annual report 2007 - enea...enea is a world leader in embedded systems and advanced technical...
TRANSCRIPT
Annual Report 2007
Enea is a world leader in embedded systems and advanced technical systems
development. The company has a broad portfolio of in-house developed software.
Enea’s operating system can be found in half of all 3G mobile phones and base stations
in the world. The company’s professional services and software are in demand from
global leaders in technologically advanced industries such as telecommunications and
aerospace, as well as industrial, medtech and automotive engineering. The common
denominator is complex requirements for high-availability systems – systems that
work in realtime without delay. Enea has about 550 employees worldwide. The company’s
shares are listed on the OMX Nordic Exchange in Stockholm. Enea is celebrating its 40th
anniversary in 2008.
highlights of the yearNet sales increased by 9 percent to SEK 821 (750) million.■■
Software revenues rose 15 percent to SEK 312 (271) million.■■
Operating profit was up 7 percent to SEK 72 (68) million ■■
and operating margin was 9 (9) percent.Profit after tax improved to SEK 71 (48) million.■■
Earnings per share were SEK 0.19 (0.13).■■
Continued focus on expanding the product portfolio – ■■
capitalized product development costs SEK 26 (33) million.Breakthrough deal in mobile telephony for 3G with Chinese ZTE.■■
We grew within Linux through the acquisition of QiValue. ■■
Rising interest for Enea Element middleware software. Orders ■■
from clients such as MobiTV, Hughes, and 4DK Technologies.Developed Enea dSPEED Platform together with client.■■
Major consulting contract signed with US-based Honeywell.■■
Enea software in more than 350 million new mobile phones ■■
in 2007.
contents highlights of the year 1 | letter from the president 2 | software 4 | services 6 | the enea share 9 | five year review 10 | directors’ report 12 | consolidated income statement and balance sheet 14 | changes in shareholders’ equity – group 15 | consolidated cash flow statement 15 | income statement and balance sheet – parent company 16 | changes in shareholders’ equity – parent company 17 | cash flow statement – parent company 17 | notes 18 | audit report 29 | glossary 29 | board of directors 30 | senior executives 31 | addresses 32 | annual general meeting 32 |
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Software Services
Net sales, SEK million
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Operating margin, SEK million
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4321432143212005 2006 2007
Operating margin Expenses Sales%
Sales by market area
Nordic Region 76 %
EMEAA 6 %North America 19 %
Sales by segment
Telecom,infrastructure 44 %
Telecom handsets 33 %
Other 23 %
1
letter from the president
2
Enea has completed yet another prosperous year. In 2007 we achieved good profitability and high growth, especially in software operations. Enea reported its best operating profit ever for the fourth quarter of 2007. We have invested heavily in our offering and at the same time demonstrated solid profitability in relation to the industry.
Strong offeringThe ongoing repositioning of the company is proceeding according to plan. Over the past two years we have developed and launched several new products such as Enea LINX and OSE Net, platform solutions such as Enea Element, Enea Accelerator, and Enea dSPEED Platform, development tools such as Enea Optima, as well as new improved versions of our traditional offering with the focus on the OSE operating system family. We have broadened our offering of consulting services, such as expertise in the Linux operating system and low-cost development services in Romania. And we have strengthened Enea’s capacity for marketing and sales.
During 2007 we have seen strong interest in Enea’s offering. For example, Chinese ZTE chose to have OSE included in all of its 3G telephones. With Enea dSPEED Platform, which we developed together with one of our largest clients, Enea is among the technology pioneers with a solution that can handle extremely high demands for performance and bandwidth. We sold seven installations of our middleware for telecom-munication infrastructure, Enea Element – three of them during the fourth quarter.
We have also found the right format to successfully provide and package our consult-ing services, as well as to provide clients with more know-how and larger projects. A growing part of our new offering involves providing software integrated with consulting services as total solutions to our customers’ challenges.
Rapidly changing marketEnea is active in a high-tech market consisting mainly of a handful of North American players. A few years ago the company initiated a repositioning process toward a greater market focus and it is gratifying to be able to conclude that the restructuring process to modernize the company has been successful.
The general market for embedded systems market shows solid growth. The telecom market in particular is in flux, with several operators and equipment manufacturers issuing warnings forecasting lower growth. Nevertheless, because Enea targets segments with higher growth, such as software and services with a focus on 3G, LTE and mobile broadband, the company contends that it has good prospects for continued growth. Enea continually adapts its management and organization in response to changing market conditions. The price pressure we see in the market may be to Enea’s advantage, as our modern portfolio of software and consulting services can help clients optimize their product development. The value generated becomes obvious when Enea offers pre-integrated total solutions that substantially reduce development time and therefore development costs for clients’ products.
Stronger distribution channels more importantEnea has dedicated considerable resources to expanding its offering in recent years. Product investments will continue, but at a lower rate of investment than to date. As Enea broadens its offering we will now focus more on further strengthening Enea’s distribution capacity and our ability to reach out to clients and deliver complete solutions. These activities may involve smaller complementary acquisitions.
Enea is a world-leading pro-vider of software and services primarily to the telecom indus-try. In 2008 we are celebrating 40 years as a technology pioneer in embedded systems. In 2007, our software was provided to over 350 million mobiles worldwide and is em-bedded in over half the radio base stations in the world.
3
Secure our positionAs a technology pioneer, Enea is always on the cutting edge. With our strengthened position on the market, the prospects are good for harvesting the fruits of the company’s repositioning work of recent years. Against this background we view the future with confidence and expect continued growth at the same rate, or somewhat faster, than the market at large.
For a technology and expertise-focused company like Enea, the ambition and enterprising spirit of our employees constitute the foundation of our success, which we would like to illustrate in this annual report and with photos of some of Enea’s more than 560 employees. In closing I would like to take this opportunity to thank our clients, our talented employees, and our shareholders for this past year.
Johan Wall, President and CEO Devoted sailor
“With our modern portfolio of software and consulting services we can help clients to optimize their product development.”
Business model software
Third part products and other 11 %
Recurring sales 78 %
Perpetual 11 %
Realtime operating systemsRealtime operating systems are used in many different types of products, and must therefore be able to be adapted for different purposes. Performance, scale-ability, operating reliability, and capacity for multipro-cessor systems are crucial specifications. Source code, configuration possibilities, development environment, and support also play an important role, over and above commercial and technological requirements, when choosing a realtime operating system. As a complement Enea offers development tools to its cli-
ents. Enea’s OSE realtime operating system is one of the world’s most commonly used systems. It is suc-cessfully used in half of all 3G mobile phones and base stations in the world.
Enea Accelerator – a package solutionEnea Accelerator is a package solution that enables operators to offer a reliable internet connection for the best quality in multimedia services. The platform solution includes Enea LINX, which can communicate between different processors in an embedded system.
Enea LINX is an open-source application that supports Linux and OSE, but can also be adapted to other oper-ating systems. The solution includes Enea Element, which sits between the operating system and the cli-ent’s applications, as well as Polyhedra and Enea dSPEED Platform. Polyhedra is a relational database that is suitable for high-speed data management at the server level. Enea dSPEED Platform comprises a pre-integrated platform solution that is well suited to the next-generation mobile network.
In just seconds your mobile phone connects your call to Thailand. The heart-lung machine pumps oxygenated air at just the right moment. Enea’s software is embedded in many everyday products and has the job of ensuring that they work – with-out delay. The more that our everyday things are controlled by processors, the more Enea’s soft-ware is used. Systems that work in realtime are Enea’s specialty, particularly in telecom.
Good market for embedded softwareBoth the general market for embedded software and the one with a focus on telecoms were good during 2007. Growth in telecom was mainly driven by strong growth in subscribers on new markets and increased demand for mobile broadband, network convergence, and advanced content services. The United States and parts of Europe demonstrated the strongest growth. The trend continued with Asian telecom players who are beginning to establish a serious global presence.
Software with high demands for precisionEnea’s software is developed for products with stringent demands for accuracy immediate response to new commands, and where precision in fractions of seconds is crucial. With its traditional product portfolio, which includes the OSE operating system family, Enea has held a world-leading position in this segment for the past few decades.
In recent years Enea has invested heavily in expanding its product portfolio with a deliberate focus on new niches, in areas such as middleware, where strong growth is expected. The new and traditional products are integrated in platforms that tie together the entire communications process between the hardware and the functions of the end prod-uct, the application. The products are used in many different fields, but the emphasis is on telecommunications, where Enea works with leading players such as Alcatel-Lucent, Ericsson, Nokia, Nokia Siemens Networks, Sony Ericsson, Motorola, and ZTE. Enea’s software can be found in both mobile phones and in infrastructure in the equipment required to send – with-out delay – mobile calls through telecom operators’ networks. A continued strategic initiative focusing on research and development is the basis of Enea’s success and will ensure that Enea will remain on the cutting edge in the field of technological development.
Enea benefits from two global trendsMillions of new wireless subscribers will be added in the developing countries, which will increase operators’ requirements for capacity. And in addition to ordinary voice traffic, growing quantities of data are being transmitted as people use their mobile phones increas-ingly to send photos and videos and to surf on the Internet. These two global trends benefit Enea since our software has the capacity to handle the extremely large quantities of data in the mobile networks that are required for tasks such as watching TV on the mobile.
Enea’s software saves time and resources for clientsSince research and development are resource-intensive, more and more clients have realized that Enea’s solutions save both time and resources. There is logic in buying ready-made solutions rather than devoting resources to developing value-generating applications in-house, especially for new players with limited resources. By purchasing software from Enea they can bring their products to market faster to start generating revenues.
Together with its partners Enea has total solutions that no individual competitor can offer at this time. The solutions are generic and hardware-independent. There is a clear advantage for clients to be able to purchase a total solution.
software
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Net sales software, SEK million
2005 2006 2007
Michael Ventrella, VP Software Sales North AmericaHockey dad with a passion for sports cars and road racing
Total solutionsOne of Enea’s strengths is total solutions, in which both software and consulting services are offered for integration, testing, and maintenance. Enea’s special-ists help clients to modify and develop components, systems, or interfaces. Assignments vary from in- dividual projects to complete system integration.
TrainingThe expertise that Enea’s consultants possess is cov-eted. Enea has extensive experience of devising and offering courses and seminars. The programs maintain high standards and are taught by consultants within the company’s specialties. Courses are held in every-thing from hardware and various programming languages, to testing, test system development, and project management. The programs are offered as standard courses, or customized together with the client.
Testing and verificationEnea offers advanced system testing services and can help to organize the process. Enea’s consultants can also develop testing systems, which are becoming increasingly important to ensure that the end products achieve optimal functionality and quality. Certification of hardware and software is another field in which Enea possesses extensive expertise.
Enea has satisfied customers. Much of the secret lies in the commitment of our employees to solving challenging tasks. Our engineers work on consulting projects such as developing embedded systems for telecom-munications that are used by bil-lions of people, control systems for airbags that save lives, and system for the aviation industry with stringent safety require-ments. Working on projects that are noticed and offer crucial functionality is a strong motiva-tor for achieving maximum per-formance.
Good market for consulting services in Nordic region and North AmericaThe consulting services market continued to show steady growth during 2007, mainly in the Nordic countries, but also in North America. Market conditions have been demanding with continued price pressures on consultants and a shortage of skilled personnel. Despite these conditions, Enea’s consulting operations performed well during the year. One clear trend is the increased demand for total solutions in which software and consultancy services are provided as a whole. The trend toward increased consolidation in the market continued.
Smart engineers provide innovative solutionsEnea has over 350 engineers who work in consulting projects with system development, system integration, testing primarily of embedded systems for clients in the fields of aero-space and telecommunications, as well as in automotive, medical, and industrial engineer-ing. The assignments are carried out either as projects for fixed services, or with on-site staff-ing. Moreover, Enea offers quality assurance of program code and system training programs, such as testing and testing systems, another of Enea’s specialties. The common denomina-tor for Enea’s consulting offering is that with our experience and cutting edge expertise we can help our clients to accelerate and streamline their product development.
Embedded system specialistsMany clients do not have the time, resources, or specialized expertise to work with system development. With forty years of experience Enea has built up both human and structural capital in developing embedded systems in order to skillfully and cost effectively solve the client’s challenges while maintaining high standards of excellence.
Enea also has the capacity to conduct the client’s ongoing development work as a proj-ect, a longer undertaking or with outsourcing to low-cost countries. During the year Enea established operations in Romania which in the long term will handle larger volumes, par-ticularly on a project basis. Parts of Enea’s own software development are also carried out in Romania.
Stronger position in LinuxOne clear trend during the year is that the open source operating system Linux is becoming entrenched as a serious alternative in embedded systems. The addition of Linux means new opportunities for Enea, with new areas of expertise and an expanding market. Through the acquisition of technology consultants QiValue Technologies AB Enea has further strength-ened its position in Linux. During the year Enea started the Enea Linux Competence Center (ELCC) with the goal of becoming a leading supplier of embedded systems based on Linux. With this acquisition we can now solve our clients’ challenges from several perspectives.
services
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Madeleine Ymerson, Test Specialist Scout leader who enjoys swing dancing
Ingela Camp, Project Manager Research & Development Loves to travel with France as her favorite destination
OWNER cATEGORiES DEcEmBER 31, 2007Number of
shares
Percentage of share capital
and votes
Ten largest individual shareholdersSIS SegaInterSettle AG 49,381,968 13.5Per Lindberg 35,280,700 9.6Lgt Bank in Lichtenstein Ltd 21,454,759 5.8Electro Medicinska AB 19,361,000 5.3DnB NOR ASA 18,603,055 5.1JP Morgan Bank 15,557,469 4.2Barclays Bank Plc 3,701,000 1.0Joachim Waldén 3,014,200 0.8Bo Steinholtz 2,905,800 0.8Second AP fund 2,612,686 0.7Total, ten largest shareholder 171,872,637 46.8
Other 195,241,627 53.2Enea AB1 5,941,000 1.6Total 367,114,264 100.0
Possible dilution from stock option programs, Enea TekSci Inc.2
maturity Dec. 31, 2009, strike price SEK 3.50 2,000,000 0.5maturity Dec. 20, 2010, strike price SEK 3.90 1,500,000 0.4Total 370,614,264
1. Including 710,000 shares paid after 2007-12-31.2. As at December 31, 2007, the option program has not led to dilution.
Source: VPC, Nordic Central Securities Depository
chANGE iN ShARE cAPiTAL SiNcE 1998
Year Share capitalNewly issued
shares Number of
shares Event
7,680,900 – 1,536,1801998 7,680,900 4,608,540 6,144,720 Split 4:11998 – – – Conversion to one class
of stock
1999 7,845,284 131,507 6,276,227 Non-cash issue2000 7,920,214 59,944 6,336,171 Non-cash issue2000 8,712,235 633,618 6,969,788 New share issue2000 8,712,235 167,274,912 174,244,700 Split 25:12001 8,877,235 3,300,000 177,544,700 New share issue2002 8,923,181 918,919 178,463,619 Non-cash issue2003 9,107,843 3,693,243 182,156,862 Non-cash issue2003 18,215,686 182,156,862 364,313,724 New share issue2004 18,215,686 – 364,313,724 –2005 18,215,686 – 364,313,724 –2006 18,265,096 988,192 365,301,916 New share issue2007 18,355,713 1,812,348 367,114,264 New share issue
OWNERShiP STRucTuRE DEcEmBER 31 2007 2006
Total number of shareholders 16,599 19,991
Shareholder categories, in percent
Foreign investors 45.4 40.9Swedish investors 54.6 59.1
of whichInstitutions 16.7 13.1Mutual funds 1.0 3.1Private individuals, incl small businesses 36.9 42.9
ThE ENEA ShARE (Ticker: enea) 2007 2006 2005 2004 20031
Earnings per share, SEK 0.19 0.13 0.19 –0.04 –0.16Diluted earnings per share, SEK 0.19 0.13 0.19 –0.04 –0.16Cash flow per share, SEK 0.03 –0.08 0.11 0.07 0.16Diluted cash flow per share, SEK 0.03 –0.08 0.10 0.07 0.15Equity per share, SEK 1.19 1.04 0.93 0.73 0.70Diluted equity per share, SEK 1.19 1.03 0.92 0.72 0.69Dividend per share, SEK 0.00 0.00 0.00 0.00 0.00Share price at December 31, SEK 2.15 3.79 5.90 4.64 2.30P/E ratio 11 29 31 117 neg.Price/equity ratio, % 181 364 634 640 331
Enea is covered by the following analysts:Karl Berglund – ABG Sundal CollierJonas Elofsson – Kaupthing BankAndreas Joelsson – SEB EnskildaGreger Johansson – RedEye
No. of shares traded, thousands (incl. after hours)
120 000
100 000
4,0
3,5
3,0
2,5
2,0
jan feb mar apr maj jun jul aug sep okt nov dec 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
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15 000
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3020
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0,3
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Aktien OMX Stockholm_PI
1998–2007
Omsatt antal aktier 1000-tal (inkl. efteranm.)
4,0
3,5
3,0
2,5
2,0
jan feb mar apr maj jun jul aug sep okt nov dec
20 000
15 000
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2007
Aktien OMX Stockholm_PI Omsatt antal aktier 1000-tal (inkl. efteranm.)
4,0
3,5
3,0
2,5
2,0
Jan2007 Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
20 000
15 000
5 000
2007
The share SIX IT
The share SIX IT No. of shares traded, thousands (incl. after hours)
120 000
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
90 000
60 000
30 000
3020
10
0,5
1998–2007
Aktien OMX Stockholm_PI Omsatt antal aktier 1000-tal (inkl. efteranm.)
No. of shares traded, thousands (incl. after hours)
120 000
100 000
4,0
3,5
3,0
2,5
2,0
jan feb mar apr maj jun jul aug sep okt nov dec 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
20 000
15 000
10 000
5 000
60 000
30 000
3020
10
0,3
2007
Aktien OMX Stockholm_PI
1998–2007
Omsatt antal aktier 1000-tal (inkl. efteranm.)
4,0
3,5
3,0
2,5
2,0
jan feb mar apr maj jun jul aug sep okt nov dec
20 000
15 000
10 000
5 000
2007
Aktien OMX Stockholm_PI Omsatt antal aktier 1000-tal (inkl. efteranm.)
4,0
3,5
3,0
2,5
2,0
Jan2007 Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
20 000
15 000
5 000
2007
The share SIX IT
The share SIX IT No. of shares traded, thousands (incl. after hours)
120 000
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
90 000
60 000
30 000
3020
10
0,5
1998–2007
Aktien OMX Stockholm_PI Omsatt antal aktier 1000-tal (inkl. efteranm.)
ShARE TREND
the enea share
1. Figures for 2003 were not restated to IFRS.
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Source: OMX AB
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Equity/assets ratio and return on equity, rolling 12, %
2005 2006 2007
Equity/assets ratio Return on equity
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0,03
0,09
Earnings and equity per share, SEK
2005 2006 2007
Earnings per share Sharesholders’ equity per share
0,06
0,0
0,4
0,8
1,2
432143214321
five year review
iNcOmE STATEmENT, SEK miLLiON 2007 2006 2005 2004 20031
Net sales 820.6 750.1 726.2 656.7 571.9Operating expenses –748.5 –682.5 –669.8 –635.5 –599.8Operating profit/loss 72.1 67.6 56.4 21.2 –27.9Net financial items 4.8 1.7 4.4 2.2 –6.2Profit/loss before tax 76.9 69.3 60.8 23.4 –34.1Tax2 –5.7 –20.9 8.5 –8.9 –7.7Profit/loss for the year 71.2 48.4 69.3 14.5 –41.8
BALANcE ShEET, SEK miLLiON
Intangible assets 175.1 132.6 108.5 106.2 106.7Other fixed assets 24.9 15.5 30.8 11.4 22.7Accounts receivable and other current assets 268.3 265.5 185.6 231.0 162.0Cash and cash equivalents 156.0 146.4 178.4 137.5 112.0Total assets 624.3 560.0 503.0 486.1 403.4
Shareholders’ equity 434.6 379.4 339.2 264.2 253.4Provisions, non-current liabilities and minority interests 8.9 0.2 0.8 7.4 13.6Current liabilities 180.8 180.4 163.0 214.5 136.4Total shareholders’ equity and liabilities 624.3 560.0 503.0 486.1 403.4
cASh fLOW, SEK miLLiON
Cash flow from operating activities before change in working capital 90.2 77.7 63.2 17.8 9.7Cash flow from change in working capital –23.8 –72.1 –11.7 7.9 –45.5cash flow from operating activities 66.4 5.6 51.5 25.7 –35.8
Cash flow from investing activities –42.7 –34.6 –13.0 0.6 –5.0Cash flow from financing activities –12.8 0.5 – – 80.9cash flow for the year 10.9 –28.5 38.5 26.3 40.1
KEY RATiOS
Operating margin (%) 8.8 9.0 7.8 3.2 –4.9Profit margin (%) 9.4 9.2 8.4 3.6 –6.0Return on capital employed (%) 19.5 20.0 20.7 10.0 –10.4Return on equity (%) 17.5 13.5 23.0 5.6 –17.6Capital employed (SEK million) 434.6 379.5 340.0 264.2 257.4Interest coverage ratio (times) 30.1 29.2 37.9 10.5 neg.Equity/assets ratio (%) 70 68 67 54 63Liquidity ratio (%) 235 228 223 172 199Risk-weighted capital ratio (%) 70 68 67 54 63Average number of employees 547 501 509 544 599Net sales per employee (SEK thousand) 1,500 1,497 1,427 1,207 955Value added per employee (SEK thousand) 879 882 852 783 607
1. Figures for 2003 were not restated to IFRS. Goodwill amortization was SEK 25.2 million in 2003. 2. Including minority share before 2006..
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Dung Vi, Software engineer An ace at speed tic tac toe
directors’ report
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The Board of Directors and the President of Enea AB (publ), 556209-7146, hereby submit this annual report and consolidated financial statements for the 2007 fiscal year, the company’s thirty-ninth year in business.
OperationsEnea is active in embedded systems and advanced system development and offers both software and consulting services in an international market.
Enea is a global provider of software in real-time technology, embedded systems, middleware, development tools, and database technology, mainly for telecom applications. Product development is carried out in USA, Sweden, the UK, and Romania. Enea mainly sells its software through its own subsidiaries in Sweden, USA, France, Germany, the UK, and Japan.
Consulting operations focus on complex technical system develop-ment, specializing in realtime systems and data/telecommunications in USA and Nordic markets. Enea has offices in several locations in North America and Sweden.
The Group’s clients are active in fields such as telecom equipment, mobile phones, avionics, medtech and automotive engineering/info-tainment. These clients include Alcatel-Lucent, Autoliv, Boeing, Bombardier, Ericsson, Fujitsu, General Dynamics, Honeywell, Hughes, Infineon, LSI (Agere), Lockheed Martin, MobiTV, Motorola, Nokia, Nokia Siemens Networks, Saab, Samsung, Sony Ericsson, Yamaha, and ZTE.
A growing portion of Enea’s offering involves providing software integrated with consulting services as complete solutions to customers’ problems and challenges.
The Group’s activities are divided into three geographic regions: the Nordic region, North America, and EMEAA (Europe, Middle East, Asia, and Africa). Operations are organized in the following units:■ Market Operations, including all sales consulting units and market communications.■ R&D, including all product development.■ Product Management, including product management.■ Finance and Administration, including finance, IT, human resources, and office services.
Significant events during the financial yearBusiness has developed favorably during the year with steady demand for Enea’s products and consulting services, as well as several new clients. In 2007 Enea continued to expand operations with new products and services, including platform solutions such as Enea Accelerator and Enea dSPEED Platform and new product releases, such as our OSE operating system and our middleware product Enea Element. At the same time, Enea broadened its offering of products to meet market demand for integrated total solutions. Enea’s traditional software portfolio – over 70 percent of which is generated by recurring revenues – has shown robust growth and profitability, particularly in the Nordic market. Interest in the new middleware and platforms segment is growing and Enea now has ten reference customers for Enea Element.
The utilization rate for the Nordic consulting business continues to be high. The operation has new leadership and the focus is on growth and improving operating margins. Consulting services in USA have developed according to plan, resulting in several key orders during the year.
Enea acquired QiValue Technologies AB during the year, a Swedish company that specializes in consulting services and training in Linux. For more information, please see note 24.
Sales and earningsConsolidated net sales increased by 9 percent to SEK 821 (750) million. Currency-adjusted growth was 11 percent. Software revenues increased by 15 percent to SEK 312 (271) million, mainly attributable to the Nordic region. Currency-adjusted growth was 17 percent. Consulting and other revenues increased by 6 percent to SEK 509 (479) million, mainly attribut-able to the Nordic region. Currency-adjusted growth was 8 percent. Oper-ating profit for the year rose to SEK 72 (68) million. Net sales outside the Nordic countries accounted for 24 (26) percent of the Group’s total sales.
Profit after tax increased to SEK 71 (48) million. Loss carryforwards had a positive effect on tax expense of SEK 13 million.
financial positionCash flow from operating activities increased to SEK 66 (6) million. At year-end cash and cash equivalents amounted to SEK 156 (146) million. The Group has no interest-bearing liabilities and therefore has a positive net cash position. The Group does not need additional capital at this time.
Research and developmentThe Group’s division Enea Software develops software for embedded sys-tems. Enea capitalized software development costs amounting to SEK 26 (33) million for the year. Research and development account for 12 (10) percent of the Group’s total operating expenses.
financial risks and policies as well as other risks and uncertain factorsIn light of factors such as the Group’s high percentage of cash and cash equivalents and long-term customer relationships, the Group’s financial risks are limited. Just over half of consolidated revenues are attributable to Ericsson including SonyEricsson. Enea strives to increase revenues from other customers, while further developing business with the Ericsson com-panies.
For more information on financial risks and policies, as well as other risks and uncertain factors, please see note 21. For important estimates and assumptions, please see note 22.
Parent company Enea ABThe Parent Company’s net sales for 2007 amounted to SEK 29 (29) million and profit after net financial items increased to SEK 95 (–15) million. Net financial items were SEK 118 (2) million including income from holdings in Group companies for SEK 113 (0) million.
Cash and cash equivalents on December 31 were SEK 120 (117) mil-lion. The Parent Company›s investment were SEK 6 (1) million and the aver-age number of employees was 20 (19).
The Enea shareAs at December 31, the registered share capital consisted of 367,114,264 common shares with a par value of SEK 0.05 each. Holders of common shares are entitled to dividends (to be specified at a later date) and each share grants the right to one vote at the Annual General Meeting.
The provisions of the articles of association do not impose any restric-tions on the transferability of shares or on each shareholder’s right to vote at the Annual General Meeting. Shareholders representing at least one tenth of voting rights for all shares in the company are Per Lindberg, in part through Electro Medicinska AB (total of 14.9 percent of share capital and votes) and SIS SegaInterSettle AG (13.5 percent of share capital and votes).
The Annual General Meeting resolved in May 2007 to authorize the Board of Directors to resolve on the acquisition of own shares up to a maximum of ten percent of all shares in Enea AB at the current share price until the 2008 Annual General Meeting. The purpose of the acquisition of own shares is to be able to continuously adapt Enea’s capital structure to its capital requirements and to facilitate financing, completely or in part, in conjunction with corporate acquisitions.
During 2007 Enea AB repurchased 5,941,000 (0) of its own shares on the OMX Nordic Exchange in Stockholm at an average share price of SEK 2.32 for a total of SEK 13,770,000. Each share has a par value of SEK 0.05. Total hold-ings of own shares correspond with 1.6 percent of share capital.
The Annual General Meeting in May 2007 also resolved, for the purpose of facilitating acquisitions, to grant the Board of Directors the authority to issue new shares in the company equivalent to an increase of a maximum of five percent of share capital with potential for deviation from shareholders’ pre-emption rights and with provisions for non-cash consideration or set-off or other terms and conditions pursuant to Chapter 13, section 5, first paragraph, point 6 of the Swedish Companies Act. The company is not a party to agreements on changing control over the company.
For more information please see The Enea Share on page 11 and note 14 Shareholders’ equity.
PersonnelIn 2007 the Enea Group had an average of about 550 employees, including 74 percent in Sweden, 21 percent in North America, and 5 percent in the EMEAA.
Enea Group employees include 50 percent with an M.Sc. in engineering or equivalent, 39 percent with a B.A. or equivalent, 1 percent with a Tech. Lic. degree, 2 percent with a PhD in engineering, and 8 percent in the category other education Employees include 81 percent men and 19 percent women. Enea works continually with recruitment and skills enhancement. Enea fol-lows local practices with respect to employment and working conditions.
Environmental impactEnea sells software and consulting services. The products themselves have no environmental impact. In 2007 Enea initiated an analysis to find ways to reduce its environmental impact.
corporate governanceEnea’s corporate governance is based on Swedish legislation, the listing agreement with OMX Nordic Exchange in Stockholm, and the directives and recommendations issued by relevant organizations.
The OMX Nordic Exchange in Stockholm has implemented the Swedish Code of Corporate Governance in its regulatory framework and the Code now applies to all listed Swedish companies and other listed companies with a market capitalization that exceeds SEK 3 billion. Although Enea is not subject to mandatory compliance, the Board has decided that the company will gradually adapt to the Code. Enea already meets most of the Code’s main requirements. Among other things, the Board has set up audit, remuneration, and nomination committees, the Board members elected by the Annual General Meeting have completed OMX training for board members, the Board carries out regular self-assessment of its performance, and the Annual General Meeting agenda complies with Code recommendations.
Additional information about corporate governance at Enea can be found on the company’s website at www.enea.com.
The work of the BoardEnea AB’s Board of Directors consists of six directors elected by the Annual General Meeting, as well as two directors and a deputy elected by the employee organizations. All directors elected by the AGM are independent in the code for purposes of corporate governance.
The President, who is not a Board member, participates at all Board meet-ings. Other employees participate at Board meetings on an as-needed basis. Each board meeting includes an executive session during which the Board of Directors meet without the presence of the President or executive manage-ment. Each year the Group’s auditor reports on observations from the audit and an analysis of the company’s internal controls to the Board of Directors.
The guidelines for the work of the Board are laid out in the rules of pro-cedure, which also specify the division of duties among the Board, the Chair-man, and the President. The rules of procedure also contain guidelines regarding the number of regular Board meetings and agenda items to be discussed at regular Board meetings.
Board activities during 2007 included follow up of and reporting on cur-rent business operations, as well as questions about acquisitions, strategy, organization, and financial matters.
The Board held 9 (8) minuted meetings in 2007, one of which was a two-day workshop that focused on the Group’s strategy. All directors attended all meetings with a few exceptions.
Remuneration guidelines for senior executivesThe following remuneration guidelines for senior executives were in effect for 2007. No changes are expected to be proposed for 2008.
Remuneration to the president was decided by the Chairman of the Board and directors chosen by the AGM, based on a recommendation from the compensation committee, which consists of Staffan Ahlberg (chair-man) and Jan Rynning (board member). The remuneration guidelines for senior executives adopted by the Annual General Meeting were followed during 2007. Senior executives include the President and five additional individuals. Salaries and other terms of employment for executive manage-ment are set at market rates. In addition to a fixed base salary, senior exec-utives also receive a limited variable salary based on financial performance in relation to a set target. Variable remuneration to the President and senior executives in 2007 was SEK 4 (4) million and pensions were SEK 2 (2) mil-lion.
Remuneration to certain senior executives in the Enea Group may also be paid in the form of share-based compensation. In the event of dismissal by the company, the President receives termination benefits equal to twelve months’ salary and benefits. The term of notice for other senior executives is three to twelve months. For more information, please see note 4 Employees and personnel expenses and note 20 Pensions, share-based compensation, and benefits of senior executives
future developmentsIn 2008 we expect the market for embedded systems to continue to grow for both software and consultancy services. Substantially higher growth is expected in niches such as middleware. Enea’s long-term objective, over one business cycle is to achieve 15 percent annual growth with an average oper-ating margin over 10 percent.
Proposed allocation of Enea AB’s profitFunds at the disposal of the AGM:Share premium reserve 1,379,822Retained earnings 91,659,432Profit for the year 111,376,694Total 204,415,948
The Board of Directors and President recommend that Enea AB’s profit be carried forward to new account.
For further information about the company’s financial position and per-formance, please see the following income statement and balance sheets with related notes. The Parent Company’s Board of Directors approved the financial reports for publication on March 18, 2008.
13
14
group
iNcOmE STATEmENTSEK thousand (January 1–December 31) Note 2007 2006
Software revenues 311,651 271,445Consulting revenues 508,985 478,633Net sales 2 820,636 750,078
Operating expensesCost of goods sold and services- software costs 10 –36,582 –46,486- consulting and marketing expenses –393,538 –359,404Gross profit 390,516 344,188Selling and marketing expenses –173,975 –146,665Product development expenses –90,896 –65,463Administration expenses –53,584 –64,492Operating profit 3, 4, 5, 6, 7, 11 72,061 67,568
Financial income 7,483 4,151Financial expense –2,643 –2,454Net financial income and expense 8 4,840 1,697
Profit before tax 76,901 69,266
Tax 9 –5,739 –20,881Profit for the year 71,162 48,385
Earnings per share, SEK 15 0.19 0.13Earnings per share fully diluted, SEK 0.19 0.13
BALANcE ShEETSEK thousand (December 31)
AssetsIntangible assets 10 175,140 132,584Equipment, tools, fixtures and fittings 11 15,253 14,942Financial investments 745 554Deferred tax assets 9 8,858 0Total fixed assets 199,996 148,080
Inventories 8,976 1,902Tax assets 9 0 9,147Accounts receivable 12 225,594 218,684Prepaid expenses and accrued income 13 30,694 33,600Other receivables 3,073 2,182Cash and cash equivalents 155,973 146,402Total current assets 424,310 411,917
Total assets 624,306 559,997
Shareholders’ equity 14Share capital 18,356 18,265Other paid-in capital 713,289 712,396Reserves –11,730 –7,230Retained earnings including profit for the year –285,277 –343,959Total shareholders’ equity 434,638 379,472
Long-term liabilitiesLong-term liabilities, non interest-bearing 24 8,880 0Total long-term liabilities 8,880 0
Current liabilitiesAccounts payable 63,561 56,707Income tax liability 9 4,828 3,446Other liabilities 28,936 23,898Accrued expenses and deferred income 16 83,463 96,474Total current liabilities 180,788 180,525
Total shareholders’ equity and liabilities 624,306 559,997
cONSOLiDATED cASh fLOW STATEmENTSEK thousand (December 31) Note 18, 24 2007 2006
Operating activities Profit before tax 76,901 69,266Adjustment for non-cash items 17,366 15,107
94,267 84,373
Tax paid –4,068 –6,657cash flow from operating activities before change in working capital 90,199 77,716
Cash flow from change in working capitalChange in operating receivables –12,858 –90,062Changes in operating liabilities –10,946 17,895cash flow from change in working capital –23,804 –72,167
cash flow from operating activities 66,395 5,549
Investing activitiesAcquisition of intangible assets –36,350 –28,342Acquisition of fixed assets –6,203 –6,158Acquisition of financial assets –191 –127Sale of fixed assets 0 0cash flow from investment activities –42,744 –34,627
Financing activitiesNew share issue 984 536Repurchase of own shares –13,770 0cash flow from financing activities –12,786 536
cash flow for the year 10,865 –28,542
Cash and cash equivalents, beginning of year 146,402 178,080Exchange rate difference in cash and cash equivalents –1,294 –3,136
cash and cash equivalents, end of year 155,973 146,402
15
iNcOmE STATEmENTSEK thousand (January 1–December 31) Note 2007 2006
Software revenues 311,651 271,445Consulting revenues 508,985 478,633Net sales 2 820,636 750,078
Operating expensesCost of goods sold and services- software costs 10 –36,582 –46,486- consulting and marketing expenses –393,538 –359,404Gross profit 390,516 344,188Selling and marketing expenses –173,975 –146,665Product development expenses –90,896 –65,463Administration expenses –53,584 –64,492Operating profit 3, 4, 5, 6, 7, 11 72,061 67,568
Financial income 7,483 4,151Financial expense –2,643 –2,454Net financial income and expense 8 4,840 1,697
Profit before tax 76,901 69,266
Tax 9 –5,739 –20,881Profit for the year 71,162 48,385
Earnings per share, SEK 15 0.19 0.13Earnings per share fully diluted, SEK 0.19 0.13
BALANcE ShEETSEK thousand (December 31)
AssetsIntangible assets 10 175,140 132,584Equipment, tools, fixtures and fittings 11 15,253 14,942Financial investments 745 554Deferred tax assets 9 8,858 0Total fixed assets 199,996 148,080
Inventories 8,976 1,902Tax assets 9 0 9,147Accounts receivable 12 225,594 218,684Prepaid expenses and accrued income 13 30,694 33,600Other receivables 3,073 2,182Cash and cash equivalents 155,973 146,402Total current assets 424,310 411,917
Total assets 624,306 559,997
Shareholders’ equity 14Share capital 18,356 18,265Other paid-in capital 713,289 712,396Reserves –11,730 –7,230Retained earnings including profit for the year –285,277 –343,959Total shareholders’ equity 434,638 379,472
Long-term liabilitiesLong-term liabilities, non interest-bearing 24 8,880 0Total long-term liabilities 8,880 0
Current liabilitiesAccounts payable 63,561 56,707Income tax liability 9 4,828 3,446Other liabilities 28,936 23,898Accrued expenses and deferred income 16 83,463 96,474Total current liabilities 180,788 180,525
Total shareholders’ equity and liabilities 624,306 559,997
SummARY Of chANGES iN ThE GROuP’S ShAREhOLDERS’ EquiTY
2006 Other paid- Retained earnings Total SEK thousand (December 31) Share capital in capital Legal reserves incl. profit for the year equity
Opening equity January 1, 2006 18,216 711,909 1,448 –392,344 339,229
Translation difference for the year –8,678Profit for the year 48,385 48,385Total recognized income and expenses –8,678 48,385 39,707New share issue 49 487 536Equity December 31, 2006 18,265 712,396 –7,230 –343,959 379,472
2007SEK thousand (December 31)
Opening equity January 1, 2007 18,265 712,396 –7,230 –343,959 379,472
Translation difference for the year –4,500 –4,500Profit for the year 71,162 71,162Total recognized income and expenses –4,500 71,162 66,662New share issue 91 893 984Employee stock option program 1,290 1,290Repurchase of own shares –13,770 –13,770Equity December 31, 2007 18,356 713,289 –11,730 –285,277 434,638
iNcOmE STATEmENTSEK thousand (January 1 – December 31) Note 2007 2006
Net sales 29,423 28,58529,423 28,585
Operating expensesAdministration expenses –52,629 –45,976Operating loss 3, 4, 5, 6, 7, 11 –23,206 –17,391
Income from holdings in group companies 8 113,287 0Interest income and similar profit/loss items 8 9,092 4,639Interest expense and similar profit/loss items 8 –4,021 –2,510Net financial income and expense 118,358 2,129
Profit before tax 95,152 –15,262
Tax 9 16,224 19,296Profit for the year 111,376 4,034
BALANcE ShEETSEK thousand (December 31) 2007 2006
AssetsIntangible assets 10 3,384 0Equipment, tools, fixtures, and fittings 11 6,452 7,487Participations in group companies 17 232,534 345,847Total fixed assets 242,370 353,334
Tax assets 9 0 490Accounts receivable 0 162Receivables, group companies 19 286,087 139,575Prepaid expenses and accrued income 13 5,312 5,515Other receivables 414 1,239Cash and bank 120,484 116,913Total current assets 412,297 263,894
Total assets 654,667 617,228
Shareholders’ equity 14Restricted equityShare capital (367,114,264 shares) 18,356 18,265Legal reserve 299,668 299,668
unrestricted equityShare premium reserve 1,380 487Retained earnings 91,659 49,619Profit for the year 111,376 4,034Total shareholders’ equity 522,439 372,073
LiabilitiesAccounts payable 5,793 7,064Income tax liability 9 2,681 0Liabilities to group companies 19 114,064 229,748Other liabilities 715 692Accrued expenses and deferred income 16 8,975 7,651Total current liabilities 132,228 245,155
Total shareholders’ equity and liabilities 654,667 617,228
16
parent company
17
SummARY Of chANGES iN ThE PARENT cOmPANY’S ShAREhOLDERS’ EquiTY
2006
SEK thousand (December 31)
Restricted equity unrestricted equity Total
equityShare
capitalLegal
reserveShare premium
reserveAccumulated
deficitProfit/loss
for the year
Opening equity January 1, 2006 18,216 310,002 0 –10,334 317,884
Group contributions received 49,619Total change in net assets recognized directly in equity,
excluding transactions with shareholders 49,619 49,619Profit/loss for the year 4,034 4,034Total changes excluding
transactions with shareholders 49,619 4,034 53,653New share issue 49 487 536Transfer of accumulated deficit to legal reserve –10,334 10,334closing equity December 31, 2006 18,265 299,668 487 49,619 4,034 372,073
2007
SEK thousand (December 31)
Opening equity January 1, 2007 18,265 299,668 487 53,653 372,073
Group contributions received 50,486 50,486Total changes reported directly against shareholders’
equity, excluding transactions with shareholders 50,486 50,486Profit for the year 111,376 111,376Total changes excluding
transactions with shareholders 50,486 111,376 161,862New share issue 91 893 984Employee stock option program 1,290 1,290Repurchase of own shares –13,770 –13,770closing equity December 31, 2007 18,356 299,668 1,380 91,659 111,376 522,439
cASh fLOW STATEmENT, PARENT cOmPANYSEK thousand (December 31) Note 18 2007 2006
Operating activities Profit/loss before tax 95,152 –15,262Adjustment for non-cash items –108,885 2,424
–13,733 –12,838
Tax paid –238 –106cash flow from operating activities before change in working capital –13,971 –12,944
Cash flow from change in working capitalChange in operating receivables –75,202 –12,786Changes in operating liabilities –115,607 –2,229cash flow from change in working capital –190,809 –15,015
cash flow from operating activities –204,780 –27,959
Investing activitiesAcquisition of fixed assets 10 –5,463 –1,155Divestment of financial fixed assets 0 0cash flow from investing activities –5,463 –1,155
Financing activitiesDividend 226,600 0New share issue 984 536Repurchase of own shares –13,770 0cash flow from financing activities 213,814 536
cash flow for the year 3,571 –28,578
Cash, cash equivalents, and short-term investments, beginning of year 116,913 145,491Exchange rate difference in cash and cash equivalents 0 0
cash and cash equivalents, end of year 120,484 116,913
Accounting principles
cOmPLiANcE WiTh NORmS AND LAWSThe annual accounts have been prepared in accordance with the Swedish Annual Accounts Act, International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB), and the interpretations of the International Financial Reporting Inter-pretations Committee (IFRIC) as approved by the EU Commission for application within the EU. In addition, the Swedish Financial Accounting Council’s recommendation RR 30:06 on Supple-mentary rules for consolidated financial statements has been applied.
The Parent Company applies the same accounting principles as the Group, except in the cases indicated under the section “Parent Company’s Accounting Principles”. Any deviations between the polices applied by the Parent Company and the Group are a result of limitations in the scope for IFRS conformity in the Parent Company due to its application of the Swedish Annual Accounts Act and the Pension Protection Act, etc., and in certain cases tax consider-ations.
ASSumPTiONS iN ThE PREPARATiON Of ThE fiNANciAL REPORTS fOR ThE PARENT cOmPANY AND ThE GROuPThe functional currency of the Parent Company is Swedish kronor (SEK), which is also the pre-sentation currency of the Parent Company and the Group. The consolidated financial statements are thus presented in SEK. Assets and liabilities are recognized at cost.
The preparation of financial reports in accordance with IFRS requires the Board of Directors and Management to make estimates and assumptions that affect the application of accounting principles and the carrying amounts of assets, liabilities, revenue, and expenses. Estimates and assumptions are based on historical experience and a number of other factors which under current conditions appear to be reasonable. The result of these estimates and assumptions is then used to determine the carrying value of assets and liabilities otherwise not clearly indicated by other sources. Actual outcomes may deviate from these estimates.
The estimations and assumptions are revised regularly. The effects of changes in estimations are reported in the period in which the changes were made if the changes affected this period only, or in the period the changes were made and future periods if the changes affect both the current period and future periods.
When applying IFRS, assessments made by the Company’s executive management and Board of Directors which have a significant effect on the financial statements and estimations made that may result in substantial adjustments to the following year’s financial statements are described in greater detail in note 21.
The following accounting standards for the Group have been consistently applied in all peri-ods presented in the consolidated financial statements, unless stated otherwise below. The accounting principles of the Group have been consistently applied to reporting and consolida-tion of the subsidiaries.
chANGED AccOuNTiNG PRiNciPLESThe same Accounting principles were used in the 2007 annual report as in the 2006 annual report.
SEGmENT REPORTiNGIn accounting terms, a segment is an identifiable part of the Group that either supplies products or services within a certain economic environment (geographical area), or products or services (business segments) which are exposed to risks and opportunities that differ from those for other segments. Information about segments is only submitted for the Group, in accordance with IAS.
The Group’s activities are divided into three geographic regions: the Nordic region, North America, and EMEAA (Europe, Middle East, Asia, and Africa). This is the Group›s primary segment. Operations are organized in the units Market Operations, R&D, Product Management and Finance and Administration. »Software« and »consulting and other« comprise the Group›s secondary segments.
cLASSificATiON, ETc.Fixed assets and long-term liabilities in the Parent Company and the Group essentially consist exclusively of amounts expected to be recovered or settled more than twelve months after the closing date. Current assets and current liabilities essentially consist exclusively of amounts expected to be recovered or settled within twelve months from the closing date.
PRiNciPLES Of cONSOLiDATiONSubsidiariesSubsidiaries are defined as entities over which Enea AB has a controlling influence. Control is the power to, directly or indirectly, govern the financial and operating policies of an entity so as to obtain benefits from its activities. When assessing whether one enterprise controls another enterprise, the existence and effect of potential voting rights currently exercisable or convert-ible is considered.
Subsidiaries are recognized in accordance with the purchase method. Under the method an acquisition is treated as a transaction in which the group indirectly acquires the subsidiary’s assets and assumes its liabilities and contingent liabilities. The consolidated cost is determined by an analysis at the time of the business combination. In the analysis, the cost of the participa-tions or operations is determined, as well as the fair value of the identifiable assets and the assumed liabilities and contingent liabilities at the acquisition date. The cost of the shares in the subsidiary and the operations, respectively, consists of the fair values on the acquisition date for assets, liabilities incurred or assumed, and equity instruments issued and used as consideration
for the net assets acquired and the transaction cost directly attributable to the acquisition. In a business combination where cost exceeds the net carrying amount of acquired assets and assumed liabilities and contingent liabilities, the difference is recognized as goodwill. When the difference is negative it is recognized directly in the income statement.
The financial statements of subsidiaries are consolidated from the date of the acquisition until the date when control ceases.
Transactions that are eliminated in consolidationIntra-group receivables and payables, revenue and expenses, and unrealized gains or unrealized losses arising in intra-group transactions, are fully eliminated in the preparation of the consoli-dated financial statements.
Unrealized losses are eliminated in the same way as unrealized gains, but only to the extent that there is no indication of impairment loss.
fOREiGN cuRRENcY Foreign currency transactions Foreign currency transactions are translated into the functional currency at the exchange rate on the date of the exchange transaction. Foreign currency monetary assets and liabilities are translated into the functional currency at the exchange rate on the balance sheet date. Exchange differences arising on translations are reported in the income statement. Translation differences on non-monetary assets and liabilities, recorded at historical purchase values, are translated at the exchange rate on the date of the transaction. Non-monetary assets and liabilities carried at fair value are translated to the functional currency at the rate ruling when the fair values were determined, after which all resulting exchange differences are recognized in the same manner as other fair value adjustments for the asset or liability.
The functional currency is the currency of the primary economic environment in which the company operates. Group companies consist of the Parent Company and subsidiaries. The functional currency and reporting currency of the Parent Company is Swedish kronor. The report-ing currency for the Group is also Swedish kronor.
Financial statements of foreign operations Assets and liabilities of foreign operations, including goodwill and other consolidated surplus and deficits, are translated to SEK at the exchange rate in effect on the balance sheet date. Rev-enues and expenses for a foreign operation are translated to SEK using an average exchange rate that approximates the exchange rates on the dates of the transactions. Translation differ-ences arising on translation of foreign operations are recognized directly in consolidated equity as a translation reserve. When a foreign operation is divested, cumulative translation differences attributable to the company are realized in the consolidated income statement. Cumulative translation differences are reported as a separate category under equity, Reserves, under Trans-lation Reserve, and consist of translation differences accumulated since January 1, 2004. Cumu-lative translation differences prior to January 1, 2004 are allocated to other categories under equity and are not recognized separately.
REvENuESValuation of work in progress in service companiesRevenue and expenditure are recorded in the statement of operations in relation to the assign-ment’s degree of completion, which is determined on the basis of accrued assignment expenses in relation to the estimated assignment expenses for the complete assignment. Anticipated losses are charged to expenses immediately.
Revenue recognitionServices are mainly conducted on current account and taken up as revenue as the work is car-ried out. Services based on a functional undertaking are taken up as revenue linearly over the stipulated period as the services are provided. Projects carried out at a fixed price are recognized as revenue as the work is completed according to the percentage of completion method. If a risk of loss is deemed to exist, individual provisions are performed on an ongoing basis. The company also has revenue from software sales arising from royalties, license fees, service con-tracts and buyouts. Royalties and licence fees are recognized on an accrual basis in accordance with the substance of the relevant agreement. Licence fees and buyouts are taken up as revenue upon full delivery of the software according to the contract, when no essential obligations remain after the date of delivery. Support agreements usually cover a twelve-month period and revenues accrue during the term of the agreement.
Criteria for taking license revenues up as revenue are:▪ Written agreement signed by both parties.▪ Delivery has occurred.▪ License fees consist of a fixed amount or are calculated according to a reliable method and offer no option to cancel, or have a credit period of less than 12 months.▪ Assurance of payment has been received.
Software and other sales are taken up as revenue upon delivery, when control over the item is transferred to the buyer and revenue can be reliably calculated.
OPERATiNG ExPENSES AND fiNANciAL iNcOmE AND ExPENSEPayments under operating leasesPayments under operating leases are recognized in the income statement on a straight-line basis over the term of the lease. Benefits received in connection with the signature of an agree-ment are entered as part of the total lease expense in the income statement.
1
notes
18
Financial income and expenseFinancial income and expense consist of interest income on bank balances, receivables and fixed-income securities, interest expense on borrowings, dividend income, exchange differences, unrealized and realized gains on financial investments and derivative instruments used in financ-ing activities.
Interest income on receivables and interest expense on liabilities are calculated by applying the effective interest method. Effective interest is the interest rate at which the present value of all future cash inflows and outflows is equal to the carrying amount of the receivable or liability. Interest income includes accrued transaction costs and any discounts, premiums and other dif-ferences between the original value of the receivable and the amount received upon maturity. The Group does not capitalize interest in the cost of assets.
fiNANciAL iNSTRumENTSThe Group classifies financial instruments into categories. The classification depends on the purpose for which the instruments were acquired. Management determines the classification of instruments when they are first acquired. Enea classifies financial instruments as follows:
Loans and receivablesLoans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Such receivables arise when an entity provides cash, goods or services directly to a customer with no intent of trading the resulting receivable. This category also includes acquired receivables. Assets in this category are recognized at amortized cost. Amortized cost is calculated using the effective interest rate on the acquisition date. They are included in current assets, with the exception of items with a maturity date which falls more than twelve months after the balance sheet date, which are classified as fixed assets. Loans and receivables are classified as accounts receivable and other current or long-term receivables in the balance sheet.
Accounts receivable are reported at the amount expected to be received less deductions for doubtful receivables judged on an individual basis. Because accounts receivable are expected to have a short maturity period, values are reported at a nominal amount without discounting.
Other financial liabilitiesFinancial liabilities not held for trading are measured at amortized cost. Amortized cost is calcu-lated based on the effective interest determined when the loan was raised. This means that surplus values and values less than carrying amount, as well as direct issuing costs, are amortized over the life of the liability.
Financial instruments reported on the assets side of the balance sheet include account receivables and cash and cash equivalents, while the liability side of the balance sheet contains accounts payables A financial asset or liability is recognized in the balance sheet when the com-pany initially becomes party to the contractual provisions of the instrument. Accounts receivable are recognized in the balance sheet when an invoice is sent. Accounts payable are recognized in the balance sheet when an invoice is received. A financial asset is derecognized from the bal-ance sheet when the company’s rights under the agreement are realized, expire or the company has relinquished control of the asset. The same applies to a part of a financial asset. A financial liability is derecognized from the balance sheet when the obligations in the contract are fulfilled or discharged in some other way. The same applies to a part of a financial liability.
Accounts payable have a short expected maturity, and are therefore stated in the nominal amount without discounting.
Cash and cash equivalentsCash and cash equivalents comprise cash, bank balances available immediately upon demand as well as special deposits and commercial paper with a maturity period of less than three months. These items are recognized at amortized cost.
TANGiBLE ASSETSOwned assetsTangible assets are recognized as assets in the balance sheet when it is probable that the eco-nomic benefits attributable to the asset will flow to the company and the cost of the asset can be measured reliably. Tangible assets in the Group are recognized at historical cost less accu-mulated depreciation and any impairment losses. Cost includes the purchase price and costs directly attributable to the asset in order to bring it on site and in a condition to be used in com-pliance with the intention of the acquisition. Examples of directly attributable costs include delivery and handling, installation, consulting services, and legal services.
Leased assetsLeased assets are reported in accordance with IAS 17. In the consolidated financial statements, leases are classified as either finance or operating leases. With no significant exceptions, signed leasing agreements are classified as operating leases and mainly involve cars in Sweden. With operating leases the leasing fee is expensed over the lease term starting from initial use, which may differ from what is de facto paid in leasing fees during the year.
Depreciation principlesDepreciation is reported using the straight line method, over the estimated useful life of the asset. The estimated service life of fixed assets such as equipment, tools and installations is five years. The residual value and the service life of an asset are reviewed each year.
iNTANGiBLE ASSETSGoodwillGoodwill represents the difference between the cost of the business combination and the fair value of acquired assets, assumed liabilities, and contingent liabilities. Goodwill is stated at cost less any accumulated impairment losses. Goodwill is allocated to cash-generating units and is tested annually for impairment.
Research & DevelopmentResearch expenses aimed at achieving a new scientific or engineering skill are reported as expenses as they arise.
Expenditure on development activities, whereby the research results or other knowledge is applied to accomplish new or improved products or processes, is reported as an intangible asset in the balance sheet, provided the product or process is technically and commercially feasible and the Company has sufficient resources to complete development, and is subsequently able to use or sell the intangible asset The reported value includes costs for materials, direct costs for salaries, and indirect costs which can be reasonably and consistently associated with the asset. Other development costs are reported in the income statement as expenses when they arise. Development expenses reported in the balance sheet are recognized at cost less accumulated amortization and impairment.
Amortization/Depreciation principlesAmortization-depreciation is reported in the income statement on a straight-line basis over the estimated useful life of the intangible asset, unless the useful life is indefinite. Goodwill and intangible assets with indefinite useful lives are tested for impairment at least quarterly, or more frequently if circumstances indicate a possible impairment. Amortizable intangible assets are amortized from the date they are available for use. The estimated useful life of capitalized devel-opment expenses is five years.
iNvENTORiESInventories are stated at the lower of cost and net realizable value. Net realizable value is the estimated sales price in the ordinary course of business, less estimated costs for completing and bringing about a sale.
imPAiRmENTThe carrying amounts of the Group’s assets, with the exception of inventories and deferred tax, are reviewed at each balance sheet date to look for any indication that an asset may be impaired. If such an indication exists, the asset’s recoverable amount is calculated. The carrying amounts of the exceptions stated above are tested in accordance with the relevant standard. The recov-erable amounts of goodwill and intangible assets not yet ready for use is calculated annually.
If essentially independent cash flow cannot be isolated for individual assets then the assets are grouped at the lowest levels where essentially independent cash flows can be identified (a so-called cash-generating unit). Impairment is indicated when the reported value of an asset or cash-generating unit exceeds the recovery value. An impairment loss is recognized in the income statement.
Impairment of assets attributable to a cash-generating unit (group of units) is allocated mainly to goodwill. After that, a proportionate impairment loss is applied to other assets included in the unit (group of units).
Calculation of recoverable amountThe recoverable amount is the higher of fair value less costs to sell and value in use. When cal-culating value in use, the future cash flow is discounted by a discounting factor which takes into consideration risk-free interest and the risk associated with the specific asset. For an asset that does not generate cash flow, which is largely independent of other assets, a common recover-able amount is determined for the cash-generating unit to which the asset belongs.
Reversal of impairmentImpairment of goodwill is not reversed. Impairment losses from other assets are reversed if a change has occurred in the assumptions that served as the basis for determining recoverable value.
Impairment is reversed only to the extent the carrying value of the assets following the reversal does not exceed the carrying value that the asset would have had if the impairment had not been recognized, taking into account the depreciation or amortization that would have been recognized.
EmPLOYEE BENEfiTSDefined contribution plansObligations related to contributions to defined contribution plans are expensed in the income statement as they arise. All pension plans in foreign subsidiaries are classified and reported as defined-contribution plans. Thus, pension expenses will be deducted from the Group’s earnings as the benefits are earned.
Salaried employees working for Enea in Sweden are covered by the ITP plan, which is classi-fied as a defined contribution pension plan. Old-age and family pension obligations for salaried employees in Sweden are secured through insurance with Alecta. In accordance with a statement (URA 42) from the Emerging Issues Task Force of the Swedish Financial Accounting Standards Council, this constitutes a multi-employer defined benefit plan. For fiscal year 2006 sufficient information was not available from Alecta to enable this plan to be reported as a defined benefit plan. Consequently, pensions secured through insurance with Alecta are reported asa defined contribution plan. This scheme is financed continually through pension insurance policies. Alec-ta’s surplus may be distributed to the policyholders and/or the insured. The collective funding ratio is defined as the market value of Alecta’s assets as a percentage of insurance obligations calculated in accordance with Alecta’s assumptions, which do not comply with IAS 19.
Termination paymentA provision is recognized on the termination of employees only if the company is demonstrably committed to terminate an employee or group of employees before the normal retirement date, or provide termination benefits as a result of an offer made to encourage voluntary redun-dancy. In cases where the company terminates employment, a detailed plan is drawn up encom-passing at least the workplace, positions, and approximate number of people affected, along with remuneration for each category of personnel or position and a schedule for implementa-tion of the plan.
Remuneration to senior executivesThe Annual General Meeting establishes remuneration guidelines for senior executives. Salaries and other terms of employment for the executive management are set at market rates. In addi-tion to a stable base salary senior executives also receive a limited variable salary based on financial performance in relation to a set target. Remuneration to certain senior executives in the Enea Group may also be paid in the form of share-based compensation.
19
Share-based compensationAn outstanding option plan enables employees to acquire stock in the company. The fair value of granted share options is recognized as a personnel expense with a corresponding increase in equity. Fair value is measured at the date of grant and is recognized over the remaining vest-ing period. The fair value of the stock options has been calculated according to the Black & Scholes method, with consideration to the terms and conditions that applied on the date of grant. The amount recognized as an expense is adjusted to reflect the current number of vested options.
Social security expenses attributable to share-based instruments granted to employees as compensation for purchased services are recognized over the periods during which the services are rendered. Provisions for social security expenses are based on the fair value of the options on the reporting date. Fair value is measured according to the same valuation method used when the options were issued.
PROviSiONSA provision is recognized in the balance sheet when the Group has a present obligation (legal or constructive) that has arisen as a result of a past event, it is probable that an outflow of resources will be required to settle the obligation and the amount can be estimated reliably. When the timing effect of payment is significant, provisions are measured at discounted present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the liability.
RestructuringRestructuring provisions are recognized when the Group has adopted a detailed and formal restructuring plan and the restructuring process has either been started or publicly announced. No provisions are made for future operating costs.
Onerous contractsProvisions for onerous contracts are recognized when the unavoidable costs under a contract exceed the expected benefits the Group expects to receive under the contract.
TAxESIncome taxes consist of current tax and deferred tax. Taxes are recognized in the income state-ment except when the underlying transaction is recognized directly in equity, in which case the accompanying tax effect is recognized in equity. Current tax is tax to be paid or received that is related to the year in question, applying the tax rates that have been decided or in practice have been decided as of the balance sheet date; this also includes adjustment of current tax that is attributable to earlier periods.
Deferred tax is calculated according to the balance sheet method, on the basis of temporary differences between carrying amounts of assets and liabilities and their values for tax purposes. The following temporary differences are not taken into account: for a temporary difference that has arisen when goodwill is first recognized, the first recognition of assets and liabilities that are not business combinations and on the transaction date affect neither accounting profit nor taxable profit. Also not taken into account are temporary differences attributable to shares in subsidiaries and associated companies that are not expected to reverse in the foreseeable future. The valuation of deferred tax is based on how the carrying amounts of assets or liabilities are expected to be realized or settled. Deferred tax is calculated by applying the tax rates and tax rules that have been set or essentially are set as of the closing day.
Deferred tax assets from deductible temporary differences and tax loss carryforwards are only recognized to the extent it is likely that they will be utilized. The value of deferred tax assets is reduced when it is no longer considered likely that they can be utilized. Any additional income tax arising on dividends is recognized when the dividend is recognized as a liability.
EARNiNGS PER ShAREEarnings per share are calculated by dividing the profit or loss in the Group attributable to ordi-nary equity holders of the Parent Company by the weighted average number of ordinary shares outstanding during the year. Diluted earnings per share are calculated by adjusting the earnings and average number of shares for the effects of dilutive potential ordinary shares which during the reported periods arise from convertible notes and options issued to employees. Diluted arises only when the exercise price is lower than the share price. The exercise price is adjusted through an addition for the value of future services related to the equity-settled employee stock options that are recognized as Share-based compensation according to IFRS 2.
cONTiNGENT LiABiLiTiESA contingent liability is recognized when there is a possible obligation relating to past events and whose existence is confirmed only by one or more uncertain future events or when there is an obligation that is not recognized as a liability or provision as it is not probable that an out-flow of resources will be required.
AccOuNTiNG PRiNciPLES Of ThE PARENT cOmPANYThe annual financial statements of the Parent Company are presented in accordance with the Swedish Annual Accounts Act (1995:1554) and the Swedish Financial Accounting Standards Council’s recommendation RR32:05, Accounting for Legal Entities. RR 32:05 states that in the report for the legal entity, the Parent Company shall apply all EU-endorsed IFRS and statements as far as possible within the framework of the Annual Accounts Act and with respect to the con-nection between accounting and taxation. This recommendation defines the exceptions and additional disclosures compared with IFRS. The differences between the accounting standards applied by the Group and the Parent Company are described below.
Differences between the accounting principles of the Group and the Parent CompanyThe areas where the accounting policies of the Parent Company differ from of the Group are described below. The accounting principles described below were consistently applied to all periods presented in the Parent Company’s financial reports.
SubsidiariesThe Parent Company reports shares in subsidiaries according to the cost method. Dividends received are recorded as revenue only on condition that these derive from profits arising after the acquisition date. Dividends in excess of these profits are regarded as a repayment of the investment and reduce the carrying amount of the company’s interest.
DividendsDividends to the Parent Company’s shareholders are reported as a liability in the Group’s financial reports in the period when the dividend is approved by the Parent Company’s shareholders.
Anticipated dividends from subsidiaries are recognized in cases where the Parent Company has full control over the size of the dividend and has decided on the size of the dividend before the Parent Company publishes its financial reports.
TaxesIn the Parent Company, untaxed reserves are reported including deferred tax liabilities. In the consolidated financial statements, however, untaxed reserves are divided between a deferred tax liability and equity.
Group contributions and shareholder contributions for legal entitiesThe Company reports Group and shareholder contributions in accordance with the statement issued by the Emerging Issues Task Force of the Swedish Financial Accounting Standards Coun-cil. Shareholders’ contributions are recognized directly in equity by the recipient and are capital-ized in shares and participations by the giver, to the extent that impairment is not indicated. Group contributions are reported in accordance with their financial significance. This means that Group contributions paid to minimize the Group’s overall tax burden are reported directly in retained earnings less the current tax effect.
Group contributions comparable with a dividend are recognized as a dividend. This means that group contributions received and their current tax effect are recognized in the income statement. Group contributions paid and their current tax effect are recognized directly against retained earnings.
Group contributions equated with shareholder contributions to subsidiaries are reported by the recipient, with consideration to their current tax effects, directly against retained earnings. The giver recognizes the group contribution and its current tax effect as an investment in par-ticipations in group companies, to the extent that impairment is not indicated.
NEW ifRSIFRIC 11 IFRS 2 Group and Treasury Share Transactions is applied in advance for 2007. IFRIC 11 deals with share-based transactions that involve the entity’s own shares or that include group companies, such as options. This interpretation has no effect on the Group’s financial reports.
The following new standards, as well as revisions and interpretations of existing standards, have been published and are obligatory as regards the consolidated financial statements for the financial year commencing on January 1, 2008 or later, but have not been applied in advance by the Group:
IAS 1 Presentation of financial statements, revision, effective January 1, 2009. The revised standard has not yet been approved by the EU. The changes mainly involve the presentation and titles of the financial statements. The future presentation of financial statements for the Group will therefore be affected by implementation of this standard.
IFRS 3 Business combinations, revision, effective on July 1, 2009. The revised standard has not yet been approved by the EU. The revision will apply in the future to business combinations after the time of entry into force. Application will involve a change in how future business com-binations are reported, including reporting of transaction costs, contingent consideration, and acquisitions in stages by successive purchases. The Group will apply the standard from the financial year beginning on January 1, 2010.
IFRS 8 Operating Segments, effective on January 1, 2009. IFRS 8 replaces IAS 14 and adapts segment reporting to the requirements of US GAAP SFAS 131, “Disclosures about segments of an enterprise and related information.” The new standard requires information about the seg-ment to be presented from the management’s perspective, which means that segments will be identified on the basis of internal reports. The Group will apply IFRS 8 beginning on January 1, 2009.
IAS 23 Borrowing costs, amendment, effective beginning January 1, 2009.IAS 27 Consolidated and Separate Financial Statements, amendment, effective beginning
July 1, 2009.IFRS 2 Share-based compensation, amendment »Vesting conditions and cancellations«,
effective from January 1, 2009.IFRIC 14, IAS 19 “The limit on a defined benefit asset, minimum funding requirements and
their interaction.” This Interpretation has not yet been approved by the EU.
Amounts in SEK thousand unless stated otherwise.
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Exchange gains/losses
2007 2006
GROuPExchange gains on operating receivables/liabilities 2,303 7,918Exchange losses on operating receivables/liabilities 0 –12,286
PARENT cOmPANYExchange gains on operating receivables/liabilities 3 0Exchange losses on operating receivables/liabilities –4 0
Business segment reporting
Primary segment 2006 Nordic Region North America EmEAA6 Other7 Total
External net sales1 565,591 150,143 34,344 – 750,078
Internal net sales2 17,074 8,115 16,696 –41,885 –
Operating profit 59,382 4,175 4,011 – 67,568
Financial income and expense – – – – 1,697
Profit before tax – – – – 69,266
Tax – – – – –20,881
Profit for the year – – – – 48,385
Assets3 385,014 81,185 27,537 66,261 559,997
Liabilities4 177,318 61,543 58,540 –116,876 180,525
Investments5 35,403 2,405 1,297 – 39,105
Depreciation/amortization 7,858 1,011 882 – 9,751
Primary segment 2007
External net sales1 637,957 152,819 29,860 – 820,636Internal net sales2 –4,479 3,914 14,833 –14,268 –Operating profit 57,543 10,783 3,735 – 72,061Financial income and expense – – – – 4,840Profit before tax – – – – 76,901Tax – – – – –5,739Profit for the year – – – – 71,162
Assets3 454,909 77,683 37,606 54,108 624,306Liabilities4 244,880 59,883 57,987 –173,082 189,668Investments5 61,401 59 296 – 61,756Depreciation/amortization 15,015 1,075 467 – 16,557
Secondary segment 2006, SEK million Software consulting and other Other Total
External net sales 271.4 478.7 – 750.1Assets 214.2 159.0 186.8 560.0Investments 36.0 1.9 1.2 39.1
Secondary segment 2007, SEK million
External net sales 311.6 509.0 – 820.6Assets 259.5 210.0 154.8 624.3Investments 26.9 31.9 3.0 61.8
1. Based on where customers are located.2. Market-based prices.3. Based on where the assets are located. Other assets consist mainly of cash and cash equivalents, deferred tax assets, financial investments, and group eliminations.4. Other liabilities consist mainly of deferred tax liabilities and group eliminations.5. Intangible and tangible assets.6. Europe, Middle East, Africa, and Asia.7. Including unallocated items and group eliminations.
2
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3
Employees and personnel costs2007 2006
Average number of employees Total of whom men, % Total of whom men, %
PARENT cOmPANYSweden 20 55 19 58Total Parent company 20 55 19 58
SuBSiDiARiESEnea Services Stockholm AB 111 81 95 80Enea Services Öresund AB 84 89 89 89Enea Services Linköping AB 74 78 69 82QiValue Technologies AB 11 94 0 0Enea Software AB 107 87 103 88Enea Embedded Technology Inc, USA 116 84 102 86Enea GmbH, Germany 5 78 6 67Enea S.A.R.L, France 5 60 5 60Enea Embedded Technology K.K, Japan 5 80 4 60Enea UK Ltd, UK 2 100 2 100Polyhedra Ltd, UK 7 100 7 100Enea Software & Services SRL, Romania 0 0 0 0Total in subsidiaries 527 81 482 85Total Group 547 81 501 84
Gender distribution in management
Board of Directors 8 88 8 88Other senior executives 6 100 6 83
Salaries, other remuneration and social security expensesSalaries,
remunerationSocial security
expenses Salaries,
remunerationSocial security
expenses
PARENT cOmPANY 13,508 7,535 11,900 7,245Of which pension costs1 – 3,156 – 3,403
SuBSiDiARiES 293,502 98,923 264,339 90,604Of which pension costs – 33,101 – 28,746Total Group 307,010 106,458 276,239 97,849Of which pension costs2 – 36,257 – 32,149
1. Of the Parent Company’s pension costs SEK 2,085,000 (1,831,000) is attributable to the Group Board of Directors and President.
2. Of the Group’s pension costs addresses SEK 3,548,000 (2,845,000) is attributable to the Group’s Board of Directors and President.
Salaries, other remuneration, by country and between Board members, the President, and other employees
Board of Directors and
PresidentOther
employees
Board of Directors and
PresidentOther
employees
PARENT cOmPANYSweden 4,320 9,188 3,063 8,837Total in Parent company 4,320 9,188 3,063 8,837
SuBSiDiARiESSweden 5,049 179,854 4,669 164,077Germany 1,341 2,515 2,823 2,073Japan 966 1,483 971 1,240France 0 4,195 0 4,202UK 1,975 4,559 1,833 4,561USA 3,380 88,185 3,526 74,364Romania 0 0 0 0Total subsidiaries 12,711 280,791 13,822 250,517Total Group 17,031 289,979 16,885 259,354
compensation to the Board of Directors, cEO and other senior executives 2007 2006
PARENT cOmPANYSalaries and other remuneration 6,401 5,493Pensions1 2,444 1,404Number of persons 8 8
SuBSiDiARiESSalaries and other remuneration 14,115 14,385Pensions 1,774 1,107Number of persons 12 13
1. Including variable compensations converted to pension.
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4
Leasing charges, operating leases
Lease charges mainly refer to cars in Sweden.2007 2006
GROuPLease charges for the year 19,101 18,454Future minimum lease charges, due within one year 18,070 17,554Future minimum lease charges, due within 2–5 years 56,830 51,083
PARENT cOmPANYLease charges for the year 8,173 8,012Future minimum lease charges, due within one year 8,041 8,029Future minimum lease charges, due within 2–5 years 32,296 30,586
financial income and expense
2007 2006
GROuPInterest income 5,895 3,146Exchange gains 1,588 1,005financial income 7,483 4,151
Interest expense 86 28Exchange losses 2,557 2,426financial expense 2,643 2,454
Net financial income and expense 4,840 1,697
PARENT cOmPANYDividend, shares and participations in subsidiary 226,600 0Write-down shares and participations in Group companies –113,313 0income from holdings in group companies 113,287 0
Interest income, other 5,343 2,741Interest income, Group companies 3,730 1,880Exchange gains 19 18interest income and similar profit/loss items 9,092 4,639
Interest expense, other –39 –19Interest expense, Group companies –3,950 –2,469Exchange losses –32 –22interest expense and similar profit/loss items –4,021 –2,510
Net financial income and expense 118,358 2,129
7
8
2007 2006
PARENT cOmPANYÖhrlings PricewaterhouseCoopersAudit assignments 623 0Other assignments 1,095 0
KPMGAudit assignments 172 800Other assignments 351 221
2,241 1,021
Operating expenses by cost type
2007 2006
Raw materials, consumables, and subconsultants 201,979 158,735Other external expenses 86,503 107,657Personnel costs 443,536 406,367Depreciation/amortization 16,557 9,751
748,575 682,510
6
fees for audit and other assignments
Audit assignment refers to auditing of the annual report, the accounting records, and the administration of the Board of Directors and the President, other tasks incumbent on the company’s independent auditor, and advice or other assistance prompted by observa-tions from such audits or the performance of other such tasks. All other work constitutes other assignments. During 2007 Enea changed its elected auditor from KPMG to Öhrlings PricewaterhouseCoopers.
2007 2006
GROuPÖhrlings PricewaterhouseCoopersAudit assignments 623 0Other assignments 1,095 0
KPMGAudit assignments 172 833Other assignments 351 221
Other auditorsAudit assignments 907 361Other assignments 348 434
3,496 1,692
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2007 2006
Directors’ fees paid toChairman of the Board 330 320Other Board members 750 730
1,080 1,050
No consulting fees have been paid.
Salary and other remuneration paid toPresident 3,294 2,819variable portion 1,094 788of which, expensed during the year 1,094 788
The variable portion is based on the attainment of pre-determined performance targets.
Pension agreementPension costs for the President 991 1,043
Salary and other remuneration paid to other senior executives 5 (5) 9,187 8,638
variable portion 3,075 3,035
Absence due to illness, %
PARENT cOmPANY 6.5 6.0
Men 1.0 2.6Women 13.9 11.8
29 years or younger – –30–49 years 4.1 6.950 years or older – –
Absence due to illness of at least 60 days as % of total absence due to illness 85.2 75.4
PRiNciPLESFees to the Board of Directors are paid in accordance with the decision of the Annual General Meeting. Remuneration to the president was decided by the Chairman of the Board and direc-tors chosen by the AGM, based on the recommendations of the compensation committee. The Annual General Meeting establishes remuneration guidelines for senior executives. Salaries and other terms of employment for the executive management are set at market rates. In addi-tion to a stable base salary senior executives also receive a limited variable salary based on financial performance in relation to a set target. Remuneration to certain senior executives in the Enea Group may also be paid in the form of share-based payment. For more information please see note 20.
PENSiON AGREEmENTThe President’s pension agreement states that pension premiums are distributed over the term of the pension plan according to his instructions. The pension agreements for other senior executives and other salaried employees in Sweden conform to the framework of the ITP plan, with a contractual retirement age of 65 years. The amount of pension benefits payable is related to the employee’s final salary and total years of service under the plan. Pension premiums are paid continuously through pension insurance policies. The pension plan is a defined benefit plan and is secured through insurance in Alecta. For more information please see note 20.
TERmiNATiON BENEfiTSIn the event of dismissal by the company, the President receives termination benefits equal to twelve months’ salary and benefits. The term of notice for other senior executives is three to twelve months.
intangible assets
2006 Goodwill
capitalized development
expensens
Other intangible
assets Total
GROuPAccumulated acquisition valueOpening balance January 1, 2006 91,902 22,283 0 114,185Acquisitions for the year 0 33,065 0 33,065Translation difference for the year –4,796 –14 0 –4,810closing balance Dec. 31, 2006 87,106 55,334 0 142,440
Accumulated amortization and impairment lossesOpening balance January 1, 2006 0 –5,675 0 –5,675Amortization for the year 0 –4,181 0 –4,181closing balance Dec. 31, 2006 0 –9,856 0 –9,856
carrying amount at Dec. 31, 2006 87,106 45,478 0 132,584
2007
GROuPAccumulated acquisition valueOpening balance January 1, 2007 87,106 55,334 0, 142,440Acquisitions for the year 25,789 25,523 4,040 55,352Translation difference for the year –1,665 –70 0, –1,735closing balance Dec. 31, 2007 111,230 80,787 4,040 196,057
Accumulated amortization and impairment lossesOpening balance January 1, 2007 0 –9,856 0 –9,856Amortization for the year 0 –10,488 –573 –11,061closing balance Dec. 31, 2007 0 –20,344 –573 –20,917
carrying amount at Dec. 31, 2007 111,230 60,443 3,467 175,140
Other intangbile assets 2007 2006
PARENT cOmPANYAccumulated acquisition valueOpening balance January 1 0 0Acquisitions for the year 3,915 0closing balance Dec. 31 3,915 0
Opening balance January 1 0 0Amortization for the year –531 0closing balance Dec. 31 –531 0
carrying amount at Dec. 31 3,384 0
Goodwill is attributable to the following cash-generating units.
2007 2006
Enea Software 56,928 58,593Enea Services 54,302 28,513
111,230 87,106
Capitalized development expenses refer primarily to internal development of new products. The majority is being amortized beginning in 2007 over a period of five years.
imPAiRmENT TESTiNG fOR cASh-GENERATiNG uNiTS cONTAiNiNG GOODWiLLImpairment tests are based on calculations of value in use, and these calculations are based on the same assumptions for all units. Value in use is determined on the basis of five-year cash flow forecasts, which are in turn based on the five-year business plan established by the com-pany’s management. The forecasted cash flows are based on an assumed annual revenue growth rate of 2 percent and an annual cost increase of 1 percent. The present value of the forecasted cash flows has been computed using a 12 percent discount rate before tax. Cash flow for the last forecasted year has been extrapolated by a growth rate assumption of 2 per-cent. The critical assumptions in the five-year business plan are shown in the following table:
variable Assumed value
Revenue growth 2 %Cost increase 1 %Long-term growth 2 %Discount rate 12 %
As of December 31, 2007 there are no write-down requirements. The management’s analysis is that any adverse changes in assumptions would not reduce the recoverable amount below carrying amount in any cash-generating unit.
Taxes
2007 2006
GROuPCurrent tax Tax expense for the period –14,597 –5,065
–14,597 –5,065Deferred tax
- on tax benefit arising from capitalization of previouslyuncapitalized tax loss carryforward
8,858
0
- tax expense arising from utilization of loss carryforward 0 –15,8168,858 –15,816
Total recognized tax expense in the Group –5,739 –20,881
Reconciliation of effective taxGROuPProfit before tax 76,901 69,266Standard tax rate 28 % –21,532 –19,394
Tax effect of - other tax rates in foreign subsidiaries –138 –1,015- utilization of previously uncapitalized loss carry-forward 1,779 1,323- approved tax loss carry-forward Tax 06 5,893 0
- measurement of future loss carry-forward in foreign company 8,858 –722
- non-deductible costs –65,398 –1,092- non-taxable income 64,873 52Additional assessment and reallocations –74 –33Total recorded tax income/expense in the Group –5,739 –20,881
7 % 30 %
2007 2006
PARENT cOmPANYCurrent tax Tax received for the year 16,224 19,296
16,224 19,296PARENT cOmPANYProfit before tax 95,152 –15,262Tax 28 % –26,642 4,273
Tax effect of - approved tax loss carry-forward Tax 06 5,893 15,183- non-deductible costs –26,476 –161- non-taxable income 63,449 1Total recorded tax income/expense in the
Parent company 16,224 19,296
–17 % 126 %
A deferred tax asset has been capitalized in the consolidated balance sheet in 2006.
GROuPDeferred tax assets in loss carryforward 0 15,233Adjustment 0 583Deferred tax on utilized loss carryforwards 8,858 –15,816Deferred tax assets recognized in the balance sheet 8,858 0
Loss carryforwards have been capitalized in the consolidated balance sheet in 2006 and 2007. At December 31, 2007, the deferred tax asset in loss carryforward with respect to companies domiciled in Sweden amounted to SEK 0 (0) thousand.
In 2007 loss carryforwards for foreign subsidiaries were measured, to the extent that it is probable that they will be utilized through taxable profits over the next few years, at a total of SEK 8,858 thousand.
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9 10
2007 2006
Opening translation reserve –7,230 1,448Translation difference for the year –4,500 –8,678Closing translation reserve –11,730 –7,230
Retained earnings including profit for the yearRetained earnings including profit/loss for the year include profits earned in the Parent Com-pany and its subsidiaries. Previous provisions to reserves, excluding transferred share premium reserves, are included in this equity component.
Between November 19 and December 31, 2007, the Parent Company repurchased 5,941,000 shares on the OMX Nordic Exchange in Stockholm at an average share price of SEK 2.32. A total of SEK 13,770 thousand was paid for the shares, which has reduced retained earnings. The shares are being held as own shares and were fully paid at December 31, 2007, with the exception of 710,000 shares, which were paid for the following week.
DividendsIn light of Enea’s plans to actively participate in the consolidation of the market, the Board intends to propose that no dividend be paid for financial year 2007 (previous year SEK 0).
PARENT cOmPANYRestricted equityRestricted reserves may not be reduced through dividends.
Legal reserveThe purpose of the legal reserve is to set aside part of net profit which may not be used to cover accumulated deficits.
uNRESTRicTED EquiTYShare premium reserve When new shares are issued at a premium, meaning that the price to be paid for a share is higher than the previous quota value of the share, an amount corresponding to the amount received in excess of the share’s quota value is transferred to the share premium reserve.
Retained earnings Consists of retained profit from previous years after any provisions to reserves and after pay-ment of any dividends. Consists of profit/loss for the year and total unrestricted equity, which is the amount available for distribution to the shareholders.
See also Summary of changes in the Group’s shareholders’ equity, page 17 and Summary of changes in the Parent Company’s shareholders’ equity, page 19.
Earnings per share2007 2006
Earnings per share, basicProfit for the year after tax 71,162 48,385Average number of shares owned (thousands) 366,619 364,354Earnings per share, basic, in SEK 0.19 0.13
Earnings per share, dilutedProfit for the year after tax 71,162 48,385Average number of shares owned (thousands) 366,619 367,248Earnings per share, diluted, in SEK 0.19 0.13
By decision of the 2007 Annual General Meeting, an option program was adopted for the employees in TekSci, Inc., equivalent to 1,500,000 stock options. Each option entitles the holder to subscribe for one share in Enea AB at a price of SEK 3.90 each. The program runs during the period 2007 to 2010.
By decision of the 2006 Annual General Meeting, an option program was adopted for the employees in TekSci, Inc., equivalent to 2,000,000 stock options. Each option entitles the holder to subscribe for one share in Enea AB at a price of SEK 3.50 each. The program runs during the period 2006 to 2009.
By decision of the 2003 Annual General Meeting, an option program was adopted for the employees in TekSci, Inc., equivalent to 1,800,000 stock options. Each option entitled the holder to subscribe for 1.64 shares in Enea AB at a price of SEK 0.89 each. The program expired on December 31, 2006.
The average number of shares decreased with the average number of own shares and was weighted in relation to the length of time they have been outstanding. As at December 31, 2007, the option program has not led to dilution.
Accrued expenses and deferred income
2007 2006
GROuPAccrued rental charges 0 81Support revenue 13,083 35,635Accrued personnel costs 49,058 47,367Other 21,322 13,391
83,463 96,474PARENT cOmPANYAccrued personnel costs 6,694 5,117Other 2,281 2,533
8,975 7,650
Equipment, tools, fixtures, and fittings
Group Parent company 2007 2006 2007 2006
Accumulated acquisition valueAt January 1 70,133 71,412 18,912 17,757Acquisitions for the year 6,394 6,040 1,588 1,155Divestitures/disposals –589 –4,979 –216 0Translation difference for the year –764 –2,341 0 0
75,174 70,133 20,284 18,912
Accumulated depreciation according to plan
At January 1 –55,191 –56,292 –11,425 –9,001Divestitures/disposals 397 4,510 175 53Depreciation for the year according to plan –5,783 –5,570 –2,582 –2,477Translation difference for the year 656 2,161 0 0
–59,921 –55,191 –13,832 11,425
carrying amount at year-end 15,253 14,942 6,452 7,487
Depreciation is attributable to the cost of goods sold and services, selling and marketing expenses, production development expenses, and administrative expenses.
Accounts receivable
As at December 31, 2007, accounts receivable amounted to SEK 225,594 (218,684) thousand without any need for write-down. Below is a breakdown of these accounts receivable by age:
Aged accounts receivable 2007 2006
GROuPNot due 161,572 141,318Due 1–60 days 62,084 69,286Due 61–90 days 572 1,628Due 90 days– 1,366 6,452Total 225,594 218,684
Prepaid expenses and accrued income
2007 2006
GROuPPrepaid expenses 13,543 13,073Accrued income 17,151 20,527
30,694 33,600PARENT cOmPANYPrepaid insurance 128 424Prepaid rents 1,987 1,945Other prepaid expenses 2,746 2,823Accrued income 451 323
5,312 5,515
Shareholders’ equity
GROuPShare capitalAt December 31, 2007, the registered share capital consisted of 367,114,264 common shares with a par value of SEK 0.05 each. Holders of common shares are entitled to dividends (TBA) and each share grants the right to one vote at an Annual General Meeting. During the year the company purchased 5,941,000 (0) of its own shares. A stock option program in Enea TecSci Inc., expiring on December 31, 2006, led to the issue of 988,192 new shares 2006 and 1,812,348 shares in 2007.
Year Event Newly issued shares Number of shares
2006 Stock option program 988,192 365,301,9162007 Stock option program 1,812,348 367,114,264
Other paid-in capitalThis refers to equity contributed by the owners, including the share premium reserve transferred to the legal reserve at December 31, 2005. Provisions to the share premium reserve on or after January 1, 2006, are also recognized as paid-in capital.
LEGAL RESERvESTranslation reserveThe translation reserve consists of all exchange differences arising on translation of the financial statements of foreign operations which present their financial statements in a currency other than that used by the Group. The Parent Company and the Group present their financial reports in Swedish kronor.
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Group companies
holdings in subsidiaries country Shareholding in %
Enea Services Stockholm AB Sweden 100Enea Services Öresund AB Sweden 100Enea Services Linköping AB Sweden 100QiValue Technologies AB Sweden 100Epact Technology Holding AB Sweden 100Enea Software AB Sweden 100Enea TekSci Inc USA 100Enea Embedded Technology Inc USA 100OSE Systems Inc USA 97.5Enea GmbH Germany 100Enea S.A.R.L France 100Enea Embedded Technology K.K Japan 100Enea UK Ltd UK 100Polyhedra Ltd UK 100Enea Software & Service SRL Romania 100
Parent company 2007 2006
Accumulated acquisition valueAt January 1 391,130 391,130Closing balance December 31 391,130 391,130
Accumulated impairment lossesAt January 1 –45,283 –45,283Write-down for the year –113,313 0Closing balance December 31 –158,596 –45,283
carrying amount at year-end 232,534 345,847
Specification of the parent company’s holdings of shares and participation in subsidiaries
Numberof shares
holding %
carrying amount 2007 2006
Subsidiary/Corporate ID/DomicileEnea Software AB,
556183-3012, Kista 5,900 100 172,034 172,034Enea Services Öresund AB,
556586-3494, Kista 5,000 100 60,500 60,500Epact Technology Holding AB,
556545-4161, Linköping 1,000 100 0 113,313OSE Systems Inc, USA 55,657,944 97.5 0 0
232,534 345,847
cash flow statement
cASh AND cASh EquivALENTSThe subcomponents included in cash and cash equivalents are cash, bank balances and spe-cial deposits or commercial paper that are exposed to insignificant risk for value fluctuations, are highly liquid and have a maturity less than three months from the date of acquisition.
Group Parent companyinformation on interest 2007 2006 2007 2006
Interest received during the period 5,791 3,146 5,343 2,741Interest paid during the period –85 –28 –39 –19
Adjustment for non-cash itemsDepreciation/ amortization 16,557 9,738 –110,175 2,477Employee stock option program 1,290 0 1,290 0Capital gain/loss 0 400 0 –53Net exchange differences –481 5,789 0 0Other 0 –820 0 0Total 17,366 15,107 –108,885 2,424
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Related party transactions
cLOSELY RELATED iNTERESTSThe Parent Company has a related party relation with its subsidiaries (see note 16) and senior executives (see note 4).
Specification of related party transactions
GROuP
Related party Year
Sales of goods and services to related parties
Purchase of goods and
services from related
parties
Liabilities to related
parties at Dec. 31
Receivables to related
parties at Dec. 31
Key persons in executive positions 2007 – – – –
Key persons in executive positions 2006 – – – –
Other related parties 2007 – – – –Other related parties 2006 – – – –
Specification of related party transactions
PARENT cOmPANY
Related party Year
Sales of goods and services to related parties
Purchase of goods and
services from related
parties
Liabilities to related
parties at Dec. 31
Receivables to related
parties at Dec. 31
Subsidiaries 2007 26,734 1,283 114,064 286,087
Subsidiaries 2006 27,967 1,190 229,748 139,575
Key persons in executive positions 2007 – – – –
Key persons in executive positions 2006 – – – –
Other related parties 2007 – – – –Other related parties 2006 – – – –
Transactions with related parties are priced on market-based terms.For information about remuneration to key persons in executive positions please see
Note 4 Employees and personnel costs and Note 20 Pensions, share-based compensation, benefits of senior executives.
Pensions, share-based compensation, benefits of senior executives
DEfiNED cONTRiBuTiON PLANSMethods for calculating pension costs and pension liabilities differ from one country to another. The companies report according to local regulations and the reported figures are consolidated in the Group accounts. All pension plans in foreign subsidiaries are classified and reported as defined-contribution plans. Thus, pension expenses will be deducted from the Group’s earn-ings as the benefits are earned. Salaried employees working for Enea in Sweden are covered by the ITP plan, which is classified as a defined contribution pension plan. Old-age and family pension obligations for salaried employees in Sweden are secured through insurance with Alecta. In accordance with a statement (URA 42) from the Emerging Issues Task Force of the Swedish Financial Accounting Standards Council, this constitutes a multi-employer defined benefit plan. For fiscal year 2007 sufficient information was not available from Alecta to enable this plan to be reported as a defined benefit plan. consequently, pensions secured through insurance with Alecta are reported asa defined contribution plan. This scheme is financed continually through pension insurance policies. Fees for pension insurance coverage with Alecta amounted to 7SEK ,815 (8,955) SEK thousand. Alecta’s surplus may be distributed to the policyholders and/or the insured. At the end of 2007 Alecta›s surplus in the form of the collec-tive funding ratio was 152 (143) percent. The collective funding ratio is defined as the market value of Alecta’s assets as a percentage of insurance obligations calculated in accordance with Alecta’s assumptions, which do not comply with IAS 19.
Group Parent company 2007 2006 2007 2006
Costs for defined contribution plans 35,902 31,959 3,156 3,403
ShARE-BASED cOmPENSATiONBy decision of the 2003 Annual General Meeting, an option program was adopted for the employees in TekSci, Inc., equivalent to 1,800,000 stock options. Each option entitles the holder to subscribe for 1.64 shares in Enea AB at a price of SEK 0.89 each. The program expired on December 31, 2006 and led to a new issue of 988,192 shares in 2006 and 1,812,348 shares in 2007. The weighted average share price during the exercise period was SEK 3.40.
By decision of the 2006 Annual General Meeting, an option program was adopted for the employees in TekSci, Inc., equivalent to 2,000,000 stock options. Each option entitles the holder to subscribe to one share in Enea AB at a price of SEK 3.50 with employment during the exercise period. Contractual maturity is 3.3 years. The options were granted free of charge.
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By decision of the 2007 Annual General Meeting, an option program was adopted for the employees in TekSci, Inc., equivalent to 1,500,000 stock options. Each option entitles the holder to subscribe to one share in Enea AB at a price of SEK 3.90 with employment during the exercise period. Contractual maturity is 3.3 years. The options were granted free of charge. No options were exercisable at the end of the period.
Stock option program with maturity in 2009 2007 2006
Outstanding options at beginning of period 1,850,000 0Options granted during the period 150,000 1,850,000Outstanding at end of period 2,000,000 1,850,000
Stock option program with maturity in 2010 2007 2006
Outstanding options at beginning of period 0 0Options granted during the period 1,305,000 0Outstanding at end of period 1,305,000 0
fair value and assumptions regarding stock options granted during 2007
Group
Fair value per option on valuation date, SEK 0.71
Share price, SEK 3.37Strike price, SEK 3.88Volatility, % 30Maturity, years 3.29Risk-free interest, % 3.92
The fair value of the stock option program has been calculated according to the Black-Scholes model with inputs shown above. The expected volatility is based on historical volatility on the valuation date.
Personnel expenses for share-based compensation
Group 2007 2006
Stock option program Enea Embedded Technology Inc 629 378
REmuNERATiON TO SENiOR mANAGEmENTPrinciplesFees to the Board of Directors are paid in accordance with the decision of the Annual General Meeting. No Board fees are paid to the employee representatives. Remuneration to the Presi-dent is determined by the Chairman and independent Board members based on the recom-mendations of the remuneration committee.
The Annual General Meeting establishes remuneration guidelines for senior executives. Salaries and other terms of employment for the executive management are set at market rates. In addition to a stable base salary senior executives also receive a limited variable salary based on financial performance in relation to a set target. Remuneration to certain senior executives in the Enea Group may also be paid in the form of share-based payment.
Pension agreementThe President’s pension agreement states that pension premiums are distributed over the term of the pension plan according to his instructions. The pension agreements for other senior executives in Sweden conform to the framework of the ITP plan, with a contractual retirement age of 65 years. The amount of pension benefits payable is related to the employee’s final sal-ary and total years of service under the plan. Pension premiums are paid continuously.
Termination benefitsIn the event of dismissal by the company, the President receives termination benefits equal to 12 months’ salary and benefits. The term of notice for other senior executives is 3 to 12 months.
Remuneration and Other benefits 2006
Basic salary/ Board fees
variable remuneration
Otherbenefits
Pension costs Total
Chairman of the Board Staffan Ahlberg 320 320
Board member Åsa Landén Ericsson 200 200Board member Gösta Lemne 125 125Board member Jon Risfelt 135 135Board member Jan Rynning 125 125Board member Anders Skarin 145 145President 2,013 788 18 1,043 3,862Other senior executives (5) 5,584 3,035 19 903 9,541Total 8,647 3,823 37 1,946 14,453
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Remuneration and Other benefits 2007
Basic salary/ Board fees
variable remuneration
Otherbenefits
Pension costs Total
Chairman of the Board Staffan Ahlberg 330 330
Board member Åsa Landén Ericsson 190 190Board member Gösta Lemne 130 130Board member Jon Risfelt 140 140Board member Jan Rynning 130 130Board member Anders Skarin 160 160President 2,146 1,094 54 991 4,285Other senior executives (5) 6,029 3,075 83 1,207 10,394Total 9,255 4,169 137 2,198 15,759
The President converted variable compensation into pension. The individuals included in the group senior executives varied during the year. Three who left the company also received severance pay of SEK 2 (0) million.
financial risks and finance policy and other risks and uncertain factors
The Group is exposed to various types of financial risks through its business activities. Financial risks refer to fluctuations in the company’s results and cash flow due to changes in exchange rates, interest levels, refinancing and credit risks. The Group’s finance policy for management of financial risk has been prepared by the Board of Directors and is a framework of guidelines and regulations in the form of risk mandates and limits for financial activities. The Parent Com-pany’s finance department is responsible for central management of the Group’s financial transactions and risks. The overall objective of the finance function is to provide cost-effective financing and minimize the negative effects of market fluctuations on the Group’s results.
Liquidity riskThe Group’s exposure to liquidity risk is limited. Cash and cash equivalents, which at December 31, 2007, amounted to SEK 155,973 (146,402) thousand, far exceed the short-term financing liabilities that are due for payment within one year. The Group has no interest bearing liabilities. Excess liquidity in Sweden is handled by the Parent Company, and is invested in special depos-its or commercial paper with a maturity of between one and three months. The purpose of these investments is to minimize risk in order to maintain a low risk profile.
Credit risksCredit risk is defined as the risk that the Group’s customers will be unable to fulfill their obliga-tions, i.e., non-payment of accounts receivable. The Group’s customers are subject to credit assessments in which information about the customers’ financial situation is gathered from credit agencies. The Group has established a credit policy for handling and assessment of cus-tomer credits. Enea helps to limit its credit risks through its long-term close collaboration with a relatively limited number of customers whose financial position is stable.
Interest risksInterest risks are limited because the Group has no interest-bearing liabilities.
Interest risks in the Group’s cash and cash equivalents are dependent on developments in the Swedish fixed income market. A one percent increase or decrease in interest rates would result in a increase/decrease of net financial items of about SEK 1,500 thousand.
Foreign exchange riskThe Group has limited foreign exchange risk in the form of transaction exposure or exports and imports of goods. All business operations are carried out through subsidiaries, which almost exclusively invoice in the same currency in which their costs are denominated. The currencies of foreign subsidiaries are translated to Swedish kronor according to the current rate method. This means that all items in the balance sheet are translated at the closing day rate while all items in the income statement are translated at the average rate during the period.
The rates used for the Group’s most significant currencies are shown in the table below.
closing day rate Average ratecurrency 2007 2006 2007 2006
EUR 9.47 9.05 9.25 9.25USD 6.47 6.87 6.76 7.38GBP 12.91 13.49 13.53 13.58JPY 0.057 0.058 0.057 0.063
Translation exposureWhen translating the balance sheets of its foreign subsidiaries into Swedish kronor, the Group is exposed to exchange rate fluctuations. The effect on equity In 2007 arising from translating the financial statements of foreign subsidiaries to Swedish kronor and reversal of previous impairment losses was SEK –4,500 (–8,678) thousand. The Group’s policy has been not to hedge translation exposure in foreign currencies. At the closing date the Group’s equity exposure to exchange rate fluctuations was:
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Stockholm March 18, 2008
Johan WallPresident
Staffan AhlbergChairman
Åsa Landén Ericsson
Gösta Lemne Jon Risfelt Jan Rynning
Anders Skarin Anders Dahlenborg Mattias Östholm
The annual report and consolidated annual report, as indicated above, have been approved by the Board for publication on March 18, 2008.
The income statements and balance sheet of the Parent Company and the Group will be submitted to the Annual General Meeting for adoption on May 15, 2008.
Our Auditors’ Report was submitted on March 19, 2008.
PricewaterhouseCoopers AB
Michael BengtssonAuthorized Public Accountant
currency AmountTranslated to SEK
at closing day rate
USD 3,521 22,772EUR 272 2,577GBP 174 2,245JPY 25,280 1,446
Customer structureMore than half of Enea’s revenues in 2007 were attributable to the Ericsson companies and SonyEricsson. Enea’s expressed ambition is to increase revenues from other customers while at the same time expanding tis business with Ericsson.
Insurance coverageThrough insurance coverage and indemnification, the Group minimizes the risk of significant claims arising from global liability including professional liability (consulting), president’s liabil-ity, officers and directors’ liability and criminal liability.
critical estimates and assumptions
cRiTicAL AccOuNTiNG ESTimATES AND ASSumPTiONSAccounting estimates are evaluated regularly and based on historic experience and other fac-tors, including expectations of future events that are considered reasonable under current conditions.
SiGNificANT ESimATES AND ASSumPTiONS iN ThE APPLicATiON Of ThE GROuP’S AccOuNTiNG PRiNciPLESSenior management and the audit committee have discussed the developments, choices and information concerning the Group’s central accounting principles and estimates, as well as their application. Some of the significant accounting estimates and assumptions used in appli-cation of the Group’s accounting policies are described below.
KEY SOuRcES Of uNcERTAiNTY iN ThE ESTimATESImpairment testing of goodwillIn calculating the recoverable amount of cash-generating units when testing for impairment of goodwill, several assumptions about future conditions and estimates of parameters have been made. A description of these can be found in note 10. As shown in the description in Note 10, changes in the conditions for these assumptions and estimates during 2007 could have a considerable effect on the value of goodwill.
contingent liabilities
The Group has no pledged assets or contingent liabilities.The Parent Company has issued guarantees to secure coverage of shareholders’ equity in
group companies.
Business combinations
On April 1, 2007, the Enea Group acquired 100 percent of share capital in QiValue Technologies AB. On December 31, 2007, the company had 16 employees and offers consulting services and training in Linux. The acquired business contributed after the acquisition in 2007 with net sales of SEK 13,024 thousand and profit after tax of SEK 289 thousand.
Details of net assets acquired and goodwill
Fixed assets in acquired company 223 Operating assets in acquired company 2,566 Cash and cash equivalents in acquired company 147 Operating liabilities in acquired company –1,820 Goodwill 25,789Total purchase price 26,905
Unsettled purchase price –18,788 Cash and cash equivalents in acquired company –147impact on the Group’s cash and cash equivalents 7,970
Goodwill is attributable to the personnel of the acquired business and the synergistic effects expected to arise after the Enea Group’s acquisition of QiValue Technologies AB. There is poten-tial for additional purchase consideration depending on the company’s financial performance until 2009. The portion of the purchase price that is unsettled, which will be settled after 2008, is estimated at SEK 8,880 thousand.
information about the Parent company
Enea AB is a Enea AB is a Sweden-registered stock corporation headquartered in Kista, Sweden. The stock of the Parent Company is registered on the OMX Nordic Exchange in Stockholm. The street address to the head office is Skalholtsgatan 9, in Kista, Sweden. The consolidated finan-cial statements for2007 include the Parent Company and its subsidiaries, together comprising the Group.
certificationThe Board of Directors and the President declare that the consolidated financial statements have been prepared in accordance with IFRS as adopted by the EU and give a true and fair view of the Group’s financial position and results of operations. The financial statements of the Parent Company have been prepared in accordance with generally accepted accounting principles in Sweden and give a true and fair view of the Parent Company’s financial position and results of operations. The statutory Administration Report of the Group and the Parent Company provides a fair review of the development of the Group’s and the Parent Company’s operations, financial position and results of operations and describes material risks and uncertainties facing the Parent Company and the companies included in the Group.
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audit report
To the Annual General meeting of the shareholders of Enea ABcorporate identity number 556209-7146
We have audited the annual accounts, the consolidated accounts, the accounting records and the administration of the board of directors and the managing director of Enea AB for the year 2007. (The company’s annual accounts and the consolidated accounts are included in the printed version on pages 12-28). The board of directors and the managing director are responsible for these accounts and the administration of the company as well as for the application of the Annual Accounts Act when preparing the annual accounts and the application of international financial reporting stan-dards IFRSs as adopted by the EU and the Annual Accounts Act when prepar-ing 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 con-solidated accounts are free of material misstatement. An audit includes exam-ining, 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 managing director and significant estimates made by the board of directors and the managing director 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 concern-ing 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 managing direc-
tor. We also examined whether any board member or the managing director has, in any other way, acted in contravention of the Companies Act, the Annual Accounts Act or the 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 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 financial reporting standards IFRSs 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 administra-tion report is consistent with the other parts of the annual accounts and the consolidated accounts.
We recommend to the Annual 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 managing director be discharged from liability for the financial year.
Stockholm, March 19, 2008PricewaterhouseCoopers AB
Michael Bengtsson Authorized Public Accountant
mARGiNS Operating margin Operating profit/loss in relation to net sales.Profit margin Profit/loss after financial items in relation to net sales.
YiELDReturn on equity Profit/loss after tax in relation to average shareholders’ equity.Return on capital employed Operating profit/loss plus financial items in relation to average capital employed.
cAPiTAL STRucTuREcapital employed Balance sheet total less non-interest-bearing liabilities including deferred tax liabilities. Average capital employed has been calcu-lated as opening and closing capital employed in relation to two.Shareholders’ equity Shareholders’ equity at yearend. Average equity has been calculated as opening plus closing shareholder’s equity in relation to two.interest coverage ratio Income after financial items plus financial expenses in relation to financial expenses.Equity/assets ratio Equity including minority interests in relation to balance sheet total.Liquidity ratio Cash and cash equivalents, short-term investments, and cur-rent receivables in relation to current liabilities.Risk-weighted capital ratio Sum of equity (including minority holdings)and deferred taxes as a percentage of the balance sheet total.
DATA PER ShAREEarnings per share Profit after tax in relation to the average number of shares.Dividend per share Actual dividend for the current fiscal year divided by the number of shares at the end of the calendar year. Equity per share Equity divided by the number of shares on the balance sheet date.P/E ratio Share price at year-end divided by earnings per share. Price/equity ratio Share price at year-end as a percentage of equity per share.
OThERNet sales per employee Reported net sales divided by average number of employees.value added per employee Operating profit/loss excluding items affecting comparability, plus payroll expenses including payroll overheads, divided by the average number of employees.
Enea®, OSE®, OSE® ck, OSE® epsilon, Enea® Element, Polyhedra®, Enea® Optima, Enea® LINX, and Enea® Accelerator are all registered trademarks of Enea AB or its subsidiaries. Accelerating Network Conver-gence™, Device Software Optimized™ and Enea® dSPEED Platform™ are non-registered trademarks of Enea AB or its subsidiaries. All rights are reserved. © 2008 Enea
glossary
fredrik hörlyk (1975) Key Account Manager Software Sales Nordic, Öresund Employee representative, deputy for AF since 2005Education: M.Sc. EngineeringShareholdings: 0
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board of directors
Staffan Ahlberg (1944)Chairman, board member since 2002Education: M.Sc. Engineering and M.Sc. Business Administration and EconomicsOther board assignments: Chairman of ProAct AB. Board member of Catella Holding AB.Shareholdings: 1,100,000
Anders Skarin (1948)Board member since 2005Education: Bachelor of ArtsOther board assignments: Chairman of Arkitektkopia AB, BTJ Group AB, and Cambio Healthcare Systems AB. Board member of Acando AB, Trio Enterprise AB, and WSP Europe.Shareholdings: 300,000
Åsa Landén Ericsson (1965)CEO Scanpix Sweden ABBoard member since 2003Education: M.Sc. Engineering and MBA, InseadOther board assignments: Board member of Rejlerkoncernen AB.Shareholdings: 20,000
Anders Dahlenborg (1967)Project leader, Enea Research & Development, Stockholm Employee representative for AF since 2006Education: M.Sc. EngineeringShareholdings: 54,000
Gösta Lemne (1956)VP, R&D Operations, Ericsson Board member since 2003Education: M.Sc. EngineeringShareholdings: 40,000
Jon Risfelt (1961)Board member since 2003Education: M.Sc. Engineering Other board assignments: Chairman of XPonCard AB. Board member of Bilia AB, Ortivus AB, Svensk Fastighetsförmedling AB, TeliaSonera AB, and Ångpanne- föreningen AB.Shareholdings: 51,000
mattias Östholm (1970)Senior Consultant Enea Nordic Services Stockholm Employee representative for Unionen since 2005Education: High school degree in engineeringShareholdings: 0
Jan Rynning (1951)Attorney, Law Firm of Jan Rynning Board member since 2001Education: Master of LawsOther board assignments: Chairman of BioPhausia AB and Teligent AB. Board member of Ticket AB, AB C A Östberg, and Remium AB.Shareholdings: 20,000
NOmiNATiON TO ThE BOARD Of DiREcTORS PRiOR TO ThE 2008 ANNuAL GENERAL mEETiNGThe chairman of the Board contacted the company’s biggest shareholders according to the register of shareholders as at September 28, 2007, in order to form a Nomination Committee. Recommendations for a new Board of Directors will be presented in the notice to the annual meeting of shareholders.
NOmiNATiON cOmmiTTEE 2008Staffan Ahlberg, Chairman of the Board, Enea ABPer Lindberg, shareholderPeter Lundqvist, Third AP FundJoakim Spetz, Handelsbanken FonderClas Nicolin, Dellner AB
senior executives
Johan WallPresident and Chief Executive OfficerEmployed since: 2004Education: M.Sc. Electrical Engineering, Royal Institute of Technology, Stockholm, Visiting Scholar, Stanford University, Palo Alto, USAShareholdings: 392,000Previous positions: President of Framfab AB, President of Netsolutions AB, Product Developer at Verizon Laboratories, Boston, USA.
Per ÅkerbergChief Operating OfficerEmployed since: 2004Education: M.Sc. in Business Administration and Economics, University of SundsvallShareholdings: 50,000Previous positions: Senior Vice President of Telelogic Central Europe and Nordic region, Vice President of Telelogic North America, Sales manager at Telia MegaCom AB
håkan GustavsonChief Financial OfficerEmployed since: 2005Education: M.Sc. in Business Administration and Economics, Stockholm School of EconomicsShareholdings: 100,000Previous positions: CFO at MediaEdgecia Europe, Middle East & Africa, CFO at TME Europe, Director Mergers & Acquisitions at Young&Rubicam Europe
Gregory SinghSenior Vice President Nordic Services.Employed since: 2007Education: System Analyst, Stockholm University.Shareholdings: 0Previous positions: CEO of ipUnplugged, Business Unit Manager at Digital Equipment, CEO of Cabletron Systems, President of CMA
Adrian LeufvénSenior Vice President Research & DevelopmentEmployed since: 1998Education: M.Sc. Eng. Mechatronics, Royal Institute of Technology StockholmShareholdings: 145,000Previous positions: VP Strategic Outsourcing, VP Marketing, Director Asian Sales, Enea AB
mathias BåthSenior Vice President Product ManagementEmployed since: 2001Education: Business major, Uppsala Upper Secondary SchoolShareholdings: 0Previous positions: Market Regional Manager for Nordic region, Enea Software, Business Area Manager for Nocom AB
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SWEDENStockholmBox 1033Skalholtsgatan 9SE-164 21 KistaTel +46 8 507 140 00
LinköpingTeknikringen 8SE-583 30 LinköpingTel +46 13 465 5800
ÖresundBox 4150Jörgen Kocksgatan 9SE-203 12 MalmöTel +46 40 660 9800
uSASan Jose, cA2635 North First StreetSuite 118San Jose, CA 95134Tel +1 408 383 9480
chandler, AZ25 South Arizona PlaceSuite 305Chandler, AZ 85225Tel +1 480 753 9200
Nashua, NhOne Tara BoulevardSuite 404Nashua, NH 03062Tel +1 603 888 7575
JAPAN1-4-2 KandaOgawa-machiChiyoda-KuTokyo 101-0052Tel +81 3 5207 6167
chiNARoom 1203, Silver Tower,No. 218 South XiZang Road,Shanghai 200021Tel +86 138 189 840 80
ROmANiA 319c Splaiul Independentei Bucharest 6Tel +40 21 305 1500
GERmANYCarl-Zeiss-Ring 15D-85737 IsmaningMunichTel +49 89 544 676
fRANcEZA Courtaboeuf 112, Avenue de ScandinavieF-91953Courtaboeuf CedexTel +33 1 69 181 440
uNiTED KiNGDOmThe Malthouse,Malthouse SquarePrinces RisboroughBuckinghamshireGB-HP27 9ABTel +44 1844 276 980
Polyhedra LtdCharlton BarnLower Charlton TradingEstateShepton MalletGB-BA4 5QETel +44 1749 347 365
addresses
annual general meeting
Annual General meetingThe Annual General Meeting of shareholders will be held at 6 p.m. on May 15, 2008 at Enea’s offices, Skalholtsgatan 9, Kista, Sweden.
Shareholders who wish to attend the meeting must be registe-red in the shareholders’ register maintained by the Nordic Central Securities Depository Värdepapperscentralen AB (VPC AB) no later than May 9, 2008.
To participate in the meeting, shareholders must notify Enea AB no later than 5 p.m. on May 9, 2008. Notification can be given in writing to Enea AB, Box 1033, SE-164 21 Kista, Sweden, by telephone +46 8 507 140 00, or by e-mail to [email protected]. The noti-fication should include the shareholder’s name, social security number (for individuals) or corporate identity number (for companies), shareholdings, address, phone number and information about proxies, if applicable.
DividendConsidering that Enea aims to actively participate in the market con-solidation, the Board of Directors intends to propose the Annual General Meeting that no dividend be paid for financial year 2007.
financial calendarFirst quarter report 2008 April 23, 2008Annual General Meeting 2008 May 15, 2008Second quarter report 2008 July 25, 2008Third quarter report 2008 October 23, 2008Full year report for 2008 February 6, 2009
All financial information is published on Enea’s website www.enea.com.
Financial reports can also be ordered from Enea AB, Box 1033, SE-164 21 Kista, Sweden, or by e-mail: [email protected]
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Text Enea and Citigate Stockholm Graphic design Waldton Project leader Anna Michélsen Photography Sune Fridell Print S-M Ewert 2008
For more information please see www.enea.com