swedish consultancy to analyses to look, for example, at the industrial fit of customers, one of the leading Nordic consultancies. values, and staff issues.
Considering your market and its trends, what's happening there? Do the operations function together? We've seen various trends. One is heavy demand within IT and The operations meshed very well. There was no overlap among technological development in general. And two: there's heavy customer bases. And in a purely operational and cultural sense, demand for global service deliveries. The Nordics' large consulting there was uniformity in working methods, engineering skills, purchasers place many projects outside Sweden. To participate on CRM, and HR management – so it worked incredibly well. this market and compete for large projects and assignments, we need delivery capacity in Asia, eastern Europe, and India – plus a What lessons learned apply to the next integration? few other places. We will definitely integrate more quickly and efficiently. We learned a lot in a large integration. The next integration will be What key changes in the operation would you like to highlight? Plenware – which we recently bought – and that one will go even The biggest changes are really about building a totally new com- more smoothly. pany, for which we developed a new vision, new strategies, and new objectives. We work much better and more consistently in Regarding last year's objectives, did you achieve them? teams among the companies, countries, and offices. Absolutely. During 2007, we doubled sales and profit. We wid- ened our margins and reported 12% organic growth. We made What does the new Cybercom look like today? a large acquisition and implemented a successful integration. We have 27 companies in 11 countries. We have a strong pres- We strengthened our market position. And we generated greater ence in Finland and Sweden, and Cybercom is one of the largest national and international market recognition. consultancies in the Nordics. We have an office in China, which is one of the larger growth markets in the world. And we have How would you summarise the year? operations in the Middle East, Africa, and in several locations in We created lasting value for our customers, employees, and eastern Europe. shareholders.
What did acquisitions in 2007 contribute to the operation? Going forward, what is the outlook for Cybercom? Delivery capacity improved, our skills base is larger, and we're I think it’s good. Strong underlying demand characterises the able to make greater commitments and take on much larger market. We'll see more internationalisation, extensive interna- projects in general. The acquisitions have greatly enhanced our tional growth, and continued expansion. market visibility, improved our position, and strengthened our trademark.
“We created lasting value for our customers, employees, and shareholders.”
3 2007 annual report / Introduction
Business concept, goals, and strategies
From its shareholders' perspective, Cybercom is charged with Objectives fulfilled in 2007 creating the right conditions for value development. This During the year, Cybercom: main task forms the foundation of its vision, business con- • Achieved up to 12% organic growth. cept, objectives, and strategy. • Reported an improved operating margin to 9.8%. • Expanded into China, eastern Europe, and Finland. Business concept • Widened its customer base and decreased dependence Through world-leading global delivery capacity, local presence, and on individual customers. close co-operation with customers, Cybercom strengthens its custom • In early 2008, no individual customer accounts for ers' operations using end-to-end solutions in which technology and real more than 15% of Group sales. ity meet. • Reduced staff turnover. • Increased the proportion of billable employees. Vision • Strengthened the company’s position on its markets. Cybercom will successfully dominate its selected markets. Customers, employees, and owners will perceive Cybercom as holding a leading Strategies position. Cybercom’s customers have stringent demands, and customer satisfac tion is key on a highly competitive market. This satisfaction ensures Operation's objectives future sales and is a requirement for good profitability. So close co- Cybercom established these long-term objectives: operation with customers is required to better understand their needs • Become a well-known brand among customers, employees, and in and to meet their expectations. the labour market. • Strengthen the company’s presence on existing markets and continue The quality of Cybercom’s proposition is closely tied to how customers to expand outside the Nordics. are treated and services are delivered. While project quality is signifi • Broaden the customer base; no individual customer will represent cant, Cybercom's employees and their knowledge, values, attitudes, and more than 15% of Group sales. behaviours constitute its number-one success factor. Cybercom must • Offshore and nearshore services will represent a larger portion of always be able to offer its customers commercially sound solutions. sales. So Cybercom continually develops its organisation to improve customer- • Annual staff turnover will not exceed 10%. related services.
Values Cybercom will achieve its established objectives by following a strat Satisfied customers egy focused on profitability and growth and by building a strong brand. • We understand that satisfied customers guarantee success. These main strategies drive its operation: • Be fast-paced and focus on strong growth markets. The company Personal motivation must expand its operation to cover more market segments and geo Cybercom . . . graphic markets via organic growth and strategic acquisitions. • Values a healthy, unpretentious workplace, characterised by trust, • Strong focus on profitability and growth – in that order. respect, professional pride, openness, and honesty. • Focus on customers that have strategic operational needs for IT and • Stands for job satisfaction, laughter, fun activities, and positive energy. expand in these areas: • Appreciates the balance between family and leisure time, customer – Portals and mobile solutions assignments and company activities – and the balance between hard – E-commerce and business support systems (BSS) work and good health. – Embedded systems • Encourages initiative and expects employees to take responsibility. • Reinforce our reputation and attraction among customers, employ • Believes in one company – one culture – one team. ees, and the labour market – via brand-boosting activities. • Form a decentralised Group organisation with short decision paths Profitability and global delivery capacity. Cybercom understands that only profitable companies: • Recruit the best employees with the right attitudes. • Survive in the long term • Focus on service through expertise, concepts, and methods, and • Grow create lasting value for customers via close, long-term partnerships. • Determine their own paths • Internally and externally act as one company – one culture – one team. Financial objectives Cybercom established these financial objectives: • 13% long-term earnings before interest and taxes (EBIT). • 15% organic growth, average per year over a business cycle.
4 2007 annual report / Introduction
History • 2003 Cybercom acquires Consafe Infotech and adopts a strong posi Cybercom was founded in March 1995; its basic concept was to create tion for telecom services in the Öresund region. In conjunction with an expert consultancy with the best consultants in the industry. Since the acquisition, the JCE Group and J. Christer Ericsson become major its start, Cybercom has focused on growth. This has occurred organically Cybercom shareholders. and through strategic acquisitions. Cybercom was listed on the O list • 2004 Cybercom reinforces its position in the telecom market and in of the Stockholm Stock Exchange (now the OMX Nordic Exchange) selected technologies. Among other things, the company is chosen as in 1999. a partner in SIMS, an EU research project, for development of mobile services and 3G applications. Important events • 2005 Cybercom acquires Netcom Consultants, which operates in • 1995 Cybercom is founded. telecom management. The acquisition gives Cybercom an office in • 1996 The Stockholm office opens. Its first customers include Telia. Singapore – and Millicom and Tele2, major international customers. • 1998 The company has more than 200 employees. • 2006 Cybercom starts a joint venture with Datamatics Ltd in Mumbai, • 1999 Cybercom works on mobile services. The company is quoted India. Cybercom phases out its operation in Norway in December on the O list of the Stockholm Stock Exchange (now the OMX Nordic 2006. Exchange) in December 1999. • 2007 Cybercom acquires Varchar, a Swedish IT consultancy, in Janu • 2000 Cybercom focuses on services aimed at the telecom and ary, which brings key customers in new market segments to Cyber finance sectors. com. Cybercom acquires auSystems’ operations in Denmark, Poland, • 2001 Cybercom establishes operations in Denmark concentrating and Sweden from Teleca in May. The auSystems acquisition more on e-business solutions. The company has 300 employees. than doubles Cybercom’s sales and staff. See the "Acquisitions and • 2002 Cybercom establishes a presence in the UK by acquiring disposals" section for more information on this deal. Patrik Boman Stratum Project Management with operations in financial solutions takes over as CEO of the company in May. Cybercom signs an agree and Reuters as its largest customer. Global application management ment to acquire Plenware, a Finnish IT consultancy with about 550 responsibility for Sony Ericsson’s portal is granted. employees and operations in China, Estonia, Finland, and Romania – in December.
Cybercom’s strategic position
Profit
Specialist Sector leader The model shows that Cybercom 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 too big to be a niche player but is too small to be a sector leader. Today, Cybercom's core areas position the company either as a sector leader or as a strong niche player.
Market share
Resource consulting
5 2007 annual report / Director’s report
Director’s report
The board and CEO of Cybercom Group Europe AB (publ), cor porate ID 556544-6522, hereby submit their annual report for the 1 January 2007 – 31 December 2007 period.
This financial presentation covers: • Director’s report • Income statement, Group and parent company • Changes in equity • Balance sheet, Group and parent company • Cash flow statement • Notes to the statements
All amounts are recognised in SEK thousands, unless otherwise specified. Numbers enclosed in parentheses/brackets refer to the previous year.
6 2007 annual report / Director’s report
2007 operations
Cybercom's proposition covers three main areas. Robust expansion Strong growth and robust expansion characterised 2007. Cybercom Portals and mobile solutions completed three acquisitions that strengthened the company by broad Cybercom provides portal and mobile solutions that help customers ening its customer base and increasing its geographical coverage. create new digital services and propositions that are provided through the Internet or mobile devices. Cybercom runs and develops portals Varchar acquisition for several international enterprises. Modern web portals are becoming In January 2007, Cybercom acquired Varchar, the IT consultancy with increasingly business critical for enabling companies to reach and com operations in the Öresund region. The acquisition gives Cybercom municate with their customers worldwide – 24/7. Often, well-functioning access to valuable .Net expertise and new customer possibilities in portals are cost effective for companies because customer services are the region. directly implemented or managed by portal visitors. auSystems acquisition in Denmark, Poland, E-commerce and BSS and Sweden Cybercom offers a range of services that covers the entire e-commerce Cybercom acquired auSystems' operations in Denmark, Poland, and business process. Cybercom has an important partnership with IBM Sweden in May 2007. The acquisition strengthened Cybercom’s position (among others) and has sought-after competence in IBM’s e-commerce in Sweden and added a nearshore operation in Poland. suite. Plenware Oy acquisition Cybercom has considerable experience in billing for BSS and often In December 2007, Cybercom signed an agreement to acquire Plenware, functions as a partner of product suppliers during a product's integration a Finnish IT consultancy with operations in China, Estonia, Finland, and into a customer's system. Romania. The acquisition broadened Cybercom's customer base and included important capabilities with Mobile Linux, among others. Embedded systems Cybercom creates technical solutions and develops software for mobile The acquisitions are part of Cybercom’s growth strategy, and the in devices. The company develops applications for customers inside and creased delivery capacity of the new Group enables it to undertake outside the telecom sector, including applications for transaction cards, larger customer projects. The deals bring in expertise, primarily in electronic locks, and systems for emergency services and monitor landline and mobile networks and embedded systems. Cybercom and ing. The company has extensive experience working with customers the acquired operations form a leading Nordic consultancy in telecom, throughout the value chain, from technology suppliers to OEMs. Internet, and media (TIM).
Frame agreements Frame agreements with customers are business critical. This applies to the sector as a whole, because customers tend to procure increasingly
Cybercom's revenue by industry
TelecomTelekom 56% 58% Most of Cybercom’s revenue comes from telecom, although its O entlig sektor 11% customer base expands continuously to enable spin-off deals State & municipal 14% Fordon 7% in its specialist expertise areas. AutomotiveBank & nans 7% 4% BankingHandel & 6% finance 6% Industri 4% Retail 5% Försvar 3% IndustryÖvrigt 7%3% Defence 1%
Other 8%
7 2007 annual report / Director’s report
large volumes from a smaller number of suppliers. Cybercom has frame • During the summer, Telenor launched the mobil.telenor.se portal that agreements/master contracts with all major customers. offers services for its customers and operators’ customers. The portal is the result of a successful partnership between Telenor and Cyber Cybercom’s major customers at Group level include: com, which created the technical solution. • AB Volvo • A world telecom leader showed its trust in Cybercom for mobile plat • Alma Media form testing. The assignment is an extension of an earlier contract • AMS, the Swedish National Labour Market Board and engages many consultants for about one year. New mobile plat • Assa Abloy form technologies mean increased complexity, which requires top- • Ericsson quality test management. • John Deere • Cybercom and Microsoft developed a secure login solution using • Kone e-authentication for Microsoft-based networks. Microsoft’s Internet • Millicom Security and Acceleration (ISA) Server and Cybercom’s Trusted • Nokia Mobile Phones Security Server form the foundation for the solution, which is called • Nokia Siemens Networks Microsoft Authentication Broker. • Pentland Brands • Cybercom signed a new frame agreement with a leading global ve • PFA Pension hicle manufacturer for hardware and software development, system • Reuters development, simulation and testing, and project management. The • Saab three-year contract has an extension option. • Sandvik • Using Bluetooth technology, Cybercom developed a wireless com • Sony Ericsson munication module for Eltrac, an electronics excellence centre in the • Tele2 Iveco Group. The module enables wireless communication between • Telenor vehicles and diagnostic computers used during workshop repair • TeliaSonera operations. • Cybercom decided to open an office in Dubai in early 2008. Cyber Broadening the customer base com is now working on several assignments in the region, so it is a Most of Cybercom’s revenue continues to come from telecom, and natural next step to establish an office to provide the best possible its customer base is continually expanding. Acquisition of Varchar, service to customers and to recruit new employees. auSystems, and Plenware broadened Cybercom’s customer base, and • One of Cybercom’s international customers placed an order worth no individual customer represents more than 15% of Group sales. about SEK 38 million. The contract is for one year with an option to extend. Other events in 2007 • Cybercom was commissioned to quality assure Bluetooth® solutions • Sweden's Meteorological and Hydrological Institute named Cybercom for Volvo Car’s model programme. as its future IT service supplier. The parties signed a frame agree • Cybercom received its single largest order in its history from a lead ment that runs until 30 June 2009. ing mobile device manufacturer. The order, worth SEK 80 million, is • In March, Cybercom presented its dynamic annual report (AR) for for mobile services development, a business-critical part of the cus 2006. The report is developed specifically for the web, with functional tomer's operation; the order covers a 15-month period with possible ity adapted for this medium. The AR is no longer published in print. extension. • Cybercom signed contracts (valid until 2010) with the Örebro and • Cybercom signed a new frame agreement with the Stockholm County Kumla municipalities. The contracts cover integration of electronic Council. The contract covers consulting services in IT control, opera document and case management for streamlining administration and tions development, informatics, system development and administra increasing service in municipality portals for citizens and authori tion, infrastructure and operation plus information security. The 2-year ties. Örebro and Kumla are members of Sambruk - an association contract has an option for extension. that brings municipalities together over issues such as selection of • The Swedish National Defence College signed a contract with Cyber e-services. com for integration of an electronic document and case management • Cybercom signed a frame agreement as one of OMX's five preferred system. suppliers. The two-year contract covers consulting services for project management, system development, and testing. • Cybercom signed a partnership agreement with UIQ Technology, which offers leading mobile platform products based on Symbian OS – one of Cybercom’s areas of expertise.
8 2007 annual report / Director’s report
Sales and profit
Sales for 2007 totalled SEK 1,165.0 million (535.8), a 117% rise Liquidity and cash flow in revenue compared to 2006. Newly acquired companies On 31 December 2007, the Group’s cash and cash equivalents stood accounted for 105%, and Cybercom reported 12% organic at SEK 82.0 million, compared to SEK 88.9 million on 31 December growth. The revenue rise is due to the higher number of 2006. During the period, cash flow before changes in working capital employees. The percentage of subcontractors continued to be amounted to SEK 105.7 million. Working capital fell by SEK 41.2 million high during the period, because recruitment could not keep during the period, so cash flow from operating activities totalled up with demand. SEK 64.5 million (34.4).
Operating profit rose 123% compared to the same period in 2006 and Financial position reached SEK 113.7 million (50.9). This corresponds to a 9.8% operating Equity on 31 December 2007 was SEK 708.4 million (272.4), yielding margin improvement (9.5%). a 51.0% equity/assets ratio (66.3%). Equity per share amounted to SEK 31.65 (22.11). In the preliminary analysis of the auSystems acquisition, the entire sur- plus value was allocated to goodwill. Per IFRS, a final acquisition analy- A new share issue with rights for the company’s shareholders was com- sis was drawn up, in which SEK 56.1 million was reallocated to amortis- pleted during the autumn. The issue injected about SEK 368 million into able customer relationships. So EBIT comprises amortisation totalling the company before issue expenses. The issue was oversubscribed. SEK 3.7 million (0.4) of acquired intangible assets (customer relation- Due to the new share issue, the number of shares in Cybercom rose by ships), of which SEK 0.9 million and SEK 1.4 million have a retroactive 9,948,605. The company’s share capital totalled SEK 22,384,362, dis- impact on Q2 and Q3, respectively, and SEK 1.4 million on Q4. tributed over 22,384,362 shares after implementation of the share issue.
Net financial items stood at a negative SEK 21.6 million (-0.8); this figure Events after year-end includes SEK 20.4 million in interest expenses for the loan used for the On 4 January 2008, Cybercom announced that Per Norén is resigning auSystems acquisition. Profit after net financial items was SEK 92.1 mil- of his own volition from the board due to an assignment and move to lion (50.1), yielding a 7.9% profit margin (9.4%). the US.
Investments On 23 January, Cybercom held an extraordinary general meeting, which Net investments in property, plant, and equipment during 2007 reached approved the Plenware Oy acquisition. SEK 8.2 million (4.4). Net investments in intangible non-current assets totalled SEK 0.9 million (1.5). On 29 January, the company announced that it had signed a new frame agreement with a leading telecom company as a global supplier for IT consulting services in 2008 and 2009. The agreement meets the cus- tomer’s needs for development and management of applications and IT solutions.
Sales per quarter EBIT per quarter Profit/loss per quarter
MSEKSEK million MSEKSEK million MSEKSEK million 400 50 35
350 30 40 300 25 250 30 20 200 15 150 20 10 100 10 50 5 0 0 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2004 2006 2004 2006 2004 2006 2005 2007 2005 2007 2005 2007
9 2007 annual report / Director’s report
Market
According to the European Information Technology Observa- ment agencies, demand for skilled computer programmers increased tory (EITO 2007), the ICT market in Europe amounted to and soon a new type of company emerged – the IT consultancy. EUR 680 billion in 2006. The market is broken down into vari- ous products and services as shown in the next diagram. Current trends The market situation for consulting companies in the IT and telecom The IT services market looks like this: sectors has been favourable in recent years. The market has been • Professional services – consulting services and services within imple very active and characterised by robust growth that generates strong mentation and application management. demand for Cybercom’s services. Cybercom’s growth has been strong • Support services – maintenance and service for hardware, software, est in the expanding Öresund region, where the company has offices in and network products. Copenhagen, Lund, and Malmö. Cybercom also held its own in Stock holm in 2007, despite tough competition. Cybercom operates within the IT services market and predominantly provides professional services. Following is a description of some trends that Cybercom management believes will affect the IT services market going forward. European IT services market EITO 2007 estimates the size of the European IT services market at Large investments in telecom EUR 140 billion for 2006. Between 2006 and 2008, EITO 2007 expects Telecom industry players continue to invest, aiming to expand and take 5.4% annual real growth, and the size of the market is expected to reach market shares. This leads to favourable market conditions for telecom EUR 156 billion in 2008. and IT consulting companies. International telecom operators invest in network expansion and development of services, along with expansion Swedish IT services market in new geographic markets. In the Nordics, telecom operators are more EITO 2007 estimates the size of the Swedish IT services market at focused on optimising existing systems than on new construction. EUR 5.2 billion for 2006. Between 2006 and 2008, EITO 2007 expects 5.1% annual real growth, and the size of the market is expected to reach A few large companies that have frame agreements with several select EUR 5.8 billion in 2008. The Swedish market for professional services ed consultancies dominate the telecom market. Size, niche propositions, amounted to EUR 3.8 billion in 2006 and is expected to have 5.5% real and an international presence are increasingly key factors for consulting growth annually through 2008 to a value of EUR 4.2 billion. companies.
Trends – historic development Telecom, Internet and media converge The end of the 1940s brought the first generation of computers, devel The market for telecom, Internet, and media is changing. Reduced call oped in university laboratories around the world. Another leap forward ing rates have forced operators to find alternative revenue streams. was taken at the end of the 1950s with the advent of integrated circuits. Together with more sophisticated technology, the result is the conver As the computer became more common with companies and govern gence of telephony, broadband, and TV with new types of content and
Market ICT European market 2006
Teletjänster 44% IT-tjänster 21% Telecom services 44% Datorhårdvara 12% Mobile phone users IT Mjukservicesvara 21% 11% System suppliers HardwareDatakommunikations- 12% Users: och nätverkshårdvara 6% Cybercom Content providers − Companies Software 11% − Individuals Kommunikations- Service providers − Organisations Datautrustning communications för & − Virtual network hardware 6% Network owners operations slutanvändare 4% Communications equipment − Mobile network Kontorsutrustning 1% for end users 4% − Landline network Office equipment 1%
10 2007 annual report / Director’s report
services. For example, recently the market for music in mobile phones 2008 and beyond has expanded quickly. TV through mobile telephones is also advancing, Technical paradigm shifts have driven changes in the IT sector in recent assisted by development of the DVB-H technology that adapts digital TV decades. The sector is now expected to enter a mature phase, and the for mobile phones. service sector is expected to become more affected by economy-driven fluctuations. Development of content and technology parallels an increase in the number of market players. Today the combination of telephony, broad Mobile communication represents the most growth in the industry and band, and TV are delivered by traditional telecom operators, by content- is expected to rise by more than 10% per year through year-end 2010. producing media companies such as Alma Media, MTG, and Schibsted, Growth will primarily come through large investments in the mobile net and by network owners like Com Hem, Teracom, and Vattenfall. works of Asia, the Middle East, Africa, and Russia. The 3G network in Europe will also continue to expand gradually. Customers demand nearshore and offshore capacity Operators’ revenues will gradually move from voice traffic and SMS to Today’s customers require suppliers with global capacity and 24/7 avail other sources. This is due to several factors: ability. Customers want better service and efficiency, but, above all, • Quickly reduced calling costs, causing operators to expand their competitive prices. The trend shows that companies primarily choose offerings. outsourcing for mature, standardised development and administration • More complex mobile phones with space for more services. processes. This changes the role of Swedish and western European • Content providers, such as the music industry and news agencies, consultancies. They find it difficult to offer standard services at competi gain influence over operator’s service offerings. tive prices. Instead, they focus on profitable specialist assignments and turnkey projects. The ongoing merger of telephony, broadband, and TV, called triple play, will include mobile telephony. The combined proposition of communica Available capabilities on the labour market tion, entertainment, and services will become wireless – i.e., quadplay The IT and telecom labour market is highly mobile and highly competi or quadruple play. New media is creating a new market. tive. It is widely believed that there is now a shortage of qualified labour on the Swedish market. Some companies are finding it difficult to recruit Demand for IT services is increasing in all parts of society and the posi and retain qualified employees. tive market outlook, based on a good economic climate, is expected to continue during 2008. Cybercom’s competitors Cybercom has various competitors in various fields and geographic mar With the auSystems and Plenware acquisitions, Cybercom forms a new kets. The company’s primary competitors are: leading consultancy within the telecom, Internet, and media (TIM) sec • Accenture – a global giant with 175,000 employees. Listed on the tor. The new company gains a stronger brand and delivery capacity that New York Stock Exchange. is attractive in large projects for local and global players. • Capgemini – A leading consultancy in Europe with 83,000 employees. Listed on Euronext. Cybercom is making no forecasts. • HiQ – a local Scandinavian company with 1,000 employees. Listed on OMX Nordic Exchange. • InCode – An American consultancy focused on telecom. Owned by the publicly traded VeriSign. • Logica CMG – British consultancy that purchased WM-data. Has 40,000 employees, including 9,000 in Scandinavia. Listed on the Lon don Stock Exchange. • Sigma – a Scandinavian player with 1,400 employees. Listed on OMX Nordic Exchange. • TietoEnator – largest in Scandinavia. A Swedish-Finnish consultancy with 16,000 employees. Listed on OMX Nordic Exchange.
Competitors also include many specialised consulting companies that operate on the international telecom market.
11 2007 annual report / Director’s report
Cybercom’s areas of operation
Cybercom develops services, applications, systems, products, a product supplier partner when integrating the product with customers' and software on behalf of its customers worldwide. The com- systems. Cybercom has extensive experience in billing for BSS. Telia pany runs turnkey projects, manages applications, and offers Sonera and Tele2 are key customers. Cybercom aims to broaden its services such as consulting, testing, and development using BSS and billing customer base beyond telecom, the dominant sector. leading technologies. Embedded systems Cybercom can deliver services globally – onshore, nearshore, or off Cybercom creates technical solutions and develops software for mobile shore. Operations are divided into these areas: portals and mobile solu phones. This area of operation is typified by intensive competition and tions, e-commerce and BSS, and embedded systems. requirements for rapid product development. Cybercom conducts these business-critical assignments mainly for Ericsson, Nokia, and Sony Portals and mobile solutions Ericsson. Cybercom provides portal and mobile solutions that help customers create new digital services and propositions that are provided through Cybercom helps various terminal manufacturers worldwide develop the Internet or mobile devices. Several new players are interested in innovative solutions that contain mobile and wireless technologies of the delivering content services to mobile phones, and a new market is be future. Cybercom combines terminal design with expertise in wireless ing created. This trend benefits Cybercom, which has solid experience technology and multimedia, such as Bluetooth®, UMTS, HSDPA, Wi-Fi, and extensive expertise in the area. Cybercom also runs and develops UWB, DVB-H, and ZigBee™. The company develops applications for portals for several international enterprises. These portals are becoming customers inside and outside the telecom sector, including applications increasingly important for companies to reach and communicate with for transaction cards, electronic locks, and systems for emergency ser customers, round the clock, worldwide. Customers include Sony Erics vices and monitoring. AB Volvo, ASSA ABLOY, and Saab are Cybercom’s son, AMS (the Swedish National Labour Market Board), ASSA ABLOY, primary customers in this area. and Reuters. Cybercom offers design services based on expertise in hardware and In portals, Cybercom received its first offshore project in 2006 when software design, from concept to production launch. The company has it signed a multi-year agreement with Sony Ericsson for application partnerships with several manufacturers and can manage the entire responsibility, development, and testing of Sony Ericsson’s external design process, from requirement specifications to production. Cyber web sites and related functions. Cybercom’s commitment includes daily com's expertise mainly comprises software design and some hardware management and participation in important development and testing design. The company carries out certification and qualification processes projects. In 2007, the company had many offshore assignments, for per most industry standards. example, from Nordnet and Pentland Brands. Cybercom plays a co-ordinating role in standardisation for the Open Mo E-commerce and BSS bile Services Interface Forum, within device management. The purpose Cybercom offers a range of services that covers the entire e-commerce of this effort is to create a common standard for all mobile telephone business process. This market displays robust growth in all segments. manufacturers when updating mobile telephone software. New or improved e-commerce solutions are in demand as Cybercom’s customers focus on gaining market share. Cybercom has an important The automotive industry is another prioritised market for Cybercom. The partnership with IBM and has sought-after competence in IBM’s e-com company has extensive experience working with customers throughout merce suite. This co-operative venture has led to new, interesting cus the value chain, from technology suppliers to OEMs, and has developed tomers, primarily in the UK. The assignments are mainly with customers genuine industry expertise. Because Cybercom focuses on telecom, in industry, telecom, and retailing. various types of communication solutions for the automotive industry are one of its core capabilities. For example, it developed Bluetooth®-based The BSS area is becoming more standardised and module-based, al applications for more than 20 national and international automotive- though customer adaptations are always made. Cybercom often acts as industry customers. Cybercom participates actively in the Bluetooth® SIG, in which it works to standardise new profiles and protocols for other application areas.
Sales per assignment Application management (AM), project and Helhetsåtaganden projekt och AM 42% consulting services Turnkey projects & AM, 42% Konsulttjänster 58% Developing and managing IT projects takes a lot of time and money. Consulting services, 58% To stay within budget, it is important to maintain cost control. Cybercom offers application management (AM), a service that guarantees high quality and service levels at a fixed price.
12 2007 annual report / Director’s report
With AM, Cybercom takes on maintenance and development of already Selected technologies operational IT systems. This can include customised and third-party Access to the latest technologies enables Cybercom to help customers applications. The concept clarifies responsibilities, activities, and costs benefit from new business opportunities. Thanks to extensive techno related to support, development, and operation of a system or an ap logical expertise, Cybercom specialises in serving leading enterprises plication. that are on the cutting edge of technology.
Cybercom’s AM concept focuses on key business processes required The ability to balance technology’s cutting edge and commercial fea for maximum use of an application – from business development and sibility requires a combination of technical know-how and thorough management to technical support. The method is structured and en understanding of customers’ business operations. Expertise in support ables contracted service levels and accurate cost forecasting. ing technologies forms the foundation for selecting, implementing, and developing the best solutions. We specialise in solutions based on these One or more service-level agreements drive AM services. Cybercom’s technologies: Java, .Net, WebSphere, Oracle, J2EE, and Akamai. management team, together with customer and supplier representa tives, regularly follow up on AM services. Consultants also need to understand customers’ operations so that they can contribute their expertise and function as discussion partners. We Cybercom runs large AM projects for its major international customers. understand the entire process – from A to Z. And we’re experts in tech nology. Bestshore Cybercom established a joint venture with Datamatics Ltd in India. This Our capabilities include: enables Cybercom to offer competitive offshore services. • Development languages – Java, C++, C, J2EE, EJB, PL/SQL, MS.NET, and CORBA The IT market is progressively becoming more global, and multina • Databases – Oracle, SQL Server, Sybase, and Informix tional companies hunt for partners that support their organisations with • Object databases – Versant outsourcing and global sourcing. Major projects inevitably raise the • Web design – HTML, various HTML tools question if they should stay local or move to less expensive countries • Data formats – XML nearshore or offshore. • Transaction processing systems – BEA WLE and Tuxedo • Application servers – WebLogic and WebSphere Primary key factors that weigh into the choice of partner include price, • Akamai efficiency, and technical expertise. During a 10-year period, Cybercom • Bluetooth® carefully evaluated its outsourcing experiences and created an offering that meets outsourcing needs. Cybercom has several outsourcing as Strategy and advisory services signments that involve business-critical applications for major customers. Cybercom provides expertise, advice, and services for telecom manage ment and networks. Cybercom offers bestshoring – a method for optimising outsourcing and for selecting the best onshore, nearshore, or offshore option. In best Our consultants and world-class telecom services enable international shoring, Cybercom’s project management works locally, close to cus customers to develop their businesses using the latest technologies. tomers, and creates and manages teams that carry out development, implementation, testing, and administration at customers' preferred Our consultants have customers worldwide – we work with telecoms, locations. For projects that demand daily flexibility, it is natural and most service providers, and content providers to develop their businesses by often cost efficient to be geographically close to customers. For projects taking advantage of new technologies. that have reached maturity and perhaps apply standardised processes, geographic presence is not as important, and implementation can be We maintain strong customer relationships by delivering the highest moved to another country if advantages outweigh disadvantages. quality consulting services, expertise on various telecom technologies, and in-depth knowledge of current and future trends. Depending on customers’ needs, Cybercom takes on various best shoring roles. Central aspects of bestshoring include 24/7 availability, Cybercom's strategy and advisory services are divided into these areas increased productivity, high quality, and cost savings, with focus on core of expertise: operations and business development. • Business applications • Network solutions Mature, standardised processes for the entire chain – from development • Technology and innovation and testing to administration and support. • Telecom management
Besides India, Cybercom offers management for these types of projects in China, Estonia, Poland, and Romania.
13 2007 annual report / Director’s report
Organisation
Cybercom’s operation is geographically divided into nine Cybercom India units plus the Group head office in Stockholm. The operative Cybercom India primarily operates in the telecom and finance sectors. organisation and distribution of employees are as follows: The unit is a joint venture with Datamatics Ltd. Cybercom owns 50%. Cybercom India works on assignment from other units within the Cyber Cybercom Sweden com Group. Its end customers include Nordnet, Pentland Brands, and Cybercom Sweden mainly provides services to the telecom and au Sony Ericsson. The company had 86 employees at the period's end. Of tomotive industries, plus the public sector with services in embedded these, half are included in Cybercom's employee count – 43 persons. systems, Bluetooth®, and wireless terminals. Cybercom provides com munication solutions for customers throughout the value chain, from Cybercom UK technology suppliers to OEMs. Major customers include AB Volvo, The UK operation concentrates on e-commerce solutions and financial ASSA ABLOY, BAE Systems, Ericsson, the National Tax Board of Swe information services primarily for Reuters. The unit also offers advice on den, OMX Group, Saab, SEB, Sony Ericsson, Stockholm Transport, the IT design and infrastructure. In the past year, the company has attracted Swedish National Labour Market Board, Tele2, Telenor, TeliaSonera, several new retail-sector customers, such as John Lewis, Pentland and Volvo Cars. The company has 1,051 employees. Brands, and Tomy. The company has 28 employees.
Cybercom Poland Cybercom Singapore Cybercom Poland works with selected technologies. Operations focus Cybercom Singapore mainly works in telecom, and Millicom is its most on local assignments in Poland and customer deliveries for sister com important customer. In 2007, Cybercom decided to open an office in panies in the Group. Major customers include Ericsson, Nokia Siemens, Dubai in early 2008. Cybercom is now working on several assignments and Telenor. The company has 91 employees. in the region, so it is a natural next step to establish an office to provide the best possible service to customers and recruit new employees. The Cybercom Denmark company has 19 employees. Cybercom’s Danish operation is primarily focused on technologies and a large proportion of its customers are in banking, telecom, and the public Partnerships sector. Some of its major customers include BEC, Nordea, PFA Pension, Cybercom's assignments are technology-intensive. The company main the Swedish National Labour Market Board, and TeliaSonera. The com tains close partnerships with leading software suppliers and actively pany has 45 employees. works with implementation of their products. Cybercom often partici pates in development of new solutions. The company's major partner ships include Akamai, BEA, IBM, Microsoft, Oracle, and Quest.
Cybercom's organisation in 2007
Cybercom Group Europe HQ
President and CEO: Patrik Boman Vice president: Peter Keller-Andreasen CFO: Per Jonsson Acting Communications manager: Patrik Anshelm 13 employees
Cybercom Cybercom Cybercom Cybercom Sweden East Sweden South Sweden West Sweden North
Malmö, Karlskrona, Göteborg, Huskvarna, Östersund, Sundsvall, Stockholm Lund Linköping Örnsköldsvik MD: Anders Franzén MD: Thomas Barge MD: Magnus Andersson MD: Joakim Ek
Cybercom Cybercom Cybercom Cybercom Cybercom Poland Denmark India UK Singapore
Warzawa, Lodz Köpenhamn Mumbai London Singapore MD: Mats Petersen MD: Karsten Adelmark MD: Per Pedersen MD: Terry Hunter MD: Conny Karlsson 91 employees 45 employees 43 (86) employees 28 employees 19 employees
14 2007 annual report / Director’s report
Business processes
Cybercom has three main processes in its operation: Customers • Business development – development of Cybercom’s services, solu Frame agreements with customers are very important to Cybercom. tions, and assignments. This also applies to the sector as a whole, because customers tend to • Sales – planning, sales, and customer relations. procure increasingly large volumes from a smaller number of suppliers. • Delivery – production and delivery of services, solutions, and assign Cybercom now has frame agreements with all major customers. ments to the customer, and follow-up and evaluation together with the customer. Cybercom’s account managers are responsible for their key accounts in all geographic markets in which the customer operates, because most Several supportive functions, such as PR, marketing, HR, IT, and ac customers in telecom operate in several countries. counting departments, supplement the main processes. Cybercom’s major customers at Group level include: The main processes and supporting functions have been developed so • AB Volvo that Cybercom can retain and use the knowledge and experience that • Alma Media the company continually develops. The results of development work are • AMS, the Swedish National Labour Market Board documented on an ongoing basis. • Assa Abloy • Ericsson Clear, user-friendly business processes boost the quality of analysis and • John Deere decision making, and facilitate knowledge transfer among individuals • Kone at Cybercom. And risk of losing important experience and knowledge if • Millicom employees leave the company is reduced. • Nokia Mobile Phones • Nokia Siemens Networks Business development • Pentland Brands Development of new product solutions normally takes 6–18 months • PFA Pension from concept to the finished, ready-to-use solution. Development ef • Reuters forts occur in close co-operation with customers, primarily in the areas • Saab of embedded systems, portals, and billing. Cybercom has gradually • Sandvik developed close relationships with its customers, and often, Cybercom • Sony Ericsson is a business-critical part of customers' development initiatives. Develop • Tele2 ment is mainly customer-specific, although a general product solution is • Telenor sometimes created that is suitable for many customers. • TeliaSonera
“Development efforts occur in close co-operation with customers.”
15 2007 annual report / Director’s report
Recruitment Cybercom continually conducts systematic work to protect data and Recruitment is one of the most critical factors required to ensure Cyber systems against judged threats. The company’s goal is to constantly com’s continued profitability and growth. The company concentrates on improve use of IT support in all processes. systematically identifying future capability needs with the aim of securing access to skilled staff. Brand Cybercom’s brand is primarily based on three basic documents: The Keeping key employees and attracting new ones is a strategic issue brand platform, the communication platform, and the graphic profile. The for Cybercom. The company has a broad recruitment base that also brand platform defines fundamental values of the Cybercom brand. The encompasses sectors outside IT and telecom. Cybercom’s co-operative communication platform defines how the brand is to be communicated ventures with universities and colleges in 2007 led to greater numbers of to its various target groups. And the graphic profile defines how the recently graduated consultants being recruited. brand’s visual identity should be perceived and controlled. The goal of Cybercom’s branding initiative is to focus on the company’s solutions Quality and their unique value, distinguish the company from its competitors, Cybercom complies with international quality standards, and most of stimulate positive brand associations and expectations, and contribute the company’s services and solutions comply with ISO 9001, the inter to a clear internal focus. national quality standard. One of the company’s most important quality objectives is security of delivery; Cybercom’s goal is to have 100% satis Financial reporting fied customers. With the aim of maintaining Cybercom’s international Cybercom conducts ongoing work on financial reporting and follow-up of competitive strength, it is of central significance that the company meets profitability. The aim is to assure correct evaluation of planned and im customers’ requirements for service, quality, and precision. plemented measures. Financial reporting is based on the annual budget, which is followed up monthly. Ongoing reporting provides a sound foun Environment dation for the quarterly forecasts that are made. Cybercom’s operation has low environmental impact, which is mainly at tributable to consumption of office materials and disposal of computers. R&D The company requires that (1) its suppliers of office materials and com Cybercom is an experienced outsourcing partner for many European puters comply with TCO 95 and TCO 99, environmental standards, and customers. The company works in all product life-cycle phases. It fo that (2) all material can be recycled. Cybercom takes part in Folksam’s cuses on technology-driven business areas and customers' entire value annual Climate Index for listed companies; in 2007 Cybercom received chains. Cybercom's services cover full staffing and equipping of R&D a high ranking for its climate work. departments as well as opportunities for hosting some online services.
IT Operation and change procedures are well-documented in the com pany’s information security policy and in the business support system.
The Cybercom model
The Cybercom model provides a general over- System development view of company methodology – from concept System architecture Integration to implementation and customer delivery.
Project mgmt Test Adaption
Investigations Strategies Problem mgmt Revision Configurations mgmt Support Project mgmt Change mgmt Procurement Information mgmt End user mgmt Decision Strategy
0.5–1 yr 0.5–1.5 yr 8–10 yr
16 2007 annual report / Director’s report
Employees
2007 employee data Cybercom runs several skills development programmes, in which man • Average number of employees: 932 (414) agers and employees can work on competence and development in a • Total number of employees on 31 December: 1,290 (481) structured way. The company defines competence requirements that are • Of all employees, 19% were women and 81%, men (21/79) measurable; fulfilment of these requirements forms the basis for deter • Level of education: 86% have academic credentials (91) mination of salaries and other benefits. • Costs for external training: SEK 7,166,000 (2,056,000) • Average age: 36 years (35) Recruitment • Average number of years in the sector: 10 years (10) Recruitment is one of the most critical factors required to ensure Cyber • Value-added per employee: SEK 782,000 (851,000) com’s continued profitability and growth. The company concentrates on • Personnel costs: SEK 666.6 million (319.4) systematically identifying its future skills needs with the aim of securing access to skilled staff. Professional training and development Professional training and development constitute one of the most critical Keeping key employees and attracting new ones is a strategic issue factors for ensuring Cybercom’s continued profitability and growth. The for Cybercom. The company has a broad recruitment base that also staff’s skills are enhanced through external courses, in skills groups, and encompasses sectors outside IT and telecom. Cybercom’s co-operative in customer projects. Alongside clear-cut skills development, seminars ventures with universities and colleges in 2007 led to greater numbers of are held that highlight the corporate culture and employees' technical recently graduated consultants being recruited. interests in the company.
Years of employment Gender distribution
< 1< year 1 år 26% 26% WomenKvinnor 19% 19% 1-3 år 34% Män 81% 1–3 years 34% Men 81% 3-5 år 6% 3–55-7 years år 14% 6% 5–7>7 years år 20% 14%
> 7 years 20%
Professional development years Professional development education of industry experience Doktor 1% Ph.D. 1% << 1 1year år 7% 7% Civilingenjör 8% 1-5 år 29% EngineeringSystemvetare degree 13% 8% 1–5 years 29% 5-10 år 27% SystemsAnnan analyst teknisk 13% akademisk utbildning 11% 5–10 years 27% 10-15 16% Akademisk utbildning 53% Other technical (college) 11% 10–1515-20 years 9% 16% Övrig eftergymnasial utbildning 7% College/university 53% > 20 år 12% Gymnasial utbildning 7% 15–20 years 9% Other post-secondary 7% > 20 years 12%
Upper secondary 7%
Age distribution
< 25< 25years år 6% 6%
26–3026-30 years år 25% 25% 31-35 år 23% 31–35 years 23 % 36-40 år 18% 36–4041-45 years år 15% 18%
41–45> 46 years år 13% 15%
> 46 years 13% 17 2007 annual report / Director’s report
Salary setting policy for the CEO and tion must be definitely tied to financial objectives. The CEO's variable other executives pay may not exceed 30% of the fixed salary. For other executives, vari Guidelines for Cybercom's CEO and other executives apply to 13 per able pay is set in relation to base salary and type of objective. Variable sons and did not change significantly since the last annual report. pay has a ceiling for each person. Variable pay is reviewed annually.
The purpose of salary and remuneration guidelines for executives is to Pension and other benefits ensure that Cybercom offers market rates – to enable recruitment and Cybercom's pension policy is described in note 32. Cybercom's current retention of persons with the highest competence possible within the pension solutions consists of the ITP plan and a complementary pre Group. Remuneration consists of fixed salary, variable pay, pension, and mium schedule. Local rules apply to persons outside Sweden. other benefits. Refer to note 32 regarding right to severance pay. Fixed salary These factors must be accounted for when setting each executive's Other benefits for executives must be provided per local practice. Total fixed salary: areas of responsibility, experience, and achieved results. value of these benefits, in relation to total remuneration, must be of limit Fixed salaries are reviewed annually. ed value and equivalent to normal market terms and conditions.
Variable pay The board may make exceptions to these guidelines if, in an individual Variable pay must be maximised, related to the fixed salary, and based case, there is reason to do so. on outcome in relation to established objectives of which the main por
18 2007 annual report / Director’s report
The share
On 1 December 1999, Cybercom’s share was quoted on the Shareholders Stockholm stock exchange (now OMX Nordic Exchange, At year-end there were 3,191 (2,863) registered shareholders, of whom Stockholm. During 2007, Cybercom implemented a prefer- 60% (71) owned 500 or fewer shares. ential rights issue for which 5 existing shares gave share holders the right to 4 new shares, adjusted for the share price Swedish institutional shareholders owned 76.8% (70.2); Swedish private of SEK 58 on 29 December 2007 (76% increase). The share is shareholders, 12.6% (18.1); and company executives, 1.0% (0.7). traded under the CYBE designation. A round lot consists of 200 shares. Foreign shareholders owned 9.6% (11.7), of whom 9.4% were institu tional and 0.2% private shareholders. Share capital Due to the share issue, on 31 December 2007, Cybercom’s share Authorising the board to buy back capital rose during the year to SEK 22.4 million (12.3), distributed over Cybercom shares 22,384,362 shares (12,321,757). All shareholders have equal right The 2007 AGM participants authorised the board – on one or more to a share of the company’s assets and profits. The share’s quotient occasions in the period until the next AGM – to decide on (1) increasing value is 1. Cybercom's share capital via new issues of at most 12,500,000 shares and (2) buying back shares that correspond to a maximum of 10% of In early 2007, there were 115,000 outstanding warrants, comparable Cybercom’s share capital. The board did not exercise its mandate to to the same number of shares. Of these 115,000 warrants, 114,000 buy back shares during the year. were exercised during the year, and 1,000 were not exercised and ex pired. In addition to these, at the start of 2007, Cybercom had 85,000 Dividend policy custodial warrants that were not exercised during the year. There were The board intends to secure Cybercom’s growth. The Group’s invest no outstanding warrants at year-end. ment needs and financial position will always be considered before dividend-related decisions are made. The board proposes to the AGM Share price trend and sales that no dividend be issued for the 2007 financial year. In 2007, Cybercom’s share price rose 76% – a considerable increase compared to OMX Stockholm IT Services (which includes Cybercom’s share), which fell 19% during the same period. OMX Stockholm All- Share (the exchange’s general index) also fell in 2007 but not as much – only 6%.
At year-end, Cybercom’s share was worth SEK 58. Its highest price during the year was SEK 67.00 (11 October) and its lowest was SEK 31.42 (5 January and 10 January, rate adjusted for share issue).
At year-end 2007, Cybercom’s market value was SEK 1,298 million (505). In 2007, 12,926,852 (8,336,018) shares were traded, which is equivalent to a value of SEK 723 million (300). On average, 51,707 shares (33,613) were traded each day, which translates to SEK 2.9 million (1.2) per trading day. During the year, 13,304 Cybercom share transactions (6,215) were completed. The annual turnover rate was 84% (67.6).
19 2007 annual report / Director’s report
The Cybercom share Ownership
SEK Thousands Institutions,Svenska institutioner Swedish: 76.8% 76,8% 80 3,000 Svenska privatpersoner 12,6% Private owners, Swedish: 12.6% 60 2,250 Utländska institutioner 9,4% Institutions,Ledande befattningshavare foreign: 9.4% 1% 40 1,500 Executives:Utländska 1.0%privatpersoner 0,2% 20 750 Private owners, foreign: 0.2% 0 0 2003 2004 2005 2006 2007 Cybercom Shares traded in thousand, OMX Stockholm IT Services including post-notification OMX Stockholm All Share © FINDATA
Major shareholders on 28 December 2007 Shareholder structure
No. of Holdings, Total holdings/ No. of share No. of Holdings, Market value, Name shares (%) owner holders shares (%) SEK thousand JCE Group AB 9,260,922 41.37 1 – 500 1,920 320,633 1.43 18,597 501 – 1,000 524 433,143 1.94 25,122 Skandia Liv 2,630,600 11.75 1,001 – 5,000 545 1,312,747 5.86 76,139 Swedbank Robur Småbolagsfond Norden 582,000 2.60 5,001 – 10,000 99 698,505 3.12 40,513 Didner & Gerge Aktiefond 565,480 2.53 10,001 – 15,000 22 284,617 1.27 16,508 Swedbank Robur Småbolagsfond Sverige 500,600 2.24 15,001 – 20,000 23 407,970 1.82 23,662 Handelsbankens Småbolagsfond 452,670 2.02 20,001 – 58 18,926 747 84.55 1,097,751 Total 3,191 22,384 362 100.00 1,298,292 Carnegie Småbolag 451,000 2.01
Goldman Sachs International 362,611 1.62
Andra AP-Fonden 361,192 1.61
Banque Carnegie Luxembourg (Funds) 325,000 1.45
Nordnet pensionsförsäkring AB 210,138 0.94
Kungliga vetenskapsakademien 210,000 0.94
Nordea Nordic equity hedge fund 170,860 0.76
Svenska kyrkan 166,680 0.74
Länsförsäkringar småbolagsfond 164,000 0.73
Banque Carnegie Luxembourg 159,100 0.71
JP Morgan Bank 131,300 0.59
SSB CL Omnibus AC 120,000 0.54
Thuresson, Wigon 117,900 0.53
Törnquist, Peter G 112,905 0.50
20 2007 annual report / Director’s report
Risk management
Risks to operations Key people Business cycle sensitivity Several key executives are crucial to Cybercom’s business. They con The state of the global economy affects general demand for IT services. tribute advanced expertise and extensive experience, which are impor A weak economy in Sweden or internationally may result in lower-than- tant to Cybercom’s development. One or more of these key employees expected market growth for IT services. So, a weak economic trend may leaving Cybercom could be detrimental to the company’s operation and negatively affect Cybercom’s sales and profits. profits.
Customer focus Contractual relationships In 2007 Cybercom had about 120 active customers; about 50 generated As mentioned, Cybercom has frame agreements with all its major revenue for Cybercom of more than SEK 1 million each. Cybercom now customers, but most agreements lack volume commitments and have has frame agreements (master contracts) in all major business relation relatively short terms of notice. Some of Cybercom’s contractual rela ships. Although Cybercom’s customer base is well diversified, a situation tionships are not formalised in written agreements. In customer relation in which several major customers terminate their frame agreements ships Cybercom sometimes relies on customary practice between the or stop or partially reduce their purchases from Cybercom cannot be parties. The content of such agreements may be difficult to clarify if the ruled out. The number of and sales from telecom customers represent parties disagree on it, which in the worst case may lead to deterioration a significant proportion of Cybercom’s total customers and sales. If the of relationships and costly disputes. above events occur, then Cybercom cannot guarantee that it will be able to establish new customer relationships to the same extent, which may This could negatively affect the company’s operation, profits, and finan adversely affect sales and profits. cial position.
Competitors Staff costs Cybercom offers business-critical solutions, mainly in telecom and se Salaries, other remuneration, and social costs form Cybercom’s largest lected technologies. Competition is strong in this market. High market single cost item. Pay rises following overheating in the IT consultant volatility means that players, offerings, and pricing models constantly market in Sweden and in the countries where Cybercom has subsidiar change. It is very important for a company to establish a niche and posi ies may lead to weakened Group profits. tion itself in relation to other players to create its own customer base. Loss carry-forwards Some competitors have larger financial and industrial resources than Several of Cybercom’s subsidiaries have previous losses that may be Cybercom, enabling them to influence pricing in the market. It cannot used in certain circumstances to offset profits in other Group compa be ruled out that greater competition may lead to less market share and nies – above all several of the companies acquired from auSystems profitability for Cybercom. AB in April 2007. There are limitations in the rules for use of loss carry- forwards, such as for recently acquired companies. This may prevent or Integration restrict use of previous losses in Cybercom’s subsidiaries. The auSystems and Plenware acquisitions entail integration of previ ously independent operations that partly competed in the same market. Legal disputes Difficulties in combining the operations include the necessity of keeping Currently, the company is not involved in any legal disputes. There is a staff, and co-ordinating geographically widespread operations, systems, risk of Cybercom becoming involved in such disputes in the future, and and facilities from operational, financial, and legal perspectives. Along a negative outcome for Cybercom in one or more of them could ad side daily operations, Cybercom’s management will devote considerable versely affect Cybercom’s operation and financial position. attention and time to the integration. Possible integration-related delays or difficulties may negatively affect Cybercom’s operation, profitability, Owner with considerable influence and financial position. JCE Group AB owns a substantial proportion of all outstanding shares. This shareholder has the option of exercising considerable influence on Recruitment and skills matters that require the approval of shareholders, including appointment Cybercom’s operation depends on the motivation and skills of its em and removal of board members; any proposals for mergers, consolida ployees. Qualified consultants are a prerequisite for successfully im tion, or sale of all or the main part of Cybercom’s assets; and other plementing customer projects and satisfying customers. In recruitment, company transactions. This concentration of ownership could limit other Cybercom sets high requirements on skills and experience and works shareholders’ opportunities to exert influence. actively to secure the future level of staff expertise. In some periods, there may be a labour shortage and Cybercom may face recruitment difficulties. If the company fails to recruit and keep qualified consultants, this may adversely affect its operation, profits, and financial position.
21 2007 annual report / Director’s report
Sensitivity analysis Financing risk This summary shows the effect on operating profit/loss of a 1% change Financing risk is defined as the risk of it being difficult and/or expensive in certain factors, calculated on the 2007 outcome: to obtain financing for the operation. If Cybercom does not develop as planned, a future situation in which Cybercom must acquire new capi
+/-1% SEK million tal cannot be ruled out. It cannot be guaranteed that additional capital can be obtained on favourable terms for Cybercom’s shareholders or Price to customer 11.2 that such an addition of capital, if obtained, will be sufficient to achieve Charging level 4.9 Cybercom’s strategy. If Cybercom fails to obtain requisite capital in the No. consultants 5.6 future, continuation of its operation cannot be guaranteed. HR costs 6.7 Credit risk Reported effects should be seen independently of each other, and they Historically, Cybercom has had very low credit losses. Most of the presume that other factors do not change. Group’s customers are large, well-reputed companies, authorities, and organisations with high credit ratings. Cybercom cannot guarantee that Financial risks credit losses will remain at the same low level in the longer term. Currency risk Cybercom is exposed to currency risk, mainly through translation of the Share-related risks year’s profits and net assets from foreign subsidiaries in Europe and A potential investor in Cybercom should note that an investment in its Asia (translation risk). The Group’s profits and net assets are exposed share involves risk and that there are no guarantees of any increase in to translation risks in Danish kroner, Polish zlotys, Singapore dollars, UK the share price. Besides development of Cybercom’s operation, share pounds, and Indian rupees. The Group’s net inflow of foreign currency price development depends on a series of factors beyond Cybercom’s mainly comprises the euro and US dollar. Currency exposure means control. They include the general economy, the market interest rate, al that Cybercom’s future competitive strength may be weakened, which ternative return options, capital flows, and political uncertainty. Although may negatively affect growth and profit level. Cybercom’s operation is developing well, there is risk of an investor incurring a capital loss when selling shares. Interest risk Interest risk is defined as a decrease in profits caused by a change in market rates. The bulk of Cybercom’s debt financing is subject to vari able interest in Swedish kronor. Cybercom’s debt financing is a risk in itself: an increase or decrease of one percentage point in the market rate affects the Group’s profit after tax and equity by about SEK 4 million in a 12-month period. The Group’s revenue and cash flow from opera tions are essentially independent of changes in market rates. The Group has interest-bearing assets in the form of bank deposits.
22 2007 annual report / Director’s report
Outlook
Demand for IT services is rising in all parts of society and the market outlook for 2008 remains good. Through the auSystems and Plenware acquisitions, Cybercom is forming a new lead- ing consultancy in telecom, the Internet, and media. The new company gains a stronger brand and an attractive delivery capacity to perform large assignments for local and global players.
Cybercom does not make other forecasts.
23 2007 annual report / Director’s report
Proposed appropriation of profit
Parent company Assurance These amounts are at the AGM’s disposal: The board assures, to the best of its knowledge, that: • The annual report was prepared per generally accepted accounting Profit brought forward 45,899,035 policies for stock market companies. Share premium reserve 354,475,224 • Submitted information matches current circumstances. Profit for the year 4,795,292 • No important information is missing that could affect the impression Total 405,169,551 of Cybercom created by the annual report.
The board and CEO propose that this profit be carried forward to a new account: SEK 405,169.551.
Stockholm, 4 April 2008
Wigon Thuresson Board chairman
Per Edlund Eva Gidlöf
Ulf Körner Thomas Landberg Lars Persson
Robin Hammarstedt Alexandra Trpkoska Employee representative Employee representative
Patrik Boman CEO
24 2007 annual report / Accounts and notes
Income statement – Group
Sales SEK thousand NOTE 2007 2006 Consolidated sales for the Group totalled Net sales 1, 32 1,155,986 534,167 SEK 1,165.0 million (535.8), representing a 117% Other operating revenue 4 8,988 1,666 increase; organic growth reached 12%.
Employee benefits 2, 32, 33 -666,640 -319,434 Operating expenses Other external expenses 3, 5, 32 -364,978 -158,190 The Group’s operating expenses rose 117% to Other operating expenses 4 -6,833 -1,142 SEK 1,038.5 million (478.8). Staff costs rose 109% Depreciation 12, 13 -12,840 -6,168 to SEK 666.6 million (319.4) primarily due to more employees. The number of employees in the Group Operating profit/loss 113,683 50,899 rose 168% to reach 1,290 employees (481) at Financial revenue 7 6,463 4,356 year-end. Financial expenses 8 -28,071 -5,136
Profit/loss after financial items 92,075 50,119 Earnings before interest and taxes (EBIT) Tax 10 -24,132 -14,399 EBIT increased 123% to reach SEK 113.7 million Year's profit/loss from remaining operation 67,943 35,720 (50.9), corresponding to a 9.8% margin (9.5). Year's loss from discontinued operation 11 -911 -429
Year's profit/loss 67,032 35,291 Taxes Tax expenses rose SEK 9.7 million to SEK 24.1 million Share data in thousands, before dilution (14.4). The tax rate during the period was 26.2% (28.7). The tax expense is calculated from the Earnings/share, SEK 4.46 2.86 current tax rate for the parent company and its re- Equity/share, SEK 31.65 22.11 spective subsidiaries. Consideration is given to tem- No. of shares at year’s start 12,322 12,322 porary differences and existing loss carry-forwards.
New share issue 10,062 – The year’s profit No. of shares at year’s end 22,384 12,322 Profit for 2007 rose 90% to SEK 67.0 million (35.3). Average no. of shares 15,033 12,322 Share data in thousands, after dilution Profit/share, SEK 4.46 2.83
Equity/share, SEK 31.65 21.90
No. of shares at year’s end 22,384 12,436
Average no. of shares 15,038 12,479
25 2007 annual report / Accounts and notes
Income statement – parent company
SEK thousand NOTE 2007 2006 Net sales 1, 32 55,357 46,100
Other operating revenue 4 13,282 5,884
Operating revenue 68,639 51,984 Other external expenses 3, 5, 32 -58,227 -29,383
Staff costs 2, 32, 33 -24,924 -24,425
Depreciation and amortisation 12, 13 -1,743 -1,807
Other operating expenses 4 -1,288 -57
Operating expense -86,182 -55,672 Operating loss -17,543 -3,688 Profit from interests in Group companies 6 11,992 –
Interest income and similar income items 7 2,766 2,990
Interest expenses and similar expense items 8 -1,663 -3,047
Profit/loss from financial items 13,095 -57 Loss after financial items -4,448 -3,745 Appropriations 9 3,905 -1,980
Tax on year’s profit/loss 10 5,338 1,377
Year’s profit/loss 4,795 -4,348
26 2007 annual report / Accounts and notes
Change in equity – Group
Shares and share capital Share Other capital Other Balanced On 31 December 2007, Cybercom’s share capital SEK thousand capital contributions reserves profit/loss Total equity amounted to SEK 22.4 million. The total number of Balance at year’s start, shares on 31 December 2007 was 22,384,362. 1 January 2006 12,322 276,684 -2,471 -48,354 238,181 Change in translation difference – – -1,081 – -1,081 Equity Year's profit – – – 35,291 35,291 Cybercom’s equity rose by SEK 436.0 million com- pared with 2006 to SEK 708.4 million (272.4). The Balance at year’s end, increase is principally attributable to the new share 31 December 2006 12,322 276,684 -3,552 -13,063 272,391 issue implemented during the year. Change in translation difference – – 4,487 – 4,487
Year's profit – – – 67,032 67,032
New share issue 10,062 354,475 – – 364,537
Balance at year’s end, 31 December 2007 22,384 631,159 935 53,969 708,447
27 2007 annual report / Accounts and notes
Change in equity – parent company
Non- Share Statutory restricted SEK thousand capital reserve equity Total equity Balance at year’s start, 1 January 2006 12,322 178,962 8,081 199,365
Group contributions received/paid – – 20,864 20,864
Tax effect on Group contributions received/paid – – -5,842 -5,842
Merger effect – – 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 New share issue 10,062 – 354,475 364,537
Group contributions received/paid – – 37,544 37,544
Tax effect on Group contributions received/paid – – -10,512 -10,512
Year's profit – – 4,795 4,795
Balance at year’s end, 31 December 2007 22,384 178,962 405,170 606,516
28 2007 annual report / Accounts and notes
Balance sheet – Group
Non-current assets SEK thousand NOTE 2007 2006 Goodwill makes up a large portion of Cybercom’s balance sheet. The assets result from company Assets acquisitions and are the difference between the Non-current assets purchase price and the acquired company’s ad- Goodwill 12 758,044 130,139 justed net assets. Large goodwill posts often arise Other intangible non-current assets 12 57,814 5,546 with acquisition of consulting operations because their largest asset is structural capital, an asset Property, plant, and equipment 13 20,725 10,863 that cannot be capitalised. Financial assets 14 700 688 Deferred tax assets 20 63,355 1,809 Current assets Accounts receivable rose 164% to SEK 321.0 million Total non-current assets 900,638 149,045 (121.4). Other receivables, primarily non-invoiced Current assets services, rose 3% to SEK 44.5 million (43.0), Accounts receivable 15 321,001 121,410 and cash and cash equivalents decreased by Income tax recoverable 9,268 – SEK 6.9 million to SEK 82.0 million (88.9). Prepaid expenses were SEK 31.0 million (6.3). Other receivables 16 44,498 43,042
Prepaid expenses 17 31,003 6,277 Equity Cash and cash equivalents 31 82,035 88,925 Equity on 31 December 2007 was SEK 708.4 million (272.4), yielding a 51.0% equity/assets ratio Total current assets 487,805 259,654 (66.6%). Equity per share amounted to SEK 31.65 Total assets 1,388,443 408,699 (22.11).
Equity and liabilities Liabilities Equity 18 Non-current liabilities amounted to SEK 323.9 million Share capital 22,384 12,322 (8.3) and consist primarily of loans that reached Other capital contributions 631,159 276,684 SEK 274.0 million and debt of SEK 23.4 million to auSystems' previous shareholders. Current liabili- Other reserves 935 -3,552 ties amounted to SEK 356.1 million (128.0), con- Profit/loss brought forward 53,969 -13,063 sisting mainly of a loan of SEK 66.0 million, ac- Total equity 708,447 272,391 crued staff costs of SEK 110.7 million (39.2) and accounts payables of SEK 83.7 million (38.0) due Non-current liabilities mainly to subcontractors. Tax provisions 20 26,094 7,785
Other non-current liabilities 21 297,829 498
Total non-current liabilities 323,923 8,283 Current liabilities Advances from customers 19,444 12,344
Accounts payable 83,697 37,987
Tax liabilities 21,381 8,413
Other current liabilities 22 101,382 19,775
Accrued expenses and deferred income 23 130,169 49,506
Total current liabilities 356,073 128,025 Total equity and liabilities 1,388,443 408,699 Group contingent liabilities and pledged assets 24
29 2007 annual report / Accounts and notes
Balance sheet – parent company
SEK thousand NOTE 2007 2006
Assets Intangible non-current assets 12 4,383 4,706
Property, plant, and equipment 13 695 2,481
Financial assets 14 143,953 153,869
Deferred tax asset 20 808 1,151
Total non-current assets 149,839 162,207 Accounts receivable 15 1,842 2,256
Receivables from Group companies 492,188 44,056
Other receivables 16 576 14,139
Prepaid expenses 17 7,670 3,004
Cash and bank deposits 31 65,159 68,165
Total current assets 567,435 131,620 Total assets 717,274 293,827
Equity and liabilities
Equity 18 Share capital 22,384 12,322
Statutory reserve 178,962 178,962
Total restricted equity 201,346 191,284 Share premium reserve 354,475 –
Profit brought forward 45,900 23,216
Year’s profit/loss 4,795 -4,348
Total non-restricted equity 405,170 18,868 Total equity 606,516 210,152 Untaxed reserves 19 15,306 19,211
Non-current liabilities 21 456 498
Total non-current liabilities 456 498 Accounts payable 8,122 12,959
Liabilities to Group companies 70,621 35,896
Tax liabilities 9,375 5,185
Other current liabilities 22 401 634
Accrued expenses and deferred income 23 6,477 9,292
Total current liabilities 94,996 63,966 Total equity and liabilities 717,274 293,827
Pledged assets and contingent liabilities Pledged assets 2,300 None
Contingent liabilities 3,253 None
30 2007 annual report / Accounts and notes
Cash flow statement – Group
Cash flow SEK thousand NOTE 2007 2006 In the cash flow statement, the annual aver- Cash flow from operating activities age currency exchange rate is used to calculate Profit after financial items 26 92,075 50,119 changes in working capital. Cash flow from operat- ing activities improved to SEK 64.5 million (34.4), Adjustments for items not included in cash flow 27 23,392 7,898 largely due to better operating profits. Cash flow from operations 115,467 58,017 Income tax paid -9,720 -3,034 Investments and disposals Cash flow from operating activities before change in Investments in property, plant, and equipment working capital 105,747 54,983 reached SEK 8.2 million (5.0). During the period, investments in non-current assets excluding Increase/decrease accounts receivable -7 -27,040 goodwill amounted to SEK 0.9 million (0.7). The Increase/decrease other current receivables 51,502 -12,378 largest investments relate mainly to property, Increase/decrease accounts payable -30,448 16,654 plant, and equipment such as computers and other equipment. Increase/decrease other current operating liabilities -62,265 2,138
Cash flow from operating activities 64,529 34,357 Cash flow from investing activities stood at Cash flow from investing activities SEK -601.4 million (0.5). The large difference is Investments in intangible non-current assets 28 -859 -696 due to no acquisitions in 2006.
Investments in property, plant, and equipment 28 -8,210 -5,001 The cash flow statement was prepared using Investments in financial non-current assets – -688 the indirect method. Recognised cash flow only Sale of property, plant, and equipment – 569 includes transactions that entail incoming or out going payments. Sale of financial non-current assets 542 –
Acquisitions of subsidiaries 29 -592,830 -760
Disposal of assets and liabilities 30 – 6,682
Decrease in current financial investments – 358
Cash flow from investing activities -601,357 464 Cash flow from financing activities New share issue 364,538 –
Amortisation of debt -390,000 –
Borrowings 557,153 –
Cash flow from financing activities 531,691 – Year’s cash flow from remaining operation -5,137 34,821 Year's cash flow from discontinued operations -1,334 -652 Change in cash and cash equivalents from discontinued operations -1,014 475
Change from inter-company transactions -320 -1,127
Year's cash flow from discontinued operations -1,334 -652 Cash and cash equivalents at year’s start 88,925 55,453
Translation difference -419 -697
Cash and cash equivalents at year’s end 31 82,035 88,925
31 2007 annual report / Accounts and notes
Cash flow statement – parent company
SEK thousand NOTE 2007 2006
Cash flow from operating activities Loss after financial items 26 -4,448 -3,745
Adjustments for items not included in cash flow 27 14,041 32,907
Cash flow from operating activities 9,593 29,162 Income tax paid -641 97
Cash flow from operating activities before change in working capital 8,952 29,259 Increase/decrease accounts receivable 414 -13,837
Increase/decrease other current receivables -401,691 -1,667
Increase/decrease accounts payable -4,837 8,972
Increase/decrease other current operating liabilities 30,525 12,408
Cash flow from operating activities -366,637 35,135 Cash flow from investing activities Investments in intangible non-current assets 28 -670 -426
Investments in property, plant, and equipment 28 -236 -518
Investments in financial non-current assets – -2,312
Acquisitions of subsidiaries 29 – -760
Cash flow from investing activities -906 -4,016 Cash flow from financing activities New share issue 364,537 –
Cash flow from financing activities 364,537 – Change in cash and cash equivalents -3,006 31,119 Cash and cash equivalents at year’s start 68,165 37,046
Cash and cash equivalents at year’s end 31 65,159 68,165
32 2007 annual report / Accounts and notes
Key figures
Group 2007 2006 Total capital, SEK million 1,388.4 408.7
Capital employed, SEK million 1,056.1 277.9
Equity, SEK million 708.4 272.4
Interest-bearing liabilities and provisions, SEK million 347.7 5.5
Return on total capital, % 13.4 14.5
Return on capital employed, % 18.0 21.2
Return on equity, % 13.7 13.8
Operating margin before goodwill, % 9.8 9.5
Operating margin, % 9.8 9.5
Net margin, % 7.9 9.4
Acid test ratio, times 1.4 2.0
Equity/assets ratio, % 51.0 66.6
Debt/equity ratio, times 0.5 0
Net debt/equity ratio, times 0.4 Neg
Share of risk-bearing capital, % 52.9 68.6
Interest-coverage ratio, times 4.3 10.8
Operating capital in relation to sales, % 4.3 8.0
Capital turnover rate, times 1.3 1.4
Investments, SEK million 708.8 6.5
No. of employees, average 932 414
No. of employees at year’s end 1,290 481
No. of consultants, average 808 357
Sales per employee, SEK thousand 1,250 1,294
Sales per consultant, SEK thousand 1,442 1,501
Value added per employee, SEK thousand 784 851
Salaries and reimbursements excl. social security contributions, SEK million 457.1 223.3
33 2007 annual report / Accounts and notes
Financial performance summary
Income statement, SEK million 2007 2006 2005 2004 2003 2002 2001 2000 1999 Sales 1,165.0 535.8 466.4 391.1 309.7 344.8 396.2 357.6 191.9
Operating expenses -1,038.5 -478.8 -425.6 -365.5 -401.01) -338.6 -368.9 324.7 -178.6
Scheduled amortisation -12.8 -6.2 -6.1 -8.0 -7.0 -5.8 -6.2 -6.2 -3.8
Operating profit/loss before goodwill 113.7 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 113.7 50.9 34.7 17.6 -111.9 -12.5 12.2 20.3 8.8
Financial revenue 6.5 4.4 6.5 4.1 2.6 5.4 4.8 3.3 6.2
Financial expenses -28.1 -5.1 -2.1 -1.8 -0.9 -1.1 -5.2 -0.2 -0.5
Profit/loss after financial items 92.1 50.1 39.0 20.0 -110.2 -8.2 11.8 23.4 14.5
Tax -24.1 -14.4 -11.7 -6.1 -0.5 -1.2 -6.9 -8.5 0
Profit/loss from discontinued operation -0.9 -0.4 -2.8 -2.7 – – – – –
Year’s profit/loss 67.0 35.3 24.5 11.2 -110.7 -9.4 4.9 14.9 14.5
Balance sheet, SEK million 2007 2006 2005 2004 2003 2002 2001 2000 1999 Assets
Intangible assets 815.9 135.7 135.8 93.8 69.7 121 83.3 75.9 9.3
Property, plant, and equipment 20.7 10.9 12.2 10.7 10.8 9.9 11.3 11.3 10.3
Financial assets 0.7 0.7 0.4 – – 0.2 0.1 5.1 0.3
Deferred tax assets 63.3 1.8 5.2 11.8 14.4 3.5 2.8 0.5 1.5
Current assets, excl. cash and cash equivalents 405.8 170.7 142.6 108.7 107.3 70.7 91.2 89.9 50.0
Cash and cash equivalents 82.0 88.9 55.5 47.7 74.1 111.5 120.8 111.9 107.3
Total assets 1,388.4 408.7 351.7 272.7 276.3 316.8 309.5 294.6 178.7
Equity and liabilities
Equity 708.4 272.4 238.2 180.1 149.5 231.5 223.5 195.4 137.4
Non-current liabilities 323.9 8.3 10.6 5.1 15.1 15.5 6.1 20.1 0.9
Current liabilities 356.1 128 102.9 87.5 111.7 69.8 79.9 79.1 40.4
Total equity and liabilities 1,388.4 408.7 351.7 272.7 276.3 316.8 309.5 294.6 178.7
Cash flow statement, SEK million 2007 2006 2005 2004 2003 2002 2001 2000 1999 Cash flow from operating activities 64.5 34.4 26.5 12.8 5.2 7.0 31.4 28.7 7.0
Cash flow from investing activities -601.4 0.5 -16.9 -41.3 -24.4 -17.1 -23.4 -44.1 -13.2
Cash flow from financing activities 531.7 – – 4.0 -16.0 1.4 0.9 20.0 107.6
Cash flow from remaining operation -5.1 34.8 9.6 -24.5 -35.2 -8.7 8.9 4.6 101.4
Cash flow from discontinued operation -1.3 -0.7 -3.0 -1.7 – – – – –
Cash and cash equivalents at year’s start 88.9 55.5 47.7 74.1 111.5 120.8 111.9 107.3 5.9
Translation differences -0.4 -0.7 1.1 -0.2 -2.2 -0.6 – – –
Cash and cash equivalents at year’s end 82.0 88.9 55.5 47.7 74.1 111.5 120.8 111.9 107.3
34 2007 annual report / Accounts and notes
Financial performance continued
Key figures 2007 2006 2005 2004 2003 2002 2001 2000 1999 Capital employed, SEK million 1,056.1 277.9 243.5 180.5 149.8 231.8 223.7 195.4 137.4
Interest-bearing liabilities and provisions, SEK million 347.7 5.5 5.3 0.4 0.3 0.3 0.2 – –
Return on capital employed, % 18.0 21.2 19.4 13.2 Neg Neg 8.1 14.2 21.8
Return on equity, % 13.7 13.8 11.7 6.8 Neg Neg 2.3 9.0 19.3
Operating margin, % 9.8 9.5 7.4 4.5 Neg Neg 3.1 5.7 4.6
Net margin, % 7.9 9.4 8.4 5.1 Neg Neg 3.0 6.5 7.6
Equity/assets ratio, % 51.0 66.6 67.7 66.0 54.1 73.6 72.2 66.3 76.9
Average no. of employees 932 414 352 309 263 289 312 310 185
No. of employees at period’s end 1,290 481 414 358 375 280 300 285 270
Sales per employee, SEK thousand 1,250 1,294 1,325 1,266 1,178 1,193 1,270 1,154 1,037
Sales per consultant, SEK thousand 1,442 1,501 1,565 1,565 1,440 1,461 1,572 1,360 1,222
Value added per employee, SEK thousand 784 851 864 834 3661) 737 742 722 755
Share data 2007 2006 2005 2004 2003 2002 2001 2000 1999 No. of shares at period’s end 22,384,362 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 period’s end, full dilution 22,384,362 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 31.65 22.11 19.33 16.08 14.01 25.02 25.52 23.15 17.43
Equity per share with full dilution, SEK 31.65 21.90 19.02 16.08 14.01 25.02 23.82 20.75 16.10
Average no. of shares 15,033,438 12,321,757 11,759,056 10,716,125 9,470,197 9,169,361 8,696,703 8,212,315 5,991,208
Average no. of shares with full dilution 15,038,164 12,478,757 11,859,056 10,716,125 9,470,197 9,169,361 8,757,279 9,198,839 6,553,708
Earnings per share, SEK 4.46 2.86 2.08 1.05 -11.70 -1.03 0.56 1.82 2.42
Earnings per share with full dilution, SEK 4.46 2.83 2.07 1.05 -11.70 -1.03 0.56 1.63 2.21
Cash flow per share with full dilution, SEK 4.20 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 0
1) Including one-time goodwill amortisation of SEK 96.1 million. 2004–2007 are recognised as per IFRS. Other years are recognised as per previously applied accounting policies.
35 2007 annual report / Accounts and notes
Definitions
Acid test ratio Net debt/equity ratio Current assets excluding inventory divided by current liabilities. Net interest-bearing liabilities divided by shareholders’ equity.
Average no. of consultants Net interest-bearing liabilities Average number of consultants adjusted for part-time employment, long- Interest-bearing liabilities minus interest-bearing assets. term sick leave, and leave of absence. Net margin Average no. of employees Profit/loss after financial items as a percentage of sales. Average number of employees adjusted for part-time employment, long- term sick leave, and leave of absence. Number of employees at period’s end Number of persons with an employment contract on the period's last day. Average number of shares Calculated as a weighted average for each year as per Swedish Society Operating capital of Financial Analysts’ recommendations. Current assets minus cash and cash equivalents and current liabilities.
Capital employed Operating expenses Balance sheet total minus non-interest-bearing liabilities. Operating expenses including goodwill amortisation.
Capital turnover rate Operating margin Sales divided by the average balance sheet total. Operating profit/loss as a percentage of sales.
Cash flow per share Return on capital employed Current cash flow divided by average number of shares after full dilution. Profit/loss after financial items plus financial expenses as a percentage of the average capital employed. Debt/equity ratio Interest-bearing liabilities divided by shareholders’ equity. Return on shareholders’ equity Year’s profit/loss as a percentage of average shareholders’ equity. Earnings per share after full dilution Earnings per share is calculated as though warrants had already been Return on total capital exercised. Profit/loss after financial items plus financial expenses as a percentage of the average balance sheet total. Earnings per share Year’s profit/loss divided by average number of shares. Sales per employee/consultant The period’s sales divided by the average number of employees/con- EBIT sultants. Earnings before interest and taxes (operating income). Share of risk-bearing capital EBITA Shareholders’ equity plus deferred tax (including minority) as a percentage Earnings before interest, tax, and amortization. of the balance sheet total.
Employee turnover Shareholders’ equity per share Number of employees that terminated employment divided by the average Shareholders’ equity divided by the number of shares at the period’s end. number of employees for the period. Shareholders’ equity Equity/assets ratio Shareholders’ equity includes 72% of the untaxed reserves. Shareholders’ equity as a percentage of the balance sheet total. Turnkey projects Interest coverage ratio Outsourcing and application management (AM) projects in which Profit/loss after financial items plus financial expenses divided by finan- Cybercom has management and staffing responsibilities. cial expenses. Value added per employee Investments Operating profit/loss plus labour costs divided by the average number of Purchased assets, including increases that result from acquisitions. employees. Labour costs are salary expenses and reimbursements plus a standard 35% for social security costs.
36 2007 annual report / Accounts and notes
Summary of important accounting principles
The most significant accounting policies applied when Key estimates and assessments preparing the consolidated accounts are stated below. These Financial reports preparation, per IFRS, requires that management and policies were applied consistently to all years presented un- the board make assessments and assumptions that affect application less otherwise stated. of accounting policies and recognised amounts of assets, liabilities, revenue, and expenses, along with other submitted information. Basis of preparation The consolidated accounts were prepared per the Swedish Annual These assessments and assumptions are based on historical experi- Accounts Act, the Swedish Financial Accounting Standards Council ences and several other factors that management and the board deter- recommendation RFR 1.1 (Supplemental Accounting Regulations for mine to be probable under the prevailing circumstances. Resulting con- Groups), International Financial Reporting Standards (IFRS) published clusions form the basis for decisions on the recognised value of assets by the International Accounting Standards Board (IASB), and interpre- and liabilities that other sources would not otherwise reveal. The actual tive statements from the International Financial Interpretations Commit- outcome can vary from these estimates and assessments. tee (IFRIC) that were approved for application within the EU. When implementing IFRS, management-made assessments can have a The parent company's annual report is prepared per the Swedish Annual key impact on the financial presentations, and any estimates made can Accounts Act and applies the Swedish Financial Reporting Board’s lead to substantial adjustments to the following year's financial presenta- recommendation RFR 2.1 for legal entities and the Emerging Issues tions. These assessments can have a significant effect on the Group's Task Force's pronouncements. So IFRS valuation and disclosure rules profit/loss and financial position, especially within revenue recognition are generally implemented. Some exceptions and additions are made to and bad debts, measurement of intangible and other non-current assets, these rules in RFR 2.1 due to statutory provisions, mostly in the Annual and taxes. See the applicable note. Accounts Act, and in the relationship between accounting and taxation. Consolidated accounts The parent company’s functional currency is the Swedish krona, which The parent company and its subsidiaries are included in the consolidat- is also the reporting currency for the parent company and the Group. ed accounts. The financial reports for the parent company and subsid- So financial presentations are in Swedish kronor, rounded to the nearest iaries included in the consolidated accounts cover the same period and thousand unless otherwise specified. are prepared as per the accounting policies that pertain to the Group. All internal Group balances, revenue, expenses, profits, or losses that arise (a) Group effects from standards, changes, and interpreta- in transactions between companies, which are included in the consoli- tions that went into effect in 2007 dated accounts, are eliminated. IFRS 4 and 7 and IFRIC 4, 7, 8, 9, and 10 went into effect in 2007. The scope of Group disclosure for financial instruments increased with A subsidiary is included in the consolidated accounts from the date of implementation of IFRS 7. Other standards and interpretations did not acquisition (which is the day the parent company takes control) to the affect the Group’s financial report. date that control ends.
(b) Standards, changes, and interpretations of existing stan- Acquired subsidiaries are included in the consolidated accounts as dards that have not yet gone into effect per the acquisition method. So acquisition cost is divided into acquired IAS 23; IFRS 8; and IFRIC 12, 13, and 14, which have not yet gone into assets, assumed commitments, and liabilities on the date of acquisition effect were not applied to the consolidated accounts. based on their actual value. The cost of an acquisition is composed of Changes in IAS 1, 23, and 27; IFRS 3; and IFRIC 11 were not applied in the fair value of assets submitted as payment, issued equity instru- the consolidated accounts. ments, and liabilities accrued or assumed by the transfer date, plus expenses directly related to the acquisition.
37 2007 annual report / Accounts and notes
When a subsidiary is sold during the year, then profit/loss is included (b) Receivables and liabilities in foreign currency for the ownership period, and its income and expenses are recognised Current receivables and liabilities were translated using the closing day in the consolidated income statement. Capital gains and losses are rate. Exchange rate differences for financial receivables and liabilities calculated within the Group as the difference between the selling price are recognised in the income statement under financial items, while and the consolidated value of the subsidiary's net assets. other exchange rate differences are under "Operating profit/loss" and recognised under the "Other operating revenue" or "Other operating When translating income statements and balance sheets of foreign expenses" headings. For a description of hedging, please see the subsidiaries, all subsidiaries' assets and liabilities are translated using "Financial risk management" section. the closing day rate, while income statements are translated using the average exchange rate. Equity was translated at the historical rate. Property, plant, and equipment Translation differences had no impact on profit or loss; they are booked Equipment is included in the balance sheet at historical cost with deduc- directly to equity. tions for scheduled, accumulated depreciation and any impairment losses. Scheduled depreciation is based on the historical cost of the Joint ventures non-current assets. Depreciation occurs linearly, based on the useful life The Group's holdings in jointly held businesses are reported using of the assets. proportional consolidation. The Group merges their portion of sales and costs, assets and liabilities, and cash flow from the joint venture with the This depreciation period was applied: corresponding entries in its own consolidated accounts. Computers and other equipment 3–5 years
The Group reports the portion of the profit/loss from its sale of assets in a joint venture that corresponds to the other owners’ holdings. The Intangible non-current assets Group does not report its portion of profit/loss in a joint venture that is Intangible assets are included on the balance sheet at acquisition the result of the Group's purchase of assets in the joint venture before cost with deductions for estimated residual value (normally 0) and for the assets are resold to an independent party. But the transaction is im- scheduled, accumulated amortisation and impairment losses. Scheduled mediately reported as a loss if the loss means that an asset is reported depreciation is based on the historical cost of the non-current assets. at an inflated value. Amortisation is linear and based on the economic lifespan of the assets.
Segment reporting These depreciation periods were applied: Segment reporting in IAS 14 includes a description of how a definition Licence rights 4–5 years of the concepts business segment and geographical segment should Goodwill* 5–10 years be used. Business segment means a reportable portion of a company that provides products or services related to one another, which vary Acquired customer relationships 10 years from other business segments. Geographic markets offer products or Acquired trademarks 10 years services within a specific economic environment that are subject to Patents 5 years risks that vary from those that apply to units operating in other eco- nomic environments. * No goodwill amortisation in the Group after 2003; solely in legal entity.
In the 2006 consolidated statement, the board assessed that the The Group divides the acquisition cost for corporate acquisitions as Group’s revenue and company structure required segment reporting for per IFRS 3, Business Combinations. Intangible assets from acquired one of the two areas: geographic markets. After acquisition of auSys- companies are only reported with the acquisition if they meet the intan- tems, reporting changed, and the board’s assessment for 2007 is that gible asset definition from IAS 38, and their actual value can be reliably there is no requirement to divide the Group into segments. calculated.
But the board intends to reintroduce segment reporting in Q1 2008 after Plenware joins the Group on 1 January 2008.
Foreign currency conversion (a) Functional currency and reporting currency Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (the functional currency). The consolidated financial statements are presented in Swedish kronor, which is the parent company’s functional and presentation currency.
38 2007 annual report / Accounts and notes
(a) Licence rights size and longevity that a value can be placed on the relationship. The Acquired software licences are capitalised based on the expenses valuation is based on the next 10 years' cash flow, assuming maintained incurred when the software application was acquired and put into use. margins and volumes. These expenses are amortised during the estimated economic lifespan. (d) Acquired trademarks (b) Goodwill A comparison, using an internal trademark valuation, determines acquisi- Goodwill represents the amount with which the acquisition cost exceeds tion costs for acquired trademarks, which are amortised during the the actual value of the Group's share of the acquired subsidiary's net estimated useful life of 10 years. assets upon acquisition. Goodwill on acquisition of subsidiaries is recognised as an intangible non-current asset. Goodwill that arises (e) Patents from acquisition of a foreign operation is translated to the closing day Acquisition costs for patents are based on the cost of patent registra- rate, and the translation difference is recognised in equity. Goodwill tion. Patents are amortised over a period of five years. is tested annually (or when there are signs of decline) to identify pos- sible impairment requirements. Goodwill is recognised at cost less Impairment accumulated impairment loss. Goodwill amortisation was discontinued When there is an indication that the value of an asset is diminished, an 31 December 2003. evaluation of the asset's recognised value occurs. In cases when an asset's recognised value exceeds its calculated recovery value, the (c) Acquired customer relationships asset is immediately depreciated to its recovery value. Cybercom eval- The Group divides the acquisition cost for corporate acquisitions as uates cash-generating units as per IAS 36 (impairment losses). When per IFRS 3, Business Combinations. One purpose with the auSystems calculating the remaining value in use for goodwill or shares in subsid- acquisition was to increase Cybercom's customer base. The company iaries, an 11% cost-of-capital rate was applied before tax. determined that the acquired customers include customers of such
4-5 years 5 years Licence rights Patents 10 years 10 years Acquired brands Acquired customer relations
39 2007 annual report / Accounts and notes
Financial assets Financial assets assessed at fair value via the income statement and The Group classifies financial instruments in these categories: (1) finan- financial assets available for sale are recognised after the acquisition cial assets assessed at fair value via the income statement, (2) financial date at fair value. Accounts receivables are recognised at amortised assets available for sale, and (3) accounts receivables. Classification cost when applying the effective interest method. depends on the purpose for which the instrument was acquired. Man- agement determines the presentation (classification) of the assets at The fair value for listed investments is based on current bid rates. If the first accounting and re-examines this decision at each presentation the market for a certain financial asset is not active (and for unlisted opportunity. securities), the Group determines the fair value by applying a valuation technique, such as using information regarding newly made transactions (a) Financial assets assessed at fair value in a similar context. Other valuation techniques that could be used are via the income statement analysis of discounted cash flows and option valuation models that were Financial assets assessed at fair value via the income statement refined to reflect the issuer's special circumstances. includes two subcategories: (1) financial assets held for trade and (2) financial assets that are initially assigned to the assessed-at-fair-value The Group assesses on each balance sheet date whether there is category via the income statement. A financial asset is classified in this objective evidence that a write-down requirement exists for a financial category if it is acquired mainly to be sold rather soon or if management asset or group of financial assets. determines this classification. (d) Accounts payable Derivative instruments are also categorised as trade holdings if they are Accounts payable are initially recognised at fair value and then at amor- not identified as hedges. Assets in this category are classified as current tised cost applying the effective interest method. assets if they are held for trade or are expected to be sold within 12 months from the balance sheet date. (e) Borrowings Borrowings are recognised initially at fair value, net of transaction costs Conversion to fair value is recognised in the income statement among incurred. Borrowings are subsequently recognised at amortised cost; the financial items. Derivative instruments are included in current assets any difference between the proceeds (net of transaction costs) and the or current liabilities and recognised in the other receivables or other cur- redemption value is recognised in the income statement over the period rent liabilities items on the balance sheet. of the borrowings using the effective interest method.
(b) Financial assets available for sale Receivables Financial assets available for sale are non-derivative assets that either Receivables are valued individually and requisite allowances are made. have been assigned to this category or have not been classified in any other category. They are included in non-current assets if management Current investments does not intend to sell the asset within 12 months after the balance Current investments are recognised at market value on the reporting sheet day. date.
(c) Accounts receivable Recognition of allocations and untaxed reserves Accounts receivables are non-derivative financial assets with fixed Tax legislation in Sweden and some other countries allows for tax pay- or ascertainable payments that are not listed on an active market. ment deferments through allocation of untaxed reserves in the balance Characteristically, they arise when the Group provides goods or services sheet via the income statement's allocations item. The consolidated directly to a customer without intending to trade with the accrued accounts do not include appropriations and untaxed reserves. receivable. They are included in current assets and recognised in the accounts receivables item on the balance sheet. After elimination, the untaxed reserves are split into deferred tax liabili- ties and balanced profit/loss. Deferred tax on untaxed reserves is esti- Purchases and sales of financial instruments are recognised on the mated without discounting, based on actual tax expense for the next trade date, i.e., the date the Group agrees to buy or sell the asset. year. For the 2007 financial year, 28% of untaxed reserves relate to Financial instruments are initially assessed at fair value plus transaction deferred tax and 72% to equity. charges, which apply to all financial assets that are not assessed at fair value via the income statement.
Financial instruments are removed from the balance sheet when the right to secure cash flow from the instrument has expired or been car- ried forward and the Group has carried forward most of the risks and advantages associated with ownership.
40 2007 annual report / Accounts and notes
Borrowing costs Cash flow statement The Group is financed with its own funds and liabilities to credit institu- The cash flow statement was prepared using the indirect method. tions. Borrowing costs burden profit/loss for the period they relate to, Recognised cash flow covers only transactions that lead to incoming regardless of how the borrowed funds are used as per IAS 23. or outgoing payments.
Current and deferred taxes Besides cash and bank balances, cash and cash equivalents include (a) Income taxes short-term financial investments that: Reported income taxes comprise tax that will be paid or recovered for • are exposed to only an insignificant risk of value fluctuations, the current year, adjustments to the actual tax of previous years, and • are traded in an open market in which amounts are known, or changes in deferred tax. • have a term shorter than three months from the time of acquisition.
A valuation of all tax liabilities/prepaid taxes is calculated at a nominal Employee benefits amount as per tax regulations and established tax rates or proposed (a) Pension obligations tax rates that will probably be adopted. The Group has only defined contribution pension plans for which the Group pays fixed fees to publicly or privately administered pension The balance sheet method is used to calculate deferred tax on all tem- insurance plans on a mandatory, contractual, or voluntary basis. The porary differences that arise between the recognised and written-down Group has no further payment obligations after the fees are paid. The values of assets and liabilities. Temporary differences primarily arise fees are recognised as staff costs when they are due. Prepaid fees are through changes in untaxed reserves and tax deficits. recognised as an asset when cash reimbursement or reduction of future payments is in the Group's favour. Deferred tax assets regarding tax deficits or other fiscal deductions are recognised to the extent that it is probable that the deduction can be (b) Other benefits after employment termination applied against future tax surpluses. Please see supplementary informa- The Group offers no benefits after termination of employment. tion in note 20. (c) Benefits compensation The parent company recognises deferred tax on untaxed reserves as Benefits compensation ceases when an employee is terminated before part of the untaxed reserves because of the connection between ac- normal pension age or when an employee accepts voluntary termination counting and taxation. in exchange for such reimbursements. The Group recognises severance pay when it is unquestionably obligated either to (1) terminate employ- Determining (1) current tax liabilities and prepaid taxes and (2) provi- ees as per a detailed formal plan without possibility of revocation or to sions for deferred tax liability and deferred tax assets – particularly the (2) grant compensation at termination due to an offer made to encour- valuation of deferred tax assets – requires considerable management age voluntary employment termination. assessment. (d) Profit sharing and bonus plans This process includes determining the tax allocation in each of the The Group recognises a liability and an expense for bonuses and jurisdictions where the Group has operations. It also includes estimat- profit sharing based on a formula that accounts for profit related to the ing exposure to current tax and determining temporary differences that parent company's shareholders after certain adjustments. The Group occur due to certain assets and liabilities being valued differently in the recognises a provision when there is a legal or informal obligation due to accounting records and income tax returns. previous practices.
Management must also estimate the likelihood of realising deferred tax Provisions assets through future taxable revenue. The actual outcome could vary Obligations are recognised as provisions if they are attributable to the from these estimates due to (1) future changes in the business climate, current financial year or earlier financial years and if on the closing day (2) currently unknown changes in tax legislation, or (3) the tax authority's they are certain or likely to occur but are uncertain in terms of amount or or courts' final audit of submitted returns. when they will be fulfilled. Provisions are recognised as current or non- current depending on due date. (b) Group contributions Cybercom follows the Swedish Financial Accounting Standards Coun- Revenue recognition cil's Emerging Issues Task Force's statement on recognition of Group Consulting services is the main source of Group revenue and accounted contributions, so recognition of Group contributions is based on the for 96% of Group sales. Other revenue made up 4% of Group sales. contributions' financial implications and consequences. Group contribu- Revenue consists of the actual value of sold goods and services exclud- tions paid and received to minimise the Group's tax are recognised as a ing VAT and discounts, and after elimination of internal Group sales. decrease or an increase in unrestricted equity. Revenue is recognised as:
41 2007 annual report / Accounts and notes
(a) Service assignments on running accounts cease or partly reduce their purchases from Cybercom. The number Running account assignments are recognised as profit/loss as the of telecom customers and sales from these customers represent a sig- assignments are performed, i.e., revenues and expenses are recogn- nificant portion of Cybercom’s total customer base and sales. If this ised for the period in which they were earned or incurred. Non-invoiced occurs, Cybercom cannot guarantee that it will be able to establish new revenue earned on the reporting date is recognised as accrued income customer relationships to the same extent; this may adversely affect under the heading for other receivables. sales and profits.
(b) Fixed-price services Competitors If a fixed-price service assignment outcome can be reliably estimated, Cybercom offers business-critical solutions, mainly in telecom and the assignment's income and expenses are recognised as revenue and selected technologies. Competition is heavy in this market. Market fluid- expenditure, respectively, relative to the assignment's degree of comple- ity means that the players, propositions, and pricing models constantly tion on the reporting date (the percentage of completion method). The change. It is crucial for a company to establish a niche and position itself number of utilised hours on the reporting date, in relation to the assign- in relation to other players – to create its own customer base. ment's estimated total, mainly determines the percentage of completion. Some of Cybercom’s competitors have larger financial and industrial If estimation is difficult (e.g., a project is in an early phase) but it is likely resources at their disposal than Cybercom, which enables them to affect that the customer will cover accrued expenses, then income is recogn- pricing in the market. It cannot be ruled out that increased competi- ised on the reporting date at an amount corresponding to the assign- tion may lead to a decrease in market shares and lower profitability for ment's accrued expenses, so no profit is recognised. Cybercom.
If an assignment's profit and loss cannot be reliably estimated, then only Integration anticipated customer-defrayed expenses are reported as income. No Acquisition of auSystems and Plenware involves integration of previ- revenue is recognised and accrued costs are reported as expenses if it ously independent operations that have in part competed on the same is expected that the customer will not cover the expenses. Suspected market. Difficulties in combining the operations include the necessity of loss is booked immediately as an expense, in as much as it can be keeping staff and co-ordinating geographically widespread operations, estimated. systems, and facilities from operational, financial, and legal perspec- tives. Alongside daily operations, Cybercom management will devote Fees on fixed-price assignment invoices for services not yet performed considerable attention and time to integration. Delays or difficulties that are recognised as advances from customers. arise in conjunction with integration may negatively affect Cybercom’s operation, profitability, and financial position. Leasing contracts All leasing contracts are based on individual evaluations and recognised Recruitment and skills as operational leasing agreements. The lessor and/or the lessee decide Cybercom’s operation depends on employees’ motivation and expertise. on the classification of leasing contracts, based on scope of financial Qualified consultants are a prerequisite for customer projects that lead risks and benefits that are associated with ownership of the leased ob- to good results and satisfied customers. In recruitment, Cybercom sets ject. To guarantee this, individual examinations of all contracts are done high requirements on expertise and experience and works actively to during the year. In 2007, there were only the usual operating leases, ensure the future level of staff expertise. During some periods, there such as for renting premises and copy machines. Payments made dur- may be a staff shortage, and Cybercom may face recruitment difficulties. ing the lease term are amortised in the income statement linearly over If Cybercom fails to employ and keep qualified consultants, this may the term of the lease. No significant leasing contracts were entered into have an adverse impact on Cybercom’s operations, profits, and financial during the year. position.
Risk management – operational risks Key people Business cycle sensitivity Several key senior executives are crucial to Cybercom’s operation. They The global economy affects general demand for IT services. A weak contribute extensive experience and expertise, which are important for economy in Sweden or internationally may result in lower-than-expected Cybercom’s development. The resignation of one or more of these key market growth for IT services. So a weak economic trend may have a people could negatively affect Cybercom’s operation and profits. negative impact on Cybercom's sales and profits. Contractual relationships Customer focus As mentioned, Cybercom has frame agreements with all major custom- In 2007, Cybercom had about 120 active customers, of which 50 gener- ers. But most of these do not specify volumes and have relatively short ated more than SEK 1 million each in sales for Cybercom. Cybercom termination periods. Some of Cybercom’s contractual relationships now has frame agreements for all major business relationships. Although are not formalised in written agreements. In customer relationships, Cybercom has a well-distributed customer base, it cannot be ruled out Cybercom sometimes relies on customary practice between the parties. that several major customers will end their frame agreements or totally And the content of such agreements may be difficult to clarify if the
42 2007 annual report / Accounts and notes
parties disagree on it, which in the worst case may lead to deterioration Financial risks in relationships and costly disputes. This may entail negative effects on Currency risk Cybercom’s operation, profits, and financial position. Cybercom is exposed to currency risk mainly through translation of the year’s profits and net assets from foreign subsidiaries in Europe HR costs and Asia (translation risk). The Group's profit/loss and net assets are Salaries, other remuneration, and social costs constitute Cybercom’s exposed to currency conversion risks in Danish and Norwegian kronor, largest outlay. Salary increases, due to an overheated IT consultant Polish zloty, Singapore dollars, British pounds, and Indian rupees. The market in Sweden and in countries where Cybercom has subsidiaries, Group’s net inflow of foreign currency primarily comprises euros and may lead to weakened profits. US dollars. Currency exposure means that Cybercom’s future competi- tive strength may be weakened, which may have a negative impact on Deficit deductions growth and profit level. Several of Cybercom’s subsidiaries have previously shown losses that may be used to offset profits in other Group companies under certain Interest risk conditions. This is primarily true for companies acquired from auSystems Interest risk is defined as a decrease in profits caused by a change in AB in April 2007. But there are regulatory limitations for using deficit de- market interest rates. Variable interest currently applies to the bulk of ductions, including those for newly acquired companies. This may lead to Cybercom’s debt financing, which is mainly in Swedish kronor. Cyber- not being able to use previous losses in Cybercom’s subsidiaries or only com’s debt financing is a risk, because a 1 percentage point movement being able to use a limited portion. in the market rate of interest affects the Group's profit after taxes and equity by about SEK 4 million over a 12-month period. The Group’s Legal disputes income and cash flow from operations are essentially independent from Cybercom is not currently involved in legal disputes. There is risk of Cy- changes in the market's interest rate. The Group has interest-bearing bercom becoming involved in such disputes in the future, and a negative assets in the bank. outcome for Cybercom in one or more of these disputes could adversely affect Cybercom’s operation and financial position. Financing risk Financing risk is defined as the risk of it being difficult and/or expensive Owner with considerable influence to obtain financing for the operation. If Cybercom does not develop as The JCE Group AB owns a considerable proportion of all outstanding planned, a future situation in which Cybercom must acquire new capital shares. This shareholder has the option of exercising significant influ- cannot be ruled out. It cannot be guaranteed that additional capital ence on matters that require the approval of shareholders, including can be obtained on favourable terms for Cybercom’s shareholders or appointment and removal of board members and any proposals for that such an addition of capital, if obtained, will be sufficient to achieve mergers, consolidation, or sale of all or the main part of Cybercom’s Cybercom’s strategy. If Cybercom fails to secure requisite capital in the assets and other company transactions. This concentration of ownership future, continuation of its operation cannot be guaranteed. control could limit other shareholders’ opportunities to exert influence. Credit risk Sensitivity analysis Historically, Cybercom has had very low loan losses. Most of the This summary shows effects on operating profit from a 1% change in Group’s customers are large, well-reputed companies, authorities, and certain factors, calculated on the 2007 outcome. organisations with high credit ratings. Cybercom cannot guarantee that credit losses over a long period will maintain the same low level.
+/-1% SEK million Price paid by customer 11.2 Share-related risk A potential investor in Cybercom should note that an investment in its Utilisation rate 4.9 share involves risk and that there are no guarantees that the share price No. of consultants 5.6 will increase. Besides development of Cybercom’s operation, share Staff costs 6.7 price development depends on a series of factors beyond Cybercom’s control. Such factors include the general economy, market interest Consider recognised effects independently of each other and assume rate, alternative return options, capital flows, and political uncertainty. that other factors did not change. Although Cybercom’s operation is developing well, there is risk of an investor making a capital loss when selling shares.
43 2007 annual report / Accounts and notes
Note 1. Segment reporting
Separate reporting for the Sweden and International segments ceased in 2007, and the whole Group was The Group was organised into two main business reported without segmentation. This change occurred, because management altered its way of managing divisions in 2006. The Sweden division focuses on operations in conjunction with the auSystems acquisition; the previous segments thus became insignificant. telecom and selected technologies for e-commerce and billing, portals and mobile solutions, and em- 2006 financial year Sweden International Other Elimination Group bedded systems in Sweden. Operations are run through subsidiaries in Sweden and Singapore. Revenue International operations were grouped in the Inter- External sales 467,709 64,889 7,467 -4,232 535,833 national business division. These operations are Internal sales 1,748 11,499 44,517 -57,764 – run through subsidiaries in Denmark, Singapore, Operating revenues 469,457 76,388 51,984 -61,996 535,833 and the UK plus a joint venture in India. The Other column mainly refers to parent company activities. Operating profit/loss 44,469 9,698 -3,268 – 50,899
Other disclosures Then and now, business division assets mainly Assets excl. goodwill 201,053 61,631 171,680 -157,613 276,751 comprise property, plant, and equipment; intangible non-current assets; and receivables. Goodwill 111,081 14,128 4,930 – 130,139
Unallocated assets 1,809 Business division liabilities consist of operating Total assets 312,134 75,759 176,610 -157,613 408,699 liabilities, excluding tax liabilities. Liabilities 161,671 22,838 94,200 -158,599 120,110 Investments refer to purchases of property, plant, Unallocated liabilities 16,198 and equipment and intangible assets, including Total liabilities 161,671 22,838 94,200 -158,599 136,308 increases resulting from acquisitions. Investments 2,635 2,876 946 – 6,457 Unallocated assets and liabilities comprise de- Depreciation -3,553 -1,301 -1,314 – -6,168 ferred tax assets, deferred tax liability, tax liabilities, Expenses, exceeding depre and liabilities related to company acquisitions. ciation, not corresponding to payments – – -845 -885 -1,730 In 2006, internal deliveries affected revenue, expenses, and profit/loss for the business divi- sions. Internal prices are now market based.
44 2007 annual report / Accounts and notes
Note 2. Salaries, other remuneration, and social security costs
Group Parent company SEK thousand 2007 2006 2007 2006
Salaries and other remuneration Board, CEO, and Group vice president 20,762 17,050 5,927 8,489
Other employees 436,349 206,242 12,090 7,689
Total 457,111 223,292 18,017 16,178
Social security costs Pension costs, CEO, and Group vice president 2,199 2,238 609 1,419
Pension costs, other personnel 41,900 18,433 1,232 775
Other social sec. costs incl. employer’s 137,168 63,062 4,929 5,466 contributions
Total 181,267 83,733 6,770 7,660
Salaries and other remuneration distributed per country and among board members, employees, and others:
2007 2006 Board, CEO, Other Board & Other SEK thousand & dep. CEO employees CEO employees Parent company 6,459 11,558 8,489 7,689
Subsidiaries in Sweden 7,337 349,683 2,811 158,651
Sweden total 13,796 361,241 11,300 166,340 Denmark 2,628 28,294 2,432 24,829
India – 2,543 – 659
Poland 326 10,129 – –
Singapore 1,314 11,859 1,337 1,658
UK 2,698 22,283 1,981 12,756
Group total 20,762 436,349 17,050 206,242
2007 2006 Of whom Of whom Average no. of employees No. men* No. men* Sweden 763 80% 355 79%
Denmark 42 87% 36 88%
India 35 80% 11 75%
Poland 58 90% – –
Singapore 12 100% – –
UK 22 86% 12 86%
Group total 932 81% 414 79% of whom parent company 17 62% 18 45%
*Percentage of men at year's end.
2007 2006 No. on No. on reporting Of whom reporting Of whom Board members and executives date men date men* Group (incl. subsidiaries) Board members 7 86% 6 83%
CEO and other executives 13 100% 9 78%
Parent company Board members 7 86% 6 83%
CEO and other executives 4 100% 3 33%
45 2007 annual report / Accounts and notes
Group Parent company Sick leave is only accounted for in Swedish Sick leave 2007 2006 2007 2006 companies. Total sick leave 2.3% 2.5% 6.7% 7.1%
– Long-term sick leave 0.9% 1.0% 5.1% 5.4%
– Sick leave, men 2.0% 1.6% 0.6% 0.8%
– Sick leave, women 3.6% 5.8% 13.7% 12.5%
– Employees up to age 29 0.3% 1.8% 0.1% 1.6%
– Employees ages 30–49 1.9% 2.8% 6.4% 8.1%
– Employees ages 50+ 0.3% 0.7% 0.2% 1.4%
Note 3. Auditing fees
Group Parent company Besides customary auditing, auditing services Fees for auditing and consulting 2007 2006 2007 2006 include all necessary audit-related consultations, Audit work linked to observations made in the audit or Öhrlings PricewaterhouseCoopers AB 2,012 1,198 1,858 1,198 other tasks that are the duty of the auditor.
PricewaterhouseCoopers, Nordic countries 91 67 – –
Other auditing firms 293 179 – –
Other consulting Öhrlings PricewaterhouseCoopers AB 45 277 44 277
PricewaterhouseCoopers, Nordic countries 6 14 – –
Other auditing firms 46 12 – –
Total 2,493 1,747 1,902 1,475
Note 4. Other operating revenue and expenses
Group Parent company Operating profit/loss includes exchange-rate SEK thousand 2007 2006 2007 2006 differences for operating receivables and operating Other operating revenue 3,748 83 63 – liabilities as per the table. Other operating expenses -2,790 -1,036 -16 -20
Total 958 -953 47 -20
Note 5. Operational leasing
Group Parent company The nominal value of future minimum leasing SEK thousand 2007 2006 2007 2006 fees, which are related to non-cancellable leasing Payable within 1 year 42,415 11,514 1,189 6,854 contracts, are thus distributed: Payable within 1–5 years 94,356 16,108 900 13,320 Rental contracts that expire during the period were Payable after 5 years 9,997 – – – estimated using similar conditions.
Leasing expenses and leasing revenue related to operational leasing contracts amount to: Leasing contracts mainly comprise rental contracts and a few office machines. Leasing expenses 50,960 14,254 5,887 6,984
Leasing revenue for sub-leased items 5,098 832 5,849 6,811 The Group has no known contracts that will gener- ate leasing revenue in future periods.
46 2007 annual report / Accounts and notes
Note 6. Profit/loss from shares in Group companies
Parent company
SEK thousand 2007 2006 Dividend from subsidiaries 23,018 –
Write-downs -11,026 –
Total 11,992 –
Note 7. Financial revenue
Group Parent company
SEK thousand 2007 2006 2007 2006 Interest 3,060 1,879 2,094 1,216
Exchange-rate differences 3,403 2,477 672 1,774
Total 6,463 4,356 2,766 2,990
Note 8. Financial expenses
Group Parent company
SEK thousand 2007 2006 2007 2006 Interest -23,432 -10 -774 -212
Exchange-rate differences -4,639 -4,304 -889 -2,835
Fair value losses for derivative instruments – -822 – –
Total -28,071 -5,136 -1,663 -3,047
Note 9. Appropriations
Parent company
SEK thousand 2007 2006 Change in excess depreciation 845 -1,680
Change in tax allocation reserve 3,060 -300
Total 3,905 -1,980
47 2007 annual report / Accounts and notes
Note 10. Tax on year's profit/loss
Group Parent company Group SEK thousand 2007 2006 2007 2006 Deferred tax expenses refer to changes in open- Year's tax -16,033 -12,959 5,713 1,482 ing temporary differences, mainly for loss-carry Tax attributable to prior years -189 2 -32 10 forwards. Deferred tax income primarily refers to endowment insurance provisions. See temporary Deferred taxes attributable to prior years – -36 – -33 differences in note 20. Year’s deferred taxes -7,910 -1,406 -343 -82
Total -24,132 -14,399 5,338 1,377 Parent company Deferred tax income primarily refers to endowment insurance provisions and employer's contribution. Group Parent company Year’s deferred tax expense/ deferred tax income 2007 2006 2007 2006 Deferred tax expense regarding temporary differences -9,721 -1,706 -343 -178
Deferred tax income regarding temporary differences 1,811 300 – 96
Year's deferred tax in the income statement -7,910 -1,406 -343 -82
Parent company
Tax regarding items directly recognised in equity 2007 2006 Tax effect from Group contributions 10,512 5,842
Total 10,512 5,842
Group Parent company Tax rate Difference between tax in income statement The Group and parent company’s applicable tax rate and tax based on applicable tax rate 2007 2006 2007 2006 amounts to 28%. Profit/loss before tax 92,075 50,119 -543 -5,725
Tax as per applicable rate -25,781 -14,033 152 1,603 The Group’s effective tax rate amounts to 26.2% (28.7). The parent company’s effective tax rate Tax attributable to prior years -189 -34 -32 -23 amounts to -983.1% (-24.1). Tax effect from non-deductible costs -858 -604 -3,165 -51
Tax effect from tax-exempt revenue 664 11 6,448 5
Tax on standard interest, tax allocation reserves -132 -174 -113 -157
Tax effect of share issue expenses in equity 2,048 – 2,048 –
Effect of non-recorded tax asset -14 -10 – –
Effect of foreign tax rates 130 445 – –
Taxes on year’s outcome as per income statement -24,132 -14,399 5,338 1,377
48 2007 annual report / Accounts and notes
Note 11. Discontinued operation
Group In December 2006, the board decided to phase out Previous effects of discontinued operation 2007 2006 Cybercom Norge AS, the Norwegian operation; Operating revenue 784 9,005 8 employees were affected. The closure was com- Operating expenses -1,629 -10,882 pleted on 31 December 2007.
Depreciation, amortisation, and impairment – -529
Operating loss -845 -2,406 Financial items 289 -298
Current tax – 4,835
Deferred tax -355 -2,560
Loss from discontinued operation -911 -429 Loss per share from discontinued operation, SEK -0.06 -0.03
Note 12. Intangible non-current assets Along with goodwill impairment testing, estimates are made of the recoverable amount based on the future cash flow that the asset is judged to be able to gener- Group Parent company ate. Value of future cash flows significantly depends Goodwill 2007 2006 2007 2006 on the interest rate that is used in the calculations. Assumptions and assessments performed in conjunc- Opening acquisition cost 130,139 129,841 4,930 – tion with the 2007 impairment testing are described Through merger of subsidiaries – – – 4,930 below. Cash flow is forecast for the next five years, Through acquisition of subsidiaries 141,921 – – – based on outcome for the segment in the current year. Since the operation's cash flows are forecast without Year's purchases 485,972 760 – – accounting for financial items, the interest rate applied Translation differences 12 -462 – – in the calculations of discounting cash flows must re- Closing accumulated acquisition costs 758,044 130,139 4,930 4,930 flect the weighted capital cost for shareholders' equity and loan financing, i.e., the weighted average cost of Opening amortisation – – -1,890 – capital (WACC). To determine the WACC, these fac- Through merger of subsidiaries – – – -1,397 tors must be estimated: Year's amortisation – – -493 -493 – Debt/equity ratio (financing mix) – The required return on shareholders' equity Closing accumulated amortisation – – -2,383 -1,890 – Cost of long-term loan financing Carrying amount 758,044 130,139 2,547 3,040 The level of return required on shareholders' equity is normally based on the capital asset pricing model Goodwill by business division 2007 2006 (CAPM); so required return is based on risk-free Sweden – 111,081 interest, with addition of a risk premium. The risk-free International – 14,128 interest rate corresponds to that of a 10-year govern- ment bond, about 5% (4%). Other – 4,930
Total – 130,139 The risk premium comprises: – General compensation for share-investment risks. This market risk premium was estimated to be about 4%, which is unchanged from last year. – A weighting up or down for the investment's risk, relative to the market average. This factor was estimated to be about 1.25 (1.3). – A supplement considering the segment's size and a supplement for specific risk conditions. In the segment's case (besides size-related supplement) this means, e.g., absence of a track record to support positive future financial trends and special dependent relationships (primarily customers and key people). Together, these supplements were estimated to about 1% (1 percentage point lower than previous years, based on the segment's per- formance last year).
The total interest rate for calculation purposes (median value in the above interval) before tax was based on the above factors and estimated to be: 5% + 1.25 x 4% + 1% = 11%
Considering the above information, there is no impairment loss. 49 2007 annual report / Accounts and notes
Group Parent company Licence rights 2007 2006 2007 2006 Opening acquisition cost 3,804 3,255 2,081 1,655
Purchases 775 549 670 426
Closing accumulated acquisition costs 4,579 3,804 2,751 2,081 Opening amortisation -2,026 -1,600 -415 –
Year's amortisation -531 -426 -500 -415
Closing accumulated amortisation -2,557 -2,026 -915 -415 Closing scheduled residual value 2,022 1,778 1,836 1,666
Group Customer relationships 2007 2006 Opening acquisition cost – –
Through acquisition of subsidiaries 56,060 –
Closing accumulated acquisition costs 56,060 – Opening amortisation – –
Year’s amortisation -3,737 –
Closing accumulated amortisation -3,737 – Closing scheduled residual value 52,323 –
Group Trademarks 2007 2006 Opening acquisition cost 4,000 4,000
Closing accumulated acquisition costs 4,000 4,000 Opening amortisation -667 -267
Year’s amortisation -400 -400
Closing accumulated amortisation -1,067 -667 Closing scheduled residual value 2,933 3,333
Group Patents 2007 2006 Opening acquisition cost 1,279 1,132
Through acquisition of subsidiaries 1,234 –
Purchases 84 147
Sales -75 –
Translation differences 106 –
Closing accumulated acquisition costs 2,628 1,279 Opening amortisation -844 -603
Through acquisition of subsidiaries -848 –
Year’s amortisation -358 -241
Sales 41 –
Translation differences -83 –
Closing accumulated amortisation -2,092 -844 Closing scheduled residual value 536 435
50 2007 annual report / Accounts and notes
Note 13. Property, plant, and equipment In 2006, these subsidiaries merged with the parent company Cybercom Group Europe AB (corporate Group Parent company ID in parentheses): • Cyber Com Consulting EC AB Equipment 2007 2006 2007 2006 (556554-3161) Opening acquisition cost 27,430 28,775 5,468 4,951 • Cyber Com Net Business Consulting AB Purchases 8,210 5,001 217 518 (556567-9445) Sales and disposals -16,421 -6,001 -3,851 -167 • Cyber Com Mobile Communication Through acquisition/merger of subsidiaries 40,832 – 23 166 Scandinavia AB
Translation differences -1,120 -345 – – (556577-1606) • Cyber Com Consulting Innovation Closing accumulated acquisition costs 58,931 27,430 1,857 5,468 Stockholm AB Opening depreciation -16,567 -16,528 -2,987 -2,137 (556535-3389) Sales and disposals 11,233 4,977 2,579 125 • Cyber Com Consulting 603 AB Through acquisition/merger of subsidiaries -26,320 – -4 -76 (556538-0432)
Year’s depreciation -7,814 -5,101 -750 -899 • Cyber Com Consulting Business Uniware AB Depreciation from discontinued operation – -97 – – (556542-2127) Translation differences 1,262 182 – – • Cyber Com Consulting Business Solutions AB Closing accumulated depreciation -38,206 -16,567 -1,162 -2,987 (556544-6332) Closing scheduled residual value 20,725 10,863 695 2,481 • Cyber Com Consulting ConcentIT AB (556563-8359) • Cyber Com Consulting Communications i Stockholm AB Note 14. Financial assets (556566-1575) • Cyber Com Consulting CoreTech Stockholm AB
Parent company (556566-0452) • Cyber Com Pir New World Media AB Shares in Group companies 2007 2006 (556571-9845) Opening acquisition cost 316,963 342,686 • Cyber Com Consulting PM AB Additional purchase price – 760 (556575-7589) Shareholder contribution 1,110 – • Cyber Com Consulting ProvideIT AB Merger of subsidiaries – -26,483 (556575-9783) • Cyber Com Consulting ConnectIT i Sverige AB Closing accumulated acquisition costs 318,073 316,963 (556579-4608) Opening write-down -165,406 -165,406 • Cyber Com Consulting Electronic Business AB Year’s write-down -11,026 – (556579-4582) Closing write-down -176,432 -165,406 • Cyber Com Consulting AE BS AB Carrying amount 141,641 151,557 (556576-8347) • Cyber Com Consulting I-Net Solutions AB (556577-4717) No. of Carrying Corporate ID Site shares amount • Cyber Com Consulting Syd AB Cybercom Stockholm IT AB 556497-0787 Stockholm 1,001 120 (556581-6674) • Cyber Com Intra-X AB Cyber Com Consulting Uppsala AB 556544-6225 Stockholm 1,000 120 (556498-6825) Cybercom Group Stockholm AB 556551-4493 Stockholm 1,000 120 • Cyber Com StreamIT AB Cybercom Nord AB 556554-8673 Stockholm 1,000 120 (556551-4568) Global Communication Solutions Nordic AB 556566-0445 Stockholm 1,000 120 • Mobility Partner Europe AB Cyber Com IT Consulting GB Ltd * 3471825 London 45,000 0 (556582-4421)
Cybercom Mobility Stockholm AB 556578-2694 Stockholm 1,000 120 In 2006, this second-tier subsidiary merged with Cyber Com Consulting A/S 25795938 Copenhagen 5,549 14,806 Cybercom CG SIT AB, the parent company: Cybercom Group UK Ltd 3064392 London 100 14,692 • Cybercom Öst AB (556591-6524)
Cybercom CGSIT AB 556518-3455 Stockholm 1,114,350 68,636 Most of the merged subsidiaries were inactive Cybercom Netcom Consultants AB 556359-1097 Stockholm 5,000 42,787 until the mergers were registered. Together, Total 141,641 the merged subsidiaries contribute net sales
* Share of capital and votes is 90%. Ownership in other Group companies is 100%. of SEK 799 thousand and operating loss of SEK 653 thousand to the parent company’s accounts.
51 2007 annual report / Accounts and notes
Other wholly owned companies in the Group Corporate ID Site No. of shares Cybercom Sweden East AB 556254-0673 Stockholm 20,000,000
Dotify Solutions AB 556677-8626 Stockholm 1,000
Cybercom Sweden South AB 556219-4471 Malmö 1,500
Cybercom 669 AB 556476-9288 Malmö 5,000
Cybercom Sweden North AB 556556-9463 Östersund 1,000
Pronyx AB 556452-6225 Nyköping 6,677,983
Cybercom 671 AB 556273-9200 Stockholm 1,000
Pronyx Automation AB 556420-6323 Östersund 1,500
Pronyx Process AB 556481-9851 Nyköping 5,000
Pronyx Sweden AB 556207-4889 Nyköping 25,000
Cybercom Sweden West AB 556262-4691 Gothenburg 1,000 auSystems Danmark 25612655 Copenhagen 500 auSystems Poland Sp. Z o.o 0000036076 Warsaw 2,000
Cybercom Syd AB 556591-8421 Stockholm 10,000
Cybercom Syd Varchar AB 556582-8299 Lund 1,000
Diator Netcom Consultants Asia Pacific PTE Ltd 199707629N Singapore 100,000
Group The Group owns 50% of Cybercom Datamatics Holdings in joint venture 2007 2006 Information Solutions Ltd, a joint venture in India Assets (corporate ID: U72900MH2000PTC123469, Non-current assets 1,094 570 registered in Mumbai). Amounts in the table are Current assets 6,411 2,021 included in the Group's income statement and balance sheet. They constitute the Group's 50% 7,505 2,591 share in the assets, liabilities, sales, and profits of Liabilities this joint venture. Current liabilities 871 368 No contingent liabilities arise from the Group's 871 368 share in this joint venture, and the joint venture has Net assets 6,634 2,223 no contingent liabilities. Income 6,572 2,343
Expenses -5,288 -1,698
Year's profit 1,284 645 Group share in joint-venture assignments 100 100
Group Parent company
Other financial assets 2007 2006 2007 2006 Opening acquisition cost 688 358 2,312 –
Purchases – 688 – 2,312
Through acquisition of subsidiaries 551 – – –
Sales/amortisation -542 -358 – –
Translation differences 3 – – –
Closing accumulated acquisition costs 700 688 2,312 2,312 Opening impairment loss – – – –
Closing accumulated impairment loss – – – – Fair value 700 688 2,312 2,312
52 2007 annual report / Accounts and notes
Note 15. Accounts receivable
Group Parent company These values correspond to fair value. 2007 2006 2007 2006 Accounts receivable 322,265 122,479 1,842 2,256
Bad debts -1,264 -1,069 – –
Net accounts receivable 321,001 121,410 1,842 2,256
Note 16. Other receivables
Group Parent company These values correspond to fair value. 2007 2006 2007 2006 Non-invoiced revenue for service assignments 35,286 32,204 – 10,571
Other items 9,212 10,838 576 3,568
Total 44,498 43,042 576 14,139
Note 17. Prepayments
Group Parent company These values correspond to fair value. 2007 2006 2007 2006 Prepaid rent 4,543 3,178 195 1,792
Prepaid leasing fees 2,696 227 2,127 178
Prepaid insurance premiums 4,061 1,254 722 508
Prepaid services and fees 1,466 714 153 54
Prepaid licence fees 2,045 397 1,662 369
Prepaid data communication 306 59 27 49
Prepaid acquisition costs 2,697 – 2,697 –
Other items 13,189 448 87 54
Total 31,003 6,277 7,670 3,004
53 2007 annual report / Accounts and notes
Note 18. Shareholders' equity
Group Share capital consists of 22,384,362 shares with a Translation difference in equity 2007 2006 quotient value of 1. All shares are fully paid up. Opening balance -3,552 -2,471
Year's change 4,487 -1,081
Closing balance 935 -3,552
Group Warrant programme 9 was implemented in November Warrants 2007 2006 2003 per these conditions: No. of outstanding warrants at year's start 115,000 30,000 No. of subscription rights issued: 200,000 Warrants exercised -114,000 – Subscription period: 16 August 2006 – 16 January 2007 Strike price: SEK 32.92 Warrants in the company's custody – 170,000
Warrants not exercised -1,000 – Warrant programme 9 was for employees in the UK. Less warrants in the company's custody – -85,000
No. of outstanding warrants at year's end 0 115,000
Note 19. Untaxed reserves
Parent company
SEK thousand 2007 2006 Tax allocation reserve, tax assessment 2002 – 8,858
Tax allocation reserve, tax assessment 2003 326 326
Tax allocation reserve, tax assessment 2004 515 515
Tax allocation reserve, tax assessment 2006 1,026 1,026
Tax allocation reserve, tax assessment 2007 5,190 5,190
Tax allocation reserve, tax assessment 2008 5,798 –
Accumulated excess depreciation 2,451 3,296
Total 15,306 19,211
54 2007 annual report / Accounts and notes
Note 20. Deferred tax
Group Parent company Temporary differences exist in those cases where Deferred tax assets 2007 2006 2007 2006 the carrying amounts and tax bases are different Non-deductible depreciation and for assets or liabilities. Temporary differences re- impairment of equipment 87 665 50 244 lating to the items above resulted in deferred tax Endowment insurance and liabilities and deferred tax assets. employer’s contribution 758 819 758 819 Deferred tax assets and tax liabilities are offset Reserves 300 325 – 88 when there is a legal offset right for current tax Goodwill from net assets acquisition 40,004 – – – assets and tax liabilities and when deferred taxes Loss carry-forwards 22,206 – – – refer to the same tax authority. After offsetting, the above amounts were derived and recognised on Total deferred tax assets 63,355 1,809 808 1,151 the balance sheet.
Deferred tax liabilities Accumulated excess depreciation -1,713 -939 – –
Tax allocation reserve -7,712 -5,011 – –
Amortisation of goodwill from net assets acquisition -996 -701 – –
Trademark -821 -933 – –
Customer relationships -14,651 – – –
Other -201 -201 – –
Total deferred tax liabilities -26,094 -7,785 – – Deferred tax, net 37,261 -5,976 808 1,151
Group Parent company
Amounts on the balance sheet include: 2007 2006 2007 2006 Deferred tax asset used after more than 12 months 42,594 1,139 666 869
Deferred tax liability payable after more than 12 months -22,877 -4,254 – –
Group Parent company
Change in deferred tax assets 2007 2006 2007 2006 Claims at period’s start 1,809 5,199 1,151 557
Tax attributable to earlier years – -36 – -33
Through acquisition of subsidiaries 68,732
Discontinued/merged operation -355 -2,560 – 709
Period change in income statement -6,853 -712 -343 -82
Translation difference 22 -82 – –
Carrying amount 63,355 1,809 808 1,151
Group
Provision for deferred tax 2007 2006 Provision at period’s start 7,785 7,091
Through acquisition of subsidiaries 17,233 –
Period's provision in income statement 2,868 994
Dissolution of provision in income statement -1,811 -300
Translation difference 19 –
Carrying amount 26,094 7,785
55 2007 annual report / Accounts and notes
Note 21. Other non-current liabilities
Group Parent company These values correspond to fair value. SEK thousand 2007 2006 2007 2006 The Nordea loan matures in 2012 and is Employer’s contribution to endowment insurance 456 498 456 498 a variable-rate loan. Loan, Nordea 274,000 – – –
Debt to auSystems' previous shareholders 23,373 – – –
Total 297,829 498 456 498
Note 22. Other current liabilities
Group Parent company These values correspond to fair value. SEK thousand 2007 2006 2007 2006 The Nordea loan is a variable-rate loan. Tax-related liabilities 20,401 11,302 401 484
Loan, Nordea 66,000 – – –
Derivatives – 150 – 150
Other current liabilities 14,981 8,323 - -
Total 101,382 19,775 401 634
Note 23. Accruals and deferred income
Group Parent company
SEK thousand 2007 2006 2007 2006 Accrued salaries 28,896 11,732 2,832 4,030
Accrued holiday pay 44,286 13,780 492 849
Accrued social security costs 37,534 13,712 1,280 1,913
Accrued external services 9,477 2,651 1,679 –
Other items 9,976 7,631 194 2,500
Total 130,169 49,506 6,477 9,292
Note 24. Contingent liabilities and commitments
The shares in the acquired companies were pledged when the loan was raised for the auSystems acquisition. Group value of this pledging was SEK 619.7 million on 31 December 2007. In addition, SEK 39.3 million in utilised floating charges on assets were pledged.
The Group had no pledged assets or contingent liabilities in 2006.
56 2007 annual report / Accounts and notes
Note 25. Financial instruments per category
The accounting policies for financial instruments Loans receivable and Liabilities at were applied to these items. Assets and liabilities on the balance sheet accounts receivable amortised cost Total
Accounts receivable 322,265 322,265 These values correspond to fair value. Other receivables 44,498 44,498
Cash and cash equivalents 82,035 82,035
Other non-current liabilities -274,000 -274,000
Accounts payable -83,697 -83,697
Other current liabilities -66,000 -66,000
Total 448,798 -423,697 25,101
Recorded amount, per currency for each category:
Accounts Accounts receivable Other payable Other Currency – trade receivables – trade liabilities Total SEK 247,627 38,194 -69,082 -340,000 -123,261
CHF 1,150 – – – 1,150
DKK 19,829 – -4,368 – 15,461
EUR 21,453 – -3,872 – 17,581
GBP 14,132 1,075 -5,269 – 9,938
NOK 2,404 – – – 2,404
PLN 5,841 3,598 -821 – 8,618
RPS – 1,157 – – 1,157
SGD – 474 -1 – 473
USD 9,829 – -284 – 9,545
Total 322,265 44,498 -83,697 -340,000 -56,934
Maturity structure, borrowings Maturity structure, accounts receivable Of the accounts receivable that are due, Total of Period SEK 104,299,000 do not qualify for impairment, amortisation 1–30 days 77,448 because these apply to customers that previously Year and interest* 31–60 days 13,873 had no bad payment records. 2008 72,302 61–90 days 996 2009 70,983 Credit is assessed as good for accounts receivable > 90 days 13,246 that are not due or reserved. 2010 69,663 Total 105,563 2011 80,254
2012 64,777
Total 357,979
* Future interest payments based on interest rate as per 31 December 2007.
Note 26. Interest
Group Parent company
SEK thousand 2007 2006 2007 2006 Interest received 3,060 1,879 2,094 1,216
Interest paid -23,432 -10 -774 -212
Interest, net -20,372 1,869 1,320 1,004
57 2007 annual report / Accounts and notes
Note 27. Adjustments for items not included in cash flow
Group Parent company
SEK thousand 2007 2006 2007 2006 Depreciation 12,840 6,168 1,743 1,807
Unrealised exchange-rate differences 5,330 – – –
Fair value derivatives – 822 – –
Loss from disposal of non-current assets 5,222 23 1,272 42
Write-down of shares in subsidiaries – – 11,026 –
Merger of subsidiaries – – – 30,885
Other – 885 – 173
Total 23,392 7,898 14,041 32,907
Note 28. Investments in property, plant, and equipment and intangible non-current assets
The year’s total investments in property, plant, and equipment and intangible non-current assets are:
Group Parent company
Intangible non-current assets 2007 2006 2007 2006 The year’s investments -685,197 -1,456 -670 -426
Group value of assets in new subsidiaries 684,338 – – –
Effect on cash and cash equivalents in investing activities -859 -1,456 -670 -426
Group Parent company Property, plant, and equipment 2007 2006 2007 2006 The year’s investments -22,722 -5,001 -236 -518
Group value of assets in new subsidiaries 14,512 – – –
Effect on cash and cash equivalents in investing activities -8,210 -5,001 -236 -518
58 2007 annual report / Accounts and notes
Note 29. Acquisition of subsidiaries
Cybercom Syd AB acquired 100% of Varchar AB's Purchase price share capital on 2 January 2007. Varchar is an Cash payment 12,500 IT consultancy that has about 25 employees and Expenses directly linked to the acquisition 443 specialises in .NET technology. The fixed pur- chase price was SEK 12,500 thousand, which was Additional purchase price 4,689 entirely paid in cash. An additional performance- Total purchase price 17,632 based purchase price of SEK 4,689 thousand was Fair value for acquired net assets -1,689 paid.
Goodwill 15,943 Goodwill of SEK 15,943 thousand arose in con- junction with the acquisition and was attributable to the greater depth of expertise and expanded cus- Carrying Fair tomer base that Varchar contributed to Cybercom. Acquired net assets amount value Property, plant, and equipment 215 215 The total value of the acquired assets and liabili-
Other current assets 4,634 4,634 ties, purchase price, and effect on the Group’s cash and cash equivalents concerning Varchar is Deferred tax liability -141 -141 shown in the table. Current liabilities -3,019 -3,019
Acquired net assets 1,689 1,689
Investing activities Cash settled purchase price 17,632
Cash and cash equivalents in acquired subsidiary -685
Effect on Group cash and cash equivalents from acquisition 16,947
Cybercom acquired auSystems in Sweden, Purchase price Poland, and Denmark, with about 700 employees, Cash payment 730,000 on 20 April 2007. The fixed purchase price was Payment of subsidiaries' loan to Teleca -172,847 SEK 730,000 thousand, paid entirely in cash. An additional purchase price of SEK 23,373 thousand Expenses directly linked to the acquisition 14,045 was entered as a liability. The additional purchase Additional purchase price 23,373 price comprises 50% of the tax effect of amortising Total purchase price 594,571 goodwill from net assets acquisition regarding one of the acquired companies. Fair value for acquired net assets -124,543
Goodwill 470,028 Goodwill of SEK 470.0 million arose in conjunction with the acquisition and was attributable to the greater depth of expertise and geographic coverage Carrying Fair that auSystems contributed to Cybercom. Also, Acquired net assets amount value SEK 56.1 million of the purchase price was allo- Goodwill from net assets acquisition 168,531 141,921 cated to customer relationships.
Customer relationships - 56,060 The total value of the acquired assets and liabilities, Other intangible non-current assets 386 386 purchase price, and effect on the Group’s cash and Property, plant, and equipment 14,297 14,297 cash equivalents concerning auSystems is shown in the table. Financial assets 551 551
Deferred tax asset 168 68,732
Other current assets 281,555 281,555
Deferred tax liability -1,395 -17,092
Current liabilities -416,126 -421,867
Acquired net assets 47,967 124,543
Investing activities Cash settled purchase price 571,198
Cash and cash equivalents in acquired subsidiary 4,685
Effect on Group cash and cash equivalents from acquisition 575,883
59 2007 annual report / Accounts and notes
The next table shows sales, the year's profit, and earnings per share for 2007 as if the Varchar and auSystems acquisitions had taken place on 1 January 2007.
Acquired companies' contribution to Group sales auSystems Varchar Cybercom Total and profit in 2007. Sales 294,717 – 1,164,974 1,459,691
Year's profit 28,694 – 67,032 95,726 The profit for auSystems includes a negative SEK 3,737 thousand for amortisation of Earnings per share, SEK 1.91 – 4.46 6.37 customer relationships and interest expense of SEK 5,569 thousand.
auSystems Varchar Sales 542,238 23,825
Year's profit 25,083 4,026
An additional purchase price of SEK 760 thousand Purchase price 2007 2006 was paid in 2006 for acquisition of Netcom Consul- Additional purchase price – 760 tants AB. Total purchase price – 760 For more information on this acquisition, see the Fair value for acquired net assets – – 2005 and 2006 annual reports. Goodwill – 760
Investing activities 2007 2006
Cash settled purchase price – 760
Cash and cash equivalents in acquired subsidiary – –
Effect on Group cash and cash equivalents from acquisition – 760
Note 30. Disposal of assets and liabilities
Group A further additional purchase price, of 2007 2006 SEK 1,569 thousand, was obtained for CyberMate Selling costs – 1,569 in 2006. This comprised an internally generated Total purchase price – 1,569 intangible non-current asset, which was disposed of in 2005. Offset against liability to the buyer – -1,569
Purchase price financed via loan to the buyer – 5,091 For more information on the disposal of assets Investment, fixed one year – 1,591 and liabilities, see the 2005 and 2006 annual reports. Effect on Group cash and cash equivalents from disposal – 6,682
Note 31. Cash and cash equivalents
Group Parent company
2007 2006 2007 2006 Current investments 411 1,014 – –
Cash and bank deposits 81,624 87,911 65,159 68,165
Cash and cash equivalents 82,035 88,925 65,159 68,165
60 2007 annual report / Accounts and notes
Note 32. Related party transactions
The parent company’s purchases from and sales Decisions on board and executive remuneration to Group companies and benefits During the year the parent company sold internal services for adminis- Each year, the AGM sets the board’s remuneration. The board sets the tration, management, and rental of premises with applicable services annual remuneration and benefits for the CEO and president (for which for SEK 40,620 thousand to Group companies. The figure for 2006 was the chairperson is ultimately responsible) and remuneration and benefits SEK 42,453 thousand. for other executives.
In 2007, the parent company bought services for SEK 3,698 thousand Other transactions from Group companies. These services comprised systems support for Separate notes contain data on: administrative systems in the Group. Equivalent purchases in 2006 were • Salaries and remuneration to the CEO and board SEK 1,045 thousand. • Transactions with Group companies • As per IAS 24, no other transactions with related parties occurred Purchases from and sales to related parties in 2007. No such purchases or sales took place in 2007. Board and executive remuneration and benefits Benefits for executives In 2007, salary and remuneration to the CEO and Group vice president Base Variable Other Pension Year / name salary Other pay benefits costs Total in the parent company amounted to SEK 5,284 thousand (7,614), of 2007 which SEK 532 thousand (925) comprised variable bonuses. Patrik Boman, CEO 1,339 – 412 – 609 2,360
Salary and remuneration paid to other executives amounted to Peter SEK 14,645 thousand (10,314), of which SEK 2,874 thousand (1,307) Keller-Andreasen, Group vice president 3,413 – 120 – – 3,533 comprised variable bonuses. This refers to 11 people (9), of whom 2 (1) worked part of the year. Executives 11,770 – 2,875 – 1,586 16,231 Board chairman For persons mentioned above, there is no compensation after employ- Wigon Thuresson 300 – – – – 300 ment termination (SEK 146 thousand last year), and no compensation Board member during the period of notice (SEK 2,070 thousand last year). Salary and Per Edlund 150 – – – – 150 remuneration paid to executives comprises two parts: one fixed and Board member one variable. The fixed part is comparable to the person’s basic salary; Eva Gidlöf 150 – – – – 150 the variable part is based on achieved objectives during the year. One Board member executive has no variable remuneration. A medical insurance benefit is Ulf Körner 150 – – – – 150 available for executives. Board member Thomas Landberg 125 – – – – 125 Executives receive premium-based pension benefits. The CEO receives Board member pension benefits amounting to 30% of his basic salary. The Group vice Per Norén 150 – – – – 150 president receives no pension benefits. Other executives receive pen- Board member sion benefits as per the Group’s premium plan, based on age and sal- Lars Persson 150 – – – – 150 ary. Apart from the above benefits for executives, there are no specific pension benefits. 2006 Other agreements with executives Peter Keller- If the company terminates the employment contract, a 6-month period Andreasen, CEO 212 – – – – 212 of notice applies to the CEO and an 18-month period applies to the Mats Alders, CEO 2,184 278 655 32 655 3,804 Group vice president – without severance pay. For other executives, Bengt Levin, a 6-12-month period of notice applies if the company cancels their Group vice president 1,800 2,183 270 0 764 5,017 contracts. If the company cancels the contract, one executive has the Executives 8,342 513 1,307 151 1,047 11,361 right to 6-months severance pay – in addition to salary during the period Board chairman of notice. Per-Eric Fylking 250 – – – – 250 Benefits for the board Board member Per Edlund 125 – – – – 125 Board fees were SEK 1,175 thousand, of which SEK 300 thousand were paid to the chairman; SEK 150 thousand each went to five board Board member Eva Gidlöf 125 – – – – 125 members and SEK 125 thousand to board member Thomas Landberg who worked for part of the year. Board member Ulf Körner 125 – – – – 125 Warrants Board member There are no outstanding warrants for executives (35,000 last year). Per Norén 125 – – – – 125 Board member Lars Persson 125 – – – – 125
61 2007 annual report / Accounts and notes
Note 33. Events after year-end Acquisition of subsidiary Purchase price On 23 January 2008, Cybercom Group Europe AB Cash payment 206,236 acquired 100% of the share capital in Plenware Oy. Settlement of acquired debt 28,421 Takeover occurred on 1 January 2008. Plenware is a Finnish IT Group with about 550 employees in Newly issued Cybercom shares 103,322 China, Estonia, Finland, and Romania. The fixed Expenses directly linked to the acquisition 7,512 purchase price was SEK 309,558 thousand Fair value of acquired net assets 23,684 (EUR 32.7 million), which was paid in cash – SEK 206,236 thousand (EUR 21.8 million) – and Total purchase price 369,175 newly issued Cybercom shares – 1,923,347 at Fair value of acquired net assets -58,006 SEK 53.72/share (EUR 10.9 million). The contact Goodwill 311,169 commits Cybercom to take over debts and obli gations up to at most EUR 14.2 million. If the debts were lower at takeover, then an additional purchase price equal to the difference between Carrying the maximum amount and the actual value of Acquired net assets amount Fair value the debt would be paid. At takeover, debts were Intangible non-current assets 156,389 156,389 EUR 3 million lower than contracted, so an addi- Property, plant, and equipment 27,439 27,439 tional SEK 28,421 thousand (EUR 3 million) is paid as a purchase price settlement. The addi- Financial assets 84 84 tional purchase price was based on 2007 profit, Deferred tax asset 1,260 1,260 which will reach EUR 2.5 million. An additional Other current assets 70,484 70,484 purchase price of at most EUR 5.5 million, based on 2008 profit, might be paid. Deferred tax liability -13,736 -13,736
Non-current liabilities and provisions -55,807 -55,807 Preliminary goodwill of SEK 311,169 thousand Current liabilities -128,107 -128,107 arose in conjunction with the acquisition and was mainly attributable to the expanded geographic Acquired net assets 58,006 58,006 coverage and customer base that Plenware Investing activities contributed to Cybercom. Cash settled purchase price 242,169
Cash and cash equivalents in acquired subsidiary -19,375 The total value of the acquired assets and liabili- ties, purchase price, and effect on the Group’s Effect on Group cash and cash equivalents from acquisition 222,794 cash and cash equivalents concerning Plenware is shown in the table.
The acquisition analysis is preliminary.
62 2007 annual report / Accounts and notes
Auditor's report
Cybercom submitted the original auditor's report below (for statement below on discharge from liability, we examined significant de- the endorsed 2007 annual report) to the Swedish Companies cisions, actions taken, and circumstances of the company – to be able Registration Office from which copies of the original may be to determine whether any board member or the president is liable to the requested. company, and whether they have in any other way acted in contraven- tion of the Swedish Companies Act, the Swedish Annual Accounts Act, To the AGM of Cybercom Group Europe AB or the Articles of Association. (Swedish corporate ID 556544-6522) We audited the 2007 annual accounts, consolidated accounts, and The annual accounts were prepared as per the Swedish Annual bookkeeping plus administration of the company by the board and CEO Accounts Act and thus provide an accurate picture of the company’s of Cybercom Group Europe AB. The board and CEO are responsible for outcome and position, according to generally accepted auditing stan- the accounts and company administration, for ensuring that the annual dards in Sweden. The consolidated accounts comply with the EU- accounts comply with the Annual Accounts Act and the EU-adopted adopted IFRS and thus provide an accurate picture of the Group’s out- IFRS, and ensuring that the consolidated accounts comply with the come and position. The board’s report is consistent with the annual Annual Accounts Act. We are responsible for expressing an opinion accounts and the consolidated accounts. (based on our audit) on the annual accounts, consolidated accounts, and administration. We recommend that the AGM adopt the income statement and balance sheet for the parent company and the Group, allocate the profit of the We conducted our audit according to generally accepted auditing parent company as per the proposal in the board’s report, and discharge standards in Sweden. These standards require us to plan and perform the board members and the president from liability for the financial year. the audit to obtain reasonable assurance that the annual accounts and consolidated accounts are free of material misstatement. An audit Stockholm, 7 April 2008 includes examining, on a test basis, evidence supporting the amounts and disclosures in the accounts; it also includes assessing the account- Öhrlings PricewaterhouseCoopers AB ing 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 Ulf Pettersson accounts and the consolidated accounts. As supporting evidence for our Authorised public accountant
63 2007 annual report / Corporate governance report
Corporate governance report
Cybercom’s board and executives actively work with corporate gover- Authorising the board to buy back shares nance. The nomination committee puts stringent demands on the com- The board was authorised to buy back Cybercom shares – on one or petence profiles of the board members. The remuneration committee more occasions, corresponding to a maximum of 10% of Cybercom’s strives to create the best possible terms for reasonable remuneration share capital – during the period until the next AGM, as proposed by the and bonus levels. The audit committee consists of all board members board. who work closely with Cybercom’s auditors. Proposals from individual shareholders may be sent to the committee by mail via Cybercom’s Authorising the board to take out a participating main office in Stockholm. loan or an equity loan The board was authorised to take out a participating loan or an equity Cybercom is not obliged to apply the Swedish code of corporate gov- loan – on one or more occasions – during the period until the next AGM. ernance. But Cybercom’s board decided to largely follow the principal aspects of the code. The board believes that the company fulfils the Nomination committee code’s requirements and that the code does not currently lead to any Per Edlund, John Örtengren, and Magnus S Eriksson were appointed substantial changes. nomination committee members.
A complete description of Cybercom Group’s corporate governance ef- Remuneration committee forts is displayed at www.cybercomgroup.com The AGM appointed Wigon Thuresson, Per Edlund, and Eva Gidlöf remuneration committee members. Exceptions from application of the code Code items: New articles of association • 2.3.1–2.3.4 – Auditor appointment. Proposed auditor appointments The AGM accepted new articles of association as per the new Compa- are submitted to the board. The board is responsible for information nies Act requirements. on and presentation of the proposed auditor, as per the code, when an auditor must be appointed. Nomination committee • 3.6.3 – Financial reporting. Cybercom’s auditor did not fully review the The 2007 AGM elected a nomination committee consisting on Per Edlund, company’s interim reports. John Örtengren, and Magnus S Eriksson. Before the 2008 AGM, the • 3.7.3 – Special review function. In 2007, Cybercom had no separate committee must submit proposals for board members, auditors, remune internal audit function. The board believes that there is no need for rations, and other relevant issues. The nomination committee prepares such a function in the operation. After acquisition of auSystems and requirement specifications and ensures that Cybercom’s board mem- Plenware, the board decided that such a function will be instituted and bers have expertise relevant to its operation. The nomination committee in 2008, Cybercom will start internal auditing. works closely with the shareholders and meets three times a year.
Aside from these exceptions, Cybercom largely follows the code. Cybercom’s 2007 AGM resolved that the nomination committee must develop and submit to the 2008 AGM proposals for: 2007 annual general meeting (AGM) • An AGM chairman Cybercom Group Europe AB (pub) held its AGM on Friday, 8 May 2007. • Board members The AGM's decisions are in agreement with the board's proposals pre- • A board chairman sented in the AGM notification. • Board remuneration, i.e., for the chairman and for other members plus remuneration for possible committee work These resolutions were made at the AGM; all were unanimous. • Auditors’ fees • Nomination and remuneration committees for the 2008 AGM. New board Wigon Thuresson and Thomas Landberg were newly elected as board members. Per Edlund, Eva Gidlöf, Ulf Körner, Per Norén, and Lars Pers- son were re-elected. Wigon Thuresson was elected as chairman.
Remuneration The AGM authorised a fee of SEK 300,000 to be paid the board chair- person and a fee of SEK 150,000 to each of the other board members.
No dividend It was resolved that no dividends would be distributed for 2007.
Authorising the board to issue shares The board was authorised to decide on new share issues of a maximum of 12,500,000 shares, on one or more occasions to increase the com- pany’s share capital, during the period until the next AGM.
64 2007 annual report / Corporate governance report
The board board members, who were elected in 2007, Thomas Landberg receives SEK 125,000 for part of the year. No special remuneration is paid to Attendance and remuneration committee members. • Total remuneration for the board: SEK 1,175,000 Attendance 5) Remunera- • Board chairperson’s remuneration: SEK 300,000 Name BRA tion 6) Shares • Other members’ remuneration: SEK 150,000/member Wigon Thuresson 1) 7/7 1/1 1/1 300,000 117 900 • Board member Thomas Landberg: SEK 125,000
Per-Eric Fylking 2) 4/5 • Committee member fees: no remuneration
Per Edlund 11/12 1/1 1/1 150,000 0 Audit committee Sverker Forsberg, The audit committee consists of all board members and is charged with employee represen proposing auditors and approving their fees. tative 3) 4/4 1/1 0 0 Eva Gidlöf 10/12 1/1 1/1 150,000 0 Remuneration committee Ulf Körner 12/12 1/1 150,000 0 The remuneration committee prepares principles for salary setting and Thomas Landberg 4) 5/5 1/1 125,000 0 employment terms and conditions for Cybercom's CEO, vice president,
Per Norén 7) 7/12 1/1 150,000 0 and other executives. The remuneration committee strives to create the best possible conditions so that benefit issues are treated carefully and Lars Persson 10/12 1/1 150,000 0 comprehensively. Alexandra Trpkoska, employee represen These members were elected to the remuneration committee at tative 3) 4/4 1/1 0 0 the AGM: • Wigon Thuresson, Cybercom board chairman 1) Elected at the 2007 AGM, after which 7 board meetings were held. • Eva Gidlöf, board member and CEO of Bankgirocentralen (BGC) AB 2) Board chair up to 2007 AGM. • Per Edlund, board member and CEO of Consafe IT AB and JCE 3) Employee representatives' work launched in autumn 2007. Gruppen Fastighets AB Robin Hammarstedt replaces Sverker Forsberg who left the company 4) Elected at the 2007 AGM. Started in June; 5 meetings held after that The remuneration committee met once in 2007; all board members 5) Board and committee presence were invited. B = Board R = Remuneration committee A = Audit committee Group management 6) Sum relates to board members' fees The president and CEO, who is also Group president, organises and 7) Resigned on 1 January 2008 of his own volition. develops the business in such a way that the board’s objectives for profitability and direction are attained. Written instructions determine Independent (as defined in the Swedish code for corporate governance) the work distribution between the board and the CEO. The rules of Member considered independent of Cybercom and its management. procedure also regulate the CEO’s financial scope. The CEO submits Member considered independent of Cybercom, its management, and its a written report to the board monthly. majority shareholders. Internal control The board consists of six members. Three of the largest owners are The board has full responsibility for the company’s internal control. represented on the board. The board represents a wide range of exper- Management and internal control follow the Group’s common reporting tise within sectors such as IT, telecom, and business development. structure, finance policy, and other policies established by the parent The board held 13 meetings in 2007. Activities included decisions on company’s board. the auSystems and Plenware acquisitions. Internal reporting procedures are audited during the annual audit. The Board remuneration in 2007 auditors annually prepare a risk analysis for the Group. The auditor’s AGM participants set the annual board fee for members elected at the review of internal controls and risks is presented in a report that is AGM to SEK 1,175,000 for 2007. Of this amount, SEK 300,000 is pay- submitted to the board. able to the board chairperson and SEK 150,000 each to the other
65 2007 annual report / Corporate governance report
The board
Wigon Thuresson (1942) Ulf Körner (1946) Board chairman since 2007 Board member since 2005 Other board positions: – Professor of telecom traffic systems at Lund Cybercom holdings: 117,900 shares University’s Faculty of Engineering (LTH) Expertise: Consultancy, acquisitions, Other appointments: Board member of growth efforts Cale Group AB Cybercom holdings: 0 shares Expertise: Telecom industry
Per Edlund (1958) Thomas Landberg (1950) Board member since 2003 New board member in 2007 MD of Consafe IT AB, Consafe Industry AB, and Other appointments: – JCE Gruppen Fastighets AB Cybercom holdings: 0 shares Other appointments: Board chairman of Docteq Expertise: International business development AB, Smarteq AB, Bruks Holding AB, and FTG experience in IT and telecom Technolygy Group AB Board member of Consafe Logistic AB Cybercom holdings: 0 shares Expertise: Acquisitions, business development
Eva Gidlöf (1957) Lars Persson (1956) Board member since 2006 Board member since 1998 MD of Bankgirocentralen (BGC) AB MD of Rymdbolaget AB Other appointments: Intellecta AB (publ.), Other appointments: Board member of BGC Holding AB, and Bankernas arbets SSC Telecom Holding AB, Svenska Basbox- givareorganisation BAO bolaget AB, Space Port Sweden AB, Neat AB, Cybercom holdings: 0 shares Universal Space Networks Inc (in the US), Expertise: Strategic consulting and operational and Turn to Törn AB management, IT industry Cybercom holdings: 0 shares Expertise: Telecom industry
Robin Hammarstedt (1970) Alexandra Trpkoska (1976) New board member in 2008 New board member in 2007 Employees' representative and senior Employee representative, business unit manager consultant Cybercom Sweden East AB at Cybercom Sweden East AB Other appointments: – Other appointments: – Cybercom holdings: 0 shares Cybercom holdings: 0 shares Expertise: – Expertise: –
66 2007 annual report / Corporate governance report
Executive team
Patrik Boman (1965) President and CEO of Cybercom Group BS in business administration and economics, Stockholm University Employed since: 2007 Previous position: MD of HiQ Stockholm AB Cybercom holdings: 20,000 shares
Peter Keller-Andreasen (1956) Vice president Cybercom Group University-trained engineer, Technical Univer- sity of Denmark Employed since: 2001 Previous positions: TietoEnator A/S, Digital A/S Cybercom holdings: 6,500 shares
Per Jonsson (1966) CFO MBA, Stockholm University Employed since: 2007 Previous positions: Metro International, Modern Holdings, Netcom Consultants, Ernst & Young, and International Business Partner Advice Cybercom holdings: 9,400 shares
Read about other executives at www.cybercomgroup.com
67 2007 annual report / Corporate governance report
Auditors
AGM participants appoint auditors every fourth year. The most recent occasion was in 2004. The auditors' task is to au- dit Cybercom's annual accounts, the accounting records, and the administration of the board of directors and the CEO. The auditors report to the board on an ongoing basis.
Öhrlings PricewaterhouseCoopers, with Ulf Pettersson as principal audi- tor, 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 describes the way in which Cybercom's organisation is structured so that bookkeeping, asset man- agement, and Cybercom's financial circumstances in general can be controlled in a satisfactory way. Auditing occurs continuously throughout the year. In 2007, auditor Ulf Pettersson participated in meetings as specified above. On behalf of Öhrlings PricewaterhouseCoopers, he presented the audit of Cybercom's bookkeeping and financial situation.
Auditors' remuneration Besides customary audits, auditing includes necessary audit-related con- sulting, work related to audit findings, or other tasks related to auditing.
Group Parent company
Auditing and 2007 2006 2007 2006 consulting fees Auditor Öhrlings Pricewaterhouse Coopers AB 2,012 1,198 1,858 1,198
PricewaterhouseCoopers, Nordic 91 67 – –
Other auditing firms 293 179 – –
Other consulting Öhrlings Pricewaterhouse Coopers AB 45 277 44 277
PricewaterhouseCoopers, Nordic 6 14 – –
Other auditing firms 46 12 – –
Total 2,493 1,747 1,902 1,475
68 2007 annual report / Information
Information
Annual general meeting of shareholders (AGM) The AGM of Cybercom Group Europe AB (publ) will be held at 3 PM on Tuesday, 22 April at the company's head office at Årstaängsvägen 19 B, Stockholm. A notice convening the meeting is issued via a press release and published in the Post and Inrikes Tidningar, Dagens Industri, and Svenska Dagbladet and on Cybercom's web site.
Shareholders who wish to participate in the AGM must: • Be entered in the VPC AB share database by Wednesday, 16 April 2008. • Have enrolled themselves, and the number of assistants they wish to bring with them, at the company's head office by 4 PM on Wednesday, 16 April 2008 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 16 April 2008.
Submit notification by: • Phone: +46 8 578 646 00 • Fax: +46 8 578 646 10 • [email protected]
Or by normal mail (write AGM notification on the envelope) to: Cybercom Group Europe AB Box 7574 SE-103 93 Stockholm, Sweden
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!
69 2007 annual report / Information
About the annual report Cybercom is a high-tech consulting operation, whose products and ser- vices help people communicate. Technology and communication drove the design of this completely web-based annual report. By using the web's capabilities, readers can extract more from the content.
Personal information policy Cybercom does not forward personal information collected through the annual report. Information collected from visitors is not used to track individuals who 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 Cybercom Group Box 7574 103 93 Stockholm, Sweden Visitors: Årstaängsvägen 19 B Tel: +46 8 578 646 00 Fax: +46 8 578 646 10 [email protected] www.cybercomgroup.com
70 2007 annual report / Information
Addresses
Cybercom Group Singapore Lund Box 7574 Netcom Consultants Cybercom 103 93 Stockholm, Sweden 133 Cecil Street Emdalavägen 16 Visitors: Årstaängsvägen 19 B #12-04 Keck Seng Tower 223 69 Lund Tel: +46 8 578 646 00 Singapore 069535 Tel: +46 40 691 96 00 Fax: +46 8 578 646 10 Tel: +65 6536 2780 Fax: +46 40 691 96 00 [email protected] Fax: +65 6536 2781 www.cybercomgroup.com Malmö Poland Cybercom Stockholm – HQ Cybercom Box 31 Cybercom Group Europe AB (publ.) 4 Wynalazek St. 201 20 Malmö Box 7574 PL-02 677 Warsaw Visitors: Dockplatsen 12, 103 93 Stockholm Poland 211 19 Malmö Switchboard: +46 8 578 646 00 Tel: +48 (0)22 60 70 660 Tel: +46 40 691 96 00 Fax: +46 8 578 646 10 Fax: +46 40 691 96 96 Visitors: Årstaängsvägen 19 B Cybercom 25 Dowborczyków St. Stockholm UK PL-90-019 Łódź Cybercom Cybercom Group UK Ltd Poland Årstaängsvägen 19B St Clare House Tel: +48 (0)42 676 50 16 Box 47612 30-33 Minories 117 94 Stockholm London EC3N 1DD Gothenburg Tel: +46 8 726 75 00 England Cybercom Tel: +44 (0)20 7264 5900 Lindholmspiren 9 Sundsvall Fax: +44 (0)20 7264 5901 417 56 Gothenburg Cybercom Tel: +46 31 744 80 00 Storgatan 29 Denmark 852 30 Sundsvall Cybercom Huskvarna Tel: +46 60 17 40 50 Vesterbrogade 149 Cybercom Fax: +46 60 17 40 57 1620 Copenhagen Datorgatan 3 Denmark 561 33 Huskvarna Örnsköldsvik Tel: +45 70 42 42 70 Tel: +46 36 39 66 00 Cybercom Fax: +45 70 42 42 72 Strandgatan 21 Karlskrona 891 18 Örnsköldsvik India Cybercom Tel: +46 660 860 80 Cybercom Datamatics Campus Gräsvik 1 1st Floor & 2nd Floor of building known as 371 41 Karlskrona Östersund M/s. Zenith Chemical Works Pvt. Ltd. Tel: +46 455 314 000 Cybercom Plot No. B6 Skiftesvägen 3 Cross Road B, MIDC, Marol Linköping Box 3093 Andheri (East), Mumbai - 400 093 Cybercom 831 03 Östersund India Teknikringen 7 Tel: +46 63 195 100 Tel: +91 22 6710 8222 583 30 Linköping +91 22 6710 8211 Tel: +46 13 210 650 +91 22 6710 8701 Fax: +46 13 21 35 78 Fax: +91 22 2836 8678
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