Annual Report 2009
IBS in brief 1
2009 in brief 2
Corporate governance of IBS 3
The IBS share 6
Five-year summary 8
Key figures and data per share 9
The Board and Auditors 10
IBS Group Management 11
Board of Directors’ report 12
The group’s statements 19
The parent company’s statements 21
Accounting principles and notes 25
Audit report 48
Definitions 49
Annual meeting and financial calendar 50
IBS in brief
IBS ProfeSSIonal ServIceS
IBS Professional Services is not only the area that accounts for the largest percentage of the company’s sales, namely professional services revenues, it is also the area in which an increasing number of customers receive the greatest value from their partnership with IBS. The reason for this is IBS’ employees and their business-related and technical experience, their commitment in combination with their desire to deliver the best results.
IBS Product develoPment
The core of IBS’ solutions is the IBS Enterprise system and the industry-specific solutions known as IBS Pharma, IBS Bookmaster, IBS Electro and IBS Rental. IBS Product Development is responsible for these, as well as for identifying and compiling customers’
business requirements and translating them into technology – and back again. The secret lies in offering solutions to business problems and removing responsibility for the complex technology involved from the user.
IBS develops and supplies international business systems, implementation, maintenance and professional services, and has more than 4 000 customers in some 40 countries, with a local presence in four geographical areas: nordics, europe, americas and asia Pacific. With a strong global organization, prominent international partnerships and efficient software, IBS helps its customers reduce their costs and optimize their operations. after more than 30 years in the industry, IBS has acquired the necessary experience to be able to offer extraordinary customer value. the company’s expertise focuses on four main areas.
IBS SaleS & marketIng
IBS’ customers require products and services that are often complex and are always extremely important to them. IBS’ sales and marketing staff ensure that the company’s customers are well- informed and know which solutions IBS provides, which options suit them and their operations best, and what IBS can offer to enable the customer to grow in the future. As part of the dialog with customers, IBS defines the products of the tomorrow to meet future business requirements.
IPtor
To be able to utilize IBS’ solutions, certain infrastructure is required.
IBS has always supplied the necessary server or servers. This meant
that customers only needed one supplier. This has developed into
a separate division, Iptor, that currently offers various types of in-
tegration and professional services solutions. The components are
configured to suit the customer’s individual needs, regardless of
whether the customer owns and operates the hardware themselves
or whether IBS operates, maintains and supports all aspects of the
complete solution.
Summary – fInancIal data
SEK million 2009 2008
Software licenses 476 419
Professional services 969 1 150
Hardware and other revenue 374 464
Total revenue 1 819 2 034
Operating income –326 –283
Net income for the year –433 –274
EBITDA*
)75 81
Number off employees at year end 1 114 1 377
*) EBITDA: earnings before interest, taxes, depreciation, amortization, res- tructureing costs and loss/gain from sale of subsidiaries/operations.
revenue SPlIt
■ Professional services, 50%
■ Software licenses, 30%
■ Hardware and other revenue, 20%
Because the global market for business systems declined and most industries were impacted by difficult financial challenges, IBS focused its organization on its core operations, particularly deliveries of software solutions to wholesalers and distributors worldwide. the company’s strategy of having a small and flexible organization has started to yield results, primarily in the form of increased productivity and license sales.
n
New license sales globally grew 30%, with the Americas market showing the biggest increase.
n
The strategic initiative announced 23 September 2008 was completed in the first half of the year, with reduction in headcount of 35%.
n
Productivity increased throughout IBS with revenue per employee increasing by 26%.
n
Full-year EBITDA*
)amounted to SEK 75 m (81).
n
EBITDA*
)per employee improved compared to 2008.
n
The company reported a net loss for the year of SEK 443 m (loss: 274). Included in the loss were several non-operational transactions such as goodwill impairment charges totaling SEK 131 m (53), restructuring costs of SEK 128 m (170) and impairment losses on defer- red tax assets totaling SEK 76 m (26).
n
A new division within IBS, Iptor, was established to focus on offerings in areas such as storage capacity, technical infrastructure, content management and system integration services.
2009 in brief
Corporate governance of IBS
SWedISH code of corPorate governance
IBS has endeavored to apply the Swedish Code of Corporate Gov- ernance (“the Code”) since the 2006 fiscal year. A basic principle of the Code is that the rules are to be complied with or the deviations explained.
lIStIng
In 2009, the Board of Directors decided to transfer trading of the company’s share from NASDAQ OMX Nordic to NASDAQ OMX First North. The IBS Class B share has been listed on NASDAQ OMX First North since May 11, 2009.
annual general meetIng
The Annual General Meeting for 2009 was held at the Nordic Sea Hotel in Stockholm on May 7, 2009. A total of 23 shareholders, including proxies, were present at the meeting, representing 83.6 percent of the votes and 78.0 percent of the capital. The Board of Directors and management of IBS, along with the auditor of the company, were present at the meeting.
The Annual General Meeting for 2010 will be held at Solna Sum- mit Gate in Solna on May 6, 2010.
eXtraordInary general meetIngS
In 2009, one Extraordinary General Meeting was held on January 15. In total, 64 shareholders, including proxies, were present at the meeting, representing 86.5 percent of the votes and 85.1 percent of the capital. The meeting resolved to introduce three long-term employee stock option programs directed in part at the CEO and in part at senior executives and key persons as well as Board members.
The meeting also resolved to approve a directed issue of warrants to ensure the programs and the transfer of warrants for the fulfillment of the undertakings pursuant to the programs. The meeting also resolved to discontinue the incentive program and associated buy- back program adopted by the 2008 Annual General Meeting.
SHareHolderS’ rIgHt to SuBmIt ProPoSalS
All shareholders are entitled to submit proposals to the Annual Gen- eral Meeting.
nomInatIon commIttee
In 2008, Deccan Value Advisors, the single largest shareholder in IBS, stated that they did not intend to participate in the work of a nomination committee, but rather present its own proposals in connection with the Annual General Meeting. Hence, the establish- ment of a nomination committee was deemed to be inapplicable.
Thus, the company deviates from the rules contained in the Code concerning nomination committees.
Proposals and opinions from the other shareholders are more than welcome. A shareholder that wishes to nominate a Board member may contact the Chairman of the Board of Directors, Dr.
Pallab Chatterjee.
Board of dIrectorS
The Annual General Meeting elected Dr. Pallab Chatterjee (Chair- man), Vinit Bodas, Gunnel Duveblad, George Ho, Christian Paulsson, Bertrand Sciard and Ann-Mari Öhman to the Board. On August 13,
George Ho withdrew on his own request and the Board has since consisted of five Board members. Ann-Mari Öhman, IBS employee representative, withdrew from the Board in January 2010 and was replaced by Ulf Eriksson and deputy Harry Greijer. No other deputy members were elected and the CEO is to be co-opted at Board meetings.
Company employees participated in Board meetings in a report- ing or administrative capacity. The Company’s auditing firm, KPMG, presented its findings from the audit during the Board meeting held on February 11, 2010.
commItteeS
The Board has elected specific committees to address matters per- taining to remuneration, strategy and audit.
remuneration committee
The Remuneration Committee is charged with handling salary and other incentives, employment terms and conditions, and pension issues pertaining to senior executives in the IBS Group, as well as ensuring that the Company complies with requirements regard- ing public disclosure related to remuneration to senior executives.
The Committee comprises Gunnel Duveblad (Chairman), Dr. Pallab Chatterjee and Bertrand Sciard. The Remuneration Committee held three meetings during the year.
Strategy committee
In October 2009, IBS established a Strategy Committee to assess, on a continuous basis, the company’s strategic position in the markets in which it is active. The Committee serves an exclusively analytical and investigative function and reports its conclusions to the Board, which then makes the necessary decisions. The Strategy Committee comprises three members: Vinit Bodas (Chairman), Pallab Chatter- jee and Christian Paulsson.
audit committee
The Audit Committee normally meets in connection with interim reports and the year-end report. The Committee’s main assignment is to prepare material for the Board to ensure a high level of quality of the company financial reporting and continuously consult with the company’s auditors regarding internal and external auditing as well as company risk. The Audit Committee follows the instructions for its work established by the Board of Directors.
During 2009, the Committee comprised Christian Paulsson (Chairman) and Gunnel Duveblad. The company thereby deviates from the Code since the Committee consists of two members in- stead of three. Auditor Åsa Wirén Linder from KPMG and the Com- pany’s Chief Financial Officer participate in all meetings held by the Audit Committee. The Audit Committee held three meetings during 2009.
Board of dIrectorS’ Work
The work of the Board is conducted in accordance with the Swed-
ish Companies Act, the NASDAQ OMX First North’s rules for issuers
and other applicable rules and regulations, as well as the formal
work plan for the Board of Directors. The formal work plan was
established at the statutory Board meeting in conjunction with the
Annual General Meeting on May 7, 2009. The Board of Directors also establishes a financial policy that stipulates appropriate levels of risk for financing, interest rates, liquidity, credit and currencies, as well as an information policy. Reviews of the work plan for the Board, associated instructions and the information policy are made annually. Other instructions are reviewed as needed.
According to the current work plan, the Board shall normally hold six Board meetings per year, in addition to the statutory meeting in conjunction with the Annual General Meeting. At each ordinary meeting, the company’s financial reports and operational reporting are addressed. One meeting shall focus on strategic issues and one shall focus on the budget for the coming fiscal year.
The Chairman of the Board leads and directs the work of the Board. The Chairman follows the business in collaboration with the President and ensures that other members of the Board receive the information and documentation required for high-quality discus- sions and decisions. The Chairman is also responsible for leading the evaluation of the President and is involved in the evaluation and development issues concerning the Board and the President.
The Chairman represents the company in matters concerning the shareholders.
During 2009, the Board held 13 meetings, of which six were ordi- nary meetings in connection with interim reports, budget approval and the Annual General Meeting. One of the Board meetings main- ly focused on the company’s strategic and long-term development, and one meeting was a statutory meeting in conjunction with the 2009 Annual General Meeting. The meetings followed an approved agenda preceded by proposals and documentation for each item on the agenda, which was sent out to the Board members.
evaluatIon of tHe Board of dIrectorS and PreSIdent
During 2009, the Chairman of the Board was evaluated in accord- ance with the Code’s guidelines. No evaluation of the Board was conducted.
audItorS
The 2008 Annual General Meeting elected the auditing firm KPMG AB as the company’s auditors for the period until the 2012 Annual General Meeting. The authorized accountant in charge is Åsa Wirén Linder.
IBS grouP management durIng 2009
The President leads and directs the work of the Group Management and makes decisions in consultation with the other members. IBS Group Management comprises Mike Shinya (President and CEO), Doreena Ross (SVP Human Resources and Administration), Oskar Ahlberg (SVP Communications) and CFO. CFO Lennart Bernard was a member of Group Management from January 1, 2009 up to and including April 7, 2009, CFO Mark Williams was a mem- ber of Group Management from April 8, 2009 up to and including December 31, 2009. At the beginning of March 2010, Fredrik San- delin assumed the position of Executive Vice President and CFO and is a member of Group Management. Christian Paulsson is a mem- ber of Group Management from February 2010 and comprises the position of Exe cutive Vice President and Corprate Development and M&A. Group Management regularly participates in business reviews under the leadership of the President.
IBS group management during 2009
CEO Mike Shinya 1 Jan – 31 Dec
CFO Lennart Bernard 1 Jan – 7 Apr
CFO Mark Williams 8 Apr – 31 Dec
SVP Communications Oskar Ahlberg 1 Jan – 31 Dec SVP Human Resources and
Administrations Doreena Ross 1 Jan – 31 Dec
Internal controlIntroduction
Under the Swedish Companies Act, the Board has the ultimate re- sponsibility for the internal control of the company, which is also stated and clarified by the Code. The organization of internal con- trol is described below, particularly with regard to the financial reporting within IBS. The report is not part of the formal Annual Report documentation and has not been audited by the company’s auditors.
In short, the Code specifies that the Board shall ensure that the company’s organization, by involving Company Management and other employees, is designed so that the accounting, financial re- porting and the company’s financial position is adequately moni- tored.
control environment
The basis of financial reporting is the control environment, which comprises the following components:
n
The Board’s work processes. The Board’s formal work plan defines the division of duties between the Board, Committees, the Chair- man and the President.
n
Organizational structure. Roles, responsibilities and processes are clarified through organizational charts and descriptions.
n
Control documents. Internal policies, handbooks, manuals and guidelines contain instructions for the reporting and accounting of financial data, descriptions of external accounting regulations and other guidelines, such as financial and investment policies.
Policies pertaining to HR, IT and communication are also defined and used in the business.
n
Appropriate internal reporting. IBS’ internal financial reports con- taining outcomes, budgets, forecasts, analyses of essential key figures, sales and market analyses and the status of product de- velopment are regularly submitted to the Board and senior execu- tives.
n
Competent and reliable personnel. Measures to recruit, retain
and further develop employees with appropriate qualifications
provide the foundation for the operation’s favorable develop-
ment.
risk assessment
IBS continuously reviews the company’s processes in order to iden- tify the manner in which the risk of errors in the financial reporting is to be minimized. In this context, items in the income statement and balance sheet that have an elevated risk of error are identified.
The IBS Board has identified a number of processes for which it is vital that risk management is described and developed further, such as the invoicing process.
control activities
Risk assessment results in a number of control activities aimed at managing the risks. For example, it is vital for IBS that approval, accuracy and completeness characterize the handling of contracts, invoices, revenue recognition, project follow-up, purchasing, pay- ments, salaries, taxes and fees. Controls shall also be in place with the aim of minimizing risks for the misappropriation of assets and of improper favors being granted at the expense of the company. Sub- sidiaries must have appropriate processes for accounting, balance- sheet analysis and reporting. The process for the Group’s external financial reporting (quarterly reports and annual reports) must be subject to control.
Internal information and communication
Company Management has compiled policies, guidelines and rules in electronic manuals on the Company’s intranet. Furthermore, management continuously updates employees on the status and outcome with regard to financial developments.
Updates of accounting procedures and principles, reporting and requests for information are continuously made available and brought to the attention of personnel concerned.
The company has an information policy for external communica- tion and contacts with analysts.
Internal communication primarily takes place over the intranet, and IBS’ goal is for employees to understand the business operation and vision, as well as the IBS core values. Every month, business areas report their income and business situation to Company Man- agement, in the form of a structured debriefing.
follow-up
Management’s follow-up of the functionality of the control struc- ture is partly implemented through reports from controller follow- up of subsidiaries. The Audit Committee receives continuous reports and assessments on the financial situation from the CFO and audi- tors, and the CFO and auditors then continuously update the Board in its entirety.
need for internal audit function
In 2009, internal audits were conducted in selected areas that the Board wished to inspect in particular. This work was led by the Chairman of the Audit Committee and reporting was made direct- ly to the Board. The objective of the internal audit function is to identify risks and improve internal control and the processes in the Group. The Board does not deem it necessary to establish a special internal audit function.
Board members
Members of the Board during the following periods in 2009
Participation in Board meetings (total of 13)
Participation in Remuneration Committee meet - ings (total of 3)
Participation in Audit Committee meetings (total of 3)
Independent Company/
Owners
Shares held in IBS
Options held in IBS 5)
Dr. Pallab Chatterjee 1 Jan – 31 Dec 12/13 3/3 - Yes/Yes 50 000
2)600 000
Bertrand Sciard 1 Jan – 31 Dec 13/13 3/3 - Yes/Yes 0 100 000
Gunnel Duveblad 1 Jan – 31 Dec 13/13 3/3 3/3 Yes/Yes 20 000
2)100 000
Vinit Bodas 1 Jan – 31 Dec 11/13 - - Yes/No 0
1)-
Christian Paulsson
3)1 Jan – 31 Dec 12/13 - 3/3 No/No 5 000
2)302 872
George Ho 1 Jan – 13 Aug 5/8 - - Yes/No N/A -
Ann-Mari Öhman
4)1 Jan – 31 Dec 13/13 - - No/Yes N/A -
1) As President and Chief Investment Officer in Deccan Value Advisors, Vinit Bodas represents Deccan Value Advisors’ entire holding of IBS shares.
The total shares held amounts to 4,650,000 Class A shares and 87,486,700 Class B shares as per December 31, 2009.
2) Class B shares
3) Christian Paulsson has been employed by IBS since February 2010. During 2009 Christian was employed by Deccan Value Advisors.
4) Ann-Mari Öhman withdrew from the Board in January 2010 and was replaced by Ulf Eriksson and deputy Harry Greijer.
5) Options held as per April 21, 2010.
The IBS share
PrIce trend and lIQuIdIty
The value of the IBS share rose by 21 percent during the year. The highest price paid for the share was SEK 8.50 on February 10 and the lowest was SEK 5.20 on March 13, measured on closing price.
The annual turnover of the IBS share decreased during 2009 to SEK 61 m. The average daily turnover was SEK 0.2 m and the IBS market value on December 31 was SEK 842 m.
oWnerSHIP Structure
On December 31, the number of shareholders amounted to 4 759.
The largest shareholder in IBS is Deccan Value Advisors, which held 72.8 percent of the capital and 79.2 percent of the votes on Decem- ber 31, 2009. At year-end, the ten largest shareholders accounted for 83.1 percent of the share capital and 87.3 percent of the votes.
SHare caPItal
IBS’ share capital is distributed across 4 725 000 Class A shares and 121 849 374 Class B shares. Each Class A share carries ten votes and each Class B share one vote. The quotient value of both share classes is SEK 0.20 per share, making a total of SEK 25 314 875 in registered share capital.
Via a profit-sharing fund for personnel established by IBS AB, the employees’ shareholding in IBS AB amounts to 226 000 shares.
However, the employees cannot exercise any direct voting rights for said shares.
In 2009, no change in the share capital took place.
lIStIng
In 2009, the Board of Directors decided to transfer trading of the company’s share from NASDAQ OMX Nordic to NASDAQ OMX First North. The IBS Class B share has been listed on NASDAQ OMX First North since May 11, 2009.
the IBS share has been listed on the naSdaQ omX first north since may 11, 2009. the share was previously listed on the naSdaQ omX nordic exchange since may 20, 1986.
WarrantS Program
On January 15, 2009, an Extraordinary General Meeting was held which resolved to introduce share-based incentive programs for the Board of Directors, the President and certain senior executives and key employees. The meeting also resolved to approve an issue of a maxi- mum of 11 518 500 warrants. At December 31, 2009, 1 711 250 employee stock options were outstanding (also refer to Note 2).
dIvIdend PolIcy
The long-term objective of the Board of Directors is to distribute not less than 20 percent of after-tax profit to shareholders in the form of dividends. When proposing dividends, the Board also takes into consideration the company’s requirements for consolidation, liquid- ity and capital for future expansion.
dIvIdend
The Board proposes that no dividend be paid for the 2009 fiscal year.
rePurcHaSe of treaSury SHareS
No repurchase of shares took place in 2009. In total, IBS has 2 303 800 shares in its possession, which were repurchased at an average share price of SEK 21.70 per share, corresponding to a total amount of SEK 50 m. According to a resolution passed by the An- nual General Meeting in 2006, the acquired shares may be used as payment for, or the financing of, company acquisitions.
SHareHolder ServIce
The IBS website www.ibs.net/en/about-us/investors/ contains infor- mation on the IBS share price trend, lists of analysts, interim reports, annual reports and press releases. This information is continuously updated. In connection with the first distribution of financial infor- mation, IBS offers all shareholders the opportunity to actively decide whether they want to continue receiving this information by post.
The ten largest shareholders in IBS, December 31, 2009
1)Shareholder Class A shares Class B shares Holding,% Votes, %
Deccan Value Advisors 4 650 000 87 486 700 72.8 79.2
LGT Bank in Liechtenstein Ltd 0 3 000 000 2.4 1.8
Didner & Gerge Aktiefond 0 2 542 750 2.0 1.5
Brohuvudet AB 0 2 100 000 1.7 1.2
Olof Andersson Förvaltnings Aktiebolag 75 000 769 142 0.7 0.9
Mike Shinya 0 1 167 250 0.9 0.7
Residenset Capital Management S.A 0 1 047 558 0.8 0.6
Avanza Pension 0 813 300 0.6 0.5
Mats Nilsson 0 759 500 0.6 0.5
Mark Williams 0 736 755 0.6 0.4
Total, largest shareholders 4 725 000 100 422 955 83.1 87.3
Other
2)0 21 426 419 16.9 12.7
Total 4 725 000 121 849 374 100.0 100.0
1) Information obtained from Euroclear Sweden.
2) Including IBS repurchase of own shares 2 303 800.
distribution of shareholdings per december 31, 2009*
Size
No. of owners
Owners,
%
No. of shares
Capital,
%
1–1 000 3 184 66.9 1 162 055 0.9
1 001–10 000 1 310 27.5 4 485 325 3.5
10 001–100 000 230 4.8 6 515 125 5.1
100 001–1 000 000 28 0.6 10 159 311 8.0
1 000 001– 7 0.2 104 252 558
1)82.4
Total 4 759 100 126 574 374 100
1) Including repurchase of own shares.
Share capital development
Year Event Share capital No of A shares No of B shares
1978 IBS founded 50 000 1 000
1984 Split 10:1 50 000 1 000 9 000
1984 New issue of Class B shares 1:3 and 1:5 80 000 1 000 15 000
1985 Bond issue 89:1 7 200 000 90 000 1 350 000
1986 New issue of Class B shares 1:5 8 550 000 90 000 1 620 000
1989 New issue of Class B shares 1:5 10 260 000 90 000 1 962 000
1989 New issue of Class B shares via convertible notes 10 418 000 90 000 1 999 500
1990 New issue of Class B shares via convertible notes 10 696 000 90 000 2 049 204
1996 Directed new share issue 11 571 020 90 000 2 224 204
1997 Split 5:1 11 571 020 450 000 11 121 020
1997 New share issue 1:5 13 867 418 540 000 13 327 418
1998 New share issue 1:6 14 823 306 630 000 14 193 306
2000 Directed new share issue 15 323 306 630 000 14 693 306
2000 Split 5:1 15 323 306 3 150 000 73 466 530
2000 Conversion of warrants 15 821 606 3 150 000 75 958 030
2001 Non-cash issue of Class B shares 15 921 606 3 150 000 76 458 030
2006 Conversion of warrants 16 721 606 3 150 000 80 458 030
2008 New share issue 1:2 25 082 409 4 725 000 120 687 045
2008 Directed new share issue 25 314 875 4 725 000 121 849 374
*) Information obtained from Euroclear Sweden key figures
2009 2008
Average number of shares (thousand) 124 271 104 185
Earnings per share –3.49 –2.63
Cash flow per share –0.80 0.73
Share price at year-end 6.65 5.50
Proposed dividend per share - -
Average share price 6.79 9.87
Market capitalization (SEK m) 842 696
ownership per the largest coun- tries, december 31, 2009 (votes)*
ownership structure, december 31, 2009*
■ USA, 79%
■ Sweden, 14%
■ UK, 2%
■ Liechtenstein, 2%
■ Other, 3%
■ Non-Swedish registered institutions and funds, 81%
■ Non-Swedish resident private owners, 1%
■ Swedish resident private owners, 8%
■ Swedish registered institutions and funds, 10%
5 000 10 000 15 000 20 000 25 000 30 000 35 000 40 000 IBS B OMX S Share turnover, 000s /month
2009
2004 2005 2006 2007 2008 2010
5 10 15 20 25 30 35 40
Share price development
Five-year summary
Sek million 2009 2008 2007 2006
5)2005
5)Income statement
Total revenue 1 819.2 2 033.8 2 259.3 2 278.0 2 376.0
Gross profit 584.8 643.7 793.4 859.0 854.9
Operating profit –325.7 –283.3 37.5 –6.6 639.2
Operating profit
(excluding one-off items, see notes below) –68.9
1)–58.0
1)39.9
2)112.4
3)68.1
4)Profit after financial items –332.5 –272.8 26.7 –6.2 653.7
Tax –100.9 –1.6 –30.5 –1.1 –31.6
Net earnings for the year –433.4 –274.4 –3.8 –7.3 622.1
Balance sheet
Intangible assets 609.0 748.7 801.3 740.4 689.5
Tangible assets 67.0 87.1 93.1 97.5 104.1
Financial assets 9.8 11.2 12.7 17.2 15.7
Deferred tax receivables 56.0 136.4 135.0 146.1 135.2
Inventories 2.1 7.0 16.6 8.5 6.8
Current receivables 682.0 801.4 892.7 845.3 820.7
Cash and cash equivalents 135.1 312.7 186.3 405.4 676.4
TOTAL ASSETS 1 561.0 2 104.5 2 137.7 2 260.4 2 448.4
Total equity 644.3 1 073.2 956.1 953.2 1 173.1
Long-term liabilities 97.2 112.4 101.1 174.5 171.8
Short-term liabilities 819.5 918.9 1 080.5 1 132.7 1 103.5
TOTAL EQUITY AND LIABILITIES 1 561.0 2 104.5 2 137.7 2 260.4 2 448.4
cash flow analysIs
Cash flow from operating activities –99.3 76.5 90.2 53.2 80.5
Cash flow from investing activities –87.7 –109.7 –174.3 –142.1 330.1
Cash flow from financing activities 12.8 140.0 –142.1 –166.1 104.5
Cash flow for the year –174.2 106.8 –226.2 –255.0 515.1
Translation differences cash equivalents –3.4 19.6 7.1 –16.0 7.8
Cash and cash equivalents, end of year 135.1 312.7 186.3 405.4 676.4
1) Excluding restructuring costs, capital loss from sale of subsidiaries, currency translation differences in receivables/liabilities of an operating character and impairment of goodwill.
2) Excluding capital loss from sale of operations and currency translation differences in receivables/liabilities of an operating character.
3) Excluding restructuring costs and capital gain from sale of subsidiaries.
4) Excluding capital gain from sale of subsidiaries.
5) 2005 and 2006 are not restated according to the same principle for function cost allocation as 2008 and 2007.
Key figures and data per share
2009 2008 2007 2006 2005
key fIgureS
Average number of employees 1 145 1 612 1 815 1 873 1 874
Revenue per employee (SEK thousand) 1 589 1 262 1 245 1 216 1 286
Value added per employee (SEK thousand) 566 534 720 638 1 043
Operating margin, % –17.9 –13.9 1.7 –0.3 26.9
Operating margin, %
(excluding one-off items, see notes below) –3.8
1)–2.8
1)1.7
2)4.9
3)2.9
4)Capital turnover ratio 1 1 1 1 1
Return on total capital, % –17.6 –12.2 2.1 0 33
Return on capital employed, % –33.2 –21.0 3.5 0 54
Return on equity, % –50.7 –27.3 –0.4 –1 73
Ratio of risk capital, % 42 51 45 43 49
Liquidity, % 100 121 100 110 136
Equity to total assets ratio, % 41 50 44 42 48
Interest cost cover ratio –32 –20 2 0 68
DSO (Days of sales outstanding) 76 68 66 52 56
Interest-bearing net debt –14 –206 150 65 –217
key fIgureS Per SHare
Earnings per share –3.49 –2.63 –0.04 –0.09 7.81
Earnings per share after dilution –3.49 –2.63 –0.04 –0.09 7.58
Adjusted equity 5.18 8.64 11.44 11.69 14.74
Adjusted equity after dilution 5.18 8.64 11.44 11.69 14.67
Cash flow from operating activities –0.80 0.73 1.07 0.65 1.01
Cash flow from operating activities after dilution –0.80 0.73 1.07 0.64 0.98
p/e ratio neg. neg. neg. neg. 3.14
p/e ratio after dilution neg. neg. neg. neg. 3.23
Dividend - - - - 2.00
SHare data
Stock price at year end 6.65 5.50 13.00 26.20 24.50
Average stock price 6.79 9.87 20.88 26.04 18.97
Market capitalization, SEK million 845 696 1 087 2 190 1 950
P/S, market cap./total revenue 0.5 0.3 0.5 0.9 0.8
Average number of shares, thousand 124 271 104 185 84 399 85 110 79 608
Average number of shares after dilution, thousand 124 271 104 185 84 399 85 862 82 026
Total no. of shares, thousand 124 271 124 271 81 304 81 532 79 608
Total no. of warrants, thousand 11 519 - - - 4 000
1) Excluding restructuring cost, capital costs, capital loss from sale of subsidiaries, currency translation differences in operating receivables/liabilities and impairment of goodwill.
2) Excluding capital loss from sale of operations.
3) Excluding restructuring costs and capial gain from sale of subsidiaries.
4) Excluding capital gain from sale of subsidiaries.
The Board and Auditors
Education and work experience: Graduated in law; Previous positions include CEO and President of Intentia, Executive Vice President of GEAC, European MD of JBA Plc, President and CEO of Presys as well as several senior roles at IBM.
Present employment: CEO and President of Aldata Solution Oyj, listed on the OMX Nordic Exchange in Helsinki.
Board assignments: On the board of Aldata Solution Oyj.
Bertrand Sciard is independent of the company and its senior management, as well as of major shareholders in the company.
Education and work experience: MBA from University of Texas at Austin, USA; Previous partner in Brandes Investment Partners, San Diego, USA.
Present employment: Chief Investment Officer, Deccan Value Advisors.
Vinit Bodas is independent of the company and its senior management and dependent as of major shareholders in the company.
Education and work experience: Master’s and Ph.D. degrees in electrical engineering from the University of Illinois, USA; Several executive positions at Texas Instruments, including Presid
ent Personal Productivity Products Group, Chief Information Officer and Senior Vice Pres ident of Research and Development and Chief Technology Officer; Chief Executive Officer i2 Technologies Inc.
Present employment: Managing Director and Operating Partner at Symphony Technology Group.
Board assignments: General Motors Advisory board, MSC Software, Optimal Solutions, Serus and Chairman of Teleca AB.
Dr. Pallab Chatterjee is independent of the company and its senior management, as well as of major shareholders in the company.
Education and work experience: Studies in Computer Science at University of Umeå, Sweden; Former President of EDS Northern Europe. 25 years of experience from IBM, including several executive positions.
Board assignments: Member of the Board of Posten Nordic, HiQ, Sweco and Ruter Dam.
Gunnel Duveblad is independent of the comp
any and its senior management, as well as of major shareholders in the company.
Gunnel Duveblad Born: 1955 Board member since:
2007
Shares: 20 000 B shares Options: 100 000
Education and work experience: Masters of Science degree in Industrial Economics at the Royal Institute of Technology (KTH) Stockholm, Sweden. 25 years of experience from ERP business systems from IndustriMatematik International (IMI).
Present employment: Senior Project Manager, IBS Sverige AB, PS Nordics.
Ulf Eriksson is Employee representative.
Ulf Eriksson Born: 1952 Board member since:
2010
Shares: 2 000 B shares Bertrand Sciard Born:1953 Board member since:
2007 Shares: 0 Options: 100 000
Vinit Bodas Born:1962 Board member since:
2007 Shares:0 (incl. family holdings)1)
Education and work experience: BBA, European University. Christian Paulsson was previously employed by Deccan Value Advisors and prior to that Managing Director of Lage Jo
nason AB. He has also worked within corporate finance at Booz Allen & Hamilton, Alfred Berg Fondkommission AB & ABN Amro and Mangold Fondkommission AB. He has also worked as controller in Akzo Nobel Industrial Coatings.
Other assignments: Chariman of the Board in Cross Sportsware International AB and board member and chairman in numerous subsidiaries within the IBS Group.
Present employment: Executive Vice Precident Coroporate Development and M&A at IBS AB.
Christian Paulsson is considered dependent in relation to the company and its senior mana
gement and dependent in relation to major shareholders in the company.
Christian Paulsson Born: 1975 Board member since:
2008
Shares: 5 000 B shares Options: 302 872 Dr. Pallab Chatterjee, Chairman
Born: 1950
Board member since:
2007
Shares: 50 000 B shares Options: 600 000
1) As President and Chief Investment Officer in Deccan Value Advisors, Vinit Bodas represents Deccan Value Advisors whole holdings of IBS shares.
The total shares owned is 4 650 000 A shares and 87 486 700 B shares.
Auditors
KPMG AB, Åsa Wirén Linder, Authorized Public Accountant.
IBS Group Management
Oskar Ahlberg, born 1971, is Senior Vice President Corporate Communications and part of Group Management.
Oskar is responsible for IR, PR and internal com- munications at IBS. Oskar joined IBS in 2004 as product manager and later as international sales director. Prior to this, he was Sales and Marketing director at EHAND AB. Before that, Oskar was employed as Java developer in Ger- many and then pre-sales consultant in the UK.
Oskar holds a Master of Science degree in Elec- tronical Engineering from KTH in Stockholm.
Mike Shinya, born 1957, is President and CEO.
Prior to joining IBS he was CEO of Sherwood International Plc., and most recently Chief Ope- rating Officer of Micro Focus International Plc.
Prior to these engagements, Mike was Head of Global Worldwide Sales operations at Baan Company, a Dutch ERP software company, and before that he held senior executive positions at Oracle Corporation and IBM. Mike is a British national, graduated from the University of East Anglia UK, in Economic & Social Sciences.
Oskar Ahlberg, Senior Vice President of Corporate Commu- nications
Shares: 10 000 B shares Options: 40 000
Fredrik Sandelin, born 1962, is Executive Vice President and Chief Financial Officer since March 2010 and part of Group Management.
Fredrik joined IBS from A-Com, the largest independent communications services network, where he was CEO since 2002. Previous exp- eriences include Senior Vice President Hilton In- ternational Nordic Region, CFO Scandic Hotels and CFO for Swedish private equity company Ratos. Fredrik has a degree corresponding to Master of Science in Economics and Business Administration, Stockholm School of Economics.
Fredrik Sandelin, Executive Vice President and CFO Joined IBS: March 8, 2010 Shares: -
Options: -
Doreena Ross, born 1962, is Senior Vice Presi- dent of Human Resources and Administration and part of Group Management.
In this role she is responsible for global Human Resources strategy and operations. Doreena is a British national who has lived and worked outside of the UK for many yaers. She has solid internation al HR and business experience and prior to joining IBS, she held global and pan-european executive positions with Micro Focus, Opentext, Interwoven, Documentum and Sybase.
Doreena Ross, Senior Vice President of Human Resources and Administration Shares: - Options: 75 000 Mike Shinya, President and CEO Shares: 1 167 250 B shares Options: 611 250
Christian Paulsson, born 1975, is Executive Vice President and Corporate Development and M&A since February 2010 and part of Group Management.
Christian Paulsson was previously employed by Deccan Value Advisors and prior to that Mana- ging Director at Lage Jonason AB. He has also worked at Booz Allen & Hamilton, Alfred Berg Fondkommission AB & ABN Amro and Mangold Fondkommission AB and Akzo Nobel Industrial Coatings. Christian has a BBA from European University.
Christian Paulsson Executive Vice President and Corporate Deve- lopment and M&A.
Shares: 5 000 B shares Options: 302 872
Board of Directors’ Report
The Board of Directors and the President of IBS AB (556198-7289) hereby submit the Board of Directors’ report for the 2009 fiscal year.
IBS AB is a public limited liability company.
InformatIon aBout tHe BuSIneSS the group
IBS offers integrated IT solutions and professional services that help customers in selected market segments to improve profitability and increase customer service. IBS business systems are specially de- veloped for efficient business and supply chain management, cus- tomer relationship management, purchasing coordination, logistics, demand-driven manufacturing, integration, financial control and business analysis. Efforts to further develop sector-specific business systems continued during the year. Through its Parent Company, subsidiaries and business partners, IBS engages in the development, sale, installation, operation and maintenance of business systems.
The Group also offers professional services and sales of comput- ing equipment and network solutions. IBS had an average of 1 145 employees (1 612) during 2009, and the Group is represented by subsidiaries in 20 countries.
ImPortant eventS durIng tHe 2009 fIScal year
During 2009, IBS completed the strategic activities that were an- nounced on September 23, 2008. In summary, the activities focused on distribution markets, an offering of business systems for Java/Win- dows and securing operational cost efficiency through cost-saving measures and cutbacks in the workforce involving as many as 500 persons worldwide, including attrition, liquidation of business units, withdrawals from certain markets and job termination notices. More clearly defined organizational divisions of the business areas were also implemented, resulting in the establishment of the new Iptor di- vision, which is focused on offerings in such areas as storage capacity, technical infrastructure, content management and system integra- tion services.
The strategic initiative created a more focused Group with fewer employees. Revenue declined as a result of lower sales from hard- ware and professional services, while revenues from sales of new licenses increased during the year. Sales per employee rose, as did professional services revenues per consultant. Profitability was im- pacted negatively, however, by lower total revenue, restructuring costs and goodwill impairment.
first quarter
An Extraordinary General Meeting in the first quarter approved three employee stock option programs for CEO, senior executives and Board members. A decision was also made to issue 11 518 500 warrants to guarantee the programs. A maximum of 2 658 292 warrants may be used to cover the social security contributions as- sociated with the programs.
The Board decided to apply for the listing of IBS Class B shares on First North, and a corresponding delisting from NASDAQ OMX.
Stronger focus on existing customers led to higher earnings and license revenues during the quarter. Professional services revenues declined overall, and in most markets, with the exception of North and South America, due to fewer consultants in a smaller and more focused organization, and due to reduction in the number of
offerings to the market. Hardware revenues declined, mainly due to lower demand for IBM’s iSeries servers.
Second quarter
Mark Williams joined IBS as Chief Financial Officer, effective April 8.
Trading of shares in IBS AB started on NASDAQ OMX First North on May 11.
The cost-reduction program was completed during the second quarter, and a Java/Windows version of the IBS Enterprise business system was accessible and sold in its entirety to a first customer.
Focus on existing customers, primarily in goods distribution in- dustries, resulted in increased revenues from new sales of software licenses. Professional and hardware revenues continued to decline, however, due to the smaller organization and weaker demand for IBM iSeries servers.
Second half of the year
After the share listing change in the second quarter, the Board of Di- rectors of IBS resolved to report financial information to the market semi annually, instead of quarterly, in accordance with the regula- tions on NASDAQ OMX First North.
A new division, Iptor, was established to focus on offerings in ar- eas such as storage capacity, technical infrastructure, content man- agement, HW hosting and system integration services.
During December the Danish payroll division was sold.
The goodwill value of several businesses, primarily in Australia, Portugal, France and Italy, were impaired in the balance sheet due to lower forcasted growth and earnings.
License revenues remained stronger compared with the corre- sponding period in the preceding year, and new sales of licenses increased. IBS booked a number of large license orders with a com- bined value of SEK 20 m and another order valued at SEK 50 m from a major European customer during the period.
Professional services and hardware revenues remained lower compared with the corresponding period of the preceding year.
Chief Financial Officer Mark Williams and IBS reached an agree- ment whereby Mark Williams would leave his position effective De- cember 31, 2009.
commentS on tHe Income Statement
The strategic initiative was launched in order to focus the business on core products and industries, and to improve profitability during the years ahead. The effects of the programs were reflected during 2009 in the form of lower personnel costs and lower other operat- ing costs.
Professional services revenues declined 16 percent compared with the preceding year, while the number of consultants decreased by slightly more than 25 percent. Hardware revenues continued to decline. License revenues rose 14 percent and revenues from new license sales increased by 30 percent. However, total revenues de- clined 11 percent to SEK 1 819 m (2 034).
IBS reported an operating loss of SEK 326 m (loss: 283) for
full-year 2009, down SEK 43 m compared with 2008. The result
for 2009 includes restructuring costs totaling SEK 128 m (170)
and other operating costs amounting to SEK 129 m (56). Other
operating costs consist of goodwill impairment charges totaling
SEK 131 m (53), capital gains from the sale of subsidiaries amount- ing to SEK 4 m (loss: 8 m) and translation differences in operating receivables/liabilities amounting to negative SEK 2 m (pos: 6). The operating loss excluding the items above was SEK 69 m, compared with a loss of SEK 58 m in 2008, down SEK 11 m. The loss after financial items amounted to SEK 333 (loss: 273) and the net loss for the year totaled SEK 433 m (loss 274). Earnings for the year were charged with a tax expense of SEK 101 (expense: 2), with most of the charge comprising impairment of deferred tax totaling SEK 76 m (26).
Earnings improvements compared with the preceding year were achieved in the European region. However, trends in the regions of other segments were negative compared with the preceding year.
Software licenses
Software license sales increased 14 percent compared with the preceding year to SEK 476 m (419). New license sales amounted to SEK 195 m (150), while renewal license sales amounted to SEK 281 m (269). The license margin rose two percentage points to 92 percent.
The increase in new sales was attributable to the new strategy, which created greater focus on goods distribution companies and generated increased sales in all geographic regions.
Professional services
Professional services revenues decreased by 16 percent compared with the preceding year to SEK 969 m (1 150). The number of con- sultants declined to 677 (899), down by 222 persons, or 25 percent, compared with the preceding year. The decline was a direct result of the restructuring program. Professional services revenues declined in all regions. The professional services margin was down eight percentage points, mainly because a larger share of administrative costs was allocated to this business area. Based on the same calcula- tion principle used in the preceding year, the professional services margin amounted to 15 percent, thus decreasing one percentage point. It should also be noted that costs for provisions for risk in projects increased.
Hardware and other revenues
Hardware and other revenues during 2009 declined 19 percent to SEK 374 m (464). The gross margin increased by one percentage point to 18 percent (17). Hardware sales were impacted mainly by lower global demand for IBM’s iSeries servers, and the weaker economy.
Margins
2009 2008 2007
License margin, % 92 90 92
Professional services margin, % 8 16 20
Hardware margin, % 18 17 18
Total Gross margin, % 32 32 35
analysis of change in sales revenues
Sales declined 11 percent compared with 2008 due to lower hard- ware and professional services revenues, while license revenues in- creased. Sales were also impacted by workforce reductions follow- ing the decision to implement a restructuring program as part of the company’s efforts to increase profitability. Excluding divestments and acquisitions during 2009 and 2008, the net effect was a 2 per- cent decline in sales. The value of SEK relative to the IBS Group’s cur- rency basket declined during the year, and sales increased 9 percent during 2009 as a result of the exchange-rate effect.
Sales per employee rose 26 percent compared with the preced- ing year.
Analysis of change In sales revenues
09/08 08/07 07/06 Volume growth (average number
of employees), % –25 –9 –1
Acquisitions/divestments, % –2 –2 –1
Price and efficiency change, % 7 0 1
Internally generated growth, % –20 –11 –1
Exchange-rate effect, % 9 1 0
Total growth rate, % –11 –10 –1
operating costs, excluding cost of goods and service sold
Operating costs declined during the year to SEK 654 m (702). The operating costs do not include restructuring costs of SEK 128 m (170), impairment of goodwill totaling SEK 131 m (53), capital gains from sales of subsidiaries amounting to SEK 4 m (loss: 8) or transla- tion differences of an operating character amounting to negative SEK 2 m (pos: SEK 6). Operating costs expressed as a percentage of sales rose one percentage point to 36 percent (35) in 2009.
The increase was mainly due to higher product development costs amounting to SEK 255 m (207) due to lower capitalization of prod- uct development costs totaling SEK 75 m (89) and higher depre- ciation costs for previously capitalized product development costs amounting to SEK 95 m (84), or SEK 20 m (4) net. Sales and market- ing costs declined 16 percent to SEK 219 m (259) and administrative expenses declined 23 percent to SEK 180 m (236). The value of SEK relative to the IBS Group’s currency basket declined during the year, and costs increased 7 percent during 2009 as a result of the exchange-rate effect.
Operating costs as a percentage of sales
2009 2008 2007
Product development costs, % 14 10 9
Sales and marketing costs, % 12 13 12
Administrative costs, % 10 12 12
Totalt, % 36 35 33
Product development
Capitalized product development costs relate to software for the IBS Group’s future product launches. During 2009, SEK 255 m (212) was invested in product development, of which SEK 75 m (89) was capitalized. Capitalized expenditure for product development was recognized in the balance sheet as a net asset of SEK 338 m (358) at December 31.
IBS’ overall strategy is to continue strengthening its position as the leading international supplier of software and professional serv- ices in the area of distribution management solutions. IBS devel- oped the next version of IBS Enterprise during 2009 and plans to launch the product in 2010. Focus areas have been the creation of functions that strengthen the competitiveness and cash flows of distribution customer companies.
Innovative solutions during 2009 increased the flexibility of IBS’
offerings. Customers are now able to choose whether they wish to operate IBS solutions in proprietary environments, outsource or use a Software as a Service (SaaS) solution. They can also choose be- tween different platforms now comprising IBS Power and Windows/
Intel. A new pre-configured “FasTrax” solution for distribution com-
panies also provides faster customer implementations and returns.
In order to deliver complete customer solutions, in parallel with a sharp focus on “core business,” IBS strengthened its cooperation with several different partners during 2009. The cooperation with HCL in India noted significant success, and programs of cooperation with different “best of breed” suppliers were initiated as part of the company’s efforts to launch completely integrated solutions that cover the business system requirements of IBS’ customers.
Product development costs recognized in profit and loss totaled SEK 255 m (207), 39 percent (29) of total operating costs. The high- er cost in 2009 was due mainly to lower capitalization of costs total- ing SEK 75 m (89) and higher amortization of previously capitalized costs for product development totaling SEK 95 m (84).
commentS on tHe Balance SHeet goodwill and other intangible assets
Goodwill items amounted to SEK 255 m (363). The decline was due mainly to goodwill impairment totaling SEK 131 m (53) related to operations focused on the products e42 and ECP, as well as opera- tions in Portugal, France and Italy. Other intangible assets of SEK 17 m (28) are capitalized investments in software. Each intangible asset item is assessed separately on a continuous basis, as shown in Note 12.
deferred tax assets
The IBS Group’s loss carryforward amounted to SEK 682 m (592), of which SEK 146 m (446) constituted the basis for capitalization of deferred tax assets. The tax value of capitalized deficits was SEK 41 m (124). In total, deferred tax assets amounted to SEK 56 m (142). An assessment during the year indicated that IBS will not be able to utilize part of the collective loss carryforwards in Sweden, Italy, France, Portugal and Australia against future profits and, ac- cordingly, an impairment loss on deferred tax assets totaling SEK 76 m (26) was recognized in the fourth quarter. The IBS Group’s tax- able earnings are expected to improve during the coming years, and actions have been taken to gradually even out surpluses and defi- cits. Most of the Group’s loss carryforwards have long or indefinite durations, and IBS’ assessment is that remaining loss carryforwards will be utilized for deductions against future profits. This balance sheet item is specified in Note 23.
current assets
Accounts receivable amounted to SEK 583 m (645). The volume of accounts receivable is linked to sales, which declined compared with the preceding year. Other receivables decreased to SEK 90 m (123), due to a lower percentage of accrued income, which is also a consequence of the lower sales volume in 2009.
Inventories totaling SEK 2 m (7) consisted of hardware purchased on behalf of customers and external software products for custom- ers scheduled for delivery and invoicing in January 2010.
Cash and cash equivalents declined, compared with the preced- ing year, amounting to SEK 135 m (313). Cash and cash equiva- lents at December 31, 2008 were unusually high following the new rights issue that raised SEK 387 m after issue costs.
current liabilities
Accounts payable increased marginally compared with the preced- ing year, totaling SEK 176 m (167). Renewal fees invoiced toward year-end are included in total deferred income amounting to SEK 200 m (263). These fees are normally accrued over the life of the renewal period, and the portion pertaining to the following fiscal year is recognized as prepaid income at year-end. The value of these agreements was unchanged compared with 2008. Accrued costs amounted to SEK 219 m (233), consisting mainly of staff-related costs such as social security expenses, pension expenses, variable remunerations and vacation pay liabilities.
liabilities to credit institutions
Total liabilities to credit institutions rose to SEK 121 m (107) as a result of utilized overdraft facilities. The unutilized credit facilities declined to SEK 45 m (248), partly as a result of reduced credit facilities.
Provisions
This item consists mainly of restructuring provisions. Provisions amounted to SEK 170 m and SEK 123 m, respectively, in 2008 and 2009. Of the total remaining provision amounting to SEK 97 m (148) at December 31, 2009, SEK 49 m (42) is classified as long- term. Other long-term provisions comprise guarantee provisions to- taling SEK 10 m (3) and a pension provision amounting to SEK 5 m (10). Provisions are specified in greater detail in Note 24.
fInancIal PoSItIon
Equity amounted to SEK 644 m (1,065), and the equity/assets ratio declined from 51 percent to 41 percent during the year. Cash and cash equivalents at year-end amounted to SEK 135 m (313), ex- cluding unutilized credit facilities totaling SEK 45 m (248). Liquidity declined compared with the preceding year to 100 percent (121).
Interest-bearing liabilities at year-end rose to SEK 121 m (107), yield- ing an interest-bearing net asset of SEK 14 m (206).
commentS on tHe caSH floW Statement
Provisions utilized for restructuring had an impact of negative SEK 174 m (neg: 87) on cash flow during the year. Cash flow from oper- ating activities, before changes in working capital, declined by SEK 176 m to negative SEK 99 m. Changes in working capital for the year affected cash flow by negative SEK 6 m (pos: 97). Accounts receivable in the Group decreased compared with 2008 as a result of lower sales, as well as more efficient procedures for invoicing and cash collection compared with the preceding year. Cash flow from investing activities amounted to negative SEK 88 m (neg: 110).
Reduced capitalization in product development during the year had a favorable impact on cash flow compared with the preceding year. The impact of product development investments on cash flow amounted to negative SEK 82 m (neg: 98). Investments in tangible assets were also lower compared with 2008. Net change in loans amounted to SEK 13 m (neg: 247). Cash flow from total financing activities amounted to SEK 13 m (140). During 2008, the rights is- sues affected cash flow by SEK 387 m.
Parent comPany
The Parent Company, IBS AB, has overall management responsi- bility for the Group. The Parent Company is financed primarily through management fees and royalties, as well as from dividends and Group contributions from subsidiaries. Net sales in the Parent Company during 2009 totaled SEK 92 m (98), and the income after financial items amounted to a loss of SEK 325 m (loss: 39). The result includes impairment losses on shares in subsidiaries totaling SEK 174 m (78). The result was impacted by dividends from sub- sidiaries amounting to SEK 0 (93). Investments in tangible and in- tangible assets totaled negative SEK 136 m (neg: 144). The Parent Company’s cash and cash equivalents at year-end amounted to SEK 40 m (192).
risks and uncertainty factors
Information on risks and uncertainty factors are the same for the
Parent Company and the entire IBS Group. Details on risks and un-
certainty factors are presented below.
InformatIon on rISkS and uncertaInty factorS
The single largest revenue item in the IBS Group derives from pro- fessional services, accounting for 53 percent of net sales. With a large consulting organization, and thus high personnel costs, the company is exposed to a risk of lower sales if the market declines.
Accordingly, the analysis below is focused on this revenue flow.
Each component in the analysis was calculated separately based on the assumption that other parameters remained unchanged.
SenSItIvIty analySIS
Parameter Change
Effect on operating earnings, SEK m
Number of workdays/years +/− 1 day +/− 4
Personnel costs +/− 1% −/+ 9
Professional services, hourly fee +/− 1% +/− 9
Degree of utilization +/− 1p.u. +/− 8
SEK/EUR +/− 1% +/− 0.6
IBS’ business operations are conducted primarily through subsidiar- ies that apply standardized, Group-wide contract terms in their busi- ness relations. These terms are weighted to achieve a reasonable balance of responsibilities between the parties. The technical busi- ness risk in customer projects is limited significantly by the Group’s utilization of proven technology. In addition, the Group is insured for a portion of the subsidiary risks in conjunction with commer- cial commitments for installations of business systems. Provisions for project miscalculations and bad debt write-offs are continuously based on individual risk assessments. Since hardware purchases in connection with customer projects are made only against firm cus- tomer orders, IBS is seldom exposed to price or obsolescence risk.
Customer credit is normally only granted after conventional evalu- ations of credit ratings. Like all process changes, any transfer of programming services to low and mid-cost countries in particular involves both opportunities and risks. This also applies to the strate- gic initiative program approved in September 2008, which called for the elimination of approximately 500 full-time positions. Refer also to the section entitled “Restructuring provision for action program”
in Note 36.
fInancIal rISkS and PrIncIPleS aPPlIed for fInancIal rISk control
The Group is exposed to various types of financial risks through its operations. The purpose of risk management is to identify, quantify and reduce or eliminate risks. IBS’ policy for financial risk manage- ment is based on profits generated by the business operations, not on investments in financial instruments. Accordingly, only low-risk investments are permissible. The objective of financial activities con- ducted in IBS is to support the Group’s commercial operations and to identify and, in the best possible way, limit the Group’s financial risks. These activities are organized and managed in the Parent Com- pany’s finance function. Through centralization and coordination, significant economies of scale are achieved with regard to terms and conditions received for financial transactions and financing. The goal of the financing activities is to clarify the Group’s risk exposure and to create predictability in terms of financial results. The financial risks are managed in accordance with the finance policy established by the Board of Directors. Also see Note 21, Risk analysis.
PerSonnel and non-fInancIal reSult IndIcatorS
The number of employees at December 31, 2009 was 1 114 (1 377), down 263 positions, or 19 percent. The number of consultants was 677 (899). The average number of employees during 2009 was 1 145 (1 612), a reduction of 467 persons. The reduced workforce
is a result of the strategic restructuring that was initiated in the preceding year.
Information on the number of employees in and outside Swe- den, along with salaries, social security expenses and pensions, is presented in Note 2. IBS is a knowledge company whose success is highly dependent on the skills and expertise of its employees.
Annual career-development talks contribute to continuous skills de- velopment and support evaluations of work performance standards.
For additional information on IBS employees, refer to Note 2.
outlook for 2010
Operations in 2010 will continue to be impacted by the prevail- ing economic conditions, most notably with regard to uncertainties related to sales, accounts receivable and deferments of investment decisions by client companies. The restructuring program that was included in the strategic initiative has been completed and the in- crease in license sales during 2009 is expected to provide a solid base for 2010. IBS has a large and loyal customer base and, with its smaller and more focused organization and solid financial position, the Group is well-equipped to meet the year’s challenges.
SHareS and oWnerSHIP Structure
IBS’ share capital is distributed across 4 725 000 Class A shares and 121 849 374 Class B shares. Each Class A share carries ten votes and each Class B share one vote. The quotient value of both share classes is SEK 0.20 per share, making a total of SEK 25 314 875 in registered share capital.
Via a profit sharing fund for personnel established by IBS AB in 1998, employee shareholdings in IBS AB amount to 226 000 shares.
However, the employees cannot exercise any direct voting rights for their shares.
IBS holds 2 303 800 Class B shares that were repurchased dur- ing 2006 and 2007. The quotient value of these shares is SEK 460 760 representing 1.8 percent of total share capital. The shares were repurchased for an average price of SEK 21.70 per share, a total of SEK 50 m. According to a resolution approved by the 2006 Annual General Meeting, the acquired shares may be used as pay- ment for, or financing of, company acquisitions.
The largest shareholder is Deccan Value Advisors holding 72.8%
of the shares and 79.2% of the votes. There have been no major changes in the structure in 2009. For information about the 10 larg- est shareholders per 31 December 2009 refer to the ‘IBS share’, page 7.
electIon of Board memBerS and artIcleS of aSSocIatIon
Members of the Board of Directors are elected annually at the Annual General Meeting for a period up until the next Annual General Meet- ing. A qualified majority (that is, a two-thirds majority of both listed votes and the shares represented at the Annual General Meeting) is required to change the Articles of Association, with the exception of changes stated in the Articles of Association in accordance with Chapter 7, Sections 43–45 of the Swedish Companies Act.
eventS after tHe cloSe of tHe fIScal year
