ready to unleash the golden potential of IBS’s technology and our customers.
Annual report 2008
n Break-through order in Russia worth SEK 23 m was signed with Rolf Group, leading Russian car distri- butor and retailer.
n The roll-out of IBS Enterprise into the world’s largest paper distributor PaperlinX reached significant milestones with the German and British subsidiaries going live.
n Swedish food distributor Servera signed a professional services agreement worth SEK 40 m.
n A rights issue during the summer raised a net of SEK 387 m including costs related to the rights is- sue that underpinned the launch of a new strategic initiative in September. The aim of this initiative is that IBS shall become the world’s leading Distribution Software Company. This will be done by enhancing value to customers and improving profitability through focusing on core offerings.
n Deccan Value Advisors placed a mandatory bid on the company and increased its ownership to around 79% of the votes.
n Mike Shinya was appointed as new CEO and President.
n Total revenue SEK 2 035 m (2 260) n Net profit SEK –274 m (–4)*
n Cash and cash equivalents SEK 313 m (186)
*) Including re-structuring costs SEK –170 m (0), impairment of goodwill SEK –53 (0) and deferment of tax assets SEK –26 m (0), in total SEK –249 m (0).
2008 in brief
The share 4
Five-year summary 6
Key figures and data per share 7
The Board and Auditors 8
Board of Directors’ report 9
The group’s statements 17
The parent company’s statements 21
Accounting principles and notes 25
Audit report 47
Definitions 48
Glossary 49
Annual meeting and financial calendar 51
Corporate governance of IBS
SwedISh Code of CorporAte GovernAnCe
IBS applies the Swedish Code of Corporate Governance (“the Code”), since 2006. A basic principle of the Code is that the rules are to be complied with or explained.
AnnuAl GenerAl MeetInG
The Annual General Meeting for 2008 was held at Summit Solna Gate in Solna on April 22, 2008. A total of 108 shareholders, includ- ing proxies, were present at the meeting, representing 59.1 percent of the votes and 44.9 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 2009 will be held at Nordic Sea Hotel in Stockholm on May 7, 2008.
extrAordInAry GenerAl MeetInGS
During 2008 two Extraordinary General Meetings (“EGM”) were held.
The first EGM was held at the offices of Advokatfirman Delphi on May 20, 2008. A total of 128 shareholders, including proxies, were present at the meeting, representing 70.4 percent of the votes and 60.0 percent of the capital. The meeting resolved to issue new shares with preferential rights for current shareholders. The EGM resolved to issue 1 575 000 class A shares and 40 229 015 class B shares.
The subscription price was set to SEK 9.50 per share. The rights issue was fully subscribed to and raised a net of SEK 387 m. It was further resolved to make a directed share issue of 1 162 329 class B shares to Deccan Value Advisors L.P. as a consideration for the guarantee in relation to the rights issue.
The second EGM was held at the offices of Advokatfirman Del- phi on September 5, 2008. A total of 61 shareholders, including proxies, were present at the meeting, representing 50.9 percent of the votes and 35.5 percent of the capital. The meeting resolved to reduce the number of board members to six and to appoint Chris- tian Paulsson director. Two board members Fredrik Svensson and Bo Pettersson left the board of directors.
ShAreholderS’ rIGht to SuBMIt propoSAlS
All shareholders are entitled to submit proposals for the Annual General Meeting agenda. Instructions on how proposals are to be submitted and deadlines are found on the IBS website www.ibs.net under About IBS/Investors/Annual General Meeting.
noMInAtIon CoMMIttee
During the period January 1 – February 24, 2008, IBS’ nomination committee consisted of George Ho (Chairman of the Committee) of Deccan Value Advisors, Henrik Strömbom of Case Asset Manage- ment, Rikard Svensson of Arvid Svensson Invest, Henrik Jonsson and Johan Björklund both of Catella Investments.
During the period February 25 – April 22, 2008, IBS’ nomination committee consisted of George Ho (Chairman of the Committee) of Deccan Value Advisors, Henrik Strömbom of Case Asset Man- agement, Rikard Svensson of Arvid Svensson Invest, Rishi Bajaj of Silverpoint Capital and IBS chairman Pallab Chatterjee.
On November 6, 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 establishment of a nomination committee was deemed not ap- plicable. Thus, the company deviates from the rules on nomination committee that are contained in the Code.
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 Board of Directors has six members elected by the Annual Gen- eral Meeting and Extraordinary General Meeting. These are Dr. Pal- lab Chatterjee (Chairman), Vinit Bodas, Gunnel Duveblad, George Ho, Christian Paulsson and Bertrand Sciard. An employee represent- ative, Ann-Mari Öhman, is also a member of the Board of Directors.
No 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, 2009.
CoMMItteeS
remuneration Committee
The Board has elected specific committees to address matters per- taining to remuneration and audit.
The Remuneration Committee is charged with handling salary and other incentives, employment terms and conditions, and pen- sion issues pertaining to senior executives within the IBS Group, as well as ensuring that the Company complies with requirements regarding public information related to remuneration to senior ex- ecutives. The Committee is comprised of Gunnel Duveblad (Chair- man), Dr. Pallab Chatterjee and Bertrand Sciard. The Remuneration Committee held three meetings during the year.
Audit Committee
The Audit Committee normally meets in connection with interim reports and year-end report. The committee’s main assignment is to prepare material for the Board to ensure high quality of the com- pany financial reporting and continuously communicate with the company’s auditors regarding internal and external auditing as well as company risk. The audit committee follows the working proce- dures established by the Board of Directors.
From January 1 2008, the Committee comprised Jan Jacobsen (Chairman), Gunnel Duveblad and Fredrik Svensson. After the Annual General Meeting held on April 22, 2008, the Committee comprised: Vinit Bodas (Chairman), Gunnel Duveblad and Fredrik Svenson. Following the Extraordinary General Meeting on Septem- ber 5, the Committee includes: Christian Paulsson (Chairman), and Gunnel Duveblad. Auditor Åsa Wirén Linder from KPMG and the Company’s Chief Financial Officer participates in all meetings held by the Audit Committee. The Audit Committee held three meetings during 2008.
BoArd of dIreCtorS’ work
The rules of procedure follow the Swedish Companies Act, the Nasdaq OMX Stockholm rules for issuers and other applicable rules and regulations, as well as the working procedures for the Board of Directors. The working procedures were established at the statu- tory meeting of the Board of Directors held in connection with the Annual General Meeting held on April 22, 2008. The procedures regulate the assignment of responsibilities between its members and the President, financial reporting formats, tasks and delegation of authority for the President. The Board of Directors also decide on a financial policy that stipulates appropriate levels of risks for financ- ing, interest rates, liquidity, credit and currencies, as well as an in- formation policy. Reviews of the working procedures for the Board, pertaining instructions and the information policy are made annu- ally. Other instructions and procedures are reviewed as needed.
According to the current working procedures the Board shall normally hold six scheduled Board meetings per year, in addition to the statutory meeting in conjunction with the Annual General Meeting. Each scheduled meeting shall discuss business and market development, follow-up of business plan and results, cash flow and financing as well as future forecast. One meeting shall focus on strategic issues and one shall focus on business plan and 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 get the in- formation and documentation required for high quality discussions and decisions. The Chairman is also responsible for the evaluation of the work of the Board. Further, the Chairman takes part in evalu- ations of leading executives of the Company. The Chairman repre- sents the Company in matters concerning the shareholders.
During 2008, the Board held 20 meetings, of which seven were scheduled meetings in connection with interim reports, budget ap- proval and the Annual General Meeting. One of the Board meet- ings focused primarily on the company’s strategic and long-term development and one meeting was a statutory meeting in connec- tion with the Annual General Meeting. Meetings complied with approved agendas, which were preceded by proposals and docu- mentation of each item on the agenda that was submitted to the Board of Directors.
evAluAtIon of the BoArd of dIreCtorS And preSIdent During 2008, the Board of Directors was evaluated in accordance with the Code instructions, as was the earlier President. The evalu- ation of the Board was the aid of an external party and predefined procedure conducted during the year.
eleCtIon of 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 after deliberations with the other members.
The current IBS Group Management, as of January 1, 2009, com- prises Mike Shinya (President and Chief Executive Officer), Lennart Bernard (Chief Financial Officer), Doreena Ross (SVP HR & Admin- istration) and Oskar Ahlberg (SVP Corporate Communications).
Group Management regularly get together to discuss the business under the leadership of the President.
IBS Group Management during 2008
President and CEO Erik Heilborn Jan 1 – Oct 14 President and CEO Mike Shinya Oct 15 – Dec 31
CFO Lennart Bernard Jan 1 – Dec 31
Senior Vice President,
Communications & IR John Womack Jan 1 – Feb 29 Senior Vice President,
Corporate Communications Oskar Ahlberg Oct 15 – Dec 31 Senior Vice President,
Legal & HR Jessika Axäll (Acting) Jan 1 – Dec 17 Senior Vice President
HR & Administration Doreena Ross Dec 18 – Dec 31 Senior Vice President,
IBS Technology and Services Henrik Stache Jan 1 – Dec 31 Senior Vice President,
Professional Services Ole Fritze Jan 1 – Dec 31 Senior Vice President, Sales &
Marketing Mark Cockings Jan 1 – Dec 31
Senior Vice President,
Product Development Kjell Nilson Jan 1 – Oct 30 Area President, IBS Nordics Kent Mattsson Jan 1 – Dec 31 Area President, IBS Europe Richard Marques Jan 1 – Dec 31 Area President, IBS Americas Barry Christian Jan 1 – Feb 29 Area President, IBS Americas John Taylor Mar 1 – Dec 31 Area President,
IBS Asia Pacific Rajiv Parrab Jan 1 – Dec 31
Board members
Members of the Board during the following periods 2008
Participation in Board meetings
(total of 20)
Participation in Remu neration Committee meetings (total of 3)
Participation in Audit Committee meetings
(total of 3) Independent Shares held in IBS AB
Bertrand Sciard Jan 1 – 17/20 3/3 - Yes 0
Fredrik Svensson Jan 1 – Sept 5 13/15 - 2/2 No N/A
Gunnel Duveblad Jan 1 – 19/20 3/3 3/3 Yes 0
Jan Jacobsen Jan 1 – Apr 22 4/5 - 2/2 Yes N/A
Dr. Pallab Chatterjee Jan 1 – 19/20 3/3 - Yes 0
Vinit Bodas Jan 1 – 13/20 - 0/1 No 0 A shares 1)
0 B shares1)
George Ho Apr 22 – 12/15 - - No 0
Bo Pettersson Apr 22 – Sept 5 10/10 - - No N/A
Christian Paulsson Sept 5 – 5/5 - 1/1 Yes 5000
Ann-Mari Öhman Mar 19 – 18/18 - - No 0
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 86 486 871 B shares as per December 31 2008.
InternAl Control Introduction
The Board has the ultimate responsibility for the internal control of the Company, which is also stated and clarified in the Code. This report was prepared in accordance with the Code and the guide- lines prepared by FAR SRS (Swedish Institute of Authorized Public Accountants) and the Confederation of Swedish Enterprise. The organization of the internal control is described below, particularly pertaining 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, through the involvement of Company Management and other employees, is designed to facilitate the ap- propriate monitoring of accounting, financial reporting and other aspects of the Company’s financial situation.
Control environment
The basis for financial reporting is the control environment, which includes the following:
n The Board’s work processes. The Board’s rules of procedure define the division of duties between the Board, Committees, Chairman and the President.
n Organizational structure. Roles, responsibilities and processes are clarified through organizational schedules and descriptions.
n Control documents. Through internal policies, handbooks, man- uals and guidelines, instructions are given for the reporting and accounting of financial data, description of external accounting principles and other guidelines, such as financial and investment policies. Policies pertaining to HR, IT, communication and sales are also defined and used in the business.
n Appropriate internal reporting. IBS internal financial reports con- taining outcome, budget, forecast, analyses of essential key fig- ures, sales and market analyses and the status of product devel- opment are provided on a regular basis to the Board and senior executives.
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 has a continuous review of the Company’s processes in order to identify the manner in which the risk of errors in the financial reporting is minimized. In this connection, high-risk items are iden- tified in the income statement and balance sheet. 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 invoic- ing process.
Control activities
Risk assessment results in a number of control activities aimed at handling the risks. For example, it is vital for IBS that approval, ac- curacy and completeness characterize the handling of contracts, invoices, revenue recognition, project follow-up, purchasing, pay- ments, salaries and taxes and fees. There shall also be controls aimed at 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.
During 2008, instructions concerning revenue recognition were further developed and clarified, as were the guidelines for handling costs related to software development.
Internal information and communication
Company Management has compiled policies, guidelines and rules in electronic manuals on the Company’s intranet. Furthermore man- agement updates employees of the status and outcome pertaining to financial developments.
The updating of accounting procedures and principles, reporting and demands for published information are made available and ac- cessible to appropriate employees on a continuous basis.
The company has an information policy for external communica- tion and contacts with analysts.
Internal communication occurs via the intranet, and the IBS goal is for employees to understand the business operation and vision, and the IBS CORE values. Business areas report their income and business situation on a monthly basis to Company Management, in the form of structured reporting.
follow-up
Management’s follow-up of the functionality of the control struc- ture is partly implemented through reports from controller visits to subsidiaries. The Audit Committee receives continuous reports and assessments on the financial situation from the CFO and the audi- tors continuously updates the Board in its entirety. Reports to the Board of Directors concerning major projects in progress, including related risk assessments from the project managers, were further developed during 2008.
evaluation – internal audit function
IBS uses controllers to monitor areas related to internal control per- taining to the financial reporting. The Board does not deem it neces- sary to establish a special internal audit function.
The IBS share
MArket trendS And lIquIdIty
The value of the IBS share decreased by 58 percent during the year.
The highest price paid for the share was SEK 14.88 on April 4 and the lowest was SEK 3.70 on October 10, measured on closing price.
The annual turnover of the IBS share decreased during 2008 to SEK 363 m. The average daily turn-over was SEK 1.4 m and the IBS mar- ket value on December 31 was SEK 696 m.
ownerShIp StruCture
On December 31, the number of shareholders amounted to 5 096.
Largest shareholder is Deccan Value Advisors with 71.8% of the share capital and 78.5% of the voting rights as per December 31, 2008. At year-end, the ten largest shareholders accounted for 82 percent of the share capital and 87 percent of the voting rights.
ShAre CApItAl
IBS share capital is divided into 4 725 000 Class A shares and 121 849 374 Class B shares. Class A shares carry ten votes per share and Class B shares one vote per share. Both Class A and Class B shares have a par value per share of SEK 0.20, which results in reg- istered share capital of SEK 25 315 845.
During 2008 two share issues were completed. During June a new share issue with preferential rights for the Company’s existing shareholders was completed. As a consequence of the rights issue, the number of shares in IBS increased by 1 575 000 class A shares and 40 229 015 class B shares. In addition to this, a new share is- sue of 1 162 329 new B shares directed to Deccan Value Advisors as consideration for the subscription guarantee issued by Deccan in connection with the completed rights issue was completed.
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 hold no direct voting rights in connection with the shares noted above.
the IBS share was listed on the nasdaq oMx nordic exchange on May 20, 1986
lIStInG
During 2008, IBS Class B share was listed on the small-cap list of the Nasdaq OMX Nordic Exchange. The Board of Directors in 2009 resolved on applying for a listing of the IBS share on First North with a simultaneous delisting of the share on Nasdaq OMX Nordic.
wArrAntS proGrAM
On 15 January, 2009, an Extraordinary General Meeting was held which resolved to launch stock option based incentive programs for the Board of Directors, the CEO and to certain senior execu- tives and key employees. It also resolved to issue a maximum of 11 518 500 warrants, of which no more than 2 215 052 warrants will be granted in 2009.
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 takes into consideration the company’s requirements for consolidation, liquid- ity and capital for future expansion. Bearing this in mind, the Board proposes that no dividend be paid for the 2008 fiscal year.
dIvIdend
The Board of Director proposes that no dividend will be paid for 2008.
repurChASe of own ShAreS
During 2008 no repurchase of shares took place. In total IBS has repurchased 2 303 800 shares at an average share price of SEK 21.70 per share, resulting in a total amount of SEK 50 m. According to a resolution, passed on the Annual General Meeting in 2006, the acquired shares may be used as payment for, or the financing of, company acquisitions.
Ten largest shareholders in IBS, December 31, 20081)
Shareholder Class A shares Class B shares Share-
holding % Voting rights %
Deccan Value Advisors 4 650 000 86 486 871 72.0 78.6
LGT Bank in Liechtenstein Ltd 3 000 000 2.4 1.8
Didner & Gerge Aktiefond 2 542 750 2.0 1.5
Brohuvudet AB 2 100 000 1.7 1.2
HQ Bank 2 000 000 1.6 1.2
Olof Andersson Förvaltnings 75 000 745 250 0.6 0.9
Mike Shinya 1 119 500 0.9 0.7
Mats Nilsson 759 500 0.6 0.4
Sawann AB 717 769 0.6 0.4
Anders Walldov 600 000 0.5 0.4
Total, largest owners 4 725 000 100 071 640 82.8 87.1
Other2) 0 21 777 734 17.2 12.9
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 shares
distribution of shareholdings per december 31, 2008*
Size No. of
owners Owners
% No. of
shares Capital
%
1–1 000 3 403 66.8 1 241 854 1.0
1 001–10 000 1 391 27.3 4 792 439 3.8
10 001–100 000 262 5.1 7 374 384 5.8
100 001–1 000 000 32 0.6 9 267 141 7.3
1 000 001– 71) 0.2 103 898 556 82.1
Total 5 095 100 126 574 374 100
1) including IBS 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 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 B shares 1:5 8 550 000 90 000 1 620 000
1989 New issue of B shares 1:5 10 260 000 90 000 1 962 000
1989 New issue of B shares via convertible notes 10 418 000 90 000 1 999 500
1990 New issue of 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 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 2008 2007
Average number of shares (thousands) 104 185 84 399
Total number of warrants (thousands) - -
Earnings per share –2.63 –0.04
Cash flow per share 0.73 1.07
Stock price at year-end 5.50 13.00
Proposed dividend per share - -
Average share price 9.87 20.88
Market capitalization (SEK m) 696 1 087
ownership per the largest countries, december 31, 2008 (votes)
ownership structure, de- cember 31, 2008
■ USA, 79%
■ Sweden, 15%
■ UK, 2%
■ Liechtenstein, 2%
■ Other, 2%
■ Non-Swedish registered institutions and funds, 80%
■ Non-Swedish resident private owners, 1%
■ Swedish resident private owners, 7%
■ Swedish registered institutions and funds, 12%
5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000
IBS B OMX S
Share turnover, 000s /month
5 10 15 20 25 30 35 40
2009
2004 2005 2006 2007 2008
ShAreholder ServICe
The IBS website www.ibs.net/investors contains information on the IBS share price trend, as well as analysts’ statements, interim re- ports, annual reports and press releases. The information is updated regularly.
In connection with the first distribution of financial information, IBS offers all shareholders the opportunity to decide whether they want to continue receiving this information by post.
Share price development
Five-year summary
Sek million 2008 2007 20065) 20055) 20045)
InCoMe StAteMent
Total revenue 2 034.5 2 259.8 2 278.0 2 376.0 2 364.1
Gross profit 644.4 793.9 859.0 854.9 844.0
Operating profit –282.6 38.0 –6.6 639.2 65.9
Operating profit –57.34) 40.43) 112.42) 68.11) 65.9
Profit after financial items –272.1 27.2 –6.2 653.7 55.8
Tax –1.9 –30.7 –1.1 –31.6 –24.4
Net profit for the year –274.0 –3.5 –7.3 622.1 31.4
BAlAnCe Sheet
Intangible assets 748.7 801.3 740.4 689.5 412.6
Tangible assets 87.1 93.1 97.5 104.1 93.8
Financial assets 147.6 147.6 163.3 150.9 139.5
Inventories 7.0 16.6 8.5 6.8 2.9
Current receivables 801.4 892.7 845.3 820.7 769.7
Cash and cash equivalents 312.7 186.3 405.4 676.4 153.5
TOTAL ASSETS 2 104.5 2 137.7 2 260.4 2 448.4 1 572.0
Total equity 1 073.2 956.1 953.2 1 173.1 525.8
Long-term liabilities 112.4 101.1 174.5 171.8 79.0
Short-term liabilities 918.9 1 080.5 1 132.7 1 103.5 967.2
TOTAL EQUITY AND LIABILITIES 2 104.5 2 137.7 2 260.4 2 448.4 1 572.0
CASh flow AnAlySIS
Cash flow from operating activities 76.5 90.2 53.2 80.5 84.9
Cash flow from investing activities –109.7 –174.3 –142.1 330.1 –124.5
Cash flow from financing activities 140.0 –142.1 –166.1 104.5 50.8
Cash flow for the year 106.8 –226.2 –255.0 515.1 11.2
Translation differences in liquid asset 19.6 7.1 –16.0 7.8 –2.6
Cash and cash equivalents, end of year 312.7 186.3 405.4 676.4 153.5
1) Excluding capital gain from sale of subsidiaries.
2) Excluding restructuring costs and capital gain from sale of subsidiaries.
3) Excluding capital loss from sale of operations and currency translation differences in receivables/liabilities of an operating character.
4) Excluding restructuring costs, capital loss from sale of subsidiaries, currency translation differences in receivables/liabilities of an operating character and impairmant of goodwill.
5) 2004, 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
2008 2007 2006 2005 2004
key fIGureS
Average number of employees 1 612 1 815 1 873 1 874 1 915
Revenue per employee (SEK thousand) 1 262 1 245 1 216 1 286 1 235
Value added per employee (SEK thousand) 534 720 638 1 043 717
Operating margin % –13.9 1.7 –0.3 26.9 2.8
Operating margin % –2.84) 1.73) 4.92) 2.91) 2.8
Capital turnover ratio 1 1 1 1 2
Return on total capital % –12 2 0 33 5
Return on capital employed % –21 4 0 54 8
Return on equity % –27 0 –1 73 6
Ratio of risk capital % 51 45 43 49 34
Liquidity % 121 100 110 136 95
Equity to total assets ratio % 51 45 42 48 33
Interest cost cover ratio –20 2 0 68 6
DSO (Days of sales outstanding) 68 66 52 56 57
Interest-bearing net debt –206 150 65 –217 140
key fIGureS per ShAre
Earnings per share –2.63 –0.04 –0.09 7.81 0.39
Earnings per share after dilution –2.63 –0.04 –0.09 7.58 0.39
Adjusted equity 8.64 11.44 11.69 14.74 6.60
Adjusted equity after dilution 8.64 11.44 11.69 14.67 6.75
Cash flow from operating activities 0.73 1.07 0.65 1.01 1.07
Cash flow from operating activities after dilution 0.73 1.07 0.64 0.98 1.05
p/e ratio neg. neg. neg. 3.14 32.96
p/e ratio after dilution neg. neg. neg. 3.23 33.54
Dividend - - - 2.00 -
ShAre dAtA
Stock price at year end 5.50 13.00 26.20 24.50 13.00
Average stock price 9.87 20.88 26.04 18.97 13.48
Market capitalization (SEK million) 696 1 087 2 190 1 950 1 036
P/S (market cap./total revenue) 0.3 0.5 0.9 0.8 0.4
Average number of shares (thousand) 104 185 84 399 85 110 79 608 79 608
Average number of shares after dilution (thousand) 104 185 84 399 85 862 82 026 81 023
Total no. of shares (thousand) 124 271 81 304 81 532 79 608 79 608
Total no. of warrants (thousand) - - - 4 000 9 000
1) Excluding capital gain from sale of subsidiaries.
2) Excluding restructuring costs and capital gain from sale of subsidiaries.
3) Excluding capital loss from sale of operations.
4) Excluding restructuring costs, capital loss from sale of subsidiaries, currency translation differences in operating receivables/liabilities and impairmant of goodwill.
The Board and Auditors
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, HiQ, Sweco and Ruter Dam.
Gunnel Duveblad is independent of the company and its senior management, as well as of major shareholders in the company.
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: President and 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 comapny.
Education and work experience: BBA, European University. Christian Paulsson is Managing Director and head of corporate finance of Lage Jonason AB. He has previously worked within corporate finance in Booz Allen & Hamilton, Alfred Berg Fondkommission AB & ABN Amro and Mangold Fondkommission AB. He has also worked as con- troller in Akzo Nobel Industrial Coatings.
Other assignments: Board member in Invisio Headsets AB, Spirits of Gold AB and Lage Jonason AB.
Christian Paulsson is independent of the com- pany and its senior management, as well 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 exe- cutive positions at Texas Instruments, including President Personal Productivity Products Group, Chief Information Officer and Senior Vice President of Research and Development and Chief Technology Officer and most recently Chief Executive Officer i2 Technologies Inc..
Board assignments: General Motors Advisory board.
Dr Chaterjee is independent of the company and its senior management, as well as of major shareholders in the company.
Education and work experience: AB Applied Mathematics/Economics, and a MBA from Harvard University. Previously held positions at Bertelsmann AG and News Corporation.
Present employment: Partner, Deccan Value Advisors.
George Ho is independent of the company and its senior management and dependent as of major shareholders in the comapny.
Education and work experience:
university degree in Social Science (IT and langua- ge), Previously held positions at Swedish software AB as Programmer, Network administrator and software trainer at ICA Utbildningar AB, Editor at Supermarket magazine at ICA-Förlaget.
Present employment: Business Product Mana- ger, IBS Sverige AB.
Ann-Mari Öhman is Employee representative.
Gunnel Duveblad Born: 1955
Board member since: 2007 Shares: 0
Bertrand Sciard Born: 1953 Board member since: 2007 Shares: 0 Vinit Bodas
Born: 1962
Board member since: 2007 Shares: 01) (incl. family holdings)
Christian Paulsson Born: 1975 Board member since: 2008 Shares: 5 000 Dr. Pallab Chatterjee,
Chairman Born: 1950
Board member since: 2007 Shares: 0
George Ho Born: 1974
Board member since: 2008 Shares: 0
Ann-Mari Öhman Born: 1969 Board member since: 2008 Shares: 0
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 86 486 871 B shares as per December 31, 2008.
Auditors
KPMG AB, Åsa Wirén Linder, Authorized Public Accountant
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 fiscal year 2008.
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 within selected market segments to improve profitabil- ity and increase customer service. IBS business systems are specially developed for efficient supply chain management, customer rela- tionship management, purchasing coordination, logistics, demand- driven manufacturing, integration, financial control and business analysis. Efforts to further develop industry-specific solutions for supply chain management 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 computing equipment and network solutions. IBS had an average of 1 612 employees (1 815) during 2008 and is represented by subsidiaries in a total of 20 countries
parent Company
The Parent Company, IBS AB (with registered offices in Stockholm, Sweden) began its operations in 1978 and at December 31, 2008 had 25 employees (28). The Parent Company has overall manage- ment responsibility for the Group. The Parent Company is financed primarily through management fees and royalties, as well as from dividends and Group contributions from subsidiaries. The number of shareholders at December 31, 2008 was slightly more than 5 000.
The share capital is represented by 4 725 000 Class A shares and 121 849 374 Class B shares. The largest shareholders were Dec- can Value Advisors, LGT Bank in Liechtenstein and Didner & Gerge Aktiefond.
the market
An overall weakening of demand for IBM System i servers was no- ticeable throughout 2008, but apart from that the trading condi- tions were good for licenses and services for most of the year. For the important fourth quarter, however, IBS saw a tendency among customers to defer larger investments, which has had some impact particularly in the sales of new licenses. On the other hand existing customers tended to upgrade and add more modules to in-place systems, in order to get more value out of their existing investments.
Renewal license fees continued to increase. Professional services revenue declined slightly however the number of consultants de- clined throughout the year due to divestments of non-strategic op- erations and focus on core business areas leading to redundancies.
Hardware sales declined as expected due to decreased world-wide demand for IBS System i servers, and consequently hardware opera- tions were downsized.
SIGnIfICAnt eventS durInG the 2008 fISCAl yeAr
While market conditions do have an influence on performance the 2008 results have mainly been influenced by several major events
internally within the company. Among other things a new owner- ship structure evolved and the CEO and President as well as parts of the Board were changed. During 2008 IBS also made two ma- jor changes the organization. The first led to the fact that for the first time in its history IBS organized along products or offerings rather than geographic market, and this led to local redundancies in management and administrative staff. The second was a result of a major strategic initiative which led to a Group wide focus on core geographies and offerings, and a partner agreement to off-shore technical services. While these changes were planned and executed a lack of customer and sales focus impacted revenue negatively.
Revenue per employee increased despite this and despite difficult trading conditions in the normally very profitable final three months of the year. This is an encouraging trend and something which indi- cates that the strategic initiative launched by IBS on September 23, 2008 can lead to better financial performance.
first quarter
A new global organization was installed during the first quarter, where staff was organized into three main global business lines rather than in local country-centric organizations. The new business line structure led to a reduction in workforce, primarily in local man- agement and administration positions. IBS’ Board of Directors and CEO Erik Heilborn reached an agreement that he would step down as CEO but remain in office until a new CEO had been recruited.
An implementation project of IBS Enterprise with a large sub- sidiary of PaperlinX, Deutsche Papier, went live, this marking a significant milestone and the subsidiary becoming the largest IBS customer in Germany.
Second quarter
An Extraordinary General Meeting was held May 20, 2008. The meeting decided on a rights issue to shareholders. The rights is- sue was fully subscribed to and raised a net of SEK 387 m, the full amount paid by July 2008. The rights issue was fully guaranteed by Deccan Value Advisors and underpinned IBS’ strategic initiative to increase profitability, launched in the third quarter. On June 30 Deccan Value Advisors placed a mandatory bid on all outstanding shares in IBS.
In June a services contract worth SEK 40 m was signed with Swedish food distribution company Servera. A break-through con- tract in the Russian market with Rolf, the largest national importer and retailer of foreign cars was a highlight in Europe.
third quarter
During the quarter, as a consequence of the bid, Deccan Value Ad- visors attained 77% of the votes in IBS. On September 5, an Ex- traordinary General Meeting was held and the composition of the Board of Directors was changed. Christian Paulsson was elected to the Board while Bo Pettersson and Fredrik Svensson left. On Sep- tember 23, IBS announced a new strategic initiative, focusing on key markets and reducing staff with up to 500 employees. IBS also appointed a new CEO and President, Mike Shinya. A loss-making division selling local products was divested in Portugal, which along
with an earlier divestment in France led to a goodwill impairment of SEK 53 m in the quarter.
fourth quarter
IBS new CEO and President Mike Shinya took up his position Oc- tober 15. The implementation of the strategic initiative aiming to increase profitability by focusing on core products and markets led to reduction in staff with 238 employees during the quarter, a re- duction of 15%, and re-structuring costs of SEK 170 m was incurred during the quarter. In view of the shareholder composition of the company and the fact that the company was informed that the company’s largest shareholder group did not, taking into considera- tion its large majority, wish to participate in the work of the nomi- nation committee but instead wished to present its own proposal in connection with the Annual General Meeting, the establishment of a nomination committee was deemed not applicable. A partner- ship agreement was signed in December with Indian partner HCL Technologies. This is an essential part of the strategic initiative that was announced in September and will enable IBS to accelerate the off-shoring of development and customer support resources to low cost countries. This partnership is expected to improve productivity and profitability during the first half of 2009. The second customer contract for the Windows version of IBS Enterprise was signed with Swedish Electro distributor Elektroskandia. The new SaaS (Software as a Service) offering was launched successfully with a first cus- tomer signing in the US.
CoMMentS on the InCoMe StAteMent
In connection with a Board meeting in December 2007, a restruc- turing program was announced aimed at reducing administration and overhead staff by re-organizing the company. IBS decided to launch a new strategic initiative program in September 2008, in order to focus the business on core products and verticals and to improve profitability during the years ahead. The year 2008 showed effects of these programs with lower staff and operating costs, particularly lower general and administration costs. How- ever these programs also caused some uncertainty among both customers and staff, leading to lower new sales than expected.
The global economic downturn has also had some negative effects on revenue, especially in selling to new customers. Professional services revenue decreased with 3% compared to last year while number of consultants decreased by a little over 9%. Hardware revenue also continued to show decline. Total revenue decreased by 10% to SEK 2 035 m (2 260).
IBS operating profit for full year 2008 amounted to a loss of SEK –283 m (38) which is a decline of SEK –321 m compared to last year.
The result for 2008 include a restructuring cost of SEK –170 m and also other operating income/costs SEK –56 m (–2). Other operating costs consist of an impairment loss of goodwill amounting to SEK –53 m (0), loss from sale of subsidiaries amounting to SEK –9 m (–4) m and currency translation differences in receivables/liabilities of an operating character SEK 6 m (1). The operating profit excluding the above items was SEK –57 m compared to SEK 40 m last year which is a decline of SEK –97 m. The decline in profit was also impacted by lower capitalization of product development costs SEK 89 m (139) and higher depreciations for capitalized product development SEK –84 m (–69). Excluding also the impact of product development cost capitalization, the decline in operating profit between the years is SEK 32 m. Earnings after financial items amounted to SEK –272 m (27) and net profit amounted to SEK –274 m (–4). Earnings im- provements were achieved in the Nordics region and Asia pacific region. However, the trend in the rest of Europe and Americas was negative as compared to the preceding year.
Software licenses
Software license sales declined by 14 percent compared with the preceding year to SEK 420 m (490). New license sales amounted to SEK 150 m (221), while renewal license sales amounted to SEK 270 m (269). License margin declined 2 percentage units to 90%.
License margin by quarter
2008 2007 2006
Q1 90% 93% 91%
Q2 86% 90% 91%
Q3 89% 93% 92%
Q4 93% 92% 91%
Full year 90% 92% 91%
professional services
Professional services decreased by 3% to SEK 1 150 m (1 186). The number of consultants has gone down to 899 (981), 82 staff or 9%
compared to last year. The decrease is due to the restructuring pro- grams and the divestment of a Portuguese division and the Brazil operations. The Nordics and Asia Pacific regions showed an increase in professional services revenue while Europe and Americas showed a decline. The professional services margin was affected negatively due to higher cost per consultant.
Professional service margin by quarter
2008 2007 2006
Q1 16% 24% 25%
Q2 15% 19% 23%
Q3 16% 25% 18%
Q4 18% 22% 26%
Full year 16% 22% 23%
hardware and other revenue
Hardware and other revenue decreased by 20 percent to SEK 464 m (584). The gross margin declined by 1 percentage points to 17 per- cent (18). The hardware sales have been affected mainly by the global slow-down in demand for IBM System i and by the slowing economy, especially noticeable in fewer large contracts from the financial sector than normal.
Hardware and other margin by quarter
2008 2007 2006
Q1 19% 16% 19%
Q2 19% 20% 20%
Q3 20% 24% 24%
Q4 14% 16% 18%
Full year 17% 18% 20%
Analysis of change in sales revenue
Sales decreased by 10 percent compared with the preceding year.
The decrease was primarily due to lower hardware revenue but also to some extent by the decline in license revenue, particularly from new customers. Hardware revenue continued to show decline, re- flecting lower worldwide demand for IBM System i servers and the slowing economy. License sales were mainly affected by uncertainty among customers and sales staff about the changes in the company structure and lack of sales focus during the re-organization. The ef-
