Annual Report 2005

Transcription

Annual Report 2005

Annual Report
2005
1
Figures at a glance
2
Organisational structure
4
The President’s comments
6
Mission, vision, objectives and strategies
8
The market and the world around us
11
Human Resources
15
ÅF and sustainable development
Divisions
18
Infrastructure
22
Process
26
Systems
30
Inspection
34
ÅF shares
36
Sensitivity analysis
39
Five-year financial summary
Annual Report
40
Administration report
44
Consolidated income statement
45
Statement of consolidated recognised income
and expense
46
Consolidated balance sheet
47
Cash flow analyses for the Group
48
Parent company income statement
48
Statement of parent company’s recognised
income and expense
A leading name in technical consulting
49
Parent company balance sheet
51
Cash flow analyses for the parent company
52
Notes
We offer highly qualified services and solutions for
77
Audit report
industrial processes, infrastructure projects and the
78
Corporate governance report
development of products and IT systems. We are also
80
Board
one of the leading names in testing and inspection.
82
Senior management
Today the ÅF Group has more than 3,000 employees.
84
Annual general meeting
Our base is in Europe, but our business and our clients
85
Addresses
The ÅF Group is a leader in technical consulting, with
expertise founded on more than a century of experience.
are found all over the world.
II
AB Ångpanneföreningen 2004
Figures at a glance
Figures at a glance
• Net sales totalled SEK 2,269 million (corresponding figure for
2004: SEK 2,136 million).
• Operating profit excl. other operating income totalled
SEK 90 million (SEK 13 million).
• Profit after net financial items totalled SEK 222 (31) million.
• Earnings after tax amounted to SEK 204 (36) million.
• Earnings per share: SEK 34.31 (6.13).
• Our objectives for 2006:
– To continue to show improvements in earnings and margins and to grow more quickly than the market as a whole
(Swedish Association of Architects and Consulting Engineers index).
Financial summary
Net sales, in millions of SEK (MSEK)
Operating profit excl. other operating income, MSEK
Operating margin excl. other operating income, percent
2005
2004
2,269
2,136
89.9
12.7
4.0
0.6
221.8
31.3
9.2
1.4
2,680
2,647
Equity/assets ratio, percent
47.6
30.0
Return on equity, percent
42.0
9.8
34.31
6.13
Profit after net financial items, MSEK
Profit margin, percent
Employees (FTE’s) incl. associated companies
Earnings per share after tax, SEK
Dividend per share, SEK
5.00 *
2.60
*As proposed by the Board of Directors to the Annual General Meeting
A brief historical summary
On 23 February 1895 Södra Sveriges Ångpanneförening (“The South
Sweden Boiler Association”) was created when a number of steam
generator owners joined forces to prevent accidents and utilise steam
power more efficiently.
Ever since, ÅF has played a major role in the industrial developments
that have revolutionised our society over the past century. ÅF has witnessed four huge technology changes – steam, electricity, nuclear power
and computerisation – and remained at the leading edge of technology
both in the industrial era and in today’s information society.
Today AB Ångpanneföreningen, which has been listed on the
Stockholm Stock Exchange since January 1986, is one of Europe’s
largest technical consulting companies.
1
Organisational structure
Division
Infrastructure
Process
Systems
Inspection
Areas of expertise
Consulting services chiefly in the construction and property management industries,
for infrastructure projects and in the electric power and telecommunications industries.
790 employees (FTE’s).
Consulting services chiefly in the pulp and paper industry, energy and the environment
and industrial automation.
1,207 employees (FTE’s).
Consulting services within three areas: IT Solutions, Embedded Systems and
Mechanical Engineering. Assignments include both one-off projects and full-service
solutions for everything from product development to production and operational
management.
Services relating primarily to inspection, testing and certification, but also supplementary services such as training and advisory services, risk analysis, CE marking and the
implementation of a variety of EU directives.
Organisation
The ÅF Group is an international technical consulting company with the Nordic region as its
domestic market. A local presence among
clients and in the labour market is essential for
success. For that reason ÅF has around 60 of
its own offices in a dozen or so countries. ÅF’s
organisation and management is characterised
by a decentralised structure which contributes
to quick decision-making processes.
To match the skills of our consultants to
the needs of our clients, the ÅF Group is organised into four divisions: Infrastructure, Process,
Systems and Inspection. Each division is headed by a strong divisional manager, who is also
a Senior Vice President of the Group. The divisions are based on the requirements of our
clients and our own spectrum of skills.
2
To boost sales and derive maximum benefit from cost and earnings synergies, there
are five regional organisations. The main
tasks of the regional managers are to monitor the effects of these synergies and to maximise local business potential. The five regions
are ÅF Sweden North, ÅF Sweden West,
ÅF Sweden East, ÅF Sweden South and ÅF
International.
The corporate structure also includes a
specialist unit, Acquisitions and New Markets,
to ensure that the Group adopts a proactive
and systematic approach to takeovers and
expansion into new geographical markets.
AB Ångpanneföreningen
Infrastructure
Process
Systems
Inspection
O rg a n i s a t i o n a l s t r u c t u re
Share of consulting business 2005
Clients
Net sales
• State-controlled authorities and
government offices
• Swedish Armed Forces
• Telecommunications operators and
network owners
• Industry
• Property owners and property
management bodies
•
•
•
•
•
33%
MSEK 778
Pulp and paper industry
Power industry and energy companies
Manufacturing industry
Trade organisations
Aid and development organisations
Telecommunications
Motor industry
Medical technology
Defence industry
Engineering industry
• All industries and sectors
Total consulting activities:
Electric, heating,
gas, refineries
Forest industry
Public sector, finance
49%
MSEK 39.7
1%
10%
MSEK 1.5
255
18%
SEK 6,000
9%
MSEK 21.8
217
SEK 100,000
MSEK 2,373
MSEK 119.7
2,469
SEK 48,000
Key figures 2005
Other manufacturing
Income
Operating
Operating
Engineering,
automotive industry
Construction,
property management,
HVAC and sanitation
from operations, MSEK
profit, MSEK
margin, %
778
56.7
7.3
Process
Infrastructure
1,123
39.7
3.5
Systems
265
1.5
0.6
207
21.8
10.5
2,373
119.7
5.0
Other service industries
Inspection
Electrical engineering, telecom
Total consulting activities
Other/eliminations
Sales by client category
Grand total
National government (Sweden)
SEK 33,000
1,207
MSEK 207
Assignments by sector
Pharmaceuticals, chemicals
SEK 72,000
790
33%
9%
Operating profit
per FTE
32%
MSEK 56.7
11%
MSEK 265
Employees (FTE’s)
48%
47%
MSEK 1,123
•
•
•
•
•
Operating profit
32
106.6
2,405
226.3
9.4
Abroad
Local government (Sweden)
Private
3
”
Kapitelrubrik
Time to advance our
positions once more
2005 was a good year for ÅF. Demand for
our services in most sectors of the market
was brisk, all our divisions have developed
positively and the conclusion of the sale
of our portfolio of properties has released
capital that we can now use to strengthen
our offer in our core business operations.
Our decision to establish the new divisions, Process and Infrastructure, has borne fruit. Merging the five former divisions into
two has created more synergies than anticipated, particularly on
the earnings side. Both divisions benefit from a size and a depth
of expertise that enables them to tackle large, international projects.
At the same time, we are able to make better use of internal
resources: having fewer internal “walls” within the organisation
gives us all a much better insight into one another’s skills and
strengths.
Another important reason for the improvement in profits is
that, for the first time since 2001, the Systems Division is no
longer running at a loss. This turnaround is thanks to an extensive rationalisation programme, concentration on core activities
and a firm focus on sales. Together, the division’s co-workers
and the new management have done a great job!
Inspection reported its best ever year, combining good
organic growth with a profit margin of more than ten percent.
The focus here has been on making business operations as a
whole more efficient at the same time as we have continued to
capture new shares of the market.
Important events in 2005
In January the ÅF Group was commissioned by the National
Swedish Rail Administration to carry out the project planning
work for systems directly related to the rail track in the tunnel
through the Hallandsåsen Ridge. The task focuses primarily on
electrics, signals and telecommunications. Another example of
projects awarded during the year comes from the Finnish
Myllykoski Group, who engaged ÅF to carry out project engineering work in conjunction with the rebuild of two of the group’s
paper mills in Germany.
In September ÅF-TÜV Nord AB (in which Inspection owns a
50 percent stake) entered into a framework agreement with the
Swedish nuclear power plant operator Ringhals AB relating to
technical inspections and testing services. The agreement runs
for five years with an option to extend for a further two years,
and has an estimated order value of SEK 100–150 million.
A new, two-year preferred supplier agreement was signed with
Ericsson in 2005 to supply consulting services in research and
development. ÅF has a large number of experienced telecom
consultants who are currently involved in a variety of projects,
including the development and maintenance of 2G and 3G systems.
Around the same time as the sale of ÅF’s property holdings
was concluded when the head office in Stockholm was sold, a
contract was signed with Skanska to build a new office complex
at one of the main northern approaches to the Swedish capital.
4
The President’s comments
“From now on the focus is firmly on businessmanship, innovation and internationalisation.”
Designed to create a good working environment with excellent
contacts between departments, the new building will combine a
highly attractive location with significantly lower costs. However,
the main argument for selling our properties is that we can enjoy
better returns from the capital we invest in our consulting operations than we can hope to get from our property holdings.
The path towards our vision
There are three aspects to the ÅF vision: our size, our focus and
our way of doing business. In concrete terms this means:
– Our sales will rise to SEK 5 billion by 2010.
– We will be number one or two in the fields in which we choose
to be active in our main markets.
– We will spearhead change in the technical consulting industry
by giving a new dimension to the concept “value added” for
our clients.
To achieve these ambitious targets for growth, we need to
expand organically and through acquisitions. We formulated an
acquisitions strategy in 2005 and established a dedicated acquisitions unit. Now, together with the capital released by the sale
of our properties, we have created a firm foundation for making
profitable acquisitions. It is important to point out that we will not
let ourselves be pressurised into taking over companies unless
the price is right. In this respect, as in all others, ÅF works with
a long-term perspective.
In 2005 we acquired Infraplan and part of Force’s business in
Sweden. In January 2006 Ingemansson Technology in Sweden
was acquired and an agreement was reached on the takeover
of Enprima in Finland. Together, these acquisitions have added
more than 400 new employees to the core areas of ÅF’s consulting business.
To increase our focus on these core activities, we sold our PX
Business Solutions operations in January 2006. Previously part
of the Systems Division, these dealt with financial and project
follow-up systems.
Structure, systems and culture
The most difficult goal in our vision, but also the most important,
is how to create more value added for our clients at a lower
cost, but with improved profitability for ourselves.
The challenge is all about how to make the best possible use of
ÅF’s size and wealth of experience, two factors that have already
created Sweden’s largest knowledge bank in technical consulting.
To succeed we need a structure that does not build up unnecessary internal walls. We need systems that make it easy to document and access our own hard-won experiences. And we need a
corporate culture that promotes collaboration and good businessmanship. Three years ago we coined the concept “ONE ÅF” as a
description for this way of meeting the challenges ahead.
Transforming ÅF from a welter of subsidiaries into four welldefined divisions has already created the sound internal structure around a shared brand that enables us to utilise our size for
large and complex undertakings.
As regards our shared business systems, we have already
replaced 17 quality systems and four environmental management systems with just one single system that brings together
both quality and environment. For that, we were nominated in
2005 as Sweden’s best IT project in the category Enhanced
Efficiency/Savings by the IT magazine CIO. But we still have
some way to go before we can derive full benefit from our
shared systems, and new investments will be made, for example
to make the systems easier to use.
The greatest impact on profitability, however, is exerted by our
corporate culture. ÅF has a strong culture and a great deal that
is worth nurturing. This is one of the factors that established ÅF
as one of the most popular places to work in 2005. In the annual
Career Index survey (published in the Swedish daily newspaper
Svenska Dagbladet in January 2006) 4,000 engineering graduates in employment were asked to rank the companies they
would most like to work for. ÅF came eighth in the overall ratings,
sharing a place in the Top Ten list with companies such as
Ericsson, Volvo, Scania and ABB. No other consulting company
was anywhere to be seen.
Ready for increased internationalisation
The ÅF culture needs to develop constantly to adapt to the
changing values and increasingly fierce competition of the new
globalised world. For this reason we have resolved that, from
now on, the focus will be firmly on businessmanship, innovation
and internationalisation.
The three areas, structure, systems and culture, were also the
themes for the managerial conference for all ÅF Group managers
held over a weekend in January. In a positively charged atmosphere, creativity and innovative ideas flourished.
Thanks to the huge fund of experience that we possess at
ÅF and the continued prospect of good conditions in the market,
I look forward to 2006 – a year in which we have resolved to
improve our own profitability and that of our clients even further.
Stockholm, March 2006
Jonas Wiström
President and CEO
5
ÅF has a strong corporate
culture. A comprehensive
Our mission
implemented to encapsulate
We make our clients’ businesses more profitable, safer and better adapted to
environmental sustainability by presenting clients with technical solutions and
assessments shaped by the demands of industry.
this culture in words and to
The hallmarks of the ÅF Group are:
create a firm foundation for
• High levels of skills and expertise
the shared values that it
• Innovation by experience
internal project has been
represents.
The work of identifying and describing
the ÅF core values involved a large
number of co-workers and clients. The
result is a formulation in which we have
carefully weighed the import and impact
of every word. The ÅF vision has been
developed by senior management with
the core values and the ÅF mission
statement as a firm basis.
The ÅF mission statement
The ÅF Group’s mission statement is
predicated on our ambition and our ability to contribute to the development of
trade, industry and society in general.
We make the operations of ÅF clients
more profitable, safer and better adapted
to environmental demands. In fact, we do
much more – but these three main issues
remain our chief concern. Every day.
Experience, a passion for innovation
and a thorough understanding of each
client’s business enables us to determine the best solution in each individual
instance. ÅF has expanded and diversified together with industry. We share our
clients’ values and talk our clients’ language – and that’s what makes us unique.
The solution we deliver is not always
the most technically sophisticated – but
it’s the best! Sometimes, tried and tested
technology better serves our clients’
interests. We don’t experiment with our
clients or their businesses.
• An unbeatable working environment
This is what makes us stand out from
the crowd. ÅF is a partner with an irrepressible desire to exceed expectations.
Our clients and we ourselves have an
incentive to stay within or below the
agreed cost of an assignment, as value
added is of importance to both of us.
We believe that productivity – and, by
extension, profitability for our clients –
can be significantly improved by doing
more business on a fixed-price basis.
The aim is to do the job at the lowest
possible price in the shortest possible
time. By consistently calculating costs
correctly and working within the parameters we have established, we can
create confidence and the right expectations in our clients.
Growth
We are one of Scandinavia’s leading technical consulting companies with an unparalleled track record of experience. It is
important for us to maintain the initiative
in our field, and we believe that our size
can help us to do this.
We will grow both organically and by takeovers, acquiring a majority shareholding in
companies that can contribute positively
to the profitability and culture of ÅF.
By 2010 the target is for the ÅF Group
to have sales of SEK 5 billion. Or more!
But we are aware that this target requires
an accelerated rate of growth.
Focus
We will be number 1 or 2 in size in each
market where we choose to establish
operations. This will give us improved
access to assignments by ensuring that
we are perceived as a consulting company
in the front rank of the industry.
Long-term objectives
Profitability
A profit of SEK 100,000 per employee
per year.
Growth
Sales of SEK 5 billion by 2010.
Market
Customer surveys to show that 90 percent
of clients are satisfied with the service we
provide.
Employees
• Better balance in the gender ratio. An
initial target is for at least 20 percent
of consultants to be women.
• Staff turnover to be 7–13 percent.
• At least 75 percent of employees to
have participated in a personal development interview each year.
Environment
In 2004 we set ourselves an environmental target. By 2006 we wanted to
convince at least 90 percent of our
clients that ÅF possesses the environ-
The ÅF Vision
Development
In concrete terms our vision means
building customer relations founded on
value added.
The time we devote to an assignment
will continue to be important, but most
important of all is the relationship between our time and the value this represents to the client. By always focusing
on the value we add, we can make our
work more effective and our offer more
commercially viable.
6
Profitability target per employee,
(in thousands of SEK)
Sales growth target, (in thousands of SEK)
5,000
100
80
4,000
60
40
3,000
20
0
2,000
03
04
05
03
ÅF’s target
ÅF’s target
Actual
Actual
04
05
06
07
08
09
10
Our vision
Development: We will spearhead the process of change in the technical consulting industry by introducing methods of cooperation that give a new dimension
to the concept “value added” for our clients.
Growth: Sales will rise to SEK 5 billion by 2010.
Focus: We will be number one or two in the fields within which we are active.
mental skills required to safeguard environmental values in the assignments we
carry out and that we work towards successful, long-term sustainable development. By the end of 2005 our customer
surveys showed that this aim had, in
fact, been achieved.
Two new environmental target were
adopted in autumn 2005:
1. Environmental target for resource
management.
In the ten largest energy efficiency
assignments during the period 2005–
2007 the energy savings achieved
must be:
• 2 percentage points greater in 2006
than in 2005.
than in 2006.
2. Environmental target for business
travel.
The number of environmentally adapted vehicles in the company’s fleet of
company cars and pool cars shall rise
to 50 percent by 2010.
The annual step-by-step targets for this are:
2006
5%
2007 10%
2008 20%
2009 30%
2010 50%
See also pages 16–17.
Strategies
Operations will be carried out
• under one and the same brand,
• with common processes and systems,
• with shared values and a shared corporate culture in order to concert our
efforts and fully exploit the potential of
the wealth of experience that the ÅF
Group represents.
Acquisitions strategy
Our acquisitions policy is based on the
above, and every effort will be made
to develop our business when the right
opportunities arise. However, expansion
will not take place at the expense of
profitability.
Our acquisitions strategy has been formulated as follows:
• Infrastructure: Nordic and Baltic
regions including Poland.
• Process: Nordic region, Eastern
Europe, South America, Asia.
• Systems: Sweden, Finland.
• Inspection: Nordic and Baltic regions.
Business support and
shared processes
ÅF is constantly developing its consulting
business and its capacity to carry out
assignments in the best possible way.
The ambition is to assure our clients and
ourselves of successful, sustainable, longterm development.
One clear example of this is the introduction of the ÅF Business Support System,
a central operational control system that
makes our own business operations considerably more cost-effective at the same
time as it assures the quality and consistency of our approach. This enables
ÅF management to control and support
operations and meet the criteria for certification for environmental and quality
management in accordance with ISO
14001:2004 and ISO 9001.
Pooling our knowledge, methods and
skills in this way and making information
more easily accessible improves opportunities for securing and succeeding in
more prestigious assignments and conventional projects alike. It helps us make
full use of our size and our broad spectrum of experience. The system also supports a methodical approach by gathering
tools and assignments in one place in a
common structure supported by document
management functions. The system’s
search functions facilitate the recycling of
our best ideas and provide easy access to
ÅF’s structural capital and references.
The system also serves as a guide for all
ÅF employees, regardless of the assignment, their position or geographical location. Here we describe in simple terms
best practice routines at ÅF from start to
finish, complemented by tools in the form
of checklists, templates, guidelines and
forms. The system, which also contains
descriptions of ÅF policy on a variety of
common issues, is adapted to assignments and available via internet.
ÅF’s business system was nominated
during the year as Sweden’s best IT
project in the category Enhanced
Efficiency/Savings by the IT magazine
CIO.
Business system
PX Control is ÅF’s web-based business
system for timesheet reports and the
financial follow-up of assignments, earnings and key figures for the individual
cost centres. The system is a powerful
analytical tool that, among other features, enables users to follow up profitability at all levels.
Personnel administration system
The administrative heart of the Group’s
activities is a personnel administration
system run by the Group HR department together with local representatives
responsible for updating data for each
division. The system administers everything from monitoring IT access codes
to salary details, indexing details of skills
in CVs and managing the rental of the
Group’s holiday homes for employees.
IT support
Under the terms of the Group’s common
IT strategy, IT operations and support
form a single unit within the parent company to ensure that IT support remains
cost-effective, reliable and readily accessible. This, in turn, improves data generation processes and enables consultants
to use their time more effectively.
7
Services and products
The Group provides services via its
divisions for Infrastructure, Process,
Systems and Inspection. Their operations are described on pages 18 to 33.
Projects can vary in duration from just
a few hours to over 200,000 and total
contract fees can amount to as much as
SEK 200 million.
Clients
ÅF’s ten largest clients during 2005 were
the Swedish National Rail Administration,
Ericsson, the Swedish Defence Materiel
Administration, Fortum, Holmen, LKAB,
Stockholm’s regional transport authority,
Stora Enso, Vattenfall and Volvo AB.
Together these clients accounted for 26
percent of total invoiced sales.
Market
Technical consulting is a significant industry in Sweden. According to the Swedish
Federation of Consulting Engineers and
8
Architects (STD), sales for Swedish companies in this field totalled some SEK
30 billion in 2005, with the ÅF Group
accounting for approximately 8 percent
of this amount. The industry employed
37,200 people, slightly more than 7 percent of them working for the ÅF Group
Industry forecast 2006–2007
In its latest Sector Review the STD
reports that capacity utilisation in the
industry reached almost record levels in
2005. First-half figures were even better
than those during the previous economic
upturn.
Industrial consulting firms’ contribution to society is very clear as industrial
clients focus increasingly on efficiency in
a bid to maintain competitiveness. Growth
in industrial consulting orders is strongest
in the energy/power, metals/machinery
and pharmaceutical/chemical sectors,
but is slowing in the highly important
motor industry, according to the STD.
Its view is that the market will, by and
large, support continued good capacity
utilisation during the first half of 2006,
but that capacity utilisation will then begin
to fall. On the other hand, pressure on
prices will ease slightly, albeit at a somewhat later stage. The industry as a whole,
therefore, looks set to record much the
same financial performance as in 2005.
In 2005 we saw a tentative recovery in prices at a relatively late stage
of the market upswing but, even so,
the industry has been able to pass on
only about one percentage point of the
increase in wage costs. The remainder
of the growth in earnings has been
achieved through good capacity utilisation. Firms have not focused sufficiely on
the value of the pricing of the most specialised services, and are living mainly
off volume adjustments. Pricing will be
subjected to greater challenges in the
years ahead, predicts the STD.
Sweden’s consulting firms perform well
Own office
ÅF has many years
experience of international
projects. Since 2000 ÅF
has carried out projects in
around 40 countries on four
continents.
in an international comparison. In a list of
the world’s 100 largest technical consulting firms in the STD report, ÅF ranks as
number 50.
500 new international
ÅF employees
ÅF is extensively involved in establishing
an international structure for its operations.
The work focuses on coordinating the
Size of projects
Number of hours, proportion in %
various national operations by the adoption of a common graphic profile, guidelines in the form of methods, systems
and processes, and shared corporate
values and targets. An English-language
intranet has also been created to
improve the international exchange of
information and ideas.
A good example of the positive effects
of these measures to internationalise ÅF
operations was provided when ÅF was
appointed process consultant in conjunction with the Holmen Group’s decision
to invest in a new paper machine in Fuenlabrada, in Madrid, Spain. The ability
to secure this assignment was testimony to the well established cooperation between ÅF units in Finland, Spain,
France and Sweden.
The internationalisation of ÅF oper-
According to figures compiled by the
Swedish Federation of Consulting
Engineers and Architects (STD), ÅF
ranks as number 50 among the world’s
100 largest technical consulting
companies.
40
30
20
10
0
– 100
2004
101 –
1,000
1,001 –
10,000
10,000
2005
9
ations has brought a steady increase in
the flow of enquiries. Since 2000 ÅF has
been involved in international projects in
some 40 countries.
Early in 2006 a further step in the
process of internationalisation was taken
with an agreement to acquire Finland’s
leading energy consulting company,
Enprima, with 270 employees in Finland,
the Baltic States and Russia. Enprima
has a track record of success in major
energy consulting projects in Europe and
new growth markets, and more than half
of its invoiced sales relate to projects outside Finland. ÅF is committed to continue
Enprima’s penetration of growth markets
such as Russia and South-east Asia.
Over the last three years ÅF has
added more than 500 highly qualified
co-workers to its worldwide consulting
operations. Today the Group has offices
in Sweden, Denmark, Finland, France,
Guatemala, Norway, Lithuania, Poland,
Spain, South Africa, the Czech Republic,
Germany and, via the acquisition of
Enprima, its own establishments in
Russia and the Baltic states.
ÅF – Sweden’s best known technical
consulting company
27%
ÅF
20%
3%
3%
WSP
4%
5%
Teleca
12%
Sweco
8%
10%
11%
Semcon
0
5
10
15
Pre-broadcast survey
20
25
30
ÅF sponsored Swedish television’s broadcasts from the winter
Olympics in Turin. In conjunction
with this, OMD carried out a brand
awareness survey. Just under
1,900 respondents chosen at random (878 before the broadcasts
and 976 after) replied to the question “How well do you know the
following technical consulting companies?” (“Very well”/”Fairly well”)
Post-broadcast survey
Source: OMD
10
Strengthening the ÅF brand
ÅF sponsored Swedish television’s broadcasts from the winter Olympics in Turin,
a decision that exposed the ÅF brand to
a massive audience via 300 so-called TV
billboards over a period of 17 days. The
result, according to a major survey carried out by media communications specialists OMD, was an increase of 35 percent in public awareness of ÅF.
ÅF was also a sponsor for Swedish
broadcasts from the summer Olympics
in Athens in 2004.
The OMD survey shows that ÅF is the
best known technical consulting company
in Sweden.
Human resources
ÅF – the top choice among engineers
The annual Career Index
survey asks some 4,000
engineering graduates with
working experience to name
the company they would
most like to work for. In
the latest survey, published
in the Swedish daily newspaper Svenska Dagbladet
in January 2006, ÅF was
ranked in eighth place
overall.
In a similar survey conducted by Universum
six months earlier engineering graduates
had already placed ÅF among the most
attractive employees.
Regular contact with students is very
important for the development of the
ÅF Group and since 1986 the company
has maintained a regular presence at
various careers fairs hosted by Sweden’s
technical universities. During the 2005–
2006 academic year ÅF took part in
15 contact days at universities and colleges throughout Sweden. Some 70 ÅF
employees met thousands of technology students, among whom the general
impression of ÅF was of an attractive
employer able to offer a wide variety of
stimulating career opportunities.
Clear objectives and long-term
commitments
Among the hallmarks of a good workplace are employees’ pride in their work
and the company they work for, confidence in their managers, and solidarity
and togetherness with their co-workers.
This can only be achieved by clear
objectives and long-term commitments
at all levels in a company.
Feedback about how successful an
individual is in his or her work is a key
factor behind job satisfaction, and this is
provided via scheduled personal development talks between employees and
their line managers. Regular employee
surveys, most recently in 2004, confirm
that more than 75 percent of employees
participate in these meetings, while
more than 75 percent are satisfied with
the continuous feedback they receive.
Another initiative of long-term importance is the conversation we always have
with employees who decide to leave ÅF.
Its purpose is twofold: to ascertain the
individual’s perceptions of the good and
not-so-good aspects of the time spent
with the company, and to terminate the
relationship in a positive spirit in order to
pave the way for possible future collaboration.
A further very important consideration is
preventive healthcare, which is catered for
via occupational healthcare services and
the Group’s support for employees’ leisure
activities.
More female consultants and
managers? Yes, please!
There is a firm conviction in the ÅF Group
that a better balance between the sexes
creates a better atmosphere at work and
leads to improved profitability. This was
the basis for the Futura project, which
aimed to increase the proportion of
female consultants to 20 percent. By the
time the project drew to a close at the
end of 2005, the result of 17.5 percent
was sufficiently encouraging to inspire
renewed efforts in this direction, and the
experience gained from the project is
11
Human resources
“I already knew that ÅF was involved in all sorts of international
projects. As I had spent some time studying abroad, that was
one of the things that attracted me. Then, after I found out
about the Futura programme and heard the company was
actively searching for female consultants, I didn’t hesitate for a
moment. I applied, was offered a job and started in May 2005.”
Siri Francke
Siri Francke has a double degree in engineering from the Faculty of Engineering at Lund University
and the Ecole Centrale Paris. Her first assignment dealt with electricity metering as part of a
project for Fortum Värme designed to determine how much electricity the various business areas
produce and consume.
now used when recruiting new employees.
The project discussed issues such as
attitudes to women, individual development plans, equality in terms of salary
and “visibility”, more female managers
and flexible working hours.
Another important issue is support for
working parents. In the latest biennial
employee survey (2004), 87 percent of
ÅF employees with children under the age
of eight agreed, to a greater or lesser
extent, that managers do their best to
make life easier for the parents of young
children.
The Futura project also arranges networking lunches for female consultants.
Equal Opportunities Prize to ÅF
The long-term commitment demonstrated
in the Futura project won ÅF a prize for
its work with equal opportunities from
the business weekly Veckans Affärer
two years in succession. The prize is
part of Veckans Affärer’s “Sweden’s Best
Workplace” awards.
Mentor programme
A mentor programme exclusively for
new female employees was successfully implemented as part of the Futura
project in 2003 and 2004.
A new mentor programme, Odysseus,
started in September 2005, this time
with 50 percent male and 50 percent
female trainees. This programme extends
12
throughout the entire ÅF Group and both
trainees and mentors are ÅF employees.
Over the course of a year, in addition to
regular trainee-mentor dialogues, there
are four two-day knowledge seminars on
topics such as equal opportunities, life/
work balance, leadership and career
development.
Finder’s fee for female consultants
In December 2005 women constituted
22 (2004: 21) percent of the Group’s
employees as a whole, and 17.5 (16)
percent of the Group’s consultants.
Female consulting managers made up 10
(9) percent of the Group total, and female
managers as a whole 12 (10) percent.
As part of the Futura project a “Finder’s
Fee” programme was introduced at the
start of 2005 intended to reward employees who identify a female consultant
subsequently employed by ÅF. The programme will continue to run in 2006.
Female directors
Two of the seven members of the board
of Ångpanneföreningen (29 percent)
elected by the annual general meeting
are women, as are two of the four
employee representatives.
The ÅF School
Consultants require special tuition in
management, law, marketing and finance
in order to cope adequately with the
administrative side of their work. This
training is generally provided by the
Group through the ÅF School.
The ÅF School runs introductory courses
and courses in sales training, presentation techniques, project management
and various forms of management development. In recent years the Group has
placed particular emphasis on the role of
the project manager, with around 700
employees graduating from courses in
project management.
Another initiative is training designed to
provide insights into the rudiments of
subjects such as contract law, finance
and the consultant’s behaviour when on
assignments. To date some 500 ÅF
employees have participated in this
course.
As well as tuition, the ÅF School also
provides added benefits in the form of
an exchange of experiences and knowledge transfer between participants from
different ÅF units, something which is
clearly in the interests of clients.
Policies
To make clear its position in a number of
employee-related issues, the ÅF Group has
formulated policies in key areas such as
human resources, salaries, equal opportunities and the climate at work. This latter area includes activities to combat discrimination of all kinds. A personal development plan is made for each individual
employee.
Human resources
Number of employees
In 2005 the ÅF Group employed a total
of 2,538 (2004: 2,531) full-time equivalents (FTEs). The total number of FTEs
including associated companies was
2,680 (2,647). The proportion of new
employees during the year, including
those with acquired companies, stood at
12.1 (20.5) percent.
Holidays, parental leave and low
sick leave
Sick leave among ÅF employees is low.
The figure for 2005 was 3.1 percent
(2004: 3.2 percent). The national average
for Sweden in 2005 was 4 percent.
Total absenteeism, including holidays,
was 17.0 (17.0) percent of normal working hours. Holidays accounted for 10.0
(10.5) percent and leave of absence 3.9
(3.4) percent.
ÅF adds a supplement to the state
benefits paid to both male and female
employees who stay at home to look
after their new-born babies. This means
that, in addition to the state benefits, ÅF
pays employees with salaries up to a
total of 7.5 times the so called “basic
statistical amount” used in Sweden for
calculating national social security benefits, etc. an additional 10 percent of
their monthly salary. Employees whose
salaries exceed 7.5 times the “basic
amount” receive in addition 90 percent
of the portion of their monthly salary
that exceeds the basic amount for either
60 or 90 days, depending on how long
the person has been employed.
Standard holiday entitlement is 28.5
days, which may also be taken out on
an hourly basis.
Joint ownership
AB Ångpanneföreningen sees great value
in involving employees as part-owners in
the company. Employees have a financial stake in operations directly through
their ownership of shares and convertibles, and indirectly through ÅFOND, the
ÅF Group Trust.
To further stimulate this sense of involvement, all new employees are given
one ÅF share to encourage them to save
and invest in the company.
Capacity utilisation
The ÅF Group’s invoiced-time ratio for
2005 – the proportion of time charged to
clients relative to the total number of hours
spent at work by all employees – was
71.5 (2004: 68.5) percent. Non-invoiced
time includes marketing, training, technical development, management, administration and non-productive working time.
93 percent of employees worked mainly
for external clients, while the remaining
7 percent were employed in a purely
administrative capacity.
Bonus system
The ÅF Group operates a profit-related
bonus system for employees that generates a bonus based on both consolidated
profit and the profit of the relevant division.
In 2005 employees received bonuses
totalling SEK 6.9 (2004: 2.5) million.
Salary system with variable
component
Some 700 employees currently participate in salary systems where up to
40 percent of the individual’s salary
consists of a variable component linked
directly to performance. So far, experiences of this have been positive.
Recreational activities
ÅF Group employees may rent one of
the cottages or apartments owned or
leased by the Ångpanneföreningen Staff
Foundation. The cottages are located
in attractive areas of Sweden, mainly in
the mountains and along the coasts. A
couple of hundred families take advantage of this opportunity every year.
The Group also runs clubs offering
employees a wide range of leisure-time
activities, such as keep-fit classes, longdistance skating, golf, massage and
weight reduction courses. There are
also cultural activities connected with
theatre visits and art appreciation.
Popular activities also include the annual
Christmas parties and those held early in
the new year at several ÅF offices, when
employees and their families are invited
to “plunder the Christmas tree” in traditional Swedish fashion.
ÅF’s sponsorship of TV broadcasts
from the Olympic Games in Athens 2004
and Turin 2006 has elicited a highly positive response from clients, co-workers
and other stakeholders in ÅF. Employees
have been involved in numerous client
activities and have also participated in
internal sales contests where the prizes
have been tickets to the Olympic Games.
ÅF is a popular employer among
engineers. In the Swedish Career Index
survey, ÅF was ranked as the eighth
most popular workplace for engineering
graduates. A similar survey conducted
by Universum confirmed ÅF’s position
among Sweden’s most attractive
employers.
13
Human resources
“My first contact with ÅF was at one of the Contact Days
hosted by the Royal Swedish Institute of Technology. That
helped to confirm my already positive impression of a company that offers employees exciting projects on which to
work and a good human resources policy.”
Johan Malmström
Johan Malmström graduated with a degree in Electrical Engineering in 2003. After a few temporary placements, including a spell with the Swedish Defence Research Agency (FOI), he joined ÅF
in November 2005. He immediately became involved in an interference analysis project for the
Swedish Defence Materiel Administration (FMV), investigating how transmitters and receivers can
interfere with one another’s signals.
Age distribution
Length of employment
Financial data
Percentage
Age group, years
Percentage
2003
2004
2005
– 29
12
11
10
30 – 39
33
33
31
40 – 49
24
25
50 – 59
23
8
60 –
SEK ’000/year/employee
2003
2004
2005
0–2
28
29
24
Net sales
3–5
35
30
28
Profit*
26
6 – 10
20
25
25
23
23
11 – 20
12
11
16
8
10
21 –
5
5
7
The average age was 43.6 (42.9) years.
Years of employment
Average length of employment is 7.2 (6.1) years.
Employees in newly acquired companies are considered new employees.
Staff turnover
New employees
2003
2004
2005
883
853
894
23
5
35
Personnel costs
570
570
586
Value added**
593
575
621
* Operating profit, excluding other operating
income.
** Personnel expenses plus operating profit
excluding other operating income.
Education
Percentage
Percentage
Percentage
2003
2004
2005
2003
2004
2005
2003
2004
2005
– 29
23
28
22
– 29
38
40
38
University
44
46
41
30 – 39
17
17
21
30 – 39
17
21
12
Secondary
54
52
54
40 – 49
16
13
17
40 – 49
15
16
10
Other
2
2
5
50 – 59
10
8
12
50 – 59
8
16
8
60 –
10
18
11
60 –
4
19
3
Total
18
15
17
Total
16
21
12
Age group, years
Age group, years
Training and R&D
SEK ’000/
The percentage of employees within each age
group who left during the year, in relation to the
average number of employees in the respective
age group.
The percentage of new employees within the
respective age group at the end of each year.
Employees in newly acquired companies are considered new employees.
year/employee
2003
2004
2005
Training
26
15
9
Research & development
12
11
11
38
26
20
Total per employee
(FTE)
Each employee receives an average of 60 hours
training per year.
14
The role of ÅF
ÅF believes that sustainable development
is predicated on a combination of financial, environmental and social factors.
The company contributes to sustainable
development through its positive influence
on society, stakeholders and its own
business. With more than a century’s
experience as an established name in
technical consulting, it goes without saying that ÅF adopts a long-term perspective to business. This is reflected today
in the commitment to contribute to longterm sustainable development.
ÅF exerts its greatest influence on
society through the projects it is commissioned to carry out. The ÅF mission statement recognises the benefits
these projects bring to society by promoting and supporting technological
development as part of the company’s
day-to-day work. The aim is for every
assignment to contribute to our clients’
progress towards sustainability in all
respects. One important aspect of this
work is the assignments that ÅF carries
out for its clients in the field of sustainable development, an area of operations
which has been reinforced by the addition of extra resources in 2005.
ÅF often participates in collaboration
with different players in industry, the
public sector and the world of research.
ÅF's role as a consultant is to act as a
bridge by facilitating understanding and
the exchange of knowledge among
Apart from purchases of materials and
external services, the flow of funds from
the business goes primarily to the following recipients: the owners in the form of
dividends on shares, banks and credit
institutions in the form of interest, employees in the form of salaries, and the state
in the form of taxes and employer’s social
security contributions, etc.
those involved. ÅF is also taking an
active part in work to produce an international standard for Social Responsibility, ISO 26000.
The Swedish Association of Environmental Managers (NMC) was established
more than ten years ago by ÅF, who also
runs its secretariat. NMC’s over-arching
goal is to make it easier for its 300
member companies to actively pursue
and develop professional work relating
to the environment and sustainability.
Some 40 activities were organised by
NMC in 2005.
ÅF’s values and stakeholders
In 2003 and 2004 ÅF worked on mapping
out its corporate values and formulating
a new vision. The results have been communicated to all co-workers and are available for others who share an interest in
the company in the form of “ÅF’s Little
Blue Book”.
ÅF’s most important partners are its
clients, present and future co-workers,
and the company’s owners. In addition to
contacts via the consulting work we do,
relations with these stakeholders are
maintained by means of surveys and
client meetings, co-worker questionaires,
contact days and tutoring students who
write their theses as part of study placements with ÅF. Other important stakeholders are the local communities in which ÅF
operates, together with official authorities
and a variety of interest groups. ÅF takes
responsibility for the economic, environ-
Shareholders’
dividends, 1%
State, 45%: of which,
Corporation tax, 1%
Income taxes
and employer’s
social security
contributions, 44%
mental and social aspects of the influence it exerts on its stakeholders.
Responsibility for economic impact
The economic impact exerted by ÅF is
twofold: the flow of capital to a variety
of stakeholders and the economic impact
on society as a whole. Decisions influencing the flow of funds are taken by
the senior management group, and in
certain cases by the board of directors.
One of the major owners of ÅF is
Ångpanneföreningen’s Foundation for
Research and Development. The annual
dividend that the foundation receives
from its shareholdings in ÅF is channelled into areas that benefit the community in the form of scholarships and
research grants, primarily in those fields
of technology in which ÅF operates. In
2005 more than SEK 4 million were
awarded to some 70 recipients.
The influx of capital is generated by
the company’s business operations and –
when required – by the owners. ÅF is not in
receipt of any government subsidies.
ÅF denounces all kinds of corruption
and the forming of cartels, and takes an
active role to assist in the creation of a
market based on healthy competition. ÅF
has never been involved in any enquiry or
judgement for unfair market influence in its
operations.
Further financial information is provided
on pages 39–77 and the financial risks are
described under the sensitivity analysis on
pages 36–38.
Banks and credit
institutions, 1%
Staff: net salaries
and remuneration, 49%
Investments, 4%
15
Responsibility for environmental
impact
ÅF’s consulting operations are in many
cases directed at improving environmental performance or increasing energy
efficiency in our clients’ plants and businesses. In this way ÅF contributes to a
positive environmental influence on the
community.
The senior management group takes
responsibility for the fact that environmental considerations are taken into
account throughout the Group. A business
policy embraces the aspects of both
environment and quality.
Business policy
It is the ambition of ÅF to safeguard successful, long-term, sustainable development both for its clients and for its own
operations.
The following factors help to achieve
this aim for the company’s consulting
business:
• ÅF combines a systematic, consistent
way of working with good quality and a
high level of environmental awareness.
• ÅF implements working methods that
place equal focus on the client’s needs
and quality criteria and concern for the
natural environment.
• ÅF makes the most effective use of
energy and natural resources in its
day-to-day work. The company strives
to prevent pollution and complies with
the relevant legislation.
16
• ÅF seeks always to provide the best possible solution in its consulting assignments – from a technical, environmental
and quality perspective – by working in
close liaison with clients.
• ÅF develops the skills of its employees
and constantly improves working
methods.
In order to ensure that ÅF takes responsibility for the impact that its business
activities have on the environment, a
group-wide business support system has
been used since 2003, certified in accordance with ISO 14001:2004. An Environmental Director, assigned the task of
running and coordinating environmental
issues, reports directly to the President/
CEO. Each division also has an environmental and quality manager, who reports
to the divisional manager. The Environmental Director and the various divisional
environmental and quality managers sit
on a steering committee for the business
support system, which is chaired by a
representative for senior management.
In conjunction with the recertification of
the environmental management system in
2005 to comply with the new edition of
ISO 14001:2004, ÅF’s environmental performance was revised. The most important aspect of this is the influence that our
advisory services have on the environmental performance of our clients in areas
such as emissions, resource management
and choice of materials. Other significant
environmental factors are our own influ-
ence in the form of travel and electricity
consumption.
Environmental goals
The environmental goal set up in 2004
was to reach the situation where at least
90 percent of clients consider that ÅF possesses the environmental skills required
to safeguard environmental values in the
assignments we carry out and that the
company works towards successful, longterm sustainable development. By the end
of 2005 our customer surveys showed
that this target had been achieved.
Two new environmental targets were
adopted in autumn 2005.
1. Environmental targets for resource
management:
In the ten largest energy efficiency
assignments during the period 2005–
2007 the energy savings achieved
must be:
than in 2005
than in 2006.
The figures relate to the reduction of
the client’s energy turnover (expressed as
a percentage) per produced unit achieved
by the implementation of energy efficiency
measures, and mean that ÅF’s performance in improving the energy-efficiency of
clients’ facilities must improve year-on-year.
2. Environmental targets for business
travel:
The number of environmentally adapted
vehicles in the company’s fleet of company cars and pool cars shall rise to 50
percent by 2010.
The annual step-by-step targets are:
2006
5%
2007 10%
2008 20%
2009 30%
2010 50%
The initial reference point (2005) was
that, of the ÅF fleet of 213 vehicles,
3.7 percent were environmentally
adapted.
Other environmental impact is controlled by guidelines and routines that
exist for each process in the business
support system. Through external and
internal reviews, and not least with the
help of proposals for improvement submitted by co-workers, the steering committee for the business system regularly
monitors that the system is being implemented as intended and is fit for purpose.
In a knowledge-based company such as
ÅF, the employees’ knowledge is decisive
for the outcome of business operations.
This also applies in the area of the environment. ÅF runs a training programme for
all employees, which is built on Internetbased teaching materials. Linked to this
there is a knowledge-based test. It is the
line manager’s responsibility to ensure that
all employees have the approved level of
basic knowledge of environmental issues.
Responsibility for social influence
Human rights/non-discrimination
ÅF’s social influence can be broken down
into four parts.
• HR issues/working environment
• Product liability and responsibility for
the quality of services
• Human rights/non-discrimination
• Social development
A large part of ÅF’s business is conducted
in EU member states, where there is a
great deal of legislation governing, for
example, the right to freedom of association, working hours and child labour.
In order to increase the number of
female employees and managers in the
Group and achieve a better balance
between the sexes, ÅF has recently run
the Futura project (see pages 11–12). A
similar initiative is now planned to increase
diversity within the Group.
HR issues/working environment
Under the heading “ÅF – the top choice
among engineers” (pages 11–14) there
is a description of how ÅF works in order
to offer a stimulating and first-class
working environment for employees.
Product liability and quality of service
ÅF does not sell products as such, but
highly qualified services, primarily to
other businesses. This means that consumers, as a rule, do not encounter any
products for which ÅF has a manufacturer’s liability. As one of Sweden’s leading technical consulting firms, however,
ÅF does shoulder a major responsibility
for the effect that its services have on
clients and their business. ÅF takes this
responsibility seriously and works actively to constantly develop and improve
its advisory services. The aim is to help
clients to create sustainability in their
business enterprises and long-term profitability. The business system ensures that
any damage and/or negative influence
on the client is followed up, and that
corrective and preventative measures
are taken. (See pages 36–38 for more
about risk management.)
Social development
ÅF has a direct impact on society as a
result of the fact that its consulting operations are carried on in different places
in Sweden and other countries across
the globe. The Swedish business is run
from some 60 offices throughout the
country. Employees normally live close
to the office where they are based. This
widespread local presence makes a positive contribution to local and regional
development across Sweden. ÅF consultants also participate in a variety of social
activities, lecturing at seminars and
taking part in different types of development projects within business, the public
sector and the academic world.
17
Infrastructure Division
The Infrastructure Division
The Infrastructure Division offers consult-
towards increasingly large and multidis-
offers consulting services
ing services, methods and solutions for
ciplinary projects is one that favours ÅF,
strategic and operational decision-making
enabling us to draw on long experience
for the needs that society
and planning processes to ensure that
of complex project management.
and industry have with
the socio-economic and industrial infra-
regard to infrastructure.
structure, including roads, railways, com-
in Sweden, four in Norway and two in
mercial premises and industrial plants,
Denmark.
The division focuses on
four business areas:
Telecommunications,
Installations, Infrastructure
can function in the best possible way.
The division has more than 40 offices
Alongside its purely commercial assign-
The division’s clients are found princi-
ments, the division is also involved in
pally in Swedish industry, the public sec-
research and development in various
tor, the defence sector, and in the Nordic
contexts, including collaborations with
property and infrastructure market for
universities and technical colleges. The
Planning and Electrical
electricity, energy, heating, ventilation
division also arranges and participates
Power Systems. The division
and sanitation. However, clients the
in seminars on the importance of infra-
world over call on the division’s special-
structure for social development.
accounts for 33 percent of
ÅF Group sales.
ist expertise for various one-off assignments. The division is expanding interna-
Organisation and operations
tionally, including a move into the Balkan
The Infrastructure Division is organised
region, a growing presence in the new
into four business areas: Telecommunica-
EU member states and an important
tions, Installations, Infrastructure Planning
bridgehead in Beijing in China.
and Electrical Power Systems. Solutions
The division leads the market in several
are tailored to the client, and encompass
areas. It owes its success to very high
everything from short, straightforward
levels of expertise among employees,
studies to large, complex full-service
many years of experience, the size and
undertakings that include a wide spec-
stability of the ÅF Group, and a broad
trum of technical, financial and environ-
geographical spread which ensures prox-
mental assignments.
imity to clients. Moreover, the trend
Telecommunications assignments
2005
Net sales (in millions of SEK)
778
698
to the high levels of pro-
Operating profit (in millions of SEK)
56.7
41.7
ficiency and among our
Operating margin, percent
7.3
6.0
33
30
790
694
72
60
co-workers, to our good
Share of consulting
business sales, percent
business sense and to our
Number of employees (FTEs)
proximity to our clients.”
Operating profit/employee
Åke Rosenius
Divisional Manager and
Senior Vice President
18
2004 *
“Our success owes much
* Pro forma
Infrastructure
– an industry leader in the
development of industry and society
cover both fixed and mobile telephony,
energy-efficiency audits, inspections,
and include implementation, project
training and a raft of environmental serv-
engineering, commissioning, documen-
ices. A further service is investigations,
the division works in areas such as
tation, inspection and systems mainten-
which frequently involve advising on the
power supply, transmission issues, control
ance. Services are aimed primarily at
right choice of technology or energy
rooms, substations and transformer sta-
operators, network owners and defence-
consumption, or creating applications
tions. Clients are found in the manufactur-
sector clients, and assignments are split
for new technical solutions. Clients are
ing, process and power industries. In the
roughly 50/50 between the civilian and
found primarily in Sweden and Norway.
aftermath of the violent storm that buf-
defence sectors.
As regards Infrastructure Planning, the
ture are enormous.
In the field of Electrical Power Systems,
feted southern Sweden in January 2005,
ÅF is Sweden’s largest installations
division offers feasibility studies and stra-
more and more Swedish network own-
consultant, and Installations is the Infra-
tegic planning services for road and rail
ers and power distributors have been
structure Division’s largest business
projects, as well as project engineering
forced to review the reliability and securi-
area. ÅF offers high-quality technical and
and installation-related services for traf-
ty of their power networks. ÅF offers both
administrative services for every con-
fic technology. These include economic
analyses and solutions for better oper-
ceivable construction and modernisa-
analyses, environmental impact assess-
ational reliability and electrical quality.
tion project for commercial, industrial
ments, noise and vibration studies,
and public-sector premises. The divi-
overhead contact (catenary) lines and
Goals and strategy
sion boasts both general and special-
safety systems for railway operation,
The Infrastructure Division’s goal is to
ist expertise in heating, ventilation, san-
and risk analyses. Examples of rail-relat-
prioritise continued growth with con-
itation, cooling, electrics, telecommuni-
ed projects include investigations for the
tinued good profitability. Given its already
cations, transport, control and regula-
City Line in Stockholm, the tunnel under
strong market position in Sweden,
tion, property automation, fire and safe-
the Hallandsåsen Ridge and the City
expansion will be primarily elsewhere.
ty. It can also offer full-service concepts
Tunnel in Malmö. International assign-
This means, for example, growing the
which make life easier for clients dur-
ments are growing in importance, and
Norwegian operation to become one
ing the construction process and provide
the division is stepping up its efforts to
of the leading consulting businesses
control over both functionality and costs.
expand further, not least in the new EU
in Norway. ÅF also plans to establish a
Another side of the Installations business
member states and the Balkan region,
presence in Poland, which is set to ben-
area is administrative services, such as
where the needs for modern infrastruc-
efit from extensive EU infrastructure
Technical optimisation of the new police station in Gothenburg
The police in Gothenburg needed a larger police station. When property owner Vasakronan began
planning the extension, it chose ÅF as technical consultant. ÅF was brought in at an early stage with
responsibility for investigating the needs and planning the solutions for heating, ventilation, sanitation, electrical and telecommunication systems, fire safety, energy and air-conditioning. To produce a
relevant assessment of a number of possible system investments, ÅF calculated the life-cycle cost of
each individual system. Purchase and operating costs, energy consumption, environmental impact,
maintenance requirements and so on were then factored in to the equation to determine the best
possible all-round solution. ÅF has extensive experience of similar projects, including Kumla Prison
and police stations in Uppsala and Kungsholmen in Stockholm.
19
Infrastructure
investments and will serve as a good
Early in the year the division was com-
nical consulting services to optimise
missioned by the National Swedish Rail
operations relating to real-estate main-
Administration to carry out project plan-
tenance and ventilation. Other examples
tain strategic acquisitions, but the main
ning work for the electric, signalling
of installations projects include the new
focus here will be on fine-tuning the divi-
and telecommunication systems for rail
police headquarters in Gothenburg and
sion’s offers in all its business areas.
traffic in the proposed tunnel through the
Borås Hospital.
base for further expansion eastwards.
In Sweden, there is still scope for cer-
Another goal is to develop new business
concepts for outsourcing, alliances and
Hallandsåsen Ridge.
Another early order was a prestigious
Clients
partnering. This will enable us to become
EU-funded project for Serbia’s Ministry of
Working with effectively run projects
involved in clients’ planning process at
Transport. Together with the European
geared to management by objectives
an earlier stage and make us better pre-
Agency for Reconstruction, ÅF was
is becoming increasingly important for
pared to take on larger and more com-
invited to propose solutions for expand-
clients, and there is a clear trend for
plex assignments. The greater commer-
ing capacity in Serbia’s transport sector.
many to feel an increased need to meas-
In June ÅF took over the infrastructure
ure the benefits of the services they pur-
cial risks will be offset by a potential for
increased revenue through the inclusion
consultants Infraplan AB in Umeå. This
chase. Clients are taking more of a long-
of incentive structures in the contracts.
business was quickly integrated into
term view in areas such as functionality,
An increased focus on management by
the division to reinforce ÅF’s position in
energy choice and environmental per-
objectives will be an important strategic
northern Sweden, particularly within the
formance. ÅF liaises closely with its
tool here. Linking projects to targets that
rail consulting segment.
clients and aims to be involved as early
as possible in the planning process so
offer clear benefits to clients will also
In the autumn ÅF was appointed main
make the overall value of ÅF’s services
contractor for all the installation systems
that it can tackle these issues in the
more apparent.
(cooling, ventilation, electricity, etc.)
proper way.
for Rögle BK ice hockey club’s training
The year in brief
During 2005 operations in Norway were
consolidated and the various companies
The division’s client structure is very
facilities at the Gripenhallen sports centre
mixed – many small clients in the instal-
in Ängelholm in the south of Sweden.
lations sector; fewer, but larger ones in
In October ÅF signed a long-term con-
the roads and railways sector. Clients
acquired over the years integrated into a
tract with the municipally owned MKB
include Akademiska Hus, Astra, the
single, powerful unit.
Fastighets AB in Malmö to supply tech-
National Swedish Rail Administration,
Materials for extreme situations
When the Swedish Defence Materiel Administration (FMV) was looking for a quick way of delivering
mobile command systems to Sweden’s international rapid deployment forces, it called upon ÅF to
assist with the technical design by providing the necessary support during procurement, roll-out and
verification of the systems. The assignment also required ÅF to act in a supporting role in FMV’s
contacts with the Swedish Armed Forces and the defence industry. Lead-times between receiving an
order and delivering fully operational material to the international rapid deployment forces are often
extremely short. Performance specifications are exceedingly high as the systems are subjected to
harsh climates, considerable wear and tear and even battlefield conditions. ÅF has been involved
with the development of command systems for the Swedish contingents in Kosovo, Bosnia, Liberia,
Afghanistan and elsewhere.
20
Infrastructure
Fortum, the Swedish Defence Materiel
ing the energy efficiency of all types of
national or Nordic consulting firms, such
Administration, JM, local and regional
premises. Energy projects are generally
as Carl Bro, Rambøll, SWECO, Atkins and
government, Locum, the Swedish
expected to be important in the future.
WSP.
Civil Aviation Authority, Midroc, Polis-
Growth in industrial construction is fore-
fastigheter, the Swedish National Public
cast to remain sluggish, but the number
Transport Agency, the Swedish Rescue
of modernisation projects is expected to
The division has a strong domestic mar-
Services Agency, Siemens, Skanska,
rise, and new legislation requiring individ-
ket, and its goal is to grow in Sweden
Stockholm’s regional transport authority,
ual properties to be energy-certified is
and, above all, in nearby countries such
Swedia Network, STOKAB, TeliaSonera,
expected to fuel demand. As regards
as Poland.
Tele2, Vattenfall and Volvo Cars.
electrical power systems, the violent
Market
Outlook
A number of challenges deserve par-
storm that raged through the south
ticular attention. For example, it is
of Sweden in January 2005 prompted
important to be alert and flexible in the
Generally speaking, the market for infra-
considerable demand for the division’s
light of the escalating deregulation of
structure services was good during the
services and highlighted some problem
public services. The role of consultants
year, particularly in the telecommunica-
areas where electricity companies need
in the new order is not self-evident, and
tions sector, and demand is expected to
to carry out modernisation and mainten-
there is a need for increased clarity
remain strong from both civilian and mili-
ance projects as well as improvements
between the relevant public bodies and
tary clients. Work on upgrading Sweden’s
to security. Both the electricity utilities
the privatised units.
road and rail networks is in full swing,
and the nuclear industry are expected to
and these investments are set to con-
invest heavily over the next few years.
Another major challenge for both ÅF
and the industries it serves is to create
a business climate which provides scope
tinue for a number of years to come:
The fact that projects are grow-
for example, the Swedish National Rail
ing bigger and more complex has led
for training, development and renewal.
Administration has a major investment
to consolidation in the consulting indus-
There is also a need to fine-tune the
plan running through to 2015. There was
try in recent years. A number of mergers
methods for project management and
a slight increase in demand in 2005 for
and acquisitions have taken place and
management by objectives, which high-
the services offered by Installations in
this trend is expected to continue, albe-
lights the scope that still remains for
the construction and property sector,
it at a somewhat slower pace. The divi-
increased professionalism and “business-
and a clear upsurge of interest in improv-
sion’s major competitors include large inter-
manship” in the industry.
Tomorrow’s warning systems can save lives
Interest among politicians and the mass media for systems that can save lives by providing early
warnings of impending accidents and disasters has increased dramatically after the tsunami in southeast Asia, the hurricane in southern Sweden and the hydrochloric acid leak in the port of Helsingborg.
When the Swedish Rescue Services Agency sought new ways of warning and informing the general
public of such accidents in Sweden and abroad, ÅF was asked to investigate and propose possible
technical solutions and to produce estimates of time-scales and costs. One question to be addressed
was a government request about the feasibility of warning people via mobile phone messages. The
project involved web searches and interviews with around 100 people in Sweden and abroad, and
contacts with government ministries, authorities, the EU Commission, operators and suppliers of
mobile phone networks and equipment, pressure groups, trade organisations, associations for disabled people, etc.
21
Process Division
The Process Division offers
The Process Division combines in-depth
ly globalised and the division has not only
consulting and engineering
expertise in process technology with a
followed its Nordic clients when they have
broad understanding of its clients’ busi-
expanded on the international market, but
services for every stage of
nesses. Involvement often begins early in
also succeeded in increasing its market
an industrial process. The
the project-engineering process, and the
share among non-Nordic clients.
division enjoys a strong
division has earned a well-deserved repu-
The Process Division has approximate-
tation for its ability to take projects from
ly 30 offices in Sweden and almost a
position in the pulp & paper
the planning stage through to implemen-
dozen abroad.
industry, energy-intensive
tation and operation. Operations have a
industries and other indus-
strong local footing, but the regional offi-
opment of the industry and of society in
ces also have access to central expertise
general. Consultants are involved in
tries, such as pharmaceuti-
ÅF also plays an active role in the devel-
and project teams which can rapidly be
numerous research projects together
cals and foods. It has opera-
deployed worldwide. Assignments come
with universities and technical colleges,
tions all over the world, and
from industry, the public sector and
and special research and development
international financial institutes.
projects are carried out for the pulp
clients are often leading
The division enjoys a leading position
and paper industry through Ångpanne-
companies in their sectors.
in the market, both in Sweden and inter-
föreningen’s Foundation for Research
The division accounted for
nationally, and is particularly strong in
and Development and the Swedish Pulp
47 percent of ÅF Group
the pulp and paper industry and in the
and Paper Research Institute (STFI).
energy sector.
sales in 2005.
The division has offices in Sweden and
the other Nordic countries, France, Spain,
The division offers consulting services
Germany, Finland, the Czech Republic,
for every stage of a project or process,
Poland, Lithuania, Guatemala and South
with a particular focus on safety, risk
Africa. Business has become increasing-
and the environment. These services
“Our strength and our
potential for development
lie in our strong local
resources in many markets,
sales, percent
brought together to work
Claes-Inge Isacson
22
2004 *
1,092
39.7
21.5
3.5
2.0
47
47
1,207
1,260
33
17
Share of consulting business
which can also be easily
on large projects.”
2005
1,123
* Pro forma
Process
– a world leader in
pulp/paper and energy
Pulp and paper assignments mainly
due diligence reviews ahead of acquisi-
involve project engineering for new mills
tions. Another is strategic investigations
and production lines, planning and imple-
undertaken on behalf of industry and offi-
porting clients during the early stages
menting modernisation projects, and
cial bodies in various areas, such as the
when industry-specific expertise is crucial:
making existing facilities more efficient.
fall into two main areas: Consulting &
Process and Engineering.
Consulting & Process is about sup-
strategic studies, concept development,
In the energy sector, the division offers
and formulation of the process solution.
consulting services relating to the con-
Engineering is about implementing,
version, distribution and consumption of
closure of nuclear reactors in Barsebäck
(Sweden) and an evaluation of the Nord
Pool electricity exchange.
Goals and strategy
operating and developing projects further.
various forms of energy, such as gas,
The division has high levels of expertise
nuclear power, district heating and district
The Process Division’s goal is to be the
and well-developed methods for a varie-
cooling. Often the aim is to make more
market leader in its sectors. To con-
ty of industries and markets. Employees
efficient use of resources or improve
solidate and develop its position even
work with common project platforms
environmental performance. Clients are
further, it is important to acquire a deep-
which are adapted to local conditions.
industrial companies, public-sector energy
er understanding of the needs clients
Flexibility and the opportunity to share
companies and aid agencies.
have and the circumstances under which
experiences gained in assignments in all
Other industries served include foods,
they work, both in their day-to-day busi-
corners of the world represent a major
pharmaceuticals, iron and steel, petro-
ness and prior to making new invest-
asset for the division.
chemicals, water treatment and the auto-
ments. This requires an increased local
motive industry. A major drive has been
presence at the same time as it neces-
sectors: pulp and paper, energy-inten-
launched to strengthen expertise in
sitates that resources can be moved
sive industries, and other process and
foods and pharmaceuticals.
quickly anywhere in the world. A new,
The division operates primarily in three
manufacturing industries. The division
Other consulting services offered
improved project management platform
has world-leading expertise in both the
by the division include studies of vari-
will be rolled out during 2006 to support
pulp and paper sector and in the field of
ous strategic, technical, financial and
this ambition.
energy.
environmental issues. One example is
Expansion of natural gas grid in Central Sweden
Natural gas will be an important source of energy in the years to come. This environmentally adapted
alternative to oil can be used in industry, for municipal heating plants and as fuel for vehicles. The
energy company E.ON is funding a project to investigate the potential for extending and linking together
the natural gas networks in Central Sweden. E.ON commissioned ÅF to conduct detailed project planning work for various gas pipelines and to formulate the details of an inquiry that forms the basis for
negotiations with potential contractors. There are numerous ancient monuments along the stretch
between the cities of Linköping and Norrköping and it is important to disturb as few of these as possible. The project requires close liaison between different technical specialities. Field results from
measurements and geotechnics produced the data for project engineering, optimisation and the exact
course of the pipeline with regard to the area’s natural values, ancient monuments and the landowners involved. Most of this field work was completed in a short time in the autumn of 2005.
23
Process
As the division already enjoys a very
During the spring ÅF won a process
in Sweden as Naturgas Mellansverige
(Central Sweden Natural Gas).
strong standing in pulp and paper, work
and automation order from AstraZeneca
is under way to improve the balance
in Södertälje (Sweden) to replace a con-
between different segments of the divi-
trol system for fluid-bed driers and sup-
Stora Enso in Kvarnsveden, Sweden,
sion’s market, initially by focusing more
ply a cleaning-in-place (CIP) facility.
and for Holmen Paper in Madrid, Spain –
resources on the energy sector.
Growth – both organic and by acquisi-
Two large orders in France during
the spring included the planning of a
Two major paper mill projects – for
were brought to a close during 2005.
Important steps to grow the business
tions – will take place mostly outside the
new back-pressure turbine for Norske
in the Russian pulp and paper industry
division’s domestic Nordic market.
Skog Golbey/Elyo, and the extension of
were also taken during the year.
a paper machine for UPM-Kymmene in
The year in brief
The following is a selection of the most
important events of 2005.
The beginning of the year saw the
completion of the acquisition of Finnish
Docelles.
In May ÅF took a major step towards
A number of large electrical and automation assignments were carried out for
LKAB during the year.
increasing its presence in Brazil with
In January 2006 ÅF reached agree-
the announcement of an alliance with
ment on the purchase of all the shares
Brazilian engineering firm A1 Engenharia
in Enprima Oy, Finland’s leading energy
company ÅF-CTS Engineering, a lead-
e Gerenciamento Ltda. This will help ÅF
consulting company.
ing provider of engineering services for
to build a strong position in the South
the pulp and paper industry. ÅF-CTS was
American forest industry.
fully incorporated into ÅF’s operations
during the year.
In February ÅF was commissioned by
In October ÅF was commissioned by
Since 1 January 2006 the Process
Division has been headed by Claes-Inge
Isacson, who has long international expe-
the energy company E.ON. to carry out
rience from senior positions in the pulp
detailed project planning work for natu-
and paper industry.
Finland’s Myllykoski Group to carry out
ral gas pipelines between Linköping and
project engineering work for the modern-
Norrköping and between Västerås and
isation of two paper mills in Germany.
Grycksbo as part of a project known
Paper machine in Kvarnsveden
Borlänge in Sweden is now home to one of the world’s largest paper machines. The expansion of
capacity at Stora Enso Kvarnsveden has been one of the largest industrial investments ever made
in Sweden. The high quality of the paper produced here demands a great deal of the manufacturing
process, and the project has involved a whole host of companies, from construction firms to technology suppliers – each one a leader in its own field. ÅF has been one of Stora Enso Kvarnsveden’s
leading suppliers for almost 30 years and was asked to head the work of project engineering
for process technology and machine functionality. Responsibilities included pilot studies and pilot
planning through to process and facility project engineering for all departments involved outside the
actual paper machine. This work involved around 70 employees at ÅF, with a core team of some 20
to 30 consultants.
24
Process
Market
its clients. It works continuously to make
Kvaerner, LKAB, Ringhals, the Swedish
The market for assignments in the pulp
the market aware of the full range of
International Development Cooperation
& paper industry was generally good in
services it can offer, and to increase the
Agency (SIDA), Siemens and StoraEnso.
2005, although there was a slowdown
efficiency of its client teams’ work.
in some markets towards the end of the
Assignments are generated more by
Outlook
year. The lower level of activity in Finland
restructuring needs at clients’ existing
The Process Division is working non-stop
was due to a strike in the paper industry
plants than by major new investments.
in four areas with development poten-
during the year. The markets showing
Key concerns are to increase productivi-
tial: expanding its international presence,
the greatest interest in investment were
ty, lower investment costs, improve safe-
improving project management, extend-
Russia, South America and Asia, where
ty and implement measures to comply
ing its range of services, and improv-
ÅF is gradually expanding its presence.
with new environmental controls, such as
ing standards of service. Together with
The energy market was stable, with
“green” certificates and emissions trad-
a special focus on the energy sector, it
increased investment in both production
ing schemes. These changes open up
is hoped that these efforts will result in
and distribution.
new business opportunities in all areas.
increased growth, reduced dependence
Another driving force is the need for
on business cycles, and synergy effects
sion’s competitors in the Nordic mar-
rationalisation measures of various kinds
both for the division and in the Group as
ket, while in Europe, competitors include
due to spiralling energy prices.
a whole.
Jaakko Pöyry Oy is among the divi-
Brazil, Central and Eastern Europe,
Piesslinger GmbH. In many markets
The division’s ten largest clients
there is also competition from local
account for approximately 30 percent
Southeast Asia and China are rapid-
niche operators.
of sales. Who these clients are varies
ly growing markets and are thus ear-
from year to year depending on where in
marked as priority areas for the divi-
Clients
the investment cycle they are. In 2005,
sion’s future work.
The Process Division enjoys a good rep-
however, the ten largest clients were
utation and frequently liaises closely with
Billerud, Forsmark, Fortum, Holmen,
Clean water in Uppsala
Pharmaceutical company Pfizer Health in Uppsala in Sweden prides itself on its high environmental standards. When the company wanted to reduce its environmental impact through emissions to
water (which sometimes included high levels of nitrogen compounds) it turned to ÅF. The brief was to
come up with a custom-designed treatment concept, more particularly to create a new pre-treatment
system to oxidise nitrogen compounds, including pre-filtering and sludge management. The project
included pilot studies, assistance in procuring process equipment, and implementation. First the
method was verified in the laboratory, then pilot tests were performed and, after these were deemed
successful, work commenced on a full-scale installation. This advanced project was highly demanding in terms of combining innovative thinking with previous experience of similar problems.
25
Systems Division
The Systems Division offers
The Systems Division has extensive
services in three areas: IT
experience of high-tech assignments in a
with close proximity to clients and
Business is mostly regionally based,
variety of industries and projects. It is
decentralised decision-making process-
Solutions, Embedded
particularly strong in IT-based automa-
es. Operations are conducted primarily
Systems and Mechanical
tion for industrial production environ-
from the division’s ten offices in Sweden,
Engineering. Assignments
ments, and in the development, manage-
but Systems’ consultants also carry out
ment and operation of technical adminis-
assignments all around the world for
include both full-service
trative systems. ÅF is also in the front
large clients with international activities.
solutions and one-off
line when it comes to product develop-
projects for everything from
ment, and has considerable experience
product development to
The division works closely with several
Swedish universities.
of piloting projects from initial idea
through to the production phase. The
operational management.
division has a strong position in the tele-
The division accounts for 11
communications market and can call on
business areas: IT Solutions, Embedded
the resources of a large number of con-
Systems and Mechanical Engineering.
percent of ÅF Group sales.
sultants in this field.
The division is organised into three
Together these three business areas
Due to the fierce competition in the
meet a whole range of specialist needs:
IT sector in recent years, the division
project management, software develop-
has made a number of adjustments to
ment, mechanical engineering, testing,
improve its sales work, make more effi-
verification, industrialisation, operation,
cient use of its resources and return to
further development and product care.
profitability. This work has borne fruit,
The nature of assignments varies.
and in 2005 the division was once again
Projects relating to Embedded Systems
able to report a profit after several
are often full-service solutions spanning
years of losses.
the whole chain from idea to production.
2005
“We have set our
sights on expanding in
all areas in which we
are already active.”
2004 *
265
342
1.5
–45.7
0.6
–13.4
11
15
255
336
6
–136
sales, percent
Johan Olsson
* Pro forma
26
Systems
– high-tech solutions
for Swedish industry
Projects in Mechanical Engineering range
ovens, the design of handheld com-
recruit more young employees with the
from one-off assignments in close col-
puters, positioning systems for vessels,
latest training. Although growth will be
laboration with clients’ own develop-
telecom base stations for both indoor
largely organic, acquisitions which are a
ment departments to contracts where
and outdoor environments, telematics
good match for the division’s business
clients farm everything out to ÅF. When
solutions and lottery terminals.
areas may be made. The sales organisa-
it comes to IT Solutions, the division
offers a broad range of consulting ser-
tion will be further improved to ensure
Goals and strategy
good profitability, and all managers with
vices for industrial IT and the develop-
The Systems Division is working towards
sales responsibilities will undergo more
ment of technical administrative sys-
set profitability and growth targets. In
in-depth sales training in 2006.
tems. Here, too, the range of services
the short term, the profitability target is
available covers the entire chain from
to ensure satisfactory levels of earnings.
forward include increasing the degree
development and implementation to
The growth target is 15–20 percent
of specialisation in the service portfolio,
administration and operation.
annual growth in sales. This is to be
focusing the division’s concepts, and
achieved primarily through organic
making the offer clearer to clients.
Areas in which the division has par-
Important strategic measures going
ticularly extensive experience include
growth, which mainly means strengthen-
medical technology, electronics, tele-
ing the division’s position in the Öresund
The year in brief
communications, telematics, defence,
region (Copenhagen-Malmö) and in west-
A number of steps were taken in 2005
pharmaceuticals, engineering, nuclear
ern Sweden around Gothenburg. The divi-
to focus the business, improve profit-
power, and the marine and automotive
sion also aims to build a clearer pres-
ability and create a platform for con-
industries.
ence in northern Sweden.
tinued growth.
Specific projects over recent years
One long-term goal is to command a
include business and enterprise systems,
leading position in the markets and seg-
mammography equipment, mobile tele-
ments in which the division operates.
phones, mobile logistics and transport
monitoring for trucks, talking microwave
Expansion means more assignments
and new clients. This entails a need to
The car that can see in the dark
Car safety specialist Autoliv wanted to warn drivers of pedestrians or animals ahead of them on the
road via a video screen. The idea was to use an infrared camera to register the presence of heatproducing bodies in front of an approaching vehicle – a technical solution whose performance would
be unaffected by weather or light conditions. ÅF was commissioned to devise a control unit for the
camera to enable users to measure current, pan, zoom, switch the unit on and off, and convert the
video signals. The project proceeded to schedule and from the fourth quarter of 2005 the new technology has been available in BMW’s 7 series. Thanks to an innovation which, in all probability, will
save many lives, drivers can now detect people and animals up to 300 metres and more in front of
their car.
27
Systems
Client work was stepped up, and in
ÅF for the consulting industry was final-
2005 saw the start of a number of new
May the division signed a new two-year
ised at the beginning of 2006, when the
client relationships.
framework agreement with Ericsson as a
accounting support company Visma took
preferred supplier of consulting services
over both the product portfolio and the
in research and development. ÅF has
support functions. A total of 26 employ-
The Systems Division often enjoys close,
been a preferred supplier to Ericsson
ees were affected.
long-term relationships with its clients. It
since 1990.
In December ÅF took over operations
Clients
consistently scores high marks in regu-
at the Ericsson Design Centre in Lysekil
lar client satisfaction surveys both for
the spring to lead the division and
on the Swedish west coast. The 21
awareness and for all-round perform-
took up his post in June. He joined us
employees there work primarily with
ance. Being able to offer the ÅF Group’s
from Swedish consulting group HiQ
radio-related systems development and
combined expertise from a variety of
International, where he headed a sub-
software development for WCDMA (3G)
industries and specialist areas is a major
sidiary and was responsible for business
and GSM technologies. The takeover
asset.
development.
strengthens the division’s position as
Johan Olsson was recruited during
The level of repeat business is high,
a leading name in technical consulting
and many clients approach ÅF at an
was taken to wind up the business in
services in the fields of radio and radio-
early stage of their projects.
Bengtsfors (Sweden) due to poor profit-
related systems. The new unit was quick-
ability. The business came from an
ly integrated into the division’s opera-
laboration is outsourcing, where clients
acquisition in 2004 and specialised in IT
tions and immediately began to make a
like Ericsson and Siemens farm out vari-
security services.
positive contribution to earnings.
ous high-tech needs, or even all or parts
During the third quarter the decision
One increasingly common form of col-
The planned sale of the PX Business
Intensified sales efforts have already
of their own development operation to
Solutions system, specially developed by
started to bear fruit for the division, and
ÅF. Outsourcing allows clients to focus
One single system for everything to do with Volvo vehicles
When the Volvo retail organisation’s development company wanted a long-term supplier of administration services for its Truck and Car Dealer Information System (TACDIS) the choice fell on the ÅF
Group. TACDIS is a highly sophisticated system for handling information about Volvo cars and trucks,
where availability and stability are essential. The system generates over SEK 30 billion a year and
has some 7,000 users in Sweden and Norway. It communicates with more than 30 other systems
inside and outside the Volvo sphere on issues from car sales and spares to financing and insurance.
ÅF was entrusted with administering and developing TACDIS over an eight-year period with an option
to extend the contract. The assignment includes project management, systems development, testing,
verification and delivery. Thanks to the continuity provided by ÅF, TACDIS is a stable system with high
levels of functionality.
28
Systems
more on their own core business, while
Sectors where demand for the
ity in following its clients out into the
enabling the Systems Division to real-
division’s services is strongest are tele-
international market. This entails repo-
ise economies of scale and synergies
communications, industry, automotive
sitioning from being a local player with
between its different operations.
and medical.
broad-based general expertise to becom-
Clients come primarily from Swedish
The process of structural change con-
ing an international player with a global
and international industry, many of them
tinues unabated, with increased spe-
network who operates in a number of
large international companies operating
cialisation and consolidation. One clear
specialist fields.
in the global market. They include ABB,
trend is continued globalisation, with cli-
Another burning ambition is to
All Set Tracking, Andrew Telecom, Astra
ents transferring not only an increasing-
become involved in our clients’ plan-
Zeneca, Atlas Copco, Autoliv, Biosensor,
ly large portion of their production to
ning processes at an earlier stage. With
Electrolux, Ericsson (and Sony Ericsson),
low-cost countries but also parts of their
its wealth of experience the division can
Essnet, the Swedish Defence Materiel
product development.
then help clients to gain a better over-
Administration, Löfbergs Lila, Mobility
The division’s competitors include
view of what is required for success in
Research Nordic, Siemens Medical
Cybercom, HiQ, Teleca, Tieto Enator and
all processes, from the initial idea to the
Solutions, St. Jude Medical, Trimble,
Mandator.
finished product on the market.
Whirlpool and Volvo.
Outlook
Market
The division plans to expand in all of the
The market as a whole has stabilised
industries in which it operates, with a
somewhat, but competition remains
special focus on telecommunications.
fierce and the pressure on prices is
unrelenting.
One important challenge is for the division to demonstrate even greater flexibil-
Better, more cost-effective base stations for Ericsson
Competition is razor sharp in the mobile phone industry, where non-stop rationalisation is essential to
maintain a leading position. One of Ericsson’s most important product areas is base stations: here, as
in all other areas, the aim is to constantly find new ways of improving cost-effectiveness and increasing functionality. ÅF has been tasked with developing the radio system in the Ericsson RBS 2308 base
station, a project that faces many challenges: tough, new EU environmental criteria, stringent costefficiency demands, the introduction of new functionalities and the need to adapt components to
volume production. Thanks to ÅF’s unparalleled expertise in radio development, a unique broadband
radio solution has made it possible to improve cost-efficiency by enabling the same base station to
handle all the various mobile frequencies all over the world. Now Ericsson can sell the same type of
base station on all markets.
29
Inspection Division
The Inspection Division works
The division offers inspection, testing,
with technical inspections,
calculation, certification and training
sights are set firmly on becoming the
services. Much of its work revolves
market leader.
The aim is to continue to grow and
chiefly in the form of peri-
around assuring the client of a safe
odic inspections, testing and
working environment and operational
to perform inspections of clients’ facil-
certification. ÅF is Sweden’s
reliability. The business spans many
ities and operations to verify compli-
areas, from safety checks on fairground
ance with laws and regulations issued
second biggest name in
attractions to inspecting nuclear power
by bodies such as Sweden’s Work
these areas and accounts for
stations.
Environment Authority, Rescue Services
9 percent of ÅF sales.
Operations began in 1995 when the
The division is accredited by SWEDAC
Agency, National Board of Housing,
market for technical inspections was
Building & Planning, and Nuclear Power
deregulated following Sweden’s acces-
Inspectorate.
sion to the EU. The operations of the
The division is also a notified body for
Swedish Plant Inspectorate were subse-
the purposes of EU directives for pres-
quently sold to Det Norske Veritas.
sure vessels, lifts and machinery.
However, the Inspection Division has
The engineering and nuclear power
performed very well from the outset,
industries are major clients, each
constantly growing its market share
accounting for around 20 percent of the
and improving profitability. Thanks to a
division’s sales. Assignments from the
strong entrepreneurial spirit and high
process industry account for a further
service levels, the gap to the market
10 percent.
leader has narrowed considerably.
2005
2004 *
“Ever since the start,
207
176
Inspection has developed
21.8
13.4
positively, capturing new
10.5
7.6
9
8
217
199
100
67
market share and improving profitability.”
sales, percent
Jörgen Backersgård
30
* Pro forma
Inspection
– ten years of strong growth
and profitability
Although the business is concentrated
in Sweden, Inspection also performs
main parts: Inspection, Testing and
cations include IFS (International Food
Certification.
Standards), BRC (Global Standard –
Food), BRC/IOP (Food Packaging) and
assignments abroad, and in recent
Inspection involves periodic inde-
years the company has carried out
pendent checks of lifts, lifting devices,
ISO/TS 16949 (Automotive). ÅF-TÜV
assignments in more than 30 different
boilers, escalators, ski-lifts, fairground
Nord also acts as a notified body for
countries.
attractions, tanks, pressure vessels, etc.
inspection activities at Sweden’s nuclear
The results are carefully documented
power stations.
Inspection is an independent third-party
and made available to clients through a
dedicated website.
Inspections are required at many
stages of clients’ operations. Above all,
inspection body. Integrity vis-à-vis other
Testing involves examining compo-
existing processes and plant need to be
parts of the ÅF Group is important, and
nents and devices using non-destruc-
checked periodically, for example, annu-
conflicts of interest between the two are
tive techniques, such as radiography,
ally or every three years. With a portfolio
avoided in various ways. Operations are
ultrasound and visual checks. Parallel
of almost 170,000 different items that
run as a separate company (ÅF-Kontroll)
with these methods, the division also
require regular inspection, much of the
with its own reporting and quality system.
offers advanced testing services for
business is relatively immune to changes
Its offices are physically separated from
manufacturing inspection and condition
in the economic climate. However, the
the rest of ÅF, and there is a “locked
monitoring.
division also has a strong position in
door” policy between the different businesses.
The division has 20 offices through-
Certification involves verifying clients’
design reviews and manufacturing in-
quality and environmental management
spections, from the design phase and
systems in accordance with various
installation through to the implementa-
out Sweden, from Malmö in the south to
European standards via ÅF-TÜV Nord,
tion of operating tests and the issue of
Luleå in the north.
a 50/50 joint venture with Germany’s
start-up permits.
The business consists of three
TÜV Nord Group. Examples of certifi-
Sweden’s first eight-chair ski-lift
Skistar, Sweden’s largest ski resort operator, wanted to increase its capacity at Hundfjället in the
Sälenfjällen mountains. An elderly four-chair ski-lift (once the first of its kind) needed to be replaced
with something more efficient. The new lift had to move faster, carry more passengers, and be at
least as safe. Could this be achieved with an eight-chair lift? Skistar asked the Inspection Division to
look into the safety and inspection aspects. Consultants were commissioned to follow the project
during the construction phase and to carry out installation and delivery inspections. This concept
proved a success for both Skistar and the lift supplier. The new eight-chair lift is the first of its kind
in Sweden. It can transport up to 3,200 skiers an hour at a speed of five metres per second.
31
Inspection
The division also offers services in areas
orations with other accredited inspection
touching on its three core areas of insp-
companies in Europe.
ection, testing and certifition. These in-
The annual growth target of 15 percent
In September ÅF-TÜV Nord signed a
five-year framework contract with nuclear power station operator Ringhals
clude advisory services, training, CE-
has been met in recent years, and con-
AB. The technical inspections covered by
marking, and the interpretation and
tinued growth will come primarily from
the contract include durability analyses,
implementation of various EU directives.
organic growth in the company’s core
damage investigation and inspection of
It also serves as a consulting body for
areas together with expansion into new
the plants.
authorities in the assessment of new leg-
areas where technical inspections are
islation.
required.
Goals and strategy
The year in brief
The vision of Inspection is to be a pioneer
The 15 percent annual growth target
client base, and strengthening the divi-
and market leader in the Nordic region.
was met in 2005. Sales increased by
sion geographically, not least in Karlstad,
This will be achieved by offering flexibil-
almost 20 percent and profitability was
Jönköping and Örebro. The business
ity, the most highly skilled engineers,
good. More efficient use of resources
was rapidly incorporated and contributed
the best working methods and relia-
contributed notably to this performance.
positive earnings even in 2005.
In October the lifting equipment inspection business of Force Technology
Sweden AB was acquired, bringing in
ble deadlines – and by being a leading
In June Inspection won a long-term
around 15 employees, broadening the
At the beginning of 2006 ÅF-TÜV Nord
player in the development of the sec-
contract from EuroMaint to perform
was accredited for verifying emission
tor. But it also requires an organisation
inspections and tests on train compo-
rights.
with the strength to be able to help exist-
nents and the axles and wheels of loco-
ing clients to co-ordinate their inspec-
motives and rolling stock. The com-
Clients
tion needs outside Sweden. International
panies using these trains include SJ,
Inspection has a decentralised organi-
work generally involves strategic collab-
Arlanda Express and Tågkompaniet.
sational structure with short processing
New rolling stock for LKAB’s iron ore trains
Sweden’s LKAB is a world leader in minerals and can trace its history back to the 1660s. As
demand for its iron ore pellets has grown in recent years so too has the need to improve delivery
capacity. The ore is taken by train from Malmberget and Kiruna in northern Sweden to the ports of
Narvik in Norway and Luleå in Sweden for onward transport. In 2004 and 2005 LKAB embarked on
a gradual increase in capacity which led to a decision to purchase a large number of railway trucks
capable of carrying 100 tonnes of ore each instead of the previous 80. Inspection was brought in to
carry out delivery inspections and take part in quality control work to achieve the quality targets. The
new rolling stock was taken into service at the end of 2005. Since the new trucks can carry more
ore, the number in operation can gradually be reduced from 900 to 700. A complete train with the
new trucks is 750 metres long and weighs 6,800 tonnes.
32
Inspection
times and close geographical proximity
has more than 25 percent of the market.
to take an active role in the oning con-
to the client. Service levels are high,
It accounted for a substantial part of
solidation of the industry, and to contiue
and there is considerable local autono-
the relatively modest growth in the over-
building up a network of collaborating
my, which means that clients feel that
all market in 2005 and believes that
inspection companies across Europe,
their needs are met quickly, flexibly and
the market has good growth potential.
not least in the new EU member states.
without any unnecessary red tape. The
EU decisions, for example, mean that
client base is very large with 12,000
more areas will be covered by technical
tions is the desire to become involved
clients in a variety of different sectors
inspections, such as the food and health-
at an earlier stage in its clients’ process-
and industries: energy, processing,
care sectors.
es. This gives clients greater peace of
Another aspect of the division’s ambi-
In an industry which continues to con-
mind by increasing the security and reli-
forestry and pulp and paper. Around
solidate, the largest competitors are the
ability in their systems from the outset.
9,000 of these purchase one or more
Finnish Inspecta Group and the Danish-
Technical inspections then become more
services each year. There is a good
owned Force Technology.
of a management tool, reducing the cost
petrochemicals, property, public sector,
of unexpected problems and operatioal
spread between small, medium-sized
and large clients. The 20 largest account
Outlook
for 40 percent of sales. Among the
Inspection plans to grow in all of its busi-
major clients are names such as Cramo,
ness areas and industrial sectors, but
EuroMaint, Kvaerner, Ringhals nuclear
the main focus will be on the nuclear
power plant and Shell.
power and process industries. Given
disruptions.
that its vision is to be the market leader
Market
in the Nordic region, the division will
The Inspection Division is the only large
also be establishing a clearer presence
Swedish-owned inspection company and
among Sweden’s neighbours. The aim is
Safety on the Stockholm underground
Tågia is a rolling-stock maintenance and modernisation company. One of its clients is Connex, which
operates the underground trains in Stockholm on behalf of the regional transport authority. Tågia
called on the services of ÅF to check certain parts of the underground trains using non-destructive
techniques. Inspection also inspects their compressed-air containers. Since the ongoing experiment
with road congestion charges in Stockholm has increased the burden on underground rolling stock,
trains cannot spend long in the depot, and the best possible use has to be made of resources. This
requires the Inspection Division’s personnel to be very flexible, accurate and decisive when reporting possible problems. Good maintenance planning leads to increased safety and less disruption to
traffic. Inspection has considerable experience in the rail sector, including contracts from companies
like EuroMaint and inspections of the X2000 high-speed train. In 2006 the division was also brought
in to inspect axles on the Arlanda Express.
33
ÅF shares
ÅF’s series “B” shares have
Liquidity guarantee
been quoted on the A list of
In order to increase the liquidity of ÅF
shares the stockbrokers Öhman Fondkommission act as liquidity providers
under an agreement from 31 October
2003 that, in essence, means that
Öhman undertakes to quote bid and offer
prices for Ångpanneföreningen’s shares.
The spread, which must not exceed
4 percent calculated on the offer price,
averaged 0.75 percent in 2005, compared to 1.04 percent in 2004.
the Stockholm Stock
Exchange since January
1986. Prior to this, Ångpanneföreningen traded as
a co-operative association
from 1895 until 1980, and
as a joint-stock company
given one share in the company. The profitsharing scheme outlined on page 13
allows employees to share in the increase
in the net worth of the company by creating funds with ÅF shares (and others) as
investment capital.
At the turn of the year 2005/2006
approximately ten percent of the shares in
the company were owned by employees.
The convertible bonds programme
from 2000 has now been terminated
without any conversion.
A new convertible programme for
SEK 54 million was initiated in 2005 to
run until 2008. On full conversion this
will increase the number of shares by
312,500. The conversion option may be
utilised with effect from the summer of
2007 at a conversion rate of SEK 172
per share. If the conversion option is
fully utilised, the additional shares will
represent a dilution of 5.0 percent of
capital and 3.2 percent of the votes.
Dividend policy and dividend
from 1981. At the end of
(2004: 780) million.
The Board has adopted a dividend policy
according to which the dividend should
correspond to approximately 50 percent
of the consolidated profit after tax excluding capital gains. For the company’s operations during 2005 the Board proposes
a dividend of SEK 5.00 per share (2004:
SEK 2.60/share).
Share movements and turnover
Split
The par value of the share is SEK 20. A
trading lot comprises 100 shares.
Ångpanneföreningen’s “B” shares traded
at SEK 236 at the end of 2005, compared with SEK 132 at the beginning of
the year, an increase of 79 percent. The
Stockholm all-share index SAX gained 33
percent during the same period. During
the year a total of 3,623,130 shares
were traded (1,579,826) for an aggregate value of SEK 634 (212) million. Turnover per trading day averaged SEK 3.03
(0.84) million. The share was traded on
100 (97) percent of trading days.
The Board also proposes a 2:1 share
split, which means that each existing
share will be replaced by two new ones.
2005 the combined market
value of the company’s
shares, including series “A”
shares was SEK 1,400
Investor relations
Shareholding and convertible bonds
among employees
ÅF Group employees are actively encouraged to invest in ÅF shares by making
use of various systems that facilitate partownership in the company. In one such
system employees are offered a plan
administered by Aktieinvest Fondkommission for saving some of their salary in the
form of ÅF shares. Each new employee is
ÅF shares
Affärsvärlden’s all-share index
Carnegie Small Cap index
Number of shares traded in thousands (incl. late applications)
B share
300
250
200
160
140
1,200
120
900
100
600
The positive developments for ÅF have
been reflected in interest in the ÅF
share. The company adopts a long-term
approach to its communications with the
capital market.
This included a Capital Market Day on
29 September 2005 which focused on
the ÅF Infrastructure Division. After ÅF
President/CEO Jonas Wiström had outlined the Group’s current situation and
sketched future scenarios, the guest
speaker for the day, Kenneth Nilsson,
Deputy MD for Skanska in Sweden,
described the driving forces in infrastructure investments from his company’s perspective. His audience comprised around
40 visitors, including analysts, institutional
shareholders, asset managers and representatives for the media.
To meet the interest shown by the international capital market in ÅF, the Group’s
President and IR Manager undertook a
“road-show” to London and Frankfurt
during the autumn.
Stakeholders’ access to regularly
updated financial information was further
improved with the launch of the new ÅF
website early in 2006.
80
300
60
01
02
03
04
05
06
(c) SIX
Analyst
One analyst who monitors the progress
of ÅF is Stefan Wård of Handelsbanken
Capital Markets.
34
ÅF shares
Historical development of share capital
Change in number of shares
Year
Par value
Change
Numbers of shares
A shares
B shares
A shares
–42,600
42,600
684,860
Share total Share capital
B shares
SEK ’000
1984
50
ÅF issues convertible bonds to employees
1985
50
Redesignation
1986
50
New issue and B share floated on A list
300,000
684,860
342,600
1,027,460
51,373
1987
20
Bonus issue and split
684,860 1,370,060
1,369,720
1,712,660
3,082,380
61,648
1990
20
Conversion of conv. bonds from 1984
269,420
480,580
1,639,140
2,193,240
3,832,380
76,648
1994
20
Redesignation
–810,475
810,475
828,665
3,003,715
3,832,380
76,648
1996
20
Bonus issue
414,332 1,501,857
1,242,997
4,505,572
5,748,569
114,971
1997
20
Redesignation
840,778
402,219
5 346,350
5,748,569
114,971
2004
20
New issue
175,807
402,219
5,522,157
5,924,376
118,488
2005
20
New issue
37,766
402,219
5,559,923
5,962,142
119,243
2007/2008
20
Dilution on full conversion 2005/2008
312,500
402,219
5,872,423
6,274,642
125,49
–840,778
Shareholders in Sweden and abroad
31 December 2005
Shareholder categories
Percent of capital
Sweden
31 December 2005
Percent of capital
Foreign owners
21.2
0.8
Swedish owners
78.8
13.6
USA
Institutions
89.4
Private individuals (incl. close companies) 10.6
31 December 2005
3,373
36,373
Percent of capital
Shareholders
500–5,000
>5,000
Total
The ten largest owners
727,460
727,460
31 December 2005
Number of
shares
<500
of which:
6.8
42,600
Size of shareholding
78.8
Rest of Scandinavia
Rest of Europe
727,460
Percentage of
shares
4,278
8.4
512
10.8
62
80.8
4,852
100
The ten largest owners
28 February 2006
Owner
A shares
B shares
Capital
%
Votes
%
Owner
A shares
B shares
Capital
%
Votes
%
Ångpanneföreningen’s Foundation
for Research & Development
345,467
1,060,766
23.59
47.12
Ångpanneföreningen’s Foundation
for Research & Development
345,467
1,060,766
23.16
46.59
Sweco AB
0
751,700
12.61
7.84
JP Morgan Chase Bank
0
505,883
8.33
5.22
JP Morgan Chase Bank
0
313,819
5.26
3.28
Client Omnibus AC Fund
0
367,000
6.04
3.79
Client Omnibus AC Fund
0
277,000
4.65
2.89
Skandia Liv (life assurance)
0
346,000
5.70
3.57
54,352
203,276
4.32
7.79
ÅFOND
(Ångpanneföreningen Group Trust)
54,352
203,276
4.24
7.70
SEB Sverige Småbolagsfond
0
247,150
4.15
2.58
SEB Sverige Småbolagsfond
0
247,150
4.07
2.55
Skandia Liv (life assurance)
0
212,100
3.56
2.21
Bank of New York
0
163,201
2.69
1.68
Didner & Gerge Aktiefond
0
100,000
1.68
1.04
Goldman Sachs International Ltd
0
154,170
2.54
1,59
Bank of New York
0
89,352
1.50
0.93
Morgan Stanley & Co Intl Ltd
0
115,000
1.89
1.19
BNY GCM client accounts
ÅFOND
(Ångpanneföreningen Group Trust)
Eikos
0
73,200
1.23
0.76
399,819
3,328,363
62.53
76.46
Total, 10 largest owners
Total, other owners
2,400
2,231,560
37.47
23.54
Total, other owners
2,400
Total 31 Dec 2005
402,219
5,559,923 100.00 100.00
Total 28 Febr 2005
402,219
Total, 10 largest owners
0
114,400
1.88
1.18
399,819
3,276,846
60.54
75.06
2,393,843
39.46
24.94
5,670,689* 100.00 100.00
*On 23 February 2006 a directed new issue of 110,766 series B share was made.
Key ratios per share (SEK), before dilution
2001
2002
2003
2004
2005
142
92
116
132
236
Pre-tax profit
15
–26
8
5
37
Profit after tax
10
–22
5
6
34
Share price, 31 Dec.
After full conversion 05/08
33.53
Equity, incl.
minority interests
94
57
60
66
97
Yield, %
9.2
2.2
2.2
2.0
2.1
Dividend
13.00*
2.00
2.60
2.60
5.00**
* Of which SEK 8.00 from Alecta premium refunds.
** Proposed dividend.
35
Sensitivity Analysis
Business risks
Capacity utilisation and hourly rates
petition from consulting companies in
A consulting firm’s capacity utilisation
countries with significantly lower cost
Economic situation and size of assignment
rate – expressed in the ÅF Group as the
structures is increasing rapidly. In Sweden,
The ÅF Group’s earnings and results are
invoiced-time ratio – is crucial for its abil-
however, foreign firms still have only
critically dependent on the market’s will-
ity to generate a profit. To appreciate
limited impact.
ingness to invest in Sweden and the
the significance of this, one need only
Only a handful of companies – among
other countries in which we operate. The
reflect on the fact that every percentage
them, ÅF – are in a position to undertake
general economic situation is, of course,
point difference in the invoiced-time ratio
major full-service projects in highly spe-
also of major significance, but ÅF’s diver-
equates to a rise or fall of SEK 25 mil-
cialised areas. This is a strength that
sification over a number of markets
lion in earnings. One percentage point is
appeals to many potential ÅF recruits. As
and areas with different business cycles
equivalent to 16 hours of a consultant’s
demand for qualified consultants rises,
reduces the risk from this.
time per year or 20 minutes of invoice-
so too does the need for the ÅF Group
able time a week. The hourly rate, of
to present itself as an attractive employ-
Sweden in the segments in which the
course, is also an essential component
er. For this reason ÅF earmarks substan-
Group is the market leader in Sweden.
behind the profitability of any consulting
tial resources each year for recruitment
Increasing the geographical spread will
company. Increasing the hourly rate by
and induction activities.
help offset the effect of fluctuations in
SEK 10 would, if all other factors
local business cycles.
remained unchanged, improve profits for
ÅF’s strategy is to grow outside
In a consulting company, assignments
vary in value from a few thousand to
the ÅF Group by SEK 29 million a year.
Various approaches are adopted to
tens of millions of Swedish kronor.
reduce sensitivity, including taking on
However, at the same time as a major
contracted consultants and temporary
assignment guarantees work for a long
staff for specific projects, increasing the
period of time, it increases vulnerability
variable component in salaries, broad-
when the assignment nears an end, as
ening our expertise and markets, and
new projects must be found to provide
developing “packages” of services to
work for a large number of consultants.
increase competitiveness and reduce
ÅF deals with this risk by also securing
clients’ sensitivity to prices.
Fixed-price contracts for carefully specified
consulting services can be beneficial to
both parties. Often consultants are able
to make use of past experience and are
well placed to make an accurate assessment of the amount of time and resources
required. A fixed-price contract may, however, involve an increased risk if the
period required to complete the assignment is wrongly estimated. In the event
that the fixed price is exceeded, ÅF
a large number of small local assignments. The right mix of large and small
Fixed-price contracts
Competitors
suffers a write-down in its fee.
Competition in the technical consulting
Training and tuition in key factors such
had a total of some 32,000 assignments,
business is fierce and consulting com-
as project management and the formula-
an average of 15 assignments per con-
panies are having to compete for the
tion of constructive terms and conditions
best employees. At the same time com-
can greatly reduce the risks associated
assignments reduces risk. In 2005, ÅF
sultant per year.
36
with this kind of agreement. Continuous
arise in conjunction with takeovers.
The Group is covered for loss of con-
monitoring and evaluations of the amount
Drawing up contracts for all assign-
tribution to cover fixed or additional
of work remaining in fixed-price contracts
ments and specifying in detail the terms
costs in the event that its premises/
also reduce this risk.
of agreement reduces the risk. In most
equipment are damaged, stolen or in any
instances, ÅF contracts are carried
other way rendered unusable.
Major fixed-price assignments may be
led only by assignment managers who
out under the terms of “The General
have received the appropriate training via
Conditions for the ÅF Group”, which in
the ÅF School.
turn are based on the terms of ABK96
Current methods of doing business call
(General Conditions for Consulting
for the most scrupulous concern for IT
Assignments for Architects and
security. Modern business demands high
Engineers, 1996).
levels of IT access and security: com-
Business support system
In 2004 a shared process system was
IT risks
introduced in the Swedish company for
For corporate acquisitions and pur-
puter malfunctions and illegal intrusion in
managing, following up, controlling and
chases of the net assets of businesses, a
the form of hacking etc. entail consider-
documenting both fixed-price and open-
standard contract is used that has been
able risks and potentially high costs.
account assignments in the most efficient
drawn up by ÅF’s legal advisors. ÅF has
way. The system has been certified in
The ÅF Group’s operations are inter-
a tried and tested body of rules and
linked via a computer network which is
accordance with ISO 9001 and ISO
regulations to be used when taking over
protected from outside access by high-
14001: 2004.
another company’s business operations.
quality firewalls. To reduce the risk of
For more complex transactions, legal
interruptions, the links set up for ÅF are
advice is always sought.
monitored round-the-clock by highly repu-
Employees
The greatest asset that any consulting
The ÅF Group is involved in a small
company possesses is its employees,
number of disputes that may have to be
capacity of these broadband connec-
but there is always a risk that skilled
settled in court. In instances where it is
tions has been substantially increased.
employees may leave to join competitors
likely that the court’s findings may incur
ÅF has contracts with suppliers specify-
or set up their own businesses. The risk
expenses for the Group, these have
ing mutually agreed response and action
is exacerbated if these people use their
been charged to the financial accounts.
times, but even these can not offer cast-
inside knowledge of the company to
table suppliers. During the year the
iron guarantees that unplanned interrup-
cherrypick the best of their colleagues.
Insurance
tions will not lead to loss of income at
A situation like this could make it difficult
In order to reduce risk in its business
one or more of the Group’s offices.
for ÅF to deliver the services it is con-
activities, ÅF has a high level of insur-
tracted to supply, resulting in substantial
ance cover. In line with good practice in
network have virus protection from one
costs for the company.
the industry, the Group has taken out
of the market leaders. This protection
ÅF deals with this risk by treating its
All the computers and servers in the
consulting liability insurance. This covers
is updated as soon as updates become
employees positively, rewarding them
the ÅF Group for the liability involved in
available, frequently several times a day.
well for their work and providing them
any given project (normally the same as
As a result of these precautions, ÅF was
with the opportunity to develop. The
the project fee), up to a ceiling of 120
completely spared from virus attacks and
ambition is to make every employee per-
times the so called “basic amount” used
other known or perceived security-related
ceive some form of added value in work-
in Sweden for national social security
incidents in its own networks in 2005.
ing for ÅF. It is highly unusual for large
purposes. The Group itself bears a risk
All external access permitted to ÅF’s
numbers of key members of the ÅF
equivalent to one basic amount per claim.
systems – via the Internet or VPN con-
Group’s consulting team to leave the
company. Regular attitude surveys carried out by ÅF show that employees are
Sensitivity analysis
largely happy in their work. Staff turnover
Change
Effect on earnings
during the year was just 17 percent.
(all other factors unchanged)
SEK/share (before tax)
Capacity utilisation
Factor
+/– 1%
4.20
ÅF’s business activities involve a risk of dis-
Hourly rate
+/– 1%
3.05
pute. Disputes may arise if ÅF disagrees
Payroll costs
+/– 1%
2.25
Legal risks
with a client about the conditions that apply
Overheads
+/– 1%
0.65
for a certain assignment. Disputes can also
Number of employees
+/– 1%
0.15
37
nections – is subject to high standards
and systematic approach to corporate
of security, and no known damage was
acquisitions and expansion into new geo-
payments and investments are made in
caused to central systems as a result of
graphical markets.
local currencies. Currency risks related
to changes in expected and contracted
such connections. Since only computers
intended for work use and registered in
This risk is relatively limited for ÅF, as
Risks in financial reporting
payment flows are also relatively limited
ÅF’s IT inventory are allowed to commu-
ÅF issues quarterly financial reports to
for ÅF, as the majority of payments are
nicate with our systems or be connect-
the market. There could be a risk that
made in local currencies. In the event of
ed in our offices, home PCs and other
the information included in these reports
a currency risk in excess of SEK 500,000
private PCs pose little risk to our busi-
is either incomplete or inaccurate. This
the risk must be hedged through deriva-
ness operations.
could be due either to poor accounting/
tives. The effects of revaluations of non-
reporting procedures or to managers
Swedish subsidiaries’ assets and liabilities
withholding important financial information.
in foreign currency (translation exposure)
Environmental risks
The ÅF Group does not require any envir-
To minimise the risk of poor account-
are likewise fairly limited, since non-
onmental permits to carry out its opera-
ing and/or reporting procedures, ÅF’s
Swedish subsidiaries represent only a
tions: nor do any of the companies
financial reporting must at all times
minor part of ÅF’s balance sheet total.
acquired. The business’s environmental
comply with the law, applicable account-
risks are restricted to the possible con-
ing standards and other requirements
Interest rate risk
sequences of contravening existing envir-
laid upon companies listed on the stock
The interest rate is the risk to which ÅF
onmental legislation. However, ÅF has
exchange.
is subjected if the interest rate changes.
sophisticated follow-up procedures built
The reporting must also conform
into its certified business support system
to ÅF’s regulations and instructions as
to safeguard that all units within the
described in our business system. To
Group comply with environmental law.
prevent important financial information
is relatively low. Group policy is for cash
The ÅF Group is not involved in any envir-
being withheld or forgotten, procedures
and cash equivalents to be deposited in
onmental disputes or incidents.
are in place for the certification of cer-
bank accounts with local banks. The
tain processes.
Swedish operations share a central
Strategic risks
This has a direct effect on the Group’s
interest-bearing assets and liabilities.
The interest rate risk for the ÅF Group
account for all the Group’s liquidity,
Over the past decade, the technical con-
Financial risks
sulting sector has undergone a process of
In its operations, the Group is exposed
Finance department. Loans from credit
consolidation. Despite doubling its
to several types of financial risk. The
institutions consist largely of bank loans.
number of employees ÅF still ranks in
term “financial risk” refers to fluctuations
The Group does, however, face some
the same position sizewise as it did ten
in the company’s results and cash flow
interest rate risk, in so far as interest
years ago. However, the process of con-
in consequence of changes in exchange
rates inhibit or stimulate investment on
solidation continues unabated and if ÅF
rates, interest rates, refinancing and
the part of clients, and thus influence
does not follow this industry trend, it
credit risks.
market conditions for ÅF as a whole.
faces the risk of losing its competitive
which is administered by the Corporate
Responsibility for the Group’s financial
edge and losing ground. For this reason
transactions and risks is handled central-
Credit risk
ÅF remains determined to take an active
ly by the parent company, through the
Credit risk arises because the com-
part in the process, at the same time as
Corporate Finance department. The
pany has a high number of outstanding
it recognises that growth and the take-
overall goal is to provide cost-effective
accounts receivable at any given time.
over of other consulting companies is
financing and to minimise the negative
not risk-free.
effects of market fluctuations on the
to ÅF clients in this way is limited through
Group’s earnings.
a strict credit policy and by credit man-
ÅF has adopted an acquisitions strategy to avoid making acquisitions where
ÅF’s ownership brings no obvious advan-
Overall, therefore, the financial risks
are relatively low.
tages to the staff of the target company.
This strategy is also designed to address
However, the amount of credit given
agement rules designed to avoid
unnecessary losses and uncontrolled
risks. These include rules about advance
Currency risk
payments and measures on how to avoid
the risks associated with business devel-
Currency risk is the risk of fluctuations in
clients who are likely to have payment
opment and long-term planning. A spe-
the value of a financial instrument as a
problems. Historically the Group has
cial Acquisitions Unit has been set up to
result of changes in exchange rates.
reported only limited credit losses.
ensure that the Group adopts a proactive
38
Figures in millions of SEK unless otherwise stated
2001 *
2002 *
2003 *
2004
2005
Operating income and profit/loss
Operating income
1,962.6
1,916.1
1,995.4
2,159.8
2,405.4
85.0
–135.6
52.9
36.5
226.3
Operating profit/loss after depreciation and
participations in associated companies
Profit/loss after net financial items
88.0
–150.6
46.6
31.3
221.8
Profit/loss for the year
57.0
–127.5
30.1
36.0
204.4
4.3
–7.1
2.7
1.7
9.4
Profit margin, percent
4.5
–7.9
2.3
1.4
9.2
Non-current assets
539.0
474.6
424.6
237.9
254.1
Current assets
737.3
617.6
697.2
1,063.9
966.0
Equity incl. minority interests
542.5
330.5
342.5
390.9
581.2
Provisions
101.2
123.1
68.6
84.4
91.6
Non-current liabilities
116.5
115.7
109.3
109.8
63.1
Current liabilities
516.2
523.0
601.3
716.7
484.3
1,276.3
1,092.3
1,121.8
1,301.7
1,220.1
547.5
436.5
336.5
367.5
486.0
1,332.4
1,184.3
1,107.0
1,211.7
1,260.9
Capital structure
Balance sheet total
Equity (annual average)
Total capital (annual average)
Capital employed (annual average)
754.4
626.7
520.1
528.1
646.9
Equity ratio, percent
42.5
30.3
30.5
30.0
47.6
Current ratio, times
1.4
1.2
1.2
1.5
2.0
Profitability
Return on equity, percent
10.4
–29.2
8.9
9.8
42.0
8.0
–11.5
5.1
3.4
18.1
14.1
–21.7
10.9
7.9
35.4
5.1
–1.6
5.5
4.8
32.8
Invoiced-time ratio, percent
69.7
66.4
67.6
68.5
71.5
Gross investment in equipment
45.0
42.3
40.0
49.4
44.7
8.3
5.5
3.3
1.3
—
Employees (FTEs) excluding associated companies
2,167
2,309
2,260
2,531
2,538
Employees (FTEs) including associated companies
2,470
2,607
2,599
2,647
2,680
Return on total capital, percent
Return on capital employed, percent
Interest cover, times
Other
Gross investment in property
* Not recalculated in accordance with IFRS.
Operating margin
Operating profit/loss in relation to operating
income.
Return on equity
Profit/loss after tax in relation to average shareholders’ equity including minority interests.
Profit margin
Profit/loss after net financial items, in relation
to operating income.
Return on total capital
Profit/loss after net financial items with restoration of interest expense, in relation to the
average balance sheet total.
Equity ratio
Equity including minority interests in relation to
the balance sheet total.
Current ratio
Current assets in relation to current liabilities.
Return on capital employed
Profit/loss after net financial items and restoration of interest expense in relation to the
average balance sheet total minus current
liabilities and the net figure for deferred tax
liabilities.
Interest cover
Profit/loss after net financial items and
restoration of interest expenses, in relation to
interest expense.
Invoiced-time ratio
The time clients are charged for, in relation
to the total time all employees are present
at work.
Employees (full-time equivalents: FTEs)
Number of employees during the year converted
to the equivalent number of year-long, full-time
positions. The actual number of employees is
higher owing to part-time employment and the
fact that some employees work only part of
the year.
39
Annual Report
Administration Report 2004
AB Ångpanneföreningen (publ)
Corporate identity number 556120-6474
The Board and President of AB Ångpanneföreningen (publ) herewith submit their
annual report for the year 2005. AB Ångpanneföreningen, which has its registered
office in Stockholm, is the parent company
of the ÅF Group (ÅF).
Group and parent company
ÅF is a leading company in the technical
consulting business, with expertise founded
on more than a century of experience. ÅF
offers highly qualified services and solutions
for industrial processes, infrastructure
projects and the development of products
and IT systems. ÅF is also one of the leading names in testing and inspection. The
Group’s operational base is in Europe, but
its business and clients are found all over
the world. In 2005 the Group had a total
workforce (converted into full-time equivalents, and excluding employees in associated companies) of 2,538 (2004: 2,531).
Of this total 436 (392) were employed outside Sweden.
The basis for ÅF’s consulting business is
the development of systems and products,
and investment, maintenance and ongoing
modification relating to industrial clients’
installations, processes, machinery and
buildings. The majority of projects originate in Swedish and international industrial
companies, service companies and the real
estate sector.
Sales and earnings
Developments were positive for ÅF in
2005. We consolidated our position in the
market, improved earnings in all of the
Group’s divisions and concluded the sale of
ÅF’s property portfolio on favourable terms.
The decision to establish the new
Process and Infrastructure divisions has
borne fruit. Merging five divisions into two
has created more synergies than anticipated and, together with better conditions
in the market, this has made a significant
contribution to improved earnings. The
Inspection Division continues to capture
new shares of the market, mostly as a
result of organic growth, and has reported
its best ever financial result. The Systems
Division finished the year somewhat more
strongly than expected.
40
The weak fourth-quarter result for
the Process Division was due to lower
levels of capacity utilisation as two major
paper industry projects drew to a close.
However, the order books are strong and
it would appear that this was merely a
temporary dip in earnings.
Net sales totalled SEK 2,269 (2,136)
million.
Operating profit was SEK 226 (37) million. Excluding other operating income this
yielded an operating margin of 4.0 (0.6)
percent.
Sales of the ÅF head office (Härolden
44) in Stockholm had a positive effect of
SEK 136 million in ÅF’s accounts for the
fourth quarter of 2005.
Capacity utilisation (expressed as
invoiced-time ratio) was 71.5 (68.5) percent.
Profit after net financial items amounted
to SEK 222 (31) million, yielding a profit
margin of 9.2 (1.4) percent. Excluding
other operating income the operating
margin was 3.8 (0.4) percent.
Earnings per share were SEK 34.31
(6.13).
Consulting activities
The consulting activities of the divisions
generated a profit of SEK 120 million
for 2005 (2004: SEK 31 million). Sales
totalled SEK 2,373 (2,308) million before
eliminations and intragroup transactions.
Process
Operating margin 12 months: 3.5% (2.0%)
The Process Division noted a slight slowdown in business towards the end of the
year. Two major paper industry projects
– one in Sweden and one in Spain – were
brought to a close during the second half
– releasing more consultants and thus
reducing overall levels of capacity utilisation. At the same time business in Finland
was still suffering in the aftermath of a
strike in the paper industry. The markets which showed the greatest interest
in investing in energy, pulp and paper facilities were the Baltic states, Russia, South
America and Asia. Redundancy costs of
SEK 7 million had a negative impact on
the division’s fourth-quarter earnings.
Systems
Operating margin 12 months: 0.6% (–13.4%)
The Systems Division improved profitability and implemented a raft of changes
which are expected to pave the way for
further improvements in earnings in the
months ahead. In a move designed to
boost growth more than 50 highly qualified consultants were added to the workforce between the summer and the end of
the year as a result of both organic growth
and acquisitions. The division’s strategic
focus on increased sales activities and
new recruitment also had a positive effect
on fourth-quarter earnings.
Infrastructure
The market for infrastructure consulting
services remained strong throughout
2005. The division has benefited from an
improving market for the construction and
property industries, while major investments in the Swedish road and rail sectors
have also played their part in high levels of
employment for the division’s consultants.
The division captured new shares of the
market in installations and the rail sector
last year. It is also worthy of note that the
telecom business, where the division
maintains a firm focus on telecom operators and the defence industry, also
chalked up a significant improvement in
results for 2005.
Inspection
The Inspection Division continued to capture new market share and reported good
profitability after posting growth of more
than 15 percent for 2005 as a whole.
Growth was strongest in inspections, but
demand has stabilised at a good level in all
three business areas: Inspections, Testing
and Certification. The individual market area
behind the best growth was the nuclear
power industry in Sweden. The purchase
of Force Technology’s lift inspection business had a positive effect on earnings
from the fourth quarter onwards.
Annual Report
Acquisitions, disposals and alliances
In February ÅF acquired the remaining
11 percent of the shares in ÅF-CTS Oy
and thus became the sole owner of this,
Finland’s best established and largest
technical consulting company for the pulp
and paper industry, with a total of 250
employees.
In May ÅF entered into a strategic alliance with the Brazilian engineering firm
A1 Engenharia e Gerenciamento Ltda to
undertake activities in the Brazilian and
South American forest industries. From
their base in Curitiba, A1’s 90 consultants
carry out consulting and engineering
projects throughout the whole of Brazil.
In June ÅF acquired the infrastructure
consulting company Infraplan AB with
12 employees. Established in 1994 and
based in Umeå, Sweden, Infraplan will
reinforce the Infrastructure Division by
bringing into the company leading-edge
expertise and contacts with valuable
clients in Sweden and abroad.
In September Inspection acquired the lift
inspection business of Force Technology
Sweden AB. This added a total of a further
15 employees to the ÅF workforce in
Sundsvall, Stockholm, Västerås, Karlstad,
Gothenburg and Jönköping.
In December ÅF acquired the remaining
51 percent of the shares in Konsultgruppen
STIBI AB to become sole owner of this
consulting company with 28 employees.
ÅF also reached agreement about
taking over the activities of the Ericsson
Design Centre in Lysekil on the Swedish
west coast, where 21 employees work
primarily with radio-related systems development and software development for
WCDMA (3G) and GSM technologies. The
acquisition was formalised on 1 January
2006 after which the company was immediately consolidated into the Systems
Division.
Other important events during the
year
In January the ÅF Group was commissioned by the National Swedish Rail
Administration to carry out the project
planning work for systems directly related to the rail track in the tunnel through
the Hallandsåsen Ridge. The task involves
primarily work on electrics, signals and
telecommunications.
In February the Finnish Myllykoski Group
engaged ÅF to carry out project engineering work in conjunction with the rebuild of
two of the group’s paper mills in Germany.
Also in February the ÅF Group was
commissioned by Scania to assist with
project planning work relating to certain
aspects of Scania’s upgrade of its Engine
Development department in Södertälje,
Sweden. The assignment extends over
a broad spectrum of consulting and
engineering skills in fields such as building
and construction, air treatment, process
media and electric power.
In March Johan Olsson was appointed
to manage the Systems Division and
assumed his new position on 7 June 2005.
In April EuroMaint commissioned the
Inspection Division to carry out inspections
and periodic testing of locomotive rolling
stock in a contract worth at least SEK 20
million over the first two years.
In May ÅF signed a new two-year framework agreement as a preferred supplier
to Ericsson with regard to consulting
services in research and development.
The month of May also brought two
major new projects for ÅF in France: one
involved project engineering work in conjunction with the installation of a new 12
MW back-pressure turbine for Norske Skog
Golbey/Elyo, while the other was a commission from UPM-Kymmene in Docelles to
increase the capacity of the plant’s existing
paper line PM 1.
In June the ÅF Group received a process
and automation order from AstraZeneca
in Södertälje, Sweden. The assignment
involved project engineering and design,
systems design, programming, manufacture and delivery of a CIP plant, commissioning, qualification and validation.
In September the ÅF Group reached an
agreement relating to the sale of the 10,700
sq. m. premises which constitute the Group’s
headquarters at its Fleminggatan address
in central Stockholm (Härolden 44) to GE
Real Estate. The agreed sale price, based
on an underlying property value of SEK
285 million, had a positive effect of SEK
136 million on the Group’s fourth quarter
accounts.
Also in September ÅF-TÜV Nord AB (in
which Inspection has a 50 percent share)
signed a framework agreement with
Ringhals AB relating to technical inspections services. The contract will run for
five years, with an option for a two-year
extension at the end of the period. The
estimated value of the order for the ÅF
Group is SEK 100–150 million.
In October ÅF was commissioned by
E.ON Sverige to conduct detailed project
planning work for natural gas pipelines
between Linköping and Norrköping as part
of a project known in Sweden as Naturgas
Mellansverige (Central Sweden Natural
Gas). At the same time ÅF was contracted to carry out preliminary project planning
work for natural gas pipelines between
Västerås and Grycksbo.
In the same month ÅF signed a longterm cooperation agreement with the
municipal property company MKB in
Malmö. The five-year contract includes an
option of a further three-year extension
and relates to the provision of technical
consulting services to optimise the running
costs and ventilation facilities of MKB’s
property holdings.
October also brought news of ÅF’s decision to bring together most of its employees in the Stockholm region (approximately 900 people) under one roof in a new
main office complex at Haga Norra in
Solna. The ÅF Group currently has five
offices in and around the Swedish capital
(Stockholm, Solna and Kista). Under an
agreement with construction company
Skanska, ÅF and Skanska will work together to develop the new offices.
Construction work will begin in 2006 and
is scheduled for completion by October
2008.
In December Claes-Inge Isacson was
appointed new Divisional Manager for the
Process Division and took up his new position on 1 January 2006.
41
Annual Report
Important events after the end of the
reporting period
In January 2006 ÅF reached agreement
with Visma on the sale of its software
operations, PX Business Solutions (PX),
with 25 employees. PX was previously
part of the Systems Division. The sale
generated a capital gain for the ÅF Group
of SEK 19 million and will have a positive
effect on the Group’s earnings for the first
quarter of 2006.
In January ÅF acquired 10 members of
staff from QB Food Tech in Lund who possess in-depth expertise with regard to the
processes of the food and pharmaceutical industries and have a track record of
experience from projects relating to installations and full-service undertakings within
these industries.
In January ÅF acquired Ingemansson
Technology AB from Lindeblad Technology
AB. Ingemansson is Scandinavia’s leading
technical consulting firm in the field of
sound and vibrations with 130 employees.
In January ÅF reached an agreement
to purchase all the shares in the Finnish
energy consulting company Enprima Oy,
an international organisation with offices in
Finland, the Baltic states and Russia. The
company, which has 270 employees, is to
be purchased from Fortum Power & Heat
Oy, Powest Oy, BE&K International Inc and
the management of Enprima.
Research and development
The divisions carry out research and development work in conjunction with universities and trade organisations, but also
internationally with EU funding. In-house
method development also forms part of
this R&D work. For the Group as a whole,
investment in R&D during the year totalled
SEK 26.7 (27.8) million, mostly in the
form of the costs for time spent on R&D
projects by ÅF’s own salaried employees.
Investments
Investment in machinery and equipment
totalled SEK 44 (49) million.
Cash flow and financial position
The cash flow was SEK 67 (83) million.
Before shareholders’ dividends and the
amortisation of loans, cash flow was SEK
280 (109) million.
42
The sale of certain of Group premises
had a positive effect of SEK 280 million on
cash flow for the fourth quarter.
The ÅF Group’s liquid funds totalled SEK
242 (175) million at the end of the reporting period.
Equity per share was SEK 97.50, and
the equity/assets ratio was 47.6 percent.
These figures compare with SEK 66.00
and 30.0 percent respectively at the
beginning of 2005.
The parent company
The parent company generated operating
income of SEK 147 (129) million, with a
profit after net financial items of SEK 172
million (as opposed to a loss of SEK 5 million in 2004).
Employees and salaries
Over the year the average number of
employees in the Group, excluding those
employed by associated companies, was
2,538 (2,531). Of these 436 (392) were
employed outside Sweden. Including employees in associated companies the average
number of employees was 2,680 (2,647),
of which 532 (482) were employed outside
Sweden. The average number of employees in the parent company was 69 (62).
Personnel costs for the Group amounted to
SEK 1,486 (1,442) million.
Financial risks and risk management
To minimise the currency risk in contracted
payment flows in foreign currencies, large
contracts are hedged using derivatives.
(See Note 6 for details.)
Shares
AB Ångpanneföreningen’s “B” shares have
been quoted on the A list of the Stockholm
Stock Exchange since January 1986. Ångpanneföreningen traded as a co-operative
association from 1895 until 1980 and has
traded as a joint-stock company since 1981.
The company’s “B” shares traded at SEK
235.50 at the end of 2005, compared
with SEK 132 at the beginning of the year,
an increase in value of 78.4 percent. The
Stockholm Stock Exchange’s (OMXSPI) allshare index gained 32.6 percent during the
same period. The combined market value
of the company’s shares at the year-end
was SEK 1,400 (780) million.
Convertible subordinated loan
On 28 April 2005 the annual general meeting of shareholders in ÅF resolved to raise
a convertible subordinated loan through
the issue of convertible bonds directed
at the ÅF Group’s permanent employees
in Sweden, Finland and Norway. These
employees subscribed for a total of
approximately SEK 54 million. The conversion price was set at SEK 172. On full
conversion, share capital will increase by
SEK 6,250,000 and the number of shares
will increase by 312,500. This is equivalent to a dilution effect of a maximum of
approximately 5.0 percent of the share
capital and 3.2 percent of the votes.
The total number of shares in circulation at
the end of 2005 was 5,962,142: 402,219
“A” shares (ten votes per share) and
5,559,923 “B” shares (one vote per share).
After full conversion the number of issued
shares will rise to 6,274,642.
Liquidity guarantee
In order to increase the liquidity of ÅF
shares the stockbrokers Öhman Fondkommission act as liquidity providers
under an agreement from 31 October
2003 that, in essence, means that Öhman
undertakes to quote bid and offer prices
for Ångpanneföreningen’s shares. The
spread must not exceed 4 percent calculated on the offer price.
Board of Directors
At AB Ångpanneföreningen’s annual general meeting in Stockholm on 28 April
2005, Ulf Dinkelspiel, Magnus Grill, EvaLotta Kraft, Carl-Erik Nyquist, Peter
Sandström, Helena Skåntorp and Gunnar
Svedberg were re-elected as directors of
the company. Jan Fröjd and Eva Lindén,
with their deputies Cecilia Axelsson and
Per-Åke Östling had been nominated as
employee representatives on the Board.
At its inaugural meeting following the general meeting, the Board elected CarlErik Nyquist as its Chairman and Gunnar
Svedberg as its Vice Chairman. Please
turn to pages 80–81 for a presentation of
board members.
The work of the Board
ÅF’s Board of Directors consists of seven
members elected by the annual general
Annual Report
meeting and two members and their deputies elected to represent the company’s
employees. The members elected by
the general meeting include individuals
with links to ÅF’s major shareholders –
Research and Development and ÅFOND,
the ÅF Group Trust – and individuals who
are independent of these major shareholders. The President has no seat on the
Board.
Six of the members elected by the general meeting are independent of the company (non-executive directors) and four
are independent of the company’s major
shareholders.
Salaried employees of the company participate in Board meetings as secretary
and to present reports. The Secretary of
the Board is the company’s Executive Vice
President for Corporate Resources.
At its inaugural meeting the Board
adopted written rules of procedure, and
issued written instructions in respect both
of the distribution of work between the
Board and the President, and of the information which the Board shall receive on a
standing basis. The rules of procedure will
ensure, inter alia, that the Board receives
all necessary information.
During the 2005 financial year, the
Board held 12 meetings, of which one was
an inaugural meeting, and one in the form
of a two-day strategy seminar with a special review of every business area.
An evaluation of the work of the Board
was carried out in the form of a questionnaire and a discussion among the Board.
The following were among the more
important resolutions and tasks during the
year:
• Progress report and action programme
for the Systems Division.
• Details of a new convertible subordinated loan programme for ÅF employees.
• Acquisition of 47 percent of the shares
in ÅF-Incepal from ÅF-Chleq Froté.
• Sale of ÅF headquarters to GE Real
Estate AB and signing of a tenancy agreement with Skanska regarding the proposed new head office at
Hagaporten in Solna, Stockholm.
• Instruction of the President to finalise
the sale of the Systems Division’s PX
Business Solutions to Visma.
• Instruction of the President to acquire
Enprima Oy.
• Visit to one of ÅF’s clients in the
Sweden South Region, the waste
management company Sydskånska
Avfallsaktiebolaget, in conjunction with
the two-day strategy seminar.
ÅF’s Corporate Governance Report is
presented separately on pages 78–79.
Group management
In 2005 senior group management comprised Jonas Wiström (President and
CEO), Anders Gabrielsson (Executive Vice
President and CFO), Karl-Anders Eriksson
(Executive Vice President, Corporate
Resources) and Viktor Svensson (Director,
Corporate Information), together with
the Divisional Managers and Senior
Vice Presidents, Jörgen Backersgård,
Per Göransson (succeeded by ClaesInge Isacson w.e.f. 1 January 2006),
Åke Rosenius and Johan Olsson, and
Regional Managers, Christer Karlsson,
Eva Nilsson and Peter Johansson. The
senior group management team also
includes Jan Nordling, Chairman for ÅF’s
Acquisitions and New Markets unit and
Deputy Divisional Manager for the Process
Division. Gunilla Fladvad is the secretary
for the senior group management. Please
turn to pages 82–83 for a presentation of
the senior executives.
Dividend
The Board proposes a dividend for 2005 of
SEK 5.00 (2004: SEK 2.60) per share. The
proposed dividend is in line with the stated
dividend policy, which means that dividends
are to correspond to around 50 percent of
the Group’s net profit, excluding any capital
gains.
Expectations for 2006
Against the background of our strong position in the market and the good demand
for ÅF’s services in most areas of business, the goal for 2006 is to continue the
trend of improved earnings and increased
margins and to grow at a faster pace than
the industry as a whole (measured using
the Swedish Association of Architects and
Consulting Engineers index).
Changes in accounting policies
As of 1 January 2005, the Group applies
IFRS accounting policies, approved by the
European Commission.
To ensure comparability in the Group’s
progress and position, the information for
the comparison year has been restated,
with the exception of the data relating to
financial instruments. In accordance with
the rules for transition to IFRS, the new
policies for financial instruments are applied
only to the sections of the accounts which
relate to 2005. In accordance with the
amended version of IAS 19, the company
is exercising the option of recognising
actuarial gains and losses in equity. The
comparative information for 2004 has not
been restated because actuarial losses as
at 31 December 2004 were not material.
The tax on participations in associated
companies of SEK 2 (2) million has been
recognised with effect from 2005 as an
operating expense instead of a tax expense.
A corresponding change has been made
to the figures for 2004.
Proposed appropriation of profits
Non-restricted profits of SEK 335,927,103
are at the disposal of the Annual General
Meeting.
The Board and President propose that
these profits be appropriated as follows:
To the shareholders:
A dividend of
SEK 5.00 per share
30,364,540
To be carried forward
305,562,563
Total
335,927,103
This proposal also includes 110,766
shares to be issued as a new issue in
March 2006 in conjunction with the acquisition of Ingemansson Technology AB.
The Board’s motivation with regard
to the proposed appropriation of profits
will be posted on the company’s website
(www.afconsult.se). It can also be ordered
from the company on request.
43
Annual Report
Consolidated income statement
1 January – 31 December (in thousands of SEK)
Note
2005
2004
2,268,915
2,135,969
Operating income
Net sales
7
Other operating income
10
Operating expenses
136,448
23,782
2,405,363
2,159,751
9
Other external costs
12,30
Personnel costs
11
–599,489
–602,240
–1,486,047
–1,441,663
Depreciation and write-downs of tangible and intangible assets
16,17
–47,107
–46,733
Other operating expenses
10
–52,698
–36,824
Share of associated companies’ profit/loss
19
6,323
4,195
Operating profit/loss
7
226,345
36,486
Result from financial investments
Financial income
Financial expenses
Net financial items
13
Profit after financial items
Tax
31
Profit for the year
3,271
4,377
–7,856
–9,529
–4,585
–5,152
221,760
31,334
–17,524
4,700
204,236
36,034
204,376
36,024
Relating to:
Shareholders in the parent company
Minority interest
Earnings per share with regard to profit relating to
shareholders in the parent company
44
–140
10
204,236
36,034
15
before dilution, SEK
34.31
6.13
after dilution, SEK
33.53
5.57
Annual Report
Statement of consolidated recognised
income and expense
As at 31 December (in thousands of SEK)
Note
Change in translation reserve for the year
2005
2004
2,438
–132
Financial assets held for sale:
Revaluations recognised in equity
415
Cash flow hedging:
Recognised in equity
–1,540
Actuarial gains and losses
–5,416
Tax attributable to items recognised in equity
1,831
Changes in assets recognised in equity,
excluding transactions with the company’s owners
Net profit for the year
24
Total change in assets, excluding transactions with the company’s owners
–2,272
–132
204,236
36,034
201,964
35,902
202,002
35,892
Attributable to:
Parent company’s shareholders
Minority interest
–38
10
201,964
35,902
1,395
2,093
Effect of change in accounting policy
Parent company’s shareholders
Minority interest
0
0
1,395
2,093
45
Annual Report
Consolidated balance sheet
As per 31 December (in thousands of SEK)
Note
Assets
8
Intangible assets
16
2005
2004
131,798
107,563
Tangible assets
17
86,506
94,587
Financial investments
19
24,307
23,232
Participations in Group companies
6,20
2,930
2,256
Long-term receivables
Deferred tax asset
31
Total non-current assets
Accounts receivable
22
Revenue generated but not invoiced
466
3,078
8,112
7,152
254,119
237,868
420,328
490,362
233,198
203,426
Tax assets
31
12,546
4,639
Other receivables
34
19,797
20,121
Prepaid expenses and accrued income
23
Cash equivalents
Assets held for sale
18
Total current assets
Total assets
Equity
38,130
38,782
242,007
175,070
—
131,452
966,006
1,063,852
1,220,125
1,301,720
119,243
118,488
23,097
18,811
24
Share capital
Other contributed capital
Reserves
–584
–132
Retained earnings including profit for the year
439,375
249,653
Equity attributable to parent company shareholders
581,131
386,820
46
4,067
581,177
390,887
Minority interest
Total equity
Liabilities
8
Liabilities to credit institutions
6,25
Convertible bond loan
27
9,165
8,176
51,655
96,006
54,587
Provisions for pensions
32
57,933
Other provisions
26
14,756
4,888
Deferred tax liabilities
31
17,365
24,878
Other liabilities
Total non-current liabilities
6,25
Work invoiced but not yet carried out
Accounts payable – trade
2,239
5,614
153,113
194,149
10,124
154,727
34,067
96,454
88,588
111,574
34
108,280
113,335
Accrued expenses and prepaid income
28
243,267
240,595
Provisions
26
1,509
—
Total current liabilities
485,835
716,685
Total liabilities
638,948
910,834
1,220,125
1,301,720
Other liabilities
Total equity and liabilities
For information about the Group’s pledged assets and contingent assets, please refer to Note 35.
46
Annual Report
Cash flow analyses for the Group
Note
2005
2004
221,760
31,334
Operating activities
Adjustment for items not included in the cash flow
33
–100,815
64,299
Income tax paid
–23,697
28,882
Cash flow from operating activities
before changes in working capital
97,248
124,515
53,718
–110,090
Cash flow from changes in working capital
Increase (–)/Decrease (+) in receivables
Increase (+)/Decrease (–) in liabilities
–95,276
36,707
–41,558
–73,383
Investing activities
Acquisition of tangible assets
–41,511
–44,610
Disposal of tangible assets
281,720
127,596
Acquisition of intangible assets
–18,362
–8,338
–7,854
–11,053
—
–5,906
Acquisition of subsidiaries
Acquisition of financial receivables
Amortisation of financial receivables
Cash flow from investing activities
9,944
—
223,937
57,689
51,655
3,821
–248,844
–14,717
Financing activities
Proceeds from borrowing
Amortisation of loans
Dividends paid to shareholders in the parent company
Cash flow from financing activities
Cash flow for the year
–15,501
–15,403
–212,690
–26,299
66,937
82,522
Cash and cash equivalents brought forward
175,070
92,548
Cash and cash equivalents carried forward
242,007
175,070
47
Annual Report
Parent company income statement
Note
2005
2004
99,582
89,347
Operating income
Net sales
Operating expenses
10
47,042
39,978
146,624
129,325
9
Other external costs
12,30
–66,850
–64,002
Personnel costs
11
–58,153
–43,228
Depreciation of tangible and intangible assets
16,17
10
–9,578
–8,674
–52,811
–37,958
–40,768
–24,537
17,862
Result from financial investments
Result from shares in Group companies
13
208,731
Result from shares in associated companies
13
—
–4
Interest income and similar profit/loss items
13
8,794
8,544
Interest expense and similar profit/loss items
13
Appropriations
14
Pre-tax profit
Tax
31
Profit for the year
–4,640
–7,343
212,885
19,059
172,117
–5,478
–21,624
30,902
150,493
25,424
16,668
–2,035
167,161
23,389
Statement of parent company’s recognised
income and expense
As at 31 December (in thousands of SEK)
Note
2005
2004
—
—
167,161
23,389
167,161
23,389
Changes in assets recognised in equity,
24
Total change in assets, excluding transactions with the company’s owners
48
Annual Report
Parent company balance sheet
As per 31 December (in thousands of SEK)
Not
2005
2004
Assets
Non-current assets
Intangible assets
16
700
—
Tangible assets
17
18,202
139,725
Participations in Group companies
21
245,989
123,500
Other securities held as assets
20,6
110
110
Other long-term receivables
Deferred tax asset
31
Total non-current assets
—
9
2,579
96
267,580
263,440
Current assets
Accounts receivable
22
1,565
1,719
Receivables from Group companies
34
268,291
299,900
Receivables from associated companies
34
42
13
Receivables from other related legal persons
34
29
121
—
13,832
Tax assets
Revenue generated but not invoiced
Other receivables
23
Total current receivables
457
899
4,293
4,350
19,322
14,702
293,999
335,536
Cash and bank balances
183,957
132,112
Total current assets
477,956
467,648
Total assets
745,536
731,088
119,243
118,488
Equity and liabilities
Equity
24
Restricted equity
Share capital (402,219 series A shares and 5,559,923 series B shares:
5,962,142 shares at quota value, i.e. net assets per share, of SEK 20)
Statutory reserve
Share premium reserve
46,948
23,324
—
18,811
Non-restricted equity
Profit brought forward
168,767
75,670
Profit for the year
167,161
23,389
Total equity
502,119
259,682
29
66,185
44,561
Untaxed reserves
Provisions
Provisions for pensions and similar obligations
32
26,693
26,430
Provisions for tax
31
180
—
Other provisions
26
9,346
—
36,219
26,430
Total provisions
49
Annual Report
Parent company balance sheet, cont’d
Convertible bond loan
27
Liabilities to Group companies
Total non-current liabilities
51,655
96,006
—
30,086
51,655
126,092
—
150,000
Current liabilities
25
Accounts payable – trade
Liabilities to Group companies
34
Current tax liabilities
31
Other liabilities
28
Total current liabilities
Total equity and liabilities
7,896
23,827
61,485
86,760
2,675
—
1,222
1,605
16,080
12,131
89,358
274,323
745,536
731,088
Pledged assets and contingent liabilities for the parent company
Pledged assets
35
None
None
Contingent liabilities
35
86,875
35,090
50
Annual Report
Cash flow analyses for the parent company
Note
2005
2004
33
Operating activities
Adjustment for items not included in the cash flow
Income tax paid
Cash flow from operating activities before
changes in working capital
172,117
–5,478
–181,337
71,225
–2,726
2,267
–11,946
68,014
43,130
–57,489
Cash flow from changes in working capital
Increase (–)/Decrease (+) in receivables
Increase (+)/Decrease (–) in liabilities
–52,139
37,525
–20,955
48,050
–175,919
–31,899
–12,060
–11,940
56
41,157
–5,679
—
Investing activities
Shareholders’ contributions provided
Acquisition of tangible assets
Disposal of tangible assets
Acquisition of intangible assets
Acquisition of financial assets
–100
—
Disposal of financial assets
388,095
71,270
Cash flow from investing activities
194,393
68,588
Financing activities
Proceeds from borrowing
51,655
—
–276,092
–21,230
Dividends paid
–15,501
–15,403
Group contributions received
118,345
—
—
-5,393
–121,593
–42,026
51,845
74,612
Amortisation of loans
Group contributions paid
Cash flow from financing activities
Cash flow for the year
Cash and cash equivalents brought forward
132,112
57,500
Cash and cash equivalents carried forward
183,957
132,112
51
Annual Report
Notes
Notes and accounting principles
Financial values in the tables are in thousands of SEK unless otherwise
stated.
1
Information about the parent company
AB Ångpanneföreningen is registered in Sweden as a joint-stock
company. The parent company’s shares are listed on the Stockholm
stock market. The company’s registered office is in Stockholm, Sweden.
Address: Fleminggatan 7, Box 8133, SE-104 20 Stockholm, Sweden.
The Group consolidated accounts for the financial year 2005 comprise the accounts for the parent company and its subsidiaries, which together form “the Group”. The Group also includes participations in associated companies.
2
Accounting policies
1.1 Compliance with standards and legislation
The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) issued by the
International Accounting Standards Board (IASB) and interpretations published by the International Financial Reporting Interpretations Committee
(IFRIC) approved by the European Commission for application in the EU.
These financial statements are the first full set of financial statements to
be prepared in accordance with IFRS. The transition from the previously applied accounting policies to IFRS reporting has been implemented in
accordance with IFRS 1, the standard which describes how the transition
to IFRS is to be reported. The Swedish Financial Accounting Standards
Council’s recommendation RR30 “Supplementary accounting regulations
for groups” has also been applied.
The parent company applies the same accounting policies as the
Group except as stated below in the section “Parent company accounting
policies”. The differences between the accounting policies of the parent
company and the Group are due to limitations in the parent company’s
scope to apply IFRS imposed by the Swedish Annual Accounts Act and
the act on the safeguarding of pensions benefits (Tryggandelagen), and in
some cases due to tax reasons.
Notes 3 and 4 contain tables and explanatory information showing
how the transition to IFRS has impacted on the Group’s financial results
and position and reported cash flows.
1.2 Basis of preparation of the parent company and consolidated
financial statements
The parent company’s functional currency is the Swedish krona (SEK),
which is also the reporting currency for the parent company and the
Group. This means that the financial statements are presented in SEK. All
amounts are rounded to the nearest thousand unless otherwise stated.
Assets and liabilities are reported at historical cost, with the exception
of various financial assets and liabilities which are carried at fair value.
The financial assets and liabilities which are carried at fair value are
derivative instruments and financial assets classified as available for
sale. Non-current assets held for sale are carried at the lower of previous
carrying amount and fair value less costs to sell.
The preparation of financial statements in accordance with IFRS requires management to make judgements and estimates, and to make
assumptions which affect the application of the accounting policies and
the carrying amounts of assets, liabilities, income and expenses. These
estimates and assumptions are based on historical experience and a
number of other factors deemed reasonable under the circumstances.
The results of these estimates and assumptions are then used to judge
the carrying amounts of assets and liabilities where these are not clear
from other sources. The actual outcome may differ from these estimates
and judgements.
These estimates and assumptions are reviewed regularly. Changes in
estimates are recognised in the period in which the change is made if the
change affects only that period, or in both the period in which the change
is made and future periods if the change affects both the current period
and future periods.
Judgements made by management in applying IFRS which have a significant effect on the financial statements, and estimates made which
could result in material adjustments in subsequent years’ financial statements, are described in more detail in note 5.
The following accounting policies for the Group have been applied
52
consistently to all periods presented in the Group’s financial statements
unless otherwise stated below, and in the preparation of the Group’s
opening IFRS balance sheet as at 1 January 2004 explaining the transition from the previously applied accounting policies to IFRS accounting
policies. The Group’s accounting policies have been applied consistently
in the reporting and consolidation of the parent company, subsidiaries
and associates.
The annual report and consolidated financial statements were approved for release by the Board of Directors on 21 February 2006. The
consolidated income statement and balance sheet and the parent company income statement and balance sheet will be put forward for adoption at the Annual General Meeting on 27 April 2006.
1.3 Changes in accounting policies
The transition to IFRS reporting for the consolidated financial statements
has been reported in accordance with IFRS 1 and is described in notes
3 and 4. In accordance with a voluntary exemption in IFRS 1, IAS 39 has
not been applied to the comparative figures for 2004 but prospectively
from 1 January 2005. The application of IAS 39 had an effect on equity
of SEK 1,395,000 as at 1 January 2005.
The amended version of IAS 19 from November 2005 has been applied when preparing the annual report for 2005. The company is exercising the option of recognising actuarial gains and losses in equity. The
comparative information for 2004 has not been restated because actuarial losses as at 31 December 2004 were not material.
1.4 Segment reporting
A segment is a distinguishable component of the Group which provides
either particular products or services (business segment) or products
or services within a particular economic environment (geographical segment) and is subject to risks and returns that are different from those of
other segments.
The Group’s internal reporting system is designed to follow up the return on the Group’s services, and so business segments are the primary
format for reporting segment information. Geographical segments are
the Group’s secondary format.
Segment information is provided only for the Group (in accordance
with IAS 14).
1.5 Classification, etc.
In both the parent company and consolidated financial statements, noncurrent assets and non-current liabilities consist essentially of amounts
expected to be recovered or settled more than 12 months after the
balance sheet date, while current assets and liabilities consist essentially
of amounts expected to be recovered or settled within 12 months of the
balance sheet date.
1.6 Basis of consolidation
1.6.1 Subsidiaries
Subsidiaries are companies over which AB Ångpanneföreningen has a
controlling influence. A controlling influence means, directly or indirectly,
the power to govern a company’s financial and operating policies with a
view to deriving economic benefits. Potential voting rights which are currently exercisable or convertible are taken into account when assessing
whether a controlling influence is held.
Subsidiaries are accounted for using the purchase method. This
means that the acquisition of a subsidiary is treated as a transaction
where the Group indirectly acquires the subsidiary’s assets and assumes
its liabilities and contingent liabilities. The consolidated cost is determined by
means of an analysis undertaken in connection with the business combination. This analysis ascertains both the cost of the shares or business and
the fair value of the identifiable assets acquired, and the liabilities and
contingent liabilities assumed. The difference between the cost of the
shares in the subsidiary and the fair value of the assets acquired on the
one hand, and liabilities and contingent liabilities assumed on the other is
treated as goodwill.
Subsidiaries’ financial statements are consolidated from the date of
acquisition until such time as the controlling influence is relinquished.
1.6.2 Associates
Associates are companies over whose operational and financial management the Group exercises a significant but not controlling influence, generally through a holding of between 20 percent and 50 percent of the
Annual Report
votes. Investments in associates are accounted for in the consolidated
financial statements using the equity method from the time significant influence is obtained. This means that the carrying amount of the shares
in the associate recognised in the consolidated financial statements consists of the Group’s share of the associate’s equity plus goodwill and any
other remaining fair value adjustments. The Group’s share of the associate’s profit/loss after tax and minority interests, adjusted for any amortisation, write-down or reversal of fair value adjustments, is recognised in
the consolidated income statement under “Share of associated companies’ profit/loss”. Any dividends received from the associate reduce the
carrying amount of the investment.
Any difference at the time of acquisition between the cost of the investment and the investor’s interest in the net fair value of the associate’s
identifiable assets, liabilities and contingent liabilities is recognised in accordance with IFRS 3 “Business combinations”.
If the Group’s interest in the recognised losses of an associate
exceeds the carrying amount of the shares in the consolidated balance
sheet, the carrying amount of the shares is reduced to nil. Losses are
also allocated against unsecured non-current financial balances which
effectively form part of the investor’s net investment in the associate.
Further losses are not recognised unless the Group has issued guarantees to cover losses arising at the associate. The equity method is applied until such time as significant influence is relinquished.
1.6.3 Transactions to be eliminated on consolidation
Intragroup receivables, liabilities, income and expenses, and unrealised
gains and losses arising on transactions between Group companies,
are eliminated in their entirety when preparing the consolidated financial
statements. Unrealised gains arising on transactions with associates and
joint ventures are eliminated in proportion to the Group’s interests in the
company. Unrealised losses are eliminated in the same way as unrealised
gains, but only to the extent that there is no indication of impairment.
1.7 Foreign currency
1.7.1 Transactions in foreign currency
Transactions in foreign currency are translated into the functional currency at the exchange rate ruling on the transaction date. Monetary
assets and liabilities in foreign currency are translated into the functional
currency at the exchange rate ruling on the balance sheet date. Exchange differences arising on translation are recognised in the income
statement. Non-monetary assets and liabilities carried at historical cost
are translated at the exchange rate ruling on the transaction date. Nonmonetary assets and liabilities carried at fair value are translated into the
functional currency at the exchange rate ruling when their fair value was
determined, and changes in exchange rates are then recognised in the
same way as other changes in the value of the asset or liability.
The functional currency is the currency of the primary economic environments in which the companies in the Group operate. The parent company’s functional currency and reporting currency is the Swedish krona
(SEK). The Group’s reporting currency is SEK.
1.7.2 Financial statements of foreign operations
The assets and liabilities of foreign operations, including goodwill and other
fair value adjustments, are translated into SEK at the exchange rate ruling
on the balance sheet date. The income and expenses of foreign operations
are translated into SEK at an average exchange rate which approximates
the exchange rates on the various transaction dates.
Translation differences arising on the translation of net investments in
foreign operations are recognised in a translation reserve in equity. When
a foreign operation is sold, the accumulated translation differences attributable to the operation are realised net of any currency hedging in the
consolidated balance sheet.
Accumulated translation differences are presented as a separate
category of equity and include translation differences accumulated since
1 January 2004. Accumulated translation differences from before 1 January 2004 are distributed between other categories of equity and are not
disclosed separately.
1.8 Revenue
Revenue from services rendered is recognised in accordance with IAS
18. The percentage of completion method is applied to all assignments
whose outcome can be measured reliably. The majority of assignments
are performed on an open-account basis, and clients are normally invoiced one month after the work is carried out. Where assignments are
carried out on a fixed-price basis, revenue is recognised in the income
statement on the basis of the stage of completion on the balance sheet
date. The stage of completion is determined by having an assignment
manager or section head make a written assessment of the amount of
work completed and remaining. Revenue is not recognised if it is probable that the economic benefits will not flow to the Group. In the event
of significant uncertainty about payment or associated expenses, no
revenue is recognised.
Income from property sales is recognised on the date of transfer of
title.
1.9 Operating expenses and financial income and expenses
1.9.1 Payments under operating leases
Payments under operating leases are recognised in the income statement on a straight-line basis over the lease term. Benefits received in
connection with signing a lease are reported as part of the total lease
cost in the income statement.
1.9.2 Payments under finance leases
Minimum lease payments are apportioned between a finance charge and
a reduction of the outstanding liability. The finance charge is spread over
the lease term so that the amount charged in each reporting period corresponds to a fixed rate of interest on the liability recognised in that
period. Contingent payments are recognised in the periods in which they
arise.
1.9.3 Financial income and expenses
Financial income and expenses consist of interest receivable on bank
balances and receivables, interest payable on loans, dividend income and
exchange differences.
Interest receivable on receivables and interest payable on liabilities are
calculated using the effective interest rate method. The effective interest
rate is the rate of interest which makes the present value of all future inflows and outflows over the life of the receivable or liability equal to its
carrying amount. The interest component of finance lease payments is
recognised in the income statement by applying the effective interest
rate method. Interest receivable includes accrued transaction costs and
any discounts, premiums or other differences between the original value
of the receivable and the amount received at maturity.
Issue costs and other similar direct transaction costs incurred in
raising loans are accrued over the term of the loan.
Dividend income is recognised when the right to receive payment has
been ascertained.
The Group and parent company do not capitalise interest in the cost
of assets.
1.10 Financial instruments
Financial instruments are measured and recognised in the consolidated
financial statements in accordance with the rules of IAS 39. Financial instruments recognised on the asset side of the balance sheet include
cash and cash equivalents, trade receivables, shares and other equity instruments, and derivatives. Included in equity and liabilities are trade payables, issued debt and equity instruments, borrowings and derivatives.
All financial instruments are recognised initially at cost, corresponding
to the instrument’s fair value plus transaction costs. Subsequent recognition depends on how the instruments are classified, as set out below.
A financial asset or financial liability is recognised in the balance sheet
when the company becomes a party to the contractual terms of the instrument. Trade receivables are recognised in the balance sheet when an
invoice has been sent. Liabilities are recognised once the counterparty
has performed and there is a contractual obligation to pay, even if an invoice has not yet been received. Trade payables are recognised when an
invoice has been received.
A financial asset is derecognised from the balance sheet when the
rights in the contract are transferred or expire or the company loses
control over them. The same applies to parts of a financial asset. A
financial liability is derecognised when the obligation in the contract is
discharged or in some other way extinguished. The same applies to parts
of a financial liability.
Acquisitions and disposals of financial assets are recognised on the
trade date, which is the day when the company makes a binding commitment to buy or sell the asset.
The fair value of quoted financial assets is the asset’s quoted bid price
on the balance sheet date. For further information, see Note 6.
53
Annual Report
At each reporting date, the company assesses whether there are
any objective indications that a financial asset is impaired. In the case
of equity instruments classified as assets available for sale, a significant
and prolonged decline in fair value below the instrument’s cost is required
before an impairment loss is recognised. When an impairment loss is to
be recognised in respect of an asset classified as available for sale, any
previous cumulative decrease in value recognised in equity is transferred
to the income statement. Impairment losses on equity instruments recognised in the income statement cannot subsequently be reversed through
the income statement.
Financial instruments are grouped into categories in accordance with
IAS 39. This classification is based on the intentions behind the acquisition of the financial instrument. Management determines the classification at the original acquisition date. The four categories relevant to the
ÅF Group are as follows:
Loan receivables and trade receivables
Loan receivables and trade receivables are financial assets other than
derivatives with fixed or measurable payments which are not quoted on
an active market. These receivables arise when companies make money,
goods or services available to a debtor immediately without any intention to trade the right to receive payment. Assets in this category are
carried at amortised cost. Amortised cost is determined on the basis of
the effective interest rate calculated at the acquisition date. Assets with a
short maturity are not discounted.
Financial assets available for sale
This category comprises shares and similar instruments. Assets in this
category are carried at fair value, and fair value changes are recognised
in equity. When the investment is derecognised from the balance sheet,
accumulated gains or losses previously recognised in equity are transferred to the income statement.
Financial liabilities
Financial liabilities are carried at amortised cost. Amortised cost is determined on the basis of the effective interest rate calculated at the time the
liability was assumed. This means that unrealised gains and losses and
direct issue costs are accrued over the term of the liability.
Derivatives used for hedging
All derivatives are carried in the balance sheet at fair value. In the case of
cash flow hedges, value changes are recognised in a separate category
in equity until the hedged item is recognised in the income statement.
Hedge accounting is described in more detail below.
1.10.1 Cash and cash equivalents
Cash and cash equivalents consist of cash, immediately accessible deposits with banks and similar institutions, and short-term liquid investments
with a maturity of less than three months from the date of purchase, which
are subject to only an insignificant risk of changes in value.
1.10.2 Financial assets and investments
Financial investments are classified as either financial non-current assets
or current investments depending on the intentions behind them. They
are classified as financial non-current assets if the maturity or expected
holding period is more than one year, and as current investments if it is
less than one year.
1.10.3 Non-current receivables and other receivables
Non-current and other receivables are receivables which arise when the
company makes money available without any intention of trading the right
to payment. They are classified as non-current receivables if the expected
holding period is more than one year, and as other current receivables if it
is less than one year. These receivables belong to the category “Loan
receivables and trade receivables”.
1.10.4 Trade receivables
Trade receivables belong to the category “Loan receivables and trade
receivables”. Trade receivables are carried at the amount expected to be
received less doubtful debts, which are assessed individually. The
expected life of trade receivables is short, and so they are carried at
their nominal value without discounting. Losses on trade receivables are
recognised in operating expenses.
1.10.5 Liabilities
Liabilities belong to the category “Financial liabilities”, which means that
they are initially recognised as the amount received less transaction
costs. Subsequently the loans are carried at amortised cost using the
effective interest rate method. Non-current liabilities have an expected
maturity of more than one year, while current liabilities have a maturity of
less than one year.
54
1.10.6 Convertible debentures issued
Convertible debentures can be converted into shares by the counterparty
exercising his option to convert the instrument into shares, and are recognised as a compound financial instrument comprising a liability component
and an equity component. The fair value of the liability is calculated by
discounting future cash flows using the current market interest rate for
an equivalent liability without a conversion right. The value of the equity
instrument is calculated as the difference between the issue proceeds
when the convertible debenture was issued and the fair value of the
financial liability at the time of issue. The transaction costs relating to the
issue of a compound financial instrument are apportioned between the
liability component and the equity component in the same proportions as
the issue proceeds. The interest cost is recognised in the income statement
and calculated using the effective interest rate method.
1.10.7 Trade payables
Trade payables belong to the category “Financial liabilities”. Trade payables have a short expected life and are carried at nominal value without
discounting.
1.11 Derivative instruments and hedging
The ÅF Group uses derivatives to a limited extent to hedge future flows in
foreign currency.
The effective portion of changes in the fair value of derivative instruments which are identified as cash flow hedges and meet the criteria for
hedge accounting is recognised in equity. The gain or loss attributable
to the ineffective portion is recognised immediately in the income statement.
Accumulated amounts in equity are transferred to the income statement in the periods when the hedged item affects profit/loss (e.g. when
the forecast sale being hedged takes place). When a hedging instrument
expires or is sold, or the hedge no longer meets the criteria for hedge
accounting, and there are accumulated gains/losses relating to the
hedge in equity, these gains/losses remain in equity and are recognised
in the income statement at the same time as the forecast transaction is
finally recognised in the income statement. When a forecast transaction
is no longer expected to take place, the accumulated gain/loss recognised in equity is immediately transferred to the income statement.
Information on the fair value of different derivative instruments used
for hedging purposes is provided in Note 6. Changes in the hedging
reserve in equity are shown in Note 24.
1.12 Tangible non-current assets: Property, plant and equipment
1.12.1 Owned assets
Tangible non-current assets (property, plant and equipment) are recognised as assets in the balance sheet if it is probable that future economic
benefits will flow to the Group, and that the cost of the item can be
measured reliably. Property, plant and equipment are recognised in the
consolidated financial statements at cost less accumulated depreciation
and any impairment losses. Cost is defined as the purchase price plus
any additional expenses directly attributable to bringing the asset to the
location and condition necessary for it to be capable of operating in the
intended manner. Examples of directly attributable additional expenses
included in cost are the costs of delivery and handling, installation, title
deeds, consulting services and legal services. Borrowing costs are not
included in the cost of self-constructed assets. The accounting policies
for impairment are set out below.
The carrying amount of an asset is derecognised from the balance
sheet on retirement or disposal or when no future economic benefits are
expected to flow from the use or retirement/disposal of the asset. The
gain or loss arising on the disposal or retirement of an asset is the difference between the disposal proceeds and the carrying amount less direct
costs to sell. The gain or loss is recognised under other operating income/expenses.
1.12.2 Leased assets
Leased assets are accounted for in accordance with IAS 17. Leases are
classified as either finance leases or operating leases in the consolidated
financial statements. A lease is classified as a finance lease if it transfers
substantially all the risks and rewards incidental to ownership to the
lessee. Otherwise it is classified as an operating lease.
Assets held under finance leases are recognised as assets in the consolidated balance sheet. The liability to make future lease payments is
recognised under non-current and current liabilities. The leased assets
are depreciated on a straight-line basis, while the lease payments are
recognised as a finance charge and a reduction in the liability.
With operating leases, the lease payments are recognised as expense
over the lease term on the basis of the user’s benefit, which may differ
from the actual payments made during the year.
Annual Report
1.12.3 Depreciation
Depreciation is charged on a straight-line basis over the estimated useful life of an asset.
Estimated useful lives:
Plant and machinery
Equipment, tools, fixtures and fittings
3 – 10 years
3 – 10 years
An asset’s residual value and useful life are reviewed annually.
1.13 Intangible assets
1.13.1 Goodwill
Goodwill is the difference between the cost of a business combination
(i.e. corporate acquisition, takeover, etc.) and the fair value of the assets
acquired and liabilities and contingent liabilities assumed.
When it comes to goodwill arising on business combinations before
1 January 2004, the Group has not applied IFRS retroactively; instead
the carrying amount on that date will continue to be the historical cost
of acquisition in the consolidated financial statements, net of impairment
losses.
Goodwill is apportioned between cash-generating units and is no
longer amortised but is instead tested annually for impairment (see
§1.14 below). Thus goodwill is carried at cost less accumulated impairment losses. Goodwill arising on the acquisition of associates is included
in the carrying amount of the investment in the associate.
Where the cost of a business combination is less than the net fair
value of the assets acquired and liabilities and contingent liabilities
assumed, the difference is recognised immediately in the income statement.
1.13.2 Research and development
Expenditure on research aimed at obtaining new scientific or technical
knowledge is recognised as expense as it is incurred.
Expenditure on development where research results or other knowledge is applied to achieve new or improved products or processes is
recognised as an asset in the balance sheet if the product or process
is technically and commercially feasible and the company has sufficient
resources to complete its development and then use or sell the intangible
asset. The carrying amount includes the cost of materials, direct payroll
costs and indirect costs which can reasonably and consistently be attributed to the asset. Other development expenditure is recognised in the income statement as expense as it is incurred. Development expenditure
recognised in the balance sheet is carried at cost less accumulated
amortisation and impairment losses.
1.13.3 Other intangible asset
Other intangible assets acquired by the Group are recognised at cost
less accumulated amortisation (see below) and impairment losses (see
§1.14 below).
Costs incurred in respect of internally generated goodwill and internally
generated trademarks are recognised in the income statement as they are
incurred.
1.13.4 Subsequent expenditure
Subsequent expenditure on capitalised intangible assets is recognised
as an asset in the balance sheet only if it increases the future economic
benefits from the specific asset to which it relates. All other expenditure
is recognised as expense as it is incurred.
1.13.5 Amortisation
Amortisation is recognised in the income statement on a straight-line
basis over the estimated useful life of the asset, unless its useful life is
indefinite. Goodwill and intangible assets with an indefinite life are tested
for impairment annually or as soon as there are indications that the asset
in question has diminished in value. Amortisable intangible assets are
amortised from the date they become available for use. The estimated
useful lives are as follows:
Capitalised development expenditure:
Acquired intangible assets:
1–3 years
1–10 years
1.14 Impairment
The carrying amounts of the Group’s assets – with the exception of
assets held for sale recognised in accordance with IFRS 5 and deferred
tax assets – are tested at each balance sheet date to assess whether
there is any indication of impairment. If there is any such indication, the
asset’s recoverable amount is determined. The carrying amounts of
the exceptions stated above are tested in accordance with the relevant
standard.
The recoverable amount is the higher of fair value less costs to sell and
value in use. When calculating value in use, future cash flows are discounted
at a discount rate which reflects the risk-free rate of interest and the risk
associated with the specific asset. Where an asset does not generate cash
flows which are essentially independent of other assets, the recoverable
amount is calculated for the cash-generating unit to which the asset
belongs. The impairment loss is the amount by which the asset’s carrying
amount exceeds its recoverable amount. Impairment losses in respect of
cash-generating units are allocated in the first instance to goodwill and
then to the other assets included in the unit on a pro rata basis.
In the case of goodwill and other intangible assets with an indefinite
life, and intangible assets not yet ready for use, the recoverable amount
is calculated annually.
1.15 Share capital
Dividends are recognised as a liability once approved by the general
meeting.
1.16 Employee benefits
1.16.1 Defined-contribution retirement benefit plans
Obligations to contribute to defined-contribution plans are recognised as
an expense in the income statement as they arise.
1.16.2 Defined-benefit retirement benefit plans
The Group’s obligations under defined-benefit plans are calculated separately for each plan by estimating the future benefits earned by employees through their employment in both the current and prior periods.
These benefits are discounted to present value. The discount rate is the
market yield on the balance sheet date on a first-class corporate bond
with a maturity corresponding to that of the Group’s retirement benefit
obligations. Where there is no active market for such corporate bonds,
the market yield on government bonds with a corresponding maturity is
used instead. The calculations are performed by a qualified actuary using
the projected unit credit method.
When the benefits under a plan are increased, that part of the increase
relating to employees’ service in prior periods is recognised as expense
in the income statement on a straight-line basis over the average period
until the benefits become fully vested. If the benefits are fully vested, the
expense is recognised immediately in the income statement.
Actuarial gains and losses are recognised in equity.
Where there is a difference between how retirement benefit costs are
determined by the Group and its constituent companies, a provision or
receivable is recognised in respect of special employer’s contributions
to reflect this difference. The provision or receivable is not discounted to
present value.
1.16.3 Other long-term employee benefits
The same principles are applied as to defined-benefit retirement benefit plans.
1.16.4 Termination benefits
A provision is made for termination benefits only when the company is
demonstrably committed to terminating employment before the normal
date, or when the benefits are the result of an offer made in order to
encourage voluntary redundancy. Where a company makes staff
redundant, a detailed plan is drawn up specifying as a minimum the
location, function and approximate number of employees involved, the
benefits for each job classification or function, and the time at which the
plan will be implemented.
1.17 Provisions
A provision is recognised in the balance sheet when the Group has a
present legal or constructive obligation as a result of a past event, and
when it is probable that an outflow of economic resources will be required to meet this obligation, and a reliable estimate of the amount of
the obligation can be made. Where the effect of when payment takes
place is significant, provisions are calculated by discounting expected
future cash flows at a rate of interest before tax which reflects current
market assessments of the time value of money and, where appropriate,
the risks associated with the liability.
Provisions for restructuring are made once the Group has adopted a
detailed and formal restructuring plan, and the work of restructuring has
either begun or been publicly announced. No provisions are made for
future operating expenses.
1.18 Tax
Income taxes comprise current tax and deferred tax. Income taxes are
recognised in the income statement except where the underlying transaction is recognised in equity, in which case the associated tax effect is
also recognised in equity.
55
Annual Report
Current tax is the tax payable or recoverable in respect of the current
year, based on the tax rates enacted or substantively enacted as at the
balance sheet date, including adjustments of current tax in respect of
prior periods.
Deferred tax is calculated using the liability method on the basis of
temporary differences between the carrying amount and tax base of
assets and liabilities. The following temporary differences are disregarded: temporary differences arising on the initial recognition of goodwill;
the initial recognition of assets and liabilities which do not constitute business combinations and affect neither recognised nor taxable income at
the time of the transaction; and temporary differences attributable to
investments in subsidiaries and associates which are not expected to
reverse in the foreseeable future. The valuation of deferred tax is based
on how the carrying amounts of assets and liabilities are expected to be
realised or adjusted. Deferred tax is calculated using the tax rates and
tax rules enacted or substantively enacted as at the balance sheet date.
Deferred tax assets in respect of deductible temporary differences
and unused tax losses are recognised only to the extent that it is probable that they can be utilised. The value of deferred tax assets is reduced
when it is no longer deemed probable that they can be utilised.
Any additional income tax arising on the payment of dividends is
recognised at the same time as the dividend is recognised as a liability.
1.19 Non-current assets held for sale
A non-current asset is classified as held for sale if its carrying amount
will be recovered primarily through sale and not through use.
When first classified as held for sale, non-current assets are recognised at the lower of carrying amount and fair value less costs to sell.
1.20 Contingent liabilities
A contingent liability is reported when there is a potential obligation relating
to past events whose existence will be confirmed only by one or more
uncertain future events, or when there is an obligation which is not recognised as a liability or provision because it is not probable that an outflow
of resources will be required.
1.21 Parent company accounting policies
The parent company has prepared its annual report in accordance with
the Swedish Annual Accounts Act (1995:1554) and the Swedish Financial
Accounting Standards Council’s recommendation RR32 “Accounting for
legal entities”. RR32 requires that the parent company’s annual report
applies all IFRS standards and interpretations approved by the EU as far
as is possible within the constraints of the Annual Accounts Act and while
taking into account the relationship between reporting and taxation. The
recommendation specifies which exceptions and supplements are to
be made with respect to IFRS. The differences between the accounting
policies of the Group and parent company are presented below.
In accordance with the transitional provisions of RR32, the company has chosen not to apply chapter 4, section 14, (a)–(e) of the Annual
Accounts Act, which permit the reporting of various financial instruments
at fair value. However, these provisions will be applied with effect from
1 January 2006. This will involve a change in accounting policy.
The accounting policies presented below for the parent company have
been applied consistently to all periods presented in the parent company’s financial statements.
1.21.1 Revenue
Sales of goods and rendering of services
The parent company recognises services rendered when the service
is completed in accordance with chapter 2, section 4 of the Swedish
Annual Accounts Act. Until then, work in progress is recognised at the
lower of cost and net realisable value on the balance sheet date.
Dividends
Dividend income is recognised when the right to receive payment is considered to be certain.
1.21.2 Financial instruments
The parent company does not apply the measurement rules of IAS 39.
The parent company reports non-current financial assets at cost less
impairment losses, and current financial assets at the lower of cost and
net realisable value. The parent company holds no derivatives, and so
hedge accounting is not applied.
56
1.21.3 Tangible non-current assets: Property, plant and equipment
leased assets
The parent company reports all leases on the basis of the rules for
operating leases.
1.21.4 Intangible assets
The parent company recognises all development expenditure as expense
in the income statement.
1.21.5 Non-current assets held for sale
The parent company applies IFRS 5 with the exceptions set out in
RR32.7–8.
IFRS 5.33a and 5.38 require certain information to be disclosed in the
income statement and balance sheet. This is not compatible with the formats in the appendices to the Swedish Annual Accounts Act. The information in question, along with other information to be disclosed under
IFRS 5, is disclosed in the notes instead.
IFRS 5.25, which requires that non-current assets held for sale are not
depreciated/amortised, is not applied. Depreciation/amortisation has
been charged in accordance with chapter 4, section 4 of the Swedish
Annual Accounts Act.
1.21.6 Employee benefits
Defined-benefit plans
The parent company applies a different basis for the calculation of
defined-benefit plans to that set out in IAS 19. The parent company
complies instead with the provisions of the act on the safeguarding of
pensions benefits (Tryggandelagen) and the regulations of the Swedish
financial supervisory authority Finansinspektionen, as this is a requirement
for tax deductibility. The most important differences relative to the
provisions of IAS 19 are the way in which the discount rate is determined, the calculation of defined-benefit obligations on the basis of
current salary levels without making assumptions about future wage
growth, and the recognition of all actuarial gains and losses in the
income statement as they arise.
1.21.7 Taxes
The parent company reports untaxed reserves inclusive of deferred tax
liabilities. In the consolidated financial statements, untaxed reserves are
apportioned between a deferred tax liability and equity.
1.21.8 Group contributions and shareholder contributions for legal
entities
The company reports group contributions and shareholder contributions
in accordance with the statement issued by the Swedish Financial
Accounting Standards Council’s Emerging Issues Task Force. Shareholder contributions are recognised by the recipient in equity and capitalised under “Participations in Group companies” by the contributor net of
impairment losses.
Group contributions are reported on the basis of economic reality.
This means that Group contributions paid in order to minimise the
Group’s overall tax liability are recognised in retained earnings net of their
current tax effect. Group contributions comparable with dividends are
treated as dividends. This means that Group contributions received and
their current tax effect are recognised in the income statement. Group
contributions paid and their current tax effect are recognised in retained
earnings. Group contributions comparable with shareholder contributions are recognised by the recipient in retained earnings taking account
of the current tax effect. The contributor reports the Group contribution
and its current tax effect under “Participations in Group companies” net
of impairment losses.
Annual Report
3
The results for 2005 have not been affected, since all changes in
value have been entered in equity.
Changes in accounting policies, 1 January 2005
In accordance with the rules for transition to IFRS, the new policies for
financial instruments, IAS 32 and IAS 39, are applied only to the sections
of the accounts which relate to 2005.
Under IFRS, financial assets which are classified as “Financial assets
held for sale” and all derivative instruments are recognised at fair value.
The effect of recognising shares and other share-related securities,
which have been classified as “Financial assets held for sale”, at fair
value is that the value of the financial assets and the fair value reserve in
equity increase by SEK 439,000 and SEK 854,000 as at 1 January 2005
and 31 December 2005 respectively. Deferred tax amounted to SEK
123,000 and SEK 239,000 respectively. Valuing derivative instruments
at fair value has increased the recognised value of derivative instruments
and the hedging reserve in equity by SEK 1,498,000 as at 1 January
2005 and reduced it by SEK 42,000 as at 31 December 2005. Deferred
tax totalled SEK 419,000 and SEK – 12,000 respectively.
IAS 19, amended November 2005
The treatment of provisions for retirement benefits in the accounts for
2005 reflects a change in the accounting policies applied from the 2004
accounts. In accordance with the amended version of IAS 19, the company has elected to recognise actuarial gains and losses in equity. The
figures for 2004 have not been restated because actuarial losses as at
31 December 2004 were not material.
Total actuarial losses recognised in equity as at 31 December 2005
amounted to SEK 3,900,000 after a deduction of SEK 1,516,000 for
deferred tax.
Reconciliation of equity with regard to the effect of the transition to IAS39
Equity attributable to parent company shareholders
Share capital
Other
contributed
capital
118,488
18,811
Equity 1 Jan 2005
Adjustment for change in accounting principles
Adjustment for change in accounting principles, deferred tax
Adjusted equity 1 Jan 2005
4
118,488
18,811
Reserves
Profit br’t fwd.
incl. profit
for the year
Total
Minority
interest
–132
249,653
386,820
4,067
1,937
1,937
–542
–542
1,263
249,653
Total
equity
390,887
1,937
–542
388,215
4,067
392,282
Reconciliation of profit for 2004 (SEK million)
Explanations relating to the transition to IFRS
These consolidated financial statements are the first to be drawn up in
accordance with IFRS, as explained in Note 2.
The accounting policies specified in Note 2 have been applied in drawing up the consolidated financial statements for financial year 2005 and
for the comparison year 2004, as well as for the consolidated opening
balances on 1 January 2004, apart from those relating to IAS 32 and 39,
which, in accordance with the exemptions in IFRS 1, are applied only for
2005.
In the preparation of the opening consolidated balance sheet, the
amounts recognised under the previously applied accounting policies
have been adjusted in accordance with IFRS. Details of how the transition
from the previous accounting policies to IFRS has affected the consolidated financial position, financial results and cash flow are given in the
following tables and the accompanying commentaries.
The application of IAS 32 and 39 with effect from 1 January 2005 is
dealt with in Note 3.
Annual report
2004
Transition
effect
2004 under
IFRS
Operating income
2,160.2
–0.5
2,159.8
Personnel costs
– 1,428.3
–13.4
–1,441.7
Other expenses
–635.3
–3.8
–639.1
–63.0
16.3
–46.7
Depreciation/amortisation
Participation in the results of
associated companies
Operating profit
Net financial income/expense
Profit after net financial
income/expense
Tax
Minority share of results
Profit after tax
2.5
1.7
4.2
36.1
0.4
36.5
–5.2
–5.2
30.9
0.4
–0.9
5.6
31.3
4.7
0.0
30.0
0.0
6.0
36.0
Reconciliation of equity (SEK million)
Attributable to:
Effect on equity 1 January 2004
Equity 1 January 2004 under previous policies
Adjusted for minority share
Equity 1 January 2004 in accordance with IFRS
Parent Company shareholders
344.0
Adjusted for minority share
Reversal of impairment of goodwill
0.0
0.6
344.6
Effect on equity 31 December 2004 and 1 January 2005
Equity 31 December 2004 under previous policies
36.0
Minority interest
Operating margin, %
1.7
0.00
1.7
Profit margin, %
1.4
0.00
1.4
5.11
1.01
6.13
380.9
4.1
Earnings per share, SEK
13.2
Reversal of impairment of goodwill, associated companies
1.7
Number of outstanding shares
5,924,376
5,924,376
Reversal of depreciation, assets in course of being sold
3.7
Number of outstanding shares,
average
5,880,424
5,880,424
Adjusted for amortisation of intangible assets
Adjusted for capital gain on the sale of properties
Adjusted for acquisition analysis, restructuring reserve
Adjusted for tax effect restructuring reserve
Equity 31 December 2004 in accordance with IFRS
Effect of introduction of IAS 39 1 January 2005
Equity 1 January 2005 in accordance with IFRS
–0.6
–0.5
–17.1
5.6
390.9
Comment on significant adjustments
to the cash flow statement for 2004
There are no significant differences between the cash flow statement
drawn up in accordance with IFRS and the cash flow statement drawn up in
accordance with the previously applied accounting policies.
1.4
392.3
57
Annual Report
5
Critical estimates
Key sources of estimation uncertainty
The Group makes estimates and assumptions about the future. By definition, the resulting accounting estimates will rarely correspond to the
actual outcome. Estimates and judgements are reviewed regularly and
are based on historical experience and other factors, including expectations of future events, which are considered reasonable under the
circumstances.
Those estimates and assumptions which, if changed, could result in
material adjustments to the carrying amounts of assets and liabilities
during the coming financial year are presented below.
Impairment of goodwill
When calculating the recoverable amount of cash-generating units, a number
of assumptions about future circumstances and estimates of parameters
have been made. Changes to these assumptions and estimates could have
an effect on the carrying amount of goodwill (see Note 16).
The forecasts of future cash flows used are based on the budget
adopted by management for the coming year supplemented with a general assessment covering a further five years. The forecast cash flows
have been based on an estimated annual growth rate of 2–3 percent.
The forecast cash flows have been discounted to present value at a discount rate of 10 percent before tax.
A lower assumed rate of growth would result in a lower recoverable
amount. The reverse applies if the calculation of the recoverable amount
is based on a higher assumed growth rate. Were future cash flows to be
discounted at a higher rate of interest, the recoverable amount would
be lower, while the recoverable amount would be higher with a lower
discount rate.
Retirement benefit obligations
The Group’s net obligations under defined-benefit plans are calculated
separately for each plan by estimating the future benefits earned by
employees through their employment in prior periods. These benefits are
discounted to present value. The calculation of the size of the Group’s
total retirement benefit obligations is based on a number of assumptions
(see Note 32). The discount rate is the market yield on the balance sheet
date on a first-class corporate bond with a maturity corresponding to that
of the Group’s estimated average retirement benefit obligations. The discount rate used is 4.2 percent. The calculations have been performed
by a qualified actuary using the projected unit credit method. Were a lower discount rate to be used, the obligations would increase and have a
negative effect on the Group’s equity. The reverse applies if a higher discount rate is used.
Stage of completion of contracts
The percentage of completion method is applied to all assignments
whose outcome can be measured reliably. The majority of assignments
are performed on an open-account basis, and clients are normally invoiced one month after the work is carried out. Where assignments
are carried out on a fixed-price basis, revenue is recognised in the income statement on the basis of the stage of completion on the balance
sheet date. The stage of completion is determined by having an assignment manager make an assessment of the amount of work completed
and remaining. In the event of significant uncertainty about its value, no
revenue is recognised.
6
Financial risks
The Group’s overall risk management policy focuses on the unpredictability of
the financial markets. The aim is to ensure cost-effective financing while minimising the negative effects of market fluctuations on the Group’s earnings.
Derivative instruments are used to hedge some risk exposure.
The Group’s risk management is handled centrally by the parent company’s Corporate Finance department on the basis of policies adopted by
the Board of Directors. Corporate Finance identifies, evaluates and hedges
financial risks in close collaboration with the Group’s operating units.
The Group is exposed to many different kinds of financial risk through
its operations, including exchange rate risk, interest rate risk, credit risk,
financing risk and price risk.
Exchange rate risk
Exchange rate risk covers future business transactions, recognised
assets and liabilities in foreign currency, and net investments in foreign
operations. Exchange rate risk is relatively limited in the ÅF Group.
Loans are raised, and investments made, in the functional currency.
Foreign subsidiaries account for a small part of the Group’s total
assets, and so translation exposure resulting from the revaluation of foreign subsidiaries’ net assets is relatively limited. The ÅF Group therefore
has a policy of not hedging currency translation exposure.
Exchange rate risks are also relatively limited as most payments
are made in the functional currency. Where this is not the case, large
amounts are hedged using derivatives. The Group classifies the forward
contracts used for hedging forecast transactions as cash flow hedges. The net fair value of these forward contracts was SEK –40,000 (SEK
1,498,000) at the end of the year. The hedges were performed during
the fourth quarter of 2005 and mature on 31 January 2006. Assets totalled SEK 0 (SEK 2,004,000) and liabilities SEK 40,000 (SEK 506,000).
The SEK –40,000 has been included in the balance sheet under “Other
liabilities”.
2005
2004
Fair value
Book value
Fair value
Book value
EUR
—
—
308
—
GBP
—
—
1,412
—
MYR
—
—
284
—
Receivables
Liabilities
USD
—
—
–506
—
EUR
–40
–40
—
—
Net
–40
–40
1,498
—
Interest rate risk
In accordance with ÅF policy, the Group’s cash and cash equivalents are
deposited in bank accounts at local banks. There are no other material
interest-bearing assets, and so income and cash flows from operating
activities are essentially independent of changes in market interest rates.
Liabilities to credit institutions are primarily bank loans with a fixed
rate of interest.
Credit risk
Credit risk is a result of the company having at all times a substantial number of outstanding trade receivables, in other words the credit granted to
clients. This risk is limited through the Group’s set principles for ensuring
that sales are made to clients with an appropriate payment history, and
through advance payments. Counterparties for derivative contracts and
cash transactions are limited to financial institutions with a high credit
rating. Historically the Group has recorded very limited credit losses.
Financing risk
Financing risk is the risk of not being able to obtain financing at all, or
only at a greatly inflated price. For the ÅF Group, prudent management
of financing risk means having adequate cash and cash equivalents and
committed credit lines.
The Group’s liabilities to credit institutions have fallen sharply as a
direct result of the disposals of properties during the year. See Note 25
for information on maturity structure and interest rate levels.
Calculation of fair value
The following summarises the main methods and assumptions used to
determine the fair value of the Group’s financial instruments.
Securities
Fair value is based on the quoted market price on the balance sheet date
less transaction costs.
Derivative instruments
Forward contracts are valued by discounting the forward price and
deducting the spot price.
58
Annual Report
7
Segment reporting
Primary segments – by division (in millions of Swedish kronor, MSEK)
Inspection
Infrastructure
2004
Process
2005
Systems
2005
2004
2005
Sales to external clients
204.2
173.4
740.4
—
—
—
—
—
—
2.3
2.6
37.3
36.0
55.3
206.5
176.0
777.7
Others & elim.
2004
2005
2004
662.0 1,068.0 1,057.7
235.7
—
34.3
29.7
698.0 1,123.2 1,092.0
265.4
ÅF Group
2005
2004
2005
2004
302.3
20.6
–59.4
—
136.5
23.8
136.5
23.8
39.7
–124.6 –112.6
0,0
0,0
342.0
32.5 –148.2
Income
Sales between segments
Total income
Operating expenses
–178.9
–156.7
–0.4
0.0
–2.5
–0.2
–0.5
–0.6
–1.5
0.0
–1.6
–1.0
–6.5
–1.8
Depreciation and impairment of
tangible non-current assets
–5.4
–5.9
–8.9
–9.7
–12.9
–15.2
–4.9
–6.9
–8.5
–7.2
–40.6
–44.9
21.8
13.4
56.7
41.7
39.7
21.5
1.5
–45.7
106.6
5.6
226.4
36.5
Operating margin, %
–257.5 –380.8
84.2
2,405.4 2,159.8
Depreciation and impairment of
intangible non-current assets
Of which participations in profit/
loss of associated companies
–709.6 –646.4 –1,070.1 –1,054.7
2,268.9 2,136.0
162.0 –2,131.9 –2,076.6
0.9
0.9
3.6
0.6
1.8
2.7
—
—
—
—
6.3
4.2
10.5
7.6
7.3
6.0
3.5
2.0
0.6
–13.4
328.0
–3.8
9.4
1.7
Assets and liabilities
Intangible non-current assets
2.2
0.3
56.8
37.0
64.8
54.1
5.7
13.7
2.3
2.4
131.8
107.5
Tangible non-current assets
11.3
13.2
17.2
20.3
24.6
29.4
9.0
12.5
24.4
19.2
86.5
94.6
Other assets
68.3
46.4
289.1
256.5
415.0
501.3
92.6
150.4
136.8
145.0
Of which proportion of
equity in associated companies
1,001.8 1,099.6
2.3
2.4
17.3
18.2
4.8
2.6
—
—
—
—
Total assets
81.8
59.9
363.1
313.8
504.4
584.8
107.3
176.6
163.5
166.6
24,3
23.2
Total liabilities
45.1
46.5
284.1
258.1
406.1
496.3
63.3
140.2
–159.7
–30.3
638.9
910.8
Investment for the year in
intangible non-current assets
2.3
0.3
16.3
15.1
14.7
47.6
0.4
—
0.6
1.5
34.3
64.5
Investment for the year in
tangible non-current assets
3.7
4.9
6.2
8.9
18.9
19.6
1.5
2.2
14.4
13.8
44.7
49.4
1,220.1 1,301.7
Other segment information
Secondary segments – by geographical area (in millions of Swedish kronor, MSEK)
Sweden
Outside Sweden
2005
2004
2005
2004
Sales to external clients
1,783.5
1,750.1
485.4
Assets
Total
2005
2004
385.9
2,268.9
2,136.0
1,301.7
1,014.7
1,065.8
205.4
235.9
1,220.1
Investment for the year in intangible non-current assets
34.2
9.1
0.1
55.4
34.3
64.5
Investment for the year in tangible non-current assets
30.8
44.5
13.9
6.3
44.7
49.4
8
Acquisition of business operations
In 2005 ÅF acquired all the shares in Infraplan AB. At the end of 2005
the former associated company, Konsultgruppen STIBI AB, became
a wholly owned subsidiary in the ÅF Group. In addition, the lift inspections business of Force Technology Sweden AB was acquired during the
year, as was a 49 percent stake in the Albanian company ITP-Infra Trans
Project Ltd.
Effects of acquisitions
The acquisitions of the lift inspection business in Force Technology
Sweden AB and 49 percent of the shares in ITP-Infra Trans Project Ltd
have first and foremost concerned staff resources and have not had a
significant impact on the Group’s assets and liabilities. The acquisitions of
Infraplan AB and Konsultgruppen STIBI AB have had the following effect
on the Group’s assets and liabilities.
Assets of the acquired companies on the date of acquisition:
Recognised value Fair value
of Infraplan AB
adjustbefore acquisition
ment
Fair value
in the
Group
166
—
166
Accounts receivable and other receivables 3,210
—
3,210
Cash and cash equivalents
3,882
—
3,882
Interest-bearing liabilities
–1,000
—
–1,000
Accounts payable and other liabilities
–2,548
—
–2,548
Net identifiable assets
and liabilities
3,710
0
3,710
Intangible assets
600
Consolidated goodwill
2,900
Liability to the seller
–1,500
Purchase price paid, cash
5,710
Cash (acquired)
3,882
Net cash outflow
1,828
Goodwill which arose on the acquisition of Infraplan AB relates to staff as well
as to strategic opportunities and synergies. Other intangible assets recognised in connection with the acquisition are customer base and brands.
59
Annual Report
Note 8, cont’d
Recognised value Fair value
of Konsultgruppen
adjustSTIBI AB before acquisition
ment
Fair value
in the
Group
32
—
32
2,008
—
2,008
Accounts receivable and other receivables 5,689
—
5,689
Income generated but not invoiced
3,729
—
3,729
Accounts payable and other liabilities
–6,519
—
–6,519
Net identifiable assets
and liabilities
4,939
0
4,939
Group
Overheads
2005
2004
51,127
34,642
Property tax
1,571
2,182
52,698
36,824
Parent company
Intangible assets
600
Consolidated goodwill
3,847
Correction for previously-owned participation
–3,922
Liability to the seller
Overheads
2004
35,588
1,571
2,145
Property tax
Loss from sales of properties
–720
Purchase price paid, cash
2005
51,240
—
225
52,811
37,958
4,744
Cash (acquired)
3,729
11
Net cash outflow
1,015
The total remunerations are included under “Personnel costs”.
Goodwill which arose on the acquisition of Konsultgruppen STIBI AB
relates to staff as well as to strategic opportunities and synergies.
Other intangible assets recognised in connection with the acquisition are
customer base and brands.
Employees and personnel costs
Average number of employees by gender
2005
Women
Men
2004
Women
Men
Parent company
Financial effects of operating acquisitions
For the financial year 1 July 2004 to 31 December 2005, the company
Infraplan AB recognised profits after tax of SEK 3,509,000. For the period
in which the company has formed part of the Group’s Infrastructure Division,
after-tax profits of SEK 1,493,000 were recognised.
For financial year 2005, the company Konsultgruppen STIBI AB recognised profits after tax of SEK 1,440,000. For the whole of 2005, the company was an associated company in the ÅF Group’s Infrastructure Division,
for which reason the company’s profits for the year were recognised as
part of the results of associated companies. During 2005, the company
made a positive contribution of SEK 706,000 to the Group’s results.
9
Sweden
30
39
30
32
Sweden
399
1,634
380
1,697
Finland
31
221
45
198
Norway
12
80
7
52
France
13
42
15
55
Germany
6
27
6
14
Others
0
4
0
0
461
2,008
453
2,016
491
2,047
483
2,048
Subsidiaries
The Group’s costs for research and development totalled approximately
SEK 26,662,000 (SEK 27,841,000). The amount comprises mostly
costs for time spent on R&D projects by ÅF’s own salaried employees.
Group total
Total average number
of employees
Total for associated companies
10
Other operating income and expenses
Other operating income and other operating expenses refer to income
and expenses relating to property management.
Total average number of
employees including
associated companies
2,538
2,531
142
116
2,680
2,647
Proportion of women in senior management positions
2005
Percentage
of women
2004
Percentage
of women
Board members
36
33
Other senior positions
17
9
Board members
12
19
Other senior positions
12
9
Group
Profit from sale of Group properties
2005
2004
136,014
23,138
434
644
136,448
23,782
Rental income
Parent company
Group overall
The profit recognised above from the sale of the Group’s properties in
2005 has been reduced by reserving an allowance of SEK 9,200,000 for
future removal costs. This reservation has been made as the agreement
reached with the new owner of the Group’s premises makes the removal
of the Group’s business activities inevitable.
Parent company
Rental income
2005
2004
47,042
39,978
Of the total amount of rental income received by the parent company,
SEK 46,608,000 (SEK 39,334,000) relates to rental payments from
Group companies.
60
Annual Report
Note 11, cont’d
Salaries, other remuneration and payroll overheads
2005
Salaries
and remunerations
2004
Salaries
Social and remucosts nerations
Social
costs
2,220
3,726
2,423
20,135
12,172
Parent company
Board & President/CEO
4,491
(of which pension expenses)
Other employees
1,006
29,705
16,988
1,229
7,303
4,896
34,196
19,208
23,861
14,595
17,211
7,398
22,541
12,862
Group
Boards & Managing
Directors
Other employees
3,573
5,400
961,067
450,599
898,434
453,922
978,278
457,997 920,975
466,784
139,818
Group Boards of Directors and Managing Directors
Salary payments, bonus and other remuneration to Boards of Directors
and Managing Directors in the Group totalled SEK 17,211,000 (SEK
22,541,000). Company car benefits are payable. For managers of
subsidiaries and three senior staff executives in the parent company, the
period of notice varies, depending on age and length of service, from 12
to 18 months. In certain instances, these senior officers of the company
have a right to a pension two years before the retirement age specified
under the SAF/PTK agreement.
68,034
Salaries and other remuneration by country
2005
Boards
Other
and MDs employees
year’s accounts. This bonus is based on the earnings for the Group and may
amount to a maximum of 60 percent of the fixed annual salary. The fixed
annual salary for the current year is SEK 2,772,000.
The President of the parent company is subject to two years’ notice
from the company and has the right to a pension at the age of 60. The
President’s pension is a defined-contribution pension, for which provisions
are made each year for an amount corresponding to 27.5 percent of
the President’s salary and bonus for that specific year. An unchanged
monthly salary is paid out as usual during the period of notice. The
requirement to continue working during the period of notice cannot be
extended beyond a maximum of one year.
2004
Boards
Other
and MDs employees
Group Management, excluding President
For salaries and remuneration to Group Management, consisting
of eleven (ten) executives excluding the President, a total of SEK
14,706,000 (SEK 12,888,000) was expensed, as well as social costs
of SEK 9,881,000 (SEK 8,774,000) in the respective companies. Bonus
payments totalled SEK 2,452,000 (SEK 859,000). Benefits to Group
Management include company cars. Group Management includes the
Managing Directors for four subsidiary companies.
Parent company
Sweden
(of which bonus and
performance-related earnings)
4,491
29,705
3,726
20,135
909
1,823
288
220
Subsidiaries
Sweden
7,236
773,098
11,397
751,208
(of which bonus and
1,187
12,748
772
2,819
Finland
1,096
84,316
758
64,572
(of which bonus and
Norway
(of which bonus and
France
(of which bonus and
Germany
(of which bonus and
Group total
—
—
—
—
2,354
39,204
3,092
29,371
23
—
73
105
223
24,577
2,108
27,599
—
—
—
—
1,811
10,167
1,460
5,549
—
—
17,211
961,067
—
—
22,541 898,434
In addition, a profit-related bonus of SEK 3,600,000 (SEK 1,400,000)
has been paid out. This bonus relates to provisions to ÅFOND, the ÅF
Group Trust, for future pensions. The bonus is extended to all permanent
employees of the Group’s Swedish-based companies.
Remuneration to senior executives
The Board
As resolved by the Annual General Meeting, a total of SEK 800,000 (SEK
700,000) was paid to the Board of Directors. Of this amount, the Chairman received SEK 300,000 (SEK 300,000) as resolved by the Board.
Remuneration to the employee representatives totalled SEK 10,000 (SEK
40,000). No agreements have been signed concerning future pensions
or severance pay for the Chairman or other members of the Board.
Severance pay for senior officers of the company who have terminated
their employment
During 2005 two employees who have previously formed part of ÅF’s
senior management group have received severance payments in the
form of salaries and other remunerations totalling SEK 3,986,000 with
an additional SEK 2,299,000 in social costs.
Determination of remuneration
The level of remuneration paid to the President/CEO for financial year
2005 was set by the Board of Directors following a proposal drafted
by the Board’s Remuneration Committee. Remuneration paid to other
senior executives was set by the President/CEO in consultation with the
Chairman of the Board.
Absence from work due to illness
Parent company
2005
2004
(Figures in percent)
Total sick leave as a percentage of
ordinary working time
3.8
4.7
49.9
31.0
Men
4.1
4.1
Women
3.5
5.5
Portion of the total sick leave comprising
absences of 60 consecutive days or more
Sick leave as a percentage of
total ordinary working time for each group:
By gender:
By age group:
29 years old or below
0.8
4.1
30–49 years
2.1
2.8
50 years or above
6.5
6.9
President/CEO
In 2005 salary payments and bonus totalling SEK 3,681,000 (SEK
3,026,000) were made to the Chief Executive Officer, who is also the
President of AB Ångpanneföreningen: this also incurred social costs of SEK
2,220,000 (SEK 2,194,000). Company car benefits are payable. A bonus
of SEK 909,000 (SEK 288,000) was paid which will impact on the current
61
Annual Report
12
14
Fees and remuneration of auditors
Group
2005
2004
Parent company
2005
2004
2,729
Other assignments
2,209
240
Parent company
2005
2004
Difference between depreciation in accounts and
depreciation according to plan
476
402
220
Tax allocation reserve, liquidation during the year
—
30,500
Tax allocation reserve, transfers during the year
Accountants KPMG
Audit assignments
Appropriations
1,707
1,241
1,204
846
4,436
3,450
1,444
1,066
Audit assignments
272
184
—
—
Other assignments
—
258
—
218
272
442
0
218
–22,100
—
–21,624
30,902
Other accounting companies
Audit assignments refer to the auditing of the annual report, the
accounting records and the administration by the Board of Directors
and the Managing Director, other duties which it is incumbent upon the
Company’s auditors to carry out, as well as advice and other assistance
stemming from observations made during such audits or the execution
of such other duties. Everything else falls under the heading “Other
assignments”.
13
Net financial income/expense
Interest income
Dividends
Gain on sale of the dormant subsidiary
Net changes in exchange rates
Earnings per share
34.31
6.13
33.53
5.57
The calculation of the numerators and denominators used in the above
calculations of earnings per share is given below.
Earnings per share before dilution
The calculation of earnings per share for 2005 was based on the net
profit for the year attributable to the parent company’s ordinary shareholders amounting to SEK 204,376,000 (SEK 36,024,000 ) and on a
weighted average number of outstanding shares during 2005 amounting
to 5,957,421 (5,880,424).
2004
2,871
4,231
5,748,569
9
146
85
—
306
—
4,377
Interest expense*
–7,347
–9,529
–450
—
Loss in connection with liquidation
of dormant subsidiary
Net loss on the disposal of financial
assets held for sale
–59
—
Financial expense
–7,856
–9,529
Net financial expense
–4,585
–5,152
Result from
participations in
Group comp.
Result from
participations in
associated comp.
Effect of new issue on acquisition of
CTS OY in March 2004
—
131,855
Effect of new issue in February 2005
33,045
—
Weighted average number of ordinary
shares during the year, before dilution
5,957,421
5,880,424
Earnings per share after dilution
In calculating earnings per share after dilution, the weighted number of
outstanding ordinary shares is adjusted for the dilution effect of all outstanding
potential ordinary shares. The parent company has a category of potential
ordinary shares with dilution effect: convertible debentures. In calculating
earnings per share after dilution, the convertible debentures are assumed to
have been converted into ordinary shares. The net profit is adjusted to
eliminate the interest expense relating to the convertible loan less tax effect.
Profit attributable to the parent company’s ordinary shareholders,
after dilution
Profit attributable to the parent company’s
ordinary shareholders
2005
2004
2005
2004
4,831
26,700
—
—
Effect of interest on convertible debentures
(after tax)
204,085
45,826
—
–4
–185 –54,664
—
—
Profit attributable to the parent company’s
ordinary shareholders, after dilution
0
–4
208,731
After dilution
2005
2004
2005
3,271
Impairments
Before dilution
2005
2004
Total number of ordinary shares 1 January 5,924,376
Financial income
Capital gain on the disposal
of participations
SEK
2004
2005
Dividends
Earnings per share
Weighted average number of outstanding ordinary shares,
before dilution
Group
Parent company
15
17,862
2005
2004
204,376
36,024
628
131
205,004
36,155
Note 13, cont’d
The impairments made during 2005 and 2004 were attributable to the parent company’s holdings in the shares of subsidiaries. The impairments were the consequence of dividends from subsidiaries, as well as the fact that, during the financial year, certain subsidiaries became dormant and are no longer trading.
Results from other securities
and receivables treated as
as non-current assets
Parent company
Interest income
and similar profit/
loss items
Interest expense
and similar profit
loss items
2005
2004
2005
2004
2005
2004
Interest, Group companies
—
—
7,345
6,186
–116
–442
Interest, other*
—
—
1,449
2,356
–4,475
–6,901
Dividends
—
2
—
—
—
—
Other
—
—
—
—
–49
—
0
2
8,794
8,542
–4,640
–7,343
* including interest on retirement benefit provisions
62
Annual Report
Note 15, cont’d
Weighted average number of outstanding ordinary shares,
after dilution
shares during the year, before dilution
2005
2004
5,957,421
5,880,424
156,250
609,840
6,113,671
6,490,264
Effect of conversion of
convertible debentures
shares during the year, after dilution
16
Instruments which may give rise to potential dilution effect and
changes after the balance sheet date
In calculating earnings per share after dilution, the weighted number of
outstanding ordinary shares is adjusted for the dilution effect of all
outstanding potential ordinary shares. The parent company has a category
of potential ordinary shares with dilution effect; convertible debentures.
The convertible debentures are assumed to have been converted into
ordinary shares, and net profit has, therefore, been increased by the
interest after tax on the convertible debenture loan.
Development
Goodwill expenditure
Group
Other
intangible
assets
Total
Development
expenditure
Parent company
Accumulated
acquisition cost
Accumulated acquisition cost
Balance brought fwd
1 Jan 2004
Balance carried fwd 31 Dec 2004
43,165
1,661
—
44,826
Corporate acquisitions
Balance brought fwd 1 Jan 2004
58,002
3,500
565
62,067
Internally developed assets
—
2,495
—
2,495
Exchange rate differences
for the year
18
—
—
18
Balance carried fwd
31 Dec 2004
101,185
7,656
565
—
0
0
5,679
Disposals and retirements
–4,423
1,256
109,406
Accumulated depreciation and write-downs
Balance brought fwd
1 Jan 2005
101,185
7,656
565
109,406
21,753
—
1,200
22,953
Corporate acquisitions
—
7,939
3,433
11,372
—
–5,441
—
–5,441
Write-downs during the year
for the year
1,138
—
–20
1,118
124,076
10,154
5,178
139,408
Balance carried fwd
31 Dec 2005
Accumulated depreciation and write-downs
Balance brought fwd
1 Jan 2004
Write-downs during the year
—
—
—
—
–150
—
—
–150
Depreciation during the year
—
–1,128
–565
–1,693
for the year
—
—
—
—
Balance carried fwd
31 Dec 2004
–150
–1,128
–565
–1,843
Balance brought fwd
1 Jan 2005
–150
–1,128
–565
–1,843
—
749
—
749
Write-downs during the year –2,368
—
—
–2,368
—
–3,568
–580
–4,148
–2,518
–3,947
–1,145
–7,610
Balance carried fwd
31 Dec 2005
Carrying amounts
Per 1 Jan 2004
43,165
1,661
0
44,826
101,035
6,528
0
107,563
Per 1 Jan 2005
101,035
6,528
0
107,563
Per 31 Dec 2005
121,558
6,207
4,033
131,798
Per 31 Dec 2004
Goodwill has been apportioned between cash-generating units, corresponding in the first instance to the Group’s divisions, but also to two major identifiable corporate investments. Goodwill is tested annually for impairment,
after the third quarter or when a need for impairment is indicated, by dis-
—
0
0
—
–556
–556
Carrying amounts
Per 1 Jan 2004
0
Per 31 Dec 2004
0
Per 1 Jan 2005
0
Per 31 Dec 2005
700
counting the expected future cash flow by a weighted average cost of capital per cash-generating unit. The present value of cash flows, the recoverable amount, is compared with the carrying value including goodwill.
During 2005, goodwill was impaired by SEK 2,368,000.
In calculating the recoverable amount of the cash-generating units, a
number of assumptions have been made on future circumstances and estimates have been made of parameters. Changes to these assumptions and
estimates may affect the carrying value of goodwill.
Forecasts used in relation to future cash flows are based on the budget
set by the senior management group for the following year, supplemented
by a general assessment covering an additional five years. The forecast
cash flow is based on estimated annual growth of 2 to 3 percent. The forecast cash flows have been discounted to present value using a discount
rate of 10 percent before tax.
At the end of 2005, goodwill amounted to SEK 121,558,000 (SEK
101,035,000). The carrying value of goodwill is allocated as follows:
Process
61,549,000
Infrastructure 55,733,000
System
4,276,000
Total
121,558,000
The above amount for Process includes goodwill of SEK 41.3 million
which arose on the acquisition of ÅF-CTS. The above amount for Infrastructure includes goodwill which arose on the acquisition of companies
in Norway of SEK 11.3 million. This goodwill has been valued separately.
63
Annual Report
17
Equipment,
tools, fixtures
and fittings
Group
Acquisition costs
Acquired via corporate acquisitions
Other acquisitions
Disposals
Parent company
Acquired via corporate acquisitions
Other acquisitions
Disposals
6,145
43,264
–51,477
219,535
37,420
1,323
10,617
11,940
–56,889
–766
–57,655
163,969
47,271
211,240
163,969
47,271
211,240
258
11,802
12,060
–164,227
–185
–164,412
0
58,888
58,888
–79,325
Acquisitions
Disposals
256,955
–289
362,684
362,684
198
Disposals
44,497
–11,085
Depreciation and write-downs
2,875
399,169
Depreciation and write-downs
Total
Acquisition costs
365,041
Acquisitions
Equipment,
Land tools, fixtures
and buildings
and fittings
–50,057
–29,268
–3,297
–5,377
–8,674
Disposals
15,810
674
16,484
–37,544
–33,971
–71,515
–71,515
–268,102
-44,890
–37,544
–33,971
Disposals
45,666
–2,223
–6,799
–9,022
39,767
84
39,851
0
–40,686
–40,686
–771
–268,097
–268,097
–40,591
Disposals
–2,132
–1,843
–312,663
Carrying amounts
Per 1 Jan 2004
169,478
8,152
177,630
Per 31 Dec 2004
126,425
13,300
139,725
Per 1 Jan 2005
126,425
13,300
139,725
0
18,202
18,202
2005
2004
Per 31 Dec 2005
Carrying amounts
Per 1 Jan 2004
96,939
Per 31 Dec 2004
94,587
Per 1 Jan 2005
94,587
Per 31 Dec 2005
86,506
The Group
Financial leasing
Equipment held under financial leasing agreements is included in the
Group at the carrying value of SEK 6,303,000 (SEK 7,826,000). Current
and non-current liabilities in the consolidated balance sheet include future
payments in respect of leasing obligations entered as liabilities. See also
Note 25 “Liabilities to credit institutions”.
18
Assets held for sale
In spring 2003, the Board and executive management of ÅF decided to
sell a total of eight properties from the ÅF property portfolio. The sale of
the head office Härolden 44 (10,700 m2) in Stockholm to GE Real Estate in
September 2005 completed the selling process. The property was taken
over in October 2005.
The sale was based on an underlying property value of approximately
SEK 285,000,000. The sale had a positive impact on ÅF’s results in the
fourth quarter of 2005 of around SEK 136,000,000. This includes a
deduction for a provision for future relocation costs of SEK 9,200,000,
since the agreement drawn up with the property owner makes a move
from the premises inevitable.
64
Values assessed for tax purposes
Parent company
Value assessed for tax purposes,
buildings
(in Sweden)
0
92,000
Value assessed for tax purposes,
land
(in Sweden)
0
67,000
Annual Report
19
Participation in associated companies
Group
Carrying value at start of year
2005
2004
23,232
25,855
Reversal of depreciation on goodwill
on transition to IFRS
—
1,724
Acquisition of associated companies
1,371
4,620
–3,922
–10,098
6,323
2,608
–3,086
–1,425
Conversion to participations
in Group companies
Participations in the results of associated
companies after tax
Dividend received and repayment of
shareholders' contribution
Translation difference
Carrying value at end of year
389
-52
24,307
23,232
The total earnings, profit, assets and liabilities of associated companies are specified in the tables below.
Associated companies 2005
Country
Earnings
Profit/loss
Assets
Liabilities
Equity
AF-Proinstall Sp.z.o.o.
Poland
2,883
–213
327
603
–276
48
Hansen & Henneberg AS
Denmark
45,924
5,836
25,375
9,609
15,766
49
Ownership %
ÅF-Tüv Nord AB
Sweden
21,955
1,582
8,213
4,377
3,836
50
ÅF-Incepal S.A
Spain
49,451
4,095
55,391
45,481
9,911
47
Konsultgruppen STIBI AB*
Sweden
32,577
1,440
11,458
6,519
4,939
49
NDT Training Center AB
Sweden
6,706
424
3,955
2,930
1,025
33
ITP-Infra Trans Project Ltd
Albania
0
0
7,247
7,247
8
49
159,496
13,164
111,966
76,766
35,209
Associated companies 2004
Country
Earnings
Profit/loss
Assets
Liabilities
Equity
Ownership %
AF-Proinstall Sp.z.o.o.
Poland
—
—
687
734
–46
48
Hansen & Henneberg AS
Denmark
38,937
4,298
20,721
7,648
13,073
49
ÅF-Tüv Nord AB
Sweden
19,268
1,661
8,613
3,809
4,804
50
ÅF-Incepal S.A
Spain
34,974
1,068
25,084
19,590
5,494
47
Konsultgruppen STIBI AB*
Sweden
17,535
–2,126
14,118
10,619
3,499
49
110,714
4,901
69,223
42,400
26,824
Participating interests in associated companies as per 31 December 2005 include goodwill of SEK 8,623,000 (SEK 8,623,000).
* The remaining 51 percent of the shares in Konsultgruppen STIBI AB were acquired per 31 December 2005.
20
Financial investments
Group
Specification of changes in carrying values for the year
2005
Group
2005
2004
2004
Financial assets which are
non-current assets
Carrying value brought forward
Listed shares and participations
Revaluation on transition
to IAS 39 1 Jan 2005
Unlisted shares and participations
Tenant-owner housing
Other
1,015
161
380
310
1,455
1,455
80
330
2,930
2,256
Parent company
2005
2004
Disposals/impairments
Change in realisable value
110
110
110
110
Financial assets which are
non-current assets
Shares and participations
Carrying value
carried forward
3,201
110
110
439
Acquisitions
Translation difference
2,256
Parent company
2005
2004
30
352
—
—
–90
–1,300
—
—
415
—
—
—
–120
3
—
—
2,930
2,256
110
110
Participations for which the realisable value cannot be reliably determined
have been recognised at acquisition value. The acquisition value of these
assets amounted to SEK 1,915,000.
65
Annual Report
21
Group subsidiaries
Companies owned directly by the parent company
2005
Interest
percent 1)
Book
value
2004
Interest
percent 1)
Corporate ID
Reg’d office
Number of
shares
Book
value
ÅF-System AB
556092-4044
Stockholm
60,000
100
34,509
100
23,409
ÅF-Infrastruktur AB
556185-2103
Stockholm
1,000
100
83,413
100
16,514
20,770
ÅF-Installation AB
556070-5039
Stockholm
—
—
—
100
ÅF-Process AB
556101-7384
Stockholm
50,000
100
84,009
100
9,609
ÅF-Energi & Miljö AB
556329-2159
Stockholm
—
—
—
100
22,000
ÅF-Industri AB
556074-0416
Stockholm
—
—
—
100
9,700
ÅF-Kontroll AB
556033-5977
Stockholm
20,000
100
28,779
100
5,379
AB Energikonsult
556208-9879
Stockholm
1,000
100
120
100
80
WO Konsult AB
556155-8338
Stockholm
—
—
—
100
493
Byggledning & Kontroll i Åmål AB
556140-2909
Stockholm
—
—
—
100
160
ÅF-Fastighets AB
556040-7651
Stockholm
18,460
100
8,436
100
8,436
AB Svensk Energiförsörjning
556158-1249
Stockholm
2,000
100
155
100
155
Communicator AB
556559-1483
Solna
1,000
100
6,568
100
6,633
ÅF i Sjöbefälsskolan AB
556074-0408
Gothenburg
—
—
—
100
162
245,989
123,500
Specification of the change in book values during the year
Parent company
2005
2004
Book value brought forward
123,500
Acquisitions
Additional purchase price
Shareholders’ contributions
Impairments/Write-downs
Disposals
Book value carried forward
148,113
100
200
—
651
175,918
31,900
–185
–54,664
–53,345
–2,700
245,989
123,500
Complete list of Group subsidiaries
ÅF-System AB
Corporate ID
Reg’d office
Number of
shares
2005
Interest
percent 1)
Book
value
2004
Interest
percent 1)
Book
value
556092-4044
Stockholm
60,000
100
34,509
100
23,409
Holotech CAD/CAM AB
556547-0225
Köping
—
—
—
100
—
K.O.M. Industridesign AB
556575-9767
Stockholm
—
—
—
100
—
3 D Teknik Sverige AB
556457-7327
Mölndal
—
—
—
100
—
ÅF-AH i Västerås AB
556593-7157
Västerås
—
—
—
100
—
ÅF-Systemdesign AB
556158-7261
Stockholm
—
100
—
100
—
Intriso It AB
556582-3910
Stockholm
—
100
—
100
—-
Arjano Data AB
556257-0563
Stockholm
—
100
—
100
—
Inometer AB
556313-1837
Sollentuna
—
100
—
100
—
ÅF-Data AB
556205-6050
Stockholm
—
100
—
100
—
Ångpanneforeningen-Data AS
930752320
Norway
—
100
—
100
—
16,514
ÅF-Infrastruktur AB
556185-2103
Stockholm
1,000
100
83,413
100
ÅF-Trafikkompetens AB
556402-4726
Stockholm
—
—
—
100
—
ÅF-Teleplan AB
556078-4489
Solna
—
—
—
100
—
SwedRail AB
556209-1644
Stockholm
—
100
—
100
—
ÅF-Installation AB
556070-5039
Stockholm
—
100
—
100
20,770
ÅF-VVS Projekt AB
556069-7004
Stockholm
—
100
—
100
—
ÅF-Communicator AB
556495-0409
Solna
—
100
—
100
—
—
Norway
—
100
—
100
ÅF-INR AB
ÅF-Consult AS
556203-3984
Malmö
—
100
—
100
—
ÅF-Funktionspartner AB
556099-8071
Malmö
—
100
—
100
—
PUAB Projektutveckling AB
—
556265-7824
Gävle
—
100
—
100
ÅF-Infraplan AB
556345-9600
Umeå
—
100
—
100
—
Konsultgruppen STIBI AB
556583-9973
Stockholm
—
100
—
49
—
66
Annual Report
Note 21, cont’d
Complete list of Group subsidiaries
ÅF-Process AB
Reg’d office
556101-7384
Stockholm
50,000
100
84,009
100
France
—
65
—
65
—
Germany
—
80
—
60
—
Sundsvall
—
100
—
100
—
Finland
—
100
—
89
—
ÅF-Celpap Engenering GmbH
556147-9022
ÅF-CTS OY
Book
value
2004
Interest
percent 1)
Corporate ID
ÅF-Chleq Froté S.A.
ÅF-SPEAB AB
2005
Interest
percent 1)
Number of
shares
Book
value
9,609
ÅF-Energi & Miljö AB
556329-2159
Stockholm
—
100
—
100
22,000
Graphium Consult AB
556056-2018
Stockholm
—
100
—
100
—
Göteborg Energi International AB
556317-6014
Gothenburg
—
60
—
60
—
ÅF-Processdesign AB
556329-5186
Malmö
—
100
—
100
—
Cresita AB
556279-2837
Helsingborg
—
100
—
100
—
ÅF-Teknik & Miljö AB
556534-7423
Stockholm
—
100
—
100
—
ÅF-International AB
556426-2292
Stockholm
—
—
—
100
—
Svenska Miljöforskargruppen AB
556245-3893
Kil
—
—
—
100
—
ÅF-Industri AB
556074-0416
Stockholm
—
100
—
100
9,700
Norway
—
100
—
100
—
556033-5977
Stockholm
20,000
100
28,779
100
5,379
ÅF-Industri &System AS
ÅF-Kontroll AB
Nordiska Certifieringsinstitutet AB
AB Energikonsult
556136-0560
Halmstad
—
—
—
100
—
556208-9879
Stockholm
1,000
100
120
100
80
Celpap AB
556199-5597
Stockholm
—
—
—
100
—
Scanmanagement AB
556397-7163
Stockholm
—
—
—
100
—
—-
SIKOB Svensk Industris Konstruktionsoch Beräkningskontor AB
556196-6531
Stockholm
—
—
—
100
AB Sveriges Tekniska Kontrollinstitut
556361-2737
Stockholm
—
—
—
100
—
Swetec Konsult AB
556348-6397
Stockholm
—
—
—
100
—
WO Konsult AB
556155-8338
Stockholm
—
—
—
100
493
Byggledning & Kontroll i Åmål AB
556140-2909
Stockholm
—
—
—
100
160
ÅF-Fastighets AB
556040-7651
Stockholm
18,460
100
8,436
100
8,436
ÅF-Fastighet i Luleå AB
556238-5996
Stockholm
—
—
—
100
—
ÅF-Fastighet i Norrköping AB
556418-6509
Stockholm
—
—
—
100
—
AB Svensk Energiförsörjning
556158-1249
Stockholm
2,000
100
155
100
155
Communicator AB
556559-1483
Solna
1,000
100
6,568
100
6,633
ÅF i Sjöbefälsskolan AB
556074-0408
Gothenburg
—
—
—
100
245,989
162
123,500
1) Participating interest refers to both the voting share and the proportion of the total number of shares.
22
Accounts receivable
Accounts receivable are recognised after taking account of bad debt
losses arising during the year of SEK 1,263,000 in the Group, which is
on a par with the same costs in the preceding year. The losses arose
primarily as a result of the bankruptcy of several of the company’s
customers.
No bad debt losses relate to the parent company.
23
Rent
2005
Group
2004
Parent company
2005
2004
19,794
10,905
13,835
6,972
Support and maintenance
contracts
9,282
2,946
2,777
2,624
Other
9,054
24,931
2,710
5,106
38,130
38,782
19,322 14,702
67
Annual Report
24
Equity
Summary of changes in the Group’s equity
Equity attributable to the parent company’s shareholders
Other
contributed
Share capital
capital
Group
Equity brought forward 1 Jan 2004
Profits brought forward
included in net profit
Reserves
for the year
114,971
Adjustment for changed accounting polices
114,971
0
0
Total
Minority
interest
Total
equity
226,939
341,910
612
342,522
2,093
2,093
229,032
344,003
612
344,615
–132
Total changes in assets recognised in equity,
0
0
–132
Total changes in assets,
0
0
–132
Dividends
New issue
3,517
18,811
Equity carried forward 31 Dec 2004
118,488
18,811
118,488
18,811
2,093
–132
–132
0
–132
0
–132
36,024
36,024
10
36,034
36,024
35,892
10
–15,403
–15,403
–15,403
22,328
22,328
35,902
Convertible debentures issued
Change in minority interest
Adjustment for changed accounting policy
3,445
3,445
–132
249,653
386,820
4,067
390,887
–132
249,653
386,820
4,067
390,887
388,215
4,067
392,282
2,336
2,336
102
2,438
415
415
415
–1,540
–1,540
–1,540
–5,416
–5,416
–5,416
1,516
1,831
1,831
1,395
118,488
18,811
Change in fair value reserve for the year
Change in hedging reserve for the year
1,263
Actuarial losses on calculation of retirement benefit obligations
315
Total changes in assets recognised in equity,
0
0
1,526
Total changes in assets,
0
0
1,526
Dividends
New issue
755
23,097
Share capital and premium
31 Dec 2004
Issue for acquisition of subsidiaries
31 Dec 2005
Number of
ordinary shares
Net assets
per share
5,748,569
114,971
—
175 807
3,516
18,811
5,924,376
118,488
18,811
37,766
755
4,286
5,962,142
119,243
23,098
Premium
The total number of shares as at 31 December 2005 is divided into
402,219 series A shares (10 votes per share) and 5,559,923 series B
shares (1 vote per share). Holders of ordinary shares are entitled to
dividends which are determined in due course. All shares have the same
right to the company’s remaining net assets. The dividends paid out during
2005 and 2004 amounted to SEK 15,502,000 (SEK 2.60 per share) and
SEK 15,403,000 (SEK 2.60 per share) respectively. At the Annual General
meeting on 27 April 2006, a dividend in respect of financial year 2005 of
SEK 5.00 per share (a total of SEK 30,365,000) will be proposed. The
proposal also covers 110,766 new shares issued in March 2006. The
proposed dividend has not been recognised in these financial reports.
The parent company has potential ordinary shares with dilution effect in
the form of convertible debentures equivalent to 312,500 ordinary shares
(Note 27).
68
–3,900
–2,374
102
–2,272
204,376
–140
204,236
200,476
202,002
–38
201,964
–15,501
–15,501
–15,501
5,041
5,041
742
847
847
435,475
581,131
–215
119,243
3,316
1,395
204,376
742
Change in minority interest
Issue for acquisition of subsidiaries
249,653
4,286
1 Jan 2004
1,395
742
–3,983
–3,136
46
581,177
–215
–215
Annual Report
Note 24, cont’d
Reserves
Convertible
debentures
Balance brought forward as at 1 Jan 2004
—
Exchange differences for the year
Translation
reserve
Hedging
reserve
Assets
held for
sale
—
—
—
Total
reserves
—
–132
–132
Revaluation – gross
0
Revaluation – tax
0
Fair value gains during the year
0
Tax on fair value gains
Balance carried forward as at 31 Dec 2004
0
0
–132
Adjustment for changed accounting policies – gross
Adjustment for changed accounting policies – tax
Balance brought forward as at 1 Jan 2005
0
Exchange differences for the year
–132
0
0
–132
1,498
439
1,937
–419
–123
–542
1,079
316
1,263
2,336
2,336
Revaluations recognised in equity
415
Cash flow hedging recognised in equity
Cash flow hedging liquidated in the income statement
Convertible debentures – equity portion (note 27)
Balance carried forward as at 31 Dec 2005
Other contributed capital
This refers to equity which has been contributed by the shareholders.
It includes premium reserve transferred to statutory reserve as at
31 December 2005. Provisions to the premium reserve on and after
1 January 2006 are also to be recognised as contributed capital.
Translation reserve
The translation reserve includes all exchange differences arising on
the translation of financial reports from foreign operations which have
prepared their financial reports in a currency other than that in which
the consolidated financial reports are presented. The currency in which
the parent company and the Group present their financial reports is the
Swedish krona (SEK). The translation reserve also includes exchange
differences arising on the revaluation of liabilities which were recognised
as hedging instruments for a net investment in a foreign operation.
415
–42
–42
–1,498
–1,498
742
742
–215
527
2,204
431
–116
100
–30
615
3,316
Actuarial gains and losses
Actuarial gains and losses in respect of the retirement benefit liability
recognised in the balance sheet are recognised in equity.
Convertible debentures
Convertible debentures which can be converted into shares by the
counterparty exercising his option to convert the instrument into shares
are recognised as a compound financial instrument comprising a liability
component and an equity component.
Profits brought forward including net profit for the year
Profits brought forward including net profit for the year include profits
earned by the parent company and its subsidiaries and associated companies. Previous transfers to the statutory reserve, excluding premium
reserve transferred, are included in this equity item.
Fair value reserve
The fair value reserve includes the accumulated net changes in fair value
of financial assets which may be sold until such time as these assets are
derecognised from the balance sheet.
Hedging reserve
The hedging reserve includes the effective portion of the accumulated
net changes of fair value of a cash-flow hedging instrument attributable
to hedging transactions which have not yet taken place.
69
Annual Report
Note 24, cont’d
Summary of changes in the parent company’s equity
Restricted equity
Statutory
Share capital
reserve
Parent company
114,971
23,324
114,971
23,324
Premium Profit carried
Profit for
reserve
forward
the year
Total equity
94,956
233,251
Adjustment for changed accounting policies
0
0
94,956
Total change in assets,
0
0
0
Dividends
0
0
233,251
23,389
23,389
23,389
–15,403
New issue
3,517
18,811
Group contributions made
23,389
–15,403
22,328
–3,883
118,488
23,324
18,811
75,670
118,488
23,324
18,811
99,059
118,488
23,324
18,811
99,059
–3,883
23,389
259,682
259,682
Adjustment for changed accounting policies
0
Total change in assets,
excluding transactions with the company’s owner
0
0
0
Dividends
New issue
755
167,161
167,161
167,161
167,161
–15,501
–15,501
85,209
85,209
5,041
527
Transfer of premium reserve to statutory reserve
119,243
Restricted reserves
Restricted reserves must not be reduced through dividends.
Statutory reserve
The purpose of the statutory reserve is to block a portion of net profits,
which are not to be used to cover losses brought forward. With effect
from 2006, it is no longer obligatory to make transfers to the statutory
reserve.
Premium reserve
When shares are issued at a premium, i.e. when shareholders pay more
than the par value of the shares, an amount equivalent to the amount
23,624
–23,624
46,948
0
527
0
168,767
167,161
502,119
received in excess of the par value of the shares is transferred to the
premium reserve. Premium reserves attributable to transactions before
1 January 2006 have been transferred to the statutory reserve. Premium
reserves which arise after that date are recognised as non-restricted equity.
Profits brought forward
These constitute non-restricted equity from previous years after any transfer
to reserves and after the payment of any dividends. Along with net profit for
the year and any reserve for fair value, these constitute total non-restricted
equity, i.e. the amount available for dividends to shareholders.
The note includes information on the company’s contractual terms in respect of interest-bearing liabilities.
For more information on the company’s interest rate risk and exchange rate risk, please refer to Note 6.
Group
2005
2004
Bank loans
4,491
2,453
Financial leasing liabilities
4,674
5,723
9,165
8,176
Short-term bank loans
8,496
152,974
Current portion of financial leasing liabilities
1,628
1,753
10,124
154,727
2005
2004
Current liabilities
Parent company
Bank loans
70
259,682
4,286
Group contributions received
25
0
0
—
150,000
0
150,000
Conditions and amortisation periods
Long-term bank loans refer to loans in Norway of SEK 3,545,000
(NOK 3,000,000) which fall due in five years with an annual interest
3.1 percent, and of SEK 946,000 (NOK 800,000) which fall due in
six years with an annual interest rate of 6.75 percent.
Short-term bank loans refer to loans in France of SEK 5,715,000
(EUR 606,000) with an annual interest rate of 4 percent, in Germany
of SEK 2,603,000 (EUR 276,000) with an annual interest rate of 3.58
percent and in Sweden of SEK 178,000.
Annual Report
Note 25, cont’d
Financial leasing liabilities
Financial leasing liabilities fall due for payment as shown in the table below:
2005
2004
Min. leasing
fees
Interest
Principal
amount
Min. leasing
fees
Within one year
1,764
136
1,628
1,926
173
1,753
1–5 years
4,764
90
4,674
5,847
124
5,723
6,528
226
6,302
7,773
297
7,476
Group
26
Interest
Principal
amount
Provisions
Payments
Group
2005
Provisions which are non-current liabilities
Restructuring costs
4,814
Provisions for future removal costs
2005
2004
3,017
9,211
—
Other
731
1,871
Total
14,756
4,888
Anticipated amount of provision made
after more than 12 mths
27
2004
9,346
—
Convertible debenture loan
Provisions which are current liabilities
Other
1,509
—
Total
1,509
0
16,265
4,888
Total provisions
Restructuring
Carrying amount at start of reporting period
Transfers during reporting period
Amount used during reporting period
Other
Carrying amount at end of reporting period
3,017
—
17,777
3,017
–16,122
—
142
—
4,814
3,017
In 2005 AB Ångpanneföreningen raised a convertible debenture loan
aimed at employees in Sweden, Norway and Finland. The loan carries an
annual interest rate of STIBOR 360. The debentures fall due in three years
from the date of issue at their nominal value, or may be converted to
shares at the request of the holder at a price of SEK 172 per share. The
conversion to shares can take place during the periods 2–13 July 2007,
12–30 November 2007, 18 February–7 March 2008 or 5–30 May 2008.
Full conversion would involve a subscription for 312,500 shares, equivalent to 5.0 per cent of the share capital and 3.2 per cent of the votes.
Convertible debentures with a nominal value of SEK 96,000,000, which
were issued in 2000, matured during 2005. No conversion to shares took
place.
2005
1,871
—
10,986
1,871
–1,477
—
Other
2004
Convertible debentures
Other provisions
71
—
11,451
1,871
Value after the issue of
3,125 convertible debentures
Transaction costs
53,750
–1,754
Net proceeds
51,996
Amount classified as equity
Capitalised interest
–742
401
Recognised liability 31 December
51,655
96,006
Group’s total provisions
Total carrying amount at start of period
Other
Total carrying amount at
end of period
Parent company
4,888
—
28,763
4,888
–17,599
—
213
—
16,265
4,888
2005
2004
Provisions
Provisions for future removal costs
9,211
—
Other
135
-—
Total
9,346
0
—
—
143
—
Other provisions
The fair value of the liability component and the equity component were
determined in connection with the issue of the debentures. The fair
value of the liability component, included in non-current liabilities, was
calculated using a market rate of interest for equivalent non-convertible debentures. The residual amount, which represents the value of the
equity component, is included in equity in the Reserves item (Note 24),
recognised after the deduction of deferred tax. The equity component
of the convertible debenture amounted to SEK 742,000 after the deduction of SEK 25,000 for transaction costs, but before the deduction of
deferred tax.
The fair value of the liability component of the convertible debentures
as at 31 December 2005 amounted to SEK 53,106,000. The fair value
was obtained by using cash flows discounted at a loan interest rate of
2.2 percent.
Interest expense for the instruments is calculated using the effective
interest rate method, using an effective rate of 3.35 percent for the
liability component.
Adjustment from previous year’s pensions
provisions to other provisions
9,211
—
–8
—
9,346
0
Provisions for future removal costs have been made as the agreement
reached with the new owner of the Group’s premises makes the removal
of the Group’s business activities inevitable. The move will take place in
October 2008.
71
Annual Report
28
31
Group
Personnel-related liabilities
2005
2004
207,032
194,880
Accrued interest expense*
Parent company
2005
2004
12,227
471
471
Prepaid rental income*
2,897
96
Accrued expenses,
sub-consultants*
3,319
Other*
29,548
243,267
6,498
Recognised in the income statement
Group
2005
–27,129
818
–896
–118
Deferred tax in respect of temporary differences
6,416
149
Deferred tax receipts for the tax base of loss
carry-forwards capitalised during the year
4,182
3,851
–97
—
–17,524
4,700
2005
2004
–18,985
—
33,136
–1,510
2,614
–622
—
97
–97
—
16,668
–2,035
Adjustment of tax attributable to previous years
Deferred tax
45,715
240,595
3,286
16,080
5,633
12,131
Untaxed reserves
Deferred tax expense resulting from the
utilisation of the tax base of loss carryforwards previously capitalised
Total recognised tax expense
in the Group
Parent company
Current tax
Parent company
Tax expense for the period
Accumulated depreciation in excess of plan
Tax in respect of group contributions
made/received
2005
2004
955
1,357
–955
–402
equipment & fittings
479
—
Closing balance 31 December
479
955
Opening balance 1 January
Disposals and retirements, bldgs
Depreciation during the year,
Deferred tax
Deferred tax in respect of temporary differences
Deferred tax receipt for the tax base of loss
carry-forwards capitalised during the year
Deferred tax expense resulting from
the utilisation of the tax base of loss
carry-forwards previously capitalised
Tax allocation reserves
Tax allocation reserve, 2001
11,356
11,356
18,000
18,000
14,250
14,250
22,100
—
Closing balance 31 December
65,706
43,606
Total recognised tax receipt
in the parent company
Reconciliation of effective tax
Group
Total untaxed reserves
66,185
44,561
Operating leases
Leasing agreements where the company is the lessee
Operating leases cover rental agreements for properties, leasing agreements for vehicles under which employees assume all the financial risks and
benefits associated with the vehicles, and the lease of certain items of office
equipment. Vehicles are generally leased for three years. The outstanding
leasing stock is worth around SEK 19,000,000 (SEK 21,000,000).
Non-revocable leasing payments are as follows
Group
2005
2004
Within one year
119,217
45,174
Parent company
2005
2004
56,031
22,618
1–5 years
302,250
81,751
262,403
63,921
More than 5 years
467,117
48,590
444,632
45,590
888,584 175,515
2005 (%)
Profit before tax
Tax in accordance with current
tax rate
30
2004
Current tax
Tax expense for the period
* In 2004 accrued interest expense, prepaid rental income and accrued expenses for
sub-consultants were not specified separately, but entered under the heading of “Other
accrued expenses and prepaid income”.
29
Taxes
2005 2004 (%)
221 760
28.00
62,092
Effect of other tax rates
for foreign subsidiaries
0.13
288
Non-deductible expenses
0.54
1,201
Non-taxable income
–21.75 –48,236
Total non-deductible expense
and non-taxable income
–21.21 –47,035
2004
31,334
28.00
8,774
–41.88 –13,122
Increase in loss carry-forward
without the corresponding
capitalisation of deferred tax
0.76
1,689
Utilisation of loss carry-forward
not previously capitalised
–0.54
–1,204
0.40
896
Standardised interest rate on
tax allocation reserve
0.28
628
—
—
Other
0.08
170
–1.50
–470
Recognised effective tax
7.90 17,524
Tax attributable to previous years
0.38
118
–15.00 –4,700
763,066 132,129
Reconciliation of effective tax
Parent company
Leasing payments during the year
Group
Premises
Other
Parent company
2005
2004
2005
2004
77,432
61,774
36,496
28,071
15,147
13,321
1,357
2,222
92,579
75,095
37,853
30,293
Tax in accordance with current tax
rate for the parent company
Non-deductible expenses
28.00
42,138
0.12
177
–39.29 –59,136
Total non-deductible expense
and non-taxable income
–39.18 –58,959
2004
25,424
28.00
7,119
–19.24 –4,891
not previously capitalised
–0.13
–194
Standardised interest rate on tax
allocation reserve
0.23
347
—
—
—
—
–0.76
–193
11.08 –16,668
8.00
2,035
Recognised effective tax
2005 2004 (%)
150,493
Non-taxable income
Other
72
2005 (%)
Profit before tax
—
—
Annual Report
Note 31, cont’d
Recognised in the balance sheet
Current tax assets in the Group amounted to SEK 12,546,000 (SEK 4,639,000). The current tax liability in the parent
company amounted to SEK 2,675,000 (SEK –13,832,000).
Deferred tax assets and tax liabilities
Recognised deferred tax assets and tax liabilities
Deferred tax assets and tax liabilities relate to the following:
Deferred
tax assets
Group
Deferred
tax liability
Net
2005
2004
2005
2004
2005
2004
Non-current assets
6,275
1,259
–568
–1,346
5,707
–87
Shares and participations
1,871
Current receivables and liabilities
2,644
374
–4,356
Provisions, other non-current liabilities
and untaxed reserves
2,579
1,668
–1,000
Loss carry-forward
8,033
3,851
–239
Untaxed reserves
1,632
0
2,946
–1,712
3,320
–26,478
1,579
–24,810
8,033
3,851
–24,492
Tax assets/tax liabilities
21,402
Set-off
–13,290
Tax assets/tax liabilities, net
8,112
7,152
–30,655
–24,492
0
–24,878
–9,253
–17,726
–24,878
–9,253
–17,726
13,290
7,152
–17,365
Recognised deferred tax assets and tax liabilities
Deferred tax assets and tax liabilities relate to the following:
Deferred
tax assets
Parent Company
2005
Deferred
tax liability
2004
2005
Net
2004
2005
–180
Provisions
2,579
Loss carry-forward
96
Tax assets/tax liabilities
2004
–180
0
2,579
0
0
96
2,579
96
–180
0
2,399
96
2,579
96
–180
0
2,399
96
Set-off
Tax assets/tax liabilities, net
Temporary difference between the carrying amount and the tax
base of participations directly owned by the parent company
ÅF recognised no deferred tax in respect of temporary differences relating
to investments in subsidiaries. Any future effects (tax deduction at source
and other deferred tax on profit-taking within the Group) are recognised
when ÅF is no longer able to control the reversal of such differences or
when, for other reasons, it is no longer unlikely that the reversal will take
place in the foreseeable future.
Unrecognised deferred tax assets
Deductible temporary differences and loss carry-forwards for tax purposes
for which deferred tax assets have not been recognised in the income
statements and balance sheets:
Group
Loss for tax purposes
2005
2004
6,032
4,300
6,032
4,300
Change in deferred tax on temporary differences and loss carryforwards
Group
Of the change in deferred tax, SEK 10,501,000 (SEK 4,000,000) has
been recognised in the income statement. Of the remaining change
between the years, the tax effect of changes in defined-benefit retirement
benefit plans has been recognised in equity. The tax effect of the new
convertible scheme has also been recognised in equity, see also Note 24.
Balance as
in
at 31 Dec
equity
2004
Parent Company
2004
statement
622
–622
0
96
96
622
Balance as
Deferred tax assets have not been recognised in respect of these losses
for tax purposes since it is not yet certain that the Group will be able to
utilise them against future taxable profits. The loss is attributable largely
to the French operation.
Recognised Recognised Balance as
at 1 Jan in the income
–526
statement
Provisions
in
34
96
–96
96
2,517
at 31 Dec
equity
2004
–180
–180
2,579
Other
96
Recognised Recognised Balance as
at 1 Jan in the income
2004
0
2,579
–34
0
0
–214
2,399
73
Annual Report
32
Retirement benefit obligations
Defined-benefit plans
Group
2005
2004
Present value of unfunded obligations
57,933
54,587
Net amount recognised in respect
of defined-benefit plans (see below)
57,933
54,587
Net amount recognised in the balance sheet under the heading
“Provisions for pensions”.
Survey of defined-benefit plans
The ÅF Group has defined-benefit plans in Sweden and Norway. In
Norway, the Group will change to defined-contribution plans in 2006. The
defined-benefit plans provide payments to employees when they retire.
Changes in the net obligations for defined-benefit plans
recognised in the balance sheet
Group
2005
2004
Obligations for defined-benefit
plans as at 1 January
54,587
33,689
Benefits paid
–1,433
–990
Contributions made
–1,326
—
Profit reduction
–4,774
—
Actuarial losses recognised in equity
5,416
—
Cost recognised in the income statement
4,931
3,010
—
19,567
Discharge obligations
–12
–252
Exchange differences
544
21
—
–458
57,933
54,587
Effects of operations acquired/sold
Other
Net obligation for defined-benefit plans
as at 31 December
Group
Interest expense for the obligation
Recognised actuarial gains (–) and losses (+)
Total net cost in the income statement
Parent company’s retirement benefit obligations
2005
2004
Present value of unfunded obligations
26,693
26,430
Recognised in respect of
defined-benefit plans
26,693
26,430
Of which covered by a credit insurance
through FPG/PRI
26,693
26,430
Defined-contribution plans
The ÅF Group has defined-contribution plans in Sweden and abroad.
Contributions to these plans are made continuously in accordance with
the regulations for each plan.
Group
2005
2004
Cost of
defined-contribution plans
Cost recognised in the income statement
Costs in respect of service, current period
The above parameters have been set on the basis that almost all
individuals covered by the defined-benefit obligation are retired or holders
of paid-up policies.
For some of the Group’s employees, the obligations in respect of
retirement pension and family pension for salaried staff in Sweden are
secured through insurance with Alecta. According to a statement from
the Swedish Financial Accounting Standards Council’s Emerging Issues
Task Force, URA 42, this is a defined-benefit plan covering a number of
employers. For financial year 2005, the company has not had access to
the information required to recognise this plan as a defined-benefit plan.
The ITP supplementary pensions for salaried employees’ retirement benefits plan secured through insurance with Alecta is, therefore, recognised
as a defined-contribution plan. Contributions during the year for retirement benefit insurance with Alecta amounted to SEK 65,658,000 (SEK
65,979,000). Alecta’s surplus may be allocated to the insurance policy
holder and/or the insured. At the close of 2005, Alecta’s surplus in the
form of the collective funding ratio was 128.5 percent (2004: 128.0 percent). The collective funding ratio is the market value of Alecta’s assets
as a percentage of the insurance obligations calculated in accordance
with Alecta’s actuarial calculation assumptions, which are not in conformity
with IAS 19.
2005
2004
939
77
3,992
2,900
—
33
4,931
3,010
The cost of defined-benefit plans is recognised in the Personnel
costs row in the income statement, apart from SEK 2,181,000 (SEK
1,685,000) which is recognised under Interest expense and similar
profit/loss items.
5,980
6,205
65,979,000) refers to the ITP plan financed through Alecta, see above.
33
Cash flow statement
Interest paid and dividends received
Group
2005
2004
Interest received
Interest paid
Group
2005
Discount rate as at 31 December
4.2%
5.1%
Future salary increases
0.0%
0.3%
Income base amount
0.0%
3.0%
Future increase in retirement benefits
2.0%
2.0%
Depreciation/amortisation
Annual increase in paid-up policies
2.0%
2.0%
Impairment
2.3 yrs
9.6 yrs
Anticipated remaining period of service
72,109
Of the Group’s total expense for defined-benefit plans, SEK 65,658,000 (SEK
Dividends received
Assumptions for defined-benefit obligations
The most significant actuarial assumptions as at the balance sheet date
(expressed as weighted averages)
140,641
Parent company
2005
2004
Parent company
2005
2004
9
146
4,831
2,542
3,721
8,794
26,702
8,542
–6,976
–8,647
–4,591
–6,914
–4,425
–4,780
9,034
28,330
2004
Adjustment for items not included in cash flow
Group
2005
2004
Results of disposals
Interest-bearing PRI liability
Other
Parent company
2005
2004
44,739
63,025
9,578
8,674
2,368
2,343
4,608
54,664
–136,180
—
–206,121
18
2,181
1,685
1,116
1,325
–2,754
9,482
6,544
64,299 –181,337
71,225
–13,923
–100,815
Transactions which do not lead to payments
Group
2005
2004
Acquisition of assets through
financial lease
74
2,629
3,218
Parent company
2005
2004
—
—
Annual Report
Note 33, cont’d
Note 34, cont’d
Acquisition of subsidiaries and other business units
Parent company
Related party relationships
Group
2005
2004
Acquired assets and liabilities
Sale of Purchase of Liabilities to Receivables
services to services from
related from related
related
related
parties as
parties as
parties
parties at 31 Dec. at 31 Dec.
15,680
65,539
198
6,145
Subsidiary
2005 142,225
20,624
61,485
268,291
Financial non-current assets
—
4,187
Subsidiary
2004 125,445
36,927
116,846
299,900
Operating receivables
Long-term provisions
Long-term interest-bearing liabilities
Deferred tax liabilities
10,123
75,674
7,611
61,102
Associated company 2005
252
—
—
42
— –23,337
76
—
—
13
Ångpanneföreningen's
Foundation for R&D 2005
416
—
—
29
436
—
—
121
–1,000
—
–762
—
Current operating liabilities
–7,521 –99,596
Proportion of equity in associated companies
–3,922
Minority interest
Year
—
2,319
4,769
Total acquired net assets
22,726
94,483
Purchase price:
22,726
94,483
Deduct: New issue
–5,041 –22,328
35
Sales promissory notes
Purchase price paid
Deduct: Cash and cash equivalents in the
acquired operation
Effect on cash and cash equivalents
Pledged assets, contingent liabilities
and contingent assets
Group
2005
2004
–2,220
—
15,465
72,155
Pledged assets
7,611
61,102
In the form of pledged
assets for the Group’s own
liabilities and provisions
–7,854 –11,053
Blocked bank accounts
34
Parent company
2005
2004
639
—
—
0
639
0
0
Guarantees, FPG/PRI
1,033
1,013
534
526
Other guarantees
3,282
—
—
—
34,564
Total pledged assets
Transactions with related parties
Contingent liabilities
The parent company has a related party relationship with its subsidiaries,
see Note 21.
Summary of related party transactions
Sureties given for the
benefit of subsidiaries
—
—
86,341
Group
The term “related parties” in the Group refers primarily to Ångpanneföreningen’s Foundation for Research and Development and associated
companies. Transactions with these parties took place on market terms.
Sureties given
25,848
34,564
—
—
Total contingent liabilities
30,163
35,577
86,875
35,090
Related party relationships
The increase in sureties given by the parent company between the years
refers primarily to sureties for subsidiaries in Norway.
Year
Sale of Purchase of Liabilities to Receivables
services to services from
related from related
related
related
parties as
parties as
parties
parties at 31 Dec. at 31 Dec.
5,369
18,640
1,148
42
3,174
12,050
4,258
13
416
—
—
29
436
—
—
121
During 2005, in addition to the above, the Group received grants from
Ångpanneföreningen’s Foundation for Research and Development
amounting to SEK 1,127,000 (2004: SEK 3,599,000). These grants
were for projects administered by the Group.
Contingent assets
The Group does not anticipate that any contingent assets will arise.
36
Events after the accounting year-end
In January 2006 ÅF reached agreement with Visma on the sale of its software operations, PX Business Solutions (PX), with 25 employees. PX was
previously part of ÅF Systems. The sale generated a capital gain for the ÅF
Group of SEK 19 million and will have a positive effect on the Group’s earnings for the first quarter of 2006.
In January ÅF acquired 10 members of staff from QB Food Tech in Lund
who possess in-depth expertise with regard to the processes of the food
and pharmaceutical industries and have a track record of experience from
projects relating to installations and full-service undertakings within the these
industries.
In January ÅF acquired Ingemansson Technology AB from Lindeblad Technology AB. Ingemansson is Scandinavia’s leading technical consulting firm in
the field of sound and vibrations with 130 employees.
In January ÅF reached agreement on the acquisition of the Finnish energy
consulting company Enprima Oy, an international organisation with offices in
Finland, the Baltic states and Russia. The company, which has 270 employees, is to be purchased from Fortum Power & Heat Oy, Powest Oy, BE&K
International Inc and the management of Enprima.
In December 2005 ÅF reached agreement about taking over the activities
of the Ericsson Design Centre in Lysekil on the Swedish west coast, where
21 employees work primarily with radio-related systems development and
software development for WCDMA (3G) and GSM technologies. The acquisition was formalised on 1 January 2006 after which the company was immediately consolidated into the Systems Division.
75
Annual Report
Stockholm, Sweden – 21 February 2006
Carl-Erik Nyquist
Chairman of the Board
Magnus Grill
Eva-Lotta Kraft
Gunnar Svedberg
Deputy Chairman
Jonas Wiström
President/CEO
Ulf Dinkelspiel
Peter Sandström
Eva Lindén
Helena Skåntorp
Jan Fröjd
Our Audit Report was presented on 20 March 2006.
Bo Ribers
Authorised Public Accountant
KPMG
76
Björn Flink
KPMG
Audit report
To the Annual General Meeting of AB Ångpanneföreningen (publ)
Corporate Identity Number 556120-6474
We have audited the annual accounts, the
consolidated accounts, the accounting
records and the administration of the board
of directors and the president/CEO of AB
Ångpanneföreningen for the year 2005.
The board of directors and the president/CEO
are responsible for these accounts and the
administration of the company as well as for
the application of the Swedish Annual Accounts
Act when preparing the annual accounts and
the application of international financing
reporting standards (IFRS) as adopted by the
EU and the Annual Accounts Act when preparing the consolidated accounts. Our responsibility is to express an opinion on the annual
accounts, the consolidated accounts and the
administration based on our audit.
We conducted our audit in accordance with
generally accepted auditing standards in
Sweden. Those standards require that we
plan and perform the audit to obtain reasonable assurance that the annual accounts and
the consolidated accounts are free of material misstatement. An audit includes examining,
on a test basis, evidence supporting the
amounts and disclosures in the accounts. An
audit also includes assessing the accounting
principles used and their application by the
board of directors and the president/CEO and
significant estimates made by the board of
directors and the president/CEO when preparing the annual accounts and consolidated
accounts as well as evaluating the overall
presentation of information in the annual
accounts and the consolidated accounts. As
a basis for our opinion concerning discharge
from liability, we examined significant decisions, actions taken and circumstances of the
company in order to be able to determine the
liability, if any, to the company of any board
member or the president/CEO. We also examined whether any board member or the president/CEO has, in any other way, acted in
contravention of the Swedish Companies Act,
the Swedish Annual Accounts Act or the
company’s Articles of Association. We believe
that our audit provides a reasonable basis for
our opinion set out below.
The annual accounts have been prepared
in accordance with the Swedish Annual
Accounts Act and give a true and fair view of
the company’s financial position and results
of operations in accordance with generally
accepted accounting principles in Sweden.
The consolidated accounts have been prepared in accordance with international financing reporting standards (IFRS) as adopted by
the EU and the Annual Accounts Act and give
a true and fair view of the Group’s financial
position and results of operations. The statutory administration report is consistent with
the other parts of the annual accounts and
the consolidated accounts.
We recommend to the general meeting of
shareholders that the income statements and
balance sheets of the parent company and
the Group be adopted, that the profit of the
parent company be dealt with in accordance
with the proposal in the administration report
and that the members of the board of directors and the president/CEO be discharged
from liability for the financial year.
Stockholm, Sweden – 20 March 2006
Bo Ribers
KPMG
Björn Flink
KPMG
77
Corporate governance report for 2005
The listing agreement for the Stockholm
Stock Exchange lays down that companies listed on the Stockholm Stock
Exchange’s A list, or companies listed
on the Stockholm Stock Exchange’s
O list which have a market value in
excess of SEK 3 billion, must adopt the
Swedish Corporate Governance Code. AB
Ångpanneföreningen (ÅF) is listed on the
A list, and, during 2006, the governance
of ÅF’s operation was gradually brought
into harmony with the Swedish Corporate
Governance Code.
ÅF’s auditors have not reviewed this
Corporate Governance Report.
Legislation and Articles of Association
AB Ångpanneföreningen (ÅF) must, in the
first instance, comply with the provisions
of the Swedish Companies Act and the
rules following from the listing of the company’s shares on the Stockholm Stock
Exchange. In its business operations, ÅF
must also comply with the provisions laid
down in ÅF’s Articles of Association.
The Annual General Meeting
At the annual general meeting (AGM) the
shareholders exercise their right to vote
in order to take decisions, in accordance
with the provisions of Swedish corporate
law and ÅF’s Articles of Association, on
the composition of the Board of Directors
and other matters of central importance.
A notice convening the 2005 AGM was
sent out on 29 March. A shareholder or
shareholder’s representative/proxy may
vote for the full number of shares he/she
owns or represents.
The President’s address was published
on the ÅF website the day after the AGM
and the minutes of the meeting were
made available via the website a few
weeks later. Because of the very limited
interest shown, it was agreed that the production costs for a live webcast of the
proceedings were not motivated.
Chairman of the AGM was Mr Martin
Börresen, a lawyer. The AGM made the
following resolutions:
• To pay a dividend of SEK 2.60 per
share;
• To re-elect Ulf Dinkelspiel, Magnus
Grill, Eva-Lotta Kraft, Carl-Erik Nyquist,
Peter Sandström, Helena Skåntorp and
Gunnar Svedberg as directors of the
company. Jan Fröjd and Eva Lindén had
been nominated to represent ÅF Group
employees on the Board, with Cecilia
Axelsson and Per-Åke Östling as their
deputies;
• To accept the proposal from the Board
to authorise the Board on one or more
occasions in the period up to the next
AGM to make a decision regarding a
possible new issue of a grand total of
78
no more than 500,000 B shares. The
purpose of this was to enable the company to use its own shares to pay all or
part of the purchase price of any corporate acquisitions during the year;
• To raise a convertible subordinated
debenture up to a ceiling of a nominal
amount of SEK 96,000,000, which may
later be converted to class “B” shares in
the company. The issue was restricted
to employees of AB Ångpanneföreningen
(publ) and its subsidiaries in Sweden, Norway and Finland. Each employee was
entitled to subscribe for a maximum
nominal amount of SEK 1,000,000.
Nominations Committee
The 2005 AGM approved a proposal from
the Board of Directors to appoint a representative for Ångpanneföreningen’s
Foundation for Research & Development
to convene a Nominations Committee
composed of representatives for the company’s major shareholders.
In accordance with the new Swedish
Code for Corporate Governance, the
Nominations Committee is responsible not
only for proposing the names of directors
of the company and the levels of remuneration for their work on the Board, but
also for proposing a Chair for the Board,
a Chair for the AGM, the division of the
funds allocated for remuneration for the
Board between the Chair, Board members and committees, together with the
election and remuneration of the auditors.
On 25 October 2005 the following individuals were named to serve on the
Nominations Committee prior to the 2006
AGM: Lena Treschow Torell, President of
the Royal Swedish Academy of Engineering
Sciences (IVA), Gunnar Svedberg, Chairman of Ångpanneföreningen’s Foundation
for Research & Development, and Björn
Lind of SEB Fonder. The Nominations
Committee was chaired by Lena Treschow
Torell.
Prior to the AGM the Nominations
Committee has held a number of telephone meetings as well as regular informal contacts as and when required.
No remuneration has been paid to the
members of the Nominations Committee.
The Board and its work
The members of the Board are elected
each year by the AGM to serve until the
end of the following year’s AGM.
ÅF’s Board of Directors consists of
seven members elected by the AGM
and two members and their deputies
elected to represent the company’s
employees. The members elected by
the general meeting include individuals
with links to ÅF’s major shareholders –
Research and Development and ÅFOND,
the ÅF Group Trust – and individuals who
are independent of these major shareholders. The President has no seat on the
Board. The Chairman of the Board does
not actively participate in the day-to-day
operational management of the company.
Of the directors elected by the AGM the
following are independent of the company
(non-executive directors): Ulf Dinkelspiel,
Magnus Grill, Eva-Lotta Kraft, Carl-Erik
Nyquist, Helena Skåntorp and Gunnar Svedberg. The following are independent of the
company’s major shareholders: Ulf Dinkelspiel, Eva-Lotta Kraft, Carl-Erik Nyquist
and Helena Skåntorp.
Salaried employees of the company
participate in Board Meetings as secretary
and to present reports. The Secretary of
the Board is the company’s Executive Vice
President for Corporate Resources.
appointed Carl-Erik Nyquist to the post
of Chairman of the Board and Gunnar
Svedberg as Deputy Chairman.
adopted written rules of procedure, and
approved written instructions in respect
both of the distribution of work between
the Board and the President, and of the
information which the Board shall receive
on a standing basis. The rules of procedure will ensure, inter alia, that the Board
receives all necessary information.
During the 2005 financial year, the
Board held twelve meetings, of which one
was an inaugural meeting, and one in the
form of a two-day strategy seminar with
a special review of every business area.
The following directors of the company
attended all twelve of the Board’s meetings: Ulf Dinkelspiel, Magnus Grill, CarlErik Nyquist and Peter Sandström. EvaLotta Kraft, Helena Skåntorp and Gunnar
Svedberg each attended eleven of the
Board’s meetings.
An evaluation of the work of the Board
was carried out in the form of a questionnaire and a discussion among the Board.
The Board as a whole is deemed to possess a good blend of skills and experience,
demonstrate commitment and be satisfied with the way in which the work of the
Board is carried out and the President/
CEO reports. The individual members of
the Board were very satisfied with the
work done by the Chairman of the Board
and the company’s President/CEO.
The following were among the more
important resolutions and tasks during
the year:
• Progress report and action programme
for the Systems Division.
• Details of a new convertible subordinated
loan programme for ÅF employees.
• Acquisition of 47 percent of the shares
in ÅF-Incepal from ÅF-Chleq Froté.
Corporate governance
• Instruction of the President to finalise
the sale of ÅF headquarters to GE Real
Estate AB and sign a tenancy agreement with Skanska regarding the proposed new head office at Hagaporten
in Stockholm.
The fee structure proposed by the
Nominations Committee for the consideration of the 2006 AGM is as follows:
• Sale of the Systems Division’s PX
Business Solutions to Visma.
Committee work
SEK 25,000
with the exception of the Chairman of the
Audit Committee, who shall receive SEK
50,000.
• Instruction of the President to acquire
Enprima Oy.
• Visit to one of ÅF’s clients in the Sweden
South Region, the waste management
company Sydskånska Avfallsaktiebolaget,
in conjunction with the two-day strategy
seminar.
Audit Committee
At its inaugural meeting in 2005, the Board
resolved to appoint an Audit Committee
consisting of Helena Skåntorp (Chair), CarlErik Nyquist and Ulf Dinkelspiel. All members of the Committee are independent of
the shareholders and the company’s senior
executives. During 2005, the Committee
held three minuted meetings, along with
informal contacts as required. The company’s auditors took part in all meetings of
the Audit Committee during the year. Attendance at all meetings was 100 percent.
The principal tasks carried out during
the year were the creation of a formal
work plan for the Audit Committee, the
determination of the most critical accounting issues facing ÅF and ÅF’s internal control procedures in relation to the Swedish
Corporate Governance Code.
No remuneration for this Committee
work was paid during 2005.
Remuneration Committee
From among its own members, the Board
of Directors appointed a Remuneration
Committee, which, for the period until the
close of the 2006 AGM, consists of CarlErik Nyquist (Chair), Gunnar Svedberg,
Eva-Lotta Kraft and Jan Fröjd.
The task of the Committee is to deal
with issues relating to wage levels, pension benefits, incentives and other conditions of employment for the President/CEO
and other senior executives within the
Group. The description “senior executives”
includes divisional managers and individuals
within the parent company who report
directly to the President/CEO, as well as
other of the Group’s executives whom the
Committee decides to include. The conditions of employment for the President/CEO
and other senior executives must be submitted to the Board for approval.
During 2005, the Remuneration Committee met on one occasion. No remuneration for this committee work was paid
during 2005.
Directors’ fees
The total fee payable to the members of
the Board of Directors elected by the AGM
was set by the AGM. The fee for 2005 was
SEK 800,000. The Board itself allocated
the fee among the company’s directors.
Chairman of the Board
SEK 350,000
Directors
SEK 125,000
Employee representatives and directors
who are in receipt of a salary from the company do not receive any directors’ fees.
For details of the remuneration to
all members of the Board of Directors,
please refer to Note 11 in the Notes to
the Annual Accounts.
Reporting
During 2005, the Board resolved to review
the procedures for internal controls in respect
of financial reporting, to ensure that these
work effectively during 2006. This will allow
the Board to give an assessment for 2006.
Group management
The President/CEO is responsible for the
day-to-day control of the Group. There is a
written instruction setting out the division
of responsibility between the Board and the
President/CEO. The responsibility of the
President/CEO includes current investment
and disposals, personnel, financial matters,
day-to-day contact with the company’s
stakeholders, the authorities and the financial
markets, as well as the preparatory work
for Board meetings. The President/CEO has
appointed a senior management group with
day-to-day responsibility for various parts of
the operation. This consists of divisional and
regional managers, as well as managers of
shared Group services. For further details
of the members of the senior management
group, please refer to pages 82–83.
The senior management group met on
nine occasions during 2005. Matters considered at the meetings included results
trends and reports in preparation for and
subsequent to meetings of the Board of
Directors. Discussions on budgets, investment and policies were also frequent, as
were reviews of market trends, business
trends and employee-related issues.
Remuneration to senior management
The remuneration of the CEO is determined by the Board after examining the
proposals of the Board’s Remuneration
Committee. The remuneration of executives directly subordinate to the President
is determined by the President in consultation with the Board’s Remuneration Committee. The Group applies the principle
that the manager’s manager must approve
decisions relating to remuneration.
A scheme, in which all members of staff
were invited, on the same terms, to buy convertibles at market price, was introduced
in 2005. The loan totalled SEK 56 million
and will run until 30 June 2008. There is no
incentive programme of options or bonuses
for senior executives.
For a table showing remuneration to
the President and other senior officers of
the company, please refer to Note 11 in
the Notes to the Annual Accounts.
Internal audits
The Audit Committee reports its findings
continually to the Board of Directors. In addition to this, the company’s auditors inform
the Board of their findings in conjunction with
the “hard close” of the accounts and the
preparation of the annual accounts. Against
this background the Board of Directors has
not deemed it necessary to set up any separate, internal audit or inspection function.
Auditors
The accountancy firm KPMG was adopted
as auditors by the annual general meeting
in 2003 for a period of four years. KPMG
carries out audits on ÅF (including all subsidiaries).
An audit of the accounts is carried out for
the period January to September, as a “hard
close” and during the preparation of the
annual accounts. This is accompanied by an
examination of routines and control systems
that are of essential significance for the
audit. The audit of the annual accounts and
annual report is carried out during January
and February. During 2005, the auditors
reported to the full Board on one occasion.
They also took part in the meetings of the
Audit Committee.
In addition to the audit assignment,
ÅF has engaged KPMG as consultants
in the taxation field, on accounting matters and for research in conjunction with
major projects, such as acquisitions. The
amount of the remuneration paid to KPMG
is shown in Note 12 in the Notes to the
Annual Accounts.
The following guidelines apply when
making decisions re: purchasing services
from the company’s auditors. The following
services may not be purchased:
• Day-to-day accounting, preparing annual
accounts
• Cash management
• Management functions
• H/R functions
The following services may only be purchased after special thought has been
given to the matter:
• Tax consulting
• Preparation of acquisition balances
Consulting assignments valued at SEK
200,000 or more may only be ordered
after consultation with the chairman of the
Audit Committee.
79
Board of directors
1.
1. Ulf Dinkelspiel
Born 1939. Graduate business administrator, Stockholm
School of Economics.
Ambassador, E Öhman j:or AB.
Director of AB Ångpanneföreningen since 2004.
Chairman of Landshypotek AB, Sveriges Allmänna
Hypoteksbank, the Sweden in Europe Foundation and the
Association for Swedes Worldwide.
Deputy Chairman of the Royal Swedish Institute of
Technology (KTH) and ICC Sweden.
Board member of E. Öhman j:or AB, Nordnet AB,
Springtime AB, Premiefinans AB and Bockholmen Hav och
Restaurang AB.
Member of the Royal Swedish Academy of Engineering
Sciences (IVA).
Shareholding in ÅF: 6,600 shares.
2.
2. Magnus Grill
Born 1945. Graduate business administrator.
President Öresundskraft AB.
Deputy Chairman of Ångpanneföreningen’s Foundation for
Research and Development since 2002.
Chairman of the Board of VÄRMEK (the Swedish Heating
Plant Association) and SweHeat (the Swedish Council for
District Heating). Board member of Elforsk AB.
Chairman of the Swedish Environmental Technology
Council (Swentec).
Shareholding in ÅF: 100 shares.
3.
3. Eva-Lotta Kraft
Born 1951. M.Sc. (Engineering), MBA. Strategy
and Marketing Manager at the Swedish Defence
Research Agency (FOI). Director of AB Ångpanneföreningen since 2002.
Board member of Munters AB and Karlstad University.
Shareholding in ÅF: 1,600 shares.
4.
4. Carl-Erik Nyquist
Born 1936, M.Sc. (Engineering). Former CEO of
Vattenfall AB.
Director and Chairman of AB Ångpanneföreningen since
2002. Board member of Vitec AB, Wireless Maingate AB
and Commet AB. Member of the Royal Swedish Academy
of Engineering Sciences (IVA) and Departmental Chairman
for the Royal Swedish Academy of War Sciences.
Shareholding in ÅF: 1,200 shares
5. Peter Sandström
Born 1948. M.Sc. (Engineering).
Chairman of the ÅFOND Trust. Employed in the Process
Division of the ÅF Group.
Convertibles: SEK 0.
80
5.
6.
Directors
6. Helena Skåntorp
7.
Board member of Mekonomen AB and Hemtex AB.
7. Gunnar Svedberg
8.
Born 1947. PhD (Engineering). Vice Chancellor of Göteborg
University. Professor of Energy Technology at the Swedish
Royal Institute of Technology.
Director and Deputy Chairman of AB Ångpanneföreningen
since 2001.
Chairman of Ångpanneföreningen’s Foundation for Research
and Development since 2002. Chairman of the Swedish
National Defence College. Board member of IRECO Holding
AB (Institute for Research and Competence) and Lindholmen
Science Park AB. Member of the Royal Swedish Academy of
Engineering Sciences (IVA).
8. Cecilia Axelsson
Born 1979, M.Sc. (Engineering).
Employee representative (deputy) for AB Ångpanneföreningen
since 2005.
Employed in the Infrastructure Division.
Shareholding in ÅF: 2 shares
Convertibles: SEK 0
9.
9. Jan Fröjd
Born 1956. Design engineer, communications and safety
systems.
Employee representative for AB Ångpanneföreningen since
2000.
Convertibles: SEK 0.
10. Eva Lindén
10.
Employee representative for AB Ångpanneföreningen since
2005.
Convertibles: SEK 51,600 (corresponds to 300 shares)
11. Per-Åke Östling
Born 1965. Engineer.
Employee representative (deputy) for AB Ångpanneföreningen
since 2004. Employed by AB Ångpanneföreningen.
Convertibles: SEK 0
11.
81
1.
Senior management
2.
1. Jörgen Backersgård
Born 1964. M.Sc. (Engineering)
Senior Vice President, Inspection Division since 2004
Employed by ÅF since 1998.
Shareholding in ÅF: 100 shares. Convertibles: SEK 516,000
(corresponds to 3,000 shares).
2. Karl-Anders Eriksson
Executive Vice President, Corporate Resources since 1989.
Shareholding in ÅF: 1,000 shares incl. related parties’ holdings.
Convertibles: SEK 688,000 (corresponds to 4,000 shares).
3.
3. Gunilla Fladvad
Born 1947. DIHM Marketing & Communication.
PA to the President.
4. Anders Gabrielsson
Executive Vice President and CFO since 1986.
Shareholding in ÅF: 3,200 shares. Convertibles: SEK 688,000
4.
5. Claes-Inge Isacson
Senior Vice President, Process Division since 2006
Shareholding in ÅF: 0 shares. Convertibles: 0
5.
6. Peter G Johansson
Regional Manager, ÅF Sweden North since 2005.
Shareholding in ÅF: 0. Convertibles: SEK 516,000
7. Christer Karlsson
Regional Manager, ÅF Sweden West since 2005.
6.
7.
82
Senior management
8.
8. Eva Nilsson
9.
Regional Manager, ÅF Sweden South since 2005.
Employed by ÅF 1976–89 and again since 2003.
(corresponds to 3,000 shares)
9. Jan Nordling
Senior Vice President, Acquisitions & New Markets since 2005.
Shareholding in ÅF: 800 shares incl. related parties’ holdings.
Convertibles: SEK 860,000 (corresponds to 5,000 shares)
10. Johan Olsson
10.
Born 1956. M.Sc.
Senior Vice President Systems Division since 2005.
(corresponds to 5,800 shares
11. Åke Rosenius
Senior Vice President, Infrastructure Division since 2005.
11.
12. Viktor Svensson
Executive Vice President, Corporate Information since 2003.
13. Jonas Wiström
12.
President and CEO since 2002.
Regional Manager, International Region since 2005.
Member of the Royal Swedish Academy of Engineering Sciences (IVA).
Shareholding in ÅF: 1,500 shares Convertibles: SEK 997,600
(corresponds to 5,800 shares)
Other senior executives
13.
Jean-Paul Bernateau
Born 1944, Graduate engineer.
Président-Directeur Général, Chleq Froté,
France
Peter Gitzen
Born 1959, Dipl.-Ing.
Geschäftsführer, ÅF-Celpap GmbH,
Germany.
Elisabeth Ekener Petersen
Born 1963, Graduate business administrator.
Environmental Director since 2002.
Shareholding in ÅF: 0 shares. Convertibles
SEK 86,000 (corresponds to 500 shares).
Anti Lukka
Born 1964, B.Sc., Chemical
Engineering
Managing Director, ÅF-CTS Oy
Finland.
Tore Fredriksen
Born 1962, Engineer, MRIF
Managing Director, ÅF-Consult AS, Norway.
Ralf Teuchert
Born 1965, Dipl.-Ing.
Geschäftsführer, ÅF-Celpap GmbH,
Germany.
83
Annual general meeting
Shareholders in AB
Entitlement to attend
Please specify your name, personal or
Ångpanneföreningen (publ)
Shareholders who wish to participate in the
Annual General Meeting must:
corporate identity number, address, phone
are invited to the General
Meeting of the company that will take place
at 17.00 (5.00 pm) on
Thursday 27 April 2006 at
AB Ångpanneföreningen’s
• have their names entered in the shareholders’ register maintained by VPC AB
(the Swedish Securities Register Centre) by
Friday 21 April 2006 at the latest, and
• confirm their intention to participate to
the company’s head office by Tuesday 25
April 2006 at the latest.
Sweden.
Shareholders who have elected to use a
nominee for their shareholding must temporarily re-register their shares in their own
name if they wish to exercise the right to
participate in the Annual General Meeting.
Shareholders who wish to do this must
inform their nominee of their intention in
good time before 21 April 2006.
Registration
Notice of an intention to participate in the
Annual General Meeting may be made to:
AB Ångpanneföreningen,
Corporate Information,
Box 8133, SE-104 20 Stockholm,
Sweden
Tel. +46 (0)8-657 10 00,
Fax +46 (0)8-653 56 13,
or by e-mail via www.afconsult.com/
bolagsstamma2005
84
The notification of attendance must be
accompanied by documentary proof of
entitlement to attend the meeting (power of
attorney, registration certificate, etc).
Dividend
The Board of Directors proposes a dividend
to shareholders of SEK 5.00 per share. It is
proposed that Wednesday 3 May 2006 be
head office at number 7
Fleminggatan in Stockholm,
number and your registered shareholding.
made the record day for the right to receive
this dividend. It is anticipated that payment
will be made via VPC on Monday
8 May 2006
Financial information – schedule for
2006
Interim report (3 months): 27 April.
Interim report (6 months): 23 August.
Interim report (9 months): 9 November.
ÅF’s Capital Market Day will be held in
September.
These reports will be published in Swedish
and English.
Financial information about the ÅF Group is
also posted on the Group’s website
www.afconsult.com
Addresses
Offices in Sweden
Offices in Sweden
Arboga
Avesta
Bengtsfors
Borlänge
Borås
Ed
Enköping
Falun
Gävle
Gothenburg
Halmstad
Helsingborg
Hudiksvall
Hässleholm
Jönköping
Karlshamn
Karlskoga
Karlskrona
Group Head Office
AB Ångpanneföreningen
Fleminggatan 7
Box 8133
SE-104 20 Stockholm
Sweden
Tel +46 8-657 10 00
International offices
Karlstad
Kiruna
Kista
Kristianstad
Köping
Linköping
Luleå
Lysekil
Malmö
Norrköping
Nynäshamn
Oskarshamn
Piteå
Skara
Skellefteå
Skövde
Solna
Stenungsund
Stockholm
Strömstad
Sundsvall
Söderhamn
Söderköping
Södertälje
Tavelsjö (Umeå)
Trollhättan
Tyresö
Uddevalla
Umeå
Uppsala
Varberg
Västerås
Växjö
Åmål
Örebro
Örnsköldsvik
Czech Republic
Denmark
Finland
France
Germany
Guatemala
Lithuania
Norway
Poland
Spain
Republic of South Africa
Fax – Group Management +46 8-653 56 13
Fax – Reception +46 8-650 91 18
For further information about addresses and contact
details, please see www.afconsult.com
Produced by Solberg in collaboration with the ÅF Group’s Corporate Information Dept. Printed by Strokirk-Landströms. This Annual Report has been printed using environmentally adapted technology on Magno Satin paper (135 gsm and 250 gsm), which meets the criteria for the Nordic Swan mark. The paper has been manufactured by
Sappi, which, like the printing company, is environmentally certified in accordance with ISO 14001. Photos: Peter Bartholdsson, Magnus Eklöf, Pix Gallery and Imagebank.
Translation: AB Språkman.
85
The ÅF Group is a leader in technical
consulting, with expertise founded on
more than a century of experience. We
offer highly qualified services and solutions for industrial processes, infrastructure projects and the development
of products and IT systems. We are also
one of the leading names in testing and
inspection.
Today the ÅF Group has more than
3,000 employees. Our base is in
Europe, but our business and our clients
are found all over the world.
www.afconsult.com

Annual Report 2005

Transcription

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