Connecta
exists to
make its clients and people
successful.
Annual Report 2009
Contents
Connecta in Brief and Highlights of the Year ... 3
CEO’s Statement ... 4–5 About Connecta ... 6
Market and Clients ... 7–9 Offerings ... 10
Business Development ... 11
Skills Segments ... 12
Human Resources ... 13–14 Corporate Social Responsibility ... 15
Financial Information Financial Goals ... 18–19 The Share ... 20–21 Directors’ Report ... 22–26 Consolidated Statement of Comprehensive Income ... 27
Statement of Other Comprehensive Income ... 27
Consolidated Balance Sheet ...28
Statement of Changes in Consolidated Equity ... 29
Consolidated Cash Flow Statement ... 30
Parent Company Income Statement ... 31
Parent Company Balance Sheet ... 32–33 Statement of Changes in Parent Company Equity ... 34
Parent Company Cash Flow Statement ... 35
Notes ... 36–47 Audit Report ... 48
Five-year Review, Group ... 50
Consolidated Quarterly Data and Key Ratios ... 51
Corporate Governance Report ... 53–58 Board of Directors’ Report on Internal Controls of Financial Reporting ... 59–60 Definitions ... 61
Annual General Meeting ... 61
Board of Directors and Senior Executives ... 62
Financial Summary of 2009 ... 63
Contacts ... 64
First-quarter Interim Report: focus on sales and profitability in a challenging market
Jens Täkte appointed COO of Connecta: to ensure a sustained focus on internal efficiency, Jens Täkte was appointed COO (Chief Operating Officer). This position is a newly created management function, with responsibilities including control processes, and the supply of leadership talent.
Connecta starts a new round of its graduate trainee program: Connecta is running its graduate trainee program for the fifth consecutive year. The aim is to supplement strong hiring of experienced consultants with young, talented graduates. The start-date of the program was 1 February 2010.
Second-quarter Interim Report: focus on sales and efficiency pays off on a still-uncertain market Extraordinary General Meeting: Connecta convened an EGM in October to deal with a strategic realign- ment of part-owned subsidiaries. The Meeting unani- mously approved the Board’s proposal to acquire shares of Tarento AB, Techta AB and qb Best On and Off Shore Sweden AB (Qube), and to divest its holding in Influence AB.
Third-quarter Interim Report: sustained positive signals on a challenging market
Connecta’s CEO assigned to consulting assignments for a limited period: Per Agélii was assigned to assist one of Connecta’s key clients at a strategic crossroads.
In his absence, Executive Vice President Per Appelgren took on the CEO’s role.
Connecta launches new SAP solution for retail in Sweden: Connecta entered a partnership agreement with European SAP vendor CTAC. This partnership will mean Connecta can start delivering a new pack- aged SAP solution for retail in Sweden. This solution was developed by CTAC from experiences of some 40 successful implementations across Europe and SAP best practice for retail.
Per Appelgren appointed Connecta’s CEO: in Decem- ber, Connecta’s Board appointed Per Appelgren as CEO of the firm, succeeding Per Agélii, who will continue his project management assignment on one of Connecta’s key accounts. Per Agélii will remain on Connecta’s corporate management, and going forward, will focus on client assignments and sales.
Per Appelgren took up his duties on 1 January 2010, when Arne Richtnér, formerly VP of Sales, became Executive Vice President of Connecta.
New CEO of Connecta’s application management and outsourcing subsidiary: Peter J. Nilsson was appointed as Tarento’s new CEO. Peter joins Tarento from ICA, where he headed up ICA and Ahold’s joint development, application management and support resources.
Financial Statement: a strong conclusion to a demanding year.
Complete versions of all press releases are available at www.connecta.se
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Connecta is a Swedish management and IT consulting firm that helps companies implement complex and lasting change.
Sometimes against all odds.
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591 employees (as of 31 December 2009).
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Offices in Stockholm and Öresund.
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Five largest clients: Apoteket, Ericsson, ICA, Nordea and Sony Ericsson.
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Client offerings in Change Management, Customer Relationship Management, Finance & Performance Management,
IT Value, Strategy & Business Transforma- tion and Supply Chain Management.
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Strategic partnerships with SAP, Microsoft, IBM and Oracle.
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SAP Service Partner, Microsoft Gold Cer- tified Partner and IBM Premier Business Partner.
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Three majority-owned subsidiaries: Tarento, Techta and Qube.
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Shares traded on Nasdaq OMX Nordic Stockholm, Small Cap since 2005.
Connecta in Brief
Highlights of 2009
In late-2008, Connecta secured sixth place in Busi- ness Week’s annual European Hot Growth ranking of Europe’s profitable growth companies. At about the same time, we were also recognized as a high- growth ‘Gazelle’ company by Swedish business daily paper Dagens Industri. We’re delighted by both these awards after a total of 12 quarters of robust sales and profitability growth under our belts. We’re pleased, but unfortunately never got the chance to celebrate because it was at this time that the ground beneath our feet, and the rest of the sector, started to shake.
The financial crisis started on the other side of the Atlantic, but soon we were all affected by the un- certainty it brought. With the benefit of hindsight, the move from 2008 to 2009 felt like we’d won the sprint-finish of a marathon, to then find out we had an extra lap.
Obviously, this put strenuous demands on everyone at Connecta: personal leadership, ambition and team-spirit were probably never as important as in spring 2009. But for my own part, I got a lot of drive from the clear decisiveness harbored within Connecta. When we take on a challenge, the whole
team pulls together to achieve our collective goal — even when it seems impossible.
The early part of the year will be a period many of us at Connecta remember with mixed feelings.
We were just as much in the dark about which way the market would go as the rest of our sector peers. Generally, clients withheld their investments, and at around year-end, we had also completed a number of major engagements. In many senses, the sector was at a standstill.
Naturally, our first move was to raise the intensity of our sales. It also became important to work even closer to our key clients, who basically all faced chal- lenges that changed the conditions on our existing assignments.
Internally, we put a sharp focus on rationalizing our own business and cutting our costs. Manage- ment had to take a number of tough decisions, and now we can proudly conclude that we avoided any liquidation procedures despite discouraging utili- zation figures from time to time. The fact that we succeeded was largely due to our people’s strong loyalty to the firm.
CEO’s Statement
“ It felt like we’d won the sprint-finish of a marathon, to then find out we had an extra lap.”
Despite everything, in the midst of this uncertainty, we still succeeded in shifting our focus to those segments that would prove right for our clients and ourselves.
Our offering was extended to achieve savings and find more efficient ways to run our operations, which we achieved with Banverket, the Swedish National Rail Administration, for example. We continued to hire key skills, develop in-demand services and focus on new segments. We also chose to concentrate on completely new segments, such as consulting serv- ices in IBM software, with results including us now assisting life insurer SEB Trygg Liv on its BPM (busi- ness process management) implementation. We also started up an all-new skills segment in web portals and e-commerce. The combination of this initiative and our Microsoft know-how resulted in us being entrusted to develop national wines and spirits retail monopoly Systembolaget’s e-ordering service.
Our intensive work on closeness to clients and sales resulted in utilization increasing throughout the first half-year. Moreover, after the summer, our clients once again became willing to discuss more aggres- sive change initiatives. As a consequence, utilization figures continued upwards, and were back at respect- able levels by year-end. Meanwhile, pricing trends were negative, which remains one of the challenges for Connecta and the rest of the sector. To address this, we are continuing to develop our offering and consultants, so we constantly raise the client value of our deliveries.
Overall, it is fair to say that in 2009, we avoided going into neutral, and instead actively chose to balance our accelerator and brake pedals, with the consistent aim of securing strong positioning with the right offering and a good ability to address our clients’ needs. The results are pleasing, and in some respects, progress has been better and faster than seemed likely in the spring. We can draw a few conclusions for 2010, and look forward to the next phase of our development.
One conclusion is that Connecta’s corporate model works, and contributes to us being able to handle drastic changes on the market. To be value-controlled, build our organization on a model of variable costs and constantly train up our group efficiency and personal leadership are examples of success factors. We be- come fleet-footed and realign easily to new conditions.
Another conclusion is that the combination of business understanding and IT has never been so intimately linked as it is now. That’s why Connecta’s offering has never been so relevant. We are the largest Swedish-
owned management consultant, while also being recognized as a partner to several of the biggest IT vendors. We deliver complex strategy projects while simultaneously developing the websites of tomor- row. We rationalize goods flows while also getting new ERP systems up and running. Being at the top level in all these segments feels fantastic. Moreover, being able to integrate these skills into a whole will make us successful in 2010. I am convinced that we will continue to develop specialist skills, and be the best at combining them. Appointing Connecta should mean getting the best in each segment, but also hav- ing your challenges addressed by the best teamwork on the market.
As we move into next year, Connecta’s strategy remains unchanged. We will be the best Swedish man- agement consulting firm. We will also have in-depth partnerships with the major platform vendors. Apart from SAP, IBM and Microsoft, we are developing new partnerships with players like Oracle and Google. We are also extending our sector initiatives, and in this work, we are putting a lot of energy into developing more specialist skills in telecom, retailing, banking, insurance, energy and the public sector. Our strategy for joint ventures has been concentrated, which means that now, we have three subsidiaries with attractive offerings in infrastructure, application management and nearshoring. Overall, all this will be integrated into the continued development of our offering to help our clients sharpen their competitiveness on markets in change.
Connecta is on the verge of its next phase, when we will pursue an aggressive agenda with the aim of emerging stronger from the recession. We could view this as easing up on our brake, while pressing a little harder on the accelerator. The key is to adopt a forward-thinking mental attitude, and unleash the potential and energy of Connecta every day. To lead a firm like Connecta is a privilege, and I’m looking for- ward to a 2010 full of opportunities. I’d like to extend a big thank-you to all our people, who made heroic efforts in 2009, and to our clients who have entrusted us, which fills me with energy and confidence ahead of the coming year.
Per Appelgren, CEO of Connecta
Connecta is a Swedish management and IT consult- ing firm that helps companies implement complex and lasting change. By combining its own and other parties’ skills in strategy, business understanding and IT, Connecta delivers the optimal solution for every client.
Connecta’s consultants possess broad business un- derstanding and in-depth knowledge of one or more specialist segments. Their experience enables exten- sive change projects to be implemented, delivering so- lutions that maintain market-leading quality—always proceeding from the client’s goals, organizational re- sources, market situation and IT structure.
Connecta’s assignments feature close collaboration with clients and partners. They often meet challenges lying at the interface between business and IT activi- ties. Connecta endeavors to set a higher standard for what consultants can achieve, and knows that its professionals are at their best when assignments are not routine, but rather when the change seems as impossible as it is imperative.
Connecta’s operations are based in Sweden, with offices in Stockholm and Öresund.
Business Concept
Connecta’s business concept is to help corporations and non-profit organizations to change and achieve desired results by integrating its own and other par- ties’ skills in management and IT.
Vision
Connecta’s vision is to create a new, higher standard for what consultants can achieve.
Mission
Connecta’s mission is to make our clients and people successful.
Business Model
Connecta’s underlying business model is based on its corporate management and consultants identifying companies that need to change to enhance their com-
petitiveness. Often, such companies need consultants that can manage challenging change projects with the aid of the right combination of skills and capacity.
The consistent aim is to achieve lasting results quick- ly and efficiently. Connecta’s consultants can create substantial values for the client on change projects, while simultaneously developing themselves. That’s why Connecta’s goals and strategies must consider clients, professionals and profitabilityequally.
Connecta’s Strategy
Connecta's long-term strategy is to be a stable and successful foundation to build on. The combination of the different components of this foundation is what makes Connecta unique.
Strategic Goals 2009-2013
This foundation supports a number of focuses that the firm views as important milestones for the years 2009-2013. These initiatives mean Connecta will:
■ Have strong partnerships with SAP, Microsoft, IBM and Oracle
■ Be experts in selected sectors
■ Work on developing its offerings at the interfaces between sectors and partners
■ Increase the number of projects
■ Own subsidiaries that enhance Connecta’s offering and raise awareness of the company
Not for routine assignments, but when it seems impossible.
Change consultants Management & IT
A single consulting model A single salary
model
Delivery in the what and the how A single
culture that makes a difference
Closeness to clients and
limited client base
Management focus:
clients and consultants
Flexible cost structure
Building the firm
Organic growth
Market and Clients
“ Despite these changes on the market, Connecta is retaining or advancing its positioning with many clients”
Closeness to the Client as a Strategic Focus and High Numbers of Client Meetings as a Tactic In the challenging year of 2009, Connecta continued to operate as the consulting partner that best under- stands the client’s unique problems and needs. Simul- taneously, as a consequence of the economic slow- down, the firm extended and deepened its servicing of clients. Connecta encounters clients through several different dimensions: closeness to clients, functional offerings and sector understanding. Connecta also has platform and application know-how, where exciting partnerships were added in the year.
In the year, Connecta remained strong in telecom and retailing, while the firm advanced its position- ing in banking, finance, insurance and the public sector, and made important advances in the energy sector. Connecta is building specific skills in these segments, while also focusing client activities here.
Just as intended, this sector focus has resulted in a broader-based client portfolio.
Connecta now has several secure legs to stand on, and through other dimensions like functional offerings and application partner- ships, has good prospects for integrating experiences across several distinct segments.
Connecta’s top priority is closeness to the client;
the firm is continuing to work for the long term and for Connecta’s central client relations. Closeness to the client means that Connecta will understand the client’s business, its competitors and its customers so Connecta can make the maximum contribution to delivering value on assignments. To be able to do this successfully, long-term assignments with the same client are prioritized. By adding sector focuses, this continuity will also capture somewhat smaller- scale consulting clients in some sectors. For clients, this means improved deliveries, where Connecta can combine best practice from different players in a specific sector. Meanwhile, more client assign- ments diversify Connecta’s risks.
The goal is for 60-70% of sales to be sourced from Connecta’s key clients and 20-30% from strategic clients, the latter being those the firm expects to see an increasing need for consulting services, or that need specific services where Connecta is the best provider.
Connecta’s clients are leaders in the Swedish tele- com, retail, banking, insurance, public, energy and
manufacturing sectors. Connecta’s largest clients in 2009 were Apoteket (the Swedish national pharmacy corporation), Ericsson, ICA, Nordea and Sony Ericsson.
Other major clients include Banverket (the Swedish National Rail Administration), Electrolux, E.ON, SEB Trygg Liv, Systembolaget (the Swedish national wines and spirits retail monopoly) and Vattenfall.
Progress on Connecta’s Market and Client Base In early-2009, Connecta noted the prevailing turmoil on the market generally, triggering a sharp focus on direct client activities, an increased frequency of client meetings and intensified dialogue on existing accounts as a result. Obviously, this also resulted in new assignments, and a gradual increase in the utilization ratio.
The demand for Connecta’s management services remained firm, which can be assumed to be an effect partly of Connecta’s strong positioning and partly the change pressure clients are experiencing. In this segment, Connecta further advanced its position- ing in the year, often interacting directly with client management.
The pricing trend-break that occurred in late-2008 sus- tained in 2009. Prices were pressurized, primarily on master agreements. First and foremost, this affected consultants with generalist skills and resulted in Connecta sharpening its focus on building in-depth sector, functional and/or application platform skills.
The trend towards increased specialization also meant Connecta’s close collaborations with strategic partners deepening. In addition to Connecta’s three skills segments, focusing on services and experience of implementing solutions from SAP, Microsoft and IBM, in 2009, Connecta was also successful with Oracle, Google and others.
Despite changes on the market, Connecta is main- taining or advancing its positioning with many clients. As client purchasing is concentrated onto fewer vendors, with extended responsibilities, in
several cases, Connecta has been able to continue or expand its assignments. For some other clients, progress has been more gradual, for example, with master agreements concentrating purchasing on to fewer vendors. In several cases, Connecta has been appointed as the main supplier of more specialist consulting services, further advancing the firm’s positioning as a high-quality provider
The Connecta Brand
Connecta is building its brand through strong deliv- eries for clients, though external communication activities via advertising, PR and activities address- ing Connecta’s target groups. The brand maintained its position in 2009, despite somewhat downscaled advertising investments. The brand’s progress over time is measured in contexts including market re- search that has been conducted by Radar Group on a semiannual basis since spring 2007. This research has gradually shown brand recognition of Connecta increasing in the measured parameters, including awareness and preference.
Connecta’s media exposure continued to grow in the year, helping raise awareness of the firm. In the year, Connecta also implemented a high number of activities targeting clients, focusing on building and developing relationships. Connecta is also putting a sharp focus on communication and leadership train- ing in-house, judged to have an important impact on Connecta’s brand-building. Increased awareness of Connecta is apparent in work on the firm’s new business and in hiring staff. Additionally, as in 2008, increased media interest in the firm’s view of issues affecting the consulting sector and trends in the firm’s skills segments is also apparent.
Delivery Quality
Connecta associates delivery quality with its vi- sion and values. In this way, quality consciousness becomes a key component of Connecta’s culture. All staff are introduced to the firm’s quality model, with additional training in the firm’s skills enhancement program, and with clients. This is fundamental to the firm being able to satisfy the progressively more stringent demands made by clients, and to manage the risk Connecta takes on in its major engagements.
Connecta has a highly developed quality model and the firm’s quality resources measure its quality continuously, internally and externally—the results are positive.
Connecta measures its performance with its larger clients and on its most critical engagements using a Customer Satisfaction Index, CSI. These measures express the client’s perception of quality. They create
the right prospects for strategic and operational ac- tions. Connecta’s CSI has improved gradually since Connecta started measuring customer satisfaction.
Connecta runs a range of initiatives to increase deliv- ery fulfillment continuously, through a delivery forum, whose members are staff responsible for delivery.
Here, they exchange their experiences, highlighting strengths and areas for improvement. Connecta has reduced its already low project risk write-downs, and its bad debt is low.
Competitors
Connecta has a broad offering and encounters a range of competitors depending on the type of as- signment and related skills. At an overall level, the primary competitors are Accenture and Cap Gemini, which have consulting operations with a similar focus to Connecta. On more technology-intensive as- signments, Connecta competes with Logica and HiQ, as well as smaller, niche consulting players. Mean- while, Connecta also competes with McKinsey, Bain or The Boston Consulting Group on management assignments.
The implication of market progress, with increased rates of change in client corporations, means that issues become more complex, bridging more skills segments. This puts more demands on consulting firms’ breadth of consulting services, and as a result, overly niche-oriented or smaller consulting firms can encounter problems satisfying client standards and needs. Connecta is one of few Swedish players with enough skills breadth and size in the management and IT segments to compete successfully with the major multinational players.
78 %
51%
SAlES 20 largest clients Sales share, 20 largest clients: 78%
Sales share, other clients: 22%
SAlES 5 largest clients Sales share, 5 largest clients: 51%
Sales share, other clients: 49%
“ Connecta wants to be the consulting
partner that best understands the
client’s unique problems and needs.”
Connecta delivers services in several over-arching segments that match the central needs of the firm’s clients—Change Management, Customer Relationship Management, Finance & Performance Management, IT Value, Strategy & Business Transformation and Supply Chain Management.
In 2009, Connecta conducted many keynote assign- ments in these segments, sharing its knowledge and experience through channels including breakfast seminars for the firm’s clients
Change Management
“For the management of complex change processes”
Change Management is a structured approach to im- plementing operational change processes, focusing on the client’s staff and business results. Connecta’s role is the practical implementation of new business strat- egies, working methods and IT systems. Consistently, this is about getting companies, departments and organizations to work with what’s new. To change behavior, get leaders to show the way and staff to take change on board. Connecta collaborates on a com- mitted basis close to the client based on its situation, organization and culture. Connecta has concrete tools and processes based on rigorous experience, which bring know-how to the client’s key staff on a structured basis.
Customer Relationship Management
“For marketing sales, services and customer insight”
Finance & Performance Management is about operational and financial efficiency, corporate control and business development. Often, Connecta’s assign- ments mean clarifying strategic crossroads, and practical implementations of models, methodologies and systems in the accounting and corporate manage- ment segment. With Connecta’s assistance, CFOs and other managers can create substantial values in their businesses. In Finance & Performance Management, Connecta works on maximizing cash flow, optimizing capital tied-up, controlling and monitoring, and man- aging systems support for these activities.
Finance and Performance Management
“For financial and corporate control”
Finance & Performance Management is about opera- tional and financial efficiency, corporate control and business development. Often, Connecta’s assignments mean clarifying strategic crossroads, and practical implementations of models, methodologies and sys- tems in the accounting and corporate management
segment. With Connecta’s assistance, CFOs and other managers can create substantial values in their businesses. In Finance & Performance Manage- ment, Connecta works on maximizing cash flow, optimizing capital tied-up, controlling and monitoring, and managing systems support for these activities.
IT Value
“For effective IS/IT”
Connecta helps companies and non-profit organi- zations to enhance their operational efficiency by adapting their IT resources to overall business goals.
Connecta is active on all points of CIO agendas and challenges. This enables the client to ensure that their IT operations are run effectively and on a busi- nesslike basis. The activities of these operations should be transparent, quantifiable, have clear goals and strategies, and focus on the current and future needs of business operations. Connecta’s IT Value offering extends from coordinating IT and business operations to optimizing the control of IT deliveries and the opera- tional efficiency of IT processes.
Strategy and Business Transformation
“For strategic development, decision support and company-wide change”
In Strategy & Business Transformation, Connecta helps corporate managements address the challenges at the top of their agendas. Combining rigorous analy- sis and drive with an in-depth understanding of busi- ness and strategic development, Connecta rolls out initiatives with a decisive impact on the client’s suc- cess. This might be about internal efficiency, profita- bility, growth and expansion, changing business models or operationalizing strategies in business plans, organizations and processes.
Supply Chain Management
“For procurement, logistics, production and planning”
Supply Chain Management is about rationalizing goods, information and payment flows. To achieve these goals, operations and IT systems must interact on a day-to-day basis—at the client and its suppliers.
If correctly managed, this helps maintain an overall grasp of procurement, production, logistics and spare parts management, and integration between off-the- shelf systems and specific IT tools. Connecta’s SCM activities include the overhaul and re-engineering of complete supply chains, the rationalization of exist- ing logistics processes and the development of sophis- ticated automated order processing tools, for example.
Offerings
Business Development
To be a successful services company, continuous change is a necessity. Connecta operates as a change consultant and the firm features a very high rate of change. To address accelerating change on the market, Connecta works proactively on business development.
The firm’s business development process has two clearly defined components. One component focuses on the continuous enhancement of Connecta’s servic- es offering and satisfying clients’ changing needs for consulting services. The second component focuses on creating subsidiaries that complement Connecta’s services offering but lie in segments outside the firm’s core segments of management and IT.
New Offerings and Skills Segments The first component of business devel- opment is managed completely within Connecta’s organizational resources, where new services are developed in focuses. The focus of business develop- ment is on businesses that are strategic to the firm’s market positioning. New offerings are created by developing new skills or integrating existing skills.
2009 was heavily characterized by the financial crisis and ensuing recession, but Connecta still chose forward-look-
ing initiatives. The year began by starting two new skills segments, IBM and Enterprise Web, both of which progressed well and as expected.
Connecta continuously enhances its partnerships with SAP, Microsoft, IBM and Oracle, which are important for Connecta being able to deliver maximum customer benefit. These partnerships are also a way for Connecta to develop its business and skills. Connecta’s partner- ship with Oracle was strengthened in 2009, and now includes joint sales, business development, search and
selection and training. Connecta also started a partner- ship with Google in the year.
Subsidiaries
The second component of business development is designed to complement Connecta’s services with entirely new offerings that do not fit into its existing organization and strategy.
In 2009, Connecta restructured the ownership of its former joint ventures by increasing its participating interest in Tarento, Techta and Qube so they became strategic subsidiaries integrated into Connecta’s busi- ness. Meanwhile, Connecta’s holding in Influence
was divested, because this operation was not judged as strategic to Connecta. The subsidiaries have offer- ings adapted to the market in nearshoring, outsourc- ing, application management and infrastructure, for example. Operating these businesses through inde- pendent companies ensures that Connecta’s pure-play management and IT consulting operation remains intact. These companies help sharpen Connecta’s competitiveness. More information on purchases and sales is in the Directors’ Report on page 23, and in Note 22 on page 45.
“To be a successful services
company, continuous change is
a necessity. Connecta operates as
change consultants and the firm
features a very high rate of change.”
The success of any consulting firm is built on its ability to attract, develop and retain the best profes- sionals. To integrate new staff and develop existing people, Connecta conducts regular, sustainable goal- oriented training packages.
Skills Enhancement
Skills enhancement is Connecta’s unique way to transform its vision and strategies into practical every- day work. Many of its professionals chose Connecta because they wanted to develop professionally and as individuals. To maintain its focus on being a value- controlled company, Connecta is focusing aggressively on education and training, directed by
its vision. Much of this training is led by Connecta’s managers and senior con- sultants, sometimes alongside external providers.
Connecta’s collective skills enhance- ment is based on a few simple principles, the clearest being experience-based skills training and control through values. Skills enhancement focuses on
five segments: culture and leadership, consultant- ship, project management, entrepreneurship and managership.
All training builds on the foundation laid in the culture and leadership training Connecta has conducted on the island of Utö in the Stockholm archipelago since the end of 2002. Connecta’s training packages rate highly in the employee surveys it regularly conducts.
All employees participate in regular appraisal inter- views and have individual development plans.
Connecta also uses mentorships as part of develop- ing its professionals and corporate culture. Employee training should result in greater willingness to take in- dividual responsibility for learning on assignment.
Advanced internal and external training packages help sharpen the specialist skills necessary for em- ployees to be able to deliver Connecta’s specialist offerings.
Search and Selection
Connecta continued to hire staff in 2009, albeit at a lower rate than in 2008. Search and selection fo- cused on identifying qualified and strategic profes-
sionals, in areas including initiatives in new skills segments that started at the beginning of the year.
A high share of new employees are sourced from personal recommendations by Connecta’s people.
At year-end 2009, the number of employees of the group was 591 (587) of which 27% (27%) were wom- en. The average number of employees in the year was 577 (579). The number of employees increased by 32 in the fourth quarter, relating to Connecta becoming the majority shareholder of former joint ventures Tarento, Techta and Qube.
“Our basic outlook has always been that Connecta exists as much for its people as its clients.”
Human Resources
Connecta receives a substantial number of highly qualified job applications. In 2009, 139 (210) new people started employment with Connecta. Connecta will continue to expand in
2010, primarily organically.
Connecta sets high stand- ards on the consulting expe- rience and specialized skills of prospective employees.
Staff turnover was 23% (26%) in 2009, which is high in relation to Connecta’s goal of 10-15%. Connecta’s view
is that the majority of this staff turnover relates to uncertain economic conditions. Many of the people leaving the firm take up qualified line positions. The firm is still working actively on selectively hiring and retaining staff without altering its flexible cost structure. In exit interviews with employees that
chose to leave Connecta, 82% said they could envis- age returning to the firm in the future.
Connecta is continuing its Nova graduate trainee pro- gram. The fifth program started in February 2010. The second round of graduates of the Nova program sat their exams in 2009, and have now joined Connecta’s other skills segments. There are a total of 36 trainees in Nova, of which 44% are women.
“Connecta’s values are ambition, team-spirit, personal leadership, honesty and integrity, plus health and a work-life balance.”
Age Men Women
20–29 46 (75) 21 (41)
30–39 242 (242) 93 (85)
40–49 122 (93) 39 (27)
50–59 18 (15) 5 (4)
60–69 3 (2) 2 (3)
Total 431 160
Percentage 73 27
Graduates %
Graduates 88
Post senior high school vocational qualifications 5
Senior high school graduates 7
2009 2008
No. employees at year-end 591 587
Ave. no. employees in the year 577 579
Active consultants, % 89 89
Average age 37 35
Average length of service, years 3 3
Staff turnover, % 23 26
Employee Age Profile 2009 (2008), No. Employee Key Ratios
Employee Educational Standard
Connecta is a pure-play consulting firm whose skills segments deliver uniform services to a collective client base. Both the firm’s regions—Stockholm and Öresund—deliver services across all Connecta’s skills segments. Connecta’s skills segments command similar margins over a business cycle, and the whole business is monitored using the same key ratios. This uniformity means that risks and opportunities are analyzed from a holistic perspective rather than by skills segment. The firm’s consulting services are delivered by project teams that mix skills depending on the particular needs of each project. Connecta’s consultants have extensive consulting experience and a high educational standard, and regardless of skills segment, consultants conform to the firm’s delivery model. Connecta offers skills enhancement to all consultants, which assures consistent delivery to the firm’s clients.
Connecta now has some 200 management consultants across its skills segments, most working in Manage- ment and IT Management. Some 250 consultants work on platform-based solutions (IBM, Microsoft, SAP) and some 150 work on platform-independent solutions.
Management
“Offering advisory services to senior management on strategy and change projects”
At Connecta, management and strategy consultants mainly work alongside the client’s senior business and operational managers. Connecta’s management con- sultants have long-term experience and in-depth skills in developing and implementing strategy, and man- aging extensive change processes in most sectors.
IT Management
“Maximizing the value of client IT investments”
IT Management identifies and realizes client busi- ness values from IT by increasing IT departments’
profitability and efficiency, supporting decisions and implementing outsourcing and insourcing projects, as well as integrating IT operations with the company’s business processes.
SAP
“Delivering large-scale ERP solutions on the SAP platform”
In the SAP skills segment, Connecta has integrated specialist know-how in off-the-shelf ERP systems.
These consultants specialize in advanced services, mainly in SAP’s product portfolio.
IT Business Solutions
“The best in business-driven system development in complex environments”
The IT Business Solutions skills segment deals with the issues that arise when implementing complex system solutions. These consultants possess a com-
bination of broad-based business skills and in-depth IT expertise and are specialists in investigating, planning, leading and implementing complex system development projects that are also close to business.
Microsoft
“Leading and delivering business-critical solutions based on Microsoft technology”
Consultants in this skills segment are experts on Microsoft products in the Integration, Portals, Dynamic IT and CRM segments. This skills segment won the .Net Awards in the “Surprise of the Year” cat- egory in 2009 and the “Information Worker” category in 2007.
Business Services
“Connecta’s specialized business support close to operations”
This skills segment consists of the Accounting, Support, HR and IT units. By working close to client business and proactively, Business Services increases efficien- cy and creates more value for the whole of Connecta.
Business services delivers business support with high quality, level of service and cost-efficiency—internally and externally.
IBM
“The leader in creating business value based on IBM software”
The goal of the IBM skills segment is to become a market leader in creating business value for clients from selected IBM software. Connecta offers specialist services in Business Process Management, Integra- tion and Portals, where the firm develops solutions to create value and lasting results in partnership with the client.
Enterprise Web
“Optimizing and implementing the digital presence of corporations and other organizations”
Enterprise Web delivers services in optimization and advisory services, and the implementation of digital channels. Examples of such services are e-commerce and channel strategies, web analytics, web manage- ment and interaction design. Implementations of internal and external webs and mobile solutions are delivered independent of platform.
Nova
“The best consultants with less than five years’
experience”
Connecta has run its Nova graduate trainee program since 2006. This program is by far the sector’s most ambitious, where consultants combine assignments with training over three years. For many of the firm’s clients, “Nova consultants” has become a hallmark of highly ambitious, well-educated and results-oriented young consultants.
Skills Segments
Connecta’s values are the foundation of its business, and much of the explanation for the firm’s success.
Building on this strong foundation of values, con- tributing to sustainable development in its role as change consultants is natural.
In 2009, Connecta defined and communicated a strategy, plan and responsibilities for continued work on corporate social responsibility issues. It also conducted a review of all Connecta’s busi- ness based on OECD guidelines for multinational companies and the UN Global Compact. This work has resulted in Connecta defining four segments for continuous work, with the over-arching ambi- tion of always setting a new and higher standard.
Ethical Responsibility
Connecta uses its values as a reference for the firm’s and its people’s ethical responsibility. Honesty and integrity should permeate Connecta’s relations with its clients and suppliers. From a corporate govern- ance perspective, apart from the external audit, internal controls of compliance in external reporting and internal policies, guidelines and control activ- ities are also conducted.
Environmental Responsibility
To address clients’ and employees’ demands, Connecta’s management has decided to envi- ronmentally accredit the firm according to ISO 14001 in 2010. This will make Connecta one of
few consulting firms in the management and IT segments that have a clear profile of greater societal environmental responsibility, and that has com- mitted to continuously improving and reducing its environmental impact. Connecta decided on an environmental organization, including an Environ- mental Manager, and put this in place in 2009.
Social Responsibility
Connecta’s social responsibility means ensuring that its people are motivated and satisfied, that Connecta features a healthy balance in terms of equality and diversity in the workplace, that every- one gets the same opportunities for development and that there is no discrimination against any group. This segment also includes Connecta’s support for non-profit organizations, by offer- ing consulting services on a pro bono basis. At present, Connecta has a major commitment to the anti-bullying organization Friends. The firm also contributes to the Swedish Childhood Cancer Foundation, and has arranged the DigiGirlz initia- tive in partnership with Microsoft for two years.
Sustainable Offerings
Connecta enjoys good prospects of having a posi- tive influence by supporting the firm’s clients with offerings in sustainable business. Environmentally intelligent logistics chains, sustainable supplier relations and green IT are three of Connecta’s offerings.
Corporate Social Responsibility
Financial Goals 18–19
The Share 20–21
Directors’ Report 22–26
Consolidated Statement of Comprehensive Income 27 Statement of Other Comprehensive Income 27
Consolidated Balance Sheet 28
Statement of Changes in Consolidated Equity 29 Consolidated Cash Flow Statement 30 Parent Company Income Statement 31 Parent Company Balance Sheet 32–33 Statement of Changes in Parent Company Equity 34 Parent Company Cash Flow Statement 35
Notes 36–47
Audit Report 48
Five-year Review, Group 50
Consolidated Quarterly Data and Key Ratios 51 Corporate Governance Report 53–58 Board of Directors’ Report on Internal
Controls of Financial Reporting 59–60
Definitions 61
Annual General Meeting 61
Board of Directors and Senior Executives 62
Financial Summary of 2009 63
Contacts 64
Financial Information
Connecta Solution #11: “Future Proof”
How does a corporate IT department evolve from having an incomplete overview and tunnel vision to being a role-model of process-oriented working?
And how can we create IT departments that are better prepared for the demands of tomorrow, whatever they may be?
Find out more about how we solved this problem and more of our seemingly impossible assignments at www.connecta.se
Profitability and Growth
Connecta’s prime goal is to deliver good profitability.
Over a business cycle, the firm’s goal is to deliver an operating margin of 10–15% excluding subcontracting consultants. In 2009, the operating margin exclud- ing subcontracting consultants was 9.6%. Connecta regards growth as a necessity and its goal is for the firm to achieve annual organic growth of over 10%
over a business cycle. Growth can be expressed as an increasing number of consultants as well as increas- ing sales per consultant. However, sales growth was negative in 2009, at -10%. This does not alter Connecta’s goal because it applies over a business cycle.
Connecta’s consulting and salary model is a central and unique success factor for the firm. The model combines experience and training levels with respon- sibility and authority. Connecta’s consultants will be offered competitive salaries, while the firm maintains control over sales and margins. The consulting model is intimately linked to a consistent salary model based on a fixed basic salary and performance-related vari- able pay component. Connecta’s model creates strong incentives for individual consultants to improve performance and to develop, while also conferring a flexible cost structure for the firm. One of the most significant key ratios is the utilization ratio, which was 71.6% (78.3%) in 2009.
Connecta takes an active approach partly to develop- ing and growing its business with selected clients, and partly to limit the number of clients with a small share of Connecta’s business. The goal is for the firm’s five largest clients to generate 50% of its sales and for the 20 largest to generate 80%. As a result, Connecta expects this to lead to longer-term assignments, more
customer benefit and reduced cost of sales. In 2009, Connecta’s five largest clients generated 51% (55%) of sales, and the 20 largest, 78% (86%) of sales.
Staff turnover in 2009 was 23% (26%), which is high in relation to Connecta’s goal of 10-15%. For more infor- mation, see page 13.
Equity/assets Ratio
Connecta’s target equity/assets ratio is a minimum of 35%. The equity/assets ratio on 31 December 2009 was 47.9% (43.9%).
Dividend Policy
Connecta’s ambition is to provide shareholders with healthy dividend yields, and accordingly, all distributable earnings will be paid to sharehold- ers providing the needs for trading liquidity and business-promoting investments are covered.
The Board of Directors is proposing a dividend of SEK 5.50 per share at the AGM, a total of SEK 57.1 m. This corresponds to consolidated net profit, plus another SEK 10.7 m.
Connecta is self-financing. The firm’s acid test ratio as of 31 December 2009 was SEK 76.9 m; Connecta also has access to unutilized overdraft and factoring facilities of SEK 80 m.
Currency Policy
Potential exposure to foreign currency should be limited, so that given a 10% change in exchange rates, the firm does not incur a loss exceeding SEK 0.3 m.
Currency positions should be hedged beyond the extent specified above.
Financial Goals
Period Adjusted no. of working days 2009* Adjusted no. of working days 2010*
Q1 60 60
Q2 56 57
Q3 43 44
Q4 62 62
Total 221 223
* Actual number of workdays reduced by vacation based on the assumptions of average vacation of 30 days per employee and a vacation split of 5, 15, 75 and 5%
respectively for quarters 1-4.
Seasonality
Like other consulting firms, Connecta exhibits earn- ings variations through the year depending on the number of available working-hours. The number of working days and seasonality are important for comparability between periods. The summer period adversely affects revenues because the number of available hours reduces significantly coincident with vacations. The consulting sector is dependent on the number of available hours, which also vary between the same months in different years, depending on, for example, when Christmas and Easter holidays fall.
The above implies sales and profit seasonality. The following table reveals how the number of available days varies between quarters in 2009 and 2010.
Sensitivity Analysis
Connecta’s net sales and profit are primarily affected by two factors: utilization ratio and revenues per consultant and hour. Revenue per hour depends on demand and the market price of the relevant service, consultant skills and the extent Connecta can reuse know-how and structural capital. Utilization ratio is a function of the capacity to maintain a balance between client demand and supply at any time, which raises demands on continuous skills enhancement, good project management and active sales close to the customer. The annualized sales and operating profit effect of changes in these variables are illustrat- ed below. The stated effects are based on year-2009 accounts and should be viewed as an indication of the effects given an isolated change in each variable for the short term.
Variable Effect on Sales Effect on Operating Profit
+/- 5 percentage point utilization ratio +/-7% +/- SEK 14 m
+/- 5% revenue per hour (hourly rate) +/-5% +/- SEK 22 m
+/- 1 working day per year +/-0.4% +/- SEK 1 m
+/- 5% change in payroll expenses - +/- SEK 15 m
Seasonality
Sensitivity Analysis
Ten largest shareholders as of 31 December 2009 No. of Shares Proportion of Votes and Capital, %
Tikk2 AB 1,091,079 10.50
Swedbank Robur 988,180 9.52
Nordea funds 937,338 9.02
Livförsäkringsaktiebolaget Skandia 885,778 8,53
Fourth AP (Pension Insurance) Fund 470,466 4.53
Hagströmer & Qviberg Svea 301,919 2.91
Thyra Hedge 293,614 2.83
Fidelity Nordic Fund 205,600 1.98
The Northern Trust Company, W9 196,411 1.89
Profit-share Fund, Connecta 192,465 1.85
Total 5,562,850 53.56
Share Capital
Connecta’s share capital is SEK 5,193,677.50 divided between 10,387,355 shares. The nominal value per share is SEK 0.50. Each share carries the right to one vote, and every shareholder entitled to vote may vote for the full number of shares held and represented at Annual General Meetings. All shares confer equal rights to participation in the company’s assets and profits.
Listing
Connecta’s shares trade on Nasdaq OMX Nordic Stockholm Small Cap (ticker: CNTA). As of 31 December 2009, Connecta AB had 3,291 shareholders, a 17% increase on year-end 2008.
Share Price and Turnover
Between 2 January 2009 and 30 December 2009, Connecta’s share price rose from SEK 42.60 to SEK 66.75 (closing price), an increase of SEK 24.15 or 56.7%.
The highest price paid in the year was SEK 68.50 on 14 December (closing price SEK 66.00), and the lowest price paid was SEK 34.90, on 24 June (closing price SEK 35.20). In 2009, a total of 7,143,598 (6,034,817) shares were traded, equivalent to a value of some SEK 346.7 (365.9) m. On average, this means 28,461 (23,984) shares worth some SEK 1.4 (1.4) m were traded each trading day. To offer shareholders healthy liquidity and efficient pricing, Connecta has appointed Remium Securities as market maker.
Shareholders
The following table illustrates Connecta’s ownership structure based on information from Euroclear Sweden AB as of 31 December 2009. The ten largest sharehold- ers held 53.6% (50.5%) of the capital. Connecta had a total of 3,291 (2,816) shareholders at the above date, of which 94.6% (94.3%) were domiciled in Sweden. Swed- ish legal entities held 67.9% (58.5%) of Connecta’s share capital at year-end.
The Share
Profit-Share Fund
Connecta has had a Profit-Share Fund since Febru- ary 2006, which helps make Connecta an even more attractive workplace. The fund invests 33% of its assets in Connecta shares. For every SEK 100 invested in Connecta shares, Connecta contributes another SEK 52.50 to the Fund. The total cost of this incen- tive scheme is largely dependent to the extent that
employees choose to participate, although the cost is estimated at some SEK 2-3 m per year. The compa- ny’s commitment to the Fund is made once yearly.
Connecta’s profit-share fund was the 10th largest shareholder as of 31 December 2009, with a holding of 192,465 shares, corresponding to 1.85% of the votes and capital.
Holding No. of shares Holding, % No. of Shareholders
1–500 346,915 3.34 2,022
501–1,000 535,629 5.16 642
1,001–2,500 586,496 5.65 336
2,501–5,000 538,185 5.18 150
5,001–10,000 475,162 4.57 60
10,001– 7,904,968 76.10 81
Total 10,387,355 100.00 3,291
Ownership Structure
The division of Connecta’s shareholdings, based on the share register maintained by Euroclear Sweden AB as of 31 December 2009 follows:
Share Price Performance and Trading Volume 2009
0 0
10 20 30 40 50 60 70 80 90
50,000 150,000
100,000 200,000 250,000 300,000 350,000 400,000
January February March April
SHARE PRICE CNTA SMALL-CAP INDEX TRADING VOLUME
May June July August September October November December 461,858
VOLUME SEK
00 20 40 60 80 100
0 100 200 300 400 500 600 700 800
Q4 Q1
Sales (SEK m) Operating profit (SEK m)
Q2 Q3 Q4
Operating profit (SEK m) Sales (SEK m)
2008 2009
Directors’ Report
The Board of Directors and Chief Executive Officer of Connecta AB (publ) corporate identity number 556610-5705 and registered office in Stockholm, Sweden, hereby present the annual accounts and consolidated accounts for the financial year 1 January 2009–31 December 2009.
Connecta is a management and IT consulting firm that helps corporations and non-profit organizations enhance their competitiveness and achieve desired results by integrating in-depth IT know-how with broad-based management skills.
Market and Clients
In early-2009, Connecta noted the prevailing turmoil on the market generally, triggering a sharp focus on direct client activities, an increased frequency of client meetings and intensified dialogue on existing accounts as a result. Obviously, this also resulted in new assignments, and a gradual increase in the utilization ratio.
The pricing trend-break that occurred in late-2008 sus- tained in 2009. Prices were pressurized, primarily on master agreements. First and foremost, this affected consultants with generalist skills and resulted in Connecta sharpening its focus on building in-depth sector, functional and/or application platform skills.
The trend towards increased specialization also meant Connecta’s close collaborations with strategic partners deepening further. In addition to Connecta’s three skills segments, focusing on services and expe- rience of implementing solutions from SAP, Microsoft and IBM, in 2009, Connecta was also successful with Oracle, Google and others.
Despite changes on the market, Connecta is maintain- ing or advancing its positioning with many clients.
As client purchasing is concentrated onto fewer vendors, with extended responsibilities, in several
cases, Connecta has been able to continue or expand its assignments. For some other clients, progress has been more gradual, for example, with master agree- ments concentrating purchasing on to fewer vendors.
In several cases, Connecta has been appointed as the main supplier of more specialist consulting services, further advancing the firm’s positioning as a high- quality provider.
Connecta continued to develop its offerings in Change Management, Customer Relationship management, Finance & Performance Management, IT Value, Strategy & Business Transformation and Supply Chain Management in 2009. This resulted in deeper and new client relationships.
Connecta’s clients are leaders in the Swedish telecom, retail, banking, insurance, public, energy and manufacturing sectors. Connecta’s five largest clients in 2009 were Apoteket, Ericsson, ICA, Nordea and Sony Ericsson.
Financial Performance
Revenues for the full year 2009 were SEK 686.9 (765.2) m, a 10% decrease on the full year 2008. This is explained by a lower utilization ratio and hourly rates in 2009.
Sales excluding subcontracting consultants reduced by 11% in the full year 2009, compared to the cor- responding period of 2008. The utilization ratio was 71.6% (78.3%) for the full year.
Average sales per active employee were SEK 1,193,000 (1,350,000) at year-end 2009, a 12% decrease on the corresponding point of 2008.
Operating profit for the full year was SEK 62.6 (100.8) m. The following graph illustrates the progress of sales and operating profit in the past year, and shows that the declining trend started to slow in the third quarter of 2009.
Sales and Operating Profit, Rolling 12 Months, SEK m
The operating margin was 9.1% (13.2%). Operating margin adjusted for subcontracting consultants and non-recurring costs was 9.6% (14.3%).
The group’s net financial income/expense was SEK 1.0 (1.4) m. Profit before tax was SEK 63.6 (102.2) m. Compre- hensive income for the period was SEK 46.4 (70.3) m.
Balance Sheet and Cash Flow
Connecta’s total assets were SEK 333.5 (348.9) m at year-end. Equity was SEK 159.9 (152.9) m. The equity/
assets ratio as of 31 December 2009 was 47.9% (43.9%).
Connecta’s goal is to achieve a minimum equity/assets ratio of 35%.
Non-current Assets
At year-end, consolidated non-current assets were reported at SEK 72.7 (65.3) m, of which intangible as- sets were SEK 60.9 (48.0) m.
Current Assets
At year-end, consolidated current assets were SEK 260.8 (283.6) m. At 31 December 2009, current re- ceivables were SEK 183.9 (191.2) m.
Accounts receivable were SEK 153.4 m as of 31 December 2009, a SEK 0.6 m decrease since the previ- ous year-end. Prepaid expenses and accrued income were SEK 28.3 m as of 31 December 2009, down SEK 8.3 m since the previous year-end.
Working capital as a proportion of total sales was somewhat higher at the end of 2009 than at the be- ginning of the year.
Cash and cash equivalents were SEK 76.9 (92.4) m as of 31 December 2009.
Equity and Liabilities
Equity was SEK 159.9 (153.0) m at year-end. Interest- bearing non-current liabilities were SEK 7.2 (8.3) m.
At year-end, current liabilities were SEK 166.4 (187.6) m, with accounts payable representing SEK 18.6 (17.9) m and tax liabilities being SEK 11.0 (22.0) m.
The Share
Connecta’s share capital is SEK 5,193,677.50 divided between 10,387,355 class B shares, with one vote per share and a nominal value of SEK 0.50 per share. Each share confers the right to one vote, and every sharehold- er entitled to vote may vote for the full number of shares held and represented at Annual General Meetings. All shares confer equal rights to participation in the com- pany’s assets and profits. There are no restrictions in
terms of dividends or other forms of capital repayment.
No limitations to transferring shares apply.
Tikk2 AB holds 10.5% of the shares and has 66 part- ners, the majority being management and executive staff of Connecta. More information on the share is on pages 20-21.
Cash Flow
Cash flow from operations for the full year 2009 was SEK 21.8 (89.6) m. Cash flow from the change in working capital was SEK 12.6 (-11.5) m.
Cash flow from operating activities was SEK 34.4 (78.1) m. Lower operating profit, larger tax payments and extended credit terms had a negative effect on cash flow.
For the full year 2009, cash flow from investing activi- ties was a total of SEK -5.9 (-3.9) m. In 2009, cash flow from investing activities was affected by SEK -5.2 m from acquisitions of subsidiaries and sales of associ- ated companies. Cash flow from financing activities for the full year 2009 was SEK -43.9 (-71.4) m. Lower dividend of SEK -42.2 (-68.4) m in 2009 had a positive effect on cash flow from financing activities compared to 2008. Total cash flow for the full year 2009 was SEK -15.5 (2.7) m.
The subsidiaries Tarento, Techta and Qube were consolidated as of 23 October, when an Extraordinary General Meeting resolved to acquire additional shares of these companies. For more information see Note 22 on page 45.
Human Resources
Connecta continued to hire staff in 2009, but at a lower rate than in 2008. At year-end 2009, the group had 591 (587) employees, of which 27% (27%) were women. The average number of employees in the year was 577 (579). In 2009, 139 (210) new staff started employment.
Connecta will continue to expand in 2010, primarily organically. Connecta sets high standards on the con- sulting experience and specialized skills of prospective employees. Staff turnover was 23% (26%) in 2009.
Parent Company
Connecta’s operating activities are mainly integrated in the parent company. Revenues for the full year 2009 were SEK 683.5 (765.0) m. Profit after financial items was SEK 63.8 (98.3) m. As of 31 December 2009, parent company equity was SEK 115.3 (114.1) m. Investments in 2009 were SEK 0.5 (3.9) m. Cash and cash equiva- lents were SEK 74.3 (92.2) m as of 31 December 2009.
Financial Risks
Financial instruments and risk management are reviewed in Note 25 on page 46.
The Work of the Board
A special review of the work of the Board is stated in the Corporate Governance Report on pages 53-60.
Guidelines for Remunerating Senior Executives The AGM 2009 approved the following guidelines for remunerating senior executives. These guidelines are unchanged from those resolved at the AGM 2008.
Connecta’s management will receive remuneration pursuant to the same salary model as other Connecta employees, i.e. that employees (and thus the manage- ment) share the risks and successes of the company.
This means that outcomes in cyclical upturns may be perceived as positive, while employees partici- pate and take responsibility for the challenges and potential utilization problems that arise in cyclical downturns. The salary model has two parts: basic salary dependent on employees’ roles and responsi- bilities, and a performance-related part controlled by employee performance. The salary model is intended to give employees a long-term incentive to grow and take new roles and responsibilities, while simultane- ously, short-term performance is also rewarded. The performance components that determine perform- ance-related pay are individually determined; but all share a clear link to the company’s success and relate to quality, customer relationships, extra sales, long-termism, progress, invoicing or performance versus budget, etc. The goal is for all employees to have 50% basic salary and 50% performance-related pay. The performance-related pay of members of Connecta’s management team (OM, CM or BM, see page 56 for explanation) and Connecta’s most senior consultants is linked to a performance-related pay system. The total outcome of this performance-related pay system is linked to Connecta’s profit growth and the individual share of the outcome is linked to the satisfaction of individual goals (see above) and respon- sibilities within the company.
The purpose of the salary model is partly cost flexibil- ity, and partly the common interest of shareholders and staff. The Chief Executive Officer has a notice period of six months and severance pay of another six months coincident with termination initiated by the company. The pension premium of the Chief Executive Officer is a maximum of 27% of basic salary. Other senior executives have 3 – 6 month notice periods and no severance pay.
The proposed guidelines for remunerating senior ex- ecutives will be submitted to the AGM on 31 March 2010 and are unchanged from those submitted to the AGM 2009. For more information on remuneration to the corporate management, see Note 8 on page 41.
Proposed Appropriation of Profits
The following funds in the parent company are at the disposal of the Annual General Meeting:
Retained profits SEK 42,682,118
Net profit SEK 45,757,383
Total 88,439,501
The Board of Directors and Chief Executive Officer propose that these funds are appropriated as follows:
Dividend to shareholders
SEK 5.50 per share SEK 57,130,453 Carried forward SEK 31,309,049
Total 88,439,501
The Balance Sheets and Income Statements of the group and parent company will be submitted to the AGM on 31 March 2010.
The dividend is calculated on the number of outstand- ing shares as of 31 December 2009, i.e. 10,387,355.
Directors’ Report, cont.
Motivation
Consolidated equity has been calculated pursuant to IFRS as endorsed by the EU and their IFRIC interpreta- tions, and pursuant to Swedish law through application of the Swedish Financial Reporting Board’s statement RFR 1.2 (Supplementary Accounting Rules for Groups).
Parent company equity has been calculated pursuant to Swedish law and applying the Swedish Financial Reporting Board’s statement RFR 2.2 (Accounting for Legal Entities).
The Board of Directors considers that the company’s restricted equity after the proposed dividend is fully covered. The Board of Directors also considers that the proposed dividend to shareholders is justifiable considering the evaluation criteria stated in chap. 17 § 3 para. 2-3 of the Swedish Companies Act. In this con- text, the Board of Directors would like to make the following statement:
Nature, Scope and Risks of Operating Activities The Board of Directors considers that the company’s and group’s equity after the proposed dividend will be sufficient in relation to the nature, scope and risks of operating activities. In this context, the Board of Directors considers factors including the company’s and group’s equity/assets ratio, historical progress, budgeted progress, investment plans and business cycle phase.
Need to Strengthen Balance Sheet, Liquidity and Position Generally
The Board of Directors conducted a general evaluation of the company’s and group’s financial position and its prospects of satisfying its commitments. The propo- sed dividend comprises 50% of the company’s equity and 36% of the group’s equity. The Board of Directors considers that the earnings capacity in the early months will imply its equity/assets ratio also being at least 35% after the dividend has been paid. Against this background, the Board of Directors considers that the company and the group have good prospects of exploiting future business opportunities while also withstanding potential losses. Planned investments have been considered when determining the propo- sed dividend. The dividend would not adversely af- fect the company’s or the group’s capacity to make further investments based on business activities according to its adopted plans.
Liquidity
The proposed dividend is not considered to affect the company’s or group’s capacity to fulfill their payment commitments at the appropriate time. The company and the group have ready access to liquidity reserves in short and long-term credit facilities.
Board of Directors’ Statement
Regarding Proposed Dividend
The Board of Directors and Chief Executive Officer hereby certify that these annual accounts have been prepared pursuant to the Swedish Annual Accounts Act and RFR 1.2 and 2.2 and gives a true and fair view of the company’s financial position and results of operations, and that the Directors’ Report gives a true and fair view of the progress of the group’s ope- rations, financial position and results of operations, and states the significant risks and uncertainty factors facing the company. The Board of Directors and Chief Executive Officer hereby offer their assurances that the Consolidated Accounts have been prepared pursuant to IFRS (International Financial Reporting Standards) as endorsed by the EU, and give a true
and fair view of the group’s financial position and re- sults of operations and that the Directors’ Report of the group gives a true and fair view of the progress of the group’s operations, financial position and results of ope- rations, and states the significant risks and uncertainty factors facing the companies included in the group.
As stated above, the annual accounts and consolidated accounts were approved for issuance by the Board of Directors on 11 March 2010. The Consolidated Income Statement and Balance Sheet will be subject to adop- tion at the Annual General Meeting on 31 March 2010.
Certification
Directors’ Report, cont.
Stockholm, Sweden, 11 March 2010
Johan Wieslander Marianne Hamilton Caroline af Ugglas Chairman of the Board
Lars Grönberg Göran Westling Per Appelgren
Chief Executive Officer
Our Audit Report was submitted on 11 March 2010
Svante Forsberg
Authorized Public Accountant Deloitte AB
