AnnuAl RepoRt 2008
Contents 2
Business Review the year in brief 3 niscayah’s offering 4 Comments by the Ceo 5 the share and ownership 7
FinAnCiAl Review Report of the Board of Directors 9 Consolidated income statement 13 Consolidated balance sheet 14 statement of recognized income and expenses 15 Consolidated cash flow statement 16 the parent Company’s income statement 17 the parent Company’s balance sheet 18 parent Company’s Changes in shareholders’ equity 19 the parent Company’s cash flow statement 20
GRoup inFoRmAtion the Group’s notes 22 the parent Company’s notes 44 Audit report 47 Corporate Governance Report 49 Board of Directors 54 Group management 56 Country presidents 57 Auditor 57 shareholder information 58 Addresses 59
Contents
sales increased by 10 percent and amounted to mseK 8,009 (7,260)
weakened operating margin
strengthened cash flow
proposed dividend seK 0.30 per share
Four acquisitions were carried out
During 2008, costs were charged of mseK 490 for impairment losses of goodwill and mseK 275 for a restructuring program.
the yeAR in BRieF 3
niscayah Group AB (publ) is a world-leading security partner offering complete security solutions for customers with high security demands.
niscayah’s customers are medium-sized and large companies and
organizations within banks and financial institutions, industry, defense, health care and retail. niscayah’s services are based on modern technology and include access control, video surveillance, intrusion protection and fire alarm systems. niscayah has approximately 6,000 employees in 17 countries.
10 % – 0.30 +
4
the year in brief
nisCAyAh’s oFFeRinG 4 System Operations System
Management Implementation
Analysis and Design
niscayah’s offering
Analysis and Design
the starting point for analysis and design is the customer’s security strategy and identified risks. Based on the analysis carried out, niscayah creates the most suitable security solution in conjunction with the customer, according to carefully identified needs. Analysis of the customer’s security demands is continuously conducted when changes occur in the customer’s business, and analysis is also carried out prior to security system upgrades arising from technical developments.
implementation
the implementation is the execution phase in the security solution that was created in the analysis and design stage. the implementation includes choice of products and security system as well as final installation, which can vary according to the complexity of the design.
system management
through assuming responsibility for service and maintenance, niscayah can ensure that the customer receives maintained or enhanced security over time. upgrades and enhancements take place regularly through presence at the customer or via electronic connection. training and security enhancing routines are also included so that new modern technology shall deliver maximum customer value.
system operations
the customer can outsource operation and monitoring of the security system
to niscayah’s security center which handles alarms, video and access control
systems and takes the correct measure, based on a defined action plan in the
event of incidents. the security center continually evaluates the outcomes of
incidents and proposes security improvements.
Comments By the Ceo 5
Comments by the Ceo
niscayah’s business is ultimately about identifying the customers’ risks and
delivering security. During the year, we have clarified and strengthened our
service offering, while at the same time, we have worked on building even
more long-term customer relationships. Against the backdrop of the financial
crisis which has engulfed the market, we have succeeded in maintaining our
volume and in generating a strengthened cash flow.
During the past year,
the financial crisis has influenced the market and our customers’
businesses. A natural consequence of this is a lower propensity to invest on the part of the customers. however, security is something that few players can afford to cut back on.
since security issues have this status, it means that niscayah is in a somewhat less sensitive position than many other players, on an otherwise turbulent market.
niscayah’s service offering features a com- plete security solution consisting of service, maintenance, and system operation. the services are supported by modern techno- logy within access control, video surveil- lance, intrusion prevention and fire alarm systems.
a stronger niscayah
During 2008, we have concentrated on strengthening the niscayah brand. we have expanded and clarified our service offering and, at the same time, reorganized the less profitable parts of our operations. An invest- ment in the training of staff in senior posi- tions and project managers has contributed to increasing skills within the Company. in addi- tion, the financial functions were strengthe- ned in a number of countries in order to meet the demands of our business model.
the past year has demonstrated the ad- vantages for niscayah of being a global player. Dissemination of knowledge across country boundaries is an example of this, as well as our international collaboration to develop a few selected product suppliers, which has made us more efficient in our service towards the customers.
us
niscayah’s operations in the us are dis- playing good growth and satisfactory results, given the prevailing market con- ditions. the acquisition of national Com- mercial has contributed to an increase of our service offering. pei and securex, which
were acquired during 2007, have been inte- grated well and are developing as planned.
niscayah now has a well-adapted customer and market organization in the us.
uK
An impairment loss of goodwill of mseK 490 was made during the third quarter, of which mseK 483 is attributable to the uK operations. Changes in management were carried out in the uK during the year aimed at improving and advancing development of the market. As in most other markets, our current focus in on customers which
have round-the clock, high security and service needs.
Mainland europe
management changes have also been implemented in mainland europe. in addi- tion, the finance functions and the service organization have been strengthened.
Growth in the service area has been good but we have not yet reached our full poten- tial. however, with the organizational chan- ges carried out, there are now good oppor- tunities to grow the service business.
in April, G4s sicherheitssysteme in Ger- many was acquired. the company is one of the five largest within security systems on the German market. through the acquisition, niscayah became the third largest player in the country and the largest product-inde- pendent operator on the German market.
the acquisition strengthens our service business and means that we can now offer service to customers throughout Germany.
we are countering an expected decrease in demand with the restructuring program which commenced in mainland europe during the fourth quarter. we are reducing our exposure to the business that is least profitable and which is not aligned with our business model. we will continue to concen- trate on profitable growth by increasing our service share. in addition, we are focusing on continuing to improve operational efficiency and on generating a good cash flow.
ever closer customer collaboration A clear trend is that the customers are continuing to demand that the security supplier, take greater responsibility and be acquainted with the customer’s secu- rity strategy. to always be the customer’s
preferred security partner, which niscayah strives for, requires great understanding of the customer’s risk view, how the ope- rations look today and where the customer plans to be in a couple of years.
video has grown most in the technology area within both monitoring and verifica- tion, while at the same time, the software behind the product has become increasingly intelligent. By having a close relationship with both technology producers and supp- liers, we maintain solid knowledge of the technology and at the same time, we can match the customer’s needs.
Long-term security partner
niscayah’s challenge is to become leading, in order words, to have a market share of more than 10 percent in a strongly tech- nology-oriented and fragmented market.
we can only achieve this by having higher expertise with regard to the customer’s security needs than the local competitor.
niscayah’s advantage is our global know- ledge base in relation to services and tech- nology as well as our cost effectiveness in functions such as market, hR, finance, sourcing and it.
niscayah is investing in long-term rela- tionships with the customers. we aim to be present in the customer’s everyday life and identify the current and future risks, and to have the right security solutions ready when the need arises.
this attitude differs from the technology- oriented approach, in which only the tech- nology shift leads to meetings with the customer. By delivering security, niscayah will become the customers’ long-term security partner and will be rewarded with more stable business relationships.
Continued efficiency improvements and growth
niscayah has a good operation on all major markets and our offering to the customers is becoming increasingly distinct. we have customers with high security needs that require a top quality security function in order to develop and run their businesses, in good times as well as bad. Just like nis- cayah, these customers often operate on several geographical markets and are thus in great need of a qualified, global partner.
the technical development combined with high customer’ demands are driving a consolidation of the industry. niscayah is one of several players that can take advan- tage of its size and can continue to expand.
in a more difficult market climate, we expect that there will be more acquisition opportunities.
During 2009, we shall continue to focus on building long-term customer relation- ships and on developing our service offe- ring, improving operational efficiency and on generating a stable cash flow. in this way, we can create profitable growth and thereby prioritize our margins. niscayah is well-equipped to meet the market’s challenges.
Juan vallejo, Ceo and president
Comments By the Ceo 6
By delivering security, niscayah will become the customers ’ long-term security partner and will be rewarded with more stable business relationships.
the past year has demonstrated the advantages for
niscayah of being a global player.
the shARe AnD owneRship 7
the share and ownership
the share
niscayah’s share is listed on nAsDAQ omX stockholm’s mid Cap list, with the ticker symbol nisC. the share’s average daily turnover was seK 14,351,426 (B-share) and the share price at the end of the period was seK 6.65. on April 22, 2008, the change of name to niscayah was carried into effect, from securitas systems previously.
the shareholders
niscayah Group AB has slightly more than 20,000 shareholders. the ten largest share- holders accounted for approximately 61 percent of the ownership as at December 31, 2008.
10 20 30 40 50 60
2006 2007 2008 2009
5 10 15 20 25 30 35 40
© NASDAQ OMX B-share
NASDAQ OMX Stockholm_PI Number of shares traded SEK
Number of shares traded, million
niscayah Group AB’s (publ) share was listed on nAsDAQ omX stockholm’s mid Cap list on september 29, 2006.
the market value at year-end 2008 was approximately seK 2.4 billion.
Dividend policy
the Board of Directors applies a dividend policy which implies that the yearly divi- dend level – adjusted to the Company’s earnings, financial position and other factors that the Board of Directors consi- ders relevant – should normally correspond to 40–50 percent of the operations’ non- restricted cash flow
¹).
1) Operating cash flow (operating income after depreciation and amortization with reversal of all depreciation and amortization and acquisition related restructuring expenses minus invest- ments in non-current assets excluding acquisition of subsidiaries), change in accounts receivable and change in other operating capital employed adjusted by financial income and expenses paid and income tax paid.
share development september 2006 – February 2009
the shARe AnD owneRship 8
Definitions
income after taxes: net income for the year attributable to shareholders in the parent Company in relation to the number of shares.
Dividend as % of income after tax: the proposed dividend for the year as a per- centage share of income after tax.
yield: Dividend in relation to the share price at the end of the year.
net asset value per share: equity in relation to the number of outstanding shares.
p/e ratio: the share price at the end of the year in relation to earnings per share after taxes.
turnover rate: turnover during the year in relation to the average market value during the period.
share distribution in order of size
number of shares number of shareholders number of A-shares number of B-shares % of shares % of votes
1–500 14,574 0 2,424,351 0.66 0.47
501–1,000 2,473 0 2,101,460 0.58 0.40
1,001–5,000 2,490 0 6,146,534 1.68 1.18
5,001–10,000 415 0 3,226,999 0.88 0.62
10,001–15,000 97 0 1,238,829 0.34 0.24
15,001–20,000 75 0 1,359,910 0.37 0.26
20,001– 385 17,142,600 331,418,214 95.48 96.82
total as at December 31, 2008 20,509 17,142,600 347,916,297 100 100
the ten largest owners (owner aligned)
name number of A-shares number of B-shares % of shares % of votes
Douglas family, via company 12,642,600 30,537,500 11.83 30.22
melker schörling AB 4,500,000 19,138,100 6.48 12.35
swedbank Robur Fonder 26,438,944 7.24 5.09
seB investment management 26,365,759 7.22 5.08
templeton 20,628,507 5.65 3.97
Alecta pensionsförsäkring 19,210,000 5.26 3.70
Fidelity 17,212,812 4.72 3.31
Didner & Gerge Aktiefond 15,237,800 4.17 2.93
Columbia wanger Asset management 15,000,000 4.11 2.89
Dupont Capital management 15,000,000 4.11 2.89
total as at December 31, 2008 17,142,600 204,769,422 60.79 72.43
source: euroclear sweden AB and changes known to niscayah.
share facts
Listing: nAsDAQ omX stockholm’s mid Cap list, since september 29, 2006.
Block of shares: 500 shares.
niscayah a-shares: 10 votes per share.
niscayah B-shares: 1 vote per share.
share capital: seK 365,058,897 distributed between a total of 365,058,897 shares.
DAtA peR shARe
2008 2007
market price at the end of the period, seK 6.65 23.00
income after tax, seK –1.21 1.16
number of outstanding shares 365,058,897 365,058,897
Average number of shares 365,058,897 365,058,897
proposed dividend, seK 0.30 0.50
Dividend as % of income after tax n/a 43
highest/lowest price paid, seK 23.00/5.75 28.10/18.20
yield, % 4.5 2.2
net asset value per share, seK 5.28 6.80
p/e-ratio –6 20
turnover rate, % 80 92
number of shareholders 20,509 22,385
the Board of Directors and Ceo of niscayah Group AB (publ), corporate identity number 556436-6267, with head office in stockholm, hereby submit the financial statements for the fiscal year 2008.
Ownership
the total number of shares in niscayah Group AB amounted to 365,058,897 shares, distributed between 17,142,600 class A-shares, and 347,916,297 class B-shares. the number of shareholders at year-end 2008/2009 totaled 20,509 (22,385 previous year-end). the A-share has ten votes and the B-share has one vote. three owners, säki, investment AB latour and melker schörling AB own all A-shares. the B-share has been listed on nAsDAQ omX stockholm’s mid Cap list since september 29, 2006.
generally regarding the operations
niscayah Group AB (publ) is a world-leading system integrator within security, offering complete security solutions for clients with high security demands in market segments such as banks and financial institutions, industry, defense, health care and retail. niscayah’s services are based on modern technology and include access control, video surveillance, intrusion protection and fire alarm systems. niscayah operates in 14 european countries and in the us, hong Kong and Australia.
niscayah’s sales consist of integration/installation of security systems (ap- prox. 60 percent), as well as services and after-sales services related to systems in the form of maintenance, surveillance, alarm services, security centers and other customer service functions (approx. 40 percent).
niscayah’s operations are divided into two different segments:
•
us/uK/ ireland•
mainland europe (europe excluding uK and ireland)sales and income
the groupFigures in parenthesis refer to the preceding year.
sales increased by 10 percent during 2008 to mseK 8,009 (7,260), of which, the organic sales growth amounted to 3 percent (11). sales were positively impacted by changes in exchange rates of mseK 108 (–64).
Costs related to the restructuring program have affected income by mseK 275 and the measures are expected to deliver yearly savings of approx. mseK 340.
Costs attributable to the change of trademark have impacted income by mseK 38.
An impairment loss of goodwill has been made amounting to mseK –490 (0) in total, of which mseK -483 is attributable to the uK operations. the Group’s total goodwill value after the impairment loss amounted to mseK 2,246 (2,676) as at December 31, 2008.
operating income was positively impacted during 2008 by changes in ex- change rates amounting to mseK 23 (–0.2).
the operating margin decreased to 6.7 percent (9.1).
net financial income/expense for 2008 amounted to mseK –138 (–68). Chan- ges in exchange rates have impacted net financial income/expense by mseK –12 (0) and arise from fluctuations in the value of niscayah’s most important currencies in relation to the swedish krona.
the tax expense for 2008 amounted to mseK 74 (168). the tax expense in- cludes adjustments of previous years’ tax expense of mseK 18 and other items of mseK 13, see note 11. Adjusted for these items, the tax rate for the year will be 34.4 percent (28.4).
net income totaled mseK –440 (423) and earnings per share amounted to seK –1.21 (1.16). Adjusted for impairment losses of goodwill and costs for the restructuring program, earnings per share totaled seK 0.89.
Consolidated income statement in summary
January–December, mseK 2008 2007
sales 8,009 7,260
sales growth, % 10 14
operating income 1 537 658
operating margin, % 1 6.7 9.1
income before taxes –366 590
net income –440 423
earnings per share, seK 2 0.89 1.16
1 excluding costs of the restructuring program and impairment losses of goodwill.
2 seK –1.21 including the restructuring program and impairment losses of goodwill.
Mainland europe
sales during 2008 increased by 13 percent and totaled mseK 6,172 (5,468), of which, 4 percent was organic growth. service sales during the period amounted to mseK 2,587 (2,318), an increase of 12 percent. weakened market conditions have impacted margins negatively. Costs attributable to the restructuring program in the segment amounted to mseK 217. yearly savings are forecast to amount to mseK 246. the integration of G4s’ operations in Germany is proceeding as planned.
the operating margin totaled 9.3 percent (12.5).
Changes in exchange rates have resulted in a positive currency effect of mseK 180 on sales and mseK 18 on operating income compared with the previous year.
the acquisitions carried out during the year (swedish company Förebygget Brandskydd AB, Dutch company installerande partners Bv and German company G4s) contributed sales of mseK 254 and operating income before amortization of mseK 8.
the Mainland europe segment in summary
January–December, mseK 2008 2007
sales 6,172 5,468
sales growth, % 13 18
operating income 1 576 681
operating margin, % 1 9.3 12.5
operating capital employed 798 1,112
operating capital employed as a % of sales 14 20
Capital employed 2,439 2,553
1 excluding costs of the restructuring program and impairment losses of goodwill.
us/uK/ireland
sales amounted to mseK 1,774 (1,740) during the period, an increase of 2 percent.
service sales during the period amounted to mseK 483 (461), an increase of 5 percent. the operations continue to develop as planned. in the us, the integration of the acquisition of national Commercial was completed during the fourth quar- ter. the book value in respect of goodwill attributable to uK was adjusted by an impairment loss of mseK 483 during the third quarter. Costs attributable to the restructuring program in the segment amounted to mseK 32. yearly savings are forecast to amount to mseK 81.
sales increased by 2 percent to mseK 1,774 (1,740), of which, 0 percent was organic growth.
the operating margin totaled 5.3 percent (3.9).
Changes in exchange rates have resulted in a negative currency effect of mseK 69 on sales and a positive currency effect of mseK 5 on operating income (eBit) compared with the previous year.
RepoRt oF the BoARD oF DiReCtoRs 9
Report of the Board of Directors
RepoRt oF the BoARD oF DiReCtoRs 10 the completed acquisition of national Guardian contributed sales of mseK 14
and operating income of mseK 0.0.
the us/uK/ireland segment in summary
January–December, mseK 2008 2007
sales 1,774 1,740
sales growth, % 2 2
operating income 1 93 68
operating margin, % 1 5.3 3.9
operating capital employed 221 345
operating capital employed as a % of sales 13 19
Capital employed 1,053 1,752
1 excluding costs of the restructuring program and impairment losses of goodwill.
the number of employees
the average number of employees in the niscayah Group amounted to 6,270 (6,022) in 2008, of which 402 have been added through acquisitions.
return on capital employed and capital employed
the Group’s return on capital employed was 8 percent (16). the Group’s operating capital employed totaled mseK 1,204 (1,330). this corresponds to 16 percent (18) of sales adjusted for the full-year sales of the acquisitions.
Acquisitions increased the Group’s goodwill by mseK 57 (290). After an impair- ment loss of goodwill of mseK 490 and adjusted for exchange rate differences of mseK 4 (–33), the Group’s total goodwill amounted to mseK 2,246 (2,675).
Acquisitions increased the Group’s acquisition related intangible assets by mseK 66 (58). After amortization of mseK 26 (20) and exchange rate differences of mseK 1 (–3), the acquisition related intangible assets amounted to mseK 284 (243).
the Group’s capital employed totaled mseK 3,734 (4,248) as at December 31, 2008.
Cash flow
Cash flow from operating activities has increased during the period and amounted to mseK 511 (312) as a result of a positive trend in the operating capital employed.
Cash flow has been impacted by costs related to the restructuring program of mseK –48. Cash flow from investing activities totaled mseK –332 (–546), of which mseK 167 (203) refers to investments in operating non-current assets.
Acquisitions of subsidiaries/operations have had an impact of mseK 165 (343) on the cash flow. the cash flow for the period amounted to mseK –73 (–238), which is an improvement of 69 percent compared with the previous year.
Financing and liquidity
the Group’s principal credit facility, multicurrency Revolving Facility, is intended to cover the company’s ongoing financing requirements and strategic growth.
During the third quarter, the possibility was exercised to extend the credit facility with unchanged terms, meaning that of the total facility of seK 3 billion, mseK 760 has a remaining term of three years and mseK 2,240 a remaining term of five years. outstanding loans amounted to mseK 2,005 (1,976) as at December 31, 2008, utilized in swedish kronor, euro and us dollars.
the Group’s net debt amounted to mseK 1,798 (1,755) and equity amounted to mseK 1,937 (2,493).
the Group’s net financial income/expense amounted to mseK –138 (–68) during 2008, of which changes in exchange rates against the swedish krona im- pacted income by mseK –12 (0). the exchange rate effects are primarily related to the Group’s internal lending which takes place in the subsidiaries’ local currency.
the Group’s interest exposure, on account that the Group’s credit facility runs on the basis of variable rates of interest rate, is managed with the assistance of interest rate swap contracts whose valuation effects are included in the Group’s net interest income. As at December 31, 2008, the average interest rate fixing period was 14.2 months.
significant events during the fiscal year
Change of trademarkthe Annual General meeting on April 22, 2008, approved the Board of Directors’
proposed amendment to the Articles of Association, entailing that the Company’s business name was changed to niscayah Group AB. the license agreement with securitas AB has been cancelled, which implies that no license cost was incurred as of the third quarter 2008. During 2008, license costs to securitas amounted to mseK 9. the change of trademark has burdened income by mseK 38.
restructuring program
A restructuring program commenced during the fourth quarter. the restructuring primarily entails a reduction in personnel of approx. 650 people in a number of the company’s countries of operation. Costs of the restructuring program of mseK 275 have burdened the company’s income during the period and in the fourth quarter 2008. the measures are expected to result in yearly cost savings of approx. mseK 340, which are anticipated to take full effect as from the se- cond half-year 2009. the measures are part of refining the company’s strategy towards an increased share of service sales as well as driving profitable growth.
the restructuring program intends to reduce selling and administrative expen- ses and enhance profitability, particularly in the part of the business covering implementation. in addition, the restructuring program aims to counter reduced demand, particularly within implementation. Costs of the restructuring program, impact both cost of goods sold and selling and administrative expenses, by mseK 87 and mseK 188 respectively.
guidelines for remuneration to senior executives
the Annual General meeting on April 22, 2008 resolved to adopt guidelines for remuneration to senior executives as follows.
the basic principle is that remuneration and other terms of employment for senior executives shall be commercially competitive in order to ensure that the niscayah Group can attract and retain qualified senior executives. the total remuneration to senior executives shall consist of basic salary, variable remu- neration, pension and other benefits. e.g. company car.
in addition to a fixed annual salary, the Group management can also receive variable salary, which shall be based on the outcome in relation to the earnings targets (and in certain cases other key ratios) within the individual area of re- sponsibility. variable salary shall correspond to a maximum of 75 percent of the fixed yearly salary for the Ceo and 60–75 percent of the fixed yearly salary for other persons in the Group management.
the Company’s obligations within regard to variable salary were estimated to have cost the Company a maximum of mseK 10 (6) in the event of a full outcome for the current members of the Group management during 2008.
Apart from the above mentioned variable remuneration resolved upon, share- related or share-price related incentive programs can arise from time to time.
pension entitlements for senior executives shall apply from 65 years at the earliest. the pension plans for the management shall mainly be defined con- tribution plans. other benefits, e.g. extra health insurance or corporate health care, shall be paid to the extent that they are assessed as being commercially competitive for senior executives in equivalent positions on the labor market where the executive operates.
in the event of termination by the Company, the notice period for all senior executives shall be a maximum of 12 months and a maximum of 24 months for the Ceo. severance pay can be payable after the end of the notice period to a maximum of 12 monthly salaries. if notice is given by individuals, a notice period of a maximum of 6 months applies and no severance pay is payable.
these guidelines shall cover the persons who were part of the Group management during the period in which the guidelines apply. the guidelines apply to agreements entered into after the resolution of the Annual General meeting, and in the cases where changes are made to existing agreements after this time. the Board of Directors shall have the right to depart from the guidelines if special grounds exist in a particular case.
no changes in the guidelines for remuneration to senior executives are proposed to the Annual General meeting 2009.
RepoRt oF the BoARD oF DiReCtoRs 11
shareholders’ equity
shareholders’ equity as at December 31, 2008 amounted to mseK 1,937 (2,493).
events of material importance which occurred after the end of the fiscal year
acquisitions
A minor acquisition was carried out in holland at the beginning of January 2009.
the company is called secuvision and mainly supplies security services within the logistics sector. the company will form part of the Group as from January 1, 2009.
Changes in group Management
Kéo Duang, previously Country president in France, left the company at the beginning of January, 2009.
Operations within research and development
niscayah does not conduct any product development under its own manage- ment with the exception of pACom in Australia which mainly develops intrusion alarm systems that communicate in the customer’s network. pACom has been among the leaders within this segment for more than 10 years. the products are particularly suitable for customers within the prioritized segments – banks and financial institutions as well as retail chains. pACom’s product development expenses totaled mseK 14 (17) during 2008.
niscayah has conducted a knowledge improvement project (lusAK) at the university of lund since 2006, in collaboration with the product supplier Assa Abloy and the technology company Axis Communications. the aim of the re- search project is to increase knowledge of new trends and increase understanding of future markets and services within the security industry.
information about risks and uncertainties
Management of business risksniscayah’s business risk exposure is principally attributable to strategic and legal risks in the everyday operations and is linked to customer assignments as well as contract commitments, credit risks and liability risks in connection with implementation and service assignments as well as acquisition situations. All business risk management aims to limit the number of indemnifications from a reputation and financial perspective and takes place on the basis of the Group’s operating risk analysis model. the model focuses on important aspects of cont- ract management as well as on the entire business cycle and the objective is to establish risk awareness and preventive measures in order to minimize financial and business related losses and protect customers and employees in particular.
Continuous evaluation is part of the negotiations and contract writing process where the main risk is that the future delivery and installation does not cor- respond to the customer’s expectation (project agreed) or occurrence of personal injury in connection with the project. there are established policies and guide- lines which define subsidiaries’ mandates and responsibility. During the year, customers’ creditworthiness, limits and accounts receivable have been in focus, which meant that no significant credit losses have arisen or been identified.
insurance solutions are utilized to minimize any negative financial effects resulting from indemnifications mainly linked to liability and property questions.
All of the Group’s common insurance programs are managed and procured cen- trally via Group treasury in order to gain a common view and scale benefits. the Group’s insurance program consist of; General product and liability insurance, Directors’ and officers’ liability insurance, Crimes insurance and employment practice liability insurance. Based on local requirements and country specific risk exposure, Group treasury has defined which local insurances are mandatory and which insurances should be considered by subsidiaries at a local level.
Management of financial risks
the overall objective of the financial operations is to support the local business activities through securing financing, liquidity management and limitation of the financial risk exposure. the financial risk exposure mainly consists of foreign exchange risk, interest rate risk, liquidity risk and refinancing risks in connection with Group financing and current transactions. All financial risk management is conducted in line with established policies and guidelines defining the mandate
for the Group’s internal bank, Group treasury and subsidiaries. At year-end, niscayah had no outstanding financial positions to banks or institutions with credit ratings outside the established mandate.
For further information see note 3, Financial risk management.
environmental information
niscayah Group AB conducts operations requiring permits through the swedish subsidiary niscayah AB and holds environmental permits for some of its products.
Foreign affiliates
niscayah Group AB does not conduct any operations through foreign affiliates.
information about acquisitions
During 2008, niscayah expanded in europe by acquiring three companies, in holland, sweden and Germany. An operation has been acquired in the us.
installerande partners BV
the company has more than 20 years’ experience within the security sector and supplies integrated security as well as ip satellite services to large customers in central holland.
Förebygget Brandskydd aB
the company supplies fire alarm services to companies and public authorities all over sweden.
g4s sicherheitssysteme gmbh
G4s sicherheitssysteme Gmbh is one of the five largest companies within security systems on the German market. the company employs approx. 300 people and has twenty branches around Germany. Focus is on banks and financial institu- tions as well as the retail sector. the acquisition strengthens niscayah’s position on the German market.
national guardian
A minor acquisition of the assets and liabilities of the national Commercial division of the company national Guardian security services, inc. was carried out in the us. national Guardian is a security company focusing on retail and fire alarm services. the acquisition in particular contributes to an expansion of niscayah’s service operations in the us.
the acquired companies and operations have contributed mseK 258 in sales and impacted operating income by mseK 8 during 2008. see note 13 for further information regarding acquisitions.
the parent Company
net sales for niscayah Group AB during the period amounted to mseK 187 (193).
income after net financial items totaled mseK –372 (443) during the period.
impairment of shares in subsidiaries has been made of mseK –483. Cash and cash equivalents amounted to mseK 123 (139). During the period, the parent Company has invested mseK 383 (397) in shares in subsidiaries and mseK 16 (0) in other non-current assets.
Dividend
the Board of Directors has resolved to propose a dividend of seK 0.30 per share to the Annual General meeting. the dividend is expected to amount to approxima- tely mseK 109.6 (182.5) in total. the Board of Directors makes the assessment that the proposed dividend will allow scope for the Group to fulfil its obligations and carry out necessary investments.
accounting policies
niscayah Group AB applies international accounting standards, international Fi- nancial Reporting standards, iFRs. more detailed information can be found in note 1.
expectations regarding the future trend
During 2009, niscayah will prioritize margins over growth. the market is expected to be characterized by weak growth.
stockholm, march 16, 2009
Jorma halonen
Chairman of the Board Carl Douglas
Board member tomas Franzén
Board member
eva lindqvist
Board member Anders Böös
Board member ulrik svensson
Board member
laila lindberg
employee representative mikael olsson
employee representative Juan vallejo
president and Board member
our audit report was submitted on march 17, 2009
pricewaterhouseCoopers AB Kerstin moberg Authorized public Accountant
RepoRt oF the BoARD oF DiReCtoRs 12
proposed distribution of profits
the Annual General meeting has at its disposal the following profits in the parent Company
seK
Retained earnings 7,013,281,031
net income for the year –447,744,856
total 6,565,536,175
the Board of Directors proposes, that:
to be distributed to the shareholders (365,058,897 shares x seK 0.30) 109,517,669
to be carried forward 6,456,018,506
total 6,565,536,175
the Board of Directors’ statement concerning the proposed dividend
After the proposed dividend, the Company’s equity/assets ratio amounts to 72.8 percent. Considering that the Company’s operations continue to be run with profitability, the Company’s equity/assets ratio is satisfactory. liquidity in the Company is deemed to be maintainable on a similarly satisfactory level. the Board’s opinion is that the proposed dividend will not hinder the Company in fulfilling its short and long-term obligations, nor from making necessary investments. the proposed dividend can thereby be justified with reference to the provisions of the swedish Companies Act, 17:3, paragraphs 2–3 (the prudence rule).
As regards the Company’s results and position in general, refer to the following income statements and balance sheets with accompanying notes to the financial statements.
the Board of Directors and the president declare that the consolidated financial statements have been prepared in accordance with international accounting standards, iFRs as adopted by the eu and give a true and fair view of the Group’s financial position and results of operations. the financial statements of the parent Company have been prepared in accordance with generally accepted accounting principles and give a true and fair view of the parent Company’s financial position and results of operations.
the statutory Administration Report of the Group and the parent Company provides a fair review of the development of the Group’s and the parent Company’s operations, financial position and results of operations and describes material risks and uncertainties facing the parent Company and the companies included in the Group.
ConsoliDAteD inCome stAtement 13
January–December, mseK note 2008 2007
income 5, 6 8,009.0 7,260.2
Cost of goods sold 7, 8, 9 –5,401.1 –4,734.6
gross income 2,607.9 2,525.6
selling and administrative expenses 7, 8, 9 –2,836.2 –1,867.3
Operating income –228.3 658.3
Financial income 22.7 27.5
Financial expenses –160.5 –95.3
net financial items 10 –137.8 –67.8
income before tax –366.1 590.5
taxes 11 –73.6 –167.5
net income for the year –439.7 423.0
Attributable to:
the parent Company’s shareholders –440.4 422.1
minority interests 0.7 0.9
–439.7 423.0
earnings per share for the income attributable to the parent
Company’s shareholders during the year, (expressed in seK) 12
before dilution –1.21 1.16
after dilution –1.21 1.16
Consolidated income statement
ConsoliDAteD BAlAnCe sheet 14
December 31, mseK note 2008 2007
assets
non-current assets
Goodwill 13, 14 2,246.1 2,675.5
other intangible assets 13, 15 409.8 347.1
property, plant and equipment 16 381.7 382.0
long-term financial assets 6.7 1.0
long-term receivables 17 20.8 14.5
Deferred tax assets 11 103.9 62.1
total non-current assets 3,169.0 3,482.2
Current assets
inventories 315.4 246.8
Accounts receivable 18 2,094.9 1,918.0
tax receivables 55.3 18.0
other receivables 19 882.1 621.2
short-term financial assets 20, 21 0.3 16.3
Cash and cash equivalents 22 356.4 401.9
total current assets 3,704.4 3,222.2
tOtaL assets 6,873.4 6,704.4
sharehOLDers’ eQuity anD LiaBiLities
sharehOLDers’ eQuity 23
Capital and reserves attributable to the parent Company’s shareholders
share capital 365.1 365.1
other paid-in capital 0.1 0.1
other reservesr 119.1 33.9
Retained earnings including net income for the year 1,444.8 2,088.7
total capital attributable to the Minority interests 1,929.1 2,487.8
Minority interests 7.4 5.7
total shareholders’ equity 1,936.5 2,493.5
LiaBiLities non-current liabilities
non-current financial liabilities 24 2,042.8 2,025.8
other non-current liabilities 0.0 0.5
Deferred tax liabilities 11 160.4 161.0
provision for pensions 25 95.4 56.2
other provisions 26 89.8 31.3
total non-current liabilities 2,388.4 2,274.8
Current liabilities
short-term financial liabilities 24 118.2 148.3
Accounts payable 751.1 558.1
tax liabilities 27.4 61.4
other short-term liabilities 28 1,475.6 1,168.3
other provisions 27 176.2 –
total current liabilities 2,548.5 1,936.1
tOtaL sharehOLDers’ eQuity anD LiaBiLities 6,873.4 6,704.4
Consolidated balance sheet
stAtement oF ReCoGnizeD inCome AnD eXpenses 15
2008 2007
January–December, mseK
Attributable to the parent Company’s
shareholders minority
interest total
Attributable to the parent Company’s
shareholders minority
interest total income and expenses recognized directly in equity
Actuarial gains and losses –21.0 – –21.0 –7.8 – –7.8
translation differences 85.2 1.0 86.2 –23.2 0.3 –22.9
total changes in capital recognized directly against equity, excl.
transactions with the Company’s owners 64.2 1.0 65.2 –31.0 0.3 –30.7
net income for the period –440.4 0.7 –439.7 422.1 0.9 423.0
total income and expenses for the period –376.2 1.7 –374.5 391.1 1.2 392.3
For further information see note 23, shareholders’ equity.
statement of recognized
income and expenses
ConsoliDAteD CAsh Flow stAtement 16
December 31, mseK note 2008 2007
Cash flow from operating activities
income after financial items –366.1 590.4
Adjustments for items not included in the cash flow, etc. 31 1,005.7 172.2
Current taxes paid –189.1 –186.4
Cash flow from operating activities before
changes in working capital 450.5 576.2
Cash flow from changes in working capital
increase (–) in inventories –15.9 –30.5
increase (–) in operating receivables –106.1 –402.4
increase (+) in operating liabilities 182.3 168.4
Cash flow from operating activities 510.8 311.7
Cash flow from investing activities
Acquisition of subsidiaries 31 –164.6 –343.5
purchase of intangible assets –44.5 –56.5
sale of property, plant and equipment 0.0 19.5
purchase of property, plant and equipment –123.1 –165.1
Cash flow from investing activities –332.2 –545.6
Cash flow from financing activities
proceeds from issue of warrants – 16.1
Dividends to shareholders –182.5 –146.0
Change in borrowings –69.1 127.4
Dividend to minority owner – –1.7
Cash flow from financing activities –251.6 –4.2
Decrease in cash and cash equivalents: –73.0 –238.0
Cash and cash equivalents at the start of the year 22 401.9 637.1
exchange rate differences in cash and cash equivalents 27.5 2.8
Cash and cash equivalents at year-end 22 356.4 401.9
Consolidated cash flow statement
January–December, mseK note 2008 2007
net sales 43 187.3 193.1
other operating expenses 35, 36 –110.3 –88.0
Operating income 77.0 105.1
income from financial items
income from participations in Group companies 37 –413.4 298.7
other interest income and similar income statement items 37 124.7 132.8
interest expenses and similar income statement items 37 –160.4 –94.0
income after financial items –372.1 442.6
Appropriations 38 –29.3 –67.0
income before tax –401.4 375.6
tax on net income for the year 39 –46.3 –59.5
net income for the year –447.7 316.1
the pARent CompAny’s inCome stAtement 17
the parent Company’s income statement
the pARent CompAny’s BAlAnCe sheet 18
the parent Company’s balance sheet
December 31, mseK note 2008 2007
assets
non-current assets
intangible assets 40 16.0 0.5
tangible assets 41 0.8 0.9
Financial assets
participations in Group companies 34 7,073.4 7,173.5
Receivables from Group companies 43 1,633.1 1,844.6
total non-current assets 8,723.3 9,019.5
Current assets Current receivables
Current receivables from Group companies 657.6 857.7
prepaid expenses and accrued income 27.8 30.9
tax receivable 17.9 –
other receivables 0.2 4.5
total current receivables 703.5 893.1
Derivative instruments 0.3 16.3
Cash and cash equivalents 42 122.8 139.0
total current assets 826.6 1,048.4
tOtaL assets 9,549.9 10,067.9
sharehOLDers’ eQuity anD LiaBiLities shareholders’ equity
share capital 46 365.1 365.1
statutory reserve 20.3 20.3
Retained earnings 7,013.2 6,909.8
net income for the year –447.7 316.1
total shareholders’ equity 6,950.9 7,611.3
untaxed reserves 38 146.2 116.9
LiaBiLities non-current liabilities
liabilities to credit institutions 44 1,995.7 1,970.1
liabilities to Group companies 21.9 11.4
other provisions 8.3 –
total non-current liabilities 2,025.9 1,981.5
Current liabilities
liabilities to credit institutions 44 0.0 94.1
Accounts payable 16.4 7.4
Derivative instruments 15.2 –
liabilities to Group companies 335.5 198.7
Current tax liabilities 0.0 22.5
other liabilities 39.5 5.4
Accrued expenses and deferred income 18.7 30.1
other provisions 1.6 –
total current liabilities 426.9 358.2
tOtaL sharehOLDers’ eQuity anD LiaBiLities 9,549.9 10,067.9
pledged assets and contingent liabilities for the parent Company
pledged assets 45 – –
Contingent liabilities 45 503.6 240.0
pARent CompAny’s ChAnGes in shAReholDeRs’ eQuity 19
Restricted equity non-restricted equity
mseK share
capital statutory
reserve Fair value reserve
share premium
reserve Retained earnings
net income for the year
total sha- reholders’
equity
Opening shareholders’ equity as at January 1, 2007 365.1 0.1 –64.1 – 6,928.1 171.2 7,400.4
Appropriation of profits – – – – 171.2 –171.2 0.0
warrants – – – 20.2 – – 20.2
translation differences from net foreign investments – – 18.0 – – – 18.0
tax attributable to items recognized directly in equity – – 2.6 – – – 2.6
total capital changes recognized directly in equity 0.0 0.0 20.6 20.2 171.2 –171.2 40.8
net income for the year – – – – – 316.1 316.1
total capital changes, excl. transactions
with the Company’s owners 0.0 0.0 20.6 20.2 171.2 144.9 356.9
Dividend – – – – –146.0 – –146.0
Closing shareholders’ equity as at December 31, 2007 365.1 0.1 –43.5 20.2 6,953.3 316.1 7,611.3
Restricted equity non-restricted equity
mseK share
capital statutory
reserve Fair value reserve
share premium
reserve Retained earnings
net income for the year
total sha- reholders’
equity
Opening shareholders’ equity as at January 1, 2008 365.1 0.1 –43.5 20.2 6,953.3 316.1 7,611.3
Appropriation of profits – – – – 316.1 –316.1 0.0
translation differences from net foreign investments – – –41.4 – – – –41.4
taxes attributable to items recognized directly in equity – – 11.6 – – – 11.6
total capital changes recognized directly in equity 0.0 0.0 –29.8 – 316.1 –316.1 –29.8
Group contribution paid – – – – –0.3 – –0.3
net income for the year – – – – – –447.8 –447.8
total capital changes, excl. transactions
with the Company’s owners 0.0 0.0 –29.8 – 315.8 –763.9 –477.9
Dividend – – – – –182.5 – –182.5
Closing shareholders’ equity as at December 31, 2008 365.1 0.1 –73.3 20.2 7,086.6 –447.8 6,950.9
parent Company’s Changes in
shareholders’ equity
the pARent CompAny’s CAsh Flow stAtement 20
January-December, mseK note 2008 2007
Cash flow from operating activities
income after financial items –372.1 442.6
Amortization and impairments 512.4 0.5
unrealized exchange rate differences 66.0 0.0
Current taxes paid –75.3 –77.5
Cash flow from operating activities before changes
in working capital 131.0 365.6
Cash flow from changes in working capital
Decrease (+) in operating receivables 104.0 169.0
Decrease (–) increase (+) in operating liabilities 38.8 –297.1
Cash flow from operating activities 273.8 237.5
Cash flow from investing activities
Acquisition of property, plant and equipment –0.2 –0.1
Acquisition of intangible assets –16.0 –0.1
Acquisition of shares in subsidiaries –412.0 –396.8
Disposal of financial assets 330.0 –
Acquisition of financial assets – –158.0
Cash flow from investing activities –98.2 –555.0
Cash flow from financing activities
Dividends to shareholders –182.5 –146.0
Cash and cash equivalents for issue of warrants – 20.2
Group contribution paid –0.3 –
Amortization of loans –9.0 –
Borrowings – 232.0
Cash flow from financing activities –191.8 106.2
Decrease in cash and cash equivalents: –16.2 –211.3
Cash and cash equivalents at the start of the year 42 139.0 350.3
Cash and cash equivalents at year-end 42 122.8 139.0
the parent Company’s cash flow statement
Contents notes 21
the GRoup’s notes
note 1 summary of significant accounting policies 22
note 2 Critical accounting estimates and judgements 26
note 3 Financial risk management 27
note 4 Key ratios, definitions and exchange rates 28
note 5 segment reporting 29
note 6 operating income 29
note 7 operating expenses 30
note 8 personnel expenses and average number of employees 30
note 9 Depreciation and amortization and impairments 31
note 10 Financial income and expenses 31
note 11 taxes 31
note 12 earnings per share 32
note 13 Acquisitions and disposals of subsidiaries and impairment 32
note 14 Goodwill 35
note 15 other intangible assets 36
note 16 property, plant and equipment 36
note 17 long-term receivables 37
note 18 Accounts receivable – trade 37
note 19 other receivables 37
note 20 short-term financial assets 37
note 21 Derivative instruments 37
note 22 Cash and cash equivalents 37
note 23 shareholders’ equity 38
note 24 Financial liabilities 39
note 25 provision for pensions 40
note 26 other provisions – long-term 40
note 27 other provisions – short-term 40
note 28 other short-term liabilities 40
note 29 pledged assets, contingent liabilities and contingent assets 41
note 30 leasing 41
note 31 Cash flow 42
note 32 Remuneration to senior executives 42
note 33 post-balance sheet events 43
the pARent CompAny’s notes
note 34 participations in Group companies 44
note 35 operating expenses 44
note 36 personnel expenses and average number of employees 45
note 37 Financial income and expenses 45
note 38 Appropriations and untaxed reserves 45
note 39 taxes 45
note 40 intangible assets 46
note 41 tangible assets 46
note 42 Cash and cash equivalents 46
note 43 transactions with related parties 46
note 44 Financial liabilities 46
note 45 pledged assets, contingent liabilities and contingent assets 46
note 46 share capital 46
notes
the GRoup’s notes 22 of the cost of that asset. the option of immediately expensing those borrowing costs will be removed. the Group will apply iAs 23 (Amended) from January 1, 2009 but it is currently not applicable to the Group as there are no qualifying assets.
•
iAs 1 (Amendment), ’presentation of Financial Reports’ (effective from January 1, 2009). the revised standard will prohibit presentation of income and expense items (i.e. ’changes in equity excluding transactions with owners’) in the state- ment of changes in equity but will require that ’changes in equity excluding tran- sactions with owners’ are recognized separately from changes in equity which relate to transactions with owners. it will be required to recognize all changes in equity which do not relate to owners in a statement (statement of changes in equity) or in two statements (separate income statement and statement of changes in equity). if a company makes a retroactive restatement or a revised classification of comparative information, it must present a restated balance sheet as per the start of the comparative period, in addition to the current requi- rement to present balance sheets at the end of the actual period and compara- tive period. the Group will apply iAs 1 (Amendment) from January 1, 2009. Both separate income statement and statement of changes in equity are likely to be presented as one statement.•
iAs 27 (Amendment), ’Consolidated and separate Financial statements’(effective from July 1, 2009). the revised standard requires that the effects of all transactions with minority owners are recognized in equity if they do not give rise to any change in the controlling influence and that that these transactions no longer are the source of goodwill or profits and losses. the standard also states that when a parent company loses the controlling influ- ence any remaining share shall be revalued at fair value and a profit or loss recognized in the income statement. the Group will apply iAs 27 (Amended) for future transactions with minority shareholders from January 1, 2010.
•
iFRs 3 (Amendment) 1, ’Business combinations’ (effective from July 1, 2009).the revised standard goes on to prescribe that the purchase method is app- lied for business combinations with some important amendments. For example, all payments for a corporate acquisition are recognized at fair value on the date of acquisition, while subsequent conditional payments are clas- sified as liabilities and are subsequently revalued via the income statement.
the minority interest in the acquired businesses can optionally for each acquisition either be valued at fair value or at the minority shareholder’s pro- portional share of the net assets of the acquired business. All transaction costs relating to acquisitions shall be recognized as an expense. the Gro- up will apply iFRs 3 (Amended) for all future business combinations from January 1, 2010.
•
iFRs 5 (Amendment), ’non-current assets held for sale and discontinued operations’ (and the consequent amendment of iFRs 1, ’First-time adoption of iFRs’) (effective from July 1, 2009). the amendment is a part of iAsB’s an- nual improvement project and was published in may 2008. the amendment clarifies that all a subsidiary’s assets and liabilities are classified as holdings for sale if a plan for partial disposal leads to the loss of the controlling in- fluence. Requisite information shall be furnished concerning this subsidiary if the definition of discontinued operation is fulfiled. the resulting amend- ment of iFRs 1 prescribes that these amendments shall be applied in the fu- ture from the date of transition to iFRs. the Group will apply iFRs 5 (Amend- ment) for all future partial disposals of subsidiaries as from January 1, 2010.Apart from what it stated above, iAsB has issued a number of amendments of existing standards and interpretations which have not been considered relevant for the Group at present.
COnsOLiDatiOn subsidiaries
subsidiaries are all the entities (including entities for special purposes) over which the Group has the power to govern the financial and operating policies generally accompanying a shareholding of more than one half of the voting
niscayah group aB
niscayah Group AB (’the parent Company’) and its subsidiaries (together ’the Group’) is a world-leading system integrator within security, offering complete security solutions for customers with high security demands. the Group operates in 14 european countries as well as in the us, hong Kong and Australia.
the parent Company is a limited liability company registered and with its head office in sweden. the address of the head office is Box 12231, 102 26 stockholm. these financial statements have been approved by the Board of Directors for publication on march 16, 2009 and will be submitted for adoption at the Annual General meeting on April 21, 2009. the parent Company is listed on nAsDAQ omX stockholm.
note 1
summARy oF siGniFiCAnt ACCountinG poliCies
the principal accounting policies applied in preparing the consolidated financial statements are set out below. these policies have been applied consistently for all presented years, unless otherwise stated.
Basis OF preparatiOn
the consolidated financial statements of niscayah Group AB have been prepared in accordance with the swedish Annual Accounts Act, the swedish Financial Reporting Board’s recommendation RFR 1.1, supplementary Accounting Rules for Groups and the international Financial Reporting standards (iFRs) as adopted by the eu. the parent Company applies the same accounting policies as the Group except in the cases stated below in the section ’the parent Company’s accounting policies’.
the consolidated financial statements have been prepared under the his- torical cost convention, as modified by the revaluation of land and buildings, available-for-sale financial assets and financial assets and financial liabilities (including derivative instruments) at fair value through profit or loss.
the preparation of financial statements in conformity with iFRs requires the use of certain critical accounting estimates. it also requires management to exercise its judgment in the process of applying the Group’s accounting policies.
the areas involving a higher degree of judgment or areas where assump- tions and estimates are significant to the consolidated financial statements are disclosed in note 2.
standards, amendments and interpretations of existing standards where the amendment is not yet effective and has not been early adopted by the group
the following standards and interpretations of existing standards have been published and are mandatory for the Group’s reporting for accounting periods beginning on or after January 1, 2009 or later periods, but the Group has not early adopted them.
•
iFRs 8, operating segments (effective from January 1, 2009). iFRs 8 replaces iAs 14 and aligns segment reporting with the requirements of the us stan- dard sFAs 131, ’Disclosures about segments of an enterprise and related information’. the new standard requires ’a management approach’, under which segment information is presented on the same basis as that used for internal reporting purposes. niscayah will apply iFRs 8 from January 1, 2009.the expected impact is still being assessed in detail by management.
